Full year 2006 SBM Offshore N.V. Earnings Analyst Presentation - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

HANS PEEREBOOM, VP IR, SBM OFFSHORE N.V.: Ladies and gentlemen, good afternoon and welcome to this presentation of the full and final results of 2006 of SBM Offshore. The presentation will follow the pattern that we have used in previous occasions; that means that we will chop it in three sections. We will start with an overview of 2006, the work executed, orders received; and that presentation will be given by Didier Keller.

The middle section will be an overview of the financial results. In particular, Mark Miles will spend some time on trying to explain to you the complications of redefining or reclassifying leases from financial to finance leases -- with operating to finance leases; that will take at least five minutes. Then, we will be in the third section, looking forward, by Didier Keller, looking at the prospects and the future developments.

Then of course, at the end we will have a question-and-answer session. As we will webcast this presentation, I would like to ask you to make use of the microphones when asking your questions and also introducing ourselves, to know who is talking. Then as a last point of the agenda, I just want to remind you to switch off your mobile phones, just to avoid any interruptions during the presentation.

So we will start with an overview of what happened in 2006, and for that I give it over to Didier Keller.

DIDIER KELLER, MANAGING DIRECTOR, CEO, SBM OFFSHORE N.V.: Thank you, Hans; and thank you, ladies and gentlemen, for having made the trip to this room. Also, of course, thanks to those who are listening on the Web.

This presentation of the final accounts is not going to surprise, by any means. It is going to be a clear confirmation of the things that we have announced end of January, the preliminary results, and the guidance for the year. We will try to elaborate a bit more than usual on the business and maybe the future.

First of all, on this slide, a few main points which highlight the performance of the year 2006. We have added two new facilities to our lease portfolio, one in the Caspian, one in Brazil. They have started operation during the first half of the year. We have delivered, in fact late 2006, the hull for the Independence Hub semi, a project which has leveraged us into the further Thunder Hawk project, so this one was important.

We have launched and we are very satisfied with the operation of the Normand Installer, our deepsea installation [tower]. We have developed starting in September, and we are ramping up now, the center of execution in Kuala Lumpur to complement our global capacity.

We have successfully expanded the lease business model with new products in new areas, and that was one of the major points of our strategy as we explained over the past two years.

We confirm a net profit of US$216 million, which is substantially above the one of 2005, if we discount the exceptional element in there. On the operational profit, a substantial increase, about the same range, to 40%. The most extraordinary feature is this enormous order intake which we have seen -- and we will come back on that -- during the year; $7 billion portfolio at the end of the year. And we propose a dividend, which is as usual the 50% of the net profit.

So a fourth execution center in Kuala Lumpur. We would like to add about 25%, 30% to the capacity of the Group as it was in September. Kuala Lumpur is of course one of the main components of this growth. We are growing the capacity initially of the three places.

A typical question which is being asked in this very buoyant market is, how do we keep our good engineers? How do we recruit the necessary additional staff? Well, we have certainly paid a lot of attention on the remuneration packages in the various places where we operate. We do have a rather substantial turnover of people in Houston, because that is the way it goes in that town; the personnel is quite volatile, I would say. But we still managed to keep the overall capacity and slightly grow it.

We have a very good growth rate in Monaco because there we have, contrarily, a very low turnover. In Schiedam it is fairly, fairly stable. In Kuala Lumpur, we are up now to about 110 people, engineering and project management; and we intend to keep growing during the year 2007.

Another main event we said is this production facility in the Caspian Sea for Petronas. That system was installed in the very beginning of last year or end of 2005 even, and is producing quite steadily. It has been producing through one well, which you see on the right-hand side of the picture. Presently, Petronas has embarked into a further drilling program, which is aiming at adding another two production wells to the facility. We have resumed production in parallel to the drilling activity. These additional wells certainly raise the hope for extension on these projects, or something to happen. But it is for sure not going to stop production at the end of year three, because that is the duration we initially contracted for. So a potential that starts maybe shaping up.

We have installed this Capixaba FPSO in Brazil on the Golfinho field. It is a look alike from the previous three systems that we have in Brazil, certainly from a distance. It is the last of the good, cheap, if I may say, FPSOs. Since we have instructed that unit, the market prices have been increasing tremendously; and today, we would not be able to touch a facility like this for less than, I would say, at least 1.5, maybe 2 times the price. So this Golfinho FPSO is the last of the series of the low market rates, if I may say.

The delivery of the Independence Hub hull. Just to remind you that was announced as the deepest floating facility in the world. It was purposely designed to be friendly to the risers, which in very large water depth become a sensitive issue in terms of fatigue. Our scope of work was the hull, and not the topsides. Here, you see the whole thing ready to be towed way from the assembly side. The unit has been installed as per schedule and is now producing. But it was contracted on a sales turnkey basis for the hull and the mooring.

This is our [pet] boat, the Normand Installer. Presently it is working in preparation for the installation of the Kikeh FPSO in Malaysia. It is working very satisfactorily. A very high performance rate. The boat was made fit for purpose to install our own product line -- TLPs, FPSOs, buoys, and semis -- in any water depth. We are quite pleased with the workability and, of course, the low cost of that boat. It was built, again, in the years where shipbuilding was obtained at very low prices.

The order intake in 2006. First, just a recap, because all this was announced through press releases. The two FPSOs for Angola ExxonMobil for what is called Kizomba 'C' on a lease and operation basis for 15 years; you remember front loaded, with quite substantially higher rates in the early years and much lower rates in the later years as we go forward. Mark will explain the special treatment that this will receive in our accounting.

A contract for the turnkey supply of an FPSO for Chevron, which is presently in progress. We are building that FPSO in Dubai, and the work has started on site. The vessel has been stripped of all the things that were to go. It has been made asbestos free, and we are going to start the conversion and refurbishment as we are talking.

Next, the two bullets are two of the three semi-sub DP drilling rigs that we have obtained from Brazilian drilling contractors. These drilling rigs go for approximately $400 million apiece. Both of these are presently being built also in the Middle East, in a specially built or purposely built grading dock. These have of course contributed greatly to make this big order intake in terms of portfolio value.

Probably the most, let's say, out of the ordinary order is this contract for the Hub service in the Gulf of Mexico, a new geographic area, for a new product on a lease, which is a semi-sub of the same type as we have delivered for Enterprise Products. You remember that we have explained that this one was a mix of demand charge, and a portion of the revenue associated to the reservoir performance, and a small risk against quite some upside potential resulting from either the performance of the field or from further tiebacks -- or a combination of both, of course. So that is really a new element in our business product line.

Then, this last bullet, a very satisfactory contract with Shell for lease and operation of an FPSO on a 15 years lease basis. Project which is being under progress now. The hull is in Singapore. We will convert this and make it an FPSO in Keppel Shipyard. No particular comment; the project is absolutely under control. Both sides, Shell and us, are pleased with the situation.

After first of January, and this also has been already announced, another out of the ordinary project, where we decided to go for the lease of a MOPUstor for a client in Norway. A MOPUstor, I think there is a sketch later on, so I will explain the technology, which is worth a few words.

Then the third drilling rig for another drilling contractor in Brazil. This one will be built in the same yard as the other two. It derives, of course, from the same design. So this series is a good leverage to optimize the use of our resources, which we have said many times are the bottleneck in our business model.

Extension on the lease of the Roncador FPSO, otherwise called FPSO Brasil. These three years come in addition to the original five and a half years, I think. Plus one? So we are up to nine and a half, thank you.

Then, an extension of the lease of the facility handling the LPG from Nkossa field in Congo.

Very quickly through the slides. You see on the left side the two ExxonMobil units. It illustrates further what generic means. They look pretty much the same, …