Subsea 7 Makes $137 Mln in First Quarter 2014

Subsea 7 S.A. announced results for the first quarter which ended on March 31, 2014. Net income for this quarter was $137 million, compared to $132 million year-over-year.

Revenue for the quarter was $1.7 billion, an increase of $201 million compared with Q1 2013. The increase primarily reflected higher activity levels in the AFGOM and APME Territories partially offset by decreased revenue in the NSC Territory.

Adjusted EBITDA for the quarter was $264 million, an increase of S23 million or 10% compared to Q1 2013. Adjusted EBITDA margin was 16%, which was in line with Q1 2013.

Net operating income was $166 million, compared with $154 million in Q1 2013. This increase was primarily due to the higher activity levels in the quarter compared with the same prior year period, partially offset by an increase in depreciation expense of $8 million, driven by vessel-related capital expenditures. General administrative expenses for Q1 2013 of $76 million benefited from the release of a $16 million provision related to the business combination in 2011. Excluding this provision release from the prior year period, Q1 2014 administrative expenses decreased by $11 million compared with Q1 2013.

The increase in net income was primarily due to the increase in net operating income, a $20 million decrease in finance costs due to higher levels of capitalised interest on assets under construction in Q1 2014, the absence of interest relating to the $500 million convertible notes which matured in Q4 2013 and costs incurred in Q1 2013 on the early repayment of the Seven Havila loan.

Jean Cahuzac, Chief Executive Officer, said:

“The Group has had a good start to 2014, with first quarter revenue and Adjusted EBITDA both increasing from the levels achieved in the first quarter of 2013. I am pleased overall with the operational performance in executing our project portfolio.

“In line with our expectation, the record order backlog with which we started 2014 declined marginally in the quarter, ending the period at $11.6 billion. In addition to announced contract awards, scope changes and commitments made under frame agreements augmented order intake.

“The Seven Waves, the first of the four new-build PLSVs, successfully completed final equipment trials in the first quarter and is expected to commence operations for Petrobras in May this year under a five-year contract. The vessel has been built and commissioned in line with our cost estimates and will be operational three months ahead of schedule.

“Cash levels declined somewhat in the quarter, consistent with our expectations, mainly reflecting the timing of milestone payments on vessel construction projects and the continuation of our share repurchase programme.”

Operational highlights for the first quarter 2014

In West Africa, the CLOV project offshore Angola achieved key execution milestones with the installation of two Hybrid Riser Towers and associated buoyancy tanks in the first quarter, led by the Seven Borealis. Other projects that progressed significantly included Block 31 GES, offshore Angola, and Eitia North, offshore Nigeria.

In Australia, the Gorgon Heavy Lift and Tie-ins project was in its offshore phase throughout the quarter, while in India, the G1 project for ONGC commenced the third phase of its offshore campaign. The Guará-Lula NE project in Brazil realised a good quarter of operational achievements, with the second and third buoys successfully placed in position and additional risers installed.

The previously communicated project timetable remains unchanged and no adjustment has been made to the estimated full-life project loss. In the North Sea and Canada, the diverse portfolio of work progressed well, with Life-of-Field particularly active. Vessel utilisation for the Group was 79% (74% in Q1 2013), which was relatively high for a first quarter period and reflected robust activity levels and moderate out of service time due to dry-dockings.

Outlook 

“The trend that began in 2013 for many clients to take longer to award subsea contracts continued in the first quarter of 2014. We expect these delays to have an impact on order intake in the near-term, although high tendering activity in all Territories bodes well for the medium-term outlook.

“We reiterate our previous guidance for an expected increase in Group revenue for the full year 2014, together with a moderate increase in Group Adjusted EBITDA from the level achieved in 2013 after adding back the full-life project loss provision recognised on the Guará-Lula NE project in 2013 that amounted to $355 million,” Mr. Cahuzac added.