SBM Offshore 2019 Full Year Earnings
Guidance delivered, doubling dividend, share repurchase
and backlog up 40%
February 13, 2020
Highlights
- 2019 guidance delivered: Directional1 revenue US$2,171 million;
reported Directional EBITDA US$921 million
- Underlying2 Directional EBITDA US$832 million
- US$6 billion net increase of pro-forma backlog3 to US$21
billion
- 100% increase in dividend to US$150 million
- Launch of EUR150 million (c. US$165 million) share
repurchase
- Market outlook positive, underscored by five hulls in the
Fast4Ward® program
- ‘Ambition 2030’: 25% of SBM Offshore’s revenues from Gas and
Renewables by 2030
- eMission Zero FPSO concept initiated aiming at net zero carbon
emissions
- 2020 Directional revenue guidance of above US$2.3 billion;
Directional EBITDA guidance of around US$900 million, an increase
of c. 8% compared with 2019
SBM Offshore’s 2019 Annual Report can be found
on its website under:
https://2019.annualreport.sbmoffshore.com/
Bruno Chabas, CEO of SBM Offshore,
commented: “2019
was marked by strong financial performance, excellent project and
operational execution and commercial success. We delivered
financials in line with recently increased guidance. FPSO Liza
Destiny reached first oil for our client ExxonMobil in Guyana
within 30 months, demonstrating our capabilities and
industry-leading experience. The investment by our major clients
translated into contracts for FPSO Liza Unity in Guyana and FPSO
Sepetiba in Brazil. We are maintaining our selective approach
towards market opportunities and the associated discipline in
project execution: these are key to perform projects in line with
commitments and to secure long-term value for all our
stakeholders.
The Company has decided to significantly
increase its returns to shareholders on the basis of our sustained
operating performance, efficient financing model and increased
backlog from recent awards. The proposed 100% increase in dividend
will yield a return of more than 4%, based on the closing share
price of EUR16.30 at February 12, 2020. This builds on our dividend
track record, now spanning five years. Our dividend has grown by
almost 40% year-on-year since 2016 on a per share basis. The
Company has today started a new share repurchase program, which
will, following the EUR175 million (c. US$200 million) share
repurchase program of 2019, further increase the per share return
in 2020.
We remain focused on the challenging task of
significantly reducing the carbon footprint of our fleet and are
developing innovative solutions for the energy future. These are
the basis of SBM Offshore’s ‘Ambition 2030’: 25% of total revenues
to come from Gas and Renewables. Through ‘Ambition 2030’, SBM
Offshore positions itself for a future where the oceans can provide
safe, sustainable and affordable energy for generations to
come.”
Financial Overview
|
|
Directional |
|
IFRS |
|
|
|
|
|
|
|
|
|
in US$ million |
|
FY 2019 |
FY 2018 |
% Change |
|
FY 2019 |
FY 2018 |
% Change |
Revenue |
|
2,171 |
1,703 |
27% |
|
3,391 |
2,240 |
51% |
Lease and Operate |
|
1,315 |
1,298 |
1% |
|
1,327 |
1,302 |
2% |
Turnkey |
|
856 |
406 |
111% |
|
2,064 |
938 |
120% |
EBITDA |
|
921 |
995 |
-7% |
|
1,010 |
838 |
21% |
Lease and Operate |
|
842 |
824 |
2% |
|
783 |
761 |
3% |
Turnkey |
|
53 |
278 |
-81% |
|
290 |
184 |
58% |
Other |
|
26 |
(107) |
124% |
|
(63) |
(107) |
41% |
Underlying EBITDA |
|
832 |
784 |
6% |
|
1,010 |
844 |
20% |
Lease and Operate |
|
842 |
824 |
2% |
|
783 |
761 |
3% |
Turnkey |
|
53 |
24 |
121% |
|
290 |
147 |
97% |
Other |
|
(63) |
(64) |
2% |
|
(63) |
(64) |
2% |
Profit attributable to Shareholders |
|
235 |
301 |
-22% |
|
366 |
212 |
73% |
Underlying Profit attributable to Shareholders |
|
171 |
113 |
51% |
|
391 |
247 |
58% |
Earnings per share [US$ per share] |
|
1.18 |
1.47 |
-20% |
|
1.84 |
1.04 |
77% |
Underlying earnings per share [US$ per share] |
|
0.86 |
0.56 |
54% |
|
1.97 |
1.21 |
63% |
|
|
|
|
|
|
|
|
|
in US$ million |
|
FY 2019 |
FY 2018 |
|
|
FY 2019 |
FY 2018 |
|
Non-recurring items impacting EBITDA |
|
90 |
211 |
|
|
- |
(6) |
|
Transaction Constellation (QGOG) |
|
90 |
- |
|
|
- |
- |
|
Turritella gain on disposal |
|
- |
217 |
|
|
- |
- |
|
Yme insurance claim |
|
- |
37 |
|
|
- |
37 |
|
Brazilian prosecutor settlement |
|
- |
(43) |
|
|
- |
(43) |
|
|
|
|
|
|
|
|
|
|
in US$ billion |
|
FY 2019 |
FY 2018 |
% Change |
|
FY 2019 |
FY 2018 |
% Change |
Pro-Forma Backlog |
|
20.7 |
14.8 |
40% |
|
- |
- |
- |
Net Debt |
|
3.5 |
2.4 |
46% |
|
4.4 |
3.8 |
16% |
Directional revenue for full year 2019 totaled
US$2,171 million, a year-on-year increase of 27%. This increase was
mainly driven by Turnkey, more than doubling its revenue over the
period to US$856 million. Lease and Operate revenues totaled US$1.3
billion; stable compared with the year before. Total Directional
Underlying EBITDA was US$832 million, an increase of 6% compared
with the year before. This increase is the result of better
performance in both the Lease and Operate and the Turnkey segments.
2019 Underlying net profit increased by more than 50%, from US$113
million in 2018 to US$171 million.
Reported 2019 EBITDA is US$921 million, the
result of a net additional US$90 million gain relating to the
acquisition of a partner’s minority share in five Brazilian FPSOs
of which SBM Offshore was already the majority shareholder and
operator. This reflects the value accretion generated from the
deal. Currently discussions are progressing with project partners
on the anticipated pro-rata divestment of 7% equity ownership in
one of the FPSO owning entities, for a total consideration of c.
US$28 million. This divestment is pending various approvals.
The sale of a 35.5% interest in the FPSO
Sepetiba project did not lead to any contribution to Turnkey EBITDA
in 2019, because the project had not yet passed our internal
technical threshold allowing recognition of margin (which occurs
generally after projects reach 25% progress) during the year. Under
Directional, the significant activity in Turnkey related to FPSO
Liza Destiny, as well as FPSO Liza Unity, is not reflected in
EBITDA for the period as these are treated as operating leases and
hence are booked in capital expenditure on the balance sheet. These
projects will generate revenues, margin and operating cash flow in
Lease and Operate starting at first oil, which FPSO Liza Destiny
reached in 2019 near year end. The gain on the sale to the client,
which is anticipated after a period of up to two years of
operations on both vessels, will be booked in Turnkey.
Funding and Directional Net Debt
As at the end of 2019, the Company’s US$1
billion Revolving Credit Facility (RCF) remained undrawn. On
February 5, 2020, SBM Offshore obtained lenders’ consent for a 1
year extension of the RCF, bringing the maturity to February 13,
2025.
The RCF carries a sustainability performance
component in its pricing mechanism based on the Company’s relative
score on sustainability metrics compared with December 2018,
measured by Sustainalytics, an independent third party expert. SBM
Offshore has improved its score resulting in a five basis points
discount calculated on the facility’s interest rate. In the
Sustainalytics results, SBM Offshore ranks first among peers
(similar market capitalization) and shares fifth place in the oil
and gas services industry.
Remaining undrawn construction finance
facilities total c. US$1 billion, from remaining debt capacity
under the Liza Destiny and Liza Unity project facilities. Total
undrawn facilities and cash totaled US$2.4 billion as at the end of
2019. As a direct result of investment in growth, Directional net
debt increased from US$2.4 to US$3.5 billion over the full year
period. This includes capital expenditures associated with the FPSO
projects Liza Destiny, Liza Unity and Sepetiba, the expenditure on
the not yet allocated Fast4Ward® hulls and the acquisition of the
minority partner’s ownership in the five Brazilian FPSOs. A
construction finance facility becomes non-recourse, when SBM
Offshore’s bank guarantee is relinquished, generally following the
acceptance by a customer of a vessel for production.
Directional Backlog
SBM Offshore provides a pro-forma Directional
backlog. The pro-forma Directional backlog as of December 31, 2019
increased by c. US$6 billion over the period to a total of US$20.7
billion. This increase was mainly driven by the addition of FPSOs
Liza Unity and Sepetiba and the acquisition of the minority
ownership in the five Brazilian FPSOs. Turnover for the period
consumed US$2.2 billion of backlog.
The pro-forma backlog reflects the following key
assumptions:
- The Lease and Operate backlog
includes the FPSO Liza Unity operating and maintenance scope, which
is pending a final work order.
- For both FPSO Liza Destiny and FPSO
Liza Unity, two years of operations are added to the Lease and
Operate backlog. The Liza Destiny contract covers 10 years of Lease
and Operate, but based on discussion with the client, it is
expected that the client will purchase the unit after a period of
up to two years of operations. The Liza Unity contract covers a
maximum lease and operate period of two years within which the unit
will be purchased by the client. The subsequent sales are added to
the Turnkey backlog for both FPSOs.
- With respect to the FPSO Prosperity
project in Guyana, for which the contract award is subject to
necessary government approvals and a final work order to be
received from the client, the amount included in the pro-forma
backlog is limited to the value of the initial limited release of
funds to the Company to begin FEED activities and secure a
Fast4Ward® hull.
- With respect to the acquisition of
the minority stakes in five Brazilian FPSOs, the Company included
the acquired backlog, with the exception of 7% ownership in one
FPSO for which two partners have expressed interest in purchasing
their pro-rata share.
(in billion US$) |
Turnkey |
Lease & Operate |
Total |
|
|
|
|
2020 |
0.6 |
1.6 |
2.2 |
2021 |
1.2 |
1.5 |
2.7 |
2022 |
0.2 |
1.2 |
1.4 |
Beyond 2022 |
1.3 |
13.1 |
14.4 |
|
|
|
|
Total Backlog |
3.2 |
17.4 |
20.7 |
|
|
|
|
Project Review
Project |
Client/country |
Contract |
SBM Share |
Capacity, Size |
POC* |
Expected Delivery |
Notes |
Castberg, Turret |
Equinor Norway |
Turnkey sale |
100% |
c. 190,000 bpd |
> 75% |
2020 |
On schedule. Second module delivered to client. |
Liza Unity, FPSO |
ExxonMobil Guyana |
2 year Build, Operate, Transfer |
100% |
220,000 bpd |
>50% <75% |
2022 |
Multipurpose hull arrived at the yard in Singapore, ready for
topsides integration |
Sepetiba, FPSO |
Petrobras Brazil |
22.5 year lease & operate |
64.5% |
180,000 bpd |
< 25% |
2022 |
Mulitpurpose hull under construction at yard in China |
Note: in cases of a consortium, client refers to the operator.
*percentage of completion
Of the Company’s standard multipurpose hulls,
one was delivered at the end of 2019 (for the Liza Unity project)
and four are under construction. Two have been allocated to
projects: FPSO Sepetiba and FPSO Prosperity, a project which
remains subject to government approvals, project sanction and an
authorization to proceed with the next phase.
FPSO Liza Destiny reached first oil in December
2019, within 30 months after final investment decision.
The FPSO Liza Unity project is progressing as
per schedule. SBM Offshore’s first Fast4Ward® multipurpose hull was
successfully delivered from China and has safely arrived in
Singapore allowing the commencement of topsides integration
work.
The FPSO Sepetiba project is ramping up in our
Kuala Lumpur office, with its multipurpose hull under construction
at a yard in China.
Fabrication of the complex turret mooring system
for FPSO Johan Castberg continues to progress well. The second
module was delivered to the client. The last two modules are on
track for delivery in 2020.
Operational Update
The 2019 fleet uptime was 99.4%. The total historical Lease and
Operate fleet uptime performance remains 99%.
Health and Safety
The Company regrets to report that a contracted
diver was fatally injured during installation activities of a
pipeline section replacement offshore Angola in December 2019. SBM
Offshore will continue to raise awareness and implement
improvements in its safety management systems.
SBM Offshore’s 2019 Total Recordable Injury
Frequency Rate (TRIFR) totaled 0.13, which is lower than 0.18 for
the year 2018.
SBM Offshore is a global company, with operations and staff in
multiple countries including China. With respect to the current
coronavirus outbreak, SBM Offshore has put in place travel
restrictions and implemented measures at the various locations in
China following medical advice and directions from authorities. The
Company continues to monitor developments.
Sustainability
Sustainability is a key topic for SBM Offshore;
it contributes to the Company's vision to provide safe, sustainable
and affordable energy for generations to come. As such, the Company
is committed to contribute to the energy transition. SBM Offshore
uses the United Nations' Sustainable Development Goals (SDG)
framework to embed sustainability in the Company’s strategy.
SBM Offshore's ambition is to integrate
sustainability in every phase of the lifecycle of our projects;
from new technological development to the recycling phase. Examples
are the eMission Zero concept (net zero emission FPSO) as part of
the roadmap under SDG 9 (Life Below Water) and commitment to the
development of the Wave Energy Converter to provide clean energy,
under SDG 7 (Affordable and Clean Energy). SBM Offshore has
committed funds to develop the first prototype Wave Energy
Converter to be deployed offshore Monaco for testing. The Company
continues to develop its floating wind product, using its extensive
experience in mooring technology. The project, currently in
engineering and design phase, is continuing in line with client
schedule.
In 2019, the Company set quantitative, specific
business targets for three SDGs. Of the seven targets set, four
have been met or achieved: energy purchased from green providers,
qualified vendors having signed the Supply Chain Charter, Total
Recordable Injury Frequency Rate, and the offices with a recycling
program. Under SDG 8 (Decent Work and Economic Growth), SBM
Offshore joined Building Responsibly: a group of leading
engineering and construction companies working together to raise
the bar in promoting the rights and welfare of workers across the
industry. As part of this initiative, SBM Offshore updated the
Company Supply Chain Charter to include the Worker Welfare
Principles from Building Responsibly, and contributed to the
development of the Worker Welfare Principles Guidance Notes.
The target on oil spills for 2019 was zero, the
ultimate goal. Over 2019, the Company reported total spills of
0.0391 m3, or just below 40 liters.
In order to reduce emissions, an ambitious
target regarding flaring on SBM Offshore account was set at 20%
reduction. This targeted reduction was not achieved, mainly due to
interrupted gas compression on one FPSO, which led to flaring to
continue safe operations on board. On another FPSO, gas flared on
SBM Offshore account increased due to reduced reliability of
seawater lift pumps at the beginning of the year and process
instability following modifications. SBM Offshore has taken action
to improve performance of these and other systems which led to
improved performance thereafter.
Although the ambitious target to reduce offshore
plastic waste by 40% has not been met, the Company did achieve a
significant reduction of 22%.
SBM Offshore aims to continue building on the
framework of selected SDGs. For 2020, the Company has set new
targets for the three previously selected SDGs and is expanding its
efforts by setting targets for three additional SDGs. From 2019
target setting, lessons learned have been implemented to continue
setting ambitious, but also realistic goals, especially on existing
production systems where significant improvements have been made in
the past and further incremental optimization is limited.
Ambition 2030: 25% of revenues to come from Gas and
Renewables
SBM Offshore's ambition towards 2030 is to grow
and create long-term value for its stakeholders. Targets and
indicators have been set in three main areas: secure and grow free
annual cash flow, ensure a steady flow of new awards within our
core business (2+ FPSOs per year) and position the Company in the
Gas and Renewables market by aiming for 25% of the Company's
revenues to come from Gas and Renewables by 2030. The expected
increase in energy demand due to the increasing world population
and the changing energy mix provide the Company various
opportunities to expand its business in the field of sustainable
energy. SBM Offshore’s Gas and Renewables product portfolio, based
on its extensive experience in floating structures and process
technology, places the Company in a good position to meet this
ambition, and includes in particular its floating wind and wave
technologies.
Capital Allocation and Shareholder Returns
The Company’s dividend policy is to maintain a
stable dividend, which grows over time. Determination of the
dividend is based on the Company’s assessment of its underlying
cash flow position. As part of the Company’s regular planning
process, following review of its cash flow position and forecast,
the Company has concluded that the outlook for cash flow generation
has improved given the increase in the quantum of the Lease and
Operate backlog and its duration. Based on this, a dividend of
US$150 million (which equals c. US$0.76 per share, based on the
number of shares outstanding at December 31, 2019), to be paid out
of retained earnings, will be proposed at the Annual General
Meeting on April 8, 2020. This represents an increase of c. 100%
compared to the dividend paid in 2019.
The Company has invested equity in projects,
which are under construction or recently completed. Most of this
equity investment will be returned to the Company following
drawdown of non-recourse project finance facilities in the near
future. After having reviewed the current liquidity position
including the return of this investment, taking account of future
growth requirements and the resulting cash flow outlook, the
Company has determined that it currently has the capacity to
repurchase shares. Consequently, on February 13, 2020 the Company
will commence a EUR150 million (c. US$165 million) share repurchase
program.
Outlook and Guidance
The outlook for the market segment in which SBM
Offshore operates continues to improve in line with expectation:
the demand for complex, large capacity FPSOs remains strong. Major
offshore developments which are sanctioned are characterized by
attractive economics and low break-even oil prices, provided that
production systems are delivered reliably and on time. Projects
awarded in 2019 have significantly reduced available capacity in
the Company’s market segment. Therefore, SBM Offshore reiterates
the fact that it will remain selective regarding the market
opportunities it will focus on.
The Company’s 2020 Directional revenue guidance
is above US$2.3 billion, of which around US$1.6 billion is expected
from the cash generating Lease and Operate segment and around
US$700 million from the Turnkey segment. Directional EBITDA
guidance is around US$900 million for the Group.
Build-Operate-Transfer (BOT) projects which
remain 100% owned by SBM Offshore up to the point of sale do not
contribute to the Company’s net result before first oil. For
further explanation on SBM Offshore’s Directional accounting
principles see chapter 4.3.2 of the Company’s 2019 Annual
Report.
Conference Call
SBM Offshore has scheduled a conference call
together with a webcast, which will be followed by a Q&A
session, regarding the Company’s FY 2019 Earnings Update. The event
is scheduled for Thursday, February 13, 2020 at 10.00 am
(Amsterdam, The Netherlands). The event will be hosted by Mr. Bruno
Chabas (CEO), Mr. Douglas Wood (CFO), Mr. Philippe Barril (COO) and
Mr. Erik Lagendijk (CGCO).
Interested parties are invited to listen to the
call by dialing +31 20 709 5189 in the Netherlands, +44 33 3300
0804 in the UK or +1 631 913 1422 in the US, using access code
68895852#.
The live webcast will be available at:
https://channel.royalcast.com/webcast/sbmoffshoreinvestors/20200213_1/
A replay of the webcast, which will be available
shortly after the call, can be accessed using the same link.
Corporate Profile
The Company’s main activities are the design,
supply, installation, operation and the life extension of floating
production solutions for the offshore energy industry over the full
lifecycle. The Company is market leading in leased floating
production systems, with multiple units currently in operation.
As of December 31, 2019, the Company employs
approximately 4,450 people worldwide spread over offices in our key
markets, operational shore bases and the offshore fleet of
vessels.
SBM Offshore N.V. is a listed holding company
headquartered in Amsterdam, the Netherlands. It holds direct and
indirect interests in other companies.
Where references are made to SBM Offshore N.V.
and /or its subsidiaries in general, or where no useful purpose is
served by identifying the particular company or companies “SBM
Offshore” or “the Company” are sometimes used for convenience.
For further information, please visit our
website at www.sbmoffshore.com.
The Management BoardAmsterdam, the Netherlands,
February 13, 2020
Financial Calendar |
Date |
Year |
Annual General Meeting of Shareholders |
April 8 |
2020 |
Trading Update 1Q 2020 – Press Release |
May 14 |
2020 |
Half Year 2020 Earnings – Press Release |
August 6 |
2020 |
Trading Update 3Q 2020 – Press Release |
November 12 |
2020 |
Full Year 2020 Earnings – Press Release |
February 11 |
2021 |
For further information, please contact:
Investor RelationsBert-Jaap
DijkstraGroup Treasurer 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 RelationsVincent
KempkesGroup Communications Director
Telephone: |
+31 (0) 20 236 3170 |
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 Directional view, presented in the Financial Statements
under Operating segments and Directional 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 reporting in this document.
2 Underlying 2019 EBITDA excludes one off effects in 2019 and
2018 to enable comparison of like-for-like underlying performance.
For explanation of the various items that were adjusted, see the
table in section “Financial Overview” below.
3 The Company provides a pro-forma backlog which
includes various assumptions, see section on Directional backlog
for more information.
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