After a year of active tendering, Subsea7’s backlog hits year-end level last seen in 2013

After another year of active tendering, Subsea7 secured $7.4 billion of contract awards in 2023, taking its backlog to $10.6 billion, a year-end level last seen in 2013.

In its full-year 2023 financial report, Subsea7 reported revenue of $6 billion, an increase of $838 million or 16% compared to the prior year, said to be due to significantly increased activity in the Subsea and Conventional business unit which reflected increased demand for services in the offshore oil & gas sector, partly offset by lower revenue in the Renewables business unit due to the phasing of large fixed-price projects in the UK.

Adjusted EBITDA was $714 million resulting in an adjusted EBITDA margin of 12%, an increase of $155 million or 28% compared to the year ended December 31, 2022, driven by both the Subsea and Conventional business unit, with the execution of projects awarded at improved margins, and double-digit adjusted EBITDA margin in the Renewables business unit where the prior year was adversely impacted by additional costs incurred on certain projects.

Net operating income was $105 million for 2023, compared to $149 million in 2022.

Vessel utilization in 2023 was 77% compared with 78% in 2022. At the end of 2023, there were 38 vessels in Subsea7’s fleet, including ten chartered vessels, with 37 active vessels and one vessel under construction.

On December 31, 2023, the backlog was $10.6 billion compared to $10.8 billion on September 30, 2023. Order intake in the fourth quarter was $1.2 billion and included new awards of $640 million, including the Baltyk II and III offshore wind project in Poland and a project related to the decommissioning of subsea infrastructure associated with the FPSO Fluminense in the Bijupirá and Salema fields in Brazil.

$8.6 billion of the backlog related to the Subsea and Conventional business unit, which included $0.3 billion related to long-term day-rate contracts for PLSVs in Brazil, and $2 billion related to the Renewables business unit. $5.7 billion of the backlog is expected to be executed in 2024, $3.8 billion in 2025, and $1.1 billion in 2026 and thereafter.

Subsea7 said it anticipates that revenue in 2024 will be between $6 billion and $6.5 billion, while adjusted EBITDA is expected to be within a range from $950 million to $1 billion. Expectations for capital expenditure in 2024 have increased slightly to $300-320 million (from $280-300 million) driven by spend deferred from 2023 into 2024.

According to the company, it long-term sees a positive outlook for demand for its Subsea and Conventional business, supported by a tender pipeline of $21 billion. The hydrocarbon industry is likely to remain a key contributor to global production under plausible ranges of energy transition scenarios.

The Luxembourg-headquartered player said it was confident that its focus on the deepwater subsea market, with attractive economics, will enable it to maximize the return on the significant historical investments made in its modern subsea fleet.

“After another year of active tendering, the Group secured $7.4 billion of high quality contract awards, taking our backlog to $10.6 billion, a year end level last seen in 2013. With $5.7 billion of firm work for execution in the coming year, the Group has excellent visibility on 2024, and we expect to deliver Adjusted EBITDA growth of at least 33%,” said John Evans, Chief Executive Officer of Subsea7, said:

“Confidence in the Group’s outlook for cash generation in 2024 and beyond, combined with a sharp reduction in capital expenditure following the completion of our two newbuild wind vessels, supports the Board’s recommendation for shareholder returns totalling at least $1 billion over the next four years. This extends Subsea7’s track record of shareholder returns since 2011 to $3 billion and underscores the commitment of both management and the Board to strong capital stewardship.”