Golden Ocean Group

Earnings Release • Feb 19, 2019

RESULTS Q4 - 2018 February 19, 2019

FORWARD LOOKING STATEMENTS

• Matters discussed in this presentation may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements, which include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. Words such as "believe," "anticipate," "intends," "estimate," "forecast," "project," "plan," "potential," "may," "should," "expect," "pending" and similar expressions identify forward-looking statements. The forward-looking statements in this presentation are based upon various assumptions. Although we believe that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond our control, we cannot assure you that we will achieve or accomplish these expectations, beliefs or projections. The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward-looking statements as a result of developments occurring after the date of this communication.
• In addition to these important factors and matters discussed elsewhere herein, important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions, including fluctuations in charter hire rates and vessel values, changes in demand in the dry bulk market, changes in our operating expenses, including bunker prices, drydocking and insurance costs, the market for our vessels, availability of financing and refinancing, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents, political events or acts by terrorists, and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.
• Certain shipping, steel, Chinese and global industry information, statistics and charts contained herein have been derived from several sources. You are hereby advised that such industry data, charts and statistics have not been prepared specifically for inclusion in these materials and Golden Ocean has not undertaken any independent investigation to confirm the accuracy or completeness of such information

COMPANY UPDATE

HIGHLIGHTS

• The Company reports net income of \$23.6 million and earnings per share of \$0.16 for the fourth quarter of 2018, compared with net income of \$35.3 million and earnings per share of \$0.24 for the third quarter of 2018
• Adjusted EBITDA in the fourth quarter was \$70.4 million, compared with \$78.8 million in the third quarter of 2018 and \$65.3 million in the fourth quarter 2017
• Announced a share buyback program in December 2018 to purchase up to an aggregate of six million of the Company's common shares
• Secured financing for up to 11 scrubber installations in combination with a three year extension and upsizing of an existing loan facility
• Repaid the outstanding balance of the convertible bond at maturity in January 2019
• Announces a cash dividend of \$0.05 per share for the fourth quarter

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PROFIT & LOSS

(in thousands of \$)	Q4 2018	Q3 2018	Quarterly Variance
Operating revenues	177,175	190,006	(12,831)
Voyage expenses	(44,059)	(54,533)	10,474
Net revenues	133,116	135,473	(2,357)
Ship operating expenses	(38,497)	(36,699)	(1,798)
Administrative expenses	(3,728)	(3,621)	(107)
Charter hire expenses	(24,992)	(21,022)	(3,970)
Depreciation / impairment	(23,333)	(23,345)	12
Other gains (losses)	65	65	-
Net operating expenses	(90,485)	(84,622)	(5,863)
Net operating income (loss)	42,631	50,851	(8,220)
Net financial expenses	(16,895)	(17,287)	392
Derivatives and other financial income (loss)	(1,956)	1,734	(3,690)
Net income before taxation (loss)	23,780	35,298	(11,518)
Income Tax expense	194	13	181
Net income (loss)	23,586	35,285	(11,699)
Earnings (loss) per share: basic and diluted	\$0.16	\$0.24	(\$0.08)
Adjusted EBITDA	70,416	78,846	(8,430)
TCE per day	17,525	17,730	(205)

CASH FLOW DURING THE QUARTER

Q4 2018

BALANCE SHEET

(in thousands of \$)	Q4 2018	Q3 2018	Quarterly Variance
ASSETS
Short term
Cash and cash equivalents (incl. restricted cash)	325,623	312,772	12,851
Other current assets	135,611	162,274	(26,663)
Long term
Restricted cash	46,981	55,633	(8,652)
Vessels (incl. newbuildings and held-for-sale)	2,406,456	2,429,561	(23,105)
Other long term assets	36,684	38,875	(2,191)
Total assets	2,951,355	2,999,115	(47,760)
LIABILITIES AND EQUITY
Short term
Current portion of long term debt and capital lease	477,413*	250,394	227,019
Other current liabilities	64,088	82,494	(18,406)
Long term
Long term debt and capital lease	879,063	1,134,754	(255,691)
Other long term liabilities	7,278	7,501	(223)
Equity	1,523,513	1,523,972	(459)
Total liabilities and equity	2,951,355	2,999,115	(47,760)

*INCLUDES CONVERTIBLE BOND REPAID WITH \$168.2 MILLION IN JANUARY 2019

MODERN, EFFICIENT FLEET

• Fully-burdened Opex includes dry docking and management fees
• Six vessels were dry docked in 2018
• 19 vessels in total, three Panamax and 16 Capesize vessels, scheduled for dry-dock in 2019
• Average fleet age of about five years and majority of the fleet designed with fuel-efficient engines and ballast water treatment systems
• Additional advantage to be gained through scrubber installations

OPERATING EXPENSES (YTD 2018) BWTS INSTALLATION SCHEDULE

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SCRUBBERS FURTHER INCREASE COMPETITIVE ADVANTAGE UNDER NEW SULPHUR CAPS

• Golden Ocean's fleet of Capesize vessels has an average age of just above four years
• The Company signed contracts to install 20 exhaust gas scrubbers on Capesize vessels with options for five additional vessels; installations to coincide with scheduled dry docks in 2019 and 2020
• Strategic investment decision creates a further competitive advantage as new regulations on sulphur emissions come into effect in 2020

POTENTIAL SCRUBBER ADVANTAGE

SCRUBBER INSTALLATION SCHEDULE

Modern 10 yr old NOTE: COMPLIANT FUEL PRICE ESTIMATED 1:2 FO:GASOIL BLEND; ASSUMES MODERN AND 10 YR OLD VESSELS CONSUME 9,500 AND 11,750 MT, RESPECTIVELY, OF FUEL ANNUALLY

FLEET DEPLOYMENT

Opportunistic chartering strategy with significant operating leverage

CHARTERING PROFILE

DRY BULK MARKET UPDATE

NEAR TERM MARKET OUTLOOK

A confluence of factors have increased uncertainty and created market headwinds

WEEKLY DRY BULK SHIPPING RATES – Q3 2018 TO PRESENT

DRY BULK SUPPLY / DEMAND & UTILIZATION

Utilization declined to ~86% in the fourth quarter due to trade tensions and caps on Chinese coal imports

SUPPLY, DEMAND AND UTILIZATION RATE - DRY BULK SHIPS 10,000 DWT +

ANNUAL GROWTH IN SEABORNE TRADE CONTINUES

Total global dry bulk trade pulled back after reaching record levels in the third quarter; good growth year over year

SEABORNE TRADE OF DRY BULK COMMODITIES (MAJOR IMPORTERS)

WORLD STEEL PRODUCTION TRENDS

Chinese steel production remained strong, while the rest of the world was unchanged year over year

ANNUAL CHANGE IN STEEL PRODUCTION

IRON ORE PRICES STEADY UNTIL JANUARY; HIGHER AFTER THE VALE ACCIDENT

GROSS PROFIT (STEEL PRICE MINUS COST OF COKING COAL AND IRON ORE; ALL PRICES SPOT)

Gross profit using Cn coking coal price, Au iron ore price and Tangshan steel billett price

IRON ORE PRICE DIFFERENTIALS

AUSTRALIA AND BRAZIL REMAIN MAJOR IRON ORE EXPORTERS

QUARTERLY EXPORTED IRON ORE VOLUMES PER COUNTRY

COAL DEMAND REMAINS HIGH, BUT IMPORT RESTRICTIONS IN CHINA NEGATIVELY IMPACTED THE FOURTH QUARTER

CONTINUED YEAR OVER YEAR GROWTH IN ELECTRICITY CONSUMPTION SUPPORTS COAL DEMAND

CHINESE ELECTRICITY OUTPUT

CHINESE ELECTRICITY OUTPUT BY SOURCE

Coal-derived electricity output Hydropower output Other output sources

U.S. GRAIN EXPORTS WERE SIGNIFICANTLY DISRUPTED BY TRADE TENSIONS

GRAIN EXPORTS BY SOURCE

SOYBEAN AND SOYBEAN MEAL EXPORTS BY SOURCE

FLEET GROWTH DECLINED GOING INTO THE END OF THE YEAR

HANDYMAX / SUPRAMAX HANDYSIZE

CAPESIZE PANAMAX / POST-PANAMAX

PROJECTED FLEET GROWTH IS MODERATE VERSUS HISTORCAL LEVELS

Some 2018 deliveries pushed out to 2019; further orderbook slippage and scrapping ahead of regulations is expected to have a moderating effect

FLEET GROWTH (ASSUMES NO SCRAPPING OR NEW ORDERING)

DOWNSIDE CASE FOR SUPPLY GROWTH

Continued slippage is expected as ~36% of vessels scheduled for delivery in 2019 have not even commenced construction

S&P PRICES ACTIVITY REMAINS LIMITED

CAPESIZE VALUES AND EARNINGS

PANAMAX VALUES AND EARNINGS

OUTLOOK AND STRATEGY

HIGHLY VOLATILE MARKET NOT IMMUNE TO TRADE TENSIONS AND SHORT TERM DISRUPTIONS

UPSIDE POTENTIAL DOWNSIDE RISKS

• Disruption in Brazilian iron ore production offset by incremental production in Brazil and Australian
• Easing of trade tensions removes significant uncertainty and also brings US soybean trade back to normal levels
• Coal imports to China rebound as restrictions are lifted and imports to India continue to grow
• China implements additional stimulus measures to support growth and/or offset potential impact of tariffs
• Older vessels are scrapped ahead of investments required to meet BWTS and sulphur emissions regulations

• New ordering activity declines due to current weak market environment and uncertainty of trade tensions

• Reduced iron ore volumes from Brazil are not offset, or by Australian exports, reducing total seaborne volume and distance

• Unresolved trade tensions cause global trade to slow
• Increased use of scrap steel and continued draw down of iron ore inventories in China
• Lower steel margins impact import vs domestically produced volumes
• Economic activity decreases in China, leading to lower consumption of steel and energy
• Slippage removed from the orderbook and fleet size grows materially
• Valemax share of order book increases market volatility

COMPETITIVE CASH COST DRIVE EARNINGS AND PROTECTS DOWNSIDE

• Fully-burdened Opex includes dry docking and management fees
• G&A net of management fees are estimated to be approximately \$450 per day on a fleet of 77 vessels
• Average margin above LIBOR on bank financing is competitive at ~2.3% and majority of bank debt has 20 year profile (adjusted for year of age)

CASH BREAKEVEN LEVELS VS. INDEXES(1)

(1) ESTIMATED CASH BREAKEVEN LEVELS AT TODAYS INTEREST LEVEL, INCLUDING FULL CASH-SWEEP FOR NON-RECOURSE DEBT AND EXCLUDING PROFITABLE CHARTERS WHICH WILL REDUCE THE CASH BREAKEVEN FROM THESE LEVELS SOURCE: CLARKSONS

QUESTIONS & ANSWERS

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