Dolphin Drilling AS — Investor Presentation 2016

Feb 16, 2016

Financial results 4Q 2015

Oslo, 16 February 2016

AGENDA

FINANCIAL RESULTS 4Q 2015

• MARKET
• OPERATIONS
• SUMMARY

Income Statement – Key Figures

(USD mill)	4Q 2015	3Q 2015	Change
Operating revenues	257,9	235,1	22,8
Recharged income	7,3	6,3	1,0
Total revenues	265,2	241,4	23,8
Operating costs	(116,3)	(105,7)	(10,6)
Recharged expenses	(7,4)	(6,1)	(1,3)
Total operating expenses	(123,7)	(111,8)	(11,9)
Oper. result before depr. (EBITDA)	141,5	129,6	11,9
Depreciation	(86,2)	(82,6)	(3,6)
Impairment	(158,0)	(31,0)	(127,0)
Operating result (EBIT)	(102,7)	16,0	(118,7)
Net financial items	(19,8)	6,3	(26,1)
Result before tax	(122,5)	22,3	(144,8)
Estimated tax	8,3	(0,9)	9,2
Net result	(114,2)	21,4	(135,6)

EBITDA Comparison 4Q 2015 vs. 3Q 2015

Financial Items Breakdown

(USD mill)	4Q 2015	3Q 2015	Change
Interest income	0,4	0,4	-
Other financial income	0,5	-	0,5
Gains on financial instruments	0,9	-	0,9
Financial income	1,8	0,4	1,4
Interest expenses	(10,9)	(11,7)	0,8
Capitalized borrowing cost (projects)	-	1,8	(1,8)
Losses on financial instruments	(8,2)	(7,7)	(0,5)
Other financial expenses	(11,9)	(3,5)	(8,4)
Financial expenses	(31,0)	(21,1)	(9,9)
Net foreign currency gain	9,4	27,0	(17,6)
Net financial items	(19,8)	6,3	(26,1)

Offshore Drilling Segment

(USD mill)	4Q 2015	3Q 2015	Change
Operating revenues	252,7	234,0	18,7
Recharged income	7,3	6,3	1,0
Total revenues	260,0	240,3	19,7
Operating costs	(114,0)	(103,4)	(10,6)
Recharged expenses	(7,4)	(6,1)	(1,3)
Total operating expenses	(121,4)	(109,5)	(11,9)
Oper. result before depr. (EBITDA)	138,6	130,8	7,8
Depreciation	(84,7)	(82,0)	(2,7)
Impairment	(158,0)	(31,0)	(127,0)
Operating result (EBIT)	(104,1)	17,8	(121,9)

Engineering & Fabrication Segment

(USD mill)	4Q 2015	3Q 2015	Change
Operating revenues (external) Inter-segment revenues Total operating revenues	5,2 0,3 5,5	1,1 (1,1) -	4,1 1,4 5,5
Operating costs Oper. result before depr. (EBITDA)	(2,6) 2,9	(1,2) (1,2)	(1,4) 4,1
Depreciation	(1,5)	(0,6)	(0,9)
Operating result (EBIT)	1,4	(1,8)	3,2

Consolidated Balance Sheet

(USD mill)	4Q 2015	3Q 2015	Change
Intangible assets	11,2	11,6	(0,4)
Property, plant & equipment	1 862,4	2 702,2	(839,8)
Other non-current assets	22,9	30,3	(7,4)
Total non-current assets	1 896,5	2 744,1	(847,6)
Other current assets	462,8	284,4	178,4
Cash and cash equivalents	214,1	209,5	4,6
Total current assets	676,9	493,9	183,0
Total assets	2 573,4	3 238,0	(664,6)
Equity	965,5	1 068,6	(103,1)
Non-current interest bearing debt	1 002,1	1 056,0	(53,9)
Other non-current liabilities	100,3	123,7	(23,4)
Total non-current liabilities	1 102,4	1 179,7	(77,3)
Current interest bearing debt	325,7	355,6	(29,9)
Current liabilities newbuilds	-	417,0	(417,0)
Other current liabilities	179,8	217,1	(37,3)
Total current liabilities	505,5	989,7	(484,2)
Total equity and liabilities	2 573,4	3 238,0	(664,6)

Consolidated Cash Flow

(USD mill)	4Q 2015	3Q 2015	Change
Profit before income taxes	(122,5)	22,3	(144,8)
Depreciation and impairment	244,2	113,6	130,6
Interest expense	11,0	9,8	1,2
Changes in working capital	51,7	11,9	39,8
Unrealized loss/(gain) financial instruments	(4,1)	(17,8)	13,7
Cash generated from operations	180,3	139,8	40,5
Interest paid	(11,7)	(11,7)	-
Taxes paid	(2,2)	(3,8)	1,6
Net cash flow from operating activities	166,4	124,3	42,1
Net investment in fixed assets	(74,2)	(94,3)	20,1
Cash flow used in investment activities	(74,2)	(94,3)	20,1
Borrowing of loans	-	130,0	(130,0)
Repayments of loans	(84,4)	(135,5)	51,1
Cash flow from financing activities	(84,4)	(5,5)	(78,9)
Foreign currency	(3,2)	(1,0)	(2,2)
Net change in cash and cash equivalents	7,8	24,5	(16,7)
Cash at beginning of period	209,5	186,0	23,5
Cash at end of period	214,1	209,5	4,6

Offshore drilling EBITDA and margin

Fleet status

RIG	DESIGN	W DEPTH	LOCATION	CLIENT	CONTRACT STATUS	DAY RATE (USD)	NEXT CRS
ULTRA DEEPWATER UNITS
Bolette Dolphin	DS/ Gusto P10'	12 000	Ivory Coast	Anadarko	2Q 2014 - 2Q 2018	488 000	1Q 2019
Belford Dolphin	Drillship	10 000	Labuan		Terminated for convenience
Blackford Dolphin	SS / Aker H-3	7 000	UK	Chevron	July '15 - January '17	428 000	2Q 2019
MID WATER FLOATERS NORWAY
Bideford Dolphin	SS / Aker H-3	1 500	Norway	Statoil	January '14 - January '17	NOK 1048' + USD 301'	2Q 2019
Borgland Dolphin	SS / Aker H-3	1 500	Norway	Consortium*	April '14 - March '17	NOK 1057' + USD 349'	1Q 2020
Bredford Dolphin	SS / Aker H-3	1 500	Norway		Idle, cold stacked		2Q 2017
MID WATER FLOATERS UK
Byford Dolphin	SS / Aker H-3	1 500	UK	BP	April '13 - September '16	345 500	2Q 2020
Borgsten Dolphin	Tender support / AH-3		UK	Total	October '15 - January '18	166 000	1Q 2018
Borgholm Dolphin	Accomodation / AH-3		UK		Idle, cold stacked	(204 500 incl. cap.contribution)	4Q 2017
Borgny Dolphin	SS / Aker H-3	2 300			Cold stacked

Participants in the consortium: * Wintershall, Tullow Oil, E.ON Ruhrgas, Suncor Energy

FINANCIAL RESULTS

• MARKET
• OPERATIONS
• SUMMARY

Global market – floating units

• Limited new demand is creating an increasing overcapacity resulting in declining day rates to a current low level
• Cold stacking of units is expected to increase
• Scrapping is expected to continue to some extent
• The market imbalance is expected to prevail through 2016 and into 2017

Norwegian floater market

• There has been a considerable reduction in the utilisation of the rig fleet in Norway during the last year
• Few new visible contract opportunities in the near to mid term
• Expect increased number of cold stacked units

			2016		2017				2018
Name	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
West Navigator
COSLPioneer
Transocean Searcher
Transocean Barents
West Venture
Songa Trym
Bredford Dolphin
Polar Pioneer
Transocean Spitsbergen
Leiv Eiriksson
Transocean Winner
West Alpha
Bideford Dolphin Borgland Dolphin
Transocean Arctic
Songa Delta
Songa Dee
West Hercules
Stena Don
Island Innovator
Scarabeo 5
Deepsea Bergen
Deepsea Stavanger
Scarabeo 8
COSLInnovator
COSLPromoter
Deepsea Atlantic
Songa Endurance
Songa Equinox
Songa Encourage
Songa Enabler
		Contract			Option					Yard/under construction

As per January 2016

Source: DNB

Average dayrates Norway

UK floater market

• The UK market is in a similar situation as the Norwegian market with a sharp decline in utilization of the fleet
• Some of the tender activity in 2016 has been postponed to 2017
• The visibility for 2016 and into 2017 is low
• The low project activity in general is affecting the accommodation segment, with few contracting opportunities also in this market

			2016		2017				2018
Name	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
Ocean Vanguard
Borgny Dolphin
Ocean Nomad
Ocean Princess
Transocean Prospect
Sertao
Sedco 711
Transocean John Shaw
Sedco 714
Paragon MSS1
Sedco 704
WilHunter
Ocean Valiant
Byford Dolphin
West Phoenix
Stena Spey
Sedco 712
Ocean Guardian
Blackford Dolphin
Paul B. Loyd, Jr.
Ocean Patriot
WilPhoenix
Transocean Leader
Deepsea Aberdeen
		Contract			Option					Yard/under construction

As per January 2016

Source: DNB

Average dayrates UK

Deepwater dayrates - worldwide

FINANCIAL RESULTS

• MARKET
• OPERATIONS
• SUMMARY

Fred. Olsen Energy – Operating worldwide

Contract overview

Average contract length approximately 11 months

Contract backlog

Total backlog approximately USD 1.1 billion

Ultra deepwater

Bolette Dolphin

• Operates under a four-year contract with Anadarko, estimated to expire 2Q 2018
• Completed the first drilling campaign offshore Colombia and has recently arrived in the Ivory Coast

Belford Dolphin

• Completed the five-year Class Renewal Survey at the Keppel yard in October 2015
• Has undergone a preservation program and is located outside Labuan, Malaysia. The unit is marketed for contract possibilities worldwide

Midwater - Norway

Borgland Dolphin

• Continued its operations under the 18-well contract with an RMN consortium, estimated to be completed 1Q 2017
• The unit is currently inshore due to lack of drilling program for the client
• The unit completed its Class Renewal Survey February 2015

Bideford Dolphin

• Operates under a three-year contract with Statoil, estimated to be completed end of January 2017
• Completed its five-year class renewal survey July 2014
• One of the winterstorms have caused damages to the helideck of the rig. The unit is therefore inshore for repairs which is expected to be completed early March

Midwater - Norway / United Kingdom

Bredford Dolphin

• Completed the 12-well contract with an AGR consortium beginning of 2016
• The unit is cold stacked at Kvinesdal, Norway, due to lack of new contract opportunities
• The class renewal survey was completed August 2012

Borgholm Dolphin

• The unit is cold stacked and located at the quay side of Harland & Wolff
• Class renewal survey was completed March 2013

Midwater - United Kingdom (cont.)

Byford Dolphin

• Continued under the contract with BP Exploration in the UK. The contract is estimated to expire 3Q 2016
• The unit completed its CRS July 2015

Borgsten Dolphin

• Continued under the tender support services contract with Total E&P UK
• The contract rate was amended from October 2015 with estimated expiry of the contact in January 2018, subject to certain early termination rights
• Completed class renewal survey and conversion to tender support vessel in February 2013

Deepwater – United Kingdom

Blackford Dolphin

• Continued the 572 days contract with Chevron offshore UK. The contract is estimated to expire around January 2017
• The unit experienced 56 days of downtime related to subsea equipment during the 4th quarter and 18 days in January 2016
• Completed its class renewal survey in June 2014

Bollsta Dolphin

• HHI's quantification of their claim that Bollsta was not entitled to cancel the contract was received in January 2016
• In addition to claiming entitlement to the first instalment HHI claims an additional payment of about MUSD 178
• An alternative claim of MUSD 38 has been submitted by HHI should their primary claim fail
• Bollsta, together with FOE, remain firm that the cancellation was rightful, that Bollsta is entitled to a full repayment of the first instalment (of about MUSD 186) and that none of HHI's claims holds any merit; they will all be vigorously refuted
• An impairment of USD 91.4 million is booked for the Bollsta Dolphin due to the cancellation

Harland & Wolff

• Focus on ship repair, ship building, steel fabrication and engineering services
• The main activities during the quarter has been several dockings and a repair of the LNG tanker Al Oraig in the main dock
• Borgny Dolphin and Borgholm Dolphin remains cold-stacked at the yard

Summary

Financial

• Revenues were USD 265 million
• EBITDA was USD 141.5 million
• Profit before tax was negative USD 122.5 million
• Impairment of totally USD 158 million is booked
• Contract backlog amounting to approximately USD 1.1 billion
• HHI's quantification of their claim that Bollsta was not entitled to cancel the contract was received in January 2016

Operational

Bredford Dolphin completed its contract early January 2016

Market

Average contract duration approximately 11 months