Good morning and welcome to Aker Solutions presentation of Fourth Quarter Results for 2018. My name is Tove Røskaft and I'm heading up Communication and Investor Relations at Aker Solutions. With me here today is our Chief Executive Officer, Luis Araujo, and our Chief Financial Officer, Svein Stoknes. They will go through the main developments of the quarter. We will also have time for some questions and one-on-one interviews with the press after their presentations. Please note that we have no fire drills scheduled today, so in case of an alarm, I'd like to point out the nearest emergency exits through the glass door behind you and to your left. Luis, I will now hand over to you.
Thank you, Tove. Good morning and thank you for joining us here today. I'm happy to say that the fourth quarter was yet another period of strong execution and solid order intake for Aker Solutions. As usual, let me start with the main develops in the quarter. The market remained challenging due to the volatility in oil price. However, we did not see any signs of activity slowing down in our segments. We delivered another period of solid performance with our major projects progressing as planned. Breakeven costs continued to come down and our customers remain pleased with the strong execution, which has improved their project economics. Here are some of the project deliveries in the quarter. We deliver our last subsea tree on the Moho Nord, developed in Congo for Total.
In November, the Valhall subsea production system reached an important milestone, the topside equipment delivered to DEA. In November, the Johan Castberg hardware topside control system was delivered 45 days ahead of schedule. This was the first delivery milestone on the NCS 2017 subsea production contract for Equinor, an important achievement. In December, the process platform for Johan Sverdrup phase I was completed and delivered to Samsung ahead of schedule and under budget. Also in December, we started fabrication of the riser platform modification at Stord. Was part of the second phase of Johan Sverdrup. Our next-generation standardized seven-inch vertical subsea tree is nearing completion, only one year after the NCS 2017 award.
This new standard tree was developed in close cooperation with Equinor and has already been adopted by our other customers on projects on the Norwegian Continental Shelf. This tree is smaller, lighter, and bring costs down by as much as 40%. Internally, we continue to make good progress on our improvement program. We see tending activity remaining high and we enjoy strong demand for front-end engineering services. After the quarter, we acquired 30% of CSE, having bought the first ownership stake of 70% in 2016. This acquisition further strengthens our position in Brazil. Now for the main numbers. We strengthened our bottom and top lines compared with a year earlier. Our fourth quarter financial figures were revenue of NOK 7 billion, EBITDA of NOK 483 million, and EBITDA margin of 7%.
Excluding special items, the margin was 7.1%. EPS was NOK 0.63. We won NOK 5.3 billion in new orders. This brings the current backlog to a healthy NOK 35 billion. For the full year, the main figures or the main numbers were revenue of NOK 25.2 billion, EBITDA of NOK 1.8 billion, and EBITDA margin of 7.2%. Excluding special items, the margin was 7.2%. EPS was NOK 2.01. We had a solid order intake of NOK 25.4 billion, including several key awards in Angola, Brazil, China, Norway, and the U.K. Our finances were solid at the end of the year with a liquidity buffer of NOK 7.5 billion.
It is so, the board has proposed no dividend payment for 2018, still deeming it prudent to conserve cash. During 2018, we saw an increased order intake for Aker Solutions in the fourth quarter confirming our international competitiveness. By year end, we had significantly increased our international order intake, improving the geographical balance of our backlog. The highlight of the quarter was a NOK 1.7 billion Lingshui subsea award for CNOOC. Lingshui 17.2 is CNOOC's first deepwater project with water depths reaching 1,500 m. The fields located in South China Sea. Smaller contracts and frame agreements call-offs total more than NOK 3.5 billion. These new contracts included a subsea manifold on the Dalia phase III project and several umbilical contracts to be executed from our plant in Mobile, Alabama.
We secure a groundbreaking sustainability win on the Northern Lights project, a commercial carbon capture and storage project in the Norwegian Continental Shelf, led by Equinor and Gassnova with Shell and Total as partners. This contract will see Aker Solutions contributing to development of the world's first subsea CO2 storage facility capable of receiving CO2 captured from several industrial sources. This opens up new opportunities for carbon capture technology and storage business, which is important to achieve the Paris climate goals. As we mentioned earlier, I'm happy to say that demand continues to grow for early phase front-end work. The earlier we get involved in a field development the greater the potential to optimize the overall project development. In the fourth quarter, we won 46 front-end orders up from 27 in the same period the year before.
This gives us a new record of 150 studies for 2018. Internationally, which is very important, we have won more than double the number of studies from the overseas markets, and that equals to 35% of the total. Pleasantly in 2018, we secured studies and FEEDs for several larger and more complex projects in Africa, Asia-Pacific, and North America. It remains clear that early involvement put us in a strong position to secure work in the next phase of our development. The number of front-end studies show that, one, that the market is improving, and two, that we are well-positioned to capitalize on these future opportunities. Well, now let me spend a few minutes on Africa as this is an important market for us.
The region has great potential for business growth. We have made strategic investment there over the past two decades. We have delivered more than 1,000 km of umbilicals and more than 150 subsea trees to major developers such as Dalia, Kizomba, Moho, and Kaombo. With this large install base and heavy investment in local infrastructure and capability, we are well-positioned to deliver subsea production and production asset services for our different locations in the African continent. Last month, we heard the announcement of a successful drilling operation in Ghana confirming a global-size deep water discovery. This news, together with our involvement in the ongoing FEED, signals another great opportunity for growth. Our continued focus in the African region has unlocked further opportunity, enabling us to secure a breakthrough contract, such as providing brownfield services in Angola for BP, one of our key global clients.
Remaining in Africa, over to another big achievement for Aker Solutions in 2018. Kaombo, operated by Total, is the world's largest subsea development located approximately 150 km offshore Angola. Reserves are estimated at 660 million barrels at water depths reaching almost 2,000 m. Last summer, we helped our customer, Total, to achieve first oil on this key development. Aker Solutions' scope on this project was to provide 19 subsea manifolds and 65 subsea trees as well as associated equipment. As of today, we have successfully installed 34 of the 65 Christmas trees in all the 19 subsea manifolds. We are progressing as planned and we have delivered 60 out of 65 Christmas trees so far. All to ensure we help our client achieve first oil on the second FPSO later this year.
In order to support this major development, we have invested in our Angola Subsea facility, supported local technology development, and education in Angola. Part of this development includes the first hyperbaric test facility for subsea controls in the African continent. Why I mention Angola and Kaombo? Partially, because I'm proud for what we have achieved so far on this important project, but also because I want to use this as an example of how Aker Solutions have the competence and capability to deliver on time to the right quality and cost globally. At Aker Solutions, we are also pursuing energy solutions that minimize the environmental footprint and promote the shift to a low-carbon energy future. This is good business and makes sense for future revenues. In late 2017, we announced our entry into the market for offshore floating wind.
In 2018, we have made good progress on this growth ambition. Offshore wind demand is increasing on a global scale and we predict that our skills and technology will help drive further growth. It's expansion outside Europe that will be the key driver to this energy source. By 2027, China is predicted to be the market leader, and the U.S. and Southeast Asia are rapidly increasing their number of planned offshore wind installations. Through our investments and partnerships with Principle Power, we are one of the only two companies with a tested and proven offshore floating wind concept. We have strong competencies within project management, industrialization of floating structures, dynamic power cables, mooring systems, and digitalization controls. The list is long. This position us well to capture opportunities in every offshore region around the world.
Together with Principle Power, we are now involved in a project offshore Northern California. Upholding our commitment to forging a sustainable future, we recently increased our investment in Principle Power to reach 11.8% stake. The outlook for oilfield services remains competitive but there are increasing signs of a recovery in the global market. Despite recent volatility in oil prices, we see more projects being sanctioned. Improvement measures across the industry continues lowering break-even costs. Tending activity remains high in our main markets and we are currently bidding for contracts totaling about NOK 45 billion. About 2/3 of this is in the subsea area and we anticipate key projects to be awarded over the next six to 12 months. We continue to see that our front-end capabilities generate new opportunities.
All in all, we believe that Aker Solutions is well-positioned to capture opportunities that are coming with an upturn in the market. Long term, we are also optimistic. Demand for energy in whatever form will increase globally. This is where building on existing capabilities, strong project delivery, and continued trust from our clients, we will secure new opportunities. In summary, we closed the year with a solid order backlog, high tender activity, and continued strong execution on our projects and services. Our awards outside of the North Sea in 2018 prove that we are competitive in a global area and confirm our strategy of international growth. These elements are supporting our margins amid continued signs of a market recovery. Thank you for listening and Svein now will go through the numbers in more detail.
Thank you, Luis and good morning. I'll now take you through the key financial highlights of the fourth quarter and for full- year 2018. I'll go through our divisional performance and run through our financial guidance before we move on to Q&A. As always, all numbers mentioned are in Norwegian Kroner. As usual, let's start with the income statement. Overall operating revenue for the fourth quarter was NOK 7 billion, up 8% year-on-year, supported by recent solid order intake and continued good progress on a number of key projects. In our projects reporting segment, a higher activity level in field design was offset by lower subsea revenues compared to the same quarter last year. Overall, projects was up 8% year-on-year. Our services segment was up 13% year-on-year, reflecting our strategy to grow our world-class services business.
This was primarily driven by the production asset services sub-segment. Our reported fourth quarter EBITDA was NOK 483 million. This included net NOK 12 million of special items primarily related to onerous leases. For your reference, we have, as usual, set out a table in the appendix that further specifies these special items. Excluding special items, EBITDA was NOK 495 million, an increase from NOK 482 million a year earlier. This was equal to underlying margins of 7.1% compared to 7.5% in the same period last year. We continue to deliver stable underlying margins, a solid achievement as we are progressing our newly awarded work, which is won in a very competitive market. It is a clear evidence of our continued strong execution and good momentum on our continuous efficiency improvement program.
Fourth quarter depreciation was down year-on-year at NOK 196 million, in line with our guidance, and we continue to expect underlying depreciation to be around NOK 750 million to NOK 800 million per year. Our reported fourth quarter EBIT or operating profit increased year-on-year to NOK 287 million from NOK 105 million. Excluding special items, EBIT was NOK 305 million, and the margin was 4.4%, up from 4.3% the previous year. Net financial items were NOK -62 million in the quarter, excluding a minor unrealized hedging gain of NOK 2 million. We continue to see our net financial items on an annual basis around NOK 60 million per quarter going forward. This excludes the effect of currency and non-qualifying hedges. Our tax charge was equivalent to a rate of 22% in the quarter.
This was primarily related to reduced deferred tax liabilities in Norway following the recent change in the corporate tax rate from 23% to 22%. The full- year effect of this change was implemented in the fourth quarter. Going forward, we continue to expect average P&L tax rates to be in the low- to- mid 30% range. We ended the quarter with a net income of NOK 178 million or earnings per share of NOK 0.58. Excluding special items, the earnings per share were NOK 0.63, up from NOK 0.55 last year. For 2018 overall, we had revenues of NOK 25.2 billion, an increase of 12% from the previous year.
Underlying EBITDA increased to NOK 1.8 billion with a margin of 7.2%. Our earnings per share excluding special items ended at NOK 2.01 up from NOK 1.54 a year earlier. As Luis mentioned, the board has proposed that no dividend payment should be declared for 2018, still deeming it prudent to exercise caution and to position the company to fully take advantage of the recovery. Now moving to our balance sheet and cash flow performance. Our net current operating assets or working capital increased by NOK 271 million from the third quarter and ended at a still solid NOK -753 million. This position is a result of continued solid project execution, ongoing initiatives to optimize cash flows, and timing of some milestone payments at year-end.
Working capital is likely to fluctuate around large project work, we continue to expect the level to gradually trend towards 2% to 4% of group revenue towards the end of 2019. We had net interest bearing items or net debt of NOK 347 million at the end of the year, down from NOK 405 million at Q3, reflecting good capital discipline and strong cash collection. Our net debt to EBITDA ended the quarter at a very solid 0.2x , our financial position remains strong with a total liquidity buffer at a healthy NOK 7.5 billion. This includes our revolving credit facility with leverage covenant at 3.5x net debt to EBITDA. Our solid financial position continues to give us flexibility and good financial headroom going forward.
Our cash flow from operations in the fourth quarter was NOK +113 million, primarily reflecting our strong operational performance and cost discipline. Our investing cash flows totaled a net NOK -160 million in the quarter. We continue to expect overall CapEx and R&D at roughly 2% of annual revenue going forward with flexibility. Cash flow from financing was NOK -26 million in the quarter, reflecting a minor change in our external borrowings. For 2018 overall, our net cash flow from operating activities was NOK 921 million and i ncluding investing and financing activities, we ended the year with a net cash flow of NOK 495 million. Now on to projects where fourth quarter revenue was up 8% year-on-year, driven by the field design sub-segment.
This resulted in an underlying project's EBITDA margin of 6.2% in the quarter versus 7.8% last year. The EBIT margin, excluding special items was 3.9% versus 5.3% last year. The lower margins are primarily driven by the phasing in of new work as well as revenue mix as field design makes up a larger portion of overall projects revenue compared to the same quarter last year. We had yet another quarter of solid operational performance. We are increasingly ramping up execution on newly awarded work. We continue to realize significant benefits from improvement programs in our projects portfolio. Order intake in projects was NOK 4.4 billion in the quarter, down from a very strong NOK 9.7 billion in the year earlier period.
We book-to-bill at 0.8x versus 1.9x a year earlier. The backlog in projects ended the quarter at a healthy NOK 25 billion. This is equal to about 15 months of projects revenue. Now let's take a look at the key figures for Subsea and Field Design within this reporting segment. Revenue from Subsea projects decreased 17% from the same period last year mainly as a consequence of the high activity level in Africa in the same quarter last year. Revenue from Field Design projects was up 28% year-on-year mainly driven by recent order intake and several ongoing modification and hookup jobs.
Fourth quarter order intake in projects was mainly driven by the subsea sub-segment with an intake of a strong NOK 2.9 billion, equal to book-to-bill of 1.4x . The field design subsegment had an order intake of NOK 1.6 billion or a book-to-bill of 0.4x with the majority in subsea. Our services revenue increased 13% year-on-year mainly driven by international growth in our production asset services sub-segment. In the fourth quarter, production asset services accounted for 56% of services revenues, up from 48% in the same period last year. Underlying EBITDA was NOK 194 million with a margin of 14.6%, an increase from 12.9% in the same quarter last year. EBIT was NOK 154 million with a margin of 11.6% up from 8.4% a year ago.
The higher margins were due to good performance on a number of contracts as well as increased activity level versus last year. Fourth quarter order intake and services was NOK 0.8 billion, down from NOK 3.6 billion a year earlier when we booked a significant five-year frame agreement. This resulted in a fourth quarter book-to-bill of 0.6x , mainly related to international awards. I would like to remind you that the part of services order intake is short cycled or book-and-turn in nature. Despite the competitive market and solid order intake for the year, tendering activity is healthy. We are currently tendering for around NOK 5 billion of service work globally. Over to the order intake and backlog performance for the group as a whole.
Overall, fourth quarter order intake ended at NOK 5.3 billion with a healthy activity level of unannounced awards in key regions globally. We saw a good combination of greenfield, brownfield, services and growth on existing contracts. The order intake was equivalent to book-to-bill of 0.8x in the quarter. We ended 2018 with a book-to-bill of 1x . Our backlog totaled NOK 35 billion at the end of the fourth quarter, which is equivalent to around 1.4x our 2018 revenue. During the second half of 2018, we successfully increased our international order intake. Our backlog is now considerably more geographically balanced despite phasing out some major projects in Africa. As we move into 2019, our visibility for the year ahead has improved compared to the same time last year. Order intake continues to be somewhat uneven caused by large contracts.
As mentioned earlier, tendering activity is still good, with some key projects likely to be sanctioned over the next six to 12 months. We are currently engaged in tenders with an estimated sales value of around NOK 45 billion. As a reminder, our backlog does not include part of our services business or potential growth or options on existing. We see an uptick in activity levels. We continue to see our overall 2019 revenue slightly up year-on-year, with growth in both projects and in services on the back of our solid order intake in 2018. The 2019 underlying EBITDA margin is still seen remaining around the 2018 level for the year overall.
We expect the effects of the new IFRS 16 accounting standard to lift the underlying EBITDA margins in the range of 240 to 320 basis points. For your reference, we have set out a table in the appendix that further specifies the effects of the implementation of IFRS 16. As previously stated, to defend our underlying margins moving into 2019, a continued relentless focus on quality execution and operational efficiency improvements are needed. We will also continue to leverage our differentiating front-end capabilities to capture opportunities and engage with our customers at an early stage. As activity levels further picks up, it will be important to harvest scale effects from our very fit and streamlined organization and asset base.
To sum up, we have a healthy backlog and a solid financial position as we are moving into 2019. This continues to give us increased flexibility and financial headroom to position Aker Solutions to fully take advantage of the recovery. We ended the year continuing to deliver strong project execution with good underlying financial performance and by securing solid international order intake that has further improved our visibility moving forward. Thank you. That was the end of our presentation here today. We will now move on to Q&A.
We also have an online audience today. We will start with the questions from the people in the room. If you please state your name and the company you represent before asking your question.
I hope you enjoy the special effects of the sun in August.
It is just.
It's preparing for you this morning.
Yeah.
Frederik Lunde, Carnegie. I'm just curious on the dividend. I think you promised a year ago that for 2018 you would pay a dividend as you could have paid for 2017 but didn't. You have a strong visibility, strong backlog, good balance sheet, you make money. It would have been a symbolic dividend, but is there anything in particular you're waiting for or is it just being cautious and hoping for M&A opportunities?
Yeah, I remember the comment, Frederik. I don't think it was a promise, but there was an indication that we might return to a dividend in 2019 for 2018. You know, we have had the discussion and I am sure you will see that moving up towards the range we have been guided on towards the end of the year. Then we have a bond maturing in October this year. All in all, the board decided to exercise caution. It's a reasonable decision.
Also on the contract side, do you have any update on Snorre phase II? I would assume you're working on that already. Will that be going into backlog or is it just the scope?
Yeah. During the year, we announced the modification of the riser platform module that we are doing in JV with Kværner, and that's phase II already. We expect the phase II subsea to be tendered this year sometime this year. It's not out there yet, but that's Equinor's intention. Our expectation is that there'll be a tender for the subsea scope soon.
Thank you.
Okay. Any other questions? Don't be shy.
Very clear.
Okay. We can take some questions from the online audience. Let's see. Amy Wong from UBS. You had a very strong cash generation during the year and hinted that a dividend could have started as early as 2017 so ou more or less answered that one just now.
Yeah.
I think Amy was a bit in a rush.
Yeah. There's a question from Stein-Erik Alvestad at Arctic. Can you please disclose the top five projects you expect to be awarded the coming six to 12 months that will have substantial contribution on 2020 activity?
Okay. Actually, we don't disclose projects so that I'm going to have to jump the response on the projects. What I can say is that we do see a lot of projects come in 2020. Of course, things can change. It's never a promise, but there's a lot of projects in the pursuit list. Actually our front end reflects that. You know, there's more activity, t he clients are looking how to develop those projects. We expect more balance in the production supply. I think 2020 can be a very good year for us but I will not list the projects.
It's a very good geographical spread of that tender list. It's, you know, Southeast Asia, it's Australia, it's Indonesia, it's Africa, it's Brazil, it's North Sea, both U.K., and the Norwegian side. A very good spread.
Absolutely. I think that the increase in offshore activity proves that things are getting better. There are basically 50 more rigs just announced this week by the survey of Baker Hughes GE that there are 50 more offshore rigs compared to last year so v ery positive.
Yep. Another question from the online audience. Sahar Islam asked, you talk about the market remaining competitive. Can you give us some more color on the competitive dynamics for awards you're bidding on right now? Is pricing better or worse versus last year? On the international FEED studies you have won, which regions are these in, and are there any particular themes in the types of work customers within these wins?
Okay. I see there are several questions in one.
Yep.
So let me.
We start with the first one with the competitive dynamics.
Yeah. Okay.
Well, I think it's not only for our scope of delivery, subsea and so forth, there are quite a lot of capacity still available in the market. Our plants are becoming busier now but we're still running those plants well below the capacity, which is positive because we can deliver more, if the market picks up. You know, it's not only for us. I think everybody's took capacity out in terms of people rather than facilities but they have also reduced facilities. I think things can improve, if the activity goes up. Right now, people are still looking for work, and that's the nature of the business. I'm actually very positive and we proved that by winning contracts in very competitive markets during the year.
I think what the work we have done to the cycle of reducing costs improve efficiency of digitalization programs and so on. T hat has placed us in a very good position as well as our technology developments for the future. It's competitive. A lot of discussion about supply chain coming up and costs. There's some more talks than actually a reality because there's also available capacity in the market. Of course, as time goes, we can expect some inflation coming back. On the other hand, we also expect better pricing and we expect to take more efficiencies of out of the supply delivery. We see that still a lot to be gained and that's what we're doing to get the clients hunting for that.
I think second question, Tove, was about front end, right?
Correct.
Yeah. I think, front end, you know, I used to, internally, I used to make that, comment that the front- end was one of our best-kept secrets because we are very strong in Norway, but we're not taking the full potential internationally. Now we start to grow that. We have front- end teams in London, Kuala Lumpur, Brazil, Houston. We have people located in several regions, and we see that's paying off now. We see activity in Asia-Pacific, some interesting and important studies that we believe will lead into projects coming soon. We see activity in Africa so i t's spread. It's a global spread. As I said, we're doing studies in Brazil, doing studies across the main regions that we operate. That's very, positive. Very nice to see.
The last part was?
No, I think you answered that.
Okay.
The next question is from James Evans, from Exane BNP Paribas. It's for you, Luis. Can I ask about Brazil? 2018 has seen a lot of delays on multiple contracts, including FPSO awards, which eventually will impact the supply chain, including yourselves. What do you think has been behind these delays and do you see any signs of improvements to this situation?
Okay. Well, I think Brazil is, of course, a long story. I think I like what I see there and not for the short term but for the long term. We see our clients, key clients coming in, people that work with us across the globe, like Equinor, BP, Shell, and others. That's very positive and Brazil is opening, there is also divestment of assets, I think that's going to be important. That's a country that we have today over 3,000 people so w e are very well positioned there and just completed the acquisition of a local company. We bet on Brazil for the future. In terms of delays, I think that's natural to the complexity of the orders that we have there.
Things are moving now and we announced the Mero One award early this year, which is extremely important for us. It shows, again, we are competitive and also shows that we have unique capabilities on the country and a lot of trust from the main operator there, Petrobras. I think that's the nature. I think that for us, of course, the earlier the awards come the better and we are now tending Mero Two, for example, and we expect that to be resolved during the year. I think there's more coming. In the short term, it is the Petrobras and the Pre-Salt and the existing projects. For the future, I think we have a lot of opportunities there.
Yep. We have two more questions from Amy Wong. Flattish underlying EBITDA margin is a great achievement, which is even more impressive given you have issued that guidance three months ago. Can you please provide a bridge how margin mix in the order book is developing versus cost savings?
Well, first of all, thank you, Amy. We are very proud of our team is achieving in terms of cutting costs and so forth. We now are facing new contracts that, as we said, was won in very competitive terms. Yeah. I think that, as I said, since day one, the name of our improvement program is called The Journey because it is a journey. We won't stop ever, reducing costs. I use my famous phrase about costs are like nails, they have to be cutting all the time. It keeps growing if you don't watch. We're doing that. We're not only cutting nails but we're actually hunting more. I think that's the balance.
Of course, we cannot rely only on reducing costs in the supply chain. I actually believe that not only for us but for the whole supply chain, we have taken enough from the supply chain. There's not a lot to take in terms of pricing, because people think about supply chain in term of pricing. What I see is that the clients understand now that they have to use standard components. They cannot have this. T hey cannot, you know, gold plate things, and they're listening to our front-end people. I think that's where we're going to capture the savings is working closely with clients. We have quite a lot of projects these days that are coming to us with performance, you know, milestones, and actually that helps us achieving our margins. Yeah, that's for us the goal. Anything else you want to add?
Yeah, no, I think the obvious ones is this continuous chase for cost driving through efficiency, you know, implementing digitalization, et cetera. Probably one you have to remember is this importance of front- end that Luis talks about because it's a main contributor to us getting much more intimately familiar with the execution we have ahead of us. We're able to de-risk and deal with the entire sort of uncertainty related to a fixed price regime in a completely different way when we did in the past. This is a key sort of contributor to maintain our margins even though they are awarded in a much more competitive landscape than the outgoing backlog.
Yep. Another question from Amy. Can you talk about the ideal level of gearing medium term?
We have indicated a level of 1x net debt to EBITDA as our sort of target, which is still sort of conservative. We said, you know, we could fluctuate, you know, over and below that level. We're now going to trend gradually towards this 1x level. With the working capital normalizing up towards the 2% to 4% of revenue level, you will see that leverage or gearing level towards the 1x net debt to EBITDA level.
Okay. Next question is from Mick Pickup at Barclays. On the subsea side, can you talk about the progress of standardization, lighter, smaller, integrated, et cetera, and how this will help offset continued margin pressure? Do we need to see more major awards to loosen up the market?
Okay. Well, a good question. Thank you, Mick. What I was going to say is that, I'll give you an example of the tree for the North Sea that is 40%, it's light and so on, and that's being used by actually at the moment, three clients in five different projects. That didn't happen in the past. People understand that, it comes with scale and also the savings you achieve by repeating, and you see that learning curve improvement, for example in the Pre-Salt in Brazil, we're almost zero lost hours lost offshore, which is of course more money for the clients because you're running that faster and improving and having efficiency gains. We see that's taking a lot of traction.
Now, we have engaged on several new develops for the future, which is for example, all electric. That's probably what Mick has in mind, because I know that some of our competitors are making a lot of noise. Our style is that rather than making the noise to talk about things, we just develop them and deliver it. I think during the year, we announced that we have signed five majors into this all electric tree that's going to really reduce the weight and the cost of the whole system on vehicles with the manifolds with some of the clients give names to it.
We just say that this is all electric and that's the future, not only for reducing cost and becoming, you know, more cheaper for our clients, but also improve the environment, which is very important. That's what we're driving towards together with all the digitalization program that we are developing. Yeah, I think, I'm very excited about that subject. I think you can see standardization several angles. You can see that making modules and building blocks standard, but also looking to the overall system, that's the key, and also implementing new technologies without disrupting that standardization route.
Next, two questions are from Lillian Starke at Morgan Stanley. She has two questions related to Saipem, has been talking about having a more formal structure in the relationship with Aker Solutions. First question, could you give us an update on this? The second question, coupled with that you are seeing an increase in the adoption of integrated contracts coming up so u pdate coupled to the integrated contract.
Okay. I think that the two questions. I start with Saipem. Saipem is our global partner for us for integrated surface and subsea and we are tending several contracts together as we speak, projects that are being tended in this, these four months. I'm not sure about formal. It's formally our partner. We have also a partnership with Subsea 7 in the North Sea that was actually established before we engaged with Saipem globally. That's actually request by the client. We are maintaining that partnership. That's the first point. Second point, I think that especially in the downturns, people start to look into ways of reducing costs. We talk about front- end.
The biggest advantage of linking SURF and subsea in the systems base is to achieve better results right from front end. Actually, we talk about working Saipem on projects. We are working on studies, we are working in front- end with them. That's for me the biggest savings. Is that all the contracts coming that way? No, there's still a lot of contracts being tended separate. There are some more contracts actually are bundled afterwards because the client can see the saves on interfaces. One thing I keep repeating is that there's some difference between the SURF and subsea, and the main one for me is the amount of technology involved in subsea.
The fact that the subsea provider will stay in the field for 25 years, while the SURF contractor is going to stay only 2.5 years, right on the CapEx. I think we're bringing more OpEx into that, but that's the nature of the relationship. I think that takes some traction. There are more projects there, and I think we are very well positioned, as I said, from us and Saipem have a very strong front end engineering. That's where the savings are.
Okay. Next two questions are from James Thompson at J.P. Morgan. I know that you have full control of CSE. What are your plans for that business? Do you plan to draw on the RCF to repay the bond later this year?
Okay, I'll take the first one, let Svein take the second one. The first one, CSE, I think that our plan has always been to take the whole company. What we did was just to, as we always do, test the waters, and I would say that it's been very well received. Brazil, and Petrobras, and all the clients there was a void for a strong and reputable contractor like Aker Solutions. We believe we can take our methods that we use on a global basis. We've proven that in several other locations like Brunei for Shell, Canada with Exxon, and now going to Angola with BP, that we can bring new methods and reduce costs of OpEx costs for our clients.
Brazil has a lot of facilities there, a lot of capable people, and acquiring a company a good base for us to grow further. We do believe that the CSE will be one of growth agents in the future. Actually, in 2019, there's quite a lot of growth on that particular division. We're going to continue to focus on growth. Also, we hope to serve the IOCs when they are there in the future. Right now, the market's pretty much to Petrobras, a very large market, a lot of facilities, and we have won a lot of work, which is very positive. That's, I think, is a very good story. On the second part.
Yeah, on the RCF, as you saw back in 2017, of course, an available revolving credit facility gives us the flexibility to time going to market on a new bond in a perfect way. Back in 2017, we did draw on the revolver to settle the bond, we found the perfect window to go to market with the bond. We might use that same approach, we're currently assessing, you know, how to address the maturity of the bond, which matures in October. It's a NOK 1 billion facility. We're looking for the perfect window to renew that.
I think it's very important to highlight the fact that, the bond was very well received by the market and highly oversubscribed, so.
Okay.
Office is now open.
Next question from Michael Alsford . You have seen an improvement in your geographical balance in 2018. However, Norway still represents 61% of backlog. Where do you expect the geographical balance to be at the end of 2019 based on the tendering outlook?
Okay. Yeah. Well, there's nothing wrong about being strong in Norway and that's our key market, and we are going to continue to be stronger here. In fact, during the downturn, we actually increased our market share in Norway, which is a huge achievement. I think we're going to continue to focus here. There's a lot of opportunities here. We have, you know, top-class capabilities here, our best people in the industry working for us, so we are very close to the local clients, and that's going to going to be the focus. Of course, it's clear that Norway pick up faster than the rest of the world, and the world's a big place. We'll continue growing. We expect to be 50/50 by 2019.
That's probably a good place to be, considering what you see in the tenders. We see, as we said, large opportunities in South Asia-Pacific, opportunities in Africa, and we expect not in 2019 but more for 2020 opportunities also in Brazil. Yeah, I think it's across the globe, we see a lot of opportunities in. How it's going to be in the future, it's very hard to predict. As I said, you know, the world's a big place, and with our capabilities, we know we can succeed. We've proven this quarter and this year, last year, that we can succeed in the global market, which I know was a question from a lot of people, but we are very strong.
The last question from Toby Scott at Bernstein is linked to the same you just answered about having a competitive advantage in winning work in Norway. Can the same be said for your operations in international markets? Please, can you help us understand how Aker Solutions differentiates itself versus competitors in international markets like Brazil and Asia? Thank you.
Okay. this, again, several questions in one. I would say that I repeat what I just said. We have proven this year that we can win. The amount of studies being awarded internationally shows that some of the clients who didn't know us before is getting to know us now. I'm convinced. I mean, our differentiation starts always the front end. We understand. We are hearing clients saying to us that they don't know any other company that knows greenfield, equipment, and brownfield. We go across the whole chain. When you look into a client's project now, we discuss with them the from zero the front- end, the greenfield.
We also discuss how they're going to ramp up, how they're going to phase their CapEx, and the future for the next 20 years-25 years. Now, more than ever, we also discuss with them how they're going to reduce their CO2 exposure. That's something I spoke a little bit about carbon capture, but that's one thing which is important, of course, capturing CO2. We actually, today, half of our studies include a CO2 section, showing our clients how they're going to reduce their footprint, CO2 footprint going forward be cause we have to do that. That's what the world expects from us. We're looking to subsea compression. We are looking into technology that reduce or eliminates completely flaring, y ou know, how to capture the, how to produce brownfield platforms with wind, how to power those platforms with different renewable energy.
There's a lot we can do to add to our clients. That's for me, the biggest differentiator. Of course, we are global clients. Most of all, we work very close to our clients. We like to collaborate. That's our culture. That's what clients are looking for because I think, as I said before, we are through the supply chain squeeze in my view, and now we have to continue to go to the efficiency hunting. That's the clients saying they trust to do. That's for me, I think, is really large range of competencies to succeed internationally.
Okay. We just received two more questions from Mick Pickup. On the digitalization side, action side, can you talk to data ownership? Do you see a business where you own the data and can use it to develop, improve, make returns o r is the data owned by the client and you provide recording equipment?
Okay. I think there's a mix, is not to the two streams. I think that there's no question that data is one of the most underutilized assets in the industry. We have generated data for years, even internal data, and not used in next projects. We've been doing that a lot now. I think I spoke about the software house that we created earlier this year, IX3 is the name. We also have this push project with which is sponsored by several clients. That's taking traction now where we're actually gathering all the engineering, all the knowledge in the past.
I think during the year, I also spoke about the so-called engineer assistant or a nickname Google for Engineers, where you can search in minutes or it used to take engineers days to gather the information. There's a lot of positive effects on digitalization. Data sometimes is owned by clients, but we see now that some clients are not starting to understand that by sharing data is important. We know that one of our key clients, Aker BP, is very forceful about that talking about liberating data. The more data we share, I guess the, and not only data, but experiences, the better it will be for the industry.
I think we still have progress to make and we are at the moment, of course, working with the data we have and the ones we can share with the clients and work in particular clients, making sure be cause we know the clients want to protect data, so making sure that the data is not shared to others.
Okay. That was the last question. Thank you all for listening and we can open up for some one-on-one with the press.