DOF ASA commissioned research 110418 - Nordea Markets · DOF is a global provider of offshore and...

Commissioned research 11 April 2018

Marketing material commissioned by DOF ASA

DOF ASA Oil Services | Norway

KEY DATA

ABSOLUTE & RELATIVE PERFORMANCE

Source: Thomson Reuters and Nordea Markets VALUATION APPROACH

Source: Nordea Markets * Sum-of-the-parts valuation **EV/EBITDA 2019E mgmt. reporting Nordea Markets - Analysts Even Mostue Naume Analyst, Oil Services

Morten Nystrøm Senior Analyst, Oil Services. Sector coordinator

Kristoffer Bollestad Pedersen Senior Analyst, Credit

Janne Kvernland Senior Analyst, Oil Services

Anders Hagen Head of Securities Research, Senior Director

Geared exposure to subsea recovery Global provider of offshore and subsea services DOF is a global provider of offshore and subsea services to the offshore oil and gas industry through its fleet of 67 offshore service vessels. DOF’s AHTS/PSV fleet is relatively young and consists mainly of high-end vessels, which makes it well-positioned in the market, while its subsea fleet of pipelay-, construction- and dive-support vessels enables DOF to serve most of the subsea value chain. Exposure to subsea recovery We are now seeing an emerging upturn in the subsea market as several years of underinvestment draw to an end and field developments keep on hitting the market, prompted by reduced field breakevens and improved financials for oil companies. We believe DOF is well-positioned to take advantage of the upturn thanks to its mix of subsea project capability and time chartering of subsea vessels. Two new pipelay support vessels will join its fleet over the next year, securing solid EBITDA growth, while the project segment will benefit from improving subsea fundamentals and gradual growth in the coming years. Strong backlog supports valuation and deleveraging DOF's reported firm backlog is equivalent to 3.5x 2017 revenue, and this increases to ~8x if we include the options on current contracts. Furthermore, given an estimated ~90% and ~80% coverage of our 2018 and 2019 EBITDA estimates respectively, DOF’s backlog offers visibility and valuation support. In addition, the strong backlog should enable DOF to reduce its net debt by ~23% between 2017 and 2020 and thus also its NIBD/EBITDA to go from 10x in 2017 to ~5x in 2020. This should allow investors to focus on the subsea market recovery and company valuation. Valuation Based on our sum-of-the-parts and multiple valuation, we value DOF at NOK 0.95 -1.38 per share. The low end of the range is based on our fundamental sum-of-the-parts approach, grounded on DCF valuations of each subsidiary, while the high-end is based on the historical average sector multiple pre-downturn and DOF's own median multiple of 8x.

Source: Company data and Nordea Markets

Country NorwayBloomberg DOF NOReuters DOF.OLShare price 0.82Free float 47%Market cap (m) NOK 2,360Website www.dof.noNext report date 09-May-18

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DOF ASA OBX

-1m -6m -12m YTDAbsolute -2% -3% -10% 25%Relative -4% -10% -33% 24%

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SUMMARY TABLE - KEY FIGURESNOKm 2013 2014 2015 2016 2017 2018E 2019E 2020E

Net sales 9,289 10,196 10,291 8,134 6,666 7,621 8,143 8,941

- growth 9.8% 0.9% -21.0% -18.0% 14.3% 6.9% 9.8%

EBITDA 2,865 3,494 3,362 2,620 1,798 2,220 2,452 2,632

- margin 30.8% 34.3% 32.7% 32.2% 27.0% 29.1% 30.1% 29.4%

EPS -1.72 1.06 -3.16 0.16 -0.59 0.08 0.13 0.17

- growth n.m. n.m. n.m. n.m. n.m. 64% 35%

DPS n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

P/E n.m. 12.0 n.m. 6.3 n.m. 10.6 6.4 4.8

EV/EBITDA 9.1 7.2 7.7 8.8 12.2 9.7 8.3 7.3

EV/Sales 2.8 2.5 2.5 2.8 3.3 2.8 2.5 2.1

RoE 3.5% -13.2% 5.3% -29.0% 5.8% 8.8% 10.7% 11.3%

FCF yield -2.5% 83.0% 14.2% 60.5% -11.9% 52.0% 57.1% 66.8%

ND/EBITDA 7.0x 5.8x 6.6x 6.7x 9.3x 7.0x 5.8x 4.8x

11 April 2018 DOF ASA

Marketing material commissioned by DOF ASA 2

Table of contents Factors to consider when investing in DOF ASA .............................................................................. 3

Company overview ........................................................................................................................... 5

E&P: The fundamentals are tuned for increased offshore activity ................................................. 12

PSV: Supply side outshines emerging demand side ...................................................................... 15

AHTS: Waiting for the supply side.................................................................................................. 20

Subsea: Demand is improving ........................................................................................................ 23

Historical financials and estimates ................................................................................................. 26

Valuation ........................................................................................................................................ 31

Risk factors ..................................................................................................................................... 36

Reported numbers and forecasts ................................................................................................... 37

Disclaimer ....................................................................................................................................... 40



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Factors to consider when investing in DOF ASA DOF is well-positioned to take advantage of the emerging upturn in the subsea market. This, in combination with delivery of two newbuilds, will support solid EBITDA growth in the coming years, in our view. Furthermore, DOF's solid backlog provides earnings visibility and allows the company to reduce its net debt by NOK ~5bn (23%) and lower NIBD/EBITDA to 5x in 2020. If the market improves more rapidly than we forecast, though, net debt reductions will be considerably more. This should allow investors to shift focus to the market recovery and to our estimated value range of NOK 0.95 – 1.38 per share.

We identify a number of key factors in DOF ASA’s investment case

See the section “Risk Factors” for a more comprehensive list of key risks

Key factors to consider when evaluating an investment in DOF ASA:

A solid backlog supports EBITDA growth, providing good visibility… …and allowing the company to reduce net interest bearing debt by 23% over

the next three years, lowering NIBD/EBITDA from ~10x in 2017 to 5x in 2020 Exposure to a recovery in the subsea market with a “free” option on

AHTS/PSV recovery

Key risk factors:

DOF Subsea’s cash position looks tight in late 2019 with the current repayment profile

DOF ASA is dependent on successful refinancing of bank debt As the leverage is high, the share price is highly sensitive to underlying

movements in asset values and operational performance.

Well-positioned to take advantage of the emerging upturn in the subsea market

Attractive exposure to recovery in the subsea market We are now seeing an upturn emerging in the subsea market as several years of underinvestment draw to an end and field developments keep on hitting the market, prompted by the reduced field breakevens and improved financials for oil companies. As a consequence, we see increased demand for subsea support services and subsea vessels in the coming years. Through its subsidiary DOF Subsea, we believe DOF is well positioned to take advantage of the upturn thanks to its unique mix of subsea project capability and time chartering of subsea vessels. Two new pipelay support vessels will join DOF's fleet over the next year, expanding EBITDA by approximately NOK 110m and NOK 270m in 2018 and 2019 respectively, while the project segment will benefit from improving subsea fundamentals and gradual growth in the coming years.

SUBSEA TREE AWARDS EXPECTED TO INCREASE

Source: Quest Offshore, Rystad Energy, Wood Mackenzie and Nordea Markets

DOF’S SUBSEA SEGMENT DRIVING SOLID EBITDA* GROWTH

Source: Company data and Nordea Markets *mgmt. reporting

386 452 452 433 333 170 212 194 212

586 619 686 733 682643 640 637 620

1,8242,082 2,184 2,179

1,799

1,4711,779

2,253 2,468

2,796

3,1533,322 3,345

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Solid backlog support deleveraging and should shift focus to market recovery and valuation

Solid backlog supports deleveraging As of Q4 2017, DOF's total firm backlog stood at NOK 23bn, equivalent to 3.5x revenue reported in 2017. If we include options attached to current contracts, this number increases to over 8x 2017 revenue. Furthermore, with ~90% and ~80% of our estimated EBITDA secured in 2018 and 2019 respectively, DOF’s backlog should support valuation.

Furthermore, in combination with DOF's ability to secure new work, the backlog should enable it to reduce its net debt by NOK ~5bn between 2017 and 2020 and thus also NIBD/EBITDA to ~5x in 2020. This should eventually allow investors to shift focus to the subsea market recovery and valuation of the share, although DOF Subsea’s cash position in late 2019 on our estimates may raise some concerns.

Our value range is based on a SOTP- valuation, the OSV sector’s historical EV/EBITDA multiple and DOF’s own median EV/EBITDA multiple

Valuation Based on our sum-of-the-parts and EV/EBITDA valuation, we value DOF ASA at NOK 0.95 -1.38 per share. The low end of the range is based on our fundamental sum-of-the-parts approach, grounded on rigorous DCF valuations of each subsidiary, while the high-end is based on the historical average sector multiple pre-downturn and DOF's own median multiple over the past eight years of ~8x.

VALUATION RANGE: NOK 0.95 – 1.38 per share

Source: Company data and Nordea Markets *Sum-of-the-parts valuation **Multiple applied on our 2019E mgmt. reported EBITDA and the value is adjusted for non-controlling interest

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STRONG BACKLOG

Source: Company data and Nordea Markets *Group revenues

REDUCTION IN NET INTEREST-BEARING DEBT*

Source: Company data and Nordea Markets *mgmt. reporting

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Company overview DOF is a global provider of offshore and subsea services to the offshore industry, and owns and operates 67 offshore supply vessels. The company operates through its three subsidiaries ‒ Norskan, DOF Rederi and DOF Subsea ‒ with a fleet consisting of supply vessels and subsea vessels. The supply fleet is relatively young and consists mainly of high-end vessels, which makes it well positioned in the market, while DOF is able to serve the whole subsea value chain with its subsea fleet. Furthermore, the fleet comprises ten supply vessels and six subsea vessels with Brazilian flag, which allow DOF to reap the benefits of having access to one of the most important OSV markets. Moreover, DOF's global organisational setup and versatile service offering have allowed the company to secure superior utilisation during the recent downturn.

DOF owns and operates a fleet of 67 offshore supply vessels

Company overviewDOF provides offshore and subsea services to the global offshore industry through its three subsidiaries: Norskan, DOF Rederi and DOF Subsea. Altogether, the company owns and operates a fleet of 67 supply and subsea vessels (OSV vessels) including two joint venture newbuilds and one chartered-in vessel. These OSV vessels operate in three segments in the offshore service market, namely PSV (platform supply vessels), AHTS (anchor handling tug supply vessels) and Subsea/CSV (construction support vessels/subsea vessels and subsea engineering services) and are present in all the major oil and gas regions in the world.

The supply vessels support oil & gas fields in production as well as development and exploration activities, while the subsea vessels are utilised for subsea project activities. DOF Rederi owns the group's international OSV fleet, while Norskan owns the Brazilian AHTS fleet and operates the group's fleet in Brazil. Most of the group's subsea fleet and all of the subsea project activities are handled by DOF's ~65% owned subsidiary DOF Subsea.

DOF ASA: COMPANY STRUCTURE


Platform supply vessels (PSVs) DOF has a fleet of 16 PSV vessels. These PSVs transport oilfield products and supplies to offshore drilling and production facilities. More specifically, the vessels carry containers, equipment and pipes on deck, while the vessels transport a variety of different fluids in separate tanks beneath the deck, such as mud and brine, cements or other dry bulk, water,

DOF ASA

Norskan (Brazil)- The Brazilian offshore

vessel activity

DOF Subsea Holding AS

"DOF Rederi"- OSV business outside

Brazil

DOF Subsea AS

DOF Installer ASA2 AHTS/OCV vessels

100%

65%

84.9%

First Reserve Corporation

30.5%

100%

DOFCON6 PLSVs (2 newbuilds)

50%

100%

DOF Deepwater AS

50%

Akastor ASA

50%

Dolphin Invest 2

4.5%



PSV fleet well-positioned as all vessels have a carrying capacity of above 3,000 dwt

fuel and drill-cut. Some vessels have tanks for special fluids such as methanol for flow assurance in subsea wells and flowlines. The PSVs range in length from about 20 to 100 metres, and the vessels in the PSV fleet are commonly categorised based on the total carrying capacity of the vessels in tonnes, ie deadweight tonnes (dwt). DOF's PSV fleet generated 6% of the group’s EBITDA in Q4 2017 (mgmt. reporting).

Fleet composition All of DOF's 16 PSV vessels have a carrying capacity above 3,000 dwt, while 11 of them have capacity to carry more than 4,000 dwt. This makes DOF's fleet of PSVs well positioned in the market, as the trend of recent years has been that oil companies prefer vessels with capacity exceeding 3,000 dwt. Furthermore, DOF possesses a fleet with an average age of ~11 years, with seven of the vessels aged up to ten years and nine are aged ten to 20 years, which is favourable as these vessels are preferred and enjoy higher utilisation than vessels above 20 years old.

Anchor handling tug supply (AHTS) vesselsDOF has a fleet of 20 AHTS vessels, which are used to set anchors for drilling rigs and FPSOs and to tow mobile drilling rigs, FPSOs and equipment from one location to another. It is common to classify the vessels based on their engine capacity (BHP), as the bollard pull of the vessels is primarily dependent on the engine output. We consider vessels with less than 15,000 BHP to be small, vessels with an engine capacity of 15,000-18,000 BHP as regular and those with capacity above 18,000 BHP as large. As of Q4 2017, the AHTS segment contributed to 24% of the group's EBITDA (mgmt. reporting).

PSV: FLEET BY TYPE


PSV: FLEET BY AGE GROUP


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Its relatively young AHTS fleet makes the company resilient to the ongoing bifurcation

Fleet composition The majority of DOF's AHTS fleet consists of large and regular AHTS vessels, while only a few are considered to be small. As a consequence, DOF's fleet is flexible as it has the capacity to work in all of the major offshore basins globally. In addition, the fleet comprises only vessels below 20 years old. 13 vessels are aged up to ten years and the average of the fleet is around nine years. This makes the fleet resilient to the ongoing bifurcation process we have witnessed for the past decade, where the utilisation of old vessels (30-plus years) has been in a negative trend and has been considerably lower than for the rest of fleet.

AHTS: FLEET BY TYPE


AHTS: FLEET BY AGE GROUP


Subsea Subsea vessels are mainly employed in the installation, inspection and maintenance of subsea equipment related to offshore oil and gas production and related offshore structures such as platform and buoys, but are also engaged in work related to offshore windmill and electrical cables. Furthermore, they are involved in the laying of pipe, installation of mooring systems and construction/removal of offshore structures. DOF has a fleet of 31 subsea vessels and 71 remotely operated vehicle (ROVs) & Autonomous Underwater Vehicles (AUVs) which support the operations in the subsea segment. The fleet consist of Pipe Lay Vessels (PLSVs), Construction Support Vessels (CSVs) and Dive Support Vessels (DSVs). DOF's subsea vessels are placed in two business areas: Subsea IMR (Inspection, Maintenance and Repair) Projects and Long-term Chartering. These segments accounted for 70% of the group's EBITDA in the fourth quarter of 2017 (mgmt. reporting).

Offers a unique mix of subsea project capability and timecharter

Subsea IMR Projects The subsea IMR projects business includes survey, diving services, ROV operations, construction, IMR, project management and engineering. DOF has large framework agreements with several well-recognised oil companies, and most of the agreements spans over several years. Moreover, these agreements are located in core offshore regions, which is a key enabler for access to new project opportunities and increased market share. The company has built a strong position within the IMR service market in Asia Pacific, North America and Brazil, while it is a leading supplier of mooring services in the North Sea and West Africa.

Long-term chartering The long-term chartering segment includes the subsea vessels on time charter contracts serving the pipe-laying market, IMR and the SURF market. The company will have nine vessels in operations from the first quarter of 2019, more specifically five pipelay support vessels (PLSVs), a construction support vessel, a dive support vessel and two PLSVs which currently are under construction. Six of the PLSVs in the fleet are owned 50/50 with TechnipFMC. DOF has secured long-term contracts with blue chip clients like Petrobras, TechnipFMC, Subsea 7 and Total, and the average contract coverage of the vessels in the segment was five years at Q4 2017. Thanks to

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the strong contract coverage DOF has a firm backlog of NOK 12.4bn, which provides good earnings visibility in this segment.

A VERSATILE SUBSEA PRODUCT MIX

Source: DOF Subsea

First right of refusal on contracts in Brazil

Global organisationDOF is global player. Its head office is in Norway and it has regional offices in Australia, Singapore, the UK, the US, Canada, Angola, Argentina and Brazil. Furthermore, the company has global infrastructure, facilities and assets located strategically around the globe, which enable the company to act on and take advantage of opportunities wherever they present themselves.

Local flag privileges in Brazil Brazil is an important country for the OSV players as this country has been vital to demand for AHTS, PSV and large pipelay vessels. However, the majority of the vessels operating on the Brazilian shelf must be registered under the Brazilian flag in order to operate and a large portion of the crew on the vessels must be locals. This gives Brazilian-flagged vessels a first-right-of-refusal on contracts in Brazil, and thus makes it more difficult for players without Brazilian-built vessels to win work in the country. With ten Brazilian-built supply vessels in its fleet, DOF controls about one-third of the existing Brazilian-flagged supply fleet and can therefore reap the benefits of having access to one of the largest OSV markets in the world. Moreover, six of the PLSVs in DOF’s subsea fleet have Brazilian-flag privileges.

AHTS/PSV fleet has delivered stable high utilisation during the downturn

Superior utilisation throughout the downturn DOF has shown an extraordinary ability to secure new contracts and work for its fleet throughout the downturn. This is evident if we compare DOF's AHTS/PSV utilisation from January 2013 until January 2018 with peers. DOF has kept its utilisation at a stable, high level, while all peers have stumbled. We attribute this to DOF's organisational setup with a global reach as well as the company's product mix that allows it to offer integrated engineering services and vessel services.



DOF’S AHTS AND PSV TERM UTILISATION VS. PEERS

Source: IHS-Petrodata and Nordea Markets

Executive management, board of directors and shareholder structure


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DOF TDW HAVI SIOFF SOFF



SHAREHOLDER STRUCTURE AS OF JANUARY 26, 2018*Shareholders Number of shares PercentMØGSTER MOHN OFFSHORE AS* 1,506,399,363 59.0%BNP PARIBAS SECURITIES SERVICES 95,701,686 3.8%MP PENSJON PK 36,718,373 1.4%CITY FINANCIAL ABSOLUTE EQUITY FD 27,750,000 1.1%SKANDINAVISKA ENSKILDA BANKEN AB 26,303,058 1.0%DRAGESUND INVEST AS 24,600,000 1.0%MOCO AS 19,844,184 0.8%GERDA MARIE AS 18,000,000 0.7%PARETO AS 14,234,975 0.6%TOPDANMARK LIVSFORSIKRING A/S 12,500,000 0.5%Others 770,260,873 30.2%Total 2,552,312,512 100%* Note that the company has completed a share issuance of 336,666,667 new shares after this list was published, hence Møgster

Mohn Offshore AS currently owns 52.14%




E&P: The fundamentals are tuned for increased offshore activity DOF operates at the mercy of the activity levels in the offshore oil industry, as it exists to serve the industry. As a consequence, E&P spending by the oil companies is the leading factor that dictates the short-, medium- and long-term demand for the company's services. We believe the stage is set for increased offshore activity as oil companies are now cash breakeven at current oil prices and we expect them to deliver strong cash flow generation going forward. Furthermore, we expect an increased focus on the replacement of reserves due to the unsustainably low discovery rates the past years, which in combination with increased fundamentals, will lead to higher E&P spending the coming years.

The world will demand oil for the foreseeable future

The world still demands oil The demand for oil goes hand in hand with the growth and state of the overall economy. According to the International Monetary Fund, we can expect positive GDP growth both in advanced economies and emerging and developing economies going forward, which should support the thirst for oil globally. Accordingly, forecasts from the International Energy Agency point to positive growth in oil demand over the horizon of the next four years. Thus, despite all the talk about renewable energy, electric cars, sustainability etc, the world still demands oil, and this will clearly be the case for the foreseeable future as well.

ANNUAL GROWTH IN GDP COMPARED TO ANNUAL CHANGE IN OIL DEMAND

Source: IMF, IEA, Bloomberg and Nordea Markets

Offshore accounts for ~28% of total oil production Oil produced from offshore fields experienced a steep increase in its share of total production, from 24% in 1989 to its peak in 2002 of 33%, equivalent to an increase from 16 million barrels/day to 28 million barrels/day. Thereafter, the offshore production remained fairly stable for the next seven years before it lost terrain due to increased competition from shale oil. Although shale oil is on the rise, it only accounts for ~5% of total production, and there is no reason to believe that production from offshore fields will not play a key part in the future oil production mix going forward.

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Oil demand World GDPAdvanced economies Emerging and developing economies



The offshore E&P industry needs to exist in order to meet demand

Offshore E&P industry needs to exist Looking further ahead and comparing oil supply with oil demand in 2025, if no further barrels are developed or discovered, the supply will be 72 million barrels/day in 2025 due to the natural rate of decline in existing fields. This compares to an estimated demand of ~106 million barrels/day in 2025. Rystad Energy estimates that new production, barrels under development and discoveries from onshore fields will increase the supply by 22 million barrels/day in 2025, which adds up to a total supply of ~93 million barrels/day in 2025. Hence, in order to meet the estimated demand, 12 million barrels/day must be added to the pot. As a consequence, the offshore oil exploration and production industry needs to exist in order for future demand to be met.

DEVELOPMENT IN OIL PRODUCTION SINCE 1985

Source: Rystad Energy and Nordea Markets

SHARE OF TOTAL OIL PRODUCTION


OIL SUPPLY BRIDGE 2017 – 2025E

*Supply figures are based on liquids only **Includes barrels under development and assumes 100% commercialisation of discovered barrels Source: Rystad Energy and Nordea Markets

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The stage is set for increased offshore investments After surging oil prices from early 2000s, the average oil price peaked in 2011 at USD 111 per barrel of oil. The oil price hovered around the same high level until the middle of 2014, when the price started to drop dramatically due to slower economic growth in several important economies, the shale oil revolution in the US and OPEC's refusal to act as a swing producer. The average oil price bottomed out in 2016 at USD ~45/bbl, and it increased to USD ~55/bbl in 2017 after OPEC once again started to act to balance the market. As seen in the graphs below, E&P companies' willingness to invest in exploration of new resources and the development of discoveries is closely related to the oil price, and the spending has been slashed in line with the tumbling oil price. Given the historical relationship and the recent uptick in the oil price, we should expect an increase in offshore spending.

Improved financials among the oil companies should lead to higher spending

The fundamental reasons for increased offshore activity are clearly in place, and so is also the final part of the equation, namely the financial fundamentals of the oil companies. Last year was the first year since 2011 where the average oil price was above what was required to deliver cash breakeven after dividends for some of the largest integrated oil companies. Furthermore, if we use consensus estimates for cash flows and dividends for the same oil companies and consensus oil price forecasts the next two years, we calculate that cash breakeven will be the case in 2018 and 2019 as well. This, coupled with positive free cash flow and growing cash flow from operations in the next couple of years, should allow companies to increase their spending.

OFFSHORE EXPLORATION AND DEVELOPMENT SPENDING

Source: Rystad Energy and Nordea Markets *2018E average oil price is year-to-date

E&D* SPENDING VERSUS AVERAGE OIL PRICE SINCE 2002

Source: Rystad Energy and Nordea Markets *Exploration & Development

CASH BREAKEVEN BEFORE AND AFTER DIVIDENDS*

Source: Bloomberg and Nordea Markets *Companies included: BP, Shell, Total, ENI, Statoil, Chevron, ConocoPhillips, ExxonMobil, Repsol, Petrobras

IOCs* CFFO, FCF vs. E&D-SPENDING

Source: Rystad Energy, Bloomberg and Nordea Markets *Integrated oil companies: ExxonMobil, Shell, BP, Chevron, Total, ENI, ConocoPhillips, Repsol, Statoil

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PSV: Supply side outshines emerging demand side With increased tendering activity, accelerating fixtures and a demand side that is slowly increasing, we believe that the rig market has now passed the trough, and consequently the demand for PSVs has troughed as well. We expect a recovery in the North Sea and the Golden Triangle; we also see several factors that point to increased demand in Brazil for the coming years. The supply side is still an issue, however, so we do not expect any significant uptick in global day rates in the short to medium term.

Global PSV utilisation currently at around 54%

Utilisation has troughed After enjoying a level of utilisation that hovered around 90% from 2005 until July 2014 for PSVs (3,000+ dwt), the industry witnessed almost two-and-a-half years of falling utilisation before it bottomed out at a historical low of around 50% in early 2017. The dramatic drop was due to a significant reduction in demand and an inelastic supply side. We estimate that global utilisation for these PSVs is currently ~54%, which is somewhat up from the levels seen early in 2017. However, it should be mentioned that many of the vessels which are in lay-up will probably never return, so the actual utilisation is higher.

GLOBAL UTILISATION FOR PSVs (3,000+ DWT)


Increased activity in the North Sea, the Golden Triangle and the Middle East is expected

Recovery expected in the North Sea and the Golden Triangle The reduction in demand was mainly driven by all the key takers of PSVs with a carrying capacity above 3,000+ dwt, namely the countries in the Golden Triangle (US GoM, West Africa and South America) and Northwest Europe. According to IHS-Petrodata, the demand increased y/y in Northwest Europe in March 2018, and we expect the demand to continue ticking upwards in line with the increased activity in the region. Based on open rig demand and comments from rig companies, we are also expecting increased activity in the Golden Triangle the next years, which will further support the demand turnaround story. We note that the Mediterranean and the Middle East region has emerged as a greater taker of tonnage than West Africa and US GoM due to the recent boost in activity in the Middle East. This region will continue to expand its offshore investments in the coming years and will thus be an important driver for demand as well.

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PSV (3,000 DWT) DEMAND PER REGION*

Source: IHS-Petrodata and Nordea Markets *MED&ME = Mediterranean and the Middle East, NWE = Northwest Europe, SAM = South America, WAF = West Africa

Activity increase expected from both Petrobras and international oil companies in Brazil

Likely uptick in Brazil in the coming years Several factors indicate that we will see increased offshore activity in Brazil in the coming years as well. The national oil company, Petrobras, plans to initiate major investments to help develop its massive pre-salt resources. The phase 3 of the pre-salt development will include 12 new FPSOs, whereof six are scheduled to be in production by the second half of 2022 and the remaining six will enter from 2023 to 2027, and these 12 FPSOs will require a total of 178 wells to be drilled. Furthermore, Petrobras stated last year that 300 wells could be developed as a result of the ongoing pre-salt bidding rounds. This activity is expected to come from both Petrobras and international oil companies, as foreign operators now have access to the pre-salt resources and the local content requirement is lowered. If we assume that the number of working rigs we have seen in the past two years of around 20 rigs is the new normal to maintain production in Brazil at current levels, which seems conservative, we argue that Petrobras simply must replace the rigs that roll off contracts in the next two years, which implies that the abovementioned increase in activity will be incremental demand and should drive demand up from today's low level.

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9990

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SOUTH AMERICA: TERM UTILISATION PSV (3,000 DWT)


BRAZIL: WORKING FLOATERS VS. OIL & GAS PRODUCTION

Source: Rystad Energy, IHS-Petrodata and Nordea Markets

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Low-end vessels have suffered from lower demand than high-end vessels

Old and low carrying capacity not so hot All PSVs have been hit hard by the downturn, but the chart below to the left shows that vessel owners with low-end PSVs (<3,000 dwt) have suffered from significantly lower demand than owners of vessels with more carrying capacity. Furthermore, the utilisation for vessels aged above 30 years has deteriorated, while newer vessels enjoy higher utilisation. These observations favour companies with newer and more high-end PSV fleets.

Increased tendering and fixture activity indicate that the rig market has troughed

Rig market has passed the trough Offshore drilling demand is the main driver for the PSV segment and the large drop in demand can be explained by the ~40% drop in rig demand from the peak in April 2014 until January 2017.

DEMAND DEVELOPMENT: RIG DEMAND* VS. PSVs

Source: IHS-Petrodata and Nordea Markets *floaters and jack-ups

Compared with the previous downturns in the drilling sector, this downturn has been the longest and most severe. However, with increased tendering activity, accelerating fixtures and a demand side that is slowly increasing, we believe that the rig market has now passed the trough, and consequently so has the PSV market.

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GLOBAL PSV TERM DEMAND BY SIZE


GLOBAL PSV TERM UTILISATION BY VESSEL AGE


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Rig demand has been back at peak levels within three years in most of the previous downturns

More than 600 vessels must be removed from the market for utilisation to return to 80%

In most of the previous downturns in the drilling sector, demand has been back at peak levels within three years after the trough, and demand has on average increased by ~20% from the trough after three years. As with the 1980s downturn, we believe demand will not reach the 2014 peak following the current downturn. The upturn we experienced until mid-2014 was characterised by significant bottlenecks and declining efficiency, which will be reversed during this cycle, and oil companies are also increasingly focusing on onshore shale. Following the crisis in the 1980s, rig demand recovered to ~80% of the peak and hovered around that level until 2005. We believe a similar development is likely this time.

Demand pick-up not enough, significant scrapping required If we assume that offshore drilling demand eventually returns to 80% of the peak and that the number of PSVs per rig remains around 1.6x (the average since 2005), we estimate total demand of ~950 vessels, up 22% from today. Even in such a scenario, ~645 units need to be scrapped for utilisation to return to 80% (assuming all newbuilds are delivered). This represents all rigs older than 20 years plus over half of the vessels aged between 10-20 years. Today, 564 PSVs are cold stacked, of which ~70% are older than 10 years and ~50% are considered to be small PSVs , but these will not necessary leave the market, as the stacking cost is low (USD ~1000/day) and the largest owners of older PSVs have few new vessels, which make them reluctant to scrap. On the other hand, many stacked vessels with upcoming SPS are unlikely to return until the market has improved significantly as the current day rate cannot justify incurring the capex or the owners simply cannot afford to do so.

CURRENT PSV FLEET BY AGE VERSUS CURRENT DEMAND AND ESTIMATED DEMAND


564780

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Current Newbuild 0-10y 10-20y 20-30y 30y+

OFFSHORE RIG DEMAND VS PREVIOUS DOWNTURNS


PREVIOUS MARKET RECOVERIES FOR OFFSHORE RIGS


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Fewer newbuilds are hitting the water On top of weak scrapping incentives, 158 PSVs are currently under construction, according to IHS-Petrodata, which is equivalent to 9% of the fleet.

GLOBAL PSV FLEET PROFILE

Source: HIS-Petrodata and Nordea Markets Order book probably overstated

However, the order book is probably overstated as most of these newbuilds will be delayed or cancelled; owners will likely push the delivery date or cancel, and delays will arise as many of the units are built at inexperienced yards. Although owners have taken delivery of newbuilds throughout the downcycle, we are now seeing fewer newbuilds hitting the water. During the past three months only two newbuilds have been delivered, which is equivalent to 0.5% of the fleet (annualised). It is positive to see fewer newbuilds being delivered, as this at least will not further weaken the balance between supply and demand.

PSV NEWBUILD DELIVERIES


PSV Current fleet Newbuilds % of fleet 0-10y % of fleet 10-20y % of fleet 10-20y % of fleet 20-30y % of fleet 30y+ % of fleetPSV <2,000 dwt 424 9 2% 101 24% 122 29% 122 29% 25 6% 176 42%PSV 2-3,000 dwt 197 8 4% 72 37% 81 41% 81 41% 21 11% 23 12%PSV 3-4,000 dwt 495 74 15% 258 52% 208 42% 208 42% 21 4% 8 2%PSV > 4,000 dwt 558 67 12% 430 77% 106 19% 106 19% 19 3% 3 1%Total 1,674 158 9% 861 51% 517 31% 517 31% 86 5% 210 13%

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Trailing 3m newbuild deliveries % of fleet (annualised)



AHTS: Waiting for the supply side Even though we are seeing some encouraging signs in certain regions and believe that the general activity will slowly tick upwards in line with increased rig demand and more field developments, the global outlook for the AHTS segment still looks bleak. This is due to the oversized supply side, which will dampen the effects of the demand recovery in terms of low utilisation.

Estimated global AHTS utilisation is currently 40%

The bottom has not yet materialised Like in the PSV segment, the utilisation for regular and large AHTS vessels has been in a downward spiral ever since the oil price crashed and impacted E&P spending dramatically. However, the bottom has not yet materialised as we have seen in the PSV segment, and we estimate that current utilisation is 40%, down from levels of around 80% before the downturn. Again, utilisation is probably a bit higher than this, as many of the cold-stacked vessels will never return.

GLOBAL UTILISATION FOR LARGE AHTS VESSELS (15,000+ BHP)


Summer season and increased activity will improve the North Sea AHTS market in the coming quarters

Also upside potential in Brazil as Petrobras is expected to tender for large AHTS vessels

Increased demand in North Sea Northwest Europe (mainly the UK and Norway) and South America (mainly Brazil) are the key takers of larger AHTS (15,000+ BHP) vessels due to harsh offshore environments and long distances, while Asia, Mediterranean and the Middle East have been the key takers of smaller tonnage as these basins are shallower and less weathered. The steady reduction in demand for large AHTS is mainly explained by the cutback in the key regions since 2014/2015. Given the increasing rig demand and upcoming summer season, we expect the North Sea AHTS market to improve in the coming quarters. However, the market remains significantly oversupplied and we do not expect to see sustainably higher day rates unless vessels mobilize to other regions, or owners begin to retire vessels and reduce excess tonnage. We are seeing upside potential in Brazil in the coming years, as Petrobras is expected to tender for large AHTS vessels going forward and there are a limited number of contestants for the work, including DOF and Solstad. Hence, we expect to see decent day rates for these fixtures.

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Oversized supply side will dampen the effects of a demand recovery

About 700 rigs need to be removed for utilisation to return to 80%

Global outlook still looks bleak Even though we are seeing some encouraging signs in certain regions and believe that the general activity will slowly tick upwards in line with increased rig demand and more field developments, the global outlook for the AHTS segment still looks bleak. This is due to the oversized supply side, which will dampen the effects of the demand recovery in terms of low utilisation. If we assume that rig demand recovers to 80% of the peak in 2014 and the number of AHTS's demanded per rig is in line with its historical average, the utilisation will only be close to 50% (assuming all newbuilds are delivered).

AHTS: SUPPLY BY AGE VERSUS CURRENT DEMAND AND ESTIMATED DEMAND

Source: IHS-Petrodata and Nordea Markets Attrition not sufficient In such a scenario, we estimate that approximately 700 rigs need to be removed from the fleet for utilisation to return to 80%. If we compare this to the current rate of attrition of about 40 vessels per year, this scenario will be a long way down the road.

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AHTS (15,000+ BHP) DEMAND BY REGION*

Source: IHS-Petrodata and Nordea Markets *MED&ME = Mediterranean and the Middle East, NWE = Northwest Europe, SAM = South America, WAF = West Africa

AHTS (15,000+ BHP): NEW DEMAND AND UTILISATION


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300 out of 504 stacked vessels scheduled for SPS in the next three years

Although the stacked fleet is currently counting 504 vessels, these will not be quickly removed from the market as the stacking costs are low and owners are clinging on to their assets in hope of a sudden recovery. However, about 300 of the 504 stacked vessels are scheduled for its Special Periodic Survey (SPS) in the next three years and a third of these are more than 30 years old. At least the old vessels are likely not to re-enter the market again, but the younger vessels will probably hit the market once the owners smell some pick-up in demand no matter the cost of reactivation.

15 regular and large AHTS scheduled for delivery the next two years

Order book less stretched for regular and large AHTS Since only 15 regular and large AHTS newbuilds are ordered for delivery in the next two years, the order book for newbuilds looks better for this segment than for smaller AHTS. As a consequence, it will be less challenging for the larger segment to adjust the supply side than it will be for the smaller segment, which may result in a faster pick-up in utilisation for the vessels with BHP above 15,000 if scrapping picks up.

AHTS: CURRENT FLEET AND NEWBUILD ORDER BOOK


Current fleet 2018 % growth 2019 % growth Total NBs NB % of fleet

AHTS:

AHTS <10,000 bhp 1,328 59 4.4% 2 0.1% 61 4.6%

AHTS 10-15,000 bhp 282 26 9.2% - 0.0% 26 9.2%

AHTS 15-18,000 bhp 127 5 3.9% 1 0.8% 6 4.7%

AHTS > 18,000bhp 120 6 5.0% 3 2.4% 9 7.5%

Sum 1,857 96 5.2% 6 0.3% 102 5.5%

AHTS: ATTRITION BY AGE AND GROUP PER QUARTER*

Source: IHS-Petrodata and Nordea Market * Rolling four quarters

AHTS: TRAILING 3-MONTH NEWBUILD DELIVERIES


AHTS: FLEET PROFILE BY TYPE AND AGE


AHTS: COLD STACKED FLEET BY AGE AND SPS YEAR*

Source: IHS-Petrodata and Nordea Markets *Estimated SPS year

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Subsea: Demand is improving Owing to reduced field breakevens and better financials for the oil companies, we are now seeing higher demand in the subsea market. We argue that subsea projects will be pushed down from the shelf and that field developments will keep on hitting the market as subsea projects are now economically viable. Moreover, after several years of underinvestment and low spending, we expect IMR spending to increase ahead. As a consequence, the stage is set for increased demand for subsea vessels and subsea services in the coming years, benefitting DOF.

Offshore subsea activity is picking up

Order intake on the rise Following years of low activity, order intake for Subsea 7 and TechnipFMC, two of the leading subsea players are once again on the rise. This clearly indicates that offshore subsea activity is picking up. Both companies' managements are also becoming more vocal about the current uptick and are more optimistic about the market even though price pressure persists. McDermott, another leading subsea company, was equally positive at its latest earnings presentation, reporting an increase in outstanding subsea bids for the third quarter in a row. Moreover, TechnipFMC believes that the increase in subsea market activity in 2018 will be fuelled by major projects and a blend of small- to medium-sized projects and service opportunities.

ORDER INTAKE: SUBSEA 7 AND TECHNIPFMC SUBSEA*


MCDERMOTT: SUBSEA BIDS AND TARGET PROJECTS


Current oil price is well above field break-even levels

Subsea projects are now economically viable The current oil price is well above break-even levels for the upcoming subsea field developments that have been identified in the regions where Rystad Energy sees the highest activity level for the next three years. In combination with oil companies being cash-breakeven after dividends at the current oil price, this should trigger an increase in new final investment decisions and boost activity further.

POTENTIAL OFFSHORE FIELDS WITH SUBSEA SCOPE


SUBSEA FIELDS BY POTENTIAL AWARD YEAR


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We expect subsea tree awards to continue increasing

Underinvestment and ageing subsea infrastructure should trigger increased IMR spending

This view is also supported by the expected number of new subsea installations in the coming years, which is a key indicator of short- and medium-term demand. Last year marked the first year in the upcycle and there were almost twice as many tree awards compared with 2016. In addition, the number of subsea tree awards is expected to continue increasing to more normal levels within three to four years, according to industry data.

SUBSEA TREE AWARDS BY AWARD YEAR

Source: Quest Offshore, Rystad Energy, Wood Mackenzie and Nordea Markets Subsea IMR spending set to grow After several years of underinvestment and low spending, Rystad Energy expects IMR spending to increase. Rystad Energy expects this year to be marginally better than 2017, while spending is set to increase further in 2019 and 2020. This is in line with market comments from several offshore supply vessel companies. In general, ageing subsea infrastructure should trigger higher investments in the IMR segment. The chart below right gives an overview of the maturity of the resources left in FPSO/subsea tie-back fields for a selected group of countries. The US and the UK stand out as having the most mature subsea fields and should thus be key takers of IMR services in the coming years, followed by Brazil, Norway, Angola and Australia.

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FPSO/SUBSEA FIELDS PER RESOURCE MATURITY*

Source: Rystad Energy and Nordea Markets *Top 10 countries based on number of fields with a FPSO/Subsea-tie-back facility

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Newbuilding order book is limited

Supply side more reasonable The outlook for subsea services is rosier and – thanks to a more consolidated supply side than the PSV/AHTS segment – we are more positive towards the subsea market. Moreover, we believe growth in the subsea fleet will largely be absorbed by the demand side, yielding decent economics for subsea vessel owners in the coming years. Two positive factors are that the newbuilding order book for subsea vessels is limited and that the wind market has absorbed a significant number of subsea vessels.

FLEET DEVELOPMENT FOR SUBSEA VESSELS*

Source: Company data and Nordea Markets *Ship, DP2+, 90m+ LOA

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PSV11%

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67%

Historical financials and estimates We expect solid growth in EBITDA in the coming years thanks to increased subsea activity and two newbuilds scheduled for delivery in Q2 2018 and Q1 2019. These newbuilds will, when both operational in 2020, deliver NOK ~440m in annual EBITDA. The expected uptick in subsea activity prompts us to increase day rates, utilisation and margins for the subsea project segment, and so we model a recovery in 2018. We forecast total operational EBITDA of NOK ~2.6bn in 2018, which translates into group EBITDA of NOK 2.2bn, up from NOK 1.8bn in 2017.

EBITDA growth driven by subsea segment

Group: strong EBITDA growth driven by subsea We estimate strong operational EBITDA growth in the coming years, mainly driven by the subsea project segment and the addition of two new pipelay vessels with long-term contracts in Brazil. These newbuilds will add NOK ~110m and NOK ~270m in EBITDA in 2018 and 2019, respectively, while we model a gradual improvement in the subsea project segment as we anticipate an increase in offshore subsea activity. Because of promising signs of recovery in Brazil and the company’s strong market position, we expect the company to be able to extend several of its AHTS contracts in the country, and so we forecast fairly flat revenue and EBITDA for this segment. The PSV market will improve going forward, in our view, but it will be gradual due to the severe oversupply of vessels. Total operational EBITDA will be NOK ~2.6bn in 2018, we estimate, in the midpoint of management's guidance range for EBITDA of NOK 2.4-2.8bn.

2017: REVENUE BY SEGMENT

Source: Company Data and Nordea Markets

EBITDA PER OPERATING SEGMENT (MGMT. REPORTING)


After adjusting for proportional consolidation and joint ventures, we estimate 2018 group revenue and EBITDA at NOK ~7.6bn and NOK ~2.2bn, respectively, up from NOK ~6.6bn and NOK 1.8bn in 2017. As of Q4 2017, DOF had a firm backlog of NOK ~23bn (do not include frame agreements within subsea vessel projects), with NOK ~5bn and NOK ~4.2bn for execution in 2018 and 2019. Based on our estimates, this gives revenue coverage of 66% in 2018 and 52% in 2019.

386 452 452 433 333 170 212 194 212

586 619 686 733 682643 640 637 620

1,8242,082 2,184 2,179

1,799

1,4711,779

2,253 2,468

2,796

3,1533,322 3,345

2,815

2,2842,631

3,0843,301

0

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FIRM BACKLOG AND REVENUE COVERAGE*

Source: Company Data and Nordea Markets *Nordea Markets’ revenue estimates

GROUP: REVENUE, EBITDA AND EBITDA MARGINS


DOF ASA: INCOME STATEMENT (ANNUAL)

Source: Company Data and Nordea Markets DOF ASA: INCOME STATEMENT (QUARTERLY)

Source: Company Data and Nordea Markets PSV market will improve, but it will be gradual, due to the severe oversupply of vessels

PSV: Marginal increase in EBITDA in 2018 We model a marginal increase in EBITDA in 2018 as vessels embark on contracts, while we see a reversal of this in 2019 when several vessels are rolling off contracts and entering a weak market. Although we forecast the market to improve in the coming years, we expect the recovery to be gradual thanks to the severe oversupply, limited supply-side discipline and low costs of reactivating vessels.

5.0

4.2

3.32.6

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37%

27%

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Firm backlog Revenue coverage

9,28910,196 10,291

8,134

6,6667,621

8,143

2,8573,027 3,030

2,4491,796 2,220 2,452

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mar

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Revenue EBITDA EBITDA margin

NOKm Q1-2017 Q2-2017 Q3-2017 Q4-2017 Q1-2018E Q2-2018E Q3-2018E Q4-2018ENet sales 1,560 1,717 1,595 1,794 1,794 1,936 1,951 1,939Operating expenses -1,181 -1,215 -1,105 -1,369 -1,278 -1,385 -1,372 -1,367Operating profit before depr. (EBITDA) 379 502 490 425 516 552 580 573Depreciation -255 -249 -257 -248 -248 -248 -248 -248Operating profit (EBIT) 124 253 233 177 268 304 332 325Net financial items -240 -219 -215 -236 -221 -216 -213 -210Profit before extraordinary items and taxes -116 34 18 -59 47 87 118 114Extraordinary items -143 -233 -19 -601 0 0 0 0Profit before taxes (EBT) -259 -199 -1 -660 47 87 118 114Taxes -44 26 -26 -192 -10 -10 -10 -10Minority interest 57 -44 -82 182 -3 -17 -32 -34Net profit (including extraordinary items) -246 -217 -109 -670 35 60 76 70

NOKm 2013 2014 2015 2016 2017 2018E 2019E 2020ENet sales 9,289 10,196 10,291 8,134 6,666 7,621 8,143 8,941Operating expenses -6,432 -7,169 -7,261 -5,685 -4,870 -5,400 -5,690 -6,310Operating profit before depr. (EBITDA) 2,857 3,027 3,030 2,449 1,796 2,220 2,452 2,632Depreciation -1,113 -1,045 -1,022 -1,063 -1,009 -992 -992 -992Operating profit (EBIT) 1,744 1,982 2,008 1,386 787 1,228 1,460 1,640Net financial items -1,281 -1,273 -1,173 -1,046 -910 -861 -808 -748Profit before extraordinary items and taxes 463 709 835 340 -123 367 653 892Extraordinary items -531 -249 -1,246 17 -996 0 0 0Profit before taxes (EBT) -68 459 -411 357 -1,119 367 653 892Taxes 16 78 95 -158 -236 -40 -40 -40Minority interest -139 -419 -35 -26 113 -85 -211 -311Net profit (including extraordinary items) -191 118 -351 173 -1,242 241 402 541

EBITDA margin, % 31% 30% 29% 30% 27% 29% 30% 29%Operating margin, % 19% 19% 20% 17% 12% 16% 18% 18%Profit margin, % -2% 1% -3% 2% -19% 3% 5% 6%Return on operating capital, % 6% 8% 6% -1% -1% 5% 6% 7%Return on capital employed, % 6% 8% 6% -1% -1% 5% 6% 7%Return on equity, % -1% 8% -5% 3% -17% 4% 7% 10%



NORTH SEA: PSV* SPOT DAY RATES AND UTILISATION

Source: Nordea Markets *PSVs > 4,000 dwt

PSV: REVENUES, EBITDA AND EBITDA MARGINS


We expect the activity increase in Brazil to result in AHTS contract extensions

AHTS: contract extensions in Brazil expected In line with the increased activity we expect in Brazil, we model contract extensions for most of DOF's AHTS vessels thanks to its strong market position with a large portion of its fleet carrying the Brazilian flag. This results in fairly flat revenues and EBITDA for the next three years.

AHTS: REVENUE, EBITDA AND EBITDA MARGINS


Subsea: unique mix of subsea project capability and timecharterUnlike other Norwegian OSV peers, which solely focus on timecharter, DOF Subsea has its own subsea project division, which we estimate will generate ~24% of EBITDA in 2018. This division has gained strong momentum in recent years and currently has a solid position in the IMR market in Asia/Australia, North America and the North Sea. It has also been instrumental in keeping the company's vessels employed, as it has returned third-party vessels and replaced these with timecharter vessels coming off contract.

Gradual improvement in the IMR market expected

Subsea projects: the upturn is emerging We are now seeing an upturn emerging as several years of underinvestment come to an end and field developments keep on hitting the market owing to reduced field breakevens and improved financials for the oil companies, which will increase the demand for IMR services. As a consequence, we model a gradual uptick in day rates and utilisation for the fleet in the spot market. Furthermore, in line with management's expectations, we factor in a marginal improvement in the EBITDA margin in 2018 and assume it will eventually normalise at 12%. This is below the historical average of 14%, but we believe fiercer competition and structural changes will prevent the margin from returning to the historical level. Our estimated increase in project revenue and EBITDA in 2018 is largely related to the full-year effects of

60%

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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E

(NO

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)


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2,328

3,051

3,522

4,970

5,378

4,810

3,544

3,086

4,142

4,635

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319 434613 814 664

509 396288

490 586 714

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vessels that embarked on contracts throughout 2017, but a share is also related to the gradual improvement in the market.

PROJECT: REVENUES, EBITDA AND MARGINS


PROJECT FLEET: UTILISATION


Skandi Niteroi and Skandi Vitoria will benefit from Brazilian flag and continue securing employment, in our view

Timecharter: Newbuilds will add NOK ~440m in annual EBITDA Due to the delivery of two newbuilds on long-term contracts with Petrobras in Q2 2018 and Q1 2019, EBITDA is estimated to increase by NOK ~110m and NOK ~270m in 2018 and 2019, respectively. In 2020, when both are operational, the newbuilds will contribute NOK~440m in annual EBITDA.

Although Skandi Niteroi and Skandi Vitoria are scheduled to come off contracts in 2018, we believe these vessels will benefit from their Brazilian flags and continue to secure employment there, albeit with the risk of idle time between contracts. As of Q4 2017, the long-term chartering segment had a firm contract backlog of NOK 12.4bn, which is equal to 3.2x 2017 revenue in DOF Subsea and secures good earnings visibility going forward.

DOF ASA: EBITDA BRIDGE*

Source: Company data and Nordea Markets *Management reporting

TIME CHARTER: NEWBUILDS INCREASE EBITDA

Source: Company data and Nordea Markets DOF Supply has ample headroom under its minimum liquidity covenant…

Cash position: Heavy debt repayments in DOF Subsea We estimate that DOF Supply, consisting of DOF Rederi and Norskan, will have ample headroom under its NOK 500m minimum liquidity covenant over the next three years. Note that we assume a refinancing of Norskan’s bank debt balloon in Q4 2019, but the covenant clearance is not dependent on this. Looking further ahead, DOF Rederi must refinance its bank debt balloon in Q2 2021 in order to maintain a sufficient cash position, a scenario which we see as likely.

2,284

2,631

3,084

39

198

110 21

204

270

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1,0851,137

1,062

1,599

1,285

1,0971,097

1,3231,279 1,264 1,255 1,260 1,240 1,277

1,2321,291 1,312

1,411

1,516

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…while DOF Subsea will have a low cash position in late 2019 on our estimates

Despite assuming a refinancing of DOF Subsea’s bank debt balloon in Q4 2019, we predict that DOF Subsea’s cash position will be tight in late 2019 mainly owing to its steep repayment profile under the bank facilities. The company has regular amortisations of around NOK 1bn per year, giving a repayment profile of around seven years, which we consider very strict given today’s challenging market environment. Furthermore, although we assume that DOF Subsea refinances its bank debt balloon in Q4 2020 and the remaining NOK 408m in the DOFSUB07 bond as well, heavy debt repayments will continue putting pressure on its cash position.

The low cash position in DOF Subsea must be addressed, either through a refinancing of the bank facility with a longer profile, a sale of vessels, cash contributions from DOF Supply or another equity injection from DOF ASA to DOF Subsea.

DOF SUPPLY*: ESTIMATED CASH POSITION

Source: Company data and Nordea Markets *DOF Rederi and Norskan

DOF SUBSEA: ESTIMATED CASH POSITION


However, DOF Subsea will have plenty of headroom if the bank debt is refinanced with a more reasonable repayment profile

DOF Subsea will have plenty of headroom if the bank allows DOF Subsea to refinance its bank facility at a more reasonable repayment profile, such as 12 years.

DOF SUBSEA: ESTIMATED CASH POSITION GIVEN 12 YEAR REPAYMENT PROFILE


1,300

1,0851,137

1,062

1,599

1,285

1,0971,097

1,240

1,055959

806710

590526

381 349280 288 304

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Cash end Covenant



Valuation Based on our sum-of-the-parts and EV/EBITDA valuation, we assign DOF ASA an equity value of NOK 0.95-1.38 per share. The low end of the range is based on our fundamental sum-of-the-parts approach, grounded on rigorous DCF valuations of each subsidiary, while the high-end is based on the historical average sector multiple pre-downturn and DOF's own median multiple over the past eight years of ~8x. Since DOF has historically traded in line with the OSV sector, we deem a value interval based on sector multiples to be prudent in combination with a DCF-based SOTP approach, which serves as a reality check due to the method’s ability to value each subsidiary based on future cash flow generation.

Sum-of-the-parts: DOF Subsea is the jewel in the crown We have performed discounted cash flow (DCF) valuations of DOF's subsidiaries and used the value estimates to build a sum-of-the-parts valuation of DOF. We have conservatively assumed a weighted average cost of capital of 10% and a terminal period with zero growth as well as a finite life of each subsidiary based on the age of the current fleet of vessels. See the tables below for a detailed view of our DCF-valuations of each subsidiary.

DISCOUNTED CASH FLOW ANALYSIS* OF DOF SUPPLY**, NOKm

**DOF Supply includes DOF Rederi and Norskan. We assume 10% WACC and 0% terminal growth as well as 15 years of remaining life in the terminal period. Source: Company data and Nordea Markets DISCOUNTED CASH FLOW ANALYSIS* OF DOF DEEPWATER, NOKm

Source: Company data and Nordea Markets * We assume 10% WACC and 0% terminal growth as well as 15 years of remaining life in the terminal period. DISCOUNTED CASH FLOW ANALYSIS* OF DOF SUBSEA excl. JVs, NOKm

Source: Company data and Nordea Markets * * We assume 10% WACC and 0% terminal growth as well as 20 years of remaining life in the terminal period.

DOF SUPPLY Q1-2019E Q2-2019E Q3-2019E Q4-2019E Q1-2020E Q2-2020E Q3-2020E Q4-2020E Q1-2021E Q2-2021E Q3-2021E Q4-2021EFCF 203 281 249 212 184 300 250 200 200 296 251 214 Terminal value - - - - - - - - - - - 7,309

Debt 8,966 Cash 1,269 Net debt 7,696 NPV 7,854 Equity 158

DOF Deepwater Q1-2019E Q2-2019E Q3-2019E Q4-2019E Q1-2020E Q2-2020E Q3-2020E Q4-2020E Q1-2021E Q2-2021E Q3-2021E Q4-2021EFCF 18 22 28 25 27 28 28 21 21 28 28 21 Terminal value - - - - - - - - - - - 743

Debt 799 CashNet debt 799 NPV 805 Equity 6 DOF ASA (50%) 3

DOF Subsea Q1-2019E Q2-2019E Q3-2019E Q4-2019E Q1-2020E Q2-2020E Q3-2020E Q4-2020E Q1-2021E Q2-2021E Q3-2021E Q4-2021EFCF 192 165 219 235 231 191 266 270 244 226 288 292 Terminal value - - - - - - - - - - - 8,935

Debt 8,171 Cash 710 Net debt 7,460 NPV 9,060 Equity 1,600 DOF ASA (65%) 1,040



DISCOUNTED CASH FLOW ANALYSIS OF DOF CON, NOKm

Source: Company data and Nordea Markets * We assume 10% WACC and 0% terminal growth as well as 20 years of remaining life in the terminal period. Equity worth NOK 0.95 per share according to our SOTP valuation

DOF Subsea represents most of the equity value in DOF ASA

We value DOF's 65% stake in DOF Subsea at NOK ~2.9bn, while we assign a low value to DOF Rederi/Norskan as the value of the vessels on our assumptions is just a tad higher than its debt. This implies an equity value of NOK ~3bn or NOK 0.95 per share for DOF ASA on a fully diluted basis. DOF Subsea is thus the jewel in DOF's crown as its 65% ownership represents most of the equity value in DOF, according to our sum-of-the-parts valuation.

SUM-OF-THE-PARTS VALUATION OF DOF ASA


DOCON (Brazil PLSVs) Q1-2019E Q2-2019E Q3-2019E Q4-2019E Q1-2020E Q2-2020E Q3-2020E Q4-2020E Q1-2021E Q2-2021E Q3-2021E Q4-2021ENiteroi/Vitoria 60 60 60 60 60 60 60 60 60 60 60 60Skandi Acu 55 55 55 55 55 55 55 55 55 55 55 55Skandi Buzios 55 55 55 55 55 55 55 55 55 55 55 55Skandi Olinda 55 55 55 55 55 55 55 55 55 55 55 55Skandi Recife 55 55 55 55 55 55 55 55 55 55 55 55EBITDA 280 280 280 280 280 280 280 280 280 280 280 280Capex -36 -36 -36 -36 -36 -36 -36 -36 -36 -36 -36 -36Taxes -67 -67 -68 -68 -69 -69 -70 -70 -71 -72 -72 -73FCF 177 177 176 176 175 175 174 174 173 172 172 171Terminal value (10% WACC, 0% growth) 5,865EV 7,379

Niteroi/Vitoria 940Skandi Acu 806Skandi Buzios 832Skandi Olinda 1,040Skandi Recife 962Debt 4,580Equity 2,800DOF ASA's portion 1,820

Equity value (NOKm)DOF Rederi / Norskan Offshore 158DOF Deepwater AS (50%) 3Equity value DOF Supply 161DOF Subsea excl. JVs 1,040DOFCON (Brazil PLSVs) 1,820Equity value DOF Subsea (65%) 2,859Equity DOF ASA 3,020Shares outstanding (fully diluted) 3,165Per share 0.95



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/EB

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y fw

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Median NO Avg. 2010-2015 (NO)

Historical normalised sector EV/EBITDA of ~8x

Relative valuation: leverage creates wide value interval As current sector multiples are distorted by restructuring and trough earnings, we argue that it is better to look at the sector multiples prior to the downturn since these multiples represent a more normalised year for the companies in the sector, and as it does not make sense to apply trough multiples when we model in a recovery in earnings. Prior to the downturn, Norwegian offshore supply vessels companies traded at EV/EBITDA multiples between ~6.7x and 9.5x yielding an average forward EV/EBITDA multiple of ~8x, and DOF has historically traded in line with the Norwegian OSV companies.

OSV SECTOR: EV/EBITDA* MULTIPLES PRE DOWNTURN

*One year forward EBITDA Source: Bloomberg and Nordea Markets

Various EV/EBITDA multiples applied to 2019E EBITDA indicate a market cap of between NOK -246m and NOK 5.9bn

We estimate that ~80% of our 2019 EBITDA estimate is secured

If we apply multiples in the range of 6.5 - 8.5x to our EBITDA estimate for 2019, we arrive at an equity value of NOK- 246m to NOK 5.92bn, equivalent to NOK -0.08 - 1.87 per share on a fully diluted basis. The wide value interval is caused by DOF's financial leverage, where only a minor change in asset values results in significant movements in the equity value.

VALUATION GIVEN VARIOUS EV/EBITDA MULTIPLES ON 2019E EBITDA, NOKm

* Adjusted for JV debt and newbuild capex Source: Company data and Nordea Markets Solid backlog supports valuation and deleveraging As of Q4 2017, DOF's total firm backlog stood at NOK 23bn, equivalent to 3.5x revenue reported in 2017. If we include options attached to current contracts, this number increases to above 8x 2017 revenue. With ~90% and ~77% of our estimated EBITDA secured in 2018 and 2019, respectively, DOF’s backlog should be supportive of valuation.

EV/EBITDA 2019 6.5 7.0 7.5 8.0 8.52019 EBITDA (mgmt. reported) 3,084 3,084 3,084 3,084 3,084EV 20,045 21,587 23,129 24,671 26,213Less non-controlling interest 1,540 1,540 1,540 1,540 1,540NIBD adj. end 2019* 18,751 18,751 18,751 18,751 18,751M.cap -246 1,296 2,838 4,380 5,922Price per share -0.08 0.41 0.90 1.38 1.87



FIRM BACKLOG VS. REVENUE 2017 (REPORTED)

Source: Company data and Nordea Markets *Market cap as of 21/03/2018 and our estimated NIBD in 2018 including PLSV debt and newbuild capex

ESTIMATED EBITDA COVERAGE* (MGMT. REPORTING)

Source: Company data and Nordea Markets *Based on firm contracts and estimated EBITDA margin on some long term project contracts.

The following table shows our estimated cash flow development for the company until 2020. Due to the repair equity issue in February, DOF will generate cash in Q1 2018 but this will not continue as debt repayments will be greater than free cash flow, reducing the cash balance. We assume that the group refinances the bank balloons in Q4 2019 (DOF Subsea and DOF Rederi) and Q4 2020 (DOF Subsea), along with the remaining NOK 408m in the DOF SUB07 bond in Q2 2020.

DOF ASA: CASH FLOW ESTIMATES

Source: Company data and Nordea Markets NIBD/EBITDA will come down from 10x in 2017 to 5x in 2020E

Thanks to a strong backlog and DOF's ability to secure new work, we believe it will manage to reduce its net debt by NOK ~5bn from 2017 until 2020 and consequently lower NIBD/EBITDA to ~5x in 2020, which compares to 10x in 2017. Although we consider the liquidity in DOF Subsea to be somewhat tight in late 2019, this could easily be remedied if the company is able to refinance the bank debt at a more reasonable repayment schedule. This should eventually allow investors to shift focus to the market recovery and the valuation of the share.

DOF ASA: CASH POSITION


NET INTEREST-BEARING DEBT DEVELOPMENT*

Source: Company data and Nordea Markets *Including newbuild capex

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NOKm Q1-2018E Q2-2018E Q3-2018E Q4-2018E Q1-2019E Q2-2019E Q3-2019E Q4-2019E Q1-2020E Q2-2020E Q3-2020E Q4-2020EEBITDA 468 499 501 492 456 535 555 526 491 593 600 545Interest -221 -216 -213 -210 -207 -204 -201 -196 -192 -189 -185 -181WC and other adjustment 183 43 29 47 81 55 57 66 73 48 65 75CFFO 430 326 317 328 330 385 411 395 372 452 480 439Maintenance capex -56 -56 -57 -57 -57 -58 -58 -58 -58 -58 -58 -58FCF 374 270 260 271 274 327 353 337 314 394 422 381Repayment of debt -353 -412 -353 -415 -373 -373 -429 -1,545 -395 -803 -395 -1,195Equity/Refinance of debt 195 0 0 0 0 0 0 1,016 0 408 0 800Net change in cash 217 -141 -92 -143 -99 -46 -76 -192 -81 -1 28 -14

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Value range is based on our SOTP valuation and the OSV sector’s normalised multiple, as well as DOF’s own historical multiple

Value range: NOK 0.95 - 1.38 per share Based on our sum-of-the-parts valuation and multiple valuation, we value the stock at NOK 0.95 - 1.38 per share. The low end of the range is based on our fundamental sum-of-the-parts approach, grounded on rigorous DCF valuations of each subsidiary, while the high-end is based on the historical average sector multiple pre-downturn and DOF's own median multiple over the past eight years of ~8x.

VALUATION RANGE

Source: Company data and Nordea Markets *Sum-of-the-parts valuation **Multiples applied on our 2019E EBITDA management reporting which may be considered conservative as we do not expect earnings to normalise until 2021/22E. The value is adjusted for non-controlling interest.

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Risk factors Below, we list the main risk factors we find relevant for DOF ASA. The purpose of this is not to provide a comprehensive picture of all of the risks that the company may be subject to, but instead to highlight those that we find most relevant.

Needs to refinance its bank debt in order to maintain a sufficient cash position

Refinancing of bank debt In order to maintain a sufficient liquidity position and avoid a breach of covenants, DOF needs to refinance its bank debt. If the company cannot refinance its debt, it may breach the covenants, which generally allow the bank to cancel its commitment and declare that all or part of the loan is immediately due and payable.

DOF Subsea may need cash in order to avoid a covenant breach

Liquidity in DOF Subsea As DOF Subsea’s cash position is looking tight in late 2019 on our estimates, there is a risk that the company needs cash in order to avoid a covenant breach. This may result in a sale of vessels, cash contribution from DOF Supply or an equity injection from DOF ASA to DOF Subsea. Should the latter be the case, DOF ASA may raise capital through an equity offering which may be dilutive for current shareholders.

Performance depends on the company’s ability to renew, extend and win contracts

Contracts DOF’s future revenue streams are dependent on the company’s ability to secure new contracts and to renew and extend existing contracts. Should the company fail to do so, this will hurt profitability.

Dependent on its relationship with its major clients

Client risk DOF’s operations and financials may be materially and adversely affected if any of its major clients fail to compensate for DOF’s services, were to terminate their contracts, fail to renew existing contract or refuse to award future contracts to the company.

Delay of newbuilds will have an adverse effect on DOF’s financials

Delay of newbuilds DOF has scheduled delivery of two newbuilds in 2018 and 2019, namely the PLSVs Skandi Recife and Skandi Olinda. Should these newbuilds be delayed, this would have a negative impact on DOF’s financial position.

Dependent on the level of exploration and development and production activity in the oil and gas industry

E&P activity DOF ASA’s business, results of operations and financial condition depend on the level of exploration, development and production activity in the oil and gas industry, which is significantly affected by, among other things, oil and gas prices. Thus, a low oil price may adversely affect the spending levels of the oil companies and thus negatively impact DOF’s operations, results and financial condition.

The entry of newbuilds may result in oversupply and low utilisation and day rates

Newbuilds Significant increases in the oil and gas prices may lead to a high level of orders for new offshore support vessels. The entry of new vessels will increase supply and could result in low day rates and utilisation for vessels if the demand side is not able to absorb the newbuilds. This will in turn affect DOF’s business negatively.



Reported numbers and forecasts



INCOME STATEMENTNOKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

Net revenue 9,289 10,196 10,291 8,134 6,666 7,621 8,143 8,941 9,710 9,702

Revenue growth 10% 1% -21% -18% 14% 7% 10% 9% 0%

EBITDA 2,865 3,494 3,362 2,620 1,798 2,220 2,452 2,632 2,741 2,701

Depreciation and impairments PPE -1,113 -1,045 -1,540 -2,824 -2,155 -992 -992 -992 -992 -992

EBITA 1,752 2,449 1,822 -204 -357 1,228 1,460 1,640 1,749 1,709

Amortisation and impairments 0 0 0 0 0 0 0 0 0 0

EBIT 1,752 2,449 1,822 -204 -357 1,228 1,460 1,640 1,749 1,709

of which associates 67 78 64 -86 62 260 382 403 402 402

Associates excl. from EBIT 0 0 0 0 0 0 0 0 0 0

Net financials -1,820 -1,990 -2,233 561 -762 -861 -808 -748 -693 -642

Pre-Tax Profit -68 459 -411 357 -1,119 367 653 892 1,055 1,067

Reported taxes 16 78 95 -158 -236 -40 -40 -40 -40 -40

Net profit from cont. operations -52 537 -316 199 -1,355 327 613 852 1,015 1,027

Discontinued operations 0 0 0 0 0 0 0 0 0 0

Minority interest -139 -419 -35 -26 113 -85 -211 -311 -378 -397

Net profit to equity -191 118 -351 173 -1,242 241 402 541 638 630

EPS -1.7 1.1 -3.2 0.2 -0.6 0.1 0.1 0.2 0.2 0.2

DPS 0 0 0 0 0 0 0 0 0 0

of which ordinary 0 0 0 0 0 0 0 0 0 0

of which extraordinary 0 0 0 0 0 0 0 0 0 0

Profit margin in percent

EBITDA 31% 34% 33% 32% 27% 29% 30% 29% 28% 28%

EBITA 19% 24% 18% -3% -5% 16% 18% 18% 18% 18%

EBIT 19% 24% 18% -3% -5% 16% 18% 18% 18% 18%

Adjusted earnings

EBITDA (adj.) 2,857 3,027 3,030 2,449 1,796 2,220 2,452 2,632 2,741 2,701

EBITA (adj.) 1,744 1,982 2,008 1,386 787 1,228 1,460 1,640 1,749 1,709

EBIT (adj.) 1,744 1,982 2,008 1,386 787 1,228 1,460 1,640 1,749 1,709

EPS (adj.) 3.1 3.3 8.1 0.1 -0.1 0.1 0.1 0.2 0.2 0.2

Adjusted profit margins in percent

EBITDA (adj.) 31% 30% 29% 30% 27% 29% 30% 29% 28% 28%

EBITA (adj.) 19% 19% 20% 17% 12% 16% 18% 18% 18% 18%

EBIT (adj.) 19% 19% 20% 17% 12% 16% 18% 18% 18% 18%

Performance metrics

CAGR last 5 years

Net revenue n.a. n.a. n.a. n.a. n.a. -4% -4% -3% 4% 8%

EBITDA n.a. n.a. n.a. n.a. n.a. -5% -7% -5% 1% 8%

EBIT n.a. n.a. n.a. n.a. n.a. -7% -10% -2% -254% -237%

EPS n.a. n.a. n.a. n.a. n.a. n.a. -35% n.a. 4% n.a.

DPS n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

Average EBIT margin 19% 22% 20% 15% 12% 12% 10% 10% 14% 18%

Average EBITDA margin 31% 33% 33% 33% 32% 31% 30% 30% 29% 29%

VALUATION RATIOSValuation ratios/adjusted earnings 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

P/E (adj.) 8.8 3.8 0.5 6.9 n.m. 10.6 6.4 4.8 4.1 4.1

EV/EBITDA (adj.) 9.1 8.3 8.5 9.4 12.2 9.7 8.3 7.3 6.6 6.2

EV/EBITA (adj.) 14.9 12.7 12.8 16.6 27.9 17.5 14.0 11.7 10.3 9.9

EV/EBIT (adj.) 14.9 12.7 12.8 16.6 27.9 17.5 14.0 11.7 10.3 9.9

Valuation ratios/reported earnings

P/E n.m. 12.0 n.m. 6.3 n.m. 10.6 6.4 4.8 4.1 4.1

EV/Sales 2.8 2.5 2.5 2.8 3.3 2.8 2.5 2.1 1.9 1.7

EV/EBITDA 9.1 7.2 7.7 8.8 12.2 9.7 8.3 7.3 6.6 6.2

EV/EBITA 14.9 10.3 14.1 n.m. n.m. 17.5 14.0 11.7 10.3 9.9

EV/EBIT 14.9 10.3 14.1 n.m. n.m. 17.5 14.0 11.7 10.3 9.9

Dividend yield (ord.) n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

FCF yield -3% 83% 14% 61% -12% 50% 55% 64% 65% 68%

Payout ratio 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%




BALANCE SHEETNOKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

Intangible assets 418 418 436 330 324 324 324 324 324 324

of which R&D 0 0 0 0 0 0 0 0 0 0

of which other intangibles 0 0 0 0 0 0 0 0 0 0

of which goodwill 418 418 436 330 324 324 324 324 324 324

Tangible assets 23,889 23,867 23,188 22,199 20,667 19,900 19,138 18,378 17,618 16,858

Shares associates 1,172 1,246 513 808 1,021 1,006 1,044 1,081 1,265 1,448

Interest bearing assets 0 0 0 0 0 0 0 0 0 0

Deferred tax assets 328 655 1,353 951 715 715 715 715 715 715

Other non-int. bearing assets 0 0 0 0 0 0 0 0 0 0

Other non-current assets 283 512 905 1,152 1,129 1,129 1,129 1,129 1,129 1,129

Total non-current assets 26,090 26,698 26,395 25,440 23,856 23,074 22,351 21,627 21,051 20,475

Inventory 70 91 77 57 60 63 68 74 81 82

Accounts receivable 1,832 2,240 2,112 1,506 1,580 1,566 1,673 1,837 1,995 1,994

Other current assets 525 710 512 535 340 340 340 340 340 340

Cash and bank 2,219 2,609 2,056 2,192 2,239 2,079 1,666 1,598 1,983 2,657

Total current assets 4,646 5,650 4,757 4,290 4,219 4,048 3,747 3,850 4,399 5,074

Assets held for sale 0 0 477 0 0 0 0 0 0 0

Total assets 30,736 32,348 31,629 29,731 28,075 27,122 26,098 25,477 25,450 25,548

Shareholders equity 3,381 3,414 1,904 4,626 3,941 4,377 4,779 5,320 5,958 6,588

of which preferred stock 0 0 0 0 0 0 0 0 0 0

of which Equity of hyb. debt 0 0 0 0 0 0 0 0 0 0

Minority interest 2,965 3,455 3,281 3,520 3,401 3,486 3,697 4,008 4,386 4,783

Total Equity 6,346 6,869 5,185 8,146 7,342 7,864 8,476 9,328 10,343 11,371

Deferred tax 78 59 42 1 16 16 16 16 16 16

Long term int. bearing debt 19,182 17,220 20,701 18,025 16,943 14,789 13,019 14,227 13,076 12,142

Non-current liabilities 0 0 0 0 0 0 0 0 0 0

Pension provisions 0 0 0 0 0 0 0 0 0 0

Other long-term provisions 0 0 0 0 0 0 0 0 0 0

Other long-term liabilities 451 469 314 186 126 126 126 126 126 126

Convertible debt 0 0 0 0 0 0 0 0 0 0

Shareholder debt 0 0 0 0 0 0 0 0 0 0

Hybrid debt 0 0 0 0 0 0 0 0 0 0

Total non-curr. liabilities 19,711 17,748 21,057 18,212 17,085 14,931 13,161 14,369 13,218 12,284

Short-term provisions 0 0 0 0 0 0 0 0 0 0

Accounts payable 1,040 1,192 1,439 1,061 874 931 998 1,104 1,212 1,217

Other current liabilities 491 903 568 650 677 677 677 677 677 677

Short term interest bearing debt 3,147 5,636 3,380 1,661 2,097 2,721 2,786 0 0 0

Total current liabilities 4,678 7,731 5,387 3,372 3,648 4,328 4,461 1,781 1,889 1,894

Liab.for assets held for sale 0 0 0 0 0 0 0 0 0 0

Total liabilities and equity 30,735 32,348 31,629 29,730 28,075 27,122 26,098 25,477 25,450 25,548

Balance sheet and debt metrics

Net debt 20,110 20,247 22,025 17,494 16,801 15,430 14,139 12,629 11,093 9,484

Working capital 896 946 694 387 429 362 407 472 528 522

Invested capital 26,986 27,644 27,089 25,828 24,285 23,436 22,757 22,099 21,578 20,997

Capital employed 26,058 24,617 26,242 26,359 24,427 22,794 21,637 23,696 23,562 23,654

ROE 3% -13% 5% -29% 6% 9% 11% 11% 10% 9%

ROIC 5% 8% 5% -1% -3% 4% 5% 6% 7% 7%

Net debt/EBITDA 7.0 5.8 6.6 6.7 9.3 7.0 5.8 4.8 4.0 3.5

Interest coverage 1.4 1.9 1.5 -0.1 -0.3 1.4 1.8 2.1 2.5 2.6

Equity ratio 11% 11% 6% 16% 14% 16% 18% 21% 23% 26%

Net gearing 317% 295% 425% 215% 229% 196% 167% 135% 107% 83%




CASH FLOW STATEMENTNOKm 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E

EBITDA (adj.) for associates 2,798 3,417 3,298 2,706 1,736 1,960 2,071 2,228 2,338 2,299

Paid taxes -29 -10 -215 -58 -62 -40 -40 -40 -40 -40

Net financials -1,288 -1,282 -1,212 -1,028 -897 -861 -808 -748 -693 -642

Change in Provisions 0 0 0 0 0 0 0 0 0 0

Change in other LT non-IB -206 -538 -1,246 27 199 0 0 0 0 0

Cash flow to/from associates 0 0 0 0 0 275 344 367 218 218

Dividends paid to minorities 0 0 0 0 0 0 0 0 0 0

Other adj. to reconcile to cash flow 226 124 719 -255 -228 0 0 0 0 0

Funds from operations (FFO) 1,501 1,711 1,344 1,392 748 1,333 1,567 1,807 1,824 1,835

Change in NWC -216 -457 674 292 -3 67 -45 -65 -56 5

Cash flow from op. (CFO) 1,285 1,254 2,018 1,684 745 1,401 1,522 1,742 1,768 1,841

Capital Expenditure -1,448 -2,163 -3,911 -1,975 -985 -225 -231 -232 -232 -232

Free Cash Flow before A&D -163 -909 -1,893 -291 -240 1,176 1,291 1,510 1,536 1,609

Proceeds from sale of assets 87 2,082 1,953 1,531 32 0 0 0 0 0

Acquisitions 0 0 0 0 0 0 0 0 0 0

Free cash flow -76 1,173 60 1,240 -208 1,176 1,291 1,510 1,536 1,609

Dividends paid 0 0 0 0 0 0 0 0 0 0

Equity issues / buybacks 0 0 0 1,044 494 195 0 0 0 0

Net change in debt 432 -859 -619 -2,053 -230 -1,531 -1,705 -1,578 -1,150 -935

Other financing adjustments -77 76 6 -96 -8 0 0 0 0 0

Other non-cash adjustments -205 0 0 1 -1 0 0 0 0 0

Change in cash 74 390 -553 136 47 -160 -413 -68 385 674

Cash flow metrics

Capex/D&A 130% 206% 281% 70% 46% 23% 23% 23% 23% 23%

Capex/Sales 21% 42% 24% 15% 3% 3% 3% 2% 2%

Key information

Share price year end (current) 26.92 12.74 3.82 1.03 0.62 0.82 0.82 0.82 0.82 0.82

Market cap 2,990 1,415 424 2,049 1,753 2,360 2,360 2,360 2,360 2,360

Enterprise value 26,065 25,117 25,730 23,063 21,955 21,277 20,197 18,997 17,839 16,627

Diluted no. of shares, year-end (m) 111 111 111 1,995 2,828 3,165 3,165 3,165 3,165 3,165

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Analyst shareholdings Nordea Markets equity and credit analysts do not hold shares in the companies that they cover. No holdings or other affiliations by analysts or associates. Fair value and sensitivity We calculate our fair values by weighting DCF, DDM, SOTP, asset-based and other standard valuation methods. Our fair values are sensitive to changes in valuation assumptions, of which growth, margins, tax rates, working capital ratios, investment-to-sales ratios and cost of capital are typically the most sensitive. It should be noted that our fair values would change by a disproportionate factor if changes are made to any or all valuation assumptions, owing to the non-linear nature of the standard valuation models applied (mentioned above). As a consequence of the standard valuation models we apply, changes of 1-2 percentage points in any single valuation assumption can change the derived fair value by as much as 30% or more. All research is produced on an ad hoc basis and will be updated when the circumstances require it

Marketing Material This research report should be considered marketing material, as it has been commissioned and paid for by the subject company, and has not been prepared in accordance with the regulations designed to promote the independence of investment research and it is not subject to any legal prohibition on dealing ahead of the dissemination of the report. However, Nordea Markets analysts are according to internal policies not allowed to hold shares in the companies/sectors that they cover.

Market-making obligations in shares or derivatives and other significant financial interest Nordea Markets has no market-making obligations in DOF ASA. Investment banking transactions Nordea Markets has been lead or co-lead manager in a public disclosed offer of financial instruments issued by DOF ASA over the previous 12 months.

Issuer Review This report has not been reviewed by the issuer prior to publication. Completion date 11 April 2018, 06:50 CET

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