Sbm Offshore Nv Adr

Ladies and gentlemen, thank you for holding and welcome to the SBM Offshore Half-Year 2024 Earnings. At this moment, all participants are in listening mode. After the presentation, there will be an opportunity to ask questions. Just to remind you, this conference is being recorded. I'd like to hand it over to the conference to Mr. Oivind Tangen. Please go ahead.

Welcome, everybody, to the SBM Offshore Half-Year 2024 Earnings Call, and thank you for joining us. I'm Oivind Tangen, CEO of SPM Offshore, and I'm joined today by Douglas Wood, our CFO. I will start with our main achievements for the half year, after which Douglas will go through our financials before I conclude. As always, we welcome your questions after the prepared section of this call. Thanks to our great teams, we have delivered an excellent performance over the first half. Under our ocean infrastructure platform, which covers our existing business under turnkey and lease and operate, we delivered a strong set of financial results, with EBITDA increasing versus the same period last year by almost 40% to $620 million. As a result, we are increasing our EBITDA guidance to around $1.3 billion. Thanks to the award of Jaguar, Our backlog reached another record level at 33.7 billion, which translates into 9.6 billion dollars of net cash or around 50 euros per share. Given these results and the very high level of completion of the three projects due to start up next year, We are launching a new share buyback program of 65 million euros on top of the previously announced 65 million euro share buyback program. FBSO Almirante Tamandaré sailed away as scheduled on August 1st and will benefit from our fast-forward program learnings as it transitions from construction to operation. The next generation of projects like our Jaguar FBSO are already seeing the fast-forward benefits from inception of a full lifecycle of learnings. Excellence in performance is created through standardization and focus. We have taken steps to rationalize our business in Angola, to focus on lease and operate, acquiring from Sonengold their share in the three FPSOs we operate, and selling them our share in the Panal Yard. As always, whether we execute or operate, safety is our top priority. The total recordable injury frequency rate stands at 0.09, below the yearly target, and has been consistently on this level through several years, a clear demonstration of our strong commitment to safety. Under the transition platform, where we secured where we secure new opportunities in develop new ocean infrastructure solutions. We secured the FBSO Jaguar contract award, the fifth FBSO awarded by Axel Mobile to SBM Offshore in Guyana. This award follows the sale and operate model, bringing accelerated cash. We expect to see 50% of future awards use this model. Then, this morning, we have announced the award of a 20-year lease and operate contract for the FSO supporting Woodside's try-on development project in Mexico, positioning the company in a new strategic region and diversifying our client portfolio. Our eighth fast-forward MPF hull has been reserved by Total Energies for the Block 58 development in Suriname, and in line with our strategy to have one hull built in anticipation, we proceeded to order the ninth hull to maintain our unique market positioning. Together with further hull options, this will allow us to de-risk future project schedules in a tight supply chain market. And finally, we are applying our expertise in ocean infrastructure solutions to position the company for a long term in a number of alternative energy markets. In July, Equil, our pure floating offshore wind venture with Technip Energies was launched. Later in the month, we signed an MOU with Ocean Power to deliver standardized low-emission floating power generation concept using carbon capture injection and storage. The fundamentals driving the strong demand we see for FPSOs have not changed. Given the pace of development of sustainable and affordable alternatives and the supply gap created by the decline rate of existing oil fields, The new field developments are required to meet demand. And FPSO is the solution of choice to meet this demand given deepwater projects are carbon and cost efficient. And SBM Offshore is a leader in this market. Large-scale deepwater developments have low break-even prices ranging between 20 to 35 US dollars per barrel. with a greenhouse gas emission intensity around 40% lower than oil and gas industry average. Through our Fast Forward program, we are helping our clients de-risk their project and enhance their cost competitiveness. And under our Emission Zero program, we have technologies ready for deployment which reduce emission intensity even further. In this context, the market outlook for deepwater FPSOs is strong and our tendering pipeline remains robust. Within the next three years, we see 40 potential FBSO awards, 40% of which are within the company's targeted market of large and complex FBSOs. With a capacity to have six FBSOs at different stages of completion concurrently, we remain disciplined in selected high-quality projects to ensure we deliver value to our stakeholders. We have a unique offering over the full FBSO lifecycle. Our standardized product offering enables us to accelerate and de-risk field development and rapidly transition from execution to operations where, with almost 400 years cumulative operating experience, we offer high levels of reliability and uptime. Then, at the end of the lifecycle, we use responsible recycling options to the highest international standards. The commercial models through which we deliver these unique value propositions are evolving. We now expect to see more sale and operate awards like Jaguar with an accelerated cash flow profile and no or very short-term financing. Douglas will explain the differences of these models a bit more in detail in a moment. Turning to project execution and operations, we have seen good performance in the first half. The three FPSOs under construction have achieved a very high level of completion, well above the 75% mark. These are the last units which have lived through the pandemic and a rapid increase in global inflation. As a result of this high level of completion, we now have a de-risked project portfolio. and our new projects like the Jaguar is benefiting from the learnings from these projects from the start through our fast forward philosophy. Another key area of focus is emission. Our team's effort and focus on flawless commissioning drives down emission and is setting new benchmarks in the industry. with an average duration for readiness for gas injection below the 60-day target. In line with company's 2030 intermediate targets, flaring intensity is reducing from 28 kilograms of CO2 equivalents per barrel in 2016 to 15 in the first half of the year, which is a 47% decrease in less than eight years. Finally, the new built units benefiting from the fast forward programs have a low emission intensity ranging between 8 and 12 kilograms of CO2 equivalents per barrel. As already mentioned, we maintained our strong safety track record and the uptime for the first half of 2024 stood at 96.4%. Slightly lower than usual as two units experienced shutdowns for part of the period. One has restarted and is back to Normal operating levels and for the second we are looking closely with all parties involved to resume operations. Now over to Douglas for more details on the financial results.

Thank you Oivind and good morning everybody. So as you've heard we're on track to beat our initial EBITDA guidance for 2024. The 100 million dollar upgrade increases this to around 1.3 billion dollars. and there is material potential upside above this where, as you may have seen from the press release, ExxonMobil Guyana has indicated that it's contemplating the exercise of its contractual purchase options for FPSO's prosperity and destiny during the second half. Now, if we look at the key financial metrics, the award of Jaguar has driven the order book higher to $33.7 billion at the first half. and that's despite the consumption of more than 1.8 billion dollars revenue for the period. We look at the backlog on a net cash basis. The Jaguar award has helped increase this to 9.6 billion dollars. That's the equivalent of nearly 50 euro per share. And note that we're now including turnkey in the net cash backlog. I will explain the details in a moment. Turning to the P&L metrics, revenue was over $1.8 billion compared with around $1.5 billion in the year-ago period. In turnkey, revenue increased to $662 million compared with $558 million for the first half last year. And in addition to the impact of Jaguar, we saw an increase in brownfield fleet support activity. And this was partially offset by the fact that Prosperity and Sepitiba moved into operations plus lower revenue from the more mature projects in the portfolio as these approach completion. And the startup of Prosperity in Sepitiba, along with an increase in reimbursable scope, drove an increase in revenue of $245 million in Leighton Operate to $1.17 billion. This impact was partially offset by the fact that Liza Unity moved to an operating contract following the purchase last year. Then turning to EBITDA, this increased to $620 million versus $457 million in the year-ago period. Turnkey EBITDA increased by $25 million to $12 million negative at the end of the first half, driven by the same factors as revenue, plus the absence of floating offshore wind pilot project investment booked last year. So at the first half, phasing effects linked to the evolution of the construction portfolio are visible. But, as ever, to reiterate that through the cycle, we very much expect Turnkey to generate positive cash flow and margin, particularly in the context of more sail and operate awards. So we see Turnkey turning positive in the second half, and that's before the potential vessel purchases in Guyana. For lease and operate, EBITDA was $679 million, around $133 million higher than the first half last year. Again, the increase was driven by the same factors as the revenue, plus an impact from the business rationalization in Angola. Then to round off the story on EBITDA, other EBITDA was $47 million negative, a $5 million improvement on the year-ago period. On net debt, this increased by $455 million, reflecting drawdown on debt to support the current construction portfolio. Then last, but very much not least, Based on the performance so far this year and the outlook for liquidity and cash flow, we're launching today an incremental buyback of 65 million euros, which is expected to complete by the end of April next year. Now, we published this slide before, but we've included it again today to emphasize the financial impact of the fact that the new opportunities we expect to win will use a different mix of different models. As Oivind already highlighted, Key to note that there are different ways of structuring the delivery of our same unique lifecycle model, which is de-risked on-time project delivery, rapid startup, exceptional high level of availability and reliability in operations, and then safe and sustainable recycling. So on this slide, we've set out the net cash profiles of the three models that we have in the portfolio, Sale and Operate, BOT, and Lease and Operate. As we've been highlighting this year, we're seeing an increase in appetite among clients for the sale and operate model, as in the case of Jaguar, where effectively the client provides all or a major part of the funding, paying for and purchasing the vessel in the EPC phase, with an O&M contract following after. This results in acceleration of cash and margin, booked in turnkey under directional, which follows cash flow with a smaller but still meaningful cash flow in the operations phase. BOT, the model we've used for the second, third, and fourth Guyana units, also results in a relatively accelerated cash flow. However, the key difference with Salem Operate is, while the material cash comes pretty early, we need to wait for this until the operating period, with the big impact coming from the purchase post-startup, as we saw with Unity. And recently, this has been driving some of the variability in margin under directional in turnkey. Finally, lease and operate, which I think you are all pretty familiar with. The majority of net cash for SBM comes towards the end of the operating period following repayment of the project debt. Our current view is that at least 50% of new opportunities will follow the sale and operate model. This would result in accelerated cash flow during the turnkey phase and therefore improve the overall turnkey P&L under directional going forward. But as evidenced by today's try-on award, There is still demand for lease and operate projects and we remain confident that we're able to access a broad range of sources of financing to continue to support this model. Finally, if we do see 50% pure sale and operate, over time our balance sheet will be leveraged and this would obviously also be helped by the potential early purchase of vessels in Guyana. Here you see a real-life example of the impact of the sale and operate model on our net cash backlog, where the award of the Jaguar FBSO has been the main driver of the increase from 9.3 to 9.6 billion dollars, so the nearly 50 euros per share, and you can see this impact reflected in the earlier years. So we're therefore now including the net cash component of the turnkey backlog. So let me explain how we've done this. We include in-hand turnkey projects on a gross margin basis. Second, for the period where we have vessels under construction, currently to end 2027, we include the turnkey overhead and taxes, net of the margin we typically generate from our services business. And this is the net circa $50 million per annum investment we have previously guided for. It's important to note that this investment in turnkey overheads is also supporting the acquisition of new awards for which we don't count ourselves rich in this backlog. But there is obviously potential for material upside to be generated here. So now in the backlog, we have the full picture of turnkey, the BOT purchases, and lease and operate, including debt repayment, overheads, and tax in these segments applicable to the backlog. Now, it's hard to forecast the year by year materialization of the turnkey backlog. So for simplicity, we are giving aggregate guidance for this for the duration of the existing construction portfolio as you can see on the slide. To note that Tryon, which is a very meaningful project but much smaller than the latest FPSO projects, is not yet included and we have not anticipated the potential early purchases of Prosperity and Destiny. Now we've seen some appreciation in the share price since the last update, but with the addition of new awards, as anticipated, the disconnect with the implied value, at least as we see it, persists. So the incremental backlog we announced today underscores this view, and as we've already guided, when it comes to our annual cash return, we expect to focus on stepping up the structural buyback component of this, where there is upside based on the existing backlog. And you can see this upside when we look at the net cash expected to be generated from the backlog up to the end of 2030, so the next six and a half years. This is $4 billion, on top of which, thanks to the investment in turnkey overhead that is now included, we should be able to generate incremental net cash in the period, particularly if we secure more sale and operate awards. From this $4 billion, as we've been guiding, we need to cover the remaining net equity of the existing projects with around $400 million to go. Then we have six and a half years of corporate overheads included here. And our existing cash return commitment gives a bit more than $1.3 billion for the period to which if you add today's buyback, you get around $1.4 billion. We then have around $1.7 billion remaining for returns and to fund any future growth requirements, which, as we've previously communicated, we would expect to be lower than in recent years. So there's therefore material upside for additional returns. And this is before further potential link to growth, where again, more sale and operate awards should generated accelerated cash in the period. Timing wise, as I just mentioned, We're still working through the remaining net equity investment, which consumes cash and liquidity in the initial part of the period. But the materialization of the potential purchases in Guyana and all the execution of project refinancings would improve this picture and create more opportunity in the shorter term. So we'll see how this picture develops for the remainder of the year and look forward to the next update at year end. That's it from me. Now back to Oivind.