Profitability

Accounting treatment of projects under construction

In contrast to Directional, the construction of FPSO Prosperity and the FPSO ONE GUYANA and finalized EPC works on FPSO Liza Unity contributed to both IFRS Turnkey revenue and gross margin over the period. This is because these contracts are classified as finance leases as per IFRS 16 and are therefore accounted for as a direct sale under IFRS.

The same treatment applied to the construction of FPSO Sepetiba, FPSO Almirante Tamandaré and FPSO Alexandre de Gusmão which fully contributed to both IFRS Turnkey revenue and gross margin over the period given these contracts are classified as finance lease. Under Directional, the contribution to Turnkey revenue and gross margin for these projects is limited to the portion of the sale to partners in the special purpose entity owning the units (i.e. respectively 35.5%, 45% and 45%).

Revenue

Total Underlying IFRS revenue increased by 29% to US$4,913 million compared with US$3,822 million in 2021.

This increase was mainly driven by the Turnkey segment, with five FPSOs under construction and completion of FPSO Liza Unity qualifying for finance lease accounting in the current period, slightly offset by a lower contribution from offshore installation services following the sale of the SBM Installer, which occurred early 2022.

Underlying IFRS Lease and Operate revenue slightly increased by 5% to US$1,414 million compared with US$1,345 million in the year-ago period. This increase is mostly driven by (i) FPSO Liza Unity joining the fleet upon successful delivery of the EPCI project during the first quarter 2022 and (ii) increased reimbursable scope partially offset by (iii) the end of the Deep Panuke MOPU lease contract (since the last payments from the client contributed to the Underlying IFRS Revenue of previous year), (iv) the end of FPSO Capixaba contracts in the first half year 2022 and finally (v) regular declining profile of interest revenue from finance leases.

As under Directional, the shutdown of operations of FPSO Cidade de Anchieta (which is classified as operating lease under IFRS as well) only had limited impact on revenue over the period, due to the extension of the contract (corresponding to the period of shutdown) beyond the original end date of the lease. As a consequence, the total contractual lease revenue remains unchanged, whereas the revenue of the period, recognized on a straight line basis over the remaining lease period, has been slightly impacted.

EBITDA

Underlying EBITDA based on IFRS accounting policies amounted to US$1,209 million, representing a 33% increase compared with US$906 million in the year-ago period.

  • Underlying Turnkey EBITDA increased from US$271 million in the year-ago period to US$569 million, supported by the same drivers as the increase in the IFRS Turnkey revenue as well as due to the successful close-out of the construction activities of FPSO Liza Unity, delivered over the first quarter of 2022. The Underlying Turnkey EBITDA margin stood at 16%% of Turnkey revenue, despite the negative effects of the pandemic and the Russia-Ukraine war on the macro-environment.
  • Underlying Lease and Operate EBITDA for the current period slightly increased by 1% to US$719 million versus US$711 million in the same period prior year. This resulted from the same drivers as the slight increase in IFRS Lease and Operate Revenue.

As under Directional, in relation to FPSO Cidade de Anchieta (which is also classified as an operating lease under IFRS), repair costs of the four tanks which were required for the safe restart of the vessel did not impact the Lease and Operate EBITDA as they met the criteria of capitalization under IAS16 and therefore have been recognized as an increase in the Property, plant and equipment value of the FPSO Cidade de Anchieta.

Net income

2022 underlying consolidated IFRS net income attributable to shareholders stood at US$450million, an increase of US$45 million from the previous year. The increase in the Underlying EBITDA under IFRS linked to the strong operating performance was partially offset by:

  • An increase in depreciation, amortization and impairment primarily explained by US$92 million FPSO Cidade de Anchieta impairment, following the shutdown of the vessel and the capitalisation of associated tank repair costs (refer to paragraph 4.3.13 Property Plant and equipment), partially offset by FPSO Capixaba and Deep Panuke MOPU (which were classified as operating lease under IFRS) leaving the fleet.
  • An increase in financing costs following the additional drawdowns on (i) project finance facilities for FPSO Liza Unity, FPSO Prosperity, and FPSO Sepetiba and (ii) the new loan achieved for FPSO ONE GUYANA.
  • A decrease in share of profits in associates profit, mainly driven by the 2021 additional six-year extension for the lease and operate contracts of the FPSO Kikeh. As a result of the revised terms and conditions, the lease contract of FPSO Kikeh remained classified as a finance lease under IFRS and the Company recognized a profit of US$76 million in 2021, corresponding to its share of the increase in the discounted value of future lease payments.