Bonds Daily. ABGSC Daily Report - Bonds. Credit Research - 04 January :51 CET

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1 Credit Research - 04 January :51 CET Bonds Daily ABGSC Daily Report - Bonds OKEA: Kufpec to sell Yme stake Kuwait Petroleum Corporations international upstream subsidiary, Kufpec, is preparing to sell its 10% interest in the Yme asset. According to merger market, the 10% stake is valued between USD 50-70m. Using our Yme DCF model, this is equivalent to an oil price of USD 44-57/bl. We value OKEA s Yme stake at USD 123m (reflecting a USD 65/bl long-term oil price), which would price Kufpec s 10% share at USD 82m. Transocean: Cash tender offer Transocean has concluded that its own bonds are cheap and launched a cash tender offer to buy back up to USD 700m in its own bonds. The tender offer will be given to its 20, 21, 22 and 9% 23 maturity. Through offering a 3% early tender premium (similar to how the American drillers including Transocean have tendered buy backs previously) the company is removing some of the natural secondary price pressure which may materialize on the back of a tender. The prices are below (including the early tender premium), and generally the prices are 1-3% higher than last trade according to FINRA-TRACE. RIG 6 ½ 11/15/20 tendered at (+289) / Last done: % RIG 6 ⅜ 12/15/21 tendered at 103.5% (+453) / Last done: 100.6% RIG /15/22 tendered at 93% (+551) / Last done: 90% RIG 9 07/15/23 tendered at 102.5% (+567bp) / Last done: 101.5% Nova Austral: increases its credit facility to USD 50m The company disclosed yesterday that it has entered into an agreement with DNB Bank ASA to increase its super senior RCF from USD 30m to USD 50m (max. allowed under the bond loan agreement). As of Q3 18 the cash balance was USD 7m, and having sufficient liquidity has been a concern given the guided harvest volume going forward. Moreover, the company has communicated its intention to acquire additional licenses in order to grow in size, which will entail some infrastructure capex. As such, Nova Austral states that the use of proceeds for the currently undrawn credit facility will go towards funding working capital requirements and capex. Petrobras: out with multi-year floatel tenders in Brazil Key for Prosafe According to Upstream this morning, Petrobras has before Christmas issued several tenders for floatels. Apparently, it is looking for 2 or more units, where a semi-submersible is a requirement for one of the packages, to go on 3y contracts starting late 19 and 1 unit to go on a ~210d contract starting mid- 19. PRS has Safe Notos operating for Petrobras on a contract expiring early 20 and Concordia operating for Modec in Brazil in 19. PRS has stated that it hopes to deploy 1-2 of its Cosco units on long-term Brazil contracts. Stock market Today 1D 1M 3M YTD OSE % -7% -13% 0% SBX % -7% -13% -6% OSX % -19% -45% -46% VIX % 23% 72% 178% High Yield Indices (Spread) Itraxx Xover 5Y bp 45bp 92bp 145bp Itraxx Xover 3Y 285 6bp 22bp n.a. 118bp HYG US 539 9bp 106bp 193bp 191bp ABG HY index 513 2bp 34bp 61bp 47bp BUHYEN bp 121bp 220bp 204bp Interest Rates Basis points NIBOR 3M 126 1bp 1bp 21bp 46bp NIBOR 3Y SWAP 156-1bp -12bp -21bp 29bp NIBOR 5Y SWAP 172-2bp -17bp -35bp 20bp US L3M 279 0bp 6bp 39bp 110bp US LIBOR 3Y SWAP bp -50bp -70bp 25bp US LIBOR 5Y SWAP bp -51bp -77bp 13bp Currencies USD/NOK % 2% 5% 7% EUR/NOK % 3% 4% 2% SEK/NOK % 2% 6% -3% Commodities Oil - Brent (USD/bl) % -10% -34% -18% Shipping Rates Baltic Dry Bulk 1,267-1% 2% n.a. 0% Baltic Tank (Dirty) 999-1% -13% n.a. 46% Baltic Tank (Clean) 657-1% -24% n.a. 1% Source: Bloomberg Jan-17 5-Feb-17 5-Mar-17 5-Apr-17 5-May-17 Source: ABG Sundal Collier ABGSC Credit Research ABGSC HY Index 5-Jun-17 5-Jul-17 5-Aug-17 Alexander Jost alexander.jost@abgsc.no Haakon Amundsen haakon.amundsen@abgsc.no Rikard M. Braaten rikard.braaten@abgsc.no Andreas Johannessen andreas.johannessen@abgsc.no Eric Wahlström eric.w ahlstrom@abgsc.se 5-Sep-17 5-Oct-17 5-Nov-17 5-Dec-17 5-Jan-18 5-Feb-18 5-Mar-18 5-Apr-18 5-May-18 Please refer to important disclosures at the end of this report

2 Petrobras has gone for having 8 to 4 floatels working in Brazil and demand could be on rise form this low level. PRS has, except for the recent Caledonia fixture, no booked capacity for 20+ (the same goes for Floatel) and it would be very positive the increase visibility especially as the recent pull-back in oil price is putting the strength of the cyclical recovery into question. DNO: relinquish from Oman Block 8 Yesterday during trading hours, DNO announced that it has relinquished operatorship and participation in Oman Block 8 as the license has expired. This is in line with our estimates, and should be neutral to the market. Dallas Fed Energy Survey shows capex slowdown amid lower oil prices In the period December Dallas Fed conducted its quarterly Energy Survey, which was published yesterday after OSE close. 167 energy firms participated in the survey, of which 104 E&Ps and 63 oil service firms. The WTI assumptions used for budget planning averaged USD 54/bbl, which is USD ~7/bbl above the current level. As for the primary objective for the E&P companies, responders showed this was clearly to grow production. Nevertheless, the quarter over quarter changes in business indicators show that the capital expenditures (i.e. the longer-term production outlook) is under pressure amid the oil prices. Results above zero is seen as a positive result (growth), however the change from last quarters index is significant. If oil prices do not recover to the levels used for corporate planning it could be further downside to this level. 4 January 2019 ABG Sundal Collier 2

3 Source: Federal Reserve Bank of Dallas Link to the survey: Click here The results of the study bodes well with our take on the US shale players adaptability to commodity prices in setting its activity level. The chart below shows that since 2016 the ten shale players we track has been more or less free cash flow neutral on a quarterly basis despite the strengthened oil prices as it has adjusted its capex level accordingly. Source: ABG Sundal Collier, Company data 4 January 2019 ABG Sundal Collier 3

4 Source: ABG Sundal Collier, Company data Reported corporate HY bonds traded in Oslo at Thursday 03 January 2019 Source: ABG Sundal Collier, company data 4 January 2019 ABG Sundal Collier 4

5 mo ssss Bonds daily Analyst certification I/We, Alexander Jost, Andreas Johannessen, Eric Wahlström, Haakon Amundsen, Rikard Magnus Braaten, the author(s) of this report, certify that not withstanding the existence of any such potential conflicts of interests referred to below, the views expressed in this report accurately reflect my/our personal view about the companies and securities covered in this report. I/We further certify that I/We have not been, nor am/are or will be, receiving direct or indirect compensation related to the specific recommendations or views contained in this report. Analyst valuation methods When evaluating the credit risk of the issuer, we look at credit ratios, management and corporate strategy, business risk, industry risk and management risk appetite. Further, we look at dividend and financial policies. From this analysis and after an assessment of the asset values as well as any potential structural subordination, ABG Sundal Collier also estimates the company s default probability and the bond s recovery rate. Important Company Specific Disclosure For company specific disclosures including employee, partner and ABGSC holdings, Corporate Finance services market making, conflicts of interest of each company mentioned in this report for which ABG Sundal Collier provides coverage (unless it is initiating coverage), please refer to the research section of our website located at All prices are as of market close on 30 November, 2018 unless otherwise noted. Disclaimer This document has been prepared by ABG Sundal Collier which is the marketing name referring to all or any of ABG Sundal Collier ASA, ABG Sundal Collier AB or ABG Sundal Collier Partners LLP and any of their affiliated or associated companies and their directors, officers, representatives and employees. 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6 ABGSC Research Department Joint Global Head of Research John Olaisen Christer Linde Head of Introduce /Company-sponsored research Arash Hakimi Fard Strategy Christer Linde, Quant/Technical Derek Laliberte Capital Goods Anders Idborg Olof Cederholm Karl Bokvist Chemicals Construction & Real Estate Tobias Kaj Philip Hallberg Laurits Louis Kjaergaard Consumer Goods Michael Vitfell-Rasmussen Ludvig Kapanen Credit Research Alexander Jost Rikard Magnus Braaten Andreas Johannessen Haakon Amundsen Eric Wahlström Financials Magnus Andersson Mads Thinggaard Patrik Brattelius Jan Erik Gjerland Jonas Bru Lien Food & Beverages Michael Vitfell-Rasmussen Healthcare Sten Gustafsson Christopher W. Uhde Daniel Thorsson Andrew Carlsen Ole Henrik Bang-Andreasen lnvestment Companies Derek Laliberte IT Aksel Øverland Engebakken Daniel Thorsson Andrew Carlsen Simon Granath Metals & Mining Oil & Gas John Olaisen Karl Fredrik Schjøtt-Pedersen Oil Service John Olaisen Haakon Amundsen Lukas Daul Karl Fredrik Schjøtt-Pedersen Online Gaming Aksel Øverland Engebakken Erik Moberg Stefan Knutsson Pulp & Paper Øystein Elton Lodgaard Renewable Energy Casper Blom Retail Ludvig Kapanen Seafood Martin Kaland Services Michael Vitfell-Rasmussen Victor Forssell Shipping & Transport Dennis Anghelopoulos Casper Blom Lukas Daul Telecom Operators Peter Kurt Nielsen Utilities Small Caps Andrew Carlsen Arash Hakimi Fard Daniel Thorsson Johan Nilsson Wall Laurits Louis Kjaergaard Media Aksel Øverland Engebakken Derek Laliberte Norway Sweden Denmark United Kingdom USA Germany Singapore Pb Vika Box 7269 Forbindelsesvej 12, 10 Paternoster Row, 5th fl 850 Third Avenue, Suite 9-C Schillerstrasse 2, 5. OG 10 Collyer Quay NO-0115 OSLO Norway SE STOCKHOLM Sweden DK-2100 COPENHAGEN Denmark LONDON EC4M 7EJ UK NEW YORK, NY USA DE FRANKFURT Germany Ocean Financial Center #40-07, Singapore Tel: Tel: Tel: Tel: Tel Tel Tel Fax: Fax: Fax: Fax: Fax Fax January 2019 ABG Sundal Collier 6