SBM Offshore N.V.

Nicolas Robert - Head, Investor Relations Bruno Chabas - Chief Executive Officer Erik Lagendijk - Chief Group Compliance Officer Peter van Rossum - Chief Financial Officer Philippe Barril - Chief Operating Officer

Nick Green - Bernstein Mick Pickup - Barclays Luuk Van Beek - Petercam Wim Gille - ABN Christyan Malek - Nomura Dirk Verbiesen - KBC Alex Brooks - Canaccord Michel Aupers - Rabobank Quirijn Mulder - ING Andre Mulder - Kepler Edward Donohue - One Invest

Okay, thank you very much, Frieda and welcome to all for this half year results conference call. I am joined today by SBM management board, namely, Erik Lagendijk, our Chief Group Compliance Officer; Peter van Rossum, our CFO; and Philippe Barril, our COO.

We are going to use the time for this presentation to give you a view on the macro – on what’s happening on the market today. Peter is going to run through the numbers and I will conclude the presentation with an outlook before opening the call for Q&A.

For the people on the line, as I am going to switch through the slides, I am going to give you the slide number on which we are going through. So, I am on Slide #3 of the presentation.

And what we want to give as feedback on this slide is really three aspects. The first one, we are in a market which is extremely difficult at this stage.

It’s a market where we will be seeing a lot of questions by the clients, by the oilfield services industry, and it’s really a market where we’re going to see a restructuring of our industry at large. The second aspect is that SBM Offshore is in a solid position.

We have a strong backlog. We’re generating strong financial results for the first half of the year.

And we’re in a strong position and we have gone through a lot of restructuring over the past few years, which really is going to help us going forward. The third aspect is, really, we’re making a lot of progress.

We’re making a lot of progress in the sense that we have signed an MoU with the Brazilian authorities in March and we are still in contact with local authorities, making progress in the discussion there. We did a joint venture agreement on the Turritella project with Mitsubishi and NYK, which was announced at the end of the first half, but the cash received in July 15 of the year.

And we completed post-event the financing on the Saquarema project. So going through the first half 2015 review.

From a financial standpoint, the revenue – and I am only going to discuss about the Directional figures. From a financial standpoint, the revenue stands at $1.6 billion for the first half of the year, a decrease of 9% year-on-year, but given the circumstance of the market, quite a performance.

The EBIT number for the first half of the year stands at $255 million, which is in line with our expectation as management. And one point we should be noting is that in the first half of 2015, we’re not making any one-off recognition.

Peter will go more in the detail of the numbers later on. On the compliance aspect, really limited news at this stage, we signed an agreement with the authorities in Brazil in March 16.

Since then, we have been in contact with them on a regular basis. We’re providing information.

The discussions are progressing, but really no news to be said at this stage. On the operating performance and other news, the HSSE performance is a proxy to our operating performance.

What is being seen there is that for the past 4 years, really we have seen an improvement in our performance in all the indicators which exist that we’re monitoring. And that’s really pleasing to see.

That’s pleasing to see, in particular, when we’re in a market which is rather difficult and people might not be too focused on safety. It’s really pleasing to see that we’re progressing even in a difficult market.

Now there is a lot of way we can improve and we cannot be complacent on that. But it’s really a sign that all level of control, the way we’re monitoring the operation has been improving over the past few years.

Now, let me discuss about the market and the market at large. And what are we seeing on the market at this stage?

We’ll be strictly seeing an industry which is in transition. The oil price dropped significantly from $110 per barrel a year ago to in the range of $50 to $60 per barrel now.

And really, we believe that this is the market – the price of barrel which is going to be there to stay and where we need to adapt the product and the services we’re going to sell to the market to this new reality. Why is this, what’s happening really in the market, and what are we seeing is we are seeing that while the price of oil has decreased, that there is still lots of investment in the Middle East, in particular, in Kuwait and in Saudi, to supply the market with new capacity.

We’re also seeing that the shale oil part of the market is still there, that people have made a lot of progress in terms of their productivity and that the shale oil market has not decreased – the supply coming from shale oil has not decreased and in fact, is still present. So, all of this is really creating a level of uncertainty in the market, in the pricing level for the oil price, and it’s putting pressure in us as an industry to adjust to that.

Now, I would say that this is almost something which is good. When the price of oil was around $100 per barrel, a lot of our clients were saying that they are still were not profitable at $100 per barrel.

And we had to do something in order to reduce the cost of our product. With the decrease in price of oil, it’s really putting a catalyst in the mind of everybody to fundamentally change their ways of doing business.

And that is good because that is really something which is going to play to the strength of SBM Offshore and it’s going to help us to generate a new way to do business in this environment. Now, our clients are already saying a number of things at this stage.

In particular, that they’re cutting their CapEx. That’s clear.

You can see this in all the numbers that you’re seeing. But it’s really a sign that we see every day.

They’re also telling us that they have plenty of opportunities to develop fields in deepwaters, plenty, but today, those fields are not profitable at an oil price in the range of $60. So we need to find a solution with them in order to develop product and services which is going to help them to develop those fields.

And there are some ways to do that. There are some ways that we can develop with them in order to get that.

In order to get to this, we are engaging with them. We’re reengaging with them at a lot of levels, at the project level to start with, where there is a high number of tenders at this stage.

It seems to be a bit counterintuitive, but really, there is a lot of activity, with people trying to seek ways to develop fields. So we’re engaging at this level.

We’re engaging also at a high level in oil companies in saying there is different ways to develop a field. And if you can rely on a company like SBM Offshore, which has a lot of reliability in doing the development of their project, you can be able to develop your field at a much lower cost than what you have done in the past.

And the third point that we are doing with our clients is reasoning that through the restructuring we have done over the past 4 years was, today, in a good place of the company. We’ll financially review it, and we can look in a future with them – to the future with them.

Now, in the short-term, all of this is not giving us pretty pictures. We are basically seeing the number of potential tenders decreasing – potential awards, I should say, decreasing.

Basically, we are estimating that by the end of this year, and that’s for all the FPSO market segments, so not only the one we’re targeting, but also the small FPSO project or the new deals, which we are not targeting. We’re seeing potentially 5 FPSOs being awarded.

Now, if we look only at our market segments specifically, we are only seeing potentially 1 FPSO being awarded for the second half of the year, which is actually low. We also have decreased expectation for next year from 10 FPSO to be awarded, to only 7 FPSO to be awarded.

But all of this is rather uncertain. It’s really a picture we see changing on a permanent basis.

It’s a picture where things are evolving on a permanent basis because our clients don’t know where they are and because we really need to engage with them. In fact, to give you a better image of this, we are showing you the number of projects we shall – and what we call, prospects, they either in FEED or in pre-FEED or in tendering stage.

If we look at all those projects, being FPSO projects, turrets or other types of projects, we’re seeing that the number of projects we shall in-house under some form of tendering is at an all-time high. We have 16 of those projects at this stage.

It doesn’t mean that those 16 projects are going to be awarded anytime soon. It means that there are lots of opportunities that people are trying to find a way to develop those opportunities, and this means that a lot of projects are being recycled on a – really for a long period of time through our systems.

If we compare the figure to 2011, we had only 7 projects under tendering at the same period, and only 2 of those were projects which were coming from the previous year. Today, we have 16 projects which are under tendering of some form or another, and 7 of those projects are coming from last year or the year before.

So it’s really showing you that the time to market is taking much longer than it used to be. But it’s taking much longer because people are trying to find solutions and that we need to engage with them.

But there – the counter side to this is also showing that there is opportunity in the market. Now, the effect on this is that it’s increasing our tendering cost, and we’re going to come back to this in Peter’s presentation.

Now, to some extent, SBM has been fortunate in all of this. We are only coming into a period of crisis in our industry, but in fact, we were ahead of the curve of a lot of our competitors.

We only spend a lot of time in restructuring the company, in preparing for the future and investing into the future of the company. So we have gone through a turnaround phase by recapitalizing the company, by reorganizing, by stopping the bleeding that we had on the legacy project.

We have gone through a transformation phase, only by investing into the infrastructure of the company, to have better processes, to have better systems, wherein to capitalize on the strength of the company. And today, we’re in a phase where we can invest in technology invest into the new ways of doing business in order to increase our productivity and to bank on the reliability that we have in order to have a project to be developed.

So, all of this means that, also we have gone through a restructuring phase also, which we started last year. And we made some announcements on it.

So, what are the sources of strength of SBM Offshore today? First of all is our backlog.

Our backlog stands at $20 billion, which is quite significant by any means. And also, I would say that today, this backlog, which is mainly on the lease and operate activity, is being generated at a cost level which is quite attractive to our clients.

So the average cost of running our FPSO for our clients is less than $7 per barrel. It’s quite competitive.

It’s still at a pricing level which means that our clients can operate those fields and generate a high level of cash flow. And therefore, they can rely on us in order to generate this cash flow during this period.

We also have gone through a phase of adaptation. We have decreased our workforce by 1,500 people.

And this is really helping us to adapt to the reality of the market by decreasing our fixed cost ratio. And we have invested in a lot of transformation initiatives, in particular, as for the Odyssey 24 project, but a number of other projects that we shall undergo.

And this is really helping us to become more productive going forward, and not only to be able to provide projects which are going to be less expensive now because of the down cycle in the market, but more importantly, to be able to provide projects to our clients, which are going to be at a lower cost even when the cycle is going to be up. Now, our backlog, again, our backlog is around $20 billion going forward.

The lease and operate part of the backlog stand at $19.1 billion, with an average life of our lease and operate contract of 14.5 years going forward. And that’s something which really is the strength of SBM Offshore because it gives us some financial stability and some – really give us the ability to be solid in this downturn in the market.

And it’s going to give us some opportunity going forward. Now, in terms of restructuring, what have we done?

I told you we are decreasing our workforce by more than 1,500 people throughout the world, which means a one-off cost in the range of $57 million, out of which $49 million has been taken as a provision in the first half of 2015. The saving of this reduction in cost for personnel and other means is in the range of $80 million on an annual basis.

We are still looking at opportunities to reduce our cost base. It’s really something which is going to be part and parcel of the industry under which we are.

We’re going to have to find ways to be more productive to reduce our cost, and it’s really something that we are looking at. The last point on this slide is really the transfer of the head management team from Monaco to Amsterdam and this is going to be effective as of September 1.

So on this, I propose we would go through the detailed financial, with Peter taking us through the different figures.

Thanks, Bruno. Good evening.

Happy to discuss the financials for this half year and let’s start with the total overview, which shows a comparison of the directional income between 2014 and 2015. If I start at the bottom part of the slide, 2014, $1.7 billion in revenue, with reported EBITDA of $98 billion and a fairly significant one-off of $240 million which was a provision we took in the first half of last year for the settlement with the Dutch Public Prosecutor.

EBIT came to $184 million on an underlying basis, which was after a correction of $225 million. That’s the same $240 million provision, and there was an add-back for Deep Panuke, a $15 million credit, so it was a positive to the P&L related to the reversal of an impairment.

This year, this first half, revenue declined by 9% to $1.6 billion, that $1.6 billion actually includes the cash call that we made, the revenue that we invoiced to the new partners, the Turritella project and the Stones project. We announced that in the press release in – on the 30th of June, and therefore, it’s a fairly important part of the revenue for this first half.

It’s reflected in the Turnkey sector, and I’ll come back to that in a minute. Directional EBITDA, $430 million, and we have not made adjustments.

Now you can say, this stake that the Mitsubishi and NYK took into Turritella, isn’t that a divestment? Now, shouldn’t you correct for that?

The reality is it’s not a divestment. There is a divestment element related to it and that’s the joint venture that we created with a de minimis share capital.

We sold 45% of those shares, actually, with the roundings that we worked with, if you don’t see it back in the numbers. But that’s joint venture then basically, it was cash calls by SBM Inc., our contracting company.

That – the revenue was recorded and obviously, the piece that we’re enforcing ourselves as a shareholder in the joint venture has been eliminated in the consolidation. So it is part of the revenue.

It’s not part of other costs and income, and we don’t make a correction for it. Secondly, this first half, we had a significant restructuring charge, $49 million related to what Bruno just said the restructuring program.

Also here, we have taken a decision not to make a correction in our numbers because obviously, this restructuring charge will lead to cost reductions. And maybe not – it will not recover everything in the course of this year, but the run rate and the payback of an organization and a reorganization like this should be just over half a year, let’s say, 7 or 8 months, so, no correction for that.

So, what you see for this first half is what you get with an EBIT of $255 million for this period. Looking at the Turnkey segment, 9% decline in revenue.

But as I said, that was really helped by the participation by new joint venture partners in the Turritella project. I am not going to say a lot about IFRS in this presentation.

But the one thing is, how does this, let’s call it, divestment, this partnership, work through on the IFRS numbers? And the answer is it doesn’t.

As you know, finance lease contracts under IFRS, is treated as a sale. And therefore, revenue and profit is taken during construction.

So, on this particular project, it has already gone through revenue and the profit has already been taken. And then, let’s say, a partner stake of 45% means also that SBM retains control and therefore, it will remain fully consolidated and therefore, there is – of this transaction, and really, we have looked at each other and say, is this really true?

Well, it is really true. We invoiced $446 million, and according to IFRS, there is nothing going on.

EBIT margin, this half, at 16.6%, that’s healthy. And as we have said before, it’s, let’s say, well above what we normally see, which is more in the 9%, 10%, 11% range for this segment.

And clearly, this has been helped by the partner stake in Turritella. Otherwise, the decline in revenue is clearly caused by the fact that there are two bigger projects no longer part of revenue in the Turnkey segment.

Ilhabela and N’Goma, we delivered at the end of last year and therefore, no longer generating let’s say the income that we charged to our partners. At the same time, the CDM, CDS, the Maricá, the Saquarema, FPSOs as well as Turritella, are at the flat end of the S curve which means that the activities are no longer, let’s say, centered around procurement.

Let’s say, the big spend is more flat. There’s a lot of installation and commissioning work ongoing, which doesn’t generate the same levels of expenditure.

We spent this half, $265 million that is directional CapEx. And that’s – we gave that number for the first time for the first quarter.

So it is pretty much in line with what we said in quarter one. Looking at the lease and operate segments, of course, the loss under Turnkey of Ilhabela and N’Goma is the benefit in the lease and operate segments because those two vessels are now contributing to income.

Income has gone up. Actually, the income, of course, relates to those vessels.

It’s quite a bit more than the delta, but we’ve seen also our three vessels dropping out of the portfolio, being the Brasil FPSO, the Marlim Sul and the Kuito. EBIT margins, fairly comparable, 26.7% last year, 27.5% this year, recognizing that in the last year, we had a $15 million reversal of the Deep Panuke impairment charge.

So, the underlying margin was $124 million rather than the reported $139 million. And we had part of the restructuring charge I talked about that is allocated to each of the segments.

There was an $11 million charge in this particular segment. So overall, the EBIT margin has improved by more than 20% over last year.

Total P&L, a few items that I haven’t touched upon. I will come back on the overheads in a minute.

Other operating income, there are two charges, and again, these are the charges that I mentioned before in 2014, the provision for the compliance case, and then this year, the restructuring charges, minus a small-plus related to the divestments of the assets held for sale, the tanker and the FPSO, depreciation going up as a result of CDI and N’Goma coming on stream. As the net financing costs, you can see there is a significant increase and that is related to those vessels now being on hire and therefore, the interest is no longer capitalized but charged to income.

9% effective tax rate, which again is, we believe, one of our competitive advantages. Looking at overheads, we are looking at overheads quite a bit, and in particular, in an environment like this where orders are scarce and costs are expensive.

We have taken necessary steps to reduce costs where we can. At the same time, we also spend money where we believe it makes good sense.

And therefore, we give you a bit more disclosure on how the overheads are built up. And we are looking at four particular components.

The G&A, which really is the cost of running the business offices, people, etcetera, but we are seeing a half year on half year reduction by $14 million. That’s somewhere between 15% and 20% reduction and that reflects fewer people, fewer offices, less travel.

We are looking at all the various cost elements and we are trying to manage them to, let’s say, as low a level as we can deal with. Sales and marketing, you see that the costs have gone up.

Activity levels, as Bruno said, are quite high, but not, let’s say, higher than we’ve seen in previous years. The only thing is that the recovery of, particularly, pre-FEEDs and presales work from clients is becoming a bit more scarce.

Last year, we had good recovery on a particular project. That’s missing this year and of course that’s immediately translated in a higher net cost to the bottom line.

Research and development, we really have increased our expenditure on R&D. That’s part of what we announced last year, the targeted investment in fleet maintenance, in organizational capabilities, Odyssey 24 and research and development and this is coming out.

Where we are spending it on? I can’t say much more than we have been very closely looking at how can we get, let’s say, to a Generation 4 FPSO, which is a Generation 3, but then significantly cheaper.

And that is where a lot of our effort is going into at the moment. And then there are a number of one-off items, some pluses, some minuses, including – and that’s a good, let’s say, point.

We had a pretty good research and development tax credit, which we’ve not netted in the R&D costs as presented here, but it’s netted, let’s say, in the interim financial statement. So R&D looks flat.

But that’s due to the fact that we had about a $7 million credit in the first half of this year. Balance sheet, now this is an IFRS statement.

So there’s a lot on it that we don’t think we own and there is – there are things not on there that we actually feel we own. What you see there, the main developments, the investments in the future finance leases, a $480 million increase in the construction contracts, and that reflects the efforts, particularly in CDI, CDM, CDS, and in Turritella.

Cash and cash equivalents, slightly down, but still at a level where we believe it is too high. And one of the efforts that we do under the Odyssey 24 program is to put in a cash management system, which is actually quite a bit of work to do that on a global basis, where that every year, $100 million of reduction on average in cash balances saves the company $5 million in the bottom line and that’s worth going for.

The final point I want to mention here is the trade payables. Since we are, let’s say, not adding new projects to the Turnkey segments and we also see this flattening of the expenditure going into the flat end of the S curve, payments trail behind because we accrue expenses, we make any of our assessments of the percentage of completion.

Invoicing from the clients or from the suppliers usually comes later. So, we have seen, for instance, this half year, a reduction in our payables.

And mind you again, this is 100% IFRS numbers, with about a $300 million reduction. And that’s immediately cash out.

So, that’s an important element of the cash flow statement for this half year. Which brings me to the cash flow position and this is really looking from the cash position at the end of last year to where we are today.

The main features, let’s say, the operational cash, the cash-in of $164 million. We entered into new loans or we called under existing facilities, but at the same time, we paid off loans according to a payment schedule and I will show you that in a minute.

So, by and large, it was about a $200 million to $300 million increase in the debt position. We had equity funding from partners, but the investments and that includes the movements in working capital of $559 million that was a major element of the cash flow for this half.

And by the way, to avoid any doubt in this statement, the cash flow position, the amount that we charged to the joint venture partners for Turritella, of course, is not included in here, the $446 million. And obviously, there is no effect of the Saquarema funding in here because debt was concluded post periods in the first cash call, or the first drawdown on the debt loan still has to take place.

Net debt, $3.6 billion at the end of the half year, that’s up $300 million for the reasons I just explained to you before. The guidance for the year is $3.5 billion.

And as Bruno said, we are actually quite comfortably reiterating that guidance. And particularly with the Turritella in the bag, that’s a – yes, that’s a comfortable situation to be in.

Just one thing, let’s say, a part sale of that project wasn’t envisaged when we set the $3.5 billion target. So, in that sense, it doesn’t come in a deduction of it and then you can say why wasn’t done then that part of the income?

When we made the guidance, we weren’t sure whether or not the deal we were going to do with a joint venture partner was going to be a divestment, which will go through other costs and income or it will be structures like we have structured it, which is the divestment of a share and then the cash call on a – on the project progress. So, that explains what could be seen otherwise as an anomaly.

Based on popular demand, we decided to give a bit more insight in the profile of our loan redemptions. So, what you see here is a proportional view of the gross proportional debt.

So, the number in the bar at the left, the $3.988 billion, this $4 billion is actually excluding the cash. And in the bars below, you can see what the repayment schedule is of that total loan amount over the years, going out to 2029.

This is the contractual schedule. Now there are a few things in here that are more difficult to capture.

For instance, at the end of June, we had about $300 million to $330 million drawn under the revolving credit facility. That’s our share.

We’re up actually, and that’s entirely in SBM facility. So when do you repay that?

Would you say, that, well, we’ll put in there when the facility runs out. My expectation is that it’s a – it will be repaid much earlier, but it is not how we’ve treated it for this particular diagram.

On funding, and that is my, let’s say, my last slide before handing it back to Bruno. The team, the funding team, has been very busy this first half on a number of projects.

And although something like the Cidade de Saquarema, the ECA funding was only completed just after the midyear. I do see that as a real achievement of the first half.

I’m quite happy with the, let’s say, with the outcome, $1.55 billion. That’s the biggest project loan we have ever done.

It’s the first time we’ve worked through export credit agencies, $800 million through the Dutch Atradius, who have been sort of pushing down some of the corporate through other European ECAs. We had $400 million coverage from the Japanese and there was a commercial tranche of $350 million.

A 14 years’ maturity post completion, so that’s, again, a very long loan, with an average cost of debt. And that’s all included, including the insurance costs, including the upfront fees that we have paid to the banks of just over 5%.

So a good deal for SBM. A few other things to mention at the end of the half year.

In terms of undrawn credit facilities and cash, close to $1.4 billion, again, before the Saquarema deal. Turritella, we talked about a couple of times already.

The one thing that I’d like to mention in this context as well, and which is also mentioned in the press release, we’re working pretty hard on the MLP. We’ve announced that we do not expect to actually launch the IPO of the MLP in the course of 2015.

A couple of reasons for it, but an important reason is just that you don’t want to launch with certain uncertainties still hanging out there. There are certain, let’s say, conditions that we also need to meet we’re still working on.

And to, let’s say, launch with the midyear 2015 numbers, they go still early November. We would have to, let’s say, file the prospectus, et cetera, in the next couple of weeks.

So it’s highly unlikely that we will have everything behind us that we need. And therefore, it’s better then to use the full 2015 year numbers, which means that we’re moving the launch, bear market circumstances and making sure that all the work and the uncertainty has been removed.

We will do that next year. Bruno, back to you.

Thank you, Peter. And so it’s for me, the opportunity to conclude the presentation, discussing about the outlook for the year.

And first of all, let’s think about the portfolio of projects that we have. Today, we have three lease and operate FPSO projects under construction.

The first one, Maricá, she has arrived in Brazil. She is under doing construction and integration in the Brasa yard.

And the expectation is for her to be in the field and in production by the first half of next year. Saquarema, she is 3 months behind.

She’s basically still under construction in China. She’s going to be sailing to the Brazil before the end of the year.

And also, she would be in production, our expectation is by the second half – by the second quarter of 2016. Turritella – and I should say, all those projects are progressing nicely.

Turritella, she’s in construction in Singapore. Also, our expectation is that she’s going to be sailing before by the end of the year to the Gulf of Mexico, with the expectation to put her in production by mid-2016.

Now, for other projects, basically, our other portfolio of projects is today on track. We have delivered our target projects in line with the expectation with the – from our clients.

And so there is really nothing to say about our portfolio, and for this type of activity, no news is good news. Now, Odyssey 24 project, it’s really a project that we started two years ago, under which we have a budget of roughly $75 million.

We have been spending, really, roughly two-thirds of this budget at this stage and we are starting to see the fruits of the investment. Now, what we are looking at is really looking at ways of doing business with our suppliers, changing our processes, changing the IT infrastructure of the company, so doing a lot of things which really are not flashy to a lot of extent, but which really are going to help us to increase our productivity going forward.

Our expectation is that the payback on this project is going to go – is going to be through to Generation 3 FPSO coming in the future. Now, let me conclude by the guidance for the year.

For a reason that Peter explained, we are increasing our revenue guidance in terms of, again, directional revenue to $2.6 billion, which is split for $1.4 billion on the Turnkey side and $1.2 billion on the lease and operate activity. We also are giving you the same level of guidance regarding our net debt level at the end of the year at $3.5 billion, and we’re doing this with a great level of confidence.

Now, for the first time, we are also giving you some guidance regarding the Directional capital expenditure going forward. And in the first half of the year, under Directional figures, we spent $265 million of capital expenditure.

What remains to be spent under the portfolio that we have is $265 million, out of which, 75% should be spent in the fiscal year 2015. So on all of this, it concludes our presentation and what I propose is that now we open the call for questions.

Good evening. Thank you for taking my question.

Peter, I wonder if we could talk about the treatment of the revenues, selling of Turritella’s stake, without going into too many technical details, are you able to confirm when you sold the stake in Ilhabela, Saquarema and Maricá, did you follow the same treatment, treating them as revenue to the business or did you follow a different treatment?

Nick, we followed exactly the same treatment. Now the big difference when we, let’s say got into projects like Saquarema, Maricá, Ilhabela was that we had the joint venture, let’s say, from the day, from the word, go in place.

So it was a gradual buildup. And as and when the project progressed that we cash called the joint venture partners and we took that through the P&L.

As I said IFRS, there is no difference at all. It’s under let’s say, directional reporting.

We follow actual invoicing. So it’s the same treatment as we have done before.

It’s let’s say, it’s pretty transparent as far as we are concerned.

Okay. And did you recognize profit from the sale of work into the JV this time around?

Yes, we did.

And how does – can you explain how you are able to do that given most of the works already won, a good portion of the work has already taken place, how come you are able to backdate the profit from the sale of that to the JV partner?

What you do in the let’s say, in a situation like this, you sit with the joint venture partners and you agree what the value is, the lump sum value for which the joint venture is going to acquire the assets. Then SBM, as a contractor actually delivers according to that lump sum value.

While it’s doing that, if everything goes well you spend a little bit less and you make a bit of a turnkey margin on it. That’s how it goes.

Okay, thank you. And to check, it is more influenced by the fact that if you haven’t done it this way, the turnkey business would have had something like a 50% reduction in sales compared to year ago?

That’s – I think it’s not difficult to do that kind of math, Nick.

Okay, thank you. And then just one final one, please on the Saquarema loan, fantastic that you have achieved a financing.

The loan to value is close to 100% by our reckoning. Historically, you have normally taken a loan at 75% to 80%, do you have any concern over the ability to raise loans on future wins and does that – does the experience of raising financing this time around encourage you also where you are a little bit towards future, future growth and future project awards?

Nick, that’s an excellent question. There are a couple of things to take into account in such a project loan.

The first one is it is a depreciating loan. So we repay the loan as we go.

So it’s not a balloon repayment. And the day that you sign the loan is indeed the moment where you actually commit a significant portion of the cash flow to interest payments and loan repayments.

Now how do you measure, let’s say, to what extent you can go. Every contract, loan contract has a debt service coverage ratio attached to it.

And as long as you stay within that ratio and you comfortably stay within that ratio, there’s actually nothing, nothing difficult for the banks to finance. That’s the same what we’ve done here.

And yes, it’s a fairly substantial amount. But it’s good for the company.

The cash flow is – the visibility on the cash income is very clear and the banks themselves are quite comfortable with this.

Okay, thank you. I will turn it over.

So, it’s Mick here. A question for Bruno and in the last couple of years, you have been talking about the industry doing things differently.

I know you talked about more work in that preparation work, what is that you think needs for the industry to move forward from here, because is there some aspect that still needs to come out a lot, lot cheaper for this to move forward and just actually progress from there?

Yes. Thank you for the question.

So tow aspects to this question. The first aspect is, there’s going to always be cycle in this industry.

And through the cycle, prices are going to decrease and increase as per the cycle. In fact today, when we are tendering a project, compared to a year ago, for exactly the same specification and scope with no change, we are basically seeing a decrease in the pricing level – in the costing level in the range of 15%.

And that’s the level we are seeing throughout the industry. It can be more for some projects.

It can be less for other. But that’s basically the level we are seeing.

Now this was – its part and parcel of the cycle in the industry, and it’s really something that doesn’t change the fundamental of the industry. What we believe there was ways to change the fundamental of the industry in terms of using the relationship with the suppliers and competent suppliers at that in order to reduce the specification of what our clients are asking.

And we are doing some exercises at this stage to demonstrate this to some of our clients. With the specification that they are requesting us to do, we will basically come do the project, but we would come to the project with a cost premium of 20% to 30%, depending on the specification of the client.

Now if we come back to them and say, listen, we as SBM, we have been running FPSO for more than 270 years combined. We have basically an ability to run the FPSO with a 99% uptime.

So the competence level that we are bringing to the table is not to be questioned. We can do your project differently with different specification and we can help you to be profitable in developing your field.

We are starting today. We are starting to be able to engage in some conversation with some key clients on this subject.

It’s a long battle, because it requires a lot of change in the mind of our clients, but the same token, it’s really something which is necessary from a client and from ourselves also being able to listen more to them in order to change the structure of the industry. The third part of this is what we are doing in terms of investment.

Over the past 2 years, 3 years, we have – despite going through the downturn, we already have gone through a fair bit of investment and the investment was focusing on trying to find new solution in order to deliver our product at a lower cost. Now we are coming to the end of this investment cycle and we are starting to see some avenues, whereby we could standardize more the type of product we are doing or could simplify them and yet again should fund with reduced cost of the industry.

But here, we are not ready to make any announcement on this subject. We are hopefully going to be in this position by the end of this year, beginning of next.

Okay. And my follow-up question for Mr.

Peter, I think the biggest difference I have seen in numbers is actually important in IFRS and the – if you look at the Turnkey revenues, it’s much slower than anybody was expecting. And it looks like that, which it comes from finance lease aspect, was a lot lower.

Can you just give me the percent of completion of the units that are ongoing, so I can try and work out why I am so wrong?

Yes. We actually gave an indication of percentage completion in the press release in the table.

And admittedly, it’s on Slide 13. It’s also on Page 3 in the press release.

It’s not, let’s say, down to let’s say, an exact point, but it’s close enough for you to hopefully get some numbers.

Percentage of completion is there, I am just a bit confused why the CapEx was so low?

Yes. There is one thing, which actually is in the presentation and it’s also mentioned in the press release, the CapEx for let’s say, the for – go forward CapEx at $265 million to complete the three projects is net of any milestone payments that the client will make directly upon first oil.

So that’s to be taken into account.

And that’s on Stones and Turritella?

Or Maricá and Saquarema.

Okay. Thank you.

Luuk Van Beek, Petercam. First a question about your net debt guidance, because I understand that the part of the Turritella was already included in the original guidance, but still you only need $70 million in the second half to meet your guidance, despite the cash coming in from Turritella, which greatly exceeds your CapEx guidance.

So could you shed any light on cash outflows that I may overlook in this regard?

Thanks, Luke for the question. That’s mostly related to working capital movements that we need to take into account.

Okay. And my second question is on the 16 projects in which you’re working.

Are those all....

No, it’s mostly working capital. But just one thing to remind you, when we did the deal with the Dutch Public Prosecutor last year, we actually had a deferred payment schedule to the $240 million.

There was $100 million paid on the spot. We’ll pay $70 million at the end of this year.

There’s another $70 million to be paid at the end of 2017, so not in significant amounts to take into account in these forecasts.

Okay. And then on the 16 projects, on which you are working, is that the work that is paid for by the customer or is it all just an investment in opening of new work?

And can you shed any light on things apart from very large awards that you could win in the near-term to – as the workflow to keep your staff busy basically and to generate a profit margin?

Yes, I mean, what we can say is that it’s likely that a lot of the standard FEED activity are going to be recycled for a period of time. Some of them we’re financing by ourselves.

Some of them are being paid by the client. And actually, in the press release, you can see an increase in the sales and marketing costs, which is already linked to the five that we are investing in industry.

One of the things which is tricky during this period is really to be able to find proposition to the time which makes sense in terms of value, but also which makes some sense to us. So we’re not going to take project whereby we’re not going to generate positive cash flow and margin that we are not in the game to do project for the sake of doing project.

We are there in order to ensure the financial stability for the company in the long-term. And that’s one of the tricks that we’re going to have to have.

And for this really, we need to spend a lot more time with our clients than what we have done in the past, because they’re trying to find solutions, trying to find solution not only due to the cycles in markets and reduction in price, but also to finding new solutions for developing their field. How many projects I’m going to do in this period?

I cannot tell you. It’s changing on a daily basis.

It’s really something, which is actually [indiscernible], and it gives high level of uncertainty. That’s the situation under which we are.

Okay. And my final question for now is on the negotiations with the Brazilian authorities, is a settlement dependent on testimonies that still has to be given by third parties or is it something that is possible to reach an agreement before all the say evidence gathered by the authorities has proclaimed completed?

So is that entirely out of your control?

And I think as Bruno has indicated, we will give a final statement if and when we have a settlement or a final resolution that we have reached, and we cannot comment on any interim position.

Good afternoon. Wim Gille from ABN.

I would like to go back to the Turnkey margin, because obviously, there was kind of an expected element of the Turritella. I think for most of the people, this is not going to greatly influence the margin, which was kind of high in the historic perspective and also high in terms of normal guidance that you give as kind of a rule of thumb.

And if I add back this $32 million in restructuring charges, we even get to about 20%. So can you kind of give us a bit more color on what exactly happened in the first half?

Why the margin is as high as it is? And secondly also, before we get too carried away, maybe a little bit of sneak preview into what’s going to happen in the second half before we blow off consensus unnecessary?

Second question will be on your cost base. Obviously, you’ve done a lot of restructuring, 1,500 FCEs and you quite indicated that the pay will be very quick.

But what’s the cash cost base that you have supposedly if you are kind of have zero Turnkey revenues in 2017? What will be the kind of the cash cost base that you would have in that case so that we can try to evaluate whether or not you are able to remain above breakeven in that scenario?

And then finally, regarding the Odyssey 24 project, I always assumed that the R&D part was included in the 2.5% to 3%, that, that is going to end in line with the Odyssey 24 project, but now you indicated it’s ongoing. So what should we put in to our models for the R&D part going forward?

Wim, to start with the Turnkey margin, yes, it’s been a good half year. That’s – we can’t deny it, guilty as charged.

There’s always lots of moving parts, particularly in the Turnkey business. Next to the other divestment, the participation of NYK and Mitsubishi on Stones, we also have various other projects, including the turrets which are also nearing completion.

When you get closer to completion, the feasibility on things like contingencies, margin becomes clear. So there’s some elements of that involved in this as well.

We don’t go – we’ve never done that into individual project profitability. So I’m afraid I’m not going to answer all your questions in this particular case.

The only thing I would say is that if you were to look at the margin we made this first half, I wouldn’t use it as a guidance for the next. But that’s you, you’re the analyst, you can do that work.

On R&D, the question on the, say, what we’re going to do, let’s say, with the engineering capabilities if the work really dries up, I’ll leave it to Bruno or to Philippe to answer. On R&D, when we set the program, the 2.5%, 3% of directional revenue to be spent on this kind of initiatives, we had clearly a path in front of us.

What’s now transpired is when we set these targets in the back end of 2013 oil price was $110 per barrel. All this changed, and I think the imperative, as Bruno said, to really come through with solutions that make us profitable in the whole value chain of deepwater exploration and production.

$50 to $60 of oil is just a must, and therefore, we will continue to invest.

That’s our ‘16 prospect. Within this prospect, the add value stage of maturity.

There are other conceptual proceeds. So, in 2016, we would expect some of them to move to proceed – FEED to FEED.

Whether those FEED are paid or unpaid is still a question of discussion with the customer. So I think you shouldn’t be anticipating that we are not going to make the best use of our personnel.

I think it’s really in that direction that we are heading. Coming back to R&D, we are looking at things such as standardization.

We are committed to come back by the end of the year, at the start of the year to tell you more what it is about. And I think this is moving from R&D to actual prospect that we’re heading.

That point on the margin, you will remember that in 2012, we changed the margin recognition principle in saying that in the first phase of the project, for the first 20% or 25% of the project, there is no margin recognition, which is being recognized toward the end. Because we are coming to the end of the portfolio, with no new project, basically you’re seeing an improvement in the margin, also due to the way we are organizing margin at completion on project.

Can we have the next question?

Hi, good evening gentlemen and thanks for taking the questions. Just two questions.

First on just the sort of the standardization of the customer base in terms of how you are looking to reduce costs, to what extent does that make the FPSO business further commoditized? And how do you in terms differentiate versus competition, particularly in Southeast Asia, if that is the trend we are going to?

What are sort of responses that make you stand out? And to what extent could price be the key determinant in terms of winning new Turnkey business?

And the second question as it is linked to the services, where do you see margins normalizing to in the mid to longer term if there will be a discontinued pressure to reduce cost? Can you give us a sort of framework or a range we can work of?

Thank you.

So, the first aspect on standardization and pushing the product into commodity, it’s an extremely valid question. At the end of the day, what we’re selling is not so much a product, it’s the ability to generate cash flow for our clients.

And today, the know-how that SBM has of the ability to run FPSOs hopefully with more than 99% uptime is really a testimony of this ability. Now we can do this in a more standardized manner, but the know-how, which is really behind this, is really not something which is a commodity that you can buy in the market.

It’s really something which comes with experience, it’s coming – something that comes with the learning curve. It’s something that comes with the lot of small trick and experience you can get in doing the project.

And even if you are standardized, a turbine is a turbine, a compressor is a compressor. It’s the way you assemble all of this which makes it different.

And therefore, for us, the way we are looking at standardization is really the way we’re going to look at a product we’re going to sell to the end client to be able to reduce the cost, but yet keeping the know-how that we have as a company and being able to differentiate ourselves from the rest of the industry. The other part, which is also very important, the ability to deliver projects on time and you should look at the track record of SBM in delivering their FPSO under the same specification than the rest of the – our competitors.

Our track record is actually impressive. And that’s really something, which has a lot of value to our clients, in the range of $700 million if you are late in the delivery of the project.

So for me, the standardization does not equate commodity. In fact, standardization equate lowering of the base cost and being able to be more predictable in the delivery of what we want to deliver.

Now regarding the margin going forward, it’s fully almost impossible question to ask. Obviously, we’re going to see pressure on the margin, but I would say that if we’re able to transfer to the market some of the know-how that we have as a company and to be able to reduce the cost on a structural basis, we actually could see the level of margin remaining the same or even increasing during this phase.

And just a follow-on from that, what escape you see for consolidation within the FPSO industry? And there is sort of – there are other companies who are looking to bid, but far more on the newbuild side, where there’s not so much differentiation.

Do you see that as a potential threat?

So, first of all, consolidation in the industry is likely to happen. It has already happened to some extent with a few mergers, which have been announced.

Here I am thinking about the oil services industry and rather than the FPSO market per se. And it’s really a trend which is going to be going in 2016 and 2017.

I think a lot of people are going to be waiting for this phase and there is going to be some opportunity to do merger and acquisition. Now, the strategy of SBM Offshore could do without any merger and acquisition.

We already believe that we have the strength, the financial strength per se that we have, the visibilities for lease and operate backlog, that we have the technology and that we can grow really without going through a merger and acquisition phase as a company, but we are going to see a lot of change and shift in the industry. There is no doubt about that.

Now, we are going to see competition. I mean, people are going to try to find new solution in order to develop new ways to develop field in deepwater.

And for this, we are planning to remain ahead of the curve.

Okay.

Yes, good evening. A question for me on the Ichthys and the Prelude turrets, your delivery seems to have – has been rescheduled into 2016.

Does that carry any additional costs for SBM? And is it only on the clients’ behalf that the delivery date is extended quite significantly versus your previous date?

That’s my first question. Second question on, if I may, following Wim’s comments on Turnkey, could you share with us what the Turnkey margin would have been excluding the Turritella transaction?

And as a final for just to make it clear to me, the seven FPSO prospects for 2016, how much of those are fitting – will be chased by SBM?

To answer your question on Prelude FLNG, the last module, I know we had a lot of post midyear results, was as well delivery 15 days after in Korea. So we delivered the vast majority of the scope, and that is represented as well on Slide 30.

The last element of the turret was provided as part of the scope by Samsung and Technip, and it’s required in order to finalize the old structure. So that’s not under our responsibility.

Most of the integration work is still to be done, and that’s the reason why you have this 2016 delivery date. Most of the activity, I think we are almost finished, and most of the activities are finally assisting customer.

On Turritella, I think Peter is going to give you a standard line.

I would say, nice try, Dirk. We – as I said before, we don’t go into individual projects.

So I’m sorry, I can’t answer that question.

Commercial activity. When we look at the number of FPSO projects for next year, we speak about 7, out of which, there is a high level of uncertainty, as I mentioned.

But we put it on stride potentially four projects, which could be of interest for SBM Offshore, but yet again, a lot of uncertainty on that linked to, first of all, other projects, the economics of those projects good or the evolution of what it is in market.

Okay, thanks.

Yes. Hi, good evening everybody.

Couple of questions. Firstly, on the MLP, I definitely appreciate some expansion on your comments on the reasoning for the delay into next year?

And secondly, I noticed that as best as I can read your accounts, the payments from customers continue without any significant delay and I just sort of want to get an update, but you are not seeing any payment delays from any customers at present?

Alex, it’s Peter here. Thanks for the question.

Yes, you want some more color on the MLP. As we said before, we need to be careful what we say.

There are gun jumping rules. It’s important to understand that we continue to go full fledged ahead in preparation.

So, we are working with a couple of banks. We are working with advisors.

We have just appointed CEO, CFO and that’s one of the most senior persons within the group. [indiscernible] was running the Schiedam center, is going to lead the MLP.

So, there is a real commitment from our sides to make this work. As I said, the – you wanted to create the best possible circumstances for such a launch to be successful, which means full valuation.

That means as little uncertainty as possible and good market circumstances. And what I said, we do not expect that those situations will be around for the next few months and when we need to file and to get the clearance for the numbers before the half year numbers go still.

So that’s the main reason. You are right in terms of the payment performance of our clients.

We see to – we continue to see, as I said, a very stable line. I think everybody realizes that what we’re doing is not just to provide an FPSO, but to give access to the ATM, as I always call this, which is the FPSO.

It produces crude, and crude is cash, and the clients need cash. So, there is some good leverage.

We do watch this, of course, very carefully because in today’s environment, you only need let’s say, one or two incidents and it shows up, so very much a scenario of tension, but so far so good.

That’s very kind and so if I can just follow-up, you have got a number of slides in the appendix on the covenants and I wonder if you could sort of draw our attention to where we need to be watching in particular, because obviously some of those ratios you are comfortably ahead of others are going to be more difficult over the next few quarters?

Sure. So if you look at the – and the sense that it’s larger is pretty transparent.

The three main covenants, there is the solvency covenant and we are comfortably, let’s say within the limits. There is the leverage, where at the moment we are within the covenant limits, where we could see ourselves break that limit.

But we have put in place, what we call an alternative covenant, which is an operating leverage. So it’s a situation that we foresee.

We don’t know whether we need it. If we need it, the facility is there, has been prearranged with the banks and it’s our call to use that at a minimum fee.

Then there is the interest coverage ratio. This is the ratio where you see – because of course, interest costs are going up, while EBITDA is coming down, where you see let’s say, a speedy movement towards the covenant level based on our current forecasts that’s a number that we will continue to watch.

But there is, let’s say there was for us no reason to negotiate also, let’s say an exceptional covenant within the numbers coming out of our business plans. So that’s in short the answer to your question, Alex.

That’s extremely kind. Thank you very much.

Michel Aupers, Rabobank. I have a question about the substantial payments on first oil on Maricá, Saquarema and also Ilhabela in the past.

There is also an impression that Kuito has a decrease in day rates over time, so I am wondering a little bit, can you kind of provide some light on the front loaded payments on first oil on other projects in your portfolio?

I think the other thing I can refer to, Michel is for Ilhabela, where we made some disclosures on what happened there. And indeed, we had about $100 million.

That’s for the joint venture that owns the vessel. There was a milestone payment on first oil of about $100 million.

You also know that Maricá and Saquarema were modeled on the Ilhabela example.

But that has happened in the past or...?

Then I would have to dig deeper. Let’s say, the – it’s possible, I am not 100% sure.

So that may be something we can look up. If we haven’t disclosed that before, I doubt it.

Okay. And then on the Saquarema and Maricá follow-up, I have a little bit the impression that you changed the contracts last year or this year, the contract terms, because you are now also talking about extension options or is that a misunderstanding from my side?

I think that’s a misunderstanding. There’s no change.

There was no change in the contract.

Good evening. Quirijn Mulder from ING.

A couple of questions, first of all for Bruno, you speak about market trends, etcetera. What’s more specific about Petrobras, if you look at the numbers, the CapEx down from $222 billion to about $130 billion and given the fact that they predict something like 20 FPSOs and 15 are already in construction, how do you look at your – at the prospects for SBM in that specific market, which is so important for you, that’s my first question.

And the second question is about the one FPSO you – yes there is maybe being awarded in 2015, I – probably you are tendering for that, how are your chances or how do you see your chance for that FPSO in 2015, if it is awarded though?

Okay. So the prospects in Brazil, I would say that the market in Brazil, like any other markets is being subject to a decrease in CapEx.

But there were still plenty of opportunities, I mean when you look at the Abreu e Lima field, even though there is a decrease in the number of FPSOs which are being put in the business on Petrobras, there are still opportunities for number of FPSOs. There is a new field opening up.

And there was new operator also starting to look at ways to develop activity in Brazil. So again Brazil like any other market is a market that we are going to have to review, that we are going to have to follow.

And Petrobras is an extremely important client of ours. We are processing at this stage, more than 20% of the oil in deepwater or the oil offshore in Brazil.

So really, we want to establish good relationship with this key client of ours. Regarding the award of the projects, I mean first of all, the likelihood of a project being awarded in 2015, I would say is rather remote.

I mean, it would mean that everything is aligned under the sun. It’s not impossible, but it’s rather remote.

It’s likely that what we are going to see is that we are going to put some offers, that those offers are going to go through a recycle and yet to another recycle. So that’s where we are.

Now again, really what is our chance of being successful on this is really based on the value proposition of our clients. If the client is only looking at a low CapEx, maybe one of them is going to be the most competitive.

But at the end of the day, that’s not the way to look at an FPSO project. The way to look at an FPSO project is the value you are going to be able to generate as a client and the cash flow you are going to be able to generate as their client.

And there, the value proposition of SBM is second to none in the market.

A final question about Marlim Sul, can you maybe update us on that project. There is something like in standby rate, so maybe you can elaborate on that development there?

Standby is actually a part of the detail of the press release. So we will stand by – up to the middle through the end of this year.

We are in decommissioning phase and that’s where we are at this stage. Again, we don’t make any detailed disclosure on specific projects.

But this is a project which is being decommissioned at this stage.

Andre Mulder with Kepler. First question on development of turnkey, if you look at the order book, if I turn it around, what kind of sales would you need to stay at least at a breakeven level?

Yes. It’s an elegant way to try to answer your question, which is also rather almost impossible to answer, because it really depends on the level of FEED activity that you could have, which might not generate a lot of margin, but generate a lot of activity, which is being paid by the client.

So even though the top line might not look weak, the recovery of the engineering resources is there. You don’t have any procurement from the outside.

So giving you a top line figure to say, what is the level of breakeven would be misguiding you in reality. So that’s why we are not giving those figures.

And also for a variety of reasons we don’t give the breakdown of our fixed cost structure.

And looking at the gap in the backlog, has that been caused by Turritella or was it something else?

Okay, good. I think I understand your question.

The – when we signed the deal with Mitsubishi and NYK, what we did effectively was we accelerated a lot of revenue into the first half of 2015 on a directional basis. The – I guess you are doing the numbers, we had set $21.8 billion at the end of last year.

We now are at $20 billion. We have $1.6 billion in production.

So you would expect it’s with also $0.3 billion of new orders that we would come out around $20.5 billion rather than the $20 billion where we are. So is that what you are asking, okay.

That $500 million is really explained by the fact that we – when we, let’s say invoice our partners, put our share in the projects, you do it as effectively on a time value corrected basis, is the present value that these guys also need to make some money out of their investments. So the way the backlog is calculated and presented is on a nominal basis.

So it is effectively the day rate and it’s not corrected for inflation or for discount rates. It’s nominal view and that explains the difference.

And so there is the big element that causes another element that’s related to it in the backlog. We also include the operating and maintenance components, which is also reflected in the day rates.

Of course, that has a very different profitability profile. And secondly, that’s not what you necessarily include in the investment value.

So, those two components, but the most important one by and large is the time and value of money, the discounting factor that drives that delta.

You disclosed three units, has there been any result on those?

Yes, a couple of million?

Last question, I can remember that when you sold Monaco buildings, you entered into a sort of sale and leaseback. Now, you are moving to Amsterdam.

Does that have any effect or would it only be the headquarters position?

So, if we look at the impact in Monaco, we have – basically, we have rationalized the office we have in Monaco to fit with the current structure that we have. Today, we have a workforce in Monaco in the range of 1,200 people.

This is a workforce which is going to remain even once the headquarter is going to be transferred. The headquarter is not an execution center.

It’s really going to be focusing on the strategic issue of the company, and there’s going to be a small team of people based in Amsterdam.

Question number two is, we expect around 100 people ultimately and not from day 1, but we were ramping up to about 100 sitting in Amsterdam. Another question is, of course, is that we’re looking at our – the usage of space in Monaco quite clearly.

We’ve gone from more than 11 offices spread over the country to, let’s say, 3 or 4. And the intention is, by the end of the year, we’re back in two buildings, and the rest is sublet or the leases have been terminated.

A follow-up question from my side. Can you give us a bit of a split on the 1,500 FTEs that you are letting go?

How many people are in the execution centers and how many people are elsewhere? And in addition to this, can you give me a bit of feeling what the seasonality in the lease and operate revenue this year, what is exactly causing it?

Okay. So, the first part is on the workforce.

The 1,500 people we are discussing about are mainly in the execution center. They are part of the delivery team of the Turnkey project.

Again, let me backtrack a bit. At the beginning of the year, we announced with the reorganization of the company along product lines in order to be able to keep the know-how that we have in the company to [indiscernible] then in some execution center and not to duplicate the workforce for the world.

So part of the reduction that we’re seeing is the fact that we have rationalized with working and also it’s due to the decrease in the volume of activity in the market. Regarding the seasonality of the lease and operate activity?

If you double the lease and operate from H1, you don’t get to the $1.2 billion. So there is more, per se, emphasis on the second half, which has to do with things like the timing of bonus payments, the recognition thereof.

It’s not new vessels coming on stream, because we expect that to be 2016.

Hi, gentlemen. A couple of questions.

Just on Page 8 under the comment on the restructuring, it says there is $49 million booked in H1, of which $45 million relates to Monaco-based employees. Can you just sort of talk me through that a bit in light of what you’ve just been saying?

I am a bit confused.

Page 8 of the press release you are speaking about.

Yes. I guess, from the restructuring, it says restructuring costs account other operating expenses in the period represent $49 million, of which $45 million related to Monaco-based employees?

Part of the reason for that is the restructuring that we have conducted for the group was over the 2-year period. Now some of the costs were recognized over the other region in 2014, while for the Monaco, because we finalized the restructuring in Monaco sometime in the second quarter, the costs were recognized in the – fully in 2015 and nothing in 2015.

So it’s why given overbearing of the cost in 2015 for Monaco versus the rest of the group. Now regarding the restructuring cost, they’re basically aligned with the number of people we are letting go in the different places and also the statutory requirement we have in the different places.

Right, okay. And then just the other one, I guess an understanding of basically the cost structure for ‘16, so we have the $80 million on the savings.

How should we be able to view the cost of Odyssey 24 with regard to that being a cost at the moment, but actually ends as of the end of this year, leaving aside the R&D element?

It’s Peter here. The Odyssey 24 project will end this second half at maybe, let’s say, a few million that run into 2016, but for all intents and purposes, we regard the project as completed in H2.

Right. So that cost burden is not going to be running through the P&L in ‘16 then?

Correct.

Okay, fine. And then just the last one, with regard to a position post-restructuring, I mean, what are you basing the scenario off for the organizational structure you’re actually putting in place now?

Because to a certain extent, I’m assuming part of the elevated R&D is actually to carry part of that intellectual property to your engineering capacity rather than just letting it walk out the door on the direct cost saving basis. But the organization is being structured for what kind of scenario?

And again, how fast could you move it, if you had to if that scenario didn’t play out over ‘16?

That’s an excellent question. Today, we believe, again, that the fundamentals of this market are good, that there is plenty of opportunity to develop field in deepwater, but the economics today do not match up.

And we are basically banking on the side that we can provide new solutions to the clients or new ways to do development and that the market is going to restart slowly, but it’s going to restart sometime by the end of 2016 and beginning of 2017. That’s the basis of the restructuring that we have put in place and that’s what we are looking at.

Now in the meantime, we need to invest into new products, and that’s why we are suspending a fair bit of money in R&D and to be able to bring those new solutions to the market. Again, it’s going to take a bit of time to go from where we stand through having some new projects in the market.

But again, by the end of 2016, we should have a much better visibility of where we are.

Right. Okay, thank you.

And one last question, sorry, just for Peter. Just on the Turnkey, acknowledging that your math is far superior to mine and your knowledge.

It would be probably helpful for everybody, especially post the reports that will be written, to give maybe some bandwidth with regard to the Turnkey margin based on the elevated position we see in H1, but how that will actually turn out on a full year basis, bearing in mind we’ve had previous bandwidth, just to give an idea?

We’ll think about it.

Now?

We’ll think about it soon, Ed.

Alright, okay. Thank you very much indeed.

Thank you very much for taking the follow-on. Just a quick one.

Can I just return to the question about the reconciling the backlog, please and specifically focused on the Turnkey backlog. Just trying to understand, you entered the year at $1.1 billion Turnkey order book.

You had revenue of about $1 billion. And you’ve closed the year at $0.9 billion.

Can you just help us understand about missing $0.8 billion, because the order intake it’s pointed in the report shows a much lower number?

I understand it. I need to get back to you on that, because that’s not the way I’ve been looking at it.

As I said, the Turritella adds a bit of backlog, as you can imagine. That was all in Lease and Operate.

Because we did a deal with Mitsubishi and NYK, there is an amount to be invoiced to the partners in H2 in the beginning of next year. So it explains at least part of the positive.

And then there were a few other bits and bops that we have added to the Turnkey, for instance, there is some offshore contracting work, etcetera, that has been involved. If you’re looking for a pinpoint precision answer, I would have to do the numbers.

So get back to Nick Robert with that question and we will see based on the information we have provided, what we can do for you.

Okay. So just to confirm, you are saying that you have probably moved that, let’s say, $400 million revenue across from the lease and operate backlog is moved into the Turnkey backlog, because that’s...

Whether that’s exactly $400 million or different, I would just have to do the numbers. I don’t want to tell you something that I’m not sure of.

Okay, thanks.

About the MLP and maybe – this is Quirijn Mulder from ING again for a follow-up. The MLP has been delayed by 9 to 12 months.

I can mention that you have delayed it for, let me say, the reason that you have not time enough for – to making the prospects, etcetera. But I am saying 9 to 12 months and if I compare that with the Brazilian bribery case as being one of the obstacles in this whole – in the MLP case, as I can imagine, does it not reflect that you are somewhat more pessimistic about the timing of the solution, of the whole bribery case?

Thank you for your question, but there is no correlation as to timing other than that we are not ready, which would have been helpful. But your conclusion is too speculative.

And I am not – other than that, I’m going to say, we do not expect timing like what you have said in relation to MLP.

So, on this note, I propose we conclude the call. I would like to thank all of you over the phone and your presence in Amsterdam for your presence and for your question.

Thank you very much for your time.