Annual Report 2009 - SBM Offshore · Annual Report 2009 SBM Offshore N.V. – Annual Report 2009 SBM Offshore N.V. Postal address P.O. Box 31 3100 AA Schiedam The Netherlands Street
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Annual Report 2009
SB
M O
ffshore N
.V. – Annual R
epo
rt 2009
SBM Offshore N.V.Postal addressP.O. Box 313100 AA SchiedamThe Netherlands
Street addressKarel Doormanweg 663115 JD SchiedamThe Netherlands
Telephone +31 (0)10 232 0900Telefax +31 (0)10 232 0999E-mail: sbm@sbmoffshore.com
www.sbmoffshore.com
Gusto B.V. / Marine Structure Consultants (MSC) B.V.P.O. Box 11 3100 AA SchiedamKarel Doormanweg 663115 JD SchiedamThe NetherlandsTelephone +31 (0)10 232 0000Telefax +31 (0)10 232 0101
SBM Malaysia Sdn BhdBlock 2B – Level 9Plaza SentralJalan Stesen Sentral 5Kuala Lumpur Sentral50470 Kuala Lumpur MalaysiaTelephone +60 (3) 2773 5300Telefax +60 (3) 2773 5399
Single Buoy Moorings IncP.O. Box 199 MC 98007 Monaco CEDEX24 avenue de Fontvieille98000 MonacoPrincipality of MonacoTelephone (+377) 9205 1500Telefax (+377) 9205 8500
SBM Atlantia Inc1255 Enclave Parkway, suite 400Houston, TX 77077USATelephone +1 (281) 848 6000Telefax +1 (281) 848 6100
Annual Report 2009
Financial Review / Financial Statements 2009
2 SBMOffshore–AnnualReport2009FPSO P-57 at quay side in Singapore during construction
TechnologyCreating
Value
Financial Review / Financial Statements 2009
SBMOffshore–AnnualReport2009 3
TechnologyCreating
Value
Financial Review / Financial Statements 2009
8 Overview 9 Message from the CEO 10 Company Profile 12 Snapshot 2009 13 Highlights 2009 13 Expectations 2010 14 Shareholder Information 16 Business Drivers and
Competitive Position 17 Company Mission and Principles 18 Corporate Strategy 21 World Map of SBM Offshore
24 Report of the Supervisory Board
25 Introduction 27 Meetings of the Supervisory
Board Committees 29 Remuneration Report 37 Information regarding the
Supervisory Board members
1 2
Financial Review / Financial Statements 2009
40 Report of the Board of Management
41 Introduction 44 SBM Offshore Lease Fleet 46 Group Activities 2009 56 Corporate Governance 65 Risk Management 75 Human Resources 77 Product and Technology
Development 82 Information regarding the Board
of Management
86 Financial Report 2009
87 Financial Review 95 Financial Statements 95 Consolidated income statement 96 Consolidated statement
of comprehensive income 97 Consolidated statement
of financial position 98 Consolidated statement
of changes in equity 99 Consolidated cash flow
statement 100 Notes to the consolidated
financial statements 156 Company balance sheet 156 Company income statement 157 Notes to the Company financial
statements 160 Other information 161 Auditor’s Report 162 Key figures
3 4
6 SBMOffshore–AnnualReport2009
Overview
6 SBMOffshore–AnnualReport2009
Overview
Semi-submersible production platform Thunder Hawk in operation in the gulf of Mexico
SBMOffshore–AnnualReport2009 7
Overview
SBMOffshore–AnnualReport2009 7
Overview
1Overview 9 Message from the CEO 10 Company Profile 12 Snapshot 2009 13 Highlights 2009 13 Expectations 2010 14 Shareholder Information 16 Business Drivers and Competitive Position 17 Company Mission and Principles 18 Corporate Strategy 21 World Map of SBM Offshore
8 SBMOffshore–AnnualReport2009
Message from the CEOTheoilandgasbusinesssectorhasbeenextensivelyaffectedbylowoilprices,resultingfromtheworldrecessionandconsequentialreductioninenergydemand.Thishascausedanalmostcompletehaltininvestmentbyoilandgascompaniesinnewprojects,whichhadalreadystartedinthelastmonthsof2008andcontinuedduringalargepartof2009.ForSBMOffshorethishasmeantthatwehadtoendurealongperiodwithoutsecuringanysignificantneworders,butbecausetheCompanyhasthelongtermleasebusinessprovidingahighlyreliablesourceofincome,aswellasarecordorderbacklogatthestartoftheyearwehavecomethrough2009relativelyunscathedandproducedanendresultwhichismarginallyabovetheprioryear.
TheCompanyhasbeenverybusywiththeexecutionofelevenmajorprojectsofwhichtwoweredelivereddur-ingtheyearandtheotherswillcontinueinto2010forcompletion.TheCompany’sorderbacklogcomprisesafewolderprojectsstilltobedeliveredwhichhaveincurredfurthercostoverrunsduringtheyear,aswellasseveralnewerprojectswhichareproducinggoodresultswellinlinewiththeCompany’sobjectives.OnebenefitfromtherecessionhasbeentheslighteasingofmanpowercapacityinthesubcontractoryardsthattheCompanyusesforitsconstructionactivitiesandtheflatteningoffintheincreaseofpricesformaterialsandequipmentthattheCompanybuysforincorporationintoitsproducts.Ourleasefleetoperationsandourservicesbusinesshaveagainproducedverygoodresults.
WehaveimplementedseveralinitiativesduringtheyearaimedatimprovingandstrengtheningtheCompany’s
projectexecutionperformance.Thishascoveredthebiddingphaseofnewprojectsaswellasthecontrolofprojectexecutionfromthecostandschedulestand-point.Amoredecentralizedmanagementstructurehasalsobeenintroducedinordertoincreasetheresponsi-bilityoflocalmanagementforindividualunitoperatingperformanceateachoftheCompany’sfourprojectexecutioncentres.
Wewerepleasedtoobtaintwoimportantnewleaseordersduringthesecondhalfoftheyear,theeffectofwhichhasincreasedouryearendorderbacklogtoanewrecord.WehavealsoobtainedourfirstsignificantorderrelatedtoourfloatingLNGproductionbusinesswiththeawardofafrontendengineeringstudyforsuchasystemoffshoreBrazil.
TheCompanyhasaveryrobustbalancesheetwiththesuccessfulshareissueinNovember,whichraised€180.7million.Thelastshareofferingofthistypewasin2001andsincethentheCompanyhasgrownitsleasefleetandsignificantlyincreaseditsprojectexecutioncapabilities.ThenewequitywillenableandfacilitatetheCompanytofurtherincreaseitsinvest-mentinnewleasedproductionfacilities.
Despitetherecentrecoveryintheawardofnewordersforourproducts,weexpecttheretobeaslowrecoveryofbusinessintheneartermbutthatthelevelofactivitywillgraduallypick-upinthemidterm.Wewillcontinuetostriveforimprovedprojectexecutionperform-ance,whilstexpandingourbusinessmodeltoprovideattractivereturnstoyouourshareholder.WethankouremployeesfortheirdedicatedeffortwhichisessentialtotheCompany’ssuccess.
SBMOffshore–AnnualReport2009 9
Overview
Company ProfileIntroductionSBMOffshoreN.V.(SBMOffshore,‘theCompany’)designsandprovidesoffshoreenergysystemsonaleaseorsalebasistoourclientsworldwidebasedonin-houseengineeringandprojectmanagementexpertise.TheCompany’sclientsaremainly offshoreoilandgasproducingcompanies,bothprivateandgovernmentowned.TheCompanyhasestablisheditspositionasaspecialisedserviceproviderinthemiddletoupperseg-mentofthefloatingproductionindustrywhereitisoneofthemarketleaders.TheCompanyoperatesgloballyunderthenameSBMOffshorewithsevenoperatingunits.Eachoperatingunitisamongoneoftheleadersinits respectivenichemarket.TheCompanycurrentlyemploysover5,000peopleworldwide.
Product lineTheCompany’sactivitiesincludetheengineering,supplyandoffshoreinstallationoffacilitiesfortheproduc-tion,storageandexportofcrudeoil,gasandLiquefiedNaturalGas(LNG).ThesecompriseFloatingProductionStorageandOffloadingsystems(FPSOs),FloatingStorageandOffloadingsystems(FSOs),TensionLegPlatforms(TLPs),monohullandsemi-submersibleFloatingProductionUnits(FPUs),aswellasselfelevat-ingMobileOffshoreProductionUnits(MOPUs).
Over30yearsago,theCompanywasthefirsttoofferclientsanintegratedoilandgasservicebyprovidingturnkeysupplyoffloatingproductionvessels,aswellas
leasingoptionswheretheCompanyoperatesthefacil-ity.Thisconceptisnowconsideredasamainstreamproductionmeansbytheoilindustry,particularlyindeepandremotewaters,andtheleaseandoper-atebusinesshasbecomeamajorcomponentoftheCompany’sactivities.
Includedintheproductlineareallthesystems,mostlybasedontheSinglePointMooringprinciple,usedtomoorcrudeoilandgascarriersinopenseasforthepurposeofloadingoroffloadingcargoes.In2009SBMOffshorecelebratedthe50thanniversaryofthefirstCALMbuoy,whichwasdesignedanddeliveredtoShellin1959.Derivedfromthesametechnologyarecomplexmooringsystems,whichanchorthefloatingproductionfacilitiesinoilandgasfieldsandarethecoreproductsoftheCompany.Therearevarioustypesofmooringsystemssuchasfixedheadingorweather-vaning,permanentordisconnectable.
Inadditiontotheseactivities,theCompanyprovidesdesignandengineeringservices,andforcertainoppor-tunitiesentersintoturnkeysupplycontracts,forcranevessels,pipelaybargesanddrillingunitsofalltypes,suchasmonohulls,jack-upsandsemi-submersibles.
Insupportofalltheabove,anothersteadyactiv-itywhichrepresentsasubstantialelementintheCompany’sbusinessistheprovisionofspecialisedservicessuchasmaintenance,spareparts,repairsandoffshoreinstallationthroughtheCompanyownedinstallationvessels.Thisformsanessentialcom-plementtothesalesoffacilities,offeringclientsacomprehensiveandintegratedservice.
SBM Offshore N.V.Netherlands
Corporate FunctionsSchiedam, Marly, Monaco
SBM-Production ContractorsWorldwide
Lease & Operate
SBM-ServicesMarly, Monaco
Turnkey Services Turnkey Systems Turnkey Systems Turnkey Systems Turnkey Systems Turnkey Systems
SBM-MonacoMarly, Monaco
SBM-GustoSchiedam
SBM-MSCSchiedam
SBM-AtlantiaHouston
SBM-MalaysiaKuala Lumpur
Company Organisation Chart
10 SBMOffshore–AnnualReport2009
Overview
TheCompanyhasaddedtheLNGFPSOtoitsproductlinetorespondtotheexpectedfuturedemandforoff-shoreproductionofLNGfromstrandedgasfieldsandisalsodevelopingrenewableenergysystemsforthemarineenvironment.
OrganisationSBMOffshorecurrentlyoperatesfromfourmainprojectexecutioncentreswithengineeringandprojectman-agementresourceslocatedinSchiedam(Netherlands),Monaco(Monaco),Houston(USA)andKualaLumpur(Malaysia).TheCompanyhasacorporatestructureconsistingofsevenoperatingunits,supportedbycorporatefunctions,whichallreporttotheBoardofManagement.Theorganisationchartonpage 10showstheindividualunits,theirlocationandtheirfinancialreportingsegment.
Inadditiontothesemaincentres,theCompanyispresentinseveralcountriesforregionalmarketingandsales,localmanagementofoffshoreoperationsandconstructionactivities.
InrespectoftheCompany’sactivities,includingboththesupplyoffacilitiesonasalebasisandtheleaseandoperateactivities,thereisaGroupManagementSystemdefiningtheCompany’sprocedures.TheCompany’sCorporateEngineeringStandardsensureacommondesignapproachinthefourcentresandfacilitatetheoptimaluseoftheskillsandglobalresourcesavailablefortheexecutionoflargeandcomplexprojects.
TheCompanysellsorleasesoffshorefacilitiesgen-erallybyoutsourcingallhardwarecomponentsandconstructionservices.Therefore,itdoesnotownanymanufacturingplant,constructionyardorshipyardwiththeexceptionofapartiallyownedconstructionyardinAngola,whichwillbedevelopedintoanFPSOintegrationfacilityshouldtheCompanybeawardedFPSOcontractsrequiringenhancedlocalcontent.OneoftheCompany’sstrengthsisthatitpossessesalltheengineering,projectmanagementandoffshoreinstallationcompetenciesin-housetoexecutelargecomplexsystems,withouthavingtorelyonexternalresources,exceptfortheliquefactiontechnologyrelatedtoLNGFPSOtopsides.
Future focusTheCompany’sbusinessdirectionischaracterisedbymarket-orientedtechnologyinnovation.TheCompanyisatrendsetterinthedevelopmentofnew,costeffec-tive,technologicallyfit-for-purposesolutionswhichoptimallyrespondtoclients’changingneeds.Today,theCompany’sfocusisonprovidingsolutionsforultra-deepwaterproduction,arcticenvironmentfloatingproductionandFloatingLNG(FLNG)developments.TheCompanyisalsoengagedindevelopmentworkforrenewableenergysystemsinthemarineenvironment.Inordertoprotectandexpanditsleadingmarketposition,theCompanydevotessignificantattentiontoresearch,development,andtheprotectionofIntellectualProperty.
SBMOffshore–AnnualReport2009 11
Overview
Top: CALM buoyMiddle: FPSO Frade in
operation in BrazilBottom: Semi-
submersible production platform Thunder Hawk
Snapshot 2009 Item(US$mln.) 2009 2008 Movement % CommentNetprofit 230.0 227.9 2.1 0.9 ImprovedTurnkeySystemscontribution;
YmeMOPUstor™impairment
Pershare(US$) 1.47 1.54 (0.07) (4.5) Higher average number of sharesEBIT 293.4 275.1 18.3 6.7 Improved Turnkey Systems contribution;
Yme MOPUstor™ impairmentEBITDA 613.3 530.1 83.2 15.7 Improved Turnkey Systems contributionEnterprisevalue(EV) 4,712.9 3,366.8 1,346.1 40.0 Market capitalisation increasedNetdebt 1,464.0 1,464.0 - - Lease fleet investments offset by new equityNetDebt:EBITDA 2.39 2.76 (0.37) (13.4) Comfortably within bank covenantsEV:EBITDA 7.7 6.4 1.3 20.3 EV increased with share priceTurnover 2,956.5 3,060.3 (103.8) (3.4) Turnkey Systems revenue downEBIT:Turnover(%) 9.9 9.0 0.9 10.0 Improved Turnkey Systems contribution;
Yme MOPUstor™ impairmentCashflow 549.8 482.9 66.9 13.9 Improved Turnkey Systems contributionPershare(US$) 3.66 3.34 0.32 9.6 Improved Turnkey Systems contributionNetcash 146.7 230.1 (83.4) (36.2) Comfortable levelCapitalexpenditure 655.9 999.8 (343.9) (34.4) Reflects slow order intake before H2 2009TotalEquity 1,816.8 1,240.9 575.9 46.4 Equity issue; Hedge portfolio value improvedCapitalemployed 3,325.8 2,740.9 584.9 21.3 Equity increasedROACE(%) 9.7 11.0 (1.3) (11.8) EBIT up; Average capital employed increased moreROE(%) 15.0 17.7 (2.7) (15.3) Net profit stable; Average equity upNetDebt:Equity(%) 80.6 118.0 (37.4) (31.7) Capacity to finance growthEBITDAinterestcover 10.2 13.1 (2.9) (22.1) Higher net interest charge
New oRdeRS:–Leases 2,374.4 1,437.8 936.6 65.1 Includes one major FPSO operating lease contract–TurnkeySystems 1,108.6 2,660.1 (1,551.5) (58.3) Includes one FPSO (finance lease)–TurnkeyServices 256.9 267.6 (10.7) (4.0) Exceeded2009turnover
TOTAL 3,739.9 4,365.5 (625.6) (14.3)
BACklog:–Leases 7,834.3 6,278.0 1,556.3 24.8 A new record–TurnkeySystems 1,995.0 2,796.2 (801.2) (28.7) 1 year equivalent turnover–TurnkeyServices 203.0 172.7 30.3 17.5 Normallevel
TOTAL 10,032.3 9,246.9 785.4 8.5
Shareprice31/12(€) 13.78 9.35 4.43 47.4
AEX-index 335.3 245.9 89.4 36.4
Marketcapitalisation(€) 2,265.4 1,361.3 904.1 66.4 Share price rose and new shares issuedMarketcapitalisation(US$) 3,248.9 1,902.9 1,346.0 70.7 Share price rose and US$ weakened against €Proposeddividend(US$) 0.67 0.93 (0.26) (28.0) 50% of net profit
12 SBMOffshore–AnnualReport2009
Overview
Highlights 2009
Financial• turnoverslightlydowntoUS$
2,957million(US$3,060millionin2008);
• neworderstotalledUS$3,740million(US$4,366millionin2008);
• EBITDAofUS$613.3million(US$530.1millionin2008);
• EBITofUS$293.4million(US$275.1millionin2008);
• EBITmargin9.9%(9.0%in2008);• netprofitofUS$230.0million
(US$227.9millionin2008);• non-recurringsalesofassets
generatednetprofitofUS$32.4million(US$31.4millionin2008);
• earningspershareofUS$1.47(US$1.54in2008);
• dividendofUS$0.67pershare(US$0.93in2008);
• investmentinfixedassetsofUS$656million(US$1,000mil-lionin2008);
• €180.7millionraisedthrough9.2%equityissue.
Expectations 2010• turnovertobeinthesame
rangeas2009;• averageEBITmargininthe
TurnkeySystemssegmentisexpectedtobesolidlywithinthe5%–10%range;
• TurnkeyServicesaverageEBITmarginexpectedaroundlowerendof15%–20%rangeduetopotentiallylowerutilisationrateforoneinstallationvessel;
• theEBITcontributionfromtheLeaseandOperatesegmentisexpectedtobebelowthelevelachievedin2009duetotheendofcertainleasecontractsin2009andlowerexpectedoperatingbonuses;
• netinterestchargewillincreasebyupto20%comparedto2009duetostartofoperationsonmajorleasecontractsandlow
expectedinterestincomeonliquidities;
• capitalexpenditure,excludinganynewoperatingleasecon-tractstobeobtainedin2010,isexpectedtoamounttoaroundUS$0.5billion;
• netgearingatyear-end2010isexpectedtoremainbelow100%,withallfinancialratioswellwithinbankingcovenants.
Lease & Operate• FPSOEspiritoSantostarted
operationoffshoreBrazil;• Semi-submersibleproduction
platformThunderHawkstartedoperationintheGulfofMexico;
• FPSOFradestartedoperationoffshoreBrazil(operatecontract,followingsupplyoftheunit);
• FPSOCapixabadisconnectedfromGolfinhofieldforupgradeandrelocationtoCachalotefield;
• 12monthsleaseextensionfromTotalfortheFSOUnityoperations;
• ExxonMobilterminatedtheleasecontractandredeliveredFPSOFalcon,followingaperiodofstandby;
• PetronasexercisedPurchaseOptionatendofleasecontractfortheTurkmenistanMOPU/FSO;
• new15yearleasecontractfromNobleEnergyfortheAsengFPSOinEquatorialGuinea;
• new18yearleasecontractfromPetrobrasfortheexistingEspadarteFPSOfortheBaleiaAzulfieldinBrazil.
Turnkey Supply & Turnkey Services• deliveryandstartupoftheFPSOFradeforChevroninBrazil;
• frameworkcontractarrangementfromShellforsupplyofturretsforFLNGfacilities;
• FrontEndEngineeringDesign(FEED)studyforanLNGFPSOforPetrobras;
• acontractfortheengineeringandsupplyofequipmentfortheDeepwaterCALMbuoyfortheUsanOilOffloadingLine(OOL)forTotal;
• goodutilisationlevelofbothinstallationvessels;
• deliveryofthefirstsegmentsoftheturretfortheSkarvFPSOforBP.
SBMOffshore–AnnualReport2009 13
Overview
Shareholder Information Share listingThesharesofSBMOffshoreN.V.havebeenlistedonthestockexchangeofAmsterdamsince11October1965,originallyunderthenameIHCHollandandlaterasIHCCaland.TheshareshavebeenincludedintheAEXIndexofEuronextAmsterdamsince4March2003withaweightingof0.79%on31December2009.OptionsonCompanyshareshavebeentradedsince7July1993ontheEuronextAmsterdamDerivativeMarkets.
Share price developmentThesharepriceincreasedby47.4%from€9.35atthestartoftheyearto€13.78at31December2009,comparedtoaincreaseoftheAEXIndexof36.4%overthesameperiod.InUSDollartermstheincreaseofthesharepricein2009was51.1%,fromUS$13.07toUS$19.75.
Averagedailyliquidityin2009amountedtoaround1.14millionshares,equivalentto194%oftheaveragenumberofoutstandingsharesonanannualbasis.
Marketcapitalisationat31December2009was€2,265millioncomparedwith€1,361millionattheendof2008,anincreaseof66.4%.Theequivalentfig-uresinUSDollarsshowamarketcapitalisationattheendof2009ofUS$3,249million,upby70.7%fromUS$1,903millionat31December2008.
Number of outstanding ordinary shares
InNovember2009,theCompanyraised€180.7millionthroughanacceleratedbookbuildofferingof13,896,880newordinaryShares,representing9.2%ofissuedcapi-tal,atapriceof€13.00pershare.ThiswasthefirstsuchofferingbytheCompanysince2001.
ThetotalnumberofordinarysharesinSBMOffshoreshowedthefollowingmovementsduringtheyear2009:
Number of ordinary shares
Balance 1 January 2009 145,613,988
Stock dividend 4,221,744Options exercised 604,400Bonus and performance shares 122,968Shares issued (equity increase) 13,896,880Balance 31 December 2009 164,459,980
14 SBMOffshore–AnnualReport2009
Overview
ShareholdersAs the shares are being held through the collective depot as mentioned in the Act on Securities Transactions by Giro (Wet Giraal Effectenverkeer) no detailed information concerning the identity of the shareholders are available. According to information provided by the largest banks and financial institutions, the shares are mainly in the hands of institutional investors.
Share Prices
Turnover as % of share
capital
Highest share price
in €
Lowest share price
in €
Closing share price
in €
Closing share price
in US$
2005 170.26 18.14 11.44 17.06 20.102006 221.22 26.45 17.19 26.05 34.332007 240.52 31.52 19.85 21.60 31.802008 309.94 26.77 8.72 9.35 13.072009 193.63 15.30 9.00 13.78 19.75
Share prices for the years 2005 through 2006 are restated for the four for one share split effected on 2 June 2006.
One institutional investor, Schroders Plc from the United Kingdom has, as required under the Major Holdings in Listed Companies Disclosure Act, dis-closed an interest in the capital of SBM Offshore in excess of 5%. The interest disclosed amounts to 9.98% of the Company’s share capital.
At 31 December 2009, employees of the Company own 988,431 shares in SBM Offshore through an Employee Share Ownership Plan (ESOP).
DividendThe Company’s dividend proposal returns to the usual 50% of net profit pay-out ratio for 2009, with the choice of payment of the dividend in cash or in shares of SBM Offshore at the election of each shareholder.
Based on the year-end closing price, the proposed divi-dend of US$ 0.67 per share gives a yield of 3.4% per share (7.1% in 2008).
The annual dividend will be calculated in US Dollars, but will be payable in Euros. The conversion into Euros will be effected on the basis of the exchange rate on 14 April 2010, the day the Annual General Shareholders Meeting is held. The same exchange rate will apply for the divi-dend payment in shares of SBM Offshore.
SBM Offshore – Annual Report 2009 15
Overview
Overview
Business Drivers and Competitive Position Business drivers• Globaloilandgassupply/demanddeterminingthe
oilpricelevel:themaindriverfuellingE&Pbudgets;• Explorationanddiscoveriesindeepandultra-deep
water offshoreandarcticareas;• MarketforLNGexport/importinfrastructure
andservices;• UpcomingmarketforoffshoreFloatingLNG
productionplants;• Requirementformorecomplexfloatingproduction
systemstoprocessfluidsfrommorechallengingreservoirs;
• Continuingdemandforseaborneoiltransportation;• Explorationactivitiesincreasingthedemandfor
offshoredrillingrigequipment;• Governmentspromotingrenewableenergywhich
increasesthedemandforwindturbineinstallationvesselsandotherrenewableenergysolutions.
Threats• CompetitionfromKoreanandChineseshipyards
forlargeturnkeyFPSOprojects;• CompetitionfromotherFPSOcontractorsgaining
experienceandmarketshare;• Shortageofqualifiedengineeringandproject
managementresourcesintheindustry;• Volatilityofinputcostsparticularlyontheequipment
supplysector(pressuredecreasingonconstructionandshipyardcapacity);
• Loweroilpricepotentiallycausingdelayinprojectsanctionbyoilcompanies;
• CapexoflargeFPSOswithhighlocalcontentobligationscreatingcomplexityinraisingprojectfunding.
Competitive strength• Flexibilityincapacitywithfourprojectexecution
centres;• Allconstructionoutsourced;• New,costeffective,patented,technicalsolutions
forproducinginincreasinglydeepwater;• Comprehensivetoolboxfordeepwater
developments;• In-houseintegratedcompetencetomanage,design,
supply,installandoperatecomplete,complexoffshoreoilandgasproductionfacilities;
• FitforpurposeFPSOconcept,basedon184yearsofcumulativeF(P)SOoperatingexperience;
• PatentedtechnologyonLNGcomponents;• LeadingpositioninthedevelopmentofaFloating
LNG productionproject;• Trackrecord–Clients’highopiniononsafety
andperformance;• Financialstrengthandreputation;• Strategicpartnershipswithseveralcompanies;• Extensionofleasecontractsorredeliveryofunits
withavailableresiduallife.
Competitive disadvantages• Lesscompetitiveonthelowendofthe
FPSOmarket;• HighEuroincreasescostofEuropeanbased
engineers.
16 SBMOffshore–AnnualReport2009
Overview
Company Mission and PrinciplesTowards Clients• toprovidesuperiorproductsandservicesthrough
innovative,fit-for-purposeandcompetitivesolutionsfortheoffshoreenergyindustry;
• todesign,construct,install,maintainandoperatesuchfacilitiesinasafeandenvironmentallysoundmanner;
Towards Employees• togenerateanattitudeofenthusiasmandpride
throughouttheCompany,throughpromotinghigh-technologyproductsandprovidingamostfavourableenvironmentforprofessionalandpersonaldevelopment,andtohighlyrewardit;
Towards Suppliers• tosupportfaircompetitionandstriveforlong-term
stabilityintherelationships;• tojointlyimprovesocialandenvironmental
performance;
Towards Society / Communities• tosupportandpromotehumanrightsand
contributetosocialwelfareinthecommunitieswhereweoperate;
• tosupportandpromotebusinesspracticesfreeofbriberyandcorruption;
Towards the Environment• tominimizethenegativeimpactandrisksofour
activitiesontheenvironmentandco-operatewithbusinesspartnerstoimproveperformance;
Towards Shareholders / Capital providers
• toconstantlyimproveourknow-howandefficiency,withtheobjectivetogeneratereturnswellabovethecostofcapital;
• tomaintainahighdegreeoftransparencyandreliabilitybyprovidingaccuratefinancialandnon-financialinformation;
• toachievethehigheststandardsofcorporategovernance;
• toprovideEPSgrowthaheadoftheexpectedEPSgrowthoftherelevantoilandgasindustry’sindices.
SBMOffshore–AnnualReport2009 17
Corporate Strategy TheCompanyhasenhanceditsCorporateStrategicPlanningprocessin2009anddevelopedanewCorporateStrategicPlan,definingtheCompany’sobjectivesforthecomingthreeyears.TheCorporatePlanissupportedbyBusinessAreaPlans,acrosstheCompany’smainareasofactivities:LeaseandOperate,TurnkeySystemsandTurnkeyServices.ThestrategydrawsupontheoutcomeofanumberofStrategySeminarsheldwiththeseniormanagementteamandwillbereviewedonanannualbasistakingintoaccountsignificantdevelopmentsinthemarketplaceandanyexternaleventsthatwouldaffecttheCompany’sbusiness.
TheCompany’sCorporateStrategicPlanningproc-ess,asoutlinedbelow,startswiththeCompany’sMissionstatementandthedefinitionoftheCompany’sStrategicObjectives.TheStrategyFormulationconsistsofthedevelopmentoftheBusinessAreaObjectivesinsupportoftheCorporateObjectives.Progresswillbemeasuredregularlyandusedasfeed-backforboththeBusinessAreaObjectivesaswellastheCorporateObjectives.
Company missionTheCompany’smissionstatementreads:Toprovide solutionsfortheoffshoreenergyindustry.
Themissionstatementhaschangedin2009fromonefocussingsolelyontheoilandgasindustryintoabroaderstatement‘energyindustry’inordertoincludetheCompany’sambitionsrelatedtorenewableenergysolutions.
Theexpressionofthismissionstatementinafewmajorobjectiveswithrespecttothekeystakeholdersishigh-lightedintheprevioussection.
TheCompany’smottois:TechnologyCreatingValue.
ThekeytargetsdrivingtheCompany’sstrategyforthethreebusinesssegmentswillbegrowth,performance,leadershipandthedevelopmentofnewmarkets.
Lease and OperateTheleaseandoperationofoilandgasproductionfacilitiesisthemaincomponentoftheoperatingresultsandtheCompanyholdsapositionofleaderintheFPSOleasingmarket.Themeritoftheleasingactivityisessentiallythatitprovideslong-termvisibilityofcashflowsandearnings,howeveritrequirestightmanage-mentofcomplexfinancial,operationalandcontractualrisks.Thestrategyistoretainthisleaderpositionwithgrowthoftheleasefleet,whileremainingfocusedonhighstandardandcomplexclientdemand,asthisrequiresintegratedcompetenceandlargeresourcesinengineeringandprojectmanagement.Inviewoftheincreasedsizeofnewprojects,strategicpartnershipswillbepursuedfurtherwherenecessarytoleveragethecurrentposition.
FortheCompany’sfleetoperationstheobjectiveistoconcentrateonperformanceandfurtherincreasereli-abilityoftheunits,maximizeproductionuptimeforourclientsandstriveforexcellenceinourfleetoperations.
Theleaseofothertypesoffacilities,suchasMOPUstor™,MOPUandsemi-submersibleproduc-tionunitsarenowoftenbeingpursuedusingthesameprinciplesthatapplytoanyoilandgasproductionunitprovidedthatithasatleastthesamerelocationpoten-tialasanFPSO.RecentexamplesofsuchfacilitiesbeingdevelopedfornewgeographicalareasincludetheNorthSea,CanadaandtheGulfofMexico.Itisexpectedthattheeffortsmadeduringthepastfouryearsinthedevelopmentofgasrelatedtechnology
Feedback
Corporate Mission
Corporate Strategic Objectives
Business Area Objectives
Strategic Analysis
Strategy Formulation
Implementation
Control
Corporate Strategic Planning
18 SBMOffshore–AnnualReport2009
Overview
willoffertheleasebusinessanotherareaforexpan-sioninthecomingyearswithFloatingStorageRe-gasificationUnit(FSRU) andLiquifiedNaturalGas(LNG)/LiquifiedPetroleumGas(LPG) FPSOs.
Lease and operate principlesTheleaseandoperationoffloatingproductionunitsisacapitalintensivebusinessandthestrategyoftheCompanyistocontinuetoapproachthisactivitycarefully,particularlyinthecurrenteconomicclimate.Thefollowingseriesofprinciplesareappliedinaconsistentmanner:• noinvestmentonspeculation,investonlyonthe
basisofacontractinhand,exceptfortheacqui-sitionofexistingtankersorhullssuitableforconversionintoanFPSO;
• convertonlyqualitytankersexcluding‘early’doublehulls;
• contractforfirmleaseperiodsideallyinexcessoffiveyears;
• revenuesnotexposedtooilpricevariations;• revenuesnot,oronlytoalimitedextent,linkedto
reservoirperformance;• interestandcurrencyexchangerateriskshedged
uponcontractaward;• whereappropriateuseprojectfinancingforupto
80%ofcapexbyfirstoildate;• projectdebtfullyrepaidbyleaseincomefrominitial
leaseduration;• applyconservativepolicieswithrespectto
depreciation;• managefleetoperationsin-house;• engageallseniorstaffforthefleetunderdirect
employment;• placesafetyperformanceandenvironmental
protectionasprimaryobjectives.
Lease partnershipsTheCompanyaimstofurtherdiversifyitssourcesofcapitalthroughtheuseofpartnerships.Engaginginlongtermpartnershipsisbecomingparticularlyimpor-tantduetotheincreasingsizeandcapitalrequirementsofourfutureprojects.Sofar,intheleaseandoperatesegment,theCompany’spartnershavebeenrespon-sibleforapre-definedpartoftheprojectaswellasacquiringacertainpercentageoftheownershipoftheproductionfacility.
SBMOffshore–AnnualReport2009 19
Overview
Top: SBM offshore employees
Middle: Manifold section of the Skarv turret for BP
Bottom: windturbine installation vessel
Reasonsforhavingequitypartnershipsinclude:• obtainingaccesstocertainspecificexpertisenot
availablewithintheCompany;• obtainingaccesstoatankerunderconstructionin
ordertomeettherequireddeliverytimeschedule;• mitigatingbusinessrisks,especiallyforunitswhere
theinitialleasecontractisrelativelyshort;• takingmutualadvantageofaclient’spreferencefor
aparticularcompany,whichdoesnotitselfhavethenecessarycompetencetosupplyandinstallacompleteFPSO;
• financingoftheequityinvestmentaswellasenlarg-ingthepotentialsourcesofdebtthroughaccesstothepartner’srelationshipbanksand/orExportCreditAgencies.
PartnershipsareonlyengagedinordertobothenhancetheprobabilityofsecuringnewbusinessandinthelongruntoaddvaluetotheCompany’sperformance.
Turnkey SystemsTheCompanyisaleaderinthesupplyofcomplexmooringsystems,FPSOs,TLPsandSemi-SubmersibleunitsandotherinnovativetechnologysuchastheGravityActuatedPipe (GAP)system.
ThestrategyistomaintainthisleadershippositionandtodevelopnewmarketsandgrowthintheTurnkeySystemssegmentbasedonaselectiveapproachdependingonthecomplexityofthetechnology,theclientandthecontractingconditions.Thefocusistodeveloptechnologicalsolutionstosuitour clients’needsandsellthesesolutionsonaturnkeybasiswhileengaginganacceptableriskandrewardbalance.TheCompanywillaimtoidentifytheclients’needsandpro-poseinnovative,fitforpurpose,robustsolutionswithsuitabledeliveryschedulesandappropriateprices.
AnimprovedexecutionperformanceistargetedfortheTurnkeySystemssegmentfocusingonrobustproce-dures,increasedprojectmanagementandenhancedprojectcontrols.Theplanistoraisethelevelofexper-tiseandefficiencyoftheengineeringandprojectmanagementresources,whichhavenowreachedanannualcapacityofmorethan3millionmanhours.
FortheLNGandgasmarketsdevelopmentthefocusisonsellingtheLNGFPSOanddevelopmentofthecryo-genicflexiblehoseandaseriesofdownstreamoffshoregassolutionswillalsobepursued.Inaddition,theCompanyisdevelopingmarineenergytechnologies.BothLNGandRenewablesarepartofthediversifica-tionoftheCompany’sincomestreams,geographicalmarketsandclientbaseinthelongrun.
Turnkey ServicesTheCompanyhasalwaysownedandoperatedanoff-shoreinstallationvesselwiththecapabilitiestoinstalltheCompanysuppliedproducts,eitherfortheleasefleetoronaturnkeysalesbasis.Themainobjectiveofthisvesselisstrategic,creatingacompetitiveedgefortheCompanyasitcanincludeandestimatethecosts,oftentwotothreeyearsfromaward,ofoffshoreinstallationoftheunits.TheNormandInstalleristheCompany’sthirdgenerationinstallationvessel,ownedinjointventurewithSolstad,andinadditiontointernalwork,italsoworksforthirdparties.Recentlytheves-selwasupgradedwithafacilitytoinstallflexiblepipe,whichincreaseditscapabilityandmarketability.TheDynamicInstalleristheCompany’ssecondinstallationvessel,fortheinstallationofCALMbuoys,andothershallowwaterworkincludingdivingservices.
Thefocusforthecomingthreeyearswillbetosuc-cessfullydeploytheCompany’sownedinstallationvessels,bothtosupportinstallationoftheCompany’sunitsaswellastoprovideservicestothirdparties.TheCompanyplanstomaintainitsleadingpositionforthesupplyofCALMbuoys,swivelsandservices. Thesup-plyofspareparts,engineeringandinspectionservicesfortheCompanysuppliedterminals(morethan400worldwide)hasalsobeenaveryimportantactivity,whichwillcontinuetoexpandinthefuture.
20 SBMOffshore–AnnualReport2009
Overview
Houston
Schiedam
Monaco
Marly
Kuala Lumpur
Project Execution/Corporate Centres Shore Bases Lease Units Future Lease Units Operate only Laid-up Unit
World Map of SBM Offshore
SBMOffshore–AnnualReport2009 21
Overview
Report of the Supervisory Board
22 SBMOffshore–AnnualReport2009FPSO Frade in operation in Brazil
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 23
Report of the Supervisory Board
24 SBMOffshore–AnnualReport2009
2Report of the Supervisory Board
25 Introduction 27 Meetings of the Supervisory Board Committees 29 Remuneration Report 37 Information regarding the Supervisory Board members
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 25
IntroductionTheSupervisoryBoardofSBMOffshoreN.V.,herebypresentstheAnnualReport2009incorporatingtheFinancialStatementstobediscussedandadoptedintheAnnualGeneralMeetingofShareholdersonWednesday14April2010.TheFinancialStatementshavebeenauditedbytheexternalauditors,KPMGAccountantsN.V.TheirfindingshavebeendiscussedwiththeAuditCommitteeandtheSupervisoryBoardinthepresenceoftheBoardofManagement.TheauditorshaveexpressedanunqualifiedopinionontheFinancialStatements.
TheSupervisoryDirectorshavesignedtheyearlyfinan-cialstatementspursuanttotheirstatutoryobligationsunderarticle2:101(2)oftheDutchCivilCode.
ThemembersoftheManagementBoardhavesignedtheyearlyfinancialstatementspursuanttotheirstatu-toryobligationsunderarticle2:101(2)oftheDutchCivilCodeandarticle5:25c(2)(c)oftheFinancialMarketSupervisionAct.
TheManagementBoardhasmadeadividendproposalofUS$0.67pershare(2008:US$0.93)payableattheshare-holders’choice,eitherincashorinshares.TheSupervisoryBoardisinagreementwiththeproposalmade.
Composition of the Supervisory Board
AttheAnnualGeneralMeeting(AGM)of14May2009,Mr.R.vanGelderreachedtheendofhisfirstfour-yeartermasaDirectoroftheSupervisoryBoardandwasre-appointedforasecondfour-yearterm.Followinghisre-appointment,Mr.R.vanGelderwasalsore-appointedchairmanoftheRemunerationCommittee.EffectiveSeptember15,2009,Mr.D.H.Kellerresignedasa
DirectoroftheSupervisoryBoard.TheSupervisoryBoardexpressesitsgratitudetoMr. D.H.KellerforhisvaluablecontributiontotheSupervisoryBoardandtotheCompanyingeneralduringhislongcareerwithSBMOffshore.
TheSupervisoryBoardischairedbyMr.H.C.Rothermund,Mr.L.J.A.M.Ligthartisthevice-chairmanandMr.F.G.H.Deckers,Mr.T.EhretandMr.R.vanGelderareSupervisoryDirectors.
UpontheadviceoftheSelectionandAppointmentCommittee,theSupervisoryBoardwillmakeanon-bindingproposaltotheAGMtoappointMr.F.J.G.M.CremersasaSupervisoryDirector.
Composition of the Committees of the Supervisory Board
Mr.L.J.A.M.LigthartistheChairmanoftheAuditCommitteeandMr.F.G.H.DeckersisamemberoftheAuditCommittee.
Followinghisre-appointmentasaSupervisoryDirector,Mr.R.vanGelder,wasre-appointedbytheSupervisoryBoardastheChairmanoftheRemunerationCommittee.Mr.H.C.RothermundisamemberoftheRemunerationCommittee.
TheSelection&AppointmentCommitteeischairedbyMr.H.C.Rothermund.Mr.L.J.A.M.Ligthartisamem-beroftheSelection&AppointmentCommittee.
TheSupervisoryDirectorswhowereappointedin2008,Mr.T.EhretandMr.F.G.H.Deckers,havecompletedtheirinductionprogrammeandhavevisitedalloftheCompany’sprojectexecutioncentres.
Meetings of the Supervisory Board
Duringthecourseoftheyearunderreview,theSupervisoryBoardheldeightmeetingsaccordingtoapre-setmeetingschedule.Inadditiontothesemeetings,therewasregularinformalcontactbetweentheChairmanandtheCEO,aswellasregularcontactbetweenSupervisoryDirectorsandtheBoardofManagement.
Report of the Supervisory Board
26 SBMOffshore–AnnualReport2009
CertainSupervisoryBoardmeetingswereprecededbyapre-meetinginwhichthefollowingitemsweredis-cussed:successionplanningoftheSupervisoryBoard,compositionofthecommitteesoftheSupervisoryBoard,andcompositionoftheManagementBoard.Onepre-meetingwasdedicatedtodiscussingtheper-formanceoftheSupervisoryBoardasawholeanditsindividualDirectors.Inaddition,theperformanceoftheBoardofManagementanditsindividualmemberswasdiscussedwiththeCEOandcontinuedinaprivateses-sionamongsttheSupervisoryDirectors.
AllSupervisoryDirectorsattendedtheSupervisoryBoardmeetingsonaregularbasis,eitherphysicallyorbytel-ephonewherebytheSupervisoryDirectorwhocouldnotattendthemeetingphysicallycouldfollowtheproceed-ingsofthemeetingandvoicehisopinion.TherewerenorepeatedabsencesofanyoftheSupervisoryDirectors.
AllbuttwomeetingsoftheSupervisoryBoardwereheldatthestatutoryofficesoftheCompanyinSchiedam,TheNetherlands.InNovember2009,theSupervisoryBoardmetinMonacoandinDecember2009,theSupervisoryBoardtravelledtoSingaporeandMalaysia.InSingapore,theCompany’songoingP-57FPSOconversionworkwasvisitedattheKeppelShipyardandtheongoingtopsidesconstructionworkwasvisitedatDyna-Mac,amajorsubcontractor.AttheMonacoandKualaLumpur projectexecutioncentres,projectmanagementandseniormanagementwereinterviewedandinformationaboutthemajorprojectprogressandthestateofaffairsattherespectivecentreswasreceived.
InitsroleofsupervisingthepoliciesoftheCompanyandadvisingtheBoardofManagement,theSupervisoryBoardchallengesinaconstructivewayandwithdueregardtotheinterestsofallstakeholderstheactionsandplansoftheManagementBoardconcerningthemanagementoftheCompany’sbusinesses.OtherthanitsgeneralactivitiesandresponsibilitiesaslaiddownintheArticlesofAssociationandtheRulesgoverningtheSupervisoryBoardprinciplesandbestpractices,thesubjectsthattheSupervisoryBoardhasfollowedpar-ticularlycloselyin2009include:• strategyoftheCompanyforachievinglong-term
growthandenhancingshareholdervalue,includingnewproductsandmarkets,contractingstructuresandfinancestrategy;
• successionplanningfortheBoardofManagementandtheSupervisoryBoard;
• supportforthevariousperformanceimprovementinitiativesidentifiedandprogressedbytheBoardofManagement;
• remunerationoftheManagementBoard;• riskmanagementsystemsandcontrols,insurance
andlegalclaims;• corporatesocialresponsibility;• safetyperformance;• compliancewiththeRevisedCorporateGovernance
Codewhichcameintoforceon1January2009;• meetingswithseniorstaffinMonacoandKuala
Lumpur;• materialtendersandcontractawards;• impactontheCompanyofthefinancialcrisis;• theraisingof€180.7millionthroughanequityoffer-
ingof13,896,880ordinarysharesatapriceof€13.00persharethroughanacceleratedbookbuildoffering;
• technicalandR&Dmattersandreportsandthesub-sequentresolutiontocreateaTechnicalcommitteeoftheSupervisoryBoard.
Inaddition,extraordinarymeetingsoftheSupervisoryBoardwereheldon13May2009,28-29May2009,22June2009andon29October2009todiscussandsubsequentlytoapprovetheManagementBoard’sproposalsconcerningtheQ1TradingUpdate,theorganisationalstructureoftheCompany,theprepara-tionofthesub10%equityemission,andtherelocationoftheEspadarteFPSO.
Independency of the Supervisory Directors
Thepersonaldetails,gender,termof(re)appointmentandotherboardpositionsofeachSupervisoryDirectoraredescribedintheInformationsectionattheendofthisreport.
TheSupervisoryBoardconfirmsthatallmemberswhoservedduringtheyearareindependentasmen-tionedunderBPIIII.2.2oftheCorporateGovernanceCode,exceptforMr.D.H.Kellerwhowas,priortohisappointment,theCEOoftheCompany.MrD.H.KellerresignedasaSupervisoryDirectorwitheffectfrom15September2009.
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 27
Meetings of the Supervisory Board CommitteesAudit CommitteeTheAuditCommitteeconvenedforsixregularmeetingsin2009andinadditionheldonemeetingbytelephoneconference.TheregularAuditCommitteemeetingswereheldontheafternoonprecedingtheSupervisoryBoardmeeting,wheretheAuditCommitteeChairmanreportedontheprincipalissuesdiscussed.Themin-utesofthemeetingoftheAuditCommitteewerereviewedinthenextmeetingoftheSupervisoryBoard.TheCEO,CFOandtheexternalauditorattendedallthemeetings.AteachofthemeetingstherewasaprivatemeetingwiththeexternalauditorwithouttheCEOorCFObeingpresent.
Themainitemsthatwerediscussedduringtheyearwere:• annualandhalf-yearlyFinancialStatementsand
financialdatatobeincludedinpressreleases;• quarterlyfinancialreports;• analysisofthefinancialresultsofprojects;• riskmanagement,internalcontrolandaudit,
insuranceandlegalclaims;• discussionoftheCompany’sInternalControl
FrameworkanditsInControlstatement;• reportsbyexternalauditorsandfollow-upofthe
recommendationsandobservations;• relationswiththeexternalauditor,including,in
particular,theindependence,remunerationandnon-auditrelatedservicesprovidedtotheCompany.AnalysisoftheKPMGfeesisdisclosedwithinnote 2totheFinancialStatements;
• performanceoftheexternalauditor.Theassess-mentoftheexternalauditor’sperformanceraisednomajorissuesthatwouldleadtoaproposaltoreplaceKPMGAccountantsN.V.Overallthestand-ardoftheauditteam,theauditprocessandfees,andtheinteractionwiththeCompany’spersonnelwereallfoundsatisfactorygiventhesize,complex-ityandriskprofileoftheCompany.TheAGMwillbeaskedtoapproveaproposaltore-appointKPMGAccountantsN.V.asexternalauditoruntiltheclo-sureoftheaccountingyear2011;
• fraudorotherirregularities;• specificaccountingissuessuchastheimpairment
testontheCompany’sassetsandclassificationofleasecontractsaseitheroperatingorfinancialleases;
• fiscalpolicyandpositionoftheCompany;• dividendpolicy;• financingoftheCompany,includingbankcovenant
compliance,andbalancesheetgearing;• theequityofferingreferredtoabove;• discussionoftheimpactandexposuresrelatingto
thefinancialcrisis;• InformationSystemsandInformationand
CommunicationTechnology(ICT);• adequacyofstaffingoffinanceandadministration
functions;• adequacyofinsuranceprogrammes;• budgetsandforecastsfortheCompanyasawhole,
andforitsmajorprojects;• reportsonTreasuryexposuresandforecastscover-
ingforeignexchange,interestrates,cashflowsandguarantees.
Remuneration CommitteeTheRemunerationCommitteemetfivetimesin2009.ThemeetingsoftheRemunerationCommitteewereheldpriortotheSupervisoryBoardmeetingswheretheRemunerationCommittee Chairmanreportedontheprincipalsubjectsdiscussed.TheminutesoftheRemunerationCommitteewerereviewedinthenextmeetingoftheSupervisoryBoard.Inaddition,therewasregularcontactbetweenthemembersoftheCommitteeandtheManagingDirectors.
AttheAGMof2008,theRemunerationPolicy2008wasapproved.ThisRemunerationPolicyisthebasisfortheremunerationoftheManagementBoard.Theremunera-tionelementsforthecurrentManagingDirectors(BaseSalary,Short-TermandLong-TermIncentives)wereestablishedinaccordancewiththepolicy.Moreinforma-tioncanbefoundintheRemunerationReporthereafter.
ThemainsubjectsdiscussedbytheRemunerationCommitteewerethefollowing:• remunerationoftheManagingDirectorsand
benchmarking;• remunerationmattersrelatedtoformerManaging
Directors;
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28 SBMOffshore–AnnualReport2009
• ShortTermandLongTermIncentives;• shareplanfortheManagingDirectors;• thereplacementofthestockoptionplanforSenior
SBMemployeesbyasharebasedLTIplan;• retirementarrangementsfortheManagingDirectors
andemployees.
TheRemunerationCommitteereceivedadvicefromaspecialistremunerationconsultant.
Selection and Appointment Committee
TheSelectionandAppointmentCommitteemettwiceduringtheyear.Themainsubjectsdiscussedwerethesuccessionplanningingeneral,there-appointmentofMr.R.vanGelderasaSupervisoryDirector,theresig-nationofMr.D.H.KellerasaSupervisoryDirectorandtheselectionofMr.F.J.G.M.CremersasaSupervisoryBoardDirector.
In conclusionTheSupervisoryBoardexpressesitsgratitudetotheCompany’semployeesandtheBoardofManagementfortheircommitmenttotheCompanyandtheperform-anceachievedin2009inadifficultbusinessandfinancialenvironment.TheSupervisoryBoardbelievesthatthesuccessfulissuanceofequityandtheorganisationalchangesimplementedduringtheyearunderreviewwillbetterpositiontheCompanytorealiseitsambitionofachievingitstargetsforshareholdervaluegrowth.
Schiedam, 25 February 2010
Supervisory BoardH.C.Rothermund,ChairmanL.J.A.M.Ligthart,Vice-ChairmanR.vanGelderF.G.H.DeckersT.Ehret
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 29
Remuneration ReportTheRemunerationReportservestoinformsharehold-ersandotherstakeholdersontheremunerationofthemembersoftheManagementBoard.ThereporthasbeenpreparedbytheRemunerationCommittee.Itisdividedintothefollowingseparatesections:Section1:AbouttheRemunerationCommitteeSection2:DutchCorporateGovernanceCodeSection3:SummaryofthecurrentRemunerationPolicySection4:TheemploymentcontractsofthemembersoftheManagementBoardandtheiractualremunera-tionin2009
Section 1: About the Remuneration Committee
During2009,theRemunerationCommitteeconsistedofthefollowingmembers:• Mr.R.vanGelder(ChairmanoftheRemuneration
Committee);and• Mr.H.C.Rothermund
BothMr.R.vanGelderandMr.H.C.RothermundareindependentmembersoftheSupervisoryBoard.
Mr.R.vanGeldertookupthepositionofCEOofHeijmansN.V.asof1July2008foratermoftwoyears.Consequently,thepositionofMr.R. vanGelderasChairmanoftheRemunerationCommitteewasnolongerinlinewithbestpracticeprovisionIII.5.11oftheDutchCorporateGovernanceCode.However,giventhefactthatMr.R. vanGelder’sroleatHeijmansN.V.concernsatemporarypositioninaDutch-basedcompanyprimarilyactiveontheDutchmarket,thereis,intheopinionoftheSupervisoryBoard,noconflictofinterestandthereforetheSupervisoryBoardhasrequestedMr.R.vanGeldertocontinueinhisroleasChairmanoftheRemunerationCommittee.Thisnon-complianceisduetoterminatesinceHeijmansN.V.issuedapress-releasetotheeffectthatMr.R. vanGelderwillretirefromtheManagementBoardofHeijmansN.V.atthe2010AGMthereof.
During2009,theRemunerationCommitteeaddressedthefollowingmainissues:• analysisoftheimplicationsoftherevisedCorporate
GovernanceCodeandupdateoftheSupervisoryBoardandManagementBoardruleswhererequiredtoenabletheimplementationoftheCode’sbestpractices;
• determinationoftheactualpay-outundertheShort-TermIncentiveinrespectofperformanceyear2008andsettingofthetargetsfortheShort-TermIncentivefortheperformanceyear2009;
• measurementoftheachievementoftheperform-ancecriteriafortheLong-TermIncentivevestingin2009andthecorrespondingvestinglevel;
• settingofthetargetsfortheLong-TermIncentivesawardedin2009;
• benchmarkingoftheremunerationoftheManagingDirectors
• introductionofaglobalrestrictedshareplanforanumberofseniormanagersandstaffthroughouttheCompanyreplacingthestockoptionplan;
• reviewoftheretirementarrangementsthroughouttheCompany;
• reviewandfollow-uponadisputewithaformerManagementBoardmemberwholefttheCompanyin2004.
TheRemunerationCommitteehasreviewedtheRemunerationPolicy2008andthecurrenttermsandconditionsofemploymentoftheManagementBoardmembersinlightoftheCode.Theconclusionsofthisreviewaresetoutinsection4ofthisreport.
Inadditiontoitssupervisory,monitoringandadvisoryroletotheSupervisoryBoardinmattersofremunera-tionoftheManagementBoard,theRemunerationCommitteealsosupervises,monitorsandadvisesontheremunerationpoliciesforseniormanagers,andotheremployees,particularlyinrespectofsharesorsharebasedremuneration,asappliedbytheManagementBoardthroughouttheCompany.
For2010andonwards,theRemunerationCommitteewillfocusonconductingscenarioanalysesonaregularbasisandontargetsettingfortheShort-TermIncentiveaswellastheLong-TermIncentive.Especiallyinlightofthecurrenteconomicclimateandthesharepriceofthe
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30 SBMOffshore–AnnualReport2009
Company,itshouldbeascertainedthattheperform-ancetargetssetarechallengingbutrealisticandresultinpayoutlevelsthatreflecttheCompany’sperform-anceandstrategicneeds.
Theannualbasesalariesfor2010ofMr.A.J.MaceandMr.M.A.S.Mileswerekeptatthe2009level.
Section 2: Dutch Corporate Governance Code
TheCorporateGovernanceMonitoringCommitteehaspublishedtheamendedDutchCorporateGovernanceCodeon10December2008andon21December2009,theAmendedCodehasbeendesignatedbylawastheCorporateGovernanceCode(Code)onthebasisofwhichcompaniesshouldreport.Duringtheyearunderreview,theRemunerationCommitteedevotedmuchattentiontotheassessmentoftheimplicationsoftheCodeontheCompany’s2008RemunerationPolicy.InthisrespecttheSupervisoryBoardwishestomakethefollowingstatements:• scenarioanalysesoftheLong-TermIncentive
awardsgrantedin2008(fortheperformanceperiod2008-2009-2010)andin2009(fortheperformanceperiod2009-2010-2011)andofthegranttobemadepursuanttotheCompany’sRemunerationPolicyin2010havebeencarriedoutbytheRemunerationCommittee.TheremunerationconsultantswhoadvisedtheSupervisoryBoarddonotadviseanyoftheManagingDirectors;
• thetotalremunerationpackageconsistsofanappropriatemixoffixedandvariableremunerationelementscontributingtotheincreaseinlong-termvalueoftheCompany.BoththeShort-TermandtheLong-TermIncentivearrangementscontributetolong-termvaluecreation;(i)theShort-TermIncentivebypartlypayingoutinsharesandtherelatedsharematchingcomponent;(ii)theLong-TermIncentivebylinkingthevestingtotheaverageEPSgrowthoverathree-yearperiod;
• theRemunerationPolicy2008hascontributedtoamoresimpleandtransparentremunerationstructure.
• theSupervisoryBoardrules,theManagementBoardrulesandtheindividualemploymentcontractswiththeManagingDirectorscontainanadjustment
clauseaccordingtowhichtheSupervisoryBoardmayadjustupwardsordownwardsthevalueofanyvariableremunerationcomponentcondition-allyawardedinapreviousfinancialyearwhen,initsopinion,suchvariableremunerationcomponentwouldproduceanunfairresultonaccountofincor-rectfinancialdataorspecialcircumstancesintheperiodinwhichthepredeterminedperformancecri-teriahavebeenorshouldhavebeenachieved;
• theremunerationstructureandthevariableremuner-ationcomponentsdonotencouragerisktakingthatisnotinlinewiththeriskprofileoftheCompany;
• a ceiling(cap)appliestothevestingofthenumberofconditionalperformancesharesundertheLong-TermIncentiveplan.
Section 3: Summary of Remuneration Policy 2008
Objective and Structure
TheRemunerationPolicy2008hasbeendesignedtoensurethatManagingDirectorsreceivefortheirworkaremunerationpackagewhichenablestheCompanytoattract,promoteandretaininternationallyoriented,qualifiedandexpertpersons.
Thetotalremunerationpackageandthedifferentele-mentsandlevelsofremunerationarebench-markedperiodically,withtheassistanceofanexternalremu-nerationadvisertotheSupervisoryBoard,againstthoseprevailinginapeergroupofcompaniestoassertthecontinuedeffectivenessoftheRemunerationPolicy.TheCompanyusestwodifferentpeergroups:• agroupofsimilarsizedDutchbasedcompanies
consistingofsmallersizeAEX-listedandlargersizeAMX-listedcompanies,and
• aninternationalgroupofdirectcompetitorsintheinternationaloilandgasoffshoreindustry.
TheManagingDirectors’totalremunerationconsistsofthefollowingelements:
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 31
Total Remuneration of Managing Directors
Type of Payment Objective
FixedBase Salary Cash Reflect position and responsibilities
Pension Cash Provide funding for retirement
VARiABleShort-Term Cash (80%) Create economic value
Shares (20%) Retention of management
Matching Shares
Long-Term Incentive Shares Create sustainable growth and align with shareholders’ interests
oTheRSCar Advantage in kind
Fringe benefits Advantage in kind
Implementation of Remuneration Policy 2008
Base salary ThefixedpartorbasesalaryoftheManagingDirectors’totalremunerationrelatestotheactivitiesoftheCompanyandtheneedtoattracthighly-qualified,internationally-orientatedmanagement.Thebasesal-aryisreviewedonayearlybasistoascertainthatitslevelremainscompetitivecomparedtothepeergroupsreferredtointheprecedingparagraph.
PensionManagingdirectorsparticipateinadefinedbenefitsCompanypensionplanwhichcurrentlyprovidesforretirementattheageof62withamaximumpen-sionequalto70%offinalsalary,earnedattherateof2%foreachyearofservicewithintheSBMOffshoregroupofcompanies.Premiumispayablefor2/3bytheCompanyandfor1/3bytheManagingDirectorwhichamountiscappedat20%ofthebasesalary.Thisplan,andotherretirementbenefitsplansapplyingtoseniormanagementandstaff,arereviewedonaregularbasisbytheSupervisoryBoardwhocanmakeadjustmentstothepensionplansforManagingDirectorswhenappropriate.
Variable RemunerationThevariablepartoftheManagingDirectors’remunera-tionislinkedtotheachievementofpredetermined,measurableandinfluenceabletargets,expressedastargetzones.ItisdesignedtostrengthentheManagingDirectors’commitmenttotheCompanyanditsobjectivesandtoaligntheirinterestswiththoseofshareholders.
Thevariableremunerationconsistsof:• aShort-TermIncentive:anannualbonuslinkedto
theCompany’sperformance(EconomicProfit)overthepastfinancialyear,payablepartlyincash(80%)andpartlyinshares(20%).“At-target”perform-ancewillresultinabonuspaymentequalto100%oftheannualbasesalaryreceivedbytheManagingDirectorintheperformanceyeartowhichthebonusrelates.ThetargetzonefortheShort-TermIncentiveincludesathreshold,i.e.bonuspay-outleveliftheminimumperformancelevelisrealisedforanypaymenttooccur(20%ofannualbasesal-ary),aswellasacap,i.e.maximumbonuspay-outlevel(200%ofannualbasesalary).TofurtheraligntheinterestsoftheManagingDirectorwiththoseoftheshareholders,thereisamatchingsharearrangementaimedatstrengtheningtheManagingDirectors’longer-termcommitmenttotheCompany.
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32 SBMOffshore–AnnualReport2009
Thismatchingsharearrangementconsistsoftheconditionalgrantofanumberofsharesequaltothenumberofsharesgrantedaspartpaymentofthebonus.Thesesharesbecomeunconditionaluponcompletionofathree-yearvestingperiod,subjecttotheManagingDirectors’continuedemploymentwiththeCompanyuntilthevestingdate.Incaseofretire-mentduringthevestingperiod,matchingshareswillvestpro-rata.IncasetheManagingDirectorresignsduringhistermasManagingDirector,allunvestedmatchingshareslapseimmediately;
• aLong-TermIncentive:anawardofconditionalperformanceshareslinkedtotheCompany’sper-formance(annualaveragenormalisedgrowthofearningspershare)overthreefinancialyears,start-ingwiththeyearinwhichtheconditionalsharesareawarded.Thenumberofconditionalperformancesharesattheawarddateis,invalue,theequivalentof100%oftheManagingDirector’sbaseannualsalaryoftheyearprecedingtheyearinwhichtheconditionalawardismade.ThetargetzonefortheLong-TermIncentiveincludesathresholdbelowwhichnoperformanceshareswillvest.Thisthresholdis50%ofthetargetedannualaveragednormalisedEPSgrowth.At-targetperformancemeansrealisingachallengingaveragednormalisedEPSgrowthandresultsinavestingof100%ofthenumberofsharesgranted.ThemaximumearningspossibilityundertheLTIplanislimitedto150%ofthenumberofsharesgranted.Fortheyear2009,thetargetannualaveragednormalisedEPSgrowthwassetat10%bytheSupervisoryBoard,uponrecom-mendationoftheRemunerationCommittee.Thevestingperiodisthreeyears.VestedperformancesharesaretoberetainedonablockedsecuritiesaccountbytheManagingDirectorsforaperiodoftwoyearsfromthevestingdate.
TheCompanyappliestheRemunerationPolicy2008toallmembersoftheBoardofManagement,irrespectiveoftheirformalpositionasstatutorydirectorornon-stat-utorydirector.However,theremunerationcomponentsofindividualnon-statutorydirectorsarenotrequiredtobedisclosedinthisRemunerationReport.
Section 4: The employment contracts of the members of the Management Board and their actual remuneration in 2009
Employment contracts of the members of the Management Board
TheemploymentcontractsofMr.A.J.Mace,CEO,andMr.M.A.S. Miles,CFO,whowereappointedtotheManagementBoardattheAnnualGeneralMeetingofShareholdersof15May2008,weredraftedinaccord-ancewiththerelevantprinciplesandbestpracticeprovisionsoftheCodeandtheRemunerationPolicy2008.ThecontractsprovideforanadjustmentclausestipulatingthediscretionaryauthorityoftheSupervisoryBoardtoadjustupwardsordownwardsthepayoutofanyvariableremunerationcomponentconditionallyawardedifsuchcomponentwouldproduceanunfairorunintendedresultasaconsequenceofextraordinarycircumstancesduringtheperiodinwhichthepre-determinedperformancecriteriahavebeenorshouldhavebeenachieved.Inaddition,aclaw-backprovisionisincludedintheemploymentcontractsenablingtheCompanytorecovervariableremunerationcompo-nentsonaccountofincorrectfinancialdata.
BothMr.MaceandMr.Milesarelong-termemployeesoftheCompany.Theirpreviousemploymentcontractsweresuspendedbymutualagreementandmayberesumeduponterminationoftheiremploymentcon-tractasManagingDirector.
Themainelementsofthesecontracts,aspublishedonwww.sbmoffshore.com,areasfollows:
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 33
Employment Contracts of Managing Directors
A.J. Mace M.A.S. Miles
BASe SAlARy€ 490,000 per annum € 395,500 per annum
VARiABle PAyShort-Term Incentive (STI) • Cash (80%)
• Shares (20%) • Matching Shares: equal to the number of “bonus” shares. Matching shares are subject to
the incumbent’s continued employment with the Company until the vesting date.
Targets • Based on Economic Profit, i.e. Return On Average Capital Employed (ROACE) exceeding an assumed Weighted Average Cost of Capital (WACC)
Target Zone • Threshold performance: payout of 20% of base salary • At-target performance: payout of 100% of base salary • Maximum STI opportunity: payout of 200% of base salary
Long-Term Incentive (LTI) Performance Shares
Target 10% average annualised (normalised) growth of earnings per share (EPS) over a three-year performance period.
Vesting period 3 years
Target Zone • Payout as percentage of base allocation (equivalent in value to 100% of base salary of the previous year):
• Threshold performance: 50%, i.e. for 2009, 5% annualised (normalised) EPS growth over a 3-year performance period
• At-target performance: 100%• Maximum LTI opportunity (capped): 150% of the number of shares granted • Linear increase within the target zone
Lock-up 2 years starting on the vesting date
SeVeRANCe PAyMeNTLimited to one year of gross annual base salary (unless termination occurs during the first term in office and is deemed manifestly unreasonable in which case the payment is limited to twice the gross annual base salary)
ChANge oF CoNTRol ClAuSeIn the event of a termination by the Company as a result of a change of control, the same con-ditions apply as under “Severance payment”
PeNSioN ARRANgeMeNTParticipation in the Company pension plan. One third of the total pension premium is paid by the Managing Director, subject to an annual cap of 20% of base salary. For Mr. A. Mace, back service entitlements will be evenly built-up during the period 15 May 2008 until 15 May 2012.
Report of the Supervisory Board
34 SBMOffshore–AnnualReport2009
Actual Remuneration of the Members of the Management Board in 2009Thissectionprovidesanoverviewoftheactualremu-nerationofManagingDirectors,Mr.Mace,CEO,and
Mr.Miles,CFO, earnedduringtheyearunderreview,withanindicationofthreshold,at-targetandmaximumearningspossibilityforboththeShort-TermIncentives(STI) andtheLong-TermIncentives(LTI).
Earnings of Managing Directors in 2009
In thousands of €Base salary Short-Term
Incentive Cash 1 Short-Term
Incentive Shares 2
A.J. Mace 490 286 71M.A.S. Miles 396 230 58
1 This amount represents 80% of the Short Term Incentive earned in respect of performance year 2009, which becomes payable in cash in 2010. The amount of the bonus is computed in Euros based upon the Economic Profit.
CostofCapital(WACC),adjustedwhereappropriateforexceptionalitemsandextraordinarycircumstances.Becauseofthesensitivenatureoftheshorttermincen-tivetargets,itisCompanypolicynottodisclosethese.
Awards made under the Long-Term Incentive to Managing Directors in 2009
Target number of perform-ance shares conditionally
awarded in 2009 3
Minimum vesting opportunity (number of
performance shares)
Maximum vesting opportunity (number of
performance shares)
A.J. Mace 42,126 0 63,189M.A.S. Miles 39,669 0 59,504
3 The number of performance shares that vest for the performance period 2009-2010-2011 will be determined in March 2012, upon finalisation of the financial accounts for the year 2011. Following the vesting of the performance shares, a lock-up of two years applies to the performance shares.
Thevalueoftheconditionalawardofperformancesharesin2009equals100%ofbasesalaryintheyearprecedingtheaward,i.e.2008.Thisvalue,dividedbytheaverageclosingpriceoftheshareoverthefivetradingdaysfollowingthedateofpublicationofthefinalresultsforthepreviousfinancialyear,determinesthenumberofperformancesharesthatmayvestif
‘at-target’performanceisachieved.Thresholdper-formancewillresultinthevestingof50%ofthetargetnumberofconditionallyawardedperformanceshareswhilstthemaximumnumberofperformancesharesthatmayvestiscappedat150%ofthetargetnumberofshares(innumbersnotvalue).
2 This amount represents 20% of the Short Term Incentive earned in respect of performance year 2009, which becomes payable in shares in 2010. The number of shares is calculated by using the average closing price of the share on the five trading days following the date of publication of the final results for the year 2009.
TheShort-TermIncentiverelatingtotheperformanceyear2009isbasedupontheEconomicProfit(EP)oftheyear2009,i.e.ReturnOnAverageCapitalEmployed(ROACE)exceedinganassumedWeightedAverage
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 35
Share-based incentives outstanding as per 31 December 2009
Mr.Miles’awardsareincludedinthisoverviewalthoughhewasnotappointedasManagingDirectoruntil15May2008.However,hedidreceiveLong-TermIncentivesinhiscapacityasDirectoroftheCompany
Share Based Incentives for Managing Directors
A.J. Mace M.A.S. Miles
MATChiNg ShAReSAwarded in 2007 and vesting in 2010 - Number: 4,261
Value at award: € 110,400
Awarded in 2008 and vesting in 2011 Number: 2,440Value at award: € 63,000
Number: 3,284 Value at award: € 84,800
Awarded in 2009 and vesting in 2012 Number: 6,720Value at award:€ 67,000
Number: 6,328Value at award:€ 63,090
PeRFoRMANCe ShAReSPerformance shares awarded in 2005, vested in 2008 and subject to two year lock up period
- Number: 21,420Value at grant: € 275,400Lock-up until March 2010
Performance shares awarded in 2006, vested in 2009 and subject to two year lock-up period
- Number: 9,000 Value at award: € 171,450Vested: 0
Performance shares awarded in 2007 and vesting in 2010 - Number: 7,500Value at award: € 194,325
Performance shares awarded in 2008 and vesting in 2011 Number: 20,035Value at award: € 395,500
Number: 18,237Value at award: € 360,000
Performance shares awarded in 2009 and vesting in 2012 Number: 42,126Value at award: € 420,000
Number: 39,669Value at award: € 395,500
Performance options (discontinued in 2008 – no grant in 2008)
Options granted in 2005 and vested in 2008 Number: 40,000Exercise Price: € 12.86Value at grant: € 108,000
Number: 102,000Exercise Price: € 12.86 Value at grant: € 275,400
Options granted in 2006 and vesting in 2009 Number: 44,000Exercise Price: € 19.05Value at grant:€ 251,680
Number:30,000Exercise Price: € 19.05Value at grant: € 171,600 Vested: 0
Options granted in 2007 and vesting in 2010 Number: 44,000Exercise Price: € 25.91Value at grant: € 285,120
Number: 30,000Exercise Price: € 25.91Value at grant: € 194,400
priortohisappointment.AsheisnowaManagingDirector,theseawardsarealsoincludedinthetablebelow.Mr.MacedidnotparticipateintheLong-TermIncentiveplanpriorto1January2008.Hereceivedunconditionalshareoptionsinstead.
2 This amount represents 20% of the Short Term Incentive earned in respect of performance year 2009, which becomes payable in shares in 2010. The number of shares is calculated by using the average closing price of the share on the five trading days following the date of publication of the final results for the year 2009.
Report of the Supervisory Board
36 SBMOffshore–AnnualReport2009
Withrespecttotheconditionalawardsmadein2006(undertheLTI2005),thethreeyearperformanceperiodendeduponcompletionofthefinancialyear2008.Basedupontheauditedfinancialstatements,thethree-yearperiod2006-2008generatedanaverageannualisedEPSgrowthbelowthethresholdof5%.Theconditionalper-formanceshareawardsandconditionaloptiongrantsmadein2006thereforedidnotvestinMarch2009.Equally,withregardtotheconditionalgrantsmadein2007,thetargetthresholdwasnotreachedandthereforenoneoftheconditionalperformanceshareawardsorconditionaloptiongrantsmadein2007willvestinMarch2010.
Costs incurred by the Company in 2009 in respect of the Remuneration of Managing Directors
In thousands of €
Base salary Short-Term Incentive 5
Expense recognised
for share-based
payments (NOT ONLY
LTI) 6
Benefits excluding
pension payments
Pension payments
Total costs
A.J. Mace 490 357 424 110 540 1,921M.A.S. Miles 396 288 (35) 109 33 791
5 This is the total amount of the Short-Term Incentive, i.e. the part payable in cash (80%) and the part payable in shares (20%).
6 The fair value of all share-based payments, i.e. the expense recog-nised in 2009 as a pro rata over the entire vesting period. Reference is made to note 3 to the financial statements (prepared in US Dollars, being the Company’s reporting currency).
Report of the Supervisory Board
SBMOffshore–AnnualReport2009 37
Information regarding the Supervisory Board membersMr. H.C. RothermundNationality:Swiss(1943)Gender:Male
• AformerManagingDirectorofShellEPInternationalB.V.
Other Supervisory Board memberships:
• MemberoftheSupervisoryBoardofRohoelA.G.
Other non-executive Board memberships:
• MemberoftheBoardofPetrotechnicsLtd.
• MemberoftheBoardofE.ONRuhrgasUKExploration&ProductionLtd.
First appointment:2003Re-appointment:2007Current term of office:2007–2011
Mr. L.J.A.M. LigthartNationality:Dutch(1938)Gender:Male
• AformerVice-ChairmanoftheManagingBoardofDirectorsofDSMN.V.
Other:• Vice-ChairmanofMinesCouncil
ofMinisterofEconomicAffairs
First appointment:2004Re-appointment:2008Current term of office:2008–2010
Mr. R. van GelderNationality:Dutch(1945)Gender:Male
Current position:• ChiefExecutiveOfficerof
HeijmansN.V.(until28April2010)• AformerPresidentandChief
ExecutiveOfficerofRoyalBoskalisWestminsterN.V.
Other Supervisory Board memberships:
• MemberoftheSupervisoryBoardofHolcimWesternEurope
Other:• MemberoftheBoardofVEUO
First appointment:2005Current term of office:2009–2013
Mr. T. EhretNationality:French(1952)Gender:Male
• AformerPresidentandChiefExecutiveOfficerofAcergyS.A.
Other Board memberships:• Deputy-ChairmanoftheBoard
ofAcergyS.A.• Deputy-ChairmanoftheBoard
ofDockwiseLtd.• Non-executivememberofthe
BoardofComexS.A.• ChairmanofViking
MooringsLtd.
First appointment: 2008Current term of office: 2008–2012
Mr. F.G.H. DeckersNationality:Dutch(1950)Gender:Male
Current position:• ChiefExecutiveOfficerof
VanLanschotN.V.
Other Supervisory Board memberships:
• MemberoftheSupervisoryBoardofIBMNederlandN.V.
• MemberoftheSupervisoryBoardofSpringpaardenFondsNederlandB.V.
• MemberoftheBoardoftheNetherlandsBankers’Association
• MemberoftheSupervisoryCommitteeofSieBoldHuis
• MemberoftheSupervisoryCommitteeofStichtingAlzheimerNederland
Other:• MemberoftheAdvisoryCouncil
ofEuronextAmsterdamN.V.• MemberofAdvisoryCounsel
WomanCapital
First appointment:2008Current term of office:2008–2012
Report of the Board of Management
38 SBMOffshore–AnnualReport2009
Report of the Board of Management
38 SBMOffshore–AnnualReport2009FPSO Capixaba at anchorage in Singapore following upgrade for the Cachalote fi eld requirements
Report of the Board of Management
SBMOffshore–AnnualReport2009 39
Report of the Board of Management
SBMOffshore–AnnualReport2009 39
3Report of the Board of Management
41 Introduction 44 SBM Offshore Lease Fleet 46 Group Activities 2009 56 Corporate Governance 65 Risk Management 75 Human Resources 77 Product and Technology Development 82 Information regarding the Board of Management
40 SBMOffshore–AnnualReport2009
IntroductionTheworldrecessionandconsequentiallowoilpricehadasignificanteffectonourneworderintakeinthefirsthalfof2009.However,becauseofthelargeorderbacklog,theCompanyhasbeenverybusyduringthewholeoftheyearontheexecutionofexistingprojects.Theresultingnetprofitfortheyearismarginallyabovethelevelof2008,fullyinlinewiththeguidanceissuedatthefirstquartertradingupdate.
Despitethecontractioninthecreditmarketsintheearlierpartoftheyear,wehavebeensuccessfulinarrangingsubstantialloansfortheEnCanaMOPUplatformleaseprojectforCanadaandtheFPSOCapixabaupgradeforPetrobras’Cachalotefield.TheCompanyalsosuccess-fullyraised€180.7millionthroughanacceleratedbookbuildofferinginNovember.TheproceedsofthisofferingwillbeusedtofundthegrowthoftheleasefleetandincreasesfinancialflexibilityfortheCompany.
ThisyeartheCompanyhasdeliveredandstartedproductionoperationsonthreenewfacilitiesofwhichonehadbeeninstalledattheendof2008aswellascontinuedtheconstructionofnineotherprojectstobedeliveredin2010.
WearepleasedtoreportthattherehasbeenanimprovementontheTurnkeySystemssegmentprofitmarginduringtheyearwhichisaresultofthebetterperformanceofthenewerprojectsinourorderport-folio.TheLeaseandOperatesegmentagaindeliveredgoodoperationalperformanceandbonuses,butwasadverselyimpactedbytheimpairmentchargetakenontheYmeMOPUstor™.TheTurnkeyServicessegment,whichisreportedseparatelyforthefirsttimethisyear,hasshownstrongresults.
Followingtheslowstarttotheorderintake,theCompanywassuccessfulinsecuringtwomajorleasecontractsinthesecondhalfoftheyearaswellasanimportantFEEDstudyforanLNGFPSOproject.TheCompany’sorderbacklogattheendof2009standsatanewrecordhigh.
Lease and OperateOperationsstartedinJuly2009ontheDeepDraftSemi™ThunderHawkintheGulfofMexicowhichjoinedourfleetofleasedunits.TheFPSOEspiritoSantowasdeliveredinBrazilandjoinedtheleasefleetattheendof2008,butonlystartedoperationsmid2009.ThethirdfacilitytocommenceoperationswastheFPSOFradewhichwasdeliveredonaturnkeysalesbasistoourclient,withtheCompanyprovidingthefirstthreeyearsoperationoftheFPSO.
ThesetwoFPSOsarethemosttechnicallycomplexunitstheCompanyhasdesigned,suppliedandoper-ate.FPSOFradehasthelargesttopsideproductionfacilityintermsofweightandisdesignedaccordingtotheclient’schallengingspecifications.TheFPSOEspiritoSantoisdesignedtohandleawiderangeofoilspecificationsandinterfaceswithacomplexsubseadevelopmentscheme;theFPSOisanchoredinultra-deepwaterwithaspecialturretmooringsystem,whichsupportssteelcatenaryrisers,thefirsttimethatsuchariserdesignisconnectedtoamooringsystem.
TheDeepDraftSemi™ThunderHawkleasecontractisnoteworthyasitisbasedonaproductionhandlingagreementwithrevenuesbasedpartiallyonproductionvolumethroughput,inadditiontoafixeddailyrate.
Board of Management, Mr M. wyllie, Mr A. Mace,
Mr d. van der Zee, Mr M. Miles and
Mr F. Blanchelande. (from left to right)
Report of the Board of Management
SBMOffshore–AnnualReport2009 41
TheYmeMOPUstor™projecthasencountereddelayandadditionalcostduetohavingtoimplementlatedesignchangesrequiredtomeetNorwegianregula-toryrequirements.Specialfocushasbeenplacedonovercomingthesedifficultiesandtheprojectisnowscheduledfordeliveryinmid2010.
TheCompanydidachievethetargetofsecuringtwonewleaseandoperatecontractsduringtheyear.ThefirstorderwasforafifteenyearleaseandoperatecontractofanFPSOfortheAsengdevelopmentinEquatorialGuineaandthesecondorderconsistsofanupgradeoftheCompanyownedFPSOEspadartewithaneighteenyearleaseandoperatecontractontheBaleiaAzulfieldinBrazil.BothFPSOsarescheduledtostartoperationsin2012.
InlinewithitsdeclaredintentiontowithdrawfromitsMyanmarbasedinvolvementintheleaseandoperatecontractfortheFSOYetagun,whichtookeffectpriortothecampaignofinternationalappealsforsanctionsagainstMyanmar,theCompanypursued,withoutsuc-cessasyet,itseffortstodisposeofitsshareinthevessel.DuringthecourseoftheyearunderreviewtheCompanyrequestedanexternalauditofitsshorebasedoperationinMyanmarwithrespecttotheSBMProductionContractorsSocialAccountabilityManualandhas obtainedaStatementofConfirmationthattheseoperationswereincompliance.TheCompanycurrentlyisindialoguewiththeDutchNationalContactPointattheMinistryofEconomicAffairsinconnectionwithitsoperationinMyanmar.
TheleaseandoperationofFPSOsandFSOscontin-uestoshowverygoodperformanceandhighbonuseshavebeenachievedwhereavailablewithintheindi-vidualleasecontracts.Theoverallnumberofvesselsintheleasefleetatyearendstandsatfourteenwithtwounitshavingleftthefleetduringtheyear,beingtheTurkmenistanMOPUandFSO,wherePetronasCarigaliexerciseditscontractualpurchaseoption,andtheredeliveryoftheFPSOFalconfromExxonMobil.TheFPSOFalconisnowinlay-upbutisbeingactivelymarketedfornewleaseandoperatecontracts.Inaddi-tion,theFPSORangDongI,whichhadbeenlaid-upin2008,wassoldforscrap.ThreenewleaseunitsarecurrentlyintheconstructionphasebeingtheYmeMOPUstor™,theEnCanaMOPUandtheAsengFPSO.
Turnkey SystemsTheCompanyhasmadeprogressonthefabricationofthreecomplexsemi-submersibledrillingrigswhicharebeingconstructedinAbuDhabi.Thedrillingrigprojectshavefacedengineeringdelays,whichhavecausedknockonconstructiondelaysandassociatedextracosts.Theengineeringworkisnowcompleteandtherigsarescheduledfordeliveryin2010.
Theorderbacklogalsoincludesthreeotherlargerprojectsintheportfolio,FPSOP-57,FPSOOkhaandtheturretforSkarv,whichareproceedingaccord-ingtoplanintermsofmeetingbudgetobjectivesandscheduleandtheoverallimpacthasbeentoincreasetheprofitmarginontheTurnkeySystemssegmentcomparedto2008.Theseordersarescheduledforcompletionin2010.
TheCompanysignedaframeworkarrangementforthesupplyofturretmooringsystemsforaseriesofFLNGfacilitiesforShell.Theseturretsaretechnicallychal-lengingandthisarrangementconfirmstheCompany’sleadershipinturrettechnology.
AFront-EndEngineeringandDesign(FEED)contractwasawardedtotheCompanyforaFLNGfacilityforPetrobrasinBrazil.ThisisanimportantcontractasitrepresentsthefirstphaseindevelopmentofFLNGinBrazilandakeystepintheCompany’sFLNGstrategy.
Turnkey ServicesTheservicesbusinesswasveryactivewithgoodoccu-pancylevelfortheCompany’stwoinstallationvesselswithworkfortheCompanyaswellasforthirdparties.ThesupplyandmaintenanceofCALMbuoysystems,specialisedequipment,sparepartsandservicesalsocontinuedatahighlevel.
TheyearendTurnkeyServicesportfoliocoversaboutninemonthsofworkwhichisnormalgiventheshort/mediumtermnatureofthisbusiness.FollowingtheabsenceofFPSOcontractawardsduringtheperiodmid2008tomid2009,FPSOinstallationworkin2010isexpectedtoberelativelylow,whichmayresultinanaverageyearintermsofoffshorecontractingwork.
Report of the Board of Management
42 SBMOffshore–AnnualReport2009
Business modelAlthoughtheCompanyreportsonthreebusinesssegments,beingtheLeaseandOperate,TurnkeySystemsandTurnkeyServices,itshouldbenotedthattheCompanyoperatesasanintegratedorganisationusingthesameprojectteamsforexecutionofprojects,irrespectiveofwhethertheyareturnkeysupplytoathirdpartyclientorwhethertheseunitsaretojointheCompany’sfleet.OperationalexperiencefromtheleasefleetunitsiscontinuouslyusedtoupdatetheCompany’sinternalstandardsandoperationalproce-dureswhicharethebasisofthedesignandoperationofthenewleasedunits.TheseCompanystandardshavebeenfullyendorsedbyourmajorclientsandarefrequentlyusedonturnkeysupplycontractsforunitsforsale.TheintegratednatureoftheCompany’sactivitiesandtherelatedpositivesynergyrepresentanimportantstrengthoftheCompany.
Company improvementsDuringthecourseof2009theBoardofManagementhasimplementedanumberofimprovementinitiativeswhichresultedinpartfromlessonslearnedfromauditsofmajorprojectsbyexternalconsultants.Theseini-tiativesincludedmorerobustproposalsprocedures,strengthenedprojectcontrolprocedures,enhancedriskmanagementproceduresandanexpandedinternalassurancesystem.TheCompanyreviseditsmanage-mentstructureinthesecondhalfoftheyearinordertodelegateaccountabilityandresponsibilityforthemainoperationstooperatingunitpresidents,reportingtotheBoardofManagementoftheCompany.Theorgani-sationhasbeenrestructuredaccordinglyintosevenoperatingunits,withacorporatesupportstructureasdescribedinsection1ofthisreport.TheCompanystrategicdirectionforthenextthreeyearshasbeencarefullyreviewedbytheManagementteamduringthecourseof2009andresultsinarevisedstrategicplanwhichisalsooutlinedinsection1ofthisreport.
MarketTheyear2009hasbeenveryslowintermsofmajorordersawardedinthesectoranddespitetheawardoftwoleasecontractstotheCompanyinthesecondhalfoftheyear,thereisstilladegreeofhesitationfrom
someofourclientsandalsofromdrillingcompaniesforplacingordersfornewproductsorequipment.Thelevelofsalesandbiddingactivityforprospectshow-ever,isstillhigh,withtheCompany’smainareasoffocusbeingdeepwaterdevelopmentsinBrazil,WestAfrica,MalaysiaandtheGulfofMexico.
TheoffshoreLNGsectorisshowingsignsoffurtherdevelopmentwithShell’sFLNGinitiativeandwithPetrobras’awardfortheFEEDstudyforfloatingLNGforthepre-saltdevelopmentsoffshoreBrazil.
Itisexpectedthattherewillbeagradualreturnofdemandduringthecourseofthenexttwelvetoeight-eenmonthsandthiswillbuilduptothepreviouslyhighlevelofactivityagaininthemidtolongterm.
Members of the Board of Management
TherewasachangeintheBoardofManagementon31December2009withtheretirementofMr.DickvanderZeeandtheappointmentofMr.MichaelWyllie.
Mr.vanderZeejoinedSBMOffshorein1996asManagingDirectorofsubsidiaryCompanyIHCGustoEngineeringinSchiedam.In2000hebecameamem-beroftheBoardofManagementasChiefOperatingOfficer.HewasappointedChiefTechnologyOfficerandPresidentofSBMProductionContractorsin2007.Mr.vanderZee’scontributionhasbeenkeyindevelop-ingthetopsidescapabilitiesoftheGroupwhichhasbeenoneofthedriverstogrowtheCompanyintotheleadingFPSOcontractorthatitistoday.
Mr.WylliehasbeenappointedChiefTechnologyOfficerandaDirectorintheBoardofManagementofSBMOffshoreN.V.witheffectfrom1January2010.Mr.Wyllie(British,1958),whohas30yearsexperienceintheoil andgasbusiness,joinedtheCompanyasaseniorprocessengineerin1995andduringhiscareerwithSBMOffshorehasheldpositionsofEngineeringProjectManageronseveralFPSOprojects,ChiefEngineerintheSBMMonacooffice,andmostrecentlyDirectorofMarketingandSalesfortheGroup.
Report of the Board of Management
SBMOffshore–AnnualReport2009 43
Field Name Client Country Vessel Name Type Year
KUITO Chevron Angola Kuito FPSO 1999
ESPADARTE Petrobras Brazil Espadarte FPSO FPSO 2000
BALEIA AZUL Petrobras Brazil Espadarte FPSO FPSO 2012
ExxonMobil FPSO Falcon FPSO 2002
RONCADOR Petrobras Brazil FPSO Brasil FPSO 2002
XIKOMBA ExxonMobil Angola FPSO Xikomba FPSO 2003
MARLIM SUL Petrobras Brazil FPSO Marlim Sul FPSO 2004
SANHA Chevron Angola Sanha LPG FPSO FPSO 2005
GOLFINHO Petrobras Brazil FPSO Capixaba FPSO 2006
CACHALOTE Petrobras Brazil FPSO Capixaba FPSO 2010
KIKEH Murphy Oil Malaysia FPSO Kikeh FPSO 2007
MONDO ExxonMobil Angola FPSO Mondo FPSO 2008
SAXI BATUQUE ExxonMobil Angola FPSO Saxi FPSO 2008
BC-10 Shell Brazil FPSO Espirito Santo FPSO 2008
ASENG Noble Energy Eq. Guinea FPSO Aseng FPSO 2012
BARINOV Petronas Turkmenistan Oguzhan MOPU/FSO 2006
THUNDER HAWK Murphy USA Semi-Sub 2009
YME Talisman Norway MOPUstor 2009
DEEP PANUKE EnCana Canada MOPU 2010
NKOSSA Total Congo Nkossa II FSO 1996
YETAGUN Petronas Myanmar Yetagun FSO FSO 2000
AMENAM Total Nigeria FSO Unity FSO 2003
ZAFIRO ExxonMobil Eq. Guinea FPSO Serpentina FPSO 2003
FRADE Chevron Brazil FPSO Frade FPSO 2009
JUBARTE Petrobras Brazil P-57 FPSO 2011
LeaseandOperateOperateonlySBM Offshore Lease Fleet
44 SBMOffshore–AnnualReport2009
Report of the Board of Management
Field Name Client Country Vessel Name Type Year
KUITO Chevron Angola Kuito FPSO 1999
ESPADARTE Petrobras Brazil Espadarte FPSO FPSO 2000
BALEIA AZUL Petrobras Brazil Espadarte FPSO FPSO 2012
ExxonMobil FPSO Falcon FPSO 2002
RONCADOR Petrobras Brazil FPSO Brasil FPSO 2002
XIKOMBA ExxonMobil Angola FPSO Xikomba FPSO 2003
MARLIM SUL Petrobras Brazil FPSO Marlim Sul FPSO 2004
SANHA Chevron Angola Sanha LPG FPSO FPSO 2005
GOLFINHO Petrobras Brazil FPSO Capixaba FPSO 2006
CACHALOTE Petrobras Brazil FPSO Capixaba FPSO 2010
KIKEH Murphy Oil Malaysia FPSO Kikeh FPSO 2007
MONDO ExxonMobil Angola FPSO Mondo FPSO 2008
SAXI BATUQUE ExxonMobil Angola FPSO Saxi FPSO 2008
BC-10 Shell Brazil FPSO Espirito Santo FPSO 2008
ASENG Noble Energy Eq. Guinea FPSO Aseng FPSO 2012
BARINOV Petronas Turkmenistan Oguzhan MOPU/FSO 2006
THUNDER HAWK Murphy USA Semi-Sub 2009
YME Talisman Norway MOPUstor 2009
DEEP PANUKE EnCana Canada MOPU 2010
NKOSSA Total Congo Nkossa II FSO 1996
YETAGUN Petronas Myanmar Yetagun FSO FSO 2000
AMENAM Total Nigeria FSO Unity FSO 2003
ZAFIRO ExxonMobil Eq. Guinea FPSO Serpentina FPSO 2003
FRADE Chevron Brazil FPSO Frade FPSO 2009
JUBARTE Petrobras Brazil P-57 FPSO 2011
BalanceofInitialLeaseConfirmedExtensionContractualExtensionOption
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032
12/09
11/10
04/22
04/10
04/14
12/09
07/12
05/12
04/12
05/13
07/14
11/11
06/10
06/12
01/14
07/10 08/18
07/15
05/15
07/25
11/3011/18
01/3201/12
12/28
01/16 01/31
12/22
06/23
12/23
11/16
07/30
01/27
07/09
07/10
11/10
06/09
01/11
07/09
SBMOffshore–AnnualReport2009 45
Report of the Board of Management
• InJuly2009,theCompany’sDeepDraftSemi™pro-ductionplatformThunderHawkstartedoperationsunderaminimumfiveyearleaseandproductionhandlingagreementforMurphyandotherProducersintheGulfofMexico.TheunitisfullyownedbytheCompanybutoperatedbyMurphy.
• InAugust2009,FPSOCapixabawasdisconnectedfromPetrobrasGolfinhofieldoffshoreBrazil,sailedtoSingaporeandstartedconversionworksforre-deploymentoftheunitatthenewCachalotefieldoffshoreBrazil.TheunitwillbeundercontractwithPetrobrasforatwelveyearleaseandoperateperiodwhichisscheduledtocommenceinApril2010.
• InSeptember2009,TheCompanyreceivednotifica-tionofterminationoftheleaseandoperatecontractoftheFPSOFalconfromEssoDeepwaterLimited,andtheunitwasredeliveredinDecember.
• InOctober2009,NobleEnergyawardedacontractfortheprovisionandfifteenyearleaseandoperateofanFPSOfortheAsengdevelopmentoffshoreEquatorialGuineaconfirmingaLetterofIntentissuedinAugust2009.AJointVenturebetweenGEPetrol(40%)andSBMOffshore(60%)willownandoperatetheunit.
• InDecember2009,theCompanyreceivedaLetterofIntentfromPetrobrasfortheupgradeoftheCompany’sexistingFPSOEspadarteandleaseandoperatecontractforaperiodof18yearsontheBaleiaAzulfieldoffshoreBrazil.
Detailsofthesemaineventsandofotheractivitiesintheyear2009arepresentedhereafter.
Atthestartof2009therewereeighteenlong-termleaseandoperatecontractsinhandforproductionand/orstoragesystems,fifteenofwhichwereatthatdateonhireandthreeunitsunderconstruction.Furthermore,therewerefouroperatecontractsforthemanagementoftheoperationofclientownedunits.
Allunitsinoperationperformedwithoutanymajorproblemsduringtheyearatacumulativeaveragethroughputratearound317millionbarrelsperdaywithatotalaverageexportfromtheunitsof900,000barrelsofoilperday.Itisanticipatedthatinthefirstquarterof2010theCompanywillachieveaproductionlevelofover1millionbarrelsperday,whenproductionfrom
Group Activities 2009SummaryAlloperatingunitshavebeenfullyoccupiedwiththeexecutionofprojectsandoperationoftheleasefleet.Theexecutionofmanyofthecontractshasbenefitedfromthesynergybetweentheoperatingunitsandfromthecomplementarynatureofthedifferentdisci-plinesandspecialisationsavailableintherespectiveGroupcompanies.Turnoverwas3%belowlastyear’srecordandtheCompany’sexecutioncapacityhasstabilisedafterseveralyearsofsubstantialgrowth.Riskmanagementandprojectcontrolprocedureshavebeenfurtherimprovedinalloperatingunitsduringtheyeartoincreasecontrolonprojectcostsanddeliveryschedules.
Themost noteworthyeventsintheyearforleaseandoperateactivitiesappearbelow.
Lease and Operate Activities• InMay2009,EssoDeepwaterLimited,asubsidi-
aryofExxonMobilextendedtheleaseandoperatecontractfortheFPSOFalconforoneyearuntilNovember2010,butsubsequentlyterminatedthecontractinDecember2009.
• InJune2009,PetronasCarigali(Turkmenistan)SdnBhdexerciseditspurchaseoptionforboththeFSOandMOPUunderthetermsoftheServiceAgreemententeredintowiththeCompanyinJanuary2005.
• InJune2009,theFSOUnityoperationscontracthasbeenextendedbyTotalExplorationProductionNigeriaLimited(TEPN)for12monthsupto30June2010.
• InJune2009,theCompanystartedthethreeyearoperationscontractfollowingfirstoilproductionontheFPSOFradeforChevroninBrazil.
• InJuly2009,theFPSOEspiritoSantoforShellBrazillocatedintheBC-10deepwaterfielddevelopmentintheCamposBasinoffshoreBrazilachievedfirstoilproduction.TheCompanywilloperatethisvesselforfifteenyearsonaleaseandoperatecontractinjointventurewithMISC.
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FPSOFradeandFPSOEspiritoSantorampup.ThiswillmarkamilestoneforSBMOffshoreasitwillbethefirsttimethatdailyaverageproductionfromunitseitherleasedoroperatedbytheCompanyexceedsthisland-marklevel.
TheorganisationofHSSEmanagementhasbeenadaptedtomeetthegrowingfleetrequirementswithamoredecentralizedapproach.InformationonHSSEcanbefoundintheSBMOffshoreCorporateSocialResponsibilityReport2009.
Totalproductionuptimeofthefleetreached99%.Thishighuptimehasbeenthebasisforthepaymentofsubstantialbonuses,inparticularfortheunitsoper-atingunderlong-termcontractswithPetrobrasandExxonMobil,thelatterincludingbonusschemestakingintoaccountnotonlytheproductionperformancebutalsosafetyandenvironmentalmeasuresandadher-encetotheoperatingbudget.
FPSO FradeTheFPSOFradeisthemostcomplexunitthattheCompanyhassuppliedintermsoftopsidesproduc-tionfacilities,withatopsidesweightofaround15,000Tonnes.Theunitismooredin1,080metresofwaterdepth.Thetotalprojectconstructionincludingoffshoreinstallationuntilfirstoilproductiontook36monthsfromsigningofthecontractin2006.TheFPSOFradesailedfromtheconstructionyardinDubaiinJanuary2009toRiodeJaneirowhereitarrivedmidMarch2009.InstallationandhookupoftheunitintheFradefieldoffshoreBrazilwasperformedbytheCompany’sinstal-lationvesselNormandInstaller.Atotalofapproximately18millionwork-hourswerespenttodesignandcon-structtheFPSOandfirstoilproductionwasachievedon20June2009.ThisFPSOwassuppliedtoChevrononaTurnkeysupplybasiswithaseparateOperatingcontractforaperiodofthreeyears,whichstartedon19June2009.
Top left: FPSO Espirito Santo sailing offshore
location in BrazilTop right: FPSO Frade
on locationMiddle right: MOPUstor™
for yme field ready for load out in Abu dhabi
Bottom right: lifting operation of
bow mounted turretBottom left: one of the
drilling rigs being floated out of the dock
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SBMOffshore–AnnualReport2009 47
FPSO KuitoThecurrentleaseandoperatecontractisexpectedtobeextendedforayearuntil31December2010.DiscussionscontinuewithChevron’ssubsidiarycom-panyCabindaGulfOilCompany(CABGOC)inAngolawithrespecttoadditionalextensionoftheFPSOKuitoleaseandoperatecontract.
FPSO AsengAcontracthasbeensignedwithNobleEnergyEGLtd.,asubsidiaryofleadingUS-basedindependentenergycompanyNobleEnergyInc.,fortheprovisionandfifteenyearleaseandoperationofanFPSOforthedevelopmentoftheAsengfieldlocatedinapproxi-mately1,000metresofwaterinBlockI,offshoreEquatorialGuinea.TheCompanywillexecutethecontractthroughajointventureithasenteredintowithCompaniaNacionaldePetroleodeGuineaEcuatorial(GEPetrol),thestateoilcompanyofEquatorialGuinea,fortheownershipandoperationoftheAsengunit.Underthisagreement,theCompanywillowna60%shareofthejointventurewithGEPetrolholdingtheremaining40%.TheFPSO,whichisbasedonthecon-versionofaVLCChullfromtheCompany’sinventory,willservenotonlytheAsengfield,butalsoestablishaliquidshubforNobleEnergy’sfuturedevelopmentsintheareawithprocessingcapacityfor120,000barrelsofliquidsperday,including80,000barrelsofoil,andinjectioncapacityofupto150,000barrelsperdayofwater,aswellashandling170millionstandardcubicfeetperdayofgas.Theunitwillhavestoragecapacityfor1.6millionbarrelsofoilincludingupto500,000bar-relsofcondensate.Firstoilproductionisscheduledforearly2012.
FPSO FalconTheFPSOFalconhasbeenredeliveredtotheCompanyinDecember2009byEssoDeepwaterLimited,asubsidiaryofExxonMobilfollowingnotificationofter-minationoftheexistingleaseandoperatecontractinSeptember2009.TheCompanyisactivelymarketingtheunitfornewFPSOdevelopmentsworldwide.UntilanewcontracthasbeenobtainedtheFPSOFalconwillremaininlayupconditionsintheFarEast.
FPSO Espirito SantoTheFPSOEspiritoSantostartedfirstoilproductioninJuly2009offshoreBrazilintheCamposBasin.Initialstart-upofthisunithasbeenchallengingbecauseofsubseaandtopsidescomplexity,howevertheunitwasproducinginlinewithexpectationatyearend2009.TheFPSOismooredinapproximately1,800metresofwaterdepthandisdesignedtoprocess100,000bar-relsofoilperdaywithAPIgravityrangingfrom16ºto42º,andtotreatupto45millionstandardcubicfeetofgasperdayforinjectionorexport.Itisthedeep-estmooredFPSOoftheCompany’sfleetandthefirstturretmooredFPSOintheworldusingsteelcatenaryrisersforfluidtransfer.TheFPSOischarteredbytheBC-10JointVenture,whichisoperatedbyShellwithONGCCamposLtda.andPetróleoBrasilieiroS.A.(Petrobras)asco-venturers,fromSBMOffshoreinjointventurewithMISC,underafifteenyearleaseandoper-atecontract.
FPSO CapixabaTheFPSOCapixabawasdisconnectedfromtheGolfinhofieldoffshoreBrazilandsailedtoSingaporeforconversionworksinKeppelshipyard.Newmod-uleshavebeeninstalledontheFPSOandtheunitdepartedfromSingaporeforBrazilmidFebruary2010,fordeploymentontheCachalotefield.TheunitwillbeundercontractwithPetrobrasforatwelveyearleaseandoperateagreement,whichisexpectedtocommenceinApril2010whenfirstoilproductionisscheduled.
FPSO EspadarteALetterofIntentwasreceivedfromPetrobrasfortherelocationoftheFPSOEspadarteunderaneweighteenyearleaseandoperatecontractontheBaleiaAzulfield.TheFPSOEspadartewillbedisconnectedfromitscur-rentlocationattheEspadartefieldoffshoreBrazilandaftertransfertoashipyard,theFPSOwillbemodifiedandupgradedforthenewproject.Itwillthenbetrans-ferredbacktoBrazilforoffshorehookup,installationandoperationontheBaleiaAzulfield.Theplanneddis-connectionoftheFPSOfromtheEspadartefieldisinApril2011andfirstoilattheBaleiaAzulfieldisplannedinJuly2012.TheFPSOwillrequireasignificantaddi-tionalcapexinvestmentfortheBaleiaAzulfield.
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48 SBMOffshore–AnnualReport2009
FPSO Rang DongTheFPSORangDongwasdisconnectedandlaidupattheendof2008inanticipationofnewprojects.Nosuit-ableprojectswereidentifiedandtheCompanyhasnowsoldtheunit,whichwillbescrapped.
FSO & MOPU TurkmenistanPetronasCarigali(Turkmenistan)SdnBhd(PCTSB)exer-ciseditspurchaseoptioninJune2009forboththeFSOandMOPUunderthetermsoftheServiceAgreemententeredintowiththeCompanyinJanuary2005.BothunitsweredeliveredtoPCTSBasiswhereis,inJuly2009attheirproductionlocationinDiyarbekirField,Block1offshoreTurkmenistanintheCaspianSea.
FSO UnityTotalExplorationProductionNigeriaLimited(TEPN)hasextendedtheConsortiumOperateandMaintenanceContractfor1year.FSOUnityhasbeenoperatedandmaintainedbyaConsortium ofSaipemandSBMOffshoresince2003.
DeepDraft Semi™ Thunder HawkConstructionoftheDeepDraftSemi™,ThunderHawk,wascompletedinearly2009andtheunitwasinstalledintheGulfofMexicoinawaterdepthofapproximately1,750metres.FirstproductioncommencedinJuly2009andtheunitisownedbytheCompanybutoper-atedbyMurphy.Theminimumfiveyearleasecontractisbasedonaproductionhandlingagreementwhichincludesapartofthedayratepaymentrelatedtopro-ductionvolume.
MOPUstor™ YmeTheseabedsupportedstoragetankoftheMobileOffshoreProductionUnitwithstoragetank(MOPUstor™)fortheYmeDevelopmentwasinstalledoffshoreNorwayinSeptember2008.TheinstallationofthetankallowedtheclientTalismanEnergyNorgeAStostartdrillingactivitiesfordrytreewellheadcom-pletions.Theproductionplatformor“Deck”isunderconstructioninAbuDhabiandscheduledforcomple-tioninMarch2010.ThecomplexityoftheprojectandnotablycompliancewithNorwegianregulationshascausedtheprojecttobedelayed.Oncompletion,theDeck(whichhasbeendesignedasaMOPU)willbeshippedonaHeavyLiftVesseltoNorwayforoffshore
installation.InstallationconsistsofjackingtheDeckuponitsthreelegsontopofthestoragetankandcon-nectingthedrytreestotheproductionplatformatdecklevel.ProductionistargetedinJuly2010foraninitialleaseperiodoffiveyears.TheMOPUstor™conceptisapatenteddesignofSBMOffshore.
MOPU Deep PanukeThehullandproductionfacilitiesoftheMOPUstructureforEnCana’sDeepPanukeProductionFieldCentrearebeingconstructedinAbuDhabi.Thehullispresentlyunderassemblyinadrydock,wherealsotheintegra-tionofthetopsideproductionfacilitieswilltakeplace.Oncompletioninthesecondhalfof2010,theplatformwillbeshippedtoNovaScotia,Canadaforoffshoreinstallation,whichconsistsofjackingituponitsfourlegsandconnectingtheproductiontreesviasubseaflowlinestotheproductionplatform.ThefacilitywillbeonaninitialeightyearleaseperiodwithEncanaCorporationwhoplansfirstproductionin2011.
Portfolio developmentResultingfromthedevelopmentswithintheleaseport-foliodescribedabove,theCompanyhadatyearendfourteenownedorpart-ownedunitsoncharter,oneunit(FPSOFalcon)laidup,withafurtherthreeunitswithleaseandoperatecontractsunderconstruction.Inaddition,theCompanycurrentlyoperatesthreecli-entownedfacilities(ExxonMobil’sFPSOSerpentinainEquatorialGuinea,Total’sFSOUnityinNigeriaandChevron’sFPSOFradeinBrazil),andhasinhandonefurtheroperationcontractfortheFPSOP-57forPetrobras,whichisstillunderconstruction.
Oil storage operations in Myanmar
In1997,theCompanysignedacontracttooperateaFSOoffshoreMyanmarattheYetagunfield.Operationscommencedin2000andwillterminatein2015.
Thiscontracttookeffectpriortothecampaignofinter-nationalappealsforsanctionsagainsttheMyanmarregime.TheCompanyhaspreviouslyexplainedthatitcannotcancelasignedcontractualcommitment.Repeatedeffortstosellthecontracthavebeenmade
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allcontractedunderdirectemploymentorthroughexclusivemanningagencies.TheCompanyseekstogiveallemployeesthebestemploymentstandardsinaccordancewiththeCompanyCodeofConductandSocialAccountabilityPolicy.TheCompanyoperateswithstandardsthatcomplywithinternationalhumanrightsandinternationallabourguidelines.Thiscommit-mentimpliesinparticularthecontinuousandtraceablecheckinginMyanmaroftheCompany’ssuppliersandsubsuppliersinrelationtoforcedlabourandchildlabourincompliancewithSocialAccountabilitystand-ardsset-outintheCompany’sSocialAccountabilitymanual.TheCompanyfurtherauditsallsuppliersandagenciesagainsttheseinternalprocedures.ItisimportanttonotehoweverthattheCompanycan-notcurrentlybeauditedagainsttheSA8000SocialAccountabilitystandardduetotheownersofthestandard(SAIInc.ofNewYork)prohibitingitsuseinMyanmar.ThereforetheCompanyanditssuppliersinMyanmararemeasuredagainsttheCompany’sowninternalSocialAccountabilitystandardsandproce-dures,whichmeettherequirementsofSA8000.
Turnkey Systems ActivitiesOngoingworkonalargenumberofTurnkeySystemssupplycontractsobtainedin2008orbeforewascar-riedforwardinto2009withdeliveryofmostprojectsscheduledfor2010.Neworderintakeinthisseg-mentofactivitiesdecreasedcomparedtolastyear
anddiscussionscontinuewithinterestedpartiesastheclearintentoftheCompanyistowithdrawfromthisMyanmarbasedoperationattheearliestopportunitytakingintoaccountcontractualandotherobligations.TheCompanycontinuestodeclarethatitwillnotenterintoanyothercontractualcommitmentinMyanmaraslongasthecurrentregimeremainsinplace.Thispolicyhasnotchangedandnofurtherinvestmenthastakenplacenorhasanynewbusinessbeencontracted.
TheCompanyiscommittedtocompliancewithSA8000normsforsocialaccountabilityforitsopera-tionsinMyanmar.TheFSOYetagunisoperatedwithacrewconsistingofmorethan90%Myanmarnationals,
Top: Process facilities on FPSO CapixabaBottom left: Semi-submersible production platform Thunder Hawk on locationBottom middle: Typical process module fabricationBottom right: lift of a module onto FPSO P-57 for Petrobras
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50 SBMOffshore–AnnualReport2009
(restatedfollowingseparatedisclosureofTurnkeyServicessegment)withaportfoliovalueatyearendofUS$2.0billion.Theactivitiesin2009aredescribedhereafterbytypeofproductorservice.
Themostnoteworthyeventsintheyearhavebeen:• inApril2009,acontractwassignedwithTotalfor
theengineeringandsupplyofequipmentfortheDeepwaterCALMbuoyfortheUsanOOL;
• inJune2009,theCompanycompletedandsuppliedanexternalturretmooringsystemforanFPSOtobelocatedoffshoreVietnamontheRubyfieldforPetronas/Petrovietnam;
• inAugust2009,aframeworkagreementwassignedwithShellGlobalSolutionsInternationalBVforthesupplyofTurretMooringSystemsforShell’sFloatingLNG(FLNG)facilities;
• inDecember2009,a FEEDcontractwassignedwithPetrobrasforaLNGFPSOfortheTupifielddevelopmentinBrazil;
• atyearend,theCompanydeliveredthesubassem-bliesoftheInternalTurretfortheBPNorgeSkarvFPSOforBP.Theremainingsectionswillbedeliv-eredinthefirstquarterof2010.
Large production systemsFPSO P-57 – PetrobrasConstructionoftheFPSOP-57forPetrobrasfortheJubartefieldoffshoreBraziliswellunderway.ThehullconversionandfabricationoffivetopsidesmodulesisperformedinSingapore,fromwherethevesselwillsailtotheBrasFelsyardinBrazilinthefirstquarterof2010.Inparallel,theremainderofthetopsidesmodulesarebeingconstructedinBrazil,inaccordancewiththecontractualrequirementsforBrazilianlocalcontentfabri-cation.UponarrivalofthevesselinBrazil,thosetopsidemoduleswillbeliftedandintegratedontheFPSO.Afterthecommissioningphase,theFPSOwillbeinstalledintheJubartefieldoffshoreBrazil,withfirstoilproductionexpectedinlate2010.TheCompanyhasathreeyearsoperatingservicescontractfortheFPSOP-57.
FPSO Okha – WoodsideFPSOOkhaisaturnkeysupplyofadisconnect-ableFPSOfortheCossackWanaeaLambertHermes(CWLHdevelopment)suppliedto
WoodsideEnergyLtd.TheFPSOOkhawillreplacetheexistingFPSOCossackPioneer.TheFSOOkhawhichwaspreviouslyownedbytheCompanyandoperatedasanFSOinthesummertimenorthofSakhalinIslandforSakhalinEnergyInvestmentCompany(SEIC)hasbeenusedasthebasisfortheFPSOOkha.Thehullrefurbishmentandconversion,integrationofprocessmodulesandconstructionofthedisconnectableturretisongoinginKeppelshipyard,withthemodulesbeingbuiltinadjacentSingaporeanmoduleconstructionyards.TheFPSOOkhaisscheduledtosailawayfromtheconversionyardduringthelastquarterof2010,afterwhichitwillbeinstalledandcommissionedintheCWLHdevelopmentoffshoreAustralia.
Large mooring systemsSkarv – BPThefabricationoftheInternalTurretfortheBPNorgeA.S.SkarvFPSOisprogressingwell.Bytheendofthefirstquarter2010,allmainturretsub-assemblieswillhavebeenhandedovertoSamsungHeavyIndustriesinKorea,wheretheyarebeingintegratedintotheFPSOhull.TheSkarvTurretisoneofthemostcom-plexturretseverbuiltandoneoftheworld’slargestintermsofmooringloads.ItisbasedontheCompany’sbogie-wheeltypedesignsimilartothatusedintheBPoperatedSchiehallionFPSOandthelargeunitsrecentlyinstalledonBraziliandeepwaterfields.
FLNG – ShellInAugust2009,aframeworkagreementwassignedwithShellGlobalSolutionsInternationalBVforthesupplyofTurretMooringSystemsforShell’sFloatingLNG(FLNG)facilities.Theagreementwillrunforuptofifteenyears,andcoversthedesign,procurementandconstructionofturretmooringsystemsforaseriesofShell’sFLNGprojects.InDecember2009,theCompanybeganaFEEDforthedevelopmentoftheturretdesignandprojectexecutionstrategy.ThisFEEDisscheduledtorununtilthefourthquarterof2010.
Ruby Field – Petronas/PetrovietnamTheCompanycompletedandsuppliedanexternaltur-retmooringsystemforanFPSOtobelocatedoffshoreVietnamontheRubyfieldforPetronas/PetrovietnaminJune2009.
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Deepwater export systemsDeepwaterexportCALMbuoysmoorshuttletankersforthetransferofcrudefromtheFPSObymeansoftwoorthreelargediameterflowlines,eithersteelpipeorbondedrubbertype,suspendedbetweentheFPSOandthebuoy.
Pazflor – Total E&PTheCompanyisworkinginconsortiumwithAPLfortheengineering,procurement,supply,constructionandinstallationoftheOilLoadingSystemforthePazflorproject.TheCompany’sscopeofworkconsistsoftheEngineering,ProcurementandSupplyofthetwooffloadinglines,whicharebasedonTrelline™rubberhoses.Thecompletesystemisscheduledfordeliveryinthesecondquarterof2010,followedbyinstallationwiththeCompany’svessel‘NormandInstaller’.
USAN – Total E&PTheCompanyreceivedanorderfromTotalfortheengineeringandsupplyofFreeIssueEquipmentfortheDeepwaterCALMbuoyfortheUsanOOL.ThebuoyitselfwillbefabricatedinNigeriaandtheCompanyisresponsiblefortheintegrationoftheequipmentandcommissioning.Thisphaseoftheprojecthasnotcom-mencedyet,buttheprojectisstillonscheduleforloadoutinthesecondquarterof2011.
Drilling unitsTheCompanyissupplyingthreeTDS2000Plusand2500seriesDynamicallyPositionedSemi-SubmersibleDrillingUnits, whichwereorderedinlate2006andearly2007.Theseunitsarefitted withthelatestdrillingcontrolsandautomationandcapableofoperatinginwaterdepthsfrom2,000to2,400metresanddrillingupto7,500metresbelowtheseabed.AllthreecontractsareEngineering,ProcurementandConstruction(EPC)contractsandtheengineeringforallthreedrillingunitsisexecutedbytheSBM-AtlantiaoperatingunitinHouston.Thethreedrillingunitsarewellintoconstructionandcommissioninghascommencedonthefirstunit.
TDS2000Plus drilling unit – Lone Star for Queiroz Galvão Perfuraçoes (QGP) S.A.Constructionofthedrillingunitisnowcompletewithcommissioningactivitieshavingcommencedlate2009atitsconstructionsiteinAbuDhabi.Seatrialsand
handovertoQGPisplannedforthesecondquarterof2010offshoreAbuDhabi.
TDS2000Plus drilling unit – Norbe VI for Odebrecht Oil & GasConstructionoftheseconddrillingunitisprogressingwithcommissioningactivitiesplannedtocommencebyfirstquarter2010atitsconstructionsiteinAbuDhabi.SeatrialsandhandovertoOdebrechtisplannedforthethirdquarterof2010offshoreAbuDhabi.
Third TDS2500 drilling unit – Delba III for Delba Drilling International Coöperative U.A.Constructionofthethirddrillingrigisinprogressandtheunitwasfloatedoutofthedrydockinthefourthquarterof2009.Equipmentinstallationiswellunder-wayatitsconstructionsiteinAbuDhabi.SeatrialsandhandovertoDelbaisplannedforthefourthquarterof2010offshoreAbuDhabi.
Design services and supply of special componentsSeveralorderswereobtainedfordesignservicesfordrillingunitsandoffshoreconstructionvesselsandincertaincasesthesewerecombinedwiththesupplyofproprietarydesignandhardwarecomponents.
ThisactivityismainlyexecutedbytheoperatingunitsSBM-GustoandSBM-MSClocatedinSchiedam.
Orders receivedThefollowingordersforproprietarydesignswerereceived:• oneSEA2750LightDrillingJack-upfromJack-up
Barge/SwiftDrilling,tobebuiltbyDrydocksWorld-SEAsiainBatam,Indonesia;
• oneNG2500XMultiPurposeJack-upVesselfromNPCC,tobebuiltbyNPCC;
• oneNG9000CWindTurbineInstallationJack-upVesselfromDrydocksWorld-SEAsia,tobebuiltbyDrydocksWorld-SEAsiainBatam,Indonesia.
Theseordersincludedthesupplyofthefollowingequipment:• threeJackingSystems;• oneXY-SkiddingSystem;• oneAroundthelegCrane(800tonne).
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Orders deliveredIn2009sixconstructionyardsaroundtheworlddeliv-eredfourteenJack-upunitsbasedontheproprietarydesignaslistedbelow:• threeSEA2000multipurposeJack-ups;twofor
Jack-upBarge,bothbuiltbyDrydocksWorld-SEAsiainBatamIndonesiaandoneforGeoSea,whichisbeingbuiltatLemantsinBelgium;
• twoNG2500XMultiPurposeJack-upVesselsforSeajacksbothbuiltatLamprellinDubai;
• twoCJ50CantileverDrillingJack-upsforMaerskDrilling,bothbuiltatKeppelFelsinSingapore;
• oneDSS51DrillingSemi-SubmersibleforTransocean,builtatKeppelFelsinSingapore;
• oneDSS21DrillingSemi-SubmersibleforMaerskDrilling,builtatKeppelFelsinSingapore;
• fourCJ46CantileverDrillingJack-ups:oneforUMW-StandardDrillingandoneforSaipem,bothbuiltatDrydocksWorld-SEAsiainBatamIndonesiaandtwoforCOSLofwhichoneisbuiltatCMHIandtheotheratDSOC,bothinChina;
• oneDSS38DrillingSemi-SubmersibleforQueirozGalvaoOleoeGas,builtatKeppelFelsinSingapore.
Theseordersincludedthesupplyofthefollowingequipment:• sevenJackingSystems;• sixXY-SkiddingSystems;• sixFixationSystems.
CranesTheCompanyissupplyingsixcranesofGustoMSCdesignsforoffshoreliftingactivitieswithcapacitiesupto5,000tonnes.Threecraneswillhavealiftingcapacitybetween500to1,000tonnesandarespecifi-callydesignedfortheinstallationofwindturbinesinoffshorelocations.Theotherthreecraneswithaliftingcapacityrangingbetween550and5,000tonnesareintendedforgeneraloffshoreinstallationwork.The5,000tonnesoffshorecraneencounteredconstruc-tiondefectswiththesteelstructuresoftheslewingplatformandtubcollarwhichhavebeenbuiltinChina.Extensiverepairswereneededwhichhasresultedincostoverrunsandprovisionshavebeentakenin2009.Fivecranes,includingthe5,000tonnescranearescheduledtobedeliveredin2010,withonecranescheduledfordeliveryearly2011.
Turnkey Services ActivitiesTheTurnkeyServicesactivitiesaremanagedbytheSBMServicesoperatingunit.
Tanker loading and discharge terminalsThemarketfortankerloadinganddischargeterminalshasbeendepressedduringthefirsthalfof2009,butdespitethisseveralorderswereobtainedduringtheyear.Theordersaredistributedalmostequallybetweenreplacementbuoysandnewterminalsandwereallobtainedinthesecondhalfoftheyearaccountingforan80%shareofthemarket.
Thefollowingreplacementandnewterminalordersweresecuredin2009:• fromAcc-Leader/Alstom/Fapcoforthesupplyofa
ConventionalBuoyMooring(CBM)fortheirpowerplantinFujairah,UAE;
• fromNAOCfortheleasingofarefurbishedCALMbuoyfortheirBrassterminal,Nigeria;
• fromGEOCEAN/GECOLforthesupplyofanewCALMsystemfortheirnewpowerstationinSirte,Libya;
• fromNNPCforthesupplyandinstallationofareplacementCALMsystemfortheirAtlasCoveterminalinLagos,Nigeria;
• fromKJO,AlKhafjiforthesupplyofanSBMstockCALMbuoy,SaudiArabia;
• fromEIL/HMPLforthesupplyofanewCALMsys-temfortheirMundraBathindapipelinesystem,India;
• fromInelectraforthesupplyofanewCALMsystemfortheirJosepipelinesystem,Venezuela.
Offshore contractingBoththeNormandInstallerandDynamicInstallerves-selswerefullyoccupiedduring2009.
InJanuary2009,theNormandInstallerinstalledtheChevronFPSOFradeinBrazil,andspenttheremainderoftheyearonvariouscontractingjobsforexternalclients.
Thisyearalsosawthevessel’sfirstdrydockinSouthAfricaattheDormacShipyardinDurban.Thiswasalsotheopportunitytoinstalla2,000tonnecapac-ityCarouselinsidetheNormandInstaller’scargoholdwhichnowaddsanattractivefeaturetothevessel’sequipment.Thisadditiontothevesselexpandsthe
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Company’sabilitytoperformwiderscopeprojectswherethelayingofflexiblelines,suchasrisersandumbilicalsisrequired,andhenceopeninganewmarketforthevessel.
ThefollowingmainjobswerecompletedbytheNormandInstallerin2009:• subseaworksforSubsea7ontheGolfinhofield,
offshoreBrazil;• mooringlegspre-installation,riserhook-upand
subseaassetsinstallationforProsafe,ontheAzuritefield,offshoreCongo;
• FPSOFradehook-upforChevron,offshoreBrazil;• ROVsurveyofFPSOMarlimSulmooringlegs,
offshoreBrazil;• stand-bymooringlinesinstallationforTotal,
ontheAkpofield,offshoreNigeria;• CALMbuoychangeoutforSAPREF,offshore
Durban,SouthAfrica;• anchorsandmooringlegspre-installationforFPSO
ArmadaPerdanaforBumiArmadaBerhad,ontheOyofield,offshoreNigeria;
• FSOchainsreplacementandelectricalcablelayingforSonangol,onthePalancafield,offshoreAngola;
• rigidjumpersinstallationforTotal,ontheMohoBilondofield,offshoreCongo;
• XmasTreeinterventionandflexiblejumperinstalla-tionforMurphy,ontheAzuritefield,offshoreCongo.
TheDynamicInstallerhasbeenfullyoccupiedallyearonessentiallythirdpartycontracts:• anchorlegsre-tensioningforTotalatDjenoterminal,
offshoreCongo;• pipelineunderwaterrepairforENIatKitinafield,
offshoreCongo;• CALMbuoychange-out,forCNLatPennington
field,offshoreNigeria;• buoyrepairforCNL,atAgbamifield,offshoreNigeria;• CALMbuoychange-outforSPDCatForcados
terminal,offshoreNigeria;• flexibleandelectricalcablelayingforTotalatYanga
field,offshoreCongo;• pilesdrivingand2xbuoyshookupforCABGOC
MTOEproject,offshoreCabinda,Angola;• buoychange-outforShellatGambaTerminal,off-
shoreGabon;
• disconnectionofEscravosLPGFSOwithreplace-mentofmooringandrisersystemsforCNLatEscravosterminal,offshoreNigeria.
OtherprojectscarriedoutnotinvolvingeithertheNormandInstallerorDynamicInstaller:• Petrobras–FPSOCapixabadisconnection,
offshoreBrazil;• Talisman–MOPUstor™PhaseII(offshoreNorway)
withtheconnectionoftheSLSflowline;• Vaalco–ROVsurveyworksperformedonEtame
field,offshoreCongo,usingtheDOFGeograph.
OffshoreContractingalsoprovidedgeneralassistancetotheCompany’sFPSOsinproductionworldwideonvariousoperationssuchasUWILDs,surveys,riserpull-ins/pull-outsandfloatinglinesinstallation.
OffshoreContractingalsoprovidedgeneralassistancetotheCompany’sFPSOsinproductionworldwideonvariousoperationssuchasUWILDs,surveys,riserpull-ins/pull-outsandfloatinglinesinstallation.
After sales servicesForthesecondyearinarow,thesupplyofsparepartshasreachedanewrecordwithmorethan237ordersobtainedin2009.
Mostsignificantordersincluded:• overhaulpartsincludingaverylargeMainRoller
BearingforVietsovpetroinVietnamfortherefurbish-mentoftheirChiLinhFSO;
• partsandtheprovisionofateamofServiceEngineerstohelpShellbringtheirEAfieldinNigeriabackintoproduction;
• supplyofseveralswivelsforStatoilfortheFPSONorne(replacementofoneunitandasspares);
• overhauloftheoldestoperationalIMODCOCALMbuoyfirstcommissionedin1970.
Swivel and mechanical components manufacturingManufacturingofproprietarymechanicalcomponentsfortheturretsystems,likeswivelstacks,bearingsandarticulationsformsanimportantpartoftheCompany’sactivities.Thisyearhasbeenademanding
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year,wherebythehighoccupationlevelofthemanu-facturingindustrywasstillaconstraintforthefirsthalfoftheyear,buteasedinthesecondhalf.
TwoswivelstackswerefabricatedfortheCompany’sprojects,onefortheWoodsideFPSOOkhaprojectandanotheriscurrentlyunderfabricationfortheBPSkarvturretmooringsystem.
Aswellastheseswivelsstacks,anumberofkeymechanicalcomponentsweredeliveredtothetwoprojects,suchastheunijointforOkhaandthebogieweathervaningsystemoftheSkarvturret.
Top left: Dynamic Installer Bottom left: Normand Installer in operation in BrazilBottom middle: Normand Installer in operation in BrazilBottom left: installation of Deepwater CALM buoy using the Normand Installer
Inrespectofexternalclients,somelargeordershavebeenexecuted.TheseincludedtherefurbishmentoftheswivelstackontheFPSOCurlewforMaerskinrecordtime,andthereplacementprogramfortheAsgardswivelstackforStatoilwhichisstillintheexecutionphase.
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BPIV.1.1:Thisprovisionmentionsthatthegeneralmeetingofshareholdersofacompanynothavingaspecificformalstructure(knownas“structuurregime”)maypassaresolutiontodismissamemberofthemanagementboardorofthesupervisoryboardbyanabsolutemajorityofthevotescast.Itmaybeprovidedthatthismajorityshouldrepresentacertainproportionoftheissuedcapital,butsuchproportionshouldnotexceedonethird.Ifthisproportionofthecapitalisnotrepresentedatthemeeting,butanabsolutemajorityofthevotescastisinfavourofaresolutiontodismissaboardmember,anewmeetingmaybeconvened.Atthatmeetingaresolutionmaybepassedbyanabsolutemajorityofthevotescast,regardlessoftheproportionofthecapitalofthatmeeting.
Undertherulesofthearticlesofassociation,amemberoftheSupervisoryBoardorManagementBoardcanbedismissedbyamajorityoftwothirdsofthevotescast,suchmajorityrepresentingmorethan50%oftheissuedsharecapital.TheManagementBoardisoftheopinionthatinordertotakeastrategicdecisioninabalancedmanner,allshareholdersshouldbeabletobeinvolvedinthedecisiontakingprocessandthereforetheBestPracticeprovisionisnotapplied.
TheCompanyhasexplainedaboveitsdeviationsfromtheCode.Material(future)developmentsinCorporateGovernancemightjustifyotherdeviationsandwouldinsuchcircumstancesbeexplainedbytheCompany.
Management BoardTheManagementBoardconsistsoftwostatutorydirectors,theCEOandtheCFO.Thestatutorydirectorsandnon-statutorydirectorsformtogethertheBoardofManagement.
Duties of the Management BoardTheCompanyismanagedbytheManagementBoard,underthesupervisionofaSupervisoryBoard.EachyeartheManagementBoardpresentstotheSupervisoryBoard,theoperationalandfinancialobjec-tivesoftheCompany,thestrategydesignedtoachievetheobjectivesandtheparametersapplicableinrelationtothestrategy.TheOperationalPlan2010hasbeendiscussedandapprovedintheSupervisoryBoard
Corporate GovernanceCorporate Governance Structure
SBMOffshoreN.V.isalimitedliabilitycompany(“NaamlozeVennootschap”)incorporatedunderthelawsofTheNetherlandswithitsstatutoryseatinRotterdam.TheCompanyhasatwotierboard,aSupervisoryBoardandaManagementBoard.EachBoardhasitsspecificroleandtaskregulatedbytheCorporateGovernanceCode,lawsandarticlesofassociation.
Dutch Corporate Governance Code
TheCorporateGovernanceMonitoringCommitteehaspublishedtheamendedDutchCorporateGovernanceCodeon10December2008andon21December2009,theAmendedCodehasbeendesignatedbylawastheCorporateGovernanceCode(Code)onthebasisofwhichcompaniesshouldreport.DuringthecourseoftheyearunderreviewtheManagementBoardandtheSupervisoryBoardhavereviewedtheCorporateGovernancestructureoftheCompanyandthebestprac-ticesoftheCode.Inthis sectionoftheAnnualReport,theCompanyreportsoncompliancewiththeCode.
SBMOffshorecomplieswithallapplicableprinciplesandbestpracticesprovisionsoftheCodeexceptfor:
BP.III.5.11:TheRemunerationCommitteeshallnotbechairedbyaSupervisoryBoardmemberwhoisamanagingboardmemberofanotherlistedcompany.TheChairmanoftheRemunerationCommitteeholdsatemporarypositioninaDutchlistedcompany,pri-marilyactiveontheDutchmarket.IntheopinionoftheSupervisoryBoardthereisnoconflictofinterestandthereforetheSupervisoryBoardhasrequestedtheChairmanoftheRemunerationCommitteetocontinueinhisrole.Thisnon-complianceisduetoterminatesinceHeijmansN.V.issuedapress-releasetotheeffectthatMr.R.vanGelderwillretirefromtheManagementBoardofHeijmansN.V.atits2010AGM.
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Meetingof8December2009andaspecialsessionwasdedicatedtotheCompany’sstrategyontheafter-noonofthatsameday.
Appointment of a Managing DirectorManagingDirectorsshallbeappointedbytheGeneralMeetingofShareholders(GM).AManagingDirectorisappointedforamaximumperiodoffouryears,andunlessaManagingDirectorresignsearlier,his/herappointmentperiodshallendonthedayofthefirstAnnualGeneralMeeting(AGM)thatwillbeheldfouryearsaftertheappointment.AManagingDirectormaybereappointedforfurtherconsecutivetermsofuptofouryearseach.
IncaseofanappointmentofoneormoreManagingDirectors,theSupervisoryBoardmaymakeabindingoranon-bindingproposal.Asfarasitconcernsabind-ingnomination,theManagementBoardshallinvitetheSupervisoryBoardtomakeaproposalwithinsixtydayssothatforeachappointmentachoicecanbemadebetweenatleasttwocandidates.
TheGMmayatalltimesoverrulethebindingnatureofaproposalbyaresolutionadoptedbyanabsolutemajorityofthevotescast,providedsuchmajorityrepresentsatleastone-thirdoftheissuedsharecapi-tal.Ifone-thirdofthecapitalisnotrepresentedatthemeeting,butanabsolutemajorityofthevotescastisinfavourofaresolutiontocancelthebindingnatureofanomination,anewmeetingmaybeconvenedatwhichtheresolutionmaybepassedbyanabsolutemajorityofthevotescast,regardlessoftheproportionofthecapitalrepresentedatthemeeting.Ifabindingnominationhasnotbeenmade,theGMmayappointaManagingDirectoratitsdiscretion.
Suspension or dismissal of a Managing DirectorTheGMmayatanytimesuspendanddismissManagingDirectors.UnlessattheproposaloftheSupervisoryBoard,aresolutiontosuspendordismissaManagingDirectormaybepassedonlybytheGMwithamajorityoftwo-thirdsofthevotescast,suchmajorityrepresentingmorethanhalfoftheissuedcapi-tal.Asstatedinthearticlesofassociationitshallnotbe
permittedtoconveneasecondGMpursuanttosection120,subsection3,Book2,DutchCivilCode.
IfeithertheGMortheSupervisoryBoardhassus-pendedaManagingDirector,thentheGMmustresolvewithinthreemonthsaftertheeffectivedateofthesus-pension,eithertoremovetheManagingDirector,ortosetasideormaintainthesuspension,failingwhichthesuspensionshallcease.Aresolutiontomaintainthesuspensionmaybeadoptedonlyonceandthesus-pensionmaybemaintainedforaperiodnotexceedingthreemonthsasfromthedayonwhichtheGMhaspassedtheresolutiontomaintainthesuspension.IftheGMhasnotresolvedwithintheperiodsetforthemaintainingofthesuspensioneithertoremovetheManagingDirectorortosetasidethesuspension,thesuspensionshallcease.
Risk Management & In Control StatementThe“InControl”statementoftheManagementBoard,otherinformationonRiskManagement,internalcontrolandreportingsystemsandproceduresaregivenintheRiskManagementsection.
Sensitivity of the results to external factors and variablesThissubjectisdealtwithintheRiskManagementsectionlaterinthisreport.
Regulations concerning ownership of and transactions in sharesInaccordancewiththeCode,theSupervisoryBoardandManagementBoardrulescontainaprovisionwithregardtotheownershipofandtransactionsinsharesinDutchlistedcompaniesotherthanSBMOffshoreN.V.ThisprovisionprohibitstradinginsharesotherthanthoseoftheCompanyonthebasisofsharepricesen-sitiveinformationobtainedinthecourseofmanagingorsupervisingtheCompany’sbusinesses.
Shares held by members of the Management BoardForinformationabouttheshares(orotherfinancialinstruments)heldinSBMOffshoreN.V.bymembersoftheManagementBoard,refertonotes 3and19totheconsolidatedfinancialstatements.
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Conflicts of interest
ThemembersoftheManagementBoardhaveanemploymentcontractwithSBMOffshoreN.V.inlinewiththeCodeandrecommendationsmadebytheCorporateGovernanceMonitoringCommittees.Intheseemploymentcontractsitisstipulatedthatmem-bersoftheManagementBoardmaynotcompetewithSBMOffshoreN.V.Inaddition,theCodeofConductofSBMOffshoreregulatesconflictofinterestmat-tersandisapplicabletomembersoftheManagementBoardandotheremployees.ThemembersoftheManagementBoarddidnotreportaconflictofinterestduringtheyear2009.
Mandates with third partiesNomemberoftheManagementBoardisamemberoftheSupervisoryBoardofanyotherlistedcompany.AcceptancebythemembersoftheManagementBoardofnomorethantwomandatesasaSupervisoryBoardmemberofalistedcompanyrequiresthepriorapprovaloftheSupervisoryBoardtopreventconflictsofinterestandreputationalrisks.Otherappointmentsofmate-rialimportanceneedtobenotifiedtotheSupervisoryBoard.MembersoftheManagementBoardarealsoappointedtothestatutoryboardofSBMOffshoreoper-ationalentities.TheCompany’sCodeofConductdoesnotpermitemployeesanddirectorstoacceptgiftsofcommercialvalueforthemselvesortheirrelatives,toprovideadvantagestothirdpartiestothedetrimentoftheCompanyortotakeadvantageofbusinessoppor-tunitiestowhichSBMOffshoreisentitled.
Loans or guaranteesNoloansorguaranteeshavebeenprovidedtomembersoftheManagementBoard.
Supervisory BoardDuringthecourseoftheyearunderreviewitwasannouncedinapressreleasedated10September2009thatonememberoftheSupervisoryBoard,Mr.D.H.Keller,resignedwitheffectfrom15September2009.Asper31December2009,theSupervisoryBoardconsistedoffivemembers.Inapressreleasedated24December2009,itwasannouncedthattheSupervisoryBoardintendedtonominateMr.F.J.G.M.CremersasaSupervisoryDirector,subjecttotheapprovaloftheGM.
Top: FPSO Capixaba at anchorage in SingaporeMiddle: FPSO Capixaba leaving the quay side in SingaporeBottom: installation of a deepwater CALM buoy
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TheSupervisoryBoardhasestablishedanAuditCommittee,aRemunerationCommitteeandaSelectionandAppointmentCommittee.MoreinformationabouttheSupervisoryBoardanditscommitteesandpersonaldetailsofthemembersoftheSupervisoryBoardcanbefoundintheReportoftheSupervisoryBoard.
Duties of the Supervisory BoardTheSupervisoryBoardsupervisesthemanagementoftheCompanyanditsbusinessesbytheManagementBoard,theeffectivenessandtheintegrityoftheinternalcontrolandriskmanagementsystemsandproce-duresimplementedbytheManagementBoardandthegeneralconductofaffairsofSBMOffshoreanditsbusi-nesses.TheSupervisoryBoardassiststheManagementBoardwithadviceinaccordancewiththebestprac-ticesoftheCode.IntheperformanceofitsdutiestheSupervisoryBoardisguidedbytheinterestsoftheCompany,andtheenterprisesconnectedtherewith.
Inaddition,certain(material)decisions–asstipulatedinthelaworarticlesofassociationortheRulesoftheSupervisoryBoard–takenbytheManagingBoard,needpriorapprovaloftheSupervisoryBoard.
Appointment of Supervisory DirectorsSupervisoryDirectorsshallbeappointedbytheGM.ASupervisoryDirectorisappointedforamaximumperiodoffouryears,and,unlessaSupervisoryDirectorresignsearlier,his/herappointmentperiodshallendonthedayofthefirstannualGM,thatwillbeheldfouryearsfollowingtheappointment.ASupervisoryDirectormaybereappointed.ASupervisoryDirectormaybeamemberoftheSupervisoryBoardforamaxi-mumperiodoftwelveyears.Thisperiodmayormaynotbeinterrupted,unlesstheGMresolvesotherwise.
IfoneormoreSupervisoryDirectorsaretobeappointed,theSupervisoryBoardmaymakeabindingoranon-bindingproposal,asreferredtointhearticlesofassociation.Asfarasabindingnominationiscon-cerned,theproposalshouldofferthechoicebetweenatleasttwocandidates.
Incaseabindingproposalismade,theGMmayatalltimesoverrulethebindingnaturethereofbyaresolu-tionadoptedbyanabsolutemajorityofthevotescast,providedsuchmajorityrepresentsatleastone-thirdof
theissuedsharecapital.Ifthisproportionofthecapitalofatleastone-thirdisnotrepresentedatthemeeting,butanabsolutemajorityofthevotescastisinfavourofaresolutiontocancelthebindingnatureofanomina-tion,anewmeetingmaybeconvened.Atthatmeeting,theresolutionmaybepassedbyanabsolutemajorityofthevotescast,regardlessoftheproportionofthecapitalrepresentedatthemeeting.
Suspension or dismissal of a Supervisory DirectorTheGMmayatanytimesuspendanddismissSupervisoryDirectors.AresolutiontosuspendorremoveaSupervisorydirectormaybepassedonlybytheGMwithamajorityoftwo-thirdsofthevotescast,suchmajorityrepresentingmorethanhalfoftheissuedcapital.AsstatedinthearticlesofassociationitshallnotbepermittedtoconveneasecondGMpursuanttosection120,subsection3,Book2,DutchCivilCode.
IftheGMhassuspendedaSupervisoryDirector,thentheGMmustresolvewithinthreemonthsaftertheeffectivedateofthesuspension,eithertoremovetheSupervisoryDirector,ortosetasideormaintainthesuspension,failingwhichthesuspensionshallcease.Aresolutiontomaintainthesuspensionmaybeadoptedonlyonceandthesuspensionmaybemain-tainedforaperiodnotexceedingthreemonthsasfromthedayonwhichtheGMhaspassedtheresolutiontomaintainthesuspension.IftheGMhasnotresolvedwithintheperiodsetforthemaintainingofthesuspen-sioneithertoremovetheSupervisoryDirectorortosetasidethesuspension,thesuspensionshallcease.
Conflicts of interestTheSupervisoryBoardRulescontainprovisionsdesignedtopreventconflictsofinterestaswellasset-tingoutinwhatmannertoabidebytheregulations.Conflictofinterestmattersandhowtheyaredealtwith,ismentionedintheSupervisoryBoardreport.AsaformerCEOoftheCompany,Mr.D.H.KellerdidnotqualifyasanindependentSupervisoryDirector.Sincehisresignationon15September2009,allSupervisoryBoardmembersareindependentfromtheCompanywithinthemeaningofbestpracticeprovisionIII.2.2oftheCode.NoneofthemembersisamemberofthemanagementboardofaDutchlistedcompanyinwhichamemberofthemanagementboardoftheCompany
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Fortheindividualremuneration,pleaserefertonote3totheconsolidatedfinancialstatements.Theseamountsaregrossamountsperyear.TheremunerationoftheSupervisoryBoardisreviewedonceayear.
DiversityTheSupervisoryBoardrulesstatethatthecomposi-tionoftheSupervisoryBoardshallbesuchthatthecombinedexperience,expertiseandindependenceofitsmembersenablestheSupervisoryBoardtobestcarryoutthefullrangeofitsresponsibilities.TheSupervisoryBoardconsidersthatitscurrentcompo-sitionsatisfiesthebestpracticeofdiversityintermsoffinancialandbusinessmanagementexpertiseandinternationalexperienceintheoilandgasindustries.TheSupervisoryBoardhastheintentioninthefuturetoachievegenderdiversityandhasaskeditsSelection&AppointmentCommitteetospecificallytakethisintoaccountintheselectionprocessofanynewSupervisoryDirectors.
Corporate Social ResponsibilityTheCompanypublisheseachyearaCorporateSocialResponsibility(CSR)report.Inthisreport,theManagementBoardreportsonthedifferentCorporateSocialResponsibilityissueswhicharerelevanttotheCompany.CSRissueswhicharerelevanttotheCompany’sbusinesswerediscussedwithandtakenintoconsiderationbytheSupervisoryBoard.
ShareholdersShare capitalTheauthorisedsharecapitaloftheCompanyisonehundredmillioneuro(€100,000,000).Thissharecapi-talisdividedintotwohundredmillion(200,000,000)OrdinaryShareswithanominalvalueoftwenty-fiveeurocent(€0.25)eachandfiftymillion(50,000,000)PreferenceShares,withanominalvalueofoneeuro(€1)each.Asper31December2009,164,459,980(2008:145,613,988)ordinarysharesareissuedandnopreferenceshares.Thepreferencesharescanbeissuedasaprotectivemeasureasexplainedbelow inthesectionontheStichtingContinuiteitSBMOffshoreN.V.Theevolutionofthenumberofissuedordinarysharesissetoutinsection1underShareholderinformation.
whichhesupervisesisaSupervisoryBoardmember.Therearenointerlockingdirectorships.NoneofthemembersrepresentdirectlyorindirectlyashareholderoftheCompanyorasupplierorcustomeroftheCompany.NoneofthemembersoftheSupervisoryBoardprovidesanyservicestoorhasanydirectorindirecttieswithSBMOffshoreoutsidehisSupervisoryBoardmembership.
InadditiontohispositionasaSupervisoryDirectoroftheCompany,Mr.T.Ehretisalsoanon-executivedirectorofAcergyS.A.,anengineeringandconstruc-tioncompany.Intheeventofanyperceivedconflictofinterestduringdiscussionofagendapoints,Mr.T. Ehretdoesnotparticipateinsuchdiscussions.Mr.F.G.H.DeckersistheCEOofVanLanschotN.V.,afinancialinstitutionestablishedinTheNetherlands.Kempen&Co.,asubsidiaryofVanLanschotN.V.actedastheadviseroftheCompanyinrelationtotheissuanceof13,896,880ordinaryshareson11November2009.Mr. F.G.H.Deckers informedtheSupervisoryBoardthat“Chinesewalls”wereinplacewithinthebankandthathehadnotbeeninvolvedintheadvisoryservicesper-formedbyKempen&Co.TheSupervisoryBoardfeltsatisfiedtherewerenoconflictsofinterestintheyearunderreview.
Regulations concerning ownership of and transactions in sharesTheSupervisoryBoardrulescontainprovisionscon-cerningtheownershipofandtransactionsinsharesheldbymembersoftheSupervisoryBoardinDutchlistedcompaniesotherthanSBMOffshoreN.V.
Remuneration – Shares held by the members of the Supervisory BoardNoneofthemembersoftheSupervisoryBoardreceivesaremunerationthatisdependentonthefinancialper-formanceoftheCompany.NoneofthecurrentmembersoftheSupervisoryBoardreportedtoholdshares(orotherfinancialinstruments)inSBMOffshoreN.V.
NoincreaseintheindividualremunerationofthemembersoftheSupervisoryBoardofSBMOffshoreN.V.anditscommitteestookplacein2009.ThetotalremunerationofthemembersoftheSupervisoryBoardamountedtoUS$433,000(2008:US$479,000).
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General Meeting of ShareholdersEveryyeartheAGMshallbeheldwithin6monthsafterthestartofanewcalendaryear.Theagendaforthismeetingshallincludethefollowingstandarditems:(i)thereportoftheManagementBoardconcerningtheCompany’saffairsandthemanagementasconductedduringthepreviousfinancialyear,(ii)thereportoftheSupervisoryBoardanditscommittees,(iii)theadoptionoftheCompany’sannualaccountsandoftheallocationofprofits,(iv)CorporateGovernance,(v)thedischargeoftheManagementBoardandoftheSupervisoryBoard,(vi)thecompositionoftheSupervisoryBoardandoftheManagementBoard,(vii)the(re)appointmentoftheexternalaccountantoftheCompany,(viii)thedelegationofauthoritytoissuesharesandtorestrictorexcludepre-emptiverightsand(ix)thedelegationofauthoritytopurchaseownshares.Inaddition,cer-tainspecifictopicsmaybeputontheagendabytheSupervisoryBoard.
ExtraordinaryGMscanbeheldwhenevertheManagementBoardand/ortheSupervisoryBoardshalldeemdesirable.
TheGMscanbeheldinSchiedam,Rotterdam,TheHague,AmsterdamorHaarlemmermeer(Schiphol).
Agenda of the meetingProposalsofpersonswhoareentitledtoattendtheshareholdersmeetingswillonlybeincludedintheagendaifsuchproposalismadeinwritingtotheManagementBoardnotlaterthansixty(60)daysbeforethatmeeting.TheproposalscanbemadebypersonswhoareentitledtoattendGMs,solelyorjointlyrepresentingsharesamountingtoatleastone-hundredth(1/100)oftheissuedsharecapital,orwithamarketvalueofatleastfiftymillioneuro(€50,000,000),unlessthiswouldbecontrarytoimportantinterestsoftheCompany.
Attendance and voting rights at the meetingWithreferencetothearticlesofassociation,allShareholdersareentitledtoattendtheGMs,toaddresstheGMandtovote.AttheGMeachOrdinaryShareshallconfertherighttocastone(1)vote.EachPreferenceShareshallconfertherighttocastfour(4)
votes,whenissued.Unlessotherwiserequiredbythelawandarticlesofassociationallresolutionsshallbeadoptedbyanabsolutemajorityofvotes.
TheCode’sprinciplesalsorequirethatproxyvotingmeansaremadeavailable,withtheintentionofmaxim-isingshareholderparticipationinGMsoftheCompany.AttheGMof14May2009aproxyvotingsystemwasprovidedandtheCompanyintendstofacilitatetheprovisionofproxiestoanindependentthirdpartyandtoenhancetheuseofelectroniccommunicationtotheextentpossiblesincethearticlesofassociationnowcontaintheprovisionsenablingtheCompanytodoso.
AttheAGMof14May2009,35,474,165ordinarysharesparticipatedinthevoting,equalto24.36%ofthethentotaloutstandingsharecapitalof145,637,210ordinaryshares.Alltheproposedresolutionswereapprovedwithavastmajorityofthevotes.Theout-comeofthevotingwaspostedontheCompany’swebsitesoonaftertheAGM.
Notice to convene a meetingThenoticefortheAGMwaspublishedaheadofthestatutorilyrequiredtimeintheofficialpricelistofEuronextAmsterdamN.V.,the“FinancieeleDagblad”newspaperandontheCompany’swebsite.
DividendTheManagementBoardisauthorised,subjecttotheapprovaloftheSupervisoryBoard,todetermineeachyearwhatpartoftheprofitsshallbetransferredtothereserves,andwhatpartwillbedistributedasdividend.Thedividendfor2009isproposedtorevertbacktotheoriginalpolicyoftheCompanytodistributeasadividend50%ofnetincome.Asanexceptiontothisgeneralprinciple,adividendofUS$0.93persharerepresenting60%ofnetincomewasproposedto,andapprovedbytheAGMof2009,ofwhich50%waspay-ableincashand50%payableinCompanyshares.AttheAGMof14April2010,aresolutionwillbesubmittedtoapprovethepaymentofadividendamountingtoUS$0.67perordinaryshare,whichwillbeconvertedintoEuroattheECBreferenceratepublishedonthedateofthemeeting.
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Articles of AssociationIssue of sharesTheGMortheManagementBoardifauthorisedbytheGMandwiththeapprovaloftheSupervisoryBoardmayresolvetoissueshares;aslongastheManagementBoardisauthorisedtoissueshares,theGMmaynotpassaresolutiontoissueshares.
TheGMortheManagementBoard,subjecttotheapprovaloftheSupervisoryBoard,shallsetthepriceandfurtherconditionsofissue,withdueobservanceoftheprovisionscontainedinthearticlesofassociation.Sharesshallneverbeissuedbelowpar,exceptinthecaseasreferredtoinsection80,subsection2,Book2,oftheDutchCivilCode.
IftheManagementBoardhasbeendesignatedasthebodyauthorisedtoissuesharesthenumberandtheclassofsharesmustbespecifiedinsuchdesignation.Uponsuchdesignationthedurationofthedesigna-tionshallbeset,whichshallnotexceedfiveyears.Thedesignationmaybeextended,fromtimetotime,forperiodsnotexceedingfiveyears.Unlesssuchdesignationprovidesotherwise,itmaynotbewith-drawn.AresolutionoftheGMtoissuesharesortodesignatetheManagementBoardasbeingauthorisedtoissueshares,shallbevalidonlyifaccompaniedbyapriororsimultaneousresolutionofapprovalbyeachgroupofshareholdersofthesameclasswhoserightsareprejudicedbytheissue.Althoughthedurationofthedesignationasprovidedbylawmaybeamaxi-mumoffiveyears,theCompanyadherestothegoodpracticeoflimitingthisdurationtoeighteenmonths.AttheAGMof14May2009,theshareholdershavedelegatedtheauthoritytotheManagingDirectorsfor
Major ShareholdersUpuntil31December2009thefollowinginvestorshavereportedtotheNetherlandsAuthorityfortheFinancialMarket(AFM)amajorshareholdinginSBMOffshoreN.V.:• CapitalResearch&ManagementCompanyhada
totalcapitalinterestof4.60%(2008:6.53%);• SchrodersPLC.hadatotalcapitalinterestof9.98%
(2008:9.98%);• CapitalIncomeBuilderInc,hadatotalcapitalinter-
estof4.84%(2008:5.93%).
TheFinancialMarketsSupervisionAct(Wetophetfinancieeltoezicht)imposesadutytodisclosepercent-ageholdingsinthecapitaland/orvotingrightsintheCompanywhensuchholdingreaches,exceedsorfallsbelow5%,10%,15%,20%,25%,30%,40%,50%,60%,75%and95%.SuchdisclosuremustbemadetotheAFMwithoutdelay.AfterthedisclosuretotheAFM,theAFMnotifiestheCompany.
left: Manifold section of the turret of FPSO CapixabaRight: lifting operation of the lower section of the Skarv FPSO
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aperiodofeighteenmonthsasfrom14May2009andsubjecttoapprovaloftheSupervisoryBoardtoissueordinarysharesuptotenpercentofthetotaloutstandingsharesatthattime.Inthesamemeeting,theshareholdershavedelegatedtheauthoritytotheManagingDirectorsforaperiodofeighteenmonthsasfrom14May2009andsubjecttotheapprovaloftheSupervisoryBoardtorestrictorwithdrawpreferentialrightsoftheshareholdersinrespectofordinaryshareswhenordinarysharesarebeingissued.
Repurchase of own sharesTheManagementBoardmay,withtheauthorisationoftheGMandtheSupervisoryBoardandwithoutprejudicetotheprovisionsofsections98andsec-tions98d,Book2,DutchCivilCodeandthearticlesofassociationcausetheCompanytoacquirefullypaidupsharesinitsowncapitalforvaluableconsideration.TheManagementBoardmayresolve,subjecttotheapprovaloftheSupervisoryBoard,todisposeofsharesacquiredbythecompanyinitsowncapital.Nopre-emptionrightshallexistinrespectofsuchdisposal.
AttheAGMof2009,theshareholdershavedelegatedtheirauthoritytotheManagingDirectorsforaperiodofeighteenmonths,asfrom14May2009andsubjecttoapprovaloftheSupervisoryBoard,therighttoacquireordinaryshares,uptotenpercentofthetotaloutstand-ingsharesatthattime.
Amendment of the articles of associationTheGMmayadoptaresolutiontoamendthearticlesofassociationoftheCompanybyanabsolutemajor-ityofvotescast,butsolelyupontheproposaloftheManagementBoardsubjecttotheapprovaloftheSupervisoryBoard.
Appointment of the Auditor of SBM Offshore N.V.
AttheAGMof2009,KPMGAccountantsN.V.wasappointedastheauditorofSBMOffshoreN.V.foraperiodof1year.AttheAGMof14April2010itwillberecommendedtoapprovetheproposaltore-appointKPMGAccountantsN.V.astheauditorofSBMOffshoreN.Vforaperiodexpiringattheclosingoftheaccountingyear2011.
Stichting Continuiteit SBM Offshore N.V.AFoundation‘StichtingContinuiteitSBMOffshoreN.V.(theFoundation),formerlynamed‘StichtingtotBeheervanPreferenteAandeleninSBMOffshoreN.V.’,hasbeenestablishedwiththeobjectiveofusingthevotingpoweronanypreferencesharesintheCompanywhichitmayholdatanytime,inthebestinterestsoftheCompanyanditsstakeholders.TheFoundationwillperformitsrole,andtakeallactionsrequired,atitssolediscretion.IntheexerciseofitsfunctionsitwillhoweverbeguidedbytheinterestsoftheCompanyandthebusinessenter-prisesconnectedwithit,andallotherstakeholders,includingshareholdersandemployees.
TheFoundationismanagedbyaBoard,thecomposi-tionofwhichisintendedtoensurethatanindependentjudgementmaybemadeastotheinterestsoftheCompany.TheBoardconsistsofanumberofexpe-riencedandreputableformerseniorexecutivesofmultinationalcompanies.TobekeptinformedaboutthebusinessandinterestoftheCompany,theCEOisinvitedtoattendtheFoundationmeetingstoaddressthisagendaitem.Onaregularbasis,theBoardmembersoftheFoundationareinformedaboutthedevelopmentsinlegislation.
TheBoardoftheFoundationconsistsof:Mr.N.Buis,aformerCEOofSmitInternationaleN.V.,Mr.P.J.Groenenboom,aformerCEOofImtechN.V.,Mr.J.C.M.Hovers,aformerCEOofStorkN.V.andofOcéN.V.,Mr.H.A.vanKarnebeek,aformerVice-ChairmanoftheBoardofManagementofAkzoandMr.R.Voogd,aformernotaryandpresentlyalawyer.
TheManagingDirectors,withtheapprovaloftheSupervisoryBoardatthattime,havegrantedacalloptiontotheFoundationtoacquireanumberofpreferencesharesintheCompany’ssharecapital,carryingvotingrights,equaltoonehalfofthevotingrightscarriedbytheordinarysharesoutstandingimmediatelypriortotheexerciseoftheoption,enablingiteffectivelytoperformitsfunctionsasit,atitssolediscretionandresponsibility,deemsusefulordesirable.Theoptionwasgrantedon30March1989.Inaccordancewiththeby-lawsoftheCompany,shareholderswereadvisedofthereasonsforgrantingthisoptionintheExtraordinaryGMof28April1989.
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ratingorwheresuchchangeofcontrolormergerwouldaffecttheproperexecutionofthecontract.Inaddition,localbiddingrulesandregulations(e.g.inBrazilforPetrobras)mayrequireclientapprovalforchangesincontrolaffectingthecharter.
ThefollowinginformationisprovidedattheCorporateGovernancePageonthewebsiteoftheCompany(www.sbmoffshore.com):• Articlesofassociation;• Companycodeofconduct;• SupervisoryBoardrules,includingrulesforthethree
committeesreportingtotheSupervisoryBoard;• SupervisoryBoardprofileandretirementschedule
foritsmembers;• ManagementBoardrules• Rulesforreportingofallegedirregularitiesofageneral,
operationalorfinancialnature(‘Whistleblowing’rules);• RegulationsconcerningInsideInformationandthe
holdingofandeffectingtransactionsinsharesandotherfinancialinstruments;
• Remunerationpolicy;• Agenda,minutesandpresentationsheldat
previousGMs.
InthejointopinionoftheSupervisoryBoard,theManagementBoardandtheFoundationboardmem-bers,theFoundation,isindependentasstipulatedinclause5:71section1subcSupervisionFinancialMarketAct.
The European Directive on Take-Over bids and the publication requirementsTomeetthepublicationrequirementasmentionedintheDecreeof5April2006relatingtoArticle10ofDirective2004/25/EContake-overbidsof21April2004oftheEuropeanParliamentandtheCounciloftheEuropeanUnion,thefollowinginformationisprovided:• thearticlesofassociationdonotprovideforany
limitationofthetransferabilityoftheordinaryshares;• thevotingrightisnotsubjecttoanylimitation;• noagreementhasbeenconcludedwithanyshare-
holderthatcouldgiverisetoanylimitationofsharesoranylimitationofthevotingrights;
• theappointment,suspensionanddischargeofmembersoftheManagementBoardandSupervisoryBoardaresetoutinthis‘CorporateGovernance’section;
• theprocedureforalterationofthearticlesofasso-ciationismentionedinthisCorporateGovernancesection;
• intheemploymentagreementbetweentheCompanyandeachofthecurrentmembersoftheManagementBoardachangeofcontrolclauseisincluded.Aseverancepaymentwillbepaidiftheemploymentcontractwillbeterminatedduetoachangeofcontrolbyapublictakeoverbid.TheSupervisoryBoardwillhavethediscretionarypowertosettletheterminationconditions;
• a subsidiaryofSBMOffshoreN.V.hasarevolv-ingcreditfacilityofUS$500millionunderwhichtheagreementoftheparticipatingbanksmustbeobtainedintheeventofachangeincontroloftheCompanyafterapublictakeoverbidhasbeenmade;
• exceptionally,certaincharterscontainclausestotheeffectthatthepriorconsentoftheclientisrequiredincaseofachangeofcontrolormergerorwherethecompanyresultingfromsuchchangeofcontrolormergerwouldhavealowerfinancial
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Risk ManagementIntroductionTheCompanyhasprogressedindevelopingitsCorporateGovernancesystemsbasedontheCOSOEnterpriseRiskManagementmodel.RiskManagement,QualityAssuranceandInternalAudithavebeenstrengthenedin2009.AnexperiencedCorporateInternalAuditmanagerhasbeenrecruitedtoprovideenhancedassuranceoncompliancewiththepoliciesandprocedures.
TheobjectiveofefficientandeffectivecontrolofallbusinessactivitieshasbeenraisedbyManagementtothelevelofastrategicpriority.Thisisbestachievedbyensuringthatresponsibilityandaccountabilityaredelegatedtothebusinessmanagerswhoarealsoresponsibletodevelop,documentanddemonstrateeffectivebusinessprocessesandcontrols.CompanyManagementreviewandapprovetheprocessesandcontrolstoensuretheiradequacy.Thisishoweveralongtermprogrammeandimprovementswillbesoughtonacontinualbasis.
Internal environmentThecontinuedgrowthoftheCompanyrequiresManagementtosupportthedevelopmentofaninte-gratedcontrolenvironment.ParticularattentionhasbeengiventotheinternalenvironmentbyraisingtheprofileandimportanceofRiskManagement,proc-esscontroleffectivenessandcompliance.Continuedemphasisisbeingappliedtoimproveroledefinitions,responsibilityandaccountabilityandtraining.Employeeassessmentsandrewardsincludecomplianceasacriterionaffectingremunerationincentives.Objectives,performancemeasurementandreportingareallareasthatManagementhasstartedaconcertedandexplicitefforttoimproveandtheseprogramsarecommuni-catedwithintheCompanytoencourageadhesion.Thenewcorporatestructureimplementedin2009willrelieveManagementfromtheburdenofthedaytodaybusinessactivitiesandincreaseitsfocusonstrategyandCompanymanagement.
ObjectivesTheCompany’sobjectivesaretranslateddowntotheindividuallevelintheorganisationtoensurealign-mentandgivegreaterassurancethattheoverallCompanyobjectiveswillbemet.Performanceismeasuredagainstsetobjectivesandspecificactionsareundertakentocorrectdeficienciesorfailurestomeetobjectiveswhereappropriate.Furtherworkhasbeendonein2009toimproveobjectivesthatpreciselyreflecttheoverallCompanyobjectivesanddevelopaccompanyingkeyperformanceindicators(KPIs)tomeasureachievements.
Internal environment
ObjectivesRisk ManagementControlsManagement information system
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Reporting
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improveanddocumenttheprocessesandcontrolsinProposals,MarketingandSalesandFinancialReporting,financing,tax,cashplanningandtreasuryusingariskbasedapproach.Thisprocesswillcontinueinallotherdepartmentsbasedonanobjectiveandriskassessedapproach.
Management information systems
TheCompanymaintainsarelativelyflatorganisationstructurewithshortlinesofcommunication.Informationflowsupwardstotheappropriatedepartmentmanag-ersanddecisionmakingismadeinconsultationwithotherdepartmentmanagerswherenecessary.SBMOffshorehasrequestedanexternalreviewofitsinfor-mationsystemsnetwork.Thefirstconclusionsarethatthesystemssupportthebusinessactivitiesandtherearenoareasofmajorrisk.Asexpected,thereisopportunityforoptimisationandimprovedintegrationofthevariousreportingsystems.Projectteamsarebeingformedtoaddresstheweaknessesandproposearoadmapforthefuture.
Internal assuranceCompliancemonitoringisperformedbytheInternalAuditandQualityAssurancefunctions,bothofwhichareindependentfromthebusinesslinefunctionsandreportdirectlytotheManagementBoardandtheAuditCommittee.Asnotedpreviously,InternalAudithasbeenstrengthenedwiththerecruitmentofaCorporateAuditManager.Compliancetestingofcriticalcontrolswillbeexpandedin2010.TheobjectiveofInternalAuditandQualityAssuranceisnotonlycompliancetestinginrespectofproceduresandcontrolsbutalsotoformanindependentopinionontheeffectivenessoftheunderlyingprocessesandcontrols.
Tobestmonitorcomplianceactivities,anInternalAssurancePlanaggregatingalltypesofCorporateandDivisionalauditshasbeensetupandendorsedbytheAuditCommittee.Itisconstructedusingavarietyoftools,includinginformationfromRiskregisters,discus-sionswithGroupManagementSystemsProcessOwnersandQualityAssuranceandHSSEauditsasrequiredbyregulation,contractcomplianceandworkplans.
Risk ManagementRiskManagementoperatesonthreefrontsthroughastandardprocessofriskidentification,assessment,andriskmanagementactions.Firstly,businessprocessesaresubjecttoriskassessmentsandkeycontrolsareupdatedwherenecessary.In2009,aconcertedeffortusingconsultantswasmadetoassessrisksandthebusinessprocessesofProposals,FinancialReportingandMarketingandSales.Secondly,majorprojectsaresubjecttoongoingriskworkshopsbyanindepend-entRiskManagementteamasfromtheearlyproposalphaseuntilprojectcompletion.Adedicateddepart-mentwasalsoestablishedtoimproveprojectcontrols.TheprojectRiskManagementprocessisreinforcedwithdedicatedLegal,QualityAssurance,andHealth,Safety,SecurityandEnvironment(HSSE)departments.Thirdly,aCorporateRiskRegisterhasbeenintroducedtomanagecorporatelevelrisks.
RiskManagementwasreinforcedduringtheyearwiththeintroductionofanon-lineriskmanagementtool.TheprinciplesofRiskManagementinSBMOffshoreare:• integrationofRiskManagementintothegeneral
managementprocess;• comprehensiveRiskManagementassurance
basedonamatrixofagreedobjectivesandthedevelopmentofacompletespectrumofrisksoriginstobeanalysed;
• communicationinvolvingallcriticalpersonnelcontributingtotheRiskRegister;
• agreementonactionsandcontrolsinaworkshop;• RiskManagementfunctionprovidingfacilitation,
monitoringandreportingtoCompanyManagement.ThepolicyofSBMOffshoreistoacceptriskswhichareinherenttoitsbusinessactivityandforwhichithascompetenceandanagreedcontrolprocess.
ControlsToensuregoodCorporateGovernance,theCompanymaintainsadocumentedsystemofkeyprocessesandcontrols.TheCompanyrecognisestheneedforongo-ingdevelopmentinthisareaandattentionisbeingdevotedtoassesstheeffectivenessofthoseproc-essesandkeycontrolsaswellastheimplementationofacontinualimprovementprocess.In2009,consult-antswereemployedandprojectteamsappointedto
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Risk profileThenatureoftherisksinherenttotheCompany’sbusinesshavenotsubstantiallychangedin2009.Theprojectsofsmallerandfinanciallyweakerclientshavebeendelayedandhighvalueleasesarenowmoreexpensiveanddifficulttofinance.TheCompanyhasbeenactiveinidentifyingstrongfinancialpartnerstoparticipateinsuchleases.TheextensiveresourcesdedicatedtoimprovingCompanyperformancecouldnotchangethecourseofsomeearlierawardedprojectsandtheirdisappointingperformancecontinuedtoaffecttheCompany’sresultsin2009.TheoriginoftheprojectexecutionissuesencounteredcanbelargelyattributedtotheProposalsphaseofprojectsandcon-structionyardmanagement.Improvementshavebeenandcontinuetobemadeintheseareasandboththeprobabilityandimpactofsimilareventsoccurringonfutureprojectshavebeenconsiderablyreduced.
ThenatureandmanagementofriskcategoriesfacedbytheCompanyareexplainedhereafter.
StrategicIrregular order intakeInherenttotheoilandgascapitalgoodsbusinessistheirregularnatureoftheorderintake.The2009situationofstable-to-risingoilpricesresultedinthesanctioningofsomenewprojects.Thefuturelookspromisinginourmarketsdespiteongoingdelaysinsomeprojectsintheindustry.TheCompanyattemptstomitigatetheriskofanirregularorderintakewiththefollowingstrategies:• prioritisingitsmarketingactivitiesontheprojects
mostlikelytogoaheadandaccordingtotheresourceskillsavailable;
• acontinuedemphasisondevelopinglowcostandeffectivetechnologybasedsolutionstoprovideacompetitiveadvantage;
• diversifyingitsproductlineandofferingsolutionstooilandgasproducersinarangeofdifferentfielddevelopmentconfigurations;
• directemploymentofacoreofcompetentengineersandprojectmanagersaroundwhichtemporarycon-tractorscanbehireddependentondemand;
• diversifiedprojectexecutionlocations–Monaco,Houston,SchiedamandKualaLumpur–topro-videflexibilityandresponsivenesstoclientneeds.
Thisalsoprovidesdiversificationinthesourcingofskillsandcostreductionopportunities;
• growthintheleaseandoperateaswellaspartsandservicesbusinesstogenerateapredictableandprofitablelong-termearningsstream;
• out-sourcingconstructionworktoeliminatetheriskofirregularutilisationofconstructioncapacityexceptwherelocalcontentprovidesameansofsecuringacompetitiveadvantagesuchasconstruc-tionatthePaenalyardinPortoAmboim,Angola.ThisyardwillbeoperatedunderajointventurewithSonangoltosatisfythelocalcontentambitionsoftheauthorities;
• investinginthesustainabletechnologiesofoffshorewindandwaveenergytechnology.
Business mix between supply and lease contractsSalecontractsgeneraterevenuesandprofitsduringexecution,andinmostcasestherelatedprogresspay-mentsallowforaneutralcashflowandtherebyreducetheCompany’sneedforcapital.Leaseandoperatecontractsarecapitalintensivealthoughtheleasepay-mentsgeneratelong-termstablecashflow,EBITandnetincome.WhiletheCompany’spreferenceistomaintainabalancebetweensupplyandleasecontracts,ithastoberecognisedthatclientsusuallyselectthecontractingmethodmostappropriateforeachspecificproject.
Cost structure and resourcesTheflexiblestructureoftheCompanyissetuptopro-videprotectionandevenbenefitfrommacro-economicforceswithgloballydiversifiedexecutioncentresandaworkforcecomposedofbothpermanentemployeesandshort-termcontractors.Overall,theCompany’sinternalcostsarebiasedtowardsEuropegivinganexposuretotheEuropeaneconomyandcurrency.Theshorttomediumtermismanagedbyforwardhedg-ingalthoughthelong-termexposureremains.Theexposuretoaworldwideshortageandhighcostofexperiencedoil-fieldresourcesremainsacriticalriskthatisbestmanagedoverthelong-termwiththeongo-inghumanresourcedevelopmentprogrammes.
Amajorchallengeinthepasthasbeenthecontractingofsuppliersandsubcontractorsinaverybuoyantmar-ket.Thisbuoyantmarketsituationmaywellreturnand
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OperationalProject executionTheCompanyprovidescustombuiltsolutionsaccord-ingtoclients’requirements.ProjectRiskworkshopsareconductedfromtheproposalphasethroughtoprojectcompletionbyexperiencedpersonneltoassuregoodRiskManagementonallsubjectscriticaltoaproject’ssuccess.
TheCompanymakesHSSEprotectionahighpriorityintheexecutionofitsprojectsandminimisingtheoccur-renceofHSSEeventsisaddressedby:• theapplicationofcontinuallyupgradedHSSE
standards;• riskbasedreviewsofoperationsbyHSSE
professionals;• internalhealthandsafetystaffadviselinemanagement
asnecessarytominimisethelevelofrisktoemployees;• securityissuesrelatingtospecificgeographicalrisks
theCompanyhasbeenworkingtomitigatetheriskbydevelopingitsownresourceswithtrainingandexperi-enceandalsobyidentifyinganddiversifyingexternalresourceproviders.Beingsituatedatthe“buyers”endofthesupplymarket,thepressureonmarginsismini-misedbyusinglong-termrelationships,commercialagreements,firmvendorcommitments,escalationformulaeandoptions.Thischallengewaslessacutein2009asdemandslackened,howevertheCompanybelievesthatthisrespiteislikelytobeonlytemporaryanddemandforhydrocarbons,andconsequentlyforequipmentandservices,willreturntopreviouslevels.
Top left: Semi-submersible production platformMiddle left: offshore workers replacing a gasketBottom left: wind turbine installation vessel during commissioning of jack-up systemTop right: lifting operation of crane house of the 5,000 tonnes of craneBottom right: Construction workers in Singapore
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areidentifiedandmitigatingplansdevelopedinaccordancewith,inthecaseoftheoffshorefleet,theInternationalShip&PortFacilityCode(ISPS)Codeandforonshorelocations,incountrysecurityandJourneyManagementplans.
Thetechnicalchallengesofeachprojectareaddressedby:• employinganddevelopingin-houseexpertiseand
externaladvicewhenappropriate;• strictadherencetotheGroupManagementSystem,
HSSEstandards,CorporateEngineeringStandardsandQualityAssuranceProcedures;
• reviewby,andcompliancewith,therequirementsoftherelevantClassificationSociety;
• includingprovisionsincostestimatesandcontin-genciesforparticularcommercial,technical,andexecutionchallenges.
ThecommercialandcontractualrisksareidentifiedandrecordedonaRiskRegisterbykeypersonnelandreviewedduringriskmonitoringworkshops.
Executionriskiscontrolledthroughon-goingmonitor-ingduringtheconstruction,installationandstart-upphases.Adetailedmonthlyreportingandforecastprocedureisusedtoanticipateandpreventexecu-tiondelaysandbudgetoverrun.TheconsequencesofaccidentaleventsencounteredinexecutionareinsuredundercomprehensiveConstructionAllRisk(C.A.R.)insurancepolicies.Thefinancialviabilityverificationprocessisbeingstrengthenedforclients,majorvendorsandsubcontractorsandatenderingprocessisappliedtoprocurequalityequipmentatcompetitiveprices.
Akeyelementofthecostcontrolstrategyistoownandcontroladequatemeansfortheoffshoreinstallationofthefloatingsystems,bymeansoftheCompany’sinstallationvessels.Thisprovidesprotectionfromthenon-availabilityandthecyclicallyhighpricingofthirdpartycontractors.
TheCompanyoperatesgloballyfromdifferentcen-tresandthecontinuityofoperationsfromeachoftheprincipallocationsisaddressedbyplanssettingoutappropriateresponsestomajorpotentialeventssuchasfireandre-establishingkeyfunctionsefficiently
includingIT.Theabilitytoworkfromanyofthemainexecutioncentresusingthesametoolsandsystemsisanimportantstrength.
Production operationsTheleaseandoperationofoffshoreproductionunitsbringsotherrisksincludingenvironmental,per-formance,health,security&safety,eachrequiringmanagement.
EnvironmentalNomajorenvironmentalincidentinvolvingFPSOsorFSOshasoccurredanywhereintheworldalthoughpollutionremainsalatentrisk.Themanagementofpollutionriskstartswithcarefulhullselection,conver-sionandrefurbishment,andcontinueswithaformalinterrogationofthemarine,oilandgasprocesssystemdesigntodemonstrateintegrityinsafety,reliabilityandoperability.AllunitspresentlyownedbytheCompanyhavedesignservicelivesthatextendbeyondtheircon-tractualcommitments.
Onceinservicethegeneralintegrityofthefleetismain-tainedthroughtheapplicationof:• strictoperatingandRiskManagementprocedures,
andpreventivemaintenanceprogrammes;• carefulselectionandintensivetrainingofhigh-qual-
itypersonnelanddirectemploymentofallpositionsofresponsibilityaboardtheunits;
• continuoussurveyprogrammeofHullandTopsidesbytheClassificationSociety;
• managementsystemaccreditationandcompliancewiththerequirementsoftheInternationalSafetyManagement(ISM)Code2002;
• regulatorycompliance.
ProtectionandIndemnityClubpollutioninsuranceispurchasedforthemaximumnecessaryandavailablecover.Indemnitieseffectivelycappingtheexposureareusuallyobtainedfromclients.AlloftheoffshoreunitsarealsoinsuredundercomprehensiveHullandMachineryinsurancepackagesprotectingagainstlossordamagetotheunititself.Insurancefornamedwind-stormdamageintheGulfofMexico islimitedtothatavailableforareasonablepriceconsideringtheriskprobabilityandlikelyimpact.
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regularlyinvolvingtheoffshoreunitsandthe‘incoun-try’managementoffices,theMECC,localfacilities,andclients.Adebriefingtakesplaceimmediatelyfollowingtheterminationoftheexercisewhichisfullydocu-mentedwiththelessonslearnedbeingincorporatedintotheEmergencyContingencyPlan.
Payment riskBeforetheacceptanceofeachmajorcontract,acreditreviewandadetailedreviewofthetermsandcondi-tionsarecarriedoutbyexperiencedfinancial,risk,legalandcommercialprofessionals.Bankand/orparentcompanyguaranteesarenegotiatedwithcustomers,andifdoubtsremainastothefinancialstrengthofthecustomer,paymentsdueinrespectofsupplycontractsarecoveredbyLettersofCredit.Paymentrisksonbanksandinsurancecompaniesaremanagedwithinreasonablecreditlimitsadjustedtoaccountforcreditratingsoftheinstitutions.
Lease riskWhenmakingaproposaltoleaseafloatingfacilitytoaclient,tenmainriskfactorsmustbeevaluated:• clientcreditreliabilityandexposurelimits;• countrystability,politicsandexposurelimits;• health,safetyandsecurity;• environmentalconditions;• contractualrightsandobligations;• performancecriteria;• financeavailability;• insuranceavailability;• taxexposure;• residualvalueexposure.
TheCompanyreducesitsexposurebyapackageofmeansincludingguarantees,limitedrecoursefinancing,interestrateswapsandinsurance.Whennecessary,financestructuresmaybearrangedpriortobidding.
Beyondthetraditionalfixedday-rateleasemodel,thereisanincreasingtendencyforclientstolooktocontractorstosharerisk,sometimesbylinkingapartoftherevenuestoproductionthroughputoreventotheoilprice.Averycarefulapproachtosuchproposalsistaken,firstlybycappingtherisktoanacceptablelevelinaworst-casescenarioandsecondlybyensuringanappropriatebalancebetweenthepotentialrisksandrewards.TheCompanyhascurrentlyonlyonelease
PerformanceLeaseratesmaynotbepaidoronlypartiallypaidbyclientsifaunitdoesnotperformasperthecontractrequirementsinsomecasesandinothercasesincen-tivesmaybereducedorlost.Systemavailabilityisassuredbydesignprocessmaturedfromexperience,reliabilityandmaintainability(RAM)modelling,plannedandpreventivemaintenanceaswellascondition-basedmonitoring.The CompanyhasoperatedF(P)SOsforover184vesselyearswithatotaloperatingdowntimeoflessthan1%,whichiswellbelowtypicalcontractualallowances.Insurancecoverageforlossofearningsiscontractedonlyifconsideredappropriateorasissometimesrequiredinrelationtodebtobligations.
Offshore health & safetyTheCompanyhasadutyofcaretoprotecttheper-sonnelwithinitsoperationsfromthepotentialhealthhazardsposedbyhydro-carbonprocessingandtoxicsubstancesinanoffshoreenvironment.Internalexper-tisesupportedbyarobustmanagementsystemandvessel-specificdesignandOperationalSafetyCasestudiesareimportantelementsinevaluatingandmiti-gatingrisks.
Furthermore,managementsystemcodesofpracticecoveringbenzeneandmercurymanagementaswellasotherhazardoussubstancesapplyonboardF(P)SOs.
Crisis managementTheManagementSystemincludesEmergencyContingencyPlanningwhichdescribestheproceduresforrespondingefficientlyandinapredeterminedwaytoanemergencyonboardanoffshoreunit.
Incaseofanemergency,aMonacoEmergencyControlCentre(MECC)isreadytobeactivated,consistingof:• EmergencyControlRoom,undertheresponsibility
oftheProductionOperationsManager;• Infrastructuretoenabledirectlinesofcommunica-
tionbetweenallrelevantparties;• RelativeResponseRoom,tofacilitatedirectcom-
municationwiththefamiliesoftheoffshorecrew;• MediaResponseRoom.
Correspondingemergencymanagementarrangementsareprovidedintheoverseasmanagementoffices.Emergencyresponsesimulationexercisesareheld
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contract(DeepDraftSemi™ThunderHawkforMurphy)whererevenuesarepartiallylinkedtoproductionthroughput.
Residualvalueriskrelatestotheportionoftheunitwhichisnotamortisedovertheinitialguaranteedleaseperiod.Decidingonthatvalueinvolvestakingaviewonthelikelihoodoftheleasebeingextended,thetech-nicalreusabilityoftheunitandtheexpectedmarketdemand.Correctlyestimatingtheresidualvalueisanimportantcomponentoftheleaseratecalculation.Acautiousapproachishowevertakenwhenestablishingthiskeyparameterandtheresidualbookvalueiscal-culatedbasedonaneconomiclifelessthanthedesignlifeandbelowtheestimatedfuturemarketvalue.Experienceshowsthatalmostallleasecontractshavebeenextendedandsofarnounithasbeenredeliveredwithamarketvaluelowerthantheresidualbookvalue.
Operating cost riskTheSBMOffshoremodeloperatingcontractisbasedonareimbursablecostprincipleandaninflationadjustedfixedfeecoveringtheCompany’sproductionmanagementcosts.ThebiddingrulesofsomeclientssuchasPetrobrasrequireafixedpricecontractandinsuchcasestheCompanyisexposedtocostinflationoverthelongterm.SuchcontractsarenowsubjecttoaformulacompensatingforinflationalthoughtheCompanyremainsexposedtoshortfallsbetweenrevenueescalationundertheformulaandactualcostinflation.TheCompanytakesaconservativeapproachinitsleasepricingbutsomeriskremains.
Political riskTheCompanyevaluatesoverallpoliticalandcountryriskindiscussionswithbanksanddoesnotholdassetsincountrieswhereacceptableinsurancecoverisuna-vailable.TheCompanyisexposedtorevenuerisksfromBrazil,Angolaandothercountriesandrisksarereducedbyacombinationofsolidcontractingpartiesorparentguaranteestructuresandinsurance.Overallcountryriskisevaluatedobjectivelyagainstcreditlimitguidelinesrelativetototalequity.Someoperationsareheldinregionswhichpresentidentifiablesecurityrisksandeventerrorism.Insuchcountriestherisksareassessed,protectionmeasuresareputinplaceandcrisisresolutionplansestablished.
Funding riskSuccessinobtainingnewleaseandoperatecontractsrequiressignificantamountsofdebttobearranged.Thisplacespressureonthebalancesheetbutalsoprovidesanexcellentopportunitytoleveragehigherreturnsonequity.TheCompanycontinuestobewellsupportedbyitsbanksduetoagoodperformancerecordandhighqualitycontracts.Thefundingrisksonprojectsaremonitoredfromprojectinceptionandnonewleaseprojectrequiringfinanceisbidoracceptedwithoutfirsthavingreceivedpositiveindicationsoffinancialsupport.Afive-yearfinancialmodelismain-tainedtoanticipatelongertermfinancingrequirements,thusdrivingdecisionsoncorporateandprojectfinance.
Thefinancialcrisisrestrictedavailabilityoffundsandthenumberofbankswillingtoengageinprojectfinanc-ingactivities,andraisedthemarginsrequiredbythosebankscontinuingtoofferliquidity.Themarkethasbeenslowlyimprovingsincethethirdquarterof2009.
Theissueofcreditavailabilityisbeingaddressedbystudyingalternativesourcesoffinance,includingexportcreditagencies,capitalmarketsandpartners.Theincreasedmargincostsareincorporatedinnewleasebidrates,andwereuptonowmitigatedbylowerlevelsofUS Dollars baseinterestrates.
LitigationFromtimetotime,theCompanyhasdisputeswithcounterpartiesconcerningcontractualrequirementsandproductperformance.Thesearegenerallyresolvedamicablybutlitigationandarbitrationmayarisecausingadditionalcosts.TheCompanyhasonlyonecaseoflitigationofsignificantsubstanceandprovisionshavebeenmadefortheexpectedoutcome.
Treasury and liquidity riskTheCompanyisexposedtofinancialmarketrisks;mainlyrelatingtocurrencyandinterestrates.Thefunc-tionalandreportingcurrencyisUSDollarsandalmostalloffshorerevenuesareearnedinUSDollars.TherearehoweversignificantcostsandsomeinvestmentsdenominatedinEurosandothernon-Dollarcurrenciesleadingtopotentialexposuresonprofitandequity.Theleasebusinessisparticularlycapitalintensiveandsub-stantiallyfinancedwithfloatingratedebtgivingrisetointerestrateexposures.
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Financial reporting riskFinancialreportingrisksaremitigatedthroughproce-dures,controlsandinternationalaccountingstandards.In2009,acompletereviewofthefinancialreportingprocesswasperformedbyanappointedprojectteamworkingwiththeassistanceofqualifiedconsultants.Theobjectivesandriskswereassessedandthecon-trolsystemredesignedtofurtherconsolidatethe“incontrol”assertioninrespectoffinancialreporting.ThecriticalcontrolsgivingassuranceforthereliabilityofFinancialreportingin2009havebeencompliancetestedwithgoodoverallresults.
Everyleaseandoperatecontract,majorprojectunderconstructionandsubsidiaryresultisreportedonamonthlybasisandreviewedbytheBoardofManagement.Thereportincorporatestheoriginalbudgets,approvedchangeordersandcostsincurredtodate,togetherwithanyimportantpositiveornega-tivevariancesincurredoridentifiedaslikelytobeincurred,withexplanations.Onceperquarter,thesta-tusofthemajorprojectsandsubsidiariesarereportedtotheSupervisoryBoard.
Theoperatingunit’sresultsareconsolidatedinareporttotheBoardofManagementandtheSupervisoryBoard.Externalfinancialreportingconsistsofthemid-yearandfull-yearfinancialstatements.TheirregularnatureoftheneworderintakeandprojectdeliveriescancausesignificantvariationsfromonequartertoanotherintheTurnkeySystemsreportingsegment.Detailedquarterlyfiguresarethereforenotpublished,buttradingupdatesareissuedaftertheendofthefirstandthirdquarters.
TheCompanyemploysappropriatelyqualifiedandcompetentprofessionalsandaseminarisheldeachyearforkeyfinancialstafftoreviewspecificaccount-ing,fiscalorothertopics.Anannualtaxreviewmeetingisalsoheld,attendedbytaxmanagersfromrespectiveGroupcompanies,andexternaladvisors.
Thepolicyistominimiseprofitvolatilityandhedgeallsignificantcurrencyandinterestrateexposuresassoonastheyarise,usingmainlyfixed-rateinstru-ments.Nospeculativeactivitiesareengagedinusingfinancialinstruments.Themarketvalueriskonfinancialinstruments(inparticularinterestrateswaps)canbesignificantand,underInternationalFinancialReportingStandards(IFRS)rules,marketvaluevariationsimpactreportedequityvaluesorinsomecasesprofitabilitywherethehedgedoesnotaccuratelymatchtheunder-lyingexposure.ThenotestotheFinancialStatementsprovidedetailsoffinancialinstrumentpolicies,sensi-tivitiestoexchangerateorinterestratemovements,accountingtreatmentsandmarketvalues.
Asadeparturefromthepolicyoffullhedging,theequityandprofitfromactivitiesofnon-USDollardenominatedsubsidiariesarenotfullyhedged.Theresultantvolatilityisnotconsideredmaterialintheover-allfinancialcontext.
TheCompanydoesnotusefinancialinstrumentstohedgeduringthebidphaseforprospectiveprojectsbutinsteadseekstomitigatesignificantforeignexchangeexposuresthroughcurrencyadjustmentmechanismsinitstenderprices.Wherethisisnotpossible,theCompanyisexposedtothecurrencyandalwaystointerestraterisk.
Treasurypreparesatwelve-monthcashplanonaquarterlybasistomonitorliquidityandborrowingrequirements.Thebusinessunitcashplansarebuiltupfromthedetailofeachprojecttoaccuratelyforecastliquidity.Treasuryreportscashanddebtbalancesonaweeklybasis,identifiesandexplainsmaterialdiver-gencesfromtheplanandtakescorrectiveactions.
TreasuryreportseverymonthtotheBoardofManagementandquarterlytotheAuditCommitteeoftheSupervisoryBoard.
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Legal complianceOperationsspanmanydiversifiedjurisdictionswithemployeesandassetspresentineachlocation,anddiligenceisrequiredoftheorganisationanditsindi-vidualstoensurecompliancewithapplicablelawsandregulations.
AdedicatedfunctionhasbeenappointedtomanagetheregulatoryrequirementsonprojectsandpreservetheknowledgewithintheCompany.Forenvironmental,healthandsafetylegislation,anindependentfirmisusedinthefirstinstancetogainanoverviewofrequire-mentsandobtainspecialistadvicewhererequired.Clientsarealsohelpfultoassistinthisprocessandprovidevaluableinformation.
AClassificationSocietyisalwaysengagedforfloatingprojectstogivethirdpartyapprovalofengineering,constructionandInternationalMarineOrganisationConventioncertification.TheClassificationSociety
willconductregularsurveystokeepvesselsinavalidClassCertificate,whichisarequirementforinsuranceandmaritimeauthorities.
Whenenteringanunfamiliarjurisdiction,adviceistakenfromlegalandtaxspecialistsaboutthecountryspecificlegalandtaxobligations.TheCompanymaintainsasystemofcontinualupdatinganddirectinquiryinthecountriesinwhichitoperates.
CorporateGovernancecomplianceismonitoredandadvisedbytheCorporateSecretary.Formalproceduresandsystemsareinplaceandwillbefurtherdevel-opedforconfirmingcompliancewithCompanyrulesconcerningCodeofConduct,InsideInformationandWhistleblowing.
Top left: Paenal yard in Angola
Top right: Topsides view of FPSO Capixaba
Middle left: SBM offshore construction employees
on a facilityMiddle right: Marine
offloading hose stringBottom right:
local equipment Room on FPSO
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Compliance statementDuetotheimplementationoftheEuropeanTransparencyDirectiveintheDutchFinancialMarketsSupervisionAct(Wetophetfinancieeltoezicht)theManagementBoardconfirmstothebestofitsknowl-edgethat:• theannualFinancialStatementsfortheyearended
31December2009giveatrueandfairviewoftheassets,liabilities,financialpositionandprofitandlossofSBMOffshoreN.V.anditsconsolidatedcompanies;
• theadditionalmanagementinformationdisclosedintheAnnualReportgivesatrueandfairviewofSBMOffshoreN.V.anditsrelatedcompaniesasat31December2009andthestateofaffairsduringthefinancialyeartowhichthereportrelates,andtheAnnualReportalsodescribestheprincipalrisksfac-ingSBMOffshoreN.V.
Management BoardMr.A.J.Mace,CEOMr.M.A.S.Miles,CFO
Internal control and Risk ManagementTheDutchCorporateGovernanceCodeundersectionII.1.4requirestheManagementBoardtoexaminestra-tegic,operational,legalandregulatory,andfinancialreportingrisks.TheManagementBoardconfirmsthatitisresponsiblefortheCompany’sriskmanagementandinternalcontrolsystemsandhasperformedreviewsoftheiroperationaleffectivenessfortheyearended31December2009.Theoutcomeofthisreviewandanalysisaswellasplannedimprovementsfor2010,hasbeensharedwiththeAuditCommitteeandtheSupervisoryBoardandhasbeendiscussedwiththeCompany’sexternalauditors.
Inrespectof2009,theCompanytestedcompliancewithitskeycontrolswithsatisfactoryoverallresultsandtheManagementBoardconsidersthatinrespectoffinancialreporting;• riskmanagementsystemsandinternalcontrol
measuresprovidereasonableassurancethatfinan-cialreportsdonotcontainanymaterialinaccuracies;
• therearenoindicationsthatriskmanagementsys-temsandinternalcontrolmeasuresdidnotworkproperlyin2009.
TheabovehoweverdoesnotimplythattheCompanycanprovidecertaintyastotherealisationofbusi-nessandfinancialstrategicobjectives,norcantheCompany’sapproachtointernalcontroloverfinancialreportingbeexpectedtopreventordetectallmisstate-ments,errors,fraudorviolationoflaworregulations.
Inviewoftheabove,theManagementBoardbelievesthatitisincompliancewiththerequirementsofII.1.4oftheDutchCorporateGovernanceCodetakingintoaccounttherecommendationsoftheFrijnsCorporateGovernanceMonitoringCommitteeandtherecentbestpracticeprovisionsoftheAmendedCode.
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Human ResourcesThereorganisationoftheCompany’scorporatestruc-turewithindividualoperatingunitshasresultedinthecreationofaCorporateHumanResources(HR)functionresponsibleforallCompanyHRactivitiesexceptfortheleasefleet.TheleasefleetHRactivitiesareorganisedseparatelyundertheSBM-ProductionContractorsoperatingunitandspecificallyprovidethecrewandlogisticsfortheoffshoreactivities.
Corporate activitiesACorporateTalentManagementandSuccessionPlanningProjectwaslaunchedinresponsetothegrowthexperiencedbytheCompanyoverthelasteightyearsandtothescheduledretirementofasig-nificantproportionofuppermanagementwithinthenextfiveyears.Thisprojecthasidentifiedthekeyrolesandcompetenciesrequiredforfuturegrowth.ThefirstphaseoftheProjectwasbasedonastructured,prag-maticandresult-orientatedprocesswhichhasprovidedthefollowingresults:• definedSuccessionPlansforuppermanagement;• mostshorttermcriticalsuccessionshavebeen
secured;• identificationoftopemployeesforfuturecore
functions.
ThenextphaseoftheprojectwillconcentrateonincludinglinemanagersintotheplanningprocesswiththeobjectiveofidentifyingandgrowingCompanytalent.
TheCompany’scompetencysystemwasextendedtoincludetheproductionshorebasestaffinBrazil,AngolaandconstructionstaffatyardsintheUnitedArabEmirates.ThesystemenablesstaffperformanceassessmentstobeperformedannuallyinaccordancewiththeCompany’sstandards.
AbenchmarksurveyoftheCompany’sprojectmanag-erswascompletedbyanexternalconsultantwiththefocusonimprovingthemanagementskillsofprojectmanagers,projectstaffingproceduresandupdatingthecompetencyrequirements.
TheCompany’sglobalworkforceof5,389in2009remainedstable,asrequiredbythecurrentprojectsandprojectbacklog.
MoredetailsregardingtheCompany’sHumanResourcesactivitiescanbefoundintheCompany’sCSRreport.
Project execution centresTherewasasmallincreaseinthenumberofemployeesintheMonacooffice,whilethenumberofemployeesinSchiedamremainedconstant.InHouston,staffnumbersreducedslightlyincomparisonwith2008reflectingeconomiesmadebytheintegrationofsharedsupportservicesofthemergedcompaniesSBM-AtlantiaandGustoMSCInc. andalsoistheresultofareductioninactivitiesduetothecompletionofamajorprojectattheendof2008.InKualaLumpurtherewasanapproximate10%increaseinemployeesin2009,whichwasnecessarytoexpandtheprojectmanage-mentandengineeringcapabilitiestobeabletoexecutelargeengineeringprojectssuchascompleteFPSOprojectsandotherturnkeywork.
Top: hook up operation of the marine offloading
hose to a deepwater CALM buoy
Bottom: SBM offshore employee
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RemunerationThelocalmarketsituationandannualinflationaretakenintoaccountin theannualreviewofthebasicsalaryandbonus of eachstaffmember, togetherwiththeirindividualperformance.
TheEmployeeShareOwnershipPlancontinuestobeofferedtostaffwithasignificantcontributionpaidbytheCompanyencouragingemployeestoinvestinSBMOffshoreshares.
AnewLongTermIncentivePlanwasimplementedforseniorstaffbychangingtheCompany’sStockOptionPlanintoanewRestrictedandPerformanceSharePlan.
Staff absenceFor2009,staffabsencewas2.5%(2.6%in2008).
TrainingTrainingcontinuesinalloftheCompany’sprojectexecutioncentreswithparticularfocusonlead,super-visoryandmanagementlevelpositions.
TheCompanyprovidesinternaltraining coursesonthetechnicalaspectsofFPSOs,languagelessonsandsoftwareclasses.IntheCompany’sCSRreportthetrainingprogrammeisdescribedinmoredetail.
TheFPSOFradeandFPSOEspiritoSantostartedupproductioninBrazilin2009.Thenewcrewswereinitiallytrainedduringtheconstructionphaseattheshipyardandfinishedtheirtrainingoffshoreontheunitswithlivesystems.
AstudentinternshipprogrammecontinuedtofunctionwellandenabledhighqualitygraduatestoobtaintheirfirstworkexperienceintheCompany.Judiciousselec-tionfromthisintakehasallowedanumberofgraduatestogainsuccessfulemploymentwithintheCompany.
Thedistributionofthetotalnumberofpersonnelatyearend2009betweenleasefleetactivitiesandprojectexecutionactivitiesandthesplitbetweenpermanentlyemployedandtemporarypersonnelareshowninthefirstchartabove.
Thesecondchartshowsthedistributionofthetotalnumberofstaff,overthefourmainprojectexecu-tioncentres,thestaffinotherofficesandshorebasesworldwideonshore,andtheworldwideoffshoreman-ningofthefleet.
A1,029
B636
C2,431
D1,293
A Lease Fleet PermanentB Lease Fleet TemporaryC Project Execution PermanentD Project Execution Temporary Total: 5,389
Total number of SBM Offshore employees at year end 2009
A587
B530
C347
E1,488
D1,143
F1,294
A Houston, USAB Schiedam, NetherlandsC Kuala Lumpur, Malaysia D MonacoE Worldwide OffshoreF Worldwide Onshore Total: 5,389
Total number of SBM Offshore employees at year end 2009
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Product and Technology DevelopmentIntroductionSBMOffshoremaintainsastrongcommitmenttoinvestinresearchanddevelopment.TheCompanycontinuestobeactiveinthedevelopmentofnewsystemsandcomponentstoenablesafeandeconomicproductionfromoffshoreoilandgasfieldsinchallengingenviron-mentsfocussingondeepwaterfloatingproductionandsystemsfortheLiquefiedNaturalGas(LNG)supplychain.TheCompanyisalsopursuingactivitiesinthemarinerenewableenergysectorwiththedevelopmentofawaveenergyconversionsystem.ResearchandDevelopmentexpenditureamountedtoaroundUS$ 39millionin2009.
Themajordevelopmentactivitiesinclude:Deepwatersystems:• Dry-treesemi-submersible• TensionLegPlatform• Mooringsystemsandswivels• GravityActuatedPipe• SteelCatenaryRisers
LNGProduction,transferandstoragesystems:• FloatingproductionofLNG• COOL™FloatingLNGHoseandLNGoffloading• Floatingstorageandregasification
Jack-upandCraneTechnologies:• Jackingsystems• Cranes
RenewableEnergySystems:• Offshorewindturbineinstallationjack-ups• Waveenergyconverters
Deepwater SystemsTheCompany’sproductlinecontinuestoexpandwithcomprehensivesolutionsforthedevelopmentofdeepandultra-deepwater offshoreoilandgasfields.Thedeepwaterchallengesarenumerousasultra-deepwatersubseaequipmentisveryexpensiveandalsodifficulttoaccess,operateandmaintain.Ourobjectiveremainstodevelopsolutionsthatreducetheoverallfielddevelopmentcosts,through:• decouplingtheinstallationofsubseasystemsfrom
surfacefacilities;• costeffectivedeepwaterrisersolutions;• reductionofequipmentontheseabedwithnew
surfaceandnear-surfacetechnologies.
Dry-tree semi-submersible and TLP designsForreservoirsrequiringfrequentwellaccess,surfacelocatedtreescanoffersignificantadvantagesoversubseatreesandtheCompanyhasinitiatedseveralsystemswhichsupportsurfacetreesystems.
TheCompanyhasdevelopedanalternativesolutionfornon-hurricane,deepwaterenvironmentsbasedonadry-treesemi-submersibledesignwithlong-strokehydraulictensionerstosupportthetop-tensionedpro-ductionrisersandsurfacetrees.Thehulldesignhasbeenspecificallydevelopedinordertoreducemotionstoanacceptablelevel,whileprovidingsufficientstabil-ityforquaysideintegrationofthetopsides.
TensionLegPlatforms(TLPs)typicallysupportsur-facetreesandprovidesuperiormotioncharacteristicscomparedtosemi-submersibles,anddesignworkcontinuestoextendtheapplicablewaterdepthrangeforTLPs.ApassiveairdampingsystemhasbeendevelopedthatcanbeplacedontheTLPcolumnstodampentheheavemotionscausedbythelongertendons.Modeltestshavevalidatedthedesigns,andComputationalFluidDynamics(CFD)analysishasbeenperformedtodemonstratethefeasibilityofthesystem.
Boththesemi-submersibleandtheTLPcanalsobeusedwithsubseatrees,usingeitherSteelCatenaryRisers(SCRs)orunbondedflexibleriserstoconnecttotheseabedwells.Engineeringworkcontinuestoallowtheapplicationofthesetechnologiesindeeperwater.
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Mooring systems and Swivels SeveralongoingmooringprojectswithdesignsoflargecomplexsystemsoperatinginharshenvironmentshavemadeasignificantcontributiontotheexpansionoftheCompany’stechnicalknowledgeandcapabilitiesinthesupplyoflargescaleweathervaningmooringsolutions.
Thereareanumberofoffshorehydrocarbondevel-opmentareasthatexperienceextremeseasonalconditions,includingtropicalcyclonesandwinterice.Floatingfacilitiescanbedesignedwithturretdiscon-nectablesystemsthatallowforreleaseandsailawayfromtheseeventsminimizingtheriskofdamagetothefacility,harmtothecrewandreducingdowntime.Thesesystemsarealsousuallydesignedforlowerenvironmen-talconditions,whichdecreasesinvestmentcosts.
Acomplexdisconnectablemooringsystemhasbeendevelopedforuseinarcticconditions.Thissystem,whichisafurtherdevelopmentofthedisconnectablesystemssuppliedpreviouslybytheCompanywillallowthefloatingproductionunit(FPU)toremainconnectedundermosticeloadconditions,buttodisconnectandmovetosafelocationincaseofexcessiveiceloadsoricebergrisks.Thissysteminvolvesseveralnewfeatures,whichhavebeensuccessfullymodeltestedin2009.TheCompanyiscurrentlyworkingonapaidFront-EndEngineeringandDesign(FEED)studyandtenderinjointventurewithotheroilservicescompaniesforadisconnectableFPUinarcticconditions.
IncorporationofSCRsforFPSOswithdisconnectableturretsystemsisachallengethefortheultra-deepwaterfieldsastheirweightrequiresalarge,buoyantdisconnectablestructure.TheCompanyhasdevelopedsuchadisconnectableturret,namedMoorSpar™,whichenablesSCRstobedeployedwithadiscon-nectableFPSO.TheMoorSpar™RiserBuoyhasbeensuccessfullytestedinawavebasinexpandingtheprojectopportunitiesfordisconnectableFPSOs.ThecombinationofdisconnectioncapabilitywithSCRsleadstosignificantcostreductionsintheoverallriser,mooringsystemandfieldoperations.
TheMoorSpar™canalsoprovidecosteffectivesolu-tionsforlesssevere,non-disconnectabledevelopmentsasthemooringsystemandSCRscanbeinstalled
Top: image from the PdMS model showing a disconnectable turret for arctic applicationMiddle: COOL™ LNG hose during line test with LNGBottom: image from the PdMS model showing the disconnectable turret for FPSO Okha
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independentlybeforethearrivaloftheFPSO.Thisfacili-tateshookupoftheFPSOonarrivalinthefieldandwillreducethetimerequiredforstartupoftheoperations.
TheCompanycontinuestodevelopandincreasethecapacityofHighVoltage(HV)electricalswivels.Testswereperformedtoconfirmtheproperfunctioningofaswivelat36kV,withoperatingAmperagevaluesupto1500Amp,enablingtheCompanytomeettheincreasingdemandsoftheindustryforHVpowertransfersystems.
Gravity Actuated PipeTheGravityActuatedPipe(GAP)wasdevelopedafewyearsagoandisnowsuccessfullyinoperationintheKikehfieldinMalaysiawhereitconnectstheCompanyownedFPSOKikehwithasatellitefloatingproductionfacility.DevelopmentoftheGAPproductcontinueswithspecificfocusonincreasingtheoperatingenve-lopeintermsofhigherpayloadandincreasingthedistancebetweenthetwofloatingbodies.
Steel Catenary RisersInultra-deepwaterrisersystemscompriseanincreas-inglysignificantpartoftheoverallfielddevelopmentcostsandhavebecomemoretechnicallychallenging.Traditionalunbondedflexiblerisersolutionsbecomeincreasinglyheavyandexpensive,andareatthelimitoftheirapplicationrange.SteelCatenaryRisers(SCRs)offeradvantagesoverunbondedflexiblerisersbybeingmorecosteffectivewhilehavingawiderrangeofappli-cationintheseultra-deepwaterconditions.
AbreakthroughintheuseofSCRswasachievedin2009withthefirsteverdeploymentonaturretmooredFPSO.TheCompanysuccessfullyconnectedandcommissionedaLazy-WaveSCRsystemtoourFPSOEspiritoSanto,inBrazil.Thisinnovationwasrecognisedatthe2009DeepOffshoreTechnologyInternationalconference,withthe“BestTechnicalInnovation”award.Operatinginapproximately1,800metres,thissystemisclassifiedasanultra-deepwaterproject.In2009studyworkcontinuedtoexpandtheoperationalrangeofSCRsforuseinharsherenvironmentsandatreducedwaterdepthsdowntoaround1,000metres.ThisallowstheCompanytoofferSCRswithFPSOs,TLPsandsemi-submersiblesforserviceconditionsfoundinalmostalldeeptoultra-deepdevelopmentareas.
TraditionalinstallationofSCRsiswithweldedpipeusingexpensiveSorJ-layinstallationvessels.Thenormalweldproceduresusedwiththeseinstallationvesselsprecludestheuseofsomeveryhighgradesteels,whicharerequiredatgreaterdepthswithhighpressureand/orhightemperaturewells.TheCompanyhasdevelopedacompetitivealternativeSCRfabrica-tionandinstallationmethodwiththeuseoffatigueresistantthreadedmechanicalconnectorstoallowrelativelyquickfield-connectionoftheSCRjointsandavoidstheneedfortraditionalfieldweldedjoints.Thismethodallowsfortheuseofhighgradesteelpiperequiredfordeepwaterwellsandalsoreducesinstal-lationtimeoffshore.ThequalificationprogrammefortheCompany’sconnectorwascompletedin2009inaccordancewithISO/DIS21329standard,makingthisconnectornowcommerciallyavailable.
LNG Production, Transfer and Storage Systems
Acknowledgingthegrowingimportanceofgasasaworldenergysource,theCompanyhasmaintaineditsfocusondevelopingtechnologiesandinfrastructureassociatedwithbringingremoteoffshoresourcesofgastomarketinliquidformasLNG.OffshoreLNGprojectsarestartingtobedevelopedbyseverallead-ingoilandgasoperatorsandtherequiredtechnologyisrapidlymaturinginanumberofareas,includingoff-shoreproductionofLNGintheformof:• theLNGFPSO;• offshoreLNGoffloadingusingLNGhosetechnology;• offshoreLNGregasification.
TheCompanyremainsattheforefrontofthesedevel-opmentsandtheexpectationisthatthesetechnologieswillplayanincreasingroleinthedevelopmentoftheoffshoreoilandgasindustryandthusinthegrowthoftheCompany.
Offshore Production of LNGTheLNGFPSOdevelopmentprojectisexpectedtoimpactthefutureprofileoftheCompanyasitcouldsignificantlyaugmentthefleetofoilproducingFPSOsovertime.TheLNGFPSO(alsoreferredtoinindustryasFloating-LNGorFLNG)presentsacost-effective
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andhencealsoimprovetheeconomicsofsubse-quentprojects.Workinginpartnershipwithvesselmanufacturersandcryogenictechnologycompanies,extensivemarketingeffortshavecontinuedthroughout2009toallmajorpotentialclients.AsaconsequencetheCompany,inconsortiumwithpartners,hasbeenawardedaFEEDstudybyPetrobrasforanLNGFPSO,whichisproposedtobeoperatedasagasgatheringstationforseveraloilFPSOsintheTupifieldinBrazil.
Offshore LNG OffloadingCurrently,openseaship-to-shipLNGtransferisonlypossibleinbenignenvironmentalconditionsinaside-by-sideconfiguration.OffloadingoperationsfromLNGFPSOsorloadingofFSRUsoutsideoftheseareasfavourstheuseoftandemtransfersasitimprovesboththesafetyandtheuptimeavailability,similartotheoffloadingofoilFPSOstocrudeoiltankers.InseveralkeytargetareasforFLNGprojectsaroundtheworld,tandemoffloadingis mandatoryandasolutiontotrans-fertheLNGbyafloatinghoseisrequired.
TheCompanyinitiatedaprogrammetodevelopaLNGcompatiblehosetobeusedinafloatingorsubmergedconfiguration.Thehosedesignisbasedonapatentedhose-in-hosesystem,whichcombinestwoprovenhosetechnologies.Thedesigniscomprisedofastand-ardoutermarinehosewithaproveninnercompositeLNGhose.Thecavitybetweenthehosesisfilledwithinsulatingmaterialswiththermalandelasticpropertiesoverthefullrangeofambienttocryogenictempera-tures.Havingproventhefeasibilityoftheconceptwithaneightinchinternaldiameter(ID)hose,aneighteeninchIDhoseisnownearingtheendofafullqualifica-tionandcertificationprogram.InterestintheCOOL™FloatingLNGHoseremainsstrongamongstallthemajorpotentialclients.
Offshore LNG RegasificationTheCompanymaintainsinitsportfolioagenericnew-buildFSRUconcept,developedforawiderangeofLNGstorageandregasificationrequirementstomeetthehighercapacityrangeofgassupplycontracts.Forsmallergassupplyrates,theCompanyproposesLNGCarrierconversionbasedFSRUs,ortheCompany’spatentedGasLink™arrangement.ThissystemisdesignedtosupplyLNGtosmallandisolatedmarkets,
meanstodevelopstrandedgasreserves,whichmayallowtheindustrytoreassessthewayitvaluesgasassets.TheCompanyiscommittedtosecuringacon-tractforsupplyofaunitattheearliestopportunity.
TheLNGFPSOistypicallyafullystand-alonesystemforgasfielddevelopment,withextensivepre-treatmentfacilitiesabletoreceiverawgasesandwellfluids,simi-lartothemajorityofoilproducingFPSOsoperatingtoday.Thehull,amajorcriticalcomponentoftheLNGFPSO,willbefittedwithSelf-supportingPrismatic-shapeIMOtypeB(SPB)tanksforstorageoftheLNGandLiquefiedPetroleumGas(LPG),toproviderobust-nessandaccessibilityformaintenance,andthereforereliablelong-termoffshoreservice.Thehullfurthersup-portsallrequiredtopsidesfacilitiesandutilitysystemsrequiredfortheprocessingoftheincomingfieldgasstream.TheLNGFPSOwillthereforebeabletotreat,fractionate,liquefy,storeandthenexportLNG,associ-atedLPGsandcondensateby-products.
TheCompany’sdevelopmenteffortshavebeendelib-eratelyconcentratedonLNGFPSOwith‘medium-size’LNGproductioncapacities,typicallyaround2.5mil-liontonnesperyear(mtpa)ofLNG,asthispresentswhatisseenasthebestbalanceintermsoftechnicalandcommercialviability.ThecurrentlistofLNGFPSOprojectopportunitiespredominantlyrequireLNGpro-ductioncapacitiesintherange2to3mtpa,forthedevelopmentofagasfieldinexcessof1.5trillioncubicfeet(tcf)ofrecoverablegasreserves.
TheCompanyfinalisedthebasicdesignofitsgenericmedium-sizeLNGFPSOfacilityin2008,developingadetailedprojectexecutionplanwithourpartners,andshipyardbuildingslotsforthehullhavebeensecured.Thedevelopmenteffortresultedinacomprehensive‘genericLNGFPSOdesigntoolbox’in2009.TheestablishedtoolboxapproachallowseasyandrapidadaptationoftheLNGFPSOdesigntothespecificrequirementsofoffshoregasprojects,whilstmaintain-ingcontrolofthesafetyaspects,executionrisksandcostunderstandingforeachparticularcase.
ItisenvisagedthatthisgenericapproachwillallowaseriesofLNGFPSOstobedevelopedinarelativelyshorttime,helpingtoreduceschedulesandcosts,
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andpossiblyrequiringtheCompanydevelopedcryo-genichosesandswivels,allowingconsumerscurrentlyrunningondieseltousecheaperandcleanerLNGwithouttheneedforlargeupfrontinvestments.
Jack-up and Crane TechnologiesTheCompanyfurtherdevelopeditscoretechnologyofthe‘pin-in-hole’typehydrauliccylinderjackingsystem,intoapatented,continuous-motion,version.
TheCompanyhasextendedthespacesaving‘cranearoundthejack-upleg’conceptbyincorporatingthebogiebasedbearing,allowinganincreaseinlegdiameter,increasedbearingcapacities,andbenefitsforintegrationandmaintenance.ThisbearingconcepthasalreadybeenappliedinthelargeoffshorecranesaswellasatthecoreoftheCompany’slargestinternalturretmoorings.
Aseriesofdesignsforselfpropelledjack-upvessels,theNGseries,withassociatedjackingsystemsandcranes,havebeendevelopedandsoldfortheinstal-lationofoffshorebottomfixedwindturbineswithcapacitiesrangingfrom2,500tonnes/legto9,000tonnes/leg.ThemostrecentdevelopmentwastheNG9000withacapacityof9,000tonnes/leg.Thislat-estunit,soldinDecember2009,featuresboththenewcontinuoushydraulicjackingsystemandthespacesavingcranearoundtheleg.
Renewable Energy SystemsTheCompanyiscurrentlydevelopingawaveenergyconverterbasedonexistingengineeringandtechno-logicalexpertise,whichistransferredforuseinmarinerenewableenergysystems.
Significanteffortsareplannedforwaveenergyconver-sionoverthenextseveralyears,focusingonproducingaprototypewaveenergyconverterbasedonbreak-throughtechnologies.
TheserenewableenergyinitiativesaredescribedinmoredetailintheCorporateSocialResponsibilityreport.
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Mark MilesBritish, 1964
MarkMilesjoinedtheCompanyin1994asinternalauditorandsubsequentlyperformedfunctionsofincreasingresponsibilitywithinthefinancialdepart-ment.InMay2004,MarkwasappointedDirectorandCFOoftheGroup.AttheAGMof15May2008,hewasappointedasManagingDirectorandCFO.Agradu-ateinEconomicsofBristolUniversityandaCharteredAccountant,priortojoiningSBMOffshore,MarkwasanauditmanagerwithCoopers&LybrandinFrance.
Dick van der ZeeDutch, 1948
DickvanderZeejoinedSBMOffshorein1996asManagingDirectorofsubsidiarycompanyIHCGustoEngineeringinSchiedam.In2000hebecameamem-beroftheBoardofManagementasChiefOperatingOfficerandwasappointedChiefTechnologyOfficerandPresidentofSBMProductionContractorsin2007.Dickretiredattheendof2009.
Information regarding the Board of ManagementTony MaceBritish, 1951
TonyMacejoinedtheCompanyasanengineerintheDesignDepartmentofSingleBuoyMooringsinMonacoin1977.DuringhiscareeratSBMOffshorehehasheldvariousmanagerialpositionsintheEngineeringDepartmentaswellasfunctionsintheProjectManagementandSalesDepartments.HewasappointedDirectorofEngineeringin2000andthenmovedtoHoustonin2002beingappointedasPresidentofSBM-Imodco.HewassubsequentlyappointedasPresidentofAtlantia,alsoinHouston.HereturnedtotheMonacoofficein2007asdirec-torofLNGProjectDevelopmentandwasappointedanon-statutoryDirectorofSBMOffshoreinAugust2007.AttheAGMof15May2008,TonywasappointedasManagingDirectorandCEO.HegraduatedfromLondonUniversitywithaBScinMechanicalEngineering/NavalArchitectureandanMScinOceanEngineering.
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Francis BlanchelandeFrench, 1949
FrancisBlanchelandejoinedtheCompanyin1978asanengineerintheOffshoreInstallationDepartment.In1984,hebecametheOperationsManageroftheServicesDivision,thenin1991ProjectManagerfortheconstructionoftheFSOXV,afloatingstoragefacilityforElfNigeria.In1992,FranciswasappointedMarineOperationsManagerbasedinNigeria.FollowinghisreturntoEuropein1995,hewasappointedVicePresidentMarine,firstbasedinAberdeenandtheninMonaco.In1996,aftertherestructuringofSingleBuoyMooringsintotwobusinessunits,supplyofsystemsandoperationofthefleetofproductionvessels,FrancisbecameDirectorofOperationsofSBMOffshoreSystemsandin1998PresidentofSBMOffshoreSystemsandaDirectorontheBoardofManagementfortheGroup.In2001,hemovedtothepositionofPresidentofSBMProductionContractors.In2007,hewasappointedChiefOperatingOfficer.AgraduatefromtheUniversityofGenevainPhysicsandapost-graduateattheEcoleSupérieuredesTravauxPublicsofParis,FrancisisaDirectorfortheStandardP&IClubandsitsontheCouncilofABS.
Michael WyllieBritish, 1958
MichaelWylliejoinedtheCompanyin1995asasen-iorprocessengineer,andsubsequentlyworkedinengineeringmanagementpositionsonseveraloftheCompany’smajorFPSOprojects.In2000hemovedintoengineeringdepartmentmanagement,andwasappointedChiefEngineerinSBMOffshore’sMonacoofficein2002,apositionwhichheheldfor4years.In2006hewasassignedtoamajorbidasProposalDirector,beforetakingthepositionofWorldwideDirectorofMarketing&Salesin2008.HewasappointedtotheBoardofManagementinJanuary2010,inthepositionofChiefTechnologyOfficer.AgraduateChemicalEngineerfromHerriot-WattUniversityinEdinburghin1980,andaFellowoftheInstitutionofChemicalEngineers,hehaspreviouslyworkedforFosterWheelerEnergyandTotal.
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84 SBMOffshore–AnnualReport2009SBM owned installation vessel ‘Dynamic Installer’ during installation of the FPSO Espirito Santo.
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4Financial Report 2009
87 Financial Review 95 Financial Statements 95 Consolidated income statement 96 Consolidated statement of comprehensive income 97 Consolidated statement of financial position 98 Consolidated statement of changes in equity 99 Consolidated cash flow statement 100 Notes to the consolidated financial statements 156 Company balance sheet 156 Company income statement 157 Notes to the Company financial statements 160 Other information 161 Auditor’s Report 162 Key figures
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Financial ReviewHighlightsInaccordancewithIFRS8accountingrulesforseg-mentalreporting,theCompanynowprovidesseparatedisclosureofitsTurnkeyServicesactivities,whichwerepreviouslycombinedwiththeTurnkeySystemsactivi-ties.SpecificallocationofSellingandMarketing,andGeneralandAdministrativeexpensesarenowmadetothereportingsegments,andthe2008comparativefigureshavebeenrestatedaccordingly.
Turnoverdecreasedby3.4%toUS$2,957million,incomparisonwithUS$3,060millionin2008,mainlyasaresultoflowerTurnkeySystemsrevenues.TurnkeySystemscontributed65%,TurnkeyServices8%andLeaseandOperate27%.In2008thecorrespondingsplitwas65%,9%,26%.
EBITDAamountedtoUS$613.3million,anincreaseof16%comparedtoUS$530.1millionin2008.
Operatingprofit(EBIT)increasedby6.7%toUS$293.4millioncomparedwithUS$275.1millionin2008.TheEBITmarginincreasedto9.9%comparedto9.0%in2008.
Beforeallocationof“Other”incomeandexpenses,segmentalEBITmarginsareasfollows:• IntheTurnkeySystemssegmentthegoodresults
generatedfromthemorerecentprojectsbecomemorepredominant,anddespitesomefurthersched-uleandcostincreasesonthedrillingrigsseriesandonaheavyliftcraneproject,theEBITmarginincreasedto5.0%(2008:0%).
• IntheTurnkeyServicesactivitiesexcellentoper-atingperformancewasoffsetbyfullimpairment(US$7.7million)ofthePyrodriverinstallationtool,
developmentofwhichhasbeendiscontinued.TheEBITmarginincreasedslightlyto20.3%(2008:19.9%).
• AlthoughturnoverintheLeaseandOperateactivi-tieswasstable,EBITwasnegativelyimpactedbytheimpairmentchargeofUS$32.5millionrelatedtotheYmeMOPUstor™(lowerthanprovidedforinthefirsthalfof2009duetovariationordersagreedwithourclient),andanoperatinglossofUS$25.1millionincurredonthetankerinventorywhichwaslaid-upformostoftheyearfollowingthecollapseofthetradingmarket.ThisresultedinadecreaseinEBITmarginto21.4%(2008:28.4%).
Non-allocated“Other”incomeandexpensesamountedtoUS$31millionin2009(2008:US$17million).Thismainlyrelatestothecostofgeneralmanagementandcorporatefunctions,aswellasthecostofvariouscor-porateimprovementprojectsundertakenin2009.
Netfinancingcostswere48.6%higherthanin2008asaresultofthestartofthechartersin2008oftheFPSOSaxiBatuqueandin2009oftheFPSOEspiritoSantoandSemi-SubmersibleThunderHawk.Interestincomefellsharplyin2009withthereductioninshort-termUSinterestrates.
The2009taxburdenwasUS$3.7million(1.6%ofprofitbeforetax),reflectinginparticularsmalllossesintheDutchandUSoperationsoftheCompany,com-binedwiththerelativelylowtaxburdenelsewhere.ThiscomparestoanettaxburdenofUS$9.4million(4.0%ofpre-taxprofit)in2008.
Theconsolidatedresultfor2009isanetprofitofUS$230.0million,a0.9%increaseincomparisonwiththe2008netprofitofUS$227.9million.ThisresultincludesnonrecurringsalesofassetswhichgeneratedanetgainofUS$32.4millionin2009(US$31.4millionin2008).Thenetprofitmarginroseto7.8%(7.4%in2008).
EarningspershareamountedtoUS$1.47,comparedtoUS$1.54in2008.• InNovember2009,theCompanyraised€180.7
millionoffreshcapitalthroughasuccessful9.2%equityissue.
• DividendproposalofUS$0.67persharerepresent-ingtheCompany’snormalpay-outratioof50%.
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• Netdebtat31December2009amountedtoUS$1,464millionwithcashandcashequivalentbalancesofUS$146.7andcommitted,undrawn,long-termbankfacilitiesofUS$703million.Netgearingreducedto81%(yearend2008:118%)providingsignificantfinancialheadroomforgrowth.
• TheCompanyarrangednewprojectfinancefacilitiesofUS$350millionforEnCanaDeepPanukeMOPUandUS$200millionforPetrobrasFPSOCachaloterelocation.
• Thetotalinvestmentinfixedassetsin2009amountedtoUS$656million,whichismuchlowerthanin2008(US$1,000million)duetotheslowdowninorderintakebetweenmid2008andmid2009;
NewordersintheyeartotalledUS$3,740million(split63%/30%/7%betweentheLeaseandOperate,theTurnkeySystemsandtheTurnkeyServicessegmentsrespectively),comparedtoUS$4,366millionofnewordersin2008.
TotalorderportfolioattheendoftheyearwasUS$10,032millioncomparedtoUS$9,247millionattheendof2008,anincreaseof8.5%.Ofthis,78%(2008:68%)orUS$7,834millionrelatestothenon-discountedvalueoftherevenuesfromtheCompany’slong-termleasecontractsinportfolioatyear-end.
Segmentalinformationinrespectofthecorebusi-nessesoftheCompanyduring2009isprovidedinthedetailedfinancialanalysiswhichfollows.Turnoverbygeographicalareaisincludedinthenotestothecon-solidatedFinancialStatements.
Order PortfolioTotalnewbookedordersfor2009amountedtoUS$3,740million.ThisamountincludesamajorcontractamendmentfortherelocationoftheFPSOEspadartetoPetrobras’BaleiaAzulfieldinBrazilforaperiodof18years,whichisassumedtobetreatedasanoperat-ingleasecontract.Thetotalalsoincludesa15yearleasecontractforanFPSOforNobleEnergy’sAsengfieldinEquatorialGuinea.Duetothespecificcontractstructureandtermsthiscontractisaccountedforasafinancelease.
0
1000
2000
3000
4000
5000
6000
2005 2006 2007 2008 2009
New ordersIn millions of US$
1510
466
1044 1367
35494916
1936
18863822
1109
2374
2573740
2660
1437
2684365
Lease Turnkey Systems Turnkey Turnkey Services
0
500
1000
1500
2000
2500
3000
3500
2005 2006 2007 2008 2009
TurnoverIn millions of US$
1519
585
934
594
13961990
690
21812871
810
1984266
816
1910231
3060 2957
Lease Turnkey Systems Turnkey Turnkey Services
0
2000
4000
6000
8000
10000
12000
2005 2006 2007 2008 2009
Order portfolioIn millions of US$
4059
3220 839 4407
25856992
5651
23047955
6278
2796
1739247
7834
1995
20310032
Lease Turnkey Systems Turnkey Turnkey Services
Financial Review / Financial Statements 2009
SBMOffshore–AnnualReport2009 89
Totalturnoverreducedmarginallywhencomparedwith2008duetolowerrevenuesrecognisedintheTurnkeySystemssegmentasthecompletionofcertainmajorprojects(e.g.FPSOFrade,FPSOEspiritoSanto)outweighedthehigherprogressandassociatedturno-veronmorerecentprojects(e.g.FPSOP-57,FPSOOkha).TurnkeySystemsthirdpartyturnoverofUS$1,910millionrepresents65%oftotal2009turnover(2008:US$1,984millionrepresenting65%).LeaseandOperateturnoverroseby1%toUS$816million(27%oftotalrevenues;26%in2008)asthefirstrevenuesfromFPSOEspiritoSantoandSemi-SubmersibleThunderHawk,andfullyearrevenuesfromtheFPSOSaxiBatuquecompensatedforthereductioninday-rateincomeresultingfromthesaleofFPSOMystras(May2008),saleofFPSOTantawanExplorer(August2008),saleofMOPU/FSOOguzhan(June2009),terminationofthechartersofRangDongI(October2008)andFPSOFalcon(December2009)andtheidletankerinventory.TurnkeyServicesthirdpartyturnoverdecreasedby13%toUS$231millionandrepresents8%oftotalrevenues(9%in2008).
ThecontractfortheFPSOAsengforNobleEnergyisafifteenyearfront-loadedleaseperformedina60/40jointventurewithGEPetrol,whichisaccountedforasafinancelease.Thismeansthattheentirecapitalvalueisrecognisedasturnkeyturnoverduringconstructionwithrelatedgrossmargin,butwithareturnoninvest-mentrecognisedasleaseincomeduringtheleaseperiod.Underanoperatingleasetreatmentonlythe
partner’s40%shareoftheCapexinvestmentwouldhavebeenaccountedforasaturnkeysale.In2009,totalturnoverrecognisedinrespectofconstructionofassetsaccountedforasfinanceleasesamountedtoUS$95million(2008:US$61million).
ThecontractsforFPSOsMondoandSaxiBatuquearesimilarlyaccountedasfinanceleases.Returnoninvest-mentrecognisedintheLease&Operateturnoverin2009inrespectofthesecontractsamountedtoUS$19million(2008:US$19million).
Theyear-endorderportfolioatUS$10.03billionisup8.5%fromlastyear’slevelofUS$9.25billionandrep-resentsayear-endrecord.ThecurrentorderportfolioincludesUS$7.83billion(2008:US$6.28billion)forthenon-discountedvalueoffuturerevenuesfromthelong-termchartersoftheleasefleet,ofwhichUS$4.84billion(2008:US$4.18billion)representsthebareboatelementoftheoperatingleases.Approximatelytwothirdsofthefuturebareboatrevenueswillbegeneratedfromtheleasecontractswhichhaveyettocommence(FPSOsCachaloteandBaleiaAzul,MOPUstor™YmeandMOPUDeepPanuke).TheTurnkeySystemsorderportfoliodecreasedby29%butstillrepresentsoneyearofturnover.TurnkeyServicesbacklogincreasedby15%toUS$0.2billion(approximatelyninemonthsofturnover).
TheCompany’sorderportfolioasat31December2009isexpectedtobeexecutedasfollows:
US$ billionTurnkey
SystemsTurnkey Services
Lease & Operate
Total
2010 1.4 0.2 0.8 2.42011 0.6 - 0.9 1.52012 - - 0.9 0.9Beyond 2012 - - 5.2 5.2TOTAL 2.0 0.2 7.8 10.0
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90 SBMOffshore–AnnualReport2009
ProfitabilityTheprimarybusinesssegmentsoftheCompanyareLeaseandOperate,TurnkeySystemsandTurnkeyServicesplus“Other”,nonallocatedcorporateincomeandexpenseitems.EBITisanalysedpersegmentbutitshouldberecognisedthatbusinessactivitiesarecloselyrelated,andcertaincostsarenotspecifi-callyrelatedtoeitheronesegmentoranother.Forexample,whensalescostsareincurred(includingsignificantsumsforpreparingthebid),itisoftenuncer-tainwhethertheprojectwillbeleasedorcontractedonaturnkeylumpsumbasis.Furthermore,withIFRSlimitingthecapitalisationofGeneral&Administrativeoverheadsintotheassetvalueoftheleasefleet,segmentalresultsareskewedinfavouroftheleaseactivities.IndeedmuchoftheCompany’sengineeringandprojectmanagementresourcescontributetocon-structionoftheleasefleet‘atcost’withoutaSelling,GeneralandAdministrationcosts(S,G&A)mark-up,whiletheLeaseandOperatesegmentresults‘benefit’fromlowercapexandlowerannualdepreciation.
Formanagementreportingpurposesthe“Other”incomeandexpenseitemsareallocatedtothethreeoperatingsegmentsasfollows:TurnkeySystems62.5%,LeaseandOperate25%andTurnkeyServices12.5%.
Grossmarginin2009ofUS$452.3million(US$399.0millionin2008)consistedofUS$195million(US$252millionin2008)fromLeaseandOperateactivities,US$187million(US$71millionin2008)fromTurnkeySystems,andUS$70million(US$76millionin2008)fromTurnkeyServices.
EBITincreasedby6.7%comparedto2008toUS$293.4milliondueto:• muchhighercontributionfromtheTurnkeySystems
segment,asthegoodresultsgeneratedfromthemorerecentprojectsbecomemorepredomi-nant,anddespitesomefurtherscheduleandcostincreasesonthedrillingrigsseriesandonaheavyliftcraneproject;
• althoughturnoveronLeaseandOperateactivitieswasstable,EBITwasnegativelyimpactedbytheimpairmentchargeofUS$32.5millionrelatedtotheYmeMOPUstor™(lowerthanprovidedforinthefirsthalfof2009duetovariationordersagreedwithourclient),andanoperatinglossofUS$25.1million
-40
0
40
80
120
160
200
240
280
320
Lease Turnkey Systems Other FPSO Serpentina Sale Turnkey Services
2005 2006 2007 2008 2009
EBIT (Operating Profit)In millions of US$
275
195
80254254
302302
230
-17
161
275
175
53
97
293
-31
0
50
100
150
200
250
300
FPSO Serpentina Sale
2005 2006 2007 2008 2009
Net profitIn millions of US$
80226
216
267
228 230
146
0.0
0.5
1.0
1.5
2.0
2005 2006 2007 2008 2009
Weighted average earnings per share*In US$
1.660.59
1.07
1.55
1.85
1.54 1.47
FPSO Serpentina Sale
*Restated for the four to one share split in 2006
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SBMOffshore–AnnualReport2009 91
incurredonthetankerinventorywhichwaslaid-upformostoftheyearfollowingthecollapseofthetradingmarket;
• excellentoperatingperformancefromtheTurnkeyServicesactivitiesoffsetbyfullimpairment(US$7.7million)ofthePyrodriverinstallationtool,developmentofwhichhasbeendiscontinued;
• non-recurringgainsofUS$32.4millionfromsaleofassetsin2009(MOPU/FSOOguzhan)weremargin-allylowerthanthepre-taxgainsofUS$34millionrealisedin2008(salesofFPSOsMystras,TantawanExplorerandAlblasserdamSouthrealestate).TheFPSORangDongIwassoldinthelastquarterof2009withthegainonsaleofUS$2millionmatchingtheunit’slay-upcostsincurredduringtheyear;
• slightlyhigherR&Dcharge.
Asapercentageofthelowerturnover,operatingprofitincreasedto9.9%(2008:9.0%).Beforeallocationof“Other”incomeandexpenses,segmentalEBITmar-ginswereforLeaseandOperate21.4%(2008:28.4%),TurnkeySystems5.0%(2008:0%)andTurnkeyServices20.3%(2008:19.9%).Therelativecontribu-tionstoEBITfromthethreesegmentswere54%fromLeaseandOperate,30%fromTurnkeySystemsand16%fromTurnkeyServices.In2008thecorrespondingsplitwas79%:0%:21%.
Non-allocated“Other”incomeandexpensesrelatemainlytothecostofgeneralmanagementandcorpo-ratefunctionsandactivitiesincludingTreasury,Finance,Tax,RiskManagement,HSSE,InternalAssuranceandIR,aswellasthecostofvariouscorporateimprove-mentprojectsundertakenin2009.ThenetcostofUS$31millionin2009iscomparedwithUS$17mil-lionin2008,whennotablythesaleoftheAlblasserdamSouthlandrealisedapre-taxgainofUS$10million.
Netfinancingcostswere48.6%higherthanin2008asaresultofthebeginningofthechartersin2008oftheFPSOSaxiBatuqueandin2009oftheFPSOEspiritoSantoandSemi-SubmersibleThunderHawk.OnceproductionunitsarebroughtintoservicethefinancingcostsareexpensedtoP&L(whereasdur-ingconstructioninterestiscapitalised).Itshouldbeemphasisedthatthenetprofitcontributionofnewlyoperationalleasedunitsislimitedbytherelativelyhighinterestburdenduringthefirstyearsofoperation,
0.0
0.2
0.4
0.6
0.8
1.0
FPSO Serpentina Sale
2005 2006 2007 2008 2009
Dividend per share*In US$
0.830.29
0.54
0.77
0.93 0.93
0.67
*Restated for the four to one share split in 2006
althoughdedicationofleaserevenuestodebtservic-ingleadstofastamortisationoftheloanbalancesandhencereducedinterestchargesgoingforward.Interestincomefellsharplyin2009withthereductioninshort-termUSinterestrates.
ThereportedShareofprofitinassociateswasmuchlowerin2009thanin2008duetotheterminationofaleasestructurerelatedtooneofthefleetunits.
The2009taxburdenwasUS$3.7million(1.6%ofprofitbeforetax),reflectinginparticularsmalllossesintheDutchandUSoperationsoftheCompany,com-binedwiththerelativelylowtaxburdenelsewhere.ThiscomparestoanettaxburdenofUS$9.4million(4.0%ofpre-taxprofit)in2008.Thecorporatetaxburdenexcludesdeemedprofittaxesandwithholdingtaxesleviedoutsideeachgroupcompany’scountryofincorporation,whichareconsideredtobeprojectcostsandreportedwithincostofsales.In2009thesetaxesamountedtoUS$29million(2008:US$22million).
Asreportedearlier,andtakingintoaccountthehighernumberofshares,thedividendproposalwillbeUS$0.67pershare,whichrepresentsa50%pay-outratio,payableincashorinSBMOffshoreshareswitharoundingpremiumforthoseshareholdersselectingthelatteroption.Forthe2008dividendahigherpay-outratiowasexceptionallyapplied.
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92 SBMOffshore–AnnualReport2009
Return On Average Capital Employed and EquityCapitalEmployed(Equity+Provisions+Deferredtaxliability+NetDebt)atyear-end2009isUS$3,326mil-lionwhichisUS$585millionabovelastyear’slevelduetotheongoinginvestmentsinleasedproductionfacilities(partlyfinancedwithnewdebt),theNovemberequityissueplusretainedprofitsandadjustmentstoequityinrespectofderivativefinancialinstruments.WiththeweakeningoftheUSDollarandthesteepen-ingoftheyieldcurveforUSinterestrates,equityhasbeenpositivelyimpactedbyUS$134millionin2009onmarkingtomarkettheCompany’sportfolioofforwardexchangecontractsandinterestrateswaps.
ROACE(ReturnOnAverageCapitalEmployed)decreasedin2009to9.7%,whichisstillwellabovetheCompany’sweightedaveragecostofcapital.Thisisthecombinedresultofthreemainfactors,namely:
• profitabilityfromtheLeaseandOperateactivitieswasimpactedsignificantlybytheimpairmentchargeontheYmeMOPUstor™andthetankerinventorycosts;
• higheraveragecapitalemployedfinancesassetsstillunderconstruction(orbroughtintoserviceduringtheyear)withoutcommensurateEBITcontribution;
• growthincapitalemployedwasamplifiedbythemovementinthemarketvalueoftheexchangerate/interestratehedgeportfolio.
ReturnOnaverageEquity(ROE)at15.0%wasbelowthelevelachievedinrecentyearsduetothesamefac-torsasmentionedabove,plusthe9.2%equityissueofNovember2009.
0
400
800
1200
1600
2000
2400
2800
3200
FPSO Serpentina Sale
2005 2006 2007 2008 2009
(Weighted) Average capital employedIn millions of US$
1886
58
18281747
2006
2499
3033
0
4
8
12
16
FPSO Serpentina Sale
2005 2006 2007 2008 2009
Return on average capital employed(in %)
14.6 3.9
10.7
14.6 15.1
11.09.7
0
5
10
15
20
25
30
FPSO Serpentina Sale
2005 2006 2007 2008 2009
Return on average equity(in %)
28.1 9.6
18.5
21.5 21.7
17.715.0
Financial Review / Financial Statements 2009
SBMOffshore–AnnualReport2009 93
Cash flow / liquiditiesUS$ million 2005 2006 2007 2008 2009Net profit 225.8 216.3 266.8 227.9 230.0Depreciation and amortisation 206.8 223.3 246.3 255.0 319.8Cash flow 432.6 439.6 513.1 482.9 549.8EBITDA 482.2 477.5 548.3 530.1 613.3Net liquidities/securities 144.8 339.7 274.1 230.1 146.7Cash flow from operations* 831.0 592.4 331.1 577.0 459.2EV: EBITDA ratio at 31/12 7.4 11.3 9.9 6.4 7.6EBITDA: interest cover ratio 9.4 15.2 24.5 13.1 10.2
*As per the consolidated statement of cash flows
CashflowandEBITDAwereeachwellaboveprioryearduetotheincreasedcontributionfromTurnkeySystemsactivities.
NetliquiditiesdecreasedtoUS$146.7million,ofwhichUS$40.6millioncanbeconsideredasbeingdedicatedtospecificprojectdebtservicingorotherwiserestrictedinitsutilisation.
Statement of financial position
US$ million 2005 2006 2007 2008 2009Capital employed 1,740.9 1,754.0 2,257.4 2,740.9 3,325.8Shareholders’ equity 895.0 1,118.7 1,333.4 1,234.7 1,802.6Net Debt 804.7 585.8 874.7 1,464.0 1,464.0Net gearing (%) 90 52 65 118 81Net Debt: EBITDA ratio 1.7 1.2 1.6 2.76 2.39Investment in fixed assets 398.5 309.0 551.3 999.8 656.0Current ratio 0.78 1.14 1.15 0.79 0.91
• Shareholders’equityincreasedby46%toUS$1,802.6millionasaresultoftheshareissueandthereductionofthenegativevalueoftheCompany’sportfolioofinterestrateandforeignexchangehedges.TheseunrealisedlossesarechargeddirectlyagainstequityinaccordancewithhedgeaccountingrulesandresultfromtheCompany’spol-icyoffullhedgingofidentifiedinterestrateandforexexposuresandthesignificantmovementsinUSinterestratesandforeignexchangerates.Capitalemployedincreasedby21%.
• At31December2009theCompanyhasundrawncommittedlong-termbankfacilitiestotallingUS$703million(RevolvingCreditFacility,DeepPanukeandCachaloteprojectloans)availableforfinancingcapitalinvestmentin2010.Therelevantbankingcovenants(principallyNetDebt:EBITDA≤3.75)aresummarisedinthenotestotheFinancialStatementsandwereallcomfortablymet.
• Therecontinuestobenooff-balancesheetfinancing.
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94 SBMOffshore–AnnualReport2009
Capital ExpenditureTotalcapitalexpenditurefor2009(comprisingofaddi-tionstoproperty,plant&equipmentpluscapitaliseddevelopmentexpenditure)amountedtoUS$656mil-lion(2008:US$1,000million).Themajorityofthistotalisrelatedtonewinvestmentintheleasefleetforwhichthemajorelementsare:
• completionoftheThunderHawkSemi-SubmersibleforMurphyOilandtheFPSOEspiritoSantoforShell;
• ongoingexpenditureontheconversionandequip-mentprocurementfortheMOPUstor™jack-upfacilityforTalisman’sYmefieldinNorway,theMOPUgasplatformforEnCana’sDeepPanukefieldinCanada,andtheFPSOCapixabaupgradeforrelo-cationtoPetrobras’CachalotefieldinBrazil;
• completionofPhaseIoftheAngolanyardPaenal;• LNGFPSOdevelopmentworkandpatents;• aVLCChullforfutureconversionintoaFPSO.
TheCompany’sinvestmentscomprisetheexternalcosts(shipyards,subcontractors,andsuppliers),internalcosts(manhoursandexpensesinrespectofdesign,engineering,constructionsupervision,etc.),thirdpartyfinancialcostsincludinginterest,andsuchoverheadallocationasallowedunderIFRS.Thetotaloftheabovecosts(oraproportionateshareinthecaseofjointventures)iscapitalisedintheCompany’sconsolidatedbalancesheetasthevalueoftherespec-tivefacility.Noprofitistakenoncompletion/deliveryofsuchasystemforaleaseandoperatecontract.
Capitalexpenditurein2009ontheFPSOAsengforNobleEnergyisexcludedfromthetotalamountabove.Duetotheclassificationofthecontractasafinancelease,investmentintheunitwasrecordedthroughconstructioncontracts,withtheinvestmentinfinanceleasetobeultimatelyrecordedinfinancialfixedassets.
Future IFRS changesCertainIFRSstandardsareintheprocessofbeingamendedorreplaced.Someofthesefutureamend-mentsandreplacementswillimpacttheconsolidatedfinancialstatementsoftheCompanysignificantlyalthoughthetimingoftheimplementationofsuchchangescannotyetbeestablished.TheamendmentoftheexistingstandardsfollowstheconvergencewithUSGAAPandwillsolvecurrentinconsistenciesbetweenseveralstandards.Thestandardsthatwillimpactthefinancialstatementsrelatetorevenuerecognition,jointventuretreatmentintheconsolidatedfinancialstate-mentsandleaseaccounting.
Therevisedrevenuerecognitionstandardwilleliminatecurrentinconsistenciesbetweentherevenuerecognitionstandard,thestandardforconstructioncontractsandrecognitioncriteria.TheproposaloftheIASBistorecog-niserevenueonceacontractualperformanceobligationismet.FortheCompanythismightleadtoadifferentrevenuerecognitionpatternandhencetoadifferentgrossmarginrecognitionpatterncomparedtothecur-rentlyusedcosttocostmethodofmeasuringprogress.
JointventuresarenowproportionatelyconsolidatedinthefinancialstatementsoftheCompany.Theproposedamendmentsdescribethetreatmentofalljointlycon-trolledentities.BasedonthenewstandardtobeissuedtheCompanywillreviewthecurrenttreatmentofitsjointlycontrolledentitiesinthefinancialstatementsandsuchreviewmightleadtojointventuresbeingeitherfullyconsolidatedorrecognisedasaninvestmentinthestatementoffinancialposition(withproportionateconsolidationnolongeranalternative).Thismayhaveasignificantimpactonconsolidatedturnover,EBITDA,EBIT,property,plant&equipment,netdebtandotherelementsofthefinancialstatements.
Thestandardforleaseaccountingaimstoincludeallleasecontractswithinthestatementoffinancialposi-tion.Firsttheexistingstandardwillbereplacedforlessees.Forlessorsthecurrentstandardwillcontinuetoexistwithanamendmentplannedtobeissuedlater.AtthismomentitisthereforenotpossibletodescribetheimpactonthefinancialstatementsoftheCompany.
Financial Review / Financial Statements 2009
SBMOffshore–AnnualReport2009 95
Financial StatementsConsolidated income statementFortheyearsended31December
In thousands of US$ Notes 2009 2008*Revenue 1 2,956,545 3,060,276Cost of Sales (2,504,211) (2,661,318)Gross margin 452,334 398,958Other operating income 2 1,080 10,345Selling and marketing expenses 2 (57,102) (40,556)General and administrative expenses 2 (80,072) (72,318)Other operating expenses 2 (22,801) (21,365)
(158,895) (123,894)Operating profit (EBIT) 293,439 275,064Financial income 4 17,278 24,932Financial expenses 4 (77,248) (65,276)Net financing costs (59,970) (40,344)Share of profit of associates 185 2,535Profit before tax 233,654 237,255Income tax 6 (3,673) (9,380)Profit 229,981 227,875
*Restated for comparison purposes
2009 2008
Attributable to shareholders 221,001 223,172Attributable to non-controlling interests 8,980 4,703Profit 229,981 227,875
Notes 2009 2008
Weighted average number of shares outstanding 150,100,926 144,659,503
Basic earnings per share 7 US$ 1.47 US$ 1.54Fully diluted earnings per share 7 US$ 1.46 US$ 1.53
Financial Review / Financial Statements 2009
96 SBMOffshore–AnnualReport2009
Consolidated statement of comprehensive income
In thousands of US$ Notes 2009 2008Profit for the period 229,981 227,875
oTheR CoMPReheNSiVe iNCoMeCash flow hedges, net of tax 19 133,913 (269,475)Currency translation differences, net of tax 19 13,646 (10,667)Other comprehensive income for the period, net of tax 147,559 (280,142)Total comprehensive income for the period 377,540 (52,267)
2009 2008ToTAl CoMPReheNSiVe iNCoMe ATTRiBuTABle To:Attributable to shareholders 368,332 (56,781)Attributable to non-controlling interests 9,208 4,514
377,540 (52,267)
Financial Review / Financial Statements 2009
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Consolidated statement of financial position at31December(beforeappropriationofprofit)
In thousands of US$ Notes 2009 2008ASSeTSProperty, plant and equipment 9 2,830,302 2,565,388Intangible assets 10 61,421 46,782Investment in associates 46 69Other financial assets 11 377,234 420,372Deferred tax asset 12 13,087 12,922Total non-current assets 3,282,090 3,045,533Inventories 13 25,763 23,305Trade and other receivables 14 681,562 672,795Income tax receivable 15 3,014 829Construction contracts 16 458,234 292,542Derivative financial instruments 17 61,106 79,661Cash and cash equivalents 18 146,712 230,329Total current assets 1,376,391 1,299,461TOTAL ASSETS 4,658,481 4,344,994
eQuiTy ANd liABiliTieSEquity attributable to shareholders 19
Issued share capital 58,963 50,885Share premium reserve 632,963 383,274Retained earnings 1,216,343 1,053,780Other reserves (105,652) (253,211)
1,802,617 1,234,728Non-controlling interests 14,215 6,207Total equity 1,816,832 1,240,935Long-term loans and other liabilities 20 1,282,468 1,430,319Provisions 21 43,924 35,275Deferred tax liability 22 1,048 709Total non-current liabilities 1,327,440 1,466,303Trade and other payables 23 1,005,421 1,039,467Current income tax liabilities 8,431 21,144Borrowings and bank overdrafts 24 328,237 263,970Derivative financial instruments 25 172,120 313,175Total current liabilities 1,514,209 1,637,756TOTAL EQUITY AND LIABILITIES 4,658,481 4,344,994
Financial Review / Financial Statements 2009
98 SBMOffshore–AnnualReport2009
Consolidated statement of changes in equity
Attributable to shareholders
Outstanding number of
shares
Issued share capital
Share premium
reserve
Retained earnings
Other reserves
Total Non- controlling
interests
Total equity
In thousands of US$ Note 19 Note 19 Note 19 Note 19 Note 19
At 1 January 2008 143,323,681 52,750 363,057 890,697 26,933 1,333,437 4,297 1,337,734
Profit for the year - - 223,172 - 223,172 4,703 227,875Foreign currency translation (2,740) - 2,931 (10,669) (10,478) (189) (10,667)Cash flow hedges/ net investment hedges - - - (269,475) (269,475) - (269,475)Comprehensive income for the period (2,740) - 226,103 (280,144) (56,781) 4,514 (52,267)Share based payments - - 16,844 - 16,844 - 16,844Stock dividend 1,300,774 498 (498) - - 0 - 0Share options/ bonus shares 989,533 377 20,715 - - 21,092 - 21,092Cash dividend - - (79,864) - (79,864) (2,604) (82,468)At 31 December 2008 145,613,988 50,885 383,274 1,053,780 (253,211) 1,234,728 6,207 1,240,935
Profit for the year - - 221,001 - 221,001 8,980 229,981Foreign currency translation 1,591 - (1,819) 13,646 13,418 228 13,646Cash flow hedges/ net investment hedges - - - 133,913 133,913 - 133,913Comprehensive income for the period 1,591 - 219,182 147,559 368,332 9,208 377,540Share issue 13,896,880 4,835 241,842 - - 246,677 - 246,677Share based payments - - - 13,300 - 13,300 - 13,300Stock dividend 4,221,744 1,409 (1,409) - - 0 - 0Share options/ bonus shares 727,368 243 9,256 - - 9,499 - 9,499Cash dividend - - - (69,919) - (69,919) (1,200) (71,119)At 31 December 2009 164,459,980 58,963 632,963 1,216,343 (105,652) 1,802,617 14,215 1,816,832
* The proposed appropriation of the profit for the year is set out in the other information on page 160 of the annual report
WithinretainedearningsanamountofUS$100.7mil-lion(2008:US$102.0million)relatestoequityofjointventuresandothernon-distributableitemsandshouldthereforebetreatedaslegalreserve.FurthermorealegalreserveofUS$30.9(2008:US$15.4million)shouldbemaintainedinrespectofcapitaliseddevelop-mentexpenditures.
Financial Review / Financial Statements 2009
SBMOffshore–AnnualReport2009 99
Consolidated cash flow statementFortheyearsended31December
In thousands of US$ 2009 2008CASh Flow FRoM oPeRATiNg ACTiViTieSReceipts from customers 2,631,497 2,958,493Payments to suppliers and employees (2,153,705) (2,376,261)Income tax received / (paid) (18,572) (5,254)Net cash from operating activities 459,220 576,978
CASh Flow FRoM iNVeSTiNg ACTiViTieSInterest received 14,385 22,861Interest paid (69,447) (64,017)Investment in property, plant and equipment (635,768) (987,570)Investment in intangible assets (15,945) (12,217)Investment in associated and group companies (906) -Disposals of property, plant and equipment 801 9,833Dividends received from associated companies - 2,535Net cash from investing activities (706,880) (1,028,575)
CASh Flow FRoM FiNANCiNg ACTiViTieSProceeds from issue of shares 254,522 12,141Additions to borrowings and loans 463,746 682,350Repayments of borrowings and loans (481,913) (204,967)Investments in other financial assets (10,052) (1,488)Dividends paid to shareholders (69,919) (79,864)Net cash from financing activities 156,384 408,172Net increase in cash and cash equivalents (91,276) (43,425)
Cash and cash equivalents at 1 January 230,137 274,088Currency differences 7,851 (526)Cash and cash equivalents at 31 December 146,712 230,137
Thereconciliationofthecashandcashequivalentsasat31Decemberwiththecorrespondingamountsinthebalancesheetisasfollows:
2009 2008Cash and cash equivalents 146,712 230,329Bank overdrafts - (192)Cash and cash equivalents at 31 December 146,712 230,137
Financial Review / Financial Statements 2009
100 SBMOffshore–AnnualReport2009
Notes to the consolidated financial statementsGeneral informationSBMOffshoreN.V.isacompanydomiciledinRotterdam,theNetherlands.SBMOffshoreN.V.istheholdingcompanyofagroupofinternational,marinetechnologyorientedcompanies.Theconsolidatedfinancialstatementsfortheyearended31December2009comprisethefinancialstatementsofSBMOffshoreN.V.anditssubsidiaries(togetherreferredtoas‘theCompany’)andtheCompany’sinterestinasso-ciatesandjointlycontrolledentitiesasat31Decembereachyear.
TheCompanyservesonaglobalbasistheoffshoreoilandgasindustrybysupplyingengineeredproducts,vesselsandsystems,andoffshoreoilandgaspro-ductionservices.TheCompanyhasitslistingontheEuronextAmsterdamstockexchange.
Theseconsolidatedfinancialstatementswereauthor-isedforissueon25February2010.
Summary of significant accounting policiesTheprincipalaccountingpoliciesappliedintheprepara-tionoftheseconsolidatedfinancialstatementsaresetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoalltheyearspresented,unlessotherwisestated.
Basis of preparationTheconsolidatedfinancialstatementsofSBMOffshoreN.V.havebeenpreparedinaccordancewithInternationalFinancialReportingStandards(IFRS)andinterpretations,adoptedbytheEUwhereeffec-tiveforfinancialyearsbeginningafter1January2009.TheconsolidatedfinancialstatementsarepresentedinthousandsofUSDollars.Theconsolidatedfinancialstatementshavebeenpreparedunderthehistoricalcostconventionexceptforderivativefinancialinstru-mentsthatarestatedatfairvalue.
PreparationoffinancialstatementsinconformitywithIFRSrequirestheuseofcertaincriticalaccountingestimates.ItalsorequiresmanagementtoexerciseitsjudgementintheprocessofapplyingtheCompany’s
accountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,orareaswhereassumptionsandestimatesaresignificanttothecon-solidatedfinancialstatementsaredisclosedintheparagraph“Useofestimates”.
TheallocationofIFRS2:‘Share-based’payments,tothevarioussegmentshasbeenchangedduringthecourseof2009.Thecostsweremainlyallocatedtothegeneralandadministrativeexpensesandarewiththenewprincipleallocatedbasedonthesegmentinwhichtheemployeesareallocated.Thecomparative2008figuresareadjustedaccordingly.Thechangeimpactedneithertheequitynortheprofitreportedinthe2008financialstatements.
Overview IFRS developments(a)Standards,amendmentsandinterpretationseffectivein2009.
• IFRS2(amendment),‘Share-basedpayment’(effectivefrom1January2009).Theamendedstandarddealswithvestingconditionsandcan-cellations.Itclarifiesthatvestingconditionsareserviceconditionsandperformanceconditionsonly.Otherfeaturesofashare-basedpaymentarenotvestingconditions.Thesefeatureswouldneedtobeincludedinthegrantdatefairvaluefortransactionswithemployeesandothersprovid-ingsimilarservices;theywouldnotimpactthenumberofawardsexpectedtovestorvaluationthereofsubsequenttograntdate.Allcancella-tions,whetherbytheentityorotherparties,shouldreceivethesameaccountingtreatment.TheCompanyhasappliedIFRS2(Amendment)from1January2009.TheamendmenthasnoimpactontheCompany’sfinancialstatements.
• IFRS3(revised),‘Businesscombinations’(effectivefrom1July2009).Therevisedstandardcontin-uestoapplytheacquisitionmethodtobusinesscombinations,withsomesignificantchanges.Forexample,allpaymentstopurchaseabusinessaretoberecordedatfairvalueattheacquisitiondate,withcontingentpaymentsclassifiedasdebtsubsequentlyre-measuredthroughtheincomestatement.Thereisachoiceonanacquisition-by-acquisitionbasistomeasurenon-controllinginterest
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intheacquireeatfairvalueoratthenon-controllinginterest’sproportionateshareoftheacquiree’snetassets.Allacquisition-relatedcostsshouldbeexpensed.TheCompanywillapplyIFRS3(Revised)prospectivelytoallbusinesscombinationsfrom1January2010.
• IFRS5(amendment),‘Non-currentassetsheld-for-saleanddiscontinuedoperations’(andconsequentialamendmentstoIFRS1:‘First-timeadoption’)(effectivefrom1July2009).Theamend-mentispartoftheIASB’sannualimprovementsprojectpublishedinMay2008.Theamendmentclarifiesthatallofasubsidiary’sassetsandliabilitiesareclassifiedasheldforsaleifapartialdisposalsaleplanresultsinlossofcontrol.Relevantdisclosureshouldbemadeforeachsubsidiaryifthedefinitionofadiscontinuedoperationismet.AconsequentialamendmenttoIFRS1statesthattheseamend-mentsareappliedprospectivelyfromthedateoftransitiontoIFRS.TheCompanywillapplytheIFRS5(amendment)prospectivelytoallpartialdisposalsofsubsidiariesfrom1January2010.
• IFRS7,‘FinancialInstruments–Disclosures’(effec-tivefrom1January2009).Theamendmentrequiresenhanceddisclosuresaboutfairvaluemeasure-mentandliquidityrisk.Inparticular,theamendmentrequiresdisclosureoffairvaluemeasurementsbylevelofafairvaluehierarchy.Asthechangeinaccountingpolicyonlyresultsinadditionaldisclo-sures,thereisnoimpactonearningspershare.
• IFRS8,‘Operatingsegments’.IFRS8replacesIAS14,‘Segmentreporting’.Itrequiresa‘manage-mentapproach’underwhichsegmentinformationispresentedonthesamebasisasthatusedforinternalreportingpurposes.Thishasresultedinanincreaseinthenumberofreportablesegmentspresented,asthepreviouslyreportedturnkeyseg-menthasbeensplitintoTurnkeySystemsandTurnkeyServicessegments.Operatingsegmentsarereportedinamannercon-sistentwiththeinternalreportingprovidedtotheChiefOperatingDecisionMaker(hereafterreferredtoas:CODM).TheCODM,whoisresponsibleforallocatingresourcesandassessingperformanceoftheoperatingsegmentsandmakingstrategicdecisions,hasbeenidentifiedastheBoardofManagement.Referenceismadetothesummary
ofsignificantaccountingpoliciesparagraphonseg-mentationandnote1ofthenotestothefinancialstatementsforfurtherinformation.
• IAS1(revised),‘Presentationoffinancialstatements’.Therevisedstandardprohibitsthepresentationofitemsofincomeandexpenses(thatis,‘non-ownerchangesinequity’)inthestatementofchangesinequity,requiring‘non-ownerchangesinequity’tobepresentedseparatelyfromownerchangesinequity.All‘non-ownerchangesinequity’arerequiredtobeshowninaperformancestatement.Entitiescanchoosewhethertopresentoneperform-ancestatement(thestatementofcomprehensiveincome)ortwostatements(theincomestatementandthestatementofcomprehensiveincome).TheCompanyhaselectedtopresenttwostatements:anincomestatementandastatementofcompre-hensiveincome.TheCompany’sfinancialstatementshavebeenpreparedunderthereviseddisclosurerequirements.
• IAS19(amendment),‘Employeebenefits’(effectivefrom1January2009).TheamendmentispartoftheIASB’sannualimprovementsprojectpublishedinMay2008.– Theamendmentclarifiesthatapensionplanamend-
mentthatresultsinachangeintheextenttowhichbenefitpromisesareaffectedbyfuturesalaryincreasesisacurtailment,whileanamendmentthatchangesbenefitsattributabletopastservicegivesrisetoanegativepastservicecostifitresultsinareductioninthepresentvalueofthedefinedbenefitobligation.
– Thedefinitionofreturnonplanassetshasbeenamendedtostatethatplanadministrationcostsaredeductedinthecalculationofreturnonplanassetsonlytotheextentthatsuchcostshavebeenexcludedfrommeasurementofthedefinedbenefitobligation.
– Thedistinctionbetweenshorttermandlongtermemployeebenefitswillbebasedonwhetherbenefitsareduetobesettledwithinorafter12monthsofemployeeservicebeingrendered.
– IAS37,‘Provisions,contingentliabilitiesandcon-tingentassets’requirescontingentliabilitiestobedisclosed,notrecognised.IAS19hasbeenamendedtobeconsistent.
TheCompanyappliesthisstandardbutthechangehasnoimpactontheCompany’sfinancialstatements.
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• IAS27(revised),‘Consolidatedandseparatefinan-cialstatements’,(effectivefrom1July2009).TherevisedstandardrequiresaccountingforchangesinownershipinterestsbytheCompanyinasubsidiary,whilemaintainingcontrol,toberecognisedasanequitytransaction.WhentheCompanylosescontrolofasubsidiary,anyinterestretainedintheformersubsidiarywillbemeasuredatfairvaluewiththegainorlossrecognisedinprofitorloss.Theamend-mentstoIAS27,whichbecomemandatoryfortheCompany’s2010consolidatedfinancialstatements,arenotexpectedtohaveasignificantimpactontheCompany’sfinancialstatements.
• IAS28(amendment),‘Investmentsinassoci-ates’(andconsequentialamendmentstoIAS32,‘FinancialInstruments:Presentation’,andIFRS7‘Financialinstruments:Disclosures’)(effectivefrom1January2009).TheamendmentispartoftheIASB’sannualimprovementprojectpublishedinMay2008.Aninvestmentinanassociateistreatedasasingleassetforthepurposesofimpairmenttesting.Anyimpairmentlossisnotallocatedtospecificassetsincludedwithintheinvestment,forexample,goodwill.Reversalsofimpairmentarerecordedasanadjustmenttotheinvestmentbal-ancetotheextentthattherecoverableamountoftheassociateincreases.TheCompanyhasappliedIAS28(amendment)toimpairmenttestsrelatedtoinvestmentsinsubsidiariesandanyrelatedimpair-mentlossesfrom1January2009.
• IAS36(amendment),‘Impairmentofassets’(effec-tivefrom1January2009).TheamendmentispartoftheIASB’sannualimprovementsprojectpublishedinMay2008.Wherefairvaluelesscoststoselliscalculatedonthebasisofdiscountedcashflows,disclosuresequivalenttothoseforthevalue-in-usecalculationshouldbemade.TheCompanyappliedtheamendmentandtherequireddisclosuresareincludedintheCompany’sfinancialstatements.
• IFRIC16,‘Hedgesofanetinvestmentinaforeignoperation’(effectivefrom1October2008).IFRIC16clarifiestheaccountingtreatmentinrespectofnetinvestmenthedging.Thisincludesthefactthatnetinvestmenthedgingrelatestodifferencesinfunctionalcurrencynotpresentationcurrency,andhedginginstrumentsmaybeheldanywhereinthegroup.TherequirementsofIAS21,‘Theeffectsof
changesinforeignexchangerates’,applytothehedgeditem.TheCompanyappliedthisamendmentasfrom1January2009butwithnoimpactontheCompany’sfinancialstatements.
(b)Standards,amendmentsandinterpretationseffectivein2009butnotrelevant.
Thefollowingstandards,amendmentsandinterpre-tationstopublishedstandardsaremandatoryforaccountingperiodsbeginningonorafter1January2009buttheyarenotrelevanttotheCompany’soperations:• IFRS1(amendment),‘FirsttimeadoptionofIFRS’,
andIAS27‘Consolidatedandseparatefinancialstatements’(effectivefrom1January2009).
• IAS23(amendment),‘Borrowingcosts’(effectivefrom1January2009).Theamendmentrequiresanentitytocapitaliseborrowingcostsdirectlyattribut-abletotheacquisition,constructionorproductionofaqualifyingasset(onethattakesasubstan-tialperiodtogetreadyforuseorsale)aspartofthecostofthatasset.Theoptionofimmediatelyexpensingthosecostsisremoved.TheamendmenthasnoimpactontheCompany’sfinancialstate-mentsastheCompanyalreadycapitaliseddirectlyattributableborrowingcosts.
• IFRIC15,‘Agreementsforconstructionofrealestates’(effectivefrom1January2009).
• IFRIC17,‘DistributionofNon-cashAssetstoOwners’(effectivefrom1July2009).
• IFRIC18,‘TransfersofAssetsfromCustomers’(effectivefrom1July2009).
• OtherimprovementstoIFRSs2008.TheIASBissuedamendmentstovariousstandardscollectivelyreferredtoas“ImprovementstoIFRSs”.TheamendmentswereseparatedintoPartIandPartII.PartIincludes24amendmentsthatresultinaccountingchangesforpresentation,recognitionormeasurementpurposes.PartIIincludes11terminologyoreditorialamend-mentsthattheIASBexpectedtohaveeithernooronlyminimaleffectsonaccounting.Theamendmentsareeffectiveasfrom1January2009excepttheamend-menttoIFRS5,‘Non-currentassetsHeldforSaleandDiscontinuedOperations’,whichiseffectiveasfrom1July2009.Theeffectoftheamendments,ifnotseparatelydisclosed,havenotoverylimited(onlywording)effectontheCompany’sfinancialstatements.
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(c)Standards,amendmentsandinterpretationstoexistingstandardsthatarenotyeteffectiveandhavenotbeenadoptedearlybytheCompany.
• IFRS9,‘FinancialInstruments’(effectivefrom1January2013).
• IAS24(amendment),‘RelatedPartyDisclosures’(effectivefrom1January2011).
• IFRIC14(amendment),‘IAS19–TheLimitonaDefinedBenefitAsset,MinimumFundingRequirementsandTheirinteractions’(effectivefrom1January2011).
• ImprovementstoIFRSs(2009).TheIASBissuedamendmentstovariousstandardswithvariouseffectivedates.TheimprovementstoIFRSs2009comprise15amendmentsto12standards.ItisexpectedthattheamendmentswillhavenotoverylimitedimpactontheCompany’sfinancialstatements.
(d)Standards,Amendmentsandinterpretationstoexist-ingstandardsthatarenotyeteffectiveandnotrelevant.
• IFRS1(amendment),‘FirsttimeadoptionofIFRS’ (effectivefrom1January2010)
• IFRS2(amendment),‘Share-basedPayments,GroupCash-settledShare-basedPayments’(effectivefrom1January2010).
• IAS32(amendment),‘FinancialInstruments:Presentation’,Classificationofrightsissues(effectivefrom1February2010).
• IFRIC19,‘ExtinguishingFinancialliabilitieswithEquity’(effectivefrom1July2010).
ConsolidationSubsidiariesSubsidiariesareentities(includingspecialpurposeenti-ties)controlledbytheCompany.ControlexistswhentheCompanyhasthepower,directlyorindirectly,togovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivitiesgenerallyaccompanyingashareholdingofmorethanonehalfofthevotingrights.Potentialvotingrightsthatpres-entlyareexercisableorconvertibleareconsideredwhenassessingwhethertheCompanycontrolsanotherentity.Thefiguresofthesubsidiariesareincludedinthe
financialstatementsfromthedatethatcontrolcom-mencesuntilsuchcontrolceases.
ThepurchasemethodofaccountingisusedtoaccountfortheacquisitionofsubsidiariesbytheCompany.Thecostofanacquisitionismeasuredasthefairvalueoftheassetsgiven,equityinstrumentsissuedandliabilitiesincurredorassumedatthedateofexchange,pluscostsdirectlyattributabletotheacquisition.Identifiableassetsacquiredandliabilitiesandcontin-gentliabilitiesassumedinabusinesscombinationaremeasuredinitiallyattheirfairvaluesattheacquisitiondate,irrespectiveoftheextentofanynon-controllinginterest.TheexcessofthecostofacquisitionoverthefairvalueoftheCompany’sshareoftheidentifiablenetassetsacquiredisrecordedasgoodwill.Ifthecostofacquisitionislessthanthefairvalueofthenetassetsofthesubsidiaryacquired,thedifferenceisrecogniseddirectlyintheincomestatement.
Transactions and non-controlling interestsTheCompanyappliesapolicyofrecognizingtradingtransactionswithnon-controllinginterestsastransac-tionswithexternalparties.Disposalstonon-controllinginterestsresultingainsandlossesfortheCompanyandarerecordedintheincomestatement.Purchasesfromnon-controllinginterestsresultingoodwill,beingthedifferencebetweenanyconsiderationpaidandtherel-evantshareacquiredofthecarryingvalueofnetassetsofthenon-controllinginterest.
AssociatesAssociatesarethoseentitiesforwhichtheCompanyhassignificantinfluence,butnotcontrol,overthefinan-cialandoperatingpolicies.ThefinancialstatementsincludetheCompany’sshareofthetotalrecognisedgainsandlossesofassociatesonanequityaccountingbasis,fromthedatethatsignificantinfluencecom-mencesuntilthedatethatsignificantinfluenceceases.WhentheCompany’sshareoflossesexceedsitsinter-estinanassociate,theCompany’scarryingamountisreducedtonilandrecognitionoffurtherlossesisdiscontinuedexcepttotheextentthattheCompanyhasincurredlegalorconstructiveobligationsormadepaymentsonbehalfoftheassociate.
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Investmentsinassociatesareaccountedforusingtheequitymethodofaccountingandareinitiallyrecog-nisedatcost.TheCompany’sinvestmentinassociatesincludesgoodwillidentifiedonacquisitions,netofanyaccumulatedimpairmentloss.
Joint venturesTheCompany’sinterestinjointventuresareaccountedforbyproportionateconsolidation,fromthedatethatjointcontrolcommencesuntilthedatethatjointcontrolceases.JointventuresarethoseentitiesoverwhoseactivitiestheCompanyhasjointcontrol,establishedbycontractualarrangement.
TheCompanycombinesitsshareofthejointventures’individualincomeandexpenses,assetsandliabilitiesandcashflowsonaline-by-linebasiswithsimilaritemsintheCompany’sfinancialstatements.TheCompanyrecognisestheportionofgainsorlossesonthesaleofassetsbytheCompanytothejointventurethatisattributabletotheotherventurers.TheCompanydoesnotrecogniseitsshareofprofitsorlossesfromthejointventurethatresultfromtheCompany’spurchaseofassetsfromthejointventureuntilitsellstheassetstoanindependentparty.However,alossonthetrans-actionisrecognisedimmediatelyifthelossprovidesevidenceofareductioninthenetrealisablevalueofcurrentassets,oranimpairmentloss.
Transactions eliminated on consolidationIntragroupbalances,andanyunrealisedgainsandlossesorincomeandexpensesarisingfromintragrouptransactions(whicharemadeatarmslength),areeliminatedinpreparingtheconsolidatedfinancialstate-ments.AccountingpoliciesofsubsidiarieshavebeenchangedwherenecessarytoensureconsistencywiththepoliciesadoptedbytheCompany.UnrealisedgainsarisingfromtransactionswithassociatesandjointlycontrolledentitiesareeliminatedtotheextentoftheCompany’sinterestintheentity.Unrealisedlossesareeliminatedinthesamewayasunrealisedgains,butonlytotheextentthatthereisnoevidenceofimpairment.
Segment reportingOperatingsegmentsarereportedinamannercon-sistentwiththeinternalreportingprovidedtothe
ChiefOperatingDecisionMaker.TheChiefOperatingDecisionMaker,whoisresponsibleforallocatingresourcesandassessingperformanceoftheoperat-ingsegments,hasbeenidentifiedastheBoardofManagement.
Foreign currency translationFunctional and reporting currencyItemsincludedinthefinancialstatementsofeachoftheCompany’sentitiesaremeasuredusingthecur-rencyoftheprimaryeconomicenvironmentinwhichtheentityoperates(the‘functionalcurrency’).ThefunctionalcurrencyoftheoffshoreoilandgasactivitiesistheUSDollar.TheconsolidatedfinancialstatementsarepresentedinUSDollars,whichisthereportingcur-rencyoftheCompany.
Transactions and balancesForeigncurrencytransactionsaretranslatedintothefunctionalcurrencyusingtheexchangeratesprevail-ingatthedatesofthetransactions.Foreignexchangegainsandlossesresultingfromthesettlementoffor-eigncurrencytransactionsandfromthetranslationatperiodendexchangerateofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecog-nisedintheincomestatement,exceptwhendeferredinequityasqualifyingcashflowhedgesandqualifyingnetinvestmenthedges.
Atyear-end2009themostimportantratewastheEuroatUS$1.434(opening2009:US$1.398).TheaverageEurorateamountedtoUS$1.392(2008:US$1.469).
Group companiesTheresultandfinancialpositionofallgroupcompaniesthathaveafunctionalcurrencydifferentfromthereport-ingcurrencyaretranslatedintothereportingcurrencyasfollows:• assetsandliabilitiesforeachbalancesheetpre-
sentedaretranslatedattheclosingrateatthedateofthebalancesheet;
• incomeandexpensesaretranslatedattheaver-ageexchangerate(unlessthisaveragerateisnotareasonableapproximationofthecumulativeeffectoftheratesprevailingonthetransactiondates,inwhichcaseincomeandexpensesaretranslatedatthedateofthetransactions);and
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• allresultingexchangedifferencesarerecognisedasaseparatecomponentofequity(Translationreserve).
Onconsolidationexchangedifferencesarisingfromthetranslationofthenetinvestmentinforeignentities,andofborrowingsofsuchinvestments,aretakentoGroupequityonconsolidation.Whenanoperationdenomi-natedinforeigncurrencyissold,suchexchangedifferencesarerecognisedintheincomestatementaspartofthegainorlossonsale.
Goodwillandfairvalueadjustmentsarisingontheacquisitionofaforeignentityaretreatedasassetsandliabilitiesoftheforeignentityandtranslatedattheclosingrate.
Leases: Accounting by lessorAleaseisanagreementwherebythelessorconveystothelesseeinreturnforapayment,orseriesofpay-ments,therighttouseanassetforanagreedperiodoftime.Leasesinwhichasignificantportionoftheriskandrewardsofownershipareretainedbythelessorareclassifiedasoperatingleases.
Whenassetsareleasedoutunderafinancelease,thepresentvalueoftheleasepaymentsisrecognisedasareceivable.Thedifferencebetweenthegrossreceivableandthepresentvalueofthereceivableisrecognisedasunearnedfinanceincome.
Leaseincomeis,asofthecommencementdateoftheleasecontract,recognisedoverthetermoftheleaseusingthenetinvestmentmethod,whichreflectsaconstantperiodicrateofreturn.Duringtheconstruc-tionperiodofthefacility,thecontractistreatedasaconstructioncontract,wherebythestageofcompletionmethodisapplied.
Whenassetsareleasedoutunderanoperatinglease,theassetisincludedinthebalancesheetbasedonthenatureoftheasset.Leaseincomefromoperat-ingleasesisrecognisedoverthetermoftheleaseonastraightlinebasis.Thisimpliestherecognitionofdeferredincomeinthebalancesheetwhenthecon-tractualdayratesarenotconstantduringtheoriginaltermoftheleasecontract.
Property, plant and equipmentProperty,plantandequipmentisstatedathistoricalcostlessaccumulateddepreciationandimpairment,exceptforland,whichisshownatcostlessimpair-ment.Historicalcostincludesexpenditurethatisdirectlyattributabletotheacquisitionofsuchitems.Thecapitalvalueofafacilitytobeleasedandoper-atedforaclientisthesumofexternalcosts(suchasshipyards,subcontractors,suppliers),internalcosts(design,engineering,constructionsupervision,etc.),thirdpartyfinancialcostsincludinginterestpaidduringconstructionandattributableoverheads.
Subsequentcostsareincludedintheasset’scar-ryingamountorrecognisedasaseparateasset,asappropriate,onlywhenitisprobablethatfutureeco-nomicbenefitsassociatedwiththeitemwillflowtotheCompanyandthecostoftheitemcanbemeasuredreliably.Thecostsofassetsincludetheinitialestimateofcostsofdemobilisationoftheasset.Allotherrepairsandmaintenancearechargedtotheincomestatementduringthefinancialperiodinwhichtheyareincurred.
Theassetsaredepreciatedbyusingthestraight-linemethodovertheiranticipatedusefullife,takingintoaccountaresidualvalueforthevesselsandfloatingequipment,withtheexceptionoftheThunderHawkfacility.ThedepreciationchargefortheThunderHawkfacilityiscalculatedbasedonitsfutureanticipatedeconomicbenefits.Thisresultsinadepreciationchargepartlybasedontheunitsofproductionmethodandfortheotherpartbasedonthestraightlinemethod.Investmentsubsidies(withtheexceptionofinvestmentpremiums)aredirectlydeductedfromthehistoricalcostsoftheassets.
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lANd ANd BuildiNgS (uNleSS uNliMiTed liVeS) 30-50 yearsVeSSelS ANd FloATiNg eQuiPMeNT:– converted tankers, including refurbishment; 10-20 years
– ‘non-recoverable’ investments costs which are incurred for a specific project e.g. installation costs, transport costs, cost of anchor lines, anchor points, risers etc. are depreciated over the period of the contract to which they relate;
3-15 years
– investment in facilities these include the mooring system, swivel stack, vessel conversion, process equipment if relevant etc. In case of long-term contracts these items are fully depreciated over the contract duration. For shorter-term contracts, a decision is taken as to which percentage of these costs should be depreciated.
3-15 years
MAChiNeRy ANd eQuiPMeNT 5-20 yearsoTheR Fixed ASSeTS 2-20 years
Whensignificantpartsofanitemofproperty,plantandequipmenthavedifferentusefullives,thosecompo-nentsareaccountedforasseparateitemsofproperty,plantandequipment.Theassets’residualvaluesarereviewed,andadjustedifappropriate,ateachbalancesheetdate.Anasset’scarryingamountiswrittendownimmediatelytoitsrecoverableamountiftheasset’scarryingamountishigherthanitsestimatedrecoverableamount.
Gainsandlossesondisposalsaredeterminedbycom-paringproceeds(lessattributablecosts)withthecarryingamount.Theseareincludedintheincomestatement.
Intangible assetsGoodwillGoodwillrepresentstheexcessofthecostofanacqui-sitionoverthefairvalueoftheCompany’sshareofthenetidentifiableassetsoftheacquiredsubsidiaryatthedateoftheacquisition.Allbusinesscombinationsareaccountedforbyapplyingthepurchasemethod.Goodwillonacquisitionofsubsidiariesisincludedin‘intangibleassets’.Inrespectofbusinessacquisitionsoccurringafter1January2004,goodwillrepresentsthedifferencebetweenthecostoftheacquisitionandthefairvalueofthenetidentifiableassetsacquired.Inrespectofacquisitionspriortothisdate,goodwillisincludedonthebasisofitsdeemedcost,whichistheamountrecordedunderDutchGAAP.
Goodwillistestedannuallyforimpairmentandcar-riedatcostlessaccumulatedimpairmentlosses.Impairmentlossesongoodwillarenotreversed.Gainsandlossesonthedisposalofanentityincludethecar-ryingamountofgoodwillrelatingtotheentitysold.
Goodwillisallocatedtocash-generatingunitsforthepurposeofimpairmenttesting.Theallocationismadetothosecash-generatingunitsorgroupsofcash-generat-ingunitsthatareexpectedtobenefitfromthebusinesscombinationinwhichthegoodwillarose.Thecash-gen-eratingunitsarethe7identifiedoperatingunits.
PatentsSeparatelyacquiredpatentsareshownathistoricalcost.Patentsacquiredinabusinesscombinationarerecognisedatfairvalueattheacquisitiondate.Patentshaveafiniteusefullifeandarecarriedatcostlessaccumulatedamortisation.Amortisationiscalculatedusingthestraight-linemethodtoallocatethecostofpatentsovertheirestimatedusefullivesof15years.Thepatentsaretestedannuallyforimpairment.
Research and developmentResearchexpenditureisrecognisedasanexpensewhenincurred.Costsincurredondevelopmentprojects(relatingtothedesignandtestingofneworimprovedproducts)arerecognisedasanintangibleassetwhenthefollowingcriteriaarefulfilled:
Theanticipatedusefullivesofthecategoriesofproperty,plantandequipmentareasfollows:
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• itistechnicallyfeasibletocompletetheintangibleassetsothatitwillbeavailableforuseorsale;
• managementintendstocompletetheintangibleassetanduseitorsellit;
• thereisanabilitytouseorselltheintangibleasset;• itcanbedemonstratedhowtheintangibleassetwill
generateprobablefutureeconomicbenefits;• adequatetechnical,financialandotherresources
tocompletethedevelopmentandtouseorselltheintangibleassetsareavailable;
• theexpenditureattributabletotheintangibleassetduringitsdevelopmentcanbereliablymeasured.
Otherdevelopmentexpendituresthatdonotmeetthesecriteriaarerecognisedasanexpenseasincurred.Developmentcostspreviouslyrecognisedasanexpensearenotrecognisedasanassetinasub-sequentperiod.Capitaliseddevelopmentcostsareamortisedfromthepointatwhichtheassetisreadyforuseonastraight-linebasisoveritsusefullife,notexceeding5years.
Impairment of non-financial assetsAssetsthathaveanindefiniteusefullife,forexam-plegoodwill,arenotsubjecttoamortisationandaretestedannuallyforimpairmentandwhenevereventsorchangesincircumstancesindicatethatthecarry-ingamountmaynotberecoverable.Assetsthataresubjecttoamortisationordepreciationaretestedforimpairmentwhenevereventsorchangesincircum-stancesindicatethatthecarryingamountmaynotberecoverable.Animpairmentlossisrecognisedfortheamountbywhichtheasset’scarryingamountexceedsitsrecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosellandvalueinuse.Forthepurposeofassessingimpairment,assetsaregroupedatthelowestlevelforwhichthereareseparatelyidentifiablecashflows(cash-generatingunits).Non-financialassetsotherthangoodwillthathavebeenimpairedarereviewedforpossiblereversaloftheimpairmentateachbalancesheetdate.
Recoverableamountsaredeterminedbasedonvalue-in-usecalculations.Thesecalculationsrequiretheuseofestimates.
Non-current assets (or disposal groups) held for saleNon-currentassets(ordisposalgroups)areclassifiedasheldforsalewhentheircarryingamountistoberecoveredprincipallythroughasaletransactionandasaleisconsideredhighlyprobable.Theyarestatedatthelowerofthecarryingamountandfairvaluelesscoststoselliftheircarryingamountistoberecov-eredprincipallythroughasaletransactionratherthanthroughcontinuinguse.
Financial assetsTheCompanyclassifiesitsfinancialassetsinthefol-lowingcategories:Fairvaluethroughprofitorloss,LoansandReceivables,andAvailableforsale.Theclassificationdependsonthepurposeofthefinancialasset.Managementdeterminestheclassificationatinitialrecognition.
Loansandreceivablesarenon-derivativefinancialassetswithfixedordeterminedpayments,thatarenotquotedinanactivemarket.Theyareincludedincurrentassets,exceptformaturitiesgreaterthan12monthsaftertheendofthereportingperiod.Theseareclassi-fiedasnon-currentassets.TheCompany’sloansandreceivablesincludefinancialleasereceivables,otherloansandreceivablesandotherfinancialassets.
Impairment of financial assetsTheCompanyassessesattheendofeachreportingdatewhetherthereisobjectiveevidencethatafinancialassetorgroupoffinancialassetsisimpaired.Afinan-cialassetoragroupoffinancialassetsisimpairedandimpairmentlossesareincurredonlyifthereisobjec-tiveevidenceofimpairmentasaresultofoneormoreeventsthatoccurredaftertheinitialrecognitionoftheasset(a‘lossevent’)andthatlossevent(orevents)hasanimpactontheestimatedfuturecashflowsofthefinancialassetorgroupoffinancialassetsthatcanbereliablyestimated.
ThecriteriathattheCompanyusestodeterminewhetherthereisobjectiveevidenceofanimpairmentlossinclude:• significantfinancialdifficultyoftheobligor;• abreachofcontract,suchasadefaultordelinquency
ininterestorprincipalpayments;
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• theCompany,foreconomicorlegalreasonsrelat-ingtotheborrower’sfinancialdifficulty,grantingtotheborroweraconcessionthatthelenderwouldnototherwiseconsider;
• itbecomesprobablethattheborrowerwillenterbankruptcyorotherfinancialreorganisation;
• nationalorlocaleconomicconditionsthatcorrelatewithdefaultsonthefinancialassets.
TheCompanyfirstassesseswhetherobjectiveevidenceofimpairmentexists.
Theamountofthelossismeasuredasthedifferencebetweentheasset’scarryingamountandthepresentvalueoftheestimatedfuturecashflows(excludingfuturecreditlossesthathavenotbeenincurred)discountedatthefinancialasset’soriginaleffectiveinterestrate.Theasset’scarryingamountisreducedandtheamountofthelossisrecognisedintheincomestatement.Ifthefinancialassethasavariableinterestrate,thediscountrateformeasuringanyimpairmentlossisthecurrenteffectiveinterestratedeterminedunderthecontract.
If,inasubsequentperiod,theamountoftheimpair-mentlossdecreasesandthedecreasecanberelatedobjectivelytoaneventoccurringaftertheimpairmentwasrecognised,thereversalofthepreviouslyrecognisedimpairmentlossisrecognisedintheincomestatement.Impairmentontradeandotherreceivablesisdescribedintheaccountingpolicywithrespecttotradeandotherreceivables.
InventoriesInventoriesarestatedatthelowerofcostandnetrealisablevalue.Costisdeterminedusingthefirst-infirst-outmethod.Netrealisablevalueistheestimatedsellingpriceintheordinarycourseofbusiness,lesstheestimatedcostsofcompletionandsellingexpenses.
Inventoriescomprisesemi-finishedproducts,finishedproductsandspareparts.Semi-finishedandfinishedproductsarevaluedatcostincludingattributableover-head.Sparepartsarestatedatthelowerofpurchasepriceandmarketvalue.
Construction contractsConstructionworkinprogressisstatedatcostplusprofitrecognisedtodatelessaprovisionforforeseea-blelossesandlessinvoicedinstalments.Costincludesallexpendituresrelateddirectlytospecificprojectsandattributableoverhead.Whereinstalmentsexceedthevalueoftherelatedcosts,theexcessisincludedincur-rentliabilities.Advancesreceivedfromcustomersareincludedinothercurrentliabilities.
Trade and other receivablesTradereceivablesareamountsduefromcustomersforsalesperformedintheordinarycourseofbusiness.Ifcollectionisexpectedinoneyearorless(orinthenor-maloperatingcycleofthebusinessiflonger),theyareclassifiedascurrentassets.Ifnot,theyarepresentedasnoncurrentassets.
Tradeandotherreceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestmethod,lessallowanceforimpairment.AnallowanceforimpairmentoftradeandotherreceivablesisestablishedwhenthereisobjectiveevidencethattheCompanywillnotbeabletocollectallamountsdueundertheoriginaltermsofthereceivables.Significantfinancialdifficultiesofthedebtor,prob-abilitythatthedebtorwillenterbankruptcyorfinancialreorganisation,anddefaultordelinquencyinpaymentsareconsideredindicatorsthatthetradeandotherreceivablesareimpaired.Theamountoftheallowanceisthedifferencebetweentheasset’scarryingamountandthepresentvalueofestimatedfuturecashflows.Thecarryingamountoftheassetisreducedthroughtheuseofanallowanceaccountandtheamountofthelossisrecognisedintheincomestatement.Whenatradeorotherreceivableisuncollectible,itiswrittenoffagainsttheallowanceaccount.Subsequentrecover-iesofamountspreviouslywrittenoffarecreditedintheincomestatement.
Derivative financial instruments and hedging activitiesTheCompanyusesderivativefinancialinstrumentssuchasforwardcurrencycontractsandinterestrateswapstohedgeitsrisksassociatedwithforeigncur-rencyandinterestratefluctuations.Suchfinancialinstrumentsareinitiallyrecognisedatfairvalueon
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thedateonwhichafinancialcontractisenteredintoandaresubsequentlyremeasuredattheirfairvalue.Themethodofrecognisingtheresultinggainorlossdependsonwhetherthederivativeisdesignatedasahedginginstrument,andifso,thenatureoftheitembeinghedged.Derivativefinancialinstrumentsarepre-sentedasassetswhenthefairvalueispositiveandasliabilitieswhenthefairvalueisnegative.
Anygainsorlossesarisingfromchangesinfairvalueonfinancialinstrumentsthatdonotqualifyforhedgeaccountingaretakendirectlytotheincomestatement.
Thefairvalueofforwardcurrencycontractsiscalcu-latedbyreferencetocurrentforwardexchangeratesforcontractswithsimilarmaturityprofilesusingquotedmarketrates.Thefairvalueofinterestrateswapcon-tractsisdeterminedbyreferencetomarketratesforsimilarcontracts.
Forhedgeaccounting,hedgesareclassifiedas:• fairvaluehedgeswhenhedgingexposureto
changesinfairvalueofarecognisedassetorliabilityorafirmcommitment(fairvaluehedge);
• cashflowhedgeswhenhedgingtheexposuretovariabilityincashflowsthatiseitherattributabletoaparticularriskassociatedwitharecognisedassetorliabilityorahighlyprobableforecastedtransaction(cashflowhedge);
• hedgesofnetinvestmentsinaforeignoperation(netinvestmenthedge).
Attheinceptionofthetransaction,theCompanyformallydesignatesanddocumentsthehedgerela-tionshiptowhichtheCompanywishestoapplyhedgeaccountingandtheriskmanagementobjectiveandstrategyforundertakingthehedge.Thedocumentationincludesidentificationofthehedginginstruments,thehedgeditem,ortransaction,thenatureoftheriskbeinghedgedandhowtheCompanywillassessthehedg-inginstrument’seffectivenessinoffsettingexposuretochangesinthefairvalueofthehedgeditemorcashflowsattributabletothehedgedrisk.Suchhedgesareexpectedtobehighlyeffectiveinoffsettingchangesinthefairvalueofthehedgeditemorcashflowsandareassessedperiodicallytodeterminethattheyactu-allyhavebeenhighlyeffectivethroughoutthefinancial
reportingperiodsforwhichtheyweredesignated.TheCompanyusescashflowhedgesandhedgesofnetinvestmentsinaforeignoperation.
Hedgeswhichmeetthestrictcriteriaforhedgeaccountingareaccountedforasfollows:theeffectiveportionofthegainorlossonthehedginginstrumentisrecogniseddirectlyinequity,whiletheineffectivepor-tionisrecognisedintheincomestatement.Amountstakentoequityareaddedordeductedfromtherecog-nisedvalueofthehedgeditemuponitsrecognitionandtotheincomestatementwhenthehedgedtransactionaffectstheincomestatement.Whenahedginginstru-mentexpiresorissold,orwhenahedgenolongermeetsthecriteriaforhedgeaccounting,anycumulativegainorlossexistinginequityatthattimeremainsinequityandisrecognisedwhentheforecastedtransac-tionisultimatelyrecognisedintheincomestatement.
Iftheforecastedtransactionisnolongerexpectedtooccur,amountspreviouslyrecognisedinequityaretransferredtotheincomestatement.
Thefairvaluesofvariousderivativefinancialinstrumentsusedforhedgingpurposesaredisclosedinnote17ofthefinancialstatements.Movementsinthehedgingreserveinequityattributabletoshareholdersareshowninnote19ofthenotestothefinancialstatements.
Cash and cash equivalentsCashandcashequivalentsconsistprimarilyofhighlyliquidinvestments,suchasbankdeposits.Bankover-draftsareshowninborrowingsandbankoverdraftsaspartofcurrentliabilitiesinthebalancesheet.
Share capitalOrdinarysharesandpreferencesharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnewsharesareshowninequityasadeduction,netoftax,fromtheproceeds.
WhenanygroupcompanypurchasestheCompany’sequitysharecapital(treasuryshares),theconsidera-tionpaid,includinganydirectlyattributableincrementalcosts(netofincometaxes)isdeductedfromequityattributabletotheCompany’sshareholdersuntilthesharesarecancelledorreissued.Wheresuchshares
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aresubsequentlyreissued,anyconsiderationreceived,netofanydirectlyattributableincrementalcostsandtherelatedincometaxeffects,isincludedinequityattributabletotheCompany’sshareholders.
Borrowings (long-term loans and other liabilities)Borrowingsarerecognisedinitiallyatfairvalue.BorrowingsareclassifiedascurrentliabilitiesunlesstheCompanyhasanunconditionalrighttodefersettlementoftheliabilityforatleast12monthsafterthebalancesheetdate.Asof2007theattributabletransactioncostsarecapitalisedinfinancialassetsandamor-tizedtonetinterestexpensesbasedontheexpectedrepaymentperiodofthedebtforwhichthecostswerecapitalised.Before2007theattributabletransactioncostswerecapitalisedintherelatedproperty,plantandequipment.Referenceismadetonote11ofthenotestothefinancialstatementsfordetailsofcapitalisedtransactioncosts.
Deferred income taxDeferredincometaxisrecognised,usingtheliabilitymethod,ontemporarydifferencesarisingbetweenthetaxbasesofassetsandliabilitiesandtheircar-ryingamountsinthefinancialstatements.However,thedeferredincometaxisnotaccountedforifitarisesfrominitialrecognitionofanassetorliabilityinatransactionotherthanabusinesscombinationthatatthetimeofthetransactionaffectsneitheraccount-ingnortaxableprofitorloss.Deferredincometaxisdeterminedusingtaxrates(andlaws)thathavebeenenactedorsubstantiallyenactedbythebalancesheetdateandareexpectedtoapplywhentherelateddeferredincometaxassetisrealisedorthedeferredincometaxliabilityissettled.
Deferredincometaxassetsarerecognisedonlytotheextentthatitisprobablethatfuturetaxableprofitwillbeavailableagainstwhichthetemporarydifferencescanbeutilised.
Deferredincometaxisprovidedontemporarydif-ferencesarisingoninvestmentsinsubsidiariesandassociates,exceptwherethetimingofthereversalofthetemporarydifferenceiscontrolledbytheCompanyanditisprobablethatthetemporarydifferencewillnotreverseintheforeseeablefuture.
Deferredincometaxassetsandliabilitiesareoffsetwhenthereisalegallyenforceablerighttooffsetcur-renttaxassetsagainstcurrenttaxliabilitiesandwhenthedeferredincometaxassetsandliabilitiesrelatetoincometaxesleviedbythesametaxationauthorityoneitherthetaxableentityordifferenttaxableentitieswherethereisanintentiontosettlethebalancesonanetbasis.
Employee benefitsPension obligationsGroupcompaniesoperatevariouspensionschemes.Theschemesaregenerallyfundedthroughpaymentstoinsurancecompaniesoraredefinedasmultiemployerplans.Thepaymentsineachcasearedeterminedbyperiodicactuarialcalculations.TheCompanyhasbothdefinedbenefitanddefinedcontributionplans.Adefinedbenefitplanisapensionplanthatdefinesanamountofpensionbenefitthatanemployeewillreceiveonretirement,usuallydependentononeormorefac-torssuchasage,yearsofserviceandcompensation.
AdefinedcontributionplanisapensionplanunderwhichtheCompanypaysfixedcontributionstopublicorprivatepensioninsuranceplansonamandatory,contractualorvoluntarybasis.TheCompanyhasnolegalorconstructiveobligationstopayfurthercontribu-tionsifthefunddoesnotholdsufficientassetstopayallemployeesthebenefitsrelatingtoemployeeserviceinthecurrentandpriorperiods.Thecontributionstodefinedcontributionplansandmulti-employerplans,arerecognisedasanexpenseintheincomestatementasincurred.
Theliabilityrecognisedinthebalancesheetinrespectofdefinedbenefitpensionplansisthepresentvalueofthedefinedbenefitobligationatthebalancesheetdatelessthefairvalueoftheplanassets,togetherwithadjustmentsforunrecognisedactuarialgainsandlossesandpastservicecosts.Thedefinedbenefitobligationiscalculatedperiodicallybyindepend-entactuariesusingtheprojectedunitcreditmethod.Thepresentvalueofthedefinedbenefitobligationisdeterminedbydiscountingtheestimatedfuturecashoutflowsusinginterestratesonhigh-qualitycorporatebondsthathavematuritydatesapproximatingthetermsoftheCompany’sobligations.
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Cumulativeactuarialgainsandlossesarisingfromexperienceadjustmentsandchangesinactuarialassumptionsexceeding10%ofthevalueofplanassetsor10%ofthedefinedbenefitobligationaretakentotheincomestatementovertheexpectedaver-ageremainingworkinglivesoftheemployeesintherelatedplan.
Past-servicecostsarerecognisedimmediatelyinnetincome,unlessthechangesofthepensionplanareconditionalonremaininginserviceforaspecifiedperiodoftime(thevestingperiod).Inthiscase,thepast-servicecostsareamortisedonastraight-linebasisoverthevestingperiod.
Other employee benefitsTheotheremployeebenefitsprovisionsrelatetootherpost-employmentbenefitobligations,termina-tionandsenioritybenefits.Terminationbenefitsarepayablewhenemploymentisterminatedbeforethenormalretirementdate,orwhenanemployeeacceptsvoluntaryredundancyinexchangeforthesebenefits.Senioritybenefitsarepaiduponreachingapre-determinednumberofserviceyears.TheCompanyrecognisesterminationbenefitswhenitisdemonstra-blycommittedtoeither:terminatingtheemploymentofcurrentemployeesaccordingtoadetailedformalplanwithoutpossibilityofwithdrawal;orprovidingtermina-tionbenefitsasaresultofanoffermadetoencouragevoluntaryredundancy.Benefitsfallingduemorethan12monthsafterthebalancesheetdatearediscountedtopresentvalue.
Share based paymentsWithintheCompanytherearefourtypesofsharebasedpayments:shareoptionplan(until2008),RSU/PSU(asof2009),performancesharesandmatch-ingbonusshares.Alltypesofsharebasedpaymentsqualifyasequitysettledplans.
Theestimatedtotalamounttobeexpensedoverthevestingperiodrelatedtosharebasedpaymentsisdeterminedbyreferencetothefairvalueoftheinstru-mentsdeterminedatthegrantdate,excludingtheimpactofanynon-marketvestingconditions.Nonmarket-vestingconditionsareincludedinassump-tionsaboutthenumberofoptionsthatareexpected
tobecomeexercisableorthenumberofsharesthattheemployeewillultimatelyreceive.Mainassumptionsforestimatesarerevisedatbalancesheetdate.Totalcostfortheperiodischargedorcreditedtotheincomestatement,withacorrespondingadjustmenttoequity.Theproceedsreceivedonexerciseoftheoptionsnetofanydirectlyattributablecostsarecreditedtoequity.FairvalueofshareoptionsiscalculatedusingtheaverageoftheBlack&Scholesandbinomialvaluationmodels.
WhenequityinstrumentsareexercisedtheCompanyissuesnewshares.
ProvisionsGeneralAprovisionisrecognisedinthebalancesheetwhentheCompanyhasapresentlegalorconstructiveobligationasaresultofapastevent,itisprobablethatanout-flowofeconomicbenefitswillberequiredtosettletheobligation,andtheamounthasbeenreliablyestimated.Iftheeffectismaterial,provisionsaredeterminedbydiscountingtheexpectedfuturecashflowsatapretaxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyand,whenappropriate,theriskspecifictotheliability.Subsequently,theinterestaccruedondiscountedprovisionswillberecognisedasfinancialexpenses.Discountingofprovisionsmainlyconcernsfleetdemobilisationobligations.
ReorganisationProvisionsforreorganisationcostsrelatetocostsforterminationofemploymentandonerouscontracts.
Demobilisation obligationsTheprovisionfordemobilisationobligationsrelatestoestimatedcostsfordemobilisationofleasedfacili-tiesattheendoftherespectiveleaseperiod.Thenetpresentvalueofthefutureobligationsisincludedinproperty,plantandequipmentwithacorrespondingamountincludedintheprovisionfordemobilisation.Astheremainingdurationofeachleasereduces,andthediscountingeffectontheprovisionunwinds,accruedinterestisrecognisedaspartoffinancialexpensesandaddedtotheprovision.
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Offsetting Financial InstrumentsFinancialassetsandliabilitiesareoffsetandthenetamountreportedinthebalancesheetwhenthereisalegallyenforceablerighttooffsettherecognisedamountsandthereisanintentiontosettleonanetbasis,orrealisetheassetandsettletheliabilitysimultaneously.
RevenueRevenueisshownnetofvalue-addedtax,returns,rebatesanddiscountsandaftereliminatingsaleswithinthegroup.
Construction contractsAssoonastheoutcomeofaconstructioncontractcanbeestimatedreliably,contractrevenueandexpensesarerecognisedintheincomestatementusingthe‘percentage-of-completionmethod’.Thestageofcompletionismeasuredbyreferencetothetotalcostincurreduptotheendofthereportingperiodasaper-centageofthetotalestimatedcostforeachcontract,unlessthephysicalprogresssignificantlydiffers.Anexpectedlossonacontractisrecognisedimmediatelyintheincomestatement.
Variationsincontractwork,claimsandincentivepay-mentsareincludedinthecontractrevenuetotheextentnegotiationswiththecustomeraresufficientlyfaradvancedandtheoutcomeiscapableofbeingreliablymeasured.
Lease and operate contractsTurnover(thetotaloftheearnedday-rates)oflong-termoperatingleaseandoperatecontractsarereportedannuallyonastraight-linebasisovertheperiodofthecontractoncethesystemhasbeenbroughtintoservice.Turnoveroffinanceleasecontractsis,asofthecom-mencementdateoftheleasecontract,recognisedoverthetermoftheleaseusingthenetinvestmentmethod,whichreflectsaconstantperiodicrateofreturn.
Services renderedRevenuefromservicesrenderedisrecognisedusingthe‘percentage-of-completionmethod’.Thestageofcompletionismeasuredbyreferencetothetotalcostincurreduptotheendofthereportingperiodasaper-centageofthetotalestimatedcostforeachcontract,unlessthephysicalprogresssignificantlydiffers.
Anexpectedlossonacontractisrecognisedimmedi-atelyintheincomestatement.
Variationsincontractwork,claimsandincentivepaymentsareincludedinthecontractrevenuetotheextentnegotiationswiththecustomeraresufficientlyfaradvancedandtheoutcomeiscapableofbeingreliablymeasured.
Income taxThetaxexpensefortheperiodcomprisescurrentanddeferredtax.Taxisrecognisedintheincomestate-ment,excepttotheextentthatitrelatestoitemsrecognisedinothercomprehensiveincomeordirectlyinequity.Inthiscasethetaxisalsorecognisedinothercomprehensiveincomeordirectlyinequity,respectively.
TheCompanyissubjecttoincometaxesinnumer-ousjurisdictions.Significantjudgementisrequiredindeterminingtheworldwideprovisionforincometaxes.Therearemanytransactionsandcalculationsforwhichtheultimatetaxdeterminationisuncertainduringtheordinarycourseofbusiness.TheCompanyrecognisesliabilitiesforanticipatedtaxauditissuesbasedonesti-matesofwhetheradditionaltaxeswillbedue.Wherethefinaltaxoutcomeofthesemattersisdifferentfromtheamountsthatwereinitiallyrecorded,suchdifferenceswillinfluencetheincometaxanddeferredtaxprovisionsintheperiodinwhichsuchdeterminationismade.
Incometaxontheprofitorlossfortheperiodpre-sentedcomprisescurrentanddeferredtax.Incometaxisrecognisedintheincomestatementexcepttotheextentthatitrelatestoitemsrecogniseddirectlyinequity.
IncometaxexpensescomprisecorporateincometaxdueincountriesofincorporationoftheCompany’smainsubsidiariesleviedonactualprofits.Corporateincometaxeswhichareleviedonadeemedprofitbasisandwithholdingtaxesinotherjurisdictionsaretreatedasprojecttaxesandincludedingrossmargin.
Currenttaxistheexpectedtaxpayableonthetaxableincomefortheyear,usingtaxratesenactedorsub-stantiallyenactedatthebalancesheetdate,andanyadjustmenttotaxpayableinrespectofpreviousyears.
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Dividend distributionDividenddistributiontotheCompany’sshareholdersisrecognisedasaliabilityintheperiodinwhichthedivi-dendsareapprovedbytheCompany’sshareholders.
Use of estimatesInthepreparationofthefinancialstatements,itisnec-essaryforthemanagementoftheCompanytomakeestimatesandcertainassumptionsthatcanaffectthevaluationoftheassetsandliabilitiesandtheout-comeoftheincomestatement.Theactualoutcomemaydifferfromtheseestimatesandassumptions.Estimatesandjudgementsarecontinuallyevaluatedandarebasedonhistoricalexperienceandotherfac-tors,includingexpectationsoffutureeventsthatarebelievedtobereasonable.
Inparticular,significantareasofestimation,uncertaintyandcriticaljudgementsinapplyingaccountingpoliciesthathavethemostsignificanteffectonamountsrecog-nisedinthefinancialstatementsare:• estimationoftheanticipatedusefullifeofthe
leasedfacilities;• leaseclassification;• revenuerecognitiononconstructioncontracts
basedonthestageofcompletionmethod;• estimatedimpairmentofintangiblefixedassets;• estimatedimpactofvariationordersandrecoveries
fromclientswherenegotiationsordiscussionsareatasufficientlyadvancedstage.
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1. Segment information
Managementhasdeterminedtheoperatingseg-mentsbasedonthereportsreviewedbytheBoardofManagementthatareusedtomakestrategicdecisions,comprisinginformationfromtheindividualbusinessunitsandfromaproductandservicesperspective.TheCompany’sreportablesegmentsareidentifiedasfollows:*LeaseandOperate*TurnkeySystems*TurnkeyServices*Other.The“other”categoryconsistsofcorporate
overheadfunctionsandotherunits
Formanagementpurposes,theCompanyisorganizedintosevenoperatingunitsbasedontheirproductsandservices.ForfinancialreportingpurposestheTurnkeySystemssegmentcombinestheresultsoffiveoftheseunitsbeingSBMMonaco,SBMAtlantia,SBMGusto,SBMMSCandSBMMalaysia.
TheTurnkeySystemssegmentderivesitsrevenuesfromturnkeysupplycontracts.Turnkeysupplycontractsconsistofamongothers:largeproductionsystems,largemooringsystems,deepwaterexportsystems,fluidtransfersystems,tankerloadinganddischargetermi-nals,supplyofdrillingunits,designservicesandsupplyofspecialcomponentsandproprietarydesignsandequipment.TheTurnkeyServicessegmentderivesitsrevenuesfromoffshorecontractingandaftersalesserv-ices.TheLeaseandOperatesegmentcomprisesthetotalofearnedday-ratesonlong-termoperatingleaseandoperatecontracts.Inthecaseofafinanceleaserevenueisrecognizedduringtheconstructionperiod
withintheTurnkeySystemssegmentand,whereinstal-lationactivitiesareeffected,withintheTurnkeyServicessegment.AsofthecommencementdateofthefinanceleasecontracttheinterestincomeisshownintheLeaseandOperatesegment.
Managementmonitorstheoperatingresultsofoperatingsegmentsseparatelyforthepurposeofmakingdeci-sionsaboutresourcestobeallocatedandofassessingperformance.Segmentperformanceisevaluatedbasedonnetresultwhichincertainrespectsismeasureddif-ferentlyfromoperatingprofitorlossintheconsolidatedfinancialstatements.Inter-segmentrevenuesaremadeatpricesthatapproximatemarketprices.
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Periodending31December2009
In thousands of US$
Lease and Operate
Turnkey Systems
Turnkey Services
Other Eliminations and
adjustments
Consoli-dated
ReVeNueSThird party 815,995 1,909,679 230,871 - - 2,956,545Inter-segment - 14,817 30,704 - (45,521) 0Total revenues 815,995 1,924,496 261,575 - (45,521) 2,956,545
PRoFiTGross margin 195,344 187,255 69,735 - 0 452,334Other operating income 207 688 - 185 - 1,080Selling and marketing (9,046) (38,924) (9,132) - - (57,102)General and administrative (8,201) (36,330) (4,099) (31,442) - (80,072)Other operating expenses (3,473) (15,855) (3,473) - - (22,801)EBIT 174,831 96,834 53,031 (31,257) 0 293,439Net financing costs (59,970)Income tax expense (3,673)Share of profit of associates 185Profit 229,981
eBiTdAEBIT 174,831 96,834 53,031 (31,257) 0 293,439Depreciation and amortization and impairment 291,274 13,255 14,174 1,135 - 319,838EBITDA 466,105 110,089 67,205 (30,122) 0 613,277
oTheR SegMeNT iNFoRMATioNImpairment charges 32,428 - 7,670 - - 40,098Segment Assets 3,558,694 780,155 196,123 123,509 - 4,658,481Investments in associates - 46 - - - 46Capital expenditure 602,283 36,392 7,148 10,143 - 655,966Segment liabilities 2,136,102 483,450 125,513 96,584 - 2,841,649
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Periodending31December2008
In thousands of US$
Lease and Operate
Turnkey Systems
Turnkey Services
Other Eliminations and
adjustments
Consoli-dated
ReVeNueSThird party 810,158 1,983,615 266,503 - - 3,060,276Inter-segment - - 41,130 - (41,130) 0Total revenues 810,158 1,983,615 307,633 - (41,130) 3,060,276
PRoFiTGross margin 252,583 70,560 75,815 - 0 398,958Other operating income 44 356 - 9,945 - 10,345Selling and marketing (11,536) (22,289) (6,731) - - (40,556)General and administrative (6,589) (35,620) (3,295) (26,814) - (72,318)Other operating expenses (4,560) (12,245) (4,560) - - (21,365)EBIT 229,942 762 61,229 (16,869) 0 275,064Net financing costs (40,344)Income tax expense (9,380)Share of profit of associates 2,535Profit 227,875
eBiTdAEBIT 229,942 762 61,229 (16,869) 0 275,064Depreciation and amortization and impairment 235,681 12,578 6,399 335 - 254,993EBITDA 465,623 13,340 67,628 (16,534) 0 530,057
oTheR SegMeNT iNFoRMATioNImpairment charges - - - - - -Segment Assets 3,361,756 708,604 141,289 133,345 - 4,344,994Investments in associates 24 45 - - - 69Capital expenditure 938,976 53,169 2,511 5,131 - 999,787Segment liabilities 2,335,211 535,240 118,548 115,060 - 3,104,059
Therewerenocontingent-basedrentsrecognisedinthe2009incomestatement(2008:nil).
Salesbetweensegmentsarecarriedoutatarm’slength.TherevenuetothirdpartiesreportedtotheChiefOperatingDecisionMakerismeasuredinamannerconsistentwiththatintheincomestatement.
TheamountsprovidedtotheChiefOperatingDecisionMakerwithrespecttototalassetsandtotalliabilitiesaremeasuredinamannerconsistentwiththatofthefinancialstatements.Theseassetsandliabilitiesareallocatedbasedontheoperationsofthesegment.
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Geographical segmentsTherevenuesfromexternalcustomerscanbeanalysedbygeographicalsegmentasfollows:
In thousands of US$ 2009 2008Netherlands 19,035 30,994Angola 300,118 365,793Australia 227,999 100,575Brasil 1,391,665 1,465,549USA 106,975 25,066Norway 221,415 162,267Malaysia 66,400 60,715Other 622,938 849,317Total revenues from external customers 2,956,545 3,060,276
Theclassificationbygeographicalareaisdeterminedbythefinaldestinationoftheproduct.
Thelocationofthenon-currentassetsbygeographicalsegmentisasfollows:
In thousands of US$ 2009 2008Netherlands 14,326 21,056Angola 527,318 577,503Australia - -Brasil 835,808 851,440USA 510,415 464,006Norway 511,076 378,153Malaysia 165,360 182,509Other 717,787 570,866Total non-current assets 3,282,090 3,045,533
Reliance on major customersThereareseveralmajorcustomersidentifiedintheLeaseandOperatesegment,theTurnkeySystemssegmentandtheTurnkeyServicessegment.Totalrev-enuesfromthetopthreemajorcustomersamounttoUS$1,394.5million(2008:US$1,375.9million).
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2. Other income and expensesOther operating income
In thousands of US$ 2009 2008Net gains on disposal of PP&E 147 9,802Other operating income 933 543Other operating income 1,080 10,345
The2008incomemainlyrelatestothesaleofAlblasserdamSouthland.Referenceismadetothenarrativesunderthe2008informationonthenatureofexpensestable.
Information on the nature of expensesThetablesbelowsetoutthereconciliationbetweenexpensesbyfunctionandexpensesbynatureforallitemsincludedinEBITfortheyears2009and2008:
In thousands of US$
Lease and operate
Turnkey Systems
Turnkey Services
Selling and marketing
General and adminis-
trative expenses
Other expenses
Total
Revenue 3rd parties 815,995 1,909,679 230,871 - - - 2,956,545Cost of sales (620,651) (1,722,424) (161,136) - - - (2,504,211)Gross margin 195,344 187,255 69,735 - - - 452,334Other operating income 207 688 - - 185 - 1,080Employee benefits (140,161) (314,667) (37,992) (18,565) (59,736) (13,900) (585,021)Selling expenses - - - (29,346) - - (29,346)Depreciation, amortisation and impairment (289,556) (9,253) (13,241) (146) (6,777) (865) (319,838)Other operating costs (200,554) (44,029) (37,328) (9,045) (13,559) (8,036) (312,551)Transfer to cost of sales 630,271 367,949 88,561 - - - 1,086,781Total expenses 0 0 0 (57,102) (80,072) (22,801) (159,975)Allocation of Selling and Marketing, General and administrative and other expenses (20,720) (91,109) (16,704) 57,102 48,630 22,801 0Operating profit (EBIT) 2009 174,831 96,834 53,031 0 (31,257) 0 293,439
Sale of MOPU/FSO OguzhanInJune2009PetronasCarigalihasexerciseditspur-chaseoptionovertheMOPUandFSOfacilities(MOPU/FSOOguzhan)currentlyoperatinginTurkmenistan.Theexecutionofthepurchaseoptiongeneratedanon-recur-ringturnoverofUS$51.5million,andapost-taxprofitofaroundUS$32.4million,includedintheTurnkeySystemssegment,andcashflowresultingfromthistransactionisincludedinthecashflowfromoperatingactivities.
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In thousands of US$
Lease and operate
Turnkey Systems
Turnkey Services
Selling and marketing
General and adminis-
trative expenses
Other expenses
Total
Revenue 3rd parties 810,158 1,983,615 266,503 - - - 3,060,276Cost of sales (557,575) (1,913,055) (190,688) - - - (2,661,318)Gross margin 252,583 70,560 75,815 - - - 398,958Other operating income 44 356 - - 9,945 - 10,345Employee benefits (138,943) (309,798) (45,860) (17,645) (71,555) (6,970) (590,771)Selling expenses - - - (16,542) - - (16,542)Depreciation, amortisation and impairment (234,118) (8,068) (5,623) (178) (6,632) (373) (254,992)Other operating costs (198,561) (30,778) (25,942) (6,191) 5,869 (14,022) (269,625)Transfer to cost of sales 571,622 348,644 77,425 - - - 997,691Total expenses 0 0 0 (40,556) (72,318) (21,365) (134,239)Allocation of Selling and Marketing, General and administrative and other expenses (22,685) (70,154) (14,586) 40,556 45,504 21,365 0Operating profit (EBIT) 2008 229,942 762 61,229 0 (16,869) 0 275,064
Sale of the FPSO MystrasOn16July2008AgipEnergyandNaturalResources(Nigeria)Ltd.exerciseditspurchaseoptiontopurchasetheFPSOMystras.Theincomerelatingtothistransac-tionisshownintheTurnkeySystemssegment.
Sale of the FPSO Tantawan ExplorerOn11June2007thenotificationtoExercisethepurchaseoptiontopurchasethe“TantawanExplorer”wasreceivedfromChevronOffshore(Thailand)Ltd.ThetransferofthevesseltoChevrontookplaceinAugust2008.TheincomerelatedtothistransactionisshownintheTurnkeySystemssegment.
In thousands of US$ 2009 2008Audit fees 787.4 756.2Audit related fees 124.6 79.9Tax fees 166.9 289.2Other 249.3 -Total 1,328.2 1,125.3
Sale of Alblasserdam South landOnthe16thofApril2008landlocatedinAlblasserdamSouthwassoldtoanexternalparty.TheincomeisincludedinOtheroperatingincomeandshownaspartofthegeneralandadministrativesegment.
Thecombinedeffectoftheabovementionedtransactionsonthe2008incomestatementamountedtoUS$31.4million.
KPMG FeesFeesincludedinOtheroperatingcostsrelatedtotheCompany’sexternalauditorcanbesummarizedasfollows:
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Minimum lease paymentsTheCompanyleasesfacilitiesundervariousoperat-ingleaseagreements,whichterminatebetween2010and2027.Anumberofagreementsincludeextensionoptions.Thenominalvaluesofthefutureexpectedbareboatreceipts(minimumleasepaymentsofleases)inrespectofoperatingleasecontractsare:
In millions of US$ 2009 2008*Within 1 year 500 554Between 1 and 5 years 2,238 2,063After 5 years 2,102 1,568Total 4,840 4,185
*restated for comparison purposes
3. Employee benefit expense
Informationwithrespecttoemployeebenefits
In thousands of US$ 2009 2008Wages and salaries 328,884 318,704Social security costs 40,004 36,051Contributions to defined contribution plans 29,706 28,248Increase in liability for defined benefit plans 2,976 3,192Increase in liability for other employee benefits 965 1,714Equity settled transactions (share based payments) 13,300 16,844Other employee benefits 169,186 186,018Total employee benefits 585,021 590,771
Otheremployeebenefitsinclude,foramajorpart,expensesrelatedtohiredpeople.
Pensions and other post-employment benefit plansTheCompanyhasdefinedbenefitpensionplans,basedonfinalsalary.Theaforementionedpensionplansrequirecontributionstoseparatelyadministeredfunds.TheCompanyhasalsoprovidedforcertainseniorityandterminationbenefits.Thesebenefitsareunfunded.Thefollowingtablesummarisesthecomponentsofnetbenefitexpenserecognisedintheconsolidatedincomestatementandthefundedstatusandamountsrecognisedintheconsolidatedbalancesheetfortherespectiveplans.
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Netbenefitexpenserecognisedwithinemployeebenefits:
2009 2008 2009 2008 2009 2008In thousands of US$ Pension plans Other employee benefits Total
Current service cost 1,879 1,293 - - 1,879 1,293Interest cost on benefit obligation 1,961 2,196 - - 1,961 2,196Expected return on plan assets (2,183) (2,402) - - (2,183) (2,402)Other expenses 1,319 2,105 965 1,714 2,284 3,819Net benefit expense 2,976 3,192 965 1,714 3,941 4,906
Theactualreturnonplanassetsisnotsignificantlydifferentfromtheexpectedreturn.
Thebenefit(asset)/liabilityincludedinthebalancesheet:
2009 2008 2009 2008 2009 2008In thousands of US$ Pension plans Other employee benefits Total
Defined benefit obligation 70,336 57,195 5,840 5,202 67,472 62,397Fair value of plan assets (67,431) (48,173) - - (58,727) (48,173)
2,905 9,022 5,840 5,202 8,745 14,224Unrecognised net actuarial gains/(losses) 1,744 (5,635) - - 1,744 (5,635)Benefit (asset)/liability 4,649 3,387 5,840 5,202 10,489 8,589
Thehistoricoverviewofthedeficit/(surplus)ofthepensionplanscanbedisplayedasfollows:
In thousands of US$ 2009 2008 2007 2006 2005Present value defined benefit obligation 70,336 57,195 62,626 50,156 36,341Fair value of plan assets (67,431) (48,173) (52,497) (42,648) (32,378)Deficit / (Surplus) 2,905 9,022 10,129 7,508 3,963
Changesinthepresentvalueofthepensionplansdefinedbenefitobligationareasfollows:
In thousands of US$ 2009 2008Opening defined benefit obligation 57,195 62,626Interest cost 1,961 2,196Current service cost 1,879 1,293Benefits paid (1,822) (1,725)Actuarial (gains)/losses on obligation - (6,854)Other movements 9,550 2,708Exchange differences on foreign plans 1,573 (3,049)Closing defined benefit obligation at 31 December 70,336 57,195
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Changesinthefairvalueofplanassetsofthepensionplansareasfollows:
In thousands of US$ 2009 2008Opening fair value of plan assets (48,173) (52,497)Expected return (2,183) (2,402)Contributions by employer (1,837) (4,999)Benefits paid 1,822 1,725Actuarial (gains)/losses (5,983) 8,035Other movements (9,550) (602)Exchange differences on foreign plans (1,527) 2,567Closing fair value of plan assets at 31 December (67,431) (48,173)
Theothermovementsrelatemainlytoanewlyincludeddefinedbenefitplanassufficientinformationtopreparethecalculationsbecameavailablein2009.
TheCompanyexpectstocontributeUS$2.8milliontoitsdefinedbenefitpensionplansin2010.
Themajorcategoriesofplanassetsasapercentageofthefairvalueoftotalplanassetsareasfollows:
2009 2008% %
Cash 2.9 3.7Equities 18.1 13.1Bonds 79.0 83.2
100.0 100.0
Theoverallexpectedrateofreturnonassetsisdeter-minedonthemarketpricesprevailingonthatdate,applicabletotheperiodoverwhichtheobligationistobesettled.
TheprincipalassumptionsusedindeterminingpensionbenefitobligationsfortheCompany’splansareshownbelow:
2009 2008% %
Discount rate 3.5 3.5Expected rate of return on assets 3.2 5.0Future salary increases 4.0 4.0Future pension increases 0.0 0.0
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Remuneration Key management personnel and Supervisory Board of the Company
TheremunerationofkeymanagementpersonneloftheCompany,includingpensioncostsandperformancerelatedbonuses,amountedtoUS$12.2million(2008:US$17.9million).Theperformancerelatedpartofthe
remunerationequals(comprisingbothSTIandLTIcom-ponents)37%(2008:49%).
ThetotalremunerationandassociatedcostsoftheManagingDirectorsandotherkeymanagementper-sonnel(non-statutorydirectorsandmanagementofthemainsubsidiaries)canbespecifiedasfollows:
2009 2008
In thousands of US$
Salary, burden and
emoluments
Termination benefits
Bonus Pension costs
IFRS 2 costs of share
based payments
Total Total
A.J. Mace (from 15 May 2008) 835 - 466 752 589 2,642 1,000M.A.S. Miles (from 15 May 2008) 702 - 439 47 (49) 1,139 941D. Keller (to 15 May 2008) - - 207 - (348) (141) 2,384Other key management personnel 3,380 475 2,209 1,503 987 8,554 13,572
4,917 475 3,321 2,302 1,179 12,194 17,897
Thebonusisperformancerelatedinrespectofthepreviousyear,basedonEconomicProfit.TherearenoguaranteesorobligationstowardsoronbehalfoftheBoardofManagement.
In2008theexistingLTIfortheBoardofManagementwasamendedtoaperformancesharesonlyplanaspartofthenewRemunerationPolicy,andadoptedbytheAnnualGeneralMeetingofShareholders,inreplacementofthe2005LTI,consistingofacombina-tionofShareoptionsandPerformanceshares.
Share Option PlanIn2009ithasbeendecidedtoreplacetheShareOptionPlanbyPerformanceSharesandRestrictedShares,whichthenhasbeenfullyimplemented(seeundertheheadingofPSU/RSUplan).
Thisreplacestheshareoptionplan,originallyintroducedin1991toallowmanagementandseniorstaffoftheGroupcompaniestoacquiresharesoftheCompany.Asfrom2008theBoardofManagementwasalreadyexcludedfromthisplanbyamendingtheLTI(seeabove).Through2008,aroundonehundredandfortysenioremployeesparticipated.Theannualissueofoptionswasbasedontheprecedingyear’sfinancialresultsandindividualperformance.Alloptionswereissuedatmar-ketpriceonthedateofissueandcanbeexercisedforaperiodoffiveyearsfromthedateofissue,withavestingperiodofthreeyears.Thedateofissueisthefirstdateonwhichsharesaretradedex-dividendfollowingtheAnnualGeneralMeetingofShareholders.
Mainassumptionstakentocalculateexpensesrelatedtotheshareoptionplanwere(2009notapplicableanymore):
2008Expected volatility 27.5%Expected option life at grant date (years) 5Risk-free interest rate 4%Dividend yield 2.5%Fair value at grant date € 6.04Expected departures 5%
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Thesharevolatilityparameterisderivedfromtheaverageofthehistoric3-yearand5-yearvolatilityatgrantdate.
Duringthefinancialyearnoshareoptionswereissued(2008:2,357,300).Thenumberofoutstandingoptionsforboth31December2009and31December2008canbesummarisedasfollows:
Year
Number at 1 January
2009
Granted in 2009
Exercised in 2009
Forfeited / expired in
2009
Number at 31 Decem-
ber 2009
Exercise price in €
Exercisable
2004 568,400 - 568,400 - 0 9.492005 1,668,000 - 36,000 - 1,632,000 12.86 1,632,0002006 1,527,000 (130,000) - 28,000 1,369,000 19.05 1,369,0002007 1,749,000 - - 84,000 1,665,000 25.91 -2008 1,693,100 - - 88,000 1,605,100 25.82 -Total 7,205,500 (130,000) 604,400 200,000 6,271,100 3,001,000
Weighted average exercise price in € 20.12 19.05 9.69 24.91 20.99Average price at exercise in € 12.32
Year
Number at 1 January
2008
Granted in 2008
Exercised in 2008
Forfeited / expired in
2008
Number at 31 Decem-
ber 2008
Exercise price in €
Exercisable
2003 522,200 - 522,200 - 0 9.812004 638,400 - 70,000 - 568,400 9.49 568,4002005 1,177,000 658,000 167,000 - 1,668,000 12.86 1,668,0002006 1,548,500 - - 21,500 1,527,000 19.05 -2007 1,771,000 - - 22,000 1,749,000 25.91 -2008 - 1,699,300 - 6,200 1,693,100 25.82 -Total 5,657,100 2,357,300 759,200 49,700 7,205,500 2,236,400
Weighted average exercise price in € 17.98 22.2 10.45 22.93 20.12Average price at exercise in € 22.78
Instrumentsgrantedin2009withrespectto2006isanegativemovementwhichreflectsthenon-vestingofperformancerelatedstockoptionsasincludedundertheLTIwithoriginalexerciseprice.
Theremainingaveragecontractuallifeoftheoutstand-ingoptionsasat31December2009is1.92years(2008:2.73years).
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Theexpirydatesofthestockoptionsareasfollows:
Year End of vesting period Expiry date
2005 24 May 2008 18 June 20102006 23 May 2009 23 May 20112007 17 May 2010 17 May 20122008 15 May 2011 15 May 2013
Informationwithrespecttotheoptionsgrantedtothe(Former)ManagingDirectors,keymanagementperson-nelandotherpersonnelfortheyear2009:
Number at 1 January
2009
Granted in 2009
Exercised in 2009
Forfeited / expired in
2009
Number at 31 Decem-
ber 2009
Exercisable
A.J. Mace 156,000 - 28,000 - 128,000 84,000Weighted average exercise price in € 17.68 - 9.49 - 19.47Average price at exercise in € 12.18
M.A.S. Miles 178,000 (30,000) 16,000 - 132,000 102,000Weighted average exercise price in € 15.80 19.05 9.49 - 15.83Average price at exercise in € 12.18
D. Keller ( to 15 May 2008) 358,000 (40,000) 40,000 - 278,000 238,000Weighted average exercise price in € 14.64 19.05 9.49 - 14.74Average price at exercise in € 12.26
Other key management personnel 1,312,000 (60,000) 98,000 - 1,154,000 700,000Weighted average exercise price in € 18.19 19.05 9.49 - 18.88Average price at exercise in € 12.14
Other personnel 5,201,500 - 422,400 200,000 4,579,100 1,877,000Weighted average exercise price in € 21.21 - 9.77 24.91 22.10Average price at exercise in € 12.38
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InformationwithrespecttotheoptionsgrantedtotheManagingDirectors,keymanagementpersonnelandotherpersonnelfortheyear2008:
Number at 1 January
2008
Granted in 2008
Exercised in 2008
Forfeited / expired in
2008
Number at 31 Decem-
ber 2008
Exercisable
A.J. Mace (from 15 May 2008) 169,000 - 13,000 - 156,000 68,000Weighted average exercise price in € 17.08 - 9.81 - 17.68Average price at exercise in € 23.52
M.A.S. Miles (from 15 May 2008) 122,000 72,000 16,000 - 178,000 118,000Weighted average exercise price in € 16.75 12.86 9.81 - 15.8Average price at exercise in € 23.38
D. Keller (to 15 May 2008) 215,000 203,000 60,000 - 358,000 278,000Weighted average exercise price in € 14.96 12.86 9.81 - 14.64Average price at exercise in € 23.67
Other key management personnel 526,000 457,000 8,000 - 975,000 556,000Weighted average exercise price in € 17.95 15.95 9.81 - 17.08Average price at exercise in € 21
Other personnel 4,625,100 1,625,300 662,200 49,700 5,538,500 1,216,400Weighted average exercise price in € 18.18 25.54 10.54 22.93 21.22Average price at exercise in € 22.69
The2009dataongrantedoptionsreflectthenon-vestingoftheoptionsfortheBoardofManagementinrespectofthe2006grants,wheretheperformanceconditionhadnotbeenmet.
ForcurrentparticipantsintheCompany’sshareoptionplantherewerenoperformancecriteriaattachedtothegrantofoptions.ForBoardofManagementmemberswhowerepartoftheLTIschemebetween2005and2007inclusivegrantofoptionswasconditionalonachievinga5%averagecompoundedEPSgrowthovera3-yearperiodfollowingthereferenceyear.Forgrowthinexcessof5%,additionaloptionsweretobegranted.Since2008undertheRemunerationPolicy,nooptionsareawardedtotheCEOorBoardofManagementmembers.
Attheendof2008,thesecondthree-yearperiodundertheformerLTIschemehasended.AverageEPSgrowth
overtheperiodhasnotreachedthe5%thresholdandaccordinglynoperformancerelatedoptionsareearnedandtheoptionsprovisionallyawardedin2006didnotvest.Attheendof2009,thelastthree-yearperiodundertheold(2005)LTIschemehasended.AverageEPSgrowthovertheperiodhasnotreachedthe5%thresholdandaccordinglynoperformancerelatedoptionsareearned,andtheoptionsprovisionallyawardedin2007willnotvest.
Performance SharesPerformancesharesunderbothformerLTIandtheamended2008LTIformpartoftheLTIforBoardofManagementmembers,andaresubjecttoanEPSgrowththreshold.Performancesharesvestthreeyearsaftertheprovisionalawarddateandmustberetainedfortwoyearsfromthevestingdate.
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Asfrom2008,undertheRemunerationPolicythenumberofconditionalperformancesharesawardedissuchthattheirvalueisequivalentto100%oftheManagingDirector’sbaseannualsalaryofthepreviousyear,assuming“Attarget”EPSgrowthperformanceoverthethreeyearperiodfollowingtheperiodofref-erence.In2009theconditionalawardswere18,735sharesforMr.Keller(prorata),42,126sharesforMr.Maceand39,669sharesforMr.Miles.IfthethresholdaverageEPSgrowthover2009to2011isnotachievedtheconditionalawardswillnotvest.Themaximumpossibleawardis150%oftheconditionalaward.
Inrespectofconditionalperformancesharesawardedin2006,thethreeyearmeasurementperiod2006-2008generatedaverageEPSgrowthbelowthethresholdof5%.UndertheformerLTIscheme,performanceshareswereawardedconditionallyassuminga5%EPSgrowththreshold,plusadditionalperformancesharesforeachpercentagepointEPSgrowthabovethe5%threshold.
Accordinglynoperformanceshares(2006baseawardplusperformancerelated)wereawardedtotheBoardofManagement.Equallyfortheperformanceperiod2007-2009theEPSgrowththresholdof5%wasnotachievedeitherandconsequentlynoperformanceshares(neitherbaseawardnoradditionalperformance
related)willbeissuedtoBoardofManagementmem-berswhowerepartoftheLTIschemein2007.
PSU and RSU plansIn2009,newplanswereapprovedbytheSupervisoryBoardandimplemented,replacingthepreviousShareOptionPlanforsenioremployees.Undertheseplans,sharesintheCompanyareissuedannuallytoeligibleemployees.In200915peopleparticipateinthePerformanceShareUnitplan(PSU),and116intheRestrictedShareUnitplan(RSU).Therespectivenumberofsharesgrantedundertheseplansin2009are116,300(PSU,attarget)and320,380(RSU).
Theannualissueisbasedonindividualperformance.ConcerningthePSUplan,aperformanceconditionapplies,basedonacombinationofEBITmarginandEBITgrowthovera3-yearperformanceperiod.Whenattarget,theconditionallygrantednumberofshareswillvest;agradetablehasbeenadoptedincludingthresholdandmaximumvestinglevelsat25%and150%respectivelyoftheat-targetgrant.TheRSUplanhasnoperformancecondition,onlyaservicecondition,andwillvestoverathreeyearperiod,with1/3vestingoneachanniversarydateoftheoriginalgrantdate.
MainassumptionsincludedinthecalculationforthePSUplanare:
2009Expected departures 5%Fair value at grant date (excluding entitlement to dividends during vestion period), 1 July 2009 € 10.05
FortheRSUplan,theassumptionsareasfollows:2009
Expected departures (tranche 1/2/3) 0% / 2.5% / 5%Fair value at grant date (excluding entitlement to dividends during vesting period), 1 July 2009 € 10.98 / € 10.50/ € 10.05
Matching SharesUnderthebonusplansfortheBoardofManagement,managementandseniorstaffofGroupcompanies20%ofthebonusisorcanbepaidinshares.ForBoardofManagementmembers,thissharebasedelementiscompulsorybutforotherseniorstafftheschemeisoptional.Subjecttoavestingperiodofthreeyearsan
identicalnumberofshares(matchingshares)willbeissuedtoparticipants.Assumedprobabilityofvestingamountsto100%forBoardofManagementmembersand95%forotherseniorstaff.
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TheamountsrecognisedinEBITforallsharebasedpay-menttransactionscanbesummarisedasfollows,takingintoaccountboththeprovisionalawardsforthecurrentyearandtheadditionalawardsrelatedtoprioryears:
In thousands of US$
Share option plan and
PSU/RSU
Performance shares
Matching shares
Total
Instruments granted 10,146 1,433 1,361 12,940Performance conditions (892) 799 453 360Total expenses 2009 9,254 2,232 1,814 13,300
In thousands of US$Share
option planPerformance
sharesMatching
sharesTotal
Instruments granted 11,927 - 1,133 13,060Performance conditions 1,832 1,517 435 3,784Total expenses 2008 13,759 1,517 1,568 16,844
RulesofconductwithregardtoinsideinformationareinplacetoensurecompliancewiththeActonFinancialSupervision.Theserulesforbide.g.theexerciseofoptionsorotherfinancialinstrumentsduringcertainperi-odsdefinedintherulesandmorespecificallywhentheemployeeisinpossessionofpricesensitiveinformation.
Remuneration of the Supervisory BoardTheremunerationoftheSupervisoryBoardamountedtoUS$433,000(2008:US$479,000)andcanbespeci-fiedasfollows:
2009 2008 2009 2008 2009 2008In thousands of US$ Basic remuneration Committees Total
H.C. Rothermund Chairman 88 93 - - 88 93J.D.R.A. Bax Vice-Chairman (to 15 May 2008) - 29 - 5 - 34L.J.A.M. Ligthart Vice-Chairman (from 15 May 2008) 73 73 17 17 90 90R.H. Matzke* To 15 May 2008 - 51 - - - 51R. van Gelder 63 66 13 13 76 79D. Keller From 15 May 2008 to
15 September 2009 45 42 - - 45 42F.G.H. Deckers From 15 May 2008 63 42 8 6 71 48T. Ehret From 15 May 2008 63 42 - - 63 42Total 395 438 38 41 433 479
*Including allowance for travel from the USA
Therearenooptionsgrantedandnoassetsavail-abletothemembersoftheSupervisoryBoard.ThereareneitherloansoutstandingtothemembersoftheSupervisoryBoardnorguaranteesgivenonbehalfofmembersoftheSupervisoryBoard.
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Number of employeesThenumberofdirectemployeeswasasfollows:
By business segment: 2009 2008Average Year-end Average Year-end
Lease and operate 1,139 1,103 1,075 1,175Turnkey Systems (including other) 2,187 2,158 1,983 2,216Turnkey Services 213 199 205 226
3,539 3,460 3,263 3,617
By geographical area: 2009 2008Average Year-end Average Year-end
The Netherlands 416 433 372 399Worldwide 3,123 3,027 2,891 3,218
3,539 3,460 3,263 3,617
Thefiguresexcludefleetpersonnelhiredthroughcrew-ingagenciesaswellasotheragencyandfreelancestaffforwhomexpensesareincludedwithinotheremployeebenefits.Theemployeesworkingforthejointventuresareincludedfor100%inthenumbersabove.
4. Net financing costs
In thousands of US$ 2009 2008Interest income 14,490 21,989Net forex exchange gain 2,788 1,599Net commodity hedge result - 1,329Dividend income - 15Financial income 17,278 24,932
In thousands of US$ 2009 2008Interest expenses (72,213) (62,115)Interest addition to provisions (1,148) (1,248)Net ineffective portion in fair value of cash flow hedge (3,020) (587)Other financial expense (867) (1,326)Financial expenses (77,248) (65,276)
ThefinancialexpensesarenetofUS$28.3million(2008:US$21.7million)capitalisedinterest.
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Theexchangedifferences(charged)/creditedtotheincomestatementareincludedasfollows:
In thousands of US$ 2009 2008EBIT (94) 120Net financing costs 2,788 1,599
2,694 1,719
5. Research and development expenseResearchanddevelopmentcostsconsistofUS$22.8million(2008:US$21.4million)chargeddirectlytootheroperatingexpenses.Developmentcostsamount-ingtoUS$15.9million(2008:US$12.2million)werecapitalisedwithinintangiblefixedassets(note10ofthenotestothefinancialstatements).
6. Income taxTheCompany’soperationalactivitiesaresubjecttotax-ationatrates,whichrangeupto34%(2008:34%).Therespectivetaxrates,includingfiscalprivilegesinsev-eralcountries,tax-exemptprofitsandnon-deductiblecostsandreleases,resultinaneffectivetaxburdenoncontinuingoperationsof1.6%(2008:4.0%),calculatedas‘Incometaxexpenses’dividedby‘Profitbeforetax’intheincomestatement.Thereconciliationoftheeffec-tivetaxrateoncontinuingoperationsis:
2009 2008In thousands of US$ % %
Profit before tax 233,654 237,255
Income tax using the domestic corporation tax rate 25.5 (59,582) 25.5 (60,500)Effect of tax rates in foreign jurisdictions (25.3) 59,360 (22.7) 54,022Non-deductible expenses 1.5 (3,604) 1.5 (3,548)Non-taxable revenues (0.1) 153 (0.3) 646Recognised tax income / expense 1.6 (3,673) 4.0 (9,380)
IncometaxexpensescomprisecorporateincometaxdueincountriesofincorporationoftheCompany’smainsubsidiariesleviedonactualprofits.Corporateincometaxeswhichareleviedonadeemedprofitbasisandwithholdingtaxesinotherjurisdictionsaretreatedasprojecttaxesandincludedingrossmargin.
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7. Earnings per shareThebasicearningspersharefortheperiodamountstoUS$1.47(2008:US$1.54);thefullydilutedearningspershareamountstoUS$1.46(2008:US$1.53).
Basicearningspershareamountsarecalculatedbydividingnetprofitfortheyearattributabletosharehold-ersoftheCompanybytheweightedaveragenumberofsharesoutstandingduringtheyear.Dilutedearnings
pershareamountsarecalculatedbydividingthenetprofitattributabletoshareholdersoftheCompanybytheweightedaveragenumberofsharesoutstandingduringtheyearplustheweightedaveragenumberofsharesthatwouldbeissuedontheconversionofallthedilutivepotentialsharesintoordinaryshares.
Thefollowingreflectsthesharedatausedinthebasicanddilutedearningspersharecomputations:
2009 2008Number of shares outstanding at 1 January 145,613,988 143,323,681Stock dividend 2,364,638 728,576New share issue 2,122,300 607,246Weighted average number of shares 31 December 150,100,926 144,659,503Potential dilutive shares from stock option scheme and other share-based payments 960,924 1,084,392Weighted average number of shares (diluted) at 31 December 151,061,850 145,743,895
Therehavebeennoothertransactionsinvolvingordi-narysharesorpotentialordinarysharesbetweenthereportingdateandthedateofcompletionofthesefinancialstatements,exceptforstockoptionsexer-cisedinaccordancewiththestockoptionschemeandissueofmatchingsharestotheBoardofManagementandotherseniormanagement.
8. Dividends paid and proposed
In thousands of US$ 2009 2008CASh diVideNd deClARed ANd PAid duRiNg The yeARFinal dividends for 2008 69,919 -Final dividends for 2007 - 79,864
69,919 79,864
PRoPoSed FoR APPRoVAl oF The AgM Final dividend 2009 110,188 -Final dividend 2008 - 135,421
110,188 135,421
diVideNd PeR ShARe Final dividend 2009 US$ 0.67 -Final dividend 2008 - US$ 0.93
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Thedividendrelatingtotheyearending31December2008amountingtoUS$0.93persharewaspaid50%incashand50%asastockdividend.Thisresultedinacashdividendof€0.345perordinaryshareandastockdividendof2newordinarysharesfor69existingordi-naryshares.Thepaymentofdividendstookplaceon9June2009andresultedinacashdividenddistributionofUS$69.9million(convertedagainstaveragerate).
Adividendinrespectoftheyearended31December2009ofUS$0.67pershare,amountingtoatotaldivi-dendofUS$110.2millionistobeproposedattheAnnualGeneralMeetingon14April2010.Thesefinan-cialstatementsdonotreflectthisdividendpayable.
9. Property, plant and equipmentThemovementoftheproperty,plantandequipmentduringtheyear2009and2008canbesummarisedasfollows:
2009
In thousands of US$
Land and buildings
Vessels and floating
equipment
Machinery and
equipment
Other fixed assets
Assets under
construction
Total
Cost 103,650 2,316,110 41 85,041 1,261,522 3,766,364Accumulated depreciation and impairment (17,358) (1,137,739) (27) (45,852) - (1,200,976)Book value at 1 January 86,292 1,178,371 14 39,189 1,261,522 2,565,388Additions 2,859 2,724 4 4,802 628,732 639,121New in consolidation - 900 - - - 900Disposals - (58,918) - (693) - (59,611)Depreciation (2,635) (261,649) (13) (13,971) (278,268)Impairment - - - - (40,098) (40,098)Exchange rate differences 2,332 - 0 925 (448) 2,809Other movements / deconsolidation 20,398 764,893 - 19,673 (804,903) 61Total movements 22,954 447,950 (9) 10,736 (216,717) 264,914Cost 129,906 2,651,634 45 102,604 1,084,903 3,969,092Accumulated depreciation and impairment (20,660) (1,025,313) (40) (52,679) (40,098) (1,138,790)Book value at 31 December 109,246 1,626,321 5 49,925 1,044,805 2,830,302
TheimpairmentchargesrelatetothereductionofthecarryingamounttoitsrecoverableamountoftheMOPUstor™unitunderconstructionandtothefullimpairmentofaninstallationtoolthatwasbuiltbytheservicesdepartmentbutforwhichdevelopmenthasbeendiscontinued.Theseimpairmentlosseshave
beenincludedinthegrossmarginintheincomestate-mentundertheLeaseandOperatesegmentandtheTurnkeyServicessegmentrespectively.Therecover-ableamountfortheMOPUstor™iscalculatedwithadiscountrateof8%andisbasedonthevalueinuseoftheasset.
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SBMOffshore–AnnualReport2009 133
2008
In thousands of US$
Land and buildings
Vessels and floating
equipment
Machinery and
equipment
Other fixed assets
Assets under
construction
Total
Cost 99,879 2,503,665 58 72,289 488,592 3,164,483Accumulated depreciation and impairment (15,710) (1,146,111) (33) (40,234) - (1,202,088)Book value at 1 January 84,169 1,357,554 25 32,055 488,592 1,962,395Additions 539 2,826 - 8,697 975,508 987,570New in consolidation - - - - - -Disposals - (51,446) - (22) - (51,468)Depreciation (2,542) (238,563) (10) (13,036) - (254,151)Exchange rate differences (4,418) - (1) (1,622) (76) (6,117)Other movements 8,544 108,000 - 13,117 (202,502) (72,841)Total movements 2,123 (179,183) (11) 7,134 772,930 602,993Cost 103,650 2,316,110 41 85,041 1,261,522 3,766,364Accumulated depreciation and impairment (17,358) (1,137,739) (27) (45,852) - (1,200,976)Book value at 31 December 86,292 1,178,371 14 39,189 1,261,522 2,565,388
Property,plantandequipmentatyear-endinclude:• Ten(2008:ten)integratedfloatingproduction,
storageandoffloadingsystems(FPSOs),eachconsistingofaconvertedtanker,aprocessingplantandamooringsystem;OneoftheFPSOsisinlayupbytheendofDecember2009andoneFPSOisupgraded;
• two(2008:two)floatingstorageandoffloadingsystems(FSOs),consistingofaconvertedornew-buildtankerandmooringsystemincludingthefluidtransfersystem;
• noExtendedWellTestSystem(2008:one);• foursecond-handtankers(2008:three)andone
barge(2008:one);• onesemi-submersibleproductionplatform
(2008:underconstruction);• twoMOPU(stor)facilitiesunderconstruction
(2008:two);• the‘NormandInstaller’,adeepwaterinstallation
vessel;• the‘DynamicInstaller’,adynamicallypositioned
divingsupportvessel.
AnamountofUS$28.3million(2008:US$20.1mil-lion)thirdpartyinteresthasbeencapitalisedduringthefinancialyearunderreviewaspartoftheadditionstoproperty,plantandequipment.
Thefairvalueofthemajorpartofthepropertyplantandequipmentcannotbeestimatedpreciselybutisexpectedtobeinexcessofcarryingvalues.Fairvalueinformationisthereforenotincludedinthenotestothefinancialstatements.
Thecategoryvesselsandfloatingequipmentmainlyrelatestothefacilitiesleasedtothirdparties.
VesselsandfloatingequipmentincludesanetcarryingamountofUS$47.8million(2008:US$89.0million)relatingtofinanceleasearrangementsoftwo(2008:three)second-handtankerswheretheCompanyisthelessee.Theleaseswillmaturein2014orsoonerifthetankerswillberequiredforFPSOconversionprojects.
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10. Intangible assets2009
In thousands of US$Development
costsGoodwill Patents Total
Cost 15,418 25,048 12,633 53,099Accumulated amortisation - - (6,317) (6,317)Book value at 1 January 15,418 25,048 6,316 46,782Additions 15,945 - - 15,945Amortisation (653) - (842) (1,495)FX on movements 189 - - 189Total movements 15,481 - (842) 14,639Cost 31,563 25,048 12,633 69,244Accumulated amortisation (664) - (7,159) (7,823)Book value at 31 December 30,899 25,048 5,474 61,421
2008
In thousands of US$Development
costsGoodwill Patents Total
Cost 3,365 25,048 12,633 41,046Accumulated amortisation - - (5,475) (5,475)Book value at 1 January 3,365 25,048 7,158 35,571Additions 12,217 - - 12,217Amortisation - - (842) (842)FX on movements (164) - - (164)Total movements 12,053 - (842) 11,211Cost 15,418 25,048 12,633 53,099Accumulated amortisation - - (6,317) (6,317)Book value at 31 December 15,418 25,048 6,316 46,782
Amortisationofpatentsanddevelopmentcostsisincludedin‘Costofsales’intheincomestatement.AlldevelopmentcostsarosefrominternaldevelopmentandrelateprincipallytoLNGproducts.
GoodwillrelatestotheacquisitionoftheHoustonbasedsubsidiaries.Therecoverableamountis
determinedbasedonvalue-in-usecalculations.Thesecalculationsusepre-taxcashflowprojectionsbasedonfinancialbudgetsapprovedbymanagementcover-ingafive-yearperiod.Cashflowsbeyondthefive-yearperiodareextrapolatedusingestimatedgrowthrates(2%).Managementdeterminedbudgetedgrossmarginbasedonpastperformanceanditsexpectationsofmarketdevelopment.Thediscountratesusedarepre-taxandreflectspecificrisks(8%).
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11. Other financial assets
In thousands of US$ 2009 2008Trade and other receivables 146,345 212,445Other financial assets 230,889 207,927
377,234 420,372
Thereconciliationbetweenthetotalgrossinvestmentintheleaseandthenetinvestmentintheleaseatthebal-ancesheetdateisasfollows:
In thousands of US$ 2009 2008Gross receivable 261,300 345,003
Less: Unearned finance income (46,083) (70,263)
215,217 274,740
Includedinthegrossreceivableisanamountrelatedtounguaranteedresidualvalues.Noallowancesforexpecteduncollectibleminimumleasepaymentsarededucted.
Grossreceivablesareexpectedtobeinvoicedtothelesseewithinthefollowingperiods:
In thousands of US$ 2009 2008within 1 year 83,804 83,804between 1 and 5 years 141,501 216,990after 5 years 29,532 37,847
254,837 338,641
Thetableabovedoesnotincludetheamountstobeinvoicedonthefinanceleasecontractthatwasawardedduringthecourseof2009whichisattheendof2009includedunderconstructioncontracts.
Thefollowingpartofthenetinvestmentintheleaseisincludedaspartofthecurrentassetswithinthebalancesheet:
In thousands of US$ 2009 2008Gross receivable 83,804 83,804Less: Unearned finance income (14,932) (21,509)
68,872 62,295
TheitemOtherfinancialassetsrelatetointerestbearingloansthathavearemainingtermofmorethanoneyear,includinginterestbearingloanstojointventures.Weightedaverageeffectiveinterestamountsto5.85%(2008:5.07%).FurthermoretheotherfinancialassetsincludeanamountofUS$13.4million(2008:US$4.0million)relatingtothebookvalueofcapitalisedfinancingcosts.Furtherreferencewithrespecttothecapitalisedfinancingcostsismadetonote20ofthenotestothefinancialstatements.
Themaximumexposuretocreditriskatthereportingdateisthefairvalueoftheinterestbearingloansandthefinanceleasereceivables(2009:US$363.8million,2008:US$416.4million)takingintoaccounttheriskofrecoverability.Noneoftheamountsarepastdue,andnoreserveforpartialimpairment(2008:nil)isnettedwiththecarryingamount.TheCompanydoesnotholdanycollateralassecurity.
Trade and other receivablesTradeandotherreceivablesrelatetotheleaseoftheFPSOMondoandFPSOSaxiBatuque.TheFPSOsweretakenintoproductionduringthecourseof2008.
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12. Deferred tax assetThedeferredtaxassetsandliabilitiesandoffsettingofassetsandliabilitiescanbesummarisedasfollows:
2009 2008 2009 2008 2009 2008In thousands of US$ Assets Liabilities Net
Property, plant and equipment 8,576 9,512 - - 8,576 9,512Intangible assets 240 3,410 - - 240 3,410Other investments - - - (709) - (709)Tax losses 1,956 - - - 1,956 -Other 2,315 - (1,048) - 1,267 -Book value at 31 December 13,087 12,922 (1,048) (709) 12,039 12,213
Expectednetcashinflowofamountsrelatingtodeferredtaxpositionsiswithinoneyear:US$3.9mil-lion(2008:US$0.4million),betweenoneandfiveyearsacashoutflowofUS$0.7million(2008:cashinflowUS$1.6million)andafterfiveyearsUS$0.3million(2008:US$0.7million).
Themovementsintemporarydifferencesduringtheyearsended31December2009and2008issumma-risedinthetablebelow:
In thousands of US$ 2009 2008Net deferred tax position 1 January 12,213 7,784Movement (174) 4,429Net deferred tax position 31 December 12,039 12,213
TheCompanyhasno(2008:US$nil)availabletaxlossesthatarenotvaluedinadeferredtaxasset.
Thegeographicallocationsofthedeferredtaxassetsareasfollows:
2009 2008 2009 2008 2009 2008In thousands of US$ Assets Liabilities Net
Netherlands 8,576 9,512 (1,048) (709) 7,528 8,803USA 4,511 3,410 - - 4,511 3,410Book value at 31 December 13,087 12,922 (1,048) (709) 12,039 12,213
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13. Inventories
In thousands of US$ 2009 2008Materials and consumables 18,274 14,301Goods for resale 7,489 9,004
25,763 23,305
Thereisnomaterialdifferencebetweenfairvalueandcostasstatedabove.
In2009therewasnowrite-downofinventoriestonetrealisablevalueincludedintheincomestatement(2008:nil).Therewerenoreversalsofpreviousinven-torywrite-offs(2008:nil).Thewrite-downisincludedaspartofthecostofsales.
14. Trade and other receivables
In thousands of US$ 2009 2008Trade debtors 384,671 318,125Non-consolidated group companies - 1,044Taxes and social security 31,899 26,698Other receivables 41,945 64,617Accruals in respect of delivered orders 59,467 81,082Current portion finance leases 68,872 62,295Securities 1,710 1,527Other prepayments and accrued income 92,998 117,407
681,562 672,795
Themaximumexposuretocreditriskatthereport-ingdateisthefairvalueofeachclassofreceivableasmentionedabove.TheCompanydoesnotholdanycollateralassecurity.TradedebtorsincluderetentionsofUS$15.0million(2008:US$0.3million).
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ThecarryingamountsoftheCompany’stradedebtorsaredistributedinthefollowinggeographicalareas:
In thousands of US$ 2009 2008Netherlands 557 868Angola 64,180 81,600Australia 19,342 21,831Brazil 114,694 71,190North America and Canada 26,491 18,928Norway 2,225 13,958Malaysia 11,544 13,212Other 145,638 96,538Total trade debtors 384,671 318,125
Thetradedebtorsbalanceisthenominalvaluelessanallowanceforestimatedimpairmentlossesasfollows:
In thousands of US$ 2009 2008Nominal amount 390,166 319,642Impairment allowance (5,495) (1,517)
384,671 318,125
Theageingofthenominalamountsofthetradedebtorsare:
2009 2008In thousands of US$ Gross Impairment Gross Impairment
Not past due 217,356 - 173,429 (23)Past due 0-30 days 74,444 - 53,262 -Past due 31-120 days 50,134 - 53,450 -Past due 121- 365 days 33,386 - 32,172 -More than one year 14,846 (5,495) 7,329 (1,494)Total 390,166 (5,495) 319,642 (1,517)
Notpastduearethosereceivablesforwhicheitherthecontractualor“normal”paymentdatehasnotyetelapsed.Pastduearethoseamountsforwhicheitherthecontractualorthe“normal”paymentdatehaspassed.Amountsthatarepastduebutnotimpairedrelatetoanumberofindependentcustomersforwhomthereisnorecenthistoryofdefaultorthereceivableamountcanbeoffsetbyamountsincludedincurrentliabilities.
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In thousands of US$ 2009 2008At 1 January (1,517) (1,340)
Addition (4,319) (303)Recognised expenses 371 3Reversal - 77Foreign exchange difference (30) 46At 31 December (5,495) (1,517)
TheallowanceforimpairmentrepresentstheCompany’sestimateoflossesinrespectoftradedebtors.Theallow-anceisbuiltonspecificexpectedlosscomponentsthatrelatetoindividualexposures.Theallowanceisnotdiscountedwhencreated.Thecreationandreleaseforimpairedtradedebtorshavebeenincludedingrossmarginintheincomestatement.Amountschargedtotheallowanceaccountaregenerallywrittenoffwhenthereisnoexpecta-tionofrecovery.Theotherclasseswithinthetradeandotherreceivablesdonotcontainallowancesforimpairment.
15. Income tax receivableApartfromdeferredtaxation,noreceivableshaveadurationofmorethan1year.Foranexplanationofthedeferredtaxpositionreferenceismadetonote12ofthenotestothefinancialstatements.
16. Construction contracts
In thousands of US$ 2009 2008Cost incurred (total) 4,254,499 3,371,940Instalments invoiced (total) (4,175,348) (3,127,387)Instalments exceeding cost incurred 379,083 47,989
458,234 292,542
Thecostincurredincludestheamountofrecognisedprofitsandlossestodate.Theinstalmentsexceedingcostincurredcomprisetheamountsofthoseindividualcontractsofwhichthetotalinstalmentsexceedthetotalcostincurred.Theinstalmentsexceedingcostincurredarereclassifiedtoothercurrentliabilities.
Advancesreceivedfromcustomersareincludedinothercur-rentliabilities.Forbothaforementioneddetails,referenceismadetonote23ofthenotestothefinancialstatements.
Detailswithrespecttotheamountofretentionsareincludedinthenotetothetradeandotherreceivables;referenceismadetonote14ofthenotestothefinancialstatements.
Fortheamountsthatarepastdueandimpairedthemovementsintheallowanceforimpairmentfortradedebtorsareasfollows:
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17. Derivative financial instrumentsForadescriptionofthefinancialriskmanagementobjectivesandpolicies,referenceismadetonote27ofthenotestothefinancialstatements.
At31December2009,theCompanyheldseveralfor-wardexchangecontractsdesignatedashedgesofexpectedfuturetransactionsforwhichtheCompany
includedintheinitialamountrecognisedinthecarry-ingamountoffixedassets,inwhichcaserecognitionisoverthelifetimeoftheasset,orthegainorlossisincludedintheinitialamountrecognisedinthecarryingamountofthecostincurredonconstructioncontractsinwhichcaserecognitionisbasedonthe‘percentage-of-completionmethod’.
Interest rate swapsTheprincipalamountsoftheoutstandinginterestrateswapcontractsat31December2009wereUS$1.6bil-lion(2008:US$2.2billion).
ThemostimportantfloatingrateisUS$3-monthLIBOR.Gainsandlossesrecognisedinthehedgingreserveinequity(note19ofthenotestothefinancialstatements)oninterestrateswapcontractsasof31December2009willbecontinuouslyreleasedtotheincomestatementuntiltherepaymentofthebankborrowings.Detailsofinterestpercentagesofthelong-termdebtareincludedinnote20ofthenotestothefinancialstatements.
hasfirmcommitmentsorforecasts.Furthermore,theCompanyheldseveralinterestrateswapcontractsdes-ignatedashedgesofvariableinterestratebearingdebt.
Thefairvalueofthederivativefinancialinstrumentsincludedinthebalancesheetcanbesummarisedasfollows:
2009 2008 2009 2008 2009 2008In thousands of US$ Assets Liabilities Net
Interest rate swaps cash flow hedge 22,294 33,203 123,327 198,071 (101,033) (164,868)Forward currency contracts cash flow hedge 37,850 41,188 41,463 112,465 (3,613) (71,277)Forward currency contracts fair value hedge 895 2,310 5,064 - (4,169) 2,310Forward currency contracts net foreign investment hedge - 1,168 2,266 - (2,266) 1,168Commodity swap cash flow hedge 67 1,792 - 2,639 67 (847)Total 61,106 79,661 172,120 313,175 (111,014) (233,514)
Theineffectiveportionrecognisedintheincomestate-mentarisesfromcashflowhedgesandamountstoUS$3.0million(2008:US$0.6million).Therewasnoineffectivenessrecognisedintheincomestatementrelatedtoforeigninvestmenthedges(2008:none).Themaximumexposuretocreditriskatthereportingdateisthefairvalueofthederivativeassetsinthebalancesheet.
Forward currency contractsThenotionalprincipalamountsoftheoutstandingfor-wardcurrencycontractsat31December2009wereUS$2.3billion(2008:US$2.1billion)ofwhichUS$2.0billionwillmatureinthenext12months.
Gainsandlossesrecognisedinthehedgingreserve(note19ofthenotestothefinancialstatements)onforwardcurrencycontractsasof31December2009arerecognisedintheincomestatementintheperiodorperiodsduringwhichthehedgedtransactionaffectstheincomestatement.Thisismainlywithin12monthsfromthebalancesheetdateunlessthegainorlossis
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18. Cash and cash equivalents
In thousands of US$ 2009 2008Cash and bank balances 66,750 123,895Short-term deposits 79,962 106,434
146,712 230,329
ThecashandcashequivalentsareavailablefordebtandinterestpaymentsUS$40.6million(2008:US$28.9million),andfordaytodayactivities.Therearenoamounts(2008:US$33.3million)relatingtorestrictedcashinescrowaccount.Short-termdepos-itsaremadeforvaryingperiodsofbetweenonedayandthreemonthsdependingontheimmediatecashrequirementsoftheCompany,andearninterestattherespectiveshort-termdepositrates.
19. Equity attributable to shareholdersForaconsolidatedoverviewofchangesinequityrefer-enceismadetotheconsolidatedstatementofchangesinequity.
Issued capitalTheauthorisedsharecapitalamountsto€100,000,000dividedinto200,000,000ordinaryshareseachof€0.25and50,000,000preferenceshares,eachof€1.At31December2009nopreferenceshareswereoutstand-ing(31December2008:none).Duringthefinancialyearthemovementsintheoutstandingnumberofordinarysharesareasfollows:
2009 2008Outstanding at 1 January 145,613,988 143,323,681
Share issue 13,896,880 -Exercise employee share options 604,400 759,200Share issue re stock dividend 4,221,744 1,300,774Share-based payment remuneration 122,968 230,333Outstanding 31 December 164,459,980 145,613,988
Oftheordinaryshares56,959shareswereheldbymanagingdirectorsat31December2009(31December2008:42,673).
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Share premiumThesharepremiumreserveisfullyavailablefordistribu-tionfreeoftaxesforprivateinvestors,andamountsto€524.1million(31December2008:€344.4million).AnamountofUS$4.8milliontransactioncosts(netofUS$1.3million)relatingtotheshareissuearedeductedfromthesharepremiumreservein2009.
Other reservesTheotherreservescomprisethehedgingreserveandtheforeigncurrencytranslationreserve.Themovementandbreakdownoftheotherreservescanbestatedasfollows:
In thousands of US$Hedging reserve
Translation reserve
Total other reserves
Balance at 1 January 2008 18,140 8,793 26,933
Cash flow hedges:
Recognised in equity (227,168) - (227,168)Transfer to financial income and expenses (14,462) - (14,462)Transfer to construction contracts and property, plant and equipment (30,270) - (30,270)Net investment hedge 2,425 - 2,425Currency translation differences:
Group companies - (10,669) (10,669)Balance at 31 December 2008 (251,335) (1,876) (253,211)Cash flow hedges:
Recognised in equity 94,706 - 94,706Transfer to financial income and expenses 11,093 - 11,093Transfer to construction contracts and property, plant and equipment 29,420 - 29,420Net investment hedge (1,306) - (1,306)Currency translation differences:
Group companies - 13,646 13,646Balance at 31 December 2009 (117,422) 11,770 (105,652)
Hedging reserveThehedgingreserveconsistsoftheeffectiveportionofcashflowandnetforeigninvestmenthedginginstrumentsrelatedtohedgedtransactionsthathavenotyetoccurred.
Translation reserveTheforeigncurrencytranslationreserveisusedtorecordexchangedifferencesarisingfromthetranslationofthefinancialstatementsofforeignsubsidiaries.
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20. Long-term loans and other liabilitiesLongtermloansandotherliabilitiescomprisebankinterestbearingloansandborrowingsandotherloans.Thebreakdownisasfollows:
In thousands of US$ 2009 2008Bank interest bearing loans and borrowings 1,217,394 1,349,983Deferred income 24,634 -Other loans 40,440 80,336
1,282,468 1,430,319
Bank interest bearing loans and borrowingsThemovementintheBankinterestbearingloansandborrowingsisasfollows:
In thousands of US$ 2009 2008Long term portion 1,349,983 921,505Add: Short term portion 255,187 227,272Remaining principal at 1 January 1,605,170 1,148,777Additions 494,443 694,385Redemptions (559,223) (237,992)Movements (64,780) 456,393Remaining principal at 31 December 1,540,390 1,605,170Less: Short term portion (322,996) (255,187)Long term portion 1,217,394 1,349,983
Thebankinterestbearingloansandborrowingshavethefollowingforecastedrepaymentschedule:
In thousands of US$ 2009 2008Within one year 322,996 255,187Between 1 and 2 years 425,311 217,197Between 2 and 5 years 618,948 1,047,888More than 5 years 173,135 84,898Balance at 31 December 1,540,390 1,605,170
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Theinterestbearingloansandborrowingsincludeat31December:
In thousands of US$
Original repayment
period
Interest per annum on
the remain-ing loan balance
Remaining loan balance
2009
Remaining loan balance
2008
uS$ PRojeCT FiNANCe FACiliTieS dRAwN:Mid 2000 (FSO Yetagun) 10 years 3.86% 4,271 10,117July / November 2003 (FPSO Xikomba) 6 years 4.55% - 11,602April / June 2004 (FPSO Marlim Sul) 7 ½ years 4.32% - 54,162March 2005 (Sanha LPG FPSO) 6 ½ years 5.40% 34,352 55,925May 2006 (FPSO Espadarte) 5 years 2.55% 28,708 55,460October 2006 (FPSO Capixaba) 6 ½ years 6.43% 149,310 193,330December 2006 / March 2008 (FPSO Kikeh) 7 years 5.18% 152,341 178,269November 2007 / March 2008 (FPSO Mondo) 6 years 4.90% 86,826 120,926April / May / September 2008 (FPSO Saxi Batuque) 6 years 4.69% 117,416 154,847September 2007 / March 2009 / July 2009 (Thunder Hawk) 5 ½ years 5.22% 303,369 126,519November 2008 / February 2009 (FPSO Espirito Santo) 6 ¼ years 5.03% 271,064 199,734
uS $ guARANTeed PRojeCT FiNANCe FACiliTieS dRAwN:June 2009 (MOPU Deep Panuke) 5 ¼ years 7.58% 202,333 -US $500 million revolving credit facility 5 years variable 145,000 395,000Other long term debt 45,400 49,279Remaining principal at 31 December 1,540,390 1,605,170
Fortheprojectfinancefacilitiestherespectiveves-selsaremortgagedtothebanks.Interestexpensedonlong-termdebtduring2009amountedtoUS$60.0million(2008:US$48.8million)andinterestcapitalisedamountedtoUS$28.3million(2008:US$21.7million).
Thefollowingimportantfinancialcovenantshavebeenagreedwiththerespectivelenders(unlessstatedother-wisetheserelatetobothSBMOffshoreN.V.andSBMHoldingInc.S.A.consolidatedfinancialstatements),afteradjustmentofEBITDAandnetdebtforcertainitemsandproposeddividend,asdefinedintherelevantfinancingfacilities:• minimumtangiblenetworthofSBMHoldingInc.
S.A.ofUS$490million.ActualtangiblenetworthisUS$1,566million(2008:US$1,115million).MinimumtangiblenetworthofSBMOffshoreN.V.ofUS$570million.ActualtangiblenetworthisUS$1,631million(2008:US$1,053million);
• leverage(netdebt:EBITDAratio)ofmaximum3.75:1atyear-end.Actualleverageis2.43(2008:3.21)
and2.39(2008:2.76)forSBMHoldingInc.S.A.andSBMOffshoreN.V.respectively;
• operatingleverage(adjustedforconstructionfinancing)ofmaximum2.75:1.Actualoperatingleverageis1.63(2008:1.69)and1.57(2008:1.38)forSBMHoldingInc.S.A.andSBMOffshoreN.V.respectively;
• interestcoverratio(EBITDA:netinterestexpense)ofminimum5.0:1;Actualinterestcoverratiois12.2(2008:14.7)and10.2(2008:13.1)forSBMHoldingInc.S.A.andSBMOffshoreN.V.respectively.
TheCompanyhasno‘off-balancesheet’financingthroughspecialpurposeentities.Alllong-termdebtisincludedintheConsolidatedstatementoffinancialpostion.
Nocarryingamountsoflongtermdebtwereindefaultatthebalancesheetdatenoratanytimeduringtheyear.Duringtheyear2009and2008therewerenobreachesoftheloanarrangementtermsandhencenodefaultneededtoberem-edied,orthetermsoftheloanarrangementrenegotiated,beforethefinancialstatementswereauthorisedforissue.
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TheCompanyhasavailableborrowingfacilitiesresult-ingfromtheundrawnpartoftherevolvingcreditfacility(RCF)andtheundrawnpartofprojectfacilities.Theexpirydateoftheundrawnfacilitiesare:
In thousands of US$ 2009 2008FloATiNg RATe:Expiring within one year 200,000 292,097Expiring beyond one year 502,667 105,000
702,667 397,097
TheRCFfacilityhasbeenarrangedtohelpfinancetheCompany’stemporarycashrequirementsrelatedtothesupplyofturnkeyprojectsortheassetsundercon-structionwhereprojectfinanceisnotplannedornotyetputinplace.
Alltransactioncostsrelatedtothelongtermloansandotherliabilitiesarecapitalisedinthebalancesheet.Transactioncostsareincludedintheconstructionbudgetforproperty,plantandequipment.Furthermore,thelongtermdebtisrepaidusingdedicatedcashflows.Theaforementionedimpliesthattheactualrepaymentscandifferfromprojectedrepaymentsandanamortisedcostcalculationisconsequentlytoocomplexandtimeconsumingtobeimplemented.Asof2007transactioncostsarecapitalisedwithinfinancialfixedassets.Priorto2007costswereincludedinprop-erty,plantandequipment.AtthebalancesheetdateapproximatelyUS$2.0million(2008:US$2.8million)isincludedinthecarryingamountofproperty,plantand
equipmentrelatedtocapitalisedtransactioncostsandanamountofUS$13.4million(2008:US$4.0million)isincludedinfinancialfixedassets.
Deferred incomeThedayratesforoneoftheoperatingleaseunitsreflectadecreasingdayrateschedule.Asincomeisshownintheincomestatementonastraight-linebasisthediffer-encebetweentheyearlystraightlinerevenueandthecontractualdayratesisincludedasdeferredincome.Thedeferralwillbereleasedasof2019andwillincreaseuntilthereleaseofthedeferralwillcommence.
Other loansTheotherloansrelatetoafinanceleasearrangementoftwo(2008:four)second-handtankers.Theloansbearanaverageinterestrateof9.0%andwillmatureuntil2013orsoonerifthetankerswillbeusedforprojectsoroth-erwiseremovedfromthescheme.Theotherloanshavethefollowingforecastedrepaymentschedule:
In thousands of US$ 2009 2008Within one year 5,241 8,591Between 1 and 2 years 5,693 9,378Between 2 and 5 years 34,747 49,812More than 5 years - 21,146Balance at 31 December 45,681 88,927
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21. Provisions
In thousands of US$Reorgan-
isationEmployee
benefitsDemobil-
isationTotal
Balance at 31 December 2008 150 8,589 26,536 35,275
Arising during the year - 1,980 7,000 8,980Addition of interest on net present value - 1,961 1,148 3,109Utilised / release (29) (2,248) (1,373) (3,650)Deconsolidation / disposal - - - -Other - (14) - (14)Currency differences 3 221 - 224At 31 December 2009 124 10,489 33,311 43,924
Current 31 December 2009 65 268 2,355 2,688Non-current 31 December 2009 59 10,221 30,956 41,236
124 10,489 33,311 43,924
Current 31 December 2008 150 2,000 3,675 5,825Non-current 31 December 2008 - 6,589 22,861 29,450
150 8,589 26,536 35,275
Theothermovementswithintheprovisionforemployeebenefitsrelatemainlytotherecognitionofactuarialgainsandlossesduringtheyear.
Reorganisation provisionTheprovisionforreorganisationcostswasestablishedin2003inrelationtotheclosureofvanderGiessen-deNoordN.V.,forwhichtheobligationsweresubstantiallydischargedinprioryears.
Employee benefitsTheprovisionsforemployeebenefitsrelatetopensionobligations,otherpost-employmentbenefitobligationsandterminationandsenioritybenefits.Foradetailedcalculationofthepensionobligationsandprincipalassumptions,referenceismadetonote3(employeeben-efits)ofthenotestothefinancialstatements.ExpectedoutflowfortheotheremployeebenefitsprovisioniswithinoneyearUS$0.3million(2008:US$0.3million),betweenoneandfiveyearsUS$1.5million(2008:US$1.4million)andafterfiveyearsUS$4.0million(2008:US$3.5million).Fortheprovisionrelatedtopensionplanstheexpectedoutflowhasnodirectrelationshipwiththeamountofprovisionatyearend,andthereforenoexpectedoutflowofthisprovisionisdisclosed.
DemobilisationTheprovisionfordemobilisationrelatestothecostsfordemobilisationoftheF(P)SOfleetattheendoftherespectiveleaseperiods.Theobligationsarevaluedatnetpresentvalue,andonayearlybasisinterestisaddedtothisprovision.Therecognisedinterestisincludedinfinancialexpenses.Thenetpresentvalueiscalculatedattheinceptiondateofthelease.Thenetpresentvalueoftheprovisioniscalculatedatarateof4.31%whichisunchangedcomparedwithlastyear.Expectedoutflowofamountsiswithinoneyear:US$2.4million(2008:US$3.7million),betweenoneandfiveyearsUS$18.0million(2008:US$18.0million)andafterfiveyearsUS$12.7million(2008:US$4.8million).
22. Deferred tax liabilityForanexplanationofthedeferredtaxliabilityrefer-enceismadetonote12ofthenotestothefinancialstatements.
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23. Trade and other payables
In thousands of US$ 2009 2008Trade payables 201,230 253,582Other payables 63,768 59,001Taxation and social security costs 34,344 25,026Pension costs 4,681 4,035Instalments exceeding cost incurred 379,083 47,989Advances 2,806 177,235Accruals regarding delivered orders 32,929 64,601Non-trade payables and accrued expenses 286,580 407,998
1,005,421 1,039,467
Thecontractualmaturityofthetradeandotherpayablesisasfollows:
In thousands of US$ 2009 2008Within 1 month 170,771 209,961Between 1 and 3 months 13,014 30,481Between 3 months and 1 year 15,595 5,789More than one year 1,850 7,351Total 201,230 253,582
24. Borrowings and bank overdrafts
In thousands of US$ 2009 2008Short term portion long term debt 328,237 263,778Bank overdrafts - 192
328,237 263,970
Forinterestpercentages,guaranteesandothernotestotheshorttermpartofthelongtermdebtrefer-enceismadetonote20ofthenotestothefinancialstatements.
TheCompanymaintainslinesofcreditforfinancialderivatives,bankguaranteesandbankoverdrafts,securedbySBMOffshoreN.V.orSBMHoldingInc.S.A.guarantees.
Thefairvaluesoftheborrowingsandbankoverdraftsequaltheircarryingamount,astheimpactofdiscount-ingisnotsignificant.
25. Derivative financial instrumentsForadetailedexplanationofthederivativefinancialinstrumentsreferenceismadetonote17ofthenotestothefinancialstatements.
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26. Commitments and contingenciesUnderthetermsoffinancingarrangementsandassecurityforcreditfacilitiesmadeavailabletoseveralsubsidiaries,propertyoftheseGroupcompanieshasbeenmortgagedandmovableassetsandcurrentassetshavebeengiveninlientotheGroup’sbankers.
At31December2009,outstandingbankguaranteesamountedtoUS$478.2million(31December2008:US$455million).
CertaininvestmentcommitmentshavebeenenteredintoprincipallyinrespectoftheFPSOAseng,Yme
2009 2008In thousands of US$ < 1 year 1-5 years > 5 years Total Total
Operating lease 2,908 4,836 - 7,744 8,297Rental and leasehold 13,219 19,983 2,052 35,254 39,682
16,127 24,819 2,052 42,998 47,979
27. Financial risk management ThisnotepresentsinformationabouttheCompany’sexposuretoriskresultingfromitsuseoffinancialinstruments,theCompany’sobjectives,policiesandprocessesformeasuringandmanagingrisk,andtheCompany’smanagementofcapital.Furtherqualitativedisclosuresareincludedthroughouttheseconsolidatedfinancialstatements.
TheCompany’sactivitiesexposeittoavarietyoffinancialrisks,marketrisk(includingcurrencyrisk,fairvalueinterestraterisk,cashflowinterestrateriskandpricerisk),creditriskandliquidityrisk.TheCompany’soverallriskmanagementprogrammefocusesontheunpredictabilityoffinancialmarketsandseekstominimisepotentialadverseeffectsontheCompany’sfinancialperformance.TheCompanyusesderivativefinancialinstrumentstohedgecertainriskexposures.TheCompanybuysandsellsderivativesintheordinarycourseofbusiness,andalsoincursfinancialliabilities,inordertomanagemarketrisks.Allsuchtransac-tionsarecarriedoutwithintheguidelinessetbytheBoardofManagement.GenerallytheCompanyseekstoapplyhedgeaccountinginordertomanagevolatil-ityintheprofitandlossaccount.Thepurposeisto
MOPUstor™,theCachaloteFPSOandEnCanaMOPU.Atyear-endtheremainingcontractualcommitmentsforacquisitionofproperty,plantandequipmentandinvestmentinleasesamountedtoUS$248.5million(2008:US$380.3million).
Certainlegaldisputeswithcustomersorsubcontrac-torsexist.Managementisoftheopinionthatamountsprovidedforthesedisputesareadequate.
Theobligationsinrespectofoperatinglease,rentalandleaseholdobligations,areasfollows:
managetheinterestrateandcurrencyriskarisingfromtheCompany’soperationsanditssourcesoffinance.Derivativesareonlyusedtohedgecloselycorrelatedunderlyingbusinesstransactions.
TheCompany’sprincipalfinancialinstruments,otherthanderivatives,comprisetradedebtorsandcreditors,bankloansandoverdraft,cashandcashequivalents(includingshorttermdeposits)andfinancialguaran-tees.ThemainpurposeofthesefinancialinstrumentsistofinancetheCompany’soperationsand/orresultdirectlyfromtheoperations.
RiskmanagementiscarriedoutbyacentraltreasurydepartmentunderpoliciesapprovedbytheBoardofManagementandtheSupervisoryBoard.Treasuryidentifies,evaluatesandhedgesfinancialrisksincloseco-operationwiththesubsidiariesandtheCFO.TheBoardprovideswrittenprinciplesforoverallriskman-agement,aswellaswrittenpoliciescoveringspecificareas,suchasforeignexchangerisk,interestraterisk,creditrisk,useofderivativefinancialinstrumentsandnon-derivativefinancialinstruments,andinvestmentofexcessliquidity.Itis,andhasbeenthroughouttheyearunderreview,theCompany’spolicythatnotrading
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infinancialinstrumentsshallbeundertaken.ThemainrisksarisingfromtheCompany’sfinancialinstrumentsaremarketrisk,liquidityriskandcreditrisks.
Market riskMarketriskistheriskthatchangesinmarketprices,suchasforeignexchangerates,interestratesandequitypriceswillaffecttheCompany’sincomeorthevalueofitsholdingoffinancialinstruments.Theobjectiveofmarketriskmanagementistomanageandcontrolmarketriskexposureswithinacceptableparameters,whileoptimisingthereturnonrisk.
Foreign exchange riskTheCompanyoperatesinternationallyandisexposedtoforeignexchangeriskarisingfromtransactionalcur-rencyexposures,primarilywithrespecttotheEuro,SingaporeDollar,andBritishpound.Foreignexchangeriskarisesfromfuturecommercialtransactions,rec-ognisedassetsandliabilitiesandnetinvestmentsin
foreignoperations.Theexposurearisesfromsalesorpurchasesbyanoperatingunitincurrenciesotherthantheunit’sfunctionalcurrency.TheCompanyrequiresallitsoperatingunitstouseforwardcurrencycontractstoeliminatethecurrencyexposureonanysignificantindividualtransactionforwhichpaymentisanticipatedmorethanonemonthaftertheCompanyhasenteredintoafirmcommitmentforasaleorapurchase.Theforwardcurrencycontractsmustbeinthesamecur-rencyasthehedgeditem.ItistheCompany’spolicynottoenterintoforwardcontractsuntilafirmcommit-mentisinplace.
TheCompanyhascertaininvestmentsinforeignoperations,whosenetassetsareexposedtoforeigncurrencytranslationrisk.
TheCompany’sexposuretoforeigncurrencyriskwasasfollowsbasedonnotionalamounts:
31 December 2009 31 December 2008
In local currency x 1,000 EUR SGD GBP EUR SGD GBP
Fixed assets 81,887 - - 87,229 - -Current assets 110,326 1,526 3,095 111,662 2,758 1,578Long term liabilities (1,106) - - (888) - -Current liabilities (187,524) (12,599) (4,138) (122,913) (37,911) (2,792)Gross balance sheet exposure 3,583 (11,073) (1,043) 75,090 (35,153) (1,214)Estimated forecast sales 26,505 - 1,127 3,000 - -Estimated forecast purchases (629,606) (747,520) (85,016) (646,000) (400,000) (75,000)Gross exposure (599,518) (758,593) (84,932) (567,910) (435,153) (76,214)Forward exchange contracts 638,838 769,920 88,799 594,572 434,387 75,351Net exposure 39,320 11,327 3,867 26,662 (766) (863)
Theestimatedforecastsalesandpurchasesrelatetoprojectrevenuesandexpendituresforupto3years.
Overheadexpensesare100%hedgedforthecom-ingyear,and33%(2008:48%)hedgedfortheyear
thereafter.Includedinthestatementabovearetheoverheadexpensesforoneyearandthecorrespondingforwardexchangecontracts.
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Thefollowingsignificantexchangeratesappliedduringtheyear:
2009 2008 2009 2008Average rate Closing rate
EUR 1 1.3917 1.4695 1.4341 1.3978SGD 1 0.6877 0.7041 0.7138 0.697GBP 1 1.5631 1.8487 1.6164 1.4566
Thesensitivityonequityandincomestatementresult-ingfromachangeof10percentoftheUSDollar’svalueagainstthefollowingcurrenciesat31Decemberwouldhaveincreased(decreased)profitorlossandequitybytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticularinterestrates,remainconstant.Theanalysisisperformedonthesamebasisasfor2008.
Profit or loss Equity
In thousands of US$10 percent
increase10 percent
decrease10 percent
increase10 percent
decrease
31 deCeMBeR 2009EUR (1,391) 1,391 (7,035) 7,035SGD (376) 376 (217) 217GBP (434) 434 (420) 420
31 deCeMBeR 2008 EUR (273) 273 (12,190) 12,190SGD (67) 67 (1,119) 1,119GBP (55) 55 (2,108) 2,108
Interest rate riskTheCompany’sexposuretoriskforchangesinmar-ketinterestratesrelatesprimarilytotheCompany’slong-termdebtobligationswithafloatinginterestrate.Inrespectofcontrollinginterestraterisk,thefloatinginterestratesoflong-termloansarehedgedbyfixedrateswapsfortheentirematurityperiod.Therevolv-ingcreditfacilityisintendedforfluctuatingneedsofconstructionfinancingoffacilitiesandbearsinterestatfloatingrates,whichisalsoswappedforfixedrateswhenexposureissignificant.
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AtthereportingdatetheinterestrateprofileoftheCompany’sinterest-bearingfinancialinstrumentswas:
In thousands of US$ 2009 2008Fixed RATe iNSTRuMeNTSFinancial assets 317,237 351,553Financial liabilities (18,723) (27,025)
298,514 324,528
VARiABle RATe iNSTRuMeNTSFinancial assets 115,542 127,035Financial liabilities (1,521,663) (1,578,145)Financial liabilities (future) (1,240,400) (759,097)
(2,646,521) (2,210,207)
In thousands of US$ 2009 2008Variable rate instruments (2,646,521) (2,210,207)Less: IRS contracts 2,700,969 2,225,353Exposure 54,448 15,146
At31December2009,itisestimatedthatageneralincreaseof100basispointsininterestrateswoulddecreasetheCompany’sprofitbeforetaxfortheyearbyapproximatelyUS$1.0million(2008:decreaseofUS$0.1million)since102.9%(2008:103.2%)oftheoperatingdebtishedgedbyfixedinterestrateswaps.
Thesensitivityonequityandincomestatementresult-ingfromachangeof100basispointsininterestrates
atthereportingdatewouldhaveincreased(decreased)equityandprofitorlossbytheamountsshownbelow.Thisanalysisassumesthatallothervariables,inparticu-larforeigncurrencyrates,remainconstant.Theanalysisisperformedonthesamebasisasfor2008.
Profit or loss Equity
In thousands of US$100 bp
increase100 bp
decrease100 bp
increase100 bp
decrease
31 deCeMBeR 2009Variable rate instruments (1,068) 1,068 - -Interest rate swap 40 (149) 65,727 (71,195)Sensitivity (net) (1,028) 919 65,727 (71,195)
31 deCeMBeR 2008Variable rate instruments 468 (468) - -Interest rate swap (520) (183) 56,913 (60,685)Sensitivity (net) (52) (651) 56,913 (60,685)
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Credit riskCreditriskistheriskoffinanciallosstotheCompanyifacustomerorcounterpartytoafinancialinstrumentfailstomeetitscontractualobligations,andarises
Referenceismadetonote14ofthenotestothefinan-cialstatementsforinformationonthedistributionofthereceivablesbycountryandananalysisoftheageingofthereceivables.
Assetoutintheparagraphsabove,theCompanyaimsbymanaginginterestrateandcurrencyriskstoreducetheimpactofshort-termfluctuationsontheCompany’searnings.Overthelonger-termhowever,permanentchangesinforeignexchangeandinterestrateswouldhaveanimpactonconsolidatedearnings.
principallyfromtheCompany’sotherfinancialassets,tradeandotherreceivables(includingcommittedtrans-actions),derivativefinancialinstrumentsandcashandcashequivalents.
In thousands of US$ 2009 2008Rating Assets Liabilities Assets Liabilities
AAA 5,722 42,101 967 49,966AA+ - - 16,985 32,065AA 6,331 13,814 8,047 11,680AA- 2,416 4,507 15,543 31,620A+ 26,182 80,694 1,437 135,298A 880 6,143 3,478 10,339BBB+ - - - 26,546BBB - 14,723 - -BBB- 9,959 10,138 15,565 15,661Other and intercompany 9,616 - 17,639 -Derivative financial instruments 61,106 172,120 79,661 313,175
AAA 17,301 - 1,133 -AA+ - - 19,515 -AA 29,694 - 44,831 -AA- 15,474 - 89,887 -A+ 61,539 - 58,232 192A 14,187 - 3,876 -A- 86 - 44 -BBB 1,862 - 1,258 -BBB- 3,133 - 6,708 -BB- - - 624 -B+ 1,052 - 17 -Other 2,384 - 4,204 -Cash and cash equivalents and bank overdrafts 146,712 - 230,329 192
ItisCompanypolicytolimitcashinvestedpercoun-terpartyasfollows:AratingUS$10.0million,AAratingUS$50millionandAAAratingUS$100million.CashheldinBBB-isheldfordebtservicing.
Fortradedebtorsthecreditqualityofeachcustomerisassessed,takingintoaccountitsfinancialposition,pastexperienceandotherfactors.Individualrisklimitsaresetbasedoninternalorexternalratingsinaccord-ancewithlimitssetbytheBoardofManagement.Atbalancesheetdatetherewerenoindividualcustom-ersthathaveoutstandingbalanceswithapercentageover10%ofthetotaloftradeandotherreceivables.
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Liquidity riskLiquidityriskistheriskthattheCompanywillnotbeabletomeetitsfinancialobligationsastheyfalldue.TheCompany’sapproachtomanagingliquidityistoensure,asfaraspossible,thatitwillalwayshavesuf-ficientliquiditytomeetitsliabilitieswhendue,underbothnormalandabnormalconditions,withoutincur-ringunacceptablelossesorriskingdamagetotheCompany’sreputation.
LiquidityismonitoredusingrollingforecastsoftheCompany’sliquidityreservesonthebasisofexpectedcashflows.Flexibilityissecuredbymaintainingavail-abilityundercommittedcreditlines.
ThetablebelowanalysestheCompany’snon-deriv-ativefinancialliabilitiesandnet-settledderivativefinancialliabilitiesintorelevantmaturitygroupingsbasedontheremainingperiodatthebalancesheetdatetothecontractualmaturitydate.Derivativefinancialliabilitiesareincludedintheanalysisiftheircontractualmaturitiesareessentialforanunderstand-ingofthetimingofthecashflows.Theamountsdisclosedinthetablearethecontractualundiscountedcashflows.Thefutureinterestcashflowsforborrow-ingsandderivativefinancialinstrumentsarebasedontheyear-endLiborrates.
In thousands of US$Less than 1
yearBetween 1
and 2 yearsBetween 2
and 5 yearsOver 5 years
31 deCeMBeR 2009Borrowings (ex finance lease liabilities) 345,746 449,250 671,083 174,944Finance lease liabilities 8,841 8,841 37,984 -Derivative financial instruments 56,258 51,644 92,225 3,125Trade and other payables 199,380 1,850 - -
In thousands of US$Less than 1
yearBetween 1
and 2 yearsBetween 2
and 5 yearsOver 5 years
31 deCeMBeR 2008Borrowings (ex finance lease liabilities) 282,794 240,150 1,123,422 90,732Finance lease liabilities 15,945 15,945 82,253 -Derivative financial instruments 49,069 56,493 143,869 -Trade and other payables 246,231 7,351 - -
Capital risk managementTheCompany’sobjectiveswhenmanagingcapitalaretosafeguardtheCompany’sabilitytocontinueasagoingconcerninordertoprovidereturnsforshareholdersandbenefitsforotherstakeholdersandtomaintainanopti-malcapitalstructuretoreducethecostofcapital.
Inordertomaintainoradjustthecapitalstructure,theCompanymayadjusttheamountofdividendspaidtoshareholders,returncapitaltoshareholders,issuenewsharesorsellassetstoreducedebt.
Consistentwithothersintheindustry,theCompanymonitorscapitalonthebasisofthegearingratio.
Thisratioiscalculatedasnetdebtdividedbytotalcapital.Netdebtiscalculatedastotalborrowings(includingtheshorttermpartofthelongtermdebtandbankoverdraftsasshownintheconsolidatedbalancesheet)lesscashandcashequivalents.Totalcapitaliscalculatedasequity,asshownintheconsolidatedbal-ancesheet,plusnetdebt.
During2009,theCompany’sstrategywhichwasunchangedfrom2008,wastotargetagearingratiobetween50%and60%.TheshareissueinNovember2009reducedtheratiobelowthisrange.Thegearingratiosat31December2009and2008wereasfollows:
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In thousands of US$ 2009 2008Total borrowings 1,610,705 1,694,097Less: net cash and cash equivalents (146,712) (230,137)Net debt 1,463,993 1,463,960Shareholders’ equity 1,802,617 1,234,728Total capital 3,266,610 2,698,688
Gearing ratio 44.8% 54.2%
Fair value estimationEffective1January2009,theCompanyadoptedtheamendmenttoIFRS7forfinancialinstrumentsthataremeasuredinthebalancesheetatfairvalue,whichrequiresdisclosureoffairvaluemeasurementsbylevelofthefollowingfairvaluehierarchy:• Quotedprices(unadjusted)inactivemarketsfor
identicalassetsorliabilities(level1).• Inputsotherthanquotedpricesincludedwithin
level1thatareobservablefortheassetorliability,eitherdirectly(thatis,asprices)orindirectly(thatis,derivedfromprices)(level2).
• Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata(thatisunobservableinputs)(level3).
Derivativefinancialinstrumentsaretheonlyassetsandliabilitiesvaluedatfairvalueandtheycanbecatego-risedaslevel2(2008:level2).Thederivativefinancialinstrumentsarenottradedinanactivemarket.Thefairvalueoftheseinstrumentsisdeterminedbyusingvaluationtechniques.Thesevaluationtechniquesmaximisetheuseofobservablemarketdatawhereitisavailableandrelyaslittleaspossibleonentityspecificestimates.
Other risksInrespectofcontrollingpoliticalandcreditrisk,theCompanyhasapolicyofthoroughlyreviewingrisksassociatedwithcontracts,whetherturnkeyorlong-termleases.Wherepoliticalriskcoverisdeemednecessaryandavailableinthemarket,insuranceisobtained.Inrespectofcreditrisk,bankorparentcompanyguaranteesarenegotiatedwithcustom-ers.Furthermore,limitedrecourseprojectfinancingremovesalargepartoftheriskonlongterm-leases.TheCompanyreducesitsexposuretothemaximumextentpossible.
28. Events after the balance sheet dateTherearenoreportableeventsafterthebalancesheetdate.
29. List of Group companiesInaccordancewithlegalrequirementsalistofGroupcompanieswhichareincludedintheconsolidatedfinancialstatementsofSBMOffshoreN.V.hasbeendepositedattheChamberofCommerceinRotterdam.
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30. Interest in joint venturesTheCompanyhasseveraljointventures.Includedintheconsolidatedfinancialstatementsarethefollow-ingitemsthatrepresenttheCompany’sinterestintheassets,liabilities,revenuesandexpensesofthejointventures:
In thousands of US$ 2009 2008Non-current assets 1,024,192 1,201,387Current assets 264,385 185,200Non-current liabilities (874,067) (928,701)Current liabilities (284,249) (335,065)Net assets / liabilities 130,261 122,821
Income 384,851 312,801Expenses (337,972) (233,934)
46,879 78,867
Includedinthefiguresabovearethefollowingsignificantjointventuresandtherelevantpercentageofownership:• GasManagement(Congo)Ltd.,49%• MalaysiaDeepwaterFloatingTerminal(Kikeh)Limited,
49%• MalaysiaDeepwaterProductionContractorsSdn
Bhd.,49%• SolgazS.A.,49%• AnchorStorageLtd.,49%• AdvancedDeepSeaInstallationInc.,49.9%• NormandInstallerS.A.,49.9%• SonasingSanhaLtd.,50%• SonasingKuitoLtd.,50%• SonasingXikombaLtd.,50%• SonasingMondoLtd.,50%• SonasingSaxiBatuqueLtd.,50%• OPS-ServiçosdeProduçãodePetroleosLtd.,50%• FPSOFirenzeProduçãodePetróleoLtda.,50%• FPSOMystras-ProduçãodePetróleoLtda.,50%• SouthEastShippingCo.Ltd.,75%• FPSOBrasilVentureS.A.,51%• SBMOperaçõesLtda.,51%• SBMSystemsInc.,51%• SBMShipYardLtd.,55.55%• BrazilianDeepwaterFloatingTerminalsLtd.,51%• BrazilianDeepwaterProductionLtd.,51%• BrazilianDeepwaterProductionContractorsLtd.,51%• AsengProductionCompanyLtd.,60%• GepsingLtd.,60%
31. Related party transactionsDuring2009nomajorrelatedpartytransactionsrequir-ingadditionaldisclosureinthefinancialstatementstookplace.
ForrelationswithSupervisoryBoardMembers,ManagingDirectorsandotherkeypersonnelrefer-enceismadetonote3ofthenotestothefinancialstatements.
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Company balance sheetAt31December(beforeappropriationofprofit)
In thousands of US$ Notes 2009 2008ASSeTSProperty, plant and equipment 1 5 37Investment in Group companies and associates 2 1,701,856 1,251,192Total non-current assets 1,701,861 1,251,229Other receivables 3 114,781 24,167Income tax receivable 3,014Cash and cash equivalents 3,130 3,172Total current assets 120,925 27,339TOTAL ASSETS 1,822,786 1,278,568
eQuiTy ANd liABiliTieSEquity attributable to shareholders
Issued share capital 58,963 50,885Share premium reserve 632,963 383,274Retained earnings 1,216,343 1,053,780Other reserves (105,652) (253,211)Shareholders’ equity 4 1,802,617 1,234,728Provisions 5 1,048 0Group companies 2,547 23,450Total non-current liabilities 3,595 23,450Other current liabilities 6 16,574 9,993Current income tax liability - 10,397Total current liabilities 16,574 20,390TOTAL EQUITY AND LIABILITIES 1,822,786 1,278,568
Company income statementFortheyearsended31December
In thousands of US$ 2009 2008Company result (16,762) (21,130)Result Group companies 237,763 244,302
221,001 223,172
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Notes to the Company financial statements
GeneralTheseparatefinancialstatementsarepartofthe2009financialstatementsofSBMOffshoreN.V.WithreferencetotheseparateincomestatementofSBMOffshoreN.V.,usehasbeenmadeoftheexemptionpursuanttoSection402ofBook2oftheNetherlandsCivilCode.
Principles for the measurement of assets and liabilities and the determination of the resultSBMOffshoreN.V.usestheoptionprovidedinsec-tion2:362(8)oftheNetherlandsCivilCodeinthattheprinciplesfortherecognitionandmeasurementofassetsandliabilitiesanddeterminationofresult(hereinafterreferredtoasprinciplesforrecogni-tionandmeasurement)oftheseparatefinancial
statementsofSBMOffshoreN.V.arethesameasthoseappliedfortheconsolidatedfinancialstate-ments.TheseconsolidatedfinancialstatementsarepreparedaccordingtothestandardslaiddownbytheInternationalAccountingStandardsBoardandadoptedbytheEuropeanUnion(referredtoasEU-IFRS).Referenceismadetopages100to113foradescriptionoftheseprinciples.Participatinginterests,overwhichsignificantinfluenceisexercised,arestatedonthebasisoftheequitymethod.
Resultsontransactions,involvingthetransferofassetsandliabilitiesbetweenSBMOffshoreN.V.anditspar-ticipatinginterestsorbetweenparticipatingintereststhemselves,arenotincorporatedinsofarastheycanbedeemedtobeunrealised.
Property, plant and equipmentThemovementintheproperty,plantandequipmentduringtheyearcanbesummarisedasfollows:
In thousands of US$ Other fixed assets
Cost 403Accumulated depreciation and impairment (366)Book value at 1 January 2009 37Additions 4Depreciation (36)Currency differences 0Total movements (32)Cost 418Accumulated depreciation and impairment (413)Book value at 31 December 2009 5
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Investment in Group companies and associatesThemovementsintheitemInvestmentinGroupcompaniesandassociatesareasfollows:
In thousands of US$ 2009 2008Balance at 1 January 1,251,192 1,332,835Provisions (50,985) (60,345)Investments at net asset value 1,200,207 1,272,490Results for the year 237,763 244,302Investments and other changes 231,638 (268,096)Dividends received (20,972) (46,409)Currency differences 2,911 (2,080)Movements 451,340 (72,283)Balance at 31 December 1,701,856 1,251,192Provisions (50,309) (50,985)Investments at net asset value 1,651,547 1,200,207
Theinvestmentsandotherchangesrelatetoinvestmentsinsubsidiariesandotherdirectequitymovements.
Other receivables
In thousands of US$ 2009 2008Amounts owed by Group companies 112,363 23,141Other debtors 2,418 1,026
114,781 24,167
Shareholders’ equityForanexplanationoftheshareholdersequity,refer-enceismadetothestatementofchangesinequityandnote19ofthenotestotheconsolidatedfinancialstatements.
Provisions
In thousands of US$ 2009 2008Deferred tax liability 1,048 -Provisions with respect to subsidiaries 0 0
1,048 0
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Theprovisionswithrespecttosubsidiariescanbespecifiedasfollows:
In thousands of US$ 2009 2008Participation in Group Companies 50,309 50,985Amounts owed by Group (50,309) (50,985)
0 0
ThisitemrelatestovanderGiessen-deNoordN.V.andXNKsubsidiaries.
Other current liabilitiesIn thousands of US$ 2009 2008Amounts owed to Group companies 11,209 6,212Taxation and social security costs 271 156Other creditors 5,094 3,625
16,574 9,993
Commitments and contingenciesTheCompanyhasissuedperformanceguaranteesforcontractualobligationstocompleteanddeliverprojectsinrespectofseveralGroupcompanies,andfulfilmentofobligationswithrespecttoF(P)SOlong-termlease/operatecontracts.Furthermore,theCompanyhasissuedparentcompanyguaranteesinrespectofsev-eralGroupcompanies’financingarrangements.
TheCompanyisheadofafiscalunityinwhichalmostallDutchGroupcompaniesareincluded.Thismeansthatthesecompaniesarejointlyandseverallyliableinrespectofthefiscalunityasawhole.
Schiedam, 25 February 2010
Board of Management A.J.Mace,CEO1 M.A.S.Miles,CFO1
F.Blanchelande2 M.Wyllie2
1 Managing Director2 Director
Supervisory Board H.C.Rothermund,ChairmanL.J.A.M.Ligthart,Vice-ChairmanR.vanGelderF.G.H.DeckersT.Ehret
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Other informationAppropriation of profitWithregardtotheappropriationofprofit,article29oftheArticlesofAssociationstates:
1.Whendrawinguptheannualaccounts,theBoardofManagementshallchargesuchsumsforthedepre-ciationoftheCompany’sfixedassetsandmakesuchprovisionsfortaxesandotherpurposesasshallbedeemedadvisable.
2.Anydistributionofprofitspursuanttotheprovisionsofthisarticleshallbemadeaftertheadoptionoftheannualaccountsfromwhichitappearsthatthesameispermitted.
TheCompanymaymakedistributionstothesharehold-ersandtootherpersonsentitledtodistributableprofitsonlytotheextentthatitsshareholders’equityexceedsthesumoftheamountofthepaidandcalleduppartofthecapitalandthereserveswhichmustbemaintainedunderthelaw.
Adeficitmaybeoffsetagainstthestatutoryreservesonlytotheextentpermittedbylaw.
3.a.Theprofitshall,ifsufficient,beappliedfirstinpaymenttotheholdersofpreferencesharesofaper-centageasspecifiedinb.belowofthecompulsory
amountdueonthesesharesasatthecommencementofthefinancialyearforwhichthedistributionismade.
3.b.Thepercentagereferredtoaboveinsubparagrapha.shallbeequaltotheaverageoftheEuriborinterestchargedforloanswithatermoftwelvemonths–weightedbythenumberofdaysforwhichthisinterestwasapplicable–duringthefinancialyearforwhichthedistributionismade,increasedbytwohundredbasispoints.
4.Themanagementboardisauthorised,subjecttotheapprovalofthesupervisoryboard,todetermineeachyearwhatpartoftheprofitsshallbetransferredtothereserves,aftertheprovisionsoftheprecedingpara-graphhavebeenapplied.
5.Theresidueoftheprofitshallbeatthedisposalofthegeneralmeetingofshareholders.
6.Thegeneralmeetingofshareholdersmayonlyresolvetodistributeanyreservesupontheproposalofthemanagementboard,subjecttotheapprovalofthesupervisoryboard.
WiththeapprovaloftheSupervisoryBoard,itispro-posedthattheprofitshownintheCompanyincomestatementbeappropriatedasfollows(inUS$):
2009Profit attributable to shareholders 221,000,000In accordance with Article 29 clause 4 to be transferred to retained earnings 110,812,000At the disposal of the General Meeting of Shareholders 110,188,000
PursuanttotheprovisionsofArticle29clause5oftheArticlesofAssociation,itisproposedthatthebalancebedistributedamongtheshareholders.Thedividendwillbepaideitherincashorinstock.FulldetailsaregivenintheAgendafortheAnnualGeneralMeetingofShareholdersofSBMOffshoreN.V.tobeheldon14April2010,underagendaitemnumber4.2andinthenotesthereto.
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To the shareholders of SBM Offshore N.V.
Auditor’s Report Report on the financial statementsWehaveauditedtheaccompanyingfinancialstatementsfortheyear2009ofSBMOffshoreN.V.,Rotterdamassetoutonpages95to160.Thefinan-cialstatementsconsistoftheconsolidatedfinancialstatementsandthecompanyfinancialstatements.Theconsolidatedfinancialstatementscomprisetheconsoli-datedstatementoffinancialpositionasat31December2009,theconsolidatedincomestatement,consolidatedstatementofcomprehensiveincome,consolidatedstatementofchangesinequityandconsolidatedcashflowstatementfortheyearthenended,andthenotes,comprisingasummaryofsignificantaccountingpoliciesandotherexplanatoryinformation.Thecompanyfinan-cialstatementscomprisethecompanybalancesheetasat31December2009,thecompanyincomestate-mentfortheyearthenendedandthenotes.
Management’s responsibilityManagementisresponsibleforthepreparationandfairpresentationofthefinancialstatementsinaccord-ancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnionandwithPart9ofBook2oftheNetherlandsCivilCode,andforthepreparationofthereportoftheBoardofManagementinaccordancewithPart9ofBook2oftheNetherlandsCivilCode.Thisresponsibilityincludes:designing,implementingandmaintaininginternalcontrolrelevanttothepreparationandfairpresentationofthefinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplyingappropriateaccountingpolicies;andmakingaccount-ingestimatesthatarereasonableinthecircumstances.
Auditor’s responsibilityOurresponsibilityistoexpressanopiniononthefinan-cialstatementsbasedonouraudit.WeconductedourauditinaccordancewithDutchlaw.Thislawrequiresthatwecomplywithethicalrequirementsandplanandperformtheaudittoobtainreasonableassurancewhetherthefinancialstatementsarefreefrommaterialmisstatement.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthefinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingtheassessmentoftherisksofmaterialmisstatementofthefinancial
statements,whetherduetofraudorerror.Inmakingthoseriskassessments,theauditorconsidersinter-nalcontrolrelevanttotheentity’spreparationandfairpresentationofthefinancialstatementsinordertodesignauditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpress-inganopinionontheeffectivenessoftheentity’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesmadebyman-agement,aswellasevaluatingtheoverallpresentationofthefinancialstatements.
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideabasisforourauditopinion.
Opinion with respect to the consolidated financial statementsInouropinion,theconsolidatedfinancialstatementsgiveatrueandfairviewofthefinancialpositionofSBMOffshoreN.V.asat31December2009,andofitsresultanditscashflowsfortheyearthenendedinaccord-ancewithInternationalFinancialReportingStandardsasadoptedbytheEuropeanUnionandwithPart9ofBook2oftheNetherlandsCivilCode.
Opinion with respect to the company financial statementsInouropinion,thecompanyfinancialstatementsgiveatrueandfairviewofthefinancialpositionofSBMOffshoreN.V.asat31December2009,andofitsresultfortheyearthenendedinaccordancewithPart9ofBook2oftheNetherlandsCivilCode.
Report on other legal and regulatory requirementsPursuanttothelegalrequirementunder2:393sub5partfoftheNetherlandsCivilCode,wereport,totheextentofourcompetence,thatthereportoftheBoardofManagementisconsistentwiththefinancialstate-mentsasrequiredby2:391sub4oftheNetherlandsCivilCode.
Rotterdam, 25 February 2010
KPMGACCOUNTANTSN.V.J.C.M.vanRooijenRA
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Key figuresIn millions of US$, unless stated otherwise Notes 2009 2008 2007 2006 2005Turnover 2,956.5 3,060.3 2,871.2 1,989.7 1,519.3New orders 3,739.9 4,365.5 3,822.5 4,915.7 1,510.1Order portfolio at 31 December 10,032.3 9,246.9 7,954.6 6,992.4 4,058.3
ReSulTSNet profit (continuing operations) 230.0 227.9 266.8 216.3 225.8Dividend 110.2 135.4 133.3 108.4 113.7Operating profit (EBIT) 293.4 275.1 302.0 254.3 275.3EBITDA 613.3 530.1 548.3 477.5 482.2Shareholders’ equity at 31 December 1,802.6 1,234.7 1,333.4 1,118.7 895.0Net debt 1,464.0 1,464.0 874.7 585.8 804.7Cash flow 549.8 482.9 513.1 439.6 432.6Capital expenditure 656.0 999.8 551.3 309.0 398.5Depreciation and amortisation 319.8 255.0 246.3 223.3 206.8Number of employees (average) 3,539 3,263 2,715 2,356 2,253Employee benefits 585.0 590.8 504.1 363.7 302.2
RATioS (%)Shareholders’ equity: net assets 57 46 58 58 53Current ratio 91 79 115 114 78Return on average capital employed 9.7 11.0 15.1 14.6 14.6Return on average equity 15.0 17.7 21.7 21.5 28.1Operating profit (EBIT): net turnover 9.9 9.0 10.5 12.8 18.1Net profit: net turnover 7.8 7.4 9.3 10.9 14.9Cash flow: average equity 36 38 42 44 56Cash flow: average capital employed 18 19 26 23 23Net debt: shareholders’ equity 81 118 65 52 90Enterprise value/EBITDA 7.7 6.4 9.9 11.3 7.4
iNFoRMATioN PeR ShARe (uS$)Net profit 1 1.47 1.54 1.85 1.55 1.66Dividend 0.67 0.93 0.93 0.77 0.83Shareholders’ equity at 31 December 2 10.96 8.48 9.30 7.95 6.50Cash flow 1 3.66 3.34 3.61 3.15 3.18Share price (€)
– 31 December 13.78 9.35 21.60 26.05 17.06– highest 15.30 26.77 31.52 26.45 18.14– lowest 9.00 8.72 19.85 17.19 11.44Price / earnings ratio 2 14.7 8.5 17.3 22.1 12.1Number of shares issued (× 1,000) 164,460 145.614 143,324 140,716 137,774Market capitalisation (US$ mln) 3,248.9 1,902.9 4,557.6 4,830.6 2,769.7Turnover by volume (× 1,000) 279,932 448,354 340,769 308,840 241,376Number of options exercised 604,400 759,200 1,098,040 1,319,580 1,801,480Number of shares issued re stock dividend 4,221,744 1,300,774 1,432,296 1,606,528 1,723,508Number of shares issued 13,896,880
Where (significant) changes in accounting principles occurred during this five year period, previous years have been restated for comparison. The information per share has been restated to reflect the four for one share split affected on 2 June 2006.1 Based upon weighted average number of shares.2 Based upon number of shares outstanding at 31 December.
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164 SBMOffshore–AnnualReport2009
DisclaimerSomeofthestatementscontainedinthisreportthatarenothistoricalfactsarestatementsoffutureexpectationsandotherforward-lookingstatementsbasedonmanagement’scurrentviewsandassumptionsandinvolveknownandunknownrisksanduncertaintiesthatcouldcauseactualresults,performance,oreventstodiffermateriallyfromthoseinsuchstatements.Suchforward-lookingstatementsaresubjecttovariousrisksanduncertainties,whichmaycauseactualresultsandperformanceoftheCompany’sbusinesstodiffermateriallyandadverselyfromtheforward-lookingstatements.Shouldoneormoreoftheserisksoruncertaintiesmaterialize,orshouldunderlyingassumptionsproveincorrect,actualresultsmayvarymateriallyfromthosedescribedinthispresentationasanticipated,believed,orexpected.SBMOffshoreNVdoesnotintend,anddoesnotassumeanyobligation,toupdateanyindustryinformationorforward-lookingstatementssetforthinthispresentationtoreflectsubsequenteventsorcircumstances.
Colophon
DesignMattmoConcept|Design,Amsterdam
PrintingB.V.DrukkerijDeEendracht,Schiedam
Corporate Social Responsibility Report 2009
SB
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SBM Offshore N.V.Postal addressP.O. Box 313100 AA SchiedamThe Netherlands
Street addressKarel Doormanweg 663115 JD SchiedamThe Netherlands
Telephone +31 (0)10 232 0900Telefax +31 (0)10 232 0999E-mail: sbm@sbmoffshore.com
www.sbmoffshore.com
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