Dolphin Drilling AS — Interim / Quarterly Report 2014

Jul 11, 2014

Presentation 2Q 2014

Oslo 11th July 2014

AGENDA

FINANCIAL RESULT 2Q 2014

MARKETS

OPERATIONS

SUMMARY

Income Statement – Key Figures

(USD mill)	2Q 2014	1Q 2014	Change
Operating revenues	256,8	259,2	(2,4)
Recharged income	16,5	18,6	(2,1)
Total revenues	273,3	277,8	(4,5)
Operating costs	(150,5)	(157,7)	7,2
Recharged expenses	(16,2)	(18,1)	1,9
Total operating expenses	(166,7)	(175,8)	9,1
Oper. result before depr. (EBITDA)	106,6	102,0	4,6
Depreciation	(87,8)	(62,6)	(25,2)
Operating result (EBIT)	18,8	39,4	(20,6)
Net financial items	(2,5)	(14,9)	12,4
Result before tax	16,3	24,5	(8,2)
Estimated tax	(9,3)	(1,0)	(8,3)
Net result	7,0	23,5	(16,5)

EBITDA Comparison 2Q 2014 vs. 1Q 2014

Financial Items Breakdown

(USD mill)	2Q 2014	1Q 2014	Change
Interest income	1,0	0,7	0,3
Gains on financial instruments	-	0,8	(0,8)
Financial income	1,0	1,5	(0,5)
Interest expenses	(14,8)	(11,0)	(3,8)
Capitalized borrowing cost (projects)	2,0	3,2	(1,2)
Losses on financial instruments	(1,2)	(0,4)	(0,8)
Other financial expenses	(2,8)	(3,4)	0,6
Financial expenses	(16,8)	(11,6)	(5,2)
Net foreign currency gain/(loss)	13,3	(4,8)	18,1
Net financial items	(2,5)	(14,9)	12,4

Offshore Drilling Segment

(USD mill)	2Q 2014	1Q 2014	Change
Operating revenues Recharged income Total revenues	249,0 16,5 265,5	248,5 18,6 267,1	0,5 (2,1) (1,6)
Operating costs Recharged expenses Total operating expenses	(140,9) (16,2) (157,1)	(145,2) (18,1) (163,3)	4,3 1,9 6,2
Oper. result before depr. (EBITDA)	108,4	103,8	4,6
Depreciation	(87,2)	(62,1)	(25,1)
Operating result (EBIT)	21,2	41,7	(20,5)

Engineering & Fabrication Segment

(USD mill)	2Q 2014	1Q 2014	Change
Operating revenues (external) Inter-segment revenues Total operating revenues	7,8 15,9 23,7	10,7 37,7 48,4	(2,9) (21,8) (24,7)
Operating costs Oper. result before depr. (EBITDA)	(18,7) 5,0	(44,3) 4,1	25,6 0,9
Depreciation	(0,6)	(0,5)	(0,1)
Operating result (EBIT)	4,4	3,6	0,8

Consolidated Balance Sheet

(USD mill)	2Q 2014	1Q 2014	Change
Intangible assets	16,0	16,5	(0,5)
Property, plant & equipment	2 822,8	2 595,9	226,9
Other non-current assets	27,1	27,4	(0,3)
Total non-current assets	2 865,9	2 639,8	226,1
Other current assets	309,3	325,7	(16,4)
Cash and cash equivalents	226,1	398,7	(172,6)
Total current assets	535,4	724,4	(189,0)
Total assets	3 401,3	3 364,2	37,1
Equity	1 242,7	1 460,2	(217,5)
Non-current interest bearing debt	1 300,2	1 191,4	108,8
Other non-current liabilities	133,9	130,6	3,3
Total non-current liabilities	1 434,1	1 322,0	112,1
Current interest bearing debt	176,4	176,4	-
Current liabilities newbuilds	213,8	165,1	48,7
Other current liabilities	334,3	240,5	93,8
Total current liabilities	724,5	582,0	142,5
Total equity and liabilities	3 401,3	3 364,2	37,1

Consolidated Cash Flow

(USD mill)	2Q 2014	1Q 2014	Change
Profit before income taxes	16,3	24,5	(8,2)
Depreciation and impairment	87,8	62,6	25,2
Interest expense	12,8	7,8	5,0
Changes in working capital	25,7	13,8	11,9
Unrealized loss/(gain) financial instruments	(11,5)	5,5	(17,0)
Cash generated from operations	131,1	114,2	16,9
Interest paid	(15,4)	(8,6)	(6,8)
Taxes paid	(3,3)	(3,2)	(0,1)
Net cash flow from operating activities	112,4	102,4	10,0
Net investment in fixed assets	(181,4)	(495,0)	313,6
Cash flow used in investment activities	(181,4)	(495,0)	313,6
Borrowing of loans Repayment of loans Dividend paid Cash flow from financing activities	151,8 (31,6) (222,6) (102,4)	631,8 (62,8) - 569,0	(480,0) 31,2 (448,8)
Foreign currency	(1,2)	0,2	(1,4)
Net change in cash and cash equivalents	(171,4)	176,4	(347,8)
Cash at beginning of period	398,7	222,1	176,6
Cash at end of period	226,1	398,7	(172,6)

Offshore drilling EBITDA and margin

Fleet status

Rig	Type / design	W depth ft	Location	Client	Contract status	Day rate (in USD)	Next CR survey
Ultra-deepwater and deepwater units
Bollsta Dolphin	SS / Moss	10 000	UK	Chevron	4Q 2015- 4Q 2020	560 000	1Q 2020
Bolette Dolphin	Drillship	12 000	West Africa	Anadarko	2Q 2014 - 2Q 2018	488 000	1Q 2019
Belford Dolphin	Drillship	10 000	Mozambique	Anadarko	January '12 - January '15	484 000	1Q 2015
Blackford Dolphin	SS / Aker H-3	7 000	UK UK UK	MPX Nexen Chevron Option	July '14 - August '14 September '14 - May '15 June '15 - January '17 January '17 - October '17	419 000 428 000 428 000	4Q 2018
Midwater floaters Norway
Bideford Dolphin	SS / Aker H-3	1 500	Norway	Statoil	February '14 - February '17	NOK 990 + USD 301'	2Q 2018
				Option	February '17 - February '19	NOK 990 + USD 301'
Borgland Dolphin	SS / Aker H-3	1 500	Norway	Consortium*	April '14 - September '17	NOK 990' + USD 354'	4Q 2014
Bredford Dolphin	SS / Aker H-3	1 500	Norway	Consortium**	October '13 - September '15	NOK 993' + USD 274'	2Q 2017
Midwater floaters UK - Brazil
Borgny Dolphin	SS / Aker H-3	2 300			Idle		4Q 2014
Byford Dolphin	SS / Aker H-3	1 500	UK	B P Option	April '13 - April '16 May '16 - April '19	345 500	1Q 2015
Borgsten Dolphin	Tender support / AH-3		UK	Total Option	February '13 -May '16 June '16 - June '17	202 000/ 240 500 incl. capital contribution	1Q 2018
Borgholm Dolphin	Accomodation / AH-3		UK	Shell B G Option	May '13- August '14 October '14 - June '15 July '15 - August '15	245 000 240 000 240 000	4Q 2017

Participants in the consortiums:

* Wintershall, Tullow Oil, E.ON Ruhrgas, Suncor Energy ** RWE DEA, Lundin, Noreco, Repsol

Financing

New bank credit facility of USD 2 billion

• Six year facility signed with a syndicate of banks including Eksportkreditt/GIEK
• Margin of US Libor +2.30%
• Includes USD 400 million in revolving credit facility and
• USD 550 million for financing of Bollsta Dolphin at delivery

FINANCIAL RESULT

MARKETS

OPERATIONS

SUMMARY

Global market outlook – floating units

• In general, continued low contracting activity in all market segments
• Some increase in number of contract fixtures during the quarter, however still at a low level
• An increase of number of idle rigs is seen, predominantly in international mid water and deepwater markets

Norwegian floater market

• Continued low contracting activity in the quarter
• Shorter term exploration demand
• Long-term, both exploration and development demand expected, with several requests for development projects in 2016/2017

Average dayrates Norway

UK floater market

• Relatively low contracting activity in the quarter, with only a few new short term contracts
• Shorter term exploration and appraisal opportunities expected, followed by in-field and development projects
• Relatively stable prospects in the accommodation segment

	2014		2015				2016
Name	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
J.W. McLean
Ocean Princess
GSF Arctic III
Transocean Prospect
West Phoenix
Sedco 711
Sedco 704
Stena Spey
Sedco 714
Transocean John Shaw
Noble Ton van Langeveld
Ocean Nomad
WilHunter
Sedco 712
Paul B. Loyd, Jr.
Blackford Dolphin
Byford Dolphin
WilPhoenix
Ocean Patriot
Bollsta Dolphin
Deepsea Aberdeen
		Contract			Option				Yard/under construction

As per June 2014 Source: DNB

Average dayrates UK

Dayrates deepwater drilling units worldwide

• FINANCIAL RESULT
• MARKETS
• OPERATIONS
• SUMMARY

Fred. Olsen Energy – Operating worldwide

Contract overview

Average contract length of ca. 27 months

Contract backlog

Contract backlog Customer base

Total backlog ca. USD 4.0 billion

Bollsta Dolphin

• Harsh environment ultra deepwater semi-submersible under construction
• Moss Maritime CS 60 E (Enhanced) design from Hyundai Heavy Industries
• Delivery is scheduled to 3Q 2015
• Block erection continued during the quarter
• Has secured a five-year contract with Chevron for operations West of Shetland in the UK sector

Ultra deepwater

Bolette Dolphin

• Newbuild ultra deepwater drillship from Hyundai Heavy Industries delivered 21st of February 2014
• Has secured a four-year contract with Anadarko for international operations
• Successful start-up of the first drilling operation in Liberia during May, which will be followed by a drilling campaign in the Ivory Coast

Belford Dolphin

• Commenced a new four-year contract with Anadarko from January 2012
• Operating offshore Mozambique
• Next five-year class renewal survey to take place in 1Q 2015

Midwater - Norway

Borgland Dolphin

• Commenced a new contract with a new RMN consortium in April 2014. Estimated duration is 3.5 years
• Next five-year class renewal survey to take place 4Q 2014, including installation of a new BOP

Bideford Dolphin

• Operates under a three-year contract with Statoil
• Entered into CCB yard end of April to undertake its five-year class renewal survey. During class work by one of the suppliers, one of the BOP bodies was overheated and had to be condemned. Due to this incident the rig is estimated to be back in operation by end of July
• The cost is estimated to USD 110 million

Midwater - Norway / United Kingdom

Bredford Dolphin

• Continued under the 12-well contract with an AGR consortium. The contract is expected to expire end of 3Q 2015
• The class renewal survey was completed August 2012

Borgholm Dolphin

• Currently under a one year contract with Shell, estimated to be completed end of August
• During the quarter, the unit undertook a yard stay in connection with the anchoring system and resumed operations for Shell end of June. The total cost for the two yard stays in first half 2014 were USD 25 million
• A new nine month contract with BG will follow, with estimated commencement in October 2014 after a one month scheduled yard stay to increase the height of the gangway pedestal
• Class renewal survey was completed March 2013

Midwater - United Kingdom (cont.)

Byford Dolphin

• Continued under a three-year drilling contract with BP Exploration, estimated to expire April 2016
• The class renewal survey and installation of a new five ram BOP is scheduled to 1Q 2015

Borgsten Dolphin

• Continued under the tender support services contract of 40 months duration with Total E&P UK. Two six month options exist under the contract
• Completed class renewal survey and conversion to tender support vessel in February 2013

Deepwater – United Kingdom / midwater Brazil

Blackford Dolphin

• The unit completed the five-year class renewal survey and upgrades at H&W yard end of June
• Commenced a one-well for MPX North Sea Ltd, to be followed by a nine month contract with Nexen and a 572 days contact with Chevron. Chevron has an option for extending the contract between 300 and 700 days
• The one well contract with Cairn/Capricorn was terminated due to late start up after yard stay
• Total cost for the CRS and upgrade was USD 210 million

Borgny Dolphin

• Completed the five-year drilling contract with Petrobras early June
• The unit will be re-exported from Brazil and located off Invergordon, Scotland

Harland & Wolff

• Focus on ship repair, ship building, steel fabrication and engineering services
• Class renewal survey of Blackford Dolphin continued during the quarter, with completion end of June
• The engineering phase for fabrication of the Humber gateway offshore windfarm substation jacket continued, with completion in 3Q 2014

Summary

Financial

• Revenues were USD 273 million
• EBITDA was USD 107 million
• Profit before tax was USD 16 million
• Contract backlog amounting to approximately USD 4.0 billion
• Refinancing of fleet loan including financing for Bollsta Dolphin completed during the quarter

Operational

• Blackford Dolphin class renewal survey and upgrades completed end of June
• Borgholm Dolphin at yard for repairs
• Borgland Dolphin commenced new contract with RMN in April

Market

• The one well contract with Cairn/Capricorn was terminated
• Average contract duration approximately 27 months