SOURCE: SBM Offshore

January 30, 2007 11:40 ET

Preliminary Results SBM Offshore 2006 - An Excellent Year - Record Order Portfolio - High Expectations 2007

SCHIEDAM, NETHERLANDS -- (MARKET WIRE) -- January 30, 2007 --Highlights

* Unaudited net profit for 2006 of US$ 216 million;
* Net operational profit up by 40% compared with 2005;
* Proposed dividend per share will be US$ 0.77;
* Order portfolio at year-end US$ 7.0 billion;
* Expected net profit for 2007 of US$ 260 million.
1. Financial (unaudited)

The net profit for 2006 is currently estimated at US$ 216 million (US$ 1.55 per share), compared with US$ 226 million in 2005 (US$ 1.66 per share). All operating companies in the offshore activities have made positive contributions to this result.

Dividend proposal will be based on 50% of the full net profit. Per share the dividend will be US$ 0.77 compared to US$ 0.825 last year (restated for the four-for-one share split effected in June 2006).

Excluding net gains on the sale of assets, net operational profit was around US$ 205 million, representing a 40% increase compared with 2005 (US$ 146 million).

Turnover rose to US$ 1,994 million (2005: US$ 1,519 million), of which approximately 70% related to turnkey sales and services projects.

EBITDA was approximately US$ 480 million (2005: US$ 482 million); EBIT was around US$ 255 million (2005: US$ 275 million), of which close to 60% was generated from lease and operate activities.

Net debt decreased from US$ 805 million at 31 December 2005 to US$ 590 million at 2006 year-end. Net gearing decreased accordingly to around 55%. Capital expenditure reached US$ 310 million, a figure well below expected levels, for a large part due to the need to classify the two lease contracts obtained in early 2006 from ExxonMobil for Angola as financial leases.

2. Development Order Portfolio

New orders in 2006 totalled US$ 4,926 million of which US$ 1,780 million relate to lease and operate activities and US$ 3,146 million relate to turnkey supply and services orders. Total order portfolio increased to US$ 7.0 billion (2005: US$ 4.1 billion).

2.1. Lease and Operate Portfolio

At the beginning of 2006 the lease portfolio value amounted to US$ 3.2 billion representing the non discounted lease revenues to be received under the seventeen long-term "lease and operate" contracts and the two "operate only" contracts for FPSOs and FSOs. At 1 January 2006 a total of fourteen of the owned or part-owned units were in operation and three under construction.

The portfolio developed over the year as follows:

New orders and extensions:

* In the first quarter of the year, in Joint Venture with Sonangol, contracts with ExxonMobil affiliate Esso Exploration Angola (Block 15) Limited, for the fifteen year lease and operation of FPSOs for the Mondo and Saxi-Batuque fields in the Kizomba 'C' development area offshore Angola. Although representing lease and operate activities, these contracts are accounted for as financial leases which implies that capital expenditure is treated as a turnkey sale;

* In the second quarter an operating contract, for a minimum period of three years, for the Frade FPSO for Chevron Frade LLC (see below);

* In the third quarter of the year, a contract with Murphy Exploration & Production Company USA and it's co-producers Dominion Exploration & Production Inc., Hydro Gulf of Mexico, L.L.C and Marubeni Offshore Production (USA) Inc. for the five year lease of a new built semi-submersible floating production unit for the development of Thunder Hawk and adjacent fields offshore Louisiana in the Gulf of Mexico;

* In the fourth quarter a contract with Shell, on behalf of themselves and their partners Petrobras and ONGC, for the fifteen year lease and operation of an FPSO for the development of the BC-10 field offshore Brazil;

* Confirmation of one year extensions of the lease contracts for the 'Nkossa II' and 'Okha' FSOs operating for Total and Shell respectively offshore Congo and Sakhalin.

Start of operations:

* In March the start of operation of an Extended Well Test system in the Caspian Sea offshore Turkmenistan under a three year lease and operate contract with Petronas Carigali (Turkmenistan) Sdn Bhd;

* In May the start of operation of the FPSO Capixaba in the Golfinho field offshore Brazil under a seven year lease and operate contract with Petrobras.

Sale of share in FPSO owning and operating companies:

* Effective 1 April 2006 the sale of 49% of the Company's affiliates owning and operating the FPSO Brasil, on long term charter with Petrobras in the Roncador field offshore Brazil, to MISC Berhad.

At the end of 2006 the count is therefore sixteen owned or part-owned units in operation and five under construction, plus a further three F(P)SO "operate only" contracts, for a total portfolio value of US$ 4.4 billion.

2.2 Turnkey Supply and Services portfolio

The value of the turnkey supply and services portfolio amounted at the beginning of 2006 to US$ 0.8 billion.

The major completions during the year included the following projects:

* Delivery of the external Riser Turret Mooring system to Woodside for the FPSO for Enfield;

* Supply and installation of the "Trelline" flexible export line between the spread moored FPSO and the deepwater export system at the Bonga field operated by Shell;

* Supply to Enterprise Products of the deep draft Semi-Submersible platform for the Independence Hub in the Gulf of Mexico.

The most significant awards during the year included:

* A contract with Petrobras for the supply of two large and complex CALM terminals for tanker loading at Pra in the Campos Basin offshore Brazil;

* A contract with Chevron subsidiary Chevron Frade LLC for the turnkey supply and installation of an FPSO for the Frade field offshore Brazil;

* Contracts for the supply of dynamically positioned Semi-Submersible Drilling Units with Queiroz Galvao Perfuraçoes S.A (QGP) and Odebrecht Drilling Services LLC, both from Brazil;

* Major turnkey lumpsum elements forming part of the overall contract packages for the ExxonMobil Kizomba 'C' and Shell BC-10 projects reported above.

The above awards, combined with orders for standard CALM type tanker loading terminals and offshore contracting activities and with the carry over into 2007 of a number of large projects, such as the compression barges for Kashagan, the internal turret for the P-53 FPSO of Petrobras, the SeaStar® TLP for Neptune and deepwater export buoys for the Greater Plutonio, Agbami and Akpo fields, bring the turnkey supply and services portfolio to US$ 2.6 billion at the end of 2006.

2.3 Developments since the beginning of 2007

In the first month of the year the Company has obtained the following orders:

* A Letter of Intent from Talisman Energy Norge AS, operator of the PL316 license offshore Norway, for the five year lease of a MOPUstor, a production jack-up installed on a subsea storage tank, for the re-development of the Yme field;

* A Letter of Intent with Tanker Pacific Offshore Terminals Pte Ltd (TPOT) for the design and supply of an external turret mooring system for an FSO to be leased by TPOT to the CuuLong Joint Venture for operation in the Su Tu Vang field offshore Vietnam;

* Several contracts for the supply of new, and for the refurbishment of existing, CALM type offshore tanker terminals, and the related offshore change out operations;

* A contract (new award - not previously announced) with Delba Perforadora Internacional S.A. from Brazil for the supply of a Dynamically Positioned Semi-Submersible Drilling Unit, filling the yard slot for a third rig secured by the Company in July 2006. The rig will be delivered first quarter 2010.

The cumulative portfolio value of the above orders is approximately US$ 1.0 billion and includes for the MOPUstor production and storage unit at the Yme field the non-discounted total of the fixed day rates payable over the initial five year lease period.

3. Expectations for 2007

The projected 2007 net profit is US$ 260 million, excluding the impact of any change in ownership relating to the FPSO lease fleet.

EBITDA is expected to amount to US$ 550 million and EBIT to US$ 300 million with a growing contribution from turnkey supply and services activities.

Capital expenditure is expected to accelerate to around US$ 800 million, depending on accounting treatment for recently awarded and prospective lease contracts.

Net gearing will increase back to a level above 100%.

4. Market Developments

As expected a year ago, the market has been quite buoyant during 2006 and there is no doubt that this will remain so for a few years to come. The best indicator is the current and planned high level of activity in the sector of exploration and development drilling. The occupancy level of the global fleet of drilling rigs is today in excess of 90% and, during the year 2006, charter contracts for deep offshore rigs have been awarded for drilling services extending into the mid and long term and at high rates, generating a wave of investments by the drilling contractors. Construction contracts for about 100 offshore rigs have been placed and deliveries are scheduled up to and including the year 2011.

The business of SBM Offshore follows in the wake of drilling activities, a couple of years down-cycle. This implies that the demand for the products of the Company should remain at a high level for at least another 4 to 6 years.

The quite favourable market has given the Company an opportunity for a record high order intake and the portfolio at the end of 2006 is exceptional not only in quantity but also in quality, as it is made of a mix of both traditional and new products and shows a satisfactory balance between lease and turnkey orders, all at reasonably good margins, terms and conditions.

5. Conference Call

Management of SBM Offshore will be available to discuss the contents of this press release in a conference call at 18.00 hrs on Tuesday 30 January 2007. The dial-in number for participants will be +31 (0) 20 531 5851 and the replay number, available for 48 hours, is +31 (0) 70 315 4300 replay code: 137 784#.

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