Subsea 7 S.A. announced results for the first quarter which ended 31 March 2022.
First quarter highlights
- Revenue up 20% year-on-year to $1.2 billion
- Adjusted EBITDA of $86 million
- Order intake of $1.2 billion, equating to a book-to-bill of 1.0 times
- Backlog of $7.3 billion, of which 14% is in Renewables, with $3.2 billion to be executed in 2022
- Cash and cash equivalents of $500 million and net debt (including lease liabilities) of $98 million
- Floating wind strategy progresses with Ørsted acquisition of 80% stake in Salamander development
John Evans, Chief Executive Officer, said:
In the first quarter of 2022, Subsea 7 delivered revenue and EBITDA in line with management’s expectations and guidance for the full year is unchanged. Our backlog remains stable at $7.3 billion, implying high visibility on revenue for the remainder of the year. Tendering activity remains high and we are collaborating with our clients and supply chain partners to navigate the bottlenecks in the global supply chain. The risk to our awarded projects is reduced through back-to-back contracts and index-linked mechanisms with our suppliers. Overall, we believe the long-term outlook remains positive for both the subsea and offshore wind industries with several large awards to the market expected in the remainder of 2022.
In line with the guidance given by management last quarter, our vessel activity in the first quarter included planned maintenance and dry docking, equivalent to around 250 days of downtime. Nevertheless, active vessel utilisation was 72% in the first quarter, compared with 66% in the prior year period, and is expected to improve over the course of the year as the level of dry docking normalises.
In the first quarter the Subsea and Conventional business unit made good progress on our portfolio of projects. In the Gulf of Mexico, Seven Navica, Seven Oceans and Seven Oceanic were active on the King’s Quay project, which is substantially complete, while Seven Arctic continued offshore activities for Mad Dog 2. In Africa, Seven Borealis and Seven Pacific completed our work scope on the Jubilee project, while good progress was made on the fabrication scope for the Sanha Lean Gas project. In Norway, Seven Vega experienced several weeks of standby time due to adverse weather but completed its pipelay scope for Johan Sverdrup Phase 2 with support from Seven Falcon. In Saudi Arabia, Seven Champion was fully utilised during the quarter on the 28 Jackets project (CPRO 48 and 49). Engineering and fabrication activities continued on the Bacalhau, Mero-3 and Barossa projects, while in Turkey, the first vessels began mobilising for seabed preparation work for the Sakarya project.
In the Renewables business unit we continued work on the Seagreen project and laid inner-array cables associated with the first 21 jackets. In Taiwan, we commenced operations on our remaining scope of the Formosa 2 project, but the pace of execution remained slower than expected due to operational challenges and the impact of Covid-19 restrictions. Towards the end of the quarter, Seaway Strashnov installed the foundations for the Kaskasi project, offshore Germany.
First quarter financial review
First quarter revenue of $1.2 billion increased by 20% compared to the prior year period, reflecting strong growth in the Subsea and Conventional business unit. Adjusted EBITDA of $86 million was in line with the prior year period after adjusting for an $18 million restructuring credit recognised in Q1 2021. During the quarter there was a high level of planned vessel maintenance and dry docking. A net operating loss of $31 million was recognised, which included depreciation and amortisation charges of $117 million. The net loss for the quarter was $12 million, after a tax credit of $15 million and other gains and losses of $7 million, including net foreign exchange gains of $2 million.
Net cash generated from operations was $39 million including a $38 million adverse movement in net working capital that reflects the timing of milestones on certain large EPCI projects. Net cash used in investing activities was $51 million. Net cash used in financing activities was $90 million which included $37 million repayment of Seaway 7 ASA’s Revolving Credit Facility and $21 million of share repurchases. Overall, cash and cash equivalents decreased by $98 million from 31 December 2021 to $500 million with net debt of $98 million, including lease liabilities of $219 million.
Order intake was $1.2 billion comprising new awards of $630 million and escalations of approximately $530 million, resulting in a book-to-bill ratio of 1.0. Backlog at the end of March 2022 was $7.3 billion, of which $3.2 billion is expected to be executed during the remainder of 2022.
Outlook for full year 2022
We continue to expect that revenue will be broadly in line with 2021 and that Adjusted EBITDA and net operating income will be in line with or better than 2021. Tendering in both the subsea and fixed offshore wind markets remains high and the underlying pricing environment continues to gradually improve. We are establishing new mechanisms for supply chain pricing to enable contract awards to occur in a volatile environment for raw material prices and we are confident that our strong pipeline of prospects will translate into new orders during the remainder of the year.