Magnora ASA

Quarterly Report • May 23, 2017

First quarter 2017

Highlights

(Figures in brackets relate to the fourth quarter 2016. The figures are unaudited.)

• In the first quarter, Sevan Marine entered into a long term framework agreement with ExxonMobil for the provision of services and the use of Sevan Marine's cylindrical hull technology. The first work order under this agreement has been issued.
• Operating revenue for continued operations in the first quarter 2017 was NOK 12.1 million, down from NOK 18.3 million in the fourth quarter 2016. The decline was largely due to a reduction in study activity in the quarter.
• Sevan Marine continued to reduce its cost base in line with the reduction in the activity level. A further restructuring charge of NOK 3.7 million affected this quarter's earnings and EBITDA for continued operations was negative NOK 16.7 million.
• Sevan Marine is in a solid financial position. It has no interest bearing debt, is in a net cash position of NOK 152.3 million and has an equity ratio of 66 percent. Sevan Marine reached a settlement with Teekay regarding the Piranema ANP environmental fine dating back to 2011. This led to a cash payment of NOK 25.3 million and a positive NOK 6.4 million financial gain in the quarter.
• Sevan Marine expects a closing of the sale of its 51% stake in KANFA to TechnipFMC during the second quarter 2017 with insignificant impact on the financial results. The Topside and Process Technology segment is reported as discontinued operations in the quarter.

Key figures

NOK million	Q1 17	Q4 16	Q1 16	2016
Continued operations
Revenues	12.1	18.3	42.9	117.1
EBITDA	-16.7	-16.0	-59.3	-104.0
Net Profit	-11.9	-9.7	-102.3	-241.4
EPS (NOK)	-0.2	-0.2	-1.9	-4.6
Continued and discontinued operations
Revenues	40.9	29.8	179.7	395.9
EBITDA	-18.5	-31.9	-55.8	-80.4
Net Profit	-14.4	-19.4	-96.6	-212.9
Cash and cash eq. continued operations	152.3	213.9	225.9	213.9
Cash and cash eq. discontinued operations	23.7	12.0	118.6	12.0
Equity ratio (%)	66 %	60 %	54 %	60 %
No. of shares outstanding	52.6	52.6	52.6	52.6
Number of employees continued operations	34	35	67	35
Number of employees discontinued operations	43	46	78	46

EBITDA continued operations, NOK million

Operational review

Work on existing projects

Sevan Marine delivered some 7,500 (12,000) engineering hours in the quarter, driven by work on the Goliat, Dana Western Isles, UK sector and drilling related projects.

Sevan Marine continued to provide engineering support for the UK Continental Shelf project in the quarter. Payments under the License Agreement remain subject to the field developers' final investment decision and start of construction of the unit.

The first work order under the ExxonMobil framework agreement was issued in the quarter. The work involves a continuation of the FLNG study for a specific FLNG field development. The current work order is for approximately 5,000 hours of engineering to be completed during 2017.

Sevan Marine continued to provide engineering support services for the Dana Western Isles project on the UK Continental Shelf. Sevan Marine is entitled to a variable license fee linked to production with respect to the Western Isles project. The unit has now been successfully transported from China to Rotterdam. The operator has announced that they expect the FPSO to be installed at the field in late 2017.

Prospective projects and studies

Sevan Marine's affiliated company HiLoad LNG continued the marketing and development of both the HiLoad LNG offloading system for FLNG and the Floating Regas Dock ("FRD") for small scale regasification projects.

With respect to the FRD, HiLoad LNG announced in April a cooperation with Flour Corporation for the development of the FRD regas technology. FRD continues to attract market interest and HiLoad LNG is optimistic that additional FRD-related work can be won in the coming quarters. FRD is a cost effective alternative to standard floating, storage and regasification unit ("FSRU") solutions, particularly for small scale regasification projects.

Progress on new developments

Sevan Marine has continued to work on new developments based on the cylindrical hull technology and expertise. This includes work on a new mid-water drilling application, work on a floating power distribution hub, work on a new fish farming concept and further work on the ultra-deepwater application using steel catenary risers (SCRs).

Sevan Marine looks to continue developing new applications for its cylindrical hull technology and related concepts with the objective of delivering cost effective solutions to the market.

Financial review

Sevan Marine has changed the functional and presentation currency to Norwegian Krone (NOK) from USD. The company has done a reassessment of the functional and presentation currency based on the relevant IFRS accounting standards and has concluded that the functional and presentation currency shall be changed to NOK from USD with effect from January 2017. The rationale for this change is that the vast majority of the company's revenue, cost and assets are based in NOK. All financial figures, including comparable figures, are now presented in NOK.

Results for the quarter

Operating revenue for continued operations for the first quarter 2017 was NOK 12.1 million, down from NOK 18.3 million last quarter. EBITDA was negative NOK 16.7 million (negative NOK 16.0 million) and net loss was NOK 11.9. million (loss of NOK 9.7 million). EBITDA was negatively impacted by further restructuring costs of NOK 3.7 million related to severance pay and retirement benefit changes. The net loss was positively impacted by the agreement regarding the Piranema ANP environmental fine which led to a positive reversal of accruals of NOK 6.4 million. In addition the net loss was negatively impacted by a currency loss on USD holdings of NOK 2.0 million.

Discontinued operating revenue for the first quarter 2017 was NOK 28.8 million (NOK 11.6 million). EBITDA was negative NOK 1.8 million (positive NOK 1.5 million) and net loss was NOK 2.5 million (loss of NOK 1.3 million). EBITDA was negatively impacted by reduced margin contribution from projects.

Cash Flow

As of 31 March 2017, cash and cash equivalents amounted to NOK 152.3 million for continued operations (NOK 213.9 million). The negative cash flow in the quarter of NOK 61.6 million is largely impacted by payment of the Piranema ANP environmental fine of NOK 25.3 million and restructuring payments (severance and legal) of NOK 18.1 million.

For discontinued operations, cash and cash equivalents amounted to NOK 23.7 million (NOK 12.0 million) with a positive cash flow in the quarter of NOK 11.8 million.

Financial position

The equity ratio was 66 percent as of 31 March 2017.

Balance sheet composition 31 March, 2017

Logitel Offshore

We refer to the earnings release in the second quarter of 2016 and comments made regarding the circumstances surrounding the legality and potential claims in relation to the Logitel Offshore Agreements. Sevan Marine is dedicated to seeking the best outcome for the company and its shareholders.

In this regard, Sevan Marine has commenced legal action against Logitel Offshore Pte Ltd claiming payment of approximately USD 60 million in relation to the Logitel loan, and in parallel has commenced arbitration against both Logitel Offshore Pte Ltd and Teekay Offshore Partners LP claiming payment of an amount of approximately USD 10 million in relation to the Fourpartite Agreement. Initial court and arbitration hearings related to these matters have been scheduled for the autumn of 2017. Sevan Marine reserves the right to, at any time, pursue other involved parties. Agreements suspending time-bar limitations have been entered into with such involved parties.

Risk and uncertainty factors

Sevan Marine is exposed to market risk, credit risk and liquidity risk. The company's overall risk management program focuses on the uncertainty of financial markets and seeks to minimize potential adverse effects on the company's financial performance.

Sevan Marine's major customers are typically oil companies with a strong financial basis, but, as with suppliers and customers in general, there is a risk that unforeseen financial difficulties on the counterparty's side may arise which could have material adverse effects on the financial condition, the cash flows and/or the prospects of Sevan Marine.

The exposure to the oil and gas market also means that the company is subject to the market risk of declining work and price pressure. The company is also subject to field development and reservoir risk in situations where the license fee is tied to production.

The outcome of the Logitel situation, any potential recovery of value and the timing of such recovery remains uncertain. As such, there remains material uncertainty regarding both the amount and timing of any payments in relation to the Logitel agreements.

Sevan Marine continues to challenge the decision by the Norwegian tax authorities (Skatt Sør) regarding the adjustment of the 2012 tax return which led to an additional tax charge of NOK 40.9 million and tax payment of NOK 31.7 million in 2016. The outcome of this matter together with any potential recovery of tax already paid or payment of any potential penalty tax already accrued for remains uncertain.

As announced, the Board received in October 2015 the external investigation report regarding allegations of possible improper conduct related to historical contracts with Petrobras in Brazil from Advokatfirmaet Selmer DA ("Selmer"). Sevan Marine provided the report to the Norwegian authority for investigation and prosecution of economic and environmental crime ("ØKOKRIM"). Sevan Marine has made no payments and had no interaction with the agent in question or any of his companies since the IPO of drilling activities and restructuring of Sevan Marine ASA in 2011. Sevan Marine is cooperating fully with relevant authorities in the various jurisdictions involved (Norway, Brazil, US and UK). Sevan Marine adheres to the strictest of compliance and ethical standards and continues to take this matter very seriously. Sevan Marine ASA has to date not been charged by any of the authorities involved.

Outlook

Sevan Marine continues to operate in a challenging market where many of its key prospects have been delayed over the past years. There has been an improvement in market sentiment. Despite this, 2017 will remain a challenging year with estimated negative profits and cash flow.

Sevan Marine remains optimistic that additional study work can be won in 2017 and 2018 for FPSO, FLNG and HiLoad FRD applications. With prospective licenses from both the Western Isles project and UK Continental Shelf project, late 2017 and 2018 should show improved results.

Sevan Marine remains confident that given its unique cost effective solutions, the increased market interest, its solid cash position and strong balance sheet that it has the resources and ability to successfully weather the current slowdown in activity and to regain profitability.

About Sevan Marine

Sevan Marine is a technology, project development and engineering company. The company is delivering products and solutions based on its unique cylindrical hull design and the HiLoad LNG technology.

Sevan Marine is focusing its efforts on independently developing, marketing and supporting the execution of projects based on its designs and engineering competence. In doing such, the company is seeking to work with industry leading partners to further promote and develop its designs, concepts and services.

The Sevan Marine cylindrical design is widely seen by oil majors around the world as a credible and proven alternative to other floating installation designs. The inherent advantages are well understood. Amongst these are excellent motion characteristics, lower operating costs, high deck load capacity, large storage space and substantial lower construction cost compared with alternatives when a turret is needed.

Oslo, May 22, 2017 The Board of Directors of Sevan Marine ASA Erling Øverland Peter Lytzen Chairman Board Member Ingvild Sæther Kjetil Sjursen Kathryn M. Baker Board Member Board Member Board Member Vidar Andersen Ann-Kristin Nielsen Løvland Reese McNeel Employee Representative Employee Representative CEO

Interim financial statements (IFRS)

Condensed consolidated income statement

NOK million	Q1 17	Q4 16	Q1 16	2016
Continued operations
Operating revenue	12.1	18.3	42.9	117.1
Operating expense	-28.7	-34.2	-102.2	-221.1
EBITDA	-16.7	-16.0	-59.3	-104.0
Depreciation, amortization and impairment	-0.6	-2.0	-0.5	-3.3
Operating profit/(loss)	-17.3	-18.0	-59.8	-107.3
Financial income/(expense)	7.3	-0.6	-24.1	-127.7
FX gain/(loss) relating to financing	-2.0	9.1	-18.3	-12.2
Net financial items	5.3	8.5	-42.4	-139.8
Profit/(loss) before tax	-11.9	-9.5	-102.2	-247.1
Tax income/(expense)	0.0	-0.2	-0.1	5.7
Net profit/(loss) continued operations	-11.9	-9.7	-102.3	-241.4
Discontinued operations
Disposal group classified as held for sale	-2.5	-1.3	5.7	28.5
Net profit/(loss) discontinued operations	-2.5	-1.3	5.7	28.5
Net profit/(loss)	-14.4	-11.0	-96.6	-212.9

Statement of comprehensive income

NOK million	Q1 17	Q4 16	Q1 16	2016
Net profit/(loss)	-14.4	-11.0	-96.6	-212.9
Actuarial gains/losses	0.0	-0.7	0.0	-0.7
Total comprehensive income	-14.4	-11.7	-96.6	-213.6

Statements of financial position

NOK million	Note	31.03.17	31.03.16	31.12.16
Fixed assets		1.2	2.8	1.4
Intangible assets		5.5	7.9	5.9
Deferred tax assets		0.0	0.9	0.0
Loan		0.0	108.3	0.0
Other non-current assets	3	46.4	45.3	46.7
Total non-current assets		53.1	165.2	54.0
Trade and other receivables	3	24.6	123.8	22.2
Cash and cash equivalents		152.3	344.5	213.9
Total current assets		176.9	468.3	236.1
Assets held for sale	4	81.8		75.5
Total assets		311.8	633.5	365.5
Share capital	2	210.4	210.4	210.4
Other equity		-12.9	119.8	-0.1
Total shareholders' equity		197.5	330.2	210.4
Non-controlling interest		7.0	9.0	8.6
Total equity		204.5	339.2	218.9
Retirement benefit obligations		4.2	8.1	6.4
Other non-current liabilities/provisions		0.0	3.3	0.0
Total non current liabilities		4.2	11.4	6.4
Current liabilities		29.8	282.8	77.1
Total current liabilities		29.8	282.8	77.1
Total liabilities		34.0	294.2	83.4
Liabilities held for sale	4	73.3		63.2
Total equity and liabilities		311.8	633.5	365.5

Statement of changes in equity

		Non
	Share	Share	Retained	controlling	Total
NOK million	capital	premium	earnings	interest	equity
Equity as of December 31, 2016	210.4	122.9	-123.0	8.6	218.9
Total comprehensive income for the period			-12.9	-1.6	-14.4
Equity as of March 31, 2017	210.4	122.9	-135.8	7.0	204.5

NOK million	Share capital	Share premium	Retained earnings	Non controlling interest	Total equity
Equity as of December 31, 2015	210.4	122.9	96.4	6.1	435.9
Total comprehensive income for the period			-99.5	2.9	-96.6
Equity as of March 31, 2016	210.4	122.9	-3.1	9.0	339.2

Statement of cash flow

NOK million	Q1 17	Q4 16	Q1 16	2016
Cash flows from operating activities
Cash from operations	-61.6	4.8	-12.3	-44.3
Taxes paid	0.0	0.0	-31.7	-31.7
Net cash generated from continued operating activities	-61.6	4.8	-44.1	-76.0
Net cash generated from discontinued operating activities	11.8	2.4	66.5	-40.2
Net cash generated from operating activities	-49.9	7.2	22.4	-116.2
Cash flows from investment activities
Sale of shares KANFA Aragon	0.0	0.0	0.0	20.0
Net cash from continued investment activities	0.0	0.0	0.0	20.0
Net cash from discontinued investment activities	0.0	0.0	0.0	0.0
Net cash from investment activities	0.0	0.0	0.0	20.0
Cash flows from financing activities
Dividends paid	0.0	0.0	0.0	0.0
Net cash from continued financing activities	0.0	0.0	0.0	0.0
Net cash from discontinued financing activities	0.0	0.0	0.0	0.0
Net cash from financing activities	0.0	0.0	0.0	0.0
Net cash flow for the period - continued activities	-61.6	4.8	-44.1	-56.0
Net cash flow for the period - discontinued activities	11.8	2.4	66.5	-40.2
Cash balance at beginning of period	225.9	218.7	322.1	322.1
Cash balance at end of period	176.0	225.9	344.5	225.9
Cash balance at end of period continued operations	152.3	213.9	225.9	213.9
Cash balance at end of period discontinued operations	23.7	12.0	118.6	12.0

Selected notes to the quarterly financial statements

1. General information and accounting policies

Sevan Marine ASA is a technology, project development and engineering company.

Sevan Marine ASA is a public limited company, incorporated and domiciled in Norway. The condensed consolidated interim financial statements consist of the company and the company's interests in associated companies.

The company prepares its financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by EU and these financial statements have been prepared in accordance with the International Accounting Standard for Interim Financial Reporting (IAS 34). As the interim financial statements do not include the full information and disclosures as required in the annual financial statements, it should be read in connection with the Annual Financial Statements for 2016.

The company has changed the functional and presentation currency to Norwegian Krone (NOK) from USD. The company has done a reassessment of the functional and presentation currency based on the relevant IFRS accounting standards and has concluded that the functional and presentation currency shall be changed to NOK from USD with effect from January 2017. The rationale for this change is that the vast majority of the company's revenue, cost and assets are based in NOK. All financial figures, including comparable figures, are now presented in NOK.

The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Annual Financial Statements for the year ended December 31, 2016.

2. Shareholder structure

20 largest shareholder accounts May 18, 2017 (source: VPS)	No. of shares	%-share
TEEKAY SERVICE HOLDINGS COÖPER. UA	22,893,631	43.52
STRAWBERRY CAPITAL	2,435,448	4.63
F2 FUNDS AS	1,801,733	3.42
MATHIAS HOLDING AS	1,600,000	3.04
DEUTSCHE BANK AKTIEN	1,275,997	2.43
SUNDT AS	1,257,486	2.39
KING KONG INVEST AS	1,250,000	2.38
DNB NOR MARKETS, AKS	1,111,729	2.11
CITIBANK, N.A.	915,725	1.74
MP PENSJON PK	837,584	1.59
ANDENERGY AS	804,326	1.53
INVESCO PERP EURAN SMLER COMPS FD	765,804	1.46
HORTULAN AS	728,730	1.39
BAKLIEN ÅSMUND	700,000	1.33
APOLLO ASSET LTD.	600,000	1.14
BEKKESTUA EIENDOM AS	542,066	1.03
SVENSKA HANDELSBANKEN	498,581	0.95
ALDEN AS	428,000	0.81
GRANLUND HOLDING AS	427,201	0.81
INVESCO FUNDS	419,109	0.80
Total, 20 largest shareholders	41,293,150	78.49
Other shareholder accounts	11,313,849	21.51
Total no of shares	52,606,999	100.00
Foreign ownership	29,420,316	55.92

3. Transactions with related parties

NOK million	Q1 17	Q4 16	Q1 16	2016
Sale to related parties
Sale to Teekay	0.0	0.0	1.2	1.4
Sale to Logitel Offshore	0.0	0.0	8.1	21.0
Purchase from related parties
Purchase from Arendal Brygge	1.3	1.3	1.3	3.8
Receivable from related parties
Receivable from Logitel Offshore	51.3	51.6	46.9	51.6
Loan to related parties
Logitel Offshore	0.0	0.0	108.3	0.0

4. Segment

Quarterly segment results	Topside and
		Floating		Process
		Production		Technology		Eliminations		Total
NOK million	Q1 17	Q1 16	Q1 17	Q1 16	Q1 17	Q1 16	Q1 17	Q1 16
Continued operations:
External revenue	12.1	42.9	28.8	136.8	-28.8	-136.8	12.1	42.9
Internal revenue	0.0	0.0	0.0	0.0	0.0	0.0	0.0	0.0
Total revenue	12.1	42.9	28.8	136.8	-28.8	-136.8	12.1	42.9
Operating expense	-28.7	-102.2	-30.6	-133.3	30.6	133.3	-28.7	-102.2
EBITDA	-16.7	-59.3	-1.8	3.5	1.8	-3.5	-16.7	-59.3
Depreciation, amortization & impairment	-0.6	-0.5	0.0	-0.1	0.0	0.1	-0.6	-0.5
Operating profit/(loss)	-17.3	-59.8	-1.8	3.4	1.8	-3.4	-17.3	-59.8
Financial income/(expense)	7.3	-24.1	-0.2	-0.4	0.2	0.4	7.3	-24.1
Foreign exchange gain/(loss) finance	-2.0	-18.3	-0.5	2.7	0.5	-2.7	-2.0	-18.3
Net financial items	5.3	-42.4	-0.6	2.3	0.6	-2.3	5.3	-42.4
Profit/(loss) before tax	-11.9	-102.2	-2.5	5.7	2.5	-5.7	-11.9	-102.2
Tax income/(expense)	0.0	-0.1	0.0		0.0	0.0	0.0	-0.1
Net profit/(loss) cont. operations	-11.9	-102.3	-2.5	5.7	2.5	-5.7	-11.9	-102.3
Discontinued operations:
Net profit/(loss) - Held for sale	0.0	0.0	0.0	0.0	-2.5	5.7	-2.5	5.7
Net profit/(loss) discont. operations	0.0	0.0	0.0	0.0	-2.5	5.7	-2.5	5.7
Net profit/(loss)	-11.9	-102.3	-2.5	5.7	0.0	0.0	-14.4	-96.6

* Topside and Process Technology segment consists of the KANFA AS Group on a 100% consolidated basis. Sevan Marine's ownership of KANFA AS is 51% and Sevan Marine's 50% ownership in KANFA Aragon was sold on June 28, 2016. Sevan Marine ASA has issued guarantees to support overdraft, guarantee and foreign exchange facilities for KANFA AS.

Segment assets and liabilities	Topside and
	Floating Process
		Production		Technology		Eliminations		Total
NOK million	31.03.17	31.03.16	31.03.17	31.03.16	31.03.17	31.03.16	31.03.17	31.03.16
Segment assets:
Fixed assets	1.2	2.2	0.2	0.6	-0.2	0.0	1.2	2.8
Intangible assets	5.5	7.9	0.0	0.0	0.0	0.0	5.5	7.9
Deferred tax assets	0.0	0.0	0.0	0.9	0.0	0.0	0.0	0.9
Loan	0.0	108.3	0.0	0.0	0.0	0.0	0.0	108.3
Other non-current assets	46.4	45.3	0.0	0.0	0.0	0.0	46.4	45.3
Total non-current assets	53.1	163.7	0.2	1.5	-0.2	0.0	53.1	165.2
Trade and other receivables	24.6	38.7	57.8	85.0	-57.8	0.0	24.6	123.8
Cash and cash equivalents	152.3	225.9	23.7	118.6	-23.7	0.0	152.3	344.5
Total current assets	176.9	264.6	81.5	203.7	-81.5	0.0	176.9	468.3
Assets held for sale					81.8		81.8
Total segment assets	230.1	428.3	81.8	205.2	0.0	0.0	311.8	633.5
Segment liabilities:
Retirement benefit obligations	4.2	4.8	0.7	3.4	-0.7	0.0	4.2	8.1
Other non-current liabilities/provisions	0.0	0.0	0.0	3.3	0.0	0.0	0.0	3.3
Total non current liabilities	4.2	4.8	0.7	6.7	-0.7	0.0	4.2	11.4
Current liabilities	29.8	95.9	72.6	186.9	-72.6	0.0	29.8	282.8
Total current liabilities	29.8	95.9	72.6	186.9	-72.6	0.0	29.8	282.8
Liabilities held for sale					73.3		73.3
Total segment liabilities	34.0	100.6	73.3	193.6	0.0	0.0	107.3	294.2

* For assets and liabilities both intra-segment balances and inter-segment balances are eliminated within the segment.

** Topside and Process Technology segment assets and liabilities are classified as held for sale in the Statement of financial position.