Subsea 7 Reports Second Quarter Results

The operating revenues and EBITDA for the second quarter 2005 were US $335 million and US $54 million, respectively, as compared to operating revenues and EBITDA of US $199 million and US $11 million, respectively, for the pro forma second quarter 2004. The net result for second quarter 2005 was 16 million or US $0.12 per diluted share, compared to a pro forma net loss of US $9 million for the same period in 2004.

FINANCIALS

Results

The operating revenues and EBITDA for the second quarter 2005 were US $335 million and US $54 million (EBITDA-margin of 16.1%), respectively, as compared to operating revenues and EBITDA of US $199 million and US $11 million (EBITDA-margin 5.5%), respectively, for the pro forma second quarter 2004. The strong performance of project execution and higher utilization of the assets have been the primary reasons for the improvement. Subsea 7 has also maintained its presence in North Sea while achieving significant growth in West Africa compared to the same quarter in 2004.

The result from affiliated companies was US $1.5 million for the second quarter 2005, as compared to US $3.5 million for the pro forma second quarter 2004. The variance relates to a demobilization fee recorded in 2004 in relation to the 50% owned Joides Resolution.

The results from affiliated companies are included in the EBITDA figures. Depreciation and amortization totaled US $15 million in second quarter 2005. An impairment of US $1 million was made in the period with regard to certain non-subsea assets held for sale. The pro forma second quarter 2004 accounts include depreciation and amortization of US $15 million and an impairment of US $1 million.

The EBIT for second quarter 2005 was US $38 million, as compared to a negative EBIT of US $5 million for the pro forma second quarter 2004.

Net financial cost totals US $8 million in second quarter 2005 as compared to a net cost of US $1 million in the pro forma second quarter 2004. The 2005 figure includes unrealized currency losses of US $6 million and a net realized currency gain of US $1 million as compared to a net currency gain of USD 2 million in the pro forma 2004 figure.

Total tax for the second quarter 2005 was US $14 million and included a current tax charge of US $22 million and a deferred tax credit of US $8 million. The comparable pro forma second quarter 2004 figure was a tax of US $2 million, arising from an increase in deferred tax.

The net result for second quarter 2005 was 16 million or US $0.12 per diluted share, compared to a pro forma net loss of US $9 million for the same period in 2004.

Cash-Flow and Balance Sheet

The cash position per end of second quarter was US $63 million. An additional US $35 million was available to be drawn under the reducing revolving credit facility. Yard installments for vessels under construction were paid at a total equivalent amount of US $26 million during the second quarter.

The net interest-bearing debt per June 30, 2005 was US $99 million, compared to US $124 million at year-end 2004. The figures include US $44 million and US $48 million for the convertible bond loan as per June 30, 2005 and December 31, 2004, respectively. The number of issued shares in Subsea 7 Inc was 132,867,847 per June 30, 2005 and 133,104,847 per July 28, 2005.

The operating revenues and EBITDA for the first six month 2005 were US $601 million and US $77 million, respectively, as compared to operating revenues and EBITDA of US $350 million and US $6 million, respectively, for the pro forma first six month of 2004. Shareholders' equity as per June 30, 2005 was US $318 million as compared to US $291 million per year-end 2004.

MARKET OUTLOOK FOR THE SUBSEA ACTIVITIES

Backlog

During second quarter Subsea 7 was awarded new contracts for its subsea activities, including call-offs on frame agreements, of an aggregate amount of approximately USD 320 million. The worldwide order book of Subsea 7 for the subsea activities per 30 June 2005 was approximately USD 1.3 billion, of which approximately USD 580 million is for execution in 2005.

Market by region

- North Sea

Tight market conditions continue to prevail in the North Sea, created by high levels of demand in the pipe-lay and IRM markets and a reduced number of vessels on the supply side. This becomes particularly pronounced during the peak summer months when vessels are achieving very high levels of utilization.

- West Africa

The West Africa activity remains strong, living up to claims that it is one of the key deepwater growth areas. Subsea 7 has now successfully executed the offshore phases of CNR Baobab and Addax Okwori and is working towards successful completion on Woodside's Chinguetti project offshore Mauritania and the Chevron Texaco Lobito Tomboco project offshore Angola. Bidding activity remains high in this region.

- Brazil

To date, Brazil has generally been typified by long term vessel charters but more recently there has been a shift towards lump sum work. Subsea 7 has capitalised on this and has recently been awarded EPIC work from Petrobras for work on Roncador, Golfinho and PDEG B. There has more recently been a geographical shift of emphasis from the Campos Basin to the Santos and Espirito Santo Basins which are increasing in importance. Developments by other operators such as Chevron Texaco & Shell are at the initial stages which will increase activity in the basin.

- Gulf of Mexico

As shelf production continues to decrease, a large percentage of reserve replacement will be supplied from deepwater discoveries. The continued development of infrastructure in deep and ultra-deep waters is key to the delivery of this replacement. Accordingly, there is a corresponding increase in the Subsea capital expenditure forecast targeted for these areas. In the region, new technology will be a driver in allowing long tie-back lengths in ultra deepwater.

- Asia Pacific

There has been huge growth in energy demand in the region, particularly from China, and this pattern of events is set to continue. There is an anticipated increase in deepwater EPIC work. Subsea 7 recently secured work of this nature from Murphy (in joint venture with Technip) for work on the Kikeh field offshore Malaysia.

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