NOL: Interim Financial Information 30 June 2021

NORTHERN OCEAN LTD.

RESULTS FOR THE SECOND QUARTER AND SIX MONTHS

ENDED JUNE 30, 2021

Highlights - Second Quarter

• On May 4, 2021, the Company received a notice of termination from Wintershall DEA Norge AS for the West Mira drilling contract following an extended downtime period after an operational incident on March 19, 2021.

Subsequent Events

• On August 8, 2021, the Company announced it had signed an amended settlement agreement with Seadrill Ltd and its subsidiaries. The settlement closes all outstanding balances and claims between the companies, provides transition services for the Company's rigs and requires bareboat lease payments on the West Bollsta to become payable from Seadrill to the Company, starting August 10, 2021.
• On August 11, 2021, both the Covenant Waivers and the Amortization Waiver were extended until September 3, 2021. The Amortization Amount remains in an account secured on behalf of the lenders.

Results

In the second quarter, operating revenue was $12.5 million compared to $26.7 million in the previous quarter. On May 4, 2021, the Company received a notice of termination from Wintershall for the West Mira drilling contract, which was being managed by a Seadrill subsidiary in Norway. The notice follows an extended downtime period after an operational incident on March 19, 2021. Contract revenue was $10.9 million, reimbursable revenue was $1.1 million and other revenue from the provision of management services was $0.6 million in the quarter.

Total operating expenses were $35.3 million compared to $32.8 million in the previous quarter. Rig operating expenses were $18.1 million, which is $0.9 million lower than the previous quarter. Reimbursable expenses were $3.2 million and depreciation was $10.7 million. Administrative expenses were $3.3 million, which is $1.6 million higher than the previous quarter primarily due to increased legal lees.

Other financial expenses were $5.3 million compared with $5.0 million in the previous quarter. Loan interest expense and amortization of deferred charges were both the same as in the previous quarter at $4.9 million and $0.5 million, respectively. There was no foreign exchange gain/loss compared with a gain of $0.4 million in the previous quarter.

The net loss in the first quarter was $25.2 million resulting in a basic and diluted loss per share of $0.39.

Business Update

On August 8, 2021, the Company announced it had signed an amended settlement agreement with Seadrill Ltd ("Seadrill") and its subsidiaries. The settlement closes all outstanding balances and claims between the companies, provides transition services for the Company's rigs and requires bareboat lease payments on the West Bollsta to become payable from Seadrill to the Company, starting August 10, 2021. The settlement is subject to several conditions, including obtaining approval by the bankruptcy court under Seadrill's Chapter 11 protection in the US, before the bareboat lease payments will be made.

The West Mira is now idle in a yard near Bergen with PSW Technology AS and Captar Holdings Ltd providing various services, and the rig is expected to remain stacked in a condition to return to service efficiently when new employment is secured.

As set out in the First Quarter Report dated May 28, 2021, the Company is running out of liquidity and is therefore dependent on loans and/or equity issuances and/or restructuring its net current liabilities to finance its working capital and debt service obligations, which raises substantial doubt about the Company's ability to continue as a going concern.

On August 11, 2021, both the Covenant Waivers and the Amortization Waiver were extended until September 3, 2021. The Amortization Amount remains in an account secured on behalf of the lenders.

Forward Looking Statements

The Company's activities are subject to significant risks and uncertainties that can have an adverse effect on the Company's business, financial condition, results of operations and cash flow. See Note 1 to the unaudited condensed consolidated financial statements.

This Report contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates, sometimes identified by the words "believes", "expects", "intends", "plans", "estimates" and similar expressions. The forward-looking statements contained in this Report, including assumptions, opinions and views of the Company or cited from third-party sources, are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. The Company does not provide any assurance that the assumptions underlying such forward-looking statements are free from errors, nor does the Company accept any responsibility for the future accuracy of the opinions expressed in the presentation or the actual occurrence of the forecasted developments. No obligations are assumed to update any forward-looking statements or to conform these forward-looking statements to actual results.

The Board of Directors

Northern Ocean Ltd.

Hamilton, Bermuda

August 27, 2021

Questions should be directed to:

Scott McReaken: Chief Executive Officer [phone]

NORTHERN OCEAN LTD.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

			CONDENSED CONSOLIDATED
	2020	2021	STATEMENT OF OPERATIONS	2021	2020
	Apr-Jun	Apr-Jun	(in thousands of $)	Jan-Jun	Jan-Jun	2020
	23,045	10,876	Contract revenue	35,615	39,821	86,849
	1,666	1,084	Reimbursable revenue	2,750	3,928	7,142
	102	579	Other income	851	211	621
	24,813	12,539	Total operating revenues	39,216	43,960	94,612
	18,688	18,123	Rig operating expenses	37,088	37,107	77,224
	1,633	3,182	Reimbursable expenses	4,811	3,790	6,996
	5,628	10,658	Depreciation	21,109	13,293	29,584
	1,240	3,318	Administrative expenses	5,034	2,050	4,495
	27,189	35,281	Total operating expenses	68,042	56,240	118,299
	(2,376)	(22,742)	Net operating loss	(28,826)	(12,280)	(23,687)
	3	1	Interest income	3	159	171
	(3,452)	(5,319)	Other financial expense	(10,324)	(10,000)	(14,845)
	(5,825)	(28,060)	Net loss before taxes	(39,147)	(22,121)	(38,361)
	67	2,899	Tax credit	2,639	1,208	1,853
	(5,758)	(25,161)	Net loss	(36,508)	(20,913)	(36,508)
	(0.09)	(0.39)	Basic and diluted loss per share ($)	(0.57)	(0.33)	(0.57)
			CONDENSED CONSOLIDATED
	2020	2021	STATEMENT OF COMPREHENSIVE LOSS	2021	2020
	Apr-Jun	Apr-Jun	(in thousands of $)	Jan-Jun	Jan-Jun	2020
	(5,758)	(25,161)	Net loss	(36,508)	(20,913)	(36,508)
	45	74	Foreign currency translation gain (loss)	1	(6)	59
	45	74	Other comprehensive income (loss)	1	(6)	59
	(5,713)	(25,087)	Comprehensive loss	(36,507)	(20,919)	(36,449)

See accompanying notes that are an integral part of these unaudited condensed consolidated financial statements.

NORTHERN OCEAN LTD.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	CONDENSED CONSOLIDATED BALANCE SHEET
	(in thousands of $)	Jun 2021		Dec 2020
	ASSETS
	Short term
	Cash and cash equivalents	17,602		37,471
	Restricted cash	10,152		157
	Accounts receivable, net	2,808		7,296
	Unbilled receivables	38		8,913
	Related party receivables	128		696
	Inventory	891		-
	Other current assets	5,661		6,373
	Long term
	Drilling units	1,050,229		1,070,745
	Fixtures and fittings	3		1
	Deferred tax	5,639		2,973
	Total assets	1,093,151		1,134,625
	LIABILITIES AND EQUITY
	Short term liabilities
	Current portion of long term debt	398,569		190,000
	Other current liabilities	10,238		14,188
	Deferred revenue	7,265		17,909
	Related party payables	133,522		122,670
	Related party short term debt	70,000		-
	Long term liabilities
	Long term debt	-		207,552
	Deferred revenue	2,989		5,231
	Related party long term debt	-		70,000
	Commitments and contingencies (Note 13)
	Total equity	470,568		507,075
	Total liabilities and equity	1,093,151		1,134,625

See accompanying notes that are an integral part of these unaudited condensed consolidated financial statements.

NORTHERN OCEAN LTD.

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

							CONDENSED CONSOLIDATED
	2020	2021		STATEMENT OF CASH FLOWS	2021	2020
	Apr-Jun		Apr-Jun		(in thousands of $)		Jan-Jun		Jan-Jun	2020
	(5,758)		(25,161)			NET LOSS	(36,508)			(20,913)			(36,508)
							Adjustment to reconcile net loss to net cash (used
							in) provided by operating activities;
	511		511			Amortization of deferred charges	1,017			1,023			2,057
	(3,118)		(9,753)			Amortization of deferred revenue	(14,063)		(5,870)		(12,101)
	5,628		10,658			Depreciation	21,109			13,293			29,584
	45		82			Unrealized foreign exchange (gain) loss	(25)	(6)		59
	(67)		(2,899)			Tax	(2,639)			(1,208)			(2,043)
							Change in operating assets and liabilities;
	(1,397)		4,058			Receivables	4,488			1,647			(82)
	2,564		7,563			Unbilled receivables	8,874		(830)		6,758
	5,087		520			Other current assets	(179)			5,435			5,343
	17,096		(148)			Other current liabilities	(1,065)	23,959		6,871
	(21,019)		8,612			Related party balances	8,071			(10,408)			5,784
	1,637		1			Deferred revenue	1,177			4,290			8,773
							Net cash (used in) provided by operating
	1,209			(5,956)			activities		(9,743)			10,412			14,495
							INVESTING ACTIVITIES
	(3,155)		1,779			Additions to newbuildings and drilling units	(131)			(5,485)			(41,290)
	(3,155)		1,779			Net cash used in investing activities	(131)			(5,485)			(41,290)
							FINANCING ACTIVITIES
	-			-			Net proceeds from share issuances		-			400			400
	-			-			Proceeds from long term debt		-			50,000			50,000
	(10,000)			-			Repayment of bank debt		-			(20,000)			(40,000)
							Net cash provided by (used in) financing
	(10,000)			-			activities		-			30,400			10,400
	(11,946)		(4,177)			Net change	(9,874)			35,327			(16,395)
	101,296			31,931			Cash, cash equivalents and restricted cash at		37,628			54,023			54,023
					start of the period
							Cash, cash equivalents and restricted cash at end
	89,350			27,754			of the period		27,754			89,350			37,628

See accompanying notes that are an integral part of these unaudited condensed consolidated financial statements.