SEVAN MARINE - Financial and Operational Update

FPSO operation and project

In Q1 2011, the FPSO Sevan Piranema had a commercial uptime of 88% due to continued problems with the gas cooling and booster compressor systems. The Company is evaluating the need for additional investments of up to USDm 25 in the process equipment on the FPSO to improve the commercial performance.

In Q1 2011, the FPSO Sevan Hummingbird had a commercial uptime of 105%, including bonus achieved for high production levels.

The FPSO Sevan Voyageur is currently undertaking an upgrade project to prepare for operation on the Huntington field under its five year fixed term contract with extension options with E.ON Ruhrgas. Following a review of the project, the expected total project cost has increased from USDm 90 to USDm 135, including contingencies and start-up costs. The cost increase is mainly due to additional steel and engineering requirements. The Board has initiated corrective measures to secure the project execution going forward. The delivery from the yard is scheduled for end of Q4 2011 and first oil in Q1 2012.

Financial update post IPO of Sevan Drilling ASA

Following the IPO of Sevan Drilling ASA and the resulting de-consolidation of the drilling segment from the Company’s consolidated financial statements an accounting loss has been estimated to approximately USDm 214 based on the pro forma balance sheet at March 31, 2011, and the issue price in the IPO. The write down is of non-cash nature and will be reflected in the Q2 2011 financial results.

The overviews below show the condensed preliminary balance sheet and profit and loss statement before tax for Q1 2011, condensed preliminary pro forma balance sheet and profit and loss statement before tax for Q1 2011 and condensed pro forma balance sheet as per January 1, 2011. The pro forma statements represent the consolidated financial statements of Sevan Marine ASA as if the IPO of Sevan Drilling had been effectuated prior to the applicable balance sheet dates.

	Preliminary P&L Q1 2011	Preliminary pro forma P&L Q1 2011
Unaudited figures in USDm
Operating revenue	51	53
EBITDA	19	21
Operating profit/(loss)	5	7
Net financial items	-43	-40
Profit/(loss) b/tax continued business	-38	-33
Profit/(loss) b/tax discontinued business	-10	0
Profit/(loss) b/tax	-48	-33

	Preliminary Balance Sheet Mar 31, 2011	Preliminary Pro forma Balance Sheet Mar 31, 2010	Pro forma Balance Sheet Jan 1, 2011
Unaudited figures in USDm
Total non-current assets	1 336	1 482	1 465
Total current assets	93	113	157
Assets of disposal group	1 298	0	0
Total assets	2 726	1 595	1 622
Total equity	769	551	594
Total non-current liabilities	864	864	855
Total current liabilities	180	180	173
Liabilities of disposal group	914	0	0
Total liabilities	1 958	1 044	1 028
Total equity and liabilities	2 726	1 595	1 622

IFRS 5 requires operations that form a major line of the business to be classified as discontinued when the assets are held for sale. Consolidated assets and liabilities of Sevan Drilling ASA are therefore presented separately in the preliminary balance sheet for Q1 2011 as ‘assets of disposal group’ and ‘liabilities of disposal group’, respectively. The estimated write-down of approximately USDm 214 is reflected in the pro forma statements, and Sevan Marine’s shareholding in Sevan Drilling is included under ‘total non-current assets’ with a value of USDm 147 in the pro forma balance sheets (reflecting a share price of NOK 8 per share).

‘Assets of disposal group’ includes USDm 192 retained on a restricted escrow account to settle the call of the NOKm 1,000 bond loan on May 11, 2011. The relevant lenders granted a waiver relating to the impact of the 30 banking days call period in relation to calculating the book equity ratio. Following the de-consolidation of Sevan Drilling, the book equity ratio has been estimated to approximately 35% after the write down described above and based on the pro forma balance as per March 31, 2011.

The preliminary balance sheet as of March 31, 2011 includes cash and cash equivalents classified as ‘current assets’ of USDm 29 and unrestricted cash and cash equivalents classified as ‘assets of disposal group’ of USDm 24. Total cash and cash equivalents at March 31, 2011 excluding the USDm 192 currently in restricted escrow account thus amounted to USDm 53. The preliminary balance sheet as of March 31, 2011, includes interest bearing debt classified as ‘total liabilities’ of USDm 950 and interest bearing debt classified as ‘liabilities of disposal group’ of USDm 833. USDm 52 of the bank financing facility to fund the upgrade of FPSO Sevan Voyageur remained undrawn and was not reflected on the balance sheet as of March 31, 2011.

The Board of Directors and management of Sevan Marine are currently evaluating alternatives for securing the Company’s financial position, including to raise equity capital. Sevan Marine has received an offer from DnB NOR Markets for a fully underwritten rights issue of approximately USDm 275, subject to due diligence, satisfactory shareholder support and other customary conditions. The Board’s ambition is to present a proposal to its shareholders by the middle of next week.

Source: Sevan Marine