Subsea 7 curbs net loss. 3,600 workers laid off in 2015

Subsea 7, a subsea engineering, construction and services company, has posted a tighter net loss in the 4Q 2015 when compared to the prior-year quarter, and a drop in revenues due to lower activity. 

In addition, Subsea 7 said in its 4Q results report on Wednesday that the company’s workforce was reduced by 3,600 employees during 2015.

Namely, the cost reduction and resizing program announced in May 2015 set out plans to deliver approximately $550 million of annualized cost savings through a workforce reduction of 2,500 and the removal of 12 vessels from the active fleet by early 2016.

However, resizing actions exceeded this guidance and Subsea 7 ended 2015 with a workforce of approximately 9,800 people, down from approximately 13,400 a year earlier, and as at the end of February 13 vessels have been removed from the active fleet, with an additional chartered vessel due to be returned to its owner before the end of the first quarter 2016. The restructuring charge of $136m relating to the resizing program, included in Adjusted EBITDA, was broadly offset by cost savings delivered by the program in the same period.

The company’s net loss was $421 million for the quarter, compared to a net loss of $977 million in 4Q 2014. The decrease was primarily due to decrease in net operating loss, which reflected the reduction of $662 million in the goodwill impairment charge in 2015 compared to 2014.

However, the subsea company said that it was partially offset by net foreign currency gains of $12 million in 4Q 2015, recognized within other gains and losses, compared with $41 million in 4Q 2014; and a tax charge of $17 million compared to a tax credit of $65 million in 4Q 2014. Excluding the impact of the goodwill impairment charge the effective tax rate for 4Q 2015 was 14% which benefited from the release of provisions in respect of certain current tax assets.

Revenue for the quarter was $1 billion, a decrease of $370 million or 27% compared with $1.39 billion in 4Q 2014. The decrease was mainly due to lower activity levels in the Northern Hemisphere and Life of Field business unit.

Total vessel utilization during the fourth quarter was 62% compared with 68% in 4Q 2014. The company explained that this reduction mainly reflected reduced offshore activity in the North Sea.

During the quarter, in line with the Group’s resizing program, the pipe-layer Seven Polaris was disposed of, five owned vessels continued to be stacked and three chartered vessels were returned.

Long-term outlook stays intact

Jean Cahuzac, Subsea 7 Chief Executive Officer, said: “The low oil and gas price continues to depress industry activity as clients delay and cancel new projects; the timing of market recovery remains highly uncertain. As guided previously, revenue and Adjusted EBITDA percentage margin are expected to be significantly lower in 2016 compared to 2015.

Cahuzac added: “Despite the difficult near to medium-term outlook, the fundamental long-term outlook for deepwater subsea field developments remains intact and industry activity is expected to recover when the oil and gas market rebalances. Subsea 7 has already implemented a number of initiatives to strengthen its position and will continue to actively adapt to industry conditions without losing its focus on longterm strategic priorities.”

Offshore Energy Today Staff