Pareto World Wide Shipping AS Kvartal 3

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1 Pareto World Wide Shipping AS 2010 Kvartal 3

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3 Pareto er en uavhengig og ledende aktør i det norske markedet for finansielle tjenester. Selskapet har kontorer i Oslo, Stavanger, Bergen, Trondheim, Kristiansand, Bryne, Singapore og New York. Pareto ble stiftet i 1986, og har utviklet seg til å bli et konsern med et omfattende produktspekter. Selskapet har mer enn 400 ansatte. Den sterke utviklingen er muliggjort gjennom dedikerte og dyktige medarbeidere, skarpt fokus på å utvikle gode produkter, kontrollert vekst og ikke minst ved at våre kunder og forretningsforbindelser har vist oss tillit. Pareto Project Finance AS Pareto Business Management AS Pareto Securities AS Pareto Forvaltning AS Pareto Eiendom AS Pareto Bassøe Shipbrokers AS Pareto Bank ASA Pareto Universal Fonds AS Pareto Offshore AS Pareto Dry Cargo AS Pareto PPN AS JGO Shipbrokers AS

4 Forvalters kommentar Utviklingen innen shipping og offshore har gått i motsatt retning i tredje kvartal. Innen shipping har ratene falt med 18 % siden forrige kvartal (gjennomsnitt for bulk, tank, gass og container), men ligger på tross av dette ca 40 % høyere enn tilsvarende periode i fjor. Innen offshore har utviklingen vært positiv i forhold til de foregående kvartalene med enten høyere eller uendrede rater innen samtlige segmenter. Spesielt moderne enheter har opplevd stigende rater, og dette gjelder samtlige segmenter. På tross av noe volatilitet i ratene er markedsverdiene fortsatt på vei opp innen shipping og offshore, noe som tyder på økt fremtidsoptimisme. En relativt høy transaksjonsaktivitet bekrefter verdiene. Det er verdt å merke seg høy fusjons- og oppkjøpsaktivitet innenfor offshore som en posisjonering for fremtidig etterspørselsvekst. Nykontraheringen har fortsatt å ta seg opp innen begge segmentene. Ordreboken er fortsatt et sted mellom % av dagens flåte i de fleste segmenter. Imidlertid er mesteparten av leveransene bak oss innenfor offshore, mens den ligger foran oss innenfor shipping. Dette har betydning for markedsutsiktene fremover, som ser bedre ut for offshore enn tilfellet er for shipping. Kina er fortsatt den store driveren på etterspørselssiden for shipping og her har makrotallene tatt seg opp igjen etter noe svakhet på sensommeren. Også oljemarkedene er avhengige av Kina og oljeprisen har styrket seg i takt med stigende aksjemarkeder og fallende USD. Markedsbalansen synes å snu til det positive de neste årene grunnet sterkt fallende vekst i produksjonskapasiteten samtidig som etterspørselsveksten synes å normalisere seg. Viktige hendelser i Selskapets investeringer i løpet av tredje kvartal De fleste prosjektene i porteføljen har utviklet seg tilnærmet som forventet gjennom tredje kvartal, og det har ikke skjedd noe på prosjektsiden som har betydelige negative effekter for Selskapet. Av litt mindre hendelser så har Pareefers II KS solgt to av sine fire skip til en prising som ligger marginalt over siste verdivurdering. I tillegg har Partankers V IS overlevert siste to skip som ble bundet opp i andre kvartal, og oppgjøret er utbetalt til deltakerne (for detaljer rundt transaksjonene, se avsnitt salg). Som følge av god likviditet i Selskapet har forvalter og styret vært relativt aktive i forhold til å se på nye investeringer den siste tiden. Dette har resultert i ytterligere kjøp for totalt ca NOK 10 millioner i henholdsvis Parchem II IS og Deep Sea Bergen Invest AS, som er prosjekter Selskapet allerede har eierandeler i. Forvalter og styret tror at timingen for å gjøre nye investeringer er god, og har tro på å kunne finne flere interessante investeringsmuligheter for Selskapet i fjerde kvartal.

5 «Siste verdijusterte egenkapital er NOK 166 per aksje» Verdi- og kapitalutvikling Kursutvikling Kursutviklingen som rapporteres for Selskapet er basert på verdijustert egenkapital (). Verdivurderingen av Selskapets investeringer er basert på innhentede markedsverdier fra megler(e)/tilrettelegger(e) hvor anerkjente verdivurderingsprinsipper og bransjemessige standarder blir lagt til grunn. Siste kurs basert på ble fastsatt 30. juni 2010 og er NOK 166 per aksje (valutakurs USD/NOK på rapporteringstidspunktet var 6,4970). Selskapet gjør halvårlige verdivurderinger av selskapet, og rapporterer således to ganger per år. Følgelig vil neste offisielle foreligge per og rapporteres til investorene i kvartalsrapport for fjerde kvartal Annenhåndsomsetning Ved utgangen av tredje kvartal er det utstedt totalt aksjer i Selskapet. Pareto Project Finance AS («PPF») legger til rette for aktiv annenhåndsomsetning av NOK Kursutvikling Pareto World Wide Shipping AS Emisjon I ,24) Emisjon II ,72) Emisjon III ,22) Emisjon IV ,18) Ex utbetaling ,47) Ex utbetaling ,15) Ex utbetaling ( ) ,95) ,01) ,60) ,74) ,50) Omfatter ikke omsetning i annenhåndsmarkedet. justert for utbytte ordinær kurs

6 MNOK Kapitalutvikling Kommitert kapital Fond Utbetalt Fri kapital Gjenstående innbetalinger prosjekter* * korrigert for latent skatt/skattefordel aksjer. Siste omsetningskurs er NOK 75 per aksje (omsatt ). Investorer som ønsker å kjøpe eller selge sine aksjer kan ta kontakt med sin rådgiver. Direkteavkastning Selskapet har som målsetning å betale ut årlige utbetalinger til aksjonærene. Utbetaling av kapital til investorene skjer innenfor aksjelovens regler, og kan skje i form av utdeling av utbytte eller ved nedsettelse av selskapskapitalen. Siste utbetaling fra Selskapet ble gjennomført i juni 2010 og var på NOK 10 per aksje. Totalt har Selskapet siden oppstart utbetalt NOK 224 millioner til aksjonærene, noe som tilsvarer NOK 36 per aksje (18 % av pari kurs). Dersom shipping- og offshoremarkedet ikke skulle forverre seg betydelig gjennom 2010 og 2011, er det styrets og forvalters intensjon at Selskapet fremover foretar årlige utbetalinger til investorene. Det er ikke forventet ytterligere utbetalinger til aksjonærene i Investeringstakt og kapitalutvikling Kommittert kapital i Selskapet var opprinnelig NOK millioner. Selskapet har en portefølje som består av andeler i 51 enheter. Selskapets kontantbeholdning per 30. september 2010 var på ca. NOK 370 millioner. Av dette er NOK 28 millioner planlagte innbetalinger på allerede kommitterte investeringer, mens resterende NOK 342 millioner er kapital som vil benyttes til en kombinasjon av nye investeringer, oppfølging av eksisterende prosjekter, samt til eventuelle fremtidige utbetalinger til investorene. Porteføljen til Selskapet gjennomgås jevnlig av forvalter med tanke på å evaluere risikoen for ytterligere kapitalbehov i prosjektene. Styret og forvalter er av den oppfatningen at Selskapets avsetninger for mulige innkallinger av egenkapital sannsynligvis har passert et toppnivå, og at disse vil reduseres i takt med en eventuell bedring i markedet. Dagens markedssituasjon tilsier at Selskapet på nåværende tidspunkt har NOK millioner i fri investeringskapital. Styret og forvalter tror timingen for å gjøre nye investeringer er god, og er således relativt aktive i forhold til å se på nye investeringsmuligheter. Med bakgrunn i kapitalsituasjonen i Selskapet og markedssituasjonen ble det på generalforsamlingen besluttet å forlenge reinvesteringsperioden og levetiden til Selskapet med ett år. Reinvesteringsperioden og levetiden utløper nå henholdsvis 30. juni 2011 og 30. juni 2013.

7 Shippingporteføljen Styret og forvalter vurderer porteføljen til å være relativt solid, der hovedtyngden av prosjektene løper med bareboatcertepartier i henhold til Selskapets investeringsmandat. Vektet certepartilengde basert på verdijustert egenkapital er 5,1 år. Porteføljen inneholder andeler i totalt 51 enheter, fordelt på segmentene offshore, roro, tank, kjemikalie, container, kjøleskip, bulk, produkt tank og cruise. Finansiering Samtlige prosjekter i Selskapet er fullfinansiert med langsiktig lånefinansiering knyttet opp mot lengden av certepartiene. Selskapets finansieringssituasjon er svært gunstig gitt rådende markedsbetingelser. Hovedvekten av lånene er inngått da utlånsmarkedet fungerte vesentlig bedre, slik at marginer og gjeldsgrad på lån i prosjektene i Selskapet er betydelig bedre enn hva man kan forvente å oppnå i dagens marked. Utfordringene på finansieringen knytter seg imidlertid til å opprettholde denne strukturen. Dersom prosjektene kommer i brudd med betingelser i låneavtalene, kan man risikere at banken vil kreve et betydelig marginpåslag på lånet. Som ledd i at markedsverdier på skip har hatt en positiv utvikling siste halvår og at underliggende lån nedbetales med avdrag, anser Styret og forvalter at risikoen for å komme i brudd med lånebetingelser i enkeltprosjekter er redusert gjennom Valuta/valutarisiko Som presisert i prospektet (og Informasjonsmemorandum) er investeringer som gjøres i valuta utsatt for svingninger mellom den underliggende valutaen og NOK. Selskapet foretar ingen valutasikring, og dette innebærer at endringer i valutakurser påvirker den verdijusterte egenkapitalen i de underliggende investeringene. Ca. 60 % av verdijustert egenkapital i Selskapet er eksponert mot USD og mindre enn 2 % mot EUR. Dagens USD/NOK kurs på ca 5,80 vil således representere en nedside i forhold til verdifastsettelsen per 30. juni 2010 hvor følgende valutakurser ble benyttet: USD/NOK 6,4970 EUR/NOK 7,9725 Selskapets transaksjoner i løpet av tredje kvartal Kjøp Styret og forvalter tror fortsatt timingen for å gjøre nye investeringer er gunstig, og har således vært relativt aktivt med å se på nye investeringsmuligheter gjennom tredje kvartal. Grunnet rådende markedsforhold ser man at store deler av investeringsmulighetene foreløpig kommer innenfor offshore, og dette tror man er en trend som vil fortsette den nærmeste tiden. I andre kvartal rapporterte Selskapet om at det var foretatt tre nye investeringer, men at endelige forbehold ikke var løftet på to av disse prosjektene. Begge disse prosjektene ble kansellert og investeringene på henholdsvis ca USD 4,35 millioner og ca NOK 16 millioner blir begge tilbakebetalt. Utover det som ble kommunisert i andre kvartal har Selskapet investert ytterligere NOK 9,6 millioner i tredje kvartal. Dette innebærer kjøp av ytterligere 7 % i Parchem II IS og 2,8 % i Deep Sea Bergen Invest AS. Etter transaksjonene har Selskapet en eierandel på 28 % i Parchem II IS og 13,4 % i Deep Sea Bergen Invest AS. Innbetaling av uinnkalt kapital Selskapet har i løpet av tredje kvartal 2010 måttet innbetale NOK 0,8 millioner i uinnkalt kapital (ytterligere egenkapital) relatert til prosjektet Tor Cimbria RoRo KS. Vi meldte om en innbetaling på NOK 4,2 millioner til det samme prosjektet i siste kvartalsrapport, men ettersom

8 verkstedsoppholdet og driften har blitt dyrere enn forventet måtte selskapet kalle inn enda litt mer egenkapital. Salg Partankers V IS Som nevnt i andre kvartal benyttet befrakter kjøpsopsjonene på siste to skip eid av Partankers V IS. Skipene ble overlevert i slutten av august, og i etterkant av overleveringen ble det utbetalt USD 13,5 millioner fra prosjektet, som tilsvarte ca NOK 10,9 millioner for Selskapet. I tillegg er det forventet en mindre utbetaling ved avvikling av Partankers V IS. Totalt har Selskapet fått utbetalt ca NOK 20,1 millioner av en investering på ca NOK 14,4 millioner, noe som tilsvarer en absolutt avkastning på ca 40 %. Pareefers II KS I løpet av tredje kvartal har selskapet solgt to av fire skip. Det første skipet ble overlevert i midten av september, mens det andre skipet er forventet overlevert i midten av oktober. Netto salgspris for skipene var totalt USD 10,3 millioner, hvorav totalt USD 8,5 millioner går til nedbetaling av gjeld. Følgelig er utestående lån kun USD 1,9 millioner på de to resterende skipene. Som følge av salget vil også selskapet utbetale et utbytte til deltakerne på USD 1,5 millioner. De to siste skipene vil fortsette å gå på kontrakter som løper frem til desember Utbetalinger fra underliggende prosjekter I 2009 mottok Selskapet minimalt med utbetalinger fra underliggende prosjekter. Dette forbedret seg fra fjerde kvartal 2009, og fra da har Selskapet mottatt totalt NOK 126 millioner i ubetalinger fra underliggende investeringer, hvorav NOK 25,4 millioner er relatert til tredje kvartal Utbetalingene i tredje kvartal har kommet fra følgende prosjekter: Asian Offshore IS Parman MPP KS Partankers V IS NOK 10,7 millioner NOK 3,8 millioner NOK 10,9 millioner Selskapets prosjekter Kjøpsdato Prosjekt / selskap Antall skip Segment Byggeår (oppgradert) Certeparti slutt Asian Offshore IS 4 Offshore Ocean Containerships II IS 2 Container Deep Sea Bergen Invest AS 1 Offshore Oppgradert ' Singapore Tankers AS 12 Produkt Tank Master and Commander IS 2 Offshore 1998/ Tor Cimbria RoRo KS 1 RoRo Pareefers II KS 2 Kjøleskip Ocean Containerships IS 2 Container Partankers IV IS 1 Tank Asian Offshore III IS 6 Offshore KS AS Bergen Drillpart 1 Offshore Oppgradert ' Ross Handy II IS 2 Bulk Parman MPP KS 0 Container 1988/ River Cruise KS 2 Cruise 2001/ Parbulk II IS 0 Bulk Partankers V IS 0 Tank 1988,1988,1984, Brøvig Stainless II DIS 2 Kjemikalie 2010/ Neptune Subsea IS 2 Offshore Brøvig UBT AS 2 Kjemikalie Parbarge IS 2 Offshore Parchem IS 2 Kjemikalie Parchem II IS 1 Kjemikalie Havila PSV IS 2 Offshore Total 51 5,1 * på de underliggende prosjektene er presentert før eventuell latent skatt.

9 Certeparti- og segmentfordeling (basert på ) RoRo 1 % Spot/Asset Play 15 % Tank 7 % Timecharter 16 % Offshore 59 % Produkt Tank 19 % Bareboat 69 % Kjemikalie 7 % Bulk 2 % Cruise 2 % Kjøleskip 3 % Type kontrakt Befrakter Disponent Eierandel * Bareboat Robert Knutzen Shipholdings Ltd. Klaveness Corporate Services AS 69 % N/A N/A Lorentzens Skibs Management AS 75 % - Timecharter Statoil Odfjell Rig AS 13 % Bareboat Titan Oil Pte. Ltd. Skibs AS Tudor 50 % Timecharter Wavefield Inseis ASA / CGG Veritas DOF Management AS 24 % Timecharter DFDS Tor Line O.T. Tønnevold AS 41 % Bareboat Lavinia Corporation P.D. Gram & Co AS 34 % N/A N/A Lorentzens Skibs Management AS 30 % - Bareboat Lavin Ltd. / BW Shipping Ltd. Bergshav Management AS 50 % Bareboat Robert Knutzen Shipholdings Ltd. Bergshav Management AS 52 % Timecharter Statoil Odfjell Rig AS 26 % Bareboat Kristen Marine S.A. Lorentzens Skibs Management AS 50 % Bareboat Kristen Marine S.A. / Pancoast Trading Lorentzens Skibs Management AS 25 % Bareboat Viking River Cruises S.A. Lorentzens Skibs Management AS 25 % Timecharter N/A Skibs As Tudor 20 % - Timecharter SBM Offshore N.V. Johs. Hansen Rederi AS 13 % Spot/Asset play N/A Brøvigtank AS 25 % Spot/Asset play N/A Neptune Offshore AS 21 % Spot/Asset play N/A Brøvigtank AS 21 % Bareboat Marine Subsea AS Bergshav Management AS 14 % Bareboat Heung-A Shipping Ltd. Brøvigtank AS 25 % Bareboat ECHEM J. B. Ugland 28 % Bareboat Havila Ships AS Havila AS 20 %

10 Markedskommentar Shipping Kilde: Shipowners have had a better year so far in 2010 compared to last year. The ClarkSea Index, which mirrors the earnings in the different shipping markets, gives a good illustration of the overall market development. Average earnings so far in 2010 have been about USD 15,700/day, much stronger than the average for 2009 of USD 11,300/ day, but still weaker than the average for the last ten years of USD 21,300/day. Clarksea Index last 10 years Source: Clarksons The shipping markets are to a very large extent driven by the global development in GDP and world trade, which both have shown significant signs of growth the last year. The emerging markets, and especially China, have shown to be especially important for the shipping industry the last years. Although rates have been under pressure in most segments, values seem to hold up for the time being. As an example, for tankers average secondhand tanker prices are up 13 % YTD and newbuilding prices are up 11 %. In the same period the spot earnings are down by an average of 40 %. Owners are clearly not willing to sell at low levels although the current spot market is struggling. Looking forward we believe that either values have to go down or rates will have to go up, or perhaps a combination of both. Demand is increasing on the back of a continued global recovery. This is very much needed to absorb the orderbook which currently still represents about 35 % Pareto Project Finance AS of the existing fleet across all segments, according to data from Clarksons. Bulk market Dry bulk earnings generally had a good start to the year, but have faded somewhat during the third quarter. According to Clarksons, weighted average bulk earnings 1H 2010 was USD 21,900/day, while they have dropped to USD 16,800/day in the third quarter. This is still above the ten year average of USD 15,200/day but far below the last 5 year average of USD 27,500/day. The orderbook is still significant, especially for the larger vessels, representing about 50 % of the existing fleet. About ¾ are scheduled for delivery by the end of We expect % slippage and around 10 % cancellations, so supply growth will no doubt be massive the next years despite the fact that 15 % of the current fleet is already past 25 years of age, and will hence be potential scrapping candidates. Global demand is expected to be strong across all major commodities in the future, as the underlying fundamentals for the key markets in Asia look favorable. High growth from developing nations led by China s steel industry and Chinese and Indian coal trade are expected to contribute to record high demand levels. Broker Lorentzen & Stemoco foresee an annual growth of % in terms of pure volumes the next 3 years. This transforms into a tonmile growth of 13 % in 2010, 13 % in 2011, 10 % in 2012 and 9 % in The bulk market has managed the last 18 months well. Although utilization is expected to decrease somewhat the next couple of years, the outlook is not all dark for bulk owners, particularly for smaller vessels, if China continues to grow, followed by the other emerging markets. (Source: Clarksons, Golden Ocean, Lorentzen & Stemoco, Pareto). Tanker market After a strong recovery of the tanker market in the first half of 2010, crude tanker spot earnings have since the summer fallen dramatically and vessels are now earning just above OPEX in the spot market. So far in 2H 2010, average tanker earnings have been around USD 17,300 per

11 day compared to average earnings of USD 32,500 the first half - a decrease of 47 %. Global oil production decreased in August, which, combined with low seasonal demand, led to very few cargoes being offered to the market by oil companies. Coupled with extensive tonnage lists in most regions, owners struggled to keep rates from falling below last done levels. Crude tanker dwt demand is forecasted to increase by 3.4 % year-on-year in 2010 mainly due to Chinese demand growth and a slight increase in OPEC production. Dwt demand for product tankers has been revised upwards to 3.3 % year-on-year growth. However, the product tanker market will have to contend with fleet growth of 6 % -10 % this year, depending on scrapping activity, as well as newbuilding slippage and cancellations. The time charter market is still at decent levels and modern VLCCs can still earn about USD 40,000 on long time charters. Some owners have jumped on this possibility lately, indicating that they believe the spot market will not rebound significantly in the short term. This may very well be a reasonable move as the fleet is expected to grow by 14 % next year and 8 % in 2012 before moderating in Owners should therefore be hoping for a cold winter in the northern hemisphere to boost tanker demand in the short term, followed by a global recovery in oil demand absorbing the increasing fleet capacity over the next years. (Source: Clarksons, Frontline, Pareto) Chemical market The chemical tanker market started off better in 2010 than was the case in 2009 with more activity across the board. However, rates are not very high in a historical perspective. Demand for chemicals is closely correlated with industrial production, and we have seen PMI indices recover significantly from bottom levels. Demand in the East is good whilst Western demand is still weak, causing disruption in trading patterns and utilization. It is clear that a recovery of Western economies is necessary for the chemical market to turn profitable again. On the supply side, the chemical orderbook is steadily decreasing although continued delays are also occurring and very few new orders are being placed. In the segment between 10,000 and 60,000 dwt, a total of 2.1 mdwt was scrapped in 2007, 1.1 mdwt in 2008 and 2.3 mdwt in In the first 7 months of 2010 alone a total of 3.0 mdwt of chemical vessels were scrapped. One of the largest players, Eitzen Chemicals, believes that potentially 17 % of the existing fleet is up for scrapping in the short term. With an expected demand growth of about 6 % annually over the next 3 years, combined with a decreasing orderbook, we believe demand will outpace supply the coming years. (Source: Steensland, Eitzen Chemical, Pareto) Container market The volume of containerized trade on both peaks legs of the Far East-Europe and Transpacific trade have been showing strong year-on-year growth according to latest data. Clarkson Research expects that global container trade will expand by 11.5 % this year. The liner fleet in general is expected to grow by 8.5 % in 2010 to reach 16.4 million TEU by the end of the year. As a result, time charter rates have continued to see steady upward movement. The rate of demolition activity has decreased in recent months, while the idle container fleet has remained at 1.7 %. However, with Western demand growth subject to uncertainties, the long term impact of the reactivation of the majority of the idle fleet on container freight rates remains to be seen. With secondhand prices presently still behind historical averages most brokers still expect values to increase in this sector in the coming year. (Source: Clarksons, Pareto) Reefers After a difficult start to the year, where the normal «high season» did not seem to appear in 2010, reefer rates are now recovering from the summer lows, both for 270,000 cft and 450,000 cft vessels. The industry players expect that 2H 2010 will be strong and there is a further upside potential in rates. The specialized reefer fleet has been in continuous decline since the mid-90s, and the fact that there are now just twelve vessels left in the orderbook demonstrates the lack of enthusiasm for the sector. More than half the fleet is now more than 20 years old. The specialized reefer fleet continues to get competition from container lines, although there are talks of cancellations of container routes, which may help. The reefer fleet, excluding container vessels with reefer capacity, is expected at ~290 million cbft at the end of 2010 compared to ~330 million cbft three years ago. Hence, there is reason to be positive on the reefer market going forward. (Source: Reefer Trends, Pareto) Ro-Ro The Ro-Ro fleet is typically split into four main vessel types (cruise, ro-pax, car carriers, ro-ro). The fleet, though relatively aged, offers unusual flexibility, being able to carry diverse cargoes and serve ports that could otherwise be difficult to access for more conventional vessels, particularly fully cellular containerships. The Ro-Ro and PCTC rates have stabilized the last 6

12 months, but are still 50 % lower than in the heydays back in 2007 and 1H The RoRo market is not very fragmented and a lot of scrapping has been undertaken the last 18 months. So, although quite a few RoRo orders placed in are now being delivered, the market is approaching a better supply/demand balance. As the existing fleet is old and the global economic situation seems to be improving we expect a better utilization of the RoRo fleet going forward, but there is still uncertainty around when this utilization increase will result in a rise in rates. (Source: Clarksons, Pareto) Markedskommentar Offshore Kilde: The oil service markets have started to recover and the fall-off in pricing has ceased, with some segments noting a meaningful increase in asset utilization and dayrates. We believe this will continue with more segments showing improvements. Moreover, supply and demand dynamics are moving in a direction where the period from 2012 and onwards could prove to be quite exciting for the sector. The fact that the oil price seems to move within a narrower band of USD 70/bbl and USD 80/bbl is encouraging in light of still very high global oil inventories and a slew of weak macro data in the early autumn. We are now putting behind us three years with very strong growth in global oil production capacity, which has coincided with shrinking demand in the developed world following the financial crisis. Going forward, this looks set to change. Global oil supply/demand growth Source: Pareto Securities, IEA Pareto Project Finance AS The capacity growth is likely to slow significantly in the coming years, based on the dwindling number of fields lined up for start-up. At the same time, an economic recovery in the developed world, coupled with still robust emerging market growth, looks set to boost oil demand growth back to normalized levels. The result is likely to be an oil market which goes from excess supply to excess demand with a rising trend in the oil price as a result. The oil price could well break up above USD 90/bbl again within the next two years. The oil industry s planned upstream investments in the next five years could be even more important. The project pipeline calls for a significant ramp-up of new field startups as we move towards With typical lead times of 3 5 years for the average oil field, investments will have to be raised soon to meet the start-up schedules. Indeed, this has already been seen through a substantial pick-up in order awards to the subsea industry, typically for projects that will enter offshore execution from 2012 and onwards with production start-up in the timeframe. Although cleaner sources of energy is likely to become more prevalent in the longer run, forecasters believe it is unlikely to have a significant impact on the need to replace producing oil reserves in the next 20 years. While the Macondo accident in the Gulf of Mexico (GoM) has had a negative impact on global deepwater rig utilization, it may also sow the seeds for a more service intensive upstream industry in the future. New regulations are likely to result in more inspection and maintenance work, more time consuming drilling operations and a

13 replacement of assets that do not meet new requirements. While short term negative, more business opportunities may emerge from this in the long run. Drilling The global drilling market is moving along two parallel axes; floaters vs jack-ups and modern vs old units. Jack-ups Global jack-up utilization has bottomed out and started to increase, with a corresponding impact on day rates. However, the increase in activity is almost solely confined to the market for modern jack-ups capable of operating in water depths in excess of 300 ft. To illustrate; total fleet utilization for 300 ft+ jack-ups is currently at 92 %, while it is 78 % for lesser jack-ups. Inside the 300 ft+ segment, modern rigs (less than 10 years old) are also enjoying higher utilization and dayrates (+ 50 %) than the older rigs built in the early 1980s. The appetite for modern units is due to enhanced capabilities and age. We expect this trend to strengthen going forward, as the older part of the global jack-up fleet (nearly two thirds) approaches 30 years of age. Tighter regulations will only serve to reinforce this. There has also been a flurry of M&A activity this year focused on modern units, with more than USD 2.8bn being shelled out on acquisitions at rig prices of USD 180m and upwards, depending on specification. The global jack-up fleet currently consists of 468 jackups. There are a further 53 units on order with delivery between 2010 and 2012, but only 8 of these are targeting the international, competitive market, while the rest have been ordered for domestic markets by domestic players (i.e. China, India, Russia, Mexico, Iran). Thus, we may have the best part of the newbuilding wave behind us already. There are currently 46 jack-ups that are not marketed, i.e. they are either stacked or undergoing extensive yard stays for maintenance and repair. Considering the age profile of the current jackup fleet we find it likely that a large number of these will remain idle going forward and ultimately retired. On the demand side, the Middle East looks particularly buoyant right now (30 % of global demand), followed by South East Asia/India (24 % of global demand). A rising need for harsh environment jack-ups in the North Sea has also been noted (11 % of global demand), while Pemex is in the market for up to 10 additional rigs. In terms of day rates, we have seen a rising trend for modern 300 ft+ jack-ups. Here, rates bottomed out at around USD 100k/d late 2009 and have now risen above USD 120k/d on average. Older and less rigs have not seen any meaningful increase in dayrates yet, with 1980s built 300 ft+ jack-ups fetching roughly USD 80k/d and the rest in the USD 40 60k/d range. Dayrates old vs new 300 ft JU Source: Pareto Securities, ODS-Petrodata Floaters The Macondo accident has robbed the floater market of a development that would have mimicked the jack-ups. With the Macondo well now plugged and the GoM Drilling Moratorium ended, focus is turning to the impact of the new regulatory regime for deepwater drilling in the GoM. Awards of new drilling permits will be more time consuming and subject to more stringent requirements. Thus, activity is likely to be slow to pick up and may take 2 3 years to normalize. Moreover, all BOPs on deepwater rigs in the GoM need to be re-certified, which means additional delays in getting idled rigs back to work. It could be that older and smaller deepwater rigs may not be eligible for renewed work in the GoM, which will serve as a positive for owners of new, leading edge units. The 25 deepwater rigs that are currently idled in the GoM due to the drilling moratorium are adding to the 22 deepwater rigs that are without contracts for 2011 (including newbuilds). Consensus has been new fixtures with start-up in the next months will see dayrates come down to around USD 350k/d. So far, we have seen dayrates on fixtures show remarkable resilience with new contracts and extensions at around USD 450k/d. This has included contracts stretching into 2014, as well as one speculative newbuild with delivery in The fact that operators do not seem to take advantage of an obvious (albeit temporary) overhang of deepwater rigs next year, may be a result of a perception that the deepwater rig market looks set to re-tighten significantly beyond 2012, particularly for ultra-deepwater units. Therefore, the preference seems to be to secure capacity in the medium to long term, rather than exploiting a short term potential for lower dayrates. We are also of the opinion that the long term supply/ demand dynamics remain favorable. This is particularly so

14 for UDW rigs, where demand has doubled in the past two years and could well double again in the next 2 3 years. Firm UDW demand is already up 36 % next year (this includes the contracted, but idled rigs in the GoM). In addition, there are 69 projects with start-up from 2012 and onwards yet to secure rig capacity. We would also like to highlight Petrobras, which plans to triple the number of rigs operated in the next decade, spending a whopping USD 62 bn on drilling and completion on the pre-salt fields alone. For the rest of the floater market the fortunes are a bit mixed. Lesser and older deepwater rigs are facing pressure from more modern rigs moving down in the market due to the Macondo-induced weakness. In the future, regulatory issues may also make life more difficult for such units. In the midwater market, utilization and dayrates have dropped, but stabilized, with only Norway as a bright spot offering unchanged day rates from peak due to a shortage of rigs able to enter this tightly regulated market. Dayrates floaters Source: Pareto Securities, ODS-Petrodata Supply market This market s ability to absorb a never ending wave of newbuilds has confounded observers for years. This owes itself to a steady 10 % p.a. growth rate in demand for the past 10 years, behind which we see two key factors: a) Growing oil & gas exploration and production offshore requires more logistical support in general and in particular during the construction phase. A trend into deep waters and more remote regions only serves to magnify this. b) The composition of the supply vessel fleet mimics the jack-up fleet in terms of age and characteristics. 60 % of the fleet consists of smaller «shallow water» vessels and 50 % of these are more than 25 years old. In the past year, 370 vessels have either been idled or laid up due to age (14 % of global fleet). With the global fleet of vessels less than 25 years old already past its peak, this will only intensify going forward. In this context, the orderbook for new vessels (28 % of the fleet), should not be seen as a threat to overall market utilization and dayrates, but rather as a necessary replacement for older and uncompetitive vessels. With a 10 % increase in the floating rig fleet by 2013, a more than 40 % jump in subsea vessel demand by 2012 and Brazil s aggressive expansion plans (250 new supply vessels by 2020) it is hard to get bearish on this market. That being said, dayrates have been through a difficult period, but have recovered reasonably well this year, particularly for PSVs. At the time of writing, North Sea spot rates are around NOK /d both for PSVs and AHTS. For the PSVs this is roughly in line with the 3-year average, while it is a bit below for ATHS. PSV term fixtures have been in the NOK range this year, while they have been higher for AHTS. Brazil has been a big taker. Subsea The order intake for this industry is perhaps the surest indicator for where overall upstream activity is heading in the next 2 3 years. Among the four major players, USD 8bn of orders were awarded in H1 10. There are a further USD 7bn of active tenders outstanding and another USD 7 bn of probable tenders for the next months. In comparison, order intake peaked in 2007 at just above USD 15bn. While some awards are for near term projects, most are for projects starting offshore execution from 2012 and onwards, fitting well with our view about the upstream cycle towards 2015 at the start of this chapter. Overall, the demand for subsea vessel services looks set to increase more than 40 % in the next two years. This does not include possible positive effects of tighter drilling and deepwater regulations, which could mandate increased IMR activity on subsea equipment, including BOPs. In the near term, however, activity is slow with 2010 probably the bottom of the market in terms of overall fleet utilization could be a bit better, but as mentioned above, things are unlikely to really start kicking until Owners of modern high quality assets will be well positioned to capture these future growth opportunities. Seismic market The seismic market received a set-back as the drilling moratorium in the GoM and uncertainty about upcoming GoM Lease rounds all but wiped away demand for multiclient seismic in the region. Despite this, we note that demand for 3D seismic is at a record level this year, with the total square km acquired set to be 8 % higher than the previous peak in Thus, there s no indication that the oil industry s demand for seismic is waning.

15 Looking forward, an uptrend in overall E&P spending will be positive, with an additional boost possible if the oil price embarks on a sharper uptrend, which tends to provide significant leverage to exploration spending. There are also structural factors which continue to influence seismic s popularity. With the oil industry s sluggish reserve replacement ratios as a backdrop, the five-fold surge in exploration well costs in the past decade represents a significant headache for the oil industry, which still only manages to strike a discovery in one out of every four exploration wells. It is estimated that dry well costs amount to USD 15 20bn per year, so any technology like seismic that can help improve the success ratios will have tremendous value for the oil industry. With wells looking to become even more expensive due to increased complexity and water depths, as well as regulatory issues following the Macondo accident, this will only intensify. The rising trend in dry well costs As ever, it is the rising acquisition capacity that has been responsible for the 40 % drop in dayrates from the peak. Streamer capacity has increased 37 % in the past two years, but the good news is that the capacity will grow only 13 % in the next two years, which should be easily matched by demand growth. Utilization levels are therefore likely to bottom this year and meaningful improvement in pricing could be expected from the spring of Definisjoner I denne kvartalsrapporten har nedenstående utrykk følgende betydning, med mindre annet er direkte uttalt eller fremgår av sammenheng. De nedenstående definisjonene gjelder også for de foregående sidene i denne kvartalsrapporten. Definisjoner: Selskapet PPF Pareto World Wide Shipping AS Verdijustert egenkapital Pareto Project Finance AS Source: Pareto Securities Kvartalsrapporten er utelukkende ment for informasjonsformål, og må ikke under noen omstendighet betraktes som et tilbud om eller en oppfordring til å handle aksjer i Selskapet. Det gis ingen garantier og det aksepteres intet ansvar for tap, direkte eller indirekte, som oppstår som følge av at leseren agerer på bakgrunn av informasjon, meninger eller estimater som finnes i dette dokumentet. Informasjonen i dette dokumentet, herunder uttrykte oppfatninger eller prognoser, er innhentet fra eller basert på kilder som vi har vurdert som pålitelige. Vi kan imidlertid ikke garantere for informasjonens nøyaktighet, tilstrekkelighet eller fullstendighet. Noe av informasjonen i dokumentet kan inneholde prognoser eller fremoverskuende uttalelser vedrørende fremtidige hendelser eller fremtidige resultater i markeder eller selskaper. Faktiske hendelser og resultater kan avvike substansielt fra dette. Pareto Project Finance AS aksepterer ikke ansvar for tap som oppstår som følge av bruk av slik informasjon. Det understrekes at den historiske kursutviklingen og de avkastningsmål det er referert til ikke innebærer noen garanti for framtidig avkastning. Det understrekes også at avkastningen / kursutviklingen kan variere som følge av svingninger i valutakursene. Vi gjør oppmerksom på at i dagens urolige marked er det stor usikkerhet knyttet til verdivurderingene da det er ingen eller veldig få transaksjoner som er gjennomført. Fremgangsmåten ved beregning av er nærmere beskrevet i Pareto Project Finance AS markedsrapport av mai Risikofaktorer og kostnadsstruktur er nærmere beskrevet i prospektet (Informasjonsmemorandum) utarbeidet i forbindelse med emisjoner i Selskapet.

16 Pareto Project Finance AS, Dronning Maudsgt. 3, P.O.Box 1396 Vika, 0114 Oslo

17 Til aksjonærene i Pareto Shippingkapital AS PARETO SHIPPINGKAPITAL AS - 3. KVARTAL 2010: Pareto Shippingkapital AS sitt eneste formål er å investere i Pareto World Wide Shipping AS og eier p.t. 58 % i fondet. Pareto World Wide Shipping AS investerer i shippingprosjekter tilrettelagt av blant annet Pareto Project Finance AS. Kvartalsrapport for Pareto World Wide Shipping AS ligger vedlagt. Verdijustert egenkapital per 30. juni 2010: Siste omsatte kurs (22. oktober 2010): Utbetaling siden oppstart: 80,00 kr 60,00 kr 17,00 kr 130 Ordinær kurs Justert for utbetaling Emisjon I ,24) Emisjon II ,72) Emisjon III ,22) Emisjon IV ,18) Ex utbetaling ,47) Ex utbetaling ,15) ,95) Ex utbetaling ( ) ,01) ,60) ,74) ,50)

18 Til aksjonærene i PPN Shippinginvest I AS PPN SHIPPINGINVEST I AS - 3. KVARTAL 2010: PPN Shippinginvest I AS sitt eneste formål er å investere i Pareto World Wide Shipping AS og eier p.t. 20 % i fondet. Pareto World Wide Shipping AS investerer i shippingprosjekter tilrettelagt av blant annet Pareto Project Finance AS. Kvartalsrapport for Pareto World Wide Shipping AS ligger vedlagt. Verdijustert egenkapital per 30. juni 2010: Siste omsatte kurs (15. oktober 2010): Utbetaling siden oppstart: 77,00 kr 58,00 kr 14,25 kr 140 Kurs 120 Justert for utbetaling Emisjon I ,24) Emisjon II ,72) Emisjon III ,22) Emisjon IV ,18) Ex Utbetaling ,47) Ex Utbetaling ,15) ,95) Ex Utbetaling ,01) ,60) ,74) ,50)

19 Til aksjonærene i Optimum Skipsinvest I AS OPTIMUM SKIPSINVEST I AS - 3. KVARTAL 2010: Optimum Skipsinvest I AS sitt eneste formål er å investere i Pareto World Wide Shipping AS og eier p.t. 12 % i fondet. Pareto World Wide Shipping AS investerer i shippingprosjekter tilrettelagt av blant annet Pareto Project Finance AS. Kvartalsrapport for Pareto World Wide Shipping AS ligger vedlagt. På generalforsamling i Optimum Skipsinvest I AS ble det vedtatt å tilbakebetale NOK 2 per aksje til aksjonærene. Utbetalingen vil bli gjennomført i slutten av oktober. Verdijustert egenkapital per 30. juni 2010: Siste omsatte kurs (30. september 2010): Utbetaling siden oppstart: 80,00 kr 62,00 kr 11,37 kr 140 Kurs 120 Justert for utbetaling Emisjon I ,24) Emisjon II ,72) Emisjon III ,22) Emisjon IVEx utbetaling ( ) 6,18) ,47) Ex utbetaling ( ) ,15) ,95) Ex utbetaling ( ) ,01) ,60) ,74) ,50)