BOURBON: 2017 Annual Results

Paris, March 15, 2018

            BOURBON 2017 Annual Results

            Results that reflect a third year of cyclical downturn
            and a sharp increase in free cash flow
                   ·  Free cash flow rose to €127.8 million, up from €64.7 million in 2016
                   ·  Net income, group share stood at -€576.3 million, including €277 million in provisions for asset impairment and non-recurring expenses, €167.2 million of which for the non-smart fleet
                    

"BOURBON's teams carried off a solid operating performance in 2017 thanks to their focus on security, cost control initiatives and the fleet's technical reliability. Performance in terms of free cash flow generation is equally sound in the crisis environment that has faced all oil & gas industry players for the past three years," said Gaël Bodénès, Chief Executive Officer of BOURBON Corporation. "On the basis of our experience as a leader, we aspire to change our business model for more integrated services, to capitalize on the digital revolution to connect our fleet and to make our new organization less centralized and more agile. Positioning our company to take advantage of the recovery under optimum competitive conditions following the cyclical downturn: this is the essence of our #BOURBONINMOTION strategic plan, presented last month and currently being implemented."

(a) Adjusted data:
The adjusted financial information is presented by Activity and by Segment based on the internal reporting system and shows internal segment information used by the principal operating decision-maker to manage and measure the performance of BOURBON (IFRS 8). Internal reporting (and thus the adjusted financial information) records the performance of operational joint ventures on which the group has joint control using the full integration method. Furthermore, internal reporting (and again the adjusted financial information) does not take into account IAS 29 (Financial Reporting in Hyperinflationary Economies), applicable for the first time in 2017 (retroactively from January,1) to an operational joint venture in Angola.
The reconciliation between the adjusted data and the consolidated data can be found in Appendix I on page 12

• Income statement

       
      The continued downswing in activity in 2017 led to the working fleet being reduced to 334 vessels and the number of stacked vessels being increased by an extra 52 units. Adjusted revenue amounted to €860.6 million, down 21.9% on the previous year. This was due to a working fleet utilization rate that was stable at 82.4%, and a fall in the average daily rate of around $1,000/day to $8725.
       
      Adjusted EBITDAR stood at €252.4 million, down 34.1% from 2016. The decrease in operating costs, net of additional charges for stacked vessels, and the reduction in general costs was 15.5% year-on-year. As a result, adjusted EBITDAR margin fell to 29.3%, from 34.7% the previous year.
       
      The sharp decline in adjusted EBIT of -€403.9 million, compared with -€165.1 million in 2016, was mainly due to a vessel impairment loss of €196.8 million, €167.2 million of which was for the non-smart fleet and provisions of €30 million, including €24.5 million for customer receivables.
       
      In terms of financial income & expenses, the cost of net debt amounted to €54.6 million, versus €43 million the previous year. This item also includes foreign exchange losses of €83 million (including €73 million in unrealized losses), impairment losses on financial receivables of €28 million, and other non-recurring financial expenses of €22 million, linked to the accounting treatment of the group debt at December 31, 2017, and the uncertainty of the related future cash flows.
       
      Net income, group share of -€576.3 million reflects the crisis in the sector, its impact on asset values and the risk of non-recovery of certain receivables.

• Balance Sheet Statement

      The €722.2 million reduction in capital employed in 2017 is due to:
       

• a €626.1 million decrease in the value of fixed assets following the recognition of non-recurring impairment losses, asset disposals and normal depreciation and amortization;
• a €96.1 million decrease in working capital due to lower revenue and a reduction in customer payment delays.

                   
As a result, shareholders' equity now stands at €643.6 million, versus 1,255.5 million at the end of 2016. There was also a slight reduction in net debt of €103.1 million year-on-year.

Furthermore, the group was unable to comply with various covenants defined in its loan documentation as of December 31, 2017.

Under IFRS, this breach of covenants at year-end requires the company to reflect the payability of its debt by reclassifying it as a current liability, even though its lenders have not requested repayment. The amount thus reclassified totaled €1,121 million at December 31, 2017.

While discussions are ongoing, BOURBON has asked its lenders to postpone exercising their rights under the loan agreements, particularly the right to repayment. To date, the group is still waiting for several replies, but is confident that it will obtain these agreements for postponement.

The group has therefore decided to enter into further discussions with its lenders, both in France and abroad, to balance the servicing of its debt with the expected gradual market recovery and the corresponding upturn in the group's performance.

This situation raises a material uncertainty with regards to the going concern, the company is however confident in its ability to find a balanced solution with its lenders - often long-standing partners - that suits all parties and allows the company to adapt its financing to its future development.

The cash flow generated by the business will enable the group to meet its current operating needs. Accordingly, it has prepared its consolidated financial statements at December 31, 2017 on a going concern basis.

• Cash flow (see appendix IV: Simplified Consolidated Cash Flow Statement)

       
The 2017 cash flow analysis highlights the following key points:

• positive cash flow from operating activities of €150.7 million. Lease payments amounted to €71.9 million, compared to €164.4 million expenses recognized under IFRS;
• cash flow from investment activities was negative by only €2.3 million, the much lower periodic maintenance expenses being offset by the sale of Endeavor, a cement carrier that had remained in the fleet after the sale of other bulk carriers in 2010, and the repayment of loans and advances granted;
• cash flow from financing activities was positive at €21.6 million. Repayments of borrowings and the cost of net debt were offset by the issuance of new debt totaling €73.2 million and refinancing of cash facilities for a net amount of €196.0 million.

Overall, the company's cash position improved by €179.0 million, given the refinancing of cash facilities. Excluding this refinancing, the group's cash position deteriorated by €17.8 million.

In 2018, BOURBON will maintain a cautious approach aimed at:
      -    disposing of the non-smart fleet, no longer considered strategic;
      -    prioritizing investment in the recommissioning of vessels required for new contracts and for its #BOURBONINMOTION action plan;
      -    making spending on leased vessels and financial debt proportional to available cash.

With the oil price climbing by more than 25% over the last three quarters, stabilizing at around $60-65/barrel, the growth in cash generated by the oil companies points to a gradual resumption of investments. While investments in company acquisitions, shale oil, onshore projects and renewable energy clearly seem to have resumed, investment growth in the offshore sector is expected to be gradual in 2019. Prices will be held down by vessel overcapacity in the PSV and AHTS segments. Performance for 2018 is therefore expected to be similar to 2017 in terms of activity.

Convinced that the industry's future will be based on models different from those of the past, BOURBON has decided to implement an action plan, #BOURBONINMOTION, built around three key objectives:

• to better serve its clients by steering its business model towards more integrated services and restructuring the group around three stand-alone companies: Bourbon Marine and Logistics, Bourbon Subsea Services, and Bourbon Mobility;
• to deliver operational excellence at optimum cost by deploying the Smart shipping program, connecting the fleet of 132 modern Supply vessels (the "smart fleet") and disposing of the fleet that can no longer be operated to BOURBON's new standards (the "non-smart fleet");
• to rise to the human challenge through effective change management.

Our clients are leading the way in connecting their Offshore facilities and are requesting business model evolution towards responsibility sharing. That's why we need to prepare to these changes, which will accompany the market's gradual upturn in the years to come.

MARINE SERVICES

Impairment losses of €177.1 million account for most of the change in 2017 adjusted EBIT relative to the previous year.

Marine Services : Deepwater offshore vessels

The utilization rate of the fleet in operation remained satisfactory at 85.7%, the same as in 2016.

Weak demand increased the number of stacked vessels by 7.5 units (full-time equivalent), while the large number of vessels available has inevitably pushed the average daily rate down, by around $2,000 per vessel, or -12.9%.

As a result, revenue fell by 23.8% and despite a sharp reduction in costs, EBITDAR was down 36.6% to €73.1 million year-on-year.

The outlook remains challenging in all regions where we operate. However, following an increase in demand in the last quarter of 2017, we have begun recommissioning vessels to meet the needs of our customers in West Africa and the Mediterranean.

Marine Services : Shallow water offshore vessels

BOURBON's shallow water offshore business is now the most affected in terms of the number of vessels in operation, after three years of a cyclical downturn. The number of stacked vessels has increased by 25.8 units (full-time equivalent), while oversupply has pushed the average daily rate down by 20%, or more than $2,000/day.

In this context, our proactive vessel-stacking policy has enabled us to maintain the utilization rate of vessels in operation at 89.3%, a slight increase year-on-year.

Despite this, revenue fell sharply by 44.8% to €154.2 million, or €125 million less than the previous year.

Sound management of operating costs and stacked vessel costs could only make up for half of this decrease, with EBITDAR 2017 down at €33.2 million, versus €92.1 million in 2016.

The pressure on daily rates is expected to continue during 2018 and probably into 2019. The boost to revenue will therefore come from higher vessel utilization.

We reacted positively to an increase in calls for tender in West Africa and the Middle East in late 2017 by bringing a number of vessels back into service for medium and long-term contracts.

Marine Services : Crew boat vessels

For Crew boats, the 12.7% drop in revenue to €216.3 million is mostly due to a fall in contractor demand. At the same time, three FSIVs in the Caribbean have been repositioned in West Africa.

Since the utilization rate of vessels in operation and the average daily rate have remained stable, the decline stems from the increase of 19.8 units (full-time equivalent) in stacked vessels. However, the transfer of passengers from helicopter to Crew boats is continuing to take place, with a +3.5% increase in the number of passengers transported between 2016 and 2017.

In this segment also, the €16.2 million reduction in costs only offset about 50% of the decline in revenue, mainly because of non-recurring maintenance costs on certain vessels, resulting in EBITDAR of €55.4 million.

SUBSEA SERVICES

Revenue remained stable between 2016 and 2017. However, the mix changed in 2017, with turnkey projects now representing 10% of revenue.

Costs rose by 12.7% due to turnkey projects, and in particular subcontracted activities, costs of equipment leasing and spare parts for ROVs.
The fall in EBITDAR reflects the 8.5% decrease in the average charter rate between 2016 and 2017.

Subsea activities for contractors remained steady in the first half of 2017 but declined in the second half of 2017. This "contractor" business will be scaled back in 2018.

The Bourbon Subsea Services fleet remains strategically positioned to respond to cycle differences between regions.

OTHER

Activities included are those that do not fit into either Marine Services or Subsea Services. The majority of the total represents earnings from such items as miscellaneous ship management activities, logistics as well as from the cement carrier Endeavor, which was sold in July 2017.

ADDITIONAL INFORMATION

• BOURBON's results will continue to be affected by the €/US$ exchange rate.
• The 2017 financial statements were approved by the Board of Directors on March 14, 2018, under the going concern accounting principle.
• The consolidated financial statements have been audited. The statutory auditors' report will be issued after completion of the procedures required for the filing of the Registration Document. The material uncertainty under going concern will be covered in a specific part of this report.
• The Board of Directors will not recommend any dividend for this year at the next Annual Shareholders' Meeting.
• BOURBON Corporation's General Management will comment on the results during an audio webcast scheduled today at 9:00 am Paris local time. The presentation will be followed by a Q&A session. The replay of the audio webcast will be available during the day on our website: http://www.bourbonoffshore.com/en/bourbon-full-year-2017

FINANCIAL CALENDAR

APPENDIX I

Reconciliation of adjusted financial information with the consolidated financial statements

Adjustment items are related the consolidation of joint ventures according to the equity method as per IFRS 11. Adjusted data for 2017 does not take account of standard IAS 29 (Financial Reporting in Hyperinflationary Economies), applicable for the first time for an operational joint venture in Angola. At December 31, 2017 and for the comparative period presented, adjustment items are as follows:

APPENDIX II

Simplified Consolidated Income Statement

* this figure takes into account the 1,156,611 immediately vested shares issued on July 17, 2017 as payment of the 2016 dividend

APPENDIX III

Simplified Consolidated Balance Sheet

APPENDIX IV

Simplified Consolidated Cash Flow Statement

APPENDIX V

APPENDIX VI

Quarterly revenue breakdown

*Effect of consolidation of joint ventures using the equity method

Quarterly average utilization rates for the offshore fleet in operation

Quarterly average utilization rates for the offshore fleet

Quarterly average daily rates for the offshore fleet

Quarterly contractualization rates for the offshore fleet

Quarterly number of vessels (end of period)

*Vessels operated by BOURBON (including vessels owned or on bareboat charter)

Yearly revenue breakdown

*Effect of consolidation of joint ventures using the equity method

Yearly average utilization rates for the offshore fleet

Yearly average daily rates for the offshore fleet

Yearly deliveries of vessels

Breakdown of revenues by geographical region

Other key indicators

Quarterly breakdown

Annual breakdown

Financial Glossary & Others Definitions

Adjusted data: internal reporting (and thus adjusted financial information) records the performance of operational joint ventures in which the Group has joint control by the full consolidation method. The adjusted financial information is presented by Activity and by Segment based on the internal reporting system and shows internal segment information used by the principal operating decision maker to manage and measure the performance of BOURBON (IFRS 8).

EBITDA: operating margin before depreciation, amortization and impairment.

EBITDAR: revenue less direct operating costs (except bare-boat rental costs) and general and administrative costs.

EBIT: EBITDA after increases and reversals of amortization, depreciation provisions and impairment and share in income/loss of associates, but excluding capital gains on equity interests sold.

Capital employed: including (i) shareholders' equity, (ii) provisions (including net deferred tax), (iii) net debt; they are also defined as the sum (i) of net non-current assets (including advances on fixed assets), (ii) working capital requirement, and (iii) net assets held for sale.

Average capital employed excl. installments: is understood as the average of the capital employed at the beginning of the period and end of the period, excluding installments on fixed assets.

Free cash-flows: net cash flows from operating activities after including incoming payments and disbursements related to acquisitions and sales of property, plant and equipment and intangible assets.

Utilization rate: over a period, number of revenue-generating days divided by the number of calendar days.

Utilization rate of the fleet in operation: over a period, number of revenue-generating days divided by the number of calendar days, for non-stacked vessels.

Contractualization rate: ratio between the number of vessels under long term contract and total number of vessels operated by BOURBON, long term contract being defined as having a remaining term equal or superior to 6 months.

About BOURBON

Among the market leaders in marine services for offshore oil & gas, BOURBON offers the most demanding oil & gas companies a wide range of marine services, both surface and sub-surface, for offshore oil & gas fields and wind farms. These extensive services rely on a broad range of the latest-generation vessels and the expertise of more than 8,400 skilled employees. Through its 37 operating subsidiaries the group provides local services as close as possible to customers and their operations throughout the world, of the highest standards of service and safety.

BOURBON provides two operating Activities (Marine Services and Subsea Services) and also protects the French coastline for the French Navy.

In 2017, BOURBON'S revenue came to €860.6 million and the company operated a fleet of 508 vessels.

Placed by ICB (Industry Classification Benchmark) in the "Oil Services" sector, BOURBON is listed on the Euronext Paris, Compartment B.

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