Subsea 7 profit jumps as revenues drop
Subsea 7, a subsea engineering, construction and services company, saw an increase in its second quarter 2016 profit but a drop in revenues over lower activity levels.
The company’s net income for the second quarter 2016 was $136 million, an increase compared to $88 million in the corresponding period last year.
The company explained that this increase was primarily due to the increase in net operating income, and net foreign currency gains of $23 million in 2Q 2016, recognised within other gains and losses, mainly as a result of the depreciation of the British Pound against the US Dollar.
Net foreign currency losses of $36 million were recognised in 2Q 2015.
Second quarter revenue of $961 million was down 29% on the prior year’s quarter that amounted to $1.352 billion, reflecting lower activity levels across the business.
Active vessel utilisation increased to 82% in the second quarter from 71% in the prior quarter as offshore phases of several projects progressed and seasonal work in the North Sea increased as anticipated.
Jean Cahuzac, Subsea 7 Chief Executive Officer, said: “Financial performance continued to be impacted by the industry downturn with diminishing activity levels as planned work was completed and client investment in oil and gas production remained low.”
In June, Subsea 7 announced a further global resizing and cost reduction program commensurate with the lower levels of activity.
The company said that its workforce will be reduced from 9,200 people to 8,000 by early 2017. In addition, five vessels will leave the active fleet. The resizing is expected to deliver annualised savings of approximately $350 million.
Order backlog at the end of June was $7.1 billion, $0.6 billion higher than at the start of the quarter, this included adverse foreign exchange impacts of approximately $50 million.
Cahuzac said that the sustained downturn in oil company expenditure continues to result in low industry activity and the timing of new awards to market is still uncertain, but that the fundamental long-term outlook for subsea field developments remains positive.
Offshore Energy Today Staff