HitecVision AS First six months 2015

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HitecVision AS

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HitecVision AS – First six months 2015

HitecVision is a leading investor in the international oil and gas industry, and the largest private equity investor in Europe to specialize exclusively in this industry. From its offices in Stavanger, Oslo and Houston, HitecVision invests in mid-size companies across the whole oil and gas sector in Europe and North America, including oilfield services and technology companies and exploration and production (E&P) companies. The staff of 60 is largely drawn from the oil industry itself, combining the company’s over 25 years of investment history in this industry with the staff’s operational know-how and experience to create value in the portfolio companies.

Over the last 25 years, HitecVision has invested in, established or acquired over 150 companies (including add-ons) and exited more than 100 of these. HitecVision currently advises five private equity funds with a total committed capital base of USD 5 billion, drawn from an institutional investor base that comprises leading European and American institutions, pension funds, fund-of-funds, sovereign wealth funds, endowments and family offices.

HIGHLIGHTS

The backdrop for this report is the decline in the

oil price over the last year, and the

corresponding industry downturn, which is

affecting our activities in several ways. On the

one hand, most of the Funds’ portfolio

companies are feeling the impact of the downturn

– although to a varying degree. The growth

challenges of recent years have in many cases

been replaced by challenges related to

down-scaling and right-sizing of companies, combined

with increased margin pressure. Our focus in this

situation is on operational issues to help the

companies adjust to the new situation and regain

profitability at lower volumes, as well as

structural and financial issues.

On the other hand, the new situation opens

interesting opportunities, both investment

opportunities for the funds, and business and

acquisition opportunities for the portfolio

companies, and we are also focusing on these.

The current industry climate is not conducive to

exit activities. Nevertheless, in the first half of

the year, we have exited two companies: Fund

IV company Seabox AS was sold to National

Oilwell Varco in April, and Agility Contracting AS,

a subsidiary of Fund V portfolio company Agility

Group, was sold to NLI, also in April.

We have also added the fourth new platform

investment to Fund VII: Houston based

Underwater Integrity Systems, a buy and build

platform aiming to consolidate small and mid-size

providers of subsea asset integrity products and

services.

Further key events are provided on the next page.

FINANCIAL RESULTS

HitecVision’s revenues for the first six months of

2015 were NOK 152.5 million, against NOK

130.5 million for the corresponding period in

2014. Net income after tax was NOK 40.1 million,

against NOK 38.8 million for the first six months

of 2014.

HitecVision paid out dividends of NOK 156

million in May.

SOLIDITY

Due to the long term nature of fund advisory

agreements, a significant part of the company’s

revenues is fairly transparent for several years to

come. HitecVision also has a strong balance

sheet with an equity ratio of 78%, enabling it to

meet its investment obligations in relation to the

funds.

SHAREHOLDER MATTERS

As at 18

th

August 2015, HitecVision had 180

registered shareholders. The HitecVision share is

listed on the A list of Norwegian Over The

Counter (NOTC) market, organized by the

Norwegian Securities Dealers Association.

HitecVision publishes annual and half year

reports.

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FUND DETAILS:

Fund VII

Key data:

Final closing: 3rd April 2014 Committed capital: 1900 MUSD HitecVision committed capital: 62.5 MUSD Fund maturity: 2014 - 2024

Fund VII is in the early stages of its investment

period. The Fund made its fourth platform

investment through the start-up of

Houston-based Underwater Integrity Systems, in March.

The Fund is targeting a portfolio of up to 14

platform investments, primarily within the North

Sea region and North America. Equity

investments per portfolio company is expected to

range from USD 50 million to USD 300 million.

The Fund expects to make a number of add-on

acquisitions to several of the portfolio companies.

In addition to the founding of UIS, key events

during the first half year include the acquisition

and delisting of Rocksource ASA (subsequently

renamed PURE E&P AS); and CapeOmega’s

acquisition of Noreco’s holding in the Oselvar

field.

Fund VI

Key data:

Final closing: 2nd December 2011 Committed capital: 1546 MUSD HitecVision committed capital: 11.6 MUSD Fund maturity: 2011 - 2021

Fund VI is fully invested, i.e. it is closed for new

direct investments, and the remaining capital will

be used for add-on and follow-on investments in

the existing 11 portfolio companies.

Our main activities regarding this portfolio are

focused on growing the companies organically

and through acquisitions. Key events during the

first half include completion of the merger of

three portfolio companies to form the new Global

Maritime Group; Flux Group’s acquisition of Vest

Ventil, and Offshore Merchant Partners’

sale-and-leaseback transaction with PGS.

HitecVision Asset Solutions

Key data:

Final closing: 2nd June 2010 Committed capital: 420 MUSD HitecVision committed capital: 15.8 MUSD Fund maturity: 2010 – 2018

Fund HVAS is fully invested and the remaining

capital will be used for follow-on investments in

the remaining two portfolio companies. A key

event in the first half is Atlantica Beta’s

completion of its first well for Petrobras, offshore

Brazil.

Fund V

Key data:

Final closing: 10th March 2008 Committed capital: 816 MUSD HitecVision committed capital: 8.2 MUSD Fund maturity: 2007 – 2017

Fund V is fully invested, i.e. it is closed for new

direct investments, and the remaining capital will

be used for add-on and follow-on investments in

the existing portfolio companies. Following a

number of realisations, the Fund has five

remaining portfolio companies.

Our main activities regarding this portfolio are

focused on growing the companies organically

and through acquisitions, and improving their

performance. Some of the companies have

matured to a degree where they may be

preparing for exits.

Key events in the first half of 2015 include Agility

Group’s sale of Agility Contracting.

Fund IV

Key data:

Final closing: 31st May 2006 Total committed capital: 300 MUSD HitecVision committed capital: 9.8 MUSD Fund maturity: 2006 – 2018

Fund IV is fully invested, and the remaining

capital will be used for add-on and follow-on

investments in the existing portfolio companies.

Following a number of exits, the company has

three remaining portfolio companies.

Our main activities regarding these companies

are related to preparing them for exits, and in the

first half of the year, Seabox AS was sold to

National Oilwell. Other key events include

Apply’s NOK 2 billion contract to build the living

quarters for the Johan Sverdrup field, and the

acquisition of IT provider Network Scenario, now

Netscenario.

Stavanger, 27th August 2015

The Board of HitecVision AS

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HitecVision Group

(all figures in NOK 1,000)

INCOME STATEMENT

30.06.2015

31.12.2014

30.06.2014

Operating revenue

123 482

227 695

111 415

Income from associated companies

29 057

200 838

19 098

Total revenues

152 539

428 533

130 513

Operating expenses

104 334

188 150

85 502

Depreciation & amortisation

2 136

3 093

1 099

Net operating income

46 069

237 290

43 911

Net financial income/-loss

(432)

251

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Net income before taxes

45 638

237 541

43 847

Income tax

(5 517)

(7 124)

(5 082)

Net income

40 120

230 417

38 766

BALANCE SHEET

Tangible fixed assets

13 360

15 281

8 460

Financial fixed assets

259 529

340 252

200 484

Long term receivables

39 148

45 799

52 377

Short term receivables

7 421

16 621

7 997

Cash and deposits

44 735

18 847

16 818

Total assets

364 192

436 799

286 137

Equity

284 193

237 686

201 378

Deferred tax liability

9 289

11 085

9 566

Current liabilities to financial institutions

39 158

-

20 466

Tax payable

2 930

-

3 203

Dividend payable

-

156 480

-Other current liabilities

28 622

31 548

51 524

Total equity and liabilities

364 192

436 799

286 137

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PORTFOLIO COMPANIES – FUND VII: Current:

Circle Group

www.circlegroup.no

Circle Group is an oilfield products and services company targeting the drilling, well completion and well intervention markets, primarily in Norway. The company is an entrepreneurial start-up by a seasoned management team. The plan is to develop Circle Group through a series of targeted acquisitions.

CapeOmega

www.capeomega.com

CapeOmega is a start-up E&P company focusing on increased value creation in mature oil and gas fields on the Norwegian Continental Shelf. The plan is to build a late-life E&P company and achieve operational excellence through the use of state of the art technology and learning from repeated late life

operations. Pure E&P

www.rocksource.com

Pure E&P (formerly Rocksource), is a Norwegian exploration focused E&P company pursuing growth opportunities on the Norwegian Continental Shelf (NCS). The company was established through the acquisition of Rocksource ASA, which was listed on the Oslo Stock Exchange.

Underwater Integrity Solutions

www.underwaterintegrity.com

Underwater Integrity Solutions, located in Houston, is a recently established buy-and-build platform within the subsea asset integrity market, focused on bundling asset-light service offerings. UIS will focus on acquiring companies that provide engineering, data management, inspection, maintenance and bespoke repair of subsea assets.

PORTFOLIO COMPANIES - FUND VI:

Current:

Spike Exploration

www.spike-x.com

Spike Exploration is an independent E&P company that pursues exploration and appraisal opportunities in the North Sea. The company has built a portfolio of opportunities through a combination of farm-ins to existing licenses and awards of new acreage in the official licensing rounds.

Global Maritime

www.globalmaritime.com

Global Maritime Group is a result of the merger of the Fund’s portfolio companies Global Maritime, Deep Sea Mooring, and Vryhof Anchors. The company is structured into six key business areas: Consultancy & Engineering; Marine Warranty; Dynamic Positioning; Products & Technology; Marine Contracting; and Deep Sea Mooring. Headquartered in Norway, it is present in over 20 countries. Axis Offshore

www.axisoff.com

Axis Offshore is a provider of high specification offshore Accommodation & Support Vessels (floatels) servicing the offshore oil & gas industry. The company is a joint venture between Danish shipowner J. Lauritzen A/S and HitecVision. Axis Offshore owns and operates the high-specification ASV mono-hull Dan Swift, which is currently on charter to Petrobras in Brazil, and has two high-specification DP3 semi-submersible ASVs under construction.

Momek Group

www.momek.no

Momek Group, headquartered in Mo i Rana, is one of the largest industrial contractors in Northern Norway, providing services to the oil & gas, mining and process industries. Momek Group operates through three divisions: Fabrication; Maintenance and Modification; and Civil.

Suretank Group

www.suretank.com

Suretank Ltd. is a world-leading manufacturer of Cargo Carrying Units for the Offshore Oil and Gas Industry. Headquartered in Ireland, the company is a global supplier of offshore tanks and offshore containers with design and manufacturing facilities in Ireland, UK, US, Brazil, Poland, Thailand and China as well as sales offices in several other key markets.

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Energy Drilling

www.edrill.com

Energy Drilling is a tender drilling company offering cost-effective solutions to the offshore drilling market. The company is led by a management team with considerable experience from the tender drilling market and has one unit in operations on long term contract, one unit recently delivered, and one under construction.

Offshore Merchant Partners

www.omp.no

Offshore Merchant Partners is an alternative finance and asset management company targeting the offshore oil and gas industry. The company focuses on deal structuring, financing and management of offshore assets, and aims to be the advisor of dedicated pools of capital to be invested in mobile offshore oil and gas assets with long dated return profiles.

DeepWell

www.deepwell.no DeepWell is a well intervention company primarily providing cased hole wireline

services to oil companies. The company is headquartered in and has its operational base outside of Haugesund, Norway.

Aquamarine Subsea

www.aquamarine.no

Aquamarine Subsea is an international service company providing asset integrity, management, and life cycle service solutions to riser and subsea equipment owners in the drilling, work-over and production markets.

Flux Group

www.fluxgroup.com

Flux Group is a buy and build platform consolidating small and mid-size providers of products and related services in the oil & gas value chain. Over the past year, Flux has established attractive positions in valves and piping.

PORTFOLIO COMPANIES – FUND HVAS: Current:

Ocean Installer

www.oceaninstaller.com

Ocean Installer AS is a subsea service provider within the Subsea construction, Umbilicals, Risers and Flowlines (SURF) segment. The company performs full Engineering Procurement Construction and Installation (“EPCI”) SURF work, based on leased vessels. Ocean Installer is based in Stavanger and operates in several geographic markets globally.

Atlantica Tender Drilling

www.atlanticatd.com

Houston-based Atlantica Tender Drilling Ltd designs, fabricates and operates safe and efficient tender drilling units. Atlantica Tender Drilling Ltd has designed and built two tender drilling rigs, where one is in operation off the coast of West Africa and one offshore Brazil, while two more tender drilling rigs are under construction for delivery in 2015 and 2016.

Exited:

Troms Offshore Supply

www.tromsoffshore.no

Troms Offshore was the Fund's investment platform in the PSV segment. Troms Offshore was established to create a leading niche Platform Supply Vessel (PSV) company which will provide offshore services to oil companies through owning and operating high-end large PSVs built to the "Clean Design" class specifications . The Fund realised its investment in 2013 through a sale of the company to Tidewater Inc.

PORTFOLIO COMPANIES - FUND V:

Current:

Axon Energy Products

www.axonep.com

Axon Energy Products is an acquisition platform in the drilling and well equipment segment, and has made 17 acquisitions since its inception. The platform is headquartered in Houston, Texas, and consists of several companies in the US, Europe and the Middle East.

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Align

www.align.no

Align is a group of colompanies providing process and safety-critical products and solutions as well as services that maintain lifecycle-long performance. Align has a strong position and extensive experience in selected niche markets within the Norwegian oil and gas industry and selected international markets.

Core Energy

www.coreenergy.no

Core Energy is an oil and gas company established with the aim of capturing the value potential in and around mature oil and gas fields on the Norwegian

Continental Shelf (NCS) The company acquires interests in producing fields on the NCS, creating value through focusing on increased oil and gas recovery, near field exploration and adjacent field developments.

Teresoft

www.teresoft.no

Teresoft is Norwegian supplier of drilling and well performance software and solutions, and consists of the companies eDrilling, Oiltec and Trade Tech. Partly exited:

Agility Group

www.agilitygroup.no

Agility Group is an industrial holding company with two operating subsidiaries; Agility Subsea Fabrication, a leading subsea fabricator that specialises in subsea manifold modules and integrated template systems, and Minox, a process technology company providing compact de-aeration solutions to the global oil and gas market.

Exited:

Merrick Systems

www.merricksystems.com

Merrick Systems was a well-established provider of software and other industrial information technologies for the upstream and midstream oil and gas industry. Headquartered in Houston, Merrick establised a global infrastructure to sell, implement and support its technologies. The Fund realized its investment in 2014 through a trade sale to P2 Energy Solutions.

Tampnet

www.tampnet.com

Pioneering the offshore communications industry, Tampnet has developed a high capacity, resilient and low latency communication network of fiber backbone cables and radio links, serving the Norwegian and the UK offshore oil and gas sector. The Fund realized its investment in 2012 through a sale of the company to EQT Infrastructure.

Naxys

www.naxys.no

Naxys was a supplier of advanced subsea acoustic sensor products and systems which developed into a world leading subsea monitoring company with unique products for subsea leak detection and condition monitoring. The Fund realized its investment in 2012 through a sale of the company to GE.

Stream

www.stream.no

Stream was a leading provider of products, solutions and services connected to piping, valves and instrumentation within the energy and offshore business. The company was a leading supplier to the Norwegian oil and gas industry and represented several of the world’s leading suppliers in the Norwegian market. The Fund realized its investment in 2013 through a sale of the company to MRC Global. Spring Energy

www.springenergy.no

Spring Energy Norway AS was an oil and gas company established by a group of E&P professionals with extensive experience and an excellent track record from the Norwegian Continental Shelf. The company built up a significant portfolio of exploration assets, discoveries and oil production. The Fund realized its investment in December 2012 through a sale of the company to Tullow Oil plc.

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PORTFOLIO COMPANIES - FUND IV: Current:

Aarbakke Group

www.aarbakke.com

Aarbakke is a leading supplier of precision manufacturing services to the oil and gas industry, specializing in machining and assembly of subsea and downhole equipment to extreme quality standards. The company develops, constructs, machines, tests and controls products for most of the major technology suppliers to the oil industry, in particular specialized products in short series.

Partly exited:

Apply

www.apply.no

Apply is one of the largest providers of technology, engineering and construction services for the Norwegian oil and gas industry, and the largest global provider of Living Quarters for offshore platforms. Apply has three business areas: Upstream Facilities; Living Quarters & Helidecks; and Rig & Modules. Apply TB, a building facilities contractor, has been demerged to form a separate entity. The Fund realised part of its investment in 2012 through a sale of Apply Nemo to the Kongsberg Group.

Subsea Technology Group

www.rossoffshore.no

www.rossnetscenario.no

Subsea Technology Group is a holding company for the Fund's investments in several technology and services companies. The currently active companies are Ross Offshore, a leading provider of consultancy, engineering and project management services, and Ross Netscenario, a specialist in hosting and

managing IT solutions for businesses in the oil and gas industry. The Fund realized parts of its investment in 2011 through a sale of the company’s former subsidiaries Bennex and Poseidon to Siemens, and in 2015 through the sale of subsidiary Seabox to NOV.

Exited:

Noble Denton Holding

www.nobledenton.com

Noble Denton was an independent, market leading consultancy firm offering services to the global offshore, shipping and insurance industries. The Group had its head office in the UK, and additional offices in 15 different locations throughout the world. The fund realised its investment in 2009 through a sale to Germanischer Lloyd.

SPG

www.vectortg.com

www.icarus-be.com

Vector is an internationally recognized manufacturer of proprietary pipe connection and sealing solutions and subsea applications. Vector has manufacturing facilities in Norway and Wales, and distribution centers worldwide. The Fund realized its investment in 2012 through a sale of the company to the Freudenberg Group. Icarus supplies piping materials and manufactured valves to the oil, -petrochemical and chemical industries for extreme service conditions. The Fund realized its investment in 2013 through a sale of the company to its management. Technor

www.technor.com

The Technor platform consisted of a number of companies in different segments in the oil and gas industry, including manufacturing and distribution of electrical equipment for hazardous environments (Technor Group) and industrial valves for a wide range of applications (Valco Group). All companies in the platform were sold to various industrial and financial buyers in the period 2012-2014.

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