Golden Ocean Group Limited
Interim Report September 30 2008
Interim Results for the Quarter ended September 30, 2008

December 1, 2008

Golden Ocean Group Limited (the “Company” or “Golden Ocean”) reports net income of $118.7 million and earnings per share of $0.43 for the third quarter of 2008. This compares with net income and earnings per share of $52.9 million and $0.20 respectively for the third quarter of 2007. Total operating revenues for the third quarter were $309.8 million, total operating expenses were $242.3 million and net other expenses were $3.1 million. Included in the third quarter results is a gain on sale of assets of $54.4 million. This relates to the two previously announced sales of one Panamax newbuilding delivered from Jiangsu Rong Sheng Heavy Industries and one Capesize newbuilding delivered from Daehan Shipyard in Korea. Golden Ocean reports net income of $373.4 million for the nine months ended September 30, 2008, equivalent to earnings per share of $1.35.

Cash and cash equivalents decreased by $71.9 million during the quarter. The Company used cash in operating activities of $14.6 million, received $16.7 million from investing activities and paid $74.0 million in financing activities. Investing activities include part payments on newbuilding instalments of $101.9 million and proceeds from the sale of assets of $165.9 million. During the third quarter the Company repaid $89.4 million in debt and borrowed an additional $137.3 million.

At September 30, 2008 the total number of shares outstanding in Golden Ocean was 276,990,107 of $0.10 par value each.

Corporate and Finance
In September 2008, the Company took delivery of the second Capesize newbuilding contracted in December 2006 from Daehan Shipbuilding Co., South Korea. As announced in January 2008 the vessel was sold, and was delivered to the buyer directly from the shipyard.

In September 2008, the Company sold one of the Kamsarmax newbuildings ordered in October 2007 at Zhoushan Jinhaiwan Shipyard in China on a sale leaseback basis. The vessel is scheduled to be delivered in Q3 2009 and will then be delivered to the buyers. The sale proceeds are $65.3 million. Upon delivery from the shipyard, the vessel will commence a 10 year bareboat contract to Golden Ocean, at a daily rate of $21,975. Golden Ocean has further been granted fixed price purchase options after three years and has thereafter yearly options until the maturity of the bareboat contract. The purchase option price after 10 years is $40 million.

In September 2008, the Company re-purchased $10 million of nominal value of Convertible Bonds with ISIN NO 0010403892 at an average price of 84.625 per cent per bond. The $10 million of nominal value represents five per cent of the total outstanding issue.

During the third and fourth quarter the Company has acquired shares in Navios Maritime Holdings Inc. On Monday December 1, 2008 Golden Ocean intend to file the share holding position with the U. S. Securities and Exchange Commission after having surpassed a 5 per cent ownership of outstanding shares in Navios Maritime. 5,275,145 shares have been acquired at an average share price of $9.10 per share. The total investment has been approximately $48.1 million. The market value of the investment was approximately $27.0 million as per 30.09.08 and approximately $9.2 million as of 29.11.08. The main strategy behind the investment was driven by an attractive valuation, but also supported by the possibility for further consolidation. Golden Ocean has, for the time being, decided not to increase the investment further. This decision is to a large extend linked to the negative development which have taken place in the underlying market since the initial investment was done.

In view of the current financial market conditions, the Company’s newbuilding commitments and the Company’s liquidity position it has been decided not to declare a dividend for the third quarter of 2008.

Market
During the third quarter of 2008 the dry bulk sector witnessed a sharp downward trend. The Capesize segment started the quarter at $157,323 per day, but by the end of the quarter the earnings reached $41,159 per day. Similar numbers for the Panamax segment was $76,393 and $19,294 respectively. In spite of the strong negative correction in spot earnings, the second hand values did not show the same weakening tendency. By the end of the third quarter brokers believed that the value of a five year Panamax vessel was $74 million while a similar aged Capesize vessel was believed to be worth $123 million. Well into fourth quarter the effect of the financial crisis has reached the dry bulk industry with full strength. At the moment of writing a modern Capesize is earning $3,500 per day while Panamaxes are earning $6,800 per day.

Values were lagging for a while, but with the negative future prospects values declined significantly since the end of third quarter.

The utilisation of the total dry bulk fleet is estimated to be around 80-85 per cent and it is believed that more than 20 per cent of the Capesize fleet is idle and waiting for employment. The main reasons for the collapse in both earnings and values are from our point of view the following:
- The steel industry which accounts for almost 50 per cent of the dry bulk trade introduced global steel production cuts of 20 – 30 per cent. (iron ore / coking coal / steel and scrap)
- China which has been the driver behind the drybulk super cycle which started in 2003, has for the first time experienced negative growth in steel production. This in combination with record high iron ore inventories, has resulted in very low iron ore imports to the country.
- Credit crunch has made it difficult to open letter of credits, which in turn has had a severe effect on spot trading of many commodities such as grains, soya beans, sugar, cement and alumina.
- New vessels are entering the market at a steady pace and in combination with lower demand this is creating an imbalance.

The order book for dry bulk tonnage was as per 30.09.08 equal to 70 per cent of the total dry bulk fleet measured in dwt tonnage.

The dramatic negative development in the dry bulk market has increased scrapping and it is likely that this trend will continue in the next years. Approximately 30 per cent of the dry bulk fleet were as per 30.09.08 built before 1988.

Further it should be assumed that the tight financing market will lead to problems for yards as well as owners, these problems will result in cancellation of new building tonnage and thereby improve the projected supply / demand balance.

Outlook and Strategy
We are concerned that the structural over capacity which is recognized in the dry bulk market today combined with the weak global economic condition will continue to put pressure on the market in the period to come. Global stimulus packages and in particular the Chinese authorities stepping up their infrastructure projects should be beneficial for the steel industry going forward. Cancellation of newbuildings and extended scrapping might further reduce the current over capacity.

There is also a possibility that in the next months we will see a relatively steep recovery in the market driven to a large extend by the need to refill storage levels. Such a recovery might be short lived.

The major focus in Golden Ocean in the coming period will be to complete a financing package for the new building projects and make sure our counterparts perform in accordance with the contracts. In general the quality of the Golden Ocean’s counterparts is considered to be good, but given the present market conditions, counterpart risk has to be taken into consideration.

Golden Ocean has as of November 30 a new building program of 30 vessels, representing contractual value of $1.6 billion. We have entered into discussions with our yards to seek amendments to our newbuilding contracts. The purpose of such a discussion is to reduce, postpone or achieve financing for parts of this newbuilding program and thereby improve the Company’s liquidity position. A constructive dialog has been established with the yards; however no results have so far been achieved.

Approximately 55 per cent of the remaining new building program has committed financing. Out of the $385 million in capital expenditure payable in 2009, 76 per cent has already been financed. The Company has a good dialog with the banks in order to achieve a resistant total financing package which can make the Company less vulnerable if the market continues to be weak for some time. Such a package will however be dependent of cancellation and or postponement of part of the newbuilding program.

The results for Q4 will, based on the strong charter coverage, continue to show positive operating income, however the Company’s main focus will be to monitor a tight liquidity situation caused by a very weak spot market and a difficult financing environment.

Golden Ocean Group Limited