dolphin analyst report 2010

8/10/2019 Dolphin Analyst Report 2010

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Equity Research

Note that First Securities AS was engaged by Dolphin as a Joint-Lead-Manager inconnection with private placements of shares in December 2010.

Dolphin Group ASAStrong Buy (Repeated) Initiation of Coverage

Share price development

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Dec -09 Feb-10 Apr-10 J un-10 Aug-10 Oc t-10

Dolphin Group ASA OSEBX

Date of publication: 14/12/2010Date for prices: 13/12/2010Date for input-data: 13/12/2010

Oil Service

Rating: Strong BuyTarget price: 5.50 NOK

Price: 3.4 NOKTicker: DOLP.OL

Market capitalisation: 89 MUSDFully diluted no. of shares: 160

1 4 D e c e m b e r 2 0 1 0

-1m -3m -12mAbsolute 36.2% 67.5% 16.6%

Rel. OSEBX 33.7% 50.2% 0.2%Rel. peers na na na

Price High 3.85 3.85 3.85

Price Low 2.12 1.69 1.25

Analyst

Pl Hold Dahl+47 2323 [email protected]

Henrik Lund Wibe+47 2323 [email protected]

Seismic bargainWe initiate coverage on Dolphin Group (DOLP) with a Strong Buy rating and a targetprice of NOK 5.50. DOLP is a start-up, full-range marine geophysical company with at-tractive time-charters for high-end seismic vessels and an experienced managementteam in place. A low cost base makes DOLP profitable in the current market while offer-ing full exposure (and considerable earnings growth potential) to a market recovery.

Experienced management team. DOLP was founded and managed by the former man-agement of Wavefield Inseis and Veritas DGC. The core team has an impressive track-record including the creation of Wavefield Inseis, which went from scratch to operating six

vessels working for BP, Statoil, Petrobras, ONGC etc. in just 3 years, before the companywas acquired by CGG Veritas for NOK 2.1bn in 2008.

Combined with attractive vessel charters. DOLP has secured a fleet of three cost effi-cient vessels on flexible time-charters from RISH. The companys two high-end vessels(delivery in April 2011 and March 2012) are among the top 7 vessels in the industry with14 streamer capacity and 200 tons bollard-pull. Their ability to operate on heavy fuel pro-vides a cost advantage only matched by PGS. The company has also chartered a 2D ves-sel which will commence a larger MC project during 2q 2011.

The seismic market is set for a rebound . We expect that the seismic dayrates will im-prove by 5% in 2011 and 10% in both 2012 and 2013. We estimate EBITDA of USD 57min 2012 and USD 104m in 2013 and derive a mid-2011 DCF value of NOK 8.3. A sharperthan expected rebound in GoM and Brazil could lead to a tighter than expected market.

Compelling valuation. Our target price of NOK 5.50 equals a 33% discount to our DCF,

and implies lease-adjusted EV/EBIT of 4.5x for 2012 and 1.5x for 2013, PE of 5.3x for2012 and 2.2x for 2013, and a vessel value of USD 178m. Our implied target multiples inDOLP equals a 25-33% discount to our comparable target price assessment in PLCS.

2012E 2013E 2014EChanges to forecast new prev diff new prev diff new prev diffSales 147 na na 203 na na 179 na na

EBIT 35 na na 76 na na 52 na na

Pretax profit 30.5 na na 72.9 na na 49.6 na na

EPS recurring 0.17 na na 0.41 na na 0.28 na naKey figures (MUSD) 2009 2010E 2011E 2012E 2013E 2014E

Sales 0 0 53 1 47 203 179

EBITDA 0 0 13 57 104 77

EBIT 0 0 3 35 76 52

Reported pretax profit 0 0 1 31 73 50

EPS recurring 0.00 0.00 0.01 0.17 0.41 0.28

EPS reported ful ly diluted 0.00 0.00 0.01 0.17 0.41 0.28

DPS 0.00 0.00 0.00 0.00 0.00 0.00

Sales growth na na nm 179.0 % 37.8% -11.5%

EBIT growth na na nm nm 119.3% -31.6%

EPS recurring growth na na nm nm 238.9% 68.0%

EBITDA margin nm nm 25.2% 38.6 % 51.3% 43.0%

EBIT margin nm nm 6.6% 23.6 % 37.6% 29.1%

Debt/Equity ratio nm nm 35.9% 34.7 % -23.0% -49.2%

EV/Sales na na 2.09 0.82 0.27 na

EV/EBITDA na na na 8 .4 2.1 5.6

EV/EBIT na na 31.9 3 .4 0.8 0.2

P/E recurring nm nm 83.9 3 .3 1.4 2.0

P/E nm nm 83.9 3 .3 1.4 2.0

FCF-yield nm nm -90.9% -9.8 % 73.4% 69.1%

Dividend yield 0.0% 0.0% 0.0% 0.0 % 0.0% 0.0% BV/share 2010E na CA GR sales 2009-12E nm ROE 2010E nm

P/BV 2010E na CA GR EBT 2009-12E nm ROCE 2010E nm

Equity ratio 2010E nm CA GR rec EPS 2009-12E nm ROIC 2010E nm

Please note that analyst certification, important disclosures pertaining estimates, recommendation structure,investment banking relationships and limitation of liabilities are in the back of this report.

The material in the report should not be copied and/or distributed without the consent of First Securities AS.


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Dolphin Group ASA - 14 December 2010

Equity Research

Executive summary

A full-range marine geophysical company

Dolphin Geophysical is full-range marine geophysical company, offering a competitive fleetwith an experienced management team in place.

High-end, cost efficient fleet secured. The company has secured a fleet of twohigh-end, cost-efficient 3D vessels and one 2D vessel on time-charter from RieberShipping. Its 3D vessels are chartered for five and three years firm with one six yearsand two four years options to extend. Its 2D vessel is chartered for one year firm withthree one year options. The company will offer its 12-14 streamer 3D vessels in thecontract seismic market with operational commencement expected in April 2011 andMarch 2012 respectively.

About to launch a large MC 2D project. We expect that Dolphin will launch a large,multi-client survey in the Americas in 2q11, shortly after time-charter commencementon its 2D vessel in 1q11. Management guides pre-funding at 100% by completion.

Data processing agreement in place. Dolphin has entered into an agreement withGeotrace for on-board data processing (identical to the set-up with Wavefield Inseis).

Strong management has done this before

Dolphin Geophysical was founded and managed by the team behind Wavefield Inseis, withadded multi-client experience from Veritas DGC. CEO Atle Jacobsen and CFO Erik Hok-holt held the exact same positions in Wavefield Inseis from 2006 until the integration withCGG Veritas in 2009. In addition to Peter Hooper (VP Operations) and Phil Suter (VPSales & Marketing), Dolphin has recruited Mr. Tim Wells as president of Western Hemi-sphere. Mr. Wells has previously held the same position at CGG Veritas and was COO atVeritas DGC from 1999-2007.

In our view, Dolphin has a very strong management team, which has a documented abilityto:

Launch a seismic company from scratch. The management team grew WavefieldInseis from scratch in 2006 to a nearly 10% market share in 2008, when it boostedfour 3D vessels and two 2D vessels in operation with one 3D vessel under construc-tion. Due to an in-depth industry experience; Wavefield managed to launch its vesselconversions more or less on time and costs, despite an extremely tight supply-chain.

Build a world-class MC organisation. During his time as COO at Veritas DGC, Mr.Tim Wells built a world-class MC operation in both GoM and Brazil. From 2002-2006,Veritas DGC was the second-largest MC operator worldwide (only Western Geco waslarger).

Generate substantial share-holder value. Wavefield Inseis was sold to CGG Veritas

for NOK 2.1bn in 2008, equalling nearly twice the NOK 1.1bn equity amount raisedbetween 3q06 and 1q07.


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Equity Research

Dolphin Group ASA -14 December 2010

High-end, cost efficient vessels on T/C

Dolphin has entered into time-charters with Rieber Shipping for a fleet of three cost-efficient vessels. Its two high-end 3D newbuild vessels are for delivery in April 2011 (PolarDuke) and March 2012 (NB 533) and are chartered for a firm period of five years with onesix years option and three years firm with two four years options respectively. Its 2D vesselwill commence operation from February 2011 and is chartered for a firm period of one yearwith three one year options.

Only the newbuild 533 remains under construction and activity at the yard is good. We findconstruction risk related to Newbuild 533 mitigated by Rieber Shippings long experienceas a seismic vessel provider, its in-depth know-how of these vessels and the Spanish yard,and strong financial incentives for the yard and its creditors (Spanish tax lease subsidies atdelivery and a back-end loaded payment structure in general).

Fleet

Polar Duke (3D) NB 533 (3D) Polar Explorer (2D)

12-14 streamers,delivery in Apr/11.T/C: 5Y firm with 1x6Y options

12-14 streamers,delivery in Mar/12. T/C:3Y firm with 2x 4Yoptions

T/C from Feb/12. T/C:1Y firm with 3x 1Yoptions

Polar Duke (3D) NB 533 (3D) Polar Explorer (2D)

12-14 streamers,delivery in Apr/11.T/C: 5Y firm with 1x6Y options

12-14 streamers,delivery in Mar/12. T/C:3Y firm with 2x 4Yoptions

T/C from Feb/12. T/C:1Y firm with 3x 1Yoptions

Source: First Securities, Dolphin

Time-charter structure gives flexibilityThe seismic market has seen a trend towards ever larger vessels over the last 15 years.15 years ago, 6 streamer vessels were the high-end of the market whereas 10-12streamer vessels are the current market standard. With its time-charters, Dolphin Geo-physical has secured what we expect will be an ideal fleet for the next five years, with theflexibility to either extend time-charters for another four, six or eight years or adapt to newmarket trends.

Seismic market requiring ever larger vessels

Source: Dolphin


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Equity Research

Higher streamer count offers efficiency gain

Although offering a smaller fleet than its peers, we expect that Dolphin will benefit from one

of the most cost efficient fleets in the seismic industry. With an average practical streamercount of 12 streamers, Dolphin boasts one of the most capable fleets in the industry, wellexceeding the average streamer count of CGG (at an average of 9.1 streamers per vessel)and Polarcus (at an average of 9.7 streamers per vessel). We highlight that, theoretically,a 12 streamer vessel should obtain a 20% higher dayrate than a 10 streamer vessel as it is20% more efficient in acquiring data.

Average streamer count per ship

6,0 7,0 8,0 9,0 10,0 11,0 12,0 13,0

CGG

PLCS

Fugro

Western Geco

PGS

DOLP

average no of s treamer s (practical)

Source: First Securities, companies

Cost advantage from bunker (heavy) fuelTogether with PGS high-end vessels, Dolphins fleet is the only fleet capable of running onheavy (bunker) fuel. Assuming a daily fuel consumption of 40-45 tonnes/day, we note thatthe current cost difference between bunker fuel and marine gas fuel is USD ~10,000 perday (and that it peaked above USD 20,000 per day in 2008). We estimate potential costsavings of 4-5% from the use of bunker fuel compared with peers, which to a large extentrelies on marine gas fuel.

Daily fuel cost (10-12 streamer vessel)

0

10000

20000

30000

40000

50000

60000

May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10

Marine Gas Fuel Bunker Fuel

Source: Bloomberg, Dolphin, First Securities


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Seismic market set to rebound

We expect that the trough in the seismic market was in 2010, and that seismic dayratesand margins will gradually improve towards a peak in 2013. Although we currently do notexpect this cycle to offer profitability in line with the peak in 2008, we note that a quicker

than expected rebound in activity in GoM and Brazil (which are both expected to seelease-sales re-start in 2011) or an oil price above USD 100/bl, could tighten the marketfaster than expected.

Seismic market profitability

-25 %

0 %

25 %

50 %

75 %

100 %

1994E

1995E

1996E

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

2014E

2015E

Contractseismicma

rgins

CGV - Marine Contract EBITDA (before SG&A, transit, mob)

PGS - Marine Contract EBIT margins

We are here

Our estimatesmay be too low, ifGoM and Brazilrebounds or oilprice rally pastUSD 100/bl

-25 %

0 %

25 %

50 %

75 %

100 %

1994E

1995E

1996E

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

2014E

2015E

Contractseismicma

rgins



We are here




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Equity Research

Strong earnings growth expected

We expect Dolphin to generate an EBITDA of USD 57m in 2012 and USD 104m in 2013,of which its high-end 3D vessels should contribute with USD 34m in 2012 and USD 75m in2013 (its first full year in operation) and MC operations with USD 23m in 2012 and USD

29m in 2013 (benefitting from the completion of i ts planned MC survey in the Americas).

P&L and key assumptions

P&L USDm 2010E 2011E 2012E 2013E 2014E 2015E

Contract revenues 41 123 172 154 128

MC revenues 12 25 31 25 17

Net operating revenues 0 53 147 203 179 145

Revenue growth nm. 0% 179% 38% -12% -19%

Opex 0 -33 -84 -92 -96 -98

G&A 0 -6 -6 -6 -7 -7EBITDA 0 13 57 104 77 41

Amortization MC 0 -5 -11 -14 -11 -8

Depreciation 0 -4 -11 -14 -14 -14

Impairments 0 0 0 0 0 0

EBIT 0 3 35 76 52 20EBIT margin 0% 7% 24% 38% 29% 13%

Interest expese (net) 0 -2 -4 -3 -3 -2

Unrealised foreign exchange gain 0 0 0 0 0 0

Other net finance 0 0 0 0 0 0

Pretax profit 0 1 31 73 50 18

Taxes expense, net 0 0 -3 -7 -5 -2

Net profit 0 1 27 66 45 16

Mill. outs. shares 160 160 160 160 160 160

EPS 0.00 0.01 0.17 0.41 0.28 0.10

CEPS 0.00 0.07 0.31 0.58 0.44 0.23

Vessel assumptions 2010E 2011E 2012E 2013E 2014E 2015E

Utilisation

Polar Duke 80% 83% 85% 85% 85%

NB 533 0% 81% 85% 85% 85%

Dayrates

Polar Duke 197 100 240 462 276 531 248 878 206 569

NB 533 224 431 276 531 248 878 206 569

Opex/d

Polar Duke 114 900 119 673 123 489 129 352 130 809

NB 533 120 673 123 989 127 352 130 852

Multi-client assumptions 2011E 2012E 2013E 2014E 2015E

MC capex 24 12 12 12 12

MC sales - total 12 25 31 25 17

MC cash opex 2 2 2 2 2

MC amortisation 5 11 14 11 8MC EBIT 5 12 15 12 7

MC sales/cash cost (capex/opex) 0.5x 0.9x 1.3x 1.4x 1.3x

Amortisation rate 45% 45% 45% 45% 45% Source: First Securities

Positive newsflow expected over the next 2-3 months

We expect positive newsflow over the next two to three months. We expect that Dolphinwill announce the first contract for Polar Duke in February 2011. We expect more informa-tion around its multi-client project in the Americas in January/February 2011 and that itsfirst pre-funding commitment will be booked around project start-up in 2q11.


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End-2015 net cash is 2.2x the USD ~60m raised in 2010

We estimate net cash flow of USD 7m in 2012 followed by USD 54m in 2013 and USD50m in 2014. Our earnings and cash flow estimates imply an end-2015 net cash position ofUSD 130m, equal to 220% the equity amount raised in 2010.

Cash flow statement and balance sheet

Cashflow statement 2010E 2011E 2012E 2013E 2014E 2015E

From operation 0 13 54 97 72 39

Net interest 0 -2 -4 -3 -3 -2

Net investment multi-client 0 -24 -12 -12 -12 -12

Net investments 0 -63 -38 -10 0 0

Gross cash flow 0 -76 0 71 58 25

Net current assets 0 -16 -18 -6 4 7

Net current liabilities 0 10 9 1 1 0

Net debt/sale leaseback fund 0 46 16 -12 -12 -12

Net equity / dividend payment 60 0 0 0 0 0

Other 0 0 0 0 0 0

Net cashflow 60 -36 7 54 50 21

Balance sheet 2010E 2011E 2012E 2013E 2014E 2015E

Cash 60 24 31 85 135 156

Current assets 0 16 34 40 36 29

MC data library 0 19 20 17 18 23

Total Current assets 60 59 85 142 189 208

PP&E (incl vessels under const.) 0 58 85 81 67 53

Other assets 0 0 0 0 0 0

Goodwill 0 0 0 0 0 0

Total non-current assets 0 58 85 81 67 53

TOTAL ASSETS 60 117 169 223 257 261

Other Current liabilities 0 10 19 20 20 21

Total current liabilities 0 10 19 20 20 21

Long term interest bearing debt 0 46 61 49 37 25

Sales Lease-back Fund 0 0 0 0 0 0Other liabilities 0 0 0 0 0 0

Share capital 60 61 89 154 199 215

Total Equity and lt liabilities 60 107 150 203 236 240

TOTAL LIABILITIES AND EQUITY 60 117 169 223 257 261

NIBD -60 22 31 -35 -98 -130

Off-B/S debt 75 68 50 31 10 0

Total debt 15 90 81 -5 -87 -130 Source: First Securities, companies


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Equity Research

Dolphin is attractively valued on all measures

1) Compelling on earningsIncluding lease commitments, Dolphin is trading at EV/EBITDA of 2.2x for 2012 and 0.7xfor 2013 (its first full year in operation) and EV/EBIT of 3.4x for 2012 and 0.9x for 2013,well below seismic peers trading at EV/EBIT of 8.1-17.7x for 2012 and 5.1-6.4x for 2013.

Valuation seismic peers

PE EV/EBIT EV/EBITDA2011 2012 2013 2011 2012 2013 2011 2012 2013

DOLP 83,0x 3,3x 1,4x 31,9x 3,4x 0,7x 8,4x 2,1x 0,5xDOLP - lease-adj 15,9x 3,4x 0,9x 7,4x 2,2x 0,7x

PLCS (34,9)x 8,3x 3,0x 20,6x 10,5x 5,6x 10,4x 6,5x 4,0xPGS 19,3x 11,3x 7,4x 13,5x 8,1x 5,1x 5,6x 4,3x 3,1xSBX (4,0)x (15,2)x 8,8x (45,8)x 17,7x 6,4x 6,8x 4,1x 2,6x

Source: First Securities

2) Vessel price is 21-26% below peers

Dolphins vessel fleet is currently priced at USD 151m per vessel, representing a 21-26%discount to PGS (at USD 205m) and PLCS (at USD 192m) and a 12% discount to currentnewbuild costs (at USD 170m).

Our calculation assumes a 20 years time-charter less maintenance capex (to be coveredby RISH).

Implied value per 12 streamer vessel (USDm) DOLP discount to peers

100

120

140

160

180

200

220

DOLP today

(NOK 3.35)

Newbuild

cost

DOLP at

target (NOK

5.50)

PLCS today

(NOK 5.25)

PGS today

(NOK 80.7,

age

adjusted)

12streamervessel(USDm)

-30 %

-25 %

-20 %

-15 %

-10 %

-5 %

0 %

New build cos t PLCS today (NOK 5.25)

PGS today (NOK 80.7, age

adjusted)

Discounttopeers



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Equity Research


3) Our mid-2011 DCF is NOK 8.30 per share

Our mid-2011 DCF value is NOK 8.30 per share, of which NOK 6.60 relates to contractseismic and NOK 1.60 relates to MC seismic. Our target price of NOK 5.50 equals a 33%discount to our mid-2011 DCF value (and 17% discount to our valuation of contract seis-

mic) to factor in start-up and execution risk.

DCF value

DCF valuation, USDm End 2010 End 2011 Mid-2011

Contract seismic 232 250 241

MC seismic 38 55 47

GAV 270 305 287

NIBD and future capex commitments 73 59 66

Equity value 197 246 221

Assumptions

USD/NOK 6,00

WACC - contract seismic 9,0%

WACC - MC seismic 10,0%

Inflation 2,5%

Terminal values

Dayrate 212 766

Opex/d 134 764

Utilization 85 %

Number of vessels 2

Shares outstanding (m) 159,9 159,9 159,9

Equity per share (USD) 1,2 1,5 1,4

Equity per share (NOK) 7,4 9,2 8,3 Source: First Securities

Key risk factors

Oil price

Seismic market

Ability to secure contracts

Operational execution

Construction of newbuild 533

Please note that our initiation of coverage assumes shareholder approval of the equity is-sue at the EGM due 20 December 2010.


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Equity Research

Dolphin Group ASA

Dolphin Geophysical was founded in 2010, and will be organised under the Dolphin Group,a holding company that will take over the listing of Dolphin Interconnect Solutions (tickerDOLP) on the Oslo Stock Exchange. Dolphin Interconnect Solutions is a small IT company,with some seven employees selling software and hardware, which was acquired by Mr. AtleJacobsen and Mr. Erik Hokholt, now CEO and CFO of Dolphin, earlier in 2010. We havenot yet included Dolphin Interconnect Solutions to our estimates, but note that this is abreak-even business with approximately USD 1m in sales and boosting a limited balancesheet.

In December 2010, Dolphin Geophysical raised USD ~60m in net equity to partly fund aUSD 133m expansion in marine seismic. The company had prior to this issue entered intotime-charter arrangements with Rieber Shipping for two high-end 3D newbuild vessels andone 2D vessel.

The company will spend USD 100m to purchase seismic equipment, where as the remain-ing USD 33m will be used as working capital for its seismic vessels and MC projects. Out ofa total funding requirement of USD 133m, USD ~60m will stem from equity with the remain-ing USD 73m to be funded by debt (DOLP has already seen USD 30m in debt committedby DnB and USD 6.5m in convertible debt (at NOK 2.5 per share) ifrom Armada Seismic).

Dolphin organisational chart

DOLP (listed on OSE)

DOLP Group ASA

Dolphin InterconnectSolutions

(7 employes)

Dolphin Geophysical

Streamer Company 1

DOLP (listed on OSE)

DOLP Group ASA

Dolphin InterconnectSolutions

(7 employes)

Dolphin Geophysical

Streamer Company 1

Source: First Securities, Bloomberg

Strong management has done this before

Dolphin Geophysical was founded and managed by the team behind Wavefield Inseis, withadded multi-client experience from Veritas DGC. CEO Atle Jacobsen and CFO Erik Hok-holt held the exact same positions in Wavefield Inseis from 2006 until the integration withCGG Veritas in 2009. In addition to Peter Hooper (VP Operations) and Phil Suter (VPSales & Marketing), Dolphin has recruited Mr. Tim Wells as president of Western Hemi-

sphere. Mr. Wells has previously held the same position at CGG Veritas and was COO atVeritas DGC from 1999-2007.

In our view, Dolphin has a very strong management team, which has a documented abilityto:

Launch a seismic company from scratch. The management team grew WavefieldInseis from scratch in 2006 to a nearly 10% market share in 2008, when it boostedfour 3D vessels and two 2D vessels in operation with one 3D vessel under construc-tion. Due to an in-depth industry experience; Wavefield managed to launch its vesselconversions more or less on time and costs, despite an extremely tight supply-chain.

Build a world-class MC organisation. During his time as COO at Veritas DGC, Mr.Tim Wells built a world-class MC operation in both GoM and Brazil. From 2002-2006,Veritas DGC was the second-largest MC operator worldwide (only Western Geco was

larger).

Generate substantial share-holder value. Wavefield Inseis was sold to CGG Veritasfor NOK 2.1bn in 2008, equalling nearly twice the NOK 1.1bn equity amount raisedbetween 3q06 and 1q07.


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Management team

Suter commenced his career as a geophysicist with Seiscom Delta in 1973. In 1978 he joined Geco, and held severalsenior processing and marketing positions until the company was acquired by Schlumberger in 1990. Following theacquisition, Suter was Exploration Services Director for EMEA for 10 years, before he joined Paradigm Geophysical asGeoscience Director. In 2006, he joined Wavefield as Marketing Director until the company was acquired byCGGVeritas in 2009.

Jacobsen has 17 years of experience in the offshore E&P industry with several contractors including PGS and StoltOffshore, Multiwave and Wavefield Inseis. Before taking the position as CEO in Wavefield Geophysical in 2006, hewas VP Operations in Multiwave Geophysical Company. Jacobsen holds a Master of Science in Nautical Engineeringfrom NTH in Trondheim. Jacobsen has served on boards in several offshore and service companies.

Tim Wells began his career in the industry in 1977, and joined Digicon Geophysical in Houston in 1981 as aProcessing Geophysicist. In 1988, he was promoted to manage North and South American Processing, before hemoved to Singapore, where he became Manager of Regional Processing and later President for the APAC Region. Timserved as President and COO of VeritasDGC after the merger with Veritas in 1999. He held this position until thecompany was acquired by CGG in 2007. Post acquisition he held the position of President of the Western Hemispherefor CGGVeritas

Hokholt has more than 20 years experience from the Marine Seismic industry and 5 years experience from the auditand banking industry. He joined PGS in 1991, where he held sen ior Financial Director positions for 10 years. Hokholtwas one of the co-founders of Wavefield Geophysical in 2006 and filled the CFO position of Wavefield Inseis ASA until2009. He was CFO of InSeis from 2002 to 2004 and CEO from 2004 to 2006. He is educated at the Norwegian Schoolof Management (BI) and Norwegian School of Economics and Business Administration (NHH).

Hooper has more than ten years experience in offshore seismic, sub-sea survey, and marine operations. One of thefounders of the seismic service company Wavefield AS and Global VP Operations at Wavefield Inseis. SVP MarineOperations at CGGVeritas following Wavefield purchase. Hooper has also held senior positions with Geoconsult andMultiwave Geophysical; Combining many years offshore experience with several years working in senior ProjectManager roles onshore. Hooper holds a BSc (Hons) from the University of Aberdeen and a post Graduate Diploma in

Hydrographic Surveying from the University of Plymouth.

Management team Experience

Atle Jakobsen

(CEO)

Erik Hokholt

(CFO)

Peter A. Hooper

(VP Operations)

Phil Suter

(VP Sales &

Marketing)

Tim Wells

(President

Western

Hemisphere)

Suter commenced his career as a geophysicist with Seiscom Delta in 1973. In 1978 he joined Geco, and held severalsenior processing and marketing positions until the company was acquired by Schlumberger in 1990. Following theacquisition, Suter was Exploration Services Director for EMEA for 10 years, before he joined Paradigm Geophysical asGeoscience Director. In 2006, he joined Wavefield as Marketing Director until the company was acquired byCGGVeritas in 2009.

Jacobsen has 17 years of experience in the offshore E&P industry with several contractors including PGS and StoltOffshore, Multiwave and Wavefield Inseis. Before taking the position as CEO in Wavefield Geophysical in 2006, hewas VP Operations in Multiwave Geophysical Company. Jacobsen holds a Master of Science in Nautical Engineeringfrom NTH in Trondheim. Jacobsen has served on boards in several offshore and service companies.

Tim Wells began his career in the industry in 1977, and joined Digicon Geophysical in Houston in 1981 as aProcessing Geophysicist. In 1988, he was promoted to manage North and South American Processing, before hemoved to Singapore, where he became Manager of Regional Processing and later President for the APAC Region. Timserved as President and COO of VeritasDGC after the merger with Veritas in 1999. He held this position until thecompany was acquired by CGG in 2007. Post acquisition he held the position of President of the Western Hemispherefor CGGVeritas

Hokholt has more than 20 years experience from the Marine Seismic industry and 5 years experience from the auditand banking industry. He joined PGS in 1991, where he held sen ior Financial Director positions for 10 years. Hokholtwas one of the co-founders of Wavefield Geophysical in 2006 and filled the CFO position of Wavefield Inseis ASA until2009. He was CFO of InSeis from 2002 to 2004 and CEO from 2004 to 2006. He is educated at the Norwegian Schoolof Management (BI) and Norwegian School of Economics and Business Administration (NHH).

Hooper has more than ten years experience in offshore seismic, sub-sea survey, and marine operations. One of thefounders of the seismic service company Wavefield AS and Global VP Operations at Wavefield Inseis. SVP MarineOperations at CGGVeritas following Wavefield purchase. Hooper has also held senior positions with Geoconsult andMultiwave Geophysical; Combining many years offshore experience with several years working in senior ProjectManager roles onshore. Hooper holds a BSc (Hons) from the University of Aberdeen and a post Graduate Diploma in

Hydrographic Surveying from the University of Plymouth.

Management team Experience

Atle Jakobsen

(CEO)

Erik Hokholt

(CFO)

Peter A. Hooper

(VP Operations)

Phil Suter

(VP Sales &

Marketing)

Tim Wells

(President

Western

Hemisphere)

Source: Dolphin Geophysical, First Securities

Wavefield Inseis a success storyCreation of shareholder value: Wavefield shareholders booked nearly a 100% equity re-turn between 2006-2008. Wavefield Inseis raised NOK 1.1bn in the period from 3q06-1q07, and was acquired by CGG for NOK 2.1bn in 2008.

Successful expansion: Wavefield grew its organisation from 0 to 360 employees in 3years by expanding to a fleet to four 3D vessels (with one vessel under construction) andtwo 2D vessels between 2006-2008.

Landmark contracts: Wavefield secured landmark contracts for BP (USD 100m contractfor the acquisition of 27,000 sqkm 3D data in 2008), ONGC (USD 170m, multi-year con-tract for the acquisition of 3D data) and Statoil (seasonal work totalling USD 150m be-tween 2006-2008) during its few years in operation

Other key achievements/events:

December 2006: Wavefield, Weatherford (WFT US) and Optoplan agrees tojointly commercialise the next generation optical 4C OBT. A contract with Cono-coPhillips for Ekofisk, Norway was later won in competition with PGS and others(the technology was successfully installed on ConocoPhillips Ekofisk field in2010).

August 2006: Wavefield Inseis was formed following the merger between Wave-field Geophysical (seismic vessel company) and Inseis AS (MC company).

March 2007: IPO on Oslo Stock Exchange raised NOK 500m in new equity withexisting shareholders selling 36.8m shares for NOK 1.621bn (heavily over-subscribed).

2008: M/V Geowave Champion sets world-record in seismic data acquisition


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Equity Research

Wavefield team has been strengthened with added

multi-client experience from Veritas DGC

The multiclient market offers significant opportunities. MC sales have risen in 2010 and are

likely to increase in the coming years as activity in Gulf of Mexico and Brazil picks up andas E&P spending reaches new highs. In order to capitalize on this momentum, experi-enced and dedicated people are key. We find Dolphin well positioned to take advantage ofthis market, and note that Mr. Tim Wells led the worlds second largest MC operator duringhis time as COO of Veritas DGC.

MC capex (USDm) by company and quarter MC sales (USDm) by company and quarter

0

20

40

60

80

100

120

140

160

180

200

1q02

2q02

3q02

4q02

1q03

2q03

3q03

4q03

1q04

2q04

3q04

4q04

1q05

2q05

3q05

4q05

1q06

2q06

3q06

4q06

1q07

2q07

3q07

4q07

1q08

2q08

3q08

4q08

1q09

2q09

3q09

4q09

1q10

2q10

3q10

4q10

MCInvestments(USDm)

CGG Veritas DGC PGS TGS Western Geco

0

50

100

150

200

250

300

350

1q02

2q02

3q02

4q02

1q03

2q03

3q03

4q03

1q04

2q04

3q04

4q04

1q05

2q05

3q05

4q05

1q06

2q06

3q06

4q06

1q07

2q07

3q07

4q07

1q08

2q08

3q08

4q08

1q09

2q09

3q09

4q09

1q10

2q10

3q10

4q10

MCsales(US

Dm)

CGG Veritas DGC PGS TGS Western Geco

Source: companies, First Securities

High-end, cost efficient vessels

Dolphin has secured time-charter contracts on favourable terms by GC Rieber Shipping.Firm contracts are short, with option structures enabling flexibility to quickly adjust the fleetto demand and industry trends. The structure also removes steel risk, an important factor,as vessels are getting ever larger.

We find construction risk limited. The Polar Duke has already been delivered and will un-dergo some modifications before launch in April 2011. NB 533 is on track for delivery inMarch 2012, as the yard has recently obtained EUR 21m in financing to complete the ves-sel. Also risk mitigating is RISH extensive knowledgeable about the seismic industry andthese vessels (which were ordered in 2h05 by RISH) and strong financial incentives to theyard (payment of Spanish tax lease subsidies and final instalments at delivery).

Vessel fleet

April

2011

April

2016

March

2012

March

2015

Feb

11

Feb

12

5y firm April2022

6y option

3y firm March2019

4y option 4y option

Nov

2012

Feb

13

Feb

14

Feb

15

1y contract 1y op t. 1y o pt . 1y o pt .

Potential delivery

Polar ExplorerPolar Explorer

Polar DukePolar Duke

NB 533 (opt.)NB 533 (opt.)

NB 535 (opt.)NB 535 (opt.)

Source: Dolphin Geophysical, First Securities


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Equity Research


Trend towards ever larger vessels

The seismic market has seen a trend towards ever larger vessels. Whereas a 6 streamervessel was market standard in 1995, several tenders require a 10 streamer vessel or lar-ger today. We expect a continued high-grading of the market leading 3D fleet, and find

Dolphin, with its 14 winches and 200 tons bollard-pull well positioned to benefit from theupcoming cycle.

Although many vessels boost a theoretical towing capacity of 10-14 streamers, very fewvessels can actually tow such a large spread. In fact only 7 vessels worldwide (top 12%)are capable of towing a 1,300m wide spread (14 streamers at 100m separation). In addi-tion to Polar Duke and Newbuild 533, PGS two Ramform S-class, CGGs two Eidesviknewbuilds and sister vessel PGS Apollo are the other vessels capable of towing this manystreamers. The attractiveness of these vessels was demonstrated by PGS 2007 acquisi-tion and time-charter agreements signed by Western Geco and attempted time-charteragreement with CGG in 2006-2007.

Average number of streamers/vessel required

Source: Dolphin Geophysical


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Equity Research

Cost advantage from bunker fuel

Together with PGS high-end vessels, Dolphins fleet is the only fleet capable of running onheavy (bunker) fuel. Assuming a daily fuel consumption of 40-45 tonnes/day, we note thatthe current cost difference between bunker fuel and marine gas fuel is USD ~10,000 perday (and that it peaked above USD 20,000 per day in 2008). We estimate potential costsavings of 4-5% from the use of bunker fuel compared with peers, which to a large extentrelies on marine gas fuel.

We expect this cost advantage to be applicable in many (most) geographical regionsworldwide.Note that heavy fuel vessels can run on marine gas oil (MGO) also, but this isnot the case the other way round and MGO vessels cannot run on heavy fuel.

Fuel costs (USD/Day)*

2003 2004 2005 2006 2007 2008 2009 2010

3,107 6,450 9,018 9,462 9,072 15,435 5,902 8,893

2003 2004 2005 2006 2007 2008 2009 2010

3,107 6,450 9,018 9,462 9,072 15,435 5,902 8,893

Daily opex savings with use of Bunker fuel instead of Marine gas oil (USD/day)*

*Based on a consumption of 40 tonnes per day. In a 14 streamer operation fuelconsumption rises to 50-55 tons per day creating even larger cost advantages

0

10000

20000

30000

40000

50000

60000

May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10

Marine Gas Fuel Bunker Fuel

Source: Dolphin Geophysical, Bloornberg, First Securities


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Equity Research


Regional focus, vessel specification and management

track-record provides comfort in utilisation levels

Dolphin expects to operate in the North Sea during the summer months and in West Africa

and Brazil during the winter months. GoM will rebound at some stage and Dolphin couldpursue work in this region as well. In our view, this regional focus together with highsteaming speed (18 knots, above other newbuilds at 15-16 knots) and a competent andexperienced management, should facilitate decent utilisation levels and offsets the riskfrom managing a smaller fleet.

Geographic target areas

Source: Dolphin Geophysical


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Equity Research

First Securities expects all-time high E&P spending in

2011 and in 2012

A higher than expected average oil price in 2010 has contributed to solid cash flows for the

worlds large oil companies. We expect capital expenditures related to exploration and pro-duction to rise by 11% and 9% in 2011 and 2012 respectively.

Change YOY E&P spending Supply, demand and oil price

-40 %

-30 %

-20 %

-10 %

0 %

10 %

20 %

30 %

40 %

50 %

60 %

1971 1976 1981 1986 1991 1996 2001 2006 2011E

2010 +12%

20112012

+11%*+9%

2010 +12%

20112012

+11%*+9%

*GoM reduces spending by 3% in 2011,with an expected catch up in 2012

0

10

20

30

40

50

60

70

80

90

100

1970 1975 1980 1985 1990 1995 2000 2005 2010E

0,0

50,0

100,0

150,0

200,0

250,0

300,0

350,0

400,0

450,0

500,0

Excess capacity mbpdWorld Demand mbpd (l.a)

World Capac ity mbpd (l.a)Oil Price $/bbl (infl. adj) (l.a)

E&P Expenditures $ billion (infl. adj) (r.a)

Source: Schlumberger, First Securities, BP, IEA, Citigroup

The number of active deepwater rigs is set to increase

Number of active deepwater rigs is usually a leading indicator of seismic demand.

Total contracted floating drillers

0

50

100

150

200

250

300

350

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011E

No.

offloating

drillers

60%

65%

70%

75%

80%

85%

90%

95%

100%

Utilizatio

n

N. America Africa/Medit Asia/Pacif icNW.Europe S. America Worldw ideNot c ontracted Marketed Utilisation

Source: First Securities, Quest Offshore


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Equity Research


Long-term, todays RRR is insufficient, providing an at-

tractive long-term market outlook for seismic

As the Reserve Replacement Ratio (RRR) has decreased significantly over the last dec-

ade, the need for increased exploration is key. The long term market outlook for oil ser-vices in general and seismic in particular looks very strong.

Post 2011, we forecast limited supply growth

We estimate a net supply increase of 10% in 2010 and 18% in 2011. However from 2012,we estimate a net supply increase of 2-6% for 2012-14, well below our expected trendgrowth at 10% per year, which should help facilitate rate improvements.

Net supply (in streamers)

-10 %

-5 %

0 %

5 %

10 %

15 %

20 %

25 %

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014N

etsupplyincrease(streamers)

Annual growth*

DOLP in fulloperation


Reserve replacement ratio

0 %

50 %

100 %

150 %

200 %

250 %

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

European Union

OECD excl. Canada

TOTAL WORLD excl Canada & Venezuella

Source: BP, IEA


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Equity Research

Seismic market set to rebound

We expect that the trough in the seismic market was in 2010, and that seismic dayratesand margins will gradually improve towards a peak in 2013. Although we currently do notexpect this cycle to offer profitability in line with the peak in 2008, we note that a quickerthan expected rebound in activity in GoM and Brazil (which are both expected to seelease-sales re-start in 2011) or an oil price above USD 100/bl, could tighten the marketfaster than expected.

Seismic market profitability

-25 %

0 %

25 %

50 %

75 %

100 %

1994E

1995E

1996E

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

2014E

2015E

Contractseismicmargins



We are here


-25 %

0 %

25 %

50 %

75 %

100 %

1994E

1995E

1996E

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

2014E

2015E

Contractseismicmargins



We are here



A sharper than expected rebound could be triggered by

activity increases in GoM and Brazil

The number of vessels in the Gulf of Mexico is down from 12 vessels in 1q10 to 2 vesselstoday following the Macondo incident. We estimate an activity increase to 4 vessels from3q11. Assuming a sharper rebound in GoM to 6-8 vessels (in line with the last few yearsaverage) and growth in Brazil (from the last couple of years 4-5 vessel averge), we couldsee dayrates improve more and faster than expected.

Number of vessels in GoM Petrobras 5 year investment plan

0

2

4

6

8

10

12

14

1q10 2q10 3q10 4q10 1q11E 2q11E 3q11E 4q11E

No vessels in GoM

?

0

2

4

6

8

10

12

14

1q10 2q10 3q10 4q10 1q11E 2q11E 3q11E 4q11E

No vessels in GoM

?

0

50

100

150

200

250

2006 2007 2008 2009 2010

USDbn

Source: Petrobras, First Securities


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Equity Research


Dolphin will have a 4% market share in 2012 with op-

tions in place for additional growth

We estimate that Dolphin will obtain a market share of roughly 4% in just two years. Givenan exclusive opportunity for growth through option vessels, we estimate that its marketshare could reach 8% end-2012.

Market shares YE10 Market shares YE12

Western Geco

27 %

CGG Veritas

27 %

PGS

18 %

Fugro14 %

Polarcus

5 %

Others

9 %Dolphin

0 %

Western Geco

22 %

CGG Veritas

25 %

PGS

15 %

Fugro

12 %

larcus

12 %

Others

10 %

Dolphin

4 %



20/29

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Equity Research

Strong earnings growth expected

We expect Dolphin to generate an EBITDA of USD 57m in 2012 and USD 104m in 2013,of which its high-end 3D vessels should contribute with USD 34m in 2012 and USD 75m in2013 (its first full year in operation) and MC operations with USD 23m in 2012 and USD

29m in 2013 (benefitting from the completion of i ts planned MC survey in the Americas).

P&L and key assumptions

P&L USDm 2010E 2011E 2012E 2013E 2014E 2015E

Contract revenues 41 123 172 154 128

MC revenues 12 25 31 25 17

Net operating revenues 0 53 147 203 179 145

Revenue growth nm. 0% 179% 38% -12% -19%

Opex 0 -33 -84 -92 -96 -98

G&A 0 -6 -6 -6 -7 -7EBITDA 0 13 57 104 77 41

Amortization MC 0 -5 -11 -14 -11 -8

Depreciation 0 -4 -11 -14 -14 -14

Impairments 0 0 0 0 0 0

EBIT 0 3 35 76 52 20EBIT margin 0% 7% 24% 38% 29% 13%

Interest expese (net) 0 -2 -4 -3 -3 -2

Unrealised foreign exchange gain 0 0 0 0 0 0

Other net finance 0 0 0 0 0 0

Pretax profit 0 1 31 73 50 18

Taxes expense, net 0 0 -3 -7 -5 -2

Net profit 0 1 27 66 45 16

Mill. outs. shares 160 160 160 160 160 160

EPS 0.00 0.01 0.17 0.41 0.28 0.10

CEPS 0.00 0.07 0.31 0.58 0.44 0.23

Vessel assumptions 2010E 2011E 2012E 2013E 2014E 2015E

Utilisation

Polar Duke 80% 83% 85% 85% 85%

NB 533 0% 81% 85% 85% 85%

Dayrates

Polar Duke 197 100 240 462 276 531 248 878 206 569

NB 533 224 431 276 531 248 878 206 569

Opex/d

Polar Duke 114 900 119 673 123 489 129 352 130 809

NB 533 120 673 123 989 127 352 130 852

Multi-client assumptions 2011E 2012E 2013E 2014E 2015E

MC capex 24 12 12 12 12

MC sales - total 12 25 31 25 17

MC cash opex 2 2 2 2 2

MC amortisation 5 11 14 11 8MC EBIT 5 12 15 12 7

MC sales/cash cost (capex/opex) 0.5x 0.9x 1.3x 1.4x 1.3x

Amortisation rate 45% 45% 45% 45% 45% Source: First Securities

Positive newsflow expected over the next 2-3 months

We expect positive newsflow over the next two to three months. We expect that Dolphinwill announce the first contract for Polar Duke in February 2011. We expect more informa-tion around its multi-client project in the Americas in January/February 2011 and that itsfirst pre-funding commitment will be booked around project start-up in 2q11.


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Equity Research


End-2015 net cash is 2.2x the USD 60m raised in 2010

We estimate net cash flow of USD 7m in 2012 followed by USD 54m in 2013 and USD50m in 2014. Our earnings and cash flow estimates imply an end-2015 net cash position ofUSD 130m, equal to 220% the equity amount raised in 2010.

Cash flow statement and balance sheet

Cashflow statement 2010E 2011E 2012E 2013E 2014E 2015E

From operation 0 13 54 97 72 39

Net interest 0 -2 -4 -3 -3 -2

Net investment multi-client 0 -24 -12 -12 -12 -12

Net investments 0 -63 -38 -10 0 0

Gross cash flow 0 -76 0 71 58 25

Net current assets 0 -16 -18 -6 4 7

Net current liabilities 0 10 9 1 1 0

Net debt/sale leaseback fund 0 46 16 -12 -12 -12

Net equity / dividend payment 60 0 0 0 0 0

Other 0 0 0 0 0 0

Net cashflow 60 -36 7 54 50 21

Balance sheet 2010E 2011E 2012E 2013E 2014E 2015E

Cash 60 24 31 85 135 156

Current assets 0 16 34 40 36 29

MC data library 0 19 20 17 18 23

Total Current assets 60 59 85 142 189 208

PP&E (incl vessels under const.) 0 58 85 81 67 53

Other assets 0 0 0 0 0 0

Goodwill 0 0 0 0 0 0

Total non-current assets 0 58 85 81 67 53

TOTAL ASSETS 60 117 169 223 257 261

Other Current liabilities 0 10 19 20 20 21

Total current liabilities 0 10 19 20 20 21

Long term interest bearing debt 0 46 61 49 37 25

Sales Lease-back Fund 0 0 0 0 0 0Other liabilities 0 0 0 0 0 0

Share capital 60 61 89 154 199 215

Total Equity and lt liabilities 60 107 150 203 236 240

TOTAL LIABILITIES AND EQUITY 60 117 169 223 257 261

NIBD -60 22 31 -35 -98 -130

Off-B/S debt 75 68 50 31 10 0

Total debt 15 90 81 -5 -87 -130 Source: First Securities, companies


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Equity Research

Dolphin is attractively valued on all measures

1) Compelling on earningsIncluding lease commitments, Dolphin is trading at EV/EBITDA of 2.2x for 2012 and 0.7xfor 2013 (its first full year in operation) and EV/EBIT of 3.4x for 2012 and 0.9x for 2013,well below seismic peers trading at EV/EBIT of 8.1-17.7x for 2012 and 5.1-6.4x for 2013.

Valuation seismic peers

PE EV/EBIT EV/EBITDA2011 2012 2013 2011 2012 2013 2011 2012 2013

DOLP 83,0x 3,3x 1,4x 31,9x 3,4x 0,7x 8,4x 2,1x 0,5xDOLP - lease-adj 15,9x 3,4x 0,9x 7,4x 2,2x 0,7x

PLCS (34,9)x 8,3x 3,0x 20,6x 10,5x 5,6x 10,4x 6,5x 4,0xPGS 19,3x 11,3x 7,4x 13,5x 8,1x 5,1x 5,6x 4,3x 3,1xSBX (4,0)x (15,2)x 8,8x (45,8)x 17,7x 6,4x 6,8x 4,1x 2,6x


Robust at current market conditionsLeveraged for the up-cycle

The chart below illustrates earnings from Dolphins two high-end 3D vessels only assum-ing different dayrates scenarios. The top chart illustrates a P&L and implied multiples asreported under the T/C arrangements. The chart below illustrates how the P&L and the im-plied multiples would have looked if Dolphin owned the vessels themselves.

Our calculations assume current EV and are based on 85% utilisation. We have assumeddaily opex of USD 115k/d (of which USD 30k/d relates to vessel element of T/C). We esti-mate an off-balance sheet debt of USD 75m and assume a depreciation of vessels of USD6m.

Sensitivity - Dayrates and multiples (contract seismic only)

Market trough 2011E (10-12 str) 2012E (10-12 str) 2013E (10-12 str) 2013E (12-14 str)Price vs. 2007/08 peak -53 % -49 % -43 % -37 % -31 % -26 % -21 % -14 % 0 %

Change in price from 2010 trough -18 % -10 % 0 % 10 % 20 % 30 % 38 % 50 % 75 %

3D rates (USD/day) 165 000 180 000 200 000 220 000 240 000 260 000 275 000 300 000 350 000Revenues 102 112 124 137 149 161 171 186 217Opex 90 90 90 90 90 90 90 90 90EBITDA 12 22 34 47 59 71 81 96 127Depreciation 13 13 13 13 13 13 13 13 13

EBIT 0 9 22 34 46 59 68 84 115

Market cap at NOK 3.35 89 89 89 89 89 89 89 89 89Fully-funded debt 73 73 73 73 73 73 73 73 73EV today 162 162 162 162 162 162 162 162 162EV/EBITDA 13,1x 7,5x 4,8x 3,5x 2,8x 2,3x 2,0x 1,7x 1,3xEV/EBIT (2403,8)x 17,6x 7,5x 4,8x 3,5x 2,8x 2,4x 1,9x 1,4x

Including off-balance sheet items 165 000 180 000 200 000 220 000 240 000 260 000 275 000 300 000 350 000

Revenues 102 112 124 137 149 161 171 186 217

Opex 68 68 68 68 68 68 68 68 68EBITDA 34 44 56 68 81 93 103 118 149Depreciation 19 19 19 19 19 19 19 19 19EBIT 16 25 37 50 62 74 84 99 130

Market cap at NOK 3.35 89 89 89 89 89 89 89 89 89

Fully-funded debt 73 73 73 73 73 73 73 73 73EV today 162 162 162 162 162 162 162 162 162

Off-B/S debt 75 75 75 75 75 75 75 75 75Depreciation of vessels (if owned) 6 6 6 6 6 6 6 6 6EV/EBITDA 6,9x 5,4x 4,2x 3,5x 2,9x 2,5x 2,3x 2,0x 1,6x

EV/EBIT 15,3x 9,5x 6,4x 4,8x 3,8x 3,2x 2,8x 2,4x 1,8x Source: First Securities


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Equity Research


2) Vessel price is 21-26% below peers

Dolphins vessel fleet is currently priced at USD 151m per vessel, representing a 21-26%discount to PGS (at USD 205m) and PLCS (at USD 192m) and a 12% discount to currentnewbuild costs (at USD 170m).

Our calculation assumes a 20 years time-charter less maintenance capex (to be coveredby RISH).

Implied value per 12 streamer vessel (USDm) DOLP discount to peers

100

120

140

160

180

200

220

DOLP today

(NOK 3.35)

Newbuild

cost

DOLP at

target (NOK

5.50)

PLCS today

(NOK 5.25)

PGS today

(NOK 80.7,

age

adjusted)

12streamerve

ssel(USDm)

-30 %

-25 %

-20 %

-15 %

-10 %

-5 %

0 %

Newbuild cos t PLCS today (NOK 5.25)

PGS today (NOK 80.7, age

adjusted)

Discounttopeers


3) Our mid-2011 DCF is NOK 8.30 per share

Our mid-2011 DCF value is NOK 8.30 per share, of which NOK 6.60 relates to contractseismic and NOK 1.60 relates to MC seismic. Our target price of NOK 5.50 equals a 33%discount to our mid-2011 DCF value (and 17% discount to our valuation of contract seis-mic) to factor in start-up and execution risk.

DCF value

DCF valuation, USDm End 2010 End 2011 Mid-2011

Contract seismic 232 250 241

MC seismic 38 55 47

GAV 270 305 287

NIBD and future capex commitments 73 59 66

Equity value 197 246 221

Assumptions

USD/NOK 6,00

WACC - contract seismic 9,0%

WACC - MC seismic 10,0%

Inflation 2,5%

Terminal values

Dayrate 212 766

Opex/d 134 764

Utilization 85 %

Number of vessels 2

Shares outstanding (m) 159,9 159,9 159,9Equity per share (USD) 1,2 1,5 1,4

Equity per share (NOK) 7,4 9,2 8,3 Source: First Securities


24/29

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Equity Research

Company Information

ROE vs. P/BV Net debt/total equity vs. Total equity/total assets

0.4

0.6

0.8

1.0

1.2

1.4

1.6

2007 2008 2009 2010E 2011E 2012E 2013E 2014E

0

10

20

30

40

50

60

P / BV ROE (%)

-50

-40

-30

-20

-10

0

10

20

30

40

2007 2008 2009 2010E 2011E 2012E 2013E 2014E

0

0

0

1

1

1

1

1

2

2

Net debt/total equity (%) Total equity/total assets (%)

Other company information

CEO Atle Jakobsen

CFO Erik Hokholt

IR na

Website http://www.dolphingeo.com/

Tel na

Address na

Annual meeting 00 January 0000

D ivide nd paid date 00 J anuary 0000

ShareholdersVotes Capital

International investors na na

Free float na na

A/B-votes na na

Quarterly P&L estimates

Quarterly P&L estimates (MUSD) Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010E Q4 2010ENet Sales 0 0 0 0 0 0 0 0

EBITDA 0 0 0 0 0 0 0 0

EBITA 0 0 0 0 0 0 0 0

EBIT 0 0 0 0 0 0 0 0

Non-recurring items na na na na na na na na

Operating profit 0 0 0 0 0 0 0 0

Income from associated companies 0 0 0 0 0 0 0 0

Net financial items 0 0 0 0 0 0 0 0

Reported pre-tax profit 0 0 0 0 0 0 0 0

Recurring pre-tax profit 0 0 0 0 0 0 0 0

Total tax 0 0 0 0 0 0 0 0

Minority interest na na na na na na na na

Reported net profit 0 0 0 0 0 0 0 0Recurring net profi t 0 0 0 0 0 0 0 0

EPS reported fully diluted 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

EPS recurring 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Tax rate na na na na na na na na

Recurring EPS excludes or normalises gains/losses on equity investments, asset sales/writedowns and currency positions and is based on long-term tax rates.Other valuation measures are based on such recurring earnings.


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Equity Research


Annual P&L estimates & Balance sheet

Annual P&L estimates (MUSD) 2007 2008 2009 2010E 2011E 2012E 2013E 2014ENet Sales 0 0 0 0 53 147 203 179

Other revenues na na 0 0 na na na naOperating costs 0 0 0 0 - 39 - 90 - 99 - 102

Cost of Goods Sold na na 0 0 - 33 - 84 - 92 - 96

R&D na na 0 0 na na na na

Selling expenses na na 0 0 na na na na

Administrative costs na na 0 0 - 6 - 6 - 6 - 7

Other operating costs na na 0 0 na na na na

Write backs na na 0 0 na na na na

EBITDA 0 0 0 0 13 57 104 77

Depreciation of property, plant & equipment na na 0 0 - 4 - 11 - 14 - 14

EBITA 0 0 0 0 9 46 90 63

Goodwill amortisation na na 0 0 na na na na

Development and amortisation na na 0 0 - 5 - 11 - 14 - 11

EBIT 0 0 0 0 3 35 76 52

Write-downs na na 0 0 na na na na

Capital gains na na 0 0 na na na naRestructuring charges and provisions na na 0 0 na na na na

Other non-recurring items na na 0 0 na na na na

Operating profit 0 0 0 0 3 35 76 52


Net interest 0 0 0 0 - 2 - 4 - 3 - 3

Interest Income na na 0 0 na na na na

Interest expenses 0 0 0 0 0 0 0 0

Other financial i tems 0 0 0 0 0 0 0 0

Extra ordinary items na na 0 0 na na na na


Total tax na na 0 0 0 - 3 - 7 - 5

Minority interest na na 0 0 na na na na

Reported net profit 0 0 0 0 1 27 66 45

Recurring net profit 0 0 0 0 1 27 66 45

EPS reported fully diluted 0.00 0.00 0.00 0.00 0.01 0.17 0.00 0.00

EPS recurring 0.00 0.00 0.00 0.00 0.01 0.17 0.00 0.00

Balance sheet, annual (MUSD) 2007 2008 2009 2010E 2011E 2012E 2013E 2014EGoodwill na na na na 0 0 0 0

Other Intangible assets na na na na na na na na

Tangible assets na na na na 58 85 81 67

Shares and partic ipations na na na na 0 0 na na

Other fixed financial assets na na na na na na na na

Other fixed assets na na na na 0 0 0 0

Fixed assets 0 0 0 0 58 85 81 67

Inventories na na na na na na na na

Receivables na na na na na na na na

Cash and liquid assets na na na na 24 31 85 135

Other current assets na na na na 35 54 58 54

Current assets 0 0 0 0 59 85 142 189

Total Assets 0 0 0 0 117 169 223 257

Shareholders Equity 0 0 0 0 61 89 154 199

Minority interest na na na na na na na na

Convertible debt na na na na na na na na

Other long-term liabilities na na na na 0 0 0 0

Long-term interest bearing debt na na na na 46 61 49 37

Provisions for pensions na na na 0 0 0 na na

Deferred tax liability na na na 0 0 0 na na

Other provisions na na na 0 0 0 na na

Short-term interest bearing debt na na na na na na na na

Accounts and notes payable na na na na na na na na

Other short-term liabili ties na na na na 10 19 20 20

Total Liabilities & Equity 0 0 0 0 117 169 223 257


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Cash Flow & Key figures

Cashflow analysis, annual (MUSD) 2007 2008 2009 2010E 2011E 2012E 2013E 2014EOperating profit 0 0 0 0 3 35 76 52

Depreciation & amortisation na na na na 10 22 28 25

Other non-cash adjustments na na na na na na na naNet financial i tems na na na na - 2 - 4 - 3 - 3

Paid taxes na na na na 0 - 3 - 7 - 5

Cash earnings in operations 0 0 0 0 11 49 93 70

Change in working capital na na na na - 6 - 9 - 5 5

Operating cash flow 0 0 0 0 5 41 88 74

Capex na na na 0 - 63 - 38 - 10 0

Other investments (including leasing) na na na na - 24 - 12 - 12 - 12

Divestments of fixed assets na na na na na na na na

Free cash flow 0 0 0 0 - 82 - 9 66 62

Other investments in fixed financial assets na na na na na na na na

Acquisitions/divestments na na na na na na na na

Free cash flow after Div & Acq 0 0 0 0 - 82 - 9 66 62

Dividend paid na na na na na na na na

Share issues & buy-backs na na na 60 0 0 0 0

Change in interest-bearing liabil ities na na na na 46 16 - 12 - 12

Others na na na na 0 na na na

Change in liquid capital / (debt) 0 0 0 60 - 36 7 54 50

FCF, excluding interest charges 0 0 0 0 - 82 - 9 66 62

Per share data (USD) 2007 2008 2009 2010E 2011E 2012E 2013E 2014EEPS reported ful ly diluted 0.00 0.00 0.00 0.00 0.01 0.17 0.00 0.00

EPS recurring 0.00 0.00 0.00 0.00 0.01 0.17 0.00 0.00

Cash earnings 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0

Cash earnings recurring 0.0 0.0 0.0 0.0 0.0 0.3 0.0 0.0

Free cash flow na na na na 0.0 0.3 0.6 0.5

Free cash flow recurring nm nm nm nm -0.5 -0.1 0.4 0.4

Book value na na na na 0.4 0.6 1.0 1.2

Book Value (ex Goodwill) na na na na 0.4 0.6 1.0 1.2

Dividend 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Valuation 2007 2008 2009 2010E 2011E 2012E 2013E 2014EEV/Sales na na na na na na na na

EV/EBITDA na na na na na na na na

EV/EBIT na na na na na na na na

P/FCF nm nm nm nm nm nm 1.4 1.4

P/E recurring (Year End) nm nm nm nm 83.9 3.3 nm nm

P/E recurring (High) nm nm nm nm na na na na

P/E recurring (Low) nm nm nm nm na na na na

P/E nm nm nm nm 83.9 3.3 nm nm

P/BV na na na na 1.48 1.02 0.59 0.45

P/BV (ex goodwill) na na na na 1.48 1.02 0.59 0.45

FCF-yield nm nm nm nm -90.9% -9.8% 73.4% 69.1%

Margins 2007 2008 2009 2010E 2011E 2012E 2013E 2014EGross margin na na nm nm 36.6% 42.8% 54.5% 46.7%

EBITDA margin nm nm nm nm 25.2% 38.6% 51.3% 43.0%

EBIT margin nm nm nm nm 6.6% 23.6% 37.6% 29.1%

PTP margin nm nm nm nm 2.3% 20.7% 35.9% 27.6%

Net margin nm nm nm nm 2.0% 18.7% 32.3% 24.9%

Recurring net margin nm nm nm nm 2.3% 20.7% 35.9% 27.6%

Profitability 2007 2008 2009 2010E 2011E 2012E 2013E 2014EFCF/Sales nm nm nm nm nm -6.0% 32.6% 34.7%

ROA na na nm nm na na na na

ROCE na na nm nm na na na na

ROIC nm nm nm nm 12.8% 51.6% 94.3% 72.6%

ROE nm nm nm nm 3.5% 36.7% 54.1% 25.3%

ROE recurring nm nm nm nm 3.9% 40.8% 60.1% 28.1%


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Company specific disclaimer

Price target methodology and risks;

Critical assumptions;

Planned updates;First Securities AS plans to update the recommendation on the company when;

The price target is achieved or When new accounting figures are released or If any material news on the company or on the industry is released

Share price, rating history and target price 12 m fwd (NOK)*

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10

Target price 12 m fwd

*Note: Change in recommendation structure Jan 1 2008

Sources of information;The sources have been;

Annual reports from the company Presentations from other seismic companies Quarterly reports from the comy Presentation from the company Prospectuses from the company Reuters Bloomberg

Share ownershipFirst Securities AS may have holdings in the companies described herein as a result of market making operations and/or underlying shares

as a result of derivatives trading. First Securities AS may buy or sell such shares both for own account, and as a principal agent. Due to in-ternal professional secrecy such holdings are not known to others outside the department which carries out the operations.

Analyst Pl Hold Dahl owns 0 Shares in Dolphin Group ASA.Employees in First Securities AS own 0 Shares in Dolphin Group ASA.

Details of stock holdings are updated once a week.Employees in First Securities AS may have indirect ownership in the companies described herein as a result of investments in securitiesfunds or similar. First Securities ASs tied agents (hereunder employees of tied agents) may have holdings in the companies described herein.Furthermore, First Securities AS/First Investment Management is appointed by LSAM as investment manager to the funds First Norway Al-pha, First Norway Delta, First Active and First Active Protector. These funds may have holdings in the companies described herein and em-ployees of First Securities AS have holdings in the funds.


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General disclaimer

Recommendation structure and definitionsFirst Securities AS Research department operates with 5 recommendation categories based on expected absolute return for the security 12months forward. The absolute return includes share appreciation and dividend yield combined.

Strong Buy: The absolute return is estimated to be in excess of 15%Buy: The absolute return is estimated between 5% and 25%Neutral: The absolute return is estimated between 0% and 10%Reduce: The absolute return is estimated between 5% and -10%Sell: The absolute return is estimated to be less than -5%Share price target: All share price targets are based on a 12 month horizon

Model for value evaluationFirst Securities AS Research department bases the recommendations on a variety of standard valuation models. Shares are commonly val-ued on a DCF-basis, except financial companies. Price-to-book value relative to long term historical empirical averages and/or relative toReturn on equity are commonly deployed as are Net Asset Value models for companies with liquid markets for their assets.Shorter-term considerations are often included in the form of relative Price-to-Earnings ratios and Enterprise Value-to-Earnings before amor-tization, depreciation, interest and taxes.

Total distribution of recom-mendations

Distribution of recommenda-tions for Companies that

First Securities has deliv-ered investment services:

No of Stocks % of total Mcap -weighted rating

Strong Buy 23 20% 56%Buy 55 47% 25%

Neutral 34 29% 14%Reduce 4 3% 6%

Sell 0 0% 0%

Distribution of recommendation as of 13 December 2010

Buy

20%Reduce

3%

Sell

0%

Neutral

29%

Buy

48%

rong

Buy

25%Reduce

5%

Sell

0%

Neutral

33%

Buy

37%

Information barriersFirst Securities AS relies on information barriers ("Chinese walls") to control the flow of information contained in one or more areas withinFirst Securities AS, into other areas or units within First Securities AS. First Securities AS is organised in accordance with relevant legislationand in accordance with the guidelines given by the Norwegian Securities Dealers Association. The analyst(s) involved in the preparation ofthis report has not at the same time been involved in corporate assignments for companies described by him or her.

Analyst certificationI/we hereby certify that the views expressed in this research report accurately reflect my personal views about the subject securities andissuers. I/we also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific recommendations orviews expressed in this research report. Analyst compensation may relate to the revenues of First Securities AS as a whole.

DisclosuresThis document has been prepared by First Securities AS, an investment banking firm domiciled in Norway, under the supervision of TheFinancial Supervisory Authority of Norway (Finanstilsynet), and member of The Oslo Stock Exchange. This document has been prepared inaccordance with the guidelines from the Norwegian Securities Dealers Association. Swedbank AB disseminates this document produced byFirst Securities AS. Swedbank AB has not altered the document. Swedbank AB is under the supervision of The Swedish Financial Supervi-sory Authority (Finansinspektionen). This document is being distributed in the United States by Swedbank First Securities LLC. ('SwedbankFirst'), which accepts responsibility for its contents - any United States institutional investor receiving the report, who wishes to obtain furtherinformation or to effect a transaction in any security discussed in the report, should do so only through Swedbank First. Swedbank First is aU.S. broker-dealer, registered with the Securities and Exchange Commission, and is a member of the Financial Industry Regulatory Author-ity. Swedbank AS disseminates this report in Estonia. Swedbank AS is under the supervision of the Estonian Financial Supervisory Authority(Finantsinspektsioon). Swedbank AB disseminates the report in Lithuania. Swedbank AB is under the supervision of the Lithuanian Finan-cial Supervisory Authority (Lietuvos Respublikos vertybinipopierikomisija) in Lithuania. Swedbank AS disseminates this report in Latvia.Swedbank AS is under the supervision of the Latvian Financial Supervisory Authority (Finanu un kapitla tirgus komisija). In no instances isthe report altered before dissemination.

Additional disclaimerThis document is intended for use only by those investors to whom it is made available by First Securities AS and no part of this report maybe reproduced in any manner, or used other than as intended, without the prior written permission of First Securities AS. The informationcontained in this document has been taken from sources deemed to be reliable. First Securities AS makes every effort to use reliable, com-prehensive information but we do not represent that such information is accurate or complete and it should not be relied on as such. Anyopinions expressed herein reflect our judgement at this date and are subject to change. First Securities AS has no obligation to noticechanges of judgements or opinions expressed herein. The opinions contained herein are based on numerous assumptions as described inthe document. Different assumptions could result in materially different results. Furthermore, the assumptions may not be realized. Thisdocument does not provide individually tailored investment advice and all recipients of this document are advised to seek the advice of afinancial advisor before deciding on an investment or an investment strategy. First Securities AS accept no liability whatsoever for any direct,indirect or consequential loss rising from the use of this document or its contents. This document does not constitute or form part of any offerfor sale or subscription of or solicitation or invitation of any offer to buy or subscribe for any securities nor shall it or any part of it form the

basis of or be relied on in connection with any contract or commitment whatsoever. The distribution of this document may be restricted by lawin certain jurisdictions and person into whose possession this document comes should inform themselves about, and observe, any such re-striction. Any failure to comply with these restrictions may constitute a violation of the laws of any such jurisdiction. First Securities AS shallnot have any responsibility for any such violations.


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Dolphin Group ASA - Error! Style not defined.

Key data summary

P&L (MUSD) 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

Sales 0 0 0 0 53 147 203 179Sales growth na na na na nm 179.0% 37.8% -11.5%

EBITDA 0 0 0 0 13 57 104 77

EBITDA margin na na na na 25.2% 38.6% 51.3% 43.0%

EBIT 0 0 0 0 3 35 76 52

EBIT margin nm nm nm nm 6.6% 23.6% 37.6% 29.1%

Non-recurring items na na 0 0 na na na na


Net financial i tems 0 0 0 0 -2 -4 -3 -3


Reported net profit 0 0 0 0 1 27 66 45

Recurring net profit 0 0 0 0 1 27 66 45

Cash flow 2007 2008 2009 2010E 2011E 2012E 2013E 2014E

Operating cash flow 0 0 0 0 5 41 88 74Capex na na na 0 - 63 - 38 - 10 0

Other net investments in fixed assets na na na na na na na na

Free cash flow 0 0 0 0 - 82 - 9 66 62

Other investments/divestments 0 0 0 0 0 0 0 0

Free cash flow after Div & Acq 0 0 0 0 - 82 - 9 66 62

Financing activ ities na na na na na na na na

Change in liquid capital 0 0 0 60 - 36 7 54 50

dolphin analyst report 2010

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