Viking Supply Ships

Quarterly Report • May 7, 2015

Viking Supply Ships A/S Financial Report Q1 2015

VIKING SUPPLY SHIPS

FINANCIAL REPORT Q1

Contents	Page
Summary of events Q1	3
Operational highlights for Q1	3
Financial highlights	4
Financing and capital structure	4
Subsequent events	4
Contract backlog	4
Employment overview	5
Outlook	5
Condensed consolidated profit and loss account	6
Condensed consolidated statement of comprehensive income	6
Condensed consolidated cash flow statement	6
Condensed consolidated balance sheet	7
Notes to the condensed consolidated financial statements	8

Viking Supply Ships A/S (VSS A/S) conducts operations in the North Sea, Arctic and in the global offshore sector. The fleet comprises of 13 offshore vessels that are equipped for and have the capacity to operate in areas with harsh environment, further 7 of the Anchor Handling Tug Supply (AHTS) vessels are equipped to operate in Arctic areas. The AHTS fleet, combined with crew and ice management competence, is tailor-made to operate in ice conditions. There has been an increased contract activity in this niche. VSS A/S is committed to have a substantial part of the fleet on longer term contracts, and have a focus on increasing the contract backlog.

For further information, please contact CEO, Christian W. Berg, ph: +45 41 77 83 80.

The interim financial statements have not been subject to audit or review.

Front picture: Njord Viking together with the Goliat FPSO

SUMMARY OF EVENTS Q1

Total revenue for Q1 2015 was MNOK 270 (MNOK 339), of which vessel operations contribute with MNOK 225 (MNOK 239) and Services and Ship Management segments contribute with MNOK 45 (MNOK 100). The EBITDA for Q1 was MNOK 73 (MNOK 75).

The operating result (EBIT) for Q1 was MNOK 25 (MNOK 27). The net result for Q1 was negative MNOK 36 (negative MNOK 19).

The average fixture rate for the AHTS fleet in Q1 was NOK 423,000 (NOK 390,000) and GBP 5,000 (GBP 10,000) for the Platform Supply Vessels (PSV) fleet. The average utilisation for the AHTS fleet for Q1 was 71% (68%) and 33% (81%) for the PSV fleet.

VSS A/S has entered into a contract with an Oil-major for the charter of Brage Viking. The vessel is firm until December 2017, with options to extend the contract until June 2019.

In order to remain competitive and reduce costs, management has decided to close down the Aberdeen office with effect from July 2015. The change in the organisation will reduce the overhead costs and ensure that the financial solidity of VSS A/S remains strong.

OPERATIONAL HIGHLIGHTS FOR Q1

Anchor Handling Tug Supply vessels (AHTS)

During Q1, five vessels have been operating in the North Sea spot market. At the end of the quarter, Brage Viking mobilised out of the region to commence a term contract in a Sub-Arctic region.

VSS A/S is actively pursuing additional term opportunities for the AHTS fleet. Despite a challenging Offshore Support Vessel (OSV) market, the company is confident that the long term outlook for the particular niche of Arctic and Harsh-environment offshore is positive.

Despite the North Sea rig fleet being reduced, the North Sea activity has remained relatively high. This has however failed to materialise into any significant increases in rate levels.

Q1 2015	Fixture rate (NOK)	Utilisation (%)
AHTS vessels on term charters	581,600 (379,500)	100 % (100 %)
AHTS vessels in spot market	236,500 (396,000)	53 % (57 %)
Total AHTS fleet	423,000 (390,000)	71 % (68 %)

Platform Supply Vessels (PSV)

During Q1, all five vessels were trading in the North Sea spot market. Increased supply of vessels, combined with reduced demand from charterers has led to a challenging market in the region. Despite several owners putting vessels into lay-up, the market has not been significantly improved, and especially the medium sized vessels have been suffering from low utilisation.

Consequently, both rates and utilisation have been weak for the quarter. VSS A/S is currently pursuing alternative areas of operation for the PSV fleet and has a clear ambition to increase the term coverage going forward.

Q1 2015	Fixture rate (GBP)	Utilisation (%)
PSV vessels on term charters	0 (9,900)	0 % (100 %)
PSV vessels in spot market	5,000 (10,400)	33 % (57 %)
Total PSV fleet	5,000 (10,000)	33 % (81 %)

Services and Ship Management

During Q1, Viking Ice Consultancy conducted ice trials simulating oil spill in the Barents Sea in cooperation with several partners. The ambition with the ice trials is to create better solutions for preventing oil spill and to increase safety in future ice operations.

Last year VSS A/S was involved in a drilling campaign in the Russian Arctic. Due to the ongoing sanction regime, it is unlikely to see any drilling campaigns in the region this summer. VSS A/S through the subsidiary Viking Ice Consultancy is however seeking other opportunities for consultancy work.

FINANCIAL HIGHLIGHTS

Results for Q1 2015

Total revenue was MNOK 270 (MNOK 339) for Q1. The total operating costs were MNOK 198 (MNOK 264) and EBITDA MNOK 73 (MNOK 75). The operating result (EBIT) was MNOK 25 (MNOK 27).

Net financials were negative MNOK 60 (negative MNOK 42). Financial costs include unrealised currency loss of MNOK 37 (loss of MNOK 10) and realised value adjustment on interest rate swap of MNOK 1 (MNOK 0).

The net result for Q1 was negative MNOK 36 (negative MNOK 19).

FINANCING AND CAPITAL STRUCTURE

Viking Supply Ships A/S is a 100% owned subsidiary of Viking Supply Ships AB (VSS AB). VSS AB is a limited liability company registered in Sweden, with its domicile in Gothenburg, and corporate registration number 556161-0113. VSS AB is listed on the Small Cap list of the NASDAQ OMX Nordic Exchange in Stockholm under the ticker VSSAB (previously RABT).

VSS A/S book equity amounted to MNOK 1,992 (MNOK 1,698) as of 31 st March 2015 and was impacted by the result for the period of negative MNOK 36 (negative MNOK 19) and currency translation effects of positive MNOK 3 (negative MNOK 3). The value adjusted equity ratio was 48 % (46 %).

At the balance date, no decision concerning dividend has been made.

SUBSEQUENT EVENTS

VSS A/S has entered into a new contract with an oil and gas company for Vidar Viking. The vessel is now firm until August 2016, with options to extend the vessel until February 2017.

At Rederi AB Transatlantic's (RABT) Annual General Meeting it was resolved, in accordance with the proposal of the Board of Directors, to amend the Articles of Association resulting in the change of name from Rederi AB Transatlantic to Viking Supply Ships AB (VSS AB). The Board of VSS AB has decided to appoint Christian W. Berg as CEO of VSS AB with immediate effect, Mr. Berg will also continue as CEO of VSS A/S.

CONTRACT BACKLOG

	2015	2016	2017
Total contract backlog (MNOK)	2,223	1,628	772
AHTS contract backlog (MNOK)	2,223	1,628	772
PSV contract backlog (MNOK)	-	-	-
Total contract coverage (%)	3 1	2 9	1 8
AHTS contract coverage (%)	5 0	4 7	3 0
PSV contract coverage (%)	0	0	0

Table is basis 31 st March 2015. All figures above include firm period and options.

EMPLOYMENT OVERVIEW

		Firm contract	Option
AHTS	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar
Tor Viking		Oil major, 11 months firm				Oil major, firm for the drilling season 2015 + 8 weeks options + options for the drilling seasons 2016/2017
Balder Viking	Spot
Vidar Viking		Oil major, firm till 1st August 2016 + 1 x 6 months options
Odin Viking	Spot
Loke Viking	Spot
Njord Viking		Oil major, firm till 29th July 2015 + 2 x 1 year options
Magne Viking	Spot
Brage Viking		Oil major, 2 years 8 months firm + 6 + 12 months options
		Firm contract	Option
PSV	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	Jan	Feb	Mar
Frigg Viking	Spot
Idun Viking	Spot
Nanna Viking	Spot
Freyja Viking	Spot
Sol Viking	Spot

Overviews are basis 31 st March 2015.

OUTLOOK

The Offshore market is challenging on the back of the reduced oil price and consequently lower activity among exploration and production companies. Despite most plans for 2015 already being in place, the industry is trying to scrutinize costs where possible, both in terms of increased efficiency and postponed activity. VSS A/S expects that the North Sea market will continue to be challenging going forward, with especially the PSV segment being challenged by a weak market balance.

In the Arctic and Sub-Arctic regions, VSS A/S has secured several contracts during the last quarter, indicating that there is still demand for vessels in these regions. VSS A/S is still pursuing contract opportunities in these markets, and has a clear ambition to increase the contract coverage going forward.

Copenhagen, 7 th May 2015

Board of Directors:

Christen Sveaas Chairman	Anders Folke Patriksson Vice chairman	Tom Ruud
Lars Håkan Larsson	Per Magnus Sonnorp
Managing Director: Christian W. Berg

CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT

	Q1	Q1	FY
(MNOK) Note	2015	2014	2014
Total Revenue	270.0	339.3	1,741.5
Direct voyage costs	-12.2	-18.3	-48.5
Operating costs	-185.3	-245.9	-974.8
Total operating costs	-197.5	-264.2	-1,023.3
Operating profit before depreciation (EBITDA)	72.5	75.1	718.2
Net gain on sale of fixed assets	-	-	0.9
Depreciation 1	-47.3	-48.3	-194.7
Operating profit (EBIT)	25.2	26.8	524.4
Financial income	1.1	0.2	2.8
Financial costs	-61.2	-41.8	-220.0
Net financials	-60.2	-41.6	-217.2
Pre-tax result	-34.9	-14.8	307.2
Taxes	-0.6	-3.8	-15.3
Result for the period 2	-35.5	-18.5	291.8

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Q1	Q1	FY
(MNOK)	2015	2014	2014
Result for the period	-35.5	-18.5	291.8
Translation effect foreign operations	2.7	-2.7	13.4
Other comprehensive income net of tax	2.7	-2.7	13.4
Total comprehensive income for the period	-32.8	-21.2	305.2

CONDENSED CONSOLIDATED CASH FLOW STATEMENT

	Q1	Q1	FY
(MNOK)	2015	2014	2014
Cash flow from operating activities	128.5	21.5	539.0
Cash flow from investing activities	-4.1	-9.7	-333.4
Cash flow from financing activities	-187.9	-35.4	-126.9
Net changes in cash and cash equivalents	-63.5	-23.6	78.7
Cash and cash equivalents at the start of period	316.9	238.2	238.2
Cash and cash equivalents at the end of the period	253.4	214.7	316.9

CONDENSED CONSOLIDATED BALANCE SHEET

	Note	Q1	Q1	FY
(MNOK)		2015	2014	2014
ASSETS
Vessels and equipment		3,863.9	3,633.4	3,887.5
Tangible fixed assets	1,2	3,863.9	3,633.4	3,887.5
Financial fixed assets	4	177.7	43.3	75.7
Total fixed assets		4,041.6	3,676.7	3,963.2
Inventories		18.4	28.9	21.7
Accounts receivables		180.6	132.2	305.8
Other current receivables		64.3	95.0	90.6
Cash and cash equivalents	4	253.4	214.6	316.9
Total current assets		516.7	470.7	735.0
Total assets		4,558.3	4,147.4	4,698.2

		Q1	Q1	FY
(MNOK)	Note	2015	2014	2014
EQUITY AND LIABILITIES
Share capital		0.5	0.5	0.5
Retained earnings and reserves		1,991.2	1,697.5	2,024.0
Total equity		1,991.7	1,698.0	2,024.5
Long-term bond loan	3	192.3	303.7	191.9
Long-term debt to credit institutions	3	1,914.8	1,648.4	1,932.7
Other non-current liabilities		24.1	27.8	28.6
Non-current liabilities		2,131.3	1,979.9	2,153.2
Short-term bond loan	3	-	99.2	-
Short-term debt to credit institutions	3	275.5	188.1	268.7
Accounts payable		69.1	68.9	154.0
Other current liabilities		90.8	113.4	97.8
Current liabilities		435.4	469.6	520.5
Total liabilities		2,566.6	2,449.5	2,673.7
Total equity and liabilities		4,558.3	4,147.5	4,698.2

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Depreciation

Tangible fixed assets are recognised at cost or after deductions for accumulated depreciation according to plan and possible impairment. Straight-line amortisation according to plan is based on the following useful lives:

• Vessels 25–30 years with residual value
• Docking and major overhaul measures 2.5–5 years
• Other equipment 5–10 years

Impairment test as of 31 st March shows no need for impairment or reversal of previous impairment.

2. Segment information

The segment information is presented in accordance with the internal reporting structure and includes four segments.

	Q1	Q1	Q1	Q1
(MNOK)	AHTS	PSV	Services	Ship Mgmt.
Total Revenue	216.5	8.5	7.0	38.0
Direct voyage costs	-9.6	-2.6	-	-
Operating costs	-111.5	-30.2	-5.6	-38.0
Total operating costs	-121.1	-32.8	-5.6	-38.0
Operating profit before depreciation (EBITDA)	95.4	-24.3	1.4	-
Depreciation	-35.0	-12.3	-	-
Operating profit (EBIT)	60.4	-36.6	1.4	-
Financial income	1.1	-	-	-
Financial costs	-52.9	-7.8	-0.5	-
Net financials	-51.9	-7.8	-0.5	-
Pre-tax result	8.6	-44.4	0.9	-
Taxes	-0.6	-	-	-
Result for the period	8.0	-44.4	0.9	-

	Q1	Q1	Q1	Q1
(MNOK)	AHTS	PSV	Services	Ship Mgmt.
Total tangible fixed assets	2,976.3	887.6	-	-
Total interest bearing debt	1,924.3	458.3	-	-

There are no significant revenue transactions between the segments.

3. Interest bearing liabilities

The vessels owned by VSS A/S are primarily financed through bank loans with pledge in the vessels. Further securities have been given in the form of pledge in revenue and insurance policies. The interest-bearing debt in VSS A/S per Q1 2015 is MNOK 2,393 (MNOK 2,239).

The interest bearing liabilities are associated with so-called covenants, according to which VSS A/S must fulfil certain key ratios. VSS A/S is proactively managing the risk. At the balance date all covenants were in compliance.

The early termination of the contract for the 2015 and optional 2016 and 2017 drilling seasons received in December 2014 caused two of the AHTS vessels not to have sufficient contract coverage pursuant to the loan agreement for the relevant vessels. In line with the terms of the loan agreement, VSS A/S in February 2015 agreed with the lenders to provide additional security in an amount of MUSD 18.8. The amount in deposit will vary up or down and the variation is dependent upon currency exchange rates, amortisations under the loan and vessel

valuations. If the vessels yet again will reach the contract coverage agreed in the loan agreement, the obligation of providing additional security will cease.

Prior to the balance date VSS A/S had provided the lenders with MUSD 12.6 out of the MUSD 18.8 additional security. Further, prior to the balance date, VSS A/S had secured additional term contract coverage on the relevant vessels. As a combination of the secured additional term contract coverage and the loan-to-value clause in the same loan agreement the lenders have, after the balance date, agreed to reduce the MUSD 18.8 to MUSD 12.6.

In March 2012 VSS A/S issued a 5 year senior unsecured bond loan in the Norwegian capital market, with maturity in March 2017, totaling MNOK 300. The bond agreement has a limit of MNOK 750. The net proceeds from the bond shall be employed for investments, capital expenditures related to fleet expansion and general corporate purposes. The bond was listed on Nordic ABM in Oslo on 28th June, 2012. In March 2013 an additional MNOK 85 was drawn in a tap issue. As at balance date VSS A/S is holding nominal MNOK 189 MNOK of this bond, consequently 196 MNOK is outstanding.

VSS A/S has 41% (38%) of its interest bearing debt in USD and 19% (0%) in GBP. The remaining loans are denominated in NOK. VSS A/S has 10% (11%) of the total loan portfolio swapped into fixed interest rate.

3.1. Classification by type of debt

	Q1	Q1	FY
(MNOK)	2015	2014	2014
Long-term bond loan	192.3	303.7	191.9
Short-term bond loan	-	99.2	-
Long-term debt to credit institutions	1,914.8	1,648.4	1,932.7
Short-term debt to credit institutions	275.5	188.1	268.7
Total interest bearing liabilities	2,382.6	2,239.4	2,393.3

3.2. Debt maturity

VIKING SUPPLY SHIPS

FINANCIAL REPORT Q1

4. Cash and cash equivalents

	Q1	Q1	FY
(MNOK)	2015	2014	2014
Restricted cash *	101.0	12.2	-
Free cash and cash equivalents	253.4	214.6	316.9
Cash and cash equivalents	354.4	226.8	316.9

* The amount is included in the item "Financial fixed assets" in the balance-sheet

5. Operational and financial risk

VSS A/S is characterised by a high degree of international operations and is thus exposed to a number of operational and financial risks. VSS A/S works actively to identify, assess and manage these risks.

VSS A/S is exposed to changes in the freight rates. To mitigate this operational risk, VSS A/S has a clear focus on increasing the number of vessels on term contracts.

Long-term loans are the principal form of financing. Accordingly, interest rate fluctuations have an impact on VSS A/S' earnings and cash flow. To reduce this risk VSS A/S aims to actively manage the interest exposure through various types of hedging instruments.

Part of the VSS A/S' cash flow is generated in currencies other than NOK which is VSS A/S' functional currency. This means that currency fluctuations have an impact on VSS A/S' earnings and cash flows. The foreign exchange risk is primarily reduced by matching the exposure to revenues in various currencies with costs in the corresponding currency. In the same manner, assets in a certain currency are primarily matched with liabilities in the same currency.

6. Basis of preparation

These condensed interim financial statements for the three months ended 31 March 2015 have been prepared in accordance with the accounting principles as described in the VSS A/S Annual report for 2013.