Tanker sector report - Concordia Maritime · Historically, rates tend to bottom out in Q3, but due to our forecast of 1.7% lower supply growth YOY on IMO disruptions, we believe that

MUST BE READ IN CONJUNCTION WITH PUBLISHED DNB MARKKETS RESEARCH

Nicolay Dyvik – Equity Analyst, Shipping Jørgen Lian – Equity Analyst, Shipping Mats Bye – Equity Analyst, Shipping

+47 24 16 91 87 | [email protected] +47 24 16 91 88 | [email protected] +47 24 16 91 86 | [email protected]

Tanker sector report Tanker peer group shares upgraded to BUY (HOLD)

12.02.2019

Nicolay Dyvik – Equity Analyst, Shipping

+47 24 16 91 87

[email protected]

Jørgen Lian – Equity Analyst, Shipping

+47 24 16 91 88

[email protected]

Mats Bye – Equity Analyst, Shipping

+47 24 16 91 86

[email protected]

Share prices in this note were correct as of 07:00 CET on 12 February 2019

mailto:[email protected]



2 MUST BE READ IN CONJUNCTION WITH PUBLISHED DNB MARKKETS RESEARCH



12/02/2019

CRUDE TANKER SECTOR

We have upgraded our crude tanker peer stocks to BUY (HOLD), and believe that, at an EV/GAV of 0.8x, OPEC output cuts are

discounted, but IMO 2020 is not. Ship prices are up in the past two months, as the one-year time-charter market starts to

discount IMO 2020, with tanker stocks set to follow in our view.

Tanker stocks upgraded to BUY

VLCC rates are down to USD14k/day, from ~USD60k/day on 1 December, due in our view to OPEC output cuts. According to Energy

Aspects, OPEC loadings fell 1.63mbpd in January MOM; we forecast a smaller decline in February, hence we believe the largest volume cut has

already hit the tanker market.

Tanker stocks at an EV/GAV of 0.80x, implying a 20% decline in asset values… Our tanker peer group is now trading at EV/GAV of 0.80x,

which implies a 20% decline in second-hand prices, far exceeding the average ~15% change in the value of a five-year old VLCC over the past

eight OPEC output changes.

...but despite tanker rates tumbling, asset values are up over the past two months. Despite tanker rates tumbling since 1 December, the

values of a 10-year old VLCC and Suezmax are up by ~10% and ~30%, respectively, in the same period.

Could it be different this time around due to IMO 2020? We believe that second-hand values are tightly correlated to the one-year TC market.

Chartering a VLCC for one year today lets the charterer hold the ship throughout Q1 2020 (the first IMO quarter). Hence, from a one-year

timecharter market perspective, the soft VLCC rate environment we expect for H1 2019 would month by month be offset by one additional month

of 2020, hence the historical relationship between OPEC output changes and tanker rates might not hold this time due to IMO 2020.

Frontline back to a P/NAV of 0.9x, which has historically been a good entry point. We calculate Frontline’s current NAV to be NOK48/share

(NOK52 incl. scrubbers), which puts Frontline at a P/NAV of 0.88x (0.80x incl. scrubbers) for the first time since March 2018. Since January

2014, Frontline has traded below 1.0x NAV on four occasions; all marked a share price trough followed by a strong appreciation.

Rates set to bottom out in H1 (not the seasonally weak Q3) due to IMO disruptions. Our VLCC rate forecast (from our 30 November sector

note) is unchanged at USD29k/day for 2019 (USD45k/day for Q4), USD41k/day for 2020 (USD50k/day in Q1), and USD43k/day for 2021. We

expect supply growth of 2.9% in 2019 and 1.1% in 2020, and tonne-mile demand of 1.5% in 2019, and 4.4% in 2020, resulting in hybrid (50%

conventional/50% speed adj.) utilisation of 83% for 2019e and 88% for 2020e. Historically, rates tend to bottom out in Q3, but due to our forecast

of 1.7% lower supply growth YOY on IMO disruptions, we believe that rates are set to bottom out in H1 2019.

We have upgraded our crude tanker peer stocks to BUY (HOLD), as we believe the risks we put forward in our 30 November 2018

downgrades are now discounted in equity values. Our small target price adjustments despite the recommendation upgrades are because our

November downgrades were essentially a call on H1 weakness resulting from the impact of the OPEC cuts. Our target prices are USD7.5 for

DHT (USD7.3), Euronav USD12.1 (unchanged), Frontline NOK69 (NOK67), Hunter Group NOK5.9 (unchanged), and Teekay Tankers USD2.0

(unchanged).

Conclusion

What is new?

Our analysis

Valuation




12/02/2019

VLCC rates and tanker stocks down since 1 December 2018 on OPEC cut impact

…which has also led to sharp correction in tanker stocks and

eroded past 12 months’ gains (EURN, FRO, DHT index)

VLCC rates peaked 1 December at ~USD60k/day and

have declined to USD14k/day on OPEC output cuts....

Source: DNB Markets (forecast), Clarksons (historical)

USD58k/day

USD14k/day

0

10

20

30

40

50

60

'000 U

SD

/day

1 Dec

90

100

110

120

130

140

150

Index 1

00

Average

1 Dec





12/02/2019

OPEC cut discounted in equities, IMO not… (EV/GAV 0.8x today down from 1.0x 1 Dec-18)

…which by far exceeds the average ~15% change in the

value of a 5 year old VLCC past eight OPEC output changes

Tanker peer group EV/GAV at ~0.81x (1.0x 30 Nov 18) implies

that tanker stocks discount a ~20% decline in crude asset

values…

0.79x 0.77x

0.93x

0.87x

0.81x

0.68x

0.81x

0.00x

0.10x

0.20x

0.30x

0.40x

0.50x

0.60x

0.70x

0.80x

0.90x

1.00x

DHT EURN FRO HUNT STNG TNK Average

EV

/GA

V

-12% -11%

7%

-5%

9%

0%

33%36%

14%

19%15%

-20%

-10%

0%

10%

20%

30%

40%

Apr-

98

Feb

-01

No

v-1

6

Ave

rag

e

Apr-

00

Ja

n-0

3

No

v-0

3

Ju

l-04

No

v-0

6

Ave

rag

e

Ave

rag

e

OPEC cuts OPEC increases

Ch

ange in

valu

e 5

year

old

VLC

C (

%)






12/02/2019

Frontline back to P/NAV below 0.9x which has historically been a good entry point

Frontline’s current NAV NOK48/share (NOK52 incl. scrubber) which puts Frontline at P/NAV 0.88x (0.80x incl.

scrubber) or below 0.9x for the first time since March 2018

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

P/N

AV

FRO P/NAV FRO current P/NAV






12/02/2019

VLCC secondhand prices correlates with 1 year timecharter rates which are unlikely to

decline much as 1y fwd rates now includes Q1 2020 (first IMO quarter)…


8 914

45

32

20 20

4549

38

27

51

0

10

20

30

40

50

60

70

Q118 Q218 Q318 Q418 Q119e Q219e Q319e Q419e Q120e Q220e Q320e Q420e

Actual DNB Markets forecast

'000 U

SD

/day

USD29k/day

USD34k/day

USD38k/day

IMO 2020

41

43 43

47 47

27 27

3234

36

25

30

35

40

45

50

55

60

Oct-2018 Nov-2018 Dec-2018 Jan-2019 Feb-2019

US

Dm

10 year old VLCC 10 year old suezmax

IMO effect

IMO 2020 already having an impact on 10 year old VLCCs

and Suezmax asset values which see values up past two

months despite spot rates weakness short term




12/02/2019

Recommendations, target prices and estimate changes (1:3)

Changes to target prices and recommendations (%) Crude tanker peer group stocks upgraded to HOLD (BUY)

We have upgraded our crude tanker peer group stocks to BUY (from

HOLD) as we argue the risks we put forward in our 30 November

2018 downgrade note are now discounted in equity values.

Our small target price adjustments despite the recommendation

upgrades are because our November downgrades were essentially

a call on H1 weakness resulting from the impact of the OPEC cuts.

Our target prices are based on our one year fwd NAV on USD107m

VLCC resale prices, up from current USD95m today.

Source: DNB Markets (forecast)

DHT EURN FRO HUNT TNK

Recommendation (old) HOLD HOLD HOLD HOLD HOLD

Recommendation (new) BUY BUY BUY BUY BUY

Current share price 3.9 7.64 42.3 3.29 0.93

Target (old) 7.3 12.1 67 5.9 2.0

Target (new) 7.5 12.1 69 5.9 2.0

Changes to target (%) 3% 0% 3% 0% 0%

Upside to target (%) 92% 58% 63% 79% 115%





12/02/2019

Tanker valuation

Price/1-year forward NAV –DNB asset value model Market adjusted leverage and sensitivity to changes in

asset values

Price / 1 year fwd NAV - unchanged asset values Price / current NAV

Source: DNB Markets, USITC, Bloomberg (historical)

52%

42%

69%

69%

66%

0.6

0x

19%

16%

28%30%

26%

0%

5%

10%

15%

20%

25%

30%

35%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

DH

T

EU

RN

FR

O

HU

NT

TN

K

Ave

rag

e

Ch

ange in

NA

V w

ith +

10%

asset

valu

es

Mark

et-

adju

ste

d l

evera

ge

Market-adjusted leverage Impact NAV by 10% move in asset values

0.83x0.90x

1.64x

0.67x0.62x

0.90x

0.00x

0.20x

0.40x

0.60x

0.80x

1.00x

1.20x

1.40x

1.60x

1.80x

DH

T

EU

RN

FR

O

HU

NT

TN

K

Ave

rag

e

P / c

urr

ent

NA

V

0.81x0.88x

1.59x

0.67x 0.63x

0.91x

0.00x

0.20x

0.40x

0.60x

0.80x

1.00x

1.20x

1.40x

1.60x

1.80x

DH

T

EU

RN

FR

O

HU

NT

TN

K

Ave

rag

eNA

V -

1 y

ear

fwd -

unchanged a

sset

valu

es

0.53x

0.62x

1.01x

0.54x

0.35x

0.61x

0.0x

0.2x

0.4x

0.6x

0.8x

1.0x

1.2x

DH

T

EU

RN

FR

O

HU

NT

TN

K

Ave

rag

e

NA

V -

1 y

ear

fwd -

valu

es d

ow

n 1

5%




12/02/2019

98,9

71

100,4

92

103,0

63

105,1

96

104,8

09

99,7

73

103,3

65

106,3

09

108,6

53

107,3

20

109,4

78

111,2

84

118,9

72

125,8

12

133,4

29

135,4

39

141,3

89

147,1

62

3%

2% 3

%

2%

0%

-5%

4%

3%

2%

-1%

2%

1.6

%

6.9

%

5.7

%6.1

%

1.5

%

4.4

%

4.1

%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

50,000

70,000

90,000

110,000

130,000

150,000

170,000

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

e

20

19

e

20

20

e

20

21

e

Barr

el-m

ile p

.a.

(bn)

Transport demand, adjusted for deadfreight and ballast

YOY growth barrel-mile

Why positive to 2020e 1:6 – we forecast continued strong tanker tonne-mile demand

after a weaker 2019

…but thanks to US export growth we end up with a

2019e tonne-mile of 1.5%, down from 6.1% in 2018e and

we forecast 4.4% in 2020e and 4.1% in 2021e

We forecast zero crude tanker volume growth in 2019e

down from 3.5% in 2018 as OPEC is cutting production,

before increasing to ~3% for 2020-2021e…


36,7

19

37,4

26

38,3

87

39,3

72

39,1

74

37,7

96

37,8

12

38,0

84

38,6

23

38,1

03

38,5

93

39,7

07

42,5

30

43,8

55

45,4

12

45,4

33

46,7

74

48,1

16

3.8

%

1.9

%

2.6

%

2.6

%

-0.5

%

-3.5

%

0.0

%

0.7

%

1.4

%

-1.3

%

1.3

%

2.9

%

7.1

%

3.1

%

3.5

%

0.0

%

3.0

%

2.9

%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

30,000

32,000

34,000

36,000

38,000

40,000

42,000

44,000

46,000

48,000

50,000

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

e

20

19

e

20

20

e

20

21

e

Volu

me g

row

th (

YO

Y)

Tra

nsport

ed v

olu

mes (

k b

pd)

Transported volume (k bpd) YoY growth trade




12/02/2019

Why positive to 2020e 2:6 – we forecast 2021e average export sailing distances to be

4% higher than in 2018e, explaining continued tonne-mile outperformance over volumes

…which explains our continued belief in longer crude

tanker export sailing distances (nautical miles)

We forecast tonne-mile to outperform trade growth due

to ever increasing US crude exports…


0%

0%

-1%

4%

2%

1%

0%

1%

-1%

0%

3% 3%

1% 1%1%

-2%

-1%

0%

1%

2%

3%

4%

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

e

20

19

e

20

20

e

20

21

e

(%)

4240

4160

4130

4110

4060

4070

4010

4010

3910

4040 4110

4140

4130

4140

4100

4130 4

220 4

320 4390

4440

4490

3600

3700

3800

3900

4000

4100

4200

4300

4400

4500

4600

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

e

20

19

e

20

20

e

20

21

e

Na

utical m

iles




12/02/2019

Why positive to 2020e 3:6 – IMO disruptions and continued high scrapping would result

in continued low fleet growth in our forecast period, but not as low as 2018 of 0.6%

…which combined with a speed increase in the fleet,

leads to a reduction in our hybrid tanker market

utilization in 2019 from 2018, but a strong H2 2019 make

us believe in higher rates YOY

We forecast fleet growth of 2.9% in 2019e, up from 0.6%

in 2018e, net of IMO disruptions of 1.7% and scrapping

of 2.2%, before decreasing to 1.1% in 2020e…


-2%

-3%

-2%

-2%

-3%

-2% 0%

0%

-2%

-4.9

% -2.2

%

-4.2

%

-3.4

%-1.7%

-0.6%

8.9%

6.6%

8.1%

5.4%

2.0%1.0%

2.1%

5.6%5.1%

0.6%

2.9%

1.1%

3.7%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

(%)

Deliveries Scrapping IMO disruptions Net fleet growth

57,0

00

59,0

00

57,0

00

96,0

00

26,0

00

36,0

00

14,0

00

18,0

00

17,0

00

32,0

00

67,0

00

41,0

00

22,0

00

20,0

00

29,0

00

41,0

00

43,0

00

93%

90%

87%

85%

79% 8

2%

82%

81%

80%

84% 86%

88%

86% 88%

83%

88%

88%

0

20,000

40,000

60,000

80,000

100,000

70%

75%

80%

85%

90%

95%

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

e

20

19

e

20

20

e

20

21

e

VLC

C r

ate

s (

US

D/d

ay)

Utiliz

ation (

%)

VLCC spot rates (USD/day) Utilization




12/02/2019

Why positive to 2020e 4:6 – We forecast strong volume growth in the tanker market in

2020e and 2021e after 2019 (in which US volume growth would be offset by OPEC cuts)

Middle East crude oil exports (mbpd) and YOY growth

(%)

We forecast US crude exports to grow by 0.7mbpd in

2019e which would be offset by a similar decline from

Middle East as we expect OPEC to cut production


0.51.0

0.7 0.7 0.7

-0.2 -0.4 -0.14

0.0 0.00.5

0.20.1 0.0 0.0

0.1 0.2

-0.7

0.5 0.5

0.30.6

0.1

0.1 0.1

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

2017e 2018e 2019e 2020e 2021e

Change in c

rude e

xport

s (

YO

Y m

bpd)

North America South America Europe North Africa

West Africa Middle East S/E Asia N/E Asia

16.6

17.717.6

17.217.1

17.7

19.7

19.920.1

19.4

19.9

20.5

6%

0%

-3%

-1%

3%

12%

1% 1%

-4%

3% 3%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

15.0

16.0

17.0

18.0

19.0

20.0

21.0

(%)

mbpd

Volume (mbpd) YOY growth (%)




12/02/2019

Why positive to 2020e 5:6 – US crude exports to dominate both tanker volumes and

tonne-mile demand with ~80% of incremental crude exports from 2019–2021, we forecast

and incremental US laden tonne-mile demand to account for ~90% in the same period

US crude oil ton-mile export (bn bmpd) and YOY growth (%) US crude oil exports (mbpd) and YOY growth (%)


0.30.5 0.5

0.9

1.9

2.6

3.3

4.0

198%

47%

0%

89%103%

37%27% 21%

-50%

0%

50%

100%

150%

200%

250%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2014 2015 2016 2017 2018e 2019e 2020e 2021e(%

)

mbpd

Volume (mbpd) YOY growth (%)

1 1 2

5

13

19

25

31

210%

79%

24%

247%

139%

48%32%

24%

0%

50%

100%

150%

200%

250%

300%

0

5

10

15

20

25

30

35

2014 2015 2016 2017 2018e 2019e 2020e 2021e

(%)

bn b

mpd

Ton-mile (bn bmpd) YOY growth (%)




12/02/2019

Why positive to 2020e 6:6 – 2019 and 2020 supply growth would be impacted not only by

high scrapping, but also by IMO supply disruptions (such as Ballast Water & scrubber

installation and bunker tank cleaning – all resulting in off-hire)

Crude tank supply disruptions on current and DNB

Markets’ scrubber forecasts for 2020e Historical and forecasted scrapping by year (% of fleet)


7.2

%

2.6

%

1.1

%

0.4

%

0.5

%

0.9

%

1.9

% 2.6

%

2.3

%

2.5

%

2.5

%

1.7

%

0.4

%

0.4

%

2.4

%

4.9

%

2.2

%

4.2

%

3.4

%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

e

20

19

e

20

20

e

20

21

e

Scrapping as % of fleet start of year

0.1%0.4% 0.4%

0.7%

0.8%

0.9%

0.2%

0.2%

1.7%

0.6%

1.4%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2019 2020 2020e

Supply

dis

ruptions f

rom

regula

tio

ns

BWMS Scrubber Bunker tank cleaning




12/02/2019

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making investment decisions, and may also base investment advice given to clients on the Note. Such use is dependent on the buy-side investment firm citing DNB Markets as the source.

The Note shall not be used for any unlawful or unauthorized purposes. The Bank, its affiliates, and any third-party providers, as well as their directors, officers, shareholders, employees or agents (individually, each a “DNB

Party”; collectively, “DNB Parties”) do not guarantee the accuracy, completeness, timeliness or availability of the Note. DNB Parties are not responsible for any errors or omissions, regardless of the cause, nor for the results

obtained from the use of the Note, nor for the security or maintenance of any data input by the user. The Note is provided on an “as is” basis. DNB PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES,

INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE

NOTE’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE NOTE WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall DNB Parties be liable to any party for any direct,

indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs) in connection with

any use of the Note, even if advised of the possibility of such damages.

Confidentiality rules and internal rules restrict the exchange of information between different parts of the Bank and this may prevent employees of DNB Markets who are preparing the Note from utilizing or being aware of

information available in DNB Markets/the Bank that may be relevant to the recipients of the Note. Please contact DNB Markets at 08940 (+47 915 08940) for further information and inquiries regarding this Note, including an

overview on all recommendations from DNB Markets over the last 12 Months according to Market Abuse Regulations.

The Note is not an offer to buy or sell any security or other financial instrument or to participate in any investment strategy. Distribution of material like the Note is in certain jurisdictions restricted by law. Persons in possession

of the Note should seek further guidance regarding such restrictions before distributing the Note.

The note has been prepared by DNB Markets, a division of DNB Bank ASA, a Norwegian bank organized under the laws of the Kingdom of Norway and under supervision by the Norwegian Financial Supervisory Authority, The

Monetary Authority of Singapore, and on a limited basis by the Financial Conduct Authority and the Prudential Regulation Authority of the UK, and the Financial Supervisory Authority of Sweden. Details about the extent of our

regulation by local authorities outside Norway are available from us on request.

Information about DNB Markets can be found at www.dnb.no/markets.

Additional information for clients in Singapore

The Note has been distributed by the Singapore Branch of DNB Bank ASA. It is intended for general circulation and does not take into account the specific investment objectives, financial situation or particular needs of any

particular person. You should seek advice from a financial adviser regarding the suitability of any product referred to in the Note, taking into account your specific financial objectives, financial situation or particular needs before

making a commitment to purchase any such product.

You have received a copy of the Note because you have been classified as an accredited investor, an expert investor, or an institutional investor, as these terms have been defined under Singapore’s Financial Advisers Act

(Cap. 110) (“FAA”) and/or the Financial Advisers Regulations (“FAR”). The Singapore Branch of DNB Bank ASA is a financial adviser exempt from licensing under the FAA but is otherwise subject to the legal requirements of

the FAA and of the FAR. By virtue of your status as an accredited investor or as an expert investor, the Singapore Branch of DNB Bank ASA is, in respect of certain of its dealings with you or services rendered to you, exempt

from having to comply with certain regulatory requirements of the FAA and FAR, including without limitation, sections 25, 27 and 36 of the FAA. Section 25 of the FAA requires a financial adviser to disclose material information

concerning designated investment products that are recommended by the financial adviser to you as the client. Section 27 of the FAA requires a financial adviser to have a reasonable basis for making investment

recommendations to you as the client. Section 36 of the FAA requires a financial adviser to include, within any circular or written communications in which “he/she” makes recommendations concerning securities, a statement

of the nature of any interest that the financial adviser (and any person connected or associated with the financial adviser) might have in the securities.

Please contact the Singapore Branch of DNB Bank ASA on +65 6212 6144 in respect of any matters arising from, or in connection with, the Note.

The Note is intended for and is to be circulated only to those classified as an accredited investor, an expert investor, or an institutional investor. If you are not an accredited investor, an expert investor, or an institutional

investor, please contact the Singapore Branch of DNB Bank ASA on +65 6212 6144.

We, the DNB group, our associates, officers and/or employees may have interests in any products referred to in the Note by acting in various roles including as distributor, holder of principal positions, adviser or lender. We,

the DNB group, our associates, officers and/or employees may receive fees, brokerage or commissions for acting in those capacities. In addition, we, the DNB group, our associates, officers and/or employees may buy or sell

products as principal or agent and may effect transactions that are not consistent with the information set out in the Note.

Additional Information, including for Recipients in the United States:

The Note does not constitute an offer to sell or buy any financial instrument and does not provide opinions or recommendations with respect to securities of an issuer or an analysis of a security or an issuer. This Note is

intended solely for Major U.S. Institutional Investors within the meaning of Rule 15a-6 under the U.S. Securities Exchange Act of 1934 and to such other U.S. Institutional Investors as DNB Markets, Inc. may determine.

Distribution to non-Major U.S. Institutional Investors will be made only by DNB Markets, Inc., a separately incorporated subsidiary of DNB Bank that is a U.S. broker-dealer and a member of the Financial Industry Regulatory

Authority (“FINRA”) and the Securities Investor Protection Corporation (“SIPC”). Any U.S. recipient of this Note seeking to obtain additional information or to effect any transaction in any security discussed herein or any related

instrument or investment should contact DNB Markets, Inc., 200 Park Avenue, New York, NY 10166-0396, telephone number +1 212-551-9800.

http://www.dnb.no/markets





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