2005 Annual Report - SBM Offshore

Report of the Board of Management
The Company’s Future
Introduction
The perspective of an upcoming global energy crisis, from
increasing demand that the present reserves will have
difficulties to satisfy, is contributing to a substantial boost in
E&P budgets of all major oil companies. Besides this, there is
already a noticeable increase in activity among the smaller
players and the National Oil Companies. This situation has
started to accelerate the progress in development of major
hydrocarbon fields, and reservoirs containing 10-20 million
barrels recoverable reserves (under the high probability P90
scenario) requiring stand-alone facilities are now being
contemplated whereas that limit used to be around 50-60
million barrels just a year ago.
Consequently, the demand for SBM Offshore products is
increasing and it is expected that for the near and mid-term
the industry will be offering improved business quality in large
quantity.
Management has evaluated whether major diversification
would be required for the Company to achieve a satisfactory
growth rate or, alternatively, whether the existing product line
can be relied upon, given the present market perspectives. It
The Independence Hub deep-draft production semi-submersible
developed by Atlantia
46
was concluded that the present product line is properly set
up and can be expanded with adjacent technology and
services to fuel growth and to respond efficiently to the
expected demand. There is no urgent need to diversify or to
consider major acquisitions: organic growth will continue to
be the strategy.
This organic growth policy is motivated by the firm view that
in this risk intensive business, focus is the most important
way to control the risk. A company can outperform its
competitors only with absolute focus and management
considers that this is a surer way to deliver value than under
a growth profile based on mergers and acquisitions.
However, resources are expected to be the bottleneck:
capacity in shipyards and construction yards, as well as in
equipment suppliers is already stretched – prices are
increasing as well as delivery times.
In companies like SBM Offshore, engineering and project
management resources are critical and hiring quality
additional staff is already at a premium. A major effort is
ongoing in each of the Group companies to raise the
production capacity.
Strategy
The three to five years to come should provide excellent
support for the Company’s ambitions. However, the implied
risks need to be carefully controlled and fine tuned strategies
are required to take the best advantage of the opportunities.
Long-term strategy becomes even more important to prepare
the Company for maintaining its expansionary mode beyond
this favourable period.
The key objectives of SBM Offshore’s business plan are as
follows:
Expand the product line through development of new
technologies:
• develop innovative technical solutions and maintain a
position of leader in the market;
• continue to develop offshore deepwater technology and
generate an increasing volume of sales for related offshore
facilities;
• continue to develop technology and marketing efforts in
the gas sector. Establish a position of leading contractor in
this market.