2012 Company overview. A year of

Transcription

1 2012 Company overview A year of Successful progress

2 at a glance

3 Turnover In millions of US$ Net result In millions of US$ Lease Turnkey Systems Turnkey Services Order portfolio In billions of US$ Lease Turnkey Systems Turnkey Services Dividend per share In US$ Total Employees over past 5 years with breakdown between contractors and permanent employees Total Employee Headcount by Location Total number of permanent employees Total number of contract employees A Schiedam, Netherlands B Houston, USA C Kuala Lumpur, Malaysia D Monaco E Marly, Switzerland F Worldwide Offshore Fleet G Construction Sites H Shorebases Total: 7493 C 604 D 1830 E 26 F B A 559 G 1913 H

4 EBIT In millions of US$ EBITDA In millions of US$ New orders In millions of US$ Lease Turnkey Systems Turnkey Services Other Lease Turnkey Systems Turnkey Services Other Lease Turnkey Systems Turnkey Services * * 2010 figures have been restated for reclassification of project taxes from cost of sales to income taxes, * 2010 figures have been restated for reclassification of project taxes from cost of sales to income taxes Weighted average earnings per share In US$ Return on average capital employed In % Return on average equity In % Workforce diversity- Permanent Staff Offshore Production Onshore Operations 1308 LTIFR TRIFR 1.00 LTIFR TRIFR Others South African Polish Malaysian Italian Indian French Dutch Chinese Canadian British Brazilian Angolan American

5 2012 Company Overview

6 FPSO Cideade de Anchieta during offloading operations

7 3 Introduction We are pleased to present our 2012 Company Overview report, which seeks to outline SBM Offshore s main areas of activity in line with its strategic priorities. As well as including elements of our financial and sustainability metrics, this document also seeks to highlight our core principles and future business objectives. To request a hard copy of this document, please the investor relations team (investor.relations@sbmoffshore.com). An electronic version can also be downloaded from the Company s website ( The Annual Report, Financial Statements and Sustainability Performance Indicators are formally published in an integrated online annual report accessible through the Company s website

8 4 Index 10 Message from the CEO Work as One, Perform, Shape the Future. 39 hardware Industry in need of transition 41 FPSO - Cidade de Anchieta 42 FPSO - Cidade de Paraty 48 FPSO - OSX 2 50 SBM Offshore Lease Fleet Product and Technology Development The Company Company Profile 15 Group Strategy 18 Group Management Systems 24 Snapshot 26 Stakeholders Information 28 SBM Offshore World Map Supervisory Board Main subjects reviewed by the Supervisory Board 34 The Supervisory Board 37 FPSO OSX 2 50

9 5 57 People and Governance The Board of Management 58 Human Resources 61 Corporate Governance HSSe HSSE 68 Policy on Health, Safety, Security, Environment and Social Performance 69 SBM Offshore s 12 Life-Saving Rules 70 Risk Management Sustainable Initiatives Porto Amboim - Angola 76 Brasa Yard - Brazil 78 Supply Chain in Focus Financial Data Financial Review 85 Consolidated financial statements 94 Key Figures 100 Key Sustainability figures 101 Colophon 104 Our Product line 105

10

11

12 2012 was a tough year at SBM, but we are decisively shaping a better future Bruno Chabas, CEO

13 9 Message from the CEO SBM Offshore is in the process of transforming it s business: safer, closer to clients, and singularly focused on FPSOs. The company has dealt with the challenge of a major legacy project, and is re-establishing its prime position in offshore oilfield services was a tough year for SBM Offshore, perhaps the toughest in our history but we can be proud of important achievements. SBM is a company transformed and we are at closure of the legacy projects that marred our financial performance. Before I review 2012, I want to take a step back, to look at what SBM stands for, and the prize we are pursuing. The global oil & gas industry is heading offshore. From Brazil, to West and East Africa, and the Arctic, the future lies in deep-water developments in challenging sea states. In 2000 there were 44 deep-water fields in production. By the end of 2013, the figure is expected to exceed 450, with many development plans envisaging FPSOs as a 30 year plus, life-of-field, production solution. Oil Majors, National Oil Companies and Independents need a FPSO provider with the engineering wisdom to solve any challenge, and a track record of operating installed vessels successfully for their entire working life. It is a specialist role, which cannot be performed in-house, and our clients rightly demand dependability. After a year as SBM s CEO, I am convinced SBM has the problemsolving focus, and committed project and operating teams to be the prominent FPSO provider for the decade to come. Now grouped around an exclusively FPSO-focused strategy, we must secure the prize of being the global champion in the provision of this vital, and exceptionally valuable, offshore service. So what advances did we make in 2012? Let me start with safety. Executing our activities without harm is a pre-requisite for our licence to operate. We made significant progress, reducing the number of incidents with potentially severe consequences by more than 15% during This is an outstanding demonstration of focus and teamwork - and a great achievement on which we can build to prevent both injuries and the risk of injuries. We were disappointed not to deliver closure of all our legacy projects in 2012, but commitment to bring these to an end has subsequently resolved the challenge. In December we wrote off the full value of the Yme project, and made a provision for settlement, at a combined cost of some US$ 600 million while in March 2013 we reached final agreement with our client. On Deep Panuke, we experienced further delays and commissioning will now occur in the first half of These impairment decisions were tough but essential - and brought an imperative to rebuild our financial strength. In this context we are very pleased with the decision of HAL Investments B.V. to take up a 10 per cent private equity placement and to underwrite a further 10 per cent rights issue. These funds, together with the ongoing non-core disposals programme, and project-secured loans of approximately US$ 2 billion, bring us the vital equity and liquidity support we need. So what of our achievements within SBM? I spoke last year of transforming our ways of working; through structures and attitudes. A comprehensive shift to integrated project teams, with each leader commanding resources from professional disciplines, has transformed the formerly departmental character of SBM. Moreover, with projects grouped across just four project management and engineering execution centres, we now have effective transparency and accountability. These changes allow for traditional strengths, technological leadership and problem-solving, to be brought more effectively to bear. Extensive changes in personnel, including almost the entire Board of Management, have supported these reforms, with large scale promotion from within, as well as recruitment. Turning to attitudes, how we think and act, I have set out three principles: to work as one, to perform and to shape our own future. SBM is already working as one. Teamwork is flourishing; accountability, sharing best practice, structuring work around the client are demonstrably, measurably, clearer. Compliance is a special aspect of working as one. In the modern era, stakeholders expect explicit codes of conduct. We have worked extensively with clients and partners to establish ways of delivering the best standards of behaviour. The whole Company has accepted these measures into our appraisal structure in In 2013, we will complete the transformation of our ways of working, and move SBM Offshore decisively toward attaining its prize. This year we aim to: Put the legacy projects behind us. See the quality of performance, which so many in the company are delivering, begin to manifest itself in financial results. Create a spotlight for the primacy of engineering and technological leadership in leading the shift offshore. Restore pride at SBM Offshore in what we do, and in our leadership of the industry. Pride can have an exceptional role in maintaining standards. It is a self-protecting mechanism: a reason to double check; a reason to help a colleague; a purpose to maintaining a technical edge. I want everyone at SBM to share in that sense of achievement in Bruno Chabas

14 THE MOST EX PARTNER FOR LIFECYCLE SO 10 ABOUT OUR BRAND ESSENCE: our people have unrivalled experience and understanding of the needs of the global offshore energy industry, and can confidently supply floating production solutions for the full production lifecycle.

15 11 PERIENCED COMPLETE LUTIONS

16 FPSO N goma with FPSO OSX 2 in the background both under construction in Singapore

17 13 The company Company Profile Group Strategy Group Management Systems Snapshot Stakeholders InformatioN SBM Offshore World Map Strategic focus on high-margin FPSO products and development of technology for deepwater solutions

18 FPSO Cidade de Anchieta

19 Company Profile 15 SBM Offshore s business is the provision of technologically advanced floating production solutions, over the full product life-cycle, to the offshore oil and gas industry. With 14 FPSOs currently in operation worldwide and 165 years of unrivalled and cumulative experience, we are the most experienced operator of FPSOs and market leader in the supply of these systems, on a lease or sale basis, to our clients. Headquartered in Schiedam, The Netherlands, SBM Offshore employs over 7,400 people worldwide. Our people work in our execution centres, operational shore bases, construction yards, and on our offshore fleet of vessels. Overview of Operations SBM Offshore s main activity is the design, supply, installation and operation of FPSOs. The FPSOs are mostly owned and operated by SBM and leased to its clients; these projects are financed by the company and its joint venture partners. The company also undertakes projects for clients on a turnkey sale basis. These FPSOs can be operated by the client or by SBM Offshore under a separate service contract; these projects are financed by the client. For projects where a FPSO is not the optimum development solution, SBM Offshore has a product portfolio that offers a range of other floating production solutions. Over the years, SBM Offshore has developed a large in-house engineering, procurement and project management capability. This capability ensures consistency between projects and a culture of continuous improvement to enhance the products within the company s portfolio. SBM Offshore rightly considers itself to be the technology leader in the industry, and constantly works with clients to push the limits of existing products, and to develop new products to fill key technology gaps. This development work is performed in the five execution centres, sometimes in collaboration with technology partners, and in the Group s dedicated R&D laboratory located in France. SBM Offshore s heritage lies in shallow water mooring terminals for the loading and unloading of tankers. These products remain an important product line for SBM Offshore, both for the supply and installation of new terminals, as well as the service, overhaul and repair of the large number of terminals already in service around the world. Business Model SBM Offshore generates profits from two distinct activities: Long term Lease and Operate contracts, of the fleet of floating production vessels, to clients. The Turnkey Sale of products to clients including installation, overhaul, and repair services to clients. The cash flows generated from these activities support the significant investment in new vessels to support the growth of the fleet, which is a highly capital intensive activity. Operational feedback, received from the FPSO fleet is vital and enables further development and improvement of the company s core competencies, i.e. engineering, project management, installation and operations. Construction work is outsourced to construction yards in locations best suited to each specific project. Local content regulations, where appropriate, are also considered when making outsourcing decisions. SBM Offshore owns shares in the Paenal construction yard in Angola, and has also established a joint venture in Brazil, to utilise the capacity of the Brasa yard as part of the company s local content strategy.

20 16 Organisation The Company operates through six Execution Centres, each headed by a Managing Director accountable for its performance. The principles, rules and guidelines which govern each Execution Centre are clearly defined by Group Functions, and provide a clear framework for its execution activities. Managing Directors and Group Functions report to the Board of Management, individually and as members of the Executive Committee. Four Execution Centres located in Schiedam (The Netherlands), Monaco (Monaco), Houston (USA) and Kuala Lumpur (Malaysia), are responsible for Turnkey Systems activities (engineering and project management). The fifth Execution Centre, located in Monaco, is responsible for Fleet Operations using a de-centralised organisational structure with strong emphasis on local shore base operations in each region. Future Focus SBM Offshore s strategy is focused on high-margin FPSO products, with growth anticipated in its lease fleet as well as in supply of FPSOs and associated FPSO technology. Through strategic and financial partnerships with International Oil Companies, National Oil Companies, local construction yards and financial parties, the Group continues to build a competitive edge that will help it secure business and growth in the coming decade. The Group also has a strong focus on technology development for FPSOs to meet the increased complexity and life cycle of FPSO and related products. In order to maintain high service standards and expand its leading position in the market, SBM Offshore remains focused on research, innovation and development of its products and services and the protection of its Intellectual Property. Turnkey Services activities are managed from several locations but centralised in Monaco within a dedicated Execution Centre. Following a reorganisation during 2012, this Execution Centre s activities are absorbed by the other Execution Centres and will be one part of Turnkey sale activity. Company Organisation Chart Group Functions Schiedam, Marly, Monaco SBM Offshore N.V. The Netherlands Lease & Operate Turnkey Systems SBM-Production Contractors Worldwide SBM-Atlantia Houston SBM-Malaysia Kuala Lumpur SBM-Monaco Marly, Monaco SBM-Schiedam Schiedam

21 17

22 Group Strategy 18 SBM Offshore operates in the highly demanded and growing segment of Floating Production Units (FPU) and has developed its core expertise in the industry s preferred solution for deep-water production: the FPSO. The market for FPSO systems developed as a response to the oil companies need for more flexible production solutions. Our clients wanted production facilities that could be mobilised quickly, had good storage capacity, could be deployed on deep-water fields, could be moved from one field to another (after upgrade works), and had low abandonment costs. Today, the FPSO is the dominating floating production solution with approximately 64% of the global fleet of FPUs, a market share that continuous to increase as 80% of all new FPUs are FPSOs. The International Energy Agency (IEA) and other expert sources expect oil to remain the leading fuel in 2035 with a 27% share (down from 33% today). Current global oil and gas production is approximately 87 mb/d. With existing reserves depleting at approximately 6-8% per annum, and a global demand continuing to grow steadily (3-4% p.a.) in non-oecd countries, the industry faces the challenge of providing between 66 mb/d and 85 mb/d of additional oil by the end of SBM Offshore is highly dependent on Exploration & Production (E&P) spend. Production spending is driven by the oil companies need to replace reserves and develop proven fields to realise value. Oil price has an impact on the companies ability and desire to invest. Low oil prices typically lead to a reduction in exploration whilst a high oil price makes the exploration of additional fields economical. The global financial crisis of 2008 combined with the steep increase in upstream costs, in the mid-2000s, has led to a decrease in E&P spending and pushed oil companies into delaying investment decisions. These events had a major impact on the oil field services industry. The stabilisation of oil prices, upstream costs, and financial markets have helped to reverse this trend over the last few years. The Group s updated Strategy Plan, adopted as of 31 December 2012, covers the years 2013 up to and including 2015 (the Strategy Plan ). The Strategy Plan draws on extensive analysis of markets, customers and technological developments, as well as in-depth internal analysis across the Group s main functions. The Management Board reviews the Strategy Plan annually in light of significant market developments and any other internal / external events that may affect the Group and require a revision of the Strategy Plan. SBM Offshore s goal and driving ambition is to be the trusted partner of choice in the development of complete offshore floating solutions for the world s energy companies. It is on this basis that the Group intends to maximise shareholder value. The Strategy Plan consists of the following elements: The Group will continue to focus on supplying complex mediumto-large floating production solutions for the full product life-cycle; from engineering and procurement, to construction, installation, operation and product life extension (including relocation). SBM Offshore targets the high-end of the converted FPSO sector with facilities requiring big processing capacities (above 80 k boe/d) and/or specific turrets or moorings systems (harsh environment, heavy oil etc.). The Group will continue to strengthen its position as the global leader in floating production and mooring systems, production operations, and terminals and services. The Group has re-focused its organisation to meet the growing demand for larger and more complex floating production facilities that it believes offers the potential to yield high margins. The Group seeks to identify industry-defining technologies and devote the necessary financial and human resources, through selected Research & Development to maintain its technological edge over competitors. The Group engages both in the lease & operation and the turnkey sale of its products. Leasing provides long-term visibility of cash flows and earnings; however, it is capital intensive and requires tight management of complex financial, operational and contractual risks. Turnkey sales contracts generate revenues and profits as the project (i.e. during the construction phase) progresses, minimising capital requirement from the Group. Balancing both types of projects allows the Group to continually improve its track record, while managing its balance sheet exposure. In view of the increased size of projects, long-term partnerships have become particularly important due to the increased capital requirements. An important advantage of the Group s business model revolves around the full life-cycle aspect of the business. By leasing and operating its assets, the Group can feed back its operational knowledge to its project teams which allows for continuous improvement and innovation. This loop results in further business opportunities such as relocations, vessel refurbishments and other Greenfield projects, but it also contributes to an in-depth understanding of the effects of age on components; this results in better life-cycle costing and asset integrity management, based on concrete experience.

23 19 Strategic focus can hardly be clearer: FPSO, FPSO, FPSO The fact that the Group offers both lease and turnkey sale possibilities to its clients is seen as an important benefit in the market place. For large floating production systems, it is essentially the Client s choice to opt for lease or sale, which at times is decided relatively late in the contracting process. However, the financial capacity of the Group combined with its assessment of the overall risk profile of each project defines whether the Group will pursue a prospect and influence the Group s appetite to expose its balance sheet. The Group aims to grow by expanding its lease fleet of FPSOs organically, but it will also consider acquisitions as opportunities arise. The Group aims to maintain its leadership in Brazil and Angola but also aims to secure new, suitable projects in geographical areas such as the Far East, Australia, North Sea, Mexico, and West Africa (other than Angola) to diversify its geographic spread, but keeping in mind its high-end positioning. The Group is dedicated to provide its stakeholders with an organisational structure that enables and incentivises on-time delivery of projects, within budget. FPSOs developed by SBM Offshore are not commodities. Main trends observed during previous years are the increasing complexity of FPSOs, the scale of investment, the doubling and sometimes even tripling of the average FPSO contract life, the use of FPSOs as full life-of-field development systems. Saskia Kunst, Group Strategy Director

24 20 To address this increasing complexity, SBM Offshore has significantly increased staff numbers from 2500 at the end of 2004 to more than 7000 in The Group transformed its organisational structure to maximise its capacity to execute large and complex FPSO projects for clients. This resulted in a consistent organisational structure with the delegation of a broad range of responsibilities for delivery and performance, to the execution level and amendments to the Group s performance and evaluation system. Furthermore, it has resulted in streamlining internal (cross-border) processes, systems and objectives for similar types of projects. The new organisation allows the Group to focus on its core business and provides the recently strengthened Management Team with the adequate tools to monitor profitability via transparent accountability throughout the organisation. It also encourages best practice sharing / implementation and capitalises on the advantages of a single brand strategy. On the basis of its strong new organisation, the Group will grow selectively and intends to lead the industry sector towards improving the risk and reward balance. Financial returns in recent years in the FPSO sector are unsustainable and show an imbalance in the risk and reward profile. The technology required on board complex FPSOs is increasingly demanding. FPSOs can re-locate to other fields much faster (after upgrade works) than other production systems. As each oil and gas field has very different characteristics, FPSOs are developed as fit-for-purpose solutions, which make them non-exchangeable. SBM Offshore believes it has a privileged position to demonstrate its qualitative differentiation and provide life-cycle solutions to its clients. SBM Offshore s products are not a commodity but bespoke solutions with long term commitments from clients to guarantee their oil (cash) flow. The Group intends to achieve a better risk/reward balance by being increasingly selective in the current market, engaging in more active dialogue with clients and only tendering for FPSO projects that meet its stringent risk-return profile. The increasing size and complexity of FPSOs has led the Group to form new partnerships to help finance the continuing growth of its lease fleet, and to develop the local content component of FPSO projects. The Group also aims to diversify its capital sources through partnerships. Key commercial partners include Sonangol, QGOG and GEPetrol; key financial partners include Mitsubishi Corporation, NYK and Itochu; key technical partners include DSME and Synergy.

25 21 Vision, promises and values Vision To be the trusted partner of choice in the development of complete offshore floating solutions for the world s energy companies In line with the Group s focused strategy on FPSOs, it has conducted a comprehensive review of its asset portfolio to identify non-core assets it can offer for sale. It is the intention of the Management Board to collect approximately US$ 400 million from disposal of non-core assets. The first steps in this divestment plan were taken by the Group in November 2012 with the divestment of GustoMSC. GustoMSC is specialised in the design and engineering of all types of mobile offshore units, such as jack-up units, semi-submersibles and mono-hull vessels, and installation vessels such as the Dynamic Installer. The Group also intends to sell and lease back its Monaco offices in The global debt crisis and the 2013 scheduled implementation of the Basel 3 principles in banking regulations, are challenges to secure long term debt through the Project Financing Market; therefore, the Group is diversifying its sources of funding and will continue to do so in the coming years. As a result of the global financial crisis and weakening of some banks, the Group has started to implement various financing diversification options, both corporate and project based, in addition to partnering with new financial partners for larger projects. In 2012, SBM Offshore secured a US$ 1.05 bln project loan for FPSO Cidade de Ilhabela and US$ 500 mln via US Private Placement of project bonds. The unrivalled reputation and track record of SBM Offshore in providing full product life-cycle, from engineering and procurement, to construction, installation, operation and FPSO life extensions, is invaluable and a strong basis on which to continue to diversify its sources of finance. Our promise to our clients: Whatever your floating production needs, we will deliver We understand the offshore production business in its entirety and can leverage our unrivalled experience and expertise to supply exactly what our clients need, whatever the demands of the offshore environment Our promise to our shareholders: Our expertise and technological know-how create significant value We are the most experienced solutions provider in the offshore energy production market a position that gives us a preferred supplier status, and enables us to deliver superior financial returns whilst maintaining a good risk/reward balance Our promise to our business partners: Long-term business partnerships are key to our performance and ability to deliver We are dedicated to building deep long-term relationships with our business partners so, together, we can confidently supply the needs of all our clients through the whole product lifecycle Our promise to our employees: A safe and stimulating work environment We aim to attract and retain a diverse set of highly talented people, and will maximise their opportunities for success by providing stimulating challenges, excellent training and high levels of work satisfaction all in an incident free workplace Our promise to society and the environment: We care for the people and environments wherever we operate We care for the lives of the people where we operate we are committed to being globally aware, promoting local development and operating with integrity and we understand our responsibilities to run a safe operation and to protect the environment Our values: Team Energy, Success, Ambition

26 Hose reel on FPSO Cidade de Anchieta

27

28 GROUP MANAGEMENT SYSTEM 24 The Group Management System (GMS) is based on the following internationally recognised standards and regulations: ISO 9001: 2008 Quality Management System. ISO 14001: 2004 Environmental Management Systems. OHSAS 18001: 2007 Occupational Health and Management Systems. SBM Offshore Social Accountability Manual (compatible with SA8000 Social accountability). MARPOL Regulations: ISM/ISPS Codes (International Safety Management / International Ship and Port Facility Security). QUALITY MANAGEMENT The GMS defines the corporate management systems and procedures. It is consistently applied in all Execution Centres. All Project Execution Centres were audited in 2009 by the American Bureau of Shipping (ABS), and all were ISO 9001 compliant. Looking forward, SBM Offshore aims to ensure that SBM PC Execution Centre, which manages all fleet operations, also becomes ISO 9001 compliant in ENVIRONMENT The Group implements ISO and seeks accreditation voluntarily. Implementation started in Brazil in 2009 and continued throughout 2010 and Implementation was completed, in 2012, for the rest of the Group s operations with the exception of FPSO Cidade de Anchieta which came on-stream in September 2012 and should be certified during HEALTH, SAFETY AND SECURITY The Group s Fleet Management System complies with the International Safety Management (ISM) standard and the International Ship and Port Facility Security (ISPS) Code, which is a mandatory requirement. The Group voluntarily aims to ensure that its operations also comply with the Occupational Health and Safety Standard (OHSAS) 18001, which requires all shore bases and operating units to verify occupational health and safety practices. In Brazil, during 2009, accreditation was obtained for onshore operations offices, followed in 2010 by accreditation for all FPSOs operating in Brazilian waters. This standard was progressively implemented onshore and offshore Angola and the rest of the world, with accreditation completed in 2012 (except for FPSOs Cidade de Anchieta and Sanha).