Viking Supply Ships

Quarterly Report • Oct 30, 2014

Viking Supply Ships A/S Financial Report Q3 2014

Contents Page

Summary of events	3
Operational highlights	3
Financial highlights	4
Financing and capital structure	4
Subsequent events	4
Contract backlog	5
Employment overview	5
Outlook	5
Condensed consolidated profit and loss account	7
Condensed consolidated statement of comprehensive income	7
Condensed consolidated cash flow statement	7
Condensed consolidated balance sheet	8
Notes to the condensed consolidated financial statements	9

Viking Supply Ships (VSS) conducts operations in the North Sea, Arctic and in the global offshore sector. The fleet comprises of 13 offshore vessels that are equipped for and have the capacity to operate in areas with harsh environment, further 7 of the AHTS vessels are equipped to operate in Arctic areas. The AHTS fleet, combined with crew and ice management competence, is tailor-made to operate in ice conditions. There has been an increased contract activity in this niche. VSS is committed to have a substantial part of the fleet on longer term contracts, and have a focus on increasing the contract backlog.

For further information, please contact CEO, Christian W. Berg, ph: +45 41 77 83 80.

The interim financial statements have not been subject to audit or review.

Front picture: AHTS vessel Brage Viking during ice trials in the bay of Bothnia.

VIKING SUPPLY SHIPS

FINANCIAL REPORT Q3

SUMMARY OF EVENTS Q3

Total revenue for Q3 2014 was MNOK 561 (MNOK 301), of which vessel operations contribute with MNOK 414 (MNOK 278) and Services and Ship Management segments contribute with MNOK 147 (MNOK 23). The EBITDA for Q3 was MNOK 271 (MNOK 133).

The operating result (EBIT) for Q3 was MNOK 223 (MNOK 90). The net result for Q3 was MNOK 159 (MNOK 80).

The political situation in Ukraine and the sanctions against Russia have to date not impacted VSS but recent US sanctions have impacted US companies' activities in Russia. It is difficult to substantiate the future consequences of these sanctions. VSS is monitoring the situation closely in order to secure its interests in the region.

The average fixture rate for the VSS AHTS fleet in Q3 was NOK 522,000 (NOK 378,000) and GBP 13,700 (GBP 13,300) for the VSS PSV fleet. The average utilization for the VSS AHTS fleet for Q3 was 95 % (74 %) and 69 % (89 %) for the VSS PSV fleet.

VSS has completed the refinancing of the three AHTS Icebreakers Tor, Balder and Vidar Viking by signing a secured bank loan agreement. The new secured bank loan agreement of MNOK 617 will mature in 2019.

As mentioned in earlier financial reports, VSS will receive a compensation fee due to the cancellation of the 2014 drilling season for the AHTS icebreaker Tor Viking. The final fee is expected to be agreed on during Q4 2014.

The 1985 built SBS Cirrus was sold and delivered to its new owners. The transaction has generated a positive impact of MNOK 1 on the Q3 2014 results.

OPERATIONAL HIGHLIGHTS FOR Q3

Anchor Handling Tug Supply vessels (AHTS)

As a result of the contract communicated in the Q2 2014 financial report, Tor Viking is now operating in Sakhalin. This further strengthens the company's presence in the harsh environment and arctic conditions. VSS had seven of its eight AHTS vessels operating on term contracts, while one vessel was traded in the North Sea spot market. Four vessels have returned to the North Sea during October following the end of the drilling season.

The low activity seen in the North Sea Spot market in the previous quarter continued into July. However, as activity increased during the last two months of the quarter, both rates and utilization increased from the levels seen in previous periods.

Q3 2014	Fixture rate (NOK)	Utilization (%)
AHTS vessels on term charters	514,000 (406,000)	100 % (100 %)
AHTS vessels on spot market	615,000 (339,000)	60 % (54 %)
Total AHTS fleet	522,000 (378,000)	95 % (74 %)

Platform Supply Vessels (PSV)

Despite increased demand for vessels, the market did not manage to absorb the ample supply of vessels, giving a soft market most of the quarter.

By the end of the third quarter of 2014, Freyja Viking concluded its four month charter to Nexen and the vessel is now trading in the North Sea spot market. SBS Typhoon also returned to the spot market during the quarter having served Enquest on a term charter for the entire year.

At the end of the third quarter of 2014, all 5 vessels were traded in the North Sea spot market. The company is presently working to increase the contract coverage on the PSV fleet, and is pursuing opportunities in the North Sea as well as other regions.

VIKING SUPPLY SHIPS

FINANCIAL REPORT Q3

PSV vessels on term charters	14,400 (11,400)	100 % (100 %)
PSV vessels on spot market	13,100 (20,200)	53 % (65 %)
Total PSV fleet	13,700 (13,300)	69 % (89 %)

Services and Ship Management

In the Services segment the Kara Sea Consultancy Project is progressing according to the project plan. The project has entered into the demobilisation phase and the Shore Operations Center in Moscow will be closed until the preparations for the next operational season which is expected to start during the second quarter of 2015. The Shore Operations Center in Moscow delivers valuable data such as weather forecast, information about ice conditions and general guidance to the vessels operating in the Kara Sea. st August 2015. Q3 2014 Fixture rate (GBP) Utilization (%)

The Ship Management segment operated according to plan with no major events during the third quarter.

FINANCIAL HIGHLIGHTS

Results for Q3 2014

Total revenue was MNOK 561 (MNOK 301) for Q3. The total operating costs were MNOK 291 (MNOK 168) and EBITDA MNOK 271 (MNOK 133). The operating result (EBIT) was MNOK 223 (MNOK 90).

Net financials were negative MNOK 58 (negative MNOK 11). Financial costs include unrealized currency loss of MNOK 24 (gain of MNOK 21) and realized value adjustment on interest rate swaps of negative MNOK 4 (positive MNOK 5).

The net result for Q3 was MNOK 159 (MNOK 80).

Results for year-to-date 2014

Total revenue was MNOK 1,266 (MNOK 748) for year-to-date 2014. The total operating costs were MNOK 805 (MNOK 523) and EBITDA MNOK 461 (MNOK 225). The operating result (EBIT) was MNOK 319 (MNOK 98).

Net financials were negative MNOK 130 (negative MNOK 84). Financial costs include unrealized currency loss of MNOK 31 (gain of MNOK 17) and realized value adjustment on interest rate swaps of negative MNOK 8 (MNOK 0).

The net result for year-to-date 2014 was MNOK 179 (MNOK 25).

FINANCING AND CAPITAL STRUCTURE

Viking Supply Ships A/S is a 100 % owned subsidiary of Rederi AB Transatlantic ("RABT"). RABT is a limited liability company registered in Sweden, with its domicile in Gothenburg, and corporate registration number 556161-0113. RABT is listed on the Small Cap list of the NASDAQ OMX Nordic Exchange in Stockholm.

VSS book equity amounted to MNOK 1,905 (MNOK 1,784) as of 30 th September 2014 and was impacted by the yearto-date result of MNOK 179 (MNOK 25) and currency effects of MNOK 7 (MNOK 36). The value adjusted equity ratio was 48 % (45 %).

SUBSEQUENT EVENTS

VSS has purchased the PSV vessel Freyja Viking which has been on a long term bareboat contract to VSS. To finance the purchase, VSS has drawn the last tranche on the secured bank loan financing the PSV vessels.

VSS has received an early termination for the AHTS vessel Loke Viking, which applies for the 2015 and optional 2016 and 2017 drilling seasons. VSS is entitled to an early termination fee.

Sakhalin Energy has exercised the second of three 4 months options on Vidar Viking. The vessel is now on firm contract until 1

CONTRACT BACKLOG

	2014	2015	2016
Total contract backlog (MNOK)	1,968	1,778	1,026
AHTS contract backlog (MNOK)	1,968	1,778	1,026
PSV contract backlog (MNOK)	-	-	-
Total contract coverage (%)	30%	29%	17%
AHTS contract coverage (%)	49%	46%	27%
PSV contract coverage (%)	0 %	0 %	0 %

Table is basis 30th September 2014 with adjustment for subsequent events. All figures above include firm period and options.

EMPLOYMENT OVERVIEW

		Firm contract	Option
AHTS				2015
Tor Viking			October November December January February Oil major, firm till 15th May 2015 + 2x6 months options		March	April	Ma y	June	July Oil major, firm 2015 + opt for 2016-17	Augus t	September
Balder Viking			Oil major, firm season 2014-2015, options for 2016-2017 SMA stand by					Oil major, firm 2015 + opt for 2016-17
Vidar Viking			Sakhalin Energy, firm till 1st August 2015 + 1x4 months options
Odin Viking	Spot
Loke Viking		Oil major, firm season 2014
Njord Viking			Eni Norge, firm till 29th July 2015 + 2x1 yearly options
Magne Viking			Oil major, firm season 2014-2015, options for 2016-2017					Oil major, firm 2015 + opt for 2016-17
Brage Viking			Oil major, firm season 2014-2015, options for 2016-2017					Oil major, firm 2015 + opt for 2016-17

		Firm contract	Option
			2014	2015
PSV		October November December January February				March	April	Ma y	June	July	Augus t	September
Frigg Viking	Spot
Idun Viking	Spot
SBS Tempest	Spot
Freya Viking	Spot
SBS Typhoon	Spot
SBS Cirrus	Spot
Overviews are basis 30		th			September 2014 with adjustment for subsequent events.

OUTLOOK

With the winter approaching, we expect several project vessels to join the North Sea AHTS fleet. Subsequently we expect a weakened AHTS market compared to Q3. However, as often seen during winter time, the weather can have a large impact, and tight periods can occur due to operational delays and temporarily increased activity.

For the PSV segment, we expect reduced demand when we approach the end of the year. Like the AHTS market, we expect periods with a tighter PSV market, but overall we expect rates and utilization to be modest.

VIKING SUPPLY SHIPS

FINANCIAL REPORT Q3

Copenhagen, 30th October 2014

Board of Directors:

Chairman	Vice chairman

Christen Sveaas Anders Folke Patriksson Tom Ruud

Lars Håkan Larsson Per Magnus Sonnorp

Managing Director:

Christian W. Berg

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

	Q3	YTD	Q3	YTD	FY
(MNOK) Note	2014	2014	2013	2013	2013
Total Revenue	561.0	1,265.6	300.8	748.3	1,006.9
Direct voyage costs	-6.5	-36.4	-7.7	-32.0	-43.6
Operating costs	-284.0	-768.3	-159.9	-491.3	-663.9
Total operating costs	-290.5	-804.7	-167.6	-523.3	-707.5
Operating profit before depreciation (EBITDA)	270.5	460.9	133.2	225.0	299.4
Net gain on sale of fixed assets	0.9	0.9	-	-	-
Depreciation	1 -48.9	-143.2	-43.0	-126.7	-175.6
Impairment	1 -	-	-	-	-80.0
Operating profit (EBIT)	222.5	318.6	90.2	98.3	43.8
Financial income	0.2	0.7	0.7	1.4	2.8
Financial costs	-57.7	-130.2	-11.4	-85.0	-105.7
Net financials	-57.5	-129.6	-10.6	-83.6	-102.8
Pre-tax result	165.0	189.1	79.6	14.7	-59.0
Taxes	-5.9	-10.3	-	10.0	7.4
Result for the period	2 159.1	178.8	79.6	24.7	-51.6

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Q3	YTD	Q3	YTD	FY
(MNOK)	2014	2014	2013	2013	2013
Result for the period	159.1	178.8	79.6	24.7	-51.6
Translation effect foreign operations	-5.4	6.9	8.9	36.2	48.0
Other comprehensive income net of tax	-5.4	6.9	8.9	36.2	48.0
Total comprehensive income for the period	153.7	185.7	88.5	60.9	-3.6

CONDENSED CONSOLIDATED CASHFLOW STATEMENT

	Q3	YTD	Q3	YTD	FY
(MNOK)	2014	2014	2013	2013	2013
Cash flow from operating activities	111.3	249.3	38.8	40.2	121.7
Cash flow from investing activities	7.8	-155.6	-4.7	-39.1	-49.4
Cash flow from financing activities	-106.4	-59.2	-30.6	16.3	-31.2
Net changes in cash and cash equivalents	12.7	34.5	3.5	17.4	41.1
Cash and cash equivalents at the start of period	260.0	238.2	211.0	197.1	197.1
Cash and cash equivalents at the end of the period	272.7	272.7	214.5	214.5	238.2

CONDENSED CONSOLIDATED BALANCE SHEET

	Note	Q3	Q3	FY
(MNOK)		2014	2013	2013
ASSETS
Vessels and equipment		3,712.2	3,758.9	3,669.8
Tangible fixed assets	1,2	3,712.2	3,758.9	3,669.8
Financial fixed assets	4	33.6	69.4	68.8
Total fixed assets		3,745.8	3,828.3	3,738.6
Inventories		14.9	20.4	24.2
Accounts receivables		251.9	143.9	118.7
Other current receivables		133.9	98.0	83.8
Cash and cash equivalents	4	272.7	214.5	238.2
Total current assets		673.4	476.8	464.9
Total assets		4,419.2	4,305.1	4,203.5

		Q3	Q3	FY
(MNOK)	Note	2014	2013	2013
EQUITY AND LIABILITIES
Share capital		0.5	0.5	0.5
Retained earnings and reserves		1,904.4	1,783.3	1,718.7
Total equity		1,904.9	1,783.8	1,719.2
Long-term bond loan	3	238.7	359.1	359.9
Long-term debt to credit institutions	3	1,776.7	1,687.9	1,647.4
Other non-current liabilities		25.9	37.5	33.1
Non-current liabilities		2,041.3	2,084.5	2,040.4
Short-term bond loan	3	-	98.4	98.8
Short-term debt to credit institutions	3	250.9	189.0	189.6
Accounts payable		91.3	32.1	38.4
Other current liabilities		130.8	117.3	117.1
Current liabilities		473.0	436.8	443.9
Total liabilities		2,514.3	2,521.3	2,484.3
Total equity and liabilities		4,419.2	4,305.1	4,203.5

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Depreciation

Tangible fixed assets are recognized at cost or after deductions for accumulated depreciation according to plan and possible impairment. Straight-line amortization according to plan is based on the following useful lives:

• Vessels 25–30 years with residual value
• Docking and major overhaul measures 2.5–5 years
• Other equipment 5–10 years

Impairment test as at 30 th September shows no need for impairment.

2. Segment information

The segment information is presented in accordance with the internal reporting structure and includes four segments.

	Q3	Q3	Q3	Q3
(MNOK)	AHTS	PSV	Services	Ship Mgmt.
Total Revenue	367.3	46.7	121.5	25.5
Direct voyage costs	-4.3	-2.2	-	-
Operating costs	-102.0	-39.1	-117.4	-25.5
Total operating costs	-106.3	-41.3	-117.4	-25.5
Operating profit before depreciation (EBITDA)	261.0	5.4	4.1	-
Net gain on sale of fixed assets	-	0.9	-	-
Depreciation	-38.2	-10.7	-	-
Operating profit (EBIT)	222.8	-4.4	4.1	-
Financial income	0.2	-	-	-
Financial costs	-52.9	-5.2	0.4	-
Net financials	-52.7	-5.2	0.4	-
Pre-tax result	170.1	-9.6	4.5	-
Taxes	-5.9	-	-	-
Result for the period	164.2	-9.6	4.5	-

	YTD	YTD	YTD	YTD
(MNOK)	AHTS	PSV	Services	Ship Mgmt.
Total Revenue	776.6	138.2	263.7	87.1
Direct voyage costs	-30.1	-6.3	-	-
Operating costs	-321.4	-119.4	-240.4	-87.1
Total operating costs	-351.5	-125.7	-240.4	-87.1
Operating profit before depreciation (EBITDA)	425.1	12.5	23.3	-
Net gain on sale of fixed assets	-	0.9	-	-
Depreciation	-114.2	-29.0	-	-
Operating profit (EBIT)	310.9	-15.6	23.3	-
Financial income	0.7	-	-	-
Financial costs	-119.8	-10.8	0.4	-
Net financials	-119.2	-10.8	0.4	-
Pre-tax result	191.8	-26.4	23.7	-
Taxes	-10.3	-	-	-
Result for the period	181.5	-26.4	23.7	-
(MNOK)	AHTS	PSV		Services Ship Mgmt.
Total tangible fixed assets	3,031.2	681.0	-	-

Total interest bearing debt	1,926.0	340.3	-	-

3. Interest bearing liabilities

The vessels owned by the Company are primarily financed through bank loans with pledge in the vessels. Further securities have been given in the form of pledge in revenue and insurance policies. The interest-bearing debt in VSS per Q3 2014 is MNOK 2,266 (MNOK 2,334).

VSS' loan agreements have a number of financial and other covenants, according to which VSS must fulfill certain key data. At the balance date all covenants were in compliance.

In March 2012 VSS issued a 5 year senior unsecured bond loan in the Norwegian capital market, with maturity in March 2017, totaling MNOK 300. The bond agreement has a limit of MNOK 750. The net proceeds from the bond shall be employed for investments, capital expenditures related to fleet expansion and general corporate purposes. The bond was listed on Nordic ABM in Oslo on 28th June, 2012. In March 2013 an additional MNOK 85 was drawn in a tap issue. As at balance date VSS is holding nominal MNOK 139 MNOK of this bond, consequently 246 MNOK is outstanding.

In June 2013 VSS issued a 15 month senior unsecured bond loan in the Norwegian capital market, with maturity on 24th September 2014, totaling MNOK 100. The bond was listed on Nordic ABM in Oslo on 25th June, 2013. During Q3 2014 the full MNOK 100 was repaid.

VSS has 39 % (10 %) of its interest bearing debt in USD and 15 % (0 %) in GBP. The remaining loans are denominated in NOK. VSS has 11 % (38 %) of the total loan portfolio swapped into fixed interest rate.

3.1. Classification by type of debt

	Q3	Q3	FY
(MNOK)	2014	2013	2013
Long-term bond loan	238.7	359.1	359.9
Short-term bond loan	-	98.4	98.8
Long-term debt to credit institutions	1,776.7	1,687.9	1,647.4
Short-term debt to credit institutions	250.9	189.0	189.6
Total interest bearing liabilities	2,266.3	2,334.4	2,295.7

3.2. Debt maturity

4. Cash and cash equivalents

	Q3	Q3	FY
(MNOK)	2014	2013	2013
Restricted cash *	-	37.1	37.2
Free cash and cash equivalents	272.7	214.5	238.2
Cash and cash equivalents	272.7	251.6	275.4

* The amount is included in the item "Financial fixed assets" in the balance-sheet

5. Operational and financial risk

VSS is characterized by a high degree of international operations and is thus exposed to a number of operational and financial risks. VSS works actively to identify, assess and manage these risks.

VSS is exposed to changes in the freight rates. To mitigate this operational risk, VSS has a clear focus on increasing the number of vessels on term contracts.

Long-term loans are the principal form of financing. Accordingly, interest rate fluctuations have an impact on VSS' earnings and cash flow. To reduce this risk the Group aims to actively manage the interest exposure through various types of hedging instruments.

Part of the VSS' cash flow is generated in currencies other than NOK which is VSS' functional currency. This means that currency fluctuations have an impact on VSS' earnings and cash flows. The foreign exchange risk is primarily reduced by matching the exposure to revenues in various currencies with costs in the corresponding currency. In the same manner, assets in a certain currency are primarily matched with liabilities in the same currency.

6. Basis of preparation

These condensed interim financial statements for the nine months ending 30 th September 2014 have been prepared in accordance with the accounting principles as described in the VSS Annual Report for 2013.