Subsea 7 S.A.

Welcome, everybody. With me on the call today are John Evans, our CEO, and Ricardo 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 third quarter before passing over to Ricardo to cover the financial results. Turning to slide three, revenues improved 53% year on year to $1.45 billion, and our adjusted EBITDA margin increased to 13% from 12% in the same quarter last year, giving us an EBITDA of $185 million, This was the result of high activity in both subsea and conventional and renewables, as well as the benefit of client settlements. Although we had a relatively high build-up in working capital during the quarter, our cash balance was $300 million at the quarter end, and our net debt, including lease liabilities, was $99 million. During the third quarter, we had a very high fleet utilization of 94%, up from 84% in the prior year, with an active summer season offshore Norway and in the Gulf of Mexico. Our engineering and procurement teams were also busy on the recent major EPCI awards. Finally, since the second quarter, we've made good progress in delivering our strategy with an increased interest in floating wind through the acquisition of a majority holding in Nautilus, the completion of our combination with OHT to create Seaway 7 ASA, and the announcement of our net zero targets. Turn to slide four and our operational highlights. Although the challenges posed by COVID remain significant, Subsea 7 made good progress during the third quarter on several projects. The engineering and procurement phase of back allow is well underway, as well as on SLGC, Sangamar, and Barossa. In the Gulf of Mexico, we towed the giant FPU for the Mad Dog 2 project to its off-load location and installed gas export infrastructure and rigid and flexible jumpers. In Norway, vessel activity was high, with the Sam Vega, Sam Oceans, and Sam Navica all active on the Johan Sveadrup 2. Sanvega also installed the electrically heat-traced flowlines on Erfugl 2. In Australia, the offshore phase of Julimar 2 was completed by the Seven Oceans and the Seven Oceanic before the vessels began the return journey to Norway. During the quarter, we announced the award of Sakuraya project in Turkey, for which engineering and procurement has commenced. And also the quarter end, we announced new contracts for three of our PLSVs in Brazil, which I'll talk a little more about shortly. In renewables, Seaway Strachanov installed monopile foundations on Hlanzi Kuzut. Seaway Amory, Moxie, and Seamer Esperanza all worked on Horn Z2. And the Seagreen project achieved an important milestone with the installation of the first jackets. Turning to slide five, we had another good quarter for new orders, resulting in a book-to-bill ratio of one. This followed strong order intake in the second quarter and gives us a book-to-bill ratio for the first nine months of the year of 1.1. The largest award this quarter was Saccaria at over $750 million, but we booked several smaller contracts in Norway as the high level of engineering work we've discussed in previous quarters began to yield EPCI work. We've presented here the backlog at the 1st of October, so we can show the addition of OHT and give you some extra details of the backlog by year for each business unit. Overall, we have good visibility on revenue for the remainder of 2021. with $1.2 billion still to be executed in subsea and conventional, and $0.3 billion in renewables. For 2022, our backlog is in line with that at the equivalent point last year. 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 six shows our income statement highlights. Third quarter revenue of almost $1.5 billion reflected higher levels of activity in both the subsea and conventional and renewables business units, underpinned by good progress in executing major EPCI contracts. Adjusted EBITDA of $185 million after incurring net direct costs associated with COVID-19 of approximately $9 million was up 63% from the prior year quarter. The adjusted EBITDA margin was 13% compared with 12% last year. This improvement largely reflects higher margins in subsea and conventional and renewables due to high vessel utilization in both business units, as well as the benefit of client settlements. The net income for the quarter was $45 million, equivalent to earnings per share of 15 cents, in contrast to a loss of $43 million in the prior year. Turning to slide 7 for additional details of the income statement. Administrative expenses increased by $15 million against the prior year, mainly reflecting an increase in tendering costs. The depreciation and amortization charge was stable at $107 million compared to the prior year quarter, as the impact of the new-built 7 Vega and upgraded 7 Phoenix joining the active fleet was offset by reduced leased vessel costs. The net operating income of $78 million in the third quarter included a credit of $8 million associated with a downward revision to the cost of the group's resizing program. This relates to the continued improvement in the outlook for the subsea sector and associated resource needs. The $29 million increase in the tax charge compared with the third quarter 2020 reflected the improvement in income before tax combined with irrecoverable withholding taxes in certain jurisdictions. On slide eight, we summarize the performance of our operating business units. The subsea and conventional business unit generated slightly more than $1 billion of revenue in the third quarter, 59% higher than the prior year period, including significant contributions from Bacalhau, Sacaria, and several projects in the Gulf of Mexico. Renewables revenue was $377 million, up 40% compared with the prior year, reflecting a higher contribution from Seagreen, Offshore Scotland, as well as the commencement of the Haalandseekust Zoet project, Offshore Netherlands. We recorded $19 million in revenue in corporate, representing the contributions from Exodus and Force of Sea, our autonomous subsidiaries. Subsea and conventional recorded net operating income of $70 million in the quarter compared to $15 million in the third quarter 2020. This reflected increased project activity and high utilization of the subsea fleet in the Gulf of Mexico, Norway, and Brazil. The renewables business unit moved from a break-even position in the third quarter of 2020 to net operating income of $5 million in 2021. Good progress in the offshore phase of the projects I've just mentioned was diluted by the impact of delays in executing work in Taiwan, as has been highlighted in our commentary on the results of the second quarter this year. Slide nine shows our cash flow waterfall chart for the quarter. Net cash used in operating activities was $20 million after incurring a $230 million adverse movement in net working capital. This adverse movement resulted from the timing of milestone payments in the Gulf of Mexico, the protracted invoice approval process in the Middle East, and delays to progress of renewables projects in Taiwan. Although we are expecting an improvement in the net working capital position in the fourth quarter, looking ahead to 2022, we expect the group's investment in working capital to increase as we execute large EPCI projects with adverse payment terms, particularly in the Middle East and Brazil. We have, nevertheless, the necessary resources or sources of liquidity to address the working capital needs of these projects and will draw on them if required. Capital expenditure was $24 million, $10 million lower than the prior quarter, and lease payments made were $22 million. At the quarter end, we had $300 million in cash and cash equivalents, a reduction of $90 million since the end of June. Our net debt position increased, but remains a modest $99 million, including lease liabilities of $208 million. To conclude, Slide 10 shows our guidance for the full year. We have, with a relatively high level of visibility on the remainder of the year, our guidance for 2021 is largely unchanged. We expect revenues to remain at an elevated level in the fourth quarter as we make progress in the procurement phase for certain major EPCI projects. Our fourth quarter EBITDA margin will reflect the normal seasonal impact of vessel utilization, particularly in the northern hemisphere. We continue to anticipate revenue and adjusted EBITDA to be above 2020 levels with positive net income. Our capex expectation for 2021 has been revised upward by $20 million to between $140 million and $160 million after including shipyard expenditures of Seaway 7's new build vessel program. Turning to 2022, we expect a modest decline in revenue year on year while adjusted EBITDA is anticipated to be broadly in line with 2021. Capital expenditure for the group in 2022 is expected to fall within the range of $420 million to $440 million, mainly driven by Seaway 7's construction commitments for the Alphalift and the VIN 1. CapEx relating to the subsea and conventional business is forecast at $140 million to $160 million, marginally higher than 2021, driven by enhancements to certain PLSVs prior to the start of their new contracts. I will now pass you back to John.

Thank you, Ricardo. On slide 11, we have a summary of our strategy, comprising the subsidy field of the future and a proactive participation in the energy transition. Our progress since June touches upon four elements of the strategy, and I'll take each in turn, starting with integrated SPS and SIRF. After our success in booking Bakalow project in the second quarter, during the third quarter, we had another big award for the Subsea Integration Alliance, the Sakarya project in Turkey. Together with some smaller contract awards this quarter, it has taken the SIA's market share since January 2020 to 75% by revenue. The award follows a strong collaborative early engagement process with Turkish Petroleum, which will enable an industry-leading timeline from discovery to first gas for a project of this scale and complexity. The project will utilize the engineering and procurement project management expertise of our global project center, as well as the local team in Turkey, and it will utilize several Subsea 7 vessels in 2022. The pipeline of opportunities for integrated work remains strong. The Subsea Integration Alliance is the preferred supplier on Scarborough, which is due to sanction in quarter four, and is the bidding on Lapa Southwest, BMC 33, and Bader Nord. Moving to slide 13, and our PLSVs in Brazil. In October, we announced new contracts for three of our PLSVs working for Petrobras, namely the 7 Rio, the 7 Sun, and the seven waves. Each award covers a three-year period, giving us visibility through 2024. In addition, 7Cs will be deployed to Brazil for approximately one year to complete the remaining stub period of the old contracts for the three vessels. Along with the 7Cruzeiro, which will continue on its existing contract until the end of 2022, we will have five vessels working for Petrobras next year. Each of the newly contracted vessels will undergo some modifications before commencing the new contracts, amounting to a total of approximately 240 days downtime and $30 million of capital expenditure. This is reflected in the guidance for 2022 that Ricardo has just discussed. We are pleased with the outcomes of the PLSV tender in Brazil. It gives us long-term revenue visibility whilst retaining some exposure to a potentially improving PLSV market in 2024-25 onwards. This continuation of our successful relationship with Petrobras is a testament to the strong performance of our team and our vessels in Brazil. On slide 14, we have a quick recap of our combination with OHT to create Seaway 7 ASA, which completed on the 1st of October. From Q4 onwards, we will be fully consolidating Seaway 7 into our results in the renewables business unit, as well as reporting Seaway 7 separately. Stuart Fitzgerald and Mark Hodgkinson, CEO and CFO of Seaway7, will be hosting an investor presentation straight after ours today. And so, to avoid repetition, I encourage you to follow their results and listen to their conference call for more details of the outlook of our renewables business unit. Finally, before we turn to our customary prospect slide, on slide 15, I want to highlight our recent commitments to achieve net zero by 2050 with a 50% reduction in emissions by 2035. These targets are the result of detailed planning by our operational team in both subsea conventional and renewables. With 98% of our emissions coming from our fleet, the plan focuses on decarbonizing our offshore activity based on increased digitalization hybridization, shore power, and the use of clean fuels. We're reporting our progress over the coming years, and our emissions data will be published annually in the sustainability report. And so we move on to the maps outlining prospects in subsea and wind over the coming 12 months. I will focus today on the subsea map on slide 16, and let Stuart and Mark talk you through the prospects in wind showed on slide 17. The industry recovery in subsea and conventional continues to gain momentum very much along the lines that we have discussed in previous quarters. The most active markets remain Brazil, the Gulf of Mexico, and Norway. Overall, the value of tenders in-house has increased 70%, since the low point in May 2020 and is up 20% from the level seen before COVID in December 2019. As well as active tendering, we are experiencing higher levels of early engagement and engineering, and we talked last quarter about the increased headcount in these teams to meet demand. We previously noted that given the long-term nature of our projects, this upturn will take time to feed through the higher vessel activity. But based on our existing backlog and potential new awards, this is expected from the second half of 2023 onwards. In the meantime, we continue to plan to rationalize our fleet in 2022. Overall, we are encouraged by the way the recovery is progressing. and remain confident in the outlook for subsea and conventional. On the next slide, we have the wind prospects. As mentioned, I'll leave the details to Seaway Sam to discuss, but we continue to see strong demand centered on the US and the UK, with high levels of bidding activity today and awards expected from 2022 onwards. To wrap up, I'll turn to our final slide on page 18. In summary, our core subsidy business is experiencing recovery focused on three key markets with early cycle activities increasing compared with both the lows of 2020 and also when compared to the pre-COVID levels at the end of 2019. The recent awards of the PLSV contracts and Sakurai give us enhanced visibility for 2022, and we expect improvement in the dynamics of our offshore activities to make a positive impact on our results from the second half of 2023 onwards. In offshore fixed wind, we have completed a combination with OHT and our renewables business unit to create Seaway 7. With a full suite of installations, and heavy transport vessels, Seaway 7 is well placed with leading edge capabilities to address this high growth market. Finally, we're making good progress ensuring we're well positioned in the emerging markets of floating wind and carbon capture that offer both Subsea 7 exciting long-term growth prospects. With that, I'll be happy to take your questions.

Thank you. As a reminder, if you do wish to ask a question, please press star 1 on your telephone. If you wish to cancel your request, please press the hash key. Once again, if you wish to ask a question, please press star 1 on your telephone. Your first question comes from the line of Nick Konstantakis from Exane. Please ask your question.

Hi, guys. Thank you for taking my questions. And Ricardo, good luck in whatever you decide to do next soon enough. I just want to start with you, actually, and a comment you made around the working capital investments that could increase next year. Do you mean that there will be further working capital absorption versus where we are today, or we should look at a higher outflow versus what we have seen so far? Then secondly, I guess on the renewable business, nice to see some positive contribution there. Would you say the 3Q performance is indicative of what you can deliver? And I guess could you give us a bit of visibility on what, if you have any revenue, the one earned margin in there into next year and how to think about that? And then lastly, can you just remind us a little bit the basis on which the PLSV is being bid? Just trying to understand around what is the cost base? What kind of EBITDA margins are we thinking? I know historically it was a 50% type of business, so just to get an understanding there as we're thinking about the mix and the bridge into next year. Thank you.

So Nick, okay, I think there's three questions in there. If I suggest that I'll take the renewables and the PLSV first, and then I'll hand over to Ricardo to talk about the working capital, if that's okay with yourselves. The renewables business in Q3 was performing well. In my prepared script, I talked about the various projects that we were working on. And we do expect an improvement in renewables next year to continue. We hopefully have a clear path to conclude the work in Taiwan for next year. So for us, we would expect to see that our ambition to have a billion-dollar business out of 10%, EBITDA should be well on the way next year. So we do expect the renewables business to make an improved contribution next year. In terms of the PLSVs, as I mentioned in my prepared script, we're pleased with the renewables that we have. There is a change in the structure of those contracts. There's some capital expenditure to spend on the assets to get them upgraded. for the new three-year contract, which we'll be taking them out of service for a period of time next year to do so, and tie that in with their statutory dry docks. We also have them revved, Brazilian flagged, so there's some friction cost in the revving process, which all three vessels will go through next year as well. But we are comfortable that we were awarded those. They were public openings, so you can see what the margins are for ourselves and our peers there. And we're very pleased that we have three years firm on those with a one-year option on each of those. And I think the other important thing to think about is each of those contracts, where they completed, had a stub length of a few months on the end of each of those. And we've been able to deploy the seas into the market next year in Brazil to collect the number of months of work on each of those contracts that could have been lost had we converted the vessels immediately to the new contracts. So there is some changes in the vessels for next year, but we're very pleased with what we've got there, and I think it's a good position that we've got in the awards for those sectors. I'll hand over then to Ricardo to talk a little bit about working capital.

Thank you, John, and good afternoon, Nick. As you say, we did see an increase in our working capital quarter on quarter of about $230 million, and I've set out in my prepared comments the drivers of that increase. We are working hard on improving the position fourth quarter and we do expect an improvement in this period. I do want to assure you too that we have robust controls and processes in place to record and monitor our receivables and importantly pursue payment. Looking ahead at 2022, we are expecting an increase in working capital. And if I understood you correctly, because the line was somewhat muffled, yes, that does imply an increase in receivables who are delayed in cash inflow. And this is because we are going to be executing large EPSI projects with adverse payment terms, particularly in the Middle East with its customary extended payment terms, and Brazil, where we'll be executing Mero3 in particular for Petrobras. You know, as we have previously flagged to the market on a number of occasions, Petrobras has been insisting on extended payment terms from its EPSI contractors. All the major contractors have been awarded work with Petrobras, major EPSI work, and they therefore face the same challenge. On a more positive note, we are starting to see that Petrobras is proposing less onerous payment terms in more recent invitations to tender. And we will continue, of course, to engage with them on the topic and convince them to consider better and more equitable payment terms for its contractors. And lastly, I just want to emphasize again that in addition to the efforts and controls and processes we have in place, we have sources of liquidity to address the working capital needs of 2020. And we'll only draw on them if they're required.

Thank you.

Thank you. Your next question comes from the line of James Thompson from J.P. Morgan. Please ask your question.

Great. Good afternoon, gentlemen. Thank you very much for the presentation. I'll just follow up on Nick's point on the working capital in the third quarter. Ricardo, are you able to sort of give us some guidance about those three buckets of the Middle East work and Taiwan, kind of which are the most significant there, which may well help us think about kind of what it might look like in the fourth quarter. My second question is really around Turkey. I mean, obviously, it's a large project which is being executed in a very short time frame. I was just wondering, John, if you could give us some you know, reassurances around delivery here and what sort of protections you might have in place. I mean, because we're reading pretty often about logistical issues, supply chain issues, things like that affecting kind of global industry. And so, you know, does that put you at risk in such a short duration project? And I guess my final question is really on Vessel CapEx. It was a little bit higher in 2022 than my My estimate, does that mean that really the bulk of the new build capex is coming in 2022 and therefore 2023 should be materially lower? Thank you.

If I do Turkey first and then Ricardo can cover the capex and the working capital. We, as I mentioned in my prepared remarks, have been working in an early engagement mode with Turkish Petroleum and Schlumberger on this opportunity. And that has been going for the bulk of this year. We have secured all the materials, prime materials that we need for the project, including line pipe, coating, umbilicals, flexibles, have all been ordered. And we're ordered in a sequenced approach with our clients backing throughout that process. And we have a full team mobilized. we've subcontracted part of the pipeline work to one of our competitors, and that's fully signed up, as well as the commitment for our vessels. So we have been, you know, very engaged in the subsea integration alliance model of working with our clients early. And this is a great example of how that work manifests itself when you can get all the stars to align. So we're very comfortable that we have a good project there. I was in Istanbul with Olivier Lepage of Swamiji about a month ago when we signed the contract and spent time with the senior team there for the clients. And it's a highly focused team working very efficiently in a very aligned way to achieve quite an ambitious deadline. But all the right things have been done at all the right times. And so for us, we look forward to executing that. I'll hand over to Ricardo to cover the capex and the working capex.

Thanks, John. Good afternoon, James. Touching first on working capital, I do want to emphasize that although we are working hard to achieve an improvement in the fourth quarter, and we are expecting it, do not expect a reversal of the working capital outflow that has occurred in the first nine months of this year. I think that I've highlighted essentially three elements to the outflow, the milestone payments in the Gulf of Mexico, and those we view as relatively short term and affect a number of clients. With regards, more importantly, to the Middle East, as I'm sure you're aware, there's one client in particular that has a very complex and paper-heavy approval process We have a detailed timeline and have assigned resources to accelerate as much as possible that approval process. And we are hopeful of improving our profile there, but there's always an element of risk associated with it. And lastly, I mentioned the renewals projects in Taiwan. And as you know, progress in the fourth quarter tends to be adversely affected by the seasonality or the bad weather which affects the offshore execution installation of the various structures. So on that front, we don't expect to see resolution until 2022. So I hope that provides you some additional color for what we're seeing in the short term. And I've already commented on what we're expecting for 2022 as a whole. As far as capital expenditure is concerned, as John has mentioned, we are investing in the construction of the alpha lift and subsequent to that within one. and the expenditures that we're envisaging would essentially be disgorged sequentially with the bulk of the alpha lift being covered in 22 as we're expecting delivery of the vessel, but most of the expenditure on the VIN 1 will take place in 23. So don't assume, therefore, that the capital expenditures will decline very significantly in 23 with respect to those two new builds.

Okay. Thank you very much, Ricardo, for all those answers. That's great. Just one final question, small follow-up, if I may. In terms of 2022 in the renewable segment, do you think it could be EBIT or positive next year?

As I said earlier, James, you know, it's well on its path to being an EBITDA business in the $100 million range is what we are targeting for that business and to be well on that path next year.

All right. Okay, John. Thank you very much. I'll hand it over.

Thank you. Your next question comes from the line of Vlad Sugevsky. From Buffett, please ask your question.

Gentlemen, good afternoon and thank you for taking my three questions. The first one, would you be able to discuss profitability drivers, positive and perhaps some negative going into 2022 compared to this year? Secondly, you are tracking to achieve a very strong order intake in 2021 already. Is there room to improve order intake further next year? And then lastly, Ricardo, if you could perhaps give us some additional color on the magnitude of potential networking capital outflow next year. Are we talking about low three-digit number, mid three-digit number? Any color would be super helpful. Thank you very much.

Okay, if I take your questions there, Vlad. So order intake, as we show in our map of the world, we remain confident that there's a good pipeline of projects there for us. And we feel comfortable that we will again achieve next year a book to bill of over one. We can see that there are good opportunities there. And we talked earlier about we expect to see Scarborough sanctioned, subject to Woodside and their partners by the end of this year. PECAN is a project in Ghana where we have been the favourite contractor for a couple of years, and there will be an opportunity to see whether that project sanctions next year. And the usual pipeline that we talk about is very strong there. We also expect next year the contract for difference awards which have been delayed in the UK. The UK government are pretty clear that they will be awarding their contract for differences in the middle of next year and that then should allow probably half a dozen UK based very large renewables projects to be awarded to the industry. We are also seeing The renewables in the U.S. market, where there's, again, half a dozen very large projects there running in parallel. Our discussions with clients say that they'll be reaching a crescendo on those next year. So we feel comfortable that we've had a very good year this year, and we expect to see next year being certainly as good as this year, hopefully better. Profitability drives for 2022. I think 2022, it's just thinking about it in the mix of the work that we do As I explained to James earlier, we expect to see renewables doing better next year, and hopefully the challenges that Taiwan threw at us this year will not reoccur. But we see next year that our offshore fleet is a smaller fleet next year, as we've discussed consistently that we would reduce the fleet for 2022, and that's the result of the no awards of major projects in 2020, meaning there's not much work taken offshore in 2022. So we'll adjust the fleet size in subsiding conventional to suit. And as I discussed earlier on the PLSV that Nick had asked, We have all three of our PLSBs out of service for a period of time next year, whilst they have their dockings and CapEx, which then allows them then to start a new three-year period ahead. So we'll see the profitability in oil and gas go down a bit next year. We expect to see renewables coming up, and that's why we're guiding next year that EBITDA is broadly in line with this year. So they're the moving parts of next year. And I'll hand over to Ricardo on the working capital.

Yes, Vlad. Your question has been couched in terms that are difficult to reply to with any clarity because I don't know what you mean by low to mid triple digits, but assuming that it's taking the triple digits, I would say that it is in the order of low to mid.

Understood. Thank you very much for the answer, gentlemen.

Once again, if you wish to ask a question, please press star 1 on your telephone. Your next question comes from the line of Frederick Lund from Carnegie. Please ask your question.

Hi there, and congratulations on a strong quarter. Could you comment a bit on how you think on cash allocation next year, given the build-in working capital, but also CVA7 being partly on its own balance sheets?

Yeah, Frederick, you know, we, as always, as a company, have three sides of a triangle that we've always looked at. The first is invest in the business, and that's why we are investing in Seaway 7, because we can see a very clear lack of supply and a huge increase in demand in that renewables business in 25, 26, and 27. And our discussions with our renewables clients are very clearly now focused around that gap, and that's why those assets are being invested in for that opportunity. The second one then is we've always had a very strong balance sheet and we continue to protect our balance sheet. And lastly, our board will sit down, as we always do, to look at returns to shareholders. We've been pretty consistent year on year in always having a view on that, be it through a share buyback or through dividend. And that conversation will take place, I'm sure, in the first quarter of next year. And, you know, just to remind everybody, over a decade, we have given $2 billion back to our shareholders, and we're clear in our minds that there will be shareholder returns as a key priority over the next few years for us. So I think the key thing for us is the renewables. It's about targeted investment in specific top-end assets that are very focused on that gap that is very clearly opening up from 2025 onwards. and we also know that there's another big gap opening up from 2030 onwards as well so that's how we think about capital allocation inside the group at the moment okay thank you thank you there seems to be no further questions please continue actually i think we might have one question from city could you just take that last one yes

One moment. The question comes from Michael Ellsford from Citi. Please ask your question.

Hi there. Good afternoon. Sorry, I think I pressed the wrong button initially. Thanks for taking my question. I've just got one really just on the renewables business. And maybe it's a question for later on. But I'm just a question around the supply chain in the U.S. is obviously a big pipeline. But I'm just wondering how you are and are getting comfortable with managing what are clearly extra supply chain challenges in the U.S. with the Jones Act, etc.? ? when it comes to bidding for those projects going forward. Thanks.

Yeah, thank you, Michael. Well, two things. I think, you know, we've been in the U.S. for over 30 years, so we're fully conversant with Jones Act, and we understand the complexity of that and the subtlety of how that works. But the one thing that is very important for us, again, is the fact that we also have in the Alphalift the ability to – to transship materials from Europe or from Canada into the American markets, which again is a certain way of working through the Jones Act complexities. And we also are aware of the fact of how to work in the Jones Act and how that can be orchestrated. We also are looking at our U.S. renewables bids in making sure that vessel owners who've been partners for us for over a decade 15 years in some cases in the U.S. work with us on those renewables projects. So again, we very much take a proactive approach of making sure that we have Jones Act compliant support vessels from existing suppliers that we're very comfortable to work with and they're comfortable to work with us as we've used in oil and gas, as well as looking at the benefits of potential tram shipment opportunities that the Alphalift allows us to do.

Thanks, John. And just maybe a follow up on the fleet for next year on the more subsea part of the business. Can you just remind me or us of what exactly you're going to be doing on managing the fleet down next year? Is it just simply just not chartering the third party vessels? Or can you maybe elaborate on how you're going to scale down to then scale back up again in 23 and beyond? Thanks.

We'll be returning a number of chartered tonnage to their owners next year, and then we'll use the flexibility that we have in the market then as the market picks up from mid-23 onwards to bring tonnage back on board as we need to. So it's really around the last step of what we discussed 18 months ago with the market. And I think it's very important to remember two different things actually happened here. In terms of the offshore fleet, we are pretty much continuing downwards in terms of adjusting to suit there. And that's about working the asset base that we have out at work at a very high level next year. But equally then, we've seen, as we've discussed in the last couple of quarters, the need for project management, engineering, supply chain skills, fabrication skills coming into the business to be ready for this uptick in work that we are seeing from mid-2023 onwards. And let's remind ourselves what does that look like. We have firm work in Brazil through Bacalao and Mero3, and we continue to bid future projects that come off the back of that in the sequence of bidding that's coming. We already have Barossa in Australia, and we do expect to see Scarborough sanctioned. this quarter. So that will give a continuity of work down in Asia and in Australia. And last but not least, we are getting ready for quite a round of awards in Norway in 2022, which is around the tax break that exists there. We're currently working as the exclusive partner with ACA BP on its portfolio, and those projects will come to sanction next year. And we are working with Equinor on a set of bids that will come out there. So We are again tuning the fleet to where we expect it to be in terms of awards in 2022 that then lead to work back end of 23, early 24. So that's the exercise that we're doing there, Michael. It's a controlled contraction to then go into a growth mode afterwards.

Great. Thanks for the call, John. Cheers.

Thank you. I believe that's the last question. Well, thank you very much. What I'd like to do just in closing though is to thank Ricardo for his very, very much valued service to Subsea7 over just a shade under a decade. I've been a colleague with Ricardo throughout his time here in Subsea7 and I very much value Ricardo's support and input into the business over the last decade. We very much wish Ricardo well in his retirement And we look forward to Mark joining the team, and he will take the next quarter's call. I'm sure each of you will get an opportunity to speak individually to Ricardo and to make your wishes known. But we very much thank you, Ricardo, and look forward to a healthy and prosperous retirement. Thank you, Ricardo.

Thank you, John, and good luck, everyone, in your respective careers. Thanks a lot, and we look forward to talking to you in Q4.