Magnora ASA

SEVAN MARINE ASA - First Quarter 2015 Results

Main figures first quarter 2015

(Previous quarter figures in brackets)

Operating revenue for the first quarter 2015 was USD

15.4 million (USD 25.2 million). EBITDA was negative

USD 2.7 million (positive USD 1.2 million), and

operating loss was USD 2.8 million (loss of USD 4.8

million). Net loss was USD 4.5 million (loss of USD

15.9 million).

The net loss of USD 4.5 million is a result of lower

license revenue, a USD 1 million restructuring

provision, a loss of USD 1 million for KANFA AS and

a loss of USD 0.8 million for KANFA Aragon. In

addition, an unrealized foreign exchange loss of USD

2.1 million related to NOK denominated cash

positions adversely impacted the net result.

As of Q1 2015, cash and cash equivalents amounted to

USD 27.0 million (USD 27.3 million).

In December 2014, Sevan Marine received the final

fixed license fee amount on the Dana Western Isles

project. This represents a USD 3 million negative

variance in Sevan Marine's results as compared to

the first quarter of 2014.

Excluding the USD 3 million variance in license fee

and a USD 1 million restructuring provision taken

during the quarter, the core FPSO / FSO segment

EBITDA was in line with previous year and quarter

due to strict cost control and high utilization of

own staff.

Sevan Marine continues investment in its core

technology and in enhanced market acceptance of the

Sevan concept

In conjunction with the restructuring of its

workforce, Sevan Marine is placing increased

emphasis on business development, marketing and

sales of its core technology. During Q1 and early

Q2, Sevan Marine spent significant time meeting with

oil and gas majors around the globe with increasing

focus being placed on gaining acceptance of the

Sevan technology by U.S. oil majors and approval of

the Sevan Marine concept for use in the U.S. Gulf of

Mexico.

Sevan Marine has also been awarded a U.S. patent for

its Steel Catenary Riser FPSO concept, a further key

milestone in developing and enhancing the value of

the Sevan Marine design.

Sevan's FLNG and Drilling solutions continue to

attract attention

FLNG remains a key initiative for Sevan Marine.

Several meetings were held with oil & gas majors

regarding specific FLNG prospects. HiLoad LNG also

received a further small paid study to evaluate its

use as an offloading technology for LNG. Sevan

Marine continues to believe that the advantages of

the cylindrical design for FLNG, such as no turret

and improved motion characteristics, will make the

design very competitive versus shipshape solutions.

Combined with the HiLoad offloading technology, the

Sevan Marine FLNG solution should also improve

safety, uptime and increase flexibility.

In the drilling segment, Sevan Marine continued its

cooperation with Sevan Drilling. Sevan Marine also

continues to pursue an opportunity to provide a

license to a new market entrant intending to build a

Sevan Marine designed drilling unit which may

materialize in 2015.

Substantial cost reduction program initiated during

the quarter

Sevan Marine implemented a cost reduction program

and reorganization during Q1 2015 with the intention

of saving USD 3 million on an annual basis. A

headcount reduction was carried out with a focus on

administrative functions. This led to a reduction in

workforce of over 15 percent. Excluding the KANFA

companies, Sevan Marine has less than 100 full time

employees. A restructuring provision of USD 1

million has been taken in the quarter and the

benefits of the cost cutting program will be visible

from Q2 2015. During 2015, the benefits will likely

be offset by continued low activity and margin

pressure at the bottom line. Further cost reduction

measures are being pursued and a key target for 2015

is to be operating cash flow breakeven excluding one-

off items.

Logitel Offshore - Successful delivery of Arendal

Spirit

In February 2015, Arendal Spirit was delivered to

Logitel. The unit has arrived in Brazil and is

preparing to start its charter with Petrobras. In

accordance with the Logitel agreement, Sevan Marine

will receive in August 2015 the first USD 10 million

fixed payment which will reduce the convertible loan

outstanding from USD 60 million to USD 50 million.

The variable compensation associated with this

vessel is expected to be USD 8-10 million and is

subject to both financial and operational

performance KPIs. The variable compensation is due

12 months after acceptance of the unit by the

charter party and is currently expected to be paid

in late Q2 2016. As of March 31, 2015 the variable

compensation has been fully accrued for by Sevan

Marine.

As expected and communicated during the Q4 2014

earnings release, Logitel has informed Cosco that it

will not exercise the option to start building a

fourth unit which will expire on May 30, 2015. In

addition, Logitel has informed Sevan Marine that due

to the current market opportunities in floating

accommodation, they wish to explore extending the

delivery dates of the units currently under

construction. Depending upon the decisions taken,

Sevan Marine faces the risk of delayed payments in

relation to vessels 2 and 3 and the potential

impairment of the convertible loan and / or license

revenue accrued to date.

Weak quarter for Topside and Process Technology

The quarter was negatively impacted by KANFA AS

(Ownership: 51% Sevan Marine and 49% Technip) where

a loss provision was taken on a package recently

delivered. The USD 50 million Yinson OTCP project

started in the quarter and the EPC contract is

expected to be entered into during Q2 2015. A high

workload is expected on the OTCP project during the

remainder of 2015 and early 2016 with margin likely

visible late in the period. KANFA is also tendering

for new projects which if successful could

positively impact results in late 2015 and provide

further backlog for 2016. The performance of KANFA

AS has been challenging over the past quarters. In

Q1 2015 action has been taken to reinforce project

execution, contract management and cost control.

Further action, including cost reduction measures,

may be required in the coming months depending upon

performance and workload.

KANFA Aragon (Ownership: 50% Sevan Marine and 50%

KANFA Aragon management) experienced a very poor

first quarter with low workload and poor

utilization. Cost cutting measures have been

implemented which should stabilize the loss in Q2

2015. KANFA Aragon is involved in a number of

tenders which if successful would improve results in

late 2015 and provide a backlog for 2016. If

unsuccessful, further cost reduction measures will

be required in the second half of 2015.

Appointment of Financial Advisor

Sevan Marine appointed Pareto Securities in April

2015 to explore potential strategic options for the

Company. Pareto Securities has been asked by the

board of Sevan Marine to look into a broad range of

strategic alternatives in order to exploit the full

potential of the Company.

Outlook

- Sevan Marine is working on several leads and

studies within the FPSO and FSO markets. The Company

is optimistic that it can maintain a high

utilization of its staff with ongoing and new FEED /

study work during 2015. Additional cost reduction

measures are also being pursued. A key target for

2015 is to be operating cash flow breakeven

excluding one-off items.

- 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 with

decisions currently expected during 2015 and early

2016. The Company also continues to pursue an

opportunity to provide a license to a new market

entrant intending to build a Sevan Marine designed

drilling unit which may materialize in 2015. Sevan

Marine is optimistic that the Sevan concept will be

selected for these prospects and that further

license income can be secured from late 2015 / early

- Logitel is exploring opportunities to extend

delivery dates on the units currently being built.

In the medium term this will likely lead to delays

in payment for Sevan Marine and potential

impairments. In the long term, Sevan Marine believes

the market will recover.

- Sevan is placing increased emphasis on

business development, marketing and sales of its

core technology. Sevan Marine is actively

considering establishing a permanent presence in

Houston, Texas, USA and is increasing its efforts to

gain acceptance for use of the Sevan technology in

the U.S. Gulf of Mexico.

- 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 secure new work. Further cost reduction

measures may be required in the second half of 2015

if additional work cannot be secured.

- 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.

- Sevan 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 Quarter 2015 Results

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