NOTE 3—USE OF ESTIMATES

The following is a discussion of our most significant changes in estimates that impacted segment operating income for the three months ended March 31, 2017 and 2016.

Three months ended March 31, 2017

Segment operating income for the three months ended March 31, 2017 was positively impacted by net favorable changes in estimates totaling approximately $47 million across all segments.

Americas, Europe and Africa Segment (“AEA”)—This segment was positively impacted by net favorable changes in estimates aggregating approximately $5 million on multiple projects, none of which individually were material.

Middle East Segment (“MEA”)—This segment was positively impacted by net favorable changes in estimates aggregating approximately $16 million, primarily due to productivity improvements and associated cost savings on Saudi Aramco projects.

Asia Segment (“ASA”)—This segment was positively impacted by net favorable changes in estimates aggregating approximately $26 million, primarily as a result of improved cost estimates associated with efficient project execution, including productivity improvements on our marine vessels and associated cost savings achieved, on our active projects.

At December 31, 2016, on our Ichthys project in Australia, we reported a $34 million increase in our estimated costs at completion and a $10 million possible additional increase due to a failure identified in a supplier-provided subsea-pipe connector component which we had previously installed. We discussed various options for replacing components with the customer and developed a remediation plan. At March 31, 2017, we believe the increase in estimated costs at completion for the project, as a whole, to replace the components will be approximately $35 million. During the quarter, we began to mitigate this risk and now believe the range of reasonably possible additional increase in costs has decreased to $5 million as compared to $10 million at December 31, 2016. We expect the project to remain in an overall profitable position.

Three months ended March 31, 2016

Segment operating income for the three months ended March 31, 2016 was positively impacted by net favorable changes in estimates totaling approximately $40 million across all segments.

AEA—This segment was positively impacted by net favorable changes in estimates aggregating approximately $16 million, primarily due to:

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successful execution and close-out improvements on two significant projects, PB Litoral and Exxon Julia Subsea Tieback, in the first quarter of 2016; and

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a reversal of a $7 million provision for liquidated damages due to an agreed extension of the PB Litoral project completion date.

MEA—This segment was positively impacted by net favorable changes in estimates aggregating approximately $7 million, primarily due to:

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productivity improvements and associated cost savings related to the DB 27 vessel on a Saudi Aramco project; and

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cost savings on miscellaneous other projects.

ASA—This segment had net favorable changes in estimates aggregating approximately $17 million driven by:

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improved productivity and project execution cost savings on the Inpex Ichthys project;

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agreement on outstanding change orders on the Brunei Shell Petroleum pipeline replacement project; and

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agreement on outstanding change orders and cost savings on miscellaneous other projects.