Reference is made to the interim financial report for Solstad Offshore ASA
("SOFF") for Q3 2018 as announced on 06.11.2018. At the time of the report, SOFF
considered that it was not necessary to carry out an impairment test with
respect to SOFF's fleet values, as they were supported by independent broker
valuations and the values realized from historic vessel sales. Accordingly, no
impairment charge was recognized in SOFF's Q3 2018 reporting. However, the Q3
2018 report highlighted that the vessel book values and shareholders' equity
were expected to be under pressure going forward.
In a decision dated 19.12.2018, Finanstilsynet expressed that SOFF should have
given more weight to its price/book ratio and to the challenging market
situation. On that basis, Finanstilsynet requested SOFF to carry out an
impairment test of SOFF's fleet by calculating its recoverable amount as per Q3
2018.
SOFF has therefore carried out an impairment test as of Q3 2018 in accordance
with Finanstilsynet's requirement. The test indicates that an impairment of
fleet values of NOK 850 million should be recognized as per Q3 2018. The
impairment mainly derives from:
i. An expected delay in the market recovery
ii. An increase in SOFF's estimated weighted average cost of capital
to 9.3%
In the Q4 2018 interim financial report, SOFF's Q3 2018 numbers will be restated
to reflect the said impairment. As per 30.09.2018 SOFF's revised consolidated
net loss for the period from 01.01.2018 until 30.09.2018 will be increased from
MNOK 1,790 to MNOK 2,640, and its revised shareholder's equity at 30.09.2018
will be decreased from MNOK 3,326 to MNOK 2,476.
As per year-end 2018, there were indications of further delay in the expected
market recovery, adversely affecting expected long-term utilization and charter
rates. Furthermore, there was a significant drop in the oil price in the fourth
quarter. On this basis, SOFF considers that there is a risk of further
impairments of fleet values to be recognized in the Q4 2018 accounts. However,
these calculations are not yet finalized. Such an impairment will put the book
equity at risk.
On 20.12.2018 SOFF announced that a number of the financial creditors of SOFF
have agreed to a suspension and deferral of payments of principal and interest
under a number of loan agreements until 20.06.2019.
Following the agreement to suspend payment of principal and interest, SOFF will,
in the months to come, continue its close dialogue with its financial creditors
with an ambition to find a long-term solution to its financial situation. The
solution is expected to involve a comprehensive restructuring of SOFF's balance
sheet. Further updates will be provided in due course.
The SOFF group otherwise continues its operations in its ordinary course.
Skudeneshavn January 23rd, 2019
Contacts
Anders Hall Jomaas CFO, at +47 40 04 29 18
Solstad Offshore ASA
www.solstad.com
This information is subject of the disclosure requirements according to the
Norwegian Securities Trading Act section §5-12.