Subsea 7 hit by reduction in SURF activityCompany News // April 28, 2016
Jean Cahuzac, Chief Executive Officer, says the company's performance in the first quarter of 2016 benefitted from good project execution but was affected by the downturn in demand for subsea, umbilicals risers and flowlines (SURF) projects.
"Reported revenue was US$746 million in the first quarter 2016, 37 per cent lower than the prior year period, due to the reduction of SURF project activity worldwide," he said. "Adjusted EBITDA was US$284 million with an Adjusted EBITDA margin of 38 per cent, which was significantly higher than 2015 despite the lower revenues. This performance benefitted from good project execution overall and successful risk mitigation measures on projects which were nearing completion. It also reflected the impact of the group’s cost reduction and resizing plan that
was implemented in 2015.
"Active vessel utilisation was 71 per cent with one chartered vessel released in the quarter and seven owned vessels stacked at quarter end. Total vessel utilisation in the first quarter was 55 per cent due to low levels of activity. Order intake of US$1.1 billion resulted in backlog increasing to US$6.5 billion as at 31 March. Announced awards in the quarter comprised the West Nile Delta Phase 2 project, offshore Egypt, the largest project awarded to Subsea 7 since 2011, and two Life of Field awards, offshore UK. Cash and cash equivalents increased to US$1.1 billion as at 31 March. Net cash increased to US$633 million, driven by US$281 million of cash generated from operating activities and a continued focus on working capital management. The group extended its revolving credit
facility from US$500 million to US$750 million during the first quarter, taking total undrawn credit facilities to US$1.1 billion at the quarter end."
Subsea 7 said the outlook remains challenging and the timing of new contract awards is still uncertain as clients continue to postpone capital investment decisions in the current market environment. Subsea 7 is successfully working with clients and alliance partners to drive down the costs of development with innovative and cost effective solutions that will enable more projects to progress despite the low oil price.
Full year 2016 revenue is expected to be significantly lower than in 2015 and Adjusted EBITDA percentage margin is expected to be lower compared to 2015. "In this context, additional cost reduction measures will be implemented during the year," said the company, noting that the fundamental long-term outlook for subsea field developments remains positive and industry activity is expected to improve when the oil and gas markets rebalance.