Subsea 7 S.A.

Welcome, everyone. Thank you for joining us.

With me on the call today are John Evans, our CEO; Mark Foley, our CFO; and Stuart Fitzgerald, CEO of Seaway 7. The results press release is available to download on our website along with the slides that we'll be using during today's call.

Please note that some of the information discussed on the call today will include forward-looking statements that reflect our current views. These statements involve risks and uncertainties that may cause actual results or trends to differ materially from our forecast.

For more information, please refer to the risk factors discussed in Subsea 7's annual report or today's quarterly press release. The call today will be focused on our fourth quarter and full year results, and we ask that you limit your questions to this topic.

I'll now turn the call over to John.

Thank you, Katherine, and good afternoon, everyone. I will start with a summary of the fourth quarter and the full year before passing over to Mark for more details on financial results.

Turning to Slide 3. Subsea 7 delivered fourth quarter adjusted EBITDA of $315 million, resulting in a full year EBITDA of $1,090 million, up 53%.

This was driven by both top line growth of 14% and margin expansion of 390 basis points. We reported a strong performance in both Subsea and Conventional and Renewables.

After several new awards in the fourth quarter, we had robust order intake in the full year, leading to our backlog of $11.2 billion at year-end. This backlog of high-quality projects gives us excellent visibility on our revenue guidance for 2025.

As a result of this visibility as well as our optimism and the outlook, the Board proposes that the group will pay a dividend equating to $350 million from 2025, up 40% from the return made last year. Turning to Slide 4.

After a strong fourth quarter, order intake in the full year was $8.2 billion, up 10% year-on-year and equating to a book-to-bill of 1.2x. Slide 5 shows growth in the backlogs of both Subsea and Conventional and Renewables.

We continue to high-grade the backlog through selective bidding, particularly in offshore wind. We have a combined backlog for execution in 2025 of $5.8 billion giving us over 80% visibility on the year ahead.

And now I'll pass over to Mark to run through the financial results.

Thank you, John, and good afternoon, everyone. I'll begin with some details of group and business unit performance in the full year before turning to the group cash flow and financial guidance for 2025 and some comments on shareholder returns.

Slide 6 summarizes the group's results. In the full year, revenue was $6.8 billion, up 14% compared to 2023, driven by strong performances in both business units, as major projects made good progress.

Adjusted EBITDA of $1.09 billion was up 53% compared to the prior year and our margin increased by nearly 400 basis points to 16%. After depreciation, amortization and impairments of $645 million, net finance costs of $77 million and an effective tax rate of 41%.

Net income was $217 million compared with $10 million in the prior year. I'll now discuss the drivers of the group's performance in the next few slides.

Slide 7 presents the key metrics for Subsea and Conventional. In the full year 2024 revenue was $5.5 billion, up 12% year-on-year, reflecting high activity in Brazil, Norway, Australia and Turkey.

Adjusted EBITDA of $897 million, equating to a margin of 16.3%, an increase of 390 basis points from the prior year. This result reflects the continued evolution of the backlog towards a mix of higher quality contracts.

Subsea and Conventional benefited from a $36 million of net income contribution from OneSubsea in the full year, in line with our expectations. We are pleased with the performance of our investment in OneSubsea and recognize the integration progress achieved in 2024.

Net operating income was $404 million, more than doubled the $196 million reported in the prior year. Selected renewables performance metrics are shown on Slide 8.

Revenue in the full year was $1.2 billion, up 29% year-on-year reflecting continued activity in our core markets, where we are focused on a small group of clients, who are long-term players in the sector. We also benefited from a full year contribution from Seaway Alfa Lift and Seaway Ventus.

Adjusted EBITDA was $185 million, equating to a margin of 15%, up from 10.8% in 2023. This was a result of high grading our portfolio projects combined with solid project execution.

Net operating income was $53 million compared to a loss of $74 million in 2023. Slide 9 shows the cash bridge for 2024.

Net cash generated from operating activities was $931 million, which included a modest favorable movement in working capital. Capital expenditure was $349 million, including $83 million relating to the acquisition of Seven Merlin.

We also made the final payment of our 10% stake in OneSubsea of $153 million. Net cash used in financing activities was $680 million, which included lease liability payments, including principal and interest of $223 million, net repayment of borrowings of $125 million, reflecting the amortization profile of our borrowing facilities.

Dividends paid were $163 million, and share repurchases of $87 million. At the end of the year, cash and cash equivalents decreased by $176 million to $575 million.

Net debt was $602 million, including lease liabilities of $455 million. The group had liquidity of $1.3 billion at year-end.

To conclude, Slide 10 shows our guidance for the full year. In 2025, we expect revenue to be between $6.8 billion and $7.2 billion, with an adjusted EBITDA margin ranging from 18% to 20%.

As profitability in our global operations continues to improve, we expect the effective tax rate to moderate to between 40% and 45%. Capital expenditure in the year is expected to be between $360 million and $380 million.

In 2026, we continue to expect an adjusted EBITDA margin of over 20%. In terms of the first quarter of 2025, I would like to take the opportunity to remind you that this quarter exhibits seasonality with lower activity in the Northern Hemisphere and also customary capital -- customary vessel planned maintenance.

I would highlight among several vessels subject to planned maintenance; 3 in renewables, Seaway Ventus, Alfa Lift and Strashnov, as well as 2 pipelay vessels, Seven Navica and Borealis. The cumulative planned maintenance days in the first quarter of 2025 is expected to be around 600 days.

This level is notably higher than the 460 days compared to the same quarter of last year. Lastly, reflecting the group's performance, position and prospects, the Board will propose a NOK 13 per share dividend, including the NOK 6 per share regular dividend at the Annual General Meeting on the 8th of May.

This aggregate level of shareholder return equivalent to $350 million, and the proposed dividend equates to a 7% dividend yield based on yesterday's closing share prices. The payments will be made in 2 equal installments on the 22nd of May and the 6th of November of this year.

I will now pass you back to John.

Thank you, Mark. On Slide 11, we take a look at our back record of Turkey, where we have completed Phase 1 and are working on Phase 2 of Sakarya gas development.

We have completed about 1/3 of our Phase 2 scope with engineering and procurement well underway. Our spoolbase in Vigra, which many of you visited last June, would be fabricating pipe and the Seven Seas, Seven Pacific and Seven Vega will begin installation activities later this year.

In Q4, we won an inspection to repair and maintenance contract for Sakarya and we are preparing for the EPCI bid for Phase 3. We're optimistic that we continue to build on our presence in Turkey, working in close collaboration with our clients, TPAO.

Now on to review of our tendering pipeline on Slides 12 and 13. Open tendering teams are very active and tenders in-house amount to approximately $19 billion.

Brazil continues to be a bright spot for Subsea 7, and we are confident of winning our fair share of work this year, sustaining high activity levels in the region. For the longer term, Petrobras continues to replenish the hopper of prospects, and we're confident in the outlook for Brazil.

Elsewhere, there are a wide range of projects in deepwater markets of the U.S., West Africa, Turkey and beyond. We are making progress with Equinor and partners in reengineering Bay du Nord and Wisting as well as Fram Sør where we're working on a FEED study.

Overall, we are confident that we have a strong tendering pipeline that can support continued momentum in Subsea order intake. On the next slide, we have our wind prospects.

Our exposure to the U.S. has been very low, and we remain focused on the U.K., Europe and Taiwan, where we continue to see selectiveness in the work that we pursue.

We have strong relationships with a number of clients, who are expected to make progress on the development plans in the coming year. Through mutually beneficial collaborations with our clients, we can plan our resource needs and ensure we approach this market in a disciplined manner that preserves our improved margin and risk profile.

To conclude, we'll turn to our final slide on Page 14. We presence in both traditional and new energy markets, Subsea 7 is well placed to benefit from the growth in energy demand under a range of different transition scenarios.

A high backlog, active tendering and strong project execution gives us confidence in the outlook for both businesses. As we look ahead, we are focused on converting growth in EBITDA, free cash flow and into prioritizing shareholder returns.

And with that, we'll be happy to take your questions.

Yes. I have 2, if I may, that are in a way related.

The first one is on the offshore wind margin that came quite strong this quarter, probably the highest level that we had recently. How should we think about this performance Q4 for the upcoming quarters?

Is it a kind of one-off? Or is it something that you consider repeatable for the upcoming quarter?

And the second one is, at the end on the EBITDA margin and the guidance because once again, you beat the guidance that you raised a few weeks, a few months ago, but you confirm the 2025 guidance. So is there any implication also should we consider that 2024, you have been performing ahead of your expectations.

So 2025, you would likely be more on the high end of the range rather than the low end, if there is any rationale between the 2?

Thank you, Kevin. So let's take the offshore wind margin question first.

We guided at the last quarter that we expect to be able to, over a year to be reasonably consistent in the 14% to 16% EBITDA range. And we are very clear that we believe that we can meet that in 2025 and moving ahead in that sector.

Some quarters give us different margins depending on where we are with projects or completing projects or contingency release, for example. So I would use the 14% to 16% that we guided as a way of modeling our offshore wind business.

On EBITDA margin, we have reappraised 2025 and are comfortable to reconfirm that our 18% to 20% is the range that we believe that we can deliver this year that has made progress through a couple of quarters here and see how we have pretty much all our work for this year's setup. I mentioned that we have 80% already on the books already in quarter 1, we've had our usual call-offs on things like DSVi, our diving services contracts.

So the remaining elements of the work that we need to win this year are coming in now in terms of call-offs that are done on an annual agreement. So at the moment, we're very comfortable with the figures that we've given you, and we'll keep you updated quarter-on-quarter.

Could you please explain a bit what's the reason for the increased level of depreciation in 2025 versus 2024?

Mark?

You're correct. We have guided an uptick in depreciation to between $700 million and $720 million.

That comes off of $645 million for the full year, which is slightly inflated because it contains $22 million of impairments that we recognized in the fourth quarter. But the main drivers, if you exclude the impairment in 2024 are related to the Skandi Acergy, which we segment to the market that we have taken on at lease hire.

That has an impact of around $50 million. And then elsewhere, as you know, we have the Seven Merlin joining the fleet during 2024.

That increases the underlying depreciation together with increased depreciation as a result of the capital investment we've made in several vessels over the course of last year, the Cruzeiro and the Ventus as examples. So having these vessels with the state of readiness that we need in order to complete our projects as well as access market opportunities is a key driver of the growing profitability that we expect in the business.

First off, maybe for you, Mark. You reported a net foreign exchange loss of $69 million in Q4.

Can you elaborate on what caused this loss? Is it related to hedging?

Is it the clean cash loss? And how should we think about similar losses in the coming quarters?

Yes. Thank you, Jørgen.

As you will have noticed, during the course of 2024 on a quarterly basis, we've seen the other gains and losses line within the income statement being quite volatile. That is driven in 2 parts, principally due to the embedded derivatives that we have within our contracts.

Just to reiterate, these are noncash and will fully reverse in future periods. So they bring some volatility to our numbers as a result of the strengthening that we saw particularly in the latter part of the year or the U.S.

dollar against a range of currencies such as the Brazilian real, the Norwegian krona, the euro and the pound. Elsewhere that's offset by what we call customary elements of FX within a multinational group around working capital balances, cash that we have within the business.

So whilst it was $67 million of the loss in the fourth quarter, full year it was 0. It's difficult to predict.

It depends upon the movements in the underlying currencies and the balances that we have on the books. But hopefully, that provides a degree of further insights.

Okay. And secondly, just related to the previous question on higher lease payments in 2025, can you indicate kind of the incremental cash flow impact relative to the $233 million of the payments, you actually reported in 2024.

What's the kind of the incremental impact for 2025?

So over the entire portfolio, you will see from our cash flow statement for the full year 2024, we have lease reliability, principal and interest payments of just short of $230 million. I would expect that to be approaching the upper end of the $200 million range for the full year 2025 year.

Just a quick one on Brazil. It would be helpful.

You highlight a strong tender opportunity there. There's been a few headlines about Brazil potentially looking to maybe change its strategy in tendering.

We've also seen headlines out suggesting Buzios-11 has been awarded to Subsea 7, but also not -- please comment on that specifically, but there's been a very wide tender range of prices. How have discussions with Petrobras being in terms of, are they -- do you seem happy with the competition?

And has there been any change to your outlook on that market in the last quarter?

Yes. Thank you, Victoria.

I happen to be in Brazil 2 days after we put the Buzios-11 bid in. So it was interesting to see how that went.

I think it's fair to say that there was strong competition for Buzios-11. So there was 4 bidders.

As you said, we let the process run its course, but there was certainly a very healthy group of bidders on that line. Historically, Petrobras, as you know, have used PLSVs for flexibles and they have 15 vessels doing that work at the moment.

But previously, in Subsea 7, like we did what was called hybrid steel, which was effectively a PLSV for steel pipeline. We use the Navica for about 6 years to do that type of work in its earlier life with us.

So again, I know that from my discussions with Petrobras, they are looking at whether they introduce 1 rigid steel pipeline into a PLSV type model, just to give them some flexibility because one of the challenges that exist there is these EPCI contracts, all stand-alone contracts. And then if any of the FPSO windows change, then they have to negotiate between 1 contract and the other.

So again, I know from my discussions with them, they're looking at the potential of doing that. We would be interested in bidding that package if that came around just as we are interested in providing flex-lay vessels, just as we're also very interested to do EPCI from Petrobras.

The key to all this is Petrobras are not changing their plans and the volume of work that comes and they may look at different contracting models. We work with them over the last 4 years and just about every contracting model they looked at.

And so we welcome to continue that discussion should they want to go down that path.

I could ask a follow-up maybe on that. It'd be interesting to hear your views on the global fleet tonnage and on maybe a more medium-term view, if that's possible.

Do you see risks to more vessels being added to the market? Has anything of that -- in that I guess, scope changed in the last 12 months -- in last -- I guess, yes, 12 months will be interesting, but also since we last spoke last quarter.

Well, I think we know we will put the bids forward in Brazil. They're all existing assets that are being put forward.

So again, I think that's the answer to the question is that the asset pool in the world is there, it's being deployed by different contractors around the world and we will continue to deploy our pool of assets to win work for Subsea 7. So no major comment on that one to answer you.

I was just wondering, I mean, you delivered a strong set of Q4. You are increasing your shareholder distribution beyond what you sort of indicated a year ago.

You announced a ground booking merger on Monday and your market cap is lower than what it was a week ago. So I was wondering if you have any thoughts on that?

And how do you -- or what do you subscribe those developments to?

Lukas, as we said at the start of today is to look at quarter 4 and 2024, full year. So that's what we'll cover today.

We're going to do a number of different roadshows in the coming months and will have opportunities to talk to individual shareholders as we go along. So I think today, you summarized it, yes, we've had good performance in '24.

And hopefully, you've seen that we're pretty confident here we'll have a strong delivery here in '25.

Okay. Sorry, I was a few minutes late into the call, so I probably didn't catch that.

So I'll address that next week when we meet. But on the sort of tender pipeline, it still remains at around $20 million, just a notch below that.

So the question is the startup of these projects. How do you sort of see them scaling up from 2027 and onwards?

What is sort of volume-weighted average of the tender pipeline in terms of start-up dates?

I don't think I can go into all the different dates at the moment. As you know, with these big projects, there are some movements between clients moving back and forth, but the direction of travel continues to be that there's opportunities.

We're seeing Namibia open up this year. There will be opportunities to bid at least 2 projects in Namibia this year, which is a new province for the industry, which is good.

As I mentioned earlier, Petrobras continues to put its portfolio out to the market. I was in Turkey last week, and I met the Turkish Energy Minister as well as the senior management of Turkish Petroleum.

They're pretty confident that their packages for Phase 3 will be out into the market imminently. And again, there's a major projects out there.

We continue to see opportunities in Gulf of Mexico. So again, as we show on the different slides that we presented here, there's a healthy marketing.

Turning to Stuart's business in renewables. This year is AR7 year in the U.K., the world's largest offshore wind market.

And the British government is making very strong noises and our clients in the U.K. are very clear that this could be a very large set of developments will go through for approval.

So for us, we see that both parts of our business are very strong opportunity sets that exist there. And as ever, we will compete base to win our fair share of that market and then get what we want.

But so at the moment the direction of travel into the out years looks strong for us at the moment. So I've got nothing that signals to me that we should be worried in the out years at this point.

The world is a bit uncertain at the moment, but certainly, our tendering pipelines and our discussions with clients are very much focused on servicing the needs in '27 and '28.

Good. And on that strong performance in renewables, obviously, things can swing off a bit from quarter-to-quarter.

But big picture, 3 years ago, that margin was 0 and now it's, say, 15% on average. What would you say has been the major contributor in that sort of improvement?

Is it better contracts or better execution on your side?

I think the combination of both, Lukas. So we definitely have got to the end, if you like, of the lower quality backlog that we had for a period of time, both in terms of the risk profile and the pricing and some of the teething problems that we had with new assets into the fleet or new methods for larger monopiles, it's quite specific in wind.

The evolution of the components has been rapid, and that's created more volatility, I would say, in performance. That performance has now stabilized.

And we've moved in, if you like, into the backlog that we awarded or that we secured with a strong focus on risk -- acceptable risk conditions and better price.

So would you say that you have sort of cracked the code of renewables and at the same time, the underlying market got sort of realistic enough of what needs to be sort of done in order to make this work in the long run?

I would say that, that's a reasonable assessment. We have -- the market has stabilized.

Our performance has stabilized, and we continue to be selective in the work that we take into the business.

Apologize for my voice. I think the transaction with Saipem has taken its toll on my body this week.

I want to build on the questions around Brazil and how their entrants of all seas and McDermott now into the Brazilian SURF market. How does that affect your view on pricing and margins?

And to just take an example from my side, when I look at the indicated contract value for Buzios-11, it seems that the margins and pricing might have already peaked. But of course, humbled to the fact that there's a lot of other factors than pricing and margins affecting that value.

But yes, it would be great to hear your take on this.

Yes. Thanks, Erik.

I don't think it's probably appropriate at this point since we're in middle of a bid to go into the specifics. But I think I raised this point on the last earnings call.

There are some projects in the Petrobras portfolio that suit us better than others because we already have a number of projects already under contract. And certainly on Buzios-10, there were very clear instructions as to, if you did have an overlap on the existing contract, how Petrobras wanted the work broken up and then in portions between, for example, Buzios-9 and Buzios 10 or Buzios-8 and Buzios-10.

That added cost to our bid on Buzios-10 and we price it according to the instructions we had. Some of the later ones like 11 are cleaner for us in terms of interactions between existing work.

And therefore, then we can price them accordingly. So I think your last comment is right.

The devil is always in the detail on these bids. And for us, we price our bids according to the set of circumstances we had ahead of us on each particular bid.

I have one on the current fleet schedule. Could you perhaps comment on the implied utilization rates that you have over the coming years?

And also maybe when you think you might get to a fully contracted position for 2026, 2027? And then the second one on CapEx.

Could you just try to provide us some color in terms of how to think about your CapEx in 2026, 2027? We saw a small increase year-on-year now for the 2025 guidance that was provided in the third quarter.

And I believe that back then there were -- there was non-vessel CapEx behind the figure. But I was just wondering if you could perhaps provide us with a breakdown in terms of how much of that should be recurring and how much of that is not recurring?

I take the utilization question, and I'll ask Mark to give you more details on the CapEx. How to think about utilization?

I think the comment is fair to say that we're working our fleet quite hard at the moment. Every asset we've got in there is there for a reason, and we're working hard.

We have discussed a number of times that moving assets around between different geographies is not as efficient as if we could keep them in the same place. So I would think that you need to be thinking about the utilization rates pretty much in line with where we were in 2024 as we move on into '25 and '26.

We've got a couple of new assets joining the fleet for a full year, the Merlin, which we own, which we discussed and then the Skandi Acergy, which will join us. And I think our utilization rates in the out years will be reasonably the same.

We have endeavored to try to keep some of the big pipelines in certain geographies. We've done a number of jobs in Australia, which is coming to an end at the moment.

We're doing a number of jobs in Norway, which will continue into this year and into next year. And then some in Brazil, then we have pipeline work that takes us into '27 and some of the later bids now.

Buzios-11 onwards take you into '28 on the pipeline ships there. So that's the way to think about it.

And then all our smaller vessels and support vessels are part of the fleet to make sure that we complete all these projects go in tandem with the main vessels. You also know that our PLSVs renew this year, all 4 of them start their new contracts this year, and each of them will sequentially come on at different points this year on to the new contracts with a small stop for some minor CapEx upgrade to meet the new contract requirements.

I'll take the CapEx question then, John. I have mentioned before, CapEx extends beyond vessels.

So we have capital expenditure requirements for vessels, vessel equipment, real estate and IT as the principal items. It is, of course, fair to acknowledge vessels as the primary component within our capital expenditure that will vary year-on-year given the nature of the maintenance required for vessels and the number of vessels that are required to go -- undergo such maintenance.

So for instance, a dry docking, a classified docking for a global enabler clearly will have a greater CapEx requirement than one for dive support vessel. What I would say is that the range that we've given is $360 million to $380 million, this year does contain a degree of nonrecurring capital expenditure, and that's related to the implementation of a new SAP system.

But looking out to 2026, not prepared to get definitive guidance at the moment, but probably be around in the upper end of the current 2025 range. But that will depend, of course, on any opportunities that we see in the market.

You will have noted that we took advantage of what we consider to be a very attractive proposition in bringing the Seven [indiscernible] into the fleet during 2024, which had very favorable economics. So hopefully, that additional color, Guilherme, will have satisfied your answer -- sorry, question.

Lot of talk about vessels. Can I move on to people, please?

And you put out your annual slide on your cost overview towards the back of your presentation and your people number costs have gone up to 30% in the last 3 years. Can you talk about head count in there, and it's a shame that you don't have the 2014 number.

And if you do have that at some stage, just so we can see the efficiency gains from when you were a similar size. So head count, people number has gone from 1.2% to 1.6%.

So can you just talk about the head count, please, over the last 3 years?

Yes, Mick, as you quite rightly point out, as well as ships, we need great people to deliver these projects for our clients. So we're at a head count at the year-end of just over 15,000 people, which is probably one of the highest we've been in terms of head count until probably where we were 10 years ago at one point, we were roughly at that level of head count.

It's all a function of number of vessels. We have working.

The offshore fleet is very flexible. We crew up and crew down to suit where we're at.

We also know that we're in a number of multiyear projects ahead of us, and that we need to engineer and procure these large jobs there. We're very comfortable that we've got a reasonably good turnover rate in terms of a relatively low turnover rate of staff and people joining us so we're quite comfortable.

And we're finding it quite easy to recruit people. The industry is now much more of an appealing industry than it was maybe 2 or 3 years ago, where people have now understood when they come and join us, they may be able to work on a gas project, an oil project or renewables project.

So again, finding the engineering talent we need is good for us. So at the moment, we're in that phase of growing the head count to suit the size and scale that we're going to be for multiple years ahead of us.

I think we sort of stabilized around that headcount. There will be a bit of up and down with different vessels coming in and out of the fleet.

But we're quite comfortable at the moment that we've sort of reached the sort of size and scale that we need to be. We have seen that it's an interesting point in the market that both renewables is looking for people.

Oil and gas is looking for people and in some places like mining is looking for people as well. So again, we're trying to make sure that we have the right mixture of staff and contractors in our mix as well.

But we've opened new offices in the last couple of years. We've opened a fantastic new office in Mexico, which has worked very well for us.

Our Turkish office is Istanbul, which started out literally in the brands banking new office when we started Sakarya 3 years ago, is now fully functioning and over 100 people working there. So again, what we were able to see is that we can find talent in many parts of the world, and they really enjoy being part of Subsea 7 and the opportunities that come with it.

Well, thank you very much. I know it's been a very busy week for everybody.

So thanks a lot for joining us. We're doing a series of road shows and one-on-one meetings, and so hopefully, we'll catch up with many of you in the next few weeks.

And if not, we will catch up with you again during our Q1 report later this -- well, we will do that in April. So thanks a lot, all the best.

Bye.