-tions presentation of second quarter results for 2016. My name is Bunny Nooryani, and I'm the Chief Communications Officer at our company. With me here today are Luis Araujo, our Chief Executive Officer, and Svein Stoknes, our Chief Financial Officer. They will go through the developments in the quarter. After that, we will have time for a Q&A and some one-on-one interviews with the media. Before we get started, I would like to point to the nearest emergency exit. It is out through the glass door on your left. Please note, though, that we do not have any fire drill scheduled today. Luis, I'll let you take it from here.
Thanks, Bunny. Thank you for joining us here today for our first presentation at our now, our new main office here in Fornebu. I'm pleased to be here today with Svein to go through our results for the second quarter, which was another period of strong operational performance. The last three months were another challenging and demanding quarter for the industry. While oil prices rose from the bottom seen early in the year, our oil companies continue to scale back spending. Despite this backdrop, we had significant achievements in the quarter with key deliveries and consistently strong execution on major projects from Africa to Norway and Brazil. To give you a flavor, at our fabrication yard in Egersund, we are now completing the first two of the 10 manifolds for the giant Kaombo subsea development offshore Angola.
We are steady delivering equipment for Total Moho Nord project in Congo, with 14 of the 28 Christmas trees now installed subsea. In Norway, we are set to deliver the six pools for Subsea 7 for the Statoil Aasta Hansteen gas project, the country's first deepwater development. This will connect flow lines to the three manifolds we delivered last year. In Brazil, we delivered a record nine Christmas trees to Petrobras in the quarter and opened a new state-of-the-art subsea plant. This will service customers both locally and globally. I am also pleased to say that we now have, for the first time at Aker Solutions in Brazil, produced a subsea control module. This is a major step in expanding our capabilities in the region, we did this at the new plant.
We made good progress in the quarter in our global push to improve operations and bring down costs across the business. This helped support our margins, which were steady in the quarter compared to the year ago. We also saw the effects of the slowdown that's affecting our entire industry with a weakening of our top and bottom lines. Our order backlog was robust at NOK 35 billion, and we had a solid financial position with liquidity buffer of NOK 7.9 billion at the end of the quarter. This give us good flexibility ahead. Of course, these are just numbers where we reflect on the terrible tragedy we and other companies suffered in April. A helicopter crashed on its way to Bergen from the Gullfaks B platform in the North Sea.
All 13 passengers were killed, including three of our own employees and a contractor hired in from Castem Ohud. There are no words to fully describe the grief we as a company feel over this loss. The safety of our employees is our highest priority. We know that to work in this industry is not without risks, and we do everything we can to minimize these risks and safeguard our people. We are fully support the Norwegian authorities and the operator, Statoil, in investigating the root cause of the accident. It's important that we understand the cause to prevent something like this from happening again. Going back to the numbers. In the second quarter, revenue was NOK 7 billion. EBIT was NOK 319 million. The EBIT margin was 4.6%.
Excluding special items, the margin was 5.7%, and earnings per share were NOK 0.37. Compared with a year earlier, revenue was down 13% as activity levels declined globally in the offshore services industry. Compared with a year earlier, margins were steady year on year, helped by a stronger performance in field design, and this was somewhat offset by a slowdown in the subsea service market. The order intake was NOK 3.4 billion, helped by new contracts for all business areas. This included an order of more than NOK 1 billion for our longest ever umbilical system for Egypt's Zohr gas field. An engineering framework agreement we learned in Norway. MO contracts in Norway for work for the Utgard and York A fields.
An order for the Idemitsu Oil and Gas to provide Front-End Engineering Design work for the Sao Vang and Dai Nguyet developments offshore Vietnam. This is the first time we team up with Idemitsu on a project in the Asia Pacific. It marks an expansion into an important emerging market, Vietnam. We also continue to see good interest in our early phase capabilities, even as customers do a lot of this work themselves now. We won 29 study awards in the quarter, including for projects in Norway, Australia, West Africa and Asia Pacific. Several of these are of strategic importance for us. Earlier, I briefly mentioned our company improvement program called The Journey. It targets improvements in cost efficiency of at least 30% across our business.
Based on our 2015 cost base and work volumes, this equates to potential annualized cost savings of minimum NOK 9 billion by the end of 2017. We are on track to reach at least a quarter of this improvement by the end of this year. Next year, we will see even more momentum helped by longer-term improvement processes. We are becoming more competitive through a leaner company structure, and we are continuously looking at further steps to boost our efficiency. These changes have included simplifying our methods, our organizational setup, our geographic footprint. We are also standardizing our products and services. This has enabled us to reduce the overall cost of our projects and our products while improving quality. Our efforts are progressing well. They are supporting overall margins, and they are reflected in the work we do with customers on projects.
Improvement is also a key driver in the subsea alliances we have formed over the past two years with peers including Baker Hughes, MAN Diesel, SBM Offshore, Saipem, and now most recently in April with ABB. This spans the entire value chain from down the reservoir, along the seabed and right up to the topside. The partnerships are with companies that are leaders in their fields of expertise and whose competence and technology complement our subsea capabilities. They close technology gaps in our portfolio and target adjacent segments, strengthening our offering. We now have access to the complete range of capabilities needed to develop fully functioning subsea production and processing systems. The alliance also bolster our platform for international expansion, and they provide flexibility. Each company is free to develop and market its own products and technologies outside of the partnership.
Our customers are also free to select the exact products and services they need instead of all-or-nothing deals. From what we can tell, this is what most of our clients prefer. We also see the potential for the alliances to work together in some areas, such as increased recovery, including subsea compression, where MAN Diesel, ABB, Baker Hughes and ourselves all have valuable expertise. The key goals of these collaborations are to lower costs, boost recovery, enable viable development of more fields, improve safety and minimize environmental footprint while securing needed energy resources. It is still early days for some of these alliances. We are getting positive feedback from our customers. We are off to a good start with several study awards and technology development underway. I am firmly convinced that this type of collaboration is crucial for our industry to move forward with strength.
Now let's look ahead. We are fully aware of the challenges that lay ahead. Steep and sustained decline in oil prices and oil companies' capital constraints are having a significant impact. Projects are being postponed and there is persistent pressure on pricing. There is, however, still steady tendering in our main markets, and we are currently bidding for contracts totaling about NOK 35 billion, with more than half in subsea. We see indications that improvement in measures across the industry are having an effect. Break-even costs are coming down and this increases the likelihood of some projects being sanctioned in the next 12 to 18 months. Activity offshore Norway, our largest regional market, is expected to remain subdued this year. There are signs that we may start to see a gradual recovery in this market from next year.
We also have the main exception already, the [Orange Vedre] development, where we have an engineering framework agreement that extends to 2023. We see the biggest potential for growth outside Norway, where we have expanded in recent years. At the end of this quarter, about 70% of our revenue was generated from contracts for delivery outside Norway. Going forward, we will continue to be vigilant about our workforce capacity to ensure it fits current market conditions after reducing our permanent staff by as much as 20% since the second half of 2014. Longer term, we are optimistic. Field develops are becoming more complex, and we have the capabilities needed to manage these challenges. Forecast global energy demands support a positive long-term outlook for offshore and deepwater oil and gas.
We are well positioned to take advantage of this through our technology, projects, and strong customer relationships. To sum up, we have solid finances and a robust order backlog. As I said earlier, we are executing strongly, and we start to see more and more payoff from our continuous improvement efforts. Well, thank you for listening to me in the middle of Norwegian summer. Svein now will take you through the numbers in more details, and I'll come back for questions afterwards. Svein?
Thank you, Luis, good morning. I will now take you through the key financial highlights of the second quarter, our divisional performance, and run through our financial guidance before we then move on to Q&A. As usual, all numbers mentioned are in Norwegian kroner. Let's start, as usual, with the income statement. Overall operating revenues for the second quarter were down 13% year-on-year. A slowdown continued in our North Sea exposed activities and within subsea services, which was partly offset by good progress on a number of key projects. Our reported second quarter EBITA was NOK 563 million. This included some special items, including a restructuring cost of NOK 18 million related to capacity adjustments in field design.
It also included further costs related to separation of IT systems following the demerger, a loss of NOK 13 million in subsea related to the sale of our Sweden office, a gain of NOK 11 million related to non-qualifying hedges, and a cost of NOK 4 million for expected unused offices. Our EBITA, excluding all special items, was NOK 590 million, equivalent to a margin of 8.5%, reflecting continued strong execution and our internal improvement efforts. On an equivalent basis in the same period last year, EBITA was NOK 647 million, with a margin of 8.1%. For your reference, we have, as usual, set out a table in the appendix that further specifies these special items.
Depreciation in the second quarter was slightly up from last year at NOK 245 million and included NOK 50 million of asset impairments, of which NOK 38 million related to intangible assets. As we mentioned at Q1, we still expect 2016 depreciation to be between NOK 850 million- NOK 900 million, reflecting our recent investments in technology development and to support our workload in Brazil and in Angola in particular. Our reported second quarter EBIT was down year-on-year to NOK 319 million. Excluding all special items, EBIT was NOK 395 million, and the margin was 5.7% versus 6% last year, reflecting the increase in our depreciation and amortization. Excluding an unrealized hedging loss of NOK 25 million, net financial items totaled negative NOK 95 million.
Excluding impact from currency and non-qualifying hedges, we now expect to see net financial items on an annual basis in the range of NOK 80 million-NOK 90 million per quarter as our working capital continues to normalize. Our tax charge for the quarter was equivalent to a rate of 34.2%. Our view remains for average P&L tax rates to be in the mid-30% rate range going forward. All in all, we ended the quarter with an unadjusted net profit of NOK 131 million, equivalent to an earnings per share of NOK 0.37. Normalizing for all special items, our underlying EPS for the quarter was NOK 0.66. Now moving to our balance sheet and cash flow performance.
As previously indicated, our net current operating assets continued to normalize in the quarter, and we ended the first half at negative NOK 100 million, up from negative NOK 1.6 billion at year-end 2015. We still expect our current favorable working capital position to continue to unwind over the medium term and as our major projects progress, and now see this happening over the next 12 to 18 months. Due to our improvement programs and ongoing initiatives to optimize the cash flow, we are now more comfortable in seeing working capital trend towards the lower end of our previous guiding through 2017. We now see a more normal level of working capital to be around NOK 1.5 billion or equivalent to 5% to 7% of revenue.
Driven by this expected normalization of our working capital position, we ended the quarter with a net debt position of just under NOK 1.3 billion. We continue to expect to end this year at around 1 times net debt to EBITDA and to slightly exceed this conservative target level during 2017. Our total liquidity buffer is robust at NOK 7.9 billion. This also includes our undrawn NOK 5 billion revolving credit facility with leverage covenant at 3.5 x. This position continues to give us good financial headroom going forward. As a reminder, the credit facility is secured at very favorable terms, with margins starting below 1%. As of the second quarter, our return on average capital employed for the group overall reached 7% versus 15% in the year-earlier period.
This decrease reflects the impact of restructuring costs and other special items over the last year, as well as some normalization of our working capital. Excluding special items, our return on average capital employed reached 13% versus 18% last year. There's also the effect of recent investments that are yet to contribute to earnings. Our group capital employed was NOK 9.4 billion at the end of Q2, and of this, around NOK 1.5 billion was linked to facilities and technologies that did not contribute to earnings at the end of Q2. Our cash flow from operations in the second quarter was negative NOK 530 million, reflecting the expected normalization of working capital. Our investing cash flows totaled NOK 133 million in Q2, mainly related to fixed assets and technology development.
As our current key investment programs come to an end through this year, we now see CapEx spend in 2016 well below NOK 1 billion. Since some major CapEx expansion programs finished this year, we see 2017 at even lower levels. We now see overall CapEx and R&D at roughly 3% of revenues going forward with flexibility. Our 2016 debt maturities relate to local resilient debt equivalent to about NOK 500 million and will be refinanced locally during Q3. Now on to Subsea, where second quarter revenues were down 12% year-over-year. A seasonal uptick in our service demand and good progress on key projects only slightly mitigated the effect of lower order intake over the past year and continued lower volumes from Subsea services.
Importantly, our major projects continue to progress to plan, and we continue to realize significant benefits from our improvement programs, helping to offset market headwinds. As a result, our Subsea EBITDA margin was only slightly lower year-on-year. After the expected effect of higher depreciation, our Subsea EBIT margin reached 6%, excluding special items, down from 7.2% a year ago. Special items for Subsea in the quarter were related to a loss of NOK 13 million from the sale of our Sweden office and NOK 50 million of asset impairments, primarily technology-related, the latter impacting depreciation. In terms of our outlook for Subsea in 2016, we continue to see a challenging market, particularly in terms of delayed project awards. We still expect revenues to be down around 20% versus 2015, with roughly 20%-25% of revenues coming from after-market services.
We see underlying EBITDA margins remaining roughly around current levels, with market headwinds largely offset by our own internal self-help. Our Subsea return on average capital employed reached 10% in the quarter. This reflected a number of factors, including impacting our 12-month rolling performance, including restructuring costs and the level of working capital. Excluding special items, our Subsea return on average capital employed was 15%. In terms of order intake, our Q2 book-to-bill was up slightly versus last year at 0.5 x, and our backlog remains strong at NOK 18.3 billion. This is equivalent to around 13 months of Subsea revenue and gives us relatively good visibility for the remainder of 2016 and for the medium term. The current market remains active. In Subsea, we are currently tendering for around NOK 20 billion of work.
This value is lower than when we last updated you at Q1, but this reflects the removal of one larger project, with all other potential work remaining active. Importantly, the number of new invitations to tender, or ITTs, continues to be at a good level. Now on to Field Design. Field Design revenues were down 17% year-on-year, due in particular to lower volumes in the Norwegian MMO market versus the last year, that were only partially offset by international growth. Margins in Field Design were impacted by NOK 18 million of restructuring costs in the quarter. Adjusted for this, our underlying EBITDA was NOK 201 million, with a margin of 7.4% versus 5.8% a year earlier. Our EBIT, also adjusted for restructuring cost, was NOK 167 million with a margin of 6.1%.
Our order intake was good, particularly for engineering, reaching NOK 1.3 billion for field design overall. Our Q2 book-to-bill was 0.5 x the same as last year. Despite the tough market, tendering activity is good, with a total value of work for tender currently around NOK 15 billion, similar to the previous quarter. This reflects international work as well as good volume of modification work on the Norwegian continental shelves. In terms of our outlook for this year, we still expect tough market conditions to continue, especially within the MMO segment in the North Sea. We now see overall revenues for field design down 15%-20% for 2016 compared to last year, with underlying margins similar year-on-year. To the order intake and backlog performance for the group as a whole.
At NOK 3.4 billion, overall second quarter order intake was equivalent to a book-to-bill of 0.5x . This was higher than in the second quarter last year in both of our business areas, helped in particular by engineering, which saw a book-to-bill of around 1.1 x. Year to date, we have booked an order intake of NOK 9.4 billion, equivalent to a book-to-bill of 0.7 x. Our backlog ended the quarter at NOK 35 billion. This is equivalent to around 1.2 x our last twelve-month revenues, giving us good visibility for this year and a reasonable visibility for the medium term. With about 50% of anticipated 2017 volume in hand, which is about the same level as twelve months ago looking into this year.
Tendering activity is at good levels, although delays in project awards remain common. Overall, we are engaged in tenders with an estimated sales value of around NOK 35 billion and more than twice this value in terms of opportunities. As a reminder, our backlog does not include the majority of service business or potential growth or options on existing contracts. Finally, I would like to remind you of our medium-term financial guidance. As you can see, our three key medium-term guidance themes and other financial policies remain unchanged. To sum up, in what continues to be a very challenging time for our industry, we continue to deliver good project execution and a good financial performance. We have reported steady underlying margins despite lower revenue and have controlled operational leverage due to the ongoing benefits of our focus on the culture of continuous improvements.
As I explained for the individual business areas, our main guidelines for 2016 on revenue and margins remain largely intact. However, as we continue to optimize our global resource base, we might see a need for further onerous leases in the second half. At this stage, our initial outlook for 2017 indicates revenues down only slightly versus this year, with activity growth in field design, especially within MMO. At this point, we see our nominal group EBITDA for 2017 as roughly in line with current market consensus. We continue to face the future with a strong balance sheet and decent visibility, thanks to a continued good backlog position. As Luis mentioned before, there are a growing number of signs that offshore break-even costs are seeing meaningful reductions across the industry. This is improving the chances for projects to move ahead.
We believe we are well placed to serve the long-term needs of recovering and growing offshore oil and gas market. Thank you. That was the end of our presentation today. We will now move on to Q&A.
Thank you. As Svein said, we have time for some questions now. We plan to end the session at the very latest at 10. We will take questions both from this audience in here as well as from our webcast audience. I would ask you to please use the microphone that we have, the handheld microphone with the gentleman over there, and to limit your questions to one-on-one as well as to please introduce yourself. For those who are wanting to ask questions via the webcast, please do so in writing. Thank you. We're ready for the first question. Haakon Amundsen?
Yes, Haakon Amundsen, ABG. Just a question on the 2017 guidance, where you're guiding for EBITDA close to market expectations, but only revenue slightly down. Is it the subsea margins which are coming down next year?
I don't want at this stage to be more specific than what I just said related to 2017 outlook. You know, as we said, we see subsea revenues down about 20% from last year, this year. Field design, we're seeing down 15%-20%. At this stage, 2017, we see it slightly down from this year. We see our nominal EBITDA roughly in line with what we see of consensus expectations.
Okay. Just a question on the Norwegian outlook for 2017. You're saying maybe some recovery. Can you put some light on that? Is it tieback projects that are coming back that you're seeing coming into the market again? Or can you put some color on that?
Yeah, absolutely, I can take that. We believe that, of course, the lowest cost barrels will be produced first. As announced during the year, we have won quite a lot of studies and for some of the brownfield and tiebacks that Statoil has been talking about, some of the clients. In our backlog, we only have the engineering part for this FEED, and then it's gonna move into, we hope, into sectioning APC, current APC content. That's where we see the market moving first. Of course, also of course see some activity outside of Norway, but that's, it's puncture in some places.
Thank you.
Any further questions in here? There were questions in...
[Inaudible]
Yeah, we do have some questions from the West Coast audience. The first is from Nicholas Green at Bernstein. Can you give clarity on the NOK 9 billion cost savings? How much do you expect to be fixed, and how much will be variable?
Okay, I can start and Sven can quantify in a way. Thanks for the question. Yeah, it's always interesting to understand that we have benchmarks and where that's where we always come back to the 2015 cost base and volumes that we had that time. Of course, we are working strongly on the fixed costs, but also on the flexible costs. I would say that a good part is fixed costs. We have streamlined our structure. You know, simplified the organization and so on. That's, that's, of course, working very hard on the fixed costs, the management costs and so forth. Also reduce some of the offices like we had in London and some other places, and is still working some other parts.
On the flexible costs, of course, we are reducing capacity to cope with existing market demand. Do you have a number, Sven?
Yeah. No, as you say, the NOK 9 billion or the 30% target, it's important to remember it's based on the 2015 activity level and cost base. Of course, volumes are coming down. The important measure is of course what we're able to drive through in terms of efficiency improvements and not in terms of just adjusting our capacity.
Mm-hmm.
This is an efficiency improvement program, but of course, a share of the NOK 9 billion is related to taking out, adjusting capacity and simplifying our organizational design and engineering processes. Take out costs related to products, lean manufacturing, et cetera. In terms of breaking the NOK 9 billion further down, at this stage, we're not gonna go there.
Yeah. Actually reducing the cost of the products is something that we see that is having a significant impact, both on our efficiency at the plants but also on our supply chain. We're working very close with suppliers to reduce those costs as well.
To add that about 80% of the target is, you know, identified, being, you know, validated and of course, being pushed to be reflected in updated project forecasts. As Luis alluded to, more than a quarter of this is expected to come through this year.
We have a follow-up from Nicholas Green. He asks: when you say a good part is fixed, can you please quantify? Is one-third fixed a reasonable assumption?
I'm not gonna comment on that.
Next question is from David Farrell from Macquarie. Can you explain the increase in minority interests?
In terms of minority interest, it's related to our setup in India, where we have just short of 70% ownership stake. It's also related to activity in Africa, where we have some joint venture setups, where that you can see coming through in the minority interests. Angola in particular.
David Farrell has another question. Can you explain the shift in field design backlog? It looks as if you have accelerated work from 2019+ into 2017 and 2018.
As, you know, every quarter, you know, we update the phasing of our backlog. You know, as backlog is executed, as new intake is coming in, and of course, in continuous dialogue with, our clients related to the phasing of the backlog and phasing the planned activities moving forward. It's just related to, backlog being burned or intake coming in and rephasing, updating of the phasing of the backlog.
Sure.
The next question is from Philip Lindsay, Credit Suisse. There are actually two questions. The first one: For MMO, you've seen some mixed change in recent quarters. You've lost some key awards but also gained some. Your book of business is certainly different. What I'd like to understand better is your view on the quality of the book you now have versus previously, and your expectation of whether the copper of work you currently would enhance or diminish this quality.
I think, yeah. As announced about a year ago, the whole in the more portfolio was under tendering. I would say that very pleased to see that we have actually booked all the IOCs in the Norwegian Sea. It will also grow some international presence. I would say that the market is competitive, there's no question about that. We just follow one action from our, from our answer on the operational improvements, and some of these operational improvements are gonna be passed to the clients. There's no questions. We're reducing costs on the fields, and that's why I believe that we are well-positioned to win more work.
That's a big part of the work we're doing now with the clients, is to look through this balance sheet and see how can you do those modifications, more efficiency. How can you reduce the cost for the clients, and of course, how to, how to protect our results and maximize our resources. I think the quality of backlog is not different than before. There's no questions that, the volume is lower, but in fact with the wins we had, we actually even increased our market share in the Norwegian Sea, for example. Do you wanna add anything?
No. We have, as you've seen, we've had a pretty good success rate lately on. It's not related to compromising anything on price. It's related to our improvement programs and what we see operators strongly believing in our improvement efforts moving forward.
The second question from Philip Lindsay: Appreciate the early guide on 2017. That's useful and reassuring. However, I suppose the main issue that any relatively small company has when they win an abnormally large contract award like Kaombo is one of replacement. Clearly, you need the market to come back, but what I'm really looking for is a comment around your approach to business development and business planning for life after Kaombo.
Okay. Yeah. I mean, there's no many Kaombos. Kaombo is the largest subsea project ever awarded. Very pleased to have that, especially in this environment. There are follow-on phases, including for those projects we won initially. We believe that, through the efforts we are making to reduce costs to be competitive. Quite frankly, the whole industry is more work. There's quite a lot of installed capacity, and that's why we have a very competitive environment and remain competitive going forward. Right now we are focusing on things we can control, which is reduce our cost to make sure we win our share of the work. That goes also to when we talk about commercial approach, I spent some time today and also some time during Capital Markets Day on the alliances.
We believe that we're teaming up with some very strong companies and leaders that will enhance our market efforts in the market going forward.
It is important also to to add that, you know, our true approach to business development now compared to, you know, in the past where a lot of industry players were just passively responding to tenders, it's the importance of our front-end capabilities. It's a true differentiator, you know, for us, and you see the result of that, several of our peers hooking up with with other players in the industry in order to tap into that front-end competence because it's clearly important moving forward to be able to get involved with the clients at a much earlier stage where you're really able to move and make a meaningful impact on the break-even price level of a project.
Through that, you know, work with the client from the conceptual stages, the feasibility stages, onto the pre-fees into the fees, and end up in a sole source negotiated situation compared to in the past where, you know, a shotgun approach in terms of see who's gonna land the tenders that are coming our way. That's our approach to business development moving forward.
Next question is from Eirik Mathisen at DNB: Can you explain the change in phasing of the subsea backlog quarter-on-quarter? The 2019 plus backlog is up from NOK 0.4 billion in 1Q 2016 to NOK 1.3 billion in 2Q 2016.
As I just responded, it's, this changes every quarter. You know, there is backlog being burned, there's new orders coming in, and project estimates and timeline project phasing is being updated on a continuous, basis. It's nothing dramatic in it. You know, if you want further details, it would be great to just contact our investor relations department. I'm sure they can provide further color on it.
Yeah, sure. Subsea projects, especially large ones, they have movements in the clients' prioritized installation sometimes. Some clients are benefiting from lower rate costs now, so it's good to accelerate the installation. That's, as Sven said, it's nothing major but just what the clients and how they want to receive the components and also balance with our capacity.
I have another question on the order intake this time from Nicholas Green at Bernstein: Can you help us understand how the order intake is NOK 3.4 billion when disclosed orders would appear to make only around half of that? In particular, can you confirm whether 100% of this intake is guaranteed work as opposed to expected but not guaranteed work within the firm period of framework agreements?
Yeah. I can start. First of all, as that's what, seems to surprise people all the time is that we have growth on contracts. We have a lot of service orders that come to the quarter. That explains that we don't announce everything. That we win, just the major orders. That's the reason for the growth.
There's growth, there are options, there is call it book and burn service type activity, that's going through our P&L. If you look back pre-previous quarters, you can see that a substantial component of our order intake is related to unannounced order intake.
Yeah. Certainly all the work that we disclosing backlog are firm orders. They're not options. We never include options on the backlog. I just mentioned that we're doing some studies there will be we believe is gonna be orders in the future. As soon as we award those contracts or if you have a call off on a framework agreement, that's gonna become backlog. Until then, it's just, it's not there.
Thank you. That was our final question from the webcast audience. Unless there are any further questions here today. One question.
Who's calling?
Magnus Olsvik, Swedbank. On the capital Det Norske announced an award for Subsea 7 and Aker Solutions. There have been no news from you guys since then. Could you give any comment?
Well, first of all, we're very Det Norske is, like, one of the key clients, in the app, actually working very close to us on those cost reductions. We work with them for a while now. What was clear by Kali was that they intend to team up with us in Subsea 7 for all the foreseeable subsea work for the atmosphere. It's a framework agreement, but we don't have anything in the backlog yet. It's basically it'll be call offs going forward. They're not in the numbers right now.
The NOK 2.7 billion was an estimate from Det Norske?
Yeah. Yeah. I guess the Norske has to quantify that one. Then as we only put in the backlog when we have award orders, we expect that to be sequential.
Any further questions in here? If not, thank you very much for joining us here today.
Thank you.
We will take some questions now from any journalists who have come. Thank you.
Thank you. Have a good summer.