Monday 19 November 2018

Financial Highlights

Year-to-date, the Company generated revenues of US$1,247 million, which is stable compared with the same period last year. Lease and Operate revenues of US$984 million represented a decrease of US$143 million, or 13% compared with the same period last year. This decrease is driven by the sale of FPSO Turritella, which left the fleet in January 2018. Turnkey revenues increased by US$135 million to a total of US$262 million, due to increased activity levels. Although the Liza Destiny project is under construction in Turnkey, under Directional accounting as a 100%-owned project, it will not contribute revenues or margin before completion: these will be booked instead during the Lease and Operating phase, in line with the operating cash flow generation.

Compared with year-end 2017, net debt decreased by US$0.6 billion to US$2.3 billion at the end of September. This is mainly driven by strong operating cash flow from Lease and Operate combined with the Turritella sale and final proceeds from the closure of the Yme insurance case. This positive cash flow more than offset interest payment and investments in the FPSO Liza Destiny and the first Fast4WardTM hull, which is currently under construction. The net debt ending balance includes a total of c. US$390 million cash received by the Company in 2017 and 2018 under its Yme insurance settlement, which was finalized during the quarter. After reimbursement of the significant claim related expenses and legal fees, the remaining amount of the insurance recoveries will be shared equally between SBM Offshore and Repsol (on behalf of the Yme license).

Regarding capital allocation, with the requisite liquidity in place to support anticipated growth, SBM Offshore’s policy remains to give priority to the dividend and overall consideration of shareholder returns.

Impairment Review

The following non-cash adjustments to the accounts are the result of SBM Offshore’s regular review, as part of its planning process.

Brazil is a key market for SBM Offshore, where a number of opportunities are being actively pursued. However, given the lead time for opportunities to mature in terms of construction activities, combined with the uncertainty regarding the evolution of local content regulations, SBM Offshore, together with its joint venture partner, has decided to take steps to further mothball the Brasa construction yard for at least the coming two years. This decision will necessitate the impairment of the investment in the Joint Venture owning yard (50% ownership) to a net book value of zero, resulting in an impairment charge of c. US$20 million.

Although the Company will continue to seek opportunities in the Floating Production Unit (FPU) market, the visibility of client activity in this segment remains subdued. As a result, goodwill related to the acquisition of Houston-based subsidiaries has been impaired in full, resulting in an impairment charge of c. US$25 million. The establishment of a global resource pool for engineering, announced in February, has facilitated the deployment of Houston-based resources towards other product lines, including FPSO.

These impairments impact the consolidated income statement below the level of EBITDA.

Project Review

FPSO Liza Destiny

Work on FPSO Liza Destiny is progressing in accordance with project schedule. The second (and last) dry-dock session was successfully completed and the vessel is now ready to receive its topside modules.

Turret Mooring System (TMS) Johan Castberg FPSO

Fabrication of the TMS for Equinor’s Johan Castberg FPSO is advancing and on schedule to meet the planned delivery date in early 2020.

Operational Update

The Lease and Operate fleet uptime performance year-to-date was 97.3%, compared to 97.0% at mid-year 2018. The uptime performance takes into account planned maintenance and life-time extension activities on FPSO Capixaba which have progressed well, in line with planning. When excluding the maintenance period for FPSO Capixaba, the fleet’s year-to-date uptime is 98.9%. The multi-year historical uptime remains constant at 99%.

Floating Wind

The classification society, ABS, has issued an Approval in Principle (AIP) to SBM Offshore for its proprietary wind floater design. The wind floater is a TLP concept and has been designed for the full life cycle, including in-place conditions, as well as wet tow with the wind turbine installed, and mooring hook-up phase. The AIP demonstrates the successful design of the floater, compliant with ABS’ design standards.