Sector report

Offshore Supply Rough times ahead, but asset prices offer valuation support
Asian Offshore and Yards 26.05.2010 Global Offshore (12m)
160 150 140 130 120 110 100 90 May Jul Sep Nov Jan Mar

C om p any Sa puraC rest P etr oleum Ke nc ana Petro leum Far stad EZR A Holding s So lstad Siem Of fshore O tto Marine Swiber Hold ings KS Ene rgy Jaya Hold in gs Ezio n Hold ings Falcon Ene rgy C H Of fshore D eep Sea S up ply AS L Marine Eid esvik Hav ila Shipp ing EOC Lim ited

Vessel values have stabilized and the spot market has started to pick up moderately, but still at low levels after adjusting for utilisations. Risk-reward returns attractive at company level. Our top pick in Asia is Swiber whereas we prefer SIOFF in Norway. We expect 2010 and 2011 to be bumpy years, but see a significant uptick in 2012 as majority of supply comes in 2010 whereas demand will increase significantly from 2011.
MYR MYR NOK SG D NOK NOK SG D SG D SG D SG D SG D SG D SG D NOK SG D NOK NOK NOK Rec BUY BUY HOLD SELL HOLD BUY HOLD BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY HOLD Targ et 2.6 1.60 170.0 1.20 117.5 14.00 0.35 1.50 1.50 1.00 0.80 0.70 0.70 13.50 1.50 40.0 80.0 7.00 Price 2.0 1.33 150.5 1.72 113.5 9.80 0.39 1.00 1.18 0.62 0.62 0.54 0.52 10.00 0.80 33.8 58.5 7.50 P/E 10E P/E 11E 17.2 9.6 16.6 12.7 10.6 15.6 17.9 12.6 11.7 8.0 31.4 17.1 11.8 13.1 11.7 7.4 12.8 8.7 6.0 10.7 6.1 7.4 6.6 5.9 7.1 5.7 24.1 nm 5.7 4.0 9.5 4.6 35.7 6.0 5.4 2.4 P/E 12E 8.0 14.3 5.1 12.7 5.8 7.1 14.3 7.7 8.2 8.9 7.2 5.8 6.2 3.3 5.4 3.9 7.3 3.9

Analysts: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no Kay Lim +65 6220 5123 kay.lim@dnbnor.no

Please see the last page for important information.

Top ideas: EZRA SP remains our conviction SELL. For peer trade, we recommend to BUY DESSC NO or SWIBER SP. DESSC is a better peer in terms of asset base. SWIBER has a different business model, but offers less country risks as EZRA and SWIBER are listed in Singapore. Top picks: SIOFF NO is our top-pick in Norway due to the upside in Siem WIS, offering limited downside and huge upside if WIS is successful. Our Asian top-picks are SWIBER SP and ASL SP. They both operate in protected markets and have very appealing valuations. Despite Offshore Supply being a global sector, valuation differs significantly within the sector. This is reflected in both share prices and far more bullish 2010-2012 estimates. Given the big dip in share prices over past few weeks, risk-reward returns are looking very favourable at company level as some are now trading below our NAV valuation. Supply demand balance in 2010/2011/2012: Rig fleet growth from 2005-2009 at 18% vs 49% for OSV. With the upcoming newbuilds through 2012, the OSV fleet is expected to increase 22% from 2009, higher than the 19% rise in rig fleet. Most of the OSV fleet growth will be registered in 2010. In 2010, OSV fleet is expected to grow 17% as compared to 9% in rig fleet. In 2011/12, OSV fleet's growth is only at 4%/1% as compared to 5%/3% in rig fleet. But with the ratio of OSV to one rig is expected to fall to 2.9 in 2012 vs 3.0 in 2010/2011, we expect demand to pick up in 2012 when the OSV growth dampens and more rig units enter the market. We have a contrarian view on the Asian names as we prefer those without global exposure. We are bullish to the Asian names which operates in more protected markets (SWIBER, ASL, SCRES, KEPB), but bearish to those seeking more international exposure (EZRA). We also prefer the mid-low-end to the very high-end market segments.

26.05.2010

Sector report > Offshore Supply

Table of contents
OFFSHORE SUPPLY INDUSTRY OUTLOOK ..................................... 3 MALAYSIA OFFSHORE SECTOR ...................................................... 14 JAYA HOLDINGS ............................................................................ 23 KENCANA PETROLEUM................................................................... 38 SAPURACREST PETROLEUM ........................................................... 54 CH OFFSHORE................................................................................ 69 FALCON ENERGY............................................................................ 73 KS ENERGY .................................................................................... 77 OTTO MARINE ............................................................................... 81 SWIBER HOLDINGS ....................................................................... 87 ASL MARINE .................................................................................. 92 EOC LIMITED ................................................................................. 96 EZION HOLDINGS........................................................................ 101 EZRA HOLDINGS.......................................................................... 106 DEEP SEA SUPPLY ....................................................................... 112 EIDESVIK .................................................................................... 115 FARSTAD SHIPPING .................................................................... 118 HAVILA SHIPPING....................................................................... 121 SIEM OFFSHORE .......................................................................... 124 SOLSTAD OFFSHORE.................................................................... 128 APPENDIX I GLOBAL & ASIA OSV FLEET................................... 131 APPENDIX II - OSV FLEET BRAZIL FOCUS ................................ 140

DnB NOR Markets - 2

26.05.2010

Sector report > Offshore Supply

Offshore Supply industry outlook

Key summary Based on the latest data points, though activities have improved, we remain skeptical on any meaningful expansion, which is sustainable, in this sector. We retain our view that the offshore supply sector is still facing the situation of over-supply in vessels.
Offshore supply market is important to many of the Asia-listed offshore players as most have direct exposure in the offshore support services segment through their fleet of support vessels.

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Sector remains crowded with vessels but risk-reward returns attractive at company level: Given the dip in share prices over past weeks, some companies are now trading below our NAV valuation. We believe this represents a good opportunity for investors to get into the sector through selected companies, which offer good upside potential. Risk reward looks very favourable at the moment. Activity level (demand) is recovering, but supply forces continue to dominate: Market confidence and E&P spending outlook have improved vs a year ago. We expect activity level in the OSV segment to grow this year, backed by the 9% E&P spending growth we are expecting for 2010. However, with the upcoming increase in supply, we argue that demand/supply gap will not close as fast as what market is suggesting. We believe OSV dayrates and asset values of the vessels will continue to face pressure from this overhang in 2010/2011. Vessel growth to put pressure on dayrates: The aggregate fleet count of the drilling rigs (jack-ups, semis and drillships) is not growing as aggressive as the OSV vessels. Fleet growth from 2005-2009 was 18% vs 49% for OSV. Going forward, the OSV fleet (based on existing backlog) is expected to increase another 22% from 2009 (bearing in mind, 2009 has a higher base count of 2544 vessels), higher than the 19% rise in rig fleet. The ratio of OSVs supporting one installation (either jack-up, semi or drillship) will reach 3.0 in this year and in 2011, 27% higher than the historical average of 2.4 from 2000-2009. But it expected to fall to 2.9 in 2012 when the OSV growth dampens and more installations enter the market. 2012 is the turning point: With the ratio of OSV to one rig expecting to fall to 2.9 in 2012 vs 3.0 in 2010/2011, we expect demand to pick up in 2012 when the OSV growth dampens and more rig units enter the market. We believe the market will be able to absorb the enlarged OSV fleet by 2012. This is based on our assumption that the drilling rigs (including the upcoming newbuilds) will enjoy good utilization (>80% on average) from 2012 onwards. Hence, the key risk to our exp that OSV demand will pick up in 2012 is the utilization level of drilling rigs. Offshore yards - higher oil prices already implied in current backlog: There were estimated to be close to 600 new OSV orders during the building boom in 2007-2008, when oil prices were trading in the highs 90-147 USD/bbl. We argue that higher oil prices of more than average of 120 USD/day would be needed in order trigger another potential newbuild bull cycle. We remain cautious on the new order assumptions for the offshore yards in 2010 and 2011. Int rates to see further drops, while North Sea out of bottom: Our view that the North Sea (NS) spot rates would bottom out in early 2010 has materialized. But we question the sustainability of current rates and expect rates to be under pressure. With more than 60 larger AHTS (>15,000bhp) and 139 PSVs (>2,000dwt) coming to the market in 2010, we argue that there will be no lack of such vessels in the market. In beginning Q2, we saw an huge increase in dayrates, driven by higher activity levels and the unsystematic Iceland volcano eruption. Dayrates for 20,000+bhp AHTS have breached the 50,000 GBP/day mark, not seen for some time. However, the average size of vessels operating in the NS has also increased from 18,000+bhp in 2008 to 21,000+bhp in 2010 (ytd). Hence the rates increase we saw over the period may not be comparable. Going forward, with high fleet growth and weak (our expectation) int rates outlook, vessel owners are likely to deploy their newbuilds in the NS market, further preventing any sustainable uptick in rates.

DnB NOR Markets - 3

26.05.2010 Figure 1: Our coverage universe

Company Swiber Ezra Otto Marine ASL Marine CH Offshore Ezion Falcon Energy KS Energy Jaya Kencana SapuraCrest EOC DESSC EIOF Siem Solstad Havila Farstad Country Market cap listed (USDm) Singapore 333 Singapore 762 Singapore 492 Singapore 159 Singapore 228 Singapore 281 Singapore 275 Singapore 318 Singapore 306 Malaysia 626 Malaysia 717 Norway 125 Norway 185 Norway 153 Norway 498 Norway 645 Norway 140 Norway 894

Sector report > Offshore Supply

Rec Prev Rec Currency BUY BUY SGD SELL SELL SGD HOLD HOLD SGD BUY BUY SGD BUY HOLD SGD BUY BUY SGD BUY HOLD SGD BUY BUY SGD BUY New coverage SGD BUY New coverage MYR BUY New coverage MYR HOLD HOLD NOK BUY BUY NOK BUY BUY NOK BUY BUY NOK HOLD HOLD NOK BUY BUY NOK HOLD BUY NOK

TP 1.50 1.20 0.35 1.50 0.70 0.80 0.70 1.50 1.00 1.60 2.60 7.0 13.5 40.0 14.0 117.5 80.0 170.0

Price 0.93 1.63 0.37 0.75 0.47 0.56 0.48 1.12 0.56 1.27 1.89 7.5 10 34 10 114 59 151

Upside 61% -26% -5% 100% 51% 43% 46% 34% 79% 26% 38% -7% 35% 18% 39% 4% 37% 13%

P/E 2010 2011 11.0 7.0 15.3 11.9 11.4 12.6 5.4 3.8 6.4 5.1 5.5 6.7 5.9 5.3 12.1 8.3 5.5 9.8 15.9 12.1 9.6 8.0 5.8 2.6 na 24.1 12.1 4.6 27.0 14.7 11.7 8.0 37.6 6.3 9.8 14.3

EV/EBITDA 2010 2011 7.3 3.8 13.8 13.8 11.7 9.2 3.4 2.7 4.7 3.0 9.5 4.9 4.3 3.1 6.6 5.3 10.2 8.3 9.7 7.4 4.4 3.4 6.9 3.9 11.0 8.3 4.7 3.9 12.5 9.1 8.0 7.0 10.8 8.8 6.9 7.5

Source: DnB NOR Markets estimates

BUY: ASL, EZI, KST, SWIB, Jaya, SCRES, KEPB, CHO, FALE, DESSC, HAVI, SIOFF, EIOF HOLD: SOFF, OTML, EOC, FAR SELL: Ezra

Demand side - E&P spending In the E&P value chain, the oil companies' spending is the key determinant in driving the fundamentals of the Offshore Supply Vessel (OSV) sector. We argue that using the aggregate value of the E&P spending as a yardstick can provide us a quantifiable measure of the general direction of the demand for oil services, hence the demand for OSV sector. Market confidence and E&P spending outlook have improved vs a year ago, supported by relatively high stable oil prices. Based on our E&P spending update 2010, we are estimating a 9% growth (largely driven by NOCs) in E&P spending this year amounting to USDbn 453 as compared to 8% decline in 2009 of USDbn 416. As such, activity levels (exploration and production) are looking to increase this year, implying that there will be more demand for OSVs. However, with the upcoming increase in supply (as pointed out below), we argue that demand/supply gap will not close as fast as what market is suggesting. We believe OSV dayrates and asset values of the vessels will continue to face pressure from this overhang. Ratio of OSV to one rig/installation remains high The situation of over-supply is alarming and we believe the problem will continue to compound with improving market sentiments, fueling the expectation of lesser cancellations or delays in current newbuild backlog. Based on our projections, the ratio of OSVs supporting one installation (either jack-up, semi or drillship) will reach 3.0 in this year and in 2011, 27% higher than the historical average of 2.4 from 2000-2009. But it expected to fall to 2.9 in 2012 when the OSV growth dampens and more installations enter the market. The ratios may be understated as we have included all rigs (working, non-working, idling, and stacked rigs) in the market.

Figure 2: Installations well supported by the OSV fleet, but expected to level off in 2012
3.5 Ratio numerator: current fleet + initial newbuilds based on ODS data
Total OSV fleet count 3500

3.0

3000

2.5 Ratio numerator: current fleet + adjusted newbuilds based on our expectations

2500

2.0

2000

1.5

1500

1.0

1000

0.5

500

2010E

2011E

Source: ODS-Petrodata and DnB NOR Markets

2012E

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1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E

0.0

DnB NOR Markets - 4

26.05.2010

Sector report > Offshore Supply Vessel growth to put pressure on dayrates The aggregate fleet count of the drilling rigs (jack-ups, semis and drillships) is not growing as aggressively as the OSV vessels. Fleet growth from 20052009 was 18% vs 49% for OSV. Going forward, with the upcoming newbuilds through 2012, the OSV fleet is expected to increase another 22% from 2009 (bearing in mind, 2009 has a higher base count of 2544 vessels), higher than the 19% rise in the rig fleet. Most of the OSV fleet growth will be registered in 2010. In 2010, OSV fleet is expected to grow 17% as compared to 9% in rig fleet over the corresponding period. In 2011/12, OSV fleet's growth is only at 4%/1% as compared to 5%/3% in rig fleet.

Figure 3: Fleet growth (JU, Semi, DS and OSV) over time

Age Above 25 years Between 15 - 24 years Between 5 - 14 years Between 1 - 4 years Into service 2010 Into service 2011 Into service 2012 Jackup 334 22 25 77 30 11 17 JU Accum 334 356 381 458 488 499 516 Fleet growth 7% 7% 20% 7% 2% 3% Semi 119 18 29 20 19 11 8 Semi Accum 119 137 166 186 205 216 224 Fleet growth 15% 21% 12% 10% 5% 4% Drillship 20 1 17 11 13 18 5 Drillship Accum 20 21 38 49 62 80 85 Fleet growth 5% 81% 29% 27% 29% 6% OSV 881 135 686 842 431 122 22 OSV Accum 881 1016 1702 2544 2975 3097 3119 Fleet growth 15% 68% 49% 17% 4% 1%

Source: DnB NOR Markets, ODS-Petrodata as of May 2010, excluding Petrobras' orders

Looking at these data, we do not believe the increase in activities (9% growth if we use our E&P spending update as yardstick) will necessarily translate to higher dayrates for the OSVs. The key argument behind this is that we are facing an over-supply situation, with too many vessels flooding the market. Given the scenario that the overall demand growth of 9% (based on our estimates from the E&P survey) is somewhat lower than the global fleet growth (known supply), pricings (dayrates) are likely to continue to face downward pressure. The sheer number of newbuild vessels and vessels going off charters this year and next will see shipowners becoming desperate to find work for their vessels. With the focus turning to fixing the vessels (utilization), rates will be sacrificed. 2012 is the turning point With the ratio of OSV to one rig expecting to fall to 2.9 in 2012 vs 3.0 in 2010/2011, we expect demand to pick up in 2012 when the OSV growth dampens and more rig units entering the market. We believe the market (drilling rigs) will be able to absorb the enlarged OSV fleet by 2012. This is based on our assumption that the drilling rigs (including the upcoming newbuilds) will enjoy good utilization (>80% on average) from 2012 onwards. Hence, the key risk to our expectation that OSV demand will pick up in 2012 is the utilization level of drilling rigs. Long lead time to build a vessel leads to wrong market timing Given the cyclical nature of the industry, the lagging effect and long lead time in vessel delivery implies that the newbuild vessels are going to be rolled out at a time when the dayrates have fallen more than 40% from the highs. As the oil companies cut back on their spending, coupled with how the oil service companies have built up capacity in the recent years to meet the expected growth in E&P spending, supply now outpaces demand in most parts of the value chain. It is a matter of market timing which has gone wrong for the shipowners who ordered their vessels in late 2008 when newbuilds' prices were at the highest. These newbuilds are coming into the market this year or next. With higher costs of building the vessels, the returns on these vessels are likely to be weaker as the lower priced vessels can command lower rates at same ROIs. Furthermore, from what we have gathered from the survey, oil companies are focusing heavily on cost reductions. The oil service companies, in this case the OSV companies, face a new situation in which the oil companies expect to see lower prices. And coupled with the situation of supply

DnB NOR Markets - 5

26.05.2010

Sector report > Offshore Supply outpacing demand, OSV companies have lost much of their leverage and bargaining power in determining the pricing of their chartering contracts. The oil companies have many options to choose from the enlarged fleet. Simply put, they are spoilt for choices. Offshore yards - higher oil prices already implied in current backlog There were estimated to be close to 600 new OSV orders during the building boom in 2007-2008, when oil prices were trading in the highs 90147 USD/bbl. We argue that higher oil prices of more than average of 120 USD/day would be needed in order trigger another potential newbuild bull cycle. Our house expects 100/120 USD/bbl oil price in 2011/2012 (where a newbuild vessel ordered today would be delivered), which suggest the next newbuild cycle will not happen, at least for this year. This explains why we remain cautious on the new order assumptions for the offshore yards in 2010 and 2011. Figure 4: DnB NOR long-term oil price forecast

Source: DnB NOR Markets

DnB NOR Markets - 6

26.05.2010

Sector report > Offshore Supply Relative performance of the offshore support players Below is an overview EV/EBITDA multiples for Asian, international and Norwegian companies. Tidewater and Bourbon both have majority of their earnings from the offshore supply business whereas drivers for the Asian players are more mixed. Estimates for Tidewater and Bourbon are from Bloomberg as we do not cover these names. Comparing against the peers, in terms of absolute share price performance, the Asia offshore players have performed average 22% better than the Norwegian peers from beginning 2009. This could be explained by the higher growth expectations in many Asian markets, they are more protected than the international markets which the Norwegian players operate. However, with more Asian players going to international markets, we argue such premiums should converge.

Figure 5: Global multiples

EV/EBITDA multiples Company CH Offshore Ltd Swiber Holdings Ltd KS Energy Services Ltd Falcon Energy Group Ltd Ezra Holdings Ltd ASL Marine Holdings Ltd Ezion Holdings Ltd Otto Marine Ltd Singapore mean SapuraCrest Petroleum BHD Kencana Petroleum Bhd Malaysia mean EOC Ltd Deep Sea Supply PLC Eidesvik Offshore ASA Farstad Shipping ASA Havila Shipping ASA Siem Offshore Inc Solstad Offshore ASA Norwegian mean Tidewater Inc Bourbon SA Others mean Mkt Cap (USDm) 283 368 337 312 810 171 316 530 772 678 128 199 156 901 143 540 658 2233 2264 Country Singapore Singapore Singapore Singapore Singapore Singapore Singapore Singapore Malaysia Malaysia Norway Norway Norway Norway Norway Norway Norway United States France 2006 9.5 n.a. 12.5 11.7 17.4 10.6 5.3 11.2 10.4 10.4 8.6 8.1 18.7 9.4 11.2 13.9 12.4 13.2 2007 11.2 17.5 14.6 11.7 34.3 6.1 43.3 19.8 8.3 14.1 11.2 8.8 10.5 8.6 4.0 22.3 5.7 10.0 10.1 11.5 10.8 2008 15.7 20.3 16.9 18.6 17.4 8.8 43.3 4.5 18.2 10.2 4.3 7.3 8.8 11.9 7.5 11.2 13.7 8.2 10.2 6.5 11.4 9.0 2009 6.6 12.6 7.4 6.9 9.1 2.9 18.9 11.5 9.5 2.6 7.1 4.9 12.7 6.5 6.7 4.8 8.2 11.7 7.8 8.4 5.8 9.7 7.8 2010E 4.7 7.3 6.6 4.3 13.8 3.4 9.5 11.7 7.7 6.2 9.7 8.0 6.9 11.0 4.7 6.9 10.8 12.5 8.0 8.7 6.0 9.4 7.7 2011E 3.0 3.8 5.3 3.1 11.4 2.7 4.9 9.2 5.4 4.4 7.4 5.9 3.9 8.3 3.9 7.5 8.8 9.1 7.0 6.9 6.0 7.6 6.8 2012E 2.4 2.9 4.7 2.1 9.3 2.9 4.0 9.2 4.7 3.4 7.6 5.5 4.7 4.7 4.1 3.5 8.5 6.5 5.4 5.4 6.5 6.5

Sources: DnB NOR Markets estimates, Consensus estimates from Bloomberg for Tidewater and Bourbon not under coverage

Figure 6: Share price performance

210 190 Rebased from Jan 09 170 150 130 110 90 70 Mar-09 May-09 Mar-10 May-10 Apr-09 Sep-09 Nov-09 Aug-09 Dec-09 Feb-09 Feb-10 Oct-09 Apr-10 Jan-09 Jun-09 Jan-10 Jul-09
Outperformance of Sing players vs Norwegians

Singapore players Norwegian players OSX INDEX

Malaysia players Other players (TDW & GBB)

Source: Bloomberg data as of 20 May

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26.05.2010

Sector report > Offshore Supply

Rates Outlook Int rates to see further drops, while North Sea out of bottom Traditionally, the North Sea spot market is a good indicator of the direction of international rates. So far, the rates internationally have not quite experienced the same magnitude of the decline spot rates over past year. International rates have remained at decent levels, especially so in the Asia Pacific markets, given that a large number of vessels are still under term charters fixed over the past two years. In the beginning of this year and end 2009, rates in the North Sea spot rates have presumably hit bottom levels. This has prompted vessel owners to redeploy their vessels out of North Sea to the international markets (given the higher rates international markets over North Sea spot in Q4Q12010). In Q42009, there was an average of 30 AHTS and 19 PSV vessels working in North Sea spot each day, these numbers were much lower than the average 38 AHTS and 29 PSVs working in Q2 this year which rates have since picked up. Figure 7: AHTS 12,000+bhp and PSV 3,000+dwt rates outlook
AHTS 12,000+bhp - Rates not expected to see large swings

PSV 3,000+dwt - Rates exp to remain range-bound

120,000 110,000 100,000 90,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 jan. feb. mar. apr. may. jun. jul. aug. sep. okt. nov. des.
GBP/day

45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 jan. feb. mar. apr. may. jun. jul. aug. sep. okt. nov. des.

80,000 GBP/day

5y Spread

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Source: Clarksons and DnB NOR Markets Research

Key reasons for rates to come down: 1. Number of vessels is record high and increasing 2. Newbuild rigs coming into the market later 3. Nowhere to hide: Also vessel owners internationally also feel the pressure 4. Newbuilds entering the market 5. Mobility in vessels

Spike in NS spot rates unlikely to sustain, W-shaped trend likely Our view that the North Sea spot rates would bottom out in early 2010 has materialized. However, we question the sustainability of current rates and expect rates to be under pressure by the supply situation. With more than 60 larger AHTS (15,000bhp and above) and 139 PSVs (>2,000dwt) coming to the market in 2010, we argue that there will be no lack of such vessels in the market. Over the 7-year period from 2003-2009, we saw very strong North Sea spot rates secured between 2006-2008, tracking the strong surge in oil prices over the same period. Average annual spot rates for AHTS above 12,000+bhp were trading in the range between 47,600-55,400 GBP/day. This had fueled shipowners and speculators to order a massive number of new vessels on the expectations that rates would continue to do well. In 2009, average North Sea spot rates had fallen almost 67% yoy at 18,300 GBP/day. And for the last two quarters in Q12010 and Q42009, rates have remained very weak as high vessel availability continues to put pressure on rates. Average 20,000+bhp AHTS was commanding less than 10,000 GBP/day, low by standards achieved over the past three years. Only in beginning Q2 (April), we saw an huge increase in dayrates, driven by higher activity levels and the unsystematic Iceland volcano eruption. Dayrates for 20,000+bhp AHTS have breached the 50,000 GBP/day mark, not seen in the last few quarters.

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26.05.2010

Sector report > Offshore Supply However, according to our records, the average size of vessels operating in the North Sea has also increased from 18,000+bhp in 2008 to 21,000+bhp in 2010 (so far this year). Hence the rates increase we saw over the period (or least what some market participants are saying that rates have reverted back to bull cycle levels) may not be comparable. Over capacity remains an issue. Going forward, with high fleet growth and weak (our expectation) rates outlook internationally, vessel owners are likely to deploy their newbuilds in the North Sea spot market, further preventing any sustainable uptick in rates. Unless activity level grows in tandem with the fleet growth or we see bigger than expected cancellations/ lay up, chartering rates are unlikely to keep up with the North trend. Below are our forecast rates for the North Sea spot market in 2010-2013.

Figure 8: Dayrate and cost assumptions

Vessel Type AHTS UUL AHTS UL AHTS L AHTS M AHTS S PSV UL PSV L PSV M PSV S Description bhp > 25k 23k to 25k 16k to 23k 10k to 16k bhp <10k dwt >4k 3k to 4k 2k to 3k dwt <2k Average day rates (GBP) Q409 2009 2010E 6,000 6,000 4,800 4,800 3,000 3,550 2,130 1,420 1,400 22,688 22,688 14,450 13,130 5,000 6,508 4,383 3,065 2,800 19,250 10,500 8,625 7,875 7,125 7,000 5,750 5,625 4,500 2011E 30,000 13,125 10,781 9,844 8,906 8,750 7,188 7,031 5,625 2012E 35,000 24,000 19,200 16,000 12,800 16,000 13,600 12,000 5,600
Vessel Type AHTS UUL AHTS UL AHTS L AHTS M AHTS S PSV UL PSV L PSV M PSV S Description bhp > 25k 23k to 25k 16k to 23k 10k to 16k bhp <10k dwt >4k 3k to 4k 2k to 3k dwt <2k Average opex (GBP) Q409 2009 2010E 13,000 8,000 7,000 6,000 5,000 5,750 4,600 4,600 4,025 13,000 8,000 7,000 6,000 5,000 5,750 4,600 4,600 4,025 13,000 8,000 7,000 6,000 5,000 5,750 4,600 4,600 4,025 2011E 13,000 8,000 7,000 6,000 5,000 5,750 4,600 4,600 4,025 2012E 13,000 8,000 7,000 6,000 5,000 5,750 4,600 4,600 4,025

Source: DnB NOR Markets research, Clarksons, ODS Petrodata and company data

Figure 9: 7-year North Sea average spot rates

120,000 AHTS +12,000 bhp
45,000 40,000 PSV +3,000 dwt

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Source: DnB NOR Markets, Clarkson Shipping

Figure 10: Daily North Sea spot rates tracker

AHTS 120% 100% Utilization 80% 60% 40% 20% 0% Mar-09 Mar-08 Mar-10 Apr-09 Apr-08 Nov-08 May-08 May-09 Nov-09 Sep-08 Sep-09 Jan-08 Aug-08 Aug-08 Aug-09 Dec-08 Dec-07 Dec-09 Jun-08 Feb-08 Feb-10 Oct-08 Apr-10 Jul-08 Jan-09 Jul-09 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 120% 100% PSV 40,000 35,000 Rates (GBP/Day) 30,000 Utilization 80% 60% 40% 20% 0% Mar-08 Mar-09 Mar-10 Apr-08 Apr-09 Nov-08 May-08 May-09 Nov-09 Dec-07 Dec-08 Dec-09 Sep-08 Sep-09 Feb-08 Aug-08 Aug-08 Aug-09 Feb-10 Oct-08 Apr-10 Jul-08 Jan-08 Jan-09 Jun-08 Jul-09 25,000 20,000 15,000 10,000 5,000 -

Utilization (Lag 3 days)

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Source: DnB NOR Markets, Hagland Offshore

DnB NOR Markets - 9

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80,000

90,000

10,000 10,000 20,000 30,000 40,000 50,000 60,000 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 USD USD Dec-07 Feb-08 Aug-07 Oct-07 Jun-07

20,000

30,000

40,000

50,000

60,000

GoM, PSV <200' DP West Africa, AHTS <10,000

26.05.2010

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Figure 11: West Africa and GoM High and Low Day Rates (Spot & Term)

Source: DnB NOR Markets, ODS-Petro-data

West Africa, AHTS 10,000+

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

Global day rates

Apr-10

USD

10,000

15,000

20,000

25,000

30,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

10,000

12,000

14,000

16,000

5,000 2,000 4,000 6,000 8,000 -

5,000

Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 GoM, PSV >200'

Sector report > Offshore Supply

Jun-07

Aug-07

Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

GoM, PSV <200'

Dec-08

West Africa, PSV >2,000

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Dec-09

Feb-10

DnB NOR Markets - 10

Apr-10

USD -

USD USD

10,000

15,000

20,000

25,000

30,000

35,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

50,000

5,000

5,000

10,000

12,000

14,000

16,000

26.05.2010

2,000 Jun-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Asia Pacific, 7-8,999 BHP Asia Pacific, 12-14,999 BHP

4,000

6,000

8,000

Jun-07

Aug-07 Oct-07

Dec-07

Feb-08 Apr-08

Jun-08

Aug-08 Oct-08

Figure 12: Asia Pacific High and Low Day Rates (Spot & Term)

Source: DnB NOR Markets, ODS-Petro-data

Asia Pacific, 5-5,999 BHP USD USD 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 5,000 10,000 15,000 20,000 25,000 5,000 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Asia Pacific, 6-6,999 BHP Asia Pacific, 9-11,999 BHP

Dec-08 Feb-09

Apr-09

Jun-09 Aug-09

Oct-09

Dec-09 Feb-10

Sector report > Offshore Supply

Apr-10

DnB NOR Markets - 11

26.05.2010

Sector report > Offshore Supply Outlook on vessel prices (NAV) Unlikely to see meaningful spike in vessel prices Vessel prices are driven by fundamentals such as the supply and demand dynamics. Our rates outlook (though slight improvements over the rates in our Feb sector report) and over-supply situation with the upcoming newbuilds, continue to undermine our expectation of stronger vessel prices this year. We believe vessel prices will continue to stay in the range of our NAV valuation as demand/supply balance continues to tilt towards the supply side. Please note that our estimates below are based on generic vessels and vessel prices will differ accordingly on the special equipments and varying technical specifications on two identical size vessels. Figure 13: Base FMV estimates for AHTS

Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS

Capacity (BHP) 28,000 24,000 22,000 20,000 18,500 17,500 16,500 15,500 12,240 10,800 6,500 5,150 4,826

Year Built 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009 2009

DnB NOR fair value estimates (USDm) 90 80 75 70 62 55 50 40

35
30 17 13 8

Source: DnB NOR Markets

Figure 14: Base FMV estimates for PSV

Type PSV PSV PSV PSV PSV PSV PSV

Capacity (DWT) 5,250 4,500 4,250 3,800 3,250 2,500 1,800

Year Built 2009 2009 2009 2009 2009 2009 2009

DnB NOR fair value estimates (USDm) 55 45 40 30 25 18 13

Source: DnB NOR Markets

DnB NOR Markets - 12

26.05.2010

Sector report > Offshore Supply Figure 15: Recent transactions support our NAV
Date Feb-10 Feb-10 Feb-10 Type PSV PSV AHTS Vessel name Krestrel K Greatship Mohini JM Gagah Built (Yr) 2010 2010 2003 Size (dwt/ bhp) 2500 4600 5500 Seller RK Offshore Greatship Jasa Merin Buyer Tag Offshore Rem Offshore Undisc losed Value fair value est (USDm) (USDm) Source 17 RS Platou 18 45 ODS 45 9 ODS 13
DnB NOR

Source: DnB NOR Markets

The resale values transacted in Q1 are generally inline with our estimated fair value (NAV) on similar type vessels after adjusting for age differences, which form our base NAV calculation of vessels in the companies under our coverage. And in the more recent Petrobras' AHTS tenders, rates submitted by the offshore players support our NAV valuation and rates expectations. Based on avg dayrate of 55,000 USD/day (for 18,000+ AHTS) tendered by the shipowners and opex of 20,000 USD/day, the market implied NAV (EV/EBITDA of 7x) on such large vessels are approx USDm 80-90 each. This is inline with our NAV valuation for similar size AHTS, which supports the valuations of our companies.

DnB NOR Markets - 13

26.05.2010

Sector report > Offshore Supply

Malaysia offshore sector

Macro-outlook of SapuraCrest and Kencana Key summary 1. Malaysia's E&P spending outlook positive: In the view of higher oil price environment and Petronas' guidance, we expect to see higher activity in the oil and gas industry in Malaysia, in particular the offshore segment where most marginal oil can be found. Petronas is expected to increase E&P spending from last year 2009 MYRbn 28 to MYRbn 43 by 2012, mainly driven by higher deepwater exploration (off Sabah blocks) and drilling activities. This represents a 4-year CAGR of 8%. Protection and high-barriers favour local players: In Malaysia, it is a highly protected market for oil service players, especially in larger projects. There is implied local content requirement such as technical qualification and local licenses are required in order to be eligible for large project (offshore units) tenders. Contracts (EPCIC) are usually separated in Malaysia, implying that some contractors will be given fabrication works while others with installation works. There are currently only 7 major offshore fabrication contractors (including Kencana, Sime Darby, Ramunia, Brooke, MMSC) who are approved by Petronas and Production Sharing Contract operators (PSC), and have the license to participate in Petronas' fabrication tenders. Hence, competition is only centralized among few local players who have the qualifications, creating relatively high barriers to entry. Soft factors are important: We like the soft factors such as the good and long relationships that Kencana and SapuraCrest have in the Malaysia oil and gas industry. We are confident this would allow them to remain market leaders in the local scene. However, though barriers to entry are high in Malaysia, the bargaining power of Petronas is much higher than other open markets as they are the single largest client and have most say in contract terms and requirements. They could determine the polices and requirements of the licensing and prequalification criteria. Demand for offshore projects in Malaysia/ Asia visible and healthy: The outlook for offshore fabrication, EPCIC projects in Malaysia are expected to remain healthy, along with expectations of E&P spending growth by Petronas. This is further supported by the list of potential offshore tenders in 2010 in Malaysia and in Asia. Key risks regulatory and political: We believe changes in regulatory (laws and policies linked to offshore oil service licensing and requirements) framework and political conditions in Malaysia, will greatly impact the business climate of the local industry.

2.

3.

4.

5.

DnB NOR Markets - 14

26.05.2010

Sector report > Offshore Supply Petronas and Malaysia offshore E&P Petronas is the national oil company (NOC) of Malaysia, serving the capacity as a custodian of the Malaysia's oil and gas resources. The NOC is wholly owned by the Malaysia's government and manages all the E&P activities in the country. In recent years, Petronas has been playing a more proactive role in explorating and developing oil and gas resources in Malaysia. Petronas' wholly-owned upstream specialist Petronas Carigali has a track record of successful oil and gas developments. It works along with a number of oil majors through PSCs to explore, develop and produce oil and gas in Malaysia. Most operations are in Malaysia. Similar to other countries, Malaysia and Petronas promote E&P investments through production sharing contract (PSC) mechanism. The NOC controls 100% ownership and exclusive rights in the exploration, development and production of Malaysia's petroleum resources. Exploration Acreages in Malaysia According to Petronas, Malaysia has approx 615,100 sq km of acreages available for oil and gas exploration, of which approx 36% of the existing acreages are covered by production sharing contracts (PSC). There are currently a total of 163 oil fields and 216 gas fields in Malaysia, with a number of significant discoveries made in Shelfal shallow waters. In recent years, Malaysia has also made number of large deepwater discoveries off Sabah. Malaysia's oil basins The continental shelf of Malaysia makes up of six major sedimentary basins and they are divided into three main regions, 1) Peninsular Malaysia, 2) Sabah, and 3) Sarawak. Peninsular Malaysia (shallow to mid-water) The Malay Basin lies in this region, which is located off east of Peninsular Malaysia. It is one of the most prolific hydrocarbon producing basins in Malaysia. Sarawak (shallow-deepwater) In the Sarawak Basin, there are seven key blocks, the West Baram Delta, Balingian, Central Luconia, Tinjar, Tatau, West Luconia and North Luconia. Sabah (deepwater) The Sabah basins consist of three major basins (Sabah Basin, Northeast Sabah Basin and Southeast Sabah Basin). Only the Northwest Sabah basin has offshore exposure and have made significant deepwater oil discoveries in recent years. Figure 16: Location of Malaysia's offshore basins

Source: Petronas

DnB NOR Markets - 15

26.05.2010

Sector report > Offshore Supply

Figure 17: Malaysia pipeline system and offshore producing oil fields more to be developed

Source: Petronas

Malaysia-Thailand Joint Development Area (MTJDA) The MTJDA is an overlapping geographical area which is jointly (50-50%) administered by Malaysia-Thailand Joint Authority. is an overlapping economic area which is administered by the Malaysia-Thailand Joint Authority (MTJA). Figure 18: Key JDA blocks
Block JDA Block JDA Block JDA Block JDA Block A-18 B-17 C-19 B-17-01 Type Upstream Upstream Upstream Upstream Operator Carigali-Hess Carigali-PTTEPI Carigali-PTTEPI Carigali-PTTEPI Partners Hess PTTEP PTTEP PTTEP Status Development and production Development Development Development

Source: Petronas

Malaysia moving to deeper offshore fields to mitigate falling production reserves In 2009, Malaysia's crude oil production has decreased from the peak of 700k bbl/day to 658k bbp/day in 2009 due to decline in reserves and falling reserve replacement ratios. Figure 19: Domestic production rate declining
As of September (in thousands of barrels of oil equivalent) Production Oil Domestic Malaysia's production PETRONAS share of Malaysia's production As a % of total production International South East Asia Asia Afric a Middle East Oceania Total international production Total Petronas production 2006 Gas 2007 Gas 2008 Gas 2009 Gas Total Oil Total Oil Total Oil Total

647 499 77%

904 593 66%

1,550 1,092 70%

672 512 76%

931 635 68%

1,603 1,146 72%

679 485 72%

980 682 70%

1,659 1,167 70%

658 450 68%

940 633 67%

1,598 1,083 68%

206 705

333 925

539 1,630

289 801

324 959

613 1,759

36 6 210 24 276 762

89 1 167 93 3 353 1,021

125 8 376 117 3 629 1,784

40 6 216 13 275 726

116 1 159 84 7 367 1,000

157 7 375 97 7 643 1,726

Source: Petronas

In order to replace and rescue the falling replacement ratio, the country needs to move to deeper and more remote basins to seek out new discoveries in Malaysia's continental shelf. According to Petronas' resources reports, deepwater oilfields now accounts for 15% of the NOC's total reserves. Going forward, Petronas aims to secure new acreages and undertake various development projects to increase reserves and production. One of the key drivers identified by the company is in deepwater E&P, given that there are many promising prospects emerging in acreages off Malaysia. Significant discoveries off deepwater Sabah blocks have resulted in deepwater developments, such as the extensive subsea pipelines invested by Petronas, benefiting local offshore players with exposure in Malaysia.

DnB NOR Markets - 16

26.05.2010

Sector report > Offshore Supply Figure 20: Malaysia offshore significant upstream activities

Source: Petronas

Malaysia and Petronas' E&P outlook In the view of higher oil price environment and Petronas' guidance, we expect to see higher activity in the oil and gas industry in Malaysia, in particular the offshore segment where most marginal oil can be found. In 2009, Petronas discovered one new offshore shallow water oil field PAUS in Sarawak and one new gas field Sepat Barat off Peninsular Malaysia. Total number of producing fields in Malaysia has reached 104 (out of which 68 are oil fields and the rest gas fields), up from 88 in 2008. According to industry sources, Petronas is expected to increase E&P spending from last year 2009 MYRbn 28 to MYRbn 43 by 2012, mainly driven by higher deepwater exploration (off Sabah blocks) and drilling activities. This represents a 4-year CAGR of 8%. Figure 21: Petronas E&P spending
Financial year-end in March (full year) Actual spending (not budget spending) E&P total E&P Malaysia (% proportion) E&P International E&P Malaysia CAGR (2009 to 2012E) Domestic total capex (including downstream) Total capex % domestic (forward based on 3-year median) % international FY2004 RMbn 13.7 5.9 7.8 FY2005 RMbn 10.7 6.0 4.7 FY2006 RMbn 11.5 6.3 5.2 FY2007 RMbn 19.1 10.0 9.1 FY2008 RMbn 20.7 11.0 9.7 FY2009 RMbn 28.3 16.9 11.5 FY2010E RMbn 32.0 17.0 15.0 8% FY2011E RMbn 35.8 19.0 16.7 8% FY2012E RMbn 39.5 21.0 18.5 8% FY2013E RMbn 43.2 23.0 20.2 8%

10.4 24.2 43% 57%

9.9 17.6 56% 44%

11.6 21.1 55% 45%

14.7 28.2 52% 48%

20 37.6 53% 47%

26.2 44.0 60% 40%

53%

53%

53%

53%

Source: Petronas, DnB NOR Markets

To ensure the long-term sustainability (replacing resources) and growth of the oil and gas industry in Malaysia, we believe Petronas is likely to maintain an relatively aggressive capex plan. Petronas and partners are likely to continue active engagement in exploration, production and development of oil and gas resources in Malaysia. Capex investments are necessary to maintain or improve Petronas' reserves replacement ratio and to promote the local oil and gas industry. Being a NOC, Petronas has obligations to spend and ensure the sustained growth and systematic development of the countrys petroleum industry. It is unlikely that Petronas will cut spending locally in face of government pressure to maintain growth domestically. According to economists, spending by Petronas has big multiplier effect on the Malaysian economy.

DnB NOR Markets - 17

26.05.2010

Sector report > Offshore Supply

Figure 22: Malaysia and Petronas' reserves and replacement ratio

As of 1st Jan (in millions of barrels of oil equivalent) Reserves Oil Domestic Malaysia's reserves International South East Asia Asia Africa Middle East Oceania Total international reserves 2006 Gas 2007 Gas 2008 Gas 2009 Gas

Total

Oil

Total

Oil

Total

Oil

Total

5,252

14,659

19,911

5,357

14,821

20,178

5,458

14,668

20,126

5,517

14,661

20,178

443 552 1,338 14 2,347 7,599

1,178 1,350 1,066 3,594 18,253

1,621 1,902 2,405 14 5,941 25,852

631 650 1,260 10 2,550 7,907

1,382 1,377 1,003 3,762 18,583

2,012 2,027 2,263 10 6,312 26,490

681 475 1,253 10 2,418

1,428 1,127 1,115 156 3,826

2,109 1,602 2,368 10 156 6,245

433 543 1,224 4 2,203

1,426 1,373 1,334 506 4,639

1,859 1,915 2,558 4 506 6,842

Reserves Replacement Ratio Domestic International Total Oil 1.4 3.7 1.9

2006 Gas 2.1 -1.8 1.6

Total 1.8 1.1 1.7

Oil 1.4 3.7 2.0

2007 Gas 1.4 2.9 1.7

Total 1.4 3.2 1.8

Oil 1.4 -0.3 0.9

2008 Gas 0.6 1.8 0.8

Total 0.9 0.6 0.9

Oil 1.2 -1.1 0.6

2009 Gas 1.0 9.7 2.6

Total 1.1 4.1 1.8

Source: Petronas

Protection and high-barriers favour local players In Malaysia, it is a much protected market for oil service players, especially in larger projects. There is implied local content requirement such as technical qualification and local licenses are required in order to be eligible for large project (offshore units) tenders. Contracts (EPCIC) are usually separated in Malaysia, implying some contractors will be given fabrication works while others with installation works. There are currently only 7 major offshore fabrication contractors (including Kencana, Sime Darby, Ramunia, Brooke, MMSC) who are approved by Petronas and Production Sharing Contract operators (PSC), and have the license to participate in Petronas' fabrication tenders. Hence, competition is only centralized among few local players who have the qualifications, creating relatively high barriers to entry.

DnB NOR Markets - 18

26.05.2010

Sector report > Offshore Supply Figure 23: Offshore projects awarded in Malaysia preference in local contractors
Client Petronas Petronas Petronas Petronas Petronas Talisman Shell ExxonMobil Shell Murphy Shell Newfield ExxonMobil Murphy Murphy Petrofac Company secured CarigaAllied Marine CarigaAllied Marine CarigaAllied Marine CarigaAllied Marine CarigaAllied Marine Offshore Subsea Works TSMarine J. Ray McDermott SapuraCrest/Acergy TL Offshore J. Ray McDermott IntraLine Resources TL Offshore Swiber Offshore Sarku Marine (Sapura) Allied Marine Company based Local Local Local Local Local Local Australia US Local JV Local US Local Local Local JV Local Local Local Contract type Support IRM IRM Support Support Support Support Installation Installation Installation Installation Installation Installation Installation Charter IRM Installation Installation Installation Installation Well Service Installation EPIC Installation Installation Support Charter Installation IRM Installation Installation Installation Installation Support IRM Installation Survey EPIC Workscope Support Inspection work Inspection and ROV work Inspection work Saturation Diving 4-5 months support on Gumusut Guntong pipeline replacement subsea equipment and pipeline installation 12-in Gas exportline Installation of platforms and pipelines Hybrid Rentis pipelay Charter with Swiber Cendor FSO IRM Pipeline and riser installation Petronas umbrella TNI contract 28-in trunkline installation Soil Boring work in Baram Delta Kumang Pipelay Installation of 1 plat/2ppl West Lutong Pipeline replacement Value (USDm ) Country Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia 825 175 Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia 70 Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Prod unit / Field Start date 17 Jun 2010 22 Mar 2010 27 Apr 2010 16 Mar 2010 16 Feb 2010 8 Feb 2010 End date 19 Jul 2010 22 Mar 2010 1 Nov 2010 16 Jun 2010 26 Apr 2010 8 Apr 2010 15 Dec 2010

Gumusut-Kakap 15 Jul 2010 Guntong

25 Aug 2009 30 Sep 2009

Gumusut-Kakap 1 Jun 2010 17 Mar 2012 Kikeh 16 Jul 2007 31 Oct 2008 16 May 2009 30 Jun 2009 East Belumut Jerneh Sarawak Gas Cendor Samarang

1 Mar 2007 1 Sep 2008 29 May 2009 1 May 2009

1 Mar 2008 30 Nov 2008 6 Jun 2009 15 May 2009

Petronas CarigaTL Offshore

29 Sep 2009 23 Dec 2009

Petronas CarigaGlobal Industries/ KencaLocal JV Local Petronas CarigaPerisai Petronas CarigaLeighton Australia Petronas CarigaTL Offshore Petronas CarigaPerisai Petronas CarigaSwiber Offshore Petronas Petronas Petronas Petronas Petronas Petronas Petronas Shell Shell Shell Shell Shell Talisman Talisman Talisman CarigaSwiber Offshore CarigaEOC Ltd CarigaNeptune Marine CarigaTL Offshore CarigaEOC Ltd CarigaAlam Maritim CarigaAlam Maritim SapuraCrest Perisai J. Ray McDermott Alam Maritim Offshore Subsea Works EOC Ltd Sarku Marine (Sapura) Swiber Offshore Local Local Local JV Local JV Singapore Singapore Local Singapore Local Local Local Local US Local Local Singapore Local Local JV

1 Mar 2010 1 Apr 2011 West Lutong 17 Feb 2009 31 Oct 2009 Kumang Cluster 19 Mar 2010 19 Apr 2010 7 Jul 2009 31 Jul 2009 Kumang Cluster 16 May 2009 28 Sep 2009 Puteri 1 Aug 2007 15 Mar 2008 West Lutong Angsi Kumang Cluster D1 Cluster Betty Angsi Gumusut-Kakap Gumusut-Kakap B11 E11 Hub gas Bunga Orkid Bunga Orkid 15 Aug 2009 1 Mar 2009 5 Dec 2008 1 May 2009 3 Oct 2009 1 Jul 2009 1 Mar 2009 15 Jun 2010 1 Mar 2010 1 1 9 1 7 1 Apr 2009 Aug 2008 Nov 2009 Feb 2009 Oct 2009 Mar 2008 13 14 31 31 25 21 30 13 31 Sep 2009 Jul 2009 Jan 2009 Oct 2009 Nov 2009 Jul 2009 Jun 2009 Oct 2010 Mar 2010

31

Charter D30 and Dana pipelay Betty Bakau pipeline IRM

Installation platform and pipeline installation F13 general support work FSO initial support work Plats inst 31

30 Jun 2009 31 Dec 2008 9 Nov 2014 28 Feb 2009 22 Nov 2009 30 Jun 2008

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

We like the soft factors such as the good and long relationships that Kencana and SapuraCrest have in the Malaysia oil and gas industry. We are confident this would allow them to remain market leaders in the local scene. However, though barriers to entry are high in Malaysia, the bargaining power of Petronas is much higher than other open markets as they are the single largest client and have most say in contract terms and requirements. They could determine the polices and requirements of the licensing and pre-qualification criteria. And they are unlikely to award contracts which result in supernormal profits. Petronas is known to be good in streamlining costs and contract negotiations. Demand for offshore projects in Malaysia/ Asia visible and healthy The outlook for offshore fabrication, EPC projects in Malaysia are expected to remain healthy, along with expectations of E&P spending growth by Petronas. This is further supported by the list of potential offshore tenders in 2010 in Malaysia and in Asia, as highlighted below. Among the local players, Kencana is one of the leading fabrication/ EPCC contractors, while SapuraCrest is one of the top EPCIC (focusing on engineering and installation and commissioning) contractors in Malaysia. This allows them to be well-positioned for Petronas' and local industry tenders, estimated to worth up to USDbn 2-3 in 2010. This is highlighted in the list of upcoming project tenders in Malaysia below. Figure 24: Upcoming offshore construction projects in Malaysia
Client Contract type Nippon Oil EPC Petronas Cariga EPC Shell EPC New field Installation Petronas Cariga Installation Petronas Cariga Installation Shell Installation New field Installation New field EPIC Nippon Oil EPIC Petronas Cariga Installation Petronas Cariga Installation Petronas Cariga Installation Country Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Workscope w ellhead platform and pipeline CPP jacket Gumusut Phase II (400km pipeline) TNI of WHP and process plat CPP jacket TNI pipelay TNI and support w ork platform installations CPP fabrication; optional w ellhead platform fabrication w ellhead platform and pipeline pipelay CPP Topside TNI Pipeline and riser installation Prod unit / Field Exp start Layang 1 Jan 2013 Kebabangan 1 May 2010 Gumusut-Kakap 1 Jan 2012 East Piatu 1 Jun 2011 Kebabangan 1 Apr 2010 Tangga Barat Clus 5 Apr 2010 E11 Hub 1 Jun 2010 West Belumut 1-Jun-2010 Lerek Layang Tangga Barat Clus Kebabangan Samarang 29-Sep-2009 Exp completion 1 Mar 2013 1 Jun 2010 1 Mar 2012 31 Aug 2011 1 Jun 2010 15 Apr 2010 1 Aug 2010 30-Jun-2010 Status Tendering Tendering Tendering Tendering Tendering Tendering Tendering Planned Planned Planned Planned Planned Planned

23-Dec-2009

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

DnB NOR Markets - 19

26.05.2010

Sector report > Offshore Supply And in Asia Pacific, the list of upcoming offshore projects is expected to provide a healthy flow of contracts for the EPC players. Contract wins will provide positive newsflow and earnings growth (positive margins) visibility, which are positive for valuations and share price of the listed EPC companies. Figure 25: Upcoming offshore construction projects in Asia Pacific
Client Nippon Oil Petronas Carigali Shell Newfield Petronas Carigali Petronas Carigali Shell Newfield Newfield Nippon Oil Petronas Carigali Petronas Carigali Petronas Carigali Shell Eni Apache Chevron Chevron Chevron Chevron Chevron ExxonMobil ExxonMobil Santos JHN JHN ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC Chevron ExxonMobil Husky Oil Kodeco Chevron Hess Pearl Oil Total Total Total Chevron ExxonMobil Hess Husky Oil Kangean Energy Kodeco Kodeco Pearl Oil Pertamina Petronas Carigali Santos Total Total Total Contract type Country EPC EPC EPC Installation Installation Installation Installation Installation EPIC EPIC Installation Installation Installation EPIC EPC EPIC Installation Installation Installation Installation Installation EPIC EPIC Installation EPC EPC EPC EPC EPC EPC EPC Installation EPIC EPIC EPIC EPIC Installation EPIC EPIC EPIC EPIC EPC EPC EPC EPC Installation Installation Installation Installation Installation Support Installation EPIC Installation EPIC EPIC Installation EPIC Installation EPIC EPIC IRM Installation EPIC Support Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia China China India India India India India India India India India India India India India India India Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Workscope wellhead platform and pipeline CPP jacket Gumusut Phase II (400km pipeline) TNI of WHP and process plat CPP jacket TNI pipelay TNI and support work platform installations CPP fabrication; optional wellhead platform fabrication wellhead platform and pipeline pipelay CPP Topside TNI Pipeline and riser installation Gumusut Phase II (400km pipeline) Flowlines wellhead platform and flowline installations Tie-in of platforms, pipelines and manifolds Umbilical installation 60km deepwater pipeline segment Subsea foundations and manifold installations 200km shallow water pipeline segment Prod unit / Field Layang Kebabangan Gumusut-Kakap East Piatu Kebabangan Tangga Barat Cluster E11 Hub West Belumut Lerek Layang Tangga Barat Cluster Kebabangan Samarang Gumusut-Kakap Kitan Julimar/Brunello Area Gorgon Gorgon Gorgon Gorgon 15-Oct-2009 1-Apr-2011 1-Jan-2011 1-Jan-2011 1-Jan-2011 1-Jan-2011 1-Sep-2010 1-Dec-2009 1-Dec-2009 15-Jun-2011 30-Jun-2011 31-Mar-2011 28-Feb-2011 31-Mar-2011 28-Feb-2011 30-Jun-2010 31-Mar-2010 24 30 30 31 Nov 2011 Apr 2011 Apr 2012 Jan 2012 Exp start 1 Jan 2013 1 May 2010 1 Jan 2012 1 Jun 2011 1 Apr 2010 5 Apr 2010 1 Jun 2010 1-Jun-2010 Exp completion Status 1 Mar 2013 1 Jun 2010 1 Mar 2012 31 Aug 2011 1 Jun 2010 15 Apr 2010 1 Aug 2010 30-Jun-2010 Tendering Tendering Tendering Tendering Tendering Tendering Tendering Planned Planned Planned Planned Planned Planned Planned Tendering Planned Planned Prequalification Tendering Planned Tendering Planned Planned Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering 1-Dec-2009 30-Apr-2011 30-Apr-2011 Tendering Tendering Tendering Planned Planned Tendering Tendering 30-Apr-2012 1-Nov-2009 1 May 2010 12 Apr 2010 1 Apr 2010 1 Oct 2010 1 Mar 2011 30 Apr 2010 1 Oct 2011 1 Oct 2011 15 Apr 2010 1-Nov-2009 30-Jun-2010 30 Jun 2010 31 May 2010 1 Jun 2010 31 Dec 2010 1 Jun 2011 30 Jun 2010 31 Mar 2012 31 Mar 2012 15 Jun 2010 31-Mar-2010 Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Prequalification Tendering Planned Tendering Tendering Planned Planned Planned Planned Prequalification Tendering Planned Tendering

29-Sep-2009

23-Dec-2009

Gorgon Wirrah Marlin B platform and pipelines Marlin-Turrum Pipeline installation Henry Topside Lufeng 13-2 Jacket Lufeng 13-2 Pipelay and plat modifications B-193 Cluster Process platform and two flare platforms B-193 Cluster EPCIC: 3 unmanned WHP + various segment D-1 11 pipelines spanning 75km Mumbai High North B-22 Cluster platform installations and pipela South Bassein Platforms ICP-R and ICP-F3 installation B-22 Cluster platform installations and pipelay Pipelay and platform modifications 5 w ellhead platforms B-46 4 platforms and flowlines Mumbai High South South Bassein B-193 Cluster B-193 Cluster B-Cluster Mumbai High Mumbai High South Mumbai High North B-193 Cluster

30 Apr 2010 3 May 2010

30 Apr 2011

9-Oct-2009

10-Apr-2010

Mumbai High South Redevelopment six wellhead platforms and 140km of pipelines Process platform and two flare platforms platform and flowline installations

North Tapti SPM refurbishment Santan EPC-3: pipeline, cables and mooring tow er coBanyu Urip EPIC Madura BD KE series (-39 and -54) KE-39 3 pipelay scope Sepinggan Retender for CPP and AUP Installations Ujung Pangkah 300km exportline installation Makassar Strait TNI of plat and subsea South Mahakam Installation of exportlines and flowlines South Mahakam Pre-commissioning, hook-up and tie-in South Mahakam TJ Jumlai crude pipeline refurbishment project Sepinggan pipeline, cables and mooring tower construction Banyu Urip Retender for CPP and AUP Installations EPIC FPU mooring, risers, manifolds and flowlines Poleng PPP module transportation and installation KE series (-39 and -54) 300km exportline installation EPIC (pipelines) 200km exportline Maleo/Oyong IRM Installation of exportlines and flowlines EPICC Pre-commissioning, hook-up and tie-in Transportation and installation of platforms and subsea elements Transportation and installation of Muda-D platform and flowline TNI of Muda-D plat and flow line EPCIC for 1 platform and 2 pipelines TNI (Compression platform) PNG LNG EPIC (200km Kopi-Port Moresby pipeline) 280km Elk-Napa Trunkline Drydocking TNI of 2 spur lines Bongkot 4A Inst (Living Quarters Platform) Installation of platforms and flowlines process and wellhead platforms Bongkot 4A Inst (Living Quarters Platform) Installation of pipelines & platform TNI wellhead platform and flowline Diving support at Chim Sao 3 w ellhead platforms and 60km of pipelines Topaz wellhead platform and flowline up to 2 wellhead platforms and pipelines Ujung Pangkah Madura BD Terang/Sirasun/Batur Poleng KE-39 Makassar Strait (MS) Kepodang Oyong South Mahakam (SMK) Peciko South Mahakam (SMK)

1-Jun-2011

31-Jul-2011

1-Apr-2010

1-Nov-2011

Total

Installation

Indonesia

South Mahakam (SMK)

1-Apr-2010

1-Nov-2011

Tendering

CPOC CPOC

Installation Installation

Joint Develop Joint Develop Myanmar Myanmar PNG PNG Singapore Thailand Thailand Thailand Thailand Thailand Vietnam Vietnam Vietnam Vietnam Vietnam Vietnam

MTJDA-B17 MTJDA-B17 Shwe/Mya Yetagun

1-Jan-2010 31 Jul 2010 1-Dec-2009 1-Jul-2011 1-Jan-2010 25-Apr-2009 1 Oct 2010 1 Jun 2011

31-Jan-2010 30 Nov 2010 31-Mar-2013 31-Aug-2011 1-Jun-2010 31-Jul-2009 31 Mar 2012 31 Jul 2011

Tendering Tendering Tendering Planned Prequalification Planned Planned Tendering Tendering Planned

Daewoo EPIC Petronas Carigali EPIC ExxonMobil Interoil HHI PTT PTTEP NuCoastal NuCoastal PTTEP Cuu Long JOC Petronas Carigali Premier Hoang Long JOC EPIC EPIC IRM Installation Installation Installation EPIC Installation Installation Installation Support Installation

Platong Bongkot Songkhla Bua Ban Bongkot Su Tu Trang Ruby Dua/Chim Sao Te Giac Trang Ruby

1-Jan-2010 1-Jun-2011 5 Apr 2010 1 Jul 2010 1 May 2010

31-Mar-2010 31-Jul-2011 30 Apr 2010 31 Jul 2010 20 Jun 2010

Planned Tendering Tendering Tendering Tendering Tendering

Petronas Carigali Installation Thang Long JOC EPIC

1-Jul-2010

31-Jul-2010 31-Dec-2010

Tendering Planned

Hai Su Trang/Hai Su Den 1-Apr-2010

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

DnB NOR Markets - 20

26.05.2010

Sector report > Offshore Supply Technology sharing with foreign partners Given that the offshore oil and gas industry in Malaysia is still enjoying relatively good growth numbers, foreign players will be attracted to the market. And because of the implied local content requirements, foreign companies who wish to join in the market will require local JV partnerships in order to bid for projects. In return, the domestic companies can enhance their technical knowledge, resulting in transfer and sharing of technology in such collaborations. They can also tie-up with foreign partners, targeting at overseas markets which require similar arrangements. One such instance is the SapuraAcergy which was initiated by Malaysia's SapuraCrest and Norway's Acergy, to utilize the high-spec CSV Sapura 300 vessel. Key risk regulatory and political We believe changes in regulatory (laws and policies linked to offshore oil service licensing and requirements) framework and political conditions in Malaysia will greatly impact the business climate of the local industry.

DnB NOR Markets - 21

26.05.2010

Sector report > Offshore Supply

Company specifics
New coverage: SCRES, KEPB, JAYA Existing coverage: EZRA, EOC, EZI, ASL, SWIB, KST, FALE, CHO, OTML, DESSC, EIOF, SIOFF, SOFF, HAVI, FAR

In this section, we provide key updates on the companies currently under our coverage and initiate coverage on three offshore names: Singapore's Jaya Holdings and Malaysia's SapuraCrest and Kencana.

DnB NOR Markets - 22

26.05.2010

Sector report > Offshore Supply

Jaya Holdings
Asset (vessel) reflation holds the key to valuation
Jaya is one of the leading shipbuilders in Asia, with shipyards in Singapore, Batam Indonesia, and China. The yard specialises in small-mid size offshore support vessels (OSV) such as AHTS, PSV and barges. Jaya also owns and charters a fleet of 20 OSVs for charters, made up mainly of bareboat and time charters, with contract length ranging from months to 2-3 years. Unlike other conventional shipyards which build vessels upon order, Jaya builds vessels, under its internal newbuild plan, for sale when the vessels are close to completion or ready. And based on market demand for new vessels and chartering opportunites, the newbuild vessels are either sold or added to the existing chartering fleet. This makes Jaya extremely cyclical and they were distressed in 2009, but restructured without dilution for shareholders. Although we are still conservative regarding charter rates in the OSV segment for the next 1-2 years, vessel values seem to have stabilized. Business divisions Yards (shipbuilding & shiprepair) owns and operates three shipyards in Singapore, Indonesia (Batam) and China (Nantong/ Qidong). The three yards have a combined shipbuilding capacity of 6-8x OSVs ranging 4,000-16,000bhp for AHTS and 3-4 barges of 3,000-10,000dwt over a 15-month building cycle. The vessel types which Jaya specialize in include AHTS (5,000-16,000bhp), PSV (1,000-3,000dwt), Utility supply vessels, tugs and accomm work barges (1,000-10,000dwt). Shipchartering owns an existing fleet of 20 vessels, mainly on bareboat and time charters. The vessels are primarily available for sale if right prices and opportunities come along. Assets 8x AHTS (averaging 5,000+bhp), 1x 8,000bhp AHTS, 3x 10,800bhp AHTS, 3x AHT (averaging 5,000bhp), 1x, 3,500bhp utility support vessel, 1x accom barge, 3x 9,000dwt deck cargo/ spud barges. Newbuilds currently under construction internally for sale: 8x 5,150bhp AHTS, 11x 8,000bhp AHTS, 5x 12,000bhp AHTS, 2x 16,000bhp AHTS, 3x 3,000dwt PSV, 3x ROVs capable of water depth up to 300m, and 4x 9,000dwt barges. 3 shipyards in Singapore, Batam and China. Recent development Successful completion in debt restructuring in Jan 2010, converting existing debt due in 2010 into 5-year secured term loan, with a 2-year principal payment holiday in calendar year 2010 and 2011. Q3 FY2010 earnings release. Contracted for sale 7x vessels (5x 5,000bhp AHTS + 1x 3,000dwt PSV + 1x accom barge) for USDm 110, which would be recognized/ sold over the next two quarters (Q4 FY2010 and Q1 FY2011). Expected news-flow Potential vessel sales announcements. Valuation DCF 1.08 SGD/share, NAV 1.11 SGD/share, 2011 EV/EBITDA and P/E 8.8x and 10.8x respectively. Based on our NAV, the implied valuation of the yard stands at SGD/sh 0.42, 5x 2011 EV/EBITDA, which is comparable to peers with similar yards. We initiate Jaya with BUY recommendation with target SGD/sh 1 as we believe the FMV of the vessels under Jaya's newbuild plan have been overlooked by investors. Based on our expectations that vessel prices have found bottom, we see limited downside risks of Jaya selling its newbuilds below our NAV and argue that the share price looks attractive on risk reward basis. We see potential price trigger from vessel sales.

DnB NOR Markets - 23

26.05.2010

Sector report > Offshore Supply Valuation summary We have adopted net asset value (NAV) and discounted cash flow (DCF) valuation frameworks to value Jaya. Between the two, we prefer to base our valuation on NAV as we argue Jaya is an asset heavy company. The core business of building vessels in its own book and selling them subsquently on a continual renewal basis. Below is the fleet summary of Jaya, which includes the upcoming newbuilds that the yard is looking to sell eventually when the vessels are ready. Based on NAV caculation, we have arrived at a NAV of SGD/sh 1.11. NAV of vessels are derived from a number of factors: 1) Second-hand market values of comparable vessels to Jaya (discounted to present values if vessels are delivered in forward years), from independent shipbrokers, and recent transacted prices; 2) Floor values of vessels if they are backed by term-charters; 3) In-house research; and 4) % mark-up from the cost of building the vessels from similar yards. We do not have the contract (dayrates) breakdown of each individual vessel on existing chartering fleet and there are no pre-existing charters on the newbuilds. Hence, we have limitations in valuing the free-cash flow of each vesel, which would otherwise form the floor value of the vessel.

DnB NOR Markets - 24

26.05.2010

Sector report > Offshore Supply

Figure 26: Net Asset Value of Fleet SGD/sh 1.11

Current fleet as of Q3 FY2010 Vessel Name JAYA SCOUT JAYA SEAL JAYA TREASURE 2 NOR SPRING NOR CAPTAIN NOR SKY JAYA ALMANAC JAYA DEFENDER(887C) JAYA AMANDAM JAYA AMARA(HT06-2014) JAYA ALLIANCE JAYA DAUPHIN JAYA PUFFIN 2 Jaya 300 SARKU 300 Jaya 301 Jaya 302 JAYA MERMAID 2 CHAI YO JAYA MERMAID 3 Total Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS Utility support Deck cargo barge Accom barge Deck cargo barge Deck cargo barge AHT AHT AHT Bhp/dwt 4,750 BHP 5,500 BHP 5,150 BHP 7,956 BHP 10,880 BHP 5,500 BHP 5,150 BHP 10,800 BHP 4,800 BHP 4,800 BHP 5,150 BHP 10,800 BHP 3,500 BHP 9,000 DWT 9,900 DWT 9,000 DWT 9,000 DWT 5,500 BHP 4,750 BHP 5,150 BHP Built 2004 2004 2005 2008 2007 2008 2008 2009 2009 2009 2009 2009 2004 2007 2008 2007 2007 2006 2004 2007 % Ownership 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Status Time charter Negotiation Time charter Bareboat Bareboat Bareboat Time charter Negotiation Transition Transition To be sold Negotiation Transition Jetty Bareboat Jetty Negotiation Time charter Time charter Bareboat NAV (USDm) 8 12 12 24 28 13 13 30 9 9 13 30 8 5 40 5 5 12 9 11 Net Sales USDSGD ownership (SGDm) leaseback ex No 1.4 11 No 1.4 17 No 1.4 17 No 1.4 34 No 1.4 39 No 1.4 18 No 1.4 18 No 1.4 42 No 1.4 13 No 1.4 13 No 1.4 18 No 1.4 42 No 1.4 11 No 1.4 7 No 1.4 56 No 1.4 7 No 1.4 7 No 1.4 17 No 1.4 13 No 1.4 15 414

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Current newbuild vessels earmarked for sale Expected delivery (FY% end) Ownership 2010 100% 2010 100% 2010 100% 2010 100% 2011 100% 2011 100% 2011 100% 2011 100% 2010 100% 2010 100% 2010 100% 2010 100% 2011 100% 2011 100% 2011 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2010 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2010 100% 2012-14 100% 2012-14 100% 2011 100% 2011 100% 2012-14 100% 2010 100% 2010 100% 2010 100% 2010 100% NAV (USDm) 13 13 13 13 13 13 13 13 25 25 25 25 25 25 25 25 25 25 25 35 35 35 35 35 45 45 22 22 22 10 10 10 6 6 6 6 Net Sales USDSGD ownership (SGDm) leaseback ex No 1.4 18 No 1.4 18 No 1.4 18 No 1.4 18 No 1.4 18 No 1.4 18 No 1.4 18 No 1.4 18 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 35 No 1.4 49 No 1.4 49 No 1.4 49 No 1.4 49 No 1.4 49 No 1.4 63 No 1.4 63 No 1.4 31 No 1.4 31 No 1.4 31 No 1.4 14 No 1.4 14 No 1.4 14 No 1.4 8 No 1.4 8 No 1.4 8 No 1.4 8 1070

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Vessel Name AHTS newbuild 1 AHTS newbuild 2 AHTS newbuild 3 AHTS newbuild 4 AHTS newbuild 5 AHTS newbuild 6 AHTS newbuild 7 AHTS newbuild 8 AHTS newbuild 9 AHTS newbuild 10 AHTS newbuild 11 AHTS newbuild 12 AHTS newbuild 13 AHTS newbuild 14 AHTS newbuild 15 AHTS newbuild 16 AHTS newbuild 17 AHTS newbuild 18 AHTS newbuild 19 AHTS newbuild 21 AHTS newbuild 22 AHTS newbuild 23 AHTS newbuild 24 AHTS newbuild 25 AHTS newbuild 26 AHTS newbuild 27 PSV newbuild 1 PSV newbuild 2 PSV newbuild 3 ROV newbuild 1 ROV newbuild 2 ROV newbuild 3 Barge newbuild 1 Barge newbuild 2 Barge newbuild 3 Barge newbuild 4 Total

Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS PSV PSV PSV ROV ROV ROV Barge Barge Barge Barge

Bhp/dwt 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 12,000 BHP 12,000 BHP 12,000 BHP 12,000 BHP 12,000 BHP 16,000 BHP 16,000 BHP 3,000 dwt 3,000 dwt 3,000 dwt 300m depth 300m depth 300m depth 9,954 DWT 9,954 DWT 9,954 DWT 9,954 DWT

Status Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild Newbuild

NAV Calculation NAV of all vessels (including sale lease-back) NAV of yard Total assets 2010 NIBD + future undiscounted capex & newbuilds' costs Net value of all assets No of outstanding shares Equity value per share (SGD)

SGDm 1484 34 1518 665 853 770 1.11

Method FMV 1x book value as of FY2009 Incl remaining cost to complete the 36 existing newbuild plan

Source: DnB NOR Markets

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26.05.2010

Sector report > Offshore Supply Figure 27: Implied valuation of yard
Implied valuation of yard NAV of current fleet (20x vessels) Stocks and WIP (existing) Current NIBD as of Q3FY2010 NAV of existing assets No of shares outstanding NAV of existing assets per share Equity value per share Implied NAV per share of yard Implied NAV of yard Implied multiple of yard (x) SGDm SGDm SGDm SGDm In million SGD SGD SGD SGDm 2011 EV/EBITDA SGDm 414 334 216 533 770 0.69 1.11 0.42 320 4.6 Remarks FMV Reported Reported Reported NAV calculation FMV Comparable to NAV of yard peers EBITDA based on Shipbuilding est

Source: DnB NOR Markets

For DCF, the key assumption is based on the expected incremental cashflow from each vessel built and subsquently sold, modeled after the yard's capacity and expectation of the number of vessels sold each year. Our DCF model values Jaya at SGD/sh 1.08. Based on both of our valuation approaches, we recommend a BUY on Jaya, tp SGD/sh 1. We believe the fair market value of the vessels under Jaya's newbuild plan have been overlooked by investors. Our NAV implies that the company is undervalued. But we do caution that Jaya's business model is extremely cyclical. Figure 28: DCF Valuation SGD/sh 1.08
Discounted value of free cashflow Value free cashflow 2010-2035 (SGDm) Value free cashflow 2035+ (SGDm) Total value free cashflow (SGDm) 2010 NIBD + future discounted capex & newbuilds' costs Net value free cashflow (SGDm) Total value per share (SGD) 604 895 1,499 665 834 1.08 Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 474 46% 565 54% 8% 1.50

Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor

-100% Risk free rate Interest rate Tax-rate Net WACC 4% 5% 17% 10%

2.5% 14.5

Source: DnB NOR Markets Estimates

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26.05.2010

Sector report > Offshore Supply

Jaya Holdings
Ticker code (SP): Jaya SP Shareprice Market capitalisation Market capitalisation 0.62 SGD 474 SGDm 338.3 USDm Target price Upside potential # shares (mill) SGDUSD

BUY
1.0 63% 770 1.40

(SGDm) Income statement Revenues EBITDA EBIT Net financial items Pre tax results Net income EPS (diluted) EBITDA margin EBIT margin Net result margin Cashflow statement C ashflow from operations C hanges in working capital Investments C ashflow from financials Net change in liquidity (SGDm) Balance sheet C urrent assets Fixed assets Short term debt Long term debt Equity & minorities Total capital C apital employed Net interest-bearing debt Enterprice value Key figures Return on total assets Return on capital employed Return on equity Interest coverage C urrent ratio Revenues growth EBITA growth EPS growth Multiples P/E P/C F EV/EBIT EV/EBITDA EV/SALES P/BOOK 2006 236 278 43 21 319 514 384 15 1,785 2006 42% 57% 67% n.m. 1.4 na na na 2006 10.7 9.4 11.1 9.6 3.7 3.6 2007 308 293 31 0 378 601 409 2 3,519 2007 21% 30% 34% n.m. 1.4 0% -6% 13% 2007 12.2 10.8 15.3 13.1 4.7 3.9 2008 411 444 112 92 439 855 643 184 658 2008 20% 27% 36% -36.0 1.3 0% 8% 22% 2008 1.5 1.3 3.7 3.2 1.2 0.5 2009 588 402 370 0 375 990 745 268 741 2009 -1% -2% -1% -3.7 1.0 -14% -58% -102% 2009 -209.1 28.9 23.1 14.6 2.8 1.2 2010E 497 485 0 363 454 982 817 265 739 2010E 7% 9% 19% -4.6 3.0 -14% 36% -3627% 2010E 6.0 4.9 14.5 10.8 3.2 1.0 2011E 484 616 20 363 498 1,101 881 288 761 2011E 3% 4% 9% -5.8 2.0 82% 27% -44% 2011E 10.7 7.6 11.1 8.8 1.8 1.0 2012E 412 746 40 363 551 1,158 954 316 790 2012E 4% 5% 10% -6.4 1.7 14% 16% 21% 2012E 8.9 6.4 9.8 7.8 1.7 0.9 2006 306 117 101 -4 127 106 0.14 38.2% 33.1% 34.7% 2006 182 -120 294 59 -173 2007 308 110 94 -3 134 120 0.16 35.6% 30.5% 39.0% 2007 151 -45 31 -41 35 2008 307 118 102 -3 166 147 0.19 38.4% 33.1% 47.7% 2008 173 -100 168 161 67 2009 263 50 31 -14 5 -2 0.00 18.9% 12.0% -0.8% 2009 -9 -37 -24 154 131 2010E 227 68 50 -15 89 79 0.10 30.0% 22.2% 34.7% 2010E 86 17 100 -7 -4 2011E 413 86 68 -15 53 44 0.06 20.9% 16.5% 10.7% 2011E 85 42 150 20 -3 2012E 469 100 80 -16 64 53 0.07 21.4% 17.0% 11.3% 2012E 84 38 150 20 -8

Source: DnB NOR Markets

DnB NOR Markets - 27

26.05.2010

Sector report > Offshore Supply Key Investment Summary We initiate Jaya with BUY recommendation with target SGD/sh 1 as we argue that current share price is undervalued against our NAV. We believe Jaya has been over-looked by investors due to the debt restructuring matter and lack of research coverage. Jaya's business model is extremely cyclical and they were distressed in 2009, but restructured without dilution for shareholders. Although we are still conservative regarding charter rates in the OSV segment for the next 1-2 years, vessel values seem to have stabilized. Vessel prices are key to Jaya's valuation as building and selling vessels form its main business model. Hence, we argue that market timing (vessel sales) is important for Jaya in value creation. The existing reconfigured shipbuilding program will keep the yard busy for at least FY2010 and FY2011. As such, potential key valuation trigger would lie in the sale price of existing newbuild commitments. Based on our OSV market outlook in the earlier segments of the report, we believe vessel prices have bottomed out. We believe Jaya will be able to sell its vessels at our NAV valuation. We argue that the share price looks attractive on risk reward basis, pricing at undemanding 0.56x of NAV. We also see further upside in valuation from higher than expected vessel sale prices on continuing asset (vessel) reflation. Figure 29: Business model at a glance
Shipbuilding Division
Internal newbuild program Built-to-order (BTO) vessels Leveraging on market strengths to capture opportunistic pricing Flexibility to transfer vessels to its charter fleet Has capability and flexibility to outsource smaller vessels to third-party Chinese shipyards
Internal Sales

Offshore Shipping Division

Renew and grow fleet Recurrent income Fleet is available for sale if price is right Existing charter agreements are flexible with vessel switch Lower acquisition cost due to in-house construction Provide market insights into demand dynamics and requirements which can be incorporated in ship designs

Gain on disposal of vessels

Operating income due to business nature Facilitates fleet renewal Proceeds used to fund newbuild program

Earnings

Tax efficiencies with certain charter income being tax exempt, for Singaporeflagged vessels

S ource: DnB NOR Markets, Company

Unlike other conventional shipyards which build vessel upon order, Jaya builds vessels, under its internal newbuild plan, for sale when the vessels are close to completion or ready. And based on market demand for new vessels and chartering opportunites, the newbuild vessels are either being sold or being added to the existing chartering fleet. And for the existing owned fleet of 20 vessels, mainly on bareboat and time charters, the vessels are primarily available for sale if right prices and opportunities come along. The chartering agreements are flexible for vessel switch in the event that the vessel is sold.

DnB NOR Markets - 28

26.05.2010

Sector report > Offshore Supply Further impairment loss on vessels unlikely We believe Jaya has made most of the provisions in FYQ409 at SGDm 99 which explains the shortfall in newbuild commitments stated previously and currently. Hence if vessel sales are able to materialize as expected, within our NAV price range, we are positive on forward earnings in Q42010 and 2011. Revenues visibility over next two quarters from firm vessels sale Jaya has recently contracted 7x vessels (5x 5,000bhp AHTS + 1x 3,000dwt PSV + 1x accom barge) for sale amounting to USDm 110 (SGDm 154), which would be recognized over the next two quarters. No longer a distress case In June last year, Jaya announced that it had to restructure its debt caused by the global economic downturn. Vessel sales, key driver of Jaya's operating cashflows, had been negatively impacted by the weak OSV market conditions. Due to weak vessel sales and large number of newbuilds in progress before the downturn, Jaya's shipbuilding commitments peaked and creditors (banks) were reluctant to roll over their existing credit facilities. And in Jan 2010, Jaya has successfully completed its debt restructuring which allow the company to convert its existing debt due in 2010 of SGDm 363 into a 5-year secured term obligations denominated in USD. There will be a 2-year principal payment holiday between 2010-2011, after which quarterly repayments begin from calendar year 2012/ financial year 2013 (June year-end) onwards with the amount to be repaid as highlighted below. This arrangement is similar to a bullet like bond which enjoys principal holiday for the next two years. The debt has been restructured in a USD denominated debt as most vessel sales are done in USD. The interest costs of the debt are variable, pegged at SIBOR + 2.5% points spread. Though the debt is pledged and secured by the newbuild vessels, the creditors allow Jaya the full control of its own operations, with the discretion to sell the vessels. Based on our understanding with the management, there are no restrictive covenants (such as financial ratios to meet) in the debt agreement. We see this term as especially beneficial for Jaya.

Figure 30: Pre-restructuring debt repayment schedule

400 350 300 SGDm SGDm 250 200 150 100 50 0 FY2010E FY2011E FY2012E FY2013E FY2014E F2015E Financial year (June-end) 0 FY2010E FY2011E FY2012E FY2013E FY2014E Financial year (June-end) F2015E 250 200 150 100 50

Principal debt repayment (Prerestructuring)

Principal debt repayment (Post-restructuring)

Source: Company

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26.05.2010

Sector report > Offshore Supply Debt Profile & Capex Quantifying the newbuild plan - outstanding capex est SGDm 578 Based on our internal cost assumptions on the newbuilds Jaya are building, we estimate the total capex/ cost of the 36 vessels to amount SGDm 930+. Our assumptions are drawn from adjusted Jaya's historical shipbuilding margins (20% EBITDA margins) and comparable costs to build similar vessel at other shipyards in Asia. And from the current (Q4 FY2010) stocks and WIP of SGDm 334 and fleet completion schedule, we estimate that the remaining capex (cost) of building the 36 vessels at SGDm 578, supported by figures of SGDm 614 provided by the management. We expect capex commitments to be met primarily by vessel sales (positive working capital due to earnings income and reversal in stocks and WIP) when the vessels are delivered this year and 2011. We do not see immediate need for financing or liquidity as Jaya enjoys a two-year principal repayment holiday. Given the principal holiday, we are modeling additional debt financing (though lower) when the loans are repaid. Figure 31: Key capex assumptions for the existing outstanding newbuild plan
2010E 2011E Est cost Est Est per vessel Capex/Cost Capex/Cost No of No of (USDm) USDm newbuilds USDm newbuilds 11 4 45 4 45 20 1 20 6 120 23 0 0 0 0 28 1 28 0 0 38 0 0 0 0 19 1 19 0 0 8 0 0 2 16 11 3 33 1 11 10 145.2 13 192 2012-14E Est Capex/Cost No of USDm newbuilds 0 0 4 80 0 0 4 112 2 76 2 38 1 8 0 0 13 314

Type AHTS AHTS AHTS AHTS AHTS PSV ROV Barges Total

Size 5,150 8,000 10,000 12,000 16,000 3,000 300m 10,000

Key capex assumptions Total capex Total capex Current commitments (stk WIP) Outstanding capex

651 912 334 578

USDm SGDm SGDm SGDm

Remarks Based on expected newbuild cost Converted at USD/SGD 1.40 Based on reported Q3FY2010 work-in-progress newbuilds For remaining Q42010-FY2014 (financial year)

Source: DnB NOR Markets estimates

Figure 32: Cashflow schedule post restructuring

FY2010E 150 FY2011E FY2012E FY2013E FY2014E F2015E

100
Debt repayment for existing debt obligations Drawing of new financing Interest expense (SIBOR + 2.5%) Operating cashflow (EBIDA)

50

0 SGDm

-50
Working capital cashflow

-100

Outstanding capex (for existing newbuilds) Net cashflow

-150

-200

-250

Source: DnB NOR Markets estimates

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26.05.2010

Sector report > Offshore Supply Figure 33: NIBD forecast

In SGDm NIBD beginning CAPEX EBITDA - net finance - tax paid Working capital c hanges NIBD end 2009 184 -4 16 -62.0 234 2010E 268 -100 96 6.5 265 2011E 265 -150 62 64.9 288 2012E 288 -150 74 48.0 316 2013E 316 -100 92 1.5 323 2014E 323 -23 92 -45.0 298 2015E 298 -23 89 10.2 222

Source: DnB NOR Markets

Figure 34: Debt forecast

In SGDm Long-term debt Short-term debt (due) Drawing/ (repayment) of long-term debt Drawing/ (repayment) of short-term debt EBITDA Cash balance Net debt Net gearing - Net debt/Equity Interest coverage (x) 2009 0 370 0 0 50 102 268 71% -3.7 2010E 363 0 363 -370 68 98 265 58% -4.6 2011E 363 20 0 20 86 95 288 58% -5.8 2012E 363 40 0 20 100 87 316 57% -6.4 2013E 297 90 -66 50 122 64 323 52% -7.7 2014E 212 190 -85 100 122 104 298 43% -7.7 2015E 0 240 -212 50 115 19 222 29% -9.0

Source: DnB NOR Markets

Key segment - Shipbuilding Jaya is running a "build for sale" instead of a typical "build upon order" shipyard model. Jaya focuses on building the larger vessels, while the smaller vessels are being outsourced to Chinese yards for the advantage of scalability. Figure 35: Shipyards' capabilities
Location Size Shoreline Berths Capacity Capability Type of vessels Singapore Shipyard Tuas, Singapore 24,939 sqm Dongjiang Shipyard Nantong, China (along Yangtze River) 183,000 sqm Batam Shipyard Batam, Indonesia 181,038 sqm

130m 800m 320m Two 90 x 20m berths, One 75 x 20m berth Two 180 x 45m berths, One 180 x 30m Five 100 x 20m berths berth Build up to 3 vessels per year Build up to 3 vessels per year Build up to 6 vessels per year Build highly-customized and sophisticated Build commercial and customized Build c ommercial and customized offshore vessels vessels vessels 8,000 to 16,000 BHP AHTS, PSVs, barges AHTS / PSVs, Accomodation barge, Container ship, Tankers 5,000 to 10,000 BHP AHTS, Accomodation barges, Sub-sea diving / ROV support vessels

Source: Company

The current order backlog of 36 new vessels (one PSV already completed) is fully initiated by its internal newbuild programme, which Jaya is looking to sell or charter (internal chartering fleet) the vessels when nearing completion or completed. But with everything else equal, Jaya prefers to do a outright sale than chartering the vessel, to free up cashflows. Based on internal rate of return required by the company and potential opportunity costs, we understand that Jaya is unlikely to take up external pre-order for vessels as margins (8-12%) from such contracts are comparatively less lucrative.

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26.05.2010

Sector report > Offshore Supply Figure 36: Newbuild plan and vessel types AHTS focus Newbuilds (in units) Type Size 2010E 2011E 2012-14E AHTS 5150 4 4 0 AHTS 8000 1 6 4 AHTS 10000 0 0 0 AHTS 12000 1 0 4 AHTS 16000 0 0 2 PSV 3000 1 0 2 ROV 300m 0 2 1 Barges 10,000 3 1 0 Total 10 13 13
Current newbuild vessels earmarked for sale Expected delivery % (FY-end) Ownership 2010 100% 2010 100% 2010 100% 2010 100% 2011 100% 2011 100% 2011 100% 2011 100% 2010 100% 2010 100% 2010 100% 2010 100% 2011 100% 2011 100% 2011 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2010 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2012-14 100% 2010 100% 2012-14 100% 2012-14 100% 2011 100% 2011 100% 2012-14 100% 2010 100% 2010 100% 2010 100% 2010 100%

Total 8 11 0 5 2 3 3 4 36

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36

Vessel Name AHTS newbuild 1 AHTS newbuild 2 AHTS newbuild 3 AHTS newbuild 4 AHTS newbuild 5 AHTS newbuild 6 AHTS newbuild 7 AHTS newbuild 8 AHTS newbuild 9 AHTS newbuild 10 AHTS newbuild 11 AHTS newbuild 12 AHTS newbuild 13 AHTS newbuild 14 AHTS newbuild 15 AHTS newbuild 16 AHTS newbuild 17 AHTS newbuild 18 AHTS newbuild 19 AHTS newbuild 21 AHTS newbuild 22 AHTS newbuild 23 AHTS newbuild 24 AHTS newbuild 25 AHTS newbuild 26 AHTS newbuild 27 PSV newbuild 1 PSV newbuild 2 PSV newbuild 3 ROV newbuild 1 ROV newbuild 2 ROV newbuild 3 Barge newbuild 1 Barge newbuild 2 Barge newbuild 3 Barge newbuild 4

Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS PSV PSV PSV ROV ROV ROV Barge Barge Barge Barge

Bhp/dwt 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 5,150 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 8,000 BHP 12,000 BHP 12,000 BHP 12,000 BHP 12,000 BHP 12,000 BHP 16,000 BHP 16,000 BHP 3,000 dwt 3,000 dwt 3,000 dwt 300m depth 300m depth 300m depth 9,954 DWT 9,954 DWT 9,954 DWT 9,954 DWT

Source: DnB NOR Markets, company

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26.05.2010

Sector report > Offshore Supply Chartering segment In the chartering segment, Jaya currently owns an existing fleet of 20 vessels, mainly on bareboat and time charters. The vessels are primarily available for sale if right prices and opportunities come along. Figure 37: Existing chartering fleet
Vessel Name JAYA SCOUT JAYA SEAL JAYA TREASURE 2 NOR SPRING NOR CAPTAIN NOR SKY JAYA ALMANAC JAYA DEFENDER(887C) JAYA AMANDAM JAYA AMARA(HT06-2014) JAYA ALLIANCE JAYA DAUPHIN JAYA PUFFIN 2 Jaya 300 SARKU 300 Jaya 301 Jaya 302 JAYA MERMAID 2 CHAI YO JAYA MERMAID 3 Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS Utility support Deck cargo barge Accom barge Deck cargo barge Deck cargo barge AHT AHT AHT Bhp/dwt 4,750 BHP 5,500 BHP 5,150 BHP 7,956 BHP 10,880 BHP 5,500 BHP 5,150 BHP 10,800 BHP 4,800 BHP 4,800 BHP 5,150 BHP 10,800 BHP 3,500 BHP 9,000 DWT 9,900 DWT 9,000 DWT 9,000 DWT 5,500 BHP 4,750 BHP 5,150 BHP Built 2004 2004 2005 2008 2007 2008 2008 2009 2009 2009 2009 2009 2004 2007 2008 2007 2007 2006 2004 2007 % Ownership 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% Status Time charter Negotiation Time charter Bareboat Bareboat Bareboat Time charter Negotiation Transition Transition To be sold Negotiation Transition Jetty Bareboat Jetty Negotiation Time charter Time charter Bareboat

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Source: DnB NOR Markets, Company

Earnings estimates The key assumptions of our segment estimates are explained below. In general, we expect some degree of variability in Jaya's earnings due to the lumpy nature of the shipbuilding segment where vessel sales may vary accordingly to demand and delivery schedule. In the offshore shipping segment, Jaya may also sells the vessels in its existing fleet, which will impact chartering revenues on aggregate. Figure 38: Segment breakdown estimates (in SGDm)
Shipbuilding Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2007 2008 2009 2010E 2011E 2012E 237 235 173 165 350 402 71 61 27 39 70 80 30% 26% 16% 24% 20% 20% 69 60 25 37 68 78 29% 25% 14% 22% 19% 19%

Offshore Shipping Operating Revenues EBITDA EBITDA margin EBIT EBIT margin

2007 2008 2009 2010E 2011E 2012E 69 71 90 61 63 67 49 57 28 33 21 25 70% 81% 31% 53% 33% 37% 34 42 12 17 5 7 49% 59% 13% 28% 8% 11%

Group 2007 2008 2009 2010E 2011E 2012E Operating Revenues 308 307 263 227 413 469 EBITDA 122 120 56 72 91 105 EBITDA margin 40% 39% 21% 32% 22% 22% EBIT 105 102 37 54 73 85 EBIT margin 34% 33% 14% 24% 18% 18% Source: DnB NOR Markets, Please note estimates before unallocated expenses

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26.05.2010

Sector report > Offshore Supply Shipbuilding segment Shipbuilding revenues are recognized when a completed vessel is sold, inline with accounting matching principle. Hence, we expect lumpiness in revenues and earnings. Figure 39: Segment estimates (in SGDm)
Shipbuilding Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Source: DnB NOR Markets 2007 2008 2009 2010E 2011E 2012E 237 235 173 165 350 402 71 61 27 39 70 80 30% 26% 16% 24% 20% 20% 69 60 25 37 68 78 29% 25% 14% 22% 19% 19%

The key assumptions and drivers of the shipbuilding segment are found below. In summary, we are modeling our estimates based on the expected number of vessels being sold from its existing newbuild plan (36x vessels) stretching to FY2014, and thereafter on a continual newbuild replacement basis (based on the yard's capacity) and expectations of future new vessel sales. We expect EBITDA margins at 20% levels as further impairment on vessels currently under construction unlikely as we believe Jaya has already made most of the provisions in Q42009 for SGDm 99. Historical EBITDA margins in this segment were at 3-year average of 24% from 2007-2009. Potential cost overruns for the larger vessels (AHTS > 15,000bhp) unlikely as Jaya has done two 15,000+bhp AHTS for DESSC before. Based on track records, Jaya's yards have the technical and project management capability to build large vessels.

Figure 40: Key assumptions for Shipbuilding segment

Key assumptions for Shipbuilding segment Existing order backlog (36 WIP vessels as of Q3 FY2010): Est outstanding units in WIP existing order book for sale (unit) Expected no of completed vessels sold from existing orderbook (unit) Est value of vessels sold from existing orderbook (SGDm): A New vessels assumed for continual newbuild plan (own yard): Est new vessel orders for internal newbuild plan (unit) Expected no of completed vessels sold from new vessel orders (unit) Est value of vessels from new orders (SGDm) Value of vessels sold from new orders (SGDm): B Total revenues (A + B) EBITDA margins assumption EBITDA (SDGm) Q3/10 Q4/10E Q1/11E Q2/11E Q3/11E Q4/11E 2011E 36 0 0 33 -3 59 29 -4 88 27 -2 84 24 -3 73 19 -5 105 19 -14 350 2012E 8 -11 371

0 0 0 0 0 na 0

0 0 0 0 59 20% 12

0 0 0 0 88 20% 18

0 0 0 0 84 20% 17

0 0 0 0 73 20% 15

1 0 31 0 105 20% 21

1 0 31 0 350 20% 70

9 -1 279 31 402 20% 80

Source: DnB NOR Markets

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26.05.2010

Sector report > Offshore Supply Offshore shipping segment We have adjusted the operating margins in this segment to exclude gains from sale of vessels reported in the income. We saw a wide range of margins in the past three years due to vessels' mix, count and contract types (bareboat, term or spot). Between 2007-2009, the average adjusted EBITDA margins were ranging from 31-81% Figure 41: Segment estimates (in SGDm)
Offshore Shipping Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Source: DnB NOR Markets 2007 2008 2009 2010E 2011E 2012E 69 71 90 61 63 67 49 57 28 33 21 25 70% 81% 31% 53% 33% 37% 34 42 12 17 5 7 49% 59% 13% 28% 8% 11%

There is no fixed fleet size as the chartering vessels are open for sale if prices are right. There is no breakdown in dayrates for each vessel sub-segment, hence, the historical dayrates (such as 2009 which is shown below) were calculated with our estimated rates for each vessel type against the total reported revenues. In our base case assumptions, we do not assume any change in current reported fleet count and mix given that the valuation has been captured in our NAV and DCF valuation. We are currently modeling flat developments in dayrates and opex for Jaya's fleet.

Figure 42: Key rates assumptions for the fleet

Operating fleet Tugs & barges AHT/ AHTS PSV Others - Utility support Average dayrates Fleet size 'Q4FY201 0 4 15 0 1 Average dayrates (SGD) 2009E 7,500 13,000 22,000 7,000 2010E 8,000 13,250 21,000 7,000 9,536 2011E 8,000 14,000 22,000 7,000 9,708 2012E 8,000 14,000 22,000 7,000 10,333 2009E 4,000 7,000 11,000 3,500 Opex (SGD) 2010E 4,000 6,500 10,000 3,500 2011E 4,000 7,000 10,500 3,500 2012E 4,000 7,000 10,500 3,500 Utilization rates (%) 2009E 84% 84% 84% 84% 2010E 75% 70% 75% 75% 2011E 75% 75% 75% 75% 2012E 75% 75% 75% 75%

Source: DnB NOR Markets estimates, Please note there are no reported breakdown in dayrates in FY2009

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Sector report > Offshore Supply

JAYA HOLDINGS (JAYA.SI)

PROFIT & LOSS SGDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 308 0 -198 110 16 94 0 -3 0 91 14 0 120 2008 307 0 -189 118 16 102 0 -3 0 98 19 0 147 2009 263 0 -213 50 18 31 0 -14 0 18 7 0 -2 2010e 227 0 -159 68 18 50 0 -15 0 36 11 0 79 2011e 413 0 -327 86 18 68 0 -15 0 53 9 0 44 2012e 469 0 -368 100 21 80 0 -16 0 64 11 0 53

BALANCE SHEET SGDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 264 28 247 29 570 378 31 192 601 2

11 404 30 386 20 850 439 204 212 856 184

4 391 7 480 102 984 375 370 245 990 268

4 473 7 394 98 977 454 363 165 982 265

4 605 7 380 95 1,092 498 383 220 1,101 288

4 735 7 314 87 1,147 551 403 203 1,158 316

CASH FLOW SGDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

136 -30 -31 -33 0 42

163 -90 -168 173 0 79

16 -62 24 166 12 155

96 7 -100 -7 0 -4

62 65 -150 20 0 -3

74 48 -150 20 0 -8

Share price and target Price SGD Price target 12m SGD Recommendation Key data per share Book value SGD P/Book X %cagr EPS gr09-12e Financial structure Market cap. SGDm Net int. bear debt SGDm Enterprise value SGDm Shares outst. million % Equity/tot assets Share price performance Abs. 1/3/12m Rel. 1/3/12m SGD High/Low 12m STI index % 30days volatility Company attributes Reuters ticker Supply

0.62 1.00 BUY 0.57 1.09 R+ 477 184 662 770.1 46.5 -19/5/27 -10/7/5 1/0 2701.2 39 JAYA.SI

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

SGD SGD SGD SGD million SGD X X % X X X X

2007 0.16 0.16 0.00 0.5 770.1 1.75 11.2 11.2 0.0 3.6 12.1 14.1 3.2

2008 0.19 0.19 0.00 0.6 770.1 1.60 8.4 8.4 0.0 2.8 11.7 13.7 2.2

2009 0.00 0.00 0.00 0.5 770.1 0.35 nm nm 0.0 0.7 10.6 16.7 0.7

2010e 0.10 0.10 0.00 0.6 770.1 0.62 6.1 6.1 0.0 1.1 10.8 14.6 0.9

2011e 0.06 0.06 0.00 0.6 770.1 0.62 10.8 10.8 0.0 1.0 8.8 11.2 0.9

2012e 0.07 0.07 0.00 0.7 770.1 0.62 9.0 9.0 0.0 0.9 7.8 9.9 0.8

Reporting Q4 2010

Management CEO CFO Address Jaya Holdings 13 Tuas Crescent

Chan Mun Lye Thai Kum Foon

H.p.: www.jayaholdings.com Tel +65 6265 1010

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Sector report > Offshore Supply

Rebased price (12m, SGD) 170 160 150 140 130 120 110 100 90 80 70 60 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jaya Holdings

Rebased consensus average forward EPS (12m, SGD) 100 95 90 85 80 75 70 65 60 55 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jaya Holdings

Revenue (SGDm) 500 450 400 350 300 250 200 150 100 50 0

Revenue Growth 100% 80% 60% 40% 20% 0%

EPS (SGD) 0.25 0.20 0.15 0.10 0.05 0.00 -0.05 2006 2007 2008 2009

DPS (SGD) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0

2006

2007

2008

2009

2010e 2011e 2012e Revenue Growth

-20%

2010e 2011e 2012e DPS (SGD)

Revenue (SGDm)

EPS (SGD)

EBITDA (SGDm) 140 120 100 80 60 40 20 0 2006 2007 2008 2009

EBITDA margin 45% 40% 35% 30% 25% 20% 15% 10% 5% 2010e 2011e 2012e EBITDA margin 0%

FCF (SGDm) 100 50 0 -50 -100 -150 -200 -250 2006 2007 2008

Dividend yield 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2009 2010e 2011e 2012e Dividend yield

EBITDA (SGDm)

FCF (SGDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 40% 35% 30% 25% 20% 15% 10% 5% 0% -5%

EBIT margin

EBITDA margin

Price/Book

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Sector report > Offshore Supply

Kencana Petroleum
Bet on Malaysia's fabrication and EPCC market
Kencana Petroleum is a Malaysia-based oil service company, focusing on providing EPCC services, marine engineering and offshore marine support services in primarily the domestic and Asia regions. Apart from its main core EPCC, the company has moved into building, refurbishing, repairing and converting marine vessels and offering of offshore drilling services (with Mermaid Maritime) as well as the charter of vessels and rigs with partners. To build up core capabilities and expertise, Kencana has been pursuing expansion strategy through strategic alliances as well as mergers and acquisitions. Backed by its established track records, Kencana is one of the preferred integrated service provider for upstream players in the industry. In Malaysia, there are currently only 7 major offshore fabrication contractors who are approved by Petronas and Production Sharing Contract operators (PSC), and have the license to participate in Petronas' tenders. Kencana is one of the contractors with such status. We like Kencana for its exposure in the Malaysia's oil service industry, with the company currently look at MYRbn 7.5 worth of fabrication tenders. Soft factors, such as the strong working relationships forged with Malaysia's NOC Petronas (evident in their project wins), are something we rate highly in this relatively protected local market. The company has an order book of close to MYRbn 1 (USDm 340) in EPC projects, keeping its yard busy till 2011. Kencana is looking to maintain a minimum base fabrication order backlog of MYRbn 1, through new contracts, at any one time. Business divisions EPCC/ Marine engineering services core business of providing EPCC services in engineering and design, fabrication of production facilities (platforms, jackets, wellheads), modules & process skid systems (subsea manifolds), installation (usually out-sourced for offshore installations), hook-up & commissioning. Offshore support services plans to expand the fleet to include more marine assets, to provide a wide range of offshore services in the oil and gas industry including the charter of rigs and marine vessels. Drilling services - plans to operate tender rigs and to drill in Malaysian waters. Currently partnering (25% direct stake in the rig) Mermaid Maritime in providing tender rig KM-1 to Petronas on a 5+3+2 year drilling contract, expected to commence FY2011. Assets 543,000 sqm fabrication yard in Malaysia, with 24/7 covered workshops providing specialised steel fabrication and infrastructure. 25% ownership in the tender drilling rig KM-1. Recent development Rights issue raising MYRm 183 in Feb. New fabrication of LNG jetty and marine structures worth MYRm 166 in May, from Saipem for the Gorgon project off Australia. New contracts of MYRm 189 announced in May for jackets and pipeline works off Malaysia and India. Expected news-flow Possible new EPCC contracts from the upcoming tenders in Malaysia (Petronas) and other Asian regions. Q3 FY2010 (Financial year-end July) in late June. Valuation SOTP valuation - SGD/sh 1.55. 2011 P/E of 13x and 2011 EV/EBITDA of 8x. We initiate Kencana with a BUY, tp of SGD/sh 1.60. We argue that Kencana deserves to be trading at premium to our NAV due to its market leading position in the protected Malaysia EPCC market. We see share price trigger from potential new EPCC orders in Malaysia and Asia, providing the driver for earnings growth.

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Sector report > Offshore Supply Valuation summary Our key valuation approach is Sum of the Parts (SOTP) valuation based on DCF valuation of the EPCC and OSV segments, and NAV of the tender drilling rig KM-1 (25% owned by Kencana). We value KM-1 using our standard fair market values of similar rigs, similar as our approach for the offshore companies under our coverage, adjusted for individual contracts. Based on this, we have arrived at a SOTP valuation of SGD/sh 1.55. We initiate Kencana with a BUY, tp of SGD/sh 1.60. We argue that Kencana deserves to be trading at premium to our NAV due to its market leading position in the protected Malaysia fabrication and EPCC market. We see upside catalyst from potential new EPCIC order flow in Malaysia and Asia, providing the earnings driver for growth. Key risks to our valuation Key risks include lack of order flow in the EPC market, project execution risks, rising raw material costs (steel) negatively impacting margins, and weaker oil prices (USD 50-60/bbl region) negatively impacting the macro E&P outlook. Figure 43: SOTP Valuation SGD/sh 1.55
Discounted value of free cashflow Value free cashflow 2010-2035 (MYRm) Value free cashflow 2035+ (MYRm) Total value free cashflow (MYRm) Net debt 2010 + future capex (MYRm) Net value (MYRm) NAV of tender drilling rig KM-1 (25% stake) SOTP (MYRm) SOTP per share (MYR) MYRm 1,978 390 2,367 -118 2,486 83 2,568 1.55 Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 668 134% -168 -34% 5% 1

Terminal Growth Assumptions Nominal growth year 2035+ Factor

2% 13

Risk free rate Interest rate Tax-rate Net WACC

4% 5% 23% 10%

Source: DnB NOR Markets Estimates

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Sector report > Offshore Supply

Kencana Petroleum
Ticker code (MK): KEPB MK Shareprice Market capitalisation Market capitalisation 1.33 MYR 2,205 MYRm 668 USDm Target price Upside potential # shares (mill) MYRUSD

BUY
1.60 20% 1,658 3.30

(MYRmn) Income statement Revenues EBITDA EBIT Net financial items Pre tax results Net income EPS (diluted) EBITDA margin EBIT margin Net result margin Cashflow statement C ashflow from operations C hanges in working capital Investments C ashflow from financials Net change in liquidity (MYRm) Balance sheet C urrent assets Fixed assets Short term debt Long term debt Equity & minorities Total capital C apital employed Net interest-bearing debt Enterprice value Key figures Return on total assets Return on capital employed Return on equity Interest coverage C urrent ratio Revenues growth EBITA growth EPS growth Multiples P/E P/C F EV/EBIT EV/EBITDA EV/SALES P/BOOK 2007 376 207 40 53 220 583 313 -70 3,519 2007 21% 39% 52% n.m. 1.3 2007 22.7 20.6 15.1 14.1 1.5 5.9 2008 533 338 91 60 311 871 462 -109 2,096 2008 12% 23% 32% 19.5 1.1 76% 56% 49% 2008 8.2 7.1 4.8 4.3 0.4 2.2 2009 543 402 57 156 429 945 642 -41 2,163 2009 14% 23% 32% 17.3 1.6 -21% 30% 38% 2009 11.0 9.6 7.9 7.1 1.1 3.0 2010E 674 554 57 156 744 1,228 938 -168 2,036 2010E 13% 18% 23% 19.0 2.1 2% 12% -39% 2010E 16.6 14.6 11.3 10.2 1.8 3.0 2011E 901 584 57 156 921 1,485 1,101 -289 1,916 2011E 13% 18% 22% 23.6 2.2 36% 24% 31% 2011E 12.7 11.4 8.4 7.8 1.2 2.5 2012E 1,029 584 57 156 1,079 1,614 1,249 -438 1,766 2012E 10% 14% 16% 21.2 2.6 -5% -11% -11% 2012E 14.3 12.7 8.8 8.0 1.2 2.1 2007 824 87 81 -4 78 57 0.06 10.6% 9.8% 6.9% 2007 63 43 213 86 -21 2008 1,452 136 123 -2 121 85 0.09 9.4% 8.5% 5.9% 2008 100 68 144 46 70 2009 1,141 177 159 -6 153 118 0.13 15.5% 13.9% 10.4% 2009 135 -123 82 62 -7 2010E 1,162 199 181 -7 174 133 0.08 17.1% 15.6% 11.4% 2010E 150 -26 170 173 127 2011E 1,581 247 227 -6 229 174 0.10 15.6% 14.4% 11.0% 2011E 196 -14 50 -12 121 2012E 1,497 220 201 -5 204 154 0.09 14.7% 13.4% 10.3% 2012E 177 3 19 -11 150

Source: DnB NOR Markets Estimates

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26.05.2010

Sector report > Offshore Supply Key Investment Summary Protected home market favours local boys like Kencana Backed by its established track records, Kencana is one of the preferred integrated service provider for upstream players in the industry. In the Malaysian offshore fabrication industry, there are currently only 7 major offshore fabrication contractors who are approved by Petronas and Production Sharing Contract operators (PSC), and have the license to participate in Petronas' tenders. Kencana is one of contractors with such status since 2002. Strong working relationships forged with Petronas are vital We like Kencana for its exposure in the Malaysia oil service industry, with an estimated USDbn 2 worth of upcoming offshore EPCC tenders. The company has been very active in the offshore marine engineering segment in recent years. Soft factors, such as the strong working relationships forged with Malaysia's NOC Petronas (evident in their project wins), are something we rate highly in this relatively protected local market. This allows Kencana to gain competitive advantage over its international and domestic players. We believe the key management of Kencana has the right experience and network, putting the company in strong position in securing new orders domestically. Overseas expansion adds growth and diversity We are also hopeful with potential new tenders in Asia, such as in Australia (relating to Western LNG projects). Kencana has recently secured a MYRm 166 fabrication and supply of pre-assembled rack for the LNG jetty and marine structures of the Chevron's Gorgon LNG project, from the main contractor Saipem. Key management has the right experience and network We rate the management of Kencana highly for their track record in project management (positive margins in last three years since listing), steady order flow (MYRbn 1.1 in FY2008/ FY2009, and MYRbn 2.2 in FY2007), and the experience and network the management brings to the table, with Dato' Mokhzani leading the team. Group Chief Executive Officer Dato Mokhzani bin Mahathir, aged 49, was appointed to the Board on 25 Nov 2004 and presently he is the Group CEO. He graduated with a Bachelor of Science in Petroleum Engineering from the University of Tulsa, Oklahoma in 1987. He began his career as a Wellsite Operations Engineer with Sarawak Shell in 1987. He later joined Tongkah Holdings Berhad in 1989 and was appointed as the Group Managing Director, a post he held till 2001. He was also the Chairman and Group CEO of Pantai Holdings till 2001. He now sits on the Board of Goldtron (Singapore), Opcom Holdings, Maxis, Kencana Capital and several private limited companies. He is also the Chairman of Sepang International Circuit, a post he has held since 2003. Dato' Mokhzani is the second son of the former Malaysia's Prime Minister Tun Dr Mathathir and Tun Dr Siti Hasmah. Executive Director Chong Hin Loon, aged 62, was appointed to the Board on 15 Sep 2005 and presently he is the Executive Director of Kencana, primarily responsible for the operations, project management and yard operations of the Group. He holds an MBA in Advanced Strategic Management from Northwestern International University and a Diploma in Shipbuilding Construction from Singapore. He started his career in 1970 with Keppel FELS in Singapore. He later joined Promet Pte Ltd, Singapore, as a Project Engineer where he was responsible for the construction of oil rigs, vessels, ship repairs and other marine facilities in the oil and gas sector. In 1976, he joined Maroil Shipbuilding & Engineering Pte Ltd as a Project and Construction Manager where he was heavily involved in oil and gas related projects. He later moved back to Malaysia in 1982 where he started his own contractor line and subsequently established Kencana HL, as subcontractor principally engaged in oil and gas fabrication, process piping and pipeline construction,

DnB NOR Markets - 41

26.05.2010

Sector report > Offshore Supply plant maintenance, skilled manpower supply and project management. He has more than 39 years of experience in the oil and gas industry as well as the shipbuilding and ship repair industry. Executive Director Ir. Cher Lee Kiat was appointed to the Board on 15 Sep 2005 and presently he is the Executive Director of Kencana. He obtained his Bachelor of Engineering Honours (Chemical) from the University of Malaya. He started work as a Process Design Engineer in 1979 with Esso Singapore Refinery. In 1983, he joined Protek Engineers, an engineering consultancy company based in Kuala Lumpur, as a Process Engineer. He was promoted to Senior Process Engineer and was also Project Manager for the detailed designs of several offshore platforms for ExxonMobil and Shell. He then left in 1989 to join Petrokon Utama, an engineering consultancy company based in Negara Brunei Darussalam, as Team Leader handling projects for Brunei Shells onshore facilities. In 1992, he was promoted to Operations Manager in charge of the overall running of the company. He returned to Malaysia in 1994 and formed Kencana Bestwide Group, where he is now the Managing Director. Order backlog to provide good visibility As of Q2FY2010, the company has a solid EPC order book of MYRbn 1.1, including new contracts of MYRm 304 in May. This excludes MYRm 827 worth of KM-1 drilling backlog, which would be recognized in the new offshore drilling segment. The EPC backlog should keep the yard busy till FY2011. According to the management, Kencana is looking to maintain a minimum base order backlog of MYRbn 1, through new contracts, at any one time. Competition space within Malaysia EPCC market is limited. We expect current order backlog to provide revenue visibility through to FY2011. Margins likely to stay strong due to lower execution risks Kencana does not do offshore installation works as it usually out-sources the jobs to other contractors which have construction support vessels. Hence, we believe margins are likely to maintain at good levels, as shown historically. This is backed by the grounds that the projects Kencana are undertaking are mainly being built at its own yard, which has established track records (since 1982) and project management expertise. The average historical 3-year EBITDA margins, from FY2007-2009, was at 12%. Key share price trigger - upcoming project radar screen According to the list of upcoming EPCIC projects in Malaysia and Asia complied by ODS, we are positive on the potential fabrication projects pipeline which Kencana is operating in. In the Malaysia home market, Kencana is currently looking at MYRbn 7.5 worth of tenders. We believe Kencana is one of the better positioned players in winning the tenders. Some of which we rate Kencana and its consortium as favourites would be the Petronas' last of the four merged transport and installation (TNI) packages worth USDm 887 and the KPOC's 7-8,000-tonne jacket off deepwater Sabah. Kencana's share of the contract is likely to be fabrication works in the range of MYRm 500. Contract wins will provide positive newsflow and earnings growth visibility, which are positive for valuations and share price. Based on historical records, we expect Kencana to maintain positive and decent margins on future new orders. Demand for offshore projects visible and healthy The outlook for offshore fabrication, EPC projects in Malaysia are expected to remain healthy, along with expectations of E&P spending growth by Petronas. This is further supported by the list of potential offshore tenders in 2010 in Malaysia and in Asia, as highlighted below. Among the local players, Kencana, MMSC and Sime Darby are one of the top fabrication contractors in Malaysia, allowing them to be well-positioned

DnB NOR Markets - 42

26.05.2010

Sector report > Offshore Supply for tenders, estimated to worth up to USDbn 2-3 (MYRbn 6.6) in 2010. This is highlighted in the list of upcoming project tenders in Malaysia below. Figure 44: Upcoming offshore construction projects in Malaysia
Client Contract type Nippon Oil EPC Petronas Cariga EPC Shell EPC Newfield Installation Petronas Cariga Installation Petronas Cariga Installation Shell Installation Newfield Installation Newfield EPIC Nippon Oil EPIC Petronas Cariga Installation Petronas Cariga Installation Petronas Cariga Installation Country Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Workscope w ellhead platform and pipeline CPP jacket Gumusut Phase II (400km pipeline) TNI of WHP and process plat CPP jacket TNI pipelay TNI and support w ork platform installations CPP fabrication; optional wellhead platform fabrication w ellhead platform and pipeline pipelay CPP Topside TNI Pipeline and riser installation Prod unit / Field Exp start Layang 1 Jan 2013 Kebabangan 1 May 2010 Gumusut-Kakap 1 Jan 2012 East Piatu 1 Jun 2011 Kebabangan 1 Apr 2010 Tangga Barat Clus 5 Apr 2010 E11 Hub 1 Jun 2010 West Belumut 1-Jun-2010 Lerek Layang Tangga Barat Clus Kebabangan Samarang 29-Sep-2009 Exp completion 1 Mar 2013 1 Jun 2010 1 Mar 2012 31 Aug 2011 1 Jun 2010 15 Apr 2010 1 Aug 2010 30-Jun-2010 Status Tendering Tendering Tendering Tendering Tendering Tendering Tendering Planned Planned Planned Planned Planned Planned

23-Dec-2009

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

And in Asia Pacific, the list of upcoming offshore projects is expected to provide a healthy flow of contracts for the EPC players. Contract wins will provide positive newsflow and earnings growth (positive margins) visibility, which are positive for valuations and share price of the listed EPC companies.

DnB NOR Markets - 43

26.05.2010

Sector report > Offshore Supply Figure 45: Upcoming offshore construction projects in Asia Pacific
Client Nippon Oil Petronas Carigali Shell Newfield Petronas Carigali Petronas Carigali Shell Newfield Newfield Nippon Oil Petronas Carigali Petronas Carigali Petronas Carigali Shell Eni Apache Chevron Chevron Chevron Chevron Chevron ExxonMobil ExxonMobil Santos JHN JHN ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC Chevron ExxonMobil Husky Oil Kodeco Chevron Hess Pearl Oil Total Total Total Chevron ExxonMobil Hess Husky Oil Kangean Energy Kodeco Kodeco Pearl Oil Pertamina Petronas Carigali Santos Total Total Total Contract type EPC EPC EPC Installation Installation Installation Installation Installation EPIC EPIC Installation Installation Installation EPIC EPC EPIC Installation Installation Installation Installation Installation EPIC EPIC Installation EPC EPC EPC EPC EPC EPC EPC Installation EPIC EPIC EPIC EPIC Installation EPIC EPIC EPIC EPIC EPC EPC EPC EPC Installation Installation Installation Installation Installation Support Installation EPIC Installation EPIC EPIC Installation EPIC Installation EPIC EPIC IRM Installation EPIC Support Country Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia China China India India India India India India India India India India India India India India India Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Workscope wellhead platform and pipeline CPP jacket Gumusut Phase II (400km pipeline) TNI of WHP and process plat CPP jacket TNI pipelay TNI and support w ork platform installations CPP fabrication; optional wellhead platform fabrication wellhead platform and pipeline pipelay CPP Topside TNI Pipeline and riser installation Gumusut Phase II (400km pipeline) Flowlines wellhead platform and flowline installations Tie-in of platforms, pipelines and manifolds Umbilical installation 60km deepwater pipeline segment Subsea foundations and manifold installations 200km shallow water pipeline segment Prod unit / Field Layang Kebabangan Gumusut-Kakap East Piatu Kebabangan Tangga Barat Cluster E11 Hub West Belumut Lerek Layang Tangga Barat Cluster Kebabangan Samarang Gumusut-Kakap Kitan Julimar/Brunello Area Gorgon Gorgon Gorgon Gorgon 15-Oct-2009 1-Apr-2011 1-Jan-2011 1-Jan-2011 1-Jan-2011 1-Jan-2011 1-Sep-2010 1-Dec-2009 1-Dec-2009 15-Jun-2011 30-Jun-2011 31-Mar-2011 28-Feb-2011 31-Mar-2011 28-Feb-2011 30-Jun-2010 31-Mar-2010 24 30 30 31 Nov 2011 Apr 2011 Apr 2012 Jan 2012 Exp start 1 Jan 2013 1 May 2010 1 Jan 2012 1 Jun 2011 1 Apr 2010 5 Apr 2010 1 Jun 2010 1-Jun-2010 Exp completion Status 1 Mar 2013 Tendering 1 Jun 2010 Tendering 1 Mar 2012 Tendering 31 Aug 2011 Tendering 1 Jun 2010 Tendering 15 Apr 2010 Tendering 1 Aug 2010 Tendering 30-Jun-2010 Planned Planned Planned Planned Planned Planned Planned Tendering Planned Planned Prequalification Tendering Planned Tendering Planned Planned Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering 1-Dec-2009 30-Apr-2011 30-Apr-2011 Tendering Tendering Tendering Planned Planned Tendering Tendering 30-Apr-2012 1-Nov-2009 1 May 2010 12 Apr 2010 1 Apr 2010 1 Oct 2010 1 Mar 2011 30 Apr 2010 1 Oct 2011 1 Oct 2011 15 Apr 2010 1-Nov-2009 30-Jun-2010 30 Jun 2010 31 May 2010 1 Jun 2010 31 Dec 2010 1 Jun 2011 30 Jun 2010 31 Mar 2012 31 Mar 2012 15 Jun 2010 31-Mar-2010 Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Prequalification Tendering Planned Tendering Tendering Planned Planned Planned Planned Prequalification Tendering Planned Tendering

29-Sep-2009

23-Dec-2009

Gorgon Wirrah Marlin B platform and pipelines Marlin-Turrum Pipeline installation Henry Topside Lufeng 13-2 Jacket Lufeng 13-2 Pipelay and plat modifications B-193 Cluster Process platform and two flare platforms B-193 Cluster EPCIC: 3 unmanned WHP + various segment D-1 11 pipelines spanning 75km Mumbai High North B-22 Cluster platform installations and pipela South Bassein Platforms ICP-R and ICP-F3 installation B-22 Cluster platform installations and pipelay Pipelay and platform modifications 5 wellhead platforms B-46 4 platforms and flowlines Mumbai High South South Bassein B-193 Cluster B-193 Cluster B-Cluster Mumbai High Mumbai High South Mumbai High North B-193 Cluster

30 Apr 2010 3 May 2010

30 Apr 2011

9-Oct-2009

10-Apr-2010

Mumbai High South Redevelopment six wellhead platforms and 140km of pipelines Process platform and two flare platforms

platform and flow line installations North Tapti SPM refurbishment Santan EPC-3: pipeline, cables and mooring tower coBanyu Urip EPIC Madura BD KE series (-39 and -54) KE-39 3 pipelay scope Sepinggan Retender for CPP and AUP Installations Ujung Pangkah 300km exportline installation Makassar Strait TNI of plat and subsea South Mahakam Installation of exportlines and flowlines South Mahakam Pre-commissioning, hook-up and tie-in South Mahakam TJ Jumlai crude pipeline refurbishment project Sepinggan pipeline, cables and mooring tower construction Banyu Urip Retender for CPP and AUP Installations EPIC FPU mooring, risers, manifolds and flowlines Poleng PPP module transportation and installation KE series (-39 and -54) 300km exportline installation EPIC (pipelines) 200km exportline Maleo/Oyong IRM Installation of exportlines and flowlines EPICC Pre-commissioning, hook-up and tie-in Transportation and installation of platforms and subsea elements Transportation and installation of Muda-D platform and flow line TNI of Muda-D plat and flowline EPCIC for 1 platform and 2 pipelines TNI (Compression platform) PNG LNG EPIC (200km Kopi-Port Moresby pipeline) 280km Elk-Napa Trunkline Drydocking TNI of 2 spur lines Bongkot 4A Inst (Living Quarters Platform) Installation of platforms and flowlines process and wellhead platforms Bongkot 4A Inst (Living Quarters Platform) Installation of pipelines & platform TNI wellhead platform and flowline Diving support at Chim Sao 3 wellhead platforms and 60km of pipelines Topaz wellhead platform and flowline up to 2 wellhead platforms and pipelines Ujung Pangkah Madura BD Terang/Sirasun/Batur Poleng KE-39 Makassar Strait (MS) Kepodang Oyong South Mahakam (SMK) Peciko South Mahakam (SMK)

1-Jun-2011

31-Jul-2011

1-Apr-2010

1-Nov-2011

Total

Installation

Indonesia

South Mahakam (SMK)

1-Apr-2010

1-Nov-2011

Tendering

CPOC CPOC

Installation Installation

Joint Develop Joint Develop Myanmar Myanmar PNG PNG Singapore Thailand Thailand Thailand Thailand Thailand Vietnam Vietnam Vietnam Vietnam Vietnam Vietnam

MTJDA-B17 MTJDA-B17 Shwe/Mya Yetagun

1-Jan-2010 31 Jul 2010 1-Dec-2009 1-Jul-2011 1-Jan-2010 25-Apr-2009 1 Oct 2010 1 Jun 2011

31-Jan-2010 30 Nov 2010 31-Mar-2013 31-Aug-2011 1-Jun-2010 31-Jul-2009 31 Mar 2012 31 Jul 2011

Tendering Tendering Tendering Planned Prequalification Planned Planned Tendering Tendering Planned

Daewoo EPIC Petronas Carigali EPIC ExxonMobil Interoil HHI PTT PTTEP NuCoastal NuCoastal PTTEP Cuu Long JOC Petronas Carigali Premier Hoang Long JOC EPIC EPIC IRM Installation Installation Installation EPIC Installation Installation Installation Support Installation

Platong Bongkot Songkhla Bua Ban Bongkot Su Tu Trang Ruby Dua/Chim Sao Te Giac Trang Ruby

1-Jan-2010 1-Jun-2011 5 Apr 2010 1 Jul 2010 1 May 2010

31-Mar-2010 31-Jul-2011 30 Apr 2010 31 Jul 2010 20 Jun 2010

Planned Tendering Tendering Tendering Tendering Tendering

Petronas Carigali Installation Thang Long JOC EPIC

1-Jul-2010

31-Jul-2010 31-Dec-2010

Tendering Planned

Hai Su Trang/Hai Su Den 1-Apr-2010

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

Leveraging of foreign partners for overseas growth Due to the implied local content requirements, foreign companies who wish to join in the local market (Malaysia) are likely to tie-up with local players (such as Alam with Swiber, Acergy with SapuraCrest). We believe this is beneficial for the Malaysian players as they can tie-up with foreign partners in return, targeting at overseas markets which require similar arrangements.

DnB NOR Markets - 44

26.05.2010

Sector report > Offshore Supply

Kencana is currently partnering Thailand-based Mermaid Maritime for the tender drilling project with Petronas, utilizing the tender rig KM-1. Marine engineering activities segment This segment provides EPCC services, through Kencana's fabrication yard, in engineering and design, fabrication of production facilities (platforms, jackets, wellheads), modules & process skid systems (subsea manifolds), installation, and hook-up & commissioning. It also covers the areas of conversion, repair and newbuilding projects such as tender drilling rigs. Figure 46: Yard capability
Kencana Fabrication yard Key strengths Location Total Yard Space Covered fabrication Area Open Space Fabrication Area Open Storage Area Total Office Space Quay Water Depth Bulkhead Jetty Length Load out jetty Capacity Yearly Capacity Workshop 1 2 3 4 5 6 7 Workshop Yard capability and details 24/7 covered workshops providing specialised steel fabric ation and infrastructure Malaysia - Lumut 543,000 m2 (135 ac res) 75,000 m2 390,000 m2 60,000 m2 11,300 m2 LAT -6 m to -9.3 m 490 m 20,000 metric ton, 5,000 metric ton & 1,500 metric ton 48,000 metric ton Dimension 25.5m(W) x 150m(L) x 12m(H) 32m(W) x 150m(L) x 15m(H) 32m(W) x 150m(L) x 15m(H) 40m(W) x 145m(L) x 30m(H) 37m(W) x 139m(L) x 15m(H) 24.4m(W) x 137m(L) x 17m(H) 15.2m(W) x 137m(L) x 9m(H) Area (m2) 3,825 m2 4,800 m2 4,800 m2 5,800 m2 5,200 m2 3,342 m2 2,082 m2 Overhead Crane Capacity 2 x 5T 2 x 25T & 1 x 5T 2 x 25T & 1x 10T 2 x 50T & 1 x 10T 2 x 25T 3 x 10T & 2 x 5T 3 x 10T & 2 x 5T

Major Equipement & Facilities 1 Covered warehouse and Cold room T&C and HUC Department Office space Calibration Lab Facilities 2 Carbon steel and stainless steel piping fabric ation shop fully equipped with TIG / SMAW welding machines 3 Structure / tubular fabrication / assembly shop fully equipped with: 1. 2. 3. 4. CNC Cutting Machine 3-pinc h Bending Roll Mac hine up to 100mm thic k Flame Planner Cutting Machine TIG / MIG / SAW / SMAW Welding Machine

4 Heavy struc tures fabrication / assembly shop, fully equipped with TIG, MIG, SAW, FCAW, SMAW welding machines 5 DSS, SS, Piping fabrication shop, fully equipped with TIG, Orbital and SMAW welding machines 6 DSS, SS, Piping fabrication shop, fully equipped with TIG, Orbital and SMAW welding machines 7 DSS, SS, Piping fabrication shop, fully equipped with TIG, Orbital and SMAW welding machines

Source: DnB NOR Markets

Figure 47: Orders secured over the past three years

Date 2006 Contract type EPCIC Details/ Scope/ Quantity EPCIC on Carigali Hess greenfield project, in Bumi, Bulan and Suriya Gas Field Development Procurement, Construction and Commissioning of a Petroleum Hub and Bunkering Fac ility at the Rec laimed Island within Mukim Serkat Daerah Pontian near the port of Tanjung Pelepas Fabrication and related services for 4x Wellhead Platforms c omprising decks, jackets, piles and conductors. Engineering, procurement, c onstruction and commissioning of offshore platform, substructures and fac ilities for J4 oilfield located offshore Bintulu Completion and loading out 18x topside proc ess modules for Prosafes Azurite FDPSO Reliance KG-D6 subsea manifolds project - subsea fabrication work Tender assisted drilling rig KM-1 Engineering, procurement, and fabric ation of 7x subsea manifolds and respective foundations Fabrication of various offshore production facilities and mechanical pipe installation works for the Bintulu onshore terminal Conversion and outfit work for lay-barge Conversion of a flat-top barge to pipelay barge Engineering works and the supply of a fuel gas conditioning skid system Management, balance engineering, proc urement, construction and testing works for the Crude Stabilisation Unit and PipeRacks for the FPSO Supply of materials, fabrication, testing, assembly and fac tory acceptance tests of several subsea equipments for a deepwater development project offshore Malaysia 2x topsides of offshore platforms, procurement, fabrication, testing, load-out and sea-fastening of the two offshore structures. Country for work Malaysia Thailand JDA Value (MYRm) 980 Client Hess Petronas Delivery -

Apr-07 Apr-07

PCC Fabrication

Malaysia Indonesia

240 80

Asia Petroleum PT Sempec (Punj Llyod)

Q12008

May-07 Oct-07 2007 Oct-07 Dec-07

EPCIC Construction Fabrication Newbuild fabrication EP and fabric ation

Malaysia

132 51

Petronas Prosafe Reliance Mermaid Kencana Cameron

1H2008 Sep-08

India Malaysia - Lumut yard Western Australia

457 24

Feb-10 Q12009

May-08 Jun-08 Jun-08 Aug-08

Fabrication & installation Conversion Conversion Engineering

Malaysia

190 32.2 27 9.7

Murphy Sarawak Mc Connell Bovis MCB Partnership OTEC Kemajuan

2008-2009 Dec -08 Q4FY2008 Jan-09

Malaysia

Sep-08

EPC

Malaysia

13.25

Malaysian FPSO Owner/Operator

Oct-08

Testing

Malaysia

10

International c ompany

Sep-09

Oct-08 Oct-08 Oct-08 May-09 Jun-09 Jul-09 Aug-09 Aug-09 Sep-09 Sep-09

Fabrication Fabrication Drilling

2x offshore platforms + 1x gas compression module 5+5-year drilling contract Engineering, procurement and fabric ation of production EP and fabric ation platform topsides facilities EPC of deck extension for existing D-35 platform, a new EPC wellhead platform and a pipeline end manifold Fabrication Fabricate parts for a pipe-lay barge Fabrication and proc urement of a jacket and topside for the Fabrication & procurement West Belumut wellhead platform Construction Construction of jackets for an offshore process platform Construction Construction of a manufac turing plant 3-year contract to provide offshore construction services for Service production platforms offshore

Malaysia - Sarawak Malaysia - Sarawak and Terengganu Malaysia Malaysia - Sarawak Malaysia - Sarawak

260 288 827.2 64 35 42 46 50.5 134.5 90

Shell Sarawak PCSB PCSB Murphy Sarawak PCPP Global Offshore Newfield Malaysia Afcons Gunanusa Sunpower Malaysia Oil c ompany

Sep-09 Q42009 2010-2014 Q12010

Q2 2011 Q1 2010 Q3 2010 2010 2012

Malaysia India Malaysia Malaysia

Source: Company, DnB NOR Markets

DnB NOR Markets - 45

26.05.2010

Sector report > Offshore Supply Offshore drilling and Marine support services Kencana Petroleum Ventures Kencana Petroleum Ventures (KPV) was established as a subsidiary of Kencana Petroleum Berhad on the 5th September 2007. KPV provides offshore drilling services and operates Offshore Support Vessels through its subsidiaries to cater to the needs and requirements of the players in the oil and gas industry worldwide. To date, KPV has invested in several marine assets that include Tender Assisted Drilling Rig and Anchor Handling Tug Supply vessels. Figure 48: Drilling and Marine support structure
KENCANA PETROLEUM VENTURES

KENCANA NAUTILUS

KENCANA MERMAID DRILLING

MERMAID KENCANA RIG 1

Teras-Kencana Ventures

Gemia Pte Ltd (Labuan)

Providing drilling services

Leasing, charter and rental of OSVs (mainly bareboat)

Source: Company

KM-1

Kencana Mermaid Drilling The company marks its entry into offshore drilling rigs and drilling related services when it expects to take delivery (revised) of its first tender assisted drilling rig KM-1 in mid-Aug 2010 (Q1 FY2011). The contract cost of the rig is USDm 136, ordered in 2008. The rig was originally scheduled for delivery in 2009 but was delayed to due initial learning cycle, common in the industry. KM-1 comprises of a self-erecting tender rig and a derrick equipment set and was fabricated and built at the Kencana Fabrication Yard. There are two separate entities behind the ownership structure of KM1 and the drilling contract to be performed by the rig. The rig is owned by Mermaid Kencana Rig 1 (MKR1), which is 25% owned by Kencana and 75% by Mermaid Drilling. Kencana Mermaid Drilling (KMD), 60% owned by Kencana and 40% owned by Mermaid Drilling, is the entity which has secured the drilling contract from PCSB valued at USDm 235 (MYRm 827) in Oct 2008. KMD is responsible for operating and utilizing KM-1 for this contract. Figure 49: Shareholding arrangement of KM-1
Kencana
25% Mermaid Drilling 75%

Kencana
60%

Mermaid Drilling 40%

Mermaid Kencana Rig 1 (MKR1)

Kencana Mermaid Drilling (KMD)

Owns Operates

Secures

KM-1 tender rig

MY Rm 827 drilling contract

Source: Company, DnB NOR Markets

Initially, there was an option to build another sister rig KM-2, but the project has since been put on hold.

DnB NOR Markets - 46

26.05.2010

Sector report > Offshore Supply Kencana Nautilus - Offshore support vessels This company (KNSB), a subsidiary of KPV, is serving as an OSV services provider in Malaysia. KNSB undertakes its first project which is an operational work in Malaysia Thailand Joint Development Area (MTJDA) for an established end user, Carigali-PTTEPI Operating Company (CPOC). Figure 50: Current operating fleet and our NAV valuation
No 1 2 3 Vessel KM-1 KPV Kapas KPV Gemia Type Tender drilling rig AHTS AHTS Size 800 ft 5220 bhp 8080 bhp Built 2010 2010 2010 Ownership 25% 100% 100% FMV (USDm) 100 12 25 NAV (USDm) 25 12 25 USD/MYR NAV ex (MYRm) Contract 3.3 83 Malaysia 3.3 40 Malaysia 3.3 83 Malaysia Client Petronas Spot PTSC Region Malaysia Malaysia Vietnam

KPV Kapas

Source: DnB NOR Markets, Company

Earnings estimates Marine engineering and EPCIC services are classified as one reporting unit. Historically, Kencana did not provide breakdown in segment reporting as the EPCIC and marine engineering operations are mainly based in Malaysia and MTJDA. The company considers these geographical areas to be significantly similar and therefore deemed them as a single geographical segment. The financial year-end for Kencana is in July. We expect contributions from new segments Offshore drilling in beginning FY2011 and Marine support services in the 2H of this FY2010. Figure 51: Segment breakdown estimates (in MYRm)
Drilling rig operations Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Share of profits from MKR-1 Marine engineering activities Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2007 0 0 na 0 na na 2007 824 87 11% 81 10% 2008 0 0 na 0 na na 2008 1452 136 9% 123 8% 2009 0 0 na 0 na na 2009 1141 177 16% 159 14% 2010E 0 0 na 0 na 0 2010E 1155 196 17% 178 15% 2011E 147 11 7% 11 7% 8 2011E 1411 226 16% 207 15% 2012E 147 11 7% 11 7% 8 2012E 1328 199 15% 180 14%

Offshore marine support Operating Revenues EBITDA EBITDA margin EBIT EBIT margin

2007 0 0 0 -

2008 0 0 0 -

2009 0 0 0 -

2010E 7 3 43% 2 32%

2011E 22 10 46% 9 39%

2012E 22 10 46% 9 39%

Group Operating Revenues EBITDA EBITDA margin EBIT EBIT margin

2007 824 87 11% 81 10%

2008 1452 136 9% 123 8%

2009 1141 177 16% 159 14%

2010E 1162 199 17% 180 15%

2011E 1581 247 16% 226 14%

2012E 1497 220 15% 199 13%

Source: DnB NOR Markets

Marine engineering segment estimates - driven by new orders The company currently has a solid EPC order book of MYRm 1,128 (excluding MYRm 827 worth of KM-1 drilling backlog). According to the management, Kencana is looking to maintain a minimum base fabrication order backlog of MYRbn 1, through new contracts, at any one time. Competition space within Malaysia EPCIC market is limited. We expect current order backlog to provide revenue visibility through to FY2011.

DnB NOR Markets - 47

26.05.2010

Sector report > Offshore Supply Figure 52: Current EPC order book as of Q2 FY2010 (and new orders) at MYRm 1,128
Project Completion Recognised up Total to Jan 2010 contract value (MYRm) (MYRm) Balance in orderbook (MYRm) Completion % as of % of total Q2FY10 orderbook

Kencana HL SDN BHD MKR-1 -Tender Rig Cameron -BHP Pyrennes FMC -Subsea Equipment SSB -Offshore Drilling Platform Topside including provisional items

Feb-10 Mar-09 Nov-09

466.2 29 10.2

392.9 27.4 7.8 44.5 170.8 27.3 22.9 0.1 7.6 11.1 2.2 2.6 0 0 0

73.3 1.6 2.4 146.1 190.5 33.6 14.1 57.7 33 10.5 48.3 9.4 166 91.9 46.2

84% 94% 76% 23% 47% 45% 62% 0% 19% 51% 4% 22% 0% 0% 0%

6% 0% 0% 13% 17% 3% 1% 5% 3% 1% 4% 1% 15% 8% 4%

April 2010/ Dec 2010 190.6 361.3 60.9 37 57.8 40.6 21.6 50.5 12 166 91.9 46.2

PCSB -Offshore Platform Component & Gas Compression Module (Base) including provisional items Aug 2009 /Jun 2010 Mar-10 Murphy -Fabrication of SEPA Topside PCPPFabrication of D-30 Offshore Platform Mar-10 PCPPFabrication of D-30 Offshore Platform installation Mar-10 Global Offshore International -Fabrication of Components for Pipe-Lay Barge Apr-10 Newfield -Offshore Platform Mar-10 Afcons-GunanusaJVConstruction of jackets for offshore process platform Aug-10 Apr-10 FMC Manifold Support Structure Fabrication of Gorgon's LNG jetty and marine structures from Saipem Sep-12 Dec-10 Installation of subsea pipeline in Labuan Jackets contract from India's L&T Mar-11 Kencana Bestwide SDN BHD Various Process Skid Systems Kencana Torsco SDN BHD TKM SunpowerFactory TKM TorscoJV SunpowerSuperstructure P5020

10.5

10.5

0%

1%

Feb-10

29 32.4 96.5 2.3 0.3 0.6

23 20.3 32.2 0.4 0.1 0.4

6 12.1 64.3 1.9 0.2 0.2

79% 63% 33% 17% 33% 67%

1% 1% 6% 0% 0% 0%

TKM TorscoJV SunpowerSuperstructure P5020 (80%) Jun-10 GerbangPerdanaMedium termlink JB MitsubishiPressure Oil Tanks Sri Lanka Oct-10 Boustead steam drums Mar-10 Kencana Pinewell SDN BHD PCSB Umbrella Contract(Associates Host Tie-in for PL347 Pipeline Replacement) Local PLC -Provision of Offshore Construction Services (BrownfieldServices) CPOC JKA, MDA, MDB & LQ Carry Over Works PCSB J4 Additional Flow Lines MLQD DamageRepair W orks Total

Dec-09 Sep-12 Jan-10 Sep-12 Oct-09

31.4 90 38.6 2 18 1993

31 0 22.1 1 17.6 865

0.4 90 16.5 1 0.4 1128

99% 0% 57% 50% 98%

0% 8% 1% 0% 0% 100%

Source: Company

For our new EPCIC order assumptions, we are modeling new orders of MYRm 400 in Q3-4 FY2010 (July-end), MYRm 1,350 in FY2011 and MYRm 1,400 in FY2012. Our new orders expectations are based on the potential hit rate of 10-20% for the upcoming onshore and offshore tenders in Malaysia and Asia, and management's guidance that they are looking to maintain their order book at MYRbn 1 at any one point of time. Figure 53: Segment estimates (in MYRm)
Marine engineering activities Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2007 824 87 11% 81 10% 2008 1452 136 9% 123 8% 2009 1141 177 16% 159 14% 2010E 1155 196 17% 178 15% 2011E 1411 226 16% 207 15% 2012E 1328 199 15% 180 14%

Source: DnB NOR Markets

We are modeling EBITDA margins of 16% for 2HFY2010-2012. We expect margins to continue at such levels on existing current order backlog. Our assumptions are also supported by Q1 and Q2 FY2010, which posted 17% and 19% EBITDA margins respectively. The 3-year (2007-2009) average EBITDA margins were 12%.

DnB NOR Markets - 48

26.05.2010

Sector report > Offshore Supply

Figure 54: New EPCIC orders assumptions

1000 900 800 700 MYRm 600 500 400 300 200 100 0 2010 4Q/06 Q1/07 2Q/07 Q3/07 Q4/07 Q1/08 2Q/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10E Q4/10E 2011
2010 903 1162 0 0 1162 400 2011 967 1581 147 147 1286 1350

New orders flow assumed/ sec ured (historical)

In MYRm Historical/current orderbook at period end (MYRm) Reported revenues at end of period Revenues of OSV Revenues of drilling Reported revenues (excluding drilling and OSV) New orders flow assumed/ secured (historical) New EPCIC order assumptions

New EPCIC order assumptions

2012 1164 1497 147 147 1203 1400

4Q/06 Q1/07 2Q/07 Q3/07 Q4/07 Q1/08 2Q/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10E Q4/10E 450 1360 1447 1836 1802 1860 1496 1584 1503 1771 1494 1207 1086 1126 824 550 903 0 72 205 229 318 495 351 298 308 318 274 290 258 281 250 276 357 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 72 205 229 318 495 351 298 308 318 274 290 258 281 250 274 352 982 293 618 284 552 -12 386 227 586 -3 3 137 321 0 0 304 na na na na na na na na na na na na na 0 0 0 400

Source: DnB NOR Markets, Company,** Assumed historical new orders include EPCIC contracts only (no drilling contracts), derived using Ending order book reported + Revenues reported - Beginning order book reported

Drilling segment backed by term contract At present, there is only one drilling rig operating in this segment tender rig KM-1. We are modeling our estimates based on the announced contract terms of MYRm 827 for firm five years (with an option for additional 3+2 years), giving us an approx dayrate of 430' MYR/day (125' USD/day). We expect to see meaningful contributions from Q1FY2011 as the rig is only expected to be delivered in mid-Aug 2010. Figure 55: Dayrates and opex estimates
Vessel Type Tender rig KM-1 (drilling c ontra Tender rig Bareboat charter of KM-1 Contract type Term 2009 na na Dayrates (MYR'000) 2010E 2011E na 431 na 129 2012E 431 129 2009 na 0 Opex (MYR'000) 2010E 2011E na 380 0 0 2012E 380 0

Source: DnB NOR Markets

Figure 56: Segment estimates (in MYRm)

Drilling rig operations Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Share of profits from MKR-1 2007 0 0 na 0 na na 2008 0 0 na 0 na na 2009 0 0 na 0 na na 2010E 0 0 na 0 na 0 2011E 147 11 7% 11 7% 8 2012E 147 11 7% 11 7% 8

Source: DnB NOR Markets

As mentioned earlier, there are two structures (MKR 1 and KMD) to this deal. Kencana would be recognizing the MYRm 827 as topline revenues, given the drilling contract is owned by KMD (60% owned by Kencana). However, in order to fulfill the drilling requirements, KMD is chartering in the tender rig KM-1 from MKR-1 (owned 25% by Kencana). Therefore, we are modeling high opex for this contract as most of the costs are associated with the bareboat charter of KM-1. We expect the main profits of the contract to be booked at the MKR-1 level through the bareboat rate, which would be equity accounted in Kencana. DnB NOR Markets - 49

26.05.2010

Sector report > Offshore Supply Offshore marine support services segment new operations The offshore marine segment is a new segment which Kencana is keen to grow through fleet expansions. There are currently two OSVs in the fleet which is on term charters arrangements. Figure 57: Segment estimates (in MYRm)
Offshore marine support Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2007 0 0 0 2008 0 0 0 2009 0 0 0 2010E 7 3 43% 2 32% 2011E 22 10 46% 9 39% 2012E 22 10 46% 9 39%

Source: DnB NOR Markets

Figure 58: Key rates assumptions for the AHTS fleet

Vessel KPV Kapas KPV Gemia Type AHTS AHTS Contract type Term Term Average dayrates (MYR'000) 2009 2010E 2011E 2012E na 26 26 26 na 46 46 46 2009 na na Opex (MYR'000) 2010E 2011E 13 13 20 20 2012E 13 20

Source: DnB NOR Markets

Q3 FY2010 earnings preview Kencana will report Q3 FY2010 earnings in late June, the exact date is not confirmed. We expect margins to be strong in this quarter on the assumptions that productivity and project efficiency will see improvements as Kencana is executing on existing order backlog. We expect to see some degree of volatility in revenues as they are driven by % completion schedule which some projects are seasonal in nature. Figure 59: Q3 FY2010 preview table
MYRm Q3/09 Q3/10E Q3/10E Chg y/y Cons* na na na na na na na -14.3 4.0 3.5 -0.5 3.0 1.8 0.0 -5% 10% 9% n.m 8% 6% -42% % Chg Full-year figures (DnB NOR) 2010E 1,162 199 181 -7 174 133 0.08 2011E 1,581 247 227 -6 229 174 0.10 2012E 1,497 220 201 -5 204 154 0.09 Reported DnB NOR Operating revenues EBITDA EBIT Net finance Pretax earnings Net result EPS 290.2 40.5 36.4 -1.3 35.1 27.6 0.03 275.9 44.5 39.9 -1.8 38.0 29.4 0.02

Source: DnB NOR Markets, consensus from Bloomberg

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Sector report > Offshore Supply Debt Profile & Capex Plans Below is an overview of Kencanas debt and capex schedule. The capex in 2010 and 2011 are modeled after the newbuild commitments announced by the company (mainly the KM-1 rig and two offshore supply vessels). Figure 60: NIBD forecast
In MYRm NIBD beginning CAPEX Investments EBITDA - net finance - tax paid Working capital changes Equity issue NIBD end 2008 2009 -109 -54.4 -26 226 -213 0 -41 2010E -41 -170 0 142 -27 182 -168 2011E -168 -50 0 103 67 0 -289 2012E -289 -19 0 169 0 0 -438

-109

Source: DnB NOR Markets

Figure 61: Debt forecast

In MYRm Long-term debt Short-term debt (due) Drawing/ (repayment) of long-term debt Drawing/ (repayment) of short-term debt EBITDA Cash balance Net debt Net gearing - Net debt/Equity Interest coverage (x) 2008 60 91 136 260 -109 -35% 19.5 2009 156 57 0 0 177 254 -41 -10% 17.3 2010E 156 57 0 0 199 381 -168 -23% 19.0 2011E 156 57 0 0 247 502 -289 -33% 23.6 2012E 156 57 0 0 220 651 -438 -42% 21.2

Source: DnB NOR Markets

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Sector report > Offshore Supply

KENCANA PETROLEUM (KENP.KL)

PROFIT & LOSS MYRm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 824 0 -737 87 6 81 0 -4 0 78 21 0 57 2008 1,452 0 -1,316 136 13 123 0 -2 0 121 36 0 85 2009 1,141 0 -964 177 18 159 0 -6 0 153 35 0 118 2010e 1,162 0 -964 199 18 181 0 -7 0 174 41 0 133 2011e 1,581 0 -1,334 247 19 227 8 -6 0 229 52 3 174 2012e 1,497 0 -1,277 220 19 201 8 -5 0 204 46 3 154

BALANCE SHEET MYRm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

24 181 1 212 164 582 220 93 270 583 -70

36 273 28 273 260 870 311 151 408 871 -109

36 309 56 288 254 944 429 213 303 945 -41

36 461 56 294 381 1,228 726 213 281 1,219 -168

36 492 56 399 502 1,485 891 213 373 1,476 -289

36 492 56 378 651 1,614 1,042 213 354 1,609 -438

CASH FLOW MYRm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

63 43 -213 93 0 -14

98 70 -144 58 0 82

226 -213 -82 62 0 -7

151 -27 -170 0 173 127

115 67 -50 0 -12 121

180 0 -19 0 -11 150

Share price and target Price MYR Price target 12m MYR Recommendation Key data per share Book value MYR P/Book X EPS gr09-12e %cagr %cagr Sales gr09-12e X PE10e/EPS gr Financial structure MYRm Market cap. Net int. bear debt MYRm Enterprise value MYRm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m MYR KLSE index 30days volatility % Company attributes Reuters ticker

1.33 1.60 BUY 0.35 3.83 -10.8% 9.5% -1.5 2,205 -109 2,096 1,657.6 59.1 -16/-8/16 -16/-8/16 2/1 212.9 35 KENP.KL

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed EV/Sales

MYR MYR MYR MYR million MYR X X % X X X X X

2007 0.06 0.06 0.00 0.2 896.8 1.85 29.0 29.0 0.0 7.5 18.2 19.6 5.1 1.9

2008 0.09 0.09 0.10 0.3 896.8 1.22 12.9 12.9 8.2 3.5 7.0 7.8 2.1 0.7

2009 0.13 0.13 0.10 0.5 902.2 1.16 8.9 8.9 8.6 2.4 5.4 6.0 1.5 0.9

2010e 0.08 0.08 0.01 0.4 1657.6 1.33 16.6 16.6 0.4 3.0 10.0 10.9 2.1 1.8

2011e 0.10 0.10 0.01 0.5 1657.6 1.33 12.7 12.7 0.5 2.5 7.5 8.2 1.7 1.2

2012e 0.09 0.09 0.01 0.6 1657.6 1.33 14.3 14.3 0.5 2.1 7.8 8.5 1.4 1.2

Reporting Q3 2010

Management Dato Mokhzani bin Mahathir CEO CFO Address Kencana Petroleum 50-2-2, Level 2, Wisma UOA Damansara 50, Jalan Dungun, Damansara Heights H.p.: www.knpe.com.my Tel +(6) 03-2093 2280

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Sector report > Offshore Supply

Rebased price (12m, MYR) 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Kencana Petroleum

Rebased consensus average forward EPS (12m, MYR) 130 125 120 115 110 105 100 95 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Kencana Petroleum

Revenue (MYRm) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2006 2007 2008

Revenue Growth 100% 80% 60% 40% 20% 0% -20% 2009 2010e 2011e 2012e Revenue Growth -40%

EPS (MYR) 0.140 0.120 0.100 0.080 0.060 0.040 0.020 0.000 2006 2007 2008 2009

DPS (MYR) 0.12 0.10 0.08 0.06 0.04 0.02 2010e 2011e 2012e DPS (MYR) 0.00

Revenue (MYRm)

EPS (MYR)

EBITDA (MYRm) 300 250 200 150 100 50 0 2006 2007 2008 2009

EBITDA margin 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 2010e 2011e 2012e EBITDA margin 0.0%

FCF (MYRm) 200 150 100 50 0 -50 -100 -150 2006 2007 2008 2009

Dividend yield 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

2010e 2011e 2012e Dividend yield

EBITDA (MYRm)

FCF (MYRm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

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Sector report > Offshore Supply

SapuraCrest Petroleum
Bet on Malaysia's oil service market
The SapuraCrest's involvement in the oil and gas industry span across areas of offshore drilling, installation of pipelines and facilities, marine services, offshore and near-shore marine engineering, the design, manufacture and operation of remote-operated vehicles as well as maintenance activities for the oil and gas, marine and power utility industries. SapuraCrest is currently one of the largest integrated oil and gas services provider in Malaysia. Backed by established track records, SapuraCrest is one of the preferred integrated service provider in the industry. We like SapuraCrest for its leadership position in the Malaysia's oil service industry, particularly in the IPF, offshore drilling and development and offshore support services. Based on our understanding, the company is currently bidding for MYRbn 6 worth of projects in Malaysia, Australia and India. Soft factors, such as the strong working relationships forged with Malaysia's NOC Petronas (evident in their project wins at MYRbn 5 from Petronas over the past three years), are something we value highly in this relatively protected local Malaysia market. The company has a solid order book of close to MYRbn 11 (USDbn 3) in IPF projects. Historical order backlog has remained fairly consistent, hovering around MYRbn 3-5. Business divisions Installation of Pipelines & Facilities (IPF) services Transportation and installation of offshore pipelines and facilities through TL Offshore and Sarku Marine. Drilling services 51:49 JV with Seadrill, managing and operating a fleet (5x) of self erecting tender drilling rigs in production, drilling, workover & associated services. Marine services Providing offshore support services such as geophysical surveys, construction support, topside maintenance in hookup commissioning, platform repairs and maintenance services, ROV inspection & intervention, diving support, and accommodation services. Operations & Maintenance Providing onshore support services such as wellhead maintenance, and total management system for Petronas' petrol stations and convenient stores in Malaysia. Assets 5x tender drilling rigs, 1x DP2 heavylift pipelay construction vessel (with Acergy), 1x DP2 heavylift pipelay construction vessel (with L&T), 1x multi-purpose accommodation work vessel, 4x accommodation work barges (1x is bareboat charter from Jaya), 1x newbuild derrick lay barge (with Quippo), 3x diving support vessels, 12x ROVs, 4x survery vessels. Recent development Q4FY2010 results. Expected news-flow Possible new IPF contracts from the upcoming tenders in Malaysia (Petronas) and other Asian regions. Q1FY2011 (Financial year-end Jan) results in early June. Valuation NAV valuation - MYR/sh 2.56, DCF valuation MYR/sh 2.59. 2011 P/E of 10x and 2011 EV/EBITDA of 4x. We initiate SapuraCrest with a BUY, tp of MYR/sh 2.60. We see share price trigger from potential new EPCIC orders (IPF related), improvement in offshore oil and gas drilling development activities in Malaysia and Asia, providing the driver for earnings growth.

DnB NOR Markets - 54

26.05.2010

Sector report > Offshore Supply Valuation summary We have adopted net asset value (NAV) and discounted cash flow (DCF) valuation frameworks to value SapuraCrest. Between the two, we prefer to base our valuation on NAV as we argue the company is asset heavy. The operations of providing offshore pipeline and facilities installations (heavylift construction vessels), offshore development drilling (tender rigs/barges), and marine support (OSVs) require offshore units and vessels which are capital intensive. Below is the fleet summary of SapuraCrest, with some vessels being coowned with partners such as Acergy, Seadrill and L&T. Based on NAV valuation, we have arrived at a NAV of MYR/sh 2.56. NAV of the vessels are derived from a number of factors: 1) Second-hand market values of comparable vessels to SapuraCrest (discounted to present values if vessels are delivered in forward years), from independent shipbrokers, and recent transacted prices; 2) Floor values of vessels if they are backed by term-charters; 3) In-house research; and 4) % mark-up from the cost of building the vessels from regional yards. And on a DCF valuation approach (key drivers - new EPC - IPF order assumptions and offshore drilling and marine contract rates), our model indicates a value of MYR/sh 2.59. We initiate SapuraCrest with a BUY, tp of SGD/sh 2.60 and argue that SapauraCrest deserves to be priced above NAV for its leading market position in the protected Malaysia market. We see upside catalyst from potential new order flow in Malaysia and Asia, providing the earnings driver for growth. Key risks to our valuation Key risks include lack of order flow in the EPC (pipeline and facilities) market, project execution risks, rising raw material costs negatively impacting margins, lower than expected contract rates for the drilling rigs, slowdown in activities in marine services and weaker oil prices (USD 5060/bbl region).

Figure 62: NAV valuation MYR/sh 2.56

Vessel T-3 T-6 T-9 T-10 Teknik Berkat Sarku Sambang Sarku Semantan Sarku Clementine Teknik Samudra Teknik Kembara Teknik Putra Teknik Perdana Nomad ROV (9x units) Navigator ROV (2x units) Seaeye ROV (1x unit) Sarku 2000 Sarku Samduera Sarku Utama Sarku Santubong Sapura 3000 (with Ac ergy) LTS 3000 (with L&T) Quippo 2000 Type Self-erecting drilling tender barge Self-erecting drilling tender rig Self-erecting drilling tender rig Self-erecting drilling tender rig Self-erecting drilling tender barge Diving support vessel Diving support vessel Diving support vessel Survey vessel Survey vessel Survey vessel Survey vessel ROV ROV ROV Acc ommodation work barge Acc ommodation work barge Acc ommodation work barge Multi-purpose ac comm work vessel DP 3000 heavylift pipelaying vessel Heavylift pipelay vessel Derrick lay barge Purpose Development drilling, accomm, heavylift Development drilling, accomm, heavylift Development drilling, accomm, heavylift Development drilling, mooring sys TLPs and SPARs Development drilling, accomm, heavylift 46-men Acc omm, diving & construc tion support 70-men Acc omm, diving & construc tion support 64-men Acc omm, diving & construc tion support Geotechnic al Geophysical and general survey Geophysical and general survey 2D seismic , geophysical Remotely-operated vehic le, mobile Remotely-operated vehic le, mobile Remotely-operated vehic le, mobile 270-men Ac comm & construc tion support 210-men Ac comm & construc tion support 150-men Ac comm & construc tion support 123-men DP2 MP ac comm & construction support 330-men, DP2 heavylift pipelaying 3000T 290-men, DP1 heavylift J-lay pipelaying 3000T 302-men, heavylift pipelay barge 2000T Year built/ refurbished 1980/2001 1982/2000 2004 2007 1990/2005 1975/2000 1974 1997 1984/1989 1979/1993 1980s/1995 1979/1995 1991 1983 1981 1979 2008 2010 2011 Status Term Term Term Term Term Marine Marine Marine Marine Marine Marine Marine Marine Marine Marine EPC EPC EPC EPC EPC EPC EPC Owner Depth/size FMV ship (m) (USDm) 51% 122 49 51% 122 73 51% 122 118 51% 2000 77 51% 152 106 100% 45x15 28 100% 56x14 25 100% 75x18 32 100% 64x10 (3100 HP) 24 100% 53x12 (1090bhp) 20 100% 54x11 (650bhp) 25 100% 79x13 (650bhp) 25 94% 1500 90 94% 600 14 94% 400 5 100% 92x31 50 100% 103x85 38 100% 73x21 33 100% 75x17 30 50% 151x38 250 40% 161x38 150 26% 120x40 120 X rate (USD/M YR) 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 FMV/ vessel (MYRm) 160 240 388 253 349 92 83 106 79 66 83 83 297 46 17 165 125 109 99 825 495 396 Total net value (MYRm) 82 123 198 129 178 92 83 106 79 66 83 83 279 43 16 165 125 109 99 413 198 103

Total fleet value Operations & Maintenance business, 8x 2011E EBITDA Total asset values NIBD (2010E) + future capex Equity value (MYRm) No of shares outstanding NAV per share

2850 100 2950 -312 3,263 1277 2.56

Source: DnB NOR Markets

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26.05.2010

Sector report > Offshore Supply Figure 63: DCF Valuation MYR/sh 2.59
Discounted value of free cashflow + Value free cashflow FY2011-2035 (MYRm) + Value free cashflow 2035+ (MYRm) Total value free cashflow (MYRm) - Net debt 2011 + future capex (MYRm) + NAV of Sapura 3000 (50% owned) + NAV of LTS 3000 (40% owned) + NAV of Quippo 2000 (24% owned) - NAV of all tender rigs (49% owned by Seadrill) Net value free cashflow (MYRm) FCFE per share (MYR) 2,681 283 2,964 -312 413 198 103 682 3,308 2.59 Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % 782 167% -312 -67%

Risk premium Beta

5% 1

Terminal Growth Assumptions Nominal growth year 2035+ Factor Source: DnB NOR Markets Estimates

2% 11

Risk free rate Interest rate Tax-rate Net WACC

3% 5% 25% 11%

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Sector report > Offshore Supply

SapuraCrest Petroleum
Ticker code (MK): SC RES MK Shareprice Market capitalisation Market capitalisation 2.02 MYR 2,579 MYRm 782 USDm Target price Upside potential # shares (mill) MYRUSD

BUY
2.60 29% 1,277 3.30

(MYRmn) Income statement Revenues EBITDA EBIT Net financial items Pre tax results Net income EPS (diluted) EBITDA margin EBIT margin Net result margin Cashflow statement C ashflow from operations C hanges in working capital Investments C ashflow from financials Net change in liquidity (MYRmn) Balance sheet C urrent assets Fixed assets Short term debt Long term debt Equity & minorities Total capital C apital employed Net interest-bearing debt Enterprice value Key figures Return on total assets Return on capital employed Return on equity Interest coverage C urrent ratio Revenues growth EBITA growth EPS growth Multiples P/E P/C F EV/EBIT EV/EBITDA EV/SALES P/BOOK 2006 1,355 1,151 394 880 655 2,505 1,929 904 1,785 2006 9% 11% 23% n.m. 1.4 na na na 2006 8.3 4.2 3.9 2.6 0.3 0.9 2007 1,521 1,033 269 894 654 2,554 1,817 871 3,519 2007 -3% -5% -3% n.m. 1.5 -2% -10% -120% 2007 -41.4 14.1 11.3 7.6 0.9 1.1 2008 1,800 1,178 540 517 1,069 2,978 2,126 703 3,282 2008 1% 1% 9% -4.4 1.3 28% 62% -543% 2008 19.6 9.9 8.5 6.6 1.0 1.4 2009 2,362 1,170 478 454 1,324 3,531 2,256 338 2,917 2009 2% 3% 10% -8.1 1.4 53% 37% 31% 2009 7.6 4.4 3.2 2.6 0.4 0.7 2010 2,093 1,260 298 405 1,458 3,353 2,161 -173 2,406 2010 4% 6% 12% -9.9 1.4 -6% -4% 37% 2010 17.2 11.5 7.6 6.2 0.8 2.0 2011E 2,372 1,324 298 405 1,841 3,696 2,544 -312 2,267 2011E 7% 10% 16% -13.3 1.6 8% 16% 57% 2011E 9.6 7.2 5.2 4.4 0.6 1.4 2012E 2,765 1,344 298 405 2,283 4,109 2,986 -662 1,917 2012E 8% 11% 16% -14.6 2.0 15% 10% 20% 2012E 8.0 6.3 4.0 3.4 0.5 1.1 2013E 3,185 1,362 298 405 2,744 4,547 3,447 -1,112 1,467 2013E 7% 10% 13% -15.5 2.3 -2% 6% 3% 2013E 7.7 6.1 2.9 2.4 0.4 0.9 2006 1,794 233 159 -51 110 74 0.08 13.0% 8.9% 4.1% 2006 189 -426 1,202 1,268 -171 2007 1,766 211 141 -94 41 -18 -0.02 11.9% 8.0% -1.0% 2007 100 -79 -48 -118 -49 2008 2,262 342 264 -78 171 78 0.07 15.1% 11.7% 3.5% 2008 234 -107 223 -118 -214 2009 3,452 469 384 -58 282 116 0.10 13.6% 11.1% 3.4% 2009 336 97 76 -125 231 2010 3,257 448 362 -45 364 170 0.13 13.8% 11.1% 5.2% 2010 413 471 176 -229 479 2011E 3,509 518 432 -39 478 269 0.21 14.8% 12.3% 7.7% 2011E 479 -189 151 0 139 2012E 4,038 569 481 -39 553 324 0.25 14.1% 11.9% 8.0% 2012E 533 -76 107 0 350 2013E 3,951 602 514 -39 576 335 0.26 15.2% 13.0% 8.5% 2013E 551 7 107 0 450

Source: DnB NOR Markets Estimates

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26.05.2010

Sector report > Offshore Supply Key Investment Summary Market leader in Malaysia We like SapuraCrest for its leadership position in the Malaysia's oil service industry (IPF, offshore drilling and development and offshore support services). It is currently one of the largest integrated oil and gas services provider in Malaysia. The company has steadily expanded its operations beyond the shores of Malaysia to markets stretching from India to China and Indonesia to Australia. We estimate that there will be approx USDbn 2-3 worth of upcoming EPCIC tenders in Malaysia alone and rate SapuraCrest as one of the betterpositioned players to win the tenders (focusing on the transportation and installation works). In offshore development drilling, we expect activity levels to remain strong in the offshore Malaysia and MTJDA regions. Based on our understanding, the company is currently bidding for MYRbn 6 worth of projects in Malaysia, Australia and India. Order backlog to provide good visibility The company has a solid order book of close to MYRbn 11 (USDbn 3) in IPF projects. Historical order backlog has remained fairly consistent, hovering average around MYRbn 3-5. We expect current order backlog to provide revenue visibility and keep the company busy through to FY2011. Strong working relationships forged with Petronas are vital Soft factors, such as the strong working relationships forged with Malaysia's NOC Petronas (evident in their project wins at MYRbn 5 from Petronas over the past three years), are something we value highly in this protected local market. This allows SapuraCrest to gain competitive advantage over its international and domestic players. Key management has the right experience and network We rate the management of SapuraCrest highly, among the Malaysia oil service players, for their track record, steady order flow (MYRbn 4 in FY2010 (Jan year-end), MYRbn 3 in FY2009, and MYRbn 5 in FY2008), and the experience and network the management brings to the table. Non-Executive Chairman Dato' Hamzah Bakar, a Malaysian, was appointed as Chairman of the Company on 25 July 2003. He has served 20 years in various senior management and board positions in Petronas, including SVP for Refining and Marketing and SVP for Corporate Planning & Development. Prior to joining Petronas, Dato' Hamzah served in the Economic Planning Unit (EPU), Prime Minister's Department for 12 years. Executive Vice Chairman Datuk Shahril Shamsuddin, a Malaysian, is the President and CEO of the Sapura Group since 1997. Datuk Shahril has held several senior positions in the Sapura Group since 1985. Among the awards and honors that Datuk Shahril has received include the Panglima Jasa Negara (PJN) from the Federal Government of Malaysia which carries the title Datuk (June 1998), Darjah Seri Paduka Tuanku Ja'afar (SPTJ) from Negeri Sembilan, Malaysia, which carries the title Dato Seri (July 2007) and the Legion d Honneur from the Republic of France (Nov 2007). Datuk Shahril has also won the 2009 Ernest & Young Entrepreneur Award in Malaysia. Chief Executive Officer En. Rohaizad, a Malaysian citizen, was appointed CEO in Feb 2010, and has been involved in the oil & gas industry for the past 22 years, beginning his career with Petronas Gas and thereafter with Esso Production Malaysia Inc. En. Rohaizad has been with the Sapura Group for the past 9 years and held the post of Chief Operating Officer of SapuraCrest Petroleum Berhad from mid 2008.

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26.05.2010

Sector report > Offshore Supply Margins volatility unavoidable but unlikely to see negative swings Margins are always one of the key concerns of investors when it comes to EPCIC (IPF) where risks associated with project executions are high. Though we do not rule out margins volatility, we are not expecting SapuraCrest to record negative margins for its IPF segment as we believe SapuraCrest would be disciplined when it comes to project biddings and vessels' rates (charter in construction support vessels to support the installation works) are now at lower levels. The average historical 3-year EBITDA margins of the IPF segment and overall group's, from FY20082010, were at 6% and 14% respectively. Key share price trigger - Upcoming project radar screen According to the list of upcoming offshore construction projects in Malaysia and Asia complied by ODS, we are positive on the potential projects pipeline (IPF) which SapuraCrest is operating in. In the Malaysia home market, we expect the country to tender up to USDbn 2-3 worth of offshore construction contracts this year and next. We believe SapuraCrest is one of the better positioned players in these upcoming tenders involving transportation and installation projects. Based on our understanding, the company is currently bidding for MYRbn 6 worth of projects in Malaysia, Australia and India. Some of the projects SapuraCrest are eyeing include 1) topsides replacement for BSP's Champion West Oilfield off Brunei, and 2) offshore installation of a new central processing platform at KPOC's Kebabangan complex off Sabah. Contract wins will provide positive newsflow and earnings growth visibility, which are positive for valuations and share price. Based on historical records, we expect SapuraCrest to maintain positive and decent margins on future new orders. Healthy demand for offshore projects in Malaysia and Asia The outlook for offshore construction projects in Malaysia are expected to remain healthy, along with expectations of E&P spending growth by Petronas. This is further supported by the list of potential offshore tenders in 2010 in Malaysia and in Asia, as highlighted below. Figure 64: Upcoming offshore construction projects in Malaysia
Client Contract type Nippon Oil EPC Petronas Cariga EPC Shell EPC Newfield Installation Petronas Cariga Installation Petronas Cariga Installation Shell Installation Newfield Installation Newfield EPIC Nippon Oil EPIC Petronas Cariga Installation Petronas Cariga Installation Petronas Cariga Installation Country Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Workscope w ellhead platform and pipeline CPP jacket Gumusut Phase II (400km pipeline) TNI of WHP and process plat CPP jacket TNI pipelay TNI and support w ork platform installations CPP fabrication; optional wellhead platform fabrication w ellhead platform and pipeline pipelay CPP Topside TNI Pipeline and riser installation Prod unit / Field Exp start Layang 1 Jan 2013 Kebabangan 1 May 2010 Gumusut-Kakap 1 Jan 2012 East Piatu 1 Jun 2011 Kebabangan 1 Apr 2010 Tangga Barat Clus 5 Apr 2010 E11 Hub 1 Jun 2010 West Belumut 1-Jun-2010 Lerek Layang Tangga Barat Clus Kebabangan Samarang 29-Sep-2009 Exp completion 1 Mar 2013 1 Jun 2010 1 Mar 2012 31 Aug 2011 1 Jun 2010 15 Apr 2010 1 Aug 2010 30-Jun-2010 Status Tendering Tendering Tendering Tendering Tendering Tendering Tendering Planned Planned Planned Planned Planned Planned

23-Dec-2009

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

And in Asia Pacific, the list of upcoming offshore projects is expected to provide a healthy flow of contracts for the EPC players. Contract wins will provide positive newsflow and earnings growth (positive margins) visibility, which are positive for valuations and share price of the listed EPC companies.

DnB NOR Markets - 59

26.05.2010

Sector report > Offshore Supply Figure 65: Upcoming offshore construction projects in Asia Pacific
Client Nippon Oil Petronas Carigali Shell New field Petronas Carigali Petronas Carigali Shell New field New field Nippon Oil Petronas Carigali Petronas Carigali Petronas Carigali Shell Eni Apache Chevron Chevron Chevron Chevron Chevron ExxonMobil ExxonMobil Santos JHN JHN ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC ONGC Chevron ExxonMobil Husky Oil Kodeco Chevron Hess Pearl Oil Total Total Total Chevron ExxonMobil Hess Husky Oil Kangean Energy Kodeco Kodeco Pearl Oil Pertamina Petronas Carigali Santos Total Total Total Contract type Country EPC EPC EPC Installation Installation Installation Installation Installation EPIC EPIC Installation Installation Installation EPIC EPC EPIC Installation Installation Installation Installation Installation EPIC EPIC Installation EPC EPC EPC EPC EPC EPC EPC Installation EPIC EPIC EPIC EPIC Installation EPIC EPIC EPIC EPIC EPC EPC EPC EPC Installation Installation Installation Installation Installation Support Installation EPIC Installation EPIC EPIC Installation EPIC Installation EPIC EPIC IRM Installation EPIC Support Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Australia Australia Australia Australia Australia Australia Australia Australia Australia Australia China China India India India India India India India India India India India India India India India Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Workscope wellhead platform and pipeline CPP jacket Gumusut Phase II (400km pipeline) TNI of WHP and process plat CPP jacket TNI pipelay TNI and support w ork platform installations CPP fabrication; optional wellhead platform fabrication wellhead platform and pipeline pipelay CPP Topside TNI Pipeline and riser installation Gumusut Phase II (400km pipeline) Flowlines wellhead platform and flowline installations Tie-in of platforms, pipelines and manifolds Umbilical installation 60km deepwater pipeline segment Subsea foundations and manifold installations 200km shallow water pipeline segment Prod unit / Field Layang Kebabangan Gumusut-Kakap East Piatu Kebabangan Tangga Barat Cluster E11 Hub West Belumut Lerek Layang Tangga Barat Cluster Kebabangan Samarang Gumusut-Kakap Kitan Julimar/Brunello Area Gorgon Gorgon Gorgon Gorgon 15-Oct-2009 1-Apr-2011 1-Jan-2011 1-Jan-2011 1-Jan-2011 1-Jan-2011 1-Sep-2010 1-Dec-2009 1-Dec-2009 15-Jun-2011 30-Jun-2011 31-Mar-2011 28-Feb-2011 31-Mar-2011 28-Feb-2011 30-Jun-2010 31-Mar-2010 24 30 30 31 Nov 2011 Apr 2011 Apr 2012 Jan 2012 Exp start 1 Jan 2013 1 May 2010 1 Jan 2012 1 Jun 2011 1 Apr 2010 5 Apr 2010 1 Jun 2010 1-Jun-2010 Exp completion Status 1 Mar 2013 1 Jun 2010 1 Mar 2012 31 Aug 2011 1 Jun 2010 15 Apr 2010 1 Aug 2010 30-Jun-2010 Tendering Tendering Tendering Tendering Tendering Tendering Tendering Planned Planned Planned Planned Planned Planned Planned Tendering Planned Planned Prequalification Tendering Planned Tendering Planned Planned Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering 1-Dec-2009 30-Apr-2011 30-Apr-2011 Tendering Tendering Tendering Planned Planned Tendering Tendering 30-Apr-2012 1-Nov-2009 1 May 2010 12 Apr 2010 1 Apr 2010 1 Oct 2010 1 Mar 2011 30 Apr 2010 1 Oct 2011 1 Oct 2011 15 Apr 2010 1-Nov-2009 30-Jun-2010 30 Jun 2010 31 May 2010 1 Jun 2010 31 Dec 2010 1 Jun 2011 30 Jun 2010 31 Mar 2012 31 Mar 2012 15 Jun 2010 31-Mar-2010 Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Tendering Prequalification Tendering Planned Tendering Tendering Planned Planned Planned Planned Prequalification Tendering Planned Tendering

29-Sep-2009

23-Dec-2009

Gorgon Wirrah Marlin B platform and pipelines Marlin-Turrum Pipeline installation Henry Topside Lufeng 13-2 Jacket Lufeng 13-2 Pipelay and plat modifications B-193 Cluster Process platform and two flare platforms B-193 Cluster EPCIC: 3 unmanned WHP + various segment D-1 11 pipelines spanning 75km Mumbai High North B-22 Cluster platform installations and pipela South Bassein Platforms ICP-R and ICP-F3 installation B-22 Cluster platform installations and pipelay Pipelay and platform modifications 5 w ellhead platforms B-46 4 platforms and flowlines Mumbai High South South Bassein B-193 Cluster B-193 Cluster B-Cluster Mumbai High Mumbai High South Mumbai High North B-193 Cluster

30 Apr 2010 3 May 2010

30 Apr 2011

9-Oct-2009

10-Apr-2010

Mumbai High South Redevelopment six w ellhead platforms and 140km of pipelines Process platform and two flare platforms platform and flowline installations

North Tapti SPM refurbishment Santan EPC-3: pipeline, cables and mooring tower coBanyu Urip EPIC Madura BD KE series (-39 and -54) KE-39 3 pipelay scope Sepinggan Retender for CPP and AUP Installations Ujung Pangkah 300km exportline installation Makassar Strait TNI of plat and subsea South Mahakam Installation of exportlines and flowlines South Mahakam Pre-commissioning, hook-up and tie-in South Mahakam TJ Jumlai crude pipeline refurbishment project Sepinggan pipeline, cables and mooring tower construction Banyu Urip Retender for CPP and AUP Installations EPIC FPU mooring, risers, manifolds and flowlines Poleng PPP module transportation and installation KE series (-39 and -54) 300km exportline installation EPIC (pipelines) 200km exportline Maleo/Oyong IRM Installation of exportlines and flowlines EPICC Pre-commissioning, hook-up and tie-in Transportation and installation of platforms and subsea elements Transportation and installation of Muda-D platform and flowline TNI of Muda-D plat and flowline EPCIC for 1 platform and 2 pipelines TNI (Compression platform) PNG LNG EPIC (200km Kopi-Port Moresby pipeline) 280km Elk-Napa Trunkline Drydocking TNI of 2 spur lines Bongkot 4A Inst (Living Quarters Platform) Installation of platforms and flowlines process and wellhead platforms Bongkot 4A Inst (Living Quarters Platform) Installation of pipelines & platform TNI wellhead platform and flowline Diving support at Chim Sao 3 w ellhead platforms and 60km of pipelines Topaz wellhead platform and flowline up to 2 w ellhead platforms and pipelines Ujung Pangkah Madura BD Terang/Sirasun/Batur Poleng KE-39 Makassar Strait (MS) Kepodang Oyong South Mahakam (SMK) Peciko South Mahakam (SMK)

1-Jun-2011

31-Jul-2011

1-Apr-2010

1-Nov-2011

Total

Installation

Indonesia

South Mahakam (SMK)

1-Apr-2010

1-Nov-2011

Tendering

CPOC CPOC

Installation Installation

Joint Develop Joint Develop Myanmar Myanmar PNG PNG Singapore Thailand Thailand Thailand Thailand Thailand Vietnam Vietnam Vietnam Vietnam Vietnam Vietnam

MTJDA-B17 MTJDA-B17 Shwe/Mya Yetagun

1-Jan-2010 31 Jul 2010 1-Dec-2009 1-Jul-2011 1-Jan-2010 25-Apr-2009 1 Oct 2010 1 Jun 2011

31-Jan-2010 30 Nov 2010 31-Mar-2013 31-Aug-2011 1-Jun-2010 31-Jul-2009 31 Mar 2012 31 Jul 2011

Tendering Tendering Tendering Planned Prequalification Planned Planned Tendering Tendering Planned

Daewoo EPIC Petronas Carigali EPIC ExxonMobil Interoil HHI PTT PTTEP NuCoastal NuCoastal PTTEP Cuu Long JOC Petronas Carigali Premier Hoang Long JOC EPIC EPIC IRM Installation Installation Installation EPIC Installation Installation Installation Support Installation

Platong Bongkot Songkhla Bua Ban Bongkot Su Tu Trang Ruby Dua/Chim Sao Te Giac Trang Ruby

1-Jan-2010 1-Jun-2011 5 Apr 2010 1 Jul 2010 1 May 2010

31-Mar-2010 31-Jul-2011 30 Apr 2010 31 Jul 2010 20 Jun 2010

Planned Tendering Tendering Tendering Tendering Tendering

Petronas Carigali Installation Thang Long JOC EPIC

1-Jul-2010

31-Jul-2010 31-Dec-2010

Tendering Planned

Hai Su Trang/Hai Su Den 1-Apr-2010

Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets

Leveraging of foreign partners for overseas growth Due to the implied local content requirements, foreign companies who wish to join in the local market (Malaysia) are likely to tie-up with local players (such as Alam with Swiber, Acergy/ Seadrill with SapuraCrest). We believe this is beneficial for the Malaysian players as they can tie-up with foreign partners in return, targeting at overseas markets which require similar arrangements.

DnB NOR Markets - 60

26.05.2010

Sector report > Offshore Supply Offshore drilling services division SapuraCrest has teamed up with Norway's driller Seadrill (51:49% venture), managing and operating a fleet (5x) of self erecting tender drilling rigs in production, drilling, workover & associated services. Seadrill is a leading global offshore drilling company, with 40x modern drilling units ranging from shallow water to ultra-deepwater capability. And Seadrill has been a shareholder of SapuraCrest since 2007 and it currently owns approx 24% stakes in SapuraCrest. Self erecting tender drilling rig Self erecting tender rigs allow shallow waters (average tender rigs water depth) to mid-waters production drilling operations to be performed from a wellhead platform, without the need for a permanently installed drilling package. The tender rig is moored next to the platform where wells are to be drilled and the modularized drilling package is lifted onto the platform. Drilling operations are then supported by facilities on the tender, including storage for drilling supplies, power generation facilities for running the drilling equipment and well completion equipment. The tender also has living quarters and a helicopter deck. Tender rigs are either barge-based or semi-sub hull-based. Both can carry the same equipment, but the semi-sub rig is able to operate in rougher weather conditions. The tender rigs which SapuraCrest own are barge-based rigs. Market outlook of tender rigs Tender rigs are in general cheaper to build than jack-ups and have similar opex as jack-ups but same to higher capabilities. There are limited number of market players in this region (Mermaid Drilling & Kencana, SapuraCrest) and incremental market demand outside the traditional markets in West Africa and Southeast Asia. There are also new opportunities for the increasing interest for the use of tender rigs in deepwater developments. Figure 66: Fleet supporting Drilling services
1 2 3 4 5 Vessel T-3 T-6 T-9 T-10 Teknik Berkat Type Self-erecting Self-erecting Self-erecting Self-erecting Self-erecting drilling drilling drilling drilling drilling tender tender tender tender tender barge rig rig rig barge Purpose Development Development Development Development Development drilling, drilling, drilling, drilling, drilling, accomm, heavylift accomm, heavylift accomm, heavylift mooring sys TLPs and SPARs accomm, heavylift Year built/ refurbished 1980/2001 1982/2000 2004 2007 1990/2005 Status Term Term Term Term Term Owner ship 51% 51% 51% 51% 51% Depth/size (m) 122 122 122 2000 152

T-10 tender rig

Source: Company, DnB NOR Markets

Marine services division Providing offshore support services such as geophysical surveys, construction support, ROV inspection & intervention, diving support, and accommodation services Figure 67: Fleet supporting Marine services
Vessel Sarku Sambang Sarku Semantan Sarku Clementine Teknik Samudra Teknik Kembara Teknik Putra Teknik Perdana Nomad ROV (9x units) Navigator ROV (2x units) Seaeye ROV (1x unit) Type Diving support vessel Diving support vessel Diving support vessel Survey vessel Survey vessel Survey vessel Survey vessel ROV ROV ROV Purpose 46-men Accomm, diving & construction support 70-men Accomm, diving & construction support 64-men Accomm, diving & construction support Geotechnical Geophysical and general survey Geophysical and general survey 2D seismic, geophysical Remotely-operated vehicle, mobile Remotely-operated vehicle, mobile Remotely-operated vehicle, mobile Year built/ refurbished 1975/2000 1974 1997 1984/1989 1979/1993 1980s/1995 1979/1995 Status Marine Marine Marine Marine Marine Marine Marine Marine Marine Marine Owner Depth/size ship (m) 100% 45x15 100% 56x14 100% 75x18 100% 64x10 (3100 HP) 100% 53x12 (1090bhp) 100% 54x11 (650bhp) 100% 79x13 (650bhp) 94% 1500 94% 600 94% 400

Source: Company, DnB NOR Markets

DnB NOR Markets - 61

26.05.2010

Sector report > Offshore Supply Installation of pipelines & facilities division This segment provides transportation, erection and installation of offshore pipelines and facilities through wholly-owned subsidiaries TL Offshore and Sarku Marine. The services provided are supported by a fleet of owned and charter in (if needed) construction support and diving vessels. Figure 68: Orders secured over the last 5 years
Calendar year Contract type IPF - transportation & 22-Jan-10 installation Vessel/ asset used LTS 3000 Country for Project scope work Transportation and Installation of 4x platform Jackets in Mumbai High North Field India Transportation and installation of offshore facilities (91 km of 16 rigid pipeline including a 60m shallow water beac h approach, subsea tie-ins and stabilisation works) in Devil Creek Development Project (DCDP) Australia Dec ommissioning of topsides, steel support jacket and a section of the assoc iated 12 inch gas export pipeline at 150m depth Japan Provision and performance of project management, proc urement, engineering, transportation and installation services and works at the Gumusut-Kakap Offshore Fields Malaysia Provision of a pipelay/derrick barge for the installation of stalk-on risers for the Northern Fields development project. Transportation and installation of offshore facilities. Offshore development drilling Offshore development drilling extension contract from Jan 2009 Subsea inspection, repair and maintenanc e services Conduct survey works for the Malaysian Marine Research Survey Project. Value Value (MYRm) (USDm) 248 75 Start Nov-10 Completion Client Jan-11 Larsen & Toubro

IPF - transportation & 2-Oct-09 installation

Sapura 3000

600

170

Nov-10

Feb-11

Apache Energy

25-May-09 IPF- decommissioning IPF- offshore 17-Mar-09 installation works IPF - installation Feb-08 support IPF - installation Apr-08 support 30-Apr-08 Drilling 15-Sep-08 Drilling 2008 Marine services 2008 Marine services

Sapura 3000

198

60

May-09

Mar-10

Nippon Steel engineering

Sapura 3000

3000

825

Mar-09

Mar-12

Shell

Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia Myanmar, Thailand, Cambodia

105 120 639 532 105 16

30 34 183 152 30 5

Jan-09 Mar-09 May-12 Jan-12 2011 2008

Talisman Malaysia Sarawak Shell Petronas Carigali (PCSB) ExxonMobil E&P Malaysia (EMEPMI) ExxonMobil E&P Malaysia (EMEPMI) Petronas Carigali (PCSB)

Teknik Berkat T-9 DSVs Survey vessel

May-08 Jan-09 -

Survey works on various regions Hook-up, commissioning and major maintenance servic es programme for work package B Malaysia Charter of an engineering maintenance barge to carry out topside installation/commissioning activities at the Northern 2008 Marine services Construc tion barge Fields Development Project. 2008 Marine services Construc tion barge Installation of FPSO Arunothai Thailand Provide the charter of a pipelay / derrick barge to install stalkon risers for Talismans BLOCK PM-3 CAA Northern Fields Malaysia 19-Feb-08 Marine services Pipelay/ derrick barge Development projec t Transportation and installation of platforms, bridges and interfield pipelines for CPOCs Block B-17 Field Development Plan IPF - transportation and Sapura 3000 Project Malaysia 15-Nov-07 installation Oct-07 Marine services Survey vessel Provision of survey services India Installation of subsea pipelines and the transportation and installation of drilling, production and wellhead platforms in IPF - transportation and Construc tion barges Sabah, Sarawak, Terengganu Malaysia Jul-07 installation Installation of approximately 26 km of subsea pipelines as well as the installation of a drilling platform for the Jerneh IPF - transportation and Construc tion barges field Malaysia Jul-07 installation Provision of EPCIC of 140 km gas pipeline transportation Jul-07 IPF - EPCIC Sapura 3000 system from the Kikeh Field to the Labuan Gas Terminal. Malaysia Thailand/ 31-Mar-06 Drilling T-3 Offshore development drilling Malaysia 23-May-06 Drilling T-6 Offshore development drilling MTJDA 17-Jan-06 Drilling T-10 Offshore development drilling MTJDA 2005 Marine services Subsea vessels Topside maintenance programme for installations Malaysia Total Sep-08 Marine services Construc tion barge

2008 Marine services

Survey vessel

27 800

8 229

Nov-08

2009 Nov-12

PTTEP Sarawak Shell Berhad (SSB)/ Sabah Shell Petroleum (SSPC)

54 87

15 25

Talisman Malaysia Ezra (Emas)

105

30

Apr-08

Jun-08

Talisman Malaysia

518 48

148 14

Sep-08

Sep-09 Feb-09

Carigali-PTTEPI (CPOC) Allseas

3000

909

Mar-07

Mar-10

Petronas Carigali (PCSB)

200 581 354 337 284 105 12062

61 176 101 95 80 30 3484

Jan-07 Sep-07 Jul-08 Jan-08 Aug-07 2005

Dec-07 Mar-08 Jun-12 Jan-11 Aug-10 2010

ExxonMobil E&P Malaysia (EMEPMI) Murphy Oil PTTEP Carigali Hess Carigali Hess EMEPMI

Source: Company, DnB NOR Markets

Figure 69: Fleet supporting IPF services

Sapura 3000
Vessel Sarku Sambang Sarku Semantan Sarku Clementine Sarku 2000 Sarku Samduera Sarku Utama Sarku Santubong Sapura 3000 (with Acergy) LTS 3000 (with L&T) Quippo 2000 Type Diving support vessel Diving support vessel Diving support vessel Accommodation work barge Accommodation work barge Accommodation work barge Multi-purpose accomm work vessel DP 3000 heavylift pipelaying vessel Heavylift pipelay vessel Derrick lay barge Purpose 46-men Accomm, diving & construction support 70-men Accomm, diving & construction support 64-men Accomm, diving & construction support 270-men Accomm & construction support 210-men Accomm & construction support 150-men Accomm & construction support 123-men DP2 MP accomm & construction support 330-men, DP2 heavylift pipelaying 3000T 290-men, DP1 heavylift J-lay pipelaying 3000T 302-men, heavylift pipelay barge 2000T Year built/ refurbished 1975/2000 1974 1997 1991 1983 1981 1979 2008 2010 2011 Status Marine Marine Marine EPC EPC EPC EPC EPC EPC EPC Owner ship 100% 100% 100% 100% 100% 100% 100% 50% 40% 26% Depth/size (m) 45x15 56x14 75x18 92x31 103x85 73x21 75x17 151x38 161x38 120x40

Source: Company, DnB NOR Markets

Sapura 3000 (50:50 JV with Norway's Acergy) In Aug 2005, SapuraCrest and Norway's Acergy entered into a 50:50 joint venture to jointly own and operate the USDm 250 newbuild DP2 heavylift and pipelay barge Sapura 3000. The vessel became operational in Feb 2008. The Sapura 3000 is designed to provide a full suite of services, from conventional shallow water pipelay to very deepwater construction projects and topside installations. It is one of the most advanced deepwater construction vessel in the region, offering conventional S-lay capabilities for shallow water pipelay projects to steep S-lay or J-lay operations in deepwater. The 151m vessel is equipped with a mastcrane of 3000ton lift capacity, at operational depth of up to 2,000m. Currently, the vessel has an order backlog of approx MYRbn 7.

DnB NOR Markets - 62

26.05.2010

Sector report > Offshore Supply LTS 3000 (40:60 JV with India's L&T) SapuraCrest and India's Larsen & Toubro (L&T) entered into a 40:60 JV, with L&T taking the larger stake, to build and operate the newbuild heavylift pipelay vessel LTS 3000. The USDm 160 vessel was delivered from Singapore's ASL Marine Shipyard in Q12010. LTS 3000 comes with 290pax DP1 3000tons crane capabilities. It is an all electric ship operating on three engine generator sets with a nominal electrical power load and is designed for heavylift operations and pipelay operations with pipes 6-60" diameter in water depth of up to 150m. Quippo 2000 (26:74 JV with India's APPPL) In Sep 2009, SapuraCrest and India-based AP Prakash Shipping (APPPL) formed a 26:74 Quippo Prakash JV to build and operate the derrick lay barge QP 2000. The 120m shallow water heavylift vessel is equipped with 302pax accommodation, 2000mt crane, and is powered by 6x1230kW generators. The cost of the vessel is at USDm 122. Earnings estimates On a conservative note, we are modeling flattish and lower margins developments across the segments SapuraCrest are operating in. The key segments of driving SapauraCrest's earnings are the IPF and the offshore drilling segments. We are rather cautious about the margins in IPF segment as revenues and margins volatilities are expected due to execution risks (such as weather and equipment schedule) associated with the nature of the business model, which are projects driven. Figure 70: Segment breakdown estimates (MYRm) FY year-end Jan
Offshore O&G drilling Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Installation of Pipelines and Facilities Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Marine services Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Operations & Maintenance Operating Revenues EBITDA EBITDA margin EBIT EBIT margin Group Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2006 299 105 35% 75 25% 2007 394 143 36% 104 26% 2008 707 188 27% 149 21% 2009 906 307 34% 262 29% 2010 2011E 2012E 2013E 844 832 843 860 355 277 288 305 42% 33% 34% 35% 309 231 241 257 37% 28% 29% 30%

2011E EBITDA

2%

18%

Offshore O&G drilling Installation of Pipelines and Facilities Marine services

54%
Operations & Maintenance

26%

2006 1173 69 6% 66 6% 2006 266 56 21% 17 6% 2006 57 9 16% 7 13% 2006 1794 238 13% 165 9%

2007 835 (24) -3% -27 -3% 2007 473 91 19% 65 14% 2007 64 3 5% 2 3% 2007 1766 213 12% 145 8%

2008 1025 67 7% 64 6% 2008 484 100 21% 66 14% 2008 47 9 19% 8 18% 2008 2262 364 16% 288 13%

2009 1893 73 4% 71 4% 2009 616 89 14% 53 9% 2009 38 12 32% 11 29% 2009 3452 481 14% 397 12%

2010 2011E 2012E 2013E 1714 1938 2442 2331 119 136 171 186 7% 7% 7% 8% 117 134 169 185 7% 7% 7% 8% 2010 2011E 2012E 2013E 646 676 684 684 (38) 93 97 97 -6% 14% 14% 14% -74 57 60 60 -11% 8% 9% 9% 2010 2011E 2012E 2013E 53 63 69 76 11 13 12 14 21% 20% 18% 18% 10 11 11 12 18% 18% 16% 16% 2010 2011E 2012E 3257 3509 4038 447 518 569 14% 15% 14% 362 433 482 11% 12% 12% 2013E 3951 602 15% 514 13%

Source: DnB NOR Markets, Please note total group EBITDA and EBIT are before unallocated expenses

DnB NOR Markets - 63

26.05.2010

Sector report > Offshore Supply IPF segment estimates - driven by new orders. In the IPF segment, we have excluded contributions from projects supported by vessels Sapura 3000, LTS 3000 and Quippo 2000 as they are equity accounted for their respective stakes in the vessels (as highlighted above). Figure 71: Current order book as of Q4 FY2010
Calendar year Contract type IPF - transportation & 22-Jan-10 installation Vessel/ asset used LTS 3000 Country for Project scope work Transportation and Installation of 4x platform Jac kets in Mumbai High North Field India Transportation and installation of offshore fac ilities (91 km of 16 rigid pipeline including a 60m shallow water beach approach, subsea tie-ins and stabilisation works) in Devil Creek Development Project (DCDP) Australia Dec ommissioning of topsides, steel support jac ket and a section of the assoc iated 12 inc h gas export pipeline at 150m depth Japan Provision and performance of projec t management, procurement, engineering, transportation and installation servic es and works at the Gumusut-Kakap Offshore Fields Malaysia Offshore development drilling Malaysia Offshore development drilling extension c ontract from Jan 2009 Malaysia Hook-up, c ommissioning and major maintenance services programme for work package B Malaysia Installation of subsea pipelines and the transportation and installation of drilling, production and wellhead platforms in Sabah, Sarawak, Terengganu Malaysia Thailand/ Offshore development drilling Malaysia Offshore development drilling MTJDA Offshore development drilling MTJDA Value Value (MYRm) (USDm) 248 75 Start Nov-10 Completion Client Jan-11 Larsen & Toubro

IPF - transportation & 2-Oc t-09 installation

Sapura 3000

600

170

Nov-10

Feb-11

Apac he Energy

25-May-09 IPF- dec ommissioning IPF- offshore 17-Mar-09 installation works 30-Apr-08 Drilling 15-Sep-08 Drilling Sep-08 Marine servic es

Sapura 3000

198

60

May-09

Mar-10

Nippon Steel engineering

Sapura 3000 Teknik Berkat T-9 Construction barge

3000 639 532 800

825 183 152 229

Mar-09 May-08 Jan-09 Nov-08

Mar-12 May-12 Jan-12 Nov-12

Shell Petronas Carigali (PCSB) ExxonMobil E&P Malaysia (EMEPMI) Sarawak Shell Berhad (SSB)/ Sabah Shell Petroleum (SSPC)

IPF - transportation and Jul-07 installation Construction barges 31-Mar-06 Drilling 23-May-06 Drilling 17-Jan-06 Drilling T-3 T-6 T-10

3000 354 337 284

909 101 95 80

Mar-07 Jul-08 Jan-08 Aug-07

Mar-10 Jun-12 Jan-11 Aug-10

Petronas Carigali (PCSB) PTTEP Carigali Hess Carigali Hess

Source: DnB NOR Markets

For the existing order backlog of MYRbn 3 (excluding backlog secured by JV vessels), we expect the backlog to be exhausted by mid-2012 (FY2013). New order assumptions (excluding JV vessels Sapura 3000, LTS 3000 and Quippo 2000) would be the key driver of forward earnings. Our assumptions are MYRbn 1.2 for remaining FY2011, MYRbn 1.6 for FY2012, and MYRbn 2 for FY2013. Our new orders expectations are based on the potential hit rate of 10-20% for the upcoming onshore and offshore tenders in Malaysia and Asia. Figure 72: New order assumptions for IPF segment
Orders from JV vessels (Sapura 3000, LTS 3000) are excluded In MYRm Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11E Q2/11E Q3/11E Q4/11E 2011E 2012E 2013E Historical/current orderbook at period end (MYRm) 5426 5704 5816 6207 4704 4089 3464 3286 2829 2994 2716 3117 1978 2276 1647 Reported IPF revenues at end of period 349 498 663 384 296 615 625 179 456 492 513 477 1938 2442 2331 New orders flow assumed/ secured (historical) 775 775 775 775 0 0 0 0 New EPCIC order assumptions na na na na 0 0 0 0 0 200 400 600 1,200 1,600 2,000

Source: DnB NOR Markets estimates

We expect margins in the IPF segment to remain below teens at EBITDA margins 7% levels in FY2011-2013, inline with what was achieved in FY2010 (adjusted for unallocated expenses). Figure 73: IPF segment estimates
Installation of Pipelines and Facilities Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2006 1173 69 6% 66 6% 2007 835 (24) -3% -27 -3% 2008 1025 67 7% 64 6% 2009 1893 73 4% 71 4% 2010 2011E 2012E 2013E 1714 1938 2442 2331 119 136 171 186 7% 7% 7% 8% 117 134 169 185 7% 7% 7% 8%

Source: DnB NOR Markets

Given our conservatism, key upside risks to our estimates would fall on the performance of the IPF segment which margins may outperform our expectations. Separate assumptions for JV vessels For individual co-owned vessels, we have modeled in separate new orders assumptions. For Sapura 3000, we are modeling new order assumptions of MYRm 400 in FY2011, MYRm 600 in FY2012 and MYRm 1,000 in FY2013. The vessel currently has an existing order backlog of MYRbn 7, which we expect to keep the vessel occupied over FY2011-2013. For LTS 3000, we are modeling new order assumptions of MYRm 200 in FY2011, MYRm 350 in FY2012 and MYRm 400 in FY2013.

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Sector report > Offshore Supply Drilling segment estimates We expect the drilling fleet to enjoy relatively stable dayrates in production and development drillings off Malaysia and MTJDA. We believe activity levels in O&G production and development phase off Malaysia and Thailand will continue at healthy levels and are less impacted by volatility in oil prices. The existing fleet of 5x tender drilling rigs are currently on term charters off Malaysia and MTJDA, averaging 1.3 years, with contracts expiring from as soon as Aug 2010 to June 2012. Figure 74: Drilling segment estimates
Offshore O&G drilling Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2006 299 105 35% 75 25% 2007 394 143 36% 104 26% 2008 707 188 27% 149 21% 2009 906 307 34% 262 29% 2010 2011E 2012E 2013E 844 832 843 860 355 277 288 305 42% 33% 34% 35% 309 231 241 257 37% 28% 29% 30%

Source: DnB NOR Markets

We expect Carigali Hess (venture between Malaysia's Petronas exploration arm and Hess) to extend the contracts of T-10 and T-6 when they are due in the second half of this year. The rates are expected to stay within existing rates, given that current contracted rates were fixed in 2006 where rates were still far from peaks. SapuraCrest owns 51% of the drilling fleet and contracts, hence contributions from this segment would be consolidated and 49% share for Seadrill would be reflected in minority share of profits. Figure 75: Key rates assumptions for the drilling fleet
Vessel T-3 T-6 T-9 T-10 Teknik Berkat Type Tender Tender Tender Tender Tender drilling drilling drilling drilling drilling rig rig rig rig rig Contract expiry Jun-12 Dec-10 Jan-12 Aug-10 Apr-12 Average dayrates (MYR) 2011E 264,000 330,000 435,600 297,000 412,500 2012E 264,000 350,000 435,600 320,000 412,500 2013E 300,000 350,000 450,000 320,000 412,500 2011E 148,500 181,500 198,000 165,000 198,000 Opex (MYR) 2012E 148,500 181,500 198,000 165,000 198,000 2013E 148,500 181,500 198,000 165,000 198,000

Source: DnB NOR Markets

Offshore marine services estimates In general, we are modeling relatively flat rates for the DSVs and work barges. Our forecasted rates are adjusted for utilizations which are typically lower than supply vessels as they are projects driven. For the survey vessels, we expect rates to pick up based on our view that seismic activities are well-positioned for growth when growth in E&P spending returns. Figure 76: Marine segment estimates
Marine services Operating Revenues EBITDA EBITDA margin EBIT EBIT margin 2006 266 56 21% 17 6% 2007 473 91 19% 65 14% 2008 484 100 21% 66 14% 2009 616 89 14% 53 9% 2010 2011E 2012E 2013E 646 676 684 684 (38) 93 97 97 -6% 14% 14% 14% -74 57 60 60 -11% 8% 9% 9%

Source: DnB NOR Markets

Figure 77: Key rates assumptions for the marine support fleet
Vessel Sarku Sambang Sarku Semantan Sarku Clementine Sarku 2000 Sarku Samduera Sarku Santubong Sarku 300 Sarku Utama Teknik Samudra Teknik Kembara Teknik Putra Teknik Perdana Contract Type type Diving support vessel Project Diving support vessel Project Diving support vessel Project Accomm work barge Project Accomm work barge Project MP accomm work vessel Project Accommodation work barge Project Accomm work barge Project Survey vessel Project Survey vessel Project Survey vessel Project Survey vessel Project Average dayrates (MYR) 2011E 250,000 210,000 220,000 300,000 250,000 200,000 160,000 220,000 210,000 210,000 210,000 210,000 2012E 250,000 220,000 220,000 320,000 250,000 200,000 160,000 220,000 210,000 210,000 210,000 210,000 2013E 250,000 220,000 220,000 320,000 250,000 200,000 160,000 220,000 210,000 210,000 210,000 210,000 2011E 160,000 120,000 120,000 160,000 150,000 120,000 120,000 130,000 140,000 140,000 140,000 140,000 Opex (MYR) 2012E 160,000 130,000 120,000 160,000 150,000 120,000 120,000 130,000 140,000 140,000 140,000 140,000 2013E 160,000 130,000 120,000 160,000 150,000 120,000 120,000 130,000 140,000 140,000 140,000 140,000

Source: DnB NOR Markets

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Sector report > Offshore Supply Q1 FY2011 earnings preview IPF margins in focus SapuraCrest will report Q1 FY2011 earnings in late May, the exact date is not confirmed. But we expect SapuraCrest to report on 27 May, the day which Seadrill is reporting its quarterly earnings. We expect to see some degree of volatility in revenues from the IPF segment as they are driven by % completion schedule which some projects are seasonal in nature. Margins from this segment are expected to be in focus as they are the key driving force behind earnings, other than new orders. Figure 78: Q1 FY2010 preview table
MYRm Q1/10 Q1/11E Q1/11E Chg y/y Cons* na na na na na na na 130.9 29.7 50.0 1.6 51.6 41.5 0.0 18% 30% 63% n.m 76% 162% 159% % Chg Full-year figures (DnB NOR) 2011E 3,509 518 432 -39 478 269 0.21 2012E 4,038 569 481 -39 553 324 0.25 2013E 3,951 602 514 -39 576 335 0.26 Reported DnB NOR Operating revenues EBITDA EBIT Net finance Pretax earnings Net result EPS 716.2 98.1 79.4 -11.3 68.1 25.7 0.02 847.1 127.8 129.4 -9.7 119.7 67.1 0.05

Source: DnB NOR Markets, consensus from Bloomberg

Debt Profile & Capex Plans Below is an overview of SapuraCrests debt and capex schedule. The capex in 2010 and 2011 are modeled after the newbuild commitments announced by the company. We expect net cash position to continue as SapuraCrest's business segments are expected to generate positive free cash flows. Figure 79: NIBD forecast
In MYRm NIBD beginning CAPEX EBITDA - net finance - tax paid Working capital changes Equity/dividend issue NIBD end 2008 2009 703 -76 331 110 0 338 2010 338 -176 457 231 0 -173 2011E -173 -151 499 -209 0 -312 2012E -312 -107 449 8 0 -662 2013E -662 -107 551 6 0 -1112

703

Source: DnB NOR Markets

Figure 80: Debt forecast

In MYRm Long-term debt Short-term debt (due) Drawing/ (repayment) of long-term debt Drawing/ (repayment) of short-term debt EBITDA Cash balance Net debt Net gearing - Net debt/Equity Interest coverage (x) 2008 517 540 342 354 703 66% -4.4 2009 454 478 0 0 469 594 338 26% -8.1 2010 405 298 0 0 448 876 -173 -12% -9.9 2011E 405 298 0 0 518 1015 -312 -17% -13.3 2012E 405 298 0 0 569 1365 -662 -29% -14.6 2013E 405 298 0 0 602 1815 -1112 -41% -15.5

Source: DnB NOR Markets

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Sector report > Offshore Supply

SAPURACREST PETROLEUM (SCRS.KL)

PROFIT & LOSS MYRm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2008 2,262 0 -1,920 342 77 264 -15 -78 2009 3,452 0 -2,983 469 84 384 -45 -58 2010 3,257 0 -2,809 448 86 362 47 -45 2011e 3,509 0 -2,991 518 86 432 85 -39 2012e 4,038 0 -3,469 569 88 481 110 -39 2013e 3,951 0 -3,348 602 89 514 101 -39

0 171 20 73 78

0 282 32 134 116

0 364 31 163 170

0 478 96 113 269

0 553 111 118 324

1 577 115 126 335

BALANCE SHEET MYRm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

146 876 154 1,446 354 2,978 1,341 1,057 853 3,250 701

150 904 106 1,768 594 3,531 1,725 932 1,276 3,933 327

149 900 192 1,217 876 3,353 1,855 703 1,192 3,750 -191

149 909 240 1,357 1,015 3,696 2,350 703 1,153 4,206 -337

149 922 240 1,400 1,365 4,109 2,911 703 1,123 4,737 -694

149 933 240 1,370 1,815 4,547 3,498 703 1,101 5,301 -1,152

Share price and target Price MYR Price target 12m MYR Recommendation Key data per share Book value MYR P/Book X EPS gr10-13e %cagr Sales gr10-13e %cagr PE11e/EPS gr X Financial structure MYRm Market cap. Net int. bear debt MYRm Enterprise value MYRm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m MYR KLSE index 30days volatility % Company attributes Reuters ticker Reporting Q1 2011

2.02 2.60 BUY 1.28 1.58 24.9% 6.6% 0.4 2,579 701 3,280 1,276.7 49.8 -11/-14/46 -11/-14/46 3/1 212.9 32 SCRS.KL

CASH FLOW MYRm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

223 -97 -223 -52 0 -148

331 102 -76 -174 0 183

457 427 -176 -142 0 566

499 -209 -151 0 0 139

449 8 -107 0 0 350

551 6 -107 0 0 450

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed EV/Sales

MYR MYR MYR MYR million MYR X X % X X X X X

2008 0.07 0.07 0.02 1.3 1045.8 1.50 20.0 20.0 1.3 1.2 6.2 8.0 1.0 1.0

2009 0.10 0.10 0.05 1.5 1177.7 0.75 7.6 7.6 6.7 0.5 2.3 2.9 0.5 0.3

2010 0.13 0.13 0.07 1.5 1265.7 2.32 17.2 17.2 3.0 1.6 5.7 7.0 1.2 0.8

2011e 0.21 0.21 0.01 1.8 1276.7 2.02 9.6 9.6 0.3 1.1 3.9 4.6 0.8 0.6

2012e 0.25 0.25 0.01 2.3 1276.7 2.02 8.0 8.0 0.4 0.9 2.9 3.4 0.6 0.5

2013e 0.26 0.26 0.01 2.7 1276.7 2.02 7.7 7.7 0.4 0.7 2.0 2.3 0.3 0.4

Management Datuk Shahril Shamsuddin CEO Azmi Arshad CFO Address SapuraCrest Petroleum Sapura Mines 7 Jalan Tasik 43300 Selangor Durul Ehsan H.p.: www.sapuracrest.com.my Tel +60-3-8659-8800

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, MYR) 190 180 170 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr SapuraCrest Petroleum

Rebased consensus average forward EPS (12m, MYR) 145 140 135 130 125 120 115 110 105 100 95 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr SapuraCrest Petroleum

Revenue (MYRm) 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2007 2008 2009 2010

Revenue Growth 60% 50% 40% 30% 20% 10% 0% 2011e 2012e 2013e Revenue Growth -10%

EPS (MYR) 0.30 0.25 0.20 0.15 0.10 0.05 0.00 -0.05 2007 2008 2009 2010

DPS (MYR) 0.080 0.070 0.060 0.050 0.040 0.030 0.020 0.010 2011e 2012e 2013e DPS (MYR) 0.000

Revenue (MYRm)

EPS (MYR)

EBITDA (MYRm) 700 600 500 400 300 200 100 0 2007 2008 2009 2010

EBITDA margin 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 2011e 2012e 2013e EBITDA margin 0.0%

FCF (MYRm) 800 700 600 500 400 300 200 100 0 -100 -200

Dividend yield 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0%

2007

2008

2009

2010

2011e 2012e 2013e Dividend yield

0.0%

EBITDA (MYRm)

FCF (MYRm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2007 2008 2009 2010 2011e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2012e 2013e 0.0

Price/Book 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2007 2008 2009 2010 2011e 2012e 2013e ROE

ROE 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4%

EBIT margin

EBITDA margin

Price/Book

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Sector report > Offshore Supply

CH Offshore
AHTS rates development key driver in earnings
CH Offshore (CHO) is an offshore support player, providing chartering services through its fleet of AHTS vessels to the offshore oil and gas industry. The company has a business presence in South East Asia, Australia and the Middle East. Riding on the growth in the Australian offshore market, CHO currently has 3x 12,240bhp AHTS operating in the country. As a pure AHTS vessel owner, dayrates is the key earnings driver for the company. Most vessels of CHO are currently under term charters (6-12 months), which provide good earnings visibility over the next few quarters. Business divisions Marine services Chartering and managing a fleet of AHTS, with average age of 3-4 years old. Assets Fleet of 17x AHTS, with 7x mid-size 12,240bhp (2x newbuild), 8x 5,000+bhp, and 2x 5,400bhp (co-owned 49%).
Vessel name Beryl Amber Zircon Jasper Temasek Seppingan Temasek Attaka Garnet Topaz Peridot Aquamarine Amethyst Turquoise Tourmaline Coral Pearl Co-owned with Scomi Co-owned with Scomi Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS BHP 4800 4800 5000 5000 5400 5400 5400 5400 12240 12240 12240 12240 12240 12240 12240 5400 5400 Built 2005 2005 2004 2004 2001 2001 2005 2005 2009 2010 2008 2008 2007 2008 2008 2002 2002 Status Spot market Operating Operating Operating Operating Operating Operating Operating Operating Newbuild Operating Operating Operating Operating Operating Operating Operating Country Indonesia Indonesia Malaysia United Arab Emirates Indonesia Saudi Arabia United Arab Emirates United Arab Emirates Japan Japan Venezuela Venezuela Australia Australia Australia Malaysia Malaysia Client Spot Total Shell Adma-Opco Chevron Saudi Aramc o Adma-Opco Adma-Opco None PDVSA PDVSA Esso Esso Woodside Region Start Southeast Asia 5-Dec-2008 Southeast Asia 15-Dec-2007 Southeast Asia 11-Jan-2006 Middle East 5-May-2006 Southeast Asia 10-Dec-2008 Middle East 1-Oct-2007 Middle East 5-May-2006 Middle East 5-May-2006 Far East 8-Nov-2006 Far East 11-May-2007 South America 12-Mar-2008 South America 30-Jun-2008 Australia/New Zea 30-Nov-2009 Australia/New Zea 29-Nov-2009 Australia/New Zea 29-Nov-2009 End 14-Dec-2009 15-Dec-2010 14-Dec-2011 4-May-2014 17-Dec-2009 14-Dec-2009 5-May-2014 4-May-2014 23-Dec-2009 16-Feb-2010 12-Mar-2012 30-Jun-2012 30-Dec-2009 29-Dec-2009 29-Dec-2009 -

Source: ODS

Recent development No major news, company has been focusing on operation execution and on fixing its newbuild deliveries. Q3 earnings release. Please see separate report on 13th May for result update. Falcon Energy bought a 29% stake in CHO from Malaysia-based Scomi. The deal was completed on 28th April. We believe this is not a passive investment, Falcon will likely partner CHO to expand into the AHTS market, from its current existing fleet of mainly accommodation support barges. In Q1 earnings release, Management cited oversupply situation of offshore support vessels coupled with lower demand is likely to continue to put pressure on chartering rates and vessel utilization. Expected news-flow Possible fleet expansion through tie-ups with partners for markets such as Vietnam, China and Thailand, which are not easy to penetrate. Possible contracts for the 2x 12,240bhp newbuild AHTS vessels. Q2 2010 earnings release (year end June) in mid-Feb. Valuation DCF valuation - SGD/sh 0.71 and NAV valuation - SGD /sh 0.73. 2010 P/E of 8x and EV/EBITDA of 6x. We upgrade CHO to BUY based on valuations. But we do not see any near-term triggers until we are able to see visibility in dayrates improvement (when we re-rate the sector).

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Sector report > Offshore Supply Valuation summary DCF valuation - SGD/sh 0.71 and NAV valuation - SGD /sh 0.73. 2010 P/E of 8x and EV/EBITDA of 6x. We upgrade CHO to BUY based on valuations. Figure 81: Net Asset Value of Fleet SGD/sh 0.73
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Vessel name Beryl Amber Zircon Jasper Temasek Seppingan Temasek Attaka Garnet Topaz Peridot Aquamarine Amethyst Turquoise Tourmaline Coral Pearl Co-owned with Scomi Co-owned with Scomi Type AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS BHP 4800 4800 5000 5000 5400 5400 5400 5400 12240 12240 12240 12240 12240 12240 12240 5400 5400 Built 2005 2005 2004 2004 2001 2001 2005 2005 2009 2010 2008 2008 2007 2008 2008 2002 2002 Status Spot market Operating Operating Operating Operating Operating Operating Operating Operating Newbuild Operating Operating Operating Operating Operating Operating Operating Country Indonesia Indonesia Malaysia United Arab Emirates Indonesia Saudi Arabia United Arab Emirates United Arab Emirates Japan Japan Venezuela Venezuela Australia Australia Australia Malaysia Malaysia Client Spot Total Shell Adma-Opco Chevron Saudi Aramco Adma-Opco Adma-Opco None PDVSA PDVSA Esso Esso Woodside Yard built China - Fujian Mawei China - Fujian Mawei Singapore - Keppel Singmarine Singapore - Keppel Singmarine Singapore - Pan United Singapore - Pan United Malaysia - Piasau slipway Malaysia - Piasau slipway Japan - Universal Japan - Universal Japan - Universal Shipyards Japan - Keihin, Yokahama Japan - Universal Shipyards Japan - Universal Shipyard Japan - Universal Shipyards NAV Ownership (USDm) 100% 12 100% 12 100% 12 100% 12 100% 13 100% 13 100% 15 100% 15 100% 35 100% 35 100% 35 100% 35 100% 34 100% 35 100% 35 49% 6 49% 6 Ex rate 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 NAV (SGDm) 17 17 17 17 18 18 21 21 49 49 49 49 48 49 49 8 8

NAV Calculation NAV of own chartering fleet NAV of co-fleet Total assets 2010 NIBD + future capex NAV of all assets No of outstanding shares Equity value per share (SGD)

SGDm Method 487 Fair mkt value 8 Fair mkt value, assuming 50% debt 495 -20 516 705 0.73

Source: DnB NOR Markets

Using a DCF approach, our model values CHO at SGD/sh 0.71. Figure 82: DCF Valuation SGD/sh 0.71
Discounted value of free cashflow Value free cashflow 2010-2035 (USDm) Value free cashflow 2035+ (USDm) Total value free cashflow (USDm) Net debt 2010 (USDm) Net value free cashflow (USDm) Net value free cashflow (SGDm @USDSGD 1.4) FCFE per share (SGD) Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor Source: DnB NOR Markets Estimates 305 33 338 -20 358 501 0.71 -100% Risk free rate Interest rate Tax-rate Net WACC 4.0% 5.0% 0% 9% Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 330 106% -20 -6% 5.0% 0.9

0.0% 11.5

AHTS rates development key driver in earnings Out of the existing fleet of 17 AHTS vessels + 1 newbuild 12,240bhp AHTS delivered in end March, 16 of them are under term charters. With some of the vessels going off charters, we expect company to announce new contracts or contract extensions for these vessels. However, we expect rates to continue to trend down due to unfavorable supply/demand balance. For vessels contracted in 2008 and coming off charter this year, we expect new charter rates to decline substantially as 2008 was a very strong year.

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Sector report > Offshore Supply

CH OFFSHORE (CHOF.SI)
PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 46 0 -24 21 5 16 2 0 2008 43 0 -18 25 5 20 1 0 2009 69 0 -18 50 6 44 1 0 2010e 66 0 -21 45 8 36 0 0 2011e 78 0 -25 53 8 45 1 0 2012e 75 0 -25 50 8 42 0 0

0 17 1 0 40

0 21 0 0 40

0 45 0 0 56

0 37 0 0 37

0 46 0 0 46

0 42 0 0 42

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 88 7 11 38 144 121 11 12 144 -27

0 132 6 5 15 159 141 7 11 159 -8

0 168 6 9 19 203 187 3 12 203 -16

0 201 6 9 23 239 224 3 12 239 -20

0 201 6 10 69 287 270 3 14 287 -66

0 201 6 10 111 328 312 3 13 328 -108

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

57 -10 -1 -9 0 37

64 -15 -48 -4 0 -3

47 13 -42 -4 10 24

44 2 -41 0 0 4

41 13 -8 0 0 46

50 0 -8 0 0 42

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million SGD USD X X % X X X X

2007 0.05 0.05 0.04 0.2 764.5 0.68 0.48 9.2 9.2 8.3 3.1 15.8 21.2 2.6

2008 0.05 0.05 0.02 0.2 771.6 0.66 0.47 9.2 9.1 4.2 2.6 14.0 17.2 2.4

2009 0.08 0.08 0.02 0.3 705.1 0.48 0.34 4.3 4.5 5.8 1.3 4.3 5.0 1.1

2010e 0.05 0.05 0.00 0.3 705.1 0.57 0.40 7.7 7.7 0.5 1.3 5.8 7.0 1.1

2011e 0.07 0.07 0.00 0.4 705.1 0.57 0.40 6.1 6.1 0.7 1.0 3.9 4.6 0.8

2012e 0.06 0.06 0.00 0.4 705.1 0.57 0.40 6.7 6.7 0.6 0.9 3.4 4.0 0.5

Share price and target Price SGD Price USD Price target 12m SGD Recommendation Key data per share Book value USD P/Book X %cagr EPS gr09-12e Financial structure SGDm Market cap. Market cap. USDm Net int. bear debt USDm Enterprise value USDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m SGD High/Low 12m STI index % 30days volatility Company attributes Reuters ticker Supply Reporting Q3 2010

0.57 0.40 0.70 BUY 0.18 2.19 -7.8% 398 283 -8 274 705.1 93.9 -19/-13/23 -8/-11/-3 1/0 1915.7 30 CHOF.SI

Management CEO CFO Address CH Offshore 388 Jalan Ahmad Ibrahim

Gary Koh Teo Peck Bee

H.p.: www.choffshore.com.sg Tel +65 6861 1711

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, SGD) 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May CH Offshore

Rebased consensus average forward EPS (12m, USD) 160 150 140 130 120 110 100 90 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May CH Offshore

Revenue (USDm) 90 80 70 60 50 40 30 20 10 0 2006 2007 2008 2009

Revenue Growth 70% 60% 50% 40% 30% 20% 10% 0% 2010e 2011e 2012e Revenue Growth -10%

EPS (USD) 0.090 0.080 0.070 0.060 0.050 0.040 0.030 0.020 0.010 0.000 2006 2007 2008 2009

DPS (USD) 0.045 0.040 0.035 0.030 0.025 0.020 0.015 0.010 0.005 2010e 2011e 2012e DPS (USD) 0.000

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 60 50 40 30 20 10 0 2006 2007 2008 2009 2010e

EBITDA margin 80% 70% 60% 50% 40% 30% 20% 10% 2011e 2012e 0%

FCF (USDm) 60 40 20 0 -20 -40 -60 -80 -100 2006 2007 2008 2009

Dividend yield 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 2010e 2011e 2012e Dividend yield 0.0%

EBITDA (USDm)

EBITDA margin

FCF (USDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 35% 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

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Sector report > Offshore Supply

Falcon Energy
Expansion in AHTS sub-segment with stake in CHO
Falcon Energy (FEG) is an offshore support services player, providing a full spectrum of services for the development and production phases of the oil and gas sector. FEG completed a reverse-takeover of then Singapore-listed Sembawang Music in 2006. In April 2007, FEG announced the divestment of its musicrelated business to focus on marine and oil & gas industries. FEG's area of operations span across South East Asia, India and Australia. Clientele base includes some of the largest oil majors including Shell, ExxonMobil, Chevron, BP and TOTAL and oil contractors including McDermott, Halliburton, PetroChina, and COSL. Business divisions Marine services chartering and managing a fleet of offshore production support vessels, providing services such as accommodation, floating workshops, offshore hook-up & commissioning, offshore conductor piling, and hydraulic work-over. They are used mainly to support the activities of offshore oil platforms. Oilfield services provides oilfield services to oil & gas companies globally and its services include agencies, logistics and procurement services and other general supporting services. Oilfield projects - involves in ad-hoc projects and investments that are related to the offshore marine and oil & gas industry. Assets Fleet of 8x multi-purpose accommodation support barge vessels, 1x 5,000bhp AHTS, 1x seismic enabled vessel and 1x FSO (40% owned). Recent development Falcon agreed to buy a 29% stake from Scomi in fellow listed pure AHTS operator CH Offshore in Feb this year. The deal was completed on 28th April. We believe this is not a passive investment, Falcon will likely partner CHO to expand into the AHTS market, from its current existing fleet of mainly accommodation support barges. We are neutral on this purchase, based on our valuation on CHO. Q1 earnings release. Please see separate report on 13th May for result update. Expected news-flow Possible fleet expansion. Aims to double the fleet with the next few years. Possible contracts arrangements/ JV vessels (AHTS) with CHO. Possible contracts on FPSO; FEG will also actively develop other oilfield projects involving FPSO, FSO vessels and other production facilities in conjunction with its existing customer base. Valuation DCF valuation - SGD/sh 0.65 and NAV valuation - SGD /sh 0.71. 2010 P/E of 7x, 2010 EV/EBITDA of 7x. We upgrade Falcon to BUY, tp SGD/sh 0.70 based on valuations. But, we do not see any near term triggers.

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Valuation summary We have adopted discounted cash flow (DCF) and net asset value (NAV) valuation methodology to value Falcon. Below is the fleet summary of Falcon, which we arrived at a NAV of SGD/sh 0.71. For most of the vessels, we do not have the breakdown of each individual vessels potential free cash flow and details, which would have formed the floor value of the vessel. Hence, our valuation on those vessels without contract details are based on second hand values in the market, which are likely to be lower as they usually have no contracts attached. Figure 83: Net Asset Value of Fleet SGD/sh 0.71
Avg size Ownership (gross tons) (%) 5180 100% 5433 100% 4568 100% 4442 100% 5121 100% 4988 100% 1792 100% 2554 100% 5000bhp 100% 40% 100% Value per Value per vessel Net value vessel X rate (SGDm) (USDm) (USD/SGD) (SGDm) 25 1.4 36 36 25 1.4 36 36 19 1.4 27 27 18 1.4 26 26 23 1.4 33 33 20 1.4 28 28 15 1.4 21 21 16 1.4 23 23 14 1.4 20 20 100 1.4 142 57 30 1.4 43 43 305 348 84 75 115 623 45 578 814 Total value/ sh (SGD) 0.04 0.04 0.03 0.03 0.04 0.03 0.03 0.03 0.02 0.07 0.05 0.43 0.10 0.09 0.14 0.76 0.06 0.71 0.71

1 2 3 4 5 6 7 8 9 10 11

Name Type Support Station 1 (SS-1) Multi-purpose accom support Support Station 2 (SS-2) Multi-purpose accom support Support Station 3 (SS-3) Multi-purpose accom support Support Station 4 (SS-4) Multi-purpose accom support Support Station V (SS-V) Multi-purpose accom support Falcon Warrior (SS-6) Multi-purpose accom support Support Station 7 (SS-7) Multi-purpose accom support Energy Miner Multi-purpose work vessel Atlantic Challenger AHTS FSO Seismic Total fleet value NAV of Oilfield services (6x 2011 EV/EBITDA) NAV of Project services (6x 2011 EV/EBITDA) Market value of CHO (29%) Total asset values NIBD incl future capex (2010E) SGDm Equity value (SGDm) No of shares outstanding NAV per share

vessel vessel vessel vessel vessel vessel vessel

Source: DnB NOR Markets

Using a DCF approach, our DCF model values FEG at SGD/sh 0.65. Based on both of our valuation frameworks, we have a BUY rating on FEG, tp of SGD/sh 0.70. In terms of valuation and estimates, we did not model in any new contributions from unannounced newbuild vessels (if any) as the estimates would then become arbitrary. For this reason, there is upside impact on valuation if the economic returns of new vessels/ fleet additions add value. Figure 84: DCF Valuation SGD/sh 0.65
Discounted value of free cashflow Value free cashflow 2010-2035 (USDm) Value free cashflow 2035+ (USDm) Total value free cashflow (USDm) Net debt 2010 (USDm) Net value free cashflow (SGDm) Market value of CHO (29%) in USDm Total value (USDm) Total value per share (USD) Total value per share (SGD @ USDSGD 1.4) Terminal Growth Assumptions Nominal growth year 2035+ Factor Source: DnB NOR Markets Estimates 270 59 330 32 298 82 380 0.47 0.65 Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 314 91% 32 9% 6% 0.94

0.0% 11.5

Risk free rate Interest rate Tax-rate Net WACC

4% 5% 17% 9%

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Sector report > Offshore Supply

FALCON ENERGY (FEGL.SI)

PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 39 0 19 22 3 19 0 -1 0 18 0 0 18 2008 80 0 37 43 5 38 0 -1 0 37 1 0 36 2009 89 0 56 36 6 30 1 -1 0 32 1 1 28 2010e 95 0 48 47 7 40 9 -2 0 47 0 0 47 2011e 111 0 62 49 7 41 14 -2 0 53 0 0 53 2012e 115 0 66 49 7 42 13 -2 0 53 0 0 53

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 68 0 21 3 91 73 12 11 96 10

0 120 6 21 10 157 107 28 23 159 18

0 125 6 39 48 219 185 26 14 226 -22

0 125 108 46 44 324 233 76 22 331 32

0 125 108 54 92 380 285 76 26 387 -16

0 125 108 56 144 433 338 76 26 441 -68

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

21 -10 -76 12 0 -52

42 12 -60 16 0 10

35 -29 -11 -2 0 -7

54 2 -109 50 0 -4

60 -4 -7 0 0 48

60 -1 -7 0 0 52

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million SGD USD X X % X X X X

2007 0.03 0.03 0.00 0.1 658.4 0.73 0.52 18.8 18.8 0.0 4.7 15.8 18.4 4.2

2008 0.05 0.05 0.00 0.2 701.0 0.27 0.19 3.8 3.8 0.5 1.3 3.6 4.1 1.1

2009 0.03 0.03 0.00 0.2 814.1 0.78 0.56 16.1 16.1 0.0 2.4 11.9 14.3 2.1

2010e 0.06 0.06 0.00 0.3 814.1 0.54 0.38 6.6 6.6 0.0 1.3 7.3 8.7 1.1

2011e 0.06 0.06 0.00 0.4 814.1 0.54 0.38 5.9 5.9 0.0 1.1 6.1 7.1 0.8

2012e 0.07 0.07 0.00 0.4 814.1 0.54 0.38 5.9 5.9 0.0 0.9 5.0 5.8 0.6

Share price and target Price SGD Price USD Price target 12m SGD Recommendation Key data per share Book value USD P/Book X %cagr EPS gr09-12e Financial structure SGDm Market cap. Market cap. USDm Net int. bear debt USDm Enterprise value USDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m SGD High/Low 12m STI index % 30days volatility Company attributes Reuters ticker Supply Reporting Q2 2010

0.54 0.38 0.70 BUY 0.15 2.51 23.6% 440 312 -22 290 814.1 70.1 -27/-20/38 -16/-18/12 1/0 1915.7 40 FEGL.SI

Management Tan Pong Tyea CEO Gan Wah Kwang CFO Address Falcon Energy 10 Anson Road Floor 22-14 H.p.: www.falconenergy.com.sg Tel +65 6538 7177

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, SGD) 240 220 200 180 160 140 120 100 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Falcon Energy

Rebased consensus average forward EPS (12m, USD) 150 145 140 135 130 125 120 115 110 105 100 95 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Falcon Energy

Revenue (USDm) 140 120 100 80 60 40 20 0 2006 2007 2008 2009

Revenue Growth 120% 100% 80% 60% 40% 20% 2010e 2011e 2012e Revenue Growth 0%

EPS (USD) 0.070 0.060 0.050 0.040 0.030 0.020 0.010 0.000 2006 2007 2008

DPS (USD) 0.0012 0.0010 0.0008 0.0006 0.0004 0.0002 2009 2010e 2011e 2012e DPS (USD) 0.0000

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 60 50 40 30 20 10 0 2006 2007 2008 2009 2010e

EBITDA margin 70% 60% 50% 40% 30% 20% 10% 2011e 2012e 0%

FCF (USDm) 60 40 20 0 -20 -40 -60 -80 2006 2007 2008 2009

Dividend yield 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 2010e 2011e 2012e Dividend yield 0.00%

EBITDA (USDm)

EBITDA margin

FCF (USDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

ROE 40% 35% 30% 25% 20% 15% 10% 5%

2006

2007

2008

2009

2010e 2011e 2012e ROE

0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 76

26.05.2010

Sector report > Offshore Supply

KS Energy
Distribution business to support earnings before drilling segment picks up
KS Energy (KSE) is a leading one-stop energy services provider to the global oil and gas, marine and petrochemical industries. Core activities include distribution and capital equipment (jack-up drilling rigs, land rigs, liftboat) charter and services. In the distribution business, KSE ranks as one of the leading distributors of oil and gas equipment, spare parts, consumables and industrial products in the region. It holds sole-distributorships in several well-established brands in the industry. With the recently announced deal to consolidate its distribution arm with Aqua-Terra and SSH, the new entity KS Distribution (if the deal is successful) will distribute more than 60,000 oil and gas related products comprising more than 140 international brands of products. In the capital equipment business, following the acquisition of Norway's Atlantic Oilfield Services (AOS) in May 2007, KSE has the capability to supply, as well as operate capital equipment, including onshore and offshore rigs. Integrating the twin capabilities of AOS and KSE's drilling support team, the group has the ability to provide a full suite of services directly to the oil & gas companies, tendering for drilling contracts in the market. Business divisions Rig capital equipment (drilling) services provides onshore and offshore drilling services through the chartering of its fleet of jack-ups, land rigs. Distribution services distributes more than 60,000 oil and gas related products comprising more than 140 international brands of products. Assets Fleet of 3x jack-up drilling rigs, 1x jack-up drilling rig equipment, 1x accommodation jack-up, 1x jack-up liftboat (50% stake), 6x land drilling rigs, and 1x non-core seismic vessel (low end). Intangible - distribution rights and networks. Recent development Acquisition deal to consolidate Aqua-Terra and SSH in Dec 2009, deal was completed in May 2010. 93m share warrants issue in June 2009, rights to exercise at price of SGD/sh 1.40 in Aug 2011. Siemens and KSE mutually terminates a firm charter for jack-up liftboat Titan-2 in Jan this year. Additional convertible bond issue in May raising up to SGDm 57, and previous issue at SGDm 50, bring total issue to SGDm 107. Q1 earnings release. Please see separate report on 17th May for result update. Expected news-flow Possible contract for newbuild jack-up drilling rig KS Endeavor and liftboat Titan-2.
Please note DnB NOR Markets is acting as Lead Arranger and Placement Agent of the convertible bond issue.

Valuation DCF valuation - SGD/sh 1.53 and NAV valuation - SGD /sh 1.46. BUY rating reiterated, tp of SGD/sh 1.50. 2010 EV/EBITDA 6.8x.

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26.05.2010

Sector report > Offshore Supply Valuation summary DCF valuation - SGD/sh 1.53 and NAV valuation - SGD /sh 1.46. BUY rating reiterated, tp of SGD/sh 1.50. 2010 EV/EBITDA 6.8x.

Figure 85: Net Asset Value of Fleet SGD/sh 1.46

Year built/ Yard refurbis Location Client built hed Egypt Petrobel Japan 2008 UAE MIS Sharja 2010 Denmark Maersk 2004 China COSL Dalian Shi 2003 North Sea 2009 US 2007 US 2007 Kurdistan TTOPCO (Adda2008 Dubai AL-Thani 2008 Pakistan BP 2007 Tunisia Eni 2008 Denmark Maersk Drydocks 2005 Avg contract Costper length vessel FMV (mths) (USDm) (USDm) 30 120 80 180 110 16 85 75 84 56 38 60 60 20 16 20 16 22 25 18 25 18 18 25 18 18 28 18 18 0 5 na 20 Total net FMV per vessel value (SGDm) (SGDm) 112 112 154 77 105 105 53 53 84 42 22 11 22 11 25 25 25 25 25 25 25 25 7 7 28 28 547 273 84 904 272 33 130 176 729 407 499 1.46

Vessel KS Medstar-1 KS Endeavor Atlantic Rotterdam Yu Song Titan 2 KS Challenger 1 KS Challenger 3 Discoverer 1 Discoverer 2 Discoverer 3 Discoverer 4 Esbjerg KS Explorer

Type Jack-up drilling rig Jack-up drilling rig Accommodation jack-up Jack-up drilling rig Jack-up liftboat Landrig Landrig Landrig Landrig Landrig Landrig Jack-up drilling rig Seismic vessel

Status Term charter Available Term charter Drylease equip Available Drylease Drylease Term charter Term charter Term charter Term charter MC with Prosafe Spot market SEA

Owner ship 100% 50% 100% 100% 50% 50% 50% 100% 100% 100% 100% 0% 100%

Avg size 300ft 300ft 250ft 300ft 200ft 1300 HP 1300 HP 1500 HP 1500 HP 1500 HP 2000 HP 250ft -

X rate (USD/SGD) 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 -

Total fleet value Distribution business, 10x 2011E EBITDA, 56% ownership Other financial assets Total asset values NIBD (2010E) incl of SGDm 50 convert bonds* issued in Jan 10 Capex commitments outstanding Proceeds from warrants, 93m at SGD/sh 1.4 assuming exercised Adj NIBD Equity value (SGDm) No of shares outstanding incl 59mn share issue related to acquisitions No of shares incl 93m warrants NAV per share

Source: DnB NOR Markets, * Given our tp of SGD/sh 1.50, we do not expect conversion of the convert bonds

Figure 86: DCF Valuation SGD/sh 1.53

Discounted value of free cashflow Value free cashflow 2010-2035 (SGDm) Value free cashflow 2035+ (SGDm) Total value free cashflow (SGDm) Net debt 2010 (SGDm) Net value free cashflow (SGDm) FCFE per share (SGD) Other financial assets (FA) Total value per share (SGD) Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor 660 150 810 273 537 1.32 84 1.53 91% Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 504 65% 273 35% 7% 1.2

0.0% 11.0

Risk free rate Interest rate Tax-rate Net WACC

4% 5% 17% 9%

Source: DnB NOR Markets Estimates

Distribution business to provide earnings support Looking ahead for remaining 2010, we believe the distribution business will provide earnings cushion to the expected weaker drilling segment performance. We reiterate our view that the consolidation (completed in May) is positive (synergies) for the company as it allows KS to streamline, integrate and strengthen its distribution services through stronger networks, cross sellings and shared services. KS is also able to tap into the new markets, such as India and Africa, of its new strategic partner Actics, who is well-established in these markets. Outlook positive for distribution activities Based on market chatters, the industry is starting to see higher business activities in the industrial sector in Asia through higher volume in parts (eg ball bearings) and equipments ordered. This is inline with the general outlook provided by the management. Potential contracts for KS Endeavor and Titan 2 expected soon We expect contract fixtures for the newbuild jack-up drilling rig KS Endeavor and liftboat Titan 2 within this quarter, which we had initially expected in the earlier this quarter. We are modeling 75' USD/day and 45' USD/day for the Endeavor and Titan 2.

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Sector report > Offshore Supply

KS ENERGY (KSTL.SI)
PROFIT & LOSS SGDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 403 0 335 68 13 55 53 -15 0 136 13 6 74 2008 611 0 509 103 26 76 15 -26 0 77 5 8 52 2009 490 0 405 85 34 51 18 -17 0 52 9 4 40 2010e 659 0 548 111 33 78 -3 -17 0 58 12 9 38 2011e 820 0 687 133 35 98 7 -19 0 85 14 16 55 2012e 898 0 759 140 35 104 7 -19 0 92 16 18 58

BALANCE SHEET SGDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

29 128 113 414 85 770 288 361 172 821 276

26 417 141 272 68 925 471 346 166 983 277

25 406 139 242 72 885 514 308 117 939 236

26 406 139 355 85 1,010 506 358 152 1,016 273

26 406 139 441 108 1,120 577 358 191 1,126 250

26 406 139 484 160 1,215 654 358 208 1,221 198

CASH FLOW SGDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

108 -199 -166 309 0 52

92 132 -340 -15 0 -130

75 -17 -16 -37 0 5

61 -61 -37 50 0 13

106 -49 -34 0 0 23

112 -26 -34 0 0 52

Share price and target Price SGD Price target 12m SGD Recommendation Key data per share Book value SGD P/Book X EPS gr09-12e %cagr Financial structure Market cap. SGDm Net int. bear debt SGDm Enterprise value SGDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m SGD High/Low 12m STI index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

1.17 1.50 BUY 1.40 0.84 10.0% 476 236 712 406.6 50.1 -15/-7/1 -6/-5/-21 1/1 2701.2 29 KSTL.SI

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

SGD SGD SGD SGD million SGD X X % X X X X

2007 0.31 0.31 0.09 1.2 236.1 3.19 10.2 10.2 2.8 2.6 15.2 18.7 1.7

2008 0.15 0.14 0.06 1.4 336.7 0.99 6.4 7.1 5.8 0.7 6.0 8.0 0.8

2009 0.10 0.11 0.00 1.3 406.6 1.24 12.6 11.5 0.2 1.0 8.7 14.4 1.0

2010e 0.09 0.09 0.00 1.2 406.6 1.17 12.7 12.7 0.2 0.9 6.8 9.7 0.9

2011e 0.13 0.13 0.00 1.4 406.6 1.17 8.7 8.7 0.2 0.8 5.5 7.4 0.8

2012e 0.14 0.14 0.00 1.6 406.6 1.17 8.2 8.2 0.2 0.7 4.8 6.5 0.7

Management CEO CFO Address KS Energy 4 Tuas Avenue 5

Wiluan Kris Wong Soon Yin

H.p.: www.ksenergy.com.sg Tel +65 6415 0808

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, SGD) 125 120 115 110 105 100 95 90 85 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May KS Energy

Rebased consensus average forward EPS (12m, SGD) 105 100 95 90 85 80 75 70 65 60 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May KS Energy

Revenue (SGDm) 1,000 900 800 700 600 500 400 300 200 100 0

Revenue Growth 60% 50% 40% 30% 20% 10% 0% -10% -20% -30%

EPS (SGD) 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 2006 2007 2008 2009

DPS (SGD) 0.100 0.090 0.080 0.070 0.060 0.050 0.040 0.030 0.020 0.010 0.000

2006

2007

2008

2009

2010e 2011e 2012e Revenue Growth

2010e 2011e 2012e DPS (SGD)

Revenue (SGDm)

EPS (SGD)

EBITDA (SGDm) 160 140 120 100 80 60 40 20 0 2006 2007 2008 2009

EBITDA margin 18.0% 17.5% 17.0% 16.5% 16.0% 15.5% 15.0% 2010e 2011e 2012e EBITDA margin 14.5%

FCF (SGDm) 100 50 0 -50 -100 -150 -200 -250 -300 2006 2007 2008 2009

Dividend yield 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 2010e 2011e 2012e Dividend yield 0.0%

EBITDA (SGDm)

FCF (SGDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 35% 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 80

26.05.2010

Sector report > Offshore Supply

Otto Marine
Quality of order backlog matters
Otto Marine is an offshore marine group engaging in shipbuilding, shiprepair and conversion and ship chartering, with a specialized focus on complex, sophisticated and environment friendly offshore support vessels. Otto Marine currently owns 14 offshore support vessels (OSVs), with newbuild plan up to 24 OSVs by 2010. The company also owns a fleet with strategic partnerships tie-ups, (4 OSVs at the moment, with newbuild plan to increase to 21 OSVs by 2010). Otto Marine provides shipbuilding (including turnkey projects) and shiprepair services from its well-equipped and strategically located Batamec Shipyard in Indonesia. Business divisions Fleet (shipchartering), 57% of NAV. 1) Own chartering fleet, 2) Chartering fleet with strategic partnerships. Yard (shipbuilding & shiprepair), 43% of NAV. Assets Chartering fleet (owns 100%): 5x 3,600dwt tugs, 5x 10,000dwt barges, 1x 61m maintenance work vessel, 2x 10,800bhp AHTS, 1x 6,000bhp AHTS. 14 vessels in total. Chartering fleet newbuilds (owns 100%, delivery till Q22010): 1x 6,000bhp AHTS, 5x 3,600bhp AHT, 2x 300pax accommodation barge, 1x 61m maintenance work vessel, 1x seismic vessel. 24 vessels after newbuild deliveries. Fleet with strategic partnerships (owns 35-49%): 3x 5,150bhp AHTS, 1x 300pax accommodation barge. 4 vessels now. Fleet with strategic partnerships newbuilds (owns 35-49%): 1x 5,150bhp AHTS, 1x 300pax accommodation barge, 3x 3,200dwt PSVs, 4x 8,000bhp AHTS, 4x 10,000bhp AHTS, 2x 6,000bhp AHTS, 2x 75m maintenance work vessels. Fleet count to increase to 21 vessels after newbuilds. Yard assets: Facilities in Batamec Shipyard in Indonesia drydock of 145x40x7m with overhead crane, a Syncrolift covering a total area of 26,000m2, wharf length 650m. Recent development Arbitration with GC Rieber over shipbuilding contract under the strategic partnership agreement. Seismic expansion with the major acquisition of Singapore-based Reflect Geophysical. Contracts secured (mainly off New Zealand) at more than USDm 20 since Otto entered into the JV with Reflect in Nov 2009. Q1 earnings release. Please see separate report on 17th May for result update. Mosvold has cancelled the 1st (out of four) high-end 21,000bhp AHTS with Otto on 19th May. Expected news-flow New chartering contracts in the region. Newbuild orders (especially the larger and more specialized vessels) in the region, such as Indonesia and Australia. New seismic contracts in the region. Arbitration with GC Rieber likely to be concluded. Valuation NAV valuation - SGD /sh 0.39. 2010 P/E of 12x and EV/EBITDA of 12x. We keep our HOLD recommendation on OTML but cut tp from SGD/sh 0.45 to SGD/sh 0.35, based on valuation. We caution investors on the potential cancellation risks in existing orderbook (97% making up of 4 large vessels, not fully-financed yet), which would be negative triggers for the share price. We advise investors to stay away until the orderbook risks subside.

DnB NOR Markets is compensated by SGX under the SERI (SGX Equity Research Insights) Sector Model for coverage of this company. The content, estimates and recommendation are solely based on DnB NOR Markets own independent judgement and the compensation is not dependent on this.

DnB NOR Markets - 81

26.05.2010

Sector report > Offshore Supply Valuation summary NAV valuation - SGD /sh 0.39. 2010 P/E of 12x and EV/EBITDA of 12x.

Figure 87: Net Asset Value of total fleet (own + strategic partnerships) SGD/sh 0.39
Own chartering fleet No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Total Size Type Tug Vessel 3600 dwt Tug Vessel 3600 dwt Tug Vessel 3600 dwt Tug Vessel 3600 dwt Tug Vessel 3600 dwt Barge 10000 dwt Barge 10000 dwt Barge 10000 dwt Barge 10000 dwt Barge 10000 dwt Maint. work vessel 61 m AHTS 10800 bhp AHTS 10800 bhp AHTS 6000 bhp Maint. work vessel 61 m Work barge 300 pax AHTS 6000 bhp 40M AHT 3600 bhp 40M AHT 3600 bhp 40M AHT 3600 bhp 40M AHT 3600 bhp 40M AHT 3600 bhp Barge 300 pax 6 streamer seismic PSV 3200 dwt Mosvold's cancelled AHTS 21000 bhp Contract Chartered Chartered Chartered Under nego Under nego Chartered Chartered Chartered Under nego Under nego Chartered Chartered Chartered Chartered Chartered Available Chartered Under nego Under nego Available Available Available Available Available Newbuild Region Middle East Middle East Middle East Middle East Middle East Middle East Asia Pacific Australia Australia Asia Pacific Asia Pacific Asia Pacific Yard built Malaysia Malaysia Malaysia Malaysia Malaysia Batam Batam Batam Batam Batam China Batamec Batamec Batamec China China China China China China China China China Batamec Batamec Contract type Delivery Age Time charter 2007 2 Time charter 2007 2 Time charter 2007 2 Time charter 2008 1 Time charter 2008 1 Time charter 2007 2 Time charter 2007 2 Time charter 2008 1 Time charter 2008 1 Time charter 2008 1 Bareboat Q209 Bareboat Q209 Bareboat Q209 Bareboat Q209 Bareboat Q409 Available Q409 Bareboat Q409 Available Q409 Available Q409 Available Q110 Available Q110 Available Q210 Available Q110 Available Q210 Newbuild Q210 NAV (USDm) 3 3 3 3 3 3 3 3 3 3 15 30 30 16 15 30 14 8 8 8 8 8 35 52 75 382 Ex rate 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 NAV Owner (SGDm) ship 4 100% 4 100% 4 100% 4 100% 4 100% 4 100% 4 100% 4 100% 4 100% 4 100% 21 100% 42 100% 42 100% 22 100% 21 100% 42 100% 20 100% 11 100% 11 100% 11 100% 11 100% 11 100% 49 100% 73 74% 105 100% 535

Chartering fleet with strategic partners No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 Total Type AHTS AHTS AHTS Work barge 57.5m- AHTS Work barge MT 6009 - MFSV MT 6009L - MFSV MT 6009L - MFSV AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS 67m x 100T BHP AHTS 67m x 100T BHP AHTS Maint. work vessel Maint. work vessel Size 5150 5150 5150 300 5150 300 3200 3200 3200 8000 8000 8000 8000 10000 10000 6000 6000 10000 10000 75 75 Contract Chartered Chartered Chartered Chartered Contract Contract Contract Contract Contract Available Available Available Available Available Available Chartered Chartered Available Available Available Available Region Australia Australia Australia Asia Pacific Europe Europe Europe Europe Europe Europe Europe Yard built China China China Batamec China China Batamec Batamec Batamec China China China China Batamec Batamec China China China China China China Contract type Delivery Age Bareboat 2009 Bareboat 2009 Bareboat 2009 Time charter Q407 Contract Q309 Contract 4Q09 Contract 4Q09 Contract Q210 Contract Q310 Available Q110 Available Q410 Available Q310 Available Q410 Bareboat 1Q10 Bareboat 1Q10 Chartered 4Q09 Chartered 4Q09 Available 3Q10 Available 4Q10 Available 3Q10 Available 4Q10 NAV (USDm) 14 14 14 34 14 35 38 38 38 23 23 23 23 32 32 16 16 30 30 25 25 Ex rate 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 1.4 NAV Owner funding (SGDm) ship on ves 20 49% 70% 20 49% 70% 20 49% 70% 48 49% 30% 20 45% 70% 49 49% 70% 53 49% 60% 53 49% 60% 53 49% 60% 32 49% 70% 32 49% 70% 32 49% 70% 32 49% 70% 45 49% 70% 45 49% 70% 22 49% 70% 22 49% 70% 42 35% 70% 42 35% 70% 35 35% 70% 35 35% 70% Debt NAV (SGDm) Otto 14 3 14 3 14 3 14 16 14 3 34 7 32 10 32 10 32 10 23 5 23 5 23 5 23 5 31 7 31 7 16 3 16 3 29 4 29 4 25 4 25 4 491 121

bhp bhp bhp pax bhp pax dwt dwt dwt bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp m m

NAV Calculation NAV of own chartering fleet NAV of fleet with strategic partnerships NAV of yard Total assets 2010 NIBD + future capex Value of WC end 2010 & 2011 NAV of all assets No of outstanding shares post equity issue Equity value per share (SGD)

SGDm 535 121 325 981 465 221 736 1890 0.39

Method Fair mkt value Fair mkt value 6x 2011 EV/EBITDA

Assumption: Long term WC need of SGDm 200 vs currently 421

Source: DnB NOR Markets

Cancellation of the 1st high-end 21,000bhp AHTS from Mosvold Cancellation of this AHTS is inline with our expectation, as stated in our previous reports. Status of the vessel now is unclear. We believe it will be challenging for Otto to either sell or charter (bareboat) this vessel. We reiterate our view that potential cancellation risks on the remaining large vessels remain. Current order book is undiversified, with 3x large AHTS and 1x OCV making up 97% of total backlog. Mosvold will be entitled to get the refund deposits, estimated at around USDm 23 (30% of the contracted value of USDm 77). Provisions of SGDm 10-15 have already been booked in Q1 in view of likelyhood of cancellation as the vessel has past the agreed cancellation date 30th April.

DnB NOR Markets - 82

26.05.2010

Sector report > Offshore Supply Valuation impact and options for Otto We currently have a NAV of USDm 75-85 for such size AHTS, hence impact on valuation (vs Otto's building cost) may not be negative if Otto is able to sell the vessel when completed. However, we caution that it will be challenging to sell such large AHTS now, given the over-supply situation. And if Otto chooses to take the vessel under its own chartering fleet, we believe it will also be challenging for Otto to get decent returns (dayrates) as Otto has to do bareboat charter, given that it does not have the expertise to operate such large vessel. We believe Mosvold is unable to market this vessel (for charter/sale) which led to the cancellation decision. Risks of cancellations for the remaining 3x AHTS We reiterate our concerns on the remaining 3x similar size AHTS which may see cancellation risks. Please see previous reports for details on the Mosvold's vessels. Orderbook undiversified Current order backlog is undiversified with 4 large vessels (3x Mosvold AHTS and 1x OCV) making up 97% of the backlog. And these vessels are not fully financed at the moment. Given that the 1st AHTS is cancelled, we do see point of concern for the remaining 3x 21,000bhp Mosvold AHTS. In the event that the remaining 3x Mosvold vessels are canceled, the refund guarantees would amount to USDm 60, based on our estimates. Please see separate report on 7th May for more details on the Mosvold vessels. The offshore construction vessel (OCV) is ordered by the Norwegian client Norshore, which was established in April 2007. Currently, based on our understanding, the company has no operational fleet. And the OCV, currently under construction at Otto's Batamec yard, is a new concept vessel, using a new patented drilling and lifting concept with very low centre of gravity. It serves as a drilling vessel and in our opinion, building this vessel will be very complex, judging by the drilling, well-intervention packages and design. Hence, we do not rule out delays in this vessel and the rest of the 3x Mosvold vessels. In the scenario that all vessels are delayed or cancelled, the impact on Otto's yard image and cashflows (to finance the vessels under its own book) would be negative for the company. We advise investors to stay away until the orderbook risks subside.

Figure 88: Current order backlog at SGDm 319, 70% expected to booked in Q2-Q4 2010
Vessel No Type 1 AHTS 3 Utility vessel 4 AHTS 5 AHTS 6 AHTS 2 Work barge 7 PSV 8 AHTS 9 PSV 10 AHTS 11 PSV 12 AHTS 13 AHTS 14 OCV Total Size 10,800 55 5,150 5,150 10,800 300 3,200 21,000 3,200 21,000 3,200 21,000 21,000 115 Deliver Expected y delivery Q309 Q309 Q309 Q309 Q309 Q309 Q309 Q309 Q309 Q309 Q409 Q409 Q409 Q409 Q110 Q210 Q110 Q110 Q210 Q310 Q210 Q210 Q410 Q211 Q311 Q211 Q411 Q411 Est price (USDm) 26 10 15 15 26 29 34 77 43 77 43 83 85 131 694 Ex rate 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 1.5 Est % of price completi Completed Balance (SGDm) on est (SGDm) (SGDm) 39 100% 39 0 15 100% 15 0 22 100% 22 0 22 100% 22 0 39 100% 39 0 44 100% 44 0 51 100% 51 0 116 100% 116 0 65 100% 65 0 116 80% 92 23 65 85% 55 10 125 45% 56 68 128 33% 41 86 197 33% 65 132 1041 722 319 % of orderbook 0% 0% 0% 0% 0% 0% 0% 0% 0% 7% 3% 21% 27% 41% 100%

bhp metres bhp bhp bhp pax tonnes bhp tonnes bhp tonnes bhp bhp metres

Source: DnB NOR Markets, company

Seismic contributions encouraging but too early to be optimistic Current outstanding backlog is around SGDm 20 which we expect Reflect to recognize over the next few quarters. Though contract wins are encouraging, we reiterate our view that the high competition in New Zealand seismic market will put pressure on margins. DnB NOR Markets - 83

26.05.2010

Sector report > Offshore Supply

Looking at larger and more specialized vessel order Going forward, the company's strategy for the yard is targeting larger and more specialized vessels (such as construction vessel, or shallow water drilling vessel). The values will on average range from USDm 70-120. We are neutral to such a move as we do not expect good margins (risk of delays and project executions) in building such vessels given the complexity and learning curve. We are expecting USDm 135 (initial est USDm 245) for remaining 2010. Figure 89: New orders assumptions
In SGDm Newbuild orders** (historical) AHTS/ AHT PSVs Utility vessel Offshore c onstruction vessel Accomodation work barge Total estimated orders 2006 541 na na na na na 2007 606 na na na na na 2008 522 na na na na na 2009E 83 0 0 0 0 0 2010E na 75 60 0 0 0 135 2011E na 113 60 15 100 40 328 2012E na 130 60 15 100 40 345

Source: DnB NOR Markets

DnB NOR Markets - 84

26.05.2010

Sector report > Offshore Supply

OTTO MARINE (OTTO.SI)

PROFIT & LOSS SGDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 314 0 -244 70 2 67 0 1 2008 484 0 -388 96 3 93 6 -13 2009 425 0 -354 71 6 65 3 -11 2010e 564 0 -472 92 12 80 4 -15 2011e 405 0 -322 83 12 71 6 -18 2012e 365 0 -288 77 12 66 6 -17

0 68 1 12 42

0 87 1 3 57

0 56 2 0 52

0 69 6 0 54

0 59 10 0 49

0 54 9 0 45

BALANCE SHEET SGDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

5 91 9 263 214 582 54 185 339 578 -29

40 149 56 484 249 978 219 313 447 978 64

45 266 57 487 251 1,251 390 449 413 1,252 199

45 368 79 876 164 1,678 539 629 511 1,679 465

45 368 79 447 488 1,573 588 634 351 1,574 147

45 368 80 403 510 1,551 633 604 315 1,552 95

CASH FLOW SGDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

56 10 -84 150 0 132

63 -138 -145 127 0 -93

58 -5 -274 137 0 -83

66 -291 -136 180 95 -86

61 270 -12 5 0 324

57 8 -12 -30 0 22

Share price and target Price SGD Price target 12m SGD Recommendation Key data per share Book value SGD P/Book X EPS gr09-12e %cagr Financial structure Market cap. SGDm Net int. bear debt SGDm Enterprise value SGDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m SGD STI index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

0.39 0.35 HOLD 0.22 1.75 -5.1% 728 64 792 1,890.4 32.1 -23/-20/16 -14/-19/-5 1/0 2723.9 42 OTTO.SI

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

SGD SGD SGD SGD million SGD X X % X X X X

2007 0.04 0.04 0.00 0.1 994.1

nm

2008 0.06 0.06 0.00 0.2 994.1 0.37 6.4 6.4 0.0 1.7 4.5 4.6 0.8

2009 0.03 0.03 0.00 0.2 1662.2 0.41 13.0 13.0 0.0 1.7 12.4 13.6 1.1

2010e 0.03 0.03 0.00 0.3 1662.2 0.39 11.8 11.8 0.0 1.2 12.0 13.8 0.9

2011e 0.03 0.03 0.00 0.4 1662.2 0.39 13.1 13.1 0.0 1.1 9.5 11.1 0.6

2012e 0.03 0.03 0.00 0.4 1662.2 0.39 14.3 14.3 0.0 1.0 9.5 11.2 0.6

Management Lee Kok Wah CEO Michael See Kian Heng CFO Address Otto Marine 9 Temasek Boulevard d33-01 Suntec Tower 2 H.p.: www.ottomarine.com Tel +65 68632366

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

DnB NOR Markets - 85

26.05.2010

Sector report > Offshore Supply

Rebased price (12m, SGD) 170 160 150 140 130 120 110 100 90 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Otto Marine

Rebased consensus average forward EPS (12m, SGD) 140 135 130 125 120 115 110 105 100 95 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Otto Marine

Revenue (SGDm) 600 500 400 300 200 100 0 2006 2007 2008 2009

Revenue Growth 140% 120% 100% 80% 60% 40% 20% 0% -20% 2010e 2011e 2012e Revenue Growth -40%

EPS (SGD) 0.070 0.060 0.050 0.040 0.030 0.020 0.010 0.000 2006 2007 2008 2009

DPS (SGD) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0

2010e 2011e 2012e DPS (SGD)

Revenue (SGDm)

EPS (SGD)

EBITDA (SGDm) 120 100 80 60 40 20 0 2006 2007 2008 2009

EBITDA margin 25% 20% 15% 10% 5% 0%

FCF (SGDm) 400 300 200 100 0 -100 -200 -300 -400 2006 2007 2008

Dividend yield 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2010e 2011e 2012e EBITDA margin

2009 2010e 2011e 2012e Dividend yield

EBITDA (SGDm)

FCF (SGDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

ROE 400% 350% 300% 250% 200% 150% 100% 50%

2006

2007

2008

2009

2010e 2011e 2012e ROE

0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 86

26.05.2010

Sector report > Offshore Supply

Swiber Holdings
Well-positioned for the upbeat EPCIC market
Swiber Holdings is an offshore oil service company, focusing in providing engineering, procurement, construction, installation and commissioning (EPCIC) and offshore supply services to the oil and gas industry. Swiber offers integrated solutions under three core business units - Offshore Construction Services (EPCIC), Offshore Support Services (OSS) and Offshore Development Services (ODS). Swiber is a niche player in an interesting shallow water market, where we are expecting healthy flow of subsea projects in the regions - shallow Brazil, India, Vietnam and Thailand. We believe the company is wellpositioned for contracts in these countries through its joint ventures with established local partners and direct contacts with the major oil companies. For instance, Swiber is partnering Alam Maritime in Malaysia, CUEL in Thailand, and Rawabi in Saudi Arabia. The company has a solid order book of over USDbn 1 (as of 21st May 2010). Competition within this segment is limited with earnings less vulnerable than the offshore supply vessel market. However, margins can be volatile at times as these are projectbased jobs. Business divisions Offshore EPCIC services core business of providing full suite of Offshore Construction Services encompassing Engineering, Procurement, Construction, Installation and Commissioning (EPCIC) services. Offshore support services offshore marine fleet and diving supportu unit is utilised mainly to support Swiber's offshore EPCIC activities, presenting enhanced efficiency, timely project delivery and competitive pricing. Shipyard support role for own fleet servicing and upgrading, yard facilities with a comprehensive and growing capability for ship repair, conversion and construction, subsea support services and a widening range of engineering design, fabrication and offshore engineering services. Assets Fleet of 52 offshore vessels: 10x CSVs, 4x utility tugs, 5x AHT, 9x AHTS, 7x flat-top barges, 10x deck cargo barges, 3x newbuild AHTS, 2x newbuild subsea vessels, and 2x newbuild CSVs. Recent development Contracts over USDm 450 secured ytd. Proposed listing of subsea business (shallow waters) on Catalist by Q4. Q1 earnings release. Please see separate report on 17th May for result update. Secured a USDm 618 EPCIC contract from a leading oil and gas operator (undisclosed) off India, with its consortium partner on 20th May. We expect Swiber's share to be around 25% of the contract. Expected news-flow Possible new EPCIC contracts, currently believed to be bidding up to USDbn 5 project tenders (USDbn 1 in Vietnam, USDbn 2 in Myanmar & India, USDbn 2 in Middle East), supporting our view that the upcoming EPC project pipeline continues to look promising. Valuation DCF valuation - SGD/sh 1.52 and NAV valuation - SGD /sh 1.46. 2010 P/E of 12x and EV/EBITDA of 9x. Q1 margins on the upside vs our expectation, ability to execute well on current order backlog (USDbn 1) raises confidence level of future margins on new orders. We see potential new order wins as positive share price catalyst. BUY recommendation reiterated.

DnB NOR Markets - 87

26.05.2010

Sector report > Offshore Supply Valuation summary DCF valuation - SGD/sh 1.52 and NAV valuation - SGD /sh 1.46. 2010 P/E of 12x and EV/EBITDA of 9x. Figure 90: Net Asset Value of Fleet SGD/sh 1.46
No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Total Vessel Swiber Glorious (for subsea listing) Swiber Conquest Da Li Hao Swiber SLB-1 Swiber Supporter (for subsea listing) Swiber Concorde Swiber Victorious Swiber Chai Aziz Swiber Eagle Swissco 99 Swiber Raven Swiber Captain Swiber Explorer Swiber Navigator Swiber Valiant Swiber Gallant Swiber Singapore Swiwar Challenger Swiwar Venturer Swiwar Victor Swiber Trader Swiber Ada Swiber Torunn Swiber Sandefjord Swiber Else Marie Swiber 123 Swiber 251 Swiber 252 Swiber 253 (sold in Q1) Swiber 254 (sold in Q1) Swiber 255 Swiber 282 Swiber 283 Kreuz 231 Kreuz 232 Kreuz 281 Kreuz 282 Kreuz 283 Kreuz 284 Kreuz 331 Kreuz 332 Kreuz 241 Swiber Oslo Swiber Crusader Swiber Anne Christine Swiber Mary Anne Swiber Atlantis (DP2) Swiber Charlton Swiber Samson Swiber Merdeka (with Alam) Swiber Magnificent Type Accommodation barge Pipelay barge Derrick crane barge Submersible barge Dive support work barge Pipelay barge Dive support accom barge Derrick pipelay barge Derrick pipelay barge Utility towing tug Utility towing tug Utility towing tug Utility towing tug AHT AHT AHT AHT AHT AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS Flat top barge Flat top barge Flat top barge Flat top barge Flat top barge Flat top barge Flat top barge Deck cargo Deck cargo Deck cargo Deck cargo Deck cargo Deck cargo Deck cargo Deck cargo Deck cargo Deck cargo AHTS AHTS AHTS AHTS Subsea support vessel Utility vessel AHTS Pipelay barge Derrick crane barge Size 300 420 2500 400 180 200 300 1100 1200 3200 2400 3200 2800 4000 4000 5000 5000 4750 5150 5150 5150 6000 5000 5000 5000 10800 81 686 692 692 678 689 772 1015 493 493 1028 1028 1028 1028 1486 1486 549 5000 10800 10800 10800 4950 2400 4200 300 4200 Built Ownership 2006 100% 2007 Lease 1980 100% 2008 100% 2009 100% 2009 Lease 2009 100% 2009 49% 2009 100% 2006 100% 1998 100% 2010 100% 1994 100% 2007 Lease 2007 Lease 2006 Lease 2006 Lease 2007 100% 2007 50% 2007 50% 2007 50% 1979 100% 2008 Lease 2008 Lease 2009 Lease 2009 Lease 2007 100% 2005 100% 2005 100% 2005 100% 2007 100% 2006 100% 2007 100% 2007 100% 2008 100% 2008 100% 2009 100% 2009 100% 2009 100% 2009 100% 2009 100% 2009 100% 2006 100% 2009 Lease 2010 100% 2010 Lease 2010 Lease 2010 100% 2010 100% 2010 100% 2010 100% 2011 100% Fair Market Value (USDm) 35 72 40 70 35 55 35 75 78 10 7 7 7 8 8 12 12 10 12 12 12 8 12 12 12 30 3 3 3 3 3 3 3 7 3 3 5 5 5 5 5 5 2 12 32 32 32 55 8 12 50 120 NAV (USDm) 35 72 40 70 35 55 35 37 78 10 7 7 7 8 8 12 12 10 6 6 6 8 12 12 12 30 3 3 3 3 3 3 3 7 3 3 5 5 5 5 5 5 2 12 32 32 32 55 8 12 50 120 1049

men T T ft men T men MT T bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp bhp NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT NRT bhp bhp bhp bhp bhp bhp bhp MT T

NAV Calculation NAV of all vessels (including sale lease-back) NAV of yard Other financial assets Total assets Sale lease-back commitments (debt) Assuming conv bonds converted to offset debt NAV of all assets No of outstanding shares No of shares assuming conv bonds converted @ SGD/sh 1.14 No of outstanding shares (assuming bonds converted) Equity value per share (USD) Equity value per share (SGD @1.4)

USDm Method 1049 Fair mkt value 22 6x 2011 EV/EBITDA 1070 268 2009 annual disclosure 100 664 508 126 635 1.05 1.46

Source: DnB NOR Markets

DnB NOR Markets - 88

26.05.2010

Sector report > Offshore Supply Using a DCF approach of Swibers operating business segments (EPCIC, OSV and yard), our DCF model values Swiber at SGD/sh 1.52. Figure 91: DCF Valuation SGD/sh 1.52
Discounted value of free cashflow Value free cashflow 2010-2035 (USDm) Value free cashflow 2035+ (USDm) Total value free cashflow (USDm) Net debt 2010 + future capex (USDm) Net value free cashflow (USDm) FCFE per share (USD) Total value per share (SGD @ USDSGD 1.4) Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor Source: DnB NOR Markets Estimates 850 74 924 234 689 1.09 1.52 407% Risk free rate Interest rate Tax-rate Net WACC 4% 5% 17% 12% Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 378 64% 217 36% 8% 1.5

0.0% 8.6

Seeking proposed catalist listing of subsea services business The proposed listing is still at early stages. But we are positive on the listing as it allows Swiber to securitize its business and create additional channels of fundings. This subsea business is in the shallow water subsea segment, such as diving support, IMR and newfield developments. The reason for doing the listing is to raise capital funding for expansion and have an independent brand name. The business was acquired in July 2008, with Swiber owning 100% of assets, comprising the offshore subsea vessels and 70% of the operational company (remaining 30% owned by the subsea management). Kreuz Holdings (100% owned by Swiber) agrees to pay USDm 107 for subsea operational company Kreuz Subsea (70% owned by Swiber and 30% owned by three executive officers of the company). And Kruez Subsea Marine (100% owned by Kreuz Holdings) will acquire 2x accomm DSVs - Swiber Glorious and Swiber Supporter and one 12-man ROV (SAT system) from two wholly-owned subsidiaries of Swiber for USDm 76.4. Assets injected inline with our NAV valuation The three vessels (Swiber Glorious, Swiber Supporter and ROV) injected of USDm 76 are inline with our NAV valuation. We have a NAV of USDm 70 for the two DSVs Glorious and Supporter, while we would value the shallow water ROV at USDm 5-7. Swiber to own 75% of the subsea company upon completion After completion of the deal, Swiber will effectively owns 75% of the subsea entity, while 25% owned by management members. Total enterprise value of the subsea entity at USDm 183 The total enterprise value (equity + net debt) of the subsea entity is estimated at USDm 183. No further details for the proposed listing size, we estimate the size to be around USDm 50-60, allowing a free float of 40%. Targeting USDbn 5 worth of tenders Mgmt is currently looking at approx USDbn 5 tenders (USDbn 1 in Vietnam, USDbn 2 in Myanmar & India, USDbn 2 in Middle East), supporting our view that the upcoming EPC project pipeline continues to look promising. We are currently modeling USDm 202 new orders assumptions for remaining 2010. Figure 92: New orders assumptions
In USDm Historical/current orderbook at period end (USDm) Reported revenues at end of period - revenues from new est orders Reported revenues (excluding yards) New orders flow assumed/ secured (historical) New EPCIC order assumptions Q1/09 Q2/09 Q3/09 Q4/09 Q1/10E Q2/10E Q3/10E Q4/10E 2010E 2011E 2012E 515 509 440 626 687 890 848 809 809 539 339 87 111 96 100 85 123 152 145 505 704 686 84 107 92 96 76 116 144 139 475 670 650 3 101 23 315 143 320 na na na na na na 102 100 202 400 450

Source: DnB NOR Markets, Company,** Assumed historical new orders include EPCIC and OSV contracts, derived using Ending order book reported + Revenues reported (excluding yard) - Beginning order book reported

DnB NOR Markets - 89

26.05.2010

Sector report > Offshore Supply

SWIBER HOLDINGS (SWBR.SI)

PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 151 0 -120 31 3 28 2 -2 2008 428 0 -382 47 9 38 3 -11 2009 393 0 -354 39 15 24 5 -14 2010e 505 0 -430 74 17 57 7 -16 2011e 704 0 -597 107 17 90 7 -17 2012e 686 0 -582 105 17 87 7 -17

0 28 2 0 50

0 30 6 1 39

0 15 5 4 35

0 48 7 4 38

0 80 14 6 61

0 77 13 6 58

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 113 8 127 98 346 178 96 97 371 -2

0 282 13 262 75 632 208 281 212 702 207

0 232 50 391 83 757 309 335 298 942 252

0 291 50 359 144 845 361 365 284 1,010 221

0 291 50 360 308 1,010 434 395 394 1,223 87

0 291 50 282 408 1,032 504 395 350 1,249 -13

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

52 -48 -82 88 0 10

48 -74 -187 190 0 -22

54 -149 2 77 0 -16

60 50 -79 30 0 61

84 69 -19 30 0 164

82 37 -19 0 0 100

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million SGD USD X X % X X X X

2007 0.12 0.12 0.00 0.4 422.4 3.36 2.38 20.3 20.3 0.0 5.7 32.0 35.0 3.6

2008 0.09 0.09 0.00 0.5 422.4 0.54 0.39 4.2 4.2 0.0 0.8 7.6 9.4 0.7

2009 0.07 0.07 0.00 0.6 508.4 1.02 0.73 10.7 10.7 0.0 1.2 14.6 23.9 0.9

2010e 0.06 0.06 0.00 0.6 634.7 1.02 0.72 12.0 12.0 0.0 1.3 8.5 11.1 0.9

2011e 0.10 0.10 0.00 0.7 634.7 1.02 0.72 7.6 7.6 0.0 1.1 4.6 5.5 0.6

2012e 0.09 0.09 0.00 0.8 634.7 1.02 0.72 7.9 7.9 0.0 0.9 3.8 4.5 0.5

Share price and target Price SGD Price USD Price target 12m SGD Recommendation Key data per share Book value USD P/Book X %cagr EPS gr09-12e Financial structure SGDm Market cap. Market cap. USDm Net int. bear debt USDm Enterprise value USDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m SGD STI index % 30days volatility Company attributes Reuters ticker Supply Reporting Q2 2010

1.02 0.72 1.50 BUY 0.49 1.47 10.5% 519 368 207 574 508.4 41.6 -15/-1/20 -4/1/-6 1/1 1915.7 48 SWBR.SI

Management Raymond Goh CEO Leonard Tay CFO Address Swiber Holdings 12 International Business Park Floor 04-01 H.p.: www.swiber.com Tel +65 6223 6151

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

DnB NOR Markets - 90

26.05.2010

Sector report > Offshore Supply

Rebased price (12m, SGD) 150 140 130 120 110 100 90 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Swiber Holdings

Rebased consensus average forward EPS (12m, USD) 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Swiber Holdings

Revenue (USDm) 800 700 600 500 400 300 200 100 0 2006 2007 2008 2009

Revenue Growth 200% 150% 100% 50% 0% -50%

EPS (USD) 0.140 0.120 0.100 0.080 0.060 0.040 0.020 0.000 2006 2007 2008 2009

DPS (USD) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0

2010e 2011e 2012e Revenue Growth

2010e 2011e 2012e DPS (USD)

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 120 100 80 60 40 20 0 2006 2007 2008 2009

EBITDA margin 25% 20% 15% 10% 5% 0%

FCF (USDm) 200 150 100 50 0 -50 -100 -150 -200 -250 2006 2007 2008

Dividend yield 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2010e 2011e 2012e EBITDA margin

2009 2010e 2011e 2012e Dividend yield

EBITDA (USDm)

FCF (USDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 91

26.05.2010

Sector report > Offshore Supply

ASL Marine
Low-risk bet on Indonesia coal activity
ASL Marine offers vertically integrated marine services, engaging in shipbuilding, shiprepair and shipchartering. Customers are mainly from Asia Pacific and South Asia. For shipbuilding and shiprepair, ASL Marine owns and operates 3 shipyards in Singapore, Indonesia and China with key capabilities in Indonesia. For shipchartering, it plans to grow its existing fleet of 189 vessels (mainly tugs and barges) to 200 vessels by 2010. Outlook of the Indonesia coal transportation market remains upbeat, due to the cabotage ruling where only Indonesian flagged vessels are allowed to operate in this coal rich country. Business divisions Fleet (shipchartering) Owns an existing fleet of 189 vessels, consisting mainly tugs and barges. Plans to increase the fleet size to 201 by FY2010. Yards (shipbuilding & shiprepair) owns and operates three shipyards in Singapore, Indonesia (Batam) and China (Guangdong). ASL Marine focuses and specializes in building smaller niche vessels. It has excellent track record in building tugs, barges, Offshore Support Vessels (OSVs), work dredger vessels and tankers. Order backlog as of Sep 09 is SGDm 457. Assets 4 AHT (average under 5,000bhp), 1 straight supply vessel, 63 Tugs, 121 barges, 1 tanker. Newbuilds: 1 AHTS newbuild (average 5,150bhp), 4 tugs, 5 barges, 1 tanker. 3 shipyards in Singapore, Batam and China. Recent development Fleet expansion from 189 vessels as of 2009 to 200 by 2010. Yard expansion addition of two graving docks Expected news-flow Potential new chartering contracts in the region, we are modeling new order assumption for remaining FY2010 at SGDm 25 and SGDm 55 including conversion projects. Further reflagging exercise of existing tugs and barges to Indonesian flags, targeting to capture the local coal transportation market, protected by the cabotage rules. Potential newbuild and conversions orders from Indonesia due to cabotage laws implementation. Q3 earnings release. Please see separate report on 13th May 2010 for result update. Valuation DCF 1.43 SGD/share, NAV 1.45 SGD/share, 2010 EV/EBITDA 4x and P/E 6x. We continue to like ASL for its leading role in the offshore coal transportation market. We reiterate our BUY rating, tp SGD/sh 1.5.

DnB NOR Markets - 92

26.05.2010

Sector report > Offshore Supply Valuation DCF 1.43 SGD/share, NAV 1.45 SGD/share. We reiterate our BUY recommendation with target SGD/sh 1.50.

Figure 93: Net Asset Value of Fleet SGD/sh 1.45

Fleet size (unit) NAV Calculation Fleet value of Tugs 66 Fleet value of Barges 121 Fleet value of AHT/ AHTS 6 Fleet value of Tanker 2 Total fleet value NAV of yards Other financial assets Total asset values NIBD incl future capex (2010E) Equity value (SGDm) No of shares outstanding NAV per share Value Avg Value per Total Total per X rate Vessel contract EBITDA EBITDA value value/ vessel (USD/ vessel avg length 2009 2010E Avg size age (mths) (SGDm) (SGDm) (USDm) SGD) (SGDm) (SGDm) sh (SGD) 2,000 bhp 4.0 3.0 30.6 25.5 1.5 1.40 2.1 139 0.46 300 x 250ft 4.0 3.0 52.5 42.9 0.8 1.40 1.1 139 0.46 5,000 bhp 1.5 3.0 12.8 10.0 15.0 1.40 21.0 126 0.42 1,000 dwt 1.0 3.0 0.3 0.6 11.0 1.40 15.4 31 0.10 434 1.44 170,000 dwt 78 0.26 8 0.03 521 1.73 84 0.28 436 1.45 301 1.45

Source: DnB NOR Markets

Figure 94: DCF valuation + Associates values SGD/sh 1.43

Discounted value of free cashflow Value free cashflow 2010-2035 (SGDm) Value free cashflow 2035+ (SGDm) Total value free cashflow (SGDm) Net debt 2010 (SGDm) Net value free cashflow (SGDm) FCFE per share (SGD) Other financial assets (FA) Total value per share (SGD) Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor
Source: DnB NOR Markets estimates

432 76 508 84 424 1.41 8 1.43 34%

Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta

273 76% 84 24% 6% 1.2

2.0% 14.8

Risk free rate Interest rate Tax-rate Net WACC

4% 4% 17% 9%

Reflagging exercise to impact near term chartering performance ASL is still in process of deflagging and reflagging its tugs and barges to Indonesia flags (though % breakdown not disclosed). The process is likely to take 3-4 months on average. Hence, we continue to expect lower vessel utilization rates in this segment in short-term, given that those vessels under the flagging exercise will be without contracts. New orders assumptions for remaining FY2010 We have new order assumption for remaining FY2010 at SGDm 25 and SGDm 55 including conversion projects. Looking beyond this financial year, we remain upbeat that the Indonesian cabotage laws (implemented for coal transportation in Jan this year) will trigger demand for chartering activities, newbuild tugs and barges and conversion/shiprepair projects. Figure 95: New orders assumptions
In SGDm Newbuild orders** (historical) Offshore support and specialised vessels Tugs Dredgers Others - Tankers Conversions (under Shiprepair segment) Total estimated orders (incl conversions) 2006 250 na na na na na 2007 467 na na na na na 2008 315 na na na na na 2009 100 na na na na na 2010E 39 17 0 0 8 30 55 2011E na 72 40 40 45 30 227 2012E na 72 40 30 45 60 247

Source: DnB NOR Markets, Company,** derived using Ending order book reported + Revenues reported - Beginning order book reported

DnB NOR Markets - 93

26.05.2010

Sector report > Offshore Supply

ASL MARINE (ASLM.SI)

PROFIT & LOSS SGDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 318 0 -262 56 15 42 7 -4 2008 404 0 -320 84 20 64 10 -4 2009 435 0 -338 98 27 71 20 -6 2010e 474 0 -384 90 30 60 -1 -7 2011e 497 0 -388 109 29 80 0 -8 2012e 401 0 -311 90 29 61 0 -7

1 47 4 1 40

2 73 9 0 60

3 90 10 3 71

4 61 10 1 42

5 82 12 0 60

6 66 9 0 45

BALANCE SHEET SGDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 216 26 154 48 444 157 101 186 444 53

0 256 5 244 103 609 240 137 232 609 32

0 397 7 202 96 703 295 160 247 703 64

0 442 7 197 130 776 328 215 233 776 86

0 452 7 206 124 789 373 195 221 789 71

0 452 7 172 130 762 406 175 180 762 46

CASH FLOW SGDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

61 1 -69 31 -7 16

82 -48 -40 35 -12 18

106 52 -170 24 -12 0

73 -9 -74 55 -10 34

88 -19 -39 -20 -15 -6

79 -12 -29 -20 -11 6

Share price and target Price SGD Price target 12m SGD Recommendation Key data per share Book value SGD P/Book X EPS gr09-12e %cagr Financial structure Market cap. SGDm Net int. bear debt SGDm Enterprise value SGDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m SGD STI index 30days volatility % Company attributes Reuters ticker Supply Reporting Q4 2010

0.80 1.50 BUY 0.80 1.00 -14.4% 241 32 274 301.4 42.2 -16/-10/-3 -7/-8/-25 1/1 2701.2 28 ASLM.SI

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

SGD SGD SGD SGD million SGD X X % X X X X

2007 0.16 0.16 0.03 0.6 251.3 1.74 10.9 10.9 1.6 2.8 8.3 11.2 1.8

2008 0.20 0.20 0.04 0.8 300.9 1.25 6.3 6.3 3.2 1.6 4.8 6.3 1.1

2009 0.24 0.24 0.04 1.0 301.4 0.84 3.5 3.5 4.8 0.9 3.2 4.4 0.7

2010e 0.14 0.14 0.04 1.1 301.4 0.80 5.7 5.7 5.0 0.7 3.5 5.3 0.6

2011e 0.20 0.20 0.05 1.2 301.4 0.80 4.0 4.0 6.7 0.6 2.8 3.8 0.5

2012e 0.15 0.15 0.04 1.3 301.4 0.80 5.4 5.4 4.8 0.6 3.1 4.6 0.5

Management Ang Kok Tian CEO Lilian Tan CFO Address ASL Marine 19 Pandan Road, Singapore 609271 H.p.: www.aslmarine.com Tel +65 6264 3833

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

DnB NOR Markets - 94

26.05.2010

Sector report > Offshore Supply

Rebased price (12m, SGD) 135 130 125 120 115 110 105 100 95 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May ASL Marine

Rebased consensus average forward EPS (12m, SGD) 110 105 100 95 90 85 80 75 70 65 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May ASL Marine

Revenue (SGDm) 600 500 400 300 200 100 0 2006 2007 2008 2009

Revenue Growth 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30%

EPS (SGD) 0.25 0.20 0.15 0.10 0.05 0.00

DPS (SGD) 0.060 0.050 0.040 0.030 0.020 0.010

2010e 2011e 2012e Revenue Growth

2006

2007

2008

2009

2010e 2011e 2012e DPS (SGD)

0.000

Revenue (SGDm)

EPS (SGD)

EBITDA (SGDm) 120 100 80 60 40 20 0 2006 2007 2008 2009

EBITDA margin 25.0% 20.0% 15.0% 10.0% 5.0% 0.0%

2010e 2011e 2012e EBITDA margin

FCF (SGDm) 60 40 20 0 -20 -40 -60 -80 -100 -120 -140 -160 2006 2007

Dividend yield 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 2008 2009 2010e 2011e 2012e Dividend yield 0.0%

EBITDA (SGDm)

FCF (SGDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 95

26.05.2010

Sector report > Offshore Supply

EOC Limited
Bet on the production phase of O&G cycle
Oslo-listed EOC is the sister company of Singapore-listed Ezra Holdings (owning 49% stake in EOC). The company is the owner and operator of one FPSO under contract off Thailand, one new FPSO contract (with partners) off Vietnam and 3 heavylift accommodation barges. EOC primarily operates in the Asia Pacific region in four focused business segments: Business divisions FPSO segment Operates and manages FPSO projects in Asia. Offshore construction support segment provides offshore construction, accommodation, pipelaying, heavylift, transportation and installation services through its three construction vessels. Assets 1x gas FPSO Arunothai off Thailand. 1x newbuild FPSO (with partners) off Vietnam, commencing operations in Q22011. 3x heavylift accommodation barges. Recent development Vietnam FPSO update: Secured Chim Dao Sao FPSO contract in Oct 09, from Premier Oil back on a 6+6-year charter. The FPSO contract is currently awaiting for the approval from the Vietnamese government. EOC announced in April that it has completed the subscription exercise of its Chim Sao FPSO JV company, owning 43% of the JV. It has appeared that the local Vietnamese partner PVT has decided not to take up 16% stake in the venture. With this, EOC now requires approx USDm 70 to fund the equity portion of this FPSO JV. EOC is looking to re-gear Champion for funding. As mentioned, re-gearing Champion now may not be advantageous to EOC as it is without contract. The expected capex is close to USDm 430, inline with our expectation. Details will likely be finalized in June. Please see separate reports for details on the FPSO arrangements. Lewek Champion barge looking for charter now: It is currently looking at two opportunities separately in China and Malaysia, which we should see award announcement by end of calendar Q2. FPSO Arunothai downtime in early May: Temporary suspension in production activities of FPSO Lewek Arunothai for approx 45 days off Arthit field, Thailand. Reasons behind the downtime: FPSO Arunothai has suspended production due to maintenance shutdown requirements and the accommodation of a modification process by the operations team on a pipe located in a tank. Q2 earnings release. Please see separate report for details. Expected news-flow Potential new FPSO opportunities: Exploring two new FPSO projects one in the Europe and the other in Indonesia. Potential contract for Lewek Champion. FPSO update on Arunothai. FPSO update on Vietnam Chim Sao project. Potential dual listing in Singapore and Norway. -

Valuation NAV valuation - NOK/sh 7.24. We reiterate our HOLD rating based on valuations. The potential plan to dual list in Singapore may be viewed as positive to share price, given that Asia offshore players are in general priced at higher multiples than Norwegian peers. But, near-term trigger is negative as we caution that Q3 may be very weak due to the downtime in construction barge Lewek Champion and FPSO Arunothai.

DnB NOR Markets - 96

26.05.2010

Sector report > Offshore Supply Valuation summary

Figure 96: NAV per/sh NOK 7.24

Vessel Lew ek Conquerer Lew ek Chancellor Lew ek Champion Lew ek Arunothai Type Accomm Construction Barge Accomm Construction Barge Accomm Pipe Lay Barge Gas FPSO Built 2004 2007 2007 2008 Cost (USDm ) A 26 26 120 322 493 Net debt (USDm ) B 16 16 77 206 315 Equity Current value equity im plied (USDm ) value (USDm ) C=A-B 9 9 43 116 178 D 10 9 45 120 183 Im plied value (USDm ) E=D+B 26 26 121 325 498 PV of Net Asset NAV vessel's Value adjusted for NAV/ share FCF (USDm ) debt (USDm ) (USD) F 32 35 148 282 498 G 27 27 145 250 449 H=G-B 11 11 68 44 134 I 0.10 0.10 0.62 0.40 1.21 7.24

Total NAV per share (NOK @ USDNOK 6.0)

Source: DnB NOR Markets

Figure 97: Chim Sao FPSO project IRR 10% (for the entire entity)
New FPSO project EBITDA after tax (USDm) Capex/ Sale of FPSO (USDm) Cash Flow IRR 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 23 58 58 58 58 58 51 51 51 51 51 51 -400 170 -400 23 58 58 58 58 58 51 51 51 51 51 221 10.0%

Source: DnB NOR Markets

FPSO Arunothai downtime unexpected Temporarily suspension in production activities of FPSO Lewek Arunothai for approx 45 days off Arthit field, Thailand in early May. Reasons behind the downtime: FPSO Arunothai has suspended production due to maintenance shutdown requirements and the accommodation of a modification process by the operations team on a pipe located in a tank. The downtime in FPSO Lewek Arunothai came as a surprise to us as the FPSO has just commenced production last Oct, though after much delays (supposed to commence in Feb 2009). We are concerned that the FPSO downtime for modification works may be due to underlying issue, associated with equipments. This may have further impact on downtime and production. Weak Q3 expected Q3 earnings would be negatively impacted by the downtime associated with the construction vessel Lewek Champion. The vessel is currently looking at two separate opportunities in China and Malaysia, which we expect contract to be awarded only in end May. Coupled with the downtime of FPSO Lewek Arunothai, we expect Q3 to be a very weak quarter. Champion downtime maybe longer than expected As mentioned in our preview, Lewek Champion's charter with NuCoastal has ended in March. Based on our communication with the management, Lewek Champion is currently looking at two opportunities separately in China and Malaysia. 1) On the China opportunity: This will be a turn-key offshore pipelaying contract which may last from 3-6 months. We are expecting a larger contract quantum but lower margins on this contract (if awarded) as it is transportation and installation projectbased works which involves project execution risks (such as weather and equipment downtime). 2) On the Malaysia opportunity: This will be a time-charter contract which likely to last 12-18 months. We expect contract quantum to be smaller than the turn-key China contract but margins will be similar to previous time-charters EBITDA margins of 45-50%. The management is guiding a base case scenario of contract award in late May/ early June and mobilisation period of less than 5-10 days.

DnB NOR Markets - 97

26.05.2010

Sector report > Offshore Supply Vietnam FPSO update According to Management, the Vietnam FPSO contract is currently awaiting approval from the Vietnamese government as the JV is a Singapore-based company. EOC announced in April that it has completed the subscription exercise of its Chim Sao FPSO JV company, owning 43% of the JV. It has appeared that the local Vietnamese partner PVT has decided not to take up 16% stake in the venture. With this, EOC now requires approx USDm 70 to fund the equity portion of this FPSO JV. EOC is looking to re-gear Champion for funding. As mentioned in our Q2 result update, re-gearing Champion now may not be advantageous to EOC as it is without contract. Details will likely be finalized in June and the FPSO is expected to commence in Q22011, as such we have not modeled in any contributions from this FPSO. We reiterate our neutral stance on this project due to execution risks and pricing dynamics. New FPSO opportunities partnership structures EOC is currently exploring two new FPSO projects - one in the Europe and the other in Indonesia. The project timeline is around end 2011-2012. Contract sizes are approx USDm 100-150 and EOC will rope in partners to share the project risks and balance sheet commitments (off balance sheet debt).

DnB NOR Markets - 98

26.05.2010

Sector report > Offshore Supply

EOC LIMITED (EOC.OL)

PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 32 0 14 18 2 16 0 -3 2008 110 0 67 43 7 36 0 -7 2009 72 0 37 35 8 27 0 -5 2010e 118 0 57 61 23 38 0 -12 2011e 146 0 54 92 24 69 0 -12 2012e 125 0 54 71 24 47 0 -13

0 13 2 0 11

0 28 3 0 25

0 22 0 0 21

0 26 2 0 24

0 57 3 0 54

0 35 2 0 33

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 230 0 43 15 288 88 154 46 288 139

0 369 0 47 24 440 110 290 39 440 266

0 469 0 54 76 599 131 378 89 599 303

0 493 35 59 73 660 155 388 117 660 315

0 493 70 66 70 698 209 358 131 698 289

0 493 70 56 66 685 242 328 115 685 263

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

13 5 -201 139 0 -44

33 -11 -147 136 0 12

32 7 -75 88 0 52

44 25 -82 10 0 -2

77 7 -59 -30 0 -4

57 -7 -24 -30 0 -4

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million NOK USD X X % X X X X

2007 0.14 0.14 0.00 1.0 83.9 26.72 4.12 30.5 30.5 0.0 3.9 27.0 30.3 2.0

2008 0.23 0.23 0.02 1.0 111.0 16.78 2.59 11.4 11.4 0.8 2.6 12.8 15.5 1.4

2009 0.19 0.19 0.00 1.2 111.0 7.55 1.16 6.1 6.1 0.0 1.0 12.4 16.1 0.8

2010e 0.21 0.21 0.00 1.4 111.0 7.50 1.16 5.4 5.4 0.0 0.8 6.7 10.7 0.8

2011e 0.49 0.49 0.00 1.9 111.0 7.50 1.16 2.4 2.4 0.0 0.6 3.8 5.1 0.6

2012e 0.30 0.30 0.00 2.2 111.0 7.50 1.16 3.9 3.9 0.0 0.5 4.5 6.8 0.6

Share price and target Price NOK Price USD Price target 12m NOK Recommendation Key data per share Book value USD P/Book X %cagr EPS gr09-12e Financial structure NOKm Market cap. Market cap. USDm Net int. bear debt USDm Enterprise value USDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m NOK High/Low 12m OSEBX index % 30days volatility Company attributes Reuters ticker Supply Reporting Q3 2010

7.50 1.16 7.00 HOLD 1.00 1.16 15.7% 832 128 303 431 111.0 23.5 -31/-29/24 -12/-18/7 11/6 53.1 60 EOC.OL

Management Lim Kwee Keong CEO Chan Eng Yew CFO Address EOC Limited 15 Hoe Chiang Road Floor 15-01 H.p.: www.emasoffshore-cnp.com Tel +65 6349 8535

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

DnB NOR Markets - 99

26.05.2010

Sector report > Offshore Supply

Rebased price (12m, NOK) 180 170 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May EOC Limited

Rebased consensus average forward EPS (12m, USD) 130 120 110 100 90 80 70 60 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May EOC Limited

Revenue (USDm) 160 140 120 100 80 60 40 20 0 2006 2007 2008 2009

Revenue Growth 300% 250% 200% 150% 100% 50% 0% 2010e 2011e 2012e Revenue Growth -50%

EPS (USD) 0.60 0.50 0.40 0.30 0.20 0.10 0.00 2006 2007 2008 2009

DPS (USD) 0.025 0.020 0.015 0.010 0.005 0.000

2010e 2011e 2012e DPS (USD)

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 100 90 80 70 60 50 40 30 20 10 0

EBITDA margin 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

FCF (USDm) 50 0 -50 -100 -150 -200

Dividend yield 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00%

2006

2007

2008

2009

2010e 2011e 2012e EBITDA margin

2006

2007

2008

2009

2010e 2011e 2012e Dividend yield

EBITDA (USDm)

FCF (USDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 40% 35% 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 100

26.05.2010

Sector report > Offshore Supply

Ezion Holdings
Strong cards on liftboat market and opportunities off Australia
Ezion develops, owns and charters offshore vessels to clients in the offshore oil and gas industry. It specializes in providing marine logistics and support services and has one of the largest fleets of ballastable vessels used in the commissioning and decommissioning of offshore oil and gas platforms. Ezion's fleet includes four multi-purpose self-propelled jack-up liftboats (one already delivered in Jan) to tap the offshore platform industry. Ezion is an investment case on 1) The market for liftboats in Asia/Middle East and 2) Possible further contracts at the Gorgon fields off Australia. We think they are well positioned for both these markets, but competition will be tough and margins under pressure. A key risk (upside and downside) is the market demand for liftboats and asset pricing as Ezion intends to expand current fleet using capital from sale leasebacks on existing liftboats. Business divisions Offshore marine logistic & support services Fleet of 21 vessels (9 ballastable vessels, 6 barges and 6 tugs) and upcoming newbuilds of 8 vessels (tugs and barges) for the Gorgon project. 3x self-propelled jack-up liftboats, consisting of 1x liftboat Lewek Leader currently on charter to Ezra and 2x newbuilds at Ezras Vietnam yard under the supervision of Levingston due delivery in 2H 2010. Additional 1x newbuild liftboat targeting at offshore wind farm market, likely to be built at Ezra's yard. Marine services 5-year charter contract for the provision of one refurbished PSV to South American NOC PDVSA. Assets Fleet of offshore oil and gas support vessels 9 ballastable, 6 tugs, 6 barges, 8 tugs and barges for Gorgon project. 3x self-propelled jack-up liftboats, consisting of 1x liftboat Lewek Leader currently on charter to Ezra and 2x newbuilds at Ezras Vietnam yard under the supervision of Levingston due delivery in 2H 2010. Additional 1x newbuild liftboat targeting at offshore wind farm market, likely to be built at Ezra's yard. Ezion is thus a pure asset provider and sub contractor for liftboats. 1x 2,000dwt PSV. Recent development 1st liftboat divestment of 51% equity stakes to a private equity fund. 2nd liftboat was sold to a Middle Eastern company (same company which signed a LOI for the remaining two liftboats, but has since been lapsed). Signed an agreement to build another liftboat, with additional wind farm capabilities. Q1 earnings release. Please see separate report on 14th May for result update. Expected news-flow Gorgon phase 2 tenders expected soon in end Q2, with Ezion targeting the offshore support services contracts and supply base logistics contract. We estimate contract sizes in batches of USDm 100-200, with an aggregate total of USDbn 2-3. The tenders will be broken into pieces with varying tendering schedule, due to different project scope and requirements. Ezra may charter the 3rd and 4th newbuild liftboats when ready. Further newbuild liftboat plan, fundings likely come from sales leaseback deals. Valuation NAV SGD/sh 0.76. DCF valuation SGD/sh 0.78. 2011 EV/EBITDA 5.6x. BUY reiterated, tp SGD/sh 0.80.

DnB NOR Markets - 101

26.05.2010

Sector report > Offshore Supply Valuation NAV SGD/sh 0.76. DCF valuation SGD/sh 0.78. BUY reiterated, tp SGD/sh 0.80.

Figure 98: Net Asset Value of Fleet SGD/sh 0.76

Avg Vessel Value Value Total avg contract Fleet per X rate per net Total age size Owners length vessel (USD/ vessel value value/ (yrs) (mths) (USDm) SGD) (SGDm) (SGDm) sh (SGD) (unit) hip Avg size NAV Calculation Flat-Top Self Ballastable Vessel 1 100% 360x120ft 3 4 16 1.4 22 22 0.03 Flat-Top Self Ballastable Vessel 1 100% 330x120ft 3 4 15 1.4 21 21 0.03 Flat-Top Ballastable Vessel 3 100% 330x100ft 3 4 14 1.4 20 59 0.08 Flat-Top Ballastable Vessel 1 100% 280x90ft 3 4 12 1.4 17 17 0.02 Flat-Top Ballastable Vessel 1 100% 330x100ft 1 4 14 1.4 20 20 0.03 Flat-Top Vessel 1 100% 330x90ft 3 4 10 1.4 14 14 0.02 Jacket Launcher Ballastable Vessel 1 100% 393x110ft 3 4 14 1.4 20 20 0.03 Tugs 6 100% 3000bhp 3 4 11 1.4 15 92 0.13 Barges 6 100% 250x150ft 4 4 3 1.4 5 29 0.04 Tugs & Barges (cargo, lift) for Gorgon proj 8 100% 300x250ft 0 36 6 1.4 9 72 0.10 Multi-purpose self-propelled JU liftboat 2 100% 220ft depth 0 36 80 1.4 112 224 0.31 Multi-purpose self-propelled JU liftboat 1 49% 220ft depth 0 36 80 1.4 112 55 0.08 PSV 1 100% 2000dwt 8 60 15 1.4 22 22 0.03 Total fleet value 33 665 0.93 Other financial assets 17 0.02 Total asset values 682 0.95 NIBD incl future capex (2010E) 108 0.15 Debt from sales leaseback of 1st liftboat 27 0.04 Equity value (SGDm) 546 0.76 No of shares outstanding 714 NAV per share 0.76

Source: DnB NOR Markets

Figure 99: DCF Valuation SGD/sh 0.78

Discounted value of free cashflow Value free cashflow 2010-2035 (SGDm) Value free cashflow 2035+ (SGDm) Total value free cashflow (SGDm) Net debt 2010 (SGDm) Net value free cashflow (SGDm) FCFE per share (SGD) Other financial assets (FA) Total value per share (SGD) Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor Source: DnB NOR Markets Estimates 569 82 651 108 543 0.76 17 0.78 -2% Calculation of WACC Market value equity (2010) - in % Net interest bearing debt (2010) - in % Risk premium Beta 507 82% 108 18% 6% 1.2

2.5% 14.2

Risk free rate Interest rate Tax-rate Net WACC

4% 5% 17% 10%

Potential tenders Ezion are eyeing in Australia As mentioned, we see potential upcoming tenders which Ezion are targeting: 1) OSV services of larger vessels (tugs and barges), targeting at marine logistics services contracts. 2) Third marine & supply base in Northern Australia, which will position Ezion as the leading player in that region, controlling the key logistics of the workflow. We rate Ezion one of the better positioned players for the offshore support services contracts but to secure the marine & supply base, it may seems challenging. For the tenders, Ezion is likely to tender the contracts with partners, similar to the Pacific Basin and Skill Group structure. We expect Ezion to target at potential contract size (in parts) larger than the phase one (AUDm 350) it secured with its JV partners. We estimate contract sizes in batches of USDm 100-200, with an aggregate total of USDbn 2-3. The tenders will be broken into pieces with varying tendering schedule, due to different project scope and requirements. We rate Ezion one of the better positioned players for the offshore support services contracts but to secure the marine & supply base, it may seems challenging.

DnB NOR Markets - 102

26.05.2010

Sector report > Offshore Supply Contract visibility for the 3rd and 4th liftboat We believe Ezra is looking to charter in the 3rd and 4th liftboat, scheduled for delivery in calendar Q3 and Q4 2010 respectively. This is because the LOI signed with the Middle Eastern company has been lapsed and Ezra needs to have at least one more liftboat to reach critical mass for its liftboat support services. Additional liftboat targeting at offshore wind farm market Ezion also said it will be entering into an agreement with The Levingston Corporation to construct an additional unit of Liftboat. The new Liftboat will incorporate capabilities for it to service the offshore wind farm in the Southern North Sea. This liftboat is expected to be delivered in the fourth quarter of 2011. We expect the newbuild cost to be around USDm 60-65 with additional wind farm capabilities. The newbuild contract is likely to be awarded to Ezra's Vietnam yard. Remaining two liftboats may see similar arrangements We believe it is likely that Ezion will also be looking to do a similar sales leaseback or outright sale arrangement for its two newbuild liftboats, due delivery in 2H2010.

DnB NOR Markets - 103

26.05.2010

Sector report > Offshore Supply

EZION HOLDINGS (EZHL.SI)

PROFIT & LOSS SGDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 14 0 8 6 2 4 0 0 2008 31 0 18 13 4 10 0 -1 2009 74 0 47 27 8 18 2 -2 2010e 105 0 54 52 15 37 48 -6 2011e 139 0 53 86 19 67 15 -10 2012e 139 0 54 86 19 67 15 -9

0 4 1 0 3

0 8 0 0 8

0 18 1 0 17

0 114 6 0 73

0 72 12 0 60

0 74 13 0 61

BALANCE SHEET SGDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

0 76 5 5 65 151 111 26 13 151 -39

0 144 6 30 35 214 121 68 26 215 33

0 260 10 54 40 365 178 156 31 365 115

0 312 17 65 103 497 250 211 36 498 108

0 299 17 76 155 547 310 191 46 548 36

0 285 17 77 210 589 371 171 47 589 -39

CASH FLOW SGDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

5 8 -83 26 0 -43

12 -16 -69 41 0 -32

26 -18 -130 88 0 -34

87 -7 -73 55 0 63

78 -2 -4 -20 0 52

80 0 -5 -20 0 55

Share price and target Price SGD Price target 12m SGD Recommendation Key data per share Book value SGD P/Book X EPS gr09-12e %cagr Financial structure Market cap. SGDm Net int. bear debt SGDm Enterprise value SGDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m SGD High/Low 12m STI index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

0.63 0.80 BUY 0.17 3.69 53.0% 446 115 562 714.0 50.3 -17/-9/30 -8/-7/8 1/1 2701.2 47 EZHL.SI

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

SGD SGD SGD SGD million SGD X X % X X X X

2007 0.04 0.04 0.00 1.3 83.9 0.60 14.6 14.6 0.0 0.5 1.9 2.8 0.1

2008 0.01 0.01 0.00 0.2 714.0 0.19 16.9 16.9 0.3 1.1 12.6 17.4 0.9

2009 0.02 0.02 0.00 0.2 714.0 0.77 32.1 32.1 0.1 3.1 24.9 36.4 2.0

2010e 0.10 0.10 0.00 0.4 714.0 0.63 6.1 6.1 0.0 1.8 10.8 15.0 1.2

2011e 0.08 0.08 0.00 0.4 714.0 0.63 7.4 7.4 0.0 1.4 5.6 7.2 1.0

2012e 0.09 0.09 0.00 0.5 714.0 0.63 7.3 7.3 0.0 1.2 4.8 6.1 0.8

Management Chew Thiam Keng CEO Cheah Boon Pin CFO Address Ezion Holdings 15 Hoe Chiang Road Floor 12-05 H.p.: www.ezionholdings.com Tel +65 6309 0555

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, SGD) 190 180 170 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Ezion Holdings

Rebased consensus average forward EPS (12m, SGD) 150 140 130 120 110 100 90 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Ezion Holdings

Revenue (SGDm) 160 140 120 100 80 60 40 20 0 2006 2007 2008 2009

Revenue Growth 160% 140% 120% 100% 80% 60% 40% 20% 2010e 2011e 2012e Revenue Growth 0%

EPS (SGD) 0.12 0.10 0.08 0.06 0.04 0.02 0.00 2006 2007 2008

DPS (SGD) 0.00070 0.00060 0.00050 0.00040 0.00030 0.00020 0.00010 2009 2010e 2011e 2012e DPS (SGD) 0.00000

Revenue (SGDm)

EPS (SGD)

EBITDA (SGDm) 90 80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010e

EBITDA margin 70% 60% 50% 40% 30% 20% 10% 2011e 2012e 0%

FCF (SGDm) 100 50 0 -50 -100 -150

Dividend yield 0.35% 0.30% 0.25% 0.20% 0.15% 0.10% 0.05%

2006

2007

2008

2009

2010e 2011e 2012e Dividend yield

0.00%

EBITDA (SGDm)

EBITDA margin

FCF (SGDm)

EBIT margin 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e

EBITDA margin 1.2 1.0 0.8 0.6 0.4 0.2 2011e 2012e 0.0

Price/Book 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 35% 30% 25% 20% 15% 10% 5% 0%

EBIT margin

EBITDA margin

Price/Book

DnB NOR Markets - 105

26.05.2010

Sector report > Offshore Supply

EZRA Holdings
Bet on deepwater subsea growth
Ezra is an integrated offshore support, subsea and marine services provider, with a focus in supporting its clients in the entire oil field life cycle with its fleet of young and sophisticated offshore vessels. Coupled with its wide range of expertise, it provides its clients with efficient and effective services, catered to their every need. Business divisions Offshore Support Services - manages a mix fleet of AHTS, AHT and crewboats. Average term charter of 2.5 years. Marine Services (yard) - provides services such as marine supplies, fabrication, engineering and design work to the same set of clients serviced by Ezras OSV division. Energy Services (Subsea) - provides an integrated services for the deepwater subsea market, including installations of subsea equipment, umbilicals, risers and flowlines; subsea inspection, maintenance and repair; well intervention, well simulation, hydraulic workover, and coil tubing services. Services will be done from 1x jack-up liftboat Lewek Leader and potentially 2x remaining newbuild liftboats (chartered from Ezion), 2x MFSV, 1x DP3 construction vessel Louis Crusader. FPSO and barges Ezra holds 49% of EOC, listed in Oslo Norway. We use mark to market for valuation of EOC. Ezra stake is currently worth SGD/sh 0.39. Please see separate report for analysis of EOC. Assets 26 mix of AHTS/ AHT vessels averaging 9,000hp, 4x 5,000+bhp AHTS under fleet management structure, 2x 30,000bhp MFSV (schedule delivery Q3-4 2010), 1x oil tanker, 3x crewboats, 1x DP3 CSV (schedule delivery 1H), 2x charter in jack-up liftboats (first liftboat Lewek Leader delivered in Jan 10, second schedule 1H), and 1x ice-maiden vessel. 1x fabrication yard in Vietnam. Recent development Q2 earnings release. Please see separate report on the results update. Associate EOC announced vessel downtime on FPSO Arunothai and Lewek Champion. New investment of 20% in Malaysia-listed Perisai for USDm 19, to gain stronger foothold in much protected Malaysia market. Perisai holds a huge pipelay construction vessel Enterprise 3 which is currently on term charter with Petronas until 2013. It is the one of the limited pipelay construction vessels flagged in Malaysia. Expected news-flow Potential contracts on the upcoming newbuilds, but any financial impact will only come after FY2010 given that the subsea newbuilds (MFSVs and CSV) are only mostly operational in FY2011 (Aug year-end). Q3 earnings release. Valuation DCF valuation - SGD/sh 1.22; NAV valuation - SGD/sh 1.22. 2010 EV/EBITDA of 15x and PE of 16x. Tp of SGD/sh 1.20 is supported by our valuation framework, SELL recommendation remains. Weak Q3 expected due to associate EOC's vessels downtime (CSV Lewek Champion and FPSO Lewek Arunothai). Subsea performance likely to be weak due to delays in key newbuild subsea assets.

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26.05.2010

Sector report > Offshore Supply Valuation summary DCF valuation - SGD/sh 1.22; NAV valuation - SGD/sh 1.22. 2010 EV/EBITDA of 15x and PE of 16x. Figure 100: DCF Valuation SGD/sh 1.22
Discounted value of free cashflow Value free cashflow 2010-2035 (USDm) Value free cashflow 2035+ (USDm) Total value free cashflow (USDm) Net debt 2010 (USDm) Net value free cashflow (USDm) FCFE per share (USD) Current market value of EOC (49%) & Ezion (14%) in USDm Other financial assets (FA) Current market value of EOC per share (USD) Total value per share (USD) Total value per share (SGD) Upside/ (Downside) Terminal Growth Assumptions Nominal growth year 2035+ Factor 491 73 565 218 346 0.52 155 71 0.34 0.86 1.22 -44% Calculation of WACC Market value equity (2009) - in % Net interest bearing debt (2009) - in % Risk premium Beta Risk free rate Interest rate Tax-rate Net WACC 1024 82% 218 18% 7.0 % 1.00 3.0% 6.0 % 17.0 % 9.12%

0.0% 11.0

Source: DnB NOR Markets Estimates

Figure 101: Net asset value SGD/sh 1.22

Owner ship 100% 100% 49% 49% 100% 100% 100% 100% 100% 49% 100% 100% 100% 100% 100% 100% 100% 100% 100% 49% 49% 100% 100% 100% 100% 100% 100% 100% 100% 49% 49% 49% 100% 100% 100% 100% No Vessel name 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 Lewek Roller Lewek Ruby Bayu Intan Lewek Eagle Lewek Robin Lewek Sapphire Lewek Ebony Lewek Ivory Lewek Kea Lewek Mallard Lewek Martin Lewek Kestrel Lewek Heron Lewek Harrier Lewek Penguin Lewek Petrel Lewek Pelican Lewek Plover Lewek Stork Lewek Emerald Lewek Swift Lewek Snipe Lewek Swan Lewek ST TBN 1 Lewek Toucan Lewek Trogon Lewek Fulmar Lewek Falcon Lewek Emas Sarah Gold Sarah Jade Sarah Pearl Ice Maiden Lewek C rusader Lewek Merlin Lewek Aries Type AHT AHT AHT AHTS AHT AHTS AHTS AHTS AHT AHTS AHTS AHT AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS AHTS MFSV MFSV Tanker C rewboat C rewboat C rewboat Flexpipe C SV AHTS PSV BHP 4,000 4,200 4,200 4,200 4,900 5,040 5,220 5,500 7,340 7,340 7,340 7,340 8,000 8,000 10,800 10,800 10,800 10,800 12,000 12,000 12,240 12,240 12,240 12,240 17,600 17,600 24,000 24,000 4,500 9,792 9,792 8,000 3,600 Built 2006 2005 2005 2004 2006 2005 2006 2001 2008 2007 2007 2007 2006 2006 2007 2008 2007 2008 2006 2003 2005 2006 2005 2010 2008 2008 2010 2011 1978 2007 2007 2007 2010 2010 2010 Total Net NAV ownershi Sale(USDm) p (USDm) leaseback 9 9 9 9 10 10 12 12 20 20 20 20 23 23 28 28 28 28 32 32 33 33 33 35 50 50 90 90 28 4 9 9 124 80 25 30 1105 9 9 4 4 10 10 12 12 20 10 20 20 23 23 28 28 28 28 32 16 16 33 33 35 50 50 90 90 28 2 4 4 124 80 25 30 1041 No No No No No No No No Yes No Yes Yes Yes No Yes Yes Yes Yes Yes No No Yes Yes No Yes Yes No No No No No No No No No No

NAV Calculation Vessels not under sale and leaseback incl newbuilds Vessels under sale and leaseback NAV of marine services assets - yards at 2011 EV/ EBITDA of 4x (USDm) NAV of energy services assets at 2011 EV/ EBITDA of 2x (USDm) NAV of EOC (49%) & Ezion (14%), current market value Other financial assets Total assets Reported NIBD Receivables from EOC NPV Future capex NPV sales leaseback commitments NPV of strike price for options Adjusted NIBD Equity value of all assets No of outstanding shares post equity issue Equity value per share (USD) Equity value per share (SGD @ USDSGD 1.4)

Q2'10 648 393 34 28 140 54 1296 270 -71 312 141 62 715 581 664 0.87 1.22

Source: DnB NOR Markets

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Sector report > Offshore Supply

Bet on deepwater subsea growth Ezra is essentially an offshore supply player trading at a high premium due to high expectations for their expansion to subsea/well intervention. Huge downside if this does not materialize as it is priced at 1.6x NAV. We prefer to price Ezra as OSV player instead of subsea engineering company as the latter is yet to be proven. The graph below shows historical and estimated USD/bhp per day for Ezra. We expect declining rates, but a much softer landing than what we have seen internationally (partly due to longer contracts at good rates and newer vessels), but we see more downside than upside risk to our estimates. Last quarter was at only USD/bhp 1.5 vs 2.4 in Q1 and est 2.3 in Q3 and 2.1 in Q4. Figure 102: Average USD/bhp per day for Ezra
2.5

2 USD/bhp per day

1.5

0.5

0 2008 2009 2010E 2011E 2012E 2013E

Source: DnB NOR Markets

Negative triggers ahead Weak Q3 expected due to associate EOC's vessels downtime (CSV Lewek Champion and FPSO Lewek Arunothai). Subsea performance likely to be weak due to delays in key newbuild subsea assets. Delays in delivery schedule of upcoming newbuilds The revised delivery schedule, provided by the management, is longer than what we expect and earlier guidance from the management. On average, the newbuilds (2x MFSVs and 1x CSV) would be delayed by one quarter. We believed this is due to the delays in purchasing the right subsea equipments for the MFSVs and the pipelaying system for the CSV. Figure 103: Revised delivery schedule

Newbuild Lewek Crusader Lewek Fulmar Lewek Falcon Second liftboat

Type CSV MFSV MFSV Liftboat

Current delivery date Aug-10 Aug-10 Mar-11 -

Our initial exp and guidance Jun-10 Jun-10 Sep-10 Jun-10

Source: Company, DnB NOR Markets

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26.05.2010

Sector report > Offshore Supply

In the deepwater subsea segment We reiterate our view that it will take time for the company to build up the business and earn good profits. It will either be 1) challenging to get decent utilization if they work directly for oil companies or 2) difficult to get decent return on the investments if they charter the assets out to other subsea operators as the asset (vessel) growth is very high within the subsea space (approx 50%+). Ezra may end up being an asset provider. New investments of 20% in Malaysia-listed Perisai for USDm 19 Ezra also announced that it has made a strategic stake of 20% in offshore player Perisai Petroleum for MYRm 64 (MYR/sh 0.49), at approx 10% discount to last traded price of MYR/sh 0.54. The company is currently listed on Malaysia's stock exchange, with a market cap of MYRm 358 (USDm 108). Key reason why Ezra bought into the company as it hopes to gain stronger foothold in much protected Malaysia market. Perisai holds a huge pipelay construction vessel Enterprise 3 which is currently on term charter with Petronas until 2013. It is the one of the limited pipelay construction vessels flagged in Malaysia. Contributions from Perisai are expected to be minimal, based on consensus net income estimates of MYRm 39 (USDm 12 - Ezra's share USDm 2) in 2010 and MYRm 52 (USDm 16 - Ezra's share USDm 3) in 2011.

DnB NOR Markets - 109

26.05.2010

Sector report > Offshore Supply

EZRA HOLDINGS (EZRA.SI)

PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 144 0 21 42 6 36 1 -4 2008 268 0 46 33 6 27 13 0 2009 329 0 32 74 6 69 13 -5 2010e 298 0 36 55 12 44 14 -9 2011e 393 0 36 74 16 59 26 -12 2012e 441 0 36 85 16 69 16 -12

0 33 6 1 68

0 40 8 1 175

0 77 9 0 70

0 49 3 0 50

0 73 9 0 64

0 73 9 0 64

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

3 122 95 393 25 638 278 125 235 638 100

10 183 116 196 153 712 370 195 146 712 9

18 299 164 239 161 952 534 309 109 952 114

28 467 164 189 213 1,132 584 449 99 1,132 203

28 631 164 198 170 1,262 648 489 125 1,262 286

28 631 164 218 177 1,288 712 439 137 1,288 229

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

83 -130 -78 49 0 -76

203 82 -149 70 0 206

67 -75 -194 114 0 -89

51 51 -190 140 0 52

70 27 -180 40 0 -43

80 -8 -16 -50 0 7

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million SGD USD X X % X X X X

2007 0.12 0.04 0.05 0.5 569.4 2.73 1.94 16.2 43.6 2.6 4.0 26.2 30.7 2.8

2008 0.30 0.05 0.04 0.6 580.0 1.80 1.28 4.2 23.7 2.8 2.0 19.5 23.5 1.1

2009 0.11 0.10 0.02 0.8 663.8 1.60 1.14 10.8 11.2 1.3 1.4 9.5 10.3 0.8

2010e 0.08 0.07 0.00 0.9 663.8 1.72 1.22 16.3 17.8 0.0 1.4 15.3 19.4 0.8

2011e 0.10 0.10 0.00 1.0 663.8 1.72 1.22 12.6 12.6 0.0 1.2 12.5 15.9 0.8

2012e 0.10 0.10 0.00 1.1 663.8 1.72 1.22 12.7 12.7 0.0 1.1 10.3 12.7 0.8

Share price and target Price SGD Price USD Price target 12m SGD Recommendation Key data per share Book value USD P/Book X %cagr EPS gr09-12e Financial structure SGDm Market cap. Market cap. USDm Net int. bear debt USDm Enterprise value USDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m SGD High/Low 12m STI index % 30days volatility Company attributes Reuters ticker Supply Reporting Q3 2010

1.72 1.22 1.20 SELL 0.64 1.91 -1.9% 1,142 810 114 924 663.8 51.6 -24/-23/47 -13/-21/21 3/1 1915.7 45 EZRA.SI

Management Lee Chye Tek Lionel CEO Tay Chin Kwang CFO Address EZRA Holdings 15 Hoe Chiang Road Floor 15-01 H.p.: www.ezraholdings.com Tel +65 6742 6765

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, SGD) 220 200 180 160 140 120 100 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May EZRA Holdings

Rebased consensus average forward EPS (12m, USD) 125 120 115 110 105 100 95 90 85 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May EZRA Holdings

Revenue (USDm) 500 450 400 350 300 250 200 150 100 50 0

Revenue Growth 120% 100% 80% 60% 40% 20% 0%

EPS (USD) 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 2006 2007 2008 2009

DPS (USD) 0.060 0.050 0.040 0.030 0.020 0.010 2010e 2011e 2012e DPS (USD) 0.000

2006

2007

2008

2009

2010e 2011e 2012e Revenue Growth

-20%

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 90 80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010e

EBITDA margin 35% 30% 25% 20% 15% 10% 5% 2011e 2012e 0%

FCF (USDm) 200 150 100 50 0 -50 -100 -150 -200 -250 2006 2007 2008 2009

Dividend yield 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 2010e 2011e 2012e Dividend yield 0.0%

EBITDA (USDm)

EBITDA margin

FCF (USDm)

EBIT margin 0.30 0.25 0.20 0.15 0.10 0.05 0.00 2006 2007 2008 2009

EBITDA margin 0.35 0.30 0.25 0.20 0.15 0.10 0.05 2010e 2011e 2012e EBITDA margin 0.00

Price/Book 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

EBIT margin

Price/Book

DnB NOR Markets - 111

26.05.2010

Sector report > Offshore Supply

Deep Sea Supply

Company Description Deep Sea Supply Plc is an offshore supply company. The Company is a shipowner and operator of several Anchor Handling Tug Supply vessels (AHTS vessels) and Platform Supply Vessels (PSV). DESSC has an opportunistic approach compared to its peers both for dividends and asset trades. Assets 8x large PSVs, mostly on longterm charters with average contract length of 18 months 13x AHTS with 9 on the international term market and 4 operating in the North Sea. 6x 6,800bhp AHTS newbuilds due for delivery in Feb-Aug 2010 (any cancellations of these vessels will be positive). Recent development For its AHTS shipbuilding program with Indias ABG shipyard, financing commitments have been put in place to effect the 6 AHTS delivery due in 2010. Secured four chartering contracts in April, inline with our expectations. Day-rates are not disclosed, but market sources indicate that the level is inline with our estimates. We estimate USD/day 25k for Jaguar and USD/day 20 for the rest Q1 earnings release, please see separate note on 6th May for result update. Expected news-flow DESSC is beginning to delve into Brazil as it established its Brazilian presence and also placed an order for a large PSV at STX Brazil, with delivery due in 2012. Financing will be provided by a local financing scheme. DESSC expects to have a fleet of 6-8 vessels in Brazil from H2 2010 to take advantage of regulations allowing imported vessels to operate locally when a newbuild order has been committed in Brazil. The 6,800 bhp newbuild are strong candidates for contracts off Brazil. DESSC have vessels number 1,2,4 and 5 in a tender from Petrobras (for 3,000+ PSVs). Rate level here is also around USD/day 20k DESSC expects to restore dividends distributions when the markets show clear recovery as it has decided against paying dividends since Q3 2008 Valuation DESSC is trading at EV/EBITDA 11x and 8x for 2010 and 2011 respectively. We have a BUY recommendation on DESSC with target NOK/sh 13.5 based on NAV NOK/sh 13.5.

DESSC Fleet value NIBD end of quarter Remaining capex, NPV NIBD adj Equity value NAV/share USD NAV/share NOK @ 6

Q1 2010 909 483 156 638 271 2.1 13.5

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Sector report > Offshore Supply

DEEP SEA SUPPLY (DESSC.OL)

PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit
2007 147 0 -46 101 18 85 -2 -17 2008 190 0 -68 122 24 86 2009 168 0 -71 96 52 75 2010e 129 0 -69 59 38 21 2011e 160 0 -85 75 39 36 2012e 211 0 -84 127 39 88

-39 9 56 3 0 59

-29 -9 37 8 0 45

-29 0 -8 0 0 -8

-28 0 8 0 0 8

-27 0 61 0 0 61

0 67 -13 0 54

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Total liabilities & equity Net interest bearing debt

0 514 0 65 31 610 159 402 561 370

0 655 46 62 40 803 97 531 628 491

0 649 49 36 32 766 162 511 673 479

0 692 49 20 -3 758 155 501 657 504

0 671 49 25 -17 728 163 457 620 474

0 702 49 33 24 808 217 472 690 448

Share price and target Price NOK Price USD Price target 12m NOK Recommendation Key data per share Book value USD NAV USD P/Book X P/NAV X EPS gr09-12e %cagr

10.00 1.54 13.50 BUY 1.27 2.36 1.21 0.65 10.3%

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

105 -99 -251 290 -180 -134

184 -27 -215 194 -37 99

-62 123 -29 -55 0 -23

-6 46 -82 7 1 -35

46 8 -18 -50 -1 -14

102 10 -70 6 -6 41

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million NOK USD X X % X X X X

2007 0.43 0.43 1.44 1.3 125.6 29.56 4.55 10.6 10.6 31.6 3.6 9.4 11.2 1.7

2008 0.38 0.38 0.28 0.7 130.0 6.53 1.01 2.6 2.6 28.2 1.4 4.7 6.3 0.9

2009 0.35 0.35 0.00 1.2 130.0 8.76 1.35 3.9 3.9 0.0 1.1 6.3 10.1 0.9

2010e -0.06 -0.06 -0.01 1.2 130.0 10.00 1.54 nm nm -0.4 1.3 11.0 31.0 1.0

2011e 0.06 0.06 0.01 1.3 130.0 10.00 1.54 24.1 24.1 0.4 1.2 8.3 17.3 1.0

2012e 0.47 0.47 0.05 1.7 130.0 10.00 1.54 3.3 3.3 3.0 0.9 4.7 6.8 0.9

Financial structure 1,300 NOKm Market cap. 200 Market cap. USDm 491 Net int. bear debt USDm 691 Enterprise value USDm 130.0 Shares outst. million 20.5 Equity/tot assets % Share price performance -23/6/17 Abs. 1/3/12m -3/17/-1 Rel. 1/3/12m 12/8 High/Low 12m NOK 53.0 OSEBX index 73 30days volatility % Company attributes DESSC.OL Reuters ticker Supply Reporting Q2 2010

Management Odd Brevik CEO Finn Amund Norbye CFO Address Deep Sea Supply Tromyveien 22 4841 Arendal H.p.: www.deepseasupply.no Tel +47 3705 8613

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Sector report > Offshore Supply

Rebased price (12m, NOK) 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Deep Sea Supply

Rebased consensus average forward EPS (12m, USD) 110 100 90 80 70 60 50 40 30 20 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Deep Sea Supply

Revenue (USDm) 250 200 150 100 50 0

Revenue Growth 120% 100% 80% 60% 40% 20% 0% -20% -40% -60% -80%

EPS (USD) 0.60 0.50 0.40 0.30 0.20 0.10 0.00 -0.10 2006 2007 2008 2009

DPS (USD) 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2010e 2011e 2012e DPS (USD) -0.2

2006

2007

2008

2009

2010e 2011e 2012e Revenue Growth

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 140 120 100 80 60 40 20 0 2006 2007 2008 2009

EBITDA margin 80% 70% 60% 50% 40% 30% 20% 10% 2010e 2011e 2012e EBITDA margin 0%

FCF (USDm) 1,000 800 600 400 200 0 -200 -400 2006 2007 2008 2009

Dividend yield 40% 35% 30% 25% 20% 15% 10% 5% 0% 2010e 2011e 2012e Dividend yield -5%

EBITDA (USDm)

FCF (USDm)

EBIT (USDm) 100 90 80 70 60 50 40 30 20 10 0

EBIT margin 70% 60% 50% 40% 30% 20% 10%

Price/Book 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 70% 60% 50% 40% 30% 20% 10% 0% -10%

2006

2007

2008

2009

2010e 2011e 2012e EBIT margin

0%

EBIT (USDm)

Price/Book

DnB NOR Markets - 114

26.05.2010

Sector report > Offshore Supply

Eidesvik
Company Description Eidesvik was established in 1978 as an offshore supply company. The Company's headquarter is located in Bmlo, north of Haugesund. In addition, the company has offices in UK and Nigeria. The number of employees is approximately 470. Eidesvik Offshore operates in three main segments, the PSV's, SubSea and Seismic. Several of the vessels are developed by Eidesvik's own project department in close cooperation with its business associates (clients) and naval architects. The Company believes there will be demand for environmentally friendly vessels in the future, of which Eidesvik is a forerunner in the market today. Eidesvik operates their vessels mainly on long-term contracts, and their contract coverage for 2010 is 95 percent. The vessels are operated in the world wide market. Assets

11x Supply vessels. 4x Subsea vessels. 6x Seismic vessels. 2x Seismic newbuilds to be delivered in 2010.

Recent development In Dec 09, Eidesvik entered into a JV with Exploration Investment Resouces (unit of CGGVeritas) for the chartering of two seismic vessels BN 285 and BN 286, which are under construction at Ulstein Verft will remain in Eidesvik Seismic Vessels AS, including building contract, time charter and all financial agreements. Eidesvik will still act as maritime manager for the vessels. In Oct 09, CGGVeritas has declared their option and extended the contract with 2 years for the seismic vessel Veritas Vantage, starting from April 2010. Dividend of NOK 0.5 paid on 21st May. Q1 earnings release. Expected news-flow Renewal of chartering contracts, with 3x AHTS up for option renewal this year. Valuation Eidesvik is trading at EV/EBITDA 5x and 4x for 2010 and 2011 respectively. Corresponding P/E multiples are 10x and 5x. We have a BUY recommendation on Eidesvik with target NOK/sh 40.

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EIDESVIK (EIOF.OL)
PROFIT & LOSS NOKm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 725 0 433 292 169 123 -90 12 181 -227 0 -46 2008 965 24 520 445 227 218 -167 0 -596 16 0 -580 2009 1,074 -32 580 494 281 213 -172 155 939 153 0 1,091 2010e 1,117 0 548 569 304 264 -110 0 97 -13 0 84 2011e 1,145 0 548 597 275 321 -84 0 237 -17 0 221 2012e 1,241 0 576 665 296 369 -86 0 283 -20 0 263

BALANCE SHEET NOKm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

33 3,651 37 426 123 4,273 1,480 2,049 744 4,273 1,923

0 3,891 35 415 211 4,555 842 2,743 970 4,555 2,529

0 4,397 219 343 306 5,267 1,902 2,839 526 5,267 2,532

0 4,316 219 335 987 5,859 1,977 2,839 1,019 5,835 1,851

0 4,241 219 343 1,528 6,333 2,176 3,039 1,095 6,309 1,510

0 4,945 219 372 1,116 6,653 2,412 3,039 1,178 6,630 1,922

CASH FLOW NOKm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

110 -408 -1,018 1,309 0 -7

-290 -68 -431 847 0 57

1,284 75 -969 -141 0 250

555 325 -200 0 0 681

393 157 -200 200 -8 541

566 43 -1,000 0 -22 -413

Share price and target Price NOK Price target 12m NOK Recommendation Key data per share Book value NOK P/Book X %cagr EPS gr09-12e Financial structure NOKm Market cap. Net int. bear debt NOKm Enterprise value NOKm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m NOK OSEBX index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

33.80 40.00 BUY 49.09 0.69 -34.6% 1,019 1,923 2,942 30.2 33.7 -8/5/28 4/7/7 39/23 344.2 33 EIOF.OL

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

NOK NOK NOK NOK million NOK X X % X X X X

2007 -1.57 -1.57 1.00 49.1 30.2 52.75 nm nm 1.9 1.1 11.9 26.1 1.0

2008 -19.24 -19.24 -1.92 27.9 30.2 18.30 nm nm -10.5 0.7 6.8 13.9 0.9

2009 31.24 31.24 3.62 63.1 30.2 29.30 0.9 0.9 12.4 0.5 6.5 14.7 0.7

2010e 3.57 3.57 0.28 65.6 30.2 33.80 9.5 9.5 0.8 0.5 4.7 9.2 0.6

2011e 7.31 7.31 0.73 72.2 30.2 33.80 4.6 4.6 2.2 0.5 3.9 7.2 0.4

2012e 8.73 8.73 0.87 80.0 30.2 33.80 3.9 3.9 2.6 0.4 4.1 7.4 0.5

Management Jan Fredrik Meling CEO Svein Ove Enerstvedt CFO Address Eidesvik N-5443 Bomlo Nils Fredrik Meling H.p.: www.eidesvik.no Tel +47 53 44 80 00

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, NOK) 150 140 130 120 110 100 90 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Eidesvik

Rebased consensus average forward EPS (12m, NOK) 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Eidesvik

Revenue (NOKm) 1,400 1,200 1,000 800 600 400 200 0 2006 2007 2008 2009

Revenue Growth 40% 30% 20% 10% 0% -10% 2010e 2011e 2012e Revenue Growth -20%

EPS (NOK) 40 30 20 10 0 -10 -20 -30 2006 2007 2008 2009 2010e 2011e

DPS (NOK) 4.0 3.0 2.0 1.0 0.0 -1.0 -2.0 2012e -3.0

Revenue (NOKm)

EPS (NOK)

DPS (NOK)

EBITDA (NOKm) 700 600 500 400 300 200 100 0 2006 2007 2008 2009

EBITDA margin 60% 50% 40% 30% 20% 10% 2010e 2011e 2012e EBITDA margin 0%

FCF (NOKm) 1,000 500 0 -500 -1,000 -1,500

Dividend yield 15% 10% 5% 0% -5% -10%

2006

2007

2008

2009 2010e 2011e 2012e Dividend yield

-15%

EBITDA (NOKm)

FCF (NOKm)

EBIT (NOKm) 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009

EBIT margin 35% 30% 25% 20% 15% 10% 5% 2010e 2011e 2012e EBIT margin 0%

Price/Book 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 80% 60% 40% 20% 0% -20% -40% -60% -80%

EBIT (NOKm)

Price/Book

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Sector report > Offshore Supply

Farstad Shipping
Company Description Farstad Shipping is a world-leading supplier of large, modern offshore support vessels to the international offshore oil & gas industry. They own and operate their vessels with focus on the high-end segment of the market. Farstad Shipping has been listed on the Oslo Stock Exchange since 1988, foreign shareholders control around 15% of Farstad Shipping. The company is best positioned among peers on international operations and diversification, and has earlier surprised with contract extensions above our assumptions (and also above market rates as the vessels have operated in areas with high barriers to enter, such as Australia). However, we believe in such positive surprises will be lesser going forward as world-wide utilization in the industry will drop. Assets 57 vessels: 32 AHTS, 23 PSVs, 2 subsea vessels. 19 vessels in North Sea, 12 in Brazil, 26 in India Pacific. Focus on traditional AHTS and PSV operations (not construction work, ROV etc). Offices world wide and one of few international players with a strong footprint in Australia. Recent development Reduced activity and introduction of newbuilds have resulted in an oversupply situation. In particular, utilisation in the North Sea has not seen major improvement and dismal performance can also be observed in charter rates. Despite the weak market balance, Petrobras has been a major charterer of Farstad vessels, usually with charters ranging 1-3years. Strong chartering contracts in April, worth USDm 102 including options. Q1 earnings. Outlook: The activity level offshore is increasing again. However, the rate level and the utilisation rate for supply vessels will continue to be negatively affected by the large number of newbuilds already in the market or which are still to be delivered. Expected news-flow Farstad expects oversupply situation to persist till late 2010 with weak charter rates and utilisation. Contract extensions or new contracts at slightly quicker pace in 2010, compared to 2009. Possible delays for newbuilds, but very limited valuation impact due to a large operating fleet. Valuation Farstad is trading at EV/EBITDA 6.9x and 7.5x for 2010 and 2011 respectively. Corresponding P/E multiples are 10.6x and 15.6x. We downgrade FAR from BUY to HOLD with price target NOK/sh 170, based on NAV.

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Sector report > Offshore Supply

FARSTAD (FAR.OL)
PROFIT & LOSS NOKm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 2,318 0 1,137 1,181 337 844 65 -180 196 925 -838 0 87 2008 2,959 0 1,291 1,668 365 1,303 -233 -222 61 909 316 0 1,226 2009 3,258 0 1,521 1,736 455 1,281 368 -226 0 1,424 508 0 1,932 2010e 3,046 0 1,781 1,265 527 737 0 -146 0 591 -39 0 552 2011e 2,807 0 1,729 1,078 540 537 0 -142 0 396 -20 0 376 2012e 3,607 0 1,764 1,843 527 1,317 0 -98 0 1,219 -61 0 1,158

BALANCE SHEET NOKm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

30 6,743 555 548 1,461 9,348 3,607 3,806 1,935 9,348 2,335

30 7,926 501 697 1,743 10,912 4,440 4,873 1,599 10,912 3,115

30 9,809 495 823 2,491 13,663 6,372 5,373 1,957 13,701 2,867

30 10,582 495 770 2,040 13,932 6,924 5,373 1,673 13,969 3,318

30 10,312 495 709 2,032 13,594 7,299 4,773 1,560 13,632 2,725

30 10,048 495 911 3,035 14,537 8,458 4,073 2,044 14,575 1,021

CASH FLOW NOKm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

424 264 -1,055 231 0 -136

1,630 -363 -1,499 1,058 0 827

2,425 192 -2,370 500 0 748

884 -35 -1,300 0 0 -451

916 -54 -271 -599 0 -8

1,685 281 -264 -699 0 1,003

Share price and target Price NOK Price target 12m NOK Recommendation Key data per share Book value NOK P/Book X %cagr EPS gr09-12e Financial structure NOKm Market cap. Net int. bear debt NOKm Enterprise value NOKm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m High/Low 12m NOK OSEBX index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

150.50 170.00 HOLD 113.85 1.32 -15.7% 5,870 3,115 8,984 39.0 49.7 -7/0/48 5/2/27 164/100 344.2 41 FAR.OL

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

NOK NOK NOK NOK million NOK X X % X X X X

2007 -2.79 -2.79 4.00 92.5 39.0 148.00 nm nm 2.7 1.6 6.4 8.9 1.0

2008 29.86 29.86 5.00 113.8 39.0 67.50 2.3 2.3 7.4 0.6 3.1 4.0 0.6

2009 49.53 49.53 0.00 163.4 39.0 128.50 2.6 2.6 0.0 0.8 4.3 5.8 0.6

2010e 14.15 14.15 0.00 177.5 39.0 150.50 10.6 10.6 0.0 0.8 6.9 11.8 0.7

2011e 9.64 9.64 0.00 187.2 39.0 150.50 15.6 15.6 0.0 0.8 7.5 15.1 0.7

2012e 29.70 29.70 0.00 216.9 39.0 150.50 5.1 5.1 0.0 0.7 3.5 4.9 0.5

Management CEO CFO Address Farstad Notenesgt. 14 Terje J.K. Andersen H.p.: www.farstad.no Tel +47 22 94 88 71

Karl-Johan Bakken Torstein L.Stavseng

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Sector report > Offshore Supply

Rebased price (12m, NOK) 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Farstad

Rebased consensus average forward EPS (12m, NOK) 105 100 95 90 85 80 75 70 65 60 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Farstad

Revenue (NOKm) 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006 2007 2008 2009

Revenue Growth 35% 30% 25% 20% 15% 10% 5% 0% -5% 2010e 2011e 2012e Revenue Growth -10%

EPS (NOK) 60 50 40 30 20 10 0 -10 2006 2007 2008 2009 2010e 2011e

DPS (NOK) 6.0 5.0 4.0 3.0 2.0 1.0 2012e 0.0

Revenue (NOKm)

EPS (NOK)

DPS (NOK)

EBITDA (NOKm) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0

EBITDA margin 60% 50% 40% 30% 20% 10%

FCF (NOKm) 2,000 1,500 1,000 500 0 -500 -1,000 2006 2007 2008

Dividend yield 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 2009 2010e 2011e 2012e Dividend yield 0.0%

2006

2007

2008

2009

2010e 2011e 2012e EBITDA margin

0%

EBITDA (NOKm)

FCF (NOKm)

EBIT (NOKm) 1,400 1,200 1,000 800 600 400 200 0 2006 2007 2008 2009

EBIT margin 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

Price/Book 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 35% 30% 25% 20% 15% 10% 5% 0%

2010e 2011e 2012e EBIT margin

EBIT (NOKm)

Price/Book

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Sector report > Offshore Supply

Havila Shipping
Company Description Havila Shipping was established on 31 July 2003. It operates platform supply vessels (PSV), anchor handling tug supply vessels (AHTS), subsea construction vessels and rescue- and recovery vessels. The Company provides maritime support functions and associated services to international offshore oil and gas production sites, mainly in the North Sea and Asia Pacific region. The company aims to safeguard its long-term perspective through a balanced chartering strategy that ensures a basic cash flow combined with an assessed exposure to the spot market. 2010/2011 contract coverage at 76%/63%. Assets

10 AHTS. 9 PSVs and 2 newbuilds. 2 subsea construction vessels and 2 newbuilds. 2 rescue recovery vessels.

Recent development Major contracts included two PSVs signed with Petrobras for fixed period of 3 years, contributing significantly to contract coverage. The group has also ensured financing for all vessel deliveries due in 2010. Sales lease-back of RRV Havila Troll for NOKm 160 (USDm 25) in April, inline with our NAV valuation. Hence, it is neutral to valuation, but the balance sheet has been a key concern for investors, so that is also on the positive side. 2-year term charter contract for subsea vessel Havila Phoenix with TS Marine in May. Q1 earnings release, please see separate note on 26th April for details. Expected news-flow Havila expects increased subsea activity to bring about increased contract momentum going forward. Potential new charters or renewals for fleet going off charter this year. Havila expects to operate a total fleet of 27 vessels in 2011, up from a current operating fleet of 23. Valuation Havila is trading at EV/EBITDA 10.7x and 8.7x for 2010 and 2011 respectively. We have a BUY recommendation on Havila with target NOK/sh 80, based on NAV.

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Sector report > Offshore Supply

HAVILA SHIPPING (HAVI.OL)

PROFIT & LOSS NOKm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 528 198 331 81 250 -82 147 340 -21 -1 320 2008 812 383 430 91 338 -112 310 259 66 10 315 2009 901 454 448 135 313 -108 -3 598 -119 2 477 2010e 951 524 427 201 208 -161 120 167 -12 0 155 2011e 1,141 558 584 244 339 -194 0 145 12 0 156 2012e 1,130 558 572 255 317 -199 0 118 9 0 128

BALANCE SHEET NOKm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

37 2,720 1 192 471 3,435 1,081 1,951 402 3,435 1,467

0 3,286 23 363 698 4,386 1,144 2,639 604 4,386 1,924

0 4,695 48 373 347 5,479 1,652 3,137 690 5,479 2,773

0 5,739 38 346 627 6,766 1,787 4,337 651 6,775 3,693

0 6,379 38 415 1,135 7,985 1,923 5,337 733 7,994 4,184

0 6,249 38 411 1,572 8,288 2,034 5,537 726 8,298 3,946

CASH FLOW NOKm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

400 144 -1,066 456 0 -66

616 -127 -644 760 0 606

456 144 -1,566 509 0 -457

378 -53 -1,244 1,200 0 280

358 55 -885 1,001 -20 508

382 -1 -126 202 -20 436

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

NOK NOK NOK NOK million NOK X X % X X X X

2007 20.05 9.31 12.50 67.8 16.0 119.00 5.9 12.8 10.5 1.8 10.2 13.4 1.1

2008 19.73 12.63 2.56 71.7 16.0 34.50 1.7 2.7 7.4 0.5 5.7 7.4 0.7

2009 29.90 5.41 3.89 103.5 16.0 59.50 2.0 11.0 6.5 0.6 8.2 11.7 0.8

2010e 9.74 1.64 1.27 112.0 16.0 58.50 6.0 35.7 2.2 0.5 10.7 23.1 0.8

2011e 9.80 9.80 1.27 120.5 16.0 58.50 6.0 6.0 2.2 0.5 8.7 15.0 0.7

2012e 8.02 8.02 1.04 127.5 16.0 58.50 7.3 7.3 1.8 0.5 8.5 15.3 0.6

Share price and target Price NOK Price target 12m NOK Recommendation Key data per share Book value NOK NAV NOK P/Book X P/NAV X EPS gr09-12e %cagr Financial structure Market cap. NOKm Net int. bear debt NOKm Enterprise value NOKm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m NOK High/Low 12m OSEBX index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

58.50 80.00 BUY 103.49 80.00 0.57 0.73 14.0% 934 1,924 2,858 16.0 26.2 -15/-7/63 -3/-5/42 72/35 344.2 72 HAVI.OL

Management CEO CFO Address Havila Shipping PO BOX 215 N-6099 Fosn Avag H.p.: www.havila.no Tel +47 53 44 80 00

Njl Svik Arne Johan Dale

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Sector report > Offshore Supply

Rebased price (12m, NOK) 200 180 160 140 120 100 80 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Havila Shipping

Rebased consensus average forward EPS (12m, NOK) 110 100 90 80 70 60 50 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Havila Shipping

Revenue (NOKm) 1,200 1,000 800 600 400 200 0 2006 2007 2008 2009

Revenue Growth 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40%

EPS (NOK) 35 30 25 20 15 10 5 0 2006 2007 2008 2009 2010e 2011e

DPS (NOK) 14 12 10 8 6 4 2 2012e 0

2010e 2011e 2012e Revenue Growth

Revenue (NOKm)

EPS (NOK)

DPS (NOK)

EBITDA (NOKm) 700 600 500 400 300 200 100 0 2006 2007 2008 2009

EBITDA margin 70% 60% 50% 40% 30% 20% 10% 2010e 2011e 2012e EBITDA margin 0%

FCF (NOKm) 400 200 0 -200 -400 -600 -800 -1,000 -1,200 2006 2007 2008 2009

Dividend yield 12% 10% 8% 6% 4% 2% 2010e 2011e 2012e Dividend yield 0%

EBITDA (NOKm)

FCF (NOKm)

EBIT (NOKm) 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009

EBIT margin 60% 50% 40% 30% 20% 10% 2010e 2011e 2012e EBIT margin 0%

Price/Book 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0

ROE 35% 30% 25% 20% 15% 10% 5%

2006

2007

2008

2009

2010e 2011e 2012e ROE

0%

EBIT (NOKm)

Price/Book

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26.05.2010

Sector report > Offshore Supply

Siem Offshore
Company Description Siem Offshore owns and operates a fleet of offshore supply vessels, including AHTS, PSV and Subsea vessels. The company operates out of their offices in Norway, Brazil and Cayman islands. The company has experienced very rapid growth over the last 3 years. Assets Fleet of 44 vessels in total (of which 14 are newbuilds), including: 14 PSVs (including 1 newbuild) 8 AHTS (including 5 newbuilds) 5 MSRVs 17 other support vessels (including 6 newbuilds for Brazil fleet) 60% ownership in SIEM WIS Recent development Q1 earnings release, please see separate note on 11th May. SIEM WIS update, successful first commercial contract for Pressure Control Device (PCD), Management Pressure Drilling (MPD), with Statoil (at Gullfaks). Pls see next page for more information They are still waiting for Petrobras to decide how many ultra large AHTS they will commit to. Siem is positioned as #1, #2, #3, #6 and #7 in the tender for 21,000+ bhp in terms of the lowest bids, but this is not new. At the last such ATHS tender in 2008, Petrobras chose to not accept any of the bids. But that was at a time when lowest bidder was above USD/day 100k vs currently 48k Expected news-flow Contracts for Siem WIS and their AHTS fleet are key triggers. With its continuing newbuild deliveries, Siem Offshore expects to have the 2nd-largest AHTS fleet worldwide. Petrobras contracts. Valuation Siem Offshore is trading at EV/EBITDA 14x and 10x for 2010 and 2011 respectively. We have a BUY recommendation on Siem Offshore with target NOK/sh 14. 50% of our NAV comes from their 8 ultra large AHTS. We value each of these vessels to USDm 90.
NAV SIOFF Fleet WIS Assets CAPEX NIBD Adj for min and ass. NAV #shares NAV/sh USD NAV/sh NOK Gearing USDm 1379 160 1539 654 159 35 761 360 2.1 14 51%

We see significant upside to our estimates for Siem WIS, although we already have doubled our value of SIEM WIS from USDm 80 to USDm 160 (NOK/sh 1.6 to 3.3).

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Sector report > Offshore Supply SIEM WIS: A potential company maker SIEM WIS, 60% owned by Siem Offshore, has developed a solution for management pressure drilling (MPD). In short, the technology creates a closed dynamic loop for drilling fluids which allow oil companies to produce more from depleted reservoirs and reservoirs with high pressure and temperatures. The technology can be use on all drilling rigs, but is slightly different for floaters vs fixed installations/Jack ups/ land rigs. PCD: For Fixed installations, Jack-ups and land rigs (commercialized) RPCD: For floaters. (expected commercialized 2012) A third product they offer is Circsub, which improves drilling effectiveness. The commercial breakthrough was when SIEM WIS got a contract with Statoil (who also has carried part of development costs and participated in the full scale test in 2008) March 23rd this year for the PCD. The dayrate is rumoured to be around NOK 100k/day (USD/day 15' @ USDNOK 6.5). The platform they are using it on is Gullfaks and operations have been even better than expected according to mgmt. Playing with numbers It is difficult to predict the potential for SIEM WIS as there is little or no guidance from management (except that they are very pleased with all results and development so far) and last cycle proved that it was difficult to get oil companies to absorb new technologies. However, there is no doubt that the potential is significant and that the positive results from Gullfaks has increased the probability for a commercial success significantly. Below are some assumptions for calculation of values: Capex per unit: USDm 5 Lifetime 10 years Day-rate: USD/day 15k Opex: USD/day 5 (including maintenance) Utilization 75%

The numbers give economics (EBITDA) to Siem WIS of USDm 10.75 per unit (discounted), or EBITDA of USD/unit 2.7 per year. If assuming that they get contracts for 10 units within end 2012, it should justify an EBITDA of USDm 27, we believe the market will be willing to pay at least a multiple of 15x, which gives an EV of USDm 607 or USDm 364 for SIOFF's 60% ownership (44% probability for this in our NAV estimate) But a base case scenario is unlikely unfold: We expect it to be worth either NOK/sh 10-20 per SIEM share, which corresponds to USDm 10002000 for the whole company, or nothing at all. This includes the whole concept including PCF and RPCD and argue that. With Siem Offshore trading below NAV for their fleet (at same discount as DESSC), risk reward is attractive. NOK/sh 10-20 implies that they have installed the equipment (PCD of RPCD) on 35-70 units with an EV/EBITDA multiple of 10x. We value SIEM WIS to NOK/sh 3.3, or 15-30% probability for this scenario. The potential number of units they could install the equipment on exceeds 1000. Operations at Gullfaks are now halted because Statoil (the operator) has lost control of the gas pressure. According to Siem mgmt this is not linked to the Siem WIS equipment at all (occurred when they have operated without the equipment for some period).

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Sector report > Offshore Supply

SIEM OFFSHORE (SIOFF.OL)

PROFIT & LOSS USDm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 159 0 80 80 19 61 -10 0 123 2 -1 122 2008 193 0 105 88 32 56 -7 0 -24 0 2 -26 2009 184 0 126 58 8 50 -5 0 128 -2 1 129 2010e 234 0 149 85 51 38 -19 0 19 1 0 17 2011e 317 0 192 125 66 66 -33 0 33 1 0 32 2012e 390 0 198 191 69 111 -33 0 78 2 0 76

BALANCE SHEET USDm Intangible assets Operating assets Associated companies Other current assets Cash & cash equivalents Total assets Equity & minority interest Interest bearing debt Non interest bearing debt Total liabilities & equity Net interest bearing debt

9 504 18 1,039 188 1,759 499 269 991 1,759 80

13 615 19 77 73 864 426 279 159 864 139

14 971 33 101 91 1,284 703 446 138 1,287 282

14 1,406 33 94 144 1,767 714 896 153 1,764 679

14 1,520 33 127 154 1,925 746 996 180 1,922 769

14 1,568 33 156 229 2,068 822 1,046 196 2,065 744

Share price and target Price NOK Price USD Price target 12m NOK Recommendation Key data per share Book value USD NAV USD P/Book X P/NAV X EPS gr09-12e %cagr Financial structure NOKm Market cap. Market cap. USDm Net int. bear debt USDm Enterprise value USDm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m NOK High/Low 12m OSEBX index 30days volatility % Company attributes Reuters ticker Supply Reporting Q2 2010

9.80 1.51 14.00 BUY 1.39 2.12 1.09 0.71 -16.1% 3,526 543 139 681 359.8 39.5 -18/5/19 2/16/1 12/8 53.0 65 SIOFF.OL

CASH FLOW USDm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

139 -34 -281 93 0 -83

8 47 -213 9 0 -149

139 -33 -385 167 0 -112

68 21 -486 450 0 53

98 -9 -180 101 0 10

145 -5 -117 51 0 74

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

USD USD USD USD million NOK USD X X % X X X X

2007 0.34 0.34 0.00 1.4 359.8 23.10 3.55 10.5 10.5 0.0 2.6 16.8 22.0 1.8

2008 -0.07 -0.07 0.00 1.2 359.8 7.61 1.17 nm nm 0.0 1.0 6.2 9.7 0.8

2009 0.36 0.36 0.00 2.0 359.8 10.01 1.54 4.3 4.3 0.0 0.8 13.8 16.2 0.7

2010e 0.05 0.05 0.00 2.0 359.8 9.80 1.51 31.4 31.4 0.0 0.8 14.0 31.5 0.7

2011e 0.09 0.09 0.00 2.1 359.8 9.80 1.51 17.1 17.1 0.0 0.7 10.2 19.4 0.7

2012e 0.21 0.21 0.00 2.3 359.8 9.80 1.51 7.1 7.1 0.0 0.7 6.6 11.3 0.7

Management Terje Srensen CEO Dagfinn Blie CFO Address Siem Offshore PO Box 425 N-4664 Krisiansands, Norway H.p.: www.siemoffshore.com Tel +47 95 29 64 00

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, NOK) 145 140 135 130 125 120 115 110 105 100 95 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Siem Offshore

Rebased consensus average forward EPS (12m, USD) 110 100 90 80 70 60 50 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Siem Offshore

Revenue (USDm) 450 400 350 300 250 200 150 100 50 0 2006 2007 2008 2009

Revenue Growth 200% 150% 100% 50% 0% -50%

EPS (USD) 0.40 0.35 0.30 0.25 0.20 0.15 0.10 0.05 0.00 -0.05 -0.10

DPS (USD) 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0

2010e 2011e 2012e Revenue Growth

2006

2007

2008

2009

2010e 2011e 2012e DPS (USD)

Revenue (USDm)

EPS (USD)

EBITDA (USDm) 250 200 150 100 50 0

EBITDA margin 60% 50% 40% 30% 20% 10%

FCF (USDm) 50 0 -50 -100 -150 -200 -250 -300 -350 -400 -450

Dividend yield 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0%

2006

2007

2008

2009

2010e 2011e 2012e EBITDA margin

0%

2006

2007

2008

2009 2010e 2011e 2012e Dividend yield

EBITDA (USDm)

FCF (USDm)

EBIT (USDm) 120 100 80 60 40 20 0 2006 2007 2008 2009

EBIT margin 45% 40% 35% 30% 25% 20% 15% 10% 5% 2010e 2011e 2012e EBIT margin 0%

Price/Book 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 35% 30% 25% 20% 15% 10% 5% 0% -5% -10%

EBIT (USDm)

Price/Book

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Solstad Offshore
Company Description Solstad Offshore is one of the world largest owner and operator of offshore supply vessels including AHTS, PSV and Subsea vessels. They have higher exposure to the spot and Subsea markets compared to key peer Farstad Shipping. The company started their offshore operations in 1973 and was listed on OSE in 1997. They are headquartered in Skudeneshavn with branch offices in Aberdeen, Rio de Janeiro and Singapore through NOR Offshore. Contract coverage for 2010/2011 at 66%/44% excl options and 72%/57% incl options. Assets 13x construction vessels + 3 newbuilds. 15x AHTS vessels. 8x PSV vessels 10 vessels + 1 newbuild through NOR Offshore in Singapore. In total, 4 vessels are under construction

Recent development Solstad has successfully completed a NOKm 700 unsecured bond issue in Q4 2009, with funds to be used for refinancing existing debt and general corporate purposes. Financing for NB's with delivery in 2010 in place. Delivery of two large AHTS in April and May. 6x PSVs commenced on term charters in Q2 2010. 3x CSVs newbuilds for delivery next 12 months. Outlook for PSV positive, seeing increased demand. Outlook for AHTS relatively soft, still a large orderbook of AHTS for delivery in 2010/2011. Expects volatility in spot rates. Outlook for CSV: increased tendering activity with demand to improve further. Targeting listing of 50% owned NOR Offshore in Singapore: This has been rumored for some time and should not be a surprise, but we believe pricing is likely to be above what SOFF gets in Norway and we think it will be positive for SOFF. The NOR Offshore vessels may contribute with approx NOK 20 per SOFF share (17% of earnings whereas we estimate NOR Offshore to contribute with only 10%-12% of 2010/2011 EBITDA). Based on our estimates, the NOR Offshore's vessels are trading at 2010/2011 EV/EBITDA 8.9x/8.2x. Expected news-flow It expects new subsea contract awards and more new rigs entering the market, to give a possible uplift to the spot market in late 2010, or early 2011. Solstad expects its current high spot exposure to be reduced from Q2 2010, when it foresees more long term contracts emerging. Valuation Solstad is trading at EV/EBITDA 7.9x and 7.0x for 2010 and 2011 respectively. We have a HOLD recommendation on Solstad with target NOK/sh 117.5, based on NAV.

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SOLSTAD (SOFF.OL)
PROFIT & LOSS NOKm Revenues Other income Operating costs EBITDA Depreciation & amortisation EBIT Associated companies Net interest Other financial items Extraordinary items Pre-tax profit Tax Minority interest Net profit 2007 2,125 0 833 1,292 437 855 -128 106 1,106 403 23 680 2008 2,249 0 932 1,317 491 826 -259 0 -114 -163 -17 66 2009 2,534 0 1,337 1,197 729 461 -240 0 864 -192 -11 1,066 2010e 2,683 0 1,441 1,242 548 695 -273 0 389 24 0 365 2011e 2,882 0 1,472 1,410 578 832 -273 0 559 20 0 539 2012e 3,128 0 1,475 1,653 589 1,064 -299 0 765 27 0 739

BALANCE SHEET NOKm 0 Intangible assets Operating assets 6,660 1,180 Associated companies Other current assets 798 Cash & cash equivalents 1,053 Total assets 10,315 Equity & minority interest 3,717 Interest bearing debt 4,437 2,160 Non interest bearing debt Total liabilities & equity 10,315 Net interest bearing debt 2,761

0 7,570 1,110 734 830 10,244 3,721 5,264 1,259 10,244 4,435

0 9,885 28 848 1,445 12,267 4,630 6,945 691 12,267 5,439

0 10,467 28 898 1,307 12,761 4,995 6,945 820 12,761 5,577

0 10,999 28 965 1,344 13,396 5,535 6,945 916 13,396 5,540

0 10,891 28 1,047 2,733 14,760 6,273 7,445 1,042 14,760 4,651

CASH FLOW NOKm Cash earnings Working capital Investments Debt Equity/dividends Change in cash & liquids

1,138 661 -2,540 662 -11 -90

690 -855 -707 683 0 -190

1,710 -368 -1,943 1,444 0 844

932 60 -1,130 0 0 -138

1,023 124 -1,110 0 0 37

1,328 43 -481 500 0 1,390

Share price and target Price NOK Price target 12m NOK Recommendation Key data per share Book value NOK P/Book X %cagr EPS gr09-12e Financial structure Market cap. NOKm Net int. bear debt NOKm Enterprise value NOKm Shares outst. million Equity/tot assets % Share price performance Abs. 1/3/12m Rel. 1/3/12m NOK High/Low 12m OSEBX index % 30days volatility Company attributes Reuters ticker Supply
Reporting Q2 2010

113.50 117.50 HOLD 98.44 1.15 -13.6% 4,290 4,435 8,724 37.8 39.0 -8/6/46 4/8/25 130/79 344.2 49 SOFF.OL

VALUATION EPS EPS adj Dividend ps Book per share Year end shares Price P/E P/E adj Dividend yield P/Book EV/EBITDA adj EV/EBIT adj EV/Cap employed

NOK NOK NOK NOK million NOK X X % X X X X

2007 15.21 15.21 4.00 98.4 37.8 155.00 10.2 10.2 2.6 1.6 5.8 8.7 0.9

2008 1.74 1.74 2.00 98.4 37.8 58.50 33.6 33.6 3.4 0.6 4.2 6.7 0.6

2009 30.33 30.33 2.50 122.5 37.8 108.00 3.6 3.6 2.3 0.9 7.9 17.5 0.8

2010e 9.66 9.66 0.00 132.2 37.8 113.50 11.7 11.7 0.0 0.9 7.9 14.2 0.8

2011e 14.27 14.27 0.00 146.4 37.8 113.50 8.0 8.0 0.0 0.8 7.0 11.8 0.8

2012e 19.54 19.54 0.00 166.0 37.8 113.50 5.8 5.8 0.0 0.7 5.4 8.4 0.7

Management CEO CFO Address Solstad Postveien 25 H.p.: www.solstad.no Tel +47 52 85 65 00

Lars Peder Solstad Eivind Kvilhaug

Analyst: Thor Andre Lunder +65 6220 1337 thor.andre.lunder@dnbnor.no

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Rebased price (12m, NOK) 170 160 150 140 130 120 110 100 90 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Solstad

Rebased consensus average forward EPS (12m, NOK) 110 105 100 95 90 85 80 75 70 65 May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Solstad

Revenue (NOKm) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2006 2007 2008 2009

Revenue Growth 45% 40% 35% 30% 25% 20% 15% 10% 5% 2010e 2011e 2012e Revenue Growth 0%

EPS (NOK) 35 30 25 20 15 10 5 0 2006 2007 2008 2009 2010e 2011e

DPS (NOK) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 2012e 0.0

Revenue (NOKm)

EPS (NOK)

DPS (NOK)

EBITDA (NOKm) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2006 2007 2008 2009

EBITDA margin 70% 60% 50% 40% 30% 20% 10% 2010e 2011e 2012e EBITDA margin 0%

FCF (NOKm) 1,000 800 600 400 200 0 -200 -400 -600 -800 -1,000

Dividend yield 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5%

2006

2007

2008

2009 2010e 2011e 2012e Dividend yield

0.0%

EBITDA (NOKm)

FCF (NOKm)

EBIT (NOKm) 1,200 1,000 800 600 400 200 0 2006 2007 2008 2009

EBIT margin 45% 40% 35% 30% 25% 20% 15% 10% 5% 2010e 2011e 2012e EBIT margin 0%

Price/Book 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2006 2007 2008 2009 2010e 2011e 2012e ROE

ROE 30% 25% 20% 15% 10% 5% 0%

EBIT (NOKm)

Price/Book

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Appendix I Global & Asia OSV Fleet

In Asia, due to the demographics of shallower waters, the region is dominated by smaller vessels. There are approx 45% of the OSVs below 7,000bhp and 2,000dwt operating in the region. The larger vessels of 15,000bhp and 3,000dwt above are mainly found in deeper water regions such as the North Sea, West Africa, Brazil and parts of South East Asia and North Asia. Figure 104: Active OSV in the markets (Asia vs Rest of the world)
Active OSV in the market (Asia vs World) 600 45%

40% 500 35%

400

30%

25% 300 20%

200

15%

10% 100 5%

0
AHT AHTS< 4,000 bhp AHTS 4,000 6,999 bhp AHTS 7,000 9,999 bhp AHTS 10,000 11,999 bhp AHTS 12,000 14,999 bhp AHTS 15,000 17,999 bhp AHTS 18,000 bhp+ PSVs< 2,000 dwt PSVs 2,000 2,999 dwt PSVs 3,000 3,999 dwt PSVs 4,000 dwt +

0%

Asia Markets

Worldwide Markets

Asia % of world markets

Source: DnB NOR Markets, ODS-Petrodata as of May 2010

Figure 105: Asia OSV size breakdown

India, Far East, Southeast Asia Markets

AHT AHTS< 4,000 bhp AHTS 4,000 - 6,999 bhp AHTS 7,000 - 9,999 bhp AHTS 10,000 - 11,999 bhp AHTS 12,000 - 14,999 bhp AHTS 15,000 - 17,999 bhp AHTS 18,000 bhp + PSVs< 2,000 dwt PSVs 2,000 - 2,999 dwt PSVs 3,000 - 3,999 dwt PSVs 4,000 dwt +

Source: DnB NOR Markets, ODS-Petrodata as of May 2010

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Sector report > Offshore Supply Global & Asia AHT/AHTS fleet The global AHTS/ AHT fleet count currently stands at 1516, of which 600 vessels were built in the last five years, presenting a five-year CAGR of 11%. In Asia, the existing fleet count is at 518, with 226 vessels being built over the past five years, a 5-year CAGR of 12%.

Figure 106: Asia vs Rest of the World AHTS/ AHT

300 Asia vs Rest of the World (AHTS)
Newbuilds able to make it to the market

250

200

Fleet count

150

100

50

0
Fleet more than 25 years old to be retired Vessels we think likely to be cancelled or delayed

-50 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E Year built 2012E

Asia count Dec

Rest of the world count Dec

Cancelled/ delayed/ retired

Source: DnB NOR Markets, ODS-Petro-data as of May 2010

In 2009 alone, 199 vessels (80 in Asia) were delivered, which were highest since 1965. With the upcoming newbuilds ordered during the top cycle, the issue of excess vessels remains clear. There will be over 357 (Asia at 273 vessels) new vessels coming into the market from 2010-2012. This represent a fleet growth of over 24% (53% for Asia) when the vessels are delivered. These figures are taken from ODS from the May 2010 vessel count and have not taken into account the potential new orders in future. As it is, a total of 279 (Asia at 205) newbuilds is scheduled to be delivered this year, making up the most of the existing newbuilds under order. Most of the fleet growth comes from the larger vessels (>18,000+bhp), which coincides with the structural change to deeper waters oil and gas exploration and production.

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Sector report > Offshore Supply Figure 107: AHTS global fleet + newbuilds size breakdown
AHTS Global Fleet + Newbuilds 1400 71% 80%

1200 232 1000

70%

60%

50% 800 40% 600 947 400 11 200 66 296 4% <5000bhp 5000-12000bhp Existing fleet 10% 205 48 68 >18000bhp 24% 20% 32%

30%

0%

12001-18000bhp % fleet growth

Newbuilds (2010-2012)

Source: DnB NOR Markets, ODS-Petro-data as of May 2010

Globally, we estimate that over 56 vessels which are more than 25 years old will be retired from the fleet. And with some shipowners still facing financing issues with their newbuilds (in particular those vessels which are built on speculations, without any firm contract), we are likely to see further delays and cancellations. However, we expect fewer cancellations/ delays as compared to a year ago. Given the run up in global share prices since March 2009 and the high stable oil prices, shipowners are more confident to take delivery of vessels. As a result, we are likely to see lesser cancellations and delays in the newbuild market, further compounding the over-supply situation. By then, the rates will continue to face pressure as the upcoming newbuild vessels and vessels going off charters are competing for contracts at the same time. We also argue that the large increase in fleet size will chartering and high utilization rates, before we see vessel owners ordering more vessels. This is negative for shipyards specializing in offshore supply vessels. We estimate that 345 newbuilds out of current 357 newbuilds (assuming no new order), will make it into the market. This only represents a decline of 3% in total existing newbuilds. The overall decline in newbuilds is relatively low as we believe 205 out of the 345 vessels are estimated to be at least 30-40% completed and are likely to be completed by this year, making the costs of cancellations at rather high levels. Many shipowners are indicating that they are likely to take delivery of their newbuilds (though delays may result) if their vessels are more than 30-40% completed. In total, we estimate that there will be close to 1805 vessels in the market by 2012, including retirements and scrapping, a growth of 24% from 2009 fleet size.

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Sector report > Offshore Supply AHTS > 14,999bhp There are currently 178 vessels above 14,999bhp in the global market, of which 17 vessels are being deployed in Asia. In 2009, a total of 29 such vessels were delivered, 19% growth from 2008 fleet. Figure 108: Asia vs Rest of the World AHTS/ AHT >14,999+bhp
Asia vs Rest of the World (AHTS>14,999bhp)
80 Newbuilds able to make it to the market

70 60

50 Fleet count

40 30

20

10 0 Fleet more than 20 years old to be retired

Vessels we think likely to be cancelled or delayed

-10

Source: DnB NOR Markets, ODS-Petro-data as of May 2010

According to ODS-Petrodata's May 2010 data, there are 88 new vessels scheduled to be delivered from 2010-2012 from existing order backlog, with a majority of 60 vessels due this year. Our overall estimates for eventual newbuilds from 2010-2012 remain the same as reported by ODS, though we expect some delays (as highlighted in the red bars in the figure above). In our opinion, the larger AHTS market will likely see less cancellations/ delays due to structural change towards deepwater water exploration and production trend. However, we are still concerned on the over-supply situation, given the high fleet growth of 49% from 2009-2012. Demand for deepwater activities has to match the growth in vessels in order to support the growth. With oil companies recognizing that there will be a large number of vessels coming into the market for them to choose from, they will be looking to cut costs/ pricings further. Thus, rates are likely to pan out flat or showing little growth during this period and are unlikely to return to previous highs achieved in 2008.

1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Year built Asia count Dec Rest of the world count Dec C ancelled/ delayed/ retired

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Sector report > Offshore Supply AHTS < 5,550bhp There are currently 584 smaller vessels in the global market, with an average age of 23 years old. Figure 109: Asia vs Rest of the World AHTS/ AHT < 5,550bhp
Asia vs Rest of the World (AHTS<5,550bhp)
80 70 60 50 40 30 20 10 0 -10 -20 1965 Fleet more than 20 years old to be retired 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011E
Vessels we think likely to be cancelled or delayed

Newbuilds able to make it to the market

Fleet count

Year built Asia count Dec Rest of the world count Dec C ancelled/ delayed/ retired

Source: DnB NOR Markets, ODS-Petro-data as of May 2010

On the newbuild front, there are currently 60 new vessels in the backlog through to 2012, which 50 of them are looking to be delivered this year. We do not expect cancellations on these newbuilds, though we do foresee some delays. The reason being that the supply situation for the smaller vessels is not as bad as the larger vessels and the overall OSV market as highlighted earlier on. There are close to 252 vessels over the age of 25 years, which most were being built in the 1980s. As these vessels are near their scrap age, new vessels are needed to replace them. Thus, with the addition of 60 vessels over the next three years and outgoing aging vessels of potentially 65, we will see a more balanced picture of vessels count working in this sub-segment.

DnB NOR Markets - 135

10

12

14

16

18

20

0 India - ABG China - Dayang China - Sinopacific Poland - Remontowa China China - Fujian Southeast China - Guangzhou Indonesia - Batamec Shipyard China - Qingdao Qianjin India - Bharati Italy - Fincantieri Malaysia China - Coastal Contracts Singapore - Pan United South Korea - Sekwang Heavy Industries Vietnam - Aker Yards China - Wuchang Japan - Universal Malaysia - Muhibbah Marine Singapore - Keppel Singmarine China - Jiangsu Zhenjiang Indonesia - Drydocks World Malaysia - NGV Tech Norway - Aker Norway - Bergen Norway - Kleven Verft

26.05.2010

Source: DnB NOR Markets, ODS-Petro-data

Fleet count 100 20 40 60 80

Singapore - ASL Singapore - Labroy Spain - Astilleros Zamakona China - Yuexin Indonesia - Marco Polo shipyard Japan - Niigata Malaysia - Coastal Contracts Malaysia - Grade One Marine China - Guangzhou Hangtong China - MLC China - Zhuhai Jaya Shipyard India - Cochin Indonesia - Britoil Indonesia - Miclyn yard Malaysia - MLC Tongbao Malaysia - MSET Shipbuilding Malaysia - Pacific Crest Malaysia - Tuong Aik Shipyard Norway - Aker Langsten Romania - Daewoo Mangalia Saudi Arabia - Zamil Singapore - President Sri Lanka - Colombo Dockyard China - c/o Tuong Aik Shipyard China - Guangzhou Panyu Lingshan China - Lingshan Panyu China - Nam Cheong Hong Kong - Cheoy Lee India Indonesia - Batamec / Guanxi Malaysia - c/o Nam Cheong Malaysia - Fujian Southeast Malaysia - Nam Cheong Malaysia - Sapor Shipbuilding Norway - Havyard Norway - Havyard Leirvik Norway - Myklebust Verft Norway - Ulstein Verft Poland - Poland - Remontowa Singapore Singapore - Cochin Singapore - Singapore Technologies Spain - Armon Vigo Spain - Union Naval Valencia USA, Gulf of Mexico - Bender

-20

Sector report > Offshore Supply

Figure 110: Yards breakdown for global newbuilds India dominates

Fleet more than 20 years old to be retired

Asia count

Asia vs Rest of the World (PSV)

Rest of the world count

Year built

Source: DnB NOR Markets, ODS-Petrodata as of May 2010

USA, GoM - North American Shipbuilders USA, GoM - North American Shipbuilding USA, Gulf of Mexico - TampaShip

Figure 111: Asia vs Rest of the World PSV fleet

C ancelled/ delayed/ retired

Vessels likely to be cancelled/delayed

Global & Asia PSV fleet The global PSV fleet count currently stands at 1028, of which 366 vessels were built in the last five years (95 in 2008 and 94 in 2009), presenting a five-year CAGR of 6%. In Asia, the existing fleet count is at 114, with 52 vessels being built over the past five years.

In terms of upcoming newbuilds, there will be over 223 (Asia at 100 vessels) new vessels coming into the market from 2010-2012. This represent a fleet growth of over 22% when the vessels are delivered. These figures are taken from ODS from the May 2010 vessel count and have not taken into account the potential new orders in future. As it is, a total of 152 (Asia at 73) newbuilds is scheduled to be delivered this year, making up the most of the existing newbuilds at 68% (Asia at 73%).

DnB NOR Markets - 136

1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E Newbuilds able to make it to the market

26.05.2010

Sector report > Offshore Supply Most of the fleet growth comes from the larger vessels (>4,000+dwt), which coincides with the structural change to deeper waters oil and gas activities. Figure 112: PSV global fleet + newbuilds size breakdown
PSV Global Fleet + Newbuilds 450 400 350 300 250 55 200 150 100 50 0 4% <2000dwt 2000-3000dwt Existing fleet 3001-4000dwt % fleet growth >4000dwt 401 114 40% 15 72% 80%

70%

60% 39

50%

30% 28% 196 14% 158 10% 273 20%

0%

Newbuilds (2010-2012)

Source: DnB NOR Markets, ODS-Petro-data as of May 2010

Globally, we estimate that over 41 vessels which are more than 25 years old will be retired from the fleet. And with some shipowners still facing financing issues with their newbuilds (in particular those vessels which are built on speculations, without any firm contract), we are likely to see further delays and cancellations. However, the situation will not be as serious as one year ago. We estimate that 218 newbuilds out of current 223 newbuilds (assuming no new order), will make it into the market. The overall decline in newbuilds is expected to be relatively low as we believe 110 out of the 223 vessels are estimated to be at least 30-40% completed and are likely to be completed by this year, making the costs of cancellations at rather high levels. Many shipowners are indicating that they are likely to take delivery of their newbuilds if their vessels are more than 30-40% completed. In total, we estimate that there will be close to 1246 vessels in the market by 2012 and early 2013, a growth of 21% from 2009 fleet size as compared to original growth of 22%.

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26.05.2010

Sector report > Offshore Supply Global PSV >1,999dwt There are currently 628 vessels above 1,999dwt in the global market, of which 65 vessels are being deployed in Asia. Almost half of the existing fleet was built over the past five years. Figure 113: Asia vs Rest of the World PSV > 1,999 dwt
Asia vs Rest of the World (PSV>1,999dwt)
125 Newbuilds able to make it to the market

105

85

Fleet count

65

45

25

5 Vessels likely to be cancelled/delayed 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E

-15

Year built Asia count Rest of the world count C ancelled/ delayed/ retired

Source: DnB NOR Markets, ODS-Petrodata as of May 2010

A total of 208 new vessels will be delivered from 2010-2012, with a majority of 139 vessels due this year. We do not expect many cancellations to occur due to reasons stated earlier. Likewise, we are concerned on the over-supply situation, given the high fleet growth of 33% from 2009-2012. Demand for deepwater activities has to match the growth in vessels in order to support the growth. With oil companies recognizing that there will be a large number of vessels coming into the market for them to choose from, they will be looking to cut costs/ pricings further. Thus, rates are likely to pan out to be flat or showing little growth during this period and are unlikely to return to previous highs achieved in 2008. We expect the newbuild market for the larger PSV vessels to remain overcrowded unless there are signs of improvement in the demand side. Therefore, before the oversupply situation improves, either through lesser newbuilds coming into the market or higher growth in demand (which is uncertain), we remain bearish on the newbuild segment of the larger PSV vessels.

DnB NOR Markets - 138

Fleet count

10

12

14

16

18

0 China - Fujian Mawei China - Sinopacific India - Cochin Shipyard USA, GoM - Tampa Ship China Norway - Aker Yards USA, GoM - North American Shipbuilders India - Bharati Brazil - Wilson,Sons Brazil - Navship USA, GoM - Eastern Shipbuilding Brazil - Allianca Italy - Rosetti Marino Japan - Universal Netherlands - Shipyard De Hoop Thailand - Italthai USA, GoM Brazil - STX Brazil India - ABG Singapore - Keppel Singmarine USA, GoM - Bollinger - Lockport, Louisiana China - Wilson China - Wuchang India - Mazagon Dock India - Tebma Indonesia - Batamec Malaysia - Grade One Norway Norway - Hellesoy Verft Norway - Simek Norway - STX Brevik Norway - Ulstein Verft Singapore - Drydocks World Spain, Mediterranean - Astilleros de Sevilla USA, GoM - NavShip Brazil USA, GoM - VT Halter Marine Canada, East - Halifax Chile - Asenav China - Jingjiang Nanyang China - Zhejiang Nigeria - West Atlantic Shipyard Norway - Fjellstrand Verft Norway - Havyard Leirvik AS Norway - Kleven Verft Spain, Mediterranean - Astilleros Gondan USA, GoM - Quality USA, GoM - Thoma-Sea Yard breakdow n for PSV new builds

26.05.2010

Source: DnB NOR Markets, ODS-Petrodata

Sector report > Offshore Supply

Figure 114: Yards Breakdown for the PSV newbuilds, Chinese yards dominate

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Appendix II - OSV fleet Brazil focus

AHTS fleet - Brazil In Brazil, given that the massive offshore pre-salt reserves are only being discovered in recent years, the AHTS/ AHT fleet in Brazil is still relatively small as compared to global fleet count. Figure 115: Brazil vs Rest of the World AHTS/ AHT
300 Brazil vs Rest of the World (AHTS)

250

200 Fleet count

150

Fleet more than 25 years old to be retired

100

50

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E

Brazil count Dec Year built

Rest of the world count Dec

Source: DnB NOR Markets, ODS-Petro-data as of April 2010

Figure 116: Brazil AHTS/ AHT fleet relatively young fleet working in Brazil
Brazil (AHTS/AHT)

20 18 16 14 12 10 8 6 4 2 0

Brazil count Dec

Fleet count

Source: DnB NOR Markets, ODS-Petro-data as of April 2010

1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E Year built

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There are currently 112 AHTS/AHT operating off Brazilian waters, as compared to the global fleet count currently stands at 1516, of which 600 vessels were built in the last five years. In 2009 alone, 231 vessels (2 newbuilds operating in Brazil and 73 newbuilds operating in Asia) were delivered, which is highest since 1965. There will be over 357 (Asia building 273 vessels and Brazil with 4 vessels) new vessels coming into the market from 2010-2012. This represent a fleet growth of over 24% when the vessels are delivered. These figures are taken from ODS from the April 2010 vessel count and have not taken into account the potential new orders into the future. As it is, a total of 279 newbuilds is scheduled to be delivered this year, making up the most of the existing newbuilds at 78%. Figure 117: Brazil AHTS/AHT size breakdown + newbuilds
Brazil AHTS Fleet size breakdown 60

50 1

40 1

30 47 20 0 10 15 13 37 2

0 <5000bhp 5000-12000bhp Existing fleet 12001-18000bhp Newbuilds (2010-2012) >18000bhp

Source: DnB NOR Markets, ODS-Petro-data

Figure 118: Global AHTS/AHT size breakdown + newbuilds

AHTS Global Fleet + Newbuilds 1400 71% 80%

1200 232 1000

70%

60%

50% 800 40% 600 947 400 11 200 66 296 4% <5000bhp 5000-12000bhp Existing fleet 10% 205 48 68 >18000bhp 24% 20% 32%

30%

0%

12001-18000bhp % fleet growth

Newbuilds (2010-2012)

Source: DnB NOR Markets, ODS-Petro-data

Most of the AHTS/AHT vessels operating in Brazil are larger ones which are in the 12000+bhp category as compared the global fleet of mid-size vessels. This coincides with deepwater fields discoveries off Brazil.

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Sector report > Offshore Supply Globally, we estimate that over 70 vessels which are more than 25 years old will be retired from the fleet. And with some shipowners still facing financing issues with their newbuilds (in particular those vessels which are built on speculations, without any firm contract), we are likely to see further delays and cancellations. However, the situation will not be as serious as a year ago. We estimate that 334 newbuilds out of current 357 newbuilds (assuming no new order), will make it into the market. This only represents a decline of 6% in total existing newbuilds. The overall decline in newbuilds is relatively low as we believe 244 out of the 334 vessels are estimated to be at least 30-40% completed and are likely to be completed by this year, making the costs of cancellations at rather high levels. Many shipowners are indicating that they are likely to take delivery of their newbuilds if their vessels are more than 30-40% completed. Most of the fleet growth comes from the larger vessels (>18,000+bhp), which coincides with the structural change to deeper waters oil and gas exploration and production such as in offshore Brazil's Campos and Santos basins.

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Sector report > Offshore Supply Figure 119: Brazils offshore activities

Source: Financial Times, Global trends; NIPE-Unicamp, IBGE, CTC

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Sector report > Offshore Supply Moving to larger sized AHTS > 14,999bhp There are currently 178 vessels above 14,999bhp in the global market, of which 38 vessels are being deployed in Brazil, representing a decent share of 21% after considering the relatively early E&P cycle of Brazil. Figure 120: Brazil vs Rest of the World AHTS/ AHT >14,999+bhp
Brazil vs Rest of the World (AHTS>14999bhp)
80

70

60

50 Fleet count

40

30

20

10

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E Year built Brazil count Dec Rest of the world count Dec

Source: DnB NOR Markets, ODS-Petro-data as of April 2010

Figure 121: Brazil AHTS/ AHT >14,999+bhp

Brazil (AHTS>14,999bhp)
10

6 Fleet count

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E

Year built Brazil count Dec

Source: DnB NOR Markets, ODS-Petro-data as of April 2010

In 2009, a total of 29 such vessels were delivered, 19% growth from 2008 fleet. According to ODS-Petrodata's April 2010 data, there are 88 new vessels scheduled to be delivered from 2010-2012, with a majority of 60 vessels due this year. Our overall estimate for eventual newbuilds from 2010-2012 remains the same as reported by ODS. In our opinion, the larger AHTS market will likely see less cancellations/ delays due to structural change towards deepwater water exploration and production trend.

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PSV fleet - Brazil There are currently 104 PSV working off Brazil as compared to global fleet size of 1041. Figure 122: Brazil vs Rest of the World PSV fleet
Brazil vs Rest of the World (PSV)
100

90 Fleet more than 20 years old to be retired 80

70

60 Fleet count

50

40

30

20

10

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E

Year built Brazil count Rest of the world count

Source: DnB NOR Markets, ODS-Petrodata as of April 2010

Figure 123: Brazil PSV fleet isolated

20

Brazil PSV fleet

18

16

14 Brazil count 12 Fleet count

10 Fleet more than 20 years old to be retired 8

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E

Year built

Source: DnB NOR Markets, ODS-Petrodata as of April 2010

Over the past 5 years, we saw a CAGR of 9% in global PSV fleet, of which 366 vessels were built in the last five years (94 in 2009 and 95 in 2008). In terms of upcoming newbuilds, there will be over 223 (Asia at 100 vessels) new vessels coming into the market from 2010-2012. This represent a fleet growth of over 22% when the vessels are delivered. These figures are taken from ODS from the April 2010 vessel count and have not taken into account the potential new orders in future. As it is, a total of 152 (Asia at 73) newbuilds is scheduled to be delivered this year, making up the most of the existing newbuilds at 68% (Asia at 73%).

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Sector report > Offshore Supply Figure 124: PSV size breakdown in Brazil larger sized to meet deepwater requirements
PSV Global Fleet + Newbuilds 50 45 40 35 30 25 20 15 25 10 5 0 <2000dwt 2000-3000dwt Existing fleet 3001-4000dwt Newbuilds (2010-2012) >4000dwt 24 22 0 43 15

10

Source: DnB NOR Markets, ODS-Petro-data

Figure 125: PSV global fleet + newbuilds size breakdown

PSV Global Fleet + Newbuilds 450 400 350 300 250 55 200 150 100 50 0 4% <2000dwt 2000-3000dwt Existing fleet 3001-4000dwt % fleet growth >4000dwt 401 114 40% 15 72% 80%

70%

60% 39

50%

30% 28% 196 14% 158 10% 273 20%

0%

Newbuilds (2010-2012)

Source: DnB NOR Markets, ODS-Petro-data

Most of the fleet growth comes from the larger vessels (>4,000+dwt), which coincides with the structural change to deeper waters oil and gas activities. Globally, we estimate that over 41 vessels which are more than 25 years old will be retired from the fleet. And with some shipowners still facing financing issues with their newbuilds (in particular those vessels which are built on speculations, without any firm contract), we are likely to see further delays and cancellations. However, the situation will not be as serious as one year ago. We estimate that 213 newbuilds out of current 223 newbuilds (assuming no new order), will make it into the market. This only represents a decline of less than 5% in total existing newbuilds. The overall decline in newbuilds is relatively low as we believe 132 out of the 213 vessels are estimated to be at least 30-40% completed and are likely to be completed by this year, making the costs of cancellations at rather high levels. Many shipowners

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Sector report > Offshore Supply are indicating that they are likely to take delivery of their newbuilds if their vessels are more than 30-40% completed. Brazil and Global PSV >1,999dwt There are currently 628 vessels above 1,999dwt in the global market, of which 89 to 95 vessels are being deployed in Brazil. A total of 208 majority of 139 for larger PSVs change towards new vessels will be delivered from 2010-2012, with a vessels due this year. Likewise in our opinion, the market is likely to see less cancellations/ delays due to structural deeper waters exploration and production trend.

Figure 126: Brazil vs Rest of the World PSV > 1,999 dwt
Brazil vs Rest of the World (PSV>1,999dwt)

120

100

80 Fleet count

60

40

20

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E

Year built Brazil count Rest of the world count

Source: DnB NOR Markets, ODS-Petrodata as of April 2010

We are concerned on the over-supply situation, given the high fleet growth of 26% from 2009-2012. Demand for deepwater activities has to match the growth in vessels in order to support the growth. With oil companies recognizing that there will be a large number of vessels coming into the market for them to choose from, they will be looking to cut costs/ pricings further. Thus, rates are likely to pan out to be flat or showing little growth during this period and are unlikely to return to previous highs achieved in 2008. Brazilian is a different animal as additional demand will require a proportion of the newbuilds being built locally to meet local content requirements. OSV Demand from Brazil Demand for OSV (AHTS and PSV) in Brazil will be driven by the number offshore drilling and production units (rigs, FPSOs, and platforms) in the Brazilian market. With the upcoming massive newbuild rig plan announced by Petrobras, we expect to see this healthy demand for OSVs operating in Brazil. The high barriers to entry (certain proportion of vessels has to be built in Brazil) imply that rates are likely to stay resilient in Brazil.

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Sector report > Offshore Supply Newbuild drilling rig plan from Brazil to stir local demand for OSVs Figure 127: Brazil rig count massive growth going forward
30 Rigs (JU, Semi, DS) in Brazil Estimates based on announced 28 drilling rigs (contract awarding 2010) + our estimates on further newbuilds

25

20 Fleet count

15

10

0 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011E 2012E 2013E 2014E 2015E Semi count JU count Year built Drillship c ount

Source: DnB NOR Markets estimates, ODS-Petrodata

In 2010, rig orders will likely be supported by Petrobras' 28 new orders, but this initiative has already been delayed for more than a year. We argue that Petrobras has the bargaining power to push down the tender prices, given that most yards in the world are facing urgent need to replenish their existing orderbook. We reiterate that in order for rig operators to order new rigs, the economics behind the order (capex) must make sense. According to our rig analyst, the utilization levels and dayrates will likely to remain soft, pressured by the upcoming newbuild supply and rigs available after their existing charters end. We have modeled the number of new orders going forward as in the table below. We expect a bulk of the orders to come from Petrobras (please see later in the report), and have up our previous assumptions on expectation that rig owners and oil companies (NOCs such as Pemex) may order new rigs on improved market sentiments. Key upside risk to estimates is national oil companies which could order bulks of newbuilds for strategic reasons. Downside risk to estimates is that the same scenario plays out as after the last newbuild cycle for jackups: Hardly any new orders in 20-25 years

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Sector report > Offshore Supply

Figure 128: Estimates on new-build orders (top-down approach) Global vs Brazil

Global newbuild units Rest of % of Rest of the % of Rest of % of Global Brazil the world Brazil Global Brazil world Brazil Global Brazil the world Brazil Year Jack-up Jack-up Jack-up to World Semi Semi Semi to World Drillship Drillship Drillship to World Total 2006 30 19 9 58 2007 35 12 16 63 2008 22 11 0 33 2009 16 1 2 19 2010E 10 0 10 0% 13 8 5 62% 22 18 4 82% 45 2011E 13 0 13 0% 10 4 6 40% 9 4 5 44% 32 2012E 14 0 14 0% 10 3 7 30% 9 4 5 44% 33 2013E 15 0 15 0% 10 2 8 20% 10 2 8 20% 35 Total/ Avg 68 0 52 0% 44 17 26 38% 52 28 22 48% 164 Newbuild price (base case) Rest of Global Brazil the world Jack-up Jack-up Jack-up 140 140 140 140 140 140 140 140 140 140 140 140 Global Brazil Semi Semi 500 500 500 500 500 500 500 500 Rest of the world Semi 500 500 500 500 Rest of Global Brazil the world Drillship Drillship Drillship 600 600 600 600 600 600 600 600 600 600 600 600

Year 2010E 2011E 2012E 2013E

Total order value (USDm) Rest of % of Global Brazil the world Brazil Year Jack-up Jack-up Jack-up to World 2010E 1,400 0 1,400 0% 2011E 1,820 0 1,820 0% 2012E 1,960 0 1,960 0% 2013E 2,100 0 2,100 0% 0 7280 0% Total/ Avg 9520 Global Semi 6,500 5,000 5,000 5,000 22000 Brazil Semi 4,000 2,000 1,500 1,000 8500 Rest of the % of Rest of % of world Brazil Global Brazil the world Brazil Semi to World Drillship Drillship Drillship to World 2,500 62% 13,200 10,800 2,400 82% 3,000 40% 5,400 2,400 3,000 44% 3,500 30% 5,400 2,400 3,000 44% 4,000 20% 6,000 1,200 4,800 20% 13000 38% 31200 16800 13200 48%

Source: DnB NOR Markets estimates

Total 21100 12220 12360 13100 62720

Figure 129: Petrobras upcoming tender details and timeline

May 08

Sep 09

Oct 09

Mar 10

April 10

May/June 10 (revised from Mar)

Est Q4 2010

Late 20102011

Late 2013

Previous tender plan Original targeting 40 ultradeepwater rigs, and this 28 drilling rigs is the second phase of the plan First 12x rigs awarded in May 2008, to our knowledge 10 completed and 2 Delba semi in progress

Board approves plan for 28x UDW rigs to be built locally Tender structure 1

Invitations of tender package

First change to tender structure

Latest changes

Tender close

Contract awards

Some of the yards bidding (some forming consortiums): Keppel Sembcorp Marine Samsung Heavy Hyundai Heavy DSME Odebrecht OAS South Atlantic UTC Andrade Gutierrez Queiroz Galvao Sevan Marine Galvo Mendes Junior Engenharia

Tender structure 2 Phase 1a adjustment To be owned by Petrobras: 7x drillships of 2x batches each of proven designs to the yards = 14x drillships divided by 2x yards 2x either semi or drillships, unproven designs allowed Total PBR to own 16x rigs Phase 1b adjustment To be owned by rig companies: Total 12x UDW rigs 4x max rigs per rig company Est around 3 rig companies to secure the contracts

Tender structure 3 Part one: PBR to own and award 28x drillships divided into 4x batches, with each batch containing 7x drillships each to yards, implying 4 yards will eventually get the orders = 28 rigs Part two: 2x semi divided into 2 batches each to yards = 2 rigs Part three: 12x rigs to drillers, max 4x rigs to each driller = 12 rigs Total rigs = 42 but industry expect Part three to be cancelled if PBR goes for Part one. Do note that Phase 1a & 1b indicated earlier still on going as the tenders run in parallel

Local content: Delivery 2013-2018 New yard investment/ 1st drillship latest expansion of delivery 48 months existing yard from contract capacity in Brazil

Phase 1a To be owned by Petrobras: 7x drillships of proven designs at the same yard 2x either semi or drillships, unproven designs allowed

2nd drillship latest delivery 58 months from contract

3rd 7th drillships latest delivery 8month interval from 58 months from contract

Phase 1b To be owned by rig companies: Total 19x UDW rigs 4x max rigs per rig company Est around 5 rig companies to secure the contracts

2x of the 9 rigs owned by Petrobras latest delivery within 40 months from contract

Please note all the tender structures (1, 2 & 3) stated above are not mutually exclusive. They are running simultaneously and are subjected to PBR to decide how many rigs they are going to order and which structure they'll adopt eventually.

Source: DnB NOR Markets, Company

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Sector report > Offshore Supply Quantifying the OSV demand from Brazil We are likely to see more newbuilds being built in Brazilian yards to meet the local content requirement. According to sources and Petrobras's 5-year spending plan, the NOC is in the midst of contracting 146 OSVs through year 2017 to meet its demand for its huge offshore finds in the Santos basin. This is inline with our estimates of 168 vessels required based on a support ratio of 3x, based on the global historical ratio. Figure 130: DnB NOR estimates on OSV required in Brazil
Year 2010 2011 2012 2013 2014 2015 Total Semi 0 0 2 5 10 4 21 Jack-Up 0 2 0 1 2 2 7 Drillship 0 0 0 7 16 5 28 Total rigs 0 2 2 13 28 11 56 Ratio of rig to OSV (DnB NOR est) 3 3 3 3 3 3 18 No of OSVs needed 0 6 6 39 84 33 168

Source: DnB NOR Markets estimates

The tenders are divided into seven rounds and we have seen the first round being completed in 2009. The pace of supply of newbuild vessels from the local yards are simply not fast enough to match the demand. With only 13 OSVs had been delivered in 2009 through the local yards, Brazil continues to attract international vessels (North Sea, GoM and Asia) to its market. Recently, we have seen several term charters in Brazil with Petrobras fixing 2x 3,000dwt PSVs, 6x 4,500dwt PSVs, and 5x oil spill recovery vessels made in Brazil, flying the Brazilian flag. And according to ODS-Petrodata, Brazilian operators have been aggressively securing OSVs, granting a number of long term fixtures and contract extensions. Petrobras is targeting 146 OSVs through to 2017 and has already done 13 fixtures last year. On the basis of known demand, Petrobras still needs 133 OSVs in the market by 2017, approx 17 per year. However, with the upcoming global supply in OSVs of 393 (298 AHTS + 95 PSV), of which 50 (31 AHTS + 19 PSV) vessels are from local Brazilian yards, from 20102012, we adopt the view that the Brazilian market alone will not be able to absorb the surplus vessels out in the market. This excludes future newbuild orders from 2013-2017 and not counting those vessels which will be going off charter this year.

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Sector report > Offshore Supply Rates outlook in Brazil On rates forecast, we are using the latest Mar tender from Petrobras to model in dayrates we can expect in Brazil. Petrobras Mar 2010 tender info The average dayrates as highlighted below are approx 55,000 USD/day for AHTS more than 18,000+bhp. We estimate opex of 20,000 USD/day to operate in Brazil. Figure 131: Tender 1 - 18,000+bhp AHTS
Shipowner Petro Santos Petro Santos Solstad Shipping Petro Santos Finarge Armamento Maersk Supply Service Maersk Supply Service DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Farstad DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Viking Supply Galaxia Martima (Ezra) Vessel ER Cristina ER Luiza Normand Borg ER Vittoria AH Valleta Maersk Asserter Maersk Advancer Siem Emerald Siem Pearl Siem Sapphire Far Sovereign Siem Diamond Siem Ruby Siem Topaz N Jord Viking Lewek Fulmar Rate ('000 USD/day) 37 39 40 40 42 47 48 48 52 52 54 55 58 59 65 90 Rate reduction 2.8 2.8 0.0 2.8 2.8 0.0 0.0 2.5 2.5 2.5 0.0 2.5 2.5 2.5 2.8 2.8 Final Rate ('000 USD/day) 34 36 40 37 39 47 48 46 50 50 54 53 55 57 62 87

Source: Various shipbrokers

Figure 132: Tender 2 - 18,000+bhp AHTS

Shipowner Petro Santos Petro Santos Petro Santos Solstad Shipping Finarge Armamento JavaBoat JavaBoat Maersk Supply Service Maersk Supply Service DSND Consub (Siem Offshore) Norskan Offshore Farstad DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Norskan Offshore DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Viking Supply Galaxia Martima (Ezra) Rate ('000 Vessel USD/day) ER Vittoria 36 ER Luiza 37 ER Cristina 38 Normand Borg 40 AH Valleta 41 John P Laborde 45 Richard M Currance 46 Maersk Asserter 47 Maersk Advancer 48 Siem Emerald 48 Skandi Giant 48 Far Sovereign 51 Siem Pearl 52 Siem Sapphire 52 Skandi Admiral 53 Siem Diamond 55 Siem Ruby 58 Siem Topaz 59 N Jord Viking 65 Lewek Fulmar 90 Rate reduction 3.8 3.8 3.8 2.0 4.8 0.0 0.0 2.0 2.0 3.5 1.0 1.0 3.5 3.5 2.3 3.5 3.5 3.5 4.8 3.8 Final Rate ('000 USD/day) 32 33 34 38 36 45 46 45 46 45 47 50 49 49 51 52 54 56 60 86

Source: Various shipbrokers

Figure 133: Tender 3 - 18,000+bhp AHTS

Shipowner Farstad Maersk Supply Service Maersk Supply Service DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Olympic Shipping DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Farstad Finarge Armamento Galaxia Martima (Ezra) Havila Shipping Solstad Shipping Vessel Far Santana Maersk Asserter Maersk Advancer Siem Emerald Siem Pearl Siem Sapphire Olympic Pegasus Siem Diamond Siem Ruby Siem Topaz Far Sagaris AH Valleta Lewek Fulmar Havila Venus Normand Ranger Rate ('000 USD/day) 46 47 48 48 52 52 54 55 58 59 62 Rate reduction 0.0 0.0 0.0 2.5 2.5 2.5 0.0 2.5 2.5 2.5 0.3 Disquali Disquali Disquali Disquali Final Rate ('000 USD/day) 46 47 48 46 50 50 54 53 55 57 62

Source: Various shipbrokers

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Sector report > Offshore Supply Figure 134: Tender 4 - 21,000+bhp AHTS
Shipowner DSND Consub (Siem Offshore) Maersk Supply Service DSND Consub (Siem Offshore) DSND Consub (Siem Offshore) Maersk Supply Service DSND Consub (Siem Offshore) Solstad Shipping Solstad Shipping DSND Consub (Siem Offshore) Havila Shipping DSND Consub (Siem Offshore) Norskan Offshore Farstad REM Shipping K Line Offshore Norskan Offshore Olympic Shipping Farstad Norskan Offshore Norskan Offshore Galaxia Martima (Ezra) Vessel Siem Emerald Maersk Asserter Siem Pearl Siem Sapphire Maersk Advancer Siem Diamond Normand Ranger Normand Prosper Siem Ruby Havila Venus Siem Topaz Skandi Skolten Far Sagaris REM Gambler KL Sandefjord Skandi Hercules Olympic Hera Far Xogun Skandi Amazonas Skandi Iguau Lewek Fulmar Rate ('000 USD/day) 48 50 52 52 53 55 57 57 58 58 59 60 62 64 69 70 72 72 80 80 90 Rate reduction 2.5 0.0 2.5 2.5 0.0 2.5 0.0 2.5 5.0 5.0 5.0 6.5 4.0 4.0 4.0 6.5 5.0 4.0 6.5 6.5 5.0 Final Rate ('000 USD/day) 46 50 50 50 53 53 57 55 53 53 54 53 58 60 65 63 67 68 73 73 85

Source: Various shipbrokers

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Sector report > Offshore Supply

IMPORTANT/DISCLAIMER This report must be seen as marketing material unless the criteria for preparing investment research, according to the Norwegian Securities Trading Regulation 2007/06/29 no. 876, are met. This report has been prepared by DnB NOR Markets, a division of DnB NOR Bank ASA. The report is based on information obtained from public sources that DnB NOR Markets believes to be reliable but which DnB NOR Markets has not independently verified, and DnB NOR Markets makes no guarantee, representation or warranty as to its accuracy or completeness. Any opinions expressed herein reflect DnB NOR Markets judgment at the time the report was prepared and are subject to change without notice. Confidentiality rules and internal rules restrict the exchange of information between different parts of DnB NOR Markets/DnB NOR Bank ASA and this may prevent employees of DnB NOR Markets who are preparing this report from utilizing or being aware of information available in DnB NOR Markets/DnB NOR Bank ASA which may be relevant to the recipients decisions. This report is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. No liability whatsoever is accepted for any direct or indirect (including consequential) loss or expense arising from the use of this report. Distribution of research reports is in certain jurisdictions restricted by law. Persons in possession of this report should seek further guidance regarding such restrictions before distributing this report. Please contact DnB NOR Markets at +47 22 94 82 72 for further information and inquiries regarding this report, such as ownership positions and publicly available/commonly known corporate advisory performed by DnB NOR Markets etc, in relation to the Norwegian Securities Trading Act 2007/06/29 no. 75 and the Norwegian Securities Trading Regulation 2007/06/29 no. 876. This report is for clients only, and not for publication, and has been prepared for information purposes only by DnB NOR Markets - a division of DnB NOR Bank ASA registered in Norway number NO 984 851 006 (the Register of Business Enterprises) under supervision of the Financial Supervisory Authority of Norway (Finanstilsynet) and Monetary Authority of Singapore. Information about DnB NOR Markets can be found at dnbnor.no. Additional information for clients in Singapore This report has been distributed by the Singapore branch of DnB NOR Bank ASA. It is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should seek advice from a financial adviser regarding the suitability of any product referred to in this report, taking into account your specific financial objectives, financial situation or particular needs before making a commitment to purchase any such product. Recipients of this report should note that, by virtue of their status as accredited investors or expert investors, the Singapore branch of DnB NOR Bank ASA will be exempt from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the FAA), the Financial Advisers Regulations and associated regulations there under. In particular, it will be exempt from: - Section 27 of the FAA (which requires that there must be a reasonable basis for recommendations when making recommendations on investments). Please contact the Singapore branch of DnB NOR Bank ASA at +65 6212 0753 in respect of any matters arising from, or in connection with, this report. We, the DnB NOR Group, our associates, officers and/or employees may have interests in any products referred to in this report by acting in various roles including as distributor, holder of principal positions, adviser or lender. We, the DnB NOR Group, our associates, officers and/or employees may receive fees, brokerage or commissions for acting in those capacities. In addition, we, the DnB NOR Group, our associates, officers and/or employees may buy or sell products as principal or agent and may effect transactions which are not consistent with the information set out in this report. In the United States Each research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the views expressed in this report accurately reflect that research analysts personal views about the company and the securities that are the subject of this report; and (ii) no part of the research analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in this report. This report is being furnished upon request and is primarily intended for distribution to Major U.S. Institutional Investors within the meaning of Rule 15a-6 of the U.S. Securities and Exchange Commission under the Securities Exchange Act of 1934. To the extent that this report is being furnished, or will be disseminated, to non-Major U.S. Institutional Investors, such distribution is being made by DnB NOR Markets, Inc., a separately incorporated subsidiary of DnB NOR that is a U.S. broker-dealer and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Any U.S. recipient of this report seeking to obtain additional information or to effect any transaction in any security discussed herein or any related instrument or investment should call or write DnB NOR Markets, Inc., 200 Park Avenue, New York, NY 10166-0396, telephone number 212-681-3800 or fax 212681-4119.

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