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Fred.Olsen Production ASA
DnB NOR Markets SMB seminar
29. March 2011
THE COMPANY
“Who we are”
Company overview
Floating ProductionEst. 1994
Ganger Rolf ASA(listed OSE)
Bonheur ASA(listed OSE)
Cruise LineSince 1901
Renewable EnergyEst. 1996
Crude Oil TankersShipping Since 1848
DrillingEst. 1973
Fred. Olsen Production First Olsen &Knock Tankers
Fred. Olsen Energy &Dolphin Drilling
Fred. Olsen Renewables / Fred. Olsen Windcarrier
Fred. Olsen CruiseLines
Over 150 years of history and experience in shipping and offshore
Fred. Olsen Production – in brief
• Established FPS contractor since 1994
• FOP listed on Oslo Stock Exchange May 2007
• Strong track record – 10 projects delivered
• Fleet of 4 production units:
– 3 FPSO’s
– 1 MOPU operation
• Top tier uptime performance
• Strong HSSEQ performance
• FOP/FOM: ISO 9001, 14001 and 18001
• Approx. 450 personnel
• Core business in West Africa; worldwide presence
Track record
FSO ConversionKnock Taggart
Abacam - Nigeria
FSO ConversionKnock Nevis
Maersk - Qatar
FSO ConversionKnock Dee Soekor - SA
FPSO ConversionKnock TaggartAddax - Nigeria
FPSO UpgradePetróleo NautipaVaalco - Gabon
2009200820072006200520042003200220012000199919981997199619951994 2010
Jack-Up UpgradeBorgen Dolphin/Marc LorenceauAddax - Nigeria
Jack-Up ConversionBorgen Dolphin MOPU
Mobil Oil - Nigeria
FPSO ConversionPetróleo Nautipa
Ranger Oil - Angola
FPSO ConversionKnock Allan
CNR – Gabon
FPSO ConversionKnock Adoon
Addax - Nigeria
10 largest shareholders as per 31st December 2010
Name of Shareholder # of shares in %
FIRST OLSEN LTD 65 191 200 61,5 %
SKANDINAVISKA ENSKILDA BANKEN AB 7 925 135 7,5 %
GEVERAN TRADING CO LTD 7 546 837 7,1 %
SKANDINAVISKA ENSKILDA BANKEN 4 755 000 4,5 %
ODIN OFFSHORE 3 008 400 2,8 %
SKAGEN VEKST 3 000 000 2,8 %
MORGAN STANLEY & CO INC. NEW YORK 2 288 600 2,2 %
SABARO INVESTMENTS LTD 1 407 700 1,3 %
HOLBERG NORGE 1 248 200 1,2 %
MARUBENI CORPORATION 692 200 0,7 %
Sum 10 largest Shareholders 97 063 272 91,6 %
105 930 000
OPERATION
“What we do”
Current fleet & offices
Houston
Nigeria
Gabon
Oslo
Singapore
OfficeUnit
Port Harcourt
Port Gentil
Knock AllanFPSO Oil: 25,000 BOPDGas: 80 MMCFDPower 2 x 27MW
Knock AdoonFPSOOil: 60’000 BOPDGas: 10 MMCFDWI: 100’000 BWPD
Knock MuirAframax 93 builtTrading tanker in The Far East/India range
Petróleo NautipaFPSO (50% owned)Oil: 30,000 BOPDGas: 10 MMCFD
Marc LorenceauMOPU (management)Oil: 40,000 BOPDGas: 70 MMCFD
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Petroléo Nautipa
Knock Adoon
Knock Allan
Knock Muir
Marc Lorenceau
Long term contracted cashflow
Addax Petroleum - Nigeria 8y option
Addax (operations)
Vaalco - Gabon 2y option
Upgrade / Conversion
Option
Call-off option
Canadian Natural Resources – Gabon – 10 yrs (10y option)
Operations
Short term tanker T/C / Spot market
Quality of operation is core for a FPSO operator
Robust HSSEQ performance
Excellent uptime record
Advantages from combination of maritime and offshore cultures
Vessel management and operation by Fred. Olsen Marine Services (FOM)
Full & effective integration of local staff in onshore and offshore organization (up to 90% local staff on some units)
ISO 9001, 14001 and OSHAS 18001 certified management systems
0
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18
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
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HSE Performance
TRCF
H-value
Current company up-date
• Knock Allan
Gas compressors performance issues not fully resolved
In full production, but not at peak capacity
• Knock Adoon
Average oil-production 50–55,000 bopd
Additional reserves sanctioned to be developed through Knock Adoon
Field production horizon is beyond 2018
• Petróleo Nautipa
Average oil-production 20–22,000 bopd
Field production horizon now extends past 2017; 2021 is likely
Current company up-date
• Mark Lorenceau
Service contract on 30 days termination notice since 3q 2008, contract extension in discussion
• Knock Muir
Operating spot in a poor tanker market
Remains as conversion candidate for Far East FPSO projects
• Business & development
Extended field horizons for PetróleoNautipa and Knock Adoon; possible variation orders to contract
Currently tendering for one project in Far East
Several business development project in different development stages
Financial snapshot
2010 2009 2008
Turnover/revenue 116,8 115,0 80,9
EBITDA 53,1 50,7 30,7
Total assets 472,4 554,7 523,5
Book equity 254,7 264,6 263,3
Market capitalization 186,5 130,2 65,1
Enterprise value 305,1 257,1 191,1
USD million
EBITDA-margin 45,5 % 44,1 % 37,9 %
EV/EBITDA 5,7 5,1 6,2
FOP share price development; last 24 months
FPSO shares indexed to 100, last 24 months
Financing capability
Financial capacity to fund medium size FPSO project(s)
USD 500 million Secured Revolving Credit Facility in place
USD 183 million drawn per 31.12.2010
Borrowing base structure
6.5 years remaining duration until 2017
Annually USD 50 million reduction of the facility from 2013
Interest margin 1.00% above US Libor
Predictable key covenants (consolidated)
Per 31.12. 2010
– NIBD to EBITDA <=4.5 2.2
– Book equity >= USD 150 million USD 255 million
– Free cash >= USD 50 million USD 64 million
Proposed dividend payment of NOK 0.50/share
THE FPSO MARKET
“..and where do we fit?”
FPSO market demand
• General market outlook
World energy demand increasing, fueled by emerging markets
In foreseeable future oil and gas will remain key source for energy and transportation
Oil and gas developments must replace current production
The increased oil price makes marginal fields economical
FPS’s are viable production solutions offshore; shallow and deep water, marginal and large fields
• FPSO market; looking back (last 12 months)
1Q 2011 – 3 contract awards (2 FSO leases and1 turn-key FPSO)
1Q-4Q 2010 contract activity (10 awards total, excluding 8 Petrobrashulls + topsides EPC’s):
Turn-key deliveries (EPC) – 2
Leases – 3
Redeployment – 5
FPSO market Demand
General FPSO outlook:
External forecasts are back to 2007 levels (16-20+ per year)
Estimated annual growth of 5-10%
Leased vs. owned FPS solutions indicated split 50/50%
The leased projects mix split is estimated 70/30% new lease/redeploy
Recovery from 2008 financial crisis is evident, including access to financing
African market now being revitalized
FOP’s FPSO market outlook
Opportunities in mid-range (FOP) segment are presently limited –expected to pick up in 2011; FOP is not in EPC market
Currently following some twenty project opportunities, in discussions on five
Market Supply
Vessel supply:
New build vessels increasingly competitive vs conversions for long contracts – due to current shipping market
Redeployment has picked up but almost entirely on shorter contracts (5y or less)
7 vessels with contract ending in 2011, unless extended; of these 3 are 1970’s and all are 25 years old or older; further scrapping is likely
Competitive Picture:
Competitive field is reduced due to bankruptcies and retrenchment due to refinancing
Increased openings for raising capital, refinancing ongoing
FPSO Operators – Total Projects
FPSO Operators - Units
02468
1012141618
BW
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PR
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SBM
MO
DEC
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FOP
Saip
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Tan
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Pac
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Ake
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On order
Idle
Contract
Market segregation
The FPSO market is segregating into three main categories:
Top-end mega-projects (e.g. sub-salt in Brazil):
Capital intensive (CAPEX > $750 mill)
Highly complex vessels, high project execution risk
Resource intensive – large in-house teams
Mid range:
(Less) capital intensive ($250-700 mill)
Clients with balance sheet to match commitments
Complex but more flexible project execution model
Low end :
Short contract commitment
Increased residual value risk
Client credit risk
SUMMARY
Fred. Olsen Production ASA:
Long term cash flow
Excellent operational track record
Cost efficient operation, tight cost control
Existing contracts have strong potential to add value
Asset portfolio tidied-up in 2009/10
Trading Aframax tanker as FPSO/FSO conversion candidate
Attractive long term financing in place
Low balance sheet gearing
Strategic and financial partner in place
Well positioned to expand portfolio in mid range segment
Market value 70% of book value
Annual dividend proposed for the AGM