Offshore Sector Report

Sector report Offshore Supply

Rough times ahead, but asset prices offer valuation support Asian Offshore and Yards 26.05.2010 Global Offshore (12m)

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Analysts: Thor Andre Lunder +65 6220 1337 [email protected] Kay Lim +65 6220 5123 [email protected]

Please see the last page for important information.

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. Company Rec Target Price P/E 10E P/E 11E P/E 12ESapuraCrest Petroleum MYR BUY 2.6 2.0 17.2 9.6 8.0Kencana Petro leum MYR BUY 1.60 1.33 16.6 12.7 14.3Farstad NOK HOLD 170.0 150.5 10.6 15.6 5.1EZRA Holdings SGD SELL 1.20 1.72 17.9 12.6 12.7Solstad NOK HOLD 117.5 113.5 11.7 8.0 5.8Siem Offshore NOK BUY 14.00 9.80 31.4 17.1 7.1Otto Marine SGD HOLD 0.35 0.39 11.8 13.1 14.3Swiber Holdings SGD BUY 1.50 1.00 11.7 7.4 7.7KS Energy SGD BUY 1.50 1.18 12.8 8.7 8.2Jaya Holdings SGD BUY 1.00 0.62 6.0 10.7 8.9Ezion Holdings SGD BUY 0.80 0.62 6.1 7.4 7.2Falcon Energy SGD BUY 0.70 0.54 6.6 5.9 5.8CH Offshore SGD BUY 0.70 0.52 7.1 5.7 6.2Deep Sea Supply NOK BUY 13.50 10.00 nm 24.1 3.3ASL Marine SGD BUY 1.50 0.80 5.7 4.0 5.4Eidesvik NOK BUY 40.0 33.8 9.5 4.6 3.9Hav ila Shipping NOK BUY 80.0 58.5 35.7 6.0 7.3EOC Limited NOK HOLD 7.00 7.50 5.4 2.4 3.9

• 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.

Sector report > Offshore Supply

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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


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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.

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. 1. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.


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

Figure 1: Our coverage universe

Company Rec Prev Rec Currency TP Price Upside 2010 2011 2010 2011Swiber Singapore 333 BUY BUY SGD 1.50 0.93 61% 11.0 7.0 7.3 3.8Ezra Singapore 762 SELL SELL SGD 1.20 1.63 -26% 15.3 11.9 13.8 13.8Otto Marine Singapore 492 HOLD HOLD SGD 0.35 0.37 -5% 11.4 12.6 11.7 9.2ASL Marine Singapore 159 BUY BUY SGD 1.50 0.75 100% 5.4 3.8 3.4 2.7CH Offshore Singapore 228 BUY HOLD SGD 0.70 0.47 51% 6.4 5.1 4.7 3.0Ezion Singapore 281 BUY BUY SGD 0.80 0.56 43% 5.5 6.7 9.5 4.9Falcon Energy Singapore 275 BUY HOLD SGD 0.70 0.48 46% 5.9 5.3 4.3 3.1KS Energy Singapore 318 BUY BUY SGD 1.50 1.12 34% 12.1 8.3 6.6 5.3Jaya Singapore 306 BUY New coverage SGD 1.00 0.56 79% 5.5 9.8 10.2 8.3Kencana Malaysia 626 BUY New coverage MYR 1.60 1.27 26% 15.9 12.1 9.7 7.4SapuraCrest Malaysia 717 BUY New coverage MYR 2.60 1.89 38% 9.6 8.0 4.4 3.4EOC Norway 125 HOLD HOLD NOK 7.0 7.5 -7% 5.8 2.6 6.9 3.9DESSC Norway 185 BUY BUY NOK 13.5 10 35% na 24.1 11.0 8.3EIOF Norway 153 BUY BUY NOK 40.0 34 18% 12.1 4.6 4.7 3.9Siem Norway 498 BUY BUY NOK 14.0 10 39% 27.0 14.7 12.5 9.1Solstad Norway 645 HOLD HOLD NOK 117.5 114 4% 11.7 8.0 8.0 7.0Havila Norway 140 BUY BUY NOK 80.0 59 37% 37.6 6.3 10.8 8.8Farstad Norway 894 HOLD BUY NOK 170.0 151 13% 9.8 14.3 6.9 7.5

Country listed

P/E EV/EBITDAMarket cap (USDm)

Source: DnB NOR Markets estimates

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

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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 2005-2009 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 Jackup JU AccumFleet

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OSV Accum

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


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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 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. 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


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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 Mkt Cap (USDm) Country 2006 2007 2008 2009 2010E 2011E 2012E

CH Offshore Ltd 283 Singapore 9.5 11.2 15.7 6.6 4.7 3.0 2.4Swiber Holdings Ltd 368 Singapore n.a. 17.5 20.3 12.6 7.3 3.8 2.9KS Energy Services Ltd 337 Singapore 12.5 14.6 16.9 7.4 6.6 5.3 4.7Falcon Energy Group Ltd 312 Singapore 11.7 11.7 18.6 6.9 4.3 3.1 2.1Ezra Holdings Ltd 810 Singapore 17.4 34.3 17.4 9.1 13.8 11.4 9.3ASL Marine Holdings Ltd 171 Singapore 10.6 6.1 8.8 2.9 3.4 2.7 2.9Ezion Holdings Ltd 316 Singapore 5.3 43.3 43.3 18.9 9.5 4.9 4.0Otto Marine Ltd 530 Singapore - - 4.5 11.5 11.7 9.2 9.2Singapore mean 11.2 19.8 18.2 9.5 7.7 5.4 4.7SapuraCrest Petroleum BHD 772 Malaysia 10.4 8.3 10.2 2.6 6.2 4.4 3.4Kencana Petroleum Bhd 678 Malaysia - 14.1 4.3 7.1 9.7 7.4 7.6Malaysia mean 10.4 11.2 7.3 4.9 8.0 5.9 5.5EOC Ltd 128 Norway - - - 12.7 6.9 3.9 4.7Deep Sea Supply PLC 199 Norway - 8.8 8.8 6.5 11.0 8.3 4.7Eidesvik Offshore ASA 156 Norway 8.6 10.5 11.9 6.7 4.7 3.9 4.1Farstad Shipping ASA 901 Norway 8.1 8.6 7.5 4.8 6.9 7.5 3.5Havila Shipping ASA 143 Norway - 4.0 11.2 8.2 10.8 8.8 8.5Siem Offshore Inc 540 Norway 18.7 22.3 13.7 11.7 12.5 9.1 6.5Solstad Offshore ASA 658 Norway 9.4 5.7 8.2 7.8 8.0 7.0 5.4Norwegian mean 11.2 10.0 10.2 8.4 8.7 6.9 5.4Tidewater Inc 2233 United States 13.9 10.1 6.5 5.8 6.0 6.0 -Bourbon SA 2264 France 12.4 11.5 11.4 9.7 9.4 7.6 6.5Others mean 13.2 10.8 9.0 7.8 7.7 6.8 6.5 Sources: DnB NOR Markets estimates, Consensus estimates from Bloomberg for Tidewater and Bourbon not under coverage

Figure 6: Share price performance

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Source: Bloomberg data as of 20 May


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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

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 Q4-Q12010). 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

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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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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 Average day rates (GBP)Type Description Q409 2009 2010E 2011E 2012E

AHTS UUL bhp > 25k 6,000 22,688 19,250 30,000 35,000AHTS UL 23k to 25k 6,000 22,688 10,500 13,125 24,000AHTS L 16k to 23k 4,800 14,450 8,625 10,781 19,200AHTS M 10k to 16k 4,800 13,130 7,875 9,844 16,000AHTS S bhp <10k 3,000 5,000 7,125 8,906 12,800PSV UL dwt >4k 3,550 6,508 7,000 8,750 16,000PSV L 3k to 4k 2,130 4,383 5,750 7,188 13,600PSV M 2k to 3k 1,420 3,065 5,625 7,031 12,000PSV S dwt <2k 1,400 2,800 4,500 5,625 5,600

Vessel Average opex (GBP)Type Description Q409 2009 2010E 2011E 2012E

AHTS UUL bhp > 25k 13,000 13,000 13,000 13,000 13,000AHTS UL 23k to 25k 8,000 8,000 8,000 8,000 8,000AHTS L 16k to 23k 7,000 7,000 7,000 7,000 7,000AHTS M 10k to 16k 6,000 6,000 6,000 6,000 6,000AHTS S bhp <10k 5,000 5,000 5,000 5,000 5,000PSV UL dwt >4k 5,750 5,750 5,750 5,750 5,750PSV L 3k to 4k 4,600 4,600 4,600 4,600 4,600PSV M 2k to 3k 4,600 4,600 4,600 4,600 4,600PSV S dwt <2k 4,025 4,025 4,025 4,025 4,025

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

Figure 9: 7-year North Sea average spot rates

AHTS +12,000 bhp

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Figure 10: Daily North Sea spot rates tracker

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-08

Nov-0

8

Dec-

08

Jan-0

9

Mar-

09

Apr-

09

May-0

9

Jul-

09

Aug-0

9

Sep-0

9

Nov-0

9

Dec-

09

Feb-1

0

Mar-

10

Apr-

10

Utiliza

tion

-10,00020,00030,00040,00050,00060,00070,00080,00090,000100,000

Rate

s (G

BP/D

ay)

Utilization (Lag 3 days) Rates

PSV

0%

20%

40%

60%

80%

100%

120%

Dec-

07

Jan-0

8

Feb-0

8

Mar-

08

Apr-

08

May-0

8

Jun-0

8

Jul-

08

Aug-0

8

Aug-0

8

Sep-0

8

Oct

-08

Nov-0

8

Dec-

08

Jan-0

9

Mar-

09

Apr-

09

May-0

9

Jul-

09

Aug-0

9

Sep-0

9

Nov-0

9

Dec-

09

Feb-1

0

Mar-

10

Apr-

10

Utiliza

tion

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

Rate

s (G

BP/D

ay)

Utilization (Lag 3 days) Rates

Source: DnB NOR Markets, Hagland Offshore


DnB NOR Markets - 10

26.05.2010

Global day rates

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

West Africa, PSV >2,000

-

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West Africa, AHTS <10,000

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USD

West Africa, AHTS 10,000+

-

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40,000

50,000

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90,000

Jun-

07Au

g-07

Oct

-07

Dec

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08Ap

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08Au

g-08

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Dec

-08

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09Ap

r-09

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g-09

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r-10

USD

GoM, PSV <200'

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16,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

g-08

Oct

-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD

GoM, PSV >200'

-

5,000

10,000

15,000

20,000

25,000

30,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

g-08

Oct

-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD

GoM, PSV <200' DP

-

10,000

20,000

30,000

40,000

50,000

60,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

g-08

Oct

-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD

Source: DnB NOR Markets, ODS-Petro-data



26.05.2010

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

Asia Pacific, 5-5,999 BHP

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

g-08

Oct

-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD


-

5,000

10,000

15,000

20,000

25,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

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08Ap

r-08

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08Au

g-08

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-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

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-09

Feb-

10Ap

r-10

USD


-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

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-08

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-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD


-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

g-08

Oct

-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD


-5,000

10,00015,00020,00025,00030,00035,00040,00045,00050,000

Jun-

07Au

g-07

Oct

-07

Dec

-07

Feb-

08Ap

r-08

Jun-

08Au

g-08

Oct

-08

Dec

-08

Feb-

09Ap

r-09

Jun-

09Au

g-09

Oct

-09

Dec

-09

Feb-

10Ap

r-10

USD




26.05.2010

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 Capacity (BHP) Year Built

DnB NOR fair value

estimates (USDm)

AHTS 28,000 2009 90AHTS 24,000 2009 80AHTS 22,000 2009 75AHTS 20,000 2009 70AHTS 18,500 2009 62AHTS 17,500 2009 55AHTS 16,500 2009 50AHTS 15,500 2009 40AHTS 12,240 2009 35AHTS 10,800 2009 30AHTS 6,500 2009 17AHTS 5,150 2009 13AHTS 4,826 2009 8


Figure 14: Base FMV estimates for PSV

Type Capacity (DWT)

Year Built

DnB NOR fair value

estimates (USDm)

PSV 5,250 2009 55PSV 4,500 2009 45PSV 4,250 2009 40PSV 3,800 2009 30PSV 3,250 2009 25PSV 2,500 2009 18PSV 1,800 2009 13




26.05.2010

Figure 15: Recent transactions support our NAV

Date Type Vessel nameBuilt (Yr)

Size (dwt/ bhp) Seller Buyer

Value (USDm) Source

DnB NOR fair value

est (USDm)

Feb-10 PSV Krestrel K 2010 2500 RK Offshore Tag Offshore 17 RS Platou 18Feb-10 PSV Greatship Mohini 2010 4600 Greatship Rem Offshore 45 ODS 45Feb-10 AHTS JM Gagah 2003 5500 Jasa Merin Undisclosed 9 ODS 13 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.



26.05.2010

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%.

2. 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.

3. 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 pre-qualification criteria.

4. 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.

5. 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.



26.05.2010

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



26.05.2010

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 Type Operator Partners StatusJDA Block A-18 Upstream Carigali-Hess Hess Development and productionJDA Block B-17 Upstream Carigali-PTTEPI PTTEP DevelopmentJDA Block C-19 Upstream Carigali-PTTEPI PTTEP DevelopmentJDA Block B-17-01 Upstream Carigali-PTTEPI PTTEP 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)

ProductionOil Gas Total Oil Gas Total Oil Gas Total Oil Gas Total

DomesticMalaysia's production 647 904 1,550 672 931 1,603 679 980 1,659 658 940 1,598

PETRONAS’ share of Malaysia's production 499 593 1,092 512 635 1,146 485 682 1,167 450 633 1,083 As a % of total production 77% 66% 70% 76% 68% 72% 72% 70% 70% 68% 67% 68%

InternationalSouth East Asia - - - - - - 36 89 125 40 116 157 Asia - - - - - - 6 1 8 6 1 7 Africa - - - - - - 210 167 376 216 159 375 Middle East - - - - - - 24 93 117 13 84 97 Oceania - - - - - - - 3 3 - 7 7 Total international production 206 333 539 289 324 613 276 353 629 275 367 643 Total Petronas production 705 925 1,630 801 959 1,759 762 1,021 1,784 726 1,000 1,726

2009200820072006

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.



26.05.2010

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) FY2004 FY2005 FY2006 FY2007 FY2008 FY2009 FY2010E FY2011E FY2012E FY2013EActual spending (not budget spending) RMbn RMbn RMbn RMbn RMbn RMbn RMbn RMbn RMbn RMbnE&P total 13.7 10.7 11.5 19.1 20.7 28.3 32.0 35.8 39.5 43.2E&P Malaysia (% proportion) 5.9 6.0 6.3 10.0 11.0 16.9 17.0 19.0 21.0 23.0E&P International 7.8 4.7 5.2 9.1 9.7 11.5 15.0 16.7 18.5 20.2E&P Malaysia CAGR (2009 to 2012E) 8% 8% 8% 8%

Domestic total capex (including downstream) 10.4 9.9 11.6 14.7 20 26.2Total capex 24.2 17.6 21.1 28.2 37.6 44.0% domestic (forward based on 3-year median) 43% 56% 55% 52% 53% 60% 53% 53% 53% 53%% international 57% 44% 45% 48% 47% 40% 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 country’s 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.



26.05.2010

Figure 22: Malaysia and Petronas' reserves and replacement ratio As of 1st Jan (in millions of barrels of oil equivalent)

ReservesOil Gas Total Oil Gas Total Oil Gas Total Oil Gas Total

DomesticMalaysia's reserves 5,252 14,659 19,911 5,357 14,821 20,178 5,458 14,668 20,126 5,517 14,661 20,178

International South East Asia 443 1,178 1,621 631 1,382 2,012 681 1,428 2,109 433 1,426 1,859 Asia 552 1,350 1,902 650 1,377 2,027 475 1,127 1,602 543 1,373 1,915 Africa 1,338 1,066 2,405 1,260 1,003 2,263 1,253 1,115 2,368 1,224 1,334 2,558 Middle East 14 - 14 10 - 10 10 - 10 4 - 4 Oceania 2,347 3,594 5,941 2,550 3,762 6,312 - 156 156 - 506 506 Total international reserves 7,599 18,253 25,852 7,907 18,583 26,490 2,418 3,826 6,245 2,203 4,639 6,842

Reserves Replacement RatioOil Gas Total Oil Gas Total Oil Gas Total Oil Gas Total

Domestic 1.4 2.1 1.8 1.4 1.4 1.4 1.4 0.6 0.9 1.2 1.0 1.1International 3.7 -1.8 1.1 3.7 2.9 3.2 -0.3 1.8 0.6 -1.1 9.7 4.1Total 1.9 1.6 1.7 2.0 1.7 1.8 0.9 0.8 0.9 0.6 2.6 1.8

20072006 20092008

2009200820072006

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.



26.05.2010

Figure 23: Offshore projects awarded in Malaysia – preference in local contractors

Client Company securedCompany based

Contract type Workscope

Value (USDm) Country

Prod unit / Field Start date End date

Petronas CarigaAllied Marine Local Support Support Malaysia 17 Jun 2010 19 Jul 2010Petronas CarigaAllied Marine Local IRM Inspection work Malaysia 22 Mar 2010 22 Mar 2010Petronas CarigaAllied Marine Local IRM Inspection and ROV work Malaysia 27 Apr 2010 1 Nov 2010Petronas CarigaAllied Marine Local Support Inspection work Malaysia 16 Mar 2010 16 Jun 2010Petronas CarigaAllied Marine Local Support Saturation Diving Malaysia 16 Feb 2010 26 Apr 2010Talisman Offshore Subsea Works Local Support Malaysia 8 Feb 2010 8 Apr 2010

Shell TSMarine Australia Support4-5 months support on Gumusut Malaysia Gumusut-Kakap 15 Jul 2010 15 Dec 2010

ExxonMobil J. Ray McDermott US InstallationGuntong pipeline replacement Malaysia Guntong 25 Aug 2009 30 Sep 2009

Shell SapuraCrest/Acergy Local JV Installationsubsea equipment and pipeline installation 825 Malaysia Gumusut-Kakap 1 Jun 2010 17 Mar 2012

Murphy TL Offshore Local Installation 12-in Gas exportline 175 Malaysia Kikeh 16 Jul 2007 31 Oct 2008Shell J. Ray McDermott US Installation Malaysia 16 May 2009 30 Jun 2009

Newfield IntraLine Resources Local InstallationInstallation of platforms and pipelines Malaysia East Belumut

ExxonMobil TL Offshore Local Installation Malaysia Jerneh 1 Mar 2007 1 Mar 2008Murphy Swiber Offshore Local JV Installation Hybrid Rentis pipelay Malaysia Sarawak Gas 1 Sep 2008 30 Nov 2008Murphy Sarku Marine (Sapura) Local Charter Charter with Swiber Malaysia 29 May 2009 6 Jun 2009Petrofac Allied Marine Local IRM Cendor FSO IRM Malaysia Cendor 1 May 2009 15 May 2009

Petronas CarigaTL Offshore Local InstallationPipeline and riser installation Malaysia Samarang 29 Sep 2009 23 Dec 2009

Petronas CarigaGlobal Industries/ KencaLocal JV InstallationPetronas umbrella TNI contract 70 Malaysia 1 Mar 2010 1 Apr 2011

Petronas CarigaPerisai Local Installation Malaysia West Lutong 17 Feb 2009 31 Oct 2009Petronas CarigaLeighton Australia Installation 28-in trunkline installation Malaysia Kumang Cluster 19 Mar 2010 19 Apr 2010

Petronas CarigaTL Offshore Local Well ServiceSoil Boring work in Baram Delta Malaysia 7 Jul 2009 31 Jul 2009

Petronas CarigaPerisai Local Installation Kumang Pipelay Malaysia Kumang Cluster 16 May 2009 28 Sep 2009Petronas CarigaSwiber Offshore Local JV EPIC Installation of 1 plat/2ppl 31 Malaysia Puteri 1 Aug 2007 15 Mar 2008

Petronas CarigaSwiber Offshore Local JV InstallationWest Lutong Pipeline replacement Malaysia West Lutong 15 Aug 2009 13 Sep 2009

Petronas CarigaEOC Ltd Singapore Installation Malaysia Angsi 1 Mar 2009 14 Jul 2009Petronas CarigaNeptune Marine Singapore Support Malaysia 5 Dec 2008 31 Jan 2009Petronas CarigaTL Offshore Local Charter Charter Malaysia Kumang Cluster 1 May 2009 31 Oct 2009Petronas CarigaEOC Ltd Singapore Installation D30 and Dana pipelay Malaysia D1 Cluster 3 Oct 2009 25 Nov 2009Petronas CarigaAlam Maritim Local IRM Betty Bakau pipeline IRM Malaysia Betty 1 Jul 2009 21 Jul 2009Petronas CarigaAlam Maritim Local Installation Malaysia Angsi 1 Mar 2009 30 Jun 2009Shell SapuraCrest Local Installation Malaysia Gumusut-Kakap 15 Jun 2010 13 Oct 2010Shell Perisai Local Installation Installation Malaysia Gumusut-Kakap 1 Mar 2010 31 Mar 2010

Shell J. Ray McDermott US Installationplatform and pipeline installation Malaysia B11 1 Apr 2009 30 Jun 2009

Shell Alam Maritim Local Support F13 general support work Malaysia E11 Hub gas 1 Aug 2008 31 Dec 2008Shell Offshore Subsea Works Local IRM Malaysia 9 Nov 2009 9 Nov 2014Talisman EOC Ltd Singapore Installation FSO initial support work Malaysia Bunga Orkid 1 Feb 2009 28 Feb 2009Talisman Sarku Marine (Sapura) Local Survey Malaysia 7 Oct 2009 22 Nov 2009Talisman Swiber Offshore Local JV EPIC Plats inst 31 Malaysia Bunga Orkid 1 Mar 2008 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 Country Workscope Prod unit / Field Exp start Exp completion StatusNippon Oil EPC Malaysia wellhead platform and pipeline Layang 1 Jan 2013 1 Mar 2013 TenderingPetronas Cariga EPC Malaysia CPP jacket Kebabangan 1 May 2010 1 Jun 2010 TenderingShell EPC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap 1 Jan 2012 1 Mar 2012 TenderingNewfield Installation Malaysia TNI of WHP and process plat East Piatu 1 Jun 2011 31 Aug 2011 TenderingPetronas Cariga Installation Malaysia CPP jacket TNI Kebabangan 1 Apr 2010 1 Jun 2010 TenderingPetronas Cariga Installation Malaysia pipelay Tangga Barat Clus5 Apr 2010 15 Apr 2010 TenderingShell Installation Malaysia TNI and support work E11 Hub 1 Jun 2010 1 Aug 2010 TenderingNewfield Installation Malaysia platform installations West Belumut 1-Jun-2010 30-Jun-2010 Planned

Newfield EPIC MalaysiaCPP fabrication; optional wellhead platform fabrication Lerek Planned

Nippon Oil EPIC Malaysia wellhead platform and pipeline Layang PlannedPetronas Cariga Installation Malaysia pipelay Tangga Barat Clus PlannedPetronas Cariga Installation Malaysia CPP Topside TNI Kebabangan PlannedPetronas Cariga Installation Malaysia Pipeline and riser installation Samarang 29-Sep-2009 23-Dec-2009 Planned Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets



26.05.2010

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 Contract type Country Workscope Prod unit / Field Exp start Exp completion StatusNippon Oil EPC Malaysia wellhead platform and pipeline Layang 1 Jan 2013 1 Mar 2013 TenderingPetronas Carigali EPC Malaysia CPP jacket Kebabangan 1 May 2010 1 Jun 2010 TenderingShell EPC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap 1 Jan 2012 1 Mar 2012 TenderingNewfield Installation Malaysia TNI of WHP and process plat East Piatu 1 Jun 2011 31 Aug 2011 TenderingPetronas Carigali Installation Malaysia CPP jacket TNI Kebabangan 1 Apr 2010 1 Jun 2010 TenderingPetronas Carigali Installation Malaysia pipelay Tangga Barat Cluster 5 Apr 2010 15 Apr 2010 TenderingShell Installation Malaysia TNI and support work E11 Hub 1 Jun 2010 1 Aug 2010 TenderingNewfield Installation Malaysia platform installations West Belumut 1-Jun-2010 30-Jun-2010 Planned


Nippon Oil EPIC Malaysia wellhead platform and pipeline Layang PlannedPetronas Carigali Installation Malaysia pipelay Tangga Barat Cluster PlannedPetronas Carigali Installation Malaysia CPP Topside TNI Kebabangan PlannedPetronas Carigali Installation Malaysia Pipeline and riser installation Samarang 29-Sep-2009 23-Dec-2009 Planned

Shell EPIC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap PlannedEni EPC Australia Flowlines Kitan Tendering

Apache EPIC Australia wellhead platform and flowline installations Julimar/Brunello Area 15-Oct-2009 15-Jun-2011 Planned

Chevron Installation Australia Tie-in of platforms, pipelines and manifolds Gorgon 1-Apr-2011 30-Jun-2011 PlannedChevron Installation Australia Umbilical installation Gorgon 1-Jan-2011 31-Mar-2011 Prequalification

Chevron Installation Australia 60km deepwater pipeline segment Gorgon 1-Jan-2011 28-Feb-2011 Tendering

Chevron Installation AustraliaSubsea foundations and manifold installations Gorgon 1-Jan-2011 31-Mar-2011 Planned

Chevron Installation Australia 200km shallow water pipeline segment Gorgon 1-Jan-2011 28-Feb-2011 TenderingExxonMobil EPIC Australia Wirrah 1-Sep-2010 PlannedExxonMobil EPIC Australia Marlin B platform and pipelines Marlin-Turrum 1-Dec-2009 30-Jun-2010 PlannedSantos Installation Australia Pipeline installation Henry 1-Dec-2009 31-Mar-2010 TenderingJHN EPC China Topside Lufeng 13-2 TenderingJHN EPC China Jacket Lufeng 13-2 24 Nov 2011 TenderingONGC EPC India Pipelay and plat modifications B-193 Cluster 30 Apr 2011 TenderingONGC EPC India Process platform and two flare platforms B-193 Cluster 30 Apr 2012 TenderingONGC EPC India EPCIC: 3 unmanned WHP + various segment D-1 30 Apr 2010 31 Jan 2012 TenderingONGC EPC India 11 pipelines spanning 75km Mumbai High North TenderingONGC EPC India B-22 Cluster platform installations and pipela South Bassein 3 May 2010 30 Apr 2011 Tendering

ONGC Installation India Platforms ICP-R and ICP-F3 installation Mumbai High South Tendering

ONGC EPIC IndiaB-22 Cluster platform installations and pipelay South Bassein 1-Dec-2009 30-Apr-2011 Tendering

ONGC EPIC India Pipelay and platform modifications B-193 Cluster 30-Apr-2011 TenderingONGC EPIC India 5 wellhead platforms B-193 Cluster TenderingONGC EPIC India B-46 4 platforms and flowlines B-Cluster PlannedONGC Installation India Mumbai High 9-Oct-2009 10-Apr-2010 Planned

ONGC EPIC India Mumbai High South Redevelopment Mumbai High South Tendering

ONGC EPIC Indiasix wellhead platforms and 140km of pipelines Mumbai High North Tendering

ONGC EPIC India Process platform and two flare platforms B-193 Cluster 30-Apr-2012 Tendering

ONGC EPIC India platform and flowline installations North Tapti 1-Nov-2009 30-Jun-2010 TenderingChevron EPC Indonesia SPM refurbishment Santan 1 May 2010 30 Jun 2010 TenderingExxonMobil EPC Indonesia EPC-3: pipeline, cables and mooring tower coBanyu Urip TenderingHusky Oil EPC Indonesia EPIC Madura BD 12 Apr 2010 31 May 2010 TenderingKodeco EPC Indonesia KE series (-39 and -54) KE-39 1 Apr 2010 1 Jun 2010 TenderingChevron Installation Indonesia 3 pipelay scope Sepinggan 1 Oct 2010 31 Dec 2010 TenderingHess Installation Indonesia Retender for CPP and AUP Installations Ujung Pangkah 1 Mar 2011 1 Jun 2011 TenderingPearl Oil Installation Indonesia 300km exportline installation Makassar Strait 30 Apr 2010 30 Jun 2010 TenderingTotal Installation Indonesia TNI of plat and subsea South Mahakam 1 Oct 2011 31 Mar 2012 TenderingTotal Installation Indonesia Installation of exportlines and flowlines South Mahakam 1 Oct 2011 31 Mar 2012 TenderingTotal Support Indonesia Pre-commissioning, hook-up and tie-in South Mahakam 15 Apr 2010 15 Jun 2010 Tendering

Chevron Installation IndonesiaTJ Jumlai crude pipeline refurbishment project Sepinggan 1-Nov-2009 31-Mar-2010 Tendering

ExxonMobil EPIC Indonesiapipeline, cables and mooring tower construction Banyu Urip Prequalification

Hess Installation Indonesia Retender for CPP and AUP Installations Ujung Pangkah TenderingHusky Oil EPIC Indonesia EPIC Madura BD Planned

Kangean Energy EPIC Indonesia FPU mooring, risers, manifolds and flowlines Terang/Sirasun/Batur Tendering

Kodeco Installation IndonesiaPoleng PPP module transportation and installation Poleng Tendering

Kodeco EPIC Indonesia KE series (-39 and -54) KE-39 PlannedPearl Oil Installation Indonesia 300km exportline installation Makassar Strait (MS) PlannedPertamina EPIC Indonesia EPIC (pipelines) PlannedPetronas Carigali EPIC Indonesia 200km exportline Kepodang 1-Jun-2011 31-Jul-2011 PlannedSantos IRM Indonesia Maleo/Oyong IRM Oyong Prequalification

Total Installation Indonesia Installation of exportlines and flowlines South Mahakam (SMK) 1-Apr-2010 1-Nov-2011 TenderingTotal EPIC Indonesia EPICC Peciko Planned

Total Support Indonesia Pre-commissioning, hook-up and tie-in South Mahakam (SMK) Tendering

Total Installation IndonesiaTransportation and installation of platforms and subsea elements South Mahakam (SMK) 1-Apr-2010 1-Nov-2011 Tendering

CPOC Installation Joint DevelopTransportation and installation of Muda-D platform and flowline MTJDA-B17 1-Jan-2010 31-Jan-2010 Tendering

CPOC Installation Joint Develop TNI of Muda-D plat and flowline MTJDA-B17 31 Jul 2010 30 Nov 2010 Tendering

Daewoo EPIC Myanmar EPCIC for 1 platform and 2 pipelines Shwe/Mya 1-Dec-2009 31-Mar-2013 TenderingPetronas Carigali EPIC Myanmar TNI (Compression platform) Yetagun 1-Jul-2011 31-Aug-2011 Planned

ExxonMobil EPIC PNGPNG LNG EPIC (200km Kopi-Port Moresby pipeline) 1-Jan-2010 1-Jun-2010 Prequalification

Interoil EPIC PNG 280km Elk-Napa Trunkline PlannedHHI IRM Singapore Drydocking 25-Apr-2009 31-Jul-2009 PlannedPTT Installation Thailand TNI of 2 spur lines Platong 1 Oct 2010 31 Mar 2012 TenderingPTTEP Installation Thailand Bongkot 4A Inst (Living Quarters Platform) Bongkot 1 Jun 2011 31 Jul 2011 Tendering

NuCoastal Installation Thailand Installation of platforms and flowlines Songkhla Planned

NuCoastal EPIC Thailand process and wellhead platforms Bua Ban 1-Jan-2010 31-Mar-2010 Planned

PTTEP Installation Thailand Bongkot 4A Inst (Living Quarters Platform) Bongkot 1-Jun-2011 31-Jul-2011 TenderingCuu Long JOC Installation Vietnam Installation of pipelines & platform Su Tu Trang 5 Apr 2010 30 Apr 2010 TenderingPetronas Carigali Installation Vietnam TNI wellhead platform and flowline Ruby 1 Jul 2010 31 Jul 2010 TenderingPremier Support Vietnam Diving support at Chim Sao Dua/Chim Sao 1 May 2010 20 Jun 2010 Tendering

Hoang Long JOC Installation Vietnam 3 wellhead platforms and 60km of pipelines Te Giac Trang Tendering

Petronas Carigali Installation Vietnam Topaz wellhead platform and flowline Ruby 1-Jul-2010 31-Jul-2010 Tendering

Thang Long JOC EPIC Vietnam up to 2 wellhead platforms and pipelines Hai Su Trang/Hai Su Den 1-Apr-2010 31-Dec-2010 Planned Source: ODS, Upstream, Strategic Offshore, companies, DnB NOR Markets



26.05.2010

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.



26.05.2010

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

Company specifics 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.



26.05.2010

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.



26.05.2010

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.



26.05.2010

Figure 26: Net Asset Value of Fleet – SGD/sh 1.11 Current fleet as of Q3 FY2010

Vessel Name Type Bhp/dwt Built%

Ownership StatusNAV

(USDm)Sales

leasebackUSDSGD

ex

Net ownership (SGDm)

1 JAYA SCOUT AHTS 4,750 BHP 2004 100% Time charter 8 No 1.4 112 JAYA SEAL AHTS 5,500 BHP 2004 100% Negotiation 12 No 1.4 173 JAYA TREASURE 2 AHTS 5,150 BHP 2005 100% Time charter 12 No 1.4 174 NOR SPRING AHTS 7,956 BHP 2008 100% Bareboat 24 No 1.4 345 NOR CAPTAIN AHTS 10,880 BHP 2007 100% Bareboat 28 No 1.4 396 NOR SKY AHTS 5,500 BHP 2008 100% Bareboat 13 No 1.4 187 JAYA ALMANAC AHTS 5,150 BHP 2008 100% Time charter 13 No 1.4 188 JAYA DEFENDER(887C) AHTS 10,800 BHP 2009 100% Negotiation 30 No 1.4 429 JAYA AMANDAM AHTS 4,800 BHP 2009 100% Transition 9 No 1.4 1310 JAYA AMARA(HT06-2014) AHTS 4,800 BHP 2009 100% Transition 9 No 1.4 1311 JAYA ALLIANCE AHTS 5,150 BHP 2009 100% To be sold 13 No 1.4 1812 JAYA DAUPHIN AHTS 10,800 BHP 2009 100% Negotiation 30 No 1.4 4213 JAYA PUFFIN 2 Utility support 3,500 BHP 2004 100% Transition 8 No 1.4 1114 Jaya 300 Deck cargo barge 9,000 DWT 2007 100% Jetty 5 No 1.4 715 SARKU 300 Accom barge 9,900 DWT 2008 100% Bareboat 40 No 1.4 5616 Jaya 301 Deck cargo barge 9,000 DWT 2007 100% Jetty 5 No 1.4 717 Jaya 302 Deck cargo barge 9,000 DWT 2007 100% Negotiation 5 No 1.4 718 JAYA MERMAID 2 AHT 5,500 BHP 2006 100% Time charter 12 No 1.4 1719 CHAI YO AHT 4,750 BHP 2004 100% Time charter 9 No 1.4 1320 JAYA MERMAID 3 AHT 5,150 BHP 2007 100% Bareboat 11 No 1.4 15

Total 414

Current newbuild vessels earmarked for sale

Vessel Name Type Bhp/dwt

Expected delivery (FY-

end)%

Ownership StatusNAV

(USDm)Sales

leasebackUSDSGD

ex

Net ownership (SGDm)

1 AHTS newbuild 1 AHTS 5,150 BHP 2010 100% Newbuild 13 No 1.4 182 AHTS newbuild 2 AHTS 5,150 BHP 2010 100% Newbuild 13 No 1.4 183 AHTS newbuild 3 AHTS 5,150 BHP 2010 100% Newbuild 13 No 1.4 184 AHTS newbuild 4 AHTS 5,150 BHP 2010 100% Newbuild 13 No 1.4 185 AHTS newbuild 5 AHTS 5,150 BHP 2011 100% Newbuild 13 No 1.4 186 AHTS newbuild 6 AHTS 5,150 BHP 2011 100% Newbuild 13 No 1.4 187 AHTS newbuild 7 AHTS 5,150 BHP 2011 100% Newbuild 13 No 1.4 188 AHTS newbuild 8 AHTS 5,150 BHP 2011 100% Newbuild 13 No 1.4 189 AHTS newbuild 9 AHTS 8,000 BHP 2010 100% Newbuild 25 No 1.4 3510 AHTS newbuild 10 AHTS 8,000 BHP 2010 100% Newbuild 25 No 1.4 3511 AHTS newbuild 11 AHTS 8,000 BHP 2010 100% Newbuild 25 No 1.4 3512 AHTS newbuild 12 AHTS 8,000 BHP 2010 100% Newbuild 25 No 1.4 3513 AHTS newbuild 13 AHTS 8,000 BHP 2011 100% Newbuild 25 No 1.4 3514 AHTS newbuild 14 AHTS 8,000 BHP 2011 100% Newbuild 25 No 1.4 3515 AHTS newbuild 15 AHTS 8,000 BHP 2011 100% Newbuild 25 No 1.4 3516 AHTS newbuild 16 AHTS 8,000 BHP 2012-14 100% Newbuild 25 No 1.4 3517 AHTS newbuild 17 AHTS 8,000 BHP 2012-14 100% Newbuild 25 No 1.4 3518 AHTS newbuild 18 AHTS 8,000 BHP 2012-14 100% Newbuild 25 No 1.4 3519 AHTS newbuild 19 AHTS 8,000 BHP 2012-14 100% Newbuild 25 No 1.4 3520 AHTS newbuild 21 AHTS 12,000 BHP 2010 100% Newbuild 35 No 1.4 4921 AHTS newbuild 22 AHTS 12,000 BHP 2012-14 100% Newbuild 35 No 1.4 4922 AHTS newbuild 23 AHTS 12,000 BHP 2012-14 100% Newbuild 35 No 1.4 4923 AHTS newbuild 24 AHTS 12,000 BHP 2012-14 100% Newbuild 35 No 1.4 4924 AHTS newbuild 25 AHTS 12,000 BHP 2012-14 100% Newbuild 35 No 1.4 4925 AHTS newbuild 26 AHTS 16,000 BHP 2012-14 100% Newbuild 45 No 1.4 6326 AHTS newbuild 27 AHTS 16,000 BHP 2012-14 100% Newbuild 45 No 1.4 6327 PSV newbuild 1 PSV 3,000 dwt 2010 100% Newbuild 22 No 1.4 3128 PSV newbuild 2 PSV 3,000 dwt 2012-14 100% Newbuild 22 No 1.4 3129 PSV newbuild 3 PSV 3,000 dwt 2012-14 100% Newbuild 22 No 1.4 3130 ROV newbuild 1 ROV 300m depth 2011 100% Newbuild 10 No 1.4 1431 ROV newbuild 2 ROV 300m depth 2011 100% Newbuild 10 No 1.4 1432 ROV newbuild 3 ROV 300m depth 2012-14 100% Newbuild 10 No 1.4 1433 Barge newbuild 1 Barge 9,954 DWT 2010 100% Newbuild 6 No 1.4 834 Barge newbuild 2 Barge 9,954 DWT 2010 100% Newbuild 6 No 1.4 835 Barge newbuild 3 Barge 9,954 DWT 2010 100% Newbuild 6 No 1.4 836 Barge newbuild 4 Barge 9,954 DWT 2010 100% Newbuild 6 No 1.4 8

Total 1070

NAV Calculation SGDm MethodNAV of all vessels (including sale lease-back) 1484 FMVNAV of yard 34 1x book value as of FY2009Total assets 1518

2010 NIBD + future undiscounted capex & newbuilds' costs 665Net value of all assets 853No of outstanding shares 770Equity value per share (SGD) 1.11

Incl remaining cost to complete the 36 existing newbuild plan




26.05.2010

Figure 27: Implied valuation of yard Implied valuation of yard SGDm RemarksNAV of current fleet (20x vessels) SGDm 414 FMVStocks and WIP (existing) SGDm 334 ReportedCurrent NIBD as of Q3FY2010 SGDm 216 ReportedNAV of existing assets SGDm 533No of shares outstanding In million 770 ReportedNAV of existing assets per share SGD 0.69Equity value per share SGD 1.11 NAV calculationImplied NAV per share of yard SGD 0.42 FMVImplied NAV of yard SGDm 320 Comparable to NAV of yard peersImplied multiple of yard (x) 2011 EV/EBITDA 4.6 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 Calculation of WACCValue free cashflow 2010-2035 (SGDm) 604 Market value equity (2010) 474Value free cashflow 2035+ (SGDm) 895 - in % 46%Total value free cashflow (SGDm) 1,499 Net interest bearing debt (2010) 5652010 NIBD + future discounted capex & newbuilds' costs 665 - in % 54%Net value free cashflow (SGDm) 834Total value per share (SGD) 1.08 Risk premium 8%

Beta 1.50

Upside/ (Downside) -100%Risk free rate 4%

Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 2.5% Tax-rate 17%Factor 14.5 Net WACC 10% Source: DnB NOR Markets Estimates



26.05.2010

Jaya Holdings BUYTicker code (SP): Jaya SP Target price 1.0

Upside potential 63%

Shareprice 0.62 SGD # shares (mill) 770

Market capitalisation 474 SGDm SGDUSD 1.40

Market capitalisation 338.3 USDm

(SGDm)

Income statement 2006 2007 2008 2009 2010E 2011E 2012E

Revenues 306 308 307 263 227 413 469

EBITDA 117 110 118 50 68 86 100

EBIT 101 94 102 31 50 68 80

Net financial items -4 -3 -3 -14 -15 -15 -16

Pre tax results 127 134 166 5 89 53 64

Net income 106 120 147 -2 79 44 53

EPS (diluted) 0.14 0.16 0.19 0.00 0.10 0.06 0.07

EBITDA margin 38.2% 35.6% 38.4% 18.9% 30.0% 20.9% 21.4%

EBIT margin 33.1% 30.5% 33.1% 12.0% 22.2% 16.5% 17.0%

Net result margin 34.7% 39.0% 47.7% -0.8% 34.7% 10.7% 11.3%

Cashflow statement 2006 2007 2008 2009 2010E 2011E 2012E

Cashflow from operations 182 151 173 -9 86 85 84

Changes in working capital -120 -45 -100 -37 17 42 38

Investments 294 31 168 -24 100 150 150

Cashflow from financials 59 -41 161 154 -7 20 20

Net change in liquidity -173 35 67 131 -4 -3 -8

(SGDm)

Balance sheet 2006 2007 2008 2009 2010E 2011E 2012E

Current assets 236 308 411 588 497 484 412

Fixed assets 278 293 444 402 485 616 746

Short term debt 43 31 112 370 0 20 40

Long term debt 21 0 92 0 363 363 363

Equity & minorities 319 378 439 375 454 498 551

Total capital 514 601 855 990 982 1,101 1,158

Capital employed 384 409 643 745 817 881 954

Net interest-bearing debt 15 2 184 268 265 288 316

Enterprice value 1,785 3,519 658 741 739 761 790

Key figures 2006 2007 2008 2009 2010E 2011E 2012E

Return on total assets 42% 21% 20% -1% 7% 3% 4%

Return on capital employed 57% 30% 27% -2% 9% 4% 5%

Return on equity 67% 34% 36% -1% 19% 9% 10%

Interest coverage n.m. n.m. -36.0 -3.7 -4.6 -5.8 -6.4

Current ratio 1.4 1.4 1.3 1.0 3.0 2.0 1.7

Revenues growth na 0% 0% -14% -14% 82% 14%

EBITA growth na -6% 8% -58% 36% 27% 16%

EPS growth na 13% 22% -102% -3627% -44% 21%

Multiples 2006 2007 2008 2009 2010E 2011E 2012E

P/E 10.7 12.2 1.5 -209.1 6.0 10.7 8.9

P/CF 9.4 10.8 1.3 28.9 4.9 7.6 6.4

EV/EBIT 11.1 15.3 3.7 23.1 14.5 11.1 9.8

EV/EBITDA 9.6 13.1 3.2 14.6 10.8 8.8 7.8

EV/SALES 3.7 4.7 1.2 2.8 3.2 1.8 1.7

P/BOOK 3.6 3.9 0.5 1.2 1.0 1.0 0.9 Source: DnB NOR Markets



26.05.2010

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

Earnings

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

Tax efficiencies with certain charter income being tax exempt, for Singapore-flagged vessels

Offshore Shipping DivisionInternal Sales

Gain on disposal of vessels

Operating income due to business nature

Facilitates fleet renewal

Proceeds used to fund newbuild program

Source: 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.



26.05.2010

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

0

50

100

150

200

250

300

350

400

FY2010E FY2011E FY2012E FY2013E FY2014E F2015E

Financial year (June-end)

SG

Dm

Principal debt repayment (Pre-restructuring)

0

50

100

150

200

250

FY2010E FY2011E FY2012E FY2013E FY2014E F2015EFinancial year (June-end)

SG

Dm

Principal debt repayment(Post-restructuring)

Source: Company



26.05.2010

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

Type SizeNo of

newbuilds

Est Capex/Cost

USDmNo of

newbuilds

Est Capex/Cost

USDmNo of

newbuilds

Est Capex/Cost

USDmAHTS 5,150 11 4 45 4 45 0 0AHTS 8,000 20 1 20 6 120 4 80AHTS 10,000 23 0 0 0 0 0 0AHTS 12,000 28 1 28 0 0 4 112AHTS 16,000 38 0 0 0 0 2 76PSV 3,000 19 1 19 0 0 2 38ROV 300m 8 0 0 2 16 1 8

Barges 10,000 11 3 33 1 11 0 0Total 10 145.2 13 192 13 314

Key capex assumptions RemarksTotal capex 651 USDm Based on expected newbuild cost Total capex 912 SGDm Converted at USD/SGD 1.40Current commitments (stk WIP) 334 SGDm Based on reported Q3FY2010 work-in-progress newbuildsOutstanding capex 578 SGDm For remaining Q42010-FY2014 (financial year)

2010E 2011E 2012-14EEst cost

per vessel (USDm)

Source: DnB NOR Markets estimates Figure 32: Cashflow schedule post restructuring

-250

-200

-150

-100

-50

0

50

100

150

FY2010E FY2011E FY2012E FY2013E FY2014E F2015E

SG

Dm

Debt repayment for existingdebt obligations

Drawing of new financing

Interest expense (SIBOR +2.5%)

Operating cashflow (EBIDA)

Working capital cashflow

Outstanding capex (forexisting newbuilds)

Net cashflow




26.05.2010

Figure 33: NIBD forecast In SGDm 2009 2010E 2011E 2012E 2013E 2014E 2015ENIBD beginning 184 268 265 288 316 323 298CAPEX -4 -100 -150 -150 -100 -23 -23EBITDA - net finance - tax paid 16 96 62 74 92 92 89Working capital changes -62.0 6.5 64.9 48.0 1.5 -45.0 10.2NIBD end 234 265 288 316 323 298 222 Source: DnB NOR Markets

Figure 34: Debt forecast In SGDm 2009 2010E 2011E 2012E 2013E 2014E 2015ELong-term debt 0 363 363 363 297 212 0Short-term debt (due) 370 0 20 40 90 190 240Drawing/ (repayment) of long-term debt 0 363 0 0 -66 -85 -212Drawing/ (repayment) of short-term debt 0 -370 20 20 50 100 50EBITDA 50 68 86 100 122 122 115Cash balance 102 98 95 87 64 104 19Net debt 268 265 288 316 323 298 222Net gearing - Net debt/Equity 71% 58% 58% 57% 52% 43% 29%Interest coverage (x) -3.7 -4.6 -5.8 -6.4 -7.7 -7.7 -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

Singapore Shipyard Dongjiang Shipyard Batam ShipyardLocation Tuas, Singapore Nantong, China (along Yangtze River) Batam, IndonesiaSize 24,939 sqm 183,000 sqm 181,038 sqm

Shoreline 130m 800m 320mBerths Two 90 x 20m berths, One 75 x 20m berth Two 180 x 45m berths, One 180 x 30m

berthFive 100 x 20m berths

Capacity Build up to 3 vessels per year Build up to 3 vessels per year Build up to 6 vessels per yearCapability Build highly-customized and sophisticated

offshore vesselsBuild commercial and customized vessels

Build commercial and customized vessels

Type of 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.



26.05.2010

Figure 36: Newbuild plan and vessel types – AHTS focus Newbuilds (in units)

Type Size 2010E 2011E 2012-14E TotalAHTS 5150 4 4 0 8AHTS 8000 1 6 4 11AHTS 10000 0 0 0 0AHTS 12000 1 0 4 5AHTS 16000 0 0 2 2PSV 3000 1 0 2 3ROV 300m 0 2 1 3

Barges 10,000 3 1 0 4Total 10 13 13 36

Current newbuild vessels earmarked for sale

Vessel Name Type Bhp/dwt

Expected delivery (FY-end)

% Ownership

1 AHTS newbuild 1 AHTS 5,150 BHP 2010 100%2 AHTS newbuild 2 AHTS 5,150 BHP 2010 100%3 AHTS newbuild 3 AHTS 5,150 BHP 2010 100%4 AHTS newbuild 4 AHTS 5,150 BHP 2010 100%5 AHTS newbuild 5 AHTS 5,150 BHP 2011 100%6 AHTS newbuild 6 AHTS 5,150 BHP 2011 100%7 AHTS newbuild 7 AHTS 5,150 BHP 2011 100%8 AHTS newbuild 8 AHTS 5,150 BHP 2011 100%9 AHTS newbuild 9 AHTS 8,000 BHP 2010 100%10 AHTS newbuild 10 AHTS 8,000 BHP 2010 100%11 AHTS newbuild 11 AHTS 8,000 BHP 2010 100%12 AHTS newbuild 12 AHTS 8,000 BHP 2010 100%13 AHTS newbuild 13 AHTS 8,000 BHP 2011 100%14 AHTS newbuild 14 AHTS 8,000 BHP 2011 100%15 AHTS newbuild 15 AHTS 8,000 BHP 2011 100%16 AHTS newbuild 16 AHTS 8,000 BHP 2012-14 100%17 AHTS newbuild 17 AHTS 8,000 BHP 2012-14 100%18 AHTS newbuild 18 AHTS 8,000 BHP 2012-14 100%19 AHTS newbuild 19 AHTS 8,000 BHP 2012-14 100%20 AHTS newbuild 21 AHTS 12,000 BHP 2010 100%21 AHTS newbuild 22 AHTS 12,000 BHP 2012-14 100%22 AHTS newbuild 23 AHTS 12,000 BHP 2012-14 100%23 AHTS newbuild 24 AHTS 12,000 BHP 2012-14 100%24 AHTS newbuild 25 AHTS 12,000 BHP 2012-14 100%25 AHTS newbuild 26 AHTS 16,000 BHP 2012-14 100%26 AHTS newbuild 27 AHTS 16,000 BHP 2012-14 100%27 PSV newbuild 1 PSV 3,000 dwt 2010 100%28 PSV newbuild 2 PSV 3,000 dwt 2012-14 100%29 PSV newbuild 3 PSV 3,000 dwt 2012-14 100%30 ROV newbuild 1 ROV 300m depth 2011 100%31 ROV newbuild 2 ROV 300m depth 2011 100%32 ROV newbuild 3 ROV 300m depth 2012-14 100%33 Barge newbuild 1 Barge 9,954 DWT 2010 100%34 Barge newbuild 2 Barge 9,954 DWT 2010 100%35 Barge newbuild 3 Barge 9,954 DWT 2010 100%36 Barge newbuild 4 Barge 9,954 DWT 2010 100%

Source: DnB NOR Markets, company



26.05.2010

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 Type Bhp/dwt Built%

Ownership Status1 JAYA SCOUT AHTS 4,750 BHP 2004 100% Time charter2 JAYA SEAL AHTS 5,500 BHP 2004 100% Negotiation3 JAYA TREASURE 2 AHTS 5,150 BHP 2005 100% Time charter4 NOR SPRING AHTS 7,956 BHP 2008 100% Bareboat5 NOR CAPTAIN AHTS 10,880 BHP 2007 100% Bareboat6 NOR SKY AHTS 5,500 BHP 2008 100% Bareboat7 JAYA ALMANAC AHTS 5,150 BHP 2008 100% Time charter8 JAYA DEFENDER(887C) AHTS 10,800 BHP 2009 100% Negotiation9 JAYA AMANDAM AHTS 4,800 BHP 2009 100% Transition10 JAYA AMARA(HT06-2014) AHTS 4,800 BHP 2009 100% Transition11 JAYA ALLIANCE AHTS 5,150 BHP 2009 100% To be sold12 JAYA DAUPHIN AHTS 10,800 BHP 2009 100% Negotiation13 JAYA PUFFIN 2 Utility support 3,500 BHP 2004 100% Transition14 Jaya 300 Deck cargo barge 9,000 DWT 2007 100% Jetty15 SARKU 300 Accom barge 9,900 DWT 2008 100% Bareboat16 Jaya 301 Deck cargo barge 9,000 DWT 2007 100% Jetty17 Jaya 302 Deck cargo barge 9,000 DWT 2007 100% Negotiation18 JAYA MERMAID 2 AHT 5,500 BHP 2006 100% Time charter19 CHAI YO AHT 4,750 BHP 2004 100% Time charter20 JAYA MERMAID 3 AHT 5,150 BHP 2007 100% Bareboat 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 2007 2008 2009 2010E 2011E 2012EOperating Revenues 237 235 173 165 350 402EBITDA 71 61 27 39 70 80EBITDA margin 30% 26% 16% 24% 20% 20%EBIT 69 60 25 37 68 78EBIT margin 29% 25% 14% 22% 19% 19%

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

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



26.05.2010

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 2007 2008 2009 2010E 2011E 2012EOperating Revenues 237 235 173 165 350 402EBITDA 71 61 27 39 70 80EBITDA margin 30% 26% 16% 24% 20% 20%EBIT 69 60 25 37 68 78EBIT margin 29% 25% 14% 22% 19% 19% Source: DnB NOR Markets

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 Q3/10 Q4/10E Q1/11E Q2/11E Q3/11E Q4/11E 2011E 2012E

Existing order backlog (36 WIP vessels as of Q3 FY2010):Est outstanding units in WIP existing order book for sale (unit) 36 33 29 27 24 19 19 8Expected no of completed vessels sold from existing orderbook (unit) 0 -3 -4 -2 -3 -5 -14 -11Est value of vessels sold from existing orderbook (SGDm): A 0 59 88 84 73 105 350 371

New vessels assumed for continual newbuild plan (own yard):Est new vessel orders for internal newbuild plan (unit) 0 0 0 0 0 1 1 9Expected no of completed vessels sold from new vessel orders (unit) 0 0 0 0 0 0 0 -1Est value of vessels from new orders (SGDm) 0 0 0 0 0 31 31 279Value of vessels sold from new orders (SGDm): B 0 0 0 0 0 0 0 31

Total revenues (A + B) 0 59 88 84 73 105 350 402EBITDA margins assumption na 20% 20% 20% 20% 20% 20% 20%EBITDA (SDGm) 0 12 18 17 15 21 70 80 Source: DnB NOR Markets



26.05.2010

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 2007 2008 2009 2010E 2011E 2012EOperating Revenues 69 71 90 61 63 67EBITDA 49 57 28 33 21 25EBITDA margin 70% 81% 31% 53% 33% 37%EBIT 34 42 12 17 5 7EBIT margin 49% 59% 13% 28% 8% 11% Source: DnB NOR Markets

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 2009E 2010E 2011E 2012E 2009E 2010E 2011E 2012E 2009E 2010E 2011E 2012E

Tugs & barges 4 7,500 8,000 8,000 8,000 4,000 4,000 4,000 4,000 84% 75% 75% 75%

AHT/ AHTS 15 13,000 13,250 14,000 14,000 7,000 6,500 7,000 7,000 84% 70% 75% 75%

PSV 0 22,000 21,000 22,000 22,000 11,000 10,000 10,500 10,500 84% 75% 75% 75%

Others - Utility support 1 7,000 7,000 7,000 7,000 3,500 3,500 3,500 3,500 84% 75% 75% 75%

Average dayrates - 9,536 9,708 10,333

Fleet size 'Q4FY201

0

Average dayrates (SGD) Opex (SGD) Utilization rates (%)

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



26.05.2010

JAYA HOLDINGS (JAYA.SI)

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

BALANCE SHEET SGDmIntangible assets 0 11 4 4 4 4Operating assets 264 404 391 473 605 735Associated companies 28 30 7 7 7 7Other current assets 247 386 480 394 380 314Cash & cash equivalents 29 20 102 98 95 87Total assets 570 850 984 977 1,092 1,147Equity & minority interest 378 439 375 454 498 551Interest bearing debt 31 204 370 363 383 403Non interest bearing debt 192 212 245 165 220 203Total liabilities & equity 601 856 990 982 1,101 1,158Net interest bearing debt 2 184 268 265 288 316

CASH FLOW SGDmCash earnings 136 163 16 96 62 74Working capital -30 -90 -62 7 65 48Investments -31 -168 24 -100 -150 -150Debt -33 173 166 -7 20 20Equity/dividends 0 0 12 0 0 0Change in cash & liquids 42 79 155 -4 -3 -8

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS SGD 0.16 0.19 0.00 0.10 0.06 0.07EPS adj SGD 0.16 0.19 0.00 0.10 0.06 0.07Dividend ps SGD 0.00 0.00 0.00 0.00 0.00 0.00Book per share SGD 0.5 0.6 0.5 0.6 0.6 0.7Year end shares million 770.1 770.1 770.1 770.1 770.1 770.1Price SGD 1.75 1.60 0.35 0.62 0.62 0.62P/E X 11.2 8.4 nm 6.1 10.8 9.0P/E adj X 11.2 8.4 nm 6.1 10.8 9.0Dividend yield % 0.0 0.0 0.0 0.0 0.0 0.0P/Book X 3.6 2.8 0.7 1.1 1.0 0.9EV/EBITDA adj X 12.1 11.7 10.6 10.8 8.8 7.8EV/EBIT adj X 14.1 13.7 16.7 14.6 11.2 9.9EV/Cap employed X 3.2 2.2 0.7 0.9 0.9 0.8

Share price and targetPrice SGD 0.62Price target 12m SGD 1.00Recommendation BUYKey data per shareBook value SGD 0.57P/Book X 1.09EPS gr09-12e %cagr R+Financial structureMarket cap. SGDm 477Net int. bear debt SGDm 184Enterprise value SGDm 662Shares outst. million 770.1Equity/tot assets % 46.5Share price performanceAbs. 1/3/12m -19/5/27Rel. 1/3/12m -10/7/5High/Low 12m SGD 1/0STI index 2701.230days volatility % 39Company attributesReuters ticker JAYA.SISupply

ReportingQ4 2010

ManagementCEO Chan Mun LyeCFO Thai Kum FoonAddressJaya Holdings13 Tuas Crescent

H.p.: www.jayaholdings.comTel +65 6265 1010

Analyst: Thor Andre Lunder+65 6220 [email protected]



26.05.2010

60708090

100110120130140150160170

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May

Jaya Holdings

Rebased price (12m, SGD)

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Jaya Holdings

Rebased consensus average forward EPS (12m, SGD)

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Price/Book ROE

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26.05.2010

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.



26.05.2010

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 MYRm Calculation of WACCValue free cashflow 2010-2035 (MYRm) 1,978 Market value equity (2010) 668Value free cashflow 2035+ (MYRm) 390 - in % 134%Total value free cashflow (MYRm) 2,367 Net interest bearing debt (2010) -168Net debt 2010 + future capex (MYRm) -118 - in % -34%Net value (MYRm) 2,486NAV of tender drilling rig KM-1 (25% stake) 83 Risk premium 5%SOTP (MYRm) 2,568 Beta 1SOTP per share (MYR) 1.55

Risk free rate 4%Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 2% Tax-rate 23%Factor 13 Net WACC 10% Source: DnB NOR Markets Estimates



26.05.2010

Kencana Petroleum BUYTicker code (MK): KEPB MK Target price 1.60


Shareprice 1.33 MYR # shares (mill) 1,658

Market capitalisation 2,205 MYRm MYRUSD 3.30

Market capitalisation 668 USDm

(MYRmn)

Income statement 2007 2008 2009 2010E 2011E 2012E

Revenues 824 1,452 1,141 1,162 1,581 1,497

EBITDA 87 136 177 199 247 220

EBIT 81 123 159 181 227 201

Net financial items -4 -2 -6 -7 -6 -5

Pre tax results 78 121 153 174 229 204

Net income 57 85 118 133 174 154

EPS (diluted) 0.06 0.09 0.13 0.08 0.10 0.09

EBITDA margin 10.6% 9.4% 15.5% 17.1% 15.6% 14.7%

EBIT margin 9.8% 8.5% 13.9% 15.6% 14.4% 13.4%

Net result margin 6.9% 5.9% 10.4% 11.4% 11.0% 10.3%

Cashflow statement 2007 2008 2009 2010E 2011E 2012E

Cashflow from operations 63 100 135 150 196 177

Changes in working capital 43 68 -123 -26 -14 3

Investments 213 144 82 170 50 19

Cashflow from financials 86 46 62 173 -12 -11

Net change in liquidity -21 70 -7 127 121 150

(MYRm)

Balance sheet 2007 2008 2009 2010E 2011E 2012E

Current assets 376 533 543 674 901 1,029

Fixed assets 207 338 402 554 584 584

Short term debt 40 91 57 57 57 57

Long term debt 53 60 156 156 156 156

Equity & minorities 220 311 429 744 921 1,079

Total capital 583 871 945 1,228 1,485 1,614

Capital employed 313 462 642 938 1,101 1,249

Net interest-bearing debt -70 -109 -41 -168 -289 -438

Enterprice value 3,519 2,096 2,163 2,036 1,916 1,766

Key figures 2007 2008 2009 2010E 2011E 2012E

Return on total assets 21% 12% 14% 13% 13% 10%

Return on capital employed 39% 23% 23% 18% 18% 14%

Return on equity 52% 32% 32% 23% 22% 16%

Interest coverage n.m. 19.5 17.3 19.0 23.6 21.2

Current ratio 1.3 1.1 1.6 2.1 2.2 2.6

Revenues growth - 76% -21% 2% 36% -5%

EBITA growth - 56% 30% 12% 24% -11%

EPS growth - 49% 38% -39% 31% -11%

Multiples 2007 2008 2009 2010E 2011E 2012E

P/E 22.7 8.2 11.0 16.6 12.7 14.3

P/CF 20.6 7.1 9.6 14.6 11.4 12.7

EV/EBIT 15.1 4.8 7.9 11.3 8.4 8.8

EV/EBITDA 14.1 4.3 7.1 10.2 7.8 8.0

EV/SALES 1.5 0.4 1.1 1.8 1.2 1.2

P/BOOK 5.9 2.2 3.0 3.0 2.5 2.1 Source: DnB NOR Markets Estimates



26.05.2010

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,



26.05.2010

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 Shell’s 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



26.05.2010

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 Country Workscope Prod unit / Field Exp start Exp completion StatusNippon Oil EPC Malaysia wellhead platform and pipeline Layang 1 Jan 2013 1 Mar 2013 TenderingPetronas Cariga EPC Malaysia CPP jacket Kebabangan 1 May 2010 1 Jun 2010 TenderingShell EPC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap 1 Jan 2012 1 Mar 2012 TenderingNewfield Installation Malaysia TNI of WHP and process plat East Piatu 1 Jun 2011 31 Aug 2011 TenderingPetronas Cariga Installation Malaysia CPP jacket TNI Kebabangan 1 Apr 2010 1 Jun 2010 TenderingPetronas Cariga Installation Malaysia pipelay Tangga Barat Clus5 Apr 2010 15 Apr 2010 TenderingShell Installation Malaysia TNI and support work E11 Hub 1 Jun 2010 1 Aug 2010 TenderingNewfield Installation Malaysia platform installations West Belumut 1-Jun-2010 30-Jun-2010 Planned



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.



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Figure 45: Upcoming offshore construction projects in Asia Pacific Client Contract type Country Workscope Prod unit / Field Exp start Exp completion StatusNippon Oil EPC Malaysia wellhead platform and pipeline Layang 1 Jan 2013 1 Mar 2013 TenderingPetronas Carigali EPC Malaysia CPP jacket Kebabangan 1 May 2010 1 Jun 2010 TenderingShell EPC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap 1 Jan 2012 1 Mar 2012 TenderingNewfield Installation Malaysia TNI of WHP and process plat East Piatu 1 Jun 2011 31 Aug 2011 TenderingPetronas Carigali Installation Malaysia CPP jacket TNI Kebabangan 1 Apr 2010 1 Jun 2010 TenderingPetronas Carigali Installation Malaysia pipelay Tangga Barat Cluster 5 Apr 2010 15 Apr 2010 TenderingShell Installation Malaysia TNI and support work E11 Hub 1 Jun 2010 1 Aug 2010 TenderingNewfield Installation Malaysia platform installations West Belumut 1-Jun-2010 30-Jun-2010 Planned




































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.



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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 Yard capability and detailsKey strengths 24/7 covered workshops providing specialised steel fabrication and infrastructureLocation Malaysia - LumutTotal Yard Space 543,000 m2 (135 acres)Covered fabrication Area 75,000 m2Open Space Fabrication Area 390,000 m2Open Storage Area 60,000 m2Total Office Space 11,300 m2Quay Water Depth LAT -6 m to -9.3 mBulkhead Jetty Length 490 mLoad out jetty Capacity 20,000 metric ton, 5,000 metric ton & 1,500 metric tonYearly Capacity 48,000 metric ton

Workshop Dimension Area (m2) Overhead Crane Capacity1 25.5m(W) x 150m(L) x 12m(H) 3,825 m2 2 x 5T 2 32m(W) x 150m(L) x 15m(H) 4,800 m2 2 x 25T & 1 x 5T 3 32m(W) x 150m(L) x 15m(H) 4,800 m2 2 x 25T & 1x 10T 4 40m(W) x 145m(L) x 30m(H) 5,800 m2 2 x 50T & 1 x 10T 5 37m(W) x 139m(L) x 15m(H) 5,200 m2 2 x 25T 6 24.4m(W) x 137m(L) x 17m(H) 3,342 m2 3 x 10T & 2 x 5T 7 15.2m(W) x 137m(L) x 9m(H) 2,082 m2 3 x 10T & 2 x 5T

Workshop Major Equipement & Facilities1 Covered warehouse and Cold room

T&C and HUC Department Office spaceCalibration Lab Facilities

2 Carbon steel and stainless steel piping fabrication shop fully equipped with TIG / SMAW welding machines

3 Structure / tubular fabrication / assembly shop fully equipped with:

1. CNC Cutting Machine 2. 3-pinch Bending Roll Machine up to 100mm thick3. Flame Planner Cutting Machine4. TIG / MIG / SAW / SMAW Welding Machine

4 Heavy structures 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 Contract type Details/ Scope/ Quantity Country for workValue (MYRm) Client Delivery

2006 EPCICEPCIC on Carigali Hess greenfield project, in Bumi, Bulan and Suriya Gas Field Development Malaysia Thailand JDA 980 Hess Petronas -

Apr-07 PCC

Procurement, Construction and Commissioning of a Petroleum Hub and Bunkering Facility at the Reclaimed Island within Mukim Serkat Daerah Pontian near the port of Tanjung Pelepas Malaysia 240 Asia Petroleum -

Apr-07 FabricationFabrication and related services for 4x Wellhead Platforms comprising decks, jackets, piles and conductors. Indonesia 80 PT Sempec (Punj Llyod) Q12008

May-07 EPCIC

Engineering, procurement, construction and commissioning of offshore platform, substructures and facilities for J4 oilfield located offshore Bintulu Malaysia 132 Petronas 1H2008

Oct-07 ConstructionCompletion and loading out 18x topside process modules for Prosafe’s Azurite FDPSO 51 Prosafe Sep-08

2007 Fabrication Reliance KG-D6 subsea manifolds project - subsea fabrication work India Reliance

Oct-07 Newbuild fabrication Tender assisted drilling rig KM-1 Malaysia - Lumut yard 457 Mermaid Kencana Feb-10

Dec-07 EP and fabricationEngineering, procurement, and fabrication of 7x subsea manifolds and respective foundations Western Australia 24 Cameron Q12009

May-08 Fabrication & installation

Fabrication of various offshore production facilities and mechanical pipe installation works for the Bintulu onshore terminal Malaysia 190 Murphy Sarawak 2008-2009

Jun-08 Conversion Conversion and outfit work for lay-barge 32.2 McConnell Bovis Dec-08Jun-08 Conversion Conversion of a flat-top barge to pipelay barge 27 MCB Partnership Q4FY2008

Aug-08 EngineeringEngineering works and the supply of a fuel gas conditioning skid system Malaysia 9.7 OTEC Kemajuan Jan-09

Sep-08 EPC

Management, balance engineering, procurement, construction and testing works for the Crude Stabilisation Unit and Pipe-Racks for the FPSO Malaysia 13.25 Malaysian FPSO Owner/Operator

Oct-08 Testing

Supply of materials, fabrication, testing, assembly and factory acceptance tests of several subsea equipments for a deepwater development project offshore Malaysia Malaysia 10 International company Sep-09

Oct-08 Fabrication

2x topsides of offshore platforms, procurement, fabrication, testing, load-out and sea-fastening of the two offshore structures. Malaysia - Sarawak 260 Shell Sarawak Sep-09

Oct-08 Fabrication 2x offshore platforms + 1x gas compression moduleMalaysia - Sarawak and Terengganu 288 PCSB Q42009

Oct-08 Drilling 5+5-year drilling contract Malaysia 827.2 PCSB 2010-2014

May-09 EP and fabricationEngineering, procurement and fabrication of production platform topsides facilities Malaysia - Sarawak 64 Murphy Sarawak Q12010

Jun-09 EPCEPC of deck extension for existing D-35 platform, a new wellhead platform and a pipeline end manifold Malaysia - Sarawak 35 PCPP

Jul-09 Fabrication Fabricate parts for a pipe-lay barge 42 Global Offshore Q2 2011

Aug-09 Fabrication & procurementFabrication and procurement of a jacket and topside for the West Belumut wellhead platform Malaysia 46 Newfield Malaysia Q1 2010

Aug-09 Construction Construction of jackets for an offshore process platform India 50.5 Afcons Gunanusa Q3 2010Sep-09 Construction Construction of a manufacturing plant Malaysia 134.5 Sunpower Malaysia 2010

Sep-09 Service3-year contract to provide offshore construction services for production platforms offshore Malaysia 90 Oil company 2012

Source: Company, DnB NOR Markets



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KM-1

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-KencanaVentures

Gemia Pte Ltd (Labuan)

• Leasing, charter and rental of OSVs (mainly bareboat)

• Providing drilling services

Source: Company 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 KM-1 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

KM-1 tender rig

Mermaid Kencana Rig 1 (MKR1)

Kencana Mermaid Drilling Kencana Mermaid Drilling

Kencana Mermaid Drilling (KMD)

MYRm 827 drilling contract

Operates

60% 40%25% 75%

Owns Secures


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



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KPV Kapas

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 Vessel Type Built Ownership FMV

(USDm)NAV

(USDm)USD/MYR

exNAV

(MYRm) Contract Client Region1 KM-1 Tender drilling rig 800 ft 2010 25% 100 25 3.3 83 Malaysia Petronas Malaysia2 KPV Kapas AHTS 5220 bhp 2010 100% 12 12 3.3 40 Malaysia Spot Malaysia3 KPV Gemia AHTS 8080 bhp 2010 100% 25 25 3.3 83 Malaysia PTSC Vietnam

Size


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

Marine engineering activities 2007 2008 2009 2010E 2011E 2012EOperating Revenues 824 1452 1141 1155 1411 1328EBITDA 87 136 177 196 226 199EBITDA margin 11% 9% 16% 17% 16% 15%EBIT 81 123 159 178 207 180EBIT margin 10% 8% 14% 15% 15% 14%

Offshore marine support 2007 2008 2009 2010E 2011E 2012EOperating Revenues 0 0 0 7 22 22EBITDA 0 0 0 3 10 10EBITDA margin - - - 43% 46% 46%EBIT 0 0 0 2 9 9EBIT margin - - - 32% 39% 39%

Group 2007 2008 2009 2010E 2011E 2012EOperating Revenues 824 1452 1141 1162 1581 1497EBITDA 87 136 177 199 247 220EBITDA margin 11% 9% 16% 17% 16% 15%EBIT 81 123 159 180 226 199EBIT margin 10% 8% 14% 15% 14% 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.



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Figure 52: Current EPC order book as of Q2 FY2010 (and new orders) at MYRm 1,128

Project Completion

Total contract value (MYRm)

Recognised up to Jan 2010 (MYRm)

Balance in orderbook (MYRm)

Completion % as of Q2FY10

% of total orderbook

Kencana HL SDN BHDMKR-1 -Tender Rig Feb-10 466.2 392.9 73.3 84% 6%Cameron -BHP Pyrennes Mar-09 29 27.4 1.6 94% 0%FMC -Subsea Equipment Nov-09 10.2 7.8 2.4 76% 0%SSB -Offshore Drilling Platform Topside including provisional items April 2010/ Dec 2010 190.6 44.5 146.1 23% 13%

PCSB -Offshore Platform Component & Gas Compression Module (Base) including provisional items Aug 2009 /Jun 2010 361.3 170.8 190.5 47% 17%Murphy -Fabrication of SEPA Topside Mar-10 60.9 27.3 33.6 45% 3%PCPP–Fabrication of D-30 Offshore Platform Mar-10 37 22.9 14.1 62% 1%PCPP–Fabrication of D-30 Offshore Platform installation Mar-10 57.8 0.1 57.7 0% 5%Global Offshore International -Fabrication of Components for Pipe-Lay Barge Apr-10 40.6 7.6 33 19% 3%Newfield -Offshore Platform Mar-10 21.6 11.1 10.5 51% 1%Afcons-GunanusaJV–Construction of jackets for offshore process platform Aug-10 50.5 2.2 48.3 4% 4%FMC –Manifold Support Structure Apr-10 12 2.6 9.4 22% 1%Fabrication of Gorgon's LNG jetty and marine structures from Saipem Sep-12 166 0 166 0% 15%Installation of subsea pipeline in Labuan Dec-10 91.9 0 91.9 0% 8%Jackets contract from India's L&T Mar-11 46.2 0 46.2 0% 4%

Kencana Bestwide SDN BHDVarious Process Skid Systems - 10.5 0 10.5 0% 1%

Kencana Torsco SDN BHDTKM –SunpowerFactory - 29 23 6 79% 1%TKM –TorscoJV SunpowerSuperstructure P5020 Feb-10 32.4 20.3 12.1 63% 1%

TKM –TorscoJV SunpowerSuperstructure P5020 (80%) Jun-10 96.5 32.2 64.3 33% 6%GerbangPerdana–Medium termlink JB 2.3 0.4 1.9 17% 0%MitsubishiPressure Oil Tanks Sri Lanka Oct-10 0.3 0.1 0.2 33% 0%Boustead steam drums Mar-10 0.6 0.4 0.2 67% 0%

Kencana Pinewell SDN BHDPCSB –Umbrella Contract(Associates Host Tie-in for PL347 Pipeline Replacement) Dec-09 31.4 31 0.4 99% 0%Local PLC -Provision of Offshore Construction Services (BrownfieldServices) Sep-12 90 0 90 0% 8%CPOC –JKA, MDA, MDB & LQ Carry Over Works Jan-10 38.6 22.1 16.5 57% 1%PCSB –J4 Additional Flow Lines Sep-12 2 1 1 50% 0%MLQD –DamageRepair Works Oct-09 18 17.6 0.4 98% 0%Total 1993 865 1128 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 2007 2008 2009 2010E 2011E 2012EOperating Revenues 824 1452 1141 1155 1411 1328EBITDA 87 136 177 196 226 199EBITDA margin 11% 9% 16% 17% 16% 15%EBIT 81 123 159 178 207 180EBIT margin 10% 8% 14% 15% 15% 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%.



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Figure 54: New EPCIC orders assumptions

0

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/06

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/07

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New orders flow assumed/ secured (historical) New EPCIC order assumptions

In MYRm 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 2010 2011 2012Historical/current orderbook at period end (MYRm) 450 1360 1447 1836 1802 1860 1496 1584 1503 1771 1494 1207 1086 1126 824 550 903 903 967 1164Reported revenues at end of period 0 72 205 229 318 495 351 298 308 318 274 290 258 281 250 276 357 1162 1581 1497Revenues of OSV 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 6 0 147 147Revenues of drilling 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 147 147Reported revenues (excluding drilling and OSV) 0 72 205 229 318 495 351 298 308 318 274 290 258 281 250 274 352 1162 1286 1203New orders flow assumed/ secured (historical) - 982 293 618 284 552 -12 386 227 586 -3 3 137 321 0 0 304 - - -New EPCIC order assumptions na na na na na na na na na na na na na 0 0 0 400 400 1350 1400 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

2009 2010E 2011E 2012E 2009 2010E 2011E 2012ETender rig KM-1 (drilling contra Tender rig Term na na 431 431 na na 380 380Bareboat charter of KM-1 - - na na 129 129 0 0 0 0

Dayrates (MYR'000) Opex (MYR'000)Vessel

Contract typeType


Figure 56: Segment estimates (in MYRm) Drilling rig operations 2007 2008 2009 2010E 2011E 2012EOperating Revenues 0 0 0 0 147 147EBITDA 0 0 0 0 11 11EBITDA margin na na na na 7% 7%EBIT 0 0 0 0 11 11EBIT margin na na na na 7% 7%Share of profits from MKR-1 na na na 0 8 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.



26.05.2010

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 2007 2008 2009 2010E 2011E 2012EOperating Revenues 0 0 0 7 22 22EBITDA 0 0 0 3 10 10EBITDA margin - - - 43% 46% 46%EBIT 0 0 0 2 9 9EBIT margin - - - 32% 39% 39% Source: DnB NOR Markets

Figure 58: Key rates assumptions for the AHTS fleet

2009 2010E 2011E 2012E 2009 2010E 2011E 2012EKPV Kapas AHTS Term na 26 26 26 na 13 13 13KPV Gemia AHTS Term na 46 46 46 na 20 20 20

Average dayrates (MYR'000) Opex (MYR'000)Vessel Contract typeType


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 % Chg

Reported DnB NOR Cons* 2010E 2011E 2012E

Operating revenues 290.2 275.9 na -14.3 -5% 1,162 1,581 1,497EBITDA 40.5 44.5 na 4.0 10% 199 247 220

EBIT 36.4 39.9 na 3.5 9% 181 227 201Net f inance -1.3 -1.8 na -0.5 n.m -7 -6 -5Pretax earnings 35.1 38.0 na 3.0 8% 174 229 204Net result 27.6 29.4 na 1.8 6% 133 174 154

EPS 0.03 0.02 na 0.0 -42% 0.08 0.10 0.09

Full-year figures (DnB NOR)

Source: DnB NOR Markets, consensus from Bloomberg



26.05.2010

Debt Profile & Capex Plans Below is an overview of Kencana’s 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 2008 2009 2010E 2011E 2012ENIBD beginning -109 -41 -168 -289CAPEX -54.4 -170 -50 -19Investments -26 0 0 0EBITDA - net finance - tax paid 226 142 103 169Working capital changes -213 -27 67 0Equity issue 0 182 0 0NIBD end -109 -41 -168 -289 -438 Source: DnB NOR Markets

Figure 61: Debt forecast In MYRm 2008 2009 2010E 2011E 2012ELong-term debt 60 156 156 156 156Short-term debt (due) 91 57 57 57 57Drawing/ (repayment) of long-term debt - 0 0 0 0Drawing/ (repayment) of short-term debt - 0 0 0 0EBITDA 136 177 199 247 220Cash balance 260 254 381 502 651Net debt -109 -41 -168 -289 -438Net gearing - Net debt/Equity -35% -10% -23% -33% -42%Interest coverage (x) 19.5 17.3 19.0 23.6 21.2 Source: DnB NOR Markets



26.05.2010

KENCANA PETROLEUM (KENP.KL)

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

BALANCE SHEET MYRmIntangible assets 24 36 36 36 36 36Operating assets 181 273 309 461 492 492Associated companies 1 28 56 56 56 56Other current assets 212 273 288 294 399 378Cash & cash equivalents 164 260 254 381 502 651Total assets 582 870 944 1,228 1,485 1,614Equity & minority interest 220 311 429 726 891 1,042Interest bearing debt 93 151 213 213 213 213Non interest bearing debt 270 408 303 281 373 354Total liabilities & equity 583 871 945 1,219 1,476 1,609Net interest bearing debt -70 -109 -41 -168 -289 -438

CASH FLOW MYRmCash earnings 63 98 226 151 115 180Working capital 43 70 -213 -27 67 0Investments -213 -144 -82 -170 -50 -19Debt 93 58 62 0 0 0Equity/dividends 0 0 0 173 -12 -11Change in cash & liquids -14 82 -7 127 121 150

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS MYR 0.06 0.09 0.13 0.08 0.10 0.09EPS adj MYR 0.06 0.09 0.13 0.08 0.10 0.09Dividend ps MYR 0.00 0.10 0.10 0.01 0.01 0.01Book per share MYR 0.2 0.3 0.5 0.4 0.5 0.6Year end shares million 896.8 896.8 902.2 1657.6 1657.6 1657.6Price MYR 1.85 1.22 1.16 1.33 1.33 1.33P/E X 29.0 12.9 8.9 16.6 12.7 14.3P/E adj X 29.0 12.9 8.9 16.6 12.7 14.3Dividend yield % 0.0 8.2 8.6 0.4 0.5 0.5P/Book X 7.5 3.5 2.4 3.0 2.5 2.1EV/EBITDA adj X 18.2 7.0 5.4 10.0 7.5 7.8EV/EBIT adj X 19.6 7.8 6.0 10.9 8.2 8.5EV/Cap employed X 5.1 2.1 1.5 2.1 1.7 1.4EV/Sales X 1.9 0.7 0.9 1.8 1.2 1.2

Share price and targetPrice MYR 1.33Price target 12m MYR 1.60Recommendation BUYKey data per shareBook value MYR 0.35P/Book X 3.83EPS gr09-12e %cagr -10.8%Sales gr09-12e %cagr 9.5%PE10e/EPS gr X -1.5Financial structureMarket cap. MYRm 2,205Net int. bear debt MYRm -109Enterprise value MYRm 2,096Shares outst. million 1,657.6Equity/tot assets % 59.1Share price performanceAbs. 1/3/12m -16/-8/16Rel. 1/3/12m -16/-8/16High/Low 12m MYR 2/1KLSE index 212.930days volatility % 35Company attributesReuters ticker KENP.KL

ReportingQ3 2010

ManagementCEO Dato’ Mokhzani bin MahathirCFOAddressKencana Petroleum50-2-2, Level 2, Wisma UOA Damansara50, Jalan Dungun, Damansara HeightsH.p.: www.knpe.com.myTel +(6) 03-2093 2280




26.05.2010

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26.05.2010

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 hook-up 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.



26.05.2010

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 co-owned 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 50-60/bbl region).

Figure 62: NAV valuation – MYR/sh 2.56

Vessel Type PurposeYear built/ refurbished Status

Ownership

Depth/size (m)

FMV (USDm)

X rate (USD/M

YR)

FMV/ vessel

(MYRm)

Total net value

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

Total fleet value - - - 2850Operations & Maintenance business, 8x 2011E EBITDA 100Total asset values - - - 2950NIBD (2010E) + future capex - - - -312Equity value (MYRm) - - - 3,263No of shares outstanding - - - 1277NAV per share 2.56




26.05.2010

Figure 63: DCF Valuation – MYR/sh 2.59 Discounted value of free cashflow Calculation of WACC+ Value free cashflow FY2011-2035 (MYRm) 2,681 Market value equity (2010) 782+ Value free cashflow 2035+ (MYRm) 283 - in % 167%Total value free cashflow (MYRm) 2,964 Net interest bearing debt (2010) -312 - Net debt 2011 + future capex (MYRm) -312 - in % -67%+ NAV of Sapura 3000 (50% owned) 413+ NAV of LTS 3000 (40% owned) 198+ NAV of Quippo 2000 (24% owned) 103- NAV of all tender rigs (49% owned by Seadrill) 682 Risk premium 5%Net value free cashflow (MYRm) 3,308 Beta 1FCFE per share (MYR) 2.59

Risk free rate 3%Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 2% Tax-rate 25%Factor 11 Net WACC 11% Source: DnB NOR Markets Estimates



26.05.2010

SapuraCrest Petroleum BUYTicker code (MK): SCRES MK Target price 2.60


Shareprice 2.02 MYR # shares (mill) 1,277

Market capitalisation 2,579 MYRm MYRUSD 3.30

Market capitalisation 782 USDm

(MYRmn)

Income statement 2006 2007 2008 2009 2010 2011E 2012E 2013E

Revenues 1,794 1,766 2,262 3,452 3,257 3,509 4,038 3,951

EBITDA 233 211 342 469 448 518 569 602

EBIT 159 141 264 384 362 432 481 514

Net financial items -51 -94 -78 -58 -45 -39 -39 -39

Pre tax results 110 41 171 282 364 478 553 576

Net income 74 -18 78 116 170 269 324 335

EPS (diluted) 0.08 -0.02 0.07 0.10 0.13 0.21 0.25 0.26

EBITDA margin 13.0% 11.9% 15.1% 13.6% 13.8% 14.8% 14.1% 15.2%

EBIT margin 8.9% 8.0% 11.7% 11.1% 11.1% 12.3% 11.9% 13.0%

Net result margin 4.1% -1.0% 3.5% 3.4% 5.2% 7.7% 8.0% 8.5%

Cashflow statement 2006 2007 2008 2009 2010 2011E 2012E 2013E

Cashflow from operations 189 100 234 336 413 479 533 551

Changes in working capital -426 -79 -107 97 471 -189 -76 7

Investments 1,202 -48 223 76 176 151 107 107

Cashflow from financials 1,268 -118 -118 -125 -229 0 0 0

Net change in liquidity -171 -49 -214 231 479 139 350 450

(MYRmn)

Balance sheet 2006 2007 2008 2009 2010 2011E 2012E 2013E

Current assets 1,355 1,521 1,800 2,362 2,093 2,372 2,765 3,185

Fixed assets 1,151 1,033 1,178 1,170 1,260 1,324 1,344 1,362

Short term debt 394 269 540 478 298 298 298 298

Long term debt 880 894 517 454 405 405 405 405

Equity & minorities 655 654 1,069 1,324 1,458 1,841 2,283 2,744

Total capital 2,505 2,554 2,978 3,531 3,353 3,696 4,109 4,547

Capital employed 1,929 1,817 2,126 2,256 2,161 2,544 2,986 3,447

Net interest-bearing debt 904 871 703 338 -173 -312 -662 -1,112

Enterprice value 1,785 3,519 3,282 2,917 2,406 2,267 1,917 1,467

Key figures 2006 2007 2008 2009 2010 2011E 2012E 2013E

Return on total assets 9% -3% 1% 2% 4% 7% 8% 7%

Return on capital employed 11% -5% 1% 3% 6% 10% 11% 10%

Return on equity 23% -3% 9% 10% 12% 16% 16% 13%

Interest coverage n.m. n.m. -4.4 -8.1 -9.9 -13.3 -14.6 -15.5

Current ratio 1.4 1.5 1.3 1.4 1.4 1.6 2.0 2.3

Revenues growth na -2% 28% 53% -6% 8% 15% -2%

EBITA growth na -10% 62% 37% -4% 16% 10% 6%

EPS growth na -120% -543% 31% 37% 57% 20% 3%

Multiples 2006 2007 2008 2009 2010 2011E 2012E 2013E

P/E 8.3 -41.4 19.6 7.6 17.2 9.6 8.0 7.7

P/CF 4.2 14.1 9.9 4.4 11.5 7.2 6.3 6.1

EV/EBIT 3.9 11.3 8.5 3.2 7.6 5.2 4.0 2.9

EV/EBITDA 2.6 7.6 6.6 2.6 6.2 4.4 3.4 2.4

EV/SALES 0.3 0.9 1.0 0.4 0.8 0.6 0.5 0.4

P/BOOK 0.9 1.1 1.4 0.7 2.0 1.4 1.1 0.9 Source: DnB NOR Markets Estimates



26.05.2010

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 better-positioned 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.



26.05.2010

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 FY2008-2010, 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 Country Workscope Prod unit / Field Exp start Exp completion StatusNippon Oil EPC Malaysia wellhead platform and pipeline Layang 1 Jan 2013 1 Mar 2013 TenderingPetronas Cariga EPC Malaysia CPP jacket Kebabangan 1 May 2010 1 Jun 2010 TenderingShell EPC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap 1 Jan 2012 1 Mar 2012 TenderingNewfield Installation Malaysia TNI of WHP and process plat East Piatu 1 Jun 2011 31 Aug 2011 TenderingPetronas Cariga Installation Malaysia CPP jacket TNI Kebabangan 1 Apr 2010 1 Jun 2010 TenderingPetronas Cariga Installation Malaysia pipelay Tangga Barat Clus5 Apr 2010 15 Apr 2010 TenderingShell Installation Malaysia TNI and support work E11 Hub 1 Jun 2010 1 Aug 2010 TenderingNewfield Installation Malaysia platform installations West Belumut 1-Jun-2010 30-Jun-2010 Planned



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.



26.05.2010

Figure 65: Upcoming offshore construction projects in Asia Pacific Client Contract type Country Workscope Prod unit / Field Exp start Exp completion StatusNippon Oil EPC Malaysia wellhead platform and pipeline Layang 1 Jan 2013 1 Mar 2013 TenderingPetronas Carigali EPC Malaysia CPP jacket Kebabangan 1 May 2010 1 Jun 2010 TenderingShell EPC Malaysia Gumusut Phase II (400km pipeline) Gumusut-Kakap 1 Jan 2012 1 Mar 2012 TenderingNewfield Installation Malaysia TNI of WHP and process plat East Piatu 1 Jun 2011 31 Aug 2011 TenderingPetronas Carigali Installation Malaysia CPP jacket TNI Kebabangan 1 Apr 2010 1 Jun 2010 TenderingPetronas Carigali Installation Malaysia pipelay Tangga Barat Cluster 5 Apr 2010 15 Apr 2010 TenderingShell Installation Malaysia TNI and support work E11 Hub 1 Jun 2010 1 Aug 2010 TenderingNewfield Installation Malaysia platform installations West Belumut 1-Jun-2010 30-Jun-2010 Planned




































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.



26.05.2010

T-10 tender rig

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


Ownership

Depth/size (m)

1 T-3 Self-erecting drilling tender barge Development drilling, accomm, heavylift 1980/2001 Term 51% 1222 T-6 Self-erecting drilling tender rig Development drilling, accomm, heavylift 1982/2000 Term 51% 1223 T-9 Self-erecting drilling tender rig Development drilling, accomm, heavylift 2004 Term 51% 1224 T-10 Self-erecting drilling tender rig Development drilling, mooring sys TLPs and SPARs 2007 Term 51% 20005 Teknik Berkat Self-erecting drilling tender barge Development drilling, accomm, heavylift 1990/2005 Term 51% 152


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


Ownership

Depth/size (m)

Sarku Sambang Diving support vessel 46-men Accomm, diving & construction support 1975/2000 Marine 100% 45x15Sarku Semantan Diving support vessel 70-men Accomm, diving & construction support 1974 Marine 100% 56x14Sarku Clementine Diving support vessel 64-men Accomm, diving & construction support 1997 Marine 100% 75x18Teknik Samudra Survey vessel Geotechnical 1984/1989 Marine 100% 64x10 (3100 HP)Teknik Kembara Survey vessel Geophysical and general survey 1979/1993 Marine 100% 53x12 (1090bhp)Teknik Putra Survey vessel Geophysical and general survey 1980s/1995 Marine 100% 54x11 (650bhp)Teknik Perdana Survey vessel 2D seismic, geophysical 1979/1995 Marine 100% 79x13 (650bhp)Nomad ROV (9x units) ROV Remotely-operated vehicle, mobile - Marine 94% 1500Navigator ROV (2x units) ROV Remotely-operated vehicle, mobile - Marine 94% 600Seaeye ROV (1x unit) ROV Remotely-operated vehicle, mobile - Marine 94% 400 Source: Company, DnB NOR Markets



26.05.2010

Sapura 3000

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 Vessel/ asset used Project scopeCountry for work

Value (MYRm)

Value (USDm) Start Completion Client

22-Jan-10IPF - transportation & installation LTS 3000

Transportation and Installation of 4x platform Jackets in Mumbai High North Field India 248 75 Nov-10 Jan-11 Larsen & Toubro

2-Oct-09IPF - transportation & installation Sapura 3000

Transportation and installation of offshore facilities (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 600 170 Nov-10 Feb-11 Apache Energy

25-May-09 IPF- decommissioning Sapura 3000

Decommissioning of topsides, steel support jacket and a section of the associated 12 inch gas export pipeline at 150m depth Japan 198 60 May-09 Mar-10 Nippon Steel engineering

17-Mar-09IPF- offshore installation works Sapura 3000

Provision and performance of project management, procurement, engineering, transportation and installation services and works at the Gumusut-Kakap Offshore Fields Malaysia 3000 825 Mar-09 Mar-12 Shell

Feb-08IPF - installation support

Provision of a pipelay/derrick barge for the installation of stalk-on risers for the Northern Fields development project. Malaysia 105 30 Jan-09 Talisman Malaysia

Apr-08IPF - installation support Transportation and installation of offshore facilities. Malaysia 120 34 Mar-09 Sarawak Shell

30-Apr-08 Drilling Teknik Berkat Offshore development drilling Malaysia 639 183 May-08 May-12 Petronas Carigali (PCSB)

15-Sep-08 Drilling T-9Offshore development drilling extension contract from Jan 2009 Malaysia 532 152 Jan-09 Jan-12 ExxonMobil E&P Malaysia (EMEPMI)

2008 Marine services DSVs Subsea inspection, repair and maintenance services Malaysia 105 30 - 2011 ExxonMobil E&P Malaysia (EMEPMI)

2008 Marine services Survey vesselConduct survey works for the Malaysian Marine Research Survey Project. Malaysia 16 5 - 2008 Petronas Carigali (PCSB)

2008 Marine services Survey vessel Survey works on various regions

Myanmar, Thailand, Cambodia 27 8 - 2009 PTTEP

Sep-08 Marine services Construction bargeHook-up, commissioning and major maintenance services programme for work package B Malaysia 800 229 Nov-08 Nov-12

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

2008 Marine services Construction barge

Charter of an engineering maintenance barge to carry out topside installation/commissioning activities at the Northern Fields Development Project. 54 15 - - Talisman Malaysia

2008 Marine services Construction barge Installation of FPSO Arunothai Thailand 87 25 - - Ezra (Emas)

19-Feb-08 Marine services Pipelay/ derrick barge

Provide the charter of a pipelay / derrick barge to install stalk-on risers for Talisman’s BLOCK PM-3 CAA Northern Fields Development project Malaysia 105 30 Apr-08 Jun-08 Talisman Malaysia

15-Nov-07IPF - transportation and installation Sapura 3000

Transportation and installation of platforms, bridges and inter-field pipelines for CPOC’s Block B-17 Field Development Plan Project Malaysia 518 148 Sep-08 Sep-09 Carigali-PTTEPI (CPOC)

Oct-07 Marine services Survey vessel Provision of survey services India 48 14 Feb-09 Allseas

Jul-07IPF - transportation and installation Construction barges

Installation of subsea pipelines and the transportation and installation of drilling, production and wellhead platforms in Sabah, Sarawak, Terengganu Malaysia 3000 909 Mar-07 Mar-10 Petronas Carigali (PCSB)


Installation of approximately 26 km of subsea pipelines as well as the installation of a drilling platform for the Jerneh field Malaysia 200 61 Jan-07 Dec-07 ExxonMobil E&P Malaysia (EMEPMI)

Jul-07 IPF - EPCIC Sapura 3000Provision of EPCIC of 140 km gas pipeline transportation system from the Kikeh Field to the Labuan Gas Terminal. Malaysia 581 176 Sep-07 Mar-08 Murphy Oil

31-Mar-06 Drilling T-3 Offshore development drilling Thailand/ Malaysia 354 101 Jul-08 Jun-12 PTTEP

23-May-06 Drilling T-6 Offshore development drilling MTJDA 337 95 Jan-08 Jan-11 Carigali Hess17-Jan-06 Drilling T-10 Offshore development drilling MTJDA 284 80 Aug-07 Aug-10 Carigali Hess

2005 Marine services Subsea vessels Topside maintenance programme for installations Malaysia 105 30 2005 2010 EMEPMITotal 12062 3484


Figure 69: Fleet supporting IPF services


Ownership

Depth/size (m)

Sarku Sambang Diving support vessel 46-men Accomm, diving & construction support 1975/2000 Marine 100% 45x15Sarku Semantan Diving support vessel 70-men Accomm, diving & construction support 1974 Marine 100% 56x14Sarku Clementine Diving support vessel 64-men Accomm, diving & construction support 1997 Marine 100% 75x18Sarku 2000 Accommodation work barge 270-men Accomm & construction support 1991 EPC 100% 92x31Sarku Samduera Accommodation work barge 210-men Accomm & construction support 1983 EPC 100% 103x85Sarku Utama Accommodation work barge 150-men Accomm & construction support 1981 EPC 100% 73x21Sarku Santubong Multi-purpose accomm work vessel 123-men DP2 MP accomm & construction support 1979 EPC 100% 75x17Sapura 3000 (with Acergy) DP 3000 heavylift pipelaying vessel 330-men, DP2 heavylift pipelaying 3000T 2008 EPC 50% 151x38LTS 3000 (with L&T) Heavylift pipelay vessel 290-men, DP1 heavylift J-lay pipelaying 3000T 2010 EPC 40% 161x38Quippo 2000 Derrick lay barge 302-men, heavylift pipelay barge 2000T 2011 EPC 26% 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.



26.05.2010

2011E EBITDA

2%

18%

26%

54%

Offshore O&Gdrilling

Installation ofPipelines andFacilities

Marine services

Operations &Maintenance

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 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 299 394 707 906 844 832 843 860EBITDA 105 143 188 307 355 277 288 305EBITDA margin 35% 36% 27% 34% 42% 33% 34% 35%EBIT 75 104 149 262 309 231 241 257EBIT margin 25% 26% 21% 29% 37% 28% 29% 30%

Installation of Pipelines and Facilities 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 1173 835 1025 1893 1714 1938 2442 2331EBITDA 69 (24) 67 73 119 136 171 186EBITDA margin 6% -3% 7% 4% 7% 7% 7% 8%EBIT 66 -27 64 71 117 134 169 185EBIT margin 6% -3% 6% 4% 7% 7% 7% 8%

Marine services 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 266 473 484 616 646 676 684 684EBITDA 56 91 100 89 (38) 93 97 97EBITDA margin 21% 19% 21% 14% -6% 14% 14% 14%EBIT 17 65 66 53 -74 57 60 60EBIT margin 6% 14% 14% 9% -11% 8% 9% 9%

Operations & Maintenance 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 57 64 47 38 53 63 69 76EBITDA 9 3 9 12 11 13 12 14EBITDA margin 16% 5% 19% 32% 21% 20% 18% 18%EBIT 7 2 8 11 10 11 11 12EBIT margin 13% 3% 18% 29% 18% 18% 16% 16%

Group 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 1794 1766 2262 3452 3257 3509 4038 3951EBITDA 238 213 364 481 447 518 569 602EBITDA margin 13% 12% 16% 14% 14% 15% 14% 15%EBIT 165 145 288 397 362 433 482 514EBIT margin 9% 8% 13% 12% 11% 12% 12% 13% Source: DnB NOR Markets, Please note total group EBITDA and EBIT are before unallocated expenses



26.05.2010

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 Vessel/ asset used Project scopeCountry for work

Value (MYRm)

Value (USDm) Start Completion Client

22-Jan-10IPF - transportation & installation LTS 3000

Transportation and Installation of 4x platform Jackets in Mumbai High North Field India 248 75 Nov-10 Jan-11 Larsen & Toubro

2-Oct-09IPF - transportation & installation Sapura 3000

Transportation and installation of offshore facilities (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 600 170 Nov-10 Feb-11 Apache Energy

25-May-09 IPF- decommissioning Sapura 3000

Decommissioning of topsides, steel support jacket and a section of the associated 12 inch gas export pipeline at 150m depth Japan 198 60 May-09 Mar-10 Nippon Steel engineering

17-Mar-09IPF- offshore installation works Sapura 3000

Provision and performance of project management, procurement, engineering, transportation and installation services and works at the Gumusut-Kakap Offshore Fields Malaysia 3000 825 Mar-09 Mar-12 Shell

30-Apr-08 Drilling Teknik Berkat Offshore development drilling Malaysia 639 183 May-08 May-12 Petronas Carigali (PCSB)

15-Sep-08 Drilling T-9Offshore development drilling extension contract from Jan 2009 Malaysia 532 152 Jan-09 Jan-12 ExxonMobil E&P Malaysia (EMEPMI)

Sep-08 Marine services Construction bargeHook-up, commissioning and major maintenance services programme for work package B Malaysia 800 229 Nov-08 Nov-12

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


Installation of subsea pipelines and the transportation and installation of drilling, production and wellhead platforms in Sabah, Sarawak, Terengganu Malaysia 3000 909 Mar-07 Mar-10 Petronas Carigali (PCSB)

31-Mar-06 Drilling T-3 Offshore development drilling Thailand/ Malaysia 354 101 Jul-08 Jun-12 PTTEP

23-May-06 Drilling T-6 Offshore development drilling MTJDA 337 95 Jan-08 Jan-11 Carigali Hess17-Jan-06 Drilling T-10 Offshore development drilling MTJDA 284 80 Aug-07 Aug-10 Carigali Hess


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 excludedIn 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 2013EHistorical/current orderbook at period end (MYRm) 5426 5704 5816 6207 4704 4089 3464 3286 2829 2994 2716 3117 1978 2276 1647Reported IPF revenues at end of period 349 498 663 384 296 615 625 179 456 492 513 477 1938 2442 2331New 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 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 1173 835 1025 1893 1714 1938 2442 2331EBITDA 69 (24) 67 73 119 136 171 186EBITDA margin 6% -3% 7% 4% 7% 7% 7% 8%EBIT 66 -27 64 71 117 134 169 185EBIT margin 6% -3% 6% 4% 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.



26.05.2010

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 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 299 394 707 906 844 832 843 860EBITDA 105 143 188 307 355 277 288 305EBITDA margin 35% 36% 27% 34% 42% 33% 34% 35%EBIT 75 104 149 262 309 231 241 257EBIT margin 25% 26% 21% 29% 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

2011E 2012E 2013E 2011E 2012E 2013ET-3 Tender drilling rig Jun-12 264,000 264,000 300,000 148,500 148,500 148,500T-6 Tender drilling rig Dec-10 330,000 350,000 350,000 181,500 181,500 181,500T-9 Tender drilling rig Jan-12 435,600 435,600 450,000 198,000 198,000 198,000T-10 Tender drilling rig Aug-10 297,000 320,000 320,000 165,000 165,000 165,000Teknik Berkat Tender drilling rig Apr-12 412,500 412,500 412,500 198,000 198,000 198,000

Opex (MYR)

TypeContract

expiryVessel

Average dayrates (MYR)


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 2006 2007 2008 2009 2010 2011E 2012E 2013EOperating Revenues 266 473 484 616 646 676 684 684EBITDA 56 91 100 89 (38) 93 97 97EBITDA margin 21% 19% 21% 14% -6% 14% 14% 14%EBIT 17 65 66 53 -74 57 60 60EBIT margin 6% 14% 14% 9% -11% 8% 9% 9% Source: DnB NOR Markets

Figure 77: Key rates assumptions for the marine support fleet

2011E 2012E 2013E 2011E 2012E 2013ESarku Sambang Diving support vessel Project 250,000 250,000 250,000 160,000 160,000 160,000Sarku Semantan Diving support vessel Project 210,000 220,000 220,000 120,000 130,000 130,000Sarku Clementine Diving support vessel Project 220,000 220,000 220,000 120,000 120,000 120,000Sarku 2000 Accomm work barge Project 300,000 320,000 320,000 160,000 160,000 160,000Sarku Samduera Accomm work barge Project 250,000 250,000 250,000 150,000 150,000 150,000Sarku Santubong MP accomm work vessel Project 200,000 200,000 200,000 120,000 120,000 120,000Sarku 300 Accommodation work barge Project 160,000 160,000 160,000 120,000 120,000 120,000Sarku Utama Accomm work barge Project 220,000 220,000 220,000 130,000 130,000 130,000Teknik Samudra Survey vessel Project 210,000 210,000 210,000 140,000 140,000 140,000Teknik Kembara Survey vessel Project 210,000 210,000 210,000 140,000 140,000 140,000Teknik Putra Survey vessel Project 210,000 210,000 210,000 140,000 140,000 140,000Teknik Perdana Survey vessel Project 210,000 210,000 210,000 140,000 140,000 140,000

Opex (MYR)

TypeContract

typeVessel

Average dayrates (MYR)




26.05.2010

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 % Chg

Reported DnB NOR Cons* 2011E 2012E 2013E

Operating revenues 716.2 847.1 na 130.9 18% 3,509 4,038 3,951EBITDA 98.1 127.8 na 29.7 30% 518 569 602

EBIT 79.4 129.4 na 50.0 63% 432 481 514Net f inance -11.3 -9.7 na 1.6 n.m -39 -39 -39Pretax earnings 68.1 119.7 na 51.6 76% 478 553 576Net result 25.7 67.1 na 41.5 162% 269 324 335

EPS 0.02 0.05 na 0.0 159% 0.21 0.25 0.26

Full-year figures (DnB NOR)

Source: DnB NOR Markets, consensus from Bloomberg

Debt Profile & Capex Plans Below is an overview of SapuraCrest’s 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 2008 2009 2010 2011E 2012E 2013ENIBD beginning 703 338 -173 -312 -662CAPEX -76 -176 -151 -107 -107EBITDA - net finance - tax paid 331 457 499 449 551Working capital changes 110 231 -209 8 6Equity/dividend issue 0 0 0 0 0NIBD end 703 338 -173 -312 -662 -1112 Source: DnB NOR Markets

Figure 80: Debt forecast In MYRm 2008 2009 2010 2011E 2012E 2013ELong-term debt 517 454 405 405 405 405Short-term debt (due) 540 478 298 298 298 298Drawing/ (repayment) of long-term debt - 0 0 0 0 0Drawing/ (repayment) of short-term debt - 0 0 0 0 0EBITDA 342 469 448 518 569 602Cash balance 354 594 876 1015 1365 1815Net debt 703 338 -173 -312 -662 -1112Net gearing - Net debt/Equity 66% 26% -12% -17% -29% -41%Interest coverage (x) -4.4 -8.1 -9.9 -13.3 -14.6 -15.5 Source: DnB NOR Markets



26.05.2010

SAPURACREST PETROLEUM (SCRS.KL)

PROFIT & LOSS MYRm 2008 2009 2010 2011e 2012e 2013eRevenues 2,262 3,452 3,257 3,509 4,038 3,951Other income 0 0 0 0 0 0Operating costs -1,920 -2,983 -2,809 -2,991 -3,469 -3,348EBITDA 342 469 448 518 569 602Depreciation & amortisation 77 84 86 86 88 89EBIT 264 384 362 432 481 514Associated companies -15 -45 47 85 110 101Net interest -78 -58 -45 -39 -39 -39Other financial itemsExtraordinary items 0 0 0 0 0 1Pre-tax profit 171 282 364 478 553 577Tax 20 32 31 96 111 115Minority interest 73 134 163 113 118 126Net profit 78 116 170 269 324 335

BALANCE SHEET MYRmIntangible assets 146 150 149 149 149 149Operating assets 876 904 900 909 922 933Associated companies 154 106 192 240 240 240Other current assets 1,446 1,768 1,217 1,357 1,400 1,370Cash & cash equivalents 354 594 876 1,015 1,365 1,815Total assets 2,978 3,531 3,353 3,696 4,109 4,547Equity & minority interest 1,341 1,725 1,855 2,350 2,911 3,498Interest bearing debt 1,057 932 703 703 703 703Non interest bearing debt 853 1,276 1,192 1,153 1,123 1,101Total liabilities & equity 3,250 3,933 3,750 4,206 4,737 5,301Net interest bearing debt 701 327 -191 -337 -694 -1,152

CASH FLOW MYRmCash earnings 223 331 457 499 449 551Working capital -97 102 427 -209 8 6Investments -223 -76 -176 -151 -107 -107Debt -52 -174 -142 0 0 0Equity/dividends 0 0 0 0 0 0Change in cash & liquids -148 183 566 139 350 450

VALUATION 2008 2009 2010 2011e 2012e 2013eEPS MYR 0.07 0.10 0.13 0.21 0.25 0.26EPS adj MYR 0.07 0.10 0.13 0.21 0.25 0.26Dividend ps MYR 0.02 0.05 0.07 0.01 0.01 0.01Book per share MYR 1.3 1.5 1.5 1.8 2.3 2.7Year end shares million 1045.8 1177.7 1265.7 1276.7 1276.7 1276.7Price MYR 1.50 0.75 2.32 2.02 2.02 2.02P/E X 20.0 7.6 17.2 9.6 8.0 7.7P/E adj X 20.0 7.6 17.2 9.6 8.0 7.7Dividend yield % 1.3 6.7 3.0 0.3 0.4 0.4P/Book X 1.2 0.5 1.6 1.1 0.9 0.7EV/EBITDA adj X 6.2 2.3 5.7 3.9 2.9 2.0EV/EBIT adj X 8.0 2.9 7.0 4.6 3.4 2.3EV/Cap employed X 1.0 0.5 1.2 0.8 0.6 0.3EV/Sales X 1.0 0.3 0.8 0.6 0.5 0.4

Share price and targetPrice MYR 2.02Price target 12m MYR 2.60Recommendation BUYKey data per shareBook value MYR 1.28P/Book X 1.58EPS gr10-13e %cagr 24.9%Sales gr10-13e %cagr 6.6%PE11e/EPS gr X 0.4Financial structureMarket cap. MYRm 2,579Net int. bear debt MYRm 701Enterprise value MYRm 3,280Shares outst. million 1,276.7Equity/tot assets % 49.8Share price performanceAbs. 1/3/12m -11/-14/46Rel. 1/3/12m -11/-14/46High/Low 12m MYR 3/1KLSE index 212.930days volatility % 32Company attributesReuters ticker SCRS.KL

ReportingQ1 2011

ManagementCEO Datuk Shahril ShamsuddinCFO Azmi ArshadAddressSapuraCrest PetroleumSapura Mines 7 Jalan Tasik43300 Selangor Durul EhsanH.p.: www.sapuracrest.com.myTel +60-3-8659-8800




26.05.2010

90100110120130140150160170180190


SapuraCrest Petroleum

Rebased price (12m, MYR)

95100105110115120125130135140145


SapuraCrest Petroleum

Rebased consensus average forward EPS (12m, MYR)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

2007 2008 2009 2010 2011e 2012e 2013e-10%

0%

10%

20%

30%

40%

50%

60%

Revenue (MYRm) Revenue Growth

Revenue GrowthRevenue (MYRm)

-0.05

0.00

0.05

0.10

0.15

0.20

0.25

0.30

2007 2008 2009 2010 2011e 2012e 2013e0.000

0.010

0.020

0.030

0.040

0.050

0.060

0.070

0.080

EPS (MYR) DPS (MYR)

DPS (MYR)EPS (MYR)

0

100

200

300

400

500

600

700

2007 2008 2009 2010 2011e 2012e 2013e0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

EBITDA (MYRm) EBITDA margin

EBITDA marginEBITDA (MYRm)

-200-100

0100

200300400

500600

700800

2007 2008 2009 2010 2011e 2012e 2013e0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

FCF (MYRm) Dividend yield

Dividend yieldFCF (MYRm)

0.0

0.2

0.4

0.6

0.8

1.0

1.2

2007 2008 2009 2010 2011e 2012e 2013e0.0

0.2

0.4

0.6

0.8

1.0

1.2



0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2007 2008 2009 2010 2011e 2012e 2013e-4%-2%

0%2%

4%6%8%

10%12%

14%16%

Price/Book ROE

ROEPrice/Book



26.05.2010

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 Type BHP Built Status Country Client Region Start EndBeryl AHTS 4800 2005 Spot market Indonesia Spot Southeast Asia 5-Dec-2008 14-Dec-2009Amber AHTS 4800 2005 Operating Indonesia Total Southeast Asia 15-Dec-2007 15-Dec-2010Zircon AHTS 5000 2004 Operating Malaysia Shell Southeast Asia 11-Jan-2006 14-Dec-2011Jasper AHTS 5000 2004 Operating United Arab Emirates Adma-Opco Middle East 5-May-2006 4-May-2014Temasek Seppingan AHTS 5400 2001 Operating Indonesia Chevron Southeast Asia 10-Dec-2008 17-Dec-2009Temasek Attaka AHTS 5400 2001 Operating Saudi Arabia Saudi Aramco Middle East 1-Oct-2007 14-Dec-2009Garnet AHTS 5400 2005 Operating United Arab Emirates Adma-Opco Middle East 5-May-2006 5-May-2014Topaz AHTS 5400 2005 Operating United Arab Emirates Adma-Opco Middle East 5-May-2006 4-May-2014Peridot AHTS 12240 2009 Operating Japan - Far East 8-Nov-2006 23-Dec-2009Aquamarine AHTS 12240 2010 Newbuild Japan None Far East 11-May-2007 16-Feb-2010Amethyst AHTS 12240 2008 Operating Venezuela PDVSA South America 12-Mar-2008 12-Mar-2012Turquoise AHTS 12240 2008 Operating Venezuela PDVSA South America 30-Jun-2008 30-Jun-2012Tourmaline AHTS 12240 2007 Operating Australia Esso Australia/New Zea 30-Nov-2009 30-Dec-2009Coral AHTS 12240 2008 Operating Australia Esso Australia/New Zea 29-Nov-2009 29-Dec-2009Pearl AHTS 12240 2008 Operating Australia Woodside Australia/New Zea 29-Nov-2009 29-Dec-2009Co-owned with Scomi AHTS 5400 2002 Operating Malaysia - - - -Co-owned with Scomi AHTS 5400 2002 Operating Malaysia - - - - 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).



26.05.2010

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

Vessel name Type BHP Built Status Country Client Yard built OwnershipNAV

(USDm)Ex

rateNAV

(SGDm)1 Beryl AHTS 4800 2005 Spot market Indonesia Spot China - Fujian Mawei 100% 12 1.4 172 Amber AHTS 4800 2005 Operating Indonesia Total China - Fujian Mawei 100% 12 1.4 173 Zircon AHTS 5000 2004 Operating Malaysia Shell Singapore - Keppel Singmarine 100% 12 1.4 174 Jasper AHTS 5000 2004 Operating United Arab Emirates Adma-Opco Singapore - Keppel Singmarine 100% 12 1.4 175 Temasek Seppingan AHTS 5400 2001 Operating Indonesia Chevron Singapore - Pan United 100% 13 1.4 186 Temasek Attaka AHTS 5400 2001 Operating Saudi Arabia Saudi Aramco Singapore - Pan United 100% 13 1.4 187 Garnet AHTS 5400 2005 Operating United Arab Emirates Adma-Opco Malaysia - Piasau slipway 100% 15 1.4 218 Topaz AHTS 5400 2005 Operating United Arab Emirates Adma-Opco Malaysia - Piasau slipway 100% 15 1.4 219 Peridot AHTS 12240 2009 Operating Japan - Japan - Universal 100% 35 1.4 4910 Aquamarine AHTS 12240 2010 Newbuild Japan None Japan - Universal 100% 35 1.4 4911 Amethyst AHTS 12240 2008 Operating Venezuela PDVSA Japan - Universal Shipyards 100% 35 1.4 4912 Turquoise AHTS 12240 2008 Operating Venezuela PDVSA Japan - Keihin, Yokahama 100% 35 1.4 4913 Tourmaline AHTS 12240 2007 Operating Australia Esso Japan - Universal Shipyards 100% 34 1.4 4814 Coral AHTS 12240 2008 Operating Australia Esso Japan - Universal Shipyard 100% 35 1.4 4915 Pearl AHTS 12240 2008 Operating Australia Woodside Japan - Universal Shipyards 100% 35 1.4 4916 Co-owned with Scomi AHTS 5400 2002 Operating Malaysia - - 49% 6 1.4 817 Co-owned with Scomi AHTS 5400 2002 Operating Malaysia - - 49% 6 1.4 8

NAV Calculation SGDm MethodNAV of own chartering fleet 487 Fair mkt valueNAV of co-fleet 8 Fair mkt value, assuming 50% debt Total assets 4952010 NIBD + future capex -20NAV of all assets 516No of outstanding shares 705Equity value per share (SGD) 0.73


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 Calculation of WACCValue free cashflow 2010-2035 (USDm) 305 Market value equity (2010) 330Value free cashflow 2035+ (USDm) 33 - in % 106%Total value free cashflow (USDm) 338 Net interest bearing debt (2010) -20Net debt 2010 (USDm) -20 - in % -6%Net value free cashflow (USDm) 358Net value free cashflow (SGDm @USDSGD 1.4) 501 Risk premium 5.0%FCFE per share (SGD) 0.71 Beta 0.9

Upside/ (Downside) -100%Risk free rate 4.0%

Terminal Growth Assumptions Interest rate 5.0%Nominal growth year 2035+ 0.0% Tax-rate 0%Factor 11.5 Net WACC 9% Source: DnB NOR Markets Estimates

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.



26.05.2010

CH OFFSHORE (CHOF.SI)

PROFIT & LOSS USDm 2007 2008 2009 2010e 2011e 2012eRevenues 46 43 69 66 78 75Other income 0 0 0 0 0 0Operating costs -24 -18 -18 -21 -25 -25EBITDA 21 25 50 45 53 50Depreciation & amortisation 5 5 6 8 8 8EBIT 16 20 44 36 45 42Associated companies 2 1 1 0 1 0Net interest 0 0 0 0 0 0Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 17 21 45 37 46 42Tax 1 0 0 0 0 0Minority interest 0 0 0 0 0 0Net profit 40 40 56 37 46 42

BALANCE SHEET USDmIntangible assets 0 0 0 0 0 0Operating assets 88 132 168 201 201 201Associated companies 7 6 6 6 6 6Other current assets 11 5 9 9 10 10Cash & cash equivalents 38 15 19 23 69 111Total assets 144 159 203 239 287 328Equity & minority interest 121 141 187 224 270 312Interest bearing debt 11 7 3 3 3 3Non interest bearing debt 12 11 12 12 14 13Total liabilities & equity 144 159 203 239 287 328Net interest bearing debt -27 -8 -16 -20 -66 -108

CASH FLOW USDmCash earnings 57 64 47 44 41 50Working capital -10 -15 13 2 13 0Investments -1 -48 -42 -41 -8 -8Debt -9 -4 -4 0 0 0Equity/dividends 0 0 10 0 0 0Change in cash & liquids 37 -3 24 4 46 42

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS USD 0.05 0.05 0.08 0.05 0.07 0.06EPS adj USD 0.05 0.05 0.08 0.05 0.07 0.06Dividend ps USD 0.04 0.02 0.02 0.00 0.00 0.00Book per share USD 0.2 0.2 0.3 0.3 0.4 0.4Year end shares million 764.5 771.6 705.1 705.1 705.1 705.1Price SGD 0.68 0.66 0.48 0.57 0.57 0.57Price USD 0.48 0.47 0.34 0.40 0.40 0.40P/E X 9.2 9.2 4.3 7.7 6.1 6.7P/E adj X 9.2 9.1 4.5 7.7 6.1 6.7Dividend yield % 8.3 4.2 5.8 0.5 0.7 0.6P/Book X 3.1 2.6 1.3 1.3 1.0 0.9EV/EBITDA adj X 15.8 14.0 4.3 5.8 3.9 3.4EV/EBIT adj X 21.2 17.2 5.0 7.0 4.6 4.0EV/Cap employed X 2.6 2.4 1.1 1.1 0.8 0.5

Share price and targetPrice SGD 0.57Price USD 0.40Price target 12m SGD 0.70Recommendation BUYKey data per shareBook value USD 0.18P/Book X 2.19EPS gr09-12e %cagr -7.8%Financial structureMarket cap. SGDm 398Market cap. USDm 283Net int. bear debt USDm -8Enterprise value USDm 274Shares outst. million 705.1Equity/tot assets % 93.9Share price performanceAbs. 1/3/12m -19/-13/23Rel. 1/3/12m -8/-11/-3High/Low 12m SGD 1/0STI index 1915.730days volatility % 30Company attributesReuters ticker CHOF.SISupply

ReportingQ3 2010

ManagementCEO Gary KohCFO Teo Peck BeeAddressCH Offshore388 Jalan Ahmad Ibrahim

H.p.: www.choffshore.com.sgTel +65 6861 1711




26.05.2010

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26.05.2010

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 music-related 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.



26.05.2010

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 vessel’s 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.


Name TypeAvg size

(gross tons)Ownership

(%)

Value per vessel

(USDm)X rate

(USD/SGD)

Value per vessel

(SGDm)Net value (SGDm)

Total value/ sh

(SGD)1 Support Station 1 (SS-1) Multi-purpose accom support vessel 5180 100% 25 1.4 36 36 0.042 Support Station 2 (SS-2) Multi-purpose accom support vessel 5433 100% 25 1.4 36 36 0.043 Support Station 3 (SS-3) Multi-purpose accom support vessel 4568 100% 19 1.4 27 27 0.034 Support Station 4 (SS-4) Multi-purpose accom support vessel 4442 100% 18 1.4 26 26 0.035 Support Station V (SS-V) Multi-purpose accom support vessel 5121 100% 23 1.4 33 33 0.046 Falcon Warrior (SS-6) Multi-purpose accom support vessel 4988 100% 20 1.4 28 28 0.037 Support Station 7 (SS-7) Multi-purpose accom support vessel 1792 100% 15 1.4 21 21 0.038 Energy Miner Multi-purpose work vessel 2554 100% 16 1.4 23 23 0.039 Atlantic Challenger AHTS 5000bhp 100% 14 1.4 20 20 0.02

10 - FSO - 40% 100 1.4 142 57 0.0711 - Seismic - 100% 30 1.4 43 43 0.05

Total fleet value - 305 - - 348 0.43NAV of Oilfield services (6x 2011 EV/EBITDA) - - - - 84 0.10NAV of Project services (6x 2011 EV/EBITDA) 75 0.09Market value of CHO (29%) 115 0.14Total asset values - - - - 623 0.76NIBD incl future capex (2010E) SGDm - - - - 45 0.06Equity value (SGDm) - - - - 578 0.71No of shares outstanding - - - - 814 -NAV per share 0.71


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 Calculation of WACCValue free cashflow 2010-2035 (USDm) 270 Market value equity (2010) 314Value free cashflow 2035+ (USDm) 59 - in % 91%Total value free cashflow (USDm) 330 Net interest bearing debt (2010) 32Net debt 2010 (USDm) 32 - in % 9%Net value free cashflow (SGDm) 298Market value of CHO (29%) in USDm 82 Risk premium 6%Total value (USDm) 380 Beta 0.94Total value per share (USD) 0.47Total value per share (SGD @ USDSGD 1.4) 0.65

Risk free rate 4%Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 0.0% Tax-rate 17%Factor 11.5 Net WACC 9% Source: DnB NOR Markets Estimates



26.05.2010

FALCON ENERGY (FEGL.SI)

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

BALANCE SHEET USDmIntangible assets 0 0 0 0 0 0Operating assets 68 120 125 125 125 125Associated companies 0 6 6 108 108 108Other current assets 21 21 39 46 54 56Cash & cash equivalents 3 10 48 44 92 144Total assets 91 157 219 324 380 433Equity & minority interest 73 107 185 233 285 338Interest bearing debt 12 28 26 76 76 76Non interest bearing debt 11 23 14 22 26 26Total liabilities & equity 96 159 226 331 387 441Net interest bearing debt 10 18 -22 32 -16 -68

CASH FLOW USDmCash earnings 21 42 35 54 60 60Working capital -10 12 -29 2 -4 -1Investments -76 -60 -11 -109 -7 -7Debt 12 16 -2 50 0 0Equity/dividends 0 0 0 0 0 0Change in cash & liquids -52 10 -7 -4 48 52


Share price and targetPrice SGD 0.54Price USD 0.38Price target 12m SGD 0.70Recommendation BUYKey data per shareBook value USD 0.15P/Book X 2.51EPS gr09-12e %cagr 23.6%Financial structureMarket cap. SGDm 440Market cap. USDm 312Net int. bear debt USDm -22Enterprise value USDm 290Shares outst. million 814.1Equity/tot assets % 70.1Share price performanceAbs. 1/3/12m -27/-20/38Rel. 1/3/12m -16/-18/12High/Low 12m SGD 1/0STI index 1915.730days volatility % 40Company attributesReuters ticker FEGL.SISupply

ReportingQ2 2010

ManagementCEO Tan Pong TyeaCFO Gan Wah KwangAddressFalcon Energy10 Anson RoadFloor 22-14H.p.: www.falconenergy.com.sgTel +65 6538 7177




26.05.2010

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26.05.2010

Please note DnB NOR Markets is acting as Lead Arranger and Placement Agent of the convertible bond issue.

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. 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.



26.05.2010

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.


Vessel Type Location ClientYard built

Year built/ refurbished Status

Ownership Avg size

Avg contract length (mths)

Costper vessel

(USDm)FMV

(USDm)X rate

(USD/SGD)

FMV per vessel

(SGDm)

Total net

value (SGDm)

KS Medstar-1 Jack-up drilling rig Egypt Petrobel Japan 2008 Term charter 100% 300ft 30 120 80 1.4 112 112KS Endeavor Jack-up drilling rig UAE - MIS Sharja 2010 Available 50% 300ft - 180 110 1.4 154 77Atlantic Rotterdam Accommodation jack-up Denmark Maersk - 2004 Term charter 100% 250ft 16 85 75 1.4 105 105Yu Song Jack-up drilling rig China COSL Dalian Shi 2003 Drylease equip 100% 300ft 84 56 38 1.4 53 53Titan 2 Jack-up liftboat North Sea - - 2009 Available 50% 200ft - 60 60 1.4 84 42KS Challenger 1 Landrig US - - 2007 Drylease 50% 1300 HP - 20 16 1.4 22 11KS Challenger 3 Landrig US - - 2007 Drylease 50% 1300 HP - 20 16 1.4 22 11Discoverer 1 Landrig Kurdistan TTOPCO (Adda- 2008 Term charter 100% 1500 HP 22 25 18 1.4 25 25Discoverer 2 Landrig Dubai AL-Thani - 2008 Term charter 100% 1500 HP - 25 18 1.4 25 25Discoverer 3 Landrig Pakistan BP - 2007 Term charter 100% 1500 HP 18 25 18 1.4 25 25Discoverer 4 Landrig Tunisia Eni - 2008 Term charter 100% 2000 HP 18 28 18 1.4 25 25Esbjerg Jack-up drilling rig Denmark Maersk Drydocks 2005 MC with Prosafe 0% 250ft 18 0 5 1.4 7 7KS Explorer Seismic vessel - - - - Spot market SEA 100% - - na 20 1.4 28 28

Total fleet value - - - - - 547Distribution business, 10x 2011E EBITDA, 56% ownership 273Other financial assets - - - - - 84Total asset values - - - - - 904NIBD (2010E) incl of SGDm 50 convert bonds* issued in Jan 10 - - - - - 272Capex commitments outstanding 33Proceeds from warrants, 93m at SGD/sh 1.4 assuming exercised 130Adj NIBD 176Equity value (SGDm) - - - - - 729No of shares outstanding incl 59mn share issue related to acquisitions - - - - - 407No of shares incl 93m warrants 499NAV per share 1.46

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

Risk free rate 4%Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 0.0% Tax-rate 17%Factor 11.0 Net WACC 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.



26.05.2010

KS ENERGY (KSTL.SI)

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

BALANCE SHEET SGDmIntangible assets 29 26 25 26 26 26Operating assets 128 417 406 406 406 406Associated companies 113 141 139 139 139 139Other current assets 414 272 242 355 441 484Cash & cash equivalents 85 68 72 85 108 160Total assets 770 925 885 1,010 1,120 1,215Equity & minority interest 288 471 514 506 577 654Interest bearing debt 361 346 308 358 358 358Non interest bearing debt 172 166 117 152 191 208Total liabilities & equity 821 983 939 1,016 1,126 1,221Net interest bearing debt 276 277 236 273 250 198

CASH FLOW SGDmCash earnings 108 92 75 61 106 112Working capital -199 132 -17 -61 -49 -26Investments -166 -340 -16 -37 -34 -34Debt 309 -15 -37 50 0 0Equity/dividends 0 0 0 0 0 0Change in cash & liquids 52 -130 5 13 23 52

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS SGD 0.31 0.15 0.10 0.09 0.13 0.14EPS adj SGD 0.31 0.14 0.11 0.09 0.13 0.14Dividend ps SGD 0.09 0.06 0.00 0.00 0.00 0.00Book per share SGD 1.2 1.4 1.3 1.2 1.4 1.6Year end shares million 236.1 336.7 406.6 406.6 406.6 406.6Price SGD 3.19 0.99 1.24 1.17 1.17 1.17P/E X 10.2 6.4 12.6 12.7 8.7 8.2P/E adj X 10.2 7.1 11.5 12.7 8.7 8.2Dividend yield % 2.8 5.8 0.2 0.2 0.2 0.2P/Book X 2.6 0.7 1.0 0.9 0.8 0.7EV/EBITDA adj X 15.2 6.0 8.7 6.8 5.5 4.8EV/EBIT adj X 18.7 8.0 14.4 9.7 7.4 6.5EV/Cap employed X 1.7 0.8 1.0 0.9 0.8 0.7

Share price and targetPrice SGD 1.17Price target 12m SGD 1.50Recommendation BUYKey data per shareBook value SGD 1.40P/Book X 0.84EPS gr09-12e %cagr 10.0%Financial structureMarket cap. SGDm 476Net int. bear debt SGDm 236Enterprise value SGDm 712Shares outst. million 406.6Equity/tot assets % 50.1Share price performanceAbs. 1/3/12m -15/-7/1Rel. 1/3/12m -6/-5/-21High/Low 12m SGD 1/1STI index 2701.230days volatility % 29Company attributesReuters ticker KSTL.SISupply

ReportingQ2 2010

ManagementCEO Wiluan KrisCFO Wong Soon YinAddressKS Energy4 Tuas Avenue 5

H.p.: www.ksenergy.com.sgTel +65 6415 0808




26.05.2010

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26.05.2010

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.

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.



26.05.2010

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 Type Contract Region Yard built Contract type Delivery AgeNAV

(USDm)Ex

rateNAV

(SGDm)Owner

ship 1 Tug Vessel 3600 dwt Chartered Middle East Malaysia Time charter 2007 2 3 1.4 4 100%2 Tug Vessel 3600 dwt Chartered Middle East Malaysia Time charter 2007 2 3 1.4 4 100%3 Tug Vessel 3600 dwt Chartered Middle East Malaysia Time charter 2007 2 3 1.4 4 100%4 Tug Vessel 3600 dwt Under nego - Malaysia Time charter 2008 1 3 1.4 4 100%5 Tug Vessel 3600 dwt Under nego - Malaysia Time charter 2008 1 3 1.4 4 100%6 Barge 10000 dwt Chartered Middle East Batam Time charter 2007 2 3 1.4 4 100%7 Barge 10000 dwt Chartered Middle East Batam Time charter 2007 2 3 1.4 4 100%8 Barge 10000 dwt Chartered Middle East Batam Time charter 2008 1 3 1.4 4 100%9 Barge 10000 dwt Under nego - Batam Time charter 2008 1 3 1.4 4 100%

10 Barge 10000 dwt Under nego - Batam Time charter 2008 1 3 1.4 4 100%11 Maint. work vessel 61 m Chartered Asia Pacific China Bareboat Q209 - 15 1.4 21 100%12 AHTS 10800 bhp Chartered Australia Batamec Bareboat Q209 - 30 1.4 42 100%13 AHTS 10800 bhp Chartered Australia Batamec Bareboat Q209 - 30 1.4 42 100%14 AHTS 6000 bhp Chartered Asia Pacific Batamec Bareboat Q209 - 16 1.4 22 100%15 Maint. work vessel 61 m Chartered Asia Pacific China Bareboat Q409 - 15 1.4 21 100%16 Work barge 300 pax Available - China Available Q409 - 30 1.4 42 100%17 AHTS 6000 bhp Chartered Asia Pacific China Bareboat Q409 - 14 1.4 20 100%18 40M AHT 3600 bhp Under nego - China Available Q409 - 8 1.4 11 100%19 40M AHT 3600 bhp Under nego - China Available Q409 - 8 1.4 11 100%20 40M AHT 3600 bhp Available - China Available Q110 - 8 1.4 11 100%21 40M AHT 3600 bhp Available - China Available Q110 - 8 1.4 11 100%22 40M AHT 3600 bhp Available - China Available Q210 - 8 1.4 11 100%23 Barge 300 pax Available - China Available Q110 - 35 1.4 49 100%24 6 streamer seismic PSV 3200 dwt Available - Batamec Available Q210 - 52 1.4 73 74%25 Mosvold's cancelled AHTS 21000 bhp Newbuild - Batamec Newbuild Q210 - 75 1.4 105 100%

Total 382 535

Chartering fleet with strategic partners

No Type Contract Region Yard built Contract type Delivery AgeNAV

(USDm)Ex

rateNAV

(SGDm)Owner

ship funding on ves

Debt (SGDm)

NAV Otto

1 AHTS 5150 bhp Chartered Australia China Bareboat 2009 - 14 1.4 20 49% 70% 14 32 AHTS 5150 bhp Chartered Australia China Bareboat 2009 - 14 1.4 20 49% 70% 14 33 AHTS 5150 bhp Chartered Australia China Bareboat 2009 - 14 1.4 20 49% 70% 14 34 Work barge 300 pax Chartered Asia Pacific Batamec Time charter Q407 - 34 1.4 48 49% 30% 14 165 57.5m- AHTS 5150 bhp Contract Europe China Contract Q309 - 14 1.4 20 45% 70% 14 36 Work barge 300 pax Contract Europe China Contract 4Q09 - 35 1.4 49 49% 70% 34 77 MT 6009 - MFSV 3200 dwt Contract Europe Batamec Contract 4Q09 - 38 1.4 53 49% 60% 32 108 MT 6009L - MFSV 3200 dwt Contract Europe Batamec Contract Q210 - 38 1.4 53 49% 60% 32 109 MT 6009L - MFSV 3200 dwt Contract Europe Batamec Contract Q310 - 38 1.4 53 49% 60% 32 10

10 AHTS 8000 bhp Available - China Available Q110 - 23 1.4 32 49% 70% 23 511 AHTS 8000 bhp Available - China Available Q410 - 23 1.4 32 49% 70% 23 512 AHTS 8000 bhp Available - China Available Q310 - 23 1.4 32 49% 70% 23 513 AHTS 8000 bhp Available - China Available Q410 - 23 1.4 32 49% 70% 23 514 AHTS 10000 bhp Available - Batamec Bareboat 1Q10 - 32 1.4 45 49% 70% 31 715 AHTS 10000 bhp Available - Batamec Bareboat 1Q10 - 32 1.4 45 49% 70% 31 716 AHTS 6000 bhp Chartered Europe China Chartered 4Q09 - 16 1.4 22 49% 70% 16 317 AHTS 6000 bhp Chartered Europe China Chartered 4Q09 - 16 1.4 22 49% 70% 16 318 67m x 100T BHP AHTS 10000 bhp Available - China Available 3Q10 - 30 1.4 42 35% 70% 29 419 67m x 100T BHP AHTS 10000 bhp Available - China Available 4Q10 - 30 1.4 42 35% 70% 29 420 Maint. work vessel 75 m Available - China Available 3Q10 - 25 1.4 35 35% 70% 25 421 Maint. work vessel 75 m Available - China Available 4Q10 - 25 1.4 35 35% 70% 25 4

Total 491 121

NAV Calculation SGDm MethodNAV of own chartering fleet 535 Fair mkt valueNAV of fleet with strategic partnerships 121 Fair mkt valueNAV of yard 325 6x 2011 EV/EBITDATotal assets 9812010 NIBD + future capex 465Value of WC end 2010 & 2011 221 Assumption: Long term WC need of SGDm 200 vs currently 421NAV of all assets 736No of outstanding shares post equity issue 1890Equity value per share (SGD) 0.39

Size

Size


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.



26.05.2010

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

NoVessel

Type SizeDeliver

yExpected delivery

Est price (USDm) Ex rate

Est price

(SGDm)

% of completi

on estCompleted

(SGDm)Balance (SGDm)

% of orderbook

1 AHTS 10,800 bhp Q309 Q309 26 1.5 39 100% 39 0 0%3 Utility vessel 55 metres Q309 Q309 10 1.5 15 100% 15 0 0%4 AHTS 5,150 bhp Q309 Q309 15 1.5 22 100% 22 0 0%5 AHTS 5,150 bhp Q309 Q309 15 1.5 22 100% 22 0 0%6 AHTS 10,800 bhp Q309 Q309 26 1.5 39 100% 39 0 0%2 Work barge 300 pax Q409 Q409 29 1.5 44 100% 44 0 0%7 PSV 3,200 tonnes Q409 Q409 34 1.5 51 100% 51 0 0%8 AHTS 21,000 bhp Q110 Q210 77 1.5 116 100% 116 0 0%9 PSV 3,200 tonnes Q110 Q110 43 1.5 65 100% 65 0 0%

10 AHTS 21,000 bhp Q210 Q310 77 1.5 116 80% 92 23 7%11 PSV 3,200 tonnes Q210 Q210 43 1.5 65 85% 55 10 3%12 AHTS 21,000 bhp Q410 Q211 83 1.5 125 45% 56 68 21%13 AHTS 21,000 bhp Q311 Q211 85 1.5 128 33% 41 86 27%14 OCV 115 metres Q411 Q411 131 1.5 197 33% 65 132 41%

Total 694 1041 722 319 100% 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.



26.05.2010

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 2006 2007 2008 2009E 2010E 2011E 2012ENewbuild orders** (historical) 541 606 522 83 na na naAHTS/ AHT na na na 0 75 113 130PSVs na na na 0 60 60 60Utility vessel na na na 0 0 15 15Offshore construction vessel na na na 0 0 100 100Accomodation work barge na na na 0 0 40 40Total estimated orders - 135 328 345 Source: DnB NOR Markets



26.05.2010

OTTO MARINE (OTTO.SI)

PROFIT & LOSS SGDm 2007 2008 2009 2010e 2011e 2012eRevenues 314 484 425 564 405 365Other income 0 0 0 0 0 0Operating costs -244 -388 -354 -472 -322 -288EBITDA 70 96 71 92 83 77Depreciation & amortisation 2 3 6 12 12 12EBIT 67 93 65 80 71 66Associated companies 0 6 3 4 6 6Net interest 1 -13 -11 -15 -18 -17Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 68 87 56 69 59 54Tax 1 1 2 6 10 9Minority interest 12 3 0 0 0 0Net profit 42 57 52 54 49 45

BALANCE SHEET SGDmIntangible assets 5 40 45 45 45 45Operating assets 91 149 266 368 368 368Associated companies 9 56 57 79 79 80Other current assets 263 484 487 876 447 403Cash & cash equivalents 214 249 251 164 488 510Total assets 582 978 1,251 1,678 1,573 1,551Equity & minority interest 54 219 390 539 588 633Interest bearing debt 185 313 449 629 634 604Non interest bearing debt 339 447 413 511 351 315Total liabilities & equity 578 978 1,252 1,679 1,574 1,552Net interest bearing debt -29 64 199 465 147 95

CASH FLOW SGDmCash earnings 56 63 58 66 61 57Working capital 10 -138 -5 -291 270 8Investments -84 -145 -274 -136 -12 -12Debt 150 127 137 180 5 -30Equity/dividends 0 0 0 95 0 0Change in cash & liquids 132 -93 -83 -86 324 22

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS SGD 0.04 0.06 0.03 0.03 0.03 0.03EPS adj SGD 0.04 0.06 0.03 0.03 0.03 0.03Dividend ps SGD 0.00 0.00 0.00 0.00 0.00 0.00Book per share SGD 0.1 0.2 0.2 0.3 0.4 0.4Year end shares million 994.1 994.1 1662.2 1662.2 1662.2 1662.2Price SGD 0.37 0.41 0.39 0.39 0.39P/E X 6.4 13.0 11.8 13.1 14.3P/E adj X 6.4 13.0 11.8 13.1 14.3Dividend yield % nm 0.0 0.0 0.0 0.0 0.0P/Book X 1.7 1.7 1.2 1.1 1.0EV/EBITDA adj X 4.5 12.4 12.0 9.5 9.5EV/EBIT adj X 4.6 13.6 13.8 11.1 11.2EV/Cap employed X 0.8 1.1 0.9 0.6 0.6

Share price and targetPrice SGD 0.39Price target 12m SGD 0.35Recommendation HOLDKey data per shareBook value SGD 0.22P/Book X 1.75EPS gr09-12e %cagr -5.1%Financial structureMarket cap. SGDm 728Net int. bear debt SGDm 64Enterprise value SGDm 792Shares outst. million 1,890.4Equity/tot assets % 32.1Share price performanceAbs. 1/3/12m -23/-20/16Rel. 1/3/12m -14/-19/-5High/Low 12m SGD 1/0STI index 2723.930days volatility % 42Company attributesReuters ticker OTTO.SISupply

ReportingQ2 2010

ManagementCEO Lee Kok WahCFO Michael See Kian HengAddressOtto Marine9 Temasek Boulevard£d£33-01 Suntec Tower 2H.p.: www.ottomarine.comTel +65 68632366




26.05.2010

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26.05.2010

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 well-positioned 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 project-based 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.



26.05.2010

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 Vessel Type Built Ownership

Fair Market Value

(USDm)NAV

(USDm)1 Swiber Glorious (for subsea listing) Accommodation barge 300 men 2006 100% 35 352 Swiber Conquest Pipelay barge 420 T 2007 Lease 72 723 Da Li Hao Derrick crane barge 2500 T 1980 100% 40 404 Swiber SLB-1 Submersible barge 400 ft 2008 100% 70 705 Swiber Supporter (for subsea listing) Dive support work barge 180 men 2009 100% 35 356 Swiber Concorde Pipelay barge 200 T 2009 Lease 55 557 Swiber Victorious Dive support accom barge 300 men 2009 100% 35 358 Swiber Chai Derrick pipelay barge 1100 MT 2009 49% 75 379 Aziz Derrick pipelay barge 1200 T 2009 100% 78 78

10 Swiber Eagle Utility towing tug 3200 bhp 2006 100% 10 1011 Swissco 99 Utility towing tug 2400 bhp 1998 100% 7 712 Swiber Raven Utility towing tug 3200 bhp 2010 100% 7 713 Swiber Captain Utility towing tug 2800 bhp 1994 100% 7 714 Swiber Explorer AHT 4000 bhp 2007 Lease 8 815 Swiber Navigator AHT 4000 bhp 2007 Lease 8 816 Swiber Valiant AHT 5000 bhp 2006 Lease 12 1217 Swiber Gallant AHT 5000 bhp 2006 Lease 12 1218 Swiber Singapore AHT 4750 bhp 2007 100% 10 1019 Swiwar Challenger AHTS 5150 bhp 2007 50% 12 620 Swiwar Venturer AHTS 5150 bhp 2007 50% 12 621 Swiwar Victor AHTS 5150 bhp 2007 50% 12 622 Swiber Trader AHTS 6000 bhp 1979 100% 8 823 Swiber Ada AHTS 5000 bhp 2008 Lease 12 1224 Swiber Torunn AHTS 5000 bhp 2008 Lease 12 1225 Swiber Sandefjord AHTS 5000 bhp 2009 Lease 12 1226 Swiber Else Marie AHTS 10800 bhp 2009 Lease 30 3027 Swiber 123 Flat top barge 81 NRT 2007 100% 3 328 Swiber 251 Flat top barge 686 NRT 2005 100% 3 329 Swiber 252 Flat top barge 692 NRT 2005 100% 3 330 Swiber 253 (sold in Q1) Flat top barge 692 NRT 2005 100% 3 331 Swiber 254 (sold in Q1) Flat top barge 678 NRT 2007 100% 3 332 Swiber 255 Flat top barge 689 NRT 2006 100% 3 333 Swiber 282 Flat top barge 772 NRT 2007 100% 3 334 Swiber 283 Deck cargo 1015 NRT 2007 100% 7 735 Kreuz 231 Deck cargo 493 NRT 2008 100% 3 336 Kreuz 232 Deck cargo 493 NRT 2008 100% 3 337 Kreuz 281 Deck cargo 1028 NRT 2009 100% 5 538 Kreuz 282 Deck cargo 1028 NRT 2009 100% 5 539 Kreuz 283 Deck cargo 1028 NRT 2009 100% 5 540 Kreuz 284 Deck cargo 1028 NRT 2009 100% 5 541 Kreuz 331 Deck cargo 1486 NRT 2009 100% 5 542 Kreuz 332 Deck cargo 1486 NRT 2009 100% 5 543 Kreuz 241 Deck cargo 549 NRT 2006 100% 2 244 Swiber Oslo AHTS 5000 bhp 2009 Lease 12 1245 Swiber Crusader AHTS 10800 bhp 2010 100% 32 3246 Swiber Anne Christine AHTS 10800 bhp 2010 Lease 32 3247 Swiber Mary Anne AHTS 10800 bhp 2010 Lease 32 3248 Swiber Atlantis (DP2) Subsea support vessel 4950 bhp 2010 100% 55 5549 Swiber Charlton Utility vessel 2400 bhp 2010 100% 8 850 Swiber Samson AHTS 4200 bhp 2010 100% 12 1251 Swiber Merdeka (with Alam) Pipelay barge 300 MT 2010 100% 50 5052 Swiber Magnificent Derrick crane barge 4200 T 2011 100% 120 120

Total 1049

NAV Calculation USDm MethodNAV of all vessels (including sale lease-back) 1049 Fair mkt valueNAV of yard 22 6x 2011 EV/EBITDAOther financial assetsTotal assets 1070Sale lease-back commitments (debt) 268 2009 annual disclosureAssuming conv bonds converted to offset debt 100NAV of all assets 664No of outstanding shares 508No of shares assuming conv bonds converted @ SGD/sh 1.14 126No of outstanding shares (assuming bonds converted) 635Equity value per share (USD) 1.05Equity value per share (SGD @1.4) 1.46

Size




26.05.2010

Using a DCF approach of Swiber’s 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 Calculation of WACCValue free cashflow 2010-2035 (USDm) 850 Market value equity (2010) 378Value free cashflow 2035+ (USDm) 74 - in % 64%Total value free cashflow (USDm) 924 Net interest bearing debt (2010) 217Net debt 2010 + future capex (USDm) 234 - in % 36%Net value free cashflow (USDm) 689FCFE per share (USD) 1.09 Risk premium 8%Total value per share (SGD @ USDSGD 1.4) 1.52 Beta 1.5

Upside/ (Downside) 407%Risk free rate 4%

Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 0.0% Tax-rate 17%Factor 8.6 Net WACC 12% Source: DnB NOR Markets Estimates

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 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10E Q2/10E Q3/10E Q4/10E 2010E 2011E 2012EHistorical/current orderbook at period end (USDm) 515 509 440 626 687 890 848 809 809 539 339Reported revenues at end of period - revenues from new est orders 87 111 96 100 85 123 152 145 505 704 686Reported revenues (excluding yards) 84 107 92 96 76 116 144 139 475 670 650New orders flow assumed/ secured (historical) 3 101 23 315 143 320 - - - - -New EPCIC order assumptions 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



26.05.2010

SWIBER HOLDINGS (SWBR.SI)

PROFIT & LOSS USDm 2007 2008 2009 2010e 2011e 2012eRevenues 151 428 393 505 704 686Other income 0 0 0 0 0 0Operating costs -120 -382 -354 -430 -597 -582EBITDA 31 47 39 74 107 105Depreciation & amortisation 3 9 15 17 17 17EBIT 28 38 24 57 90 87Associated companies 2 3 5 7 7 7Net interest -2 -11 -14 -16 -17 -17Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 28 30 15 48 80 77Tax 2 6 5 7 14 13Minority interest 0 1 4 4 6 6Net profit 50 39 35 38 61 58

BALANCE SHEET USDmIntangible assets 0 0 0 0 0 0Operating assets 113 282 232 291 291 291Associated companies 8 13 50 50 50 50Other current assets 127 262 391 359 360 282Cash & cash equivalents 98 75 83 144 308 408Total assets 346 632 757 845 1,010 1,032Equity & minority interest 178 208 309 361 434 504Interest bearing debt 96 281 335 365 395 395Non interest bearing debt 97 212 298 284 394 350Total liabilities & equity 371 702 942 1,010 1,223 1,249Net interest bearing debt -2 207 252 221 87 -13

CASH FLOW USDmCash earnings 52 48 54 60 84 82Working capital -48 -74 -149 50 69 37Investments -82 -187 2 -79 -19 -19Debt 88 190 77 30 30 0Equity/dividends 0 0 0 0 0 0Change in cash & liquids 10 -22 -16 61 164 100


Share price and targetPrice SGD 1.02Price USD 0.72Price target 12m SGD 1.50Recommendation BUYKey data per shareBook value USD 0.49P/Book X 1.47EPS gr09-12e %cagr 10.5%Financial structureMarket cap. SGDm 519Market cap. USDm 368Net int. bear debt USDm 207Enterprise value USDm 574Shares outst. million 508.4Equity/tot assets % 41.6Share price performanceAbs. 1/3/12m -15/-1/20Rel. 1/3/12m -4/1/-6High/Low 12m SGD 1/1STI index 1915.730days volatility % 48Company attributesReuters ticker SWBR.SISupply

ReportingQ2 2010

ManagementCEO Raymond GohCFO Leonard TayAddressSwiber Holdings12 International Business ParkFloor 04-01H.p.: www.swiber.comTel +65 6223 6151




26.05.2010

80

90

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Swiber Holdings


90

100

110

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Swiber Holdings


0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010e 2011e 2012e-50%

0%

50%

100%

150%

200%



0.000

0.020

0.040

0.060

0.080

0.100

0.120

0.140

2006 2007 2008 2009 2010e 2011e 2012e0.00.1

0.20.3

0.40.50.6

0.70.8

0.91.0

EPS (USD) DPS (USD)

DPS (USD)EPS (USD)

0

20

40

60

80

100

120

2006 2007 2008 2009 2010e 2011e 2012e0%

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-250

-200

-150

-100

-50

0

50

100

150

200

2006 2007 2008 2009 2010e 2011e 2012e0.0%10.0%

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0.0

0.2

0.4

0.6

0.8

1.0

1.2

2006 2007 2008 2009 2010e 2011e 2012e0.0

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2006 2007 2008 2009 2010e 2011e 2012e0%

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Price/Book ROE

ROEPrice/Book



26.05.2010

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.



26.05.2010

Valuation DCF 1.43 SGD/share, NAV 1.45 SGD/share. We reiterate our BUY recommendation with target SGD/sh 1.50.


NAV Calculation

Fleet size

(unit) Avg size

Vessel avg age


EBITDA 2009

(SGDm)

EBITDA 2010E

(SGDm)

Value per

vessel (USDm)

X rate (USD/SGD)

Value per

vessel (SGDm)

Total value

(SGDm)

Total value/

sh (SGD)Fleet value of Tugs 66 2,000 bhp 4.0 3.0 30.6 25.5 1.5 1.40 2.1 139 0.46Fleet value of Barges 121 300 x 250ft 4.0 3.0 52.5 42.9 0.8 1.40 1.1 139 0.46Fleet value of AHT/ AHTS 6 5,000 bhp 1.5 3.0 12.8 10.0 15.0 1.40 21.0 126 0.42Fleet value of Tanker 2 1,000 dwt 1.0 3.0 0.3 0.6 11.0 1.40 15.4 31 0.10Total fleet value - - - - - - - - - 434 1.44NAV of yards - 170,000 dwt - - - - - - - 78 0.26Other financial assets - - - - - - - - - 8 0.03Total asset values - - - - - - - - - 521 1.73NIBD incl future capex (2010E) - - - - - - - - - 84 0.28Equity value (SGDm) - - - - - - - - - 436 1.45No of shares outstanding - - - - - - - - - 301 -NAV per share 1.45 Source: DnB NOR Markets

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

Discounted value of free cashflow Calculation of WACCValue free cashflow 2010-2035 (SGDm) 432 Market value equity (2010) 273Value free cashflow 2035+ (SGDm) 76 - in % 76%Total value free cashflow (SGDm) 508 Net interest bearing debt (2010) 84Net debt 2010 (SGDm) 84 - in % 24%Net value free cashflow (SGDm) 424FCFE per share (SGD) 1.41 Risk premium 6%Other financial assets (FA) 8 Beta 1.2Total value per share (SGD) 1.43Upside/ (Downside) 34%

Risk free rate 4%Terminal Growth Assumptions Interest rate 4%Nominal growth year 2035+ 2.0% Tax-rate 17%Factor 14.8 Net WACC 9% Source: DnB NOR Markets estimates

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 2006 2007 2008 2009 2010E 2011E 2012ENewbuild orders** (historical) 250 467 315 100 39 na naOffshore support and specialised vessels na na na na 17 72 72Tugs na na na na 0 40 40Dredgers na na na na 0 40 30Others - Tankers na na na na 8 45 45Conversions (under Shiprepair segment) na na na na 30 30 60Total estimated orders (incl conversions) 55 227 247 Source: DnB NOR Markets, Company,** derived using Ending order book reported + Revenues reported - Beginning order book reported



26.05.2010

ASL MARINE (ASLM.SI)

PROFIT & LOSS SGDm 2007 2008 2009 2010e 2011e 2012eRevenues 318 404 435 474 497 401Other income 0 0 0 0 0 0Operating costs -262 -320 -338 -384 -388 -311EBITDA 56 84 98 90 109 90Depreciation & amortisation 15 20 27 30 29 29EBIT 42 64 71 60 80 61Associated companies 7 10 20 -1 0 0Net interest -4 -4 -6 -7 -8 -7Other financial itemsExtraordinary items 1 2 3 4 5 6Pre-tax profit 47 73 90 61 82 66Tax 4 9 10 10 12 9Minority interest 1 0 3 1 0 0Net profit 40 60 71 42 60 45

BALANCE SHEET SGDmIntangible assets 0 0 0 0 0 0Operating assets 216 256 397 442 452 452Associated companies 26 5 7 7 7 7Other current assets 154 244 202 197 206 172Cash & cash equivalents 48 103 96 130 124 130Total assets 444 609 703 776 789 762Equity & minority interest 157 240 295 328 373 406Interest bearing debt 101 137 160 215 195 175Non interest bearing debt 186 232 247 233 221 180Total liabilities & equity 444 609 703 776 789 762Net interest bearing debt 53 32 64 86 71 46

CASH FLOW SGDmCash earnings 61 82 106 73 88 79Working capital 1 -48 52 -9 -19 -12Investments -69 -40 -170 -74 -39 -29Debt 31 35 24 55 -20 -20Equity/dividends -7 -12 -12 -10 -15 -11Change in cash & liquids 16 18 0 34 -6 6


Share price and targetPrice SGD 0.80Price target 12m SGD 1.50Recommendation BUYKey data per shareBook value SGD 0.80P/Book X 1.00EPS gr09-12e %cagr -14.4%Financial structureMarket cap. SGDm 241Net int. bear debt SGDm 32Enterprise value SGDm 274Shares outst. million 301.4Equity/tot assets % 42.2Share price performanceAbs. 1/3/12m -16/-10/-3Rel. 1/3/12m -7/-8/-25High/Low 12m SGD 1/1STI index 2701.230days volatility % 28Company attributesReuters ticker ASLM.SISupply

ReportingQ4 2010

ManagementCEO Ang Kok TianCFO Lilian TanAddressASL Marine19 Pandan Road, Singapore 609271

H.p.: www.aslmarine.comTel +65 6264 3833




26.05.2010

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26.05.2010

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.



26.05.2010

Valuation summary

Figure 96: NAV per/sh – NOK 7.24

Vessel Type BuiltCost

(USDm)Net debt (USDm)

Equity value

(USDm)

Current equity implied value (USDm)

Implied value

(USDm)

PV of vessel's

FCF

Net Asset Value

(USDm)

NAV adjusted for debt (USDm)

NAV/ share (USD)

A B C=A-B D E=D+B F G H=G-B ILew ek Conquerer Accomm Construction Barge 2004 26 16 9 10 26 32 27 11 0.10Lew ek Chancellor Accomm Construction Barge 2007 26 16 9 9 26 35 27 11 0.10Lew ek Champion Accomm Pipe Lay Barge 2007 120 77 43 45 121 148 145 68 0.62Lew ek Arunothai Gas FPSO 2008 322 206 116 120 325 282 250 44 0.40Total 493 315 178 183 498 498 449 134 1.21NAV per share (NOK @ USDNOK 6.0) 7.24 Source: DnB NOR Markets

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



26.05.2010

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).



26.05.2010

EOC LIMITED (EOC.OL)

PROFIT & LOSS USDm 2007 2008 2009 2010e 2011e 2012eRevenues 32 110 72 118 146 125Other income 0 0 0 0 0 0Operating costs 14 67 37 57 54 54EBITDA 18 43 35 61 92 71Depreciation & amortisation 2 7 8 23 24 24EBIT 16 36 27 38 69 47Associated companies 0 0 0 0 0 0Net interest -3 -7 -5 -12 -12 -13Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 13 28 22 26 57 35Tax 2 3 0 2 3 2Minority interest 0 0 0 0 0 0Net profit 11 25 21 24 54 33

BALANCE SHEET USDmIntangible assets 0 0 0 0 0 0Operating assets 230 369 469 493 493 493Associated companies 0 0 0 35 70 70Other current assets 43 47 54 59 66 56Cash & cash equivalents 15 24 76 73 70 66Total assets 288 440 599 660 698 685Equity & minority interest 88 110 131 155 209 242Interest bearing debt 154 290 378 388 358 328Non interest bearing debt 46 39 89 117 131 115Total liabilities & equity 288 440 599 660 698 685Net interest bearing debt 139 266 303 315 289 263

CASH FLOW USDmCash earnings 13 33 32 44 77 57Working capital 5 -11 7 25 7 -7Investments -201 -147 -75 -82 -59 -24Debt 139 136 88 10 -30 -30Equity/dividends 0 0 0 0 0 0Change in cash & liquids -44 12 52 -2 -4 -4

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS USD 0.14 0.23 0.19 0.21 0.49 0.30EPS adj USD 0.14 0.23 0.19 0.21 0.49 0.30Dividend ps USD 0.00 0.02 0.00 0.00 0.00 0.00Book per share USD 1.0 1.0 1.2 1.4 1.9 2.2Year end shares million 83.9 111.0 111.0 111.0 111.0 111.0Price NOK 26.72 16.78 7.55 7.50 7.50 7.50Price USD 4.12 2.59 1.16 1.16 1.16 1.16P/E X 30.5 11.4 6.1 5.4 2.4 3.9P/E adj X 30.5 11.4 6.1 5.4 2.4 3.9Dividend yield % 0.0 0.8 0.0 0.0 0.0 0.0P/Book X 3.9 2.6 1.0 0.8 0.6 0.5EV/EBITDA adj X 27.0 12.8 12.4 6.7 3.8 4.5EV/EBIT adj X 30.3 15.5 16.1 10.7 5.1 6.8EV/Cap employed X 2.0 1.4 0.8 0.8 0.6 0.6

Share price and targetPrice NOK 7.50Price USD 1.16Price target 12m NOK 7.00Recommendation HOLDKey data per shareBook value USD 1.00P/Book X 1.16EPS gr09-12e %cagr 15.7%Financial structureMarket cap. NOKm 832Market cap. USDm 128Net int. bear debt USDm 303Enterprise value USDm 431Shares outst. million 111.0Equity/tot assets % 23.5Share price performanceAbs. 1/3/12m -31/-29/24Rel. 1/3/12m -12/-18/7High/Low 12m NOK 11/6OSEBX index 53.130days volatility % 60Company attributesReuters ticker EOC.OLSupply

ReportingQ3 2010

ManagementCEO Lim Kwee KeongCFO Chan Eng YewAddressEOC Limited15 Hoe Chiang RoadFloor 15-01H.p.: www.emasoffshore-cnp.comTel +65 6349 8535




26.05.2010

90

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EOC Limited

Rebased price (12m, NOK)

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EOC Limited


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26.05.2010

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 Ezra’s 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 Ezra’s 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 lease-

back 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.



26.05.2010

Valuation NAV SGD/sh 0.76. DCF valuation SGD/sh 0.78. BUY reiterated, tp SGD/sh 0.80.


NAV Calculation

Fleet size

(unit)Owners

hip Avg size

Vessel avg age

(yrs)


Value per

vessel (USDm)

X rate (USD/SGD)

Value per

vessel (SGDm)

Total net

value (SGDm)

Total value/

sh (SGD)Flat-Top Self Ballastable Vessel 1 100% 360x120ft 3 4 16 1.4 22 22 0.03Flat-Top Self Ballastable Vessel 1 100% 330x120ft 3 4 15 1.4 21 21 0.03Flat-Top Ballastable Vessel 3 100% 330x100ft 3 4 14 1.4 20 59 0.08Flat-Top Ballastable Vessel 1 100% 280x90ft 3 4 12 1.4 17 17 0.02Flat-Top Ballastable Vessel 1 100% 330x100ft 1 4 14 1.4 20 20 0.03Flat-Top Vessel 1 100% 330x90ft 3 4 10 1.4 14 14 0.02Jacket Launcher Ballastable Vessel 1 100% 393x110ft 3 4 14 1.4 20 20 0.03Tugs 6 100% 3000bhp 3 4 11 1.4 15 92 0.13Barges 6 100% 250x150ft 4 4 3 1.4 5 29 0.04Tugs & Barges (cargo, lift) for Gorgon proj 8 100% 300x250ft 0 36 6 1.4 9 72 0.10Multi-purpose self-propelled JU liftboat 2 100% 220ft depth 0 36 80 1.4 112 224 0.31Multi-purpose self-propelled JU liftboat 1 49% 220ft depth 0 36 80 1.4 112 55 0.08PSV 1 100% 2000dwt 8 60 15 1.4 22 22 0.03Total fleet value 33 - - - - - - 665 0.93Other financial assets - - - - - - - 17 0.02Total asset values - - - - - - - 682 0.95NIBD incl future capex (2010E) - - - - - - - 108 0.15Debt from sales leaseback of 1st liftboat 27 0.04Equity value (SGDm) - - - - - - - 546 0.76No 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 Calculation of WACCValue free cashflow 2010-2035 (SGDm) 569 Market value equity (2010) 507Value free cashflow 2035+ (SGDm) 82 - in % 82%Total value free cashflow (SGDm) 651 Net interest bearing debt (2010) 108Net debt 2010 (SGDm) 108 - in % 18%Net value free cashflow (SGDm) 543FCFE per share (SGD) 0.76 Risk premium 6%Other financial assets (FA) 17 Beta 1.2Total value per share (SGD) 0.78Upside/ (Downside) -2%

Risk free rate 4%Terminal Growth Assumptions Interest rate 5%Nominal growth year 2035+ 2.5% Tax-rate 17%Factor 14.2 Net WACC 10% Source: DnB NOR Markets Estimates

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.



26.05.2010

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.



26.05.2010

EZION HOLDINGS (EZHL.SI)

PROFIT & LOSS SGDm 2007 2008 2009 2010e 2011e 2012eRevenues 14 31 74 105 139 139Other income 0 0 0 0 0 0Operating costs 8 18 47 54 53 54EBITDA 6 13 27 52 86 86Depreciation & amortisation 2 4 8 15 19 19EBIT 4 10 18 37 67 67Associated companies 0 0 2 48 15 15Net interest 0 -1 -2 -6 -10 -9Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 4 8 18 114 72 74Tax 1 0 1 6 12 13Minority interest 0 0 0 0 0 0Net profit 3 8 17 73 60 61

BALANCE SHEET SGDmIntangible assets 0 0 0 0 0 0Operating assets 76 144 260 312 299 285Associated companies 5 6 10 17 17 17Other current assets 5 30 54 65 76 77Cash & cash equivalents 65 35 40 103 155 210Total assets 151 214 365 497 547 589Equity & minority interest 111 121 178 250 310 371Interest bearing debt 26 68 156 211 191 171Non interest bearing debt 13 26 31 36 46 47Total liabilities & equity 151 215 365 498 548 589Net interest bearing debt -39 33 115 108 36 -39

CASH FLOW SGDmCash earnings 5 12 26 87 78 80Working capital 8 -16 -18 -7 -2 0Investments -83 -69 -130 -73 -4 -5Debt 26 41 88 55 -20 -20Equity/dividends 0 0 0 0 0 0Change in cash & liquids -43 -32 -34 63 52 55


Share price and targetPrice SGD 0.63Price target 12m SGD 0.80Recommendation BUYKey data per shareBook value SGD 0.17P/Book X 3.69EPS gr09-12e %cagr 53.0%Financial structureMarket cap. SGDm 446Net int. bear debt SGDm 115Enterprise value SGDm 562Shares outst. million 714.0Equity/tot assets % 50.3Share price performanceAbs. 1/3/12m -17/-9/30Rel. 1/3/12m -8/-7/8High/Low 12m SGD 1/1STI index 2701.230days volatility % 47Company attributesReuters ticker EZHL.SISupply

ReportingQ2 2010

ManagementCEO Chew Thiam KengCFO Cheah Boon PinAddressEzion Holdings15 Hoe Chiang RoadFloor 12-05H.p.: www.ezionholdings.comTel +65 6309 0555




26.05.2010

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26.05.2010

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 Ezra’s 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.



26.05.2010

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 Calculation of WACCValue free cashflow 2010-2035 (USDm) 491 Market value equity (2009) 1024Value free cashflow 2035+ (USDm) 73 - in % 82%Total value free cashflow (USDm) 565 Net interest bearing debt (2009) 218Net debt 2010 (USDm) 218 - in % 18%Net value free cashflow (USDm) 346FCFE per share (USD) 0.52 Risk premium 7.0 %Current market value of EOC (49%) & Ezion (14%) in USDm 155 Beta 1.00Other financial assets (FA) 71Current market value of EOC per share (USD) 0.34 Risk free rate 3.0%Total value per share (USD) 0.86 Interest rate 6.0 %Total value per share (SGD) 1.22 Tax-rate 17.0 %Upside/ (Downside) -44% Net WACC 9.12%

Terminal Growth Assumptions Nominal growth year 2035+ 0.0%Factor 11.0 Source: DnB NOR Markets Estimates

Figure 101: Net asset value – SGD/sh 1.22

Ownership No Vessel name Type BHP Built

NAV (USDm)

Net ownership (USDm)

Sale-leaseback

100% 1 Lewek Roller AHT 4,000 2006 9 9 No100% 2 Lewek Ruby AHT 4,200 2005 9 9 No49% 3 Bayu Intan AHT 4,200 2005 9 4 No49% 4 Lewek Eagle AHTS 4,200 2004 9 4 No

100% 5 Lewek Robin AHT 4,900 2006 10 10 No100% 6 Lewek Sapphire AHTS 5,040 2005 10 10 No100% 7 Lewek Ebony AHTS 5,220 2006 12 12 No100% 8 Lewek Ivory AHTS 5,500 2001 12 12 No100% 9 Lewek Kea AHT 7,340 2008 20 20 Yes49% 10 Lewek Mallard AHTS 7,340 2007 20 10 No

100% 11 Lewek Martin AHTS 7,340 2007 20 20 Yes100% 12 Lewek Kestrel AHT 7,340 2007 20 20 Yes100% 13 Lewek Heron AHTS 8,000 2006 23 23 Yes100% 14 Lewek Harrier AHTS 8,000 2006 23 23 No100% 15 Lewek Penguin AHTS 10,800 2007 28 28 Yes100% 16 Lewek Petrel AHTS 10,800 2008 28 28 Yes100% 17 Lewek Pelican AHTS 10,800 2007 28 28 Yes100% 18 Lewek Plover AHTS 10,800 2008 28 28 Yes100% 19 Lewek Stork AHTS 12,000 2006 32 32 Yes49% 20 Lewek Emerald AHTS 12,000 2003 32 16 No49% 21 Lewek Swift AHTS 12,240 2005 33 16 No

100% 22 Lewek Snipe AHTS 12,240 2006 33 33 Yes100% 23 Lewek Swan AHTS 12,240 2005 33 33 Yes100% 24 Lewek ST TBN 1 AHTS 12,240 2010 35 35 No100% 25 Lewek Toucan AHTS 17,600 2008 50 50 Yes100% 26 Lewek Trogon AHTS 17,600 2008 50 50 Yes100% 27 Lewek Fulmar MFSV 24,000 2010 90 90 No100% 28 Lewek Falcon MFSV 24,000 2011 90 90 No100% 29 Lewek Emas Tanker 1978 28 28 No49% 30 Sarah Gold Crewboat 4,500 2007 4 2 No49% 31 Sarah Jade Crewboat 9,792 2007 9 4 No49% 32 Sarah Pearl Crewboat 9,792 2007 9 4 No

100% 33 Ice Maiden Flexpipe - - 124 124 No100% 34 Lewek Crusader CSV - 2010 80 80 No100% 35 Lewek Merlin AHTS 8,000 2010 25 25 No100% 36 Lewek Aries PSV 3,600 2010 30 30 No

Total 1105 1041NAV Calculation Q2'10Vessels not under sale and leaseback incl newbuilds 648Vessels under sale and leaseback 393NAV of marine services assets - yards at 2011 EV/ EBITDA of 4x (USDm) 34NAV of energy services assets at 2011 EV/ EBITDA of 2x (USDm) 28NAV of EOC (49%) & Ezion (14%), current market value 140Other financial assets 54Total assets 1296Reported NIBD 270Receivables from EOC -71NPV Future capex 312NPV sales leaseback commitments 141NPV of strike price for options 62Adjusted NIBD 715Equity value of all assets 581No of outstanding shares post equity issue 664Equity value per share (USD) 0.87Equity value per share (SGD @ USDSGD 1.4) 1.22




26.05.2010

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

0

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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 TypeCurrent

delivery dateOur initial exp and guidance

Lewek Crusader CSV Aug-10 Jun-10Lewek Fulmar MFSV Aug-10 Jun-10Lewek Falcon MFSV Mar-11 Sep-10Second liftboat Liftboat - Jun-10 Source: Company, DnB NOR Markets



26.05.2010

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.



26.05.2010

EZRA HOLDINGS (EZRA.SI)

PROFIT & LOSS USDm 2007 2008 2009 2010e 2011e 2012eRevenues 144 268 329 298 393 441Other income 0 0 0 0 0 0Operating costs 21 46 32 36 36 36EBITDA 42 33 74 55 74 85Depreciation & amortisation 6 6 6 12 16 16EBIT 36 27 69 44 59 69Associated companies 1 13 13 14 26 16Net interest -4 0 -5 -9 -12 -12Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 33 40 77 49 73 73Tax 6 8 9 3 9 9Minority interest 1 1 0 0 0 0Net profit 68 175 70 50 64 64

BALANCE SHEET USDmIntangible assets 3 10 18 28 28 28Operating assets 122 183 299 467 631 631Associated companies 95 116 164 164 164 164Other current assets 393 196 239 189 198 218Cash & cash equivalents 25 153 161 213 170 177Total assets 638 712 952 1,132 1,262 1,288Equity & minority interest 278 370 534 584 648 712Interest bearing debt 125 195 309 449 489 439Non interest bearing debt 235 146 109 99 125 137Total liabilities & equity 638 712 952 1,132 1,262 1,288Net interest bearing debt 100 9 114 203 286 229

CASH FLOW USDmCash earnings 83 203 67 51 70 80Working capital -130 82 -75 51 27 -8Investments -78 -149 -194 -190 -180 -16Debt 49 70 114 140 40 -50Equity/dividends 0 0 0 0 0 0Change in cash & liquids -76 206 -89 52 -43 7


Share price and targetPrice SGD 1.72Price USD 1.22Price target 12m SGD 1.20Recommendation SELLKey data per shareBook value USD 0.64P/Book X 1.91EPS gr09-12e %cagr -1.9%Financial structureMarket cap. SGDm 1,142Market cap. USDm 810Net int. bear debt USDm 114Enterprise value USDm 924Shares outst. million 663.8Equity/tot assets % 51.6Share price performanceAbs. 1/3/12m -24/-23/47Rel. 1/3/12m -13/-21/21High/Low 12m SGD 3/1STI index 1915.730days volatility % 45Company attributesReuters ticker EZRA.SISupply

ReportingQ3 2010

ManagementCEO Lee Chye Tek LionelCFO Tay Chin KwangAddressEZRA Holdings15 Hoe Chiang RoadFloor 15-01H.p.: www.ezraholdings.comTel +65 6742 6765




26.05.2010

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Price/Book ROE

ROEPrice/Book



26.05.2010

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 India’s 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 Q1 2010Fleet value 909NIBD end of quarter 483Remaining capex, NPV 156NIBD adj 638Equity value 271NAV/share USD 2.1NAV/share NOK @ 6 13.5



26.05.2010

DEEP SEA SUPPLY (DESSC.OL)

PROFIT & LOSS USDm 2007 2008 2009 2010e 2011e 2012eRevenues 147 190 168 129 160 211Other income 0 0 0 0 0 0Operating costs -46 -68 -71 -69 -85 -84EBITDA 101 122 96 59 75 127Depreciation & amortisation 18 24 52 38 39 39EBIT 85 86 75 21 36 88Associated companies -2Net interest -17 -39 -29 -29 -28 -27Other financial itemsExtraordinary items 0 9 -9 0 0 0Pre-tax profit 67 56 37 -8 8 61Tax -13 3 8 0 0 0Minority interest 0 0 0 0 0 0Net profit 54 59 45 -8 8 61

BALANCE SHEET USDmIntangible assets 0 0 0 0 0 0Operating assets 514 655 649 692 671 702Associated companies 0 46 49 49 49 49Other current assets 65 62 36 20 25 33Cash & cash equivalents 31 40 32 -3 -17 24Total assets 610 803 766 758 728 808Equity & minority interest 159 97 162 155 163 217Interest bearing debt 402 531 511 501 457 472Total liabilities & equity 561 628 673 657 620 690Net interest bearing debt 370 491 479 504 474 448

CASH FLOW USDmCash earnings 105 184 -62 -6 46 102Working capital -99 -27 123 46 8 10Investments -251 -215 -29 -82 -18 -70Debt 290 194 -55 7 -50 6Equity/dividends -180 -37 0 1 -1 -6Change in cash & liquids -134 99 -23 -35 -14 41

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS USD 0.43 0.38 0.35 -0.06 0.06 0.47EPS adj USD 0.43 0.38 0.35 -0.06 0.06 0.47Dividend ps USD 1.44 0.28 0.00 -0.01 0.01 0.05Book per share USD 1.3 0.7 1.2 1.2 1.3 1.7Year end shares million 125.6 130.0 130.0 130.0 130.0 130.0Price NOK 29.56 6.53 8.76 10.00 10.00 10.00Price USD 4.55 1.01 1.35 1.54 1.54 1.54P/E X 10.6 2.6 3.9 nm 24.1 3.3P/E adj X 10.6 2.6 3.9 nm 24.1 3.3Dividend yield % 31.6 28.2 0.0 -0.4 0.4 3.0P/Book X 3.6 1.4 1.1 1.3 1.2 0.9EV/EBITDA adj X 9.4 4.7 6.3 11.0 8.3 4.7EV/EBIT adj X 11.2 6.3 10.1 31.0 17.3 6.8EV/Cap employed X 1.7 0.9 0.9 1.0 1.0 0.9

Share price and targetPrice NOK 10.00Price USD 1.54Price target 12m NOK 13.50Recommendation BUYKey data per shareBook value USD 1.27NAV USD 2.36P/Book X 1.21P/NAV X 0.65EPS gr09-12e %cagr 10.3%Financial structureMarket cap. NOKm 1,300Market cap. USDm 200Net int. bear debt USDm 491Enterprise value USDm 691Shares outst. million 130.0Equity/tot assets % 20.5Share price performanceAbs. 1/3/12m -23/6/17Rel. 1/3/12m -3/17/-1High/Low 12m NOK 12/8OSEBX index 53.030days volatility % 73Company attributesReuters ticker DESSC.OLSupply

ReportingQ2 2010

ManagementCEO Odd BrevikCFO Finn Amund NorbyeAddressDeep Sea SupplyTromøyveien 224841 ArendalH.p.: www.deepseasupply.noTel +47 3705 8613




26.05.2010

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26.05.2010

Eidesvik Company Description Eidesvik was established in 1978 as an offshore supply company. The Company's headquarter is located in Bømlo, 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.



26.05.2010

EIDESVIK (EIOF.OL)

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

BALANCE SHEET NOKmIntangible assets 33 0 0 0 0 0Operating assets 3,651 3,891 4,397 4,316 4,241 4,945Associated companies 37 35 219 219 219 219Other current assets 426 415 343 335 343 372Cash & cash equivalents 123 211 306 987 1,528 1,116Total assets 4,273 4,555 5,267 5,859 6,333 6,653Equity & minority interest 1,480 842 1,902 1,977 2,176 2,412Interest bearing debt 2,049 2,743 2,839 2,839 3,039 3,039Non interest bearing debt 744 970 526 1,019 1,095 1,178Total liabilities & equity 4,273 4,555 5,267 5,835 6,309 6,630Net interest bearing debt 1,923 2,529 2,532 1,851 1,510 1,922

CASH FLOW NOKmCash earnings 110 -290 1,284 555 393 566Working capital -408 -68 75 325 157 43Investments -1,018 -431 -969 -200 -200 -1,000Debt 1,309 847 -141 0 200 0Equity/dividends 0 0 0 0 -8 -22Change in cash & liquids -7 57 250 681 541 -413

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS NOK -1.57 -19.24 31.24 3.57 7.31 8.73EPS adj NOK -1.57 -19.24 31.24 3.57 7.31 8.73Dividend ps NOK 1.00 -1.92 3.62 0.28 0.73 0.87Book per share NOK 49.1 27.9 63.1 65.6 72.2 80.0Year end shares million 30.2 30.2 30.2 30.2 30.2 30.2Price NOK 52.75 18.30 29.30 33.80 33.80 33.80P/E X nm nm 0.9 9.5 4.6 3.9P/E adj X nm nm 0.9 9.5 4.6 3.9Dividend yield % 1.9 -10.5 12.4 0.8 2.2 2.6P/Book X 1.1 0.7 0.5 0.5 0.5 0.4EV/EBITDA adj X 11.9 6.8 6.5 4.7 3.9 4.1EV/EBIT adj X 26.1 13.9 14.7 9.2 7.2 7.4EV/Cap employed X 1.0 0.9 0.7 0.6 0.4 0.5

Share price and targetPrice NOK 33.80Price target 12m NOK 40.00Recommendation BUYKey data per shareBook value NOK 49.09P/Book X 0.69EPS gr09-12e %cagr -34.6%Financial structureMarket cap. NOKm 1,019Net int. bear debt NOKm 1,923Enterprise value NOKm 2,942Shares outst. million 30.2Equity/tot assets % 33.7Share price performanceAbs. 1/3/12m -8/5/28Rel. 1/3/12m 4/7/7High/Low 12m NOK 39/23OSEBX index 344.230days volatility % 33Company attributesReuters ticker EIOF.OLSupply

ReportingQ2 2010

ManagementCEO Jan Fredrik MelingCFO Svein Ove EnerstvedtAddressEidesvikN-5443 BomloNils Fredrik MelingH.p.: www.eidesvik.noTel +47 53 44 80 00




26.05.2010

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26.05.2010

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.



26.05.2010

FARSTAD (FAR.OL)

PROFIT & LOSS NOKm 2007 2008 2009 2010e 2011e 2012eRevenues 2,318 2,959 3,258 3,046 2,807 3,607Other income 0 0 0 0 0 0Operating costs 1,137 1,291 1,521 1,781 1,729 1,764EBITDA 1,181 1,668 1,736 1,265 1,078 1,843Depreciation & amortisation 337 365 455 527 540 527EBIT 844 1,303 1,281 737 537 1,317Associated companies 65 -233 368 0 0 0Net interest -180 -222 -226 -146 -142 -98Other financial itemsExtraordinary items 196 61 0 0 0 0Pre-tax profit 925 909 1,424 591 396 1,219Tax -838 316 508 -39 -20 -61Minority interest 0 0 0 0 0 0Net profit 87 1,226 1,932 552 376 1,158

BALANCE SHEET NOKmIntangible assets 30 30 30 30 30 30Operating assets 6,743 7,926 9,809 10,582 10,312 10,048Associated companies 555 501 495 495 495 495Other current assets 548 697 823 770 709 911Cash & cash equivalents 1,461 1,743 2,491 2,040 2,032 3,035Total assets 9,348 10,912 13,663 13,932 13,594 14,537Equity & minority interest 3,607 4,440 6,372 6,924 7,299 8,458Interest bearing debt 3,806 4,873 5,373 5,373 4,773 4,073Non interest bearing debt 1,935 1,599 1,957 1,673 1,560 2,044Total liabilities & equity 9,348 10,912 13,701 13,969 13,632 14,575Net interest bearing debt 2,335 3,115 2,867 3,318 2,725 1,021

CASH FLOW NOKmCash earnings 424 1,630 2,425 884 916 1,685Working capital 264 -363 192 -35 -54 281Investments -1,055 -1,499 -2,370 -1,300 -271 -264Debt 231 1,058 500 0 -599 -699Equity/dividends 0 0 0 0 0 0Change in cash & liquids -136 827 748 -451 -8 1,003

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS NOK -2.79 29.86 49.53 14.15 9.64 29.70EPS adj NOK -2.79 29.86 49.53 14.15 9.64 29.70Dividend ps NOK 4.00 5.00 0.00 0.00 0.00 0.00Book per share NOK 92.5 113.8 163.4 177.5 187.2 216.9Year end shares million 39.0 39.0 39.0 39.0 39.0 39.0Price NOK 148.00 67.50 128.50 150.50 150.50 150.50P/E X nm 2.3 2.6 10.6 15.6 5.1P/E adj X nm 2.3 2.6 10.6 15.6 5.1Dividend yield % 2.7 7.4 0.0 0.0 0.0 0.0P/Book X 1.6 0.6 0.8 0.8 0.8 0.7EV/EBITDA adj X 6.4 3.1 4.3 6.9 7.5 3.5EV/EBIT adj X 8.9 4.0 5.8 11.8 15.1 4.9EV/Cap employed X 1.0 0.6 0.6 0.7 0.7 0.5

Share price and targetPrice NOK 150.50Price target 12m NOK 170.00Recommendation HOLDKey data per shareBook value NOK 113.85P/Book X 1.32EPS gr09-12e %cagr -15.7%Financial structureMarket cap. NOKm 5,870Net int. bear debt NOKm 3,115Enterprise value NOKm 8,984Shares outst. million 39.0Equity/tot assets % 49.7Share price performanceAbs. 1/3/12m -7/0/48Rel. 1/3/12m 5/2/27High/Low 12m NOK 164/100OSEBX index 344.230days volatility % 41Company attributesReuters ticker FAR.OLSupply

ReportingQ2 2010

ManagementCEO Karl-Johan BakkenCFO Torstein L.StavsengAddressFarstadNotenesgt. 14Terje J.K. AndersenH.p.: www.farstad.noTel +47 22 94 88 71




26.05.2010

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26.05.2010

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.



26.05.2010

HAVILA SHIPPING (HAVI.OL)

PROFIT & LOSS NOKm 2007 2008 2009 2010e 2011e 2012eRevenues 528 812 901 951 1,141 1,130Other incomeOperating costs 198 383 454 524 558 558EBITDA 331 430 448 427 584 572Depreciation & amortisation 81 91 135 201 244 255EBIT 250 338 313 208 339 317Associated companiesNet interest -82 -112 -108 -161 -194 -199Other financial itemsExtraordinary items 147 310 -3 120 0 0Pre-tax profit 340 259 598 167 145 118Tax -21 66 -119 -12 12 9Minority interest -1 10 2 0 0 0Net profit 320 315 477 155 156 128

BALANCE SHEET NOKmIntangible assets 37 0 0 0 0 0Operating assets 2,720 3,286 4,695 5,739 6,379 6,249Associated companies 1 23 48 38 38 38Other current assets 192 363 373 346 415 411Cash & cash equivalents 471 698 347 627 1,135 1,572Total assets 3,435 4,386 5,479 6,766 7,985 8,288Equity & minority interest 1,081 1,144 1,652 1,787 1,923 2,034Interest bearing debt 1,951 2,639 3,137 4,337 5,337 5,537Non interest bearing debt 402 604 690 651 733 726Total liabilities & equity 3,435 4,386 5,479 6,775 7,994 8,298Net interest bearing debt 1,467 1,924 2,773 3,693 4,184 3,946

CASH FLOW NOKmCash earnings 400 616 456 378 358 382Working capital 144 -127 144 -53 55 -1Investments -1,066 -644 -1,566 -1,244 -885 -126Debt 456 760 509 1,200 1,001 202Equity/dividends 0 0 0 0 -20 -20Change in cash & liquids -66 606 -457 280 508 436

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS NOK 20.05 19.73 29.90 9.74 9.80 8.02EPS adj NOK 9.31 12.63 5.41 1.64 9.80 8.02Dividend ps NOK 12.50 2.56 3.89 1.27 1.27 1.04Book per share NOK 67.8 71.7 103.5 112.0 120.5 127.5Year end shares million 16.0 16.0 16.0 16.0 16.0 16.0Price NOK 119.00 34.50 59.50 58.50 58.50 58.50P/E X 5.9 1.7 2.0 6.0 6.0 7.3P/E adj X 12.8 2.7 11.0 35.7 6.0 7.3Dividend yield % 10.5 7.4 6.5 2.2 2.2 1.8P/Book X 1.8 0.5 0.6 0.5 0.5 0.5EV/EBITDA adj X 10.2 5.7 8.2 10.7 8.7 8.5EV/EBIT adj X 13.4 7.4 11.7 23.1 15.0 15.3EV/Cap employed X 1.1 0.7 0.8 0.8 0.7 0.6

Share price and targetPrice NOK 58.50Price target 12m NOK 80.00Recommendation BUYKey data per shareBook value NOK 103.49NAV NOK 80.00P/Book X 0.57P/NAV X 0.73EPS gr09-12e %cagr 14.0%Financial structureMarket cap. NOKm 934Net int. bear debt NOKm 1,924Enterprise value NOKm 2,858Shares outst. million 16.0Equity/tot assets % 26.2Share price performanceAbs. 1/3/12m -15/-7/63Rel. 1/3/12m -3/-5/42High/Low 12m NOK 72/35OSEBX index 344.230days volatility % 72Company attributesReuters ticker HAVI.OLSupply

ReportingQ2 2010

ManagementCEO Njål SævikCFO Arne Johan DaleAddressHavila ShippingPO BOX 215N-6099 Fosn AvagH.p.: www.havila.noTel +47 53 44 80 00




26.05.2010

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26.05.2010

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).

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 USDmFleet 1379WIS 160Assets 1539CAPEX 654NIBD 159Adj for min and ass. 35NAV 761#shares 360

NAV/sh USD 2.1NAV/sh NOK 14

Gearing 51%



26.05.2010

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 day-rate 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 1000-2000 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).



26.05.2010

SIEM OFFSHORE (SIOFF.OL)

PROFIT & LOSS USDm 2007 2008 2009 2010e 2011e 2012eRevenues 159 193 184 234 317 390Other income 0 0 0 0 0 0Operating costs 80 105 126 149 192 198EBITDA 80 88 58 85 125 191Depreciation & amortisation 19 32 8 51 66 69EBIT 61 56 50 38 66 111Associated companiesNet interest -10 -7 -5 -19 -33 -33Other financial itemsExtraordinary items 0 0 0 0 0 0Pre-tax profit 123 -24 128 19 33 78Tax 2 0 -2 1 1 2Minority interest -1 2 1 0 0 0Net profit 122 -26 129 17 32 76

BALANCE SHEET USDmIntangible assets 9 13 14 14 14 14Operating assets 504 615 971 1,406 1,520 1,568Associated companies 18 19 33 33 33 33Other current assets 1,039 77 101 94 127 156Cash & cash equivalents 188 73 91 144 154 229Total assets 1,759 864 1,284 1,767 1,925 2,068Equity & minority interest 499 426 703 714 746 822Interest bearing debt 269 279 446 896 996 1,046Non interest bearing debt 991 159 138 153 180 196Total liabilities & equity 1,759 864 1,287 1,764 1,922 2,065Net interest bearing debt 80 139 282 679 769 744

CASH FLOW USDmCash earnings 139 8 139 68 98 145Working capital -34 47 -33 21 -9 -5Investments -281 -213 -385 -486 -180 -117Debt 93 9 167 450 101 51Equity/dividends 0 0 0 0 0 0Change in cash & liquids -83 -149 -112 53 10 74

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS USD 0.34 -0.07 0.36 0.05 0.09 0.21EPS adj USD 0.34 -0.07 0.36 0.05 0.09 0.21Dividend ps USD 0.00 0.00 0.00 0.00 0.00 0.00Book per share USD 1.4 1.2 2.0 2.0 2.1 2.3Year end shares million 359.8 359.8 359.8 359.8 359.8 359.8Price NOK 23.10 7.61 10.01 9.80 9.80 9.80Price USD 3.55 1.17 1.54 1.51 1.51 1.51P/E X 10.5 nm 4.3 31.4 17.1 7.1P/E adj X 10.5 nm 4.3 31.4 17.1 7.1Dividend yield % 0.0 0.0 0.0 0.0 0.0 0.0P/Book X 2.6 1.0 0.8 0.8 0.7 0.7EV/EBITDA adj X 16.8 6.2 13.8 14.0 10.2 6.6EV/EBIT adj X 22.0 9.7 16.2 31.5 19.4 11.3EV/Cap employed X 1.8 0.8 0.7 0.7 0.7 0.7

Share price and targetPrice NOK 9.80Price USD 1.51Price target 12m NOK 14.00Recommendation BUYKey data per shareBook value USD 1.39NAV USD 2.12P/Book X 1.09P/NAV X 0.71EPS gr09-12e %cagr -16.1%Financial structureMarket cap. NOKm 3,526Market cap. USDm 543Net int. bear debt USDm 139Enterprise value USDm 681Shares outst. million 359.8Equity/tot assets % 39.5Share price performanceAbs. 1/3/12m -18/5/19Rel. 1/3/12m 2/16/1High/Low 12m NOK 12/8OSEBX index 53.030days volatility % 65Company attributesReuters ticker SIOFF.OLSupply

ReportingQ2 2010

ManagementCEO Terje SørensenCFO Dagfinn BlieAddressSiem OffshorePO Box 425N-4664 Krisiansands, NorwayH.p.: www.siemoffshore.comTel +47 95 29 64 00




26.05.2010

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26.05.2010

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.



26.05.2010

SOLSTAD (SOFF.OL)

PROFIT & LOSS NOKm 2007 2008 2009 2010e 2011e 2012eRevenues 2,125 2,249 2,534 2,683 2,882 3,128Other income 0 0 0 0 0 0Operating costs 833 932 1,337 1,441 1,472 1,475EBITDA 1,292 1,317 1,197 1,242 1,410 1,653Depreciation & amortisation 437 491 729 548 578 589EBIT 855 826 461 695 832 1,064Associated companiesNet interest -128 -259 -240 -273 -273 -299Other financial itemsExtraordinary items 106 0 0 0 0 0Pre-tax profit 1,106 -114 864 389 559 765Tax 403 -163 -192 24 20 27Minority interest 23 -17 -11 0 0 0Net profit 680 66 1,066 365 539 739

BALANCE SHEET NOKmIntangible assets 0 0 0 0 0 0Operating assets 6,660 7,570 9,885 10,467 10,999 10,891Associated companies 1,180 1,110 28 28 28 28Other current assets 798 734 848 898 965 1,047Cash & cash equivalents 1,053 830 1,445 1,307 1,344 2,733Total assets 10,315 10,244 12,267 12,761 13,396 14,760Equity & minority interest 3,717 3,721 4,630 4,995 5,535 6,273Interest bearing debt 4,437 5,264 6,945 6,945 6,945 7,445Non interest bearing debt 2,160 1,259 691 820 916 1,042Total liabilities & equity 10,315 10,244 12,267 12,761 13,396 14,760Net interest bearing debt 2,761 4,435 5,439 5,577 5,540 4,651

CASH FLOW NOKmCash earnings 1,138 690 1,710 932 1,023 1,328Working capital 661 -855 -368 60 124 43Investments -2,540 -707 -1,943 -1,130 -1,110 -481Debt 662 683 1,444 0 0 500Equity/dividends -11 0 0 0 0 0Change in cash & liquids -90 -190 844 -138 37 1,390

VALUATION 2007 2008 2009 2010e 2011e 2012eEPS NOK 15.21 1.74 30.33 9.66 14.27 19.54EPS adj NOK 15.21 1.74 30.33 9.66 14.27 19.54Dividend ps NOK 4.00 2.00 2.50 0.00 0.00 0.00Book per share NOK 98.4 98.4 122.5 132.2 146.4 166.0Year end shares million 37.8 37.8 37.8 37.8 37.8 37.8Price NOK 155.00 58.50 108.00 113.50 113.50 113.50P/E X 10.2 33.6 3.6 11.7 8.0 5.8P/E adj X 10.2 33.6 3.6 11.7 8.0 5.8Dividend yield % 2.6 3.4 2.3 0.0 0.0 0.0P/Book X 1.6 0.6 0.9 0.9 0.8 0.7EV/EBITDA adj X 5.8 4.2 7.9 7.9 7.0 5.4EV/EBIT adj X 8.7 6.7 17.5 14.2 11.8 8.4EV/Cap employed X 0.9 0.6 0.8 0.8 0.8 0.7

Share price and targetPrice NOK 113.50Price target 12m NOK 117.50Recommendation HOLDKey data per shareBook value NOK 98.44P/Book X 1.15EPS gr09-12e %cagr -13.6%Financial structureMarket cap. NOKm 4,290Net int. bear debt NOKm 4,435Enterprise value NOKm 8,724Shares outst. million 37.8Equity/tot assets % 39.0Share price performanceAbs. 1/3/12m -8/6/46Rel. 1/3/12m 4/8/25High/Low 12m NOK 130/79OSEBX index 344.230days volatility % 49Company attributesReuters ticker SOFF.OLSupply

ReportingQ2 2010

ManagementCEO Lars Peder SolstadCFO Eivind KvilhaugAddressSolstadPostveien 25

H.p.: www.solstad.noTel +47 52 85 65 00




26.05.2010

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26.05.2010

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)

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Figure 105: Asia OSV size breakdown

India, Far East, Southeast Asia Markets

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26.05.2010

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

Asia vs Rest of the World (AHTS)

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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.



26.05.2010

Figure 107: AHTS global fleet + newbuilds size breakdown

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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.



26.05.2010

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)

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2006

2007

2008

2009

2010E

2011E

2012E

Year built

Fle

et

co

un

t



Newbuilds able to make it to the

market



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.



26.05.2010

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)

-20

-10

0

10

20

30

40

50

60

70

80

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011E

Year built

Fle

et

co

un

t



Newbuilds able to

make it to the market



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.



26.05.2010

Figure 110: Yards breakdown for global newbuilds – India dominates

0

2

4

6

8

10

12

14

16

18

20

Indi

a - A

BGC

hina

- D

ayan

gC

hina

- Si

nopa

cific

Pola

nd -

Rem

onto

wa

Chi

na -

Chi

na -

Fujia

n So

uthe

ast

Chi

na -

Gua

ngzh

ouIn

done

sia

- Bat

amec

Shi

pyar

dC

hina

- Q

ingd

ao Q

ianj

inIn

dia

- Bha

rati

Italy

- Fi

ncan

tieri

Mal

aysi

a -

Chi

na -

Coa

stal

Con

tract

sS

inga

pore

- P

an U

nite

dSo

uth

Kore

a - S

ekw

ang

Hea

vy In

dust

ries

Viet

nam

- Ak

er Y

ards

Chi

na -

Wuc

hang

Japa

n - U

nive

rsal

Mal

aysi

a - M

uhib

bah

Mar

ine

Sing

apor

e - K

eppe

l Sin

gmar

ine

Chi

na -

Jian

gsu

Zhen

jiang

Indo

nesi

a - D

rydo

cks

Wor

ldM

alay

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- NG

V Te

chN

orw

ay -

Ake

rN

orw

ay -

Berg

enN

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ay -

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en V

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Sing

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SL

Sing

apor

e - L

abro

yS

pain

- As

tille

ros

Zam

akon

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hina

- Yu

exin

Indo

nesi

a - M

arco

Pol

o sh

ipya

rdJa

pan

- Niig

ata

Mal

aysi

a - C

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al C

ontra

cts

Mal

aysi

a - G

rade

One

Mar

ine

Chi

na -

Gua

ngzh

ou H

angt

ong

Chi

na -

MLC

Chi

na -

Zhuh

ai J

aya

Shi

pyar

dIn

dia

- Coc

hin

Indo

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a - B

ritoi

lIn

done

sia

- Mic

lyn

yard

Mal

aysi

a - M

LC T

ongb

aoM

alay

sia

- MSE

T Sh

ipbu

ildin

gM

alay

sia

- Pac

ific

Cre

stM

alay

sia

- Tuo

ng A

ik S

hipy

ard

Nor

way

- A

ker L

angs

ten

Rom

ania

- D

aew

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anga

liaS

audi

Ara

bia

- Zam

ilSi

ngap

ore

- Pre

side

ntSr

i Lan

ka -

Col

ombo

Doc

kyar

dC

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- c/

o Tu

ong

Aik

Ship

yard

Chi

na -

Gua

ngzh

ou P

anyu

Lin

gsha

nC

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- Li

ngsh

an P

anyu

Chi

na -

Nam

Che

ong

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g K

ong

- Che

oy L

eeIn

dia

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done

sia

- Bat

amec

/ G

uanx

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alay

sia

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Nam

Che

ong

Mal

aysi

a - F

ujia

n S

outh

east

M

alay

sia

- Nam

Che

ong

Mal

aysi

a - S

apor

Shi

pbui

ldin

gN

orw

ay -

Hav

yard

Nor

way

- H

avya

rd L

eirv

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orw

ay -

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lebu

st V

erft

Nor

way

- U

lste

in V

erft

Pol

and

- Pol

and

- Rem

onto

wa

Sin

gapo

re -

Sing

apor

e - C

ochi

nS

inga

pore

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pain

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mon

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nion

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al V

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cia

USA

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f of M

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SA, G

oM -

Nor

th A

mer

ican

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lder

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Nor

th A

mer

ican

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pbui

ldin

gU

SA, G

ulf o

f Mex

ico

- Tam

paSh

ip


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. Figure 111: Asia vs Rest of the World PSV fleet

Asia vs Rest of the World (PSV)

-20

0

20

40

60

80

100

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

Fle

et

co

un

t

Asia count Rest of the world count Cancelled/ delayed/ retired


Newbuilds able to make it to the

market

Vessels likely to be cancelled/delayed


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%).



26.05.2010

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

401

196

273

158

15

55

39

114

14%

72%

4%

28%

0

50

100

150

200

250

300

350

400

450

<2000dwt 2000-3000dwt 3001-4000dwt >4000dwt0%

10%

20%

30%

40%

50%

60%

70%

80%



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%.



26.05.2010

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)

-15

5

25

45

65

85

105

125

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

Fle

et

co

un

t

Asia count Rest of the world count Cancelled/ delayed/ retired

Newbuilds able to

make it to the market

Vessels likely to be cancelled/delayed


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.



26.05.2010

Figure 114: Yards Breakdown for the PSV newbuilds, Chinese yards dominate

0

2

4

6

8

10

12

14

16

18

Chi

na -

Fujia

n M

awei

Chi

na -

Sino

paci

fic

Indi

a - C

ochi

n Sh

ipya

rd

USA

, GoM

- Ta

mpa

Shi

p

Chi

na -

Nor

way

- Ak

er Y

ards

USA

, GoM

- N

orth

Am

eric

an S

hipb

uild

ers

Indi

a - B

hara

ti

Braz

il - W

ilson

,Son

s

Braz

il - N

avsh

ip

USA

, GoM

- Ea

ster

n Sh

ipbu

ildin

g

Braz

il - A

llianc

a

Italy

- R

oset

ti M

arin

o

Japa

n - U

nive

rsal

Net

herla

nds

- Shi

pyar

d D

e H

oop

Thai

land

- Ita

lthai

USA

, GoM

-

Braz

il - S

TX B

razi

l

Indi

a - A

BG

Sing

apor

e - K

eppe

l Sin

gmar

ine

USA

, GoM

- Bo

llinge

r - L

ockp

ort,

Loui

sian

a

Chi

na -

Wils

on

Chi

na -

Wuc

hang

Indi

a - M

azag

on D

ock

Indi

a - T

ebm

a

Indo

nesi

a - B

atam

ec

Mal

aysi

a - G

rade

One

Nor

way

-

Nor

way

- H

elle

soy

Verft

Nor

way

- Si

mek

Nor

way

- ST

X Br

evik

Nor

way

- U

lste

in V

erft

Sing

apor

e - D

rydo

cks

Wor

ld

Spai

n, M

edite

rran

ean

- Ast

illero

s de

Sev

illa

USA

, GoM

- N

avSh

ip B

razi

l

USA

, GoM

- VT

Hal

ter M

arin

e

Can

ada,

Eas

t - H

alifa

x

Chi

le -

Asen

av

Chi

na -

Jing

jiang

Nan

yang

Chi

na -

Zhej

iang

Nig

eria

- W

est A

tlant

ic S

hipy

ard

Nor

way

- Fj

ells

trand

Ver

ft

Nor

way

- H

avya

rd L

eirv

ik A

S

Nor

way

- Kl

even

Ver

ft

Spai

n, M

edite

rran

ean

- Ast

illero

s G

onda

n

USA

, GoM

- Q

uality

USA

, GoM

- Th

oma-

Sea

Flee

t cou

nt

Yard breakdow n for PSV new builds

Source: DnB NOR Markets, ODS-Petrodata



26.05.2010

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

Brazil vs Rest of the World (AHTS)

0

50

100

150

200

250

300

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

Fle

et

count

Brazil count Dec 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)

0

2

4

6

8

10

12

14

16

18

20

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

Fle

et

count

Brazil count Dec

Source: DnB NOR Markets, ODS-Petro-data as of April 2010



26.05.2010

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

15

37

47

13

0

1

1

2

0

10

20

30

40

50

60

<5000bhp 5000-12000bhp 12001-18000bhp >18000bhp

Existing fleet Newbuilds (2010-2012)


Figure 118: Global AHTS/AHT size breakdown + newbuilds

AHTS Global Fleet + Newbuilds

296

947

205

68

11

232

66

48

32%

71%

24%

4%0

200

400

600

800

1000

1200

1400

<5000bhp 5000-12000bhp 12001-18000bhp >18000bhp0%

10%

20%

30%

40%

50%

60%

70%

80%



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.



26.05.2010

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.



26.05.2010

Figure 119: Brazil’s offshore activities

Source: Financial Times, Global trends; NIPE-Unicamp, IBGE, CTC



26.05.2010

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)

0

10

20

30

40

50

60

70

80

1965

1966

1967

1968

1969

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1971

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1973

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1984

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2004

2005

2006

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2008

2009

2010E

2011E

2012E

2013E

Year built

Fle

et

co

un

t

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)

0

1

2

3

4

5

6

7

8

9

10

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

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1989

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1991

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1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

Year built

Fle

et

co

un

t

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.



26.05.2010

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)

0

10

20

30

40

50

60

70

80

90

100

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

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1981

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2010E

2011E

2012E

2013E

Year built

Fle

et

co

un

t

Brazil count Rest of the world count


Source: DnB NOR Markets, ODS-Petrodata as of April 2010

Figure 123: Brazil PSV fleet isolated

Brazil PSV fleet

0

2

4

6

8

10

12

14

16

18

20

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

Fle

et

co

un

t

Brazil count


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%).



26.05.2010

Figure 124: PSV size breakdown in Brazil – larger sized to meet deepwater requirements


25 24

43

22

0

10

1

15

0

5

10

15

20

25

30

35

40

45

50

<2000dwt 2000-3000dwt 3001-4000dwt >4000dwt

Existing fleet Newbuilds (2010-2012)


Figure 125: PSV global fleet + newbuilds size breakdown


401

196

273

158

15

55

39

114

14%

72%

4%

28%

0

50

100

150

200

250

300

350

400

450

<2000dwt 2000-3000dwt 3001-4000dwt >4000dwt0%

10%

20%

30%

40%

50%

60%

70%

80%



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



26.05.2010

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 new vessels will be delivered from 2010-2012, with a majority of 139 vessels due this year. Likewise in our opinion, the market for larger PSVs is likely to see less cancellations/ delays due to structural change towards 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)

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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.



26.05.2010

Newbuild drilling rig plan from Brazil to stir local demand for OSVs Figure 127: Brazil rig count – massive growth going forward

Rigs (JU, Semi, DS) in Brazil

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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…



26.05.2010

Figure 128: Estimates on new-build orders (top-down approach) – Global vs Brazil

Global BrazilRest of

the world% of Brazil Global Brazil

Rest of the world

% of Brazil Global Brazil

Rest of the world

% of Brazil

Year Jack-up Jack-up Jack-up to World Semi Semi Semi to World Drillship Drillship Drillship to World Total2006 30 - - - 19 - - - 9 - - - 582007 35 - - - 12 - - - 16 - - - 632008 22 - - - 11 - - - 0 - - - 332009 16 - - - 1 - - - 2 - - - 192010E 10 0 10 0% 13 8 5 62% 22 18 4 82% 452011E 13 0 13 0% 10 4 6 40% 9 4 5 44% 322012E 14 0 14 0% 10 3 7 30% 9 4 5 44% 332013E 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


the world Global BrazilRest of the

world Global BrazilRest of

the worldYear Jack-up Jack-up Jack-up Semi Semi Semi Drillship Drillship Drillship2010E 140 140 140 500 500 500 600 600 6002011E 140 140 140 500 500 500 600 600 6002012E 140 140 140 500 500 500 600 600 6002013E 140 140 140 500 500 500 600 600 600


the world% of Brazil Global Brazil

Rest of the world

% of Brazil Global Brazil

Rest of the world

% of Brazil

Year Jack-up Jack-up Jack-up to World Semi Semi Semi to World Drillship Drillship Drillship to World Total2010E 1,400 0 1,400 0% 6,500 4,000 2,500 62% 13,200 10,800 2,400 82% 211002011E 1,820 0 1,820 0% 5,000 2,000 3,000 40% 5,400 2,400 3,000 44% 122202012E 1,960 0 1,960 0% 5,000 1,500 3,500 30% 5,400 2,400 3,000 44% 123602013E 2,100 0 2,100 0% 5,000 1,000 4,000 20% 6,000 1,200 4,800 20% 13100

Total/ Avg 9520 0 7280 0% 22000 8500 13000 38% 31200 16800 13200 48% 62720

Global newbuild units

Newbuild price (base case)

Total order value (USDm)


Figure 129: Petrobras upcoming tender details and timeline

Local content: New yard investment/ expansion of existing yard capacity in Brazil

Previous tender plan

• Original targeting 40 ultra-deepwater 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

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

• Galvão

• Mendes Junior Engenharia

Sep 09

Phase 1a

To be owned by Petrobras:

• 7x drillships of proven designs at the same yard

• 2x either semi or drillships, unproven designs allowed

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

Board approves plan for 28x UDW rigs to be built locally

Tender structure 1

May 08

May/June 10 (revised from Mar)

Tender close

Oct 09

Invitations of tender package

Est Q4 2010

Contract awards

Late 2010-2011

Delivery 2013-2018

1st drillship latest delivery 48 months from contract

2nd drillship latest delivery 58 months from contract

3rd – 7th drillshipslatest delivery 8-month interval from 58 months from contract

2x of the 9 rigs owned by Petrobras– latest delivery within 40 months from contract

Late 2013April 10

• Part one: PBR to own and award 28x drillships divided into 4x batches, with each batch containing 7x drillshipseach 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

Latest changes

Tender structure 3

Phase 1a adjustment

To be owned by Petrobras:

• 7x drillships of 2x batches each of proven designs to the yards = 14x drillshipsdivided 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

First change to tender structure

Tender structure 2

Mar 10

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.




26.05.2010

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 Semi Jack-Up Drillship Total rigsRatio of rig to OSV

(DnB NOR est)No of OSVs

needed2010 0 0 0 0 3 02011 0 2 0 2 3 62012 2 0 0 2 3 62013 5 1 7 13 3 392014 10 2 16 28 3 842015 4 2 5 11 3 33Total 21 7 28 56 18 168


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 2010-2012, 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.



26.05.2010

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 VesselRate ('000 USD/day)

Rate reduction

Final Rate ('000

USD/day)Petro Santos ER Cristina 37 2.8 34Petro Santos ER Luiza 39 2.8 36Solstad Shipping Normand Borg 40 0.0 40Petro Santos ER Vittoria 40 2.8 37Finarge Armamento AH Valleta 42 2.8 39Maersk Supply Service Maersk Asserter 47 0.0 47Maersk Supply Service Maersk Advancer 48 0.0 48DSND Consub (Siem Offshore) Siem Emerald 48 2.5 46DSND Consub (Siem Offshore) Siem Pearl 52 2.5 50DSND Consub (Siem Offshore) Siem Sapphire 52 2.5 50Farstad Far Sovereign 54 0.0 54DSND Consub (Siem Offshore) Siem Diamond 55 2.5 53DSND Consub (Siem Offshore) Siem Ruby 58 2.5 55DSND Consub (Siem Offshore) Siem Topaz 59 2.5 57Viking Supply N Jord Viking 65 2.8 62Galaxia Marítima (Ezra) Lewek Fulmar 90 2.8 87 Source: Various shipbrokers

Figure 132: Tender 2 - 18,000+bhp AHTS


Rate reduction

Final Rate ('000

USD/day)Petro Santos ER Vittoria 36 3.8 32Petro Santos ER Luiza 37 3.8 33Petro Santos ER Cristina 38 3.8 34Solstad Shipping Normand Borg 40 2.0 38Finarge Armamento AH Valleta 41 4.8 36JavaBoat John P Laborde 45 0.0 45JavaBoat Richard M Currance 46 0.0 46Maersk Supply Service Maersk Asserter 47 2.0 45Maersk Supply Service Maersk Advancer 48 2.0 46DSND Consub (Siem Offshore) Siem Emerald 48 3.5 45Norskan Offshore Skandi Giant 48 1.0 47Farstad Far Sovereign 51 1.0 50DSND Consub (Siem Offshore) Siem Pearl 52 3.5 49DSND Consub (Siem Offshore) Siem Sapphire 52 3.5 49Norskan Offshore Skandi Admiral 53 2.3 51DSND Consub (Siem Offshore) Siem Diamond 55 3.5 52DSND Consub (Siem Offshore) Siem Ruby 58 3.5 54DSND Consub (Siem Offshore) Siem Topaz 59 3.5 56Viking Supply N Jord Viking 65 4.8 60Galaxia Marítima (Ezra) Lewek Fulmar 90 3.8 86 Source: Various shipbrokers



Rate reduction

Final Rate ('000

USD/day)Farstad Far Santana 46 0.0 46Maersk Supply Service Maersk Asserter 47 0.0 47Maersk Supply Service Maersk Advancer 48 0.0 48DSND Consub (Siem Offshore) Siem Emerald 48 2.5 46DSND Consub (Siem Offshore) Siem Pearl 52 2.5 50DSND Consub (Siem Offshore) Siem Sapphire 52 2.5 50Olympic Shipping Olympic Pegasus 54 0.0 54DSND Consub (Siem Offshore) Siem Diamond 55 2.5 53DSND Consub (Siem Offshore) Siem Ruby 58 2.5 55DSND Consub (Siem Offshore) Siem Topaz 59 2.5 57Farstad Far Sagaris 62 0.3 62Finarge Armamento AH Valleta DisqualiGalaxia Marítima (Ezra) Lewek Fulmar DisqualiHavila Shipping Havila Venus DisqualiSolstad Shipping Normand Ranger Disquali Source: Various shipbrokers



26.05.2010



Rate reduction

Final Rate ('000

USD/day)DSND Consub (Siem Offshore) Siem Emerald 48 2.5 46Maersk Supply Service Maersk Asserter 50 0.0 50DSND Consub (Siem Offshore) Siem Pearl 52 2.5 50DSND Consub (Siem Offshore) Siem Sapphire 52 2.5 50Maersk Supply Service Maersk Advancer 53 0.0 53DSND Consub (Siem Offshore) Siem Diamond 55 2.5 53Solstad Shipping Normand Ranger 57 0.0 57Solstad Shipping Normand Prosper 57 2.5 55DSND Consub (Siem Offshore) Siem Ruby 58 5.0 53Havila Shipping Havila Venus 58 5.0 53DSND Consub (Siem Offshore) Siem Topaz 59 5.0 54Norskan Offshore Skandi Skolten 60 6.5 53Farstad Far Sagaris 62 4.0 58REM Shipping REM Gambler 64 4.0 60K Line Offshore KL Sandefjord 69 4.0 65Norskan Offshore Skandi Hercules 70 6.5 63Olympic Shipping Olympic Hera 72 5.0 67Farstad Far Xogun 72 4.0 68Norskan Offshore Skandi Amazonas 80 6.5 73Norskan Offshore Skandi Iguaçu 80 6.5 73Galaxia Marítima (Ezra) Lewek Fulmar 90 5.0 85 Source: Various shipbrokers



26.05.2010

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. 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