UK: Subsea 7 Second Quarter and Half Year results for 2010.


Subsea 7 Inc.  today reports the second quarter and half year results for 2010.

PERFORMANCE SUMMARY

Quarter Highlights

* Good project execution in all regions.

* Award of the largest single contract to the Company’s i-Tech business by Petrobras in Brazil. The contract value is estimated at a minimum of USD 250 million with the potential for up to USD 405 million.

* The Company and Acergy S.A. announced that their Boards of Directors had agreed to combine the two companies. Completion is anticipated towards the end of 2010 or the first quarter of 2011, subject to shareholder

approval, regulatory and other customary completion conditions.

Half Year Highlights

In addition to the above, the following is of note for the half year:

* Successful completion of Santos’ Henry project in Australia and Murphy’s Kikeh flexible project in Malaysia.

* The new-build diving support vessel, Seven Atlantic, was commissioned and joined the fleet.

OPERATIONS

North Sea

During the quarter, the Seven Seas successfully completed the riser installation on Statoil’s Troll B Gas Injection project. Fabrication of BP’s Skarv clad flowlines was completed at the Vigra spoolbase in Norway. The offshore

installation continued on BP’s Skarv and Valhall Re-development projects in the Norwegian sector of the North Sea. Pipeline fabrication and offshore installation was completed on Total’s K5CU project. Procurement, engineering and project management commenced on Apache’s Bacchus and BP’s Andrew pipeline bundles. These projects are scheduled for offshore installation in 2011. Life-of-Field operations continued on the Shell, ConocoPhillips, Total and BP frame agreements. The Seven Atlantic, and Normand Subsea continued working on Shell’s frame agreement.

Africa

During the quarter, the Rockwater 1 successfully completed work for Addax in its Okwori and Antan field developments, offshore Nigeria. Operations continued on BP’s Block 18 Life-of-Field project, offshore Angola. Preparation for spoolbase operations  on BP’s Block 18 Gas Export Line project continued, with offshore execution scheduled to commence late 2010. Project management and engineering progressed well in respect of BP’s Block 31 project, which is scheduled to commence offshore operations late 2010. The Seven Oceans and Seven Seas achieved high levels of utilisation which contributed positively to the result for the
region.

Brazil

Activity in Brazil remained high during the quarter. Offshore operations were successfully completed on Statoil’s Peregrino project supported by the Seven Oceans. The Ubu spoolbase completed pipeline fabrication activity in respect of Petrobras’ P-56 project, with offshore installation rescheduled to the fourth quarter 2010 due to the necessary permits not being available. Project management and engineering continued in respect of Petrobras’ P-55 project in the Roncador field. The Lochnagar, K3000 and Normand Seven continued to support Petrobras on day-rate operations. The K3000 completed a scheduled drydock during the quarter.

Other significant activities for the half year include the successful completion of Petrobras’ Sul Capixaba project.

North America

Marathon’s Droshky project was closed out following completion of offshore activities during the first quarter 2010. The Skandi Neptune supported BP in the Macondo field, Gulf of Mexico. Life-of-Field operations were completed for ENI, Newfield and Shell. Engineering and project management progressed well for Anadarko’s Caesar Tonga project. Other significant activities for the half year include the close out of Petrobras’ Cascade project.

Asia Pacific

During the quarter, Murphy’s Kikeh flexibles project was closed out. The Rockwater 2 completed FPSO installation activities in Vietnam and undertook planned maintenance.
Project management and engineering commenced on BHP’s Stybarrow project in Australia. Other significant activities for the half year include the successful conclusion of Santos’ Henry project.

FINANCIALS

Second Quarter 2010

Revenue for the second quarter 2010 was USD 519.9 million compared to USD 637.2 million for the same period in 2009. The decrease in revenue was mainly due to reduced activity levels in Brazil in the second quarter of 2010 compared to the same period in 2009 during which Shell’s BC-10 project was in its offshore phase. In addition, there were lower activity levels in Africa, which was offset to some extent by increased revenues in Asia Pacific due to the close out of Murphy’s Kikeh project and the Rockwater 2 completing FPSO installation activities in Vietnam.

Net operating profit for the second quarter 2010 was USD 93.8 million compared to USD 117.8 million for the same period in 2009. Net operating margins as a percentage of revenue were 18.0% in the second quarter 2010 compared to 18.5% in the second quarter 2009.

Net financial expense for the second quarter 2010 was USD 29.8 million compared to net financial income of USD 0.8 million for the second quarter 2009. The main reasons for this difference are losses in the marking-to-market of derivative financial instruments during the second quarter of 2010 of USD 12.9 million compared to gains of USD 23.5 million in the same period in 2009. In addition, net currency losses of USD 6.5 million were reported in the second quarter 2010 compared to net currency gains of USD 4.2 million reported in the second quarter 2009. This was offset to some extent by a lower finance expense of USD 12.5 million during the second quarter of 2010 compared to USD 28.9 million reported in the same period in 2009. This difference is predominantly attributable to the fact that in the second quarter of 2009, there was USD 20.3 million additional accretion which was recognised in respect of the reassessment of the life of the 2007 convertible notes, whereas there was no equivalent item in 2010. This was partly offset by interest expense of USD 4.7 million in respect of the convertible notes that were issued during the fourth quarter 2009.

Taxation expense for the second quarter 2010 was USD 22.6 million which equates to an effective rate of 35.3%. Net profit attributable to equity shareholders for the second quarter 2010 was USD 41.5 million, or USD 0.28 per share, compared to a net profit of USD 82.2 million, or USD 0.56 per share, for the second quarter 2009.

Half Year 2010

Revenue for the half year ended 30 June 2010 was USD 972.8 million compared to USD 1.2 billion for the same period in 2009. The decrease in revenue was mainly due to reduced activity levels in Brazil in the half year ended 30 June 2010 compared to the same period in 2009 during which Shell’s BC-10 project was in its offshore phase.

Increased activity in Asia Pacific in the half year ended 30 June 2010 compared to the same period in 2009 was offset by a decrease in activity in the North Sea and Africa.

Net operating profit for the half year ended 30 June 2010 was USD 172.3 million, compared to USD 199.9 million for the same period in 2009 representing an increase in net operating margins as a percentage of revenue from 16.1% in the half year ended 30 June 2009 to 17.7% in the half year ended 30 June 2010.

Net financial expense for the half year ended 30 June 2010 was USD 54.5 million compared to USD 4.4 million for the same period in 2009. The main reasons for this difference are losses in the marking-to-market of derivative financial instruments during the half year ended 30 June 2010 of USD 18.9 million compared to gains of USD 35.1 million made in the same period in 2009.

Taxation expense for the half year ended 30 June 2010 was USD 40.4 million which equates to an effective rate of 34.3% compared to an expense of USD 61.7 million and an effective rate of 31.0% in 2009.

Net profit attributable to equity shareholders for the half year ended 30 June 2010 was USD 77.6 million, or USD 0.53 per share, compared to a net profit of USD 137.3 million, or USD 0.93 per share in 2009.

Cash and cash equivalents at 30 June 2010 were USD 455.6 million compared to USD 84.8 million at 30 June 2009. Shareholders’ equity at 30 June 2010 totalled USD 1.2 billion compared to USD 942.6 million at 30 June 2009.

For Detailed Subsea 7 Inc. Earnings Presentation  Quarter Ended 30 June 2010 click here

Subsea 7  is one of the world’s leading subsea engineering and construction companies. Subsea 7 has its headquarters in George Town on the Cayman Islands. The largest owner is Siem Industries with 39%. The company was listed on the Oslo Stock Exchange in August 2005 following its restructuring the same year.

The company has five main divisions: Subsea field development; ROV support to Drill Rig Operations (the name of this division is i-Tech); Inspection, Repair and Maintenance; Survey and Positioning (the name of this division is Veripos); and Development and Application of Subsea Technology. 45% of revenue is generated in the North Sea while West Africa generates 28%, Brazil (11%), Asia Pacific (8%), and Gulf of Mexico (7%).

Subsea 7 is the result of a series of mergers between DSND, Halliburton Subsea, Subsea Offshore and Rockwater over an extended period, with Rockwater and SubSea merging in 1999 to form Halliburton Subsea, and the resulting company merging with DSND in 2002 to form the present business.

Source: Subsea 7, July 27, 2010:

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