Bruno Chabas - Chairman and Chief Executive Officer Douglas Wood - Chief Financial Officer Erik Lagendijk - Chief Governance & Compliance Officer Philippe Barril - Chief Operating Officer

Luuk Van Beek - Degroof Petercam Gregory Brown - Credit Suisse Wim Gille - ABN AMRO Al Zeera Almeida - Petros Andre Mulder - Kepler Mick Pickup - Barclays

Thank you, Patricia, and welcome all to this conference call for the half year 2017 earning update of SBM Offshore. I'm joined this morning by Douglas Wood, our CFO; and Philippe Barril, our COO based in - all of us in Amsterdam; and Erik Lagendijk, our CGCO is traveling so he's over the phone during this call.

As always, we can go through the disclaimer and advise you to go through this with quite a lot of details. Having said all of this, let's discuss about where we stand today as a company.

And I would say the first of half of the year 2017 has been good. We have experienced production of 1 - of more than 1 million barrel per day of actual production in our fleet or 10% of the overall production in the quarter, which surely is a proof of the position of SBM Offshore and the experience that we have.

Our financial results are in line with expectation, but more importantly our backlog on a pro forma basis is stable from the - compared to the December of 2016 showing the resilience of our business model. So on top of the financial performance which has been in line with guidance, a number of events have happened during the quarter or during the half year and some of them subsequent to the quarter in reality.

So, the first point was the Liza award. The contract was signed at the end of June of this year.

The second point was the partial settlement on the Yme insurance claim. This partial settlement, we have signed the Heads of Agreement, we are working through the detail; but Douglas is going to go through the financial numbers during his presentation.

Last point, which we got subsequent event, was the sale of Turritella. Turritella was a production - a collection by - rather by Shell with their willingness to integrate the Turritella within their fleet in order to capitalize on their existing operation and reduce their operating cost.

The fact that they have called this asset in their fleet is really a testimony of the quality and the standard that we have developed and the fact that Turritella has been developed with SBM standard and is going to be operated by Shell is really a demonstration of that. So, both the Yme and the Turritella financial impact would be detailed by Douglas later on.

From an industry standpoint, what we can see is an improving economics of the deepwater development. So based on this, we have been working as you know over the past few years to capitalize on our experience to find ways to make FPSO more reliable and we have committed to the development of the Fast4Ward hull, again more detail later on the presentation.

Now one of the common complaints we have had over the years was the difficulty to follow-up the cash flow of SBM Offshore even though it's a fairly straightforward story. So what we decided is really to expand on our reporting and going forward not only we're going to provide the P&L on the directional basis, but also the cash flow and the balance sheet and we expect that this is going to firstly take the visibility of the cash flow of SBM Offshore in the - and the financial stages of the company.

Now, the first point is really the Liza Award. Now all of you are aware we signed the feed in December, the contract was signed in June.

But the important point in all of this was really the engagement of a client first of all with the FPSO contractor. And the reason why the engagement came with the FPSO contractor of sales for the development of this field is that we're on the critical path of development.

And as such, when new field are being developed, we are really part of the early cycle in the development and it's to show that the SBM business model is actually strong not only through the lease and operate; we're part of the late cycle, part of the business, but also because of the type of equipment we're delivering which are always on the critical path of those developments, we're also part of the early cycle of the business. From a financial standpoint, the revenue at $835 million are in line with our guidance, our EBITDA from an underlying basis have increased $431 million or 23% increase year-on-year, our backlog is flat at USD 17 billion and our net debt decreased slightly to USD 3 billion; on a directional basis all of this.

Our health and safety performance has improved through the first half of the year. We'll continue really to drive further improvement going forward with program like Life Day where we engage the other company or clients or suppliers on ways of making our safety better and really to improve our ways of doing business.

From an environmental standpoint, despite the fact that we have increased significantly our fleet and operation, our energy consumption has really not increased and has been stable through the quarter. So, that's really one of the focus that we have also to succeed - to limit the impact that we can have on the environment.

From a compliance standpoint, where do we stand? We had discussion with the different parties.

In Brazil in particular, we are continuing with respect to the discussion on the contemplated Leniency Agreement. In the U.S.

discussion with the DOJ are advancing, but we cannot provide today any clarity regarding the timing of the outcome of the discussion. That's the position where we stand today.

Now let's discuss about the macro view and what we're seeing on the market at this stage. First of all, we're seeing a new reality in the deepwater development.

We're seeing an improving deepwater economic reality throughout the world; it could be in the North Sea, it could be in the Gulf of Mexico, in South America, in Western Africa. So throughout the world, we really see an improvement on the economics of this deepwater.

It means that further opportunity are going to be coming to the market and that today deepwater is in part from an economic standpoint with Shell oil. In fact if you look at the Liza development and those numbers have been provided by us, you can compare the Liza cost of development compared to a good Shell oil development and the cost of supply with a 10% rate of return is $35 per barrel for Liza against $40, $45 for the Shell oil - typical Shell oil.

So it demonstrates that deepwater is becoming attractive again and eventually in the coming few months or year, the deepwater word is not going to become a dirty word anymore. It's really where the activity is going to restart and where opportunity are going to be there.

Now having said all of this, if we compare the potential market going forward compared to the 2010 and 2014 phase, we're seeing a decrease and basically market being reduced by 2 compared to the peak of the market. In the period 2010 to 2014, 14 FPSOs were awarded per year.

Now what - when we look at the 2017 going forward for the coming 5, 6 years, we basically see a market which is going to be within the world market of 7 FPSOs per year. That's what our expectation are and that's also where we are fairly optimistic, but in the same time cautious in the future of the industry.

Now one of the reason why we are seeing such a bad word in the deepwater market is really the delivery or like thereof in terms of the liability in delivering FPSOs. Since 2009, we have seen 50 FPSOs being delivered.

Out of those 50 FPSOs, basically 70% have been delivered late. Now the late delivery of an FPSO means that the clients are getting there field in production later and their cash flow later and the net impact on this average delay is somewhere in the range of $500 million of loss of NPV for a client.

Now it demonstrates that reliability, consistency in delivery is extremely important and the experience of SBM Offshore is absolutely unique in the sense to be able to bring reliable solution to our clients. Now the experience of SBM Offshore is really unique as you can see on this graph.

It's unique in sense of the number of FPSOs we have delivered to the world, but also in the number of years of experience that we have in running FPSO and basically with an average of time of 99%. This experience - this unique experience and learnings from it is really what is going to help to provide new solution to the clients, which are going to be able to come faster to the market being more reliable and basically make deepwater field development economic again going forward.

So, what is our positioning on this? We're really on the floating solution market to the energy business and we have 3 legs to our strategy.

The first one is really optimize are we to bring a premium performance in everything that we do. It is from this - the operating side, delivering cash flow through the fleet that we are operating, the lease and operate fleet that we have throughout the world; but it's also delivering our project on time to the specification that the clients ask.

The second leg is to transform the industry. If we were to stay in the same position as an industry with so much delays in the delivery of field, basically the deepwater industry is an industry which is not going to happen in the coming few years.

Now we believe that with the experience that we have, we can standardize much more the equipment that we are doing and deliver solution to our clients faster. That's the nature behind Fast4Ward project.

It's also what we're doing under the digital FPSO project whereby we're using the information that we have as a company not only to improve our production, but also to improve the delivery of what we're going to be doing - we're going to be delivering going forward. The last pillar of our strategy is Innovate and there it's really being to position ourselves through floating production in the gas and in the renewable market.

Now in terms of premium performance, what we can see is that the production that we have - we're doing has had an average of over the past half year 98%. We're producing basically 10% of the total deepwater production oil offshore and we have had an average of almost 1 million barrels of production per day in the past quarter.

We also can see the number of FPSO we have delivered throughout the world and this experience - this unique experience is really what is leading us to be able to standardize some of the things that we're being - we're doing. Now we are leveraging on our experience by basically learning from the cost ratio of the FPSO, but also operating them.

And that's quite a unique feature into our business model, help us to evolve as a contractor much faster than we otherwise would be able to do and really to capitalize on our experience. By doing that, we can provide standard like we have done on Turritella with Shell standard, treat for purpose rather than golden plating, which really are able to reduce cost and reduce and provide saving.

On an ongoing basis, we have less of the inflation existing in the industry or not of somewhere in the range of 30% and really we're trying to optimize on this and to provide new solution to our client based on that. This is really the nature behind the standardization and the flexibility associated with the Fast4Ward projects and Fast4Ward is really a project with 2 legs.

The first one is the commitment that we have made in June to build a new hull with standard of sale, which is going to be there to be the foundation of everything that we're going to build going forward. Fast4Ward is also the development of a series of catalogue of standard modules that we can be using in order to speed up the engineering in what we're doing and basically speed up the time to market and to increase the quality and the reliability of what we're doing.

Speaking about the commitment to the hull, we have basically signed an agreement for the delivery of the hull and the cash commitment on this in 2017 is $20 million and in 2018 it's $55 million of commitment in order to transform what - the industry going forward. Now on the gas market, gas is a commodity where the increase in demand is going to be significant going forward and there are plenty of opportunity offshore.

Now we have had a number of experience in running plant offshore - gas plant offshore like the Sanha or the Encana Deep Paunke plant. We also have tendered a number of projects throughout the year and developed a number of concepts and those concepts are not only for the delivery of the full FLNG, but it's also for the delivery of component pieces like [indiscernible].

In 2017 we have signed a feed, a feed on which we're going to be working in order to find solution to develop one of several FPSO going forward - FLNG plant going forward. Now I leave the door - the floor to Douglas to go through the financial number.

Thank you, Bruno, and good morning everybody. So as Bruno just mentioned, we delivered a good set of results in line with expectation.

Then we had a couple of notable post-period events concerning Turritella and Yme and I'm going to spend some time on those later plus I'll also cover the first step we're taking today in expanding directional reporting to cover the balance sheet and the cash flow. Now in terms of the overall story line on this slide with last year's delivery of the remaining major projects, the transition from Turnkey to Lease and Operate continued.

At the first half of 2017, this resulted in lower overall revenues, but higher EBITDA. As anticipated, revenue dropped about $100 million or 11% compared to the same period last year and that was mostly due to a low level of activity at the Turnkey side as a result of the lack of major orders in a difficult market.

Now this effect was partly offset by increasing Lease and Operate revenues and here we saw a full contribution from the 3 new assets in Lease and Operate in the first half. On EBITDA despite a small negative in Turnkey, better than expected though, which I'm going to come back to in a minute, the contribution from the larger fleet drove an increase over the period to $431 million.

That's up 23% compared to the first half 2016. And then those same factors impacted underlying EBITDA.

Now if we zoom in on the different segments starting with Lease and Operate, I think the point to mention on this slide is the increase in the numbers are a function of the additions to the fleet and I think I'd just highlight here the uptick in EBITDA to revenue margin from 61% to 65% so in line with the cash conversion guidance. If we move to Turnkey, revenue dropped around $250 million to $90 million, again a function of the absence of material and new order intake.

And as anticipated as a result of this, an EBITDA loss was recorded $23 million for the period. Now as we've been emphasizing, this is the result of the strategic choice we made to protect experience and retain Turnkey capacity plus maintaining R&D investment and marketing effort to prepare for the future, Notwithstanding the loss, Turnkey performance was better than anticipated and that's mainly as a result of sound performance in closing out remaining scope on past projects such as punch list items which allowed us to release contingencies.

And then we also had an impact from a slightly higher than anticipated level of engineering activity, including some activity on fleet, and that led to a reduction in under recovery of man hours. Moving now to the group P&L where I'll focus on some of the other elements I have not covered on the previous slides.

On the overheads front, we managed to decrease our cost by around $11 million mainly due to personnel cost reductions as a result of the restructuring activities that we've undertaken over the past year. Then the decrease in other expenses was caused by non-recurring charges impacting last year's period and particularly restructuring charges and the increase in the Brazil provision.

Financing costs, these increased in line with a higher project debt balance and just to note, this line item also includes a charge of $11 million related to the time value of money impact for part of the provision in Brazil related to bonus payments. And if you put all these various elements together, we saw an increase in underlying net income to $78 million compared to $66 million over the same period last year and the difference were the headline earnings in both periods being related to the Brazil provision.

Now to an update on Directional reporting. So as Bruno mentioned, this quarter we're making the first step to expand Directional reporting to include the balance sheet and the cash flow and I wanted to briefly take the opportunity to recap on the rationale for why we introduced Directional in the first place.

For SPM's business with the large amount of Lease and Operate activity, applying finance lease accounting required by IFRS means that profits have to be recognized while ahead of real cash flow generation. Further, our Lease and Operate projects are structured in ring-fenced joint venture entities with limited recourse financing from which we're entitled to our share of the proportionate cash flows after financing.

So in order to provide a better view on the business more closely related to the real cash flow generated by the company, we introduced Directional reporting in 2013 for the income statement and this is the basis upon which the management runs and evaluates the performance of the business. Now Directional reporting remains tied to IFRS but in 2 defined instances, it uses alternatives but IFRS defined accounting treatments, which are consistently applied.

First, we consolidate Lease and Operate joint ventures on a proportionate basis. However, this does not affect equity accounted joint ventures owning yards and installation vessels on the Turnkey side, which remain equity accounted.

And secondly, we account for all leases on an operating as opposed to finance lease basis. Now these changes are designed to bring Directional accounting more in line with the cash that is actually being generated, but yet keep Directional reporting anchored to well-defined IFRS principles and this facilitates straightforward reconciliation of Directional reporting to IFRS and external audit by the company's auditors.

In order to improve the transparency of understanding of Directional reporting, we are expanding this to include the balance sheet and the cash flow where we believe that this should help provide better insight into an understanding of our cash flow generating ability. So, now to show you the results on a Directional basis for the first time starting with the cash flow.

Now here firstly, I should mention that in presenting cash flow on a Directional basis, there is a small difference with the previous proportional view we provided which is that we now exclude cash and the equity accounted Turnkey joint ventures, which makes a difference of $28 million for the balance reported at the end of the period. So that on a Directional basis, cash balance decreased by $71 million from December 2016 arriving at a position of $752 million at the mid-year and cash from operating activities of $275 million reflected the strong Lease and Operate performance offset by the Turnkey and other segments.

And the Turnkey impact includes a reduction of around 50% of the $150 million payables related to close-out of last year's projects that we highlighted at the beginning of the year. And we repaid debt and interest and the dividend in respect of last year.

And finally, we have another bucket at the end, which includes the CapEx for a VLCC to support bidding activity. Then the Directional balance sheet.

I think we've already covered the main elements of the story line reflected here. But to mention we see the movement on loans and borrowings in line with the previous slide where important to note that all debt is non-recourse at the project level so we don't have any debt at corporate level.

If you combine the debt and the cash, the net debt position at mid-year decreased by just over $100 million from $3.1 billion year-end 2016 to $3 billion at the end of June. Now in the presentation, which will be available on the web after this call, you will find a reconciliation with the IFRS balance sheet and cash flow which we published this morning in our interim financial statements.

And then going forward from full-year 2017 reporting, we will be incorporating the Directional balance sheet and cash flow in the consolidated financial statements. So, that now concludes the summary of the half.

All in all, a solid set of results in line with expectations. We know there is also interest in the announcement of 2 significant so-called post-period non-adjusting events, which occurred in July; the sale of Turritella to Shell and the partial settlement of Yme insurance claim.

Given the materiality of these, we wanted to give some guidance on the estimated impacts. So, starting with the sale of Turritella to Shell.

I think there are 3 elements to mention in particular on the numbers. Firstly, the purchase price, it's formula driven hands-on time and is expected to give rise to a price around $1 billion on a 100% basis at the anticipated closing date in early 2018.

The second component relates to the write-off of financing related items so interest rate swaps and upfront transaction fees. The third element is then the settlement arrangement with partners.

Now partner return requirements and the price paid for their acquisition of 45% of the project in 2015 reflected the derisking of the project at the point when they joined and as such, the payback profile of their investment over the life of the lease would take some time. Therefore solely for the very specific circumstance of an option exercise, a settlement mechanism was agreed to take account of this.

Now because of the payback profile, the impact of this mechanism has a greater effect were the option to be exercised in the early years of the lease. Now turning to the accounting estimates, which depend on timing of the transaction, that here we're assuming the closing in early 2018.

On a Directional basis where the accounting aligns with the cash flows, we expect an estimated profit of around $120 million based on SBM's share of the purchase option price less CapEx and this is impacted by the financing and partner settlement items I just mentioned. Under IFRS as profits are front-end loaded from the inception of the finance lease ahead of the cash flow, a loss of around $130 million is anticipated.

For the large part, this reflects partner settlement arrangements, then the unwinding of hedging instruments and amortization of transaction costs. It also includes an impact from the fact that the option purchase price formula at the time of exercise is 4% lower than the net investment in the lease.

I would venture to say that this transaction is a good case study on Directional where you see the P&L tracking the cash flows. But in any event for the avoidance of doubt, the aggregate of previously booked profits related to the Turritella project combined with the impact from the transaction will be identical under Directional and IFRS on a group basis.

Now on the assumption of closing next year, we expect to see some elements booked at the end of this year with the rest in 2018. Then if we look at net debt after the partner and financing items, we expect to see a reduction of Directional net debt by around $450 million.

And finally, if we step back and look at the aggregate profit and cash flow for the Turritella project overall, it ranks favorably for SBM with the earlier sale of 45% contributing to our ability to return over $200 million to shareholders in relation to last year. Now following the announcement, we've received some questions in relation to purchase options in other contracts.

And what I would say to start with on this is when you enter into long-term lease contracts, the base case is that they run to the end of their term. That's what we've experienced with most of our leases and in fact we see in many cases extension options being exercised.

The contracts contain clauses to provide for a change in situation and as such, it's not uncommon for contracts to include a purchase option to provide the client with the option to finance that if circumstances change for them and if it would be beneficial. That is the case with Turritella, but again our experience has been such cases are exceptional.

Now with the exclusion of the contracts with Petrobras, there are purchase options in all of SMB's lease contracts. These are not reciprocal right of client only so as such, Turritella was unique in this case.

And were any of these options to be exercised, we would be appropriately compensated and there are no partner settlement provisions in any of the other contracts. So now turning to the second post-period event, the partial settlement of our Yme insurance claim.

As announced in our press release on the settlement, we've agreed on a Heads of Terms with the majority of the first layer of insurers. The proceeds from this deal will be equally shared with our client Repsol after deducting quite some substantial costs.

Now the exact cost is still to be established, but the net impact for SBM in 2017 is expected to be in excess of $100 million on EBITDA or in cash. Then with respect to the remainder of the claim, we'll continue pursuing this against the remaining insurers and the trial for this is scheduled for October 2018.

Now moving to the outlook for 2017. So for this period, we are providing a pro forma Directional backlog overview giving normalized outlook on existing leases.

Now normally the backlog wouldn't take account of the sale of Turritella pending signature of the sale's contract or the agreed Liza operating and maintenance pending a final work order. But a missed backlog presentation, we've adjusted for both elements to give a better view on the outlook.

Also the 5-year operating and maintenance contract for FPSO Serpentina has also been added. So despite the turnover books during the first half of 2017, the pro forma Directional backlog remains nearly constant at $17 billion compared to year-end 2016 and we're still expecting an average cash conversion margin of 63% over the period.

And then on this slide we've also now included at the bottom the pro forma debt redemption profile so you can get a better sense of how it fits with the backlog profile and here to be consistent with the pro forma backlog, we've excluded the Turritella impacts, which finally brings us to guidance next. We are reiterating the revenue guidance of around $1.7 billion, but on EBITDA due to the Turnkey performance there's an upside to the forecast so we have changed the guidance from around to above $750 million on an underlying basis.

And just to be clear on underlying, it doesn't include the impact of the Yme settlement or any effects from the Turritella sale. So, there's still half a year to go.

We'll keep the forecast under review for the next quarter. And with that, let me now hand back to Bruno, who will summarize the presentation.

Thank you, Douglas. So in summary, performance in line with our expectation and good performance for the first half of the year.

We're seeing improving deepwater economics and opportunity arising from that. Those opportunities are going to happen if we're able to standardize and we're able to bring reliable solution and that is what we are doing through the Fast4Ward program and the commitment that we have made in order to develop this going forward.

We're increasing the transparency in our disclosures with the Directional reporting and we believe that we are well positioned to capitalize on the uptake that we're going to see in the market going forward being both a late and an early cycle player in this industry. So, that's our summary so far.

We are now opening the floor for questions. Thank you for listening.

Good morning. I have a question about your EBIT loss that you previously indicated for Turnkey of $150 million for 2016 and '17 combined.

I assume that did not include the level of contingency pre-fall that we've seen in H1. So can you give us an update to what extent you still expect such a loss and if there are any negatives that would compensate for this better release of contingencies?

Douglas here. So yes, indeed as we mentioned, we saw a better than expected performance in closing out some of the past projects and remember we had delivered projects last year with a kind of total value of around $5 billion.

So, it's possible to get some variance when you're thinking about the close-out and then the slightly higher level of activity in terms of the engineering man hours. We are not giving kind of specific updates on the various segments going forward.

But yes, as you would have heard what we're saying on the overall guidance of $750 million, we were talking about around. Now because of the better than expected performance in Turnkey for the first half, we're now saying above.

As I mentioned, there's 6 months to go. We keep it under review and as appropriate, we can come back to it next time we talk at the third quarter.

Okay. My second question is on the liquidity position because you're in an excellent position with the RCF fully undrawn and on top of that will be a cash inflow from Yme and the Turritella sale going forward.

So, to what extent do you think that your liquidity is becoming excessive and would you consider to do share buybacks or shareholder returns in the future?

So yes, we're keeping our liquidity position under careful review. So I think on Yme, it's a Heads of Terms with a group of the first layer.

We are working at the moment to turn this into a definitive agreement and then we've got the proceedings ongoing with the rest of the insurers. We're shortly going to be coming into our planning exercise for next year.

So, what we will be doing there is we'll take stock of exactly where we are with the moving parts on Yme and the impact of Turritella as part of the analysis we'll do on cash flow and there obviously incorporating a view on the business outlook. But I think what I'd say overall there's no change in terms of the capital allocation framework that we talked about at the beginning of the year.

What we do is we prioritize growth and then where we see a cash flow position in excess of our needs and as a value-adding opportunity relative to share price, share buyback remains an option.

Okay. Thank you.

Those are my questions for now.

Hi, good morning, gentlemen, and thank you for taking my question. I had two if I may.

Your safety exposure costs are down over 50%, that's obviously a big number. To your mind, how much more is there to do in times of driving cost down and improving safety?

Perhaps you can provide examples of work to be done and help us to understand what the industry and what SMB specifically may actually be capable of? And then in regards to Fast4Ward, it's been known that you're making progress, could you perhaps update us in regards to the types of opportunities you see?

Are your target projects [Technical Difficulty] oil and gas operations because recent turbulence in the oil market impacted the conversations with those perspective clients. Are you seeing any opportunities for big turbines?

Thank you.

The first point or the first point I can give you is some example in the industry and I'm going to use the Shell oil as a good example. The number of rigs which are operating today in the Shell oil market has decreased by 80% compared to the period of 2014 and yet the production today is at the same level or above what it was at this stage.

So it shows you that when you deliver something which is standardized that you repeat the business, you can really reduce costs significantly. Now if I take the example of SBM Offshore, through SBM Offshore we have standardized 2 programs that we have done; 1 from Exxon that we did in the period of 2000 with some 4 or 5 FPSOs that we delivered to them in Western Africa and 1 period where we delivered standardized FPSO for Petrobras, the 2 being in production last year CDM and CDS.

What we have seen is that the learning curve going from 1 project to the next is absolutely significant and you can reduce time in terms of reducing the number of engineering hours that you're spending on developing the project, growing faster in the commissioning plant of the equipment and basically shortening the time to market by few months using standardized method. Now our expectation is that using Fast4Ward and demonstrating that we have the experience to standardize because that is the critical point.

If you don't have the experience to standardize, you're not going to be able to do it in deepwater and we do have the experience to standardize. So, we are engaging in conversation with our clients and we have been engaging in a lot of conversation with our clients demonstrating that we can bring them a solution, which is fit for purpose which basically is going to bring them more value, give them more cash flow early on and obviously give us some benefit in doing so.

Now the type of project we're targeting or the type of clients we're targeting are really projects where we are looking at the production profile of anywhere between 100,000 to 220,000, 250,000 barrel per day. And really that depends on the projects we sign in South America, in Western Africa or in Australia.

It can also be used for the gas market field where there is a lot of gas to be developed, but you need to have a lot of topside and already we have a number of engagement with our clients today.

Okay, that's very useful. Thank you very much.

Hi. Good morning.

So remaining questions from my side. Maybe first on the fact that you signed an agreement with the first - with the primary insurance layer on Yme.

I was wondering after that - after that agreement, did you see also sort of an acceleration or an increasing amount of discussions with the remaining parties in the other insurance layers. That is my first question.

Eric is going to take this question.

Fair question. It's early days and we cannot really comment on the process compare it to actually who is doing what at what point in time.

But it's fair to say that the other layers have as a policy they may represent difference positions. The claimants start then to litigate both the insurance aspect and the underlying technical aspects of the platform as well as the claim.

So we cannot provide you any more guidance at this point in time, but we will update you if and when developments are taking place.

Okay. That's clear.

And maybe on my second question, you guys hear me correctly or - because I hear some noise on the line actually.

Yes. No, that's fine.

Okay. My second question is on the Leniency Agreement in Brazil because I was wondering, it was not very clear for me because you're now talking there about an adjusted Leniency Agreement with the public prosecutor's office.

So I mean just to be sure, is there - have you seen any sort of acceleration or a new update on - in discussions about an adjusted Leniency Agreement or is there no material change versus Q1?

What I can share with you and what we are doing is that we have quite intense contacts with both the authority as well as Petrobras trying to follow up on the - as you may recall - process that has started with the decision of the Fifth Chamber not to approve the Leniency Agreement we signed a year ago and their instruction to make some amendment. That process is now taking place and again we will update you when there is a resolution.

Okay. And my last question would be on the margin you make at Lease and Operate because I think in the second half of '16 you reported a 64% margin and now you reported close to 65% EBITDA margin in Lease and Operate.

And I was just wondering given that you sort of guide for a 63% run rate I mean at that sort of a cash conversion, can we expect sort of volatility also below 63%? How should I think about this development or is this 63% more or less a minimum or...?

The guidance we're providing really is for the life of the portfolio and obviously you're going to see some up and downs for the life of the portfolio. So you could see some - like you're seeing today, some upside compared to 63%, but you could see also some downside.

But the average of the life of the portfolio is at 63%.

Okay, thank you. That's all my questions.

Yes, good morning. Wim Gille, ABN.

First questions are about the Fast4Ward project, you're about to spend $75 million on the whole. Is that it or is the total cost of building a hull in the Fast4Ward concept a bit higher than that?

What are the - what's the construction time of building this hull? And in previous occasions you mentioned that the Fast4Ward concept is primarily catered towards Brazil and Africa, but can you also use that for a possible Phase 2 in Hyana?

So, those would be the first questions. And the second question is related to Brazil.

Obviously you cannot - we don't have any updates on the case over there, but we did see that in June Petrobras removed Andrade Gutierrez from their provisional ban list. Is this something you are talking about with Petrobras and would it actually free up for you guys to also participate again in the Buzios and Marlim tenders coming up?

Since Eric is not online, let me take the Brazilian answer. Philippe will go through the Fast4Ward point with you.

In Brazil we are engaged with Petrobas on a daily basis, obviously we're producing a significant amount of their production. We have contacted different levels and there is ongoing engagement with them.

It's - there is a lot of work which is being done, a lot of contacts which is being done at all level. Now like Eric explained previously, it's very difficult or impossible at this stage to give any guidance on this side.

But the relationship at working level and the delivery of our premium performance is such that we have a good relationship with Petrobras at this stage. Philippe on Fast4Ward?

I'm going to disappoint you some more because we are not selling - our aim is to sell an FPSO. So, I want to come back on what would be this report we believe for Fast4Ward.

You've heard somehow, we believe now there are further opportunities beyond oil, but let's stay on oil first. On oil - I would - on oil we're talking 150,000 to 200,000 barrel of production so this means major provinces.

I guess coming back to your question on Exxon, we don't know yet what would be the intention and I guess it would be best to address what would be their further programs on that to know whether this is suitable. On gas we see opportunities as well for major gas production and there will be an opportunity well mentioned, but yes, let's stay just on Australia just as an example to feed the major LNG trends onshore, the number of opportunities where it would be suitable to have a gas FPSO.

There have been some recent discoveries as well in West Africa, a major gas province again, so this is - would be again a topic for application. Coming back to your question about delivery and we've got to go back how we've been engaging with customers, I think there was an earlier question about that.

We validated the concept whether with these - with the independent majors, but as well we have a number of NOCs and hence we've done - we've done that, we were able to stop exchanging ballpark figures. We are now at this stage where we have a number of expression of interest not yet tenders, but we see a number of prospect for application of Fast4Ward.

And coming back to your question with the schedule, it means that we believe that independently from the time of delivery of the oil we're going to be in position to be able to answer to a number of those requests when the material has to tender and delivering what is on the promise of the Fast4Ward program, which would be a faster delivery than the traditional condition.

Okay. And I got a final question for Douglas.

When you provided the answer about potential share buybacks, you said you provided or you prioritize growth over dividends whereas in your presentation you usually say that the cash flow after deference is geared towards dividends and then growth. So, can you clarify this?

I don't think I mentioned actually dividends, but to be clear. Firstly dividends, then growth and then as I said, if we - if we see a cash flow position in excess of our needs, buyback remains an option.

So, we're not going to see any further activity on the Lease and Operate side towards the end of the year. With new prospects coming up, would a share buyback be a realistic option for you guys?

Yes, I think there are various moving parts there on the - on the liquidity, the special items we discussed. Yes, we're doing our plan.

We're looking at the outlook for next year where we see things, the amount of money we need to preserve to pursue those things. And then yes, after that in line with what we said on the capital allocation framework, we'll look at whether we have any excess cash flow and if - in excess of our needs and if so, what we do with that.

So first of all starting on the - I want to thank you guys for the work you've done on reporting. I think it makes it much easier to understand the business namely know that it's really the L&O business that carries the debt not necessary the Turnkey so we think it's great work that you guys have done.

Well, I like to ask is it possible in the future to also provide further visibility on the L&O side, namely would like to understand what's the actual distributable cash flow and how much cash do you really get out of these SPVs and out of these dispositions you have on the L&O business?

Douglas here. So yes, I think when I look at it, it's sort of a first step.

First we start with the balance sheet and cash flow on a consolidated position and then we look to see if we can expand some of the reporting going forward. But for now, we're going to stick with the consolidated amount and then we're going to - understand your question.

Still a few complexities to iron out, but we'll review that going forward in terms of whether we can provide more of a breakdown on the segments.

Okay. It will be really, really interesting.

Next question that I have is on the - obviously in the past you mentioned that you guys have looked into an MLP or a similar structure where basically you will remain in control, but obviously transparency and financing optionality will be improved, right. But now moving to this disclosure at the L&O cash flow that also will be improved.

Would like to understand is it still a priority now? That's the first part of the question.

The second part of the question is obviously an MLP typical restructure where - is with a lot of cash. That's one of the characteristics.

If you look at the dividend yields from these MLP's, they're very, very high. However, looking at your dividend yields, it's relatively low.

So would like to understand also if it's just a question of the structure so if you change the structure, you will be able to increase the dividend yield or why is it low?

So firstly, we continue to look at ways in which we can optimize the financial structuring of the business and the projects. I think we have pretty efficient mechanism right now at the project level.

One of the things we wanted to work on and I mean I think that's actually linked with what we're doing on the Directional cash flow and balance sheet is getting better visibility around our cash generating ability. Another leg to that would be conceptually something like doing an MLP where then you obviously have the listed instrument.

Right now we don't see the MLP market recovering to the levels where we were looking at when we actually kind of launched our first project a few years ago to look at that. So we're keeping that under review, but it does remain an option.

And then I think on the dividend; yes, for now we increased the dividend at the beginning of year. We have been clear that we - in terms of the kind of the waterfall of priorities we just discussed on the previous question and that's something.

We'll keep that under review with the whole question of liquidity and cash flow going forward.

So, the next question is regarding the LTP for the management. It was something that was being discussed in the next 3-year award.

It's already been discussed the terms of the new LTP for the next three years?

The new what? I'm sorry.

The new long-term planning that is planned for management.

So, the competition policy for the management has been agreed under what is called the RP-2015. So, it was agreed at the AGM in 2015 as the name is saying and basically things are described this way - and described what is concerning the SPI, but also the MTI and the criteria associated with those.

But this was for the - but now if I don't get it wrong - you were discussing a new one for the next 3 years, right, for the coming 3 years?

No. The way it works is a 3-year program, which is basically in basically in place every year.

So, we're taking 3-year program. So every year, you start with a 3-year - a new 3-year phase.

So it started in 2015, 2016, and the one in 2017 and so on and so forth with a 3-year rotation for - in order for this event.

Okay, got it. So, basically the parameters were the ones agreed in the AGM and then you just update them every year.

That's correct.

Okay. And so therefore the 2017 is already in place basically using the same...

It is already in place.

So, just the final question from my side. So basically obviously right now on the current market you gave your update, but the reality is you know you won Liza, it basically allows you to keep the backlog stable.

However, going forward, we expect the backlog to start reducing because obviously in Brazil you cannot win new projects. Some of the project that where like that you've lost it and of course some of the projects where we were very, very well positioned were pulled like the project that was pulled or delayed.

So, obviously there's nothing you can do, but obviously it's a negative, right? However, you go forward and invest into the project for the new standardized approach and at the same time you keep the engineering capacity in the Turnkey so at the same - if you look at some of your peers, they are trying to be a little more cautious not doing speculative investment while you going forward are doing speculative and not really addressing the cost issue where it could probably increase flexibility.

So just want to hear your thoughts on this, about costs, about the - our risky is what you're doing vis-a-vis what your other major peers are doing?

And that's a valid question and I think it's - there are several aspect too for answering this question. The first one is we are already an early cycle player in the industry.

It's a bit contradictive, but the reality if people wants to develop their field in the quarter, the first thing they are going have to commit is to an FPSO. And most likely field to be developed, our FPSO which are going to be producing between 100,000 to 250,000 barrel per day and that's what envelope of the Fast4Ward.

So, that's one comment. The second aspect is as we have seen the cost on quality or the lack of reliability in the industry has been absolutely killing the industry in sense that a lot of deepwater projects which were economical were not economical once they have been delivered because of the late delivery of the FPSO.

But this has an impact not only on the client and on the economics of the deepwater industry going forward, it has also an impact on the contractor. And what I'm saying there if you don't keep the know-how inside the company, the first project you're going to get, you're going to get negative volumes which are well in excess of the fixed curve that you're maintaining during the period that you have in the downtime.

The third aspect to it is that we kept a number of project managers and engineers in the company without allocating job to the outside. However, it doesn't mean that those guys have been meeting first oil during this period.

They have been involved in developing new product, new technology, which really is going to help us to go forward and really to deliver and to create new opportunities in the market. So, the combination of all those factors is in fact showing in the backlog that we have today.

Now you cannot look on the backlog on a quarterly basis because it's absolutely meaningless and I would say even in the size of our industry, you need to look this over a period of 2, 3 years. But we really believe that which - what we're doing with Fast4Ward and the opportunities we're seeing worldwide that we are going to have a lot of good opportunities in order to capitalize on the investment we have made.

So basically it's really - if I understand correct, so basically what you were saying it's a speculative, it's basically a bet on the recovery of the - of the deepwater basically?

It's - the reality of that is if you look at the presentation that we have given on Liza is today deepwater has a bad name. I mean when you mention deepwater to the financial community, which usually have a timeframe which is fairly short given the specificity of your work, it has a bad name.

The reality of that bad name is not something which makes sense. If you look at Liza the field development, the return on Liza is going to be done with an IRR of 10% at $35 per barrel.

This is really much better than what you can see in Shell oil. And if you see the opportunity which exists in the contract if we deliver on time, if we deliver with the right kind of products, if we cut costs and that's what we believe we can use from the experience that we have at SBM Offshore, you can this industry basically going again with lots of opportunities.

Now if you don't believe this, the best way to do would be to shut down all the contracts in the offshore industry and basically to scrap this industry. We don't believe this is the case.

We believe that there is a lot of opportunities, but those opportunities would come with people with experience and able to deliver reliable solution and that's the case of SBM Offshore and that's why we're investing into our structure.

Firstly, in Brazil we have seen some changes on the requirement of local content. Would that bring any change to your local presence in Brazil?

Second question is on the expiring contracts, next year 2 contracts will expire. Anything new relating to that expiries to mention?

Would those be cancelled or is there a possibility to extend those contracts? Pushing on Marlim Sul, did you make any book profit on that one?

And last, also a numbers question, what's the difference between this $68 million and $78 million that you reported; the first one a reported one, the other one an underlying number for net profits?

So I propose the last 3 question on the Marlim Sul, the backlog and the $68 million or $67 million whatever it is, Douglas is going to take those. If we speak with regard to local content in Brazil or elsewhere, what we would do as a company is basically to adjust ourselves to the requirement which are being put by the different authorities or the clients in order to develop local content.

Now if I could expand a little bit on the subject. One other point which in my view is critical is I do not see any on oil province being developed without any local content and it would not make sense for the local economy, it wouldn't make sense for the local population.

I do not see any oil province being done basically with all the fabrication and construction being done in other parts of the world and with the equipment coming with basically no benefit to the local population other than the tax benefit. So at the end of the day, what is important there is to find the right balance.

And if I look specifically at Brazil and what we have demonstrated in Brazil is when you have the right setup and the local content is aligned with what can be done by the local economy, Brazil can be productive, can be developing projects which are in line with the requirement - the economic requirement of the market and that's the positioning that we have today and we expect that is going to help us to capitalize on it going forward. Now with regard to the - your 3 other questions, Douglas would you want to take those?

I think the first one was about extensions that we see next year. There are 2 there, there's Yetagun and Encasa.

On the Yetagun, the reservoir is declining so there's no real merit in extension there so that one won't be extended. Then the other one, the time frame for that extension is a bit later.

We haven't started the discussions on that. Marlim Sul is going to be scrapped so no P&L impact on that.

Then you said the - I think the $68 million and the $78 million, the difference between headline and underlying. That is the - it's about $10 million to $11 million.

We booked that amount in financing costs and it relates to the unwinding of the discounting effect related to the bonus part of the Brazil provision, which is done on a kind of NPV basis. And as the time gets closer, you increase the provision and the P&L impact goes through financing costs.

Firstly, can we just talk about Fast4Ward and the conversations you've been having with your clients? Are they enabling you to bid that in a tender against conversions given you're the only one who can do it or is it going to be a direct award?

I mean the conversation we're having with clients at this stage is really to see what can we bring into Fast4Ward and we're looking at some of the tender that there is and if we can apply Fast4Ward and again there are 2 components to Fast4Ward, there is the hull and there is the topside. So if we can bring Fast4Ward solution to the tender, we're bringing to the tenders.

What we're seeing is that basically by doing this, we're saving a significant amount of time in terms of tender, we're increasing the quality of what we're doing and we believe it's going to create a lot of traction by - to our clients going forward.

Okay. Then I understand you're hesitant to giving details on Liza, but if you could give us Directional CapEx guidance that would be helpful.

Directional CapEx guidance on Liza?

Even overall will do fine. You were $50 million plus a whole plus, I'm assuming it's gone out from that point.

I think probably what we need to do is the guidance we're going to look at for next year, we're going to provide you a full set of guidance including probably the CapEx and all of this. So if you can bear a little bit with us and we're going to provide you with some numbers.

Okay. What do you expect in '17 then?

In '17, it's not major, I think we didn't provide any guidance in '17.

So there's something on Fast4Ward and then on the Liza side, there's a bit of a link there in terms of partnering, we're still working on that. So once we have that kind of picture clear and the timing that as Bruno said that we'll be able to on an overall basis give you a better picture.

But for now, you have to use the publicly available information where I think it's reasonable - it's possible to get to kind of a reasonable estimate with the publicly available stuff. So, you have to take your due scenario.

And the main point being there the restructuring of the partnership on this project, which would have an influence on the numbers we are going to provide. If we could finalize this and once this is finalized, we can provide more guidance on it.

Following a question on what Mick just asked on Fast4Ward and the discussions you have with clients. Are there also some discussions taking place on a 1-on-1 basis or all discussions that you have in providing distribution of Fast4Ward more skewed in the general tender environment?

It's a combination of the 2. But you can imagine that in order to validate the concept we have gone through some specific cases with clients having some specific discussion about some field, some development, the value we could bring, what would be preventing them to put an order on this.

So, it's really combination of those 2. It's a direct engagement with clients on field specific and - which could lead to direct negotiation or tender activity ongoing.

Another couple of questions on Liza. Especially the physical advantage in Liza is quite high leading to this very low cost price.

Can you give any indication of what that number would look like in a normal world so to say? Secondly, looking at the further finding of reserves there.

It might just well be that there's no room for maybe even 3 lease hours on that field. Have you been in talks on any additional follow-throughs or options therefore my questions for timing?

So with regard to the economics of the field, the question is really better addressed to the clients. We don't have the detail on this information and it's more a question to them.

What we can see is that the cost of development and of the different package is such that if we compare with other field development, it's really quite competitive. Now with regard to the physical policy on this - specific to this field, I cannot comment and it's really a question that you need to bring to the client.

And the same I would say for what they intend to do in order to develop the field going forward is really something which in my understanding is under review by themselves, they're still assessing the opportunities and how they're going to do so. We're not privy to this.

We just - at this stage we engaged in Liza 1 and the development of it. That's why we will concentrate our effort in and that's where we are making sure that we are going to deliver a good quality product.

Also any news on the rather short term of the lease? I think we now see that lease terms of 15, 20 years are now in fashion so 10 years looks a bit short?

Yes. But at the end of the day, our policy as a company has been always extremely clear.

An FPSO is a product which is specific to 1 field and 1 location in a field I would even say and as such, our policy has been saying that when we bid on FPSO under our Lease and Operate model, we are going to take the economic value which is assessed by the clients. We don't have access to the reserve or data and if the client is saying it's 10 years, we're going to take the economic value of our investment over a period of 10 years and that's the policy that we are taking.

We are not taking risk into the residual value or the expectation that there's going to be a continuation to the field. It doesn't make any sense and in fact if I look at the casualty we have seen in the industry, people taking this type of risk are in bad shape or extreme bad shape.

No further questions. So in this case, thank you very much for your attention.

We thank you for the attendance and we wish you a good day going forward. You can now resume a normal activity as I say.

Thank you very much.