CEO: Ivar Gimse CFO: Mikkel Ektvedt 29 August 2014 Disclaimer This - - PowerPoint PPT Presentation

Magseis AS: Second Quarter 2014

CEO: Ivar Gimse CFO: Mikkel Ektvedt

29 August 2014

Strictly private & confidential

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Source: Magseis

Disclaimer

This Presentation of Magseis AS (the “Company”) has been prepared solely for information purposes. This Presentation may not be distributed, reproduced or used without the consent of the Company. The information contained herein does not purport to contain all information concerning the Company. No party has made any kind of independent verification of any of the information set forth herein, including any statements with respect to projections or prospects of the business or the assumptions on which such statements are based. The Company nor any of its subsidiaries make any representations or warranty, express or implied, as to the accuracy, reliability or completeness of this Presentation or of the information contained herein and shall have no liability for the information contained in, or any omissions from, this Presentation. Included in this Presentation are various “forward-looking statements”, including statements regarding the intent, opinion, belief or current expectations of the Company or its management. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance and outcomes to be materially different from any future results, performance or outcomes expressed or implied by such forward-looking statements, including, among others, risks or uncertainties associated with the Company’s business, segments, development, growth management, financing, market acceptance and relations with customers, and, more generally, general economic and business conditions, changes in domestic and foreign laws and regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other factors, including lack of operating history. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this document. No information contained herein constitutes, or shall be relied upon as constituting, any advice relating to the future performance of the

• Company. The Company undertakes no obligation to publicly update or revise any forward-looking statements included in this Presentation.

Content

• 1. Highlights
• 2. Operational and Market update
• 3. Financials
• 4. Summary and Q&A

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Note: 1) Excludes Financial Lease for winch package Source: Magseis

This is Magseis

• Industry-leading seabed seismic

company

• One vessel in operations and

working for Statoil and Talisman

• 75 employees
• ~NOK 500m in equity raised
• Listed on Oslo Axess

Ticker: MSEIS Shares outstanding: 27,162,561 Market cap (NOKm) 800 Book Equity – Q2 14 (NOKm) 417.9 Net Debt – Q2 14 (NOKm) (194.1)1

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Source: Magseis

Highlights

• Completed Albatross and Snøhvit survey
• Production on Oseberg and Gullfaks surveys well

underway

• Successfully completed new equity issues of

NOK 144 million to finance further expansion

• Listed Magseis ASA on Oslo Axess on 6 June

Financial results Q2 2014 Operational

• Revenues of NOK 98 million
• EBITDA of NOK 16.9 million (EBITDA adjusted for

non-recurring items: NOK 21.2 million)

• EBIT of NOK 4.2 million (EBIT adjusted for non

recurring items: NOK 9.5 million)

• Net Income of NOK 1.3 million

Finalist ONS 2014 Innovation Award

Content

• 1. Highlights
• 2. Operational and Market update
• 3. Financials
• 4. Summary and Q&A

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Good operational performance on Oseberg and Gullfaks

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• Mobilized for Oseberg project on 16 May
• Work now completed on Oseberg
• In the process of finalising Gullfaks
• Expected completion by mid-September
• Efficiency:

– Shooting speeds and line changes have improved – Average deployment / recovery speed of cable has increased but remains short of

• target. Significant uplift expected with

improved backdeck handling machine in Oct – Technical downtime in-line with expectations

Source: PTIL, Magseis

Athene upgrade ongoing

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• Target upgrade to 150km of cable by November 2014

(with 50m sensor spacing)

• 1,500 additional sensors in production (G2) ready by

end-Q4 14 – Significantly longer battery life – Significantly faster download speeds – Significantly reduced cost

• Improved backdeck handling equipment to be installed

during October – Target a doubling of cable deployment / recovery speeds

• Associated additional handling equipment to be

installed by end of November

Source: Magseis

Artemis Athene

Crew 2 status

– Planning well underway

• Target vessel identified

– Capable of carrying > 300km of cable – Efficient layout - Limited conversion work needed

• Traction and pulling line system developed to facilitate operations down to 3,000m water depth

– Will be the only cable-based OBS crew able to work in ultra-deep waters – Significant competitive advantage with respect to ROV-based node crews

• Target >6,000 sensor capacity

– G2 sensors with significantly improved battery life, downloading speeds and cost

• Engineering and project planning ongoing

– Target start of operations during Q2/Q3 2015 – Closely monitoring developments in backlog and market sentiment prior to making final investment decision

• This crew will enable a step-change in OBS acquisition costs and open up entirely new markets

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Current backlog status

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Source: Magseis

• Firm backlog
• Gullfaks and Oseberg surveys ongoing under Statoil Frame Work Agreement
• Progress has been very good so far and with less than expected timeshare/weather –

project may finish by mid September

• New Contract: Expected duriation of 1-2 months, starting mid September-14
• Working on several leads to secure further work for Q4 14 and 2015

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Broader market outlook

• 2014 record OBS year
• 2015 likely to be lower activity

due to Statoil cost focus

• Significant MC survey potential
• A lot of OBS work in

progress/coming out

• Significant percentage is Transition

Zone

• Big OBS markets
• Very significant ultra-deep

potential

• Many large programs

coming out in 2015 and beyond

• Big OBS market
• Very significant ultra-

deep potential

• MC surveys already

rolling

Source: Magseis

• 2015 looks to be more challenging than 2014 in the North Sea
• However, mid-/long-term prospects continue to develop favorably
• Focus next 12 months:

– Continued development of North Sea position (MC strategy will be important) – Establish marketing presence in GoM, West Africa and Middle East

Content

• 1. Highlights
• 2. Operational and Market update
• 3. Financials
• 4. Summary and Q&A

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Q2 2014 results

• Comprehensive income
• Revenue

– Significant improvement over Q1 14 but still below our expectations due to complex nature of Gullfaks field

• Cost of sales

– Includes NOK 2.5m accrual for vessel maintenance (of which only 0.9m related to Q2 14)

• R&D

– Capitalised NOK 2.7m in Q2 2014 and a total

• f NOK 4m in YTD 2014.

– Expensed R&D impacted by deep water project fjord test

• SG&A

– Includes share options cost of NOK 1.6m in Q2 and NOK 3.3m in YTD – Equipment write off, all cost taken in June 2014

• Other finance cost

– NOK 3.3m in fair value adj related to conversion of loan 13

All figures in NOK thousands Q2 14 Q2 13 YTD 14 YTD 13 Revenue 98,240 182,653 Cost of sales 62,189 117,989 Research and development 2,151 834 3,490 1,271 SG&A and other expenses 16,984 10,883 31,828 13,771 EBITDA 16,916

• 11,717

29,346

• 15,042

Depreciation 11,299 269 22,500 516 Impairment 1,422 1,422 EBIT 4,195

• 11,986

5,424

• 15,558

Net interest and foreign currency gain/loss

• 414
• 120
• 1,151
• 1,702

Other finance cost 3,286 3,286 Net finance costs 2,872

• 120

2,135

• 1,702

EBT 1,322

• 11,866

3,289

• 13,856

Tax Net income 1,322

• 11,866

3,289

• 13,856

Earnings per share 0.05

• 0.56

0.14

• 0.66

Diluted earnings per share 0.05

• 0.56

0.14

• 0.66

Q2 2014 results

• Normalised earnings

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All figures in NOK thousands Actual earnings Adjust-

• ments

Normalised earnnings Actual earnings Adjust-

• ments

Normalised earnnings EBITDA 16,916 4,287 21,204 29,346 3,387 32,733 Adjustment for maintenance days 1,800 900 Adjustment for IPO and conv loan costs 2,487 2,487 EBIT 4,195 5,354 9,549 5,424 3,743 9,167 Adjustment EBITDA 4,287 3,387 Adjustment for impairment 1,067 356 EBT (profit before tax) 1,322 8,641 9,963 3,289 7,029 10,318 Adjustment EBIT 5,354 3,743 Adjustment fair value adj conversion loss 3,286 3,286

Q2 2014 YTD 2014

• Maintenance days

– Cost relating to Q4 13 and Q1 14 were recorded in Q2 14

• Costs relating to IPO and

convertible loan

– Includes OSE fee, some bank fees, legal fees etc.

• Equipment write off

– All cost related to equipment write off recorded in Q2

• Convertible loan

– The conversion trigged a loss due to fair value adjustment. Equals difference between share value at conversion date (NOK 27.00) and conversion price (NOK 23.75) times no. of shares issued

Q2 2014 results

• Financial position

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• Other current assets

– includes inter alia NOK 56.5m in receivable from Statoil for acquisition in June and May, and NOK 5.6m in VAT receivable

• TC amortisation

– TC discount rate from Q4 2013 is amortised over the TC period to reflect a steady TC cost throughout the lease term

• Other current liabilities

– Mainly consists of accruals, provisions and short term portion

• f TC amortisation

All figures in NOK thousands YTD 14 YTD 13 2013 Equipment and intangibles 237,731 177,967 240,594 Cash and cash equivalents 194,156 144,076 41,780 Other current assets 76,178 8,759 74,513 TOTAL ASSETS 508,065 330,802 356,887 EQUITY 417,857 303,336 268,783 Obligation under finance lease 19,278 21,298 TC amortisation 9,952 11,357 TOTAL NON-CURRENT ASSETS 29,230 32,655 Trade payables 28,288 17,776 26,372 Current portion of obligation under finance lease 4,443 4,170 Other current liabilities 28,247 9,690 24,907 TOTAL CURRENT LIABILITIES 60,978 27,466 55,449 TOTAL LIABILITIES 90,208 27,466 88,104 TOTAL EQUITY AND LIABILITIES 508,065 330,802 356,887

Q2 2014 results

• Equity and cash flow

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Equity (NOK 417.9m)

– Share issuance and conversion of loan amounted to NOK 144.5m – Expenses of NOK 5.6m related to the transactions reduce the net increase in equity

_________________________________________________________________________________ Cash flow

All figures in NOK thousands YTD 14 YTD 13 2013 Cash flow from operationg activities 36,603

• 14,820
• 57,570

Cash flow from investing activities

• 20,588
• 98,729 -182,717

Cash flow from financing activities 136,361

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24,422 Net cash flow 152,376 -113,569 -215,865 Cash at end of period 194,156 144,076 41,780

• Cash flow from operations

– Variance from EBITDA is due to changes in working capital adjustments

• Cash flow from investments

– Mainly consists of costs related to 4,500 node upgrade on Athene

• Cash flow from finance

– Consists of share issuance and convertible loan

Content

• 1. Highlights
• 2. Operational and Market update
• 3. Financials
• 4. Summary and Q&A

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Next step in strategic growth plan

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• Upgrade of Artemis Athene to 150km of cable

(4,500 sensor unit) capacity underway – All orders have been placed – Target completion by end-2014

• Preparations for Crew # 2 well underway

– 6,000 sensor units / 300km, target start Q2/Q3 2015 – Estimated capex in line with previous communication at USD 60m – Vessel identified and engineering ongoing

• Funding strategy

– Capital requirement assumed at USD 50m – Capital structure partly depending on market developments Planned timeline of crew expansion

Crew #1 (75 km) Crew #1 (100 – 150km) Crew #2 (150 - 300km) Crew #3 (>300km)

• 50

100 150 200 250 300 350 400 450 2013 2014e 2015e 2016e Total km of cable Source: Magseis

• Ocean Bottom Seismic delivers best data
• Faster growing , less cyclical and fewer suppliers
• But not immune to oil & gas industry cost reductions

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Facilitating OBS «industrialization» Successful start-up achieved Attractive market fundamentals Profitable growth

• pportunities
• Proprietary technology
• Enables much larger spreads from lower vessel cost base
• Next vessel will enable a step-change in OBS costs for clients
• Technology now proven after a very successful first year of operations
• Track-record helping to expand client base
• Strong support for Magseis’ technology from leading oil companies
• Expansion of crew # 1 during 2014
• Crew # 2 (2015) will open up entirely new markets

Summary

Source: Magseis

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Questions?