Subsea 7 S.A.

Welcome everyone and thank you for joining us. With me on the call today are John Evans, our CEO, Mark Foley, our CFO, and Stuart Fitzgerald, CEO of Seaway 7. The results press release is available to download on our website along with the slides that we'll be using during today's call. Please note that some of the information discussed on the call today will include forward-looking statements that reflect our current views. These statements involve risk and uncertainties that may cause actual results or trends to differ from our forecast. More information please refer to the risk factors discussed in Subsea 7's 2022 annual report or in today's quarterly press release. I'll now turn the call over to John.

Thank you Catherine and good morning and good afternoon everyone. I will start with a summary of a quarter before passing over to Mark to cover the financial results in more detail. Turning to slide three, Subsea 7 delivered fourth quarter adjusted EBITDA 245 million dollars up 45 percent -on-year and with a margin of 15 percent, an increase of 200 basis points. In 2023 we grew the backlog 18 percent, 10.6 billion dollars, adding high quality projects with an attractive risk and reward that give us good visibility on significant margin expansion in the years ahead. The quarter marked a strategic milestone for Subsea and conventional with the completion of the one Subsea joint venture with SLB and Acre Solutions. Our combined strengths, innovations and global reach enable us to accelerate innovation and to support our customers in their continued drive to enhance subsea performance. In renewables we strengthen our fleet with the addition of Seaway AlphaLift and in early 2024 Seaway Ventus, adding new capabilities and capacity to reinforce our position as a tier one player in the high growth offshore wind markets. With a solid backlog, active tendering pipeline and strong market position in both oil and gas and offshore wind, we're excited for the future. This confidence is shared by the board and is reflected in the commitment to shareholder returns, totaling at $1 billion over four years from 2024 to 2027. Turning to slide four, order intake in the fourth quarter was $1.2 billion split equally between new awards and escalations. This gives us an order intake for the full year of $7.4 billion, a book to bill of 1.2 times. Momentum continued in our backlog and at year end we had $10.6 billion of firm work, the highest year end since 2013. Slide six shows the backlog by business units with $4.7 billion for work for subsea and conventional in 2024 and $1 billion for renewables. We have very high visibility of the year ahead and with that I'll pass over to Mark to run through the financial results.

Thank you, John. Good morning and good afternoon, everyone. I'll begin the financial performance review with some details of group and business unit performance in the fourth quarter before commenting on the group cash flow and concluding with financial guidance for 2024. Slide seven summarizes the group's fourth quarter performance in the context of the full year and prior three years. Revenue in the fourth quarter increased 26% to $1.6 billion compared to the fourth quarter 2022, mainly driven by increased activity in subsea and conventional. Adjusted EBITDA of $245 million was 45% higher compared with the prior year quarter and the margin improved to 15%. In the fourth quarter, depreciation and amortization amounts of $142 million were recognized as well as a net and permit charge of $48 million, which I will discuss in the following slides. After net finance costs of $80 million or the losses of $28 million, driven by movements in non-cash embedded derivatives and a tax charge of $20 million, the resulting net loss of the fourth quarter was $11 million. The fourth quarter results contributed to the strong growth in revenue, adjusted EBITDA and margin in 2023. I will now run through the drivers for the group's performance in the next few slides. Slide eight presents the key metrics for subsea and conventional. Revenue in the fourth quarter was $1.4 billion, up 33% year on year, reflecting progress on Bacalao and Merle three and four in Brazil, as well as a career scope in Turkey and early stage activity on Idrasil in Norway. Adjusted EBITDA was $212 million, equating to a margin of 15.2%, a 150 basis points expansion on the same quarter last year. This includes an $8 million share of net income from our one subsea investment, as well as reflecting the continued shift of activity towards contracts awarded in an improved pricing environment. Net operating income in subsea and conventional was $128 million. The performance of the renewables business unit is summarized on slide nine. Revenue in the fourth quarter was $218 million, flat year on year, reflecting the phasing of major projects and as a result of our increased focus to ensure the right balance between risk and rewards and tendering. Adjusted EBITDA was $31 million, resulting in an adjusted EBITDA margin of 14.2%, marking the third consecutive quarter of double-digit margins. This has been achieved as a result of improved execution, as well as the aforementioned further selective approach to tendering. We believe this margin level is sustainable in full year 2024, although in Q1 it is expected to be lower, reflecting seasonality in the northern hemisphere and a high level of planned vessel maintenance. In the fourth quarter, we recognized impairments of $73 million. These mainly relate to Seaway AlphaLift's monopile installation equipment owing to a contract dispute, as well as the impairment of Seaway Euden prior to sale in early 2024. Slide 10 shows the cash flow waterfall for the fourth quarter. Net cash flow from operating activities was $528 million, which included a better than expected favorable working capital movement of $306 million. Net cash used in investing activities was $374 million, mainly relating to final payments for the new-build wind vessel Seaway Vertis and the first of two $153 million installments related to together with a sharp improvement in cash conversion at 2.2 times. Both metrics benefited from the significant working capital online. Net cash flow from financing activities was $62 million, this included net proceeds from borrowings of $190 million, partially offset by lease liability payments of $41 million, mainly related to chart vessels. Cash and cash equivalents increased to $151 million and net debt was $552 million. This included lease liabilities of $458 million. The group had liquidity of $1.6 billion at the 31st of December, which included around $860 million of committed un-drawing borrowing facilities. To conclude, slide 11 shows our guidance for the 2024 budget. In 2024, we continue to expect revenue to be in a range of between $6 and $6.5 billion, where we also continue to expect adjusted EBITDA to be between $950 million and $1 billion. Our expectation for capital expenditure in 2024 has increased slightly to -$320 million due to amounts deferred from last year. This range is still broadly half the 2020-2023 capital expenditure in capital. In terms of the first quarter, I would like to take the opportunity to remind you that this quarter exhibits seasonality, seasonally lower activity in the northern hemisphere, as well as customarily corresponds with higher levels of planned maintenance. 28 vessels have planned maintenance in Q1, which cumulatively exceeds 400 days. This level is broadly similar to the same quarter last year. I will now pass you back to John.

Thank you, Mark. On slide 12, we take a look at our ongoing projects and positioning in the important Australian market. We have a strong track record of work in Australia, having completed over 50 projects from Morocco, St. Perth since 1977. We currently have four projects totaling $1.2 billion under way, the two biggest being Scarborough and Barossa. Scarborough is an integrated SIA, SURF and SPS project that was awarded with our alliance to One Subsea. Environmental permits have been received for our scope, and we are well under way installing subsea equipment and flowlines. At Barossa, we have the SURF package. Here, we also have the permits to proceed with fabrication underway at our Bintan school base in Indonesia. Overall, we're very pleased with our activities in Australia, building on strong multi-year relationship with key clients such as Woodside, Chevron and Santos. The outlook for further work is positive, with multiple gas requirements requiring backfill for existing LNG infrastructure, as well as longer-term opportunities in carbon capture and offshore wings. Now onto a review of our tendering pipeline on slide 13 and 14. Bidding for subsea work remains very active, and our tenderer's in-house totaling $21 billion. Conversations with our clients about solutions and capabilities to deliver their projects provide visibility and supports our positive outlook into 2026 and 2027. A key border region is of course Brazil, where we are well positioned to win a fair share of the -and-coming Bouges-Yours phases. Negotiations to extend the long-term charters of a pipeline support vessel are also ongoing. We also remain optimistic for this year in the Gulf of Mexico, where bidding activity remains high, and Turkey, where our strong track record leaves us well placed in bidding work for the future. Overall, we are confident that we have a strong tendering pipeline that can support continued momentum in our subsea order intake. On the next slide, we have our win prospects. After the challenges faced by the industry in 2023, the outlook for new orders in 2024 is positive, with an active CFD allocation round expected in the UK this summer and continued strong tendering activity in continental Europe. Longer term, we expect US tendering activity to rebound as developers rework their plans to reflect the current cost and improve power price environments. Turning to slide 15, reflecting the board's confidence in the outlook for the long-term financial performance of the group, we have announced today a commitment to shareholder returns totaling at least $1 billion over the four years from 2024 to 2027, and that's through a combination of dividends and share repurchases. Subject to shareholder approval at the AGM on the 2nd of May, the regular dividend will increase to 6 kronor per share from 1 kronor per share paid in two equal installments in May and November. This represents approximately $170 million and equates to a dividend yield of .4% based on yesterday's closing price of $147. In 2024, the company intends to distribute approximately $80 million through share repurchases, resulting in a distribution this year of approximately $250 million, a total yield of 6%. This commitment extends the group's track record of shareholder returns to over $3 billion since 2012. To wrap up, we'll turn to our final slide on page 16. Subsea Salmon delivered a strong underlying performance with adjusted EBITDA for the four years of $714 million. Our working capital position unwound in the second half, including a strong inflow in Q4 and notable improvements in cash conversion. In 2024, we have high visibility on sustainable growth in our EBITDA combined with a significant reduction in our capital expenditure. The expected increase in pre-cash flow in 2024 and beyond has underpinned a renewed commitment from management and the Board to shareholder distributions of at least $1 billion over the coming four years. And with that, we'll be happy to share your questions.

Thank you, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 11 again. Please stand by, we'll compile the Q&A roster. This will take a few minutes. And now we're going to take our first question. And it comes from a line of Kevin Roger from Cap Le Chouvreau. Your line is open. Please ask your question.

Yes, good afternoon. Thanks for taking my questions. I would have two if I may. The first one will be rated on the expected order intake and commercial dynamic because basically one of your main peer, Technic FMC, has increased recently its objective in terms of order intake for the next three years, mentioning the strength of the cycle. So I was wondering if there is any direct read across for you if you share this sentiment that's also on your side, if you do not share with us some specific number, you have also right now a positive statement, better statement on the expected order intake in the subsidy business. And that's the follow-up on the offshore wind business. What would be the order intake that you will target for the coming years? And the second one will be related to the working cap. So working cap has been probably much better than expected. What should we expect basically for 2024 and 2025 working cap movement, please?

Thank you, Kevin. So in terms of the subsidy business, we see the same market as our peer C, which is still a very strong market, a lot of very positive engagements with our clients. And we're now moving into the 26-27 arena for workload and that continues to be strong. So again, the direction of travel is very similar for subsidy seven and its peers. And we remain very confident that we'll get a good share of our work. We have a number of partnerships and frameworks which are strong. And we see work with those clients being very important for us. And as I touched in my prepared remarks, we are very, very strong in Brazil. And I was down in Brazil a month ago and a continued message there from Petrobras. They have a large portfolio of work to liquidate three to four years. And they expect subsidy seven to be a key player in delivering that. So we are very comfortable that the direction of travel in subsidy is very strong. I'll ask Stuart to give you an update on the offshore wind and then Mark can take your working capital question.

Thanks, John. So I think to comment on the forward outlook on order intake in offshore wind, current position is good with 2Bn of backlog and significant coverage of our fleet utilization over the next two years. We would expect that to continue to replenish with the market outlook that we see. And a key factor in the scale of order intake over the next couple of years will really relate to the portion of EPCI work. Current backlog contains limited EPCI. There are Sea Green projects in the backlog. If we see further EPCI coming into the backlog, then the rate of order intake could live.

Hello, Kevin. Thank you for your question. So maybe to set the context and we signal clearly an advance to the market. We saw a temporary build in our capital. In fact, the first half of the year, that build was $400 million. And as we had expected, that unwound in the second half of the year, actually unwound slightly stronger than I had anticipated. If I look to 2024, I would expect us to be broadly neutral in terms of the exit rate of 2023. But as you know, we can have significant variations quarter on quarter, depending upon project milestone. So very pleased in terms of what we achieved in 2023. And that was very much in line with what we had communicated to you and the market.

Okay. Thanks a lot. Thank you. Thank you. Now we're going to take over next question. Just give us a moment.

And the next question comes from Lan of Victoria McClurk from RBC. Your line is open. Please ask your question.

Morning. Thanks very much. First one for Mark. Pardon me. Just on the timing of CAPEX, how should we expect that to, I guess, distribute across the quarters? Obviously, the payment to the one sub CJV is quite clear. But where should we see the remainder of the CAPEX throughout the year? And then not to be negative, but should there be a turn in the offshore cycle late this year or into 2025? What proportion of the billion payout do you see as being sustainable across that period from 2024 to 2027? Thanks very much.

Okay. So first thing, Victoria, the investment and the one sub C joint venture is not included in our CAPEX guidance. That is excluded. And as we've communicated, that will happen in the end of June this year. And it's 153 million dollars. In terms of the CAPEX over the course of the year, it will be more biased towards the first half than the second half. So hopefully that gives you some clarity on the evolution of that spend.

Your other question was about the market. As we said, we can see a very strong market in our two core businesses, in particular in the sub C business. Our commitment is to deliver at least one billion dollars to our shareholders over the next four years. And our board will look at it on a year by year basis. We expect the market to continue to strengthen. We expect our free cashflow to continue to be very strong. So again, this time next year, we look at it again. So this year, very clear commitment to 250 million of that one billion. And again, we will take a review of it this time next year. But direction of travel in the market looks strong to us at the moment.

Thanks very much.

Thank you. Now we're going to take up the next question. And the next question comes from Lucas from Arctic Securities. Your line is open. Please ask your question.

Thank you. Good afternoon. I was wondering regarding your 2024 EBITDA guidance, could you say whether the contribution from one sub C is included in that number? And what would be the size of it?

Hi Lucas. Yeah, this is Mark. Yes, the contribution of our share of net income of the one sub C joint venture is included. It's in a quantum of around. Yeah, again, I think if I reflect that hasn't been shared by the majority shareholder. So hence, it would be appropriate for me to share in the call.

Okay, fair enough. And your tax rate guidance, 35 to 40 percent. How much of that would you say would be payable tax?

Generally, as a rule of thumb, we should link the taxation and the income statement with the

And then finally, you mentioned or John mentioned the PLSV tender in Brazil. Could you give us sort of the latest update on how that process is progressing?

Yeah, so the PLSV tendering process is ongoing. Heterobarbs are working their way through the various requirements. There were a number of different criteria for different classifications vessels. They expect to conclude that at the end of March, early April. So we would expect clarity during Q2. And I remain comfortable that we will certainly get our fair share of that work.

Okay, that's all. Thank you very much.

Thank you. Now we're going to take our next question. And the next question comes from Giam

Levy from Morgan Stanley. Yolane is open. Please ask your question.

Hi, thank you for taking my question. It's related to Brazil. So I was wondering, earlier this year, we saw one of your competitors there being affected by a two year ban. So I was just wondering if you can say a few words on the competitive environment. I'm not sure if you can say a few words on the competitive environment in the country at the moment. And if this change in the competitive environment recently, if it gives you more pricing power, or if there is any risk that Heterobarbs might actually need to delay the processes on the back of a lack of bidders. And in that sense, would you be keen on taking more than one Buzi's FPSO if you have the chance? Or better said, do you have enough capacity to do more than one FPSO there? Thank you.

Yeah, thank you, Gloomy. I'm not going to comment on our competitors position. All I can give you is feedback from our discussions with Petrobras, which as I said, were in the last month. They see Subsea 7 as a key supplier, a very solid performing supplier that's been there for many decades. They see that we deliver their projects well for them. And I would expect us to get our fair share out of the Buzios packages between 9, 10 and 11, which is the current three. All three have FPSOs ordered. So I don't believe the client is thinking about delaying anything because they have FPSOs which will turn up and will need certain infrastructure put into place. So at the moment, we're concentrating on the near term opportunity, but there are three very large packages there. We do have capability and capacity inside our global fleet to execute those type of projects. And so for us, it's just about how does the timing of these projects fit together and how do they work? So for us, it's a good dialogue we're in Petrobras at the moment.

And I'll leave it at that for the time being. Thank you. Thank you. Now we're going to take our next question.

And the next question comes from the line of Hawken Amundsen from ABG Sundow-Collier. Your line is open. Please ask your question.

Yes, thank you. Just a question on a bit of a longer term outlook. I know you won't guide specifically, but I'm just wondering whether we would like you to see that activity levels are leveling off after 2025 simply from a lack of vessel capacity in the subsea market so that we should expect more kind of lower or moderate growth or flatish market beyond that. And then secondly on the pricing power that of course would have positive impact on that so that we should expect you have to have room to further expand your margins beyond 2025. Thanks.

Thanks, Hawken. At the moment, we don't see any slowdown at all. Petrobras' latest five year plan is 14 more FPSOs to be installed in the next five years. So they continue to push ahead full steam with their proposals. We see that Gulf of Mexico continues to be strong for us. We are very generally not that much affected by the changes in Saudi because we have a relatively small business there in Saudi. As I discussed in my prepared remarks, Australia has a need to bring on more LNG gas supply into those big LNG plants towards the end of the decade. We're currently in Ghana, where we're about to start working on the gas export lines in Ghana this year, again, offering more opportunities there. So at the moment, we remain positive towards the fact that the opportunities set in 26, 27, 28 look very strong. And that's what our client discussions are about. Clients are talking about availability. How do they get capacity and capability in terms of people, equipment, ships in place? And similarly, I think we look at the wind sector, as we discussed in the prepared remarks again, the UK government has really listened to the industry and understood about the challenges of getting CFD price right. This year's CFD round is at 66% higher price per megawatt hour than the failed bidding round last year. So again, I think it's fair to say that we're in a number of very positive and structured dialogues with clients about how we can support them in the outer years there as well. So for us, both our business at the moment, direction of travel seems to be very positive for us. And we don't see any real slowdown at this stage.

Okay, that's very clear on the demand side. But do you think the industry kind of in particular, the subsea vessel capacity is sufficient to support further growth beyond 2025?

Well, as we've discussed before, we've always had a lot of enabling assets being owned by subsea seven and we bring chartered tonnage in to supplement our fleet. And if we look at slide 23, if we can put that up on screen, Catherine, we've shown you in the appendix at the back our fleet optimizations and how we bring tonnage in and how we move tonnage around inside the fleet. So again, you know, subsea seven is very proactive. We bought the forward subsea in to do a couple of years work for us. We're bringing the Scandi ACG in. So again, for us, we continue to strengthen our fleet, both in heavy construction vessels, as well as lighter construction vessels. We've optimized the fleet, the alpha lift in wind has come in a big state of the art dynamic positioning asset. And then we've let go of the union, which was a more that's it, which did fantastic service for us for many years. So again, we keep optimizing the fleet to make sure that we are prepared for what's ahead of us. So at the moment, it is part of a process that is a well rehearsed part of our business, I would hasten to add, I think. So we're pretty comfortable that we can get to where we need to be.

All right. That's very clear. Thank you. Thank you.

Now we're going to take our next question. Just give us a moment. And the next question comes from land of Kate Somerville from JP Morgan, your line is open. Please ask your question.

Hi, good morning. Thank you so much for taking my questions. And two for me, if I may, first is on escalation, I think they made us about 50% in Q4, just trying to understand what has driven this and what you're expecting from that front of going into 2024. And then the second question is on your sort of optimization and potential at least in strategy, you know, you sort of talked about a very strong market. And some of your competitors this morning have been talking about moving to sort of more asset like leasing strategy to cope with the increase in demand. Is that something that you're looking at as well? And I believe you have spoken about it before, but we'd love to have an update. Thanks.

I think we're slightly in a different place. You need assets to do this work. So an asset like model, I'm not sure is the way to go here. We are very much into a world where we are very clear that you need assets to liquidate this work. Our model has always been a combination of owned assets and chartered assets. And as I answered in the last question, we're very clear here is how we intend to make sure that we can capitalize on the opportunity sets ahead of us. So for us, we feel comfortable with that model. We think it's much stronger model. And it's ultimately we own the largest and youngest fleet in the industry. So when times get very, very tight in terms of capacity, we're in the right place on that discussion. On the escalations, I'll pass you over to Mark to discuss those.

Yes, thanks, Kate. No, you're correct. So escalations in the quarter were $600 million, half the total quarter intake. Escalations in this instance were driven by variation orders. Now, variation orders are a characteristic of our industry. And that is where the client has a change in the contract for us to do more work, change the timing, or whatever it may be that leads to variation order. So that was across several projects within the portfolio. The other part of your question is more challenging. How do we forecast that? It's very difficult to forecast because that is at the behest of the client in terms of how they want us to proceed with the work. However, it does represent a driver, a contribution to our backlog. But it would be somewhat inappropriate for me to speculate in terms of how I expect that to evolve during the

year or indeed any year. Thank you. Now we're going to take our next question.

And the next question comes from the line of Christopher Mollerluken from Spare Bank One Markets. Your line is open. Please ask your question.

Yes, good morning. This is Christopher Mollerluken from Spare Bank One Markets. Of course, Brazil is an important market for you. At the same time, Petrobras is struggling to attract interest in its FPSO tenders as these FPSOs tend to become more and more costly. And FPSO companies are struggling to attract the required financing from their banks. And also they complain about the risk reward profile in the Petrobras tenders and the local content requirements. Do you see this as a risk that surf tenders associated with these projects also will be pushed out in time as there seems to be an ongoing debate between the FPSO industry and Petrobras as the key client? Thank you.

Yeah, thank you, Christopher. As I said in one of the previous questions, certainly Bougios 9, 10 and 11 FPSOs are all ordered and have been committed. Again, the surf elements of those projects will certainly push ahead. So we don't see that as being a near-term challenge. I think it's fair to say that since we interact with FPSOs day to day as part of our business, how all that fits together is one of the opportunities the industry has to optimize how it works. So for us at the moment, when we spoke to Petrobras, they were very clear that they were going out to seek surf capacity to match their plans. And therefore then the opportunity sets for us were very, very clear. Timing of FPSO arrivals and stuff, we work a big fleet across the globe. And that's part of day to day business for us is working inside the windows that our clients have for FPSOs and such like. So by having a very strong global presence, a very strong client-centered relationships, we generally can work through. Different windows that our clients give us for FPSOs. So for us, I think the direction of travel is strong. Yes, an industry that needs an FPSO and a surf and a hardware site. We're comfortable that the subsea hardware site from our discussions with our colleagues at One Subsea, that hardware site is there to support the next five years. We believe that the surf sector is there as well. We do believe that there are enough heavy duty top end FPSO providers as well to provide what the industry needs. How their business model adapts and changes, maybe that's part of the discussion that needs to happen.

Excuse me, Christopher, any further questions?

No, I'm fine. Thank you. Thank you. Now we're going to take our next question.

And then next question comes from Mick Pickup from Barclays. Your line is open. Please ask your question.

Good morning everybody. Thanks for taking my question. A couple of questions just on the renewable and heavy lifting fleet as of May. And I have to say, sad to see the yudding go after all these years. So firstly, on the outer lift and the ventures, obviously new vessels, what are the new vessels up and running? And secondly, the transportation fleet. Can you just tell me how busy that is? I'm just thinking with all the renewables work, I've seen some oil and gas work in there as well. So what's that looking like at this moment?

I'll ask Stuart to take those questions, Mick. Thank you.

Yep. So the alpha lift, I would say normal teething problems, but quite productive over the last period installing transition pieces for the Dogger Bank project. And that scope of work will continue through 2024 and 2025. So I would say, yes, bring new tonnage into the fleet, has its early teething problems and hiccups, but we're in good flow now on the alpha lift and the Ventus looks to be in good shape. We'll start its mobilisation for the Godavind project in Denmark in the second half of March with a start in the beginning of April. And we're also comfortable and confident about the status of that ship that's in the final stages of transit. In terms of the HTV fleet, it was a busy year last year, driven, I would say, more by oil and gas activities than renewables activities. What we are seeing now is an increasing number of longer term renewables contracts. This year, one of the vessels goes on to a seven month commitment for Deme, transporting jackets backwards and forwards out in Asia. And we're bidding multiple prospects, I would say, for longer term, longer visibility commitments in the renewables, but current activity still remains dominated by either special transports for oil and gas rig moves.

Thank you. Could you send us photos of when they've come out?

I

quite will. Thank you. Have a

good day. Thank you. Now we're going to take our next question.

And the next question comes from Mark Wilson from Jeff East, your line is open. Please ask a question.

Yeah, thank you. Good morning. It kind of follows on from mixed questions before. I'm just wondering about renewables and the margin shift as we go into 2024. You've got the Ventus starting up, so there should be more installation work in your $1 billion of renewable backlog. So I was just wondering, your margin is now almost equivalent to where the subsea is at 14% in 4Q. Would you see that stepping further in renewables because of more installation in 2024, potentially with a higher margin in the subsea? That's my first question. Thank you.

I wouldn't say we would say margins in line with, you know, current performance, incrementally improving more capacity, yes, more volume of pure installation activity, yes, but margins, I wouldn't like to say that they're moving up above the subsea and conventional market. As said before, on one of the earlier questions, in 2024, no real large EPCI project in there as per a SEA green. And that's, you know, that may come to awards with new EPCI work in 2024, but particularly in the UK market. But for 2024, currently, no large EPCI is in the backlog.

Okay, very clear. My second question is on one subsea, just so I understand correctly. So your net share of net income is embedded in subsea EBITDA, as I understand it. Are there any other areas we should be included one subsea, either CAPEX or such things in our models going forward? Thanks.

No, Mark. So where you will see one subsea in our financial statements is in two places. The first being the share of net income of one subsea in the income statement. And then secondly, on the balance sheet, our share or our investment in the associate. So to be absolutely clear, any capital expenditure associated with the one subsea is not included in our financial statements.

Okay, thank you very much. I'll hand it over. Thank you. Now we're going to take our next question.

And the question comes to the line of Kate Sullivan from Citi. Your line is open. Please ask your question.

Hello, Kate Sullivan, Citi. Thanks for taking my question. Can you just talk about your capital allocation priorities that may inform what level shareholder distribution you land on each year? As part of that, at least one billion return over the period. Is there any flexibility to distribute above your regular dividend via special or growing or that firmly share buyback, if you could just confirm? And then apologies if I missed it, but on slide 20, your costs. Could you just give some further color on the increase in your direct project costs and the outlook here? Thank you very much.

Okay, so maybe we'll go back to your first question. As you know, we as a company have a triangle that we've used for many, many years to look at how we look at using our money. Shareholder returns is a key priority and the statements we've made today show again the support that management and the board have, but we will have a strong pre-cash flow in the future. We also look at potential investments in the business and we also make sure that we have an investment grade balance sheet. So we always make sure that three sides of that triangle are very strong for us. The commitment we made today is at least one billion dollars over the four years and we have declared where we're at for this year. As I mentioned in a previous question, we will look at it on a yearly basis with the board and with management and there may be some adjustments up and down. The clear commitment to us was to adjust our dividend from one knock a share up to six knock a share. So that is cast in stone. So you can model that going forward. And then the remainder then we will look at instruments such as share buybacks or special dividends as the vehicle to return more money back to our shareholders. So I think that's the way to look at the capital allocation. On your question on the cost overview, I'd suggest that Mark gives you the building blocks of what we show on that slide. Thank you.

Yes, Kate. So the slides shows the trend and our costs from 2015 to 2023. As you can see between 2022 and 2023, there has been an uptick in the cost. Now that directly correlates with the increase in our activity. So as a calibration point, our revenue increased from five point one billion dollars in 2022 to almost six billion dollars in 2023. And the largest part of that, of course, is a direct project costs we require to procure and steal equipment, et cetera, in order to deliver the solutions to our clients. We see some other changes as well as we gear up for the workload that we have embedded within our backlog. And again, as a reminder, our ten point six billion dollar backlog at the end of 2023 is the highest we've had at year end since 2013. And together with the tender pipeline prospects that we see, almost 30 billion dollars across the two businesses means we have to increase our headcount and anticipation for that. So hopefully that provided some additional color on the switch between 22 and 23.

Yeah, great. Thanks very much. Thank you. And now we're going to take our last question for

today. And the question comes from Richard Dawson from Berenberg. He's open. Please ask your question.

Hi, good morning and thank you for fitting me in. Just two questions from me, please. Firstly, just given the high backlog for 2024, what does vessel utilization look like for your key vessels this year and next? I'm just trying to gain a sense of whether there's scope for more work to be won this year and delivered and what sort of work that would be. And then secondly, and apologies if I missed it, but can you give some more color on the impairment to take in this quarter and whether there's any risk to the other offshore wind projects within your backlog? Thank

you. Okay, thank you. I'll take the 2024 utilization as Mark can take the impairment. So for us, utilization, as we show in the material we give you at the front part of our deck here, we have a very high committed backlog already in terms of where we're at here. So we are pretty clear on how we will execute our work and our utilization this year. We have some new tonnage coming in as we showed in slide 23 and that tonnage also assists us on some of our more spot work like IRM work with Jones Act vessels in the US. We're also starting renewable work in the US this year on Orsted's revolution there. So we have some capacity, but generally bigger projects, the time scale would mean that anything new that we take on now would be going offshore beyond 2024. But we have some flexibility in the heavy construction vessel and the lighter construction vessel to take some last minute work on if needed, but I wouldn't bank on that as being the main drivers for this year. And I'll hand over to Mark to talk about the imping. Sure,

good afternoon Richard. Richard, two impairments which were covered in the earnings release and they are not related to projects, they are related to property, plant and equipment within the renewables business unit. The first was the impairment on the Seaway Uden, which we have subsequently sold the early part of 2024. So that vessel has now left the fleet. And the other is in relation to monopile installation equipment. We have a contractual dispute with the provider of that equipment and both those elements contributed to the almost 74 million dollar impairment that we had at group level. That being said, we had an impairment reversal in the quarter from a prior year and that resulted in net impairments of around just under 50 million dollars in Q4.

Yeah, thank you for that clarity.

Thank you. I know it's been a very, very busy morning for you, but we look forward to catching up with you in a couple of months time. As I said, with the direction of travel is strong here, we remain confident over the next few years for our business. And as you see, our board and our management are aligned to make sure that we focus on shareholder returns in the coming years. So thank you and we'll talk to you again soon.