UK subsea engineering, construction, and services company Subsea 7 saw a decrease in revenues in the third quarter of 2019 due to lower activity levels in the Renewables and Heavy Lifting business and a smaller profit due to lower pricing and competitive market environment.
Subsea 7 on Thursday posted revenues of $951 million for the third quarter of 2019, which is 12% lower compared to $1.08 billion revenues in the prior-year period.
This reduction was driven by lower activity levels in the Renewables and Heavy Lifting business unit, primarily due to the completion of the Beatrice wind farm project. Revenue in the SURF and Conventional and Life of Field business units was in line with 3Q 2018.
Net operating income for the quarter was $59 million, compared to net operating income of $111 million in 3Q 2018. Net operating income in the SURF and Conventional business unit was $62 million in 3Q 2019 compared to $93 million in 3Q 2018, reflecting lower pricing on projects awarded during the downturn. The Life of Field business unit recorded a net operating income of $6 million. The Renewables and Heavy Lifting business unit recorded a net operating loss of $8 million driven by significantly lower activity levels and a competitive market environment.
The company recorded a profit of $42 million in 3Q 2019, also lower compared to $76 million in the same period last year.
The reduction was primarily due to the decrease in net operating income, partially offset by net foreign currency gains of $12 million in 3Q 2019, compared to net foreign currency losses of less than $1 million in 3Q 2018.
Order intake totaled $1.4 billion during the third quarter, not including an adverse foreign exchange movement of approximately $80 million. The order backlog at the end of September was $4.9 billion, of which $2.6 billion is expected to be executed in 2020.
Guidance for full-year 2019 has been revised due to the timing of progress on certain projects and Subsea 7 now expects revenue to decrease slightly compared to the full year 2018.
According to the company, 2019 is expected to represent the low point in the cycle for the group’s profitability. Revenue and Adjusted EBITDA are both expected to be higher in 2020, driven by an increase in activity in our key markets. The percentage margin will take longer to recover as projects awarded with low pricing in prior years progress to offshore execution.
Looking ahead, demand for offshore wind farm construction services is expected to increase and, as larger greenfield oil and gas projects are sanctioned, a continued gradual recovery is expected for deepwater SURF activity.
Offshore Energy Today Staff
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