Electromagnetic Geoservices ASA — Interim / Quarterly Report 2017

Feb 8, 2018

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.

FOURTH QUARTER 2017 RESULTS.

Oslo, 8 February 2018 CEO Christiaan Vermeijden, CFO Hege A. Veiseth

Revenues and costs down

2017 Full Year Financials

• Revenues of USD 35.9 million (down USD 44.5 million FY 2016)
• EBITDA of USD 2.1 million (up from negative USD 8.9 million FY 2016)
• Reduction of OPEX to USD 52.7 million (USD 89.6 million in FY 2016)

2017 Sales & Operations

• Dominated by multi-client revenues in Norway
• First commercial project with the new source (DeepBlue)
• Multi-client sales, reprocessing and consultancy revenues in the Americas
• Announced prefunded multi-client surveys in AsiaPacific

2017 Market Development

• Increase in oil price supportive of future growth
• Caution required as no significant change to backlog recorded

Financial review

Fourth quarter performance

• Revenues
• USD 11.3 million
• Mainly multi-client revenues in Norway and Canada
• EBITDA
• USD 0.4 million
• Vessel utilisation of 13%
• Two vessels on charter
• Pre-funded multi-client survey in Canada
• Mobilisation is not included in utilisation rate

Operational costs

Quarterly operational cost base development* (USD million)

Comments

• Operational costs base in Q4 of USD 11.6 million
• Thalassa back on charter 1 October 2017
• Capitalised multi-client and JIP mobilisation expenses of USD 0.7 million
• Cost control
  • Reduction of yearly operational cost base to USD 42.0 million (USD 63.1 million in 2016)
  • Target the 2018 cost base around USD 50 million, subject to operational activity

Capitalisation of multi-client and JIP test costs

• Other operational expenses
• Employee expenses
• Charter hire, fuel and crew expenses

*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

Decrease in free cash in Q4

Quarterly free cash development (USD million) Comments

• Net decrease in free cash of USD 6.5 million to USD 16.5 million
• Trade receivables increased by USD 3.7 million to USD 11.1 million
• USD 0.6 million in interest-payment on interest bearing debt of USD 30.6 million
• Total investments of USD 1.5 million

Multi-client book value of USD 16.3 million

Multi-client library – NBV (USD million) Comments

• Reduction of book value from USD 18.2 million previous quarter to USD 16.3 million
• Investments of USD 0.3 million
• Barents Sea
• Amortisation of USD 1.9 million
• Straight-line amortisation
• Impairment of USD 0.4 million

Operations, Market and Outlook

Hardware, Imaging & Interpretation improvements

Troll & Fram: CSEM data acquired in 2005 vs 2014

2005: Troll 2D survey with the 1,000 amp source 2014: Troll & Fram 3D survey with 7,200 amp source

Represents CSEM Data and the bump is the EM anomaly CSEM data overlaid 3D semsic data. High temperature color represent EM anomalies

Are there more CSEM anomalies hiding here?

Operations and selection of current opportunities

Norway:

• CSEM part of several work commitments following the APA awards
• Upcoming event: 24th round awards in Q2 2018
• DeepBlue providing the potential to open up new markets for CSEM

Global:

• Thalassa committed in Indonesia through mid February
• Leads and proposals pursued to improve utilization for both Thalassa and Atlantic Guardian
• Good traction and prospect development in the Americas and Africa

Market update | Continued limited visibility

Revenues and costs down

2017 Full Year Financials

• Revenues of USD 35.9 million (down USD 44.5 million FY 2016)
• EBITDA of USD 2.1 million (up from negative USD 8.9 million FY 2016)
• Reduction of OPEX to USD 52.7 million (USD 89.6 million in 2016)

2017 Sales & Operations

• Dominated by multi-client revenues in Norway
• First commercial project with the new source (DeepBlue)
• Multi-client sales, reprocessing and consultancy revenues in the Americas
• Mobilising for multi-client surveys in AsiaPacific

2017 Market Development

• Increase in oil price supportive of future growth
• Caution required as no significant change to backlog recorded

Questions?

Consolidated Income Statement

	Q4 2017	Q4 2016	2017	2016
Amounts in USD 1 000	Unaudited	Unaudited	Unaudited	Audited
Operating revenues
Contract sales	965	7,953	2,583	21,797
Multi-client pre-funding	2,787	579	13,256	579
Multi-client late sales	6,869	3,438	19,132	22,151
Other revenue	667	0	886	0
Total revenues	11,287	11,970	35,858	44,527
Operating expenses
Charter hire, fuel and crew expenses	5,491	6,228	10,331	18,176
Employee expenses	4,007	5,985	17,057	25,097
Depreciation and ordinary amortisation	2,072	1,956	6,779	7,677
Multi-client amortisation	1,858	2,827	8,613	11,244
Impairment of long-term assets	460	8,058	3,626	17,286
Other operating expenses	1,368	1,882	6,334	10,137
Total operating expenses	15,256	26,936	52,740	89,617
Operating profit/ (loss)	-3,969	-14,966	-16,882	-45,090
Financial income and expenses
Interest income	6 5	5 4	193	217
Interest expense	-1,014	-715	-4,088	-3,273
Net gains/(losses) of financial assets and liabilities	-1,144	-2,300	2,143	-6,297
Net foreign currency income/(loss)	-112	3,036	-3,292	1,512
Net financial items	-2,206	7 5	-5,043	-7,841
Income/ (loss) before income taxes	-6,175	-14,892	-21,926	-52,931
Income tax expense	-281	215	-394	-100
Income/ (loss) for the period	-5,893	-15,107	-21,532	-52,831

Consolidated Statement of Financial Position

Amounts in USD 1 000	31 December 2017 Unaudited	31 December 2016 Audited
ASSETS
Non-current assets
Multi-client library	16,280	24,332
Other intangible assets	1,559	2,457
Property, plant and equipment	36,281	13,901
Assets under construction	3,112	28,255
Total non-current assets	57,233	68,945
Current assets
Spare parts, fuel, anchors and batteries	7,200	7,854
Trade receivables	11,075	8,534
Other receivables	5,957	7,080
Cash and cash equivalents	16,548	14,038
Restricted cash	6,521	4,841
Total current assets	47,301	42,347
Total assets	104,534	111,292

Amounts in USD 1 000	31 December 2017 Unaudited	31 December 2016 Audited
EQUITY
Capital and reserves attributable to equity holders
Share capital, share premium and other paid-in equity	336,764	319,283
Other reserves	-1,617	-1,608
Retained earnings	-306,508	-284,975
Total equity	28,639	32,700
LIABILITIES
Non-current liabilities
Provisions	20,670	19,140
Financial liabilities	2,993	4,668
Borrowings	30,288	31,636
Total non-current liabilities	53,950	55,444
Current liabilities
Trade payables	6,882	6,672
Current tax liabilities	5,549	5,853
Other short term liabilities	9,223	10,372
Borrowings	290	251
Total current liabilities	21,944	23,148
Total liabilities	75,894	78,592
Total equity and liabilities	104,534	111,292

Largest shareholders as of 7 February

#	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 ROSENFONN INVESTERING	1,500,000	1.64
	7 KRISTIAN FALNES AS	1,000,000	1.09
	8 NHO - P665AK JP MORGAN CHASE BANK	902,932	0.99
	9 NORDNET LIVSFORSIKRING	817,999	0.89
	10 DNB NAVIGATOR (II)	711,279	0.78
	11 STATOIL PENSJON	701,458	0.77
	12 RYGG, JAN WIGGO	417,146	0.46
	13 HAAV HOLDING AS	400,000	0.44
	14 JACKWITZ, SVEIN-ERIK	351,832	0.38
	15 GALTUNG, LARS OTTO	350,000	0.38
	16 ØVERLAND, JARLE	340,000	0.37
	17 J&J INVESTMENT AS	340,000	0.37
	18 RAGE, PER EGIL	300,000	0.33
	19 PEDERSEN, FINN BIRK	285,000	0.31
	20 NORDEA BANK AB CLIENTS ACCOUNT	283,491	0.31