Akastor — Investor Presentation 2019

Jul 17, 2019

Second Quarter Results 2019 Akastor ASA

Karl Erik Kjelstad (CEO) & Leif Borge (CFO)

Fornebu | 17 July 2019

Presenters and agenda

Leif Borge Chief Financial Officer Group highlights

Portfolio highlights

Financial update

Q&A session

2Q 2019 highlights

• Revenue of NOK 1.3 billion, 49 percent growth year-on-year
• ⁻ Revenue of NOK 234 million from AKOFS Offshore (not consolidated)

▪ EBITDA of NOK 114 million

• ⁻ Including positive effect of IFRS 16 (new leasing standard) of NOK 30 million
• ⁻ EBITDA of NOK 104 million from AKOFS Offshore (not consolidated)

▪ Net interest-bearing debt of NOK 898 million, increase of NOK 608 million in the quarter

• ⁻ NOK 154 million external debt in AGR (non recourse to Akastor)
• ⁻ Acquisition of Bronco Manufacturing cash effect of NOK 269 million
• ⁻ Cash Flow from operations negative with NOK 143 million, mainly due to increase in working capital
• MHWirth completes acquisition of Bronco Manufacturing in June 2019, strengthening its onshore aftermarket services

Note: Financial figures for 1Q 2019 and onwards include effects of IFRS 16, comparative figures have not been re-stated

Portfolio companies highlights

Akastor portfolio composition

Industrial investments Financial investments

	100%
Leading global provider of first-class drilling systems, products and services
	50%
Global provider of subsea well construction and intervention services
Global provider of well design and drilling project management, HSEQ, reservoir and field management services	55%1)
	100%
Global provider of solids control and drilling waste management services
	100%
Supplier of vapour recovery technology, systems and services to O&G installations

1) Economic ownership | 100% legal ownership

Portfolio Highlights 2Q 2019

MHWirth strengthens onshore aftermarket services through acquisition of Bronco Manufacturing

Transaction rationale

Bronco brings MHWirth with an immediate and established presence in the onshore drilling market

Both businesses are complementary with regards to each respective product portfolio and market areas (offshore/onshore)

MHWirth's aim is to increase Bronco's market share globally through utilizing MHWirth's established offshore relationships and to strengthen the position in the US onshore market by leveraging the relationships of MHWirth's new management team

Key areas for cost synergies include efficient use of facilities, improved supply chain management, corporate overhead and optimization of R&D spending

Bronco Manufacturing in brief

About Bronco Manufacturing Key financials

• Founded in 1984 and headquartered in Tulsa (US), Bronco is a leading provider of critical aftermarket solutions and products to the global onshore and offshore drilling market
• Bronco's primary product offering includes components and spare parts for Mud Pumps, Drawworks, Travelling Blocks, Hooks, Swivels, Rotary Tables, Mobile Rig and Iron Roughneck
• Bronco has in-house manufacturing capabilities, engineering and design expertise, global scales of operations, long-standing customer relationships, and a broad product portfolio

Revenue (USDm) vs EBITDA margin

Global geographic footprint

Financial update

Financial highlights 2Q 2019

NOK million	2Q 2019	2Q 2018	1H 2019	1H 2018
Revenue	1 304	873	2 375	1 754
EBITDA	114	78	206	141
EBIT	27	31	58	47
Net financials	(53)	103	(16)	54
Profit (loss) before tax	(26)	134	42	102
Tax income (expense)	(12)	(14)	(18)	(15)
Profit (loss) from continuing operations	(38)	121	24	86
Net profit (loss) from disc. operations	(40)	(372)	(40)	(357)
Profit (loss) for the period	(78)	(251)	(16)	(271)
Order intake	1 786	1 635	2 932	2 703
Order backlog	3 529	2 907	3 529	2 907
NCOA	876	617	876	617
Net Capital Employed	5 236	6 035	5 236	6 035

2Q 2019 highlights

• Revenues in 2Q up 49% year-over-year
• EBITDA of NOK 114 million includes effect from IFRS 16 (new leasing standard) of NOK 30 million
• Depreciation, amortization and impairment of NOK 87 million includes effect from IFRS 16 of NOK 35 million
• Net financial items of negative NOK 53 million include net non-cash items from financial investments of NOK 39 million and net effect from IFRS 16 of NOK 7 million

Note: Financial figures for 1Q 2019 and onwards include effects of IFRS 16, comparative figures have not been re-stated

Key financials reconciliation

Revenue (NOK million)	2Q 2019	2Q 2018	1H 2019	1H 2018
MHWirth	1 013	681	1 916	1 412
AGR	156	47	186	80
Step Oiltools	76	61	134	114
Cool Sorption	35	28	95	45
Other	33	70	63	124
Elimination	(8)	(13)	(19)	(19)
Reported Group revenue	1 304	873	2 375	1 754
AKOFS Offshore (100%)	234	289	491	551

EBITDA (NOK million)	2Q 2019	2Q 2018	1H 2019	1H 2018
MHWirth	109	68	197	137
AGR	(1)	10	1	13
Step Oiltools	12	1	16	3
Cool Sorption	5	3	14	3
Other	(11)	(4)	(22)	(14)
Reported Group EBITDA	114	78	206	141
AKOFS Offshore (100%)	104	123	240	209

Net financial items (NOK million)	2Q 2019	2Q 2018	1H 2019	1H 2018
Odfjell Drilling	15	52	61	52
Awilco Drilling	(16)	26	(4)	42
NES Global Talent	25	14	41	23
DOF Deepwater	(28)	(24)	(34)	(50)
AKOFS Offshore	(26)	-	(34)	-
Contribution from financial investments	(31)	69	31	67
Net interest exp. on external borrowings	(15)	(18)	(27)	(35)
Net interest exp. on lease liabilities	(9)	-	(17)	-
Net foreign exchange gain (loss)	7	31	4	8
Other financial income (expenses)	(5)	21	(24)	14
Net financial items	(53)	103	(16)	54

▪ Odfjell Drilling: the result of NOK 15 million includes cash interests of NOK 8 million, PIK interests of NOK 8 million and valuation effects on the warrant structure of negative NOK 2 million

▪ DOF Deepwater and AKOFS Offshore: the negative results represent 50% of the companies' net profit – depreciation, impairment and financial costs explaining the negative results

Note: Financial figures for 1Q 2019 and onwards include effects of IFRS 16, comparative figures have not been re-stated

Cash flow and net debt position

• Net interest-bearing debt position increased by NOK 608 million to NOK 898 million
• Other Net Debt increase mainly driven by lease payments and funding of Seafarer capex
• Liquidity reserve of NOK 1.3 billion
• Operating CF impacted negatively by increased working capital of NOK 354 million

NOK million	2Q 2019
Non-current bank debt	1 538
Current bank debt	19
Non-recourse AGR debt	154
Cash and cash equivalents	(281)
Net debt	1 430
AKOFS receivable	(521)
Other receivables	(10)
Net interest bearing debt (NIBD)	898

1) Acquisitions include cash effect of NOK 269 million from Bronco acquisition and net debt of NOK 120 million in AGR.

Akastor © 2019 Akastor | July 2019 Slide 12

Net Capital Employed as per 2Q 2019

NOK million

MHWirth

• Project & Products revenues for 2Q were NOK 461 million, an increase of 89% compared to last year
• DLS revenues for 2Q were NOK 552 million (including Digital Technologies), an increase of 26% compared to last year
• Second quarter EBITDA of NOK 109 million (10.8% margin), including effect of IFRS 16 (new leasing standard) of NOK 18 million
• Order backlog and order intake for the second quarter amounted to NOK 3.0 billion and NOK 1.6 billion, respectively
• Revenue and EBITDA contribution from Bronco of NOK 19 million and negative NOK 1 million (net after transaction costs of NOK 5 million), respectively

Quarterly development in revenues and EBITDA-margin1)

Highlights 2Q 2019 Installed base per 2Q 2019

MHWirth installed base hit turning point mid 2017

AKOFS Offshore

Highlights 2Q 2019 Fleet overview

• Revenues and EBITDA for 2Q of NOK 234 million and NOK 104 million, respectively
• Skandi Santos revenue utilization impacted by planned engine overhaul
• Aker Wayfarer continues to have good operational utilization
• AKOS Seafarer financing proceeding according to plan and is expected to be completed in 3Q 2019

1) Figures presented on a 100% basis. Financial figures for 1Q 2019 and onwards include effects of IFRS 16, comparative figures have not been re-stated

Quarterly development in revenues and EBITDA-margin1) NOK million

Akastor © 2019 Akastor | July 2019 Slide 15

NES Global Talent

• Continued strong contracting activity, with solid growth in total number of contractors also this period
• Key growth drivers for the last period were Middle East and Americas, as well as the Managed Solutions business area
• Continued focus on diversifying client portfolio, with good growth seen within life sciences and the onshore market
• Akastor holds ~17% economic interest in NES

Recent development Award winning workforce solution specialist

Highlights 2Q 2019

• Revenue and EBITDA in 2Q of NOK 156 million and NOK -1 million, respectively
• Most of AGR business comes from the offshore markets in Norway, UK, GoM and Australia
• In Norway, the demand for consultants has been strong with substantial revenue growth compared with 2018
• In UK, the tender activity is high, but revenues and profitability has been disappointing so far in 2019
• In other regions the recovery is still slow but expected to increase from a low level

Key offering

Well	Reservoir		Software and
Management	Management	Consulting	other services
World largest independent well management group with ability to deliver complete well management services	Independent reservoir management advice and unique products such as Multi-Client Regional Studies	Recruitment and consultancy solutions in the form of single placement of experienced drilling and engineering personnel	Proprietary in house developed WM software and other services such as Operational HSEQ, TRACS training and Facilities solutions

Global reach with offering through offices worldwide

Other Holdings

Highlights 2Q 2019

• Other holdings reported pro-forma consolidated revenue and EBITDA in 2Q of NOK 110 million and NOK 17 million, respectively
• Step Oiltools: Revenues in 2Q of NOK 76 million, up NOK 15 million from last year. EBITDA of NOK 12 million, up NOK 11 million from last year
• Cool Sorption: Revenues in 2Q of NOK 35 million, up NOK 7 million from last year. EBITDA of NOK 5 million, up NOK 2 million from last year

Quarterly development in revenues and EBITDA-margin1)

1) Pro-forma figures for Step Oiltools and Cool Sorption. Financial figures for 1Q 2019 and onwards include effects of IFRS 16, comparative figures have not been re-stated

Akastor © 2019 Akastor | July 2019 Slide 18

Akastor as an investment company

Key priorities

MHWirth

• Further strengthen MHWirth's leading market position with stateof-the-art technologies ready to capitalize on efficiency and automation trend in an improving offshore market
• Ambitious growth agenda, both organically and through M&A

Other portfolio companies

▪ Improve operational performance and pursue structural opportunities

Balance Sheet / Capital Allocation

▪ Continued capital discipline with flexibility to pursue value enhancing M&A opportunities

Appendix

Transactions track-record since inception in 2014

1) Pref shares USD 75m + warrants 2) cash gain 3) Plus earnout of max USD 65m

ODL preferred equity and warrant instrument

Preferred equity of USD 75m Warrant structure

Instrument description:

• 5% cash dividend + 5% PIK per annum (semi-annual payment)
• Call price: 125% year 2, 120% year 3, 115% year 4, 110% year 5, 105% year 6, 100% thereafter
• Cash dividend step-up: 8.0% p.a. from year 7 and an additional 1.0% step-up per year until a maximum cash dividend of 10.0% p.a.
• Commitment fee of USD 5.75 million paid in 2Q 2019
• Certain rights and covenants1) in favor of Akastor

Instrument payment profile:

USDm	2018e	2019e	2020e	2021e	2022e	2023e	2024e	2025e	2026e
Cash Dividend	2.2	3.9	4.1	4.3	4.5	4.8	8.0	9.5	11.0
Acc. PIK	77.2	81.1	85.2	89.5	94.1	98.8	103.8	109.1	114.6
Call price incl. PIK		99.9	100.2	100.8	101.6	102.6	103.8	109.1	114.6
Dividend	5 %	5 %	5 %	5 %	5 %	5 %	8 %	9 %	10 %
PIK interest	5 %	5 %	5 %	5 %	5 %	5 %	5 %	5 %	5 %
Call price	n.a.	125 %	120 %	115 %	110 %	105 %	100 %	100 %	100 %

1) The agreement contain several covenants, including but not limited to an obligation not to pay dividends or other distributions exceeding 50% of the net profit from the preceding year (unless a similar portion of the preference capital is repaid prior to the distribution), and in any case not pay dividends or make distributions after year 6. Also the agreement includes a change of control covenant pertaining to restructurings with the effect that Odfjell Partner's shareholding falls below 25%

Instrument description:

▪ The total warrant issue comprise six tranches with 987,500 warrants per tranche, amounting to a total 5,925,000 warrants. Furthermore, one warrant can be exercised for one share (1-to-1 ratio) for a price of USD 0.01 per share. Maximum number of share allocation if share price in ODL has increased with 20% p.a.

Warrant overview:

Exercise dates

• Schedule 4.2: If any warrants remain unexercised at the ultimate exercise date in 2024, the holder will receive a number of shares determined linearly according to:

× [ ℎ @ 31 2024 − 36] (107.5 − 36)

Key figures

AKASTOR GROUP

NOK million	2Q 18	3Q 18	4Q 18	1Q 19	2Q 19	YTD 2019
Revenue and other income	873	955	1 090	1 070	1 304	2 375
EBITDA	78	87	63	92	114	206
EBIT	31	41	21	31	27	58
CAPEX and R&D capitalization	8	68	37	16	23	39
NCOA	617	547	375	521	876	876
Net capital employed	6 035	4 771	4 556	4 721	5 236	5 236
Order intake	1 635	799	980	1 146	1 786	2 932
Order backlog	2 907	2 759	2 692	2 755	3 529	3 529
Employees	1 970	1 790	1 775	1 812	2 179	2 179

Note: Financial figures before 01.01.2019 are not adjusted for IFRS 16

Split per Company (1 of 4)

MHWIRTH

NOK million	2Q 18	3Q 18	4Q 18	1Q 19	2Q 19	YTD 2019
Revenue and other income	681	751	893	904	1 013	1 916
EBITDA	68	71	73	88	109	197
EBIT	36	39	45	47	57	104
CAPEX and R&D capitalization	8	11	36	16	21	37
NCOA	671	613	655	734	1099	1099
Net capital employed	2 347	2 258	2 363	2 411	2 883	2 883
Order intake	1 466	640	713	1 013	1 599	2 611
Order backlog	2 504	2 398	2 282	2 394	2 985	2 985
Employees	1 412	1 422	1 424	1 457	1 531	1 531

Note: 1) Financial figures before 01.01.2019 are not adjusted for IFRS 16 2) NCOA in 4Q 18 and 1Q 19 has been restated to exclude the provision related to MPO arbitration (included in Other Holdings)

Split per Company (2 of 4)

AKOFS OFFSHORE 1)

NOK million	2Q 18	3Q 18	4Q 18	1Q 19	2Q 19	YTD 2019
Revenue and other income	289	290	266	258	234	491
EBITDA	123	118	144	136	104	240
EBIT	(280)	78	68	56	24	79
CAPEX and R&D capitalization	(1)	54	124	144	110	254
NCOA	217	214	180	76	138	138
Net capital employed	2 203	3 371	3 441	3 431	3 520	3 520
Order intake	2 936	42	4	-	-	-
Order backlog	6 633	6 286	6 250	5 937	5 579	5 579
Employees	186	190	202	237	240	240

1) Figures presented on a 100% basis. Akastor's share of net profit from the joint venture is presented as part of "net financial items"

Note: Financial figures before 01.01.2019 are not adjusted for IFRS 16

Split per Company (3 of 4)

AGR

NOK million	2Q 18	3Q 18	4Q 18	1Q 19	2Q 19	YTD 2019
Revenue and other income	47	53	36	30	156	186
EBITDA	10	15	(1)	2	(1)	1
EBIT	10	15	(1)	2	(6)	(4)
CAPEX and R&D capitalization	-	-	-	-	2	2
NCOA	(7)	(13)	(1)	(2)	2	2
Net capital employed	12	1	14	12	154	154
Order intake	50	23	51	18	81	99
Order backlog	66	37	52	40	260	260
Employees	70	68	65	62	350	350

Financial figures before 01.01.2019 are not adjusted for IFRS 16. Financial figures before 2Q 2019 include First Geo only.

Split per Company (4 of 4)

OTHER HOLDINGS

NOK million	2Q 18	3Q 18	4Q 18	1Q 19	2Q 19	YTD 2019
Revenue and other income	150	144	171	148	144	292
EBITDA	(8)	(10)	(10)	2	6	8
EBIT	(23)	(23)	(23)	(18)	(24)	(42)
CAPEX and R&D capitalization	1	2	2	-	-	1
NCOA	(47)	(52)	(279)	(210)	(225)	(225)
Net capital employed	1 473	1 371	1 094	1 221	1 157	1 157
Order intake	125	133	215	118	108	226
Order backlog	338	324	356	322	284	284
Employees	302	300	286	293	298	298

Note:

1) Financial figures before 01.01.2019 are not adjusted for IFRS 16

2) Other holdings has been restated (excluding First Geo which is consolidated into AGR)

3) NCOA in 4Q 18 and 1Q 19 has been restated to include the provision related to MPO arbitration (previously included in MHWirth)

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 July 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.