Q2 2013 Presentation DOF Subsea Group
Agenda In brief Recent events Group overview Contract status Financials Outlook Appendix DOF Subsea
DOF Subsea Group In brief Fleet One of the largest subsea vessel owners in the world Owns and operates a fleet of 24 vessels, plus 5 newbuilds on order In addition 2 vessels on long-term charter The market value of owned vessels in operation is NOK17 167 million, with a value adjusted age of 4.5 years Operates 52 ROVs Global organization Head office in Bergen Regional offices in Australia, Singapore, Norway, UK, Angola, US, Canada and Brazil Total of 2 642 employees Subsea employees: 1 642 Of which offshore engineers and project staff: 1 260 Marine crew: 1 000 Norway Brazil Canada US UK Asia Pacific Angola 365 325 48 88 468 330 18 DOF Subsea 3
NOK million DOF Subsea Group In brief Quarterly figures 1 800 1 600 40% 35% 1 400 1 200 30% 25% 21.2 % CAGR 1 000 800 20% 600 15% Key figures Back-log incl. options Market value of fleet NOK 29 627 million NOK 17 167 million 400 200 - Q2 2010 Q2 2011 Q2 2012 Q2 2013 10% 5% 0% 15.5 % CAGR Number of shares 119 733 714 Operating revenue EBITDA EBITDA margin Total Per share Book equity NOK 4 996 million NOK 41.73 Value adj. equity NOK 8 057 million NOK 67.30 Book equity ratio 25.4 % Value adj. equity ratio 35.5 % DOF Subsea 4
Recent events Operational Utilization of the subsea project vessels has been 76 % in April, 86 % in May and 92 % in June Utilization of the time charter vessels has been 100 % in April, 96 % in May and 100 % in June Skandi Bergen started on the Banff project end June Skandi Constructor started a long-term charter with Helix During the quarter two vessels have been in transit to and from the Gulf of Mexico One vessel has been dry-docked while two vessels have had yard stay for repair/upgrade Fleet Ordered 4 new PLSVs from VARD Norway and Brazil together with Technip (see separate slides) Took delivery of Skandi Bergen in June Geobay delivered to new owners DOF Subsea 5
Recent events Contracts Several subsea contracts in the Atlantic region, including increased work scope on the Banff project, increasing the utilization of the vessels Geosund, Geoholm, Skandi Skolten and Skandi Bergen Several subsea contracts in the Asia Pacific region, increasing the utilization of the vessels Skandi Singapore, Skandi Hawk and Skandi Hercules Chevron extended the charter on Skandi Salvador, firm until year end 2014 Petrobras extended the charter for Skandi Vitória with two years, firm until September 2015. The extension was done at market terms Subsea 7 extended the charters on Skandi Neptune and Skandi Seven with one year Total value of contracts listed is above USD 300 million. Finance Petrobras awarded DOF Subsea/Technip JV contract for 4xPLSVs (see separate slides) Financing secured on Skandi Bergen at market terms with standard DOF Subsea covenants DOF Subsea 6
State-of-the-art PLSVs DOF Subsea 7
PLSV contracts Mons S. Aase, DOF Subsea s Chief Executive Officer, declared: The contracts confirm that our co-operation with Technip on the Skandi Vitória and Skandi Niterói have been successful, and reinforces our position as a leading provider of offshore vessels to the Brazilian O&G industry. It comes as a result of our long-term focus on the Brazilian market and is an acknowledgment of the expertise of our employees. Frédéric Delormel, Technip s Executive Vice President and Chief Operating Officer Subsea, added: This strategic contract reinforces our subsea leadership in Brazil and our long-term relationship with Petrobras. We are confident that these new state-of-the-art PLSVs, including two with the most important flexible pipelay tension capacity in the world - 650 tons - will be key assets for our client to successfully achieve its projects offshore Brazil. Roy Reite, VARD s Chief Executive Officer and Executive Director commented: I look forward to working with Technip and DOF on these milestone projects. VARD yards both in Europe and Brazil being chosen to build these vessels illustrates the value of having a global presence when working with international clients, and bringing leading edge technology to new markets. DOF Subsea 8
PLSV key information PLSV 1+2 To be built in Brazil Delivered Q4 2016 and Q2 2017 Design 316 Type Pipe Lay support LOA 140 m Breadth 28 m VLS 340 t 2 ROVs DWT 10 800 t PLSV 3+4 To be built in Norway, Søviknes Delivered Q2 2016 and Q4 2016 Design 305 Type Pipe Lay support LOA 150 m Breadth 30 m VLS 650 t 2 ROVs DWT 13 200 t DOF Subsea 9
PLSV financial information Contract 8+8 years Norskan will provide Marine Services Approx. USD 110 million in annual EBITDA contribution for DOF Subsea when all vessels are in operations DOF Subsea part of CAPEX approx. USD 625 million DOF Subsea 10
DOF Subsea Group overview
Ownership structure DOF ASA FIRST RESERVE CORPORATION 51% 49% DOF SUBSEA HOLDING AS 100% Modern high-end fleet and equipment DOF SUBSEA AS A workforce of 2 642 highly skilled employees 24 owned subsea vessels in operation 5 vessels on order 2 vessels on charter 50 ROVs, 1 ROTV and 1 AUV in operation Leading subsea contractor DOF Subsea 12
DOF Subsea Group structure DOF Subsea AS DOF Subsea Asia Pacific DOF Subsea Atlantic DOF Subsea North America DOF Subsea Brazil Survey & Positioning Engineering companies Ship/asset owning companies Management companies Singapore Norway US UK CSL DOF Subsea Rederi DOF Management (34 %) Australia UK Canada US Semar (50%) DOF Subsea Rederi II Marin IT (35 %) Indonesia Angola DOF Installer (83.66 %) Malaysia Arctic Russia DOFTECH (50 %) Mashhor DOF Subsea (50%) Brunei DOF Subsea divided into regions, engineering companies and asset-owning companies Regions, engineering companies and asset-owning companies are profit centers Head office in Bergen TECHDOF (50 %) DOF Subsea ROV DOF Subsea 13
DOF Subsea - A global subsea player Bergen (365) Houston (88) St. Johns (48) Macaé Rio de Janeiro (325) Aberdeen (468) Cairo Angola (18) Moscow Malaysia Singapore (61) Jakarta Perth (264) Manila (5) Brunei Buenos Aires GEOGRAPHICAL FOCUS AREAS DOF Subsea 14
Number of operated vessels NOK million DOF Subsea Company history Incorporated on 24 th of May 2005 after DOF ASA acquired GEO Group AS and its subsidiary Geoconsult AS DOF Subsea was established by DOF ASA in order to create a more effective organization with the aim of establishing a leading subsea services company DOF ASA transferred its multipurpose/rov vessels to DOF Subsea, constituting four vessels and one newbuild DOF Subsea is headquartered in Bergen, Norway 28 24 20 16 12 8 4 0 DOF Subsea fleet evolution MV of fleet 2005 2006 2007 2008 2009 2010 2011 2012 2013 18 000 16 000 14 000 12 000 10 000 8 000 6 000 4 000 2 000 - Owned vessels Chartered vessels MV of owned fleet (r.a.) 2005 2006 2007 2008 2009 2010 2011 2012 2013 Fleet: 11 vessels Fleet: 11 vessels Fleet: 13 vessels Fleet: 16 vessels Fleet: 18 vessels Fleet: 21 vessels Fleet: 24 vessels Fleet: 25 vessels Fleet: 26 vessels May: DOF acquired Geoconsult and established GEO (now DOF Subsea) May: Private placement of shares of NOK 715 mill Nov: Listed on Oslo Stock Exchange Nov: Acquisition of Century Subsea Feb: Acquisition of Covus Corp May: Set up of Geo do Brazil Aug: Established 50/50 JV in Brunei Jan: Acquired 50% of SEMAR Jan: Acquired 100% of DOFCON Mar: Establishment of Aker Oilfield Services Mar: Name change to DOF Subsea Apr: Acquisition of CSL Aug: Merger of Mgmt company with DOF Management AS Feb: Delivery of Geograph Jul: Delivery of Skandi Acergy Nov: Delivery of Skandi Seven and sale of Geofjord Dec: DOF Subsea acquired by DOF ASA and First Reserve JV with Technip Feb: Delivery of Skandi Salvador Mar: Delivery of Skandi Arctic Dec: Delivery of Skandi Santos Jan: Delivery of Skandi Aker Feb: Sale of Geo Challenger Jun: Acquisition of SWG Jul: Delivery of Skandi Vitoria and Skandi Skolten Dec: Delivery of Skandi Hercules JV with Technip Feb: Delivery of Skandi Niteroi May: Sale of Geosounder Jun: Acquisition Skandi Constructor Jul: Delivery of Skandi Skansen Sep: Delivery of Skandi Singapore Mar: Sale of OSCV newbuild. Mar: Signed OSCV newbuild contract Feb: Signed OSCV newbuild contract Feb: Chartered Harvey Deep-Sea Mar: Sale of Geobay Jun: Delivery of Skandi Bergen Aug: Signed newbuild contracts for 4 x PLSVs DOF Subsea 15
Complexity and size of operations Increased system requirement Level of barriers to entry Increased engineering requirement Level of industry barriers to entry Complex subsea operations Marine transport/ services DOF Subsea s main presence is in segments with medium to high barriers to entry and high complexity of operations Higher margins and earnings beyond the time charter rates DOF Subsea is gradually building engineering capabilities DOF Subsea 16
New high-end fleet Building year DOF Subsea fleet 2000-2006 21 % Before 2000 3 % Newbuild 17 % 8,00 7,00 6,00 5,00 4,00 3,00 2007-2013 59 % 2,00 1,00 - Average fleet age Value adjusted Majority of the fleet delivered after 2007 Industry leading value adjusted average fleet age of 4.5 years High-end vessels capable of a wide scope of operations, world wide DOF Subsea 17
Business management Global business management system accredited by DNV to: Business Management System ISO 9001: 2008 Health and Safety System OHSAS 18001:2007 Environmental Management System ISO 14001:2004 2009 DOF Subsea 18
HSEQ key statistcs LTI frequencies for 2011 was 0.9 and for 2012 it has been 0.3 12,00 10,00 8,00 6,00 4,00 2,00 DOF Subsea LTI frequency IMCA - LTI frequency DOF Subsea - recordable incident frequency IMCA - recordable incident frequency 0,00 2005 2006 2007 2008 2009 2010 2011 2012 2013 High number of safety observations reported shows commitment to HSEQ 1400 1200 1000 800 600 400 200 0 Safety Observations 2012 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun DOF Subsea 19
DOF Subsea Projects
DOF Subsea Life-of-field services DOF Subsea offers integrated subsea solutions across life-of-field Field development Production phase Field abandonment / decommissioning DOF Subsea 21
DOF Subsea Projects DOF Subsea has built a global organization over the last 8 years Presence in all major Oil Hubs Standardization of routines and systems Training of personnel DOF Subsea are growing the project business gradually within Survey IRM SURF Project business going forward Establish MSA with all major players (Asia, Atlantic and GOM) Hire more engineers (Asia, Atlantic, GOM and Brazil) Increase the activity within Survey and Positioning (Global player) Gradually increase the complexity of work done (Step by Step) Build a project back-log DOF Subsea 22
DOF Subsea Contract status
Contract coverage vessels FIRM CONTRACTS OPTIONAL PERIOD DOF Subsea 24
Contract coverage vessels 35 000 Note: includes options on long-term contracts 30 000 29 627 27 084 25 000 20 000 24 285 22 299 20 405 18 229 16 127 15 000 14 222 10 000 5 000-2013 2014 2015 2016 2017 2018 2019 2020 DOF Subsea Group has solid cash flow visibility over the next 3-5 years By August 2013 the total back-log (incl. options) was approx. NOK 29 627 million Firm contracts counts for NOK 14 586 million Options counts for NOK 15 041 million * As per August 2013 DOF Subsea 25
DOF Subsea Financials
Condensed profit & loss Operating income increased from NOK 1 384 million in Q2 2012 to NOK 1 679 million in Q2 2013. EBITDA (excl. gain on sale of assets) increased from NOK 470 million in Q2 2012 to NOK 471 million in Q2 2013. EBIT (excl. gain on sale of assets) decreased from NOK 292 million in Q2 2012 to NOK 276 million in Q2 2013. DOF Subsea 27
Condensed balance sheet From year end 2012 total fixed assets has increased from NOK 16 012 million to NOK 16 344 million From year end 2012 cash and cash equivalents has increased from NOK 1 478 million to NOK 1 674 million Total liabilities as per 30 th of June 2013 was NOK 14 667 million Net interest bearing debt of NOK 11 340 million as per 30 th June 2013 Book equity of NOK 4 996 million giving a ratio of 25.4 % to total assets as per 30 th June 2013 Value adjusted equity of NOK 8 057 million giving a ratio of 35.5 % as per 30 th June 2013 DOF Subsea 28
NOK million Quarterly performance (excl. asset sales) 1 800 1 600 Operating income EBITDA EBITDA margin 40% 35% 1 400 1 200 1 000 800 600 400 200 30% 25% 20% 15% 10% 5% 22.9 % CAGR 21.7 % CAGR - Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 NOK million Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Operating income 735 743 754 730 944 851 1 080 900 1 028 1 152 1 246 1 223 1 384 1 354 1 288 1 225 1 679 EBITDA 215 234 171 186 306 282 320 241 325 370 406 411 470 489 417 329 471 EBITDA margin 29,2% 31,4% 22,6% 25,4% 32,4% 33,2% 29,7% 26,8% 31,6% 32,1% 32,6% 33,6% 34,0% 36,1% 32,4% 26,9% 28,1% Current assets 2 492 2 380 2 670 2 467 2 919 3 192 3 366 2 829 3 003 2 938 2 923 2 782 2 962 2 704 2 612 3 077 3 319 Fixed assets 10 106 10 149 10 933 11 738 12 499 13 325 14 179 14 520 15 089 16 178 16 305 16 455 16 230 16 056 16 012 16 043 16 344 Total assets 12 598 12 530 13 603 14 205 15 418 16 517 17 545 17 349 18 092 19 117 19 228 19 238 19 192 18 760 18 624 19 120 19 663 Current liabilities 1 618 1 286 1 489 2 035 2 496 2 942 2 167 2 311 2 458 2 640 2 637 2 543 2 495 2 260 1 989 2 000 2 805 Non-current liabilities 7 251 7 383 8 279 8 350 8 867 9 109 10 154 9 946 10 542 11 694 11 759 11 723 11 735 11 439 11 534 12 051 11 524 Equity 3 728 3 860 3 833 3 819 4 054 4 466 5 224 5 091 5 092 4 782 4 832 4 970 4 963 5 061 5 102 5 069 4 996 DOF Subsea 29 0%
NOK million Debt maturity profile Debt maturity profile DOF Subsea AS level, 2013E 2017E 4 000 3 500 3 000 2 500 2 000 1 500 1 000 DOFSUB04 - NOK 750 million - Maturity April 2014 - Net NOK 517.5 million DOFSUB05 - NOK 750 million - Maturity April 2016 - Net NOK 668 million DOFSUB06 - NOK 700 million - Maturity Oct 2015 - Net NOK 482 million 500-2013E 2014E 2015E 2016E 2017E After Bond Loan Bank Debt Balloons DOFSUB07 - NOK 1 300 million - Maturity May 2018 The figures reflects amortization and balloon payments on debt drawn as per 30th June 2013. Debt maturity profile excludes approx. NOK 0.6 billion in payments to Eksportfinans which is serviced by corresponding amount of restricted cash. * As per 30th June 2013 DOF Subsea 30
NOK million Stable asset values over the last years Market value development 900 800 700 600 500 400 300 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Skandi Seven Ocean Protector Geoholm Skandi Patagonia Fair market values of DOF Subsea fleet have been stable in 2011 and increased by 3.6 % in 2012 * As per 30th June 2013 DOF Subsea 31
Asset coverage Combined market value of DOF Subsea s fleet is NOK 17 167 million Vessel level gearing on the existing fleet is estimated to 52 % at year end 2013, decreasing to 45 % at year end 2014 Provides a significant equity cushion on top of the existing vessel level financing Significant gearing reduction on the existing fleet in the years to come Gearing forecast summary Total assets (NOK million) Market value 100 % 90 % 80 % 70 % 60 % 50 % 40 % 30 % 20 % 10 % 0 % 48% 55% 64% 66% 68% 52% 45% 36% 34% 32% 2013E 2014E 2015E 2016E 2017E Vessels 17 167 Other equipment (a) 1 222 Total assets 18 389 Note: vessel values as per 30th June 2013 (a) Includes ROVs, AUV, diving systems and other equipment Loan to value Market Value Cushion The figures reflects amortization and balloon payments on debt drawn as per 30th June 2013, including newbuilds to be delivered assuming standard DOF Subsea leverage. Bonds not included. DOF Subsea 32
Improved credit metrics going forward Value added services provide increased earnings potential New, high-end fleet provides safe collateral Robust liquidity buffer above 25% of annual revenues Diversified bluechip customers reduce counterparty risk Spare leveraging capacity on existing fleet Extremely strong back-log provides stable earnings Improved credit metrics going forward Strong bank and investor relationships provide access to credit Subsea market looks favourable DOF Subsea 33
DOF Subsea Outlook
Healthy fundamentals for subsea activity Demand High oil price Expected 6-8 % growth in E&P spending in 2013 and 2014 Increased deep water spending Increased infrastructure spending High tendering activity Strong growth expected in Brazil, North Sea, Gulf of Mexico and Asia Pacific Increased focus on newer, larger and more technologically advanced vessels and engineering capabilities DOF Subsea owns the world s most sophisticated fleet and has a global project organization DOF Subsea 35
Healthy fundamentals for subsea activity Supply Increasing number of high-end newbuilds Limited growth in supply of engineering capabilities Increasing demand Increasing supply Mixed market conditions Qualified personnel will be the bottleneck for asset utilization DOF Subsea 36
Thank you
Disclaimer This presentation by DOF Subsea AS ( DOF Subsea or the Company ) is designed to provide a high level overview of aspects of the operations of DOF Subsea and the DOF Subsea group. The material set out in the presentation is current as at 30 th June 2013. This presentation contains forward looking statements relating to operations of DOF Subsea and the DOF Subsea Group that are based on management s own current expectations, estimates and projections about matters relevant to DOF Subsea s future financial performance. Words such as likely, aims, looking forward, potential, anticipates, expects, predicts, plans, targets, believes and estimates and similar expressions are intended to identify forward looking statements. References in the presentation to assumptions, estimates and outcomes and forward looking statements about assumptions, estimates and outcomes, which are based on internal business data and external sources, are uncertain given the nature of the industry, business risks, and other factors. Also, they may be affected by internal and external factors that may have a material effect on future business performance and results. No assurance or guarantee is, or should be taken to be, given in relation to the future business performance or results of DOF Subsea or the DOF Subsea Group or the likelihood that the assumptions, estimates or outcomes will be achieved. While management has taken every effort to ensure the accuracy of the material in the presentation, the presentation is provided for information only. DOF Subsea, its officers and management exclude and disclaim any liability in respect of anything done in reliance on the presentation. All forward looking statements made in this presentation are based on information presently available to management and DOF Subsea assumes no obligation to update any forward looking statements. Nothing in this presentation constitutes investment advice and this presentation shall not constitute an offer to sell or the solicitation of any offer to buy any securities or otherwise engage in any investment activity. DOF Subsea 38