2011 Annual Report - SBM Offshore

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This is a customized selection from the SBM Offshore N.V. Annual Report 2011 24
3.1 Report of the Board of Management- Introduction At the end of the first half of the year the Company installed the Yme and Deep Panuke platforms on their respective offshore locations in Norway and Canada. This was the start of the commissioning activities, as well as remaining construction works offshore to complete and prepare the facilities for start of production. On both projects the Company had incurred additional cost due to re-measurement of on-site works, part of which has been completed inshore, with the remainder to be completed offshore. These additional costs and clarifications of the client’s contractual position on Yme at that time lead the Company to recognize an additional cost exposure and book impairment charges totalling US$ 450 million on the two projects under the Lease and Operate segment in the first half year 2011 results. In January of 2012 the Company announced that progress on the work offshore and commissioning of the Yme platform for start-up of the system had been significantly slower than anticipated. The productivity levels were affected by bad weather conditions, among other reasons, and an increase in the work scope offshore. The Company, together with its Yme client are taking action to improve productivity offshore and reach a common path forward to complete the platform and start production. The Company cannot be explicit about the path forward as the details are under discussion with our client, but all scenarios result in a significant delay in start-up of the platform. The amount of work to be completed offshore has been updated and, taking more realistic productivity levels into account, this has resulted in substantial additional in the estimates of the costs and time to complete. The potential recovery from the on-going arbitration proceedings has also been re-assessed, with the first arbitration conclusions finding in favour of the client. The Deep Panuke platform delivery has also been delayed due to low productivity and additional work on certain systems, requiring further cost provisions. At year-end 2011, no potential recovery from the on-going court case has been recognized, due to the likely long duration of the proceedings. On timing, the Company anticipates first gas production at Deep Panuke in the summer of 2012. Accordingly, a total additional impairment charge of US$ 407 million related to the Yme MOPUstor and Deep Panuke platforms has been booked under the Lease and Operate segment in the second half of the year. The Company will actively continue legal proceedings to minimise the costs to complete and to maximise recovery of those costs. The outcomes of proceedings will only be known when the litigation, arbitration or negotiation processes have run their course. During 2011, the Company has refocused its product line on core FPSO products and associated services. By focusing on core products with historically good margins whilst improving execution standards and project risk profiles, the Company believes it will eventually return to delivering superior financial returns. The disappointing financial performance over several years of FPSO projects worldwide is an indication that rewards are structurally not aligned with obligations and liabilities of FPSO contractors. The Company will actively pursue contract structures in which this risk/reward in balance is more favourable for contractor. To face the new challenges of increasingly complex projects, the Company has adopted a new risk management approach leading to a deferral of gross margin of US$ 57 million from 2011 to future years. Accordingly a new This is a customized selection from the SBM Offshore N.V. Annual Report 2011 25
Page 2 and 3: Table of contents 1 Overview 1 1.1
Page 4 and 5: esource, through selected R&D, to m
Page 6 and 7: Business Model The Company generate
Page 8 and 9: 1.3 Snapshot 2011 (US$ mln.) 2011 2
Page 10 and 11: 1.4 Stakeholders Information 1.4.1
Page 12 and 13: 1.4.5 Investor Relations The Compan
Page 14 and 15: 1.5 Corporate Strategy 1.5.1 Introd
Page 16 and 17: 1.5.2 Vision, promises and values V
Page 18 and 19: The Company only enters partnership
Page 20 and 21: Supply Chain In line with its Code
Page 22 and 23: 1.6 Corporate Management Systems &
Page 24 and 25: Status updates for the implementati
Page 28 and 29: organisation has been implemented w
Page 30 and 31: 3.1.6 Local Content Brazil In Brazi
Page 32 and 33: New contracts During 2011 the Compa
Page 34 and 35: 3.4 Product and Technology Developm
Page 36 and 37: time, and cost. 3.4.3 Offshore LNG
Page 38 and 39: Appointment of a Managing Director
Page 40 and 41: Loans or guarantees No loans or gua
Page 42 and 43: In case a binding proposal is made,
Page 44 and 45: 3.5.5 Shareholders Share capital At
Page 46 and 47: Dividend The Management Board is au
Page 48 and 49: former notary and presently a lawye
Page 50 and 51: This is a customized selection from
Page 52 and 53: Onshore Operations In addition to t
Page 54 and 55: voluntary basis in Brazil for Occup
Page 56 and 57: Permit-to-Work (Carros) Safety is a
Page 58 and 59: Although unhappy with the increases
Page 60 and 61: 2012. The primary emissions from th
Page 62 and 63: 3.8 Human Resources 3.8.1 Introduct
Page 64 and 65: The total headcount is based on all
Page 66 and 67: This is a customized selection from
Page 68 and 69: The Employee Share Ownership Plan,
Page 70 and 71: White Collar Staff Training is base
Page 72 and 73: 3.9 Sustainable Initiatives 3.9.1 C
Page 74 and 75: 3.9.2 Supply Chain in Focus SBM Off
Page 76 and 77:
3.9.3 Local content In a number of
Page 78 and 79:
Equatorial Guinea A very motivated
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the building process, an SBM team a
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This is a customized selection from
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5.1.2 Environmental Reporting Envir
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Total Production of Hydrocarbons Of
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HSS Accident Statistics for Dynamic
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Regional CO2 Emissions Values expre
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Permanent Part Time Employees Headc
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Women Men Equality % of Women in ma
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GRI Index Level C Vision and Strate
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LTIFR = (LTI x 200,000)/ EH Where:
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