Innovation through generations

Transcription

1 Annual report 2007

2 Innovation through generations Aker Kvaerner is an Aker company. Shared values and an innovative spirit are long-standing traditions that forge active industrial development. People create Aker companies. Ever since Aker was established in 1841, innovation and commitment drive us. Several Aker companies have roots that date back to the 1700 s to the industrial revolution in Great Britain and the Nordic countries. Aker has a long history of industrial innovation. In recent decades, Aker companies have strengthened their market position as preferred partners in global growth markets: energy resources, energy technologies, maritime technologies, seafood, and marine biotechnology. Aker is an active industrial holding company. Aker companies are developed and strengthened through organic growth, acquisitions, restructuring and focusing of businesses. People who are willing to take on challenges and have the ability to deliver innovative solutions constitute Aker s heritage. Aker s generations of dedication and know-how, combined with today s technologies and tools, yield tomorrow s products, services, and industrial solutions. Aker companies, with a total of employees on five continents, had 2007 operating revenues totaling NOK 62 billion. Aker Kværner ASA Aker Exploration Aker Floating Production Aker Drilling A leading supplier to the energy sector worldwide Innovative, technology-driven offshore exploration company Owns, operates, and charters FPSO vessels Operator of the world s two most advanced drilling rigs Aker Oilfield Services Aker DOF Supply Aker American Shipping Aker Philadelphia Shipyard Subsea well maintenance and intervention specialists Shipowner building a fleet of anchor handling vessels Premiere US shipowner for product and shuttle tankers The most modern and costeffective US shipyard Aker Seafoods Aker BioMarine Aker Clean Carbon Aker Seafood company that harvests, processes, and sells white fish Biotechnology company that develops high-value products from krill Pioneering CO 2 capture technology with patented solution Active industrial owner creates and develops companies

3 Aker Kvaerner: Historical facts Aker Kvaerner delivers engineering, construction, manufacturing, technology products, maintenance and other specialised services, often as total solutions for complete projects. Global scale Aker Kvaerner has annual revenues totalling approximately NOK 58 billion and employs almost individuals worldwide, with more than direct employees and approximately hired-in. We have offices in around 30 countries worldwide with global headquarters at Fornebu near Oslo, Norway. Markets and customers Aker Kvaerner delivers products, services and solutions to customers worldwide in the oil and gas, refining, chemicals, metals and other process industries, mining, nuclear and power generation. The majority of our customers are companies in the energy and process industries. Our deliveries enable our customers to build, efficiently operate and effectively maintain their facilities. Examples include complete offshore platforms for oil and gas projects and onshore petrochemical plants. Ownership Aker Kvaerner is part of Aker ( and was listed on the Oslo Stock Exchange in 2004 (ticker: AKVER). The largest share holder is Aker Holding AS with a percent stake in the company. Aker Holding is owned by Aker ASA (60 percent), the Norwegian Government (30 percent), SAAB AB (7.5 percent) and Investor AB (2.5 percent). The companies brought together to create Aker Kvaerner were established in the first half of the 19th Century, during the Industrial Revolution. Cutting-edge technology and engineering providers from the very beginning, they delivered products including steam engines for rail and marine use and a range of industrial ironworks. Over the next 100 years, the businesses grew significantly. In the mid-1900 s, both Aker and Kvaerner were international corporations with activities in ship building, water power, wood processing and other process operations, mechanical workshops and other industries. Through the 1970 s, 80 s and 90 s, they developed their capabilities and experience as suppliers of complete solutions to offshore and onshore oil and gas and processing projects. They each grew organically and through international acquisitions to be leaders in their markets. On 11 March 2002, the former Kvaerner group and the Aker Maritime group (comprising the oil and gas activities of the wider Aker group) were merged, and started to operate as one company under the name Kvaerner. On 29 March 2004, following a restructuring of both Aker and Kvaerner, today s Aker Kvaerner was established.

4 About us and our goals Highlights 2007 Contents About us and our goals 5 Key figures 6 Goals and strategies 8 Our values 10 Letter from the President & CEO Our business 12 Business Areas 14 Field Development 16 Maintenance, Modifications and Operations 18 Subsea 20 Products & Technologies 22 Process & Construction Our performance 26 Board of Directors report 38 Annual accounts 78 Annual accounts parent company 86 Auditor s report 88 Share and shareholder information 92 Analytical information Our organisation and governance 94 Corporate governance 96 Board of Directors 98 Executive Management Team 100 Address Financial Calendar February 4th quarter and preliminary annual results April Annual General Meeting April 1st quarter results July 2nd quarter results October 3rd quarter results November Capital Markets Day Best year ever Full year consolidated revenues of NOK million represented an increase of 15 percent compared to This increase was due mainly to good markets and high activity in all business areas. EBITDA of NOK million for the year showed an increase of 36 percent from NOK million in 2006, which gave a margin increase from 5.7 percent to 6.8 percent. Net profit for the year was NOK million, giving earnings per share of NOK New global operating model To further strengthen our offering and become more transparent to the market, we have optimised our operations by transforming our existing structure into five focused business areas with truly global scope. Bringing together specialised units serving the same market segments enhances knowledge sharing and enables more effective use of our total resources. The change supports the company s stated objective of further profitable growth. Improvement programmes To strengthen our competitiveness, we have initiated multiple improvement programmes including supply management enhancement, legal structure simplification, tax optimisation and overhead restructuring. These programmes share the common ambition of driving down our cost base, saving more than NOK 1 billion over the next two to three years. Strategic ownership of Aker Kvaerner In June Aker ASA, Wallenberg-related companies and the Norwegian Government entered into agreements providing long term strategic ownership for Aker Kvaerner. Under the agreements, Aker transferred its 40.1 percent ownership interest in Aker Kvaerner to the newly established company Aker Holding. Aker holds a controlling 60 percent stake in Aker Holding. The Norwegian Government owns 30 percent and the Swedish companies SAAB AB and Investor AB own 7.5 percent and 2.5 percent respectively. Ormen Lange and Snøhvit projects completed On 6 October, gas production commenced from the Ormen Lange gas field, 120 km into the North Sea. Aker Kvaerner was the main contractor for the large onshore processing facility which was developed with an innovative subsea-to-shore concept. The terminal was Norway s largest construction site, employing at one time over people from more than 50 nations. On 13 September, after five years of development, StatoilHydro commenced production of liquefied natural gas (LNG) at Hammerfest, as the world s most northerly gas liquefaction plant came on stream. The plant serves the Snøhvit field, which is the first offshore development in the Barents Sea. Aker Kvaerner was the main installation contractor for the plant. High-tech manufacturing centre opened Aker Kvaerner s integrated subsea oil and gas centre in Malaysia was officially opened in June. Located in Port Klang Free Zone, Pulau Indah, this purpose-built manufacturing centre, with a total investment value of USD 100 million, is the fi rst of its kind in the world. Aker Kvaerner acquires drilling technology company In August, Aker Kvaerner signed an agreement for the acquisition of 50 percent of the shares in the German company Wirth GmbH, with an option to buy the remaining shares over the next few years. Wirth is a quality supplier of drilling equipment and has been one of Aker Kvaerner s key suppliers for more than twenty years. Contract awards Aker Kvaerner was awarded several important contracts in Among these were the Skarv EPcma contract for BP with a contract value of NOK 2 billion; the Longview project for Genpower Holdings with a contract value of USD 654 million; process technology to Aker Floating Production with a contract value of NOK 430 million; a complete subsea production system to Reliance Industries worth approximately USD 250 million; and the Valhall redevelopment of steel structure for BP with a contract value of NOK 450 million. In addition drilling equipment contracts worth in total approximately NOK 6 billion and several frame agreements were awarded. The total order intake in 2007 was NOK 58.3 billion. 4 Aker Kvaerner annual report 2007

5 About us and our goals Key fi gures Orders and results Order backlog NOK mill Order intake NOK mill Operating revenues NOK mill EBITDA NOK mill EBITDA margin Percent Net profit from continuing operations NOK mill Cash flow Cash flow from operational activities NOK mill Balance sheet Interest bearing debt NOK mill ) Equity ratio Percent Return on equity Percent Return on capital employed Percent Share Share price ) NOK Dividends per share 2) NOK Earnings per share continuing operations 2) NOK Employees Employees Full time equivalents HSE Lost time incident frequency Per million worked hours ) Incl. subordinated loan. 2) Adjusted for share split. Operating revenues Amounts in NOK million EBITDA Amounts in NOK million Order intake Amounts in NOK million Order backlog Amounts in NOK million Field Development MMO Subsea P&T P&C Field Development MMO Subsea P&T P&C Field Development MMO Subsea P&T P&C Field Development MMO Subsea P&T P&C Aker Kvaerner annual report

6 About us and our goals Goals and strategies The preferred partner 6 Aker Kvaerner annual report 2007

7 About us and our goals Goals and strategies Goals and strategies To deliver on our strategy Aker Kvaerner will: Drive HSE improvement Continue to develop our Just Care culture through increased awareness, training, auditing and sharing of best practice, engaging with all stakeholders Strengthen technology leadership Continue to develop leading technologies within subsea, drilling equipment, well services, LNG, concrete and floating structures and downstream processing Acquire companies and enter into partnerships that fill technology gaps or supplement our product portfolio Apply Aker Kvaerner technologies and competence to develop environmentally sustainable solutions, e.g. within carbon capture and sequestration (CCS) and offshore wind energy Increase global presence Strengthen leading position in the North Sea and in Arctic regions Expand product offering in selected markets including Asia, West Africa, Brazil and Gulf of Mexico Expand value-added products and services offering Leverage our comprehensive offering across the entire value chain to enhance our competitive advantage Further capitalise on our partnering activities with other Aker companies to meet new market opportunities Generate new service concepts to expand our offering to new and existing customers Optimise use of resources Develop resources to secure flexible capacity and cost base Select, bid and execute the right projects Be the preferred employer in our chosen markets Deliver on improvement programmes Continue to roll out commodity-based supply management using best value sourcing Reduce cost base by focusing on working capital, taxation and overheads Convert risk to profit through full utilisation of Aker Kvaerner s Project Execution Model Aker Kvaerner annual report

8 About us and our goals Our values Unity and commitment Aker Kvaerner s business activities build on our six corporate values, which are shared by Aker companies worldwide. Our employees dedication and know-how allow us to deliver on our commitments to customers, employees, and the communities in which we work. The values that we share have a long history. They originated among Aker companies, and have steadily evolved over time, always reflecting the work of the generations at Aker. Although the companies that comprise Aker generally engage in distinctly different businesses, they share many common cultural features. Aker s six core values are the nucleus of comprehensive, long term efforts that ensure the companies vitality in tomorrow s conditions. How the various Aker companies achieve their growth and profitability is no less important than the achievements themselves. Aker Kvaerner s corporate values lend support and guidance in dayto-day priorities and decision-making. Acting in accordance with our corporate values promotes sound action and reinforces Aker Kvaerner s long term relations with its many and varied stakeholders. An effective corporate culture must remain dynamic and responsive. Thus, it is with a combination of humility and pragmatism that Aker Kvaerner works to strengthen and cultivate its shared values. Solid values are the foundation that enables Aker Kvaerner to achieve sustainable, long term industrial development. People who speak the same language cooperate more easily. At the annual Operating Managers Conference, we gather 200 executives from around the world to set the direction and align the organisation to drive execution on our strategy for continued profitable growth. Aker Kvaerner Our values in context We take personal responsibility for HSE because we care All incidents can be prevented. We strive continuously for zero accidents to personnel, material and non-material assets. We focus on employee health and on continuously improving the work environment. We conduct our operations through efficient use of materials and energy, with minimum waste and damage to the environment. We design products and services to have no undue environmental impact, to be safe and to be efficient in consuming energy and natural resources. We seek to ensure that our products can be recycled or disposed of safely. We deliver consistently and strive to beat our goals When doing a job, we understand both the risks and opportunities involved and know how to manage them. We take pride in delivering as we promise. Making money creates new opportunities and the resources for going forward, both for us and for our customers and partners. Commercial edge benefits us all. We reward performance what you achieve and alignment with our values how you behave. Building customer trust is key to our business After all, without customer trust and satisfaction, the rest doesn t matter. Good customer references build our reputation and the only way to achieve this is by consistent and predictable performance. Our customers will recognise us for our global execution excellence. We fi nd new ways, always linked to real customer needs and business priorities. 8 Aker Kvaerner annual report 2007

9 About us and our goals Our values Our values HSE mindset We take personal responsibility for HSE because we care Delivering results We deliver consistently and strive to beat our goals Customer drive Building customer trust is key to our business People and teams All our major achievements are team efforts Hands-on management We know our business and get things done Open and direct dialogue We encourage early and honest communication All our major achievements are team efforts In the end, it comes down to the talent and motivation of you and me. Delivering strong results is impossible without a highly capable workforce. We learn on the job, through challenging tasks, coaching and training. Development of people and teams in our company has one purpose to create a foundation for long term sustainable value creation through efficient project execution and sound business operation. We respect and encourage diversity and build strong, energised and effective teams and we have fun together, making us even better. Our goal is to be the preferred employer in our industry. We know our business and get things done Once decisions are made we combine all our efforts and focus all our energies on execution. We are accountable and solutionsoriented, focusing on the right details at the right time. We follow through and ensure accountability. We believe in empowering people close to the action to take responsibility. Hands-on does not mean hands-in. We stimulate entrepreneurship and challenge bureaucracy, complicated hierarchies and silo mentality. We are One Aker Kvaerner. We encourage early and honest communication We listen hard and talk straight no sugar coating, no filters. We value early, accurate and reliable communication after all, the first problem we encounter is usually the easiest one to cope with. We challenge each other. The best decisions are taken when different opinions and different cultures meet in open and direct dialogue. We expect the highest standards of ethical behaviour and integrity from all of us, everywhere. Aker Kvaerner annual report

10 About us and our goals Letter from the President & CEO 10 Aker Kvaerner annual report 2007

11 About us and our goals Letter from the President & CEO It has been another record setting year Strong fi nancial performance, successful delivery of key projects, major project wins and a safer working environment characterise An overall improvement in our Health, Safety and Environment (HSE) performance has made our company a safer place to work. This result is attributed to the ever increasing number of our people being trained in HSE regulations and practices as part of the continuing development of our Just Care culture. To date, Aker Kvaerner is a company with more than employees and NOK 58 billion in revenues. Our positive profit performance has enabled the Board of Directors to propose a NOK 3 per share ordinary dividend payment for We have a workforce made up of both permanent employees and hired-in personnel that totals people worldwide. We are proud to be a company that is repeatedly recognised as an attractive employer in international third party rankings. This is reflected in our ability to attract talent in a challenging employment market. In April, we restructured the company to streamline our operations into five business areas with global responsibilities. We also appointed country managers with responsibility for key regions. The new structure is designed to better align the global resources and expertise we offer to the market. As part of our continuous push for operational improvement, we initiated a detailed review of all of our core processes and for staff functions earlier this year. To date the results of this improvement process are very encouraging, and it will be continued in In June 2007, Aker ASA announced the transfer of its 40.1 percent ownership interest in Aker Kvaerner to the newly established company Aker Holding AS. Aker holds a controlling, 60 percent stake in Aker Holding. The Norwegian Government now owns 30 percent of Aker Holding, the Swedish technology company SAAB AB owns 7.5 percent, and the Swedish investment company Investor AB holds 2.5 percent. Aker and the Norwegian Government have a common understanding and a mutual commitment to hold their shares in Aker Holding for at least ten years. This agreement secures our company a strong platform for continuing our profitable growth strategy. In 2007 we delivered on some of the largest and most complex projects we have ever undertaken, most notably StatoilHydro s Snøhvit and Ormen Lange. We also continued to win significant contracts, securing a healthy order backlog going forward. We opened a new high-tech subsea manufacturing centre in Malaysia, and conducted a state-of-the-art upgrade of our subsea engineering and manufacturing facilities at Tranby in Norway. We also invested in a purpose-built aftermarket facility in Houston. During the year we won multiple technology awards, encouraging us to continue our investments in clearly identified technology niches where we differentiate ourselves from the competition. At the same time we will continue to look for acquisitions that strengthen our technology offering. There is an increasing concern about global warming and the need for measures to limit emissions of greenhouse gases. We recognise that, as a large international company and a supplier to producers of fossil fuels, our commitment to addressing these environmental dilemmas is more important than ever. During 2007, we invested in a new pilot facility based on our Just Catch technology, a world leading concept for CO 2 capture. We have also formed a joint venture with Praj under the name BioCnergy to become the leader in the European biofuels market. These are just two examples of our environmental initiatives. In September, we conducted our People Survey. This survey is designed to measure how well we live up to our values in our everyday operations. Over 90 percent of employees responded. The input from this survey will for the basis for improvements that will be implemented through On behalf of all Aker companies, a NOK 1 million donation was made to the Red Cross to assist in their disaster relief programmes around the world. At the same time, we were pleased to announce the signing of a strategic three year partnership agreement with the Norwegian Red Cross. The partnership encompasses fi nancial support, exchange of expertise and volunteerism, and is in effect on a global basis from January We have a world of opportunities. The challenge is to select the right ones and to deliver consistently, on budget, on schedule and with the right quality. Our markets continue to show positive growth in demand. We have a world of opportunities. The challenge is to select the right ones and to deliver consistently, on budget, on schedule and with the right quality. In January 2008, it was announced that I am to accept a new role in Aker ASA, and that the nomination committee would propose my candidacy as the new Chairman of the Board of Aker Kvaerner. I will go on to spend more than 50 percent of my time together with the new President & CEO Simen Lieungh and his team to further develop the company and to explore cross-business opportunities within the Aker family of companies. Best regards, Aker Kværner ASA Martinus Brandal President & CEO Aker Kvaerner annual report

12 Our business Business Areas 12 Aker Kvaerner annual report 2007

13 Our business Business Areas Field Development A leading global provider of services from studies, through front-end engineering design to full turn-key engineering, procurement and construction (EPC) project execution for fixed and floating offshore platforms, LNG terminals, and onshore oil and gas facilities. Page Maintenance, Modifications and Operations A leading global provider of maintenance, modifications and operations (MMO) services to operators of offshore platforms and onshore oil and gas facilities from concept screening through engineering, procurement, construction and installation (EPCI) project execution and operational support to removal, decommissioning and recycling of discarded offshore installations. Page Subsea A leading global provider of subsea systems, solutions and services for the oil and gas industry. Covering all aspects of subsea field development for both new and existing fields from individual activities and products to complete subsea production systems, and maintained for the complete life-of-field. Page Products & Technologies A leading global provider of specialised products and services to the upstream oil and gas industry, based on proprietary technology and know-how. Key deliverables include advanced drilling equipment and systems, upstream processing technology, mooring systems, as well as loading and offloading technology. Other deliveries include well intervention technology and services, marine operations and subsea installations, and reservoir evaluation services. Page Process & Construction A leading global provider of management, design and construction services for major projects spanning refining, petrochemical processing and bio refinery, metals and mining, power generation, acid plants, and nuclear clean-up services. The full life cycle of services from initial concept through technology development, process technology application, design, procurement, construction, commissioning, operations, maintenance, modification and decommissioning. Page Aker Kvaerner annual report

14 Our business Field Development Technology and project execution expertise With the world s energy needs increasing sharply, oil companies are aiming to liberate new resources in deeper waters and in more demanding climates. Aker Kvaerner s Field Development (FD) business area is well positioned to tackle complex developments that make major demands on the interaction between technology and project execution. Highlights 2007 Successful delivery of giant projects Ormen Lange and Snøhvit to StatoilHydro Integration of topsides for the advanced Aker H-6e rig for Aker Drilling Completion of concrete structure for Adriatic LNG terminal; topside progressing on schedule Record high turnover The Skarv EPcma contract covers detail engineering and procurement work for the ton FPSO topsides as well as construction management assistance to BP. On peak, the project will engage over 400 people from Aker Kvaerner. We service oil and gas field developments in carefully selected business segments. Our service offering includes concept development, preliminary studies, front-end engineering, detailed engineering, project management, procurement and fabrication as well as assembly and hook-up of modules, topsides and complete platforms. Our core competence covers: floating drilling rigs and production platforms fixed installations in concrete or steel gas liquefaction plants and regasification terminals onshore receiving and processing terminals Deliveries include complete value chains for gas technology including carbon capture, and tailored solutions for Arctic conditions and ultra deepwaters. We are pursuing major projects in Norway, Russia, Kazakhstan, Gulf of Mexico and in the Asia-Pacific region, together with a number of studies and preliminary projects in these and other regions. Our main engineering and technology unit is located in Oslo, together with our headquarters, and we have three offshore yards at Verdal, Stord and Egersund in Norway. FD also has units in the US, Russia, Kazakhstan, Australia and Malaysia. Turnover in 2007 totalled NOK million and we engage approximately permanent and non-permanent employees. Our customers experience predictability, effective risk assessment and the assurance that their projects are executed to the agreed level of quality, on schedule and to budget. That applies whether the work is done in Arctic areas, in ultra deepwaters or in other tough environments. The complexity of our projects, and the fact that they are often executed in challenging locations, makes it even more important to deliver on our health, safety and environmental commitment. Our results reflect our success. Combined with our responsible approach, our project management competence, engineering expertise, advanced technology and world class fabrication has made us a preferred supplier of complex oil and gas projects worldwide. Strong in selected areas National and international oil companies are concentrating their exploration activities and new developments in ever deeper waters and areas with more extreme climates. This creates opportunities and highlights our competitive edge in demanding regions. Rising activity in climatically challenging areas and deepwater reflects expectations among the oil companies about long term trends in energy prices. We pursue projects in the North and Norwegian Seas, the Norwegian and Russian sectors of the Barents Sea, the Atlantic off Canada, the Caspian Sea, the Sakhalin region, Australia and the deepwater parts of the Gulf of Mexico. In Norway, we are number one in our segment. We are the contractor of choice for robust floating production platforms for deepwater worldwide and are solidly placed in concrete technology, with unique experience gained over many years in the North Sea. Today concrete structures have acquired a new relevance, not least in waters with harsh climates and for LNG terminals. We also have specialist expertise in offshore processing installations and land-based plants, both for traditional oil and gas operations and for LNG regasification. Supplies under pressure Our markets developed positively during 2007 and prospects are good, with a number of interesting opportunities on the horizon in our key markets. Constraints in global fabrication capacity and in the supply of qualified labour continue to impact the market. We are working effectively with these challenges and are selective about the exciting projects we take on. Exciting projects During the first quarter, we secured the contract to construct the production platform for the Valhall field south of Ekofisk. Our Verdal yard is responsible for this delivery. Worth NOK 450 million, the contract includes construction of the jacket, transport to the field and installation on the seabed. Peak staffing, planned for June 2008, will involve some 300 people. 14 Aker Kvaerner annual report 2007

15 Our business Field Development The Gjøa project has entered into the fabrication phase, and four yards in Poland, four in Norway and one in Russia will fabricate steel structures and piping for the platform s topside. The topside will be assembled at Aker Kvaerner Stord. During 2008 Aker Kvaerner has performed engineering and procurement for StatoilHydros semisubmersible production platform Gjøa. At the end of the year almost 800 people were involved in this project, 140 of them were engineers doing detail piping, structure and outfitting steel design at Aker Kvaerner Powergas in Mumbai, India. Aker Kvaerner will deliver the Gjøa semisubmersible to StatoilHydro late January A letter of intent for the Kashagan hookup contract, part of the Kashagan experimental phase development, was awarded in the second quarter to an unincorporated consortium of Aker Kvaerner and Ersai. The client is Agip KCO, and the early work activities for the hook-up work, worth approximately USD 157 million, started in April. In the third quarter, BP awarded us the contract for detailed engineering services, procurement and construction management assistance for a new fl oating production, storage and offloading (FPSO) unit. This production facility is intended for the Skarv field in the Norwegian Sea. Our scope of the project is worth approximately NOK 2 billion and will involve more than 400 of our people at peak staffing. The fi eld is due to come on stream in the autumn of As in 2006, the now completed Snøhvit and Ormen Lange projects contributed to a high level of activity, as did other projects including the construction of the two Aker H-6e drilling rigs for Aker Drilling. The hull and topsides for the fi rst of these units, Aker Spitsbergen, were mated at our Stord yard in November. The schedule for delivering these two rigs has been extended to July 2008 and December 2008 respectively. The new timeline is caused by delays in work from subcontractors with more subsequent carry-over work to the later project phases, and also that the scope of our engineering has been more extensive than originally planned. We delivered Blind Faith for Chevron and will deliver the Adriatic LNG terminal - to be installed off the Italian coast for ExxonMobil and its partners - in For the Kashagan project for Agip KCO, the fi rst of seven barges with process equipment was delivered during The yards in Egersund, Norway and Astrakhan, Russia had high levels of activity on this project. Aker Kvaerner is well positioned to win more contracts for the development of Kashagan, one of the world s largest offshore oil fields. Good results We enjoyed high activity in Operating revenues were NOK million, compared with NOK million in This increase reflects activity levels which were high, especially as a result of work on Snøhvit and Ormen Lange. EBITDA was NOK 891 million, compared with NOK 903 million in The EBITDA margin was 5.4 percent, compared with 5.6 percent the year before. Order intake during the year totalled NOK million, with a significant number of small projects together with major awards and a growing workload. As part of Aker Kvaerner s focused restructuring in the spring of 2007, Aker Kvaerner Powergas in India and the US engineering services unit were transferred from FD to the new Process & Construction business area, while our engineering services unit in Malaysia was transferred to the Subsea business area. Goals for 2008 Our immediate goal is to extend our position in our selected market segments. Our leadership in Norway and the far north will be maintained. Aker Kvaerner s development as an attractive partner in Russia and the Caspian Sea will be continued. We will strengthen our activities on the UK continental shelf and in the deepwater areas of the Gulf of Mexico. south-east Asia is another priority, where we will build on our presence from the company s base in Perth, Australia. We will continue to strengthen our position as a supplier of LNG installations. In addition we will maintain our commitment to carbon capture. Strong markets in the Arctic and in the gas value chain Our key markets are expected to remain strong. The order backlog at 1 January 2008 of NOK million consists of a number of contracts with deliveries from 2008 to 2011 and form a solid foundation for the future. The completion of deliveries to Ormen Lange and Snøhvit will contribute to a somewhat lower level of activity in 2008 than in Key figures Field Development Operating revenue NOK million EBITDA NOK million EBITDA margin Percent Order intake NOK million Order backlog (as of 31 December) NOK million Number of employees (as of 31 December) Man years Aker Kvaerner annual report

16 Our business Maintenance, Modifications and Operations The thriving modifications market Aker Kvaerner s Maintenance, Modifications and Operations (MMO) business area is a market leader in the North Sea. We are the only major contractor that has a presence in both the Norwegian and UK markets. With more than 30 years experience, we hold a unique market position and are rapidly expanding internationally. Highlights 2007 Actively contributed to delivery of giant Ormen Lange onshore gas facility Statfjord Late Life ready for gas export First oil Buzzard, Dumbarton, Brenda Al Zaafarana operations contract in Egypt Delivered on Frigg field decommissioning milestones Ormen Lange onshore site, Norway. Installed and completed all electrical, instrumentation and telecommunications systems. Continuing through longterm contract for maintenance and modification work. Our operations support and maintenance business encompasses a wide range of services that supplement and support our customers effective operation of installations and infrastructure. Our core competencies are in: modifications project execution and tools operational expertise and technology shutdown planning and execution concept development and front-end engineering and design (FEED) studies maintenance planning and execution electrical, instrumentation and telecommunications contracting at offshore and land-based oil and gas facilities on-site operations and operational support services decommissioning, including subsequent re-use of parts, and material recycling We derive competitive advantage from being in close proximity to our customers, particularly with our operations in Norway at Stavanger, Bergen, Trondheim and Kristiansund; in the UK at Aberdeen and Stockton; in St John s, Canada and in Houston, USA. Our headquarters are in Stavanger, and we have a second major hub in Aberdeen. We have prefabrication workshops in Norway at Hinna, Mongstad, Ågotnes, and Kristiansund. We also have a facility at Stord for recycling offshore installations. In 2007, we delivered revenues of NOK million. We have approximately permanent and non-permanent employees. Increased value creation Carefully planned maintenance and improved efficiency are two of the most important measures for increasing productivity and the production lifetime of offshore oil and gas infrastructure and land-based processing plants. Longer installation lifetimes, reduced downtime and more efficient operations lead to greater value creation for customers. Our local market presence and ability to deploy the resources required for large scale projects are a winning combination. Our strategy is to offer expert, intensive and value creating services in our market. We have the knowledge, depth and breadth of experience to take on the largest of projects. We minimise downtime through well-planned facilities maintenance combined with unbeatable upgrading expertise. This significantly reduces risk from operational interruptions, either scheduled or unforeseen. We continuously develop services with new technology that contribute to improved working methods and solutions. Examples include investment in hydrocarbon training maintenance training for complex operations integrated operations sensor/wireless technology robotics (both subsea and topsides) and unmanned platforms In our operation and management of the AH001 production platform in the North Sea, we are responsible for all formal approvals as the appointed duty holder in the UK. This responsibility attests to the expertise of our operations people. We also provide operations services on other UK continental shelf platforms and, from our base in Egypt, for platforms in the Red Sea. There are clear synergies between MMO and Aker Kvaerner s Field Development (FD) business area. FD delivers offshore platforms which offer us significant potential for subsequent operations, maintenance and decommissioning contracts. Servicing the entire life cycle of facilities gives us a clear competitive advantage in our market. The growing MMO market We perform maintenance and modification services for oil and gas operators in the Norwegian and UK sectors of the North Sea. We also decommission, remove and dismantle offshore installations. The combined market for these services is worth approximately NOK 19 billion per year. We are working to develop our market share, which is around 45 percent in Norway, 20 percent in the UK, and growing in the international market. The overall market for our services grew significantly in 2007 thanks to rising energy prices. This was reflected in the postpone- 16 Aker Kvaerner annual report 2007

17 Our business Maintenance, Modifications and Operations Statfjord Late Life, Norway. Modified Statfjord A&B from oil producer to gas producer. Milestone ready for gas export to UK achieved this autumn. ment of decommissioning projects, offset by increases in the development of marginal fields, high investment in new field developments, an increasing focus on field life extension projects, and further modifications to aging infrastructure. At the same time, the rising average age of installations in the North Sea has led to greater demand for maintenance services. One example of where life extension postpones decommissioning is Statfjord Late Life, where the facility has changed from being an oil producer to be a gas producer. Continued high activity levels We developed our business very favourably during 2007, with growth in revenues and significantly increased margins. We focused on international expansion and establishment in selected areas, principally Canada, the Caspian Sea and the Gulf of Mexico. Significant contract awards and achievements included: Statfjord Late Life: ready for gas late 2007 Kashagan hook-up: letter of intent plus early work agreement Engineering studies and projects capability expanded across the North Sea and in Houston Al Zaafarana, Egypt: operation and maintenance contract in Gulf of Suez Completion of significant project milestones on Frigg decommissioning Husky White Rose: retained maintenance contract and gained engineering, field development and subsea support Helped achieve first oil from Buzzard, Dumbarton and Brenda Continued LTI-free performance on Hess AH001 and Nexen Scott/Buzzard assets Our order intake of NOK million was excellent. At year end 2007, we had an order backlog of NOK million. Operating revenues were NOK million, compared with NOK million in This increase reflects high oil prices, resulting in several projects for lifetime extension of installations, development of smallersized fields, and projects focusing on environmental improvements. EBITDA was NOK 530 million, compared with NOK 452 million in 2006, an increase of NOK 78 million. EBITDA margin was 5.4 percent, compared with 4.7 percent the year before. In this busy market, recruitment and retention is a competitive challenge. We succeeded in retaining employees and recruiting some 500 new permanent employees. In April 2007, Aker Kvaerner Geo was transferred from MMO to Aker Kvaerner s Products & Technologies business area goals and objectives Our goals for 2008 are to maintain our market share in the traditional MMO market in Norway, and to maintain and improve our UK market share. We will focus on growing in high margin and specialist technology niches. One such market niche is for engineering studies, where we will continue to develop, based on our successes in We will continue to deliver our strategy for international growth in selected regions e.g. Canada, the Caspian Sea and the Gulf of Mexico and will capitalise on synergies across Aker Kvaerner. We will be a preferred partner to our customers and a preferred employer to both existing and potential employees. Outlook for 2008 High energy prices and high industry activity levels are expected to continue, leading to further fi eld life extensions and marginal field developments. Tendering levels will remain high, particularly for late life modifications and similar life extension projects, and for the engineering studies that are often the precursors to this type of work. We are ideally positioned for both. The international market for our MMO services is expected to demonstrate sustained and significant growth. Our market share will remain strong. Key figures Maintenance, Modifications and Operations Operating revenue NOK million EBITDA NOK million EBITDA margin Percent Order intake NOK million Order backlog (as of 31 December) NOK million Number of employees (as of 31 December) Man years Aker Kvaerner annual report

18 Our business Subsea Deep impact Aker Kvaerner s subsea business area (Subsea) has grown to become a key player in the fast expanding global subsea market. The only supplier in the world that can manufacture and deliver a complete subsea production system including umbilicals, we are well positioned for further growth. Highlights 2007 Record high revenue, EBITDA and EBITDA margin Opened new high-tech manufacturing centre in Malaysia, the world s only one stop shop for production of complete subsea systems Established long term frame agreement with StatoilHydro for delivery of subsea production systems and related aftermarket services Technology breakthroughs with MultiBooster at BP s King field and entry into the subsea power cable market USD 300 million subsea system contract on the Indian continental shelf signed with Reliance Industries Aker Kvaerner: The world s no. 1 supplier of steel tube umbilicals. As a full lifecycle provider of subsea products and systems, from front-end studies to aftermarket support, we manufacture and deliver the following products and services both as complete engineering, procurement and construction (EPC) deliveries and standalone products: subsea production systems, including subsea trees subsea control systems template and manifold systems umbilicals: flexible flowlines for tie-in of subsea production systems subsea processing and boosting technology, including subsea gas compression, processing systems, multi-phase pumps, water and gas injection deepwater drilling riser systems tie-in systems surface wellheads aftermarket services We are a global business area with permanent and non-permanent employees based in 23 locations around the world. Awarded global ISO 9001:2000 quality certification, we work on projects worldwide, through one global organisation and a single business model, using common systems. Our headquarters are in Oslo, Norway. Manufacturing facilities are located in Moss and Tranby, Norway; Curitiba and Rio das Ostras, Brazil; Port Klang, Malaysia; Aberdeen, UK; Mobile, Alabama, US; and Batam, Indonesia. A global network of service bases secures quality aftermarket support. In 2007, we had operating revenues of NOK million, an increase of 42 percent compared to Complete subsea solutions Over several decades we have developed unbeatable know-how in subsea oil and gas developments. Our ability to manufacture and deliver complete subsea production systems, including umbilicals, is unrivalled in the marketplace. Our reputation as a complete system provider was further strengthened in 2007 with the opening of a new high-tech manufacturing centre in Port Klang, Malaysia. This centre, built in record time, is the world s only one stop shop for the production of complete subsea systems. Over the past 20 years, we have developed a strong market position in processing and boosting technologies which increase oil and gas recovery and life-of-field from wells with declining production rates. This position was highlighted this year with the successful start-up of two MultiBooster pumps at BP s King field in the Gulf of Mexico and the installation of a SeaBooster seawater injection system at StatoilHydro s Tyrihans field. A significant proportion of the world s remaining oil and gas reserves is in demanding reservoir conditions. Aker Kvaerner is addressing this by developing suitable technologies for these fi elds. For example, our unique technology for high-pressures/hightemperatures (HPHT) received another accolade in 2007 when StatoilHydro chose us as supplier of a subsea production system for the Morvin field. Growth in all subsea segments The global subsea market grew significantly in The key driver behind this growth is the high price of oil, itself driven by the dramatic increase in energy consumption, particularly in fast-developing countries such as India and China. Total investment in subsea hardware our core business increased by 60 percent compared to 2006, to NOK 30 billion. Market analysts predict that growth will continue over the coming years, at an annual rate of approximately 20 percent. Strong growth in new-builds of deepwater drilling units has also resulted in a high order intake for deepwater drilling risers, a product we began offering out of our new facility in Malaysia and shortly Brazil. The global umbilical market had a solid year. According to Quest Offshore, we were the world s leading manufacturer of steel tube umbilicals in 2007, with a market share of 40 percent in km. High activity levels 2007 was an excellent year for us, with our best ever revenues of NOK million, and a record high EBITDA of NOK 960 million. 18 Aker Kvaerner annual report 2007

19 Our business Subsea The high-tech manufacturing centre in Malaysia is the world s only one stop shop for production of complete subsea systems. Among key contracts awarded in 2007 were the USD 300 million subsea system contract signed with Reliance Industries MA-D6 project, and the year frame agreement with StatoilHydro for delivery of subsea production systems and related aftermarket services. The USD 90 million deal to deliver three subsea manifolds to Petrobras of Brazil, the umbilical frame agreement with Australia s Woodside Petroleum, a fi rst step into the Chinese drilling riser market through a contract with CNOOC, and entry into the subsea power cable market through a USD 65 million contract also with Petrobras, are other milestone awards. At year end 2007, our order backlog stood at a record high NOK million, an 25 percent increase over also saw significant investment in upgrading our manufacturing and service facilities around the world. Our new Houston-based centre for assembly, testing and aftermarket activity in the Gulf of Mexico was opened in April. A NOK 65 million upgrade of our facility in Tranby, Norway, made it one of the most efficient subsea tree and pump manufacturing sites in the world. Additionally, our USD 100 million high-tech manufacturing centre in Malaysia was officially opened in June. These investments will provide a sound basis for our future growth. Another important development was our establishment, together with Aker and DOF Subsea, of Aker Oilfield Services, a provider of subsea light well intervention services. The acquisition of Phoenix Polymers International Ltd, a manufacturer of buoyancy products for the oil and gas industry and supplier of floatation elements to our drilling risers, was also strategically important. This was a year for key deliveries, such as fi rst oil through the subsea system at the Kikeh field, the fi rst deepwater project in Malaysia, and the technology breakthrough of the MultiBooster at BP s King fi eld. Deliveries to Reliance Industries giant projects on the Indian continental shelf have been and still are a key focus area Goals One of our key objectives for 2008 and beyond is to continue the expansion of our strong global position, partly by leveraging the manufacturing centre in Malaysia to become the number one subsea supplier in the Asia-Pacific region. We will continue to develop technology in selected areas, particularly within increased oil recovery (IOR), where we already hold a pioneering position. Increasing service revenue is another key goal. This will be met by growth in the installed base and through planned investments into our existing aftermarket facilities in Ågotnes, Norway and Perth, Australia, as well as the opening of a new facility in Kakinada, India. Continuing to contribute to Aker Kvaerner s deliveries across the entire oil and gas value chain, as well as working with other companies in the wider Aker family, will remain a strategy for success, as will improving margins through increasingly cost-efficient supply chain management with best value sourcing. Continuous growth High oil prices and market activity levels are expected to continue. Market analysts suggest that all subsea markets will continue to grow in the coming years, with a strong increase in the Asia-Pacific and West Africa regions. Construction activity for deepwater drilling units is predicted to remain high. As a result, we will open a new production facility for deepwater drilling risers in Rio das Ostras, Brazil in An increasing number of subsea developments will move into deeper waters, with subsequently longer step-outs. This trend will continue to drive demand for subsea support infrastructure such as umbilicals. We are enjoying high tendering and bidding activity at the start of 2008, and the market outlook remains positive. We will not, however, lose focus on the safe, on-time delivery of our existing solid order backlog. Key figures Subsea Operating revenue NOK million EBITDA NOK million EBITDA margin Percent Order intake NOK million Order backlog (as of 31 December) NOK million Number of employees (as of 31 December) Man years Aker Kvaerner annual report

20 Our business Products & Technologies Growth through innovative technology Through its Products & Technologies (P&T) business area, Aker Kvaerner holds a leading position in the drilling equipment, FPSO topsides and sub-surface market, delivering systems, equipment and services. Highlights 2007 Strong growth in all business segments, record high EBITDA Strategic investment in Wirth GmbH, a German quality provider of key drilling equipment Breakthrough in the Chinese offshore market and successful entrance into the drillship market FPSO process modules delivered in record time to Aker Floating Production Successful introduction of BOA SUB C, a specialised construction vessel for ultra deepwater Winner of Offshore Technology Conference (OTC) Spotlight on New Technology award with PowerTrac Cone Crusher, a highly innovative and efficient method for scale removal in oil and gas wells Market leading position gained for environmentally safe crude loading technology for Arctic conditions Aker Kvaerner s PowerTrac Cone Crusher provides a new solution for cost-efficient, safe and environmentally sound removal of scale from wells. P&T growth is driven by three key markets: Deepwater drilling Drilling equipment and systems Mooring systems Floating production Mooring and offloading equipment Upstream process technologies Floater installation and subsea construction Increased oil recovery Well intervention Geological consulting and services Process technology upgrades Drilling equipment upgrade Subsea tieback installation We are a leading supplier of: Advanced drilling equipment and systems Upstream processing technology Mooring systems and loading and offloading technology Well intervention technology and services Marine and subsea installation Reservoir evaluation services Developed for the demanding North Sea environment, most of our products, technologies and services are now also exported to other oil producing regions. Today more than two thirds of our deliveries are outside the North Sea. We are a global business area with more than permanent and 800 non-permanent skilled employees worldwide. Our headquarters are in Norway while we have offices, service bases and production facilities in key oil producing regions around the world. Our increasing installed base provides significant service and after-sales potential going forward. State-of-the art expertise and competitive advantages A significant proportion of the world s remaining oil and gas reserves are located at great water depths, in Arctic regions, and in reservoirs with demanding conditions such as high temperatures and pressures. Advanced technologies and innovative solutions for increased oil recovery (IOR) are often decisive in exploiting identified reserves. We have state-of-the-art expertise, products and technologies to address these challenges, holding a leading position in several upstream technology segments including advanced drilling equipment systems, well stream separation and process systems, mooring and offloading systems. Our marine operations segment has secured full market and operational control of two highly specialised construction vessels. With their high-tech specifications and safety margins, these vessels are ideally suited for operations in harsh marine environments. Extensive experience in the towing and installation of offshore fixed and floating platforms has helped us develop a safe, costeffective and patented technique for the installation of subsea structures, known as the Pencil Buoy Method. Market conditions From a market perspective, 2007 was yet another positive year. All target segments developed favourably. Contracts for 4 floating drilling units (i.e. semisubmersibles and drillships) were awarded and nearly 40 FPSO s were under construction or on order at yearend As a result the market for drilling equipment and systems, mooring equipment, processing systems and offloading units enjoyed high activity. With an increasing number of drilling rigs and floating production units entering the market, contracting of marine operations and subsea installation services are expected to develop positively. With increasing oil prices, the life of several projects in their tail-end production phase has been extended. This has lead to growing interest in our increased oil recovery (IOR) solutions, which include well intervention services and technology. An excellent year 2007 was an excellent year with strong financial performance and growth opportunities for all business segments. Key developments in 2007 included: the award-winning PowerTrac Cone Crusher, 20 Aker Kvaerner annual report 2007