SBM Offshore N.V. has its registered office in Amsterdam, the Netherlands, and is located at Evert van de Beekstraat 1-77, 1118 CL, Schiphol, the Netherlands. SBM Offshore N.V. is the holding company of a group of international marine technology-oriented companies. The Company globally provides services in the offshore oil and gas industry and alternative energy sources.
\nThe Company is registered at the Dutch Chamber of Commerce under number 24233482 and is listed on the Euronext Amsterdam stock exchange.
\nThe consolidated financial statements for the year ended December 31, 2023 comprise the financial statements of SBM Offshore N.V., its subsidiaries and interests in associates and joint ventures (together referred to as \u2018the Company\u2019). They are presented in millions of US dollars, except when otherwise indicated. Figures may not add up due to rounding.
\nThe consolidated financial statements were authorized for issue by the Supervisory Board on February 28, 2024.
The consolidated financial statements were authorized for issue by the Supervisory Board on February 28, 2024.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuthorisationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-442": { "value": "\nThe consolidated financial statements of the Company have been prepared in accordance with, and comply with, International Financial Reporting Standards (\u2019IFRS\u2019) and interpretations adopted by the European Union, which were effective for the financial year beginning January 1, 2023, and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code.
\nThe Company financial statements included in section 4.4 are part of the 2023 financial statements of SBM Offshore N.V.
The Company has adopted the following new standards as of January 1, 2023:
IFRS 17 \u2013 \u2018Insurance Contracts\u2019;
Amendments to IAS 8 \u2013 \u2018Definition of Accounting Estimates\u2019;
Amendments to IAS 1 and IFRS Practice Statement 2 \u2013 Disclosure of Accounting Policies\u2019;
Amendments to IAS 12 \u2013 \u2018Deferred Tax related to Assets and Liabilities arising from a Single Transaction\u2019; and
Amendments to IAS 12 \u2013 \u2018International Tax Reform \u2013 Pillar Two Model Rules\u2019.
IFRS 17 is the new accounting standard for insurance contracts covering recognition and measurement, presentation, and disclosure. This standard applies to all types of insurance contracts, regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features.
\nIn contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.
\nThe Company has made a thorough assessment of its transactions against the scope of IFRS 17 and concluded that, despite the fact it does have some transactions that may fall within the scope of IFRS 17, those transactions are either scoped out (such as warranties provided to its customers) or an accounting policy choice is available (e.g., fixed-fee service contracts). The Company has decided to apply the accounting policy option to not apply IFRS 17 where permitted.
\nTherefore, this new standard had no impact on the consolidated financial statements of the Company.
\nThis amendment clarifies the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors in IAS 8. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.
\nThe amendment had no impact on the consolidated financial statements of the Company.
\nThese amendments provide guidance and examples to help entities applying materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful, by replacing the requirement for entities to disclose their \u2018significant\u2019 accounting policies with a requirement to disclose their \u2018material\u2019 accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
\nThe amendments had a minor impact on the consolidated financial statements of the Company. The Company has performed a reassessment of its accounting policy disclosures against the amended guidance, which resulted in minor changes to the section on accounting policies.
\nThis amendment aims to narrow the scope of the initial recognition exception (\u2019IRE\u2019) provided in IAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences, such as leases and decommissioning liabilities.
\nThe impact of the application of this amendment to IAS 12 relates to lease transactions in which the Company is the lessee, and for which the Company applied the initial recognition exemption.
\nThis amendment resulted in the recognition of additional deferred tax assets and deferred tax liabilities on the balance sheet at January 1, 2023, of US$11 million and US$10 million respectively, with an insignificant net impact of less than US$1 million. Considering the materiality, the Company has recognized the impact fully in 2023.
\nWith regards to the amendments to IAS 12 on International Tax Reform \u2013 Pillar Two Model Rules the amendment:
Provide a mandatory temporary exception to the requirements in IAS 12 to recognize and disclose information about deferred tax assets and liabilities arising from Pillar Two Model Rules.
The Company has been monitoring the accounting discussion around the recognition of deferred taxes arising from Pillar Two Model Rules and, following the amendment requirements, the Company did not recognize any deferred taxes in its financial statements 2023 related to potential impacts of top-up taxes arising from such legislation. The mandatory temporary exception applies immediately.
Introduce new disclosure requirements, which are only applicable to annual financial statements commencing on or after January 1, 2023.
As the Company is within the scope of the Pillar Two legislation, the Company is in the process of assessing the applicable regulations and understanding the requirements. The EU has published the Directive (EU) 2022/2523, in the Official Journal of the EU, on December 22, 2022, aiming to ensure a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU, based on a system of two interlocked rules, together referred to also as the \u2018GloBE rules\u2019, through which an additional amount of tax (so-called \u2018Top-up Tax\u2019) should be collected when the effective tax rate in a given jurisdiction is below 15%. Following the EU Directive, the Dutch government issued its draft proposal of the Minimum Taxation Act 2024 in October 2022 for consultation, while on December 15, 2022, the Council of the European Union formally adopted the directive implementing the minimum taxation at EU level. On December 19, 2023 the Dutch Senate approved the Minimum Tax Act 2024. The measures are considered to be substantively enacted for financial statements ending after 19 December 2023. The main rule of the Minimum Tax Act 2024 (so-called Income Inclusion Rule or IIR) will become effective on or after December 31, 2023 with the backstop rule (so-called Undertaxed Profits Rule or UTPR) becoming effective on or after December 31, 2024. On top of the IIR and UTPR, the jurisdictions that will implement an IIR are generally expected to also implement a Qualifying Domestic Minimum Top-up Tax or QDMTT.
\nThe Company will be impacted by the GloBE rules, the result of the assessment of the expected impact is disclosed under 4.3.10 Income Tax Expense as per requirements of the issued IAS 12 amendment.
The following standards and amendments published by the IASB and endorsed by the European Union are not mandatorily applicable as of January 1, 2023:
Amendments to IFRS 16 \u2013 \u2018Lease Liability in a Sale and Leaseback\u2019; and
Amendments to IAS 1 \u2013 \u2018Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants\u2019.
The Company is currently assessing the impact of amendments issued, however the Company does not expect a material impact on the financial statements due to their future adoption.
\nOther new standards and amendments have been published by the IASB but have not been endorsed yet by the European Commission. Early adoption is not possible until European Commission endorsement. Those which may be relevant to the Company are set out below:
Amendments to IAS 7 and IFRS 7 \u2013 \u2018Disclosures: Supplier Finance Arrangements\u2019; and
Amendments to IAS 21 - Lack of exchangeability.
The Company does not expect a significant effect on the financial statements due to the adoption of the remaining amendments. Other standards and amendments are not relevant to the Company.
Critical accounting policies that involve a high degree of judgment or complexity, or areas where assumptions and estimates are material, are disclosed in the paragraphs below.
When preparing the financial statements, it is necessary for the Management of the Company to make estimates and certain assumptions that can influence the valuation of the assets and liabilities and the outcome in the income statement. The actual outcome may differ from these estimates and assumptions due to changes in facts and circumstances. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable.\u00a0
\nSignificant areas of estimation and uncertainty in applying accounting policies that have the most significant impact on amounts recognized in the financial statements are:
\nRevenue of the Company is measured and recognized, based on the input method (i.e. costs incurred). Costs and revenue at completion are reviewed periodically throughout the life of the contract. This requires a large number of estimates, especially of the total expected costs at completion, due to the complex nature of the Company\u2019s construction contracts. Judgment is also required for the accounting of contract modifications and claims from clients where negotiations or discussions are at a sufficiently advanced stage. Costs and revenue (and the resulting gross margin) at completion reflect, at each reporting period, the Management\u2019s current best estimate of the probable future benefits and obligations associated with the contract.\u00a0The policy for measurement of transaction price, including variable considerations (i.e. claims, performance-based incentives), is included below in the point (d) Revenue.
\nIn case a contract meets the definition of an onerous contract as per IAS 37, provisions for anticipated losses are made in full in the period in which they become known.
\nAssumptions and estimates used in the discounted cash flow model and the adjusted net present value model to determine the value in use of assets or group of assets (e.g. discount rates, residual values and business plans) are subject to uncertainty. There is a possibility that changes in circumstances or in market conditions could impact the recoverable amount of the asset or group of assets.
\nManagement uses its experience to estimate the remaining useful life of an asset. The actual useful life of an asset may be impacted by an unexpected event that may result in an adjustment to the carrying amount of the asset.
\nThe Company is subject to income taxes in multiple jurisdictions. Significant judgment is required in determining the Company\u2019s overall income tax liability. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company takes into account the following considerations when determining the liabilities related to uncertain income tax treatment:
When necessary, the Company engages with local tax advisers, which provide advice on the expected view of tax authorities on the treatment of judgmental areas of income tax;
The Company considers any changes in tax legislation, and knowledge built based on prior cases, to make an estimate/judgment on whether or not to provide for any tax payable; and
The Company takes into account any dispute resolutions, case law and discussions between peer companies and the tax authorities on similar cases over an uncertain tax treatment.
The Company consistently monitors each issue around uncertain income tax treatments across the group in order to ensure that the Company applies sufficient judgment to the resolution of tax disputes that might arise from examination of the Company\u2019s tax position by relevant tax authorities.
\nThe Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The income tax liabilities include any penalties and interest that could be associated with a tax audit issue. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will influence the income tax and deferred tax provisions in the period in which such determination is made.
\nThe Company identifies and provides analysis on a regular basis of current litigation and measures, when necessary, provisions based on its best estimate of the expenditure required to settle the obligations, taking into account information available and different possible outcomes at the reporting date.
\nA warranty provision is accrued during the construction phase of projects, based on historical warranty expenditure per product type. At the completion of a project, a warranty provision (depending on the nature of the project) is therefore provided for and reported as provision in the statement of financial position. Following the acceptance of a project, the warranty provision is released over the warranty period. For some specific claims formally notified by the customer and which can be reliably estimated, an amount is provided in full and without discounting. An overall review of the warranty provision is performed by Management at each reporting date. Nevertheless, considering the specificity of each asset, actual warranty expenditures could vary significantly from one project to another and therefore differ materially from initial statistical warranty provision provided at the completion of a said project.
\nThe estimated future costs of demobilization are reviewed on a regular basis and adjusted when appropriate. Nevertheless, considering the long-term expiry date of the obligations, these costs are subject to uncertainty. Cost estimates can vary in response to many factors, including, for example, new demobilization techniques, the Company\u2019s own experience on demobilization operations, future changes in laws and regulations, and the timing of demobilization operations.
\nEstimates and assumptions made in determining these obligations can therefore lead to significant adjustments to the future financial results. Nevertheless, the cost of demobilization obligations at the reporting date represents Management\u2019s best estimate of the present value of the future costs required.
\nDuring the 2023 financial year, there was significant commodity price volatility, high inflation, rising interest rates and increasing energy prices that increased the current economic and geopolitical uncertainty. Accordingly, the Company reassessed its significant estimates and judgments. The following main areas identified by the Company as potentially affected by the current global circumstances are:
Key assumptions used in the impairment test of assets, or group of assets;
Expected credit losses; and
Additional costs in order to satisfy the performance obligations on some of the construction contracts, mainly due to expected delay in the project delivery following lockdown periods in China, international travel restrictions, remote working, pressure on the supply chain and a general increase in global inflation.
The impact of the current economic and geopolitical environment on the impairment of the tangible assets is disclosed in note 4.3.13 Property, Plant and Equipment. Regarding the Company\u2019s considerations for estimation of expected credit losses, refer to note 4.3.8 Net Impairment Gains/(Losses) on Financial and Contract Assets. In relation to the impact of additional costs incurred due to these current macroeconomic circumstances when satisfying the Company\u2019s performance obligations, refer to note 4.3.3 Revenue.
\nFollowing the assessments, the Company does not expect any significant impact in other areas.
\nIn addition to the above estimates, the Management exercises the following judgments:
\nWhen the Company enters into a new lease arrangement, the terms and conditions of the contract are analyzed in order to assess whether or not the Company retains the significant risks and rewards of ownership of the asset subject of the lease contract. To identify whether risks and rewards are retained, the Company systematically considers, among others, all the examples and indicators listed by IFRS 16.63, on a contract-by-contract basis. By performing such an analysis, the Company makes a significant judgment to determine whether the arrangement results in a finance lease or an operating lease. This judgment can have a significant effect on the amounts recognized in the consolidated financial statements and its recognition of profits in the future. The most important judgment areas assessed by the Company are (i) determination of the fair value, (ii) determination of the useful life of the asset, (iii) the highly specialized nature of an FPSO constructed on behalf of the client and (iv) the probability of the client exercising the purchase or termination option (if relevant).
A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment, or series of payments, the right to use an asset for an agreed period of time.
\nLeases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Under an operating lease, the asset is included in the statement of financial position as property, plant and equipment. Lease income is recognized over the term of the lease on a straight-line basis. This implies the recognition of deferred income when the contractual day rates are not constant during the initial term of the lease contract.
\nWhen assets are leased under a finance lease, the present value of the lease payments is recognized as a finance lease receivable. Under a finance lease, the difference between the gross receivable and the present value of the receivable is recognized as revenue during the lease phase. Lease income is, as of the commencement date of the lease contract, recognized over the term of the lease using the net investment method, which reflects a constant periodic rate of return. The discount rate used to measure the net investment in the lease is the interest rate implicit in the lease. During the construction phase, revenue is recognized over time, as per IFRS 15, due to the fact the Company is acting as manufacturer lessor (refer to accounting policy (d) Revenue).
Under certain circumstances, impairment tests must be performed. Assets that are subject to amortization or depreciation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
\nThe recoverable amount is the higher of an asset\u2019s Cash Generating Unit\u2019s (\u2019CGU\u2019) fair value, less costs of disposal and its value-in-use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. An impairment loss is recognized for the amount by which the assets, or CGU\u2019s carrying amount, exceeds its recoverable amount.
\nIn assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. The Company bases its future cash flows on detailed budgets and forecasts.
\nNon-financial assets, other than goodwill, that have been impaired are reviewed for possible reversal at financial position date, when circumstances which caused the initial impairment have improved or no longer exist.
The Company provides design, supply, installation, operation, life extension and demobilization of Floating Production, Storage and Offloading (FPSO) vessels. The vessels are either owned and operated by SBM Offshore and leased to its clients (Lease and Operate arrangements) or supplied on a Turnkey sale basis (construction contracts). Even in the latter case, the vessels can be operated by the Company, under a separate operating and maintenance agreement, after transfer to the clients.
\nOther products of the Company include: Turret Mooring Systems (\u2019TMS\u2019), Floating Offshore Wind (\u2019FOW\u2019) and brownfield and offshore (off)loading terminals. These products are mostly delivered as construction, lease or service type agreements.
\nSome contracts include multiple deliverables (such as Front-End Engineering Design (\u2019FEED\u2019), engineering, construction, procurement, installation, maintenance, operating services, demobilization). The Company assesses the level of integration between different deliverables and the ability of the deliverable to be performed by another party. Based on this assessment, the Company ascertains whether the multiple deliverables are one, or separate, performance obligation(s).
\nThe Company determines the transaction price for its performance obligations based on contractually agreed prices. The Company has various arrangements with its customers in terms of pricing, but, in principle (i) the construction contracts have agreed fixed pricing terms, including fixed lump sums and reimbursable type of contracts, (ii) the majority of the Company\u2019s lease arrangements have fixed lease rates and (iii) the operating and service type of contracts can be based on fixed lump sums or reimbursable type of contracts. The Lease and Operate contracts generally include a variable component for which the treatment is described below under \u2019Lease and Operate contracts\u2019. In rare cases when the transaction prices are not directly observable from the contract, they are estimated based on expected cost plus margin (e.g. based on an operating service component in a lease arrangement).
\nThe Company assesses, for each performance obligation, whether the revenue should be recognized over time or at a point in time. This is explained more in detail under the below sections \u2019Construction contracts\u2019 and \u2019Lease and Operate contracts\u2019.
\nThe Company can agree on various payment arrangements that generally reflect the progress of delivered performance obligations. However, if the Company\u2018s delivered performance obligation exceeds installments invoiced to the client, a contract asset is recognized (see note 4.3.3 Revenue). If the installments invoiced to the client exceed the work performed, a contract liability is recognized (see note 4.3.25 Trade and Other Payables).
\nRevenue policies related to specific arrangements with customers are described below.
\nThe Company, under its construction contracts, usually provides Engineering, Procurement, Construction and Installation (\u2019EPCI\u2019) of vessels. The Company assesses the contracts on an individual basis as per the policy described above. Based on the analysis performed for existing contracts:
The construction contracts generally include one performance obligation due to significant integration of the activities involved; and
Revenue is recognized over time as the Company has an enforceable right to payment for performance completed to date and the assets created have no direct alternative use.
Based on these requirements, the Company concludes that, in principle, construction contracts meet the criteria of revenue to be recognized over time. Revenue is recognized at each period based upon the advancement of the work, using the input method. The input method is based on the ratio of costs incurred to date to total estimated costs. Up to the moment that the Company can reasonably measure the outcome of the performance obligation, revenue is recognized to the extent of cost incurred.
\nComplex projects that present a high-risk profile due to technical novelty, complexity or pricing arrangements agreed with the client are subject to independent project reviews at advanced degrees of completion in engineering. An independent project review is an internal, but independent, review of the status of a project, based upon an assessment of a range of project management and company factors. Until this point, and when other significant uncertainties related to the cost at completion are mitigated, revenue is recognized to the extent of cost incurred.
\nDue to the nature of the services performed, variation orders and claims are commonly billed to clients in the normal course of business. The variation orders and claims are modifications of contracts that are usually not distinct and are therefore normally considered as part of the existing performance obligation. When the contract modification (including claims) is initially approved by oral agreement or implied by customary business practice, the Company recognizes revenue only to the extent of contract costs incurred. Once contract modifications and claims are approved, the revenue is no longer capped at the level of costs and is recognized based on the input method.
\nGenerally, the payments related to the construction contracts (under EPCI arrangements) are corresponding to the work completed to date, therefore the Company does not adjust any of the transaction prices for the time value of money. However the time value of money is assessed on a contract-by-contract basis and in case the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year, the transaction price is adjusted for the identified and quantified financing component.
\nFurthermore, finance lease arrangements under which the Company delivers a unit to a client are treated as direct sales (see also point (b) above), therefore revenue is recognized over time during the construction period as the present value of the lease payments accruing to the lessor, discounted using a market rate of interest. In order to determine the revenue to be recognized, based on this policy, the Company determines the applicable discount rate using a market rate of interest that takes into account, among others: time value of money, financing structure and risk profile of a client and project.
\nThe Company provides, to its customers, possibilities to lease the units under charter contracts. Charter contracts are multi-year contracts and some of them contain options to extend the term of the lease or terminate the lease earlier. Some of the contracts also contain purchase options that are exercisable throughout the lease term.
\nCharter rates received on long-term operating lease contracts are reported on a straight-line basis over the period of the contract once the facility has been brought into service. The difference between straight-line revenue and the contractual day-rates, which may not be constant throughout the charter, is accounted for as deferred income.
\nRevenue from finance lease contracts is, as of the commencement date of the lease contract, recognized over the term of the lease using the amortized cost method, which reflects a constant periodic rate of return.
\nOperating fees are received by the Company for facilitating receipt, processing and storage of petroleum services on board the facilities which occur continuously through the term of the contract. As such, they are a series of services that are substantially the same and that have the same pattern of transfer to the customer. Revenue is recognized over time, based on input methods by reference to the stage of completion of the service rendered, either on a straight-line basis for lump sum contracts or in line with cost incurred on reimbursable contracts.
\nOn some contracts, the Company is entitled to receive bonuses (incentives) or incurs penalties, depending on the level of interruption of production or processing of oil. Bonuses are recognized as revenue once\u00a0it is highly probable that no significant reversal of revenue recognized will occur, which is generally the case only once the performance bonus is earned. Penalties are recognized as a deduction of revenue when they become probable. For estimation of bonuses and penalties, the Company applies the \u2018most likely\u2019 method, where the Company assesses which single amount is the most likely in a range of possible outcomes.
\nThe incremental costs of obtaining a contract with a customer are recognized as an asset when the costs are expected to be recovered. The Company uses a practical expedient that permits the costs to be expensed to obtain a contract as incurred when the expected amortization period is one year or less. The costs of obtaining a contract that are not incremental are expensed as incurred, unless those costs are explicitly chargeable to the customer. Bid, proposal, and selling and marketing costs, as well as legal costs incurred in connection with the pursuit of the contract, are not incremental, as the Company would have incurred those costs even if it did not obtain the contract.
\nIf the costs incurred in fulfilling a contract with a customer are not\u00a0within the scope of another IFRS standard (e.g. IAS 2 Inventories,\u00a0IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets), the Company recognizes an asset for the costs incurred to fulfill a contract\u00a0only if those costs meet all of the following criteria:
The costs relate directly to a contract or to an anticipated contract\u00a0that the Company can specifically identify (for example, costs relating\u00a0to services to be provided under renewal of an existing contract or\u00a0costs of designing an asset to be transferred under a specific\u00a0contract that has not yet been approved);
The costs generate or enhance resources of the entity that will be\u00a0used in satisfying (or in continuing to satisfy) performance\u00a0obligations in the future; and
The costs are expected to be recovered.
An asset recognized for contract costs is amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.
\nContract assets, as defined in IFRS 15, represent the Company\u2019s construction work-in-progress. Construction work-in-progress is the Company\u2018s right to consideration in exchange for goods and services that the Company has transferred to the customer. The Company\u2018s contract assets are measured as accumulated revenue, recognized over time, based on progress of the project, net of installments invoiced to date. The invoiced installments represent the contractually agreed unconditional milestone payments during the construction period and these amounts are classified as trade receivables until the amount is paid. The Company recognizes any losses from onerous contracts under provisions, in line with IAS 37. Further, the impairment of contract assets is measured, presented and disclosed on the same basis as financial assets that are within the scope of IFRS 9. The Company applies the simplified approach in measuring expected credit losses for contract assets. In case of contract asset balances relating to the finance lease contracts, the Company applies the low credit risk simplification of IFRS 9 for the computation of the expected credit loss. The simplification is applied as the credit risk profile of these balances has been assessed as low.
\nIn prior consolidated financial statements, the Company has presented contract assets as Construction work-in-progress in the consolidated statement of financial position, as well as the notes to the consolidated financial statements.
\nThe Company recognizes a contract liability (see note 4.3.25 Trade and Other Payables) where installments are received in advance of satisfying the performance obligation towards the customer.
As per IFRS 8, an operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose segmental operating results are regularly reviewed by the entity\u2019s chief operating decision maker, and for which distinct financial information is available.
\nThe Management Board, as chief operating decision maker, monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on revenue, gross margin, EBIT and EBITDA, and prepared in accordance with Directional reporting.\u00a0The Company has two reportable segments:
The Lease and Operate segment includes all earned day-rates on operating lease and operate contracts.
The Turnkey segment includes revenues from Turnkey supply contracts and after-sales services, which consist mainly of large production systems, large mooring systems, deepwater export systems, fluid transfer systems, tanker loading and discharge terminals, design services and supply of special components and proprietary designs and equipment. The new energy business, which mainly relates to floating offshore wind solutions, also forms part of the Turnkey segment.
No operating segments have been aggregated to form the above reportable segments.
\nThe Company\u2019s corporate overhead functions do not constitute an operating segment as defined by IFRS 8 \u2019Operating segments\u2019 and are reported under the \u2019Other\u2019 section in note 4.3.2 Operating Segments and Directional Reporting.
\nOperating segment information is prepared and evaluated based on Directional reporting, for which the main principles are explained in note 4.3.2 Operating Segments and Directional Reporting.
The demobilization obligations of the Company are either stated in the lease contract or derived from the international conventions and the specific legislation applied in the countries where the Company operates assets. Demobilization costs will be incurred by the Company at the end of the operating life of the Company\u2019s facilities.
\nFor operating leases, the net present value of the future obligations is included in property, plant and equipment, with a corresponding amount included in the provision for demobilization. As the remaining duration of each lease reduces, and the discounting effect on the provision unwinds, accrued interest is recognized as part of financial expenses and added to the provision. The subsequent updates of the measurement of the demobilization costs are recognized, both impacting the provision and the asset.
\nIn some cases, when the contract includes a demobilization bareboat fee that the Company invoices to the client during the demobilization phase, a receivable is recognized at the beginning of the lease phase for the discounted value of the fee. When the receivable is recognized, it is limited to the amount of the corresponding demobilization obligation. These receivables are subject to expected credit loss impairment, which are analyzed together with the finance lease receivable using the same methodology.
\nFor finance leases, demobilization obligations are analyzed as a component of the sale recognized under IFRS 15. It is determined whether the demobilization obligation should be defined as a separate performance obligation. In that case, because the demobilization operation is performed at a later stage, the related revenue is deferred until the demobilization operations occur. Subsequent updates of the measurement of the demobilization costs are recognized immediately through the contract liability, for the present value of the change.
The consolidated financial statements of the Company have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.
The Company classifies its assets as current when it expects to realize the asset, or intends to sell or consume it, in its normal operating cycle. Inventory and contract balances are classified as current while the time when these assets are sold or consumed might be longer than twelve months. In the context of Company\u2019s operations it is considered that its operating cycle begins with the construction of the vessels up to the moment of sale or transfer to finance lease receivable. Financial assets are classified as current when they are realized within twelve months. Liabilities are classified as current when they are expected to be settled within less than twelve months and the Company does not have an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. All other assets and liabilities are classified as non-current.
The Company\u2019s consolidated financial statements include the financial statements of all controlled subsidiaries.
\nIn determining, under IFRS 10, whether the Company controls an investee, the Company assesses whether it has (i) power over the investee, (ii) exposure or rights to variable returns from its involvement, and (iii) the ability to use power over investees to affect the amount of return. To determine whether the Company has power over the investee, multiple contractual elements are analyzed, among which (i) voting rights of the Company at the General Meeting, (ii) voting rights of the Company at Board level and (iii) the power of the Company to appoint, reassign or remove other key management personnel.
\nFor investees, whereby such contractual elements are not conclusive because all decisions about the relevant activities are taken on a mutual consent basis, the main deciding feature resides then in the deadlock clause existing in shareholders\u2019 agreements. In case a deadlock situation arises at the Board of Directors of an entity, whereby the Board is unable to conclude a decision, the deadlock clause of the shareholders\u2019 agreements generally stipulates whether a substantive right is granted to the Company or to all the partners in the entity to buy its shares through a compensation mechanism that is fair enough for the Company or one of the partners to acquire these shares. In case such a substantive right resides with the Company, the entity will be defined under IFRS 10 as controlled by the Company. In case no such substantive right is held by any of the shareholders through the deadlock clause, the entity will be defined as a joint arrangement.
\nSubsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated using the full consolidation method.
\nAll reciprocal transactions between two controlled subsidiaries, with no profit or loss impact at consolidation level, are fully eliminated for the preparation of the consolidated financial statements.
\nThe Company has applied IFRS 11 \u2019Joint Arrangements\u2019 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. In determining, under IFRS 11, the classification of a joint arrangement, the Company assesses that all joint arrangements are structured through private limited liability companies incorporated in various jurisdictions. As a result, assets and liabilities held in these separate vehicles are those of the separate vehicles and not those of the shareholders of these limited liability companies. Shareholders have no direct rights to the assets, nor primary obligations for liabilities of these vehicles. As a result, the Company classifies its joint arrangements to be joint ventures.\u00a0Joint ventures are accounted for using the equity method.
\nAssociates are all entities over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is not control over those policies. Investments in associates are accounted for using the equity method.
\nWhen losses of an equity-accounted entity are greater than the value of the Company\u2019s net investment in that entity, these losses are not recognized unless the Company has a constructive obligation to fund the entity. The share of the negative net equity of these is first accounted for against the loans held by the owner towards the equity-accounted company that forms part of the net investment. Any excess is accounted for under provisions.
\nReciprocal transactions carried out between a subsidiary and an equity-accounted entity are not eliminated for the preparation of the consolidated financial statements. Only transactions leading to an internal profit (e.g. for dividends or internal margin on asset sale) are eliminated, applying the percentage owned in the equity-accounted entity.
\nThe financial statements of the subsidiaries, associates and joint ventures are prepared for the same reporting period as the Company and the accounting policies are in line with those of the Company.
The Company\u2019s financial assets consist of finance lease receivables, loans to joint ventures and associates and trade and other receivables. The accounting policy on trade and other receivables is described separately.
\nFinance lease receivables are non-derivative financial assets with fixed or determined payments that are not quoted in an active market.
\nLoans to joint ventures and associates relate primarily to interest-bearing loans to joint ventures. These financial assets are initially measured at fair value plus transaction costs (if any) and subsequently measured at amortized cost.
\nThe Company classifies its financial assets at amortized cost only if both of the following criteria are met:
The asset is held within a business model whose objective is to collect the contractual cash flows; and
The contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Borrowings are recognized on settlement date, being the date on which cash is paid or received. They are initially recognized at fair value, net of transaction costs incurred (transaction price), subsequently measured at amortized cost and classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.\u00a0
\nBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized into the cost of the asset in the period in which they are incurred. Otherwise, borrowing costs are recognized as an expense in the period in which they are incurred.
\nBorrowings are derecognized when the Company either discharges the borrowing by paying the creditor or is legally released from primary responsibility for the borrowing, either by process of law or by the creditor.
\nLease liabilities, arising from lease contracts in which the Company is the lessee, are initially measured at the net present value of the following:
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that are based on an index or a rate;
Amounts expected to be payable under residual value guarantees;
The exercise price of a purchase option, if the Company is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Company\u2019s incremental borrowing rate.
\nEach lease payment is allocated between the lease liability and finance cost. Finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Foreign currency transactions are translated into the functional currency, the US dollar, at the exchange rate applicable on the transaction date. At the closing date, monetary assets and liabilities stated in foreign currencies are translated into the functional currency at the exchange rate prevailing on that date. Resulting exchange gains or losses are directly recorded in the income statement. At the closing date, non-monetary assets and liabilities stated in foreign currency remain translated into the functional currency using the exchange rate at the date of the transaction.
\nTranslation of foreign currency income statements of foreign operations (except for foreign operations in hyper-inflationary economies) into US dollars is converted at the average exchange rate prevailing during the year. Statements of financial position are translated at the exchange rate at the closing date. Differences arising in the translation of financial statements of foreign operations are recorded in other comprehensive income as foreign currency translation reserve. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and borrowings of such investments, are taken to Company equity. On disposal or partial disposal of a foreign operation, any corresponding cumulative exchange differences are transferred from equity to profit or loss.
\nDerivative financial instruments held by the Company are aimed at hedging risks associated with market risk fluctuations. The Company uses primarily forward currency contracts, interest rate swaps and commodity contracts to hedge foreign currency risk, interest rate risk and commodity price risk. Further information about the financial risk management objectives and policies is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nA derivative instrument (cash-flow hedge) qualifies for hedge accounting when all relevant criteria are met. A cash-flow hedge aims at reducing risks incurred by variations in the value of future cash flows that may impact net income. In order for a derivative to be eligible for hedge accounting, the following criteria must be met:
There is an economic relationship between the hedging instrument and the hedged item.
The effect of credit risk does not dominate the value changes resulting from that economic relationship.
The hedge ratio of the hedging relationship is the same as that used for risk management purposes.
All derivative instruments are recorded and disclosed in the statement of financial position at fair value. Purchases and sales of derivatives are accounted for at trade date. Where a portion of a financial derivative is expected to be realized within twelve months of the reporting date, that portion is presented as current; the remainder of the financial derivative as non-current.
\nChanges in fair value of derivatives designated as cash-flow hedge relationships are recognized as follows:
The effective portion of the gain or loss of the hedging instrument is recorded directly in other comprehensive income, and the ineffective portion of the gain or loss on the hedging instrument is recorded in the income statement. The gain or loss which is deferred in equity, is reclassified to the net income in the period(s) in which the specified hedged transaction affects the income statement.
The changes in fair value of derivative financial instruments that do not qualify as hedging in accounting standards are directly recorded in the income statement.
The sources of hedge ineffectiveness are:
The non-occurrence of the hedged item;
The change in the principal terms of the hedged item;
The severe change of the credit risk of the Company and, or the derivative counterparty.
When measuring the fair value of a financial instrument, the Company uses market observable data as much as possible. Fair values are categorized into different levels in a fair value hierarchy, based on the inputs used in the valuation techniques. Further information about the fair value measurement of financial derivatives is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
Provisions are recognized if, and only if, the following criteria are simultaneously met:
The Company has an ongoing obligation (legal or constructive) as a result of a past event.
It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
The amount of the obligation can be reliably estimated; provisions are measured according to the risk assessment or the exposed charge, based upon best-known facts.
Demobilization provisions relate to estimated costs for demobilization of leased facilities at the end of the respective lease period or operating life.
\nWarranty provisions relate to the Company\u2019s obligations to replace or repair defective items that become apparent within an agreed period, starting from final acceptance of the delivered system. These assurance-type warranties are provided to customers on most Turnkey sales. These provisions are estimated on a statistical basis regarding the Company\u2019s past experience or on an individual basis in the case of any warranty claim already identified. These provisions are classified as current by nature as it coincides with the production cycle of the Company.
\nOther provisions include provisions like commercial claims, regulatory fines related to operations and local content penalty. In relation to local content penalty, Brazilian oil and gas contracts typically include local content requirements. These requirements are issued by the Ag\u00eancia Nacional do Petr\u00f3leo, G\u00e1s Natural e Biocombust\u00edveis (ANP) to the winning concessionaire/consortia of auctioned Brazilian exploratory blocks or areas at the end of the bidding round, with the intention to strengthen the domestic Brazilian market and expand local employment. The owning concessionaire/consortia normally contractually passes such requirements on to, among other suppliers, the company delivering the FPSO. For the Company\u2019s Brazilian contracts, the Company assesses the execution strategy and may decide that execution of the project in locations other than Brazil is more beneficial. Such a decision takes into account factors such as optimization of overall cost of delivery, quality and timeliness. As a result, following the chosen execution strategy, the Company may expect to not meet entirely the agreed local content requirements. In such circumstances, the expected penalty to be paid, as a result of not meeting the local content requirements, is determined, based on management\u2019s best estimate and recognized as provision during the construction period. The corresponding cost is expensed over the construction period of the asset.
Property, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of such items. The capital value of a facility to be leased and operated for a client is the sum of external costs (such as shipyards, subcontractors and suppliers), internal costs (design, engineering, construction supervision, etc.), third-party financial costs including interest paid during construction and attributable overhead.
\nSubsequent costs are included in an asset\u2019s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The costs of assets include the initial estimate of costs of demobilization of the asset net of reimbursement expected to be received by the client.
\nCosts related to major overhaul, which meet the criteria for capitalization, are included in the asset\u2019s carrying amount. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
\nWhen significant parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate line items of property, plant and equipment. The depreciation charge is calculated, based on future anticipated economic benefits, e.g. based on the unit of production method or on a straight-line basis as follows:
New build Fast4Ward\u00ae FPSO up to 30 years (included in vessels and floating equipment);
Converted tankers FPSO 10-20 years (included in vessels and floating equipment);
Floating equipment 3-15 years (included in vessels and floating equipment);
Buildings 30-50 years;
Other assets 2-20 years;
Land is not depreciated.
Regarding useful lives for vessels in operation, they are usually aligned with the lease period. Useful lives and methods of depreciation are reviewed at least annually and adjusted if appropriate.
\nThe assets\u2019 residual values are reviewed and adjusted, if appropriate, at each statement of financial position date. An asset\u2019s carrying amount is written down immediately to its recoverable amount if the asset\u2019s carrying amount is higher than its estimated recoverable amount.
\nGains and losses arising on disposals or retirement of assets are determined by comparing any sales proceeds and the carrying amount of the asset. These are reflected in the income statement in the period that the asset is disposed of or retired.
\nRight-of-use assets related to the Company\u2019s lease contracts in which the Company is a lessee are included in Property, plant and equipment. Right-of-use assets and corresponding liabilities are recognized when the leased asset is available for use by the Company. Right-of-use assets are measured at cost comprising the following:
The amount of the initial measurement of the lease liability;
Any lease payments made at or before the commencement date;
Any initial direct costs; and
Restoration costs.
The right-of-use asset is depreciated over the shorter of the asset\u2018s useful life and the lease term, on a straight-line basis.
\nPayments associated with short-term leases and leases of low-value assets are recognized, on a straight-line basis, as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and accumulated impairment losses.
\nSoftware is recognized at historical cost and is amortized, on a straight-line basis, over its useful life. The useful life of software is generally between 3 and 5 years, dependent on the type of software.
\nResearch costs are expensed when incurred. In compliance with IAS 38, development costs are capitalized if all of the following criteria are met:
The projects are clearly defined.
The Company is able to reliably measure expenditures incurred by each project during its development.
The Company is able to demonstrate the technical feasibility of the project.
The Company has the financial and technical resources available to achieve the project.
The Company can demonstrate its intention to complete, to use or to commercialize products resulting from the project.
The Company is able to demonstrate the existence of a market for the output of the intangible asset, or, if it is used internally, the usefulness of the intangible asset.
When capitalized, development costs are carried at cost, less any accumulated amortization and impairment losses. Amortization begins when the project is complete and available for use. It is amortized over the period of expected future benefit, which is generally between 3 and 5 years.
Inventories are valued at the lower of cost and net realizable value. Cost is determined using the first-in first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses. Inventories comprise semi-finished, finished products and the Company\u2019s Fast4Ward\u00ae Multi Purpose Floater (\u2019MPF\u2019) valued at cost, including attributable overheads and spare parts stated at the lower of purchase price or market value. MPFs under construction are accounted for as inventories until they are allocated to awarded projects and then reclassified from inventories to contract assets.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore all classified as current. Trade receivables are recognized initially at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost, using the effective interest method. The Company applies the simplified approach in measuring expected credit losses for trade receivables.
\nOther receivables are recognized initially at fair value and subsequently measured at amortized cost, using the effective interest rate method. Interest income, together with gains and losses when the receivables are derecognized or impaired, is recognized in the income statement.
For finance lease receivables, the Company assumes that the credit risk has not increased significantly since the initial recognition if the finance lease receivable is determined to have a low credit risk at the reporting date (i.e. the Company applies the low credit risk simplification). As a result, if the finance lease receivable is determined to have a low credit risk at the reporting date, the Company recognizes a 12-month expected credit loss.
Cash and cash equivalents consist of cash in bank and in hand fulfilling the following criteria: a maturity of usually less than three months, highly liquid, a fixed exchange value and an extremely low risk of loss of value.
Ordinary shares and protective preference shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the associated tax is also recognized in other comprehensive income or directly in equity.
\nIncome tax expenses comprise corporate income tax due in countries of incorporation of the Company\u2019s main subsidiaries and levied on actual profits. Income tax expense also includes the corporate income taxes which are levied on a deemed profit basis and revenue basis (withholding taxes in the scope of IAS 12). This presentation adequately reflects the Company\u2019s global tax burden.
Deferred tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
\nDeferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred tax is provided for on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Pension obligations: the Company operates various pension schemes that are generally funded through payments determined by periodic actuarial calculations to insurance companies or are defined as multi-employer plans. The Company has both defined benefit and defined contribution plans:
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
A defined contribution plan is a pension plan under which the Company pays fixed contributions to public or private pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions to defined contribution plans and multi-employer plans are recognized as an expense in the income statement as incurred.
The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date, less the fair value of the plan assets, together with adjustments for unrecognized actuarial gains and losses and past service costs. The defined benefit obligation is calculated periodically by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on high-quality corporate bonds that have maturity dates approximating to the terms of the Company\u2019s obligations.
\nThe expense recognized within the EBIT comprises the current service cost and the effects of any change, reduction or winding up of the plan. The accretion impact on actuarial debt and interest income on plan assets are recognized under the net financing cost.
\nCumulative actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized immediately in comprehensive income.
\nShare-based payments: within the Company there are four types of share-based payment plans that qualify as equity settled:
Restricted Share Unit (RSU);
Short-term Incentive Program of Bonus Shares and Matching Shares;
Value Creation Stake (VCS); and
Ownership Shares.
The estimated total amount to be expensed over the vesting period related to share-based payments is determined by (i) reference to the fair value of the instruments determined at the grant date, and (ii) non-market vesting conditions included in assumptions about the number of shares that the employee will ultimately receive. Main assumptions for estimates are revised at statement of financial position date. Total cost for the period is charged or credited to the income statement, with a corresponding adjustment to equity.
\nWhen equity instruments vest, the Company issues new shares, unless the Company has Treasury shares in stock.
\nAny cancellation of matching shares will lead to an accelerated expense recognition of the total fair value, with a corresponding adjustment to equity.
Trade payables are amounts due to suppliers for goods sold or services received in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore classified as current. Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.
The consolidated financial statements of the Company have been prepared in accordance with, and comply with, International Financial Reporting Standards (\u2019IFRS\u2019) and interpretations adopted by the European Union, which were effective for the financial year beginning January 1, 2023, and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code.
\nThe Company financial statements included in section 4.4 are part of the 2023 financial statements of SBM Offshore N.V.
The Company has adopted the following new standards as of January 1, 2023:
IFRS 17 \u2013 \u2018Insurance Contracts\u2019;
Amendments to IAS 8 \u2013 \u2018Definition of Accounting Estimates\u2019;
Amendments to IAS 1 and IFRS Practice Statement 2 \u2013 Disclosure of Accounting Policies\u2019;
Amendments to IAS 12 \u2013 \u2018Deferred Tax related to Assets and Liabilities arising from a Single Transaction\u2019; and
Amendments to IAS 12 \u2013 \u2018International Tax Reform \u2013 Pillar Two Model Rules\u2019.
IFRS 17 is the new accounting standard for insurance contracts covering recognition and measurement, presentation, and disclosure. This standard applies to all types of insurance contracts, regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features.
\nIn contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.
\nThe Company has made a thorough assessment of its transactions against the scope of IFRS 17 and concluded that, despite the fact it does have some transactions that may fall within the scope of IFRS 17, those transactions are either scoped out (such as warranties provided to its customers) or an accounting policy choice is available (e.g., fixed-fee service contracts). The Company has decided to apply the accounting policy option to not apply IFRS 17 where permitted.
\nTherefore, this new standard had no impact on the consolidated financial statements of the Company.
\nThis amendment clarifies the distinction between changes in accounting estimates and changes in accounting policies and the correction of errors in IAS 8. They also clarify how entities use measurement techniques and inputs to develop accounting estimates.
\nThe amendment had no impact on the consolidated financial statements of the Company.
\nThese amendments provide guidance and examples to help entities applying materiality judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures that are more useful, by replacing the requirement for entities to disclose their \u2018significant\u2019 accounting policies with a requirement to disclose their \u2018material\u2019 accounting policies and adding guidance on how entities apply the concept of materiality in making decisions about accounting policy disclosures.
\nThe amendments had a minor impact on the consolidated financial statements of the Company. The Company has performed a reassessment of its accounting policy disclosures against the amended guidance, which resulted in minor changes to the section on accounting policies.
\nThis amendment aims to narrow the scope of the initial recognition exception (\u2019IRE\u2019) provided in IAS 12, so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences, such as leases and decommissioning liabilities.
\nThe impact of the application of this amendment to IAS 12 relates to lease transactions in which the Company is the lessee, and for which the Company applied the initial recognition exemption.
\nThis amendment resulted in the recognition of additional deferred tax assets and deferred tax liabilities on the balance sheet at January 1, 2023, of US$11 million and US$10 million respectively, with an insignificant net impact of less than US$1 million. Considering the materiality, the Company has recognized the impact fully in 2023.
\nWith regards to the amendments to IAS 12 on International Tax Reform \u2013 Pillar Two Model Rules the amendment:
Provide a mandatory temporary exception to the requirements in IAS 12 to recognize and disclose information about deferred tax assets and liabilities arising from Pillar Two Model Rules.
The Company has been monitoring the accounting discussion around the recognition of deferred taxes arising from Pillar Two Model Rules and, following the amendment requirements, the Company did not recognize any deferred taxes in its financial statements 2023 related to potential impacts of top-up taxes arising from such legislation. The mandatory temporary exception applies immediately.
Introduce new disclosure requirements, which are only applicable to annual financial statements commencing on or after January 1, 2023.
As the Company is within the scope of the Pillar Two legislation, the Company is in the process of assessing the applicable regulations and understanding the requirements. The EU has published the Directive (EU) 2022/2523, in the Official Journal of the EU, on December 22, 2022, aiming to ensure a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU, based on a system of two interlocked rules, together referred to also as the \u2018GloBE rules\u2019, through which an additional amount of tax (so-called \u2018Top-up Tax\u2019) should be collected when the effective tax rate in a given jurisdiction is below 15%. Following the EU Directive, the Dutch government issued its draft proposal of the Minimum Taxation Act 2024 in October 2022 for consultation, while on December 15, 2022, the Council of the European Union formally adopted the directive implementing the minimum taxation at EU level. On December 19, 2023 the Dutch Senate approved the Minimum Tax Act 2024. The measures are considered to be substantively enacted for financial statements ending after 19 December 2023. The main rule of the Minimum Tax Act 2024 (so-called Income Inclusion Rule or IIR) will become effective on or after December 31, 2023 with the backstop rule (so-called Undertaxed Profits Rule or UTPR) becoming effective on or after December 31, 2024. On top of the IIR and UTPR, the jurisdictions that will implement an IIR are generally expected to also implement a Qualifying Domestic Minimum Top-up Tax or QDMTT.
\nThe Company will be impacted by the GloBE rules, the result of the assessment of the expected impact is disclosed under 4.3.10 Income Tax Expense as per requirements of the issued IAS 12 amendment.
The following standards and amendments published by the IASB and endorsed by the European Union are not mandatorily applicable as of January 1, 2023:
Amendments to IFRS 16 \u2013 \u2018Lease Liability in a Sale and Leaseback\u2019; and
Amendments to IAS 1 \u2013 \u2018Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants\u2019.
The Company is currently assessing the impact of amendments issued, however the Company does not expect a material impact on the financial statements due to their future adoption.
\nOther new standards and amendments have been published by the IASB but have not been endorsed yet by the European Commission. Early adoption is not possible until European Commission endorsement. Those which may be relevant to the Company are set out below:
Amendments to IAS 7 and IFRS 7 \u2013 \u2018Disclosures: Supplier Finance Arrangements\u2019; and
Amendments to IAS 21 - Lack of exchangeability.
The Company does not expect a significant effect on the financial statements due to the adoption of the remaining amendments. Other standards and amendments are not relevant to the Company.
The consolidated financial statements of the Company have been prepared on the historical cost basis, except for the revaluation of certain financial instruments.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-444": { "value": "\nThe consolidated financial statements of the Company have been prepared in accordance with, and comply with, International Financial Reporting Standards (\u2019IFRS\u2019) and interpretations adopted by the European Union, which were effective for the financial year beginning January 1, 2023, and also comply with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code.
", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-445": { "value": "\nWhen preparing the financial statements, it is necessary for the Management of the Company to make estimates and certain assumptions that can influence the valuation of the assets and liabilities and the outcome in the income statement. The actual outcome may differ from these estimates and assumptions due to changes in facts and circumstances. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable.\u00a0
\nSignificant areas of estimation and uncertainty in applying accounting policies that have the most significant impact on amounts recognized in the financial statements are:
\nRevenue of the Company is measured and recognized, based on the input method (i.e. costs incurred). Costs and revenue at completion are reviewed periodically throughout the life of the contract. This requires a large number of estimates, especially of the total expected costs at completion, due to the complex nature of the Company\u2019s construction contracts. Judgment is also required for the accounting of contract modifications and claims from clients where negotiations or discussions are at a sufficiently advanced stage. Costs and revenue (and the resulting gross margin) at completion reflect, at each reporting period, the Management\u2019s current best estimate of the probable future benefits and obligations associated with the contract.\u00a0The policy for measurement of transaction price, including variable considerations (i.e. claims, performance-based incentives), is included below in the point (d) Revenue.
\nIn case a contract meets the definition of an onerous contract as per IAS 37, provisions for anticipated losses are made in full in the period in which they become known.
\nAssumptions and estimates used in the discounted cash flow model and the adjusted net present value model to determine the value in use of assets or group of assets (e.g. discount rates, residual values and business plans) are subject to uncertainty. There is a possibility that changes in circumstances or in market conditions could impact the recoverable amount of the asset or group of assets.
\nManagement uses its experience to estimate the remaining useful life of an asset. The actual useful life of an asset may be impacted by an unexpected event that may result in an adjustment to the carrying amount of the asset.
\nThe Company is subject to income taxes in multiple jurisdictions. Significant judgment is required in determining the Company\u2019s overall income tax liability. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company takes into account the following considerations when determining the liabilities related to uncertain income tax treatment:
When necessary, the Company engages with local tax advisers, which provide advice on the expected view of tax authorities on the treatment of judgmental areas of income tax;
The Company considers any changes in tax legislation, and knowledge built based on prior cases, to make an estimate/judgment on whether or not to provide for any tax payable; and
The Company takes into account any dispute resolutions, case law and discussions between peer companies and the tax authorities on similar cases over an uncertain tax treatment.
The Company consistently monitors each issue around uncertain income tax treatments across the group in order to ensure that the Company applies sufficient judgment to the resolution of tax disputes that might arise from examination of the Company\u2019s tax position by relevant tax authorities.
\nThe Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The income tax liabilities include any penalties and interest that could be associated with a tax audit issue. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will influence the income tax and deferred tax provisions in the period in which such determination is made.
\nThe Company identifies and provides analysis on a regular basis of current litigation and measures, when necessary, provisions based on its best estimate of the expenditure required to settle the obligations, taking into account information available and different possible outcomes at the reporting date.
\nA warranty provision is accrued during the construction phase of projects, based on historical warranty expenditure per product type. At the completion of a project, a warranty provision (depending on the nature of the project) is therefore provided for and reported as provision in the statement of financial position. Following the acceptance of a project, the warranty provision is released over the warranty period. For some specific claims formally notified by the customer and which can be reliably estimated, an amount is provided in full and without discounting. An overall review of the warranty provision is performed by Management at each reporting date. Nevertheless, considering the specificity of each asset, actual warranty expenditures could vary significantly from one project to another and therefore differ materially from initial statistical warranty provision provided at the completion of a said project.
\nThe estimated future costs of demobilization are reviewed on a regular basis and adjusted when appropriate. Nevertheless, considering the long-term expiry date of the obligations, these costs are subject to uncertainty. Cost estimates can vary in response to many factors, including, for example, new demobilization techniques, the Company\u2019s own experience on demobilization operations, future changes in laws and regulations, and the timing of demobilization operations.
\nEstimates and assumptions made in determining these obligations can therefore lead to significant adjustments to the future financial results. Nevertheless, the cost of demobilization obligations at the reporting date represents Management\u2019s best estimate of the present value of the future costs required.
\nDuring the 2023 financial year, there was significant commodity price volatility, high inflation, rising interest rates and increasing energy prices that increased the current economic and geopolitical uncertainty. Accordingly, the Company reassessed its significant estimates and judgments. The following main areas identified by the Company as potentially affected by the current global circumstances are:
Key assumptions used in the impairment test of assets, or group of assets;
Expected credit losses; and
Additional costs in order to satisfy the performance obligations on some of the construction contracts, mainly due to expected delay in the project delivery following lockdown periods in China, international travel restrictions, remote working, pressure on the supply chain and a general increase in global inflation.
The impact of the current economic and geopolitical environment on the impairment of the tangible assets is disclosed in note 4.3.13 Property, Plant and Equipment. Regarding the Company\u2019s considerations for estimation of expected credit losses, refer to note 4.3.8 Net Impairment Gains/(Losses) on Financial and Contract Assets. In relation to the impact of additional costs incurred due to these current macroeconomic circumstances when satisfying the Company\u2019s performance obligations, refer to note 4.3.3 Revenue.
\nFollowing the assessments, the Company does not expect any significant impact in other areas.
\nIn addition to the above estimates, the Management exercises the following judgments:
\nWhen the Company enters into a new lease arrangement, the terms and conditions of the contract are analyzed in order to assess whether or not the Company retains the significant risks and rewards of ownership of the asset subject of the lease contract. To identify whether risks and rewards are retained, the Company systematically considers, among others, all the examples and indicators listed by IFRS 16.63, on a contract-by-contract basis. By performing such an analysis, the Company makes a significant judgment to determine whether the arrangement results in a finance lease or an operating lease. This judgment can have a significant effect on the amounts recognized in the consolidated financial statements and its recognition of profits in the future. The most important judgment areas assessed by the Company are (i) determination of the fair value, (ii) determination of the useful life of the asset, (iii) the highly specialized nature of an FPSO constructed on behalf of the client and (iv) the probability of the client exercising the purchase or termination option (if relevant).
When preparing the financial statements, it is necessary for the Management of the Company to make estimates and certain assumptions that can influence the valuation of the assets and liabilities and the outcome in the income statement. The actual outcome may differ from these estimates and assumptions due to changes in facts and circumstances. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable.\u00a0
\nSignificant areas of estimation and uncertainty in applying accounting policies that have the most significant impact on amounts recognized in the financial statements are:
\nRevenue of the Company is measured and recognized, based on the input method (i.e. costs incurred). Costs and revenue at completion are reviewed periodically throughout the life of the contract. This requires a large number of estimates, especially of the total expected costs at completion, due to the complex nature of the Company\u2019s construction contracts. Judgment is also required for the accounting of contract modifications and claims from clients where negotiations or discussions are at a sufficiently advanced stage. Costs and revenue (and the resulting gross margin) at completion reflect, at each reporting period, the Management\u2019s current best estimate of the probable future benefits and obligations associated with the contract.\u00a0The policy for measurement of transaction price, including variable considerations (i.e. claims, performance-based incentives), is included below in the point (d) Revenue.
\nIn case a contract meets the definition of an onerous contract as per IAS 37, provisions for anticipated losses are made in full in the period in which they become known.
\nAssumptions and estimates used in the discounted cash flow model and the adjusted net present value model to determine the value in use of assets or group of assets (e.g. discount rates, residual values and business plans) are subject to uncertainty. There is a possibility that changes in circumstances or in market conditions could impact the recoverable amount of the asset or group of assets.
\nManagement uses its experience to estimate the remaining useful life of an asset. The actual useful life of an asset may be impacted by an unexpected event that may result in an adjustment to the carrying amount of the asset.
\nThe Company is subject to income taxes in multiple jurisdictions. Significant judgment is required in determining the Company\u2019s overall income tax liability. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company takes into account the following considerations when determining the liabilities related to uncertain income tax treatment:
When necessary, the Company engages with local tax advisers, which provide advice on the expected view of tax authorities on the treatment of judgmental areas of income tax;
The Company considers any changes in tax legislation, and knowledge built based on prior cases, to make an estimate/judgment on whether or not to provide for any tax payable; and
The Company takes into account any dispute resolutions, case law and discussions between peer companies and the tax authorities on similar cases over an uncertain tax treatment.
The Company consistently monitors each issue around uncertain income tax treatments across the group in order to ensure that the Company applies sufficient judgment to the resolution of tax disputes that might arise from examination of the Company\u2019s tax position by relevant tax authorities.
\nThe Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The income tax liabilities include any penalties and interest that could be associated with a tax audit issue. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will influence the income tax and deferred tax provisions in the period in which such determination is made.
\nThe Company identifies and provides analysis on a regular basis of current litigation and measures, when necessary, provisions based on its best estimate of the expenditure required to settle the obligations, taking into account information available and different possible outcomes at the reporting date.
\nA warranty provision is accrued during the construction phase of projects, based on historical warranty expenditure per product type. At the completion of a project, a warranty provision (depending on the nature of the project) is therefore provided for and reported as provision in the statement of financial position. Following the acceptance of a project, the warranty provision is released over the warranty period. For some specific claims formally notified by the customer and which can be reliably estimated, an amount is provided in full and without discounting. An overall review of the warranty provision is performed by Management at each reporting date. Nevertheless, considering the specificity of each asset, actual warranty expenditures could vary significantly from one project to another and therefore differ materially from initial statistical warranty provision provided at the completion of a said project.
\nThe estimated future costs of demobilization are reviewed on a regular basis and adjusted when appropriate. Nevertheless, considering the long-term expiry date of the obligations, these costs are subject to uncertainty. Cost estimates can vary in response to many factors, including, for example, new demobilization techniques, the Company\u2019s own experience on demobilization operations, future changes in laws and regulations, and the timing of demobilization operations.
\nEstimates and assumptions made in determining these obligations can therefore lead to significant adjustments to the future financial results. Nevertheless, the cost of demobilization obligations at the reporting date represents Management\u2019s best estimate of the present value of the future costs required.
\nDuring the 2023 financial year, there was significant commodity price volatility, high inflation, rising interest rates and increasing energy prices that increased the current economic and geopolitical uncertainty. Accordingly, the Company reassessed its significant estimates and judgments. The following main areas identified by the Company as potentially affected by the current global circumstances are:
Key assumptions used in the impairment test of assets, or group of assets;
Expected credit losses; and
Additional costs in order to satisfy the performance obligations on some of the construction contracts, mainly due to expected delay in the project delivery following lockdown periods in China, international travel restrictions, remote working, pressure on the supply chain and a general increase in global inflation.
The impact of the current economic and geopolitical environment on the impairment of the tangible assets is disclosed in note 4.3.13 Property, Plant and Equipment. Regarding the Company\u2019s considerations for estimation of expected credit losses, refer to note 4.3.8 Net Impairment Gains/(Losses) on Financial and Contract Assets. In relation to the impact of additional costs incurred due to these current macroeconomic circumstances when satisfying the Company\u2019s performance obligations, refer to note 4.3.3 Revenue.
\nFollowing the assessments, the Company does not expect any significant impact in other areas.
\nIn addition to the above estimates, the Management exercises the following judgments:
\nWhen the Company enters into a new lease arrangement, the terms and conditions of the contract are analyzed in order to assess whether or not the Company retains the significant risks and rewards of ownership of the asset subject of the lease contract. To identify whether risks and rewards are retained, the Company systematically considers, among others, all the examples and indicators listed by IFRS 16.63, on a contract-by-contract basis. By performing such an analysis, the Company makes a significant judgment to determine whether the arrangement results in a finance lease or an operating lease. This judgment can have a significant effect on the amounts recognized in the consolidated financial statements and its recognition of profits in the future. The most important judgment areas assessed by the Company are (i) determination of the fair value, (ii) determination of the useful life of the asset, (iii) the highly specialized nature of an FPSO constructed on behalf of the client and (iv) the probability of the client exercising the purchase or termination option (if relevant).
When preparing the financial statements, it is necessary for the Management of the Company to make estimates and certain assumptions that can influence the valuation of the assets and liabilities and the outcome in the income statement. The actual outcome may differ from these estimates and assumptions due to changes in facts and circumstances. Estimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable.\u00a0
\nSignificant areas of estimation and uncertainty in applying accounting policies that have the most significant impact on amounts recognized in the financial statements are:
\nRevenue of the Company is measured and recognized, based on the input method (i.e. costs incurred). Costs and revenue at completion are reviewed periodically throughout the life of the contract. This requires a large number of estimates, especially of the total expected costs at completion, due to the complex nature of the Company\u2019s construction contracts. Judgment is also required for the accounting of contract modifications and claims from clients where negotiations or discussions are at a sufficiently advanced stage. Costs and revenue (and the resulting gross margin) at completion reflect, at each reporting period, the Management\u2019s current best estimate of the probable future benefits and obligations associated with the contract.\u00a0The policy for measurement of transaction price, including variable considerations (i.e. claims, performance-based incentives), is included below in the point (d) Revenue.
\nIn case a contract meets the definition of an onerous contract as per IAS 37, provisions for anticipated losses are made in full in the period in which they become known.
\nAssumptions and estimates used in the discounted cash flow model and the adjusted net present value model to determine the value in use of assets or group of assets (e.g. discount rates, residual values and business plans) are subject to uncertainty. There is a possibility that changes in circumstances or in market conditions could impact the recoverable amount of the asset or group of assets.
\nManagement uses its experience to estimate the remaining useful life of an asset. The actual useful life of an asset may be impacted by an unexpected event that may result in an adjustment to the carrying amount of the asset.
\nThe Company is subject to income taxes in multiple jurisdictions. Significant judgment is required in determining the Company\u2019s overall income tax liability. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company takes into account the following considerations when determining the liabilities related to uncertain income tax treatment:
When necessary, the Company engages with local tax advisers, which provide advice on the expected view of tax authorities on the treatment of judgmental areas of income tax;
The Company considers any changes in tax legislation, and knowledge built based on prior cases, to make an estimate/judgment on whether or not to provide for any tax payable; and
The Company takes into account any dispute resolutions, case law and discussions between peer companies and the tax authorities on similar cases over an uncertain tax treatment.
The Company consistently monitors each issue around uncertain income tax treatments across the group in order to ensure that the Company applies sufficient judgment to the resolution of tax disputes that might arise from examination of the Company\u2019s tax position by relevant tax authorities.
\nThe Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The income tax liabilities include any penalties and interest that could be associated with a tax audit issue. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will influence the income tax and deferred tax provisions in the period in which such determination is made.
\nThe Company identifies and provides analysis on a regular basis of current litigation and measures, when necessary, provisions based on its best estimate of the expenditure required to settle the obligations, taking into account information available and different possible outcomes at the reporting date.
\nA warranty provision is accrued during the construction phase of projects, based on historical warranty expenditure per product type. At the completion of a project, a warranty provision (depending on the nature of the project) is therefore provided for and reported as provision in the statement of financial position. Following the acceptance of a project, the warranty provision is released over the warranty period. For some specific claims formally notified by the customer and which can be reliably estimated, an amount is provided in full and without discounting. An overall review of the warranty provision is performed by Management at each reporting date. Nevertheless, considering the specificity of each asset, actual warranty expenditures could vary significantly from one project to another and therefore differ materially from initial statistical warranty provision provided at the completion of a said project.
\nThe estimated future costs of demobilization are reviewed on a regular basis and adjusted when appropriate. Nevertheless, considering the long-term expiry date of the obligations, these costs are subject to uncertainty. Cost estimates can vary in response to many factors, including, for example, new demobilization techniques, the Company\u2019s own experience on demobilization operations, future changes in laws and regulations, and the timing of demobilization operations.
\nEstimates and assumptions made in determining these obligations can therefore lead to significant adjustments to the future financial results. Nevertheless, the cost of demobilization obligations at the reporting date represents Management\u2019s best estimate of the present value of the future costs required.
\nDuring the 2023 financial year, there was significant commodity price volatility, high inflation, rising interest rates and increasing energy prices that increased the current economic and geopolitical uncertainty. Accordingly, the Company reassessed its significant estimates and judgments. The following main areas identified by the Company as potentially affected by the current global circumstances are:
Key assumptions used in the impairment test of assets, or group of assets;
Expected credit losses; and
Additional costs in order to satisfy the performance obligations on some of the construction contracts, mainly due to expected delay in the project delivery following lockdown periods in China, international travel restrictions, remote working, pressure on the supply chain and a general increase in global inflation.
The impact of the current economic and geopolitical environment on the impairment of the tangible assets is disclosed in note 4.3.13 Property, Plant and Equipment. Regarding the Company\u2019s considerations for estimation of expected credit losses, refer to note 4.3.8 Net Impairment Gains/(Losses) on Financial and Contract Assets. In relation to the impact of additional costs incurred due to these current macroeconomic circumstances when satisfying the Company\u2019s performance obligations, refer to note 4.3.3 Revenue.
\nFollowing the assessments, the Company does not expect any significant impact in other areas.
\nIn addition to the above estimates, the Management exercises the following judgments:
\nWhen the Company enters into a new lease arrangement, the terms and conditions of the contract are analyzed in order to assess whether or not the Company retains the significant risks and rewards of ownership of the asset subject of the lease contract. To identify whether risks and rewards are retained, the Company systematically considers, among others, all the examples and indicators listed by IFRS 16.63, on a contract-by-contract basis. By performing such an analysis, the Company makes a significant judgment to determine whether the arrangement results in a finance lease or an operating lease. This judgment can have a significant effect on the amounts recognized in the consolidated financial statements and its recognition of profits in the future. The most important judgment areas assessed by the Company are (i) determination of the fair value, (ii) determination of the useful life of the asset, (iii) the highly specialized nature of an FPSO constructed on behalf of the client and (iv) the probability of the client exercising the purchase or termination option (if relevant).
A lease is an agreement whereby the lessor conveys to the lessee, in return for a payment, or series of payments, the right to use an asset for an agreed period of time.
\nLeases in which a significant portion of the risk and rewards of ownership are retained by the lessor are classified as operating leases. Under an operating lease, the asset is included in the statement of financial position as property, plant and equipment. Lease income is recognized over the term of the lease on a straight-line basis. This implies the recognition of deferred income when the contractual day rates are not constant during the initial term of the lease contract.
\nWhen assets are leased under a finance lease, the present value of the lease payments is recognized as a finance lease receivable. Under a finance lease, the difference between the gross receivable and the present value of the receivable is recognized as revenue during the lease phase. Lease income is, as of the commencement date of the lease contract, recognized over the term of the lease using the net investment method, which reflects a constant periodic rate of return. The discount rate used to measure the net investment in the lease is the interest rate implicit in the lease. During the construction phase, revenue is recognized over time, as per IFRS 15, due to the fact the Company is acting as manufacturer lessor (refer to accounting policy (d) Revenue).
Borrowings are recognized on settlement date, being the date on which cash is paid or received. They are initially recognized at fair value, net of transaction costs incurred (transaction price), subsequently measured at amortized cost and classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.\u00a0
\nBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized into the cost of the asset in the period in which they are incurred. Otherwise, borrowing costs are recognized as an expense in the period in which they are incurred.
\nBorrowings are derecognized when the Company either discharges the borrowing by paying the creditor or is legally released from primary responsibility for the borrowing, either by process of law or by the creditor.
\nLease liabilities, arising from lease contracts in which the Company is the lessee, are initially measured at the net present value of the following:
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that are based on an index or a rate;
Amounts expected to be payable under residual value guarantees;
The exercise price of a purchase option, if the Company is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Company\u2019s incremental borrowing rate.
\nEach lease payment is allocated between the lease liability and finance cost. Finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Right-of-use assets related to the Company\u2019s lease contracts in which the Company is a lessee are included in Property, plant and equipment. Right-of-use assets and corresponding liabilities are recognized when the leased asset is available for use by the Company. Right-of-use assets are measured at cost comprising the following:
The amount of the initial measurement of the lease liability;
Any lease payments made at or before the commencement date;
Any initial direct costs; and
Restoration costs.
The right-of-use asset is depreciated over the shorter of the asset\u2018s useful life and the lease term, on a straight-line basis.
\nPayments associated with short-term leases and leases of low-value assets are recognized, on a straight-line basis, as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-449": { "value": "\nUnder certain circumstances, impairment tests must be performed. Assets that are subject to amortization or depreciation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
\nThe recoverable amount is the higher of an asset\u2019s Cash Generating Unit\u2019s (\u2019CGU\u2019) fair value, less costs of disposal and its value-in-use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. An impairment loss is recognized for the amount by which the assets, or CGU\u2019s carrying amount, exceeds its recoverable amount.
\nIn assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. The Company bases its future cash flows on detailed budgets and forecasts.
\nNon-financial assets, other than goodwill, that have been impaired are reviewed for possible reversal at financial position date, when circumstances which caused the initial impairment have improved or no longer exist.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore all classified as current. Trade receivables are recognized initially at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost, using the effective interest method. The Company applies the simplified approach in measuring expected credit losses for trade receivables.
\nFor finance lease receivables, the Company assumes that the credit risk has not increased significantly since the initial recognition if the finance lease receivable is determined to have a low credit risk at the reporting date (i.e. the Company applies the low credit risk simplification). As a result, if the finance lease receivable is determined to have a low credit risk at the reporting date, the Company recognizes a 12-month expected credit loss.
Under certain circumstances, impairment tests must be performed. Assets that are subject to amortization or depreciation are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
\nThe recoverable amount is the higher of an asset\u2019s Cash Generating Unit\u2019s (\u2019CGU\u2019) fair value, less costs of disposal and its value-in-use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. An impairment loss is recognized for the amount by which the assets, or CGU\u2019s carrying amount, exceeds its recoverable amount.
\nIn assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and risks specific to the asset. The Company bases its future cash flows on detailed budgets and forecasts.
\nNon-financial assets, other than goodwill, that have been impaired are reviewed for possible reversal at financial position date, when circumstances which caused the initial impairment have improved or no longer exist.
The Company provides design, supply, installation, operation, life extension and demobilization of Floating Production, Storage and Offloading (FPSO) vessels. The vessels are either owned and operated by SBM Offshore and leased to its clients (Lease and Operate arrangements) or supplied on a Turnkey sale basis (construction contracts). Even in the latter case, the vessels can be operated by the Company, under a separate operating and maintenance agreement, after transfer to the clients.
\nOther products of the Company include: Turret Mooring Systems (\u2019TMS\u2019), Floating Offshore Wind (\u2019FOW\u2019) and brownfield and offshore (off)loading terminals. These products are mostly delivered as construction, lease or service type agreements.
\nSome contracts include multiple deliverables (such as Front-End Engineering Design (\u2019FEED\u2019), engineering, construction, procurement, installation, maintenance, operating services, demobilization). The Company assesses the level of integration between different deliverables and the ability of the deliverable to be performed by another party. Based on this assessment, the Company ascertains whether the multiple deliverables are one, or separate, performance obligation(s).
\nThe Company determines the transaction price for its performance obligations based on contractually agreed prices. The Company has various arrangements with its customers in terms of pricing, but, in principle (i) the construction contracts have agreed fixed pricing terms, including fixed lump sums and reimbursable type of contracts, (ii) the majority of the Company\u2019s lease arrangements have fixed lease rates and (iii) the operating and service type of contracts can be based on fixed lump sums or reimbursable type of contracts. The Lease and Operate contracts generally include a variable component for which the treatment is described below under \u2019Lease and Operate contracts\u2019. In rare cases when the transaction prices are not directly observable from the contract, they are estimated based on expected cost plus margin (e.g. based on an operating service component in a lease arrangement).
\nThe Company assesses, for each performance obligation, whether the revenue should be recognized over time or at a point in time. This is explained more in detail under the below sections \u2019Construction contracts\u2019 and \u2019Lease and Operate contracts\u2019.
\nThe Company can agree on various payment arrangements that generally reflect the progress of delivered performance obligations. However, if the Company\u2018s delivered performance obligation exceeds installments invoiced to the client, a contract asset is recognized (see note 4.3.3 Revenue). If the installments invoiced to the client exceed the work performed, a contract liability is recognized (see note 4.3.25 Trade and Other Payables).
\nRevenue policies related to specific arrangements with customers are described below.
\nThe Company, under its construction contracts, usually provides Engineering, Procurement, Construction and Installation (\u2019EPCI\u2019) of vessels. The Company assesses the contracts on an individual basis as per the policy described above. Based on the analysis performed for existing contracts:
The construction contracts generally include one performance obligation due to significant integration of the activities involved; and
Revenue is recognized over time as the Company has an enforceable right to payment for performance completed to date and the assets created have no direct alternative use.
Based on these requirements, the Company concludes that, in principle, construction contracts meet the criteria of revenue to be recognized over time. Revenue is recognized at each period based upon the advancement of the work, using the input method. The input method is based on the ratio of costs incurred to date to total estimated costs. Up to the moment that the Company can reasonably measure the outcome of the performance obligation, revenue is recognized to the extent of cost incurred.
\nComplex projects that present a high-risk profile due to technical novelty, complexity or pricing arrangements agreed with the client are subject to independent project reviews at advanced degrees of completion in engineering. An independent project review is an internal, but independent, review of the status of a project, based upon an assessment of a range of project management and company factors. Until this point, and when other significant uncertainties related to the cost at completion are mitigated, revenue is recognized to the extent of cost incurred.
\nDue to the nature of the services performed, variation orders and claims are commonly billed to clients in the normal course of business. The variation orders and claims are modifications of contracts that are usually not distinct and are therefore normally considered as part of the existing performance obligation. When the contract modification (including claims) is initially approved by oral agreement or implied by customary business practice, the Company recognizes revenue only to the extent of contract costs incurred. Once contract modifications and claims are approved, the revenue is no longer capped at the level of costs and is recognized based on the input method.
\nGenerally, the payments related to the construction contracts (under EPCI arrangements) are corresponding to the work completed to date, therefore the Company does not adjust any of the transaction prices for the time value of money. However the time value of money is assessed on a contract-by-contract basis and in case the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds one year, the transaction price is adjusted for the identified and quantified financing component.
\nFurthermore, finance lease arrangements under which the Company delivers a unit to a client are treated as direct sales (see also point (b) above), therefore revenue is recognized over time during the construction period as the present value of the lease payments accruing to the lessor, discounted using a market rate of interest. In order to determine the revenue to be recognized, based on this policy, the Company determines the applicable discount rate using a market rate of interest that takes into account, among others: time value of money, financing structure and risk profile of a client and project.
\nThe Company provides, to its customers, possibilities to lease the units under charter contracts. Charter contracts are multi-year contracts and some of them contain options to extend the term of the lease or terminate the lease earlier. Some of the contracts also contain purchase options that are exercisable throughout the lease term.
\nCharter rates received on long-term operating lease contracts are reported on a straight-line basis over the period of the contract once the facility has been brought into service. The difference between straight-line revenue and the contractual day-rates, which may not be constant throughout the charter, is accounted for as deferred income.
\nRevenue from finance lease contracts is, as of the commencement date of the lease contract, recognized over the term of the lease using the amortized cost method, which reflects a constant periodic rate of return.
\nOperating fees are received by the Company for facilitating receipt, processing and storage of petroleum services on board the facilities which occur continuously through the term of the contract. As such, they are a series of services that are substantially the same and that have the same pattern of transfer to the customer. Revenue is recognized over time, based on input methods by reference to the stage of completion of the service rendered, either on a straight-line basis for lump sum contracts or in line with cost incurred on reimbursable contracts.
\nOn some contracts, the Company is entitled to receive bonuses (incentives) or incurs penalties, depending on the level of interruption of production or processing of oil. Bonuses are recognized as revenue once\u00a0it is highly probable that no significant reversal of revenue recognized will occur, which is generally the case only once the performance bonus is earned. Penalties are recognized as a deduction of revenue when they become probable. For estimation of bonuses and penalties, the Company applies the \u2018most likely\u2019 method, where the Company assesses which single amount is the most likely in a range of possible outcomes.
\nThe incremental costs of obtaining a contract with a customer are recognized as an asset when the costs are expected to be recovered. The Company uses a practical expedient that permits the costs to be expensed to obtain a contract as incurred when the expected amortization period is one year or less. The costs of obtaining a contract that are not incremental are expensed as incurred, unless those costs are explicitly chargeable to the customer. Bid, proposal, and selling and marketing costs, as well as legal costs incurred in connection with the pursuit of the contract, are not incremental, as the Company would have incurred those costs even if it did not obtain the contract.
\nIf the costs incurred in fulfilling a contract with a customer are not\u00a0within the scope of another IFRS standard (e.g. IAS 2 Inventories,\u00a0IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets), the Company recognizes an asset for the costs incurred to fulfill a contract\u00a0only if those costs meet all of the following criteria:
The costs relate directly to a contract or to an anticipated contract\u00a0that the Company can specifically identify (for example, costs relating\u00a0to services to be provided under renewal of an existing contract or\u00a0costs of designing an asset to be transferred under a specific\u00a0contract that has not yet been approved);
The costs generate or enhance resources of the entity that will be\u00a0used in satisfying (or in continuing to satisfy) performance\u00a0obligations in the future; and
The costs are expected to be recovered.
An asset recognized for contract costs is amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates.
\nContract assets, as defined in IFRS 15, represent the Company\u2019s construction work-in-progress. Construction work-in-progress is the Company\u2018s right to consideration in exchange for goods and services that the Company has transferred to the customer. The Company\u2018s contract assets are measured as accumulated revenue, recognized over time, based on progress of the project, net of installments invoiced to date. The invoiced installments represent the contractually agreed unconditional milestone payments during the construction period and these amounts are classified as trade receivables until the amount is paid. The Company recognizes any losses from onerous contracts under provisions, in line with IAS 37. Further, the impairment of contract assets is measured, presented and disclosed on the same basis as financial assets that are within the scope of IFRS 9. The Company applies the simplified approach in measuring expected credit losses for contract assets. In case of contract asset balances relating to the finance lease contracts, the Company applies the low credit risk simplification of IFRS 9 for the computation of the expected credit loss. The simplification is applied as the credit risk profile of these balances has been assessed as low.
\nIn prior consolidated financial statements, the Company has presented contract assets as Construction work-in-progress in the consolidated statement of financial position, as well as the notes to the consolidated financial statements.
\nThe Company recognizes a contract liability (see note 4.3.25 Trade and Other Payables) where installments are received in advance of satisfying the performance obligation towards the customer.
As per IFRS 8, an operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose segmental operating results are regularly reviewed by the entity\u2019s chief operating decision maker, and for which distinct financial information is available.
\nThe Management Board, as chief operating decision maker, monitors the operating results of its operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on revenue, gross margin, EBIT and EBITDA, and prepared in accordance with Directional reporting.\u00a0The Company has two reportable segments:
The Lease and Operate segment includes all earned day-rates on operating lease and operate contracts.
The Turnkey segment includes revenues from Turnkey supply contracts and after-sales services, which consist mainly of large production systems, large mooring systems, deepwater export systems, fluid transfer systems, tanker loading and discharge terminals, design services and supply of special components and proprietary designs and equipment. The new energy business, which mainly relates to floating offshore wind solutions, also forms part of the Turnkey segment.
No operating segments have been aggregated to form the above reportable segments.
\nThe Company\u2019s corporate overhead functions do not constitute an operating segment as defined by IFRS 8 \u2019Operating segments\u2019 and are reported under the \u2019Other\u2019 section in note 4.3.2 Operating Segments and Directional Reporting.
\nOperating segment information is prepared and evaluated based on Directional reporting, for which the main principles are explained in note 4.3.2 Operating Segments and Directional Reporting.
The demobilization obligations of the Company are either stated in the lease contract or derived from the international conventions and the specific legislation applied in the countries where the Company operates assets. Demobilization costs will be incurred by the Company at the end of the operating life of the Company\u2019s facilities.
\nFor operating leases, the net present value of the future obligations is included in property, plant and equipment, with a corresponding amount included in the provision for demobilization. As the remaining duration of each lease reduces, and the discounting effect on the provision unwinds, accrued interest is recognized as part of financial expenses and added to the provision. The subsequent updates of the measurement of the demobilization costs are recognized, both impacting the provision and the asset.
\nIn some cases, when the contract includes a demobilization bareboat fee that the Company invoices to the client during the demobilization phase, a receivable is recognized at the beginning of the lease phase for the discounted value of the fee. When the receivable is recognized, it is limited to the amount of the corresponding demobilization obligation. These receivables are subject to expected credit loss impairment, which are analyzed together with the finance lease receivable using the same methodology.
\nFor finance leases, demobilization obligations are analyzed as a component of the sale recognized under IFRS 15. It is determined whether the demobilization obligation should be defined as a separate performance obligation. In that case, because the demobilization operation is performed at a later stage, the related revenue is deferred until the demobilization operations occur. Subsequent updates of the measurement of the demobilization costs are recognized immediately through the contract liability, for the present value of the change.
The Company\u2019s consolidated financial statements include the financial statements of all controlled subsidiaries.
\nIn determining, under IFRS 10, whether the Company controls an investee, the Company assesses whether it has (i) power over the investee, (ii) exposure or rights to variable returns from its involvement, and (iii) the ability to use power over investees to affect the amount of return. To determine whether the Company has power over the investee, multiple contractual elements are analyzed, among which (i) voting rights of the Company at the General Meeting, (ii) voting rights of the Company at Board level and (iii) the power of the Company to appoint, reassign or remove other key management personnel.
\nFor investees, whereby such contractual elements are not conclusive because all decisions about the relevant activities are taken on a mutual consent basis, the main deciding feature resides then in the deadlock clause existing in shareholders\u2019 agreements. In case a deadlock situation arises at the Board of Directors of an entity, whereby the Board is unable to conclude a decision, the deadlock clause of the shareholders\u2019 agreements generally stipulates whether a substantive right is granted to the Company or to all the partners in the entity to buy its shares through a compensation mechanism that is fair enough for the Company or one of the partners to acquire these shares. In case such a substantive right resides with the Company, the entity will be defined under IFRS 10 as controlled by the Company. In case no such substantive right is held by any of the shareholders through the deadlock clause, the entity will be defined as a joint arrangement.
\nSubsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated using the full consolidation method.
\nAll reciprocal transactions between two controlled subsidiaries, with no profit or loss impact at consolidation level, are fully eliminated for the preparation of the consolidated financial statements.
\nThe Company has applied IFRS 11 \u2019Joint Arrangements\u2019 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. In determining, under IFRS 11, the classification of a joint arrangement, the Company assesses that all joint arrangements are structured through private limited liability companies incorporated in various jurisdictions. As a result, assets and liabilities held in these separate vehicles are those of the separate vehicles and not those of the shareholders of these limited liability companies. Shareholders have no direct rights to the assets, nor primary obligations for liabilities of these vehicles. As a result, the Company classifies its joint arrangements to be joint ventures.\u00a0Joint ventures are accounted for using the equity method.
\nAssociates are all entities over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is not control over those policies. Investments in associates are accounted for using the equity method.
\nWhen losses of an equity-accounted entity are greater than the value of the Company\u2019s net investment in that entity, these losses are not recognized unless the Company has a constructive obligation to fund the entity. The share of the negative net equity of these is first accounted for against the loans held by the owner towards the equity-accounted company that forms part of the net investment. Any excess is accounted for under provisions.
\nReciprocal transactions carried out between a subsidiary and an equity-accounted entity are not eliminated for the preparation of the consolidated financial statements. Only transactions leading to an internal profit (e.g. for dividends or internal margin on asset sale) are eliminated, applying the percentage owned in the equity-accounted entity.
\nThe financial statements of the subsidiaries, associates and joint ventures are prepared for the same reporting period as the Company and the accounting policies are in line with those of the Company.
Subsidiaries are all entities over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated using the full consolidation method.
\nAll reciprocal transactions between two controlled subsidiaries, with no profit or loss impact at consolidation level, are fully eliminated for the preparation of the consolidated financial statements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-459": { "value": "\nThe Company has applied IFRS 11 \u2019Joint Arrangements\u2019 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. In determining, under IFRS 11, the classification of a joint arrangement, the Company assesses that all joint arrangements are structured through private limited liability companies incorporated in various jurisdictions. As a result, assets and liabilities held in these separate vehicles are those of the separate vehicles and not those of the shareholders of these limited liability companies. Shareholders have no direct rights to the assets, nor primary obligations for liabilities of these vehicles. As a result, the Company classifies its joint arrangements to be joint ventures.\u00a0Joint ventures are accounted for using the equity method.
\nAssociates are all entities over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is not control over those policies. Investments in associates are accounted for using the equity method.
\nWhen losses of an equity-accounted entity are greater than the value of the Company\u2019s net investment in that entity, these losses are not recognized unless the Company has a constructive obligation to fund the entity. The share of the negative net equity of these is first accounted for against the loans held by the owner towards the equity-accounted company that forms part of the net investment. Any excess is accounted for under provisions.
\nReciprocal transactions carried out between a subsidiary and an equity-accounted entity are not eliminated for the preparation of the consolidated financial statements. Only transactions leading to an internal profit (e.g. for dividends or internal margin on asset sale) are eliminated, applying the percentage owned in the equity-accounted entity.
\nThe financial statements of the subsidiaries, associates and joint ventures are prepared for the same reporting period as the Company and the accounting policies are in line with those of the Company.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-460": { "value": "\nThe Company has applied IFRS 11 \u2019Joint Arrangements\u2019 to all joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations or joint ventures depending on the contractual rights and obligations of each investor. In determining, under IFRS 11, the classification of a joint arrangement, the Company assesses that all joint arrangements are structured through private limited liability companies incorporated in various jurisdictions. As a result, assets and liabilities held in these separate vehicles are those of the separate vehicles and not those of the shareholders of these limited liability companies. Shareholders have no direct rights to the assets, nor primary obligations for liabilities of these vehicles. As a result, the Company classifies its joint arrangements to be joint ventures.\u00a0Joint ventures are accounted for using the equity method.
\nAssociates are all entities over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is not control over those policies. Investments in associates are accounted for using the equity method.
\nWhen losses of an equity-accounted entity are greater than the value of the Company\u2019s net investment in that entity, these losses are not recognized unless the Company has a constructive obligation to fund the entity. The share of the negative net equity of these is first accounted for against the loans held by the owner towards the equity-accounted company that forms part of the net investment. Any excess is accounted for under provisions.
\nReciprocal transactions carried out between a subsidiary and an equity-accounted entity are not eliminated for the preparation of the consolidated financial statements. Only transactions leading to an internal profit (e.g. for dividends or internal margin on asset sale) are eliminated, applying the percentage owned in the equity-accounted entity.
\nThe financial statements of the subsidiaries, associates and joint ventures are prepared for the same reporting period as the Company and the accounting policies are in line with those of the Company.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-463": { "value": "\nAssociates are all entities over which the Company has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but it is not control over those policies. Investments in associates are accounted for using the equity method.
\nWhen losses of an equity-accounted entity are greater than the value of the Company\u2019s net investment in that entity, these losses are not recognized unless the Company has a constructive obligation to fund the entity. The share of the negative net equity of these is first accounted for against the loans held by the owner towards the equity-accounted company that forms part of the net investment. Any excess is accounted for under provisions.
\nReciprocal transactions carried out between a subsidiary and an equity-accounted entity are not eliminated for the preparation of the consolidated financial statements. Only transactions leading to an internal profit (e.g. for dividends or internal margin on asset sale) are eliminated, applying the percentage owned in the equity-accounted entity.
\nThe financial statements of the subsidiaries, associates and joint ventures are prepared for the same reporting period as the Company and the accounting policies are in line with those of the Company.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-478": { "value": "\nThe Company\u2019s financial assets consist of finance lease receivables, loans to joint ventures and associates and trade and other receivables. The accounting policy on trade and other receivables is described separately.
\nFinance lease receivables are non-derivative financial assets with fixed or determined payments that are not quoted in an active market.
\nLoans to joint ventures and associates relate primarily to interest-bearing loans to joint ventures. These financial assets are initially measured at fair value plus transaction costs (if any) and subsequently measured at amortized cost.
\nThe Company classifies its financial assets at amortized cost only if both of the following criteria are met:
The asset is held within a business model whose objective is to collect the contractual cash flows; and
The contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore all classified as current. Trade receivables are recognized initially at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost, using the effective interest method. The Company applies the simplified approach in measuring expected credit losses for trade receivables.
\nOther receivables are recognized initially at fair value and subsequently measured at amortized cost, using the effective interest rate method. Interest income, together with gains and losses when the receivables are derecognized or impaired, is recognized in the income statement.
For finance lease receivables, the Company assumes that the credit risk has not increased significantly since the initial recognition if the finance lease receivable is determined to have a low credit risk at the reporting date (i.e. the Company applies the low credit risk simplification). As a result, if the finance lease receivable is determined to have a low credit risk at the reporting date, the Company recognizes a 12-month expected credit loss.
The Company\u2019s financial assets consist of finance lease receivables, loans to joint ventures and associates and trade and other receivables. The accounting policy on trade and other receivables is described separately.
\nFinance lease receivables are non-derivative financial assets with fixed or determined payments that are not quoted in an active market.
\nLoans to joint ventures and associates relate primarily to interest-bearing loans to joint ventures. These financial assets are initially measured at fair value plus transaction costs (if any) and subsequently measured at amortized cost.
\nThe Company classifies its financial assets at amortized cost only if both of the following criteria are met:
The asset is held within a business model whose objective is to collect the contractual cash flows; and
The contractual terms give rise to cash flows that are solely payments of principal and interest.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
Borrowings are recognized on settlement date, being the date on which cash is paid or received. They are initially recognized at fair value, net of transaction costs incurred (transaction price), subsequently measured at amortized cost and classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.\u00a0
\nBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized into the cost of the asset in the period in which they are incurred. Otherwise, borrowing costs are recognized as an expense in the period in which they are incurred.
\nBorrowings are derecognized when the Company either discharges the borrowing by paying the creditor or is legally released from primary responsibility for the borrowing, either by process of law or by the creditor.
\nLease liabilities, arising from lease contracts in which the Company is the lessee, are initially measured at the net present value of the following:
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that are based on an index or a rate;
Amounts expected to be payable under residual value guarantees;
The exercise price of a purchase option, if the Company is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Company\u2019s incremental borrowing rate.
\nEach lease payment is allocated between the lease liability and finance cost. Finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Foreign currency transactions are translated into the functional currency, the US dollar, at the exchange rate applicable on the transaction date. At the closing date, monetary assets and liabilities stated in foreign currencies are translated into the functional currency at the exchange rate prevailing on that date. Resulting exchange gains or losses are directly recorded in the income statement. At the closing date, non-monetary assets and liabilities stated in foreign currency remain translated into the functional currency using the exchange rate at the date of the transaction.
\nTranslation of foreign currency income statements of foreign operations (except for foreign operations in hyper-inflationary economies) into US dollars is converted at the average exchange rate prevailing during the year. Statements of financial position are translated at the exchange rate at the closing date. Differences arising in the translation of financial statements of foreign operations are recorded in other comprehensive income as foreign currency translation reserve. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and borrowings of such investments, are taken to Company equity. On disposal or partial disposal of a foreign operation, any corresponding cumulative exchange differences are transferred from equity to profit or loss.
\nDerivative financial instruments held by the Company are aimed at hedging risks associated with market risk fluctuations. The Company uses primarily forward currency contracts, interest rate swaps and commodity contracts to hedge foreign currency risk, interest rate risk and commodity price risk. Further information about the financial risk management objectives and policies is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nA derivative instrument (cash-flow hedge) qualifies for hedge accounting when all relevant criteria are met. A cash-flow hedge aims at reducing risks incurred by variations in the value of future cash flows that may impact net income. In order for a derivative to be eligible for hedge accounting, the following criteria must be met:
There is an economic relationship between the hedging instrument and the hedged item.
The effect of credit risk does not dominate the value changes resulting from that economic relationship.
The hedge ratio of the hedging relationship is the same as that used for risk management purposes.
All derivative instruments are recorded and disclosed in the statement of financial position at fair value. Purchases and sales of derivatives are accounted for at trade date. Where a portion of a financial derivative is expected to be realized within twelve months of the reporting date, that portion is presented as current; the remainder of the financial derivative as non-current.
\nChanges in fair value of derivatives designated as cash-flow hedge relationships are recognized as follows:
The effective portion of the gain or loss of the hedging instrument is recorded directly in other comprehensive income, and the ineffective portion of the gain or loss on the hedging instrument is recorded in the income statement. The gain or loss which is deferred in equity, is reclassified to the net income in the period(s) in which the specified hedged transaction affects the income statement.
The changes in fair value of derivative financial instruments that do not qualify as hedging in accounting standards are directly recorded in the income statement.
The sources of hedge ineffectiveness are:
The non-occurrence of the hedged item;
The change in the principal terms of the hedged item;
The severe change of the credit risk of the Company and, or the derivative counterparty.
When measuring the fair value of a financial instrument, the Company uses market observable data as much as possible. Fair values are categorized into different levels in a fair value hierarchy, based on the inputs used in the valuation techniques. Further information about the fair value measurement of financial derivatives is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore all classified as current. Trade receivables are recognized initially at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost, using the effective interest method. The Company applies the simplified approach in measuring expected credit losses for trade receivables.
\nOther receivables are recognized initially at fair value and subsequently measured at amortized cost, using the effective interest rate method. Interest income, together with gains and losses when the receivables are derecognized or impaired, is recognized in the income statement.
For finance lease receivables, the Company assumes that the credit risk has not increased significantly since the initial recognition if the finance lease receivable is determined to have a low credit risk at the reporting date (i.e. the Company applies the low credit risk simplification). As a result, if the finance lease receivable is determined to have a low credit risk at the reporting date, the Company recognizes a 12-month expected credit loss.
Cash and cash equivalents consist of cash in bank and in hand fulfilling the following criteria: a maturity of usually less than three months, highly liquid, a fixed exchange value and an extremely low risk of loss of value.
Trade payables are amounts due to suppliers for goods sold or services received in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore classified as current. Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.
Financial assets are derecognized when the contractual rights to the cash flows from the financial asset expire or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-481": { "value": "\nBorrowings are recognized on settlement date, being the date on which cash is paid or received. They are initially recognized at fair value, net of transaction costs incurred (transaction price), subsequently measured at amortized cost and classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.\u00a0
\nBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized into the cost of the asset in the period in which they are incurred. Otherwise, borrowing costs are recognized as an expense in the period in which they are incurred.
\nBorrowings are derecognized when the Company either discharges the borrowing by paying the creditor or is legally released from primary responsibility for the borrowing, either by process of law or by the creditor.
\nLease liabilities, arising from lease contracts in which the Company is the lessee, are initially measured at the net present value of the following:
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that are based on an index or a rate;
Amounts expected to be payable under residual value guarantees;
The exercise price of a purchase option, if the Company is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Company\u2019s incremental borrowing rate.
\nEach lease payment is allocated between the lease liability and finance cost. Finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Borrowings are recognized on settlement date, being the date on which cash is paid or received. They are initially recognized at fair value, net of transaction costs incurred (transaction price), subsequently measured at amortized cost and classified as current liabilities, unless the Company has an unconditional right to defer settlement of the liability for at least twelve months after the statement of financial position date.\u00a0
\nBorrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized into the cost of the asset in the period in which they are incurred. Otherwise, borrowing costs are recognized as an expense in the period in which they are incurred.
\nBorrowings are derecognized when the Company either discharges the borrowing by paying the creditor or is legally released from primary responsibility for the borrowing, either by process of law or by the creditor.
\nLease liabilities, arising from lease contracts in which the Company is the lessee, are initially measured at the net present value of the following:
Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable;
Variable lease payments that are based on an index or a rate;
Amounts expected to be payable under residual value guarantees;
The exercise price of a purchase option, if the Company is reasonably certain to exercise that option; and
Payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be determined, or the Company\u2019s incremental borrowing rate.
\nEach lease payment is allocated between the lease liability and finance cost. Finance cost is charged to the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.
Trade payables are amounts due to suppliers for goods sold or services received in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore classified as current. Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset are capitalized into the cost of the asset in the period in which they are incurred. Otherwise, borrowing costs are recognized as an expense in the period in which they are incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingCostsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-486": { "value": "\nForeign currency transactions are translated into the functional currency, the US dollar, at the exchange rate applicable on the transaction date. At the closing date, monetary assets and liabilities stated in foreign currencies are translated into the functional currency at the exchange rate prevailing on that date. Resulting exchange gains or losses are directly recorded in the income statement. At the closing date, non-monetary assets and liabilities stated in foreign currency remain translated into the functional currency using the exchange rate at the date of the transaction.
\nTranslation of foreign currency income statements of foreign operations (except for foreign operations in hyper-inflationary economies) into US dollars is converted at the average exchange rate prevailing during the year. Statements of financial position are translated at the exchange rate at the closing date. Differences arising in the translation of financial statements of foreign operations are recorded in other comprehensive income as foreign currency translation reserve. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and borrowings of such investments, are taken to Company equity. On disposal or partial disposal of a foreign operation, any corresponding cumulative exchange differences are transferred from equity to profit or loss.
\nDerivative financial instruments held by the Company are aimed at hedging risks associated with market risk fluctuations. The Company uses primarily forward currency contracts, interest rate swaps and commodity contracts to hedge foreign currency risk, interest rate risk and commodity price risk. Further information about the financial risk management objectives and policies is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nA derivative instrument (cash-flow hedge) qualifies for hedge accounting when all relevant criteria are met. A cash-flow hedge aims at reducing risks incurred by variations in the value of future cash flows that may impact net income. In order for a derivative to be eligible for hedge accounting, the following criteria must be met:
There is an economic relationship between the hedging instrument and the hedged item.
The effect of credit risk does not dominate the value changes resulting from that economic relationship.
The hedge ratio of the hedging relationship is the same as that used for risk management purposes.
All derivative instruments are recorded and disclosed in the statement of financial position at fair value. Purchases and sales of derivatives are accounted for at trade date. Where a portion of a financial derivative is expected to be realized within twelve months of the reporting date, that portion is presented as current; the remainder of the financial derivative as non-current.
\nChanges in fair value of derivatives designated as cash-flow hedge relationships are recognized as follows:
The effective portion of the gain or loss of the hedging instrument is recorded directly in other comprehensive income, and the ineffective portion of the gain or loss on the hedging instrument is recorded in the income statement. The gain or loss which is deferred in equity, is reclassified to the net income in the period(s) in which the specified hedged transaction affects the income statement.
The changes in fair value of derivative financial instruments that do not qualify as hedging in accounting standards are directly recorded in the income statement.
The sources of hedge ineffectiveness are:
The non-occurrence of the hedged item;
The change in the principal terms of the hedged item;
The severe change of the credit risk of the Company and, or the derivative counterparty.
When measuring the fair value of a financial instrument, the Company uses market observable data as much as possible. Fair values are categorized into different levels in a fair value hierarchy, based on the inputs used in the valuation techniques. Further information about the fair value measurement of financial derivatives is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
Foreign currency transactions are translated into the functional currency, the US dollar, at the exchange rate applicable on the transaction date. At the closing date, monetary assets and liabilities stated in foreign currencies are translated into the functional currency at the exchange rate prevailing on that date. Resulting exchange gains or losses are directly recorded in the income statement. At the closing date, non-monetary assets and liabilities stated in foreign currency remain translated into the functional currency using the exchange rate at the date of the transaction.
\nTranslation of foreign currency income statements of foreign operations (except for foreign operations in hyper-inflationary economies) into US dollars is converted at the average exchange rate prevailing during the year. Statements of financial position are translated at the exchange rate at the closing date. Differences arising in the translation of financial statements of foreign operations are recorded in other comprehensive income as foreign currency translation reserve. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and borrowings of such investments, are taken to Company equity. On disposal or partial disposal of a foreign operation, any corresponding cumulative exchange differences are transferred from equity to profit or loss.
\nDerivative financial instruments held by the Company are aimed at hedging risks associated with market risk fluctuations. The Company uses primarily forward currency contracts, interest rate swaps and commodity contracts to hedge foreign currency risk, interest rate risk and commodity price risk. Further information about the financial risk management objectives and policies is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nA derivative instrument (cash-flow hedge) qualifies for hedge accounting when all relevant criteria are met. A cash-flow hedge aims at reducing risks incurred by variations in the value of future cash flows that may impact net income. In order for a derivative to be eligible for hedge accounting, the following criteria must be met:
There is an economic relationship between the hedging instrument and the hedged item.
The effect of credit risk does not dominate the value changes resulting from that economic relationship.
The hedge ratio of the hedging relationship is the same as that used for risk management purposes.
All derivative instruments are recorded and disclosed in the statement of financial position at fair value. Purchases and sales of derivatives are accounted for at trade date. Where a portion of a financial derivative is expected to be realized within twelve months of the reporting date, that portion is presented as current; the remainder of the financial derivative as non-current.
\nChanges in fair value of derivatives designated as cash-flow hedge relationships are recognized as follows:
The effective portion of the gain or loss of the hedging instrument is recorded directly in other comprehensive income, and the ineffective portion of the gain or loss on the hedging instrument is recorded in the income statement. The gain or loss which is deferred in equity, is reclassified to the net income in the period(s) in which the specified hedged transaction affects the income statement.
The changes in fair value of derivative financial instruments that do not qualify as hedging in accounting standards are directly recorded in the income statement.
The sources of hedge ineffectiveness are:
The non-occurrence of the hedged item;
The change in the principal terms of the hedged item;
The severe change of the credit risk of the Company and, or the derivative counterparty.
When measuring the fair value of a financial instrument, the Company uses market observable data as much as possible. Fair values are categorized into different levels in a fair value hierarchy, based on the inputs used in the valuation techniques. Further information about the fair value measurement of financial derivatives is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
Foreign currency transactions are translated into the functional currency, the US dollar, at the exchange rate applicable on the transaction date. At the closing date, monetary assets and liabilities stated in foreign currencies are translated into the functional currency at the exchange rate prevailing on that date. Resulting exchange gains or losses are directly recorded in the income statement. At the closing date, non-monetary assets and liabilities stated in foreign currency remain translated into the functional currency using the exchange rate at the date of the transaction.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-490": { "value": "\nTranslation of foreign currency income statements of foreign operations (except for foreign operations in hyper-inflationary economies) into US dollars is converted at the average exchange rate prevailing during the year. Statements of financial position are translated at the exchange rate at the closing date. Differences arising in the translation of financial statements of foreign operations are recorded in other comprehensive income as foreign currency translation reserve. On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and borrowings of such investments, are taken to Company equity. On disposal or partial disposal of a foreign operation, any corresponding cumulative exchange differences are transferred from equity to profit or loss.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-491": { "value": "\nDerivative financial instruments held by the Company are aimed at hedging risks associated with market risk fluctuations. The Company uses primarily forward currency contracts, interest rate swaps and commodity contracts to hedge foreign currency risk, interest rate risk and commodity price risk. Further information about the financial risk management objectives and policies is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nA derivative instrument (cash-flow hedge) qualifies for hedge accounting when all relevant criteria are met. A cash-flow hedge aims at reducing risks incurred by variations in the value of future cash flows that may impact net income. In order for a derivative to be eligible for hedge accounting, the following criteria must be met:
\nChanges in fair value of derivatives designated as cash-flow hedge relationships are recognized as follows:
\nThe sources of hedge ineffectiveness are:
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-495": { "value": "\nProvisions are recognized if, and only if, the following criteria are simultaneously met:
The Company has an ongoing obligation (legal or constructive) as a result of a past event.
It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation.
The amount of the obligation can be reliably estimated; provisions are measured according to the risk assessment or the exposed charge, based upon best-known facts.
Demobilization provisions relate to estimated costs for demobilization of leased facilities at the end of the respective lease period or operating life.
\nWarranty provisions relate to the Company\u2019s obligations to replace or repair defective items that become apparent within an agreed period, starting from final acceptance of the delivered system. These assurance-type warranties are provided to customers on most Turnkey sales. These provisions are estimated on a statistical basis regarding the Company\u2019s past experience or on an individual basis in the case of any warranty claim already identified. These provisions are classified as current by nature as it coincides with the production cycle of the Company.
\nOther provisions include provisions like commercial claims, regulatory fines related to operations and local content penalty. In relation to local content penalty, Brazilian oil and gas contracts typically include local content requirements. These requirements are issued by the Ag\u00eancia Nacional do Petr\u00f3leo, G\u00e1s Natural e Biocombust\u00edveis (ANP) to the winning concessionaire/consortia of auctioned Brazilian exploratory blocks or areas at the end of the bidding round, with the intention to strengthen the domestic Brazilian market and expand local employment. The owning concessionaire/consortia normally contractually passes such requirements on to, among other suppliers, the company delivering the FPSO. For the Company\u2019s Brazilian contracts, the Company assesses the execution strategy and may decide that execution of the project in locations other than Brazil is more beneficial. Such a decision takes into account factors such as optimization of overall cost of delivery, quality and timeliness. As a result, following the chosen execution strategy, the Company may expect to not meet entirely the agreed local content requirements. In such circumstances, the expected penalty to be paid, as a result of not meeting the local content requirements, is determined, based on management\u2019s best estimate and recognized as provision during the construction period. The corresponding cost is expensed over the construction period of the asset.
Pension obligations: the Company operates various pension schemes that are generally funded through payments determined by periodic actuarial calculations to insurance companies or are defined as multi-employer plans. The Company has both defined benefit and defined contribution plans:
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
A defined contribution plan is a pension plan under which the Company pays fixed contributions to public or private pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions to defined contribution plans and multi-employer plans are recognized as an expense in the income statement as incurred.
The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date, less the fair value of the plan assets, together with adjustments for unrecognized actuarial gains and losses and past service costs. The defined benefit obligation is calculated periodically by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on high-quality corporate bonds that have maturity dates approximating to the terms of the Company\u2019s obligations.
\nThe expense recognized within the EBIT comprises the current service cost and the effects of any change, reduction or winding up of the plan. The accretion impact on actuarial debt and interest income on plan assets are recognized under the net financing cost.
\nCumulative actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized immediately in comprehensive income.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-496": { "value": "\nProperty, plant and equipment are stated at cost, less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of such items. The capital value of a facility to be leased and operated for a client is the sum of external costs (such as shipyards, subcontractors and suppliers), internal costs (design, engineering, construction supervision, etc.), third-party financial costs including interest paid during construction and attributable overhead.
\nSubsequent costs are included in an asset\u2019s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The costs of assets include the initial estimate of costs of demobilization of the asset net of reimbursement expected to be received by the client.
\nCosts related to major overhaul, which meet the criteria for capitalization, are included in the asset\u2019s carrying amount. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
\nWhen significant parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate line items of property, plant and equipment. The depreciation charge is calculated, based on future anticipated economic benefits, e.g. based on the unit of production method or on a straight-line basis as follows:
New build Fast4Ward\u00ae FPSO up to 30 years (included in vessels and floating equipment);
Converted tankers FPSO 10-20 years (included in vessels and floating equipment);
Floating equipment 3-15 years (included in vessels and floating equipment);
Buildings 30-50 years;
Other assets 2-20 years;
Land is not depreciated.
Regarding useful lives for vessels in operation, they are usually aligned with the lease period. Useful lives and methods of depreciation are reviewed at least annually and adjusted if appropriate.
\nThe assets\u2019 residual values are reviewed and adjusted, if appropriate, at each statement of financial position date. An asset\u2019s carrying amount is written down immediately to its recoverable amount if the asset\u2019s carrying amount is higher than its estimated recoverable amount.
\nGains and losses arising on disposals or retirement of assets are determined by comparing any sales proceeds and the carrying amount of the asset. These are reflected in the income statement in the period that the asset is disposed of or retired.
\nRight-of-use assets related to the Company\u2019s lease contracts in which the Company is a lessee are included in Property, plant and equipment. Right-of-use assets and corresponding liabilities are recognized when the leased asset is available for use by the Company. Right-of-use assets are measured at cost comprising the following:
The amount of the initial measurement of the lease liability;
Any lease payments made at or before the commencement date;
Any initial direct costs; and
Restoration costs.
The right-of-use asset is depreciated over the shorter of the asset\u2018s useful life and the lease term, on a straight-line basis.
\nPayments associated with short-term leases and leases of low-value assets are recognized, on a straight-line basis, as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
Costs related to major overhaul, which meet the criteria for capitalization, are included in the asset\u2019s carrying amount. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepairsAndMaintenanceExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-498": { "value": "\nWhen significant parts of an item of property, plant and equipment have different useful lives, those components are accounted for as separate line items of property, plant and equipment. The depreciation charge is calculated, based on future anticipated economic benefits, e.g. based on the unit of production method or on a straight-line basis as follows:
New build Fast4Ward\u00ae FPSO up to 30 years (included in vessels and floating equipment);
Converted tankers FPSO 10-20 years (included in vessels and floating equipment);
Floating equipment 3-15 years (included in vessels and floating equipment);
Buildings 30-50 years;
Other assets 2-20 years;
Land is not depreciated.
Regarding useful lives for vessels in operation, they are usually aligned with the lease period. Useful lives and methods of depreciation are reviewed at least annually and adjusted if appropriate.
\nThe assets\u2019 residual values are reviewed and adjusted, if appropriate, at each statement of financial position date. An asset\u2019s carrying amount is written down immediately to its recoverable amount if the asset\u2019s carrying amount is higher than its estimated recoverable amount.
\nThe right-of-use asset is depreciated over the shorter of the asset\u2018s useful life and the lease term, on a straight-line basis.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-507": { "value": "\nIntangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and accumulated impairment losses.
\nSoftware is recognized at historical cost and is amortized, on a straight-line basis, over its useful life. The useful life of software is generally between 3 and 5 years, dependent on the type of software.
\nResearch costs are expensed when incurred. In compliance with IAS 38, development costs are capitalized if all of the following criteria are met:
The projects are clearly defined.
The Company is able to reliably measure expenditures incurred by each project during its development.
The Company is able to demonstrate the technical feasibility of the project.
The Company has the financial and technical resources available to achieve the project.
The Company can demonstrate its intention to complete, to use or to commercialize products resulting from the project.
The Company is able to demonstrate the existence of a market for the output of the intangible asset, or, if it is used internally, the usefulness of the intangible asset.
When capitalized, development costs are carried at cost, less any accumulated amortization and impairment losses. Amortization begins when the project is complete and available for use. It is amortized over the period of expected future benefit, which is generally between 3 and 5 years.
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost, less any accumulated amortization and accumulated impairment losses.
\nSoftware is recognized at historical cost and is amortized, on a straight-line basis, over its useful life. The useful life of software is generally between 3 and 5 years, dependent on the type of software.
\nResearch costs are expensed when incurred. In compliance with IAS 38, development costs are capitalized if all of the following criteria are met:
The projects are clearly defined.
The Company is able to reliably measure expenditures incurred by each project during its development.
The Company is able to demonstrate the technical feasibility of the project.
The Company has the financial and technical resources available to achieve the project.
The Company can demonstrate its intention to complete, to use or to commercialize products resulting from the project.
The Company is able to demonstrate the existence of a market for the output of the intangible asset, or, if it is used internally, the usefulness of the intangible asset.
When capitalized, development costs are carried at cost, less any accumulated amortization and impairment losses. Amortization begins when the project is complete and available for use. It is amortized over the period of expected future benefit, which is generally between 3 and 5 years.
Research costs are expensed when incurred. In compliance with IAS 38, development costs are capitalized if all of the following criteria are met:
The projects are clearly defined.
The Company is able to reliably measure expenditures incurred by each project during its development.
The Company is able to demonstrate the technical feasibility of the project.
The Company has the financial and technical resources available to achieve the project.
The Company can demonstrate its intention to complete, to use or to commercialize products resulting from the project.
The Company is able to demonstrate the existence of a market for the output of the intangible asset, or, if it is used internally, the usefulness of the intangible asset.
When capitalized, development costs are carried at cost, less any accumulated amortization and impairment losses. Amortization begins when the project is complete and available for use. It is amortized over the period of expected future benefit, which is generally between 3 and 5 years.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForResearchAndDevelopmentExpenseExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-512": { "value": "\nInventories are valued at the lower of cost and net realizable value. Cost is determined using the first-in first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses. Inventories comprise semi-finished, finished products and the Company\u2019s Fast4Ward\u00ae Multi Purpose Floater (\u2019MPF\u2019) valued at cost, including attributable overheads and spare parts stated at the lower of purchase price or market value. MPFs under construction are accounted for as inventories until they are allocated to awarded projects and then reclassified from inventories to contract assets.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore all classified as current. Trade receivables are recognized initially at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost, using the effective interest method. The Company applies the simplified approach in measuring expected credit losses for trade receivables.
\nOther receivables are recognized initially at fair value and subsequently measured at amortized cost, using the effective interest rate method. Interest income, together with gains and losses when the receivables are derecognized or impaired, is recognized in the income statement.
Trade receivables are amounts due from customers for goods sold or services performed in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore all classified as current. Trade receivables are recognized initially at fair value. The Company holds the trade receivables with the objective to collect the contractual cash flows and therefore measures them subsequently at amortized cost, using the effective interest method. The Company applies the simplified approach in measuring expected credit losses for trade receivables.
\nFor finance lease receivables, the Company assumes that the credit risk has not increased significantly since the initial recognition if the finance lease receivable is determined to have a low credit risk at the reporting date (i.e. the Company applies the low credit risk simplification). As a result, if the finance lease receivable is determined to have a low credit risk at the reporting date, the Company recognizes a 12-month expected credit loss.
Cash and cash equivalents consist of cash in bank and in hand fulfilling the following criteria: a maturity of usually less than three months, highly liquid, a fixed exchange value and an extremely low risk of loss of value.
Ordinary shares and protective preference shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.
The tax expense for the period comprises current and deferred tax. Tax is recognized in the income statement, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the associated tax is also recognized in other comprehensive income or directly in equity.
\nIncome tax expenses comprise corporate income tax due in countries of incorporation of the Company\u2019s main subsidiaries and levied on actual profits. Income tax expense also includes the corporate income taxes which are levied on a deemed profit basis and revenue basis (withholding taxes in the scope of IAS 12). This presentation adequately reflects the Company\u2019s global tax burden.
Deferred tax is recognized using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates and laws that have been enacted or substantially enacted by the statement of financial position date and are expected to apply when the related deferred tax asset is realized or the deferred tax liability is settled.
\nDeferred tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. Deferred tax is provided for on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.
Pension obligations: the Company operates various pension schemes that are generally funded through payments determined by periodic actuarial calculations to insurance companies or are defined as multi-employer plans. The Company has both defined benefit and defined contribution plans:
A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.
A defined contribution plan is a pension plan under which the Company pays fixed contributions to public or private pension insurance plans on a mandatory, contractual or voluntary basis. The Company has no legal or constructive obligation to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. The contributions to defined contribution plans and multi-employer plans are recognized as an expense in the income statement as incurred.
The liability recognized in the statement of financial position in respect of defined benefit pension plans is the present value of the defined benefit obligation at the statement of financial position date, less the fair value of the plan assets, together with adjustments for unrecognized actuarial gains and losses and past service costs. The defined benefit obligation is calculated periodically by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates on high-quality corporate bonds that have maturity dates approximating to the terms of the Company\u2019s obligations.
\nThe expense recognized within the EBIT comprises the current service cost and the effects of any change, reduction or winding up of the plan. The accretion impact on actuarial debt and interest income on plan assets are recognized under the net financing cost.
\nCumulative actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized immediately in comprehensive income.
\nShare-based payments: within the Company there are four types of share-based payment plans that qualify as equity settled:
Restricted Share Unit (RSU);
Short-term Incentive Program of Bonus Shares and Matching Shares;
Value Creation Stake (VCS); and
Ownership Shares.
The estimated total amount to be expensed over the vesting period related to share-based payments is determined by (i) reference to the fair value of the instruments determined at the grant date, and (ii) non-market vesting conditions included in assumptions about the number of shares that the employee will ultimately receive. Main assumptions for estimates are revised at statement of financial position date. Total cost for the period is charged or credited to the income statement, with a corresponding adjustment to equity.
\nWhen equity instruments vest, the Company issues new shares, unless the Company has Treasury shares in stock.
\nAny cancellation of matching shares will lead to an accelerated expense recognition of the total fair value, with a corresponding adjustment to equity.
Share-based payments: within the Company there are four types of share-based payment plans that qualify as equity settled:
Restricted Share Unit (RSU);
Short-term Incentive Program of Bonus Shares and Matching Shares;
Value Creation Stake (VCS); and
Ownership Shares.
The estimated total amount to be expensed over the vesting period related to share-based payments is determined by (i) reference to the fair value of the instruments determined at the grant date, and (ii) non-market vesting conditions included in assumptions about the number of shares that the employee will ultimately receive. Main assumptions for estimates are revised at statement of financial position date. Total cost for the period is charged or credited to the income statement, with a corresponding adjustment to equity.
\nWhen equity instruments vest, the Company issues new shares, unless the Company has Treasury shares in stock.
\nAny cancellation of matching shares will lead to an accelerated expense recognition of the total fair value, with a corresponding adjustment to equity.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-540": { "value": "\nTrade payables are amounts due to suppliers for goods sold or services received in the ordinary course of business. They are generally due for settlement within a maximum of 90 days and are therefore classified as current. Trade payables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method.
The Company\u2019s reportable operating segments as defined by IFRS 8 \u2018Operating segments\u2019 are:
Lease and Operate;
Turnkey;
Other.
Strictly for the purposes of this note, the operating segments are measured under Directional reporting, which in essence follows IFRS, but with two main exceptions:
All lease contracts are classified and accounted for as if they were operating lease contracts under IFRS 16. Some lease and operate contracts may provide for defined invoicing (\u2018upfront payments\u2019) to the client occurring during the construction phase or at first-oil (beginning of the lease phase), to cover specific construction work and/or services performed during the construction phase. These \u2019upfront payments\u2019 are recognized as revenues and the costs associated with the construction work and/or services are recognized as \u2019Cost of sales\u2019 with no margin during the construction. As a consequence, these costs are not capitalized in the gross value of the assets under construction.\u00a0
All investees related to Lease and Operate contracts are accounted for at the Company\u2019s share as if they were classified as joint operations under IFRS 11, whereby all lines of the income statement, statement of financial position and cash flow statement are consolidated, based on the Company\u2019s percentage of ownership (hereafter referred to as \u2019percentage of ownership consolidation\u2019). All joint ventures and associates within the Turnkey segment (such as yards and installation vessel) remain equity accounted. Therefore, when the Company has partners in the lessor-related SPV owning the lease contract with the client, the Company recognizes revenue as well as margin associated with the EPC works to the extent of the partners\u2019 shares in the lessor SPV. In situations where the Company reduces its percentage of ownership after award date of the contract, due to a disposal of shares to a partner, the relevant portion of the assets and liabilities already accounted at transaction date are derecognized. This derecognition is accounted against (i) the recognition of the fair value of any consideration received and associated revenue and (ii) the recognition of cost of sales,\u00a0from contract award to transaction date and to the extent of the ownership divested.
All deferred tax impacts generated by intragroup elimination are not recognized.
In 2023, all other accounting principles remain unchanged compared with applicable IFRS standards.
\nThe above differences to the consolidated financial statements between Directional reporting and IFRS are highlighted in the reconciliations provided in this note on revenue, gross margin, EBIT and EBITDA as required by IFRS 8 \u2019Operating segments\u2019. The Company also provides the reconciliation of the statement of financial position and cash flow statement under IFRS and Directional reporting. The statement of financial position and the cash flow statement under Directional reporting are evaluated regularly by the Management Board in assessing the financial position and cash generation of the Company. The Company believes that these disclosures should enable users of its financial statements to better evaluate the nature and financial effects of the business activities in which it engages, while facilitating the understanding of the Directional reporting by providing a straightforward reconciliation with IFRS for all key financial metrics.
\nThe Directional Lease and Operate Revenue and Directional EBITDA increased versus the year-ago period, mainly driven by (i) FPSO Prosperity joining the fleet upon successful delivery of the EPCI project during the last quarter 2023 (ii) an increase in reimbursable scopes and an improved performance of the fleet, partially offset by (iii) FPSO Capixaba, which finished production in 2022 (no contribution to Directional revenue in 2023, now in the decommissioning phase).
\nThe Directional Turnkey Revenue and Directional EBITDA increased versus the year-ago period. This increase was mainly driven by the sale of FPSO Liza Unity in 2023. Directional Turnkey revenue was additionally positively impacted by (i) the awarded limited scope for the FPSO for the Whiptail development project and (ii) additional variation orders on FPSO Prosperity (including the variation orders for the compensation of costs incurred by the Company after topside readiness, before the commencement of the charter at first-oil). The increase in Directional Turnkey revenue was partially offset by (i) the partial divestment on FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o in 2022, which allowed the Company to recognize revenue for all the EPCI related work performed on these projects up to divestment date, to the extent of the partners\u2019 ownership in lessor-related SPVs, (ii) the completion of FPSO Liza Unity project in February 2022, and (iii) a reduced level of progress during the period, compared with the year-ago period, on FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o, consistent with the commencement of topsides\u2019 integration.
\n| \u00a0 | Lease and Operate | Turnkey | Reported | Other | Total Directional reporting |
|---|---|---|---|---|---|
Directional revenue | 1,954 | 2,578 | 4,532 | - | 4,532 |
Directional Cost of sales | (1,285) | (2,185) | (3,469) | - | (3,469) |
Directional Gross margin | 669 | 394 | 1,063 | - | 1,062 |
Directional Other operating income/expense | 0 | 0 | 0 | (11) | (11) |
Directional Selling and marketing expenses | (0) | (22) | (22) | (0) | (22) |
Directional General and administrative expenses | (30) | (62) | (92) | (91) | (183) |
Directional Research and development expenses | (7) | (30) | (37) | (0) | (37) |
Directional Net impairment gains/(losses) on financial and contract assets | 1 | (21) | (20) | (2) | (22) |
Directional Operating profit/(loss) (EBIT) | 633 | 259 | 892 | (104) | 788 |
Directional Net financing costs | \u00a0 | \u00a0 | \u00a0 | \u00a0 | (238) |
Directional Share of profit of equity-accounted investees | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 4 |
Directional Income tax expense | \u00a0 | \u00a0 | \u00a0 | \u00a0 | (30) |
Directional Profit/(Loss) | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 524 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Directional Operating profit/(loss) (EBIT) | 633 | 259 | 892 | (104) | 788 |
Directional Depreciation, amortization and impairment | 492 | 37 | 529 | 3 | 532 |
Directional EBITDA | 1,124 | 296 | 1,421 | (101) | 1,319 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Other segment information : | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Directional Impairment charge/(reversal) | 6 | - | 6 | - | 6 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
| \u00a0 | Reported segments under Directional reporting | Impact of lease accounting treatment | Impact of consolidation methods | Total Consolidated IFRS |
|---|---|---|---|---|
Revenue | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 1,954 | (529) | 139 | 1,563 |
Turnkey | 2,578 | 707 | 115 | 3,400 |
Total revenue | 4,532 | 177 | 253 | 4,963 |
Gross margin | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 669 | (94) | 97 | 671 |
Turnkey | 394 | 290 | 64 | 748 |
Total gross margin | 1,063 | 196 | 161 | 1,420 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EBITDA | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 1,124 | (527) | 98 | 695 |
Turnkey | 296 | 284 | 65 | 646 |
Other | (101) | - | (0) | (101) |
Total EBITDA | 1,319 | (243) | 163 | 1,239 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EBIT | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 633 | (91) | 96 | 638 |
Turnkey | 259 | 287 | 66 | 612 |
Other | (104) | - | 0 | (104) |
Total EBIT | 788 | 196 | 162 | 1,145 |
Net financing costs | (238) | (218) | (119) | (575) |
Share of profit of equity-accounted investees | 4 | - | 15 | 19 |
Income tax expense | (30) | (2) | 57 | 25 |
Profit/(loss) | 524 | (24) | 114 | 614 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Impairment charge/(reversal) | 6 | 0 | 2 | 8 |
The reconciliation from Directional reporting to IFRS comprises two main steps:
In the first step, those lease contracts that are classified and accounted for as finance lease contracts under IFRS are restated from an operating lease accounting treatment to a finance lease accounting treatment.
In the second step, the consolidation method is changed (i) from percentage of ownership consolidation to full consolidation for those Lease and Operate-related subsidiaries over which the Company has control, and (ii) from percentage of ownership consolidation to the equity method for those Lease and Operate-related investees that are classified as joint ventures, in accordance with IFRS 11.
For the Lease and Operate segment, the restatement from an operating to a finance lease accounting treatment has the main following impacts for the 2023 period:
Revenue reduced by US$(529) million. During the lease period, under IFRS, the revenue from finance leases is limited to that portion of charter rates that is recognized as interest, using the interest effective method. Under Directional reporting, in accordance with the operating lease treatment, the full charter rate is recognized as revenue, on a straight-line basis. Directional Lease and Operate EBITDA is similarly impacted (reduction of US$(527) million) for the same reasons.
Gross margin is reduced by US$(94) million. Under IFRS, gross margin and EBIT from finance leases equal the recognized revenue, following the declining profile of the interest recognized using the effective interest method. On the other side, under the operating lease treatment applied under Directional, the gross margin and the EBIT correspond to the revenue, less depreciation of the recognized property, plant and equipment, both accounted for on a straight-line basis over the lease period.
For the Turnkey segment, the restatement from operating to finance lease accounting treatment had the following impacts over the 2023 period:
Revenue and gross margin increased by US$707 million and US$290 million respectively. This primarily resulted from the two following opposite effects:
An increase, mainly due to the accounting treatment of the Company\u2019s FPSOs, which were under construction during the period (FPSO Prosperity, FPSO Sepetiba, FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o, FPSO ONE GUYANA) and accounted for as finance leases under IFRS. Under IFRS, a finance lease is considered as if it were a sale of the asset, leading to recognition of revenue during the construction of the asset corresponding to the present value of the future lease payments. This (mostly not-yet-cash) revenue is recognized within the Turnkey segment.
Partially offset by the FPSO Liza Unity sale, where the consideration received in the amount of US$1,259 million was recognized as Directional Revenue and the net book value in the amount of US$902 million was derecognized as Directional cost of sales, generating a positive impact in Directional profit or loss in the amount of US$357 million under Directional reporting. Under IFRS reporting, the consideration received was already included in the finance lease receivable and led to a derecognition of the finance lease receivable against the payment received by the Company, with no impact on the net result.
The impact on Turnkey EBIT and EBITDA is largely in line with the impact on gross margin.
Net financing costs increased by US$(218) million. During construction, interest on project loans are expensed under IFRS while they are capitalized in the vessel under construction under Directional. As a result of the above elements, restatement from operating to finance lease accounting treatment results in an aggregate decrease of net profit of US$(24) million under IFRS when compared with Directional reporting.
\nThe impact of consolidation methods in the above table describes the net impact from:
Percentage of ownership consolidation to full consolidation for those Lease and Operate-related subsidiaries over which the Company has control, resulting in an increase of revenue, gross margin, EBIT and EBITDA;
Percentage of ownership consolidation to the equity accounting method for those Lease and Operate-related investees that are classified as joint ventures, in accordance with IFRS 11, resulting in a decrease of revenue, gross margin, EBIT and EBITDA.
For the Lease and Operate segment, the impact of the changes in consolidation methods results in a net increase of revenue, gross margin, EBIT, EBITDA and net profit under IFRS when compared with Directional reporting. This reflects the fact that the majority of the Company\u2019s FPSOs that are leased under finance lease contracts, are owned by subsidiaries over which the Company has control and which are consolidated using the full consolidation method under IFRS.
\nFor the Turnkey segment, the impact of the changes in consolidation methods results in a net increase of revenue, gross margin, EBIT and EBITDA. This reflects the fact that under IFRS reporting the Company recognizes the full revenue, gross margin, EBIT and EBITDA in the subsidiaries that are not totally owned by the Company, but over which the Company has the control.
\nAs a result of the above elements, the restatement of the impact of consolidation methods results in an aggregate increase of net profit of US$114 million under IFRS when compared with Directional reporting.
\n| \u00a0 | Lease and Operate | Turnkey | Reported | Other | Total Directional reporting |
|---|---|---|---|---|---|
Directional revenue | 1,763 | 1,525 | 3,288 | - | 3,288 |
Directional Cost of sales | (1,272) | (1,452) | (2,723) | - | (2,724) |
Directional Gross margin | 492 | 73 | 565 | - | 564 |
Directional Other operating income/expense | 16 | 8 | 24 | (3) | 20 |
Directional Selling and marketing expenses | 0 | (16) | (16) | (0) | (16) |
Directional General and administrative expenses | (28) | (50) | (78) | (75) | (154) |
Directional Research and development expenses | (5) | (30) | (35) | - | (35) |
Directional Net impairment gains/(losses) on financial and contract assets | 11 | 2 | 13 | (1) | 12 |
Directional Operating profit/(loss) (EBIT) | 484 | (12) | 471 | (80) | 392 |
Directional Net financing costs | \u00a0 | \u00a0 | \u00a0 | \u00a0 | (188) |
Directional Share of profit of equity-accounted investees | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 0 |
Directional Income tax expense | \u00a0 | \u00a0 | \u00a0 | \u00a0 | (88) |
Directional Profit/(Loss) | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 115 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Directional Operating profit/(loss) (EBIT) | 484 | (12) | 471 | (80) | 392 |
Directional Depreciation, amortization and impairment | 596 | 19 | 615 | 3 | 618 |
Directional EBITDA | 1,080 | 7 | 1,087 | (77) | 1,010 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Other segment information | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Directional Impairment charge/(reversal) | 109 | 1 | 110 | 0 | 110 |
| \u00a0 | Reported segments under Directional reporting | Impact of lease accounting treatment | Impact of consolidation methods | Total Consolidated IFRS |
|---|---|---|---|---|
Revenue | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 1,763 | (482) | 133 | 1,414 |
Turnkey | 1,525 | 1,854 | 120 | 3,499 |
Total revenue | 3,288 | 1,372 | 253 | 4,913 |
Gross margin | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 492 | (52) | 111 | 551 |
Turnkey | 73 | 500 | 59 | 632 |
Total gross margin | 565 | 449 | 169 | 1,182 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EBITDA | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 1,080 | (479) | 118 | 719 |
Turnkey | 7 | 506 | 57 | 569 |
Other | (77) | - | (2) | (80) |
Total EBITDA | 1,010 | 26 | 173 | 1,209 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EBIT | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Lease and Operate | 484 | (42) | 120 | 562 |
Turnkey | (12) | 494 | 59 | 540 |
Other | (80) | - | (2) | (82) |
Total EBIT | 392 | 451 | 177 | 1,020 |
Net financing costs | (188) | (91) | (93) | (373) |
Share of profit of equity-accounted investees | 0 | (0) | 12 | 12 |
Income tax expense | (88) | (14) | (2) | (104) |
Profit/(loss) | 115 | 346 | 94 | 555 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Impairment charge/(reversal) | 110 | 12 | (3) | 119 |
| \u00a0 | Reported under Directional reporting | Impact of lease accounting treatment | Impact of consolidation methods | Total Consolidated IFRS |
|---|---|---|---|---|
ASSETS | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Property, plant and equipment and Intangible assets1 | 8,5152 | (7,977) | (0) | 538 |
Investment in associates and joint ventures | 10 | - | 278 | 288 |
Finance lease receivables | 0 | 5,373 | 1,428 | 6,801 |
Other financial assets | 2443 | (167) | 18 | 95 |
Contract assets | 282 | 4,706 | 2,146 | 7,134 |
Trade receivables and other assets | 1,275 | 40 | 46 | 1,361 |
Derivative financial instruments | 326 | - | 90 | 416 |
Cash and cash equivalents | 563 | - | (20) | 543 |
Assets held for sale | 0 | - | - | 0 |
Total Assets | 11,214 | 1,975 | 3,986 | 17,176 |
EQUITY AND LIABILITIES | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Equity attributable to parent company | 1,450 | 2,280 | 3 | 3,733 |
Non-controlling interests | (2) | 13 | 1,786 | 1,797 |
Equity | 1,448 | 2,293 | 1,790 | 5,530 |
Borrowings and lease liabilities | 7,2184 | - | 2,072 | 9,290 |
Provisions | 682 | (188) | 92 | 586 |
Trade payable and other liabilities | 1,570 | 56 | 19 | 1,646 |
Deferred income | 211 | (187) | 2 | 27 |
Derivative financial instruments | 86 | - | 11 | 97 |
Total Equity and Liabilities | 11,214 | 1,975 | 3,986 | 17,176 |
Consistent with the reconciliation of the key income statement line items, the above table details:
The restatement from the operating lease accounting treatment to the finance lease accounting treatment for those lease contracts that are classified and accounted for as finance lease contracts under IFRS; and
The change from percentage of ownership consolidation to either full consolidation or equity, accounting for investees related to Lease and Operate contracts.
For the statement of financial position, the main adjustments from Directional reporting to IFRS as of December 31, 2023 are:
For those lease contracts that are classified and accounted for as finance lease contracts under IFRS, derecognition of property, plant and equipment recognized under Directional reporting (US$(7,977) million) and subsequent recognition of (i) finance lease receivables (US$5,373 million) and (ii) contract assets (US$4,706 million) for those assets still under construction.
For operating lease contracts with non-linear bareboat day rates, a deferred income provision is recognized to show linear revenues under Directional reporting. The part of the balance (US$(187) million) is derecognized for the contracts that are classified and accounted for as finance lease contracts under IFRS.
Restatement of the provisions for demobilization and associated non-current receivable assets, mainly impacting other financial assets (US$(167) million) and provisions (US$(188) million).
As a result, the restatement from operating to finance lease accounting treatment gives rise to an aggregate increase of equity of US$2,293 million under IFRS when compared with Directional reporting. This primarily reflects the earlier margin recognition on finance lease contracts under IFRS when compared with Directional reporting.
\nThe above table of statement of financial position also describes the net impact of moving from percentage of ownership consolidation to either full consolidation, for those lease related investees in which the Company has control, or equity accounting, for those investees that are classified as joint ventures under IFRS 11. The two main impacts are:
Full consolidation of asset-specific entities that mainly comprise finance lease receivables (representing the net present value of the future lease payments to be received) and non-recourse project debts.
Derecognition of the individual line items from the statement of financial positions for those entities that are equity-accounted under IFRS, rolling up in the line item \u2019Investment in associates and joint ventures\u2019.
As a result, the restatement of the impact of consolidation methods gives rise to an aggregate increase of equity of US$1,790 million\u00a0under IFRS when compared with Directional reporting.
\n| \u00a0 | Reported under Directional reporting | Impact of lease accounting treatment | Impact of consolidation methods | Total Consolidated IFRS |
|---|---|---|---|---|
EBITDA | 1,319 | (243) | 163 | 1,239 |
Adjustments for non-cash and investing items | 972 | (859) | 29 | 142 |
Changes in operating assets and liabilities | (571) | (2,050) | (572) | (3,193) |
Reimbursement finance lease assets | 0 | 1,718 | 24 | 1,743 |
Income taxes paid | (104) | (0) | 4 | (101) |
Net cash flows from (used in) operating activities | 1,616 | (1,433) | (352) | (169) |
Capital expenditures | (1,658) | 1,486 | (1) | (173) |
Other investing activities | 19 | 1 | 11 | 31 |
Net cash flows from (used in) investing activities | (1,639) | 1,487 | 10 | (142) |
Equity payment from/(repayment to) partners | - | - | 235 | 235 |
Additions and repayments of borrowings and lease liabilities | 287 | 0 | 165 | 452 |
Dividends paid to shareholders and non-controlling interests | (197) | - | (82) | (279) |
Interest paid | (248) | (54) | (64) | (366) |
Share repurchase program | (5) | - | - | (5) |
Proceeds from settlement of interest rate swaps | 155 | - | 0 | 155 |
Net cash flows from (used in) financing activities | (29) | (54) | 254 | 171 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Net cash and cash equivalents as at 1 January | 615 | - | 68 | 683 |
Net increase/(decrease) in net cash and cash equivalents | (52) | (0) | (89) | (141) |
Foreign currency variations | 0 | 0 | 0 | 1 |
Net cash and cash equivalents as at 31 December | 563 | - | (20) | 543 |
At net cash level, the difference in lease accounting treatment is neutral. The impact of the different lease accounting treatment under Directional reporting versus IFRS is limited to reclassifications between cash-flow activities.
\nFollowing the announcement that ExxonMobil Guyana Limited exercised the purchase option for FPSO Liza Unity (refer to note 4.3.1 Financial Highlights), the Company received the proceeds of the purchase in the amount of US$1,259 million, which is presented under IFRS reporting as inflow within cash flows from operating activities in the line \u2018Reimbursement finance lease assets\u2019. Under Directional, the proceeds are also presented within cash flows from operating activities under EBITDA which should be considered together with \u2019Adjustments for non-cash and investing items\u2019 where the net book value of the FPSO Liza Unity in the amount of US$902 million recognized as cost of sales was cancelled.
\nA large part of the capital expenditures (US$1,486 million) are reclassified from investing activities under Directional to net cash flows from operating activity under IFRS, where finance lease contracts are accounted for as construction contracts. Furthermore, the financing costs incurred during the construction of the FPSOs, which are capitalized under Directional as part of asset under construction (and therefore presented in investing activities), are reclassified to financing activities under IFRS.
\nThe impact of the change of lease accounting treatment at EBITDA level is described in further detail in the earlier reconciliation of the Company\u2019s income statement.
\nThe impact of the consolidation method on the cash flow statement is in line with the impact described for the statement of financial position. The full consolidation of asset specific entities, mainly comprising finance lease receivables and the related non-recourse project debts, results in increased additions and repayments of borrowings under IFRS versus Directional.
\n| \u00a0 | Reported under Directional reporting | Impact of lease accounting treatment | Impact of consolidation methods | Total Consolidated IFRS |
|---|---|---|---|---|
ASSETS | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Property, plant and equipment and Intangible assets1 | 8,1962 | (7,763) | (2) | 432 |
Investment in associates and joint ventures | 6 | 0 | 284 | 289 |
Finance lease receivables | 0 | 5,739 | 1,454 | 7,193 |
Other financial assets | 2943 | (217) | 13 | 90 |
Contract assets | 170 | 3,927 | 1,583 | 5,681 |
Trade receivables and other assets | 964 | (1) | (52) | 912 |
Derivative financial instruments | 524 | - | 86 | 610 |
Cash and cash equivalents | 615 | - | 68 | 683 |
Assets held for sale | 0 | 0 | (0) | 0 |
Total Assets | 10,769 | 1,685 | 3,434 | 15,889 |
EQUITY AND LIABILITIES | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Equity attributable to parent company | 1,080 | 2,313 | 4 | 3,397 |
Non-controlling interests | (2) | 4 | 1,515 | 1,517 |
Equity | 1,078 | 2,317 | 1,519 | 4,914 |
Borrowings and lease liabilities | 6,6974 | - | 1,867 | 8,564 |
Provisions | 644 | (219) | 62 | 487 |
Trade payable and other liabilities | 1,868 | (155) | (11) | 1,703 |
Deferred income | 265 | (258) | (3) | 4 |
Derivative financial instruments | 217 | - | 0 | 217 |
Total Equity and Liabilities | 10,769 | 1,685 | 3,434 | 15,889 |
| \u00a0 | Reported under Directional reporting | Impact of lease accounting treatment | Impact of consolidation methods | Total Consolidated IFRS |
|---|---|---|---|---|
EBITDA | 1,010 | 26 | 173 | 1,209 |
Adjustments for non-cash and investing items | 54 | 67 | 43 | 163 |
Changes in operating assets and liabilities | (164) | (1,755) | (846) | (2,764) |
Reimbursement finance lease assets | (0) | 421 | 18 | 439 |
Income taxes paid | (100) | 0 | 4 | (96) |
Net cash flows from (used in) operating activities | 799 | (1,242) | (607) | (1,049) |
Capital expenditures | (1,342) | 1,260 | (0) | (82) |
Other investing activities | (257) | 1 | 406 | 149 |
Net cash flows from (used in) investing activities | (1,600) | 1,261 | 406 | 67 |
Equity payment from/repayment to partners | - | - | 358 | 358 |
Additions and repayments of borrowings and lease liabilities | 717 | (0) | 40 | 757 |
Dividends paid to shareholders and non-controlling interests | (178) | - | (39) | (217) |
Interest paid | (181) | (20) | (52) | (252) |
Share repurchase program | - | - | - | - |
Payments to non-controlling interests for change in ownership | 0 | 0 | (1) | (0) |
Net cash flows from (used in) financing activities | 359 | (20) | 306 | 646 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Net cash and cash equivalents as at 1 January | 1,059 | - | (38) | 1,021 |
Net increase/(decrease) in net cash and cash equivalents | (441) | 0 | 106 | (335) |
Foreign currency variations | (3) | (0) | 0 | (3) |
Net cash and cash equivalents as at 31 December | 615 | - | 68 | 683 |
| \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|
Within one year | 52 | 61 |
Between 1 and 2 years | 44 | 46 |
Between 2 and 5 years | 59 | 87 |
More than 5 years | 56 | 70 |
Balance at 31 December | 211 | 265 |
The Directional deferred income is mainly related to the revenue of those lease contracts, which include a decreasing day-rate schedule. As revenue from lease contract with customers is recognized in the income statement on a straight-line basis with reference to IFRS 16 \u2018Leases\u2019, the difference between the yearly straight-line revenue and the contractual day rates is included as deferred income. The deferral will be released through the income statement over the remaining duration of the relevant lease contracts.
The classification by country is determined by the final destination of the product for both revenues and non-current assets.
\nThe revenue by country is analyzed as follows:
\n| \u00a0 | Directional | IFRS | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Lease and Operate | Turnkey | Reported | Lease and Operate | Turnkey | Reported |
Brazil | 832 | 572 | 1,405 | 940 | 1,505 | 2,445 |
Guyana | 688 | 1,826 | 2,514 | 485 | 1,694 | 2,179 |
Angola | 247 | 19 | 266 | 4 | 38 | 43 |
Equatorial Guinea | 108 | 1 | 109 | 104 | 0 | 104 |
Malaysia | 49 | 3 | 51 | 0 | 5 | 6 |
The United States of America | 28 | 2 | 30 | 28 | 2 | 30 |
France | - | 43 | 43 | - | 43 | 43 |
Nigeria | - | 22 | 22 | - | 22 | 22 |
Norway | - | 25 | 25 | - | 25 | 25 |
Other | 2 | 65 | 67 | 2 | 65 | 67 |
Total revenue | 1,954 | 2,578 | 4,532 | 1,563 | 3,400 | 4,963 |
| \u00a0 | Directional | IFRS | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Lease and Operate | Turnkey | Reported | Lease and Operate | Turnkey | Reported |
Brazil | 807 | 1,063 | 1,871 | 922 | 2,113 | 3,035 |
Guyana | 541 | 338 | 878 | 360 | 1,256 | 1,615 |
Angola | 230 | 6 | 236 | 3 | 9 | 12 |
Equatorial Guinea | 101 | 1 | 101 | 92 | (0) | 92 |
Malaysia | 47 | 3 | 50 | 0 | 5 | 5 |
The United States of America | 33 | 1 | 34 | 33 | 1 | 34 |
France | - | 25 | 25 | - | 25 | 25 |
Mozambique | - | 19 | 19 | - | 19 | 19 |
Nigeria | - | 14 | 14 | - | 14 | 14 |
Norway | - | 18 | 18 | - | 18 | 18 |
Other | 4 | 39 | 43 | 4 | 39 | 43 |
Total revenue | 1,763 | 1,525 | 3,288 | 1,414 | 3,499 | 4,913 |
The non-current assets by country are analyzed as follows:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||
|---|---|---|---|---|
| \u00a0 | IFRS | DIR | IFRS | DIR |
Brazil | 5,276 | 6,115 | 5,331 | 5,351 |
Guyana | 1,753 | 2,468 | 628 | 2,857 |
Angola | 252 | 132 | 242 | 178 |
Switzerland | 93 | 93 | 264 | 270 |
Monaco | 77 | 77 | 25 | 25 |
Malaysia | 64 | 13 | 79 | 9 |
Equatorial Guinea | 41 | 70 | 57 | 93 |
The United States of America | 19 | 19 | 27 | 27 |
France | 12 | 12 | 12 | 12 |
Netherlands | 6 | 6 | 13 | 13 |
Other | 163 | 138 | 140 | 115 |
Total | 7,757 | 9,143 | 6,818 | 8,951 |
Under Directional, two customers each represent more than 10% of the consolidated revenue. Total revenue from these two major customers amounts to US$3,979 million (US$2,643 million and US$1,335 million, respectively). In 2022, the revenue related to the two major customers was US$2,825 million (US$1,823 million and US$1,002 million, respectively). In both 2023 and 2022, the revenue of these major customers were mainly related to the Lease and Operate segment.
\nUnder IFRS, two customers each represent more than 10% of the consolidated revenue. Total revenue from these major customers amounts to US$4,598 million (US$2,213 million and US$2,386 million respectively). In 2022, two customers accounted for more than 10% of the consolidated revenue (US$4,635 million), US$2,988 and US$1,647 million respectively.
The Company\u2019s revenue mainly originates from construction contracts and lease and operate contracts. Revenue originating from construction contracts is presented in the Turnkey segment while revenue from lease and operate contracts is presented in the Lease and Operate segment. Around 46% of the Company\u2019s 2023 Lease and Operate revenue is made of charter rates related to lease contracts, while the remaining amount originates from operating contracts. The Company recognizes most of its revenue (i.e. more than 97%) over time.
\nThe Company\u2019s policy regarding revenue recognition is described in further detail in note 4.2.7 B. Critical Accounting Policies \u2212 (d) Revenue. For the disaggregation of total revenue by country and by segment, please refer to Geographical Information under note 4.3.2 Operating Segments and Directional Reporting.
\nThe Company\u2019s construction contracts can last for several years, depending on the type of product, scope and complexity of the project, while the Company\u2019s Lease and Operate contracts are generally multiple-year contracts. As a result, the Company has (partially) outstanding performance obligations to its clients (unsatisfied performance obligations) at December 31, 2023. These unsatisfied performance obligations relate to:
Ongoing construction contracts, including the construction of vessels under finance leases that still need to be completed;
Ongoing multiple-year operating contracts. Note that for this specific disclosure on unsatisfied performance obligations, the lease component of the Lease and Operate contracts is excluded (this component being described in further detail in notes 4.3.13 Property, Plant and Equipment and 4.3.15 Finance Lease Receivables). As noted, some contracts include (performance) bonuses when earned or penalties incurred under the Company\u2019s Lease and Operate contracts. The net amount of performance-related payments for 2023 increased to US$132 million (2022: US$(3) million). This increase is mostly related to the shutdown of FPSO Cidade de Anchieta in the year-ago period.
The following table presents the unsatisfied performance obligations as at December 31, 2023 (in billions of US$):
\nUnsatisfied performance obligations related to: | 2023 | 2022 |
|---|---|---|
- constructions contracts including finance leases | 2.4 | 5.8 |
- operating contracts | 13.4 | 10.6 |
Total | 15.8 | 16.4 |
The unsatisfied performance obligations for the committed construction contracts mostly relate to four major construction FPSO contracts. Revenue related to these construction contracts is expected to be recognized over the coming two years in line with the construction progress on these projects.
\nThe unsatisfied performance obligations for the operating contracts relate to i) the Company\u2019s vessels leased to clients where the Company is the operator (both operating and finance lease contracts) and ii) one operating contract for operating services on a vessel that is owned by the client. The operating contracts end between 2024 and 2050. The Company will recognize the unsatisfied performance obligation over this period in line with the work performed.
\nThe Company can agree on various payment arrangements which generally reflect the progress of delivered performance obligations. However, if the Company\u2019s delivered performance obligation exceeds installments invoiced to the client, a contract asset is recognized. If the installments invoiced to the client exceed the work performed, a contract liability is recognized.
\nAs a result of various commercial discussions with clients, the Company recognized revenue amounting to US$7 million in 2023 (2022: US$27 million) originating from performance obligations satisfied in previous periods.
\nLease revenue recognized for leases where the Company is the lessor, for both operating and finance leases, relates to fixed and variable lease payments. Most of the Company\u2019s revenue from lease contracts is based on fixed day-rates. To the extent that lease payments are dependent on an index or a rate, they are excluded from the initial recognition of the lease payments receivable. The impact related to a change in index or a rate is recognized in the consolidated income statement when a change occurs.
\nThe table below sets out the contract balances for the years 2023 and 2022:
\n| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Current contract liability | 74 | 42 | |
Non-current contract liability | 22 | - | |
Total contract liabilities | \u00a0 | 97 | 42 |
Current contract assets | \u00a0 | 7,134 | 5,681 |
Total contract assets | \u00a0 | 7,134 | 5,681 |
During the period ended December 31, 2023, the Company completed construction of FPSO Prosperity, marking first oil date on November 14, 2023. As of this date, the lease of FPSO Prosperity commenced and the contract asset related to this unit was reclassified to finance lease receivables (refer to notes 4.3.1 Financial Highlights and 4.3.15 Finance Lease Receivables).
\nAs a result, the contract asset balance as at December 31, 2023 of US$7,134 million (2022: US$5,681 million) increased in relation to progress made during the period on the construction of FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o, FPSO Sepetiba, FPSO ONE GUYANA and initial limited scope for the FPSO for the Whiptail development project, partly offset by the finalization of the FPSO Prosperity construction.
\nRegarding information about expected credit losses recognized for contract assets, refer to note 4.3.27 Financial Instruments \u2013 Fair Values and Risk Management.
\nCurrent contract liabilities of US$74\u00a0million (2022: US$42 million) comprise the amounts of those individual contracts for which the total installments invoiced exceed the revenue recognized over time. Contract liabilities are reported in trade an other payables (see note 4.3.25 Trade and Other Payables).
\nAs at December 31, 2023, current contract liabilities relate to one of the Company\u2019s renewable projects and other minor construction projects.
\nNon-current contract liabilities of US$22 million (2022: nil) have been recognized as at December 31, 2023, following the reassessment of the demobilization performance obligations and associated remeasurement of future demobilization costs in finance lease contracts. This reassessment triggered an increase in the contract liability for demobilization costs. Therefore, as explained in B. Critical Accounting Policies \u2013 (f) Demobilization obligations, these future obligations have been recognized during the period through contract liability, for the present value of the change.
\nThe Company recognized revenue of US$31 million during the period, which was included in the contract liabilities as per December 31, 2022.
The Company\u2019s revenue mainly originates from construction contracts and lease and operate contracts. Revenue originating from construction contracts is presented in the Turnkey segment while revenue from lease and operate contracts is presented in the Lease and Operate segment. Around 46% of the Company\u2019s 2023 Lease and Operate revenue is made of charter rates related to lease contracts, while the remaining amount originates from operating contracts. The Company recognizes most of its revenue (i.e. more than 97%) over time.
\nThe Company\u2019s policy regarding revenue recognition is described in further detail in note 4.2.7 B. Critical Accounting Policies \u2212 (d) Revenue. For the disaggregation of total revenue by country and by segment, please refer to Geographical Information under note 4.3.2 Operating Segments and Directional Reporting.
\nThe Company\u2019s construction contracts can last for several years, depending on the type of product, scope and complexity of the project, while the Company\u2019s Lease and Operate contracts are generally multiple-year contracts. As a result, the Company has (partially) outstanding performance obligations to its clients (unsatisfied performance obligations) at December 31, 2023. These unsatisfied performance obligations relate to:
Ongoing construction contracts, including the construction of vessels under finance leases that still need to be completed;
Ongoing multiple-year operating contracts. Note that for this specific disclosure on unsatisfied performance obligations, the lease component of the Lease and Operate contracts is excluded (this component being described in further detail in notes 4.3.13 Property, Plant and Equipment and 4.3.15 Finance Lease Receivables). As noted, some contracts include (performance) bonuses when earned or penalties incurred under the Company\u2019s Lease and Operate contracts. The net amount of performance-related payments for 2023 increased to US$132 million (2022: US$(3) million). This increase is mostly related to the shutdown of FPSO Cidade de Anchieta in the year-ago period.
The following table presents the unsatisfied performance obligations as at December 31, 2023 (in billions of US$):
\nUnsatisfied performance obligations related to: | 2023 | 2022 |
|---|---|---|
- constructions contracts including finance leases | 2.4 | 5.8 |
- operating contracts | 13.4 | 10.6 |
Total | 15.8 | 16.4 |
The unsatisfied performance obligations for the committed construction contracts mostly relate to four major construction FPSO contracts. Revenue related to these construction contracts is expected to be recognized over the coming two years in line with the construction progress on these projects.
\nThe unsatisfied performance obligations for the operating contracts relate to i) the Company\u2019s vessels leased to clients where the Company is the operator (both operating and finance lease contracts) and ii) one operating contract for operating services on a vessel that is owned by the client. The operating contracts end between 2024 and 2050. The Company will recognize the unsatisfied performance obligation over this period in line with the work performed.
\nThe Company can agree on various payment arrangements which generally reflect the progress of delivered performance obligations. However, if the Company\u2019s delivered performance obligation exceeds installments invoiced to the client, a contract asset is recognized. If the installments invoiced to the client exceed the work performed, a contract liability is recognized.
\nAs a result of various commercial discussions with clients, the Company recognized revenue amounting to US$7 million in 2023 (2022: US$27 million) originating from performance obligations satisfied in previous periods.
\nLease revenue recognized for leases where the Company is the lessor, for both operating and finance leases, relates to fixed and variable lease payments. Most of the Company\u2019s revenue from lease contracts is based on fixed day-rates. To the extent that lease payments are dependent on an index or a rate, they are excluded from the initial recognition of the lease payments receivable. The impact related to a change in index or a rate is recognized in the consolidated income statement when a change occurs.
\nThe table below sets out the contract balances for the years 2023 and 2022:
\n| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Current contract liability | 74 | 42 | |
Non-current contract liability | 22 | - | |
Total contract liabilities | \u00a0 | 97 | 42 |
Current contract assets | \u00a0 | 7,134 | 5,681 |
Total contract assets | \u00a0 | 7,134 | 5,681 |
During the period ended December 31, 2023, the Company completed construction of FPSO Prosperity, marking first oil date on November 14, 2023. As of this date, the lease of FPSO Prosperity commenced and the contract asset related to this unit was reclassified to finance lease receivables (refer to notes 4.3.1 Financial Highlights and 4.3.15 Finance Lease Receivables).
\nAs a result, the contract asset balance as at December 31, 2023 of US$7,134 million (2022: US$5,681 million) increased in relation to progress made during the period on the construction of FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o, FPSO Sepetiba, FPSO ONE GUYANA and initial limited scope for the FPSO for the Whiptail development project, partly offset by the finalization of the FPSO Prosperity construction.
\nRegarding information about expected credit losses recognized for contract assets, refer to note 4.3.27 Financial Instruments \u2013 Fair Values and Risk Management.
\nCurrent contract liabilities of US$74\u00a0million (2022: US$42 million) comprise the amounts of those individual contracts for which the total installments invoiced exceed the revenue recognized over time. Contract liabilities are reported in trade an other payables (see note 4.3.25 Trade and Other Payables).
\nAs at December 31, 2023, current contract liabilities relate to one of the Company\u2019s renewable projects and other minor construction projects.
\nNon-current contract liabilities of US$22 million (2022: nil) have been recognized as at December 31, 2023, following the reassessment of the demobilization performance obligations and associated remeasurement of future demobilization costs in finance lease contracts. This reassessment triggered an increase in the contract liability for demobilization costs. Therefore, as explained in B. Critical Accounting Policies \u2013 (f) Demobilization obligations, these future obligations have been recognized during the period through contract liability, for the present value of the change.
\nThe Company recognized revenue of US$31 million during the period, which was included in the contract liabilities as per December 31, 2022.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Gains from sale of financial participations, property, plant and equipment | \u00a0 | 0 | 9 |
Other operating income | \u00a0 | 3 | 28 |
Total other operating income | \u00a0 | 3 | 37 |
Other operating expenses | \u00a0 | (2) | (6) |
Impairment of other assets and onerous contracts | \u00a0 | - | (2) |
Restructuring expenses | \u00a0 | (11) | 0 |
Total other operating expense | \u00a0 | (13) | (8) |
Total | \u00a0 | (10) | 28 |
In 2023, the total other operating income and expense mainly includes a restructuring expense in the amount of US$11 million corresponding to severance costs relating to the implementation of an optimization plan for the Company\u2019s support functions\u2019 activities, aiming to improve the global performance and cost efficiency. The restructuring impacted approximately 106 employees.
\nFor comparison, in 2022, the total other operating income and expense mainly included US$9 million gain realized from the disposal of the SBM Installer and an insurance recovery of US$27 million in respect of one of the Brazilian units.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Gains from sale of financial participations, property, plant and equipment | \u00a0 | 0 | 9 |
Other operating income | \u00a0 | 3 | 28 |
Total other operating income | \u00a0 | 3 | 37 |
Other operating expenses | \u00a0 | (2) | (6) |
Impairment of other assets and onerous contracts | \u00a0 | - | (2) |
Restructuring expenses | \u00a0 | (11) | 0 |
Total other operating expense | \u00a0 | (13) | (8) |
Total | \u00a0 | (10) | 28 |
In 2023, the total other operating income and expense mainly includes a restructuring expense in the amount of US$11 million corresponding to severance costs relating to the implementation of an optimization plan for the Company\u2019s support functions\u2019 activities, aiming to improve the global performance and cost efficiency. The restructuring impacted approximately 106 employees.
\nFor comparison, in 2022, the total other operating income and expense mainly included US$9 million gain realized from the disposal of the SBM Installer and an insurance recovery of US$27 million in respect of one of the Brazilian units.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Gains from sale of financial participations, property, plant and equipment | \u00a0 | 0 | 9 |
Other operating income | \u00a0 | 3 | 28 |
Total other operating income | \u00a0 | 3 | 37 |
Other operating expenses | \u00a0 | (2) | (6) |
Impairment of other assets and onerous contracts | \u00a0 | - | (2) |
Restructuring expenses | \u00a0 | (11) | 0 |
Total other operating expense | \u00a0 | (13) | (8) |
Total | \u00a0 | (10) | 28 |
In 2023, the total other operating income and expense mainly includes a restructuring expense in the amount of US$11 million corresponding to severance costs relating to the implementation of an optimization plan for the Company\u2019s support functions\u2019 activities, aiming to improve the global performance and cost efficiency. The restructuring impacted approximately 106 employees.
\nFor comparison, in 2022, the total other operating income and expense mainly included US$9 million gain realized from the disposal of the SBM Installer and an insurance recovery of US$27 million in respect of one of the Brazilian units.
The table below sets out expenses by nature for all items included in EBIT for the years 2023 and 2022:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Expenses on construction contracts | \u00a0 | (2,130) | (2,367) |
Employee benefit expenses | (842) | (740) | |
Vessels operating costs | \u00a0 | (512) | (412) |
Depreciation, amortization and impairment | \u00a0 | (94) | (189) |
Selling expenses | \u00a0 | (10) | (4) |
Other costs | \u00a0 | (232) | (218) |
Total expenses | \u00a0 | (3,820) | (3,930) |
In 2023 \u2019Expenses on construction contracts\u2019 slightly decreased compared to the previous year. Despite having five FPSO\u2019s under construction during the period and the start of FPSO FEED work for the Whiptail development project (compared to five FPSO\u2019s in 2022), the reduction is a result of lower progress on Turnkey Brazilian projects and the completion of FPSO Prosperity partially offset by the higher progress of FPSO ONE GUYANA and newly awarded FPSO FEED work for the Whiptail development project.
\n\u2019Employee benefit expenses\u2019 increased due to higher man-hour-related activities in Turnkey projects and the ramp-up of operations on the fleet in operation.
\n\u2019Vessel operating costs\u2019 increased, mainly as a result of a higher scope of work in several vessels and the operational start of FPSO Prosperity during the last quarter of 2023, which was partially offset by the impact of FPSO Capixaba leaving the fleet. FPSO Liza Unity, despite the sale of the unit during 2023, continues to be operated by the Company through the OMEA signed with the client in 2023.
\nThe decrease of \u2019Depreciation, amortization and impairment\u2019 mainly relates to the prior year impairment of US$92 million on FPSO Cidade de Anchieta due to the additional costs required for tank repairs, following the shutdown in 2022 and the capitalization of associated tank repair costs, and FPSO Capixaba, which finished production in 2022.
\nExpenses related to short-term leases and leases of low-value assets amounted to US$6 million (2022: US$1 million).
\nThe increase of \u2019Other costs\u2019 is mainly driven by the overall ramp-up of digital activities, with impact on consultancy and software fees, business travel costs and currency exchange differences.
The table below sets out expenses by nature for all items included in EBIT for the years 2023 and 2022:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Expenses on construction contracts | \u00a0 | (2,130) | (2,367) |
Employee benefit expenses | (842) | (740) | |
Vessels operating costs | \u00a0 | (512) | (412) |
Depreciation, amortization and impairment | \u00a0 | (94) | (189) |
Selling expenses | \u00a0 | (10) | (4) |
Other costs | \u00a0 | (232) | (218) |
Total expenses | \u00a0 | (3,820) | (3,930) |
The decrease of \u2019Depreciation, amortization and impairment\u2019 mainly relates to the prior year impairment of US$92 million on FPSO Cidade de Anchieta due to the additional costs required for tank repairs, following the shutdown in 2022 and the capitalization of associated tank repair costs, and FPSO Capixaba, which finished production in 2022.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-551": { "value": "\nExpenses related to short-term leases and leases of low-value assets amounted to US$6 million (2022: US$1 million).
\nAs of December 31, 2023, the Company leases buildings and cars. The movement of the right-of-use assets during the year 2023 is summarized as follows:
\n| \u00a0 | Buildings | Other fixed assets | Total |
|---|---|---|---|
Book value at 1 January | 39 | 1 | 40 |
Additions | 54 | 1 | 55 |
Disposals | (5) | - | (5) |
Depreciation | (14) | (1) | (14) |
Impairment | - | - | - |
Foreign currency variations | 2 | 0 | 2 |
Other movements | (1) | (0) | (1) |
Total movements | 36 | 1 | 37 |
Cost | 104 | 4 | 108 |
Accumulated depreciation and impairment | (29) | (2) | (31) |
Book value at 31 December | 75 | 2 | 77 |
| \u00a0 | Buildings | Other fixed assets | Total |
|---|---|---|---|
Book value at 1 January | 44 | 1 | 45 |
Additions | 12 | 1 | 13 |
Disposals | - | (0) | (0) |
Depreciation | (14) | (1) | (15) |
(Impairment)/impairment reversal | - | - | - |
Foreign currency variations | (2) | (0) | (2) |
Other movements | (1) | (0) | (1) |
Total movements | (5) | 0 | (4) |
Cost | 72 | 3 | 75 |
Accumulated depreciation and impairment | (33) | (2) | (35) |
Book value at 31 December | 39 | 1 | 40 |
During the year 2023, the main movements regarding right-of-use assets related to US$55 million of capitalization of lease extensions and new lease office contracts, partially offset by US$14 million of depreciation charges. In March 2023, the Company extended the lease agreement of one of its office buildings until 2037. This resulted in an increase of US$43 million to right-of-use assets and a similar increase in lease liabilities (refer to note 4.3.23 Borrowings and Lease Liabilities).
\nSignificant contracts under buildings relate to the lease of offices. The remaining contract periods of the Company\u2019s office rentals vary between one and ten years and most of the contracts include extension options between three and fourteen years. The extension options have been taken into account in the measurement of lease liabilities when the Company is reasonably certain to exercise these options. The lease agreements do not impose any covenants.
The category \u2019Vessels and floating equipment\u2019 mainly relates to facilities leased to third parties under various operating lease agreements which terminate between 2025 and 2031. Leased facilities included in the \u2019Vessels and floating equipment\u2019 amount to:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Cost | \u00a0 | 1,821 | 1,813 |
Accumulated depreciation and impairment | \u00a0 | (1,637) | (1,596) |
Book value at 31 December | \u00a0 | 185 | 217 |
As of December 31, 2023, the units included under leased facilities are FPSO Cidade de Anchieta and the semi-submersible production facility Thunder Hawk. The book value of the leased facilities included in the vessels and floating equipment has decreased by US$32 million, mainly due to depreciation.
\nThe nominal values of the future expected bareboat receipts (undiscounted lease payments) in respect of the remaining operating lease contracts are:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Within 1 year | \u00a0 | 105 | 113 |
2 years | \u00a0 | 99 | 111 |
3 years | \u00a0 | 91 | 104 |
4 years | \u00a0 | 91 | 91 |
5 years | \u00a0 | 91 | 91 |
After 5 years | \u00a0 | 214 | 306 |
Total | \u00a0 | 693 | 816 |
A number of agreements have extension options, which have not been included in the above table.
\nThe operating lease contract of semi-submersible Thunder Hawk includes a call option for the client to purchase the underlying asset. The exercise of this call option would have resulted in a gain for the Company as at December 31, 2023.
The reconciliation between the total gross investment in the lease and the net investment in the lease at the statement of financial position date is as follows:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Gross receivable | \u00a0 | 9,576 | 10,330 |
Less: unearned finance income | \u00a0 | (2,775) | (3,137) |
Total | \u00a0 | 6,801 | 7,193 |
Of which | \u00a0 | \u00a0 | \u00a0 |
Current portion | \u00a0 | 526 | 1,725 |
Non-current portion | \u00a0 | 6,276 | 5,468 |
As of December 31, 2023, finance lease receivables relate to the finance lease of:
FPSO Prosperity, which started production in November 2023 for a charter of 2 years;
FPSO Liza Destiny, which started production in December 2019 for a charter of 10 years;
FPSO Cidade de Marica, which started production in February 2016 for a charter of 20 years;
FPSO Cidade de Saquarema, which started production in July 2016 for a charter of 20 years;
FPSO Cidade de Ilhabela, which started production in November 2014 for a charter of 20 years;
FPSO Cidade de Paraty, which started production in June 2013 for a charter of 20 years;
FPSO Aseng, which started production in November 2011 for a charter of 15 years;
FPSO Espirito Santo, which started production in January 2009 for a charter of 15 years until December 2023, and which was extended in December 2020 until December 2028.
The decrease in finance lease receivable is driven by (i) the client exercise of the purchase option for FPSO Liza Unity on November 9, 2023, for the amount of US$1,259 million, which was included in the finance lease receivable. As a result, the finance lease receivable was derecognized against the payment made by the client with no impact on the net result, (ii) redemptions as per the payment plans of lease contracts partially offset by (iii) FPSO Prosperity, which started production in November 2023.
\nIncluded in the gross receivable is an amount related to unguaranteed residual values (i.e. scrap value of units). The total amount of unguaranteed residual values at the end of the lease term amounts to US$50 million, as of December 31, 2023, (2022: US$53 million). The 2023 reassessment of unguaranteed residual values resulted in an impairment of US$2 million due to the decrease of scrap value of units.
\nAs per the contractual terms, gross receivables should be invoiced to the lessee within the following periods:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Less than 1 year | \u00a0 | 1,026 | 2,221 |
Between 1 and 2 years | \u00a0 | 2,060 | 804 |
Between 2 and 5 years | \u00a0 | 2,345 | 2,389 |
More than 5 years | \u00a0 | 4,146 | 4,916 |
Total Gross receivable | \u00a0 | 9,576 | 10,330 |
The significant decrease in the gross receivable \u2019Less than 1 year\u2019 mainly relates to the anticipated exercising of an FPSO Liza Unity purchase option which was materialised during the current year. The increase of the gross finance lease receivable in \u2019Between 1 and 2 years\u2019 is mainly explained by FPSO Prosperity following first oil in November 2023.
\nThe following part of the net investment in the lease is included as part of the current assets within the statement of financial position:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Gross receivable | \u00a0 | 1,026 | 2,221 |
Less: unearned finance income | \u00a0 | (500) | (496) |
Current portion of finance lease receivable | \u00a0 | 526 | 1,725 |
The maximum exposure to credit risk at the reporting date is the carrying amount of the finance lease receivables, taking into account the risk of recoverability. The Company performed an assessment, which concluded that the credit risk for these receivables has not increased significantly since the initial recognition. The Company does not hold any collateral as security.
\nThe finance lease contracts of FPSO Aseng, FPSO Liza Destiny and FPSO Prosperity, where the Company is the lessor, include call options for the client to purchase the underlying asset or to terminate the contract early. If the client had exercised the purchase option for FPSO Aseng as of December 31, 2023, this would have resulted in a gain for the Company. The exercise of the early termination option, under which the Company would retain the vessel, would have resulted in a near breakeven result. If the client had exercised the purchase option for FPSO Liza Destiny as of December 31, 2023, this would have resulted in a near breakeven result for the Company while the exercise of the early termination option under which the Company would retain the vessels would have resulted in a gain. If the client had exercised the purchase option or early termination option for FPSO Prosperity as of December 31, 2023, this would have resulted in a gain for the Company.
\nThe finance lease contract of FPSO Espirito Santo includes a call option for the client to terminate the contract early without obtaining the underlying asset. The exercise of the early termination option would have resulted in a loss for the Company as of December 31, 2023.
\nThe finance lease contracts of FPSO ONE GUYANA (under construction as per December 31, 2023) contain options for the client to purchase the underlying asset or terminate the contract early. These options are exercisable at any time starting from the delivery date of the vessel.
The line item \u2019Borrowings and lease liabilities\u2019 in the consolidated statement of financial position is further detailed as follows:\u00a0
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Borrowings | \u00a0 | 8,112 | 6,839 |
Lease liabilities | \u00a0 | 74 | 33 |
Total Non-current portion of Borrowings and lease liabilities | \u00a0 | 8,186 | 6,873 |
Borrowings | \u00a0 | 1,093 | 1,678 |
Lease liabilities | \u00a0 | 11 | 13 |
Total Current portion of Borrowings and lease liabilities | \u00a0 | 1,105 | 1,691 |
\u00a0
The movement in bank interest bearing borrowings is as follows:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Non-current portion | \u00a0 | 6,839 | 5,891 |
Add: current portion | \u00a0 | 1,678 | 1,754 |
Remaining principal at 1 January | \u00a0 | 8,517 | 7,645 |
Additions | \u00a0 | 3,943 | 1,642 |
Redemptions | \u00a0 | (2,999) | (759) |
Transaction and amortized costs | \u00a0 | (255) | (10) |
Total movements | \u00a0 | 688 | 872 |
Remaining principal at 31 December | \u00a0 | 9,206 | 8,517 |
Less: Current portion | \u00a0 | (1,093) | (1,678) |
Non-current portion | \u00a0 | 8,112 | 6,839 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Transaction and amortized costs | \u00a0 | 472 | 216 |
Remaining principal at 31 December (excluding transaction and amortized costs) | \u00a0 | 9,677 | 8,734 |
Less: Current portion | \u00a0 | (1,142) | (1,710) |
Non-current portion | \u00a0 | 8,535 | 7,023 |
The additions in borrowings of US$3,943 million relate mainly to drawdowns on (i) project finance facilities for FPSO ONE GUYANA, FPSO Prosperity, and FPSO Sepetiba, (ii) the new loans achieved for FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o, (iii) the Company\u2019s RCF and SCF, (iv) a funding loan of US$125 million from CMFL in relation to FPSO Cidade de Ilhabela and the new Revolving Credit Facility for MPF hull financing of US$210 million.
\nIn the context of FPSO Cidade de Ilhabela, during 2023, the Company has created a new entity, Guara Norte Swiss Holding SA, and subsequently transferred 15% non-voting shares to CMFL which, in turn, granted the US$125 million funding loan. The terms of the agreement set out a call and put options that can be exercised at nominal amount of the non-voting shares. Therefore the Company assessed that IAS 32 takes precedence over IFRS 10 and will therefore not recognize a non-controlling interest but rather recognize the liability. This transaction is in line with the Company\u2019s aim to diversify its sources of debt funding and to accelerate equity cashflow from the backlog.
\nAs announced on March 31, 2023, the Company has secured the project financing of FPSO Almirante Tamandar\u00e9 for a total of US$1.63 billion. As of December 31, 2023, the Company has drawdown US$1,053 million from the project financing and fully repaid the bridge loan of US$635 million.
\nAs announced on June 20, 2023, the Company has secured the project financing of FPSO Alexandre de Gusm\u00e3o for a total of US$1.615 billion. As of December 31, 2023, the Company has drawdown US$1,165 million from the project financing and fully repaid the bridge loan of US$620 million.
\nAs announced on December 15, 2023, the Company has secured the new Revolving Credit Facility for MPF hull financing for a total of US$210 million. As of December 31, 2023, the Company has fully drawn down this financing.
\nThe redemptions are mostly related to (i) the repayment of the bridge loan facility of FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o following the completion of the project financings, the repayment of the FPSO Liza Unity loan of US$1,140 million following the sale of the unit to the client (ii) the non-recourse debt repayment schedules.
\nFor further disclosures about fair value measurement, we refer to note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nThe Company has no \u2019off-balance sheet\u2019 financing through special purpose entities. All long-term debt is included in the consolidated statement of financial position.
\nThe borrowings, excluding the amount of transaction and amortized costs, have the following forecast repayment schedule:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Within one year | \u00a0 | 1,142 | 1,710 |
Between 1 and 2 years | \u00a0 | 1,877 | 1,657 |
Between 2 and 5 years | \u00a0 | 3,237 | 3,010 |
More than 5 years | \u00a0 | 3,421 | 2,357 |
Balance at 31 December | \u00a0 | 9,677 | 8,734 |
The borrowings by entity are as follows:
\n| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | Net book value at 31 December 2023 | Net book value at 31 December 2022 | ||||
|---|---|---|---|---|---|---|---|---|---|---|
Entity name | Project name or nature of loan | % Ownership | % Interest1 | Maturity | Non-current | Current | Total | Non-current | Current | Total |
Project Finance facilities drawn | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Tupi Nordeste Sarl | FPSO Cidade de Paraty | 63.13 | 5.50% | 15-Jun-23 | - | - | - | - | 72 | 72 |
SBM Baleia Azul Sarl | FPSO Cidade de Anchieta | 100.00 | 5.50% | 15-Sep-27 | 122 | 41 | 163 | 163 | 39 | 202 |
Alfa Lula Alto Sarl | FPSO Cidade de Marica | 61.00 | 5.60% | 17-Dec-29 | 544 | 128 | 672 | 672 | 121 | 793 |
Beta Lula Central Sarl | FPSO Cidade de Saquarema | 61.00 | 4.20% | 15-Jun-30 | 712 | 108 | 820 | 820 | 102 | 922 |
Guyana Deep Water UK Limited | FPSO Liza Destiny | 100.00 | SOFR + 1.91% | 18-Dec-29 | 405 | 70 | 474 | 474 | 67 | 541 |
Guyana Deep Water II UK Limited | FPSO Liza Unity | 100.00 | SOFR + 1.76% | 09-Nov-23 | - | - | - | 1,140 | (4) | 1,136 |
Guyana Deep Water III UK Limited | FPSO Prosperity | 100.00 | SOFR + 1.86% | 29-Aug-25 | 951 | 87 | 1,038 | 965 | (4) | 960 |
Senior secured notes | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Guara Norte Sarl | FPSO Cidade de Ilhabela | 75.00 | 5.20% | 15-Jun-34 | 672 | 48 | 720 | 720 | 44 | 764 |
Guaranteed project finance facilities drawn | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Mero 2 Owning B.V. | FPSO Sepetiba | 64.50 | 4.30% | 15-Jun-38 | 1,370 | 56 | 1,425 | 1,410 | (14) | 1,397 |
Guyana Deep Water IV UK Limited | FPSO ONE GUYANA | 100.00 | 5.20% | 31-Jul-27 | 1,077 | (4) | 1,073 | 426 | - | 426 |
Tamandare Owning B.V. | FPSO Almirante Tamandar\u00e9 | 55.00 | 5.90% | 15-Dec-38 | 920 | (10) | 911 | (3) | 635 | 632 |
Mero 4 Owning B.V. | FPSO Alexandre de Gusm\u00e3o | 55.00 | 6.40% | 15-May-39 | 1,022 | (5) | 1,017 | (2) | 620 | 618 |
Bridge loan facility | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Tamandare Owning B.V. | FPSO Almirante Tamandar\u00e9 | 55.00 | Libor + 0.6% | 26-May-23 | - | - | - | (3) | 635 | 632 |
Mero 4 Owning B.V. | FPSO Alexandre de Gusm\u00e3o | 55.00 | Libor + 0.75% | 20-Jul-23 | - | - | - | (2) | 620 | 618 |
Revolving credit facility | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
SBM Holding Inc | Corporate Facility | 100.00 | Variable | 13-Feb-26 | - | 550 | 550 | (0) | (1) | (1) |
SBM Holding Inc | Fast4Ward\u00ae hull financing | 100.00 | SOFR + 1.9% | 20-Jun-25 | 209 | (1) | 208 | (0) | (1) | (1) |
Other | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Guara Norte Swiss Holding SA | FPSO Cidade de Ilhabela | 100.00 | 7.90% | 31-Dec-27 | 75 | 25 | 100 | - | - | - |
Brazilian Deepwater Production B.V. | FPSO Espirito Santo | 51.00 | SOFR + 1.05% | 31-Jan-29 | 25 | - | 25 | 47 | - | 47 |
Brazilian Deepwater Production Contractors Ltd. | FPSO Espirito Santo | 51.00 | 3.00% | 31-Dec-28 | 8 | - | 8 | 5 | - | 5 |
Other | \u00a0 | 100.00 | \u00a0 | \u00a0 | 0 | - | 0 | 2 | - | 2 |
Net book value of loans and borrowings | 8,112 | 1,093 | 9,206 | 6,839 | 1,678 | 8,517 |
For the project finance facilities, the respective vessels are mortgaged to the banks or to note holders.
\nThe Company has available facilities resulting from (i) the undrawn RCF, (ii) the undrawn portion of FPSO ONE GUYANA, FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o project facilities, and (iii) short-term credit lines.
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Expiring within one year | \u00a0 | 274 | 274 |
Expiring beyond one year | \u00a0 | 2,174 | 2,452 |
Total | \u00a0 | 2,448 | 2,726 |
The RCF in place as of December 31, 2023, has a maturity date of February 13, 2026. The US$1 billion facility was secured with a selected group of 12 core relationship banks and has an uncommitted option to increase the RCF by an additional US$500 million. The Company does not have any other extension option remaining.
\nWhen needed, the RCF allows the Company to finance EPC activities/working capital, bridge any long-term financing needs, and/or finance general corporate purposes. On December 23, 2021, the RCF was amended by means of an amendment and restatement agreement to reflect a dedicated green funding tranche. By creating this green tranche, US$50 million of the RCF may only be used to fund activities that comply with the Green Loan Principles (primarily activities related to renewable energy projects) and the remaining US$950 million can be used in the following proportions:
EPC activities/working capital \u2013 100% of the facility;
General Corporate Purposes \u2013 up to 50% of the facility;
Refinancing project debt \u2013 100% of the facility but limited to a period of 18 months.
The pricing of the RCF is currently based on SOFR. The margin is adjusted in accordance with the applicable leverage ratio, ranging from a minimum level of 0.50% p.a. (0.40% for the green tranche) to a maximum of 1.50% p.a. (1.40% for the green tranche). The margin also includes a Sustainability Adjustment Mechanism whereby the margin may increase or decrease by 0.05% based on the absolute change in the Company performance as measured and reported by Sustainalytics1. The Company\u2019s Sustainability performance in 2023 allows the 0.05% margin decrease to remain applicable for 2023.
The Company has secured a US$210 million revolving credit facility for the financing of the construction of Fast4Ward\u00ae Multi-Purpose Floater (MPF) hulls, as announced on December 15, 2023. The tenor of the MPF facility is eighteen months, with an uncommitted extension option for another six months. Repayment is expected to take place upon sale of the MPF hulls or upon drawdown of the relevant project loan. The pricing is based on SOFR and a margin, which is 1.90% per annum for the first 12 months and thereafter 2.10% per annum. The Company has fully drawn this facility as of December 31, 2023.
The following key financial covenants apply to the RCF, as agreed with the respective lenders on February 13, 2019, and to the new Revolving Credit Facility for MPF hull financing, and, unless stated otherwise, relate to the Company\u2019s consolidated financial statements:
Solvency: Consolidated IFRS Tangible Net Worth divided by Consolidated IFRS Tangible Assets must be > 25%;
Interest Cover Ratio: Consolidated Directional Underlying EBITDA divided by Consolidated Directional Net Interest Payable must be > 4.0.
The Lease Backlog Cover Ratio (LBCR) is used to determine the maximum funding availability under the RCF. The maximum funding availability is determined by calculating the net present value of the future contracted net cash after debt service of a defined portfolio of operational offshore units in the directional backlog. The maximum theoretical amount available under the RCF is then determined by dividing this net present value by 1.5. The actual availability under the RCF will be the lower of this amount and the applicable Facility Amount. As at December 31, 2023 additional headroom above the US$1 billion capacity under the RCF exceeded US$870 million.
\nFor the purpose of covenants calculations, the following simplified definitions apply:
IFRS Tangible Net Worth: Total equity (including non-controlling interests) of the Company in accordance with IFRS, excluding the marked-to-market valuation of currency and interest derivatives undertaken for hedging purposes by the Company through other comprehensive income, dividends declared, value of intangible assets and deferred taxes.
Consolidated IFRS Tangible Assets: The Company\u2019s total assets (excluding intangible assets) in accordance with the IFRS consolidated statement of financial position less the marked-to-market valuation of currency and interest derivatives undertaken for hedging purposes by the Company through other comprehensive income.
Consolidated Directional Underlying EBITDA: Consolidated profit of the Company adjusted for net interest payable, tax and depreciation of assets and impairments, any exceptional or extraordinary items, and by adding back (i) the annualized production EBITDA for units which started operations during the financial year, and (ii) the acquisition annualized EBITDA for units acquired during the financial year.
Consolidated Directional Net Interest Payable: All interest and other financing charges paid up, payable (other than capitalized interest during a construction period and interest paid or payable between wholly owned members of the Company) or incurred by the Company, less all interest and other financing charges received or receivable by the Company, as per Directional reporting.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
IFRS Tangible Net Worth | \u00a0 | 4,968 | 4,494 |
Consolidated IFRS Tangible Assets | \u00a0 | 16,606 | 15,161 |
Solvency ratio | \u00a0 | 29.9% | 29.6% |
Adjusted (Directional) Underlying EBITDA | \u00a0 | 1,6091 | 1,0362 |
Consolidated Directional Net Interest Payable | \u00a0 | 234 | 190 |
Interest cover ratio | \u00a0 | 6.9 | 5.5 |
The Leverage ratio based on reported Directional figures, is used to determine the pricing only.
\nThe Company monitors its financial and non-financial covenants for borrowings, which are included in the consolidated financial statement continuously throughout the year. None of the borrowings in the statement of financial position were in default as at the reporting date or at any time during the period.
Starting April 2023, the Company has secured short-term funds in the form of a Supply chain financing facility of EUR50 million (or USD equivalent). The pricing of the Supply Chain Financing facility (SCF) is based on a reference rate, depending on the tenor and currency (such as term SOFR for USD) of the individual utilizations. The margin is adjusted in accordance with the currency of the utilization, 0.85% p.a. for payables denominated in EUR and 0.95% p.a. in USD. The Company has utilized the SCF during the year with no outstanding balance as of December 31, 2023.
The lease liabilities mostly relate to the leasing of office buildings as of December 31, 2023.
\nThe movement in the lease liabilities is as follows:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Principal recognized at 1 January | \u00a0 | 46 | 56 |
Additions | \u00a0 | 55 | 13 |
Redemptions | \u00a0 | (18) | (20) |
Foreign currency variations | \u00a0 | 2 | (3) |
Other | \u00a0 | - | - |
Total movements | \u00a0 | 39 | (10) |
Remaining principal at 31 December | \u00a0 | 85 | 46 |
Of which | \u00a0 | \u00a0 | \u00a0 |
Current portion | \u00a0 | 11 | 13 |
Non-current portion | \u00a0 | 74 | 33 |
The movements in lease liabilities over the period were mainly related to an increase due to the extension of some lease contracts for offices and the regular redemptions and foreign currency translations.
\nThe maturity of the lease liabilities is analyzed in section 4.3.27 financial instruments - fair values and risk management (liquidity risk).
\nThe total cash outflow for leases in 2023 was US$22 million, which includes redemptions of principal and interest payments. Total interest for the period amounted to US$4 million.
Information with respect to employee benefits expenses are detailed as follows:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Wages and salaries | \u00a0 | (420) | (370) |
Social security costs | \u00a0 | (57) | (48) |
Contributions to defined contribution plans | \u00a0 | (39) | (33) |
Contributions to defined benefit plans | \u00a0 | (2) | 1 |
Share-based payment cost | \u00a0 | (26) | (24) |
Contractors' costs | \u00a0 | (197) | (178) |
Other employee benefits | \u00a0 | (100) | (88) |
Total employee benefits | (842) | (740) |
Wages and salaries increased, due to FPSO Prosperity joining the fleet, full ramp-up on FPSO Sepetiba before producing and on hire on January 2, 2024, and the increased activity in projects under construction. This was partially offset by FPSO Capixaba leaving the fleet (now under decommissioning).
\nContractors\u2019 costs include expenses related to contractor staff not on the Company\u2019s payroll, linked to the Company\u2019s strategy of aiming to maintain flexibility in its workforce management. Other employee benefits mainly include commuting, training, expatriate and other non-wage compensation costs.
The contributions to defined contribution plans includes Company participation in the Merchant Navy Officers Pension Fund (MNOPF). The MNOPF is a defined benefit multi-employer plan, which is closed to new members. The fund is managed by a corporate Trustee, MNOPF Trustees Limited, and provides defined benefits for nearly 21,936 (2022: 22,440) Merchant Navy Officers and their dependents, out of which approximately 29 (2022: 29) are SBM Offshore former employees.
\nThe Trustee apportions its funding deficit between Participating Employers, based on the portions of the Fund\u2019s liabilities, which were originally accrued by members in service with each employer. When the Trustee determines that contributions are unlikely to be recovered from a Participating Employer, it can re-apportion the deficit contributions to other Participating Employers.
\nEntities participating in the MNOPF are exposed to the actuarial risk associated with the current and former employees of other entities through exposure to their share of the deficit of those other entities\u2019 default. As there is only a notional allocation of assets and liabilities to any employer, the Company is accounting for the MNOPF in its financial statements as if it was a defined contribution scheme. There are no contributions to the plan agreed at present.
The employee benefits provisions recognized relate to:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Pension plan | \u00a0 | (0) | (3) |
Lump sums on retirement | \u00a0 | 8 | 6 |
Defined benefit plans | \u00a0 | 7 | 3 |
Long-service awards | \u00a0 | 14 | 12 |
Other long-term benefits | \u00a0 | 14 | 12 |
Employee benefits provisions | 21 | 15 |
The defined benefit plan provision is partially funded as follows:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Pension plans | Lump sums on retirement | Total | Pension plans | Lump sums on retirement | Total |
Defined benefit obligation | 22 | 8 | 30 | 22 | 6 | 29 |
Fair value of plan assets | (22) | - | (22) | (25) | - | (25) |
Benefit (asset)/liability | (0) | 8 | 7 | (3) | 6 | 3 |
The main assumptions used in determining employee benefit obligations for the Company\u2019s plans are shown below:
\nin % | 2023 | 2022 |
|---|---|---|
Discount rate | 1.50 - 3.40 | 2.50 - 4.25 |
Inflation rate | 2.00 | 2.00 |
Discount rate of return on plan assets during financial year | 1.50 | 2.50 |
Future salary increases | 1.00 - 3.00 | 1.00 - 3.00 |
Future pension increases | 0 - 2.00 | - |
The overall expected rate of return on assets is determined based on the market prices prevailing on that date, applicable to the period over which the obligation is to be settled.
The remuneration of the key management personnel of the Company paid during the year, including pension costs and performance-related Short-Term Incentives (STI), amounted to US$14 million (2022: US$15 million). There are no loans\u00a0outstanding to\u00a0members of\u00a0the\u00a0key management or\u00a0guarantees\u00a0given\u00a0on\u00a0behalf\u00a0of\u00a0members of\u00a0the\u00a0key management.
\nThe performance-related part of the remuneration of the Management Board, comprising Value Creation Stake and STI components, was 66% (2022: 60%). The Management Board\u2019s remuneration decreased in 2023 versus 2022, mainly explained by the decrease to three members in the overall year-by-year comparison.
\nThe total remuneration and associated costs of the Management Board and other key management personnel (members of the Executive Committee) is specified as follows:
\nin thousands of US$ | Base salary | STI1 | Share-based compensation2 | Other3 | Pensions4 | Total remuneration |
|---|---|---|---|---|---|---|
Management Board Members | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
2023 | 2,186 | 2,279 | 3,866 | 457 | 585 | 9,373 |
2022 | 3,036 | 1,864 | 4,634 | 546 | 728 | 10,808 |
Other key personnel5 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
2023 | 2,021 | 562 | 1,292 | 442 | 442 | 4,759 |
2022 | 2,124 | 517 | 1,075 | 379 | 336 | 4,430 |
Total 2023 | 4,207 | 2,841 | 5,158 | 899 | 1,027 | 14,132 |
Total 2022 | 5,159 | 2,382 | 5,709 | 925 | 1,064 | 15,238 |
The table above represents the total remuneration in US dollars, being the reporting currency of the Company.
\nAs at December 31, 2023, there are no unvested shares of current and former Management Board members. The total number of vested shares held by current Management Board members are reported in note 4.3.22 Equity Attributable to Shareholders.
The Short-Term Incentive Program is based upon short-term operational performance, which includes three sets of performance indicators, as noted below:
Profitability;
Growth;
Sustainability.
The Supervisory Board may adjust the outcome of the STI down by 10%. Any such adjustment would be reported in the Remuneration Report. No such reduction has been made for 2023 or 2022.
\nFor 2023 (equal to 2022), the Supervisory Board concluded that the Company\u2019s performance indicators had outcomes ranging from threshold to maximum. For the year 2023, a total of ten performance indicators were established (2022: seven). The Company\u2019s performance resulted in performance of 120% (2022: 85%) of salary for the CEO and 90% (2022: 64%) for the other Management Board members.
Under the Remuneration Policy 2022, the members of the Management Board are entitled to a Value Creation Stake, being a number of shares determined by a four-year average share price (volume weighted). These shares vest immediately upon the award date, and must be retained for five years from the vesting date, or, in the event of retirement or termination, two years.
\nNumber of issued shares | 2023 | 2022 |
|---|---|---|
Total | 242,375 | 317,510 |
The number of shares granted is based upon 175% of the individual\u2019s base salary and determined by the 4-year average volume-weighed share price (VWAP) over the years 2019 through 2022 (2022: 2018 through 2021), being EUR14.60 (2022: EUR14.61). The grant date fair value of these shares upon issue was EUR14.75, being the opening share price of January 2, 2023 (2022: EUR13.15).
The number of shares granted under the RSU plan in 2023 was 812,950 (2022: 803,320), with the three-year employment period starting on January 1, 2023 (2022: January 1, 2022).
\nThe annual RSU award is based on individual potential. The RSU plans themselves have no performance condition, only a service condition, and will vest at the end of three years\u2019 continuing service. The fair value is determined based on the share price at the grant dates, with an adjustment for the present value of the expected dividends during the vesting period.
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
RSU grant date fair value per share | \u20ac\u00a010.85 | \u20ac\u00a011.44 |
For RSUs, a vesting probability (based on expectations on, for example, the number of employees leaving the Company before the vesting date of their respective RSU plan) of 5% is assumed. The Company periodically reviews this estimate and aligns to the actual forfeitures.
Ownership Shares is an annual award in shares to compensate the overall STI target reduction of 3-6% of annualized gross salary under the Company\u2019s 2019 STI plan awarded to employees based on seniority. The Ownership Shares have no performance conditions, only a service condition. The Ownership Shares are subject to a three-year holding requirement after the grant date. This means that a fixed population of onshore employees, based on seniority in the Company, are eligible to the Ownership Shares equal to 4-8% of annualized gross salary.
\nThe total number of Ownership Shares that vested during 2023 was 76,485 shares (2022: 96,333). The fair value of the Ownership Shares is measured at the opening share price of January 2, 2023.
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Ownership Shares grant date fair value per share | \u20ac\u00a014.75 | \u20ac\u00a013.15 |
Under the STI plans for the management and staff of the Company, 20% of the STI is or can be paid in shares. Subject to a vesting period of three years, an identical number of shares (matching shares) will be issued to participants, assuming a probability of 95%. The Company periodically reviews this estimate and aligns to the actual forfeitures. The grant date fair value is measured indirectly, based on the grant date price of the equity instrument, with an adjustment for the present value of the expected dividends during the vesting period.
\nThe assumptions included in the calculation for the matching shares are:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Matching shares grant date fair value per share | \u20ac\u00a010.74 | \u20ac\u00a011.75 |
The amounts recognized in operating profit for all share-based payment transactions have been summarized by taking into account both the provisional awards for the current year and the additional awards related to prior years. Total share-based compensation has slightly increased in comparison to 2022.
\n2023 (in thousands of US$) | Performance shares and RSU/Value Creation Stake | Matching | Total |
|---|---|---|---|
Instruments granted | 14,424 | 5,087 | 19,511 |
Total expenses 2023 | 14,424 | 5,087 | 19,511 |
2022 (in thousands of US$) | Performance shares and RSU/Value Creation Stake | Matching | Total |
|---|---|---|---|
Instruments granted | 13,327 | 5,840 | 19,167 |
Total expenses 2022 | 13,327 | 5,840 | 19,167 |
Rules of conduct with regard to inside information are in place to ensure compliance with the Act on Financial Supervision. For example, these rules forbid the exercise of options or other financial instruments during certain periods, more specifically when an employee is in possession of price-sensitive information.
\nThe movement in the outstanding number of shares which could potentially vest at a point in time under the Company share-based payment plans is illustrated in the following table.
\nin number of shares | 2023 | 2022 |
|---|---|---|
Outstanding at 1 January | 3,064,079 | 2,910,725 |
Granted | 1,686,474 | 1,629,422 |
Vested | (1,064,211) | (1,125,632) |
True-up at vesting | - | - |
Cancelled or forfeited | (350,106) | (350,436) |
Total movements | 272,157 | 153,354 |
Outstanding at 31 December | 3,336,236 | 3,064,079 |
The remuneration of the Supervisory Board amounted to EUR601 thousand (2022: EUR658 thousand) and can be specified as follows:
\n| \u00a0 | 2023 | 2022 | ||||
|---|---|---|---|---|---|---|
in thousands of EUR | Basic remuneration | Committees | Total | Basic remuneration | Committees | Total |
Total | 521 | 78 | 599 | 580 | 78 | 658 |
There are no share-based incentives granted to the members of the Supervisory Board. Nor are there any loans outstanding to the members of the Supervisory Board or guarantees given on behalf of members of the Supervisory Board. In 2023, the number of Supervisory Board members decreased from 7 to 6.
| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
By operating segment: | Average | Year-end | Average | Year-end |
Lease and Operate | 2,420 | 2,667 | 2,072 | 2,172 |
Turnkey | 2,129 | 2,036 | 2,110 | 2,221 |
Other | 639 | 701 | 549 | 576 |
Total excluding employees working for JVs and associates | 5,187 | 5,404 | 4,731 | 4,969 |
Employees working for JVs and associates | 531 | 531 | 529 | 530 |
Total | 5,717 | 5,935 | 5,259 | 5,499 |
| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
By geographical area: | Average | Year-end | Average | Year-end |
the Netherlands | 507 | 496 | 471 | 518 |
Worldwide | 4,680 | 4,908 | 4,260 | 4,451 |
Total excluding employees working for JVs and associates | 5,187 | 5,404 | 4,731 | 4,969 |
Employees working for JVs and associates | 531 | 531 | 529 | 530 |
Total | 5,717 | 5,935 | 5,259 | 5,499 |
The figures exclude fleet personnel hired through crewing agencies as well as other agency and freelance staff for whom expenses are included within 'other employee benefits'. The increase of Lease and Operate average headcount is primarily due to FPSO Prosperity joining the fleet during the current year and full ramp up on FPSO Sepetiba before producing and on hire on January 2nd, 2024, resulting as well in the reduction of the Turnkey segment at year end. The increase in 'Other' is mainly due to temporary headcount transition following the implementation of an optimization plan related to the Company's support functions' activities and a continuing investment in the Company\u2019s digital initiatives.
The remuneration of the key management personnel of the Company paid during the year, including pension costs and performance-related Short-Term Incentives (STI), amounted to US$14 million (2022: US$15 million). There are no loans\u00a0outstanding to\u00a0members of\u00a0the\u00a0key management or\u00a0guarantees\u00a0given\u00a0on\u00a0behalf\u00a0of\u00a0members of\u00a0the\u00a0key management.
\nThe performance-related part of the remuneration of the Management Board, comprising Value Creation Stake and STI components, was 66% (2022: 60%). The Management Board\u2019s remuneration decreased in 2023 versus 2022, mainly explained by the decrease to three members in the overall year-by-year comparison.
\nThe total remuneration and associated costs of the Management Board and other key management personnel (members of the Executive Committee) is specified as follows:
\nin thousands of US$ | Base salary | STI1 | Share-based compensation2 | Other3 | Pensions4 | Total remuneration |
|---|---|---|---|---|---|---|
Management Board Members | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
2023 | 2,186 | 2,279 | 3,866 | 457 | 585 | 9,373 |
2022 | 3,036 | 1,864 | 4,634 | 546 | 728 | 10,808 |
Other key personnel5 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
2023 | 2,021 | 562 | 1,292 | 442 | 442 | 4,759 |
2022 | 2,124 | 517 | 1,075 | 379 | 336 | 4,430 |
Total 2023 | 4,207 | 2,841 | 5,158 | 899 | 1,027 | 14,132 |
Total 2022 | 5,159 | 2,382 | 5,709 | 925 | 1,064 | 15,238 |
The table above represents the total remuneration in US dollars, being the reporting currency of the Company.
\nAs at December 31, 2023, there are no unvested shares of current and former Management Board members. The total number of vested shares held by current Management Board members are reported in note 4.3.22 Equity Attributable to Shareholders.
The remuneration of the Supervisory Board amounted to EUR601 thousand (2022: EUR658 thousand) and can be specified as follows:
\n| \u00a0 | 2023 | 2022 | ||||
|---|---|---|---|---|---|---|
in thousands of EUR | Basic remuneration | Committees | Total | Basic remuneration | Committees | Total |
Total | 521 | 78 | 599 | 580 | 78 | 658 |
There are no share-based incentives granted to the members of the Supervisory Board. Nor are there any loans outstanding to the members of the Supervisory Board or guarantees given on behalf of members of the Supervisory Board. In 2023, the number of Supervisory Board members decreased from 7 to 6.
Under the Remuneration Policy 2022, the members of the Management Board are entitled to a Value Creation Stake, being a number of shares determined by a four-year average share price (volume weighted). These shares vest immediately upon the award date, and must be retained for five years from the vesting date, or, in the event of retirement or termination, two years.
\nNumber of issued shares | 2023 | 2022 |
|---|---|---|
Total | 242,375 | 317,510 |
The number of shares granted is based upon 175% of the individual\u2019s base salary and determined by the 4-year average volume-weighed share price (VWAP) over the years 2019 through 2022 (2022: 2018 through 2021), being EUR14.60 (2022: EUR14.61). The grant date fair value of these shares upon issue was EUR14.75, being the opening share price of January 2, 2023 (2022: EUR13.15).
The number of shares granted under the RSU plan in 2023 was 812,950 (2022: 803,320), with the three-year employment period starting on January 1, 2023 (2022: January 1, 2022).
\nThe annual RSU award is based on individual potential. The RSU plans themselves have no performance condition, only a service condition, and will vest at the end of three years\u2019 continuing service. The fair value is determined based on the share price at the grant dates, with an adjustment for the present value of the expected dividends during the vesting period.
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
RSU grant date fair value per share | \u20ac\u00a010.85 | \u20ac\u00a011.44 |
For RSUs, a vesting probability (based on expectations on, for example, the number of employees leaving the Company before the vesting date of their respective RSU plan) of 5% is assumed. The Company periodically reviews this estimate and aligns to the actual forfeitures.
Ownership Shares is an annual award in shares to compensate the overall STI target reduction of 3-6% of annualized gross salary under the Company\u2019s 2019 STI plan awarded to employees based on seniority. The Ownership Shares have no performance conditions, only a service condition. The Ownership Shares are subject to a three-year holding requirement after the grant date. This means that a fixed population of onshore employees, based on seniority in the Company, are eligible to the Ownership Shares equal to 4-8% of annualized gross salary.
\nThe total number of Ownership Shares that vested during 2023 was 76,485 shares (2022: 96,333). The fair value of the Ownership Shares is measured at the opening share price of January 2, 2023.
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Ownership Shares grant date fair value per share | \u20ac\u00a014.75 | \u20ac\u00a013.15 |
Under the STI plans for the management and staff of the Company, 20% of the STI is or can be paid in shares. Subject to a vesting period of three years, an identical number of shares (matching shares) will be issued to participants, assuming a probability of 95%. The Company periodically reviews this estimate and aligns to the actual forfeitures. The grant date fair value is measured indirectly, based on the grant date price of the equity instrument, with an adjustment for the present value of the expected dividends during the vesting period.
\nThe assumptions included in the calculation for the matching shares are:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Matching shares grant date fair value per share | \u20ac\u00a010.74 | \u20ac\u00a011.75 |
The amounts recognized in operating profit for all share-based payment transactions have been summarized by taking into account both the provisional awards for the current year and the additional awards related to prior years. Total share-based compensation has slightly increased in comparison to 2022.
\n2023 (in thousands of US$) | Performance shares and RSU/Value Creation Stake | Matching | Total |
|---|---|---|---|
Instruments granted | 14,424 | 5,087 | 19,511 |
Total expenses 2023 | 14,424 | 5,087 | 19,511 |
2022 (in thousands of US$) | Performance shares and RSU/Value Creation Stake | Matching | Total |
|---|---|---|---|
Instruments granted | 13,327 | 5,840 | 19,167 |
Total expenses 2022 | 13,327 | 5,840 | 19,167 |
Rules of conduct with regard to inside information are in place to ensure compliance with the Act on Financial Supervision. For example, these rules forbid the exercise of options or other financial instruments during certain periods, more specifically when an employee is in possession of price-sensitive information.
\nThe movement in the outstanding number of shares which could potentially vest at a point in time under the Company share-based payment plans is illustrated in the following table.
\nin number of shares | 2023 | 2022 |
|---|---|---|
Outstanding at 1 January | 3,064,079 | 2,910,725 |
Granted | 1,686,474 | 1,629,422 |
Vested | (1,064,211) | (1,125,632) |
True-up at vesting | - | - |
Cancelled or forfeited | (350,106) | (350,436) |
Total movements | 272,157 | 153,354 |
Outstanding at 31 December | 3,336,236 | 3,064,079 |
| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
By operating segment: | Average | Year-end | Average | Year-end |
Lease and Operate | 2,420 | 2,667 | 2,072 | 2,172 |
Turnkey | 2,129 | 2,036 | 2,110 | 2,221 |
Other | 639 | 701 | 549 | 576 |
Total excluding employees working for JVs and associates | 5,187 | 5,404 | 4,731 | 4,969 |
Employees working for JVs and associates | 531 | 531 | 529 | 530 |
Total | 5,717 | 5,935 | 5,259 | 5,499 |
| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
By geographical area: | Average | Year-end | Average | Year-end |
the Netherlands | 507 | 496 | 471 | 518 |
Worldwide | 4,680 | 4,908 | 4,260 | 4,451 |
Total excluding employees working for JVs and associates | 5,187 | 5,404 | 4,731 | 4,969 |
Employees working for JVs and associates | 531 | 531 | 529 | 530 |
Total | 5,717 | 5,935 | 5,259 | 5,499 |
The figures exclude fleet personnel hired through crewing agencies as well as other agency and freelance staff for whom expenses are included within 'other employee benefits'. The increase of Lease and Operate average headcount is primarily due to FPSO Prosperity joining the fleet during the current year and full ramp up on FPSO Sepetiba before producing and on hire on January 2nd, 2024, resulting as well in the reduction of the Turnkey segment at year end. The increase in 'Other' is mainly due to temporary headcount transition following the implementation of an optimization plan related to the Company's support functions' activities and a continuing investment in the Company\u2019s digital initiatives.
Research and development expenses amounted to US$37 million (2022: US$35 million) and mainly relate to the internal projects for Renewables development costs and energy transition costs related to emissionZERO\u00ae and \u2019Digital FPSO\u2019.
\nThe amortization of development costs recognized in the statement of financial position is allocated to cost of sales when the developed technology is used through one or several projects. Otherwise, it is allocated to research and development expenses.
In the context of the current economic and geopolitical environment, during 2023, the Company anticipated a range of possible impacts that could arise from the general economic downturn, the pressure on price inflation, the energy market pressure, increasing interest rates and other governmental actions as a consequence of the geopolitical environment. In response to these effects, the Company (i) reassessed whether there is a significant increase in credit risk related to its financial assets as of December 31, 2023, and (ii) updated estimates in terms of \u2019probability of default\u2019 and \u2019loss given default\u2019 in order to determine the expected credit losses.
\nThere was no payment default on any finance lease contract over the period. In addition, despite the overall economic downturn, the Company concluded that the counterparties of the finance lease receivables still have a strong capacity to meet their contractual cash flow obligations, based on existing contractual arrangements, which include parent company guarantees. Based on the available forward-looking information related to the oil price, it is also assumed that none of the assets leased under the Company\u2019s finance lease contracts would become uneconomical to operate for clients.
\nTherefore, the Company concludes that (i) the credit risk has not increased significantly since the initial recognition of the finance lease receivable, and (ii) the finance lease receivables still have a low credit risk as of December 31, 2023. As a result, the Company recognizes a 12-month expected credit loss.
\nAs for the finance leases, there was no payment default (including overdue of more than 90 days) on any significant trade receivables over the period. The Company performed, as usual, a detailed analysis of the credit risks associated with significant trade receivables balances as at the reporting date. This did not result in any specific significant increase in credit risks related to its outstanding contract assets and trade receivables.
\nOverall, the reassessment of the expected credit losses of other financial assets resulted in a limited impact.
\nDuring the year, the following gains/(losses) related to credit risks were recognized:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Impairment losses | \u00a0 | \u00a0 | \u00a0 |
- Movement in loss allowance for trade receivables | \u00a0 | (1) | 1 |
- Movement in loss allowance for contract assets | \u00a0 | 0 | 0 |
- Movement in loss allowance for finance lease receivables | \u00a0 | 0 | (0) |
(Impairment)/impairment reversal losses on financial lease receivables | \u00a0 | - | - |
(Impairment)/impairment reversal losses on other financial assets | \u00a0 | (20) | 14 |
Net impairment gains/(losses) on financial and contract assets | \u00a0 | (21) | 15 |
During the year 2023, the Company recognized a US$(21) million net impairment loss on financial and contract assets (December 31, 2022: gain of US$15 million attributable to the reversal of an impairment which was previously recognized for a funding loan provided to an equity accounted entity).
The movement of loss allowance during the year 2023 is summarized as follows:
\n| \u00a0 | Finance lease receivable | Contract assets | Trade receivables | Other financial assets | ||||
|---|---|---|---|---|---|---|---|---|
| \u00a0 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
Opening loss allowance as at 1 January | (0) | (0) | (1) | (1) | (2) | (3) | (95) | (108) |
Increase in loss allowance recognized in profit or loss during the year | - | (0) | (1) | (1) | (3) | (1) | (28) | - |
Receivables written off during the year as uncollectible | - | - | - | - | - | - | - | - |
Unused amount reversed | 0 | 0 | 1 | 1 | 1 | 2 | 0 | 14 |
At 31 December | (0) | (0) | (1) | (1) | (5) | (2) | (123) | (95) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Interest income on loans & receivables | \u00a0 | 3 | 0 |
Interest income on investments | \u00a0 | 21 | 10 |
Net foreign exchange gain | \u00a0 | - | - |
Other financial income | \u00a0 | 1 | 2 |
Financial income | \u00a0 | 25 | 12 |
Interest expenses on financial liabilities at amortized cost | \u00a0 | (731) | (352) |
Interest income / (expenses) on hedging derivatives | \u00a0 | 139 | (28) |
Interest expenses on lease liabilities | \u00a0 | (5) | (2) |
Interest addition to provisions | \u00a0 | (1) | (1) |
Net cash flow hedges ineffectiveness | \u00a0 | - | (1) |
Net foreign exchange loss | \u00a0 | (3) | (1) |
Financial expenses | \u00a0 | (601) | (385) |
Net financing costs | \u00a0 | (575) | (373) |
The Company has increased its debt (see note 4.3.23 Borrowings and Lease Liabilities) in order to finance its ongoing construction program of five FPSOs during the period.
\nThe increase in net financing costs is mainly due to (i) increased project financing to fund continued investment in growth on the five FPSOs under construction during the period, (ii) additional interest expense on FPSO Liza Destiny and FPSO Liza Unity variable rate project loans and (iii) interest expense on the US$125 million funding loan agreement secured in 2023 with CMFL in relation to FPSO Cidade de Ilhabela, in line with the Company aim to diversify its sources of debt funding and to accelerate equity cash flow from the backlog, partially offset by (iv) the scheduled amortization of project loans.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Interest income on loans & receivables | \u00a0 | 3 | 0 |
Interest income on investments | \u00a0 | 21 | 10 |
Net foreign exchange gain | \u00a0 | - | - |
Other financial income | \u00a0 | 1 | 2 |
Financial income | \u00a0 | 25 | 12 |
Interest expenses on financial liabilities at amortized cost | \u00a0 | (731) | (352) |
Interest income / (expenses) on hedging derivatives | \u00a0 | 139 | (28) |
Interest expenses on lease liabilities | \u00a0 | (5) | (2) |
Interest addition to provisions | \u00a0 | (1) | (1) |
Net cash flow hedges ineffectiveness | \u00a0 | - | (1) |
Net foreign exchange loss | \u00a0 | (3) | (1) |
Financial expenses | \u00a0 | (601) | (385) |
Net financing costs | \u00a0 | (575) | (373) |
The Company has increased its debt (see note 4.3.23 Borrowings and Lease Liabilities) in order to finance its ongoing construction program of five FPSOs during the period.
\nThe increase in net financing costs is mainly due to (i) increased project financing to fund continued investment in growth on the five FPSOs under construction during the period, (ii) additional interest expense on FPSO Liza Destiny and FPSO Liza Unity variable rate project loans and (iii) interest expense on the US$125 million funding loan agreement secured in 2023 with CMFL in relation to FPSO Cidade de Ilhabela, in line with the Company aim to diversify its sources of debt funding and to accelerate equity cash flow from the backlog, partially offset by (iv) the scheduled amortization of project loans.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Interest income on loans & receivables | \u00a0 | 3 | 0 |
Interest income on investments | \u00a0 | 21 | 10 |
Net foreign exchange gain | \u00a0 | - | - |
Other financial income | \u00a0 | 1 | 2 |
Financial income | \u00a0 | 25 | 12 |
Interest expenses on financial liabilities at amortized cost | \u00a0 | (731) | (352) |
Interest income / (expenses) on hedging derivatives | \u00a0 | 139 | (28) |
Interest expenses on lease liabilities | \u00a0 | (5) | (2) |
Interest addition to provisions | \u00a0 | (1) | (1) |
Net cash flow hedges ineffectiveness | \u00a0 | - | (1) |
Net foreign exchange loss | \u00a0 | (3) | (1) |
Financial expenses | \u00a0 | (601) | (385) |
Net financing costs | \u00a0 | (575) | (373) |
The Company has increased its debt (see note 4.3.23 Borrowings and Lease Liabilities) in order to finance its ongoing construction program of five FPSOs during the period.
\nThe increase in net financing costs is mainly due to (i) increased project financing to fund continued investment in growth on the five FPSOs under construction during the period, (ii) additional interest expense on FPSO Liza Destiny and FPSO Liza Unity variable rate project loans and (iii) interest expense on the US$125 million funding loan agreement secured in 2023 with CMFL in relation to FPSO Cidade de Ilhabela, in line with the Company aim to diversify its sources of debt funding and to accelerate equity cash flow from the backlog, partially offset by (iv) the scheduled amortization of project loans.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Interest income on loans & receivables | \u00a0 | 3 | 0 |
Interest income on investments | \u00a0 | 21 | 10 |
Net foreign exchange gain | \u00a0 | - | - |
Other financial income | \u00a0 | 1 | 2 |
Financial income | \u00a0 | 25 | 12 |
Interest expenses on financial liabilities at amortized cost | \u00a0 | (731) | (352) |
Interest income / (expenses) on hedging derivatives | \u00a0 | 139 | (28) |
Interest expenses on lease liabilities | \u00a0 | (5) | (2) |
Interest addition to provisions | \u00a0 | (1) | (1) |
Net cash flow hedges ineffectiveness | \u00a0 | - | (1) |
Net foreign exchange loss | \u00a0 | (3) | (1) |
Financial expenses | \u00a0 | (601) | (385) |
Net financing costs | \u00a0 | (575) | (373) |
The other reserves comprises the hedging reserve, actuarial gains/losses, the foreign currency translation reserve and IFRS 2 reserves. The movement and breakdown of the other reserves can be stated as follows (all amounts are expressed net of deferred taxes):
\n| \u00a0 | Hedging reserve Forward currency contracts | Hedging reserve Interest rate swaps | Actuarial gain/(loss) on defined benefit provisions | Foreign currency translation reserve | IFRS 2 Reserves | Protective share reserve | Total other reserves |
|---|---|---|---|---|---|---|---|
Balance at 1 January 2022 | (104) | (167) | 7 | (105) | 22 | - | (347) |
Cash flow hedges | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in fair value | (78) | 473 | - | - | - | - | 394 |
Transfer to financial income and expenses | 1 | 12 | - | - | - | - | 12 |
Transfer to construction contracts and property, plant and equipment | 62 | - | - | - | - | - | 62 |
Transfer to operating profit and loss | 48 | - | - | - | - | - | 48 |
IFRS 2 share-based payments | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
IFRS 2 vesting costs for the year | - | - | - | - | 19 | - | 19 |
IFRS 2 vested share-based payments | - | - | - | - | (19) | - | (19) |
Actuarial gain/(loss) on defined benefit provision | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in defined benefit provision due to changes in actuarial assumptions | - | - | 7 | - | - | - | 7 |
Foreign currency variations | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Foreign currency variations | - | - | - | 2 | (1) | - | 1 |
Mergers and acquisitions | - | - | - | (0) | \u00a0 | - | (0) |
Other movements | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reclassification | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 26 | 26 |
Balance at 31 December 2022 | (72) | 317 | 15 | (103) | 21 | 26 | 204 |
Cash flow hedges | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in fair value | 85 | (53) | - | - | - | - | 32 |
Deferred tax on cash flow hedges | - | (45) | - | - | - | - | (45) |
Transfer to financial income and expenses | - | 4 | - | - | - | - | 4 |
Transfer to construction contracts and property, plant and equipment | 24 | - | - | - | - | - | 24 |
Transfer to operating profit and loss | 8 | - | - | - | - | - | 8 |
IFRS 2 share-based payments | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
IFRS 2 vesting costs for the year | - | - | - | - | 20 | - | 20 |
IFRS 2 vested share-based payments | - | - | - | - | (16) | - | (16) |
Actuarial gain/(loss) on defined benefit provision | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in defined benefit provision due to changes in actuarial assumptions | - | - | (4) | - | - | - | (4) |
Foreign currency variations | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Foreign currency variations | - | - | - | (2) | 1 | - | (2) |
Mergers and acquisitions | - | - | - | 0 | \u00a0 | - | 0 |
Other movements | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reclassification | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | - |
Balance at 31 December 2023 | 44 | 224 | 11 | (105) | 25 | 26 | 224 |
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEffectOfChangesInForeignExchangeRatesExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-567": { "value": "\nThe relationship between the Company\u2019s income tax expense and profit before income tax (referred to as \u2019effective tax rate\u2019) can vary significantly from period to period considering among other factors: (i) changes in the blend of income that is taxed based on revenues versus profit, (ii) the different statutory tax rates in the location of the Company\u2019s operations and (iii) the possibility to recognize deferred tax assets on tax losses to the extent that suitable future taxable profits will be available.
\nSome of the taxes are withholding taxes (paid on revenues). The assessment of whether the withholding tax is in scope of IAS 12 is judgmental; the Company has performed this assessment in the past and some of the withholding taxes that the Company pays in certain countries qualify as income taxes, as it creates an income tax credit or it is considered as deemed profit taxation.
\nConsequently, income tax expense does not change proportionally with profit before income taxes. Significant decreases in profit before income tax typically lead to a higher effective tax rate, while significant increases in profit before income taxes can lead to a lower effective tax rate, subject to the other factors impacting income tax expense, noted above. Additionally, where a deferred tax asset is not recognized on a loss carry forward, the effective tax rate is impacted by the unrecognized tax loss.
\nThe components of the Company\u2019s income taxes are:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Corporation tax on profits for the year | \u00a0 | (129) | (85) |
Adjustments in respect of prior years | \u00a0 | (1) | (1) |
Movements in uncertain tax positions | \u00a0 | (2) | 3 |
Total current income tax | \u00a0 | (131) | (83) |
Deferred tax | 156 | (20) | |
Total | \u00a0 | 25 | (104) |
The Company\u2019s operational activities are subject to taxation at rates which range up to 35% (2022: 35%).
\nFor the year ended December 31, 2023, the respective tax rates, the change in the blend of income tax based on income withholding tax and deemed profit assessment versus income tax based on net profit, the unrecognized deferred tax asset on certain tax losses, tax-exempt profits and non-deductible costs resulted in an effective tax on continuing operations of (4)% (2022: 16%).
\nThe reconciliation of the effective tax rate is as follows:
\n| \u00a0 | \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|---|
| \u00a0 | \u00a0 | % | \u00a0 | % | \u00a0 |
Profit/(Loss) before income tax | \u00a0 | \u00a0 | 589 | \u00a0 | 660 |
Share of profit of equity-accounted investees | \u00a0 | \u00a0 | 19 | \u00a0 | 12 |
Profit/(Loss) before income tax and share of profit of equity-accounted investees | \u00a0 | \u00a0 | 570 | \u00a0 | 648 |
Income tax using the domestic corporation tax rate (25,8% for the Netherlands) | \u00a0 | 25,8% | (147) | 25,8% | (167) |
Tax effects of : | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Different statutory taxes related to subsidiaries operating in other jurisdictions | \u00a0 | (5%) | 29 | (9%) | 57 |
Withholding taxes and taxes based on deemed profits | \u00a0 | 8% | (46) | 5% | (33) |
Non-deductible expenses | \u00a0 | 10% | (55) | 10% | (64) |
Non-taxable income | \u00a0 | (17%) | 98 | (19%) | 125 |
Adjustments related to prior years | \u00a0 | 0% | (1) | 0% | (1) |
Tax effect originating from current year timing differences and unused tax losses for which no deferred tax is recognized | \u00a0 | (26%) | 150 | 4% | (24) |
Movements in uncertain tax positions | \u00a0 | 0% | (2) | (0%) | 3 |
Total tax effects | \u00a0 | (30%) | 172 | (10%) | 63 |
Total of tax charge on the Consolidated Income Statement | \u00a0 | (4%) | 25 | 16% | (104) |
The effective tax rate was impacted in 2023 by the recognition of a deferred tax asset on a tax goodwill in Switzerland for a net amount of US$141 million (absent this deferred tax asset, the effective tax rate would stand at 20%), for more detailed information refer to note 4.3.17 Deferred Tax Assets and Liabilities.
\nSimilar to last year, the effective tax was also impacted by\u00a0unrecognized deferred tax assets concerning Brazil, USA, Switzerland, Luxembourg, Monaco and the Netherlands.
\nDetails of the withholding taxes and other taxes are as follows:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Withholding Tax and Overseas Taxes | Withholding tax | Withholding tax |
Brazil | (22) | (20) |
Guyana | (22) | (12) |
Other | (2) | (1) |
Total withholding and overseas taxes | (46) | (33) |
The Company\u2019s construction and lease activities related to Guyana are subject to Guyanese withholding tax.
\nThe Company files federal and local tax returns in several jurisdictions throughout the world. Tax returns in the major jurisdictions in which the Company operates are generally subject to examination for periods ranging from three to six years. Tax authorities in certain jurisdictions are examining tax returns and in some cases have issued assessments. The Company believes there is a sound basis for its tax positions in those jurisdictions. The Company provides for taxes that it considers probable of being payable as a result of these audits and for which a reasonable estimate may be made. While the Company cannot predict or provide assurance as to the final outcome of these proceedings, the Company does not expect the ultimate liability to have a material effect on its consolidated statement of financial position or results of operations, although it could have a significant adverse effect on its consolidated cash flows.
\nEach year management completes a detailed review of uncertain tax positions across the Company and makes provisions based on the probability of the liability arising. The principal risks that arise for the Company are in respect of permanent establishment, transfer pricing and other similar international tax issues. In common with other international groups, the difference in alignment between the Company\u2019s global operating model and the jurisdictional approach of tax authorities often leads to uncertainty on tax positions.
\nAs a result of the above, in the period, the Company recorded a net tax decrease of US$5 million in respect of ongoing tax\u00a0audits and in respect of the Company\u2019s review of its uncertain tax positions. This decrease is primarily in relation to uncertain tax positions on tax other than corporate income tax. However it is possible that the ultimate resolution of the tax exposures could result in tax charges that are materially higher or lower than the amount provided.
\nThe Company has recognized a deferred tax asset for a gross amount of US$2,184 million in relation to a tax goodwill in Switzerland (refer to note 4.3.17 Deferred Tax Assets and Liabilities). In determining the taxable profits, the Company performed an extensive assessment and modeling to determine that an amount of US$2,043 million\u00a0could possibly be unrecoverable, which is driven by the assessment of profitability and commercial uncertainties (i.e. future awards) impacting future profits. Based on the uncertainty of recovering this tax asset in future years, in light of applicable enacted Swiss tax regulations, the Company determined the expected value based on a range of possible outcomes. As a result, the Company as of December 31, 2023, recognized a deferred tax asset related to the tax goodwill in Switzerland net of US$141\u00a0million in accordance with IAS 12 and IFRIC23.
\nThe Company\u00a0conducts\u00a0operations\u00a0through\u00a0its\u00a0various subsidiaries\u00a0in\u00a0a\u00a0number\u00a0of\u00a0countries\u00a0throughout\u00a0the\u00a0world.\u00a0Each country\u00a0has\u00a0its\u00a0own tax\u00a0regimes\u00a0with varying\u00a0nominal\u00a0rates, deductions\u00a0and\u00a0tax attributes.\u00a0From\u00a0time to\u00a0time,\u00a0the Company may identify changes to previously evaluated tax positions that could result in adjustments to its recorded assets and liabilities.\u00a0Although the\u00a0Company\u00a0is\u00a0unable\u00a0to\u00a0predict\u00a0the\u00a0outcome\u00a0of\u00a0these\u00a0changes, it\u00a0does\u00a0not\u00a0expect\u00a0the\u00a0effect,\u00a0if\u00a0any, resulting\u00a0from\u00a0these\u00a0adjustments\u00a0to\u00a0have\u00a0a\u00a0material\u00a0effect on\u00a0its\u00a0consolidated\u00a0statement\u00a0of\u00a0financial\u00a0position,\u00a0results\u00a0of operations or cash\u00a0flows.
\nIn December 2021, the OECD released the GloBE Pillar Two model rules, also referred to as the \u2018Global Anti-Base Erosion\u2019 or \u2018GloBE\u2019 rules, which subsequently led to the issuance of the draft proposal for a GloBE Directive by the European Commission. These rules aim to ensure large multinational enterprises (MNEs) pay a minimum amount of tax on income arising in each jurisdiction in which they operate through introducing a global minimum corporate income tax rate set at 15%. The GloBE rules are intended to be implemented as part of an agreed-upon common approach, introduced via domestic tax law and expected to be effective as from January 1, 2024.
\nThe Company is assessing its exposure to Pillar Two legislation in the jurisdictions in which it operates and acknowledges that:
Pillar Two represents a significant additional layer of tax calculation and reporting to what is already a very complex tax compliance process for most MNEs. It will ultimately require a new global tax calculation in every jurisdiction in which the Company operates.
There will likely be divergence in rules as countries adopt slightly different versions in domestic legislation, which will add to the complexity of these calculations.
The tax base that Pillar Two is determined upon is entirely new and calculations will need to be based, in part, on data that the Company currently does not structurally gather within its tax compliance processes.
As indicated above, the assessment process is complex and is based on legislation which is in various degrees of enactment and subject to further interpretation. Taking this into account, the Company has performed a preliminary assessment which uses assumptions on the specific adjustments envisaged in the Pillar Two legislation. Based on the results for the year 2023, the Company estimated that the potential impact would represent between 0.4% and 0.6% on the effective tax rate. For 2023 this impact primarily concerns entities within the jurisdictions of Bermuda and the Cayman Islands. The Company highlights that the disclosed impact is on the basis of certain assumptions, which eventually might deviate from the actual impact due to differences in interpretation, divergence in rules between jurisdictions and further guidance to be issued.
\nAs the situation is still evolving, it leads to uncertainties of the financial impact in periods in which legislation will be in effect. The Company has been reviewing Pillar Two features providing for simplification and/or relief for multinational enterprises that have genuine economic activities in different jurisdictions. The 2021 transition in Swiss tax regimes applicable to Swiss companies of the Company notably has a positive impact in respect of Pillar Two, as bringing those companies firmly within the scope of Swiss taxation. Therefore, the Company continues to monitor the implementation of the Pillar Two model rules in each jurisdiction\u2019s legislation and will implement processes and governance for reporting on the financial impact related to Pillar Two in 2024.
The basic earnings per share for the year amounts to US$2.74 (2022: US$2.53), and the fully diluted earnings per share amounts to US$2.70 (2022: US$2.50). Basic earnings/(loss) per share amounts are calculated by dividing net profit/(loss) for the year attributable to shareholders of the Company by the weighted average number of shares outstanding during the year.
\nDiluted earnings/(loss) per share amounts are calculated by dividing the net profit/loss attributable to shareholders of the Company by the weighted average number of shares outstanding during the year plus the weighted average number of shares that would be issued on the conversion of all the potential dilutive shares into ordinary shares.
\nThe following reflects the share data used in the basic and diluted earnings per share computations:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Earnings attributable to shareholders (in thousands of US$) | 490,821 | 450,137 |
Number of shares outstanding at January 1 (excluding treasury shares) | 178,054,655 | 176,622,557 |
Average number of treasury shares transferred to employee share programs | 1,225,505 | 1,283,909 |
Average number of shares repurchased / cancelled | (45,044) | - |
Weighted average number of shares outstanding | 179,235,116 | 177,906,466 |
Impact shares to be issued | - | - |
Weighted average number of shares (for calculations basic earnings per share) | 179,235,116 | 177,906,466 |
Potential dilutive shares from stock option scheme and other share-based payments | 2,269,314 | 1,965,043 |
Weighted average number of shares (diluted) | 181,504,430 | 179,871,509 |
Basic earnings per share in US$ | 2.74 | 2.53 |
Fully diluted earnings per share in US$ | 2.70 | 2.50 |
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these financial statements, except for the issuance of Value Creation Stake shares for the Management Board, Ownership Shares for the Company\u2019s senior management and the Matching Shares and RSUs that have vested on January 1, 2024 (see note 4.3.6 Employee Benefit Expenses).
The Company is evolving its shareholder return policy as follows: \u201dThe Company\u2019s shareholders return policy is to maintain a stable annual cash return to shareholders which grows over time, with flexibility for the Company to make such cash return in the form of a cash dividend and the repurchase of shares. Determination of the annual cash return is based on the Company\u2019s assessment of its underlying cash flow position. The Company prioritizes a stable cash distribution to shareholders and funding of growth projects, with the option to apply surplus capital towards incremental cash returns to shareholders.\u201d The policy will be presented for discussion at the Annual General Meeting on April 12, 2024.
\nAs a result, following review of its cash flow position and forecast, the Company intends to pay a total cash return to shareholders of US$220 million in 2024. This represents an increase of 12% compared with the dividend paid in 2023. The cash return is to be composed of a proposed dividend of US$150 million (equivalent to c. US$0.83 per share1) combined with a EUR65 million (US$70 million equivalent2) share repurchase program. Shares repurchased as part of the cash return will be cancelled.\u00a0The share repurchase program will be launched on March 1, 2024 and the dividend will be proposed at the Annual General Meeting on April 12, 2024. Going forward, the Company intends to maintain a material level of dividend as part of the annual cash return with US$150 million as a base level.
The line item \u2019Property, plant and equipment\u2019 consists of property, plant and equipment owned by the Company and right-of-use assets:
\n| \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|
Property, plant and equipment excluding leases | 308 | 274 |
Right-of-use assets | 77 | 40 |
Total | 384 | 314 |
The movement of the Property, plant and equipment during the year 2023 is summarized as follows:
\n| \u00a0 | Land and buildings | Vessels and floating equipment | Other fixed assets | Assets under construction | Total |
|---|---|---|---|---|---|
Cost | 60 | 1,813 | 78 | 16 | 1,967 |
Accumulated depreciation and impairment | (41) | (1,596) | (56) | - | (1,693) |
Book value at 1 January | 19 | 217 | 23 | 16 | 274 |
Additions | 0 | 3 | 6 | 70 | 79 |
Disposals | (0) | - | (0) | - | (0) |
Depreciation | (2) | (30) | (9) | - | (41) |
Impairment | - | (6) | - | - | (6) |
Foreign currency variations | 0 | (0) | 1 | 0 | 1 |
Other movements | 5 | (0) | 1 | (6) | 0 |
Total movements | 3 | (32) | (2) | 65 | 34 |
Cost | 67 | 1,821 | 82 | 81 | 2,051 |
Accumulated depreciation and impairment | (45) | (1,637) | (62) | - | (1,744) |
Book value at 31 December | 22 | 185 | 21 | 81 | 308 |
| \u00a0 | Land and buildings | Vessels and floating equipment | Other fixed assets | Assets under construction | Total |
|---|---|---|---|---|---|
Cost | 63 | 1,741 | 83 | 4 | 1,891 |
Accumulated depreciation and impairment | (38) | (1,446) | (55) | - | (1,540) |
Book value at 1 January | 25 | 295 | 28 | 4 | 351 |
Additions | 0 | 13 | 5 | 79 | 97 |
Disposals | - | (0) | (0) | (0) | (0) |
Depreciation | (5) | (47) | (11) | - | (63) |
Impairment | - | (108) | - | - | (108) |
Foreign currency variations | (1) | 0 | (1) | (0) | (2) |
Other movements | 0 | 65 | 2 | (67) | (0) |
Total movements | (6) | (78) | (5) | 12 | (77) |
Cost | 60 | 1,813 | 78 | 16 | 1,967 |
Accumulated depreciation and impairment | (41) | (1,596) | (56) | - | (1,693) |
Book value at 31 December | 19 | 217 | 23 | 16 | 274 |
During the 2023 period, the following main events occurred regarding owned property, plant and equipment:
US$41 million of annual depreciation charges, following the normal depreciation schedule;
US$79 million additions mainly related to capitalized major overhaul costs related to repair work performed on FPSO Cidade de Anchieta.
US$(6) million impairment of FPSO Capixaba residual value due to the reassessment of the expected towing and green recycling costs of the unit following the final selection of a scrapping yard in Denmark.
Property, plant and equipment at year-end comprises of:
One (2022: one) integrated floating production, storage and offloading system (FPSO) (namely FPSO Cidade de Anchieta) consisting of a converted tanker, a processing plant and one mooring system. This FPSO is leased to third parties under an operating lease contract;
One semi-submersible production platform, the Thunder Hawk (2022: one), leased to third parties under an operating lease contract.
The depreciation charge for the semi-submersible production facility Thunder Hawk is calculated based on its future anticipated economic benefits, resulting in a depreciation plan based on the unit of production method. All other property, plant and equipment is depreciated on a straight-line basis.
\nCompany-owned property, plant and equipment with a carrying amount of US$178 million (2022: US$195 million) has been pledged as security for liabilities, mainly for external financing.
\nNo interest has been capitalized during the financial year as part of the additions to property, plant and equipment (2022: nil).
\nFPSO Cidade de Anchieta was shut down from January 22, 2022, following observation of oil near the vessel. Adequate anti-pollution measures were immediately deployed and were effective and inspections quickly identified oil leaks from two tanks. A repair program has been implemented to repair the four tanks required for the safe restart of the vessel in agreement with the client and approved by Class and local authorities as well as for the repair of other tanks for which works progressed as planned during the current year and which will continue over the coming years. This enabled a safe restart at full production on December 17, 2022. In prior year, the total expected net cost of repairs resulted in an adverse cash flow and an impairment of US$92 million.
\nIn the current year, an impairment assessment of FPSO Cidade de Anchieta was performed. No additional impairment was recognised in the year 2023.
\nThe recoverable amount of the vessel was determined using its value in use. Significant estimates are part of the impairment calculation:
If the discount rate (7.4%) used in the impairment test were to vary by +/- 1%, the impairment would change by +/- US$10 million;
If the cash outflow were to vary by +/- US$20 million, the impairment would change by +/- US$19 million;
If the cash inflow were to vary by +/- US$20 million, the impairment would change by -/+ US$19 million;
If the timing of some cash inflow would vary by one year, the impairment would change by + US$7 million.
As of December 31, 2023, the Company leases buildings and cars. The movement of the right-of-use assets during the year 2023 is summarized as follows:
\n| \u00a0 | Buildings | Other fixed assets | Total |
|---|---|---|---|
Book value at 1 January | 39 | 1 | 40 |
Additions | 54 | 1 | 55 |
Disposals | (5) | - | (5) |
Depreciation | (14) | (1) | (14) |
Impairment | - | - | - |
Foreign currency variations | 2 | 0 | 2 |
Other movements | (1) | (0) | (1) |
Total movements | 36 | 1 | 37 |
Cost | 104 | 4 | 108 |
Accumulated depreciation and impairment | (29) | (2) | (31) |
Book value at 31 December | 75 | 2 | 77 |
| \u00a0 | Buildings | Other fixed assets | Total |
|---|---|---|---|
Book value at 1 January | 44 | 1 | 45 |
Additions | 12 | 1 | 13 |
Disposals | - | (0) | (0) |
Depreciation | (14) | (1) | (15) |
(Impairment)/impairment reversal | - | - | - |
Foreign currency variations | (2) | (0) | (2) |
Other movements | (1) | (0) | (1) |
Total movements | (5) | 0 | (4) |
Cost | 72 | 3 | 75 |
Accumulated depreciation and impairment | (33) | (2) | (35) |
Book value at 31 December | 39 | 1 | 40 |
During the year 2023, the main movements regarding right-of-use assets related to US$55 million of capitalization of lease extensions and new lease office contracts, partially offset by US$14 million of depreciation charges. In March 2023, the Company extended the lease agreement of one of its office buildings until 2037. This resulted in an increase of US$43 million to right-of-use assets and a similar increase in lease liabilities (refer to note 4.3.23 Borrowings and Lease Liabilities).
\nSignificant contracts under buildings relate to the lease of offices. The remaining contract periods of the Company\u2019s office rentals vary between one and ten years and most of the contracts include extension options between three and fourteen years. The extension options have been taken into account in the measurement of lease liabilities when the Company is reasonably certain to exercise these options. The lease agreements do not impose any covenants.
The category \u2019Vessels and floating equipment\u2019 mainly relates to facilities leased to third parties under various operating lease agreements which terminate between 2025 and 2031. Leased facilities included in the \u2019Vessels and floating equipment\u2019 amount to:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Cost | \u00a0 | 1,821 | 1,813 |
Accumulated depreciation and impairment | \u00a0 | (1,637) | (1,596) |
Book value at 31 December | \u00a0 | 185 | 217 |
As of December 31, 2023, the units included under leased facilities are FPSO Cidade de Anchieta and the semi-submersible production facility Thunder Hawk. The book value of the leased facilities included in the vessels and floating equipment has decreased by US$32 million, mainly due to depreciation.
\nThe nominal values of the future expected bareboat receipts (undiscounted lease payments) in respect of the remaining operating lease contracts are:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Within 1 year | \u00a0 | 105 | 113 |
2 years | \u00a0 | 99 | 111 |
3 years | \u00a0 | 91 | 104 |
4 years | \u00a0 | 91 | 91 |
5 years | \u00a0 | 91 | 91 |
After 5 years | \u00a0 | 214 | 306 |
Total | \u00a0 | 693 | 816 |
A number of agreements have extension options, which have not been included in the above table.
\nThe operating lease contract of semi-submersible Thunder Hawk includes a call option for the client to purchase the underlying asset. The exercise of this call option would have resulted in a gain for the Company as at December 31, 2023.
During the 2023 period, the following main events occurred regarding owned property, plant and equipment:
US$41 million of annual depreciation charges, following the normal depreciation schedule;
US$79 million additions mainly related to capitalized major overhaul costs related to repair work performed on FPSO Cidade de Anchieta.
US$(6) million impairment of FPSO Capixaba residual value due to the reassessment of the expected towing and green recycling costs of the unit following the final selection of a scrapping yard in Denmark.
FPSO Cidade de Anchieta was shut down from January 22, 2022, following observation of oil near the vessel. Adequate anti-pollution measures were immediately deployed and were effective and inspections quickly identified oil leaks from two tanks. A repair program has been implemented to repair the four tanks required for the safe restart of the vessel in agreement with the client and approved by Class and local authorities as well as for the repair of other tanks for which works progressed as planned during the current year and which will continue over the coming years. This enabled a safe restart at full production on December 17, 2022. In prior year, the total expected net cost of repairs resulted in an adverse cash flow and an impairment of US$92 million.
\nIn the current year, an impairment assessment of FPSO Cidade de Anchieta was performed. No additional impairment was recognised in the year 2023.
\nThe recoverable amount of the vessel was determined using its value in use. Significant estimates are part of the impairment calculation:
If the discount rate (7.4%) used in the impairment test were to vary by +/- 1%, the impairment would change by +/- US$10 million;
If the cash outflow were to vary by +/- US$20 million, the impairment would change by +/- US$19 million;
If the cash inflow were to vary by +/- US$20 million, the impairment would change by -/+ US$19 million;
If the timing of some cash inflow would vary by one year, the impairment would change by + US$7 million.
Company-owned property, plant and equipment with a carrying amount of US$178 million (2022: US$195 million) has been pledged as security for liabilities, mainly for external financing.
\nSBM Offshore N.V., as the parent company, is committed to fulfill various types of obligations arising from customer contracts, such as full performance and warranty obligations.
\nIn the past, the parent company has issued guarantees for contractual obligations in respect of several Group companies, including equity-accounted joint ventures, with respect to long-term lease-and-operate contracts. The few remaining guarantees still active as of December 31, 2023, relate to the Deep Panuke MOPU unit, Thunder Hawk semi-submersible platform, FPSO Mondo and FPSO Saxi Batuque. These were signed prior to 2010.
As of December 31, 2023, the Company has provided bank guarantees to unrelated third parties for an amount of US$361million (2022: US$327 million). No liability is expected to arise under these guarantees.
\nThe Company holds in its favor US$654 million of bank guarantees from unrelated third parties. No withdrawal under these guarantees is expected to occur.
| \u00a0 | Development costs | Software | Intangible assets under construction | Patents | Total |
|---|---|---|---|---|---|
Cost | 38 | 28 | 100 | 19 | 185 |
Accumulated amortization and impairment | (29) | (20) | - | (19) | (68) |
Book value at 1 January | 9 | 8 | 100 | 0 | 117 |
Additions | 6 | 7 | 31 | - | 45 |
Amortization | (5) | (4) | - | - | (9) |
(Impairment)/impairment reversal | - | - | - | - | - |
Total movements | 1 | 3 | 31 | - | 36 |
Cost | 44 | 29 | 132 | 19 | 224 |
Accumulated amortization and impairment | (33) | (18) | - | (19) | (71) |
Book value at 31 December | 11 | 11 | 132 | 0 | 153 |
| \u00a0 | Development costs | Software | Intangible assets under construction | Patents | Total |
|---|---|---|---|---|---|
Cost | 34 | 25 | 67 | 19 | 145 |
Accumulated amortization and impairment | (25) | (15) | - | (19) | (59) |
Book value at 1 January | 9 | 11 | 67 | 0 | 86 |
Additions | 4 | 3 | 34 | - | 41 |
Amortization | (3) | (4) | - | - | (7) |
(Impairment)/impairment reversal | - | (2) | - | - | (2) |
Total movements | 1 | (3) | 34 | - | 31 |
Cost | 38 | 28 | 100 | 19 | 185 |
Accumulated amortization and impairment | (29) | (20) | - | (19) | (68) |
Book value at 31 December | 9 | 8 | 100 | 0 | 117 |
The increase in \u2019Intangible assets under construction\u2019 mainly relates to costs capitalized relating to the design and implementation of the new global ERP system, the capitalization of software licenses and other capital expenditures related to the IT infrastructure upgrade project.
\nAmortization of development costs is included in \u2019Research and development expenses\u2019 in the income statement in 2023 for US$5 million (2022: US$3 million).
\nAmortization of software is included in \u2019General and administrative expenses\u2019 in the income statement in 2023 for US$4 million (2022: US$4 million).
| \u00a0 | Development costs | Software | Intangible assets under construction | Patents | Total |
|---|---|---|---|---|---|
Cost | 38 | 28 | 100 | 19 | 185 |
Accumulated amortization and impairment | (29) | (20) | - | (19) | (68) |
Book value at 1 January | 9 | 8 | 100 | 0 | 117 |
Additions | 6 | 7 | 31 | - | 45 |
Amortization | (5) | (4) | - | - | (9) |
(Impairment)/impairment reversal | - | - | - | - | - |
Total movements | 1 | 3 | 31 | - | 36 |
Cost | 44 | 29 | 132 | 19 | 224 |
Accumulated amortization and impairment | (33) | (18) | - | (19) | (71) |
Book value at 31 December | 11 | 11 | 132 | 0 | 153 |
| \u00a0 | Development costs | Software | Intangible assets under construction | Patents | Total |
|---|---|---|---|---|---|
Cost | 34 | 25 | 67 | 19 | 145 |
Accumulated amortization and impairment | (25) | (15) | - | (19) | (59) |
Book value at 1 January | 9 | 11 | 67 | 0 | 86 |
Additions | 4 | 3 | 34 | - | 41 |
Amortization | (3) | (4) | - | - | (7) |
(Impairment)/impairment reversal | - | (2) | - | - | (2) |
Total movements | 1 | (3) | 34 | - | 31 |
Cost | 38 | 28 | 100 | 19 | 185 |
Accumulated amortization and impairment | (29) | (20) | - | (19) | (68) |
Book value at 31 December | 9 | 8 | 100 | 0 | 117 |
The increase in \u2019Intangible assets under construction\u2019 mainly relates to costs capitalized relating to the design and implementation of the new global ERP system, the capitalization of software licenses and other capital expenditures related to the IT infrastructure upgrade project.
\nAmortization of development costs is included in \u2019Research and development expenses\u2019 in the income statement in 2023 for US$5 million (2022: US$3 million).
\nAmortization of software is included in \u2019General and administrative expenses\u2019 in the income statement in 2023 for US$4 million (2022: US$4 million).
The breakdown of the non-current portion of other financial assets is as follows:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Non-current portion of other receivables | \u00a0 | 113 | 106 |
Sublease receivables | \u00a0 | - | - |
Non-current portion of loans to joint ventures and associates | \u00a0 | 38 | 45 |
Total | \u00a0 | 151 | 151 |
The increase in non-current portion of other receivables relates to the increase of the demobilization receivables, partially offset by the recognition of the linearized revenue for FPSO Cidade de Anchieta.
\nThe current portion of (i) other receivables and sublease receivables, and (ii) loans to joint ventures and associates, is included within \u2018Trade and other receivables\u2019 in the statement of financial position.
\nIn relation to the exposure to credit risk at the reporting date on the carrying amount of the interest-bearing loans, non-current portion of other receivables and sublease receivable, please refer to note 4.3.8 Net Impairment Gains/(Losses) on Financial and Contract Assets and note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management for the risk of recoverability (i.e. for expected credit losses). The Company does not hold any collateral as security.
\nThe breakdown of loans to joint ventures and associates is presented below.
| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Current portion of loans to joint ventures and associates | 3 | 7 | |
Non-current portion of loans to joint ventures and associates | \u00a0 | 38 | 45 |
Total | 41 | 52 |
The balance of loans to joint ventures and associates has decreased compared with the year-ago period due to the impairment of a funding loan provided to some equity accounted entities.
\nThe maximum exposure to credit risk at the reporting date is the carrying amount of the loans to joint ventures and associates, taking into account the risk of recoverability. The Company does not hold any collateral as security.
| \u00a0 | Note | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Trade debtors | \u00a0 | 200 | 308 |
Other accrued income | \u00a0 | 258 | 198 |
Prepayments | \u00a0 | 126 | 149 |
Accrued income in respect of delivered orders | \u00a0 | 74 | 0 |
Other receivables | \u00a0 | 147 | 75 |
Taxes and social security | \u00a0 | 92 | 57 |
Current portion of loan to joint ventures and associates | 3 | 7 | |
Total | \u00a0 | 901 | 795 |
The decrease in \u2019Trade debtors\u2019 of US$(108) million is mainly due to the collection of upfront payment for FPSO Prosperity.
\nThe increase in \u2019Other accrued income\u2019 is mainly due to FPSO Prosperity joining the fleet and additional accrued income on FPSO Cidade de Anchieta not yet invoiced after the re-start of operations.
\nThe decrease in prepayments of US$(23) million is mainly related to advance payments to yards related to the new multi-purpose floater hull (MPF).
\nThe increase in accrued income in respect of delivered orders relates to FPSO Prosperity\u2019s finalization project, including variation orders.
\nThe increase in \u2019Other receivables\u2019 mainly relates to advance payments made in relation to the Brazilian and Guyana fleet.
\nThe carrying amounts of the Company\u2019s trade debtors are distributed in the following countries:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Angola | \u00a0 | 66 | 48 |
Brazil | \u00a0 | 36 | 17 |
Guyana | \u00a0 | 45 | 208 |
Equatorial Guinea | \u00a0 | 8 | 11 |
The United States of America | \u00a0 | 4 | 3 |
Australia | \u00a0 | 1 | 1 |
Nigeria | \u00a0 | 10 | 4 |
Canada | \u00a0 | 10 | 2 |
France | \u00a0 | 6 | 0 |
Other | \u00a0 | 14 | 14 |
Total | \u00a0 | 200 | 308 |
The trade debtors balance is the nominal value less an allowance for estimated impairment losses as follows:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Nominal amount | \u00a0 | 204 | 312 |
Impairment allowance | \u00a0 | (4) | (4) |
Total | \u00a0 | 200 | 308 |
The allowance for impairment represents the Company\u2019s estimate of losses in respect of trade debtors. The allowance related to credit risk for significant trade debtors is built on specific expected loss components that relate to individual exposures. Furthermore, the Company uses historical credit loss experience as well as forward-looking information to determine a 1% expected credit loss rate on individually insignificant trade receivable balances. The creation and release for impaired trade debtors due to credit risk are reported in the line item \u2019Net impairment losses on financial and contract assets\u2019 of the consolidated income statement. Amounts charged to the allowance account are generally written off when there is no expectation of recovery.
\nThe aging of the nominal amounts of the trade debtors are:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||
|---|---|---|---|---|
| \u00a0 | Nominal | Impairment | Nominal | Impairment |
Not past due | 82 | (1) | 236 | (3) |
Past due 0-30 days | 40 | (0) | 9 | (0) |
Past due 31-120 days | 25 | (0) | 6 | (0) |
Past due 121- 365 days | 21 | (0) | 33 | (0) |
More than one year | 36 | (2) | 27 | (0) |
Total | 204 | (4) | 312 | (4) |
Not past due are those receivables for which either the contractual or \u2019normal\u2019 payment date has not yet elapsed. Past due are those amounts for which either the contractual or the \u2019normal\u2019 payment date has passed. Amounts that are past due but not impaired relate to a number of Company joint ventures and independent customers for whom there is no recent history of default, or the receivable amount can be offset by amounts included in current liabilities.
\nFor the closing balance and movements during the year of allowances on trade receivables, please refer to note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Current portion of loans to joint ventures and associates | 3 | 7 | |
Non-current portion of loans to joint ventures and associates | \u00a0 | 38 | 45 |
Total | 41 | 52 |
The balance of loans to joint ventures and associates has decreased compared with the year-ago period due to the impairment of a funding loan provided to some equity accounted entities.
\nThe maximum exposure to credit risk at the reporting date is the carrying amount of the loans to joint ventures and associates, taking into account the risk of recoverability. The Company does not hold any collateral as security.
The Company has several joint ventures and associates:
\nEntity name | Partners | Joint venture/ | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|---|
Sonasing Xikomba Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO N'Goma |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. Branch | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Angola | Lease & Operate | Angola operations |
Sonasing Sanha Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Sanha |
Sonasing Kuito Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Kuito |
Sonasing Mondo Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Mondo |
Sonasing Saxi Batuque Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Saxi-Batuque |
OPS Production Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
Gas Management (Congo) Ltd. | Maersk group | Joint venture | 49.00 | Bahamas | Lease & Operate | Nkossa II FSO |
Malaysia Deepwater Floating Terminal (Kikeh) Ltd. | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Malaysia Deepwater Production Contractors Sdn Bhd | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Floventis Energy Limited | CIERCO LTD. | Joint venture | 70.00 | United Kingdom | Turnkey | Cierco |
Ll\u0177r Floating Wind Limited | CIERCO LTD. | Joint venture | 70.00 | Scotland | Turnkey | Cierco |
CADEMO Corporation | CIERCO LTD. | Joint venture | 70.00 | United states of America | Turnkey | Cierco |
Normand Installer S.A. | The Solstad group | Joint venture | 49.90 | Switzerland | Turnkey | Normand Installer |
SBM Ship Yard Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Daewoo Shipbuilding & Marine Engineering Co. Ltd. | Associate | 33.33 | Bermuda | Turnkey | Angolan yard |
PAENAL - Porto Amboim Estaleiros Navais Ltda. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; SBM Shipyard | Associate | 30.00 | Angola | Turnkey | Angolan yard |
The Company has no joint operation as per definition provided by IFRS 11 \u2018Joint arrangements\u2019.
\nThe movements in investments in associates and joint ventures are as follows:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Investments in associates and joint ventures at 1 January | \u00a0 | 290 | 361 |
Share of profit of equity-accounted investees | 19 | 12 | |
Dividends | \u00a0 | (17) | (92) |
Cash flow hedges | \u00a0 | (2) | 9 |
Capital increase/(decrease) | \u00a0 | (0) | - |
Foreign currency variations | \u00a0 | (0) | 1 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | - | (1) |
Investments in associates and joint ventures at 31 December | \u00a0 | 288 | 290 |
In July 2023, the Company signed two Share Purchase Agreements with its partner Sonangol EP for (i) the acquisition of Sonangol's equity shares in the lease and operating entities related to FPSOs N\u2019goma, Saxi Batuque and Mondo; and (ii) the full divestment to a Sonangol subsidiary of the Company\u2019s equity shares in the parent company of the Angolan based Paenal Yard. Those agreements remain conditional upon several conditions precedent, including consent from clients, lenders, partners and approval by various competent authorities. Therefore, there was no impact considered in the current period from these share purchase agreements.
\nThe finance lease contract of FPSO N\u2019Goma, where the Company is the lessor, includes a call option for the client to purchase the underlying asset or to terminate the contract early. The exercise of the purchase option as per December 31, 2023, would have resulted in a gain for the Company. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe finance lease contract of FPSO Kikeh, where the Company is the lessor, includes a call option for the client to terminate the contract early. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe following tables present the figures at 100%.
\nProject name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 668 | 302 | 211 | 190 | 152 | 85 | - | 39 |
Angola operations | Angola | 225 | 2 | 20 | 29 | 27 | 203 | - | 291 |
FPSO Kikeh | Malaysia | 153 | 89 | 4 | - | 10 | 28 | 35 | 71 |
Angolan yard | Angola | 52 | (0) | 43 | 588 | 588 | 28 | - | 9 |
Non material joint ventures/associates | \u00a0 | 70 | 48 | 8 | 109 | 104 | 15 | - | 0 |
Total at 100% | \u00a0 | 1,167 | 441 | 286 | 917 | 880 | 359 | 35 | 410 |
Project name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 722 | 448 | 102 | 259 | 227 | 88 | 155 | 55 |
Angola operations | Angola | 178 | 4 | 10 | 28 | 7 | 172 | - | 236 |
FPSO Kikeh | Malaysia | 189 | 117 | 6 | - | 5 | 36 | 30 | 74 |
Angolan yard | Angola | 57 | (0) | 48 | 556 | 556 | 34 | (0) | 1 |
Non material joint ventures/associates | \u00a0 | 70 | 49 | 12 | 101 | 67 | 42 | - | 0 |
Total at 100% | \u00a0 | 1,217 | 618 | 178 | 944 | 862 | 372 | 184 | 367 |
The bank interest-bearing loans and other borrowings held by joint ventures and associates are as follows:
\n| \u00a0 | \u00a0 | \u00a0 | \u00a0 | Net book value at 31 December 2023 | Net book value at 31 December 2022 | ||||
|---|---|---|---|---|---|---|---|---|---|
Entity name | % Ownership | % Interest | Maturity | Non-current | Current | Total | Non-current | Current | Total |
US$ Project Finance facilities drawn: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Sonasing Xikomba Ltd | 50.00 | 4.10% | 15-05-2026 | 117 | 73 | 190 | 190 | 69 | 259 |
Normand Installer SA | 49.90 | 6.00% | 15-12-2026 | 11 | 6 | 16 | - | 22 | 22 |
Loans from subsidiaries of | \u00a0 | \u00a0 | \u00a0 | 324 | - | 324 | 293 | 7 | 300 |
Loans from other shareholders of the joint ventures and associates | \u00a0 | 368 | - | 368 | 341 | 6 | 346 | ||
Loans from other joint ventures2 | \u00a0 | \u00a0 | \u00a0 | 266 | - | 266 | 255 | - | 255 |
Net book value of loans and borrowings | \u00a0 | \u00a0 | \u00a0 | 1,086 | 79 | 1,164 | 1,079 | 103 | 1,182 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result at 100% | \u00a0 | 2 | (18) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | (72) | (18) |
Partner ownership | \u00a0 | 193 | 141 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | 166 | 166 |
Investments in associates and joint ventures | \u00a0 | 288 | 290 |
| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Current portion of loans to joint ventures and associates | 3 | 7 | |
Non-current portion of loans to joint ventures and associates | \u00a0 | 38 | 45 |
Total | 41 | 52 |
The balance of loans to joint ventures and associates has decreased compared with the year-ago period due to the impairment of a funding loan provided to some equity accounted entities.
\nThe maximum exposure to credit risk at the reporting date is the carrying amount of the loans to joint ventures and associates, taking into account the risk of recoverability. The Company does not hold any collateral as security.
The Company has several joint ventures and associates:
\nEntity name | Partners | Joint venture/ | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|---|
Sonasing Xikomba Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO N'Goma |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. Branch | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Angola | Lease & Operate | Angola operations |
Sonasing Sanha Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Sanha |
Sonasing Kuito Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Kuito |
Sonasing Mondo Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Mondo |
Sonasing Saxi Batuque Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Saxi-Batuque |
OPS Production Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
Gas Management (Congo) Ltd. | Maersk group | Joint venture | 49.00 | Bahamas | Lease & Operate | Nkossa II FSO |
Malaysia Deepwater Floating Terminal (Kikeh) Ltd. | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Malaysia Deepwater Production Contractors Sdn Bhd | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Floventis Energy Limited | CIERCO LTD. | Joint venture | 70.00 | United Kingdom | Turnkey | Cierco |
Ll\u0177r Floating Wind Limited | CIERCO LTD. | Joint venture | 70.00 | Scotland | Turnkey | Cierco |
CADEMO Corporation | CIERCO LTD. | Joint venture | 70.00 | United states of America | Turnkey | Cierco |
Normand Installer S.A. | The Solstad group | Joint venture | 49.90 | Switzerland | Turnkey | Normand Installer |
SBM Ship Yard Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Daewoo Shipbuilding & Marine Engineering Co. Ltd. | Associate | 33.33 | Bermuda | Turnkey | Angolan yard |
PAENAL - Porto Amboim Estaleiros Navais Ltda. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; SBM Shipyard | Associate | 30.00 | Angola | Turnkey | Angolan yard |
The Company has no joint operation as per definition provided by IFRS 11 \u2018Joint arrangements\u2019.
\nThe movements in investments in associates and joint ventures are as follows:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Investments in associates and joint ventures at 1 January | \u00a0 | 290 | 361 |
Share of profit of equity-accounted investees | 19 | 12 | |
Dividends | \u00a0 | (17) | (92) |
Cash flow hedges | \u00a0 | (2) | 9 |
Capital increase/(decrease) | \u00a0 | (0) | - |
Foreign currency variations | \u00a0 | (0) | 1 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | - | (1) |
Investments in associates and joint ventures at 31 December | \u00a0 | 288 | 290 |
In July 2023, the Company signed two Share Purchase Agreements with its partner Sonangol EP for (i) the acquisition of Sonangol's equity shares in the lease and operating entities related to FPSOs N\u2019goma, Saxi Batuque and Mondo; and (ii) the full divestment to a Sonangol subsidiary of the Company\u2019s equity shares in the parent company of the Angolan based Paenal Yard. Those agreements remain conditional upon several conditions precedent, including consent from clients, lenders, partners and approval by various competent authorities. Therefore, there was no impact considered in the current period from these share purchase agreements.
\nThe finance lease contract of FPSO N\u2019Goma, where the Company is the lessor, includes a call option for the client to purchase the underlying asset or to terminate the contract early. The exercise of the purchase option as per December 31, 2023, would have resulted in a gain for the Company. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe finance lease contract of FPSO Kikeh, where the Company is the lessor, includes a call option for the client to terminate the contract early. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe following tables present the figures at 100%.
\nProject name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 668 | 302 | 211 | 190 | 152 | 85 | - | 39 |
Angola operations | Angola | 225 | 2 | 20 | 29 | 27 | 203 | - | 291 |
FPSO Kikeh | Malaysia | 153 | 89 | 4 | - | 10 | 28 | 35 | 71 |
Angolan yard | Angola | 52 | (0) | 43 | 588 | 588 | 28 | - | 9 |
Non material joint ventures/associates | \u00a0 | 70 | 48 | 8 | 109 | 104 | 15 | - | 0 |
Total at 100% | \u00a0 | 1,167 | 441 | 286 | 917 | 880 | 359 | 35 | 410 |
Project name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 722 | 448 | 102 | 259 | 227 | 88 | 155 | 55 |
Angola operations | Angola | 178 | 4 | 10 | 28 | 7 | 172 | - | 236 |
FPSO Kikeh | Malaysia | 189 | 117 | 6 | - | 5 | 36 | 30 | 74 |
Angolan yard | Angola | 57 | (0) | 48 | 556 | 556 | 34 | (0) | 1 |
Non material joint ventures/associates | \u00a0 | 70 | 49 | 12 | 101 | 67 | 42 | - | 0 |
Total at 100% | \u00a0 | 1,217 | 618 | 178 | 944 | 862 | 372 | 184 | 367 |
The bank interest-bearing loans and other borrowings held by joint ventures and associates are as follows:
\n| \u00a0 | \u00a0 | \u00a0 | \u00a0 | Net book value at 31 December 2023 | Net book value at 31 December 2022 | ||||
|---|---|---|---|---|---|---|---|---|---|
Entity name | % Ownership | % Interest | Maturity | Non-current | Current | Total | Non-current | Current | Total |
US$ Project Finance facilities drawn: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Sonasing Xikomba Ltd | 50.00 | 4.10% | 15-05-2026 | 117 | 73 | 190 | 190 | 69 | 259 |
Normand Installer SA | 49.90 | 6.00% | 15-12-2026 | 11 | 6 | 16 | - | 22 | 22 |
Loans from subsidiaries of | \u00a0 | \u00a0 | \u00a0 | 324 | - | 324 | 293 | 7 | 300 |
Loans from other shareholders of the joint ventures and associates | \u00a0 | 368 | - | 368 | 341 | 6 | 346 | ||
Loans from other joint ventures2 | \u00a0 | \u00a0 | \u00a0 | 266 | - | 266 | 255 | - | 255 |
Net book value of loans and borrowings | \u00a0 | \u00a0 | \u00a0 | 1,086 | 79 | 1,164 | 1,079 | 103 | 1,182 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result at 100% | \u00a0 | 2 | (18) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | (72) | (18) |
Partner ownership | \u00a0 | 193 | 141 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | 166 | 166 |
Investments in associates and joint ventures | \u00a0 | 288 | 290 |
The Company has several jointly owned subsidiaries:
\nEntity name | Partners | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|
Aseng Production Company Ltd. | GE Petrol | 60.00 | Cayman island | Lease & Operate | FPSO Aseng |
Gepsing Ltd. | GE Petrol | 60.00 | Cayman island | Lease & Operate | FPSO Aseng / FPSO Serpentina |
Gepsing Ltd - Equatorial Guinea Branch | GE Petrol | 60.00 | Equatorial Guinea | Lease & Operate | FPSO Aseng / FPSO Serpentina |
Brazilian Deepwater Production Ltd. | Malaysia International Shipping Corporation Behard | 51.00 | Bermuda | Lease & Operate | FPSO Espirito Santo |
Brazilian Deepwater Production Contractors Ltd. | Malaysia International Shipping Corporation Behard | 51.00 | Bermuda | Lease & Operate | FPSO Espirito Santo |
Brazilian Deepwater Production B.V. | Malaysia International Shipping Corporation Behard | 51.00 | The Netherlands | Lease & Operate | FPSO Espirito Santo |
Opera\u00e7\u00f5es Mar\u00edtimas em Mar Profundo Brasileiro Ltda | Owned by Brazilian Deepwater Production Contractors (see information above) | 51.00 | Brazil | Lease & Operate | FPSO Espirito Santo |
Alfa Lula Alto S.\u00e0.r.l. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Luxembourg | Turnkey | FPSO Cidade de Marica |
Alfa Lula Alto Holding Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Bermuda | Lease & Operate | FPSO Cidade de Marica |
Alfa Lula Alto Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Marica |
Alfa Lula Alto S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Marica |
Beta Lula Central S.\u00e0.r.l. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Luxembourg | Turnkey | FPSO Cidade de Saquarema |
Beta Lula Central Holding Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Bermuda | Lease & Operate | FPSO Cidade de Saquarema |
Beta Lula Central Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Saquarema |
Beta Lula Central S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Saquarema |
Tupi Nordeste S.\u00e0.r.l. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Luxembourg | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Brazil | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste Holding Ltd. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Bermuda | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste S.\u00e0 r.l. (Brazilian branche) | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Bermuda | Lease & Operate | FPSO Cidade de Paraty |
Guara Norte S.\u00e0.r.l. | Mitsubishi Corporation | 75.00 | Luxembourg | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte Holding Ltd. | Mitsubishi Corporation | 75.00 | Bermuda | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation | 75.00 | Brazil | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation | 75.00 | Brazil | Lease & Operate | FPSO Cidade de Ilhabela |
Mero 2 Operacoes Maritima Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | Brazil | Lease & Operate | FPSO Sepetiba |
Mero 2 Operacoes Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | Switzerland | Lease & Operate | FPSO Sepetiba |
Mero 2 Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
Mero 2 B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
MERO 2 B.V. (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
YTSM JV S.A. | CB&I Nederland B.V. | 70.00 | Switzerland | Lease & Operate | FPSO ONE GUYANA |
Tamandare Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandare B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandare Operations Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Switzerland | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandar\u00e9 Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
MERO 4 Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
MERO 4 B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
Mero 4 Operations Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Switzerland | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
Mero 4 Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
NOVA EAST WIND INC. | Micantia Wind Inc - DP Global Energy Limited | 90.00 | Canada | Turnkey | Atlantic Canada |
Tamandare BV (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
MERO 4 BV (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
The US$255 million reported in 4.2.4 Consolidated Statement of Changes in Equity mainly relates to multiple equity contributions from the partners in the subsidiaries Mero 2, Mero 4 and Tamandar\u00e9, related to respectively FPSO Sepetiba, FPSO Alexandre de Gusm\u00e3o and FPSO Almirante Tamandar\u00e9, out of which US$235 million were cash transactions.
\nDuring 2023, the Company acquired the remaining shareholding in SBM Nauvata Private Limited. The Company already exercised control over the investees and now has full ownership over the entity. The transaction was directly booked within equity with a reattribution from non-controlling interests to equity attributable to shareholders. For more information, refer to note 4.3.25 Trade and Other Payables.
\nIncluded in the consolidated financial statements are the following items that represent the Company\u2019s interest in the revenues, assets and loans of the partially owned subsidiaries.
\nFigures are presented at 100% before elimination of intercompany transactions.
\nProject name | Place of business | Total assets | Non-current assets | Cash | Loans | Non-current liabilities | Current liabilities | Dividends to NCI | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO Aseng / FPSO Serpentina | Equatorial Guinea | 118 | 41 | 23 | 0 | 0 | 33 | 8 | 104 |
FPSO Espirito Santo | Brazil | 151 | 71 | 18 | 97 | 110 | 95 | - | 57 |
FPSO Cidade de Marica | Brazil | 1,512 | 1,311 | 68 | 672 | 544 | 185 | 10 | 210 |
FPSO Cidade de Saquarema | Brazil | 1,481 | 1,326 | 26 | 820 | 712 | 150 | 16 | 204 |
FPSO Cidade de Paraty | Brazil | 985 | 826 | 9 | 20 | 3 | 71 | 26 | 168 |
FPSO Cidade de Ilhabela | Brazil | 1,320 | 1,122 | 63 | 720 | 672 | 120 | 21 | 203 |
FPSO Sepetiba | Brazil | 2,070 | 154 | 8 | 1,425 | 1,438 | 218 | - | 213 |
FPSO Almirante Tamandar\u00e9 | Brazil | 1,745 | 26 | 23 | 911 | 1,005 | 10 | - | 513 |
FPSO Alexandre de Gusm\u00e3o | Brazil | 1,815 | 0 | 27 | 1,017 | 1,134 | 36 | - | 773 |
FPSO ONE GUYANA | Guyana | 237 | 12 | 0 | - | 2 | 196 | - | 752 |
Non material NCI | \u00a0 | 18 | 4 | 2 | 3 | 2 | 5 | - | 0 |
Total 100% | \u00a0 | 11,450 | 4,895 | 268 | 5,685 | 5,622 | 1,119 | 81 | 3,197 |
Project name | Place of business | Total assets | Non-current assets | Cash | Loans | Non-current liabilities | Current liabilities | Dividends to NCI | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO Aseng / FPSO Serpentina | Equatorial Guinea | 124 | 57 | 16 | 0 | 0 | 30 | 9 | 93 |
FPSO Espirito Santo | Brazil | 130 | 66 | 15 | 114 | 114 | 76 | 7 | 45 |
FPSO Cidade de Marica | Brazil | 1,577 | 1,388 | 71 | 793 | 675 | 174 | - | 190 |
FPSO Cidade de Saquarema | Brazil | 1,557 | 1,405 | 39 | 922 | 820 | 145 | 10 | 202 |
FPSO Cidade de Paraty | Brazil | 1,058 | 901 | 58 | 92 | 0 | 126 | - | 156 |
FPSO Cidade de Ilhabela | Brazil | 1,366 | 1,201 | 63 | 764 | 720 | 95 | 14 | 185 |
FPSO Sepetiba | Brazil | 2,105 | 170 | 28 | 1,397 | 1,500 | 151 | - | 219 |
FPSO Almirante Tamandar\u00e9 | Brazil | 1,296 | - | 41 | 632 | 56 | 663 | - | 1,019 |
FPSO Alexandre de Gusm\u00e3o | Brazil | 1,002 | - | 15 | 618 | 62 | 652 | - | 880 |
FPSO ONE GUYANA | Guyana | 196 | 1 | 0 | - | 10 | 190 | - | 492 |
Non material NCI | \u00a0 | 18 | 4 | 2 | 4 | 3 | 7 | - | 0 |
Total 100% | \u00a0 | 10,428 | 5,192 | 347 | 5,335 | 3,959 | 2,309 | 40 | 3,482 |
Reference is made to note 4.3.23 Borrowings and Lease Liabilities for a description of the bank interest-bearing loans and other borrowings per entity.
\nThe risks associated with interests in subsidiaries, joint ventures and associates are described in section 4.3.27 Financial Instruments \u2013 Fair Values and Risk Management.The risks identified are deemed to be inherent to the operations of the Company as a whole and includes the risk profiles of interests in other entities.
\nIncluded in the consolidated financial statements are the following items that represent the aggregate contribution of the partially owned subsidiaries to the Company consolidated financial statements:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result | \u00a0 | 123 | 105 |
Accumulated amount of NCI | \u00a0 | 1,797 | 1,517 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | 4,709 | 4,159 |
Company ownership | \u00a0 | (2,912) | (2,642) |
Accumulated amount of NCI | \u00a0 | 1,797 | 1,517 |
| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Current portion of loans to joint ventures and associates | 3 | 7 | |
Non-current portion of loans to joint ventures and associates | \u00a0 | 38 | 45 |
Total | 41 | 52 |
The balance of loans to joint ventures and associates has decreased compared with the year-ago period due to the impairment of a funding loan provided to some equity accounted entities.
\nThe maximum exposure to credit risk at the reporting date is the carrying amount of the loans to joint ventures and associates, taking into account the risk of recoverability. The Company does not hold any collateral as security.
The Company has several joint ventures and associates:
\nEntity name | Partners | Joint venture/ | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|---|
Sonasing Xikomba Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO N'Goma |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. Branch | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Angola | Lease & Operate | Angola operations |
Sonasing Sanha Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Sanha |
Sonasing Kuito Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Kuito |
Sonasing Mondo Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Mondo |
Sonasing Saxi Batuque Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Saxi-Batuque |
OPS Production Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
Gas Management (Congo) Ltd. | Maersk group | Joint venture | 49.00 | Bahamas | Lease & Operate | Nkossa II FSO |
Malaysia Deepwater Floating Terminal (Kikeh) Ltd. | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Malaysia Deepwater Production Contractors Sdn Bhd | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Floventis Energy Limited | CIERCO LTD. | Joint venture | 70.00 | United Kingdom | Turnkey | Cierco |
Ll\u0177r Floating Wind Limited | CIERCO LTD. | Joint venture | 70.00 | Scotland | Turnkey | Cierco |
CADEMO Corporation | CIERCO LTD. | Joint venture | 70.00 | United states of America | Turnkey | Cierco |
Normand Installer S.A. | The Solstad group | Joint venture | 49.90 | Switzerland | Turnkey | Normand Installer |
SBM Ship Yard Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Daewoo Shipbuilding & Marine Engineering Co. Ltd. | Associate | 33.33 | Bermuda | Turnkey | Angolan yard |
PAENAL - Porto Amboim Estaleiros Navais Ltda. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; SBM Shipyard | Associate | 30.00 | Angola | Turnkey | Angolan yard |
The Company has no joint operation as per definition provided by IFRS 11 \u2018Joint arrangements\u2019.
\nThe movements in investments in associates and joint ventures are as follows:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Investments in associates and joint ventures at 1 January | \u00a0 | 290 | 361 |
Share of profit of equity-accounted investees | 19 | 12 | |
Dividends | \u00a0 | (17) | (92) |
Cash flow hedges | \u00a0 | (2) | 9 |
Capital increase/(decrease) | \u00a0 | (0) | - |
Foreign currency variations | \u00a0 | (0) | 1 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | - | (1) |
Investments in associates and joint ventures at 31 December | \u00a0 | 288 | 290 |
In July 2023, the Company signed two Share Purchase Agreements with its partner Sonangol EP for (i) the acquisition of Sonangol's equity shares in the lease and operating entities related to FPSOs N\u2019goma, Saxi Batuque and Mondo; and (ii) the full divestment to a Sonangol subsidiary of the Company\u2019s equity shares in the parent company of the Angolan based Paenal Yard. Those agreements remain conditional upon several conditions precedent, including consent from clients, lenders, partners and approval by various competent authorities. Therefore, there was no impact considered in the current period from these share purchase agreements.
\nThe finance lease contract of FPSO N\u2019Goma, where the Company is the lessor, includes a call option for the client to purchase the underlying asset or to terminate the contract early. The exercise of the purchase option as per December 31, 2023, would have resulted in a gain for the Company. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe finance lease contract of FPSO Kikeh, where the Company is the lessor, includes a call option for the client to terminate the contract early. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe following tables present the figures at 100%.
\nProject name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 668 | 302 | 211 | 190 | 152 | 85 | - | 39 |
Angola operations | Angola | 225 | 2 | 20 | 29 | 27 | 203 | - | 291 |
FPSO Kikeh | Malaysia | 153 | 89 | 4 | - | 10 | 28 | 35 | 71 |
Angolan yard | Angola | 52 | (0) | 43 | 588 | 588 | 28 | - | 9 |
Non material joint ventures/associates | \u00a0 | 70 | 48 | 8 | 109 | 104 | 15 | - | 0 |
Total at 100% | \u00a0 | 1,167 | 441 | 286 | 917 | 880 | 359 | 35 | 410 |
Project name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 722 | 448 | 102 | 259 | 227 | 88 | 155 | 55 |
Angola operations | Angola | 178 | 4 | 10 | 28 | 7 | 172 | - | 236 |
FPSO Kikeh | Malaysia | 189 | 117 | 6 | - | 5 | 36 | 30 | 74 |
Angolan yard | Angola | 57 | (0) | 48 | 556 | 556 | 34 | (0) | 1 |
Non material joint ventures/associates | \u00a0 | 70 | 49 | 12 | 101 | 67 | 42 | - | 0 |
Total at 100% | \u00a0 | 1,217 | 618 | 178 | 944 | 862 | 372 | 184 | 367 |
The bank interest-bearing loans and other borrowings held by joint ventures and associates are as follows:
\n| \u00a0 | \u00a0 | \u00a0 | \u00a0 | Net book value at 31 December 2023 | Net book value at 31 December 2022 | ||||
|---|---|---|---|---|---|---|---|---|---|
Entity name | % Ownership | % Interest | Maturity | Non-current | Current | Total | Non-current | Current | Total |
US$ Project Finance facilities drawn: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Sonasing Xikomba Ltd | 50.00 | 4.10% | 15-05-2026 | 117 | 73 | 190 | 190 | 69 | 259 |
Normand Installer SA | 49.90 | 6.00% | 15-12-2026 | 11 | 6 | 16 | - | 22 | 22 |
Loans from subsidiaries of | \u00a0 | \u00a0 | \u00a0 | 324 | - | 324 | 293 | 7 | 300 |
Loans from other shareholders of the joint ventures and associates | \u00a0 | 368 | - | 368 | 341 | 6 | 346 | ||
Loans from other joint ventures2 | \u00a0 | \u00a0 | \u00a0 | 266 | - | 266 | 255 | - | 255 |
Net book value of loans and borrowings | \u00a0 | \u00a0 | \u00a0 | 1,086 | 79 | 1,164 | 1,079 | 103 | 1,182 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result at 100% | \u00a0 | 2 | (18) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | (72) | (18) |
Partner ownership | \u00a0 | 193 | 141 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | 166 | 166 |
Investments in associates and joint ventures | \u00a0 | 288 | 290 |
The deferred tax assets and liabilities and associated net positions are summarized as follows:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Assets | Liabilities | Net | Assets | Liabilities | Net |
Property, plant and equipment | 0 | - | 0 | 0 | - | 0 |
Tax losses | 2 | - | 2 | 6 | - | 6 |
Other | 245 | 173 | 72 | 6 | 38 | (32) |
Book value at 31 December | 247 | 173 | 74 | 12 | 38 | (26) |
Deferred tax assets increased by US$234 million during the year of 2023, mainly due to deferred tax recognized in relation to a tax goodwill in Switzerland. Within the frame of the Company\u2019s periodical review of its tax positions, the Company had previously identified the need for an evolution of its Swiss structure to bring it in line with shifts in tax paradigms that occurred over the past decade. Accordingly, the Company ceased to apply its decade's-old Swiss tax rulings, initiating a transition process under Swiss law which has resulted in a tax goodwill for a transitory period of time.
\nThe increase in deferred tax liabilities is mainly due to the recognition of tax for the Brazilian and Guyana units under construction in 2023 and on unrealized profits on hedging instruments booked in other comprehensive income for which a total deferred tax liability was recognized in 2023 for an amount of US$59 million (without impact in the income tax charge).
\nAs explained in note 4.3.10 Income Tax Expense, no deferred taxes were recognized for the year ended in December 31, 2023, in relation to the potential impacts of top-up taxes arising from Pillar Two Model Rules.
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
| \u00a0 | Note | Net | Net |
Deferred tax at 1 January | \u00a0 | (26) | (5) |
Deferred tax recognized in the income statement | 156 | (20) | |
Deferred tax recognized in other comprehensive income | \u00a0 | (57) | - |
Other | \u00a0 | - | - |
Foreign currency variations | \u00a0 | - | (1) |
Total movements | \u00a0 | 100 | (21) |
Deferred tax at 31 December | \u00a0 | 74 | (26) |
Expected realization and settlement of deferred tax positions is within 20 years. The current portion of the net deferred tax position as of December 31, 2023 amounts to US$70 million. The deferred tax losses are expected to be recovered, based on the anticipated profit in the applicable jurisdiction. The Company has US$48 million (2022: US$27 million) of deferred tax assets unrecognized in 2023, due to current tax losses not valued. The term in which these unrecognized deferred tax assets could be settled depends on the respective tax jurisdiction and ranges from five years to an unlimited period of time.
\nThe non-current portion of deferred tax assets amounts to US$157 million (2022: US$9 million). On a cumulative basis, a total amount of US$2,307 million at the end of 2023 (2022: US$220 million) corresponds to deferred tax assets basis unrecognized on temporary differences, unused tax losses and tax credits.
\nDeferred tax in connection with unused tax losses carried forward, temporary differences and tax credits:
\n| \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|
Unused tax losses carried forward, temporary differences and tax credits not recognized as a deferred tax asset | 2,306 | 220 |
Unused tax losses carried forward, temporary differences and tax credits recognized as a deferred tax asset | 247 | 12 |
Total | 2,553 | 232 |
The material increase of \u2018Unused tax losses carried forward, temporary differences and tax credit not recognized as a deferred tax asset\u2019 is primarily related to the recognition of tax goodwill in Switzerland.
\nThe Company has recognized a deferred tax asset for a gross amount of US$2,184 million in relation to a tax goodwill in Switzerland. In determining the taxable profits, the Company performed an extensive assessment and modeling to determine that an amount of US$2,043 million could possibly be unrecoverable, which is driven by the assessment of profitability and commercial uncertainties (i.e. future awards) impacting future profits. Based on the uncertainty of recovering this tax asset in future years in light of applicable enacted Swiss tax regulations, the Company determined the expected value based on a range of possible outcomes. As a result, the Company as of December 31, 2023, recognized a deferred tax asset related to the tax goodwill in Switzerland net of US$141 million in accordance with IAS 12 and IFRIC 23.
\nExpiry date on deferred tax assets unrecognized on temporary differences, unused tax losses and tax credits:
\n| \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|
Within one year | 12 | 24 |
More than a year but less than 5 years | 17 | 11 |
More than 5 years but less than 10 years | 38 | 8 |
More than 10 years but less than 20 years | 2,079 | 22 |
Unlimited period of time | 160 | 156 |
Total | 2,306 | 220 |
Deferred tax assets per location are as follows:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Assets | Liabilities | Net | Assets | Liabilities | Net |
Guyana | 2 | 70 | (69) | - | 36 | (36) |
Monaco | 14 | 12 | 2 | 2 | - | 2 |
Switzerland | 221 | 84 | 136 | 7 | - | 7 |
the Netherlands | 0 | 1 | (0) | 3 | - | 3 |
Other | 9 | 5 | 4 | 0 | 2 | (2) |
Book value at 31 December | 247 | 173 | 74 | 12 | 38 | (26) |
| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Materials and consumables | \u00a0 | 13 | 9 |
Goods for resale | \u00a0 | 0 | 4 |
Multi-purpose floaters under construction | \u00a0 | 135 | 13 |
Total | \u00a0 | 149 | 25 |
Multi-purpose floaters (\u2019MPFs\u2019) under construction relate to the ongoing EPC phase of any Fast4Ward\u00ae new-build hulls. Fast4Ward\u00ae hulls remain in inventory until they are allocated to a specific FPSO contract.
\nThe increase of the inventory balance at year-end 2023 relates to the new multi-purpose hull for use on a future FPSO project. As per December 31, 2023, the Company has one MPF under construction for use on a future FPSO project.
Further information about the financial risk management objectives and policies, the fair value measurement and hedge accounting of financial derivative instruments is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nIn the ordinary course of business and in accordance with its hedging policies as of December 31, 2023, the Company held multiple forward exchange contracts designated as hedges of expected future transactions for which the Company has firm commitments or forecasts. Furthermore, the Company held several interest rate swap contracts designated as hedges of interest rate financing exposure. The most important floating rate is the US$ 3-month SOFR (2022: US$ 3-month LIBOR). Details of interest percentages of the long-term debt are included in note 4.3.23 Borrowings and Lease Liabilities. Lastly, the Company held commodity contracts in order to hedge against the fluctuation of operating cash flows and future earnings resulting from movement in commodity prices.
\nThe fair value of the derivative financial instruments included in the statement of financial position is summarized as follows:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||
|---|---|---|---|---|---|---|
| \u00a0 | Assets | Liabilities | Net | Assets | Liabilities | Net |
Interest rate swaps cash flow hedge | 279 | 31 | 248 | 490 | 28 | 463 |
Forward currency contracts cash flow hedge | 86 | 17 | 68 | 50 | 103 | (53) |
Forward currency contracts fair value through profit and loss | 48 | 44 | 4 | 69 | 85 | (15) |
Commodity contracts cash flow hedge | 3 | 4 | (1) | - | 2 | (2) |
Total | 416 | 97 | 319 | 610 | 217 | 393 |
Non-current portion | 258 | 8 | 250 | 465 | 25 | 440 |
Current portion | 158 | 89 | 69 | 145 | 192 | (47) |
The movement in the net balance of derivative assets and liabilities of US$(74) million over the period is mostly related to (i) the settlements of interest rate swaps related to the financing of FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o of US$154 million, (ii) the increase in marked-to-market value of forward currency contracts, which is mainly driven by the depreciation of the US$ exchange rate versus the hedged currencies (especially EUR and BRL) and (iii) the decrease in marked-to-market value of interest rate swaps, which mainly arises from decreasing US$ market interest rates.
\nNo ineffective portion arising from cash-flow hedges was recognized in the income statement in 2023 (2022: US$1 million). The maximum exposure to credit risk at the reporting date is the fair value of the derivative assets in the statement of financial position.
\nNo ineffectiveness was recognized due to the IBOR transition, refer to note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
The following table indicates the period in which the cash flows associated with the cash-flow hedges are expected to occur and the carrying amounts of the related hedging instruments. The amounts disclosed in the table are the contractual undiscounted cash flows. The future interest cash flows for interest rate swaps are estimated using the forward rates as at the reporting date.
\n| \u00a0 | Carrying amount | Less than | Between | More than | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD SOFR 3 Months) | 248 | 22 | 104 | 129 | 255 |
Forward currency contracts | 68 | 48 | 14 | - | 62 |
Commodity contracts | (1) | (1) | - | - | (1) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD LIBOR 3 Months) | 463 | 19 | 254 | 212 | 486 |
Forward currency contracts | (53) | (58) | (9) | - | (67) |
Commodity contracts | (2) | (1) | (1) | - | (2) |
The following table indicates the period in which the cash-flow hedges are expected to impact profit or loss and the carrying amounts of the related hedging instruments.
\n| \u00a0 | Carrying amount | Less than | Between | More than | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD SOFR 3 Months) | 248 | 22 | 104 | 129 | 255 |
Forward currency contracts | 68 | 48 | 14 | - | 62 |
Commodity contracts | (1) | (1) | - | - | (1) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD LIBOR 3 Months) | 463 | 19 | 254 | 212 | 486 |
Forward currency contracts | (53) | (58) | (9) | - | (67) |
Commodity contracts | (2) | (1) | (1) | - | (2) |
Gains and losses recognized in the hedging reserve in equity on interest rate swap contracts will be continuously released to the income statement until the final repayment of the hedged items (please refer to note 4.3.22 Equity Attributable to Shareholders).
\nGains and losses recognized in the hedging reserve on forward currency contracts are recognized in the income statement in the period or periods during which the hedged transaction affects the income statement. This is mainly within twelve months from the statement of financial position date, unless the gain or loss is included in the initial amount recognized in the carrying amount of fixed assets, in which case recognition is over the lifetime of the asset. If the gain or loss is included in the initial amount recognized in the carrying amount of the cost incurred on construction contracts, the recognition is over time.
\nGains and losses recognized in the hedging reserve on commodity contracts are recognized in the income statement in the period or periods during which the hedged transaction affects the income statement. If the hedged transaction subsequently results in the recognition of non-financial assets (such as inventory, asset under construction) or non-financial liability, the gain or loss is included in the initial cost or other carrying amount of the asset. In such case, this amount is recognized in profit or loss at the same time as the hedged item affects profit or loss.
| \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|
Cash and bank balances | 196 | 109 |
Short-term investments | 347 | 573 |
Cash and cash equivalent | 543 | 683 |
Net cash and cash equivalent | 543 | 683 |
The decrease of the cash and bank balances mainly relates to the significant progress in the projects under construction and the Fast4Ward\u00ae new build multi-purpose hulls, partially covered by the additional project financing granted for FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o, FPSO ONE GUYANA, drawdowns on the Company\u2019s RCF and on the new Revolving Credit Facility for MPF hull financing, the net cash proceeds of the sale of FPSO Liza Unity and the cash generated by the Lease and Operate business segment.
\nThe cash and cash equivalents dedicated to debt and interest payments (and therefore restricted) amounted to US$193 million as per December 31, 2023 (2022: US$235 million). Short-term investment deposits are made for varying periods of up to one year, usually less than three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.
\nThe cash and cash equivalents held in countries with restrictions on currency outflow (Angola, Brazil, China, Equatorial Guinea, Ghana and Nigeria) amounted to US$26 million (2022: US$21 million). These restrictions do not limit the liquidity of the cash balances.
\nFurther disclosure about the fair value measurement is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
| \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|
Cash and bank balances | 196 | 109 |
Short-term investments | 347 | 573 |
Cash and cash equivalent | 543 | 683 |
Net cash and cash equivalent | 543 | 683 |
The decrease of the cash and bank balances mainly relates to the significant progress in the projects under construction and the Fast4Ward\u00ae new build multi-purpose hulls, partially covered by the additional project financing granted for FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o, FPSO ONE GUYANA, drawdowns on the Company\u2019s RCF and on the new Revolving Credit Facility for MPF hull financing, the net cash proceeds of the sale of FPSO Liza Unity and the cash generated by the Lease and Operate business segment.
\nThe cash and cash equivalents dedicated to debt and interest payments (and therefore restricted) amounted to US$193 million as per December 31, 2023 (2022: US$235 million). Short-term investment deposits are made for varying periods of up to one year, usually less than three months, depending on the immediate cash requirements of the Company, and earn interest at the respective short-term deposit rates.
\nThe cash and cash equivalents held in countries with restrictions on currency outflow (Angola, Brazil, China, Equatorial Guinea, Ghana and Nigeria) amounted to US$26 million (2022: US$21 million). These restrictions do not limit the liquidity of the cash balances.
\nFurther disclosure about the fair value measurement is included in note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
The cash and cash equivalents held in countries with restrictions on currency outflow (Angola, Brazil, China, Equatorial Guinea, Ghana and Nigeria) amounted to US$26 million (2022: US$21 million). These restrictions do not limit the liquidity of the cash balances.
", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-595": { "value": "\nFor a consolidated overview of changes in equity reference is made to the Consolidated Statement of Changes in Equity.
The authorized share capital of the Company is two hundred million euros (EUR200,000,000). This share capital is divided into four hundred million (400,000,000) ordinary shares with a nominal value of twenty-five euro cents (EUR0.25) each and four hundred million (400,000,000) protective preference shares, with a nominal value of twenty-five euro cents (EUR0.25) each. The protective preference shares can be issued as a protective measure as described in note 3.1.8 Stichting Continu\u00efteit SBM Offshore.
\nDuring the financial year the movements in the outstanding number of ordinary shares are as follows:
\nnumber of shares | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Outstanding at 1 January | \u00a0 | 180,671,305 | 180,671,305 |
Treasury shares cancelled | \u00a0 | - | - |
Outstanding 31 December | \u00a0 | 180,671,305 | 180,671,305 |
All outstanding shares have been fully paid.
\nThe Company completed its share repurchase program under authorization granted by the AGM of the Company held on April 13, 2023. In the period between November 9, 2023 and November 21, 2023 a total number of 350,000 shares totaling circa EUR4.3 million (circa US$4.6 million) were repurchased. A total number of 1,652,0781 treasury shares are still reported in the outstanding ordinary shares as at December 31, 2023 (2022: 2,616,650) and are held predominantly for employee share programs. During 2023, a total of 1,314,575 shares (2022: 1,400,258) were transferred to employee share programs.
\nIn terms of ordinary shares, 1,791,995 shares were held by members of Management Board, in office as at December 31, 2023 (December 31, 2022: 1,648,665) as detailed below:
\n| \u00a0 | Shares subject to conditional holding requirement | Other shares | Total shares at 31 December 2023 | Total shares at 31 December 2022 |
|---|---|---|---|---|
Bruno Chabas | 330,965 | 987,740 | 1,318,705 | 1,254,864 |
Douglas Wood | 176,470 | 123,716 | 300,186 | 264,009 |
\u00d8ivind Tangen | 78,250 | 94,854 | 173,104 | 129,792 |
Total | 585,685 | 1,206,310 | 1,791,995 | 1,648,665 |
The other reserves comprises the hedging reserve, actuarial gains/losses, the foreign currency translation reserve and IFRS 2 reserves. The movement and breakdown of the other reserves can be stated as follows (all amounts are expressed net of deferred taxes):
\n| \u00a0 | Hedging reserve Forward currency contracts | Hedging reserve Interest rate swaps | Actuarial gain/(loss) on defined benefit provisions | Foreign currency translation reserve | IFRS 2 Reserves | Protective share reserve | Total other reserves |
|---|---|---|---|---|---|---|---|
Balance at 1 January 2022 | (104) | (167) | 7 | (105) | 22 | - | (347) |
Cash flow hedges | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in fair value | (78) | 473 | - | - | - | - | 394 |
Transfer to financial income and expenses | 1 | 12 | - | - | - | - | 12 |
Transfer to construction contracts and property, plant and equipment | 62 | - | - | - | - | - | 62 |
Transfer to operating profit and loss | 48 | - | - | - | - | - | 48 |
IFRS 2 share-based payments | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
IFRS 2 vesting costs for the year | - | - | - | - | 19 | - | 19 |
IFRS 2 vested share-based payments | - | - | - | - | (19) | - | (19) |
Actuarial gain/(loss) on defined benefit provision | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in defined benefit provision due to changes in actuarial assumptions | - | - | 7 | - | - | - | 7 |
Foreign currency variations | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Foreign currency variations | - | - | - | 2 | (1) | - | 1 |
Mergers and acquisitions | - | - | - | (0) | \u00a0 | - | (0) |
Other movements | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reclassification | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 26 | 26 |
Balance at 31 December 2022 | (72) | 317 | 15 | (103) | 21 | 26 | 204 |
Cash flow hedges | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in fair value | 85 | (53) | - | - | - | - | 32 |
Deferred tax on cash flow hedges | - | (45) | - | - | - | - | (45) |
Transfer to financial income and expenses | - | 4 | - | - | - | - | 4 |
Transfer to construction contracts and property, plant and equipment | 24 | - | - | - | - | - | 24 |
Transfer to operating profit and loss | 8 | - | - | - | - | - | 8 |
IFRS 2 share-based payments | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
IFRS 2 vesting costs for the year | - | - | - | - | 20 | - | 20 |
IFRS 2 vested share-based payments | - | - | - | - | (16) | - | (16) |
Actuarial gain/(loss) on defined benefit provision | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in defined benefit provision due to changes in actuarial assumptions | - | - | (4) | - | - | - | (4) |
Foreign currency variations | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Foreign currency variations | - | - | - | (2) | 1 | - | (2) |
Mergers and acquisitions | - | - | - | 0 | \u00a0 | - | 0 |
Other movements | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reclassification | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | - |
Balance at 31 December 2023 | 44 | 224 | 11 | (105) | 25 | 26 | 224 |
The hedging reserve consists of the effective portion of cash-flow hedging instruments related to hedged transactions that have not yet occurred, net of deferred taxes. The decreased fair value of interest rate swaps mainly arises from decreasing US$ market interest rates whereas the increased fair value of forward currency contracts is mainly driven by the depreciation of the US$ exchange rate versus the hedged currencies (especially EUR and BRL).
\nActuarial gain/(loss) on defined benefits provisions includes the impact of the remeasurement of defined benefit provisions.
\nThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
\nThe Management Board, with the approval of the Supervisory Board, has granted a call option to Stichting Continu\u00efteit SBM Offshore to acquire a number of preference shares. As of October 1, 2022, and with reference to articles 5.5 and 5.6 of the Articles of Association of the Company, a \u2019Protective Preference Shares\u2019 reserve amounting to US$26 million (2022: US$26 million) was created at the expense of the share premium reserve at the level of the Company. If and when Stichting Continuite\u00eft SBM Offshore would exercise the call option to acquire preference shares, these preference shares may also be paid-up from the reserve of the Company. In addition to the legal reserves, distributions to the Company\u2019s shareholders are restricted to the amount of the statutory reserves.
\nThe Company\u2019s total equity as at December 31, 2023 is US$3,733 million, out of which US$2,052 million relates to legal reserves and US$26 million relates to the statutory reserves (December 31, 2022: Total equity of US$3,397 million out of which US$1,860 million relates to legal reserves and US$26 million to the statutory reserves). For more information, reference is made to note 4.5.4 Shareholders\u2019 Equity.
The authorized share capital of the Company is two hundred million euros (EUR200,000,000). This share capital is divided into four hundred million (400,000,000) ordinary shares with a nominal value of twenty-five euro cents (EUR0.25) each and four hundred million (400,000,000) protective preference shares, with a nominal value of twenty-five euro cents (EUR0.25) each. The protective preference shares can be issued as a protective measure as described in note 3.1.8 Stichting Continu\u00efteit SBM Offshore.
\nDuring the financial year the movements in the outstanding number of ordinary shares are as follows:
\nnumber of shares | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Outstanding at 1 January | \u00a0 | 180,671,305 | 180,671,305 |
Treasury shares cancelled | \u00a0 | - | - |
Outstanding 31 December | \u00a0 | 180,671,305 | 180,671,305 |
All outstanding shares have been fully paid.
\nThe Company completed its share repurchase program under authorization granted by the AGM of the Company held on April 13, 2023. In the period between November 9, 2023 and November 21, 2023 a total number of 350,000 shares totaling circa EUR4.3 million (circa US$4.6 million) were repurchased. A total number of 1,652,0781 treasury shares are still reported in the outstanding ordinary shares as at December 31, 2023 (2022: 2,616,650) and are held predominantly for employee share programs. During 2023, a total of 1,314,575 shares (2022: 1,400,258) were transferred to employee share programs.
\nIn terms of ordinary shares, 1,791,995 shares were held by members of Management Board, in office as at December 31, 2023 (December 31, 2022: 1,648,665) as detailed below:
\n| \u00a0 | Shares subject to conditional holding requirement | Other shares | Total shares at 31 December 2023 | Total shares at 31 December 2022 |
|---|---|---|---|---|
Bruno Chabas | 330,965 | 987,740 | 1,318,705 | 1,254,864 |
Douglas Wood | 176,470 | 123,716 | 300,186 | 264,009 |
\u00d8ivind Tangen | 78,250 | 94,854 | 173,104 | 129,792 |
Total | 585,685 | 1,206,310 | 1,791,995 | 1,648,665 |
The Company completed its share repurchase program under authorization granted by the AGM of the Company held on April 13, 2023. In the period between November 9, 2023 and November 21, 2023 a total number of 350,000 shares totaling circa EUR4.3 million (circa US$4.6 million) were repurchased. A total number of 1,652,0781 treasury shares are still reported in the outstanding ordinary shares as at December 31, 2023 (2022: 2,616,650) and are held predominantly for employee share programs. During 2023, a total of 1,314,575 shares (2022: 1,400,258) were transferred to employee share programs.
", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-599": { "value": "\nThe other reserves comprises the hedging reserve, actuarial gains/losses, the foreign currency translation reserve and IFRS 2 reserves. The movement and breakdown of the other reserves can be stated as follows (all amounts are expressed net of deferred taxes):
\n| \u00a0 | Hedging reserve Forward currency contracts | Hedging reserve Interest rate swaps | Actuarial gain/(loss) on defined benefit provisions | Foreign currency translation reserve | IFRS 2 Reserves | Protective share reserve | Total other reserves |
|---|---|---|---|---|---|---|---|
Balance at 1 January 2022 | (104) | (167) | 7 | (105) | 22 | - | (347) |
Cash flow hedges | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in fair value | (78) | 473 | - | - | - | - | 394 |
Transfer to financial income and expenses | 1 | 12 | - | - | - | - | 12 |
Transfer to construction contracts and property, plant and equipment | 62 | - | - | - | - | - | 62 |
Transfer to operating profit and loss | 48 | - | - | - | - | - | 48 |
IFRS 2 share-based payments | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
IFRS 2 vesting costs for the year | - | - | - | - | 19 | - | 19 |
IFRS 2 vested share-based payments | - | - | - | - | (19) | - | (19) |
Actuarial gain/(loss) on defined benefit provision | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in defined benefit provision due to changes in actuarial assumptions | - | - | 7 | - | - | - | 7 |
Foreign currency variations | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Foreign currency variations | - | - | - | 2 | (1) | - | 1 |
Mergers and acquisitions | - | - | - | (0) | \u00a0 | - | (0) |
Other movements | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reclassification | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | 26 | 26 |
Balance at 31 December 2022 | (72) | 317 | 15 | (103) | 21 | 26 | 204 |
Cash flow hedges | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in fair value | 85 | (53) | - | - | - | - | 32 |
Deferred tax on cash flow hedges | - | (45) | - | - | - | - | (45) |
Transfer to financial income and expenses | - | 4 | - | - | - | - | 4 |
Transfer to construction contracts and property, plant and equipment | 24 | - | - | - | - | - | 24 |
Transfer to operating profit and loss | 8 | - | - | - | - | - | 8 |
IFRS 2 share-based payments | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
IFRS 2 vesting costs for the year | - | - | - | - | 20 | - | 20 |
IFRS 2 vested share-based payments | - | - | - | - | (16) | - | (16) |
Actuarial gain/(loss) on defined benefit provision | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Change in defined benefit provision due to changes in actuarial assumptions | - | - | (4) | - | - | - | (4) |
Foreign currency variations | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Foreign currency variations | - | - | - | (2) | 1 | - | (2) |
Mergers and acquisitions | - | - | - | 0 | \u00a0 | - | 0 |
Other movements | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Reclassification | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | - | - |
Balance at 31 December 2023 | 44 | 224 | 11 | (105) | 25 | 26 | 224 |
The hedging reserve consists of the effective portion of cash-flow hedging instruments related to hedged transactions that have not yet occurred, net of deferred taxes. The decreased fair value of interest rate swaps mainly arises from decreasing US$ market interest rates whereas the increased fair value of forward currency contracts is mainly driven by the depreciation of the US$ exchange rate versus the hedged currencies (especially EUR and BRL).
\nActuarial gain/(loss) on defined benefits provisions includes the impact of the remeasurement of defined benefit provisions.
\nThe foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries.
\nThe Management Board, with the approval of the Supervisory Board, has granted a call option to Stichting Continu\u00efteit SBM Offshore to acquire a number of preference shares. As of October 1, 2022, and with reference to articles 5.5 and 5.6 of the Articles of Association of the Company, a \u2019Protective Preference Shares\u2019 reserve amounting to US$26 million (2022: US$26 million) was created at the expense of the share premium reserve at the level of the Company. If and when Stichting Continuite\u00eft SBM Offshore would exercise the call option to acquire preference shares, these preference shares may also be paid-up from the reserve of the Company. In addition to the legal reserves, distributions to the Company\u2019s shareholders are restricted to the amount of the statutory reserves.
\nThe Company\u2019s total equity as at December 31, 2023 is US$3,733 million, out of which US$2,052 million relates to legal reserves and US$26 million relates to the statutory reserves (December 31, 2022: Total equity of US$3,397 million out of which US$1,860 million relates to legal reserves and US$26 million to the statutory reserves). For more information, reference is made to note 4.5.4 Shareholders\u2019 Equity.
The line item \u2019Borrowings and lease liabilities\u2019 in the consolidated statement of financial position is further detailed as follows:\u00a0
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Borrowings | \u00a0 | 8,112 | 6,839 |
Lease liabilities | \u00a0 | 74 | 33 |
Total Non-current portion of Borrowings and lease liabilities | \u00a0 | 8,186 | 6,873 |
Borrowings | \u00a0 | 1,093 | 1,678 |
Lease liabilities | \u00a0 | 11 | 13 |
Total Current portion of Borrowings and lease liabilities | \u00a0 | 1,105 | 1,691 |
\u00a0
The movement in bank interest bearing borrowings is as follows:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Non-current portion | \u00a0 | 6,839 | 5,891 |
Add: current portion | \u00a0 | 1,678 | 1,754 |
Remaining principal at 1 January | \u00a0 | 8,517 | 7,645 |
Additions | \u00a0 | 3,943 | 1,642 |
Redemptions | \u00a0 | (2,999) | (759) |
Transaction and amortized costs | \u00a0 | (255) | (10) |
Total movements | \u00a0 | 688 | 872 |
Remaining principal at 31 December | \u00a0 | 9,206 | 8,517 |
Less: Current portion | \u00a0 | (1,093) | (1,678) |
Non-current portion | \u00a0 | 8,112 | 6,839 |
| \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Transaction and amortized costs | \u00a0 | 472 | 216 |
Remaining principal at 31 December (excluding transaction and amortized costs) | \u00a0 | 9,677 | 8,734 |
Less: Current portion | \u00a0 | (1,142) | (1,710) |
Non-current portion | \u00a0 | 8,535 | 7,023 |
The additions in borrowings of US$3,943 million relate mainly to drawdowns on (i) project finance facilities for FPSO ONE GUYANA, FPSO Prosperity, and FPSO Sepetiba, (ii) the new loans achieved for FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o, (iii) the Company\u2019s RCF and SCF, (iv) a funding loan of US$125 million from CMFL in relation to FPSO Cidade de Ilhabela and the new Revolving Credit Facility for MPF hull financing of US$210 million.
\nIn the context of FPSO Cidade de Ilhabela, during 2023, the Company has created a new entity, Guara Norte Swiss Holding SA, and subsequently transferred 15% non-voting shares to CMFL which, in turn, granted the US$125 million funding loan. The terms of the agreement set out a call and put options that can be exercised at nominal amount of the non-voting shares. Therefore the Company assessed that IAS 32 takes precedence over IFRS 10 and will therefore not recognize a non-controlling interest but rather recognize the liability. This transaction is in line with the Company\u2019s aim to diversify its sources of debt funding and to accelerate equity cashflow from the backlog.
\nAs announced on March 31, 2023, the Company has secured the project financing of FPSO Almirante Tamandar\u00e9 for a total of US$1.63 billion. As of December 31, 2023, the Company has drawdown US$1,053 million from the project financing and fully repaid the bridge loan of US$635 million.
\nAs announced on June 20, 2023, the Company has secured the project financing of FPSO Alexandre de Gusm\u00e3o for a total of US$1.615 billion. As of December 31, 2023, the Company has drawdown US$1,165 million from the project financing and fully repaid the bridge loan of US$620 million.
\nAs announced on December 15, 2023, the Company has secured the new Revolving Credit Facility for MPF hull financing for a total of US$210 million. As of December 31, 2023, the Company has fully drawn down this financing.
\nThe redemptions are mostly related to (i) the repayment of the bridge loan facility of FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o following the completion of the project financings, the repayment of the FPSO Liza Unity loan of US$1,140 million following the sale of the unit to the client (ii) the non-recourse debt repayment schedules.
\nFor further disclosures about fair value measurement, we refer to note 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nThe Company has no \u2019off-balance sheet\u2019 financing through special purpose entities. All long-term debt is included in the consolidated statement of financial position.
\nThe borrowings, excluding the amount of transaction and amortized costs, have the following forecast repayment schedule:
\n| \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Within one year | \u00a0 | 1,142 | 1,710 |
Between 1 and 2 years | \u00a0 | 1,877 | 1,657 |
Between 2 and 5 years | \u00a0 | 3,237 | 3,010 |
More than 5 years | \u00a0 | 3,421 | 2,357 |
Balance at 31 December | \u00a0 | 9,677 | 8,734 |
The borrowings by entity are as follows:
\n| \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | Net book value at 31 December 2023 | Net book value at 31 December 2022 | ||||
|---|---|---|---|---|---|---|---|---|---|---|
Entity name | Project name or nature of loan | % Ownership | % Interest1 | Maturity | Non-current | Current | Total | Non-current | Current | Total |
Project Finance facilities drawn | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Tupi Nordeste Sarl | FPSO Cidade de Paraty | 63.13 | 5.50% | 15-Jun-23 | - | - | - | - | 72 | 72 |
SBM Baleia Azul Sarl | FPSO Cidade de Anchieta | 100.00 | 5.50% | 15-Sep-27 | 122 | 41 | 163 | 163 | 39 | 202 |
Alfa Lula Alto Sarl | FPSO Cidade de Marica | 61.00 | 5.60% | 17-Dec-29 | 544 | 128 | 672 | 672 | 121 | 793 |
Beta Lula Central Sarl | FPSO Cidade de Saquarema | 61.00 | 4.20% | 15-Jun-30 | 712 | 108 | 820 | 820 | 102 | 922 |
Guyana Deep Water UK Limited | FPSO Liza Destiny | 100.00 | SOFR + 1.91% | 18-Dec-29 | 405 | 70 | 474 | 474 | 67 | 541 |
Guyana Deep Water II UK Limited | FPSO Liza Unity | 100.00 | SOFR + 1.76% | 09-Nov-23 | - | - | - | 1,140 | (4) | 1,136 |
Guyana Deep Water III UK Limited | FPSO Prosperity | 100.00 | SOFR + 1.86% | 29-Aug-25 | 951 | 87 | 1,038 | 965 | (4) | 960 |
Senior secured notes | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Guara Norte Sarl | FPSO Cidade de Ilhabela | 75.00 | 5.20% | 15-Jun-34 | 672 | 48 | 720 | 720 | 44 | 764 |
Guaranteed project finance facilities drawn | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Mero 2 Owning B.V. | FPSO Sepetiba | 64.50 | 4.30% | 15-Jun-38 | 1,370 | 56 | 1,425 | 1,410 | (14) | 1,397 |
Guyana Deep Water IV UK Limited | FPSO ONE GUYANA | 100.00 | 5.20% | 31-Jul-27 | 1,077 | (4) | 1,073 | 426 | - | 426 |
Tamandare Owning B.V. | FPSO Almirante Tamandar\u00e9 | 55.00 | 5.90% | 15-Dec-38 | 920 | (10) | 911 | (3) | 635 | 632 |
Mero 4 Owning B.V. | FPSO Alexandre de Gusm\u00e3o | 55.00 | 6.40% | 15-May-39 | 1,022 | (5) | 1,017 | (2) | 620 | 618 |
Bridge loan facility | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Tamandare Owning B.V. | FPSO Almirante Tamandar\u00e9 | 55.00 | Libor + 0.6% | 26-May-23 | - | - | - | (3) | 635 | 632 |
Mero 4 Owning B.V. | FPSO Alexandre de Gusm\u00e3o | 55.00 | Libor + 0.75% | 20-Jul-23 | - | - | - | (2) | 620 | 618 |
Revolving credit facility | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
SBM Holding Inc | Corporate Facility | 100.00 | Variable | 13-Feb-26 | - | 550 | 550 | (0) | (1) | (1) |
SBM Holding Inc | Fast4Ward\u00ae hull financing | 100.00 | SOFR + 1.9% | 20-Jun-25 | 209 | (1) | 208 | (0) | (1) | (1) |
Other | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | |
Guara Norte Swiss Holding SA | FPSO Cidade de Ilhabela | 100.00 | 7.90% | 31-Dec-27 | 75 | 25 | 100 | - | - | - |
Brazilian Deepwater Production B.V. | FPSO Espirito Santo | 51.00 | SOFR + 1.05% | 31-Jan-29 | 25 | - | 25 | 47 | - | 47 |
Brazilian Deepwater Production Contractors Ltd. | FPSO Espirito Santo | 51.00 | 3.00% | 31-Dec-28 | 8 | - | 8 | 5 | - | 5 |
Other | \u00a0 | 100.00 | \u00a0 | \u00a0 | 0 | - | 0 | 2 | - | 2 |
Net book value of loans and borrowings | 8,112 | 1,093 | 9,206 | 6,839 | 1,678 | 8,517 |
For the project finance facilities, the respective vessels are mortgaged to the banks or to note holders.
\nThe Company has available facilities resulting from (i) the undrawn RCF, (ii) the undrawn portion of FPSO ONE GUYANA, FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o project facilities, and (iii) short-term credit lines.
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Expiring within one year | \u00a0 | 274 | 274 |
Expiring beyond one year | \u00a0 | 2,174 | 2,452 |
Total | \u00a0 | 2,448 | 2,726 |
The RCF in place as of December 31, 2023, has a maturity date of February 13, 2026. The US$1 billion facility was secured with a selected group of 12 core relationship banks and has an uncommitted option to increase the RCF by an additional US$500 million. The Company does not have any other extension option remaining.
\nWhen needed, the RCF allows the Company to finance EPC activities/working capital, bridge any long-term financing needs, and/or finance general corporate purposes. On December 23, 2021, the RCF was amended by means of an amendment and restatement agreement to reflect a dedicated green funding tranche. By creating this green tranche, US$50 million of the RCF may only be used to fund activities that comply with the Green Loan Principles (primarily activities related to renewable energy projects) and the remaining US$950 million can be used in the following proportions:
EPC activities/working capital \u2013 100% of the facility;
General Corporate Purposes \u2013 up to 50% of the facility;
Refinancing project debt \u2013 100% of the facility but limited to a period of 18 months.
The pricing of the RCF is currently based on SOFR. The margin is adjusted in accordance with the applicable leverage ratio, ranging from a minimum level of 0.50% p.a. (0.40% for the green tranche) to a maximum of 1.50% p.a. (1.40% for the green tranche). The margin also includes a Sustainability Adjustment Mechanism whereby the margin may increase or decrease by 0.05% based on the absolute change in the Company performance as measured and reported by Sustainalytics1. The Company\u2019s Sustainability performance in 2023 allows the 0.05% margin decrease to remain applicable for 2023.
The Company has secured a US$210 million revolving credit facility for the financing of the construction of Fast4Ward\u00ae Multi-Purpose Floater (MPF) hulls, as announced on December 15, 2023. The tenor of the MPF facility is eighteen months, with an uncommitted extension option for another six months. Repayment is expected to take place upon sale of the MPF hulls or upon drawdown of the relevant project loan. The pricing is based on SOFR and a margin, which is 1.90% per annum for the first 12 months and thereafter 2.10% per annum. The Company has fully drawn this facility as of December 31, 2023.
The following key financial covenants apply to the RCF, as agreed with the respective lenders on February 13, 2019, and to the new Revolving Credit Facility for MPF hull financing, and, unless stated otherwise, relate to the Company\u2019s consolidated financial statements:
Solvency: Consolidated IFRS Tangible Net Worth divided by Consolidated IFRS Tangible Assets must be > 25%;
Interest Cover Ratio: Consolidated Directional Underlying EBITDA divided by Consolidated Directional Net Interest Payable must be > 4.0.
The Lease Backlog Cover Ratio (LBCR) is used to determine the maximum funding availability under the RCF. The maximum funding availability is determined by calculating the net present value of the future contracted net cash after debt service of a defined portfolio of operational offshore units in the directional backlog. The maximum theoretical amount available under the RCF is then determined by dividing this net present value by 1.5. The actual availability under the RCF will be the lower of this amount and the applicable Facility Amount. As at December 31, 2023 additional headroom above the US$1 billion capacity under the RCF exceeded US$870 million.
\nFor the purpose of covenants calculations, the following simplified definitions apply:
IFRS Tangible Net Worth: Total equity (including non-controlling interests) of the Company in accordance with IFRS, excluding the marked-to-market valuation of currency and interest derivatives undertaken for hedging purposes by the Company through other comprehensive income, dividends declared, value of intangible assets and deferred taxes.
Consolidated IFRS Tangible Assets: The Company\u2019s total assets (excluding intangible assets) in accordance with the IFRS consolidated statement of financial position less the marked-to-market valuation of currency and interest derivatives undertaken for hedging purposes by the Company through other comprehensive income.
Consolidated Directional Underlying EBITDA: Consolidated profit of the Company adjusted for net interest payable, tax and depreciation of assets and impairments, any exceptional or extraordinary items, and by adding back (i) the annualized production EBITDA for units which started operations during the financial year, and (ii) the acquisition annualized EBITDA for units acquired during the financial year.
Consolidated Directional Net Interest Payable: All interest and other financing charges paid up, payable (other than capitalized interest during a construction period and interest paid or payable between wholly owned members of the Company) or incurred by the Company, less all interest and other financing charges received or receivable by the Company, as per Directional reporting.
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
IFRS Tangible Net Worth | \u00a0 | 4,968 | 4,494 |
Consolidated IFRS Tangible Assets | \u00a0 | 16,606 | 15,161 |
Solvency ratio | \u00a0 | 29.9% | 29.6% |
Adjusted (Directional) Underlying EBITDA | \u00a0 | 1,6091 | 1,0362 |
Consolidated Directional Net Interest Payable | \u00a0 | 234 | 190 |
Interest cover ratio | \u00a0 | 6.9 | 5.5 |
The Leverage ratio based on reported Directional figures, is used to determine the pricing only.
\nThe Company monitors its financial and non-financial covenants for borrowings, which are included in the consolidated financial statement continuously throughout the year. None of the borrowings in the statement of financial position were in default as at the reporting date or at any time during the period.
Starting April 2023, the Company has secured short-term funds in the form of a Supply chain financing facility of EUR50 million (or USD equivalent). The pricing of the Supply Chain Financing facility (SCF) is based on a reference rate, depending on the tenor and currency (such as term SOFR for USD) of the individual utilizations. The margin is adjusted in accordance with the currency of the utilization, 0.85% p.a. for payables denominated in EUR and 0.95% p.a. in USD. The Company has utilized the SCF during the year with no outstanding balance as of December 31, 2023.
The lease liabilities mostly relate to the leasing of office buildings as of December 31, 2023.
\nThe movement in the lease liabilities is as follows:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Principal recognized at 1 January | \u00a0 | 46 | 56 |
Additions | \u00a0 | 55 | 13 |
Redemptions | \u00a0 | (18) | (20) |
Foreign currency variations | \u00a0 | 2 | (3) |
Other | \u00a0 | - | - |
Total movements | \u00a0 | 39 | (10) |
Remaining principal at 31 December | \u00a0 | 85 | 46 |
Of which | \u00a0 | \u00a0 | \u00a0 |
Current portion | \u00a0 | 11 | 13 |
Non-current portion | \u00a0 | 74 | 33 |
The movements in lease liabilities over the period were mainly related to an increase due to the extension of some lease contracts for offices and the regular redemptions and foreign currency translations.
\nThe maturity of the lease liabilities is analyzed in section 4.3.27 financial instruments - fair values and risk management (liquidity risk).
\nThe total cash outflow for leases in 2023 was US$22 million, which includes redemptions of principal and interest payments. Total interest for the period amounted to US$4 million.
The movement and type of provisions during the year 2023 are summarized as follows:
\n| \u00a0 | Demobilisation | Warranty | Restructuring | Employee benefits | Other | Total |
|---|---|---|---|---|---|---|
Balance at 1 January 2023 | 119 | 86 | 2 | 15 | 264 | 487 |
Arising during the year | 40 | 44 | 11 | 4 | 72 | 170 |
Unwinding of interest | 1 | - | - | 1 | - | 2 |
Utilized | (31) | (5) | (1) | (1) | (5) | (43) |
Released to profit | (0) | (20) | - | (1) | (7) | (30) |
Other movement | (0) | - | (5) | 4 | 0 | (1) |
Balance at 31 December 2023 | 129 | 104 | 7 | 21 | 324 | 586 |
of which : | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Non-current portion | 97 | - | - | 21 | 265 | 383 |
Current portion | 32 | 104 | 7 | - | 59 | 203 |
The provision for demobilization relates to the costs for demobilization of the vessels and floating equipment at the end of the respective operating lease periods. The obligations are valued at net present value, and a yearly basis interest is added to this provision. The recognized interest is included in the line item \u2019Financial expenses\u2019 of the consolidated income statement (refer to note 4.3.9 Net Financing Costs).
\nThe increase in the provision for demobilization mainly relates to an increase following the reassessment of the expected decommissioning and green recycling costs of FPSO Capixaba, following the final selection of a scrapping yard in Denmark, and the reassessment for FPSO Cidade de Anchieta, partially offset by utilization in relation to the progress of the decommissioning activities on FPSO Capixaba. In addition, the reassessment of the demobilization obligations and associated future demobilization costs in operating lease contracts triggered an increase of US$3 million in net present value of demobilization costs. Therefore, as explained in B. Critical Accounting Policies \u2212 (f) Demobilization obligations, this increase has been recognized both impacting the provision and the asset.
\nExpected outflows within one year are US$32 million, between one and five years is US$48 million and US$49 million after five years.
\nFor most Turnkey sales, the Company gives warranties to its clients. Under the terms of the contracts, the Company undertakes to make good, by repair or replacement, defective items that become apparent within an agreed period, starting from the final acceptance by the client. The increase of the warranty provision consists of new provisions accrued on projects under construction over the period or still under warranty period, which was partially offset by the regular consumption of existing warranty provisions over the applicable warranty period.
\nDuring the 2023 financial year, the Company announced the implementation of an optimization plan for its support functions\u2019 activities, aiming to improve global performance and cost efficiency. As a result, the Company has recognized a provision in the amount of US$11 million against cost in the income statement (amount included in line \u2019Other operating income/(expense)\u2019. The restructuring of the Company will impact approximately 106 employees.
\nOther provisions mainly relate to claims, regulatory fines related to operations, onerous contracts and planned local content penalty on construction projects. The latter was the main driver of the increase in Other provisions during 2023.
\nOn June 21, 2022, the district court in Rotterdam delivered its decision in the case between the Company and the AFM (Dutch Authority for the Financial Markets) relating to certain public disclosures made by the Company in the period from 2012-2014. The court has honored the position of the Company in relation to two disclosures and reduced the fine to US$1 million.
\nOn August 1, 2022, the AFM filed an appeal with the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, CBB) against the Rotterdam District Court\u2019s ruling in respect of alleged violations 1 and 2 (the principal appeal). On January 5, 2023, SBM Offshore filed its response to the AFM\u2019s appeal and additionally, filed an appeal with the Trade and Industry Appeals Tribunal against the Rotterdam District Court\u2019s ruling in respect of alleged violations 3 and 4 (the incidental appeal). On May 25, 2023, the AFM has filed its reply to SBM Offshore\u2019s appeal. SBM Offshore is currently awaiting the listing of the hearing, which SBM Offshore\u2019s lawyers expect to happen during the 3rd quarter of 2024.
SBM Offshore N.V., as the parent company, is committed to fulfill various types of obligations arising from customer contracts, such as full performance and warranty obligations.
\nIn the past, the parent company has issued guarantees for contractual obligations in respect of several Group companies, including equity-accounted joint ventures, with respect to long-term lease-and-operate contracts. The few remaining guarantees still active as of December 31, 2023, relate to the Deep Panuke MOPU unit, Thunder Hawk semi-submersible platform, FPSO Mondo and FPSO Saxi Batuque. These were signed prior to 2010.
As of December 31, 2023, the Company has provided bank guarantees to unrelated third parties for an amount of US$361million (2022: US$327 million). No liability is expected to arise under these guarantees.
\nThe Company holds in its favor US$654 million of bank guarantees from unrelated third parties. No withdrawal under these guarantees is expected to occur.
As at December 31, 2023, the remaining contractual commitments for acquisition of intangible assets, property, plant and equipment and investment in leases amounted to US$859 million (December 31, 2022: US$2,201million). Investment commitments have decreased principally on the construction of FPSO Almirante Tamandar\u00e9 and FPSO ONE GUYANA.
As at December 31, 2023 the Company did not identify any contingent liabilities.
The movement and type of provisions during the year 2023 are summarized as follows:
\n| \u00a0 | Demobilisation | Warranty | Restructuring | Employee benefits | Other | Total |
|---|---|---|---|---|---|---|
Balance at 1 January 2023 | 119 | 86 | 2 | 15 | 264 | 487 |
Arising during the year | 40 | 44 | 11 | 4 | 72 | 170 |
Unwinding of interest | 1 | - | - | 1 | - | 2 |
Utilized | (31) | (5) | (1) | (1) | (5) | (43) |
Released to profit | (0) | (20) | - | (1) | (7) | (30) |
Other movement | (0) | - | (5) | 4 | 0 | (1) |
Balance at 31 December 2023 | 129 | 104 | 7 | 21 | 324 | 586 |
of which : | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Non-current portion | 97 | - | - | 21 | 265 | 383 |
Current portion | 32 | 104 | 7 | - | 59 | 203 |
The provision for demobilization relates to the costs for demobilization of the vessels and floating equipment at the end of the respective operating lease periods. The obligations are valued at net present value, and a yearly basis interest is added to this provision. The recognized interest is included in the line item \u2019Financial expenses\u2019 of the consolidated income statement (refer to note 4.3.9 Net Financing Costs).
\nThe increase in the provision for demobilization mainly relates to an increase following the reassessment of the expected decommissioning and green recycling costs of FPSO Capixaba, following the final selection of a scrapping yard in Denmark, and the reassessment for FPSO Cidade de Anchieta, partially offset by utilization in relation to the progress of the decommissioning activities on FPSO Capixaba. In addition, the reassessment of the demobilization obligations and associated future demobilization costs in operating lease contracts triggered an increase of US$3 million in net present value of demobilization costs. Therefore, as explained in B. Critical Accounting Policies \u2212 (f) Demobilization obligations, this increase has been recognized both impacting the provision and the asset.
\nExpected outflows within one year are US$32 million, between one and five years is US$48 million and US$49 million after five years.
\nFor most Turnkey sales, the Company gives warranties to its clients. Under the terms of the contracts, the Company undertakes to make good, by repair or replacement, defective items that become apparent within an agreed period, starting from the final acceptance by the client. The increase of the warranty provision consists of new provisions accrued on projects under construction over the period or still under warranty period, which was partially offset by the regular consumption of existing warranty provisions over the applicable warranty period.
\nDuring the 2023 financial year, the Company announced the implementation of an optimization plan for its support functions\u2019 activities, aiming to improve global performance and cost efficiency. As a result, the Company has recognized a provision in the amount of US$11 million against cost in the income statement (amount included in line \u2019Other operating income/(expense)\u2019. The restructuring of the Company will impact approximately 106 employees.
\nOther provisions mainly relate to claims, regulatory fines related to operations, onerous contracts and planned local content penalty on construction projects. The latter was the main driver of the increase in Other provisions during 2023.
\nOn June 21, 2022, the district court in Rotterdam delivered its decision in the case between the Company and the AFM (Dutch Authority for the Financial Markets) relating to certain public disclosures made by the Company in the period from 2012-2014. The court has honored the position of the Company in relation to two disclosures and reduced the fine to US$1 million.
\nOn August 1, 2022, the AFM filed an appeal with the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, CBB) against the Rotterdam District Court\u2019s ruling in respect of alleged violations 1 and 2 (the principal appeal). On January 5, 2023, SBM Offshore filed its response to the AFM\u2019s appeal and additionally, filed an appeal with the Trade and Industry Appeals Tribunal against the Rotterdam District Court\u2019s ruling in respect of alleged violations 3 and 4 (the incidental appeal). On May 25, 2023, the AFM has filed its reply to SBM Offshore\u2019s appeal. SBM Offshore is currently awaiting the listing of the hearing, which SBM Offshore\u2019s lawyers expect to happen during the 3rd quarter of 2024.
| \u00a0 | Notes | 31 December 2023 | 31 December 2022 |
|---|---|---|---|
Trade payables | \u00a0 | 254 | 204 |
Accruals on projects | \u00a0 | 590 | 933 |
Accruals regarding delivered orders | \u00a0 | 76 | 15 |
Other payables | \u00a0 | 101 | 88 |
Contract liability | 74 | 42 | |
Pension taxation | \u00a0 | 10 | 9 |
Taxation and social security costs | \u00a0 | 89 | 81 |
Current portion of deferred income | \u00a0 | 4 | 3 |
Other non-trade payables | \u00a0 | 148 | 125 |
Total | 1,347 | 1,501 |
\u2019Trade payables\u2019 and \u2019Accruals on projects\u2019 together decreased as a result of lower accrued expenses on ongoing projects and increased payments to suppliers. At the end of the year there were still four FPSOs under construction, two MPF hulls under construction and the awarded initial scope to begin FEED activities for the FPSO for the Whiptail development project.
\nThe increase in \u2018Accruals regarding delivered orders\u2019 mainly relates to FPSO Prosperity's finalization project.
\nFor \u2019Contract liability\u2019 refer to note 4.3.3. Revenue where the movement in current and non-current contract liabilities is explained.
\nPayables related to \u2019Taxation and social security\u2019 concerns uncertain tax positions related mainly to various taxes other than corporate income tax.
\n\u2019Other non-trade payables\u2019 include a prepayment of US$52 million relating to the future potential participation of partners to charter contracts, which was presented in \u2019Other non-current liabilities\u2019 in 2022, and interest payable and the short-term portion of the outstanding payments related to the Leniency Agreement and the settlement with Brazilian Federal Prosecutor\u2019s Office (Minist\u00e9rio P\u00fablico Federal \u2013 \u2019MPF\u2019). The long-term portion of the outstanding payments related to these agreements is presented in the line item \u2019Other non-current liabilities\u2019 in the Company\u2019s statement of financial position.
\nThe line item \u2019Other non-current liabilities\u2019 in the consolidated statement of financial position (refer to 4.2.3 Consolidated Statement of Financial Position) includes non-current contract liabilities of US$22 million as detailed in note 4.3.3 Revenue.
\nThe contractual maturity of the trade payables is analyzed in the liquidity risk section in 4.3.27 Financial Instruments \u2212 Fair Values and Risk Management.
\nDuring 2023, the Company acquired an additional stake of 49%, through the exercise of a put option in SBM Nauvata Engineering Private Limited (SBM Nauvata), thereby increasing its ownership to 100%. The put option over the interests held by non-controlling shareholders was initially recognized in 2019, when the Company acquired control of SBM Nauvata, as a financial liability. In accordance with IFRS 10 Consolidated Financial Statements, the acquisition of an additional ownership interest in a subsidiary without a change of control is accounted for as an equity transaction, with any excess or deficit of consideration paid over the carrying amount of the non-controlling interests being recognized in equity. As of December 31, 2022, the \u2018Trade and Other Payables\u2019 included an amount of US$22.8 million related to the put option, which was derecognized following the exercise of the put option and the cash consideration of US$21 million paid to the non-controlling shareholders. The carrying value of the net assets of SBM Nauvata attributable to non-controlling interests was US$4.3 million, which has been reattributed to retained earnings.
The line item \u2019Other non-current liabilities\u2019 in the consolidated statement of financial position (refer to 4.2.3 Consolidated Statement of Financial Position) includes non-current contract liabilities of US$22 million as detailed in note 4.3.3 Revenue.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:549300RDGCRYZ5QE6513", "period": "2023-01-01T00:00:00/2024-01-01T00:00:00" } }, "ixv-609": { "value": "\nSBM Offshore N.V., as the parent company, is committed to fulfill various types of obligations arising from customer contracts, such as full performance and warranty obligations.
\nIn the past, the parent company has issued guarantees for contractual obligations in respect of several Group companies, including equity-accounted joint ventures, with respect to long-term lease-and-operate contracts. The few remaining guarantees still active as of December 31, 2023, relate to the Deep Panuke MOPU unit, Thunder Hawk semi-submersible platform, FPSO Mondo and FPSO Saxi Batuque. These were signed prior to 2010.
As of December 31, 2023, the Company has provided bank guarantees to unrelated third parties for an amount of US$361million (2022: US$327 million). No liability is expected to arise under these guarantees.
\nThe Company holds in its favor US$654 million of bank guarantees from unrelated third parties. No withdrawal under these guarantees is expected to occur.
As at December 31, 2023, the remaining contractual commitments for acquisition of intangible assets, property, plant and equipment and investment in leases amounted to US$859 million (December 31, 2022: US$2,201million). Investment commitments have decreased principally on the construction of FPSO Almirante Tamandar\u00e9 and FPSO ONE GUYANA.
As at December 31, 2023 the Company did not identify any contingent liabilities.
As at December 31, 2023, the remaining contractual commitments for acquisition of intangible assets, property, plant and equipment and investment in leases amounted to US$859 million (December 31, 2022: US$2,201million). Investment commitments have decreased principally on the construction of FPSO Almirante Tamandar\u00e9 and FPSO ONE GUYANA.
As at December 31, 2023 the Company did not identify any contingent liabilities.
This note presents information about the Company\u2019s exposure to risk resulting from its use of financial instruments, the Company\u2019s objectives, policies and processes for measuring and managing risk, and the Company\u2019s management of capital. Further qualitative disclosures are included throughout these consolidated financial statements.
The Company uses the following fair value hierarchy for financial instruments that are measured at fair value in the statement of financial position, which require disclosure of fair value measurements by level:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);
Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (Level 3).
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
\n| \u00a0 | \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 | ||
|---|---|---|---|---|---|---|
| \u00a0 | Notes | Fair value level | Total book value | Total fair value | Total book value | Total fair value |
Financial assets measured at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Finance lease receivables | 3 | 6,801 | 7,053 | 7,193 | 7,219 | |
Loans to joint ventures and associates | 3 | 41 | 42 | 52 | 51 | |
Total | \u00a0 | \u00a0 | 6,842 | 7,095 | 7,244 | 7,270 |
Financial liabilities measured at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
US$ project finance facilities drawn | 2 | 9,543 | 9,604 | 8,679 | 8,678 | |
Lease liabilities | \u00a0 | 3 | 85 | 85 | 46 | 46 |
Other debt | 2 | 134 | 133 | 54 | 54 | |
Total | \u00a0 | \u00a0 | 9,762 | 9,822 | 8,780 | 8,778 |
In the above table, the Company has disclosed the fair value of each class of financial assets and financial liabilities for which the book value is different than fair value in a way that permits the information to be compared with the carrying amounts.
There are financial assets and financial liabilities measured at fair value, namely the interest rate swaps, forward currency contracts and commodity contracts which are classified at a Level 2 on the fair value hierarchy. Level 2 is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). The carrying amount for these financial assets and liabilities approximates the fair value as at December 31, 2023.
The Company has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values as the impact of discounting is insignificant.
Classes of financial instruments that are not used are not disclosed.
No instruments were transferred between Level 1 and Level 2.
No instruments were transferred between Level 2 and Level 3.
None of the instruments of the Level 3 hierarchy are carried at fair value in the statement of financial position.
No financial instruments were subject to offsetting as of December 31, 2023 and December 31, 2022.
The effects of the foreign-currency-related hedging instruments on the Company\u2019s financial position and performance including related information are included in the table below:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Foreign currency forwards | \u00a0 | \u00a0 |
Carrying amount | 68 | (53) |
Notional amount | (2,774) | (3,343) |
Maturity date | 14-8-2024 | 30-8-2023 |
Hedge ratio | 100% | 100% |
Change in discounted spot value of outstanding hedging instruments since 1 January | 121 | 27 |
Change in value hedged rate for the year (including forward points) | (121) | (27) |
Interest rate swaps | \u00a0 | \u00a0 |
Carrying amount | 248 | 463 |
Notional amount | 8,043 | 7,253 |
Maturity date | 24-3-2033 | 22-5-2031 |
Hedge ratio | 95% | 94% |
Change in discounted spot value of outstanding hedging instruments since 1 January | (214) | 606 |
Change in value hedged rate for the year (including forward points) | 214 | (606) |
Commodity contracts | \u00a0 | \u00a0 |
Carrying amount | (1) | (2) |
Notional amount | 62 | 59 |
Maturity date | 5-9-2024 | 22-12-2023 |
Hedge ratio | 100% | 100% |
Change in discounted spot value of outstanding hedging instruments since 1 January | 1 | (2) |
Change in value hedged rate for the year (including forward points) | (1) | 2 |
The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.
\n| \u00a0 | Level 2 and level 3 instruments | Level 3 instruments | |
|---|---|---|---|
Type | Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value measurement |
Financial instrument measured at fair value | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps | Income approach \u2212 | Not applicable | Not applicable |
Commodity contracts | Income approach \u2212 | Not applicable | Not applicable |
Forward currency contracts | Income approach \u2212 | Not applicable | Not applicable |
Financial instrument not measured at fair value | \u00a0 | \u00a0 | \u00a0 |
Loans to joint ventures and associates | Income approach \u2212 |
| The estimated fair value would increase (decrease) if:
|
Finance lease receivables | Income approach \u2212 |
| The estimated fair value would increase (decrease) if:
|
Loans and borrowings | Income approach \u2212 | Not applicable | Not applicable |
Other long-term debt | Income approach \u2212 | Not applicable | Not applicable |
The following table indicates the period in which the cash flows associated with the cash-flow hedges are expected to occur and the carrying amounts of the related hedging instruments. The amounts disclosed in the table are the contractual undiscounted cash flows. The future interest cash flows for interest rate swaps are estimated using the forward rates as at the reporting date.
\n| \u00a0 | Carrying amount | Less than | Between | More than | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD SOFR 3 Months) | 248 | 22 | 104 | 129 | 255 |
Forward currency contracts | 68 | 48 | 14 | - | 62 |
Commodity contracts | (1) | (1) | - | - | (1) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD LIBOR 3 Months) | 463 | 19 | 254 | 212 | 486 |
Forward currency contracts | (53) | (58) | (9) | - | (67) |
Commodity contracts | (2) | (1) | (1) | - | (2) |
The following table indicates the period in which the cash-flow hedges are expected to impact profit or loss and the carrying amounts of the related hedging instruments.
\n| \u00a0 | Carrying amount | Less than | Between | More than | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD SOFR 3 Months) | 248 | 22 | 104 | 129 | 255 |
Forward currency contracts | 68 | 48 | 14 | - | 62 |
Commodity contracts | (1) | (1) | - | - | (1) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps (USD LIBOR 3 Months) | 463 | 19 | 254 | 212 | 486 |
Forward currency contracts | (53) | (58) | (9) | - | (67) |
Commodity contracts | (2) | (1) | (1) | - | (2) |
Gains and losses recognized in the hedging reserve in equity on interest rate swap contracts will be continuously released to the income statement until the final repayment of the hedged items (please refer to note 4.3.22 Equity Attributable to Shareholders).
\nGains and losses recognized in the hedging reserve on forward currency contracts are recognized in the income statement in the period or periods during which the hedged transaction affects the income statement. This is mainly within twelve months from the statement of financial position date, unless the gain or loss is included in the initial amount recognized in the carrying amount of fixed assets, in which case recognition is over the lifetime of the asset. If the gain or loss is included in the initial amount recognized in the carrying amount of the cost incurred on construction contracts, the recognition is over time.
\nGains and losses recognized in the hedging reserve on commodity contracts are recognized in the income statement in the period or periods during which the hedged transaction affects the income statement. If the hedged transaction subsequently results in the recognition of non-financial assets (such as inventory, asset under construction) or non-financial liability, the gain or loss is included in the initial cost or other carrying amount of the asset. In such case, this amount is recognized in profit or loss at the same time as the hedged item affects profit or loss.
The movement of loss allowance during the year 2023 is summarized as follows:
\n| \u00a0 | Finance lease receivable | Contract assets | Trade receivables | Other financial assets | ||||
|---|---|---|---|---|---|---|---|---|
| \u00a0 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
Opening loss allowance as at 1 January | (0) | (0) | (1) | (1) | (2) | (3) | (95) | (108) |
Increase in loss allowance recognized in profit or loss during the year | - | (0) | (1) | (1) | (3) | (1) | (28) | - |
Receivables written off during the year as uncollectible | - | - | - | - | - | - | - | - |
Unused amount reversed | 0 | 0 | 1 | 1 | 1 | 2 | 0 | 14 |
At 31 December | (0) | (0) | (1) | (1) | (5) | (2) | (123) | (95) |
The Company\u2019s activities expose it to a variety of financial risks, market risks (including currency risk, interest rate risk and commodity risk), credit risk and liquidity risk. The Company\u2019s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company\u2019s financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The Company buys and sells derivatives in the ordinary course of business and also incurs financial liabilities in order to manage market risks. All such transactions are carried out within the guidelines set in the Company policy. Generally, the Company seeks to apply hedge accounting in order to manage volatility in the income statement and statement of comprehensive income. The purpose is to manage the interest rate, currency and commodity price risk arising from the Company\u2019s operations and its sources of finance. Derivatives are only used to hedge closely correlated underlying business transactions.
\nThe Company\u2019s principal financial instruments, other than derivatives, comprise trade debtors and creditors, bank loans, short-term facilities and overdrafts, cash and cash equivalents (including short-term deposits) and financial guarantees. The main purpose of these financial instruments is to finance the Company\u2019s operations. Trade debtors and creditors result directly from the business operations of the Company.
\nFinancial risk management is carried out by a central treasury department under policies approved by the Management Board. Treasury identifies, evaluates and hedges financial risks in close co-operation with the subsidiaries and the Chief Financial Officer (CFO) during the quarterly Asset and Liability Committee. The Management Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. It is, and has been throughout the year under review, the Company\u2019s policy that no speculation in financial instruments shall be undertaken. The main risks arising from the Company\u2019s financial instruments are market risk, liquidity risk and credit risk.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices, will affect the Company\u2019s income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.
The Company operates internationally and is exposed to foreign exchange risk arising from transactional currency exposures, primarily with respect to the euro, Singapore dollar, Chinese Yuan and Brazilian real. Due to the increase of the activities in China, the Company has included its exposure in Chinese Yuan for the year ended on December 31, 2023. The exposure arises from sales or purchases in currencies other than the Company\u2019s functional currency. The Company uses forward currency contracts to eliminate the currency exposure once the Company has entered into a firm commitment of a project contract.
\nFor foreign currency risk, the principal terms of the forward currency contract (notional and settlement date) and the future expense or revenue (notional and expected cash flow date) are identical. The Company has established a hedge ratio of 1:1 for all its hedging relationships.
\nThe main Company\u2019s exposure to foreign currency risk is as follows based on notional amounts:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
in millions of local currency | EUR | SGD | BRL | CNY | EUR | SGD | BRL | CNY |
Fixed assets | 158 | - | 277 | 26 | 133 | - | 274 | 24 |
Current assets | 76 | 7 | 1,118 | 32 | 99 | 3 | 606 | 18 |
Long-term liabilities | (136) | (0) | (622) | (18) | (105) | - | (685) | (16) |
Current liabilities | (198) | (26) | (1,505) | (160) | (183) | (9) | (1,251) | (101) |
Gross balance sheet exposure | (100) | (19) | (731) | (120) | (55) | (6) | (1,055) | (75) |
Estimated forecast sales | 4 | - | - | - | 27 | - | - | - |
Estimated forecast purchases | (1,242) | (222) | (2,617) | (1,800) | (1,673) | (383) | (1,779) | (1,344) |
Gross exposure | (1,338) | (241) | (3,348) | (1,920) | (1,701) | (388) | (2,834) | (1,419) |
Forward exchange contracts | 1,362 | 240 | 3,129 | 1,930 | 1,831 | 390 | 2,799 | 1,439 |
Net exposure | 24 | (1) | (219) | 10 | 130 | 1 | (35) | 20 |
The increase of the BRL exposure results from the requirements of the Brazilian operations for the next three years. The decrease of the EUR and SGD exposure is the result of progress on FPSO Sepetiba, FPSO ONE GUYANA, FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o. CNY exposure has been added to the foreign exchange risk as a result of the Company\u2019s increased presence in China for FPSOconstruction and hull preparation.
\nThe estimated forecast purchases relate to project expenditure and overhead expenses for up to three years. The main currency exposures of overhead expenses and Brazilian operations are hedged at 100% for the coming year, between 66% and 100% for the year after, and between 33% and 100% for the subsequent year, depending on internal review of the foreign exchange market conditions.
\n| \u00a0 | 2023 | 2022 | 2023 | 2022 |
|---|---|---|---|---|
| \u00a0 | Average rate | \u00a0 | Closing rate | \u00a0 |
EUR 1 | 1.0813 | 1.0530 | 1.1050 | 1.0666 |
SGD 1 | 0.7445 | 0.7253 | 0.7573 | 0.7459 |
BRL 1 | 0.2003 | 0.1939 | 0.2061 | 0.1892 |
CNY 1 | 0.1412 | 0.1488 | 0.1407 | 0.1450 |
The sensitivity on equity and the income statement resulting from a change of 10% of the US dollar\u2019s value against the following currencies at December 31, would have increased (decreased) profit or loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis as for 2022.
\n| \u00a0 | Profit or loss | Equity | ||
|---|---|---|---|---|
| \u00a0 | 10% increase | 10% decrease | 10% increase | 10% decrease |
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EUR | (0) | 0 | (139) | 139 |
SGD | (0) | 0 | (17) | 17 |
BRL | (0) | 0 | (50) | 50 |
CNY | (0) | 0 | (26) | 26 |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EUR | (0) | 0 | (189) | 189 |
SGD | (0) | 0 | (29) | 29 |
BRL | (0) | 0 | (33) | 33 |
CNY | (0) | 0 | (20) | 20 |
As set out above, by managing foreign currency risk, the Company aims to reduce the impact of short-term market price fluctuations on the Company\u2019s earnings. Over the long-term however, permanent changes in foreign currency rates would have an impact on consolidated earnings.
The Company\u2019s exposure to risk from changes in market interest rates relates primarily to the Company\u2019s long-term debt obligations with a floating interest rate. In respect of controlling interest rate risk, the floating interest rates of long-term loans are hedged by fixed rate swaps for the entire maturity period. The revolving credit facility is intended for the fluctuating needs of construction financing and bears interest at floating rates, which is also swapped for fixed rates when exposure is significant.
\nFor interest rate risk, the principal terms of the interest rate swap (notional amortization, rate-set periods) and the financing (repayment schedule, rate-set periods) are identical. The Company has established a hedge ratio of 1:1, as the hedging layer component matches the nominal amount of the interest rate swap for all its hedging relationships.
\nThe reform and replacement of benchmark interest rates such as USD LIBOR 3M and other interbank offered rates (\u2018IBORs\u2019) has become a priority for global regulators. On March 5, 2021, LIBOR\u2019s administrator (IBA) set out clear end-dates for new use of USD LIBOR and its cessation as a representative rate:
December 31, 2021: cessation of USD LIBOR 1W and 2M tenors; deadline for most of new contract to use USD LIBOR as sole reference;
June 30, 2023: cessation of remaining USD LIBOR tenors.
To transition existing contracts and agreements that reference USD LIBOR to Secured Overnight Financing Rate (\u2019SOFR\u2019), as the benchmark for US$ denominated derivatives and loans, adjustments for term differences and credit differences might need to be applied to SOFR, to enable the two benchmark rates to be economically equivalent on transition.
\nThe Company has applied the following reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in September 2019:
When considering the \u2018highly probable\u2019 requirement, the Company has assumed that the USD LIBOR 3M interest rate on which the Company\u2019s hedged debt is based does not change as a result of IBOR reform.
In assessing whether the hedge is expected to be highly effective on a forward-looking basis, the Company has assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based, is not altered by LIBOR reform.
The Company has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
Reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in August 2020 are applied once amendments to financial contracts become effective:
Changes in the basis for determining contractual cash flows of financial assets and financial liabilities have been reviewed and reflected in updated effective interest rate, once they become effective.
The Company amended the formal designation of a hedging relationship to reflect the changes that are required by the reform. The reform did not result in a discontinuation of the hedge or designation of a new hedging relationship. When the interest rate benchmark on which the hedged future cash flows had been based is changed, as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows is based.
In 2021 the Company has started hedging future debt interest rate risk with SOFR interest rate derivatives. For the FPSO Prosperity financing, IBOR transition to SOFR principles have been agreed with lenders as of March 31, 2023.
\nFor the FPSO ONE GUYANA financing (announced on July 21, 2022), FPSO Almirante Tamandar\u00e9 financing (announced on March 31, 2023) and FPSO Alexandre de Gusm\u00e3o financing (announced on June 20, 2023), the project loans carry a variable interest rate based on SOFR plus margin. No amendments of loan agreements and hedges due to IBOR reform are required.
\nThe Company\u2019s Treasury department has completed SBM Offshore\u2019s IBOR transition with the support of the Company\u2019s Legal department. The amendments to the contractual terms of the USD LIBOR-referenced floating-rate debt and the associated interest rate swaps and the corresponding update of the hedge designation was completed by mid-year 2023. The result of the negotiations with external banks and the implementation of SOFR did not have material impacts on the Company\u2019s financial results. The changed reference rate has also been effected in the treasury management system, processes, risk and valuation models.
\nAt the reporting date, the interest rate profile of the Company\u2019s interest-bearing financial instruments (excluding transaction costs) was:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Fixed rate instruments | \u00a0 | \u00a0 | \u00a0 |
Financial assets | \u00a0 | 6,856 | 7,232 |
Financial liabilities | \u00a0 | (891) | (985) |
Total | \u00a0 | 5,964 | 6,247 |
Variable rate instruments (USD LIBOR 3 Months) | \u00a0 | \u00a0 | \u00a0 |
Financial assets | \u00a0 | 12 | 12 |
Financial liabilities (USD LIBOR 3 Months) | \u00a0 | - | (6,317) |
Financial liabilities (SOFR) | \u00a0 | (8,777) | (1,432) |
Financial liabilities (future) (USD LIBOR 3 Months) | \u00a0 | - | (652) |
Financial liabilities (future) (SOFR) | \u00a0 | (1,670) | (1,368) |
Total | \u00a0 | (10,435) | (9,757) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Variable rate instruments (USD LIBOR 3 Months) | \u00a0 | - | (6,957) |
Variable rate instruments (SOFR) | \u00a0 | (10,435) | (2,800) |
Less: Reimbursable items (USD LIBOR 3 Months) | \u00a0 | - | 1,681 |
Less: Reimbursable items (SOFR) | \u00a0 | 1,524 | 321 |
Less: IRS contracts (USD LIBOR 3 Months) | \u00a0 | - | 4,774 |
Less: IRS contracts (SOFR) | \u00a0 | 8,043 | 2,479 |
Exposure | \u00a0 | (867) | (502) |
| \u00a0 | Profit or loss | Equity | ||
|---|---|---|---|---|
| \u00a0 | 100 bp increase | 100 bp decrease | 100 bp increase | 100 bp decrease |
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Variable rate instruments (USD LIBOR 3 Months) | (9) | 9 | - | - |
Variable rate instruments (SOFR) | - | - | - | - |
Interest rate swap (USD LIBOR 3 Months) | - | - | - | - |
Interest rate swap (SOFR) | - | - | 404 | (404) |
Sensitivity (net) | (9) | 9 | 404 | (404) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Variable rate instruments (USD LIBOR 3 Months) | (5) | 5 | - | - |
Variable rate instruments (SOFR) | - | - | - | - |
Interest rate swap (USD LIBOR 3 Months) | - | - | 211 | (211) |
Interest rate swap (SOFR) | - | - | 95 | (95) |
Sensitivity (net) | (5) | 5 | 306 | (306) |
The exposure of US$867 million is primarily arising from (i) the Company\u2019s RCF being partially hedged; (ii) the new Fast4Ward\u00ae hull financing, which is unhedged, and (iii) the residual exposure on the unhedged portion of project loan facilities for FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o and FPSO ONE GUYANA. The interest rate exposure arising from these loans is mainly offset by the Cash and Cash Equivalents at December 31, 2023.
\nThe sensitivity on equity and the income statement resulting from a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown above. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis was performed on the same basis as for 2022.
\nAt December 31, 2023, it is estimated that a general increase of 100 basis points in interest rates would decrease the Company\u2019s profit before tax for the year by approximately US$8 million (2022: decrease of US$5 million), mainly related to the residual interest rate exposure.
\nAs set out above, the Company aims to reduce the impact of short-term market price fluctuations on the Company\u2019s earnings. Over the long-term however, permanent changes in interest rates could have an impact on consolidated earnings.
\nCommodity exposure is defined by the Company as the risk of realizing adverse effects on operating cash flows and future earnings resulting from movement in commodity prices. The Company establishes hedge strategies in order to limit their commodity risk exposure in the following:
Oil exposure is mostly associated to transportation fuels connected with the Company\u2019s prospective contract awards, construction contracts, and future decommissioning.
Aluminum, steel, copper and iron ore exposures arise from the construction, refurbishment, repair of the products embedded in the Company\u2019s prospective contract awards, construction contracts and operation contracts.
Incoming lease payments following the Company\u2019s contractual arrangements with its clients are not impacted by the oil price.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company\u2019s other financial assets, trade and other receivables (including committed transactions), derivative financial instruments and cash and cash equivalents.
\n| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
Rating | Assets | Liabilities | Assets | Liabilities |
AA | 32 | (9) | 55 | (34) |
AA- | 173 | (54) | 231 | (93) |
A+ | 180 | (31) | 227 | (63) |
A | 30 | (3) | 69 | - |
BBB | 1 | - | 1 | - |
Non-investment grade | - | - | - | - |
Derivative financial instruments | 416 | (97) | 583 | (190) |
AAA | 153 | - | 116 | - |
AA | 6 | - | 51 | - |
AA- | 343 | - | 311 | - |
A+ | 23 | - | 178 | - |
A | 10 | - | 10 | - |
A- | - | - | 0 | - |
Non-investment grade | 8 | - | 16 | - |
Cash and cash equivalents and bank overdrafts | 543 | - | 683 | - |
The Company maintains and reviews its policy on cash investments and limits per individual counterparty are set to:
BBB- to BBB+ rating: US$25 million or 10% of cash available.
A- to A+ rating: US$75 million or 20% of cash available.
AA- to AA+ rating: US$100 million or 20% of cash available.
Above AA+ rating: no limit.
As per December 31, 2023, cash investments above AA+ rating do not exceed US$100 million per individual counterparty. Cash held in banks rated A+ has been diversified in cash investments above AA+ rating since year-end.
\nCash held in banks rated AA- is mainly linked to cash pledged to loan reimbursements to those same banks. Cash held in banks rated below A- is mainly related to the Company\u2019s activities in Brazil (US$8 million). Cash held in Angola has significantly decreased since 2021 following cash repatriation.
\nFor trade debtors, the credit quality of each customer is assessed, taking into account its financial position, past experience and other factors. Bank or parent company guarantees are negotiated with customers.\u00a0Individual risk limits are set based on internal or external ratings, in accordance with limits set by the Management Board. At the date of the financial statements, there are two customers that have an outstanding balance with a percentage over 10% of the total of trade and other receivables. Reference is made to note 4.3.19 Trade and Other Receivables for information on the distribution of the receivables by country and an analysis of the ageing of the receivables. Furthermore, limited recourse project financing removes a significant portion of the credit risk on finance lease receivables.
\nFor other financial assets, the credit quality of each counterpart is assessed, taking into account its credit agency rating when available or a comparable proxy.
\nRegarding loans to joint ventures and associates, the maximum exposure to credit risk is the carrying amount of these instruments. As the counterparties of these instruments are joint ventures, the Company has visibility over the expected cash flows and can monitor and manage credit risk that mainly arises from the joint venture\u2019s final client.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and abnormal conditions, without incurring unacceptable losses or risking damage to the Company\u2019s reputation.
\nIn 2023, the Company again conducted various liquidity scenarios, financial stress tests and sensitivity analyses. The conclusion remained that the Company\u2019s lease portfolio and the existing financing facilities and overall financing capacity are sufficient to ensure that the Company will continue as a going concern in the foreseeable future and it can sustain future growth plans. Furthermore, under its Lease and Operate contractual arrangements with clients, the Company has considerable time under charters in which to deal with disruptions from events outside the Company\u2019s control, thus providing it with considerable financial protection.
\nLiquidity is monitored using rolling forecasts of the Company\u2019s liquidity reserves, based on expected cash flows. Flexibility is secured by maintaining availability under committed credit lines.
\nThe table below analyses the Company\u2019s non-derivative financial liabilities, derivative financial liabilities and derivative financial assets into relevant maturity groupings, based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The future interest cash flows for borrowings and derivative financial instruments are based on the USD LIBOR/SOFR 3-month rates as at the reporting date.
\n| \u00a0 | Note | Less than 1 year | Between 1 and 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Borrowings | \u00a0 | 436 | 7,327 | 6,176 | 13,939 |
Lease liabilities | \u00a0 | 11 | 44 | 61 | 116 |
Derivative financial liabilities | \u00a0 | 80 | 10 | - | 90 |
Derivative financial assets | \u00a0 | (302) | (539) | (468) | (1,310) |
Trade and other payables | 1,347 | - | - | 1,347 | |
Total | \u00a0 | 1,572 | 6,841 | 5,769 | 14,182 |
| \u00a0 | Note | Less than 1 year | Between 1 and 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Borrowings | \u00a0 | 2,110 | 5,885 | 2,908 | 10,902 |
Lease liabilities | \u00a0 | 13 | 25 | 8 | 46 |
Derivative financial liabilities | \u00a0 | 201 | 52 | - | 253 |
Derivative financial assets | \u00a0 | (365) | (254) | (185) | (805) |
Trade and other payables | 1,501 | - | - | 1,501 | |
Total | \u00a0 | 3,459 | 5,708 | 2,730 | 11,897 |
The Company\u2019s objectives when managing capital are to safeguard the Company\u2019s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain a capital structure which optimizes the Company\u2019s cost of capital while, at the same time, ensuring diversification of sources of external funds.
\nThe Company mainly uses its corporate revolving credit facility (RCF, US$1 billion) and supply-chain financing (SCF, US$54 million) and, going forward, the new revolving credit facility for MPF hulls (US$210 million) to bridge financing requirements on projects under construction\u00a0prior to putting a dedicated project finance facility in place. When a project finance facility is arranged and draw-downs have started, the RCF is repaid\u00a0and a corporate guarantee from the Company is put in place for the construction period.\u00a0When the project facility is drawn in full and the associated FPSO is producing, the corporate guarantee is recovered and the project finance becomes non-recourse debt.
\nAs per December 31, 2023, all the debt associated with operating FPSOs is non-recourse.
\nThe Company has limited appetite to decrease the existing debt in its structure, as this would involve breakage cost, through winding down the hedges and it would decrease the Company\u2019s return on equity. From time to time, it may decide to refinance existing facilities in order to increase and/or extend the tenor of leverage subject to sufficient charter tenor and income.
\nGiven the non-recourse nature of a large part of its debt, the Company monitors its capital risk, based on the Lease Backlog Cover Ratio, which is also used by the bank consortium supporting the Company\u2019s RCF. Generally, this ratio is calculated as the net present value of the future contracted net cash,\u00a0after deducting the project finance debt and interest payments of a selected group of FPSO owning entities divided\u00a0by 1.5 (see note 4.3.23 Borrowings and Lease Liabilities).
\nThe gearing ratios at December 31, 2023 and 2022 were as follows:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Total borrowings and lease liabilities | 9,291 | 8,564 |
Less: net cash and cash equivalents | 543 | 683 |
Net debt | 8,748 | 7,881 |
Total equity | 5,531 | 4,914 |
Total capital | 14,278 | 12,795 |
Gearing ratio | 61.3% | 61.6% |
The Company has adopted three climate change scenarios to future-proof current strategy and take appropriate action. The scenarios are based on the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) data, as explained in section 5.1.4 Taskforce for Climate-related Disclosure (TCFD):
The Stated Policies Scenario (STEPS) is designed to provide a sense of the prevailing direction of energy system progression, based on a detailed review of the current policy landscape.
The Announced Pledges Scenario (APS), illustrates the extent to which announced ambitions and targets can deliver the emissions reductions needed to achieve net zero emissions by 2050.
The Net Zero Emissions by 2050 Scenario (NZE) is a normative scenario that shows a pathway for the global energy sector to achieve net zero CO2 emissions by 2050, as per the Paris Agreement.
Through its strategy process, the Company tests the resilience of its portfolio and business model against each of these scenarios. The Company factors in upsides and downsides to demand for new projects in its financial planning depending on various energy transition scenarios. By applying data and these scenarios as included in 1.4.3 Climate Change Risk & Opportunity, the fleet currently operated for its clients will be contributing to energy demand going forward, also in the low case scenarios where fossil energy sees a steeper decline in demand (NZE scenario). The Company does consider that oil & gas supply would be needed in the coming years.
\nFinancial and non-financial information is aligned in order to ensure that the financial impact of climate-related risks is identified. The Company assessed the physical and transitional risks which are disclosed in 1.4.3 Climate Change Risk & Opportunity from a financial statement perspective. Based on the reasonable and supportable information available to date and the outcome of risk assessments, the Company did not identify any circumstances which had an impact on impairment of non-financial assets, provisions or contingent liabilities and assets in the 2023 consolidated financial statements.
\nAlthough climate related risks are key drivers of the Company strategy, budgeting exercise, capital allocation and prospects selection, the Company did not experience any significant impact on the financial statements of the period.
\nThe risks will however remain key points of attention for areas such as impairment testing, estimation of remaining useful life, expected credit losses and provisions for future periods.
With respect to controlling political risk, the Company has a policy of thoroughly reviewing risks associated with contracts, whether Turnkey or long-term leases. Where political risk cover is deemed necessary and available in the market, insurance is obtained.
The Company uses the following fair value hierarchy for financial instruments that are measured at fair value in the statement of financial position, which require disclosure of fair value measurements by level:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);
Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (Level 3).
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
\n| \u00a0 | \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 | ||
|---|---|---|---|---|---|---|
| \u00a0 | Notes | Fair value level | Total book value | Total fair value | Total book value | Total fair value |
Financial assets measured at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Finance lease receivables | 3 | 6,801 | 7,053 | 7,193 | 7,219 | |
Loans to joint ventures and associates | 3 | 41 | 42 | 52 | 51 | |
Total | \u00a0 | \u00a0 | 6,842 | 7,095 | 7,244 | 7,270 |
Financial liabilities measured at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
US$ project finance facilities drawn | 2 | 9,543 | 9,604 | 8,679 | 8,678 | |
Lease liabilities | \u00a0 | 3 | 85 | 85 | 46 | 46 |
Other debt | 2 | 134 | 133 | 54 | 54 | |
Total | \u00a0 | \u00a0 | 9,762 | 9,822 | 8,780 | 8,778 |
In the above table, the Company has disclosed the fair value of each class of financial assets and financial liabilities for which the book value is different than fair value in a way that permits the information to be compared with the carrying amounts.
There are financial assets and financial liabilities measured at fair value, namely the interest rate swaps, forward currency contracts and commodity contracts which are classified at a Level 2 on the fair value hierarchy. Level 2 is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). The carrying amount for these financial assets and liabilities approximates the fair value as at December 31, 2023.
The Company has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values as the impact of discounting is insignificant.
Classes of financial instruments that are not used are not disclosed.
No instruments were transferred between Level 1 and Level 2.
No instruments were transferred between Level 2 and Level 3.
None of the instruments of the Level 3 hierarchy are carried at fair value in the statement of financial position.
No financial instruments were subject to offsetting as of December 31, 2023 and December 31, 2022.
The effects of the foreign-currency-related hedging instruments on the Company\u2019s financial position and performance including related information are included in the table below:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Foreign currency forwards | \u00a0 | \u00a0 |
Carrying amount | 68 | (53) |
Notional amount | (2,774) | (3,343) |
Maturity date | 14-8-2024 | 30-8-2023 |
Hedge ratio | 100% | 100% |
Change in discounted spot value of outstanding hedging instruments since 1 January | 121 | 27 |
Change in value hedged rate for the year (including forward points) | (121) | (27) |
Interest rate swaps | \u00a0 | \u00a0 |
Carrying amount | 248 | 463 |
Notional amount | 8,043 | 7,253 |
Maturity date | 24-3-2033 | 22-5-2031 |
Hedge ratio | 95% | 94% |
Change in discounted spot value of outstanding hedging instruments since 1 January | (214) | 606 |
Change in value hedged rate for the year (including forward points) | 214 | (606) |
Commodity contracts | \u00a0 | \u00a0 |
Carrying amount | (1) | (2) |
Notional amount | 62 | 59 |
Maturity date | 5-9-2024 | 22-12-2023 |
Hedge ratio | 100% | 100% |
Change in discounted spot value of outstanding hedging instruments since 1 January | 1 | (2) |
Change in value hedged rate for the year (including forward points) | (1) | 2 |
The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.
\n| \u00a0 | Level 2 and level 3 instruments | Level 3 instruments | |
|---|---|---|---|
Type | Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value measurement |
Financial instrument measured at fair value | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps | Income approach \u2212 | Not applicable | Not applicable |
Commodity contracts | Income approach \u2212 | Not applicable | Not applicable |
Forward currency contracts | Income approach \u2212 | Not applicable | Not applicable |
Financial instrument not measured at fair value | \u00a0 | \u00a0 | \u00a0 |
Loans to joint ventures and associates | Income approach \u2212 |
| The estimated fair value would increase (decrease) if:
|
Finance lease receivables | Income approach \u2212 |
| The estimated fair value would increase (decrease) if:
|
Loans and borrowings | Income approach \u2212 | Not applicable | Not applicable |
Other long-term debt | Income approach \u2212 | Not applicable | Not applicable |
The Company uses the following fair value hierarchy for financial instruments that are measured at fair value in the statement of financial position, which require disclosure of fair value measurements by level:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (Level 2);
Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs) (Level 3).
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
\n| \u00a0 | \u00a0 | \u00a0 | 31 December 2023 | 31 December 2022 | ||
|---|---|---|---|---|---|---|
| \u00a0 | Notes | Fair value level | Total book value | Total fair value | Total book value | Total fair value |
Financial assets measured at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Finance lease receivables | 3 | 6,801 | 7,053 | 7,193 | 7,219 | |
Loans to joint ventures and associates | 3 | 41 | 42 | 52 | 51 | |
Total | \u00a0 | \u00a0 | 6,842 | 7,095 | 7,244 | 7,270 |
Financial liabilities measured at amortized cost | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
US$ project finance facilities drawn | 2 | 9,543 | 9,604 | 8,679 | 8,678 | |
Lease liabilities | \u00a0 | 3 | 85 | 85 | 46 | 46 |
Other debt | 2 | 134 | 133 | 54 | 54 | |
Total | \u00a0 | \u00a0 | 9,762 | 9,822 | 8,780 | 8,778 |
In the above table, the Company has disclosed the fair value of each class of financial assets and financial liabilities for which the book value is different than fair value in a way that permits the information to be compared with the carrying amounts.
There are financial assets and financial liabilities measured at fair value, namely the interest rate swaps, forward currency contracts and commodity contracts which are classified at a Level 2 on the fair value hierarchy. Level 2 is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). The carrying amount for these financial assets and liabilities approximates the fair value as at December 31, 2023.
The Company has not disclosed the fair values for financial instruments such as short-term trade receivables and payables, because their carrying amounts are a reasonable approximation of fair values as the impact of discounting is insignificant.
Classes of financial instruments that are not used are not disclosed.
No instruments were transferred between Level 1 and Level 2.
No instruments were transferred between Level 2 and Level 3.
None of the instruments of the Level 3 hierarchy are carried at fair value in the statement of financial position.
No financial instruments were subject to offsetting as of December 31, 2023 and December 31, 2022.
The effects of the foreign-currency-related hedging instruments on the Company\u2019s financial position and performance including related information are included in the table below:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Foreign currency forwards | \u00a0 | \u00a0 |
Carrying amount | 68 | (53) |
Notional amount | (2,774) | (3,343) |
Maturity date | 14-8-2024 | 30-8-2023 |
Hedge ratio | 100% | 100% |
Change in discounted spot value of outstanding hedging instruments since 1 January | 121 | 27 |
Change in value hedged rate for the year (including forward points) | (121) | (27) |
Interest rate swaps | \u00a0 | \u00a0 |
Carrying amount | 248 | 463 |
Notional amount | 8,043 | 7,253 |
Maturity date | 24-3-2033 | 22-5-2031 |
Hedge ratio | 95% | 94% |
Change in discounted spot value of outstanding hedging instruments since 1 January | (214) | 606 |
Change in value hedged rate for the year (including forward points) | 214 | (606) |
Commodity contracts | \u00a0 | \u00a0 |
Carrying amount | (1) | (2) |
Notional amount | 62 | 59 |
Maturity date | 5-9-2024 | 22-12-2023 |
Hedge ratio | 100% | 100% |
Change in discounted spot value of outstanding hedging instruments since 1 January | 1 | (2) |
Change in value hedged rate for the year (including forward points) | (1) | 2 |
The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used.
\n| \u00a0 | Level 2 and level 3 instruments | Level 3 instruments | |
|---|---|---|---|
Type | Valuation technique | Significant unobservable inputs | Inter-relationship between significant unobservable inputs and fair value measurement |
Financial instrument measured at fair value | \u00a0 | \u00a0 | \u00a0 |
Interest rate swaps | Income approach \u2212 | Not applicable | Not applicable |
Commodity contracts | Income approach \u2212 | Not applicable | Not applicable |
Forward currency contracts | Income approach \u2212 | Not applicable | Not applicable |
Financial instrument not measured at fair value | \u00a0 | \u00a0 | \u00a0 |
Loans to joint ventures and associates | Income approach \u2212 |
| The estimated fair value would increase (decrease) if:
|
Finance lease receivables | Income approach \u2212 |
| The estimated fair value would increase (decrease) if:
|
Loans and borrowings | Income approach \u2212 | Not applicable | Not applicable |
Other long-term debt | Income approach \u2212 | Not applicable | Not applicable |
The Company\u2019s activities expose it to a variety of financial risks, market risks (including currency risk, interest rate risk and commodity risk), credit risk and liquidity risk. The Company\u2019s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Company\u2019s financial performance. The Company uses derivative financial instruments to hedge certain risk exposures. The Company buys and sells derivatives in the ordinary course of business and also incurs financial liabilities in order to manage market risks. All such transactions are carried out within the guidelines set in the Company policy. Generally, the Company seeks to apply hedge accounting in order to manage volatility in the income statement and statement of comprehensive income. The purpose is to manage the interest rate, currency and commodity price risk arising from the Company\u2019s operations and its sources of finance. Derivatives are only used to hedge closely correlated underlying business transactions.
\nThe Company\u2019s principal financial instruments, other than derivatives, comprise trade debtors and creditors, bank loans, short-term facilities and overdrafts, cash and cash equivalents (including short-term deposits) and financial guarantees. The main purpose of these financial instruments is to finance the Company\u2019s operations. Trade debtors and creditors result directly from the business operations of the Company.
\nFinancial risk management is carried out by a central treasury department under policies approved by the Management Board. Treasury identifies, evaluates and hedges financial risks in close co-operation with the subsidiaries and the Chief Financial Officer (CFO) during the quarterly Asset and Liability Committee. The Management Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. It is, and has been throughout the year under review, the Company\u2019s policy that no speculation in financial instruments shall be undertaken. The main risks arising from the Company\u2019s financial instruments are market risk, liquidity risk and credit risk.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices, will affect the Company\u2019s income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.
The Company operates internationally and is exposed to foreign exchange risk arising from transactional currency exposures, primarily with respect to the euro, Singapore dollar, Chinese Yuan and Brazilian real. Due to the increase of the activities in China, the Company has included its exposure in Chinese Yuan for the year ended on December 31, 2023. The exposure arises from sales or purchases in currencies other than the Company\u2019s functional currency. The Company uses forward currency contracts to eliminate the currency exposure once the Company has entered into a firm commitment of a project contract.
\nFor foreign currency risk, the principal terms of the forward currency contract (notional and settlement date) and the future expense or revenue (notional and expected cash flow date) are identical. The Company has established a hedge ratio of 1:1 for all its hedging relationships.
\nThe main Company\u2019s exposure to foreign currency risk is as follows based on notional amounts:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
in millions of local currency | EUR | SGD | BRL | CNY | EUR | SGD | BRL | CNY |
Fixed assets | 158 | - | 277 | 26 | 133 | - | 274 | 24 |
Current assets | 76 | 7 | 1,118 | 32 | 99 | 3 | 606 | 18 |
Long-term liabilities | (136) | (0) | (622) | (18) | (105) | - | (685) | (16) |
Current liabilities | (198) | (26) | (1,505) | (160) | (183) | (9) | (1,251) | (101) |
Gross balance sheet exposure | (100) | (19) | (731) | (120) | (55) | (6) | (1,055) | (75) |
Estimated forecast sales | 4 | - | - | - | 27 | - | - | - |
Estimated forecast purchases | (1,242) | (222) | (2,617) | (1,800) | (1,673) | (383) | (1,779) | (1,344) |
Gross exposure | (1,338) | (241) | (3,348) | (1,920) | (1,701) | (388) | (2,834) | (1,419) |
Forward exchange contracts | 1,362 | 240 | 3,129 | 1,930 | 1,831 | 390 | 2,799 | 1,439 |
Net exposure | 24 | (1) | (219) | 10 | 130 | 1 | (35) | 20 |
The increase of the BRL exposure results from the requirements of the Brazilian operations for the next three years. The decrease of the EUR and SGD exposure is the result of progress on FPSO Sepetiba, FPSO ONE GUYANA, FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o. CNY exposure has been added to the foreign exchange risk as a result of the Company\u2019s increased presence in China for FPSOconstruction and hull preparation.
\nThe estimated forecast purchases relate to project expenditure and overhead expenses for up to three years. The main currency exposures of overhead expenses and Brazilian operations are hedged at 100% for the coming year, between 66% and 100% for the year after, and between 33% and 100% for the subsequent year, depending on internal review of the foreign exchange market conditions.
\n| \u00a0 | 2023 | 2022 | 2023 | 2022 |
|---|---|---|---|---|
| \u00a0 | Average rate | \u00a0 | Closing rate | \u00a0 |
EUR 1 | 1.0813 | 1.0530 | 1.1050 | 1.0666 |
SGD 1 | 0.7445 | 0.7253 | 0.7573 | 0.7459 |
BRL 1 | 0.2003 | 0.1939 | 0.2061 | 0.1892 |
CNY 1 | 0.1412 | 0.1488 | 0.1407 | 0.1450 |
The sensitivity on equity and the income statement resulting from a change of 10% of the US dollar\u2019s value against the following currencies at December 31, would have increased (decreased) profit or loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis as for 2022.
\n| \u00a0 | Profit or loss | Equity | ||
|---|---|---|---|---|
| \u00a0 | 10% increase | 10% decrease | 10% increase | 10% decrease |
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EUR | (0) | 0 | (139) | 139 |
SGD | (0) | 0 | (17) | 17 |
BRL | (0) | 0 | (50) | 50 |
CNY | (0) | 0 | (26) | 26 |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EUR | (0) | 0 | (189) | 189 |
SGD | (0) | 0 | (29) | 29 |
BRL | (0) | 0 | (33) | 33 |
CNY | (0) | 0 | (20) | 20 |
As set out above, by managing foreign currency risk, the Company aims to reduce the impact of short-term market price fluctuations on the Company\u2019s earnings. Over the long-term however, permanent changes in foreign currency rates would have an impact on consolidated earnings.
The Company\u2019s exposure to risk from changes in market interest rates relates primarily to the Company\u2019s long-term debt obligations with a floating interest rate. In respect of controlling interest rate risk, the floating interest rates of long-term loans are hedged by fixed rate swaps for the entire maturity period. The revolving credit facility is intended for the fluctuating needs of construction financing and bears interest at floating rates, which is also swapped for fixed rates when exposure is significant.
\nFor interest rate risk, the principal terms of the interest rate swap (notional amortization, rate-set periods) and the financing (repayment schedule, rate-set periods) are identical. The Company has established a hedge ratio of 1:1, as the hedging layer component matches the nominal amount of the interest rate swap for all its hedging relationships.
\nThe reform and replacement of benchmark interest rates such as USD LIBOR 3M and other interbank offered rates (\u2018IBORs\u2019) has become a priority for global regulators. On March 5, 2021, LIBOR\u2019s administrator (IBA) set out clear end-dates for new use of USD LIBOR and its cessation as a representative rate:
December 31, 2021: cessation of USD LIBOR 1W and 2M tenors; deadline for most of new contract to use USD LIBOR as sole reference;
June 30, 2023: cessation of remaining USD LIBOR tenors.
To transition existing contracts and agreements that reference USD LIBOR to Secured Overnight Financing Rate (\u2019SOFR\u2019), as the benchmark for US$ denominated derivatives and loans, adjustments for term differences and credit differences might need to be applied to SOFR, to enable the two benchmark rates to be economically equivalent on transition.
\nThe Company has applied the following reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in September 2019:
When considering the \u2018highly probable\u2019 requirement, the Company has assumed that the USD LIBOR 3M interest rate on which the Company\u2019s hedged debt is based does not change as a result of IBOR reform.
In assessing whether the hedge is expected to be highly effective on a forward-looking basis, the Company has assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based, is not altered by LIBOR reform.
The Company has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
Reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in August 2020 are applied once amendments to financial contracts become effective:
Changes in the basis for determining contractual cash flows of financial assets and financial liabilities have been reviewed and reflected in updated effective interest rate, once they become effective.
The Company amended the formal designation of a hedging relationship to reflect the changes that are required by the reform. The reform did not result in a discontinuation of the hedge or designation of a new hedging relationship. When the interest rate benchmark on which the hedged future cash flows had been based is changed, as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows is based.
In 2021 the Company has started hedging future debt interest rate risk with SOFR interest rate derivatives. For the FPSO Prosperity financing, IBOR transition to SOFR principles have been agreed with lenders as of March 31, 2023.
\nFor the FPSO ONE GUYANA financing (announced on July 21, 2022), FPSO Almirante Tamandar\u00e9 financing (announced on March 31, 2023) and FPSO Alexandre de Gusm\u00e3o financing (announced on June 20, 2023), the project loans carry a variable interest rate based on SOFR plus margin. No amendments of loan agreements and hedges due to IBOR reform are required.
\nThe Company\u2019s Treasury department has completed SBM Offshore\u2019s IBOR transition with the support of the Company\u2019s Legal department. The amendments to the contractual terms of the USD LIBOR-referenced floating-rate debt and the associated interest rate swaps and the corresponding update of the hedge designation was completed by mid-year 2023. The result of the negotiations with external banks and the implementation of SOFR did not have material impacts on the Company\u2019s financial results. The changed reference rate has also been effected in the treasury management system, processes, risk and valuation models.
\nAt the reporting date, the interest rate profile of the Company\u2019s interest-bearing financial instruments (excluding transaction costs) was:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Fixed rate instruments | \u00a0 | \u00a0 | \u00a0 |
Financial assets | \u00a0 | 6,856 | 7,232 |
Financial liabilities | \u00a0 | (891) | (985) |
Total | \u00a0 | 5,964 | 6,247 |
Variable rate instruments (USD LIBOR 3 Months) | \u00a0 | \u00a0 | \u00a0 |
Financial assets | \u00a0 | 12 | 12 |
Financial liabilities (USD LIBOR 3 Months) | \u00a0 | - | (6,317) |
Financial liabilities (SOFR) | \u00a0 | (8,777) | (1,432) |
Financial liabilities (future) (USD LIBOR 3 Months) | \u00a0 | - | (652) |
Financial liabilities (future) (SOFR) | \u00a0 | (1,670) | (1,368) |
Total | \u00a0 | (10,435) | (9,757) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Variable rate instruments (USD LIBOR 3 Months) | \u00a0 | - | (6,957) |
Variable rate instruments (SOFR) | \u00a0 | (10,435) | (2,800) |
Less: Reimbursable items (USD LIBOR 3 Months) | \u00a0 | - | 1,681 |
Less: Reimbursable items (SOFR) | \u00a0 | 1,524 | 321 |
Less: IRS contracts (USD LIBOR 3 Months) | \u00a0 | - | 4,774 |
Less: IRS contracts (SOFR) | \u00a0 | 8,043 | 2,479 |
Exposure | \u00a0 | (867) | (502) |
| \u00a0 | Profit or loss | Equity | ||
|---|---|---|---|---|
| \u00a0 | 100 bp increase | 100 bp decrease | 100 bp increase | 100 bp decrease |
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Variable rate instruments (USD LIBOR 3 Months) | (9) | 9 | - | - |
Variable rate instruments (SOFR) | - | - | - | - |
Interest rate swap (USD LIBOR 3 Months) | - | - | - | - |
Interest rate swap (SOFR) | - | - | 404 | (404) |
Sensitivity (net) | (9) | 9 | 404 | (404) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Variable rate instruments (USD LIBOR 3 Months) | (5) | 5 | - | - |
Variable rate instruments (SOFR) | - | - | - | - |
Interest rate swap (USD LIBOR 3 Months) | - | - | 211 | (211) |
Interest rate swap (SOFR) | - | - | 95 | (95) |
Sensitivity (net) | (5) | 5 | 306 | (306) |
The exposure of US$867 million is primarily arising from (i) the Company\u2019s RCF being partially hedged; (ii) the new Fast4Ward\u00ae hull financing, which is unhedged, and (iii) the residual exposure on the unhedged portion of project loan facilities for FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o and FPSO ONE GUYANA. The interest rate exposure arising from these loans is mainly offset by the Cash and Cash Equivalents at December 31, 2023.
\nThe sensitivity on equity and the income statement resulting from a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown above. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis was performed on the same basis as for 2022.
\nAt December 31, 2023, it is estimated that a general increase of 100 basis points in interest rates would decrease the Company\u2019s profit before tax for the year by approximately US$8 million (2022: decrease of US$5 million), mainly related to the residual interest rate exposure.
\nAs set out above, the Company aims to reduce the impact of short-term market price fluctuations on the Company\u2019s earnings. Over the long-term however, permanent changes in interest rates could have an impact on consolidated earnings.
\nCommodity exposure is defined by the Company as the risk of realizing adverse effects on operating cash flows and future earnings resulting from movement in commodity prices. The Company establishes hedge strategies in order to limit their commodity risk exposure in the following:
Oil exposure is mostly associated to transportation fuels connected with the Company\u2019s prospective contract awards, construction contracts, and future decommissioning.
Aluminum, steel, copper and iron ore exposures arise from the construction, refurbishment, repair of the products embedded in the Company\u2019s prospective contract awards, construction contracts and operation contracts.
Incoming lease payments following the Company\u2019s contractual arrangements with its clients are not impacted by the oil price.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company\u2019s other financial assets, trade and other receivables (including committed transactions), derivative financial instruments and cash and cash equivalents.
\n| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
Rating | Assets | Liabilities | Assets | Liabilities |
AA | 32 | (9) | 55 | (34) |
AA- | 173 | (54) | 231 | (93) |
A+ | 180 | (31) | 227 | (63) |
A | 30 | (3) | 69 | - |
BBB | 1 | - | 1 | - |
Non-investment grade | - | - | - | - |
Derivative financial instruments | 416 | (97) | 583 | (190) |
AAA | 153 | - | 116 | - |
AA | 6 | - | 51 | - |
AA- | 343 | - | 311 | - |
A+ | 23 | - | 178 | - |
A | 10 | - | 10 | - |
A- | - | - | 0 | - |
Non-investment grade | 8 | - | 16 | - |
Cash and cash equivalents and bank overdrafts | 543 | - | 683 | - |
The Company maintains and reviews its policy on cash investments and limits per individual counterparty are set to:
BBB- to BBB+ rating: US$25 million or 10% of cash available.
A- to A+ rating: US$75 million or 20% of cash available.
AA- to AA+ rating: US$100 million or 20% of cash available.
Above AA+ rating: no limit.
As per December 31, 2023, cash investments above AA+ rating do not exceed US$100 million per individual counterparty. Cash held in banks rated A+ has been diversified in cash investments above AA+ rating since year-end.
\nCash held in banks rated AA- is mainly linked to cash pledged to loan reimbursements to those same banks. Cash held in banks rated below A- is mainly related to the Company\u2019s activities in Brazil (US$8 million). Cash held in Angola has significantly decreased since 2021 following cash repatriation.
\nFor trade debtors, the credit quality of each customer is assessed, taking into account its financial position, past experience and other factors. Bank or parent company guarantees are negotiated with customers.\u00a0Individual risk limits are set based on internal or external ratings, in accordance with limits set by the Management Board. At the date of the financial statements, there are two customers that have an outstanding balance with a percentage over 10% of the total of trade and other receivables. Reference is made to note 4.3.19 Trade and Other Receivables for information on the distribution of the receivables by country and an analysis of the ageing of the receivables. Furthermore, limited recourse project financing removes a significant portion of the credit risk on finance lease receivables.
\nFor other financial assets, the credit quality of each counterpart is assessed, taking into account its credit agency rating when available or a comparable proxy.
\nRegarding loans to joint ventures and associates, the maximum exposure to credit risk is the carrying amount of these instruments. As the counterparties of these instruments are joint ventures, the Company has visibility over the expected cash flows and can monitor and manage credit risk that mainly arises from the joint venture\u2019s final client.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and abnormal conditions, without incurring unacceptable losses or risking damage to the Company\u2019s reputation.
\nIn 2023, the Company again conducted various liquidity scenarios, financial stress tests and sensitivity analyses. The conclusion remained that the Company\u2019s lease portfolio and the existing financing facilities and overall financing capacity are sufficient to ensure that the Company will continue as a going concern in the foreseeable future and it can sustain future growth plans. Furthermore, under its Lease and Operate contractual arrangements with clients, the Company has considerable time under charters in which to deal with disruptions from events outside the Company\u2019s control, thus providing it with considerable financial protection.
\nLiquidity is monitored using rolling forecasts of the Company\u2019s liquidity reserves, based on expected cash flows. Flexibility is secured by maintaining availability under committed credit lines.
\nThe table below analyses the Company\u2019s non-derivative financial liabilities, derivative financial liabilities and derivative financial assets into relevant maturity groupings, based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The future interest cash flows for borrowings and derivative financial instruments are based on the USD LIBOR/SOFR 3-month rates as at the reporting date.
\n| \u00a0 | Note | Less than 1 year | Between 1 and 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Borrowings | \u00a0 | 436 | 7,327 | 6,176 | 13,939 |
Lease liabilities | \u00a0 | 11 | 44 | 61 | 116 |
Derivative financial liabilities | \u00a0 | 80 | 10 | - | 90 |
Derivative financial assets | \u00a0 | (302) | (539) | (468) | (1,310) |
Trade and other payables | 1,347 | - | - | 1,347 | |
Total | \u00a0 | 1,572 | 6,841 | 5,769 | 14,182 |
| \u00a0 | Note | Less than 1 year | Between 1 and 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Borrowings | \u00a0 | 2,110 | 5,885 | 2,908 | 10,902 |
Lease liabilities | \u00a0 | 13 | 25 | 8 | 46 |
Derivative financial liabilities | \u00a0 | 201 | 52 | - | 253 |
Derivative financial assets | \u00a0 | (365) | (254) | (185) | (805) |
Trade and other payables | 1,501 | - | - | 1,501 | |
Total | \u00a0 | 3,459 | 5,708 | 2,730 | 11,897 |
The Company\u2019s objectives when managing capital are to safeguard the Company\u2019s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain a capital structure which optimizes the Company\u2019s cost of capital while, at the same time, ensuring diversification of sources of external funds.
\nThe Company mainly uses its corporate revolving credit facility (RCF, US$1 billion) and supply-chain financing (SCF, US$54 million) and, going forward, the new revolving credit facility for MPF hulls (US$210 million) to bridge financing requirements on projects under construction\u00a0prior to putting a dedicated project finance facility in place. When a project finance facility is arranged and draw-downs have started, the RCF is repaid\u00a0and a corporate guarantee from the Company is put in place for the construction period.\u00a0When the project facility is drawn in full and the associated FPSO is producing, the corporate guarantee is recovered and the project finance becomes non-recourse debt.
\nAs per December 31, 2023, all the debt associated with operating FPSOs is non-recourse.
\nThe Company has limited appetite to decrease the existing debt in its structure, as this would involve breakage cost, through winding down the hedges and it would decrease the Company\u2019s return on equity. From time to time, it may decide to refinance existing facilities in order to increase and/or extend the tenor of leverage subject to sufficient charter tenor and income.
\nGiven the non-recourse nature of a large part of its debt, the Company monitors its capital risk, based on the Lease Backlog Cover Ratio, which is also used by the bank consortium supporting the Company\u2019s RCF. Generally, this ratio is calculated as the net present value of the future contracted net cash,\u00a0after deducting the project finance debt and interest payments of a selected group of FPSO owning entities divided\u00a0by 1.5 (see note 4.3.23 Borrowings and Lease Liabilities).
\nThe gearing ratios at December 31, 2023 and 2022 were as follows:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Total borrowings and lease liabilities | 9,291 | 8,564 |
Less: net cash and cash equivalents | 543 | 683 |
Net debt | 8,748 | 7,881 |
Total equity | 5,531 | 4,914 |
Total capital | 14,278 | 12,795 |
Gearing ratio | 61.3% | 61.6% |
The Company has adopted three climate change scenarios to future-proof current strategy and take appropriate action. The scenarios are based on the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) data, as explained in section 5.1.4 Taskforce for Climate-related Disclosure (TCFD):
The Stated Policies Scenario (STEPS) is designed to provide a sense of the prevailing direction of energy system progression, based on a detailed review of the current policy landscape.
The Announced Pledges Scenario (APS), illustrates the extent to which announced ambitions and targets can deliver the emissions reductions needed to achieve net zero emissions by 2050.
The Net Zero Emissions by 2050 Scenario (NZE) is a normative scenario that shows a pathway for the global energy sector to achieve net zero CO2 emissions by 2050, as per the Paris Agreement.
Through its strategy process, the Company tests the resilience of its portfolio and business model against each of these scenarios. The Company factors in upsides and downsides to demand for new projects in its financial planning depending on various energy transition scenarios. By applying data and these scenarios as included in 1.4.3 Climate Change Risk & Opportunity, the fleet currently operated for its clients will be contributing to energy demand going forward, also in the low case scenarios where fossil energy sees a steeper decline in demand (NZE scenario). The Company does consider that oil & gas supply would be needed in the coming years.
\nFinancial and non-financial information is aligned in order to ensure that the financial impact of climate-related risks is identified. The Company assessed the physical and transitional risks which are disclosed in 1.4.3 Climate Change Risk & Opportunity from a financial statement perspective. Based on the reasonable and supportable information available to date and the outcome of risk assessments, the Company did not identify any circumstances which had an impact on impairment of non-financial assets, provisions or contingent liabilities and assets in the 2023 consolidated financial statements.
\nAlthough climate related risks are key drivers of the Company strategy, budgeting exercise, capital allocation and prospects selection, the Company did not experience any significant impact on the financial statements of the period.
\nThe risks will however remain key points of attention for areas such as impairment testing, estimation of remaining useful life, expected credit losses and provisions for future periods.
With respect to controlling political risk, the Company has a policy of thoroughly reviewing risks associated with contracts, whether Turnkey or long-term leases. Where political risk cover is deemed necessary and available in the market, insurance is obtained.
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and commodity prices, will affect the Company\u2019s income or the value of its holding of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk.
The Company operates internationally and is exposed to foreign exchange risk arising from transactional currency exposures, primarily with respect to the euro, Singapore dollar, Chinese Yuan and Brazilian real. Due to the increase of the activities in China, the Company has included its exposure in Chinese Yuan for the year ended on December 31, 2023. The exposure arises from sales or purchases in currencies other than the Company\u2019s functional currency. The Company uses forward currency contracts to eliminate the currency exposure once the Company has entered into a firm commitment of a project contract.
\nFor foreign currency risk, the principal terms of the forward currency contract (notional and settlement date) and the future expense or revenue (notional and expected cash flow date) are identical. The Company has established a hedge ratio of 1:1 for all its hedging relationships.
\nThe main Company\u2019s exposure to foreign currency risk is as follows based on notional amounts:
\n| \u00a0 | 31 December 2023 | 31 December 2022 | ||||||
|---|---|---|---|---|---|---|---|---|
in millions of local currency | EUR | SGD | BRL | CNY | EUR | SGD | BRL | CNY |
Fixed assets | 158 | - | 277 | 26 | 133 | - | 274 | 24 |
Current assets | 76 | 7 | 1,118 | 32 | 99 | 3 | 606 | 18 |
Long-term liabilities | (136) | (0) | (622) | (18) | (105) | - | (685) | (16) |
Current liabilities | (198) | (26) | (1,505) | (160) | (183) | (9) | (1,251) | (101) |
Gross balance sheet exposure | (100) | (19) | (731) | (120) | (55) | (6) | (1,055) | (75) |
Estimated forecast sales | 4 | - | - | - | 27 | - | - | - |
Estimated forecast purchases | (1,242) | (222) | (2,617) | (1,800) | (1,673) | (383) | (1,779) | (1,344) |
Gross exposure | (1,338) | (241) | (3,348) | (1,920) | (1,701) | (388) | (2,834) | (1,419) |
Forward exchange contracts | 1,362 | 240 | 3,129 | 1,930 | 1,831 | 390 | 2,799 | 1,439 |
Net exposure | 24 | (1) | (219) | 10 | 130 | 1 | (35) | 20 |
The increase of the BRL exposure results from the requirements of the Brazilian operations for the next three years. The decrease of the EUR and SGD exposure is the result of progress on FPSO Sepetiba, FPSO ONE GUYANA, FPSO Almirante Tamandar\u00e9 and FPSO Alexandre de Gusm\u00e3o. CNY exposure has been added to the foreign exchange risk as a result of the Company\u2019s increased presence in China for FPSOconstruction and hull preparation.
\nThe estimated forecast purchases relate to project expenditure and overhead expenses for up to three years. The main currency exposures of overhead expenses and Brazilian operations are hedged at 100% for the coming year, between 66% and 100% for the year after, and between 33% and 100% for the subsequent year, depending on internal review of the foreign exchange market conditions.
\n| \u00a0 | 2023 | 2022 | 2023 | 2022 |
|---|---|---|---|---|
| \u00a0 | Average rate | \u00a0 | Closing rate | \u00a0 |
EUR 1 | 1.0813 | 1.0530 | 1.1050 | 1.0666 |
SGD 1 | 0.7445 | 0.7253 | 0.7573 | 0.7459 |
BRL 1 | 0.2003 | 0.1939 | 0.2061 | 0.1892 |
CNY 1 | 0.1412 | 0.1488 | 0.1407 | 0.1450 |
The sensitivity on equity and the income statement resulting from a change of 10% of the US dollar\u2019s value against the following currencies at December 31, would have increased (decreased) profit or loss and equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis as for 2022.
\n| \u00a0 | Profit or loss | Equity | ||
|---|---|---|---|---|
| \u00a0 | 10% increase | 10% decrease | 10% increase | 10% decrease |
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EUR | (0) | 0 | (139) | 139 |
SGD | (0) | 0 | (17) | 17 |
BRL | (0) | 0 | (50) | 50 |
CNY | (0) | 0 | (26) | 26 |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
EUR | (0) | 0 | (189) | 189 |
SGD | (0) | 0 | (29) | 29 |
BRL | (0) | 0 | (33) | 33 |
CNY | (0) | 0 | (20) | 20 |
As set out above, by managing foreign currency risk, the Company aims to reduce the impact of short-term market price fluctuations on the Company\u2019s earnings. Over the long-term however, permanent changes in foreign currency rates would have an impact on consolidated earnings.
The Company\u2019s exposure to risk from changes in market interest rates relates primarily to the Company\u2019s long-term debt obligations with a floating interest rate. In respect of controlling interest rate risk, the floating interest rates of long-term loans are hedged by fixed rate swaps for the entire maturity period. The revolving credit facility is intended for the fluctuating needs of construction financing and bears interest at floating rates, which is also swapped for fixed rates when exposure is significant.
\nFor interest rate risk, the principal terms of the interest rate swap (notional amortization, rate-set periods) and the financing (repayment schedule, rate-set periods) are identical. The Company has established a hedge ratio of 1:1, as the hedging layer component matches the nominal amount of the interest rate swap for all its hedging relationships.
\nThe reform and replacement of benchmark interest rates such as USD LIBOR 3M and other interbank offered rates (\u2018IBORs\u2019) has become a priority for global regulators. On March 5, 2021, LIBOR\u2019s administrator (IBA) set out clear end-dates for new use of USD LIBOR and its cessation as a representative rate:
December 31, 2021: cessation of USD LIBOR 1W and 2M tenors; deadline for most of new contract to use USD LIBOR as sole reference;
June 30, 2023: cessation of remaining USD LIBOR tenors.
To transition existing contracts and agreements that reference USD LIBOR to Secured Overnight Financing Rate (\u2019SOFR\u2019), as the benchmark for US$ denominated derivatives and loans, adjustments for term differences and credit differences might need to be applied to SOFR, to enable the two benchmark rates to be economically equivalent on transition.
\nThe Company has applied the following reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in September 2019:
When considering the \u2018highly probable\u2019 requirement, the Company has assumed that the USD LIBOR 3M interest rate on which the Company\u2019s hedged debt is based does not change as a result of IBOR reform.
In assessing whether the hedge is expected to be highly effective on a forward-looking basis, the Company has assumed that the USD LIBOR interest rate on which the cash flows of the hedged debt and the interest rate swap that hedges it are based, is not altered by LIBOR reform.
The Company has not recycled the cash flow hedge reserve relating to the period after the reforms are expected to take effect.
Reliefs that were introduced by the amendments made to IFRS 9 Financial Instruments in August 2020 are applied once amendments to financial contracts become effective:
Changes in the basis for determining contractual cash flows of financial assets and financial liabilities have been reviewed and reflected in updated effective interest rate, once they become effective.
The Company amended the formal designation of a hedging relationship to reflect the changes that are required by the reform. The reform did not result in a discontinuation of the hedge or designation of a new hedging relationship. When the interest rate benchmark on which the hedged future cash flows had been based is changed, as required by IBOR reform, for the purpose of determining whether the hedged future cash flows are expected to occur, the Group deems that the hedging reserve recognized in OCI for that hedging relationship is based on the alternative benchmark rate on which the hedged future cash flows is based.
In 2021 the Company has started hedging future debt interest rate risk with SOFR interest rate derivatives. For the FPSO Prosperity financing, IBOR transition to SOFR principles have been agreed with lenders as of March 31, 2023.
\nFor the FPSO ONE GUYANA financing (announced on July 21, 2022), FPSO Almirante Tamandar\u00e9 financing (announced on March 31, 2023) and FPSO Alexandre de Gusm\u00e3o financing (announced on June 20, 2023), the project loans carry a variable interest rate based on SOFR plus margin. No amendments of loan agreements and hedges due to IBOR reform are required.
\nThe Company\u2019s Treasury department has completed SBM Offshore\u2019s IBOR transition with the support of the Company\u2019s Legal department. The amendments to the contractual terms of the USD LIBOR-referenced floating-rate debt and the associated interest rate swaps and the corresponding update of the hedge designation was completed by mid-year 2023. The result of the negotiations with external banks and the implementation of SOFR did not have material impacts on the Company\u2019s financial results. The changed reference rate has also been effected in the treasury management system, processes, risk and valuation models.
\nAt the reporting date, the interest rate profile of the Company\u2019s interest-bearing financial instruments (excluding transaction costs) was:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Fixed rate instruments | \u00a0 | \u00a0 | \u00a0 |
Financial assets | \u00a0 | 6,856 | 7,232 |
Financial liabilities | \u00a0 | (891) | (985) |
Total | \u00a0 | 5,964 | 6,247 |
Variable rate instruments (USD LIBOR 3 Months) | \u00a0 | \u00a0 | \u00a0 |
Financial assets | \u00a0 | 12 | 12 |
Financial liabilities (USD LIBOR 3 Months) | \u00a0 | - | (6,317) |
Financial liabilities (SOFR) | \u00a0 | (8,777) | (1,432) |
Financial liabilities (future) (USD LIBOR 3 Months) | \u00a0 | - | (652) |
Financial liabilities (future) (SOFR) | \u00a0 | (1,670) | (1,368) |
Total | \u00a0 | (10,435) | (9,757) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Variable rate instruments (USD LIBOR 3 Months) | \u00a0 | - | (6,957) |
Variable rate instruments (SOFR) | \u00a0 | (10,435) | (2,800) |
Less: Reimbursable items (USD LIBOR 3 Months) | \u00a0 | - | 1,681 |
Less: Reimbursable items (SOFR) | \u00a0 | 1,524 | 321 |
Less: IRS contracts (USD LIBOR 3 Months) | \u00a0 | - | 4,774 |
Less: IRS contracts (SOFR) | \u00a0 | 8,043 | 2,479 |
Exposure | \u00a0 | (867) | (502) |
| \u00a0 | Profit or loss | Equity | ||
|---|---|---|---|---|
| \u00a0 | 100 bp increase | 100 bp decrease | 100 bp increase | 100 bp decrease |
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Variable rate instruments (USD LIBOR 3 Months) | (9) | 9 | - | - |
Variable rate instruments (SOFR) | - | - | - | - |
Interest rate swap (USD LIBOR 3 Months) | - | - | - | - |
Interest rate swap (SOFR) | - | - | 404 | (404) |
Sensitivity (net) | (9) | 9 | 404 | (404) |
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Variable rate instruments (USD LIBOR 3 Months) | (5) | 5 | - | - |
Variable rate instruments (SOFR) | - | - | - | - |
Interest rate swap (USD LIBOR 3 Months) | - | - | 211 | (211) |
Interest rate swap (SOFR) | - | - | 95 | (95) |
Sensitivity (net) | (5) | 5 | 306 | (306) |
The exposure of US$867 million is primarily arising from (i) the Company\u2019s RCF being partially hedged; (ii) the new Fast4Ward\u00ae hull financing, which is unhedged, and (iii) the residual exposure on the unhedged portion of project loan facilities for FPSO Almirante Tamandar\u00e9, FPSO Alexandre de Gusm\u00e3o and FPSO ONE GUYANA. The interest rate exposure arising from these loans is mainly offset by the Cash and Cash Equivalents at December 31, 2023.
\nThe sensitivity on equity and the income statement resulting from a change of 100 basis points in interest rates at the reporting date would have increased (decreased) equity and profit or loss by the amounts shown above. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis was performed on the same basis as for 2022.
\nAt December 31, 2023, it is estimated that a general increase of 100 basis points in interest rates would decrease the Company\u2019s profit before tax for the year by approximately US$8 million (2022: decrease of US$5 million), mainly related to the residual interest rate exposure.
\nAs set out above, the Company aims to reduce the impact of short-term market price fluctuations on the Company\u2019s earnings. Over the long-term however, permanent changes in interest rates could have an impact on consolidated earnings.
\nCommodity exposure is defined by the Company as the risk of realizing adverse effects on operating cash flows and future earnings resulting from movement in commodity prices. The Company establishes hedge strategies in order to limit their commodity risk exposure in the following:
Oil exposure is mostly associated to transportation fuels connected with the Company\u2019s prospective contract awards, construction contracts, and future decommissioning.
Aluminum, steel, copper and iron ore exposures arise from the construction, refurbishment, repair of the products embedded in the Company\u2019s prospective contract awards, construction contracts and operation contracts.
Incoming lease payments following the Company\u2019s contractual arrangements with its clients are not impacted by the oil price.
Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Company\u2019s other financial assets, trade and other receivables (including committed transactions), derivative financial instruments and cash and cash equivalents.
\n| \u00a0 | 2023 | 2022 | ||
|---|---|---|---|---|
Rating | Assets | Liabilities | Assets | Liabilities |
AA | 32 | (9) | 55 | (34) |
AA- | 173 | (54) | 231 | (93) |
A+ | 180 | (31) | 227 | (63) |
A | 30 | (3) | 69 | - |
BBB | 1 | - | 1 | - |
Non-investment grade | - | - | - | - |
Derivative financial instruments | 416 | (97) | 583 | (190) |
AAA | 153 | - | 116 | - |
AA | 6 | - | 51 | - |
AA- | 343 | - | 311 | - |
A+ | 23 | - | 178 | - |
A | 10 | - | 10 | - |
A- | - | - | 0 | - |
Non-investment grade | 8 | - | 16 | - |
Cash and cash equivalents and bank overdrafts | 543 | - | 683 | - |
The Company maintains and reviews its policy on cash investments and limits per individual counterparty are set to:
BBB- to BBB+ rating: US$25 million or 10% of cash available.
A- to A+ rating: US$75 million or 20% of cash available.
AA- to AA+ rating: US$100 million or 20% of cash available.
Above AA+ rating: no limit.
As per December 31, 2023, cash investments above AA+ rating do not exceed US$100 million per individual counterparty. Cash held in banks rated A+ has been diversified in cash investments above AA+ rating since year-end.
\nCash held in banks rated AA- is mainly linked to cash pledged to loan reimbursements to those same banks. Cash held in banks rated below A- is mainly related to the Company\u2019s activities in Brazil (US$8 million). Cash held in Angola has significantly decreased since 2021 following cash repatriation.
\nFor trade debtors, the credit quality of each customer is assessed, taking into account its financial position, past experience and other factors. Bank or parent company guarantees are negotiated with customers.\u00a0Individual risk limits are set based on internal or external ratings, in accordance with limits set by the Management Board. At the date of the financial statements, there are two customers that have an outstanding balance with a percentage over 10% of the total of trade and other receivables. Reference is made to note 4.3.19 Trade and Other Receivables for information on the distribution of the receivables by country and an analysis of the ageing of the receivables. Furthermore, limited recourse project financing removes a significant portion of the credit risk on finance lease receivables.
\nFor other financial assets, the credit quality of each counterpart is assessed, taking into account its credit agency rating when available or a comparable proxy.
\nRegarding loans to joint ventures and associates, the maximum exposure to credit risk is the carrying amount of these instruments. As the counterparties of these instruments are joint ventures, the Company has visibility over the expected cash flows and can monitor and manage credit risk that mainly arises from the joint venture\u2019s final client.
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company\u2019s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and abnormal conditions, without incurring unacceptable losses or risking damage to the Company\u2019s reputation.
\nIn 2023, the Company again conducted various liquidity scenarios, financial stress tests and sensitivity analyses. The conclusion remained that the Company\u2019s lease portfolio and the existing financing facilities and overall financing capacity are sufficient to ensure that the Company will continue as a going concern in the foreseeable future and it can sustain future growth plans. Furthermore, under its Lease and Operate contractual arrangements with clients, the Company has considerable time under charters in which to deal with disruptions from events outside the Company\u2019s control, thus providing it with considerable financial protection.
\nLiquidity is monitored using rolling forecasts of the Company\u2019s liquidity reserves, based on expected cash flows. Flexibility is secured by maintaining availability under committed credit lines.
\nThe table below analyses the Company\u2019s non-derivative financial liabilities, derivative financial liabilities and derivative financial assets into relevant maturity groupings, based on the remaining period at the statement of financial position date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. The future interest cash flows for borrowings and derivative financial instruments are based on the USD LIBOR/SOFR 3-month rates as at the reporting date.
\n| \u00a0 | Note | Less than 1 year | Between 1 and 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
31 December 2023 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Borrowings | \u00a0 | 436 | 7,327 | 6,176 | 13,939 |
Lease liabilities | \u00a0 | 11 | 44 | 61 | 116 |
Derivative financial liabilities | \u00a0 | 80 | 10 | - | 90 |
Derivative financial assets | \u00a0 | (302) | (539) | (468) | (1,310) |
Trade and other payables | 1,347 | - | - | 1,347 | |
Total | \u00a0 | 1,572 | 6,841 | 5,769 | 14,182 |
| \u00a0 | Note | Less than 1 year | Between 1 and 5 years | Over 5 years | Total |
|---|---|---|---|---|---|
31 December 2022 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Borrowings | \u00a0 | 2,110 | 5,885 | 2,908 | 10,902 |
Lease liabilities | \u00a0 | 13 | 25 | 8 | 46 |
Derivative financial liabilities | \u00a0 | 201 | 52 | - | 253 |
Derivative financial assets | \u00a0 | (365) | (254) | (185) | (805) |
Trade and other payables | 1,501 | - | - | 1,501 | |
Total | \u00a0 | 3,459 | 5,708 | 2,730 | 11,897 |
The Company\u2019s objectives when managing capital are to safeguard the Company\u2019s ability to continue as a going concern in order to provide returns for shareholders, benefits for other stakeholders and to maintain a capital structure which optimizes the Company\u2019s cost of capital while, at the same time, ensuring diversification of sources of external funds.
\nThe Company mainly uses its corporate revolving credit facility (RCF, US$1 billion) and supply-chain financing (SCF, US$54 million) and, going forward, the new revolving credit facility for MPF hulls (US$210 million) to bridge financing requirements on projects under construction\u00a0prior to putting a dedicated project finance facility in place. When a project finance facility is arranged and draw-downs have started, the RCF is repaid\u00a0and a corporate guarantee from the Company is put in place for the construction period.\u00a0When the project facility is drawn in full and the associated FPSO is producing, the corporate guarantee is recovered and the project finance becomes non-recourse debt.
\nAs per December 31, 2023, all the debt associated with operating FPSOs is non-recourse.
\nThe Company has limited appetite to decrease the existing debt in its structure, as this would involve breakage cost, through winding down the hedges and it would decrease the Company\u2019s return on equity. From time to time, it may decide to refinance existing facilities in order to increase and/or extend the tenor of leverage subject to sufficient charter tenor and income.
\nGiven the non-recourse nature of a large part of its debt, the Company monitors its capital risk, based on the Lease Backlog Cover Ratio, which is also used by the bank consortium supporting the Company\u2019s RCF. Generally, this ratio is calculated as the net present value of the future contracted net cash,\u00a0after deducting the project finance debt and interest payments of a selected group of FPSO owning entities divided\u00a0by 1.5 (see note 4.3.23 Borrowings and Lease Liabilities).
\nThe gearing ratios at December 31, 2023 and 2022 were as follows:
\n| \u00a0 | 2023 | 2022 |
|---|---|---|
Total borrowings and lease liabilities | 9,291 | 8,564 |
Less: net cash and cash equivalents | 543 | 683 |
Net debt | 8,748 | 7,881 |
Total equity | 5,531 | 4,914 |
Total capital | 14,278 | 12,795 |
Gearing ratio | 61.3% | 61.6% |
The Company has several joint ventures and associates:
\nEntity name | Partners | Joint venture/ | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|---|
Sonasing Xikomba Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO N'Goma |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
OPS-Servi\u00e7os de Produ\u00e7\u00e3o de Petr\u00f3leos Ltd. Branch | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Angola | Lease & Operate | Angola operations |
Sonasing Sanha Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Sanha |
Sonasing Kuito Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Angola Offshore Services Limitada | Joint venture | 50.00 | Bermuda | Lease & Operate | FPSO Kuito |
Sonasing Mondo Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Mondo |
Sonasing Saxi Batuque Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; | Joint venture | 90.00 | Bermuda | Lease & Operate | FPSO Saxi-Batuque |
OPS Production Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P. | Joint venture | 50.00 | Bermuda | Lease & Operate | Angola operations |
Gas Management (Congo) Ltd. | Maersk group | Joint venture | 49.00 | Bahamas | Lease & Operate | Nkossa II FSO |
Malaysia Deepwater Floating Terminal (Kikeh) Ltd. | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Malaysia Deepwater Production Contractors Sdn Bhd | Malaysia International Shipping Corporation Behard | Joint venture | 49.00 | Malaysia | Lease & Operate | FPSO Kikeh |
Floventis Energy Limited | CIERCO LTD. | Joint venture | 70.00 | United Kingdom | Turnkey | Cierco |
Ll\u0177r Floating Wind Limited | CIERCO LTD. | Joint venture | 70.00 | Scotland | Turnkey | Cierco |
CADEMO Corporation | CIERCO LTD. | Joint venture | 70.00 | United states of America | Turnkey | Cierco |
Normand Installer S.A. | The Solstad group | Joint venture | 49.90 | Switzerland | Turnkey | Normand Installer |
SBM Ship Yard Ltd. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; Daewoo Shipbuilding & Marine Engineering Co. Ltd. | Associate | 33.33 | Bermuda | Turnkey | Angolan yard |
PAENAL - Porto Amboim Estaleiros Navais Ltda. | Sociedad Nacional de Combustiveis de Angola Empresa Publica -Sonangol E.P.; SBM Shipyard | Associate | 30.00 | Angola | Turnkey | Angolan yard |
The Company has no joint operation as per definition provided by IFRS 11 \u2018Joint arrangements\u2019.
\nThe movements in investments in associates and joint ventures are as follows:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Investments in associates and joint ventures at 1 January | \u00a0 | 290 | 361 |
Share of profit of equity-accounted investees | 19 | 12 | |
Dividends | \u00a0 | (17) | (92) |
Cash flow hedges | \u00a0 | (2) | 9 |
Capital increase/(decrease) | \u00a0 | (0) | - |
Foreign currency variations | \u00a0 | (0) | 1 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | - | (1) |
Investments in associates and joint ventures at 31 December | \u00a0 | 288 | 290 |
In July 2023, the Company signed two Share Purchase Agreements with its partner Sonangol EP for (i) the acquisition of Sonangol's equity shares in the lease and operating entities related to FPSOs N\u2019goma, Saxi Batuque and Mondo; and (ii) the full divestment to a Sonangol subsidiary of the Company\u2019s equity shares in the parent company of the Angolan based Paenal Yard. Those agreements remain conditional upon several conditions precedent, including consent from clients, lenders, partners and approval by various competent authorities. Therefore, there was no impact considered in the current period from these share purchase agreements.
\nThe finance lease contract of FPSO N\u2019Goma, where the Company is the lessor, includes a call option for the client to purchase the underlying asset or to terminate the contract early. The exercise of the purchase option as per December 31, 2023, would have resulted in a gain for the Company. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe finance lease contract of FPSO Kikeh, where the Company is the lessor, includes a call option for the client to terminate the contract early. The exercise of the option to terminate the contract early, in which case the Company retains ownership of the vessel, would result in a gain.
\nThe following tables present the figures at 100%.
\nProject name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 668 | 302 | 211 | 190 | 152 | 85 | - | 39 |
Angola operations | Angola | 225 | 2 | 20 | 29 | 27 | 203 | - | 291 |
FPSO Kikeh | Malaysia | 153 | 89 | 4 | - | 10 | 28 | 35 | 71 |
Angolan yard | Angola | 52 | (0) | 43 | 588 | 588 | 28 | - | 9 |
Non material joint ventures/associates | \u00a0 | 70 | 48 | 8 | 109 | 104 | 15 | - | 0 |
Total at 100% | \u00a0 | 1,167 | 441 | 286 | 917 | 880 | 359 | 35 | 410 |
Project name | Place of the business | Total assets | Non-current assets | Cash | Loans | Non- current liabilities | Current liabilities | Dividends paid | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO N'Goma | Angola | 722 | 448 | 102 | 259 | 227 | 88 | 155 | 55 |
Angola operations | Angola | 178 | 4 | 10 | 28 | 7 | 172 | - | 236 |
FPSO Kikeh | Malaysia | 189 | 117 | 6 | - | 5 | 36 | 30 | 74 |
Angolan yard | Angola | 57 | (0) | 48 | 556 | 556 | 34 | (0) | 1 |
Non material joint ventures/associates | \u00a0 | 70 | 49 | 12 | 101 | 67 | 42 | - | 0 |
Total at 100% | \u00a0 | 1,217 | 618 | 178 | 944 | 862 | 372 | 184 | 367 |
The bank interest-bearing loans and other borrowings held by joint ventures and associates are as follows:
\n| \u00a0 | \u00a0 | \u00a0 | \u00a0 | Net book value at 31 December 2023 | Net book value at 31 December 2022 | ||||
|---|---|---|---|---|---|---|---|---|---|
Entity name | % Ownership | % Interest | Maturity | Non-current | Current | Total | Non-current | Current | Total |
US$ Project Finance facilities drawn: | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 | \u00a0 |
Sonasing Xikomba Ltd | 50.00 | 4.10% | 15-05-2026 | 117 | 73 | 190 | 190 | 69 | 259 |
Normand Installer SA | 49.90 | 6.00% | 15-12-2026 | 11 | 6 | 16 | - | 22 | 22 |
Loans from subsidiaries of | \u00a0 | \u00a0 | \u00a0 | 324 | - | 324 | 293 | 7 | 300 |
Loans from other shareholders of the joint ventures and associates | \u00a0 | 368 | - | 368 | 341 | 6 | 346 | ||
Loans from other joint ventures2 | \u00a0 | \u00a0 | \u00a0 | 266 | - | 266 | 255 | - | 255 |
Net book value of loans and borrowings | \u00a0 | \u00a0 | \u00a0 | 1,086 | 79 | 1,164 | 1,079 | 103 | 1,182 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result at 100% | \u00a0 | 2 | (18) |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | (72) | (18) |
Partner ownership | \u00a0 | 193 | 141 |
Share in negative net equity reclassification to loans to joint ventures and associates | \u00a0 | 166 | 166 |
Investments in associates and joint ventures | \u00a0 | 288 | 290 |
The Company has several jointly owned subsidiaries:
\nEntity name | Partners | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|
Aseng Production Company Ltd. | GE Petrol | 60.00 | Cayman island | Lease & Operate | FPSO Aseng |
Gepsing Ltd. | GE Petrol | 60.00 | Cayman island | Lease & Operate | FPSO Aseng / FPSO Serpentina |
Gepsing Ltd - Equatorial Guinea Branch | GE Petrol | 60.00 | Equatorial Guinea | Lease & Operate | FPSO Aseng / FPSO Serpentina |
Brazilian Deepwater Production Ltd. | Malaysia International Shipping Corporation Behard | 51.00 | Bermuda | Lease & Operate | FPSO Espirito Santo |
Brazilian Deepwater Production Contractors Ltd. | Malaysia International Shipping Corporation Behard | 51.00 | Bermuda | Lease & Operate | FPSO Espirito Santo |
Brazilian Deepwater Production B.V. | Malaysia International Shipping Corporation Behard | 51.00 | The Netherlands | Lease & Operate | FPSO Espirito Santo |
Opera\u00e7\u00f5es Mar\u00edtimas em Mar Profundo Brasileiro Ltda | Owned by Brazilian Deepwater Production Contractors (see information above) | 51.00 | Brazil | Lease & Operate | FPSO Espirito Santo |
Alfa Lula Alto S.\u00e0.r.l. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Luxembourg | Turnkey | FPSO Cidade de Marica |
Alfa Lula Alto Holding Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Bermuda | Lease & Operate | FPSO Cidade de Marica |
Alfa Lula Alto Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Marica |
Alfa Lula Alto S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Marica |
Beta Lula Central S.\u00e0.r.l. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Luxembourg | Turnkey | FPSO Cidade de Saquarema |
Beta Lula Central Holding Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Bermuda | Lease & Operate | FPSO Cidade de Saquarema |
Beta Lula Central Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Saquarema |
Beta Lula Central S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Saquarema |
Tupi Nordeste S.\u00e0.r.l. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Luxembourg | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Brazil | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste Holding Ltd. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Bermuda | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste S.\u00e0 r.l. (Brazilian branche) | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Bermuda | Lease & Operate | FPSO Cidade de Paraty |
Guara Norte S.\u00e0.r.l. | Mitsubishi Corporation | 75.00 | Luxembourg | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte Holding Ltd. | Mitsubishi Corporation | 75.00 | Bermuda | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation | 75.00 | Brazil | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation | 75.00 | Brazil | Lease & Operate | FPSO Cidade de Ilhabela |
Mero 2 Operacoes Maritima Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | Brazil | Lease & Operate | FPSO Sepetiba |
Mero 2 Operacoes Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | Switzerland | Lease & Operate | FPSO Sepetiba |
Mero 2 Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
Mero 2 B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
MERO 2 B.V. (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
YTSM JV S.A. | CB&I Nederland B.V. | 70.00 | Switzerland | Lease & Operate | FPSO ONE GUYANA |
Tamandare Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandare B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandare Operations Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Switzerland | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandar\u00e9 Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
MERO 4 Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
MERO 4 B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
Mero 4 Operations Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Switzerland | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
Mero 4 Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
NOVA EAST WIND INC. | Micantia Wind Inc - DP Global Energy Limited | 90.00 | Canada | Turnkey | Atlantic Canada |
Tamandare BV (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
MERO 4 BV (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
The US$255 million reported in 4.2.4 Consolidated Statement of Changes in Equity mainly relates to multiple equity contributions from the partners in the subsidiaries Mero 2, Mero 4 and Tamandar\u00e9, related to respectively FPSO Sepetiba, FPSO Alexandre de Gusm\u00e3o and FPSO Almirante Tamandar\u00e9, out of which US$235 million were cash transactions.
\nDuring 2023, the Company acquired the remaining shareholding in SBM Nauvata Private Limited. The Company already exercised control over the investees and now has full ownership over the entity. The transaction was directly booked within equity with a reattribution from non-controlling interests to equity attributable to shareholders. For more information, refer to note 4.3.25 Trade and Other Payables.
\nIncluded in the consolidated financial statements are the following items that represent the Company\u2019s interest in the revenues, assets and loans of the partially owned subsidiaries.
\nFigures are presented at 100% before elimination of intercompany transactions.
\nProject name | Place of business | Total assets | Non-current assets | Cash | Loans | Non-current liabilities | Current liabilities | Dividends to NCI | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO Aseng / FPSO Serpentina | Equatorial Guinea | 118 | 41 | 23 | 0 | 0 | 33 | 8 | 104 |
FPSO Espirito Santo | Brazil | 151 | 71 | 18 | 97 | 110 | 95 | - | 57 |
FPSO Cidade de Marica | Brazil | 1,512 | 1,311 | 68 | 672 | 544 | 185 | 10 | 210 |
FPSO Cidade de Saquarema | Brazil | 1,481 | 1,326 | 26 | 820 | 712 | 150 | 16 | 204 |
FPSO Cidade de Paraty | Brazil | 985 | 826 | 9 | 20 | 3 | 71 | 26 | 168 |
FPSO Cidade de Ilhabela | Brazil | 1,320 | 1,122 | 63 | 720 | 672 | 120 | 21 | 203 |
FPSO Sepetiba | Brazil | 2,070 | 154 | 8 | 1,425 | 1,438 | 218 | - | 213 |
FPSO Almirante Tamandar\u00e9 | Brazil | 1,745 | 26 | 23 | 911 | 1,005 | 10 | - | 513 |
FPSO Alexandre de Gusm\u00e3o | Brazil | 1,815 | 0 | 27 | 1,017 | 1,134 | 36 | - | 773 |
FPSO ONE GUYANA | Guyana | 237 | 12 | 0 | - | 2 | 196 | - | 752 |
Non material NCI | \u00a0 | 18 | 4 | 2 | 3 | 2 | 5 | - | 0 |
Total 100% | \u00a0 | 11,450 | 4,895 | 268 | 5,685 | 5,622 | 1,119 | 81 | 3,197 |
Project name | Place of business | Total assets | Non-current assets | Cash | Loans | Non-current liabilities | Current liabilities | Dividends to NCI | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO Aseng / FPSO Serpentina | Equatorial Guinea | 124 | 57 | 16 | 0 | 0 | 30 | 9 | 93 |
FPSO Espirito Santo | Brazil | 130 | 66 | 15 | 114 | 114 | 76 | 7 | 45 |
FPSO Cidade de Marica | Brazil | 1,577 | 1,388 | 71 | 793 | 675 | 174 | - | 190 |
FPSO Cidade de Saquarema | Brazil | 1,557 | 1,405 | 39 | 922 | 820 | 145 | 10 | 202 |
FPSO Cidade de Paraty | Brazil | 1,058 | 901 | 58 | 92 | 0 | 126 | - | 156 |
FPSO Cidade de Ilhabela | Brazil | 1,366 | 1,201 | 63 | 764 | 720 | 95 | 14 | 185 |
FPSO Sepetiba | Brazil | 2,105 | 170 | 28 | 1,397 | 1,500 | 151 | - | 219 |
FPSO Almirante Tamandar\u00e9 | Brazil | 1,296 | - | 41 | 632 | 56 | 663 | - | 1,019 |
FPSO Alexandre de Gusm\u00e3o | Brazil | 1,002 | - | 15 | 618 | 62 | 652 | - | 880 |
FPSO ONE GUYANA | Guyana | 196 | 1 | 0 | - | 10 | 190 | - | 492 |
Non material NCI | \u00a0 | 18 | 4 | 2 | 4 | 3 | 7 | - | 0 |
Total 100% | \u00a0 | 10,428 | 5,192 | 347 | 5,335 | 3,959 | 2,309 | 40 | 3,482 |
Reference is made to note 4.3.23 Borrowings and Lease Liabilities for a description of the bank interest-bearing loans and other borrowings per entity.
\nThe risks associated with interests in subsidiaries, joint ventures and associates are described in section 4.3.27 Financial Instruments \u2013 Fair Values and Risk Management.The risks identified are deemed to be inherent to the operations of the Company as a whole and includes the risk profiles of interests in other entities.
\nIncluded in the consolidated financial statements are the following items that represent the aggregate contribution of the partially owned subsidiaries to the Company consolidated financial statements:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result | \u00a0 | 123 | 105 |
Accumulated amount of NCI | \u00a0 | 1,797 | 1,517 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | 4,709 | 4,159 |
Company ownership | \u00a0 | (2,912) | (2,642) |
Accumulated amount of NCI | \u00a0 | 1,797 | 1,517 |
The Company has several jointly owned subsidiaries:
\nEntity name | Partners | % of ownership | Country registration | 2023 main reporting segment | Project name |
|---|---|---|---|---|---|
Aseng Production Company Ltd. | GE Petrol | 60.00 | Cayman island | Lease & Operate | FPSO Aseng |
Gepsing Ltd. | GE Petrol | 60.00 | Cayman island | Lease & Operate | FPSO Aseng / FPSO Serpentina |
Gepsing Ltd - Equatorial Guinea Branch | GE Petrol | 60.00 | Equatorial Guinea | Lease & Operate | FPSO Aseng / FPSO Serpentina |
Brazilian Deepwater Production Ltd. | Malaysia International Shipping Corporation Behard | 51.00 | Bermuda | Lease & Operate | FPSO Espirito Santo |
Brazilian Deepwater Production Contractors Ltd. | Malaysia International Shipping Corporation Behard | 51.00 | Bermuda | Lease & Operate | FPSO Espirito Santo |
Brazilian Deepwater Production B.V. | Malaysia International Shipping Corporation Behard | 51.00 | The Netherlands | Lease & Operate | FPSO Espirito Santo |
Opera\u00e7\u00f5es Mar\u00edtimas em Mar Profundo Brasileiro Ltda | Owned by Brazilian Deepwater Production Contractors (see information above) | 51.00 | Brazil | Lease & Operate | FPSO Espirito Santo |
Alfa Lula Alto S.\u00e0.r.l. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Luxembourg | Turnkey | FPSO Cidade de Marica |
Alfa Lula Alto Holding Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Bermuda | Lease & Operate | FPSO Cidade de Marica |
Alfa Lula Alto Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Marica |
Alfa Lula Alto S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Marica |
Beta Lula Central S.\u00e0.r.l. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Luxembourg | Turnkey | FPSO Cidade de Saquarema |
Beta Lula Central Holding Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Bermuda | Lease & Operate | FPSO Cidade de Saquarema |
Beta Lula Central Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Saquarema |
Beta Lula Central S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 61.00 | Brazil | Lease & Operate | FPSO Cidade de Saquarema |
Tupi Nordeste S.\u00e0.r.l. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Luxembourg | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Brazil | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste Holding Ltd. | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Bermuda | Lease & Operate | FPSO Cidade de Paraty |
Tupi Nordeste S.\u00e0 r.l. (Brazilian branche) | Nippon Yusen Kabushiki Kaisha; Itochu Corporation | 63.13 | Bermuda | Lease & Operate | FPSO Cidade de Paraty |
Guara Norte S.\u00e0.r.l. | Mitsubishi Corporation | 75.00 | Luxembourg | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte Holding Ltd. | Mitsubishi Corporation | 75.00 | Bermuda | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation | 75.00 | Brazil | Lease & Operate | FPSO Cidade de Ilhabela |
Guara Norte S.\u00e0 r.l. (Brazilian branche) | Mitsubishi Corporation | 75.00 | Brazil | Lease & Operate | FPSO Cidade de Ilhabela |
Mero 2 Operacoes Maritima Ltd. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | Brazil | Lease & Operate | FPSO Sepetiba |
Mero 2 Operacoes Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | Switzerland | Lease & Operate | FPSO Sepetiba |
Mero 2 Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
Mero 2 B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
MERO 2 B.V. (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 64.50 | The Netherlands | Lease & Operate | FPSO Sepetiba |
YTSM JV S.A. | CB&I Nederland B.V. | 70.00 | Switzerland | Lease & Operate | FPSO ONE GUYANA |
Tamandare Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandare B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandare Operations Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Switzerland | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
Tamandar\u00e9 Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
MERO 4 Owning B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
MERO 4 B.V. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | The Netherlands | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
Mero 4 Operations Holding S.A. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Switzerland | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
Mero 4 Opera\u00e7\u00f5es Mar\u00edtimas Ltda. | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
NOVA EAST WIND INC. | Micantia Wind Inc - DP Global Energy Limited | 90.00 | Canada | Turnkey | Atlantic Canada |
Tamandare BV (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Almirante Tamandar\u00e9 |
MERO 4 BV (Brazilian Branch) | Mitsubishi Corporation; Nippon Yusen Kabushiki Kaisha | 55.00 | Brazil | Lease & Operate | FPSO Alexandre de Gusm\u00e3o |
The US$255 million reported in 4.2.4 Consolidated Statement of Changes in Equity mainly relates to multiple equity contributions from the partners in the subsidiaries Mero 2, Mero 4 and Tamandar\u00e9, related to respectively FPSO Sepetiba, FPSO Alexandre de Gusm\u00e3o and FPSO Almirante Tamandar\u00e9, out of which US$235 million were cash transactions.
\nDuring 2023, the Company acquired the remaining shareholding in SBM Nauvata Private Limited. The Company already exercised control over the investees and now has full ownership over the entity. The transaction was directly booked within equity with a reattribution from non-controlling interests to equity attributable to shareholders. For more information, refer to note 4.3.25 Trade and Other Payables.
\nIncluded in the consolidated financial statements are the following items that represent the Company\u2019s interest in the revenues, assets and loans of the partially owned subsidiaries.
\nFigures are presented at 100% before elimination of intercompany transactions.
\nProject name | Place of business | Total assets | Non-current assets | Cash | Loans | Non-current liabilities | Current liabilities | Dividends to NCI | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO Aseng / FPSO Serpentina | Equatorial Guinea | 118 | 41 | 23 | 0 | 0 | 33 | 8 | 104 |
FPSO Espirito Santo | Brazil | 151 | 71 | 18 | 97 | 110 | 95 | - | 57 |
FPSO Cidade de Marica | Brazil | 1,512 | 1,311 | 68 | 672 | 544 | 185 | 10 | 210 |
FPSO Cidade de Saquarema | Brazil | 1,481 | 1,326 | 26 | 820 | 712 | 150 | 16 | 204 |
FPSO Cidade de Paraty | Brazil | 985 | 826 | 9 | 20 | 3 | 71 | 26 | 168 |
FPSO Cidade de Ilhabela | Brazil | 1,320 | 1,122 | 63 | 720 | 672 | 120 | 21 | 203 |
FPSO Sepetiba | Brazil | 2,070 | 154 | 8 | 1,425 | 1,438 | 218 | - | 213 |
FPSO Almirante Tamandar\u00e9 | Brazil | 1,745 | 26 | 23 | 911 | 1,005 | 10 | - | 513 |
FPSO Alexandre de Gusm\u00e3o | Brazil | 1,815 | 0 | 27 | 1,017 | 1,134 | 36 | - | 773 |
FPSO ONE GUYANA | Guyana | 237 | 12 | 0 | - | 2 | 196 | - | 752 |
Non material NCI | \u00a0 | 18 | 4 | 2 | 3 | 2 | 5 | - | 0 |
Total 100% | \u00a0 | 11,450 | 4,895 | 268 | 5,685 | 5,622 | 1,119 | 81 | 3,197 |
Project name | Place of business | Total assets | Non-current assets | Cash | Loans | Non-current liabilities | Current liabilities | Dividends to NCI | Revenue |
|---|---|---|---|---|---|---|---|---|---|
FPSO Aseng / FPSO Serpentina | Equatorial Guinea | 124 | 57 | 16 | 0 | 0 | 30 | 9 | 93 |
FPSO Espirito Santo | Brazil | 130 | 66 | 15 | 114 | 114 | 76 | 7 | 45 |
FPSO Cidade de Marica | Brazil | 1,577 | 1,388 | 71 | 793 | 675 | 174 | - | 190 |
FPSO Cidade de Saquarema | Brazil | 1,557 | 1,405 | 39 | 922 | 820 | 145 | 10 | 202 |
FPSO Cidade de Paraty | Brazil | 1,058 | 901 | 58 | 92 | 0 | 126 | - | 156 |
FPSO Cidade de Ilhabela | Brazil | 1,366 | 1,201 | 63 | 764 | 720 | 95 | 14 | 185 |
FPSO Sepetiba | Brazil | 2,105 | 170 | 28 | 1,397 | 1,500 | 151 | - | 219 |
FPSO Almirante Tamandar\u00e9 | Brazil | 1,296 | - | 41 | 632 | 56 | 663 | - | 1,019 |
FPSO Alexandre de Gusm\u00e3o | Brazil | 1,002 | - | 15 | 618 | 62 | 652 | - | 880 |
FPSO ONE GUYANA | Guyana | 196 | 1 | 0 | - | 10 | 190 | - | 492 |
Non material NCI | \u00a0 | 18 | 4 | 2 | 4 | 3 | 7 | - | 0 |
Total 100% | \u00a0 | 10,428 | 5,192 | 347 | 5,335 | 3,959 | 2,309 | 40 | 3,482 |
Reference is made to note 4.3.23 Borrowings and Lease Liabilities for a description of the bank interest-bearing loans and other borrowings per entity.
\nThe risks associated with interests in subsidiaries, joint ventures and associates are described in section 4.3.27 Financial Instruments \u2013 Fair Values and Risk Management.The risks identified are deemed to be inherent to the operations of the Company as a whole and includes the risk profiles of interests in other entities.
\nIncluded in the consolidated financial statements are the following items that represent the aggregate contribution of the partially owned subsidiaries to the Company consolidated financial statements:
\n| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Net result | \u00a0 | 123 | 105 |
Accumulated amount of NCI | \u00a0 | 1,797 | 1,517 |
| \u00a0 | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Equity at 100% | \u00a0 | 4,709 | 4,159 |
Company ownership | \u00a0 | (2,912) | (2,642) |
Accumulated amount of NCI | \u00a0 | 1,797 | 1,517 |
During 2023, the Company made equity contributions towards investees, related to FPSO Almirante Tamandar\u00e9, FPSO Sepetiba, FPSO Alexandre de Gusm\u00e3o and FPSO Espirito Santo (combined US$321 million) projects. There were no other major related party transactions requiring additional disclosure in the consolidated financial statements.
\nFor relations with Supervisory Board members, Management Board members and other key personnel reference is made to note 4.3.6 Employee Benefit Expenses.
\nThe Company has transactions with joint ventures and associates which are recognized as follows in the Company\u2019s consolidated financial statements:
\n| \u00a0 | Note | 2023 | 2022 |
|---|---|---|---|
Revenue | \u00a0 | 48 | 16 |
Cost of sales | \u00a0 | (17) | (17) |
Loans to joint ventures and associates | 41 | 52 | |
Trade receivables | \u00a0 | 125 | 70 |
Trade payables | \u00a0 | 16 | 12 |
The Company has provided loans to joint ventures and associates such as shareholder loans and funding loans at rates comparable to the commercial rates of interest.
\nDuring the period, the Company entered into trading transactions with joint ventures and associates on terms equivalent to those that prevail in arm\u2019s-length transactions.
\nAdditional information regarding the joint ventures and associates is available in note 4.3.29 Investment in Associates and Joint Ventures.
Fees included in other operating costs related to PwC, the 2023 and 2022 Company\u2019s external independent auditor, are summarized as follows:
\nin thousands of US$ | \u00a0 | 2023 | 2022 |
|---|---|---|---|
Audit of financial statements | \u00a0 | 3,789 | 2,883 |
Out of which: | \u00a0 | \u00a0 | \u00a0 |
- invoiced by PwC Accountants N.V. | \u00a0 | 2,367 | 1,849 |
- invoiced by PwC network firms | \u00a0 | 1,422 | 1,034 |
Tax advisory services by PwC network firms | \u00a0 | 34 | 66 |
Other assurance services | \u00a0 | 153 | 165 |
Total | \u00a0 | 3,976 | 3,114 |
In both 2023 and 2022, the other assurance services were mainly related to the review of the Company sustainability report. No other non-assurance services were conducted.
The Company is evolving its shareholder return policy as follows: \u201cThe Company\u2019s shareholder return policy is to maintain a stable annual cash return to shareholders which grows over time, with flexibility for the Company to make such cash return in the form of a cash dividend and the repurchase of shares. Determination of the annual cash return is based on the Company\u2019s assessment of its underlying cash flow position. The Company prioritizes a stable cash distribution to shareholders and funding of growth projects, with the option to apply surplus capital towards incremental cash returns to shareholders.\u201d The policy will be presented for discussion at the Annual General Meeting on April 12, 2024.
\nAs a result, following review of its cash flow position and forecast, the Company intends to pay a total cash return to shareholders of US$220 million in 2024. This represents an increase of 12% compared with the dividend paid in 2023. The cash return is to be composed of a proposed dividend of US$150 million (equivalent to c. US$0.83 per share1) combined with a EUR65 million (US$70 million equivalent2) share repurchase program. Shares repurchased as part of the cash return will be cancelled.\u00a0The share repurchase program will be launched on March 1, 2024 and the dividend will be proposed at the Annual General Meeting on April 12, 2024. Going forward, the Company intends to maintain a material level of dividend as part of the annual cash return with US$150 million as a base level.
\nOn January 5, 2024, SBM Offshore announced that FPSO Sepetiba was formally on hire as of January 2, 2024, after achieving first oil and the completion of a 72-hour continuous production test, leading to Final Acceptance by the customer (Petrobr\u00e1s). Accordingly, as from that date, the lease of FPSO Sepetiba will commence and the contract asset related to this unit will be reclassified to finance lease receivables.