Subsea 7 S.A. Announces First Quarter 2023 Results
Luxembourg – 27 April 2023 – Subsea 7 S.A. (Oslo Børs: SUBC, ADR: SUBCY, ISIN: LU0075646355, the Company) announced today results of Subsea7 Group (the Group, Subsea7) for the first quarter which ended 31 March 2023.
First quarter highlights
First quarter Adjusted EBITDA of $107 million resulting in a margin of 9%
Order flow remains strong, with a book-to-bill of 1.5x
Backlog of $9.7 billion at 31 March 2023, of which $4.0 billion to be executed in 2023 and $3.4 billion in 2024
High tendering activity with continued momentum in pricing
Recent awards and ongoing bids underpin management’s confidence in the outlook, including a return of Adjusted EBITDA margins to a range of 15-20% over the coming four years
Offer for Seaway7 progressing towards delisting of Seaway 7 ASA from Euronext Growth in early May 2023
Three Months Ended
For the period (in $ millions, except Adjusted EBITDA margin and per share data)
31 Mar 2023 Unaudited
31 Mar 2022 Unaudited
Adjusted EBITDA margin(a)
Net operating loss
Earnings per share – in $ per share
At (in $ millions)
Book-to-bill ratio – year-to-date(a)
Cash and cash equivalents
Net cash excluding lease liabilities(a)
Net (debt)/cash including lease liabilities(a)
(a) For explanations and reconciliations of Adjusted EBITDA, Adjusted EBITDA margin, Backlog, Book-to-bill ratio and Net cash/(debt) refer to the ‘Alternative Performance Measures’ section of the Condensed Consolidated Financial Statements.
(b) For the explanation and a reconciliation of diluted earnings per share refer to Note 7 ‘Earnings per share’ to the Condensed Consolidated Financial Statements.
John Evans, Chief Executive Officer, said:
The first quarter of 2023 unfolded as we expected and Subsea7 is on track to meet management’s guidance for the full year. Our backlog continued to grow during the quarter, with awards in both subsea and offshore wind, and bidding remains very active in both businesses. The sustained high level of demand from our clients supports our view of a return to an Adjusted EBITDA margin range of 15-20% in the coming four years. While this year marks a period of re-investment in both the subsea and renewables businesses, we are confident that our strategy positions the Group for strong cash generation, and the return of excess capital to shareholders, next year and beyond.
Notably, during the quarter we largely completed installation of the $1.2 billion fast-track Sakarya project in Türkiye and the development achieved first gas in April. After just 31 months since the initial gas discovery by the client, the project is testament to the strong and successful collaboration both with Turkish Petroleum and with SLB, our alliance partner in Subsea Integration Alliance. This ambitious schedule, in a new country for Subsea7, was led by our project management team in Istanbul, and drew on the expertise of engineers in France, the UK, Malaysia and Australia, as well as utilising vessels including Seven Arctic, Seven Oceanic and Seven Pegasus.
Overall, Subsea7 delivered a satisfactory financial performance in the first quarter and we are confident in the outlook for the remainder of the year and beyond.
During the first quarter the Subsea and Conventional business unit experienced normal seasonality due to winter conditions in most of the Northern Hemisphere. Seven Oceanic, Seven Pacific, Seven Sisters and Seven Vega were active on Sakarya in Türkiye, Bacalhau in Brazil and Sangomar in Senegal. Seven Oceans was active in the Gulf of Mexico before transiting to Norway where it prepared for work on the Northern Lights carbon capture project. In the UK, against a backdrop of fiscal uncertainty, our fleet of diving support vessels achieved reduced utilisation due to the postponement of activities by clients.
In the Renewables business unit Seaway Aimery and Seaway Moxie worked on the cable lay scope of Hollandse Kust Zuid in the Netherlands. Seaway Strashnov was in dry dock, as planned, for most of the first quarter and resumed operations on Dogger Bank A&B at the end of March. We also resumed activity at Seagreen and the final jacket was installed mid-April.
First quarter financial review
Revenue of $1.2 billion increased 4% compared to the prior year period reflecting strong growth of 18% in Subsea and Conventional, partially offset by a decline in Renewables due to the phasing of the Seagreen project. Adjusted EBITDA of $107 million equated to an Adjusted EBITDA margin of 8.6%, up from 7.2% in Q1 2022. After depreciation and amortisation charges of $122 million, net operating loss improved to $15 million from a loss of $31 million in the prior year period. After net finance costs of $8 million and without the benefit of the prior year’s tax credit, net loss for the quarter increased to $29 million compared to a net loss of $12 million in Q1 2022.
Net cash used in operations was $127 million including a $209 million anticipated increase in net working capital. Net cash used in investing activities was $86 million while net cash generated by financing activities was $256 million which included $300 million proceeds from borrowings. Overall, cash and cash equivalents increased by $40 million from 31 December 2022 to $686 million at 31 March 2023. Net debt at the end of the first quarter was $419 million including lease liabilities of $456 million.
First quarter order intake was $1.9 billion comprising new awards of $1.2 billion and escalations of $0.7 billion resulting in a book-to-bill ratio of 1.5x. Backlog at the end of March was $9.7 billion, of which $4.0 billion is expected to be executed in 2023 and $3.4 billion in 2024.
Outlook – full year 2023 on track
We continue to expect revenue and Adjusted EBITDA in 2023 to be higher than 2022, with a weighting towards the second half of the year. Pricing and contract terms continued to improve during the first quarter and recent awards, as well as ongoing tenders, support our view that Adjusted EBITDA margins should trend back to a range of 15-20% over the coming four years. This is approaching the margin necessary to yield an appropriate return on capital employed.
Conference Call Information
Date: 27 April 2023
Time: 12:00 UK Time
Access the webcast at subsea7.com or https://edge.media-server.com/mmc/p/obrzwjpp
Register for the conference call at https://register.vevent.com/register/BI835ccb83027d4b0291b319f2cd431b57
For further information, please contact:
Head of Investor Relations
Telephone: +44 20 8210 5568
Special Note Regarding Forward-Looking Statements
Certain statements made in this announcement may contain ‘forward-looking statements’ (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 ‘anticipate’, ‘believe’, ‘estimate’, ‘expect’, ‘future’, ‘goal’, ‘intend’, ‘likely’ ‘may’, ‘plan’, ‘project’, ‘seek’, ‘should’, ‘strategy’ ‘will’, and similar expressions. The principal risks which could affect future operations of the Group are described in the ‘Risk Management’ section of the Group’s Annual Report and Consolidated Financial Statements. 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.