SeaMetric International AS

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1 FOR ALL THINGS HEAVY Interim report Q delivers safe and cost effective marine services and operations to the offshore oil and gas industry. SeaMetric has developed the Twin Marine Lifter (TML) System for installation and removal of very heavy objects such as platform topsides and jackets with weights up to 20,000 tonnes. SeaMetric s vision is to become a key international player in the offshore heavy lift, construction support and heavy transportation markets by owning and managing the unique TML System and multipurpose support vessels. SeaMetric s shares are traded on the Norwegian OTC market under the ticker SEAM.

2 SeaMetric is one of the relatively few companies specializing in the markets for heavy lift, construction support and heavy transport. These are niche markets of the world maritime industry which are currently undergoing significant growth. SeaMetric s investment into heavy lift, construction support and heavy transport shipping assets is based on an expectation of a long term positive development in the demand for such assets. SeaMetric s TML System has been received with significant interest among leading industrial players. Highlights Q SeaMetric s two TML vessels are currently under construction at the CPLEC Offshore Engineering Company shipyard in Panjin, China SeaMetric has invited various contractors to tender for the construction of the TML lifting arm system CNOOC has nominated SeaMetric s TML System as its preferred heavy lift tool in its new 5-year strategic plan SeaMetric and COOEC will soon jointly initiate engineering and planning work for a major marine heavy lift project offshore China SeaMetric has submitted tenders to Swecomex (ultimate customer Pemex) and Global Industries (ultimate customer Aramco) for installation work in Mexican and Saudi Arabian waters, respectively SeaMetric has completed a paid study for the removal of Fairfield Energy s A platform on the Dunlin field SeaMetric remains focused on completing the financing processes for the TML System SeaMetric has a Q net loss of NOK 0.4 million; the net loss for the first six months of 2008 amounts to NOK 7.7 million SeaMetric s cash reserves at 30 June 2008 total NOK 232 million, and the book equity ratio is 45% The first TML System project status SeaMetric is currently constructing two 140 meter long semi submersible heavy transport vessels, with dynamic positioning (DP class 3), living quarters and helideck. Such vessels are not available in today s markets. Each vessel will be capable of carrying up to 25,000 dwt of cargo. When not used as part of SeaMetric s TML System, the vessels may be used in the traditional heavy transport market and also in the attractive markets for construction support, subsea construction and subsea intervention. CPLEC Offshore Engineering Company shipyard The two vessels are constructed in parallel at the China Petroleum Liaohe Equipment Company (CPLEC) Offshore Engineering Company shipyard in Panjin, China. The shipyard is itself also under construction. The shipyard is owned by PetroChina, a company listed on the Shanghai, Hong Kong and New York stock exchanges. PetroChina is a subsidiary of the state owned China National Petroleum Company (CNPC), one of the world s leading energy corporations with businesses covering oil and gas with both upstream and downstream operations. Due to adjustments in the yard development schedule, the overall vessel construction progress has fallen five weeks behind. However, the cutting of steel is progressing satisfactorily, after the first steel was cut on 10 April Block fabrication has also started. SeaMetric s site team cooperates well with the shipyard s management, and substantial efforts are made to improve the vessel construction progress. The contract delivery date for the two TML vessels is 31 August SeaMetric has received assurance from the shipyard confirming this delivery date. SeaMetric has initiated a strengthening of the site team management to support the yard in the efforts to recover the lost progress. SeaMetric s Twin Marine Lifter (TML) System consists of the two vessels described above, in addition to a number of lifting arms which are placed across the vessels. With eight lifting arms in place, four on each vessel, the TML System will be able to 2

3 install and remove platform topsides and jackets weighing up to 20,000 tonnes. Such marine heavy lifting capacity is not currently available in the world markets. SeaMetric s existing shipbuilding contracts also envision the possibility of the company ordering two additional 140 meter long DP class 3 semi submersible heavy transport vessels for a second TML System as well as two larger (length 180 meter) DP class 3 semi submersible transport vessels. These orders would however be executed through separate contracts. The most critical items that could affect timely delivery of a potential second order are the engines, generators and thrusters. SeaMetric has successfully secured production slots for these items for all four additional vessels. SeaMetric has not exercised the options in the vessel construction contracts to extend the scope of work to also include the TML lifting arm structures and lifting equipment. During July 2008, SeaMetric issued tender packages to a number of contractors for the construction of the TML lifting arm systems, with planned delivery in Q The construction of the lifting arm systems will not start until the necessary financing is in place. Business development The main drivers in the heavy lift market are installation and decommissioning of jackets, platform decks and subsea structures. The installation market is driven by new discoveries and further development of existing oilfields, while the market for removal is driven by depleting oilfields and salvage work, e.g. removal of hurricane wrecks. SeaMetric is actively pursuing contracts for the TML System to be used in such marine heavy lift projects. SeaMetric also pursues contracts for employment for the two vessels in heavy transport, construction support, subsea construction or subsea intervention markets whenever they will not be engaged in heavy lifting mode. These activities are primarily directed towards the industrial and operational partners of the company s two Memorandums of Intent (MoIs) and one Memorandum of Understanding (MoU) Mexican marine contractor Blue Marine Technology Group, CNOOC Offshore Oil Engineering Company (COOEC) in China and the British oil company Fairfield Energy Ltd. All three MoI/MoU partners have strategies in which the TML System will play a central role. The MoI with Blue Marine concerns operations in Latin America. Blue Marine in February 2008 gave SeaMetric an undertaking as to the use of the TML vessels for construction support or heavy transport, whenever the vessels are not used as part of the TML System in heavy lifting mode. SeaMetric and Blue Marine are in the process of establishing a jointlyowned operating company for TML System operations in this region. In July 2008, SeaMetric submitted a tender to Swecomex for transport and installation of a platform in Mexican waters in The ultimate customer would be Pemex. China National Offshore Oil Corporation (CNOOC) has nominated SeaMetric s TML System as its preferred heavy lift tool in its new 5-year strategic plan. CNOOC s affiliate COOEC and SeaMetric are in the process of establishing a jointly-owned operating company for the first TML System, as set out in the MoI. The operating company will initially operate in the North East Asia region and will be fully established by December In August 2008, COOEC and SeaMetric will jointly initiate engineering and planning work for a major marine heavy lift project offshore China. During Q2 2008, SeaMetric received a funding commitment for the study for this project from Innovasjon Norge ( Innovation Norway ), a Norwegian state owned company promoting industrial development. The MoU with Fairfield Energy concerns the use of the TML System in the decommissioning of Fairfield s current and future platforms. The MoU also includes any future installation work for Fairfield. During Q2 2008, SeaMetric completed a paid study for the removal of Fairfield s A platform at the Dunlin Field. SeaMetric in July 2008 submitted a tender to Global Industries for the installation of a topside (with an option for jacket) in Saudi Arabian waters in The ultimate customer would be Aramco. 3

4 Financing SeaMetric s existing financing arrangements consist of the equity issue from June 2006 of USD 50 million and a 5-year bond issue of USD 60 million from May As the first TML System has projected total capital expenditures of USD 335 million, the TML System is not fully financed. SeaMetric remains focused on completing the financing processes. Several potential financing options are currently explored. The financing of the TML lifting arm system would most likely be triggered by SeaMetric first winning a contract from an end user of the TML System. As described above, SeaMetric is actively pursuing contracts for major marine heavy lift projects. Until such contract has been achieved, SeaMetric focuses on the completion of financing for the two TML vessels. These vessels have projected total capital expenditures of USD 175 million. SeaMetric plans to raise the remaining capital requirement through a combination of an equity issue and new debt. SeaMetric is actively pursuing employment agreements for the vessels. Such agreements could become important elements in the finalisation of the vessel financing process. SeaMetric remains confident that the remaining financing for completion of the two TML vessels will be secured on acceptable terms. SeaMetric is also confident that acceptable financing for the construction of the TML lifting arm system can be achieved on the back of a contract for the use of the TML System. Financial performance SeaMetric has a net loss in Q of NOK 0.4 million (NOK 2.8 million in Q2 2007), consisting of a combination of an operating loss of NOK 2.1 million (NOK 6.8 million) and a financial items profit of NOK 1.6 million (NOK 4.0 million). SeaMetric has operating revenues in Q of NOK 3.6 million (nil) from a study for the removal of Fairfield Energy s A platform at the Dunlin Field. The Q operating expenses of NOK 5.6 million (NOK 6.8 million) reflect administration costs for the SeaMetric organisation. Some, but not all, of the operating expenses are capitalised on the TML project. SeaMetric has financial income in Q of NOK 4.2 million (NOK 4.1 million), consisting of interest income from the company s cash balances. The Q financial expenses of NOK 2.6 million (nil) equal the part of the interest expenses on the USD 60 million bond issue which are not capitalised on the TML project. For the first six months of 2008, SeaMetric has a net loss of NOK 7.7 million (NOK 4.2 million in the first half of 2007). The operating loss so far this year is NOK 9.4 million (NOK 10.2 million), while the profit on financial items is NOK 1.7 million (NOK 6.1 million). SeaMetric s liquidity situation is still satisfactory, with cash and bank deposits totalling NOK 232 million at 30 June 2008, a decrease during Q of NOK 130 million, reflecting the quarter s investments in the TML vessels. SeaMetric s solidity is also satisfactory, with a book equity ratio of 45%. Organisation Tina Gellein joined SeaMetric as HSEQ Manager in April SeaMetric s top management structure is now complete. The management team has the following composition: Johan F. Andresen, Managing Director Robert N. Browning, Commercial Director Georg Eliassen, Chief Financial Officer Tina Gellein, HSEQ Manager Leif Erik Haugen, Contract Director Hanne Nesse, Administration Manager Petter Vabø, Technical & Project Director SeaMetric s organisation in Stavanger consists of 16 employees, an increase of four employees since the start of In June 2008, Board member Elisabeth Barstad Dehlie resigned from the Board for personal reasons. A replacement Board member will be elected at the first opportunity. SeaMetric s Board of Directors has the following composition: Jan Pihl Grimnes, Chair Arne Lier Ole C. Wiborg Donald J. Wright 4

5 Top 10 shareholders Shareholders as of 18 August 2008 Shares Ownership Redback AS 889, % Skagen Vekst 519, % Verdipapirfond Odin 457, % Captrol AS Goldman Sachs (nom.) 354, , % 4.19% Fortis Bank Luxembourg (nom.) 280, % Jobas AS 252, % Johan Fredrik Andresen 226, % Holberg Norge 217, % Rams AS Goldman Sachs 198, , % 2.03% Total 10 largest shareholders 3,911, % Stavanger, 19 August 2008 The Board of Directors of Løkkeveien 99, 4008 Stavanger, Norway Tel. no: Fax no.: Website: 5

6 Financial statements Q (unaudited) PROFIT AND LOSS STATEMENT Q2 First six months (in NOK thousand) Operarting revenues and expenses Operating revenues Total operating revenues Personnel expenses (2 581) (4 022) (4 940) (6 033) (4 520) Depreciation (114) (28) (206) (42) (364) Other operating expenses (2 945) (2 766) (7 865) (4 149) (11 076) Total operating expenses (5 640) (6 816) (13 011) (10 224) (15 960) Net operating profit/(loss) (2 065) (6 816) (9 436) (10 224) (15 734) Financial income and expenses Financial income Financial expenses (2 568) (17) (7 573) (26) (9 267) Net financial items Tax (347) Net profit/(loss) (431) (2 768) (7 744) (4 152) (6 038) 6

7 Financial statements Q (unaudited) BALANCE SHEET At 30 June At 31 December (in NOK thousand) ASSETS Fixed assets Intangible fixed assets Research and development Deferred tax asset Total intangible fixed assets Tangible fixed assets Vessels under construction Fixtures and fittings Total tangible fixed assets Total fixed assets Current assets Receivables Cash, bank deposits Total current assets Total assets EQUITY AND LIABILITIES Equity Share capital Share premium Net profit/(loss) this period (7 744) (4 152) - Total equity Liabilities Long term liabilities Liabilities to financial institutions Other long term liabilities Total long term liabilities Current liabilities Accounts payable Dues and taxes Other current liabilities Total current liabilities Total liabilities Total equity and liabilities

8 Financial statements Q (unaudited) CASH FLOW STATEMENT Q2 First six months (in NOK thousand) Cash at beginning of the period Cash flow from operating activities Net profit for the period (431) (2 768) (7 744) (4 152) (6 038) Depreciation Change in receivables (10 159) 507 (17 579) (695) Change in payables Tax Net cash flow from operating activities (45) (9 853) Cash flow from investment activities Office refurbishment and IT equipment (79) (73) (256) (133) (1 422) Research and development - (10 382) - (20 764) (16 499) Vessels under construction ( ) (10 739) ( ) (21 478) ( ) Net cash flow from investment activities ( ) (21 194) ( ) (42 375) ( ) Cash flow from financing activities Proceeds from bond issue Effect of exchange rate changes (15 142) (8 660) (21 252) (8 660) (37 470) Net cash flow from financing activities (15 142) (21 252) Net change in cash ( ) ( ) Cash at end of the period