Mid Year 2005 SBM Offshore N.V. Analysts Meeting (Amsterdam) - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

HANS PEEREBOOM, VP IR, SBM OFFSHORE NV: Ladies and gentlemen, thank you very much for coming to the presentation of the half-year results of SM Offshore. The presentation will be in a couple of sections. First Mr. Keller will give you a general overview of what has happened over the first half of the year; then Mark Miles will talk about the financial side of it, the results, the forecasts and a very important issue, of course, the conversion and the implications of the application of IFRS. And then, after the financial section, Mr. Keller will continue with an overview of the current order book and what the future is going to bring.

It will be the first time that we have a webcast of the presentation and therefore I really want to ask you, for the question and answer session, to make use of one of the two microphones that you see here in the location. And to avoid any unexpected interruptions, I really want to ask you to switch off your mobile phones, and that applies to Didier as well. So I think we'll kick it off with Didier and he will tell you what happened in the first half of the year.

DIDIER KELLER, CEO, SBM OFFSHORE NV: Thank you in turn for being here and for your continued interest in the Company. I'm glad to see that not everybody is looking at us on the web, well, thanks to those as well, because for the first time we will have this more general access.

The press release came out yesterday night and revealed a rather comfortable situation for this first half. We used to say that the first half has to be taken with some prudence because it doesn't reflect exactly the ongoing situation of the Company. We feel comfortable it's well in excess of what we did last year, in spite of the -- no income from the shipbuilding section and in spite of the IFRS impact.

We are comfortable and we are comfortable also with the prediction that we announced for the rest of the year. It's the first time we talk in the name of SBM Offshore, which has the name in May, May 1, after the sale of the shipbuilding division. And it's really a turnaround, a straight turnaround of the Company, symbolically. We have, through that, through that sale of the shipbuilding, we have improved the transparency and the predictability of the financial results. And that is, of course, thanks to, in great part, to the fact that a large part of our profits and cash flows result from the lease fleet, which we do intend to keep going.

We provide for the first time this year a split by segment in our financial results, which we will see later. We are ahead of expectation by about 40%, mainly as a result of great improvements; a very good performance in the services division and some tightening of costs in the leasing operate area and some good news in a few projects. And of course, the fact that we have targeted our profit plan in a most conservative way, so there is always room for upsize.

We today, we do have a good order book. The order intake was good at mid-year and we took another $0.25b in July and early August. So the companies of the Group are all quite busy presently with contracts, which are in general good quality contracts, and particularly with Atlantia.

On the rather downside, I would say, we have seen a list of major contracts in the area of FPSOs/FSOs being awarded to the competition for a number of reasons. And we have seen new entrants, such as Saipem and to some extent Bergesen, coming in in a big way, particularly in Brazil.

Most of you know already what I'm going to say on the next few slides, but for those who don't, the Company structure is unchanged, at least from what it was in the oil and gas division previously. All these companies are fully owned by the holding and we still have NCI, which is a non-core business activity, operating in a different sector. We continue to say that we do intend on mid term to try to sell that activity.

The Board of Management is unchanged. We are all directly involved in the execution of our business. I do not know why the picture of Mr. Dick van der Zee is missing, it has disappeared from the screen but you know him well. Nothing to comment here.

This picture, we like it because it is in a glance the product line of the Company today. It's particularly geared to the deep offshore developments and it features the FPSOs. It features the satellite facilities, such as this TLP that you see on the image. To which you could add also, as you know, semi-submersible deep graft facilities, particularly suitable for the ultradeep and both coming from Atlantia business area.

It features the GAP, this green line that you see between the two facilities and that's one of the substantial satisfactions this year. We've managed to secure first contracts for that technology, which was developed and patented over the last few years. You see in the background the deep offshore offloading terminals, which are needed to export the oil. You have seen through the press release that we got another two this year, which keeps our market share quite high. Of all the facilities we've lost one so far.

You see on the bottom left this beautiful ship, which is still under construction and is on schedule.

So that's really what we are doing in the Company, of course, with a number of things associated to it, such as summarized on this next slide. Quickly, all the design, build, install and operate floating production facilities, to which we have added now tension leg platforms, semi-subs. And one day, possibly, we will see a demand for even the lease and operation of such facilities in the deep water. We feel it's coming up and it might be a little change or a little addition, I would say, in our business.

The supply of the mooring systems, which used to be the core technology of the Group and still going on. The supply of deepwater export systems, which in excess of 1000 meters become very large facilities. We do provide all sorts of engineering and design services for oil industry -- offshore oil industry, such as drillships, jack-up rigs, etc. We do intend to provide facilities for the LNG business and we are actively promoting that business right now. It's a bit slow to come, but it is certainly on the mid-term horizon. And particularly the facilities related to importation of LNG.

And we have, of course, the full after-sales services, which as I said is a very substantial contributor to our bottom line and our activity.

Our competitive edge, that's the same slide as we had previously. A good flexibility through the three centers - Houston, Rotterdam and Monaco. Second bullet, our integrated competence to design, supply, install and operate FPSOs. It's a business on which we are very focused, makes us a bit different from quite a number of our competitors. But basically, with the learning curve, we do get more and more at ease with this kind of technology and we undertake FPSOs of very large complexity in a very comfortable way.

We do not have, like we have had over the long past, we do not have surprises, in general, with respect of budget or with respect of operating performance once they are installed. So this focus on the long term is paying off and we feel comfortable in this core business.

The track record in general is quite good and it gives us a very good attention from the majors, particularly ExxonMobil. The success of these operations with ExxonMobil, where we produce today about 0.5b -- sorry, 0.5m barrels of oil per day as a throughput is quite excellent. And it plays a role, of course, in the objectives for the upcoming projects. We get a status of a rather preferred contractor.

The partnership continues to play a big role and particularly with Sonangol and Petronas. And as I've shown on this slide, we have a full toolbox for deepwater field developments with quite a few ideas patented. Today we could basically, and certainly we will once the new ship is available, we could undertake full field development without too much hesitation.

The new orders which make this close to 1b portfolio intake at mid-year. Enterprise Products have confirmed the order which was initially a field study, for the deep draft semi-sub for the Gulf of Mexico. The project is on schedule and is on budget. We have obtained, of course, this Kikeh FPSO in partnership with MISC, an affiliate of the Petronas group, for an eight-year lease and operate contract.

We have got two buoys, one for BP Greater Plutonio and another one which is on the next slide. As I say, out of seven deep offshore terminals I think we've got six, if my counting is correct. So we hold a pretty good market share there. And they are, in general, profitable projects with margins that vary but in general profitable.

We have obtained through Daewoo a contract from Chevron for the Agbami FPSO mooring system. In Gusto Engineering here in Rotterdam we have a nice contract from Maersk for four jack-up and two semi-submersible drilling rigs for the supply of engineering and certain specialized components, particularly for the jack-ups.

We have these GAP contracts, we will come back on this, for Murphy Oil. The GAP will link the satellite facility to the FPSO, which is the second bullet on this slide.

A number of small buoys, which shows that this business is still alive and we still continue to play a role. Not with big margins though because competition is very fierce. But we try to maintain our market share because it's a good business for the services and the spare parts, which of course rolls in after a few years. But we pay a good attention to these small orders and we want to keep the market share.

And since mid-year, to link with the previous slide first, the Agbami Buoy for Chevron Texaco, another deepwater export system. And the second large order for Atlantia order book, for the supply of a TLP for the Neptune field. The turnkey supply, where for the first time in the Group we are going to design and deliver the topsides as well, so on a turnkey basis and lump sum. This project is ongoing and is on schedule and on budget.

To highlight the major events of the first half, this Sanha LPG facility, which has been a rather long construction schedule. I think we've had that project for three years on our lap. The unit is now in Angola, or rather in Kabinda, operating, receiving gas from the Block Zero fields and splitting butane and propane and exporting it.

The unit had a few compression problems at the start. We did not lose any charter revenue, as the problems were not of our own making. The unit is now working and ready to take the full capacity and is ramping up. It's a very prestigious facility, which combines gas processing, gas stripping and compression, liquefaction, storage and export. It's a kind of a first, because those features have never been combined before to that extent on a brand new build facility. The contract is for eight years, lease and operate.

The Kikeh field for a rather large size FPSO, which will be built in Malaysia, is being built now in one of the yards that are affiliated to Petronas Group. We are pleased with the progress. It's a rather long delivery because the, let's say, the yard still has to learn in a number of areas for construction of such facilities, so the delivery is 27 months. We are about eight months into the project now and we have no particular concern.

The huge turrets, which we have obtained for Petrobras, for the P-53 FPSO, which Keppel FELS will build under direct contract from Petrobras. The unit will be essentially built, at least as far as the topsides are concerned, in country, in Brazil. We concentrate on the turret. This will be by far the largest ever built. It features 75 risers in deepwater; it's a monster of a turret. I don't know if the slide is talking by itself but we use, for that turret, technology that we have used on [Shehallion] in the North Atlantic, west of Shetlands. So it's technology that is already proven, as far as we are concerned. We don't have any particular fear.

What makes the turret even larger is the sheer complexity of the manifolding arrangement; with 75 risers you can imagine. I think we have four or five decks in the turret of a very large diameter. It's going to be really a reference on our product line.

These are two pictures of ongoing projects in Atlantia. The semi-sub on the left side, presently built in Juron in Singapore. As I said, no particular concern; it's on time and on budget. On the right side you see a picture representing the Neptune TLP for BHP. This one will be built in the Gulf of Mexico in Louisiana, in the yard of Signal, the [Freda Gorman] old yard. So we will have a large American content. In Atlantia things are going well and the projects both are under control.

And now we go into figures and I have to leave this microphone to the expert, particularly this year where it's quite complex. And I'm sure Mark is on top of the subject for any questions. …