Subsea 7 — Earnings Release 2021

Nov 17, 2021

Subsea 7 S.A. Announces Third Quarter 2021 Results

Subsea 7 S.A. Announces Third Quarter 2021 Results

Luxembourg - 17 November 2021 - Subsea 7 S.A. (the Group) (Oslo Børs: SUBC, ADR:

SUBCY, ISIN: LU0075646355) announced today results for the third quarter which

ended 30 September 2021.

Third quarter highlights

* Third quarter 2021 revenue up 53% year-on-year to $1.45 billion

* Adjusted EBITDA of $185 million equating to a margin of 12.8%

* Cash and cash equivalents of $300 million, and net debt including lease

liabilities of $99 million at quarter end

* Order intake of $1.4 billion, equating to a book-to-bill ratio of 1.0,

resulting in a backlog of $6.7 billion

* Completion on 1 October of the combination with OHT ASA to create Seaway 7

ASA (Oslo Børs: SEAWY7)

* At 1 October, following the combination, the backlog was $6.9 billion of

which 19% in Renewables

Third Quarter Nine Months Ended

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For the period (in $

millions, except

Adjusted EBITDA margin Q3 2021 Q3 2020 30 Sep 2021 30 Sep 2020

and per share data) Unaudited Unaudited Unaudited Unaudited

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Revenue 1,451 947 3,645 2,452

Adjusted EBITDA((a)) 185 114 378 172

Adjusted EBITDA

margin((a)) 13% 12% 10% 7%

Net operating

income/(loss)

excluding goodwill

impairment charges 78 7 41 (394)

Goodwill impairment

charges - - - (578)

Net operating

income/(loss) 78 7 41 (972)

Net income/(loss) 45 (43) 33 (1,002)

Earnings per share -

in $ per share

Basic 0.15 (0.14) 0.12 (3.33)

Diluted(()(b)()) 0.15 (0.14) 0.12 (3.33)

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30 Sep 2021 30 Jun 2021

At (in $ millions) Unaudited Unaudited

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Backlog((c))     6,733 6,766

Cash and cash

equivalents 300 390

Borrowings     (191) (197)

Net cash excluding

lease liabilities((d)) 109 193

Net debt including

lease liabilities((d)) (99) (39)

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(a) For explanations and reconciliations of Adjusted EBITDA and Adjusted EBITDA

margin refer to Note 8 'Adjusted EBITDA and Adjusted EBITDA margin' to the

Condensed Consolidated Financial Statements.

(b) For the explanation and a reconciliation of diluted earnings per share refer

to Note 7 'Earnings per share' to the Condensed Consolidated Financial

Statements.

(c) Backlog is a non-IFRS measure.

(d) Net cash is a non-IFRS measure and is defined as cash and cash equivalents

less borrowings.

John Evans, Chief Executive Officer, said:

Subsea 7 delivered a strong operational and financial performance in the third

quarter driven by very high utilisation of the active fleet in both Subsea and

Conventional and Renewables, as well as an increased level of engineering and

procurement activity relating to recent major awards.

Revenue increased 53% year-on-year due to a significant increase in activity in

the Subsea and Conventional and Renewables business units in the UK, Norway,

Gulf of Mexico, Brazil and Turkey. After deducting net direct costs related to

the Covid-19 pandemic of $9 million, with the benefit of an increased

contribution from client settlements, the Adjusted EBITDA margin of 12.8% was up

from 12.0% in the prior year quarter. Conversion to cash flow was impacted by an

adverse movement in working capital which drove a modest increase in net debt to

$99 million from $39 million in the second quarter. We expect working capital

requirements to reduce in the fourth quarter.

During the third quarter Subsea 7 made progress in the delivery of its two-fold

strategy encompassing "subsea field of the future" and "energy transition".

Subsea field of the future - integrated SPS and SURF

During the third quarter Subsea Integration Alliance was awarded contracts for

the development of the Sakarya gas field, offshore Turkey. As a result of a

strong, collaborative early engagement process with the client and reaping the

benefits of a truly integrated solution we expect to deliver the development

within an industry-leading timeline from discovery to first gas in 2023. As well

as drawing on the breadth and depth of expertise within our Global Project

Centre, the project will utilise several Subsea 7 vessels and represents a

significant contribution to our operational and financial visibility for 2022.

The Sakarya project, along with Bacalhau, Brazil's first integrated project, and

several smaller awards, confirms the industry-leading position of Subsea

Integration Alliance and reaffirms integrated solutions as a cornerstone

component of our strategy for the subsea field of the future.

Subsea field of the future - systems innovation and enabling products

In October we announced three new contracts for our pipelay support vessels

(PLSVs) in Brazil - Seven Rio, Seven Sun and Seven Waves - as well as the

transfer of some of our existing contractual commitments to a fourth PLSV -

Seven Seas. Along with the continuation of the contract for Seven Cruzeiro,

Subsea 7 will have five PLSVs working for Petrobras next year. This is testament

to the strong operational performance that our team and vessels have delivered

in Brazil, and includes the successful launch of our 4insight(®) technology.

This proprietary innovation, developed by our autonomous subsidiary, 4Subsea,

utilises big data harvested from the vessels and their pipelay operations to

optimise vessel uptime and maximise overall performance.

Energy transition - offshore wind

In the third quarter Subsea 7 continued to expand its proactive participation in

the energy transition. The Group furthered its interest in floating wind through

the acquisition of a majority holding in Nautilus Floating Solutions, a

developer of technology for this emerging market. Together with our agreement

with Simply Blue Energy to develop the Salamander floating wind project, and the

creation of Seaway 7 ASA, this acquisition reinforces our industry-leading

position across the high growth offshore wind market.

Energy transition - sustainable and efficient operations

Subsea 7 announced new targets to cut its Scope 1 and 2 emissions by half by

2035 and achieve Net Zero by 2050. These targets will utilise solutions

available today as well as future cleaner technologies as they become

commercially available, and they mark another step in our journey to decarbonise

our business.

Third quarter operational review

In the third quarter the Subsea and Conventional business unit made good

operational progress in the engineering and procurement phases of the SLGC,

Sangomar, Barossa and Bacalhau projects, while engineering commenced for the

Sakarya project offshore Turkey. Utilisation of the active fleet was very high

resulting in good progress in the installation phase of several projects.

Offshore Norway, three reeling vessels, Seven Vega, Seven Oceans and Seven

Navica, laid pipelines at the Johan Sverdrup Phase 2 project, while umbilicals

were installed by Seven Pacific. Seven Vega was also active on Ærfugl Phase 2

where it successfully completed the installation of the Electrically Heat-Traced

Flowline (EHTF). In the Gulf of Mexico, the floating production unit for the Mad

Dog 2 project was towed from the yard at Ingleside, Texas to the field, while

Seven Seas installed gas export infrastructure and Seven Arctic installed rigid

and flexible jumpers. Meanwhile the offshore phase of the Julimar Phase 2

project in Australia was completed by Seven Oceans and Seven Oceanic before

these vessels began transiting back to Norway. In Saudi Arabia, Seven Champion

was utilised throughout the quarter on the 28 Jackets project (CRPO 47) and on

the Berri field (CRPO 36/37).

In the Renewables business unit, Seaway Yudin restarted work on the Formosa 2

project in Taiwan with a reduced crew due to the limited availability of visas.

The season's offshore campaign was completed and the vessel demobilised to

Indonesia. It is expected to return in the first quarter of 2022 to complete our

scope of the Formosa 2 project. Also in Taiwan, Seaway Phoenix continued laying

inner-array cables for the Yunlin project. In Europe, Seaway Aimery, Seaway

Moxie and Simar Esperança were fully utilised throughout the quarter installing

inner-array cables for the Hornsea II project while Seaway Strashnov installed

monopiles at Hollandse Kust Zuid, offshore Netherlands. The Seagreen project

reached an important milestone with the installation of the first suction

caisson jackets.

Overall, utilisation of Subsea 7's active fleet of 28 vessels was 94% in the

third quarter, compared to 84% in the prior year period, including 92%

utilisation of the Subsea and Conventional fleet and 99% utilisation of the

Renewables vessels.

Third quarter financial review

Third quarter revenue of $1.45 billion increased by 53% compared to the prior

year period, reflecting significantly higher activity in both Subsea and

Conventional and Renewables. Adjusted EBITDA of $185 million was up from $114

million in the prior year quarter. The improvement reflects an increased level

of engineering and procurement on major projects, combined with high vessel

utilisation and some client settlements. After deducting net direct costs

related to the Covid-19 pandemic of $9 million (compared with $20 million in the

third quarter of 2020) the underlying Adjusted EBITDA margin increased slightly

to 12.8% from 12.0%. After depreciation and amortisation of $107 million, the

Group recorded net operating income of $78 million. Net income for the quarter

was $45 million, after a tax charge of $61 million equating to an effective tax

rate of 58%.

During the quarter, the net cash outflow from operating activities was $20

million after a $230 million adverse movement in net working capital that

largely related to timing of milestone payments in the Gulf of Mexico, the

protracted invoice approval process in the Middle East and delays to the

progress of Renewables projects in Taiwan. Capital expenditure was relatively

low at $24 million excluding business acquisition costs that amounted to a net

$7 million. Overall, cash and cash equivalents decreased by $90 million since

30 June 2021 to $300 million and the Group ended the quarter with net debt of

$99 million, including lease liabilities of $208 million.

In the third quarter, Subsea 7 booked new orders of approximately $1.3 billion

and escalations of approximately $100 million, resulting in a book-to-bill ratio

of 1.0. The backlog at the end of September 2021 was $6.7 billion. Following the

completion of the combination with OHT ASA to create Seaway 7 ASA at 1 October,

the backlog was $6.9 billion of which $1.4 billion is expected to be executed

during the remainder of 2021, $3.5 billion in 2022 and $1.8 billion in 2023 and

thereafter.

Outlook for full year 2021 and 2022

The industry recovery in Subsea and Conventional continues to gain momentum. At

the end of the third quarter, the value of tenders in-house had increased by

approximately 70% compared with the low point in May 2020 and was almost 20%

above the pre-Covid levels recorded in December 2019. Our tendering and early

engagement teams are active and we have seen an increase in headcount over the

past year to meet demand from clients in key areas of the world. We continue to

be well-placed in the advantaged markets of Brazil, the Gulf of Mexico and

Norway.

While our activity on early-stage projects has increased significantly, we

continue to plan a temporary reduction in the active Subsea and Conventional

fleet for 2022 before a recovery in offshore activity in 2023. With a healthy

backlog and high levels of tendering activity, we remain confident in the

outlook for this business unit.

In Renewables, tendering is active for projects expected to be awarded to the

industry in 2022, including in Asia, Europe and the US. With an enhanced fleet

of cable, foundation and turbine installation vessels, Seaway 7 ASA is well-

positioned to capture a fair share of this long-term, high-growth market.

We expect that revenue and Adjusted EBITDA in 2021 will exceed the prior year

levels, and that net operating income will be positive. In 2022, we expect that

Adjusted EBITDA will be broadly in line with 2021 before returning to growth in

Conference Call Information

Date: 17 November 2021

Time: 12:00 UK Time

Access the webcast at subsea7.com (https://edge.media-server.com/mmc/p/sdhad4b2)

or https://edge.media-server.com/mmc/p/6kjx5zsv

Register for the conference call at

http://emea.directeventreg.com/registration/1477014

Advance registration is required.

For further information, please contact:

Katherine Tonks

Head of Investor Relations

Email: katherine.tonks@subsea7.com (mailto:katherine.tonks@subsea7.com)

Telephone: +44 20 8210 5568

Special Note Regarding Forward-Looking Statements

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

statements' (within the meaning of the safe harbour provisions of the U.S.

Private Securities Litigation Reform Act of 1995). These statements relate to

our current expectations, beliefs, intentions, assumptions or strategies

regarding the future and are subject to known and unknown risks that could cause

actual results, performance or events to differ materially from those expressed

or implied in these statements. Forward-looking statements may be identified by

the use of words such as 'anticipate', 'believe', 'estimate', 'expect',

'future', 'goal', 'intend', 'likely' 'may', 'plan', 'project', 'seek', 'should',

'strategy' 'will', and similar expressions. The principal risks which could

affect future operations of the Group are described in the 'Risk Management'

section of the Group's Annual Report and Consolidated Financial Statements for

the year ended 31 December 2020. Factors that may cause actual and future

results and trends to differ materially from our forward-looking statements

include (but are not limited to): (i) our ability to deliver fixed price

projects in accordance with client expectations and within the parameters of our

bids, and to avoid cost overruns; (ii) our ability to collect receivables,

negotiate variation orders and collect the related revenue; (iii) our ability to

recover costs on significant projects; (iv) capital expenditure by oil and gas

companies, which is affected by fluctuations in the price of, and demand for,

crude oil and natural gas; (v) unanticipated delays or cancellation of projects

included in our backlog; (vi) competition and price fluctuations in the markets

and businesses in which we operate; (vii) the loss of, or deterioration in our

relationship with, any significant clients; (viii) the outcome of legal

proceedings or governmental inquiries; (ix) uncertainties inherent in operating

internationally, including economic, political and social instability, boycotts

or embargoes, labour unrest, changes in foreign governmental regulations,

corruption and currency fluctuations; (x) the effects of a pandemic or epidemic

or a natural disaster; (xi) liability to third parties for the failure of our

joint venture partners to fulfil their obligations; (xii) changes in, or our

failure to comply with, applicable laws and regulations (including regulatory

measures addressing climate change); (xiii) operating hazards, including spills,

environmental damage, personal or property damage and business interruptions

caused by adverse weather; (xiv) equipment or mechanical failures, which could

increase costs, impair revenue and result in penalties for failure to meet

project completion requirements; (xv) the timely delivery of vessels on order

and the timely completion of ship conversion programmes; (xvi) our ability to

keep pace with technological changes and the impact of potential information

technology, cyber security or data security breaches; and (xvii) the

effectiveness of our disclosure controls and procedures and internal control

over financial reporting;. Many of these factors are beyond our ability to

control or predict. Given these uncertainties, you should not place undue

reliance on the forward-looking statements. Each forward-looking statement

speaks only as of the date of this announcement. We undertake no obligation to

update publicly or revise any forward-looking statements, whether as a result of

new information, future events or otherwise.