Prosafe SE

Earnings Release • Aug 24, 2016

Prosafe SE: Second quarter and first half report 2016

Prosafe SE: Second quarter and first half report 2016

(Figures in brackets refer to the corresponding period of 2015)

Operations

The fleet utilisation rate in the second quarter of 2016 was 41 per cent (58 per

cent).

Safe Boreas commenced the contract with Talisman Sinopec in the UK mid-March and

was fully contracted throughout the quarter.

Safe Zephyrus was delivered from the yard in the first quarter of 2016 and

received acknowledgement of compliance from the Petroleum Safety Authority

Norway, in July. The vessel commenced a contract with Det norske in Norway in

late July.

Safe Scandinavia commenced the TSV contract with Statoil in Norway mid-March.

Drilling support operations successfully commenced at the beginning of April

with a firm contract period until July 2018.

Regalia commenced a contract with Shell in the UK in late May.

Safe Concordia and Safe Caledonia were fully contracted in the quarter.

Safe Bristolia commenced a contract with BG Group in mid-May in the UK for a

two-month firm period. This contract has been completed and the vessel is now

laid up in Norway.

Safe Notos was delivered from the yard in the first quarter of 2016 and is in

transit to Brazil to perform the contract with Petrobras. The vessel is expected

to arrive in Brazil early in the fourth quarter of 2016. The Safe Notos

contract, as extended, is now for three years plus 222 days and the total

contract value is USD 189 million.

Safe Astoria was idle in the quarter and is cold-stacked in Batam, Indonesia.

Safe Lancia is cold stacked in Port Isabel, Texas, USA. The company incurred

off-hire and demobilisation costs as well as costs related to the removal of

thrusters on the vessel in the second quarter.

Safe Regency has transited from Aruba and is now preparing for lay-up in

Curaçao. The company incurred off-hire costs for the vessel in the second

quarter.

In June 2016, Safe Britannia was sold for scrap/recycling in the US. The company

incurred off-hire and demobilisation costs in the quarter until the vessel was

sold.

In August 2016, Jasminia and Safe Hibernia were sold for scrap/recycling in the

US. The company incurred lay-up and demobilisation costs in the quarter.

Financials

Revenues for the second quarter of 2016 were USD 115.4 million (USD 92.5

million). This increase reflects that high day rate units have been on contract

during the second quarter this year as opposed to last year. This has been

partly offset by the closure of the Gulf of Mexico contracts which generated

relatively low day rates.

Operating expenses increased slightly to USD 53.8 million (USD 51 million). Cost

saving initiatives implemented in 2015/2016 have reduced operating expenses in

the second quarter. These savings were offset to a large degree by non-recurring

costs relating to the vessels which previously operated in the Gulf of Mexico.

EBITDA increased to USD 61.6 million (USD 41.5 million). This improvement is

mainly due to higher average day rates, as described above.

Depreciation increased to USD 29.1 million (USD 18.7 million) mainly due to the

new build Safe Boreas and the Safe Scandinavia TSV project. Operating profit was

USD 32.5 million (USD 22.8 million).

Net financial expenses for the second quarter were USD 26.4 million (USD 7.0

million) mainly due to currency effects and higher interest costs.

Net profit amounted to USD 5.2 million (USD 12.2 million).

Total assets at 30 June amounted to USD 2,599.7 million (USD 2,241.7 million),

while the book equity ratio declined to 26.1 per cent (33.9 per cent). Net

interest-bearing debt stood at USD 1,648.5 million (USD 1,123.7 million).

Financial restructuring

On 7 July 2016, the Company announced a proposed comprehensive refinancing. The

refinancing included a proposed private placement of minimum USD 130 million and

maximum USD 150 million at an issue price of NOK 0.25 per share, and a

subsequent equity offering of up to USD 15 million. It was furthermore proposed

that NOK 2.4 billion (approx. USD 290 million) in aggregate face value of the

Company's outstanding senior unsecured bonds be converted into new shares at

30% of the face value and/or cash at the option of each bondholder.

The combined effect of the reduction in bank debt amortisation from Q1 2017

until and including Q4 2020, and the interest rate swap restructuring is

expected to provide a total positive liquidity impact of approximately USD 493

million. There is also a significant financial covenant relief on all facilities

to provide the Company with sufficient headroom to operate.

As part of and subject to the refinancing being completed, the Company has

agreed with Cosco a deferred delivery of Safe Eurus to Q4 2019 (or such earlier

time required by the Company) and a limitation on any further liability in the

event Prosafe does not take delivery of the vessel, giving the Company increased

flexibility and reduced financing risk. In addition, Prosafe and Cosco have also

agreed a deferral of the repayment of the USD 29 million seller's credit to Q4

On 13 July 2016, the Company announced that it had completed the private

placement of new shares. The private placement of minimum USD 130 million and

maximum USD 150 million, conducted as an accelerated book-building with

preferred allocation for shareholders and bondholders, was fully subscribed. The

final amount of new shares to be issued would be determined on the basis of the

amount required for the cash-out of bonds under the refinancing.

On 11 August 2016, the Company announced that the bondholders had exercised the

cash-out option for NOK 242 million. As per the terms of the proposed

refinancing, the clearing price was therefore set to 35% of current face value

of the bonds. The difference between NOK 84.7 million (35% of NOK 242 million)

and the minimum cash-out amount (NOK 336 million) will be applied for a pro-rata

redemption across remaining bonds as part of the refinancing.

Further, based upon received requests from bondholders, the Company will, as

part of the refinancing, issue a convertible bond of NOK 82.79 million

convertible into 331,163,764 new shares. Adjusted for the cash-out amount and

the convertible bond, the remaining bonds will be converted to 1,396,836,250 new

shares in Prosafe through a debt to equity conversion. As a result of the

minimum cash-out amount being exercised, the Company will issue 4,368,000,000

new shares in the private placement.

The refinancing was approved by the requisite majorities in the Company's bond

loans on 12 August 2016. On 23 August 2016 the Extraordinary General Meeting of

Prosafe resolved to authorise the issuance of the shares and convertible bonds

as described above.

Currently, bank lenders representing 89% (in aggregate) of Prosafe's USD 1,300

million and USD 288 million bank facilities have confirmed credit approval or

agreement-in-principle in favour of the refinancing. The Company is working

constructively with the bank syndicate to obtain the remaining credit approvals

and secure the required all lender support. The refinancing is expected to be

completed by end August / beginning of September 2016.

Reorganisation and rationalisation

As announced on 26 July 2016, as a part of its cost efficiency measures reported

in connection with the company's Q1 2016 report, Prosafe is implementing a

reorganisation of the group's shore-based business resulting in a leaner

organisation around a smaller and partly changed group management team.

The new organisational model of the group is based on the principle of a lean

line organisation focusing on the core business of safe and efficient management

of the fleet.

The rationalisation is necessary to ensure that the Prosafe group remains

competitive in the current difficult market conditions and in a solid position

for future growth when the industry starts to recover. The proposed workforce

reduction is ongoing throughout the remainder of 2016 eventually achieving a

substantial headcount reduction across the group.

The Group's target remains to reduce annual costs by at least USD 30 to 40

million. This should show increasing effect throughout the second half of 2016

as the rationalisation program takes effect and capacity is adjusted to a

falling activity level. In addition, the target includes a reduced capex spend

noticeably in the near and medium term to protect the financial position.

Outlook

Market outlook remains uncertain in the near term, and although there are a

number of prospects, 2017 is expected to be the low point in activity level. In

general, the company sees the demand returning more to the traditional demand

related to maintenance and modification projects with shorter lead times

compared to hook-up projects. Cost reductions in the E&P sector are expected to

contribute to more projects becoming economically viable. Combined with

continued focus on asset integrity and maintenance on offshore installations,

the company expects a gradual market recovery from 2018 onwards.

Prosafe has moved quickly to scrap three vessels and it anticipates that other

suppliers' vessels will be scrapped and/or exit the high-end market of the North

Sea. As a consequence of this, the supply-demand environment is expected to

become more balanced by 2020. The aforementioned plus the substantial debt

reduction, the significantly improved cash flow from the refinancing and

combined with Prosafe's high quality and versatile fleet places the company in a

strong position when the market recovers.

Risk

Prosafe's key risks are described in detail in the Directors' Report as set out

in the Annual Report 2015 and include Prosafe's main operational risks e.g. day

rate level and  utilisation rate of the accommodation vessels. The company's

results also depend (inter alia) on operating costs, interest expenses and

exchange rates.

Statement from the Board, the Acting CEO and the Acting CFO

We confirm that, to the best of our knowledge, the financial statements for the

first half year of 2016, which have been prepared in accordance with IAS 34

Interim Financial Statements as adopted by the European Union and the

requirements of the Cyprus Companies Law, give a true and fair view of the

company's assets, liabilities, financial position and profit or loss of the

company, and that the interim management report includes a fair review of the

information required under the Norwegian Securities Trading Act section 5-6

fourth paragraph and the Cyprus Companies Law and Cyprus Transparency

Requirements Law No:190(1) 2007 section 10.

Prosafe is the world's leading owner and operator of semi-submersible

accommodation vessels. The company is headquartered in Larnaca, Cyprus and

listed on the Oslo Stock Exchange with ticker code PRS. For more information,

please refer to www.prosafe.com

Attachment: Q2 2016 report

Larnaca, 24 August 2016

The Board of Directors of Prosafe SE

For further information, please contact:

Stig Harry Christiansen, Acting CEO

Prosafe Management AS

Phone: +47 478 07 813

Robin Laird, Acting CFO

Prosafe Offshore Services Pte Limited

Phone: +65 81 27 21 01

Cecilie Helland Ouff, Senior Manager Finance and Investor Relations

Prosafe AS

Phone: +47 991 09 467

This information is subject to the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.