Subsea 7 4Q profit slides 52 pct

Offshore oilfield services provider Subsea 7 today reported a 52 per cent fall in its fourth quarter of 2013.

The company’s net income for the quarter fell to $72 million, compared to $149 million earned in the same period of 2012.  Subsea 7 said that the net income was hurt by lower operational income which in turn was hit by a decrease of $43 million in the Group’s share of net income of associates and joint ventures mainly due to a reduced contribution from Seaway Heavy Lifting as its vessel the Stanislav Yudin was in dry-dock.

The groups operation income was $109 million, versus $180 million in the fourth quarter of 2012.

Revenue for the quarter was $1.6 billion, similar to the result achieved in 4Q 2012, primarily reflecting increased activity levels in the Africa,Gulf of Mexico and Mediterranean regions and also in Asia Pacific and Middle east,  offset by decreased activity levels in the North Sea and Canada and Brazil Territories.

For the full year 2013, net income was $350 million, a decrease of $497 million or 59% compared to 2012. Revenue for the full year 2013 was $6.3 billion, which matched the level achieved in 2012.

 Record backlog

Subsea 7 had a record backlog of $11.8 billion at 31 December 2013, an increase of $2.7 billion or 30% compared to 31 December 2012. The increase was mainly attributable to the renewal of PLSV contracts and awards for the operation of three new-build PLSVs in Brazil. Other significant contracts awarded in 2013 included Aasta Hansteen, offshore Norway, TEN, offshore Ghana and Erha North, offshore Nigeria.

$9.6 billion of the backlog at 31 December 2013 related to SURF activity, $1.0 billion to Life-of-Field, $0.6 billion to Conventional and Hook-up and $0.6 billion to i-Tech. $5.8 billion of this backlog is expected to be executed in 2014, $2.5 billion in 2015 and $3.5 billion in 2016 and thereafter. Backlog related to associates and joint ventures is excluded from these amounts.

Since 31 December 2013, contract awards in excess of $165 million have been secured. These included contracts with Petrobras for remote intervention services by the i-Tech division and a three-year subsea construction services contract with ExxonMobil in Canada.

Outlook

Jean Cahuzac, Chief Executive Officer said: “Conflicting pressures on the use of capital by major oil and gas companies, combined with a flat oil price and cost inflation, resulted in a lower level of tendering and market award activity for large EPIC contracts in the latter part of 2013. Life-of-Field and smaller project work in the North Sea remains relatively stable and is increasing in the Gulf of Mexico, albeit from a low level.

“Tendering activity in early 2014 has increased for SURF projects in Africa. While this is encouraging, it must be remembered that there is typically a two-year period between tendering and the start of the offshore phase of such projects. The trend for market awards for large SURF projects to be postponed, for a variety of reasons, is continuing. We therefore expect our order backlog to decline during the first half of 2014.

“In light of this environment, the Group’s revenue for 2014 is nevertheless expected to increase from that realised in 2013. Adjusted EBITDA for 2014 is anticipated to increase moderately from that achieved in 2013 after adding back the full-life project loss provision recognised on the Guará-Lula NE project in 2013.

“We remain positive about the medium and long-term prospects for our business, which is supported by a strong fundamental outlook for deepwater subsea field developments. To support this view, our vessel construction programme with six new-build vessels (four of which are committed on long-term contracts in Brazil), is proceeding on schedule and within our cost estimates. Owing to the phasing of vessel construction payments, the Group’s capital expenditure for 2014 will be higher than in 2013.”