financial report Q4 2017

Transcription

1 financial report Q4 2017

2 DOF Subsea AS Thormøhlens gate 53 C 5006 Bergen NORWAY

3 Index Financial Report 4 th quarter Financial statements 4 th quarter 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...16 Note 3 Financial income and expenses Note 4 Tangible assets...18 Note 5 Net interest-bearing debt...19 Note 6 Financial instruments and hedging activities...20 Note 7 Transactions with related parties...21 Note 8 Investments in associates and joint ventures...21 Note 9 Events after the consolidated statement of financial position date...21 Note 10 Shareholder information...22 Note 11 General...22 Note 12 Performance measurement definitions...24 Supplemental information...26 Condensed statement of comprehensive income 5 last quarters...26 Condensed statement of financial position 5 last quarters...27 Key figures

4 Financial Report Q DOF SUBSEA Financial Report 4 th quarter 2017 Headlines In the 4th quarter of 2017, DOF Subsea had an operating income of NOK million (NOK million in the 4th quarter of 2016) and an operating profit before depreciation of NOK 292 million (NOK 385 million including a sales gain of NOK 96 million). The operating profit was NOK 91 million (NOK 10 million) after depreciation and impairment of NOK 201 million (NOK 375 million). The net financial loss was NOK 305 million (NOK 417 million), and the loss before tax was NOK 215 million (NOK 407 million). For 2017, the Group had an operating income of NOK million (NOK million) and an operating profit before depreciation of NOK million (NOK million including a sales gain of NOK 170 million). The operating profit was NOK 136 million (NOK 446 million) after depreciation and impairment of NOK 999 million (NOK million). The net financial loss was NOK 259 million (NOK 179 million) giving a loss before tax of NOK 123 million (profit NOK 266 million) During the quarter the 5-year IMR contract with Shell in Australia commenced, and in December, the Company completed a private placement of NOK 500 million towards the main shareholder, DOF ASA, increasing the number of outstanding shares from million to million. In connection with the private placement, the DOFSUB07 bond was extended by 2 years. Geograph have been idle, whilst the utilisation of Skandi Niteroi has been 30%. The overall vessel utilisation for both owned and chartered-in vessels was 78% in the 4th quarter, where the utilisation in the Long-term Chartering segment was 87% and the utilisation in the Subsea/IMR Projects segment was 75%. Operational events 4 th quarter As at 31 December 2017, the number of subsea employees was 1 214, and the Group s fleet comprised 22 owned vessels, 3 chartered-in vessels and 2 newbuilds under construction, plus a fleet of 71 ROVs. During the 4th quarter, the Asia Pacific region has conducted IMR and construction work for Shell in the Philippines, Chevron, TechnipFMC and Shell in Australia, PTSC in Vietnam and repair and installation work for PT Amman in Indonesia. In the Atlantic region, the Group has executed engineering, survey, light construction and installation work for Eni in Angola, Conoco Phillips in Norway, TMPC in Libya and TechnipFMC in Libya, work within the renewables industry for Prysmian and Siemens and survey and positioning work for HMC. In the North America region, the Group has conducted IMR work, installation work and ROV services for Husky Energy, Allseas, Shell, Hess and Enbridge and survey and positioning work for HMC. Key figures (NOK million) 4Q Q Operating income EBITDA EBIT Net interest-bearing debt EBITDA proportional method In the 4th quarter the Group has seen increased activity in both the Asia Pacific region and the North America region with increased utilisation of both personnel and assets. The activity in the Atlantic region and Brazil region was variable during the quarter giving a lower than expected utilisation of both personnel and assets. The general market conditions within our industry are still challenging, however in line with the rebound in the oil price the tendering activity has increased during the quarter for projects with start-up in 2018 and During the quarter, the Group has seen improved performance in the Subsea/IMR Projects segment compared to 3rd quarter where the highlight was the start-up of the 5-year Shell Prelude IMR contract, and Skandi Constructor and Skandi Neptune receiving contracts within the renewables industry. In the 4th quarter, Geosea was in transit from Brazil to the North Sea, and Skandi Achiever and Skandi Vitoria were in dry-dock. In general, the idle time between projects has increased, lowering the personnel and vessel utilisation. In the quarter Geosea and In Brazil, the Group has been engaged in ROV inspection work for Petrobras. In addition, the joint venture with TechnipFMC has provided pipelay services to Petrobras and McDermott/Queiroz Galvao. During the quarter, the Group has been awarded several shortterm contracts in the Subsea/IMR Projects segment where the APAC region was awarded contracts for Geotechnical services in Northern Australia utilising Skandi Hercules, and the Atlantic region was awarded contracts in the renewables industry utilising Skandi Constructor and Skandi Neptune. The North America region was awarded contracts by Allseas and Chevron utilising Skandi Achiever and Harvey Deep Sea. The JV company DOFCON Navegacao Ltda was awarded a short-term contract with McDermott utilising Skandi Niteroi. Utilisation 4Q Q Q Q Q 2016 Long-term Chartering 87% 86% 83% 85% 95% Subsea/IMR Projects 75% 70% 58% 57% 66% Fleet 78% 74% 66% 65% 75% Consolidated statement of comprehensive income and consolidated statement of financial position In the 4th quarter of 2017, the Group achieved an operating income of NOK million compared to an operating income of NOK million in the 4th quarter of The operating 4

5 DOF SUBSEA Financial Report Q profit before depreciation (EBITDA) was NOK 292 million (NOK 385 million in 2016, including a sales gain of NOK 96 million). The operating profit (EBIT) was NOK 91 million (NOK 10 million). Depreciation and impairment amounted to NOK 201 million (NOK 375 million), of which NOK 64 million was impairment. NOK million 4Q Q 2016 Change % Operating income % EBITDA % EBIT % Net financial loss was NOK 305 million (NOK 417 million), where NOK 194 million (NOK 193 million) was unrealised net loss on derivative instruments and currency positions. The loss before tax was NOK 215 million (NOK 407 million), and the loss for the period was NOK 375 million (NOK 430 million). Income tax expense was NOK 161 million, of which NOK 150 million was impairment of deferred tax assets. (NOK million). At the end of December, the book equity ratio was 38%, and the value-adjusted equity ratio was 42%. The value-adjusted equity ratio is calculated by adjusting the book equity and total assets by excess values on all owned vessels in the Group. Cash and cash equivalents have changed due to operating, investing and financing activities. Net cash flow from operating activities in the 4th quarter was NOK -143 million (NOK 27 million). Cash flow from investing activities was NOK -5 million (NOK 759 million), of which NOK -38 million (NOK -185 million) was from investment in assets that increases or will increase capacity for the Group. Cash flow from financing activities was NOK 151 million (NOK -867 million) of which NOK -305 million (NOK -869 million) was instalments and repayments on long-term interest-bearing debt. At the end of the 4th quarter, the Group s cash and cash equivalents were NOK million (NOK million). The total operating income for 2017 was NOK million (NOK million in 2016) with an operating profit before depreciation (EBITDA) of NOK million (NOK 1 764, including a sales gain of NOK 170 million) and an operating profit (EBIT) of NOK 136 million (NOK 446 million) after depreciation and impairment of NOK 999 million (NOK million). The net financial loss was NOK 259 million (NOK 179 million), giving a loss before tax of NOK 123 million (profit of NOK 266 million). The loss for the period amounted to NOK 273 million (profit of NOK 155 million). The Group s total assets were NOK million (NOK million), where non-current assets amounted to NOK million (NOK million), including NOK 609 million (NOK 642 million) in intangible assets. Current assets were NOK million (NOK million), of which NOK million (NOK million) was cash and cash equivalents. NOK million Change % Total assets % Tangible assets % Cash and cash equivalents % NIBD Total equity % The total equity was NOK million (NOK million), including non-controlling interests of NOK 226 million (NOK 224 million). Non-current liabilities were NOK million (NOK million). Current liabilities were NOK million (NOK million), of which NOK million (NOK million) was current portion of debt. The Group s total equity and liabilities were NOK million (NOK million). The net interest-bearing debt (NIBD) was NOK million Debt, financing and liquidity The Group s current portion of debt at the end of December was NOK million, including balloons, bond, drawn credit facilities and ordinary instalments. During the quarter no new loans were drawn, and the Group paid ordinary instalments. The current weak market conditions have increased the risk for impairment of the Group s non-current assets, and put pressure on the Group s liquidity position. In December the Group completed a private placement of NOK 500 million towards DOF ASA, increasing the numbers of outstanding shares from million to million. The private placement was dependent on an extension of the remaining part of the DOFSUB07 bond of NOK 508 million from May 2018 to May In December the bondholder meeting voted in favour of extending the DOFSUB07 bond from 2018 to 2020, however with an instalment of NOK 100 million in October Financial risk The Group s operating income is in NOK, USD, AUD, GBP, CAD and BRL, while the Group s loans are distributed between NOK, USD and CAD. This exposes the Group to the risk of exchange rate fluctuations. The Group has an active exchange rate policy and uses derivatives to hedge the exchange rate exposure. 5

6 Financial Report Q DOF SUBSEA 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. Shareholders The shares in DOF Subsea AS are owned by DOF ASA (64.9%), FRC Lux Holding Limited (30.6%) and Dolphin Invest 2 AS (4.5%). The number of outstanding shares is , with a book equity of NOK per share. Employees At the end of 4th quarter, the number of employees in the Group was The number does not include marine employees that are employed in DOF Management and Norskan and hired in through shipman agreements to operate and crew the vessels. The Fleet As at end of December, the Group s fleet comprised 22 owned vessels, 3 chartered-in vessels and 2 vessels under construction in DOFCON Navegacao Ltda, a 50/50 owned joint venture with TechnipFMC. The Backlog As at end of December, the firm contract backlog amounts to NOK 16.1 billion, and including options NOK 34.3 billion. However, the Group is exposed to the short-term market conditions in the Subsea/IMR Projects segment. In this segment the management is working to increase the backlog and improve the utilisation of personnel and assets. Contract Backlog* Skandi Skansen s contract with TechnipFMC has been extended, and the vessel has further been awarded a new contract securing high utilisation for the vessel the first four months of the year. In the Brazil region, Skandi Salvador has been awarded a shortterm contract with Saipem. In the Asia Pacific region, an IMR frame agreement has been extended by one year, under which Skandi Singapore has been awarded 30 days of work in Q with potential for additional scope. In the North America region, Harvey Deep Sea and Skandi Achiever have been awarded short-term contracts securing utilisation in Q Forward looking statement The Board of Directors is satisfied with the performance in 4th quarter, however the financial numbers for 2017 are below the Board of Directors expectations due to one-off events in the North America region and in the Asia Pacific region. The market has continued to be challenging, with seasonal variations in the different regions during the 4th quarter, and the Board of Directors expects the markets to continue to be challenging in A continuing weak market, both with regards to terms and margins on new contracts, could lead to reduced earnings and impairment of the vessel values for the Group. As such, the Group will continue its focus on adjusting its capacity and risk exposure to the current challenging market environment. However with oil prices stabilising above USD 60 per barrel, oil companies have increased their tendering activity which may indicate the subsea markets to gradually improve, increasing the demand for the Group s services in the medium term. The majority of the Group s high-end assets are committed on longterm contracts, and represents the largest portion of the Group s backlog, including the two remaining newbuilds committed on 8-year contracts. The Board of Directors would like to thank all employees for the efforts made in * Contract backlog excludes master service agreements (MSAs) within the subsea/ IRM project segment. Under the MSAs only confirmed POs are accounted for. Events after the consolidated statement of financial position date In January, DOF Subsea Brazil was awarded 2 new ROV contracts by Petrobras and an extension for 2 additional ROV s. In the Atlantic region, the contracts for Skandi Neptune and Skandi Constructor have been extended until the beginning of April and end of February Bergen, 22 February 2018 The Board of Directors of DOF Subsea AS Contact information: Mons S. Aase, CEO Marianne Møgster DOF Subsea AS Thormølens gate 53 C 5006 Bergen 6

7 DOF SUBSEA Financial Report Q

8 Financial Report Q DOF SUBSEA Financial statements 4 th quarter 2017 Consolidated statement of comprehensive income Note 4Q Q Operating income 1, Payroll expenses Other operating expenses Share of net income of associates and joint ventures 1, Profit from sale of non-current assets Operating profit before depreciation (EBITDA) 1, Depreciation and impairment Operating profit (EBIT) Financial income Financial expenses Realised net gain / loss on derivative instruments and currency position Unrealised net gain / loss on derivative instruments and currency position Net financial income / loss Profit / loss before tax Income tax expense Profit / loss for the period Other comprehensive income net of tax Items that may be subsequently reclassified to profit / loss Currency translation difference (CTA) Share of other comprehensive income of associates and joint ventures Items that will not be subsequently reclassified to profit / loss Defined benefit plan actuarials gains/losses Other comprehensive income / loss net of tax Total comprehensive income / loss for the period net of tax Total comprehensive income / loss attributable to: Non-controlling interests Owners of the parents

9 DOF SUBSEA Financial Report Q Consolidated statement of financial position Assets Note Tangible assets Goodwill Deferred tax asset Investment in associates and joint ventures 1, Non-current receivables Non-current assets Trade receivables Other current receivables Total current receivables Restricted cash Unrestricted cash and cash equivalents Cash and cash equivalents Current assets Total assets

10 Financial Report Q DOF SUBSEA Consolidated statement of financial position Equity and liabilities Note Paid-in equity Other equity Non-controlling interests Total equity Bond loans Debt to credit institutions Financial non-current derivatives Other non-current liabilities Non-current liabilities Current portion of debt Trade payables Other current liabilities Current liabilities Total liabilities Total equity and liabilities

11 DOF SUBSEA Financial Report Q Consolidated statement of cash flows Note 4Q Q Operating profit (EBIT) Depreciation and impairment Profit from sale of non-current assets Share of net income of associates and joint ventures 1, Change in trade receivables Change in trade payables Changes in other working capital Exchange rate effect on operating activities Cash flow from operating activities Interest received Interest paid Tax paid Net cash flow from operating activities Sale of tangible assets Purchase of tangible assets Purchase of shares Dividends received Net cash flows from other non-current receivables Cash flow from investing activities Proceeds of interest-bearing debt Instalments on interest-bearing debt Payments to non-controlling interests Share issue Cash flow from financing activities Net change in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents from merger and acquisition Exchange rate effect on cash and cash equivalents Cash and cash equivalents at the end of the period

12 Financial Report Q DOF SUBSEA Consolidated statement of changes in equity Share capital Share premium Other paid-in capital Retained earnings Currency translation differences Total Noncontrolling interests Total equity Equity at Profit / loss for the period Other comprehensive income for the period Total comprehensive income for the period Capital increase by cash Merger DOF Subsea Holding AS Changes in non-controlling interests Equity at Equity at Profit / loss for the period Other comprehensive income for the period Total comprehensive income for the period Changes in non-controlling interests Equity at

13 DOF SUBSEA Financial Report Q

14 Financial Report Q DOF SUBSEA Notes to the financial statements Note 1 Management reporting The Group uses the proportionate consolidation method when accounting for joint ventures in management reporting. Porportional consolidation method is used to better reflect the operating performance for vessels in the JV. At the end of 2017, the joint venture has 4 PLSVs in operation and 2 PLSVs under construction. The table below shows the effect of proportional consolidation method used in management reporting. YTD 2017 Consistent with management reporting Reconciliation to equity method YTD 2017 Operating income Payroll expenses Other operating expenses Share of net income of associates and joint ventures Profit from sale of non-current assets Operating profit before depreciation (EBITDA) Depreciation and impairment Operating profit (EBIT) Financial income Financial expenses Realised net gain / loss on derivative instruments and currency position Unrealised net gain / loss on derivative instruments and currency position Net financial income / loss Profit / loss before tax Income tax expense Profit / loss for the period

15 DOF SUBSEA Financial Report Q Note 1 Management reporting (continued from previous page) Consolidated statement of financial position Consistent with management reporting Reconciliation to equity method YTD 2017 Intangible assets Tangible assets Financial assets Non-current assets Current assets Total assets Consolidated statement of financial position Consistent with management reporting Reconciliation to equity method YTD 2017 Total equity Non-current liabilities Current liabilities Total liabilities Total equity and liabilities Consolidated statement of cash flows Consistent with management reporting Reconciliation to equity method YTD 2017 Net cash flow from operating activities Cash flow from investing activities Cash flow from financing activities Net change in cash and cash equivalents Cash and cash equivalent at the beinning of the period Effect of merger and acquisition Exchange rate effect on cash and cash equivalents Cash and Cash equivalents at the end of the period

16 Financial Report Q DOF SUBSEA 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, see note 1. The bridge between management reporting and the figures reported in the financial statements is presented 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 delivered to each segment. From 2nd quarter 2017 the Group has changed its composition of segments. More information about the changes is given below. Previous reported segment information is restated for presentation purpose. Operating income consistent with management reporting* 4Q Q Long-term Chartering Subsea/IMR Pprojects Total consistent with management reporting Reconciliation to equity method Total EBITDA consistent with management reporting Long-term Chartering** Subsea/IMR Projects Total consistent with management reporting Reconciliation to equity method Total *The split of Operating Income between Long-term Chartering and Subsea/IMR projects as of 2nd quarter 2017 has been reclassified in For presentation purposes, 2016 have been restated accordingly. **EBITDA for Long-term Chartering includes a sales gain of NOK 96 million in Q4 2016, and a sales gain of NOK 170 million in The Group has changed the way it organises and operates its two segments. At the same time, naming of the segments has been changed to better reflect the underlying operations. The Subsea Projects segment has changed name to Subsea/IMR Projects, and Chartering of vessels segment has changed name to Long-term Chartering. After this change, the Group s business is divided into two business segments: Subsea/ IMR Projects and Long-term Chartering. The Long-term Chartering segment is a change to a clearer profile towards long-term chartering contracts compared to how the old segment, Chartering of vessels segment, was organised. To reflect this, the Chartering of vessels segment has changed name to Long-term Chartering. As a result of these changes, 3 vessels have been transferred from the Chartering of vessels segment to the Subsea/IMR Projects segment. The Subsea/IMR Projects segment covers operations in four regions; the Asia Pacific Region, the Atlantic Region, the North America Region and the Brazil region. In the Subsea/IMR Projects segment, the vessels and equipment are utilised on a global basis. The Subsea/IMR Projects segment is the Group s largest segment, accounting for 81% of the Group s total revenues for the year ended 31 December The Group has gradually built up the Subsea/IMR Projects segment, and has become a global provider of subsea services with a core focus on IMR. Within IMR, the Group has been awarded several long-term contracts over the last couple of years, among others, the 7-year contract with Shell Philippines, the 3-year contract with Chevron Australia, the 5-year contract with Shell Australia and the 10-year contract with Husky Oil in Canada. In addition to the IMR market, the Subsea/IMR Projects segment has focused on mooring and survey work utilising the Group s core competences and assets. The Long-term Chartering segment covers letting of vessels to third-party charterers and is managed through the Group s associated company, DOF Management AS, and the Company s sister company Norskan Offshore Ltda. The Long-term Chartering segment is built on DOF Subsea s long standing as an internationally recognised vessel owner and operator of highend subsea vessels. Typical clients of the Group s Long-term Chartering services are, inter alia, Total, Petrobras, TechnipFMC and Subsea 7. 16

17 DOF SUBSEA Financial Report Q Note 3 Financial income and expenses 4Q Q Interest income Other financial income Financial income Interest expenses Capitalisation of interest Other financial expenses Financial expenses Net gain / loss on non-current debt Net gain / loss on operational capital Net gain / loss on financial derivatives Net realised gain / loss on financial instruments Net unrealised gain / loss on non-current debt Net unrealised gain / loss on operational capital Net unrealised gain / loss on financial derivatives Unrealised gain / loss on financial instruments Net financial income / loss

18 Financial Report Q DOF SUBSEA Note 4 Tangible assets Vessels & periodic maintenance ROVs Machinery & other equipment Newbuilds Total Net booked value Additions Vessel completed Disposals Reclassification Depreciation Impairment Currency translation differences Net booked value Net booked value Additions Disposals Reclassification Depreciation Impairment Currency translation differences Net booked value The challenging market conditions for offshore service vessels have continued. In the 4th quarter 2017, the Group faced lower market 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 principles presented in the annual report for Impairments of NOK 64 million have been recognised in the 4th quarter of YTD 2017, the Group has recognised an impairment of NOK 425 million. 18

19 DOF SUBSEA Financial Report Q Note 5 Net interest-bearing debt Non-current interest-bearing debt Bond loan floating rate Debt to credit institutions Total non-current interest bearing debt Current interest-bearing debt Bond loan, floating rate - - Debt to credit institutions Total current interest-bearing debt Total non-current and current interest-bearing debt Net interest-bearing debt Cash and cash equivalent Other interest-bearing assets - non-current Total net interest-bearing debt Debt repayment profile Q Q Q Q Total current debt Thereafter Total Bond loan Debt to credit institutions Total repayment 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 The cash deposit is included in restricted deposits. In December, the Group completed a private placement of NOK 500 million towards DOF ASA, increasing the numbers of outstanding shares from million to million. The private placement was dependent on an extension of the remaining part of the DOFSUB07 bond of NOK 508 million from May 2018 to May In December, the bondholder meeting voted in favour of extending the DOFSUB07 bond from 2018 to 2020, however with an instalment of NOK 100 million in October Share of debt secured by fixed interest rate Fixed rate Floating rate Total NOK Debt to credit institutions 94 % 6 % 100 % Bond loan % 100 % Total NOK 83 % 17 % 100 % USD Debt to credit institutions 69 % 31 % 100 % Bond loan 100 % % Total USD 78 % 22 % 100 % CAD Debt to credit institutions 100 % % Total CAD 100 % % Total debt 81 % 19 % 100 % 19

20 Financial Report Q DOF SUBSEA Note 5 Interest-bearing debt (continued from previous page) Financial covenants The 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 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 % 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. Note 6 Financial instruments and hedging activities Assets Liabilities Assets Liabilities Non-current and current portion Interest rate swaps - cash flow hedges Foreign exchange contracts cash flow hedges Total non-current and current Non-current portion Interest rate swaps - cash flow hedges Foreign exchange contracts cash flow hedges Total non-current portion Total current portion Committed Received Amount Committed Received Amount Instrument Foreign exchange contracts, buy NOK NOK NOK

21 DOF SUBSEA Financial Report Q Note 7 Transactions with related parties Description of transactions with related parties is given in the Annual Report for There are no major changes in type of transactions between related parties during the first half of During the year the Group has had Skandi Chieftain, owned by DOF ASA, on bareboat charter. In addition, the Group has receivables and liabilities towards DOF ASA, Norskan, DOF Management and Marin IT related to operations. Note 8 Investments in associates and joint ventures Entity Proportion of ownership Joint ventures DOFCON Brasil AS 50 % Associated companies Marin IT AS 35 % DOF Management AS 34 % Master & Commander IS 20 % Booked value of investments in associates and joint ventures Reclassification to subsidiaries -1 Capital increase 8 Share of net income of associates and joint ventures 303 Share of other comprehensive income related to associates and joint ventures -1 Disposal of investments in associates and joint ventures - Booked value of investments in associates and joint ventures See also note 1 and note 2. Note 9 Events after the consolidated statement of financial position date In January, DOF Subsea Brazil was awarded 2 new ROV contracts by Petrobras and an extension for 2 additional ROV s. In the Atlantic region, the contracts for Skandi Neptune and Skandi Constructor have been extended until the beginning of April and end of February Skandi Skansen s contract with TechnipFMC has been extended, and the vessel has further been awarded a new contract securing high utilisation for the vessel the first four months of the year. In the Brazil region, Skandi Salvador has been awarded a short-term contract with Saipem. In the Asia Pacific region, an IMR frame agreement has been extended by one year, under which Skandi Singapore has been awarded 30 days of work in Q with potential for additional scope. In the North America region, Harvey Deep Sea and Skandi Achiever have been awarded short-term contracts securing utilisation in Q

22 Financial Report Q DOF SUBSEA Note 10 Shareholder information Name No. shares Shareholding Voting shares DOF ASA % 65 % FRC Lux Holding Limited % 31 % Dolphin Invest 2 AS % 5 % Total % % A reverse merger was executed during the quarter effective 1 January 2017 between DOF Subsea AS and DOF Subsea Holding AS. This resulted in DOF Subsea Holding AS being absorbed into DOF Subsea AS, thus changes in the shareholders. In December the Group made a private placement of NOK 500 million towards DOF ASA, increasing the numbers of outstanding shares from million to million. Note 11 General This interim report has been prepared in accordance with the standard for interim reporting (IAS 34). The accounting principles and calculation methods applied for the latest published annual accounts have been applied to the quarterly financial report. Amendments and interpretations to the standards which are effective for the financial year beginning on 1 January 2017 are not material to the Group. The Financial Statement is unaudited. IFRS 15 Revenue from contracts with customers - effective from 1 January 2018 The new standard is based on the principle that revenue is recognised when control of goods or service transfers to a customer - the notion of control replaces the existing notion of risks and rewards. The Group has finalised an internal project regarding the implementation of IFRS 15 Revenue from contracts with customers. The main purpose of the project was to assess the impact of applying the new standard on the Group s Financial Statements to ensure a good implementation process. All contracts ongoing at year-end are evaluated based on the five step model described in IFRS 15 Revenue from contracts with customers. The purpose of the evaluation was to identify the effect on the equity 1 January In addition, all types of contracts within the different revenue streams are evaluated on a general basis to determine the effects of the implementation in As part of the project the Group s revenue streams has been categorised into the following types: Time Charter revenue and Project revenue. Time Charter revenue is based on contracts wehre the Group delivers a vessel (including crew) to the client. During the contract period, the client decides how and when to operate the vessel. Based on existing IFRS, and after the implementation of IFRS 15 Revenue from contracts with customers, this revenue stream is recognised over time. The Time Charter revenue will be affected by the implementation of IFRS 15 Revenue from contracts with customers and the bareboat element will be recognised as lease revenue based on IFRS 16 Leases. Result of the assessment is that the timing of the revenue recognition under IFRS 15 Revenue from contracts with customers and IFRS 16 Leases will be the same as under IAS 18 Revenue and IAS 17 Leases. Project revenue is based on operations where the Group utilises its vessels, equipment and crew to perform tailor made operations on the client s installations, assets etc. Based on existing IFRS this revenue is recognised over time. Result of the assessment is that the timing of the revenue recognition under IFRS 15 Revenue from contracts with customers will be the same as under IAS 18 Revenue/IAS 11 Construction contracts. 22

23 DOF SUBSEA Financial Report Q Note 11 General (continued from previous page) Despite no change in the main recognition method, the Group has identified that the following areas might be affected going forward: - The application of IFRS 15 Revenue from contracts with customers may result in identification of several separate performance obligations, which could affect the timing of revenue recognition in relation to the separate performance obligations. - Certain costs will be recognised as a contract asset under IFRS 15 Revenue from contracts with customers with additional disclosures. Under existing IFRS, contract assets are not separated from other assets. - Parts of the Time charter revenue might be recognised as lease revenue based on IAS 17 Leases/IFRS 16 Leases. The Group will apply IFRS 15 Revenue from contracts with customers retrospectively with the cumulative effect of initial application recognised as an adjustment to equity as of 1 January This transition method will only be applied retrospectively on contracts that are not completed by 1 January Based on the assessment the Group does not expect any adjustment to the equity as of 1 January IFRS 9 Financial instruments - effective from 1 January 2018 IFRS 9 Financial instruments addresses the classification, measurement and de-recognition of financial assets and financial liabilities and introduces new rules for hedge accounting. The Group does not use hedge accounting as of 4th quarter 2017, and the Group does not intend to use hedge accounting in The implementation might cause a minor effect on the equity as of 1 January 2018, due to the modification of the remaining part of the DOFSUB07 bond loan in December The Group does not expect any material effects on the equity as of 1 January IFRS 16 Leases - mandatory from 1 January 2019 The new standard will result in almost all leases being recognised in the statement of financial position, as the distinction between operating and finance leases is removed. Under the standard, an asset (the right to use a leased item) and a financial liability (the obligation to pay rentals) are recognised. The only exceptions of this recognition principle are short-term and low-value leases. As of 31 December 2017, the Group has three vessels on lessee arrangements which are presented as operating leases. One of the agreements is for less than 12 months. Furthermore, the Group has and will have lease agreements on office buidlings and warehouses that will be affected by implementation of IFRS 16 Leases. Yearly lease fee for the Group s office buildings and warehouses are approximately NOK 50 million. At the moment some lease agreements are longer than 12 months and some lease agreements are shorter than 12 months. It is expected that the composition of long- and short-term lease agreements can be changed before implementation of IFRS 16 Leases. For further information about DOF Subsea offices, see Annual Report of For the Group as a lessor, expected impacts on revenue are related to presentation, classification and notes to the Financial Statements. The Group does not intend to adopt the standard before its effective date, 1 January

24 Financial Report Q DOF SUBSEA Note 12 Performance measurement definitions Operating profit before depreciation (EBITDA) Operating profit before depreciation (EBITDA) is defined as operating profit, including profit from sale of non-current assets, before impairment of tangible and intangible assets, depreciation of tangible assets and amortisation of contract assets. EBITDA represents earnings before interest, tax, depreciation and amortisation, and is a key financial parameter for the Group. This measure is useful in evaluating operating profitability on a more variable cost basis as it excludes depreciation, impairment and amortised expenses related primarily to capital expenditures and acquisitions that occurred in the past. The EBITDA margin presented is defined as EBITDA divided by operating income. Operating profit (EBIT) Operating profit (EBIT) represents earnings before interest and tax, and is a common non-ifrs measure to assess profitability before financial income and 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 and cash and cash equivalents. Non-current receivables from joint ventures are not included in net interest-bearing debt. Cash and cash equivalents will include restricted cash. Current interest-bearing debt includes 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. Equity ratio Equity ratio is defined as total equity divided by total assets at the reporting date. Market value Calculated average vessel value between two independent brokers estimates based on the principle of willing buyer and willing seller. Vessel utilisation Vessel utilisation is a measure of the Group`s ability to keep vessels in operation and on contracts with clients, expressed as a percentage. The vessel utilisation numbers are based on actual available days, including yard-stay days for dry-docking, repairs and upgrade/conversion, transits and idle time between subsea/imr projects and long-term chartering contracts. Contract backlog Sum of undiscounted revenue related to secured contracts in the future and optional contract extensions as determined by the client in the future. Contract backlog excludes master service agreements (MSAs) within the Subsea/IRM Projects segment. Under the MSAs only confirmed POs are included. Firm contract backlog Sum of undiscounted revenue related to secured contracts in the future. Secured contracts are contracts signed with clients in the past, covering future delivery of services. Backlog options Sum of undiscounted revenue related to optional contract extensions as determined by the client in the future. Working capital The working capital position of the Group is equal to current assets less current liabilities. It is a measure of the Group s liquidity and efficiency, and demonstrates the Group s ability to pay its current liabilities. 24

25 DOF SUBSEA Financial Report Q

26 Financial Report Q DOF SUBSEA Supplemental information The supplemental information below is presented according to internal management reporting, based on the proportionate consolidation method. Proportionate consolidation method implies full consolidation for subsidiaries, and consolidation of 50% of the comprehensive income and financial position for the joint ventures. Condensed statement of comprehensive income 5 last quarters 4Q Q Q Q Q 2016 Operating income Payroll expenses Other operating expenses Share of net income of associates and joint ventures Profit from sale of non-current assets Total operating expenses Operating profit before depreciation (EBITDA) Depreciation and impairment Operating profit (EBIT) Financial income Financial expenses Realised gain / loss on financial instruments Unrealised gain / loss on financial instruments Net financial income / loss Profit / loss before tax Tax expenses Profit / loss for the period

27 DOF SUBSEA Financial Report Q Condensed statement of financial position 5 last quarters Assets 4Q Q Q Q Q 2016 Intangible assets Tangible assets Financial assets Non-current assets Total receivables Cash and cash equivalents Current assets Total assets Equity and liabilities 4Q Q 2017 Q Q Q 2016 Paid in equity Other equity Non-controlling interests Total equity Non-current provisions for commitment Other non-current liabilities Non-current liabilities Current portion of debt to credit institutions Other current liabilities Current liabilities Total liabilities Total equity and liabilities Key figures 4Q Q Q Q Q 2016 Profit per share (NOK) EBITDA margin 32 % 30 % 33 % 28 % 37 % EBIT margin 13 % -2 % 14 % -1 % 2 % Return on net capital -6 % 2 % 1 % -2 % -7 % Book value equity per share (NOK) Value-adjusted equity per share (NOK) Net interest-bearing debt (NOK million)

28 Financial Report Q DOF SUBSEA DOF Subsea vessels Owned vessels DOF Subsea currently owns one of the largest fleet of high-end construction vessels (including newbuilds) in the world. These assets offer a versatile, new generation of high-powered and purpose-built vessels with broad offshore capabilities. Geograph Geoholm Geosea Geosund Skandi Acergy Skandi Achiever Skandi Açu Skandi Africa Skandi Buzios Skandi Carla Skandi Constructor Skandi Hawk 28

29 DOF SUBSEA Financial Report Q Skandi Hercules Skandi Neptune Skandi Niteroi Skandi Singapore Skandi Salvador Skandi Seven Skandi Skansen Skandi Patagonia Skandi Vinland Skandi Vitoria 29

30 Financial Report Q DOF SUBSEA DOF Subsea vessels (continued) Newbuilds in joint ventures and associated companies DOF Subsea invests in the next generations of vessels. An ambitious Newbuild program utilises new technology and smart engineering to ensure efficient and environmentally-friendly operations in the future. Skandi Olinda Skandi Recife Chartered-in 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 Darwin Harvey Deep Sea Skandi Chieftain 30

31 GLOBAL HQ DOF Subsea AS Thormøhlensgate 53 C 5006 Bergen NORWAY Phone: Fax: AUSTRALIA DOF Subsea Australia Pty Ltd 5th Floor, 181 St. Georges Tce Perth, Wa 6000 AUSTRALIA Phone: Fax: DOF Management Pte Ltd 460 Alexandra Road# PSA Building, SINGAPORE Phone: Fax: UNITED KINGDOM NORWAY DOF Subsea Norway AS Thormøhlensgate 53 C 5006 Bergen NORWAY Phone: Fax: SEMAR AS Oksenøystein Lysaker NORWAY Phone: Fax: DOF Management AS Alfabygget 5392 Storebø NORWAY Thormøhlensgate 53 C 5006 Bergen NORWAY Phone: Fax: ANGOLA DOF Subsea Angola Belas Business Park-Talatona Edificio Bengo, 1º Andar Sala 106/107, Luanda Republic of Angola Phone: Fax: Mobile: DOF Management Australia 5th Floor, 181 St. Georges Tce Perth, Wa 6000 AUSTRALIA Phone: Mobile: BRAZIL DOF Subsea Brasil Serviços Ltda Rua Fiscal Juca, 330 Q: W2 L: 0001 Loteamento Novo Cavaleiros Vale Encantado Macaé/RJ BRAZIL - CEP Rio address: Rua Lauro Muller 116, 17 andar Torre do Rio Sul - Botafogo Rio de Janeiro, R.J. BRAZIL - CEP: Phone: Fax: CANADA DOF Subsea Canada 26 Allstone Street, Unit 2 Mount Pearl, Newfoundland CANADA, A1N 0A4 Phone: Fax: SINGAPORE DOF Subsea Asia Pacific Pte Ltd 460 Alexandra Road# PSA Building, SINGAPORE Phone: Fax: DOF Subsea UK Ltd Horizons House, Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOM Phone: Fax: DOF Subsea S&P UK Ltd Horizons House, Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOM Phone: Fax: CSL Engineering Horizons House, Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOM Phone: Fax: DOF (UK) Ltd Horizons House, Waterloo Quay Aberdeen, AB11 5DE UNITED KINGDOM Phone: Fax: USA DOF Subsea USA Inc 5365 W. Sam Houston Parkway Suite 400, Houston, Texas 77041, USA Phone: Fax: