SUBSEA 7 INC. REPORT FOR THE FIRST QUARTER April 2009

Transcription

1 SUBSEA 7 INC. REPORT FOR THE FIRST QUARTER April 2009 Subsea 7 Inc. (Oslo Stock Exchange: SUB) today reports results for the first quarter of PERFORMANCE SUMMARY Quarter Highlights Good project execution and profitable in all regions. Successful completion of a number of projects, including Chevron s Tombua Landana development. Awarded contract by Petrobras in Brazil valued at approximately USD 200 million in support of the Tambau Urugua and P-56 developments. Financial Results The Group s accounts are prepared in accordance with International Financial Reporting Standards (IFRS). OPERATIONS North Sea Three months ended 31/03/ /03/2008 In USD millions Unaudited Unaudited Revenue Adjusted EBITDA Net operating profit Profit before tax Net profit attributable to equity shareholders Earnings per share, in USD per share Earnings per share, basic Earnings per share, diluted Highlights for the quarter included the successful completions of Venture s Chestnut P2 development and Ithaca s Jacky project. Engineering and procurement activity continued on Centrica s Grove project during the quarter and offshore work on Venture s Channon / Barbarossa and Eon s Rita developments also progressed as planned. In Norway, offshore activity on the StatoilHydro Vega project commenced towards the end of the quarter whilst onshore fabrication of the pipeline was undertaken at the Vigra base. Project management, engineering and procurement continued on BP s Skarv and Valhall Re-Development projects. Inspection, Repair and Maintenance (IRM) operations continued on the Shell, ConocoPhillips, Total and BP frame agreements. The Rockwater 1, Toisa Polaris and Kommander Subsea vessels all completed scheduled drydocks during the quarter. 1

2 Africa The final offshore phase of Chevron s Tombua Landana project in Angola was successfully completed during the quarter. Operations continued on the BP Block 18 Life of Field project offshore Angola and engineering and project management activities progressed in respect of BP s Block 31 contract. Activity continued in support of Addax s Okwori field in Nigeria. Brazil The pipe for the StatoilHydro Peregrino project and the shore-approach section of the Petrobras Sul Capixaba project were installed during the quarter. The remainder of the Sul Capixaba pipeline will be installed during the third quarter of Shell s BC-10 project continued to progress with completion scheduled for the third quarter of Oceans and Seven Seas continued to perform well in support of this development. The Seven The K3000 and Lochnagar continued to support Petrobras on day-rate operations. The Normand Seven made good progress on the Roncador project for Petrobras having temporarily suspended work to successfully complete Shell s Salema riser replacement project. North America The Skandi Neptune continued to support BP s Thunder Horse project with some further work being undertaken for BP s Atlantis development. This vessel was off-hire from the end of January 2009 until the middle of February 2009 for a planned drydock. Engineering and project management continued in respect of the Petrobras Cascade and Marathon Droshky projects. Construction work at the Port Isabel spoolbase in Texas progressed well. The works are on track to be concluded in the second quarter of 2009 with welding in respect of the Marathon Droshky project due to commence on schedule. Asia Pacific The Rockwater 2 continued to support Allseas offshore India, before commencing a scheduled drydock at the end of March The Venturer continued to support Woodside s operations in Australia during the quarter. In February 2009, the Company and Technip announced their agreement to dissolve their joint venture, Technip Subsea 7 Asia Pacific, once it has completed all its existing projects and tendered work. The companies intend to pursue separate strategic development opportunities in the region. 2

3 INVESTMENTS During the quarter, the Company continued to hold investments in listed equity shares and debt securities. At 31 March 2009, these investments were treated as Available-for-sale financial assets and were marked-to-market in the balance sheet, giving rise to an increase in their carrying value during the quarter of USD 23.8 million. USD 15.7 million of this increase in the quarter has been reflected directly in Shareholders equity. The remaining USD 8.1 million, which reflects the re-measurement at fair value of the embedded option contained within the debt securities, is included in the consolidated income statement. FINANCING On 31 March 2009, the Company repurchased USD 15 million (par value) of the USD 300 million 2.8% Subsea 7 Inc. convertible notes due 2011 for US$11.03 million, or 73.5% of the par value. The Company did not previously hold any of its own convertible notes. A gain of USD 2.5 million in respect of this repurchase has been included within finance income in the consolidated income statement. On 2 April 2009, the Company concluded a three-year revolving credit facility with HSBC Bank plc for USD 50 million. The undrawn loan facilities available to the Company at the date of this report total USD 150 million. FINANCIALS Revenue for the first quarter 2009 was USD million compared to USD million for the same period in Net operating profit for the first quarter 2009 was USD 82.0 million compared to USD 84.7 million for the same period in Net financial expense for the first quarter 2009 was USD 5.1 million compared to USD 4.9 million for the first quarter Taxation expense for the first quarter 2009 was USD 24.7 million, which equates to an effective rate of 31%. Net profit attributable to equity shareholders for the first quarter 2009 was USD 55.0 million, or USD 0.37 per share, compared to a net profit of USD 55.1 million, or USD 0.37 per share, for the first quarter CAPITAL EXPENDITURE The construction of the diving support vessel Seven Atlantic progressed during the quarter with delivery expected by the end of the third quarter of Engineering and procurement continued in respect of the new-build pipelay and construction vessel to be named Seven Pacific. This vessel is scheduled for delivery in the fourth quarter of SHARE CAPITAL During the quarter, 7,500 share options were exercised under the Group s share option plan at a strike price of NOK per share. The Company had 146,919,380 shares issued and outstanding at 31 March

4 BACKLOG The Group was awarded new contracts, including commitments under frame agreements, of an aggregate amount of USD 0.3 billion during the quarter. The worldwide order book of the Group at 31 March 2009 was approximately USD 2.9 billion, comprised of approximately USD 1.9 billion of day-rate contracts and USD 1.0 billion of lump-sum contracts. This compares to a worldwide order book of the Group of USD 3.9 billion at 31 March MAJOR NEW CONTRACT AWARDS SINCE 1 JANUARY 2009 In March 2009, the Company announced that it had been awarded a contract by Petrobras for the Tambau Urugua and P-56 developments in the Santos and Campos basins, offshore Brazil. The contract is valued at approximately USD 200 million, with the offshore pipeline installation campaign scheduled to take place during OUTLOOK The market outlook continues to retain a degree of uncertainty for the medium term as a result of the current economic climate. As indicated previously, national oil companies and major operators are generally expected to maintain their spending levels. Notwithstanding this, the whole industry is taking time to re-assess projects and take advantage of potential cost reductions given the current environment. This is resulting in delays in contract awards and, in respect of some of the smaller players in the North Sea and North America, a cancellation or deferment of projects. The Company continues to focus on its efforts to reduce costs and improve efficiencies in the supply chain in order to remain competitive in the current market. On behalf of the Board of Directors of Subsea 7 Inc. 21 April 2009 Kristian Siem, Chairman 4

5 CONSOLIDATED INCOME STATEMENT Three months ended Year ended 31/03/ /03/ /12/2008 (Amounts in USD 1,000) Unaudited Unaudited Audited Revenue 602, ,109 2,373,252 Operating expenses (495,625) (456,937) (1,864,331) Depreciation, amortisation and impairments (25,168) (20,735) (95,300) Profit on disposal of property, plant and equipment ,671 Net operating profit 82,033 84, ,292 Changes in fair value of derivative financial instruments 11,644 5,135 (34,177) Net currency (loss)/gain (11,249) (4,772) 18,761 Finance income 3,452 2,361 5,881 Finance expense (8,968) (7,604) (33,014) Net financial items (5,121) (4,880) (42,549) Share of post-tax profit from joint ventures 2,488 1,580 11,768 Share of post-tax profit/(loss) from associates (8) Profit before tax 79,785 81, ,503 Taxation expense (24,740) (26,499) (130,506) Net profit attributable to equity shareholders 55,045 55, ,997 Average number of issued shares (1,000) 146, , ,938 Earnings per share, in USD per share Average number of issued shares, diluted (1,000) 164, , ,975 Earnings per share, diluted, in USD per share

6 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three months ended Year ended 31/03/ /03/ /12/2008 (Amounts in USD 1,000) Unaudited Unaudited Audited Net profit attributable to equity shareholders 55,045 55, ,997 Other comprehensive income/(expense): Currency translation differences (11,989) (8,066) (302,219) Available-for-sale financial assets fair value adjustment 15,707 - (71,801) 3,718 (8,066) (374,020) Total comprehensive income/(expense) for the period 58,763 47,014 (110,023) 6

7 CONSOLIDATED BALANCE SHEET At 31/03/2009 At 31/03/2008 At 31/12/2008 (Amounts in USD 1,000) Unaudited Unaudited Audited ASSETS Non-current assets Goodwill 98,533 98,533 98,533 Other intangible assets 989 1,636 1,130 Property, plant and equipment 994, , ,408 Deferred tax assets 14,774 3,458 15,113 Retirement benefit asset Investment in joint ventures 14,972 2,394 12,582 Investment in associates 1,985 1,799 1,601 1,125,458 1,089,356 1,120,367 Current assets Inventories 46,417 21,038 22,567 Trade and other receivables 772, , ,097 Available-for-sale financial assets 109,203-85,414 Derivative financial instruments 3,869 9,274 1,483 Cash and cash equivalents 89, , ,066 1,020, , ,627 TOTAL ASSETS 2,146,245 1,954,375 2,002,994 SHAREHOLDERS EQUITY AND LIABILITIES Shareholders equity Share capital 1,469 1,468 1,469 Share premium reserve 271, , ,238 Shares held by Employee Share Trust (9,430) - (9,430) Other reserves (226,075) 143,243 (225,650) Retained Earnings 712, , , , , ,666 Non-current liabilities Borrowings 553, , ,737 Deferred tax liabilities 98,034 63,292 99,610 Retirement benefit obligations 1,101-1,002 Other non-current liabilities 4,222 4,369 4, , , ,586 Current liabilities Trade and other payables 694, , ,358 Current tax liabilities 35,284 42,165 32,728 Derivative financial instruments 9,479 1,301 10,656 Finance lease obligations , , ,742 Total liabilities 1,396,817 1,102,144 1,313,328 TOTAL SHAREHOLDERS EQUITY AND LIABILITIES 2,146,245 1,954,375 2,002,994 7

8 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (Amounts in USD 1,000) Share capital Share premium Shares held by Employee Share Trust Other reserves Retained earnings Total At 1 January 2009 (Audited) 1, ,238 (9,430) (225,650) 652, ,666 Foreign currency translation (11,989) - (11,989) Available-for-sale financial assets fair value adjustment ,707-15,707 Other comprehensive income/(expense) ,718-3,718 Net result for the period ,045 55,045 Total comprehensive income/(expense) ,718 55,045 58,763 Share based payments Shares issued exercise of options Repurchase of convertible notes (3,163) 3,163 - Depreciation on re-valued assets (980) At 31 March 2009 (Unaudited) 1, ,270 (9,430) (226,075) 712, ,428 At 1 January 2008 (Audited) 1, , , , ,757 Foreign currency translation (8,066) - (8,066) Other comprehensive income/(expense) (8,066) - (8,066) Net result for the period ,080 55,080 Total comprehensive income/(expense) (8,066) 55,080 47,014 Purchase of own shares (9) (15,707) (15,716) Share based payments ,161 1,161 Shares issued exercise of options Depreciation on re-valued assets (1,053) 1,053 - At 31 March 2008 (Unaudited) 1, , , , ,231 8

9 CONSOLIDATED CASH FLOW STATEMENT Three months ended Year ended 31/03/ /03/ /12/2008 (Amounts in USD 1,000) Unaudited Unaudited Audited Cash flows from operating activities Cash generated from operations 38, , ,414 Finance income received 927 2,635 6,237 Finance expense paid (1,048) (19) (10,578) Taxation paid (23,421) (26,235) (115,016) Net cash from operating activities 14,833 99, ,057 Cash flows from investing activities Proceeds from sale of property, plant and equipment ,073 Purchase of property, plant and equipment (45,128) (105,841) (449,282) Purchase of Available-for-sale financial assets - - (179,381) Net cash used in investing activities (45,128) (105,564) (602,590) Cash flows from financing activities Net proceeds from issue of ordinary share capital Purchase of own shares - (15,716) (15,716) Shares purchased by Employee Share Trust - - (9,430) Drawdown of loans ,000 Government grants received Finance lease principal payments - (198) (394) Net cash generated from/(used in) financing activities 32 (15,899) 124,913 Effects of exchange rate changes 5,404 3,023 (46,971) Net decrease in cash and cash equivalents (24,859) (19,159) (53,591) Cash and cash equivalents at start of period 114, , ,657 Cash and cash equivalents at end of period 89, , ,066 9

10 NOTES TO THE FINANCIAL INFORMATION 1. Basis of preparation The condensed consolidated financial information for the period 1 January to 31 March 2009 has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union, but has not been audited or reviewed. The condensed consolidated financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2008 which have been prepared in accordance with IFRSs as adopted by the European Union. 2. Accounting policies The accounting policies adopted in the preparation of the condensed consolidated financial information are consistent with the annual financial statements for the year ended 31 December 2008, as described in those annual financial statements. In addition the following new standards, amendments to standards and interpretations have been adopted from 1 January 2009: Improvements to IFRSs IAS 39 and IFRS 7 IFRS 2 (Amendment) IFRS 8 IAS 1 (Revised) IAS 23 IAS 27 Reclassification of Financial Assets Share Based Payment vesting conditions and cancellations Operating Segments Presentation of Financial Statements Borrowing Costs (Revised) Consolidated and Separate Financial Statements Cost of an investment in a subsidiary, jointly controlled entity or associate (Amendments) As a result of the adoption of IAS 1 (Revised) and IFRS 8, the Group has made some presentational changes to the interim statements. As a result of the adoption of IFRS 8, the Group has reviewed its reportable segments. The segments presented under IFRS 8 have not changed from those presented as primary segments under IAS 14. The Group has updated its accounting policy in respect of borrowing costs to include requirements of IAS 23 to capitalise attributable interest on assets which necessarily take a substantial period of time to get ready for their intended use or sale. This has had no material impact in the quarter. The adoption of the remaining standards, amendments to standards and interpretations above had no impact on the reported income or net assets of the Group in the quarter. 3. Segment reporting (Amounts in USD 1,000) North Sea Africa Brazil North America Asia Pacific Global Total Three months ended 31/03/2009 (Unaudited) Revenue 216,669 74, ,157 23,330 12, ,826 Profit/(loss) before tax 26,315 18,021 26,311 10,060 5,580 (6,502) 79,785 Three months ended 31/03/2008 (Unaudited) Revenue 200, , ,536 50,118 14, ,109 Profit/(loss) before tax 22,252 37,689 12,244 13,428 11,720 (15,754) 81,579 The Global segment comprises the global support functions, including the vessel and equipment management group which is responsible for the management and maintenance of the vessels and equipment. Finance income and expense, derivative instrument fair value changes, net currency items, profits or losses on disposals of property, plant and equipment and share of profits from associates are also allocated to this segment. 10

11 4. Cash flow from operating activities Three months ended Year ended 31/03/ /03/ /12/2008 (Amounts in USD 1,000) Unaudited Unaudited Audited Net profit attributable to equity shareholders 55,045 55, ,997 Adjustments for: Taxation expense 24,740 26, ,506 Depreciation and amortisation 25,168 20,735 95,300 Share based payments 967 1,161 4,640 Profit on disposal of property, plant and equipment - (252) (11,671) Deferred government grant income (5) (6) (39) Finance income (3,452) (2,361) (5,881) Finance expense 8,968 7,604 33,014 (Gain)/loss on embedded derivative within convertible notes (8,082) - 22,166 Share of post tax profit from joint ventures (2,488) (1,580) (11,768) Share of post tax (profit)/loss from associates (385) (190) 8 Changes in working capital: (Increase)/decrease in inventories (23,850) 4,171 2,642 (Increase)/decrease in trade and other receivables (115,356) (31,498) 3,325 Increase in trade and other payables 77,105 43,537 64,175 Cash generated from operations 38, , , Adjusted EBITDA Three months ended 31/03/ /03/2008 (Amounts in USD 1,000 except percentages) Unaudited Unaudited Net profit attributable to equity shareholders 55,045 55,080 Adjustments: Taxation expense 24,740 26,499 Net financial items 5,121 4,880 Depreciation, amortisation and impairments 25,168 20,735 Profit on disposal of property, plant and equipment - (252) Adjusted EBITDA 110, ,942 Revenue 602, ,109 Adjusted EBITDA % 18.3% 19.0% The Group calculates "Adjusted EBITDA" (adjusted earnings before interest, taxation, depreciation and amortisation) as net profit attributable to equity shareholders adjusted for taxation, net financial items, depreciation, amortisation, impairments and profits or losses on disposals of property, plant and equipment. 11

12 6. Repurchase of Convertible Notes On 31 March 2009, the Company repurchased USD 15 million (par value) of the USD 300 million 2.8% Subsea 7 Inc. convertible notes due 2011 for US$11.03 million, or 73.5% of the par value. The Company did not previously hold any of its own convertible notes. A gain of USD 2.5 million in respect of this repurchase has been included within finance income in the consolidated income statement. 7. Contingent liabilities The Group is party to indemnities, legal actions and claims that arise in the ordinary course of business. Whilst the outcome of such legal proceedings cannot be readily foreseen, management believes that they will be resolved without material effect on the Group s results, financial position or liquidity. 8. Events occurring after the balance sheet date On 2 April 2009, the Company concluded a three-year revolving credit facility with HSBC Bank plc for USD 50 million. There were no other subsequent events between the balance sheet date and the date the condensed consolidated financial information was authorised for issue that require disclosure. 12