Ladies and gentlemen, thank you for holding and welcome to the SBM Offshore third quarter 2023 trading update conference call. My name is Natalie, and I'll be your coordinator for today's event. Please note, this call is being recorded. At this moment, all participants are in listen-only mode. After the presentation, there'll be an opportunity to ask questions, which you can do so by pressing star one. I would like to hand over the conference to Mr. Charles Alby-Défossé, Investor Relations. Please go ahead.
Thank you, Natalie, and thank you all for joining us today. This call is being recorded and will be available for replay on the company's website. Today's prepared remarks will be delivered by Mr. Bruno Chabas, followed by a Q&A session. Before we begin, I would like to point out the disclaimer at the bottom of our press release and remind participants that some of our comments today may include forward-looking statements reflecting SBM Offshore's view of future events. These matters involve risks and uncertainties that could cause our results to materially differ from our forward-looking statements. The risks are included in detail in SBM Offshore's 2022 annual report, which can be found on the company's website. Once again, we will welcome your questions after the conclusion of the prepared remarks. I will now turn the call over to Bruno.
Thank you, and good morning, all, and thank you for taking the time to join SBM Offshore third quarter 2023 trading update call. My name is Bruno Chabas, CEO of SBM Offshore, and I'm joined today by all members of our management board, Øivind Tangen and Douglas Wood. SBM Offshore delivered results in line with expectation for the third quarter of 2023. As indicated in the half year earnings, ExxonMobil has confirmed it will exercise its purchase option of FPSO Liza Unity before the end of the maximum lease term in February 2024. The sale is expected to be completed this month. Considering this transaction, the company's 2023 guidance has been updated. 2023 directional revenue guidance is revised from above $2.9 billion to around $4.4 billion.
This comprises unchanged revenue guidance for the Lease and Operate of around $1.9 billion, and around $2.5 billion is expected for the Turnkey, compared to above $1 billion in the previous guidance. 2023 directional EBITDA guidance is revised from above $1 billion to around $1.3 billion. Another significant event this quarter is, of course, the award of FEEDD contracts for FPSO in Guyana for the Whiptail development project. This project, which is subject to government approvals and final investment decision by ExxonMobil Guyana, is based on a new commercial model. At the end of the construction phase, the FPSO ownership will transfer to ExxonMobil Guyana. The company will then operate the unit through its integrated operations and maintenance model, combining SBM Offshore and ExxonMobil Guyana's experience.
The effects of this innovative ownership are already demonstrated by the current outstanding performance of the vessels in Guyana. Now, a few words on the progress the teams are making across the business. On the execution side, we have five large FPSO under construction, including two vessels expected to reach first oil by year-end. FPSO Prosperity has been successfully delivered on time and is preparing for first oil, while FPSO Sepetiba, which arrived in Brazil in September 2023, is in the final stages of the offshore installation campaign. The three remaining FPSOs under construction are progressing well, with topside module lifting campaigns ongoing on Almirante Tamandaré and Alexandre de Gusmão. The topside fabrication is progressing in line with plan for FPSO ONE GUYANA .
On top of this project, the company has two hulls under construction, one allocated to the Whiptail project for Guyana and one supporting our tendering activities, driven by the strong FPSO market outlook. For the Lease and Operate activity, the fleet utilization stood at 99.3% at the end of the third quarter of 2023, reflecting the solid operational performance of the fleet. As for new energies, the company's construction and installations scope for the three offshore floaters of the Provence Grand Large pilot project has been completed. The floating wind turbines have successfully and safely been anchored and hooked up during October 2023, at 17 km off the coast of Marseille and in 100-meter water depth. Once commissioned, the project will have an installed capacity of around 125 MW, along with our good execution and solid operational performance, safety remains the company's top priority.
Year- to- date, the total recordable injury frequency rate was at 0.09, below our full year target. Now on the financial. Year- to- date, the company's directional revenue stood at $2,247 million. This 11% decrease compared to the same period in 2022 is driven by the turnkey segment and reflects the partial divestment of FPSO Almirante Tamandaré and Alexandre de Gusmão at the beginning of 2022, and the completion of the FPSO Liza Unity construction in 2022. Reflecting the performance of the fleet, the full contribution of FPSO Liza Unity in 2023 and higher reimbursables growth, partly offset by the demobilization of FPSO Capixaba in 2022.
Directional lease and operate revenue increased by 9% compared to the previous year, standing at $1.412 billion at the end of the third quarter of the year. Our net debt position stood at $7.5 billion at the end of September 2023, compared to $6.1 billion in December 2022, reflecting the high level of activity and investment in growth. Most of the debt is related to our projects in operation and the funding for large five FPSO under construction, which are linked to project-specific lease contracts. There is no refinancing risk, and all project debt becomes non-recourse in the operating phase. Additionally, the company used interest rate swap to substantially hedge interest rate risk.
To conclude, the company continued to deliver its strategy by progressing the FPSOs under construction according to plan, successfully installing our first floating offshore wind project, a solid operating uptime of the fleet, and a strong focus on safety. This reflected in our third quarter results, in line with expectations and the successful FEED contract awards for the fifth FPSO contract in Guyana. All of these demonstrate our ability to grow our FPSO business using our new commercial model. So this concludes the prepared remarks portion of the call today. Thank you for listening. Natalie, we can now open the call for questions.
Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Thank you. Our first question comes from Yteke de Jong from De Telegraaf. Your line is open. Please go ahead.
Yes, hello, good morning. Do you hear me?
Yep.
Okay. This is Yteke from De Telegraaf. It has been a few years that I was in your call, but here I am again. A question. In the Netherlands wants to cut off the guarantees for fossil projects of Dutch companies who are active in the world. What is the status on that, and what is the effect on your order book?
Okay, thank you for your question, and the point you're making is something which we have been commenting over the past few years. In reality, there is definitely a change in what's happening in the way the ECA or the European government are providing support to financing of the development project. It has no impact on our ongoing business. All the projects are financed. There is no exposure. And going forward, as you know, there is still a strong demand for FPSO and new ways of financing and developing-
Mm-hmm.
The project are gonna be in place.
Mm-hmm. And,
Next question, please.
Okay, we'll move to our next question from Thijs Berkelder from ABN AMRO. Your line is open. Please go ahead.
Yeah, good morning. It's Thijs Berkelder, ABN AMRO. Bruno, first question, how is your health? Sounds like you caught a cold.
Yeah, I'm sorry, I lost my voice, so I'm probably not gonna answer any question this morning, but thank you for asking.
Okay. Well, I hope you get healthy soon again. Second question is on the transaction with Exxon. Well, good news that they agreed to buy the vessel early, earlier. Can we maybe expect a similar event to happen with the Destiny FPSO next year? On top, an external online report that SBM Offshore was in talks with the chinese bank on potentially divesting part of your, I would say, Brazilian FPSOs to the chinese bank. Can you maybe give a bit of flavor there where we can expect these chinese talks already to lead to announcements before year-end, or that it probably will be something like 2024?
Again, so I propose the best to take those questions.
Yep. Good morning, guys. So, regarding the Exxon contracts and purchases, really, all that we can would say is that you know, our best estimates as per the backlog at this stage is to say that they run to the maximum time in the contract. So, that's up to two years for Prosperity and ONE GUYANA, and then you know, could be up to 10 years for Destiny. But noting that Exxon do have the option to buy them earlier, but that's really the best we can say.
Then regarding the article you mentioned, yeah, I think we've been clear for some time now, and actually linked to the previous question, that as the financing market evolves, we're looking to diversify the sources of financing. So we have several angles, if you like, that we're looking at, b ut I don't expect any material news this fifth year on that. But we are working very hard on a variety of different options.
Okay, thank you.
Thank you.
Once again, if you'd like to ask a question, please press star one. Your next question comes from Quirijn Mulder from ING. Your line is open. Please go ahead.
Yeah, good morning, everyone. I have in principle two questions. My first question is about the guidance, s o you gave a guidance for the EBITDA of $1.3 billion, and previously it was over $1 billion. Is the conclusion right, that your booking on this transaction from Exxon is $200 million, or is that the wrong figure? Can you maybe, and why didn't you give that number in the third quarter numbers? Is there still something to do about it? So maybe you can elaborate that? And then my question on the Prosperity, as I understand, the Prosperity has just arrived, and it's starting up now, as I understand. What is the reason that it took so long, relatively compared to the Liza Unity?
Because as I remember, Liza Unity arrived in October, and it started up in February, and this one's arrived in Guyana in April, and it starts in November. That is seven months instead of five. So maybe you can say me what's happening there? And I think in the presentation you mentioned something like, some variation orders. Maybe you can elaborate on that? That are my questions.
Okay. So Douglas is going to take the first question, let me comment just quickly on the second question. We mentioned that Prosperity arrived and is preparing for first oil. As you can imagine, there are a lot of different contracts which are involved there with the full picture. What the only comment that we can make is that we have arrived, and we are preparing for first oil. We don't have any comments to make on your whole planning. We can only comment on what we're doing in that space. So, Douglas.
Yeah. So, good morning, Quirijn. So yeah, as you surmise, the impact of the Unity purchase is around $300 . It's a net number, so we've got the purchase impact that netted the fact that in turnkey, netted the fact that in lease to operate, we won't get the charter for the remaining period of the year after they purchase it. And I think that then if we hadn't had Unity, we wouldn't otherwise have changed our previous guidance. So I hope that clarifies your question.
Okay.
Thank you. Next question.
Once again, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from Mick Pickup from Barclays. Your line is open. Please go ahead.
Hey, everyone, Mick here. A couple of questions, if I may, just on the future outlook. Can you just talk about availability of yards? I'm looking at the offshore market and the onshore market, as strong as I've seen it in a long, long time. Lots of modular stuff going on out there. So can you just talk about what you're seeing for your next projects on availability of yard space?
Yeah. So yeah, as you point out, the level of activity in fabrication yard is extremely high at this stage, not only for the offshore world, but also for onshore fabrication. So, when we look at the potential market, which is very high for FPSO, we always mention that we're going to be disciplined in taking new projects... which, in not so many words, means that we're gonna have an execution plan which is secure, and for which we're not going to take any risk on fabrication, on supplying key equipment. But it's definitely one criteria, the decision-making going forward for a new project. One of the constraint.
Okay, and then the other one was just my own benefit. There was something the other week announced at OTC Brazil, SBM+. Can you just tell me what that is and talk through it? I was a bit trying to work it out.
Yeah. Yeah, definitely. So, Øivind is gonna expand on this and what we are, we're doing on the digital journey.
Yeah, good, Mick. So thank you for the question. Part of what we're doing under our digital within the company is to drive development, to transform the way we work, both in the turnkey and the operating segments. And we also feel there is an opportunity to take some of those developments out into external markets, and SBM Plus has launched as the portal for that. And we have a small organization that takes that value proposition out, where we combine digital with our industrial knowledge to something, to create some enthusiasm in the external market. So that's the first step out into that.
So that's offering your digital platform to third parties?
Yeah, it's a digital platform for products that combines our industrial know-how with digital products to the benefit of other operators or Turnkey providers.
Okay, thank you.
Thank you, Mick.
Your next question comes from Quirijn Mulder from ING. Your line is open. Please go ahead.
Yeah, thanks for picking up my following up questions. So with regard to your, let me say, your guidance, in the line is still over $1 billion. Can you maybe elaborate on the difference in the second half compared to the first half? As, let me say, first half, your coverage of the overhead cost was not very, very great in that period. So can you maybe say something more on some extras in the second half compared to the first half year?
And then, on the M&A transactions in the oil industry, has it any consequence for you if Hess is, let me say, taken out by Chevron for your operations there? Is there anything you can say about, let me say, because Chevron is a completely different player than Hess is, and it's, let me say, a smaller player compared to Exxon?
So you're on the guide?
Yeah. So on the, I guess, what I could say is, I think that the financials are revolving in line with expectations. You will have seen in turnkey, we have a boost from the Unity sale, but there's also some increase there relative to commercial efforts. So we mentioned some of the variance or that we got on Prosperity, then the quick sale so you were to take into account. So, those are positives for the revenue, always remembering in Turnkey, largely margin comes later.
Okay.
And your second question?
And the second one was on Hess and Chevron, and I think the answer to that is no, we don't see any impact there.
Yeah. We don't see any impact.
Okay, thank you.
Okay, our next question comes from Robbert Manders from Antaurus. Your line is open. Please go ahead.
Hi, thanks for taking my question. Robert here. My question is very simple. You have a huge cash inflow, obviously, from the Unity. You have said that you would use some of that to repay project debt, but there is something left, I think. What are your plans for that cash?
Thank you, Robert.
Yeah, so, hi, hi, Robert. So, so indeed, yeah, it's a substantial amount of money, but it largely goes to pay a substantial amount of debt, where the repayment was basically back-ended right to the purchase. It leaves us with an amount of cash of around $100 million, as we've disclosed in our net cash backlog. And yeah, we see that as really part of the operating cash flow of the company. We've been guiding for the fact that we're in quite a substantial investment phase, and we've been working through that this year. With respect to the net equity investment requirements continuing through next year for the interesting vessels under construction.
Okay, and what if the next FPSO, the next option is exercised early? Will that change anything in your capital allocation?
No, our capital allocation policy remains unchanged. So we've got a fixed amount that we're paying as a dividend, which we look to grow over time. And then we look at the cash as and when we look at if we have excess cash above our needs, then, in principle, that could be applied to a buyback. So it's really all about the timing of when things happen relative to what else is going on in the business.
Okay, thank you.
There are no further questions. Please continue.
Okay. Thank you very much for joining the call today. If you have any further question, please contact us directly. Have a nice day, and you may all now resume your normal activity.
Ladies and gentlemen, this completes the SBM Offshore conference call. You may now disconnect your lines. Thank you for your participation.