Bert-Jaap Dijkstra - IR Director Bruno Chabas - CEO Erik Lagendijk - CGCO Douglas Wood - CFO Philippe Barril - COO

Luuk Van Beek - Banque Degroof Petercam Dirk Verbiesen - KBC Securities Mick Pickup - Barclays Quirijn Mulder - ING Wim Gille - ABN AMRO Peter Testa - One Investments Andre Mulder - Kepler Cheuvreux

Thank you, operator, and thank you all for joining us today. Today's call is being recorded and will be available for replay 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 would 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 involves -- involve risks and uncertainties that could cause our results to materially differ from our forward-looking statements.

The risks are discussed in detail in SBM Offshore's 2016 annual report, which can be found in the company's website. Once again, we'll welcome your questions after the conclusion of the prepared remarks.

I'll now turn the call over to Bruno.

As anticipated and communicated earlier, based on our engagement with clients, we see signs of our markets recovering on the back of improving deepwater project economics. We do expect the market to have a lower level of activity going forward compared to the 2005 to 2014 period.

In this environment, the strength of our Lease and Operate business leaves us well-positioned and enable us to remain disciplined in our commercial activity. In Brazil, discussion with the adjustments of the leniency agreement are ongoing.

It is a highly complex environment where we do not drive the timing for finalizing this. The current situation is also having an impact in our ability to get new projects awarded there.

And at the current interpretation of the tender rules by Petrobras, we can participate in tenders, but we cannot get a contract awarded until the leniency agreement is finalized. We challenge this position as part of our ongoing effort to reach a final resolution.

In the U.S., discussion with the U.S. Department of Justice on inquiring, following the reopening of its case in January 2016; and the Unaoil investigation are advancing.

Pending the discussion with the authorities, the company cannot provide further clarity or assurance on the outcome of the timing thereof. Regarding the first quarter, SBM Offshore continued to work for clients on its portfolio of FEEDs.

Overall revenue came in according to expectation with low level of activity in turnkey, balanced by revenue increase in the Lease and Operate segment due to the overall contribution of the three FPSOs delivered in 2016. Directional revenue for the quarter was in line with management expectations at $420 million.

Lease and Operate generated loss revenue of $378 million, with Turnkey revenue at $42 million. Proportional net debt at the end of the first quarter decreased slightly compared to December 2016 to just below $3.1 billion.

Turning to guidance, we are reiterating our 2017 directional revenue of around $1.7 billion, of which around $1.5 billion is expected in the Lease and Operate segment and around $200 million in the turnkey segment of the activity. Management also confirms 2017 directional EBITDA guidance of around $750 million, which is similar to last year reported actual.

As the downturn in overall activity persists, SBM Offshore continues to focus on current work for clients, early commercial activity, fleet operational reliability, and cost management. So, this conclude the prepared remarks portion of the call for today.

Thank you for listening and we'll now open for questions. Operator?

As anticipated and communicated earlier, based on our engagement with clients, we see signs of our markets recovering on the back of improving deepwater project economics. We do expect the market to have a lower level of activity going forward compared to the 2005 to 2014 period.

In this environment, the strength of our Lease and Operate business leaves us well-positioned and enable us to remain disciplined in our commercial activity. In Brazil, discussion with the adjustments of the leniency agreement are ongoing.

It is a highly complex environment where we do not drive the timing for finalizing this. The current situation is also having an impact in our ability to get new projects awarded there.

And at the current interpretation of the tender rules by Petrobras, we can participate in tenders, but we cannot get a contract awarded until the leniency agreement is finalized. We challenge this position as part of our ongoing effort to reach a final resolution.

In the U.S., discussion with the U.S. Department of Justice on inquiring, following the reopening of its case in January 2016; and the Unaoil investigation are advancing.

Pending the discussion with the authorities, the company cannot provide further clarity or assurance on the outcome of the timing thereof. Regarding the first quarter, SBM Offshore continued to work for clients on its portfolio of FEEDs.

Overall revenue came in according to expectation with low level of activity in turnkey, balanced by revenue increase in the Lease and Operate segment due to the overall contribution of the three FPSOs delivered in 2016. Directional revenue for the quarter was in line with management expectations at $420 million.

Lease and Operate generated loss revenue of $378 million, with Turnkey revenue at $42 million. Proportional net debt at the end of the first quarter decreased slightly compared to December 2016 to just below $3.1 billion.

Turning to guidance, we are reiterating our 2017 directional revenue of around $1.7 billion, of which around $1.5 billion is expected in the Lease and Operate segment and around $200 million in the turnkey segment of the activity. Management also confirms 2017 directional EBITDA guidance of around $750 million, which is similar to last year reported actual.

As the downturn in overall activity persists, SBM Offshore continues to focus on current work for clients, early commercial activity, fleet operational reliability, and cost management. So, this conclude the prepared remarks portion of the call for today.

Thank you for listening and we'll now open for questions. Operator?

Yes, good morning. I've two questions.

One on your comment that you are challenging actually the ban on winning orders in Brazil. Can you tell anything about the responses you get from the authorities and also into what extent your customer supports these efforts?

Because I can imagine that it's also in their interest that you can't participate in -- or execute new projects. And my second question is on the contract for Serpentina that you won, can you give any indication of the size and also explain a bit entails in here of greater renovation work?

Okay, so let me take the second question first and Erik is going to through the question on Brazil second. The Serpentina project is an -- the project is an Operate contract, it's not a Lease and Operate contract.

So, the value of the contract is not something that we're going to disclose and it's not something that we're going to make public, but the level of margin is in line with the Operate aspect of the business, which is lower than the Lease and Operate aspect of our activities.

Okay.

And with regard to the situation in Brazil, there are two ways to resolve the current situation where we can participate in tenders, but we can actually not be awarded a contract under the current interpretation of these tender rules. One, of course, is that one changes the interpretation of the rules and that is a dialogue that we are having with the state or company, as well as that we, of course, discussed it with the authorities.

And the other way, of course, is that we finalize the adjustment process of the leniency agreement. It requires work, it's a continuous situation as to who actually decides on what.

We have commented on that situation before. It has our full attention because we believe that, of course, the current situation is unacceptable and unsustainable and it's in -- at this point in time, it's what we can say about it.

Okay. Thank you.

The impact of the working capital or the received payables outflow, has that been fully recognized in the first quarter, the residual amount which was outstanding there? And second question I have is on the remark of the acquisition of a vessel, what is the strategic rationale for that?

That's my second question. And also, following the -- yes, the question and the comments on Brazil, what would happen if you would participate in the -- in one of the tenders or, example the Libra tender and eventually it would be the fact that you would have the most attractive bid for Petrobras?

What is the likely outcome of that situation, hypothetically? Thanks.

Okay, so the first question, with regard to working capital, Douglas is going to take this one. The acquisition of the vessel, Philippe will take this one, and Brazil, Erik is going to go back to that.

Yes. Hi Dirk, Douglas here.

So, the answer is there is -- some of the pay-down is reflected, but there's still more to come. And in terms of what we were expecting, it's in line with what we said at the -- over the whole course of the year.

It's in line with what we said at Q4, around $150 million.

Okay. Thanks.

Regarding the acquisition of a vessel, we do not ensure that every vessel is [Indiscernible] for conversion, which is often a requirement in order to enter to qualifications on tenders by the customers. The vessel is a VLCC in the original [Indiscernible] we require for optimal conversion potential.

But is that done with a few on a concrete order, I guess, or prospects or?

We generally don't comment on individual projects, but as this is part of the acquisition of the vessel according to the strategy of being able to unsort what we see on the market coming.

Okay. Thanks.

And further to the question on the tender activity in Brazil. When I said before that we need to resolve the situation, it's either the interpretation of the tender rules or the leniency agreement.

It's exactly as you have asked the question. If and when we would participate in tenders and we are the lowest bidder and with the best technical solution, we should be in a position to also be awarded a contract.

And that goes without saying that is exactly what we're trying to achieve at this point in time.

Thanks.

And in Brazil let's remember that we reached an agreement with the authorities in principle almost a year ago now. So, it's -- you can feel that this is taking long, but as Erik is saying, it's really a quite an involved process with the authorities and other participants and is slightly frustrating.

That's where we are.

Thank you for that.

Hi, it's not Vlad. It's Mick here.

A couple of questions, if I may gents. Where are we on the Liza project?

And obviously, over the last week or so, every other contract has been awarded, can you just say where you are in terms of your work on that project?

Yes, so we're still progressing the FEED. At this stage, the project is still a FEED and it has not been confirmed as a full investment decision at this stage.

So, they've ordered the trades and ordered the SURF, but you're still working on the FPSO?

Yes. I don't know the detail of what the order on the FEED and on the SURF, but it is like for us.

It's a FEED which is subject to confirmation for the -- a full investment decision.

Okay. And where--

And it's just not only--

If I may add here and just to tell you that we believe this is a consistent story. As part of the FEED, we have to place on certain long-lead items, some order on some of the equipment and we've been doing that.

We still maintained at doing that and still require at the end a final investment decision for the full field in order the project to go ahead.

Okay, okay. And secondly, where are we on Fast4ward?

Have we chosen a yard as yet? And have we placed orders for those holes?

We -- so we're still progressing on that. We're in final negotiations and the timing for us is really by mid-year to be able to make a decision on this.

We're still on track with the signing. We have progressed -- just as a reminder, Fast4ward is two legs.

The first one is the standardization of the topside and to make sure that we have a topside that we can use on all the different projects and based on the experience that we have accumulated over the past 60 years. So, that's progressing well.

That's some of the [Indiscernible] set are being used in the current tender that we're using and there is the hull also. So, the hull is where we are in negotiation with a number of yards and we should make the investment decision before mid-year or by mid-year.

Okay. Thank you, Bruno.

Cheers.

Yes, good morning. Quirijn Mulder from ING.

And about the bribery case in Brazil, let me say to say your frustrations about the situation. Is that not a risk that you will get your -- the politicians even more against you in Brazil than before?

That's my first question. The second question, about the Department of Justice work, you're speaking of progression.

Can you maybe elaborate on what you mean by progression? Is that sending some e-mails to the New York and then get e-mails back or is that more than that?

And my final question is about can you give the order book on the end of March?

So, we're going to give you an update on the order book at mid-year with the overall picture. So, we have decided not to provide any additional information at this stage because it was not really meaningful, but the information will be provided at mid-year.

Yes and with regard to your questions on Brazil and United States, it's a very fair remark about how do we engage with all the authorities and the politicians involved in Brazil. And it's fair to say that, of course, this is a lengthy process.

And sometimes, we are very polite and at sometimes, we just need also to demonstrate that we're here to defend the interest of the company and that we also need to pursue other ways to make sure that we are best placed and to compete and to continue our work in Brazil. And that is -- indeed, it is sometimes frustrating, but it's fair to say that we're also making some progress every now and then but heavily depend also on the situation in country that is far bigger and far beyond SBM's position.

With regard to the DoJ, I'm not going to lecture you on how these things go, but it's not just that you send some e-mails. These are investigations as all companies in this situation and probably every company in the Fortune 500 or the [Indiscernible] whatever index that you take have been in this situation or is in a current position of having the same situation.

It requires exchange of documents. Sometimes, there are some interviews, sometimes, there are face-to-face meetings, we have lawyers involved.

It's -- unfortunately, it's a lengthy and somewhat burdensome process and when we're hinting that we're advancing, what we're meaning is that -- I mean you cannot continue to just share information at a certain point. There also needs to be a lending of this situation.

And what we have been indicating is that we believe that we have answered the questions and that we're now entering into the next phase where we will see how this will resolve.

I do understand that you make more progression in the U.S. than in Brazil?

Well, that's a difficult to compare. The two situations are different.

In Brazil, of course, it's focusing on the situation in country, whereas the situation we're discussing with the DoJ has two angles. The one is the investigation into Unaoil.

And the other one and too more and more linked is the improper or, let's -- improper sales activities by agents during the period of 2007 to 2011. And Unaoil was one of those agents in a certain way and have also provided some maintenance for us.

But the two investigations or procedures are different and -- but hopefully, we can resolve both these opportunities.

Okay. Thank you.

Yes, first, on the Brazilian case. You mentioned that you are appealing with the regulator, but which part of the regulator?

I mean there are so many parties in Brazil that kind of pretend to have a say in this thing, so who do you appeal with? And who actually has the authority to kind of change the tender rules or the restrictions of the tender rules that you currently have?

With regard to tender rules, I think, again I appreciate that it's complicated and sorry to say that also for us it is sometimes not completely clear. But just to try to give it a steer, the tender rules itself are set by Petrobras and they have quite a substantial ways to make sure that's independent and it has the proper governance.

It's something that I think Petrobras is controlling, but also other institutions have a say over it. One of the aspects today of tendering in Brazil is local content.

There is an ANP authority that is also having a say over it. So, at the end of the day, we face it to be -- we are a contractor and we need to look at the rules and we try to play by it.

But, again, we think that the current situation for us is unacceptable, but again, we can participate in tenders but an actual award of the contract today is not possible and that is indeed something we are trying to overcome.

So, to make it crystal clear, is Petrobras the party that actually needs to give a nod and okay this? Or is other regulatory body the final one to go to in order to get approval to actually win awards again?

Because as far as I've always understood, it was -- you are not on the blacklist of the Brazilian government like the likes of [Indiscernible], that you are kind of on a specific restriction from Petrobras. So, it's kind of starting to look at bit fizzy on who actually has the authority to allow you to win awards there.

Again, I fully appreciate the fact that it's not crystal clear. And I have to admit it's not always crystal clear to us as well, but it's obvious that Petrobras plays a very important role in this.

It's not just Petrobras, probably, because I said, like, ANP and other authorities might also have a say over this. And this is exactly where we are today, that we try to seek clarity and try to overcome this hurdle.

Okay. And then second is more a bookkeeping question.

What did you pay for the VLCC that you acquired and how many do you have in stock at the moment?

No comments on the value of the acquisition and today, there are two VLCC on stock.

Okay. Thanks.

Hi, two questions please. One on the VLCCs on stock and the fact that you're also looking to advance your own hull solution.

I'm just interested in when you look at activity, do you see a split view in terms of activity with one hull solution versus another? Does this have to do with timing requirements of the clients?

Just curiosity on that. And the second is on tender activity, if you could give some thoughts as to what degree you've seen of a change of tender activity you're engaged in through 2017 and maybe a view as to degree towards activities developing outside of Brazil.

Yes. So, first aspect with regards to the volume of activity, we're seeing much more engagement with clients on early FEED.

It doesn't mean that we're on tendering activity. It only means that there's more discussion about potential projects to happen.

All of this doesn't change our view that the market is going to increase from the low point of 2016, but it's naturally difficult, the low point was at zero FPSO awarded. So, we're going to see -- we still have an expectation that projects will -- between -- I will say between two to seven FPSO will be awarded in 2017 and likewise in 2018 and that we're going to see the market going forward at around seven FPSOs.

Now, to put things in perspective, the market between the period of 2005 to 2014 was around 14 FPSO per year. So, we're seeing -- despite the decrease in volume of activity compared to the low point, we're seeing quite a shrinkage in the market and this is really for the medium to long-term.

The second aspect is prestriking when you look at the economics of a field to see what is on the critical path for field development. And you can see the projects which are being discussed with clients.

The first engagement that they have is really with the facility provider, so the provider of an FPSO or a floating structure. And the reason for that is we're in the critical path for development.

And usually, there is a need to contract that six months to 12 months in advance compared to the rest of the market. So, based on this, we're looking at ways we can improve the timing to market.

Fast4ward is one way. And Fast4ward, again, is -- does the standardization of the topside, which can apply to any VLCC; or the full package, meaning the hull and the topside.

And we're looking at ways that we can basically make our product more attractive in order to improve the economics of the quarter. And really, Fast4ward for us is one other way to do that, but it's not the only way.

VLCC and convention of VLCC is still part of this answer.

Okay. And can you give some comments in terms of your activity, how it's moving outside of Brazil?

There's so much focus on Brazil. I mean, should -- what are you seeing out and around?

It's -- I mean, as we have said before, it's roughly 50% of the activity in Brazil and 50% outside Brazil. That has been consistent over the years and that's still what we're seeing.

Okay. Thank you.

Good morning. Question on Brazil.

To turn things around, if you would be blocked from awards, would you still be tendering for new projects in Brazil? Or has that put on hold for the time being?

The answer to that is absolutely clear. If we're basically not allowed to win projects, I mean, then we're not going to tender in Brazil.

Okay. But that would also be -- so, let's say, if there will be a project tomorrow, you would not be tendering for that project unless there's a very clear outcome that you will also actually win an award or be in a position to win that award.

Again, our position, as Erik explained, is today we believe that we're in position where we can get project awarded. We're seeking clarification.

If the clarification is in line with our expectation, it will lead to one set of action. If the clarification is not in line with our expectation, it's going to lead to a different set of actions.

Thanks.

Good morning. I was wondering.

You say you're challenging the decisions, are there cold cases going on there? Could you elaborate on these cold cases?

If this is so -- and maybe tell us if there is some sort of a time [Indiscernible] cases?

I will not go into the detail of every particular step, but I think we have made clear to you that we believe that the current position -- or the current interpretation, for us, is unacceptable. So, we're not excluding any kind of action, but we're not commenting on any of the detail.

Okay. Thanks.

Yes. Again, on the Brazilian case, if you're not going after tender because you're not allowed -- actually, you are allowed.

You have to win. You have done your homework, anyway and you should be able to move quite fast in that case.

Is that true or not?

Probably fair to say that this situation that we'd call unsustainable could lead to a situation where we participate in tenders because we need to be ready if and when the approval is achieved or when we the interpretation is such that we can actually win contracts. But tendering activity is not something we do for the fun of it and it's very expensive.

And that is why we believe that the current situation is unsustainable and needs to be resolved.

Okay. But you have done your homework for Liza anyway?

We don't comment on any particular project.

Okay. And my final question is about the -- about your forecast for Fast4ward.

And you expect to make a decision before end of the -- let me say, the second quarter, is that correct?

That's correct. And also it's something which is linked to the evolution of the market and if the market is in line with our expectations.

So, it's going to be a number of factor coming into this decision, but that's the timing we're looking at.

But you were -- last year, you were somewhat delaying the Fast4ward because of slow progression in the market in general.

That's correct. And in fact, what we have seen is basically a shift of the market by one year compared to our expectation of last year.

Today, we're seeing the market more or less in line with the expectation that we gave at the end of the year, but again there is a huge amount of uncertainty. Even though there is more engagement with clients, more discussion with clients, there is today limited number of projects which are being sanctioned.

And we're going to see what's going to happen in the coming few months before we make the decision. Because it's possible that the market is shifting by another year again.

No, no, I understand, but this might be that you are if -- let me say, [Indiscernible], very positive about Liza, that you might Fast4ward put it in, yes.

Yes, but the Liza FEED that we're doing is not -- I mean, some of it, it's Fast4ward, but this is not the Fast4ward one.

No, no, not this one, but maybe in another one.

No.

Okay. Thank you.

So, in this case, thank you very much for your attention. Bert-Jaap is going to do the formal closing with giving all the warning about looking at the forward-looking statements in all of these, but in any case, on my side I wish you a good day.

And you can resume your normal activities.

Yes. So, thank you very much.

This closes the call. If you have further questions, don't hesitate to reach out to us.

Thank you and have a good day indeed.