Electromagnetic Geoservices ASA

Earnings Release • Jul 27, 2017

SECOND QUARTER 2017 RESULTS.

Oslo, 27 July 2017 CEO Christiaan Vermeijden, CFO Hege A. Veiseth

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.

Increase in Revenues and Positive EBITDA

Operations

• Continued multi-client investments in the Barents Sea
• Mobilisation of the Deep Blue (JIP) source

Financials

• Revenues of USD 10.6 million (USD 3.9 million in Q1)
• EBITDA of USD 4.5 million (USD -5.7 million in Q1)
• Fully underwritten NOK 144 million (USD 17.5 million) rights issue completed in July

Market

• Backlog slightly improved going into Q3 2017

Financial review

Second quarter performance | Increase in revenues and EBITDA

• Revenues
• USD 10.6 million
• Mainly multi-client revenues in Norway
• EBITDA
• USD 4.5 million
• Positively impacted by increase in revenues and reduced costs
• Vessel utilisation of 85% of one vessel
• Prefunded multi-client projects in the Barents Sea

Key financial metrics Quarterly development (USD million)

Reduced operational costs

Quarterly operational cost base development* (USD million)

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

Comments

• Operational costs base of USD 9.2 million
• Capitalised multi-client and JIP test expenses of USD 3.0 million
• Vessel lease expenses for one vessel (Atlantic Guardian)
• Cost control
  • Cost control continues in 2017
  • Target the 2017 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

Small decrease in free cash in Q2

• Small net decrease in free cash of USD 0.9 million to USD 12.1 million
• Financing activities
• USD 8.5 million drawn on credit facility
• Fully underwritten NOK 144 million (USD 17.5

Multi-client book value of USD 18.9 million

Operations, Market and Outlook

Deep Blue Source installed on the Atlantic Guardian

Commercial source system installed

• First commercial survey started in July
• Survey progressing as planned
• Results to be delivered in Q3

Deep Blue enables detection of deeper and smaller targets

• High current output (up to 10,000 A)
• High accuracy of output signal, positioning and timing
• Depth rating for 4km water depth

Update on Norway and the 24th Licensing Round

• CSEM supported wells in the Barents Sea yet to be drilled in 2017 (Koigen, Gemini North, etc)
• Kayak (oil) and Blåmann (gas) are now confirmed as discoveries
• 93 blocks are part of the 24th round in the Barents Sea and the multi-client library currently covers 52 blocks
• Identified a 100 km2 lead in the new data acquired with a similar resistivity signature as the Wisting discovery
• In discussion with various oil companies for both existing data and prefunding new areas

Mexico's 2 Rounds in Mexico are progressing nd Deepwater License Round Announced

CSEM data calibrated against existing wells shows a similar track record as in the Barents Sea

"Once the prospects were drilled, an extraordinary match between proven hydrocarbons and areal distribution of resistivity was observed."

Mexico - CSEM counts towards Minimum Work Program

• CSEM counts as working units for the exploratory work program commitment incl. reprocessed MC
• 16,000 sqkm of CSEM MC data available

Excerpt from License contract:

Activity	Units	Work Units (number)
quisition and process of ctromagnetic ormation	$Bv$ $km2$	3.00
process of ctromagnetic	By km-

Source: Official bid-round web site at: http://rondasmexico.gob.mx.

Selection of current opportunities

Canada:

• MC data covering Flemish Pass basin available for sale
• Industry interest to acquire more data in 2017/2018

US:

• MC data available for annual licensing rounds
• Great White data a natural extension of the Mexican Perdido area for an improved regional understanding

Mexico:

• Reprocessed 3D MC data (16,000 sqkm) available for sale

Brazil:

• 12,300 sqkm MC data from Sergipe-Alagoas, Foz and Ceara available for sale
• Round 14 expected to be announced in Q3 2017

Norway:

• Coverage in the Barents Sea expanded in Q2 2017 in anticipation of the nominations and announcements during the 24th licensing round (60% covered)
• Prefunding received for work outside of the 24th round
• 24th round announcement made in June 2017

East Africa:

• Looking for prefunding opportunities in 2018

Asia:

• Progress made with marketing new acquisition Indonesia:
• 2,800 sqkm MC data available

Market update | Continued limited visibility

• Work awarded in Q2 2017 will keep the Guardian busy through the end of Q3 2017 25

• Prospects being developed to put Thalassa back at work at the commencement date of the firm charter period on 1 October 2017 15 20
• Slight improvement of the market noted as earlier dialogues are converted into pricing requests
• Supported by a relatively stable oil price (close to USD 50 per barrel) when compared to 2016
• Caution is still required as some 2017 prospects have been deferred until 2018

Comments Order backlog - limited earnings visibility

Increase in Revenues and Positive EBITDA

Operations

• Continued multi-client investments in the Barents Sea
• Mobilisation of the Deep Blue (JIP) source

Financials

• Revenues of USD 10.6 million (USD 3.9 million in Q1)
• EBITDA of USD 4.5 million (USD -5.7 million in Q1)
• Fully underwritten NOK 144 million (USD 17.5 million) rights issue completed in July

Market

• Backlog slightly improved going into Q3 2017

Questions?

Consolidated Income Statement

			First half year	First half year
	Q2 2017	Q2 2016	2017	2016	2016
Amounts in USD 1 000	Unaudited	Unaudited	Unaudited	Unaudited	Audited
Operating revenues
Contract sales	474	388	1,175	13,426	21,797
Multi-client pre-funding	4,369	0	5,199	0	579
Multi-client late sales	5,800	14,678	8,186	14,678	22,151
Total revenues	10,643	15,066	14,560	28,104	44,527
Operating expenses
Charter hire, fuel and crew expenses	885	3,732	3,652	9,295	18,176
Employee expenses	3,439	5,936	8,612	13,419	25,097
Depreciation and ordinary amortisation	1,502	1,932	2,909	4,043	7,677
Multi-client amortisation	2,312	2,824	4,604	5,648	11,244
Impairment of long-term assets	3,170	9,228	3,170	9,228	17,286
Other operating expenses	1,848	2,573	3,530	5,972	10,137
Total operating expenses	13,157	26,225	26,476	47,605	89,617
Operating profit/ (loss)	-2,515	-11,159	-11,916	-19,501	-45,090
Financial income and expenses
Interest income	5 6	4 5	7 0	9 6	217
Interest expense	-990	-752	-2,043	-1,790	-3,273
Net gains/(losses) of financial assets and liabilities	710	-377	1,736	-5,291	-6,297
Net foreign currency income/(loss)	-822	1,089	-1,838	-118	1,512
Net financial items	-1,045	5	-2,074	-7,103	-7,841
Income/ (loss) before income taxes	-3,560	-11,154	-13,990	-26,604	-52,931
Income tax expense	3 4	5 5	6 7	5 5	-100
Income/ (loss) for the period	-3,594	-11,209	-14,057	-26,659	-52,831

Consolidated Statement of Financial Position

	Half year ended	Half year ended	Year ended
	30 June 2017	30 June 2016	31 December 2016
Amounts in USD 1 000	Unaudited	Unaudited	Audited
ASSETS
Non-current assets
Multi-client library	18,891	33,131	24,332
Other intangible assets	2,100	3,161	2,457
Property, plant and equipment	11,694	14,335	13,901
Assets under construction	29,403	27,796	28,255
Total non-current assets	62,088	78,423	68,945
Current assets
Spare parts, fuel, anchors and batteries	6,963	8,555	7,854
Trade receivables	9,413	19,545	8,534
Other receivables	6,536	7,259	7,080
Cash and cash equivalents	12,054	21,220	14,038
Restricted cash	4,870	4,199	4,841
Total current assets	39,837	60,778	42,347
Total assets	101,924	139,201	111,292

	Half year ended 30 June 2017	Half year ended	Year ended 30 June 2016 31 December 2016
Amounts in USD 1 000	Unaudited	Unaudited	Audited
EQUITY
Capital and reserves attributable to equity holders
Share capital, share premium and other paid-in equity	319,283	319,174	319,283
Other reserves	-1,616	901	-1,608
Retained earnings	-299,033	-261,313	-284,975
Total equity	18,634	58,762	32,700
LIABILITIES
Non-current liabilities
Provisions	21,918	15,598	19,140
Financial liabilities	3,400	3,662	4,668
Borrowings	29,751	32,180	31,636
Total non-current liabilities	55,069	51,440	55,444
Current liabilities
Trade payables	3,619	6,743	6,672
Current tax liabilities	5,853	5,814	5,853
Other short term liabilities	9,967	16,247	10,372
Borrowings	8,781	195	251
Total current liabilities	28,221	28,999	23,148
Total liabilities	83,290	80,439	78,592
Total equity and liabilities	101,924	139,201	111,292

Largest shareholders as of 26 July

#	Shareholder	Shares	Holding
	1 SIEM INVESTMENTS INC.	21,869,450	23.92
	2 PERESTROIKA AS	20,560,847	22.49
	3 MORGAN STANLEY & CO. LLC	18,074,938	19.77
	4 BÆKKELAGET HOLDING AS	3,010,00	3.29
	5 SPORTSMAGASINET AS	2,575,001	2.82
	6 NHO - P665AK	1,127,686	1.23
	7 KRISTIAN FALNES AS	1,090,794	1.19
	8 NORDNET LIVSFORSIKRING	1,022,163	1.12
	9 DNB NAVIGATOR (II)	974,279	1.07
	10 STATOIL PENSJON	701,458	0.77
	11 NORDNET BANK AB	571,862	0.63
	12 PIREN HOLDING AS	404,873	0.44
	13 RYGG, JAN WIGGO	390,130	0.43
	14 FALNES, OLAV KRISTIAN	360,000	0.39
	15 GALTUNG, LARS OTTO	350,000	0.38
	16 HAAV HOLDING AS	350,000	0.38
	17 ØVERLAND, JARLE	340,000	0.37
	18 J&J INVESTMENT AS	340,000	0.37
	19 JACKWITZ, SVEIN-ERIK	313,152	0.34
	20 PEDERSEN, FINN BIRK	300,000	0.33