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Subsea 7 är verksamma inom offshore segmentet. Bolaget erbjuder teknik- och installationstjänster, vilket innefattar tekniska - och integrerade lösningar som används vid analys av naturresurser på djupa vatten. Lösningarna används i miljöer där utvinningen är tuff och krävande. Subsea 7 kom till vid en sammanslagning under 2011 mellan Acergy ASA och Subsea 7 Inc. Bolagets huvudkontor ligger i London.


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2020-04-30 08:00:00

Subsea 7 S.A. Announces First Quarter 2020 Results

Luxembourg – 30 April 2020 – Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR: SUBCY, ISIN: LU0075646355) announced today results for the first quarter which ended 31 March 2020.

First quarter summary

  • Prompt action taken to address the challenges posed by Covid-19 in order to safeguard the health and wellbeing of our workforce
  • Adjusted EBITDA of $68 million and margin of 9% for the first quarter of 2020, reflecting lower activity levels in the North Sea, an absence of Conventional activity offshore Africa and the Middle East and increased costs due to the Covid-19 pandemic
  • Order intake totalled $1.5 billion, equivalent to a book-to-bill ratio of 2.0, with four awards announced in the first quarter
  • Order backlog increased to $5.6 billion at quarter end, with $2.7 billion expected to be executed in the remainder of 2020
  • Strengthened liquidity position, with cash and cash equivalents of $340 million, $656 million in unutilised revolving credit facilities and a new Euro Commercial Paper programme equivalent to $740 million to diversify our sources of liquidity in these unpredictable times
  • Reflecting the deterioration in the outlook for new oil and gas awards, swift and decisive action has been initiated to re-size the business targeting the removal of approximately $400 million in annualised cash costs by the second quarter 2021
    Three Months Ended
For the period (in $ millions, except Adjusted EBITDA margin and per share data)     31 Mar 2020
31 Mar 2019
Revenue     751 859
Adjusted EBITDA(a)     68 111
Adjusted EBITDA margin(a)     9% 13%
Net operating loss     (49) (10)
Net loss     (38) (19)
Earnings per share – in $ per share        
Basic     (0.13) (0.06)
Diluted(b)     (0.13) (0.06)
At (in $ millions)     31 Mar 2020
31 Dec 2019
Backlog - unaudited(c)     5,648 5,187
Cash and cash equivalents     340 398
Borrowings     (228) (234)
Net cash(d)     112 164
Net debt(d)     (255) (181)

(a) For explanations and reconciliations of Adjusted EBITDA and Adjusted EBITDA margin refer to Note 8 ‘Adjusted EBITDA and Adjusted EBITDA margin’ to the Condensed Consolidated Financial Statements.

(b) For the explanation and a reconciliation of diluted earnings per share refer to Note 7 ‘Earnings per share’ to the Condensed Consolidated Financial Statements.

(c) Backlog at 31 March 2020 and 31 December 2019 is unaudited and is a non-IFRS measure.

(d) Net cash is a non-IFRS measure and is defined as cash and cash equivalents less borrowings. Net debt is defined as net cash less lease liabilities.

John Evans, Chief Executive Officer, said:
Subsea 7 had a strong start to 2020, with the announcement of four contract awards in the SURF and Conventional business unit, including a major integrated EPCI award for the Sangomar project in Senegal, and the FEED award for the Bacalhau project in Brazil. Just eight weeks ago, we discussed our positive outlook for the year, with an expectation of continued momentum in new order intake and a tightening market for some of our high-end pipelay vessels. The outlook has changed significantly as a result of the impact of the Covid-19 pandemic on demand for energy and the price of oil. In the near term, our efforts are now focused on safeguarding the health of the Group’s 12,000 workforce while we continue to deliver projects for clients under difficult conditions. We are also implementing longer-term plans to re-shape the business to reflect the changed outlook for the industry.

Impact of Covid-19 and low oil prices
The combination of the Covid-19 pandemic and a new low oil price environment has had a dual impact on Subsea 7, both in terms of the execution of current contracts and on the longer-term outlook for the business.

Our project teams have been quick to adapt our work practices to safeguard the health and wellbeing of the workforce on our vessels, at our onshore worksites and in our offices, while negotiating the logistical challenges of keeping clients’ projects moving forward. Measures taken to prevent the spread of the virus have included crew quarantines, extended crew rotations, reduced operating capacity at onshore sites to enable appropriate social distancing, and remote working for our engineers and office staff. While we were successful in minimising cases among our offshore workforce and maintaining operational continuity in the first quarter, this has inevitably come at a financial cost that is evident in today’s results and is likely to be a feature of the coming quarters. Since the quarter end, we temporarily stopped work on one vessel in Brazil to manage a number of confirmed Covid-19 cases on board.

Reflecting the deterioration in the macro environment, our SURF and Conventional clients have been quick to reduce investment plans, cutting budgets for this year by 20-25% and, for the most part, pausing tendering activity. Subsea 7 was fortunate to start the year with a strong backlog and has benefitted from $1.5 billion of new orders in the first quarter. This provides us with a degree of visibility on activity levels this year, but we expect order flow to be low in the coming months and competition to increase, impacting the outlook for revenues and margins in the latter part of 2020 and beyond. Our Renewables and Heavy Lifting business unit has proven somewhat countercyclical and progress is continuing in tendering for offshore windfarm projects.

Measures to reduce costs and strengthen the balance sheet
In early April, we withdrew our guidance for 2020, reflecting both the risks posed by the virus to ongoing operations, and the uncertainty in the wider energy industry. While we cannot fully control the pace of project execution and revenue recognition in this environment, we are finalising our review of operating and capital expenses and have formulated various initiatives to maximise flexibility and cash preservation.

A comprehensive cost reduction programme is being developed and will be announced in the second quarter. This will allow us to address the current market conditions while maintaining our competitive position. It is envisaged that we would make a reduction in our global workforce, the majority of which would impact the non-permanent workforce but a reduction in permanent employees would also be necessary. We anticipate that our active fleet would be reduced by releasing a number of chartered vessels and stacking some owned vessels. These actions would be implemented over the next twelve months, corresponding to the phasing of the projected workload, and we aim to achieve a targeted annualised reduction in cash costs of approximately $400 million by Q2 2021. As a result of these actions we expect to record a restructuring charge in 2020.

We expect to take delivery in the third quarter of our new-build rigid reel-lay vessel, Seven Vega, which is scheduled to work on several projects. We have cut our capital investment plans for this year to $230-250 million, from our prior guidance of $270-290 million. Subsea 7 operates a modern fleet and investments in our vessels and onshore assets can be reduced to a minimum with further reductions in capital expenditure in 2021 and 2022.

Through these initiatives, our aim is to preserve cash and maintain balance sheet strength. At the end of the first quarter, Subsea 7 had cash and cash equivalents of $340 million and an undrawn revolving credit facility (RCF) of $656 million. In April we finalised a new Euro Commercial Paper programme equivalent to $740 million to further diversify our sources of liquidity in these unpredictable times.

First quarter review
First quarter revenue of $751 million was 13% lower than the prior year period reflecting lower activity levels in the North Sea and an absence of Conventional activity offshore Africa and the Middle East. Adjusted EBITDA of $68 million, a year-on-year decrease of 39%, at a margin of 9% (Q1 2019: 13%) was adversely impacted by low levels of Conventional and diving activity and high vessel transit time, as several global enablers were redeployed for new projects. In addition, profitability was affected by the impact on operations of the Covid-19 pandemic which is estimated to have ranged between $15 million and $20 million. The net loss for the quarter was $38 million.

During the quarter, net cash generated from operations was $82 million with a favourable movement in net operating assets and liabilities of $19 million. Capital expenditure was $93 million in the quarter, including milestone payments for Seven Vega. The Group ended the quarter with net debt of $255 million including IFRS 16 lease liabilities of $367 million.

In early 2020, Subsea 7 was successful in a number of tenders and booked new orders totalling $1.5 billion, including approximately $70 million of escalations. In SURF and Conventional, key awards included the Sangomar project, offshore Senegal, the Barossa project, offshore Australia, the King’s Quay project, in US Gulf of Mexico and FEED for the Bacalhau project, offshore Brazil. Backlog at the end of March was $5.6 billion, of which $2.7 billion is expected to be executed in the remainder of 2020. The backlog for execution in 2021 of $2.0 billion is up 40% since the end of 2019.

Utilisation of Subsea 7’s active fleet of 32 vessels was 63% in the first quarter 2020, compared to 72% in the prior year period, reflecting continued seasonality in the North Sea, low Conventional activity in Africa and the Middle East, and intercontinental transiting of certain global enabler vessels. At 31 March 2020, the total fleet comprised 34 vessels, including Seven Vega, which is due for delivery in the third quarter and one stacked vessel.

Outlook for 2020
Having started the year on a positive note, we are now preparing for a downturn in SURF and Conventional activity as our clients focus on reducing their capital expenditure budgets. This will have an impact on the pace of new awards and may affect the phasing of execution of recent contract awards. While these factors affect our revenue expectations for 2020 to some extent, the impact on EBITDA is greater. Rescheduling of higher-margin contracts which were due to start later this year will have an impact on the EBITDA for the SURF and Conventional business.

The outlook for Renewables is more positive and our tendering team remains in active negotiations on a number of projects. The business unit benefits from a diverse range of clients, many of which are not impacted by low oil prices and have not needed to make material cuts to near-term investment plans. While, in the short term, competition for these contracts is high, we are confident that these clients remain committed to their clean energy initiatives and we continue to view the offshore wind market as a source of sustainable, profitable growth for Subsea 7 in the longer term.

Given the pace at which the environment continues to change and the low level of visibility on factors influencing our business we are unable at this stage to give any revenue or EBITDA guidance for 2020. Uncertainties include the timing of new contract awards and the conversion of FEED studies to full EPCI projects, as well as the phasing of projects already underway. This may include the deferral of some recently awarded, higher-margin work from 2020 to 2021 and beyond. Finally, the financial cost of addressing the operational inefficiencies of Covid-19 is yet to be determined, as the duration and extent of the pandemic’s impact are unknown.

In the near future we expect to announce details of our cost reduction programme and it is anticipated that a restructuring charge will be recognised in 2020. We are also assessing whether an impairment of the carrying value of our non-current assets, including goodwill, is required.

We are taking action to address the elements under our control, with swift and decisive moves to reduce our cost base and capital expenditure, and to strengthen our balance sheet. We believe these measures will improve our resilience to the downturn, while protecting our strong competitive position in our core markets.

Conference Call Information

Lines will open 15 minutes prior to conference call.

Date: 30 April 2020

Time: 12:00 UK Time

Conference ID: 91740296#

    Conference Dial In Numbers
United Kingdom   0800 358 9473
United States   631 913 1422
Norway   23 50 02 43
International Dial In   +44 333 300 0804


Replay Facility Details

A replay facility (with conference ID 301307646#) will be available from:

Date: 30 April 2020
Time: 17:00 UK Time

    Conference Replay Dial In Numbers
International Dial In   +44 333 300 0819

For further information, please contact:

Katherine Tonks

Head of Investor Relations

email: katherine.tonks@subsea7.com

Telephone: +44 20 8210 5568

Special Note Regarding Forward-Looking Statements

Certain statements made in this announcement may contain ‘forward-looking statements’ (within the meaning of the safe harbour provisions of the U.S. Private Securities Litigation Reform Act of 1995). These statements relate to our current expectations, beliefs, intentions, assumptions or strategies regarding the future and are subject to known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements may be identified by the use of words such as ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘future’, ‘goal’, ‘intend’, ‘likely’ ‘may’, ‘plan’, ‘project’, ‘seek’, ‘should’, ‘strategy’ ‘will’, and similar expressions. The principal risks which could affect future operations of the Group are described in the ‘Risk Management’ section of the Group’s Annual Report and Consolidated Financial Statements for the year ended 31 December 2019. Factors that may cause actual and future results and trends to differ materially from our forward-looking statements include (but are not limited to): (i) our ability to deliver fixed price projects in accordance with client expectations and within the parameters of our bids, and to avoid cost overruns; (ii) our ability to collect receivables, negotiate variation orders and collect the related revenue; (iii) our ability to recover costs on significant projects; (iv) capital expenditure by oil and gas companies, which is affected by fluctuations in the price of, and demand for, crude oil and natural gas; (v) unanticipated delays or cancellation of projects included in our backlog; (vi) competition and price fluctuations in the markets and businesses in which we operate; (vii) the loss of, or deterioration in our relationship with, any significant clients; (viii) the outcome of legal proceedings or governmental inquiries; (ix) uncertainties inherent in operating internationally, including economic, political and social instability, boycotts or embargoes, labour unrest, changes in foreign governmental regulations, corruption and currency fluctuations; (x) the effects of a pandemic or epidemic or a natural disaster; (xi) liability to third parties for the failure of our joint venture partners to fulfil their obligations; (xii) changes in, or our failure to comply with, applicable laws and regulations (including regulatory measures addressing climate change); (xiii) operating hazards, including spills, environmental damage, personal or property damage and business interruptions caused by adverse weather; (xiv) equipment or mechanical failures, which could increase costs, impair revenue and result in penalties for failure to meet project completion requirements; (xv) the timely delivery of vessels on order and the timely completion of ship conversion programmes; (xvi) our ability to keep pace with technological changes and the impact of potential information technology, cyber security or data security breaches; and (xvii) the effectiveness of our disclosure controls and procedures and internal control over financial reporting;. Many of these factors are beyond our ability to control or predict. Given these uncertainties, you should not place undue reliance on the forward-looking statements. Each forward-looking statement speaks only as of the date of this announcement. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.