Akastor — Investor Presentation 2016

Jul 14, 2016

Kristian Røkke and Leif H. Borge

SECOND QUARTER AND HALF YEAR 2016 RESULTS

Kristian Røkke and Leif Borge Oslo | July 14, 2016

Q2 and 1H 2016 HIGHLIGHTS Kristian Røkke CEO

FINANCIALS Leif Borge CFO

Q & A Kristian Røkke and Leif Borge

Highlights

ü EBITDA of NOK -45 million

• ⁻ Normalized EBITDA of NOK 169 million
• ⁻ Restructuring charges and onerous lease
• ⁻ Satisfactory operational performance in MHWirth, Frontica, and Fjords
• ⁻ Challenging market conditions for KOP Surface
• Sold Managed Pressure Operations (MPO) to AFGlobal
• Continued market uncertainty, but high business development activity

EBITDA NOK -45 million	NIBD NOK 5.4 billion	Order Backlog NOK 15.1 billion

Q2 and 1H 2016 HIGHLIGHTS Kristian Røkke CEO

FINANCIALS Leif Borge CFO

Q & A Kristian Røkke and Leif Borge

Portfolio Highlights

ü Restructuring coming to an end, work force reduction of 54% ü Brazil situation remains uncertain ü MPO sold to AFGlobal in July for USD 10 million, plus an earn out up to USD 65 million
ü Signed five year contract with MHWirth ü Margin improvement in the quarter
ü Skandi Santos with high utilization ü Aker Wayfarer conversion completed ü AKOFS Seafarer idle in Q2; being marketed towards select opportunities
ü Strengthened position in the Middle East, challenging market in North America ü Book to bill ratio of 1.2 in the first half of 2016 ü Revenue growth and improved margins in the quarter
ü Reduced activity levels due to weak 2015 order intake ü Focus on expanding customer base and exploring new regions Strong operations, but capacity costs causing negative EBITDA ü

Condensed Consolidated Income Statement

	Second	Quarter First half			Full Year
NOK million	2016	2015 (restated)	2016	2015 (restated)	2015 (restated)
Operating revenues and other income	2 782	3 638	5 325	8 034	15 654
Operating expenses	(2 827)	(3 463)	(5 354)	(7 665)	(14 758)
EBITDA
	(45)	176	(30)	370	895
Depreciation and amortization	(210)	(233)	(424)	(460)	(944)
Impairment	(35)	(10)	(66)	(10)	(1 257)
Operating profit (loss)	(289)	(67)	(520)	(101)	(1 305)
Net financial items	(377)	(180)	(570)	(321)	(692)
Profit (loss) before tax	(667)	(247)	(1 090)	(422)	(1 997)
Tax income (expense)	99	27	204	42	279
Profit (loss) from continuing operations	(567)	(220)	(886)	(380)	(1 718)
Net profit (loss) from discontinued operations	(270)	(78)	(318)	(168)	(869)
Profit (loss) for the period	(838)	(298)	(1 204)	(549)	(2 587)

Analysis of underlying performance

NOK million	Q2 reported	Disqualifying hedges	Impairment	Onerous leases	Restructuring costs	Sum	Q2 underlying
EBITDA	(45)	(8)	-	(110)	(96)	(214)	169
Depreciation & amortization	(210)	-	-	-	-	-	(210)
Impairment	(35)	-	(35)	-	-	(35)	0
EBIT	(289)	-	-	-	-	-	(40)
Net financial items	(377)	(187)	(50)	-	-	(237)	(140)

The Akastor Portfolio

NET CAPITAL EMPLOYED OF NOK 11.3 BILLION

NOK million

• Impairment in MPO NOK 185 million

Capital Structure

• ü Net Debt of NOK 5.4 bn as of Q2:
• ― Gross Debt of NOK 6.0 bn
• ― Cash of NOK 0.3 bn
• ― Interest bearing assets of NOK 0.3 bn
• ü Liquidity reserve of NOK 2.2 bn
• ― Cash of NOK 0.3 bn
• ― Undrawn credit facilities of NOK 1.9 bn
• ü Financial Covenants:
• ― Gearing: Net Debt/ Equity < 1.0 (Wayfarer lease excluded)
• ― Minimum liquidity: NOK 750 million
• ― Interest coverage ratio: EBITDA/ net interest (see table)

FUNDING

	SIZE	MATURITY	MARGIN
REVOLVING	USD 422.5 million	July 2019	1.65%-4.5%
REVOLVING	NOK 2.0 billion	July 2019	1.65%-4.5%
REVOLVING	NOK 362.5 million	June 2017	1.65%-4.5%
BRAZIL FACILITY	BRL 129 million	May 2022	9.4% average cost

INTEREST COVERAGE RATIO

2016		2017
		Q1	3.0
Q2	0.7	Q2	4.0
Q3	0.7	Q3	4.0
Q4	1.5	Q4	4.0

MHWirth

• ü Revenues down 35% in Q2 2016 compared with 2015
• ü EBITDA of NOK -16 million in the quarter including:
• ― Restructuring cost of NOK 95 million
• ü Order intake of NOK 912 million
• ü NCOA down NOK 128 million to NOK 1.7 billion
• ü Removed NOK 3.6 billion from backlog

Revenue and EBITDA

AKOFS Offshore

• ü Skandi Santos with high utilization
• ü Aker Wayfarer completed conversion for the Petrobras contract
• ü AKOFS Seafarer remains cold stacked. Opex below USD 10 000 per day

VESSEL PROGRAM

• ü Revenue of NOK 877 million in the quarter, down 30 % compared with 2015 due to lower activity level of key clients
• ü EBITDA of NOK 50 million with a margin of 5.7 percent
• ü Order intake of NOK 410 million, giving a backlog of NOK 5.2 billion

Revenue and EBITDA

NOK million

Frontica Fjords Processing

• ü Revenues of NOK 655 million in Q2, up 38 % from 2015, driven by Europe and Middle East, and increased activity within the gas processing market
• ü EBITDA of NOK 52 million in Q2 compared with NOK 16 million in 2015
• ü Order intake of NOK 239 million in Q2

Revenue and EBITDA

NOK million

KOP Surface Products Other Holdings

• ü Revenues of NOK 66 million in the quarter, down 74% compared with 2015, due to destocking and weak Asian market
• ü EBITDA of NOK -5 million

• ü Order intake of NOK 71 million in Q2

• ü Step Oiltools and First Geo: EBITDA of NOK -5 million

• ü Provisions for onerous real estate leases of NOK 110 million
• ü Effect from hedges not qualifying for hedge accounting of NOK - 8 million
• ü DOF Deepwater restructured

Revenue and EBITDA

NOK million

Revenue and EBITDA NOK million

© 2016 Akastor Second Quarter and Half Year Results 2016 14 July 2016 Slide 13

Q2 and 1H 2016 HIGHLIGHTS Kristian Røkke CEO

FINANCIALS Leif Borge CFO

Q & A Kristian Røkke and Leif Borge

Additional information

Condensed Consolidated Income Statement

	Second	Quarter First half			Full Year
NOK million	2016	2015 (restated)	2016	2015 (restated)	2015 (restated)
Operating revenues and other income	2 782	3 638	5 325	8 034	15 654
Operating expenses	(2 827)	(3 463)	(5 354)	(7 665)	(14 758)
EBITDA
	(45)	176	(30)	370	895
Depreciation and amortization	(210)	(233)	(424)	(460)	(944)
Impairment	(35)	(10)	(66)	(10)	(1 257)
Operating profit (loss)	(289)	(67)	(520)	(101)	(1 305)
Net financial items	(377)	(180)	(570)	(321)	(692)
Profit (loss) before tax	(667)	(247)	(1 090)	(422)	(1 997)
Tax income (expense)	99	27	204	42	279
Profit (loss) from continuing operations	(567)	(220)	(886)	(380)	(1 718)
Net profit (loss) from discontinued operations	(270)	(78)	(318)	(168)	(869)
Profit (loss) for the period	(838)	(298)	(1 204)	(549)	(2 587)

Condensed Consolidated Statement of Financial Position NOK million June 30, 2016 December 31, 2015

Deferred tax assets	863	468
Intangible assets	2 436	2 785
Property, plant and equipment	6 399	6 480
Other non-current assets	88	478
Other investments	252	437
Non-current interest-bearing receivables	196	84
Total non-current assets	10 234	10 732
Current operating assets	7 154	9 171
Current interest-bearing receivables	70	72
Cash and cash equivalents	315	563
Assets classified as held for sale	259	-
Total current assets	7 799	9 805
Total assets	18 033	20 537
Equity attributable to equity holders of Akastor ASA	5 718	7 386
Total equity	5 718	7 386
Deferred tax liabilities	87	51
Employee benefit obligations	412	434
Other non-current liabilities	450	414
Non-current borrowings	5 330	1 583
Total non-current liabilities	6 279	2 483
Current operating liabilities	5 304	6 613
Current borrowings	679	4 054
Liabilities classified as held for sale	53	-
Total current liabilities	6 037	10 667
Total liabilities and equity	18 033	20 537

Key Figures

AKASTOR GROUP

Amounts in NOK million	Q2 15 (restated)	Q3 15 (restated)	Q4 15 (restated)	Q1 16	Q2 16	YTD 15 (restated)	YTD 16
Operating revenue and other income	3 638	3 663	3 956	2 542	2 782	8 034	5 325
EBITDA	176	(75)	601	15	(45)	370	(30)
EBIT	(67)	(1 439)	235	(231)	(289)	(101)	(520)
CAPEX and R&D capitalization	280	107	146	70	60	1 407	130
NCOA	2 925	2 920	2 340	2 058	2 030	2 925	2 030
Net capital employed	14 710	14 297	12 088	11 618	11 326	14 710	11 326
Order intake	2 289	2 358	2 779	6 695	1 665	5 369	8 360
Order backlog	18 886	18 017	15 852	19 725	15 103	18 886	15 103
Employees	6 406	5 935	5 566	4 915	4 414	6 585	4 414

Split per Company MHWIRTH (continuing operations)

Amounts in NOK million	Q2 15	Q3 15	Q4 15	Q1 16	Q2 16	YTD 15	YTD 16
Operating revenue and other income	1 564	1 407	1 533	907	1 010	3 588	1 917
EBITDA	38	(90)	50	(63)	(16)	58	(79)
EBIT	(27)	(214)	(66)	(163)	(119)	(70)	(282)
CAPEX and R&D capitalization	148	63	50	11	14	248	25
NCOA	2 770	2 836	2 133	1 811	1 683	2 770	1 683
Net capital employed	5 151	5 212	4 285	3 909	4 032	5 151	4 032
Order intake	896	671	1 139	631	912	1 665	1 542
Order backlog	7 019	6 313	5 654	5 363	1 668	7 019	1 668
Employees	3 515	3 171	2 894	2 477	2 059	3 515	2 059

FRONTICA

Q2 15	Q3 15	Q4 15	Q1 16	Q2 16	YTD 15	YTD 16
						1 761
57	74	64	36	50	121	86
31	45	33	12	26	69	38
8	5	13	-	6	26	6
(298)	(426)	(303)	(139)	-156	(298)	(156)
300	187	244	374	289	300	289
804	1 088	997	4 837	410	2 298	5 247
2 260	2 235	1 754	5 670	5 200	2 260	5 200
1 065	1 029	983	894	810	1 065	810
	1 261	1 145	1 083	884	877	2 692

Split per Company AKOFS OFFSHORE

Amounts in NOK million	Q2 15	Q3 15	Q4 15	Q1 16	Q2 16	YTD 15	YTD 16
Operating revenue and other income	186	229	198	159	142	354	301
EBITDA	31	51	45	38	32	7	70
EBIT	(56)	(1 082)	(41)	(41)	(45)	(165)	(86)
CAPEX and R&D capitalization	61	13	17	48	25	1 027	73
NCOA	99	45	69	103	256	99	256
Net capital employed	5 567	5 171	5 183	5 142	5 264	5 567	5 264
Order intake	66	107	12	23	7	186	30
Order backlog	6 194	6 395	6 430	6 145	6 160	6 194	6 160
Employees	102	102	91	93	93	102	93

FJORDS PROCESSING

Amounts in NOK million	Q2 15	Q3 15	Q4 15	Q1 16	Q2 16	YTD 15	YTD 16
Operating revenue and other income	475	487	582	463	655	867	1 118
EBITDA	16	17	60	27	52	26	78
EBIT	7	7	51	18	43	9	60
CAPEX and R&D capitalization	13	9	15	3	10	21	13
NCOA	(70)	(4)	117	28	81	(70)	81
Net capital employed	532	618	715	616	647	532	647
Order intake	500	391	789	1 083	239	936	1 322
Order backlog	1 245	1 148	1 398	1 983	1 559	1 245	1 559
Employees	572	542	545	548	543	572	543

Split per Company KOP SURFACE PRODUCTS

Amounts in NOK million	Q2 15	Q3 15	Q4 15	Q1 16	Q2 16	YTD 15	YTD 16
Operating revenue and other income	255	338	214	123	66	579	188
EBITDA	59	67	52	14	(5)	124	9
EBIT	45	53	28	(1)	(19)	96	(19)
CAPEX and R&D capitalization	3	8	16	3	2	8	5
NCOA	410	442	240	187	163	410	163
Net capital employed	700	744	555	490	461	700	461
Order intake	138	108	91	115	71	354	186
Order backlog	466	264	149	138	144	466	144
Employees	736	693	682	549	502	736	502

OTHER HOLDINGS

Amounts in NOK million	Q2 15	Q3 15	Q4 15	Q1 16	Q2 16	YTD 15	YTD 16
Operating revenue and other income	113	227	558	126	124	406	250
EBITDA	(25)	(194)	329	(37)	(158)	33	(194)
EBIT	(66)	(249)	229	(56)	(175)	(39)	(231)
CAPEX and R&D capitalization	42	4	30	3	2	65	5
NCOA	(103)	(70)	(34)	(72)	15	(103)	15
Net capital employed	1 590	1 478	661	650	438	1 590	438
Order intake	46	105	319	95	103	255	198
Order backlog	1 660	1 545	412	368	284	1 660	284
Employees	416	398	372	354	327	416	327

Copyright and disclaimer

Copyright

Copyright of all published material including photographs, drawings and images in this document remains vested in Akastor and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction.

Disclaimer

This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Akastor ASA and Akastor ASA's (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Akastor ASA. oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although Akastor ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Akastor ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Akastor ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use.