Pareto Securities Oil & Offshore Conference

Transcription

1 Pareto Securities Oil & Offshore Conference Oslo, September 2, Aker Solutions Slide 1 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 Good morning. It is a pleasure to be here today and meet you, industry partners and colleagues from around the world. We are in historic times for our industry. Crude prices are seeing 6-year lows, exacerbating capital constraints that are having a significant impact. Many are now seeking to combine and many are being forced to part with valuable colleagues. There are tough choices to be made and at Aker Solutions we have made many, but we also see that there are many opportunities to capture for us and the industry as a whole. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 1

2 Leaner and More Focused Subsea Field Design 2015 Aker Solutions Slide 2 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 The split of our company a year ago was one such opportunity. We simplified our structure, moving from nine business areas to two reporting segments, to build on our strengths in the global subsea and field design markets. This has enabled us to reduce complexity, realize synergies and bring down costs - and we will continue to work tirelessly to boost operational and financial performance. Our narrower focus has put us in a much better position to respond to the needs of customers in the more than 20 countries where we operate. And we have expanded globally. Thanks to key subsea projects in Congo and Angola, Africa accounted for 37 percent of our order backlog at the end of the second quarter of this year compared with 30 percent for Norway. You could say the split was our big play last year to boost our business in key offshore oil and gas markets. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 2

3 Major Improvement Potential 15% through operational excellence and leaner processes 35% through standardization and predictable volumes 50% through new technology and innovation 2015 Aker Solutions Slide 3 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 Let me now, as I m sure many others will as well, address the cost issues in the industry. We see ourselves as a partner for our clients in the endeavor to bring down costs. We hope to lead the standardization that many crave. There is great improvement potential. Data we have compiled tells us we can achieve: 15 percent of the improvement through operational excellence and leaner processes 35 percent through standardization, industrialization and predictable volumes And 50 percent through new technology and innovation Each company has its own improvement initiatives and at Aker Solutions we work diligently every day to become more efficient and develop more effective technologies for our customers. Each effort counts but to truly make a difference and find the solutions that will make more fields viable, boost profitability and ensure a sustainable long-term future for our industry, we need a major change in how we look at fields and how we collaborate. We need an industrywide change in mindset. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 3

4 Creating Value at the Front End Project cost Ability to influence cost Time Front end FEED E P C I C Operation Current market fuels interest in feasibility, concept studies Early involvement to boost overall economics, value of field developments Front-end spectrum team uses expertise across Subsea, Engineering and MMO 2015 Aker Solutions Slide 4 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 For us, this means taking a holistic approach to a field s development and finding ways to boost value at every stage from design to construction to maintenance and upgrades. It means getting involved early, at the appraisal and feasibility stages, so that we can evaluate the total development not just parts. This is where we see the greatest potential to improve the overall economics and value of a field, or in other words, to lower the break-even cost. Some examples: We were involved in early concept studies at the Johan Sverdrup, Edward Grieg, Eldfisk, White Rose and Hibernia offshore developments. Our efforts and close cooperation with our customers were instrumental in finding costeffective solutions for these fields. In some instances we lowered the estimated capital expenditure by as much as 30 percent. In other cases we shaved between 6 and 12 months off the planned development time. And in one specific example we reduced the topside weight by about 8,000 tons. In itself this was a good cost saving, but it was also absolutely necessary for the development to survive. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 4

5 We achieved these savings because we could tap into our technical experience from the full spectrum of field development and our life-cycle knowledge. We have front end teams in Houston, Oslo, Perth, Kuala Lumpur and London and they are seeing growing interest from customers seeking more effective solutions in the current market environment. To give you a flavor, we ve won several strategically important studies so far this year. These include: Studies for six customers in Norway, including three focused on the Barents Sea The early design work for the next phases of the Johan Sverdrup field in Norway Part of a deepwater field development study in Malaysia Several studies for a compression platform offshore Australia And several umbilicals and risers studies for clients operating in the Gulf of Mexico To build on this growing interest and strengthen our offering, we formed an early-phase cooperation with Baker Hughes in June. The cooperation will provide field concept studies that address the entire value chain from reservoir understanding and well design to subsea and topside facilities, including flow assurance and risk management. The first customer studies are already underway. We also last week appointed Svenn Ivar Fure to lead our global Front End efforts. As many of you know, Svenn Ivar also heads our side of the Subsea Production Alliance that we formed last year with Baker Hughes. I m certain that his close working relationship with Baker and strong track record in business development will be of major value as we pursue new opportunities in the growing front end space. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 5

6 Creating Value Through New Technology Delivering the world s first full-scale subsea gas compression facility 2015 Aker Solutions Slide 5 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 All of these efforts rest on our ability to provide new technologies and new solutions or innovation if you will. We are now delivering the world s first full-scale subsea gas compression facility. Moving compressors to the seabed will reduce costs and raise recovery rates. But innovation by itself is pretty pointless if it doesn t take into account the world as it is the current market environment. We have therefore shifted our research and develop ment efforts from filling product gaps to addressing the current challenges in the industry from aging fields, more complex reservoirs, stricter regulation and higher costs. As an example, we are introducing Vectus 6.0, a subsea controls and automation system that will help operators address the challenges of harder-to-reach reserves, low recovery rates and increasingly complex subsea reservoirs. Vectus is designed to meet these challenges, delivering greater data and power capabilities with lower project execution risks. We are also currently testing the MultiBooster, a multiphase pump that we re jointly developing with several key clients. We expect it to be ready for commercial application early next year, complementing our existing subsea pumps portfolio. At the same time, we need to be on guard. We have to ensure that the current focus on cashflow doesn t stifle the industry. If we stop investing in new solutions, processes and technologies, it will become even harder to win the improvements and savings the industry needs. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 6

7 Creating Value in Partnership POWERJump Fast-track and cost-effective boosting system Built using proven technology from Aker Solutions and Baker Hughes Subsea Methane Hydrates First contract offshore Japan Pressure riser system for test production of deepwater subsea methane hydrates 2015 Aker Solutions Slide 6 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 Everything I ve described so far depends on collaboration and an open mind to truly succeed. None of us should be too proud or inflexible when it comes to finding the best solutions for our customers. Aker Solutions has a long history of working with partners. We wouldn t be here today without this collaboration and we intend to continue forming cooperations that create value. As I touched on earlier, we last year formed an alliance with Baker Hughes to help boost output, increase recovery rates and reduce costs at subsea fields. This partnership combines Baker Hughes well expertise with our subsea know-how to deliver integrated in-well and subsea system solutions that will help our customers unlock vast values from subsea production. The alliance has made a strong start with several new ideas and concepts emerging and recently introduced PowerJump, a fast-track and cost-effective boosting system that s particularly well-suited to increasing production from maturing wells. It s built using proven technology from both companies and complements and broadens our subsea boosting technology portfolio. Compared with traditional subsea pumping applications PowerJump can reduce CAPEX costs by 75 percent at smaller fields. But that s not all. Recently, work conducted by the alliance led to a break-through order for Aker Solutions to supply a pressure riser system to test production of deepwater subsea methane hydrates in Japan. This is our first contract offshore Japan in a new market with interesting potential. It is an example of the type of opportunities the right Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 7

8 partnerships can lead to. Not all partnerships have to be long-term alliances. Some may be project-specific. As an example, we recently teamed up with Subsea 7 and were jointly awarded a FEED contract for Ophir Energy s Fortuna FLNG project in Equatorial Guinea. The award shows how we work with key SURF partners to offer full-field capabilities on selected projects. Collaboration is key to our success and I m pleased to see more of it in our industry right now. Standardization is Key Collaboration with clients to achieve operational, costsavings improvements Standardization through scale, repetition, industrywide accords is key to reducing costs Utilize know-how and technology to find effective development solutions Standardized processes cut time to refurbish subsea tree to 17 weeks from 1 year 2015 Aker Solutions Slide 7 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 Collaboration is of course not only with our peers, but also with clients on projects. As an example, we are working very closely with Statoil on the Johan Sverdrup development so that we can lower costs through more efficient and industrialized solutions, standardization across the field, simplification of technical requirements and reduced supply chain costs. Earlier this year we also bid on a subsea production system project where our price was based on the customer s specifications. But we also put to- Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 8

9 gether an alternative bid based on reduced specifications and copy technology. This lowered the cost of the production system by more than 50 percent. Some might say that s really bad business. We think not. This example shows the huge savings to be had on all sides when we reuse existing solutions instead of reinventing the wheel time and again. There are also significant gains in streamlining our work methods. We have, for instance, increased our use of standardized processes for subsea services. This has enabled us to cut the average time spent refurbishing a subsea tree to 17 weeks from 1 year. As you can tell from these examples, standardization is key to bringing down costs in our industry. We see three main ways to do this: Scale, repetition and by setting industrywide standards. Scale is often the first route and can be achieved through large contracts that put us in a position to achieve lower unit costs through the entire value chain from supply to manufacturing. Repetition lets us reduce engineering by using past experience on new projects. But this can only happen if the industry stops customizing projects and instead focuses on designing solutions that can be modularised and repeated. A good example of this is in West Africa where we are delivering subsea production systems for Total s Moho Nord and Kaombo developments. The subsea tree that will be used at Kaombo is basically a replica of the tree used at Moho. Of course we won t see the full benefits of standardization until we all agree on industrywide standards. Aker Solutions is currently in dialogue with several major oil companies on this topic. Let s also think harder about industrialization. While we love great engineering, it is not always good business. There s still a tendency for different companies to prefer separate solutions instead of leveraging what a competitor has done. That attitude is costly and may prevent the best solutions from being developed. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 9

10 Outlook Market uncertainty persists amid concern over oil price, capital constraints Tougher commercial environment and increasing price pressure Steady tendering in main markets, though seeing projects postponed Norway market sluggish next 1-2 years Healthy order backlog and growing international presence Well placed to capture long-term, global subsea market growth Vigilant about costs and workforce capacity in all areas 2015 Aker Solutions Slide 8 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 Now let s take a quick look at the near-term future. There is still steady tendering in our main markets and we are currently bidding for contracts totaling well over 50 billion kroner, with about half of that in Subsea. Still, some projects are being postponed and we see tougher commercial discussions. There s no question there is mounting pressure in our industry to bring down prices further. Activity offshore Norway, our largest regional market, is expected to be sluggish over the next year or two. This is being somewhat offset by the Johan Sverdrup development where we have an engineering framework agreement for as many as 10 years. We have adjusted the workforce capacity in our Norwegian maintenance, modifications and operations unit as well as our subsea services businesses in Norway. Yesterday we announced that about 500 subsea positions in Norway may be affected. This comes in addition to the about 200 positions in Subsea and 300 positions in MMO announced earlier this year in Norway. We will continue to keep a close eye on market developments and make further adjustments if necessary. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 10

11 Outside of Norway our business has been growing. In the second quarter about 65 percent of our revenue was generated outside our home market, up from 50 percent a year earlier and 40 percent in We had a healthy order backlog of 44 billion kroner at the end of June. That s about 1.5 times our annual revenue. Our backlog, international expansion and continuous efforts to boost operational and financial performance will stand us well as we face near-term market uncertainty. We expect these improvement efforts to support our Subsea margin at around current levels and to lead to an increase toward peer group levels as market conditions improve. We also expect continued stable margins in our Engineering business and a gradual recovery in MMO margins. Longer term, we are upbeat. Field developments are becoming more complex as the age of easy oil ends and we have no doubt that we have the technology, or will create the solutions, needed to cope with these challenges. We are well placed in the global deepwater and subsea segments where the growth potential is good. Many people here today will be asked to predict future oil prices and some will try! I m going to resist except to say that I expect prices to recover in the longer term. The current level isn t sustainable to ensure necessary reserves are produced to meet forecast global demand. So we are ready for a lower-for-longer oil price environment. But we are also preparing for a market recovery and taking the necessary steps to emerge stronger when that time comes. Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 11

12 Step Change Needed Open and constructive dialogue needed between customers and suppliers Start collaboration at earliest stage of field development to maximize value Focus on breakthrough technology that will change how we work for the better Standardize as first step toward industrialization and sustainable development 2015 Aker Solutions Slide 9 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 With that outlook in mind I would like to close off by saying that the improvements that I outlined today can be achieved on an even greater scale and this is where the opportunity lies. But this won t happen as long as our main focus is on how each company can bring down its own procurement costs. It also won t happen through only minor changes in the interaction between customers and suppliers. To make a difference, we need a step change a major leap forward in how we work together as an industry. One, we need an open and constructive dialogue between customers and suppliers so that we understand each other s drivers and the cost benefits. Two, the collaboration needs to start at the earliest phase possible when we can look at the overall solution for a field and the potential to make a difference is great. Three, we need innovation that fits our needs and a focus on developing the breakthrough technology that will change how we work for the better. Four, standardization is also a must wherever possible. We need to stop Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 12

13 2015 Aker Solutions Slide 10 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 reinventing the wheel. And five, we need to move toward industrialization so that we can develop sustainably and be better positioned for the future. This is a competitive industry, but it s also about collaboration. With the opportunities, and challenges we face, it has become even more important that we work together to find the right solutions to make our industry stronger and sustainable. Thank you for your attention. I m happy to take any questions you may have. Copyright and disclaimer Copyright Copyright of all published material including photographs, drawings and images in this document remains vested in Aker Solutions and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any form nor used in any manner without express prior permission and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction. Disclaimer This Presentation includes and is based, inter alia, on forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. These statements and this Presentation are based on current expectations, estimates and projections about global economic conditions, the economic conditions of the regions and industries that are major markets for Aker Solutions ASA and Aker Solutions ASA s (including subsidiaries and affiliates) lines of business. These expectations, estimates and projections are generally identifiable by statements containing words such as expects, believes, estimates or similar expressions. Important factors that could cause actual results to differ materially from those expectations include, among others, economic and market conditions in the geographic areas and industries that are or will be major markets for Aker Solutions businesses, oil prices, market acceptance of new products and services, changes in governmental regulations, interest rates, fluctuations in currency exchange rates and such other factors as may be discussed from time to time in the Presentation. Although Aker Solutions ASA believes that its expectations and the Presentation are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Presentation. Aker Solutions ASA is making no representation or warranty, expressed or implied, as to the accuracy, reliability or completeness of the Presentation, and neither Aker Solutions ASA nor any of its directors, officers or employees will have any liability to you or any other persons resulting from your use. Aker Solutions consists of many legally independent entities, constituting their own separate identities. Aker Solutions is used as the common brand or trade mark for most of these entities. In this presentation we may sometimes use Aker Solutions, we or us when we refer to Aker Solutions companies in general or where no useful purpose is served by identifying any particular Aker Solutions company Aker Solutions Slide 11 September 2, 2015 Pareto Securities Oil & Offshore Conference 2015 Pareto Securities Oil & Offshore Conference Oslo, September 2, 2015 Page 13