Luxembourg - 28 July 2021 - Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR:
SUBCY, ISIN: LU0075646355) announced today results for the second quarter and
first half of 2021 which ended 30 June 2021.
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Second quarter highlights
- Second quarter 2021 revenue up 59% year-on-year to $1.2 billion
- Adjusted EBITDA of $90 million equating to a margin of 7.5%
- Order intake of $1.9 billion, equating to a book-to-bill of 1.6 times
- Backlog of $6.8 billion of which 22% in Renewables, with $2.7 billion to be
executed in 2021 and $2.4 billion in 2022
- Cash and cash equivalents of $390 million, after payment of the previously
announced dividend of $72 million
- Net debt including lease liabilities of $39 million at quarter end
Second Quarter Half Year
For the period (in $
millions, except
Adjusted EBITDA margin Q2 2021 Q2 2020 1H 2021 1H 2020
and per share data) Unaudited Unaudited Unaudited Unaudited
Revenue 1,198 754 2,194 1,505
Adjusted EBITDA((a)) 90 (9) 193 59
Adjusted EBITDA
margin((a)) 8% (1%) 9% 4%
Net operating loss
excluding goodwill
impairment charges (28) (352) (37) (401)
Goodwill impairment
charges - (578) - (578)
Net operating loss (28) (930) (37) (979)
Net loss (13) (922) (12) (959)
Earnings per share -
in $ per share
Basic (0.04) (3.06) (0.03) (3.19)
Diluted(()(b)()) (0.04) (3.06) (0.03) (3.19)
30 Jun 2021 31 Mar 2021
At (in $ millions) Unaudited Unaudited
Backlog -
unaudited((c)) 6,766 6,002
Cash and cash
equivalents 390 527
Borrowings (197) (203)
Net cash excluding
lease liabilities((d)) 193 324
Net (debt)/cash
including lease
liabilities((d)) (39) 74
(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) For the explanation and a reconciliation of diluted earnings per share refer
to Note 7 âEarnings per shareâ to the Condensed Consolidated Financial
Statements.
(c) Backlog at 30 June 2021 and 31 March 2021 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.
John Evans, Chief Executive Officer, said:
Subsea 7âs onshore and offshore teams continued to work hard in the second
quarter to deliver clientsâ projects in spite of the challenges associated with
the Covid-19 pandemic. Revenue increased 59% year-on-year due to increased
activity in both the Subsea and Conventional and Renewables business units.
Adjusted EBITDA margin of 7.5% was adversely impacted by continued delays and
Covid-19 affecting renewables projects in Taiwan, as well as low margins in
Subsea and Conventional. The latter reflects the level of activity in the Middle
East and the execution of SURF contracts won during a competitive pricing
environment in 2019 and 2020.
We expect an increase in profitability in the second half of the year with
improved margins in both business units. The long-term outlook continues to
strengthen with higher tendering activity in both Subsea and Conventional and
Renewables. Increased worldwide demand for certain pipelay vessels from late
2023 is supporting positive momentum in the pricing environment for new subsea
awards. We also have increased confidence in the forecast step-up in offshore
wind farm activity as bidding for several projects is underway.
Unlocking value in offshore wind
This month Subsea 7 announced the proposed combination(1) of its Renewables
business unit with OHT ASA to form Seaway 7 ASA, a pure-play renewables company
focused on the offshore fixed wind industry. With its combined fleet of ten
vessels, and two high specification installation vessels under construction,
Seaway 7 ASA will be equipped with the enabling assets, engineering expertise
and project management track record required to forge an enhanced growth
trajectory as a global leader in the offshore fixed wind market. The combination
should help accelerate and enhance value creation for Subsea 7 shareholders
through a majority ownership of this pure-play entity, listed on the Euronext
Growth market in Oslo.
The transaction reflects Subsea 7âs proactive commitment to Energy Transition
that is focused on delivering the energy the world needs, with sustainability at
its heart. We look forward to supporting the successful growth of Seaway 7 ASA
while continuing to nurture, in-house, our businesses in floating wind, carbon
capture and other emerging energies.
Second quarter operational review
In the second quarter the Subsea and Conventional business unit made good
operational progress in the engineering and procurement phases of the SLGC,
Sangomar and Barossa projects. Despite the challenges posed by Chinaâs strict
Covid-19 restrictions, the Lingshui project was successfully completed utilising
Seven Borealis and Seven Eagle. Elsewhere, offshore activity was centred on the
Gulf of Mexico, Norway, Saudi Arabia and Australia. In Norway, Seven Arctic
installed umbilicals on Ărfugl Phase 2 and Seven Navica made progress installing
gas pipelines on Johan Sverdrup Phase 2. Activity remained high in the Gulf of
Mexico on the installation phases of Manuel, Kingâs Quay and Mad Dog Phase 2,
for which Seven Navica was deployed to accommodate the rescheduling of some work
from Seven Vega. In Saudi Arabia, Seven Champion continued to execute the 28
Jackets installation project (CRPO 47, 48 and 49) throughout the second quarter,
and in Australia, Seven Oceans spent the quarter installing equipment for the
Julimar Phase 2 project. After finishing work in the UK, Seven Oceanic began its
transit to Australia to assist on the Julimar project.
In the Renewables business unit, in Taiwan, the progress of Seaway Yudin was
adversely impacted by restrictions imposed by the government to control the
spread of Covid-19. In addition, environmental conditions at the worksite and a
number of changes in scope have hampered progress. We are in discussions to
recover the incremental costs from our client in accordance with contractual
terms. Elsewhere in Renewables, we continued work on the Seagreen project. The
first five jackets began their transit from China to Europe, and progress on the
remaining 109 jackets by our three suppliers is running to schedule. Good
progress was also made in the UK on the Hornsea II project, on which Seaway
Aimery, Seaway Moxie and Simar Esperança were fully utilised during the quarter.
In June Seaway Strashnov completed an oil and gas heavy lift project and began
mobilising for the Hollandse Kust Zuid wind project, offshore Netherlands.
Overall, utilisation of Subsea 7âs active fleet was 82% in the second quarter,
compared to 71% in the prior year period. At the quarter end, the active fleet
comprised 29 vessels.
Second quarter financial review
Second quarter revenue of $1.2 billion increased by 59% compared to the prior
year period, reflecting significantly higher activity in both Subsea and
Conventional and Renewables. Adjusted EBITDA of $90 million was up from an
Adjusted EBITDA loss of $9 million in the prior year quarter. The improvement
largely reflects the absence of restructuring charges in 2021 ($104 million in
2020). The underlying margin has declined year-on-year as a consequence of
continued delays and Covid-19 affecting renewables projects in Taiwan, and
reduced margins in Subsea and Conventional. After depreciation, amortisation and
impairment charges of $118 million, the Group recorded a net operating loss of
$28 million. The net loss for the quarter was $13 million, after a tax credit of
$15 million.
During the quarter, net cash generated from operations was $15 million including
a $48 million adverse movement in net working capital largely due to increased
activity in the Middle East and movement in non-project related balances.
Capital expenditure was $34 million including the payments for the conversion of
Seaway Phoenix. The second quarter was also impacted by the distribution of
dividends amounting to $72 million. Overall, cash and cash equivalents decreased
by $137 million since 31 March 2021 to $390 million and the Group ended the
quarter with net debt of $39 million, including lease liabilities of $232
million.
During the second quarter, Subsea 7 booked new orders of approximately $1.5
billion and escalations of approximately $400 million, resulting in a book-to-
bill ratio of 1.6. The backlog at the end of June 2021 was $6.8 billion, of
which $2.7 billion is expected to be executed during the remainder of 2021 and
$2.4 billion in 2022.
Outlook for full year 2021
The outlook for oil and gas contract awards has remained robust during the
second quarter and continues to be centred on the three key regions with the
most attractive project economics. Tendering activity in Brazil remains strong
following the award of Bacalhau and Mero 3 to Subsea 7 in the second quarter,
with several projects scheduled to be awarded to the industry over the next two
years. Early engagement in Norway is beginning to yield awards such as Kobra
East Gekko and Hasselmus, and front-end engineering activity is high in
preparation for further EPCI prospects. Offshore activity in the Gulf of Mexico
should increase in the second half of the year and we are actively tendering for
further tie-back opportunities.
To accommodate a higher level of tendering and engineering activity, Subsea 7âs
onshore workforce is expected to increase in number, though plans to reduce the
size of the active fleet remain in place given the current offshore workload
projected for 2022. Demand for certain vessels from late 2023 onwards is driving
positive momentum in the pricing environment compared to 2019 and 2020, giving
us confidence in the outlook for Subsea and Conventional.
Tendering in Renewables is active for projects expected to be awarded to the
industry in 2022, including in Asia, Europe and the US. This has contributed to
improved visibility on the forecast step-up in installation activity from 2025
onwards, for which the new Seaway 7 ASA will be well-positioned.
Despite the successful roll-out of Covid-19 vaccinations in some countries, we
continue to manage the challenges of operating within the constraints imposed by
many governments around the world. Subsea 7 is likely to continue to incur both
direct costs relating to travel and quarantine of offshore personnel, as well as
indirect adverse impacts on operational efficiency of offshore operations and
the supply chain in general.
Nevertheless, absent a deterioration in the impact of the Covid-19 pandemic, we
continue to expect that revenue and Adjusted EBITDA in 2021 will exceed the
prior year levels, and that net operating income will be positive.
Conference Call Information
Date: 28 July 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/1977909.
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 2020. 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
