Bert-Jaap Dijkstra - IR Director Bruno Chabas - CEO Peter van Rossum - CFO Erik Lagendijk - CGCO Douglas Wood - CFO Designate

Dirk Verbiesen - KBC Securities Wim Gille - ABN AMRO Fiona McLean - Merrill Lynch Carel Grol - Financieele Dagblad Andre Mulder - Kepler Cheuvreux Edward Donohue - One Invest Dirk Verbiesen - KBC Securities Mick Pickup - Barclays Alex Brooks - Canaccord

Thank you, Rahila. Thank you all for joining us today.

Today’s call is being recorded and will be available for playback on the company's website. Today’s prepared remarks will be delivered by Mr.

Bruno Chabas, followed by a Q&A session. Before we begin, I’d just like to point out the disclaimer at the bottom of our press release and remind participants that some of our comments today may include forward-looking statements, reflecting SBM Offshore’s view of future events.

These matters involve risks and uncertainties and could cause our results to materially differ from our forward-looking statements. The risks are discussed in detail in SBM Offshore’s 2015 annual report, which can be found on the company's website.

Once again, we welcome your questions after the conclusion of the prepared remarks. In the interest of time, please make your questions concise.

I'll now turn over the call to Bruno.

Thank you and good evening and thank you for taking the time to join our third quarter of 2016 trading update conference call. I'm Bruno Chabas, CEO of SBM Offshore and I'm joined today by our CFO, Peter van Rossum; our CGCO, Erik Lagendijk and our CFO designate, Douglas Wood.

First of all, I’m proud to report that during the last quarter, we successfully added another two FPSOs to our Lease and Operate fleet. Cidade de Saquarema, a Generation 3 FPSO was successfully delivered to the client.

She has been on hire as of July 8 this year. The second equally successful delivery was Turritella in the Gulf of Mexico.

She has been hire as of September 2, 2016. Turritella is the deepest installed FPSO at almost 3,000 meter water depth.

If and when needed, her internal disconnectable turret allows her to sail to safety in the event of a heavy storm or hurricane. Testimonies to our experience, these deliveries are in line with client’s expectation.

It is another clear demonstration of SBM’s offshore capabilities and builds on the 483 years of cumulative operating experience whereby experience matters. Besides these important turnkey deliveries, the company is on track to deliver results in line with expectations for the year.

On the operational side, we had a good fleet uptime of 99.2% during the quarter, in line with our historical average. In today’s difficult environment, we remain disciplined and are ahead of our cost saving targets.

As previously reported, we are determined to protect our capability and experience in order to be ready when the market comes back. On the market outlook, SBM Offshore remains cautious.

We reiterate that we do not expect a material recovery before 2018. At the same time, we are witnessing earlier client engagement on a number of prospects.

Let’s look at the consequences of the lack of investments in our core deepwater segment over the last couple of years. Compared to the normal investment cycle, we estimate that 40 to 50 deepwater production facilities have been delayed or canceled during this downturn to 2020.

This implies a production gap in deepwater of around 5 million barrels of oil per day, which compounds the effect of normal field decline. This gap cannot be closed overnight by existing alternative production sources.

As such, we firmly that the deepwater sector has opportunities going forward assuming solution upfront from this new oil price reality. We are confident that our fast forward solution will play a pivotal role in making these goals a reality.

SBM has a strong position which tends to show it is ready for when the market picks up again. The company has a strong balance sheet and positive cash flow, with demonstrated cost disciplined while retaining engineering capability and delivering on the fast-forward program.

Turning to compliance, in Brazil as you know, the Fifth Chamber referred our case to the Higher Council of the MPF for further review. We continue to engage and cooperate with all relevant authorities until the Leniency Agreement is approved.

At this stage, we can neither speculate on timing nor on the outcome of these developments. Some news on the floating wind project initiative.

Over the past few years, we worked on potential new application for SMB Offshore experience in floating and moving technology, particularly to the offshore renewable sector. Our first success was announced on November 4.

The French government selected the EDF EN proposal to construct a pilot floating wind farm, Offshore Marseille. SBM Offshore’s floating solution system is start of this proposal and we redeployed on this project.

We would turnkey the mooring and floater component of two floating wind systems. This project is still subject to the client’s final investment decision and execution timing depends on discussion with EDF EN authorities and other stakeholders.

It is the first step in building on our 60 years’ experience to broaden the market application of our floating and mooring solution. Now, let me run through the numbers.

Directional revenue for the quarter was in line with management expectation at almost 1.6 billion, driven by the continued decrease in currency activity partially offset by increasing the Lease and Operate revenue, attributable to the new assets commencing the contract. Directional backlog as of September 30 totaled 17.5 billion, adding 193 million consisting of new order including FEED and contract closeouts.

Proportional net debt stood at 3 billion at the end of the period, down from 3.1 billion at the year-end 2015. We start to see the effect of our delivery to the Lease and Operate segment combined with the drop in turnkey investment, leading to positive operating cash flow.

Directional capital expenditure through the end of the period stood at 35 million, taking into account client upfront payment as well as release of contingency due to successful closure of turnkey projects. For the full year, we expect directional CapEx, net of upfront payment, to land at 50 million.

The share repurchase program launched in August is well underway with more than half of the planned EUR150 million executed at November 4. Turning to guidance, we are reiterating our 2016 directional revenue of at least 2 billion, of which 1.3 to 1.4 billion is expected in the Lease and Operate segment and 600 million to 700 million in the turnkey segment.

We also confirm 2016 directional EBITDA guidance of around $750 million. This concludes the introduction of today’s call.

Again, thank you for joining us and operator, we can now - you can now open the call for questions.

Yes. Good evening, gentlemen.

Dirk Verbiesen, KBC. A question on the order intake in Q3, which is a bit higher than in the first six months.

Have there been any new FEED studies added to the backlog? That's my first question and maybe if so, can you be a bit more precise in what region or what client we should think of and also in that respect, the prospects you are talking about is that a more concrete view you have now versus the green shoots you referred to in the first six months as well?

And last question I have is on the Lease and Operate outlook, the range is still $1.3 billion, $1.4 billion in revenues and what would be needed to get into the higher-end of this range? Thanks.

Okay. So I propose that Peter takes the question on the Lease and Operate outlook.

I’m going to take the two first part of your questions. The last time we discussed about green shoot and in reality, I don’t think that there is much difference compared to where two or three months ago with regard to the market.

We’re not seeing projects which are going to be awarded quickly inside, when we look at the market at the end of the first half of the year, we believe that we could see award of up to three FPSO and down to 0 with the likely outcome being 0. We still have the same opinion.

Now, what we’re seeing is really some engagement, actually early engagement with some clients discussing about potential field development, which could happen in the period starting in 2018. So, if you start a project in 2018, you’re not going to see any financial impact on the P&L of the company for a period - not before 2020.

So we’re really in the phase where we believe we are at the bottom of the cycle, but we’re not going to see any quick uptake in the market. Regarding the order intake, the order intake is a combination of factors.

It’s some valuation order we got in to some projects, is some activity that we have in some of the smaller product lines that we’re selling. It’s an extension of some FEED.

As you know, we never comment on the specific FEEDs and we’re going to remain at this level. But the order intake was not good, I mean it’s 193 million for the full year, which is - for the quarter sorry, which is not a good figure, but that’s the state of the market.

Hey, Dirk, it’s Peter. Yeah.

You’re looking for what could influence the outlook, particularly on the Lease and Operate side, well, as always; it’s influenced by a number of things, not by the oil price, but definitely by the uptime. It’s influenced by the bonuses we can earn on not using the maintenance day allowances.

It’s avoiding penalties and the one facility we’re depending on throughput which is the Thunder Hawk facility where we signed not so long ago, indeed an extension through the [indiscernible] facility. That production is still a bit variable, so we could see some variability in those numbers, but I think the most important thing that we’re saying here is that overall, the 2 billion revenue, we’re confident in reiterating our guidance in that respect.

I've got a couple actually. First of all, on the Prelude, the delay in that project, is there going to be any financial impact on your side and does it have any impact on the outlook?

The second thing is, if I look at the third quarter numbers, the implied numbers if I take year-to-date minus first half, I think especially the Turnkey number looks quite high compared to the previous quarters. So can you give us a bit more feeling on what's exactly in there and also in relation to that, the outlook on Turnkey still cautious, $600 million to $700 million, whereas you're already at $622 million year-to-date?

So, in that respect, how do you look at that outlook and what should we expect for the fourth quarter? Zero revenues or how should we look at it?

Okay. Wim, let me take that.

It’s Peter here. On Prelude, Prelude, we see a shift of revenue and of course with revenue some of the margins in to next year, we’re not exactly clear on the timing we’re dependent on the client here from our point of view, we’ve delivered what we can and we continue to work with the client on the project.

So this is a matter of moving things from ‘16 into ‘17, which overall does not move it away from the outlook we’ve given on both revenue and on EBITDA. Yeah.

You’ve run your numbers on Turnkey, first half, quarter three and what about quarter four. What we’ve seen is with the delivery of the last FPSOs, in quarter three, you see that we move our percentage of completion to higher numbers, that means that we’ve realized revenue.

With that comes margin. We see a gradual release of some of the contingencies that we have on the projects as we near the completion.

So all in all, it’s been in that sense a pretty good quarter for the turnkey segment. Quarter four is going to look different, as you can imagine.

We’re not 100% POC, there is always some follow-up activities that happen first oil and that’s normal with all these large and complex construction projects, but we’re not going to see anything like a repetition of quarter three in quarter four and I want to say one thing is that we do think on the turnkey segment, we think we will beat our lower-end of the guidance of 600, given the fact that we’re at 622 already and that the 700, yeah, we’re confident that we will end up within that range.

Okay, very good. And then two follow-ups, if I may.

Firstly on the YME Decommissioning, I assume everything has been provisioned for, but what about the cash costs. Do you have any cash implications in the fourth quarter?

And if you look at the other item, is the release of the pre-completion corporate guarantees, which are expected to be completed in the fourth quarter. Can you give me a bit more background on what exactly that is again?

Sure. On YME, we’re obviously happy to see that the projects to lift the top size and to deliver them safely at the yards in the Norway has been successfully completed and the costs related to that, as I say, particularly the lifting costs, which was down by the pioneering were for the owners account that would see the client’s account, which is Repsol Talisman these days.

The transport from the location through to Norway, on our account, we had fully provisioned for that and now that the platform was effectively, it’s the yards that will - de-commission will take that past the platform and we will basically get the value for the scrap that comes off it. So by and large, big cash flow items on this project are behind us.

Your question on the corporate guarantees, project loans are corporate loans as long as you build, because you can’t establish a mortgage on an asset that doesn’t produce cash flow. Once the cash flow is starting, we turn the project launch from corporate to non-recourse.

You have to go through a number of steps. As we said, with the half year results, the two Brazilian vessels were flacked in the Bahamas, where some issues in Brazil, this was not specific for SBM, but generally in the industry that put a bit of a question mark on the enforceability of the mortgage rights with the vessel under Bahamas flack, so we decided to re-flack this.

That’s been done sort of the process is behind us and then you need to basically sit with the banks and get from each of the banks that are of the various consortia and agreements that the launch can grow non-recourse and that just takes a bit of time. It’s paperwork by and large.

And we’re pretty confident that in the next month or so, it will be completed.

Thank you. I'd like to talk and get a little bit more information on your fast-forward program.

You promised us more clarity earlier in the year around how that process is going to work? How the shipyard aspect is going to work?

Could you just give an update on how discussions are ongoing with the shipyards and slides and things like that and what type of conversations you're having with the oil companies? Thank you.

Yeah. Thanks for the question, Fiona.

So we have been working as you know on this project developing the concept and some of the design engineering over the past two years. Then, we’ve been engaging with a number of construction yards through this period and we’re in a phase of detailed negotiation with those yards in order to engage with a yard at the end of the day to do the detail engineering on the concept and ready to be able to start making it real.

This phase is taking a bit longer than what we anticipated initially. It’s taking longer because of the, there is a variety of subjects that we want to address, we want to be actually filling what we’re doing, we want to make sure that we can obtain the standardization that we can obtain with this product and we want to make sure that once we launch the program, we’re going to have some things which is going to be fit for purpose.

So the fit for purpose is really something which is being discussed with a number of oil companies at different levels, we’re sharing the concept, we’re sharing what we’re doing, we’re sharing the experience that we’ve had in running FPSOs and validating the concept at the same time doing the negotiation with the yard. Our expectation today is that we should be in a position really to make some further announcement, my expectation will be for the end of the year.

I had a couple of questions, but they have all been answered. However, I've just come with another question.

As a journalist, I'll have questions. One thing is recently on a newspaper in a story about this company called Bluewater, which is almost bankrupt according to its bonds loan anyway and apparently the whole [indiscernible] earlier layoffs.

A question not related to your quarter results, but do you see any consolidation in this whole FPSO market. What do you see at BW Offshore in Norway, it's also painful at the moment?

And you said that there is the awareness - quoting your press release that the structural under-supply is likely to be only a matter of time. So there might be prosperous futures coming on.

Do you see any consolidation in your industry or you think everything will stay as it is now?

Yes. It’s actually a bit of a complex question.

Let’s start with the market fundamentals. If we look at the market, we have seen that there is a decrease in the market demand at this stage and the market demand is extremely low, but going forward, someone is stating the same time, so could you put yourself on mute please.

Okay. So, we’re going to see going forward basically a decrease of market demand for the FPSO market.

In the past, we’ve seen the market demand of around 14 FPSOs per year. Going forward, in the normal market demand, we’re likely to see a decrease in market demand through a normalized level of FPSO per year.

So based on this organization consolidation market, there are too many players in the market, that’s clear. How is next consolidation going to happen, nobody knows and nobody has a clue, but the market can be sustained towards so many players there.

Now, the position of SBM Offshore on this has been clear for the last year or a year-and-a-half, you’re saying if the right opportunity was to present itself, we will look at it, if we bring the value from the financial standpoint, positioning the market, assets to new technology, our new clients. But we don’t need to do an acquisition in order to be well positioned, we will do it only if it was to make sense.

And just to get my numbers correct, before the plunge of the oil price, there were 14 or 40 FPSOs a year?

14.

14. And this will be 10.

So this is the decrease?

Yeah.

And are there any talks, I mean in this market, which cannot sustain this amount of pace as it is now. Are there any talks or discussions going on or is this just the official stance, which it has been for the last two years or for the last year from SBM's point of view?

As you imagine, we cannot comment on a year-over-year, but if you know that there is some stuff, we will be curious to know what they are.

Well, I don't know, I only know that there are some companies are - I mean I know that SBM has gotten some leeway I think earlier this year, so your financial position is not at stake I guess, but I think of your competitors they are, but, so this is the market and I think this is what Dirk said in the first question as well because it seems the second quarter in the press release it seems to be a glimmer of hope, but there won't be a very rapid reversal of the market?

That I confirm in the earlier question. Even the discussion which are happening at this stage, nothing of significance is going to happen in the market in terms of the world and even if your [indiscernible] in 2018 from the funnel standpoint, it’s not for 2020 to 2021, before anything I materialize into the P&L of anybody.

So they're in for the long haul.

So this means that the current market conditions, which they are now will probably stretch for another maybe three years?

Yeah, if you get your math right that's correct.

Four questions from my side. Firstly, regarding your outlook, you used to say that the combined loss in Turnkey would be $150 million spread over two years.

Is that still the case because there is no statement on that?

Andre, if we have seen a fundamental shift from that number, we’d said so but basically we resurrect what we sit with the half year, 150 million over a 24-month period of 2016, 2017 is still there with the lesser with the remark that we made in half year as well that’s going to be pretty much back-end loaded.

On the floating wind, do you have any idea what the size in terms of sales value could be for such a wind system? Secondly, can you give us an impression of how you see the market the - your wind market developing for the floating systems?

First of all let's say that the floating wind market is really what we have seen in a number of wind farm project happening in shallow water and whether the field has been developed. Today, going in deeper water, with quite different technology mainly the floating and moving technology that we can bring and some projects are going to be tested over the coming three to five years.

From there the market potential is big, in fact, when you look at the potential development in Europe, 70% of the wind farm could be developing in deep water thus with a floating system like the one we provide. Now just to be clear the project which was announced on November 4 is still subject to regulatory permitting and financing overview by the clients and the different stakeholders.

So we're not going to know for a period of few months when this project is going to be effectively offshore. And once we’ll get to know, we are going to be able to provide some financial guidance.

Again, two more questions. Anything worth mentioning on the US Department of Justice?

Thank you, Erik Lagendijk. No, there is nothing at this point in time to mention with regard to the DOJ.

We are working with them and we're seeking resolution but we cannot give you guidance on the timing thereof.

And last question on Maersk and read this question on consolidation, Maersk now has only one floater left, have showed that [indiscernible] carry on with them and is there any talk of you taking over that stake because I don't think that they will be left with just half of floater?

Again, we're not going to comment on any particular asset or any particular company or combination. What we say in an acquisition were to make sense from a lot of different aspect, but also from a financial aspect, and in particular from a financial aspect we're going to consider them.

Again, a related question to that. Would you in the future consider building FSOs, designing, building of FSOs or would you really concentrate on the more complex systems?

We need to look at what we provide as a company and where is our area of expertise, the strength that we can bring to the industry. And if you remember properly when we presented the half year result we showed you a case on what did happen in Brazil but the same case can apply on the worldwide basis.

Basically the case is that more than 60% or 70% of ASPs which have been contracted by the oil companies are being delivered late or extremely late. The experience that SBM Offshore brings to the market is the ability to deliver larger FPSO on time for clients and thus providing the return on investment to our clients.

That’s the area where we need to be. That’s the area where there is a lot of opportunity for development and really where we can build on the experience that SBM Offshore has.

A couple from my side. Just going back to the comment - I apologize if I use the phrase Generation 4.

It was just the comment you were making that fit for purpose. Can you just elaborate what that actually means and I'm assuming when you stated the announcement by year-end is actually just with regard to the optionality on purchasing the hull and would the CapEx still be running at the $10 million this year, $15 million next year potential and what does that CapEx actually envisage?

When we discuss about fit for purpose is really basing the design and the development of the fast-forward concept on the 283 years of experience of running FPSOs. When you do this, you can learn a lot about what works well, what is impact over the long run, what can you fit onboard FPSOs and so on.

So it’s taking all this knowledge and there is a lot of knowledge in SMB Offshore into what is called fit for purpose. Now as you say you, you’re correctly mentioning that the discussion with the yard at this stage are related with the detailed engineering of what we're going to be doing with the option basically to launch into a program there.

Right and this is purely the discussions with the clients is with regard to Generation 4. If you then take the whole concept of Generation 4 and look at the whole supply chain and ecosystem around that from the basically seabed up, are all other suppliers aligned with your next-generation and the ability to bring in the total all-in cost on such projects because it’s no good if your significantly lower and everybody else is actually Generation 3 because the totaling cost of the client doesn't change that dramatically.

That's right. And in fact if you look at the field development value what you're seeing on average is 50% of the cost leading to drilling.

15% is linked to FPSO cost and the rest is basic drilling through the planning and the hardware and the plumbers. So what we're seeing today is an evolution obviously on the day rate of the drilling and there is another supply in this market which is certainly here for long period of time so the prices are likely to remain the price for a period.

In the meantime, this contractor for what they can read are looking at ways to improve and to accelerate with that wind as well. So there is a combination of factor, decreasing rate and better productivity in what they're doing.

On the Subsea hardware and on the shelf, there is a lot of work which are being conducted by a number of companies as I'm sure you're aware in terms of limiting, decreasing the number of Subsea wells which needs to be at the sea bottom optimizing the development. So all the ecosystem as you call it is really working in ways to decrease the cost of developing field in deep water.

And basically at the day it’s a necessity if we want field in deep water to developed and they need to be developed with a breakeven point which is going to be below the $50 per barrel.

I can ask just one last question, it goes back to your statement saying on the front page talking about the turning point, supply demand is closer, structural oversupply, meta-ton, blah, blah, blah and there is a slight change in attitude of clients with regard to discussion levels. Is this purely being triggered by the fact that you've actually brought Generation 4 plus the others in the supply chain to a situation where it's actually executable because if I went back 12 months ago or even maybe nine months ago, one wouldn't have seen that kind of phrasing from yourselves.

So just give an understanding, what has actually changed within that?

It's a combination of factor is the ability to support difference solution, the ability to look at combining enough the Subsea the floating system. It’s also the cycle in the whole industry.

I think probably 12 months ago they were still in the period of a shock as for the price decrease of restructuring and their vision was really not looking at developing new fields was really trying to mind the sheep while the price of oil was decreasing. Today, with the price of oil, we should stabilize the one between $40 to $50, they're looking at these as the new reality and basically trying to see what they can do with the asset that they have in their portfolio.

Thank you for taking some follow-up questions. Starting with the remark you made Bruno in the introduction on the press release, you're stating that on the projects delivered, expectations were exceeded.

Can you be a bit more precise there, it's delivered on time and budget, but in what way did they exceed expectations and did that also affect the return profile for you on those or for SBM Offshore on those contracts? That's my first question.

Second question on the floating wind solution, in your presentation, you state that there will be a material P&L impact from 2019 onwards, would that be for these three floating wind systems as an early start or do you see a broader pipeline of prospects there and maybe also larger volumes? And last question I have, just to make sure on the remarks on the release of the pre-completion guarantees, will there be any impact in financials?

Thanks.

Peter, you want take the question in the recent guarantee announcement…

I’ll start with last one. Hi Dirk, no there's no real impact.

There's a slight difference in the interest rates that you pay once the loan is going on recourse but given the interest rates we’re paying that's not going to be very visible on our bottom line.

When we think about the windmill we said that there is not going to be any materialistic impact to our P&L before 2019, what I meant by this, really that we're not going to recognize some revenue in this period, so that’s what meant by significant. The fact that we're starting to recognize some revenues we didn’t provide any guidance on the quantum of what we’re discussing about.

Again, I believe has a great potential. But really a market in the infancy and which we need to develop at this stage.

Regarding the performance of what we have done, where we have shown a capability of improving for example, the three units we delivered in Brazil, with each unit we demonstrated our ability to deliver things faster to a better level of competition which basically allowed us going offshore to be able to put the facility in production faster than what was anticipated in the previous FPSOs and basically to get the production of the client at the higher rate much faster. Obviously for us, it had an impact, the impact that we’ll receive some revenue on the lease and operate at an early stage.

And to add to that Dirk, if you look at a project like Turritella in the Gulf of Mexico. I mean that's a project that has a whole string of the world's first world records in terms of water depths, in terms of pressure, it terms of internal disconnectable turrets in terms of steel lazy risers.

That's never been done before. So with the complexity of these types of projects expected to delivery in line with the clients schedule is in our view pretty amazing and hence I can only second Bruno the words, we're really proud of that achievement.

I sat through three presentations over the last couple of months all talking about ultra-long tie-backs and growing well head to beach and actually trying to get rid of the need for any fixed facility in there. Is that within your lower market outlook or what do you think along the tie-backs as a threat?

It’s actually an interesting question. As part of longer tie-back, actually both a threat because they are going to take away some facilities which are probably in less than 100 kilometers of the coastline, you could do tie-back for sure assuming that you have the facility onshore in order to receive the oil and other gas.

So that’s the strength threat aspect, however, it could be an opportunity. We are seeing some fields whereby there could be in deepwater which are further away offshore but those fields by themselves cannot sustain the development of one FPSO.

However, with longer tie-back, we could tie-back those different fields to one facility and make one development happen in a place where economically speaking it couldn't happen in the past. So it's both a threat when it's close to the shoreline but it's also an opportunity when it’s in deeper water further away and where there is no infrastructure.

I've got two questions that I'll give you straight off. One is the come back to Andre's question earlier about when he asked about Maersk and I guess without talking specifics, what are the reasons for you not to buy hulls in the market at the moment, hulls which may even be - have some sort of production equipment on top of them?

And the second question is just a comeback on something which came up from some large competitors talking about payment delays. You've shown no sign of payment delay so far this cycle, but it is going to make sure that that hasn't changed?

Now, there is always a misconception in the FPSO market that an FPSO on standby waiting for a contract has a lot of value. The reality of that is not the case, the reality is a FPSO needs to be tailored to the field which is going to be put in production.

And usually you have do a fairly big refurbishment even of a new unit in order to adapt the new unit to a field. So buying FPSOs on speculation with no contract is basically getting a huge liability on your balance sheet for zero value.

And in fact, if you look at what had happened in the previous cycle in the beginning of the 2000 period, a lot of people have tried to do this to speculate on the ability of building it, of either building FPSO on speculation, adding FPSO ready for field with a serious top side and all the story have ended up in tears. Now we are in the phase of the market or so, where we are going to see number of FPSO which are going to come as contract - not for us and we’re going to have all of FPSO, the first renewal of contract I think is 2020 or 2022 but in the market by and large we're going between 50 to 80 FPSO in the coming two years, which are not going to have any contract.

And those units, a lot of them, the best outcome is going to be scrap them because that's going to be the more economical efficient manner to deal with them.

Hi Alex, this is Peter, your question on payment delays. Things are going well, and I’ll use the analogy of SBM running the ATMs of the oil industry is probably part of the reason for that.

The only thing that separates the clients from oil and cash ultimately is the FPSO which means that we are a pretty important part of their value chain. We keep watching this of course with a great amount of interest.

But so far, I’d say the payment performance is very satisfactory.

I would like to go back to the Turnkey revenues. You generated $284 million in revenues in the third quarter in Turnkey, which are primarily related to [indiscernible] percentage of completion in fact contingencies i.e., these are all high margin revenues.

If I compare that to kind of the $338 million in the first half, is it kind of logical to assume that you will be profitable in Turnkey in the second half?

The only guidance I’m giving you then is and you have to run your numbers, roughly 62%, 63% conversion rates on Lease and Operate revenue and 750 million guidance on normalized EBITDA. And I'm not going to go any further than that.

There was another guidance that we gave is over the period of 2016 and 2017 investment into the turnkey business for 150 million. So I’m sure with all those number [indiscernible].

I just want to make sure that you guys aren't going to make $150 million loss in the next - in 2017. So that was kind of more the implied question there because should you be profitable in 2016, it would imply that your guidance implies that you will be severely loss making in 2017?

We’ve mentioned that the 150 million is going to be backend loaded which means 2017.

Follow-up on the contract length. Looking at the three units that's now hit the water.

The Saquarema are quite long in terms of contract, Turritella is quite short. Where would you put the sort of threshold in accepting contract also taking into account, it's increasingly difficult to redeploy ships, would you be satisfied in the future with a ten-year contract or would you say, well, that's too short?

Again, it's a matter of economics at the end of the day. For us, an FPSO does not have any residual value at the end of the contract that’s the premise.

If the payback on the FPSO is done over a two-year period then the economics of the field allow this, we’re going to do over a two-year period, but still with the same principle that there is no residual value at the end.

And let me finish this. Thank you very much for joining us for this particular call.

Thank you for your questions. I can imagine if you upon further study have some further questions, you can reach Bert-Jaap at Investor Relations and again thank you for your attention and I wish you all a very pleasant evening.

Thank you Mr. van Rossum and thank you all for the call.

Have a good evening.