Offshore

Petrobras and Equinor keeping Subsea 7 busy in Brazil

Norwegian contractor reports worldwide improved finances and upbeat prospects in the country

On Wednesday, 17 November, Subsea 7 released its results for Q3 2021.

According to a press release issued by the Oslo-listed company, revenue for the nine months ended 30 September 2021 was $3.6 billion, an increase of $1.2 billion or 49% compared to the nine months ended 30 September 2020. Revenue for the quarter was up 53% year-on-year, reaching $1.45 billion.

The increase was driven by higher revenue in both the ‘Subsea and Conventional business’ unit, particularly in West Africa, the Gulf of Mexico, Middle East, Brazil, and Australia, and the ‘Renewables business’ unit, with work progressing on the Seagreen offshore wind farm project.

John Evans, Chief Executive Officer, said: “Subsea 7 delivered a strong operational and financial performance in the third quarter driven by very high utilization 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”.

After deducting net direct costs related to the Covid-19 pandemic of $9 million, the quarterly Adjusted EBITDA margin of 12.8% was up from 12.0% in the prior-year quarter.

Adjusted EBITDA and Adjusted EBITDA margin for the nine months ended 30 September 2021 were $378 million and 10% respectively, compared to $172 million and 7% in the nine months ended 30 September 2020. Diluted earnings per share were $0.12 for 9M2021 compared to diluted loss per share of $3.33 for 9M2020.

Seven Waves, one of the PLSVs chartered to Petrobras in Brazil. Image credits: Subsea 7

In October, the Kristian Siem-backed contractor announced three new contracts for the pipelay support vessels (PLSVs) in Brazil – Seven Rio, Seven Sun, and Seven Waves – as well as the transfer of some of its existing contractual commitments to a fourth PLSV – Seven Seas. Along with the continuation of the contract for Seven Cruzeiro (until end-2022), Subsea 7 will have five PLSVs working for Petrobras next year. The three new three-year contracts have a total value of $500-750 million. As a result, the company’s backlog in the ‘Subsea and Conventional’ segment reached $ 5.6 billion.

In Brazil, Subsea 7 also reported “good operational progress” in the engineering and procurement phases of Equinor’s Bacalhau project, the company’s first integrated project in the country. Total project progression for Subsea Integration Alliance’s scope in Bacalhau reached 30%. Subsea Integration Alliance is a non-incorporated strategic global alliance between Subsea 7 and OneSubsea, the subsea division of Schlumberger.

During the third quarter, Subsea 7 also expanded its investments in the energy transition. The Group furthered its interest in floating wind through the acquisition of a majority holding in Nautilus Floating Solutions, following the agreement with Simply Blue Energy to develop the Salamander floating wind project and the creation of Seaway 7 ASA.

Seaway 7 resulted from the combination of Subsea 7’s Renewables business unit and OHT ASA. At the time of combination on 1 October 2021, Subsea 7 owned 72% and OHT’s shareholders 28%. Seaway 7 ASA retains OHT’s listing on Oslo’s Euronext Growth market, with a view to a future listing on the main Oslo stock exchange.

Although OHT has performed various heavy transport jobs in South America over the years, there are currently no prospective renewables projects in the region, as offshore wind is developing faster elsewhere, especially in Europe, the US and East Asia.

Seaway 7 portfolio of renewables services. Image credits: Seaway 7

However, the global oil and gas subsea business recovery continues to gain momentum. At the end of the third quarter, Subsea 7’s in-house value of tenders 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.

On the outlook for new subsea business in the South Atlantic, the company listed a string of prospects, including Shell’s Bonga SW and North projects in Nigeria, Aker Energy’s Pecan project in Ghana, and TotalEnergies’ CLOV-3 and Begonia projects in Angola. But it is in Brazil that the bulk of the region’s opportunities are concentrated. These include Mero 4, Búzios 8 & 9, and riser replacement projects by Petrobras, Equinor’s BMC-33, Shell’s Gato do Mato, and TotalEnergies’ Lapa SW.

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