Prospectus - SBM Offshore

advantages. If the Group fails to keep up with the current competition in the market, or any increased
competition, such failure could adversely affect the Group's business, results and financial condition.
(d) There can be no assurance that the Group's efforts to address low returns in the FPSO industry in
recent years will be successful. If those efforts are unsuccessful, returns may remain low (or may
even decrease), which may have an adverse effect on the Group's business, results and financial
condition.
It has been recognised in the FPSO industry that the returns over recent years have not followed the increased
size and complexity of project tenders in comparison with the returns for E&P companies and the integrated
specialist equipment suppliers. The need by FPSO clients often for fit-for-purpose solutions in increasingly
demanding conditions have led to requests from the Group's clients for larger, more technical and more
complex FPSOs and the Group having to absorb increasing levels of risk, related to project schedule and the
operations of the FPSO over the duration of the contract. Despite this trend, returns for FPSO providers have
been at a very low and at times negative level, disconnected from the sustained good returns of the Group's
clients, which are fuelled by a sustained high oil price. While the Group is seeking to address this imbalance
(by providing for differentiated, value-adding life-cycle solutions and proper contract management through
which to justify higher margins and achieve an improved risk/reward profile), there can be no assurance that
the Group's efforts will be successful. As a result, returns may remain low (or may even decrease), which may
have an adverse effect on the Group's business, results and financial condition.
(e) The Group's customers have made, and may continue to make, increasing demands on the Group.
The increasing complexity, size and duration of these projects increases the risk of technical errors,
as well as errors in the making of assumptions and estimates in relation to a project. Such errors
may adversely impact the business, results or financial condition of the Group should they occur. A
failure by the Group to adapt to the increased demands of its customers, or to adapt quickly
enough, may also adversely impact demand for its products and services, and thus the Group's
business, results or financial condition.
Increasingly, customers demand larger, more complex production facilities that present increasingly difficult
technological challenges, increase development costs and result in longer execution periods. This is, in part, a
consequence of the decline rate of existing oil and gas fields that is resulting in the exploration and
development of new production fields in deep water. By way of example, the FPSO Cidade de Ilhabela is the
largest and most complex FPSO the Group has ever undertaken. The topsides process modules will weigh
close to 23,000 tonnes, and will include large and complex gas processing facilities. The increasing scale and
complexity of projects increases the risk of errors in the making of assumptions and estimates in relation to a
project. In addition, a failure by the Group to adapt to the increasing demands of its customers, or to adapt
quickly enough, may adversely impact demand for its products and services, which could adversely impact the
Group's business, results and financial condition.
2.2 Risks related to the Group's business
(a) There can be no assurance that there will be no further delays or additional costs in relation to the
Deep Panuke project, that the provisions made in relation to that project will be sufficient, or that
further impairment charges will not be incurred. There can be no assurance that the litigation with
EnCana Corporation will be determined in the Group's favour, or that the outcome (including
settlement) of the litigation will not involve the payment of damages and costs by the Group.
Since 2011 the mobile production facility for EnCana's Deep Panuke natural gas project offshore Nova Scotia,
Canada, has suffered from project delays and the Group has incurred additional costs due to, amongst others,
the re-measurement of on-site works and additional work on certain systems. Although the project is on
schedule for delivery in the first half of 2013, there can be no assurance that further delays and additional costs
will not be incurred, that the provisions made will be sufficient, or that further impairment charges will not be
incurred. The relevant Group Company and EnCana Corporation are also involved in legal proceedings in
Canada in relation to this project. The relevant Group Company filed a claim against EnCana Corporation for
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