Subsea 7 slips into the red over lower activity levels
27 April 2018
UK-based subsea engineering and construction company Subsea 7 sank to a loss during the first quarter of 2018 due to lower activity levels and foreign currency loss as its revenues fell by 10 percent.
Subsea 7 on Thursday posted a net loss of $18 million for the first quarter of the year compared to a profit of $146 million in the prior-year quarter.
This loss was primarily due to a decrease in net operating income – reflecting lower activity levels, partly due to seasonally bad weather, and fewer projects in the final stage of completion compared to the same period in the prior year – and a net foreign currency loss of $22 million in 1Q 2018, recognized within other gains and losses, compared to a net foreign currency loss of $7 million in 1Q 2017.
The company’s revenues in the first quarter of the year were $809 million, a decrease of 10% compared to revenues of $897 million in the first quarter of 2017.
The lower revenue compared to the prior year reflected deterioration in activity levels due to seasonality of northern hemisphere operations and fewer large projects progressing with offshore campaigns.
As tendering activity continued to gradually increase, the company’s order backlog at the end of March rose to $5.3 billion. This represented an increase of $0.1 billion compared with December 31, 2017.
Commenting on the company’s performance, Jean Cahuzac, Chief Executive Officer, said: “Vessel utilization and offshore activity in the quarter was low, reflecting the seasonality of operations in the North Sea and the impact of fewer large projects.”
According to the company, the oil and gas cycle is gradually recovering from the very low levels of activity experienced in the last three years and awards to market are increasing, however pricing remains challenging in the near term. The outlook for offshore renewables market activity is on a moderate growth trajectory, but with volatility year on year.
It is worth mentioning that Subsea 7 recently tried and failed to acquire the Houston-based McDermott for a reported price of $2 billion. Subsea 7’s offer was subject to the termination of McDermott’s pending transaction with CB&I, which is scheduled to be completed next month.