SBM Offshore N.V.

[Technical Difficulty] 2021 Earnings Update Call. My name is Bruno Chabas, CEO of SBM Offshore and I'm joined today by the Management Board with Philippe Barril, COO; Erik Lagendijk, CGCO; and Douglas Wood, CFO.

I will present the general update of the company after which Douglas will talk through the financials. We will welcome any questions at the end of the prepared section of this call.

So, as always, you can go through the disclaimer at your leisure. And then we're going to go to the first highlight -- to the highlights of the first half of the 2021.

So, starting with this. SBM Offshore is going through a major growth phase with the announcement of two FPSO awards over the last six months.

[technical difficulty] All the five FPSOs are building on our Fast4Ward technology. It shows that the concept is realizing its potential to be a game-changer of our FPSO industry.

This growth is shown in our financial with a record backlog of almost $30 billion today. We forecast a net cash generation for lease and operate activity of almost $9 billion.

Our contractual backlog now covers a 30-year period up to 2050. We announced today the launch of €150 million share buyback program converting our solid performance for our clients into value to our shareholders.

[Technical Difficulty] key milestone achieved on Offshore Wind business. I need to emphasize here that our outstanding performance is the achievement of the dedicated SBM offshore teams contractors and integrated in its client teams.

Their hard work also facing the challenges of the continuing pandemic remains highly appreciated. Now, over to our vision and strategy.

At SBM Offshore, we believe the oceans will provide the world with safe, sustainable, and affordable energy for generations to come. We share our experience to make it happen.

Our vision is supported by three value platforms by which we bring [Technical Difficulty]. Our strategy is to improve on each of these value platform and our strategy remains consistent.

It is articulated around our optimize, transform, and innovate stream. I would describe in turn the main advantages per platform.

Let's first start with our Ocean Infrastructure 1. While going through a major growth phase with the contractor backlog providing cash flow visibility until 2050, generating net cash flow through SBM Offshore's own operating performance and track record.

Secondly, the growth opportunity of our core business sustained by our transformation program, mainly Fast4Ward and emissionZERO [Technical Difficulty] and the lowest carbon footprint. Thirdly, the new energies opportunities, while we can leverage our ocean experience, know-how, and technology, allowing us to play a key role in the ever-changing evolving energy world and particularly in the renewable business such as in the Offshore Wind, Wave Energy, as well as in the Carbon Capture value chain.

Before going into more detail on our value platform, I would like to cover on our portion ESG. Environmental, Social, and Governance matters are at the heart of running our business.

It is based on what our stakeholder value. [Technical Difficulty] and where we can have a significant difference or we can make a significant difference.

As before, we report on a sustainability-related KPIs at year-end. What can be said at midyear is that we're generally on track and are forecasting a performance that largely meets our target.

Although on some indicators, some hard work remains to be done. For reference, we included the 2021 target in the appendix of our presentation.

Our teams are currently working on the final stages of our long-term ambition in sustainability. We are using a science-based methodology in order to land ambitious but also realistic targets.

We will come back to this with our full-year earnings presentation. [Technical Difficulty] a few tangible achievements from our teams.

We are considered to be a sustainability leader in the industry. This is confirmed by third-party experts in their review of SBM Offshore sustainability performance.

We embedded sustainability in everything that we do exactly in the same way we integrated environment matter and safety matter in our ways of working and being. Then, I just wanted to highlight the next nice example of how the company aims to bring social impact into the countries where we operate.

We're working on an agricultural project in Guyana, whereby we aim to bring positive impact to the local farming practices, ensuring supplies of the locally grown food for teams in country [Technical Difficulty] local talent. This project brings healthy food with minimized carbon footprint from the significantly decreased transportation needs versus the import foods.

Now, let's go through our different platform in turn and let's start with The Ocean infrastructure value platform. Our Ocean Infrastructure platform is based on our lease and operate portfolio.

We currently have 15 units under operation for which we focus on maintaining a solid track record in uptime for our clients. This in turn ensures stable cash flow for shareholders.

The operational time was just above 99% for the first half of 2021 [Technical Difficulty] 99%. This achievement is the result of our outstanding performance of our staff, still facing the ongoing challenges from the pandemic.

Taking into consideration, the anticipated future contribution of five units currently under construction, our fleet will generate until 2050 an average of around $300 million of net cash flow per year after debt servicing and tax. On this net cash flow backlog, it is important to highlight the significant potential to accelerate cash flow.

The company successfully demonstrated this principle with the issuance of our first project bond in February this year. Later, in this presentation, Douglas would call out the [Technical Difficulty] Financial presentation.

Now, turning to the shareholder return. We again like to emphasize the fact that our Ocean Infrastructure platform continues to generate predictable and significant net cash flow.

Looking back, we have created a solid track record of returning money to our shareholders and now looking to further build on this in the future. The first element is a stable and growing dividend over time with a share buyback -- with a share buyback we started this morning, we have returned more than US$1.2 billion over the last six-year period including 2021.

This represents more than 40% of [Technical Difficulty] a significant number. The current growth phase brings further upside through delivery of additional vessels to our Ocean Infrastructure platform.

Now, turning to our Growing The Core platform. On the execution side, following the award of two FPSO to date, namely Almirante Tamandaré and Alexandre de Gusmão, previously known as level 4, we now have five FPSO under construction, all at various stages of construction.

As with our operation activities, our project team are facing challenges from the pandemic environment, through travel limitation, yard capacity and other restrictions. Through strong dedication and collaboration by [Technical Difficulty] SBM offshore teams continue to deliver perform and maintain execution plans on shore.

The Liza Unity topside integration was completed and sell away to Guyana is scheduled in the third quarter of this year, with first oil scheduled next year. The Fast4Ward MPF hull for Sepetiba project was successfully delivered allowing the start of the topside lifting campaign with first oil scheduled in 2023.

Topside fabrication for FPSO Prosperity is ongoing and the progress -- the project progress is on schedule with planned delivery in 2024. Finally, FPSO Almirante Tamandaré's construction is progressing at [Technical Difficulty] in most extra scenario, oil will continue to be an important source of energy and remains important to generate economic development and human prosperity.

SBM Offshore is proud that it plays a significant role in producing the energy that the world needs, while ensuring that this oil is produced responsibly and reliably. SBM Offshore is assisting clients with the dual objective of lowering emission intensity while at the same time lowering breakeven prices and therefore reducing the cost.

Our clients concentrate on projects with the lowest carbon intensity and the most attractive breakeven prices. [Technical Difficulty] our target market.

Our solutions offered to the market are double resilience, allowing development with breakeven prices well below $40 per barrel and greenhouse gas emission intensity below the industry average. emissionZERO, which we're building on our Fast4Ward concept improves the carbon intensity further, ultimately aiming at zero net carbon emission in our production.

Going through the overall market, we see a rebound in activity in 2021. Currently, we have identified around 30 potential awards until 2024.

We continue to see opportunity worldwide. However, of key markets for large complex units [Technical Difficulty].

America is a strong hold market for SBM Offshore. Of the 30 potential awards, we have highlighted, the one with a breakeven prices below $40 per barrel, which represents our target market for FPSOs are highlighted on this chart.

SBM Offshore reiterate that we remain selective and disciplined in the selection of the target project. The company continues to carry a capacity of winning two-plus award per year in order to deliver projects in line with commitment to secure long-term value for our clients and to the SBM Offshore's stakeholders.

This translates to a total sale portfolio of around six FPSO in different phases of construction at any given [Technical Difficulty] new energy value platform. Through our new energy platform, we aim to innovate, create and develop solutions products or technology for developing safe, sustainable and affordable energy for the Ocean.

The objective is to capture the opportunity where SBM can play an active and leading role through its experience and knowhow. For example, we have built around 600 floating anchor structure worldwide over the past 60 years more than any company.

We're transferring our knowhow and moving technology to new energy segment, including the floating offshore wind market. We are leveraging our significant experience in capturing and reacting to [Technical Difficulty] Company in the growing carbon capture and storage business.

Finally, our extensive operating experience and expertise that we nurture throughout the life cycle of our products bring values and that we can deliver this value through digitalization for all our products but also through new digital services. So let's expand on the floating offshore wind.

SBM offshore has taken a position as a co-developer in the floating Offshore wind project market. SBM Offshore in collaboration with strategic partners seek to secure ceded rights and relevant permits to develop and implement state-of-the-art technology for the floating offshore wind market activity.

What is done on the [Technical Difficulty] of two sites in the Celtic Sea for a total of 200-megawatt floating wind electricity generation. The Provence state has confirmed his intention to move forward with the lease process with a project award remaining subject to various assessment and consenting process.

Through the further development and optimization of this technology, focusing on obtaining cost benefits from enhanced design and scale up, the company is on the path towards a competitive levelized cost of electricity. In the execution phase, the company is making good progress in the construction of [Indiscernible] for 25 megawatts Provence Grand Large project.

We intend to play a role [Technical Difficulty] and accelerate our technology entrance into the market. We are therefore targeting rights in various regions of the world.

The current total project pipeline cover at least 6 gigawatt capacity for the next decade, which is expected to grow significantly over the next few years. The [Technical Difficulty] is to co-develop or participate as a technology or certain provider in 2 gigawatts of this existing global pipeline of projects.

Total associated codevelopment expenditure for SBM Offshore over the next seven to eight years is estimated to be around US$150 million to US$200 million. The investment will be generally phased so that significant derisking of [Technical Difficulty] commencing most of the expenditure is taken.

About the strength of our floating technology solution. In summary, the Tension Leg platform offers our clients a solution that bring high output with lower costs.

This is a proven technology transferred from the oil and gas activity to the renewable market. This technology offers several benefits and to highlight some of them now, the seaward footprint of the TLP lowering is reduced compared to others.

This makes an easier subsea configuration and optimize the bed layout. This is particularly beneficial for the overall windform farm configuration.

[Technical Difficulty] The system is very stable with limited motion which enable optimized turbine performance and facilitate more efficient offshore operation. And the TLP concept is scalable to accommodate almost any turbine size and almost – allow installation for a wide range of water depth.

Then let's turn to the Carbon Capture, and let's provide a few words on this dynamic market. SBM Offshore has decades long experience and has developed various technology, which can be applied to the carbon capture and storage value chain.

It is probably not a widely known fact but presently SBM Offshore SPF [Technical Difficulty] Project capture capacity in the world. With two million tonnes of CO2 reinjected per year in the world -- per year in our fleet.

Currently, the company is designing a tower loading unit, which would connect short vessel and vessel to reinjection facility. SBM Offshore is working together with Carbon Collectors, a Dutch firm and aim to apply this technology on the first carbon capture and storage project in the Netherlands.

So let's now turn to the financials. Douglas, the floor is yours.

Thank you, Bruno and good morning everybody. So as Bruno mentioned, we're now in a major growth phase with five FPSOs under construction.

And from a financial perspective, this has led to significant growth in the value of our ocean infrastructure platform. And the order book, we have in hand, based on firm contracts with premium clients is now at a record level close to $30 billion.

And in turn the net cash this order book is expected to generate has increased to almost $9 billion. And during the first half, we made good progress on financing on multiple fronts.

For projects under construction, we closed the prosperity financing and we're now in the final phase of the Sepetiba financing. We also demonstrated our ability to accelerate equity cash flow from the backlog with the FPSO Ilhabela bond refinancing in Brazil.

The increased outlook on cash generation, plus progress on the project financings and the cash acceleration from the bond allow us to maintain the focus on shareholder returns with the launch of the €150 million share buyback this morning. The increase in the backlog also gives further line of sight on returns potential going forward.

Our core FPSO business has driven the increase in value in our infrastructure platform with further growth and value upside anticipated in the short-term. Then as you just heard, we're now getting more visibility on the long-term value potential in the new energies platform.

I'll come back on how we see the potential here and the investment we're making to secure this plus further details on shareholder returns in a minute. But first, to review the key metrics for the first half on a directional basis.

So it's a bit of a different order than usual because we feel the key metric to focus on for SBM is the level of the order book and the long-term net cash that this will generate. So starting with this, our backlog increased by $7.9 billion to $29.5 billion, with the impact of the awards of FPSOs Almirante Tamandaré and Alexandre de Gusmão more than offsetting consumption by turnover in the period.

Over the next 30 years or so, this backlog is expected to generate a net cash flow of $300 million on average per annum. And we'll look at some of the further details of this in a few slides time.

To net debt. Now for many company models an increase in debt may not always be viewed positively.

But in the SBM model, debt is very closely correlated to the generation of value. This is because of the linkage of debt to specific projects.

Effectively we sell a portion of the future cash flows of our projects to debt investors and they're investing in our projects as opposed to SBM corporately. This project investment is used to substantively finance the cost of the project securing future cash flow or as we just did with the Ilhabela bond to accelerate some of that cash flow.

So the increase in net debt you see here to $4.6 billion is supporting the delivery of future cash flow and value. Then to the P&L metrics.

Of course, also important as these allow for the monitoring of the delivery and realization of the backlog. Underlying revenue of around $1.15 billion and underlying EBITDA of around $500 million, were broadly stable compared with the prior period with both lease and operate and turnkey segments delivering a similar performance to the year-ago period.

For lease and operate, this reflects the stability in the number of vessels in the fleet. In Turnkey, despite the major growth phase the balance of activity continues to be more weighted to projects to be transferred to the Lease and Operate portfolio, with then the revenues and margin to come in that phase.

But of course the level of Turnkey overhead costs including continuous investment in R&D remains the same. So therefore a small decrease in revenue and EBITDA in Turkey reflecting mainly the comparative effect from the completion of the Johan Castberg turret EPCI project in the first half last year.

And then to note for underlying. Here we're adding back an impact of $75 million to revenue and EBITDA linked to the redelivery of the Deep Panuke platform.

And you'll recall we adjusted the underlying 2020 revenue and EBITDA last year for this, as the cash payment was to come this year. And very good to note, that the client opted to pay the full amount early in the first half.

Turning to cash flow, on a directional basis. Cash from operations before working capital generated during the first half was sufficient to cover debt interest and tax and a good portion of the dividend.

This is trending in line with expectations where we expect to see some of the working capital unwind in the second half. On the investment side you see cash inflow from borrowings exceeded cash out towards investments.

That's mainly driven by the proceeds from the refinancing of Ilhabela, noting also that the first drawdown on the Prosperity loan occurred in July only. Now to spend a bit more time highlighting the link between debt, and future growth and value.

Now we've updated here a chart we've shown before, where we have debt versus the backlog and then the evolution of the gearing of debt to the backlog. This is showing the clear correlation between debt and the backlog and therefore, the future cash that will be generated from this.

Then to take a different approach looking at the graphic at the bottom. If we analyze the balance sheet you see that there is a significant amount there that represents future value not yet reflected in the P&L.

Zooming in on debt you can make a connection between the nonrecourse operating debt of around $3 billion we had at the end of June and the circa $1 billion annual EBITDA from Lease and Operate using 2020 here as a proxy. The ratio of this debt-to-EBITDA is around 3:1.

But this then points to a significant amount of annual EBITDA to be generated from the committed future cash flow linked to projects under construction and the associated financing of the balance sheet. So if you're wanting to apply EBITDA multiples to assess the value of SBM or benchmark debt levels it's important to factor in and adjust for this committed future value that's not yet reflected in the P&L.

Now moving to look at some more details of the backlog and the net cash flow to be generated going forward. Again, driven by the two new awards the backlog increased from $21.6 billion to $29.5 billion a record level for SBM.

And the backlog here we're assuming an initially targeted SBM ownership share of 55% in both projects and that's reported in the Lease and Operate part and then the partial divestment to partners of the corresponding 45% share which is reported in the Turnkey component. We're making good progress on bringing in partners.

And obviously this remains subject to final approval and the completion of the requisite agreements. Then to note the Guyana projects are maintained as per original contract durations.

Then if we look at the net cash to be generated the two new awards on an after-tax basis the average expected net lease and operating cash flow has grown to $300 million per annum for the 29-year period. This compares with $260 million average over 25 years at year-end 2020.

And again this cash flow is underpinned by contracts from premium clients supporting projects with very low operating breakeven. In the appendix of the presentation, you'll also find the usual details of the revenue backlog and associated debt repayment profile and all the supporting assumptions that we've used.

And on this slide, we've also made an update on the discounted per share value of the net lease and operate cash flow plus currently assumed cash from the sale of the BOT project in orange on the chart here. at the range of discount rates we observed being used by the financial community.

So you see an increase since last time the average range increasing to €18 to €21 per share compared with €16 to €18 last time. So here you see how both add value with the two awards adding roughly €2 to €3 per share in this analysis.

And as you saw in Bruno's presentation earlier, we see significant growth potential to be delivered by our Growing the Core and New Energy platforms. The impact of the two new FPSO awards I just mentioned correlates with the broad estimates we have provided in the past of the NPV impact of the new FPSO award being between €1 and €2 per share per FPSO size of FPSO and discount rate being important assumptions and of course assuming expected project execution and operational performance.

Then on the right-hand side some metrics around new energies focusing on floating offshore wind. As Bruno mentioned there's currently a pipeline of opportunities of at least six gigawatts which is expected to increase in the next few years.

Now our ambition is to co-develop or participate as a technology or Turnkey provider in two gigawatts of this existing global pipeline by leveraging our unique know-how. We've allocated an amount of up to $200 million in our forward planning to support our co-developer ambition.

And you can look at it as a kind of internal revolving credit facility which can be drawn to fund milestones for development projects as these are progressively matured and derisked. Our model will then be to seek to deploy our technology and projects and to sell down the vast majority of our shares before FID.

Of course, not all developments will be successful, but with spend controlled by milestones and increasing only as projects are derisked, we would expect this investment to be recovered as a minimum. Now to put all the pieces we just discussed together in terms of model for capital allocation and shareholder returns.

The foundation is the contracted in-hand net cash flow from our order book. As you just saw with the two new projects the Lease and Operate portion is $300 million on average for the next 30 years or $9 billion in aggregate.

In the shorter term the average net cash from lease and operate in the next 10 years is higher at $360 million. And that's before the Turnkey part including BOT which gives good visibility on the ability of Turnkey to be at least self-sufficient.

Obviously, we need to bear in mind corporate overheads and investments and certainly the case that we do need to invest some cash in FPSO projects particularly given the higher ownership share of the current portfolio under construction. And then we want to preserve some flexibility for investment in new energy opportunities.

However, equity cash flow acceleration through further project equity sell-down or project financing should give the flexibility to cover any investments to the extent necessary. So net cash from the backlog after overheads is the foundation for returns to shareholders.

Of course, at all times we'll ensure we've got the capacity to fund future growth in our two businesses. And there is obviously a great deal of upside.

Delivery of projects as anticipated and implementation of further equity cash flow acceleration from the backlog will maximize our ability to deliver dividends and share buybacks. And new awards from growth will bring additional upside potential over and above the current in-hand backlog.

Today's buyback of €150 million which we expect to complete by the end of this year is indicative of this upside. Now it's fair to say there seems to be a disconnect between the recent share price and how we and most of the financial community following us assess value, despite all our efforts to explain this.

But at the very least, you can say this gives the opportunity for a good investment. Based on yesterday's closing price, we're targeting around 6.5% of the outstanding share capital with our repurchase.

And assuming completion, this would increase the dividend yield to around 6.3%. Then in the meantime, what we're focusing on is continuing to deliver on all the elements of our strategy.

Growing the value of our Ocean Infrastructure platform, delivering industry-leading shareholder returns. That's it from me.

Now back to Bruno for the outlook.

Thank you, Douglas. And let's go through the outlook.

And let's speak about the guidance. So our guidance for 2021 remains unchanged, with directional revenues of around $2.6 billion with around $1.6 billion for the Lease and Operate activity and around $1 billion for the Turnkey activity.

Directional EBITDA, of around $900 million, this includes $75 million revenues and EBITDA for Deep Panuke received in cash in the first half of 2021. It also considers the currently foreseen COVID-19 impact on project and fleet operation while we note the ongoing uncertainties with respect to the COVID-19 prices.

So to conclude before questions, again thank [Technical Difficulty] Results in an extremely difficult environment. We are delivering value to our stakeholders helping our clients to transition towards lower carbon oil production at affordable cost and providing new renewable and energy transition solutions.

And we continue to focus on and generate shareholder return. So thank you for your attention in the formal part of this presentation.

Now the floor is yours, for your questions.

Yes. Good morning.

Thank you for taking my questions. First of all, I have a question about the tightness in the supply chain.

So can you talk a bit about, how you see yard capacity for the construction of the top sites and also for future hulls, because already you have the use of one but all of the hulls that you have under construction. So how do you see the opportunities to construct additional hulls?

And the second question is about the economies of scale because with all the awards that you already have won for Fast4Ward, I assume that you're moving up the learning curve quite fast. So do you have any metrics of how much benefit does it bring you in terms of cost and efficiency?

And my third question is about, wave energy. When you're co-developing a certain wind farm does it also bring opportunities in the future to include your wave energy solution there as well?

Thank you, Luuk. So on the three questions, I'm going to go through the economy [Technical Difficulty] Philippe will complement this also through a discussion on the supply chain market and the fabrication market.

So let me start with the economy of scale. We started the Fast4Ward program in 2014.

The first order of the hull was in 2016 if my recollection is correct. Today, we have six hulls under fabrication.

Obviously, after each project we're learning more we're looking at ways to improve. We're looking at ways to improve from a quality standpoint, from an economic standpoint.

But we're still pretty much in the phase of the learning curve, I would say. I've been encouraged in a number of projects, where we can see some of the benefits.

But in my view we're really only at the beginning of that. Now having said that, when you look at the performance of the, [Technical Difficulty], SBM offshore, today is linked definitely to the dedication of our teams to their quality to the involvement and all aspects of the contract.

But it's also linked in the fact that we can replicate a number of things. And therefore, be much more efficient in our ways of operating.

How do you quantify this for the time being is a guess but hopefully in the coming few years, we're going to have more data, in order to provide this, to the market. Now, on the wave energy market, so first of all as you know we're developing this technology with the aim of installing it offshore in 2023.

Now what could be said is that, once we have validated the technology further development are going to be required. So it's not really short access to the market, but we could see opportunity [Technical Difficulty] and having a combined form of floating offshore wind with wave energy in the shape of what we're doing.

And this is particularly well suited with the [Indiscernible] mooring system which really has a limited footprint to the, seabed and therefore allow to have more system in the middle, and therefore making the farm much more productive in terms of electricity and from an economic standpoint. But again, here we're speaking about in a few years down the line.

But that's some of the vision of some of the expectations we could see in the phase of growth that SBM Offshore is in. Philippe, do you want to take over on the supply chain market and the yacht market?

Yeah, absolutely, well, look you're right, a key part of our activity was be to monitor all along the tendering phase for the supply chain market from brick to long lead equipment evolves and likewise on construction. Coming back on COVID, surely COVID has brought a number of limitations in house to move some of the workers.

Nonetheless, I think we're quite pleased with the performance so far. Coming back to the recent awards and to the tendering phase, we look at securing capacity as early as possible and to have execution plan that allows as well flexibility during the execution.

So in short, there might be tension there and there, but this is something which is part of the business and that we will -- we are monitoring again from very early on from tendering. The other thing I'd like to stress is that, one of the main benefits of the Fast4Ward program is not only that we have the hull placed early, even sometimes earlier than we get the order, as you know.

But we're doing a similar exercise with long-lead equipment suppliers and looking at bringing the benefit of the standardization.

Thank you, Philippe.

Thank you.

Good morning, guys and thanks for taking my questions. I got a few, if I may, please.

Firstly on the buyback, obviously, welcome by the market. You discussed the factors you released that informed your decision.

How does the farm-down of Mero and Búzios play into this decision? Following the farm-downs, which I assume in the backlog, do you see additional scope for buyback in 2022?

And can you just remind us as well, the units that you're trying to refine on the rest of the portfolio and the distribution [ph] of the capital? Then turning on offshore wind, thank you for the color here.

Can you please discuss a little bit how you arrived at your 2 gigawatt ambition top-down or market share targets in APC industry, do tend to make investors a bit nervous. Your execution track record is obviously something that speaks for itself, but just wanted some color there, if we could?

And lastly, I just wanted to ask, when do you expect to hit the 25% completion mark on Mero and Búzios? I appreciate you just got the FPSOs.

But just want to understand when does this revenue in Turnkey start translating into profit and avoid any bad calculations there?

Okay. So three questions there.

The first one on the buyback, Douglas will take this one. The one on the progress, percentage progress on the project, Douglas and Philippe will look at this.

On the offshore wind ambition, I'm going to go through the answer there. One of the strengths of SBM Offshore has always been when we are [Technical Difficulty] market segment.

We believe that we have the know-how, the experience, the project management capability, the fabrication experience, the financial strength and the technology in order to be one of the leader into the offshore wind market. What does it mean being one of leader?

It means basically that you have at least on selected market segment 30% market share. So when you look at the offshore wind market, up to the end of this decade, you're looking at a commitment for somewhere in the range of 6 gigawatts.

Our ambition is really to have the positioning in this market such that we will have 30% of this market and therefore, in the range of 1.8, 2 gigawatts of market share. Now this is really sustained by the experience that we have [Technical Difficulty] more than 600 floating anchor structure in the world, more than any other company.

Our experience in operation, our experience in fabrication and our experience in project management. When you look at the complexity of the offshore wind project, they're beyond understanding at times.

I mean the logistics aspect, the local content aspect, the way you need to assemble everything is really quite challenging. And really, fairly commensurable to the -- what we're doing on the FPSO market.

So really transferring this experience into the offshore wind market make us confident, along with the technology that we have and the know-how that we have that we can reach this ambition. Douglas you want to go ahead on the two other questions with Philippe?

Yes, will do. So let's start off with the buyback and yes, maybe touch shareholder returns in general, what drives these.

I think the key driver for this is the visibility and outlook that we have on net cash to be generated from the business. And, yes, as you saw today we've got a record backlog going to deliver an estimated $9 billion of net cash over the period.

So we looked at that. We thought about the liquidity that we have in place.

At the end of the first half, it was more than $2 billion, took into account how we're doing in financing all the projects, plus also our dividend policy is stable and growing over time. And based on where we are, we've concluded that it made sense to do a buyback and we have the ability to do that.

Now, going forward, and just turning to your question around the new units. As we -- as I mentioned, we have the ability to kind of manage this future cash flow to an extent with -- by accelerating equity cash flow by selling down units or doing more financings.

So as I mentioned, the plan is to sell down 45% of the two new units that's in the works. And then we have a number of potential refinancing opportunities that we're considering right now.

So going forward, what we're going to do is, we continue to look at the cash outlook, the timing of when that cash is going to be realized, how we can manage it with the cash acceleration mechanisms I just used and then, we put that all together and take a view on shareholder returns. Then, if I can move to the next one.

I mean, on the 25% to 70% of completion for the two units, we'd expect to be there sometime next year. From a P&L perspective, then the other driver in terms of booking revenue and margin is the sell-down to the partners.

Nikolaos, sorry, if I may to expand a little on the progress on the project to illustrate. Almirante Tamandaré is executed out of [Indiscernible].

We are fully mobilized there. Obviously, the hull is progressing.

What I would like to say is we've already placed some of the construction contracts. We've placed a meaningful part of the long-lead item.

So that's where we are. But I think too it has got even better on hull 4, which will be executing in continuity of Kuala Lumpur coming back to some part of the discipline to use teams that have the experience.

We already placed POs yesterday because we had done that pre-investment tour somewhat tendering to clarify with some of the suppliers.

Thank you, Erik and Philippe.

Yes. Good morning, everyone.

I understand your frustration about the share price. But I would like to ask a couple of things.

First of all, about Sepetiba and it reached a somewhat delay in the delivery end of 2022, but it's not exactly clear to me because it was first delivery in 2022 and now it's the first commissioning with first oil in 2023. So maybe you can elaborate on that?

And then to go home in Brazil. If I look at the press release of the 3rd August about the Gusmão when I compare that with the Sepetiba story.

First of all, is that Mero 4 in fact a copycat of Mero 2? I'm missing some more details there in the press release of the 3rd of August compared to the 1st of June of 2019.

So I'm interested in that. Or are there other let me say other equipment on board related to Petrobras demands, et cetera CO2 catching et cetera?

So maybe you can give me some details there to get some view on them maybe on the final construction costs et cetera? Those are my two questions.

Yes. That's -- so thank you very much for that.

Thank you for your support also. Philippe you want to go through some of the detail?

Obviously we cannot provide you all the detail but [Technical Difficulty].

Yes, coming back to your earlier question I can understand you're getting confused on Sepetiba because in fact we are indicating the first oil. But before the first oil there is a delivery of the unit.

And the delivery of the unit is basically it requires a further towing, mooring and as well connection which is not within our scope. So there's a lag time there.

Nonetheless and I have to somehow cover that what I mentioned that COVID had its impact on the yard where with some restrictions from movement of personnel. And so yes, there have been some of a delay which is represented in us indicating the first oil in 2023.

To follow on your question between Mero 4 and Mero 2 this is not exactly a copycat because there are a number of changes, but there are some commonalities. And that's why somehow I've indicated that we already placed some POs and here talking going back to the same suppliers because we're talking about the same equipment and then there will be hopefully some benefits not just in the EPC delivery but in the OpEx phase because I want to remind you that we are contracted for 22.5 years.

Okay. So is there any financial consequence of the Sepetiba, or is that all reimbursed to let me say, discussed with Petrobras and let me say, that that's okay further and COVID accepted?

I think we are basically talking about an extension of time.

Okay.

A number of questions. First, you elaborated on the offshore wind market.

And any statement on what the market for wave energy could look like and what kind of market share are you're thinking there? Secondly, a question on the Meros.

First on the Mero 2, I believe that financing has not been completed yet. Any news from that?

On the Mero 4 it's taken quite some time before -- between the tendering and the actual award. Of course, you cannot hedge in that period.

Has there been any negative influence on pricing on that? Next question is on the lease expiries.

Any news of the lease expiries that's going to come in 2022? Further question on the sale of the leases.

Any indication any talks that you had with extra mile on that? And last on the offshore wind market you're talking about six gigawatts.

I don't know where you got that number from. But if I add all the plans in the website the four Sea offshore arriving at levels of around 40 gigabits for all.

If I look at the development zone there's another 40 gigawatts coming. So these numbers are way higher than the six that you mentioned.

So I'm curious to hear how that six gigawatt is composed?

Sure. So it's a lot of questions.

And hopefully I'm going to be able to go through all of those. So the first one on Wave Energy, I will take the one on the renewable on Wave Energy and on the market for the floating offshore wind.

And I propose that goes through the Mero 2 financing and goes also through the Mero -- your question on Mero 4. And I think that was all.

So Wave Energy the market it's too early to say. I mean at the end of the day the market potential for this could be large.

[Technical Difficulty] Technology used on the solar panel in a sense that it could be manufactured at a large scale. You could get a huge economy of scale.

And then 70% of the world population lives near the ocean a lot of those ocean could provide energy through the wave system. So the market could be extremely big.

Now we're not discussing about the market for tomorrow morning or even in the coming five or 10 years, but we'll see how things are going to develop. We believe that the technology that we're putting in place is rather innovative is the only technology, which is not using any mechanical component.

And therefore, has quite a potential for up-scaling quickly. But making an assessment on the market, it's extremely difficult.

Wave energy. You can read everything and anything [Technical Difficulty] some of the publications that you're reading, this market is going to be huge by tomorrow morning, yet, when you look at the reality of the market time to tender, time to develop the application and so on is taking time.

And those projects are big they're massive. They need to have a logistic aspect, a technological aspect, a project management aspect, which is often underestimated.

Therefore, the six gigawatts commitment that we see by 2030. So from now until 2030 is what we believe is a realistic market rather than the pipe dream than some people can have.

Now, I'm extremely optimistic on this market. After that, I really believe that this market could grow significantly for a variety of reasons.

But like everything it's – time is [Technical Difficulty] before the logistics the supply chain the know-how is established. And before the permitting also is a lot.

So yes six gigawatts is rather conservative. But as you know, we have always been more on the conservative side of things in order to deliver and not to disappoint rather than selling a pipe dream.

Douglas?

Yeah. So, good morning, Andre, to start with your question on Sepetiba.

As I mentioned we're pretty happy with the progress that we've made on Sepetiba financing and we are now in the final phase of the financing. Fair to say, it's been complex financing involving a very large number of lenders export credit agencies working across multiple time zones and where you get some of the challenges of the virtual world, which we're facing.

But as I said, we're nearing the end now. And I think the good thing is that, we now have a set of documentation that we can use for the future financing.

So if you will could help us with a faster forward approach on financing to come. Then you were asking about Mero four, and the period between tendering and NOI that's and the risks that come from that.

As you'd expect in our tendering process, we very carefully consider the exposures that we have on financing or supply chain. And there we seem to make appropriate level of provisions as we see the potential evolution in the respective part of the market.

So we seek to take that into account in the pricing.

There was these two questions on the lease expiries in 2022, any news and also on the sale of the leases?

So on the lease extension, there is basically no news. We're obviously in contact with clients we're seeing what the opportunities are.

When this and if this materialize obviously we will inform the market. And the same answer, could apply to your second question.

Okay. Thank you.

Yeah. Good morning, gentlemen.

Thanks again for explaining on slides 26, 27 how conservative the financing of FPSO still is – so it's three times EBITDA for the very long-term operational contracts and the 70% debt on assets under construction. But taking a closer look at slide 26, net debt to backlog is back down to 15% versus the historical range of 16% to 20%.

The 5% of backlog range implies there is a potential and maybe a maximum potential to return $1.5 billion cash to shareholders right away, not just $180 million. Can you maybe explain the drivers for not returning more to shareholders via share buybacks, especially now that the share price is still at these very low levels?

Douglas, do you want to take this?

Yes, sure. Okay.

So when we look at shareholder returns, we're looking at the overall kind of equation of the cash flow of the company. So, for sure with the increase of the backlog that we now have more potential.

You talked about the debt being relatively low. Obviously, we just booked those two new projects.

So you can expect that, the debt to backlog will increase relative to those going forward. So we need to think about managing the period until we get the project financing in place.

We need to think about the growth investment that we need to make in the projects where we have quite a high ownership share. So yeah, we're trying to balance all of these factors.

Also, thinking about the capacity of the market, the liquidity to absorb buybacks. I think, the way that we're pacing it is appropriate given all of the factors that we're seeking to work to manage.

Okay.

And sorry, Thijs. I think we're targeting based on yesterday's closing price 6.5%.

So that's quite a meaningful amount of our shares.

Fully agreed. Fully agreed there.

I'm just wondering how rapidly you want to deliver on the buyback? And we're looking at expecting, let's say, financing of vessels to materialize in the second half.

Might this already trigger maybe new buybacks before the end of the year or should we be patiently waiting for the let's say, the full year results release?

Yes. So I think, we made good progresses with the financing of the vessels that we're constructing where we're really in the thick of the construction so Prosperity Sepetiba.

Financing for the new one will take some time. Obviously, we'll be getting started with that straight away.

I think our model -- for shareholder returns, we can phase in relation to the evolution of the business, and we'll take another look at the end of the year, and let you know then where we stand.

Okay. Clear.

Then, follow-up questions on hulls and the constructions. Am I right that there's only one hull at this moment, three four clients to contract?

Shouldn't that be maybe become three soon or so?

So Thijs, you're right in your assumption that there is one hull. I can confirm, there's multiple interest from customers.

But at a point, I think that's where we've done and that's where we think we should be.

Okay. Then, can you clarify what the status is of the contract negotiations in Vienna right now?

Has they been halted for now? What is the waiting for?

That's what I mentioned in a previous question. And on knowing which contracts are going to remain under this and operate later on and transfer or whatever, is something which is an ongoing discussion with the clients and really we don't have anything to comment at this stage.

Okay. Clear.

Then, looking at the low share price your frustration about the low share price, you're indicating refinancing of vessels selling down to minority equity shareholders. Are you looking at other options to force the market to re-rate your stock?

And maybe Singapore -- maybe a Singapore listing for your equity?

At the end of the day, the stock market is a bit like fashion. When you look at fashion, mini skirt was something in fashion in the '60s then came back in fashion in the '80s and then later on.

The same applied to stock market. Today we're not in fashion.

That's what it is. What we're doing is returning cash to our shareholders.

We're doing this and we have done this over the past six years with $1.2 billion including 2021. Then when the fashion is going to come back and common sense is going to come back then we're going to get the proper valuation of our stock, but we're not there to manage the stock price.

We don't have any control on that. However, what we could do is to wear mini skirts and we're going to send you a picture of it.

Yes. Okay.

Thanks.

Yes. Quirijn Mulder.

Let me say about the wind Lindsay. You're looking at Lindsay development cost in -- for the next seven to eight years of about $150 million $200 million.

Is that being activated in accounting terms, or is that being as seen as the operating expenses? How do you handle that?

And then, in the first half of 2021, the word bribery again popped up, I think in some newspapers. Is that something to mention on the developments there?

And also, is there any impact you think from the release of Mr. John Taylor?

So please get me -- I hope that we get some answers on these questions.

Douglas, do you want to take the first one and maybe we'll start with Erik on the second question. Erik?

Yes. Thank you.

There is -- indeed there is -- every now and then there is some media attention for things that happened long, long, long time ago. We have the procedure in Switzerland on which there is no news, but that's indeed concerns matters that we have been dealing with in various locations, so already.

On Mr. Taylor, we have really nothing to say.

And yes, I mean let's not forget, I mean we have a history where occasionally there will be some news popping up from long, long times ago. The company today is in a completely different space, different management our commitment to do our business almost is well recognized by our clients and our stakeholders.

So, we're not getting excited by these occasional messages.

But you don't see a risk, let me say that Angola is taking some action or let me say, because you have paid for to the Dutch authorities, but that's not the same as Angola in my view?

We have always been open about our past. And it could be that at some point, some countries may ask some questions, but there's no reason for us to speculate on it.

We're factual. There are no investigations other than the one in Switzerland that we have been open about.

And again, we have dealt with the matters in various locations and we're -- that's where we stand.

Okay. Thank you.

And if I take the one on the development expenditure. So yeah, so far it's pretty limited only a few millions in the P&L.

But yeah, obviously we hope as we get more opportunities. We'll see that increasing in the seven or eight year period.

So you're not putting cost -- development costs materially on the balance sheet?

No, you can't do that, no.

No, no. Okay.

Okay. I understand.

As long as it is not very concrete, I understand.

Yeah.

Thank you very much. Final question is about let me say the market developments and your positioning.

It looks like that West Africa is still existing for you, but it's -- how relevant is that still given let me say that your Fast4Ward is especially strong in Latin America and the opportunities are there both for Brazil or Guyana and even maybe for Suriname?

As we mentioned in introduction, in the presentation, we will be extremely disciplined in the project we're going to target and the projects we're going to go after. And part of the discipline is really to look at the project, which have the best economic profile and they are usually large unit and the lowest impact to the environment and also is our internal capacity.

So when we look at the opportunities in the market and the selection of those opportunities that's our way of selecting this. If they happen to be in Western Africa, so be it.

If they happen to be in Latin America, so be it. The majority of what we have seen so far is in Latin America.

Yeah. Thank you very much.

Good morning, and thanks for taking my questions. I've got two.

First of all, you have ordered six hulls for the Fast4Ward program. One is still not earmarked for a specific project.

You highlighted that you see a potential for up to eight FPSOs per annum in the next few years. And when should you take a decision on ordering any new hulls?

Is that something we can expect in the foreseeable future? And the other one is we've had the share ruling a couple of weeks ago, a month ago or so in Rotterdam, which caused a lot of promotion in the sector.

I believe that that's perhaps one of the reasons why your share price has been under pressure as well. Has the ruling done something to the attitude of your -- of the parties you were speaking with either to refinance projects like Prosperity and Sepetiba?

And in the talks with potential partners for the last two FPSOs you signed Almirante and the Mero 4. Those were my questions.

Thanks.

Okay. Thank you very much, So Erik would go through the answer related to the share ruling.

With regard to the NPA, our practice in the past has always been to make announcement, once we make commitment. So obviously, we're looking at the potential in the market.

We're looking at our capacity, we're looking at still being disciplined. So when -- and if we make the choice to build additional hulls in anticipation, we will notify the market like we have done in the past.

But there is really nothing to say at this stage. Erik, do you want to go ahead with the second question?

Yeah, sure. Obviously, the ruling on Shell was a remarkable one.

We have obviously also looked at that. I see this really as a sign of the time where there is a lot of concern, especially in some parts of the world on climate change and the impact on the environment.

And this is obviously where we feel also an obligation to contribute. We're offering solutions to our clients including Shell to meet the expectations that are there in society.

Today, we have our emissionZERO program. Our position is in that sense very different.

We're not an oil company. We're a construction company and have contracted to the industry and we're there to offer solutions to our clients.

Other than that, it's for Shell to comment, but you have seen they appealed the decision. But again, it's a sign of the time where we all need to be mindful that the impact on the environment is extremely important.

It's the same discussion we're having with our banks and shareholders. And yeah, there also again we see positive feedback on the various programs and initiatives that we are developing.

We have an open mind to all of that and we will continue on that trajectory.

So summarizing, you have not seen a major impact on the [Indiscernible] of potential financiers or co-investors in certain projects?

No, not directly. But again, let's face it.

I mean for some banks investing in fossil fuels is becoming more difficult and even more important for us to demonstrate that where we stand in this whole development. We're not in that sense directly exposed to it, but it's something that is meaningful for us and other stimulus go in the emissionZERO and lower emissions for our clients where we can.

Okay. Thank you.

Yeah. Good morning.

Long question, maybe a bit related to the last one. A group of countries has decided that there should be sort of a general tax level of around 15% for international companies.

You are an international company in this effectiveness your tax rate is quite low. What -- do you see any implications of that decision?

How will it affect you?

Douglas, you want to go through this?

Yeah. I mean -- so we've just seen the kind of the headlines of what the people are trying to work on there the sort of the final form of that is yet to be sent out.

So really, we need to wait to see what that is before we can make any kind of an assessment.

Okay. Thank you.

Okay. So, thank you operator.

Thank all of you for being tuned to our conference call and asking questions. Now stay safe keep your spirit up and you can now resume a normal activity.

Thank you.