Subsea 7 S.A. announced an increase in the estimated full-life project loss on the Guará-Lula NE project, offshore Brazil. As a result, the Company no longer expects full year Adjusted EBITDA to show progress compared to 2012.
The Guará-Lula NE project entered the offshore phase in the second quarter 2013. Delays have been experienced during the quarter as a result of on-going problems with the supply chain, the delayed commencement of pipeline fabrication due largely to customs clearance issues, and adverse weather conditions in the winter season.
Based on the experience to date, the estimated full-life project costs are expected to increase by between $250 million and $300 million as compared to our previous expectations, with the net operating income for Brazil expected to reflect the impact of these costs in the second quarter 2013. The post-tax effect on the Company’s results is expected to be in a similar range for the same period and the Company’s underlying effective tax rate for the full year is therefore expected to be higher than previously indicated.
Jean Cahuzac, CEO , said “I’m disappointed that we are obliged to take another loss provision on the Guará-Lula project. Our current financial results in Brazil are unacceptable and we have put in place a plan to improve margins in this Territory. This plan includes the decision not to bid any further EPIC projects with similar risk profiles.
Guará-Lula represented 5% of our backlog at March 31, 2013. The remaining 95% of our contract portfolio is performing in line with expectations. Insofar as the global market is concerned, tendering activity remains high and we remain positive about the medium and long-term market prospects.”
[mappress] Press Release, June 27, 2013; Image: Subsea 7