Electromagnetic Geoservices ASA

Earnings Release • Nov 2, 2017

THIRD QUARTER 2017 RESULTS.

Oslo, 2 November 2017 CEO Christiaan Vermeijden, CFO Hege A. Veiseth

Disclaimer

This quarterly 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. Such forward-looking information and statements 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 Electromagnetic Geoservices ASA (EMGS) and its subsidiaries. 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 the EMGS' businesses, 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. Although Electromagnetic Geoservices ASA believes that its expectations and the information in this Report were based upon reasonable assumptions at the time when they were made, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in this Report. Electromagnetic Geoservices ASA nor any other company within the EMGS Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Report, and neither Electromagnetic Geoservices ASA, any other company within the EMGS Group nor any of their directors, officers or employees will have any liability to you or any other persons resulting from your use of the information in the Report. Electromagnetic Geoservices ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the Report.

Revenues of USD 10 m and EBITDA of USD 3 m

Operations

• Continued with multi-client investments in Norway
• First commercial survey for the Deep Blue (JIP) source completed

Financials

• Revenues of USD 10.0 million (USD 10.6 million in Q2)
• EBITDA of USD 2.9 million (USD 4.5 million in Q2)
• Rights issue of USD 17.4 million completed in July

Market

• No significant change to backlog

Financial review

Third quarter performance

• Revenues
• USD 10.0 million
• Mainly multi-client revenues in Norway
• EBITDA
• USD 2.9 million
• Vessel utilisation for 77% of one vessel
• First commercial project with the Deep Blue source completed
• Prefunded multi-client projects in Norway

5

Reduced operational costs

Quarterly operational cost base development* (USD million)

• Capitalisation of multi-client and JIP test costs
• Other operational expenses
• Employee expenses
• Charter hire, fuel and crew expenses

Comments

• Operational costs base in Q3 of USD 9.2 million
• Capitalised multi-client and JIP test expenses of USD 2.2 million
• Vessel lease expenses for one vessel (Atlantic Guardian)
• Cost control
  • Cost control continues in 2017
  • Target the 2017 cost base of approximately USD 45 million, subject to operational activity

*Cost base is defined as Operational costs (charter hire etc, employee expenses, other operating expenses) plus MC investments, less provision for onerous contract, restructuring charges and other extraordinary items

Increase in free cash in Q3

Quarterly free cash development (USD million) Comments

• Net increase in free cash of USD 10.9 million to USD 23.0 million
• Financing activities
• Rights issue of USD 17.4 million
• Repaid credit facility of USD 8.5 million

Multi-client book value of USD 18.2 million

Operations, Market and Outlook

Putting CSEM to use

"Providing an example of an integrated solution for improved performance on prospect evaluation"

Prospect evaluation for Barents Sea wells posted on LinkedIn pre-well

Korpfjell: Well prediction of shallow section by EMGS

• Seismic suggests the presence of a large volume of hydrocarbons
• Large volumes in shallow section not supported by CSEM
• CSEM data could be explained by small oil or gas accumulations

Prediction by EMGS:

Presence of hydrocarbons Low volumes

Possible pitfalls:

High background resistivity

Korpfjell: Well result (1st well / shallow well)

As reported:

• Gas discovery
• Much smaller volumes reported than anticipated by seismic

Prediction lookback:

Presence of hydrocarbons Low volumes

Possible pitfalls:

Resolved

Consistent use of CSEM on a prospect portfolio

Polarising an oil company's prospect portfolio provides for:

• improved decision making and
• the potential to increase the return on investment

for illustrative purpose only

Operations and selection of current opportunities

Canada:

• MC data covering Flemish Pass basin available for sale
• Atlantic Guardian en route to Newfoundland
• Industry interest to acquire more data in 2018

US:

• MC data available for annual licensing rounds and geological understanding of the Perdido area
• Marketing ongoing but subdued level of interest through 2017

Mexico:

• Reprocessed 3D MC data (16,000 sqkm) available for sale
• License terms of partnerships being finalised

Brazil:

• 12,300 sqkm MC data from Sergipe-Alagoas, Foz and Ceara available for sale
• Round 14 results announced during the quarter. Mixed results

Norway:

• Coverage in the Barents Sea expanded in Q3 2017 in anticipation of the 24th licensing round. Library also expanded with coverage in the Norwegian Sea
• Upcoming events: APA awards in Q1 2018 and the 24th round awards in Q2 2018
• Expect CSEM to be part of several work commitments

East Africa:

• Looking for prefunding opportunities in 2018

Asia:

• Several proposals issued to customers during the quarter Indonesia:
• 2,800 sqkm MC data available

Market update | Continued limited visibility

• Work awarded in Q3 2017 will keep the Guardian busy through the middle of Q4 2017 25

• Prospects being developed to put Thalassa back at work during Q4 2017 20
• Pricing requests received in anticipation of firming up 2018 budgets 15
• Backlog remains under pressure
• The Company expects market fundamentals to remain weak going into 2018

Comments Order backlog - limited earnings visibility

Revenues of USD 10 m and EBITDA of USD 3 m

Operations

• Continued with multi-client investments in Norway
• First commercial survey for the Deep Blue (JIP) source completed

Financials

• Revenues of USD 10.0 million (USD 10.6 million in Q2)
• EBITDA of USD 2.9 million (USD 4.5 million in Q2)
• Rights issue of USD 17.4 million completed in July

Market

• No significant change to backlog

Questions?

Consolidated Income Statement

			Year to date	Year to date
	Q3 2017	Q3 2016	2017	2016	2016
Amounts in USD 1 000	Unaudited	Unaudited	Unaudited	Unaudited	Audited
Operating revenues
Contract sales	443	393	1,619	13,818	21,797
Multi-client pre-funding	5,270	0	10,469	0	579
Multi-client late sales	4,078	4,061	12,263	18,740	22,151
Other revenue	220	0	220	0	0
Total revenues	10,011	4,454	24,571	32,558	44,527
Operating expenses
Charter hire, fuel and crew expenses	1,188	2,653	4,840	11,948	18,176
Employee expenses	4,438	5,693	13,050	19,112	25,097
Depreciation and ordinary amortisation	1,796	1,678	4,708	5,721	7,677
Multi-client amortisation	2,151	2,769	6,755	8,417	11,244
Impairment of long-term assets	0	0	3,167	9,228	17,286
Other operating expenses	1,436	2,283	4,966	8,255	10,137
Total operating expenses	11,008	15,076	37,484	62,681	89,617
Operating profit/ (loss)	-997	-10,622	-12,913	-30,123	-45,090
Financial income and expenses
Interest income	5 8	6 6	128	162	217
Interest expense	-1,031	-768	-3,074	-2,558	-3,273
Net gains/(losses) of financial assets and liabilities	1,551	1,295	3,287	-3,995	-6,297
Net foreign currency income/(loss)	-1,342	-1,406	-3,179	-1,524	1,512
Net financial items	-764	-813	-2,838	-7,915	-7,841
Income/ (loss) before income taxes	-1,761	-11,435	-15,751	-38,038	-52,931
Income tax expense	-180	-371	-113	-316	-100
Income/ (loss) for the period	-1,582	-11,064	-15,639	-37,722	-52,831

Consolidated Statement of Financial Position

Amounts in USD 1 000	Unaudited	30 September 2017 30 September 2016 31 December 2016 Unaudited	Audited
ASSETS
Non-current assets
Multi-client library	18,238	32,215	24,332
Other intangible assets	1,816	2,810	2,457
Property, plant and equipment	33,415	13,560	13,901
Assets under construction	6,726	30,319	28,255
Total non-current assets	60,195	78,904	68,945
Current assets
Spare parts, fuel, anchors and batteries	7,251	8,621	7,854
Trade receivables	7,346	8,264	8,534
Other receivables	6,710	7,631	7,080
Cash and cash equivalents	22,986	15,718	14,038
Restricted cash	4,024	4,131	4,841
Total current assets	48,317	44,365	42,347
Total assets	108,512	123,269	111,292

		30 September 2017 30 September 2016 31 December 2016
Amounts in USD 1 000	Unaudited	Unaudited	Audited
EQUITY
Capital and reserves attributable to equity holders
Share capital, share premium and other paid-in equity	336,740	319,233	319,283
Other reserves	-1,617	901	-1,608
Retained earnings	-300,615	-272,377	-284,975
Total equity	34,508	47,757	32,700
LIABILITIES
Non-current liabilities
Provisions	20,994	19,045	19,140
Financial liabilities	1,849	2,368	4,668
Borrowings	31,367	34,001	31,636
Total non-current liabilities	54,210	55,414	55,444
Current liabilities
Trade payables	6,037	6,649	6,672
Current tax liabilities	5,859	5,324	5,853
Other short term liabilities	7,605	7,930	10,372
Borrowings	292	195	251
Total current liabilities	19,793	20,098	23,148
Total liabilities	74,003	75,512	78,592
Total equity and liabilities	108,512	123,269	111,292

Largest shareholders as of 1 November

#	Shareholder	Shares	Holding
	1 SIEM INVESTMENTS INC.	21,869,450	23.92
	2 PERESTROIKA AS	20,560,847	22.49
	3 MORGAN STANLEY & CO. LLC	18,074,938	19.77
	4 BÆKKELAGET HOLDING AS	3,010,00	3.29
	5 SPORTSMAGASINET AS	2,575,001	2.82
	6 NHO - P665AK	1,127,686	1.23
	7 KRISTIAN FALNES AS	1,090,794	1.19
	8 DNB NAVIGATOR (II)	971,279	1.06
	9 NORDNET LIVSFORSIKRING	751,785	0.82
	10 STATOIL PENSJON	701,458	0.77
	11 ROSENFONN INVESTERING	513,518	0.56
	12 RYGG, JAN WIGGO	423,234	0.46
	13 JACKWITZ, SVEIN-ERIK	353,552	0.39
	14 GALTUNG, LARS OTTO	350,000	0.38
	15 HAAV HOLDING AS	350,000	0.38
	16 NORDNET BANK AB	347,607	0.38
	17 ØVERLAND, JARLE	340,000	0.37
	18 J&J INVESTMENT AS	340,000	0.37
	19 FALNES, OLAV KRISTIAN	300,000	0.33
	20 PEDERSEN, FINN BIRK	300,000	0.33