Q1 2020 12 May 2020
Highlights • COVID-19: Primary concern is the safety and welfare of employees and their families (zero cases so far) • Operations Total Recordable Case Frequency (TRCF) for the quarter was 1.27, an improvement from the previous quarter • Sustained operation and delivery on existing backlog – no interruptions in Q1 2020 • SG&A cost reduction of ~60% compared to FY 2019 Cost and capex measures • Capex reduction of ~80% compared to FY 2019, excluding MC investments • Refinanced debt in Q1 2020 by converting term loan to USD 30 million RCF with new covenants Balance sheet and liquidity • Completed private placement in Q1 2020 of USD 28 million • Backlog increased to USD 169 million Backlog • Z100 node sale and deepwater acquisition project in Mexico • Focus on the safety and security of our people • Securing new contracts remains #1 priority Managing the new market reality • Strengthened capital adequacy and liquidity in Q1 to provide a buffer to operate in the new market • Protect and preserve cash position to ensure solid entry in to 2021 2
Q1 2020 financials Q1 2020 figures Revenue Revenue of USD 53.3 million EBITDA EBITDA of USD 5.8 million 54% equity ratio Financial position Cash balance of USD 65.8 million 3
Restructuring and new organization is starting to deliver results in Q1 Revenue EBITDA USD million USD million Flawless execution in the GoM delivers a step up in margins 160 134 132 140 Equipment lease and Rentals continues to 120 95 deliver good margins 40 44 100 74 75 80 53 55 60 Reduced SG&A burden 26 40 35 9 6 20 15 92 90 Good fall through to EBITDA 0 -5 Q2'19 Q3'19 Q4'19 Q1'20 -24 Revenue MASS node sales -25 Q2'19 Q3'19 Q4'19 Q1'20 4
Uninterrupted operations and delivery on existing backlog Global presence in all major offshore basins No interruption from COVID-19 so far • ZXPLR crew continued operations in the GoM deepwater • In the Caspian Sea, operations for the MASS Micro undershoot project was completed • The MASS I system and node lease in Malaysia, which began in Q4 was completed in Q1 • The Z700 node on a rope crew completed the transit from the Middle East to the North Sea Recent and current • Mobilizing for the Multi-client project in the UK sector operations • The reservoir monitoring and source team began Current offices remobilizing and preparing for activities in the second quarter 5
Working closely with clients to secure potential new projects USD 57.4m in backlog added in Q1 2020: Backlog USD million • Equipment sale of Z100-nodes to an existing client 169 2% 165 in Asia • Awarded deepwater OBN adding on backlog for 32 43 ZXPLR crew, commencing in Q3 2020 No signed contracts have been cancelled at this time Tenders are being cancelled or postponed Discussions still ongoing for remaining opportunities 133 125 Current backlog sufficient to support operations in 2020 with current cash position 31 Dec 2019 31 Mar 2020 2020 2021 and beyond 6 6
Magseis Fairfield crew activity outlook Q1 2020 Q2 2020 Q3 2020 Q4 2020 Crew Jan Feb March April May June July Aug Sept Oct Nov Dec MASS I Crew 1 Z700 Crew 1 Z700 Crew 2 ZXPLR Crew 1 ZXPLR Crew 2 MASS III Crew 1 Continued qualification of MASS III nodes RM Source Crew 1 RM Source Crew 2 RM Source Crew 3 Deepwater ROV Rentals Multi-client Source contract Transit/Mobilization/ Available Storage 7
Proactively manage a lower revenue scenario Fixed cash cost base – SG&A and capex USD million, excluding CoS and Multi-Client investments Fixed Cash cost based on low case revenue scenario 155m • Reduced from 155m in FY 2019 to 40m for FY 2020. Strategy to Preserve and Protect our cash position for a good entry in to 2021 40m FY 2019 FY 2020E 8
Financials
Revenue and gross profit Lower revenue in first quarter 2019 Revenue • Fewer crews in operations – more in transit USD million and storage 160 134.2 • Large node sale contract completed in Q3’19 131.5 140 119.5 ZXPLR crew in Gulf of Mexico operated 120 successfully throughout the quarter 28 40 44 100 Nodes rental of MASS 1 crew in Malaysia and 74.4 80 sale of Z100 nodes 53.3 60 Gross profit of USD 12.3m 40 • Gross margin of 23% 20 • Healthy margins on active projects 92 92 90 0 • Idle crews and transits negatively affect CoS Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Revenue MASS node sales 10 Note: Restated figures for Q1 and Q2 2019
SG&A Significantly lower cost level of USD 6.5m SG&A 25.0 R&D is included in SG&A figures • Positively affected by ~USD 4m reversal of USD million provisions 20.0 Restructuring program and cost measures progressing as planned 6.9 15.0 7.4 1.6 • Full effect from the initial restructuring program from H2 2020 10.0 4.0 13.1 • Additional measures announced in April, 12.9 11.4 10.5 5.0 including headcount reductions, temporary 6.5 layoffs/furlough and other cost reductions - Revised SG&A estimate of USD ~25 million Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 for FY 2020 SG&A Special items • >60% reduction from 2019 Q2’19 special item: USD 1.6m reflecting settlement of 2018 outstanding receivable Q3’19 special items: USD 3.0m reflecting change of management and co -location in Norway, and USD 3.9m write-off of R&D/WIP projects Q4’19 special items: USD 3.1m severance pay and lay -off, USD 3.5m other restructuring costs and USD 0.7m from write-off of R&D/WIP projects 11 Note: Restated figures for Q1 and Q2 2019
EBITDA development Reported EBITDA of USD 5.8m in the first EBITDA split quarter of 2020 USD million • EBITDA margin of 11% 45 • High-margin node sale contract throughout 35 2019 ended in Q3’19 25.5 25 10.4 9.2 16.0 15 9.3 11.0 5 11.0 -23.6 6.8 5.8 5.0 -1.6 -5.6 -5.6 -6.9 -5 -18.0 -15 -25 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 Special items MASS node sales EBITDA excl. MASS node sales and special items 12 Note: Restated figures for Q1 and Q2 2019
Key figures (unaudited) Q1 Q1 FY USD million 2020 2019 2019 Operating loss (EBIT) of USD 8.1 million Profit and loss 53.3 119.5 459.6 Revenues (41.0) (96.2) (374.3) Net loss of USD 12.0 million Cost of sales 12.3 23.3 85.3 Gross Profit (6.5) (12.9) (63.8) High cash balance and negative NIBD following SG&A and R&D 5.8 10.4 21.5 EBITDA recent equity raise and early cash preservation - (5.6) (32.1) Of which: special items affecting EBITDA efforts 11% 9% 5% EBITDA margin (%) (11.8) (15.4) (56.7) Depreciation The company will seek potential governmental (2.2) (2.4) (8.9) Amortization support programs to improve the financial - - (106.2) Impairments (8.1) (7.4) (150.4) situation EBIT (3.5) (2.1) 7.0 Net financial items • Both the U.S. and Norway have announced such (11.6) (9.5) (143.4) Net profit/(loss) before tax (12.0) (11.2) (151.5) Net profit/(loss) programs Other key figures Net cash from operating activities 10.5 9.9 144.7 Net cash used in investing activities (16.1) (16.6) (112.6) 19.7 (11.4) (46.8) Net cash used in financing activities Total assets 365 582 357 Equity ratio 54% 55% 52% Cash and cash equivalents 65.8 50.0 53.4 (33.2) 2.5 (20.9) Net interest-bearing debt/(cash) Note: Restated figures for Q1 and Q2 2019 13
Cash flow development Positive cash flow from operating Cash flow in quarter activities USD million Investments in multi-client library, nodes and handling systems • Multi-client library of USD 7.1m Positive financing cash flow from equity raise, partly offset by lease payments and interest paid Total increase in cash and cash equivalents of USD 12.3m in Q1 on cash balance 14
Net working capital development Net working capital change Net working capital USD million USD million 50 50 40 40 30 30 49 42 20 20 29 10 10 0 0 -10 -10 -35 -35 -20 -45 -20 -45 -30 -30 -40 -40 -50 -50 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 NWC Q4 Trade Trade Inventory Other NWC Q1 2019 Receivable payables 2020 15 Note: Restated figures for Q1 and Q2 2019
Further reduction of capex levels Significantly lower capex level compared to Annual Capex Capex by quarter previous quarters USDm (excluding MC inv.) USD million (excluding MC investments) 50 100 • Majority of Q1 capex relates to new parts for 45 90 the MASS III node program 40 80 • The program has now been postponed due to 35 70 the increased market uncertainty – flexibility 30 60 retained to restart in case of market rebound 25 50 91 Revised capex level of ~USD 15 million for 20 40 2020 (excluding Multi-Client) 29 15 30 26 • >80% reduction from 2019 19 10 20 17 • Only previously committed capex remains 9 5 10 15 • Sufficient inventory to support expected 0 0 Q1'19 Q2'19 Q3'19 Q4'19 Q1'20 2019 2020E business activity level 16 Note: Restated figures for Q1 and Q2 2019
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