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Subsea 7’s recent Q1 earnings defy oil price drop

Precise look at the latest financials released from Subsea 7 that seem to show that the oil price has not had as much of a detrimental effect on their Q1 earnings as expected.

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Subsea 7 has warned it expects revenues and margin to shrink this year, despite reporting Q1 earnings and order figures which were above those forecasted.

The UK based oil services firm recorded a net income of $151m which compared to $131 in Q1 2014. Its revenue for the same comparative period was $1.2bn, down $487m.

Jean Cahuzac, Chief Executive Officer, credited the company’s strong operational performance to good execution and cost control discipline.

However he highlighted the impact on the company from the global collapse of oil prices. “The continuation of challenging market conditions resulted in subdued order intake and order backlog declined to $7.6 billion by the period end which included an adverse foreign exchange impact of $0.4 billion. New orders and escalations totalled $1.0 billion and included the Persephone project for Woodside, offshore Australia, and the extension of two Life of Field contracts for Shell, offshore UK, both announced in the quarter. Unannounced order intake included fabrication work for Sonamet in Angola and an award for the i-Tech division, offshore Australia. Since the quarter end, a two-year PLSV contract has been awarded offshore Brazil for Seven Seas.”

The report also focused on low field activity, particularly in the North Sea, saying offshore activity in the more operationally challenging winter months was reduced as clients felt the pinch.

Subsea 7 has been preparing for the turn of events however and pointed out that its ability to maintain a positive outlook is based partly on the fact that moves to realign costs to those of the market are making “good progress” and it intends on introducing further measures as the year continues.

While Subsea 7 expects contract awards to the market to be delayed, because of the low oil price environment and resultant capital expenditure reductions by oil companies, Cahuzac says he’s confident that the company will be successful in tendering for those projects which are greenlighted, concluding that, “Subsea 7 is a top tier service provider with a solid financial position, and is well placed to win and execute projects in a lower oil price environment.”