Good morning. Welcome to Aker Solutions presentation of fourth quarter and full year results for 2017. My name is Bunny Nooryani, I head Communications and Investor Relations at the company. With me here today are Luis Araujo, our CEO, and Svein Stoknes, our CFO. They'll go through the main developments in the period. After that, we'll have time for a Q&A, as well as some brief media interviews. Before we get started today, I'd just like to point to the nearest emergency exit, which is on your left-hand side through the glass doors. I'd also like to point out that we don't have any fire drills planned for today. With that, I'll ask Luis to please take the floor.
Thanks, Bunny Nooryani. Good morning to you all. Thank you for being with us here today, especially competing with our main client, Statoil, for our audience. I'm glad to see so many of you here. I'm pleased to be here with Svein today to go through our results for the fourth quarter. We're going to also sum up the year and provide you a view where we think we're going from here. As usual. Oops. Okay. As usual, let's start with the main developments. We are now emerging from the deepest slowdown ever in the global oil and gas industry. Market conditions remain challenging. We are seeing increasing positive signs in the industry. Break-even costs are continuing to come down. More projects are being sanctioned, particularly at our home market of Norway.
In fact, we won more than NOK 13 billion in new orders in the quarter. That's the highest level since the 2Q 2014. We strengthened both our top line and bottom lines compared with a year earlier. We deliver another period of strong execution as our major projects progress as planned globally. To give you some examples, we delivered the umbilical system for the first phase of the major Zohr gas field offshore Egypt, and this has helped operator Eni achieve its ambitious target of starting production from the field still in December. In Congo, Brazzaville, we completed our work for Total on the landmark Moho Nord subsea development.
We also continue to make steady progress on the giant Kaombo development offshore Angola, where a third of our 65 subsea trees and production well jumpers are now installed. In Brazil, we delivered three of the eight water and gas alternate injection manifolds for the pre-salt fields operated by Petrobras in the Santos Basin. Last month, two of those manifolds were installed very successfully at water depth of more than 2,222 meters. We also have been at hard work in our home market in Norway, delivering subsea trees for the Boa tieback to Alf, Alvheim as part of our alliance with Aker BP and Subsea 7. We also thankfully started our work on the Subsea production system and the FPSO for the landmark Johan Castberg development in the Barents Sea.
If you recall, we won about a NOK 4 billion order in the quarter to help Statoil to develop this project, which is of major importance to further develop Northern Norway as an oil and gas region. Of course, delivering on time and on budget must never be at the expense of health and safety. Aker Solutions is continuing to work to achieve our goal of zero incidents. Last year, we reduced the number of serious incidents to nine from 34 in 2016. A very successful year for our efforts in HSE. We also continue to make good progress in improving operations and reducing costs within the company. I'm pleased to say that we have achieved our target to increase cost efficiency across the company by 30% at the end of 2017.
These improvement efforts supported our margins, which were steady compared with a year ago. Now, for the main numbers, our fourth quarter financial figures were revenue of NOK 6.4 billion, EBITDA of NOK 458 million, an EBITDA margin of 7.1%. Excluding special items, the margin was 7.5% and EPS was NOK 0.55. We had a order intake of NOK 13.4 billion, bringing the backlog to a healthy NOK 34.6 billion. For the full year, the main numbers were revenue of NOK 22.5 billion, EBITDA of NOK 1.5 billion, an EBITDA margin of 6.8%. Excluding special items, the margin was 7.4% and EPS was NOK 1.54.
We had a total order intake in the year of NOK 23.5 billion. About three-quarter of this was for projects in Norway, where we have seen the strongest pickup in activity. Our finances were solid at the end of the year, with a liquidity buffer of NOK 5.7 billion. The board has proposed no dividend payment for 2017. They need prudence to conserve cash in the current market environment. To my favorite slides. Let me provide some details of our fourth quarter order intake that included contracts totaling about NOK 4 billion to supply the subsea production system and the detailed design for the FPSO of the Johan Castberg field.
This is the largest discovery in the Norwegian Barents Sea. I'm pleased to say that we also won a contract from Sembcorp Marine to design the FPSO's living quarters. Additionally, in Norway, we secure a framework agreement to provide subsea services for Statoil-operated fields. The contract has a fixed period of five years with an estimated value of NOK 3 billion. It may be extended by as many as 20 years. We also secure orders from Statoil, from umbilicals for the Aasgard, Vedrop, Utsira, and Borg developments offshore Norway. We won subsea orders for Aker BP for three developments in Norway. I'm so glad I don't have to pronounce these names again. This work will be carried out as part of our subsea alliance with Aker BP and Subsea 7. We also secure a topside modifications contract from Maersk Drilling for the Ima redevelopment.
That's not, the new work is not all in Norway. We won also the world's largest order for an umbilical system for the second phase of the Zohr gas development offshore Egypt. This order from Petrobel entails delivering 250 km of steel tube umbilicals. It follows our delivery last year of 180 km of umbilicals for the development. We've beaten that record. That actually, I said earlier, has achieved first gas in this field in record time. Very proud to be part of that development with Eni, BP, and partners. That's not all. As you may have seen, we have had more good news at the start of this year. Last month, we secured contracts from Statoil to provide subsea production systems and services for the Troll phase three and Askeladd gas developments offshore Norway.
We expect to generate significant synergies at these projects by building on our work on Johan Castberg. Our strong start of the year as our customer shows confidence in our ability to deliver. Well, importantly, we have seen a surge in demand for early phase capabilities, from feasibility and concept studies to front-end engineering design. We won 27 awards in the quarter, leading to an all-time record of 124 studies in the year. That compares with our previous record of 81 study awards in 2016. We beat the record by a long way. About three-quarters of these studies are for projects in Norway, three-quarters, one quarter globally, where in Norway, we are seeing the biggest pickup in activity.
About a third of the awards were won with our alliance partners, and this included work within subsea compression as well as field electrification. As I said this before, but I think it's worth highlighting again. The earlier we get involved in a field, the greater the potential to significantly optimize the overall project. That's because we can look holistically at the entire development and apply our expertise to the life of the field to really create value for the customers. Early involvement output is in a strong position to secure work in the next phases of the development. In fact, we saw a strong increase last year in the number of early-phase studies that led to more work at a project. Give you some data. 26 of our concept studies led to full FEEDs in 2017.
That's up from 10 the year before. Twelve of our FEEDs led to fully-fledged projects, and that compares with six at a year earlier. I guess we have to give you an example on that. I think I have a good example for you. It's just a very recent example. The Johan Castberg development really highlights what we can achieve through our early engagement. At Johan Castberg, we have worked closely with our customer, Statoil, from day one. We began with an early concept study and concept development before moving to pre-FEED and FEED, and finally now to the full project phase. During this time, we helped Statoil to half the costs of the development, enabling the project to move forward.
As you can see, our front-end engineering capabilities are a clear advantage in today's competitive landscape, both for our customers and for our ability to win more work. As I said earlier, we last year achieved our target to improve cost efficiency by 30% or NOK 9 billion in annualized cost savings compared with our 2015 cost and work volumes. We're not stopping there. As previous announced, we are now also targeting an additional cost efficiency improvement of at least 5% per year or 20% in total by the end of 2021. We have made these improvements by simplifying our work methods, our organization set up and our geographic footprint. We are also standardizing our products and services and boosting efficiency through innovation and digital technologies. These efforts has become a way of life for Aker Solutions.
It is a continuous improvement, a continuous journey to keep improving the company. While reducing the costs and drive efficiency are essential for our industry to have a sustainable development. 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 a lot of sense. Today, we announce our entry into the market for offshore floating wind, where we see great potential. We have invested and formed a partnership with Principle Power, a company that has developed WindFloat. This is an innovative floating foundation for offshore wind turbines. It allows turbines to be placed offshore at any water depth to capture the greatest wind resources. This technology also lowers risk, cost, and environmental impact of installing, operating, and maintaining floating wind turbines.
We will help bring WindFloat to a broader market by harnessing our extensive offshore experience, including our expertise in floating facilities. Offshore wind demand is growing and we predict our skills and technology will help spur even further growth. At the same time, we also strengthen our capability in natural gas, which is widely regarded as a transitional fuel to a low carbon environment. As an example, our subsea gas compression technology improves recovery rates, cuts costs, and leaves a smaller environmental footprint than traditional platform compressors. We are seeing great interest globally on this technology. We are also working on electrification of offshore equipment and installations, another key step in minimizing the environmental footprint. We are continued to perfect and develop our carbon capture, utilization, and storage technology, an essential tool in helping to meet emissions targets.
We just launched our standardized and modular units to capture carbon dioxide. I believe that Aker Solutions is walking the walk when it comes to our commitment to sustainability. Let's look ahead. While the outlook for oil services remains challenging, there are increasing signs of recovery. Improvement measures across the industry are having an effect, and we are seeing more projects being sanctioned. There is steady tendering in our activity in our main markets, and we are currently bidding for contracts totaling about NOK 50 billion even after the award. About two-thirds of this in the subsea area, and we expect to see some key projects to be sanctioned over the next six months, particularly in Norway, South America, Asia-Pacific, and some countries in Africa. Long term, we are positive. We are upbeat that demand for energy in whatever form will increase globally.
That is where our push for sustainable energy solutions will truly start paying off. As I round off today's presentation, let me quickly recap the main points of my presentation. We started the year with a strong order intake, continued solid execution, and a major cost efficiency improvements. They are supporting margins as we see increasing signs of a market recovery. We are also looking further ahead to new opportunities as we build our capabilities in delivering sustainable energy solutions. Thank you for listening, and Svein will now go through the numbers in more details, and we'll come back for some Q&A. Svein?
Thank you, Luis, and good morning. I will now take you through the key financial highlights of the fourth quarter and 2017, 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 revenues for the fourth quarter was NOK 6.4 billion, up 5% year-on-year. In our projects reporting segment, a higher activity level in field design was offset by lower subsea revenues. Our services segment saw double-digit growth, primarily due to the acquisition of CSE in Brazil that was closed at the very end of the previous year. Excluding this acquisition, services revenues year-over-year was flat. Our reported fourth quarter EBITDA was NOK 458 million.
This included some special items, including a gain of NOK 6 million related to non-qualifying hedges, as well as a net loss from restructuring costs and onerous leases of NOK 31 million. These are mainly related to the optimization of our manufacturing footprint in the U.S., as communicated in our Q3 update. Excluding special items, EBITDA was NOK 482 million compared with NOK 539 million a year earlier. This was equal to an underlying margin of 7.5% in the fourth quarter, down from 8.8% in the same period last year. We continue to deliver sequential stable underlying margins as a result of strong execution and good momentum on our continuous efficiency improvement program. Fourth quarter depreciation was down from last year at NOK 353 million.
Depreciation was impacted by non-cash related impairments and write-downs of technology and fixed assets of NOK 148 million. Underlying depreciation was slightly up from last year at NOK 205 million. We ended the year with underlying depreciation of NOK 790 million. Looking ahead, we continue to expect our underlying depreciation to be around NOK 750 million-NOK 800 million per year. Our reported fourth quarter EBIT or operating profit was up year-on-year to NOK 105 million. Excluding special items, EBIT was NOK 277 million, and the margin was 4.3% versus 5.6% last year. This is in line with our underlying EBITDA development. The mentioned restructuring and related one-off costs in the fourth quarter slightly exceeded what we indicated at the third quarter update.
Of the NOK 172 million, NOK 24 million impacted our reported EBITDA, and NOK 148 million were non-cash related impairments and write-offs. For your reference, we have, as usual, set out a table in the appendix that further specifies these special items. Excluding an unrealized hedging gain of NOK 3 million, net financial items were minus NOK 34 million in the quarter, positively impacted by currency effects and other financial items. We continue to see net financial items on an annual basis in the range of NOK 60 million-NOK 70 million per quarter. This excludes the effect of currency and non-qualifying hedges. Our tax charge was equivalent to a rate of 74% in the quarter.
This was primarily due to the special items impacting earnings before tax, withholding taxes, and revaluation of tax positions, in particular in the U.S. following the recent changes to the U.S. tax system. Looking ahead, our view is still for average P&L tax rates to be in the low to mid-30% range going forward. We ended the quarter with unadjusted net income of NOK 19 million, or earnings per share of NOK 0.09, or excluding special items, NOK 0.55. For 2017 overall, our main financial figures were revenues of NOK 22.5 billion, down 12% from NOK 25.6 billion the previous year. For 2017, an underlying EBITDA of NOK 1.7 billion, with a margin of 7.4% for the full year. Moving to our balance sheet and cash flow performance.
On net current operating assets or working capital under the fourth quarter, very strong at minus NOK 844 million. This was an improvement from NOK 15 million at the end of Q3 as a result of ongoing initiatives to optimize cash flows and strong cash collection during the last quarter of the year. We still expect to gradually trend towards a more normalized level of working capital over the next 12- 18 months, or around NOK 1 billion-NOK 1.5 billion, equal to about 5%-7% of revenue. We had net interest-bearing items or net debt of NOK 1 billion at the end of the quarter, down from NOK 2 billion at Q3, reflecting good capital discipline and strong cash collection. On net debt to EBITDA ended the quarter at a solid 0.7x .
In line with our previous guidance, we still expect to exceed our conservative target level of 1 x net debt to EBITDA through 2018. We had a solid financial position at the end of the year with a total liquidity buffer at a healthy NOK 5.7 billion. This includes our revolving credits facility. Following year-end, we have successfully issued a NOK 1.5 billion senior NOK-denominated bond. The bond was significantly oversubscribed at a margin of 315 basis points above NIBOR. We have also agreed with a syndicate of banks to renew our NOK 5 billion multicurrency revolving credit facility for another five years until 2023, still at competitive terms with the same amount, tenor, and leverage covenants as the existing revolver at 3.5 x net debt to EBITDA. This position continues to give us flexibility and good financial headroom going forward.
At the end of the fourth quarter, our reported return on average capital employed was 5.4%, which was unchanged from a year ago. At the end of the fourth quarter, our group capital employed was NOK 8.2 billion. This includes about NOK 800 million linked to facilities and technologies that were not yet contributing to earnings. Our cash flow from operations in the fourth quarter was strong at NOK 1.2 billion, reflecting good progress on our backlog and strong cash collection. Our investing cash flows totaled -NOK 96 million in the quarter. Our total 2017 CapEx and R&D spend was NOK 361 million, or 1.6% of revenue, down from 2.7% of revenue in 2016. We continue to see overall CapEx and R&D at roughly 2% of revenues going forward with flexibility.
Cash flow from financing was NOK -680 million in the quarter, mainly related to a reduced utilization of our revolving credit facility. On to projects, where fourth quarter revenue was up 2% year-on-year. Increased activity within field design more than offset lower year-on-year subsea revenues. This resulted in an underlying project's EBITDA margin of 7.8% in the quarter versus 7.6% last year. The EBIT margin, excluding special items, was 5.3%, an increase from 4.5% a year earlier. We continue to realize significant benefits from the improvement programs in our projects portfolio. Coupled with our solid operational performance, this helped offset the market headwinds during the quarter.
We had a very strong order intake in projects overall, mainly from subsea awards. Our fourth quarter book-to-bill ended at 1.9x versus 0.7 x last year. Our projects backlog is healthy and increased to NOK 25 billion at the end of the quarter. This is equal to about 17 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 was down 8% year-on-year due to lower activity in some markets and as some projects near completion. However, up from previous quarters in 2017. Revenue from field design projects was up 15% year-on-year, mainly driven by North Sea modification work awarded over the last 12 months and the acquisition of the Reinertsen in Norway in Q2 last year.
In terms of order intake, subsea projects delivered a very strong 2.3 x book-to-bill, and field design a solid 1.4 x book-to-bill. Despite the tough market, tendering activity is still healthy, and we are currently tendering for around NOK 40 billion of work overall in projects with the majority in subsea. Our services revenue increased 11% year-on-year. This was supported by growth within our production asset services sub-segment, partly due to the acquisition of CSE in Brazil in December of 2016, but also from good activity levels in some of our regions. As of the fourth quarter, subsea lifecycle services accounted for about 53% of services revenues, somewhat down from the same period last year.
Underlying EBITDA was NOK 151 million, with a margin of 12.9% in line sequentially, but down from an unusually high 15.9% in the same quarter last year. EBIT was NOK 98 million, with a margin of 8.4%, down from 12.6% a year ago. The lower margins are primarily due to unusually high installation and commissioning activity in Q4 of 2016, lower subsea activity in some of our markets, and a slightly different revenue mix between our two services segments. Fourth quarter order intake increased year-on-year and totaled NOK 3.6 billion for services overall, resulting in a fourth quarter book-to-bill of 3.1x . This was mainly related to the award of a five-year frame agreement plus options for Statoil in Norway within subsea lifecycle services.
I would like to remind you that a significant part of services order intake is short cycled or book-and-turn in nature. Despite the tough market, tendering activity is good, and we are currently tendering for around NOK 10 billion of work globally. Over to the order intake and backlog performance for the group as a whole. Overall, fourth quarter order intake was very strong at NOK 13.4 billion. This is equivalent to book-to-bill of 2.1x, significantly up from the same quarter last year. Our backlog totaled NOK 34.6 billion at the end of the quarter. This is equivalent to around 1.5x our revenues over the last 12 months.
As mentioned earlier, tendering activity is still good and several key projects are likely to be sanctioned over the next six to 12 months. We are currently engaged in tenders with an estimated sales value of around $50 billion. With the recent strong order intake, visibility has improved, and as a reminder, our backlog does not include a significant part of our services business or potential growth or options on existing contracts. Finally, we keep our guidance largely unchanged from that of Q3. As Luis mentioned, there are some signs of a pickup in activity levels. On the back of our strong Q4 order intake and continued good momentum on securing new work so far in 2018, we see our top line somewhat up year-on-year. We see improved activity levels in both projects and services and across all subsegments.
We have some regions that would benefit from improved order intake. We also see indications of an uptick in activity levels in these regions. We will leverage our front end capabilities to capture opportunities and engage with our customers at an early stage. At this point, we continue to see our underlying margins remaining around 2017 levels, also as new orders are entering our backlog. This will have to be supported by continued solid project execution and our relentless focus on continuous efficiency improvement efforts. Important now as we see activity levels picking up will be to harvest scale effects from a very fit and streamlined organization and asset base. We have a relatively healthy backlog, improved visibility, and a good financial position.
Despite the indications of increased activity ahead, market conditions are challenging, and we also this year consider it prudent to maintain our financial position by conserving additional cash. As Luis mentioned, because of this, the board has proposed zero dividend for 2017. This gives us increased flexibility and financial headroom in this market and is positioning Aker Solutions to fully take advantage of a recovery. We still maintain our policy of paying a dividend of between 30% and 50% of net profit over time, either through cash or through share buybacks. To sum up, as we face continued market challenges, we ended the fourth quarter of 2017 by continuing to deliver strong project execution with good underlying financial performance and by securing a strong order intake that has considerably improved our visibility moving forward. Thank you.
That was the end of our presentation here today, and we will now move on to Q&A.
Thank you. As Svein said, we're ready for a Q&A. We do aim to end the session today by 10:00 A.M., so I would ask that for those who ask questions, please ask one question and follow up with one, and please don't exceed that. We'll start with some Q&A in this room, and then we will move on to our webcast audience. For the sake of good order, please do introduce yourself. Right. First question's in here. Tove G. Falkå at the back row there.
Yeah. With the market now picking up, also we see that supported by increase in NP spending budgets, do you see any signs of customers trying to lock in projects and activity longer into the future now than a year ago?
Thanks. A good question. I don't think we're there yet. I think we see signs of improvement, but we are still far away from the norms in terms of, as you know, from FID. We had more over 20 in 24, if I remember well, in 17 versus less than 20 of 16 the year before. It's moving. I think some clients are doing that actually. Some clients realize that that's a good time to do a project, because there is capacity. The A teams are there, right, available. We are in Aker Solutions, we kept all the good resource we needed knowing that the market will come back. Some clients are doing that.
Some clients are still curtailing investment to save cash and recover the balance sheets. We see a mix. Some of the clients are actually moving ahead, and we see some of the awards in greenfields on that trend. You see the brownfield, yes, because people know that cash will come quicker. The brownfield, that's why brownfield is showing more, I guess, more resilience in an uptick there.
Second is on Brazil. You have been mentioned as front runner for two projects there, both in MMO and on the Libra. Any updates on that?
Yeah. I mean, hopefully soon. Things are moving slower than usual in Brazil for what they've been through the last few years. We see Brazil with a very positive eyes. I think our company in Brazil are really working. We don't announce things they're not there day to day. We all bought this company in Brazil, CSE. They're performing quite well. We are integrated to Aker Solutions. Our plants are still occupied. We see Brazil, as I said, with positive signs, you know, with new clients coming in. Luckily, they're all our key clients globally as well, Statoil, Total.
We actually won a small service contract for Total already, but it's not announced because for the size, because Total is the first company to operate in the pre-salt in Brazil, with the Lapa field that they acquired from Petrobras. We are doing service because they had trees in the field that belong being manufactured by Aker Solutions. We see that we hopefully things are gonna progress fast with Petrobras. We're actually confident to announce something quite soon.
The final one is for Stein. With all the restructuring costs and provisions you have made in the recent years, what would be the impact on cash relative to EBITDA in 2018 approximately?
Related to restructuring.
The provisions you have made. I guess some of that will have cash impact and not PNL impact in 2018. Can you quantify approximately how much that would be?
Yeah. About two-thirds of the provisions or write-downs we took now in Q4 were non-cash related. We took some additional restructuring charges, primarily related to the steps we're taking in the U.S. to optimize our manufacturing setup there. The NOK 24 million you saw impacting our EBITDA were the cash-related items from the one-offs.
Okay, thank you. We can follow up afterwards. Thank you.
Okay.
Kristian Olsen in Pareto.
Hey, guys. Just wondering how, you know, now having firmed up the guidance, and backed it with orders, which is great, how do you feel about your sort of the global manufacturing model that you've now right-sized? Are we sort of where you see 2018 moving in terms of capacity and utilization?
Okay, Per, good question. Very well-supported question, I guess, for your knowledge. It is, I would say that, one thing we have to keep in mind is that, the volumes you see now are actually larger than in 2014, so the capacity being occupied. Different than some other competitors didn't take capacity. Our plants in Brazil, in Port Klang, and in Tromso, to a certain extent, remain. They are open and they remain without any reductions. We reduced actually the shifts, so we kind of trimmed down to be able to cope with the volumes. As Vince said, as the market picks up, we're gonna start to take quite a lot of leverage from that.
I think I would say that, we are getting to good utilization levels, and we expect that to help also the scale. I mentioned today, during the presentation about the Troll and Askeladd. Interesting to highlight that the trees are similar or identical to actually Johan Castberg. Not by coincidence, also, very close and almost identical to the trees we are providing to formerly called Snadd, now Ærfugl. I think that's right. We have a lot of trying to get synergies. We know how that works, you know, in Brazil. We see in now Caombo, we see that the hours assembly in Caombo is half to be in the first unit. We get those efficiencies. I think the plants are occupied to a good level.
Are you seeing, you know, traction with all of your or most of your key customers at this point in terms of using your globally, you know, your global delivery capabilities, so not as locked to regions where you will deliver projects perhaps?
Another good question. Just to make sure on the follow-on question, we still have space. We still have capacity for more work. I'll give you an example on both these projects I mentioned for Statoil, Johan Castberg, Troll, and Askeladd. There's a global model. For example, the controls will be made in Brazil, in a Brazilian plant, who is actually the most modern plant in the world, and the controls area there is actually 4 x bigger than what we had as a global supply center in Aberdeen before. Lots of capacity there, so the volumes are going there. We're making controls in Brazil, we are making the freeze in Tromsø, and we are using some engineering resource in India. We're using the global model to be able to support the clients.
That's a good point as well for the clients because, for example, in Brazil, Statoil gets credit for all content by providing us equipment from Brazil to Norway. It's a win-win. Of course we get better costs.
Great. Thank you.
A question there, gentleman in the middle row.
Thank you. Truls Olsen , Fearnley Securities. In terms of, essentially a follow-up on Per's questions, on your NOK 50 billion tender in work, could you sort of split that into regions?
Yeah, I can give you a little flavor 'cause we usually don't name projects. We see activity picking up in Asia Pacific, China and other places. It is for us it will be a new market and we are tendering there. We see activity in South America, which is Brazil, as we mentioned. We see activity of in Orion, more on the Type X and Brownfield, is a field to be awarded. It's global. Of course, Africa is starting to move. We cannot qualify Africa as one country. It's several countries. Countries are moving faster than others. We see positive signs, for example, in Angola, that some fields will move forward despite all the trouble and the re-restruction they have in the country.
It's kinda, it's a global, but we see that activity is good in our main, where we are well-positioned, which is good for us.
Okay. Bit differently. Majority of your tender work is in Norway or is it sort of more equal split?
Well, I think now after the awards, as you've noticed, most of the awards were in Norway, two-thirds. Now it's, I guess, more international.
Okay. Thank you.
Yes.
Then also on, in terms of your financial flexibility and sort of bolstering you for taking advantage of this current down cycle, as it were, I mean, M&A is obviously always attached to Aker Solutions one way or the other. I guess, your NOK 5.7 million is supposed to be used on something. Could you sort of give us an ideas on how you're thinking about sort of bolt-on acquisitions or otherwise, how to continue to grow and develop the company?
Okay, yeah. We don't give that many details usually, but it's true that we always. There's always a lot of rumors around acquisitions so forth. We have been acquiring a few companies actually very successfully during the, you know, the downturn, as you say it. Now we just made an investment now in this wind technology, so might consider more. It's good to have flexibility and opportunities will arise in this market. Not everybody's doing as well as we are doing. We can still, you know, getting close to opportunities. We think about. We can always when you see something that can plug our. 'Cause we have, as I said since the beginning, we are a very broad company. We have a lot of knowledge, a lot of potential for growth organically.
Internationally, since, you know, we have this presence and also the portfolio from greenfield to brownfield. But really, if you see gaps or opportunities, then we tend to plug them. Now we're seeing the renewables area that we might invest for in the future. Svein, any comments from you?
We will of course continue to take advantage of depressed valuations and pick up businesses on it that we see and would add to our own strategy. Of course, another need of cash moving forward is the guidance I'm giving you on normalization of our working capital level. Of course, we need that flexibility, and we're gonna continue looking for opportunities on the buy side.
Yeah. I have to say that we're very pleased to see the enthusiasm of the market towards our company during the bonus roadshow. It's good to see that the market trust our, I guess, our management, our execution as well.
Are there any further questions in the room here? If not, we do have some questions from our webcast audience. I'll start with a question from Lillian Starke at Morgan Stanley. My first question is if you could provide some detail around the working capital move this quarter, which seems largely driven by payables. Should we expect a reversal of this effect in 2018?
I will just repeat my guidance that we see a more normal level of working capital for Aker Solutions to be between NOK 1 billion and NOK 1.5 billion, 5% - 7% of revenue. We see that normalization taking place over the next 12 - 18 months. We do expect during 2018 that this balance will increase.
The second question from Lillian Starke is regarding the time it takes for the conversion of concept studies into projects. With Johan Castberg, you mentioned the concept study started in 2012, with the project awarded five years later in 2017. Are you seeing the same timeframe between concept and project award, or do you believe this time to be shorter in the concept studies you are undertaking?
That's a very good question. I would say that we see a shorter cycle in the front end. I think we mentioned that a lot of companies are moving straight from front end to execution. In fact, actually some of the competition for the EPC or for the real project is starting now in the front end, and sometimes even integrated front end with some of our alliance partners. Yes, I think the clients realize that they have to shorten the cycle to get cash quicker. Of course, the project she mentioned, Castberg, was a very different and particular project. We are very pleased to see that how much costs have cut on that field to make it viable because the project five years ago were not commercially viable, and now it's a success story.
I think they need less time to mature now, especially if they're using standard technologies. I think there's a huge improvement for the client's cash flow to move faster from front end into execution.
There's also a question from Mick Pickup at Barclays. Over recent months, two of your competitors have heralded step changes in subsea equipment, which is lighter, cheaper, easier to install. How do you see your offering versus these new solutions?
It's a very good question. Thanks for it, Mick. It is interesting because I think I personally haven't seen anything new. As you can imagine, I follow this very closely. What our competitors are talking about is in general all electric systems. We are very advanced on that. In fact, Castberg is the only all electric system installed subsea, so there's no hydraulics there, and that's been two years in operation. There is also a challenge to get clients to change. I think this is gonna come. I think our offer, we are par, if not above in some areas to our competitors. I just mentioned subsea compression, which is something we believe a lot.
We're doing actually, three studies at the moment in global terms for companies who are actually considering moving from platforms, large platforms, to subsea compression so they can cut the costs. They can have more flexibility, improve recovery, and of course, the footprint, environmental footprint of the project. On that one, of course, we are clear leaders compared to the other guys, and I just mentioned the all electric systems. We've developed new umbilical systems which with the hydraulic and fiber optics. We're doing a lot of new stuff. Maybe we just have to do more marketing than we're doing right now. What's important is that the clients know which technology they have in Aker Solutions.
A question from Haavard Kippe at DNB. You expect underlying margins to be around 2017 levels in 2018. Related to this, how do you view the competitive pressure from international players? Do you expect this to increase going forward?
Can you repeat that again?
This is a question on our margins. You expect underlying margins to be around 2017 levels in 2018. Related to this, how do you view the competitive pressure from international players?
Okay.
Do you expect this pressure to increase going forward?
Okay. Yeah. Thanks for the question. Well, I mean, I like to see that, if you talk about international players or competitors in Norway, I mean, it would be very tough to compete with us 'cause we are good, right? We are good. We have the good people. We are well-positioned. We have the best footprint in terms of delivery. I don't worry about the competition, external competition here. Actually, competition is good. It make us, you know, on our toes. Globally, yes, I mean, everything we have won has been won in very tough competition. We haven't got anything for free, right? We are competing across the industry, and I'm very pleased to say that we are winning. Of course, we're gonna continue pushing the cost base down, to, in the long term, improve our margins.
Yeah, it's competitive, but I think as a company, we are very well-prepared, and I trust that my people have been working very hard. We started that journey three years ago, even before the downturn. I'd like to see the enthusiasm to reduce costs in the company. It's something that it became, as I mentioned in the presentation, a way of life in Aker Solutions. It's also fun.
A question from Jørgen Lunde at Clarksons. Does your 2018 revenue and EBITDA guidance include potential revenue from your partnership with Principle Power?
Yeah. Well, not really. It is a new venture. You know, this is something that we made, it's not a very large investment, but it's a good investment. It's more a partnership. We see this is gonna be a long-term investment. The wind market is, according to IEA, the biggest growth for renewables in the future, and especially offshore, we have more wind than onshore and also very few areas in the world have possibility to put bottom supported structures. I guess it's only. We don't think about that because we see the North Sea. The North Sea is a special place. Most of the region that need renewables are actually deep water, and they don't have the same shelf that we have here.
But we're investing as the market is developing. We see a lot of capabilities in the company that gonna be applied on that, including our partners, you know, that we have technology alliances. Those guys are really involved on that part, as we know. I think that's a long term. We have not considered any revenue in 2018 for that venture.
A question from Morten Nystrøm at Nordea. Are there any signals that your under-suppliers are starting to increase prices, or are you still able to push prices favorably? Does it make sense to consolidate the SPS market?
Okay. There are two questions there. One, we hear a lot about the pressures for price increases. We have not seen it yet. I think we work very close with suppliers in long-term partnerships. We are very careful through the down cycle to make sure that we keep those guys healthy. It's important for us to have suppliers and good suppliers and health suppliers. We have not seen that uptick yet. Of course, if the awards accelerates, it might be pressures, but we are monitoring that very quickly, very closely, and we have not seen any indications at the moment. In terms of the second part of the question was about consolidation of SPS. I have been saying that for a long time.
Of course, the, we have today four, I call four and a half players in subsea market. I'm sure that the market will be a better market with only three. Then, we still, I guess, gather the money to buy Schlumberger and, NOV. It is, of course that, something that will benefit the market, for sure.
That was the final question from our webcast audience, unless there are any further questions in this room.
There's one here.
Is there?
There's one here.
Uh-huh.
Thank you Samuel Størmen from Danske Bank . You mentioned the shortening cycle offshore as well. Could you give some comment on the NOK 50 billion tendering portfolio and the average lead time or kind of split of timing on those projects? Would it be largely 2019, 2020 beyond? Could you give some comment on that?
You know, we actually see some projects move in the next six months. There's stuff that's been up there and has been in clarification. We believe the work will be awarded to the industry, so hopefully get a share of that. We see a natural tendency now of brownfield moving very quickly, and that's something that we try to educate people because people get surprised because sometimes we announce a contract for a FEED or, you know, and then we have an option for EPC. Usually FEED is the smallest part of, and then the award is gonna be much larger.
We have quite a few of those being done right now in brownfield because the client sees that, just to start with, when it comes to Norway, some of those facilities were actually designed by Aker Solutions and built by Aker in the past, so we know that facility very well. They just want to make sure the project is economical. We're doing those studies. They are looking to actually quick cash flow. Brownfield moves faster than greenfield. We see today that some people start to get more courageous. We saw quite a few greenfields awarded a few at the end of the year in Guyana. We saw some in Norway and so on, and Brazil with Libra.
We see clients very, still very cautious about jumping to greenfield, which is different than brownfield. The instructions are there. The infrastructure is in place. They can produce quick. I think this cycle is probably half of the cycle. We also see interesting, give you an example of Aker BP in the alliance. They realized that they cut costs of a tieback. The time and cost of tieback, cost by 30% and time by six months for a normal tieback by working alliance. We're moving straight with from standard components into execution. That kind of attitude or behavior or contracting model-Can reduce the cycle. What's the most important thing, you have to remember that we are competing against Shell.
We see every day, I think if I monitor the rigs in U.S., you see that people can turn up very quickly. We have to be able to compete and cope with that kind of cycle.
Secondly, on the services part and the book-and-turn nature of projects which typically don't get into the backlog. Could you give some comment on 18, 19 trend versus where we were in 17? What do you expect in terms of activity improvement?
We see increased activity level moving ahead both within subsea, lifecycle services as well as within production asset services. We see a lot of new opportunities for us within production asset service, in particular, in some new regions of the world for us that we see plenty of opportunities where we try to leverage the combined competence and portfolio we have to penetrate new services markets. We have about NOK 10 billion services backlog. If you look historically, you can see there is a good journal for book in turn or unannounced intake on services based. In terms of giving any guidance related to that activity moving forward, it would be, I don't want to go into.
I think I would rather look at the historical levels related on announced and then try to read something out of that.
Finally, on offshore wind, floating offshore wind. The pioneer in that segment has been your key client, Statoil, with their own Hywind concept. Are you going to be a potential supplier to them? Will you be a competitor to them? How does your sort of engagement here overlap or correspond with what Statoil is doing in that field?
You know, we certainly expect to be a supplier to Statoil. Those are our key clients, and we don't tend to compete with our clients. We have different technology. I think the Hywind is a different kind of technology which relies on is a spar concept and relies on a lot of heavy lifting. The concept that we are working together with Principle Power is something you can assemble at the dockside, reduce the cost immensely of offshore installation. Of course that's, we have, they have done prototypes, have done actually a whole project, operated the this concept offshore Portugal for several months. The idea is to come with something new and also to be the integrator.
We believe that our knowledge of engineering, as I said, floater technology, offshore technology, will be great support for clients like Statoil, BP, Total, and Shell, that actually our key clients will move in that direction. We want to be an integrator of these projects rather than compete with the clients.
Okay, thanks.
Are there any further questions here? In that case, we have time now for some media interviews. Both Svein and Luis are available. For those who wish to speak with Svein, please. Reach out to Stina sitting over there in the corner. Luis, you can reach out to me. Thank you very much for joining us here today.
Thanks for calling.
Thank you.