Annual Report 2010 - SBM Offshore

equipment procurement for the MOPUstor jackup
facility for Talisman’s Yme field in Norway, the
MOPU gas platform for EnCana’s Deep Panuke field
in Canada, and the FPSO Espadarte upgrade for
relocation to Petrobras’ Baleia Azul field in Brazil;
• completion of Phase I of the Angolan yard Paenal;
• LNG related products development work and patents;
• a VLCC hull for future conversion into a FPSO.
Capital expenditure in 2010 on the FPSO Aseng for
Noble Energy and the FPSO Cidade de Paraty for
Petrobras is excluded from the total amount above.
Due to the classification of the contracts as finance
leases, investment in the units were recorded through
construction contracts, with the investments in finance
lease to be ultimately recorded in financial fixed assets.
The increase in property, plant and equipment in 2010
to US$ 2,942 million (31 December 2009: US$ 2,830
million) resulted from capital expenditure in 2010 less
depreciation and amortisation and less the impact of
deconsolidation of 20% of the shares in the Paenal
Yard joint venture to DSME, and the transfer of one
tanker to construction contracts.
The Company’s investments comprise the external
costs (shipyards, subcontractors, and suppliers),
internal costs (manhours and expenses in respect of
design, engineering, construction supervision, etc.),
third party financial costs including interest, and such
overhead allocation as allowed under IFRS. The total
of the above costs (or a proportionate share in the
case of joint ventures) is capitalised in the Company’s
consolidated balance sheet as the value of the respective
facility. No profit is taken on completion/delivery of
Statement of financial position
Financial Review / Financial Statements 2010
such a system for a lease and operate contract which is
classified as an operating lease.
Return On Average Capital
Employed and Equity
ROACE (Return On Average Capital Employed) rose
marginally in 2010 to 10.1%. This was achieved
through improved operating performance and despite
the following:
• profitability from the Lease and Operate activities
was impacted significantly by the impairment
charges on the Yme MOPUstor and the tanker
inventory;
• higher average capital employed finances assets
still under construction without commensurate EBIT
contribution (no new leases commenced in 2010,
except for the relocated FPSO Capixaba);
• growth in capital employed was also amplified by
the upward movement in the total market value of
the exchange rate/interest rate hedge portfolio.
Return On average shareholders’ Equity (ROE) at
12.4 % was below the level achieved in recent years
due to the same factors as mentioned above, the
increased net financing costs (including the hedge
losses explained earlier), plus the 9.2% equity issue of
November 2009.
As noted earlier the minority share of 2010 net profit is
higher than in previous years and accordingly has a significant
impact on ROE. Return on total equity (before
deduction of minority) amounted to 14.0% in 2010
(2009: 15.0%).
US$ million 2006 2007 2008 2009 2010
Capital employed 1,754.0 2,257.4 2,740.9 3,325.8 3,878.7
Total equity 1,119.0 1,337.7 1,240.9 1,816.8 2,123.4
Net Debt 585.8 874.7 1,464.0 1,464.0 1,711.1
Net gearing (%) 52 65 118 81 81
Net Debt: Unadjusted
EBITDA ratio 1.23 1.60 2.76 2.39 2.49
Capital expenditure 309.0 551.0 999.8 656.0 519.0
Current ratio 1.14 1.15 0.79 0.91 1.32
SBM Offshore – Annual Report 2010 107