Magseis ASA Pareto Oil & Offshore Conference 13 September 2017
Highlights • Strong growth in the OBS market in 2016-2018, driven by focus on 4D / IOR Ocean Bottom Seismic • market growing rapidly Technology drives acquisition costs down, capturing market share from streamer • Magseis has the smallest and highest-spec sensors on the market Magseis holds strong • Strong track-record of delivering efficient, automated cable and ROV operations technology position • Operate with a fleet of short and longer term vessels charters Flexible business model • Strategic partnerships with other contractors in certain markets 2 Source: Magseis
OBS provides superior image quality - Continues to gain market share over high-end streamer seismic Streamer Seismic Ocean Bottom Seismic (OBS) 80% 20% Market share Market share 3 Source: Magseis/Statoil
Market has returned to growth - Driven by 4D/IOR focus, cost reductions will accelerate this 4 Source: Magseis/Arkwright/Rystad Energy/Statoil
MASS technology - Marine Autonomous Seismic System Handling system Applications Miniaturised node sensors Cable Cable deployment • Highest spec sensor on the market • Smart, light, robust and easy-to-handle node ROV • ROV deployment Superior logistics and efficiency • Automated handling system Node Deployer Ultra deep water deployment 5 Source: Magseis
Larger spread driving substantial cost reductions 2018 2015 2014 2016 >600km 150km 75km 350km Cable length Large spreads - 25K rolling operations Multiple patch deployment 100K $ per.km² $ per. km² 6 Source: Magseis
Red Sea project (S-78) Operational highlights • Magseis and BGP have delivered a highly-efficient, continuous operation for more than 15 months in the region • Operating a rolling spread of more than 350km of MASS cable • Covering a complex area of more than 1,500km2 with water depths varying from 0 – 1,100m • Delivering a high-quality data set and excellent HSE performance 7 Source: Magseis
Further Red Sea exploration potential Saudi Aramco was the first to use a deep water rig in the Red Sea region after a 15-month seismic study in 2009 indicated the presence of natural gas. The company discovered three oil and two gas fields in 2013. ( Abdelghani Henni, HartsEnergy ) “We continue our program to explore the shallow waters of the Red Sea, completing our largest single survey of the seabed encompassing Saudi Arabian territorial waters,” Saudi Aramco said in its latest annual report (2016). ( Abdelghani Henni, HartsEnergy ) State-owned Saudi Aramco is hoping that innovative seismic acquisition technology will help the company to successfully explore the geologically complex sub-salt of the ecologically sensitive Red Sea. The operator had said its share of Red Sea oil and gas resources had the potential to boost Saudi Arabia’s reserves base by more than 30%. (Saleh Al Saleh, Upstream online) Red Sea 8 Source: Magseis, NASA
ConocoPhillips Eldfisk project • First full scale Mobile ROV operation • 3000 MASS nodes and 2 ROVs • Completed on schedule and budget • Using ROV vessel and Source vessels already on charter with ConocoPhillips • Operational efficiency can be improved further by deploying more MASS nodes and faster ROVs 9 Source: Magseis
MASS Modular High capacity, mobile ROV operation • Containerised, modular system • Can be rigged up/down within 1 week on vessels of opportunity or onshore • Unlimited number of nodes can be deployed • Efficiency comparable to high-end cable based deployment platforms • Commercially available from Q3 17, strong interest from clients 10 Source: Magseis
Ramping up capacity to meet market growth: • MASS node inventory growing from 5,000 to 14,000 by Q1 MASS Node Inventory 2018 30 000 • Critical long-lead components for an additional 6,000 has 25 000 been secured, enabling Magseis to reach 20,000 MASS nodes by YE 2018 20 000 • Firmly establishing Magseis as a joint industry leader in terms 15 000 of OBS node capacity 10 000 • Strategic focus on maximizing the utilisation of our MASS nodes and Return On Capital Employed 5000 0 2018 2019 2016 2017 Committed orders for complete MASS nodes Secured, critical long-lead items 11 Source: Magseis
Crew #3 preparations ongoing • Recent experience from ROV operations have reduced the gap in efficiency between ROV and cable operations • Efficient ROV operations with small MASS nodes can address a significant part of the OBS market • Refinement of cable vessel design ongoing to increase efficiency and reduce capex • Cable operation is a requirement for many projects and we plan to operate 2-3 cable vessels • Target start of next cable operations during 2018 based on potential projects • The 6000 nodes built for Crew 3 will be delivered Q1 2018 and a new mobile handling unit will be built 12 Source: Magseis
Exclusive source technology agreement - Significant potential to reduce costs further • Improved efficiency and data quality by new Source Isolation technology • Improved source efficiency though simultaneous shooting by one source vessel • Improved shot sampling over conventional technologies • Exclusive agreement for OBS • Field test conducted August 2017 • Commercially available in 2018 Source Isolation Conventional shooting 25m 50m 13 Source: Magseis
Y FIGURES 1H H 2017 KEY F 17 $ MILLION 40.5 REVENUE 40.5 EBITDA 16.7 25.8 16.7 $ MILLION $ MILLION NET INCOME 6.8 CASH BALANCE 33.7 0.0 REVENUE EBITDA REVENUE EBITDA H1 1H 1H H1 $ MILLION $ MILLION 2016 2017 2017 2016 14 Source: Magseis
Summary: Magseis well positioned for 2018 • Succesfull introduction of MASS Modular with ROV deployment Strong Operational • Impressive operations in challenging conditions in the Red Sea Performance • Several active tenders in key markets (capacity already tied-up on awarded projects) Strong Pipeline • High likelihood of repeat business with current clients • Continue to develop the MASS technology for flexible operations MASS Technology • Source Isolation technology targeting 30-50% acquisition cost reduction • Strong focus on reducing cost through large spreads and efficient operations Strategy • Balance risk through a combination of short and long term vessel charters 15
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Second quarter and first half 2017 - Key figures USD 19.4 million in Revenues • Profit and loss Q2 2017 Q2 2016 YTD 2017 YTD 2016 • Higher than expected due to strong operational performance 19 399 7 671 40 475 25 786 Revenue on both Red Sea and ConocoPhillips projects 8 659 5 903 18 656 19 532 Cost of sales • USD 1.5m of paid standby incurred during the quarter 8 398 -1 578 16 727 -19 EBITDA EBIT 4 711 -3 546 9 472 -6 032 Net profit/loss 3 313 -3 970 6 823 -7 912 • Very strong EBITDA performance at USD 8.4 million Basic earnings per share 0.05 -0.25 0.11 -0.12 • Capitalised 10 day yard stay during April (USD 2.0m reduction) • Financial position Total Amortisation of USD 2.8m during the quarter Cash 33 657 16 855 Working Capital 1) • Closing cash position of USD 33.7 million 17 359 -4 238 95 069 57 563 Total equity • Equity ratio of 78.6% 78.6% 66.4% Equity ratio 9 752 6 329 Gross interest bearing debt Working Capital increase • 1): Working Capital defined as Trade Receivables less Trade Payables • Reversion to more normalised payment terms from BGP Cash flow • Increased revenue base Net cash from operating activities - 5 461 592 -3 928 - 9 481 • Low level of payables Net cash from investing activities -8 399 -18 276 -10 714 - 8 827 Net cash from financing activities 15 497 32 367 20 062 - 2 228 Full-year guidance re-iterated • • Expected EBITDA for 2017 of > USD 20m 17 Source: Magseis
Second quarter and first half 2017 • Revenue - Comprehensive income • USD 19.4m, strong performance on the Aramco S-78 and ConocoPhillips projects Cost of sales • Q2 2017 YTD 2017 Q2 2016 YTD 2016 In USD thousands (unaudited) (unaudited) (unaudited) (audited) • Full quarter of production Revenue 19 399 40 475 7 671 25 786 • Amortisation of capitalised mobilisation and yard costs Cost of sales 18 656 5 903 19 532 8 659 (net effect of USD 0.8m during Q2) Research and development 514 1 013 769 1 261 • Lower Cost of Sales due to fuel provided on survey SG&A and other expenses 1 828 4 079 2 578 5 012 (Q2 2016 also included source vessel costs) EBITDA 8 398 16 727 -1 578 -19 Depreciation 3 572 6 791 1 580 4 571 • Depreciation 116 Amortisation 231 133 1 143 -00 Impairment 233 254 300 • Amortisation of capitalised mobilisation and yard cost USD 0.4m EBIT 4 711 9 472 -3 546 -6 032 560 Net interest and fx (gain)/loss 1 022 117 594 Amortisation and Impairment • -00 -00 -7 -00 Other finance cost Net finance costs 560 1 022 109 594 • No impairment in the second quarter EBT 4 151 8 450 -3 655 -6 627 838 Tax 1 627 315 1 285 • Finance Net income 3 313 6 823 -3 970 -7 912 Currency translation differences 0 0 0 0 • Primarily interest related to BGP pre-funding, GIEK and Total comprehensive income 3 313 6 823 -3 970 -7 912 Innovation Norway • BGP pre-funding repaid Tax • • USD 0.8m for withholding tax in Saudi Arabia 18 Source: Magseis
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