Aker Solutions Asa · OSL:AKSO
Aker Solutions Asa — Investor Day (December 2013)
62 slides from Aker Solutions Asa's investor day presentation, Dec 4, 2013
Slide 1: Capital Markets Day 2013
CMD 2013 Capital Markets Day 4 December 2013 © 2013 Aker Solutions www.akersolutions.com
Slide 2: Agenda | Capital Markets Day 2013
Preferred partner Capital Markets Day Oslo, 4 December 2013 © 2013 Aker Solutions Preferred partner Agenda | Capital Markets Day 2013 Time Presentation Speaker 08:30 Status and way forward + Q&A Øyvind Eriksen 09:10 Our improvement agenda + Q&A Nicoletta Giadrossi 09:30 Regional markets Mark Riding
Slide 3: Status and way forward
Preferred partner Status and way forward Capital Markets Day, 4 December 2013 Øyvind Eriksen | Executive Chairman © 2013 Aker Solutions Slide 3 4 December 2013 Capital Markets Day 2013 Preferred partner 2013 – A mountain hike © 2013 Aker Solutions Slide 4 4 December 2013 Capital Markets Day 2013 Pre
Slide 4: Stock price: January 2013 – YTD
Stock price: January 2013 – YTD January 2013 YTD 2013 © 2013 Aker Solutions Slide 5 4 December 2013 Capital Markets Day 2013 Preferred partner Stock price: January 2012 – YTD January 2012 January 2013 YTD 2013 © 2013 Aker Solutions Slide 6 4 December 2013 Capital Markets Day 2013 Preferred partner 3
Slide 5: Best-performing large-cap oil services stock; what we have gained from 2013
Aker Solutions: Best-performing large-cap oil services stock Total return since 1 January 2012 (%) Source: Bloomberg (dividends reinvested in security) 100% 80% 60% 40% 20% 0% -20% -40% -60% -80% © 2013 Aker Solutions Slide 7 4 December 2013 Capital Markets Day 2013 Preferred partner What we have ga
Slide 6: Aker Solutions strengths and recent industry trends
Aker Solutions – Strengths Subsea factory solutions Drilling packages Offshore field design Increased oil-recovery technology © 2013 Aker Solutions Slide 9 4 December 2013 Capital Markets Day 2013 Preferred partner Recent industry trends The oil price is steady at about 100 USD Oil companies face ch
Slide 7: Outlook: Subsea and Drilling Technologies
Outlook: Subsea SUB ■ Fastest-growing offshore oil service segment Subsea business area has grown backlog by ■ Important tenders in Brazil and Angola NOK 14.2 billion this ■ Market leading in subsea trees and year controls © 2013 Aker Solutions Slide 11 4 December 2013 Capital Markets Day 2013 Prefe
Slide 8: Outlook: Engineering and MMO
Outlook: Engineering ENG ■ Increasing complexity boosts engineering demand Global offshore- engineering services ■ Johan Sverdrup is crucial market seen growing ■ Expected stream of FEED projects 10-15 percent a year ■ Arctic region opportunities © 2013 Aker Solutions Slide 13 4 December 2013 Capita
Slide 9: Growth vs profit margin; focus on the bottom line
Growth vs profit margin EBITDA margin Order intake and backlog % NOK billion Intake Backlog 12 30 80 10 25 60 8 20 60.6 6 15 40 4 10 11.9 20 2 5 0 0 0 3Q 4Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 3Q 3Q 4Q 1Q 2Q 3Q 2012 2013 2012 2013 2012 2013 © 2013 Aker Solutions Slide 15 4 December 2013 Capital Markets Day 2013 Pr
Slide 10: Improved capital discipline
Improved capital discipline ■ New financial standards to improve profit and predictability ■ Reduced investment level ■ Tighter investment criteria, with 15% hurdle rate ■ Corresponding management incentives © 2013 Aker Solutions Slide 17 4 December 2013 Capital Markets Day 2013 Preferred partner Ne
Slide 11: Streamlining the business; Aker Solutions 2014
Streamlining the business Sale of WIS Deepwater and to EQT subsea oil-services company Sale of P&C Sale of MLS to Jacobs to Cargotec 2010 2013 Future 2002 2011 2014 Demerger of 7 business Marine Contractors areas Demerger of Merger of EPC business Aker Maritime and Kværner © 2013 Aker Solutions Slid
Slide 12: Our improvement agenda: unlock the value
Preferred partner Our improvement agenda Capital Markets Day, 4 December 2013 Nicoletta Giadrossi | Head of Operations © 2013 Aker Solutions Slide 21 4 December 2013 Capital Markets Day 2013 Preferred partner The case for action Margin levels Margin predictability 3% to 4 % lower than peers Historic
Slide 13: Optimise our cost base; leverage our size
Optimise our cost base Leverage our size Enhance our productivity Streamline Direct our Aker structure materials Solutions’ cost base Engineer to value Direct labour SG&A Eng+ other BNOK 2012 TY attributable Other © 2013 Aker Solutions Slide 23 4 December 2013 Capital Markets Day 2013 Preferred part
Slide 14: Enhance our labour productivity
Enhance our labour productivity Engineering Offshore ■ Fit for purpose technical requirements ■ Decrease carry-over work ■ Components reuse ■ Punctuality of materials ■ Interface standardisation ■ Mobilisation readiness ■ Frozen design for fabrication ■ Job-card completeness ■ LCI standardisation Pr
Slide 15: Example: Offshore; streamline our structure
Example: Offshore From root causes… …to the improvement agenda Offshore readiness Right quality job cards Timely availability of job cards and material Offshore productivity Common offshore performance measurement Efficient and best practices offshore 1st line leadership engagement Coordination on-/
Slide 16: Value engineering
Value engineering ■ Design for value ■ Modularise systems design ■ Reuse components in product design ■ Frame-in proliferation through seed drawings control Sell what we can make… profitably © 2013 Aker Solutions Slide 29 4 December 2013 Capital Markets Day 2013 Preferred partner Example: PRS TEG Tr
Slide 17: Example: UMB focused product offering
Example: UMB focused product offering Product Application area Elements ■ Control of subsea ■ Steel tubes Control valves ■ Electric cable umbilical ■ Fiber optics ■ Operation of subsea ■ Medium voltage Power power units Steel tubes umbilical ■ Control of subsea valves ■ Electric cable ■ Fiber optics
Slide 18: Decrease our variation
Decrease our variation Project 1 Project 2 ■ Tender approval Project 3 process Project 4 ■ Risk management Project 5 ■ Project planning Project 6 and forecasting Project 7 ■ Variation order Project 8 management ■ Supplier management Address the root causes © 2013 Aker Solutions Slide 33 4 December 2
Slide 19: Regional Markets
Next steps ■ Continuous improvement ■ Change management ■ First push to the flywheel © 2013 Aker Solutions Slide 35 4 December 2013 Capital Markets Day 2013 Preferred partner Preferred partner Regional Markets Capital Markets Day, 4 December 2013 Mark Riding | Chief Strategic Marketing © 2013 Aker S
Slide 20: Regional structure is the key growth vehicle
Regional structure is the key growth vehicle Proximity 1 Better knowledge about and proximity to customers and markets Coordination 2 Improved coordination between Business Areas and achieving critical mass on a joint basis Matrix view 3 Extension of corporate into regions and ensuring increased eff
Slide 21: Region Norway
Norway and Brazil represents key growth markets Per Harald Kongelf Regional President Norway Luis Araujo Regional President Brazil © 2013 Aker Solutions Slide 39 4 December 2013 Capital Markets Day 2013 Preferred partner Preferred partner Region Norway Capital Markets Day, 4 December 2013 Per Harald
Slide 22: Our home market | Norway
Our home market | Norway ■ Backbone of Aker Solutions ■ Number one position ■ Unique customer contact ■ Large geographical footprint ■ Best supplier of integrated system solutions Employees: 13,400 Locations: 25 Offices: 45 © 2013 Aker Solutions Slide 41 4 December 2013 Capital Markets Day 2013 Pref
Slide 23: Norway | diverse and attractive
Norway | diverse and attractive ■ North Sea ■ Focus on increased recovery ■ Extending life of fields ■ Emerging greenfield opportunities ■ Norwegian Sea ■ Deep water, harsh environment ■ Focus on building robust gas production infrastructure ■ Barents Sea ■ The gate to the Arctic © 2013 Aker Solutio
Slide 24: Continued high investment levels expected
Continued high investment levels expected NCS offshore E&P purchases by major NCS offshore E&P purchases by new operators (BnNOK) entrants/other key operators (BnNOK) 300 45 40 250 35 30 200 25 20 150 15 10 100 5 50 ‐ 2012 2013 2014 2015 2016 2017 RWE Centrica Energy ‐ BG Det norske oljeselskap 2012
Slide 25: An industry challenge – where does the money go
An industry challenge – where does the money go ■ Increasing cost levels ■ Higher oil price yet declining return on capital employed ■ Need for cost reductions and improved cost and capital efficiency © 2013 Aker Solutions Slide 47 4 December 2013 Capital Markets Day 2013 Preferred partner Moving No
Slide 26: Aker Solutions in Brazil
Summary ■ Norway is the back-bone of Aker Solutions ■ Three dimensional ■ Export of know-how ■ Import of low-cost ■ Proximity to world’s largest offshore market ■ Flexible delivery model ■ NCS: attractive market with three diverse regions and four main targets ■ Common industry challenges ■ Focus on
Slide 27: Brazil – finding the right balance
Brazil – finding the right balance ■ Be selective and evaluate the risks of the projects you undertake ■ Understand the business environment ■ Invest and develop the business where you have clear differentiation Manage your risks and play to your strengths © 2013 Aker Solutions Slide 51 4 December 2
Slide 28: Key achievements in 2013
Key achievements in 2013 ■ Subsea turnaround complete ■ Regained customer confidence ■ Started construction of new subsea and drilling manufacturing facilities to deliver on solid order backlog ■ Successfully hired, trained and retained local workforce ■ Doubled size of business in Brazil in 2 years
Slide 29: 2013: Successful acreage concession
2013: Successful acreage concession Libra Field Auction ■ After a five-year hiatus, Brazil successfully held acreage rounds ■ 11th round had record investment commitment (~USD 3.25 bn) and signature bonuses (~USD 1.32 bn) ■ Good presence by key global clients Petrobras, Statoil, Total, BG, BP ■ Firs
Slide 30: Pre-salt fields: a technology play
Pre-salt fields: a technology play ■ Oil production above 300,000 barrels Location of Brazil’s per day (May, 2013) pre-salt fields ■ Level reached just seven years after discovery (average in the GOM 17 years, and the North Sea nine years) ■ Most subsea equipment produced by Aker Solutions ■ First c
Slide 31: Differentiated position in Brazil on deepwater technologies
Differentiated position in Brazil on deepwater technologies Subsea Drilling ■ First company to qualify pre-salt subsea trees ■ Order for seven drilling packages for ■ Backlog of 100+ subsea trees with Petrobras, Jurong/Sete Brasil to deliver until 2018 ■ Over 30 deepwater rigs operating with Aker ■
Slide 32: Subsea in brief
Preferred partner Reliable subsea production solutions Subsea Capital Markets Day 4 December 2013 Alan Brunnen | EVP and Head of Subsea © 2013 Aker Solutions Slide 61 4 December 2013 Capital Markets Day 2013 Preferred partner Subsea in brief ■ Top-tier subsea production system and product provider ■
Slide 33: Key developments in past 12 months
Key developments in past 12 months Growth investments ■ Record-high order intake ■ 2,500 new people ■ Acquired Enovate Execution achievements ■ Successful execution on order book ■ Brazil turnaround ■ On-time delivery of Åsgard template and manifold New technologies to improve oil recovery and reduc
Slide 34: Leading market positions
Leading market positions 3Q YTD subsea tree awards (percentages) Revenue development (indexed: 2010 = 100) 1 13 0 2 0 10 10 200 30 7 23 30 180 19 9 14 20 30 160 59 53 140 38 32 120 2010 2011 2012 YTD 2013 100 3Q YTD subsea controls awards (percentages) 80 1 1 0 0 24 60 41 40 42 40 12 37 12 19 4 2 20
Slide 35: Subsea market set to continue strong growth
Subsea market set to continue strong growth Equipment market size by product group 18 424 MUSD Subsea trees & control pods Quest May 2013 14 706 +18% Tree control packages Quest Aug 2013 12 339 Subsea manifolds 11 151 Subsea production umbilicals installed 9 490 8 265 7 659 6 241 5 648 6 080 5 233 3
Slide 36: Aker Solutions' combined subsea strength
Aker Solutions’ combined subsea strength ■ Technology and competence ■ Industry leading front-end organisation ■ Most complete product portfolio ■ Execution ■ Systems and scale to design and deliver next generation subsea projects ■ In-house delivery and integration capacity ■ Locations ■ Capabiliti
Slide 37: Engineering in brief
Engineering in brief Hubs ■ Oslo, London, Mumbai, Kuala Lumpur, Houston and Perth Holistic development solutions ■ Project management ■ Feasibility and concept studies ■ FEEDs ■ Detail engineering and procurement services Revenue: NOK 4.1 bn ■ Management assistance EBITDA: NOK 291 million Margin: 7.
Slide 38: Front End Spectrum – well received by the market
Front End Spectrum – well received by the market ■ Launched Capital Markets Day 2012 ■ One year later - hubs in: ■ Oslo ■ London ■ Houston ■ Kuala Lumpur ■ Perth ■ Feasibility and concept studies awarded in Norway, UK, Gulf of Mexico, Arctic Canada, Australia, South East Asia, India, Azerbaijan ■ Ne
Slide 39: Complex field development studies; engineering market outlook
Complex field development studies Johan Sverdrup Johan Castberg Jackdaw © 2013 Aker Solutions Slide 75 4 December 2013 Capital Markets Day 2013 Preferred partner Engineering market outlook Global engineering offshore CAPEX ■ Global CAGR 2012-2017 of 10-15 MNOK/year percent 80 000 ■ About 50-50 perce
Slide 40: Market approach
Market approach NCS market Harsh environment and Arctic The UKCS execution market and the global market for clients operating out of London SEA market Global delivery model from The North Kuala Lumpur American market Brazilian with regional and the global market yards market for clients operating ou
Slide 41: Joint improvement agenda
Joint improvement agenda “ We use significantly more engineering hours per ton than before, and we think the reasons are complex. It's neither Statoil nor the contractors’ fault in isolation, but there is much to be gained in the way we interact. Therefore, we have agreed to develop joint improvemen
Slide 42: Solutions for the future
Solutions for the future © 2013 Aker Solutions Slide 81 4 December 2013 Capital Markets Day 2013 Preferred partner Summary ENG ■ Capital-light business with strong cash generation ■ Deliver ongoing projects with quality ■ Improve engineering efficiency – reduce EP costs 30 percent within 2017 ■ Catc
Slide 43: MMO in brief
Preferred partner Extending the life of a field Maintenance, modifications and operations Capital Markets Day, 4 December 2013 Tore Sjursen | Head of Maintenance, modifications and operations © 2013 Aker Solutions Slide 83 4 December 2013 Capital Markets Day 2013 Preferred partner MMO in brief ■ Pro
Slide 44: MMO project portfolio's risk exposure
MMO project portfolio’s risk exposure ■ Current MMO portfolio dominated by reimbursable contracts with incentives and KPIs rewarding good performance ■ Portfolio risk reduced after successful delivery of Ekofisk Zulu project ■ Operational excellence is key Reimbursable © 2013 Aker Solutions Slide 85
Slide 45: Long-term contracts essential in all locations; key figures
Long-term contracts essential in all locations Frame agreements Modification projects Niche services © 2013 Aker Solutions Slide 87 4 December 2013 Capital Markets Day 2013 Preferred partner Key figures Revenue EBITDA NOK billion NOK billion and % 11.1 11.2 ■ Capital-light business with strong cash
Slide 46: Defending our position on the NCS
Defending our position on the NCS ■ The two largest players increasing ■ Margins and competitiveness market share during a period of derived not only from excellence in strong growth execution, but also scale effects Revenue EBIT Billion NOK Aker Solutions Aker Solutions 12 15% 10 10% 8 6 5% 4 0% 2
Slide 47: Improved competitiveness during slowdown
Improved competitiveness during slowdown Efficient Reduce engineering direct costs Efficient Reduce SG&A fabrication Efficient Simplify systems installation and tools Continuous focus on HSEQ ■ Launch improvement programmes to strengthen our competitiveness in delivery and improve margins ■ Collabor
Slide 48: Strategically developing our service mix
Strategically developing our service mix Revenue EBITDA Niches Niches 11 % 15 % 2013 Other Other MMO MMO 89 % 85 % Niches 15 % Niches 22 % 2017 Other Other MMO MMO 78 % 85 % © 2013 Aker Solutions Slide 93 4 December 2013 Capital Markets Day 2013 Preferred partner Positioning for growth in the hook-u
Slide 49: MMO summary; Drilling Technologies
Summary MMO ■ MMO a large cash contributor at Aker Solutions ■ Captured market share in past years and delivered better margins than competitors ■ Reduced portfolio risk after delivering Ekofisk Zulu project ■ Expanding outside the NCS through portfolio of low-risk projects © 2013 Aker Solutions Sli
Slide 50: Drilling Technologies in brief
Drilling Technologies in brief ■ Provides complete topside packages and riser systems ■ System integration and commissioning ■ Managed pressure operations ■ Growing drilling lifecycle services business Photo: Erik Ruud ■ Global service hubs and simulator training Revenue: NOK 9.7 billion EBITDA: NOK
Slide 51: Four key priorities; customer focus
Four key priorities 1 Customer focus 2 Organisation 3 Product offering 4 Operational improvement © 2013 Aker Solutions Slide 99 4 December 2013 Capital Markets Day 2013 Preferred partner 1. Customer focus ■ Focus on customer satisfaction and building trust ■ Aim to grow through: ■ Improved global cu
Slide 52: Global organisation with regional focus; product offering
2. Global organisation with regional focus Norway Russian Federation United Kingdom Germany Azerbaijan South Korea United States United Arab Emirates China India Malaysia Angola Brazil Singapore Australia © 2013 Aker Solutions Slide 101 4 December 2013 Capital Markets Day 2013 Preferred partner 3. P
Slide 53: Operational improvement; market outlook for drilling
4. Operational improvement ■ Optimised cost base ■ Increase focus on best value sourcing ■ Optimise manufacturing set-up ■ Increase execution effectiveness ■ Standardisation and modularisation ■ New portfolio of modularised equipment ■ Global execution ■ International service hubs ■ Build-up of US a
Slide 54: Drilling summary; financial overview
Summary ■ Four key priorities ■ Positive market outlook ■ Customer satisfaction ■ Well positioned for new contracts ■ Product offering ■ Organisation ■ Next-generation drilling equipment ■ Cost optimisation ■ Stick to core business © 2013 Aker Solutions Slide 105 4 December 2013 Capital Markets Day
Slide 55: Our agenda: improve profitability and return on capital
Our agenda: improve profitability and return on capital We will continue investing in growth with increased capital discipline and greater scrutiny on our investments’ returns… …So that our main focus going forward is to improve profitability and return on capital © 2013 Aker Solutions Slide 107 4 D
Slide 56: Our business going forward is changed
Our business going forward is changed Divestment plan Net capital employed Net interest bearing items By divestment object NOK billion NOK billion 22.4 9.9 Nine business area Aker Solutions MLS MLS Mooring and Loading Systems has been sold to Cargotec for NOK 1.4 billion with closing in Q1 2014. Pro
Slide 57: Look at the BA performance to understand the future
Look at the 6 BA performance to understand the future Revenue and EBITDA (six BA)1 Net capital employed and ROACE (six BA) NOK billion NOK billion and % Revenue EBITDA Net capital employed ROACE 50 5.0 25 30% 45 4.5 26.0% 41.8 40.4 25% 40 4.0 20 22.9% 3.7 35 3.5 3.4 31.9 15.6 20% 30.0 30 3.0 2.8 15
Slide 58: We have to reduce Aker Solutions' risk premium
We have to reduce Aker Solutions’ risk premium Our history Our improvement agenda Share price development indexed to AKSO January 2012 Portfolio optimisation ■ Less EPC AKSO ■ More exposure to stable earnings (e.g. services and reimbursable engineering) OSEBX NOV CAM Improving operations FMC ■ Impro
Slide 59: Engineering; Maintenance, modifications and operations
Engineering Business model Financial measures ■ Customer deliveries: ■ Capital intensity: low ■ Engineering: 100% of business ■ Working capital: low; 3-5% of revenue ■ Manufacturing: none ■ Maintenance capex/ R&D: 0.5 – 1.0% of revenue ■ Procurement: none, but provides procurement management service
Slide 60: Subsea; Drilling Technologies
Subsea Business model Financial measures ■ Customer deliveries: ■ Capital intensity: medium. Production capacity, tooling for ■ Engineering: technology and project management services and technology programmes ■ Manufacturing: four plants (Norway, UK, Brazil, ■ Working capital: services high, standa
Slide 61: Umbilicals; Process Systems
Umbilicals Business model Financial measures ■ Customer deliveries: ■ Capital intensity: medium ■ Engineering: technology ■ Working capital: low, 5 – 10% of revenue ■ Manufacturing: two plants (Norway and US) ■ Maintenance capex/ R&D: 3.0 – 4.0% of revenue ■ Procurement: substantial part of cost is
Slide 62: Aker Solutions going forward; copyright and disclaimer
Aker Solutions going forward Revenue Balance sheet We see the general market growing Maintenance capex and R&D: ≈ 3 % of 8-10% and our core markets growing revenues faster Working capital: ≈ 7 - 8 % of revenues Projects: Low, but fluctuating Products: ≈ 20 - 25 % of revenues Services: ≈