Subsea 7 Down on Impairment

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Oil services company Subsea 7 has plunged into the red on fourth quarter revenue drop and hefty impairment charge, following a downward revision of forecast activity levels, driven by challenging market conditions. 

The company recognised net loss of $977 million in the quarter, compared to net income of $74 million in Q4 2013. The net loss was primarily due to the goodwill impairment charge of $1,183 million.

Revenue for the quarter was $1.4 billion, a decrease of $191 million compared with Q4 2013. The decrease reflected lower activity levels across AFGOM and NSC, partially offset by increased activity in APME and Brazil.

Revenue for 2014 was $6.9 billion, an increase of $573 million or 9% compared to 2013.

A net loss of $381 million was incurred in 2014 compared to net income of $344 million in 2013. Excluding the impact of the goodwill impairment charge, the underlying net income in 2014 increased by $458 million to $802 million compared to 2013.

“The level of tendering activity for new SURF awards remains subdued as oil companies continue to delay final investment decisions and although there are potential projects expected to be awarded to the market in 2015, the timing remains highly uncertain,” the company said in a statement.

Subsea 7 had a backlog of $8.2 billion at 31 December 2014, a decrease of $1.2 billion compared with 30 September 2014. Major awards in the quarter included the Stampede project for Hess Corporation in the US Gulf of Mexico, a contract for CNR International in support of Baobab Field Phase III, offshore Ivory Coast, and an installation contract for Shell in the US Gulf of Mexico.

Jean Cahuzac, Chief Executive Officer, said: “Subsea 7 is positioned competitively for new market awards and reported 2014 order intake of $3.3 billion. This comprised $2.1 billion of new awards, including the Catcher development in the North Sea for Premier Oil, and $1.6 billion of escalations, partly offset by a $0.4 billion adverse foreign exchange impact. Market awards for large SURF contracts slowed in the latter half of the year as a number of potential projects were delayed. As a result our backlog decreased to $8.2 billion at the end of 2014, of which $4.1 billion is expected to be executed in 2015.”

“Reflecting challenges facing the oil and gas industry in the near to medium-term, and in order to preserve the Group’s financial flexibility so that it can benefit from opportunities that may arise during the downturn, the board of directors will not recommend a dividend in respect of 2014 to the shareholders at the Annual General Meeting.”

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