SBM Offshore Half Year 2023 Earnings

Highlights

• Record-level US$32.2 billion pro-forma order book
• Record-level US$9.5 billion pro-forma net cash flow from L&O and BOT[i] sales backlog^[ii]
• 2023 Directional[iii] revenue and EBITDA guidance maintained
• 2 FPSOs on track for first oil by year-end
• Over US$3.2 billion project financing secured

The 2023 Half Year Earnings and Interim Financial Statements are published on the Company’s website here.

Bruno Chabas, CEO of SBM Offshore, commented:

“The increase in our order book to a new record level and reiteration of the 2023 guidance underline the fact that our strategy as an Energy Transition Company is delivering results.

We are on track to achieve first oil as planned this year on two major FPSO projects. FPSO Prosperity is already in Guyanese waters and FPSO Sepetiba has started her journey to Brazil from China. While we continue to live with the after-effects of the pandemic plus supply chain and inflationary constraints, we are progressing the remaining projects under construction and the overall margin remains robust at portfolio level.

With the closing of the financing for the FPSO Alexandre de Gusmão in June, financing is now in place for the entire construction portfolio. Including the FPSO Almirante Tamandaré financing, we have secured over US$3.2 billion so far this year which is a remarkable achievement in today’s challenging environment.

The Lease and Operate division continues to deliver solid results with fleet uptime standing at 99.5%[iv] for the first half of the year. The new 10-year agreement for the operations and maintenance of our FPSO fleet in Guyana through an integrated operations model with our client is delivering impressive operational results. This model establishes a benchmark which can be applied to help other clients maximize value from their developments.

The economics and low emission qualities of deepwater resources mean that they will play a leading role in fulfilling future demand through the Energy Transition, where the FPSO is the solution of choice. Given the evolution of the financing market, new models and sources of finance will need to mature and evolve. We are well placed to capitalize on this new dynamic given our ability to structure new models as in Guyana and the depth and breadth of our experience and relationships with financial institutions. The two un-allocated Multi-Purpose Floater (MPF) hulls under construction further strengthen our ability to secure new opportunities in a market with strong fundamentals.

In New Energies, we completed the successful load out of the floating foundations for our first Floating Offshore Wind farm and integration of the turbines has commenced. This brings us one step closer to delivering the first iteration of our latest floating energy solution, demonstrating our ability to continue to innovate and to stay relevant through the energy transition and beyond.”

Financial Overview^[v]

Directional revenue for the first half-year of 2023 stood at US$1,491 million, a 15% decrease when compared with the same period in 2022.

This is driven by Directional Turnkey revenue which decreased to US$558 million compared with US$909 million in the year-ago period mainly resulting from (i) the comparative effect of the partial divestment of FPSOs Almirante Tamandaré and Alexandre de Gusmão at the beginning of 2022, (ii) the completion of FPSO Liza Unity project in the first half-year of 2022, (iii) a reduced level of progress during the first half-year of 2023 compared with same period in 2022 on FPSO Almirante Tamandaré consistent with the commencement of topsides’ integration, partly offset by (iv) additional variation orders and increased level of activity on FPSOs Prosperity and ONE GUYANA.

Directional Lease and Operate revenue for the first half-year of 2023 stood at US$933 million, a 9% increase compared with the same period in 2022. This increase mainly reflects (i) FPSO Liza Unity fully contributing to revenue in the first half-year of 2023, (ii) an increase in reimbursable scopes partly offset by (iii) the end of the FPSO Capixaba lease during the first half of 2022.

Directional EBITDA for the first half-year of 2023 came in at US$457 million compared with US$500 million in the year-ago period.

Directional Turnkey EBITDA contribution was US$(37) million for the first half-year of 2023, a decrease from US$16 million in the year-ago period. This is mainly driven by (i) the fact that as previously highlighted for certain projects it has been harder to fully mitigate impacts from the pressure on the global supply chain and the pandemic, (ii) the lower contribution of FPSO Almirante Tamandaré consistent with the commencement of topsides’ integration, and (iii) a number of prior period one-off impacts including a US$9 million gain recognized in the year-ago period from the disposal of the SBM Installer.

It should be noted that in Directional Turnkey EBITDA, the result is mainly driven by the margin made on the portion of FPSOs sold to partners. It does not therefore include the margin made on the SBM Offshore ownership share of the five FPSOs currently in the construction phase. Including the latter, the overall Turnkey margin at portfolio level remained robust, as can be seen from the IFRS results. Under Directional, during the period only a part of this overall margin compensated for costs allocated to Turnkey which include growth related expenditure such as Sales & Marketing, R&D and investment in Renewables. The Directional Turnkey margin is therefore influenced by choices made in relation to the level of ownership of FPSOs in the portfolio which are driven by the optimization of the overall cash flow and economics for the Company.

Directional Lease and Operate EBITDA was US$546 million in the first half-year of 2023, a slight increase compared with US$527 million in the same period last year. The increase reflects the same drivers as for Directional Lease and Operate revenue.

The Other non-allocated costs charged to Directional EBITDA amounted to US$52 million in the first half-year of 2023, a US$9 million increase compared with the year-ago period explained by US$11 million of restructuring costs following the implementation of an optimization plan related to the Company’s support functions’ activities.

Directional net profit stood at US$36 million for first half-year of 2023, down from US$103 million in the year-ago period. The decrease reflects the same drivers as for Directional Turnkey EBTIDA and Other non-allocated costs charged to Directional EBITDA.

Funding and Directional Net Debt

Reflecting the continued investment in growth, net debt increased from US$6.1 billion to US$7.2 billion as of June 30, 2023. While the Lease and Operate segment continues to generate strong operating cash flow, the Company drew on the project finance facilities of FPSOs Prosperity, ONE GUYANA, Almirante Tamandaré and Sepetiba, and on the Revolving Credit Facility to fund continued investment in growth on FPSOs under construction. The first drawdown on the recently closed US$1.615 billion FPSO Alexandre de Gusmão project financing occurred in July 2023.

In line with its aim to diversify its sources of debt and equity funding and to accelerate equity cash flow from the backlog, the Company finalized the funding loan agreement with a new funding partner in relation to FPSO Cidade de Ilhabela and received US$125 million. The Company has also secured short-term funds in form of a Supply Chain Financing facility of EUR50 million (or USD equivalent) with outstanding balance of US$25 million as of June 30, 2023.

Almost half of the Company’s debt at half-year consisted of non-recourse project financing in special purpose investees. The remainder is mainly comprised of borrowings supporting the ongoing construction of five FPSOs which will become non-recourse following project execution finalization and release of the related parent company guarantee.

As of June 30, 2023, the net cash balance stood at US$381 million.

Directional Pro-Forma Backlog

Change in ownership scenarios and lease contract duration have the potential to significantly impact the Company’s future cash flows, net debt balance as well as the profit and loss statement. The Company therefore provides a pro-forma Directional backlog based on the best available information regarding ownership scenarios and lease contract duration for the various projects.

The pro-forma Directional backlog increased by US$1.7 billion compared with the position at December 31, 2022 to a total of US$32.2 billion. The increase was mainly the result of the signed 10-year operations and maintenance enabling agreement for the Guyana FPSO fleet, partially offset by turnover for the period which consumed approximately US$1.5 billion of backlog. The Company’s backlog provides cash flow visibility up to 2050.

The pro-forma Directional backlog at June 30, 2023 reflects the following key assumptions:

• The FPSO Liza Destiny contract covers the basic contractual term of 10 years of lease.
• The FPSOs Liza Unity, Prosperity and ONE GUYANA contracts cover a maximum period of lease of two years, within which the FPSOs ownership will transfer to the client.
• 10 years of operations and maintenance is considered for FPSOs Liza Destiny, Liza Unity, Prosperity and ONE GUYANA following enabling agreement signature in 2023.
• The impact of the subsequent sale of FPSOs Liza Unity, Prosperity and ONE GUYANA is reflected in the Turnkey backlog at the end of the maximum two-year period.
• ExxonMobil Guyana has indicated that it is contemplating the exercise of its contractual purchase option to acquire the FPSO Liza Unity towards the end of 2023, slightly ahead of the end of the maximum lease term in February 2024.
• The 13.5% equity divestment in FPSO Sepetiba