Subsea 7 S.A. Announces Second Quarter and Half Year 2017 Results

Source Press Release
Company Subsea 7 S.A. 
Tags Financial & Operating Data
Date July 26, 2017

Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR: SUBCY, ISIN: LU0075646355) announced today results for the second quarter and first half of 2017 which ended 30 June 2017. The Group’s reporting segments are set out in Note 6 ‘Segment information’.

Second Quarter highlights:

• Acquired certain businesses of EMAS Chiyoda Subsea (ECS) from Chapter 11, accelerating growth plans in the Middle East

• Market conditions continued to gradually improve with awards to market expected to increase by first half 2018

• New awards and escalations totalled $141 million; acquired ECS contracts added $856 million, order backlog totalled $5.7 billion at end June 2017

• Adjusted EBITDA of $340 million, at a margin of 33%, reflected excellent execution and continued cost discipline

• Net cash totalled $825 million; $200 million share repurchase programme extended to July 2019 cost discipline

Jean Cahuzac, Chief Executive Officer, said:

‘We have made significant progress on our strategy to grow and strengthen our business. Two key acquisitions were completed in the first half of 2017: Seaway Heavy Lifting and EMAS Chiyoda Subsea (ECS). Our acquisition of certain businesses from ECS in June reinforced our position in the Middle East. As a result, we look forward to working in consortium with L&T Hydrocarbon Engineering to provide services to Saudi Aramco under a long-term agreement.

In July, after the quarter end, we were awarded extensions on three of our long-term contracts for PLSVs offshore Brazil. These extensions were awarded at the same day rates and on the same commercial terms as the original contracts.

Our good execution and continued focus on cost efficiency have driven another quarter of excellent results. Our Adjusted EBITDA margin exceeded expectations, as our projects progressed well and we controlled costs. As our mix of projects evolves we do not expect to sustain this exceptional margin performance. Our full-year guidance for a lower percentage margin remains unchanged.’

Second quarter 2017 operational highlights

Operational performance remained strong with safe and reliable execution across all three Business Units. Active vessel utilisation was 77%, up 12 percentage points from the first quarter reflecting an increase in North Sea activity as well as continued high utilisation for the PLSVs operating offshore Brazil. Total vessel utilisation was 68%, including four vessels that remained stacked in the quarter.
Several SURF and Conventional projects made good progress in the quarter. Offshore UK, the Dana Western Isles and Catcher projects neared completion. The Culzean project made substantial progress with flowline installation by Seven Borealis. Offshore Norway, Seven Oceans carried out reeled pipe-lay installation on the Maria project. Offshore Egypt, the West Nile Delta Phase One project was substantially completed and Phase Two progressed well. In the US Gulf of Mexico the Coulomb project was substantially completed and the Stampede project neared completion. The PLSV Seven Waves mobilised to Brazil and resumed work under its long-term day-rate contract on schedule at the start of July.

Renewables and Heavy Lifting saw increased activity offshore compared to the first quarter, with pile installation commencing on the Beatrice wind farm project in April.

i-Tech Services’ operational performance was good in the quarter. The life of field vessel Harvey Intervention was chartered and deployed on a newly awarded Inspection, Maintenance and Repair (IMR) contract for Shell in the Gulf of Mexico. Encouraging progress was made on the Emergency Pipeline Repair System (EPRS) project, offshore Australia.

Financial highlights for the second quarter 2017

Second quarter revenue was $1.0 billion, up 6% on the prior year’s quarter due to the additional renewable project activity and significant progress on SURF projects. Adjusted EBITDA of $340 million and margin of 33% reflected good execution and reduced risk profiles and costs on certain projects.

Subsea 7’s new awards and escalations totalled $141 million in the second quarter. Order backlog at the end of June was $5.7 billion, which was unchanged from the first quarter and included $856 million of order backlog from the acquisition of ECS. Order Backlog at 30 June 2017 did not include the PLSV contract extensions, as these were signed after the quarter end.

The Group’s financial and liquidity position remains strong. Cash and cash equivalents was $1.5 billion as at 30 June 2017 and net cash was $825 million. The Group’s $656 million Revolving Credit Facility was unutilised at 30 June 2017.

On 29 June 2017 Subsea 7 acquired certain businesses of ECS for a consideration of $55 million. In an associated transaction ECS’s Ingleside spoolbase was acquired for $16 million.

Outlook

Subsea 7’s guidance for the full year has been updated to include the consolidation of certain businesses of ECS which were acquired in June. Revenue for 2017 is now expected to be higher than 2016. Adjusted EBITDA percentage margin is still expected to be lower than the record level reported in 2016.

Assuming the global energy prices sustain current levels and that cost reductions identified by the industry are consistently achieved, there is reason to believe that the number of awards to the market could increase by the first half of 2018.

Source: EvaluateEnergy® ©2019 EvaluateEnergy Ltd