MDR
#Hi, <UNK>.
It's <UNK>.
Hi, <UNK>.
It's <UNK>.
The $100 million we mentioned for 2015 was cash savings in year.
Now, not all of that is going to flow through to the profit and loss, given some of it is subject to a percentage of completion in our projects.
And then next year, we are seeing that we will be able to generate an additional $50 million of in-year cash savings on top of the previous $100 million target.
Yes.
Because the capitalized interest is occurring on the DLV-2000 and we expect that to be delivered at the end of the first quarter, we are expecting quite a step up in the interest charge in the P&L next year.
As you saw from the third quarter results today, we are capitalizing $5 million of interest.
We have $18 million of gross.
After Q1 next year, you would expect the $18 million of gross to stay in the P&L.
Absolutely.
When you look at our working capital in the balance sheet, on the asset side you are seeing quite an increase year to date on our contracts and progress.
That's really driven by our Middle East business and our BSP project in Asia.
In the Middle East, we are working through a number of change orders with the customers, and when those get agreed, then we will be able to agree billings and also cash collection.
BSP had a very, very active quarter in Q3, so we did a lot of work there that we will bill out and collect in the fourth quarter.
And then on the other side of the balance sheet, you also see a big drop-off this year in our advanced billings.
And those advanced billings really relate to our Ichthys project and also our PB Litoral project.
All of that is run rate business, and we do not recognize any potential change orders in our P&L and therefore our balance sheet, unless we have a demonstrated track record with the customer and a sound contractual basis to recognize them.
In the event there is a dispute on a presented change order, we would then move that to a formal claim.
And at the end of the third quarter 2015, we only had $9 million of claims recognized on our balance sheet.
This is <UNK>.
Absolutely.
On our head count reductions, there's really ---+ as you've seen our headcount drop this year, really driven by two factors.
Firstly, it's our project work load as we sequence within projects.
Available workforce, that would be our craft labor, or some of our project-specific labor.
We would release when the project is finished, if there's not a new project to move onto.
And then there's the profitability initiative headcount reductions that we've made.
We've made in excess of 1,000 head reductions this year with MPI related to rightsizing, centralization and other initiatives.
Yes, so at the end of the third quarter 2015, we have $317 million of backlog on the lost projects.
Year to date 2015, on the three active projects that we have, they have been accretive to approximately $28 million to gross profit, so we've successfully either negotiated change orders or achieved other cost recovery or contract extension to approximately $28 million.
Good afternoon.
This is <UNK>, <UNK>.
When we're specifically talking about Batam, yes, the Ichthys workload completes toward the end of the fourth quarter.
However, you will notice in our supplemental deck, we do include a fabrication-only project that's going into Batam that was awarded in the third quarter of 2015.
That is producing LNG modules for the [Amal] project.
This is part of our fabrication-only strategy that we started in the earlier part of the year, where we're looking to provide certain of our yards baseload work moving through the cycle.
We would hope that that would absorb a significant amount of our both fixed ---+ our fixed cost base going into 2016.
That's correct, yes.
We gave a total fixed cost net absorption number for the quarter, and this quarter we were slightly underabsorbed by about $5 million.
Rob, let me just clear that and I'll ask <UNK> to add more detail, but contrary to what ---+ we've also heard is that working in the Middle East is we haven't seen any structural change of how we are working with our customers, both in terms of negotiating terms and conditions or negotiating change orders.
We haven't seen any significant change of what's been happening in the past.
<UNK>, do you want to add to that.
Absolutely.
On working capital specifically in Saudi Arabia, in the new long-term agreement, there was a subtle change to the procurement payment schedule, in that it's now driven by receipt of materials in-country as opposed to within our yard in Jebel Ali.
However, we are allowed to receive advanced payments if we post advanced payment guarantees for that amount.
We are able to manage that change in contracting terms.
In other parts of the Middle East, the working capital parts of the contract remain stable as from the last couple of years.
Yes, this is <UNK>.
Our bids outstanding at end of the third quarter were slightly above $2 billion.
With the DLV-2000, we expect delivery at the end of the first quarter.
That delivery includes the basic sea trials performed by the building contractor, which is [Keppel].
Post-receipt, we will put the vessel through pipelay trials and some other operational aspects specific to the equipment, at which we will deem it in-service.
As <UNK> has said, we've always actively looked to deploy the vessel either in a contract that we have or on a new contract that we're currently bidding.
The vessel is due to go in-service in the middle of the second quarter next year, and we are not yet in a position to release what the first project will be for the vessel.
Thank you, Sonya.
And thank you, everyone, for joining us today.
As <UNK> mentioned, next Tuesday on November 17, McDermott will be hosting its 2015 investor day, which will also be webcast live.
The link to the webcast and a copy of the presentation will be available on our website in the Investor Relations section next week.
And we look forward to seeing you there or having you join us on the webcast.
Operator, this concludes our call.
Thank you.
