Subsea 7 Remains Positive despite Weak EPIC Market

UK-headquartered offshore oil and gas services firm Subsea 7 said Wednesday that it remains positive about the medium and long-term prospects for its business in spite of a weak market for EPIC (engineering, procurement, installation and commissioning) work in the latter part of 2013.

Subsea 7 said that conflicting pressures on the use of capital by major oil and gas companies was to blame for the recent lower level of tendering and market award activity for large EPIC contracts. However, the firm noted that life-of-field and smaller project work in the North Sea "remains relatively stable" and is increasing in the Gulf of Mexico.

Subsea 7 also said that activity for SURF (subsea umbilicals, risers and flowlines) projects in Africa has increased in early 2014. But the firm cautioned that there is typically a two-year period between tendering and the start of the offshore phase of such projects.

Meanwhile, the firm pointed out that a general trend of postponement of large SURF projects is continuing, which means that Subsea 7's order backlog is expected to decline during the first half of this year.

Subsea 7 said that, despite these weaker market conditions, it still expects to increase revenue and profit at the EBITDA level in 2014. For 2013, the firm's revenue of $6.3 billion matched that generated in 2012. Adjusted EBITDA for 2013 came in at $981 million (2012: $1.1 billion).

"We remain positive about the medium and long-term prospects for our business, which is supported by a strong fundamental outlook for deepwater subsea field developments," Subsea 7 CEO Jean Cahuzac said in a statement.

"To support this view, our vessel construction program, with six new-build vessels (four of which are committed on long-term contracts in Brazil), is proceeding on schedule and within our cost estimates."


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