Subsea 7 profit nose-dives, cutbacks in full swing
Subsea 7, a subsea engineering, construction and services company, announced today results for the second quarter and first half 2015 which ended on June 30, 2015. The company’s net profit for the second quarter has dropped to $88 million from $266 million in the same period last year.
In addition, the company’s net income for the first half of 2015 dipped to $239 million from $397 million in the first half of 2014.
During the quarter Subsea 7 announced a cost reduction programme to resize the fleet and workforce in line with the declining workload. A $100 million charge related to the resizing was recognised in the second quarter, out of an estimated total charge of $140 million. The Group will reduce its capacity by 2,500 people and 12 vessels by early 2016, delivering expected annualised savings of approximately $400 million in employee related costs and about $150 million in vessel costs.
Jean Cahuzac, Chief Executive Officer, said: “Subsea 7 delivered good operational and financial results in the second quarter, driven by strong execution and cost control discipline in a challenging market environment.”
Second quarter revenue of $1,352 million was down $553 million on the prior year quarter, reflecting the difficult industry conditions and declining workload. Adjusted EBITDA of $275 million and margin of 20.3% included the $100 million charge related to the cost reduction programme. Excluding this charge Adjusted EBITDA was $375 million and the margin was 27.7%.
According to Subsea 7, the sustained downturn in oil company expenditure continues to result in lower industry activity and the timing of new awards to market remains highly uncertain. By balancing the implementation of its cost reduction programme with a focus on maintaining its core in-house expertise and capability, Subsea 7 remains well positioned to continue to deliver its projects in a consistent and efficient manner and capture future business opportunities, the company said in its report.
Group revenue is expected to be significantly lower in 2015 compared to the record level reported last year and Adjusted EBITDA margin is expected to decrease compared to 2014.
The company concluded the report by stating that the fundamental long-term outlook for deepwater subsea field developments remains intact despite the challenges facing the industry as a result of the lower oil price.