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Good morning. I'm delighted to welcome you all to our full year results presentation for 2019. I'm joined today by Al Cochran, our Chief Financial Officer, who will take you through the financial results shortly. In the audience also my colleague, John Pearson, who is the -- who runs our EPS business, he's here with us today. But first, I'll take you through some of the highlights. We delivered a solid operational performance across our business in 2019, underpinned by steady project execution. We improved cost competitiveness, taking approximately $40 million cost out for the business, mainly in the functions. Our $3.2 billion order intake reflected lost awards in Saudi Arabia & Iraq and delays to tendering processes in other markets, partly offset by a strong performance in EPS. Despite this, we are reporting good financial results today, in line with expectations. Our balance sheet remains strong, and we are announcing a final dividend of $0.253 per share delivering a full year dividend of $0.38 per share. We've made good progress against our strategic objectives of best-in-class delivery, enhancing returns and positioning for growth. Looking ahead, we expect this year 2020 to be a year of transition. Continued improvement in market conditions reflected in both our busy tendering pipeline and recent new awards, means we're investing and maintaining our bench strength and technical capability. While this investment, together with project mix and lower new order intake in recent years will impact financial performance in 2020, we are confident, it best positions us for a return to growth as we rebuild our order book. This is reflected in our target group book-to-bill of greater than 1 in 2020. Turning on to our sustainability highlights. For the group ESG. For the group, ESG is fundamental to delivering our strategy and creating sustainable long-term value. In 2019, our environmental performance improved with our CDP rating upgraded from C to B and lower recordable spill volumes. We remain well ahead of our emissions reduction target with a 56% decrease in E&C and EPS emissions intensity since 2015. Our safety performance was 4x better than the industry average, with no fatalities and a reduction in the injury frequency rate. In-country value, which is a key component of our sustainability proposition and a competitive differentiator for us increased in 2019, with 41% of project spend on local goods and services on average. On our human rights agenda, we introduced new mandatory due diligence for suppliers. Governance remains an area of key focus, both systems and controls and the right behaviors. Along with the Board, I recently launched our updated Code of Conduct via global employee webcast as we keep our workforce informed on our new and emerging legislation. Just before I hand over to Al, as we have outlined in today's announcement, we remain committed to our ongoing proactive engagement with the SFO with a view to bringing about a conclusion to their work with pace and focus. As you by now appreciate, until that time, we won't be able to elaborate further. So please bear that in mind in your questions. With that, I'll hand over to Al to take you through our financials. And I'll return then for the operational update. Thank you.
Thank you, Ayman. Good morning, everyone. I'm pleased to report good full year results today, with net profit of $276 million, in line with expectations. Better-than-expected working capital inflows at the year-end ensured that we generated strong free cash flow in 2019 and maintained a net cash position of $15 million. Looking forward, our order backlog was $7.4 billion, gives us good revenue visibility in the near term. Consequently, the Board is proposing a final dividend of $0.253 per share, resulting in a full year dividend of $0.38 per share in line with policy and the prior year. So let's look at the results in a little more detail. At a group level, revenue was down 5% at $5.5 billion, impacted by a decline in E&C revenues and IES divestments. EBITDA and net profit, excluding exceptional items, were also lower year-on-year, with project mix, prior year asset sales and a higher effective tax rate, all reducing net margin. As a consequence, diluted earnings per share fell 21% to $80.4 per share. Reported earnings, on the other hand, increased to $73 million after recognizing exceptional items of $203 million in the year. The majority of these were incurred in our IES upstream portfolio. Notably, a $49 million impairment charge triggered by the agreed sale of our remaining 51% interest in Mexico and $86 million impairment charge to the carrying value of PM304 in Malaysia and a $37 million fair value adjustment to the carrying value of Pánuco contingent consideration. Overall, the cash impact of exceptional items was only $31 million. At a divisional level, Engineering & Construction delivered results broadly in line with guidance. Revenue fell 5% to $4.5 billion, reflecting lower levels of activity as our project portfolio matured. And as you can see from the chart, net margin also decreased to 6.2%, driven by project mix and higher tax. Consequently, net profit fell 18% to $278 million. Looking forward, our order backlog provides E&C with $3.8 billion of secure revenue in 2020 at an expected margin of between 5% and 5.75%. As previously guided, this year-on-year decline reflects a higher contribution from lower margin contracts. As well as our $30 million investment in maintaining bench strength and technical capability. And as Ayman said, this investment ensures that Petrofac can capitalize on the improving market outlook thereby, best positioning for the group for a recovery in new orders in 2020 and a return to growth thereafter. Our reimbursable business is already benefiting from the improvement in market conditions, with a 4% growth in revenue, driven by resurgence in brownfield projects in the North Sea as well as the continued strength of our well engineering business. Double-digit growth in both these service lines more than offset our operations activity in the year and increased order backlog. Net margins in Engineering & Production services were in line with guidance at 3.6%, as high-margin contracts rolled off in the east and as we increased investment in business development and digital technologies. As a result, net profit declined 26% to $32 million. Looking forward, we expect continued growth in EPS revenue in 2020. And net margins of 3.5% to 4.5%, driven by growth in brownfield projects and expansion into new markets. Unsurprisingly, the contribution from our upstream Integrated Energy Services division fell year-on-year as we transition back to a capital-light business, with prior year asset sales resulting in a material decline in both revenue and profitability. However, this masks an underlying improvement in performance in many areas in 2019. Underlying equity production increased 6% in the year, which largely offset declines in both realized oil prices and cost recovery from our service contracts in Mexico. Similarly, higher associate income from our PetroFirst joint venture largely offset higher OpEx. So whilst underlying revenue and EBITDA fell modestly in 2019, underlying net profit increased to $12 million. Benefiting from lower depreciation and the unwinding of discounts on deferred consideration receivables. Looking forward, we expect the divestment of our remaining interest in Mexico to complete in mid-2020, leaving PM304, the sole upstream asset in our portfolio. On this basis, we expect IES to make a small loss at current spot prices. Moving on to the balance sheet. Net working capital increased marginally year-on-year, reflecting an expansion in both days sales outstanding and days payable outstanding. The 19-day increase in days payable outstanding, or DPO, was driven almost exclusively by a rise in trade payables. Whilst the increase in days sales outstanding or DSO largely reflected an increase in non-billable work in progress. Now you'll recall from our discussion last year that this simply represents revenue we cannot invoice until projects are either complete or contractual and progress milestones are reached. Perhaps, the best understood components of non-billable WIP is assessed variation orders. And whilst, AVOs did increase to $341 million in the year. They remain at relatively low levels. More notable was the impact of not reaching invoice milestones on projects. This is simply a function of contract terms and progress. But as you can see, it increased non-billable WIP by 19 days and working capital by $216 million. Looking forward, we are pulling all available levers to reduce DSO and the time taken to convert revenue into cash. I want to stress, however, that working capital and by extension, cash flow and net debt will be more sensitive to the timing of commercial settlements in 2020 than in prior years. Several large projects are due to complete construction this year. And whilst we will work hard to close these contracts before the year-end, it is prudent to assume working capital will expand in 2020. In cash terms, the working capital outflow of $179 million suppressed cash conversion. This, together with lower proceeds from divestments, generated free cash flow of $138 million, enough to cover dividend payments and ensure the group closed the year with $15 million of net cash. We also retained strong liquidity throughout the period, ending the year with $1.6 billion of readily available cash and undrawn facilities. Please also note that the terms of agreed non-core asset sales mean that we could collect up to $184 million in divestment proceeds in 2020 and further amounts thereafter, if conditions for contingent consideration are met. The strength of our balance sheet and liquidity reflects excellent progress in reducing capital intensity and transitioning back to a capital-light business. This has delivered a step change in returns as well as a more cash-generative business model. Our focus now is to maximize cash conversion and enhance returns. We achieved this in 2019 by pulling all the levers within our control. We reduced overhead costs, embracing digitalization to improve productivity, profitability and our competitive position. We reduced gross indebtedness and maintained capital discipline to enhance returns and strengthen the balance sheet. And we agreed the sale of our residual interest in IES Mexico, consistent with our strategy to exit non-core assets. In 2020, we will continue to pull these levers to improve our cost position and to protect the balance sheet. This clear financial strategy is the foundation for maximizing cash flow and enhancing returns in both this year transition and as we return to growth. So in summary, we have delivered a good set of results, maintained a strong balance sheet and generated attractive returns. Looking forward, we expect 2020 to be a year of transition. Declining group revenue, lower E&C margins and the divestment of IES Mexico will impact financial performance, but our investment in maintaining bench strength and the improving market outlook best positions the group for a recovery in new orders in 2020 and thereafter. With that, I'll hand back to Ayman.
Thank you, Al. So we continue to make progress against a consistent set of strategic objectives with the ultimate goal of driving improved returns for shareholders. In 2019, our focus on best-in-class delivery produced a further reduction in cost and enabled us to deliver sector-leading margins. Our in-country value differentiation strengthened our position in major bidding markets. As an example, 71% of our UAE project expenditure was in-country, and our hiring of 64 new Emirati graduates, 70% of them women, won us an award for Best Private Energy Company for Emiratisation. Our confidence in an improving market underpinned our commitment to invest in our bench strength and technical capability. We made progress in positioning for growth by diversifying our bidding pipeline and continuing our expansion into new geographies and target markets. I'd like to now go through the progress we've made on our digital transformation and what's ahead. We see tremendous opportunity to support our clients through digital innovation. In the offshore market, we're focused on technologies that so far have enabled productivity gains of up to 200% on industry standards with 3 initiatives now going live on client assets. In E&C, our Connected Construction tool, which improves the efficiency and safety of our project execution is being trialed on a major project in the Middle East and is set for wider deployment. Internally, we're investing in the implementation of ERP cloud software and a significant automation program. Turning now to 2019 new order intake. While we secured the number of E&C contracts in the year, our order intake was disappointing. This was in large part due to the lost awards in Saudi Arabia & Iraq. Compounded by the delays to tendering process in other markets. By contrast, EPS performance was strong with a book-to-bill ratio of 1.2x. We remain competitive with our E&C win rate of bids awarded outside Saudi and Iraq at around 20% in 2019, broadly in line with our historic average. We have made a good start to 2020 with $1.8 billion of award to date and we maintain excellent relationship with our clients. Turning to this year. We expect 2020 to be a year of transition. Our investment in retaining bench strength and our core capability, together with project mix and a lower new order intake in recent years will impact financial performance. Group revenue will decrease slightly, and margins in E&C will be lower. However, the investment will best position us for a return to growth. With our current project management and technical capability, E&C is a platform that can deliver between $5 billion and $6 billion of revenue without an increase in our core head count. We also -- and our revenue for 2020 we will be less than this number. We also have other levers to enhance shareholder returns, including further improving our cost competitiveness and completing non-core divestments. Turning on to 2020 bidding pipeline. Continued recovery in our markets is reflected in our strong bidding pipeline. Looking at 2020, we have around $37 billion of opportunities in both E&C and EPS. And this excludes anything in Saudi and Iraq, which is another $10 billion, if we were to add them. While some of that is in competitive lower margin markets, we have maintained and will continue to maintain bidding discipline in line with our historic track record. We also continue to diversify into new geographies and target markets, which I will talk about next. You will see, we've made good progress in diversifying our bidding pipeline. Almost half our E&C bidding pipeline for 2020 is in new geographies such as India, Europe and the CIS. We are also successfully increasing -- Europe is principally offshore wind, so just to be clear. We are also successfully increasing our bidding pipeline in target markets where we see growth, including refining, petchem and renewables. We're also well positioned in gas, where global demand is expected to grow as part of the energy transition. In EPS, we continue to be successful in diversifying into brownfield projects and wells with several new awards during 2019. One of our major growth -- target growth markets is offshore wind, where we have been building a successful track record for more than a decade. Our first project was an operations and maintenance consultancy contract in 2009. And in 2010, we acquired a renewable consultancy business, specifically to build our credentials in the sector. We've since, steadily expanded our offering from engineering and maintenance services to our first major EPCI contract with a highly successful Borwin 3 HVDC project. This is in the German waters. We have since won and executed several EPCI contracts for HVAC substations. So what is the opportunity for Petrofac and the renewables looking ahead? Global capacity in offshore wind is set to grow rapidly, particularly in offshore -- particularly in Europe, where we have developed our track record. New offshore wind farms will require substations. This is a significant addressable market, which requires the sophisticated engineering and project management skills that we have developed in oil and gas and that we have already proven we can take into the growing sector. We have a competitive cost base with our engineering and procurement capabilities in the UAE and India and a global network of efficient subcontractors. Beyond wind, we've been looking at concentrated solar, particularly to generate steam for heavy oil. We've just started injecting steam on 1 major project in Kuwait. Actually, this morning, the KOC announced that the project is starting to produce oil. This is the Lower Fars project. But we've been generating steam there using natural gas, but we believe the future for many of these heavy oil fields is to produce steam from solar energy. We are currently undertaking a FEED study in Oman to see if we can deliver steam economically. And we are hoping that this will translate into -- would result in an EPC opportunity for us in that country. We also seek the potential in carbon capture and storage, having come close to securing a major project in the U.K. in the past. As a result, we are targeting more than 10% of our revenue from offshore wind and other renewable opportunity within the next 2 to 3 years. Beyond our target markets, we see upstream gas as a resilient pillar of our business. Global demand for gas is expected to grow over the next decade as it plays an important role in the energy transition. Here, Petrofac has a leading track record with over half our E&C projects between 2008 and 2018 related to either gas processing or sulphur recovery. The recently announced Dalma project and many other projects we're bidding for in Abu Dhabi are to produce and handle sour gas. As you can see here, projects that focus either exclusively or partly on gas comprised the largest component of our E&C bidding pipeline. Finally, and before we open up for Q&A, I'd like to reflect on Petrofac's compelling investment proposition. We see an improving macro outlook with a more resilient core markets in both the MENA region as well as the UKCS. We've positioned the business for growth in new geographies and sectors, and we are well placed to support clients through the energy transition. Our best-in-class delivery is evident through consistent sector-leading margins, which will continue to be sector leading, even in a transition year. We are a capital-light and cash flow generative business. We have a healthy balance sheet. And finally, we recognize the importance of our attractive dividend to our shareholders. And so maintaining this through 2020 and delivering growth over the long-term will continue to be a strategic objective. With that, I'll open up the floor to questions. Thank you very much. Amy? Yes. There's a mic.
It's Amy Wong from UBS. I have 2 questions, please. The first 1 is on -- can you talk about the timing of when you expect to see some of these bid opportunities come through, convert to order intake and whether -- and rebuild your order book, and that would lead to -- are you confident that could lead to 2021 recovering and going back to growth for 2021. My second question relates to margins. You are implementing a lot of self-help cost savings and efficiencies, as you called out. And combining that with the margin profile you see in your bidding pipeline, how does that affect your view on your E&C margin profile beyond 2020, please?
Okay. On the timing, we're hoping that the awards for this year will be balanced between first half and second half. We're close to $2 billion already so far. We have -- we have another $10 billion to $12 billion of bids that are in the pipeline. We're very hopeful that award decisions for most of these will be made before the end of June. I mean the 1 thing that we continue to see is some delay to some of the processes. Many of the bids that we have right now, for instance, we have more in Abu Dhabi. We have -- we're bidding some more gas developments. And what happened in Abu Dhabi is like Hail and Ghasha, which we're bidding the packages, the 3 or 4 of them there. Every 1 of them is multibillion. Abu Dhabi involved new partners in these concessions. So getting the approvals and getting the partners to up the learning curve has taken a bit of time. But I'm very hopeful that the award for this will happen. We'll get the first half and second half. Without having the lumpiness in the award that happened historically in the second half of the year. In terms of margin, I mean we are very comfortable with what Al said about the margin for 2020. The margin going forward will depend to a large extent on what we secured during the course of this year. We have flagged historically that there are some geographies where we generate lower margin, Abu Dhabi is a competitive market. I think the other thing that we have to say about Abu Dhabi is we have a subsidiary there, Petrofac Emirates, where we own 75%. So we net out 25% of the margin as well. But -- and India is a competitive market, but we are trying hard to diversify the portfolio and maintain a degree of discipline in the way we bid. And as we come towards the end of the year, we'll be giving some more guidance about the margins going forward. Obviously, we would like to go back to growing our margins. And we want to grow our top line, and we're doing everything we can to do that. But until such time, as we know exactly what's in the pipeline, that's going to flow into 2021. It's very hard to give a very definitive guidance. Al, do you want to say?
I think just to build on Ayman's answer on margin. One of the things we are doing a lot of work on is the self-help piece. It's part of your question. So what's that practically mean? We're trying to reduce our back-office costs by 25% by the end of next year, end of '21. And similarly, we've always benchmarked the front office by reference to project support costs, the percentage of revenue, and we're trying to drive that lower down to low levels historically. So that's what we can do day in, day out. It's got a lot of attention as a management team as a business. We know it improves our cost position. And that in itself helps us win more work. So there's a double benefit from that. But as Ayman says, the biggest driver ultimate of margin will be the mix of work we win. Mick?
It's Mick Pickup from Barclays. I wonder if you could talk to the competitive landscape. Obviously, some of your peers have been very busy winning LNG work. And if I look at the amount of work that's out there in convertible FEED, it looks like they're getting pretty full up at the moment. So I'm wondering, if you can see -- say anything about how you're seeing the competition? And then perhaps connected to that, if I look at your completed bids charts, I think ex Saudi and Iraq, you won 7% out of 37%. So it's like 1 in 5, given that you were focused on those projects, not in your -- in Saudi and Iraq, it does seem to be a smaller number that I would have thought. So what drove that lower than typically 1 in 4, that type of number, you say, for the ones that you're competitive on?
Well, I think on the competitive landscape, I do have to say that it is getting a lot better. Many of our competitors are getting very busy. So some of our European competitors are getting very busy. Others have very weak balance sheet and have been damaged. I mean you know some that are not going to be considered until such time as they resolve their balance sheet issues. So -- and I know that many of our clients, including the major NOCs are worried about the competitive landscape. And this is part of the reason I'm very confident that as soon as there is a resolution to the SFO matter, our return to Saudi is not a matter of when -- it's not a matter if, it's a matter of when. They are very, very keen on bringing us back. And we've completed the work that we are -- we've done fully to their satisfaction. So clients want to see us back and want to see us bidding, and they're very, very happy with our performance. I mean our client relationship is excellent. Our performance is great. And the client confidence in our capability is very high. So -- and if you look at the South Korean competitors also we only now see, frankly, 2 companies competing. And many of the others have come out of the -- what they call the plant business, the industrial plants, and they're focused on housing and focused on the domestic South Korean business. So the Asian competition that was difficult to manage a few years ago is now disappearing from the scene. As you said, there are lots of FEEDs in the pipeline. And if you look at the projects that are planned, the pipeline is increasing, if anything. So I think, that is a very positive macro outlook for the demand for our services. The next question is, you're saying with a big pipeline, why are we not being more ambitious, is how the -- to have a more higher book-to-bill?
No, I'm just looking at the 2019 results and you won 7% and lost 30%. So 1 in 5 sort of win rate. And given, you had a much smaller focus on projects, I'm wondering why you weren't more successful last year?
Well, I mean the number speaks for themselves. We did win 20%, if you exclude Saudi and Iraq. I mean 1 of the themes of last year and particularly, second half, where we're less successful was delays in awards. So a lot of awards have been pushed from the second half of 2019, into 2020. It's 1 of the reasons why we expect more awards in the first half this year. So we haven't changed our ambition in terms of win rate. We still think our historic track record of 20% to 30% is as good a guide as any in terms of looking forward to the future.
Erwan Kerouredan from RBC. Quick question on the net cash position. So I was wondering if the changes in working capital that occurred towards the end of the year have changed anything on the M&A road map, whether it be on further small bolt-on acquisitions or further divestments?
In short order, no. Inevitably, given our success at the tail end of last year and the positive tailwind we got from working capital movements, that will unwind in 2020. We've seen that happen in the past as well. That plus the guidance I gave you about the potential timing of commercial settlements and sort of a prudent approach we're taking in not assuming they all come this year means we will see what we expect a working capital outflow this year in 2020. That said, over a 2- to 3-year view, we do believe this business is going to be highly cash generative. Coupled with that, we have a very clear capital allocation model that prioritizes the dividend, essential CapEx and maintaining a strong balance sheet. But this business having transitioned to a capital-light business model is much more cash generative. And therefore, as we generate surplus cash flow beyond those 3 priorities, we will look and ask ourselves a question, is that best deployed with small bolt-on acquisitions like the 1 we did this year with W&W or do we return that to shareholders. It's premature to speculate which way we land. But clearly, we're very, very focused on ensuring that our shareholders are appropriately rewarded for the investment in this business. And a big proportion, that is the cash that we returned to them year in, year out.
The bolt-on acquisition has to be very compelling. I mean we continue to look at bolt-on acquisitions. But we will not be doing anything big. It will be with -- in tens of millions, not hundreds of millions. And it has to be very compelling against, frankly, buying back our own shares. And so we -- but we're looking at that. I think -- but as Al said, the priorities for us continue to be maintaining a very strong balance sheet and prioritizing our dividend and anything surplus, we might be looking at bolt-ons.
James Hubbard from Numis. 2 questions. You mentioned disposal proceeds contingent, disposal proceeds of up to $184 million, is that mainly just a function of the oil price, given that is a lot of -- several disposed upstream assets in there? And then secondly, you also said the working capital moves this year, maybe have a higher degree of uncertainty around them, given the scale of the number of large projects that may or may not fully close by year-end. I'm wondering, what kind of scale of working capital variability are you, Al, planning for? And how do you do that?
So firstly, on disposal proceeds. That is not all contingent. You'll see actually on the slide, on the cash flow slide, the bottom right-hand side, there's a breakdown there. In fact, the smallest proportion of the up to $184 million figure we gave you is contingent consideration. Going forward -- yes, going forward, the majority of the contingent consideration is geared to migrations of PECs contracts into PSCs in Mexico. But there are other elements to contingent considerations. For example, the performance of the GSA asset in the U.K., but the vast majority is geared to migration of assets in our contracts in Mexico. In terms of working capital proceeds -- sorry, not working capital -- working capital outflows in 2020. I think prudent guidance will be a couple of hundred million dollars. Now, I do want to stress that, if we do close these contracts out, working capital will be much stronger. The other variability is, of course, is our success in winning new work because it typically generates advanced payments. And that's also quite difficult to predict. So we are working very hard to mitigate any working capital outflow this year. We've been pretty successful doing that in the last few years, and that's a clear focus for the management team.
Mark Wilson, Jefferies. A few questions on backlog phasing, if I may. First is that between your December trading update and today, your E&C backlog for 2020 increased $400 million. I was just wondering where that comes from, that increased phasing? Does it include Dalma? And if you include Dalma, what does $4.5 billion secured revenue look like?
So it doesn't include Dalma because it's a position at the end of the year. Dalma adds round numbers, $1.4 billion to backlog. The phasing, I mean we typically will add to backlog through variation orders, for example, as that often explains the delta as we move during the course of the year, and there's also small projects that we win from time to time. So that will explain the move during the period.
And how much of that Dalma would you expect to bring through this year?
Very little of that, because essentially this year, I expect the contribution to be essentially cost, the revenue will equal costs in 2020.
Okay. And I noticed in the appendix, the medium-term phasing that you show, you slightly changed the way you show that. It actually showed '21 and beyond. I was just wondering, what would be the ratio of that column into the forward year of 2021?
It's phasing of what, sorry, Mark?
The phasing of backlog.
Well, let me answer the question this way. The -- typically, in a 4-year project, the vast majority of the contribution and margin contribution is in years 2 and year 3. There's essentially no margin contribution in year 1. And then there's some 20% to 30% contribution in the final year. Now the other way of thinking about this is, what's our project maturity profile at the moment has been increasing. So in essence, we're about 79% complete on all projects. With one of the reasons explained the working capital flows in 2020 and '21, if you really want the break down for '21 and '22, I'm sure we can provide it after this meeting, but I don't have it at hand.
It's James Thompson from JPMorgan. Obviously, you've done a good job in terms of reducing gross debt. Are there any plans to bring that down further in 2020? Is the first question. Secondly, obviously, you're increasing CapEx on PM304 this year. Just wanted to understand a little bit more about why you decided to up investment there? Is it to do with opportunity before the license expires and things like that? Or is it to prepare it to -- for disposal, like the rest of the assets in the IES portfolio to date?
So in terms of gross debt, we've -- I mean last year, we essentially, we retired gross debt. This year, we've got another couple -- $300 million and change of maturities. We have been retiring that as we go through. I mean we'll continue to review that. We may well replace some of those facilities, but we haven't taken a final decision on that. But we have, as a trend being reducing average gross debt in part to reduce the interest burden and increase cash conversion. On PM304, it's been scheduled for some time there. It's about developing some additional reserves. It creates -- increases production before the license expire in '26. It also increases value of that asset as well. So it generates cash flow, well, good positive cash flow, net cash flow well before the '26 extension and indeed it will beyond that, but the base of the investment was taken on pre-extension on cash flows.
But this is probably the last major development that we would have in terms of CapEx, I mean the whole development is our share is 30%. So it's probably about [ $207 ] million of investment. The rest of it is going to be just maybe some minor CapEx and drilling, if we stay with the asset until it goes, until it reverts back. The -- and we are looking at whether this is where the best priority is to keep it until the expiry or we should consider options. So this has been reviewed internally, right now. But we needed to do the right thing also. As the operator, we have a fiduciary responsibility to the host government to do the right thing.
Okay, great. Just 1 separate question. Back on the sort of competitive landscape. Obviously, AVOs gone up a little bit recently. Is that a trend? Do you think that your customers are more willing to listen to change ideas now? They are more accommodating when it comes to optimizing projects and you feel like actually your ability to improve value through the project here in the backlog today is better?
I think the clients, I think this whole idea of capital discipline in the industry is, frankly, here to stay. I think everybody is -- the days before 2014 decline in iron ore prices, where there was, frankly, a lot more rent in the overall system have gone. So absolutely, clients today are willing to listen to all kinds of ideas that achieve -- that would help them achieve their objectives. We're seeing that -- I mean historically, we saw that from the independents, and we saw it from the IOCs. Now we're seeing it from the very conservative classic NOCs. Certainly with ADNOC, we have that kind of dialogue. And it's quite helpful, quite -- but that's not related to the AVOs. The AVOs is because of the -- some of the assessment variation orders that we have on the balance sheet. And the closure of some of these issues. I mean we have something which is long outstanding in Algeria. And frankly, the delay because they've had 3 or 4 CEOs of Sonatrach as a result of the political changes in the country in the last year, and we've had fits and starts in the commercial negotiations. But now we see some stability, and we're hopeful that we'll be able to bring it down by the end of 2020, again. But I think what Al mentioned is the assumption that we have, we will bring it down, but maybe the payments will not come until 2021, and thus, the movement in the working capital.
David Farrell from Crédit Suisse. 2 questions for Al. Just following on, on the debt. As you look into 2021, you've got the revolving credit facility expiring. Would you expect to replace that for the same magnitude? And then the second question relates to the bench cost of $30 million. Would they fully reverse in 2021, if you secure more than 1x book-to-bill? Or are they going to carry on being carried into 2021 and then extinguish by 2022, say?
Well, let me take the net debt question and RCF. I mean yes, we will replace the RCF. It will almost certainly be a smaller facility than the current $1.2 billion facility we have. And that just simply reflects the fact we don't need that size of facility anymore. We typically refinanced that about 12 months out. That's the policy. That's what lenders expect. So it's something we'd look to do in the second half of this year. Do you want to pick up the bench?
A question on the --
So will the $30 million bench strength investment...
Look, the bench strength, I mean we're very hopeful that this year we'll be able to secure enough work to keep everyone fully occupied. The $30 million of costs, these are people not sitting in their houses doing nothing, but they are looking at operational improvement. They're working on a number of initiatives that we're trying to do. And we are sending some people on extended leaves, if they had some family issues. We were very keen to retain our core capability. As I mentioned earlier, we have a core capability in E&C. The machine can do $5 billion to $6 billion of business. We're down to $4 billion plus or minus. And we want to get back the machine to delivering $5 billion to $6 billion. And many of these people have been with us for 20, 25 years. Obviously, we need to hire some more disciplined engineers maybe or some more people at lower levels. But in terms of core strength, we would need that. So I'm hopeful that by 2020, '21, all these guys are fully assigned and chargeable to projects.
Kevin Roger from Kepler Cheuvreux. 2 questions on my side, please. The first 1 is related to the commercial dynamic and the pipeline that you see, basically, 2019, you have seen several projects postponed to 2020. In your bidding pipeline, you still have something, like more than $10 billion related to the upstream gas. When you look at the macro environment around the guys with very low price around the world, don't you feel that those upstream guys will once again be postponed maybe to 2021 because basically, it seems that there is enough gas currently in the world. And the second question is related to the offshore wind and the strategy that you have for the next 2 to 3 years with 10% of the revenue related to this business. Looking forward, is there any plan in terms of development of internal technology, proprietary technology and will you diversify yourself beyond the HVAC? Or will you remain focused on this kind of work, please?
Okay. On upstream gas, you have to look at the country-specific demand dynamics. So for instance, I mean Saudi Arabia and the projects that were awarded on Marjan and the -- all the projects that are being bid out now, Zuluf and others they're gas projects. Saudi Arabia, as you probably know for a long time, they've been burning crude oil, and they want to -- and there is a huge demand for gas for their industrialization and for their petchem industries. So the drive in Saudi has been on developing natural gas. We're seeing absolutely the same thing in Abu Dhabi. Abu Dhabi, they are saying that they're going to be gas -- they will have self-sufficiency, and they will no longer import gas. As you probably know Abu Dhabi and the UAE, they import gas from Qatar. They have their own gas resources. These gas resources in the past, they thought that they were not fairly economic because the -- they're sour gas, high sulphur and high CO2. And -- but now with the optimization of the designs and frankly, with the political will of the country that they are going to develop this gas to achieve self-sufficiency. All these projects are proceeding, irrespective of what's happening with the global gas market. So most of the gas projects that we're looking at in our portfolio are driven by domestic considerations, and they are for domestic needs in these countries. On the offshore wind, what is proprietary for us is really the proprietary design that we have to reduce the footprint, the size of these structures to be able to achieve a much more optimal designs and thus, cost. We're only focused on the transmission, on the AC and DC transmission. We think that, in that part of the business, we can add value. We can add very little value in offshore generation. It's basically turbines and you plug them in, and it's an installation business. We don't add much value in the cable layout. In the offshore transmission system, you are designing offshore structures. And you have to design it to very, very high levels of minimal tolerances because you can't have deflections, you can't have movements. These are very sophisticated equipment that is operating in difficult environments. So what we're doing is we're doing -- we're using our offshore engineering capability, to design these, and we are manufacturing a low-cost in places. I mean and we are doing the installation in Europe, and that was the delivery model that we had on the Borwin 3 which was a EUR 1.3 billion project. Our share was about EUR 700 million, and we did it in joint venture with Siemens. We've had the provision acceptance. The project is delivering the transmission the power to the designed capacity, and it's -- the client was very pleased, and we closed the account very, very satisfactorily and the client/tenant from Holland -- they're keen on involving us in future projects. Historically, these projects were delivered by the OEMs. So the Siemens and ABB and so on. We're seeing a shift increasingly to EPC companies working with OEMs to bring in the project management and the engineering skills, and then the suppliers, they just simply provide their kit. This is an area that we are focused on. We announced early this year the Seagreen project in the North Sea. We have a limited order to proceed. I think what we're booking in our backlog now is about $30 million, $40 million. But we absolutely and confidently are confident that this is going to proceed at about $300 million, sometime in the first half of this year. When -- as soon as the client takes the final FID decision. And we have 3 or 4 other projects in the pipeline that we are pursuing right now.
Sahar Islam from Goldman Sachs. I have 2 questions, please. Firstly, on the advanced payment and the cash profiles in Abu Dhabi and India specifically. Are those different versus other countries? And then secondly, on the digital innovations, a lot of the things you've talked about, like Connected Construction. Is that still case studies? Or are you seeing any significant proportion of rollouts already on projects?
I'll answer the second.
Okay. So advanced payments, yes, typically, we budget for about 5% advanced payments. And we typically do secure those on UAE and Indian contracts. But every contract, frankly, is different. Every client is different, but that 5% benchmark is a good 1 to bear in mind.
On the digital investment. Putting aside the one-off capital investment that we're making at PM304 to maximize value of the asset. Our biggest spend will continue to be on digital investment. We're spending about $50 million a year. And really to transform the business in the way we do work. On the Connected Construction, we had a very successful pilot that we launched in Oman. We're trying now to launch it on other projects. But well, that on the major EPC contracts, we don't do construction. We do the construction through our subcontractors. So the way we will be utilizing this tool is on the smaller brownfield projects, we will deploy the tool ourselves with our own people. And we're looking at doing that directly in the Middle East as well on the smaller brownfield projects, where we don't rely on subcontractors. But on the major projects where we rely on subcontractors, we offer the tool to our subcontractors to help them because it's in our interest for them to reduce their cost and achieve maximum efficiency. And that way, we can guarantee delivery on time, on schedule, without hopefully a cost overrun on their part, which could result in a claim on us. We have some subcontractors who accept to deploy the tool and other subcontractors who -- I mean we're offering it, frankly, we're bearing all the cost of the investment. But we think driving efficiency with our construction subcontractors is something that's good for us in the long term. And we have different take up from different construction subcontractors. Any other questions? I mean I just want to kind of leave you with a final message. The business has gone a long way from 2017, 2018, when we announced the beginning of the SFO investigation. We have done all the right things. Honestly, we have done -- we were -- in 2017, we had a net debt of close to $1.5 billion. We've taken the right measures to bolster the balance sheet. We exited for many businesses where we didn't feel that we had the skills to be able to execute at a very high level that we want to continue to execute. We invested in the business, in talent management and development. And in the digital transformation and the automation, we have kept our head down and executed well for our clients. We had -- there's no doubt, we announced we were damaged. We lost some business in the last year. But as we mentioned in today's announcement, this is resulting in a reduction in 2020, but we're very confident that we'll return to growth because we have the machine, we have the capability, we have the market, we have the client relations to be able to position us very well for growth. And as a sign of our confidence, we said in today's announcement that we would be looking to hold our dividend throughout this period and then hopefully grow it again as the earnings of the business grow again. Thank you very much for being here today. Thanks.