Dutch FPSO leasing company SBM Offshore has raised its EBIDTA guidance and maintained the revenue guidance for 2020, after "successfully navigating" a challenging period caused by the pandemic. Still, it is preparing for shorter oil price cycles with increased volatility and will lay off 300 workers, as part of its effort to cut costs.
"Over the last six months, SBM Offshore has successfully navigated a challenging period, having mitigated the COVID-19 crisis at our construction projects, in the fleet, and through remote working...The financial results during the period and full-year guidance remain in line with management expectation, which demonstrates the robustness of SBM Offshore’s business model and its effective response," CEO Bruno Chabas said.
With the “in hand” activities from its US$19.7 billion backlog, "and benefiting from good performance on closeout of projects and other commercial items", SBM Offshore increased its 2020 Directional EBITDA guidance from “around” US$900 million to “above” US$900 million.
Further, 2020 Directional revenue guidance is maintained at “around” US$2.3 billion of revenues, with around US$1.6 billion coming from Lease and Operate and around US$0.7 billion from the Turnkey segment.
SBM Offshore's Directional revenue for the first half of 2020 was around $1,18 billion, up from last year's 1H revenue of $965 million.
Underlying Directional net profit for the first half-year of 2020 totaled $94 million, or US$0.50 per share, an increase of 55% compared with the same period last year. Underlying Directional net profit is adjusted for the non-recurring impairment of US$57 million related to the SBM Installer vessel
Job cuts
SBM Offshore said that the COVID-19 crisis is having a profound impact on the energy industry, not only in the short term but expected also for the longer term future.
The company said it expects the oil industry cycles to become shorter and shorter, forcing it to "ensure flexibility, performance, and competitiveness, regardless of the phase in the cycle," and lower its breakeven point.
"Unfortunately, the need to lower our cost base will lead to job losses. Compared with year-end 2019, the reorganization is expected to lead to a reduction of c. 600 positions," SBM Offshore said. The cuts include the reduction of around 300 positions as announced in the first-quarter update.
"The annualized cost of these positions is around US$100 million. Restructuring costs are expected to be c. US$50-60 million, mainly booked in the second half of 2020," SBM Offshore said.
Looking ahead, SBM Offshore said that the outlook for the number and timing of new projects coming to the market remains uncertain.
"SBM Offshore is maintaining its ability to win two to three FPSO orders per year. Investments into the energy of the future (e.g. gas and renewables) continue as planned," SBM Offshore said.
To remind, energy intelligence firm Rystad Energy said in July it didn't expect any new FPSO orders to be made by the end of 2020, but that the situation would improve next year when it foresees seven new FPSO to be ordered.
"Hit by the second industry downturn in five years, global awards for floating production, storage and offloading (FPSO) vessels will likely be limited to a single unit in 2020, Rystad Energy believes, as exploration and production firms slash budgets and activity. Similar to the previous downturn, awards are set to recover next year, with seven projects likely to be sanctioned," the company said last month.
Back in March, energy intelligence company Wood Mackenzie downgraded its expectations when it comes to new orders for floating production systems in 2020, citing the oil price crash.
The company had expected up to 18 new floating production systems to be ordered in 2020, but it then said only "a handful" would go ahead which would take the FPS market to 2015/16 levels.