Subsea 7 sees growth in revenues, expects tendering activity to remain high

Subsea 7 has reported a revenue of $1.2 billion in the first quarter of 2022, an increase of $197 million or 20% compared to Q1 2021, said to reflect strong growth in the Subsea and Conventional business unit.

According to the UK-based company, the increase in revenue is impacted by significant activity on the Sakarya project in Turkey, as well as progressed offshore work on the Seagreen offshore wind project.

A net operating loss of $31 million was recognized, which included depreciation and amortization charges of $117 million. The net loss for the quarter was $12 million, after a tax credit of $15 million and other gains and losses of $7 million, including net foreign exchange gains of $2 million.

Order intake was $1.2 billion comprising new awards of $630 million and escalations of approximately $530 million, resulting in a book-to-bill ratio of 1.0.

Backlog at the end of March was $7.3 billion, of which 14% is in Renewables, with $3.2 billion expected to be executed during the remainder of the year.

Subsea 7’s vessel activity in Q1 2022 included planned maintenance and dry docking, equivalent to around 250 days of downtime. Active vessel utilization was at 72%, compared with 66% in the prior-year period, and the company expects it to improve over the course of the year as the level of dry-docking normalizes.

“In the first quarter of 2022, Subsea 7 delivered revenue and EBITDA in line with management’s expectations and guidance for the full year is unchanged. Our backlog remains stable at $7.3 billion, implying high visibility on revenue for the remainder of the year,” said John Evans, Subsea 7 CEO.

“Tendering activity remains high and we are collaborating with our clients and supply chain partners to navigate the bottlenecks in the global supply chain. The risk to our awarded projects is reduced through back-to-back contracts and indexlinked mechanisms with our suppliers. Overall, we believe the long-term outlook remains positive for both the subsea and offshore wind industries with several large awards to the market expected in the remainder of 2022.”

Project updates

It is worth noting that in the first three months of 2022 Subsea 7 continued work on the Seagreen offshore wind project in Scotland and laid inter-array cables associated with the first 21 jackets. Towards the end of the quarter, Seaway Strashnov installed the monopile foundations at the Kaskasi project offshore Germany.

The company commenced operations on its remaining scope of the Formosa 2 project in Taiwan, but the pace of execution remained slower than expected due to operational challenges and the impact of Covid-19 restrictions.

In the Gulf of Mexico, Seven Navica, Seven Oceans and Seven Oceanic were active on the King’s Quay project, which is substantially complete, while Seven Arctic continued offshore activities for Mad Dog 2.

In Africa, Seven Borealis and Seven Pacific completed their work scope on the Jubilee project, while good progress was made on the fabrication scope for the Sanha Lean Gas project.

In Norway, Seven Vega experienced several weeks of standby time due to adverse weather but completed its pipelay scope for Johan Sverdrup Phase 2 with support from Seven Falcon.

Furthermore, Seven Champion was fully utilized during the quarter on the 28 Jackets project (CPRO 48 and 49) in Saudi Arabia.

Engineering and fabrication activities continued on the BacalhauMero-3 and Barossa projects, while in Turkey, the first vessels began mobilizing for seabed preparation work for the Sakarya project.

Outlook

Subsea 7 expects for the full year that revenue will be broadly in line with 2021 and that adjusted EBITDA and net operating income will be in line with or better than 2021.

Tendering in both the subsea and fixed offshore wind markets remains high and the underlying pricing environment continues to gradually improve, Subsea 7 said.

The company concluded that it is establishing new mechanisms for supply chain pricing to enable contract awards to occur in a volatile environment for raw material prices and is confident that its strong pipeline of prospects will translate into new orders during the remainder of the year.

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