Subsea 7, the London based seabed to surface construction company, has warned of further challenges ahead and reported a sharp reduction in interim profits.
Group net profit in 2Q15 fell to USD88 million from USD266 million in the same period last year, while revenue decreased to USD1.35 billion from USD1.90 billion.
In 1H15, the profit fell to USD239 million from USD397 million a year before and revenues decreased to USD2.53 billion from USD3.57 billion.
“As guided previously, Group revenue is expected to be significantly lower in 2015 compared with the record level reported last year and adjusted EBITDA margin is expected to decrease compared with 2014,” the company said in a statement.
It started a cost reduction programme to resize the fleet and workforce in line with the declining workload during the second quarter and a USD100 million charge related to the resizing was recognised in the quarter, out of an estimated total charge of USD140 million. “The Group will reduce its capacity by 2,500 people and 12 vessels by early 2016, delivering expected annualised savings of approximately USD400 million in employee related costs and about USD150 million in vessel costs,” the company said.
The company currently operates a fleet of about 40 vessels and has four newbuildings on order. Capital expenditure related to these is estimated at USD348 million in 2H15 and USD230 million in calendar 2016.
Net debt fell to USD151 million compared to USD288 million at the end of the first quarter, reflecting USD297 million net cash generated from operating activities in the latest 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 USD357 million was signed after the period close,” the company said.
Vessel utilisation fell to 82% from 91% in 2Q14, led by decrease in activity in the North Sea. Yesterday, the Norwegian state controlled oil company Statoil unveiled a further USD500 million capital expenditure cut for 2015 after a USD2.0 billion cut unveiled in the winter, which indicates further reduction of activity in the region.
Moving on to the outlook, the company said 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.,” the company concluded.