Annual Report 2016 We create solutions to unlock energy safely and sustainably for future generations. Introduction Page 2 Aker Solutions has been a key part of Norway’s offshore industry since before oil was even found. We delivered the rig that discovered the giant Ekofisk deposit in the North Sea in 1969. That field is still going strong and so are we. Building on nearly two centuries of technological and engineering excellence, we are now driving development to help solve the world’s energy needs safely and sustainably. Back to index Introduction Annual Report Index Key Figures Key Figures 2016 2015 Orders and results Order backlog December 31 NOK mill 31,188 39,684 Global Presence Order intake NOK mill 17,004 22,793 Revenue NOK mill 25,557 31,896 EBITDA NOK mill 1,929 1,841 Highlights 2016 EBITDA margin Percent 7.5% 5.8% EBITDA margin ex. special items Percent 8.3% 8.3% EBIT NOK mill 687 958 EBIT margin Percent 2.7% 3.0% CEO Introduction EBIT margin ex. special items Percent 5.3% 6.0% Net profit NOK mill 152 383 Board of Directors’ Report Cashflow Cashflow from operational activities NOK mill 312 1,934 Balance sheet Consolidated Financial Net interest-bearing debt NOK mill 1,002 -301 Statements Equity ratio Percent 29.8% 23.9% Liquidity buffer NOK mill 7,480 8,862 Share Parent Company Financial Share price December 31 NOK 41.37 30.30 Statements Basic earnings per share NOK 0.21 1.44 Employees Total employees December 31 Own employees 14,385 15,395 Auditor's Report HSE Lost time incident frequency Per million worked hours 0.30 0.49 Total recordable incident frequency Per million worked hours 1.30 1.34 Alternative Performance Measures Sick-leave rate Per million worked hours 2.75 2.83 Key Figures Key Figures Revenue EBIT and margin Order intake and backlog Amounts in NOK billion Amounts in NOK billion and percent Amounts in NOK billion 35 2.5 8 60 30 7 2.0 50 25 6 5 20 1.5 40 4 15 30 1.0 3 10 2 20 0.5 5 1 10 0 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 Revenue EBIT (NOK billion) EBIT margin (percent) Intake Backlog Back to index Key Figures Subsea Revenue EBIT and margin Order intake and backlog Amounts in NOK billion Amounts in NOK billion and percent Amounts in NOK billion 1.8 9 40 1.6 8 20 35 1.4 7 30 15 1.2 6 1.0 5 25 10 0.8 4 20 0.6 3 15 5 0.4 2 10 0.2 1 5 0 0 0 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 Revenue EBIT (NOK billion) EBIT margin (percent) Intake Backlog Field Design Revenue EBIT and margin Order intake and backlog Amounts in NOK billion Amounts in NOK billion and percent Amounts in NOK billion 1.4 12 14 20 1.2 18 12 10 16 1.0 10 8 14 0.8 12 8 6 6 0.6 10 4 8 4 0.4 6 2 2 0.2 4 0 0 0 2 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 0 2012 2013 2014 2015 2016 Revenue EBIT NOK billion EBIT margin (percent) Intake Backlog Back to index Global Presence Page 6 Global Presence More than 14,000 employees in about 20 countries Norway 5,800 North America 500 Europe Asia Pacific Brazil 1,900 2,600 3,300 Manufacturing sites Fabrication facilities Service bases Aberdeen Egersund Luanda Mobile Ågotnes Ågotnes Africa Houston Houston Tranby Engineering hubs Rio das Ostras Moss Oslo Labuan Port Klang London Kakinada 200 Curitiba Kuala Lumpur Perth Mumbai Aberdeen Pointe-Noire Figures in illustration show number of employees per region. Back to index Highlights 2016 Page 7 Highlights 2016 Reorganization Innovation and Subsea Compression Engineering Aker Solutions in November replaces its Technology Award Aker Solutions and MAN Diesel & Turbo Achievement business area structure with five delivery make progress in developing the next centers: Customer Management, Front The company wins Subsea UK’s innovation generation in subsea compression systems. The company wins an engineering End, Products, Projects and Services. and technology award for its Vectus 6.0 The partnership says it expects to reduce achievement award at the OTC conference The new setup better reflects the subsea electronics module which improves the size and weight of such systems by at in Houston for its El-drive subsea electric company’s workflow from early engagement performance and lowers risk at oil and gas least 50 percent just a year after the world’s actuators. These are more compact, with customers to project execution and installations on the seafloor. first subsea compression system went on effective and environmentally friendly than through to life-of-field services. stream at Statoil’s Åsgard field. traditional hydraulic solutions. Egypt Vietnam Development Alliance BP Contracts The company in June secures an order Aker Solutions wins a contract from Idemitsu Aker Solutions, Aker BP and Subsea 7 form Aker Solutions secures several global valued at more than NOK 1 billion to deliver Oil and Gas to provide front-end engineering a ‘one for all, all for one’ collaboration that framework agreements with BP, including in its longest-ever umbilicals system at the design work for the development of oil and marks a major shift in how an operator and the engineering and subsea areas. Zohr gas field offshore Egypt. gas resources in the Nam Con Son basin off its suppliers work together on Norwegian oil Vietnam. This marks an expansion into a key and gas developments. new market for Aker Solutions. Carbon Capture Brazil Lean Semi ABB Cooperation Aker Solutions carries out the world’s first Aker Solutions opens a new state-of-the-art subsea The company introduces a new lighter Aker Solutions and ABB join forces to build test project for carbon capture at Norway’s manufacturing plant in Brazil and also secures weight and faster to deliver semisubmersible on their combined strengths in subsea, largest waste-to-energy plant, successfully a subsea services framework agreement with platform. The Lean Semi will help producers power and automation technologies, removing 90 percent of the CO2 from waste national oil and gas producer Petrobras. In unlock marginal oil and gas fields in harsh bringing customers more effective, reliable burned to create energy. The company’s December, the company buys 70 percent of environments across the globe. and flexible oil and gas production solutions. carbon capture, utilization and storage Brazilian C.S.E. Mecânica e Instrumentação Initial focus areas include developing subsea technology is an important tool in reducing Ltda., building on a strategy to expand its compression systems at lower costs and in emissions and curtailing global warming. services business internationally. less time. Back to index CEO Introduction Page 8 Encouraging Signs Aker Solutions made major progress in 2016 in becoming a leaner and more competitive company and promoting its aim of creating a more sustainable industry. Back to index CEO Introduction Page 9 We streamlined how we are organized, strengthening operations and taking big with Petrobras in Brazil. We secured a record of more than 80 steps to improve cost-efficiency. We delivered consistently on major projects study awards last year, including for the Johan Sverdrup and globally and increased our collaboration with other industry-leading companies to Johan Castberg projects, where we have worked closely with find the best field development solutions. the customer Statoil to significantly lower development costs. We also had to make some tough decisions and let go of valued colleagues About two-thirds of our project backlog is for outside Norway. because of the continued market decline. Together with the trade unions, we We built on our network of partnerships with companies ensured that this process was as fair and transparent as possible. We will continue that are leaders in their fields, agreeing in April to collaborate to be vigilant and do what is necessary to safeguard our company and future jobs. with ABB on subsea, power and automation technologies. Our business area structure was replaced with the following new delivery We also continued to partner in subsea with Baker Hughes, centers: Customer Management, Front End, Products, Projects and Services. These better reflect our workflow from early engagement with customers to project execution and through to life-of-field services. Our underlying margins were steady The new setup is driving leaner workflows and greater synergies and will boost our standardization efforts and further speed up #thejourney program, which in 2016, aided by cost-efficiency targets cost-efficiency improvements of at least 30 percent by the end of this year. efforts and strong project execution It will propel growth in our services organization and help in the pursuit of more international business. Building on this strategy, we last year bought 70 percent of C.S.E. Mecânica e Instrumentação, a Brazilian provider of maintenance, assembly, commissioning MAN Diesel & Turbo, SBM Offshore and Saipem. These collabo- and crane operation services. Through this we gain access to the country’s rations close technology gaps in our portfolio, providing access to expanding market for servicing existing oil and gas fields. I am pleased to say that the entire range of capabilities needed to develop fully-functioning the process of integrating our two businesses is going well. subsea production and processing systems. Our underlying margins were steady in 2016, aided by the cost-efficiency We carried out the world’s first test project for carbon efforts and strong project execution, even as the industrywide slowdown caused capture at Norway’s largest waste-to-energy plant, success fully a weakening of both our top and bottom lines.