Polarcus Pareto Securities Oil & Offshore Conference Sept 2013

www.polarcus.com 1

4-5 September, 2013

Rolf Ronningen, CEO

Tom Henrik Sundby, CFO

Polarcus Limited

www.polarcus.com 2

Disclaimer

This Presentation of Polarcus Limited (the “Company”) has been prepared solely for information purposes. This Presentation may not be

distributed, reproduced or used without the consent of the Company.

The information contained herein does not purport to contain all information concerning the Company. No party has made any kind of

independent verification of any of the information set forth herein, including any statements with respect to projections or prospects of the

business or the assumptions on which such statements are based. The Company nor any of its subsidiaries make any representations or

warranty, express or implied, as to the accuracy, reliability or completeness of this Presentation or of the information contained herein and shall

have no liability for the information contained in, or any omissions from, this Presentation.

Included in this Presentation are various “forward-looking statements”, including statements regarding the intent, opinion, belief or current

expectations of the Company or its management. Such forward-looking statements are not guarantees of future performance and involve known

and unknown risks, uncertainties and other factors that may cause the actual results, performance and outcomes to be materially different from

any future results, performance or outcomes expressed or implied by such forward-looking statements, including, among others, risks or

uncertainties associated with the Company’s business, segments, development, growth management, financing, market acceptance and

relations with customers, and, more generally, general economic and business conditions, changes in domestic and foreign laws and

regulations, taxes, changes in competition and pricing environments, fluctuations in currency exchange rates and interest rates and other

factors, including lack of operating history. Should one or more of these risks or uncertainties materialize, or should underlying assumptions

prove incorrect, actual results may vary materially from those described in this document.

No information contained herein constitutes, or shall be relied upon as constituting, any advice relating to the future performance of the

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

www.polarcus.com 3

Agenda

Highlights

Financials

Operations & Market update

Summary & Q&A

Appendices

1

2

3

4

5

www.polarcus.com 4

Polarcus in brief

• Seven high-end 3D seismic vessels ~11% market share

• Youngest most uniform fleet in industry

• 500+ professionals and global presence

• State of the art technology with complete broadband solution

• Specialized Arctic and low environmental impact offerings

• Clear strategy for delivering and delevering

• Listed on Oslo Børs Main List – Market Cap USD ~400 million

2008 2009 2010

Polarcus

launched

2008

20122011

Polarcus Asima in operation offshore west Greenland

www.polarcus.com 5

Highlights H1 2013

• A company in growth

– Revenues of USD 275.3 million, up 28% from H1 2012

– EBITDA of USD 104.0 million, up 51% from H1 2012

– EBIT of USD 57.9 million, up 84% from H1 2012

– Net Cash Flow from operating activities of USD 130.5 million,

up 39% from H1 2012

• Strengthening the balance sheet

– Sale of Polarcus Samur to TPAO with a long term

collaboration arrangement

– Reduced average interest rate to 7.1% through refinancing

• Strong operational performance

– Technical downtime < 5%

www.polarcus.com 6

Agenda

Highlights

Financials


Summary & Q&A

Appendices

1

2

3

4

5

www.polarcus.com 7

Key financials

Quarter ended Six months endedYear ended

(In millions of USD) 30-Jun-13 30-Jun-12 30-Jun-13 30-Jun-12 31-Dec-12

Revenues 130.5 114.3 275.3 214.2 529.3

Vessel operating expenses (71.3) (65.3) (155.4) (133.3) (312.7)

EBITDA 51.1 42.9 104.0 69.0 190.2

EBIT excluding impairment charges* 26.7 21.9 57.9 31.4 98.8

Net Financial Income/(Expenses) (20.4) (25.0) (41.6) (43.0) (83.4)

Net profit / (loss) for the period 6.3 3.4 16.1 (8.0) 9.8

Basic earnings / (loss) per share (USD) 0.012 0.007 0.032 (0.016) 0.020

Net cash flows from operating activities 90.1 47.8 130.5 93.9 203.7

Total assets (period end) 1,337.2 1,377.8 1,337.2 1,377.8 1,372.4

Total liabilities (period end) 838.1 915.9 838.1 915.9 891.0

Total Equity (period end) 499.1 461.9 499.1 461.9 481.4

Equity Ratio 37% 34% 37% 34% 35%

Capital expenditures 29.8 118.8 41.4 191.2 311.2

Cash and cash equivalents (period end) 145.5 59.5 145.5 59.5 43.8

Net interest bearing debt (period end) 591.7 749.9 591.7 749.9 749.8

www.polarcus.com 8

Key financials – historic development

114.3 130.5

-

50

100

150

200

Q1-1

0

Q2-1

0

Q3-1

0

Q4-1

0

Q1-1

1

Q2-1

1

Q3-1

1

Q4-1

1

Q1-1

2

Q2-1

2

Q3-1

2

Q4-1

2

Q1-1

3

Q2-1

3

Revenues

21.926.7

(10)

-

10

20

30

40

50

Q1-1

0

Q2-1

0

Q3-1

0

Q4-1

0

Q1-1

1

Q2-1

1

Q3-1

1

Q4-1

1

Q1-1

2

Q2-1

2

Q3-1

2

Q4-1

2

Q1-1

3

Q2-1

3

EBIT

20%

19%

42.951.1

(10)

-

10

20

30

40

50

60

70

Q1-1

0

Q2-1

0

Q3-1

0

Q4-1

0

Q1-1

1

Q2-1

1

Q3-1

1

Q4-1

1

Q1-1

2

Q2-1

2

Q3-1

2

Q4-1

2

Q1-1

3

Q2-1

3EBITDA

39%

38%

47.7

90.1

(20)

-

20

40

60

80

100

Q1-1

0

Q2-1

0

Q3-1

0

Q4-1

0

Q1-1

1

Q2-1

1

Q3-1

1

Q4-1

1

Q1-1

2

Q2-1

2

Q3-1

2

Q4-1

2

Q1-1

3

Q2-1

3

Cash from operations

www.polarcus.com 9

Fleet Utilization – 85% in H1 - 13

55%

81% 79%

89%85%

73%

53%

73%77%

81%86%

63%

72% 72%

30%

8% 3%

8%

6%

16%

13% 13%

35%

9%17%

10%13%

25%

13% 16% 18%

7%7%

19%13% 14%

10% 10%4%

1% 2% 3% 5% 3% 2% 4% 1% 2% 2% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1-1

0

Q2-1

0

Q3-1

0

Q4-1

0

Q1-1

1

Q2-1

1

Q3-1

1

Q4-1

1

Q1-1

2

Q2-1

2

Q3-1

2

Q4-1

2

Q1-1

3

Q2-1

3

Yard stay (including shakedown)

Transit

Multi-Client Seismic Contract

Exclusive Seismic Contract

www.polarcus.com 10

15

30 30 30 30 30 30 30 3

6 7 7 9 12

120

125

95

40

35

H 2 - 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0

Bank debt Sale leaseback USD 125m CB

USD 95m bond NOK 230m bond USD 35m CB

Robust balance sheet

10

110

(repurchasing

The vessels is

Optional)

• Long term fleet bank facility with fixed

interest of 5.6%

• New USD 95m bond with 8% interest to

refinance:

– USD 60 million 2nd lien 2011/2016 bond with

12.5% interest

– USD 35 million 2008/2013 Convertible bond

with 8.5% interest

• Improved terms on sale- lease back

from 12% to 10.8% implied interest rate

• Average interest rate reduced to 7.1%

New debt maturity profile

www.polarcus.com 11

Update on lawsuit filed by WesternGeco

• On 15 August 2013 WesternGeco filed a lawsuit in Texas, USA, for alleged

US patent infringement against Polarcus US Inc. and Polarcus Limited

• Applies to four method and apparatus patents for streamer steering and

positioning related to the DigiFIN™ lateral streamer control systems

purchased from ION Geophysical Corporation

• Polarcus believes that it has strong and valid defenses

– Polarcus' activities have not and do not infringe the US Patents

– Serious doubt as to whether US courts have jurisdiction over Polarcus

• Polarcus is confident that the lawsuit will not disrupt operational activities

www.polarcus.com 12

Polarcus share information

• Listed on the Oslo Stock

Exchange

• Market Cap USD ~400 million

• Included in the OBX and

OSEBX indices from June 2013

• ~2500 shareholders

• Free float ~85%

Shareholder Share %

ZICKERMAN HOLDING LT 40,571,476 8.00

VARMA MUTUAL PENSION 23,648,025 4.66

ZICKERMAN GROUP LTD 23,178,081 4.57

LOCAL TAPIOLA MUTUAL 21,600,000 4.26

SEB PRIVATE BANK S.A 16,284,410 3.21

VERDIPAPIRFONDET DNB 15,189,948 2.99

JP MORGAN CLEARING C 12,798,472 2.52

SKANDINAVISKA ENSKIL 11,855,191 2.34

EUROCLEAR BANK S.A./ 11,444,816 2.26

GOLDMAN SACHS & CO E 11,103,192 2.19

CLEARSTREAM BANKING 10,449,768 2.06

OYSTER 10,427,100 2.06

BLKRCK GLBL SMALLCAP 9,013,991 1.78

VERDIPAPIRFONDET DNB 8,100,000 1.60

STATE STREET BANK & 6,758,158 1.33

BNP PARIBAS SEC. SER 6,402,843 1.26

BNP PARIBAS SEC. SER 6,100,000 1.20

TVETERAAS EIENDOMSSE 5,673,362 1.12

SKANDINAVISKA ENSKIL 5,465,934 1.08

RAIFFEISEN BANK INTE 5,200,000 1.03

Top 20 Shareholders 261,264,767 52%

Other shareholders 245,931,412 48%

Total 507,196,179 100%

Top 20 Shareholders (as per 26 Aug)

www.polarcus.com 13

Agenda

Highlights

Financials


Summary & Q&A

Appendices

1

2

3

4

5

www.polarcus.com 14

Operational performance

• Technical downtime < 5% for Q2

• Completion of 12 month Woodside project in Q2 (~22,000 sq.km in 11 months)

– Production record of >2900sq.km in 30 days

• Deflector upgrade to reduce drag and increase streamer spread

– Currently operating 10 long streamers with 150m separation or 1350 m lateral spread

• Polarcus Naila back in solid production after 1 month off hire in Q3 13 due to thruster replacement

End August

Polarcus Naila

Polarcus Nadia

Polarcus AlimaPolarcus Amani

Polarcus Adira

Polarcus Samur

Current vessel locations

Vessel under Management

Polarcus Asima

www.polarcus.com 15

Polarcus Nadia & Naila propulsion upgrade

• Polarcus Nadia and Naila are the only vessels with thruster units in the PLCS fleet.

• Upgrade to Berg Propulsion Twin Fin™ conventional straight shaft is planned for H1 and H2 2014

• CAPEX of MUSD 10 per vessel

• 6 weeks at yard per vessel

• Significant improvement in fuel efficiency and bollard pull

• Upgrade to full 12 streamer capability

Prefabrication Installation Completion

www.polarcus.com 16

Multi-client library in the making

• MC Project Library now ~ 25,000 km² 3D data

• Established a new ‘core area’ in the UK

Southern Gas Basin in Q2 ‘13

– Strong revenues forecast for Q4 following the 27th

Round second tranche

• E.ON announced the largest UK gas basin

discovery for many years in Q3 ‘13

– Tolmount discovery on southern flank of core area

– Highly positive for exploration interest

• Project library NBV at USD 73.3 million end Q2

E.ON Tolmount

gas discovery

‘Catcher’ Projects

~6,100 sq. km

‘Ravenspurn’ Projects

~5,400 sq. km

www.polarcus.com 17

Global 3D Seismic Fleet Capacity

2013

2014

2015

60 60 61 62

0

10

20

30

40

50

60

70

2012 2013 2014 2015

Excludes COSL (3 vessels) & Sinopec (1 vessel)

• Estimated seismic fleet growth 2013 – 2015 net

2% YOY assuming vessel retirement

• Lead time for new build capacity traditionally

between 24 – 36 months

• Further fleet retirement expected as >20% of

the global 3D fleet is older than 20 years

* Vessel name may vary though are based on Polarcus interpretation

of peer groups fleet retirement plans.

Estimated seismic fleet growth

No. Vessels Company Vessel Streamer cap.

1 PGS Ramform Titan 16

1 Dolphin Sanco Swift 12

1 PGS Ramform Atlas 16

-1 Reflect Geowave Comander -8

-1 CGG Geo Barents -6

-1 Western Geco Western Patriot -8

0 Net growth 22

1 Dolphin Sanco Sword 12

1 Western Geco Amazon 1 16

1 Western Geco Amazon 2 16

-1 Western Geco Western Pride* -8

-1 PGS Pacific Explorer* -8

1 Net growth 28

1 PGS Ramform Opt 1 16

1 Dolphin Super Duke 16

1 PGS Ramform Opt. 2 16

-1 PGS Atlantic Explorer* -8

-1 CGG Artemis Arctic -6

1 Net growth 34

www.polarcus.com 18

Robust E&P demand

• Robust E&P growth expected YOY for the coming few years

• Marine seismic representing ~ 3% of Global Offshore E&P spend

• Seismic demand projected to grow ~10 % YOY 2013 – 2015

• Current oil price well within the comfort zone for continued E&P spending

0

20

40

60

80

100

120

140

2007 Report 2008 Report 2009 Report 2010 Report 2011 Report 2012 Report 2013

USD/bbl Comfort zone Brent crude oil

Source: DNB Markets

www.polarcus.com 19

Global seismic outlook

Russian Arctic: Rosneft &

Gazprom awarded extensive

acreage

Australasia: Strong outlook

for Myanmar, current

industry issues with permits

in Australia normalizing

West Africa: Continued high activity

with further growth potentials,

Namibia, Angola, Gabon and S Africa

South America: Significant activity in

Uruguay and Falklands and new

activity firming up in Brazil.

North America: Increased focus

from Supermajors and new WAZ

surveys in Nova Scotia

Central America: Strong activity in

Caribbean and northern S America

(Suriname, Guyana)

Mediterranean: Activity

in Med and Black Sea

Polarcus vessels

NW Europe: Consistent high

activity for MC and Contract

behind active license rounds

East Africa: Oil-majors

planning large surveys

Vessels under management

www.polarcus.com 20

0

5,000

10,000

15,000

20,000

25,000

2012 2013 2014 2015 2016 2017 2018

3D

in k

m²

Black Sea

Far East

Arctic

Projected increasing due to:

- New licensing

- Correction of existing

exploration plans

Russia 3D market outlook 2013-18

• Russian Arctic ~ 4 x the size of Gulf of

Mexico

• Significantly improved tax regime

accelerates interest

• Super majors partnering with Rosneft

& Gazprom

• Russian Arctic potentially holds ~ 10X

the BOE of the US GOM

• Russia is expected to absorb ~ 10% of

the global fleet seasonally from 2014

1,5

00

,00

0

35

4,0

00

74

,70

0

R U S S I A N L I C E N C E D A C R A G E Y T D

3 D R E Q U I R E M E N T T O C O V E R G E O L O G I C A L

S T R U C T U R E S

I N I T I A L 3 D C O M I T M E N T S 2 0 1 3 -

2 0 1 8

The New Russian offshore 3D Seismic market in km²

km

²

Projected 3D

demand

Source: NOC’s and Oil Companies exposed to the region

www.polarcus.com 21

Backlog

• USD ~215 million contract backlog*

• Contract backlog secured in the range of

USD 260k-330k/day

• Booked capacity Q3 2013 - 100%



* Inclusive of bareboat charter of Vyacheslav Tikhonov to SCF

Received contract tenders in USD million (As of Aug)

-

50

100

150

200

250

300

350

400

Dec-0

8

Fe

b-0

9

Ap

r-09

Jun

-09

Au

g-0

9

Oct-

09

Dec-0

9

Fe

b-1

0

Ap

r-10

Jun

-10

Au

g-1

0

Oct-

10

Dec-1

0

Fe

b-1

1

Ap

r-11

Jun

-11

Au

g-1

1

Oct-

11

Dec-1

1

Fe

b-1

2

Ap

r-12

Jun

-12

Au

g-1

2

Oct-

12

Dec-1

2

Fe

b-1

3

Ap

r-13

Jun

-13

Au

g-1

3

Millions

www.polarcus.com 22

Agenda

Highlights

Financials


Summary & Q&A

Appendices

1

2

3

4

5

www.polarcus.com 23

RIGHTSIZE, RIGHTDESIGN, RIGHTPLAN

• Strong operational performance

• Strengthening the balance sheet

• Focus on improving margins and generating cash

www.polarcus.com 24

Agenda

Highlights

Financials


Summary & Q&A

Appendices

1

2

4

5

3

www.polarcus.com 25

RIGHTSIZE RIGHTDESIGN RIGHTPLAN

Polarcus Nadia Polarcus Naila

Type 3D Vessel Type 3D Vessel

Design Ulstein SX124 Design Ulstein SX124

LOA 88.8m LOA 88.8m

Beam 19.0m Beam 19.0m

Streamer cap 12 Streamer cap 12

Speed 14.0 knots Speed 14.0 knots

Ice class ICE-C Ice class ICE-C

Year delivered 2009 Year delivered 2009

Ownership On sale lease back with

purchase option

Ownership On sale lease back with

purchase option

Polarcus Amani Polarcus Adira



LOA 92.0m LOA 92.0m




Ice class ICE-1A* Ice class ICE-1A*


Ownership 100% Ownership 100%

Polarcus Asima Polarcus Alima



LOA 92.0m LOA 92.0m




Ice class ICE-1A Ice class ICE-1A


Ownership 100% Ownership 100%

Barbaros Hayreddin Paşa Vyacheslav Tikhonov



LOA 84.2m LOA 84.2m




Ice class ICE-1A Ice class ICE-1A


Ownership Sold Ownership 100%

Under management

www.polarcus.com 26

First

Pass

Wide tow

High

Density

3D

Base-

line 4D

High

density

4D

4D

Monitor

Multi-

vessel

3D

Multi-

vessel

4D

Monitor

Arctic

Operations

Multi

Azimuth

Vessel +

Equipment

Personnel +

Procedures

Acquisition

Portfolio

Broadband Solutions

Polarcus offering

www.polarcus.com 27

Awards through RIGHTDESIGN

ICE-1A or 1A* Class1

Safe Arctic operations 1 POLARCUS ASIMA, ALIMA,

SAMUR, SELMA, AMANI & ADIRA

ULSTEIN X-BOW®

Improved efficiency and

reduced emissions Fuel: MGO with low

sulfur content

BWM-T 2

Removal of invasive species from ballast water2 POLARCUS ASIMA, ALIMA, SAMUR, SELMA, AMANI & ADIRA

IMO Green Passport

Multiple main engines and independent

propellers in case of failure

DYNPOS-AUTR

Systems redundancy

with DP2

CLEAN DESIGN

High specification

exhaust catalysts

Double hull – no oil contact

with outer skin

Bilge water cleaning system to

reduce contaminants to <5ppm

Triple – E™

Environmental &

Energy EfficiencySentinel® solid streamers

www.polarcus.com 28

Pioneering environmental leadership

DNV’s Triple-E™ is a voluntary environmental

performance rating scheme for ships, independent of

class, age and flag

Key measures of Energy & Environmental Efficiency :

– Environmental management practices

– Fuel efficient operations

– Energy efficient vessel design

– Verifiable monitoring, measurement and

documentation

Triple-E™ has four levels with ‘1’ as the highest

Leading

Sustained

Heightened awareness

Systemized

1

2

3

4

First Triple-E™ ‘Level 1’ in the world

www.polarcus.com 29

Debt overview

Debt Security SizeBalance

30 June 2013Tenure Maturity Interest

Convertible bond Unsecured USD 35m USD 35m 5 years Fully paid Jul-13 8.50%

Unsecured bond Unsecured NOK 230m NOK 230m 3 years Nov-14 14.00%

Unsecured bond Unsecured USD 95m USD 95m 5 years Jun-18 8.00%

Senior secured convertible bond Selma USD 125m USD 125m 5 years Apr-16 2.88%

Sale lease back Nadia & Naila USD 180m USD 165m 10 years Sep-19 ~10.8%

Fleet bank facility

Tranche 1Asima USD 80m USD 64m 12 years Aug-22 6.20%

Fleet bank facility

Tranche 2Alima USD 55m USD 46m 12 years Mar-23 5.10%

Fleet bank facility

Tranche 3Amani USD 114m USD 105m 12 years Mar-24 5.60%

Fleet bank facility

Tranche 4Adira USD 114m USD 109m 12 years Jun-24 5.60%

www.polarcus.com 30

Potential Arctic oil and gas resources

• The region within the Arctic circle covers

6% of the worlds surface, though a

USGS study estimated that the Arctic

could hold about 20% of the world’s

undiscovered but recoverable oil and

natural gas resources.

• Russia is estimated to hold more than

half of the total Arctic resources

Potential Arctic oil and gas resources: 84% is

estimated to be offshore

Source: E&Y calculations from US DOE and USGS data

www.polarcus.com 31

Attractiveness of Russian Arctic

• The new offshore tax regime represents a major break-through in Russian oil sector

• Specific tax rate has been reduced from 87% to 5 - 15% in the Arctic; guaranteed for

10 – 15 years – making the IRR very attractive for the oil companies even at a

moderate oil price.

Attractiveness of Arctic opportunities by country

www.polarcus.com 32

New offshore tax regime in Russia

• Offshore taxation represents a major break-

through in Russian oil sector taxation. The

overall marginal oil & gas specific tax rate

has reduced from 87% for brownfields to

5%-30% for offshore projects, depending on

the area.

• With the new tax regime, it is believed that

the Russian offshore projects can generate

IRRs exceeding 25% (depending on oil

price assumptions), which looks competitive

compared with the global deep-water

average of 24% for other regions.

• While it is too early to say whether there are

any commercial development opportunities

in Russian offshore, the area looks

extremely promising given the interest from

international majors and the fact that it is a

geological continuation of the West Siberian

oil province, where some of the world’s

largest fields were discovered.

www.polarcus.com 33

Polarcus Pareto Securities Oil & Offshore Conference Sept 2013

Business

Transcript of Polarcus Pareto Securities Oil & Offshore Conference Sept 2013