Ladies and gentlemen, thank you for holding, and welcome to the SBM Offshore Third Quarter 2022 Trading Update conference call. At this moment, all participants are in listen-only mode. After the presentation, there will be the opportunity to ask questions. I would like to hand over the conference to Ms. Krystel Brand, Investor Relations. Please go ahead.
Thank you, operator. 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 on future events. These may 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 2021 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, Krystel, and good morning, all. Thank you for taking the time to join SBM Offshore Third Quarter 2022 Trading Update call. I'm 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 solid results over the third quarter 2022. This is despite the continuing challenging environment we all know, ranging from the COVID-19 constraints in China, where partial lockdowns are still imposed, to supply chain capacity issues and accelerating inflation. The good results reflect our high level of activity, the reliability of the fleet, and the resilience of our Turnkey division. Once again, I would like to highlight the fantastic work done by SBMers throughout the world to overcome those challenges. This performance is only possible thanks to their hard work, resilience, and dedication.
Now, a few words on the progress the teams are making across the business. On the Lease and Operate segment, the reported 91% year-to-date fleet uptime was impacted by the ongoing shutdown of FPSO Cidade de Anchieta. Tank repair work is progressing. A restart of production is scheduled by year-end. Following restart, repairs will continue at least until the end of the next year, and it is expected that the associated costs will require one-off impairment charge in the range of $75 million-$100 million, impacting the 2022 net profit. An update will be provided with year-end results once scope of repair and associated cost estimates will be finalized. On an underlying basis, the fleet performance remains strong and as expected. The third quarter uptime excluding FPSO Cidade de Anchieta was above 99%, which is in line with historical level.
On our Turnkey activity, with five FPSO projects under construction, the company continues in a major growing phase. 2022 is proving to be a challenging year with construction activity impacted by the quarantine measure in China on top of inflation and global supply chain issues. We continue to work closely with clients and supplier teams to mitigate this impact. Despite varying effect on project execution, the Turnkey division is expected to deliver robust margin at portfolio level this year. On top of these macroeconomic challenges, we experienced a tragic incident following the collapse of a pier alongside FPSO Prosperity project, where a contractor lost his life. Safety must, and will remain our top priority. The learning from this event have been applied across all our work sites.
The team has completed the damage assessment of the incident and has managed to limit the impact of the overall schedule. First oil on this project is still likely to occur before end of 2023. As for the other projects, on FPSO Sepetiba, integration and commissioning activity are ongoing, with first oil expected in 2023. On FPSO Almirante Tamandaré and FPSO Alexandre de Gusmão, the topside fabrication is progressing in line with plan. The Fast4Ward hulls will launch out of drydock as scheduled. Expected first oil date are 2024 and 2025, respectively. The topside construction has started as planned on FPSO ONE GUYANA, and first oil is expected in 2025.
Confirming the strong FPSO market outlook for large and complex FPSO, a memorandum of understanding was signed with ExxonMobil Guyana, granting the exclusivity of our seventh Fast4Ward MPF hull for use on future low-cost and low carbon intensity competitive FPSO project. This is in line with the company's commitment to support our clients in reducing their emission. Also, on our Turnkey activity for our new energy platform, the teams have reached an important milestone on our Provence Grand Large project. The transition pieces linking the floater to the mast of the wind turbine has been successfully installed. The project commissioning is scheduled in 2023. Finally, we are pleased to see our efforts once again recognized by third-party experts in their assessment of the company's sustainability performance. SBM Offshore was quoted by S&P Global for very high disclosure quality and leadership based on climate strategy.
On the financial side, the company generated a total underlying directional revenue of $2.5 billion over the first three quarters of the year. This is an increase of over 45% compared to the same period last year, mostly driven by the Turnkey segment. Turnkey activity increased year-on-year by over $700 million due to the ramp up of execution projects, combined with the pre-SOP divestment of two projects at the beginning of 2022. As for the performance of the Lease and Operate segment, it is mostly due to the contribution from Liza Unity joining the fleet in 2022, partially offset by the end of Deep Panuke and Capixaba lease contracts. Net debt at the end of September was $5.6 billion compared to $5.4 billion at the end of year-end 2021, supporting the ongoing investment in growth.
We are progressing the financing of FPSO Almirante Tamandaré and FPSO Alexandre de Gusmão project in preparation for what will be a year of large investment in the construction portfolio in 2023. Over to our guidance. Based on our outlook for the remainder of the year, we have revised our guidance upwards. 2022 directional revenue guidance is increased from around $3.2 billion to above $3.2 billion. 2022 directional EBITDA guidance is revised from above $950 million to around $1 billion. To summarize, year-to-year, SBM Offshore reports solid results and increases guidance. The company is demonstrating resilience in a challenging environment and is successfully executing its energy transition strategy through the delivery of this record-breaking backlog from market outlook and with the highest sustainability standard. This concludes the prepared remarks portion of the call today.
Thank you for listening, and operator, you can now open the call for questions.
If you would like to ask a question, please press star one on your telephone keypad. Please ensure your line is unmuted locally as you'll be advised when to ask your questions. Once again, that's star one if you'd like to ask a question. The first question comes from the line of Thijs Berkelder from ABN AMRO on the beach house. Please go ahead.
Yeah. Good morning, gentlemen. Congratulations with the lift in guidance. Let's start with the first client question. There was some of my clients worried that the extra repair cost for the Anchieta could be a restriction for your dividend payment. If you please answer that question. Second question from my end is on, maybe more on 2023. Can you maybe remind us a bit on, Exxon two FPSOs, about to produce first oil in 2023, plus your offshore wind project being delivered in 2023. Are you also losing a couple of contracts in 2023 or not? I assume all in all that EBITDA then in 2023 should be clearly higher than in 2022.
Okay. Thanks for your question. Douglas is gonna take the dividend question and probably also expand a bit more on 2022-2023 guidance. As you know, our normal practice is not to provide guidance at this stage of the year. We're not gonna do so at this stage. What can be said is you're seeing in our portfolio the projects which are likely to be delivered next year and the one under construction. You can make up your mind of where we're gonna go. The other part that we have mentioned is that the market to date is extremely strong to say the least.
As a company, we have a capacity to have a portfolio of six FPSOs under construction, which is the case today, by the way. We have five projects under construction, plus one here that we're building in anticipation. We have also said that we're gonna be extremely disciplined and prudent in our way of taking project. That's where we are at this stage. I'll leave Douglas to expand on those two points.
Okay. Let's start with the first. Yeah, good morning, Thijs. On the dividend, I think, as we've been very clear, our policy is to pay a stable dividend that grows over time. With the word stable, that implies we need to think very carefully about changing it in a downward direction. When we put it up, in other words, we are quite cautious in terms of, you know, making sure that we're gonna be able to hold it at that level. We make allowances for unforeseen things that could crop up during the year.
To answer your question, no, we don't see the Anchieta incident impacting the dividend next year. I think, Bruno, you gave a pretty good answer relative to the guidance next year. Yeah, we'll give you the guidance in February. I think you mentioned the elements. The only other thing I would mention is, yes, we have some planned startups next year. As you know, this year, Capixaba has come off hire, so there'll be a good impact from that.
Okay, thank you.
Thank you.
Next question comes from the line of Luuk van Beek from Degroof Petercam. Please go ahead.
Yes, thank you for taking my question. First, a question on the memorandum of understanding you've signed with ExxonMobil. Can you elaborate a bit on the type of project for which the hull will be used? You mentioned CO2 equivalent intensity and so on, so can you explain a bit what you mean by that? The second is on the repairs to the Cidade de Anchieta. Is there any precedent for the remainder of the fleet here to do quite extensive repairs? Do the OpEx reveal any weakness in this design that should be addressed with other units as well?
Okay. Thank you, Luuk, for this question. Øivind, do you wanna take the second question, and I will take the first question?
Yeah. Yeah. Good morning, Luuk. We've understood the nature of the problem on the Anchieta, and we do not see any reason for this to repeat itself across the fleet. That's what we can say about that. With regard to the next hull that we are building. We started our Fast4Ward program in 2014. We have under construction or built seven FPSOs, which are under this category. Those FPSOs, by definition, are large FPSOs with a strong production capacity, but also low emission impact.
If you look at the portfolio of our new asset coming into production, they're gonna have on average, once we are producing at full capacity, an emission of CO2 of somewhere in the range between 8 kg-9 kg of CO2 per barrel of oil produced, while the average emission on the quarter is around 16 kg. It shows you the progress that we're making and the trend that we have done through the industry. Specifically, the next hull that we're looking at is really in the same range of project that we're looking at. We're looking at the opportunity to deploy this asset in Guyana or elsewhere, depending on what the opportunities are gonna come.
Okay, thank you.
Next question comes from the line of Quirijn Mulder from ING. Please go ahead.
Yeah, good morning, everyone. Indeed, congratulations with your upgrade in spite of COVID zero policy by Xi Jinping, et cetera. I have questions about Guyana. First question is about the situation with regard to ExxonMobil breaking into that market. How do you look at it? Is it too much work, or is Exxon now a real competitor in that market? I'm sorry, MODEC now a real competitor in that market? That's my first question. The second is about the hull situation. As I understand, you have ordered seven hulls a couple of months ago. Hull number eight, how should I see the positioning with regard to the hulls? Do you have now hulls on spec or something like that? Those are my questions.
Thank you very much. If we look at our client portfolio and specifically what we have done in Guyana, we need to put things in context. The first oil discovery was made in Guyana in May 2015. Seven years down the road, in fact last month, we produced through our assets almost 11 million barrels of oil during the month, seven years after the first discovery. On average, in deepwater field development, it takes 10 years before we get first oil. It shows the capacity that SBM Offshore, along with its clients and all the stakeholders, have had to deliver value to all stakeholders, including the Guyanese state. As you have seen, there is plenty of opportunity coming up in Guyana.
The way the clients manage their portfolio, I cannot comment on it. The only point I can comment is the satisfaction and the track record that we're having during this project. With regard to commitments of hull, every time we make a formal commitment, we make an announcement, and we have done so in August saying that we were gonna build a new hull in anticipation for the market. We do this only when we do a formal commitment. It doesn't mean that we don't have a plan to do more. Again, we align with our policy of being extremely prudent and disciplined on our way of committing to assets and to make sure that we have a line of sight on where the assets are gonna be deployed. That's where we are.
When we need to do an announcement, we will do so, but it's not the time today.
Is the seventh hull you mentioned in August the same as the one used for ExxonMobil or is that another one?
No, it's the one that we have committed in August. That's the one.
Okay. Okay.
The option has been taken.
Okay. Yeah. Okay. Thank you.
Next question comes from the line of Guillaume Delaby from Société Générale. Please go ahead.
Yes, good morning. Thank you for taking my two questions. The first one, Bruno, you mentioned that the market is too strong to suddenly, if I am putting you correctly. Maybe could you provide us a little bit of maybe of qualitative color when you have discussion with your clients, I would say today versus, I would say maybe six months ago, what has changed? Is it only a continued gradual improvement or maybe any element which are structured during your client discussions? My second question, which relates to the first one, to what extent, given the fact that you are only working at capacity in terms of FPSO, to what extent do you still have, I would say, some optionality to grow your Turnkey division in 2023?
Maybe I'm thinking about, are there some equipment sales which could be expected, some threats or any color regarding potential increase in equipment sales in 2023? Thank you.
Okay. Thank you very much for your question. When you look at the market and try to provide some color on it, I mean, you can see the number of awards which has been done in the market over the past few months. I believe in Brazil over the past less than 12 months, five FPSO have been awarded. There's gonna be more than eight FPSO which are gonna be up for tender or awarded in the coming 12-18 months. That's a huge amount of projects, and that's only in one country.
On top of this, when you look at the capacity constraints which exist in key suppliers, fabrication yards, long-lead item equipment, you can see that there is a lot of bottlenecks in the industry. As such, that I respond to your next question, we as SBM Offshore, we have said we have a capacity to build, to have a portfolio of two FPSOs under construction, and we're gonna remain at this level. We're gonna remain at this level because we believe that this is the best way for us to generate value for all stakeholders involved, starting with our clients, the host government, and obviously ourselves. When you look at our Turnkey division, next year, we're likely to deliver two FPSOs, which are under construction.
It's gonna provide more capacity for us to get the new project. Those projects are gonna start, but as you say, the ramp up from a revenue standpoint and a margin standpoint is slow at the beginning of the project because we do not recognize margin for the first 25% of the project. The engineering phase, by definition, provides no revenue recognition. That's where we're gonna be. Now, we're not looking at growing the Turnkey top line. We're looking at making it stable, but making it profitable for all stakeholders.
Okay. Thank you. [ Tony Cover].
We currently have no questions in the queue. As a reminder, please press star one if you'd like to ask a question. The next question comes from the line of Quirijn Mulder from ING. Please go ahead.
On the follow-up here. With regard to Anchieta, is there anything you can say about, let me say, the operational profitability next year. I think that in the results it was something like an EBITDA included. Maybe you can elaborate on that, what the situation is there with regard to the operational profitability. The last question I have about situation is Uaru, because it looks to me that, let me say, number five was an easy target for you, the Uaru field. I'm still almost surprised that, let me say, that SBM did not win this project. Or what, was there a reason for you to be cautious there? You said, yeah, we are fully occupied and we have no space at this moment. Is that the reason?
Okay.
I mean, we cannot comment on the way our clients manage their portfolio of awards. That is really their prerogative. The only thing I can say is really the track record that we have had in Guyana and that we're having, and also the fact that we got an option for the upcoming years, which is a demonstration of our capability and our know-how there. With regards to profitability on the Lease and Operate aspect, but Douglas is raising his hand and wants to jump on the microphone. Douglas.
Good morning, Quirijn . With the restart at the end of this year, you can assume a normal level of EBITDA next year. Obviously, though, noting from a cash flow perspective, there will be an impact from the CapEx on the repair costs.
Okay.
The next question comes from the line of André Mulder from Kepler Cheuvreux. Please go ahead.
Yeah. Good morning. Just one last question. Can you be a bit more specific on the timing that these units will come on stream in 2023?
Yeah, we said during 2023. That's all the detail we can provide at this stage. I mean, as we are gonna come closer to the delivery date, we're gonna provide more color to that. But as you can realize, André, the situation today is extremely volatile on a number of aspects. Let's take the example of Prosperity just to highlight this. Prosperity, we were ahead of schedule when the incident happened. We could have had a potential delivery before year end. Obviously this incident has happened, and has pushed the delivery to next year. Now we have said 2023. Our internal planning is showing some precise date, obviously, but there is always the unknown unknown that we cannot quantify.
As such, we'll rather say, give the overall guidance in 2023, and when we come closer to the date, we're gonna provide you more color. But yeah. I mean, it's a highly developed environment. That's what I want to say.
Great. Thanks.
There are no further questions, so I will now hand it back to your host to conclude the call.
Okay. Thank you all of us for joining us today. If you have further question, please do not hesitate to contact us. It's gonna be with pleasure. In the meantime, have a nice day, and you can now all resume normal activity. Thank you.
Ladies and gentlemen, this concludes the SBM Offshore conference call. You may now disconnect your lines. Thank you for your participation.