August 9, 2018
Faster Forward SBM Offshore continues to deliver solid
results. Turnkey is ramping up on the back of recent order wins in
a market where recovery is gaining momentum. Both major projects in
Turnkey, the Castberg turret mooring system and FPSO Liza 1, are
progressing according to client schedule. The Company was awarded
the Front End Engineering and Design (FEED) study for FPSO Liza 2.
The next phase for this major project will represent SBM Offshore's
first Fast4WardTM project, subject to final authorizations. FPSO
Liza 2 will be the largest capacity FPSO the Company has ever
delivered, at the same time following an accelerated time schedule.
Post period, SBM Offshore signed a Leniency Agreement with
authorities in Brazil and Petrobras, with payment amounts in line
with its provision. The agreement marks a key milestone towards a
closure of the Company's legacy issues in Brazil, allowing the
pursuit of new Petrobras tenders.
The market outlook shows signs of a cycle
turning following years-long under-investment in oil and gas
production infrastructure. SBM Offshore has positioned itself over
the last five years to benefit from this, retaining experience and
investing in Fast4WardTM. This program enables the Company to
deliver larger capacity FPSOs faster, on a de-risked schedule using
a standard new-build hull with a number of standardized topsides'
modules.
Bruno Chabas, CEO of SBM Offshore,
commented:
"Building on our long history and experience, we
are entering a new phase. Our Lease and Operate business has helped
stabilize the Company through one of the longest and deepest oil
and gas services crises in living memory and is continuing its
record of strong operational performance and cash flow delivery.
During the downturn, we invested in the industry-changing
Fast4WardTM concept, capitalizing on the Company's unique
experience in project delivery and offshore operations. Our first
Fast4WardTM based contract and the level of client endorsement
demonstrate that the concept is winning the confidence of the
industry. We intend to apply the Fast4WardTM philosophy to our
overall offering of products and services leveraging also the
investments we are making in digitalization. Today, with full
access to all markets, SBM Offshore is looking forward with
confidence on the basis of increased demand, its strong strategic
position and its uniquely experienced work force."
Highlights
- Underlying[1] year-to-date Directional[2] revenue of US$808
million and Directional EBITDA of US$414 million in line with the
same period last year, with strong operational performance
compensating for the impact from FPSO Turritella leaving the
fleet
- An additional US$233 million EBITDA realized from the sale of
FPSO Turritella and the net impact of an additional settlement for
the Yme insurance claim
- Underlying Directional profit attributable to shareholders[3]
increased by 17% to US$81 million compared with first half of 2017,
resulting in Underlying Directional EPS of US$0.40 per share
- Directional net debt[4] decreased by US$0.6 billion compared
with year-end 2017 to a total of US$2.3 billion
- Confirmed award for FPSO Liza 2 contracts by ExxonMobil,
representing SBM Offshore's largest and first Fast4WardTM FPSO,
next phase contracts (construction and installation) subject to
authorizations
- Leniency Agreement signed with authorities in Brazil (CGU,
AGU)[5] and Petrobras on July 26, 2018; enabling SBM Offshore to
compete in new tenders for Petrobras in Brazil
- 2018 Directional revenue guidance adjusted to around US$1.7
billion with US$1.3 billion from Lease and Operate and around
US$400 million from Turnkey due to a revised assumption of FPSO
Liza 1 remaining fully Company-owned
- Underlying 2018 Directional EBITDA guidance maintained at
around US$750 million, excluding positive effects from the sale of
FPSO Turritella and an additional Yme settlement but including the
effect of early adoption of IFRS 16
The 2018 Half Year Results and Interim Financial Statements are
published on the Company's website under
https://www.sbmoffshore.com/investor-relations-centre/financial-information/financial-results/half-year-results/.
Overview
Directional revenue was stable, decreasing by 3%
to US$808 million for the first half of 2018. This was due to lower
Lease and Operate revenues, mainly as a result of FPSO Turritella
leaving the fleet in January 2018 and planned maintenance. This
decrease was partly offset by increased Turnkey activity which,
compared to the same period last year, resulted in an increase in
revenues by US$64 million to a total of US$154 million at mid-year
2018.
The Company's Underlying Directional EBITDA for
the first half of 2018 decreased by 4% compared with the same
period last year to a total of US$414 million. Lease and Operate
EBITDA for the first half of 2018 was US$427 million, 11% lower
than the first half of 2017, driven by the same factors as revenue.
Turnkey saw a reduction in overheads compared with the same period
last year and similarly benefited from successful project close-out
with clients and suppliers, bringing the Underlying EBITDA to US$17
million for the first half of this year.
Underlying EBITDA excludes positive one-off
effects from the realized gain on the sale of FPSO Turritella
(US$217 million) and an additional settlement relating to the Yme
insurance case (US$16 million, net of claim-related cost for the
period). To ensure consistency with future reporting, Underlying
EBITDA includes impacts from the early adoption of IFRS 16 where
over the first half year of 2018 rental expenses amounting to US$15
million are replaced by US$13 million additional depreciation and
financing cost.
For mid-year 2018 the Company reports Underlying
Profit attributable to Shareholders of US$81 million, representing
an increase of 17% compared with the same period in 2017.
Project Review
Fast4WardTM
SBM Offshore's first standard, multi-purpose
hull is progressing well and according to schedule. This hull is
reserved and planned to be allocated to the FPSO Liza 2 project,
subject to authorizations. FPSO Liza 1
The major project FPSO Liza 1 is making good
progress to the satisfaction of our client. After finishing the
first dry dock session, the project has entered an important phase
with concurrent activities in hull conversion, module fabrication
and package delivery. In Guyana, work is underway with respect to
operations readiness while reviewing ways to maximize local
content. Castberg Turret Mooring System
The complex turret mooring system is making good
progress in Dubai, after passing the milestone of the first steel
cut. The project is on track to meet delivery early 2020, in line
with client schedule. Operational Update
The Lease and Operate fleet uptime performance
year-to-date was 97.0% which takes into account planned maintenance
and life-time extension activities on FPSO Capixaba, a vessel with
more than eight years in operation. Excluding this unit, the
fleet's year-to-date uptime is 99.2%. The multi-year historical
uptime remains constant at 99%.
FSO Yetagun was decommissioned and will be sold
and transferred off balance sheet in 3Q18 for recycling, in line
with SBM Offshore policies and in accordance with the Hong Kong
convention. Corporate Social Responsibility
While ramping up on two major projects entering
construction, SBM Offshore continued to build on its safety
performance, operating at a level better than its 2018 Total
Recordable Injury Frequency Rate (TRIFR) target of 0.26 as of
mid-year 2018. On May 15, 2018, the Company organized its fifth
Life Day across all the Company's vessels and locations, involving
all SBM Offshore staff and other stakeholders, emphasizing process
safety, human rights and wellbeing at work. The Company continued
its focus on safety awareness through its company-wide monthly
campaigns, which included sessions on the 12 lifesaving rules and a
focus on process safety monitoring.
Regarding environmental impact, SBM Offshore
maintained its year-to-date 2017 performance in the areas of air
emissions and energy consumption. Oil released in produced water
showed a 28% increase compared to the solid performance reported
last year. Despite this increase, year-to-date 2018 performance
remained better than target.
In the area of sustainability, the Company has
selected seven sustainable development goals (SDG) for which there
is an ongoing process for defining goals and creating action plans
with associated performance monitoring and reporting. The Company
continues to further embed sustainability in its processes and
culture commensurate with HSSE and compliance. Yme Insurance
Claim
In addition to last year's announced binding
settlement with a group of the primary insurers relating to the
Company's insurance claim arising from the Yme project, the Company
has settled with the remaining primary insurers, as well as some
additional insurers. SBM Offshore's share in this additional
settlement is for US$16 million, net of claim related expenses.
Under the terms of the settlement agreement with Repsol, all
insurance claim recoveries after expenses and legal costs are to be
shared equally between the Company and Repsol. The gross total
recovery to be shared currently stands at around US$340
million.
The Company continues to pursue its claim
against the last remaining insurers. Unless settlement with these
remaining insurers is reached, trial is scheduled to commence in
October 2018. Directional Backlog
SBM Offshore provides a pro-forma Directional
backlog[6] overview, which provides a normalized outlook of
the existing leases. The pro-forma Directional backlog at the end
of June 2018 decreased by c. US$0.7 billion to a total of US$16.1
billion. This decrease was mostly caused by the US$0.8 billion
turnover for the period mainly coming from Lease and Operate.
Various new orders in Turnkey more than offset other adjustments
and caused a net increase in the backlog by c. US$100 million.
With respect to FPSO Liza 1, as disclosed on
July 3, 2018 discussions with the client are underway regarding a
potential accelerated transfer of ownership using the purchase
option in the 10 year lease contract. The outcomes of these
discussions are expected to lead to a transfer of the FPSO
ownership and operation after a period of up to 2 years after
startup. This however is not final as such and will be reflected in
the backlog if and when this has become final.
(in billion US$) |
|
Turnkey |
|
Lease & Operate |
|
Total |
|
|
|
|
|
|
|
2H 2018 |
|
0.2 |
|
0.7 |
|
0.9 |
2019 |
|
0.4 |
|
1.3 |
|
1.7 |
2020 |
|
0.1 |
|
1.5 |
|
1.6 |
Beyond 2020 |
|
0.1 |
|
11.9 |
|
11.9 |
|
|
|
|
|
|
|
Total
Backlog |
|
0.7 |
|
15.4 |
|
16.1 |
|
|
|
|
|
|
|
Funding and Directional Net Debt
At the end of June 2018, SBM Offshore had
Directional cash and undrawn corporate committed credit facilities
totaling US$1,842 million compared to US$1,878 million at year-end
2017. Strong Directional cash flow from operations driven by Lease
and Operate, combined with the net proceeds from Turritella and Yme
was broadly sufficient to fund investments in FPSO Liza 1 and the
Fast4WardTM hull construction, pay interest and redeem project
loans as well as pay dividend.
Directional net debt decreased by US$0.6 billion
from US$2.9 billion at year-end 2017 to US$2.3 billion at the end
of June 2018. Compliance
The Company entered into a Leniency Agreement
with the CGU, the AGU and Petrobras, as reported on July 26, 2018.
The agreement marks a key milestone towards a closure of the
Company's legacy issues in Brazil, supporting the continuation of a
long-lasting relationship with Petrobras and allowing the pursuit
of new Petrobras tenders.
The payment amounts agreed upon in the Leniency
Agreement are in line with the provision maintained by the Company
(for further details see Note 7 of the Interim Financial
Statements).
The MPF[7] is not a party to the Leniency
Agreement. The lawsuit brought by the MPF under the Brazilian
Improbity Law against various SBM Group companies, and the
requested associated provisional measure, are still pending, as
reported on July 5, 2018. The Company has subsequently re-engaged
with the MPF to discuss the impact of the Leniency Agreement on
this lawsuit and the request for provisional measures. Outlook
and Guidance
The recovery in the oil and gas sector continues
to progress. Increasingly, deep water developments demonstrate
competitive break-even pricing on the basis of supply-chain
efficiency gains. Industry sources are predicting an increased risk
of a significant energy supply gap occurring in the mid-2020s,
exacerbated by many years of under-investment in new projects. For
clients who are moving forward with investments in major deep water
projects, this trend has the potential to bring substantial upside
to already attractive original project economics.
The oil and gas services industry has
structurally lost significant capacity which, combined with
continued demand growth should create opportunity for selected
players. SBM Offshore's strategic position combined with its
Fast4WardTM philosophy places the Company "in the right place, at
the right time, with the right product offering". The Company will
remain disciplined around tendering activities, evaluating risk and
reward when selecting its opportunities. For the long term,
considering a diverse range of third-party scenarios, the Company
maintains its optimism about the role of deep water oil and gas in
the energy mix of the future and continues to position itself to
benefit from the anticipated energy transition towards more gas
developments and renewable energy sources.
Subject to final outcome of the discussion with
the client relating to the potential acquisition of the FPSO Liza
1, the Company has determined that it is optimal from an
operational and financial perspective to retain full ownership as
opposed to partnering and is changing its assumptions for 2018
guidance accordingly. As a consequence, under the Company's
Directional accounting policy, the Company will not book revenue
and margin deriving from partner contributions during the Turnkey
phase of the project. The Company will instead book increased
amounts related to the full 100% share in the Lease and Operate
phase in line with the cash flow. The Company is therefore
adjusting the guidance for Turnkey revenues for 2018 to around
US$0.4 billion. The guidance for Lease and Operate revenues is
maintained at around US$ 1.3 billion, meaning that the overall
guidance for revenues now becomes around US$1.7 billion in
aggregate.
2018 Underlying EBITDA guidance is maintained at
around US$750 million. To ensure consistency for future reporting,
this now includes the positive effect from early adoption of IFRS
16 in relation to which a total of c. US$30 million has moved from
rental cost in EBITDA to depreciation and financing costs. This
effect partially offsets the change in the assumption of partnering
for Liza 1. One-off effects from the sale of Turritella (US$217
million) and the additional Yme insurance case settlement (US$16
million) are reported over and above the Underlying guidance.
Analyst Presentation & Conference Call
SBM Offshore has scheduled a conference call and
webcast of its presentation to the financial community followed by
a Q&A session at 10.00 Central European Time on Thursday,
August 9, 2018.
The webcast will be hosted by Bruno Chabas
(CEO), Philippe Barril (COO), Erik Lagendijk (CGCO) and Douglas
Wood (CFO). Interested parties are invited to listen to the call by
dialing +31 20 531 5851 in the Netherlands, +44 203 365 3210 in the
UK or +1 (866) 349 6093 in the US. Interested parties may also
listen to the presentation via webcast through the link below, also
posted on the Investor Relations section of the Company's
website.
The live webcast and replay, which should be available shortly
after the call, will be available at:
https://ssl.webinar.nl/webcast/sbmoffshoreinvestors/20180809_1/
Financial Calendar |
Date |
Year |
Trading Update 3Q 2018 - Press Release |
November 15 |
2018 |
Full-Year 2018 Earnings - Press Release |
February 14 |
2019 |
Annual General Meeting of Shareholders |
April 10 |
2019 |
Trading Update 1Q 2019 - Press Release |
May 16 |
2019 |
Half-Year 2019 Earnings - Press Release |
August 8 |
2019 |
Trading Update 3Q 2019 - Press Release |
November 14 |
2019 |
Corporate Profile
SBM Offshore N.V. is a listed holding company
that is headquartered in Amsterdam. It holds direct and indirect
interests in other companies that collectively with SBM Offshore
N.V. form the SBM Offshore Group ("the Company").
SBM Offshore provides floating production
solutions to the offshore energy industry, over the full product
lifecycle. The Company is market leading in leased floating
production systems delivered to date, with multiple units currently
in operation and has unrivalled operational experience in this
field. The Company's main activities are the design, supply,
installation, operation and the life extension of floating
production solutions for the offshore energy industry.
As of December 31, 2017, Group companies employ
approximately 4,800 people worldwide. Full time company employees
totaling c. 4,300 are spread over offices in key markets,
operational shore bases and the offshore fleet of vessels. A
further 500 are working for the joint ventures with two
construction yards. For further information, please visit our
website at www.sbmoffshore.com.
The companies in which SBM Offshore N.V.
directly and indirectly owns investments are separate entities. In
this communication "SBM Offshore" is sometimes used for convenience
where references are made to SBM Offshore N.V. and its subsidiaries
in general, or where no useful purpose is served by identifying the
particular company or companies.
The Management BoardAmsterdam, the Netherlands,
August 9, 2018
For further information, please contact:
Investor Relations |
|
Bert-Jaap Dijkstra |
|
Director
Corporate Finance and IR |
|
Telephone: |
+31 (0)
20 236 3222 |
Mobile: |
+31 (0)
6 21 14 10 17 |
E-mail: |
bertjaap.dijkstra@sbmoffshore.com |
Website: |
www.sbmoffshore.com |
Media
Relations |
|
Vincent
Kempkes |
|
Group
Communications Director |
|
Telephone: |
+31 (0)
20 2363 170 |
Mobile: |
+31 (0)
6 25 68 71 67 |
E-mail: |
vincent.kempkes@sbmoffshore.com |
Website: |
www.sbmoffshore.com |
Disclaimer
This press release contains inside information
within the meaning of Article 7(1) of the EU Market Abuse
Regulation. This press release contains regulated information
within the meaning of the Dutch Financial Markets Supervision Act
(Wet op het financieel toezicht). Some of the statements contained
in this release that are not historical facts are
statements of future expectations and other forward-looking
statements based on management's current views and assumptions and
involve known and unknown risks and uncertainties that could cause
actual results, performance, or events to differ materially from
those in such statements. Such forward-looking statements are
subject to various risks and uncertainties, which may cause actual
results and performance of the Company's business to differ
materially and adversely from the forward-looking statements.
Certain such forward-looking statements can be identified by the
use of forward- looking terminology such as "believes", "may",
"will", "should", "would be", "expects" or "anticipates" or similar
expressions, or the negative thereof, or other variations thereof,
or comparable terminology, or by discussions of strategy, plans, or
intentions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described in this
release as anticipated, believed, or expected. SBM Offshore NV does
not intend, and does not assume any obligation, to update any
industry information or forward-looking statements set forth in
this release to reflect subsequent events or circumstances. Nothing
in this press release shall be deemed an offer to sell, or a
solicitation of an offer to buy, any securities.
[1] Underlying 1H18 EBITDA excludes the one off positive effects
from the sale of FPSO Turritella (US$217 million) and additional
settlement relating to the Yme insurance case (US$16 million);
Underlying net profit 1H18 is adjusted for the same items, 1H17 was
adjusted by US$11 million related to the unwinding effect on the
net present value of future payments (instalments and bonus
reductions) related to the Leniency Agreement, in financing
cost.
[2] Directional view, presented under IFRS8 Segment reporting,
represents a pro-forma accounting policy, which assumes all lease
contracts are classified as operating leases and all vessel
investees are proportionally consolidated. This explanatory note
relates to all Directional in this document.
[3] As previously announced,1H17 Directional earnings restated
to reflect updated Directional tax computation methodology.
[4] Net debt as of June 30, 2018 includes a lease liability
recognized for US$202 million following the early adoption of IFRS
16. For comparison purposes, an amount of US$218 million related to
IFRS 16 was added to the net debt position as of December 2017.
[5] CGU (Ministério da Transparência e Controladoria-Geral da
União), AGU (Advocacia Geral da União).
[6] Normally the backlog would not yet reflect the agreed FPSO
Liza 1 operating and maintenance scope, which is pending a final
work order. However, for the purpose of the pro-forma backlog
represented in the backlog table, the FPSO Liza 1 operating and
maintenance scope has been taken into account.
[7] MPF (Ministério Público Federal).
- SBM OFFSHORE 2018 HALF-YEAR EARNINGS.pdf
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