Luxembourg - 25 February 2021 - Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR:
SUBCY, ISIN: LU0075646355) announced today results for the fourth quarter and
full year which ended 31 December 2020. Unless otherwise stated the comparative
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period is the full year which ended 31 December 2019.
Fourth Quarter and Full Year 2020 highlights
- Adjusted EBITDA of $165 million in the quarter after incurring net costs of
approximately $5 million relating to Covid-19, equating to a margin of 16%
- Adjusted EBITDA of $337 million in the full year after incurring net costs
of approximately $70 million relating to Covid-19 and $86 million charges
relating to restructuring, equating to a margin of 10%
- Net cash generated from operations of $24 million in the quarter and $447
million in the full year
- Cash and cash equivalents of $512 million at year end with net cash of $49
million, including lease liabilities of $254 million
- Resilient backlog of $6.2 billion, up 20% year-on-year, of which 32% in
Renewables, with $4.0 billion expected to be executed in 2021
- Special dividend of NOK 2.00 per share to be recommended for shareholder
approval at the AGM, marking the Boardâs confidence in the financial
position and outlook for the Group
Fourth Quarter Full Year
For the period (in $ millions,
except Adjusted EBITDA margin Q4 2020 2020 2019
and per share data) Unaudited Q4 2019 Unaudited Audited Audited
Revenue 1,014 889 3,466 3,657
Adjusted EBITDA((a), (b)
)(unaudited) 165 168 337 631
Adjusted EBITDA margin((a), (b)
)(unaudited) 16% 19% 10% 17%
Net operating (loss)/income
excluding goodwill impairment
charges (35) (16) (428) 77
Goodwill impairment charges (27) (100) (605) (100)
Net operating loss (62) (116) (1,034) (23)
Net (loss)/income excluding
goodwill impairment charges (76) (29) (500) 18
Net loss (103) (129) (1,105) (82)
Earnings per share - in $ per
share
Basic (0.35) (0.45) (3.67) (0.27)
Diluted(Š) (0.35) (0.45) (3.67) (0.27)
Adjusted diluted(Š) (0.25) (0.12) (1.64) 0.05
2020 2019
At (in $ millions) 31 Dec 31 Dec
Backlog - unaudited((d)) 6,214 5,187
Cash and cash equivalents 512 398
Borrowings (209) (234)
Net cash excluding lease
liabilities((e)) 303 164
Net cash/(debt) including lease
liabilities((e)) 49 (181)
(a) For explanations and reconciliations of Adjusted EBITDA and Adjusted EBITDA
margin refer to Note 8 âAdjusted EBITDA and Adjusted EBITDA marginâ to the
Condensed Consolidated Financial Statements.
(b) During the year ended 31 December 2020 restructuring charges of $86 million
were recognised (2019: $nil), adversely impacting Adjusted EBITDA and Adjusted
EBITDA margin.
Š For the explanation and a reconciliation of diluted earnings per share and
Adjusted diluted earnings per share, which excludes the impact of the goodwill
impairment charges, refer to Note 7 âEarnings per shareâ to the Condensed
Consolidated Financial Statements.
(d) Backlog at 31 December 2020 and 31 December 2019 is unaudited and is a non-
IFRS measure.
(e) Net cash is a non-IFRS measure and is defined as cash and cash equivalents
less borrowings.
John Evans, Chief Executive Officer, said:
In a challenging twelve months Subsea 7 responded well. The Covid-19 pandemic
required radical changes to operations and had an adverse effect on the market
for our oil and gas businesses. In response, we booked incremental operating
costs, restructured our cost base, and recognised material impairments to
goodwill and asset values. Yet, we continued to deliver projects to our clients,
generated positive cash flow, reduced debt and increased our backlog.
As a result of the efforts and dedication of our employees, we completed 20
projects in the year for 15 clients in 10 countries. Although we incurred net
costs of approximately $70 million associated with the Covid-19 pandemic and
restructuring charges of $86 million, Subsea 7 generated Adjusted EBITDA of $337
million in 2020, equating to a margin of approximately 10%. Despite the
uncertain environment, we experienced no contract cancellations. Instead, Subsea
7âs backlog of work grew by 20% to $6.2 billion a result of a strong presence in
the growing offshore renewables market and our focus on parts of the oil and gas
market with advantaged economics.
Among Subsea 7âs key attributes, its strong cash generation, commitment to
capital discipline and prudent balance sheet management proved vital in
navigating the complexities of 2020. Over the course of the year, cash and cash
equivalents increased by $114 million, resulting in a year end balance of $512
million and net cash of $49 million after including lease liabilities of $254
million. Liquidity remained strong with a revolving credit facility of $656
million and a Euro Commercial Paper programme equivalent to $800 million, both
of which were unutilised at year end.
Given the improvement in the stability and visibility of our markets over the
past six months, a special dividend payment of NOK 2.00 per share, equivalent to
approximately $70 million, is to be recommended by the Board for approval by
shareholders at the AGM. Subsea 7 has returned $2 billion of excess capital to
shareholders over the past decade, and this latest dividend recommendation marks
the Boardâs confidence in the financial position and outlook for the Group.
Fourth quarter operational review
The SURF and Conventional business unit made good progress on several projects
in the fourth quarter. In Angola, Seven Borealis completed its scope of work on
Zinia, alongside Seven Arctic and Simar Esperanca, which continued operations
into the first quarter of 2021. In the Gulf of Mexico, Seven Oceans and Seven
Pacific continued our offshore activities on Mad Dog 2, while in Brazil, Seven
Seas completed its scope on Lapa NE and the PLSVs continued to achieve high
utilisation. We were also active on several projects in the UK North Sea, with
tie-in activity on Arran, the completion of bundle fabrication for Penguins, and
the completion of pipelay operations at Blythe. Good progress continues to be
made in the engineering and procurement phases of Sangomar in Senegal, as well
as Anchor, Kingâs Quay and Jack St Malo in the Gulf of Mexico. During the
quarter, FEED and engineering activities were completed on the Bacalhau project
in Brazil. Life of Field achieved high vessel utilisation in the fourth quarter
with work in the Gulf of Mexico and the North Sea, as well as continued activity
on the three long-term contracts in the Caspian and the North Sea.
In the Renewables and Heavy Lifting business unit we continued work on the
Seagreen project, with fabrication of the jackets and inner array cables well
underway. In Taiwan, progress on the Yunlin project was delayed due to
restricted site access and environmental constraints. The issues have been
resolved by the Client and operations will recommence in the second quarter,
with agreement reached on the approach to scheduling the balance of the scope in
2021. Seaway Yudin was also on standby in Taiwan during the quarter on the
Formosa II project due to adverse weather conditions.
Overall, utilisation of Subsea 7âs active fleet was 82% in the fourth quarter,
compared to 71% in the prior year period, driven by high utilisation of Life of
Field vessels and the PLSVs in Brazil. At 31 December 2020, the active fleet
comprised 30 vessels.
Fourth quarter financial review
Fourth quarter revenue of $1.0 billion increased 14% compared to the prior year
period, reflecting higher activity in Renewables and Heavy Lifting, partially
offset by reduced activity in SURF and Conventional. Renewables and Heavy
Lifting benefitted from progress on the Seagreen project as well as standby
revenue relating to vessels in Taiwan. The decrease in SURF and Conventional
revenue was mainly due to lower Conventional activity in West Africa and the
Middle East.
Adjusted EBITDA of $165 million was flat year-on-year and benefited from the
close-out of certain projects in SURF and Conventional, partially offset by the
impact of net costs associated with Covid-19 of approximately $5 million. During
the quarter the Group recorded goodwill impairment charges of $27 million and
other asset impairment charges of $94 million, resulting in a net operating loss
of $62 million. After a tax charge of $14 million, the net loss for the quarter
was $103 million. During the quarter, net cash generated from operations was $24
million including a $97 million adverse movement in net working capital partly
due to the timing of payments by clients around the year end. Capital
expenditure was approximately $36 million, contributing to an overall decrease
in cash and cash equivalents of $30 million during the quarter.
Full year financial review
In the full year 2020, revenue was $3.5 billion representing a decrease of 5%
compared to the prior year driven by lower activity in SURF and Conventional in
West Africa and the Middle East, partly offset by higher activity in Renewables
and Heavy Lifting. Adjusted EBITDA was $337 million, a reduction of 47% year-on-
year mainly due to the adverse impact of restructuring charges of $86 million,
approximately $70 million of net costs relating to Covid-19, as well as a
reduction in SURF and Conventional activity. The Adjusted EBITDA margin was
10%, down from 17% in the prior year. After goodwill impairment charges of $605
million, other asset impairment charges of $323 million and a tax charge of $33
million, the net loss for the year was $1.1 billion. During the year, net cash
generated from operations was $447 million including a $192 million improvement
in working capital due to active working capital management as well as the
timing of milestone payments on certain projects. Capital expenditure was $183
million, slightly lower than expected due to a strong focus on cash
preservation. Cash and cash equivalents increased by $114 million and the Group
ended the year with net cash, including leases liabilities, of $49 million.
In the full year 2020, Subsea 7 booked new orders of approximately $3.7 billion
and escalations of approximately $0.7 billion. The backlog at the end of
December 2020 was $6.2 billion, of which $4.0 billion is expected to be executed
in 2021.
Streamlining our business units
To align with our strategic focus area âsubsea field of the future - systems and
deliveryâ, we have combined our SURF and Conventional and Life of Field business
units. Since January 2021 one business unit, named Subsea and Conventional, has
encompassed our full portfolio of services and products dedicated to the oil and
gas industry, allowing us to streamline the organisation and maximise potential
synergies between the two areas. This includes greater integration of IRM and
well intervention into the integrated field development solutions created by
Subsea Integration Alliance to provide a holistic offering across the life cycle
of our clientsâ fields. It will also enable us to accelerate our drive to
digitalise field developments. Also from January 2021, the Renewables and Heavy
Lifting business unit has been renamed Renewables and excludes activities
relating to the oil and gas industry. In 2020, oil and gas activity represented
under $1 million of Renewables and Heavy Lifting revenues.
Outlook for full year 2021
After a brief pause in the first half of the year, tendering for oil and gas
projects recommenced at a lower level during the second half of 2020 and
continues at this pace in 2021. Regions with greater activity include Norway,
where fiscal incentives have stimulated an increase in early-stage engineering
activity, the Gulf of Mexico, predominantly focused on low-cost tie-backs, and
Brazil, where the large, pre-salt fields have low oil price break-evens that
continue to attract capital. In addition, Subsea 7 has been selected as
preferred supplier for several projects, including Bacalhau, Scarborough, Pecan
and Rovuma and we are optimistic that some of these will progress to award
during the year.
Tendering in Renewables remains active for projects expected to be awarded to
the industry in nine to twelve monthsâ time, including in Asia, Europe and the
US. While the market for wind turbine installation work remains competitive,
Subsea 7 continues to differentiate itself through its integrated and EPCI
contract offerings, leveraging a strong track record in the management of large,
complex projects across the globe.
Subsea 7âs full year 2021 results are likely to be adversely impacted by costs
associated with the Covid-19 pandemic, including more contagious, new variants
of the virus. We currently anticipate that revenue in 2021 will exceed the prior
year level, predominantly driven by greater activity in Renewables. Revenue in
Subsea and Conventional should increase due to the re-phasing of some work from
2020 into 2021. While it is difficult to predict the operational and financial
impact of Covid-19 in 2021, Adjusted EBITDA is expected to improve year-on-year
and we forecast net operating income to be positive.
Conference Call Information
Date: 25 February 2021
Time: 12:00 UK Time
Access the webcast at subsea7.com (https://edge.media-server.com/mmc/p/sdhad4b2)
or register for the conference call at
http://emea.directeventreg.com/registration/4154356. Advance registration is
required.
For further information, please contact:
Katherine Tonks
Head of Investor Relations
email: katherine.tonks@subsea7.com (mailto:katherine.tonks@subsea7.com)
Telephone: +44 20 8210 5568
Special Note Regarding Forward-Looking Statements
Certain statements made in this announcement may contain âforward-looking
statementsâ (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 âanticipateâ, âbelieveâ, âestimateâ, âexpectâ,
âfutureâ, âgoalâ, âintendâ, âlikelyâ âmayâ, âplanâ, âprojectâ, âseekâ, âshouldâ,
âstrategyâ âwillâ, and similar expressions. The principal risks which could
affect future operations of the Group are described in the âRisk Managementâ
section of the Groupâs 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.
Kilde
