Ann: Trading Update, page-17

Hi all.

I remain of the view that many are mixing up oil prices with MRMs recovery.

MRM gets paid renting its services. The 2 things to multiply together here are day rates and utlisation.

Even should oil prices increase (I expect they will), of course this a good thing for MRM, but the massive supply of vessels needs to be factored in before declaring any recovery to the OSV industry.

As I've said so many times before there is a huge number of boats stacked (it's about 35 percent of the global fleet) and these will come out of stack progressively as work becomes available. Neglible earnings (and I mean cash flow, not allowing for depreciation or return on capital) will be made on all new contracts, but operators are better best off getting some work out of their boats than sitting stacked doing nothing other price than rusting and costing money to store.

Future stages of the OSV industry path to recovery will see more boats activated from stack however these will effectively be run into the ground with negligible mainntance. At the same stage some stacked boats will begin to be scrapped as capital expenditure needed will not be forthcoming. All this will take some time before the OSV industry starts itself to get into balance from the supply side.

Indeed to make matters worse there are still new build boats being built, for orders placed in 2014 and a little earlier. Many operators are still looking to walk away from delivery payments of boats coming in 2017. Even tho the operators may have paid for say half of the boats value to date, operators are still considering walking away from the delivery of the new boats to conserve cash. Many of these boats are better boats (Jones class compliant, Norweign built) than MRMs largely Asian built boats. So that should tell you how bankable the book asset value of MRMs fleet actually is. Another observation I make is that US operators have made multiple impairments to asset values as I recall MRM has only impaired a small number of times and for lesser percentages.

This it's pretty clear to me that MRMs cash payment schedule to the banks is unsustainable as there simply will be no available cash to pay them. Indeed the recent announcement is really in effect a technical default.

So I maintain my view that something will have to give. Perhaps they sell the supply base. It's a shame to do so but might not have any choice.

I do maintain obviously an interest in the sector and I do hold the stock, however before increasing investments into the sector I would like to see the company in a survivable position. In my view it can not survive through 2017, even if the oil price hits $100 on 1 January and stays there all year.