Net operating profit for the third quarter of 2007 was $118.4 million compared to $73.7 million for the same period in 2006. Net operating margins as a percentage of revenue increased to 19.2% in the third quarter 2007 from 17.8% in the third quarter 2006. The major reasons for the improvement in margins include higher activity levels, improved pricing and good project execution. The net operating profit also benefited from a gain of $1.3 million during the quarter in respect of the disposal of the Salgueiro.
Net financial costs for the third quarter of 2007 were $1.9 million compared to $4.3 million for the third quarter 2006. The main drivers for this net decrease in cost are additional interest income from higher levels of cash and foreign exchange gains being offset to some extent by an increase in interest expense in respect of the company’s convertible bonds compared to the same period last year.
Operations in General
The third quarter 2007 was extremely busy for the Company with good operational performance and high activity levels, particularly in the North Sea and Africa. The new pipelay vessel Seven Oceans completed a number of North Sea lifts and is currently in the Gulf of Mexico preparing for the Chevron Blind Faith project. The Skandi Bergen and Normand 7 joined the fleet during the quarter. The installation of the pipelay spread for the Normand 7 is going as planned with the vessel due to commence operations in the fourth quarter 2007.
The North Sea region delivered strong revenue and margins, resulting from high levels of asset utilization and successful project execution. A significant level of activity in the quarter related to pipelay operations with the completion of the offshore phases on the Venture GKA and Talisman Rev projects. The pipelay operations on the ConocoPhillips Kelvin project were also completed and the final tie-ins are scheduled for the fourth quarter.
Other significant milestones in Norway included the completion of the Oseberg Delta and Ormen Lange Phase 2 projects for Norsk Hydro and the ConocoPhillips Eldfisk tie-ins project.
Work continued on the Shell ISSC, Venture Production PLC partnership, BP West of Shetland and ConocoPhillips projects.
Activity levels increased significantly in the quarter with the offshore phases of the ExxonMobil Saxi Batuque project in Angola and the Agbami project in Nigeria commencing on schedule.
The Rockwater 1 completed the offshore phase of the Petro SA project during the third quarter.
Project management, procurement and engineering are ongoing on the Tombua Landana and Addax projects.
Offshore activity was completed on the first phase of the PDEG recording a small loss in the quarter. The final scope of the PDEG project is scheduled to be completed by the deepwater rigid lay vessel Seven Oceans during the fourth quarter 2007. The Company’s Brazilian spoolbase continued welding pipelines for the Petrobras Hybrid Steel contract with installation scheduled to commence in the latter part of the fourth quarter 2007.
Project management, procurement and engineering continued on the Roncador and BC10 projects with the Roncador project scheduled to commence its offshore phase during the fourth quarter 2007. The Lochnagar and K3000 continued to support Petrobras on day rate operations during the quarter.
The sale of the Salgueiro was completed in the third quarter with a gain on sale of USD 1.3 million.
Gulf of Mexico
The project management, engineering and onshore pipeline fabrication continued on ChevronTexaco’s Blind Faith project. The pipeline was loaded onboard the Seven Oceans and will be installed in the fourth quarter of 2007.
The additional work secured on the BP Thunderhorse project continued and is scheduled to complete in the first quarter of 2008.
The Murphy Kikeh project is substantially complete with minor commissioning work outstanding whilst offshore activities continued on the BHP Stybarrow project in Australia. Both projects are scheduled to be completed during the fourth quarter of 2007. The TUI project in New Zealand was completed in the quarter and further offshore activity took place under the Woodside Frame Agreement.
The Technip-Subsea 7 Joint Venture continues to have a high level of asset utilization supporting both legacy projects and new awards.
Good progress has been achieved on the construction of the new-build deepwater flexlay/J lay vessel Seven Seas. Main engines have been run and electrical load tests completed. The ship will move to the Dutch yard for pipelay system installation in November as planned. Final delivery of this vessel is on schedule for the second quarter of 2008.
Steel cutting for the new-build diving support vessel Seven Atlantic commenced on schedule at the Dutch shipyard in August. Keel lay is planned for the end of the fourth quarter of 2007 and the vessel is due for delivery in the first quarter of 2009.
Progress on the Company’s new North Sea spoolbase in Vigra, Norway is on schedule and will commence operations in the first quarter 2008.
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