Dolphin Group ASA Presentation of unaudited Q2 2015 results 12 August 2015 Atle Jacobsen (CEO) & Erik Hokholt (CFO) 1
Disclaimer This presentation 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 Dolphin Group ASA ( Dolphin Group or Dolphin ) and its subsidiaries. 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 Dolphins 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 Dolphin believes that its expectations and the information in this Report 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 Report. Dolphin nor any other company within the Dolphin group is making any representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the information in the Report, and neither Dolphin, any other company within the Dolphin 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 Report. Dolphin undertakes no obligation to publicly update or revise any forward-looking information or statements in the Report. There may have been changes in matters which affect Dolphin Group subsequent to the date of this presentation. Neither the issue nor delivery of this presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof or that the affairs of Dolphin Group has not since changed, and Dolphin Group does not intend, and does not assume any obligation, to update or correct any information included in this presentation. The contents of this presentation are not to be construed as legal, business, investment or tax advice. Each recipient should consult with its own legal, business, investment and tax adviser as to legal, business, investment and tax advice. This presentation is subject to Norwegian law, and any dispute arising in respect of this presentation is subject to the exclusive jurisdiction of the Norwegian courts. 2
Table of contents I. Highlights Q2 2015 results II. III. IV. Financials Operational status and market outlook Appendix 3
Atle Jacobsen, CEO, commented for Q2 In the second quarter, Dolphin was increasingly exposed to the challenging market conditions with low oil price and tender volumes, which negatively affected utilization and contract pricing for second quarter. Revenues are down at USD 80 million, due to a quarter with extensive relocation of vessels into new regions on contracts reflecting the current low market prices, but also because one vessel have been redelivered and one de-rigged during the quarter. In addition, our new flagship, Polar Empress, generated no revenues in the quarter due to late delivery. The planned increased Multi-Client activities are within what we believe are highly attractive areas, though oil companies restricted spending and strong competition provided us with low Multi-Client prefunding and Late Sales for the quarter. At present, the market outlook is hard to predict, the recent drop in oil price caused further uncertainty with our clients and a rebound in seismic demand may take longer than previously expected. As a consequence, Dolphin will continue the cost and capex reductions, as well as working on improving our financial position. By being a full-range, fully integrated marine geophysical company with a focus on operational excellence, Dolphin is an attractive and valuable contractor in these challenging times for the E&P industry. Continued weak market fundamentals 4
Highlights Q2 Q2 2015 vs. (Q2 2014) Financial Operational Revenues of USD 80.1 million (USD 101.0 million) Multi-Client revenues of USD 12.1 million (USD 14.9 million) EBITDA of USD 18.5 million (23.1%) (USD 30.3 million) EBIT before restructuring charge of USD -4.2 million (-5.2%) (USD 14.2 million ) Restructuring charge of USD 6.2 million Net cash flow from operations of USD 45.3 million and cash balance of USD 65.4 million Improved financial position by extending debt maturities and increasing equity capital with 20% Dolphin s new flagship Polar Empress in steady production end of June with 14 Q- Marine streamers Extensive relocations after completion of long-term contracts in India and Pacific region High Multi-Client activity compared to previous quarters, cooperation with partner Utilising asset light flexibility by; redelivering Artemis Atlantic (2D), de-rigging Artemis Arctic from 3D for 2D 5
Key financials - quarterly developments (USD Million) DOLPHIN TREND REFLECTING WEAK MARKET FUNDEMENTALS Net operating revenues EBITDA* EBIT** Profit Before Tax * EBITDA, when used by the Company, means EBIT excluding other charges, depreciation, amortisation and write-down ** EBIT; excluding other charges (restructuring) of USD 6.2 million in Q2 2015 6
Backlog (USD Million) Quarterly development USD 135 million as of 1 July 2015* 260 300 340 285 Vessel coverage for the next quarters - ~ 90% covered for Q3 15 - ~ 45% covered for Q4 15 132 106 150 143 108 140 200 225 135 ~ 50% of backlog relates to Powerful Solutions (+12 streamers) High expectations related to seasonal awards in APAC and West Africa Industry vessel coverage is higher Year-on-Year * ONGC contract value reduced by USD 15 million due to shallow water / obstructions 7
Table of contents I. Highlights Q2 2015 results II. III. IV. Financials Operational status and market outlook Appendix 8
Profit & Loss Statement (USD Million) Q2 2015 Q2 2014 YTD 2015 YTD 2014 Unaudited Unaudited Unaudited Unaudited Net Operating Revenues 80.1 101.0 200.2 181.1 Operating Expenses Cost of sales 55.6 65.1 139.7 116.9 Amort/write-down Multi-Client library 9.9 6.9 14.4 7.7 Selling, general and administrative cost 5.4 5.2 10.9 10.3 Share-based compensation 0.6 0.4 0.7 0.9 Depreciation /amort /write-down 12.8 9.3 27.0 18.2 Other charges (restructuring) 6.2 6.2 Total Operating Expenses 90.5 86.8 199.0 154.0 Operating Profit (EBIT) -10.4 14.2 1.2 27.2 Total financial income 0.2 0.3 0.4 0.8 Total financial expenses -7.2-4.7-13.0-10.0 Net Financial Items -7.0-4.4-12.6-9.2 Profit Before Taxes -17.4 9.8-11.4 17.9 Tax expense -2.4 2.4-1.0 4.3 Net Income -15.0 7.5-10.4 13.7 Q2 Revenue decrease - weaker market prices - extensive relocation of vessels - less vessel capacity for Q2 Increased Multi-Client activity for Q2 (19% of vessel capacity) with moderate prefunding 81,5% amortisation rate for Q2 Restructuring charge USD 6.2 million Basic earnings per share -0.04 0.02-0.03 0.02 Diluted earnings per share -0.04 0.02-0.03 0.02 Revaluation of cash flow hedge 2.2-1.9 0.6-1.8 Total Comprehensive Income -12.9 5.5-9.8 11.9 Average share outstanding 366,261,473 343,313,155 353,898,561 343,047,556 Average share outstanding diluted 366,261,472 350,582,568 355,339,961 349,914,540 9
Revenue distribution Multi-Client Comments cash investment 23.8 15.9 35.9 26.1 Prefunding Contract revenues % * 85% of Total revenues 35.9% 89.1% 34.6% 58.2% Multi-Client revenues 15% of Total revenues Processing & Imaging growing as planned Q2 2015 Q2 2014 YTD 2015 YTD 2014 In millions of USD Unaudited Unaudited Unaudited Unaudited Geophysical: Marine Exclusive contracts 63.0 83.2 169.0 158.5 Multi-Client prefunding 8.6 14.2 12.4 15.2 Multi-Client late sales 3.6 0.7 9.0 1.4 Processing 4.3 2.1 8.4 4.2 Dolphin Interconnect: Contract 0.6 0.9 1.3 1.8 Net Operating Revenues 80.1 101.0 200.2 181.1 10
Asset-light balance sheet (USD Million) Q2 2015 YE 2014 Comments on assets: Asset-light balance sheet Other current assets reduced due to settled receivables Prudent growth in Multi-Client library Comments on equity and debt: Improved equity ratio at 41,5% Interest bearing debt increase relates to financing of seismic equipment on Polar Empress See appendix for covenants and detailed interest bearing debt 11
Asset-light business model limited off-balance sheet commitments Annual minimum operational leasing obligations (USD million) 374 336 272 USD 185 million reduced commitment from 2012 to 2015 T/C also include compensation to owner for loan instalments and interest 203 189 Significantly lower commitments than vessel ownership 117 60 23 3 Asset-light model, highly flexible and valuable in a weak market No vessel impairments applicable to Dolphin Graph shows total minimum operational leasing obligations according to IAS 17 Source: Dolphin Group ASA, 31 December 2014 12
Cash flow detailed (USD Million) Operating Activities Q2 2015 Q2 2014 YTD 2015 Profit before tax -17.4 9.8-11.4 Depreciation and write-down 12.8 9.3 27.0 Amortisation/write-down Multi-Client library 9.9 6.9 14.4 Share-based payment expense 0.6 0.4 0.7 Interest expense 5.5 3.2 10.2 Changes in current assets/liabilities 34.2-24.0 51.2 Net Cash Flow From Operating Activities 45.5 5.5 92.2 Investing Activities Purchase of property, plant and equipment -3.8-1.4-7.2 Prepaid seismic equipment -7.1-28.3-8.6 Net investment in Multi-Client -23.8-15.9-35.9 Invest. in intangible asset/operating equipment -0.2-0.6-0.6 Investment through acquisition -0.3-0.49-0.3 Net Cash Flow From Investing Activities -35.2-46.6-52.6 Financing Activities Net proceeds from issue of new equity 17.8 0.7 17.8 Purchase of treasury shares 0.0 0.0-0.1 Disposal of treasury shares 0.0-0.1 Proceeds from borrowing 0.0 7.3 2.8 Interest paid -4.0-3.6-8.1 Repayment of interest bearing debt -11.7-6.0-23.3 Net Cash Flow From Financing Activities 2.1-1.6-10.8 Comments: Solid cash flow from operations Strong collection of receivables WesternGeco equipment lease with no effect in cash flow report Increased Multi-Client investment Issue of 70 million shares Payment of USD 2.3 million consent fee to bond holders Cash position increased from USD 53 million to USD 65.4 million Net Change In Cash and Cash Equivalents 12.4-42.6 28.7 Cash and cash equivalents opening balance 53.0 74.3 36.7 Cash and Cash Equivalents Closing Balance 65.4 31.7 65.4 13
Dolphin takes a prudent approach to Multi-Client (USD Million) Net cash investment vs. Multi-Client net sales Net Book Value Comments: Target Multi-Client net sales > net cash investment Q2 net cash investment of USD 23.8 million 36% pre-funding (USD 8.6 million), total sales of USD 12.1 million Pre-funding level negatively affected by the Australia Monument project Comments: Net Book Value at USD 139 million 81,5% amortisation rate for Q2 Adjusted Multi-Client investment guidance of USD 80 million for 2015 14
Multi-Client investments and NBV per vintage USD million NBV USD 139 million, of which WIP is USD 65 million (47.5%) Actual NBVs of all vintages are below possible max NBV Detailed review of all library vintages for Q2 USD 6.5 million at risk for 2H15 for specific projects N n NBV Max NBV 15
Initiatives to improve liquidity and reduce cost Aspects Pro-active strengthening balance sheet Already executed Evaluating Initiatives Finalised extension of bond maturities Revised amortisation profile of main bank facility Increased share capital by 20% at market price Redelivered Artemis Atlantic Artemis Arctic de-rigged for 2D Re-negotiated improved terms for support vessels Headcount reductions aligned with fleet adjustments No bonus cash payments for 2014 Salary freeze for 2015 Salary cuts for executive management (-10%) Terms for seismic vessels Further headcount reductions All suppliers and overhead cost Further salary cuts Lay-up of vessels Cost savings programme with target of USD 20-25 million for 2015 16
Table of contents I. Highlights Q2 2015 results II. III. IV. Financials Operational status and market outlook Appendix 17
Business lines Marine Contract Multi-Client Processing & Imaging Processing Software High-end modern fleet Growing Multi-Client data library Full onshore & offshore processing & imaging Land & marine seismic processing software Operating fleet Library of modern 2D & 3D data In-house Processing and R&D Software for the 21 st Century 6x High-End 3D vessels 1x 2D vessel North Sea UK and Norway Norwegian Barents Sea West Africa Brazil Australia Mexico 34,500 km2 of 3D and 48,300 km of 2D successfully acquired Processing centres in UK, Houston and Singapore On-board Processing on all vessels Fast track data delivery AVO Friendly Broadband solution (SHarp) QC, Time & Depth Processing Interactive user interface Advanced 2D and 3D visualisation Parallel processing and job management 18
Rapid and successful fleet expansion completed Polar Duke (3D, 12-14 str) Polar Duchess (3D, 12-14 str) Sanco Swift (3D, 16 str) Polar Marquis (3D, 14 str) Delivered May 2011 Delivered April 2012 Delivered July 2013 Delivered May 2014 May 11 Q1 12 Q2 13 Q2 14 Q2 15 Fully operational fleet Artemis Atlantic (2D) Artemis Arctic (3Dm 6/8str) Sanco Sword (3D, 16 str) Polar Empress (3D, 22 str) Delivered May 2011 Delivered May 2011 Delivered April 2014 Re-delivered 5 May De-rigged for 2D (June) Delivered June 2015 19
Dolphin is asset-light with flexible Time-Charter commitments Vessel Firm initial period/options 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Artemis Atlantic Polar Duke Artemis Arctic TC firm 4 years from May '11 Option of 2+2 years TC firm 5 years from May '11 Option of 6 years TC firm 5 years from May '11 Option of 2+2 years May Redelivery May May Polar Duchess Polar Marquis TC firm 5 years from March '12 Option of 4+2 years TC firm 3.5 years from May '14 Option of 2+2 years March Nov Sanco Swift TC firm 5 years from June '13 Option of 2+2+2 years June Sanco Sword TC firm 5 years from March '14 Option of 2+2+2 years March Polar Empress TC firm 5 years from April '15 Option of 3+3 years April Comments: Artemis Atlantic redelivered 5 May 2015 Artemis Arctic planned redelivered early 2016 Variable options to extend at a pre-agreed rates Control high-end vessels in 11 years, only small index adjustment of the terms in option period Dolphin business model is flexible and highly favourable compared to steel on balance sheet 20
Strong supply response to lower demand Market shares (# of vessels 3D fleet) Market shares (# of practical streamers 3D fleet) Source: SEB Equity Research, SEB CF Includes SCF vessel currently on bareboat Cold stacked vessels assumed taken out 21
Dolphin fleet - among the most powerful vessels in the industry 25% 12% High End Market moving towards larger surveys and higher streamer capacity 22
Market moving towards larger surveys Productivity increases Time reduction/cost saving when acquiring 10,000 km2 Commodity offering 12 streamers with 100m separation and 8 km long 163 days Powerful solution offering I 12 streamers with 150m separation and 8 km long 115 days Powerful solution offering II 10 streamers with 200m separation and 8 km long 104 days 4 of 6 Dolphin 3D vessels can tow 16 streamers (@100 m) time is money 23
Multi-Client surveys world wide 2011-2015 Møre/Tampen 4,200 km 2 Utstord 5,100 km 2 Faroes-Shetland Sharp Well Tie 2,100 km Hoop Barents Sea 1,750 km Ringvassøy, 4,100 km 2 Maud, Gotha, Hammerfest SHarp, 6,250 km 2 Gulspurv 2,000 km 2 Norway SHarp Well Tie 1,100 km UKCS Q29/37, 3,300 km2 Norway / UK 1,150 km Deepwater Levantine Basin, 2,300 km 2 East Campeche 19,000 km Sud Profond 3,600 km 2 North West Africa Atlantic 28,500 km Ohlo de Boi, 5,700 km 2 North Monument, 2,500 km 2 Santos Campos 13,650 km Carnarvon, 15,000 km 2 3D Multi-Client In progress 3D 2D Multi-Client In progress 2D 24
Well positioned for upcoming licencing rounds in Mexico East Campeche - 2D long offset SHarp survey - Supported by industry pre-funding - CNH permit approved - 19,597 2D line kilometers - Survey start Q3 2015 - Delivery of time processed products: Q4 2015 Significant increase in 2D and 3D activity already from Q2 2015 25
Dolphin is building a strong presence offshore Norway Existing library - Gulspurv (2013) - Maud (2013-2014) - Gotha (2014) - Utstord (2013) - 5 prospective 23rd round blocks - 1 prospective APA block New 2015 programmes - Ringvassøy (50/50 Dolphin/TGS), 4.100 Sq. km, cover APA 2015 blocks - Møre-Tampen (Q315) 26
Delivering on Australia strategy North Carnarvon Basin - 15,200km2 SHarp Broadband 3D - Statoil and Shell prefunding - Covering Licenced and Open acreage - Wide Tow up to 12 x 150 x 8100m - Two vessel operations Monuments - Cooperation with TGS - Survey area 2,332km2 - All open acreage 27
Processing & Imaging a critical success factor Makes Dolphin a fully integrated marine geophysical contractor Our people, our software, our hardware Worldwide software sales Processing centres in Houston, London and Singapore Brings us closer to our clients It s all about imaging and reduced exploration and production risk Marine Contract Processing & Imaging SHarp broadband depth image Multi- Client A continuing successful growth story More than doubled external revenues to USD 4.3 million (USD 2.1 million in Q2 2014) Growing within re-processing and depth imaging 28
Market outlook Continued weak market fundamentals Difficult to predict longer term trends Fierce competition on contracts for winter season Improved tender activity from low levels continues in Q3 Industry vessel booking higher than for similar period 2014 Myanmar, Mexico and Pacific region represent bright spots Starting to see tenders for 2016 North Europe summer season It s all about utilisation 29
2015 Guidance update In the current market environment it s difficult to provide a longer term guiding for our future financial performance. Third quarter expected total revenues in the range of USD 90-100 million based on operational projections and backlog Guidance for full year Multi-Client cash investments is increased to USD 80 million Polar Duke will have renewal main class in September (2-3 weeks owner s cost) Dolphin will continue the cost and capex reductions, as well as improving our financial position to meet the challenging market conditions 30
Question & Answer Session 31
Table of contents I. Highlights Q2 2015 results II. III. IV. Financials Operational status and market outlook Appendix 32
Financial Covenants* / fully compliant as per 30/06/2015 Definitions** Loan Facility Bonds Liquidity Unrestricted cash USD > 15m USD > 10m and equivalents Equity ratio Total Equity/Total Assets > 35% > 35% Gearing ratio NIBD / EBITDA < 2.0 NA Rolling 12 months Interest cover EBITDA/Net Interest Cost Rolling 12 months > 3.25 > 2.5 Working Capital Positive Working Capital > 0 NA NIBD = total interest bearing debt (including financial leasing) less free and available cash. Any new debt outside of the Loan Facility is included in NIBD by adding ¼ in each of the 4 subsequent quarters. * Adjusted and valid from 31.12.14 as per amended Term Loan Facility **All covenants measured quarterly on a consolidated basis 33
IBD with earliest major maturity in February 2018 Debt Security Amount Balance 30/06/15 Comments: DOLP01 and DOLP02 have USD swaps Term loans primarily to finance seismic equipment Quarterly instalments Financial leasing primarily for processing and business IT equipment Tenure Maturity Interest Bond Dolp01 Unsecured NOK 400,000,000 USD 69,076,194-5.25 years Feb-2018 3M Nibor + 775 Bond Dolp02 Unsecured NOK 500,000,000 USD 86,836,255-5.25 years Mar-2018 3M Nibor + 750 Term Loan Secured USD 93,000,000 USD 45,386,397 USD 3,000,000 Tranches Q115 - Q2 2018 Libor + 400 Term Loan Secured USD 25,000,000 USD 17,478,250 USD 2,500,000 2.5 years Q115 - Q4 2016 Libor + 400 Fin. lease various Secured USD 19,000,000 USD 9,541,727 USD 1,400,000 Various Q115 - Q2 2019 Various, less than 5% Fin. lease WG Secured USD 38,000,000 USD 35,200,000 USD 3,000,000 3 years Sep-2018 Financial lease Grand total USD 263,518,824 USD 9,900,000 See Note 7, NIBD, with short-term debt USD 39.1 million and long-term debt USD 224.4 million, totalling USD 263.5 million 34