Subsea 7 announced today results of Subsea7 Group for the second quarter and first half of 2023 which ended 30 June 2023.

Second quarter highlights  

• Second quarter Adjusted EBITDA of $162 million resulting in a margin of 11%
• Renewables business unit back on track, with Adjusted EBITDA margin of 11%
• Order intake remains strong at $2.2 billion, resulting in a book-to-bill of 1.4 times
• Backlog of $10.4 billion, of which $3.0 billion to be executed in 2023 and $4.3 billion in 2024
• Recent awards and high levels of ongoing tendering activity continue to support a return of Adjusted EBITDA margins to a range of 15-20% over the coming four years
• Full year 2023 guidance reconfirmed

John Evans, Chief Executive Officer, said:
Subsea7 delivered satisfactory financial results for the second quarter of 2023 reflecting a good operational performance in Subsea and Conventional and a strong result in Renewables. Continued positive momentum in new orders saw over $2 billion new work booked during the quarter, including notable awards of the Sakarya Phase 2A integrated subsea development in Türkiye, and an integrated monopile and cable installation contract for the East Anglia THREE wind development in the UK. Our book-to-bill was 1.4 times and the backlog grew to $10.4 billion. The Group is on track to meet Adjusted EBITDA expectations for the full year 2023, and the strong backlog, combined with the current positive dynamics in project tendering, gives us confidence that the Group Adjusted EBITDA margin will return to a range of 15-20% over the coming four years.

Operational highlights

During the second quarter, utilisation of our Subsea and Conventional vessels was high at 85%. Seven Seas made good operational progress on Sangomar in Senegal, and Seven Vega and Seven Pacific were active on the Bacalhau project in Brazil. Seven Borealis began the installation of jackets for the Marjan 2 project in Saudi Arabia, and we completed the transport and installation of a large jacket at the Azeri Central East development in the Caspian Sea. In addition, five vessels were active in Norway – Seven Oceans, Seven Oceanic, Seven Navica and Seven Falcon worked on eight fields for five clients including the Northern Lights CCUS project, while Seven Viking, continued its long-term IRM contract.

In the Renewables business unit Seaway Aimery finished the cable lay scope of Seagreen in July, and this $1.4 billion project has now been successfully completed. In Taiwan, Seaway Phoenix was active on Changfang and Xidao while, in the UK, Seaway Strashnov made good progress on Dogger Bank A where it has now installed 71 of 95 monopiles (at 25 July 2023). This strong performance by Seaway Strashnov will allow commencement of Dogger Bank B in late 2023, allowing us to de-risk the scope of work for 2024.

Seaway Alfa Lift is currently in transit to Europe and will join the fleet in Q3 2023. The vessel is planned to be deployed on transition piece installation on Dogger Bank A&B and C from 2023 to 2025, while monopile installation will continue throughout the period with Seaway Strashnov. This revised plan is being developed with our client and, although subject to final approvals, provides confidence in our financial estimates for the project. The construction of Seaway Ventus, a heavy-duty jack-up suitable for turbine and monopile installation, remains on track.

Second quarter financial review

Revenue of $1.5 billion increased 22% compared to the prior year period. Adjusted EBITDA of $162 million equated to an Adjusted EBITDA margin of 10.7%, in line with the prior year period. This reflected an increased contribution from Renewables – with a return to a double-digit Adjusted EBITDA margin – offset by lower margins in Subsea and Conventional where the mix of activity is currently skewed towards projects won in a challenging environment in 2020 and 2021. Depreciation, amortisation and impairment charges of $161 million included charges of $23 million primarily relating to two non-core, shallow water vessels in Nigeria. Net operating income, including the impairment charges, declined to $1 million from $18 million in the prior year period. After net finance costs of $8 million, and a net foreign exchange gains of $59 million – driven by non-cash embedded derivatives - net income for the quarter was $14 million compared to $22 million in Q2 2022.

Net cash used in operations was $31 million including a $176 million increase in net working capital. The increase in net working capital was in line with expectations. Net cash used in investing activities was $201 million mainly related to the remaining milestone payments for Seaway Alfa Lift and the compulsory acquisition of the remaining shares in Seaway 7 ASA equating to $13 million. Net cash used in financing activities was $60 million including a dividend payment of $112 million. Overall, cash and cash equivalents decreased by $288 million from 31 March 2023 to $398 million at 30 June 2023. Net debt at the end of the second quarter was $805 million including lease liabilities of $442 million.

Second quarter order intake was $2.2 billion comprising new awards of $1.5 billion and escalations of $0.7 billion resulting in a book-to-bill ratio of 1.4 times. Backlog at the end of June was $10.4 billion, of which $3.0 billion is expected to be executed in 2023 and $4.3 billion in 2024.

Outlook – full year 2023 on track

Subsea 7 continue to expect revenue and Adjusted EBITDA in 2023 to be higher than 2022, with a weighting towards the second half of the year. Pricing and contract terms showed continued positive momentum during the second quarter and recent awards, as well as the current market dynamics, support our view that Adjusted EBITDA margins should gradually return to a range of 15-20% over the coming four years. This is approaching the margin necessary to yield an appropriate return on capital employed.

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