Mid-term Business Plan 2020 February 7th, 2018
Contents Review of Previous Mid-term Business Plan (2015-2017) Environment Result Activity Mid-term Business Plan 2020 Outlook of Long Term Energy Consumptions Current Market Strategy of Mid-term Business Plan 2020 Target for 2020 - Quantitative Goals Mission and Vision APPENDIX 2
Review of Previous Mid-term Business Plan (2015-2017)
Review of Previous Mid-term Business Plan (2015-2017) - Environment Reduced number of projects due to low oil price and political instability in Brazil Number of Projects* 14 12 WTI Oil price(usd/bbl.) 140 120 10 100 8 80 6 60 4 40 2 20 0 2011 2012 2013 2014 2015 2016 2017 0 Previous Mid-term Business Plan From :Number of projects: EMA, Floating Production Systems Outlook Report 2018 Q1 Executive Summary *Floating production facility excluding FSO & MOPU WTI oil price : EIA 4
Review of Previous Mid-term Business Plan (2015-2017) - Result Strong increase of net income despite the revenue drop Revenue (USD MM) Target of Previous Mid-term Business Plan Net Profit (USD MM) 4,000 3,500 Revenue 3,500 Net Profit 100 ROE 10% 200 3,000 150 2,500 2,000 100 1,500 1,000 50 500 0 2011 2012 2013 2014 2015 2016 2017 0 Previous Mid-term Business Plan 5
Review of Previous Mid-term Business Plan (2015-2017) - Activity Action Plans were steadily achieved, and will be evolved into the new Mid-term Business Plan. Asset Integrity Enhancement Enhanced asset management with active resource allocation. Achieved EPCI and O&M service which enable longer and more stable production by effective use of accumulated know-how in O&M for each FEED/EPCI/O&M. Strengthened Competitiveness Improved EPCI cost competitiveness and shortened delivery time. Reduced cost of O&M. Execution of R&D Continued research of technology for seabed mining. Continued R&D of technology for offshore wind power. Developed FSRWP. Efficient Organization Enhanced group cash management for efficient use of funds. Asset Integrity: To provide with design, facility and production service for long-term safe & steady oil and gas production. FEED: Front End Engineering Design EPCI: Engineering, Procurement, Construction & Installation O&M: Operation & Maintenance 6
Mid-term Business Plan 2020
Outlook of Long Term Energy Consumption Oil will stay as an important source of energy, whereas Gas will rise sharply. Total energy consumption(mtoe/y) 16,185 17,865 13,684 14,576 2014 2020 2030 2040 Oil consumption(mtoe/y) Gas consumption(mtoe/y) Renewable energy consumption(mtoe/y) 4,266 4,474 4,630 4,775 2,893 3,141 3,686 4,313 1,937 2,259 2,827 3,456 2014 2020 2030 2040 2014 2020 2030 2040 2014 2020 2030 2040 from : IEA, World Energy Outlook 2016 *mtoe: million tonnes of oil equivalent 8
Current Market Business conditions have improved and numbers of prospective projects are coming. Numbers of projects using floating oil and gas production facilities (as of September 2017) World Total 56 48 135 Bidding & Final Design Planning Appraisal 5 5 Canada 2 6 North Sea 15 1 2 6 China 3 4 GOM 14 3 3 6 Mediterranean 7 Southeast Asia 11 24 Brazil 9 16 10 8 9 Africa 26 Southwest Asia & Middle East 6 11 Other S. America & Caribbean 2 7 2 1 1 Australia & New Zealand 13 from :EMA, 2017 Q4 FPS Report" *Australia & New Zealand includes one project in bidding and final design stage in Pacific. 9
Strategy of Mid-term Business Plan 2020 Maximize LIFECYCLE VALUE Evolution of Asset Integrity 01 Development of new business Penetrate into gas market 03 Asset Integrity Digitalization GAS R&D 02 04 Digitalization Continuous investment in R&D LIFECYCLE VALUE : The value which MODEC provides with stakeholders, i.e., community, customer, partner and our shareholders through the whole life of the FPSO, from design to operation. 10
Strategy of Mid-term Business Plan 2020 1.Evolution of Asset Integrity Maximizing Lifecycle Value Evolution of Asset Integrity O&M FEED EPCI O&M FEED Integrated Management System KPI management aiming to maximize lifecycle value Global Organization IT Platform HR Development Optimization Renewal of ERP Investment in Next leaders/specialists 11
Strategy of Mid-term Business Plan 2020 2. Digitalization Massive amount of operational data is our key asset of competence. We will move forward with a digitalization program to enhance the lifecycle value. Advanced Analytics Enhanced efficiency leveraging IoT Reduced maintenance cost Safe & Steady operation Increased uptime Optimized FPSO design & EPCI - Targeting to achieve O&M automation by applying robotics FPSO operational data 12
Strategy of Mid-term Business Plan 2020 3. Penetration into gas market Expected volume of investment in floating gas related facility Considering alliance/collaboration with 3 rd parties if necessary. Europe North America & the Caribbean Middle East South Asia Southeast Asia Africa South America Australasia Accumulated volume of market in 2018-2020 from :MODEC 13
Strategy of Mid-term Business Plan 2020 4. Continuous investment in R&D Offshore fleet repair Development and materialization of innovative in-situ fleet repair method using CFRP Offshore wind power Research for low cost offshore installation Seabed mining development Leading a Japanese national project 14
Target for 2020 - Maximize LIFECYCLE VALUE USD 4,000 MM Revenue Award (FPSO) 2 vessels/year USD 200 MM Net Profit 2020 Award (Gas) 1 vessel 12% ROE Digitalization 6 vessels in 2018 - expand up to 2020 15
Mission and Vision - Commitment to leading the offshore industry MISSION MODEC delivers and safely operates high-quality, innovative floating solutions for the offshore industry. VISION To be the global leader in delivering and operating innovative and reliable floating solutions by cultivating diverse and talented teams that work with integrity, communicate openly, serve the community and protect the environment. 16
APPENDIX
Outlook of Oil Price Both scenario 1 and 2 show steady oil price. Scenario1 Energy demand will increase steadily due to the rise of world population, growth of living standards and urbanization in developing countries. Scenario2 Energy demand will increase but that will be offset by improved energy efficiency in industry and home, which is enabled by widespread low-energy-consuming equipment. Unit:USD/bbl 125 110 80 85 78 73 2020 2030 2040 from : IEA, "World Energy Outlook 2016" 18
Continue to accumulate experience Charter/O&M (as of February 2018) 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 (1) Petrobras Mero Pilot FPSO Petrobras (2) FPSO Carioca MV30 Petrobras (3) FPSO Cidade de Campos dos Goytacazes MV29 Petrobras 1 FPSO Prof. John Evans Atta Mills Tullow 2 FPSO Cidade de Caraguatatuba MV27 Petrobras 3 FPSO Cidade de Itaguaí MV26 Petrobras 4 FPSO Cidade de Mangaratiba MV24 Petrobras 5 FPSO Cidade de São Paulo MV23 Petrobras 6 FPSO Cidade de Angra dos Reis MV22 Petrobras 7 FPSO Cidade de Santos MV20 Petrobras 8 FPSO Cidade de Niterói MV18 Petrobras 9 FSO Rang Dong MV17 JVPC 10 FSO Cidade de Macaé MV15 Petrobras 11 FPSO Cidade do Rio de Janeiro MV14 Petrobras 12 FSO Rong Doi MV12 KNOC 13 FPSO Baobab Ivoirien MV10 CNR 14 FPSO MODEC Venture 11 Santos (15) FPSO Stybarrow Venture MV16 available 1 FPSO Raroa OMV 2 FPSO Kwame Nkrumah MV21 Tullow 3 FPSO Pyrenees Venture BHPB 4 FPSO Fluminense Shell 17.5y More than 200 years of O&M 45+α EPCI 10y 5y 8y 7y 20y 7y + 9y 9y 12y 15y 15y 5y+ 20y 15y 20y 20y 20y 10y 20y 7.5y 5y 10y y 22y 21y Charter(fixed) Charter(option) O&M 19
Disclaimer The information contained in this material is based on a set of assumptions and it is not guaranteed as to its materialization of financial visions or corporate strategies. 20