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Amended to reflect an issue with the PDF attachment in the prior release
Luxembourg – 28 July 2022 – Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR: SUBCY, ISIN: LU0075646355) announced today results for the second quarter and first half of 2022 which ended 30 June 2022.
Second quarter highlights
Adjusted EBITDA of $134 million, up 48% year-on-year, resulting in a margin of 11%
Order intake of $2.1 billion, equating to a book-to-bill of 1.6 times
Backlog of $7.8 billion, of which 10% is in Renewables, with $2.5 billion to be executed in 2022
Cash and cash equivalents of $464 million and net debt (including lease liabilities) of $88 million
Renewal of Subsea Integration Alliance for a further seven years
For the period (in $ millions, except Adjusted EBITDA margin and per share data)
Q2 2022 Unaudited
Q2 2021 Unaudited
Adjusted EBITDA margin(a)
Net operating income/(loss)
Earnings per share – in $ per share
At (in $ millions)
30 Jun 2022
31 Mar 2022
Cash and cash equivalents
Net cash excluding lease liabilities(d)
Net debt including lease liabilities(d)
(a) For explanations and reconciliations of Adjusted EBITDA and Adjusted EBITDA margin refer to Note 8 ‘Adjusted EBITDA and Adjusted EBITDA margin’ to 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.
(c) Backlog is a non-IFRS measure. Book-to-bill ratio represents total order intake divided by revenue recognised in the second quarter. Comparative figure is for the quarter ended 31 March 2022.
(d) Net cash/(debt) is a non-IFRS measure and is defined as cash and cash equivalents less borrowings.
John Evans, Chief Executive Officer, said:
In the second quarter of 2022, Subsea 7 delivered a strong performance in Subsea and Conventional, while the Renewables business unit performed in line with June’s trading update. Since the first quarter, the industry’s challenges relating to the supply chain and raw material price inflation have stabilised, allowing a number of projects to proceed. Order intake in the quarter was robust at $2.1 billion resulting in growth in our backlog to $7.8 billion. In addition, our pre-backlog (subject to FID(1)) was over $1 billion, reflecting offshore wind projects in the UK that we expect to convert to firm awards by early 2023. Both our core markets - subsea and offshore fixed wind - continue to improve, with positive momentum in pricing and risk allocation. During the quarter, we extended the Subsea Integration Alliance with Schlumberger for a further seven years. Subsea Integration Alliance has become a market leader in integrated SPS-SURF projects and we look forward to further growth. Overall, Subsea 7 is well-positioned to benefit from these positive market dynamics, and to deliver on a strategy that combines capital returns and growth over the long term.
In the second quarter the Subsea and Conventional business unit made good progress on its portfolio, with projects completing in the Gulf of Mexico and Saudi Arabia. Activity remained high in the Gulf of Mexico, with Seven Arctic, Seven Navica, Seven Oceans and Seven Vega active on Anchor, Jack St Malo 4, Mad Dog 2, and Vito. In northern Europe, Seven Oceans worked on the Johan Sverdrup Phase 2, Balmoral and Pierce fields. Procurement neared completion for the fast-tracked Sakarya integrated project in Turkey, and the shallow water section of pipelay commenced.
In the Renewables business unit, foundation installation and cable lay work continued, as planned, on the Seagreen project in the UK. At the end of the quarter, 30 of 114 foundations and 21 cables had been installed. In Taiwan, Seaway Yudin worked on the Formosa 2 project while, in the Netherlands, Seaway Strashnov, Seaway Aimery and Seaway Moxie worked on the Hollandse Kust Zuid project. Both Formosa 2 and Hollandse Kust Zuid progressed in accordance with the execution plan announced in June, and they remain on track for completion in August and September, respectively.
Second quarter financial review
Second quarter revenue of $1.2 billion increased by 4% compared to the prior year period, reflecting growth in Subsea and Conventional offset by lower revenues in Renewables primarily driven by the phasing of the Seagreen project. Adjusted EBITDA of $134 million was up 48% year-on-year driven by a strong margin in Subsea and Conventional, partly offset by losses in Renewables. Net operating income was $18 million after depreciation and amortisation charges of $116 million. Net income for the quarter was $22 million, after taxation of $36 million and favourable other gains and losses of $47 million, including net foreign exchange gains of $44 million.
Net cash generated from operations was $94 million including a $63 million adverse movement in net working capital. Net cash used in investing activities was $50 million, including $52 million related to purchases of property, plant and equipment. Net cash used in financing activities was $72 million which included dividends of $32 million. Overall, cash and cash equivalents decreased by $36 million from 31 March 2022 to $464 million with net debt of $88 million, including lease liabilities of $184 million. As communicated in the Seaway 7 trading update in June 2022, progress on Seaway Alfa Lift build has encountered delays. The root cause of the delays in the delivery of the vessel is due to the status of the mission equipment, engineering and procurement. These conditions, attributable to OHT ASA, were present on 1 October 2021, the date of the business combination, as a result, the adverse financial impact has been accounted for as an adjustment to the transaction’s purchase price allocation.
Order intake was $2.1 billion comprising new awards of $1.7 billion, escalations of approximately $400 million, and adverse foreign exchange movements of approximately $300 million, resulting in a book-to-bill ratio of 1.6 in the quarter. Backlog at the end of June was $7.8 billion, of which $2.5 billion is expected to be executed during the remainder of 2022.
Outlook for full year 2022
We continue to expect that revenue and Adjusted EBITDA will be broadly in line with 2021. Tendering in the subsea market remains high and the pricing environment continues to improve. In fixed offshore wind, contract pricing and risk allocation have improved and should contribute to robust long-term margins and returns.
(1) Final investment decision by the clients
Conference Call Information
Date: 28 July 2022
Time: 11:00 UK Time
Access the webcast at subsea7.com or https://edge.media-server.com/mmc/p/5qxr3swf
Register for the conference call at https://register.vevent.com/register/BI519e84258b954cb6af64f7a30949e0c8
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.