HAMILTON, Bermuda, Feb. 27, 2020 (GLOBE NEWSWIRE) — Hermitage Offshore Services Ltd., (“Hermitage Offshore” or the “Company”) announces its financial results for the three months and year ended December 31, 2019.A reverse asset acquisition in April 2019 resulted in a change in the basis of accounting for the Company. As a result, the financial information presented for the three months and year ended December 31, 2019 and 2018 is not directly comparable.Results for the three months ended December 31, 2019 and 2018For the three months ended December 31, 2019, the Company’s net loss was $2.3 million, or $0.10 basic and diluted loss per share (based on 22,279,447 weighted average shares outstanding).  The Company recorded a $1.5 million gain on financial instruments (as described below under the caption “DVB Supplemental Agreement”) during the three months ended December 31, 2019.  Excluding the gain on financial instruments, the Company’s adjusted net loss (see Non-GAAP Measures section below), was $3.7 million, or $0.17 basic and diluted loss per share.For the three months ended December 31, 2018 (Predecessor, as defined below) the Company’s net loss was $169.3 million, or $26.23 basic and diluted loss per share (based on 6,454,222 weighted average shares outstanding).  The Company recorded a $160.1 million non-cash impairment charge during the three months ended December 31, 2018. Excluding the non-cash impairment charge described above, the Company’s adjusted net loss (see Non-GAAP Measures section below), was $9.2 million, or $1.43 basic and diluted loss per share.Results for the year ended December 31, 2019 and 2018For the year ended December 31, 2019 (combined Predecessor and Successor, which are defined below), the Company’s combined net loss was $19.1 million, or $1.13 basic and diluted loss per share (based on 16,962,006 combined weighted average shares outstanding).  There were no adjustments to the net loss for the year ended December 31, 2019 as the loss on financial instruments that was included in the nine months ended September 30, 2019 was reversed as of December 31, 2019.For the year ended December 31, 2018 (Predecessor, as defined below), the Company’s net loss was $197.3 million, or $31.50 basic and diluted loss per share (based on 6,263,094 weighted average shares outstanding).  The Company recorded a $160.1 million non-cash impairment charge during the year ended December 31, 2018. Excluding the non-cash impairment charge described above, the Company’s adjusted net loss (see Non-GAAP Measures section below), was $37.2 million, or $5.94 basic and diluted loss per share.Share and per share results included herein have been retroactively adjusted to reflect the one-for-ten reverse stock split of the Company’s common shares, which took effect on January 28, 2019.  There are 25,661,915 common shares outstanding as of the date of this press release.Fleet list and employment update
Set forth below is the Company’s fleet list along with an update on the long-term employment of each vessel as of the date of this press release.  For purposes of the below table, only contracts with periods of three months or greater have been presented.⁽¹⁾   Contracts denominated in GBP and NOK have been converted using spot rates in effect as of February 26, 2020.LiquidityAs of February 26, 2020, the Company had $7.8 million in cash and cash equivalents.  There is $15 million of additional drawdown capacity available under the Company’s previously announced New Equity Line of Credit as of the date of this press release.Drydock and capital expenditure updateThe Company made approximately $0.7 million in drydock payments during the three months ended December 31, 2019, which primarily related to the special surveys and/or engine overhauls for three of the PSVs.  The aggregate cost of this work was approximately $2.5 million.  These three PSVs were offhire for an aggregate of 56 days during the fourth quarter of 2019.One of the Company’s PSVs underwent an engine overhaul during the first quarter of 2020 for aggregate costs of approximately $0.3 million.  This vessel was offhire for an aggregate of approximately 20 days during the first quarter of 2020 for this work.  An additional PSV is expected to undergo an engine overhaul before the end of the first quarter of 2020 and the aggregate costs for this work are expected to be approximately $0.3 million and 7 days of offhire.Additionally, the Company reflagged three of its PSVs, two of which were reflagged from the UK sector to the Norwegian sector and the other was reflagged from the Norwegian sector to the UK sector.  This reflagging process resulted in an aggregate of approximately 40 days of offhire and approximately $0.4 million in various costs relating to the reflagging process (which includes crewing and technical manager changes).No other special surveys and/or engine overhauls are scheduled for the first or second quarter of 2020.DebtThe following table sets forth the principal balance of the Company’s debt outstanding:New Equity Line of CreditIn December 2019, the Company reached an agreement to enter into a new common stock purchase agreement with SSH, a related party, for $15 million.  The New Equity Line of Credit was executed in January 2020 and provides for $15 million to be available on demand to the Company in exchange for its common shares priced at 94% of the then-prevailing 5-day trailing volume weighted average price.  There have been no issuances of common shares under the New Equity Line of Credit through the date of this press release.New $132.9 Million Term Loan Facility with DNB and SEBIn December 2019, the Company reached an agreement with the lenders under its term loan facility with DNB Bank ASA and Skandinaviska Enskilda Banken AB (publ) (the “Initial Credit Facility”), whereby it was agreed that the New Equity Line of Credit satisfies the condition precedent to refinance the Initial Credit Facility with a new $132.9 million term loan facility (the “New Term Loan Facility”) that the Company raise $15 million of additional equity.  Accordingly, in January 2020, the Company closed on the refinancing of the Initial Credit Facility with the New Term Loan Facility.The terms and conditions of the New Term Loan Facility are similar to the previously announced commitment for this credit facility, with the exception of modifications to certain financial covenants and other key terms. These new financial covenants and terms are summarized as follows:DVB Supplemental Agreement
As part the Company’s purchase of its two AHTS vessels in April 2019, the Company assumed aggregate outstanding indebtedness on the two AHTS vessels of $9.0 million under a term loan facility with DVB Bank SE, Nordic Branch (the “DVB Credit Facility”). The DVB Credit Facility was supplemented as part of the acquisition (the “DVB Supplemental Agreement”) and under the terms of the DVB Supplemental Agreement, DVB had the right, but not the obligation, to unwind the Company’s acquisition of the two AHTS vessels if a minimum of $15 million of additional equity was not raised by October 31, 2019. This deadline was subsequently extended until December 15, 2019.  As a result of the agreement for the New Equity Line of Credit, the condition to raise an additional $15 million of equity in the DVB Supplemental Agreement was deemed satisfied, thereby resulting in DVB’s right to unwind the sales of the two AHTS vessels to expire unexercised.At inception, the provision to unwind the sales of the two AHTS vessels was accounted for as a freestanding financial instrument.  As of September 30, 2019, the value of this financial instrument was estimated to be a liability of $1.5 million.  As a result of the New Equity Line of Credit, which satisfied the condition under the DVB Supplemental Agreement to raise an additional $15.0 million of additional equity, the Company reversed this liability during the fourth quarter of 2019.   Accordingly, the Company recorded a gain on financial instruments (within Other financial expense, net, on the Company’s Statement of Income or Loss) of $1.5 million for the three months ended December 31, 2019.Reverse acquisition accounting treatment arising from the acquisition of assets from SOHIIn April 2019, the Company acquired 13 vessels consisting of two AHTS vessels and 11 Crew Boats from Scorpio Offshore Holding Inc. (“SOHI”), a related party, in exchange for 8,126,219 common shares of the Company.  As part of this acquisition, the Company assumed the aggregate outstanding indebtedness of $9.0 million under the DVB Credit Facility relating to the two AHTS vessels.  The assets acquired in this transaction are collectively referred to as the “SOHI Assets”, and the transactions to acquire the SOHI Assets, and assumption of the related indebtedness, are referred to as the “Transaction”.As a result of the Transaction, SOHI and its affiliated entities (collectively referred to as “Scorpio”), which are part of the Scorpio group of companies, obtained a controlling voting interest in the Company.  Accordingly, under the relevant accounting guidance, Scorpio was identified as the accounting acquirer of the Company, and the Transaction is considered to be a reverse acquisition.  Moreover, the Company determined that the Transaction constitutes a reverse acquisition of assets rather than a reverse business combination.  The implications of this determination can be summarized as follows:Since it has been determined that the Transaction constitutes an acquisition of assets, the historical financial information prior to the date of the Transaction presented herein (and in future reports and filings) will continue to reflect that of the Company prior to the Transaction rather than that of the SOHI Assets as would be required in a business combination.  Management believes that the historical financial information of the Company prior to the Transaction is more relevant to investors than the historical financial information of the SOHI Assets due to the relative size of the Company’s 10 PSVs compared to the SOHI Assets and that the value and operating results of the PSVs are expected to be the ultimate driver of the Company’s business in future periods.  The results from the operations and cash flows of the SOHI Assets are included only in the Company’s financial information from the Transaction date.
Accordingly, the Company’s pre-Transaction financial information is presented for periods as of and for the three months and year ended December 31, 2018 (Predecessor).  In presenting financial information for 2019, the Company has combined pre-Transaction financial information for the periods from January 1, 2019 to April 8, 2019 (Predecessor) with post-Transaction financial information for the period from April 9, 2019 to December 31, 2019 (Successor) in the year to date amounts, without applying pro-forma adjustments.  Additionally, combined share information has been calculated based upon the weighted average days outstanding from the issuance date.  The combined year to date financial information for 2019 will differ from what will be presented under U.S. GAAP in the Company’s annual consolidated financial statements which will present Predecessor and Successor information separately.  See the Non-GAAP Measures section below for a table showing separate Predecessor and Successor financial information for 2019 and their combination for 2019 statement of income or loss information.* Reflects the financial results of the Company including the periods both prior to (relating to a fleet of 10 PSVs) and subsequent to the Transaction date of April 8, 2019 (relating to a fleet of 10 PSVs, two AHTS vessels and 11 Crew Boats).  Under U.S. GAAP, the basis of accounting changed as a result of the Transaction since it was accounted for as a reverse acquisition of assets.  Accordingly, the periods prior to and subsequent to the Transaction should be presented separately.  The above table combines these periods in 2019 as the Company believes that the combined presentation provides investors and other users of the Company’s financial statements, such as its lenders, with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance.  Combined share information has been calculated based upon the weighted average days outstanding from the issuance date. See Non-GAAP Measures section below for the presentation of each of these periods separately and reconciliation to the above table.** Reflects the financial results of the Company (relating to a fleet of 10 PSVs) for the historical periods prior to the Transaction. 
* The other operating data for these vessels is presented from the Transaction date.  Therefore, operating results for these vessels is not presented for the three months and year ended December 31, 2018.
About the CompanyHermitage Offshore Services Ltd. is an offshore support vessel company that owns 23 vessels consisting of 10 platform supply vessels, or PSVs, two anchor handling tug supply vessels, or AHTS vessels, and 11 crew boats.  The Company’s vessels primarily operate in the North Sea or the West Coast of Africa.  Additional information about the Company is available at the Company’s website www.hermitage-offshore.com, which is not a part of this press release.Non-GAAP MeasuresThis press release presents the Company’s results of operations on a combined basis for the periods prior to and subsequent to the reverse acquisition involving the AHTS vessels and Crew Boats acquired from SOHI.  This press release also describes adjusted net loss, and adjusted EBITDA.  The presentation of results of operations on a combined basis for the periods prior to and subsequent to the reverse acquisition, adjusted net loss, and adjusted EBITDA are not measures prepared in accordance with U.S. GAAP (“Non-GAAP” measures). The Non-GAAP measures are presented in this press release as we believe that they provide investors and other users of the Company’s financial statements, such as its lenders, with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance. These Non-GAAP measures should not be considered in isolation from, as substitutes for, or superior to financial measures prepared in accordance with U.S. GAAP.The Company believes that the presentation of adjusted net loss, and adjusted EBITDA are useful to investors or other users of its financial statements, such as its lenders, because they facilitate the comparability and the evaluation of companies in the Company’s industry. In addition, the Company believes that adjusted net loss, and adjusted EBITDA are useful in evaluating its operating performance compared to that of other companies in the Company’s industry. The Company’s definitions of adjusted net loss, and adjusted EBITDA may not be the same as reported by other companies in the offshore support vessel industry or other industries.Statement of income or loss prior to and subsequent to the TransactionIn Q4 2019, the allocation between the Predecessor and Successor activity was adjusted primarily to align the Predecessor activity to the period prior to the Transaction date. There was no impact to the year-to-date net income as a result of these adjustments.The above table reflects the financial results of the Company both prior to (relating to a fleet of 10 PSVs) and subsequent to the Transaction date of April 8, 2019 (relating to a fleet of 10 PSVs, two AHTS vessels and 11 Crew Boats).  Under U.S. GAAP, the basis of accounting changed as a result of the Transaction since it was accounted for as a reverse acquisition of assets.  Accordingly, the periods prior to and subsequent to the Transaction should be presented separately.  The above table displays both the Predecessor and Successor periods in addition to the combined periods in 2019.  The Company believes that the combined presentation provides investors and other users of the Company’s financial statements, such as its lenders, with a means of evaluating and understanding how the Company’s management evaluates the Company’s operating performance.Reconciliation of Net Loss to Adjusted Net Loss

Reconciliation of Net Loss to Adjusted EBITDACAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSMatters discussed in this press release may constitute forward‐looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward‐looking statements in order to encourage companies to provide prospective information about their business. Forward‐looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “target,” “project,” “likely,” “may,” “will,” “would,” “could” and similar expressions identify forward‐looking statements.The forward‐looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although management believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, there can be no assurance that the Company will achieve or accomplish these expectations, beliefs or projections. The Company undertakes no obligation, and specifically declines any obligation, except as required by law, to publicly update or revise any forward‐looking statements, whether as a result of new information, future events or otherwise.Important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the offshore support vessel (“OSV”) market, changes in charter hire rates and vessel values, demand in OSVs, the Company’s operating expenses, including bunker prices, dry docking and insurance costs, governmental rules and regulations or actions taken by regulatory authorities as well as potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, the availability of financing and refinancing, vessel breakdowns and instances of off-hire and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission.Contacts:Hermitage Offshore Services Ltd.
+ 377 9798 5717 (Monaco)
+ 1 646 432 3315 (New York)
Web-site: www.hermitage-offshore.com
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