Statement for Corporate Governance

THE BOARD OF DIRECTORS’ REPORT ON CORPORATE GOVERNANCE

Det norske oljeselskap ASA (‘Det norske’) aims to ensure the greatest possible value creation to the shareholders over time. A good management and control model with a clear division of responsibility and roles between the owners, represented by the shareholders in the general meeting, the Board of Directors and the corporate management is crucial to achieve this.

1. IMPLEMENTATION AND REPORTING ON CORPORATE GOVERNANCE

The Board of Directors (‘the Board’) establishes the company’s goals and strategy, while it is the executive management’s task to implement the strategy in order to achieve the goals.

The Board at Det norske is responsible for actively adhering to sound corporate governance standards. The Board therefore carries out an annual review of the company’s principles for corporate governance.

Rules and regulations

Det norske is a Norwegian public limited liability company (ASA), listed on the Oslo Stock Exchange and established under Norwegian laws.

According to the Norwegian Accounting Act, section 3-3b, Det norske has to include a description of its principles for corporate governance as part of the Board of Directors Report in the annual report or alternatively make a reference to where this information can be found.

The Norwegian Corporate Governance Board (NCGB) has issued the Norwegian Code of Practice for Corporate Governance (‘the Code’). The Code can be found on www.ncgb.no. Adherence to the Code is based on the "comply or explain" principle, which means that a company must comply with all the recommendations of the Code or explain why it has chosen an alternative approach to specific recommendations.

The Oslo Stock Exchange requires listed companies to publish an annual statement of their policy on corporate governance in accordance with the Code in force at the time. Continuing obligations for companies listed at the Oslo Stock Exchange is available at www.oslobors.no.

Det norske complies with the above mentioned rules and regulations. Det norske complies with current edition of the Code, issued on 21 October 2010 and adjusted on 20 October 2011, unless otherwise specifically stated. The following statement on corporate governance is structured the same way as the Code, thus following the 15 chapters included in the Code.

Values and Code of Ethics

The Board has defined the company’s corporate values and has adopted a Code of Ethics to ensure that employees, hired personnel, consultants and others acting on behalf of Det norske, do so in a consistent manner with respect to ethics and good business practice. The Code of Ethics clarifies the company’s fundamental ethical values and is a guideline for those making decisions on behalf of the company.

Corporate social responsibility is partly reflected in the Code of Ethics, as principles for how the company and its employees shall act in relation to others, as well as the company’s sponsorship program. The Board of Det norske plans to establish a separate set of guidelines for sustainability.

The company shall demonstrate responsibility through actions, the quality of its work, the projects and products and all its activities. The company's ambition is that business activities shall integrate social, ethical and environmental goals and measures. As a minimum, Det norske will comply with laws, regulations and conventions in the areas where the company operates, but the established set of ethical guidelines extends beyond compliance. The company shall achieve its goals in accordance with the adopted Code of Ethics.

Det norske can use sponsorships to promote the company and its activities. Guidelines for the use of sponsorships are included in the Code of Ethics. Det norske supports measures that are directly related to the company’s business as an oil company, measures that provide significant exposure and measures that can be for the benefit of the employees.

The Code of Ethics is available on the website here.

Ongoing sponsorships is available on the website here.

2. BUSINESS GOALS AND STRATEGY

According to Det norske’s Articles of Associations section 3, its objective is "to carry out exploration for and recovery of petroleum and activities related thereto, and, by subscribing for shares or by other means, to participate in corresponding businesses or other business, alone or in cooperation with other enterprises and interests".

The company’s strategies are presented in the Board of Directors’ Report in the Annual Report and include more specific objectives. Through an annual strategy process, the Board evaluates and defines the company’s goals. Together with the company’s financial status, these goals are communicated to the market.

There are risks associated with Det norske’s oil and gas operations. Efficient operations that minimizes risk, is the company’s number one priority.

It is Det norske’s goal to build up a substantial and profitable oil and gas production over time. In order to achieve this goal, the company will take part in exploration, development and production activities and be opportunistic in its approach to buying and selling interests in fields and discoveries.

Further information about the Articles of Associations is available at: http://www.detnor.no/en/investor-relations/articles-ofassociation .

Further information about licences and activities is available at http://www.detnor.no/en/our-assets/portfolio .

3. EQUITY AND DIVIDENDS

The Board continuously evaluates the company’s capital structure, and underlines that a solid equity ratio is important if Det norske is to achieve its strategic goals in the future. Ensuring an optimal capital structure is a key priority to the Board. This involves monitoring available funding sources and related cost of capital.

The company wishes to maintain an appropriate capital structure that is consistent with the company’s risk profile and ambitions. Det norske plans to carry out an extensive exploration programme during the next few years. Future developments will require substantial investments. Dividends to shareholders will therefore not be given priority in the short term. In the current period, the Board’s priority is rather to create value for shareholders by identifying the exploration portfolio’s underlying values, and by maturing existing discoveries towards development and production.

At year-end 2011, the company’s book equity was NOK 3,677 million, which represents 48% of the balance sheet total of NOK 7.716 million.

The financial liquidity is considered to be good. At 31st December 2011, the company’s cash and cash equivalents were NOK 842 million. In addition, Det norske has a credit facility for exploration of NOK 3.500 million, of which NOK 400 million had been drawn at year end.

In April 2011, the annual general meeting authorised the Board to increase the share capital by a maximum of NOK 11,111,111, representing up to 10 percent of the outstanding share capital at the time of the meeting. The mandate was sought with the aim to strengthen the company’s equity.

In September 2011, Det norske completed a private placement of 11.1 million new shares, and thus used the full authorization. Additionally, the company issued 5,693,564 shares in December 2011 as investors in the convertible bond AKX01 exercised their right to convert bonds into shares at a price of NOK 79.3 per share. The new share capital of the company is NOK 127,915,786.

The general meeting in April 2011 provided the Board a mandate to re-purchase company shares equivalent to up to 10 percent of the total share capital. The mandate is valid until the ordinary general meeting in 2012, but is not restricted to defined purposed as recommended by the Code. As of 31 December 2011, the mandate has not been used.

4. EQUAL TREATMENT OF SHAREHOLDERS AND TRANSACTIONS WITH CLOSELY RELATED PARTIES

It is a fundamental principle that all shareholders in the company shall be treated equally. The company has one class of shares, and all shares carry the same rights.

As per 31 December 2011, Aker Capital AS, owned 50.81 percent of Det Norske. Aker Capital AS is a wholly owned subsidiary of Aker ASA. On 30 January 2012, Aker Capital sold 1,047,366 shares in Det norske and thus reduced its ownership stake to 49.99 percent. For the fiscal year 2011, Det norske oljeselskap ASA’s accounts will be incorporated in Aker ASA’s accounts.

The Board recognise Aker Capital’s contribution as an active shareholder engaging in the company’s activities and providing input in matters concerning strategy, transactions and financing. Investor communication seeks to ensure that any shareholders who have views on these issues are heard, and management will actively seek the views of other key shareholders. Investor activities are also directed at promoting higher stock liquidity to counter the reduced free float of shares due to concentrated ownership structure.

Aker Capital’s parent company Aker ASA is not defined as a closely related company of Det norske according to the Public Limited Liability Companies Act (‘Companies Act’). The Board and management of Det norske are particularly aware of commercial situations where Aker-companies are potential partners. Internal procedures for ensuring arm’s length principles have been developed and are monitored.

The Board ensures equal treatment of shareholders in all capital market transactions. Prior to any transactions, the Board will discuss principles for allocation and related issues.

Transactions in own shares

In the event that the Board decides to use its current authorisation to buy back company stock, the transactions will be carried out through the stock exchange or at prevailing stock exchange prices if carried out in any other way.

Risk of conflicts of interest

The company’s employees are prohibited from engaging in financial activities of a potentially competitive nature in relation to Det norske. The company’s Code of Ethics provides clear guidelines as to how employees and representatives of the company’s governing bodies should act in situations where there is a risk of conflicts of interest and partiality.

5. FREELY NEGOTIABLE SHARES

Det norske’s shares are freely negotiable securities, and the company’s Articles of Association do not impose any form of restriction on their negotiability.

The company’s shares are listed on the Oslo Stock Exchange and the company works actively to attract the interest of new shareholders, both Norwegian and foreign investors. Strong liquidity in the company’s shares is essential if the company is to be viewed as an attractive investment and thus achieve a low cost of capital.

6. GENERAL MEETING

The annual general meeting (‘AGM’) of Det norske

The AGM is the company’s highest authority. The Board strives to ensure that the AGM is an effective forum for communication between the shareholders and the Board, and encourages shareholders to participate in the meeting.

The Board of Directors can convene an extraordinary general meeting at any time. A shareholder or a group holding at least five per cent of the company’s shares, can request an extraordinary general meeting. The Board is then obliged to hold the meeting within one month of receiving the request.

Preparation for the AGM

The AGM is normally held before the end of April each year, and no later than the end of June, which is the latest date permitted by the Company Law. The AGM for 2012 will be held 19 April. The date of the next AGM is normally included in the financial calendar.

The notice is sent to the shareholders and published to the company’s website and the stock exchange no later than 21 days before the AGM.

Section 7 in the company’s Articles of Association, about the general meeting, stipulates that documents concerning matters to be considered by the AGM, can be made available to the shareholders on the company’s website. This also applies to documents that are required by law to be included in or enclosed with the notice of the AGM.

The supporting documentation provides the necessary information for shareholders to form a view on the matters to be considered.

The Board of Directors’ Report is published on the company’s website no later than one week before the meeting.

Participation in the AGM

According to section 7 in the Articles of Association, the right to attend and vote at the general meeting can only be exercised when the share transaction is introduced in the shareholder register no later than the fifth business day prior to the general meeting (registration date).

Shareholders who are unable to attend the AGM are encouraged to vote by proxy. The deadline for registration is set as close as possible to the date of the meeting, normally the day before.

Agenda and conduct of the AGM

The Board propose the agenda for the AGM. The main agenda items are determined by the requirements of the Public Limited Liability Companies Act and section 7 in the company’s Articles of Association.

At the meeting in April 2012, the Board will nominate an independent person who can vote on behalf of the shareholders as their authorised representative. The Board of Directors may decide that it shall be possible for shareholders to cast their votes in writing, including by means of electronic communication, in a given period prior to the general meeting. Satisfactory methods shall be used in order to authenticate the sender.

Det norske’s general meetings are normally chaired by the Chair of the Board, or a person appointed by the Chair of the Board. The Board of Directors, the Nomination Committee, the auditor and representatives of the executive management shall attend the AGM.

Minutes of the meeting are published on the company’s website and through a stock exchange announcement.

7. NOMINATION COMMITTEE

Section 8 in the company’s Articles of Association stipulates that the nomination committee shall consist of three members elected by the AGM. It also stipulates that the majority of the members shall be independent of the Board and the executive management and that the members shall be elected for a period of two years at a time.

At the AGM in April 2011, the following three members were elected to the nomination committee:

Finn Haugan - CEO Sparebanken Midt-Norge
Øyvind Eriksen - CEO Aker ASA
Helge Eide - CEO DNO International ASA

Information about the members of the nomination committee is available on the company’s website. Committee member Øyvind Eriksen is currently the CEO of Aker ASA, who is the 100 percent owner of Aker Capital, the major shareholder of the company.

The nominating committee should be composed in a manner that takes into account the interests of shareholders in general. The nominating committee’s duties are also stated by section 8 in the Articles of Association. The committee shall propose candidates for - and remuneration to the Board of Directors and the nomination committee. The committee’s recommendation shall be well-grounded.

8. BOARD OF DIRECTORS: COMPOSITION AND INDEPENDENCE

The Board of Det norske consisted of eight members as of 31 December 2011. The company’s Articles of Associations, section 5, stipulates that the Board shall consist of between five and ten members and the members shall be elected for a period of up to two years.

Six directors, hereof three women, are elected by shareholders while two directors, of which one woman, are elected by and amongst employees. Among the six shareholder-elected directors, one (Maria Moræus Hanssen) is affiliated with the company’s largest shareholder Aker Capital. All other directors are considered independent of the company’s main shareholder, as well as of the company’s material business contacts. All directors are considered independent of the company’s executive personnel.

The Board composition ensures alignment of interests with all shareholders and the Board collectively meets the need for expertise, capacity and diversity. Directors possess strong experience from banking and finance, oil and offshore in general, and reservoir engineering, exploration and field development in particular.

An overview of the expertise of the members is available on the website: http://www.detnor.no/en/about-det-norske/board-of-directors

9. THE WORK OF THE BOARD OF DIRECTORS

The Board has authority over and is responsible for supervising the company’s business operations and management. The Board’s objectives are to create value for the company’s shareholders in both the short and long term and to ensure that Det norske fulfils its obligations at all times. While the Chief Executive Officer is responsible for the day-to-day management of the company’s business activities, the Board acknowledges its responsibility for the overall management of the company. The Board is actively involved in:

A. Drawing up strategic plans and supervising these through regular reporting and reviewing,

B. Identifying significant risks to Det norske’s activities and establishing appropriate systems to monitor and manage such risks,

C. Ensuring that shareholders have access to timely and correct information about financial circumstances and important business-related events in accordance with relevant legislation, and

D. Ensuring the establishment and securing the integrity of the company's internal control and management systems.

The board members contribute with extensive experience, knowledge and capabilities for the benefit of the company. Through regular meetings with the executive management, the Board is kept up-to-date about the company’s development and performance. The division of roles between the Board and the company’s management is clearly defined in the instructions for the Board and the instructions for the CEO, with specific areas of responsibility and administrative procedures. The AGM elects the Chair of the Board. Det norske’s board appoints its own Deputy Chair.

Considering the size of the company and the scope of its activities, the Board finds it appropriate to keep all board members informed about all board matters.

The Board has established an audit committee consisting of the following three board members:

Kaare Gisvold
Maria Moræus Hanssen
Hege Sjo

Of the three members, two are independent of the biggest owner. The audit committee holds regular meetings and reviews all interim reports before they are published. The committee works extensively with the auditor and reviews the quality of all quarterly reports. The committee is also extensively involved in the company’s risk management. In 2011 the committee and management held several meetings evaluating the risk management on financial reporting. With the assistance of auditor firm Ernst and Young the company has implemented applicable parts of the COSO framework, which is describd further in the chapter below. The audit committee has designed a self-assessment method which will be applied in 2012.

Also, the Board has a remuneration committe consisting of the following two board members:

Svein Aaser
Kaare Gisvold

The Board did not carry out a formal evaluation of its own performance in 2011, as recommended by the Code.

10. RISK MANAGEMENT AND INTERNAL CONTROL

Good internal control and risk management contributes to the transparency and quality reporting for the benefit of the company and the shareholders' long-term interests.

Det norske's internal procedures provide a good basis for monitoring and managing the company's activities.

The management system consists of four levels, which cover all important activity areas. The top level includes a description of the company's vision, the management system and the management’s responsibilities. Governing documents and policies are at level two, procedures at level three, while guidelines and support documents are included in level four. Key policy documents for risk management, internal control and financial reporting are included at level two and three. The company's risk management process covers a wide range of risks, opportunities and threats, and outlines how these shall be monitored and governed.

The Board undertakes an annual review of the company's main business areas and internal control procedures.

Det norske has established a framework for Internal Control for Financial Reporting based on COSO (Committee of Sponsoring Organizations of the Treadway Commission) and is operationalized as follows:

Internal Control Environment
Objective setting
Event Identification and Risk assessment
Risk Response and Control Activities
Information and communication
Monitoring

The established framework is an integrated part of the Company’s Governing Documents. The company's internal control environment is characterized by a clearly defined responsibilities and roles between the Board of Directors, Audit Committee and Management. The implemented procedure for financial reporting is integrated with the company’s Governing Documents, including ethical guidelines that describe how the representatives of the company must act.

The Company has implemented and documented that processes, procedures and controls for Financial Reporting, is at an adequate level for the business. These objectives settings ensure:

effective and appropriate identification of risks
procedures are documented in a satisfactory manner that makes compliance possible
sufficient segregation of duties
provision of relevant, timely and reliable reporting
prevention of manipulation/fraud of reported figures
that all relevant requirements of IFRS are complied

Key events that may affect the financial reporting are identified and monitored continuously. A risk assessment related to financial reporting is performed and documented by the management, and reviewed by Audit Committee and approved by the Board. The company's risk response ensures proper quality of financial reporting through the use of appropriate and effective controls in order to reduce risk to an acceptable level.

The company emphasizes proper information and communication of financial reporting, with appropriate involvement of various levels in the organization. A separate meeting with the Audit Committee is conducted prior to the Boards approval of quarterly reporting, where the auditor also is present.

The Finance department monitors that the established procedures and processes are complied with and significant deviations are reported to the Audit Committee. Actions for further development are identified and a self-evaluation is completed and discussed with the Audit Committee. The management prepares an annual report as the basis for the Board's description of the internal control of financial reporting.

The company works continuously and systematically with risk management, both at the overall company level as well as on the operational level. Det norske’s operational activities are limited to Norway and are subject to Norwegian regulations. All activities taking place in a production license are subject to audits from authorities, such as The Petroleum Safety Agency, The Climate and Pollution Agency and the Norwegian Petroleum Directorate, as well as license partners. During 2011, Det norske participated in financial audit in seven license partnerships, while the company received audits on three of its
operated licenses. Furthermore, several reports were purchased from financial audits in partner-operated licenses. In addition to these financial audits, there were audits from authorities and license partners on Det norske’s management system and the planning and execution of our drilling operations. These audits, from external parties, contribute to the quality control of the company’s internal systems. They are also valuable in the work to identify risks and weaknesses, and in this way assist the company in its continuous work to improve the management system.

To further ensure that Det norske’s management system is in alignment with laws, regulations, standards and best practice within the industry, Det norske has identified specific areas for further improvements in 2012. These processes are stated in the company’s HSEQ-plan for 2012.

During the strategy meeting early 2012 the Board will discuss risk management strategy integration on all levels of the company’s activities. The Board considers an even wider risk definition to be applied as the company grows and meets enhanced demands from all of the company’s stakeholders.

11. REMUNERATION OF THE BOARD OF DIRECTORS

The remuneration of the board members is not performance-based, and none of the shareholder-elected board members have pension schemes or termination payment agreements with the company. Information about all remuneration paid to individual board members is provided in Note 9 to the annual accounts.

The nomination committee proposes the remuneration of the Board and ensures that it is proportionate to the responsibility of its members and the time spent on board work. The Board must approve any board member’s consultancy work for the company and remuneration for such work.

12. REMUNERATION OF EXECUTIVE PERSONNEL

The Board stipulates the Chief Executive Officer’s remuneration and other terms and conditions of employment. Note 9 to the annual accounts contains details about the remuneration of the Board and executive personnel, including payroll and pension expenses.

The company has a bonus scheme whereby bonuses can represent up to 20 percent of the annual salary. The Board decides whether bonuses will be paid, based on the previous year’s performance. For 2011, the board decided to give full bonus based on the extraordinary exploration results, which has resulted in an exceptional strong share price performance. The company has no pension scheme for salaries exceeding 12 times the basic amount (G), but a share investment scheme has been introduced as part of the pay system. The employees receive an annual payment of 10 percent of the previous year’s gross salary. If, within thirty days of this payment, employees wish to buy shares in the company, the company will pay a corresponding amount as tax compensation. For those who do not buy shares, a tax withholding will be deducted from the payment. The first payments under the share investment scheme were made in January 2011.

13. INFORMATION AND COMMUNICATION

Det norske maintains a proactive dialogue with analysts, investors and other stakeholders of the company. The company strives to continuously publish relevant information to the market in a timely, effective and non-discriminatory manner, and has a clear goal to attract both Norwegian and foreign investors and to promote higher stock liquidity.

The company recognizes the challenges related to estimating the underlying values in the company. The investor communication seeks to provide a balanced picture of the risks and opportunities related to the company’s assets.

All stock exchange announcements are made available on the Oslo Stock Exchange website, www.newsweb.no, as well as the company’s website (www.detnor.no). The announcements are also distributed to news agencies and other online services through Cision.

Det norske publishes its preliminary annual accounts by the end of February. The complete annual report, including approved and final annual accounts and the Board of Directors report, is available no later than one week before the AGM. The AGM is held before 1st of May , as required by the Securities Trading Act.

The company’s financial calendar for the coming year is published as a stock exchange announcement and made available on the company’s website no later than 31 December each year, in accordance with the continuing obligations for companies listed at the Oslo Stock Exchange.

Det norske holds open presentations in connection with the publication of the company’s quarterly results. The presentations are webcasted for the benefit of investors who are prevented from attending or do not wish to attend the presentations. At the presentations, the executive management review and comment on the published results, market conditions and the company’s future prospects.

The company’s management gives high priority to communication with the investor market. Individual meetings are organised for major investors, investment managers and analysts. The company also attends investor conferences.

The long-term purpose of the IR function is to secure access to capital on competitive terms, and for the share price to reflect the underlying values in the company.

14. TAKEOVERS

The company’s objective is to create value for its shareholders. Any invitations to participate in structural changes will be evaluated on the basis of this objective. The Board has not established a separate set of guidelines for how it will act in the event of a take-over bid, as recommended by the Code. The Board will, as a main rule, follow the recommendations issued by the Code related to take-overs.

The Board of Directors is committed to equal treatment of all shareholders and will ensure openness with respect to any potential take-over of the company. Also, the Board will do its utmost to ensure that the shareholders are given sufficient information and time to form a view of the offer.

The Board will not, except on special grounds, seek to prevent or obstruct bids for the company’s shares or individual business areas. In the event of a takeover bid, the Board will issue a statement evaluating the offer and making a recommendation as to whether or not the shareholders should or should not accept the offer. The Board’s statement will state whether the views included are unanimous or not.

15. AUDITOR

Ernst & Young in Stavanger, Norway, is the auditor of Det norske.

The AGM elects the auditor and approves the auditor’s fee. At least once a year, the Board of Directors will meet with the auditor without representatives of the company management being present, to review internal control procedures and identify any weaknesses and proposals for improvement. The auditor participates in most meetings with the audit committee and in board meetings to discuss the annual accounts. The auditor’s independence in relation to the company is evaluated annually. The auditor carries out certain consultancy services for the company, which is viewed not to be in conflict with its interests as auditor.