Oceanteam ASA - Release of Q3 2016 report and presentation

Capital restructuring ahead to further develop Company’s potential

With a Q3 EBITDA of USD 3.6 million, the Oceanteam Shipping and Solutions divisions have proven their ability to perform in an operationally robust manner. Oceanteam succeeded in sustaining occupancy and revenues when building long term backlog for its shipping business unit under very challenging market conditions. Also, the dry dock and maintenance period and startup of new contracts has had its impact on the third quarter EBITDA. In addition, the Oceanteam Solutions division has shown an ongoing high level of activity and has made a promising and exciting entrance into the Chinese renewables market.

While the Company has proven that it is operationally and strategically agile, with a solid business model, the Company’s financial situation is challenging. The Company is facing financial restraints due to its current high cost of capital and its (2017) maturing debt capital structure, which is restricting the ability to develop in what the Company believes is in the interest of its stakeholders.

Following the Company’s earlier communications, Oceanteam announced to have initiated a process of restructuring and has started dialogues with banks and bondholders aimed at a financial restructuring that should lead to a structurally lower cost of capital and a later maturity of its loans. The Company aims to gain more effective headroom resulting in improved day-to-day cash flow to cope with an extended downfall of market liquidity faced by practically all market players in the offshore industry, whether this is incidental or structural.

We are currently in a constructive dialogue with our bondholders following our deferral of interest payment of the Company’s Senior unsecured Bond. However, the immediate effect of this deferral is that under the loan agreements cash is retained by the banks within the working entities instead of flowing to Oceanteam ASA and that advisor and legal costs have increased as a result.

Our newly appointed interim CFO will lead the Company’s financial department and will be heading the current financial restructuring process. Mr Bøhn has a solid track record in corporate finance and has been involved in a number of capital restructurings. Oceanteam is pleased to have Mr Bøhn on board to help manoeuvre the Company during a demanding time and in a challenging market environment.

During the first weeks of Q4, we started to tackle the liquidity squeeze, in particular due to the newly entered vessel contracts for CSV Bourbon Oceanteam 101 and CSV Southern Ocean, by payment issues on two smaller vessels in Venezuela and by some of Solutions’ clients. Oceanteam has chosen a strategy aimed at keeping utilisation of its assets high and securing a long-term backlog, and Q3 is a quarter in which reduced rates take effect on the CSV Southern Ocean and CSV Bourbon Oceanteam 101. In addition, CSV Bourbon Oceanteam 101 has been off hire from May until mid-August 2016 for (de)mobilisations and dry dock, prior to starting a three to five-year contract.

As stated above, given the market realities and despite the Company’s current financial situation, third-quarter results were at a reasonable and robust level, certainly when taking into account the start-up of new vessel contracts with an EBITDA of USD 3.6 million. Oceanteam Solutions’ operations and service project mix is growing steadily, and the quarter once again showed a high level of operational activity in both new and existing contracts. With the renewables market showing strong growth and a positive outlook, Oceanteam is also expanding its geographical focus.

During the third quarter, Solutions signed its first long-term agreement for engineering and consultancy services in China. The project includes work related to offshore wind installations and support for power cable projects in China. This is a very exciting opportunity, as we are entering the Chinese market, which has enormous potential.

Oceanteam has secured significant contracts in the last six months for its main assets. Its strong focus on Mexico, IRM support and offshore renewables gives the Company a secure backlog and cash flow for the years to come, although at reduced rates. Unlike a number of its peers, the Company did manage to secure a backlog. The Company is confident this provides a solid basis to reset its capital structure as well.

With solid revenue, strong focus on structural cost reductions, reduction of capex commitment, geographical opportunities, diversified business activities and a newly appointed Chief Financial Officer, Oceanteam is prepared to overcome the financial hurdles ahead in order to develop the Company in the interest of our stakeholders. Now is the time to prove the viability of a diversified business model and robust performance, and we are confident that we have all the necessary elements in place to do so.

Please find attached the complete Q3 2016 report and presentation.