pro Negro Drilling PTE., Lim ited(a subsidiary of Integradora de Servicios Pctroleros Oro Negro, S. A. P. L de a V.)Consolidated Financial Statements December 31, 2015 and 2014

Ora Negro DriUii^ PTE., iAmited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I. de C. V.) - .IndexDecember 31, 2015 and 2014

Contents Page

Independent Auditor’s Report....... ......... .......... .................................... .................. . 1 to 2

Consolidated financial statements:

Statements of financial position........ ................ ................. .................. ..... .......... ........... ......... ....... ......... 3

Statements of comprehensive incom e ....... .................... ............... ........ ................. ...................................4

Statements of changes in stockholders’ equ ity...... ........................... ...... ..................................................5

Statements of cash flows................................................. ......... .......................................... .............. ............6

Notes to the consolidated financial statements......... . . . 7 to 24

a nosImpulsando locxtraordmario

Independent Auditor’s Report

Mexico City, May 12, 2016

To the Stockholders ofOro Negro Drilling PTE., Limitedand subsidiaries

We have audited the accompanying consolidated financial statements of Oro Negro Drilling PTE., Limited and subsidiaries (Group), which comprise the consolidated statements of financial position as of December 31, 2015 and 2014 and the consolidated statements of comprehensive income, of changes in stockholders’ equity and of cash flows for the years then ended, as well as a summary of significant accounting policies and other explanatory information.

Management’s responsibility for the financial statements

The Company’s and subsidiaries’ management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards (IFRS), and for such internal control as management determines necessary to prepare financial statements that are free from material misstatement, whether due to fraud or errors.

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranee about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures contained in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

PricewaterhouseCoopei-s, S. C., Mariano Escobedo 573, Cotonia Rincon del Bosque, C\P, 11580 Mexico, Distiito Federal T: ±52 (55)5263 6000 F: +52(55)5363 6010 www.pvvc.com/inx

a no sImpuhando hextraor dinar io

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

in our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of Oro Negro Drilling PTE,, Limited and subsidiaries, as of December 31, 2015 and 2014, and its financial performance and its cash flows for the years then ended, in accordance with IFRS. \

Oro Negro Drilling PTE., Limited and subsiriaries(a subsidiaiy of Integradora de Servicios Petroleros Oro Negro,S. A. P. L de C. V.)Consolidated Statements of Financial Position December 31, 2015 and 2014 ____

Thousands of US dollars, unless otherwise indicated

December 31.

Notes 2015 2014Assets

CURRENT ASSETS:Cash and cash equivalents 10 $ 29,414 $ 49,223Related parties 13 72,976 41,173Other receivables ■ ■ 2 5,087Prepaid expenses 428

Total current assets 102.820 95.483

NON-CURRENT ASSETS:Deferred income tax asset 15 7 29,591 24,277Property and equipment ;■ 11 : ;■ 913.274 943.206

Total assets £ 1 045.685 $ 1.062.966

Liabilities and stockholders’ eauitv

CURRENT LIABILITIES:Current portion of long-term debt 12 $ 71,532 v$. 48,317Current portion of deferred income ■ 17 ■■■ 4,566 4,554Related parties ■■■■■■■■ V 13 2,237 880Value-added tax and trade payables 6,024 82Other liabilities ■■■■ 14 7 7.790 3.517

Total current liabilities 92,149 57,350

NON-CURRENT LIABILITIES:Long-term debt 12 645,393 691,232Deferred income , 7 " : 17 7 5.125 9.691

Total liabilities 742.667 758.273

STOCKHOLDERS’ EQUITY:Share capital 16 : 286,172 328,229Retained earnings (23,536) (39,402)Profit for the year 40.382 15.866

Total stockholders’ equity 303.018 304.693

Total liabilities and stockholders’ equity $ 1.045.685 $ 1.062.966

Page 3

Oro Negro Drilling PTE., Limited and subsidiaries

S. A. P. I, de C. V.)Consolidated Statements of Comprehensive Income December 31, 2015 and 2014

Thousands of US dollars, unless otherwise indicated

Year ended December 31.

Notes 2015 2014

Revenue ./■.' 17 $ 135,937 $105,704Operating costs 6 (37.0531 (31.5111

Gross profit 98,884 74,193

Administrative expenses 6 (4,569) (4,809)Other expenses - Net ■ ■ - - (2)

Operating profit 94.315 69.382

Finance income :7.V::;9,Y 49Finance costs (59.2561 (77.8421

Financing cost - Net (59.2471 ■ (77.7931

Profit (loss) before income taxes 35,068 (8,411)

income tax benefit ■V-7Yv:;8.;V{ 5.314 24.277

Profit for the year VY'-.'.:'. 40,382 15,866

Other comprehensive income ■ ■■■;- 7;

Total comprehensive income for the year $ 40.382 S 15.866

Page 4

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora dc Servicios Petroleros Oro Negro,S. A. P. L de C. V.)Consolidated Statements of Changes in Stockholders’ Equity December 31, 2015 and 2014

Thousands of US dollarst unless otherwise indicated

Attributable to owners of the parent company

NotesSharecapital

Retainedearninas

Totaleauitv

Balance as of January 1, 2014 ■ $189,978 ($ 32,834) $157,144

Transfer investment Oro Negro Fortius, PTE., Limited and Oro Negro Decus, PTE,, Limited 3b.,16 : 56,877 (6,568) 50,309

Proceeds from shares issuance 16 81,374 81,374

Other comprehensive profit for the year 15.866 15.866

Balance as of December 31, 2014 : 328,229 (23,536) 304,693

Capital decrease V ■ 16 (42,057) (42,057)

Other comprehensive profit for the year 40.382 40.382

Balance as of December 31, 2015 $286,172 $ 16.846 $303,018

Page 5

Oro Negro ̂t y Limited and subsidiaries(a subsidiary of Integradora dc Servicios Petroleros Oro Negro,S. A. P. 1. de C. V . ) v ; ;Consolidated Statements of Cash Flows December 31, 2015 and 2014

Thousands of US dollars, unless otherwise indicated

Year ended December 31,

Notes 2015 2014Operating activities

Profit (loss) before income tax $ 35,068 (S 8,411)

Adjustment for: :; ■

DepreciationDeferred income amortization

11 32,759 29,25817 :.\V (4,554) (2,495)

Deferred income 17 16,740Increase in other liabilities 6, 14 4,294 2,253Finance cost : 7. 59,256 77,842

Changes in working capital Increase (decrease) in trade payables Increase in related parties 13

9,904(30.449V

Net cash generated in operating activities 106.278 ■ 83.255

Investing activities

Net cash used in property and equipment i i o / V ; __ (2,827) (265.770)

Financing activities

Capital (decrease) and shares issuance - 16 (42,057) 81,374Transfer investment Fortius and Decus (5,017)Proceeds from borrowings 2, 12, 19 725,000Debt restructuring cost 12 ■■ (11,645)Loans paid 12 (24,000) (515,000Debt restructuring charges (9,018)Interest paid (57.203) (40.268)

Net cash flows provided by financing activities (123.260) 225.426

(Decrease) increase in cash and cash equivalents (19,809) 42,911

Cash and cash equivalents at the beginning of the year 49.223 6.312

Cash and cash equivalents at the end of the year $ 29.414 $ 49.223

Page 6

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Pctroleros Oro Negro,S. A. P. I. de C. Vdy v:VNotes to the Consolidated Financial StatementsDecember 31, 2015 and 2014 : ■ : • ; ■■ ' > ■■■

Thousands of US dollars unless otherwise stated

Note 1 - General information:

Oro Negro Drilling, PTE., Ltd. and its subsidiaries (“Drilling” or the “Group") is a wholly owned subsidiary of Integradora de Servicios Petroleros Oro Negro, S. A. P. I. de C. V. (Oro Negro). It was incorporated to obtain financing to purchase jack-ups. The Group leases these assets to a related party, Perforadora Oro Negro through a bareboat agreement. Perforadora Oro Negro has contracts signed with Pemex Perforacion y Servicios (PPS), a wholly owned subsidiary of Petroieos Mexicanos, Mexico’s national oil company (NOC). \

Oro Negro was controlled by three institutional investors, Axis, Ares and Temasek. On May 2, 2016, affiliates of Axis purchased, directly or indirectly, ali of the issued and outstanding shares of Integradora de Servicios Petroleros Oro Negro, SAP,I. de C.V. held directly or indirectly by each of Ares and Temasek.

The Group is domiciled in Javier Barros Sierra 540, Park Plaza Torre 1, Santa Fe, Mexico City.

The Group has no employees, and its administrative services are provided by related parties.

Note 2 - Liquidity and going concern considerations:

Pemex, Perforadora Oro Negro's only customer, is currently undergoing a major restructuring which implies a new business model. These changes are being implemented in the midst of a global crisis in the oil and gas industry. The average oil price went from $105 per barrel in 2013 to $50 in 2015 and has a forecasted average price of $25 in 2016. Thus, Perforadora Oro Negro did not have the financial resources to fulfill the bareboat agreement.

Alt these factors triggered the Group to default on the $725,000 bond payment. During January 2016, the Group failed to make the required principal and interest payment under the terms of the Bond Agreement (Note 12 and 19). Consequently, the amount owed under the Bond Agreement of approximately $50,287 accrued a default interest rate of 12.5 % per annum until paid in full. /

Management negotiated and signed on April 29, 2016 a new agreement with the bondholders with a maturity date of January 2019 (see Note 19). All outstanding defaults were waived and no further action has been taken by the Group’s lenders against them.

The accompanying financial statements have been prepared in accordance with IFRS on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments related to the recoverability of assets and classification of liabilities that might be necessary should the Group be unable to continue as a going concern.

Note 3 - Summary of significant accounting policies:

The following are the main accounting policies applied in the preparation of these consolidated financial statements. These policies have been consistently applied to all the years presented, unless otherwise stated.

Page 7

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P I. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014 _

a. Basis of preparation

The consolidated financial statements have been prepared in accordance with international Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS 1C) interpretations applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost basis.

The preparation of these financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or the areas in which assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 5.

Changes in accounting policies and disclosures

a. New standards and interpretations not vet effective

New standards and amendments will become effective for annual periods beyond the reporting dates of these consolidated financial statements, and have not yet been applied. The Group is in the process of evaluating the impact of the adoption of the following standards:

IFRS 9 “Financial instruments”, addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and in October 2010. It replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured at fair value and those measured at amortized cost. The determination is made at initial recognition.The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liability purposes, the standard retains most of the IAS 39 requirements. The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in “other comprehensive income” rather than in “revenue”, unless this results in an accounting mismatch.

IFRS 15 “Revenue from contracts with customers”, provides a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The revenue standard establishes that an entity must determine the measurement of revenue and timing for recognition thereof. The underlying principle is that an entity must recognize revenue to support the transfer of goods or services to customers at the amount that the entity expects in exchange for those goods or services. The revenue standard is effective for entities that report under IFRS for annual periods beginning on or after January 1, 2017. Early adoption is permitted for IFRS reporters. . .

IFRS 16 "Leases” addresses the definition of a lease, recognition and measurement of leases and establishes principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for on balance sheet for lessees. The standard replaces IAS 17 "Leases”, and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2019 and earlier application is permitted subject to EU endorsement and the entity adopting IFRS 15 “Revenue from contracts with customers” at the same time.

Page 8

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Scrvicios Petroleros Oro Negro,S, A. P. I. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

b. Consolidation

Subsidiaries

Subsidiaries are ail entities over which the Group has control. The Group controls an entity when it is exposed to, or has the right to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group, and are deconsolidated from the date that control

■'■' ■ceases. . V :

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities transferred by the former owners to the acquirer and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired, liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. \

Inter-company transactions, balances, and unrealized gains and losses on transactions between the subsidiaries of the Group are eliminated. Unrealized losses are also eliminated.

On December 31, 2015 and 2014, the Group’s subsidiaries were as follows:

December 31

2015 2014

Ownership Ownership Functional : MainLeaal entity Country Dercentaae (%) Dercentaae (%) currency activity

Subsidiaries of Oro Nearo Driliina. Pte. Ltd. v-.;.Oro Negro Primus, Pte. Ltd. Singapore 100 100 : Dollar : Jack-up ownerOro Negro Laurus, Pte. Ltd. Singapore ioo : 100 Dollar Jack-up ownerOro Negro Fortius, Pte. Ltd. Singapore . 100 100 Dollar Jack-up ownerOro Negro Decus, Pte. Ltd. Singapore 100 100 ; -Dollar Jack-up owner

Foreign currency translation

i. Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in US dollars, which is the Group’s presentation and functional currency.

ii. Transactions and balances

Foreign currency transactions are translated to the functional currency using the exchange rate prevailing at the dates of the transactions, or at the valuation date when items are re-measured.

Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end of the exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Foreign exchange gains and losses

Page 9

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I. de C.Notes to the Consolidated Financial Statements December 31, 2015 and 2014

that relate to “borrowings” and to "cash and cash equivalents” are presented in the income statement under "finance income or costs”.

iii. Group companies

The results and financial position of all the Group entities that have a functional currency different from the presentation currency are translated to the presentation currency as follows:

1) Assets and liabilities for each balance sheet presented are translated at the closing rate at the balance sheet date; 7 7 7;

2) Share capital is recognized at historical cost;

3) Income and expenses of each statement of income are translated at average exchange rates (unless said average is not a reasonable approximation of the cumulative effect of the rates

7 prevailing on the transaction dates, in which case income and expenses are translated at the rate in effect on the transaction date), and

■ T 4) All resulting exchange differences are recognized in “other comprehensive income".

c. Cash and cash equivalents 7 ■

The consolidated statement of cash flows includes cash and cash equivalents; petty cash; and deposits held at call with financial institutions with original maturities of three months or less.

d. Financial assets

Classification 777-7 T7- :

The Group classifies its financial assets in the following categories: loans and receivables. Classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

Loans and receivables 71/

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except if its maturities exceed 12 months after the end of the reporting period. Said maturities are classified as non-current assets. The Group’s loans and receivables comprise “trade and other receivables”, and “cash and cash equivalents” shown in the statement of financial position.

e. Property and equipment

Property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditures that are directly attributable to the item’s acquisition and transportation costs.

Subsequent costs are included in the assets’ carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The book value of the parts that are

Page 10

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

replaced is cancelled. All other repair and maintenance fees are charged to the statement of comprehensive income for the financial period in which they are incurred.

Depreciation is calculated using the straight-line method to allocate asset costs or restated amounts to their residual values over their estimated useful lives. The Group estimates thirty years of useful life for its drilling equipment. ;

Asset’s residual values, useful lives and depreciation method are revised, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. T y T ;

(Sains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized under “other income” in the statement of income.

f. Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity, in which case tax is also recognized in other comprehensive income or directly in

T equity, respectively. 'T; ■:

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the Group and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation, for which it sets up provisions of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; additionally, deferred income tax is not recorded if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable income or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted as of the date of the statement of financial position used and that are expected to be applied when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax assets are recognized only to the extent that is probable that future taxable income will be available against which temporary differences may be offset.

Deferred income tax assets are recognized on deductible temporary differences arising from investments in subsidiaries, associates and joint arrangements only to the extent that it is probable the temporary difference will reverse in the future and there is sufficient taxable profit available against which the temporary difference can be utilized.

Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries, associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the

Page 11

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I. de C. YJNotes to the Consolidated Financial Statements December 31, 2015 and 2014 ' V :: ■ V

temporary difference will not reverse in the foreseeable future. Generally, the group is unable to control the reversal of the temporary difference for associates, only when there is an agreement in place that gives the group the ability to control the reversal of the temporary difference not

. : recognized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.

g. Impairment of non-financial assets

Intangible assets that have an indefinite useful life or intangible assets that are not ready for use are not subject to amortization and are tested annually for impairment. Assets that are subject to depreciation or amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount.The recoverable amount is the highest between of an asset's fair value less costs of disposal and its value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are large independent cash inflows (cash generating units). Prior impairment, non- financial assets (other than goodwill) are reviewed for a possible reversal at each reporting date.

h. Impairment of financial assets

For the loans and receivables category, the amount of the loss is measured as the difference between : the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognized in the consolidated statement of income.

■If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized (such as an improvement in the debtor's credit rating), reversal of the previously recognized impairment loss is recognized in the consolidated statement of comprehensive income.

i. Trade payables

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the payment is due within one year or less. If not, they are presented as non-current liabilities.

Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method if greater than one year.

j. Borrowings .

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method.

Page 12

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. L de C. VONotes to the Consolidated Financial Statements December 31, 2015 and 2014

k. Borrowing costs

Genera! and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to be ready for their intended use or sale, are added to the cost of those assets until the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognized as profit or loss in the period in which they are incurred,

l. ■. Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation, and the amount has been reliably estimated. Provisions are not recognized for future operating losses.

When there are a number of similar obligations, the likelihood that an outflow will be required in a settlement is determined by considering the type of obligations as a whole. A provision is recognized even if the likelihood of a cash outflow required to settle any of the obligations included in the same class of obligations is small. ^ ^ ;

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks related to the obligation

m. Share capital . 0

Ordinary shares are classified as equity.

n. Recognition of leasing

Revenue is measured at the fair value of the consideration received, and represents amounts receivable, stated net of discounts, returns and value added taxes. The Group recognizes revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity, and when specific criteria have been met for each of the Group’s activities, as described below.

Lease income is received as per the bareboat agreement and is recognized over the term of the lease on a straight-line basis.

o. Mobilization costs and fees

Mobilization costs are costs incurred to move and place equipment ready for its intended use. Such costs generally include expenses incurred for transportation of drilling equipment prior to commencement of the lease and maintenance services. Such contract costs are recognized as an asset provided that it is probable for them to be recovered through the fees set forth in the contract. Given the significance of mobilization costs, the Group often receives a "mobilization fee”, which can be in the form of a lump sum payment or on a per day rate, depending on the bareboat agreement signed with related party Perforadora Oro Negro.

Page 13

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. L de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

Mobilization fees are recognized with the rest of the contract fees over the term of the contract.

In the statements of financial position, the mobilization cost is recognized within “current portion of deferred costs”, and “deferred costs”. Mobilization fees are recognized within “current portion of deferred revenue”, and “deferred revenue”.

Note 4 - Financial risk management:

4.1 Financial risk factors

The Group’s activities have exposure to the following financial risks: credit risk, liquidity risk and price risk.

The Group assesses its risk exposure on a continuous basis and develops different strategies to mitigate its exposure.

(a) Credit risk - - o ;

Credit risk is generated from cash and cash equivalents, deposits in banks and financial institutions and ■accounts receivable. 7 V/-

In 2015 and 2014, Perforadora Oro Negro signed various different agreements signed with PPS to lease drilling equipment. The fulfillment of these agreements may impair Perforadora Oro Negro to meet its obligations under the bareboat agreements.

(b) Liquidity risk

The Oro Negro’s strategic planning and treasury department continuously monitors the Group’s cash flow projections and liquidity requirements to ensure that it has sufficient readily available cash to comply with Its operations. .

Projections consider the Group’s financial plans, purchase commitments, compliance with minimum internal liquidity ratios and legal and regulatory requirements.

The following table analyzes the Group’s financial liabilities grouped in accordance with their contractual maturity at the reporting date. The amounts disclosed in the table are the contractual undiscounted cash flows and include interest expenses:

Between 3 Between 1 Between 2Less than months and year and 2 years and 5 More than 53 months 1 vear years vears years Total

December 31, 2015Trade and other payables $ 531 $ : - .. $ - v $ $ : T $ 531Related parties 1,200 1,037 ■ ■ 2,237Debt : 51.164 50.288 97.875 672.948 '■ - 872.275

Total $ 51.325 S 97.875 $ 672.948 $ .. - $875,043

Page 14

Oro Negro Drilling PTE.? Limited and subsidiaries(a subsidiary of Integraclora de Servicios Petroleros Oro Negro,

Notes to the Consolidated Financial Statements December 31, 2015 and 2014 _

Between 3 Between 1 Between 2Less than months and year and 2 years and 5 More than 53 months 1 vear vears vears vears Total

December 31, 2014Trade and other payables $ 82 $ ; - $ $ ■■ $ v ; V ■ - $ 82Related parties 880 ■■ > ■ 880Debt 27.411 77.438 97.979 744.514 ■ - 947.342

Total $ 28.373 S 77.438 $ 97.979 S 744.514 $ $ 948.304

(c) Price risk

The Group recognizes lease income as per the bareboat agreement and is recognized over the term of the lease on a straight-line basis. The drop in oil price combined with RPS’s restructuring plans with its related party, Perforadora Oro Negro, could lead to contract renegotiations that in turn could potentially impact future revenues.

4.2 Capital risk management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits to other stakeholders, and to maintain an optimal capital structure while optimizing the cost of capital.

The Group monitors capital on the basis of the leverage ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including “current and non-current borrowings” as shown in the consolidated statement of financial position) less cash and cash equivalents. Total capital is calculated as ’equity’ as shown in the consolidated balance sheet plus net debt.

During 2015 and 2014, the Group’s strategy was to maintain its leverage ratio within a range of 50% - 70%. On December 31, 2015 and 2014 the Group’s leverage ratios were as follows:

: 2015 ^ 2014

Total debt (Note 12) $716,925 $ 739,549Less: cash and cash equivalents (Note 10) 129.4141 (49.2231

Net debt 687,511 690,326Total equity (Note 16) 286.172 328.229

Total capital $973,683 $1,018,555

Leverage ratio - 70% 67%

(d) Fair value interest rate risk .

The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The Group maintains all its borrowings at fixed rates.

Page 15

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Seryicios Petroleros Oro Negro,S. A. P/ I. de C. V.).Notes to the GonsoUdated Financial Statements December 31, 2015 and 2014

Note 5 - Critical accounting estimates and assumptions:

Estimates and judgments are continually evaluated and are based on the historical experience and other factors, including expected future events that are considered to be reasonable under the circumstances.

Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal actual results. The estimates and assumptions that pose a significant risk of causing a material adjustment to the carrying accounts of assets and liabilities within the next financial

.'year are addressed below.

a. Estimated impairment of property and equipment

The Group reviews its property and equipment for impairment when events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.

These assumptions and Management’s judgments are subject to change as new information becomes available. Changes in economic conditions can also affect the rate used to discount future cash flow estimates. ■.

b. Income tax

The Group is subject to income tax in numerous jurisdictions. . ,:

There are many transactions and calculations for which the ultimate tax determination is uncertain. When the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

c. Recognition of deferred tax assets

Deferred tax assets are recognized for tax losses carried forward only to the extent that realization of the related tax benefit is probable. As at 31 December 2015, $60,721 (2014: $37,048) of deferred tax assets related to available loss carry forwards are disclosed as deferred tax assets. In evaluating whether it is probable that taxable profits will be earned in future accounting periods prior to any tax loss expiry as may be the case, all available evidence was considered, including approved budgets, forecasts and business plans and, in certain cases, analysis of historical operating results. These forecasts are consistent with those prepared and used internally for business planning and Impairment testing purposes. Following this evaluation, it was determined there would be sufficient taxable income generated to realize the benefit of the deferred tax assets and that no reasonably possible change in any of the key assumptions would result in a material reduction in forecast headroom of tax profits so that the recognized deferred tax asset would not be realized /.

If the Group didn’t recognize 10% of the tax loss carry forwards, the deferred tax assets would have been $6,072 ($3,704 in 2014) lower and the profit for the year would have been $2,368 lower at December 31, 2015 ($3,704 in 2014). .. V :

Page 16

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

Note 6 - Expenses:December 31.2015 and 2014

Operationcost

Administrativeexpenses Total

Operationcost

Administrativeexpenses Total

Depreciation and amortization $ 32,759 $ - "■ $ 32,759 $ 29,258 - $ - ■ $ 29,258Corporate expenses 4,137 4,137 ' ■ ' 'T ■ ■ ■ ' ■ - ■ 4,650 4,650Certification 4,294 ■ '■ 4,294 2,253 2,253Professional fees and administrative services 385 385 80 80Other- ■- ■ 47 47 . - 79 79

Total $ 37.053 $ 4.569 $ 41.622 S 31.511 , 4Rno $ 36.320

Note 7 - Financing income and costs:

Finance income:2015 2014

Interest income from short term bank deposits $ - 9 ■■■ $ 49

■Finance.cost:Interest on borrowings - ■ ($ 56,317) ($ 56,597)Transaction costs (2,175) : (11,162)Foreign exchange loss - Net (764)Debt restructuring charges Y10.083)

Finance costs ($59,256) ($77,842)

Finance costs - Net ($69,247) ($77,793)

Note 8 - Income tax expense:

Tax payable:2015 2014

Current tax on profits for the year $ - - ■, $ ■:Deferred tax 5.314 24.277

Income tax benefit ■ 5 . 3 1 4 $ 24.277

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using theweighted average tax rate applicable to profits of the consolidated entities as follows:

Tax calculated at domestic tax rates to profits in the2015 2014

respective countries Tax effects of:

($18,132) ($22,088)

- Expenses not deductible for tax purposes ' 2 . 7- Annual inflation adjustment 5,476 10,469- Recoverable investment in fixed assets 15,477 39,540- Other temporary differences 2.491 (3,651).

Income tax benefit $ 5.314 $ 24.277

Page 17

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

The applicable tax rate was 30% in 2015 and 2014.

Deferred tax asset is expected to be reversed starting in 2020 and has been measured using an effective tax rate of 30%.

Note 9 - Financial instruments:

a. Financial instruments by categoryAmortized cost December 31.

Loans and receivables:2015 2014

Related parties (Note 13) $ 72,976 $ 41,173Cash and cash equivalents (Note 10) 29.414 49.223

Other financial liabilities at amortized cost:$ 102.390 $ 90.396

Debt (Note 12) $ 716,925 $ 739,549Related parties (Note 13) 2,237 880Trade and other payable ■ 531 .. 82

$ 719.693 $ 740.511

b. Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired may be assessed either by reference to external credit ratings (if available) or based upon historical information on counterparty default rates:

December 31.

■ v 2015 2014 .Bank deposits, with and without restriction, except cash on hand ;DNB Bank ASA "A+” $ 28,655 $45,262HSBC Mexico “BBB+” 759 3.961

$ 29.414 . $49.223

c. Fair values of financial assets and iiabilities

The amount of “cash and cash equivalents", “trade and other payables” and "related parties" approximates their fair value given their short maturity date. The carrying value of those accounts represents the expected cash flow.

Page 18

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Scrvicios Petroleros Oro Negro,s. a . p. l de c. v jNotes to the Consolidated Financial Statements December 31, 2015 and 2014 ' '■ '/'

The carrying value and estimated fair value of debt is presented below:

December 31. 2015 December 31, 2014

Book value Fair value Book value Fair value

Debt $716.925 $487 200 $739,549 $700.833

The estimated fair values are based on discounted cash flows and are classified within level two of the fair value hierarchy. These fair values consider the non-current portion of financial liabilities, since the current portion approximates the fair value.

Note 10 - Cash and cash equivalents:

December 31,

2015 2014

Cash and cash equivalents $29,414 $49 223

Note 11 - Property and equipment:

As of January 1, 2015 and 2014 $ 983,062 $ 486,479Accumulated depreciation \ (39.856) (10.596)

Carrying value as of January 1, 2015 and 2014 943,206 475,883

Additions • - . '■ 432,000Disposals ■V.- \ :.Conditioning and transportation costs 2.827 64.581

As of December 31, 2015 and 2014 946,033 972,466Depreciation for the period (32.759) (29.258)

Carrying value at December 31, 2015 and 2014 $ 913.274 $ 943 206

Depreciation expenses amounted of $32,759 and $29,258 for the period ended December 31, 2015 and 2014, respectively. '■

Page 19

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,

Notes, to the Consolidated Financial Statements December 31, 2015 and 2014 ; ;

Note 12 - Debt:

Long-term debt:BondsLess; current portion of debt

Non-current debt

December 31.

2015 2014

$716,925 $ 739,549(71,532) (48,317)

$ 645.393 $ 691.232

On January 24, 2014 the Group signed a bond loan agreement with the bond trustee, Nordic Trustee ASA, pursuant to which the Group issued bonds with a principal amount of $725,000 (the '‘2019 Bonds”), bearing an interest rate of 7.5% with semiannual interest payments starting on July 24, 2014 and semiannual amortizations of $6 million per each of the four jack-ups financed with the 2019 Bonds starting in July 2015. The maturity date of the 2019 Bonds is January 24, 2019.

Included in current portion of long-term loans is an amount of $71,532 on the 2019 Bonds. As of December 31, 2015 the Group was not in compliance with some of the covenants under the 2019 Bonds, (see Note 19) v : \V:\

Note 13 - Transactions with related parties:

a. The following transactions were carried out with related parties:December31. 'TPt

2015 2014

Bareboat Charter with Perforadora Oro Negro, S. de R. L. de C. V. Mobilization revenue with Perforadora Oro Negro, S. de R. L. de C. V.

$ 131,383 $103,20916.740

Total; --; f y S 131.383 3119.949

Adaptations, leasehold improvement with Perforadora Oro Negro, S. de R. L. de C. V.Corporate expenses with Operadora pro Negro, S. de R. L. de C. V. Other expenses with Perforadora Oro Negro, S. de R. L. de C. V. Interest loss with Oro Negro Offshore Drilling, PTE., Limited

($ 2,827) (4,137)

($41,124)(4,137)

(510)(69)

Total . ;■ (S 6.964) ($45,840)

b. The balances with related parties were:

Perforadora Oro Negro, S. de R. L. de C. V. $ 72.976 $41,173

Operadora Oro Negro, S. de R. L. de C. V. ($ 2.237)

oGO°ocel

Page 20

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S, A. P. I. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

Note 14 - Other liabilities:

2015 2014

Certification $6,547 \ $2,253Other ■■■ ■; 1.243 1.264

$7,790 $3,517

Certification Other Total

As of January 1,2015 $2,253 $1,264 $3,517Increases 4,294 2,806 7,100Amounts used during the year (2.827) (2.827)

As of December 31, 2015 y $6,547 : $1,243 $7,790

<1) Provision to obtain certifications from various regulatory bodies in order to operate the drilling rigs. The Group must maintain such certifications through periodic inspections and surveys. The provision includes the cost of maintaining such certifications, Including inspections, tests, surveys and dry-docking, as well as remedial structural work and other compliance costs.

Note 15 - Deferred income tax asset:

Deferred tax assets and deferred tax liabilities are as follows:

December 31.

Deferred tax assets:To be recovered in over 12 months To be recovered within 12 months

2015 2014

$ 65,592 $41,810_____17 700

Deferred tax liability:To be expensed in over 12 months To be expensed within 12 months

Deferred tax asset - Net

65.609 42.510

(36.018) (15,303)______ : (2.930)

(36.018) (18.233)

$ 29.591 $24.277

Page 21

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A.P. 1. de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014 -

December. 31.

■, 2015 V 2014

Tax loss carry-forwards $60,721 $37,048Deferred income i 2,907 4,763Accruals 1,981 700Prepaid expenses (2,280) (2,930)Property and equipment (33.738) (15.304)

$29,591 $24,277

Movements in deferred income tax assets and liabilities during the year are as follows:

■ TaxDeferred tax liabilities :. losses

As of January 1,2015 $ 37,048Charged to the income statement 23.673

As of December 31, 2015 $ 6.0.721

; : . Tax ■..Deferred tax liabilities ;: losses :

As of January 1, 2014 $Charged to the income statement 37.048

As of December 31,2014 $ .37,048

' ■ 'Property,Deferred ; Prepaid andrevenue Accruals expenses equipment Total

$ 4,763 $ 700 ($ 2,930) ($ 16,304) ; $ 24,27711.8561 : .1,281 , .......6.50 118,4341 5.314 V

S 2.907 $. 1.981 IS 2.2801 1$ 33.7381 $29.591 ■

Property,Deferred : Prepaid. : andrevenue Accruals expenses equipment Total

■■ $ V ; $ $ . ■■ : ■ ■ ■4,763 700 : \ f2.9301 : ■ 115.3041 : 24.277

$ .4,76.3 $ 700 ($ .2,930) 1$ 15.3041 $ 24,271

related tax benefits is probable.

As of December 31,2015, the Group has accumulated tax losses carry forwards of $202,403 which expire as follows: ;

Year in which the tax loss was aenerated Amount Expiration vear

2012 $4,892 20222013 33,296 20232014 72,449 ; 20242015 91,766 2025

Page 22

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. .PvL.de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

Note 16 - Stockholders’ equity:

Share capita!;

As of January 1, 2014

Transfer investment Fortius and Decus (Note 3b.)

Amount

$ 189,978

56,877

Shares issued 81.374

As of December 31, 2014 328,229

Capital decrease (42.0571

As of December 31,2015 $ 286.172

Due to the transfer of the investment in Oro Negro Fortius, PTE., Limited and Oro Negro Decus, PTE., Limited, to Oro Negro Drilling, PTE., Limited, there was a net loss of $6,568 that was recognized in stockholders’ equity. .

Note 17 - Leasing income:

Revenue generated per rig was as follows;December 31.

2015 2014

Jack-up Laurus $ 32,865 $ 30,842Jack-up Fortius 32,865 26,596Jack-up Decus \ 32,836 15,444Jack-up Primus 32.817 v- 30.327

Revenue generated 131,383 103,209

Mobilization revenue 4.554 2.495

Total revenue $ 135 937 $ 105.704

The mobilization revenue was recognized in the income statement as follows:

Fortius Decus Total

Mobilization income 2014 $8,240 $ 8,500 $16,740

Revenue recognized during 2014 11.6301 (8651 (2.4951

Carrying value as of December 31, 2014 6,610 7,635 14,245

Revenue recognized during 2015 (2.1641 (2.3901 (4.5541

Carrying value as of December 31, 2015 $4,446 $ 5.245 $ 9.691

Page 23

Oro Negro Drilling PTE., Limited and subsidiaries(a subsidiary of Integradora de Servicios Petroleros Oro Negro,S. A. P. I de C. V.)Notes to the Consolidated Financial Statements December 31, 2015 and 2014

Note 18 -Contingencies:

There are no pending or threatened claims, lawsuits and tax and administrative proceedings broughtagainst the Group or its subsidiaries arising in the ordinary course of business to seek remediation or.'damages.

Note 19 - Subsequent events:

• In 2016, the Group breached financial covenants with the 2019 Bonds prior to the completion of the Restructuring Transactions as is described below.

• On April 29, 2016, the Group completed a global restructuring transaction (together with the associated transactions, the “Restructuring Transactions”). Oro Negro Impetus, a related party, had signed a 2015 bond agreement to purchase the jack-up Impetus. As part of the restructure this bond was terminated and combined with the 2019 bond. The outstanding principal and accrued and unpaid interest on the 2015 Bonds converted into outstanding principal amount of 2019 Bonds. The Restructuring Transactions also resulted in the issuance of new 2019 Bonds with a principal amount equal to the accrued and unpaid interest under the 2019 Bonds and the issuance of new 2019 Bonds in respect of interest accrued at a rate of 7.5% per annum on certain amounts of restricted cash utilized prior to April 29, 2016. Upon the completion of the Restructuring Transactions, the totaI outstanding principal amount of 2019 Bonds was $939,100 with no interest accrued thereon, and the 2015 Bonds terminated, with no outstanding principal or accrued interest remaining thereunder. In connection with the Restructuring Transactions, all outstanding defaults under the 2019 Bonds were waived.

• On April 29, 2016, in accordance with the Share Transfer Agreement, Oro Negro Offshore DriHing PTE., Limited and Integradora de Servicios Petroleros Oro Negro, S. A. P. I. de C. V., transferred the control of Oro Negro Impetus, PTE., Limited to Oro Negro Drilling, PTE., Limited, becoming the intermediate shareholder.

Note 20 - Authorization for issuance of consolidated financial statements:

The financial statements and accompanying notes were authorized for issuance on May 12, 2016 by theGroup Officers legally empowered to do so.

Page 24