NorAm Drilling : Q3 2022

INTERIM FINANCIAL INFORMATION

NORAM DRILLING AS

THIRD QUARTER 2022

21 November 2022

NORAM DRILLING AS REPORTS RESULTS FOR THE THIRD QUARTER ENDED

SEPTEMBER 30, 2022

Oslo, Norway, November 21, 2022. NorAm Drilling AS (the "Company" or "NorAm"), today reported unaudited results for the three months and nine months ended September 30, 2022:

HIGHLIGHTS

• Revenue increased to MUSD 26.5, up 19.1% from the previous quarter
• EBITDA increased to MUSD 8.5, up 104.2% from the previous quarter
• Fleet utilization increased to 98.9% compared to 94.8% in the second quarter 2022
• Average base dayrate (1) increased to $25,200, up 17.3% from the second quarter 2022
• Current revenue backlog of MUSD 52.2 as of November 21, 2022

Marty L. Jimmerson, Chief Executive Officer & Chief Financial Officer of NorAm Drilling AS commented:

"NorAm is positioned as a leading and reliable operator of the US industry's most advanced onshore drilling rigs and we were among the first to have all rigs reactivated after the market disruption caused by Covid-19. Our focus remains on the Permian Basin where approximately 60% of reserves in the U.S are located, and we have industry leading operating margins after maintenance capital expenditures.

We continue to see a tight supply/demand market and have executed five contracts subsequent to the third quarter with average base dayrates above $31,000 per day. After prepaying the bond loan in November, NorAm is now debt free, and we look forward to executing on dividend strategy from December onwards."

SUMMARY

NorAm Drilling AS owns 100% of NorAm Drilling Company, a Texas corporation, collectively referred to as NorAm or the Company herein. NorAm owns and operates a quality rig portfolio of "super spec" advanced high-end AC driven rigs tailored for the drilling of horizontal wells in the US land drilling market. Currently, all eleven (11) of our rigs are under contract in the Permian Basin. These rigs are designed to combine the cost efficiency of a compact rig with the versatility of different rig classes, enabling the rigs to cover a broad range of wells for both liquids and gas.

MARKET & ACTIVITIES

Demand for drilling rigs in the US and Permian Basin continued at a strong level despite WTI commencing the quarter above $100 and finishing near $80 per barrel. During the quarter, oil inventories increased 2.9%, daily production was essentially flat, the number of drilled but uncompleted wells in the Permian Basin continued to decline and oil companies continue to maintain oil production.

Dayrates for high end "super spec" drilling rigs continued to improve during the third quarter, primarily due to the lack of available rig supply, operator and drilling contractor financial discipline and supply chain constraints for both labor and supplies.

As of November 18, 2022, the US land drilling active rig count and Permian rig count was 762 and 349, respectively. As of December 31, 2021, the US land drilling active rig count and Permian rig count was 570 and 293, respectively.

OPERATIONS

During Q3 2022, NorAm achieved a 98.9% utilization compared to 94.8% utilization in Q2 2022. In comparison, we achieved a utilization rate of 64.8% in Q3 2021.

Rig operating costs were in line with expectations during the first nine months of 2022 with strong focus on rig personnel staffing levels and management of other daily operating costs.

FINANCIALS

NorAm had revenue of MUSD 26.5 during 3Q 2022 compared to MUSD 22.3 in 2Q 2022. We generated an operating profit of MUSD 3.7 in 3Q 2022 compared to an operating loss of MUSD

0.6 in 2Q 2022. The increase in revenue was the result of higher utilization and dayrates. Moreover, we generated an EBITDA of MUSD 8.5 in 3Q 2022 compared to MUSD 4.1 in 2Q 2022. 2Q 2022 EBITDA included MUSD 0.4 of expense related to a bond amendment fee. The increase in operating profit and EBITDA is due to higher utilization and dayrates.

Capital expenditures were MUSD 2.4 in the first nine months of 2022, including MUSD 0.5 in 3Q 2022. As of September 30, 2022, our cash position was MUSD 19.1, and we had MUSD 80.0 of outstanding bonds. See Subsequent Events for further discussion of full bond repayment. The Company provided notice and terminated its MUSD 6.0 Revolving Credit Facility effective September 22, 2022. There were no outstanding amounts under the revolving credit facility upon termination.

CARES ACT

NorAm Drilling applied for support relating to the Employee Retention Tax Credit (ERTC), part of the CARES Act, which is a payroll credit available from March 12, 2020, through September

30, 2021, for a total amount of approximately MUSD 4.0. The company received approximately MUSD 1.0 in 2Q 2022 and MUSD 1.6 in 3Q 2022. The Company has not received confirmation that the remaining applications for MUSD 1.4 have been approved.

OUTLOOK

Since August 2020, WTI oil prices and US land rig counts have steadily increased indicating that the US drilling industry bottomed in 3Q 2020. The extent of a continued recovery in the US drilling industry cannot be reasonably predicted and is subject to many variables including, but not limited to: (i) global oil demand, (ii) Russian invasion of Ukraine, (iii) OPEC+ maintaining and complying with appropriate supply targets, (iv) economic recovery as the COVID - 19 pandemic is mitigated, (v) operating discipline demonstrated by US E&P operators, (vi) availability and costs of labor, equipment and rig supplies and (vii) any possible regulatory changes issued by the US government.

Subject to key risks and uncertainties mentioned in this report, we currently expect continued demand for high end "super spec" drilling rigs.

SUBSEQUENT EVENTS

On October 7, 2022, the Company commenced trading on the Euronext Growth Oslo exchange under the ticker "NORAM" following the successful raise of approximately MUSD 75 of gross proceeds. The Company issued 19,670,000 of new shares in connection with this listing. On October 19, 2022, the Company received MUSD 0.3 from and issued 78,676 new shares to certain members of management. The Company utilized the proceeds from the listing with a combination of cash on hand to repay its outstanding bond of MUSD 80.0 and accrued interest of MUSD 3.2 on November 14, 2022. The Company is debt free and expects to pay dividends to its shareholders subject to maintaining a minimum level of liquidity with the first dividend expected in December 2022.

On November 21, 2022, the Company's subsidiary entered into a loan agreement with a U.S. based bank that provides for a Revolving Promissory Note ("Revolver") of MUSD 4.5. Use of proceeds for any borrowings under this Revolver are available for working capital and general corporate purposes based upon a borrowing base calculation equal to 70% of eligible accounts. Financial covenants include (i) a debt service coverage ratio of not less than 1.2 to 1; (ii) minimum liquidity requirement of MUSD 5.0 and (iii) a debt to EBITDA ratio of not more than

2.0 to 1.0. The Revolver is only secured by accounts receivable and is expected to be utilized to reduce the required level of liquidity on our balance sheet.

1. Base dayrate includes contracted revenue divided by total operating days and excludes reimbursables for "out-of-pocket" expenses.

					Unaudited
Condensed consolidated Income Statement	Three Months Ended	Nine Months Ended
(All amounts in USD 1000s)	Sep 2022	June 2022	Sep 2021	Sep 2022	Sep 2021
Revenue/Expense
Sales	26,535	22,274	13,121	65,905	35,818
Other Income
Total Operating Income	26,535	22,274	13,121	65,905	35,818
Payroll Expenses	7,007	6,838	5,331	20,952	13,581
Depreciation of Tangible and Intangible Assets	4,769	4,700	4,569	14,109	13,693
Rig Mobilization, Service and Supplies	7,205	6,791	4,777	19,820	11,435
Insurance Rigs and Employees	1,750	1,579	1,130	4,216	2,529
Other Operating Expenses	2,101	2,917	1,080	6,584	3,836
Total Operating Expenses	22,833	22,825	16,888	65,681	45,075
Operating Profit (+)/ Loss (-)	3,703	-551	-3,767	224	-9,257
Financial Income and Expenses
Other Interest Income	60	3		64
Other Financial Income	7		3	18	6
Other Interest Expenses	1,800	1,791	1,813	5,400	5,421
Other Financial Expenses	26	67	2	98	10
Net Financial Items	-1,759	-1,855	-1,812	-5,417	-5,426
Profit (+)/Loss(-) before Income Tax	1,944	-2,406	-5,578	-5,192	-14,682
Income Tax Expense	408	1,148	-440	1,131	-1,299
Net Profit (+)/Loss (-)	1,536	-3,554	-5,139	-6,323	-13,384