Luxembourg - 16 November 2023 - Subsea 7 S.A. (Oslo BĂžrs: SUBC, ADR: SUBCY,
ISIN: LU0075646355, the Company) announced today results of Subsea7 Group (the
Group, Subsea7) for the third quarter which ended 30 September 2023.
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Third quarter highlights
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Third quarter Adjusted EBITDA of $201 million, a margin of 13%
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Free cash flow of $223 million, resulting in an increase in cash and cash
equivalents to $530 million
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Net debt including lease liabilities $606 million, down from $805 million in
the second quarter
-
Order intake of $2.1 billion resulted in a book-to-bill of 1.3 times and
continued backlog growth to $10.8 billion
-
Backlog for execution in 2024 of $4.8 billion, up 51% on the equivalent
position a year ago, with $3.2 billion for 2025
-
Recent awards and high levels of ongoing tendering activity support a return
of Adjusted EBITDA margins to a range of 15-20%, reaching towards the upper
end of the range in 2025
-
Full year 2023 guidance reconfirmed. In 2024, we anticipate that revenue
will be between $6.0 and $6.5 billion, while Adjusted EBITDA is expected to
be within a range from $950 million to $1.0 billion
Third Quarter Nine Months Ended
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For the period (in $
millions, except
Adjusted EBITDA margin Q3 2023 Q3 2022 30 Sep 2023 30 Sep 2022
and per share data) Unaudited Unaudited Unaudited Unaudited
Revenue 1,578 1,404 4,342 3,845
Adjusted EBITDA((a)) 201 171 470 391
Adjusted EBITDA
margin((a)) 13% 12% 11% 10%
Net operating income 64 53 50 40
Net income 36 - 21 10
Earnings per share - in
$ per share
Basic 0.11 0.01 0.11 0.10
Diluted((b)) 0.11 0.01 0.11 0.10
30 Sep 2023 30 June 2023
At (in $ millions) Unaudited Unaudited
Backlog((a)) 10,794 10,363
Book-to-bill ratio((a)) 1.3x 1.4x
Cash and cash
equivalents 530 398
Borrowings (726) (760)
Net debt excluding lease
liabilities((a)) (196) (363)
Net debt including lease
liabilities((a)) (606) (805)
(a) For explanations and reconciliations of Adjusted EBITDA, Adjusted EBITDA
margin, Backlog, Book-to-bill ratio and Net debt refer to the âAlternative
Performance Measuresâ section of 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.
John Evans, Chief Executive Officer, said:
Subsea7 reported solid third quarter results in line with managementâs
expectations and the Group is on-track to meet guidance for the full year 2023.
During the quarter, good operational progress was made on key projects in both
Subsea and Conventional, and Renewables, including early activity on the backlog
of higher-margin contracts. As these contracts mature, we are confident that
Adjusted EBITDA margins will return to a range of 15-20%, reaching towards the
upper end of the range for the full year 2025. Tendering activity in both subsea
and offshore wind remains at high levels, extending our visibility beyond 2025
and supporting our view of a sustained upcycle into the latter part of the
decade.
In Q3, the Renewables business unit delivered a double-digit Adjusted EBITDA
margin for the second consecutive quarter by stabilising execution and high-
grading new orders to rebalance risk and return. While the offshore wind
industry continues its non-linear growth trajectory, we are confident that we
have the right approach to sustain this improved level of performance.
On 2 October, the OneSubsea joint venture between Subsea7, SLB and Aker
Solutions completed and, simultaneously, Subsea Integration Alliance between
Subsea7 and OneSubsea was extended to 2033. The joint venture and Alliance
leverage our combined market-leading assets, services and technologies to
reinforce our ability to deliver greater efficiencies to clients, enabling them
to unlock lower-carbon subsea reserves. During the quarter, the Alliance signed
an agreement with BP for integrated subsea developments, working in a
collaboration that will create value for BP, Subsea7 and OneSubsea, through
enhanced visibility and optimised delivery.
Operational highlights
During the third quarter, Subsea7 made good progress on its major Subsea and
Conventional projects. In Norway, for the large Yggdrasil project, activity was
focused on design engineering, while offshore activities continued on Hanz,
Hasselmus, Heimdal, Kobra East Gekko, Ormen Lange, Northern Lights and Tyrving
utilising Seven Oceans, Seven Oceanic, Seven Falcon and Seven Navica. In Brazil
Seven Vega and Seven Pacific were active offshore on the Bacalhau project and
good progress was made on Mero 3, where we installed torpedo piles and
fabrication works at Ubu commenced. In Senegal, Seven Seas installed structures
at Sangomar while, in Angola, onshore fabrication for the CLOV 3 project
continued. In Saudi Arabia, Seven Borealis completed the first campaign for the
Marjan 2 project and in Indonesia, fabrication of pipe stalks began at the
Bintan spoolbase for the Scarborough and Barossa projects in Australia.
In Renewables, activity was high in the UK where Seaway Strashnov completed the
installation of monopiles for Dogger Bank A. In October, Seaway Alfa Lift
commenced mobilisation for the installation of the transition pieces. Elsewhere,
Seaway Phoenix continued cable lay at the Changfang and Xidao project in Taiwan
and our newbuild foundation and turbine installation vessel, Seaway Ventus,
underwent sea trials in China ahead of yard delivery in the fourth quarter.
Third quarter financial review
Revenue of $1.6 billion increased 12% compared to the prior year period.
Adjusted EBITDA of $201 million equated to an Adjusted EBITDA margin of 13%,
slightly ahead of the prior year period. This reflected the continued improved
profitability in Renewables and a good performance in Subsea and Conventional.
After a depreciation and amortisation charge of $137 million, net operating
income increased to $64 million from $53 million in the prior year period. After
net finance costs of $12 million, and a net foreign exchange loss of $7 million,
net income for the quarter was $36 million compared to breakeven in the third
quarter of 2022.
Net cash generated from operating activities was $289 million including an $88
million improvement in net working capital. Net cash used in investing
activities was $61 million mainly related to payments for Seaway Ventus. Net
cash used in financing activities was $94 million including lease payments of
$45 million and repayment of borrowings of $31 million. Overall, cash and cash
equivalents increased by $132 million from 30 June 2023 to $530 million at 30
September 2023. Net debt at the end of the third quarter was $606 million
including lease liabilities of $410 million.
Third quarter order intake was $2.1 billion comprising new awards of $1.4
billion and escalations of $0.7 billion resulting in a book-to-bill ratio of
1.3 times. Backlog at the end of September was $10.8 billion, of which $1.7
billion is expected to be executed in the fourth quarter of 2023, $4.8 billion
in 2024 and $3.2 billion in 2025.
Outlook
We continue to expect revenue and Adjusted EBITDA in 2023 to be higher than
2022. In 2024, we anticipate that revenue will be between $6.0 and $6.5 billion,
while Adjusted EBITDA is expected to be within a range from $950 million to $1.0
billion. We expect capital expenditure to reduce to between $280 and $320
million. We therefore anticipate a sharp increase in free cash flow generation
in 2024 which will enable us to extend our decade-long track record of
shareholder returns. As pricing and contract terms continue to improve, Adjusted
EBITDA margins should increase within a range of 15-20%, reaching towards the
upper end of the range for the full year 2025.
With a tight subsea vessel market in 2024 and 2025, we are now tendering work
for major EPCI projects with offshore activity in 2026 and beyond. We see
sustained capital expenditure by clients in the subsea market, where the carbon
intensity of resources and extraction method is lower than the global
hydrocarbon average. A positive outlook for demand, combined with stability in
the competitive landscape and the absence of newbuild global enabler pipelay
vessels should ensure we generate an appropriate return on the substantial
capital already invested in our subsea fleet.
In offshore wind, our foundation and cable lay installation vessels are near-
fully utilised on world-class projects through 2024 and 2025. Despite the recent
uncertainty in the regulatory and fiscal environments in the UK and US markets,
demand for our services is strong, including in the Netherlands, Germany and
Poland. With a focus on balancing risk and returns, we believe our offshore wind
business will deliver sustainable value creation for shareholders for the long
term.
Overall, through strong positions in lower-carbon oil and gas, as well as
offshore wind, Subsea7 is well-placed to deliver the energy the world needs for
today and tomorrow.
Conference Call Information
Date: 16 November 2023
Time: 12:00 UK Time, 13:00 CET
Access the webcast at subsea7.com (https://edge.media-server.com/mmc/p/sdhad4b2)
or edge.media-server.com/mmc/p/zawi5mv6/ (https://edge.media-
server.com/mmc/p/zawi5mv6/)
Register for the conference call at
Conference Registration
For further information, please contact:
Katherine Tonks
Head of Investor Relations
Email: ir@subsea7.com (mailto:ir@subsea7.com)
Telephone: +44 20 8210 5568
Special Note Regarding Forward-Looking Statements
This document 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. 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 Fourth 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 document. We undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
This information is considered to be inside information pursuant to the EU
Market Abuse Regulation and is subject to the disclosure requirements pursuant
to Section 5-12 the Norwegian Securities Trading Act.
This stock exchange release was published by Katherine Tonks, Investor
Relations, Subsea7, on 16 November 2023 at 08:00 CET.
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