SBX Seabright Holdings, Inc.

4 May 2016, Limassol, Cyprus

2016 SUMMARY OBSERVATIONS FOR THE FIRST QUARTER

• Revenues for the quarter were $26.0 million, an increase of 7% compared to Q1 2015 and down 4% relative to Q4 2015.
• Contract revenues for the period were $26.0 million, up 13% from Q1 2015 and a decrease of 3% from Q4 2015.
• Multi-client revenues were nil, down from $1.2 million reported in Q1 2015 and $0.5 million reported in Q4 2015. None of the company's vessels were utilized for multi-client surveys during the period, similar to Q4 2015.
• EBITDA was $7.4 million compared to $8.2 million for Q1 2015 and $4.6 million for Q4 2015. 
• EBIT for the quarter was $3.6 million compared to $3.7 million for Q1 2015 and negative $5.6 million for Q4 2015. 
• Vessel utilization for the five vessels active in the period was 90.3%. Four vessels were in operation on the Mexico Gigante survey, and Northern Explorer finished a contract in the Caribbean. Two vessels remain stacked.
• 6.8% technical downtime in the quarter compared to 4.7% for Q1 2015 and 9.1% previous quarter.
• Zero lost time injury frequency (LTIF) in the quarter. 
• Mr. Christophe Debouvry appointed as new CEO replacing Mr. Dag Reynolds.

Key Highlights

Operational review

The first quarter was characterized by continued weakness in oil prices and very challenging market conditions for oil exploration. Oil companies have communicated significant reductions in their exploration and production budgets for 2016 and seismic tender activity has remained low and marked by substantial competition. The 2D/source market has continued to experience significant competition from multi-streamer 3D vessels. However, the active 3D fleet is now being reduced as less competitive vessels are being retired or stacked. The reduced 3D vessel capacity is expected to have a positive impact on the 2D/source market dynamic. Nevertheless, the negative market sentiment has exacerbated industry risk factors and increased the uncertainty related to timing of a market recovery.

Vessel utilization was 90.3% during Q1 2016, down from 100% in the previous quarter. Technical downtime for the fleet was 6.8% in Q1 2016, down from 9.1% in Q4 2015. Technical downtime has been reduced following recent operational changes. Nevertheless, management is continuing to implement measures aimed at further improving performance. Contract surveys represented 90.3% of vessel capacity compared to 100% for the fourth quarter of 2015.

Harrier Explorer, Hawk Explorer, Aquila Explorer and Osprey Explorer were in production on the Mexico Gigante project during the quarter. Osprey Explorer completed its demobilization from Mexico due to scheduled maintenance commencing towards the end of the quarter. Northern Explorer left Gigante temporarily in January and February to complete a 2D survey in the Caribbean Sea. The vessel returned to Mexico to replace the Osprey Explorer during April. Munin Explorer and Voyager Explorer remained stacked during the period.

Multi-client surveys represented 0% of vessel utilization in the quarter, similar to the previous quarter and the same quarter last year. Multi-client revenues were nil in the period, compared to $0.5 million previous quarter. The multi-client amortization policy was changed with effect from 1 January 2016. Please see selected notes for details.

One new significantly pre-funded 2D multi-client survey in North West Europe and a source vessel contract in the North Sea were announced during the quarter. The multi-client survey is scheduled for quarter two with an acquisition period of two to three weeks and the source project is planned for quarter three with an estimated duration of three weeks.

Operating costs were reduced due to the lay-up of two chartered vessels (3D vessel Voyager Explorer and 2D vessel Munin Explorer) and lower crew headcount. The company will continue its review of additional savings initiatives as well as measures to increase cost flexibility.

Capital expenditures were $0.7 million during the quarter, which is in line with the lower spending estimates communicated during 2015. Lost time injury frequency (LTIF) rate for the quarter was zero. The company continued to focus on maintaining high standards in health, safety, security, environment and quality (HSSEQ).

Regional review

North and South America (NSA) continued to be the most active region during the quarter. NSA revenues of $26.0 million represented 100% of total revenues for the quarter. Sales in Europe, Africa and the Middle East (EAME) and Asia Pacific (APAC) was nil during the quarter. No SeaBird vessels worked in either APAC nor EAME during the quarter. 

Outlook

Global seismic demand continued to be very weak in the first quarter. While there has been a modest increase in tender activity, oil industry spending is anticipated to remain depressed through 2016 and this will negatively impact seismic activity during the year.

The second quarter is expected to be negatively impacted by the repositioning of two vessels for projects in North West Europe as well as upcoming scheduled docking. The remaining active fleet will continue its operations on the Mexico Gigante survey, which is anticipated to be completed by the end of quarter three.

The Mexico Gigante project continues to represent the main part of the company's current backlog. While there are a number of contract opportunities under review, surveys have generally been delayed due to permitting, lack of prefunding and/or budget concerns. The current market uncertainty makes it difficult to predict the level of contract coverage that is possible to obtain beyond the company's current firm backlog.

Financial review

Financial comparison

All figures below relate to continuing operations unless otherwise stated. For discontinued operations, see note 1. The company reports a net profit of $1.8 million for Q1 2016 ($63.3 million in the same period in 2015).

Revenues were $26.0 million in Q1 2016 ($24.2 million in Q1 2015).

Cost of sales was $15.0 million in Q1 2016 ($17.0 million in Q1 2015). The decrease is due to fewer vessels in operation, provisions taken in 2014 and 2015 for laid-up vessels and cost reduction efforts commencing in 2015.

SG&A was $3.9 million in Q1 2016, up from $3.8 million in Q1 2015.

Other income (expense) was $0.3 million in Q1 2016 ($0.1 million in Q1 2015).

EBITDA was $7.4 million in Q1 2016 ($8.2 million in Q1 2015). The decrease is due to the one-off effect of the $4.7 million operational restructuring gain booked in Q1 2015.

Depreciation, amortization and impairment were $3.8 million in Q1 2016 ($4.5 million in Q1 2015). The decrease is due to lower ship and equipment book values in Q1 2016 relative to Q1 2015.

Financial expenses were $1.4 million in Q1 2016 ($1.0 million in Q1 2015). The increase is largely due to one-off effects in Q1 2015.

Other financial items were negative $0.2 million in Q1 2016 (negative $0.2 million in Q1 2015).

Income tax expense was $0.2 million in Q1 2016 ($0.5 million in Q1 2015).

Capital expenditures in Q1 2016 were $0.7 million ($0.2 million in Q1 2015).

Multi-client investment was nil in Q1 2016.

Liquidity and financing

Cash and cash equivalents at the end of the period were $10.1 million ($15.9 million in Q1 2015), of which $0.5 million was restricted in connection with deposits and tax. Net cash from operating activities was $6.1 million in Q1 2016 (negative $6.2 million in Q1 2015).

The company has one bond loan, one secured credit facility, one unsecured note and the Hawk Explorer finance lease.

The SBX04 secured bond loan (issued as SeaBird Exploration Finance Limited First Lien Callable Bond Issue 2015/2018") is recognized in the books at amortized cost of $26.5 million per Q1 2016 (nominal value of $29.3 million plus accrued interest of $0.2 million plus amortized interest of $1.4 million less fair value adjustment of $4.4 million). This bond has been issued in two tranches; tranche A amounting to $5.0 million and tranche B amounting to $24.3 million. The SBX04 bond tranche A is carrying an interest rate of 12.0% and Tranche B is carrying an interest rate of 6.0%. Interest is paid quarterly in arrears with first interest instalment paid on 3 June 2015. The bond matures on 3 March 2018, with principal amortizations due in quarterly instalments of $2.0 million starting at 3 June 2017. The outstanding loan balance will be paid at the maturity date. Interest paid during Q1 2016 was $0.5 million. The bond is listed on Nordic ABM, and it is traded with ticker SBEF01 PRO and SBEF02 PRO for the respective two bond tranches.

The three-year secured credit facility is recognized at amortized cost of $2.2 million (initial nominal value of $2.4 million plus accrued interest of $0.01 million plus amortized interest of $0.1 million less fair value adjustments of $0.4 million). Coupon interest rate is 6.0%. Interest is to be paid quarterly in arrears and the first interest amount was paid on 3 June 2015. The facility matures at 3 March 2018 with quarterly instalments of $0.2 million starting on 3 June 2017. The outstanding loan will be repaid in full at maturity. Principal repayments during Q1 2016 amounted to $0.04 million and additional amounts drawn on the credit facility during the period was $0.1 million. Interest paid during Q1 2016 was $0.03 million.

The three-year unsecured loan is recognized at amortized cost of $1.6 million (initial nominal value of $2.1 million plus amortized interest $0.2 million less fair value adjustment and accrued interest of $0.2 million less principal repayments of $0.5 million). Coupon interest rate is 6.0%. Stated maturity date is on 1 January 2018. Interest is paid quarterly in arrears and the first payment was due on 1 April 2015. The principal will be repayable in nine equal quarterly instalments of $0.2 million commencing on 1 January 2016. Interest paid during Q1 2016 was $0.06 million and principal repayments during Q1 2016 were $0.5 million.

The lease of Hawk Explorer is recognized in the books as a finance lease at $3.1 million per Q1 2016. Instalments and interest amounting to $0.6 million were paid during Q1 2016 ($0.6 million in Q1 2015).

Net interest bearing debt was $23.2 million as at the end of Q1 2016 ($17.5 million in Q1 2015).

Accrued interest on the bond loan, credit facility and the unsecured note for Q1 2016 was $0.2 million ($1.2 million).

The company was in compliance with all covenants as of 31 March 2016.

The total outstanding amount of common shares in the company is 3,065,434. The company has also issued 884,686 warrants, convertible into 884,686 ordinary shares. The warrants are listed on the Oslo Stock Exchange with ticker SBX J.

At the commencement of the quarter, the company announced that Mr. Christophe Debouvry was appointed as new CEO, following Mr. Dag Reynolds, who resigned from his position with effect from 1 January 2016. Ms. Annette Malm Justad, Chairman of the Board, assumed the position of interim Chief Executive Officer from 1 January until 18 January 2016.

The company's accounts have been prepared on the basis of a going concern assumption. In the view of the board of directors, the continued very challenging market conditions and the company's limited working capital creates a material risk to this assumption. In the event that project performance is significantly worse than expected, contracts and other arrangements in respect of the employment of SeaBird's vessels are cancelled, or significantly delayed, new backlog cannot be secured on satisfactory rates or at all, the company would need to sell assets or raise additional financing, which may not be available at that time. Reference is made to the Going Concern section in selected notes and disclosures for further details on the financial position of the company.

The Board of Directors and

Chief Executive Officer

SeaBird Exploration Plc

3 May 2016

The first quarter 2016 presentation will be transmitted live at

http://www.sbexp.com/investor-relations.aspx.

This information is subject of the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.

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