SUBSEA 7 INC. REPORT FOR THE SECOND QUARTER AND HALF YEAR 2010 - UNAUDITED 27 July 2010 Subsea 7 Inc. (Oslo Stock Exchange: SUB) today reports the second quarter and half year results for 2010. PERFORMANCE SUMMARY Quarter Highlights Good project execution in all regions. Award of the largest single contract to the Company s i-tech business by Petrobras in Brazil. The contract value is estimated at a minimum of USD 250 million with the potential for up to USD 405 million. The Company and Acergy S.A. announced that their Boards of Directors had agreed to combine the two companies. Completion is anticipated towards the end of 2010 or the first quarter of 2011, subject to shareholder approval, regulatory and other customary completion conditions. Half Year Highlights In addition to the above, the following is of note for the half year: Successful completion of Santos Henry project in Australia and Murphy s Kikeh flexible project in Malaysia. The new-build diving support vessel, Seven Atlantic, was commissioned and joined the fleet. Financial Results The Group s accounts are prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union. Three months ended Half year ended 30/06/2010 30/06/2009 30/06/2010 30/06/2009 In USD millions Unaudited Unaudited Unaudited Unaudited Revenue 519.9 637.2 972.8 1,240.1 Adjusted EBITDA 126.8 145.7 237.7 255.7 Net operating profit 93.8 117.8 172.3 199.9 Profit before tax 64.1 119.2 117.8 198.9 Profit for the period attributable to equity shareholders 41.5 82.2 77.6 137.3 Earnings per share, in USD per share Basic 0.28 0.56 0.53 0.93 Diluted 0.28 0.55 0.52 0.93 1
OPERATIONS North Sea During the quarter, the Seven Seas successfully completed the riser installation on Statoil s Troll B Gas Injection project. Fabrication of BP s Skarv clad flowlines was completed at the Vigra spoolbase in Norway. The offshore installation continued on BP s Skarv and Valhall Re-development projects in the Norwegian sector of the North Sea. Pipeline fabrication and offshore installation was completed on Total s K5CU project. Procurement, engineering and project management commenced on Apache s Bacchus and BP s Andrew pipeline bundles. These projects are scheduled for offshore installation in 2011. Life-of-Field operations continued on the Shell, ConocoPhillips, Total and BP frame agreements. The Seven Atlantic, and Normand Subsea continued working on Shell s frame agreement. Africa During the quarter, the Rockwater 1 successfully completed work for Addax in its Okwori and Antan field developments, offshore Nigeria. Operations continued on BP s Block 18 Life-of-Field project, offshore Angola. Preparation for spoolbase operations on BP s Block 18 Gas Export Line project continued, with offshore execution scheduled to commence late 2010. Project management and engineering progressed well in respect of BP s Block 31 project, which is scheduled to commence offshore operations late 2010. The Seven Oceans and Seven Seas achieved high levels of utilisation which contributed positively to the result for the region. Brazil Activity in Brazil remained high during the quarter. Offshore operations were successfully completed on Statoil s Peregrino project supported by the Seven Oceans. The Ubu spoolbase completed pipeline fabrication activity in respect of Petrobras P-56 project, with offshore installation rescheduled to the fourth quarter 2010 due to the necessary permits not being available. Project management and engineering continued in respect of Petrobras P-55 project in the Roncador field. The Lochnagar, K3000 and Normand Seven continued to support Petrobras on day-rate operations. completed a scheduled drydock during the quarter. The K3000 Other significant activities for the half year include the successful completion of Petrobras Sul Capixaba project. North America Marathon s Droshky project was closed out following completion of offshore activities during the first quarter 2010. The Skandi Neptune supported BP in the Macondo field, Gulf of Mexico. Life-of-Field operations were completed for ENI, Newfield and Shell. Engineering and project management progressed well for Anadarko s Caesar Tonga project. Other significant activities for the half year include the close out of Petrobras Cascade project. 2
Asia Pacific During the quarter, Murphy s Kikeh flexibles project was closed out. The Rockwater 2 completed FPSO installation activities in Vietnam and undertook planned maintenance. Project management and engineering commenced on BHP s Stybarrow project in Australia. Other significant activities for the half year include the successful conclusion of Santos Henry project. INVESTMENTS Second Quarter 2010 The Company continued to hold 1,094,004 shares in Acergy S.A. At 30 June 2010, these available-for-sale financial assets were marked-to-market in the balance sheet, giving rise to a decrease in their carrying value during the quarter of USD 3.9 million. This decrease in the quarter has been reflected directly in shareholders equity. Half Year 2010 In addition to the above, other significant investing activities for the half year include the following: During the first quarter 2010, the Company sold 3,488,881 of the shares held in Acergy S.A. for USD 61.4 million and recognised a gain of USD 4.3 million in respect of these shares. This gain was transferred from equity to the income statement and is included within finance income. During the first quarter 2010, the Company also sold its entire holding of the debt securities in Acergy S.A. for USD 111.6 million. Over the entire period of ownership, the Company realised a profit of USD 7.0 million in respect of these investments. FINANCING Second Quarter 2010 On 29 June 2010, the holders of USD 131.1 million (par value) of the USD 175 million zero coupon Subsea 7 Inc. convertible notes due 2017 exercised their option to redeem the notes at their accreted principal amount of USD 134.9 million. In July 2010, the Company cancelled its USD 40.5 million (par value) holding of these convertible notes. The remaining USD 3.4 million (par value) of convertible notes remain outstanding. Half Year 2010 In addition to the above, other significant financing activities for the half year include the following: In February 2010, the Company repurchased USD 11 million (par value) of its USD 300 million 2.8% coupon Subsea 7 Inc. convertible notes due 2011 for USD 11.1 million. The repurchased convertible notes remain outstanding and have not been cancelled. The Company now holds USD 51 million (par value) of its USD 300 million 2.8% Subsea 7 Inc. convertible notes due 2011. 3
FINANCIALS Second Quarter 2010 Revenue for the second quarter 2010 was USD 519.9 million compared to USD 637.2 million for the same period in 2009. The decrease in revenue was mainly due to reduced activity levels in Brazil in the second quarter of 2010 compared to the same period in 2009 during which Shell s BC-10 project was in its offshore phase. In addition, there were lower activity levels in Africa, which was offset to some extent by increased revenues in Asia Pacific due to the close out of Murphy s Kikeh project and the Rockwater 2 completing FPSO installation activities in Vietnam. Net operating profit for the second quarter 2010 was USD 93.8 million compared to USD 117.8 million for the same period in 2009. Net operating margins as a percentage of revenue were 18.0% in the second quarter 2010 compared to 18.5% in the second quarter 2009. Net financial expense for the second quarter 2010 was USD 29.8 million compared to net financial income of USD 0.8 million for the second quarter 2009. The main reasons for this difference are losses in the marking-to-market of derivative financial instruments during the second quarter of 2010 of USD 12.9 million compared to gains of USD 23.5 million in the same period in 2009. In addition, net currency losses of USD 6.5 million were reported in the second quarter 2010 compared to net currency gains of USD 4.2 million reported in the second quarter 2009. This was offset to some extent by a lower finance expense of USD 12.5 million during the second quarter of 2010 compared to USD 28.9 million reported in the same period in 2009. This difference is predominantly attributable to the fact that in the second quarter of 2009, there was USD 20.3 million additional accretion which was recognised in respect of the reassessment of the life of the 2007 convertible notes, whereas there was no equivalent item in 2010. This was partly offset by interest expense of USD 4.7 million in respect of the convertible notes that were issued during the fourth quarter 2009. Taxation expense for the second quarter 2010 was USD 22.6 million which equates to an effective rate of 35.3%. Net profit attributable to equity shareholders for the second quarter 2010 was USD 41.5 million, or USD 0.28 per share, compared to a net profit of USD 82.2 million, or USD 0.56 per share, for the second quarter 2009. Half Year 2010 Revenue for the half year ended 30 June 2010 was USD 972.8 million compared to USD 1.2 billion for the same period in 2009. The decrease in revenue was mainly due to reduced activity levels in Brazil in the half year ended 30 June 2010 compared to the same period in 2009 during which Shell s BC-10 project was in its offshore phase. Increased activity in Asia Pacific in the half year ended 30 June 2010 compared to the same period in 2009 was offset by a decrease in activity in the North Sea and Africa. Net operating profit for the half year ended 30 June 2010 was USD 172.3 million, compared to USD 199.9 million for the same period in 2009 representing an increase in net operating margins as a percentage of revenue from 16.1% in the half year ended 30 June 2009 to 17.7% in the half year ended 30 June 2010. Net financial expense for the half year ended 30 June 2010 was USD 54.5 million compared to USD 4.4 million for the same period in 2009. The main reasons for this difference are losses in the marking-to-market of derivative financial instruments during the half year ended 30 June 2010 of USD 18.9 million compared to gains of USD 35.1 million made in the same period in 2009. Taxation expense for the half year ended 30 June 2010 was USD 40.4 million which equates to an effective rate of 34.3% compared to an expense of USD 61.7 million and an effective rate of 31.0% in 2009. Net profit attributable to equity shareholders for the half year ended 30 June 2010 was USD 77.6 million, or USD 0.53 per share, compared to a net profit of USD 137.3 million, or USD 0.93 per share in 2009. Cash and cash equivalents at 30 June 2010 were USD 455.6 million compared to USD 84.8 million at 30 June 2009. Shareholders equity at 30 June 2010 totalled USD 1.2 billion compared to USD 942.6 million at 30 June 2009. 4
CAPITAL EXPENDITURE Following the launch of the hull of the Seven Pacific in March 2010, the outfitting work continued during the quarter and is at an advanced stage at IHC Merwede s Hardinxveld yard. The fabrication of the main crane and vertical lay pipelay system is progressing well. The completed vessel is on schedule to be delivered during the fourth quarter of 2010. SHARE CAPITAL During the quarter, 22,500 share options were exercised under the Company s share option plan at a strike price of NOK 29.49 per share and 24,000 share options were exercised at a strike price of NOK 44.85 per share. The Company had 147,239,880 shares issued and outstanding at 30 June 2010. BACKLOG The Group was awarded new contracts, including commitments under frame agreements, of an aggregate amount of approximately USD 0.7 billion during the quarter. The worldwide order book of the Group at 30 June 2010 was approximately USD 2.8 billion, comprised of approximately USD 2.0 billion of day-rate contracts and USD 0.8 billion of lump-sum contracts. MAJOR NEW CONTRACT AWARDS SINCE 1 APRIL 2010 In April 2010, the Company announced the award of a pipeline bundle contract by Apache North Sea Ltd in the UK sector of the North Sea. The work includes the engineering, fabrication, installation and commissioning of a 7km pipeline bundle and will be offshore in early 2011. The contract is valued in excess of USD 75 million. In May 2010, the Company announced the award of the largest single contract award to its i-tech business. The award, from Petrobras in Brazil, is for the provision of ROV and intervention tooling services onboard a minimum of 20 and a maximum of 30 offshore drilling units. The contract value is estimated at a minimum of USD 250 million with the potential for up to USD 405 million, dependent upon the number of units awarded and the number of personnel deployed. In June 2010, the Company announced the award of a pipeline bundle contract by BP Exploration Operating Company Ltd for the Andrew Area Development Project in the UK sector of the North Sea. The contract is valued in excess of USD 135 million. In July 2010, the Company announced the award of a contract by Petrobras in Brazil, through its i-tech business. The contract is for the provision of ROV and underwater survey services onboard an ROV support vessel and is valued in the region of USD 50 million. PROPOSED COMBINATION OF SUBSEA 7 AND ACERGY In June 2010, the Company and Acergy S.A. announced a proposed combination of the two companies. The key terms of the proposed combination are: The combination is based on an agreed ratio between equity value of Acergy and Subsea 7 of 54:46 (Acergy: Subsea 7). Subsea 7 s shareholders to receive 1.065 Acergy common shares for every Subsea 7 common share. The Board will have a majority of independent directors and be chaired by Subsea 7 s current Chairman, Kristian Siem. Completion is anticipated towards the end of 2010 or the first quarter of 2011, subject to shareholder approval, regulatory approvals and other customary completion conditions. The Boards of Directors of both companies have unanimously agreed to recommend the combination to their respective shareholders. 5
OUTLOOK The market remains competitive in the short term. encouraging. However, the outlook in the medium to long-term remains Tendering activity remains at high levels in all regions. Recent project awards in the North Sea have been a positive development, with further projects expected to be awarded for execution in 2011 and 2012. Elsewhere, a number of major contracts are progressing towards sanction, with offshore installation due to commence after 2011. RISKS AND UNCERTAINTIES The principal risks and uncertainties faced by the Company over the remainder of the year are typical to the industry: risks associated with the bidding process, vessel performance and utilisation, project execution and supply chain management. In particular, the significant risks faced by the Company over the remaining half of the year relate to project execution, especially with regards to BP s Skarv project in Norway, Petrobras P-55 and P-56 projects in Brazil and BP s Block 31 and Block 18 Gas Export Line projects in Angola, all of which will be in offshore phases. In addition to the above, the Company is also exposed to a variety of financial risks associated with multinational operations and debt financing. The Company has in place risk management policies that seek to limit the adverse effects of these risks on its financial performance. Further details regarding these risks are set out in Note 2 to the financial statements in the Company s annual report for 2009. RESPONSIBILITY STATEMENT We confirm, to the best of our knowledge, that the condensed consolidated financial information for the period 1 January to 30 June 2010 included in this report has been prepared in accordance with IAS 34 Interim Financial Reporting and gives a true and fair view of the Group s assets, liabilities, financial position and profit as a whole. We also confirm, to the best of our knowledge, that this report includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year. On behalf of the Board of Directors of Subsea 7 Inc. 27 July 2010 Kristian Siem Chairman www.subsea7.com Mel Fitzgerald Chief Executive Officer 6
CONSOLIDATED INCOME STATEMENT Three months ended Half year ended Year ended 30/06/2010 30/06/2009 30/06/2010 30/06/2009 31/12/2009 (Amounts in USD 1,000) Unaudited Unaudited Unaudited Unaudited Audited Revenue 519,860 637,231 972,775 1,240,057 2,439,278 Project and vessel expenses (378,983) (478,149) (706,501) (960,150) (1,861,990) Other operating expenses (14,183) (13,991) (28,497) (27,614) (57,223) Depreciation and amortisation (33,507) (27,877) (66,987) (53,044) (117,214) Profit on disposal of property, plant and equipment 571 613 1,559 613 1,160 Net operating profit 93,758 117,827 172,349 199,862 404,011 Changes in fair value of derivative financial instruments (12,851) 23,501 (18,949) 35,145 47,755 Net currency (loss)/gain (6,511) 4,154 (10,383) (7,094) 4,767 Finance income 2,117 2,021 8,808 5,472 8,896 Finance expense (12,525) (28,924) (34,016) (37,892) (59,955) Net financial items (29,770) 752 (54,540) (4,369) 1,463 Share of post-tax (loss)/profit from joint ventures (107) 506 (417) 2,993 5,652 Share of post-tax profit from associates 171 78 358 462 1,074 Profit before tax 64,052 119,163 117,750 198,948 412,200 Taxation expense (22,631) (36,924) (40,353) (61,664) (123,849) Profit for the period 41,421 82,239 77,397 137,284 288,351 Attributable to: Equity shareholders 41,505 82,239 77,588 137,284 288,351 Non-controlling interests (84) - (191) - - 41,421 82,239 77,397 137,284 288,351 Earnings per share attributable to equity shareholders (in USD per share) Basic 0.28 0.56 0.53 0.93 1.96 Diluted 0.28 0.55 0.52 0.93 1.94 Weighted average number of issued shares (1,000) Basic 147,224 146,919 147,166 146,918 146,941 Diluted 148,591 158,013 148,581 147,122 150,586 7
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three months ended Half year ended Year ended 30/06/2010 30/06/2009 30/06/2010 30/06/2009 31/12/2009 (Amounts in USD 1,000) Unaudited Unaudited Unaudited Unaudited Audited Profit for the year 41,421 82,239 77,397 137,284 288,351 Currency translation differences (7,132) 98,035 (62,872) 86,046 97,012 Available-for-sale financial assets fair value adjustment (3,906) 11,750 9,652 27,457 56,743 gains reclassified to income statement - - (4,321) - - losses reclassified to income statement - - 8,246 - - Other comprehensive (expense)/income (11,038) 109,785 (49,295) 113,503 153,755 Total comprehensive income 30,383 192,024 28,102 250,787 442,106 Attributable to: Equity shareholders 30,467 192,024 28,293 250,787 442,106 Non-controlling interests (84) - (191) - - 30,383 192,024 28,102 250,787 442,106 8
CONSOLIDATED BALANCE SHEET At 30/06/2010 At 30/06/2009 At 31/12/2009 (Amounts in USD 1,000) Unaudited Unaudited Audited ASSETS Non-current assets Property, plant and equipment 1,123,066 1,143,100 1,189,389 Goodwill 98,533 98,533 98,533 Other intangible assets 340 895 621 Derivative financial instruments - 1,563 194 Deferred tax assets 14,240 15,819 11,849 Investment in joint ventures 3,195 9,571 2,958 Investment in associates 3,033 2,063 2,675 1,242,407 1,271,544 1,306,219 Current assets Inventories 33,751 23,218 32,981 Trade and other receivables 616,458 785,175 505,978 Available-for-sale financial assets 16,180 132,860 176,443 Derivative financial instruments - 7,417 5,337 Cash and cash equivalents 455,604 84,781 487,251 1,121,993 1,033,451 1,207,990 TOTAL ASSETS 2,364,400 2,304,995 2,514,209 EQUITY AND LIABILITIES Equity Share capital 1,473 1,469 1,470 Share premium reserve 273,099 271,270 271,664 Shares held by Employee Share Trust (9,430) (9,430) (9,430) Other reserves (133,151) (117,270) (43,603) Retained earnings 1,086,700 796,607 967,187 Shareholders equity 1,218,691 942,646 1,187,288 Non-controlling interests (191) - - Total equity 1,218,500 942,646 1,187,288 Non-current liabilities Borrowings 232,734 410,591 468,540 Deferred tax liabilities 96,839 98,793 106,577 Retirement benefit obligations 255 1,097 279 Derivative financial instruments 2,827 297 - Other non-current liabilities 310 3,667 346 332,965 514,445 575,742 Current liabilities Borrowings 238,697 167,452 133,465 Trade and other payables 546,872 639,259 576,098 Current tax liabilities 13,148 38,492 40,368 Derivative financial instruments 14,218 2,701 1,248 812,935 847,904 751,179 Total liabilities 1,145,900 1,362,349 1,326,921 TOTAL EQUITY AND LIABILITIES 2,364,400 2,304,995 2,514,209 9
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Amounts in USD 1,000) Share capital Share premium Shareholders equity Shares held by Employee Share Trust Other reserves Retained earnings Total Noncontrolling interest Total equity At 1 January 2010 (Audited) 1,470 271,664 (9,430) (43,603) 967,187 1,187,288-1,187,288 Foreign currency translation - - - (62,872) - (62,872) - (62,872) Available-for-sale financial assets fair value adjustment - - - 9,652-9,652-9,652 gains reclassified to income statement - - - (4,321) - (4,321) - (4,321) losses reclassified to income statement - - - 8,246-8,246-8,246 Other comprehensive expense - - - (49,295) - (49,295) - (49,295) Net result for the period - - - - 77,588 77,588 (191) 77,397 Total comprehensive (expense)/income - - - (49,295) 77,588 28,293 (191) 28,102 Share based payments - - - - 1,878 1,878-1,878 Shares issued exercise of options 3 1,435 - - - 1,438-1,438 Redemption of convertible notes - - - (35,973) 35,973 - - - Repurchase of convertible notes - - - (2,320) 2,114 (206) - (206) Depreciation on re-valued assets - - - (1,960) 1,960 - - - At 30 June 2010 (Unaudited) 1,473 273,099 (9,430) (133,151) 1,086,700 1,218,691 (191) 1,218,500 At 1 January 2009 (Audited) 1,469 271,238 (9,430) (225,650) 652,039 689,666-689,666 Foreign currency translation - - - 86,046-86,046-86,046 Available-for-sale financial assets fair value adjustment - - - 27,457-27,457-27,457 Other comprehensive income - - - 113,503-113,503-113,503 Net result for the period - - - - 137,284 137,284-137,284 Total comprehensive income - - - 113,503 137,284 250,787-250,787 Share based payments - - - - 2,161 2,161-2,161 Shares issued exercise of options - 32 - - - 32-32 Repurchase of convertible notes - - - (3,163) 3,163 - - - Depreciation on re-valued assets - - - (1,960) 1,960 - - - At 30 June 2009 (Unaudited) 1,469 271,270 (9,430) (117,270) 796,607 942,646-942,646 10
CONSOLIDATED CASH FLOW STATEMENT Half year ended Year ended 30/06/2010 30/06/2009 31/12/2009 (Amounts in USD 1,000) Unaudited Unaudited Audited Cash flows from operating activities Cash generated from operations 89,852 154,616 639,977 Finance income received 4,644 2,027 4,551 Finance expense paid (10,001) (6,059) (11,941) Taxation paid (69,131) (57,422) (90,998) Net cash from operating activities 15,364 93,162 541,589 Cash flows from investing activities Deferred consideration (2,500) - - Proceeds from sale of property, plant and equipment 1,821 618 1,413 Purchase of property, plant and equipment (59,424) (115,796) (246,331) Proceeds from sale of available-for-sale financial assets 173,015 - - Dividends received 230 7,136 16,336 Net cash from/(used in) investing activities 113,142 (108,042) (228,582) Cash flows from financing activities Net proceeds from issue of ordinary share capital 1,438 32 427 Repayment of loans - - (150,000) Proceeds from issue of convertible notes - - 272,902 Redemption of convertible notes (134,881) - - Repurchase of convertible notes (11,067) (11,025) (75,486) Net cash (used in)/from financing activities (144,510) (10,993) 47,843 Effects of exchange rate changes (15,643) (3,412) 12,335 Net (decrease)/ increase in cash and cash equivalents (31,647) (29,285) 373,185 Cash and cash equivalents at start of period 487,251 114,066 114,066 Cash and cash equivalents at end of period 455,604 84,781 487,251 11
NOTES TO THE FINANCIAL INFORMATION 1. Basis of preparation The condensed consolidated financial information for the period 1 January to 30 June 2010 has been prepared in accordance with International Accounting Standard (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 2009 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 2009, as described in those annual financial statements. In addition the following new standards, amendments to standards and interpretations have been adopted from 1 January 2010: IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended) IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after implementation. Changes affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results. IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill, nor will it give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes made by IFRS 3 (Revised) and IAS 27 (Amended) will affect future acquisitions or loss of control of subsidiaries and transactions with non-controlling interests. The changes in accounting policy will be applied prospectively. In addition, the changes to IAS 27 have impacted the basis of consolidation used by the Group. The main impact is in the accounting for non-controlling interests. Prior to 1 January 2010 losses incurred by the Group were allocated to non-controlling interests until that balance was reduced to nil. Any further losses were attributable to the Group. From 1 January 2010 losses are attributable to the non-controlling interest even if that results in a deficit balance. Losses attributable to the non-controlling interest incurred prior to 1 January 2010 are not reclassified. The adoption of the following standards, amendments to standards and interpretations had no impact on the reported income or net assets of the Group in the quarter. Title Effective Date Improvements to IFRSs 2009 Various IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions 1 January 2010 IAS 39 Financial Instruments: Recognition and Measurement Eligible hedged items 1 July 2009 IFRIC 17 Distributions of Non-Cash Assets to Owners 1 July 2009 IFRIC 18 Transfers of Assets from Customers 1 July 2009 12
3. Segment reporting North Sea Africa Brazil North America Asia Pacific Global Total (Amounts in USD 1,000) 2Q 2010 (Unaudited) Revenue 293,359 52,056 117,182 29,194 28,069-519,860 Profit/(loss) before tax 47,273 20,989 20,791 7,062 5,247 (37,310) 64,052 2Q 2009 (Unaudited) Revenue 307,744 62,291 227,409 28,091 11,696-637,231 Profit/(loss) before tax 74,881 34,856 13,042 9,965 (11,698) (1,883) 119,163 Half year 2010 (Unaudited) Revenue 454,492 98,503 232,305 50,313 137,162-972,775 Profit/(loss) before tax 54,370 40,123 32,719 10,626 45,879 (65,967) 117,750 Half year 2009 (Unaudited) Revenue 524,413 137,170 502,566 51,421 24,487-1,240,057 Profit/(loss) before tax 101,196 52,877 39,354 20,025 (6,118) (8,386) 198,948 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. 4. Cash flow from operating activities Half year ended Year ended 30/06/2010 30/06/2009 31/12/2009 (Amounts in USD 1,000) Unaudited Unaudited Audited Net profit 77,397 137,284 288,351 Adjustments for: Taxation charge 40,353 61,664 123,849 Depreciation and amortisation 66,987 53,044 117,214 Profit on disposal of property, plant and equipment (1,559) (613) (1,160) Share based payment charge 1,878 2,161 4,595 Deferred government grant income (10) (10) (20) Finance income (8,808) (5,472) (8,896) Finance expense 34,016 37,892 59,955 Gain on embedded derivative within convertible loan notes (3,100) (19,990) (34,284) Share of post tax loss/(profit) from joint ventures 417 (2,993) (5,652) Share of post tax profit from associates (358) (462) (1,074) Changes in working capital (excluding the effects of acquisitions and disposals of subsidiaries): Increase in inventories (770) (651) (10,414) (Increase)/decrease in trade and other receivables (105,936) (133,575) 149,804 (Decrease)/increase in payables (10,655) 26,337 (42,291) Cash generated from operations 89,852 154,616 639,977 13
5. Adjusted EBITDA Three months ended Half year ended 30/06/2010 30/06/2009 30/06/2010 30/06/2009 (Amounts in USD 1,000 except percentages) Unaudited Unaudited Unaudited Unaudited Net profit 41,421 82,239 77,397 137,284 Adjustments: Taxation expense 22,631 36,924 40,353 61,664 Net financial items 29,770 (752) 54,540 4,369 Depreciation and amortisation 33,507 27,877 66,987 53,044 Profit on disposal of property, plant and equipment (571) (613) (1,559) (613) Adjusted EBITDA 126,758 145,675 237,718 255,748 Revenue 519,860 637,231 972,775 1,240,057 Adjusted EBITDA % 24.4% 22.9% 24.4% 20.6% The Company calculates "Adjusted EBITDA" (adjusted earnings before interest, taxation, depreciation and amortisation) as net profit adjusted for taxation, net financial items, depreciation, amortisation, impairments and profits or losses on disposals of property, plant and equipment. 6. 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. 7. Events occurring after the balance sheet date In July 2010, the Company cancelled its USD 40.5 million (par value) holding of the USD 175 million zero coupon Subsea 7 Inc. convertible notes due 2017. 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. 14