Subsea 7 S.A. has announced the results for the third quarter 2016 which ended 30 September 2016.
Third quarter highlights
Jean Cahuzac, Chief Executive Officer, said:
‘We have delivered another quarter of strong performance despite the continued industry-wide downturn in activity, with good execution across all our market segments and high utilisation of our active vessels. Our Adjusted EBITDA margin remained high at 31% as we executed well on projects nearing completion and realised the savings from our early actions to reduce costs and resize our capacity.
We are driving innovative and collaborative solutions that help our clients to sanction projects and develop their oil and gas reserves in the current price environment. Many of our clients are interested in pursuing an integrated approach. We have engaged with clients on 30 potential integrated projects and undertaken eight early engineering studies.
Industry conditions remained challenging in the third quarter and there were few awards made to the market. However, assuming the oil price increase over the last nine months is sustained and the cost reductions identified by the industry are consistently achieved, there is cause to believe that the number of SURF project awards to the market could increase within the next 18 months.
Significant progress was made on several large projects during the third quarter. The Aasta Hansteen project concluded its third seasonal offshore campaign with all flowlines and control cables connected, and the subsea infrastructure is now ready to hook up to the SPAR platform when it arrives in 2018. This technology-rich project has been executed in a harsh offshore environment and is the deepest development on the Norwegian continental shelf at a water depth of approximately 1300 m. Also offshore Norway, the Maria and Martin Linge projects progressed well.
Offshore UK, the Catcher project neared completion with the installation of a technically complex riser system comprising ten flexible risers and three umbilicals supported by three large tethered mid-water arches. The Callater and Culzean projects, offshore UK, made good progress with engineering, procurement and fabrication.
Offshore Egypt, the first phase of the West Nile Delta project progressed well with pipelay by Seven Borealis and offshore operations on the fast-track East Nile Delta project were successfully concluded on time. Offshore Ghana, the TEN project was completed and closed out.
Offshore Brazil, Subsea 7’s PLSVs long-term contracts delivered another quarter of high utilisation.
Active Vessel Utilisation was 91% in the third quarter and Total Vessel Utilisation was 75%. This reflected the usual peak in seasonal activity in the North Sea and efficient vessel scheduling to maximise deployment of the active fleet. During September two vessels left Subsea 7’s fleet. Seven Petrel was sold outside the oil and gas sector and Normand Seven was returned to its owner at the end of its charter contract. The new-build PLSV, Seven Sun, completed its final commissioning offshore Brazil and has commenced its five year day-rate contract in November 2016.
Third quarter revenue of US$928 million and Adjusted EBITDA of US$289 million were respectively 23% and 18% lower than the prior year comparative period. Adjusted EBITDA included a restructuring charge of US$52 million, taking the total restructuring charge recognised year-to-date to US$105 million. No significant additional charges are expected in relation to the cost reduction and resizing measures announced in June 2016.
Diluted earnings per share was US$0.44, a decrease of 4% on the prior year period.
Cash and cash equivalents was US$1.4 billion as at 30 September and net cash was US$943 million. Subsea 7’s strong financial and liquidity position is a competitive advantage and provides the Group with the capacity to consider strategic investment opportunities. In the third quarter Subsea 7 enhanced its technology capability with the acquisition of Swagelining, a leading specialist in subsea polymer lining.
Order intake and contract awards
At 30 September order backlog was US$6.2 billion, with no material foreign exchange impact in the quarter. Subsea 7’s order intake was US$0.1 billion, with work awarded in the North Sea, the US Gulf of Mexico and Brazil.
In October, Subsea 7 was awarded an EPIC contract for the Atoll project, consolidating its presence offshore Egypt with almost US$1.8 billion awarded to Subsea 7 in this country over the last 18 months. This project will be included in the reported order intake for the fourth quarter.
During the third quarter Subsea 7 was awarded a four-year frame agreement by Det norske to develop their projects offshore Norway using an integrated model. This innovative agreement has the potential to save costs and reduce risk on projects, to the benefit of all involved parties.
Subsea 7 guidance for the full year 2016 has been updated. Revenue is still expected to be significantly lower in 2016 compared to 2015, but due to cost discipline, operational performance and successful project completions Adjusted EBITDA percentage margin is now expected to be above 2015 levels. For 2017, revenue is expected to be broadly in line with the Group’s forecast for 2016 and Adjusted EBITDA percentage margin is expected to be significantly lower.
Only a few projects have been sanctioned in 2016. Assuming the oil price increase over the last nine months is sustained and the cost reductions identified by the industry are consistently achieved, there is cause to believe that the number of SURF project awards to the market could increase within the next 18 months.
For more information, please visit : http://www.subsea7.com
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