Subsea 7 — Earnings Release 2015

Mar 2, 2016

Subsea 7 S.A. Announces Fourth Quarter and Full Year 2015 Results

Subsea 7 S.A. Announces Fourth Quarter and Full Year 2015 Results

Luxembourg - 2 March 2016 - Subsea 7 S.A. (the Group)

(Oslo Børs: SUBC, ADR: SUBCY) announced today results

for the fourth quarter and the full year which ended

31 December 2015.

Jean Cahuzac, Chief Executive Officer, said:

Full year 2015

'Subsea 7 delivered good operational and financial

performance in 2015 in a very challenging market.

Revenue for the full year 2015 of $4.8 billion (2014:

$6.9 billion) reflected lower levels of activity

resulting from the industry downturn. Adjusted EBITDA

was $1,217 million driven by consistently good project

execution and strong cost discipline. Adjusted EBITDA

percentage was 26%, five percentage points higher than

the prior year in part due to significant progress on

several large projects that reached the final stages

of execution.

A downward revision of forecast activity levels

resulted in an impairment charge of $521 million

relating to goodwill and $136 million relating to

vessels and equipment. This contributed to a reported

net loss for the year of $37 million. Excluding the

$521 million goodwill impairment charge, net income

was $484 million with both Business Units profitable

in the year.

The Group's liquidity position remains strong with

cash and cash equivalents of $947 million and net cash

of $423 million as at 31 December. In addition, the

Group had unutilised credit facilities totalling $857

million. Working capital discipline contributed

towards $1.0 billion of cash generated from operating

activities in the year.

The low price of oil and uncertain market outlook

resulted in fewer new awards to market in 2015 as

clients delayed projects and reduced their

expenditure. In this context, Subsea 7 achieved $3.4

billion order intake during 2015, reflecting its

strong competitive position and collaborative approach

to drive lower cost solutions. In February 2016 Subsea

7 was awarded the West Nile Delta Phase Two project,

offshore Egypt, this large award is in addition to the

$6.1 billion order backlog reported at 31 December

2015 (2014: $8.2 billion).

Subsea 7 implemented a number of initiatives in 2015

to position itself for an extended period of low

activity and strengthen itself for when the business

environment improves. These initiatives included

simplification of the Group's reporting structure,

formation of new alliances with industry leading

partners, investment in innovation to drive lower cost

solutions through new technology and better ways of

working, and reduction of costs by resizing the

business.

The cost reduction and resizing programme announced in

May 2015 set out plans to deliver approximately $550

million of annualised cost savings through a workforce

reduction of 2,500 and the removal of 12 vessels from

the active fleet by early 2016. Resizing actions

exceeded this guidance and Subsea 7 ended 2015 with a

workforce of approximately 9,800 people, down from

approximately 13,400 a year earlier, and as at the end

of February 13 vessels have been removed from the

active fleet, with an additional chartered vessel due

to be returned to its owner before the end of the

first quarter 2016. The restructuring charge of $136m

relating to the resizing programme, included in

Adjusted EBITDA, was broadly offset by cost savings

delivered by the programme in the same period.

In order to preserve the Group's financial flexibility

during the sustained industry downturn, the Board of

Directors will recommend to the shareholders at the

Annual General Meeting that no dividend be paid in

respect of 2015.

Fourth quarter 2015

Group revenue was $1.0 billion (2014: $1.4 billion) in

the fourth quarter of 2015 and Adjusted EBITDA was

$310 million, equating to a margin of 30%. The

decrease in revenue was mainly due to lower activity

levels in the Northern Hemisphere and Life of Field

Business Unit and the Adjusted EBITDA reflected

successful project execution and a strong cost

discipline.

Net operating loss of $415 million included a goodwill

impairment charge of $521 million and a $96 million

impairment charge relating to vessels and equipment.

Excluding the goodwill impairment charge, net

operating income of $106 million increased by $5

million compared to the fourth quarter 2014, despite

the lower activity levels. There was a strong

contribution from projects nearing completion in the

Southern Hemisphere and Global Projects Business Unit

partly offset by net operating losses in the Northern

Hemisphere and Life of Field, and Corporate Business

Units.

Order intake of $0.5 billion in the quarter was partly

offset by the adverse impact from foreign exchange

movements in the quarter of approximately $50 million.

New awards announced in the quarter comprised a

platform extension and tie-in project for Burullus Gas

Company on the West Nile Delta project and an award

for the development of the East Nile Delta Phase 3

project, both located offshore Egypt, as the Group

built on its strong and growing presence in this

important offshore region.

Operational highlights for the fourth quarter 2015

Total vessel utilisation was 62% in the fourth quarter

2015 (2014: 68%). Utilisation was lower in the

Northern Hemisphere and Life of Field Business Unit

where there was a significant reduction of work for

diving support vessels, whereas the Southern

Hemisphere and Global Projects Business Unit

benefitted from PLSV activity under the long-term day-

rate contracts in Brazil. Full year total vessel

utilisation was 72% (2014: 82%). Active vessel

utilisation, which excludes stacked vessels, was 78%

for the full year 2015 and 74% for the fourth quarter.

In the Northern Hemisphere and Life of Field Business

Unit the Gullfaks project, offshore Norway, was

substantially completed and significant progress was

made on the Stones and Dalmatian projects in the US

Gulf of Mexico. The Maria project, offshore Norway,

and Culzean project, offshore UK, both made progress

with engineering and procurement. Life of Field

activity remained low with reduced offshore activity

levels compared to the fourth quarter 2014.

In the Southern Hemisphere and Global Projects

Business Unit the Lianzi SURF project, offshore

Angola, was substantially completed and significant

progress was made on the TEN project, offshore Ghana,

the Lianzi Topside project, offshore Angola and the BC-

10 Phase 3 project, offshore Brazil. Also offshore

Brazil the PLSVs under long-term contracts continued

to operate with high levels of activity, however

towards the end of the quarter an incident on Seven

Waves resulted in damage to the lay-tower. This vessel

has returned to Europe for extensive repairs and once

these have been completed the vessel is expected to

return to Brazil in 2017.

Outlook

The low oil and gas price continues to depress

industry activity as clients delay and cancel new

projects; the timing of market recovery remains highly

uncertain. As guided previously, revenue and Adjusted

EBITDA percentage margin are expected to be

significantly lower in 2016 compared to 2015.

Backlog as at 31 December of $6.1 billion, included

$2.2 billion related to 10 long-term contracts for

PLSVs, offshore Brazil. There are two third party

Brazilian flagged single-lay PLSVs with a top tension

capacity of less than 350 tonnes that may be

prioritised under Brazilian law over international

vessels of a similar specification. As a result, a

proportion of the Group's backlog relating to these

contracts could be affected and discussions are in

progress with the client regarding this risk.

Despite the difficult near to medium-term outlook, the

fundamental long-term outlook for deepwater subsea

field developments remains intact and industry

activity is expected to recover when the oil and gas

market rebalances. Subsea 7 has already implemented a

number of initiatives to strengthen its position and

will continue to actively adapt to industry conditions

without losing its focus on long-term strategic

priorities.'

Conference Call Information

Lines will open 15 minutes prior to conference call.

Date: 2 March 2016

Time: 12:00 UK Time

Conference ID: 27439507#

Conference Dial In Numbers

United Kingdom 020 3139 4830

United States 718 873 9077

Norway 23 50 05 59

International Dial In +44 20 3139 4830

For further information, please contact:

Isabel Green

Investor Relations Director

email: isabel.green@subsea7.com

Telephone: +44 (0) 20 8210 5568