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Electromagnetic Geoservices ASA

Earnings Release Feb 2, 2022

3587_rns_2022-02-02_c725a1ae-5eab-4da5-9edf-f4a8ee14a221.pdf

Earnings Release

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EMGS FOURTH QUARTER 2021.

Fourth Quarter 2021. 1

1

Highlights in the Fourth Quarter.

Operational highlights

  • Atlantic Guardian completed fully funded multi-client survey in the North Sea
  • Vessel utilisation for the fourth quarter 2021 was 44% compared with 0% in the corresponding quarter in 2020
  • Vessel entered warm-stack mid-November

Financial highlights for the quarter

  • Significant improvement in financial results, and turning negative profitability in 2020 to positive in 2021
  • Revenues of USD 5.1 million, up 27% from USD 4.0 million in 4Q 2020
  • Operating profitability during the quarter resulted in EBITDA of USD 2.7 million, up 65% from the same quarter in 2020
  • Adjusted EBITDA of USD 0.4 million is down 46% from 4Q 2020 given higher operational activity. YTD for the full year (unaudited) Adjusted EBITDA was USD 11 million, up from negative USD 3.3 million in 2020
  • 2 nd Bond buy-back with an aggregate nominal value of USD 4.0 million, reducing the outstanding bond to USD 24.5 million
  • Year end free cash balance of USD 9.9 million

Subsequent events

  • Several licenses offered in Norway's 2021 APA License round with EM commitments
  • Proposal to extend Senior Unsecured Convertible Bond (EMGS03) by 24 months to May 2025, sent to bondholders and is expected to be approved, given indicated support by major bondholders

Key financial figures

Q4 2021 Q4 2020 YTD 2021 2020 Q3 2021
Amounts in USD million (except per share data) Unaudited Unaudited Unaudited Audited Unaudited
Contract sales 0.0 0.4 7.6 11.5 7.4
Multi-client sales 3.8 2.3 15.9 7.8 4.0
Other revenue 1.3 1.4 5.3 5.6 1.3
Total revenues 5.1 4.0 28.9 24.9 12.7
Operating profit/ (loss) 0.8 -1.4 9.2 -17.7 7.3
Income/ (loss) before income taxes 0.9 -2.4 5.3 -22.7 5.3
Net income/ (loss) 1.2 -3.0 4.9 -23.4 4.7
Earnings/ (loss) per share 0.01 -0.02 0.04 -0.18 0.04
Average number of shares outstanding (in thousands) 130,970 130,970 130,970 130,970 130,970
EBITDA 2.7 1.6 19.4 6.1 9.7
Multi-client investments 0.8 0.0 1.4 0.6 0.1
Vessel and office lease 1.5 0.9 6.9 8.8 2.1
Adjusted EBITDA 0.4 0.7 11.0 -3.3 7.6

EBITDA = Operating profit /(loss) + Depreciation and ordinary amortisation + Multi-client amortisation + Impairment of long-term assets Adjusted EBITDA = EBITDA (see above) less multi-client investment (capitalisation) and less the cost of vessel and office lease.

Financial Review.

Revenues and operating expenses

EMGS recorded revenues of USD 5.1 million in the fourth quarter of 2021, up 27% from USD 4.0 million reported for the corresponding quarter of 2020. Contract sales and other revenue totalled USD 1.3million, of which USD 1.3million is related to revenue recognition of DeepBlue partner contribution with no cash effect, while multi-client sales amounted to USD 3.8 million up 65% from the fourth quarter 2020. EMGS has elected to delay recognition of USD 0.8 million in uplift revenue as a consequence of a dispute with a customer, for which EMGS cannot reliably estimate the outcome. For the fourth quarter of 2020, contract sales and other revenue totalled USD 1.7 million, while multi-client sales amounted to USD 2.3 million.

Revenues for the full year 2021 amounted to USD 28.9 million, up 16% compared with USD 24.9 million for the full year 2020.

Charter hire, fuel and crew expenses totalled USD 0.9 million in the fourth quarter of 2021, down 34% compared to USD 1.3 million in the fourth quarter of 2020. The Company capitalised USD 0.8 million of the charter hire, fuel and crew expenses as multi-client expenses in the fourth quarter of 2021, while no charter hire, fuel and crew expenses were capitalised in the fourth quarter of 2020. The charter hire, fuel and crew expenses have increased from USD 2.0 million in the fourth quarter of 2020 to USD 3.0 million in same period this year when adding back the vessel lease expenses and the capitalised multi-client expenses. This is a result of increased activity level in the fourth quarter of 2021 compared to 2020 where the Atlantic Guardian was warm-stacked for the entire fourth quarter.

For the full year 2021, the Company has recorded charter hire, fuel and crew expenses of USD 3.5 million, down 41% from USD 5.9million in 2020. The reduction in expenses reflects, despite increased vessel activity, the Company's continued focus on optimizing our variable expenses.

Employee expenses amounted to USD 0.8 million in the fourth quarter of 2021, up from USD 0.3 million in the same quarter in 2020. Employee expenses for the full year were USD 3.0 million in 2021, compared with USD 9.8 million in 2020. This 69% decrease is primarily the result of a more flexible business model.

Other operating expenses totalled USD 0.8 million in the fourth quarter this year. For the full year 2021, other operating expenses amounted to USD 3.0 million, slightly down from USD 3.1 million in 2020.

Depreciation, amortisation and impairment

Depreciation and ordinary amortisation totalled USD 1.0 million in the fourth quarter of 2021, down from USD 1.2 million in the fourth quarter of 2020. Depreciation of right-of-use assets, vessel leases and office leases totalled USD 0.7 million in the fourth quarter of 2021 compared to USD 1.2 million in fourth quarter of 2020.

Depreciation and ordinary amortisation decreased from USD 4.5 million for the full year 2020 to USD 4.2 million in 2021. Depreciation right-of-use assets, vessel leases and office leases for the full year 2021 were USD 3.5 million compared to USD 7.9 million for the full year 2020, due largely to the reduction in the number of vessels from two to one. The Company capitalised USD 1.2 million of the depreciation of the right-of-use asset as multi-client expenses in 2021, compared with USD 0.5 million in 2020.

Multi-client amortisation amounted to USD 0.2 million the fourth quarter, compared with USD 0.5 million in the fourth quarter of 2020. The Company uses straight-line amortisation for its completed multi-client projects, assigned over the useful lifetime of four (4) years.

Multi-client amortisation totalled USD 2.5 million for the full year 2021, down from USD 4.1 million in 2020.

Net financial items

Net financial items ended at positiveUSD 0.1million in the fourth quarter of 2021, compared with a negative USD 1.0million in the corresponding quarter of 2020. This is largely the result of a USD 1.0 million gain that was recognised in the fourth quarter as a consequence of a bond repurchase with an aggregate nominal value of USD 4.0 million at 75 per cent of par. An equivalent bond repurchase was made in the third quarter of 2021. In the fourth quarter of 2021, the Group recorded an interest expense of USD 0.8 million compared with an interest expense of USD 1.0 million in the fourth quarter of 2020. In the fourth quarter of 2021, the Company recorded a net currency loss of USD 46 thousand, compared with a currency loss of USD 129 thousand in the fourth quarter of 2020.

Interest income amounted to USD 5 thousand in the fourth quarter compared to USD 130 thousand in the corresponding quarter in 2020.

For the full year 2021, net financial items were negative USD 3.9 million, compared to negative USD 5.0 million in 2020.

Income/(loss) before income taxes

Profit before income taxes amounted to USD 0.9 million in the fourth quarter 2021, compared with loss before income taxes of USD 2.4 million in the corresponding quarter in 2020.

Profit before income taxes for the full year 2021 amounted to USD 5.3 million, compared with loss before income taxes of USD 22.7 million in 2020.

Income tax expenses

Income tax expenses of negative USD 0.3 million were recorded in the fourth quarter of 2021, compared with an income tax expense of USD 0.7 million in the fourth quarter of 2020. The negative income tax in the fourth quarter of 2021 is the result of an adjustment to income tax accrued in the third quarter of 2021.

Income tax expenses for the full year 2021 were USD 0.4 million, compared with USD 0.7 million in the same period in 2020.

Net income for the period

Profit for the fourth quarter of 2021 amounted to USD 1.2 million, up from a loss of USD 3.0 million in the fourth quarter of 2020.

Profit for the full year 2021 was USD 4.9 million, up from a loss of USD 23.4 million in 2020. This significant turnaround in profitability is the result of the new flexible business model and successful execution of acquisition projects.

Cash flow and balance sheet

In the fourth quarter 2021, net cash flow from operating activities was USD 1.3 million, down slightly from net cash flow of USD 1.6 million in the fourth quarter of 2020.

For the full year 2021, net cash flow from operating activities was USD 23.6 million, compared with negative USD 1.9 million in 2020. This is in large part the result of the significant improvement in EBITDA for 2021 as compared to 2020.

EMGS applied USD 1.4 million in investing activities in the fourth quarter of 2021, compared with USD 0.1 million in the fourth quarter of 2020. EMGS invested in two separate multi-client surveys in the North Sea in the fourth quarter of 2021. Both surveys were in the Utsira High area.

Cash flow from investing activities for the full year 2021 amounted to a negative USD 2.7 million, compared with a negative USD 1.8 million in 2020. The Company invested USD 0.1 million in equipment and USD 2.7 million in the multi-client library in 2021.

The carrying value of the multi-client library was USD 2.4 million at 31 December 2021, up from USD 1.3 million at 30 September 2021 and USD 2.2 million at 31 December 2020.

Cash flow from financial activities was negative USD 4.8 million in the fourth quarter of 2021, compared with a negative cash flow of USD 1.6 million in the fourth quarter of 2020. The increased finance cost in the fourth quarter of 2021 is the

result of the USD 3.0 million used in the bond buy-back.

Cash flow from financial activities for the full year 2021 amounted to negative USD 15.2 million, compared with a negative USD 11.9 million in the same period of 2020. The increased finance cost in the for the full year 2021 is a result of USD 6.0 million used in the two separate bond repurchases.

The Company had a net decrease in cash, excluding restricted cash, of USD 4.8 million during the fourth quarter of 2021. At 31 December 2021, cash and cash equivalents totalled USD 9.9 million.

Financing

Total borrowings were USD 24.3 million at 31 December 2021, down 24% from USD 31.8 million at 31 December 2020 and down 14% from USD 28.1 million at 30 September 2021. This includes the Company's bond loan, which had a carrying value of USD 32.0 million recorded as non-current borrowings and USD 1.9 million recorded as equity in accordance with IFRS.

In December of 2021, the Company repurchased a portion of the Company's outstanding USD 28.5 million convertible bond. Bonds with an aggregate nominal value of USD 4.0 million were repurchased at 75 per cent of par value. This was the second bond repurchase, the first occurring in July 2021 also at 75% of par value, with a combined nominal value of USD 8.0 million for the full year.

The convertible bond loan contains a financial covenant requiring free cash and cash equivalents of at least USD 2.5 million. In addition, the convertible bond agreement has restrictions regarding the Company´s ability to sell or otherwise dispose of the multi-client library, declare or make dividend payments, incur additional indebtedness, change its business or enter into speculative financial derivative agreements. As of 31 December 2021, the free cash and cash equivalents totalled USD 9.9 million.

Operational Review.

Q4 2021 Q3 2021 Q2 2021 Q1 2021 Q4 2020
Proprietary work 0 % 42% 0 % 0 % 0 %
Multi-client projects 44% 6 % 31% 6 % 0 %
Total utilisation 44% 48% 31% 6 % 0 %

Vessel utilisation and fleet allocation

Vessel utilisation for the fourth quarter 2021 was 44% compared with 0% in the corresponding quarter in 2020. For the full year 2021, vessel utilisation was 32% compared with 12% for 2020.

In the fourth quarter of 2021, the Company's vessel was allocated 44% to multi-client projects and no time was spent on proprietary work. In the comparable quarter of 2020, no time was spent on multi-client projects or proprietary work.

EMGS had one vessel on charter and recorded 3.0 vessel months in the quarter. In the fourth quarter 2020, the Company also had one vessel on charter and recorded 3.0 vessel months.

Vessel activity in the fourth quarter

Utilisation Q4 2021 Status Q4 2021 Firm charter period Remaining option periods
Atlantic Guardian 44% In operation 20 October 2022 4 x 12 months

Atlantic Guardian

The Atlantic Guardian successfully completed a fully funded multi-client survey in the North Sea and entered warm-stack for the second half of the fourth quarter.

Backlog

As of 31 December 2021, EMGS' backlog was USD 0.1 million, compared with a backlog of USD 8.6 million at the end of the fourth quarter 2020. The Company is encouraged by the level of interest in new acquisition projects both in Norway and internationally and is working to secure backlog.

Subsequent events

On the 18th of January 2022, the result of Norway's 2021 APA license round was announced. Of the 53 production licenses offered, five production licenses included an EM commitment. These EM commitments are an important driver in securing additional backlog.

On the 27th of January EMGS announced a resolution to propose an extension of the maturity date for the USD 24.5 million convertible bond by 24 months and increase the interest margin by 100 bps. A sufficient majority of the bondholders have indicated they intend to vote in favour of the proposal.

Share information

EMGS was listed at the Oslo Stock Exchange in March 2007. During the fourth quarter 2021, the EMGS share was traded between NOK 1.19 and NOK 1.54 per share. The last closing price before 31 December 2021 was NOK 1.19.

As of 31 December 2021, the Company had a total of 130,969,690 shares outstanding.

Risks and uncertainty factors

The most important risk factor for EMGS is the demand for EM services. Historically, demand for EM services has been correlated to the oil price, which can be volatile, unpredictable and is subject to upward and downward pressure from economic, environmental, political, and other factors. The Company expects that this correlation will remain going forward. As EM surveys are still considered a niche product to many E&P companies, demand can quickly change as a response to declining oil price.

The Company's convertible bond loan due in 2023 contains a financial covenant requiring free cash and cash equivalents of at least USD 2.5 million. As of 31 December 2021, the free cash and cash equivalents totalled USD 9.9 million.

In 2021, the Company'sfocus has been on increasing backlog and project execution. The first project in Mexico, subsequent to mobilising the vessel from warm-stack, was successfully completed ahead of schedule prior to the end of April 2021. The second major survey in 2021, located in Southeast Asia, has also been successfully completed prior to the end of the third quarter. The final survey of 2021, a fully prefunded multi-client survey in the North Sea, was completed in November. Upon completion, the vessel was placed in warm-stack until additional backlog is secured.

Securing additional backlog in 2022 represents the most significant uncertainty factor going into 2022.

Reference is made to the 2020 Annual Report for a further description of other relevant and important risk factors.

Outlook

The implementation of the new more flexible business model implemented in late 2020, combined with safe and efficient execution of acquisition projects contributed to 2021 being profitable. At the start of 2022, the Company has more free cash and a materially lower outstanding balance on the convertible bond loan as compared to the start of 2021.

We prepared for any increase in demand for CSEM services as a result of higher oil prices and increased investment in exploration.

The Atlantic Guardian will start 2022 in warm-stack and remain so until sufficient acquisition projects are secured to warrant mobilisation of the vessel. EMGS plans to mobilise the Atlantic Guardian for a multi-client campaign in early Q2 on the Norwegian Continental Shelf. The Company is encouraged by the interest for EM services and is working to secure prefunding for the campaign.

Multi-client late sales have been and will continue to be an important part of EMGS' revenue stream, generating cash in addition to acquisition contracts. Late sales in 2021 increased by 27% from an all-time low in 2020, and EMGS will work toward securing additional late sales in 2022.

During 2021, the Company made two accretive bond buy-backs. Capital discipline remains a top priority for the Company, and it is our aim that the equity of the Company will continue to gradually improve.

In the longer term, the Company believes that its unique EM technology could also play an importantrole in the exploration for marine minerals as well as development of the offshore wind market in Norway and internationally. The Company has initiated early-stage discussions with customers and stakeholders aimed at generating proof of concept surveys.

The Company maintains its cutting-edge technological position in the EM market and is well-positioned to be able to capitalise on any upturn in the market with a more streamlined and efficient organisation.

Oslo, 02 February 2022

Board of Directors and CEO

Consolidated Income Statement.

Q4 2021 Q4 2020 2021 2020
Amounts in USD 1 000 Unaudited Unaudited Unaudited Audited
Operating revenues
Contract sales 41 359 7,634 11,503
Multi-client pre-funding 2,951 0 10,151 3,229
Multi-client late sales 825 2,286 5,785 4,542
Other revenue 1,294 1,380 5,304 5,642
Total revenues 5,112 4,024 28,874 24,916
Operating expenses
Charter hire, fuel and crew expenses 894 1,349 3,502 5,924
Employee expenses 757 337 3,012 9,818
Depreciation and ordinary amortisation 981 1,197 4,207 4,462
Depreciation right-of-use assets 714 1,236 3,524 7,856
Multi-client amortisation 224 513 2,457 4,077
Impairment of long-term assets 0 46 0 7,439
Other operating expenses 775 713 2,964 3,067
Total operating expenses 4,345 5,390 19,665 42,644
Operating profit/ (loss) 767 -1,366 9,209 -17,728
Financial income and expenses
Interest income 5 130 28 208
Interest expense -675 -748 -2,925 -4,105
Interest expense lease liabilities -147 -258 -762 -1,111
Impairment financial assets 0 0 -1,920 0
Net gains/(losses) of financial assets and liabilities 1,000 -3 2,000 -3
Net foreign currency income/(loss) -46 -129 -290 25
Net financial items 138 -1,008 -3,869 -4,987
Income/ (loss) before income taxes 905 -2,374 5,339 -22,715
Income tax expense -316 661 417 671
Income/ (loss) for the period 1,221 -3,035 4,922 -23,385

Consolidated Statement of Comprehensive Income.

Amounts in USD 1 000 Q4 2021
Unaudited
Q4 2020
Unaudited
2021
Unaudited
2020
Audited
Income/ (loss) for the period 1,221 -3,035 4,922 -23,385
Oher comprehensive income
Other comprehensive income to be reclassified to profit or loss
in subsequent periods:
Exchange differences on translation of foreign operations -2 0 -25 -13
Oher comprehensive income -2 0 -25 -13
Actuarial gains/(losses) on defined benefit plans 0 0 0 0
Other comprehensive income -2 0 -25 -13
Total other comprehensive income/(loss) for the period 1,219 -3,035 4,897 -23,398

Consolidated Statement of Financial Position.

31 December 2021 31 December 2020
Amounts in USD 1 000 Unaudited Audited
ASSETS
Non-current assets
Multi-client library 2,412 2,209
Other intangible assets 422 939
Property, plant and equipment 12,747 16,374
Right-of-use assets 4,465 8,246
Financial lease receivables 7 2 141
Assets under construction 3 3
Total non-current assets 20,121 27,911
Current assets
Spare parts, fuel, anchors and batteries 3,813 4,726
Trade receivables 1,267 6,246
Other receivables 3,759 3,142
Financial lease receivables 6 8 6 8
Cash and cash equivalents 9,855 4,179
Restricted cash 1,278 7,995
Total current assets 20,041 26,357
Total assets 40,162 54,269
EQUITY
Capital and reserves attributable to equity holders
Share capital, share premium and other paid-in equity 71,490 71,490
Other reserves -1,570 -1,544
Retained earnings -72,433 -77,361
Total equity -2,514 -7,417
LIABILITIES
Non-current liabilities
Provisions 4,812 9,625
Borrowings 24,295 31,816
Non-current leasing liabilities 387 6,501
Total non-current liabilities 29,494 47,942
Current liabilities
Trade payables 1,981 1,461
Current tax liabilities 3,376 4,035
Other short term liabilities 1,451 2,774
Current leasing liabilities 6,374 5,474
Total current liabilities 13,183 13,744
Total liabilities 42,677 61,686
Total equity and liabilities 40,162 54,269

Consolidated Statement of Cash Flows.

Amounts in USD 1 000 Q4 2021
Unaudited
Q4 2020
Unaudited
2021
Unaudited
2020
Audited
Net cash flow from operating activities
Income/(loss) before income taxes 905 -2,374 5,339 -22,715
Adjustments for:
Withholding tax expenses 292 0 459 0
Total taxes paid -301 -31 -1,536 -453
Depreciation and ordinary amortisation 981 1,197 4,207 4,462
Depreciation right-of-use assets 1,208 1,236 4,751 8,362
Multi-client amortisation 224 513 2,457 4,077
Impairment of other long term assets 0 46 0 7,439
Cost of share-based payment 2 2 6 10
Change in trade receivables -270 64 4,979 17,257
Change in inventories 812 1,683 913 3,536
Change in trade payables 472 446 520 -6,793
Change in other working capital -2,759 -2,054 55 -21,611
Finance Income -1,005 -135 -2,028 -208
Finance Cost 780 999 3,498 4,787
Net cash flow from operating activities 1,340 1,593 23,621 -1,850
Investing activities:
Purchase of property, plant and equipment -46 -80 -90 -620
Investment in multi-client library -1,319 0 -2,659 -1,134
Cash used in investing activities -1,366 -80 -2,749 -1,754
Financial activities:
Financial lease liabilities -1,161 -855 -6,206 -8,043
Interest lease liabilities -147 -258 -762 -1,111
Repayment of loan -3,000 0 -6,000 0
Interest paid -501 -649 -2,257 -3,001
Interest received 5 135 28 208
Cash used in/provided by financial activities -4,804 -1,626 -15,197 -11,947
Net change in cash -4,829 -113 5,676 -15,552
Cash balance beginning of period 14,685 4,292 4,179 19,731
Cash balance end of period 9,855 4,179 9,855 4,179
Net change in cash -4,830 -113 5,676 -15,552

Consolidated Statement of Changes in Equity.

Share capital
share premium Foreign currency
and other paid-in translation
Amounts in USD 1 000 capital reserves Retained earnings Total equity
Income/(loss) for the period 0 0 -3,035 -3,035
Other comprehensive income 0 0 0 0
Total comprehensive income 0 0 -3,035 -3,035
Cost of share-based payments 0 0 2 2
Balance as of 31 December 2020 (Audited) 71,490 -1,544 -77,361 -7,417
Income/(loss) for the period 0 0 -3,602 -3,602
Other comprehensive income 0 0 0 0
Total comprehensive income 0 0 -3,602 -3,602
Cost of share-based payments 0 0 1 1
Balance as of 31 March 2021 (Unaudited) 71,490 -1,544 -80,962 -11,018
Income/(loss) for the period 0 0 2,640 2,640
Other comprehensive income 0 0 0 0
Total comprehensive income 0 0 2,640 2,640
Cost of share-based payments 0 0 2 2
Balance as of 30 June 2021 (Unaudited) 71,490 -1,544 -78,320 -8,376
Income/(loss) for the period 0 0 4,663 4,663
Other comprehensive income 0 -23 0 -23
Total comprehensive income 0 -23 4,663 4,640
Cost of share-based payments 0 0 2 2
Balance as of 30 September 2021 (Unaudited) 71,490 -1,567 -73,656 -3,735
Income/(loss) for the period 0 0 1,221 1,221
Other comprehensive income 0 -2 0 -2
Total comprehensive income 0 -2 1,221 1,219
Cost of share-based payments 0 0 2 2
Balance as of 31 December 2021 (Unaudited) 71,490 -1,570 -72,433 -2,514

Notes.

Accounting principles

These interim consolidated financial statements of the Group have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual financial statements as of 31 December 2020, which is available on www.emgs.com.

Segment reporting

EMGS reports its sales revenue as one reportable segment. The sales revenues and related costs are incurred worldwide. The amounts below show sales revenues reported by geographic region.

Amounts in USD million Q4 2021
Unaudited
Q4 2020
Unaudited
YTD 2021
Unaudited
2020
Audited
Americas 0.3 0.0 10.2 8.3
Asia/Pacific 0.0 0.0 7.4 0.1
EAME 4.8 4.0 11.4 16.5
Total 5.1 4.0 28.9 24.9

Multi-client library

The multi-client library consists of electromagnetic data acquired through multi-client surveys, i.e., EMGS owns the data. The electromagnetic data can be licensed to customers on a non-exclusive basis. Directly attributable costs associated with multi-client projects such as acquisition costs, processing costs, and other direct project costs are capitalised.

Amounts in USD million Q4 2021
Unaudited
Q4 2020
Unaudited
YTD 2021
Unaudited
2020
Audited
Opening carrying value 1.3 2.7 2.2 6.0
Additions 1.3 0.0 2.7 1.1
Amortisation charge -0.2 -0.7 -2.5 -4.1
Impairment 0.0 0.0 0.0 -0.8
Closing carrying value 2.4 2.2 2.4 2.2

Disclaimer for forward-looking statements

This quarterly report includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differmaterially. Such forward-looking information and statements are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets and potential clients for EMGS ASA and its subsidiaries.

These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or could be major markets for EMGS' businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be relevant from time to time.

Although EMGS ASA believes that its expectations and the information in this report were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this report. Neither EMGS ASA nor any other company within the EMGS Group is

14 Fourth Quarter 2021.

making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the report, and neither EMGS ASA, any other company within the EMGS Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the report.

EMGS ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the report.

For further information, please visit www.emgs.com, or contact:

Anders Eimstad CFO Email: [email protected] Phone: +47 948 25 836

Definitions – Alternative Performance Measures.

EMGS' financial information is prepared in accordance with IFRS. In addition, EMGS provides alternative performance measures to enhance the understanding of EMGS' performance. The alternative performance measures presented by EMGS may be determined or calculated differently by other companies.

EBITDA

EBITDA means Earnings before interest, taxes, amortisation, depreciation and impairments. EMGS uses EBITDA because it is useful when evaluating operating profitability as it excludes amortisation, depreciation and impairments related to investments that occurred in the past and are not cash-flow items. Also, the measure is useful when comparing the Company's performance to other companies.

Q4 2021 Q4 2020 YTD 2021 2020
Amounts in USD 1 000 Unaudited Unaudited Unaudited Audited
Operating profit / (loss) 767 -1,366 9,209 -17,728
Depreciation and ord. amortisation 1,695 2,433 7,731 12,318
Multi-client amortisation 224 513 2,457 4,077
Impairment of long term assets 0 4 6 0 7,439
EBITDA 2,686 1,625 19,396 6,107

Adjusted EBITDA

Adjusted EBITDA means EBITDA (see above) less multi-client investment (capitalisation) and less the cost of vessel and office leases.

EMGS uses Adjusted EBITDA because the Company believes this provides users of the financial reporting with a clearer picture when evaluating the operating profitability regardless if the Company is working on a multi-client or a proprietary survey. The Adjusted EBITDA measure includes the gross cash costs of the Company. The Adjusted EBITDA adds back cash items as capitalised multi-client expenses and vessel and office lease expensesto the costs included in the adjusted EBITDA.

Backlog

Backlog is defined as the total nominal value of future revenue from signed customer contracts. EMGS believes that the backlog figure is a useful measure in that it provides an indication of the amount of committed activity in the coming periods.

EMGS Headquarters Karenslyst Allè 4 , 4th Floor N-0278 Oslo, Norway

emgs.com [email protected]

16 Fourth Quarter 2021.

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