Luxembourg - 25 July 2019 - Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR:
SUBCY, ISIN: LU0075646355) announced today results for the second quarter and
first half of 2019 which ended 30 June 2019.
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Second Quarter highlights
- Revenue of $958 million, Adjusted EBITDA of $171 million and margin of 18%
reflected steady performance in SURF and Conventional offset by low levels
of renewables activity in the quarter
- $4.6 billion order backlog at 30 June 2019 with $395 million of new awards
and escalations in the quarter
- 2019 share repurchase programme completed 11 July 2019. Year to date, $279
million has been returned to shareholders including NOK 1.50 per share
dividend paid in the second quarter
- New $200 million share repurchase programme announced, supported by the
recovering offshore oil and gas market and Subsea 7’s solid financial and
liquidity position
Jean Cahuzac, Chief Executive Officer, said:
'The recovery in offshore oil and gas continues to make steady progress as lower
cost solutions for offshore developments service the growing global demand for
energy. Our market-leading technology and engineering expertise applied to
integrated and standalone developments enable us to support our clients as they
sanction and develop their projects. We are working with our clients and
alliance partners from the early stages of the field life cycle, and the number
of tenders and early engineering studies we are engaging in continues to grow.
We are positive on the outlook for our markets. We have a modern and versatile
fleet, strong portfolio of proprietary technology and teams of highly capable
people able to deliver complex solutions efficiently, reliably and safely. The
new share repurchase programme announced today reflects our confidence in the
gradually recovering market, our secure financial position and the diminishing
capital investment needs of our business in the medium-term.’
Operational performance highlights
Project planning and engineering activity increased year-on-year mainly driven
by EPIC contracts awarded in 2018 and early 2019, which require 12 to 18 months
of preparation before the offshore phases commence. Offshore activity on EPIC
projects was lower than the prior year period reflecting the low volume of
projects awarded in 2016 and 2017.
On the West Nile Delta (GFR) Phase Two project, offshore Egypt, spools and
flying leads were installed, using the flex-lay vessels Seven Seas and Simar
Esperança. In the US Gulf of Mexico, the Mad Dog 2 project progressed with
qualification and fabrication activities and, for the Manuel project, work
continued on engineering, procurement and fabrication of the Electrically Heat
Traced Flowline (EHTF). Offshore Australia, hyperbaric welding and subsequent
testing was successfully completed on the Sole project. In the North Sea, Seven
Oceans completed the first reel-lay campaign on the Nova project, offshore
Norway, and fabrication progressed at Subsea 7’s Pipeline Bundle facility in
Scotland for the Snorre project, enabling the first Pipeline Bundle for this
project to be towed out in early July.
Offshore Brazil, the four pipelay support vessels (PLSVs) on long-term day-rate
contracts continued to perform well with high levels of utilisation.
Conventional activity in shallow water areas included the completion of the 20"
pipeline pull-in for the PUPP project, offshore Nigeria, using Seven Antares,
and completion of umbilical installation for the Hasbah project, offshore Saudi
Arabia.
Life of Field activity included inspection, repair and maintenance (IRM)
services in the US Gulf of Mexico under a new contract awarded to i-Tech 7 in
the quarter and a successful weld inspection campaign using ROV-deployed
technology offshore Australia, a first for the client which had previously
relied on diving services for this workscope.
Renewables and Heavy Lifting activity included an oil and gas decommissioning
project in the North Sea, installation of wind turbine foundations and
transition modules on the Formosa I (Phase 2) project, offshore Taiwan, and
cable lay activity on the Hornsea One wind farm project, offshore UK.
Vessel Utilisation was 75%, unchanged from the prior year period with lower
levels of utilisation for Renewables and SURF projects offset by higher
utilisation for the PLSVs and Life of Field services. At 30 June 2019, Subsea 7
had 34 vessels in its fleet, including one vessel under construction and two
stacked vessels. The new-build reel-lay vessel, Seven Vega, was launched in May,
a significant construction milestone, and is now undergoing outfitting and
testing ahead of scheduled delivery in early 2020.
Financial performance highlights
Second quarter revenue was $958 million and Adjusted EBITDA was $171 million,
down 17% and 8% respectively. Adjusted EBITDA margin was18%, reflecting steady
performance on SURF and Conventional projects offset by low levels of activity
in Renewables and Heavy Lifting.
Subsea 7’s new awards and escalations totalled $395 million in the second
quarter, including the Johan Sverdrup Phase Two project, offshore Norway,
announced in June. The pace of offshore oil and gas awards to market is
gradually increasing supported by higher tendering and early engagement
activity. Larger greenfield awards often include engineering studies and
integrated solutions, and so take longer to progress from tender to project
sanction and award. Order backlog at 30 June 2019 was $4.6 billion.
The Group’s financial and liquidity position remains strong. $204 million was
returned to shareholders in the quarter through share repurchases and a special
dividend. Following the completion on 11 July 2019 of the $200 million share
repurchase programme announced on 28 February 2019, a further share repurchase
programme for $200 million, valid for two years, was announced today. Subsea
7’s activities are cash generative and the Group’s priorities are to invest in
the business, maintain an investment grade profile and return surplus cash to
shareholders. The share repurchase programme gives the Group flexibility to
balance these priorities to support long-term sustainable value creation.
Cash and cash equivalents was $420 million at the quarter end and net debt was
$221 million, including $396 million of lease liabilities (IFRS 16). During the
second quarter cash generated from operating activities of $72 million included
a $63 million decrease in net operating liabilities reflecting timing of
milestones on certain projects. The Group’s $656 million Revolving Credit
Facility was unutilised at 30 June 2019.
Outlook
The pace of SURF awards to market so far this year has been steady and Subsea 7
has announced four new project awards year to date. The pace of awards is
expected to increase over the next 12 months as clients progress their
investment decisions on the first phase of greenfield projects to be sanctioned
since the downturn. The increase in market activity and subsequent tightening in
key vessel availability in the medium-term is supporting improved pricing
compared to the prior year. Demand for IRM services is steady, and market award
activity for Conventional projects in the Middle East is strong.
The offshore renewables market continues to benefit from decreases in the
levelised cost of electricity (LOCE) as the size of turbines and wind farms
increases. The demand for offshore foundation and cable-lay services is expected
to grow at a double digit pace annually in the medium-term, supporting the
transition plans of several host governments to lower carbon energy. Near-term,
new entrants in the foundation installation market are having a negative impact
on pricing, but this is expected to improve as the market globalises and
rebalances.
The full results document and associated slides are avaiable to download from
www.subsea7.com
Conference Call Information
Lines will open 15 minutes prior to conference call.
Date: 25 July 2019
Time: 12:00 UK Time
Conference ID: 34322203#
Conference Dial In Numbers
United Kingdom 0333 300 0804
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 301273850#) will be available from:
Date: 25 July 2019
Time: 17:00 UK Time
Conference Replay Dial In Numbers
International Dial In +44 333 300 0819
For further information, please contact:
Isabel Green
Investor Relations Director
email: isabel.green@subsea7.com (mailto:isabel.green@subsea7.com)
Telephone: +44 20 8210 5568
Special Note Regarding Forward-Looking Statements
Certain statements made in this announcement may include ‘forward-looking
statements’. These statements may be identified by the use of words like
‘anticipate’, ‘believe’, ‘could’, ‘estimate’, ‘expect’, ‘forecast’, ‘intend’,
‘may’, ‘might’, ‘plan’, ‘predict’, ‘project’, ‘scheduled’, ‘seek’, ‘should’,
‘will’, and similar expressions. The forward-looking statements reflect our
current views and are subject to risks, uncertainties and assumptions. The
principal risks and uncertainties which could impact the Group and the factors
which could affect the actual results are described but not limited to those in
the ‘Risk Management’ section in the Group’s Annual Report and Consolidated
Financial Statements 2018. These factors, and others which are discussed in our
public announcements, are among those that may cause actual and future results
and trends to differ materially from our forward-looking statements: actions by
regulatory authorities or other third parties; our ability to recover costs on
significant projects; general economic conditions and competition in the markets
and businesses in which we operate; our relationship with significant clients;
the outcome of legal and administrative proceedings or governmental enquiries;
uncertainties inherent in operating internationally; the timely delivery of
vessels on order; the impact of laws and regulations; and operating hazards,
including spills and environmental damage. Many of these factors are beyond our
ability to control or predict. Other unknown or unpredictable factors could also
have material adverse effects on our future results. Given these factors, you
should not place undue reliance on the forward-looking statements.
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