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2015-08-18

SeaBird Exploration Plc: Second quarter report 2015

18 August, Limassol, Cyprus

2015 SUMMARY OBSERVATIONS FOR THE SECOND QUARTER

* Revenues for the quarter were $19.6 million, a decrease of 56% compared to
Q2 2014 and down 19% relative to Q1 2015.
* Contract revenues for the period were $18.8 million, down 54% from Q2 2014
and a decrease of 18% from Q1 2015.
* Multi-client revenues were $0.7 million, down 80% from $3.7 million
reported in Q2 2014 and a decrease of 40% from $1.2 million reported in Q1
2015.
* EBITDA was negative $6.5 million compared to $12.6 million for Q2 2014 and
$8.2 million for Q1 2015.
* EBIT for the quarter was negative $15.7 million compared to negative $2.6
million for Q2 2014 and positive $3.7 million for Q1 2015.
* Vessel utilization for the period was 68.1%. Contract surveys during the
second quarter represented 68.1% of vessel capacity compared to 58.4%
during the first quarter 2015. None of the company's vessels were utilized
for multi-client surveys during the period, similar to Q1 2015.
* Mexico Gigante survey commenced at the end of the quarter. Expect to have
approximately four vessels employed on the project.
* Zero lost time injury frequency (LTIF) in the quarter.
* 1.94% technical downtime in the quarter compared to 6.09% Q2 2014.
* Conversion of 6,015,693 preference shares and 1,769,375 warrants into
3,007,846,500 common shares and 884,687,500 warrants on common shares.
* Non-recurring SG&A costs in the period of $2.2 million relating to bad debt
provisions. Multi-client library impairments were $3.5 million during the
quarter while seismic equipment impairments were $0.6 million.
Restructuring charges on onerous long-term lease contracts amounted to $8.1
million.

Key highlights

Operational review

The second quarter was characterized by low oil prices and a weak market
sentiment for oil exploration. Seismic tender activity has been substantially
impacted and price competition has intensified. Furthermore, the 2D/source
market has continued to experience significant competition from
multi-streamer 3D vessels. The negative market sentiment has exacerbated
industry risk factors and increased the uncertainty related to timing of a
market recovery.

Revenues for the quarter were reduced due to project delays and the continued
softness in seismic market demand. In light of challenging market conditions,
the company decided to stack Munin Explorer. This capacity reduction is in
addition to the lay-up of Voyager Explorer and Geo Pacific, which were cold
stacked during Q4 2014 and Q1 2015, respectively.

The company continued its cost reduction effort. The office relocation from
Dubai is completed and run-rate SG&A is currently in line with initial
targets. Operating expenses have been reduced relative to plan estimates and
the company has initiated measures to realize permanent cost savings as
indicated in the previously communicated savings initiative. Capital
expenditures have been reduced relative to the investment plan. This
reduction is the result of capital expenditure postponements due to lay-ups
as well as savings initiatives. The company is continuing its efforts to
review and implement further cost savings. In addition to cost reductions,
the company is actively focusing on cost flexibility measures as well as
improving operational efficiency.

Vessel utilization was 68% during Q2 2015, up from 58% in the previous
quarter. Technical downtime for the fleet was less than 2%, down from 5% for
Q1 2015. Q2 yard stay represented 13% of vessel capacity. Contract surveys
represented 68% of vessel capacity compared to 58% for the first quarter of
2015.

Aquila Explorer completed its Australasia project, and then undertook a short
2D survey in South East Asia before entering dry-dock in Singapore for
planned maintenance. Thereafter, the vessel mobilized for a source project in
the region. Harrier Explorer also entered a scheduled dry-docking and
completed a source contract in South East Asia towards the end of the
quarter. Munin Explorer continued its long-term source contract in South
America throughout the quarter. Hawk Explorer mobilized to the Gulf of Mexico
during the first half of the quarter and completed a short 2D survey before
commencing the TGS Gigante project in Mexico. Osprey Explorer completed two
projects in the Gulf of Mexico and mobilized to the TGS Gigante project at
the end of the quarter. Northern Explorer completed a scheduled maintenance
docking in Las Palmas and was in transit to Mexico towards the end of the
quarter. Geo Pacific and Voyager remained cold-stacked during the quarter. As
part of an effort to reduce costs and optimize fleet utilization, the company
also made a decision to lay-up the Munin Explorer subsequent to quarter
closing.

Multi-client surveys represented 0% of vessel utilization in the quarter
compared to 12.5% in the same quarter previous year. Multi-client revenues
were $0.7 million in the period. An impairment of $3.1 million was charged to
the 3D multi-client survey in West Africa. Reduced revenue forecasts from
selected 2D multi-client surveys triggered an additional impairment of $0.3
million during the quarter.

During the quarter, the company's costs were reduced. The lay-up of 3D
vessels, reduced operating expenses, lower project activity, reduced vessel
charter rates and lower crew headcount contributed to bring down costs of
sales relative to 2014 and Q1 2015.

During the quarter, the company deferred $2.2 million in mobilization costs on
the TGS Gigante project.

Non-recurring SG&A costs in the period amounted to $2.2 million, which relate
to bad debt charges on receivables. The company incurred extraordinary
operational restructuring charges of $8.1 million related to lay-up costs and
onerous contracts charges on leased vessels (see selected notes and
disclosure section for further details). Non-recurring multi-client
impairments were $3.5 million, while seismic equipment on the Munin Explorer
was impaired with $0.6 million. Total extraordinary non-recurring charges
amounted to $14.4 million during the quarter.

Lost Time Injury Frequency (LTIF) rate for the quarter was zero.
Industry-leading HSSEQ processes continue to ensure that the company provides
a safe and healthy work environment both offshore and onshore while
continuously improving operational performance and quality. ISM / ISO 9001
and 14001 recertification audits by DNV passed with zero non-conformities or
observations. The FPAL audit was passed with an improved result compared to
2013.

Regional review

Asia Pacific (APAC) and North and South America (NSA) remained the most active
regions during the second quarter.

Sales in APAC of $9.4 million, a decrease of 11% from the previous period,
accounted for 48% of total revenues for the quarter. Aquila Explorer and
Harrier Explorer completed four different contracts in the region during the
period.

NSA revenues of $9.4 million represented 48% of total revenues for the
quarter. Sales in this region increased slightly with Munin Explorer, Osprey
Explorer and Hawk Explorer completing multiple contract surveys during the
quarter. Increased revenues from this region is expected in the future as a
result of the commencement of the Mexico Gigante survey. Osprey Explorer,
Hawk Explorer and Northern Explorer operation on this project before and just
after the end of the quarter. Harrier Explorer is scheduled to start on the
project during the third quarter.

Sales in Europe, Africa and the Middle East (EAME) accounted for of $0.7
million or 4% of total revenues. No SeaBird vessels were working in the
region during the period, and the revenues recorded consist of multi-client
late sales.

Outlook

Global seismic market demand continued to show weakness in the second quarter.
The reduced capital spending in the sector has materially lowered seismic
industry activity and delayed or cancelled survey start-ups and awards. We
expect the market to remain challenging in the intermediate term.

A high proportion of the company's fleet is expected to be employed on the
Mexico Gigante project until mid-2016. The current market uncertainty makes
it difficult to predict the level of contract coverage that is possible to
obtain beyond the company's current backlog.

Financial review

Financial comparison

All figures below relate to continuing operations unless otherwise stated. For
discontinued operations, see note 1. The company reports a net loss of $16.8
million for Q2 2015 (net loss of $7.9 million in the same period in 2014).

Revenues were $19.6 million in Q2 2015 ($44.7 million). The decreased revenues
are primarily due to reduced number of vessels in operation and lower
multi-client activity during the period.

Revenues for first half of 2015 were $43.8 million ($78.4 million).

Cost of sales was $20.0 million in Q2 2015 ($28.4 million). The decrease is
predominantly due to fewer vessels in operation as the Geo Pacific and
Voyager Explorer are laid up, lower operating expenses, reduced charter hire
and lower fuel cost partially offset by a $8.1 million non-recurring
restructuring charge for onerous long-term lease contracts.

For the first half of 2015, cost of sales amounted to $37.0 million, down from
$48.1 million for same period during 2014.

SG&A was $6.1 million in Q2 2015, up from $5.1 million in Q2 2014. The
increase is principally due to one-off bad debt expenses on long-dated
receivables, offset by savings related to the closing of the Dubai office and
reduced onshore headcount.

SG&A for first half of 2015 were $9.9 million ($10.0 million).

Other income (expense) was nil in Q2 2015 ($1.3 million).

Other income (expense) for the first half was $0.1 million ($2.4 million).

Restructuring gain on leases was nil in Q2 2015 (nil).

Restructuring gain on leases for the first half of $4.7 million (nil) as a
result of negotiated debt forgiveness as a part of the company's financial
restructuring that was completed during Q1 2015.

EBITDA was negative $6.5 million in Q2 2015 ($12.6 million).

EBITDA for first half of 2015 was $1.7 million ($22.7 million).

Depreciation, amortization and impairment were $9.2 million in Q2 2015 ($15.2
million). This decrease is largely due to lower vessel book values, and lower
multi-client impairments.

For the first half of 2015, depreciation amortization and impairment were
$13.7 million compared to $22.9 million for same period of 2014.

Finance expense was $1.3 million in Q2 2015 ($3.6 million). The decrease is
due to reduced debt levels resulting from the recent restructuring.

For the first half of 2015 finance expense was $2.3 million ($6.6 million).

Other financial items was positive $0.1 million ...

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