Electromagnetic Geoservices ASA

Earnings Release • Nov 1, 2018

Q3 2018 RESULTS

Oslo, 1 November 2018

Christiaan Vermeijden, CEO Hege Veiseth, CFO

Disclaimer

This quarterly presentation 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 differ. 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 for Electromagnetic Geoservices ASA (EMGS) 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 will be major markets for the 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 discussed from time to time. Although Electromagnetic Geoservices 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. Electromagnetic Geoservices ASA nor any other company within the EMGS Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Report, and neither Electromagnetic Geoservices 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. Electromagnetic Geoservices ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the Report.

Q3 2018 Highlights

Operations

• Expanded the library in Norway
• Mobilised for a (up to) USD 8 million contract in South America

Financials

• Revenues of USD 6.0 million (USD 7.9 million in Q2)
• EBITDA of neg. USD 4.0 million (neg. USD 0.8 million in Q2)

Market

• Positioned to capitalise on the 24th round (Norway)
• Momentum regarding international opportunities
• Caution required as no significant change to backlog recorded

Financial review

Third quarter performance

• Revenues

• USD 6.0 million
• New revenue recognition standard implemented in 2018
• Vessel utilisation of 29%
• Two vessels on charter
• Multi-client surveys in the North Sea and the Norwegian Sea
• EBITDA
• Negative USD 4.0 million

All 2017 financial figures in this presentation are restated applying IFRS 15

Q3'17 Q4'17 Q1'18 Q2'18 Q3'18 1

Key financial metrics Quarterly development (USD million)

Operational costs

Quarterly operational cost base* development (USD million)

Comments

• Operational costs base in Q3 18 of USD 11.9 million
• Higher than Q3 2017 as Thalassa was off-hire in Q3 last year
• Higher than Q2 2018 as a result of holiday pay in Q2
• Cost control
  • Cost control focus continues
  • Target the 2018 cost base below USD 50 million, subject to operational activity

*Cost base is defined as Operational costs (charter hire etc., employee expenses, other operating expenses) plus MC investments, less provision for onerous contract, restructuring charges and other extraordinary items

• Capitalisation of multi-client and JIP test costs
• Other operational expenses
• Employee expenses
• Charter hire, fuel and crew expenses

Decrease in free cash in Q3

• Net decrease in free cash of USD 5.9 million to USD 9.5 million
• Trade receivables decreased by USD 7.9 million to USD 2.5 million
• USD 0.7 million in interest-payments on interest bearing debt
• Total investments of USD 2.3 million

Multi-client book value of USD 14.9 million

Multi-client library – NBV (USD million) Comments

• Decrease in book value from USD 16.8 million previous quarter to USD 14.9 million in Q3 2018
• Investments of USD 1.9 million in MC data
• North Sea and Norwegian Sea
• Amortisation of USD 3.9 million
• Straight-line amortisation

Operations, Market and Outlook

Market update | Continued limited visibility

• A proprietary data acquisition program in South America will keep the Atlantic Guardian busy through Q4 2018 7 8

• Well positioned to capitalise on the 24th round in Norway with Production Licenses discussing data needs and timing
• Upward momentum regarding international opportunities to improve utilisation
• Market expected to be more balanced between multi-client and proprietary in 2019
• Caution required as no significant change to backlog recorded

Comments Order backlog - limited earnings visibility

Are there more CSEM anomalies hiding here?

Hardware, Imaging & Interpretation improvements

Grane: Revisiting 2003 data

2003 MVO Plot Interpretation Method 2018 Imaging and well correlation

Represents CSEM Data and the «bump» between the purple lines is the EM anomaly over the Grane field

Inverted 2003 CSEM data. High temperature color represent CSEM anomalies matching Grane field outline

Cara discovery clearly imaged on data acquired with Deep Blue

Q3 2018 Highlights

Operations

• Expanded the library in Norway
• Mobilised for a (up to) USD 8 million contract in South America

Financials

• Revenues of USD 6.0 million (USD 7.9 million in Q2)
• EBITDA of neg. USD 4.0 million (neg. USD 0.8 million in Q2)

Market

• Positioned to capitalise on the 24th round (Norway)
• Momentum regarding international opportunities
• Caution required as no significant change to backlog recorded

Questions?

Consolidated Income Statement

			Year to date	Year to date
	Q3 2018	Q3 2017	2018	2017	2017
Amounts in USD 1 000	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
		Restated*		Restated*	Restated*
Operating revenues
Contract sales	568	443	880	1,619	2,583
Multi-client pre-funding	3,768	5,933	6,308	8,999	11,295
Multi-client late sales	924	4,078	8,895	12,263	19,132
Other revenue	701	220	2,071	220	886
Total revenues	5,961	10,674	18,153	23,101	33,896
Operating expenses
Charter hire, fuel and crew expenses	3,861	1 2	11,645	3,478	7,655
Employee expenses	4,741	4,345	13,524	12,957	16,964
Depreciation and ordinary amortisation	1,816	1,796	5,857	4,705	6,779
Multi-client amortisation	3,870	2,892	8,267	7,681	10,345
Impairment of long-term assets	0	0	0	3,170	3,626
Other operating expenses	1,346	1,436	4,200	4,966	6,334
Total operating expenses	15,634	10,480	43,494	36,955	51,703
Operating profit/ (loss)	-9,673	194	-25,340	-13,854	-17,807
Financial income and expenses
Interest income	8	5 8	169	128	193
Interest expense	-1,242	-1,031	-3,664	-3,074	-4,088
Net gains/(losses) of financial assets and liabilities	0	1,551	649	3,287	2,143
Net foreign currency income/(loss)	-234	-1,342	-1,089	-3,179	-3,292
Net financial items	-1,469	-764	-3,935	-2,838	-5,043
Income/ (loss) before income taxes	-11,142	-570	-29,275	-16,692	-22,850
Income tax expense	1 4	-180	132	-113	356
Income/ (loss) for the period	-11,156	-391	-29,406	-16,580	-23,206

Consolidated Statement of Financial Position

	30 September 2018	30 September 2017	31 December 2017
Amounts in USD 1 000	Unaudited	Unaudited	Unaudited
		Restated*	Restated*
ASSETS
Non-current assets
Multi-client library	14,868	18,766	17,317
Other intangible assets	1,362	1,816	1,559
Property, plant and equipment	31,310	33,415	36,281
Assets under construction	3,551	6,726	3,112
Restricted cash	2,910	3,668	3,524
Total non-current assets	54,001	64,391	61,793
Current assets
Spare parts, fuel, anchors and batteries	7,523	7,251	7,200
Trade receivables	2,508	7,346	11,075
Other receivables	6,407	6,710	5,957
Cash and cash equivalents	9,525	22,986	16,548
Restricted cash	4,004	356	2,997
Total current assets	29,966	44,649	43,778
Total assets	83,967	109,040	105,571

		30 September 2018 30 September 2017 31 December 2017
Amounts in USD 1 000	Unaudited	Unaudited	Unaudited
		Restated*	Restated*
EQUITY
Capital and reserves attributable to equity holders
Share capital, share premium and other paid-in equity	350,504	336,740	336,764
Other reserves	-1,591	-1,617	-1,617
Retained earnings	-338,167	-302,137	-308,761
Total equity	10,743	32,986	26,386
LIABILITIES
Non-current liabilities
Provisions	19,625	20,994	20,670
Financial liabilities	0	1,849	2,993
Borrowings	31,032	31,367	30,288
Total non-current liabilities	50,657	54,210	53,950
Current liabilities
Trade payables	7,458	6,037	6,882
Current tax liabilities	5,368	5,859	6,299
Other short term liabilities	9,423	9,655	11,763
Borrowings	317	292	290
Total current liabilities	22,567	21,843	25,234
Total liabilities	73,224	76,053	79,184
Total equity and liabilities	83,967	109,040	105,571

Largest shareholders as of 31 October 2018

#	Shareholder	Shares	Holding
	1 SIEM INVESTMENTS INC.	31 327 467	23.92
	2 PERESTROIKA AS	29 452 795	22.49
	3 MORGAN STANLEY & CO. MS & CO LLC	25 891 805	19.77
	4 BÆKKELAGET HOLDING AS	5 010 000	3.83
	5 SPORTSMAGASINET AS	4 329 090	3.31
	6 ROSENFONN INVEST AS	2 148 705	1.64
	7 NHO - P665AK JP MORGAN CHASE BANK	1 293 422	0.99
	8 DNB NAVIGATOR (II) V/DNB ASSET MANAGEMENT	1 169 175	0.89
	9 SIX SIS AG 25PCT ACCOUNT	1 110 280	0.85
	10 NORDNET LIVSFORSIKRING	761 302	0.58
	11 STATOIL PENSJON C/O JP MORGAN	701 458	0.54
	12 HAAV HOLDING AS	650 000	0.50
	13 KRISTIAN FALNES AS	578 883	0.44
	14 VESTVIK PRESERVING	558 799	0.43
	15 RYGG, JAN WIGGO	547 583	0.42
	16 RAGE, PER EGIL	509 535	0.39
	17 NORDEA BANK, ABP NORDEA SE/CLIENTS	469 190	0.36
	18 SANDBÆK, RUNE	466 530	0.36
	19 ØVERLAND, JARLE	457 039	0.35
	20 PEDERSEN, FINN BIRK	407 000	0.31