Electromagnetic Geoservices ASA

Earnings Release • May 11, 2017

FIRST QUARTER 2017 RESULTS.

Oslo, 11 May 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.

Refinancing announced, slight improvement of backlog, caution still required

Operations

• Completed contract work in Malaysia
• Continued multi-client investments in the Barents Sea
• Investments in the Advanced EM System (JIP) ongoing

Financials

• Revenues of USD 3.9 million
• EBITDA of negative USD 5.7 million
• Net change in cash (from previous quarter) of USD 1.1 million
• Partial bond buy-back of NOK 24 million completed
• Fully underwritten USD 17 million rights issue announced

Market

• Backlog slightly improved going into Q2 2017

Financial review

First quarter performance | Reduction in revenues and EBITDA

• Revenues
• Multi-client revenues in Norway of USD 3.2 million
• Vessel utilisation of 92% of one vessel
• Multi-client projects in the Barents Sea
• EBITDA
• Negatively impacted by reduction in revenues

Key financial metrics Quarterly development (USD million)

Reduced operational costs

Quarterly operational cost base development* (USD million)

Comments

• Operational costs base of USD 12.0 million
• Capitalised multi-client expenses of USD 1.0 million
• Reversal provision for onerous contract of USD 1.4 million
• Cost control
  • Cost control continues in 2017
  • Target the 2017 cost base below USD 50 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

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

Small decrease in free cash in Q1

Quarterly free cash development (USD million) Comments

• Small net decrease in free cash of USD 1.0 million to USD 13.0 million
• Financing activities
• Credit (USD 10 million) and guarantee (USD 10 million) facilities made available, USD 3 million drawn
• Partial buy-back of bond of NOK 24 million
  • Terms remain unchanged
• Fully underwritten rights issue of USD 17 million announced
  • To strengthen the financial / free cash position
  • For general corporate purposes

Rights issue tentative timeline

Note: All dates are indicative and subject to change

Multi-client book value of USD 21.6 million

Operations, Market and Outlook

First quarter vessel operations

	BOA Thalassa	Atlantic Guardian
Q1 activity	Completed proprietary survey, offshore Malaysia on 1 January	In operation, MC Projects in the Barents Sea, Norway
Vessel owner	BOA SBL	North Sea Shipping
Firm Charter	1 October 2019	1 October 2021
Comments on terms	Improved terms, fixed, with additional flexibility in 2017	Fixed

Update on Norway's 24th Licensing Round

• Several CSEM supported wells in the Barents Sea to be drilled in 2017 (Blåmann, Kayak, Koigen, Gemini North, etc)
• 93 blocks nominated in the Barents Sea during Q1 2017. Multi-client library data covered 36 nominated blocks, in addition 11 blocks prefunded/acquired by end of Q1 17
• Further pre-funded acquisition ongoing to be well positioned when the round is announced
• Preliminary inversion results show a possible 100 km2 (!) lead in the data acquired during Q1 2017
• In discussion with various oil companies for both existing data and prefunding new areas

Advanced EM System (JIP) update

• Prototype testing successfully executed during the summer of 2016 on the Norwegian Continental Shelf
• Test results reviewed during Q3/Q4 2016 and original objectives met
• Commercialisation discussions ongoing

Selection of current opportunities

Canada:

• MC data covering Flemish Pass basin available for sale
• Industry interest to acquire more data in 2017

US:

• MC data available for annual licensing rounds
• Great White data a natural extension of the Mexican Perdido area for an improved regional understanding

Mexico:

• Reprocessed 3D MC data (16,000 sqkm) available for sale

Norway:

• Coverage in the Barents Sea expanded in Q1 2017 in anticipation of the nominations and announcements during the 24th licensing round
• Prefunding received for work outside of the 24th round
• 24th round announcement expected: June 2017

Brazil:

• 12,300 sqkm MC data from Sergipe-Alagoas, Foz and Ceara available for sale
• Round 14 expected to be announced in 2017

East Africa (looking for prefunding opportunities)

Asia:

• Progress made with marketing new acquisition Indonesia:
• 2,800 sqkm MC data available

Market update | Still limited visibility

• Work awarded (prefunding) in Q1 2017 will keep the Guardian busy through the end of Q2 2017 45 50
• Prospects being developed to put Thalassa back at work before the commencement of the firm charter period 30 35 40
• Slight improvement of the market noted as earlier dialogues are converted into pricing requests
• Supported by a relatively stable oil price when compared to 2016
• Caution is still required as prospects take time to materialise

Comments Order backlog - limited earnings visibility

Q4'14 Q1'15 Q2'15 Q3'15 Q4'15 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17

Refinancing announced, slight improvement of backlog, caution still required

Operations

• Completed contract work in Malaysia
• Continued multi-client investments in the Barents Sea
• Investments in the Advanced EM System (JIP) ongoing

Financials

• Revenues of USD 3.9 million
• EBITDA of negative USD 5.7 million
• Net change in cash (from previous quarter) of USD 1.1 million
• Partial bond buy-back of NOK 24 million completed
• Fully underwritten USD 17 million rights issue announced

Market

• Backlog slightly improved going into Q2 2017

Questions?

Consolidated Income Statement

	Q1 2017	Q1 2016	2016
Amounts in USD 1 000	Unaudited	Unaudited	Audited
Operating revenues
Contract sales	701	13,037	21,797
Multi-client pre-funding	830	0	579
Multi-client late sales	2,386	0	22,151
Total revenues	3,918	13,037	44,527
Operating expenses
Charter hire, fuel and crew expenses	2,766	5,563	18,176
Employee expenses	5,172	7,483	25,097
Depreciation and ordinary amortisation	1,407	2,111	7,677
Multi-client amortisation	2,292	2,824	11,244
Impairment of long-term assets	0	0	17,286
Other operating expenses	1,682	3,400	10,137
Total operating expenses	13,319	21,381	89,617
Operating profit/ (loss)	-9,402	-8,344	-45,090
Financial income and expenses
Interest income	14	51	217
Interest expense	-1,053	-1,038	-3,273
Net gains/(losses) of financial assets and liabilities	1,026	-4,913	-6,297
Net foreign currency income/(loss)	-1,016	-1,207	1,512
Net financial items	-1,029	-7,107	-7,841
Income/ (loss) before income taxes	-10,430	-15,451	-52,931
Income tax expense	33	0	-100
Income/ (loss) for the period	-10,464	-15,451	-52,831

Consolidated Statement of Financial Position

	31 March 2017	31 March 2016 31 December 2016
Amounts in USD 1 000	Unaudited	Unaudited	Audited
ASSETS
Non-current assets
Multi-client library	21,643	41,187	24,332
Other intangible assets	2,399	3,409	2,457
Property, plant and equipment	12,874	15,920	13,901
Assets under construction	28,353	27,139	28,255
Total non-current assets	65,268	87,655	68,945
Current assets
Spare parts, fuel, anchors and batteries	7,565	10,503	7,854
Trade receivables	3,336	15,633	8,534
Other receivables	6,337	6,686	7,080
Cash and cash equivalents	12,995	19,978	14,038
Restricted cash	4,780	5,806	4,841
Total current assets	35,013	58,606	42,347
Total assets	100,282	146,261	111,292

	31 March 2017	31 March 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	319,272	319,112	319,283
Other reserves	-1,615	786	-1,608
Retained earnings	-295,439	-250,104	-284,975
Total equity	22,218	69,794	32,700
LIABILITIES
Non-current liabilities
Provisions	19,645	15,535	19,140
Financial liabilities	4,479	0	4,668
Borrowings	29,042	32,514	31,636
Total non-current liabilities	53,166	48,049	55,444
Current liabilities
Trade payables	4,850	6,277	6,672
Current tax liabilities	5,841	5,641	5,853
Other short term liabilities	10,923	12,262	10,372
Financial liabilities	0	4,019	0
Borrowings	3,285	219	251
Total current liabilities	24,899	28,418	23,148
Total liabilities	78,064	76,467	78,592
Total equity and liabilities	100,282	146,261	111,292

Largest shareholders as of 10 May

#	Shareholder	Shares	Holding
	1 SIEM INVESTMENTS INC.	7,844,249	23.92
	2 PERESTROIKA AS	6,993,857	21.33
	3 MORGAN STANLEY & CO. LLC	4,507,948	13.75
	4 BÆKKELAGET HOLDING AS	1,010,00	3.08
	5 STATOIL PENSJON C/O JP MORGAN	701,458	2.14
	6 SPORTSMAGASINET AS	575,001	1.75
	7 NHO - P665AK JP MORGAN CHASE BANK	404,485	1.23
	8 NORDNET LIVSFORSIKRING	366,556	1.12
	9 DNB NAVIGATOR (II)	344,818	1.05
	10 J&J INVESTMENT AS	340,000	1.04
	11 KRISTIAN FALNES AS	305,751	0.93
	12 STATOIL PENSJON C/O JP MORGAN	185,517	0.57
	13 RYGG JAN WIGGO	165,208	0.50
	14 FLATHOLMEN AS	137,000	0.42
	15 NORDNET BANK AB	131,712	0.40
	16 ØVERLAND, JARLE	118,775	0.36
	17 VESTVIK PRESERVERING	115,746	0.35
	18 PEDERSEN, FINN BIRK	115,000	0.35
	19 HAAV HOLDING AS	112,500	0.34
	20 JACKWITZ, SVEIN-ERIK	112,323	0.34