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SBM Offshore's H1 2023 Earnings: A Deep Dive into Financials, Strategy, and Future Outlook

August 25, 2023
SBM Offshore's H1 2023 Earnings: A Deep Dive into Financials, Strategy, and Future Outlook

SBM Offshore, a global leader in floating production and mooring systems, has released its Half Year 2023 Earnings, revealing a robust financial performance and strategic advancements. The report provides a comprehensive view of the company's financial health, ongoing projects, organizational changes, and future outlook, including its commitment to environmental, social, and governance (ESG) goals. This article aims to dissect the various elements of the earnings release to offer a nuanced understanding of SBM Offshore's current standing and future trajectory.

Financial Highlights

SBM Offshore reported a record-level pro-forma order book of $32.2 billion and a pro-forma net cash flow of $9.5 billion from Lease and Operate (L&O) and Build Operate Transfer (BOT) sales backlog. The company has maintained its 2023 Directional revenue and EBITDA guidance, while also securing over $3.2 billion in project financing. Directional revenue for the first half of 2023 stood at $1.491 billion, a 15% decrease compared to the same period in 2022. Despite the decrease in revenue, the company's Lease and Operate division continues to deliver solid results, with a fleet uptime of 99.5% for the first half of the year.

Additional Insights: Organizational and Project Updates

Pro-Forma Directional Backlog Assumptions

The company's pro-forma Directional backlog as of June 30, 2023, is based on several key assumptions. These include a 10-year basic contractual term of lease for FPSO Liza Destiny and a maximum period of a two-year lease for FPSOs Liza Unity, Prosperity, and ONE GUYANA, after which ownership will transfer to the client. ExxonMobil Guyana has indicated plans to acquire FPSO Liza Unity towards the end of 2023. Additionally, the 13.5% equity divestment in FPSO Sepetiba to CMFL has not yet been reflected in the backlog, pending various approvals.

Organizational Changes

SBM Offshore is undergoing significant organizational changes to enhance efficiency and competitiveness. A new multi-disciplinary Corporate and Business Solutions Center (CBSC) is being established in Porto, Portugal. This center will consolidate various functions, including Finance, Business Services, Human Resources, and IT. The restructuring will cost an estimated $11 million and will be implemented in three European locations.

The company is also expanding its footprint in India by acquiring the remaining 49% equity ownership in the SBM Nauvata engineering and operational center located in Bangalore. Renamed as SBM Offshore India, the center aims to focus on turnkey execution, support to operations, and innovation.

Project and Fleet Update

The company provided updates on several ongoing projects, all of which are progressing despite inflationary pressures and supply chain constraints:

- FPSO Sepetiba: Targeting first oil by the end of 2023.
- FPSO Prosperity: On track for first oil in 2023.
- FPSO Almirante Tamandaré: Expected first oil in early 2025.
- FPSO Alexandre de Gusmão: First oil expected in 2025.
- FPSO ONE GUYANA: First oil also expected in 2025.

Under the Fast4Ward® program, the company has ordered eight Multi-Purpose Floater (MPF) hulls, with six already delivered to projects.

Further Developments: Contract Extensions, ESG Goals, and Future Outlook

Contract Extension

In a noteworthy development, SBM Offshore has agreed to extend the contract related to the lease and operations of FPSO Mondo until December 2024. This extension is indicative of the company's strong relationships with its clients and its ability to secure long-term commitments.

Environment, Social, and Governance (ESG)

On the ESG front, SBM Offshore reported a Total Recordable Injury Frequency Rate of 0.10 year-to-date, well below the full-year 2023 target of 0.146. In terms of emissions, the company is on track to meet its target set on gas flared, with a maximum average fleet target of 1.48 mmscf/d. These metrics underscore the company's commitment to safety and environmental stewardship.

New Energies and Innovations

In the realm of renewable energy, SBM Offshore has made significant strides with its Provence Grand Large pilot project. All three floaters for this project have been successfully loaded out and launched. The integration of turbines, each with a capacity of 8.4 MW, is progressing well. Once commissioned, the pilot farm will produce electricity equivalent to the consumption of 45,000 people and will account for approximately 10% of the total installed floating wind electricity capacity globally.

Outlook and Guidance Amid Geopolitical Tensions

SBM Offshore has maintained its 2023 Directional revenue guidance at above $2.9 billion, with around $1.9 billion expected from the Lease and Operate segment and above $1 billion from the Turnkey segment. The EBITDA guidance for 2023 is also maintained above $1 billion. Importantly, this guidance takes into account the currently foreseen impacts from the war between Russia and Ukraine, highlighting that the geopolitical event could continue to have a material impact on the company’s business and results.

Should the purchase of FPSO Liza Unity occur in 2023, the guidance will be revised once the final details are confirmed.

To conclude the additional details provided in the press release further enrich the narrative of a company that is not only financially robust but also committed to environmental, social, and governance goals. SBM Offshore's contract extensions, ESG commitments, and innovations in renewable energy are indicative of a multi-faceted strategy to navigate the complexities of the modern energy landscape. Amidst geopolitical tensions and market uncertainties, the company's forward-looking statements and actions suggest a resilient and adaptive business model, well-positioned for the challenges and opportunities that lie ahead.

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