Isabel Green - IR Jean Cahuzac - CEO Ricardo Rosa - CFO

Michael Alsford - Citi Fiona Maclean - Bank of America Merrill Lynch Rob Pulleyn - Morgan Stanley Maria-Laura Adurno - Goldman Sachs Kevin Roger - Kepler Cheuvreux Nicholas Green - Bernstein Anne Gjoen - Handelsbanken Frederik Lunde - Carnegie James Thompson - JPMorgan Morten Nystrom - Nordea Bank Haakon Amundsen - ABG Sundal Collier

Thank you very much and welcome, everyone, to our third quarter 2017 results call. With me on the call today are Jean Cahuzak, our Chief Executive Officer; Ricardo Rosa, our Chief Financial Officer; and John Evans, our Chief Operating Officer. The results press release is available to download on our website along with the presentation slides that we'll be referring to on today's call. Turning to Slide 2, I must remind you that this call may include forward-looking statements that reflect our current views and are subject to risks, uncertainties and assumptions. Similar wording is also included in our press release. And with that, I shall now hand the call over to Jean.

Thank you, Isabel, and good afternoon and welcome to our third quarter results conference call. In a moment, I will summarize our key operational and financial results and then Ricardo will review our financial performance in more detail. I will then conclude the call with the review of the progress we are making on our strategy and differentiated client service. As usual, there will be time to take your questions at the end of the call. Starting on Page 4 of the presentation. We have achieved another quarter of strong execution and continued cost discipline in all three of our business units and this was reflected in our group results. Our revenue of $1.1 billion was 15% higher than the same period last year, driven by renewables activity in particular of the Beatrice Windfarm project. Our adjusted EBITDA of $250 million was lower than the prior-year period as our mix of work has begun to reflect the more price competitive projects awarded in the downturn. Utilization of our active fleet was 78%, in line with the level reported in the second quarter this year, but well below the utilization achieved a year ago. Total vessel utilization was 69%. Our third quarter order intake included $538 million of new awards and escalations, taking our backlog to $5.3 billion. We have seen some improvements in the volume of tenders. However, pricing is competitive, particularly for near-term work. Our financial and liquidity position remains strong. At the end of September, we had net cash of almost $900 million and undrawn credit facilities of approximately $650 million. Our first priority for cash is to strengthen and grow our business. In the third quarter, we ordered a new-build reel-lay vessel to increase our capability for long tie-back SURF projects. And we strengthened our presence in renewables and commercial markets with integration of Seaway Heavy Lifting and EMAS CHIYODA Subsea which were acquired in the first half of this year. Turning to Slide 5. We have illustrated some of the projects that have contributed to our performance. Offshore Egypt, we made good progress on the West Nile Delta Phase II project for BP. In the third quarter, we completed the shore approach iteration of three pipeline. The shallow water iteration was carried out using Seven Antares and followed most of engineering and preparation. Offshore Norway, we have completed tying and pre-commission income campaigns on the Maria project for Wintershall. This project, which is due to complete shortly, has been a showcase of how Subsea 7 can help to deliver the projects ahead of time. Cross-collaboration between Wintershall and Subsea 7 has been key to the successful completion of the scope. The project has demonstrated the efficiency, utilizing the diversity of the fleet, including our new heavy construction vessel Seven Arctic. Also in the North Sea, the Western Isles project for Dana was substantially completed. This project was awarded in 2012, but with the significant portion of the scope delayed in 2017 due to the timing of the FPSO arrival. Since 2012, we have designed and fabricated two pipeline bundles, manage to design and fabrication of two mid-water arches and install 11 risers. The OCTP SURF project offshore Ghana was assumed by Subsea 7 as part of the ECS acquisition in the second quarter. It's progressing well with offshore installation using Lewek Constellation, a relay vessel previous owned by ECS and working on the short-term charter for Subsea 7. In the U.S. Gulf of Mexico, we have been moving ahead with engineering and procurement for the Mad Dog 2 project for BP. This project is being executed by Subsea Integration Alliance, our global and exclusive partnership with OneSubsea, Schlumberger. By working in collaboration on the SURF and SPS scope, we were able to combine our engineering and design expertise to reduce the risk and lower the cost of the project for our clients. The offshore scope is scheduled for 2019 and 2020. Our PLSVs working on long-term direct contract for Petrobras offshore Brazil has had another quarter of high utilization. Seven Waves restarted work in July. At present, we have seven PLSVs working for Petrobras, four of this vessel with contract that last until 2021 and 2022, and 3 lower top tension vessels with contract that mature next year. Offshore Australia. Our i-Tech Services business reached the final stage of EPRS, emergency pipeline repair system, project. The system is ready to deploy -- is a read to deploy solution involving several technologies developed by i-Tech Services that enables an expedient terminal repair to different types of pipeline damage, minimizing production shutdown for the operator. In Renewables and Heavy Lifting, the Beatrice project made good progress. All the 84 sets of four piles have been fabricated and by quarter end, 78 sets have been installed. During August and September, the heavy lift vessel, Oleg Strashnov, installed the first 24 steel foundation jackets. This is Subsea seventh largest ever project in the North Sea and our largest ever project in renewables. Turning to Slide 6. We reported backlog of $5.3 billion at the end of September. During the third quarter, we were awarded $538 million of new awards and escalations. We announced the award of $250 million relating to the extension of three long-term day-rate contracts for PLSVs, Offshore Brazil. This took our PSLV backlog to $1.5 billion at the quarter end. Over 90% of this sits with the four higher specification vessels that joined our fleet in 2014. On the last day of the quarter, the Fortuna project was awarded by tie-back to Subsea Integration Alliance. Our alliance OneSubsea, Schlumberger enabled us to offer the clients with fully integrated solution, benefiting from our combined expertise and technology. This project is substantial in size at between $150 million and $300 million for the combined SPS and SURF scope. But only the expected Subsea 7 share of the revenue was reported in our backlog. Unannounced projects included smaller SURF rewards in the North Sea and U.S. Gulf of Mexico, various awards for i-Tech Services and the substation installation award for Renewables and Heavy Lifting. And now, I will hand back over to Ricardo to cover our financial performance in more detail.

Thank you, Jean, and good afternoon, everyone. I will begin on Slide 7 with the key highlights from our income statement. Third quarter revenue of $1,063,000,000 was up 15% from the prior-year period, as the increase in revenue from our renewables business more than offset the declines in our revenues from SURF and i-Tech Services. Net operating income for the quarter was $149 million. This included $13 million share of net losses from the associates and joint ventures, partly due to the impairment recognized within our SapuraAcergy joint venture. The tax charge for the quarter was $12 million, implying and effective tax rate of just 9% for the quarter. This relatively low rate reflected revisions to the full year forecast effective tax rate based on the mix of jurisdictions where we expect our profits to be generated. Net income was $111 million, which gave rise to diluted earnings per share of $0.34, 23% lower than for the prior-year period. Slide 8, illustrates our quarterly adjusted EBITDA margin in recent years. Our good execution on projects awarded prior to the downturn and our early action on costs resulted in a period of exceptionally high adjusted EBITDA margin performance from the third quarter 2015 to the second quarter 2017. We've continued to execute well and control our costs. However, the mix of projects we have today reflects a more competitive tendering environment. The cost reduction measures we implemented in 2015 and 2016 benefited our profitability as we executed lump-sum projects that were awarded in earlier in the cycle. However, more recent awards and tenders reflect our lower cost base in the price, lowering the cost of the project for the client. As the effects of the downturn continue, our near-term margin is expected to deteriorate further due to lower activity and continued competitive pressure on new awards. This is indicated directionally by the red arrow on this slide. In the medium term, as activity increases, we expect our margin to recover to historical levels. Our third quarter adjusted EBITDA margin of 24% is lower than any of the last eight quarters, but still is above the average achieved prior to that period. Slide 9 shows the revenue and net operating income by business unit. Our SURF and Conventional business unit generated revenue of $755 million and $103 million of net operating income, down 6% and 52% respectively on the prior-year period. The substantial decrease in net operating income compared to the prior year reflected fewer large projects in the final stages of completion, resulting in less opportunity to enhance profitability through project derisking and recognizing additional income from final settlements and closeouts. Net operating income also included an $11 million non-cash loss recorded in the SapuraAcergy joint venture. This loss resulted from the recognition of an impairment associated with the sale of the pipeline heavy lift vessel, the Sapura 3000, by the joint venture shortly after the third quarter close. Our i-Tech Services business unit produced $76 million revenue and $6 million in net operating income. Lower activity levels compared to the prior-year period were due to the decline in active rigs and less preventive maintenance by clients, partly mitigated by cost discipline. We have continued to reduce the number of chartered Life of Field vessels to more closely align our capacity with market demand. Renewables and Heavy Lifting revenue was $232 million mostly related to the Beatrice project, which progressed well with pile and jacket installation in the quarter. Net operating income was $45 million. Year-on-year performance reflects the consolidation of Seaway Heavy Lifting, which was equity accounted for in 2016 prior to the acquisition of the remaining 50% interest in March 2017. I now turn to Slide 10, which provides an overview of cash movements in the quarter. Cash and equivalents were $1.5 billion at the end of September, an increase of $50 million on the position at the end of June. We repaid $28 million of debt as we spent $23 million in the quarter on convertible bond repurchases in addition to paying a $5 million scheduled installment of the ECA loan. Capital expenditure of $54 million including the initial investment in our new-build reel-lay vessel. We received a $30 million dividend in the quarter from SapuraAcergy. This joint venture is discontinued and in the process of being dissolved. We reported working capital related outflows of $94 million in the quarter with a decrease in our net operating liabilities. This resulted largely from the timing of cash flows on the Beatrice project as the fabrication phase progressed as well as increased activity in the Middle East following our acquisition out of Chapter 11 of former ECS businesses. Our financial and liquidity positions remained strong. At the end of September, we had net cash of $877 million and a further $656 million of undrawn committed credit facilities. I move now to Slide 11. It's been four months since we acquired EMAS Chiyoda Subsea or ECS from Chapter 11. In that time, we have started work on the projects that were already in the ECS backlog and so far, they have progressed as expected. We are in the process of integrating the 1,000 people approximately that have joined us from ECS, helping to align them with our values and processes. We've integrated Lewek Champion into our fleet. We have it on our long-term charter for conventional work in the Middle East and are in the process of renaming it Seven Champion. We have a short-term charter in place for Lewek Constellation which is working on the OCTP SURF and TVEX projects, and we will return this vessel to its owner early next year. Organizationally, we have combined our new Middle East operations with our existing Asia Pacific business and these are now being managed as a single region within the SURF and Conventional segment. Turning to Slide 12, we have reported three significant events since the end of the quarter. Firstly, our $700 million 1% convertible bond matured. We had already repurchased $342 million of the bonds and these were cancelled at maturity. The outstanding $358 million bonds were repaid on the 5th of October, utilizing our available cash. This had no impact on our net cash position and our credit facility remain undrawn. Secondly, as previously highlighted, we announced an agreement to discontinue our SapuraAcergy joint venture. The vessel owned by this joint venture, the Sapura 3000, was sold to Sapura Energy, our joint venture partner. As a result of the discontinuation and the sale of the vessel, we have received a total of $100 million in dividends from the joint venture. We remain committed to maintaining our presence in Asia Pacific and the discontinuation of this joint venture does not impact our ability to offer a full range of services in this region. Thirdly, we have acquired for nominal consideration the remaining shares in our Normand Oceanic joint venture. This transaction was completed on the 31 of October and brings the heavy construction and flex-lay vessel, the Normand Oceanic, into our fleet as a full-year asset. This joint venture had outstanding debt of approximately $100 million which has since been repaid by Subsea 7 from our available cash reserves. The vessel is currently on a long-term charter to a third party and is generating positive cash flow for the group. Before I hand back to Jean, I would like to discuss our guidance, which is summarized on Slide 13. For 2017, we continue to expect revenue to be higher than levels reported last year and adjusted EBITDA margin to be lower than last year's record level. Administrative expense guidance is expected to be between $230 million and $240 million. We have lowered our net finance cost guidance, expecting it to be between nil and $5 million. Our expected range for depreciation and amortization has been narrowed and is now between $410 million and $420 million. As I mentioned earlier, we have lowered our full-year effective tax rate due to the change in geographic mix of our sources of income. We now expect it to fall in the range of 25% to 28%, 3 percentage points lower than previously guided. Our CapEx guidance for the year has increased to include the initial expenditure in the reel-lay vessel. We now guide between $180 million and $200 million for the full year. We have $2.6 billion of work in our backlog for execution in 2018. We expect to add new projects as awards to market increase. However, most of the projects from projects -- most of the revenue from projects awarded in 2018 will be recognized in later years once the offshore phase is commenced. For this reason, we expect our revenue in 2018 to be broadly in line with our forecast revenue for 2017. As our mix of projects changes, we expect our percentage margin to fall. Furthermore, awards being tended for near-term execution are particularly impacted by the competitive market conditions. As a result, we are guiding that our 2018 adjusted EBITDA percentage margin would decrease significantly compared to 2017. I'll now pass it back to Jean.

Thank you, Ricardo. Turning now to Slide 14. Our strategy is founded on providing a differentiated service and working with our client as a long-term partner for the creation, developments, maintenance and eventually decommissioning of the asset. We are differentiated by our skilled and experienced people, our innovation and technology, and our overall diverse fleet of vessels. These trends are complemented by our alliance and partnership and our local presence in all the major offshore markets. We are helping to transform our industry with integrated solutions and new technology that deliver the step change in cost and productivity. We have invested in our capability and online capacity to meet our clients' need and execute it well. This has helped us to win work as well as make better returns on the projects that we were awarded before the oil price decline. Moving to Slide 15. Skilled and experienced people are central to our ability to deliver the services our clients need. Between 2014 and 2016, we reduced the size of our workforce by approximately 40% as we aligned our capacity to market conditions while protecting our capability. This year we have grown our presence in the Renewables and Conventional market with the consolidation Seaway Heavy Lifting and the acquisition of EMAS Chiyoda Subsea. These additions have broadened our scope of work, brought in new areas of expertise and added over 1 billion of work to our backlog. We have integrated approximately 1,500 people from these businesses. Their expertise and local experience complements Subsea 7's capability. We are committed to retaining the new ways of working established over the last two years. This means our workforce will remain the right size for the market and we will continue to operate efficiently. Slide 16 shows four of our latest key technology areas as displayed for our clients, employees and investors at our technology and innovation week in certainly last months: long distance tie-backs, pipeline bundles and towed production systems, pipeline materials, and inspection, repair and maintenance. We have concentrated our investments in technology that enables offshore activity at lower cost and with increased efficiency. Long distance tie-backs enable marginal fees to be developed without the expense of adding new production facilities. In the medium term, we expect approximately 20% of the project to use this enabling technology, including a number of current tenders in the North Sea. Subsea 7 has installed over 80 pipeline bundles. The same patented controlled towed installation method that we use for bundles can be used to install large subsea structures. Many recent projects have been based on our cost-effective bundle solutions, including Western Isles, Catcher, Callater and Montrose. We are working to develop and commercialize new cost-effective pipeline materials for use in offshore oil and gas fields. For example, higher strength steel can reduce pipeline weight and cost. Corrosion resistant alloys and polymer linings are cost effective anticorrosion solution. And in the future, composite pipe could be used to overcome cost limitation in ultra-deep and highly corrosive developments. Cost effective position is not just about the capital investment of a development. Increasingly, our clients are looking at the total field cost of projects. Our i-Tech services business is developing better data management system to announce our Life of Field solutions. All of these technologies benefit from earlier client engagement and front-end engineering which we can offer through KG7, our earlier engineering alliance with KBR and Granherne. Turning to Slide 17. As our technology evolves and the needs of the market change, we aligned our fleet to match. In September, we announced our plans to invest a newly built reel-lay vessel. This vessel has been designed for cost effective installation of long distance tie-back, and in particular more complex pipe-in-pipe and heated pipes solution. It is now under construction and is expected to be delivered in 2020, in time for the projected increase in offshore activity. The cost of the vessel will be will be less than $300 million, excluding capitalized financing cost. At the end of the quarter, we had 31 vessels in our active fleet. We returned two chartered Life of Field vessels to their owners at the end of their contracted terms. There was no change to the status of our four stacked vessels. Moving to Slide 18. Collaboration is a core value at Subsea 7 and in some cases, this has developed into preferred supply relationships, creating significant value for us and our clients. We have a unique integrated common incentive model with Aker BP. The first project to be executed under this model, the Volund Infill project, was completed in the third quarter. By working collaboratively on this project, we saved approximately 30% on project management and engineering hours. And overall, the project was completed 40% faster compared to similar project executed with a more traditional contracting model. Our alliance with OneSubSea Schlumberger, Subsea Integration Alliance, on Slide 19, is another example of collaboration that is changing the traditional contracting and execution model. We are working successfully together on several projects to deliver faster, better and cheaper outcomes for our clients. By integrating SPS and SURF at an early stage, project can be engineered to achieve enhanced production at a lower cost. This could be as a result of optimized field architecture or simply choosing solution that are more cost effective to install and maintain. By combining schedules and sharing critical data, we can eliminate certain risk, minimize contingency overlap and shorten the time to vessel. To conclude, on Slide 20, the outlook for our market remain challenging in short term. We believe Subsea 7 is relatively well placed with our backlog for firm work of approximately to serve 2018 consensus expectation and a strong financial and liquidity position. Our strategy as differentiated service, partnership and alliance give us confidence that we will win our fair share of the available work. In terms of new awards to market, we believe the worst of the downturn is now behind us and that rewards will increase gradually as we move through the first half of 2018. However, in most cases, newly awarded project takes 12 to 18 months in engineering and procurement phases before offshore activity, while most of the revenue and profit is recognized. We list here some of the active SURF project tenders that we expect to see awarded to the market in the near to medium term. The most active market today is Norway were several clients are moving ahead with financial investment decision and project sanction. In particular, we foresee progress on Snorre, Skarfjell, Snadd, and Johan Castberg projects. Larger projects of Shore Africa are likely to take more time and the Golfinho, Mamba and Tortue project listed here are not likely to be awarded before mid-2018. Other sizeable projects that the market is waiting for includes the first of the ultra-deepwater Libra project of Petrobras and the second phase of the Gorgon gas project offshore Australia. We are tendering for several conventional projects in Saudi Arabia under the LTA with Saudi Aramco acquired as part of the ECS acquisition. We were unable to participate in new tenders while ECS was under Chapter 11, but we are quickly catching up on lost time. i-Tech services are seeing a gradual increase in tendering activity in the North Sea, U.S. Gulf of Mexico and Asia. In the Renewables and Heavy Lifting market, we continue to be the number of foundation and substation installation projects in U.K., Poland Germany, and are tendering foundation opportunities in both U.S. and Taiwan. Offshore renewable energy is an important area of growth for us and we remain committed to strengthening our presence worldwide. I would now open the call for your questions.

[Operator Instructions] And we have our first question from the line of Michael Alsford from Citi.

I've got two, if I could please. Just firstly, you've been pretty active around your fleet capabilities as you mentioned in your prepared remarks. So, I just wondered whether you feel that you're now comfortable with the sort of vessel fleets that you have and whether you might need to do more to try and align yourself to what you see as the market opportunity going forward? And then just secondly on renewables, you're clearly, you've build that capability out this year. And I was just wondering whether you could talk a little more around what you think is the size of the market opportunity in terms of dollar millions or dollar billions, for example. That would be helpful.

Thank you. To take your first question on the fleet, yes, we are comfortable with the fleet and comfortable that the fleet that we have will allow to fulfill our needs in foreseeable future, including new technology needs on the SURF market. The last commitment to this new-build project is a key step in the right direction for us to meet the additional requirement, both in terms of activity and new technology that we see in 2020, 2021. Regarding the renewable market, we see this market as a growing market for a number of reason, one being technology. We are seeing on the renewable side the technology playing critical parts in lowering the cost of the projects, in particular on the turbine side. And it's not a coincidence if we start to see a number of project which can be launched without subsidies from the various government. So, we see growth there and we are well positioned because our project and engineering expertise, the fleet that we have on traditional foundation and the expertise of SHL in this business line which has been in place for a number of years. So, I'm optimistic about the growth of this business in the years to come.

Your next question comes from the line of Fiona Maclean at Bank of America Merrill Lynch.

I have two questions. Firstly, I was hoping to get some clarity around your language regarding your margins. You talk about margins declining next year and I know you are in a slightly strange position where you've had incredibly high margins over the last couple of years. So, could you maybe help define what we should be thinking about in terms of where you see normalized margins being? And then the second question, I would like to get a little bit more detail on your very specific outlook the Middle East region, particularly after the transaction you did earlier this year. I appreciate you gave some brief commentary and the remarks earlier. But any further detail would be great.

Yes. I will take the first question on the margin and ask John to answer specifically on the Middle East. The way we see the margin is, we see that was -- will be lower, significantly lower in 2018 compared with '17. There is no doubt there is a pressure on short term -- on project which are going to executing short term on the margin. We expect when the market picks up to go back to historical high margins and I believe that in fact exceed this historical high margin because of our differentiators with technology and the alliance and everything else on the longer term. But Ricardo, do you want to be more specific?

No, I think, Jean, you pretty much summarized it. I think I understand the need for clarity on normalized. I think perhaps the better term that Jean has used is historical margin, is a good reference point and that is what we've highlighted in our slides. I think as Jean has said, we are seeing significant pricing pressure at the moment as we move through the trough period of this cycle and there is excess capacity in the SURF sector at present. But as we -- we remain confident that there will be growth in activity thereafter as indicated by the level of tendering that we are seeing at present. And as the excess capacity in the SURF sector is consumed, we would expect the return of margins to historical levels or better as Jean has said.

John, do you want to comment on Middle East?

Yes, as we mentioned in Jean's presentation there, we have been given the opportunity to bid for the work under the LTA agreement in Saudi since the ECS acquisition and we have got a number of offers in the last few months. There is mixture of different types of work between pipelines and jacket installation, top side installation, varying size from small to reasonably larger projects. So, we continue to bid those packages and we'd expect to get a reasonable share of that work in due course. So, for us, we remain pleased with the acquisition. The timing of which rewards get done is not always clear to everybody, but we feel that there is reasonable opportunity to believe that Saudi will continue to certainly invest in the coming years and we are also seeing other opportunities in the Emirates and Qatar as well.

And just a quick follow-up on the margin. So, looking at your historical, so basically a range between 15% and 20% would seem reasonable for EBITDA.

Well, we cannot comment on the timing of the margins recovery. I would say historically north of 20% was more what I was referring to on the medium to long term.

The next question comes from the line of Rob Pulleyn from Morgan Stanley.

If I can follow-up on from the last question. I understand the medium- to long-term margin commentary you're giving there. But can we just delve a little bit more into the word significantly for near-term margins as we go into 2018? So, 12 months ago, you guided 2017 margins to be down significantly year-over-year and it looks like they are going to come in 450 bases lower to 500 bases lower. Is that what you would consider significant in terms of where we should put 2018? As a reference, I think consensus had a 700-basis point margin income traction. So, you are guiding margins up or down for 2018? Secondly, shifting gears, could I also ask about working capital to Ricardo? You are on the verge of a positive working capital position for the first time in a while. How will this look in 2018? And then finally, could you give a little bit of color as what gives you confidence around this 2018 revenue guidance? Does the $1.4 billion difference between your backlog currently for 2018 and where guidance is and are those projects somewhat oil price dependent or not?

A number of questions in your question. So, if I start with the revenue and the '18, we expect the revenue to be in line with '17. It's based on a number of things. It's based on the tender activity that we see. It's based on the fact that when we look at the projects, we see today that with our lower cost base than two years ago and our technologies that we can bring, we believe that we will win our share of the market or more than our share at the market. And that's the reason that where we -- what we made with this statement on the revenue. We don't expect a change to absolute values for 2018 versus consensus EBITDA even after this revenue upgrade and that reflects lower margin that foresee in '18 and '17. So that's the way I would like [Technical Difficulty]

Sorry, we had a communication interruption there we've now got rid of. So, we're active now, I suppose.

So, what I was -- in case you missed the comments. We expect the revenue to be as per our earning call's statement in '18. In that context, we don't expect the change to absolute '18 consensus EBITDA even after revenue upgrades, which give you kind of indication of the deterioration of margin that we foresee in '18. That's for short term. When we talk about bidding jobs which we believe will be executed medium term when we see a gradual recovery of the industry, we see a gradual improvement of these margins overtime. And I was referring to historical values before. That's our reference point.

And picking up on the questions around net working capital, Rob, I mean you right. I mean, we have had a significant unwinding of our net operating liability position in 2017 and it was something that we had guided our investors to for a while. And really, I mean, if you look at it, the readjustment has largely taken place in the first half of this year where our net operating liability position reduced by $465 million and this was driven largely by the completion of various large projects and associated recognition of the deferred revenues and evaluation of contingencies. In Q3, we did have a further reduction of our position -- of our net operating liability position by about $95 million. But this was significantly impacted by the timing of cash flows related to the Beatrice project and the ramp up of activity in the Middle East. So, we are not expecting going forward these significant reversals that we've seen so far, this year. And I would say that that is our expectation over the course of 2018.

The next question comes from the line of Maria-Laura Adurno from Goldman Sachs. Please go ahead. Your line is now open. Maria-Laura Adurno: So, the first question that I have is maybe if you could provide us a bit of a reminder with respect to the PLSVs that you have where the contracts are expiring in 2018 and where you stand in terms of any type of negotiation to extend those. The second question that I have, given the strength of your balance sheet and net cash position and the fact that this year, to a certain extent, you've acquired a bit of backlog, what are your thoughts around that? Are you looking to acquire any other businesses, and if so, which areas? That would be the first two questions I have.

I will answer to the second question first and then John will cover the PLSVs. Our strategy is to use our balance sheet for investment for growth if there are identified opportunities which would deliver superior return for the shareholders. So, we're always looking at opportunities as part our overall strategy in terms i-Tech Services and Renewable and Heavy Lifting. I mentioned before that as far as the fleet is concerned, we are comfortable with where we are. Regarding the opportunities, very difficult to say what will materialize on not. So, future will tell.

On the PLSVs, as we mentioned, we have four, 550-ton new asset class PLSVs under contract for a significant number of years. We have three low coming to close on their existing contracts next year. The Petrobras system is very transparent. They go publicly bidding for extensions and such like and they do not show any intention to come to the market for further needs for those, although we may get some short term, one or two months, extensions have historically happened sometimes on the conclusion of existing contracts. Maria-Laura Adurno: And just one last question. You've been extremely aggressive at reducing your costs and you're now mentioning near-term challenges with respect to pricing. I was just wondering whether on your side there is additional cost that can be squeezed out.

I think we have reduced significantly our internal cost while maintaining capability. People look at headcount reduction, but sometimes underestimate what working in a different way and what efficiency can bring to actually lower not only the internal cost and project cost. So, we really believe that lower cost of the projects will get even more momentum with the initiatives that we've taken with early engagement and different allowance. That's where we see the differentiator to help the industry to lower the cost further on the project.

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

The first one is related to that the margin speech that you have since the beginning. One of your peer recently stated that 2018 should mark the lower point in terms of revenue and both in terms of margin. So, I was wondering if you can assume the same statement for Subsea 7, if you had the same view for 2019? And also, second one is related to the Oslo-listed project. You are bidding with TechnipFMC on integrated basis on this project. But McDermott finally won this contract. I was wondering in your view what are the key element that you missed on this project?

I mean regarding the momentum that we see on the integrated approach for the projects as a way to lower the cost of the project and find different to our working, I think recent experience and what we foresee today everyday makes me believe there is no doubt that it's a step change in what's happening in the industry. Reliance was not an integrated project, we built it in consortium with Technip as do sometimes when this bring more flexibility on the assets and for the client. So, we were not on an SPS SURF integrated offer on Reliance. It's not the option that the client had chosen. McDermott won the projects. I'll let them answer on why they seem they won it. That includes, obviously, pricing which Reliance looked at. It may relate to operational risk and different things. But I cannot comment really on what the competition is doing.

And so, regarding these statements for 2019 compared to 2018 that one of your peer recently made?

I think it's too early to be very specific on 2019. I mean, as you know, there is still some questions on the timing of some project awards. One positive side is what we've seen on the price of oil, that would be encouraging for the longer term. But I would never -- I cannot comment on '19. It's too early.

The next question comes from the line of Nick Green from Bernstein.

Can I just come back on the PLSVs please? John, you mentioned three come to close next year. Can you just confirm them? I thought the Condor was maybe comes to close at the end of Q3 this year. So, has that been extended or has it slightly delayed? If it wasn't the Condor, could you confirm the three vessels please?

Yes, the two AAAs come to a close which is the Condor and KG3 next year, and we also conclude the Phoenix contract as well.

And the Condor, has that been extended then? Because that was due originally to close in end of Q3, I think.

We in -- sorry which -- in '18 your discussing this, sorry Nick, just so I'm clear.

Is due to close, I thought, in Q3 '17.

No, she works into '18 for us at the moment.

It was the initial contract, I mean there is no change there and the contract is going on.

As you know, there were some changes to the -- there were extensions given to us in the last quarter through the backlog we picked up with Petrobras, but that was all extensions to the large 550-ton class asset base.

Sorry, if I may add one point on the PLSVs, one of the thing we said in our script is that we have today, at the end of the quarter, we had $1.5 billion backlog and that 90% of this backlog comes with the four highest specific rentals which are really what matter.

And then just a general question on, I guess, sales for the future and your comments, Jean, about being comfortably taking your fair share of work. Across the sector, you guys I think have probably the lowest rolling 12-month book-to-bill at the movement, probably caused by having quite good sales from work won in the last year or so. But it does seem on those kinds of metrics that maybe you're not taking your fair share of work. Could you give any comments on why you're comfortable you will still be taking a fair share of whatever work is available next year?

Yes, I think first, it's difficult to evaluate the share, what is the market share on a couple of -- on a one or two quarter. But what we are seeing today is that the industry is moving towards more technology, more early engagement on the engineering side, clearly a very big momentum on the Reliance side with the SPS and so. And we see this market starting to pick up first in the North Sea, which is a short-term fuse, where we are very well placed from a competition perspective. So, when I put all that together, I come to the conclusion that I'm comfortable with where we are going.

Just a final question, back to the margins, talking about recovering to historical trends or to historical levels. If we did a longer historical, we did a 2005 to current level, you are close at the sort of 13%, 14% margins. You go back to the beginning of 2000, which I guess includes the last down cycle, it's lower again. The last 5 years it's about 19%, 20%. So just to be clear on what you're roughly guiding to, are you viewing historical as more like the last 5 years or are you open to the idea that it could be a 10-year average historical?

Well, I was looking -- I was referring to the good time as historical time in the years to come in medium and long term. And when I was referring to margins, I really believed that the differentiator of Subsea 7 will allow to improve this margin because of the early enrollment, because of the technology, because our alliance with OneSubsea, Schlumberger.

Your next question comes from the line of Anne Gjoen from Handelsbanken.

Yes, I have two questions if I may. First one, is it some part or areas where you find it interesting to broaden your scope, particularly in -- within renewables. And the second one, when it comes to this windfarm tenders, is it possible to indicate how sizeable they are, name some of them or have you seen some new in third quarter?

John, you want to take the question?

Yes. I think the renewables is a market where today we have a very strong position in -- through our SHL business in installing substations and also, we have a strong position in jacket and monopile foundations. And as Jean mentioned earlier, the sizes of the turbines are getting bigger, which means larger foundations, which means the SHL asset base is the right capability for that. As we're seeing on Beatrice, we also have about 180 kilometer of inter-array cables to install. So that's an adjacent part of the market that's also of interest and sometimes becomes part of our scope. And finally, then actual turbine installation is something that we don't do today, but we also have in our mind that we need to understand strategically where we go with the turbine installation activities. In terms of bids at the moment, we are bidding a number of substations in Europe. There will be some in Holland coming to the market soon. In terms of the larger EPIC, we're going to see the U.K. project called [indiscernible], which is quite an interesting Gaelic name, coming out in Scotland and that would be a project for installation in 2020. That would be out to the market for bidding reasonably soon. We're also preparing ourselves for the electrical projects in France, which will also be out for bidding at the first packages of the French EPIC market coming there. We are presently tendering some work in Taiwan, which is the first packages of work to come out in Taiwan, and also the Vineyard project in the U.S. is also a project which will be to the market in the near term. So, we are seeing what is traditionally a very European based -- and successful based renewable industry, starting to spread its wings in a limited way. We're starting to see the French market pick up. So, for us we remain very focused and very interested in that market and we remain very open minded as to what capability we need to have enhanced and what ability we will purchase from the market.

The next question comes the line of Frederik Lunde from Carnegie. Please go ahead, your line is now open.

Just a couple questions. Firstly, on the Normand Oceanic, could you just clarify if any of the debt was on your balance sheet before acquisition, 50%, 100% or nothing?

Yes, Ricardo, you want to answer this question?

Yes, Frederik, this was a non-consolidated joint venture. So, none of debt was on our balance sheet.

And in terms of dividends, is it fair to assume that an improving market should warrant dividend also next spring? I know it's up to the board, but I'm sure you have some opinions on that.

Frederik, I think you're quite familiar with the processes of Subsea 7. Our board evaluates it's -- the options for returning cash to shareholders regularly and we intent to file a review of that towards the end of this year in the light of result for 2017 in this instance, so we'll be providing more clarity next year on our intentions there.

I've been quick so, I will take the chance of one more question. M&A, do you see benefits from closer integration, meaning ownership -- joint ownership which you don't have today?

You are referring to the vessels?

No, I'm thinking of integrated offerings, SPS and SURF. Can you take out all the synergies from the current alliance or will it have an even more synergy potential if you have joint ownership?

Well, I think we're quite pleased with the way the alliance works together -- works today. We are working every day on strengthening this alliance and finding better ways of working and we have more and more collaboration by the teams on the two sides. I think, overall, it works very well. Always ready of ideas of how to improve it further. But it's -- I see more and more momentum and my comments on differentiators in -- the comment I made on differentiation in previously relate to a large extent on what we are seeing today with the OneSubsea, Schlumberger alliance.

Your next question comes from line of James Thompson from JP Morgan. Please go ahead, your line is now open.

Just a quick one on the short-term market really. Referring back to the question on the revenue bridge into 2018, I was just interested to know, we've seen oil prices strengthen pretty materially through the third quarter and into the fourth quarter. So, I was kind of interested to getting idea about how you're seeing the spot market and a shorter-term charter market developing in the fourth quarter and whether that's a sort of significant component going forward of your revenue bridge into 2018. Because if I look back through Q1 to now, you added about $800 million of backlog for revenues into FY'2018, but you still got $1.4 billion to go. Clearly some of that might be a Saudi LTA. But just I'm struggling to bridge that gap. So just some insights on the short-term market and that revenue bridge would be very helpful.

Yes, depending on the execution of the project depends obviously on the time of or the type of project between like field and SURF and also where it happens, the type of model, the commercial model in North Sea, et cetera. I would like John to give a bit color on how we see this market evolution and why we made our comment about '18 on the revenue.

Yes. So, I think in the revenue, as we mentioned earlier, we are seeing a lot of interest in the North Sea, there is lot of tendering in the North Sea. We're doing a large number of studies. There remains a lot of interest in our bundle opportunity and bundles upon award bring revenue quite quickly into our system as we're manufacturing those the year before installation. As we stand here today, we have four diving ships still working in mid-November here, in the North Sea which shows again that operators in the North Sea can move very quickly either to get their Life of Field work done or some incremental CapEx done as well. As you mentioned, we do see that we will get a reasonable fillip of work in the Middle East as well next year to build up the revenue bridge. So, for ourselves, the level of interest in the North Sea, our historical strength in the North Sea, the number of studies we are seeing, gives us a good insight that we believe we'll be able to pick that up, as well as the Middle East are two prime drivers for us in making our views on the revenue.

And just maybe one final one following up on a couple of earlier questions, just wanted to try to understand how important the PLSV renewal is to margin recovery in sort of medium term.

Our main as Jean said 90% of our backlog is on the four large 550 class and they don't get renewed till 2020, 2021 -- '21, '22 period, sorry. So, the renewals of those won't come to market we don't believe for two or three more years.

The next question comes from the line of Morten Nystrom from Nordea Bank. Please go ahead. Your line is now open.

But I just want to follow up on the dynamics with respect to the integrated contracts. For us looking into this industry, it seems clearly, I think you also mentioned it that this is getting more and more momentum basically for each month. On the back of that, do you see any negative aspects of being in alliance compared to a fully integrated company such as TechnipFMC? Do you get any comments from clients regarding that?

No, I think from client, I've not had one negative comment regarding our model versus TechnipFMC. When the way you actually manage an alliance compared with an integrated company, obviously you have pros and cons. I would say, overall, I'm very comfortable with the way we work and I'm more than comfortable with what camaraderie bring on the table, which is also part of the downhaul and pro-insurance and everything else, which some of our competitors do not have. So overall, it's positive.

I think we think we can take one more question.

Next question comes from the line of Haakon Amundsen from ABG Sundal Collier. Please go ahead. Your line is now open.

I just had a question on your cost base. You're adding some headcount from the acquisitions. So, I wondered if you could quantify how much your fixed cost base is growing into 2018 and also if you could give some color on the level of procurement in 2018 relative to 2017 please.

Yes, Haakon, I guess terms of the cost base, I'm not going to give you specific guidance at this stage. But essentially, we have, obviously, incorporated additional resources both on the SHL side and through the acquisition of the remains of the ECS business. But these are the activities that are incremental to what we had before and we will be looking overtime and through 2018 to seeing what sort of synergies we can achieve as a result of these acquisitions that we have made. I do want to emphasize too that the quality of personnel that we have incorporated into Subsea seven is very high and certainly in the case of the Middle East where we had no presence, we are relying on the resource that ECS brings there. As far as procurement is concerned, I think we highlighted that, I mean, 2017 would be relatively high in procurement proportion versus '16 because of the impact of Beatrice, in particular on the renewable side. Going forward in 2018, I think it's -- you're safe to assume that we will be returning to our historical levels, which I think we've guided in the past to somewhere between 35% and 45%.

Thank you. I think we must now draw to a close. I would like to thank everybody for participating in this Q3 earning call. And if you have any follow-up questions, please contact Isabel, our Investor Relations Director. Thank you again and looking forward to talking to you in different visits or at the next earning call. Thank you.