Reach Subsea — Earnings Release 2020

Feb 23, 2021

4Q and full year 2020: Record results

Highlights

Record results ▪ Best 4Q result in history – pre-tax of NOK 14.1m ▪ Best full year result in history – pre-tax of NOK 43.1m Introducing Reach Remote ▪ Game changing impact on economics and emissions ▪ Delivering subsea services on a remote basis ▪ Two new USVs from 2022, ambition of 10 by 2025 Dividend to shareholders ▪ Solid financial position with working capital of NOK 130m ▪ Board proposes DPS of NOK 0.15

Good start to 2021 ▪ 3-year contract with Nord Stream secured

• 550 project days secured for 2021 38% up from last year

Reach Subsea in brief

We provide clients with Data and Solutions for their subsurface assets in maritime areas

• Data: Maps, reports, images, videos, and digital twins of the seabed or subsurface assets
• Solutions: Solving or preventing problems with subsurface assets, or installing and removing assets from the seabed

Our services are delivered from a subsea vessel, utilizing the right technology, managed by our skilled people

Our services have been developed in the oil & gas sector, and are increasingly being adopted in new sectors

What is our core competence?

We provide a service in a maritime environment based on:	▪ Mapping of routes and areas on the seabed ▪ Inspection of subsurface infrastructure and equipment ▪ Repair and maintenance of subsurface infrastructure and equipment ▪ Installing and removing equipment on the seabed
In order to execute this service we need to bundle:	▪ Competence through the right engineers, skilled ROV pilots, proper systems, and the right culture ▪ Technology in the form of ROVs, tools, software and sensors ▪ Vessels to carry the Competence and Technology to the area of operation
and the end product our client actually buys is:	▪ Data in the form of maps, reports, images and videos, and/or digital twins ▪ Solutions in the form of solving or preventing a problem with a subsurface asset ▪ An operation that ensures Data and Solutions are collected and delivered timely, safely, and in compliance with rules and regulations

How our core competence is converted to deliverable service

Subsea vessel chartered in from a shipowner, including personnel to run the vessel and the onboard "hotel"

The vessel is equipped with our ROVs, equipment, software, and people becoming a "spread" ready for service

Planning of how the Spread will execute the service, and produce a deliverable product, is done by our engineers onshore

The spread executes the service for a client, e.g. inspect the condition of an export cable from an offshore wind farm

License to operate: Strict requirements on Health, Safety, Environment & Quality (HSEQ) assurance

….and the services we provide

		IMR
	Survey	Inspection	Light repair	Heavy repair	Light construction
Scope of service	Mapping of seabed	Mapping of subsurface asset condition	Repair of subsurface asset in place	Lifting of subsurface asset, repair/replace on deck/shore	Installing (smaller) subsea assets
Competitive parameter	Data quality, speed	Data quality, speed, impact on client operations	Quality of solution, speed, impact on client operations	Quality of solution, speed, impact on client operations	Quality of solution, speed, impact on client operations
End product	Data on seabed conditons Hazard identification Seabed maps	Data on asset condition Images/videos Digital models	Restore condition of subsurface asset to proper state	Restore condition of subsurface asset to proper state	Subsurface asset installed and ready to use
Client use or benefit	Planning of installation of assets on the seabed	Planning of maintenance, repair, or replacement	Ensure integrity and operating capability of subsurface asset	Ensure integrity and operating capability of subsurface asset	Subsurface asset in place for own operations

IMR = integrated service involving inspection, maintenance and repair of a clients subsurface asset

Serving clients across several sectors

Balancing growth and performance

Finance

Key figures

	4Q 2020	4Q 2019	12M 2020	12M 2019
	unaudited	unaudited	unaudited	audited
Revenues (NOKm)	131	108	628	509
EBITDA (NOKm)	61	31	267	171
Pre-tax profit (NOKm)	14	$-25$	43	$-36$
Cash and cash equivalents (NOKm)	105	39	105	39
Net working capital (NOKm)	25	32	25	32
Net interest bearing debt, incl IFRS 16 leases (NOKm)	$-64$	144	$-64$	144
Equity (NOKm)	210	166	210	166
Order backlog (NOKm)	145	120	145	120
Outstanding tender value (NOKbn)	2.1	2.1	2.1	2.1
Number of ROV days sold	578	345	2 3 8 8	1790
Number of ROV days available	767	838	3 2 5 0	3638
Technical uptime on ROVs	99%	100 %	99%	100 %
Number of offshore personnel days sold	2543	1823	15780	10992
LTIs	0	$\Omega$	$\Omega$	1
Number of vessel days sold	252	164	956	818

• Strong quarterly result and best annual result in Reach Subsea's history despite challenging market and operating conditions, driven by high utilization and successful project execution .
• 4Q 2020 EBITDA was NOK 60.8 million compared with NOK 31.3 mill in 4Q2019, while pre -tax result was NOK 14.2 million (NOK -24.8 million).
• EBITDA for the full year of 2020 was NOK 267.2 million (NOK 171.4 million), while pre -tax result was NOK 43.1 million (NOK – 35.7 million).
• High growth in renewables segment during 4Q2020 with 57% (15% in 4Q2019) of revenue generated from non -oil & gas clients, driven by major survey projects in the offshore wind sector .

Increasing renewables share of business

4Q revenue mix

Full year revenue mix

Solid financial performance through a difficult market

Record 2020 results despite pandemic

Note: EBIT for 2016-2018 is excluding amortisation of termination fee (see our quarterly reports in this period for an explanation of amortised termination fee)

Ending 2020 with a solid financial position

Driven by utilization and solid execution

Strong ROV utilization

Note: EBITDA per sold ROV day = reported EBITDA less IFRS 16 depreciation, divided by number of sold ROV days.

EBITDA per sold ROV day up on

Reach Remote

What is Reach Remote?

• Innovative concept for remote and autonomous operations of subsea vessels
• Dramatically lowers operational costs and environmental footprint of subsea operations
• Jointly developed in cooperation with Kongsberg Maritime

Reach Remote – for a sustainable future

	▪ Increasing awareness among clients to adopt environmentally sustainable solutions from suppliers
Rationale	▪ Technology is now available to redesign ROV operations towards a remote and autonomous set-up
	▪ Timing is right to introduce next generation, sustainable, and highly cost competitive solution for subsea services
	▪ Team up with solid partners in Kongsberg Maritime and Massterly, leaders in remote & autonomous technology and operations
Action	▪ Unlock the opportunity by combining the competence and technology of Reach, Kongsberg, and Massterly
	▪ Bring to market two Unmanned Surface Vessels (USV) with connected ROVs ready for operations in 2022
	▪ More than 90% reduction in CO2 and NOx emissions associated with our operations
	▪ Virtually eliminate personnel risk associated with offshore operations
Impact	▪ Game changing reduction in cost of providing subsea services by up to 65%

Balance sheet comparison Game changing impact on economics and emissions

Note: Daily operating cost includes shipowners personnel and other costs, but excludes capital cost (i.e. daily rate for servicing cost of hardware/capex)

Conversion of our core competence to deliverable service

Operational parameters:

• 80 meter vessel with 70-80 berths
• 30-50 personnel offshore
• Strict HSEQ regime
• 8,000 tons in annual CO2 emissions

End product

Survey or inspection service today Survey or inspection service tomorrow

Operational parameters:

• 25 meter vessel unmanned
• All personnel onshore
• Simple HSEQ regime
• 90-100% reduction in emissions

Shifting from a capital- and personnel intensive set-up towards a lean remote and autonomous platform

Our USV can be put to immediate use in our core service areas

We are already running USV operations

▪ Equinor Hywind Scotland

▪ Data gathered safely & efficiently from land fall, through shallow waters and merging into the main survey data seamlessly for 100% scope attainment

▪ BP Trinidad & Tobago

• Land fall and shallow water route survey
• Pioneering Aerial & Subsea photogrammetry
• Millimetric accuracy during the field execution
• Damage between the air & water mediums (splash zone) made visible and accurately presented by simultaneous use of air drone and ROV.

Flexible vessel portfolio allows for right timing of Reach Remote

Reach has the track record and client base to deploy Reach Remote

The timing is right for Reach Remote

Appendix

Appendix

Income statement

Statement of profit or loss (NOK 1000)	4Q 2020	4Q 2019	12M 2020	12M 2019
Operating revenue	130 337	107 625	618 870	508 337
Other income/losses	426		9 1 6 0	194
Revenue	130 763	107 625	628 030	508 531
Procurement expenses	$-27551$	$-34842$	$-169972$	$-184140$
Personnel expenses	$-30620$	$-24036$	$-111422$	$-90552$
Other operating expenses	$-11764$	$-17469$	$-79429$	$-62433$
EBITDA	60827	31 278	267 207	171406
Depreciation	$-45907$	$-50149$	$-208386$	$-187728$
Impairment			$-7505$
Operating result (EBIT)	14 9 20	$-18871$	51317	$-16322$
Interest income	$-84$	132	149	680
Interest expenses	107	$-2457$	$-6576$	$-11452$
Other net financial items	$-2810$	$-2147$	$-3274$	$-5200$
Result from associated companies	2042	$-1475$	1487	$-3391$
Profit (loss) before taxes	14 175	$-24817$	43 103	$-35685$
Taxes				$-24$
Profit (loss)	14 175	$-24817$	43 103	$-35709$

Assets

Statement of financial position (NOK 1000)	2020 31/12	2019 31/12
Non-current assets
Deferred tax assets	8 1 6 1	8 1 6 1
Investment in joint ventures	22772	21 285
Property, plant and equipment	90 103	247802
Total non-current assets	121 036	277 247
Current assets Bunkers	1376	6696
Trade receivables	90 783	59 154
Other receivables	44 4 2 2	63 624
Cash and cash equivalents	105 396	38 657
Total current assets	241 978	168 131
Total assets	363014	445 378

Equity & liabilities

Statement of financial position (NOK 1000)	2020 31/12	2019 31/12
Equity
Share capital	143 606	143 546
Share premium	105 070	105 025
Other equity	$-38522$	$-82740$
Total equity	210 154	165831
Non-current liabilities
Interest-bearing debt to credit institutions	12 731	25 216
Interest-bearing debt, other (related to IFRS 16)		58 784
Total non-current liabilities	12731	83 999
Current liabilities
Interest-bearing debt to credit institutions, short term	12859	16 023
Interest-bearing debt, other (related to IFRS 16), short term	15766	82 497
Trade payables	65 055	53 984
Other current liabilities	46 448	43 045
Total current liabilities	140 128	195 548
Total liabilities	152859	279 548
Total equity and liabilities	363014	445 378

Shareholders

	Shares	Stake
NORTH ENERGY ASA	46 126 567	32.1%
VERDIPAPIRFONDET EIKA NORGE	10 285 650	7.2%
JOSO INVEST AS	7 564 589	5.3%
HOLME HOLDING AS	5 910 000	4.1%
JT INVEST AS	5 5 29 5 39	3.9%
NORMAND DRIFT AS	5 000 000	3.5 %
DANSKE INVEST NORGE VEKST	2820462	2,0%
STAVA INVEST AS	2 300 000	1.6 %
CORUNA AS	2 250 000	1,6 %
RMS INVEST AS	2 000 000	1.4 %
LION INVEST AS	2 000 000	1.4%
TEOMAR AS	2 000 000	1.4 %
A-Å INVEST AS	1938725	1.4%
ENGELSTAD	1873426	1,3%
FREEMAN SHIPPING & OFFSHORE AS	1 700 000	1.2%
SMS INVESTERING AS	1652366	1.2%
NÆRINGSLIVETS HOVEDORGANISASJON	1635991	1.1 %
BARRUS CAPITAL AS	1510090	1,1 %
TEM INVEST AS	1 250 000	0.9%
CASTEL AS	1 248 517	0.9%
Total 20 largest	106 595 922	74.2 %
Others	37 010 086	25,8%
Total	143 606 008	100,0 %

Shareholder structure

• North Energy
• Board members
• Management & Employees
• Other

The vessels we currently provide our services from…

D400 Te AHC Main Crane and 100 Te AHC Auxiliary Crane DP3 ICE 1B
4,400 Te below deck Carousel.
Moonpool
2600 m 3 steel deck
1x Kystdesign supporter WROV and 1x constructor WROV
Battery pack installed 1Q2020

Reach Remote – an enabler for growth

• A compelling value proposition to clients:
• Substantial reduction in procurement cost
• Low/no emission from service provision
• Low/no risk of health & safety incidents to people

The value proposition is a competitive adavantage in the oil & gas and offshore wind sectors, and an enabler for further adoption in new marine sectors