Magnora ASA

SEVAN MARINE ASA - First Half 2015 Results

During the first half of 2015, Sevan Marine

continued to work on several FPSO, FSO and Drilling

opportunities and is hopeful that one or more of

these opportunities will result in license fees for

Sevan Marine during the second half of 2015 / early

Main events and developments, first half 2015

- High utilization in the FPSO/FSO market and

continued work on key prospects

Sevan Marine worked on several studies and tenders

for upcoming FPSO/FSO prospects, like the potential

FPSO for a UK sector field and the potential FSO for

the Culzean field. The continuation of work and

positive progression of the UK sector FPSO project

during the quarter is a clear positive. Sevan Marine

maintained a high utilization of its engineering

staff, in excess of 70%, despite declining activity

and margin pressure.

- Successful start of Arendal Spirit charter

Arendal Spirit began operation with Petrobras under

a 3 year charter contract in June. This leads to

variable compensation currently expected to be USD 8

million and due June 2016 subject to KPIs. Fixed

compensation of USD 10 million is due in August

- Non-cash impairment of Logitel Offshore

convertible loan

Logitel Offshore decided to utilize the options

available in the construction contract to delay the

delivery of unit 2 and postpone work on unit 3. This

leads to delays in payment and in Sevan Marine's

view substantially increases the risk that options

for further new builds will not be called off and /

or such call offs will be delayed. Based on a

revised assessment, an impairment of USD 37 million

has been taken in the quarter in relation to the

Logitel Offshore convertible loan and accrued

interest.

- Drilling solution continues to attract attention

Sevan Marine granted a license to construct a Sevan

Marine designed drilling unit for a new market

entrant. The effective date of the license and

payment to Sevan Marine is subject to the project

receiving financing and the construction contract

becoming effective. A decision on whether this

project will proceed is expected in Q3 or early Q4

- Improved quarter for Topside and Process Technology

KANFA AS EBITDAFX was breakeven for the quarter

driven by high activity on the USD 50 million Yinson

OTCP project. The EPC contract has been entered into

and a high workload is expected on the OTCP project

during the remainder of 2015 and early 2016. KANFA

was also recently awarded a chemical injection

package for the Johan Sverdrup field. KANFA

continues to tender for further projects.

KANFA Aragon EBITDAFX was negative USD 0.5 million

which was USD 0.3 million better than Q1 2015 driven

by cost cutting measures.

- Investigation

During the quarter, Sevan Marine launched an

investigation into a former manager and agent of

Sevan Marine, Mr Raul Schmidt Felippe Junior,

charged in connection with the Brazilian

authorities' investigation into corrupt activities

involving Petrobras and Operation Car Wash ("Lava

Jato"). Sevan Marine has been in contact with the

various jurisdictions involved (Norway, Brazil, US

and UK) and are cooperating fully with authorities.

The focus of the investigation is on the historical

activities of Mr. Raul Schmidt as agent and

employee. Sevan Marine is currently not aware of any

payments or interactions with Mr. Raul Schmidt or

any of his companies since the IPO of the drilling

activities and restructuring of Sevan Marine in

2011. Sevan Marine expects the investigation to

continue during Q3 and Q4 2015 at an expected total

cost of approximately USD 2-4 million. Sevan Marine

adheres to the strictest of compliance and ethical

standards and is taking this matter very seriously.

- Cost Reduction

The cost cutting program has had a positive impact

of approximately USD 0.7 million in Q2 2015. The

number of employees, (excluding the KANFA

companies), has been reduced by over 15 percent and

a number of other measures has led to increased

efficiency.

- Strategic Review Process

The strategic review process continues, albeit at a

slower pace than initially foreseen. Sevan Marine

remains optimistic that the outcome will help Sevan

Marine to achieve its full potential and deliver

enhanced value to shareholders.

- Dividend

The Board communicated an intention to consider an

extraordinary dividend in the second half of 2015

depending upon developments. In light of the

continuing fall in activity and remaining

uncertainty regarding key new business opportunities

the board has decided to return to this discussion

at the earliest during Q4 2015.

Main Figures, Second Quarter 2015

(Previous quarter figures in brackets)

Operating revenue for the second quarter 2015 was

USD 15.5 million (USD 15.4 million). EBITDA was

negative USD 3.0 million (negative USD 2.7 million),

and operating loss was USD 3.1 million (loss of USD

2.8 million). Net loss was USD 39.1 million (loss of

USD 4.5 million).

The net loss of USD 39.1 million is a result of an

impairment charge of USD 37 million related to the

Logitel Offshore convertible loan and accrued

interest. An unrealized foreign exchange gain of USD

1.6 million related to NOK denominated cash

positions positively impacted the net result.

As of Q2 2015, cash and cash equivalents amounted to

USD 30.3 million (USD 27.0 million). The change in

cash and cash equivalents is largely attributable to

changes in working capital.

The equity ratio was 64.7 percent as of June 30,

2015 (74.0 percent). The decline in the equity ratio

is driven by the impairment of the Logitel Offshore

convertible loan.

Outlook

- The outlook for the Floating Production segment in

2015 and 2016 is dependent upon the outcome of field

investment decisions and vendor selection for key

FPSO / FSO prospects. Sevan Marine is optimistic

that the Sevan Marine technology will be selected

and that further license income can be secured from

late 2015 / early 2016.

- The successful start of the Arendal Spirit charter

during June 2015 leads to variable compensation

currently expected to be USD 8 million and due June

2016 subject to KPIs.

- The delays agreed by Logitel Offshore have led to

reduced cash flow expectations. In the long term,

Sevan Marine believes the market will recover and

that the inherent advantages of the Sevan Marine

technology make it competitive versus other floating

accommodation unit designs.

- The outlook for the Topside and Process Technology

segment in 2015 and 2016 is dependent upon the

progress of the Yinson OTCP project within KANFA AS

and the ability for both KANFA AS and KANFA Aragon

to continue securing new work. New projects and cost

measures should improve results in KANFA Aragon

during the second half of 2015.

- Sevan Marine believes with its solid cash position

and cost reduction plans that it has the resources

and ability to successfully weather the current

slowdown in activity. A key target for 2015 is to be

operating cash flow breakeven excluding one-off

items.

- Sevan Marine has initiated the strategic review

process and is optimistic that the outcome will help

Sevan Marine to achieve its full potential and

deliver enhanced value to shareholders.

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SEVAN MARINE ASA - First Half 2015 Results

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