Subsea 7 S.A.

Welcome, everyone. With me on the call today are John Evans, our CEO, and Mark Foley, 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. We will start with a summary of the first quarter of 2022 before passing over to Mark to cover the financial results. Turning to slide three, the first quarter unfolded as we had anticipated and the financial results were in line with our expectations. As we flagged last quarter, both sub-seam conventional and renewables were affected by a total of over 250 days of planned maintenance and dry dockings on our fleet. We plan this downtime for the quiet periods for offshore activity and activity will pick up in the second and third quarters. We continue to see signs of an upcycle in both the subsea and offshore wind sectors. Our clients continue to push ahead with tenders despite challenges related to raw material pricing and pressures in parts of the supply chain. The pace of bidding in both markets remains strong with an underlying improvement in pricing and contractual terms. Turning to slide four, sustainability is a core value for subsea SEM, and in the first quarter, we continued our transition journey with the publication of our third sustainability report. In it, you'll find enhanced disclosures and details of progress we're making against key objectives. along with new targets that expand our environmental, societal, and governance goals. Our sustainability team has been expanded in 2022, with Marcelo Xavier assuming responsibility at executive committee level as part of his new role as EVP Strategy and Sustainability. He will be reinforcing the efforts of our sustainability team and making sure that Subsea 7 continues to drive our strategy forward. Turning to slide five and an update on four of our largest contracts. In subsea and conventional, work on the SACAREA project is around a third complete. Significant progress has been made to fast track material delivery and two vessels have been mobilized for seabed preparation work. Pipeway operations are due to begin in Q3. In Norway, Senvega completed pipe bay operations on the Johanstredrup phase two, after a period of waiting on weather, and the remaining scope is expected to be completed during Q2. In Brazil, good progress has been made on Bacalao project, where fabrication works are on track at three yards we are using, and the project is 41% complete. In renewables, activity remains high at Seagreen, where 21 foundations were installed by the end of 2021, and Seaway Amory and Seaway Phoenix began installing in-array cables. Of the 114 jackets, 60 jackets have now been delivered, with a further 20 in transit. Delivery of the remaining jackets and cables to the Martian Yard in Scotland remains on schedule. The next couple of slides will discuss some of the ramifications of the situation in Ukraine. Firstly, to reiterate, we have no direct operations in either Russia or Ukraine. We have around 200 Russian and Ukrainian nationals among our crew, and we are providing them the support they need at this time. The oil industry is used to dealing with sanctions, and we have well-developed processes in place to ensure we're always compliant. SubseaSem's only exposure is through a small pipeline repair contract in Europe. It is for a Russian client, but it is exempt from sanctions because of the essential nature of the service. It represents less than half a percent of our revenue in 2022. Finally, we have operations in the Black Sea, about 34 kilometers from the Turkish maritime border with Ukraine. We haven't encountered any issues so far, but this is something that we are monitoring closely. Sanctions on Russian gas and oil exports have brought energy security to the forefront of European politics, and this is likely to become a long-term theme in both the subsea and wind industries. Next, turning to slide seven and the supply chain issues faced by the industry today. By the end of 2021, pricing of some key components had already increased 25% to 30%, and the supply chain was tightening. In recent months, as a consequence of sanctions placed on Russia and the disruption to supply from Ukraine, raw materials prices have become extremely volatile. Two key raw materials for Subsea Sen are steel and copper, and both of these have seen price volatility. Our exposure can be roughly defined by two categories, that for contracts already awarded and that for ongoing and future tenders. For contracts already awarded to Subsea 7, as we mentioned last quarter, we are generally protected from raw material inflation and supply chain tightness by various contractual mechanisms. Either we have back-to-back contracts in place at time of award, index-linked pricing, or the contract has a specific mechanism to pass through inflation as an escalation. Fuel costs are mainly hedged or passed on to clients. We have a small exposure to fuel cost relating to vessel standby and transits. Moving to tenders, where the environment has become more complex. First, we note our clients in both subsea and wind industry remains positive and are pushing ahead with the tendering process. Clearly, though, with increased volatility of raw materials pricing, it has become more difficult to get firm pricing and delivery dates from suppliers to allow us to fix our own bids to clients. Where we are preferred bidder, we're working collaboratively with each of our clients to implement suitable contractual protections to cover this level of uncertainty. This environment has really reinforced the benefits of early engagement with our clients and our collaborative relationship with our suppliers, which is crucial to navigate this complex issue. Turning to slide eight, we continue to make good progress on our long-term strategy. In the first quarter, the Salamander Floating Wing Joint Venture made progress in attracting a cornerstone investor. You may recall at the time we announced this project with Simply Blue that we planned to bring in a major operator to fund and help develop the project, and we are very pleased that Orsted has acquired an 80% stake. Our objective in being part of this group is to build know-how and experience in planning and executing this type of floating wind development and to help establish the local supply chain in Scotland. We are now at an advanced planning stage and expect to participate in the Intoc Leasing Round later this year before participating in the Contract for Difference Allocation Round in 2025. And now I'll pass over to Mark to run through the financial results.

Thank you, John, and good afternoon, everyone. I'll begin the financial results review with some details of group performance in the first quarter before turning to the business units. Slide nine summarizes the solid backlog position at the end of the first quarter. Order intake was $1.2 billion, equating to a book-to-bill of one, and backlog at the end of the first quarter was $7.3 billion. Over $3 billion in backlog is expected to be executed over the remainder of the year and $2.6 billion in 2023. As with Q4 2021, the level of escalations was high at over $500 million. This comprised variation orders and contractual price escalations across several projects. Turning to slide 10 and the headline results for the group. Revenue was $1.2 billion, an increase of 20% year-on-year, as we made good progress on some of our large EPCI projects in both subscene conventional and renewables. Adjusted EBITDA of $86 million was broadly flat compared with 2021, excluding the impact of an $18 million restructuring provision credit in the prior year period. Adjusted EBITDA margin fell to 7.2% from 10.2% or from 8.6%, excluding the prior year credit. I will discuss the drivers of this change at the business unit level on slides 11 and 12. Slide 11 presents the key metrics for sub-seeing conventional. Order intake in sub-seeing conventional was $1 billion, equating to a book-to-bill of 1.1 times, resulting in a healthy backlog of $6.2 billion. Revenue was $902 million, up 23%, reflecting progress on major EPCI projects and, in particular, the procurement phase on Sakaria. Adjusted EBITDA was $76 million, with a margin of 8.4%, down from the 11.6% in Q1 2021. This low profitability reflects planned vessel maintenance on key enablers, as previously communicated, execution of contracts when at lower margins, and the rollover of seven waves onto its new contract. Selected renewables performance metrics are shown in slide 12. Our intake of renewables was light at $93 million, taking the backlog to $1 billion. As we've highlighted in previous quarters, awards of fixed offshore wind projects do tend to be lumpy, as they are often linked to licensing rounds and contracts for different options. John will discuss the outlook for new awards shortly. Revenue from renewables was $266 million, up 10%, reflecting good progress in the delivery and installation of jackets and cables for the Seagreen project, as well as activity on the Kiskazi and Honzi II projects. Adjusted EBITDA of $5 million equated to a margin of 2%. Although this is an improvement from the prior year quarter, it remains depressed by slow progress in Taiwan and planned maintenance on SeaWish FastLock. Slide 13 shows the cash flow waterfall for the first quarter. Net cash generated from operating activities was $39 million, including a $38 million billed in working capital. Cash conversion, measuring the conversion of adjusted EBITDA to adjusted operating cash was 66%. Net cash used in investing activities was $51 million, mainly attributable to purchases of property, plant, and equipment associated with vessel maintenance and upgrades. Free cash flow in the period was negative $14 million. Net cash used in financing activities was $90 million. This comprised $37 million used to repay Seaway 7's revolving credit facility, $25 million of lease payments, mainly related to chartered vessels, and $21 million relating to the share repurchase program. At the end of the quarter, cash and cash equivalents was $500 million, and net debt was $98 million, which included lease liabilities of $219 million. The group's liquidity was $1.5 billion, which included $956 million of undrawn borrowing facilities. To conclude the financial review, slide 14 shows our expectations for the full year. Revenue is expected to be broadly in line with 2021, and adjusted EBITDA and net operating income are expected to be broadly in line or better than 2021. As we announced last quarter, our capital expenditure in 2022 is expected to fall within the range of $420 to $440 million, inclusive of approximately $280 million relating to Seaway 7's new build vessel program. As announced in March, we will pay approximately $30 million in dividends. This payment will be made on the 6th of May. This represents the one not per share regular dividend payment, and we have allocated $70 million to share repurchases, of which $21 million was utilized in the first quarter. After the quarter end, we've acquired approximately $2 million of additional shares. I will now pass you back to John.