Oilfield services firm Subsea 7 warned Wednesday of increased uncertainty in the timing of certain project awards from customers due to declining crude oil prices as it reported a strong financial performance for its third quarter.
Subsea 7 said that, as it had previously indicated throughout the year, uncertainty remains over the timing of market awards for most large SURF (subsea umbilicals, risers and flowlines) projects and that this trend "was particularly evident in the third quarter when a number of potential market awards were postponed to 2015 and beyond".
The firm said that the decline in crude oil prices, which began at the start of the third quarter, is adding uncertainty over its clients' timing to proceed with offshore field development projects.
However, Subsea 7 said that its order backlog – which stood at $9.4 billion at the end of September, compared to $11.8 billion a year earlier – and execution plans for projects underway provided it with "a sound basis" for 2015 despite the deferral of awards to the market that the industry is currently experiencing.
Subsea 7's revenue for the third quarter was $1.9 billion, compared to $1.6 billion for 3Q 2013. The firm's profit at the adjusted EBITDA level came in at $426 million (3Q 2013: $359 million).
Subsea 7 CEO Jean Cahuzac commented in a company statement:
"I am pleased to report that we continued to deliver strong operational performance in the third quarter of 2014, which supported the solid financial results.
"Global vessel utilization was strong at 91 percent and was five percentage points higher than in the third quarter of 2013, matching the high level achieved in the second quarter of this year.
"Significant net cash was generated from operating activities in the third quarter. This supported continuing payments under our new vessel construction program, returns to investors in the form of a dividend and the repurchase of shares and convertible bonds.
"Order backlog declined in the third quarter, owing to a low level of order intake caused by the postponement of a number of potential market awards, a low level of escalations on existing contracts and a negative foreign exchange impact of approximately $300 million."
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