Subsea 7 S.A.

Welcome, everyone. With me on the call today are John Evans, our CEO, and Riccardo Rosa, our CFO. The results press release is available to download on our website, along with the presentation slides that we'll be referring to during today's call. May I remind you that this call includes forward-looking statements that reflect our current views and are subject to risks, uncertainties, and assumptions. Similar wording is also included in our press release. I'll now turn the call over to John.

Thank you, and good afternoon, everyone. I will start with highlights from the second quarter before passing over to Ricardo to cover the financial results. Turning to slide three, revenues improved 59% year-on-year to $1.2 billion, driven by both renewables and subsea and conventional, but our underlying adjusted EBITDA margin fell to 7.5%. Nevertheless, at the end of the quarter and after paying dividends of $72 million, our balance sheet remained strong with $390 million of cash and equivalents and net debt of $39 million. Following the high level of vessel transits we reported in the first quarter, our key enabling vessels were working in the second quarter and utilization of our active fleet increased to 82%. Whilst we faced challenges in Taiwan, We made good operational progress on a number of projects, including Seagreen. We had a strong quarter for order intake, resulting in a book to bill of 1.6. Finally, just after the quarter end, we announced the combination of our renewables business unit with OHT. Turning to slide four and our operational highlights. Despite the challenges posed by China's strict COVID-19 restrictions, the Lingshui project was successfully completed ahead of schedule by the CERN Borealis and CERN Eagle. In Norway, for the HOD project, we completed fabrication of the world's first mechanically lined pipeline based on Gluby technology. Meanwhile, CERN Arctic installed umbilicals on Eifugl phase two, and SEMNavica made progress installing gas pipelines on Johannesfedra Phase 2. Activity remained high in the Gulf of Mexico on the installation phases of Manuel, Kingskey and Mad Dog 2. SEMNavica was deployed to the US to accommodate the rescheduling of some work from the SEM Vega, meaning we incurred some extra cost to keep project deliveries on track. In Australia, Sevenocean spent a quarter installing pipelines for the Julimar II phase project, whilst in Angola, the fabrication of top sides and jacket for the SLGC project is ahead of plan at the Sonomet Yard. The PLSBs underpinned a solid performance and contribution from Brazil. Turning to the renewables business unit. In Taiwan, progress of the CY Yulin was impacted by restrictions imposed by the government to control the spread of COVID-19. In addition, conditions at the worksite and changes in scope of the project hampered progress. We are in negotiations to recover incremental costs from our clients in accordance with contractual terms. Elsewhere in renewables, we continue to work on the Sea Green project, where the first five jackets began their transit from China to Europe A further 10 jackets were loaded out from China and the UAE in July, and fabrication of the remaining 99 jackets is running according to plan. Good progress was also made in the UK on the Horn Z2 project, on which Seaway Amory, Seaway Moxie, and the Seamar Esperanza were fully utilized during the quarter. Turning to slide five. We ended the second quarter with a backlog of $6.8 billion, up 13% from the first quarter this year. During the quarter, we announced two large awards in Brazil, Bacalao and Mero3, and including unannounced awards and escalations, we achieved a book-to-bill ratio of 1.6 times. We have good visibility on the revenue for the remainder of 2021, with $2.7 billion still to be executed. And now I'll pass over to Ricardo to run through the financial results in more detail.

Thank you, John, and good afternoon, everyone. Slide 6 shows our income statement highlights. Second quarter revenue of $1.2 billion reflected higher levels of activity in both the subsea and conventional and renewables business units. Adjusted EBITDA of $90 million after incurring net costs associated with COVID-19 of approximately $4 million was up from a loss of $9 million in the prior year quarter. The adjusted EBITDA margin was 7.5%. This improvement largely reflects the absence of the restructuring charge of $104 million that was recorded in Q2 2020. The underlying margin, including items relating to the restructuring provision, declined year on year as a consequence of continued delays and challenges affecting renewables projects in Taiwan, as well as reduced margins in subsea and conventional. The net loss for the quarter was $13 million. Turning to slide seven for additional details of the income statement, administrative expenses improved by $12 million against the prior year period, reflecting the absence of restructuring costs, with underlying expenses remaining in line. The depreciation and amortization charge was stable at $114 million compared to the prior year quarter, with declines, in part driven by prior year impairments, offsetting the impact of the new-build 7 Vega and the converted 7 Phoenix. The quarter also benefited from the absence of impairment charges against property, plant, and equipment and right-of-use assets totaling $229 million and goodwill of $578 million, which impacted the prior year quarter. The net operating loss of $28 million in the second quarter included a credit of $11 million relating to downward revisions to the cost of the group's resizing program. The latter follows a significant improvement in the outlook for the industry since we first introduced the cost reduction plan in the second quarter of 2020. To accommodate a higher level of tendering and engineering activity, combined with improved vessel utilization throughout the year, Subsea 7's workforce is now expected, on average, to be approximately 2,000 more than forecast in the downsizing plan. However, given the phasing of our current projects and the timing of new orders, plans to reduce the size of the active fleet in 2022 remain in place. The net loss was $13 million after a $15 million tax credit. On slide eight, we summarized the performance of our operating business units. The subsea and conventional business unit generated $863 million of revenue in the second quarter, 24% higher than the prior year period, mainly due to improved activity in Norway, Saudi Arabia, and China. Renewables revenue was $315 million, a near five-fold increase compared to the prior year, mainly driven by the Sea Green and the Hornsey II projects. We recorded $20 million in revenue in corporate, representing the contribution from Exodus and 4Sub-C, our autonomous subsidiaries. Subsea and conventional recorded a $10 million net operating loss in the quarter compared to an underlying net operating income of $14 million in the second quarter of 2020. This loss is due to a number of factors. It reflects the early stage of progress of the 2021 offshore campaigns relating to work won at low margin in the competitive environment of 2019 and 2020. Secondly, we incurred extra costs associated with the transfer of some work from Severn Vega to Severn Namika. The net operating loss of the renewables business unit was $32 million, a deterioration of $6 million from the first quarter 2020. Progress on Seagreen and Hornsea II continued as planned, but was offset by the issues that John has discussed regarding the execution of work in Taiwan. As John has mentioned, we are in negotiations to recover these costs from our client. In the corporate business unit, net operating income of $14 million included the $11 million credit I have previously highlighted. Slide 9 shows our cash flow waterfall chart for the quarter. Net cash generated from operating activities was $15 million after incurring a $48 million adverse movement in net working capital driven largely by increased activity in the Middle East and the timing of milestone payments for various other projects. This increase was partly offset by client receipts on a newly awarded project. The net working capital position is expected to improve in the second half of 2021, with milestone payments and final settlements expected on a number of projects. Capital expenditure was $34 million, including payments related to the conversion of Seaway Phoenix, a loan of $33 million to one of our non-consolidated joint ventures, and the distribution of dividends amounting to $72 million following approval by shareholders at the AGM in April. At the end of the quarter, we had $390 million in cash and cash equivalents, a reduction of $137 million since the end of March. We moved into a modest net debt position of $39 million, including lease liabilities of $232 million. To conclude, slide 10 shows our guidance for the full year. Despite the low margins reported in the first half of the year, our guidance for 2021 remains largely unchanged. We expect increased profitability in the second half to be driven by continued de-risking of projects as execution progresses and commercial settlements, with clients are achieved. Compared with 2020, managing COVID-19 has become a more complex challenge as we navigate the differing requirements of various host countries. It remains difficult to forecast the magnitude of our direct costs net of client recoveries, as well as the indirect impact on efficiency, offshore operations and the supply chain in general. However, absent COVID-19, we continue to anticipate revenue and adjusted EBITDA to be above 2020 levels with positive net operating income. I will now pass you back to John.