Q3 2016 - DOF Group Sub/IR/2016/DOF Subsea Financial Report Q3 2016.pdfDuring the 3rd quarter 2016...

financial report

STRENGTH THROUGH TRANSITION

Q3 2016

DOF Subsea ASThormøhlens gate 53 C5006 BergenNORWAYwww.dofsubsea.com

Index

Financial Report 3rd quarter 2016 . . . . . . . . . . . . . . . . . . .4

Financial statements 3rd quarter 2016 . . . . . . . . . . . . . . .8

Consolidated statement of comprehensive income . . . . . . . . . . . 8

Consolidated statement of financial position . . . . . . . . . . . . . . . . . . 9

Consolidated statement of financial position . . . . . . . . . . . . . . . . 10

Consolidated statement of cash flows. . . . . . . . . . . . . . . . . . . . . . . . 11

Consolidated statement of changes in equity . . . . . . . . . . . . . . . . 12

Notes to the financial statements . . . . . . . . . . . . . . . . . . 14

Note 1 Management reporting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Note 2 Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Note 3 Financial income and expenses . . . . . . . . . . . . . . . . . . . . 16

Note 4 Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Note 5 Tangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Note 6 Net interest-bearing debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Note 7 Financial instruments and hedging activities . . . . . 19

Note 8 Transactions with related parties . . . . . . . . . . . . . . . . . . 20

Note 9 Investments in associates and joint ventures. . . . . 20

Note 10 Events after the consolidated statement of financial position date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Note 11 Shareholder information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Note 12 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Note 13 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Supplemental information . . . . . . . . . . . . . . . . . . . . . . . . . 24

Condensed statement of comprehensive income 5 last quarters . . . . . . . . . . . . . . . . . . . . 24

Condensed statement of financial position 5 last quarters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Key figures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

Financial Report Q3 2016 | DOF SUBSEA

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HeadlinesIn the 3rd quarter of 2016, DOF Subsea had an oper-ating income of NOK 1 132 million (vs. NOK 1 904 million in the 3rd quarter of 2015) with an EBITDA of NOK 396 million (NOK 452 million). The EBIT was NOK 62 million (NOK 273 million) after depreciation and impairment of NOK 334 million (NOK 179 million). The net financial income was NOK 129 million (loss NOK 605 million) and the profit before tax was NOK 191 million (loss NOK 332 million). The operating in-come for the first 9 months of 2016 was NOK 4 098 million (NOK 5 326 million) with an EBITDA of NOK 1 379 million (NOK 1543 million) and an EBIT of NOK 436 million (NOK 1 039 million) after depreciations and impairment of NOK 944 million (NOK 503 million). The financial income was NOK 238 million (loss NOK 913 million) giving a profit before tax of NOK 673 million (NOK 126 million).

Key figures (NOK million) 3Q 2016 3Q 2015 YTD 2016 YTD 2015

Operating income 1 132 1 904 4 098 5 326

EBITDA 396 452 1 379 1 543

EBIT 62 273 436 1 039

Net interest-bearing debt 8 864 9 595 8 864 9 595

EBITDA proportional method 447 553 1 487 1 773

EBITDA proportional method excluding profit from sale of non-current assets 447 552 1 413 1 526

In July the Group was awarded a 5+2+2 year IMR contract with Shell Australia, in August the JV vessel Skandi Acu entered into a 8 year contract with Petrobras and Skandi Salvador was awarded a 1+1 year IMR contract with Petrobras. In September the Group entered into an agreement with AKASTOR ASA to sell the vessel Skandi Santos with esti-mated delivery to the new owners in November/December. The agreement is dependent on inspection of the vessel and final approval. During the 3rd quarter the Group saw a mixed project activity level, especially in the North Sea and in North America. During the quarter several vessels have been in dock for upgrade and maintenance in addition idle time between projects has increased and vessel were repo-sitioned. The vessel utilization in the 3rd quarter was 80 %, where the TC vessel utilization was 82 % and the project vessel utilization was 75 %.

Operational events 3rd quarterAs of 30th of September 2016, the Group’s fleet comprised 21 owned vessels, 2 chartered-in vessels, and 4 vessels under construction, a ROV fleet of 63 units and 4 ROVs on order.

During the 3rd quarter 2016 the Asia Pacific region conducted IMR work for Shell Philippines, Chevron Australia and Saipem in Indonesia. In the Atlantic region, the Group has been doing engineering, survey, light construction and in-stallation work for Shell, Eni, Maersk, Teekay, BW, HMC, Repsol and Yinson. In the North American region, the Group has conducted IMR work for Chevron, Husky, Statoil, Shell, Emera, Noble, and survey and positioning work for HMC. In Brazil, the Group has been engaged in inspection work, survey and installation work for Petrobras.

In July, Shell Australia awarded the Group a 5+2+2 year IMR contract. Under the IMR contract the Group will provide project management, engineering and support services for the Prelude field off the coast of Western Australia. In August the JV vessel Skandi Acu entered into a 8 year contract with Petrobras after the vessel had been through an extensive test program. The vessel is a state of the art PLSV with a 650 ton tiltable lay tower. In August Petrobras awarded the Group a 1+1 year IMR contract on the Skandi Salvador, and several contracts was won in the APAC region securing the utilization of the Skandi Singapore and Skandi Hercules. In September the Group entered into an agreement to sell the vessel Skandi Santos with estimated delivery to the new owners in November/December. The Group also took first delivery of the JV vessel Skandi Buzios from Vard and the vessel will install the 650 ton tiltable lay tower in Holland, thereafter the vessel will undergo an extensive test program before she will enter into an 8 years contract with Petrobras in 2nd quarter 2017. During the 3rd quarter 2016, the utilization of the Group’s vessels was 80 %. The utilization for the project vessels during the quarter was 75% and for the TC vessels 82 %. The main reasons for the low utilization of the TC vessels were repair, maintenance and re-positioning of Skandi Achiever, idle time on Skandi Salvador before she entered into contract with Petrobras, repair and maintenance on Skandi Hercules and Skandi Singapore and idle time between projects on several vessels in the Subsea regions.

Utilization 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015

Project vessels 75% 92% 79 % 74 % 76 %

Time charter vessels 82% 82% 93 % 91 % 97 %

Fleet 80% 87% 88 % 85 % 88 %

All utilization of vessel numbers is based on actual avail-able days not excluding days at yard for dry-docking, repair/upgrading, transit or idle time between projects and charter contracts.

Financial Report 3rd quarter 2016

| Financial Report Q3 2016DOF SUBSEA

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Consolidated statement of comprehensive income and consolidated statement of financial positionIn the 3rd quarter of 2016, the Group achieved an operating income of NOK 1 132 million compared to an operating income of NOK 1 904 million for the 3rd quarter of 2015. Operating profit before depreciation (EBITDA) was NOK 396 million (NOK 452 million) and the operating profit after depreciation and write down (EBIT) was NOK 62 million (NOK 273 million). Depreciation and impairment amounted to NOK 334 million (NOK 179 million), of which NOK 194 million was impairment.

NOK million 3Q 2016 3Q 2015 Change %

Operating income 1 132 1 904 -41 %

Operating expenses 735 1 452 -49 %

EBITDA 396 452 -12 %

EBIT 62 273 -77 %

Net financial income was NOK 129 million (net financial loss NOK 605 million), whereas NOK 225 million (loss NOK 450 million) of the net financial income was unrealized gains on financial instruments. The profit before tax was NOK 191 million (loss NOK 332 million) and the profit for the period was NOK 170 million (loss NOK 312 million).

For the first 9 months 2016 DOF Subsea had an operating income of NOK 4 098 million (vs. NOK 5 326 million in 2015) with an EBITDA of NOK 1 379 including a sales gain of NOK 73 million (NOK 1 543 million including a sales gain of NOK 205 million). The EBIT was NOK 436 million (NOK 1 039 million) after depreciation and im-pairment of NOK 944 million (NOK 503 million). The net financial income was NOK 238 million (loss NOK 913 million) and the profit before tax was NOK 673 million (NOK 126 million) and the profit for the period was NOK 585 million (NOK 123 million).

The Group’s total assets were NOK 17 661 million (NOK 18 553 million) where non-current assets amounted to NOK 15 259 million (NOK 15 086 million), including NOK 647 million (NOK 810 million) in intangible assets. Current assets were NOK 2 402 million (NOK 3 467 million) of which NOK 1 137 million (NOK 1 487million) was cash and cash equivalents.

NOK million 30 .09 .2016 30 .09 .2015 Change %

Tangible assets 12 918 13 295 -3 %

Cash and cash equivalents 1 137 1 487 -24 %

NIBD 8 864 9 595 - 8 %

Total equity 6 437 5 641 14 %

The total equity was NOK 6 437 million (NOK 5 641 million), including non-controlling interests of NOK 222 million (NOK 261 million). Non-current liabilities, including non-current provisions for commitments, were NOK 8 944 million (NOK 8 593 million). Current lia-bilities were NOK 2 280 million (NOK 4 320 million) of which NOK 1 396 million (NOK 2 909 million) were short-term portion of debt. The net interest-bearing debt (NIBD) was NOK 8 864 million (NOK 9 595 mil-lion). By the end of 3rd quarter the book equity ratio was 36,5 %, and the value adjusted equity ratio was 41 %. The value-adjusted equity ratio is calculated by adjusting the book equity and total assets by excess values on all owned vessels.

Cash and cash equivalents has changed due to refinancing of vessels, repayment of debt, instalments and change in working capital. Net interest-bearing debt was NOK 8 864 million representing 51 % of total assets and 47 % of value adjusted assets.

Net cash flow from operating activities in the 3rd quarter 2016 was NOK 350 million (NOK 301 million). Cash flow from investing activities was negative NOK 40 million (negative NOK 167 million) of which NOK 29 million is from investment in assets that increase or will increase capacity for the Group. Cash flow from financing activities was negative NOK 242 million (negative NOK 67 million) of which NOK 444 million was instalment on long term interest bearing debt. At the end of the 3rd quarter the Group’s cash and cash equivalents was NOK 1 137 million (NOK 1 487 million).

Debt, financing and liquidityDuring the quarter the Group has paid ordinary instal-ments on outstanding debt. For the new building program owned 50/50 with Technip the 1st tranche of the financing on Skandi Buzios was drawn during the quarter upon 1st delivery of the vessel, the 2nd tranche will be drawn medio January.


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The Group’s short portion of debt as at 30th of September 2016 totals NOK 1 396 million, and includes balloons, drawn credit facilities and ordinary instalments. The Group is in progress to refinance balloons and loans that mature over the next 12 months.

Financial riskThe Group’s operating income is in NOK, USD, AUD, GBP and BRL while the Group’s loans are distributed between NOK and USD. This exposes the Group to the risk of ex-change rate fluctuations. The Group has an active exchange rate policy, and uses derivatives to hedge the exchange rate exposure.

The Group is exposed to fluctuations in interest rates. Part of the Group’s loans has fixed interest rates, reducing the exposure. The Group has an active interest rate policy, and uses derivatives to hedge the interest rate exposure.

ShareholdersThe shares in DOF Subsea AS are 100 % owned by DOF Subsea Holding AS. The number of outstanding shares is 119,733,714, with book equity of NOK 53,76 per share. The value-adjusted equity per share as per 30th of September was NOK 65,00.

EmployeesAs per 30th of September 2016, the number of full time employees in the DOF Subsea Group was 1 372 persons. The numbers do not include marine employees that are employed in DOF Management and Norskan.

The FleetAs per 30th of September, the Group fleet comprised 21 owned vessels, 2 chartered-in vessels and 4 vessels under construction.

Contract Coverage** Contract coverage excludes master service agreements (MSAs) within

the subsea project segment. Under the MSAs only confirmed POs are

accounted for.

Forward looking statementThe Board of Directors is pleased with the financial numbers for 3rd quarter of 2016. In order to adjust the Group’s capacity to the challenging market conditions, needed cost cutting measures have continued in 2016. The organization has been adapted to the underlying activity, vessels have been re-allocated between regions in order to secure utilization and chartered-in vessels from 3rd parties have been redelivered.

The firm contract backlog amounts to approximately NOK 18.5 billion, and including options approximately NOK 35.6 billion as at 30th of September 2016. However, the Group is exposed to the short-term market conditions on the subsea project vessels. On these vessels, management is working to increase the backlog.

The Board of Directors expect the challenging market conditions to continue, with an oil price of about USD 45 per barrel, the current cost focus in the oil industry and over-supply of vessels, a weak market is expected. This increase the risk for further impairment of the Group’s non-current assets. The cost cutting measures taken so far have proved to be needed, and the Board of Directors and the Management has a strong focus on continuously adjusting the Group’s capacity and risk ex-posure to the market conditionsgoing forward.

Bergen, 15th November 2016The Board of DOF Subsea AS

Contact information:Mons S. Aase, CEO +47 916 61 012Marianne Møgster +47 993 06 916

DOF Subsea ASThormølens gate 53 C5006 Bergen www.dofsubsea.com


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Amounts in NOK million

Financial statements 3rd quarter 2016

Consolidated statement of comprehensive income

Note 3Q 2016 3Q2015 YTD 2016 YTD 2015 2015

Operating income 1, 2 1 132 1 904 4 098 5 326 6 891

Payroll expenses -394 -510 -1 236 -1 576 -2 051

Other operating expenses -370 -915 -1 640 - 2 472 -3 113

Share of net income of associates and joint ventures 1, 8 29 -27 84 59 163

Profit from sale of non-current assets - 1 73 205 210

Total operating expenses -735 -1 452 -2 719 -3 783 -4 791

Operating profit before depreciation (EBITDA) 1, 2 396 452 1 379 1 543 2 100

Depreciation and impairment 4 -334 -179 -944 -503 -703

Operating profit (EBIT) 62 273 436 1 039 1 397

Financial income 3 5 8 39 29 50

Financial expenses 3 -113 -145 -385 -439 -613

Realized gain / loss on financial instruments 3 12 -17 -83 7 -21

Unrealized gain / loss on financial instruments 3 225 -450 666 -510 -592

Net financial income / loss 129 -605 238 -913 -1 176

Profit / loss before tax 191 -332 673 126 221

Tax expense -21 20 -88 -3 -44

Profit / loss for the period 170 -312 585 123 177

Other comprehensive income

Items that may be subsequently reclassified to profit / loss

Currency translation difference (CTA) -35 -35 -33 -37 73

Cash flow hedges - 10 - 20 23

Share of other comprehensive income of associates and joint ventures 8 -28 -202 218 -334 -450

Items that will not be subsequently reclassified to profit / loss

Defined benefit plan actuarial gains / losses - - - - -

Other comprehensive income / loss net of tax -63 -228 185 -352 -354

Total comprehensive income for the period 107 -540 770 -229 -176

Total comprehensive income attributable to:

Non-controlling interests -6 7 -21 14 22

Owners of the parents 113 -547 791 -243 -199


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Consolidated statement of financial position

Assets Note 30 .09 .2016 30 .09 .2015 31 .12 .2015

Deferred tax asset 266 319 320

Goodwill 381 490 478

Intangible assets 647 810 798

Vessels 4 11 600 9 899 11 999

ROVs 4 893 930 963

Machinery and other equipment 4 392 454 455

Newbuilds 4 32 2 013 7

Tangible assets 12 918 13 295 13 425

Investment in associates and joint ventures 1, 8 637 275 336

Other non-current receivables 6 1 056 706 858

Financial assets 1 693 981 1 194

Non-current assets 15 259 15 086 15 417

Trade receivables 780 1 451 1 152

Other current receivables 6 486 528 408

Total receivables 1 265 1 980 1 560

Restricted cash 305 392 390

Unrestricted cash and cash equivalents 831 1 095 1 074

Cash and cash equivalents 5 1 137 1 487 1 464

Asset held for sale 4, 9 - - 477

Current assets including assets held for sale 2 402 3 467 3 501

Total assets 17 661 18 553 18 919


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Equity and liabilities Note 30 .09 .2016 30 .09 .2015 31 .12 .2015

Paid-in equity 10 3 844 3 844 3 844

Other equity 2 370 1 535 1 579

Non-controlling interests 222 261 269

Total equity 6 437 5 641 5 692

Deferred taxes 1 7 2

Pensions 12 12 12

Other non-current liabilities - 2 -

Non-current provisions for commitments 13 21 15

Bond loans 5 1 296 1 292 1 293

Debt to credit institutions 5 7 519 7 076 8 288

Financial non-current derivatives 6 98 176 163

Other non-current liabilities 18 28 22

Non-current liabilities 8 931 8 572 9 765

Short portion of debt 5 1 396 2 909 1 822

Trade payables 510 873 838

Other current liabilities 6 374 537 526

Current liabilities 2 280 4 320 3 186

Liabilities held for sale 5 - - 260

Current liabilities including liabilities held for sale 2 280 4 320 3 447

Total liabilities 11 224 12 912 13 226

Total equity and liabilities 17 661 18 553 18 919



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Consolidated statement of cash flows

Note 3Q 2016 3Q 2015 YTD 2016 YTD 2015 2015

Operating profit (EBIT) 62 273 436 1 039 1 397

Depreciation and impairment 4 334 179 944 503 703

Profit from sale of non-current assets - -1 -73 -205 -210

Share of net income of associates and joint ventures 1, 8 -29 27 -84 -59 -163

Change in trade receivables 423 -123 372 106 405

Change in trade payables -294 98 -329 76 41

Changes in other working capital -32 40 56 -67 -17

Exchange rate effect on operating activities 7 -49 -79 -91 -14

Cash flow from operating activities 472 444 1 243 1 303 2 143

Interest received 2 7 28 24 32

Interest paid -110 -126 -399 -433 -638

Tax paid -14 -24 -39 -132 -191

Net cash flow from operating activities 350 301 832 761 1 346

Sale of tangible assets - 1 551 976 992

Purchase of tangible assets 4 -29 -106 -294 -2 578 -3 364

Sale of shares - - - 417 417

Purchase of shares -2 - -2 - -

Dividends received - - 3 3 3

Changes in other receivables and liabilities -9 -62 -254 -298 -406

Cash flow from investing activities -40 -167 4 -1 478 -2 357

Proceeds of interest-bearing debt -687 825 319 2 844 3 891

Instalments on interest-bearing debt 444 -667 -1 410 -2 630 -3 420

Dividend / Group contributions paid - -225 - -225 -225

Payments to non-controlling interests - - -26 -18 -18

Cash flow from financing activities -242 -67 - 1 116 -29 228

Net change in cash and cash equivalents 68 67 -280 -746 -783

Cash and cash equivalents at the beginning of period 1 085 1 416 1 464 2 119 2 120

Exchange rate effect on cash and cash equivalents -16 3 -47 114 128

Cash and cash equivalents at the end of the period 1 137 1 487 1 137 1 487 1 464

A fleet loan was refinanced in 1st quarter 2016 and the loan was increased with NOK 113 million. In 3rd quarter 2016 the finance transaction is presented net. In 1st and 2nd quarter 2016 the finance transaction was presented gross, with NOK 800 million as Proceeds of interest-bearing debt, and NOK 687 million as Instalments on interest-bearing debt. Cash flow from finance transactions of NOK 242 million are all related to instalments on interest-bearing debt.


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Consolidated statement of changes in equity

Share

capital

Share

premium

Other paid-in capital

Retained earnings

Currency translation

differences

Cash flow

hedges

Total

Non- controlling

interests

Total

equity

Equity at 01 .01 .2016 1 197 516 2 130 1 498 81 - 5 422 269 5 692

Profit / loss for the period - - - 606 - - 606 -21 585

Other comprehensive income for the period - - - 218 -33 - 185 - 185

Total comprehensive income for the period - - - 824 -33 - 791 -21 770

Changes in non-controlling interests - - - - - - - -26 -26

Equity at 30 .09 .2016 1 197 516 2 130 2 324 46 - 6 213 222 6 437

Equity at 01 .01 .2015 1 197 741 2 130 1 793 8 -23 5 847 265 6 112

Profit / loss for the period - - - 109 - - 109 14 123

Other comprehensive income for the period - - - -334 -37 20 -352 - -352

Total comprehensive income for the period - - - -225 -37 20 -243 14 -229

Dividends - -225 - - - - -225 - -225

Changes in non-controlling interests - - - - - - - -18 -18

Equity at 30 .09 .2015 1 197 516 2 130 1 568 -29 -4 5 379 261 5 641

Cash flow hedges and change in defined benefit actuarial gains / losses are presented after tax. Tax rate used is 25-34 %.


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Notes to the financial statements

Note 1 Management reporting

Consolidated statement of comprehensive income

YTD 2016Consistent with

management reportingReconciliation

to equity method YTD 2016

Total operating income 4 298 -200 4 098

Total operating expenses -2 824 22 -2 802

Share of net income of associates and joint ventures 12 71 84

Operating profit before depreciation (EBITDA) 1 487 -107 1 379

Operating profit (EBIT) 521 -86 436

Net financial income / loss 173 64 238

Profit / loss for the period 585 - 585


30 .09 .2016Consistent with


to equity method 30 .09 .2016

Intangible assets 714 -67 647

Tangible assets 17 072 -4 154 12 918

Financial assets 728 965 1 693

Non-current assets 18 514 -3 255 15 259

Current assets including assets held for sale 2 742 -340 2 402

Total assets 21 256 -3 595 17 661


30 .09 .2016Consistent with


to equity method 30 .09 .2016

Total equity 6 437 - 6 437

Non-current provisions for commitments 19 -6 13

Non-current liabilities 12 154 -3 224 8 931

Current liabilities including liabilities held for sale 2 645 -366 2 280

Total liabilities 14 819 -3 595 11 224

Total equity and liabilities 21 256 -3 595 17 661

The Group uses the proportionate consolidation method when accounting for joint ventures in management reporting. The table below shows the effect of proportional consolidation method used in management reporting.


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Note 2 Segment information

The Group applies the equity method to account for joint ventures, as required by IFRS 11. The segment reporting below is presented according to internal management reporting, based on the proportionate consolidation method of accounting for joint ventures. The bridge between management reporting and the figures reported in the financial statements is pre-sented below.

Presentation of segments includes information that is reported to the chief operating decision-makers on a regular basis. Corporate expenses and similar are allocated to the segments proportionately based on the estimated split of services de-livered to each segment.

Figures reported in the chartering of vessels segment are covering all vessels on long-term charters to external customers, and includes sales gains from the sale of vessels (Skandi Protector in 1st quarter). The subsea projects segment is covering the Group’s integrated service activities in survey, subsea construction and inspection, maintenance and repair services (IMR).

Operating income consistent with management reporting

3Q 2016

3Q 2015

YTD 2016

YTD 2015

2015

Chartering of vessels 497 607 1 432 1 812 2 442

Subsea projects 734 1 384 2 866 3 797 4 810

Total consistent with management reporting 1 231 1 992 4 298 5 609 7 252

Reconciliation to equity method -100 -87 -200 -283 -360

Total 1 131 1 904 4 098 5 326 6 891

EBITDA consistent with management reporting

Chartering of vessels 350 384 1 102 1 376 1 785

Subsea projects 97 169 385 396 509

Total consistent with management reporting 447 553 1 487 1 773 2 294

Reconciliation to equity method -50 -101 -107 -231 -194

Total 397 452 1 380 1 543 2 100


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Note 3 Financial income and expenses

3Q 2016 3Q 2015 YTD 2016 YTD 2015 2015

Interest income 3 8 31 26 41

Other financial income 1 - 8 3 9

Financial income 5 8 39 29 50

Interest expenses -106 -160 -369 -468 -597

Capitalization of interest - 13 - 29 30

Other financial expenses -7 2 -16 - -46

Financial expenses -113 -145 -385 -439 -613

Net gain / loss on non-current debt -23 5 -69 111 117

Net gain / loss on operational capital 17 5 9 119 102

Net gain / loss on financial derivatives 19 -27 -23 -224 -240

Net realized gain / loss on financial instruments 12 -17 -83 7 -21

Net unrealized gain / loss on non-current debt 96 -330 358 -555 -668

Net unrealized gain / loss on operational capital -2 -5 -27 -39 -8

Net unrealized gain / loss on financial derivatives 131 -115 335 84 84

Unrealized gain / loss on financial instruments 225 -450 666 -510 -592

Net financial income / loss 129 -605 238 -913 -1 176

Note 4 Intangible assets

Goodwill in relation to the acquisition of CSL UK Ltd has since acquisition been allocated to the cash generating unit Subsea projects. As a result of changes in 2016, goodwill related to CSL UK Ltd will be defined as separate cash generating unit, and impairment for 2016 is based on this definition. Based on impairment tests, goodwill related to CSL UK Ltd is impaired with NOK 62 million.


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Note 5 Tangible assets

30 .09 .2016

Vessels & periodic maintenance

ROVs

Machinery & other equipment

Newbuilds

Total

Net booked value 01 .01 . 11 999 963 455 7 13 425

Additions 234 13 22 61 330

Disposals - - - - -

Reclassification - 36 - -36 -

Reclassification held for sale - - - - -

Depreciation -238 -121 -71 - -430

Impairment -451 - - - -451

Currency translation differences 57 1 -14 - 44

Net booked value 30 .09 . 11 600 893 392 32 12 918

30 .09 .2015

Net booked value 01 .01 . 10 476 991 421 255 12 143

Additions 611 128 80 1 759 2 578

Disposals -753 -1 -17 - -771

Reclassification 32 -48 16 -1 -

Depreciation -249 -132 -61 - -441

Impairment -62 - -1 - -63

Currency translation differences -157 -8 15 - -150

Net booked value 30 .09 . 9 899 930 454 2 013 13 295

The challenging market condition for offshore service vessels has continued. In 3rd quarter 2016 the Group faced lower marked values for some of the Group`s vessels. Impairment indicators are observed and an impairment test for vessels in the Group has been performed. Impairment tests are performed in line with accounting principle presented in annual report for 2015. Impairment of NOK 132 million has been recognised in 3rd quarter 2016. YTD the Group has recognized an impairment of NOK 451 million.


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Note 6 Net interest-bearing debt

30 .09 .2016 30 .09 .2015 31 .12 .2015

Non-current interest-bearing debt

Bond loan floating rate 1 296 1 300 1 293

Debt to credit institutions 7 519 7 111 8 288

Total non-current interest bearing debt 8 815 8 411 9 581

Current interest-bearing debt

Bond loan, floating rate - 926 422

Debt to credit institutions * 1 300 1 844 1 556

Total current interest-bearing debt 1 300 2 770 1 977

Total non-current and current interest-bearing debt 10 115 11 181 11 558

Net interest-bearing debt

Cash and cash equivalent 1 137 1 487 1 464

Other interest-bearing assets - non-current 114 99 99

Total net interest-bearing debt 8 864 9 595 9 995

Share of debt secured by fixed interest rate30 .09 .2016 Fixed rate Floating rate Total

NOK

Debt to credit institutions 74 % 26 % 100 %

Bond loan 0 % 100 % 100 %

Total NOK 58 % 42 % 100 %

USD

Debt to credit institutions 67 % 33 % 100 %

Total USD 67 % 33 % 100 %

Total debt 62 % 38 % 100 %

* ) Current interest-bearing debt includes liabilities held for sale.Non-current interest-bearing debt in the consolidated statement of financial position includes amortized cost.Amortized costs and accrued interest expenses are excluded in the figures below.

* ) Included in the remaining balance 2016, NOK 274 million is related to balloon that are in process to be refinanced.

A long-term loan has been provided by Eksportfinans and is invested as a restricted deposit. The repayment terms on the loan from Eksportfinans are equivalent with the reduction on the deposit. The loan will be fully repaid in 2020. The cash deposit is included in restricted deposits.

Debt repayment profile

Remaining

balance 2016* 2017 2018 2019 2020 Thereafter Total

Bond loan - - 1 300 - - - 1 300

Debt to credit institutions 550 1 018 1 017 2 143 1 673 2 458 8 859

Total repayment 550 1 018 2 317 2 143 1 673 2 458 10 159


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Note 6 Interest-bearing debt (continued from previous page)

Note 7 Financial instruments and hedging activities

Financial covenantsThe Group’s long-term financing agreements include the following covenants: - The Group shall have available cash of at least NOK 500 million at all times - The Group shall have value-adjusted equity to value-adjusted assets of at least 30% - The Group shall have book equity of at least NOK 3 000 million at all times - The Group shall have positive working capital at all times, excl. short portion of debt to credit institutions - The fair value of the Group’s vessels shall always be at least 100-130% of the outstanding loan amount

In addition to the above mentioned financial covenants, the loan agreements are also subject to the following covenants:- The Group’s assets shall be fully insured - There shall not be any change to classification, management or ownership of the ships without the prior written approval of the lenders- DOF ASA shall be the principal shareholder in DOF Subsea AS, and own a minimum of 50.1 % of the shares- DOF Subsea AS shall not merge or demerge activities without the prior written approval of the lenders - DOF Subsea AS shall report financial information to the lenders and Oslo Stock Exchange on a regular basis - The Group’s vessels shall be operated in accordance with applicable laws and regulations

The Group is in compliance with all covenants.

Assets

30 .09 .2016

Liabilities

Assets

30 .09 .2015

Liabilities

Non-current and current portion

Interest rate swaps - cash flow hedges 7 98 12 227

Interest rate swaps - cash flow hedges under hedge accounting - - - 4

Foreign exchange contracts cash flow hedges 118 14 13 120

Total non-current and current 125 111 25 351

Non-current portion

Interest rate swaps - cash flow hedges 7 98 - 154

Interest rate swaps - cash flow hedges under hedge accounting - - - -

Foreign exchange contracts cash flow hedges - - 8 22

Total non-current portion 7 98 8 176

Total current portion 118 14 18 175

Committed Received

30 .09 .2016

Amount

Committed Received

30 .09 .2015

Amount

Instrument

Foreign exchange contracts, buy NOK NOK 2 884 NOK 1 911


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Note 10 Events after the consolidated statement of financial position date

There were not any subsequent events following the consolidated statement of financial position date.

Note 9 Investments in associates and joint ventures

Entity Proportion of ownership

30 .09 .2016

Joint ventures

DOFCON Brasil Group 50 %

Associated companies

Canadian Subsea Shipping Company AS 45 %

Marin IT AS 35 %

DOF Management AS 34 %

Master & Commander AS 20 %

DOF Subsea Ghana Ltd 49 %

30 .09 .2016

Booked value of investments in associates and joint ventures 31.12.2015 336

New investments 2

Share of net income of associates and joint ventures 84

Share of other comprehensive income related to associates and joint ventures 218

Dividend received from associates and joint ventures -3

Disposal of investments in associates and joint ventures -

Booked value of investments in associates and joint ventures 30 .09 .2016 637

See also note 1 and note 2.

Note 8 Transactions with related parties

Description of transactions with related parties is given in the Annual Report for 2015. There are no major changes in type of transactions between related parties during the quarter. During the quarter the Group has had Skandi Chieftain, owned by DOF ASA, on BB charter.


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Note 11 Shareholder information

Name No . shares Shareholding Voting shares

DOF Subsea Holding AS 119 733 714 100 % 100 %

Note 12 General

This interim report has been prepared in accordance with the standard for interim reporting (IAS34). The accounting principles and calculation methods applied for the last annual accounts published have been applied to the quarterly financial report. Amendments and interpretations to the standards which are effective for the financial year be-ginning on 1 January 2016 are not material to the Group. The Financial Statement is unaudited.

Note 13 Definitions

The Group`s financial information is prepared in accordance with international reporting standards (IFRS). It is manage-ment`s intent to provide additional performance measures that are regularly reviewed to provide an enhanced insight into the operating performance and financial positions. Additional performance measures presented may be determined or calculated differently by other companies.

Operating profit before depreciation (EBITDA)Operating profit before depreciation (EBITDA) is defined as operating profit including gains and losses on sale of non-current assets less impairment of tangible- and intangible assets, depreciation of tangible assets and amortizations on contract assets. Earnings before interest, tax, depreciations and amortization (EBITDA) are a key financial parameter for the Group. This measure is useful in evaluating operating profitability on a more variable cost basis as it excludes depreciations, impairments and amortization expenses related primarily to capital expenditures and acquisitions that occurred in the past.The EBITDA margin presented is defined as operating profit before depreciation (EBITDA) divided by total revenues.

Operating profit (EBIT)Operating profit (EBIT) is defined as “operating profit before depreciation (EBITDA)” after depreciations, impairments and amortizations but before net financial income/loss items and tax expenses.

Net interest-bearing debt Net interest-bearing debt consists of both current and non-current interest-bearing liabilities less interest bearing financial assets, cash and cash equivalents. Cash and cash equivalent will include restricted cash. Current interest-bearing debt in-cludes interest-bearing debt related to asset held for sale. Net interest-bearing debt is a measure of the Group’s net indebtedness that provides an indicator of the overall statement of financial position strength. The use of the term ‘net debt’ does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities included in this measure.

Equity ratioEquity ratio is defined as total equity divided by total assets at the reporting date.


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Note 13 Definitions (continued from previous page)

Market valueCalculated average vessel value between two independent brokers’ estimates based on the principle of “willing buyer and willing seller”.

Utilization of vesselUtilization of vessel numbers is a measure of Group`s ability to keep vessels in subsea operations and on contracts with clients. Utilization of vessel numbers is based on actual available days not excluding days at yard for dry-docking, repair/upgrading, transit or idle time between projects and charter contracts.

Owned vessels Owned vessels are defined as all vessels owned by subsidiaries and joint venture companies in the Group.

Contract Coverage Sum of undiscounted revenue related to secured contracts in the future and optional contract extensions as determined by the client in the future. Contract coverage excludes master service agreements (MSA`s) within the project segment. Under the MSA`s only confirmed PO`s are accounted for.

Firm contract back-log Sum of undiscounted revenue related to secured contracts in the future. Secured contracts are contract signed with clients, in the past, covering future delivery of services.

Back-log optionsSum of undiscounted revenue related to optional contract extensions as determined by the client in the future.

Back-log including optionsSum of undiscounted revenue related to secured contracts in the future and optional contract extensions as determined by the client in the future.


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Supplemental information

Condensed statement of comprehensive income 5 last quarters

3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015

Operating income 1 232 1 660 1 406 1 642 1 991

Payroll expenses -395 -414 -428 -475 -510

Other operating expenses -385 -750 -525 -651 -920

Share of net income of associates and joint ventures -5 14 4 - -9

Profit from sale of non-current assets - 3 70 5 1

Total operating expenses -785 -1 147 -879 -1 122 -1 438

Operating profit before depreciation (EBITDA) 447 513 526 521 553

Depreciation and impairment -352 -271 -343 -207 -183

Operating profit (EBIT) 95 243 184 314 370

Financial income - 9 16 19 9

Financial expenses -125 -132 -146 -179 -151

Realized gain / loss on financial instruments 6 -54 -61 -47 -23

Unrealized gain / loss on financial instruments 219 77 365 40 -538

Net financial income / loss 100 -100 173 -166 -704

Profit / loss before tax 195 142 357 148 -333

Tax expenses -25 -43 -41 -95 21

Profit / loss for the period 170 99 316 53 -312

The supplemental information below is presented according to internal management reporting, based on the proportionate consolidation method.


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Condensed statement of financial position 5 last quarters

Assets 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015

Intangible assets 714 806 872 962 988

Tangible assets 17 072 16 663 16 091 15 261 14 972

Financial assets 728 737 689 596 487

Non-current assets 18 514 18 206 17 652 16 818 16 447

Total receivables 1 439 1 754 1 495 1 664 2 080

Cash and cash equivalents 1 611 1 594 1 303 1 256 1 405

Asset held for sale - - - 477 -

Current assets 2 742 3 010 2 900 3 752 3 674

Total assets 21 256 21 216 20 552 20 570 20 121

Equity and liabilities 3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015

Paid in equity 3 844 3 844 3 844 3 844 3 844

Other equity 2 370 2 258 1 979 1 579 1 535

Non-controlling interests 222 228 256 269 261

Total equity 6 437 6 330 6 078 5 692 5 641

Non-current provisions for commitment 19 20 19 23 29

Other non-current liabilities 12 154 11 844 11 463 11 205 9 959

Non-current liabilities 12 174 11 864 11 482 11 228 9 989

Short portion of debt to credit institutions 1 606 1 619 1 938 1 926 3 007

Other current liabilities 1 464 1 4851 039 1 403 1 054

Liabilities held for sale - - - 260 -

Current liabilities 2 645 3 022 2 991 3 650 4 492

Total liabilities 14 819 14 886 14 474 14 878 14 480

Total equity and liabilities 21 256 21 216 20 552 20 570 20 121

Key figures

3Q 2016 2Q 2016 1Q 2016 4Q 2015 3Q 2015

Profit per share (NOK) 1.42 0.83 2.64 0.45 -2.61

EBITDA margin 36 % 31 % 37 % 31 % 28 %

EBIT margin 8 % 15 % 13 % 19 % 19 %

Return on net capital 3 % 2 % 5 % 1 % -6 %

Book value equity per share (NOK) 53.76 52.87 50.76 47.54 47.11

Value-adjusted equity per share (NOK) 65.00 67.99 68.23 69.26 69.24

Net interest-bearing debt (NOK million) 12 002 12 049 11 823 11 387 10 927


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DOF Subsea vessels

DOF Subsea currently owns one of the largest fleets of high-end construction vessels (including newbuilds) in the world. Offering a versatile, new generation of high power and purpose-built vessels with broad offshore capabilities.

Owned vessels

Skandi Acergy

Geograph Geoholm Geosea

Geosund

Skandi Carla

Skandi Constructor

Skandi Achiever

Skandi SingaporeSkandi Neptune Skandi Niteroi

Skandi Hawk Skandi Hercules

Skandi AfricaSkandi Açu


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Skandi Skansen Skandi Patagonia Skandi Vitoria

Skandi Salvador Skandi Santos Skandi Seven


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DOF Subsea vessels (continued)

DOF Subsea invests in the next generations of vessels. An ambitious New Build program utilises new technology and smart engineering to ensure efficient and environmental friendly operations in the future.

Newbuilds in joint ventures and associated companies

Chartered vessels

DOF Subsea charters in vessels on short and long-term contracts based on operational needs, building greater flexibility and a complementary fleet mix to meet our clients’ subsea challenges.

Skandi Buzios (NB-824) Skandi Olinda Skandi Recife

Skandi TBN (NB-834) (Part owned)

Harvey Deep Sea

AUSTRALIA

DOF Subsea Australia Pty Ltd5th Floor, 181 St. Georges TcePerth, Wa 6000 AUSTRALIAPhone: +61 8 9278 8700Fax: +61 8 9278 [email protected]

DOF Management AustraliaLevel 1, 441 South RoadBentleigh, Vic. 3204AUSTRALIAPhone: +61 3 9556 5478Mobile: +61 418 430 939

BRAZIL

DOF Subsea Brasil Serviços LtdaMacae address:Rua Fiscal Juca, 330 Q: W2 – L: 0001 Loteamento Novo Cavaleiros Vale Encantado – Macaé/RJ BRAZIL - CEP 27933-450Rio address:Rua Lauro Muller, 116 Salas 2802 a 2805,Torre do Rio Sul - Botafogo22290-160, Rio de Janeiro, R.J.,BRAZIL - CEP: 27910-000Phone: +55 22 2123-0100Fax: +55 22 [email protected]

CANADA

DOF Subsea Canada26 Allstone Street, Unit 2Mount Pearl, NewfoundlandCANADA, A1N 0A4Phone: +1 709 576 2033Fax: +1 709 576 [email protected]

SINGAPORE

DOF Subsea Asia Pacific Pte Ltd460 Alexandra Road# 15-02PSA Building, 119963SINGAPOREPhone: +65 6561 2780Fax: +65 6561 [email protected]

GLOBAL HQ

DOF Subsea ASThormøhlensgate 53 C5006 Bergen NORWAYPhone: +47 55 25 22 00Fax: +47 55 25 22 [email protected]

NORWAY

DOF Subsea Norway ASThormøhlensgate 53 C5006 Bergen NORWAYPhone: +47 55 25 22 00Fax: +47 55 25 22 [email protected]

SEMAR ASOksenøystein 121366 Lysaker NORWAYPhone: +47 67 12 40 06Fax: +47 67 12 40 06 [email protected]

DOF Management ASAlfabygget5392 StorebøNORWAY

Thormøhlensgate 53 C5006 Bergen NORWAYPhone: +47 56 18 10 00Fax: +47 56 18 10 [email protected]

ANGOLA

DOF Subsea AngolaBelas Business Park-Talatona Edificio Bengo, 1º AndarSala 106/107, LuandaRepublic of AngolaPhone: +244 222 43 28 58Fax: +244 222 44 40 68Mobile: +244 227 28 00 96 +244 277 28 00 [email protected]

DOF Management Pte Ltd460 Alexandra Road# 15-02PSA Building, 119963SINGAPOREPhone: +65 6868 1001Fax: +65 6561 2431

UNITED KINGDOM

DOF Subsea UK LtdHorizons House, 81-83 Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOMPhone: +44 1224 614 000Fax: +44 1224 614 [email protected]

DOF Subsea S&P UK LtdHorizons House, 81-83 Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOMPhone: +44 1224 614 000Fax: +44 1224 614 [email protected]

CSL EngineeringHorizons House, 81-83 Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOMPhone: +44 1224 285 566Fax: +44 1224 285 [email protected]

DOF (UK) LtdHorizons House, 81-83 Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOMPhone: +44 12 24 58 66 44Fax: +44 12 24 58 65 [email protected]

USA

DOF Subsea USA Inc5365 W. Sam Houston Parkway Suite 400, Houston, Texas 77041, USAPhone: +1 713 896 2500Fax: +1 713 726 [email protected]

DOF Subsea ASThormøhlens gate 53 C

5006 BergenNORWAY

www.dofsubsea.com

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Q3 2016 - DOF Group Sub/IR/2016/DOF Subsea Financial Report Q3 2016.pdfDuring the 3rd quarter 2016...

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