Subsea 7 — Earnings Release 2019

Jul 25, 2019

Subsea 7 S.A. Announces Second Quarter and Half Year 2019 Results

Subsea 7 S.A. Announces Second Quarter and Half Year 2019 Results

Luxembourg - 25 July 2019 - Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR:

SUBCY, ISIN: LU0075646355) announced today results for the second quarter and

first half of 2019 which ended 30 June 2019.

Second Quarter highlights

* Revenue of $958 million, Adjusted EBITDA of $171 million and margin of 18%

reflected steady performance in SURF and Conventional offset by low levels

of renewables activity in the quarter

* $4.6 billion order backlog at 30 June 2019 with $395 million of new awards

and escalations in the quarter

* 2019 share repurchase programme completed 11 July 2019. Year to date, $279

million has been returned to shareholders including NOK 1.50 per share

dividend paid in the second quarter

* New $200 million share repurchase programme announced, supported by the

recovering offshore oil and gas market and Subsea 7's solid financial and

liquidity position

Jean Cahuzac, Chief Executive Officer, said:

'The recovery in offshore oil and gas continues to make steady progress as lower

cost solutions for offshore developments service the growing global demand for

energy. Our market-leading technology and engineering expertise applied to

integrated and standalone developments enable us to support our clients as they

sanction and develop their projects. We are working with our clients and

alliance partners from the early stages of the field life cycle, and the number

of tenders and early engineering studies we are engaging in continues to grow.

We are positive on the outlook for our markets. We have a modern and versatile

fleet, strong portfolio of proprietary technology and teams of highly capable

people able to deliver complex solutions efficiently, reliably and safely. The

new share repurchase programme announced today reflects our confidence in the

gradually recovering market, our secure financial position and the diminishing

capital investment needs of our business in the medium-term.'

Operational performance highlights

Project planning and engineering activity increased year-on-year mainly driven

by EPIC contracts awarded in 2018 and early 2019, which require 12 to 18 months

of preparation before the offshore phases commence. Offshore activity on EPIC

projects was lower than the prior year period reflecting the low volume of

projects awarded in 2016 and 2017.

On the West Nile Delta (GFR) Phase Two project, offshore Egypt, spools and

flying leads were installed, using the flex-lay vessels Seven Seas and Simar

Esperança. In the US Gulf of Mexico, the Mad Dog 2 project progressed with

qualification and fabrication activities and, for the Manuel project, work

continued on engineering, procurement and fabrication of the Electrically Heat

Traced Flowline (EHTF). Offshore Australia, hyperbaric welding and subsequent

testing was successfully completed on the Sole project. In the North Sea, Seven

Oceans completed the first reel-lay campaign on the Nova project, offshore

Norway, and fabrication progressed at Subsea 7's Pipeline Bundle facility in

Scotland for the Snorre project, enabling the first Pipeline Bundle for this

project to be towed out in early July.

Offshore Brazil, the four pipelay support vessels (PLSVs) on long-term day-rate

contracts continued to perform well with high levels of utilisation.

Conventional activity in shallow water areas included the completion of the 20"

pipeline pull-in for the PUPP project, offshore Nigeria, using Seven Antares,

and completion of umbilical installation for the Hasbah project, offshore Saudi

Arabia.

Life of Field activity included inspection, repair and maintenance (IRM)

services in the US Gulf of Mexico under a new contract awarded to i-Tech 7 in

the quarter and a successful weld inspection campaign using ROV-deployed

technology offshore Australia, a first for the client which had previously

relied on diving services for this workscope.

Renewables and Heavy Lifting activity included an oil and gas decommissioning

project in the North Sea, installation of wind turbine foundations and

transition modules on the Formosa I (Phase 2) project, offshore Taiwan, and

cable lay activity on the Hornsea One wind farm project, offshore UK.

Vessel Utilisation was 75%, unchanged from the prior year period with lower

levels of utilisation for Renewables and SURF projects offset by higher

utilisation for the PLSVs and Life of Field services. At 30 June 2019, Subsea 7

had 34 vessels in its fleet, including one vessel under construction and two

stacked vessels. The new-build reel-lay vessel, Seven Vega, was launched in May,

a significant construction milestone, and is now undergoing outfitting and

testing ahead of scheduled delivery in early 2020.

Financial performance highlights

Second quarter revenue was $958 million and Adjusted EBITDA was $171 million,

down 17% and 8% respectively. Adjusted EBITDA margin was18%, reflecting steady

performance on SURF and Conventional projects offset by low levels of activity

in Renewables and Heavy Lifting.

Subsea 7's new awards and escalations totalled $395 million in the second

quarter, including the Johan Sverdrup Phase Two project, offshore Norway,

announced in June. The pace of offshore oil and gas awards to market is

gradually increasing supported by higher tendering and early engagement

activity. Larger greenfield awards often include engineering studies and

integrated solutions, and so take longer to progress from tender to project

sanction and award. Order backlog at 30 June 2019 was $4.6 billion.

The Group's financial and liquidity position remains strong. $204 million was

returned to shareholders in the quarter through share repurchases and a special

dividend. Following the completion on 11 July 2019 of the $200 million share

repurchase programme announced on 28 February 2019, a further share repurchase

programme for $200 million, valid for two years, was announced today. Subsea

7's activities are cash generative and the Group's priorities are to invest in

the business, maintain an investment grade profile and return surplus cash to

shareholders. The share repurchase programme gives the Group flexibility to

balance these priorities to support long-term sustainable value creation.

Cash and cash equivalents was $420 million at the quarter end and net debt was

$221 million, including $396 million of lease liabilities (IFRS 16). During the

second quarter cash generated from operating activities of $72 million included

a $63 million decrease in net operating liabilities reflecting timing of

milestones on certain projects. The Group's $656 million Revolving Credit

Facility was unutilised at 30 June 2019.

Outlook

The pace of SURF awards to market so far this year has been steady and Subsea 7

has announced four new project awards year to date. The pace of awards is

expected to increase over the next 12 months as clients progress their

investment decisions on the first phase of greenfield projects to be sanctioned

since the downturn. The increase in market activity and subsequent tightening in

key vessel availability in the medium-term is supporting improved pricing

compared to the prior year. Demand for IRM services is steady, and market award

activity for Conventional projects in the Middle East is strong.

The offshore renewables market continues to benefit from decreases in the

levelised cost of electricity (LOCE) as the size of turbines and wind farms

increases. The demand for offshore foundation and cable-lay services is expected

to grow at a double digit pace annually in the medium-term, supporting the

transition plans of several host governments to lower carbon energy. Near-term,

new entrants in the foundation installation market are having a negative impact

on pricing, but this is expected to improve as the market globalises and

rebalances.

The full results document and associated slides are avaiable to download from

www.subsea7.com

Conference Call Information

Lines will open 15 minutes prior to conference call.

Date: 25 July 2019

Time: 12:00 UK Time

Conference ID: 34322203#

Conference Dial In Numbers

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United Kingdom   0333 300 0804

United States   631 913 1422

Norway   23 50 02 43

International Dial In   +44 333 300 0804

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Replay Facility Details

A replay facility (with conference ID 301273850#) will be available from:

Date: 25 July 2019

Time: 17:00 UK Time

Conference Replay Dial In Numbers

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International Dial In   +44 333 300 0819

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For further information, please contact:

Isabel Green

Investor Relations Director

email: isabel.green@subsea7.com (mailto:isabel.green@subsea7.com)

Telephone: +44 20 8210 5568

Special Note Regarding Forward-Looking Statements

Certain statements made in this announcement may include 'forward-looking

statements'. These statements may be identified by the use of words like

'anticipate', 'believe', 'could', 'estimate', 'expect', 'forecast', 'intend',

'may', 'might', 'plan', 'predict', 'project', 'scheduled', 'seek', 'should',

'will', and similar expressions. The forward-looking statements reflect our

current views and are subject to risks, uncertainties and assumptions. The

principal risks and uncertainties which could impact the Group and the factors

which could affect the actual results are described but not limited to those in

the 'Risk Management' section in the Group's Annual Report and Consolidated

Financial Statements 2018. These factors, and others which are discussed in our

public announcements, are among those that may cause actual and future results

and trends to differ materially from our forward-looking statements: actions by

regulatory authorities or other third parties; our ability to recover costs on

significant projects; general economic conditions and competition in the markets

and businesses in which we operate; our relationship with significant clients;

the outcome of legal and administrative proceedings or governmental enquiries;

uncertainties inherent in operating internationally; the timely delivery of

vessels on order; the impact of laws and regulations; and operating hazards,

including spills and environmental damage. Many of these factors are beyond our

ability to control or predict. Other unknown or unpredictable factors could also

have material adverse effects on our future results. Given these factors, you

should not place undue reliance on the forward-looking statements.