Subsea 7 S.A. Announces Third Quarter 2023 Results
Luxembourg – 16 November 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 third quarter which ended 30 September 2023.
Third quarter highlights
- Third quarter
Adjusted EBITDA of $201 million, a margin of 13%
- Free cash flow of
$223 million, resulting in an increase in cash and cash equivalents
to $530 million
- 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 |
For the period (in $ millions, except Adjusted EBITDA margin and
per share data) |
Q3 2023Unaudited |
Q3 2022Unaudited |
30 Sep 2023 Unaudited |
30 Sep 2022 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 |
|
|
|
|
|
At (in $ millions) |
|
|
30 Sep 2023Unaudited |
30 June 2023Unaudited |
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 ‘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:
Subsea7 reported solid third quarter results in
line with management’s 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 reviewRevenue 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
2023Time: 12:00 UK Time, 13:00 CETAccess
the webcast at subsea7.com or
edge.media-server.com/mmc/p/zawi5mv6/Register for the
conference call at
https://register.vevent.com/register/BI27406ccbe6134b6c875efd57a1191e4a
For further information, please
contact:
Katherine TonksHead of
Investor RelationsEmail:
ir@subsea7.comTelephone: +44 20 8210
5568
Special Note Regarding Forward-Looking
StatementsThis document 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. 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.
- SUBC 3Q23 Presentation
- SUBC 3Q23 Earnings Release
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