Subsea 7 announce results for the second quarter of 2022
Second quarter highlights
- Adjusted EBITDA of $134 million, up 48% year-on-year, resulting in a margin of 11%
- Order intake of $2.1 billion, equating to a book-to-bill of 1.6 times
- Backlog of $7.8 billion, of which 10% is in Renewables, with $2.5 billion to be executed in 2022
- Cash and cash equivalents of $464 million and net debt (including lease liabilities) of $88 million
- Renewal of Subsea Integration Alliance for a further seven years
| Second Quarter | Half Year | |||
| For the period (in $ millions, except Adjusted EBITDA margin and per share data) | Q2 2022 Unaudited | Q2 2021 Unaudited | 1H 2022 Unaudited | 1H 2021 Unaudited |
| Revenue | 1,247 | 1,198 | 2,441 | 2,194 |
| Adjusted EBITDA(a) | 134 | 90 | 220 | 193 |
| Adjusted EBITDA margin(a) | 11% | 8% | 9% | 9% |
| Net operating income/(loss) | 18 | (28) | (13) | (37) |
| Net income/(loss) | 22 | (13) | 10 | (12) |
| Earnings per share – in $ per share | ||||
| Basic | 0.14 | (0.04) | 0.09 | (0.03) |
| Diluted(b) | 0.14 | (0.04) | 0.09 | (0.03) |
| At (in $ millions) | 30 Jun 2022 Unaudited | 31 Mar 2022 Unaudited | ||
| Backlog(c) | 7,796 | 7,295 | ||
| Book-to-bill ratio(c) | 1.6 | 1.0 | ||
| Cash and cash equivalents | 464 | 500 | ||
| Borrowings | (368) | (379) | ||
| Net cash excluding lease liabilities(d) | 96 | 121 | ||
| Net debt including lease liabilities(d) | (88) | (98) |
John Evans, Chief Executive Officer, said:
In the second quarter of 2022, Subsea 7 delivered a strong performance in Subsea and Conventional, while the Renewables business unit performed in line with June’s trading update. Since the first quarter, the industry’s challenges relating to the supply chain and raw material price inflation have stabilised, allowing a number of projects to proceed. Order intake in the quarter was robust at $2.1 billion resulting in growth in our backlog to $7.8 billion. In addition, our pre-backlog (subject to FID(1)) was over $1 billion, reflecting offshore wind projects in the UK that we expect to convert to firm awards by early 2023. Both our core markets – subsea and offshore fixed wind – continue to improve, with positive momentum in pricing and risk allocation. During the quarter, we extended the Subsea Integration Alliance with Schlumberger for a further seven years. Subsea Integration Alliance has become a market leader in integrated SPS-SURF projects and we look forward to further growth. Overall, Subsea 7 is well-positioned to benefit from these positive market dynamics, and to deliver on a strategy that combines capital returns and growth over the long term.
Operational highlights
In the second quarter the Subsea and Conventional business unit made good progress on its portfolio, with projects completing in the Gulf of Mexico and Saudi Arabia. Activity remained high in the Gulf of Mexico, with Seven Arctic, Seven Navica, Seven Oceans and Seven Vega active on Anchor, Jack St Malo 4, Mad Dog 2, and Vito. In northern Europe, Seven Oceans worked on the Johan Sverdrup Phase 2, Balmoral and Pierce fields. Procurement neared completion for the fast-tracked Sakarya integrated project in Turkey, and the shallow water section of pipelay commenced.
In the Renewables business unit, foundation installation and cable lay work continued, as planned, on the Seagreen project in the UK. At the end of the quarter, 30 of 114 foundations and 21 cables had been installed. In Taiwan, Seaway Yudin worked on the Formosa 2 project while, in the Netherlands, Seaway Strashnov, Seaway Aimery and Seaway Moxie worked on the Hollandse Kust Zuid project. Both Formosa 2 and Hollandse Kust Zuid progressed in accordance with the execution plan announced in June, and they remain on track for completion in August and September, respectively.
Second quarter financial review
Second quarter revenue of $1.2 billion increased by 4% compared to the prior year period, reflecting growth in Subsea and Conventional offset by lower revenues in Renewables primarily driven by the phasing of the Seagreen project. Adjusted EBITDA of $134 million was up 48% year-on-year driven by a strong margin in Subsea and Conventional, partly offset by losses in Renewables. Net operating income was $18 million after depreciation and amortisation charges of $116 million. Net income for the quarter was $22 million, after taxation of $36 million and favourable other gains and losses of $47 million, including net foreign exchange gains of $44 million.
Net cash generated from operations was $94 million including a $63 million adverse movement in net working capital. Net cash used in investing activities was $50 million, including $52 million related to purchases of property, plant and equipment. Net cash used in financing activities was $72 million which included dividends of $32 million. Overall, cash and cash equivalents decreased by $36 million from 31 March 2022 to $464 million with net debt of $88 million, including lease liabilities of $184 million. As communicated in the Seaway 7 trading update in June 2022, progress on Seaway Alfa Lift build has encountered delays. The root cause of the delays in the delivery of the vessel is due to the status of the mission equipment, engineering and procurement. These conditions, attributable to OHT ASA, were present on 1 October 2021, the date of the business combination, as a result, the adverse financial impact has been accounted for as an adjustment to the transaction’s purchase price allocation.
Order intake
Order intake was $2.1 billion comprising new awards of $1.7 billion, escalations of approximately $400 million, and adverse foreign exchange movements of approximately $300 million, resulting in a book-to-bill ratio of 1.6 in the quarter. Backlog at the end of June was $7.8 billion, of which $2.5 billion is expected to be executed during the remainder of 2022.
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