April 26, 2018 / 7:39 AM / 25 days ago

UPDATE 1-Subsea 7 trades downs as Q1 lags

(Adds share price, details)

By Nerijus Adomaitis

OSLO, April 26 (Reuters) - Offshore oil services firm Subsea 7 posted first-quarter results that missed expectations due to lower activity but maintained its outlook for the year, sending its shares lower.

Its adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) fell to $103 million, lagging expectations for $157 million in a Reuters poll of analysts, and down from $268 million in the same period a year ago.

Subsea 7 shares opened 3.4 percent down from the previous day close, and were trading down 1.4 percent at 0821 GMT. It was the second-worst performer of the European oil and gas index , which was up 0.57 percent.

“The lower revenue and adjusted EBITDA compared to the prior year reflected deterioration in activity levels due to seasonality of northern hemisphere operations and fewer large projects progressing with offshore campaigns,” the company said in a statement.

While activity in the oil and gas industry is recovering from very low levels in the last three years, pricing remains challenging in the near term, Subsea 7 added.

The company repeated that it still expected 2018 revenue to be in line with 2017, while its adjusted EBITDA margin, which stood at 26 percent last year, would be significantly lower.

The margin was down to 12.7 percent in the first quarter, the lowest level since 2005, from 18 percent in the last quarter of 2017.

On April 17 the Oslo-listed firm made an unsolicited offer to acquire Houston-based McDermott for $2 billion, but the U.S. rival has rejected the proposal repeatedly.

The company said it had $1 billion in cash and undrawn credit facilities at the end of March.

Subsea 7’s chairman, Norwegian billionaire Kristian Siem, who owns a fifth of the company, has long called for the industry to consolidate as a means to cope with cost-cutting by oil companies.

A combination with McDermott could make Subsea 7 a market leader in supplying subsea installations and services to oil and gas firms, overtaking TechnipFMC and Saipem, said Oslo-based consultancy Rystad Energy.

Subsea 7’s offer to McDermott comes after it started talks with Schlumberger earlier this year to form a joint venture to deliver subsea installations and services.

The flurry of M&A activity is happening as oil prices have risen to more than $70 a barrel, lifting the appetite for offshore investments.

Subsea 7’s order backlog stood at $5.3 billion at the end of March, slightly higher than $5.2 billion at end-December 2017. (Editing by Gwladys Fouche, Editing by William Maclean)

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