Good day, and thank you for standing by. Welcome to the Subsea 7 Fourth Quarter 2023 Results Conference Call. [Operator Instructions] Please be advised that this conference is being recorded. I would now like to hand the conference over to your first speaker today, Katherine Tonks. Please go ahead.

Welcome, everyone, and thank you for joining us. With me on the call today are John Evans, our CEO; Mark Foley, our CFO; and Stuart Fitzgerald, CEO of Seaway 7. The results press release is available to download on our website along with the slides that we'll be using during today's call. Please note that some of the information discussed on the call today will include forward-looking statements that reflect our current views. These statements involve risks and uncertainties that may cause actual results or trends to differ from our forecast. For more information, please refer to the risk factors discussed in Subsea 7's 2022 Annual Report or in today's quarterly press release. I'll now turn the call over to John.

Thank you, Katherine, and good morning and good afternoon, everyone. I will start with a summary of the quarter before passing over to Mark to cover the financial results in more detail. Turning to Slide 3. Subsea 7 delivered fourth quarter adjusted EBITDA of $245 million, up 45% year-on-year, and with a margin of 15%, an increase of 200 basis points. In 2023, we grew the backlog 18% to $10.6 billion, adding high-quality projects with an attractive risk and reward that give us good visibility on significant margin expansion in the years ahead. The quarter marked a strategic milestone for Subsea and Conventional with the completion of the OneSubsea joint venture with SLB and Aker Solutions. Our combined strengths, innovations and global reach enable us to accelerate innovation and to support our customers in a continued drive to enhance Subsea performance. In Renewables, we strengthened our fleet with the addition of Seaway Alfa Lift, and in early 2024, Seaway Ventus, adding new capabilities and capacity to reinforce our position as a Tier 1 player in the high-growth offshore wind market. With a solid backlog, active tendering pipeline, and strong market position in both oil and gas and offshore wind, we are excited for the future. This confidence is shared by the Board and is reflected in the commitment to shareholder returns totaling at least $1 billion over 4 years from 2024 to 2027. Turning to Slide 4. Order intake in the fourth quarter was $1.2 billion, split equally between new awards and escalations. This gives us an order intake for the full year of $7.4 billion, a book-to-bill of 1.2x. Momentum continued in our backlog, and at year-end we had $10.6 billion of firm work, the highest year-end since 2013. Slide 6 shows the backlog by business units. With $4.7 billion for work for Subsea and Conventional in 2024 and $1 billion for Renewables, we have very high visibility for the year ahead. And with that, I'll pass over to Mark to run through the financial results.

Thank you, John. Good morning, and good afternoon, everyone. I will begin the financial performance review with some details of group and business unit performance in the fourth quarter before commenting on the group cash flow and concluding with financial guidance for 2024. Slide 7 summarizes the group's fourth quarter performance in the context of the full year and prior 3 years. Revenue in the fourth quarter increased 26% to $1.6 billion compared to the fourth quarter 2022, mainly driven by increased activity in Subsea and Conventional. Adjusted EBITDA of $245 million was 45% higher compared with the prior year quarter, and the margin improved to 15%. In the fourth quarter, depreciation and amortization amounts of $142 million were recognized as well as a net impairment charge of $48 million, which I'll discuss in the following slides. After -- net finance costs of $80 million on a loss of $28 million driven by movements in noncash embedded derivatives and a tax charge of $20 million, the resulting net loss for the fourth quarter was $11 million. The fourth quarter results contributed to the strong growth in revenue, adjusted EBITDA and margin in 2023. I will now run through the drivers for the group's performance in the next few slides. Slide 8 presents the key metrics for Subsea and Conventional. Revenue in the fourth quarter was $1.4 billion, up 33% year-on-year reflecting progress on Bacalhau, and Mero 3 and 4 in Brazil as well as Sakarya scopes in Turkey and early-stage activity on Yggdrasil in Norway. Adjusted EBITDA was $212 million, equating to a margin of 15.2%, a 150 basis points expansion on the same quarter last year. This includes an $8 million share of net income from our OneSubsea investment as well as reflecting the continued shift of activity towards contracts awarded and an improved pricing environment. Net operating income in Subsea and Conventional was $128 million. The performance of the Renewables business unit is summarized on Slide 9. Revenue in the fourth quarter was $218 million, flat year-on-year, reflecting the phasing of major projects and as a result of our increased focus to ensure the right balance between risk and reward in tendering. Adjusted EBITDA was $31 million, resulting in an adjusted EBITDA margin of 14.2%, marking the third consecutive quarter of double-digit margins. This has been achieved as a result of improved execution as well as the aforementioned [inaudible] selective approach to tendering. We believe this margin level is sustainable in full year 2024, although in Q1 it is expected to be lower, reflecting seasonality in the Northern Hemisphere and a high level of planned vessel maintenance. In the fourth quarter, we recognized impairments of $73 million. These mainly relate to Seaway Alfa Lift's monopile installation equipment owing to a contract dispute as well as the impairment of Seaway Yudin prior to sale in early 2024. Slide 10 shows the cash flow waterfall for the fourth quarter. Net cash flow from operating activities was $528 million, which included a better-than-expected favorable working capital movement of $306 million. Net cash used in investing activities was $374 million, mainly relating to final payments for the newbuild wind vessel, Seaway Ventus, and the first of two $153 million installments related to our investment in OneSubsea. Free cash flow in the quarter was strong at $303 million, together with a sharp improvement in cash conversion at 2.2x. Both metrics benefited from the significant working capital unwind. Net cash flow from financing activities was $62 million. This included net proceeds from borrowings of $119 million, partially offset by lease liability payments of $41 million, mainly related to chartered vessels. Cash and cash equivalents increased $751 million and net debt was $552 million. This included lease liabilities of $458 million. The group had liquidity of $1.6 billion at the 31st of December, which included around $860 million of committed undrawn borrowing facilities. To conclude, Slide 11 shows our guidance for the full year 2024. In 2024, we continue to expect revenue to be in a range of between $6 billion and $6.5 billion, where we also continue to expect adjusted EBITDA to be between $950 million and $1 billion. Our expectation for capital expenditure in 2024 has increased slightly to $300 million to $320 million due to amounts deferred from last year. This range is still broadly half to 2023 capital expenditure incurred. In terms of the first quarter, I would like to take the opportunity to remind you that this quarter exhibits seasonality, seasonally lower activity in Northern Hemisphere as well as customarily corresponds with higher levels of planned vessel maintenance. 28 vessels had planned maintenance in Q1, which cumulatively exceeds 400 days. This level is broadly similar to the same quarter of last year. I will now pass you back to John.

Thank you, Mark. On Slide 12, we take a look at our ongoing projects and positioning in the important Australian market. We have a strong track record of work in Australia, having completed over 50 projects since 1977. We currently have 4 projects totaling $1.2 billion underway, the 2 biggest being Scarborough and Barossa. Scarborough is an integrated SIA SURF and SPS project that was awarded with our alliance to OneSubsea. Environmental permits have been received for our scope and we are well underway installing subsea equipment and flow lines. At Barossa, we have the SURF package. Here, we also have the permits to proceed with fabrication underway at our Bintan spoolbase in Indonesia. Overall, we're very pleased with our activities in Australia, building on strong multiyear relationship with key clients such as Woodside, Chevron and Santos. The outlook for further work is positive with multiple gas developments requiring backfill for existing LNG infrastructure as well as longer-term opportunities in carbon capture and offshore wind. Now on to review of our tendering pipeline on Slide 13 and 14. Bidding for subsea work remains very active and our tenders in-house totaling $21 billion. Conversations with our clients about our solutions and capabilities to deliver their projects, provide visibility and supports our positive outlook into 2026 and 2027. A key deepwater region is, of course, Brazil, where we are well positioned to win a fair share of the up and coming Buzios phases. Negotiations to extend the long-term charters of our pipelay support vessels are also ongoing. We also remain optimistic for awards this year in the Gulf of Mexico, where bidding activity remains high, and Turkey where our strong track record leaves us well placed in bidding work for the future. Overall, we are confident that we have a strong tendering pipeline that can support continued momentum in our subsea order intake. On the next slide, we have our wind prospects. After the challenges faced by the industry in 2023, the outlook for new orders in 2024 is positive with an active CFD allocation rent expected in the U.K. this summer and continued strong tendering activity in Continental Europe. Longer term, we expect U.S. tendering activity to rebound as developers rework their plans to reflect the current costs and improve power price environment. Turning to Slide 15. Reflecting the Board's confidence in the outlook for the long-term financial performance of the group, we have announced today a commitment to shareholder returns totaling at least $1 billion over the 4 years from 2024 to 2027, and that's through a combination of dividends and share repurchases. Subject to shareholder approval at the AGM on the 2nd of May, the regular dividend will increase to NOK 6 per share from NOK 1 per share, paid in 2 equal installments in May and November. This represents approximately $170 million and equates to a dividend yield of 1.4% based on yesterday's closing price of NOK 147. In 2024, the company intends to distribute approximately $80 million through share repurchases, resulting in the distribution this year of approximately $250 million, a total yield of 6%. This commitment extends the group's track record of shareholder returns to over $3 billion since 2012. To wrap up, we'll turn to our final slide on Page 16. Subsea 7 delivered a strong underlying performance with adjusted EBITDA for the full year of $714 million. Our working capital position unwound in the second half, including a strong inflow in Q4 and notable improvements in cash conversion. In 2024, we have high visibility on sustainable growth in our EBITDA, combined with a significant reduction in our capital expenditure. The expected increase in free cash flow in '24 and beyond has underpinned a renewed commitment from management and the Board to shareholder distributions of at least $1 billion over the coming 4 years. And with that, we'll be happy to share your questions.

[Operator Instructions] And now we're going to take our first question, and it comes from the line of Kevin Roger from Kepler Cheuvreux.

Yes, good afternoon, thanks for taking my questions. I would ask two, if I may. The first one will be related on the expected order intake and commercial dynamic. Because basically, one of your main peer, TechnipFMC, increased recently its objective in terms of order intake for the next 3 years, mentioning the strength of the cycle. So I was wondering if there is any direct read across for you if you share this sentiment, that's also on your side if you do not share with us some specific number you have also right now a positive statement, better statement from the expected order intake in the subsea business? And as a kind of follow-up on the offshore wind business. What would be the kind of order intake that you will target for the coming years? And the second one will be related to the working cap. So working cap has been probably much better than expected. What would you -- what should we expect basically for 2024 and 2025 working cap movement, please?

Thank you, Kevin. So in terms of the subsea business, we see the same market as our peers see, which is still a very strong market, a lot of very positive engagements with our clients. And we're now moving into the '26, '27 arena for workload and that continues to be strong. So again, the direction of travel is very similar for Subsea 7 and its peers, and we remain very confident that we will get a good share of our work. We have a number of partnerships and frameworks, which are strong, and we see work with those clients being very important for us. And as I touched in my prepared remarks, we are very, very strong in Brazil. And I was down in Brazil a month ago, and a continued message there from Petrobras, they have a large portfolio of work to liquidate over the coming 3 to 4 years. And they expect Subsea 7 to be a key player in delivering that. So we are very comfortable that the direction of travel in subsea is very strong. I'll ask Stuart to give you an update on the offshore wind and then Mark can take your working capital question.

Thanks, John. So I think to comment on the forward outlook on order intake in offshore wind. Current position is good with $2 billion of backlog and significant coverage of our fleet utilization over the next 2 years. We would expect that to continue to replenish with the market outlook that we see. And a key factor in the scale of order intake over the next couple of years will really relate to the portion of EPCI, where the current backlog contains limited EPCI. There are no Seagreen projects in the backlog. If we see further EPCI coming into the backlog, then the rate of order intake could move.

Kevin, thank you for your question. So maybe to set the context and -- we signaled clearly in advance to the market, we saw a temporary build in our working capital. In fact, in the first half of the year, that build was $400 million. And as we had expected, that unwound in the second half of the year -- actually unwound slightly stronger than I had anticipated. If I look to 2024, I would expect us to be broadly neutral in terms of the exit rate for 2023. But as you know, we can have significant variations quarter-on-quarter depending upon project milestones. So very pleased in terms of what we achieved in 2023, and that was very much in line with what we have communicated to you at the moment.

And the next question comes from the line of Victoria McCulloch from RBC.

Good morning, thanks very much. First one for Mark -- just on the CapEx. How should we expect that to, I guess, just to beat across the quarters, obviously, the payment to the OneSubsea JV is quite clear, but where should we see the remainder of the CapEx throughout the year? And then not to be negative, but should there be a turn in the offshore cycle late this year or into '25? What proportion of the $1 billion payout do you see as the sustainable across that period from '24 to '27?

Okay. So first thing, Victoria, the investment and the OneSubsea joint venture is not included in CapEx guidance. That is excluded. And as we've communicated, that will happen in the end of June this year and it's $153 million. In terms of the CapEx over the course of the year, it will be more biased towards the first half than the second half. So hopefully, that gives you some clarity on the evolution of our spend.

Your other question was about the market. As we said, we can see a very strong market in our 2 core businesses, in particular in the subsea business. Our commitment is to deliver at least $1 billion to our shareholders over the next 4 years. And our Board will look at it on a year-by-year basis. We expect the market to continue to strengthen. We expect our free cash flow to continue to be very strong. So again, this time next year, we look at it again. So this year, a very clear commitment to $250 million of that $1 billion. And again, we will take over a review of it this time next year. But direction of travel in the market looks strong to us at the moment.

And the next question comes from the line of Lukas Daul from Arctic Securities.

Thank you. Good afternoon. I was wondering regarding your 2024 EBITDA guidance. Could you say whether the contribution from OneSubsea is included in that number? And what would be the size of it?

Lukas, yes, this is Mark. Yes, the contribution of our share of net income of the OneSubsea joint venture is included. It's a quantum of around -- yes, again, I think if I reflect that hasn't been shared by the majority shareholder. So hence, that would be inappropriate for me to share in the call.

Okay. Fair enough. And your tax rate guidance, 35% to 40%. How much of that would you say would be payable tax?

Generally as a rule of thumb, we should link the taxation in the income statement with the taxation that we see in the cash flow statement.

Okay. And then finally, you mentioned -- or John mentioned the PLSV tender in Brazil. Could you give us sort of the latest update on how that process is progressing?

Yes. So the PLSV tendering process is ongoing. Petrobras are working their way through the various requirements. There were a number of different criteria for different classifications of vessels. They expect to conclude that at the end of March, early April. So we would expect the clarity during Q2, and I remain comfortable that we will certainly get our fair share of that work.

And the next question comes from the line of Guilherme Levy from Morgan Stanley.

Hi, thank you for taking my question. It's related to Brazil. So I was wondering, earlier this year, we saw one of your competitors there being affected by a 2-year ban. So I was just wondering if you can say a few words on the competitive environment in the country at the moment? And if this change in the competitive environment recently, if it gives you more pricing power or if there is any risk that Petrobras might actually need to delay the processes on the back of a lack of bidders? And in that sense, would you be keen on taking more than one Buzios FPSO if you have the chance? Or better said, if -- do you have enough capacity to do more than one FPSO there?

Yes. Thank you, Guilherme. I'm not going to comment on our competitor's position. All I can give you is feedback from our discussions with Petrobras, which as I said, were in the last month. Basically, Subsea 7 is a key supplier, a very solid performance supplier that's been there for many decades. They see that we deliver their projects well for them. And I would expect us to get off a share out of the Buzios packages between 9, 10 and 11, which is the Cohort 3. All 3 have FPSOs ordered. So I don't believe the client is thinking about delaying anything because they have FPSOs, which will turn up and we'll need to infrastructure put into place. So at the moment, we're concentrating on the near-term opportunity, but there are three very large packages there. We do have capability and capacity inside our global fleet to execute those type of projects. And so for us, it's just about how the timing of these projects fit together and how do they work. So for us, it's a good dialogue we're in with Petrobras at the moment, and I'll leave it at that for the time being.

And the next question comes from the line of Haakon Amundsen from ABG Sundial Collier.

Yes, thank you. Just a question on a bit of a longer-term outlook, I know you won't guide specifically. But I'm just wondering whether we would likely to see that activity levels are leveling off after 2025 simply from a lack of vessel capacity in the subsea market, so that we should expect more -- kind of lower or moderate growth or flattish market beyond that. And -- and then secondly, on the pricing power that, of course, would have positive impact on that so that we should expect -- you have to have room to further expand your margins beyond 2025?

Yes. Thanks, Haakon. At the moment, we don't see any slowdown at all. Petrobras' latest 5-year plan was 14 more FPSOs to be installed in the next 5 years. So they continue to push ahead at full sea with their proposals. We see that Gulf of Mexico continues to be strong for us. We are very generally not that much affected by the changes in Saudi because we have a relatively small business there at Saudi. As I discussed in my prepared remarks, Australia has a need to bring on more LNG gas supply into those big LNG plans towards the end of the decade. We're currently building Block 58 in Suriname, a new arena that's opening up. And we continue to see Guyana, where we're about to start working on the gas export lines in Guyana this year, again, offering more opportunities there. So at the moment, we remain positive towards the fact that the opportunity set in '26, '27, '28 look very strong. And that's what our client discussions are about. Clients are talking about availability, how do they get capacity and capability in terms of people, equipment, ships in place. And similarly, I think if we look at the wind sector, as we discussed in the prepared remarks, again, the U.K. government has really listened to the industry and understood about the challenges of getting CFD price right. This year's CFD round is at 66% higher price per megawatt hour than we failed bidding round last year. So again, I think it's fair to say that we're in a number of very positive and structured dialogues with clients about how we can support them in there as well. So for us, both our businesses at the moment, direction of travel seems to be very positive for us, and we don't see any real slowdown at this stage.

Okay. That's very clear on the demand side. But do you think the industry, kind of in particular, the subsea vessel capacity is sufficient to support further growth beyond 2025?

Well, as we've discussed before, we've always had a model of enabling assets being owned by Subsea 7 and we bring chartered tonnage in to supplement our fleet. And if we look at Slide 23, if we can put that up on screen, Katherine, we've shown you in the appendix of the back of fleet optimizations and how we bring tonnage in and how we move tonnage around inside the fleet. So again, Subsea 7 is very proactive. We bought always subsea in to do a couple of years work for us. We're bringing the Skandi Acergy in. So again, for us, we continue to strengthen our fleet both in heavy construction vessels as well as lighter construction vessels. We've optimized the fleet. The Alfa Lift in wind has come in a big state-of-the-art dynamic positioning asset. And then we've let go Yudin, which was a more asset, which did fantastic service for us for many years. So again, we keep optimizing the fleet to make sure that we are prepared for what's ahead of us. So at the moment, it is part of a process that is a well-rehearsed part of our business, I would hasten to add, I think. So we're pretty comfortable that we can get to where we need to be.

And the next question comes from the line of Kate Somerville from JPMorgan.

Hi, good morning. Thank you so much for taking my questions. And two from me, if I may. First is on escalations. I think they made up about 50% in Q4. Just trying to understand what has driven this and what you're expecting from that front going into 2024? And then the second question is on your sort of optimization and potential leasing strategy. You sort of talked about a very strong market and some of your competitors this morning has been talking about moving to sort of more asset-light leasing strategy to cope with the increase in demand. Is that something that you're looking at as well? I believe you have spoken about it before, but would love as an update.

Well, I think we're slightly in a different place. You need assets to do this work. So an asset-light model, I'm not sure is the way to go here. We are very much into a world where we are very clear that you need assets to liquidate this work. And our model has always been a combination of old assets and chartered assets. And as I answered in the last question, we're very clear here is how we intend to make sure that we can capitalize on the opportunity set ahead of us. So for us, we feel comfortable with that model. We think it's a much stronger model. Because, ultimately, we own the largest and youngest fleet in the industry. So when times get very, very tight in terms of capacity, we're in the right place on that discussion. On the escalations, I'll pass you over to Mark to discuss those.

Yes. Thanks, Kate. No, you're correct. So escalations in the quarter were $600 million, half the total quarter. And the escalations in this instance were driven by variation of those. And variation of those is characteristic of our industry and that is where the client has a change in the contract for us to do more work, change the timing or whatever it may be leads to a variation of also -- across several projects within the portfolio. The other part of your question is more challenging. How do we forecast that? It's very difficult to forecast because that is at the behest of the client in terms of how they want us to proceed with the work. However, it does represent a driver contribution to our backlog, but it would be somewhat inappropriate for me to speculate in terms of how I expect that to evolve during the year or indeed any year.

And the next question comes from the line of Christopher Mollerlokken from SpareBank 1 Markets.

Yes, good morning. This is Christopher Mollerlokken from SpareBank 1 Markets. Of course, Brazil is an important market for you. And at the same time, Petrobras is struggling to attract interest in its FPSO tenders as these FPSOs tend to become more and more costly, and SPSL companies are struggling to attract the required financing from their banks. And also, they complain about the risk/reward profile in the Petrobras tenders and the local confidence requirement. Do you see this as a risk that SURF tenders associated with these projects also will be pushed out in time? As there seems to be an ongoing debate between the FPSO industry and Petrobras as the key client.

Yes. Thank you, Christopher. As I said in one of the previous questions, certainly, Buzios 9, 10 and 11 FPSOs are all ordered, have been committed. Again, the SURF elements of those projects will certainly push ahead. So we don't see that as being a near-term challenge. I think it's fair to say that since we interact with FPSOs day-to-day as part of our business, how all that fits together is one of the opportunities the industry has, to optimize how it works. So for us, at the moment, when we spoke to Petrobras, they were very clear that they were going out to seek SURF capacity to match their plants, and therefore then the opportunity sets for us were very, very clear. Timing of FPSO arrivals and stuff, we work a big fleet across the globe. And that's part of day-to-day business for us is working inside the windows that our clients have for FPSOs and such like. So by having a very strong global presence, a very strong client-centric relationships, we generally can work through different windows that our clients give us for FPSOs. So for us, I think the direction of travel is strong. Yes, an industry that needs an FPSO and SURF on the hardware side. We're comfortable that the subsea hardware side from our discussions with our colleagues of OneSubsea, that hardware side is there to support the next five years. We believe that the SURF sector is there as well. And we do believe that there are enough heavy-duty top-end FPSO providers as well to provide what the industry needs. How their business model adapts and changes? Maybe that's part of the discussion that needs to happen.

And the next question comes from the line of Mick Pickup from Barclays.

Good morning, everybody. Thanks for taking the questions. A couple of just on the renewable and heavy lifting fleet, if I may. And I have to say, sad to see the Yudin go after all these years. So firstly, on the Alfa Lift and the Ventus, obviously, new vessels. What are the challenges about getting them up and running? And secondly, the transportation fleet, can you just tell me how busy that is? I'm just thinking with all the renewables work, I've seen some oil and gas work in there as well, so what's that looking like at this moment?

I'll ask Stuart to take those questions, Mick. Thank you.

Yes. So the Alfa Lift, I would say, normal teething problems, but quite productive over the last period, installing transition pieces for the Dogger Bank project. And that scope of work will continue through '24 and '25. So I would say, yes, bringing new tonnage into the fleet has its early teething problems and hiccups but we're in good flow now on the Alfa Lift. And the Ventus looks to be in good shape. We'll start its mobilization for the project in Denmark in the second half of March with the start in the beginning of April. And we're also comfortable and confident about the status of that ship that's in the final stages of transit. In terms of the HTV fleet, it was a busy year last year, driven, I would say, more by oil and gas activities than renewables activities. What we are seeing now is an increasing number of longer-term renewables contracts. This year, one of the vessels goes on to a 7-month commitment for DEME, transporting jackets backwards and boards out in Asia. We're bidding multiple prospects, I would say, for longer-term, longer visibility commitments in the renewables. But current activity still remains dominated by either special transports or oil and gas rig moves.

And could you send us photos of when they come out? I quite enjoy them.

We will do.

And the next question comes from the line of Mark Wilson from Jefferies.

Yes, thank you. Good morning. Kind of follows on from mixed questions before. I'm just wondering about renewables and the margin shift as we go into '24. You got the Ventus starting up. So there should be more installation work in your $1 billion of renewable backlog. So I was just wondering, your margin is now almost equivalent to where the subsea is at 14% in 4Q. Would you see that stepping further in renewables because of more installation in '24, potentially with a higher margin in the subsea? That's my first question.

I wouldn't say we would say margins in line with current performance. Incrementally improving more capacity? Yes. More volume of pure installation activity? Yes. But margins, I wouldn't like to say that they are moving up above the subsea and conventional market. As said before on one of the earlier questions in 2024, no real large EPCI project in there as per Seagreen. And that's -- that may come to award with new EPCI work in 2024, but -- particularly in the U.K. market. But for 2024, currently now large EPCIs in the backlog.

Okay. Very clear. My second question is on OneSubsea. Just so I understand correctly, so the share -- your net share of net income is embedded in subsea EBITDA, as I understand it. Are there any other areas we should be included, OneSubsea, either CapEx or such things in our models going forward?

No, Mark. So where you will see OneSubsea in our financial statements is in 2 places. The first being the share of net income of OneSubsea in the income statement, then secondly on the balance sheet or share -- or investment and the associates. So to be absolutely clear, any capital expenditure associated with the OneSubsea is not included in our financial statements.

And the question comes from the line of Kate O’Sullivan from Citi. Kate O'Sullivan: Hello. It’s Kate O'Sullivan, Citi. Thanks for taking our question. Could you just talk about your capital allocation priorities that may inform what level shareholder distribution you land on each year as part of that at least $1 billion return over the period? Is there any flexibility to distribute above your regular dividend via special or growing? Or is it firmly share buyback? If you could just confirm. And then apologies if I missed it, but on Slide 20, your costs. Could you just give some further color on the increase in your direct project costs and the outlook here?

Okay. So maybe we go back to your first question. As you know, we, as a company, have a triangle that we have used for many, many years. to look at how we look at using our money. Shareholder returns is a key priority and the statements we've made today show again the support that management and the Board have that we will have a strong free cash flow in the future. We also look at potential investments in the business and we also make sure that we have an investment-grade balance sheet. So we always make sure and precise that triangle is very strong for us. The commitment we made today is at least $1 billion over the 4 years and we have declared where we're at for this year. As I mentioned in the previous question, we will look at it on a yearly basis with the Board and with management. And there may be some adjustments up and down. The clear commitment to us was to adjust our dividend from NOK 1 per share up to NOK 6 per share. So that is cast in stone, so you can model that going forward. And then the remainder then we will look at instruments such as share buybacks or special dividends as the vehicle to return more money back to our shareholders. So I think that's the way to look at the capital allocation. On your question on the cost overview, I'd suggest that Mark gives you the building blocks of what we show on that slide. Thank you.

Yes, Kate. So the slide shows the trend in our cost from 2015 to 2023. As you can see, between 2022 and 2023, there has been an uptick in the cost, directly correlates with the increase in our activity. So as a calibration point, our revenue increased from $5.1 billion in 2022 to almost $6 billion in 2023. And the largest part of that, of course, is a direct project cost we require to procure steel equipment, et cetera. in order to deliver the solutions to our clients. We see some other changes as well as we gear up for the workload that we have embedded within our backlog. And again, as a reminder, $10.6 billion backlog at the end of 2023 is the highest we've had at year-end since 2013. And together with the tender pipeline prospects, that we see almost $30 billion across the 2 businesses, means we have to increase our headcount in anticipation for that. So hopefully, that provided some additional color on the switch between '22 and '23.

And now we're going to take our last question for today, and the question comes from the line of Richard Dawson from Berenberg.

Hi, good morning. And thank you for taking me in. And just two questions from me, please. Firstly, just given the high backlog for 2024, what does vessel utilization look like for your key vessels this year and next? I'm just trying to gain a sense of whether there's scope for more work to be won this year and delivered and what sort of work that would be? And then secondly, and apologies if I missed it, but could you give some more color on the impairments taken this quarter and whether there's any risk to the other offshore wind projects within your backlog?

Okay. I'll take the 2024 utilization; Mark can take the impairment. So for us, utilization, as we show in the material we gave you at the prime part of our deck here, we have a very high committed backlog already in terms of where we're at here. So we are pretty clear on how we will execute our work and our utilization this year. We have some new tonnage coming in, as we showed in Slide 23. And that tonnage also assists us on some of our more spot work like IRM work with Jones Act vessels in the U.S. We're also starting renewable work in the U.S. this year on Olsted revolution there. So we have some capacity, but generally bigger projects, the time scale would mean that anything new that we would take on now would be going offshore beyond 2024. But we have some flexibility in the heavy construction vessel and the lighter construction vessel to take some last minute work on it if needed, but I wouldn't bank on that as being the main drivers for this year. And I'll hand over to Mark to talk about the impairment.

Sure, Richard. Richard, two impairments which we have covered in the earnings release, and they are not related to projects. They are related to property, plant and equipment within the Renewables business unit. The first was the impairment on the Seaway Yudin, which we have subsequently sold the early part of 2024. So that vessel has now left the fleet. And the other is in relation to monopile installation equipment. We have a contractual dispute with the provider of that equipment. And both those elements contributed to the almost $74 million impairment that we had at the group level. That being said, we had an impairment reversal in the quarter from a prior year, and that resulted in net impairments of around just under $50 million in Q4.

Thank you very much, everybody, for your questions. We appreciated the input you gave us today. I know it's been a very, very busy morning for you. But we look forward to catching up with you in a couple of months' time. As I said, with the direction of travel is strong here, we remain confident over the next few years for our business. And as you see, our Board and our management are aligned to make sure that we focus on shareholder returns in the coming years. So thank you, and we'll talk to you again soon.

That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.