Philly Shipyard — Interim / Quarterly Report 2013

Feb 27, 2014

AKPS 4th Quarter Report

Fourth quarter 2013 – Aker Philadelphia Shipyard delivered record strong financial results in 2013 with full-year revenues of USD 279.0 million and EBITDA of USD 30.1 million. For the quarter, AKPS recorded revenues and EBITDA of USD 51.3 million and USD 2.0 million, respectively. As previously announced, AKPS signed shipbuilding contracts with Matson Navigation Company for two 3,600 teu containerships with deliveries in 2018 and completed definitive documentation for the joint venture with Crowley Maritime Corporation for four product tankers with deliveries in 2015 and 2016. AKPS also signed commitment letters with Caterpillar Financial Services for a construction loan facility of USD 120 million and PIDC Regional Center for a term loan of up to USD 60 million. As of 31 December 2013, the two aframax tankers under contract with SeaRiver are approximately 71% complete. In January 2014, AKPS successfully completed a private placement of its shares for approximately USD 60 million.

OSLO / PHILADELPHIA (26 February 2014) -

As previously disclosed, on 6 November 2013, Aker Philadelphia Shipyard, Inc. (APSI), the sole operating subsidiary of Aker Philadelphia Shipyard ASA (AKPS), signed shipbuilding contracts with Matson Navigation Company (Matson) to build two 3,600 teu containerships (Hulls 029 and 030). Both vessels will be delivered in 2018 and the total contract value is USD 418 million. The contract price for each vessel will be received through a series of customer milestone payments, which are estimated to be in line with construction progress. These vessels will be the largest containerships ever built for the Jones Act market and will be utilized in Matson's service from the U.S. West Coast to Hawaii.

Also as previously disclosed, on 6 November 2013, APSI, Crowley Maritime Corporation (Crowley) and certain of their respective affiliates signed definitive documentation for the establishment of a joint venture. This joint venture was originally announced on 9 August 2013 and includes four product tankers (Hulls 021-024). The vessels will be delivered in 2015 and 2016 and the total contract value is approximately USD 490 million. The construction costs for each vessel will be funded by a combination of shipyard capital, customer advances and construction financing. After the vessels are delivered, Crowley and APSI will share in the economics of the operation and chartering of the vessels throughout their useful lives. APSI expects to hold an investment of approximately USD 115 million in the APSI-Crowley partnership after delivery of the fourth vessel.

Also as previously disclosed, during Q4 2013, APSI signed commitment letters with Caterpillar Financial Services for a loan facility of USD 120 million for the construction of Hulls 021-024 and PIDC Regional Center for a secured term loan of up to USD 60 million. The company expects to sign definitive documentation for these two commitments in Q1 2014. An additional commitment for a USD 65 million secured term loan from a group of private lenders was announced on 14 November 2013, but this commitment has expired and the loan will not be closed.

Both aframax tankers for SeaRiver Maritime, Inc. (SeaRiver), ExxonMobil Corporation's U.S. marine affiliate, are under construction at the shipyard. AKPS is recognizing revenues and expenses for the two-tanker order as one project. As of 31 December 2013, the project is approximately 71% complete. Both vessels are scheduled for delivery in 2014. The tankers are intended to be used to transport Alaskan North Slope crude oil from Prince William Sound, Alaska to the U.S. West $\text{Coast}$

Between 1 January 2013 and 31 December 2013, AKPS's share price on the Oslo Axess increased 933%. In January 2014, AKPS successfully completed a private placement of its shares for approximately USD 60 million, or 2.25 million shares at an issue price of NOK 165 per share. The private placement was substantially over-subscribed. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not participate in the private placement in March 2014.

Fourth Quarter Results

Revenues for the quarter ended 31 December 2013 were USD 51.3 million compared to Q4 2012 revenues of USD 26.9 million. EBITDA (earnings before net financial items, taxes, depreciation and amortization) for the quarter ended 31 December 2013 was USD 2.0 million compared to Q4 2012 EBITDA of USD 3.7 million. EBIT for Q4 2013 was USD 0.3 million compared to O4 2012 EBIT of USD 2.7 million. Net income for the quarter ended 31 December 2013 was USD 0.5 million compared to Q4 2012 net income of USD 1.3 million.

The increase in quarterly revenues was primarily attributable to more progress made on the SeaRiver project for the last three months in 2013 than the last three months in 2012. The decrease in EBITDA, EBIT and net income for the quarter in comparison to Q4 2012 was primarily driven by an increase in vessel construction costs, which are still in line with previous guidance, and one-time gains of approximately USD 2.5 million recorded in Q4 2012. Net financial items for Q4 2013 were USD 0.1 million compared to negative USD 0.2 million for Q4 2012. This change was caused primarily by higher interest income and less interest expense in the current quarter.

A tax benefit of USD 0.1 million was booked in Q4 2013 compared to tax expense of USD 1.2 million in Q4 2012. The primary causes for the change was lower pre-tax income and the recognition of deferred tax assets for Norwegian tax loss carry-forwards in Q4 2013.

Cash and cash equivalents of USD 68.8 million at 31 December 2013 increased USD 10.5 million from USD 58.3 million at 31 December 2012 due primarily to the sale and delivery of Hull 018 to Crowley in January 2013 and the milestone payments from SeaRiver during 2013.

Work-in-process decreased from USD 67.7 million at 31 December 2012 to USD 0 at 31 December 2013 due to the sale and delivery of Hull 018 to Crowley in Q1 2013.

Customer advances, net decreased from USD 60.1 million at 31 December 2012 to USD 33.8 million at 31 December 2013. This amount represents customer milestone payments from SeaRiver and Matson, net of work-in-process and earned profit.

Year-to-Date Results

For the twelve months ended 31 December 2013, revenues were USD 279.0 million which represented a USD 138.0 million increase compared to the twelve-month period ended 31 December 2012. EBITDA for the twelve months ended 31 December 2013 increased to the company's highest historic results of USD 30.1 million compared to EBITDA of USD 17.8 million for the twelve months ended 31 December 2012. EBIT for the twelve months ended 31 December 2013 increased to USD 23.2 million compared to EBIT of USD 16.0 million for the twelve months ended 31 December 2012. Tax expense for the year ended 31 December 2013 was USD 7.8 million (effective tax rate of 33.3%) compared to tax expense of USD 6.2 million (effective tax rate of 39.5%) for the year ended 31 December 2012. The decrease in effective rates is primarily driven by the deferred tax asset booked in Q4 2013 related to the tax loss carry-forwards and certain other differences, including the intercompany transfer of assets between a higher tax jurisdiction to a lower tax jurisdiction in 2012. Net income for the twelve-month period ended 31 December 2013 increased to USD 15.6 million compared to net income of USD 9.5 million for the twelve-month period ended 31 December 2012. The increases in revenues, EBITDA, EBIT and net income were primarily attributable to significantly more progress made on the SeaRiver project for the twelve months in 2013 than the twelve months in 2012 and certain provision adjustments. As noted previously, the Company sold Hulls 017 and 018 to Crowley in August 2012 and January 2013, respectively, which had similar revenues and costs.

	Unaudited		Unaudited *
Amounts in USD millions	Q4	Q4	Twelve Months Ended 31 Dec.
(except shares and per share information)	2013	2012	2013	2012
Operating revenues	51.3	26.9	279.0	141.0
EBITDA	2.0	3.7	30.1	17.8
Operating income - EBIT	0.3	2.7	23.2	16.0
Income before tax	0.4	2.5	23.4	15.7
Income for the period	0.5	1.3	15.6	9.5
Average number of shares	10,165,305	10,165,305	10,165,305	10,165,305
Basic and diluted earnings per share (USD)	0.05	0.13	1.53	0.93

Amounts in USD millions	Unaudited 31-Dec 2013	Unaudited * 31-Dec 2012
Property, plant and equipment	54.8	57.0
Deferred tax assets	3.0	3.6
Restricted cash	20.0	20.0
Other non-current assets	5.4	3.2
Work-in-process	۰	67.7
Prepayments and other receivables	35.3	20.5
Cash and cash equivalents	68.8	58.3
Total assets	187.3	230.3
Total equity	114.0	98.4
Interest-bearing long-term debt	3.0	5.6
Interest-bearing short-term debt	2.6	2.6
Interest-bearing short-term construction loan		31.2
Customer advances, net	33.8	60.1
Deferred tax liabilities	7.9	0.9
Taxes, trade payables and accrued liabilities	26.0	31.5
Total equity and liabilities	187.3	230.3

* Annual 2012 financial information is derived from audited financial statements.

Operations

At the end of the fourth quarter 2013, APSI had two vessels under construction, Hulls 019 and 020. Hull 019, the first aframax tanker for SeaRiver, was launched on 9 November 2013. Some of the challenges associated with completing the first vessel in a new class combined with an abnormally harsh winter have resulted in slightly higher than forecasted vessel construction costs, but the expected margin for the SeaRiver project is still in line with previous guidance. Hull 020 production activities have progressed and the first block was placed in the Building Dock on 18 November 2013.

After the end of the fourth quarter 2013, APSI began construction of Hull 021. When completed, this product tanker will be the first vessel in the joint venture with Crowley. Engineering, planning, and procurement activities for the product tanker series is progressing concurrently with the construction of Hull 021.

APSI's workforce is in line with historical norms and will continue to be adjusted according to the backlog and production activities.

Outlook

The contracts with SeaRiver (Hulls 019 and 020), Crowley (Hulls 021-024) and Matson (Hulls 029 and 030) provide for shipbuilding activity with delivery dates through 2018. The company's order backlog for these three projects exceeds USD 1.0 billion at 31 December 2013. All financing that is required by APSI for this firm backlog has been committed.

The company expects to build Hulls 025-028 as product tankers with deliveries in 2016 and 2017. AKPS remains confident in the product tanker market and is currently working with several interested parties to enter into definitive shipbuilding contracts for the four product tankers and agreements for joint ownership in the vessels.

In addition, AKPS continues to pursue prospects for new construction projects in all other areas of the Jones Act market, including containerships, shuttle tankers, short-sea shipping vessels, off-shore service vessels, barges, wind turbine installation vessels, and other large steel fabrication projects. LNG propulsion continues to be a consideration for potential owners and AKPS is able to leverage its experience from the Matson containership design.

The company's shipping assets, consisting of the existing profit sharing interests in Hulls 017 and 018 and the future economic interests in the joint venture with Crowley for Hulls 021-024, provide a mechanism for AKPS to receive returns on the ownership, chartering and operation of the vessels it builds, in addition to returns on traditional shipbuilding activities. These shipping assets will be managed with an opportunistic ownership strategy to maximize their value.

Risks

AKPS faces risks related to construction of vessels which may adversely affect the shipvard's ability to meet anticipated budgets and schedules. These risks include changes in productivity, shortages of material, equipment and labor and changes in the availability and pricing of key vendors for design and procurement. In order to address these risks, where possible, the company has entered into contracts with suppliers and subcontractors for material, equipment and labor and with vendors for design and procurement.

AKPS faces risks related to the construction of new classes of vessels. These challenges sometimes tend to impact quality, timely delivery and cost efficiencies. In order to mitigate these risks, the company seeks to partner with global experts in the fields of engineering, shipbuilding, and procurement.

The company depends on unionized labor for construction of vessels. Work stoppages or other labor disturbances could have a material adverse effect. In order to mitigate this risk, the company and unions have signed a collective bargaining agreement, which is effective until February 2015. The collective bargaining agreement includes a no-strike clause.

The company's operations are subject to the usual hazards inherent in shipbuilding, such as the risk of equipment failure and work accidents. These hazards can cause personal injury and loss of life, business interruption, property and equipment damage, pollution and environmental damage. The company continues to implement its HSE management system and provide training to its workforce to mitigate these risks. The company also seeks to cover these risks through contractual limitations of liability and indemnities and through insurance.

The overall market risk is related to the Jones Act. Interest groups have lobbied the U.S. Congress in the past to repeal or modify the Jones Act; however, market experts believe that significant changes to the legislation are unlikely. Repeal of or significant changes to the Jones Act could, among other things, increase competition from foreign (non-U.S.) shipbuilders with lower costs or require increased use of higher priced domestic content, and as a result reduce the demand for U.S. built vessels. In order to address this risk, the company has continuous engagement with local, state and federal government officials.

AKPS is also exposed to normal market risk related to an imbalance between supply and demand for vessels in the Jones Act market, which may result in a reduction of vessel prices and/or delay in new projects.

AKPS faces risks, including early termination of its facility lease, if it is unable to secure new orders and/or financing for Hulls 025-028, which are planned to be built as product tankers, or projects beyond the Matson project (i.e., Hulls 029 and $(30).$

AKPS's activities expose it to a variety of financial risks: market risk (including commodity pricing risk, currency risk, and price risk), credit risk, and cash flow interest-rate risk. AKPS's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on AKPS's financial performance. AKPS uses derivative financial instruments to hedge certain risk exposures.

SeaRiver bears the risk of steel and other material price escalation on Hulls 019 and 020. APSI and Crowley ultimately share the risk of steel price escalation on Hulls 021-024 through the joint venture structure. Matson bears the risk of steel price escalation on Hulls 029 and 030.

There is minimal foreign exchange exposure for Hulls 019 and 020. In order to mitigate exposure to exchange rate risk on other vessels, the company has begun securing foreign exchange forward contracts for Hulls 021-024 and the company will continue to follow its foreign exchange policy with respect to Hulls 029-030.

Through construction financing, the Company is exposed to fluctuations in interest rates. There is no construction financing for the SeaRiver project (i.e., Hulls 019 and 020) or the Matson project (i.e., Hulls 029 and 030), as these contracts will be fully-funded by customer milestone payments.

The company accrues an estimate for future warranty claims on its outstanding projects. Thus far the claims have been below the reserve amounts. In order to mitigate the risk of future warranty claims exceeding warranty provisions, the company has secured back-to-back warranties for most major components on the vessels.

The company accepted a profit sharing component as part of the compensation for the sale of Hulls 017 and 018 to Crowley in August 2012 and January 2013, respectively. Profit sharing is to occur based on the performance of each vessel

over its life and could be less than projected. In order to monitor this risk, the company built in certain third party reporting to validate profit sharing calculations as well as active review of projections and actual costs. Additionally, there is no sharing in losses going forward if the vessels do not perform.

The company is exposed to risks related to the take-out financing upon delivery of Hulls 021-024. The actual amount of APSI's investment in the joint venture with Crowley will depend in part on the net amount of this take-out financing. In addition, APSI cannot draw under its construction loan facility for Hulls 021-024 until this take-out financing is obtained. As part of the joint venture efforts, APSI and Crowley are currently working together to secure this financing on favorable terms.

After Hulls 021-024 are delivered and in service, the company will be exposed to additional risks due to its continued ownership interests in the companies that will own, charter and operate the vessels under the Crowley joint venture. These risks include, but are not limited to, fluctuations in the market value of the vessels, damage or loss of the vessels, inadequacy of insurance to cover such damages and losses, reductions in charter revenue, non-compliance with environmental laws and regulations, unexpected drydock costs, increases in operating costs and capital expenses as the vessels age, and repeal or significant changes to the Jones Act. By partnering with Crowley, a first class operator, AKPS has sought to mitigate these risks.

For a further analysis of risks, please refer to the 2012 AKPS annual report.

Oslo, Norway 26 February 2014 Board of Directors and General Manager Aker Philadelphia Shipyard ASA

CONDENSED CONSOLIDATED INCOME STATEMENT

	Unaudited		Unaudited
Amounts in USD millions	Q4	Q4	Twelve Months Ended 31 Dec.
(except shares and per share information)	2013	2012	2013	2012
Operating revenues	51.3	26.9	279.0	141.0
Operating expenses	(49.3)	(23.2)	(248.9)	(123.2)
Operating income before depreciation	2.0	3.7	30.1	17.8
Depreciation	(1.7)	(1.0)	(6.9)	(1.8)
Operating income	0.3	2.7	23.2	16.0
Net financial items	0.1	(0.2)	0.2	(0.3)
Income before tax	0.4	2.5	23.4	15.7
Tax benefit/(expense)	0.1	(1.2)	(7.8)	(6.2)
Income for the period *	0.5	1.3	15.6	9.5
Average number of shares	10,165,305	10,165,305	10,165,305	10,165,305
Basic and diluted earnings per share (USD)	0.05	0.13	1.53	0.93

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Unaudited		Unaudited
	04	Ο4	Twelve Months Ended 31 Dec.
Amounts in USD millions	2013	2012	2013	2012
Income for the period	0.5	1.3	15.6	-9.5
Other comprehensive income, net of income tax		$\overline{\phantom{a}}$	-
Total comprehensive income for the period *	$0.5\,$	1.3	15.6

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

	Unaudited	Unaudited **
	31-Dec	$31-Dec$
Amounts in USD millions	2013	2012
Assets
Non-current assets
Property, plant and equipment	54.8	57.0
Restricted cash	20.0	20.0
Deferred tax assets	3.0	3.6
Other non-current assets	5.4	3.2
Total non-current assets	83.2	83.8
Current assets
Work-in-process		67.7
Prepayments and other receivables	35.3	20.5
Cash and cash equivalents	68.8	58.3
Total current assets	104.1	146.5
Total assets	187.3	230.3
Equity and liabilities
Total equity	114.0	98.4
Non-current liabilities
Interest-bearing long-term debt	3.0	5.6
Other long-term liabilities	6.9	5.9
Deferred tax liabilities	7.9	0.9
Total non-current liabilities	17.8	12.4
Current liabilities
Customer advances, net	33.8	60.1
Interest-bearing short-term debt	2.6	2.6
Interest-bearing short-term construction loan		31.2
Taxes, trade payables and accrued liabilities	19.1	25.6
Total current liabilities	55.5	119.5
Total liabilities	73.3	131.9
Total equity and liabilities	187.3	230.3

All attributed to the equity holders of AKPS.
$*$ Annual 2012 financial information is derived from audited financial statements.

		CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITT Unaudited
		Twelve Months Ended 31 Dec.
Amounts in USD millions	2013	2012
As of beginning of period	98.4	88.9
Total comprehensive income for the period	15.6	9.5
As of end of period	114.0	98.4

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN FOUTTY

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

	Unaudited
	Twelve Months Ended 31 Dec.
Amounts in USD millions	2013	2012
Net cash from operating activities	49.2	61.9
Net cash used in investing activities	(4.9)	(9.8)
Net cash used in financing activities	(33.8)	(12.7)
Net change in cash and cash equivalents	10.5	39.4
Cash and cash equivalents at beginning of period	58.3	18.9
Cash and cash equivalents at end of period	68.8	58.3

Notes to the condensed interim consolidated financial statements for the 4^th quarter 2013

1. Introduction - Aker Philadelphia Shipyard ASA

Aker Philadelphia Shipyard ASA (AKPS) is a company domiciled in Norway. The condensed interim consolidated financial statements for the three-month and twelve-month periods ended 31 December 2013 and 31 December 2012 are comprised of AKPS and its direct and indirect wholly-owned subsidiaries, including Aker Philadelphia Shipyard, Inc. $(APSI).$

This interim report has not been subject to audit or review by independent auditors.

The consolidated 2012 annual financial statements of AKPS, which include a detailed description of accounting policies and significant estimates, are available at www.akerphiladelphia.com.

2. Basis of preparation

These condensed interim consolidated financial statements reflect all adjustments, in the opinion of AKPS's management, that are necessary for a fair presentation of the results of operations for the periods presented. Operating results for the three-month and twelve-month periods are not necessarily indicative of the results that may be expected for any subsequent quarter or year. These condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements of AKPS as of and for the year ended 31 December 2012.

3. Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU (IFRS) IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements, and should be read in conjunction with the consolidated financial statements of AKPS as of and for the year ended 31 December 2012.

4. Significant accounting principles

The accounting policies applied by AKPS in these condensed interim consolidated financial statements are substantially the same as those applied by AKPS in its consolidated financial statements as of and for the year ended 31 December 2012.

There have not been any new IFRS standards or interpretations which were effective 1 January 2013 that have had a significant impact on Q4 2013 or the year-to-date period, although AKPS adopted IFRS 13, Fair Value Measurement.

5. Use of estimates

The preparation of condensed interim consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

The most significant judgments made by management in preparing these condensed interim consolidated financial statements in applying AKPS's accounting policies, and the key sources of estimation uncertainty, are the same as those that are applied to the consolidated financial statements as of and for the year ended 31 December 2012 unless described elsewhere in this report.

6. Tax estimates

Income tax expense is recognized in each interim period based on the best estimate of the expected annual income tax rates.

7. Share capital and equity

At 31 December 2013, AKPS had 10,165,305 ordinary shares at a par value of NOK 10 per share which is the same as the average number of shares used in the calculation of earnings/(loss) per share in all periods in 2012 and through 31 December 2013.

8. Interest-bearing debt

The following shows material changes in interest-bearing debt during 2013:

	Long-term	Short-term	Total interest-
Amounts in USD millions	debt	debt	bearing debt
Balance 1.01.13	5.6	33.8	39.4
Issuance of debt	$\overline{\phantom{0}}$	0.3	0.3
Repayment of debt	(2.6)	(31.5)	(34.1)
Balance 31.12.13	3.0	2.6	5.6

The USD 30 million construction loan provided by Aker ASA was repaid on 28 January 2013 in conjunction with the sale and delivery of Hull 018 to Crowley.

On 1 October 2013, APSI executed a commitment letter with Caterpillar Financial Services for USD 120 million of construction financing for Hulls 021-024. The commitment letter provides that the loan will be subject to a maximum borrowing amount of USD 58-60 million per vessel and will be secured by a first lien on Hulls 021-024. The commitment letter provides further that the loan will accrue interest at three-month Libor plus 3.0%, subject to an increase or decrease depending on the lender's cost of funds as defined in the commitment letter.

On 6 November 2013, APSI executed a commitment letter with PIDC Regional Center, LP XXXI, a partnership between CanAm Enterprises and PIDC, for a secured term loan of up to USD 60 million. The commitment letter provides that the loan will have a five-year term and will be initially secured by a second lien on Hulls 021-024 during construction. After the vessels are delivered, the lender will have a lien on the economic interests in the vessels under the joint venture with Crowley. The commitment letter provides further that the loan will have a fixed interest rate of 2.75% through maturity. The funds are anticipated to be drawn in Q4 2014 and Q1 2015. This loan will be made through the Welcome Fund loan program, a source of low-cost capital generally available to commercial, retail, industrial or non-profit firms that create significant job growth and are located in or planning to locate to the City of Philadelphia.

AKPS expects to sign definitive documentation for the Caterpillar and Welcome Fund loans described above in Q1 2014.

9. Related party transactions

Converto Capital Fund AS, an investment fund controlled by Aker ASA, is the majority shareholder of AKPS, owning 71.2% of its total outstanding shares as of 31 December 2013. In addition, Kristian Rokke, the President and CEO of AKPS, is a Board member of TRG Holding AS, which owns 66.7% of the total outstanding shares of Aker ASA as of 31 December 2013. AKPS believes that related party transactions are made on terms equivalent to those that prevail in arm's length transactions.

AKPS has service agreements with Aker ASA and its affiliates which provide certain specified consulting, accounting, tax, financial and administrative services. AKPS also has a secondment agreement with Aker ASA which establishes a framework for the mutual secondment of personnel between their respective organizations. All payables under these agreements are paid within the normal course of business.

Related administrative costs and financial statement amounts for the three-month period ending 31 December 2013 were USD 177 thousand (USD 34 thousand for the same period in 2012) and for the twelve-month period ending 31 December 2013 were USD 398 thousand (USD 136 thousand for the same period in 2012).

10. Capitalized interest

	Q4	О4	Twelve Months Ended 31 Dec.
Amounts in USD millions	2013	2012	2013	2012
Interest expense	(0.2)	(0.5)	(0.8)	(3.1)
Interest capitalized on construction contracts	$\overline{\phantom{0}}$	0.2	0.1	1.8
Net interest expense	(0.2)	(0.3)	(0.7)	(1.3)

11. Construction contracts

The order backlog is USD 1,017.7 million at 31 December 2013 and represents an obligation to deliver vessels that have not yet been produced for our customers: SeaRiver, Crowley and Matson. The order backlog consists of future revenues plus certain materials to be supplied by SeaRiver (approximately USD 11.9 million) and is subject to adjustments based on change orders as defined in the construction contracts. The materials to be supplied by SeaRiver will not be recognized as future revenues by AKPS.

	Order	Order intake	Order
	backlog	12 months to	backlog
Amounts in USD millions	31.12.13	31.12.13	31.12.12
Total	1.017.7	909.1	338.7

The recognized profit on long-term contracts in process for the periods that ended:

Amounts in USD millions	31.12.13
Contract revenue recognized as revenue to date	233.4
Less: recognized contract expenses	(218.5)
Recognized profit to date	14.9
Contract costs incurred to date	214.4

All contract costs incurred to date are netted against customer advances as noted below.

Customer milestone payments as of 31 December 2013 and 31 December 2012 totaled USD 263.1 and USD 116.2 million, respectively.

Customer advances, net as of 31 December 2013 and 31 December 2012 totaled USD 33.8 million and USD 60.1 million, respectively. These represent customer milestone payments net of work-in-process and earned profit.

Because AKPS has no obligation towards Crowley with respect to Hulls 017 and 018 after delivery other than standard warranty, it recognizes all variable revenue when the amount can be measured reliably and it is probable that it will receive the economic benefits associated with the transaction. AKPS has determined that these criteria are met once Crowley has executed a firm charter agreement with a third party, because at this stage the charter rates and duration are known and related costs can be estimated within a reasonable range based upon historical performance and budgets. The profit sharing agreement with Crowley for Hulls 017 and 018 covers the entire useful lives of the vessels which could extend over 25 years. As a result, profit sharing revenue may be recognized several times over multiple years. Based on the existing three-year firm charter, the Company recognized USD 3.2 million of revenue for the variable component related to Hull 018 in January 2013. Payments will be received annually based on actual results of the vessel over the three-year charter period.

As of 31 December 2013, APSI has non-cancellable purchase commitments for materials and equipment of approximately USD 50.1 million for the construction of Hulls 019-024.

12. PSDC Agreement

On 31 March 2011, Philadelphia Shipyard Development Corporation (PSDC) and APSI closed the transactions contemplated by the Authorization Agreement dated 15 December 2010 and effective as of 18 February 2011 (the Authorization Agreement). Pursuant to the Authorization Agreement, PSDC purchased certain shipyard assets from APSI for a purchase price of USD 42.0 million, payable in two equal tranches, with funds provided by the Commonwealth of Pennsylvania. APSI is leasing back those same assets from PSDC subject to the terms of its shipyard lease and the Authorization Agreement. APSI used the sale proceeds, in combination with construction period financing with private lenders and its own available funds, to construct Hulls 017 and 018. Upon the delivery of Hull 018 to Crowley in January 2013, the Authorization Agreement (excluding the lease of shipyard assets described above) was terminated. For accounting purposes the transaction is accounted for as a sale/leaseback and no adjustments were made to the net accounting value of the assets at closing and the gross proceeds were proportionately recognized as a reduction of vessel cost over the construction of Hulls 017 and 018.

In connection with the closing, the City of Philadelphia agreed to temporarily defer USD 8.0 million in tax payments due from APSI over three years $(2011-2013)$ . The full deferred amount is due in 2017.

In addition, APSI agreed to a new termination event under its shipyard lease, pursuant to which PSDC has the right to recapture the shipyard if APSI fails to maintain an average of at least 200 full-time employees at the shipyard for 90 consecutive days, subject to the right of APSI to complete work-in-process projects and a one-time, limited cure right which allows APSI to restore the lease to a 5-year term under certain circumstances. Based on its current construction schedule and backlog, AKPS expects that it will have at least 200 full-time employees on staff for the foreseeable future.

13. Financial instruments

As of 31 December 2013, the Company accounts for the profit sharing receivable (USD 7.2 million and USD 3.4 million at 31 December 2013 and 2012, respectively) and forward exchange contracts (USD 57 thousand at 31 December 2013) at fair value. Other than as noted above, there are no significant deviations between carrying amounts of financial assets and liabilities and their fair values due to short term maturities.

14. Commitments and Contingencies

Joint venture

On 6 November 2013, APSI executed definitive agreements for a joint venture with Crowley Maritime Corporation and certain of its affiliates ("CMC") related to the ownership, operation and chartering of four product tankers. The vessels will be delivered in 2015 and 2016 and Crowley will maintain control over the ownership, technical operation, and commercial management of the vessels. APSI and CMC will share approximately 49.9% and 50.1%, respectively, in the economic benefits from the vessels. It is anticipated that APSI will have an investment in the joint venture of approximately USD 115 million once all four vessels are delivered. The actual amount of the investment will depend upon the total capital cost of the vessels to the joint venture and the net amount of take out financing upon delivery of the vessels. The vessels owned by the joint venture will be subject to mortgage debt residing at the joint venture. Due to the nature of the transaction, approximately 49.9% of the gross margin on each vessel being constructed by APSI for the joint venture will be deferred and recognized ratably over the life of such vessel once it is delivered. All four vessels have multi-year charters in place at 31 December 2013.

15. Events after 31 December 2013

On 17 January 2014, the Company obtained commitments in a private placement to sell equity totaling USD 60 million, or 2.25 million shares at an issue price of NOK 165 per share. The private placement was approved at an extraordinary general meeting on 7 February 2014 and trading of the new shares commenced on 10 February 2014. The Board intends to carry out a subsequent offering in order to offer shares to existing shareholders that did not participate in the private placement in March 2014.

The Company announced on 20 January 2014 that the commitment it had received during Q4 2013 from a group of private lenders for a secured term loan of USD 65 million had expired and will not be closed. The Company will incur a charge of USD 1.2 million in Q1 2014 related to this transaction.

On 24 February 2014, APSI prepaid in full the remaining balance of USD 2.8 million under a USD 20 million loan by the Pennsylvania Industrial Development Authority (PIDA) and the remaining balance of USD 1.2 million under a USD 10 million loan from PIDC Local Development Corporation (PIDC), without premium or penalty, and the mortgages and all other liens securing such loans were released.

Building the Future

Contact information:

Aker Philadelphia Shipyard ASA Fjordalleen 16 Postboks 1423 Vika $0115$ Oslo Norway

Kristian Rokke President and CEO Tel: $+12158752745$ kristian.rokke@phillyshipyard.com

Jeffrey Theisen CFO Tel: $+1$ 215 875 2678 jeffrey.theisen@phillyshipyard.com Eirik Fadnes Vice President Tel: $+4724130064$ eirik.fadnes@akerasa.com

Disclaimer

This press release 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 Aker Philadelphia Shipyard ASA and its subsidiaries and affiliates (the "Aker Philadelphia Shipyard Group") lines of business. 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 Aker Philadelphia Shipyard Group's 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 Aker Philadelphia Shipyard ASA believes that its expectations and the information in this press release 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 press release. Neither Aker Philadelphia Shipyard ASA nor any other company within the Aker Philadelphia Shipyard Group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the press release, and neither Aker Philadelphia Shipyard ASA, any other company within the Aker Philadelphia Shipyard 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 press release.

Aker Philadelphia Shipyard ASA undertakes no obligation to publicly update or revise any forward-looking information or statements in the press release, other than what is required by law.

The Aker Philadelphia Shipyard Group consists of various legally independent entities, constituting their own separate identities. Aker Philadelphia Shipyard is used as the common brand or trade mark for most of these entities. In this press release we may sometimes use "Aker Philadelphia Shipyard", "Group", "we" or "us" when we refer to Aker Philadelphia Shipyard companies in general or where no useful purpose is served by identifying any particular Aker Philadelphia Shipyard company.