Isabel Green – Investor Relations Jean Cahuzac – Chief Executive Officer Ricardo Rosa – Chief Financial Officer John Evans – Chief Operating Officer

James Evans – Exane BNP Paribas Phillip Lindsay – HSBC Andrew Dobbing – SEB Christyan Malek – Nomura International Rob Pulleyn – Morgan Stanley Nick Green – Sanford Bernstein Amy Wong – UBS Mukhtar Garadaghi – Citi Group Kevin Roger – Kepler Cheuvreux Frederik Lunde – Carnegie

Hello and welcome to the Subsea 7 second-quarter results call. [Operator Instructions] I will now hand you over to Isabel Green, Head of Investor Relations. Please begin.

Welcome, everyone, to this conference call and webcast covering our results for the second-quarter 2015. Here with me on the call are Jean Cahuzac our Chief Executive Officer; Ricardo Rosa, our Chief Financial Officer; and John Evans, our Chief Operating Officer. The full press release of the results can be found on the Investor Relations section of our website along with the presentation slides that we'll be referring to on today's call. Before we start, I'd like to draw your attention to Slide number 2. This contains important information regarding forward-looking statements. I think the disclosures also provided on the press release. So I will now turn the call over to Jean.

Thank you. Good afternoon, everyone, and welcome to our results conference call. I will start with the highlights of our second-quarter performance and our view of the outlook, before handing over to Ricardo who will cover our financial results and cost-reduction program in more detail. I will conclude with an overview of our recently announced alliance and as usual, we will take your questions at the end of the call. So let's look first at the second-quarter highlights on Slide 4. The present market environment remains challenging and, as a consequence, activity levels are significantly lower than last year. In spite of the difficult business environment, our excellent project execution and strong focus on cost-control discipline have driven good financial and operational results given the circumstances. Second-quarter revenue was $1.4 billion, down 29% on the prior year; and adjusted EBITDA was $275 million, giving a margin of 20%. This included a charge of $100 million relating entirely to the cost of resizing the workforce that we announced in May. Earnings per share of $0.27 were down compared to $0.74 last year. Global vessel utilization of 82% was an improvement on last quarter, in part due to the seasonally better weather. However, compared to the 91% utilization during the same period last year, it was down, particularly in the North Sea. Our view on the outlook has not changed from what we were saying three months ago. Although we continue to see a good level of tendering activity, the timing of new awards to market remains highly uncertain as FIDs are delayed further by our clients. We did react early to this challenging situation; more than a year ago, as soon as we recognized the industry slowdown intensifying. The new organization we implemented at the beginning of this year is delivering results as we are simplifying our processes and delivering fit-for-purpose solutions at lower cost. Our capacity resizing program that we announced in May is well on track. We are also strengthening our short and long-term competitive position with the formation of alliance with market-leading partners. I will talk more about this alliance later on. I turn now to Slide 5 to look at the operational performance in more detail. Starting in the Northern Hemisphere and life of field business unit, several projects made significant progress in the quarter. Offshore UK, the Montrose project made good progress with pipe lay completed successfully by the Seven Navica and pipeline trenching and backfilling undertaken by the Skandi Skansen. Also in the UK, the Catcher project progressed well with pre-installation service completed and the first trip of five spool on the Seven Navica at the end of the quarter. Offshore Norway. The Aasta Hansteen project completed fabrication and started installation, and the Martin Linge project completed the installation of flexible floor lines, fiber optic cables and power cables. In Southern Hemisphere and global project business units, we have also made significant progress on several projects offshore Africa. The OFON 2 project in Nigeria is now over 90% complete. The Erha North project, also in Nigeria, progressed with pipe lay and umbilical installation. The two Lianzi projects offshore Angola are now well advanced in their offshore phases and the TEN project in Ghana is due to commence offshore operations in the third quarter. Our fleet of seven PLSVs in Brazil achieved a high level of utilization again this quarter, with our long-term contract with Petrobras that provides steady activity for the Group with good medium-term visibility. Moving on to Slide 6 to look at our backlog. We ended the quarter with another backlog of $7.2 billion, with no material impact from foreign exchange movements this quarter. The water market remains subdued, but we continue to win a good share of the available work. Our second-quarter order intake of $900 million reflects our drive to find better ways of working, simplify and standardize where possible and use our proprietary technology to engineer better solutions. Announced awards in the period comprised the Maria project offshore Norway, and a two-year contract with Petrobras for the PLSV Seven Seas. Our pure play subsea strategy aligns us closely with our clients to drive down the cost of producing deepwater oil, and the Maria award is a good example of our collaborative approach. By using a menu of options embedded within the contract, we were able to offer Wintershall a highly cost-effective solution with standardized content, with allowing them flexibility to take alternative choice as the project progressed, such as best scope well specifications. At this point, I wish to take the opportunity to remind you that our high-quality backlog only includes signed contracts and approved deals. We do not include letters of intent on contract extension options. Turning now to Slide 7, I would like to offer some comments on the outlook. The tendering environment is competitive and the timing of new awards to market remains highly uncertain. All of our peers are fully focused on winning the available work and competition is more aggressive, in particular for smaller projects. In the Northern Hemisphere, activity in the North Sea has been particularly affected by the lower oil price, especially in the Norway sector, where short-and medium-term award sanctions continue to face delays. Life-of-field activity is low, although the spot market is becoming more buoyant, as expected in the summer months. The outlook for the Gulf of Mexico is better, with near-term activities supported by independent clients taking advantage of lower rates. However, the majors are taking a longer-term view in the region and are looking well beyond the immediate future. In the Southern Hemisphere, we have several large projects that are nearing completion. The outlook for new awards is uncertain, but there are various large tenders actively progressing towards sanction and award. The demand for domestic gas is supporting projects such as West Nile Delta in Egypt, where the award to market is anticipated this summer. And in India, tenders have been submitted for Vashishta. Other large awards to market expected in the medium term include Bonga South West and ETAN in Nigeria, as well as Golfinho and Coral FLNG in Mozambique. With that, I shall pass you to Ricardo, who will talk you through the numbers in more detail.

Thank you, Jean, and good afternoon, everyone. Let's first look at the income statement highlights on Slide 9. Second-quarter revenue of $1.4 billion was down 29% from the prior-year period. Both business units contributed to the decrease, which reflected lower offshore activity levels compared to 2014. Adjusted EBITDA was $275 million for the quarter, including a $100 million charge relating to the resizing of our workforce as part of the cost-reduction program announced in May. Excluding the resizing charge, the EBITDA margin was 28%, reflecting good execution on several projects that are approaching completion. Net income was $88 million and earnings per share was $0.27 for the quarter. This included a net foreign exchange loss of $39 million from functional currency movements, reported within other gains and losses. In the results for the six months to June, the net foreign exchange loss was only $4 million, as the second-quarter loss was mostly offset by the net gain reported in the first quarter. The tax charge for the quarter was $49 million, implying an effective tax rate of 36%. The increase in the rate was, in part, attributable to the low effective tax rate benefit associated with the $100 million charge. Slide 10 shows in more detail the charge relating to the cost-reduction program. It related exclusively to the expected cost of resizing the workforce, and does not include any charges or impairments relating to projects, vessels or other assets. The charge has been reflected solely in the corporate segment, and allocated to operating and administrative expense lines as appropriate. It does not impact the results for the Northern or Southern Hemispheres, which I will now discuss. Slide 11 shows the results of each business unit for the second quarter and the first half of the year. In both hemispheres, results are down significantly year on year, reflecting the lower activity levels. Good execution and successful conclusions on projects nearing completion, combined with strong cost discipline, has resulted in robust net operating income margins, despite the decline in offshore work compared to 2014. The Northern Hemisphere generated revenue of $642 million, and net operating income of $105 million in the quarter; an improvement on the first quarter as seasonally better weather supported higher vessel utilization. In the Southern Hemisphere, second-quarter revenue was $707 million, and net operating income was $131 million. The half-year net operating income was $249 million. This benefited from a $29 million reduction in the full-life loss provision reported in the first quarter on the Guara-Lula project, which is now over 95% complete. I now turn to Slide 12, which provides an overview of cash flow for the first half of 2015. Net debt of $151 million at the end of June represented an improvement of $137 million on the position at the end of the first quarter, but was higher than the $6 million at the start of the year. Net cash generated from operating activities of $219 million was impacted by a decrease in net operating liabilities of $195 million, as several projects neared completion or were closed down. We have previously highlighted this expected increase in working capital, linked to the downturn in activity. However, I would emphasize that the movement since the first quarter-end has improved by $153 million, thanks mainly to reduced receivables outstanding. Net cash flow used in investing activities included $362 million of capital expenditure, most of which related to the construction of the remaining five vessels in our new build program. Net cash used in financing activities was $13 million, which included $7 million in share repurchases during the six-month period. Our financial position remains secure. During the second quarter, we repaid $80 million that we had previously drawn under our $500 million revolving credit facility, and subsequent to the quarter-end, we secured an additional term loan facility, adding up to $357 million to our liquidity position. We have a good track record of returning excess cash to shareholders and using our capital to reduce potential shareholder dilution. While we remain prudent in our management of liquidity in the current uncertain environment, our Board has extended for a further two years the $200 million share repurchase program initiated in July 2014. As a result, approximately $143 million remains available for future share repurchases. As shown on Slide 13, investment in our new build program was $262 million in the first half-year. The total forecast spend this year is $610 million, with $230 million forecast for 2016 as some of the payment milestones have been delayed compared to previous guidance. Turning to Slide 14, construction of the new build vessels is progressing well. Seven Rio will be the next one to join our fleet and is expected to start operations in the fourth quarter this year. Our new build program will be completed in 2016, with the delivery of the remaining four vessels. When the new vessels join our fleet, they will add to our cost base, reflecting incremental marine crew and other standard running costs. In addition, when the vessels are delivered, we will start to incur depreciation. The impact of this will be included in the standard depreciation and amortization guidance we provide to you each year. On Slide 15, we have provided you some guidance on the potential financial impact of our cost-reduction program. We will reduce our workforce by 2,500 people, a cut of around 20% from the 13,000 reported at end December 2014. We are on track to achieving this resizing by early 2016 and the estimated annualized saving is approximately $400 million. There is a $100 million charge associated with the resizing included in the second-quarter results. And it is expected to be liquidated by the year-end. We are forecasting a further charge of up to $40 million in the second half, some of which will impact cash flow this year. The impact of the resizing charge on our full-year 2015 earnings will be broadly offset by the savings we expect to achieve this year from the reduction in our workforce. We plan to reduce the active fleet by 12 vessels. This is a slight increase from the reduction announced in May as we continue to review the vessel schedule to optimize utilization of the remaining fleet. We will be returning four chartered vessels to their owners and we have identified eight owned vessels that can be long-term stacked or sold. We estimate annualized savings of approximately $150 million, excluding the crew reductions which are already included in the projected workforce cost savings. The cost to stack vessels is relatively low and is included in our estimate. The cost of removing our equipment from chartered vessels was provided for at the time the vessel was contracted. Slide 16 provides the detail underlying our active fleet management plan. By this year-end, we will have 30 vessels remaining in the active fleet, with eight owned vessels stacked or sold and two chartered vessels returned by the end of December. The addition of the four remaining new build vessels and the return of two more chartered vessels will take the active fleet to 32 by the end of 2016. We renewed the chartered vessel Skandi Acergy in the quarter, extending the contract to three years at a favorable rate. This vessel was due to be returned in the middle of next year, but instead, we negotiated the early return of Skandi Seven, a more expensive vessel, in its place. The market for asset sales is slow, so if necessary, we will stack a vessel while exploring more permanent solutions. We are not under pressure to sell assets at a discount to their market value. Stacking vessels saves up to 80% of their cash running costs, whereas returning a chartered vessel or selling an owned vessel, eliminates all of its costs, both cash and non-cash. We have assumed in our guidance that all the owned vessels are stacked. There will be a small improvement in savings if any of the vessels are sold. When market activity improves, we will be ready to increase our capacity by taking on new charters and reactivating certain stacked vessels. Reinstalling our stored power and pipe-laying equipment onto the newly chartered vessels is a relatively quick process. The time and cost to reactivate a stacked vessel will vary, case by case. Slide 17 sets out our financial guidance for 2015. We continue to expect revenue to be significantly below the record level reported last year, and we expect our EBITDA margin to decrease. This is unchanged from previous guidance. Administrative expense is still expected to be in the range of $280 million to $300 million but includes the additional $16 million resizing charge allocated to this cost line. Including the impact of the charge relating to the cost-reduction program, our effective tax rate range has been raised from the 28% to 31% previously guided and is now 31% to 33%. We forecast a total charge of up to $140 million relating to the reduction in our workforce, including the $100 million reported this quarter. Finally, our capital expenditure guidance for the year is at $810 million to $835 million, as some milestone payments on the new build program have moved into 2016. Sustaining CapEx is now projected to be between $200 million and $225 million. It is too early to provide guidance on 2016. The environment remains challenging and the timing of awards is highly uncertain. I will now pass you back to Jean to talk about our strategy for driving the business forward.

Thank you, Ricardo. So let’s turn now to Slide 19. It’s Subsea 7’s vision to be acknowledged as a leading strategic partner in the seabed-to-surface offshore engineering energy industry. Our clients need from us a partner who can execute cost-effective technical solutions that will safely deliver complex projects at a lower cost. The slide shows some of the area of focus that enable us to help our clients reduce the cost of field development. And engaging early and innovating helps us to deliver a fit-for-purpose solution at a significantly reduced cost. Our collaborative approach will benefit our clients and us, both now and into the long term. As shown on Slide 20, I would like to talk in more detail about the opportunities early engagement offers. In particular, I will focus on how we recently announced alliance with Granherne, KBR and OneSubsea, and how these alliances are enhancing the scale and scope of our capabilities. This complementary alliance create a more formal structure which allows Subsea 7 to work closely with industry leading partners to drive better and lower-cost solutions for our clients. We believe this will not only strengthen our competitive position, but also deliver sustained improvements in the economics of deepwater oil and lead to a recovery of industry activity over time. Slide 21 illustrates the importance of engaging early to deliver optimum value. The alliance with Granherne and KBR enable us to offer the full range of early stage engineering services and we will do all our future concept and FEED studies through this arrangement. Secondly, we are faced with re-engineering a field late in the project’s phase, which is a costly and inefficient process. By combining the best-in-class engineering capacity of Granherne and KBR with Subsea 7 technology, engineering and installation expertise, we have created a market-leading offering in early engagement. Moving onto the alliance with OneSubsea on Slide 22. This partnership will leverage our announced early engagement capability to design, develop and deliver integrated Subsea development solutions with expertise spanning downhaul, SPS, SURF and life of field. OneSubsea and Subsea 7 are already working together on a number of project tenders and we see great potential for cost savings and better production, both of which will improve project economics for our clients. By forming this alliance, we are committing to collaborate for the long-term, to develop integrated technology and to drive innovative new solutions. Clients’ interest in an integrated approach is growing and the spirit of the agreement is that for integrated projects, we will work together on an exclusive basis. The alliance agreement allows both parties to work independently on a project-by-project basis, when our client’s preference is not for an integrated or single interface solution. To conclude my remarks today, I turn to Slide 23 with a reminder of how Subsea 7 is driving the business forward and performing well through the downturn. We are focused on finding cost-effective solutions that enable our clients to progress with field development. We are already delivering significant savings now and with closer collaboration, we can do more. We recognized the downturn early. And as a consequence, we have proactively reduced our cost base through good cost discipline and by the implementation of a structured cost-reduction program. We are offering innovative and competitive solutions to win new awards. The market is challenging, but it’s not just price driven. The quality of the solution, reputation for good execution and a high level of safety are all important as well. However, we will not compromise on the risk profile of a project to win a contract. Even in today’s challenging business environment, there is no project which is worth taking with the wrong contractor or terms and conditions. We will also continue to innovate and invest in new technology. The market needs better solutions to lower the cost of deepwater production. The companies that are best at this will win market share and emerge from the downturn stronger. And finally, as we are showing with our results today, we will continue to focus on consistently executing projects well, keeping costs down for us and our clients. With that, I would like to invite you to ask questions.

Thank you very much. [Operator Instructions] And our first question comes from the line of James Evans of Exane BNP Paribas. Please go ahead. Your line is now open.

Yes – thanks for taking my question. Jean, I wonder if I could push you a little bit more on the integrated engineering project that you’re working on today. How many or could you quantify how many opportunities you’re seeing to take on this sort of work over the next six or 12 months? And secondly, maybe a little bit more prosaically, I just wondered if you could comment on the guidance. If you were to exclude the restructuring costs, would you still expect margins to be down year on year?

I will – James, thank you for your question. I mean the first part on the integrated project and the early engagement, one of the things I want to highlight is that Subsea 7 has already working on these types of activities and have done FEED and pre-engineering work quite successfully on a number of projects. The alliance that we are putting together is going to strengthen even further our capabilities. Today, we are already working on four or six projects which are potential projects with our partners and we are expecting more to come in the future. Regarding the guidance, Ricardo, do you want to comment?

Yes, James. I think we have indicated earlier that the guidance that we have provided for 2015 already includes the impact of the downsizing costs that I’ve described in a fair amount of detail. And we basically indicated that the impact on the year will be broadly neutral.

Okay, thank you.

Our next question comes from the line of Phillip Lindsay of HSBC. Please go ahead. Your line is now open.

Yes. Good afternoon, gentlemen. Two questions please. When we look at the order intake potential for the second half, do you deem it possible or likely that you could maintain the rate of order intake that we’ve seen in the first half, where I think book-to-bill was running at around 0.75x? I’m just thinking ahead to next year where the Street’s looking for low-double digit revenue declines in 2016. Just trying to get a sense of how realistic that might be. That’s the first question.

Thanks, Phillip, for your question. As we said in our comments, it’s too early to comment on 2016 and we are not going to comment on next year. What we said and the timing of project awards and the order intake trend is highly volatile, so it’s very difficult to predict what can happen in very near term. And the timing of very large project can have an impact on order intake on a given quarter and that’s not new, but it’s probably even more, I would say, a moving target into the environment.

Okay, all right. And then changing tack, just thinking about the alliance of, I suppose, specifically the one with OneSubsea. I’m just keen to understand how you see it evolving and whether there’s actually any sort of commitment to do sort of collaborative R&D as part of this. I suppose I’m just trying to get a sense of how powerful this combination could be over time. And perhaps, you could also indicate what the initial response has been from your early marketing efforts.

Yes. I mean I’m going to let John answer to the specific aspect of the technology. I must say we are quite excited with the alliance with OneSubsea. For me, it’s the best partner that we could identify to propose a solution for the clients, starting with downhaul up to the production site. So, John, do you want to comment on?

Yes, one of the areas we are going to look at is the technologies and what do we need to lower costs together. If you look at our industry, we’ve historically demarked the allocation of work between downhaul, SPS and SURF and then the FPSO a certain way. So we have work group looking at the technology potentials between the two companies. And we will certainly go into this alliance with an open mind as to what new technologies we may choose to deliver together. So we’re having, as Jean says, some good positive feedback from our key clients. And a couple of our key clients have identified specific projects they’d like us to start looking, in the next six months, with them at.

One of the things that I would like to add also, is to succeed in this type of partnership and alliance, you need the approach to be – support by the teams. And I’m particularly impressed by the enthusiasm and the quality of the exchanges that we have between the teams of both companies already. That made me very comfortable that we’re on the right track.

All right, thank you very much.

Thank you. Our next question comes from the line of Christyan Malek of Nomura International. Please go ahead. Your line is now open. I think we have lost Christyan Malek. So we will go to our next question from the line of Andrew Dobbing of SEB. Please go ahead. Your line is now open.

Yes. Good afternoon. A couple of questions. First, could you give us an idea about the aggregate revenue contribution you’ve typically seen from the 12 vessels you’re planning to idle this year and next year? That’s the first question. And secondly, I’m a bit surprised by some of the vessels you outlined for idling. Perhaps the Seven Navica stands out. It’s been pretty active this year. It is a rigid load vessel. Is it fair to assume that the flexible market is holding up a little bit better than the rigid market? And could you – you’ve said that it varies a lot from vessel to vessel, but for a vessel like that, how quickly could you get it back into the market if required? Thank you.

I’m going to let John answer to the three questions. But I mean definitely, the rigid pipe layer vessel, the rigid pipe market is still very attractive and, I would say, at least as attractive in the flexible market.

Yes, Andrew, thank you for your question. Yes, the Navica, as you know, we have the Oceans which is a bigger reeler than the Navica. And we foresee in the next couple of years, we can probably liquidate everything we need to do with the Oceans. And, therefore, then we will cold stack the Navica. She is a vessel that we have stacked once in the past and, therefore, we can get her back to life again quite quickly. You asked about the view on flexibles. I guess the view on flexibles for us is the volume of flexibles we install is always distorted by Petrobras, which is a solid constant volume of work that we do on the PLSVs. But as you’ll see on the list of vessels, we’re also taking flex lay vessels out of our fleet as well, such as the Neptune and the Skandi Seven as well. So what we’re trying to do here is to cut our cloth according to the market that we see in the future.

Thank you. And could you – I did ask about if you could give an idea about the typical revenue contribution you’ve seen from those 12 vessels. I’m not thinking vessel by vessel, but just on aggregate, a rough idea of what you think we could be losing in terms of revenues from the 12 vessels you’re taking out of the fleet?

A very difficult question to answer, as you can imagine, because for the same reason as we cannot give guidance for 2016, because of the uncertainty that we have at this stage, it would be very difficult to give you a value for the aggregate of these 12 vessels. All depends what would have happened on the market, what will happen on the market. And to refer to the past is not necessarily relevant.

Okay, thank you.

Thank you. Our next question comes from the line of Christyan Malek of Nomura International. Please go ahead. Your line is now open.

Hi, good afternoon, gentlemen. Sorry for the disruption in the line. And so, just two questions if I may please. First, in terms of the restructuring of the fleet, I know you won’t talk about 2016 guidance, that’s arguably premature. But assuming there are no major projects in the next 12 months to 18 months, what exactly is your plan for the high-end vessels, which I notice are still alive and well and working through the current backlog? Will you – decision being to continue to subsidize the cash costs of those boats or will you have another round of cutting? Is there a clear mandate from the outset regarding most profitable and highest contributing boats? And then the second question is regarding the pricing of new work. Is there any way you can quantify the percentage change from last year, down 20%, 30%, I don’t know, in absolute terms? And have we found a floor, given the oversupply of the capacity, or could we see prices down further from here? Where do you sense that equilibrium is at the moment?

Thanks, Christyan, for your question. I mean first, regarding the market I mean I wouldn’t make the assumption that there will be no large project affected to the market in the next 19 months to 18 months. I mean we are still seeing project being discussed, and I think project will be awarded to the market. In terms of the utilization of the high fleet – of the high-specification vessels, it’s obviously key to have some utilization or to have utilization for these vessels. And we will market them aggressively to secure more work. Regarding the pricing of the new work, there is no doubt that there is pressure on the margins. As I mentioned in my comments, more small projects than large projects, but this pressure does exist. The way I look at the pricing of the project is as follows. I think it’s very important, whatever the conditions of the market, to look first at the cost and the risk, and the required contingency when you bid the job. And I would say we haven haven’t changed our approach for that. We are lowering our costs through optimization, simplification of our processes, standardization, that allow us to be more competitive. But we are putting the right price, the right cost in our tendering. We are putting the right operational contingency, and we are not accepting risk on terms and conditions that we should not accept. And once we have done this base work, then on a case-by-case basis, we look at margins. And in some cases, we have to be very aggressive on margin because there is a lot of competition, or because we are filling gaps of utilization for the vessels. And that push margin down. That’s the nature of the world we are in, in a downturn market. But it’s important to remain disciplined, and we are disciplined. And we will go through the downturn by keeping the same approach.

Right. And would it be fair to say, and this is a very simplistic way to do it, but oil prices have halved, therefore, in theory, your margins should have halved in the process too, or some sort of quantification of where margins are normalizing to? Albeit I don’t want to focus on 2016, but just where is the margin of returns moving to for the subsea industry? How do you see it within a range, or can you quantify that?

No, I’m not going to comment on that. And I also would like to - margin will be under pressure, no doubt, but I cannot give you figures. But also, the overall financial results of a company like Subsea 7 are based also on our ability of execution. And we are doing very well. It’s based on recovery of fixed cost. And that’s where utilization of vessels is important. And it’s also in – on the margin. And that’s, to some extent, market driven. But we are still seeing contracts that we - awarded to Subsea 7 at a higher price than some of our competitors, because the operator knows that there is a higher chance of a good delivery of the project with us than some of the competitors, and some, it has been the case very recently. So that hasn’t changed. And I think that will allow us to mitigate the impact somewhat that the challenging environment imposed on the sector. We will have margin going down, the margin will go down until this market gets up.

And just quick a follow-up. So, I guess, on consolidation, clearly, we’re seeing these JVs emerging in the industry. Could you make a case for consolidating with one of your peers, given the oversupply in the market? And that’s not putting words in your mouth, but is there a logic that you would consider over the next 12 to 18 months?

Mergers are – would be good for the industry. There may be opportunities, there may be no opportunity. We are looking at options, as well as, I’m sure, some of our competitors are looking at options. So I think it’s – I’ll let you guess what happen.

Thank you very much.

Thank you. Our next question comes from the line of Robert Pulleyn of Morgan Stanley. Please go ahead. Your line is now open.

Thank you. Rob Pulleyn from Morgan Stanley. Three questions if I may. The first one is you’re removing eight of your own vessels and taking equipment off four more chartered vessels, but there’s no impact on the value of that equipment. Or is that yet to come, as and when those vessels actually physically leave the fleet? So just if we could maybe have a bit of clarification about whether there’s any asset write-downs associated with the fleet reduction from here. The second question, and sorry, I didn’t quite catch this earlier, Jean. But of the $550 million cost savings, does that include – or is that net of the new PLSVs coming on, which, of course, will increase the cost base? Or should we just consider this as a like-for-like change, and then the PLSVs are something different? And then, finally, with all these asset moves in 2016, and I know you’re not going to give operational guidance, but would you be willing to give us a bit of a steer or where D&A could land for 2016? Thank you very much.

Ricardo, I’ll let you

Okay. Good afternoon, Rob. I guess, taking your questions in reverse order. No, it’s premature to give you a steer on the D&A for 2016, at this juncture. As you know, traditionally, we provide guidance towards the end of the year, and we’ll stick to that routine. The second question you raised, the $550 million is gross savings. So it’s $550 million reduction in personnel costs relating to 2,500 employees that we have highlighted in our presentation; plus $150 million non-employee related cash costs associated with the vessels that we are taking out of service. So as the new vessels are delivered and become operational, there will be an increase in cash costs and depreciation associated with each one of those vessels, as they come into service.

And there will be the additional revenue associated with these vessels. And that includes a five-year term contract on the PLSVs.

Exactly. And lastly, I think talking about taking the 12 vessels out of service, I think you’re asking whether or not we had considered whether their value to the business was impaired. Clearly, for the chartered vessels, this is not an issue. They return to their orders and the owners who decide what value to attribute to them. As far as our own vessels are concerned, the eight vessels that are earmarked for stacking, we look, every quarter, closely at the continued economic value of each vessel in the fleet. And we have done so this past quarter, and concluded that, based on what we know today, based on our projections for going forward and based on the book value of each of the vessels concerned, there is not a basis for taking any impairment. So I'm not saying that there is no risk that that won't happen in the future. We will continue to evaluate this on a regular basis, and keep our investors informed.

Okay. That's very helpful, Ricardo. And if I may just have one follow-up. So could I push you for a net cost savings number of the gross you've announced, minus the PLSVs, when they come online in 2016?

Rob, it's – I would suggest that there is sufficient information for uou to arrive at an informed guess on the potential impact of new vessels. And I'm sure that your skills in modeling and those of your team will come up with an answer that is appropriate.

Fair enough. Thank you.

Thank you. Our next question comes from the line of Nick Green of Sanford Bernstein. Please go ahead. Your line is now open.

Good afternoon, thank you taking my question. It's a general question on the Southern Hemisphere division please. So, in your prepared comments, you mentioned quite a few projects are nearing completion or fairly far progressed. Clearly, the backlog is getting smaller there, and it's an area where there isn't a great deal of new work coming in just yet. So, with that context, could you – do you have any concerns that the cost base and the underlying viability of that business is okay? And connected to that, are the cost-cutting plans that you've announced reflecting your view that that is a particularly difficult market? Or have you assumed, effectively, a decent amount of order intake coming in to rectify the problem of a fairly old backlog in that region? That's my first question. Thanks.

Thank you, Nick. The cost cutting that we have decided to implement is based on our estimate of what we see coming on the market. And we are doing this cost reduction while keeping the core expertise that we need to continue to win projects, keep the confidence that the clients have on Subsea 7 and deliver the projects. So there are a number of assumptions. There are projects which could materialize in the Southern Hemisphere. Timing, as we said before, is very uncertain, but Subsea 7 is - we have shown the flexibility and we have shown that we are proactive. If further actions are required in the future, we will take the necessary action. It would be premature to go further today with what we know about the market. And regarding the Southern Hemisphere, Brazil is expected to continue to generate solid financial results in the years to come. A number of projects are coming to an end in Africa and the timing of the replacement of these projects by other large projects or middle-sized projects, will obviously have an impact on future results. We are also monitoring what’s happening on the conventional in Nigeria and on some other type of – and there are other projects in Asia and that all create uncertainty. We cannot really give you more guidance on that.

Okay, thank you. So just to confirm then for my understanding, the Southern Hemisphere is effectively being hit by a double whammy here; your fairly old backlog and obviously, a difficult new market. Is the cost-cutting plan you’ve announced reflecting that position, or is this something you’re going to have review over the next quarter or two and consider whether further measures are needed for the Southern Hemisphere division?

No. From what we see today, it does reflect our view and it’s adequate. So, to answer your question, yes, it’s – my view is that the plan that we put in place is the answer to what we see on the market.

Okay. That’s very helpful. And then a short follow-up question, returning to the vessel fleet. From my understanding of what I jotted down at the beginning of the call, you said that the Skandi Acergy chartered vessel has been renewed and the Skandi Seven has been terminated or stopped. My previous understanding is that both of these vessels were due at one long-term charter hire, the first one until mid-2016, the second one until Q1, 2017. So, if those assumptions are right, under what circumstances could you persuade DOF ASA to conclude and terminate two vessel hires and replace them with one vessel hire? Presumably, that was a fairly difficult negotiation?

Yes, I think, Nick, we have a large fleet of assets and we also have some owned assets, which also can do some of the activities that some of these vessels that are being discussed can do. So we went into this with a viewpoint of trying to understand what was right Subsea 7. And what we needed was early redelivery of some of the higher-cost vessels and a view then on some of the lower-cost vessels extending those contracts. We went into that discussion with an open mind, as did the ship owner on the other side, and we concluded on an arrangement that works well for both companies. The important thing to remember with our model is that we always have owned assets in the fleet, as well as some chartered assets. And that gives us some ability to balance out what we need through the cycles in terms of what we choose to do. So I think we’ve ended up here with a view of putting eight of our own assets into stack and four assets being returned is the right balance for us. As we’ve discussed before, we’ll take all the equipmentoff these vessels. We own all the equipment on these vessels, the pipe laying equipment, the vertical lay towers and such lot. We will store those in our yards and we will have that equipment available, as Ricardo says, so when the market [indiscernible] again, we’ll go out into the market, pick up another vessel in - in the market and then have the capability and capacity as the market picks up.

But presumably, DOF wouldn’t have wanted to let go of two firm contracts, which would have continued for many months ahead. In doing – in persuading them to let go of the Skandi Seven, which was due in March 2017, is it fair to assume you may have had to pay either a higher day rate or a longer contract term on Skandi Acergy to make that deal worthwhile for DOF?

We made that deal worthwhile for ourselves. That’s all I can say.

Okay. Thank you very much. I’ll turn it over.

Thank you. Our next question comes from the line of Amy Wong of UBS. Please go ahead. Your line is now open.

Good afternoon. I had a couple of questions around costs please. The first one relates to the $550 million of cost savings. You mentioned that it was going to have a net neutral impact on your adjusted EBITDA guidance. So does that imply that the cost savings so far of this pool is roughly $140 million, if my math is correct? And then secondly, still staying on the topic of costs, in your 2014 full-year presentation, you provided a pretty helpful slide in breaking down your operating expenses by people and procurement and other costs. Would you have some of those numbers handy in terms of looking at your first-half numbers please?

Hello, Amy. This is Ricardo. Taking your first question, I would say that just to reconfirm what we’ve said. We said that the $400 million are the annualized cost savings that we estimate will result directly from this downsizing program that we have undertaken, having announced it in May.

The people side

On the people side, that is correct. And there’ll be a further $150 million reduction in the cash costs associated with our fleet as a result of our decision to stack a number of vessels. Those are annualized run rates going forward and which will be impacting, we believe, 2016, bearing in mind, of course, that we’re going to have new vessels coming on-stream, which I’ve previously discussed in response to Rob’s question. What we do believe is that the cost of the downsizing plan, which we’ve estimated at $140 million—up to $140 million, and again, that’s just people and costs associated with people, we believe that that, over the course of the year, will be largely absorbed by cost savings achieved in 2015.

Got it

Okay. As far as the guidance that we provided in respect of the full-year 2014, the short answer is no, we’re not in a position to provide you with that guidance at this stage, but we will consider it in due course.

All right. Thank you very much then. Thank you.

Thank you. Our next question comes from the line of Mukhtar Garadaghi of Citi Group. Please go ahead. Your line is now open.

Good afternoon, gentlemen. Just two quick questions from me. So for the larger SURF awards out there, the likes of Bonga or West Nile Delta that are out there for discussion, how have the sizes of these awards shrunk over the last year? And any elaboration on that would be great. And the second question is around the Tier 2 players, which have introduced quite high-capacity assets in the recent months and quarters. Are you seeing some aggressive bidding by those players? And is there uptake from your clients to allocate high-end work to some of these new guys? Thank you.

Thanks, Mukhtar, for your questions. On the first question about the number of large projects, in fact, the number of projects hasn’t changed and there are projects which are coming back to discussions as the industry find ways to lower he cost. And we are working actively with a number of operators on specific projects to see how we can help them to lower the cost. And what is – still the same is the uncertainty of when, these project will come to sanctions. It’s a combination of lowering the cost of the project together through innovative solutions and. in some cases technology, but it also depends on priorities and cash flow management of the operator. So uncertainty on timing is still there and I don’t see changes from Q1 from that perspective. The projects are still there, they are just impossible to tell you when they will come to sanction. Regarding

Sorry, Jean, just on that first question. I actually meant in the last year, not the count, but the size of let’s say a given SURF award that was $1 billion dollars, how were you able to downsize that already? The industry, are we seeing that 20%, 30% cost saving that was talked about, on a given award?

It all depends on the project and if you have a straightforward project where there is. no technology and it’s a standard tieback, I think it would be a bit ambitious to say that the industry is going to lower by 50% the cost. There are projects which are more sophisticated projects, where a different approach through standardization, different way of working and innovative engineering, with a front engineering can generate more than 50% savings, so it all depends on the project. Q – Mukhtar Garadaghi: Thank you. And just on new players?

Well the new players, we are seeing the new players being very aggressive and in some cases, I would say ready to take some terms and contractual risk which our opinion shouldn’t be taken. But what we are also seeing, which is. reassuring, is the clients give a value to what a company like Subsea 7 can bring, in terms of confidence in delivery. And a way to lower costs for the operator is, in fact, to accelerate first oil or first gas. So the performance side is also part of the equation. So, yes, there is more competition. In some cases, competition can be very aggressive, but we keep our approach and I think our clients like that Q – Mukhtar Garadaghi: Thank you.

Our next question comes from the line of Kevin Roger of Kepler Cheuvreux. Please go ahead. Your line is now open.

Thanks, good afternoon everyone. Thanks for taking my question. The first one is a follow-up on the order intake trend; even if I understand that you don't want to give a precise guidance of figures. But your intake is quite positive over the first part of the years compared to competitors and I was wondering what could be the trend of the H2. I mean that you register around $600 million of orders maturing in 2016, during the first part of the year. Some competitors seem to be expecting a more important number of awards over the second part of the year, so is it fair for your to consider that the H2 order intake maturing next year will be stronger for the rest of the year? And the second question is on the own vessel that you are expecting to stacked or sold, in case of any cessation, what could be the range of the element and what could be the impact on the D&A for next year? Thanks.

I will answer the first question and I think on the second question, maybe ask you to reset the question I’m not sure I fully understood it. But regarding the first question, it is very difficult to tell you what our order intake will be in the second part. What I can tell you is that we are competitive. I think we are very competitive because we are lowering our cost and the client sees the value of being able to deliver the projects in a consistent manner. But we will see what happens in the second part. The competition is also quite aggressive on projects, so future will tell. The only thing I can ensure you is what I said before; we’re not changing our approach on costing the project, risk taking and doing that, we remain competitive, but we’ll see. I cannot really comment further than that.

Okay. And.

Regarding your second question, sorry.

Yes, the second question is related to the reduction of your fleet. You are saying that you will stack or sell vessels. I mean if you sell any vessel in the second part of the year or in 2016, what could be the range of the cash impact and what could be the impact on your D&A for next year?

Ricardo?

Yes, Kevin. It’s a very difficult question you’re asking there. The assumptions that we’ve taken on cost reduction assume that all vessels are stacked. We have not assumed any sales, I think that’s the starting point. The cash impact and the impact on the D&A will depend on the vessel that we dispose of and, to state the obvious, the price that we achieve and that’s as far as I can guide you. I mean I think the depreciation profile of each vessel will vary and what I can say is that whilst they remain stacked, we will continue to depreciate them. We don’t touch the usual lives and we don’t make any changes to the accounting policies that we’ve been applying.

Okay, thanks a lot.

Thank you, Ricardo. I think we can take one more question before we close

Thank you, very much. Our last question comes from the line of Frederik Lunde of Carnegie. Please go ahead. Your line is now open.

Thank you and congratulations on very good numbers. A very tangible question for my part. Looking at the second half of the year, how do you see Q3 and Q4 shaping up, given that you have, I count, eight big products due for completion soon? Is it fair to assume a very strong Q3 and a much more muted Q4?

We haven’t changed our guidance for this year at the end of the year. I would say traditionally Q3 is stronger than Q4 and Q4 can be challenging, particularly in the North Sea because of the seasonal effect of the operation. I don’t think I can comment further.

Okay. And just one more add-on. If you look at the quarter now, would you say that cost reductions and a lot of bidding costs have been a major part in driving earnings this quarter?

I think cost reduction and the initiative that we took last year with a new organization are going in the right direction and have played a role. But it’s not the only thing which happened. The main factor is the status of the project and, coming to the end of the project, the execution of the project in their final stage; all that being combined with a very, very good execution. And I would like to thank again our teams all around the world for their commitment in difficult circumstances to deliver what they are delivering for Subsea 7.

Thank you.

Well thank you for your questions. I think it's time to end the session, but before we finish, just to ramp up, I would like to say that in today’s challenging business environment, there are a number of elements that we cannot control, such as price of oil and its impact on our client investment timing. However, our initiatives allow us to make more projects viable for our clients through our all-year involvement, our technology and consistent delivery of our projects. And I see this trend continuing further. I think we can bring Subsea 7, but also with our alliance partner, valuable solution for our clients to make more projects come into FID or approval. And the last point I want to mention is time factors, but we will continue to take the actions required to navigate through the downturn, at the same time, we will continue to build a stronger company for when the business environment improves and. I’m convinced that we can do that. So that brings us to the end of our call and I would like to thank you for participating. If you have any additional questions regarding our results today, thanks to call Isabel. Thank you again.

This now concludes our call. Thank you for attending. Participants, you may disconnect your lines.