Subsea 7 S.A.

Welcome everyone and thank you for joining us.

With me on the call today are Stuart Fitzgerald, our CEO, and Mark Foley, our CFO. 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 risks and uncertainties that may cause actual results or trends to differ materially from our forecast. For more information please refer to the risk factors discussed in SOTC 7's annual report or in today's quarterly press release. I'll now turn the call over to Stuart.

Thank you and good afternoon everyone. First I will talk to the highlights for the second quarter of 2026. This will be followed by a more detailed review of our financial performance by Mark. I will then return to talk about our operations in Norway and our tender pipeline before we open for Q&A. Turning to slide 3. In the second quarter, the group delivered adjusted EBITDA of $471 million, representing over 30% growth year-on-year and a margin of 24%. This was underpinned by strong project execution in both business units. We continue to see good order intake with a $2.1 billion backlog booked in the quarter, giving us a robust backlog of $13.6 billion and high visibility for the second half of 2026 and 2027. With seven months of the year under our belt, and a strong operational and financial performance to date, we have raised our guidance for full year EBITDA margin. Slide 4 shows details of our backlog, which continues to increase in quality in terms of both margins and terms and conditions. After strong order intake in the quarter, the backlog for subsea and conventional has reached a new all-time high of $11.8 billion, while the order book for renewables was maintained just below $2 billion. We have a combined backlog for execution in the second half of 2026 of $3.9 billion, giving us excellent visibility over the remainder of the year. and our backlog of $5.9 billion for 2027 supports our positive view of the years ahead. As a reminder, the Middle East accounts for single digit percentages of our backlog. We are currently commencing the offshore phase of CRPO 153 and this is progressing as planned with all the necessary resources to begin pipeline operations in the Gulf. This contract represents 1% of our backlog, with the vast majority of our Middle East exposure represented by CRPO 148, which is due to go offshore in 2027, with the bulk of operations in 2028. And now I'll hand over to Mark to run through details of our financial performance.

Thank you Stuart, and good afternoon everyone. I will start my review of our financial performance with a look at group and business unit results in the second quarter and then move on to our financial guidance for 2026. Slide 5 summarises the group revenue by quarter and by business unit. The group continues to deliver revenue growth driven by good project execution across our high quality portfolio. Second quarter revenue was $1.9 billion, up 10% compared to the same quarter last year, while first half revenue of $3.7 billion was up 13% year-on-year, placing us firmly on track to generate good revenue growth for the full year. Both business units contributed to this success, as I'll detail in later slides. Turning to slide 6, adjusted EBITDA of $471 million was up 41% compared with the prior year period, and our margin expanded by more than 3 percentage points to 24%. Other gains and losses were a positive $46 million, driven in part by the gain on foreign exchange forward contracts, entered into to mitigate the currency exposure of the $414 million dividend which was paid in May. Our effective tax rate was 29%, broadly in line with the 28% in the first quarter. Overall, we reported net income of $254 million, nearly double that of the prior year quarter. I will discuss the performance of each business unit in the next few slides. Slide 7 presents the key metrics for subsea and conventional. Revenue in the second quarter was $1.5 billion, up 9% year-on-year, as progress continued across the portfolio, including notable projects such as Bureaus 9 and 11 in Brazil, Yggdrasil in Norway, and Zachariah Two and Three in Prutty. Adjusted EBITDA was $410 million, equating to a margin of 26%. This represents an increase of five percentage points from the prior year period and reflects strong project execution and high vessel utilization, as well as the favorable consequence of replenishing the backlog of high-grade all-dirt intake. Subsea Inconventional also benefited from a $9 million net income contribution from 1 Subsea in line with our expectations. Net operating income was $291 million, up 76% from the prior year period, equating to a margin of 19%. Selected renewables performance metrics are shown in slide 8. Revenue in the second quarter was $350 million, up 14% year-on-year, mainly relating to continued activity in the North Sea at East Anglia III as well as the Inch Cape project. Adjusted EBITDA was $69 million, equating to a margin of 20%, up from 17% in Q2 2025, and a net operating income of $39 million. This represented a net operating income margin above 11% and reflects the outcome of selective bidding leading to improved risk-reward allocation between us and our clients. Slide 9 shows the cash bridge between the first and second quarters. Net cash generated from operating activities was $570 million which included a better than expected favorable movement in working capital of $139 million, more than offsetting the outflow of the first quarter. Overall, the first half saw a net inflow from working capital of $85 million, which, as I've noted on previous calls, is expected to reverse in the second half. Within investing activities, capital expenditure was $92 million, We also received a $7 million dividend from one subsidy. Net cash used in financing activities was $528 million, including $414 million paid to shareholders as dividends in May. The net cash impact of the dividend to the group after including the gain on foreign exchange forward contracts was $403 million. After this significant cash dividend payment, cash and cash equivalents was just over $1 billion, demonstrating the resilient cash generation profile of the group. Net cash was $198 million, including lease liabilities of $363 million, broadly unchanged from the end of the first quarter. Overall, the group had an equity of $1.6 billion at quarter end, which included $600 million of committed and utilised borrowing facilities. To conclude the financials, we come to slide 10. Following another strong performance in the second quarter, particularly in terms of continued good project execution across the portfolio, and increased clarity on the remainder of the year, we have revised upwards our guidance for the full year 2026. We now expect an adjusted EBITDA margin of approximately 24% from approximately 23% previously. Our guidance for net finance costs has also been favourably revised by $10 million to between $30 and $40 million from between $40 and $50 million driven by higher-earned forecast cash balances.

I will now pass you back to Stuart. Thank you, Mark. During the quarter, we announced an award by Boar Energy for the Goliath Gas Export Project in the Barents Sea. The project will connect the Goliath field to the existing Snervit pipeline system, which will take the gas to the onshore Hummerfest LNG plant. This is the first award under the new strategic partnership with VOR that was signed only a few months ago in March. By working closely together, we've been able to optimize the development solution to advance the installation schedule by a year and Accelerate First Gas. This demonstrable value creation has reinforced the confidence and collaboration between our two teams and we look forward to working together to unlock opportunities across their entire Norwegian continental shelf portfolio. Now on the customary review of our subsea prospects on slide 12. Tendering activity remains high with a pipeline value of approximately $20 billion, a level we've experienced consistently for the past two years, independent of volatility in commodity prices. Clients continue to progress towards FID on multi-year projects supported by fundamental drivers, including a persistent growth in global energy demand, A drive for energy security reinforced by geopolitical supply disruptions and the natural depletion of baseline reserves. With favorable economics and given their strategic importance, deported developments rank highly in the portfolios of our clients, adding to the resilience of our target markets. Overall, we are confident in both the near-term and longer-term outlook for subsea 7, supported by favorable markets and our differentiated offer. To conclude our review of the results, we'll turn to slide 13. Subsea 7 finished the second quarter of 2026 with a strong backlog, implying high visibility on revenue this year and next, while the robust tendering pipeline gives us confidence in the longer term. We continue to execute our proven strategy focused on advantage offshore energy markets underpinned by the highest safety standards and excellence in project execution. Regulatory processes relating to the proposed merger with SIFEM are on track and integration planning is well advanced. Overall, I'm pleased with the performance of Subsea 7 this quarter and excited by the output, both for Subsea 7 today and in the future as part of SiteM7. We'll now turn over to questions.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your questions, please press star 1 and 1 again. One moment for our first question. And this question comes from Guilherme Levi from Morgan Stanley. Please go ahead.

Hi. Hello. Thank you for taking my questions. I have two, please. Firstly, on execution in the Gulf, you mentioned, of course, that you are now starting the offshore phase of CRPO 153. Can you just remind us how many months that is expected to last? And I know it's small in the overall scheme of things, but can you share with us any color on the sort of inflation that you are seeing on costs there, if any, compared to the original estimates before the conflict started? And then secondly, in terms of guidance, and perhaps if you could share some color on what has surprised you in terms of execution in the second queue that allowed for this small increasing margin guidance for the year. Any particular project or region where you had initially built some contingency that now has been released? Thank you.

Thanks, Guilherme. I'll take the first one and then Mark can comment on the guidance question. So as said, CRPO 153 commencing in the gulf with pipe lay operations. in the very near term with the required assets and equipment within the Gulf. We have additional campaigns coming up over the next three to four months and would expect to be complete with our operations by the end of the year. So that's the kind of timeframe that you're looking at. Within the scale of that project, I would say not significant inflationary effects. and so we're not seeing any notable impact on our expected performance of that project given its size and the scope that we have. The other project that we have that you're aware of, CRPO 148, which will go offshore middle of next year and into 2028, there we're in the early phases of that project Thank you Stuart. Thank you Guillaume. You're right, we increased guidance as communicated from across

and as a reminder, that was in the back of the uplift we announced to the market with our Q1 results moving from 22% to 23%. No specific project or indeed the region that is contributing towards this. We're very satisfied and encouraged with the performance across the portfolio and that, together with the results that we've delivered in the first half of the year, together with the clarity that we have for the remainder of the year, has given us the confidence to share this upgrade with the market as we've done today. So again, no specific project, no specific region, but we are encouraged by the high level of good execution that we observe across the portfolio.

Understood. Thank you.

Thank you. We are now taking our next question. And this question comes from Victoria McCulloch from RBC. Please go ahead.

Good morning. Thanks very much for your time today. On this side, can we talk a bit about renewables and the tender outlook there? I notice you've taken sort of the tender opportunities off, but maybe You could give us, Stuart, some colour on what we should be thinking about in the second half of the year in the opportunities and what that tells us about the market. And then secondly, maybe a bit on numbers. Mark, what should we expect working capital-wise in the second half of the year? And the one subsidy dividend, what's your expectation on that for the remainder of the year? Thanks very much.

I'll talk to the tender outlook on renewables. So we've been communicating for some time now that the renewables market is going or is in a lull in terms of project sanctioning, associated order intake, and that that will feed through into a weaker market in 28, 29 is our Mark's perspective there. We are actively working, I would say, on tenders in relation to AR7, so awarded projects in AR7, as you know. And then there is a, the various developers are shaping their bids for AR8, so significant client engagement in preparation for AR8. In terms of actual awards to market, we think very limited in the second half of the year. Those prospects, if you like, both for AR7 and AR8. will be 2027 awards and project FIDs. Outside of the UK, as you know, markets in Poland and Germany stalled to some degree, some ambitions and objectives stated, but still to see the project flow restart in those two key countries. Poland, a better market, some projects under bid now but really the key as has been for the last period and we expect to be for the coming year or so is going to be the UK market where not much second half of the year but probably a strong flow next year. Over to Mark.

Hi, Victoria. As previously trailed, I expect working capital to unwind in the second half of the year, something in the quantum of around $200 million, Victoria. As you know, we have had a good run in terms of tight working capital management over recent years, so that $200 million should be put into context of where we are today. and what we've achieved in 2025 and 2024. As you know, forecasting working capital can be quite tricky, but I do expect something in the region of around $200 million. Of course, we'll be able to mitigate that impact. In terms of 1 C dividend, just as a reminder, we're a 10% shareholder in 1 C. This will be a decision for the bulk of 1 C. I would be expecting something in the region of 20 or so million dollars for the remainder of this year.

Thank you very much. Thank you. We are now going to take our next question. And this question comes from Mick Pickup from Barclays. Please go ahead.

Good afternoon, everybody. Quick one for you Stuart, just on the bigger picture, I think in your introduction you talked about terms and conditions improving and quality of projects improving and obviously over the last few months some of your clients have gone to great lengths to try and document how tight this market is, so is their behaviour changing?

What I would say, Mick, is so I've spent the last three to four months obviously as part of the handover process with John traveling to every region and meeting every client and all of our key suppliers, some of the regulators, etc., Consistent messages in those visits and in those interactions with clients is number one, confidence in their forward activity. and number two has been I would say a good solid pull on Subsea 7 as a reliable contractor for them that they want to work with. So I would say that is the backdrop for obviously discussions about pricing and discussions about terms and conditions. which we're working under and if we take the example of the of the Boer contract that we signed in Norway. It's a different way of working where risk balance is different from what it's been in the past and where I would say the risk terms are more favorable than we've seen before. So the general momentum, I wouldn't like to go into specifics, but the general momentum is good client pull on subsea 7 as a preferred supplier, and with that comes obviously improved working conditions.

Thank you.

Thank you. We are now going to take our next question. And this question comes from Kevin Rodger from Kepler-Shabra. Please go ahead.

Yeah, good afternoon. Thanks for taking the time as a kind of follow-up following the question from me. Where is basically the landing point for your ABDM margin in the sub-C and conventional business? Because over the past few quarters, you have continued to positively surprise the street. So I was wondering if you have the better terms and conditions, the bottleneck on the vessel, etc., I guess the BDM margin should continue to gradually improve. So any sense on where this BDM margin could land, please? Because I remember a few times ago we were saying that the 30% plus number that you had back in 2017-18 was a kind of one-off effect. But now we are not so far from this level. So any color that you can share with us? and the second one is just to try to understand a bit the 26 top line guidance now because when I make the sum up between the H1 plus already what you have in the backlog for execution in 26 we are already in the high end of the range roughly so is there any risk on this H2 top line that is preventing any fine tuning of the top line guidance for 26? Thanks.

Thanks. I'll let Mark comment on the top line question and I will make some colour around the margins without being specific. So obviously not going to provide any specific guidance on achievable margin. What I would say though, Kevin, is this is partly market conditions which we have obviously expressed our confidence in. and that was part of our commentary. Do not underestimate the execution side of it. So in terms of our efficiency of execution, consistency of execution and quality of execution, we continue to push hard and the organisation continues to perform well there. and that continues to improve and we will continue to push for further improvement. And then the second thing that we are seeing is in certain geographies as we get portfolio effects really coming through. So there I call out Brazil and I call out Norway and I call out the Gulf of Mexico where we get Thank you, Stuart.

Kevin, so we have maintained our guidance for revenue between $7.4 to $7.8 billion. Based on the first half of the year and what we have in backlog, I think it would be fair to look at the upper end of that $7.4 to $7.8 billion range. Certainly don't infer any downside risk that we have in the portfolios. So the 7.4 to 7.8, think about the upper end of that range here.

OK. Thanks a lot. Have a good day.

Thank you. We are now going to take our next question. Kate O'Sullivan from Citi. Please go ahead.

Hi. Thanks for taking my question. So first one just on the merger. One of the strategic attractions is the enhanced exposure to key growth regions, one of those being the Middle East. However, with the region becoming a material larger part of the combined backlog, has the recent disruption prompted any reassessment of the balance between opportunity and risk as you move towards closing? More specifically, have there been any discussions as part of the merger process around how best to manage the increased exposure? And then just secondly, congrats on stepping into the CEO role, Stuart. And while you've only been in the position for about a month, you're obviously not new to the business. So appreciating that a significant amount of management attention is naturally focused on the merger. That aside, could you share your key priorities as CEO over the next 12 months or so? More specifically, since taking on the role, have there been any opportunities or aspects of the business that have stood out to you that you believe investors may be underappreciating? Thank you very much.

Okay. So obviously no rediscussion of any merger terms. We see the combined positions of the two companies in terms of complementarity that we have. in terms of significant exposure in the two very advantaged areas in terms of break-evens in the medium and the longer term. This is all benefit in our mind and positive in our mind. No discussions that we're not happy with the exposure that we have and that we think this is for the long-term benefit of us and our shareholders. In terms of my own priorities, very clear and simple, I would say the first priority, and these are messages that I'm continuously communicating within and other stakeholders. First priority is continuity. Subsea 7 has a strong delivery machine which is performing well as you see by the The results that we have here, so continuously improve, yes, but don't come in as the new CEO and try and make a whole bunch of changes. So there's a strong continuity piece as the number one. both in our internal delivery model and in terms of what we present as our value proposition to our shareholders. The second piece, a bit softer, but 77 is a people and values company and I feel some responsibility as a custodian of that people and values focus that John had and that John had before him, so very focused on and people, values, culture. And then the third piece is really the SIPEM merger and doing all that I can within my powers and ensuring the organization is equally focused to ensure that that merger is a success. So of all of the different inputs that I've had and impressions that I've had over the time leading up to from being announced to taking over. It's essentially crystallized to continuity, people and values, and making the merger a success.

Great. Thank you very much.

Thank you. We are now going to take our next question. And this question comes from Richard Dawson from Bernberg. Please go ahead.

Hi, good afternoon, and thank you for taking my questions. Two from my side. Firstly, Mark, your comments suggested that the higher forecasted cash balance drove that improved net interest guidance. So what's driving that higher cash expectations than before? Is that 200 million working capital outflow for H2, is that slightly below what was previously expected, for example? and then secondly there's a slide on collaborations and alliances on particularly for the Goliath award so just wondering if there's any new partnerships you're looking at in either subsidy or renewable markets? Thank you.

Okay Richard, you've noted that the cash performance has been good in recent years and it's been good the first half of this year together with the second quarter so when we put together the guidance in terms of net finance costs like a part of Last year, earlier this year, we had a cash flow profile and balances associated with that. Now we have surpassed that to date and our expectation is then for the remainder of the year allowed us to bring the range down. So that takes into consideration the working capital outflow that we are predicting as well. And that is slightly lower than perhaps I would have and others. So that provides a bit of colour around the rationale for the change in the guidance driven by the dynamics of cash within the business.

And on the second question there Richard, so within the last six months or so obviously the Petronas partnership for Suriname which is at its early stages but holds obviously promise as that I would say yes, we have discussions with different clients. They may be collaborations and partnerships in different forms, not necessarily always SIA. Not necessarily of similar nature to what we have with Vore, but still a number of discussions ongoing with different clients about how we can work closer together and have the benefit of closer collaboration. It was one of the observations I would say from That's clear, thank you.

Thank you. We are now going to take our next question. And this one comes from Alejandra Magano from JP Morgan. Please go ahead.

Hi. Thank you for taking my questions. You've spoken about improving fleet efficiency through project sequencing and optimization. How much further runway do you see from those initiatives before growth becomes more dependent on adding capacity? or is the next phase really about moving from project by project optimization toward basin wide optimization enabled by partnerships? And my second question is how should we think about the margin profile of their renewables business going forward given the improvements in project risk reward profiles?

So I can comment there. So I think we are starting to, you talked about basin-wide optimization. We are starting to see that. It's definitely something that we're seeing in Brazil as we get a larger portfolio of similar projects. where we can move assets not only from one project to the next but also as client drivers and constraints may come into play we have the flexibility to adapt our schedules to match their Whether it's an FPSO early or an FPSO late, we can adapt to that and bring a lot of value to the customer. So I wouldn't want to get specific about how far along the journey of optimizing I think on the second question not going to comment on the renewables margin going forward. as we get into later in the year. We'll provide the guidance for next year, but we haven't effectively changed. We've had a good quarter this year. This quarter, sorry, but we're not changing our guidance from the longer term 14% to 16% of ETA. Thank you.

Thank you. We are now taking our next question. And this one is from Mark Wilson from Jefferies. Please go ahead.

Thank you. Just like to ask on two points. I think at the start, Stuart, you mentioned how tender activity is high and your overall outlook for projects, that slide you have, of around 20 billion has stayed at the same level for the last couple of years. I'd just like to ask about that because obviously others show that increasing and your backlog has grown. So just whether you would say that is correct that the opportunities out there has stayed steady or actually has grown. Then the second point is on the subject of new capacity coming into the market for the high-end real lay, J lay and S lay vessels. Is it still the case that we're not seeing any new capacity coming in? Those are my two points. Thank you.

So on the first one, stand by what we communicated there. This is the anticipated tendering that we see over the next period and that number stayed pretty steady just above $20 billion for effectively the last two years. So I wouldn't change that message that it's going up or down. It's a steady picture. In terms of new capacity in the market, I'm not really going to comment there. There's no specific new build projects that we're seeing. There may be things on the drawing board, but nothing visible to ourselves at the moment.

Okay, thank you very much. I'll hand it over.

Thank you. We are now going to take our last questions for today. And this one is for Paul Redman from BNP Paribas. Please go ahead.

Yeah, hi. Thank you. And two questions. First one is just, could you give us an update on all your views on the recent competition authorities on the Saipan 7 deal, so Europe, Australia and Brazil? And then Could you give us a little bit of information on the Subsea Integration Alliance? It recently runs the Angola Awards. How much of your revenue EBITDA is generated from this business now? Thank you.

I'll take the first one and Mark can comment on the second one. So on the first one, we're not giving running commentary. We haven't since the beginning on the... and all of the different processes that we're in. When we announced the merger, what we can say is eight of the 16 jurisdictions that we needed to file in have now cleared. When we started the process here and announced the merger, we said that we expected These clearances to come through in the second half of 2026 and that's still our expectation so we wouldn't go into any details there we haven't in the past and we don't intend to go into them now either. Mark, any comments on SIU?

Yeah, SIU, a very attractive proposition to our clients and great being able to partner with SOBs once I've seen very successfully since 2014. And as you know, that alliance extends out to 2033. So again, it's something that is valued by certain of our clients. I don't have revenue data, Paul, but it represents something in the mid-teens of the backlog that we currently have at the moment. And you should be familiar with the SIA projects in our portfolio. So I didn't answer your question, but I've given you another data point that hopefully you will find useful.

Thank you very much.

Thank you. There are no further questions for today. I will hand the call back to Stuart for closing remarks.

Yep, so thank you very much everyone for taking the time. A strong quarter, which we're very pleased with. And we will speak to you in the Q3 results. And if you're on holiday, thanks for interrupting. And if you haven't gone on holiday yet, then have a good break. All the best.