Magnora ASA

SEVAN MARINE ASA - Fourth Quarter 2015 Results

Main events and developments, Fourth Quarter 2015

- License and Service Agreement for UK sector

prospect

The selection of the Sevan Marine concept for a UK

sector FPSO prospect and the entering into of both a

Technology License Agreement and Service Agreement in

December 2015 are very positive for Sevan Marine and a

further endorsement of Sevan Marine's unique

cylindrical design.

- Continued focus on existing projects

During the quarter, Sevan Marine continued to provide

engineering and site support services for the Goliat,

Logitel Offshore and Dana Western Isles projects.

- Sevan Marine's FLNG solutions attract attention

FLNG remains a key initiative for Sevan Marine. During

the quarter Sevan Marine completed a paid feasibility

study with an oil major to explore the use of Sevan

Marine's cylindrical hull for a specific FLNG

development.

- HiLoad LNG secures license and engineering

services for regasification terminal

During the quarter, HiLoad LNG continued the

development of both the HiLoad offloading system for

FLNG and the Floating Regas Dock ("FRD") for small

scale regasification projects. For offloading, HiLoad

worked with Technip, integrating and simulating the

use of their offloading technology together with the

HiLoad. With respect to the FRD, the first license and

service agreement was signed in early January 2016

with Vires Energy Corporation ("Vires") to support

their regasification project in the Philippines.

- Cost Reduction

The cost cutting programs launched in Q1 2015 had an

impact in excess of USD 4 million for the year ending

December 31, 2015. Headcount has been reduced by 30 or

over 25 per cent in Sevan Marine. Further cost

reduction measures were also taken in Q4 2015

including the implementation of temporary leave for

certain employees, the consolidating of offices in

Arendal and the settlement of the CeFront cooperation

agreement.

- Logitel Offshore

Arendal Spirit began operation with Petrobras under a

3 year charter contract in June 2015. Variable

compensation associated with this vessel is due 12

months after the start of charter hire, June 2016. The

total value of expected variable proceeds related to

Arendal Spirit and unit number 2 is USD 10.0 million

as of December 31, 2015.

The value of the convertible loan to Logitel Offshore

was as of December 31, 2015 USD 16 million including

accrued interest. The value reflects the discounted

value of the two remaining USD 10 million fixed

payments expected for units 2 and 3. The total

outstanding loan obligation remains USD 50 million.

The board of Sevan Marine has initiated a review of

the circumstances surrounding and the legality of the

Logitel Offshore agreements, including the USD 60m

bond loan granted by Sevan Holding V AS to Logitel

Offshore Pte Ltd. The outcome of this review may have

an impact on both the amount and timing of repayments

under the bond loan.

- Strategic Review Process

Sevan Marine appointed Pareto Securities in April 2015

to explore potential strategic options for the

Company. The corporate investigation carried out

between June and October resulted in delays to the

strategic review. The Company continues the work to

explore strategic options for Sevan Marine.

- Dividend policy

The Board has communicated an intention to pay a

dividend depending upon developments. Given the

uncertain market outlook, the Board has decided not to

pay an ordinary dividend for 2015. An extraordinary

dividend in 2016 may be considered depending upon

developments during the year.

Main Figures, Fourth Quarter 2015

(Previous quarter figures in brackets)

Operating revenue for the fourth quarter 2015 was USD

27.2 million (USD 21.8 million). EBITDA was negative

USD 3.0 million (negative USD 1.9 million), and

operating loss was USD 3.1 million (loss of USD 8.0

million). Net loss was USD 8.4 million (loss of USD

10.0 million).

As of Q4 2015, cash and cash equivalents amounted to

USD 36.6 million (USD 38.1 million). The change in

cash and cash equivalents is largely attributable to

operating losses, working capital changes in the

Topside and Process segment and a final payment of USD

0.8m related to the acquisition of the HiLoad FLNG

rights.

As announced on January 19, 2016, Sevan Marine

received a notice from Skatt Sør (Norwegian tax

authorities) that the tax assessment for 2012 will be

adjusted. Sevan Marine has per December 31, 2015

therefore recorded conservatively a USD 4.6 million

(NOK 40.9 million) provision for the full amount of

the potential additional tax, interest and penalty

tax. Sevan Marine expects the additional tax and

interest of USD 3.6 million (NOK 31.7 million) to

become payable in the coming weeks. The penalty tax

will become payable only if and to the extent the

matter is ultimately resolved in favour of the tax

authorities' position. Sevan Marine strongly disagrees

with the tax authorities' view with respect to the

factual as well as legal issues and will take action

to contest the decision.

The equity ratio was 49.7 per cent as of December 31,

2015 (59.2 per cent).

Outlook

- Sevan Marine works to achieve a good

utilization of its staff with ongoing and new FEED /

study work during 2016 and to secure further license

income by late 2016 or early 2017.

- Additional cost reduction measures are being

implemented to reduce operating losses and cash burn.

These measures include a further 15 to 20% reduction

in headcount, voluntary salary cuts by staff and

senior management, simplification of the group

structure as well as continued stringent cost control.

- Sevan Marine's FLNG concept has been well

received. After the successful completion of an

initial study for a U.S. oil major in the fall of

2015, it is expected that additional paid work will be

carried out in 2016.

- Sevan Marine is pursuing opportunities to use

the HiLoad both as an FLNG offloading solution as well

as an LNG regasification unit or Floating Regas Dock

("FRD"). The HiLoad has attracted substantial market

interest. The license and engineering agreements

signed with Vires are expected to generate income in

2016. Sevan Marine also believes that additional paid

study work related to the HiLoad can be generated in

- In KANFA AS, a high workload on the OCTP

project will continue during the first half of 2016

with a positive margin expected. KANFA continues to

tender for further projects which if successful could

provide for backlog from Q2 2016. Cost reduction

measures are being taken.

- KANFA Aragon has secured workload through a

study contract with a Singapore based client which is

expected to provide backlog and improve results for

the first half of 2016. Sevan Marine is considering

its strategic options with respect to its shareholding

in KANFA Aragon which may result in either a disposal

or greater integration of KANFA Aragon's activities

into Sevan Marine during the first half of 2016.

- Sevan Marine believes with its solid cash

position and cost reduction plans that it has the

resources and ability to successfully weather the

current slowdown in activity.

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SEVAN MARINE ASA - Fourth Quarter 2015 Results

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