Golden Ocean Group

Earnings Release • Feb 25, 2014

Results Q4 - 2013

February 25, 2014

• Highlights
• Financials
• Operations
• Macro Update
• Q&A

Highlights

• GOGL results Q4 2013
• EBITDA: \$32.0 million
• Profit: \$18.1 million
• Earnings per share: \$0.04
• GOGL results 2013
• Profit: \$ 84.5 million
• GOGL declares a dividend of \$0.025 for Q4 2013
• Received \$14.1 million up-front payment from one charterer
• GOGL issued a \$200 million Convertible Bond in January 2014
• GOGL purchased three 2012-built kamsarmax vessels in February 2014

Financials

Per Heiberg, Acting CFO Golden Ocean Management AS

Profit & Loss

	2013	2013
	Oct-Dec	Jul-Sep
Operating revenue	70 998	78764
Vessel voyage expenses	$-14809$	$-21063$
Vessel operating expenses	$-11882$	$-12260$
Charter hire expenses	$-15306$	$-16063$
Administrative expenses	$-2604$	$-3013$
Depreciation and amortisation	$-10031$	$-9814$
Other gain/ (losses net)	5 5 7 8	5495
Operating profit	21945	22 046
Interest income	207	374
Interest expense	-4 954	$-4807$
Interest swap	651	$-2420$
Other financial items	434	929
Taxation	$-174$	0
Profit for the period	18 108	16 12 2
Profit attributable to:
Owners of the parent	17985	15 40 7
Non-controlling interest	122	715
Profit for the period	18 108	16 122

• Operating revenues down due to lower activity on trading, which is partly off set by higher market rates on owned vessels trading spot
• Voyage related expences and charter hire expences correspondingly lower
• Opex slightly lower
• Other gain is unchanged. Profit on FFA and bunkers is down, but profit from Joint Ventures is up. The latter includes the profit from sale of Golden Azalea.
• Positive MtM change on interest rate swaps
• Profit for the period 2 mill higher than in Q3

Balance Sheet

(in thousands of \$)	2013	2012
	Dec 31	Dec 31
ASSETS Vessels and equipment, net	667 788	611 517
Vessels held under finance leases, net	130 795	140 217
Vessels under construction	16 144	116 082
Investment in Joint Venture	17 419	1 248
Other assets	11 323	8 026
Total non-current assets	843 469	877 090
Cash and cash equivalents	98 841	112 537
Trade receivables and other current assets	36 270	20 427
Refundable installements for cancelled newbuildings	192 976	100 325
Avaiable-for-sale financial assets	16 916	-
Total current assets	345 002	233 289
Non-current assets held for sale
Total assets	1 188 471	1 110 379
EQUITY AND LIABILITIES
Equity attributable to equity holders of the parent
Share capital	44 726	44 726
Additional paid in capital	99 156	99 156
Other reserves	23 551	16 635
Retained earnings	457 823	377 288
Non-controlling interest	1 108	491
Total Equity	626 364	538 296
Long term debt	319 605	324 432
Obligations under finance leases	110 416	118 055
Other long term liabilities	1 903 -	2 205 -
Deferred income Total non-current liabilities	431 924	444 693
Current Liabilities
Long-term debt - current portion	84 414	68 733
Obligations under finance leases – current portion	7 370	6 837
Other current liabilities	38 399	51 820
Total current liabilities	130 183	127 390
Total liabilities and shareholders' equity	1 188 471	1 110 379

• Vessels and equipment increased by delivery of Golden Diamond
• Vessels under construction contain only payments on Supramaxes
• Investment in Joint Ventures reduced by sale of Golden Azalea and financing of Golden Opus
• Payment on Jinhaiwan contracts classified as short term receivables
• Financial assest include shares in KLC and Greenship
• Debt on cancelled contracts classified as short term

Equity ratio ~ 52,7 %

Operations

Per Heiberg, Acting CFO Golden Ocean Management AS

Vessels: Deliveries and charters

• Golden Diamond, the second vessel bought from Pipavav in May 2013, was delivered to the Company in October 2013
• Golden Azalea, a 2010 built Handysize owned in a JV together with a cargo owner was sold and delivered to new owner in November 2013
• In December 2013 the Company received \$14.1 million in prepayment of hire from one charterer relating to three vessels
• In February 2014 the Company purchased three 2012 Korean built 81.500 dwt Kamsarmaxes in an enblock transaction. The vessels will be delivered to the Company during April 2014
• One on index +13% until Q2-2016
• One on Time Charter until Q4-2014 at 15,881 \$/d net
• One will be open at the end of June 2014

Open positions on sailing vessels

Capesize exposure - Sailing vessels Core Fleet*

	2014	2015	2016
Total vessel days	2 176	2 459	2 466
Open vessel days	1 805	2 456	2 462
Open position (%)	83 %	100 %	100 %
Average net rate on fixed days	19 557	na	na
No of vessels	8	8	8
Panamax exposure - Sailing vessels Core Fleet**
	2014	2015	2016
Total vessel days	7 011	7 909	7 509
Open vessel days	4 177	5 503	5 359
Open position (%)	60 %	70 %	71 %
Average net rate on fixed days	17 843	20 808	21 060
No of vessels	23	23	23

* Capesize: MV Golden Magnum and Golden Opus included with 50%

** Panamax: 3 new kamsarmaxes included from end April 2014

Vessel operating expenses

Based on 16 Panamax/Kamsarmax and 6 Capesize vessels

Newbuildings: Delivery schedule supramax vessels

Yard	Vessels	Contracted out	Open	Delivery
JMU (Japan)	2	0	2	Q1-15
Chengxi, (China)	6	0	6	Q1-Q2/2015 Q1-Q2/2016

• Total newbuilding program consist of 8 Supramaxes
• Steel cutting commenced on the JMU vessels in Q1-2014
• None of the newbuildings are financed
• Strong interest from financial institutions for financing of the vessels

Jinhaiwan situation

• All nine contracts cancelled
• USD 175.3 million in installments to be refunded
• USD 43.2 million in debt on the installements
• Positive awards received on the three first contracts
• The awards declare that the Company had the right to cancel
• Seeking Final Award for the right to repayment
• The six other contracts are in various stages of the arbitration process. Hearing on all arbitrations will commence during Q1-2014
• The Board is confident that the Company has a strong case on all arbitrations

Corporate transactions

• The Joint Venture owning Golen Opus obtained financing of the vessel in Q4-13 and the proceeds was used to repay shareholders loan to the owners
• Greenship Bulk Trust
• In October the Company invested USD 10 million in Greenship Bulk Trust by participation in their latest Private Placement
• Current market value is appr. \$12.5 million
• Korea Line Corporation
• In October KLC used their option under the rehabilitation plan to repay the long term debt. The Company received USD 1.1 million
• The Company currently own 170,042 shares, which is booked in the Balanace Sheet at market value. Current market value of the shares is appr. \$ 4.0 million
• Convertible Bond
• In January the Company issued a \$200 million Convertible Bond with a 5 year tenor
• Coupon of 3,07% p.a
• Current Conversion Price is 2.86 \$/share
• Full dividend protection for Bond holders

Macro Update

Herman Billung, CEO Golden Ocean Management AS

Dry Bulk Market fundamentals

Year	2012	2013
Deliveries (dwt)	98	59
Removals (dwt	33	22
% change prev yr	12.4	7.9
Tonnage demand: %
Ton miles	5.3	6.9
Congestion	$-0.4$	0.4
Other productivity	2.4	1.9
Total tonnage demand	7.3	9.1
Fleet utilization rate
Yearly average in %	83.7	84.9

The underlying fleet growth is slowing…

Source: RS Platou Economic Research

Bulk Carrier fleet trend...

Dry Bulk fleet trend…

However, despite China's overall slowing economy, China's impact on global dry bulk freight demand has never been higher than in 2013 (disregard 2009).

China's iron ore market

Iron ore production capacity expansion

	Australia	Brazil	Other	Total
2013	51		10	61
2014	55	20	5	80
2015	50	30		87
2016	55	40	15	110
2017	50	10	12	102

Despite a slow growth in China's steel production in 2014 and 2015, we expect iron ore imports to be strong; growing 8.5% in 2014 (reaching 890 million tons) and 7.5% in 2015.(reaching 960 million tons)

IEA Energy outlook (Nov 2013) prediction net coal imports

China's coal imports rose 13.3% last year and reached 327 million tons. We believe coal imports to China will grow an additional 14% in 2014 (to 375 million tons) and 15% in 2015 (to 430 million tons)

China environmental politics can support dry bulk demand…

In China's most notorious "Ghost Towns", prices rose quite substantially last year. UP 12.6% in Ordos, which we for sure know does NOT have a housing shortage problem. This is likely a proof that some of last year's property price increases in China was driven by speculation.

Local governments in China have been very active lending money in the unregulated "shadow finance" market, which now account for approximately half of all new debt in China. Growth in regulated lending has been kept in check over the last four years, shadow financing has exploded

Total outstanding shadow finance liabilities surpassed USD 5trln last year

We believe Beijing likely is artificially keeping the default ratio low, constantly rolling over debt. This can last for a while, but not indefinitely. Chinese authorities have enough power to clean up once, but in the aftermath of such a clean-up, credit growth will have to drop substantially

Thank you for your attention !