Thank you for standing by, and welcome to the Subsea 7 Q4 2021 Results Conference Call. At this time, all participants are in listen-only mode. There will be presentation followed by question-and-answer session. [Operator Instructions] I must tell you that the conference is recorded today at 3rd of March 2022. I would now like to hand over to speaker, Katherine Tonks, please go ahead.

Welcome everyone. With me on the call today are John Evans, our CEO; and Mark Foley, our CFO. The results press release is available to download on our website, along with the presentation slides that we’ll be referring to during today’s call. May I remind you that this call includes 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. I'll now turn the call over to John.

Thank you and good afternoon, everyone. I will start with the highlights from 2021 before passing over to Mark to cover the financial results. Turning slide 3, revenues improved 45% year-on-year to $5 billion and our adjusted EBITDA margin was broadly stable of 10%, giving us an EBITDA of $521 million, up 55%. Operating cash flow was $293 million and we generated free cash flow of $127 million, resulting in net debt including lease liabilities of $55 million. As we announced with our results, the Board has decided to adopt the regular dividend policy. It is approved the total return to shareholders of $100 million in 2022 comprising of a regular dividend of NOK1 per share, and the share of purchase of approximately $70 million. Both the regular dividend policy and the buyback mark the Board's confidence in the financial position and the outlook for the group. During the year, we had good fleet utilization of 83% with activity centered on Norway, the Gulf of Mexico and Brazil. Our large EPCI projects such as Seagreen, Bacalhau [indiscernible] and Sakarya are all making good progress. We ended 2021 with a healthy backlog of $7.2 billion after order intake of $6.1 billion. We make good progress in our strategies for both the Subsea and the wind businesses and increased our presence in the floating wind markets. I'll discuss these a little more in detail later. Turning to slide 4, and our recent operational highlights. The engineering and procurement phases of a major EPCI projects are on track. In Brazil, fabrication of Bacalhau project is progressing well, whilst on [indiscernible] engineering is underway. In Turkey, we have started preparatory siteworks for Sakarya Phase 1. In Norway, we tested and commissioned the electrical heat trace flowline on [indiscernible] and we had several vessels, including [indiscernible], although we incurred some downtime for weather. In the Gulf of Mexico, we close out the King’s Quay at EU and the Seven Navica, Arctic, and Oceans all contributed to installation activities. At Jack St Malo, the production flowlines and rises were completed and loading over the equipment to the Seven Oceans has begun. In renewables, the Seagreen project remains on track with 10 foundations installed by the year end 2021 and a further 11 installed in January. Delivery of the cables to our base in Scotland is on track and the installation of the first cables has commenced. The remaining foundations and in array cables will be installed in 2022 as planned. Elsewhere, Seaway Strashnov installed monopile foundations on Hollandse Kust Zuid; and the remaining 105 to be installed during 2022. Seaway Aimery, Moxie and Simar Esperanca all continue to work on Hornsea II. Turning to slide five. We had a very good year for new awards at $6.1 billion, up 38% year on year, resulting in a book to bill of 1.2. Q4 awards, including Scarborough in Australia, and the three year PLVS contracts in Brazil. These were boosted in the fourth quarter by a high level of escalations. By the year end, the backlog has reached the highest levels since 2015. We have good visibility on revenue for 2022 with $3.4 billion to be executed in Subsea and Conventional, and $0.9 billion in renewables. Our backlog for execution in 2023 is $2 billion. And that is nearly 30% ahead of the level for the equivalent period this time last year. And now, I'll pass over to Mark to run through the financial results in more detail.

Thank you, John, and good afternoon, everyone. I will begin the financial results review with some details of business unit performance in the fourth quarter and full year, before returning to the group income statement for some additional comments. Slide six summarizes the fourth quarter performance of our business units. Subsea and Conventional generated $1 billion of revenue, 44% higher than the prior year with notable contributions from Sakarya, Bacalhau projects in the Gulf of Mexico and Saudi Arabia. Renewables revenue was $326 million, up 49% year on year, mainly driven by higher revenues from the Seagreen project as well as contributions from Yunlin, Hollandse Kust Zuid and Hornsea II. Adjusted EBITDA for Subsea and Conventional was $143 million, broadly flat year on year, equating to a low margin of 14% compared with 18% last year. This decline was due to the early phase of projects in the portfolio, lower claims settlements as well as some costs associated with working on Rewa in Norway. Adjusted EBITDA for renewables was $10 million in light with the prior year period. This compares with the adjusted EBITDA reported by Seaway of $40 million. The $20 million difference reflects a charge on a wind project in Taiwan, whose economic interest was retained by Subsea 7 as part of the combination with OHT. The depreciation and amortization, net operating income for Subsea and conventional was $50 million compared to $47 million loss in the prior year quarter, which included $94 million of asset impairment charges, while renewables recorded a net operating loss of $12 million compared with a loss of $2 million in the prior year. Coming to the full year, Subsea and Conventional revenue increased 33% to $3.7 billion, while revenue from renewables doubled to $1.3 billion, representing 25% of the group revenue. The greatest contributions in the year were from e Seagreen and Renewables on the Bacalhau, Mad Dog 2, King's Quay and Sakarya projects in Subsea and Conventional. Adjusted EBITDA for Subsea and Conventional was $468 million, up 10% year-on-year, equating to a lower margin 14% compared to 16% last year. This was mainly due to the execution of early phases of projects and a portfolio awarded at a relatively low margin in prior years, more client settlements from certain projects, partly offset by lower COVID-19 costs. Adjusted EBITDA for Renewables is $4 million, going from $12 million in 2020 due to charges in Taiwan resulting from operational delays, partly offset by good progress on Seagreen. After depreciation and amortization, full year net operating income for Subsea and Conventional was $103 million compared to $48 million in the prior year quarter, excluding $294 million of impairment charges, mainly related to vessels. Renewables recognize the net operating loss of $60 million compared with a loss of $40 million in the prior year. Slide 8, shows summarized income statement. The group's fourth quarter revenue was $1.4 billion, 45% higher than the prior year period. Adjusted EBITDA of $143 million was down from $165 million last year. This resulted in an adjusted EBITDA margin of 10%, about 600 basis points lower than the margin achieved in the prior year quarter just the phasing of projects in the early stages, some downtime for well [ph], and charges relating to projects in Taiwan. The prior year fourth quarter benefited from the release of restructuring provisions of $40 million. Coming to the full year, revenue in 2021 was $5 billion, up 45% year-on-year. Adjusted EBITDA was $521 million, up from $347 million in 2020. The improvement included the reversal of restructuring charges of $47 million in 2021, compared to the charter $86 million in 2020. Net COVID-19 costs $27 million in 2021 were lower compared to $70 million incurred in 2020. Adjusted EBITDA margin was 10.4%, slightly up from 9.7% in 2020, while the underlying margins reflect the execution of projects awards during the downtime, as well as phasing of certain projects in the early stages and charges related to delays on projects in Taiwan. In 2021, net income benefited from the absence of asset impairment charges on goodwill, property, plant and equipment and right of use assets but reflects the COVID-19 deterioration and the outlook for oil and gas markets. Overall, net income for 2021 was $46 million, compared with a net loss of $1.1 billion in the prior year. Coming to Slide 9 for supplementary details of the income statement. Administrative expenses in the fourth quarter improved $10 million year-on-year, driven by impairment charges of $4 million compared to $14 million impairment charges in 2020, partly offset by the addition of administrative expenses related to the combination with OHT. Fourth quarter depreciation and amortization increased slightly to $112 million from $105 million, mostly due to the addition of OHT five heavy transportation vessels, to be actively from the fossil approval. Net finance costs fell by $3 million, mainly due to low charges related to lease liabilities While taxation was $16 million, representing an ETR of 81% elevated by extra profits in certain jurisdictions and irrecoverable reporting taxes. Moving to the full year, administration expenses about $228 million $40 million year-over-year, benefiting from an impairment with assets of $4 million in 2021 compared to charges of $18 in 2020. And credits related to restructuring of $3 million in 2021, compared to charges about $11 million in 2020. Depreciation and amortization was $444 million in 2021 up $2 million year-over-year and included the OHT vessels in the fourth quarter. Net finance costs for $15 million in 2021 and $5 million year-on-year, mainly due to low charges related to lease liabilities. Taxation of $64 million equating to an effective tax rate of 64% was driven by the mix of profits in certain jurisdictions and irrecoverable reporting taxes On Slide 10, irrecoverable cost histogram which shows four segments in four categories. In 2020, you saw the impact of the cost reduction plan as we realigned our business in response to the COVID-19 pandemic and associated global economic slowdown. The costs have increased in 2021 and while the industry recovering. Direct project costs are a functions of volume mix and phasing of activities on the pricing and bitumen forprocurement. In 2021, we saw significant increase in our procurement costs driven by the mix and phasing of a project portfolio, particularly our largest EPCI projects, for example Sakarya, Bacalhou and Seagreen. Personnel costs increased approximately $1.1 billion in 2021 as we expanded our tendering and engineering teams to assess the sharp uptick in industry activity. Personnel costs also include the extra gross cost in relation to COVID-19. Such costs include the need to have standby crews under quarantine with crews in accordance with local regulations. Vessel and other costs increased approximately $400 million. We ended the year with 34 vessels in their active fleet up from 40 at the end of 2020 with the additional five heavy transportation vessels from OHT partially offset by the recycling of Seven Vega. Slide 11 shows a cash flow waterfall for the full year. Net cash generated from operating activities was $293 million, including a $303 million build working capital. The lawsuit [ph] was driven by the timing of milestone payments and working capital requirements associated with projects in the Middle East and lease payments in Taiwan. Capital expenditure was $167 million, but way above well depreciation and amortization of $444 million, reflecting the absence of new build vessels in the year. During the year we recalled $93 million in lease payments, mainly related to charter vessels, and $93 million relating to dividend payments and share repurchases. In the fourth quarter, we driven $200 million from the group's UK export finance facility and advance of the anticipated working capital build in 2022. At the end of the year, we have $598 million in cash and cash equivalents and moved to a net debt position of $55 million, including lease liabilities compared to a net cash position of $44 million, including refi abilities at the end of 2020. The group's liquidity was $1.6 billion, which included $956 million of undrawn borrowing facilities. To conclude, slide 12 shows our guidance for the full year. Before I comment on the full year, I want to highlight that the first quarter have a heavy plan vessel maintenance schedule, with 10 vessels undertaking drydocking, modifications, or maintenance. This is an addition to the Northern Hemisphere seasonality normally experienced during the quarter that results in more activity. Quarter one adjusted EBITDA will be more than in particular periods, however, full year adjusted EBITDA is expected to be in line with or better than last year. Returning to the full year, revenue is expected to be broadly in line with 2021, while adjusted EBITDA as mentioned a moment ago, and net operating income are expected to be in line with or better than last year. Our administrative expenses are expected to be in the region of $240 million and $260 million, depreciation and amortization expense is expected to be between $460 million and $480 million, while net finance costs are expected to be between $20 million and $25 million. Taxation for the year is anticipated to be in the range of $35 million to $45 million. As we announced last quarter, our capital expenditure in 2022 is expected to fall within the range of $420 million to $440 million, inclusive of approximately $280 million relating to Seaway Seven’s newbuild vessel program. I'll now pass you back to John.

Thank you, Mark. On slide 13, we have a summary of our strategy comprising the Subsea Field of the Future, and a proactive participation in the energy transition. In the next two slides, I'll do a recap of our successes this year, before turning to our strategy for capital allocation. Strategy for the Subsea Field of the Future revolves around four focus areas; early engagement, system innovation, our integrated offering, and digital delivery. Early engagement has become a cornerstone of our relationships with clients, allowing us to work closely with them to help optimize their field developments and has been particularly important as supply chains have tightened. Our engineers and supply chain management teams work with our clients to navigate bottlenecks to ensure they get access to the right capacity at the right time. About 60% of our EPCI contracts awarded in 2021 follow a reengagement and seven out of 10 awards in Norway were the result of working in close partnerships with our clients. 2021 was a significant year for innovation in Subsea 7. Our state-of-the-art pipeline vessel, Seven Vega joined the fleet and has been key to our delivery of our Electrically Heat Traced Flowlines. With enhanced flow assurance, EHTF allows longer tiebacks as well as reducing the carbon footprint of satellite developments. Moving to integrated SPS and SURF and our Subsea integration alliance with OneSubsea. We offer our clients one interface and the streamline service from design to commissioning of entire Subsea developments. The feedback from our clients has been excellent, and the numbers speak for themselves, with the 76% share of integrated rewards by revenue since January 2020. The integrated offering is gaining popularity with our clients and in 2021, 62% of our service awards were integrated. Finally, we are rolling our digital strategies across several aspects of our business, delivering an improved performance for our teams and enhanced experience for our clients. The good example of this has been the launch and rollout in 2021 the 4insight, which uses big data and machine learning to improve the uptime of our vessels. Moving to slide 14 and our strategy of proactive participation in the energy transition. The renewables piece of the strategy is probably well known to you by now, with the creation of Seaway 7 ASA, as well as our participation in the salamander floating wind joint venture, and investment in Nautilus floating solutions. Floating wind is gaining momentum, with several demonstrated projects underway and being tended. Other exciting markets are carbon capture and hydrogen. We won our first carbon capture award for Equinor's Northern Lights project in 2021, and we are bidding for further projects that will highlight in a moment. A hydrogen strategy is at an earlier stage and we gained valuable insight from our subsidiary Xodus, which has worked on over 50 hydrogen studies, as well as over 30 carbon capture strategy studies. Of course, as well as embracing new energy markets, a very important part of our energy transition journey is helping to reduce the carbon emissions of clients oil and gas projects, as well as reducing the emissions of our own fleets. In 2021, our carbon estimator tool is now incorporated into all our studies. It allows our clients to estimate the carbon emissions from different permutations for field ads, and helps them optimize their developments. And the carbon estimator was used to optimize 64% of contracts awarded to us during this year. Finally, but perhaps most significantly, in 2021, we lined the goals of the UN Paris agreements to target Net Zero by 2050 with a reduction of 50% in our Scope 1 and Scope 2 emissions by 2035. Our vessels accounted for over 90% of our Scope 1 and Scope 2 emissions, and we aim to reduce the carbon footprint through a combination of hybridization, shore power, clean fuels, and digital efficiency. We will report on our progress in our sustainability report for 2021, which we’ll publish in mid March. Wrapping up the strategy session, let's turn to Slide 16, where we clarify questions about capital allocation that we've heard often from investors and analysts over the past months. What we have here is a simple schematic to highlight on one hand use of cash from Subsea and Conventional and on the other hand, the funding strategy to Seaway 7. Our Subsea and Conventional business unit has a young fleet of vessels that will capture opportunities in the rising oil and gas markets, was requiring reduced levels of capital investments with a solid industry outlook, stable competitive landscape and investment well below DNA. This business is well positioned to generate significant free cash flow. The priority for this cash flow will be shareholder returns. Starting as we announced today, with a regular dividend. The mechanism and magnitude of additional cash returns will be left to the discretion of the Board and assessed annually, but this year includes a $70 million share repurchase. On the right hand side, we have Seaway 7, which we currently have 72% stake and it is our intention to HoldCo at least 51% stake. Seaway 7is as focused on the high growth fixed offshore wind market and has two new vessels under construction, which are due for delivery in 2023. It is Seaway 7 intention to fund these and any future new bills independently for Subsea 7. Of course, Seaway 7 debt will be fully consolidated on Subsea 7 balance sheet. I hope this slide illustrates our intention to keep a relatively separate underlying structure. Also working capital support from Subsea 7 may provide the Seaway 7 whilst it establishes itself with an independent capital structure. And with that, back to our usual outlook slides, starting with the prospects for Subsea market on slide 17. We were very pleased with our strong order in-take we reported for 2021, and indicative of a recovery that's underway in the oil and gas industry. Tendering remains very active. And we are optimistic that 2022 will be another very good year for new awards. At the core of this recovery, the most active markets remain Brazil, where we have a long list of prospects for both Petrobras and Búzios [ph] the Gulf of Mexico with multiple tie-back projects in the tendering pipeline, and Norway, with a tax incentives should lead to high level of awards this year. We see pockets of improving activity outside these regions. There are a handful of projects in West Africa that are pushing ahead, bidding in Saudi Arabia remains active. We're now working on the tender for Sakarya Phase 2 Turkey, the follow up to a $1 billion Phase 1 project. In 2022, we also expect to see further carbon capture awards, as capital allocated to this emerging market by our clients begins to accelerate. The first such projects we will bid are in the UK for the northern endurance partnerships in Humberside and Teesside. In US field will act as a CO2 store lies approximately 100 kilometers offshore from the Humber. And we expect an award to the market in 2022. Although, we are encouraged by the way the recovery is progressing, and remain confident in the outlook for Subsea and Conventional. On the next slide, we have the wind prospects. I'll leave these and the detail to see what – centered the discuss. But we continue to see strong demand centered on the US and UK with awards expected to the industry this year and onwards. We're also expected to bid two floating wind demonstrated projects in Korea during 2022. So to wrap-up, we'll turn to our final slide on page 19. While it's true to say that, some of the challenges of COVID-19 continued to affect 2021. It was a year of strong recovery for Subsea 7 that leaves us very well positioned to deliver as the cycle develops. This is a view that is shaped by the Board and underpins the decision to introduce a regular dividend. The Subsea and Conventional business, we have already seen order intake reach the highest levels we've seen for several years, and tendering remains very active. In Renewables, after a hiatus in awards in the U.K. offshore wind market, the CFD round in the first half of this year should unlock opportunities, whilst in the U.S. some large projects are scheduled to award to the industry this year. Of course, as we've heard from companies around the globe, raw material exposure and supply chain management becomes critical, because no one can be totally immune. We believe we have measures in place to mitigate these risks as much as possible. Finally, the emerging energy markets that support the long-term outlook for Subsea 7 are gathering momentum with demonstration projects in floating wind and tenders for carbon capture projects. Overall, we believe Subsea 7 is well placed to capture opportunities in today's evolving and dynamic energy markets. With that, we'll be happy to take your questions.

Thank you. [Operator Instructions] We have the first question is coming from the line of Sasikanth Chilukuru from Morgan Stanley. Please ask your question.

Hi. Thanks for taking my questions. I had three please. The first one was, I was wondering if you could provide some more color on how the tendering activity has improved in recent weeks, especially in the Subsea and the Conventional business. How the discussions with clients have changed over the course this year so far. And how confident are you in improving your order intake in 2022 relative to 2021? The second one was related to the offshore wind project, the Formosa 2 project, you've highlighted, you're getting the costs recognized for Taiwan offshore wind project within Subsea 7, I suppose this is the Formosa 2 project. Can you update -- can you give us an update on how the project is progressing? What contingencies you have included in your 2022 EBITDA guidance related to this project? And previously you have highlighted that you're in discussions to recover the incremental costs from the clients in accordance to your contractual terms? How are these discussions progressing? And finally, if you can give us a guidance or color on the expectations of working capital in 2022? Last quarter, it was highlighted that there will be a working capital build in 2022, is it still the case and if you can guidance on the expected magnitude of the potential working capital outflow? Thanks.

So, there are more than three questions there that fell, try to answer them as best I can. But good to talk to you again. So as I mentioned, in my prepared remarks, we are certainly seeing a lot of activity, but a lot of tendering moving. We are very much in a place where we are seeing improvements in terms of pricing on every tender that we submit. We know that we are very well placed for quite a large portfolio of projects in Norway to come our way this year. And those discussions and clarifications are moving ahead, as well as certain base to the market that Equinor will do in the first half of this year. As I mentioned, in my prepared remarks, we're working on the second phase of Sakarya, so that our client is accelerating the next phase of Sakarya moving ahead, and there's no lack of in Petrobras bidding process, you'd have seen Búzios 8 was publicly bid, only two was bided and Subsea 7 is the lowest bidder on the public opening on that. So we're seeing a number of factors happening, limited number of people bidding tenders, a speeding up of the number of tenders that are happening there. So having the largest fleet in this industry is really, really helping us at the moment, because it allows us to be very clear about where we want to place our assets. I've talked about this in previous quarters our aim was to have one of the big pipe lays down in Australia and Barossa and Scarborough coming together at the end of first quarter helps us there. In Brazil, we want to have one of the big pipe lay in future years and then Bacalhau, Mero-3, and hopefully Búzios 8 fits that. And lastly, then we will have one big pipe lay working between Norway and the Gulf of Mexico. And lastly, then one of the pipelayers in Africa and the Middle East. And again, we can see those pieces of those jickles fitting together. So main message is, it's speeding up. The main messages is that we're very well positioned. And we get many questions why haven't the largest fleet in the world, why haven’t the largest fleet in the world helps you when the market is quite strong. Your second question on Formosa 2. Formosa 2, because we were in the middle of a very complex situation in 2021 in Taiwan, Subsea 7 retaining the economic interest of that assets and that project at the time. We have since clarified our remaining scope, our remaining renumeration and our remaining schedule with our client. And we expect to close that project physically, hopefully, by the end of Q2 2022. We are going back to work this week as we speak with the remaining scopes that we've got. We did incur also some further increased costs in the supply chain, because we have this entire wave of projects that were held up in 2021 that are now on top of a bunch of projects that we have also to be done in 2022. We have now secured all our third-party assets that we need in Taiwan for this year. And that adjustment was taken in quarter four. So we expect to be able to give you an update on how the project goes during the year, but we expect to be materially complete by the middle of 2022. And on working capital Mark can give you an update.

Yes. Thank you, Sasikanth. Working Capital improved by around $100 million in Q4. We communicated in Q3 earnings call that we expected a improvement in quarter four which indeed materialize. However, we do expect working capital build 2022 due to the increased procurement activity of Mero-3 in Brazil, together with the significant activities that we have planned for the Middle East. So, the guidance provided in November of the working capital build in 2022 will be in the low to mid $100 million. What I would say is that we are actively working on this area. And to give an example in January, although its harder a very constructive call with the Petrobras, CFO we had learned the Petrobras very hard to seek improvements regarding working capital requirements as ever with Petrobras it was a very constructive conversation. And what I would say is we are pleased with the changes that Petrobras made and the most recent tender on Búzios 8, elsewhere, optimizing cash management as a focus as I said at some moments ago. So again, our guidance remains the same as we communicated in November regarding 2022 for working capital.

Great. Thank you.

We have next questions coming from Haakon Amundsen from ABG Sundal Collier. Please ask your question?

Yeah. Hi, guys. Thanks for taking my question. Just a question on the Subsea and Conventional margin development. I don't know if you want the guide specifically, but can you give some color on the movement into 2022 and 2023, relative to 2021, please?

Well, we already discussed before Haakon on margins is, you know, we expect to see from middle of 2023 onwards the benefit of newer projects coming into the mix when we physically go offshore. So that position is certainly starting to fit together with the work that we bought in Q4 and work we expect to bring in this year. As we guided in our press release and our comments, we expect to see 2022 EBITDA to be in line or better than 2021. So for us, I think, we should be able to give better clarity to the market has -- and we see things moving. As Mark touched on, we have a large number of vessels under dock and repair in quarter one. So I will see that as the year develops, we can certainly give the market more clarity, but directionally, it's improving and we're seeing that on the pricing that we're seeing. And linked to what Mark just said, you know, on Búzios 8 the working capital is substantially better than Mero 3. So we're seeing two things happening here. We're seeing our margin improved for [indiscernible] projects, and we've seen the entry ticket in certain locations such as Brazil, improve as well.

All right. That's helpful. Just to understand your guidance -- for because when you guide for potentially improving EBITDA in 2022, of course, that's the consolidated numbers. And I guess, Seaway 7 appears to be expanding its EBITDA. So I just wondered if you could give some color on, is the -- should we expect the Subsea EBITDA to expand as well, or is it just the consolidated number and the Seaway 7 number that we should expect to improve? Thanks?

Yeah, I think for us, what we, you know, we've guided were Seaway 7 should be this year, which is a $1 billion business and heading towards its 10% EBITDA. We can hopefully see the piece of that coming together this year. We do need to remember the 2022 offshore is a relatively quiet year for us, because very few projects were awarded to the market in 2020. We've adjusted the size of the fleet. And as Mark has discussed, we have a large volume of low margin procurements on all these future projects for 2024 and 2025 going through the books. So the mix is changing, but they're actually happen -- we're very comfortable with which way this is all heading.

All right. Thank you. That's it for me.

We have our next questions coming from James Thompson from JPMorgan. Please ask your question.

Great. Thanks very much. Good afternoon, gents. Just a follow-up there on Brazil, John. I mean, you said that Búzios 8 [indiscernible] improving, you know, something you talked about last quarter looking for that? Do you think that's a sort of permanent adjustment that Petrobras is making, or is this something that's kind of very specific to the wants and needs of this particular project?

I hope they are actually heading the right way. You know, they only had two bids on that opportunity. And, you know, as the market starts to tighten up, I think they are acutely aware that they have used the cycle to get some better working capital in on previous bids, which all the main players were taking at the time. But I think all of us are pretty clear now in the market that we should see some improved working capital there. So, I believe that certainly in the message the Mark and I gave to the executive members that we discussed these that [Indiscernible] needs to improve, but your remaining list of projects also need to improve that this was a temporary move that Petrobras were quite smart in taking the downturn in the market to achieve. But we should hope to see each bid comes along. The Petrobras system is very open, you can send as many questions in as you want on each bid. And we have been banging that drum for a number of quarters about the very, very important side of making sure that the working capital was fair and proportionate for the risks that we take.

Okay, okay. That's helpful. More of a more general question. I mean, just COVID, obviously, a big impact last year, can you tell maybe about the sort of changes. Is it -- you feel like operations are going to be just a lot easier now this year, in general?

I think if we keep COVID very simple, 2020 was the entire world, that exactly the same thing all the world round. Our crews who are effectively mariners, were free to move around the world on seamen’s tickets. And it was a very difficult year. But logistically, simpler. 2021 is dependent on the color of your passport and which countries have vaccinated and which countries hadn't. So 2021 was an exceptionally complex set of nationality mixes that we have on our vessels and how we did that. This year, we're actually seeing, in places like Thailand and Brazil, a slightly different problem. All our crews are fully vaccinated and very healthy and no major issues on our vessels. But we still have some regulations that were put in place quite rightly 18 months ago, that say, if you have a single case of COVID on your vessels, then you need to change the entire crew out. So it's that sort of lag between regulation and medical risk and reality that is one of the challenges our industry is facing at the moment. But I expect to see that normalize as time moves on.

Okay. Thanks. Just two small questions for me. One is, just in terms of the sort of renewable piece. I mean, just wondering if you could talk a little bit about 2023. I mean, in terms of the bids that are coming up for this year, is there much that you can sort of fill in from a revenue perspective or expecting a pretty significant drop in revenues in 2023? And then, just in terms of your other projects that are ongoing? Just wondering if you can give us an update on the Sangomar project, actually, don't hear that much about it?

Okay. Renewables, as I touched a little bit in my prepared remarks, James, the biggest market for renewables is the UK sector. The UK Government, for political reasons, decided to delay the contract for different auction lands by a year. So a large group of UK projects that are on the diagram, we're delayed by a year, but we do expect them to be awarded by the middle of this year in the market. But what that means is, physically offshore, next year, it'll be a quite the market than we expect. So we do expect probably the revenue in the renewables business to go down next year. So -- but, equally, we do expect that the Seaway 7 share of some of those UK projects and awards, the market should be reasonably strong is the Seagreen 1A is mentioned, which is the extension to the current project that we're working on. And we expect that one to have its CfD awarded in the middle of this year. And we're bidding a number of those other projects there. So we'd expect Seaway 7 get its fair share of work on those. But most of those, with the exception of Seagreen 1A and T&I projects, which will cut in 24 onwards. We expect the USA projects to continue to be awarded to market, but most of those again that transport uninstall for 24 onwards. If we come back to Sangomar, Sangomar is a project that goes offshore. Literally as we speak, we have vessels working in Senegal at the moment in the preparation work. And we expect the pipeline to take place as planned in quarter two this year. So Sangomar is trucking along in the background and dreams a big project and hopefully we can give the market more updates in Q3 and Q4, as we liquidate the bulk of the work in Q2 and Q3.

Okay, great. Thank you. I'll turn it back. I'll pass it on.

Thank you.

We have the next question is coming from Nick Peacock from Barclays. Please ask your question.

Hi. Good afternoon everybody. Obviously, good to hear, you are making progress on working cap, project terms or conditions. I'm just wondering, if you're getting to that point yet where you think you can start increasing your gross margin expectations on projects. And whether you think the future whenever you to be selective and start drop, not dig into contracts yourself and some of these projects are coming?

Thanks Nick, great questions as always. Yeah. For us, we run the business with job level income on each of our projects, and that is improving and increasing. But the other side of good, very good profitability in this industry is over recovery in the vessel, fleet in the vessel asset base. We set our recoveries across a normalized number of days, per year recovery on each asset. And that's why, I mentioned the sort of tactical planning about where we deploy our assets, because we've talked for this group, over the downturn of the inefficiencies of moving type of ships from Australia, to the Norway, to Brazil, where you spend 100 days a year translating. So for us, it's the two sides of that equation that will really start to move the EBITDA margin for this business. And I expect from mid-23, to really start to see the benefits are not only improved job level income and the projects cutting through, but the asset deployment allowing us to get quite high utilizations on the key assets per day. So that's the way I think we will see the market move for us, and this sort of classic combination of two things coming together. And that's why our approach of targeting certain projects in Brazil, certain projects in Norway, certain projects in Gulf of Mexico, and certain projects in Australia should hopefully the market should see all that fit together as time moves on. So directionally, we hope to see that happening. And we see the same hopefully coming in with Alfa Lift in due course, coming in 2023 in the renewables. So we don't have to keep moving crane vessels around the world and such like to do so. So altogether, we should be able to see that coming into fruition, hopefully from the 2023 onwards Nick.

Okay. And just follow-up, you've obviously talked a lot about Brazil. You've talked about Norway later in the year, you mentioned West Africa in passing, clearly, somewhere. It's been important to you over the years, what exactly you've seen in West Africa?

Well, I think we've seen two things in West Africa, we've seen Angola pick up and we're betting some work in Angola. And, we expect to get our share, there's, about three projects there. So we'd like to get one of those over the line in the next few months. So for us, Angola is definitely picking up, as you know, with a preferred bidder on Pecan. So there's work there with Aker Energy to try and see if we can get the stars to align in that part of the world to get that Pecan project over the line as well. And we're seeing, other areas, especially the next phases of Senegal, and others, potentially coming to the market in due course. So West Africa doesn't have the momentum and the speed that we had in the past. But the important thing, it's waking up and starting to move.

Okay. Thank you.

We have the next question is coming from Lukas Daul from Arctic Securities. Please limit your question to one. Thank you.

Thank you. Good afternoon. I was wondering about your order intake in the fourth quarter. There was a decent amount of unannounced orders. Is that something that was exceptional of this quarter, or is it something you anticipate I'm looking forward as well? And then the escalations that you have seen, could you talk a little bit more about them, or what is driving them? And what sort of contributed to the size of those, $400 million?

Yeah, so Lukas, thanks for your question. Escalations come to us in a number of different ways. First one, not all our contracts in Brazil have an annual escalation mechanism, because of the underlying inflation in Brazil for Petrobras contracts that is our international old company contracts in Brazil. So they generally cut in, and they have come into play in this quarter. We also have different settlements with clients, variation order settlements with clients that then go through our lines in both revenue and drop level income in terms of how we do that. So it's really about us working in terms of how we do that. And the last piece for us we took in the fourth quarter, of course, the OHT acquisition, and the revenue that the heavy transport ships and such like that are the sort of foundational via, which can business cut in for us as well. They're the main three elements, Lukas.

Okay. Sounds good. Thank you

We have the next question is coming from the line of from Nick Konstantakis from BNP Paribas Exane. Please ask your question.

Hi, guys, thank you for taking my question. I think, let me just start by welcoming Mark as well in your first conference call. So welcome aboard.

Thank you very much Nick.

Just two question please. Look, I appreciate you're talking about 2022. But I'm looking at 2023 revenue figures and the top line being below than 2021, coverage of about 43%, which is quite high given where we are in the cycle. You spoke confidently about order intake in 2022, you're talking about good momentum. If that outlook were to materialize, could you exceed that, or to ask differently, given the backdrop, isn't the most probable outcome, the 2023 top-line is higher than 2021? And then one for Mark, just looking at a contract asset, I think they've been declining quite steadily through the course of the year in 2020. We have declined this quarter, can you just please discuss the biggest components in there, what drove the decline in Q-on-Q, just looking, for example, at Saudi as well, which could complete the projects next year, and whether that would drive the next step down? Thank you guys.

So Nick, I'll take the first one, and I'll handle over to Mark on the second. We aren't giving guidance today for 2023. I'm giving you directional information about, which way we're going, and we're comparing 2022 with 2021. I think we've been relatively fair with Ricardo, myself and Mark and myself, we can see a number of projects that go offshore from mid '23, being very important in terms of the overall recovery and the utilization. And that remains unchanged. And those pieces of the jigsaw are fitting together. We've talked in some of the other questions about how we see '24 pulling together. So, I think for today, we won't be giving any further detail on '23, other than the direction information that we shared with the market. And we can see that coming. We touched in the previous question, that the gap in the CFDs in the largest market in UK will mean the offshore work in renewables will be lower in '23. And you need to use that in your modeling for 2023. I’ll then asked Mark maybe to address the questions on the contract assets.

Yeah, indeed. So the contract assets is ostensibly a work in progress. This, as the opening balance for projects that haven't yet met the milestone, contractual rate to build to the client. You're correct. We have seen that increase between the end of 2020 and 2021. And that's one of the key factors contributing to the working capital performance. I would expect that to continue through 2022 and one region in particular contributing more. I think we can see that the contribution across a number of projects and a number of regions. I think, we're all familiar with those regions that have a particular condition that our customer into the clients within that region. So I would expect the contract assets to remain elevated during 2022.

Thank you.

We have the next questions coming from Chris Mollerlokkens from SpareBank 1 Markets. Please ask your question.

Yes, good afternoon, gentlemen. With regards to the terms you are offering to your clients, you talked about pricing, but you also try to push out, push out other contracting terms like whether standby, payment terms, et cetera. And can you give a bit more flavor there and how do you see that development?

The main the main area that we're very clear with our clients on the moment is the supply chain. We touched on our prepared remarks, unless we can have a back to back supplier pricing and delivery assurance, or unless we can have a set of escalation mechanisms that provide our suppliers with protection on price of copper or price of steel. So most of our discussions with our clients today about terms and conditions to make sure that we make sure that our supply chain exposure is passed up and down the chain between ourselves and also buyers. We've talked about previously that we've seen our one recent bid in Brazil and improvements in the payment terms. So those are the main areas that we are working on with our clients at the moment. We have a very clear set of contracting principles, inside Subsea 7. And even in the darkest times in the cycle year, we've always maintained our positions about the types of risks that we take and such like, waiting on weather, we again, are quite selective about what we take. And that's what – do you have a pool of different opportunities in certain markets that you can take a view on how the weekend weather may play out through a handful of different projects in that region. So for us, we work and as the market strengthens, we will continue to work on the risk profile that we take. For me, it's all about the holistic risk profile on a project and then the contingency levels and the profit levels that go with a particular project. So that's in a nutshell, where we're at the moment.

You have 4.5 million shares already Subsea 7 on your accounts, and you announced today a repurchase program of around $70 million, would that be a fair assumption regarding the fate of the shares you are repurchasing in Subsea 7?

Okay, so we have a mandate for the Board for share repurchases out to April 2023, we will take a decision closer for the time as to whether those shares will be cancelled, or indeed, they will be retained within Treasury shares. So, too early for us to comment upon the fate of those shares have been bought back in the recent repurchase tranches, Chris,

Thank you.

We have the next questions coming from Kevin Roger from Kepler Cheuvreux. Please ask your question.

Yes, good afternoon, thanks. The first one is relating to the pricing environments in the oil and gas business, because you mentioned remote, et cetera. That's favorable in Brazil. You have only two deal on Brazils 8 [ph]. I was wondering if you can just give us some metrics to show how the pricing is evolving, given you can give a number or something like that to show the trend. And the second question is related to the renewable markets. I wasn't – and if you can also commence the competitive landscape in that space. Because we have seen recently that Saipem trapped with execution issuing a number of projects of wind energy, as recently console contracts. So I was wondering if you can also give us some color in terms of the competitive landscape and the pricing environment in the offshore world, please?

As you know, we have the Seaway 7 team will be coming up. And we'll be coming up with their earnings really soon. So I'll let them give you more details on that. So I think -- coming back to the pricing metrics, I think Kevin, we – you know us we – despite a change in CFL [ph] market we have worked for enough years that we are also about to change our total [indiscernible] decades. I hope we've given you enough information, Kevin, to show to you that directionally things are heading the right way. The market is moving faster. Our clients want to talk to us. They're engaging with us earlier. They want to talk to us about how they can move their projects ahead how they can accelerate their projects ahead. So I would hope you can draw different dots together about what that means. We are late cycle. But now is the time that we are making the impacts on picking the workup that will generate some very good EBITDAs for us in 2024 and 2025. And I think it's important to think about coming back to where we are today. You know, in our sector today, there's us and one other that have a reasonable position in terms -- and a strong position in terms of balance sheet and position with clients. And the clients are talking to us. And there's a certain amount of capacity and our clients are very clear. There's a certain amount of capacity there, hence the speed at which discussions are taking place. I've spoken to many clients in the last month and the same discussion as both. Please be open with us about your capacity. Please tell us what we need to do to secure that capacity. So for me, I think directionally, it's moving well. But we have also been very thoughtful about how we position ourselves here about the size of the fleet we needed, the technology and the capabilities we needed, the relationship with some of those 76% share by revenue integrated SURF and SPS that we have today in that market, means again, there’s value added how we do these projects. So again, we're quite thoughtful about what we're doing. And that thoughtfulness is also about which clients we work with and how we will position ourselves for what is a good set of opportunities for us at the moment. Certainly in wind, we are seeing that, clients are now starting to think ahead about. So again, there's been a number of casualties along the way. So how do they get access to quality, capability? Which can also take the larger size projects that are coming. You see the recent leases in the US, and the recent size projects in the US, these are huge projects that two or three contractors can do. So I think for us, it's about how do we position ourselves and how do we get ourselves in the right place. But I'll have to see we can go, spend a spend a bit more time on their call to explain that if that's the case, Kevin.

Okay. Okay, thanks a lot.

Well, thank you very much. Thanks a lot for everybody's questions. And we appreciate your continued support and input into the market here and we will talk again to you at the end of Q1. Thanks a lot.

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating, you may now disconnect your lines. Thank you.