Subsea 7 S.A. (Oslo Børs: SUBC, ADR: SUBCY) announced today results for the third quarter which ended on 30 September 2015.
Jean Cahuzac, Chief Executive Officer, said:
‘Subsea 7 has delivered another quarter of good results in the three months to 30 September, despite the continuation of difficult industry conditions and resultant decline in market activity, with strong operational performance in both Business Units driven by consistently good project execution.
Third quarter revenue of $1.2 billion was $702 million lower than the prior year quarter reflecting reduced workload due to the sustained downturn in oil company expenditure. Adjusted EBITDA of $351 million and margin of 29.2% reflected significant progress on several large projects and included positive contribution from projects in the final stages of execution. Adjusted EBITDA included a $36 million charge related to the cost reduction and resizing programme, in line with prior guidance.
Global vessel utilisation was 74% in the quarter reflecting a reduction in Life of Field work in the Northern Hemisphere and reduced activity levels as certain projects completed their offshore phases. In Brazil, there were high levels of vessel activity under the long-term PLSV contracts with Petrobras throughout the quarter.
Backlog at 30 September was $6.7 billion and included an adverse impact from foreign exchange movements of approximately $400 million. Order intake, excluding the adverse foreign exchange impact, was $1.1 billion, which reflected the Group’s strong competitive position and collaboration with clients to capture opportunities in a market that has remained subdued.
Cash generated from operating activities in the quarter was $409 million, which resulted in cash and cash equivalents of $657 million and net cash of $104 million as at 30 September.
Operational highlights for the third quarter of 2015:
Course Summary The LNG supply industry is rapidly developing with new technology, supplies and contractual arrangements. Drawing on MJMEnergy’s comprehensive, recently published LNG Supply Handbook, the LNG Supply Outlook Workshop…
In the Northern Hemisphere and Life of Field Business Unit the Aasta Hansteen project, offshore Norway, progressed its offshore installation phase with all major fabrication completed. Offshore UK, the Montrose and Catcher projects made significant progress and concluded offshore activities for 2015, and the Mariner project also progressed with high levels of offshore activity in the quarter. In the Gulf of Mexico, the Heidelberg project was successfully completed. Life of Field activity remained low as clients continued to defer non-essential expenditure.
In the Southern Hemisphere and Global Projects Business Unit the TEN project, offshore Ghana, progressed well with fabrication, and Seven Borealis commenced pipelay activity. The completion of the Gorgon project, offshore Australia, contributed positively to results in the quarter. Offshore Nigeria, the Erha North project was substantially completed with first oil achieved in September. New awards in the quarter included a contract for phase one of the West Nile Delta project offshore Egypt. Towards the end of the quarter the new-build pipelay support vessel (PLSV) Seven Rio joined the fleet and commenced work in the Gulf of Mexico: this vessel will subsequently transit to Brazil to commence a five-year contract for Petrobras.
The cost reduction and resizing programme announced in May 2015 is on track to deliver approximately $550 million of annualised cost savings, as previously guided. The headcount and active fleet reduction has progressed as planned; of the 12 vessels to leave the active fleet by early 2016, six owned vessels have been stacked and one chartered vessel has been returned during the third quarter. An impairment charge of $36 million was recognised during the quarter on Seven Polaris, which will be scrapped.
The sustained low oil price environment continues to result in lower oil company expenditure and subdued industry activity. The timing of contract awards to market remains uncertain.
The guidance provided previously for the full year 2015 has been updated. Group revenue is still expected to be significantly lower in 2015 compared to the record level reported last year, but due to strong execution and timing of completion on several projects Adjusted EBITDA percentage margin is now expected to be above 2014 levels. Based on the prevailing market trends both revenue and Adjusted EBITDA percentage margin in 2016 are expected to be significantly lower than the Group’s forecasts for 2015. The outlook beyond 2016 remains uncertain.
The fundamental long-term outlook for deepwater subsea field developments remains intact despite the challenges facing the industry as a result of the lower oil price. Subsea 7, in partnership with clients and suppliers, continues to develop innovative solutions to lower the cost base such that projects can become viable in the current low oil price environment.’
This article is for information and discussion purposes only and does not form a recommendation
to invest or otherwise. The value of an investment may fall. The investments referred to in this
article may not be suitable for all investors, and if in doubt, an investor should seek advice from
a qualified investment adviser. More