Subsea 7 sees highest order intake in last 9 years
Subsea 7 has reported an order intake of over $7 billion for the full year of 2022, representing the highest order intake since 2013, with a backlog of over $9 billion, said to have resulted in high revenue visibility for 2024 and beyond.
In 2022, Subsea 7 reported revenue of $5.1 billion, which is a 3 per cent increase compared to the prior year, reflecting 6 per cent growth in Subsea and Conventional, offset by an 11 per cent reduction in Renewables.
The adjusted EBITDA was $559 million, while net operating income increased to $149 million from $72 million in 2021. Net cash generated from operations was $486 million, including a $28 million favorable movement in net working capital.
Full-year order intake was $7.1 billion comprising new awards of $5.3 billion, escalations of $1.8 billion, and adverse foreign exchange movements of $0.2 billion. The backlog at the end of December was $9 billion, of which $4.2 billion is expected to be executed in 2023 and $3 billion in 2024.
“2022 was a year of strong momentum for Subsea7 as the recovery in our subsea market gathered pace. The cumulative impact of years of underinvestment by the oil and gas industry combined with a new urgency for energy security supported a resurgence in demand for our services,” said John Evans, CEO of Subsea 7.
“The increase in tendering and early engineering activity that we were experiencing twelve months ago translated into strong order intake over the course of 2022, driving a rapid tightening of vessel availability and an improvement in new project margins.”
In the fourth quarter of the year, the revenue of $1.3 billion declined 5 per cent compared to the prior year period, reflecting growth of 3 per cent in Subsea and Conventional, offset by a 33 per cent decline in Renewables, due to the phasing of the Seagreen project. The adjusted EBITDA was $169 million.
Order intake was $3 billion comprising new awards of $2.3 billion, escalations of $0.6 billion, and a beneficial foreign exchange movement of approximately $0.2 billion.
According to Evans, the success in subsea was underpinned by the company’s long-held strategy of early engagement, and collaboration and partnerships. The company CEO noted that Subsea 7’s energy transition strategy includes carbon capture, floating wind and hydrogen.
However, within Renewables, Seaway 7 did not perform as expected. The problems are said to have originated from the combination with OHT ASA primarily linked to issues with the construction of Seaway Alfa Lift. Specifically, the design and fabrication of the mission equipment led to an overrun on the vessel construction schedule and budget with a knock-on impact on Dogger Bank A&B, for which a provision was taken in 2022.
Among other factors, this development contributed to Subsea 7 being unable to realize its initial objective to increase the free float of Seaway 7 and necessitated recapitalizing Seaway 7 through a combination of debt and equity rights issue.
For 2023, Subsea 7 expects revenue and adjusted EBITDA to be higher than in 2022, with a weighting towards the second half of the year.
The outlook is said to be supported by a vast portfolio of potential developments in both subsea and offshore wind with attractive economics. According to the company, the availability of installation capacity for subsea and offshore fixed wind markets continues to tighten for 2024 and 2025, and Subsea 7 is now tendering projects for 2026 and beyond.
“While order inflow was subdued in 2022, our pre-backlog of over $1 billion, combined with a tendering pipeline of over $7 billion, gives us confidence in the future for this important part of our energy transition strategy,” Evans said.
“Overall, Subsea7 delivered a good financial and operational performance in 2022, while making important progress on several aspects of our strategy, and we are well-placed to deliver growth, both near and longer term.”