Aker Solutions Asa · OSL:AKSO
Aker Solutions Asa — Non-Deal Roadshow (February 2014)
53 slides from Aker Solutions Asa's roadshow presentation, Feb 17, 2014
Slide 1: Strategic overview
Preferred partner Strategic overview January 2014 © 2013 Aker Solutions Slide 1 17 February, 2014 Capital Markets Day Preferred partner
Slide 2: This is Aker Solutions
This is Aker Solutions ■ Provides oilfield products, systems and services for customers in the oil and gas industry world-wide ■ Built on more than 170 years of industrial tradition ■ Employs approximately 28 000 people in more than 30 countries Employees: 21 500 Contract staff: 6 500 Revenues: 44.9
Slide 3: Business areas
Business areas Engineering Drilling technologies Subsea Umbilicals Process systems Maintenance, Oilfield services modifications and and marine assets operations © 2013 Aker Solutions Slide 3 17 February, 2014 Who we are and what we do Preferred partner
Slide 4: Streamlining the business
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 5: Aker Solutions – Strengths
Aker Solutions – Strengths Subsea factory solutions Drilling packages Offshore field design Increased oil-recovery technology © 2013 Aker Solutions Slide 5 4 December 2013 Capital Markets Day 2013 Preferred partner
Slide 6: Our agenda: improve profitability and return on capital
Our agenda: improve profitability and return on capital A more streamlined and capital-disciplined Aker Solutions will foster growth, better earnings predictability and higher ROCE © 2013 Aker Solutions Slide 6 4 December 2013 Capital Markets Day 2013 Preferred partner
Slide 7: With AKSO's mix of engineering and product businesses
With AKSO’s mix of engineering and product businesses returns should be higher not lower than peers. Aker Solutions Current PB vs Best ROE Next Annuals © 2013 Aker Solutions Slide 7 January 2013 Preferred partner
Slide 8: Underlying ROCE is improving
Underlying ROCE is improving and the investments in the core should be online by 2015 at 2012 type returns. Return on average capital employed 9 business areas ROACE 26.0% 6 core business areas ROACE 22.9% 15.5% 15.2% 14.9% 12.5% 12.5% 8.5% 2010 2011 2012 2013* Net Capital employed and EBITDA 6 Busi
Slide 9: How to drive Return on Capital Employed
How to drive Return on Capital Employed Growth rate = ROE*(1-Payout Ratio) © 2013 Aker Solutions Slide 9 January 2013 Preferred partner
Slide 10: Oil companies are cash constrained but...
Oil companies are cash constrained but…. The oil price is steady at about 100 USD Oil companies face challenges in growing their capex, dividends Brent Oil MSCI World Capex Dividends Operating cash flow 150 1600 USD bn 140 350 324 325 1500 317 130 300 261 60 120 1400 58 110 250 52 100 1300 200 53 90
Slide 11: Focusing spend on AKSO's key markets
…are focusing their spend on AKSOs key markets and so we should be able to outgrow the industry. Subsea 18%for trees and 40% for subsea factory giving around 20% Key driver is wet completions ie: The growth in the floater fleet of around 100% x The mix shift in the rig fleet from exploration to prod
Slide 12: Margin Improvement
Margin Improvement driven by Operational Backlog Mix Improvements • Pricing improvements since • A greater focus on • Leverage the organization’s the cycle lows in 2007 eg the Brownfield vs Greenfield buying power new Brazil Subsea tree projects. framework agreement and • Improve labour productivity
Slide 13: Improving the capital allocation process
Improving the capital allocation process Increase the hurdle rate for our investments to the level of our cost of equity Capex Assessing the return of investment Invest Divest against share buybacks Shareholder Return Mgmt Incentive Structures based on ROCE and Total Return to Shareholders © 2013 Ak
Slide 14: Reduce the existing capital intensity
Reduce the existing capital intensity OMA Non core assets Other non core businesses • 3 Well Intervention • Hotel • To be announced Vessels • Anchor Handlers • Ezra shares • …. © 2013 Aker Solutions Slide 14 January 2013 Preferred partner
Slide 15: Focusing growth on high return business models
Focusing growth on high return business models © 2013 Aker Solutions 15 Preferred partner
Slide 16: Organic growth opportunities behind high barriers to entry
There are lots of opportunities to grow organically in markets surrounded by high barriers to entry. The Future Subsea Factory Platforms/FPSO Subsea Drill Tech Products SUB, PRS,UMB 4 7 7 Cost Plus Engineering 6 8 7 Lump sum Integration & 4 9 7 Maintenance Target ROCE: 18%-22% Target ROCE: 15%-20% G
Slide 17: Return on Equity and cost of equity
AKSO’s cost of equity is around 16% vs 11% for the peer group Return on Capital Employed P Return on Equity – growth rate BV = Cost of Equity – growth rate Forecastabilty Understanding Trust Simplify Investor Relations Capital Allocation © 2013 Aker Solutions Slide 17 January 2013 Preferred partner
Slide 18: Lower earnings volatility will reduce the cost of equity
Lower earnings volatility will reduce the cost of equity and help build the trust of the market Brazil Higher Engineering, Subsea etc and MMO Trees Drilling Technologies Barriers to Moring and Loading Systems entry H6 Rig Building Shut down / spun off Growth Rigs Ecofisk Returns Offshore EPC spun ou
Slide 19: Summary
Summary Aker Solutions is well positioned in attractive markets But needs to focus on: › Operational improvement › Capital discipline › Increasing forecastability › Building trust and understanding in the financial markets © 2013 Aker Solutions 19 Preferred partner
Slide 20: Slimmer capital base and more financial capacity
Slimmer capital base and more financial capacity Asset approach Equity and liabilities approach NOK billion NOK billion By balance sheet item and business area 9 BA Aker Solutions 6 BA Aker Solutions 25 25 25 25 25 WIS & MLS 2.5 20 20 20 20 20 OMA 4.4 OMA 4.4 Net interest Deferred tax, Net interest
Slide 21: Look at the 6 BA performance
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 22: Our core is now made up of two parts
Our core is now made up of two parts ENG and MMO SUB, DRT, UMB and PRS % of six BA total % of six BA total Technology business with large elements Product based technology manufacturing business Description of day rate/ reimbursable contract form and low capital expenditures with captive aftersales
Slide 23: Engineering
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 24: Maintenance, modifications and operations
Maintenance, modifications and operations Business model Financial measures ■ Customer deliveries: ■ Capital intensity: low ■ Engineering: substantial part of business ■ Working capital: low, cash neutral business ■ Manufacturing: two plants (Egersund and Sandessjøen). Prefabrication of modules and
Slide 25: Subsea
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 26: Drilling Technologies
Drilling Technologies Business model Financial measures ■ Customer deliveries: ■ Capital intensity: medium. Production capacity, tooling for ■ Engineering: technology and project management services and technology programmes ■ Manufacturing: one plant (Germany) producing core ■ Working capital: serv
Slide 27: Umbilicals
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 28: Process Systems
Process Systems Business model Financial measures ■ Customer deliveries: ■ Capital intensity: low ■ Engineering: technology and project management ■ Working capital: low, cash neutral business ■ Manufacturing: none. Assembly of systems at yards. ■ Maintenance capex/ R&D: 1.0 – 2.0% of revenue ■ Proc
Slide 29: Aker Solutions going forward
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: ≈
Slide 30: Optimise our cost base
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 Preferred partner
Slide 31: Leverage our size
Leverage our size Direct Indirect ~320 MNOK ~250 MNOK ~700 MNOK 3 BNOK ~440 MNOK ~1,500 MNOK ~330 MNOK ~190 MNOK 3Q – 4Q 2013 2014 3Q – 4Q 2013 2014 Target -10-15% price year 1, then -1-2% © 2013 Aker Solutions Slide 31 4 December 2013 Capital Markets Day Preferred partner
Slide 32: Streamline our structure
Streamline our structure From To 30+ Legal entities 1+1 Legal entities 9+ IT systems 1 One general ledger 15 Locations for HR back office 4 Regional HR hubs 15 Locations for finance back office 1 HR transactions centre 100% Onshore shared services 1 Finance COE Onshore only high-touch shared service
Slide 33: Value engineering Example: PRS TEG
Value engineering Example: PRS TEG Traditional TEG unit Onshore Offshore ■ Design for value 45% weight saving 40% weight saving ■ Modularise systems design ■ Reuse components in product design 45% footprint reduction ■ Frame-in proliferation through seed drawings control © 2013 Aker Solutions Prefer
Slide 34: The journey to predictable performance
The journey to predictable performance From «We are all different» To «We are one Aker Solutions» ■ Each BA has own ■ Standardised procedures ■ Upfront risk identification and mitigation PEM interpretation ■ Actual vs historical cost Tenders ■ Tender vetting by fulfillment owners ■ BU-specific ■ Cro
Slide 35: Reducing Tendering Risk
Reducing Tendering Risk • Technology qualification will be done before signing a contract • Capacity built on the back of contracts • Increase the number of qualified subs suppliers • Qualification of a number of global plants so that production can be optimized across plants. • Identical machine se
Slide 36: Best-performing large-cap oil services stock
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 36 4 December 2013 Capital Markets Day 2013 Preferred partner
Slide 37: 3Q 2013 | Key figures
3Q 2013 | Key figures Revenue and EBITDA Order intake and backlog NOK billion NOK billion Revenue EBITDA Intake Backlog 14 1,4 30 80 12 1,2 25 60 10 1,0 20 10.9 60.6 8 0,8 1.1 15 40 6 0,6 10 4 0,4 11.9 20 5 2 0,2 0 0,0 0 0 2Q 3Q 4Q 1Q 2Q 3Q 2Q 3Q 4Q 1Q 2Q 3Q 2Q 3Q 4Q 1Q 2Q 3Q 2Q 3Q 4Q 1Q 2Q 3Q 2012
Slide 38: 3Q 2013 | By business area
3Q 2013 | By business area Revenue Profitability NOK million versus 3Q 2012 Percentage EBITDA margin versus 3Q 2012 SUB 3,289 SUB 10.9 2,899 8.7 MMO 2,514 MMO 6.8 2,877 8.1 DRT 2,326 DRT 9.8 2,156 12.7 ENG 830 ENG 5.3 1,117 12.7 WIS 593 WIS 25.5 587 17.2 UMB 488 UMB 7 518 1.5 PRS 466 PRS 1.3 428 5.4
Slide 39: Order intake per business area
Order intake per business area 3Q 2013 order intake of NOK 11.9 billion NOK million DRT DRT 3,440 New orders include: SUB SUB 2,607 3 x drilling equipment WIS WIS 1,657 packages MMO MMO 1,434 Subsea system GoM UMB UMB 902 Subsea system Africa PRS PRS 856 ENG ENG 747 Umbilicals GoM MLS MLS 48
Slide 40: Consolidated income statement
Consolidated income statement (NOK million) 3Q 13 3Q 12 YTD 2013 YTD 2012 2012 Operating revenues and other income 10,930 11,158 33,897 32,888 44,922 EBITDA 1,074 1,122 2,888 3,519 4,739 Of which related to non-recurring items - - - 1651 3251 Of which related to hedging (35) (2) (59) 61 36 Depreciat
Slide 41: Split per business area
Split per business area NOK million Revenues 1Q 11 2Q 11 3Q 11 4Q 11 FY 11 1Q 12 2Q 12 3Q 12 4Q 12 FY 12 1Q 13 2Q 13 3Q 13 Product Solutions 4 345 4 306 4 514 6 541 19 706 5 394 6 620 6 198 7 079 25 291 6 384 7 418 6 788 Field Life Solutions 2 643 2 899 2 920 3 716 12 178 3 261 3 709 3 673 3 677 14
Slide 42: Split per business segment in Aker Solutions
Split per business segment in Aker Solutions NOK million Revenues 1Q 11 2Q 11 3Q 11 4Q 11 FY 11 1Q 12 2Q 12 3Q 12 4Q 12 FY 12 1Q 13 2Q 13 3Q 13 Subsea 1 657 1 782 1 927 2 638 8 004 2 445 3 401 2 899 3 429 12 174 3 023 3 535 3 289 Umbilicals 435 506 420 685 2 046 413 506 518 561 1 998 397 519 488 Dri
Slide 43: Split per business segment in Aker Solutions
Split per business segment in Aker Solutions NOK million Order intake 1Q 11 2Q 11 3Q 11 4Q 11 FY 11 1Q 12 2Q 12 3Q 12 4Q 12 FY 12 1Q 13 2Q 13 3Q 13 Subsea 2 555 4 415 2 473 1 991 11 434 2 423 3 203 1 908 2 348 9 882 17 835 3 771 2 607 Umbilicals 419 1 080 283 524 2 306 297 790 500 31 1 618 1 074 103
Slide 44: Where we are – a global footprint
Where we are – a global footprint Countries: 31 Locations: ~ 80 - engineering hubs - service bases - manufacturing plants - sales offices - project management Angola Canada Finland Indonesia Norway Norway [cont.] Singapore UK Luanda Calgary Helsinki Batam Asker Stokke Singapore Aberdeen St. John’s U
Slide 45: Competent and experienced workforce
Competent and experienced workforce Work force by region Norway 21 500 Americas Asia-Pacific Africa & Middle East Europe Work force by degree PhD and Master 21 500 Bachelor Professionals Higher education Skilled worker Other © 2013 Aker Solutions Slide 45 17 February, 2014 Who we are and what we do
Slide 46: North America
North America Employees: 1 700 Locations: 6 Aker Solutions in North America ■ Regional office HQ in Houston, TX Main offerings ■ Front End Spectrum ■ Umbilical manufacturing: prime location by the Gulf ■ Subsea production and of Mexico in Mobile, AL lifecycle services ■ The most advanced drilling tr
Slide 47: Norway: the world's largest offshore market
Norway: the world’s largest offshore market Employees: 15 400 Locations: 23 Established: 1841 Aker Solutions in Norway ■ Global headquarters at Fornebu Main offerings ■ Main provider of field development engineering ■ Drilling equipment services on NCS ■ Field development ■ Market leader within main
Slide 48: UK: International hub for Subsea and Engineering
UK: International hub for Subsea and Engineering Employees: 3 200 Locations: 7 Established: 1978 Aker Solutions in the UK ■ Largest hub outside Norway Main offerings ■ Drilling technologies ■ Aberdeen main centre for subsea production technologies, well services, and maintenance, ■ Field development
Slide 49: West Africa
West Africa Employees: 230 Locations: 5 Established: 1999 Aker Solutions in West Africa ■ Bases in Lagos and Port Harcourt in Main projects Nigeria, Luanda in Angola, Malabo in ■ Sonangol Gimboa Equatorial Guinea and Takoradi in Ghana ■ Total Dalia ■ Bonga NW umbilicals ■ Focus on increasing local c
Slide 50: Asia Pacific
Asia Pacific Employees: 5 500 Locations: 24 First project: 1970 Aker Solutions in Asia Pacific ■ Regional head office for subsea, umbilicals, engineering and Main offerings well intervention are based in Kuala Lumpur, Malaysia ■ Subsea systems and ■ Manufacturing centres in Port Klang, Malaysia and
Slide 51: Brazil: 40 years experience – major growth
Brazil: 40 years experience – major growth Employees: 1 300 Locations: 3 Established: 1978 Aker Solutions in Brazil ■ Reference in engineering and construction Main offerings services, technology, products and life of ■ Subsea systems field solutions for the oil & gas industry ■ Drilling equipment B
Slide 52: India
India Employees: 2 200 Locations: 3 Established: 1959 Aker Solutions in India ■ Renowned provider of engineering, project Main offerings management, construction supervision services in ■ Engineering and India since 1959 (Powergas) project services for ■ Experienced workforce providing engineering u
Slide 53: Copyright and disclaimer
Copyright and disclaimer Copyright Copyright of all published material including photographs, drawings and images in this document remains vested in Aker Solutions and third party contributors as appropriate. Accordingly, neither the whole nor any part of this document shall be reproduced in any for