BW OFFSHORE Ltd.Shipowners’ Experience and

Requirements in Procurement

and Building process

By Carl K. Arnet, March 2014

Three numbers to define BW Offshore

March 2014 2

99.0%

FPSOs + 1 FSO

700,000 boe/day

uptime

16top tier world-wide

“like a large independent”

2013 average

Global footprint

Crew centers

Offices

UnitsSendje Berge

Yùum K’ak’Náab

Belokamenka

Petroleo NautipaAzuriteAbo

Espoir Ivoirien

Cidade de São

Mateus

Polvo

Umuroa

Berge Helene

BW Cidade de Sáo

Vicente

BW Pioneer

BW Athena

BW Joko Tole

* Operation & Maintenance

P-63*

Peregrino*

March 2014 3

Operational highlights – 2013

■ Class-leading HSSEQ performance

− Lost time injuries (LTI*) of 0.23

■ Stable operations

− Uptime of 99.0%

■ EBITDA of USD 447.4 million for 2013

■ First oil on FPSO P-63 (Papa Terra)

− Project completed

■ Signed extension contract for three units

− Abo

− Sendje Berge

− Polvo

■ Commenced marketing of FPSO Azurite for new projects

March 2014

Uptime

* Injuries per million man-hours

4

0

50

100

150Reported One-offs

EBITDAUSD million

90%

92%

94%

96%

98%

100%

Orderbook

■ Orderbook of USD 6.9 billion as of 31

December 2013

− Whereof USD 3.3 billion are firm contracts

− 7x revenue (2013)

■ Long term lease contracts with solid

counterparties

− Visible and sustainable revenue

− Diversified client base

■ Portfolio with solid EBITDA-margins

− 2013 EBITDA margin of 46%

March 2014

Total orderbook and clients

28%

37%

35%

NOC E&P Petrobras

5

USD

6.9billion

WHAT IS AN FPSO?

FPSO in the upstream value chain

March 2014 7

SEISMIC DRILLING DEVELOPMENT PRODUCTION

BUSINESS

DEVELOPMENT

CONTRACT

ENGINEERING

PROCUREMENT

CONSTRUCTION

INSTALLATION

COMMISSIONING

PRODUCTION DE-

COMMISSIONING

FPSO: Floating Production Storage and Offloading

The FPSO is an “oil platform”

March 2014 8

WELL FLUID

OIL, GAS AND WATER SEPARATION

GAS COMPRESSION

OIL

STORAGE

MEETERING

OFFLOADING

GAS

INJECTION/EXPORT

WATER INJECTION

Turret &

swivel stack

Risers and umbilicals

Mooring lines

Flare tower

Helideck

AccommodationHeating medium

Power generation

Gas compression

Offloading hoseFiscal metering

Process plant

Storage

Switchgear room

BUILD PROCESS

FPSO project cycle

■ Tender Phase

− Front End Engineering & Design (FEED)

− Bid major procurement items & sub contracts

− Cost & Schedule Estimate

− Contract negotiations with client

■ Execution Phase

− Detailed Engineering

− Major Procurement and Sub-contracting

− Build New Hull or Convert existing, Build Topsides, & Build Single Point Mooring (Turret)

− Integrate & Pre-commission

− Pre-Operations, transport to site, & installation

■ Operations

− Commission

− Operate Long term

March 2014 10

FEED,

BUDGET &

BID

ENGINEER, BUILD OR CONVERT

HULL

ENGINEER & BUILD TOPSIDES

TRANSPORT

& INSTALL

COMMISSION &

OPERATE

INTEGRATE

HULL, TOPSIDES

& SPM

Hull: new vs. converted

NEW:■ New! Long Life.

■ Design exactly what you want

■ More predictable

But

■ Cost & Schedule “floor”

■ Subject to shipyard market

March 2014 11

USED:■ Not new! Lifecycle risk.

■ Compromised Design

■ Less predictable & often more complex

But

■ Can be cheap and quick

■ Subject to hull availability

Topsides: E+P+C vs. EPC

E+P+C:■ Manage each component yourself

■ Manage your core competence

■ Need substantial resources & competence

■ Keep much of the risk in house

But

■ Keep the margin and the risk/reward in house.

■ Build competitive competence

March 2014 12

EPC:■ Turnkey to others

■ Rely on other parties for core competence.

■ Need only supervision

■ Shed the risk

But

■ Margin & risk/reward is captured by others

■ Others keep building competence we need

Integration & pre-commissioning:

■ Essential core competence of FPSO contractor

■ Right now Singapore shipyards are the best location worldwide for integration:

− 3 substantial competing shipyards with capacity and decades of experience

− Unequalled regional resource, procurement & industrial complex

− Most business friendly possible location

March 2014 13

Requirements in

Procurement and Building

Process

Preferred contract strategy: E+P+C

March 2014 15

■ In addition, BWO’s preference is to have a “Competitive Relationship” with small numbersof competing key sub-contractors and/or vendors.

Requirements to BWO subcontractors

■ Competitive Bid process is BWO standard approach

■ Approved Subcontractor List is maintained taking the input from Operation Fleet

(life-cycle feed back)

■ Clear definition of Scope of Work and applicable specifications when ITT / RFQ

package is developed

■ BWO T&C’s to be applied in comparison to Subcontractor’s T&C’s

■ Proven “Technology” and “Track Record” are the key words for the selection of

suppliers / subcontractors (BWO put innovative approach when designing the

facility, but individual element to be “proven”)

■ Collaborative working approach – Pre-mobilization audit / Kick Off Meeting / Weekly

meeting / Quality Surveillance Program – we will not let Subcontractor failing to

deliver

March 2014 16

Cost breakdown:

■ FPSO project with new purpose built FPSO hull

■ Typical modern FPSO will have more than US$ ½ billion in procurement and sub-contracting

March 2014 17

Cost definition at project start

■ The following illustrates why the FPSO business remains quite risky and requires

substantial competence.

■ Most major cost elements are not firm when a contract is signed with the client.

March 2014 18

Sub-contractors & suppliers

■ This is a time

snapshot of

BWO’s most

recent biggest

suppliers and

sub-contractors

by order of

value.

■ Over the same

timeframe, BWO

had over 320

suppliers or

subcontractors

from which it

procured in

excess of US$1

million.

March 2014 19

FINANCE

Strong and supportive lending banks

■ BW Offshore refinanced it’s main credit facilities in 2010/2011

− USD 2.4 billion 7-year credit facility

− The syndication of the facilities was substantially oversubscribed

■ New credit facility signed in 2013 for BW Joko Tole

− USD 285 million 5-year credit facility

March 2014 21

Lending banks

Financing overview

■ USD 2,400 million credit facility ~ maturity March 2018 (LIBOR +200 bps)− Remaining term loan of USD 1,001 million (initial amount USD 1,700 million)

− Semi-annual payment of USD 111 million

− Drawn USD 310 million on USD 641 million RCF (USD 68 mill LC included in RCF)− Full bullet at maturity

■ Umuroa facility ~ maturity October 2015 (LIBOR +200 bps)− Remaining term loan of USD 63 million (initial amount USD 130 million)

− Quarterly instalments (USD 4 mill) and bullet (USD 30 million)

■ BW Joko Tole facility ~ maturity June 2018 (LIBOR +250 bps)− Remaining term loan of USD 221 million (initial amount USD 250 million & USD 35 mill LC)

− Quarterly instalments (initial USD 15 mill reducing to USD 9 million)

■ BWO01 bond ~ maturity March 2017 (NIBOR +425 bps)− NOK 500 million (approx USD 90 million)

■ BWO02 bond ~ maturity March 2018 (NIBOR +415 bps)− NOK 500 million (approx USD 87 million)

■ BWO03 bond ~ maturity March 2019 (NIBOR + 350 bps)− NOK 750 million (approx USD 125 million)

March 2014 22

CONCLUSIONS

Conclusion

Successful investments in the FPSO space require:

■ The right client

■ The right project

■ A well defined and specified end product

■ Support from the right banks

■ Selection of the right subcontractors

■ Efficient competition

■ Assembly in an efficient hub (Singapore)

Other possibilities:

■ Export financing

■ Equity partners

March 2014 24

Q & A

26March 2014