Subsea 7 announced revenue for the second quarter 2015 of $1.4 billion, a decrease of $553 million or 29% compared with Q2 2014.
Adjusted EBITDA for the quarter was $275 million, a decrease of $178 million compared to Q2 2014. Adjusted EBITDA margin was 20%, compared with 24% in Q2 2014. The reduction in Adjusted EBITDA reflected the decrease in activity and included a charge of $100 million following the Group’s decision, announced in May, to implement its programme of cost reduction measures including a resizing of the fleet and workforce.
Jean Cahuzac, Chief Executive Officer, said: “Subsea 7 delivered good operational and financial results in the second quarter, driven by strong execution and cost control discipline in a challenging market environment.
“During the quarter Subsea 7 announced a cost reduction programme to resize the fleet and workforce in line with the declining workload. A $100 million charge related to the resizing was recognised in the second quarter, out of an estimated total charge of $140 million. The Group will reduce its capacity by 2,500 people and 12 vessels by early 2016, delivering expected annualised savings of approximately $400 million in employee related costs and about $150 million in vessel costs.”
Net operating income for the quarter was $169 million, a decrease of $182 million compared to Q2 2014.
Net income was $88 million in the quarter, compared to $266 million in Q2 2014. The reduction was primarily due to the decrease in net operating income; and a net foreign currency loss of $36 million in Q2 2015, recognised within other gains and losses, compared with a net foreign currency gain of $10 million in Q2 2014, partially offset by a decrease in the tax charge of $49 million compared to Q2 2014.
“Global vessel utilisation increased to 82% in the second quarter from 68% in the prior quarter as the offshore phase of several projects progressed significantly and activity in the North Sea increased in part due to the seasonally better weather,” Cahuzac added.
“Order intake was $0.9 billion reflecting Subsea 7’s competitiveness in a market that remained subdued. Announced awards comprised a two year contract offshore Brazil for the pipelay support vessel (PLSV) Seven Seas and a large contract for the Maria project, offshore Norway. Order backlog at the end of June was $7.2 billion, $0.4 billion lower than at the start of the quarter, with no material impact from foreign exchange movements in the period.
“Net debt of $151 million compared to $288 million at the end of the first quarter, reflected $297 million net cash generated from operating activities in the second quarter, which included a decrease in net operating assets. To further strengthen the Group’s liquidity position a new Export Credit Agency backed secured term loan facility of up to $357 million was signed after the period close.”
Operational highlights for the second quarter 2015
In the Northern Hemisphere and Life of Field Business Unit significant progress was made on several projects. The Montrose project completed the installation of bundles and pipelines in the quarter. The Aasta Hansteen and Martin Linge projects, both progressed well with their offshore phases. Offshore installation on the Catcher project commenced with Seven Navica beginning pipelay at the end of the period. Life of Field and i-Tech activity levels were similar to the first quarter.
In the Southern Hemisphere and Global Projects Business Unit the OFON 2 and Erha North projects, offshore Nigeria, progressed significantly, as did the two Lianzi projects, offshore Angola. The TEN project, offshore Ghana, proceeded with engineering, procurement and fabrication, and is due to commence offshore operations in the third quarter. The seven PLSVs on long-term contracts, offshore Brazil, delivered another strong quarter with high utilisation, the company noted.
The sustained downturn in oil company expenditure continues to result in lower industry activity and the timing of new awards to market remains highly uncertain.
“As guided previously, Group revenue is expected to be significantly lower in 2015 compared to the record level reported last year and Adjusted EBITDA margin is expected to decrease compared to 2014.
“The fundamental long-term outlook for deepwater subsea field developments remains intact despite the challenges facing the industry as a result of the lower oil price. Subsea 7 is being proactive in implementing a cost reduction programme and maintaining a solid financial position. By reinforcing its ability to engage early with clients and offer lower cost global solutions for the development of projects, Subsea 7 is strengthening its top tier position,” Cahuzac concluded.