2012 Sustainability selection - SBM Offshore

1.1 Message from the CEO
2012 was a tough year for SBM Offshore, perhaps the toughest in our history. But we can be proud of some
important achievements. In several vital respects, SBM is a Company transformed. And we are on route to
closure of the legacy projects that mar our financial performance.
Before I review 2012, I want to take a step back, to look at what SBM stands for, and to describe the prize we are
pursuing. The global oil & gas industry is heading offshore. From Brazil, to West and East Africa, and the Arctic
the future lies in deep-water developments in challenging sea states. In 2000 there were 44 deep-water fields in
production. By the end of 2013, the figure is expected to exceed 450, with many development plans envisaging
FPSOs as a 30 year plus, life-of-field, production solution. Industry capex is accelerating commensurately with
these shifts.
At this time, Majors, National Oil Companies and Independents need an FPSO provider with the accumulated
engineering wisdom to solve any challenge, and a track record of operating installed vessels successfully for their
entire working life. It is a specialist role, which cannot be performed in-house, and our clients rightly demand
dependability of cost and performance.
After a year as SBM’s CEO, I am convinced SBM has the right problem-solving focus, and committed project and
operating teams to successfully engineer, procure, commission, install and operate the world’s most
technologically advanced and durable ships. Now grouped around an exclusively FPSO-focused strategy, we
must secure the prize of being the global champion in the provision of this vital and exceptionally valuable
offshore service.
So what advances did we make in 2012? Let me start with safety. Executing our activities without harm to people
or the environment is a pre-requisite to our licence to operate. We made significant progress, reducing the
number of incidents with potentially severe consequences by more than 15% during 2012. This is an outstanding
demonstration of what we can achieve when focused and working together in teams - and a great achievement
on which we can build to eradicate both injuries and the risk of injuries.
The facts of our financial performance are a US$ 75 million net loss for the consolidated result. This loss reflects
the impact of two legacy projects wholly outside our core FPSO focus. Across the core of our business we have
performed creditably and delivered good results – financially and for our clients.
We are deeply disappointed not to have delivered closure of our legacy projects in 2012. It has taken longer, and
cost more than anyone would have liked, but we are committed to bring these to an end. In December, following
thorough re-assessment, we wrote off the full value of the Yme project, and made a provision for settlement, at a
combined cost of some US$ 600 million. Reaching final agreement with our client will be lengthy and technical,
but we are making progress. Arbitration remains an option. On Deep Panuke, we also took a US$ 29 million
impairment, to reflect further delays. We are confident that its commissioning will occur in the first half of 2013.
These impairment decisions were tough but essential - and brought an imperative to rebuild our financial strength.
In this context we are very pleased with the decision of HAL Investments B.V. to support SBM with a 9.95 per
cent equity injection. HAL’s intention to underwrite, under clearly specified conditions, a further 10 per cent rights
issue, brings us the strategic support of a long term investor. These funds, together with the ongoing non-core
disposals programme, and project-secured loans of approximately US$ 2 billion, bring us the vital equity and
liquidity support we need.