February 14, 2019
Highlights
- 2018 Guidance delivered: Directional1 revenue US$1,703 million; Underlying2 Directional EBITDA US$784
million
- 2018 Directional EBITDA of US$995 million (including non-recurring items)
- Underlying 2018 Directional Profit attributable to shareholders increased 41% to US$113 million
- Dividend increase of c. 50% to US$75 million proposed (equivalent to US$0.37 per share3)
- Launch of EUR175 million (c. US$200 million) share repurchase program
- Increased confidence in market underlined by third Fast4WardTM hull to be ordered 1Q19
- Innovative US$1 billion Revolving Credit Facility refinancing brings flexibility for anticipated growth
- Legacy issues closed out
- 2019 Directional revenue guidance of around US$2.0 billion; Directional EBITDA guidance of around US$750 million
Bruno Chabas, CEO of SBM Offshore, commented:
"2018 marked an important turning point for SBM Offshore on several fronts. We closed
out our legacy issues and with growth returning to the market, we are now seeing the results of our efforts to
transform our offering and ways of working. Our Fast4WardTM concept is being
recognized by our clients. The planned order of a third Fast4WardTM hull reflects our confidence in
the market recovery and our business model.
With the outlook for demand increasing, the level of opportunity and potential that we see for our solutions
looks promising. We are stepping up our efforts to leverage our experience to enhance the sustainability of our current products
for the oil market, with an ambitious target to lower the level of CO2 emissions per barrel produced. As the energy
transition gains further momentum, we are committed to develop products and services for the gas and renewables markets.
We are significantly increasing shareholder returns, underpinned by the continued track record of
delivery from both business segments, Turnkey and Lease and Operate, as evidenced by the results published
today. The combination of the proposed c. 50% increase in the dividend and the
EUR175 million share repurchase is currently equivalent to an 8% return or c. US$1.34 per share for shareholders."
Overview
Directional revenue increased 2% year-on-year to US$1,703 million, benefiting from an increase in Turnkey
activity, which more than offset a decrease in Lease and Operate caused by FPSO Turritella leaving the fleet and planned
maintenance.
Reported 2018 Directional EBITDA totaled c. US$1 billion. Underlying 2018 Directional EBITDA at US$784 million
was nearly constant year-on-year and in line with Company's guidance. Items restated in Underlying EBITDA can be found in the table
above.
Lease and Operate EBITDA decreased by 14% mostly due to FPSO Turritella leaving the fleet. Turnkey 2018
Underlying EBITDA increased to above break even on the back of increased activity levels, realized savings in overhead and IFRS16
implementation (c. US$30 million). These Turnkey results and the overall guidance were achieved despite the decision not to pursue
a partnership on Liza Destiny and so retain full ownership. This has deferred to the operating phase the revenue and margin which
would otherwise have been realized in 2018 from the previously planned 50% divestment. By retaining full ownership, SBM Offshore
will generate a significantly higher aggregate cash flow and profit over time.
Underlying 2018 Directional profit attributable to shareholders increased by 41% year-on-year to a total of
US$113 million.
Funding and Directional Net Debt
At year-end 2018 the Company had undrawn credit facilities of US$1,720 million comprising the Company's US$1
billion Revolving Credit Facility and the Liza Destiny loan7 for US$720 million.
Directional net debt decreased by US$0.5 billion at year-end 2018, to a total of US$2.4 billion. Both net debt
as at year-end 2017 as well as year-end 2018 include the effect of IFRS16 (c. US$0.2 billion). The reduction was achieved despite
significant investment for growth (mainly in FPSO Liza Destiny and the two Fast4WardTM hulls) and was largely due
to the strong operating cash flow from the Lease and Operate segment. The net proceeds from the Yme insurance claim and the FPSO
Turritella disposal offset to a large extent the payment of the non-recurring penalties as a result of the Leniency
Agreement.
Excluding the lease liability recognized under IFRS16, all the Company's debt consists of non-recourse project
financing in special purpose investees.
Directional Backlog
SBM Offshore provides an overview of pro-forma Directional backlog8. The pro-forma Directional
backlog as of December 31, 2018 decreased by c. US$2 billion to a total of US$14.8 billion. This decrease was caused in part by
US$1.7 billion of turnover during the year but also takes into account the expected early purchase of FPSO Liza Destiny
after a period of two years of operations, instead of the contractual ten year lease, which leads to a further decrease in the
backlog of c. US$0.7 billion. This overall decrease in backlog was partly offset by US$0.4 billion of order intake in Turnkey
during the year.
Project Review
Fast4WardTM
SBM Offshore's first standard, multi-purpose hull is progressing well and according to schedule. In November
2018, the Company announced the second hull for which progress is in line with expectations. Due to anticipated demand, the Company
has progressed negotiations to start work on its third standard, multi-purpose hull. These negotiations are expected to be closed
in the first quarter of 2019.
FPSO Liza Destiny
The major project FPSO Liza Destiny is making good progress according to schedule. The last modules were
lifted on board and commissioning activities are currently taking place. Sail-away is planned for summer 2019 so that the vessel
can be installed offshore Guyana later in the year. In Guyana, work is underway with respect to operations readiness, setting up
the shore base and delivering on our local content commitments.
Castberg Turret Mooring System
With engineering now nearly completed, the fabrication of the complex turret mooring system for the FPSO
Johan Castberg is well advanced in Dubai and remains on track to meet client schedule with delivery early in 2020.
Operational Update
The total historical Lease and Operate fleet uptime performance remains 99%. In 2018, a fleet uptime of 98% was
achieved, integrating the planned maintenance and life-time extension campaign on FPSO Capixaba.
FSO N'Kossa received a short term lease extension before it was sold at the end of 2018.
Organizing for Growth
In early 2018, the Turnkey related organization was restructured bringing the staffing of projects and
functional support across the globe under centralized management. This has facilitated further efficiency and productivity by
allowing more effective leverage of the Company's overall experience and resource base. Given the positive market outlook backed by
ongoing project and engineering study work, the Company is implementing a new resourcing model to ensure it will be able to
appropriately service increased anticipated demand. The model is managed through a stage gate process linked to contracts from
clients. While it involves the recruitment of new SBM Offshore engineering staff, the model utilizes a much higher degree of
subcontracting of partner companies and individuals compared to the past. This will afford a greater degree of flexibility to ramp
up or down depending on market conditions.
As part of this model to support growth, the Company is establishing a High Value Engineering Centre in
Bangalore, India, with its long-term existing partner Nauvata. The primary purpose of the partnership will be to provide quality
detailed design services for SBM Offshore projects. As India has become a global source for innovation and economics, establishing
presence there is a logical strategic move. The Engineering Centre will start with a light structure which will however allow for
rapid growth to meet the expected workload increase to come.
HSSE and Sustainability
SBM Offshore's safety performance continued to be strong during 2018. The Total Recordable Injury Frequency Rate
(TRIFR) of 0.18 showed a similar performance compared with the Company's best ever TRIFR performance of 0.19 achieved in 2017. The
fact that safety can never be taken for granted was underscored by a tragic event in October 2018 in which one of our contractors
was fatally injured in an incident at a construction yard.
In 2018, steps were taken to further strengthen the culture and practice of Process Safety Management with the
launch of the Process Safety Fundamentals: these aim to increase awareness among all employees to perform their work in a way that
is as safe as possible.
Over the past few years the Company introduced initiatives to reduce its global CO2 footprint,
including the CO2 Challenge. These initiatives have assisted the Company in reducing the fleet's greenhouse gas
emissions per unit of production by almost 40% over the past three years.
Building on this and other initiatives, SBM Offshore is further embedding sustainability into its business by
developing for 2019 quantified targets for three Sustainable Development Goals (out of the seven selected for implementation of
its sustainability strategy). SBM Offshore's overall performance on environmental and social criteria was recognized once
again: for 2018, the Company was included in the Dow Jones Sustainability Europe Index in the category OIE Energy Equipment &
Services and improved its CDP (formerly Carbon Disclosure Project) score to B. Moreover, SBM Offshore is committed to respecting
internationally-recognized human rights, and became a member of 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.
Legacy Related
Following the Fifth Chamber approval of the Agreement with the Brazilian Federal Prosecutor's Office (Ministério
Público Federal - "MPF") as disclosed on December 18, 2018, the MPF has made a court filing to terminate the improbity lawsuit
including the associated provisional measure to secure payment of potential damages. The MPF initiated the improbity lawsuit in
2017. Upon closure of the lawsuit, the Agreement with the MPF will become fully effective, after which SBM Offshore will pay the
earlier announced fine of BRL200 million.
In accordance with the terms of the Leniency Agreement signed between SBM Offshore, CGU, AGU and Petrobras on
July 26, 2018, effective from that date, the Company received confirmation that the Administrative Proceeding before the CGU
against SBM Offshore was terminated.
The Company is close to finalizing an agreement with Repsol with respect to the sharing of proceeds and costs
related to the Yme insurance case handled by the Company. SBM Offshore has provisioned for a total cost of c. US$185 million,
covering payment to Repsol and other insurance related expenses, payable after signing of an agreement. Total recovery by the
Company is expected to end at c. US$200 million overall, which includes compensation for legal expenses paid by the Company during
the years of the complex litigation.
First Sustainable Revolving Credit Facility in the Oil and Gas Services industry
SBM Offshore signed a new five year sustainable Revolving Credit Facility (RCF) agreement on February 13, 2019.
The US$1 billion amount of the facility and its competitive pricing are aligned with the previous facility. The key change is that
the potentially growth-restrictive leverage covenant of the former RCF has been replaced by a Lease Backlog Cover Ratio (LBCR). The
LBCR links availability of the RCF to the future contracted cash flows of a defined portfolio of operational FPSOs in the Company's
backlog. As at signing, the LBCR would allow for corporate borrowing significantly in excess of US$1.5 billion. The facility
includes an uncommitted option to increase borrowing by US$0.5 billion and pricing can increase or decrease by 0.05% based on the
absolute change in the Company's performance with respect to sustainability as measured by an independent specialist.
Capital Allocation and Shareholder Returns
In line with the Company's dividend policy and further taking into account the specific circumstances relating
to 2018 including the nature of the non-recurring items, the Company proposes a dividend of US$75 million, or c. US$0.37 per share
in respect of 2018, to the AGM on April 10, 2019. This dividend per share calculation is based on number of shares as at December
31, 2018 before taking account of the 2019 share repurchase program, as announced today in a separate press release. The proposed
dividend represents a c. 50% increase per share compared to last year and represents a pay-out of circa 25% of the Directional 2018
net result. The proposed ex-dividend date is April 12, 2019. The dividend is payable within 30 days following the AGM and will be
calculated in US dollars but payable in euros. The conversion into euros will be effected on the basis of the exchange rate on
April 10, 2019. Given the Company's cash position, the dividend will be fully paid in cash.
The Company reviews its dividend policy on a regular basis. The Company plans to simplify the policy by focusing
purely on cash flow and removing the additional reference to Directional net income in the policy. This results in the new policy
as follows: "The Company's 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". The proposed change to the dividend policy will be
presented for discussion at the AGM on April 10, 2019.
Having reviewed the current liquidity position and the resulting cash flow outlook, the Company has determined
that it currently has the capacity to fund growth and repurchase shares for an amount of EUR175 million (c. US$200 million).
For further details, reference is made to the separate press release on the matter on February 14, 2019.
Outlook and Guidance
Management confirms its continued positive outlook for the Company. The recovery may not be industry-wide,
however the recovery is visible within the area of large-size FPSOs with expected multiple awards for the coming years.
SBM Offshore, as an industry leader with its game changing Fast4WardTM program, is well positioned to be one of the key
players to benefit from the upturn in the market.
The Company's 2019 Directional revenue guidance is around US$2.0 billion, of which US$1.3 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$750 million for the Group.
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, February 14, 2019.
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://channel.royalcast.com/webcast/sbmoffshoreinvestors/20190214_1/
Financial Calendar |
Date |
Year |
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 |
Full year 2019 Full Year Earnings |
February 13 |
2020 |
Annual General Meeting of Shareholders |
April 8 |
2020 |
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, 2018, Group companies employ approximately 4,350 people worldwide, including circa 650
contractors, which are spread over offices in key markets, operational shore bases and the offshore fleet of vessels. Group
Companies employ a further 400 people, 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 Board
Amsterdam, the Netherlands, February 14, 2019
For further information, please contact:
Investor Relations
Bert-Jaap Dijkstra
Director Corporate Finance and IR
Media Relations
Vincent Kempkes
Group Communications Director
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 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.
2 Underlying 2018 EBITDA excludes one off effects in 2018 and 2017 to enable comparison of like-for-like underlying performance.
For explanation of the various items that were adjusted, see the table in section "Overview".
3 Dividend per share takes into account the proposed dividend (US$75 million) and the number of shares as of December 31, 2018
(204.7 million) - whereas the final dividend per share will be dependent on progress of the announced share repurchase program.
4 2017 IFRS results were restated to separately present 'net impairment losses on financial and contract assets' in the Income
Statement following the adoption of IFRS9; with no material impact.
5 An overview of non-recurring items which have an impact on financial performance underneath the EBITDA level can be found in
the FY 2018 Financial Statements and webcast presentation.
6 Net debt has been presented to include the impact of IFRS16 under Directional and IFRS as at year-end 2017 and 2018.
7 Loan availability subject to fulfilling of certain conditions precedent, including various documentation
requirements.
8 The pro-forma backlog includes the FPSO Liza Destiny operating and maintenance scope, which is pending a final work
order. It also assumes that FPSO Liza Destiny will be purchased by the client after a period of two years of operation,
which is under discussion as previously announced. This purchase is reflected in the Turnkey backlog whereas the first two years of
operation are included in the Lease and Operate backlog.