Subsea 7 SA

OSE:SUBC

Earnings Call Transcript 2021-Q4

[Operator]

Thank you

for

standing

by,

and

welcome

to

the

Subsea

7

Q4

2021

Results

Conference

Call.

At

this

time,

all

participants

are

in

listen-only

mode.

There

will

be

presentation

followed

by

a

question-and-answer

session.

[Operator Instructions]



I

must

advise

you

that

the

conference

is

recorded

today,

the

3rd

of

March

2022.

I

would

now

like

to

hand

over

to the

speaker,

Katherine

Tonks.

Please

go

ahead.

[Katherine Tonks, Head-Investor Relations, Subsea 7 SA]

Welcome,

everyone.

With

me

on

the

call

today

are

John

Evans,

our

CEO;

and

Mark

Foley,

our

CFO.

The

results

press

release

is

available

to

download

on

our

website

along

with

the

presentation

slides

that

we'll

be

referring

to

during

today's

call.

May

I

remind

you that

this

call

includes

forward-looking

statements

that

reflect

our

current

views

and

are

subject

to

risks,

uncertainties

and

assumptions.

Similar

wording

is

also

included

in

our

press

release.

I'll

now

turn

the

call

over

to

John.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Thank

you

and

good

afternoon,

everyone.

I

will

start

with

the

highlights

from

2021

before

passing

over

to

Mark

to

cover

the

financial

results.

Turning

to

slide

3.

Revenues

improved

45%

year-on-year

to

$5

billion,

and

our

adjusted

EBITDA margin

was

broadly

stable

at

10%,

giving

us

an

EBITDA

of

$521

million,

up

55%.

Operating

cash

flow

was

$293

million,

and

we

generated

free

cash

flow

of

$127

million,

resulting

in

net

debt

including

lease

liabilities

of

$55

million.

As

we

announced

with

our

results,

the

board

has

decided

to

adopt

the

regular

dividend

policy.

It

has

approved

the

total

return

to

shareholders

of

$100 million

in

2022,

comprising

of

a

regular

dividend

of

NOK

1

per

share,

and

a

share

repurchase

of

approximately

$70 million.

Both

the

regular

dividend

policy

and

the

buyback

marked

the

board's

confidence

in

the

financial

position

and

the

outlook

for

the

group.

During

the

year,

we

had

group

fleet

utilization

of

83%

with

activity

centered

on

Norway,

the

Gulf

of

Mexico,

and

Brazil.

Our

large

EPCI

projects

such

as

Seagreen,

Bacalhau,

Mero-3,

and

Sakarya

are

all

making

good

progress.

We

ended

2021

with

a

healthy

backlog

of

$7.2

billion

after

order

intake

of

$6.1

billion.

We

made

good

progress

in

our

strategies

for

both

the

subsea

and

the

wind

businesses,

and

increased

our

presence

in

the

floating

wind

market.

I

will

discuss

these

a

little

more

in

detail

later.

Turning

to

slide

4,

and

our

recent

operational

highlights.

The

engineering

and

procurement

phases

of

our

major

EPCI

projects

are

on

track.

In

Brazil,

fabrication

of

Bacalhau

project

is

progressing

well,

whilst

on

Mero-3,

engineering

is

underway.

In

Turkey,

we

have

started

preparatory

site

works

for

Sakarya

Phase

1.

In

Norway,

we

tested

and

commissioned

the

Electrical Heat

Traced Flowline (sic) [Electrically Heat Traced Flowline] (00:03:24) line on Ærfugl

2,

and

we

had

several

vessels,

including

Seven

Vega

working

on

Johan

Sverdrup

2,

although

we

incurred

some

downtime

for

weather.

In

the

Gulf of

Mexico,

we

towed

out

the

King's

Quay

FPU,

and

the

Seven Navica, Seven

Arctic,

and Seven

Oceans

all

contributed

to

installation

activities.

At

Jack

St

Malo,

the

production

flowlines

and

rises

were

completed

and

loading

out

of

equipment

to

the Seven Oceans

has

begun.

In

Renewables,

the

Seagreen

project

remains

on

track

with

10

foundations

installed

by

the

year

end

2021

and

a

further

11

installed

in

January.

Delivery

of

the

cables

to

our

base

in

Scotland

is

on

track

and

the

installation

of

the

first

cables

has

commenced.

The

remaining

foundations

and

inner-array

cables

will

be

installed

in

2022

as

planned.

Elsewhere,

Seaway

Strashnov

installed

34

for

monopole

foundations

on

Hollandse

Kust

Zuid

and

the

remaining

105

to

be

installed

during

2022.

Seaway

Aimery,

Seaway Moxie,

and

Simar

Esperança

all

continued

to

work

on

Hornsea

II.

Turning

to

slide

5.

We

had

a

very

good

year

for

new

awards

at

$6.1

billion,

up

38%

year-on-year,

resulting

in

a

book-to-bill

of

1.2.

Q4

awards included

Scarborough

in

Australia

and

the

three-year

PLSV

contracts

in

Brazil.

These

were

boosted

in

the

fourth

quarter

by

a

high

level

of

escalations.

By the

year

end,

the

backlog

could

reach

the

highest

levels

since

2015.

We

have

good

visibility

on

revenue

for

2022

with

$3.4

billion

to

be

executed

in

Subsea

and

Conventional

and

$0.9

billion

in

Renewables.

Our

backlog

for

execution

in

2023

is

$2

billion,

and

that

is

nearly 30%

ahead

of

the

level

for

the

equivalent

period

this

time

last

year.

And

now,

I'll

pass

over

to

Mark,

to

run

through

the

financial

results

in

more

detail.

[Mark Foley, Chief Financial Officer, Subsea 7 SA]

Thank

you,

John,

and

good

afternoon,

everyone.

I'll

begin

the

financial

results

with

you

with

some

details

of

business

unit

performance

in

the

fourth

quarter

and

full-year,

before

returning

to

the

group

income

statement

for

some

additional

comments.

Slide

6

summarizes

the

fourth

quarter

performance

of

our

business

units.

Subsea

and

Conventional

generated

$1

billion

of

revenue,

44%

higher

than

the

prior

year

with

notable

contributions

from

Sakarya,

Bacalhau,

projects

in

the

Gulf

of

Mexico

and

Saudi

Arabia.

Renewables

revenue

was

$326

million,

up

49%

year-on-year,

mainly

driven

by

higher

revenues

from

the

Seagreen

project,

as

well

as

contributions

from Yunlin,

Hollandse

Kust

Zuid,

and

Hornsea

II.

Adjusted

EBITDA

for

Subsea

and Conventional

was

$143

million,

broadly

flat

year-on-year,

equating

to

a

lower

margin

of

14%

compared

with

18%

last

year.

This

decline

was

due

to

the

early

phase

of

projects

in

the

portfolio,

lower

client

settlements,

as

well

as some

costs

associated

with

waiting

on

weather

in

Norway.

Adjusted

EBITDA

for

Renewables

was

$10 million,

in

line

with

the

prior

year

period.

This

compares

with

the

adjusted

EBITDA

reported

by

Seaway

7

of

$30 million.

The

$20

million

difference

reflects a

charge on a

wind

project

in

Taiwan,

whose

economic

interest

was

retained

by

Subsea

7

as

part

of the

combination

with

OHT.

After

depreciation

and

amortization,

net

operating

income

for

Subsea

and

Conventional

was

$50

million

compared

to

our

$37

million

loss

in

the

prior

year

quarter,

which

includes a

$94

million

of

asset

impairment

charges

while

renewables

recorded

a

net

operating

loss

of

$12 million

compared

with

a

loss

of

$2

million

in

the

prior

year.

Coming

to

the

full-year,

Subsea

and

Conventional

revenue

increased

33%

to

$3.7

billion

while

revenue

from

renewables

doubled

to

$1.3

billion,

representing

25%

of

the

group

revenue.

The

greatest

contributions

in

the

year

were

from

Seagreen

and

Renewables;

and

the

Bacalhau,

Mad

Dog 2,

King's

Quay

and

Sakarya

projects

in

Subsea

and

Conventional.

Adjusted

EBITDA

for

Subsea

and

Conventional

was

$468

million,

up

10%

year-on-year,

equating

to

a

lower

margin

of

13%

compared to

16%

last

year.

This

was

mainly

due

to

the

execution

of

early

phases

of

projects

in

the

portfolio

awarded

at

a

relatively

low

margin

in

prior

years,

lower

client

settlements

on

certain

projects,

partly

offset

by

lower

net

COVID-19

costs.

Adjusted

EBITDA

for

Renewables

was

$4

million,

down

from

$12

million

in

2020 due

to

charges

in

Taiwan

resulting

from

operational

delays,

partly

offset

by

good

progress

on

Seagreen.

After

depreciation

and

amortization,

full-year

net

operating

income

for

Subsea

and

Conventional

was

$103

million,

compared

to

$48

million

in

the

prior-year

quarter,

excluding

$294

million

of

impairment

charges,

mainly

related

to

vessels.

Renewables

recognized

a

net

operating

loss

of

$60

million,

compared

with

a

loss

of

$40

million

in

the

prior

year.

Slide

8

shows

a

summarized

income

statement.

The

group's

fourth

quarter

revenue

was

$1.4

billion,

45%

higher

than

the

prior-year

period.

Adjusted

EBITDA

of

$143

million

was

down

from

$165

million

last

year.

This

resulted

in

an

adjusted

EBITDA

margin of

10%, about 600 basis

points lower than the margin achieved in the

prior-year quarter

due

to the

phasing

of

project

in

their early

stages,

some

downtime

from

weather,

and

charges

relating

to

projects

in

Taiwan.

The

prior-year

fourth

quarter

benefited

from

the

release

of

restructuring

provisions

of $14

million.

Coming

to

the

full

year,

revenue

in

2021 was

$5

billion,

up

45%

year-on-year.

Adjusted

EBITDA

was

$521

million,

up

from

$347

million

in 2020.

The

improvement

included

the

reversal

of

restructuring

charges

of

$37

million

in

2021,

compared

to

a

charge

of

$86

million

in

2020.

Net

COVID-19

costs

of

$27

million

in

2021 were

lower

compared

to

$70

million

incurred in

2020.

Adjusted

EBITDA

margin

was

10.4%,

slightly

up

from

9.7%

in

2020,

while

the

underlying

margin

reflected

the

execution

of projects

awarded

during

the

downtime,

as

well

to

the

phasing

of

certain

projects

in

their

early

stages,

and

charges

related

to

delays

on

projects

in

Taiwan.

In

2021,

net

income

benefited

from

the

absence

of

asset

impairment

charges

on

goodwill,

property,

plant

and

equipment,

and

right

of

use

assets,

but

reflect

the

COVID-19

induced

deterioration

in

the

outlook

for

oil

and

gas

markets.

Overall,

net

income

for

2021

was

$46

million,

compared

with

a

net

loss

of

$1.1

billion

in

the

prior

year.

Turning

to

slide

9

for

supplementary

details

of

the

income

statement,

administrative

expenses

in

the

fourth

quarter

improved $10

million

year-on-year,

driven

by

impairment

reversals

of

$4

million,

compared

to

$14

million

impairment

charge

in

2020,

partly

offset

by

the

addition

of

administrative

expenses

related

to

the

combination

with

OHT.

Fourth

quarter

depreciation

and

amortization

increased

slightly

to

$112

million

(sic) [$113 million] (00:12:03) from

$105

million,

mostly

due

to

the

addition

of

OHT's

five

heavy

transportation

vessels

to

be

active

fleet

from

the 1st

of

October.

Net

finance

cost

fell by

$3

million,

mainly

due

to

low

charges

related

to

lease

liabilities,

while

taxation

was

$16

million,

representing

an

ETR

of

81%,

elevated

by

a

mix

of

profits

in

certain

jurisdictions

and

irrecoverable

withholding

taxes.

Moving

to

the

full

year,

administration

expenses

were

$228

million,

down

$14

million

year-on-year,

benefiting

from

an

impairment

reversal

of

$4 million

in

2021,

compared

to

charges

of

$18

million

in

2020, and

credit

related

to

restructuring

of

$3

million

in

2021,

compared

to

charges

of

$11

million

in

2020.

Depreciation

and

amortization

was

$444

million

in

2021,

up

$2

million

year-on-year,

and

included

the

OHT

vessels

in

the

fourth

quarter.

Net

finance

costs

were

$15

million

in

2021,

down

$5

million

year-on-year,

mainly

due

to

[ph]



work (00:13:23) charges

related

to

lease

liabilities.

Taxation

of

$64

million,

equating

to

an

effective

tax

rate

of

64%,

was

driven

by

the

mix

of

profits

in

certain

jurisdictions

and

irrecoverable

withholding

taxes.

On

slide

10,

we

developed our

cost

histogram

that

shows our costs

segmented

into

four

categories.

In 2020,

we

saw

the impact

of the

cost

reduction

plan

as

we

realigned

our

business

in

response

to

the

COVID-19

pandemic

and

associated

global

economic

slowdown.

But

costs

have

increased

in 2021 in line with

the

industry

recovery.

Direct

project

costs

are

a

function

of the

volume,

mix,

and

phasing

of

our

activities

and

the

pricing

environment

for

procurement.

In

2021,

we

saw

a

significant

increase

in

our

procurement

costs,

driven

by

the

mix

in

phasing

of

our

project

portfolio,

particularly

our

largest

EPCI projects

for

example,

Sakarya,

Bacalhau

and

Seagreen.

Our

personnel

costs

increased

approximately

$1.1

billion

in

2021,

as

we

expanded

our

tendering

and

engineering

teams

to

address

the

sharp

uptick

in

industry

activity.

Personnel

costs

also

include

the

extra

[ph]



gross

cost

incurred

(00:14:42) relating

to

COVID-19.

Such

costs

include

the

need

to

have

standby

crews

and

the

quarantining

of

crews

in

accordance

with

local

regulations.

Vessel

and

other costs

increased

approximately

$400 million.

We

ended

the

year

with

34

vessels

in

their

active

fleet,

up

from

30 at

the

end

of

2020,

with

the

addition

of five

heavy

transportation

vessels

from

OHT,

partially

offset

by

the

recycling

of

17.

Slide

11

shows

our

cash

flow

waterfall

for

the

full

year.

Net

cash

generated

from

operating

activities

was

$293

million,

including

a

$202

million

build

in working

capital.

The

latter

was

driven

by

the

timing

of

milestone

payments

and

working

capital

requirements

associated

with projects

in

the

Middle

East

and

delays

in

payment

in

Taiwan.

Capital

expenditure

was

$167

million,

[indiscernible]



(00:15:42) depreciation

and amortization

of

$444

million,

reflecting

the absence

of

new

build

vessels

in

the

year.

During

the

year,

we

incurred

$93

million

in

lease

payments,

mainly

related

to

chartered

vessels

and

$93

million

relating

to

dividend

payments

and

share

repurchases.

In

the

fourth

quarter,

we

drew

down

$200 million

from

the

group's

UK

Export

Finance

facility

in

advance

of

the

anticipated

working

capital

build

in

2022.

At

the

end

of

the

year,

we

have

$598

million

in

cash

and

cash

equivalents

and

moved

to

a

net

debt

position

of $55

million

including

lease

liabilities

compared

to

a

net

cash

position

of

$44 million

including

lease

liabilities

at

the

end

of 2020.

The

group's

liquidity

was

$1.6

billion,

which

included

$956

million

of

undrawn

borrowing

facilities.

To

conclude,

slide

12

shows

our

guidance

for

the

full-year.

Before

I

comment

on

the

full-year,

I

want

to

highlight

that

the

first

quarter

has

a

heavy planned

vessel

management

schedule

with

10

vessels

undertaking

dry-docking,

modifications

or

maintenance.

Vessels

in

addition

to

the

Northern

Hemisphere

weather

seasonality

normally

experienced

during

the

quarter

that

results

in

lower

activity.

Quarter

one

adjusted

EBITDA

will

be

lower

than

prior

comparative

periods.

However,

full year

adjusted

EBITDA

is

expected

to

be

in

line

with

or

better

than

last

year. When

coming

to

the

full

year,

revenues

expected

to

be

broadly

in

line

with

2021

while

adjusted

EBITDA

as

mentioned

a

moment

ago

and

net

operating

income

are

expected

to

be

in

line

with

or

better

than

last

year.

Our

administrative

expenses

are

expected

to

be

in

the

region

of

$240

million

and

$260

million. Depreciation

and

amortization

expense

is

expected

to

be

between

$460

million

and

$480

million,

while

net

finance

costs

are

expected

to

be

between

$20 million

and

$25

million.

Taxation

for

the

year

is

anticipated

to

be

in

the

range

of

$35

million

to

$45

million.

As

we

announced

last

quarter,

our

capital

expenditure

in

2022

is

expected

to

fall

within

the

range

of

$420

million

to

$440

million,

inclusive

of

approximately

$280

million

relating

to

Seaway

7's

new

build

vessel

program.

I

will

now

pass

you

back

to

John.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Thank

you,

Mark.

On

slide

13,

we

have

a

summary

of

our

strategy

comprising

the

subsea

field

of

the

future

and

the

proactive

participation

in

the

energy

transition.

In

the

next

two

slides,

I'll

do

a

recap

of

our

successes

this

year

before

turning

to

our

strategy

for

capital

allocation.

Our

strategy

for

the

subsea

field

of

the

future

revolves

around

four

focus

areas,

early

engagement,

system

innovation,

our

integrated

offering

and

digital

delivery.

Early

engagement has

become

a

cornerstone

of

our

relationships

with

clients,

allowing

us

to

work

closely

with

them

to

help

optimize

their

field

developments

and

has

been

particularly

important

as

supply

chains

have

tightened.

Our

engineers

and

supply

chain

management

teams

work

with

our

clients

to

navigate

bottlenecks

to

ensure

they

get

access

to

the

right

capacity

at

the

right

time.

About

60%

of

our SURF

EPCI

contracts

awarded

in

2021

follow

early

engagement,

and

7 out

of

10

awards

in

Norway

were

the

result

of

working

in

close

partnerships

with

our

clients.

2021

was

a

significant

year

for

innovation

in

Subsea

7.

Our

state-of-the-art

pipelay

vessel,

Seven

Vega,

joined

the

fleet

and

has

been

key

to

our

delivery

of

our

Electrical

Heat Traced

Flowlines (sic) [Electrically Heat Traced Flowlines] (00:19:53).

With

enhanced

flow

assurance,

EHTF

allows

longer

tiebacks

as

well

as

reducing

the

carbon

footprint

of

satellite

developments.

Moving

to

integrated

SPS and

SURF,

and

our

subsea

integration

alliance

with

One

Subsea.

We

offer

our

clients

one

interface

of

a

streamlined

service

from

design

to

commissioning

of

entire

subsea

developments.

The

feedback

from

our

clients

has

been

excellent

and

the

numbers

speak

for

themselves

with

a

76%

share

of

integrated

rewards

by

revenue

since

January

2020.

The

integrated

offering

is

gaining

popularity

with

our

clients.

And

in

2021, 62%

of

our

SURF

awards

were

integrated.

Finally,

we

are

rolling

out

digital

strategies

across

several

aspects

of

our

business,

delivering

an

improved

performance

for

our

teams

and

enhanced

experience

for

our

clients.

A

good

example

of this

has

been

the

launch

and

rollout

in

2021

of

4insight,

which

uses

big

data

and

machine

learning

to

improve

the

uptime

of

our

vessels.

Moving

to

slide

14

and

our

strategy

of

proactive

participation

in

the

energy

transition.

The

renewables

piece

of

this

strategy

is

probably

well

known

to

you

by

now

with

the

creation

of

Seaway

7 ASA,

as

well

as

our

participation

in

the

Salamander

floating

wind

joint

venture,

an

investment

in

Nautilus

Floating

Solutions.

Floating

wind

is

gaining

momentum

with

several

demonstrative

projects

underway

and

being

tendered.

Other

exciting

markets

are

carbon

capture

and

hydrogen.

We

won

our

first

carbon

capture

award

for

Equinor's

Northern

Lights

project

in

2021,

and

we

are

bidding

for

further

projects

that

we'll

highlight

in

a

moment.

Our

hydrogen

strategy

is

at

an

earlier

stage,

and

we

gained

valuable

insight

from

our

subsidiary,

Xodus,

which

has

worked

on

over

30 hydrogen

studies,

as

well

as

over

30

carbon

capture

studies. Of

course,

as

well

as

embracing

new

energy

markets,

a

very

important

part

of

our

energy

transition

journey

is

helping

to

reduce

the

carbon

emissions

of

clients'

oil

and

gas

projects,

as

well

as

reducing

the

emissions

of

our

own

fleet.

In

2021,

our

Carbon

Estimator

tool

is

now

incorporated

into

all

our

studies.

It

allows

our

clients

to

estimate

the

carbon

emissions

from

different

permutations

of

field

layouts

and

helps

them

optimize

their

developments.

And the

Carbon

Estimator

was

used

to

optimize

64%

of

contracts

awarded

to

us

during

this

year.

Finally

but perhaps

most

significantly,

in

2021,

we

aligned

the

goals

of

the

UN

Paris

Agreement

to

target

net

zero

by

2050

with

a

reduction

of

50%

in

our

Scope

1

and

Scope

2

emissions

by

2035.

Our

vessels

account

for

over

90%

of

our

Scope

1

and

Scope

2

emissions,

and

we

aim

to

reduce

their

carbon

footprint

through

a

combination

of

hydrolization,

shore

power,

clean

fuels

and

digital

efficiency.

We

will

report

on

our

progress

in

our

sustainability

report

for

2021,

which

we will

publish

in

mid-March.

Wrapping

up

the

strategy

section,

let's turn

to

slide

16,

where

we

clarified

questions

about

capital

allocation

that

we've

heard

often

from

investors

and

analysts

over

the

past

months.

What

we

have here

is

a

simple

schematic

to

highlight

on

one

hand

use

of

cash

from

Subsea

and

Conventional,

and

on

the

other

hand,

the

funding

strategy,

the

Seaway

7.

Our

Subsea and

Conventional

business

units

has

a

young

fleet

of

vessels

that

will

capture

opportunities

in

the

rising

oil

and

gas

market

was

requiring

reduced

levels

of

capital

investment.

With

a

solid

industry

outlook,

stable

competitive

landscape,

and

investment

well

below

D&A,

this

business

is

well

positioned

to

generate

significant

free

cash

flow.

The

priority

for

this

cash

flow

will

be

shareholder

returns

starting

as

we

announced

today

with

a

regular

dividend.

The

mechanism

and

magnitude

of

additional

cash

returns

will

be

left

to

the

discretion

of

the

board

and

assessed

annually,

but

this

year

includes

a

$70

million

share

repurchase.

On

the

right-hand

side,

we

have

Seaway

7,

which

we

currently

have

72%

stake.

And

it

is

our

intention

to

always

hold

at

least

51%

stake.

Seaway

7

is,

as

you

know,

focused

on

the

high

growth

fixed

offshore

wind

market

and

has

two

new

vessels

under

construction,

which

are

due

for

delivery

in

2023.

It's

Seaway

7's

intention

to

fund

these

and

any

future

new

builds

independently

of

Subsea

7.

Of

course,

Seaway

7's

debt

will

be

fully

consolidated

on

Subsea

7's

balance

sheet.

I

hope

the

slide

illustrates

our

intention

to

keep

a

relatively

separate

underlying

structure.

[indiscernible]

(00:25:21)

working

capital

support

from

Subsea

7

may

provide

to

Seaway

7

whilst

it

establishes

itself

with

an

independent

capital

structure.

And

with

that,

back

to

our

usual

outlook

slides

starting

with

the

prospects

for

subsea

market

on

slide

17.

We

were

very

pleased

with

our

strong

order

intake

we

reported

for

2021

and

indicative

of

the

recovery

that's

underway

in

the

oil

and

gas

industry.

Tendering

remains

very

active,

and

we

are

optimistic

that

2022

will

be

another

very

good

year

for

new

awards.

At

the

core

of

this

recovery,

the

most

active

markets

remain

Brazil,

where

we

have a

long

list

of

prospects

for

both

Petrobras

and

IOCs,

the

Gulf

of

Mexico

with

multiple

tie-back

projects

in

the

tendering

pipeline.

And

Norway,

with

the

tax

incentives,

should

lead

to

a

high

level

of

awards

this

year.

We

see

pockets

of

improving

activity

outside

these

regions.

There

are

a

handful

of projects

in

West

Africa

that

are

pushing

ahead.

Bidding

in

Saudi

Arabia

remains

active.

And

we're

now

working

on

the

tender

for

Sakarya

Phase

2

Turkey,

the

follow

up to

$1

billion

Phase

1

project.

In

2022, we

also

expect

to

see

further

carbon

capture

awards

as

capital

allocated

to

this

emerging

market

by

our

clients

begins

to

accelerate.

The

first

such

project

we

will

bid

are

in

the

UK

for

the

Northern

Endurance

Partnership

in

Humber

site

and

Teesside.

Endurance

field

will

act

as

a

CO2

store,

lies

approximately

100

kilometers

offshore

from

the

Humber,

and

we

expect

an

award

to

the

market

in

2022.

Overall,

we

are

encouraged

by

the

way

the

recovery

is

progressing

and

remain

confident

in

the

outlook

for

Subsea

and

Conventional.

On

the

next

slide,

we

have

the

wind

prospects. I'll

leave

these

and

the

detail

to Seaway 7

to

discuss,

but

we

continue

to

see

strong

demand

centered

on

the

US

and

the

UK,

with

awards

expected to

the

industry this

year

and

onwards. We're

also expected to

bid

two

floating

wind demonstrator

projects

in Korea

during

2022.

So, to

wrap

up,

we'll

turn

to

our

final

slide

on

page

19. While

it's

true

to

say

that

some

of

the

challenges

of

COVID-19

continued

to

affect

2021,

it

was

a

year

of

strong

recovery

for

Subsea

7

that

leaves

us

very

well-positioned

to

deliver

as

the

cycle

develops.

This

is

the

view

that

is

shared

by

the

board

and

underpins

their

decision

to

introduce

a

regular

dividend.

For

the

Subsea

and

Conventional

business,

we

have already

seen

order

intake

reach

the

highest

levels

we've

seen

for

several

years

and

tendering

remains

very

active.

In

Renewables,

after

a

hiatus

in

awards

in

the

UK

offshore

wind

market,

the CFD

round

in

the

first

half of

this

year

should

unlock

opportunities

whilst

in

the

US,

some

large

projects

are

scheduled

for award

to

the

industry

this

year.

Of

course,

as

we've

heard

from

companies

around

the

globe,

raw

material

exposure

and

supply

chain

management

becomes

critical.

Whilst

no

one

can

be

totally

immune,

we

believe

we

have measures

in

place

to

mitigate

these

risks

as

much

as

possible.

Finally,

the

emerging

energy

markets

that

support

the

long-term

outlook

for

Subsea

7

are

gathering

momentum,

with

demonstration

projects

in

floating

wind

and

tenders

for

carbon

capture

projects.

Overall,

we

believe Subsea

7

is

well-placed

to

capture

opportunities

in

today's

evolving

and

dynamic

energy

markets.

With

that,

we'll

be

happy

to

take

your

questions.

[Operator]

Thank

you.

[Operator Instructions]



We

have

the

first

questions

coming

from

the

line

of

Sasikanth

Chilukuru

from

Morgan

Stanley.

Please

ask

your

question.

[Sasikanth Chilukuru, Analyst, Morgan Stanley & Co. International Plc]

Hi.

Thanks

for

taking

my

questions.

I

had

three,

please.

The

first

one

was,

I

was

wondering

if

you

could

provide

some

more

color

on

how

the tendering

activity

has

improved

in

recent

weeks,

especially

in

the

Subsea

and

the

Conventional

business,

how

the

discussions

with

clients

have

changed

over

the

course of

this

year

so

far.

And

how

confident

are

you

in

improving

your

order

intake in

2022

relative

to

2021?

The

second

one

was

related

to

the

offshore

wind

project,

the

Formosa

2

project.

You've

highlighted

you have

retained

the

costs

recognized

for

the

Taiwan

offshore

wind

project

within

Subsea

7,

I

suppose

this

is

the

Formosa

2

project.

Can

you

update

– can

you

give

us an

update

on

how

the

project

is

progressing,

what

contingencies

you

have

included

in

your

2022

EBITDA

guidance

related

to

this

project?

And

previously,

you

have

highlighted

that

you

are

in

discussions

to

recover

the

incremental

costs

from

the

clients

in

accordance

to

your

contractual

terms.

How

are

these

discussions

progressing?

And

finally,

if

you

can

give

us

a

guidance

or

color

on

the

expectations

of

working

capital

in

2022.

Last

quarter,

it

was

highlighted

that

there

will

be

a

working

capital

build

in

2022.

Is

it

still

the

case?

And

if

you

can

guide

us

on

the

expected

magnitude

of

the

potential

working

capital

outlook.

Thanks.

[John Evans, Chief Executive Officer, Subsea 7 SA]

It

sounded

like more

than

three

questions

there,

but

I'll

try

to

answer

them

as best

I

can,

but

good

to

talk

to

you

again.

So, as

I've

mentioned

in

my

prepared

remarks,

we

are

certainly

seeing

a

lot

of

activity

and

a

lot

of

tendering

moving.

We

are

very

much

in

a

place

where

we

are

seeing

improvements

in

terms

of

pricing

on

every

tender

that

we

submit.

We

know that

we

are

very

well-placed

for

quite

a

large

portfolio

of

projects

in

Norway

to

come

our

way

this

year.

And

those

discussions

and

clarifications

are

moving

ahead,

as

well

as

certain

bids

to

the

market

that

Equinor

will

do

in

the

first

half of

this

year.

As

I

mentioned in

my

prepared

remarks,

we're

working

on

the

second

phase

of

Sakarya

so

that

our

client

is

accelerating

the

next

phase

of

Sakarya

moving

ahead,

and

there's

no

let-up

in

Petrobras'

bidding

process.

You'll

have

seen

that

Búzios

8

was

publicly

bid,

only

two

was

bidded, and

Subsea

7

is

the

lowest

bidder

on

the

public

opening

on

that.

So

we're

seeing

a

number

of

factors

happening,

limited

number

of

people

bidding

tenders,

a

speeding

up

of

the

number

of

tenders

that

are

happening

there.

So

having

the

largest

fleet

in

this

industry

is

really,

really

helping

us

at

the

moment,

because

it

allows

us

to

be

very

clear

about

where

we

want

to

place

our

assets.

I've

talked

about

this

in

previous

quarters.

Our

aim

was

to

have

one

of

the big

pipelayers

down

in

Australia

and

Barossa

and

Scarborough

coming

together

in

the end

of

the

first

quarter

helps

us

there.

In

Brazil,

we

wanted

to have

one

of

the big

pipelayers

in

future

years

and

then Bacalhau, Mero-3, and

hopefully

Búzios

8

fits

that.

And

lastly

then,

we

will

have

one

big

pipelay

work in

between

Norway

and

the

Gulf

of

Mexico,

and

lastly

then,

one

of

the

pipelayers

in

Africa

and

the

Middle

East.

And

again,

we

can

see

those

pieces

or

those

jigsaws

fitting

together.

So,

main

message

is

it's

speeding

up.

The

main

message

is,

is

that

we're

very

well-positioned.

And

we

get

many

questions

why

having

the

largest

fleet

in

the

world

or

having

the largest

fleet

in

the

world

helps

you when

the

market is

quite

strong.

Your

second

question

on

Formosa

2,

Formosa

2,

because

we

were

in

the

middle

of

a

very

complex

situation

in

2021

in

Taiwan,

Subsea

7

retained

the

economic

interest

of

that

asset

and

that

project

at

the

time.

We

have

since

clarified

our

remaining

scope,

our

remaining

remuneration,

and

our

remaining

schedule

with

our

client.

And

we

expect

to

close

that

project

physically

hopefully

by

the

end

of

Q2

2022.

We

are

going

back

to

work

this

week,

as

we

speak,

with

the

remaining

scope

that

we've

got.

We

did

incur

though

some

further

increased

cost

in

the

supply

chain,

because

you

have

this

entire

wave

of

projects

that

were

held

up

in

2021

that

are

now

on

top

of

a

bunch

of

projects

that

were

also

to

be

done

in

2022.

We

have

now

secured

all

our third-party

assets

that

we

need

in

Taiwan

for

this

year,

and

that

adjustment

was

taken

in

quarter

four.

So

we

expect

to

be

able

to

give

you

an

update

on

how

the

project

goes

during

the

year,

but

we

expect

to

be

materially

complete

by

the

middle

of 2022.

And

on

working

capital,

Mark

can

give

you

an

update.

[Mark Foley, Chief Financial Officer, Subsea 7 SA]

Yes.

Thank

you,

Sasikanth.

Working

capital

improved

by

around

$100

million

in

Q4.

We

communicated

in

our

Q3

earnings

call

that we

expected

a

improvement

in

quarter

four,

which

indeed

materialized.

However,

we

do

still

expect

a

working

capital

build

in

2022

due

to

the

increased

procurement

activity

of

Mero-3

in

Brazil,

together

with

the

significant

activity

that

we

have

planned

for

the

Middle

East.

So

we

reiterate

our

guidance

provided

in

November

about

the

working

capital

build

in 2022

will

be

in

the

low

to

mid $100

million.

What

I

would

say

is

that

we

are

actively

working

on

this

area.

And

to

give

an

example,

in

January,

I

and

[ph]



others (00:35:33)

had

a

very

constructive

call

with

the

Petrobras

CFO.

We

had

lobbied

Petrobras

very

hard

to

seek

improvements

regarding

working

capital

requirements.

As

ever

with

Petrobras,

it

was

a

very

constructive

conversation.

And

what I

would

say

is

we are

pleased

with

the

changes

that

Petrobras

made

in

the

most

recent

tender

on Búzios

8

elsewhere,

optimizing

cash

management

as

a

focus,

as

I

said

some

moments

ago.

So

again,

our

guidance

remains

the

same

as

we

communicated

in

November

regarding

2022

for

working

capital.

[Sasikanth Chilukuru, Analyst, Morgan Stanley & Co. International Plc]

Great.

Thank

you.

[Operator]

We

have

the

next

questions

coming

from

Haakon

Amundsen

from

ABG

Sundal

Collier.

Please

ask

your

question.

[Haakon Amundsen, Analyst, ABG Sundal Collier ASA]

Yeah.

Hi,

guys.

Thanks

for

taking

my

question.

Just

a

question

on

the

Subsea

and

Conventional

margin

development.

I

don't know

if

you want

to guide specifically,

but

could

you

give

some

color

on

the

movement

into

2022

and

2023

relative

to

2021,

please?

[John Evans, Chief Executive Officer, Subsea 7 SA]

Well,

what

I

discussed

before,

Haakon,

on

margins

is

we

expect

to

see

from middle

of

2023

onwards,

the

benefits

of

newer

projects

coming

into

the

mix

when

we

physically

go

offshore.

So,

that

position

is

certainly

starting

to

fit

together

with

the work

that

we

bought in,

in

Q4

and

what

we

expect

to

bring

in

this

year.

As

we

guided

in

our

press

release

and

our

comments,

we

expect

to

see

2022

EBITDA

to

be

in

line

or

better

than

2021.

So,

for

us,

I

think

we

should

be

able

to

give

better

clarity

to

the

market

as

to

how

and

we

see

things

moving.

As

Mark

touched

on,

we

have

a

large

number

of

vessels

on

the

dock

in

repair

in

quarter

one.

So,

I

will

see

that

as

the

year

develops,

we

can

certainly

give

the

market

more

clarity.

But

directionally,

it's

improving

and

we're

seeing

that

on

the

pricing

that

we're

seeing.

And

linked

to

what

Mark has

just

said,

on

Búzios

8,

the

working

capital

is

substantially

better

than

Mero-3.

So,

we're

seeing

two

things

happening

here.

We're

seeing

our

margin

improve

for

our

outer

year

projects,

and

we're

seeing

the

entry

ticket

in

certain

locations

such

as

Brazil

improve

as

well.

[Haakon Amundsen, Analyst, ABG Sundal Collier ASA]

All

right.

That's

helpful.

Just

to

understand

your

guidance

for

– because

when

you

guide

for

potentially

improving

EBITDA

in

2022,

of

course,

that's

the

consolidated

numbers.

And

I

guess

Seaway

7

appears

to

be

expanding

its

EBITDA.

So, I

just

wondered

if

you

could

give us

some

color

on –

is

the –

should we

expect

the

Subsea

EBITDA

to

expand

as

well?

Or

is

it

just

the

consolidated

number

and

the

Seaway

7

number

that

we

should

expect

to

improve?

Thanks.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Yeah.

I

think for

us,

what

we

guided

with

Seaway

7

should

be

this

year,

which

is

a

$1

billion

business

and

heading

towards

its

10%

EBITDA,

and

we

can

hopefully

see

the

piece

of

that

coming

together

this

year.

We

do

need

to

remember

that

2022

offshore

is

a

relatively

quiet

year

for

us,

because

very

few

projects

were

awarded

to

the

market

in

2020.

We've

adjusted

the

size

of

the

fleet.

And

as

Mark

has

discussed,

we

have

a

large

volume

of

low

margin

procurement

on

all

these

future

projects

for

2024

and

2025

going

through

the

books.

So,

the

mix

is

changing,

but

directionally,

Haakon,

we're

very

comfortable

with

which

way

this

is

all

heading.

[Haakon Amundsen, Analyst, ABG Sundal Collier ASA]

All

right.

Thank

you.

That's

it

for

me.

[Operator]

We

have

the

next

questions

coming

from

James

Thompson

from

JPMorgan.

Please

ask

your

question.

[James Thompson, Analyst, JPMorgan Securities Plc]

Great.

Thanks

very

much. Good

afternoon,

gents.

Just

a

follow-up

there

on

Brazil,

John,

I

mean,

you

said

that Búzios

8

[indiscernible]

(00:39:36)

improved,

something

you

talked

about

last

quarter

looking

for

that.

Do you

think

that's

a

sort

of

permanent

adjustment

that

Petrobras

is

making

or

is

this

something

that's

kind

of

very

specific

to

the

wants

and

needs

of

this

particular

project?

[John Evans, Chief Executive Officer, Subsea 7 SA]

I

hope

direction

is

heading

the

right

way.

We

only

had

two

bids

on

that

opportunity.

And

as

the

market

starts

to

tighten

up,

I

think

they're

acutely

aware

that

they

have

used

the

cycle

to

get

some

better

working

capital

in –

on

previous

bids,

which

all

the

main

players

were

taking

at

the

time,

but

I

think

all

of us

are

pretty

clear

now

in

the

market

that

we

should

see

some

improved

working

capital

there.

So,

I

believe

that

certainly

the

message

that

Mark

and

I

gave to

the

executive

members

that

we

discussed

is

that

Búzios

8 needs to improve

but

your

remaining

list

of

projects

also

need

to

improve.

This

was

a

temporary

move

that

Petrobras

was

quite

smart

in

taking

the

downturn

in

the

market

to

achieve,

but

we

should

hope

to

see.

Each

bid

comes

along.

The

Petrobras

system

is

very

open.

You

can

send

as

many

questions

in

as

you

want

on

each

bid.

And

we

have

been

banging

the

drum

for

a

number

of

quarters

about

the

very,

very

important

side

of

making

sure

that

the

working

capital

was

there

and

proportionate

for

the

risks

that

we

take.

[James Thompson, Analyst, JPMorgan Securities Plc]

Okay.

Okay.

That's

helpful.

I

mean

more

of

a

general

question.

I

mean,

just

COVID

obviously

a

big

impact

last

year.

Can

you

talk

maybe

about

the

sort

of

changes?

Is

it

– do

you

feel

like

operations

are

going to

be

just

a

lot

easier

now

this

year

in

general?

[John Evans, Chief Executive Officer, Subsea 7 SA]

I

think

if

we

keep

COVID

very

simple,

2020

was

the

entire

world

that

exactly

the

same

thing,

all the

world

around.

Our

crews

who

are

effectively

mariners

were

free

to

move

around

the

world

on

seaman's

tickets

and

that

– it

was

a

very

difficult

year,

but

logistically

simpler.

2021

is

depended

on

the

color

of

your

passport

and

which

countries

had

vaccinated

and

which

countries

hadn't.

So

2021

was

an

exceptionally

complex

set

of

nationality

mixes

that

we

have

on

our

vessels

and

how

we

did

that.

This

year,

we're

actually

seeing

in

places

like

Taiwan

and

Brazil

a

slightly

different

problem.

Although

crews

are

fully

vaccinated

and

very

healthy

and

no

major

issues

on

our

vessels,

but

we

still

have

some

regulations

that

were

put

in

place,

quite

rightly

18 months

ago,

that

say

if

you

have

a

single

case

of

COVID

on

your

vessels,

then

you

need

to

change

the

entire

crew

out.

So,

it's

that

sort

of

lag

between

regulation

and

medical

risk

in

reality.

That

is

one

of

the

challenges

our

industry

is

facing

at

the

moment,

but

I

expect

to

see

that

normalize

as

time

moves

on.

[James Thompson, Analyst, JPMorgan Securities Plc]

Okay.

Thanks.

Just

two, I guess,

small

questions at first.

So

maybe

one

is,

just

in

terms

of

the

sort of

Renewables

pace,

I

mean,

just

wondered

if

you

could

talk a

little

bit

about

2023.

I

mean,

in

terms

of

the

bids

that

are

coming

out for

this

year,

is

there

much

that

can

sort

of

fill in

from

a

revenue

perspective

or

are

you expecting

a

pretty

significant

drop

in

revenues

in

2023?

And

then,

just

in

terms

of

your

other

projects

that

are

ongoing,

I

just wondered

if

you

can

give

us

an

update

on

the

Sangomar

projects,

actually,

don't

hear

that

much

about

it.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Okay.

Renewables,

as

I've

touched a

little

bit

in

my

prepared

remarks,

James,

the

biggest

market

in

renewables

is

the

UK

sector.

The

UK

government,

for

political

reasons,

decided

to

delay

the

Contracts

for Difference

auction

rounds

by

a

year.

So

a

large

group

of

UK

projects

that

are

on

the

diagram

were

delayed

by

a

year,

but

we

do

expect

them

to

be

awarded

by

the

middle

of

this

year

in

the

market.

But

what

that

means

is,

physically,

offshore

next

year,

it'll

be

a

quieter

market

than

we

expect.

So,

we

do

expect

probably

the

revenue

in

the

Renewables

business

to

go

down

next

year.

So

– but,

equally,

we

do

expect

that

the

Seaway

7's

share

of

some

of those

UK

projects

and

awards, the

market

should

be

reasonably

strong.

As

the

Seagreen

1A

is

mentioned,

which

is

the

extension

to

the

current

project

that

we're

working

on,

and

we

expect

that

one

to

have

its

CFD

awarded

in

the

middle

of

this

year,

and

we're

bidding

a

number

of

those

other

projects

there.

So,

we'd

expect

Seaway

7

to

get

its

fair

share

of

work

on

those.

But,

most

of

those,

with the

exception

of

Seagreen

1A,

are

T&I

projects,

which

will

cut

in

in

2024

onwards.

We

expect

the

US

projects

to

continue

to

be

awarded

to

the

market,

but

most

of

those,

again,

are

transport

and

install

for

2024

onwards.

If

we

come

back to

Sangomar,

Sangomar

is

a

project

that

goes

offshore

and

that's

literally

as

we

speak.

We

have

vessels

working

in

Senegal

at

the

moment

in

the

preparation

work,

and

we

expect

the

pipe-laying

to

take

place

as

planned

in

quarter

two

this

year.

So,

Sangomar

is

trucking

along

in the

background

and,

James,

a

big

project

and then,

hopefully,

we

can

give

the

market

more

updates

in

Q3

and

Q4

as

we

liquidate

the

bulk

of

the

work

in

Q2

and in

Q3.

[James Thompson, Analyst, JPMorgan Securities Plc]

Okay.

Great.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Thank

you,

James.

[James Thompson, Analyst, JPMorgan Securities Plc]

Thanks

very much.

I'll

pass –

I'll pass

it

over.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Thank

you.

[Operator]

And

we

have

the

next

questions

coming

from

Mick

Pickup

from

Barclays.

Please

ask

your

question.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Yeah.

Hi.

Good

afternoon,

everybody.

Obviously,

good

to

hear

that

you're

making

progress

on the

working

cap

and the

project

terms and

conditions.

I'm

just

wondering

if

you're

getting

to

that

point

yet

where,

you

think, that

you

can

start

increasing

your

gross

margin

expectations

on

projects

and

whether

you

think

the

future

will

enable

you

to

be

selective

and

start

drop

– not

bid

into

contracts

yourself

on

some

of

these

projects

that

come

in?

[John Evans, Chief Executive Officer, Subsea 7 SA]

Thanks,

Mick.

Great

question,

as

always.

For

us,

we

run

the

business

with

a

job

level

income

on

each

of

our

projects,

and

that

is

improving

and

increasing.

But

the

other

side

of

good

– very

good

profitability

in

this

industry

is

all the

recovery

in

the

vessel

fleet

and

the

vessel

asset

base.

We

set

our

recoveries

across

a

normalized

number

of

days

per

year

recovery

on

each

asset.

And

that's why

I

mentioned

the

sort

of

tactical

planning

about

where

we

deploy

our

assets

because

we've

talked

to

this

group

over

the

downturn

of

the

inefficiencies

of

moving

pipelay ships

from

Australia

to

the

Norway

to

Brazil

where

you

spend

100 days

a

year

transiting.

So,

for

us,

it's

the

two

sides

of

that equation

that

will

really

start

to

move

the

EBITDA

margin

for

this

business.

And

I

expect

from

mid-2023

to

really

start

to see

the

benefits

of

not

only

improved

job level

income

in

the

projects

cutting

through,

but

the

asset

deployment,

allowing

us

to

get

quite

high

utilizations

on

the

key

assets

per

day.

So,

that's

the

way

I

think

we

will

see

the

market

move

for

us,

and

it's

a

sort

of

classic

combination

of two

things

coming

together.

And

that's why

our

approach

of

targeting

certain

projects

in

Brazil,

certain

projects

in

Norway,

certain

projects in

Gulf

of

Mexico,

and

certain

projects

in

Australia

should

hopefully

– the

markets

to

see

all

that

fit

together

as

time

moves

on.

So,

directionally,

we

hope

to

see

that

happening,

and

we

see

the

same

hopefully

coming

in

with

the

Alfa

Lift

in

due

course

coming

in

in

2023

in

the

renewables.

So,

we

don't

have

to

keep

moving

crane

vessels

around

the

world

and

such

like

to

do

so.

So,

all

together,

we

should

be able

to see

that

coming

into

fruition,

hopefully,

from

mid-2023

onwards, Mick.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Okay.

And

can

I

just

follow

up?

You've obviously

talked

a

lot

about

Brazil.

You've

talked

about

Norway

later in

the year.

You

mentioned

West

Africa

in

passing.

Clearly,

somewhere,

it's

been

important

to you

over

the

years.

Where

exactly

are

we

seeing

West

Africa?

[John Evans, Chief Executive Officer, Subsea 7 SA]

Well,

I

think we've

seen

two

things

in

West

Africa.

We've

seen

Angola

pick

up.

And

we're

bidding

some

work

in

Angola,

and

we would

expect

to

get

our

share.

There's

about

three

projects

there,

so

we'd

like

to

get

one

of

those

over

the

line

in

the

next

few

months.

So,

for

us,

Angola

is

definitely

picking

up.

As

you

know,

we're

the

preferred

bidder

on

Pecan,

so

there's

work

there

with

Aker

Energy

to

try

to

see

if we

can

get

the

stars

to

align

in

that

part

of

the

world

to

get

that

Pecan

project

over

the

line

as

well.

And

we're

seeing

other

areas

such

as

the

next

phases

of

Senegal

and

others

potentially

coming

to

the

market

in

due

course.

So,

West

Africa

doesn't

have

the

momentum

and

the

speed

that

we

had

in

the

past.

But

the

important

thing,

it's

waking

up

and

starting

to

move.

[Mick Pickup, Analyst, Barclays Capital Securities Ltd.]

Okay.

Thank

you very

much.

Cheers.

[Operator]

We

have

the

next

questions

coming

from

Lukas

Daul

from

Arctic

Securities.

Please

limit

your

question

to

one.

Thank

you.

[Lukas Daul, Analyst, Arctic Securities AS]

Thank

you.

Good

afternoon.

I

was

wondering

about

your

order

intake

in

the

fourth

quarter.

There

was

a

decent

amount

of

unannounced

orders.

Is

that

something

that

was

exceptional

this

quarter

or

is

it

something

you

anticipate

going

forward

as

well?

And

then

the

escalations

that

you

have

seen,

could

you

sort

of

talk a

little

bit

more

about

them,

what

is

driving

them

and

what

sort of

contributed

to

the

size

of

those

to

$400 million?

[John Evans, Chief Executive Officer, Subsea 7 SA]

Yes.

So,

Lukas, thanks

for your

question.

Escalations

come

to

us

in

a

number

of

different

ways.

First

one,

all

our

contracts

in

Brazil

have

an

annual

escalation

mechanism

because

of

the

underlying

inflation

in

Brazil.

So

Petrobras

contracts

have

it,

our

international

oil

company

contracts

in

Brazil

have

it.

So

they

generally

cut

in,

and

they

have

come

into

play

in

this

quarter.

We

also

have

different

settlements

with

clients,

durational

settlements

with

clients

that

then

go

through

our

lines

in

both

revenue

and

job

level

income,

in

terms

of

how

we

do

that.

So

it's

really

about

us

working

in

terms

of

how

we

do

that. And

the

last

piece

for

us,

we

took

in

the

fourth

quarter

of course

the

OHT acquisition,

and

the

revenue

that

the

heavy

transport

ships

and

such

like

that

are

the

sort

of foundation

of

the

OHT

business

cut

in

for

us

as

well. They're

the

main

three

elements

for

that,

Lukas.

[Lukas Daul, Analyst, Arctic Securities AS]

Okay.

Sounds

good.

Thank

you.

[Operator]

We

have

the

next

questions

coming

from

the

line

of

Nick

Konstantakis

from

BNP

Paribas

Exane.

Please

ask

your

question.

[Nick Konstantakis, Analyst, Exane BNP Paribas]

Hi,

guys.

Thank

you

for

taking

my

question.

I

think

let

me

just

start

by

welcoming

Mark

as

well,

I

think it's

your

first

conference

call.

So

welcome

aboard.

Just

on

the...

[Mark Foley, Chief Financial Officer, Subsea 7 SA]

Thank you

very

much.

[Nick Konstantakis, Analyst, Exane BNP Paribas]

Just

on

the

questions,

please. Look,

I

appreciate

you're

talking

about

2022,

but

I'm

looking

at

2023,

the

revenue

figures

and

the

top

line

being

below

than

2021,

coverage

of

about

43%,

which

is quite

high

given

where

we

are

in

the

cycle.

You

spoke

confidently

about

order

intake

in 2022.

You're

talking

about

good

momentum.

If

that

outlook

were

to

materialize,

could

you

exceed

that?

Or

to

ask

differently,

given

the

backdrop,

isn't the

most

probable outcome

for

2023 top

line is

higher than

2021?

And

then

one

for Mark,

just looking

at

the contract

assets, I

think

they've

been climbing

quite

steadily through

the

course

of

the

year

and

2020.

We'll have

a

decline

this

quarter.

Can

you

just

please

discuss

the

biggest

components

in

there

or

what

drove

the

decline

Q-on-Q,

just

looking,

for

example,

at

Saudi

as

well,

which

could

complete

the

projects

next

year

and

whether

that

would

drive

the

next

step-down?

Thank

you,

guys.

[John Evans, Chief Executive Officer, Subsea 7 SA]

So,

Nick,

I'll

take

the

first

one

and

I'll

hand

over to

Mark

on

the

second.

We

aren't

giving

guidance

today

for

2023.

I'm

giving

you

directional

information

about

which

way

we're

going,

and

we're

comparing

2022

with

2021.

I

think

we've

been

relatively

clear, with

Ricardo and

myself

and

Mark

and

myself,

we

can

see

a

number of

projects

that

go

offshore

from

mid-2023

being

very

important

in

terms

of

the

overall

recovery

and

the

utilization.

And

that

remains

unchanged,

and

those

pieces

of

the jigsaw

are

fitting

together.

We've

talked

in

some

of the

other

questions

about

how

we

see

2024

fitting

together.

So,

I

think

for

today,

we

won't

be

giving

any

further

detail on

2023,

other

than

the

directional

information

that

we've

shared

with

the

market,

and

we

can

see

that

coming.

We

touched

in

the

previous

question

that

the

gap

in

the

CFDs in

the

largest

market

in

the UK

will

mean

the

offshore

work

in

renewables

will

be

lower

in

2023,

and

you

need

to

use

that

in

your

modeling

for

2023.

I'll

then ask

Mark

maybe

to

address

the

questions

on

the

contract

assets.

[Mark Foley, Chief Financial Officer, Subsea 7 SA]

Yeah,

indeed.

So,

the

contract

assets

is

ostensibly

a

work-in-progress.

This

is

the holding

balance

for

projects

that

haven't

yet

met

the

milestone

contractual

right

to

build

to

the

client.

You're

correct.

We

have

seen

that

increase

between

the

end

of

2020

and

2021,

and

that's

one

of

the

key

factors

contributing

to

the

working

capital

performance.

I

would

expect

that

to

continue

through

2022

next.

And

one

region in particular

contributing?

No.

I

think

we

can

see

the

contribution

across

a

number

of

projects

and

a

number

of

regions.

I

think

we're

all

familiar

with

those

regions

that

have

a

particular

conditions

that

are

customary

to

the

clients

within

that

region.

So

I

would

expect

the

contract

assets

to

remain

elevated

during

2022.

[Nick Konstantakis, Analyst, Exane BNP Paribas]

Thank

you.

[Operator]

We

have

the

next

questions

coming

from

Chris

Møllerløkken

from

SpareBank1

Markets.

Please

ask

your

question.

[Christopher Møllerløkken, Analyst, SpareBank 1 Markets AS]

Yes.

Good

afternoon,

gentlemen.

With

regards

to

the

terms

you

are

offering

to

your

clients,

you

talked

about

pricing,

but

do

you

also

try

to

push

out

other

contracting

terms,

like

weather

stand-by,

payment

terms,

etcetera,

and

could

you

give

a

bit

more

flavor

there

and

how

do

you

see

that

development?

[John Evans, Chief Executive Officer, Subsea 7 SA]

The

main

area that

we're

very

clear

with

our

clients

on the

moment

is

the

supply

chain.

We

touched

on

it in

our

prepared

remarks,

unless

we

can

have

a

back-to-back

supplier

pricing

and

delivery

assurance,

or

unless

we

can

have

a

set

of

escalation

mechanisms

that

provide

our

suppliers

with

protection

on

price

of

copper

or

price

of

steel.

So

most

of

our

discussions

with

our

clients

today

about

terms

and

conditions

to

make

sure

that

we

–

make

sure

that

our

supply

chain

exposure

is

passed

up

and

down

the

chain

between

ourselves

and

our

suppliers.

We've

talked

about

previously

that

we've

seen

on

one

reason bid

in

Brazil

an

improvement

in

the

payment

terms.

So

they

are

in the

main

areas

that

we

are

working

on

with

our

clients

at

the

moment.

We

have

a

very

clear

set

of

contracting

principles

inside

Subsea

7.

And

even

in

the

darkest

times

in

the

cycle

here,

we've

always

maintained

our

positions

about

the

types

of

risks

that

we

take

and

such

like

waiting

on

weather.

We

again

are

quite

selective

about

what

we

take,

and

that's

about

do

you

have

a

pool

of

different

opportunities

in

a

certain

market

that

you

could

take

a

view

on

[indiscernible]



(00:55:47) weather

may

play

out

through

a

handful

of

different

projects

in

that

region.

So

for

us,

we

work.

And

as

the

market

strengthens,

we

will

continue

to

work

on

the

risk

profile that

we

take.

For

me,

it's

all

about

the

holistic

risk

profile

on

a

project

and

then

the

contingency

levels

and

the

profit

levels

that

go

with

a

particular

project.

So,

that's

in

a

nutshell

where

we're

at

in

the

moment.

[Christopher Møllerløkken, Analyst, SpareBank 1 Markets AS]

You

have

4.5

million

shares

already

in

Subsea

7

on

your

accounts.

And

you

announced

today

a

repurchase

program

of

around

$70

million.

What

could

be

fair

assumption

regarding

the

fate

of

the

shares

you

are

repurchasing

in

Subsea

7?

[Mark Foley, Chief Financial Officer, Subsea 7 SA]

Okay.

So,

we

have

a

mandate

from

the

board

for

share

repurchases

out to

April

2023.

We

will

take

a

decision

closer

to

the

time

as

to

whether

those

shares

will

be

cancelled

or

indeed

they

will

be

retained

within

treasury

shares.

So,

too

early

for

us

to

comment

upon

the

fate

of

those

shares

that

have been

bought

back

in

the

recent

repurchase

tranches,

Chris.

[Christopher Møllerløkken, Analyst, SpareBank 1 Markets AS]

Thank

you.

[Operator]

We

have

the

next

questions

coming

from

Kevin

Roger

from

Kepler

Cheuvreux.

Please

ask

your

question.

[Kevin Roger, Analyst, Kepler Cheuvreux SA]

Yeah.

Good

afternoon.

Thanks.

The

first

one

is

relating

to

the

pricing

environment

in

the

oil

and

gas

business

because

you

mentioned

in

your

remarks,

[indiscernible]



(00:57:15)

to

bid on

Búzios 8.

I

was wondering

if

you

can just

give

us

some

metrics

to show

how

the pricing

is

evolving,

if

you

can

give

a

number

or

something like

that

to

show

the

trend. And

the

second question

is

related

to

the

renewable

markets.

I

was

wondering

if

you

can

also

comment

the

competitive

landscape

in

that

space

because

we

have

seen

recently

that Saipem

is

trapped

with

execution

issuing

a

number

of

projects that

provide

energy

as

recently a concern

of

contracts.

So

I

was

wondering

if

you

can

also

give

us

some

color

in

terms

of

the

competitive

landscape

and

the

pricing

environment

in

the

offshore

wind,

please.

[John Evans, Chief Executive Officer, Subsea 7 SA]

As

you

know,

we

have

the

Seaway

7

team

will

be

coming

up

with

their

earnings

release

soon,

so

I'll

let

them

give

you

more

details

on

that.

So,

I

think

coming

back

to

the

pricing

metrics,

I

think,

Kevin,

we

– you

know

us,

we

– despite

the

change

in

the

CFO,

Mark

has worked

with

Subsea 7

for

enough

years

that

we aren't

about

to

change

our

tone for the

[indiscernible]



(00:58:25).

I hope

we've

given

you

enough

information,

Kevin,

to

show

to

you

that

directionally

things

are

heading

the

right

way.

The

market

is

moving

faster.

Our

clients

want

to

talk to

us.

They're

engaging

with

us

earlier.

They

want

to

talk

to

us

about

how

they

can

move

their

projects

ahead,

how

they

can

accelerate

their

projects

ahead.

So

we

hope

you

can

draw

different

thoughts

together

about

what

that means.

We

are

late

cycle,

but

now

is

the

time

that

we

are

making

the

impacts

on

picking

the

work

up

that

will

generate

some

very

good

EBITDAs

for

us

in

2024

and

2025. And

I

think it's important

to

think about

coming

back

to

where

we

are

today.

In

our

sector

today,

there's

us

and

one

other

that

have

a

reasonable

position

in

terms

– and

a

strong

position

in terms

of

balance

sheet

and

position

with

clients,

and

the

clients

are

talking

to

two

of

us.

And there's

a

certain

amount

of

capacity,

and

those

clients

are

very

clear.

There's

a

certain

amount

of

capacity

there;

hence,

the

speed

at

which

discussions

are

taking

place.

I've

spoken

to

many

clients

in

the

last

month

and

the

same

discussion

is

about

please

be

open

with

us

about

your

capacity.

Please

tell

us

what

we

need

to

do

to

secure

that

capacity.

So,

for

me,

I

think,

directionally,

it's

moving

well.

But

we

have

also

been

very

thoughtful

about

how

we

position

ourselves

here

about

the

size

of the

fleet

we

needed,

the

technology

and the

capabilities

we

needed,

the

relationship

with

Schlumberger,

the

76%

share

by

revenue

of

integrated

SURF

and

SPS

that

we

have

today

in

that

market

means,

again,

there's

value

add

in

how

we

do

these

projects.

So,

again,

we're

quite

thoughtful

about

what

we're

doing,

and

that

thoughtfulness

is

also

about

which

clients

we

work

with

and

how

we

will

position

ourselves

for

what

is

a

good

set

of

opportunities

for

us

at

the

moment.

Certainly,

in

wind,

we

are

seeing

that

clients

are

now

starting

to

think

ahead

about.

So,

again,

there's

been

a

number

of

casualties

along

the

way,

so

how

do

they

get

access

to

quality

capability,

which

can

also

take

the

largest-sized

projects

that

are

coming.

You

see

the

recent

leases

in

the

US

and

the

recent

sized

projects

in

the

US.

These

are

huge

projects,

but

two

or

three

contractors

can

do.

So,

I

think,

for

us,

it's

about

how

do

we

position

ourselves

and

how

do

we

get

ourselves

in

the

right

place.

But

I'll

let

the

Seaway

7

guys

spend

a

bit

more

time

on

their

call

to

explain

that,

if

that's

okay

with you,

Kevin.

[Kevin Roger, Analyst, Kepler Cheuvreux SA]

Okay.

Okay.

Thanks

a

lot.

[John Evans, Chief Executive Officer, Subsea 7 SA]

Well,

thank

you very

much.

Thanks

a

lot

for

everybody's

questions.

And

we

appreciate

your

continued

support

and

input

into

the

market

here.

And

we

will

talk

again

to

you

at

the

end

of

Q1.

Thanks

a

lot.

[Operator]

Ladies

and

gentlemen,

that

does

conclude

our

conference

for

today.

Thank

you

for

participating.

You

may

now

disconnect

your

lines.

Thank

you.