Magnora ASA

SEVAN MARINE ASA - First Half 2016 Results

Main events and developments, Second Quarter 2016

- Focus on UK sector FPSO prospect and FLNG

study with oil major

Sevan Marine has continued to provide engineering

support for the UK sector FPSO prospect during the

quarter. Payments under the License Agreement remain

subject to the field developers' final investment

decision and start of construction of the unit, which

is not expected before 2017. Sevan Marine expects to

continue to provide engineering support through 2016

and into 2017.

A continuation of the FLNG feasibility study for a

specific FLNG field development with a U.S. oil major

was agreed and work started during the quarter which

the agreed phase expected to run through the end of

- Continued work on existing projects

Sevan Marine continued to provide engineering and site

support services for the Goliat, Logitel Offshore and

Dana Western Isles projects. Work on the Logitel

Offshore project will come to an end in Q3 2016 as the

construction contracts with the yard in China have

been cancelled. The work for Sevan Marine on the

Goliat project is expected to decline substantially

from Q3 2016 with the vessel now successfully

producing in the Barent's Sea.

Sevan Marine remains entitled to a variable license

fee linked to production with respect to the Dana

Western Isles project. Sevan Marine continues to

support the construction of the vessel at the COSCO

yard in China, and Dana has announced that the FPSO

will not commence production before the second half of

- Further development work on the ultra deep

water application with steel catenary risers

Substantial progress was made regarding the Sevan

Marine design for use in the U.S. Gulf of Mexico with

Steel Catenary Risers (SCRs). A successful model test

was carried out at the Offshore Technology Research

Centre (OTRC) at Texas A&M University in May 2016

which attracted substantial market interest. Further

testing and development is being planned for late 2016

and 2017. Sevan Marine hopes to obtain approval to use

its unique cylindrical design with steel catenary

risers as a non-disconnectable FPSO with the ability

to retain cargo during a hurricane. This would be a

first in the U.S. Gulf of Mexico and Sevan Marine

believes it will provide a substantially cheaper

solution compared to the disconnectable, turret based

solutions used today.

- Increased market awareness through increased

business development activity

Sevan Marine met with numerous oil companies, lease

providers, suppliers, partners and clients in the

U.S., China, Australia and Europe during the quarter.

Sevan Marine also held a two day user forum in

Arendal, Norway bringing together current operators

and partners of existing Sevan Marine designed units.

The feedback received is very positive. The Sevan

Marine cylindrical design is widely seen by oil majors

around the world as a credible and proven alternative

to other floating installation designs. The inherent

advantages are also well understood. Amongst these are

excellent motion characteristics, lower operating

costs, high deck load capacity, large storage space

and substantial lower construction cost compared with

alternatives when a turret is needed. Sevan Marine

remains optimistic that the increased industry focus

on cost-effective solutions will lead to increased

work for the Company as the market improves.

This increased market awareness has already led to the

Sevan Marine concept being selected for small

feasibility studies for projects in the Barents Sea

and Caribbean.

- HiLoad

HiLoad LNG continued the marketing and development of

both the HiLoad offloading system for FLNG and the

Floating Regas Dock ("FRD") for small scale

regasification projects. With respect to the FRD,

initial Pre-FEED work for the Vires Energy Corporation

project in the Philippines was completed.

- Improved Performance of KANFA

The KANFA group saw improved results in the quarter

driven by further recognition of margin on the USD 50

million OCTP project from Yinson Production which was

successfully delivered in the quarter. KANFA

maintained a solid workload in the quarter driven by

the finalizing of the OCTP project.

- Disposal of KANFA Aragon AS

Sevan Marine announced on June 28, 2016 the successful

disposal of its 50 percent stake in KANFA Aragon AS to

SembCorp Marine Ltd for cash consideration of NOK 20

million.

The disposal represents a further positive step in

Sevan Marine's efforts to reduce complexity, reduce

cost and increase focus on its core cylindrical hull

technology.

- Logitel Offshore

We refer to the press releases of May 23, 2016, August

05, 2016 and the Q1 2016 earnings release and comments

made regarding the circumstances surrounding the

legality and potential claims in relation to the

Logitel Offshore Agreements. The Board of Sevan Marine

maintains that substantial claims may be made against

the parties involved, and Sevan Marine is dedicated to

seeking the best outcome for the Company and its

shareholders. The first step in this respect will be

to commence legal action against Logitel Offshore Pte

Ltd claiming payment of an amount exceeding USD 60

million in relation to the Logitel loan, and in

parallel to commence arbitration against both Logitel

Offshore Pte Ltd and Teekay Offshore Partners LP

claiming payment of an amount of approximately USD 10

million in relation to the Fourpartite Agreement.

Sevan Marine reserves the right to, at any time,

pursue other involved parties. Agreements suspending

time-bar limitations have been entered into with such

involved parties.

On August, 04 2016, Teekay Offshore Partners

("Teekay") also made the announcement of the

cancellation of the shipyard contracts for the two

remaining Logitel Offshore units.

The outcome of this situation and any potential

recovery of value remains uncertain. As such, there

remains material uncertainty regarding both the amount

and timing of any payments in relation to the Logitel

agreements. In accordance with IFRS accounting

standards and based on the cancellation of the

shipyard contracts, Sevan Marine has recorded a

further non-cash impairment of USD 13 million in

relation to the Logitel loan as per June 30, 2016.

Sevan Marine will do its utmost to realize the

underlying merits and outperform the impairments taken

over the coming months.

- Strategic Review Process

Sevan Marine appointed Pareto Securities in April 2015

to explore potential strategic options for the

Company. During the quarter, Sevan Marine received

indicative expressions of interest from industrial

parties regarding the purchase of certain assets of

Sevan Marine. These offers reflected a discount to the

current market value of the Company, and the Board has

therefore decided to focus the strategic review

process on Sevan Marine's continued development as a

standalone Company.

Sevan Marine will focus its efforts on independently

developing, marketing and supporting the execution of

projects based on its unique cylindrical hull design.

In doing such, the Company will seek to work with

industry leading partners to further promote and

develop the concept.

- Dividend policy

The Board has communicated an intention to pay a

dividend depending upon developments. Given the

uncertain market outlook, and the unresolved situation

with regard to Logitel, no extraordinary dividend is

planned in 2016.

Main Figures, Second Quarter 2016

(Previous quarter figures in brackets)

Operating revenue for the second quarter 2016 was USD

16.9 million (USD 21.0 million). EBITDA was negative

USD 0.3 million (negative USD 7.0 million), and

operating loss was USD 0.4 million (loss of USD 7.1

million). Net loss was USD 11.6 million (loss of USD

8.1 million). EBITDA is positively impacted by results

in the Topside and Process segment where further

margin on the OCTP project has been recognized in the

quarter. The net loss in the quarter is negatively

impacted by the further impairment of the Logitel Loan.

As of June 30, 2016, cash and cash equivalents

amounted to USD 31.7 million (USD 41.3 million). The

change in cash and cash equivalents is largely

attributable to working capital changes in the Topside

and Process segment as well as the NOK 20 million in

proceeds received from the sale of Sevan Marine's 50

percent stake in KANFA Aragon AS.

The equity ratio was 51.3 per cent as of June 30, 2016

(44.9 per cent).

Outlook

- Sevan Marine faces a difficult market with

many key prospects continuing to be delayed. The Board

expects that 2016 and 2017 will be difficult years.

Substantial cost reduction measures have already been

taken, including redundancies as well as temporary

salary reductions and reduced working time by all

employees. Despite further cost reductions, which will

be required, the Board expects Floating Production

cash flow to be negative in the coming quarters due to

ongoing operating losses driven by a lack of work and

license fees.

- In the Floating Production segment, work on

the Dana Western Isles and UK sector FPSO projects is

expected to continue through the year and into 2017.

Work on the Goliat and Logitel Offshore projects is

expected to end in the coming months. Sevan Marine

remains hopeful that it can secure further feasibility

study work for 2016 and 2017 in addition to the FLNG

study with the US oil major and small studies already

received.

- Sevan Marine is also hopeful that the Vires

Energy Corporation Project in the Philippines will

proceed with further FEED and follow-up work related

to the FRD provided by Sevan Marine.

- In the Topside and Process segment, KANFA AS

does not expect to be awarded any substantial process

package awards in 2016 given the low market activity.

Cost reduction measures may also need to be taken if

workload is insufficient. It is expected that the

working capital change and cash flow in the segment

will continue to be negative during Q3 2016 prior to

reversing near year end 2016 when the final project

milestone on the OCTP project is expected to be

received. Technip has the option to take over the

remaining 51 percent of KANFA AS in 2017 based on a

multiple of 2014, 2015 and 2016 results. No

substantial gains can be expected if Technip should

decide to exercise this option.

- Sevan Marine has received substantially

increased interest in its unique design from many,

high quality, global oil and gas majors. Sevan Marine

believes this is a reflection of both the changing

market place, increased willingness of oil majors to

consider different technologies and Sevan Marine's own

business development efforts.

- Sevan Marine believes given its unique cost

effective solution, the increased market interest, its

solid cash position and cost reduction plans that it

has the resources and ability to successfully weather

the current slowdown in activity and to regain

profitability in the years to come.

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SEVAN MARINE ASA - First Half 2016 Results

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