Financing a sustainable future – people, assets and … • Membership fees and operating costs rise in line with inflation • Modest (5%) annual growth in preparedness services

© Copyright Oil Spill Response Limited.

Financing a sustainable future –people, assets and technology


Agenda

Financial update– Update on performance & looking ahead– Opportunities and risks– Capital expenditure & investment

Response assetsTechnology– Transforming our applications– Cyber security


Our global capability

NORWAY

S.AFRICA

BRAZILSINGAPORE

BAHRAIN

SOUTHAMPTONABERDEEN

FT. LAUDERDALEHOUSTON

SUBSEA WELL INTERVENTION SERVICES BASE

RESPONSE BASE

REGIONAL OFFICES

OSRL employs about 265 people across 11 locations around the world

TRIESTE

PERTH


Funding Model

Participant & Associate

Membership Fees

Response Capability

Spill Income

Capital and investment

Supplementary Services

Membership Fees

Income from Preparedness

Services

Service Delivery & Service Specific

Overheads

Service Delivery &

Departmental Overheads

Support Services (Corporate, HSEQ, Finance, IT & HR)

Operatingcosts

Income

Overheads


A period of growth

Growth due to new services

In a period of increased stability

Modest growth from preparedness services after a period of falling revenues

0

20

40

60

80

100

120

140

2012 2013 2014 2015 2016 2017 F2018

£M

Year

Total Revenue


OSRL’s Operating Costs – all services

38%

14%15%

18%

15%

%

Staff & Travel

Premises

Aviation

Equipment &MaintenanceOther

Costs excluding capex, depreciation and interest


Headcount

230

240

250

260

270

280

290

300

310

320

2014 2015 2016 2017 2018 B2019

Number ofemployees


Contributions from Supplementary Services

Supplementary services make a significant contribution to covering OSRL’s overheads:

2018 £M B2019 £M

Capping 1.5 1.6

Containment 1.5 1.6

OIE 0.4 0.5

GDS 1.3 1.4

OSPRAG 0.1 0.1

UKCS 0.25 0.25

UKDI 0.1 0.1

WACAF 0.1 -

Total 5.25 5.55


Looking Ahead - Cash Forecast

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2017 2018 2019 2020 2021

GBP

Year

Closing cash (excluding Supplementary Services)

Assumptions:• Membership fees and operating costs rise in line with inflation• Modest (5%) annual growth in preparedness services• Capital & investment expenditure grows from £1.3m as per B2019 to £1.75m in 2021• Spill income available to fund loan repayments


Opportunities and risks


Foreign exchange – why does it matter?

Participant and associate subscriptions are collected in GBP

Approximately one third of OSRL costs are in SGD or USD

This creates an exposure due to the need to convert GBP to pay these outgoings


Foreign exchange – the risk

We have forward contracts in place to purchase 2019 currency requirements and so have largely mitigated this risk for the next 12 months

But OSRL only takes forward contracts on a 12 month rolling basis and therefore remains exposed for 2020 and beyond

Geo-political factors continue to drive volatility in the foreign exchange markets


GBP vs SGD/USD

SGD USD


Preparedness Income

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

2014 2015 2016 2017 F2018 B2019

GBP

Year


Preparedness opportunities and risks

Increasing drilling activitiesFocus on growth marketsWork with more members

Equipment hire services growth required to enhance profitability 2018 performance heavily reliant on secondments

Opp

ortu

nitie

sRisks


Spill income – recent experience

-

500

1,000

1,500

2,000

2,500

3,000

3,500

2012 2013 2014 2015 2016 2017 2018 (ytd)

GBP

£'0

00

Year

Net Spill Income


Spill income

Income from spills is used to fund capital and investment

During 2018 OSRL has entered into a £4.5m loan agreement (not yet all drawn down) to ensure the response capabilities are aligned to Member expectations

The funding model assumes sufficient spill income will be available in future years to cover loan repayments


Capital and Investment Expenditure

2017 2018 - Forecast 2019 - BudgetIncomeMembership fees 1.1 1.2 1.3Net spill Income 0.7 0.6 -Loan drawdown - 4 0.5Total income 1.8 5.8 1.8Expenditure (spent or committed)Tersus (0.1) - -Response equipment (0.9) (4.9) (1.0)Buildings and infrastructure (0.3) (0.15) (0.3)

IT equipment (0.3) (0.15) (0.5)Transformation* (0.2)Total expenditure (1.8) (5.2) (1.8)

*Ongoing transformation expenditure is being funded from opening cash


Response Assets – Bow Wave Update


Bow Wave Status

Completion of orders for Very High and High risk equipment (88% of Bow Wave). – Some items received– Main bulk of FAT begins in December 2018

Target to complete orders for Medium risk equipment by 31 January 2019Target to complete orders for Low risk equipment is 28 February 2019All equipment fully commissioned and ready end September 2019


Future SLA CAPEX Forecasting

+5 year SLA capex forecast– Average £600k per year

Excludes replacement of the EARL vesselOver 20yr period the whole stockpile will be replaced – Peak periods will be 15yrs after Macondo and 15yrs

from now– Procurement planning will level out peaks and

troughsAbove figure does not include investment in new technology, growth or changes in scope


Technology


Current Investment

Overall strategy is to move to cloud-based environment– Office 365 adopted globally – annual license costs

£75k– Transformation (budget £1.3m) – the majority of this

cost is ERP (NetSuite) along with specialist resource to support the procurement & implementation. This was funded from 2016/17 spill income

– Significant implications from these new applications & need to enhance cyber security tools


ERP Scope

One global database

HR

CRM

Finance

Resource Planning


ERP Benefits

• Globally accessible• Scalable and

increased scope for innovation

• Specific resource planning tool

• Mobile technology

• One version of the “truth”

• Reduced duplication of input time

• Increased efficiency• Improved reliability

Automation of key

processes

Single point of data entry

Cloud based Optimise performance


Office 365 – quick wins

Skype has made an immediate improvement to communications, especially between bases.

Microsoft Teams allows groups to work collaboratively on projects/documents using the O365 real time cloud functionality

SharePoint enabling cloud based file storage and increased collaboration on document creation


OSRL Cyber Security

BackgroundThe Oil & Gas industry is critical to the Global economy and therefore highly targeted by cyber attacks. The most common guise of attack is by email to deliver Malware or Spam. The aim being to compromise data & systems or to gather powerful O365 credentials.

In 2017 54% of all email traffic was Spam [Symantec]


OSRL Cyber Security

StatusOSRL is seeing increasing volumes of Phishing attacks since transition to O365

Email Filtering is blocking 12,000 Spam a month600 malware emails a month…… and rising

Highest targeted user:350 blocked a month

Head of IT reviewing infrastructure landscape and Security Mitigation work done to date. We are building a Strategy of initiatives based on UK National Cyber Security Centre Guidelines


The Risk for OSRL

The main risk to OSRL from a cyber breach is unauthorised access to data stored in our systems, specifically:

– Spill data– Member contingency plans– Other data required for Preparedness engagements– Bank account data– Employee details (OSRL and Member employees)


Security Technology

Current Activity & InitiativesWorking with partners to ascertain, prioritise & mitigate risks:

PWC Network Penetration audit Getronics Hard Disk Encryption(IT Managed Service) Multi Factor Authentication

Security Incident Event Management (as a service)

Optimise Spam FilteringO365 enabling resilienceProxy enhancement

Mobile Mobile Device Manager SoftwareBYOD Policy


Security Technology

Current ActivityWorking with Teams to educate on awareness:

O365 Move to SharePoint & CloudEducation & Reporting of SpamNew self-serve training tools

IT Steering Group Central View of all IT related activityPilot group initiatives

Ways of Working Resilience of DataIT PolicyMember recommendations


Looking Ahead

Security Technology Strategy2019 Rescope our IT Managed Services Platform

Introduce enhanced SIEM monitoring servicePenetration TestingResource 2 key roles:

1. New O365 Applications Specialist- usage & governance (with IT Policy)2. New ERP Enterprise Application Specialist

2020 Review our network designFurther Penetration testing OSRL Security Policy Manager


Conclusions

The 2019 budget and 3 year forecast demonstrate that OSRL has almost reached a cash neutral position

The £4.5m loan has allowed OSRL to bring the response equipment back in line with Member expectations

The three year plan allows for a level of investment in assets that will sustain response capability levels, and in IT to respond to increasing cyber threats


Feedback from you

1. Long term OSRL requires £1.2m per annum to fund SLA asset replacement. However, there will be year on year volatility in the specific requirements. Do Members want us to continue to assume £1.2m per annum to avoid fee volatility, or base fees on actual annual funding requirements?

2. There are extensive options available to prevent cyber crime, and extra security increases cost and can make it harder to do business.

– How secure do our Members expect OSRL to be?– What do Members consider industry best practice for Cyber

security, and how should OSRL apply this?


Staying in touch

www.oilspillresponse.com

Training courseswww.oilspillresponse.com/[email protected][email protected]

Find us on

www.facebook.com/OilSpillResponseLimitedwww.linkedin.com/company/oil-spill-response-ltdwww.youtube.com/user/OilSpillResponseLtdwww.twitter.com/oilspillexperts

http://www.facebook.com/OilSpillResponseLimited

http://www.linkedin.com/company/oil-spill-response-ltd?trk=company_name

http://www.youtube.com/user/oilspillresponseltd

http://www.twitter.com/oilspillexperts

Documents

Financing a sustainable future – people, assets and … • Membership fees and operating costs rise in line with inflation • Modest (5%) annual growth in preparedness services