SBM OFFSHORE HALF-YEAR RESULTS 2014
Revenue up 6%; Outlook confirmed
August 6, 2014

SBM Offshore's execution of projects on hand in the first six months of the year led to better than expected revenue growth. The Company is making progress towards resolving its compliance issue, as evidenced by the US$240 million provision, secured US$1.45 billion of financing for Cidade de Maricá and signed the Operations & Maintenance contract for FPSO Turritella. Directional1 Backlog stands at US$21.5 billion. SBM Offshore continued to achieve over 99% uptime across the fleet. The Company delivered the Kikeh brownfield extension project on time and on budget while also reaching a settlement of claims arising from the Deep Panuke project.

Bruno Chabas, CEO of SBM Offshore commented:

"In financial and operational terms, the first half of 2014 has been a period of solid performance. We have also made progress towards the closure of our final legacy issue with a provision against a potential settlement.

The period also presented a significant challenge: our withdrawal from two current tenders in Brazil pending the outcome of the compliance investigation. Nevertheless, the Company has built a decades-long track record of close cooperation with Petrobras. We believe this will provide a basis to resume a successful working relationship, once the investigation is properly completed.

Tendering activity remains high, and there is industry consensus on a substantial number of new FPSOs and turrets due for award in the coming years. Thus, while we remain cautious on the timing of individual awards in the short term, we have a sound basis for confidence in our medium and long term prospects."

Financial Highlights



Directional1 revenue ahead of expectations at US$1,729 million
Underlying Directional1 EBIT decreased by 37% to US$184 million, compared to a strong 1H 2013
Directional1 Backlog stands at US$21.5 billion, including the O&M contract for the Shell FPSO Turritella
Cash at the end of the period stood at US$154 million; undrawn credit facilities of US$939 million
Net debt at the end of June stood at US$4,302 million, under new IFRS reporting standards
Project financing secured for Cidade de Maricá totaling US$1.45 billion at an average cost of debt of 5.3% with 12 and 14 year maturity tranches
US$240 million provision related to the compliance investigation

Guidance

Management is confidently reiterating 2014 Directional1 revenue guidance of US$3.3 billion, of which US$2.3 billion is expected in the Turnkey segment and US$1.0 billion in the Lease & Operate segment.

First Half 2014 Results

Project Review

FPSO N'Goma (Angola)

The construction, refurbishment, and module work at Keppel Singapore was completed in early May 2014. A successful lifting campaign at the Paenal yard in Port Amboim, Angola, was completed in July and the vessel set sail to the offshore site where mooring has been completed and hook-up operations and acceptance testing is to follow. The scheduled start of production is in 3Q14 at a design capacity of 100,000 bpd.

FPSO Cidade de Ilhabela (Brazil)

Following completion of refurbishment and conversion at the Chinese yard at the end of 2013, construction continued for the finance leased vessel during the first half of 2014 in Brazil where the process modules were successfully installed at the Brasa yard. The FPSO includes topside facilities able to process 150,000 bpd of production fluids for export, including the substantial volumes of associated gas from the pre-salt field. Start-up of the facility is expected in the second half of 2014.

FPSO Cidade de Maricá and Cidade de Saquarema (Brazil)

Construction is ongoing for the two finance leased vessels. Refurbishment and conversion work progressed during the first half of 2014 at a Chinese yard. The charter contract for both vessels includes an initial period of 20 years with extension options. The two double-hull sister vessels will be moored in approximately 2,300 meters of water depth and possess a storage capacity of 1.6 million barrels each. The topside facilities of each FPSO weigh approximately 22,000 tons, will be able to produce 150,000 bpd of well fluids and have associated gas treatment capacity of 6,000,000 Sm3/d. The water injection capacity of the FPSOs will be 200,000 bpd each.

FPSO Turritella (US Gulf of Mexico)

Construction on the FPSO previously known as Stones continued for the finance leased vessel in the first half of the year, with refurbishment and conversion work continuing at Keppel Singapore. The charter contract includes an initial period of 10 years with extension options up to a total of 20 additional years. In May 2014, the Operations & Maintenance contract was signed with Shell Offshore Inc. When installed at almost 3 kilometers of water depth, the FPSO Turritella will be the deepest offshore production facility of any type in the world. The vessel is a typical Generation 2 design, with a disconnectable internal turret and processing facility capacity of 60,000 barrels of oil per day (bpd) and 15 mmscfd of gas treatment and export.

FPSO Marlim Sul (Brazil)

An extension of six months through the end of 2014 has been agreed to with Petrobras. Negotiations for further extension opportunities beyond 2014 continue.

FPSO Kikeh (Malaysia)

SBM Offshore and its joint venture partner MISC Bhd achieved a key milestone with the start-up of the Siakap North-Petai (SNP) field through a tie-back to the Kikeh FPSO.

The SNP field, a unitized development operated by Murphy Sabah Oil Co.,Ltd (Murphy), is located offshore Malaysia in water depth of approximately 1,300 metres. Murphy announced first oil production from the SNP field on February 27, 2014.

The event is an important milestone for a project that commenced in January 2012 at SBM Offshore's Kuala Lumpur office and involved the fabrication and offshore lifting of four new modules and approximately 340,000 man-hours of offshore construction and commissioning work done on a live FPSO.

Turret Mooring Systems

The three large, complex turrets for Prelude FLNG, Quad 204 and Ichthys are progressing, in close consultation with the respective clients, on schedule according to their respective stages of project completion. Fabrication work on Prelude FLNG is underway in Dubai, while the integration of the Quad 204 Turret with the vessel continues in South Korea, with expected delivery in the second half of 2014. Engineering and procurement for the Ichthys turret has been completed while construction continues to progress at the yard in Singapore, with expected delivery in the first half of 2015.

HSSE

During the period, SBM Offshore deeply regrets to have to report two fatalities of contractor staff at the relevant yard on construction projects in Singapore. Root cause analysis has been carried out and appropriate measures have been put into effect at contractor facilities.

These fatalities are all the more regrettable, since over the course of the first six months of 2014 the Company achieved an improved safety performance in a range of its business activities, with a Total Recordable Injury Frequency Rate (TRIFR) of 0.26 for the first half of 2014 compared to 0.40 at the end of 2013. The Lost Time Injury Frequency Rate (LTIFR) also improved to 0.06 in the first half of 2014 from 0.15 at the end of 2013.

Compliance

As previously disclosed in various press releases, SBM Offshore voluntarily reported in April 2012 an internal investigation into potentially improper sales practices involving third parties to the relevant authorities, and has since been in dialogue with these authorities.

SBM Offshore is discussing a potential settlement of the issues arising from the investigation. While these discussions are ongoing, it is sufficiently clear that a resolution of the issues will have a financial component, and consequently SBM Offshore has recorded a non-recurring charge of US$240 million in the first half of 2014, reflecting the information currently available to the Company.

Until the matter is concluded, SBM Offshore cannot provide further details regarding a possible resolution of the issues arising from the investigation, and no assurance can be given that a settlement will actually be reached. As always, the Company will inform the market as soon as further information can be provided.

Overheads & Operating Costs

As announced with the Full Year 2013 results on February 6, 2014, SBM Offshore has embarked on a two year programme focused on business improvements, increased fleet maintenance and Research and Development.

The business improvement project Odyssey 24 is aiming to achieve several objectives. It will optimize and consolidate the ways of working of a Company that has quickly grown from a mid-sized centrally managed business to a multi-national, organized in accountable business units. It will improve project management and controls of projects that have grown in size from around US$500 million a few years ago, to close to US$2 billion today. It aims to reduce project costs by at least 5% for each project through improved project, supply chain and materials management, improving both profitability and competitive edge. These financial benefits will accrue to the bottom line increasingly over the next few years. Increased investments in R&D will ensure SBM Offshore stays at the forefront of floating solutions technology, such as complex large turret and swivel systems, thereby opening up new deepwater frontiers for the industry. Finally, a focused increased in offshore maintenance will ensure that the Company is better prepared for long duration lease contracts and contract extensions.

The Company expects incremental annual costs equivalent to 2.5%-3% of Directional1 revenue in 2014 and 2015. These incremental costs have an impact on the 1H'14 Gross Margin and Overheads, as the investments precede the expected benefits.

Orders

Directional1 order intake during the first half of 2014 totalled US$1,034 million, driven primarily by the finalization of the FPSO Turritella Operations & Maintenance contract with Shell and the payment of agreed upon variation orders by clients.

Post-Period Events

The Company secured project financing for FPSO Cidade de Maricá totalling US$1.45 billion from a consortium of international banks at a weighted average cost of debt of 5.3%. The financing consists of two tranches, $1.0 billion with a 12 year post-completion maturity and $450 million with 14 year maturity.

Divestment Update

Marketing of the newbuild DSCV SBM Installer continues. The FPSO Falcon and VLCC Alba remain held for sale and the disposal of the last of three Monaco office buildings is nearing completion.

Outlook and Guidance 2014

Management is confidently reiterating 2014 Directional1 revenue guidance of US$3.3 billion, of which US$2.3 billion is expected in the Turnkey segment and US$1.0 billion in the Lease & Operate segment.

In terms of new FPSOs, SBM Offshore anticipates total industry-wide awards in double digits over the next few years, and the Company is well-positioned to take an appropriate share of the projects which it is targeting. On the timing of individual awards, SBM Offshore is cautious, noting the trend in recent years for tendering processes to lengthen. Nevertheless, it is clear that a substantial body of FPSOs must be commissioned over the next two years for oil & gas companies to maintain production levels.

FINANCIAL REVIEW

IFRS 10, 11 & 12

New consolidation standards for joint ventures (JVs) have been introduced as of January 1, 2014 ending proportional consolidation of JVs for SBM Offshore. As disclosed in its 2013 Annual Report, the Company is now required to account for its fully controlled JVs on a fully consolidated basis (mostly impacting all Brazilian FPSOs) and apply equity accounting to the Company's jointly controlled JVs (mostly Angolan FPSOs). These new standards (IFRS 10, 11 & 12) apply to the income statement, statement of financial position and cash flow statement.

On balance, this implementation has a limited impact on SBM Offshore's IFRS revenue as the additionally reported partner share in the fully consolidated ventures is offset by the exclusion of revenue in the equity accounted ventures and almost nil to net income attributable to shareholders. However, the Company's reported total asset value at year-end 2013 has increased significantly by approximately US$1.6 billion, as the now fully consolidated Brazilian assets are younger and represent a larger part of the balance sheet. A similar effect is visible at the gross debt level, increasing from US$2.9 billion to US$3.6 billion. The Company's 2013 pro-forma financial statements were disclosed in SBM Offshore's Q1 trading update.

As this change of consolidation rules under IFRS further complicates the understanding of the Company's performance and as previously announced, Directional1 reporting will be based on proportional consolidation for all Lease & Operate contracts. Compared to previous Directional1 reporting the change is limited to FPSOs Aseng (60% owned) and Capixaba (80% owned) previously fully consolidated and now proportionally consolidated as all other Lease & Operate contracts. This change to Directional1 reporting led to a limited negative impact of US$35 million and US$5 million in first half 2013 Directional¹ Revenue and EBIT respectively (no impact on Directional¹ net income attributable to shareholders) and restated figures for first half 2013.

Effective January 1, 2014 SBM Offshore's Directional¹ reporting principles are as follows:



Directional¹ reporting represents an additional non-GAAP disclosure to IFRS reporting
Directional¹ reporting assumes all lease contracts are classified as operating leases
Directional¹ reporting assumes all JVs related to lease contracts are consolidated on a proportional basis
Directional¹ reporting is limited to restating the consolidated income statement however no restatement of the statement of financial position is made

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