2008 Annual Report - SBM Offshore

SBM Offshore Annual Report 2008 / Financial Review89Balance sheetUS$ million 2004 2005 2006 2007 2008Capital employed 1,846.1 1,740.9 1,754.0 2,257.4 2,740.9Shareholders'662.4 895.0 1,118.7 1,333.4 1,234.7equityNet Debt 1,139.6 804.7 585.8 874.7 1,464.0Net gearing (%) 172 90 52 65 118Net Debt:3.1 1.7 1.2 1.6 2.76EBITDA ratioInvestment in237.3 398.5 309.0 551.3 999.8fixed assetsCurrent ratio 0.96 0.78 1.14 1.15 0.79Shareholders’ equity decreased by 7.4% to US$ 1,235million as a result of the negative change in value in theCompany’s portfolio of interest rate and foreign exchangehedges. These unrealised losses are charged directlyagainst equity in accordance with hedge accountingrules and result from the Company’s policy of full hedgingof identified interest rate and forex exposures and thesignificant movements in US interest rates and foreignexchange rates in the latter part of 2008. Capital employedincreased by 21.4% when taking into account the expansionof net debt. The Company remains clearly focused on theCompany’s gearing and other balance sheet ratios. Therelevant banking covenants (principally Net Debt: EBITDA≤ 3.75) are summarised in the Notes to the FinancialStatements and were all more than comfortably met.Before deduction of accrued interest, at 31 December2008 the Company has undrawn committed bank facilitiestotalling US$ 404 million (Revolving Credit Facility, ThunderHawk and BC-10 project loans) available for financingcapital investment in 2009.There continues to be no off-balance sheet financing.Capital ExpenditureTotal capital expenditure for 2008 (comprising of additionsto property, plant & equipment plus capitalised R&Dexpenditure) amounted to US$ 999.8 million (2007: US$551 million). The majority of this total is related to newinvestment in the lease fleet for which the major elementsare:• completion of the FPSO Espirito Santo for Shell,Brazil (51%);• ongoing expenditure on the conversion andequipment procurement for the semi-submersiblefor Murphy Thunder Hawk (US Gulf of Mexico), theMOPUstor jack-up facility for Talisman’s Ymefield in Norway, and for the MOPU gas platform forEnCana’s Deep Panuke field in Canada.Capital expenditure in 2008 on the FPSO Saxi Batuquefor ExxonMobil, Angola, is excluded from the total amountabove. Due to the classification of the contract as afinance lease, investment in the unit was recorded throughconstruction contracts with the investment in finance leaseultimately recorded in financial fixed assets.In order to understand better what is meant by capitalexpenditure, it is useful to define the cost elements whichconstitute the Company’s investments. These comprise theexternal costs (shipyards, subcontractors, and suppliers),internal costs (manhours and expenses in respect ofdesign, engineering, construction supervision, etc.), thirdparty financial costs including interest, and such overheadallocation as allowed under IFRS. The total of the abovecosts (or a proportionate share in the case of joint ventures)is capitalised in the Company’s consolidated balance sheetas the value of the respective facility. No profit is takenon completion/delivery of such a system for a lease andoperate contract.