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    Deep Sea Supply makes a loss

    Company News // February 22, 2016

    In the fourth quarter of 2015, Deep Sea Supply reported consolidated revenues US$22.9 million and EBITDA of US$10.5 million. Following ordinary depreciation of US$13.0 million, extraordinary impairments of book value of vessels of US$117.2 million, financial expenses of US$D5.5 million and negative currency items of US$0.7 million,  the company's pre-tax result was a loss of US$S126.3 million.

    For the 12 months period ending 31 December 2015, the company reported a loss of US$119.8 million.

    Revenues fell steeply as a result of lower utilization due to vessels coming off long term charters not being replaced by new contracts.

    "When testing the book value of all assets for possible impairments, the company has considered both market valuations received from independent ship brokers and an internal cashflow valuation on a per vessel basis. Such cashflow valuation reflects the current low contract coverage, significant number of vessels in lay-up and a very difficult market outlook.

    "The result of these tests shows an impairment of book values of US$123.7 million for the total fleet on a consolidated basis. Of this, US$6.5 million was deducted from deferred gain in the balance sheet, resulting in a P&L effect of the extraordinary impairment of US$117.2 million.

    The company's bank loan facilities, except a senior loan facility, are due to mature in 2019 or later. The senior loan has maturity date end of October 2016 and a balloon payment of US$117 million. The company said dialogue with the banks to refinance theballoon payment is in progress and will continue in the next months.

    The company has sold two AHTS vessels, Sea Lynx, and Sea Bear. The vessels will be delivered to their new owners by the end of February 2016.

    During the fourth quarter of 2015, the company says it saw a continued weakening of the global OSV market. In Brazil, the situation remains difficult with reduced activity and foreign flagged vessels being blocked by vessels with local flag. The North Sea spot market is challenging with unsustainable rate levels and low utilization.

    "No improvement in the market situation for OSVs is expected in the short to medium term," said the company. "Following the sale of two AHTS vessels, the company has no vessels in the North Sea spot market. The contract coverage for 2016 for the company is not satisfactory. DESS is currently pursuing some term opportunities,
    however the competition is fierce and rate levels are low."

    As a consequence of the weak market, Deep Sea Supply saqid it will continue to lay up vessels that do not have any fixed activity the next months. In addition to laying up vessels to reduce cost, the company is working hard to further reduce operating expenses for the vessels in operation.

    The 50 per cent owned joint venture with BTG (DESS BTG) which owns 21 vessels, is in a challenging financial position with a significantly  reduced contract backlog following the expiry of many term charters without new contracts being entered into. The cash position was US$25.7 million as of the end of 2015, and the company is
    dependent on certain adjustments of its financial obligations going forward. Financing of DESS BTG is non-recourse to Deep Sea Supply Plc.

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