Subsea7_AnnualReport2008.pdf

1 subsea partner of choice

Subsea 7 Annual Report 2008

subsea partner of choice

Subsea 7 Annual Report 2008 2

Who We AreSubsea 7 is one of the worlds leading subsea engineering and construction companies servicing the oil and gas industry. Our skilled and experienced multinational workforce of about 5,800, supports our onshore and offshore operations in the North Sea, North America, Brazil, Africa and Asia Pacifi c.

Our Values: Safe, Clean, Smart, Fair, Anywhere

Investing in Strong FoundationsSince 2005, Subsea 7 has pursued a focused investment programme in new assets, training and development of its people, and new business systems and processes to improve project execution and delivery. Some examples of these investments are shown below.

Investment in vessels, equipment and onshore facilities

Increase in overall fleet size

Technical Centres of Excellence

Critical Supply Networks

New pipeline fabrication spoolbases serving key regional markets(2 OPERATIONAL; 1 CURRENTLY UNDER CONSTRUCTION)

New deepwater pipelay vessels(4 OPERATIONAL; 1 CURRENTLY UNDER CONSTRUCTION)

People recruited into graduate training schemes and apprenticeships


Contents

Who We AreWhat We DoFinancial ResultsMessage from the ChairmanMessage from the Chief Executive OfficerThrough the Year A Vision Built on Strong Foundations Executive Management TeamFinancial ReportVessel FleetOperational Bases

2.4.6.8.

10.12.14.24.26.80.82.

2008 Financial HighlightsOur fi nancial performance has benefi ted from our focused investment programme.

$521m$2,373m2008

2008

2008

2008

2007

2007

2007

2007

$392m

$214m $384m

$264m $449m

$2,187m


Precise positioning services

Drill support ROV services

Conceptual design

*Subsea Engineering Solutions is a 75% owned subsidiary group, with the other 25% owned by Richtech International Holding Inc.

What We DoSubsea 7 has a strong focus on the growing high-tech and high-value deepwater Subsea Umbilical, Riser and Flowline (SURF) sector, but also retains a leading role in the key shallow water markets in the North Sea and Asia Pacifi c.

Subsea 7 offers the full spectrum of products and capabilities to deliver Subsea Field Developments and Life-of-Field (LoF)services to our clients.

Exploration and Appraisal Development

Project management with a focus on Engineering, Procurement, Installation and Commissioning (EPIC) projects

Front-End Engineering Design (FEED)

Detailed design and engineering

Design, fabrication and installation of rigid flowlines and risers

Design, fabrication and installation of steel catenary risers (SCR)

Installation of flexible flowlines and risers

Installation of umbilicals

Trenching and burial services

Design, fabrication and installation of subsea structures

Subsea construction and tie-ins (diving and diverless)

Commissioning

Diving services

ROV and tooling solutions


Seismic DrillingConceptual

Design

FEED andDetailed Design

Procurementand Fabrication

Installation andCommissioning

Subsea Field Development


Production Decommissioning

Project management

Engineering and preparation

Environmental engineering

Pipeline, riser, umbilical and subsea structure removal

Disposal and recycling

Diving services

ROV and tooling solutions


Project management

Integrity management

Survey and inspection

Data management, analysis and reporting

Repair and maintenance

Emergency pipeline repair systems

Diving services

ROV, AUV and tooling solutions


IntegrityManagement

Survey and Inspection

Repair and Maintenance

Removal DisposalEngineering

Life-of-Field Life-of-Field


Financial Results

Year ended 31 December(In $ millions, except per share data)

Revenue

Operating expenses

Net operating profit

Net financial items

Profit before tax

Net profit attributable to equity shareholders

Earnings per share ($)

- Basic

- Diluted

As at 31 December

Shareholders equity

Backlog

2008

2,373

(1,948)

425

(43)

395

264

1.80

1.74

690

3,268

2007

2,187

(1,871)

316

(3)

315

214

1.45

1.44

820

4,215

Summary

Regional ResultsREVENUE 20072008 PROFIT BEFORE TAX 20072008

Africa$m

$m$m

$m $m

$514

m $75m

$462

m

$115

m

600

300

0

North America

$152

m $30

m

$166

m

$42m

200

100

0

North Sea

$1,0

25m $

229m

$1,0

51m $

235m

1,200

600

0

Asia Pacifi c*

$167

m

$36m

$73m

$40m

200

100

0

Brazil

$323

m

($27

m)

$621

m

$28m

700

350

0

* The year-on-year decrease in revenue is attributable to a greater proportion of joint venture activities of Technip Subsea 7 Asia Pacific, being accounted for on an equity basis.


2009

$1,701m

2010

$794m

2011

$558m

2012-2014

$215m

Projected year of execution

$668m $615m $493m $215m

$65m

$179m

$1,033m

TOTAL

DAY-RATELUMP-SUM

Backlog at 31 December 2008: $3,268 million

REVENUE YEAR-ON-YEAR

+8%2008

$2,373m

YEAR-ON-YEARNET PROFIT

+23%2008

$264m

CAPITALEXPENDITURE YEAR-ON-YEAR

+17%2008

$449m

YEAR-ON-YEAREBITDA

+33%2008

$521m EBITDA is calculated as net profi t adjusted for taxation, net fi nancial items, depreciation, amortisation, impairments and profi ts or losses on disposals of property, plant and equipment.

2006

2006

2006

2006

2007

2007

2007

2007

2008 $2,373m

$521m

$264m

$449m

$2,187m

$392m

$214m

$384m

$1,670m

$265m

$138m

$265m

2008

2008

2008


Message from the Chairman

2008 was an important year for Subsea 7 for a number of reasons. We enjoyed strong operational and financial performance with satisfactory growth in revenue, delivering strong margins and record profitability. The commissioning of further new assets from our long-term capital investment programme began to make a significant contribution to our operational and financial performance. The business improvement initiatives addressing the way we bid for and execute projects also began to deliver efficiencies in terms of schedule and cost.

Revenue increased by 8% to $2,373m (2007: $2,187m), net operating profit increased by 34% to $425m (2007: $316m) and earnings per share increased by 24% to $1.80 (2007: $1.45). Our financial results and excellent operational performance were achieved without compromising our

Kristian Siem, Chairman

commitment to safety. Our performance in 2008 has been underpinned by the quality of the people in Subsea 7 and the effectiveness of the teamwork between many different disciplines, various examples of which are cited in this report. I thank everyone at Subsea 7 for their dedication and congratulate them on the results they have delivered.

We are confident that our investment programme is providing us with the right vessels, infrastructure and capabilities to meet our clients future needs and to deliver sustainable value for our shareholders. Many new contracts from our existing clients reaffirm this view, and I thank them for their continued business. I also thank our shareholders for their continuing support and belief in our reinvestment strategy.

We are confi dent that our investment programme is providing us with the right vessels, infrastructure and capabilities to meet our clients future needs and to deliver sustainable value for our shareholders.


Kristian SiemChairman

In the last few months, the global economy has been affected by unprecedented turbulence and uncertainty. In the latter part of 2008, we began to see some impact of this on the subsea market. It is very encouraging, however, that most of the national oil companies and major international oil companies which represent the majority of Subsea 7s client base are maintaining investment levels. Any delayed investment decisions and project postponements are mostly related to the smaller independent oil companies. While these companies are very important to our overall mix of clients, on the whole, they account for a small proportion of Subsea 7s global business. It is our view that the medium to long-term fundamentals of global oil and gas demand are strong, and that this will continue to drive substantial capital investment to develop new oil and gas reserves. We also believe that the subsea market will play an increasingly important role in future oil and gas development.

Through our investment strategy, we have built a modern and fit-for-purpose asset base. We have invested substantially in our organisation and business processes to improve our efficiency and effectiveness. We have also developed closer, longer-term and mutually beneficial relationships with key suppliers. All of these initiatives together have created a stronger, leaner, and more efficient organisation which is better prepared to deal with the challenges of the current economic climate and market conditions.

Although I believe that Subsea 7 is well-prepared, it is important that we work in collaboration with our clients and our supply chain to face economic and market challenges together. Pressure on the supply chain purely to reduce prices may well deliver short-term results for the buyer but it is ultimately unsustainable.

A broader and more measured approach is required which addresses the overall business model and relationships between the parties in order to seek synergies and efficiencies. The manner in which we conduct our business must be such that it protects the long-term interests of all parties. Maintaining acceptable profit margins is vital if contractor investment in new assets and supplier investment in product and service innovation are to continue.

This long-term approach to effective supply chain management is the route that Subsea 7 has chosen to follow and we urge our clients and suppliers to work with us to achieve its aims for our mutual benefit.

We still have hard work ahead of us. Nevertheless, I look back at 2008 with satisfaction as a key year in which the Company reached a level of maturity and laid the solid foundations on which we will continue to build the business and face with confidence both the challenges and the exciting opportunities which lie ahead.


Message from the Chief Executive Offi cer

2008 was a year in which Subsea 7 made further strides towards the vision of being the Subsea Partner of Choice. Our ability to execute complex projects globally has continued to improve without any compromise to our focus on safety and we have delivered record EBITDA of $521m on revenues of $2,373m, representing an EBITDA margin of 21.9%.

Our state-of-the-art pipelay and construction vessel, the Seven Seas, entered the fleet and made significant contributions to projects in Norway and Brazil. She was joined in the fleet by other vessels on long-term charter, including the multi-purpose subsea construction vessel, the Seven Sisters, which supported several projects in Norway and the UK.

Mel Fitzgerald, Chief Executive Officer

In order for Subsea 7 to be truly successful, the drive for effi ciencies and cost-effectiveness in our business must be ingrained into our behaviours and shape all aspects of how we work.

We confirmed our belief in our long-term market by acquiring the pipelay vessel, the Seven Navica, which had previously been on charter. Our deepwater installation capabilities in the Gulf of Mexico were greatly enhanced by the commissioning of a Vertical Lay System on one of our chartered vessels.

Onshore, the new North Sea pipeline fabrication spoolbase commenced operations at Vigra in Norway. Construction of our new North America spoolbase began at Port Isabel, Texas, quickly followed by the award of the first contract it will support, for the Marathon Droshky development. In Brazil, we expanded the capacity of the Ubu spoolbase through the addition of a second fabrication line. We also acquired a site at Paranagu in Brazil for future development, to support the anticipated pre-salt projects in this region.


Mel FitzgeraldChief Executive Officer

In addition to our ongoing capital investment programme on new assets, we have spent the last few years building a business model which focuses on the safe, timely, efficient and cost-effective delivery of our projects. This Annual Report provides many examples of the tangible impact these initiatives are having on our business.

We have organised our tendering expertise to ensure we can win work based on well-planned, risk-assessed and cost-effective bids. Our technical specialists in many different disciplines have been harnessed to deliver their collective expertise to bids and projects through our 17 Centres of Excellence. Vessel Support Teams bring retained knowledge, consistency and reliability both to tendering and to the operational activities of our major vessels. For key third-party goods and services, our 15 Critical Supply Networks have sought to optimise delivery lead times and value through mutually beneficial long-term supply chain relationships.

All of the above are underpinned by a learning culture supported by our Knowledge Management teams and systems, and by our investment in a new Business Management System which provides the governing framework for the way we work.

With regard to our safety performance, this year the Subsea Viking reached the milestone of eight years of operations without a single Lost Time Incident (LTI). Very close behind, on seven years LTI-free, were the Kommandor Subsea and the Rockwater 2. I congratulate the crews and project teams involved in this achievement. This demonstrates what is possible and sets a benchmark for all our vessels and

operational sites. We were pleased to receive two awards from one of our major clients, Chevron, for Safety Excellence on the Agbami project in Nigeria and the Outstanding Contractor Award to i-Techs ROV team on the Ocean Bounty drilling rig in Australia.

While we welcome these awards as acknowledgements of the great efforts our people are making towards continuously improving the safety of everyone involved in our business, we must remain focused on improving safety throughout the Company.

In order for Subsea 7 to be truly successful, the drive for efficiencies and cost-effectiveness in our business must be ingrained into our behaviours and shape all aspects of how we work. This represents sound business practice for sustainable and profitable business under all economic conditions. The current economic climate merely emphasises its importance. We believe we have started to take the right steps to address inefficiencies and reduce non-value-adding costs to make Subsea 7 fit for the future.

Finally, I am proud of the many achievements in 2008 by the people in Subsea 7. None of these would have been possible without their skills and dedication. They have delivered for all of our stakeholders on several fronts overall financial results, projects, delivery of new assets, and business efficiencies. I thank them for their efforts.


Through the Year:Building Blocks of Success

March

$200m EPIC contract for Sul Capixaba project in Brazil awarded by Petrobras. The challenging project includes a horizontally-drilled shore approach.

February

Major new technology project announced for development of next-generation Autonomous Underwater Vehicle (AUV) with partner SeeByte and part-funding from BP and Chevron.

May

Announcement of plans for our new spoolbase in Port Isabel, Texas, followed in August by award of the first contract for the spoolbase, from Marathon for the Droshky development.

January

Successful offshore completion of Saxi Batuque project in Angola for ExxonMobil.

April

Our new North Sea spoolbase in Vigra, Norway, commenced operations on its first project, a gas pipeline for StatoilHydro from Kollsnes processing plant to Mongstad refinery.

June

The Seven Seas, our state-of-the-art pipelay and construction vessel, started work on its first project, StatoilHydros Yttergryta field in the Norwegian sector of the North Sea.


September

New Aberdeen office campus opened, facilitating better integration and greater efficiencies for the UK business unit and global support functions.

August

First-ever Global Time-out for Safety meeting held simultaneously on all our vessels and operational sites around the world.

July

Award of framework agreement with BP in support of Block 31 development programme. A contract for the first project, valued on award at an estimated $460m, was also confirmed.

December

Milestone of 60 pipeline bundle projects reached at Wick fabrication yard with successful launch and installation of a bundle for BPs Machar field in the UK sector of the North Sea.

November

The Seven Oceans and the Seven Seas undertook joint operations for Shell on the BC-10 project in the Campos basin, Brazil.

October

The Skandi Neptunes new Vertical Lay System was used for the first time to install umbilicals on the Chevron Tahiti project, in the USA.

Awards & Achievements

Subsea UK Company of the Yearawarded in February 2009

Chevron Australia Outstanding Contractor Award - i-Techs Ocean Bounty ROV teamawarded in December 2008

Oil & Gas UK Supply Chain Innovationawarded in November 2008 (in conjunction with Venture Production plc)

The Subsea Viking completed eight years LTI-freeachieved in November 2008

Chevron Project Resources Company Contractor Safety Excellence Award - Agbami projectawarded in October 2008

The Kommandor Subsea and the Rockwater 2 both completed seven years LTI-freeachieved in May and June 2008

Scottish Offshore Achievement Awards - Export Achievementawarded in March 2008

Scottish Offshore Achievement Awards - Overall Excellenceawarded in March 2008


A Vision Built on Strong Foundations

We have launched a range of measures to help us attract, retain and reward the right people to drive our business improvement initiativesand to deliver our projects. Highlights in2008 included the following:

Engineering pool has been boosted globally 1. to support operations

100 people commenced either graduate, 2. trainee or apprenticeship schemes

98% of eligible workforce received a formal 3. performance appraisal

Maintained one of the lowest employee 4. turnover rates in the industry

Expanded and improved training facilities5.

Over $10m spent on training 6.

In order to achieve our vision, it is essential that Subsea 7 has:

skilled people and effective teamwork;

the right assets and supporting infrastructure;

excellent project delivery and execution.

During 2008, we continued ourmulti-year programme of investment and business improvement initiatives addressing these three key areas in order to further our progress towards becoming the Subsea Partner of Choice. Each of these areas is actively led by a member of our executive management team.

Subsea 7 will be the Subsea Partner of Choice in the challenging and exciting global oil and gas industry. We will build our business around a motivated and valued workforce. We will be the recognised leader in safety and quality, delivering exceptional performance with the appropriate technical solutions and creating sustainable value for all our stakeholders.

WORKFORCE COMPOSITIONapproximate fi gures at 31 Dec 2008

1,200

1,500

ON

SH

OR

E P

ER

SO

NN

EL

OFFS

HO

RE

PE

RS

ON

NE

L

Staff2,400Staff

Contractors

700Contractors

TOTAL

5,800


We have implemented a range of initiatives to optimise the way we are organised and the way we work to provide an improved framework for tendering and project execution.Highlights in 2008 included the following:

17 GLOBAL CENTRES OF EXCELLENCE

Gateway bidding team played a key role in 1. awards of BP Block 31 and Petrobras Sul Capixaba contracts

Critical Supply Networks achieved 2. i) improved frame agreements for linepipe, and ii) lead time reduction and cost-saving for valves through standardisation

Centres of Excellence overcame technical 3. challenges on major projects and bids (narrow pipelay corridor, steel catenary riser welding, drilled shore approach and pipe-in-pipe technology)

Vessel Support Team created for Seven Seas 4. improving operational efficiency

New Business Management System5.

Bundles1.

Corrosion, Coatings 2. and Field Joints

Flexibles3.

Geotechnical4.

Lay Equipment5.

Lifting6.

Pressure Testing and 7. Pre-commissioning

Risk and Reliability8.

ROV Technology and 9. Remote Tasks

Survey and Positioning10.

Valves and Flanges11.

Wire Ropes12.

Pipeline Welding and Non-13. Destructive Examination

Pipeline Design14.

Cranes15.

Riser Design16.

Umbilicals and Controls17.

Since 2005, we have invested $1.2 billion in vessels, equipment and onshore facilities to enable us to service our clients needs effectively and effi ciently around the world. Highlights in 2008 included the following:

Three new vessels joined the fleet: Seven 1. Seas, Seven Sisters and Skandi Seven

Acquired Seven Navica (previously on charter)2.

New-build deepwater pipelay and 3. construction vessel ordered: Seven Pacific

New North Sea spoolbase began operations 4. at Vigra in Norway; construction began on Port Isabel spoolbase in Texas

Paranagu site acquired in Brazil for future 5. development, to service anticipated pre-salt projects

New Vertical Lay System installed on Skandi 6. Neptune in Gulf of Mexico

New Aberdeen office campus opened; 7. work started on new Stavanger campus

2008 CAPITAL EXPENDITURE

$351m $87m

$11m

Land and buildings

Plant and equipment

Vessels and marine equipment


People and Teamwork

The Brazilian market is extremely important for Subsea 7. The Company has a long history of working in the country and has a well-established infrastructure. The two main challenges during 2008 were to return the business to profi tability and to prepare and position the Company strategically for the exciting growth opportunities that lie ahead.

The successful achievement to date of these goals was a result of the efforts of our people in Brazil and the focus by executive management on further strengthening the local team, supported by excellent integration and teamwork between the Brazilian organisation and global business improvement initiatives.

2008 was Subsea 7s busiest-ever year in Brazil. The Company worked on seven major projects and laid 737km of rigid and flexible pipelines. Offshore operations featured nine different vessels from the global fleet, including all three of the new pipelay vessels the Seven Seas, the Seven Oceans and the Normand Seven. Over 30 workclass ROVs were employed in construction operations and in i-Techs drilling support operations.

Subsea 7s main offices in Brazil are situated in Niteri, near Rio de Janeiro. To the north of Niteri lies the Ubu spoolbase, which is strategically positioned to serve projects in the Campos Basin, which has traditionally been the most active of the oil and gas basins offshore Brazil. Further north again, the Vila Velha site is used for subsea structure fabrication including jumpers for projects such as Shells BC-10.

Further investment in 2008 to support the growth in activity included expansion of the Niteri offices, a new office and logistics base at Maca, a new logistics base at Rio das Ostras and construction of a second welding production line at the Ubu spoolbase.

Subsea 7s business in Brazil has grown substantially due to our investment in assets and infrastructure to serve our clients needs. Equally importantly, we have invested in our people to develop a strong, indigenous team. We are well-placed to take advantage of the great opportunities in the coming years.

Victor Bomfi m,Vice PresidentBrazil

Brazil - investing in people and process

The Seven Seas (left) and the Seven Oceans working for Shell on the BC-10 project offshore Brazil.


Financial growth and return to profi tability

Organisational growth and global teamwork

2008 was a pivotal year for Subsea 7 in Brazil, with a growth in revenue of 92% as compared to 2007. More importantly, however, our Brazilian business returned to profi tability.

This welcome turnaround was the result of focused effort by the entire Brazilian team, ably supported by the global organisation and the Company's business improvement initiatives. Further investment in the local organisation strengthened operational performance and business controls. A further key feature was the successful shift towards a better balance of the business portfolio from mostly day-rate contracts to include more lump-sum contracts. The shift towards lump-sum contracts, although demanding stronger project controls and risk management, has also provided the opportunity for improved returns.

Subsea 7s strategy in Brazil is to build a strong local organisation. In 2008, this grew to over 1,000 people. Several important steps were taken during the year to consolidate this growth and drive improved performance.

The management team was strengthened with the addition of personnel in key positions. The capacity of the engineering function was increased by 25%. Its capabilities continued to develop with several novel engineering challenges successfully overcome, such as installation of lazy-wave steel catenary risers and installation of heavy manifolds in deep water. In addition, support from the Centres of Excellence and the Vessel Support Teams greatly benefited bids and project operations.

The pre-salt discoveries are expected to feature prominently in future growth opportunities in Brazil. Estimates of recoverable reserves vary from around 50 to 80 billion barrels. Subsea 7 has acquired a substantial site for future development near Paranagu, approximately 1,000km south of Rio de Janeiro.

This site is strategically positioned close to the pre-salt region of the Santos Basin, which is expected to be the first to be developed. This extensive 2,400 hectare site, which has a 5km seafront, is large enough to accommodate a spoolbase and support fabrication and logistics activities.

Ubu spoolbase

Subsea 7's people in Brazil

Subsea 7's infrastructure in Brazil and the pre-salt province

Pre-salt growth and strategic positioning


Assets and Infrastructure

June 2008 saw Subsea 7s new-build pipelay and construction vessel, the Seven Seas, join the fl eet on time and on budget.

The Seven Seas is a sister vessel of the Seven Oceans, but rather than having a rigid reel and lay tower, she is equipped with a highly versatile multi-lay tower and twin underdeck carousels. With a top tension capacity of 400t, the vessel can operate in flexlay and rigid J-lay mode in water depths of up to 3,000m, enabling Subsea 7 to offer J-lay capability to our customers for the first time.

In addition, her 1,750m2 deck area and 400t crane capacity mean she is ideally suited to installing the large structures associated with deepwater subsea field developments. She quickly proved her versatility and worth by working in quick succession on the Yttergryta project for StatoilHydro in Norway and for Shell on the BC-10 project in Brazil.

From inception to delivery in under 24 months, the Seven Seas is the second of four vessels being built through a successful, long-term partnership between Subsea 7, Merwede Shipyard and pipelay equipment specialist Huisman (the first being the Seven Oceans, which was delivered in 2007, and the next two being a state-of-the-art diving support vessel, the Seven Atlantic, and an additional pipelay and construction vessel, the Seven Pacific).

The close working relationships and repeat business between the parties in this partnership have generated many benefits. These have included cost-efficiencies, a reduction in duplicate design work and consistent on-time and on-budget delivery.

Including the Seven Seas, Subsea 7 has invested $1.2 billion since 2005 to ensure that it has the right assets, equipment and infrastructure in the global organisation so that it is strongly positioned for future growth.

We worked hard to develop an effective team ethic which combined project and marine crews into one integrated team. We received great support from all supervisory staff in our efforts to make the vessel operate as a single entity, rather than a collection of unconnected departments.Bryan Woodward, Captain of theSeven Seas

Seven Seas - a cornerstone of the fl eet strategy

Saturday 26th April 2008 saw the offi cial inauguration of Subsea 7s deepwater pipelay and construction vessel, the Seven Seas, at Merwede Shipyard in The Netherlands.


In July 2008, Subsea 7 was awarded a framework agreement with BP Angola Ltd in support of BPs development programme in Block 31. A contract for the fi rst project, valued on award at an estimated $460m, was also confi rmed.

The Seven Seas multi-purpose capabilities were designed specifically for this type of large, remote and technically challenging deepwater project. The vessel will be deployed on the first project for over 400 days, commencing in 2010.

In addition to supporting the African business unit to secure the contract award, the Gateway team also worked closely with BP to develop the novel commercial model designed to reward both parties for performance improvements and efficiencies.

Subsea 7 was awarded the engineering, fabrication and installation contract by Shell Brasil Ltda for the development of the BC-10 fi elds. This project was the fi rst to utilise both of Subsea 7s new pipelay vessels, the Seven Oceans and the Seven Seas.

Most of the engineering and project management was conducted in Subsea 7s Brazilian offices, with a high proportion of local engineering talent in the project team. In water depths of 1,900m, the scope of work included installation of 11 steel pipelines, 7 lazy-wave steel catenary risers, 5 umbilicals, 4 manifolds and 25 rigid jumpers.

StatoilHydro's Yttergryta fi eld in the Norwegian sector of the North Sea went from exploration to production in a mere 16 months. This required robust technical solutions and safe execution by Subsea 7 of the main subsea installation scope, together with a remarkable team effort and excellent co-operation with the client and other key subcontractors.

The extensive capabilities offered by the Seven Seas made it possible to complete a range of construction activities, including installation of heavy structures, reel pipelay with a piggy-backed umbilical and installation of several rigid spools in a highly efficient programme. This was an important factor which helped the Yttergryta project to achieve first production in January 2009, four months ahead of target.

Seven Seas - the shape of things to comeBlock 31 - BP, Angola

Seven Seas' fi rst deepwater projectBC-10 - Shell, Brazil

Seven Seas maiden projectYttergryta - StatoilHydro, Norway

An alternative sea-fastening method for spools on deck reduced risk and saved cost

The Seven Seas working alongside her sister ship, the Seven Oceans, on Shells BC-10 project offshore Brazil

Executives from BP Angola and Subsea 7 at BPs offi ce in London on the award of the Block 31 project.


Project Execution and Delivery:Putting Business Improvement into Action

Subsea Field DevelopmentTombua Landana - Chevron, Angola

Subsea 7 combined its extensive engineering and project management experience with established in-country resources and infrastructure, and vessel capability, to deliver the Tombua Landana EPIC project for Cabinda Gulf Oil Company Limited (a wholly owned subsidiary of Chevron Corporation) in Block 14, offshore Angola.

Jan Willem van der Graaf, Subsea 7 s Vice President Africa, said: The Tombua Landana project team delivered significant operating performance efficiencies by engaging directly with a number of our specialist in-house support

teams, including the Vessel Support Teams (VST), technical Centres of Excellence (CoE) and Critical Supply Networks (CSN).

Experienced engineering resources from the rigid pipelay VST supported the project team to help meet critical deadlines by transferring knowledge from previous projects.

Invaluable input and guidance from the Umbilicals and Controls CoE helped to ensure high-quality output during umbilical manufacturing.

Expertise from the Corrosion, Coatings and Field Joints CoE contributed greatly towards overcoming technical challenges during pre-qualification trials at a new pipeline coating plant in Angola.

The Luanda spoolbase facility underwent an extensive multi-million dollar upgrade to improve workstations for welding, non-destructive examination and field joint coating. A substantial investment in training and development of Angolan nationals enabled welding activity to be provided by an in-country team of over 50 personnel.

Close relationships with key suppliers forged over multiple projects by the CSN proved invaluable in securing the supply of critical materials, such as flexible pipe for the project, during a period of high market demand.

Duration2006 - 2009

Main scope of workDesign, procurement, fabrication, installation and pre-commissioning of subsea tie-back facilities

AssetsLuanda Spoolbase

VesselsSeven OceansToisa Perseus

LocationBlock 14, Angola

Water depth270m - 370m

ClientChevron (Cabinda Gulf Oil Company Limited)

The Seven Oceans spooling pipe at 1. Luanda

Subsea 7 Angolan welders at work2.

11

22222222222222222


CamarupimPetrobras, Brazil

Sul CapixabaPetrobras, Brazil

MacharBP, UK

The challenge was to install a 12 diameter rigid pipeline in a narrow, uneven seabed corridor with high slopes of up to 30o, near an existing operating line.

In such conditions, it was necessary to ensure that the stresses and strains experienced by the pipeline during installation were kept well below critical levels. The installation analysis undertaken by Subsea 7 s Pipeline Design CoE and the high-resolution bathymetric survey performed under the guidance of the Survey and Positioning CoE played a crucial role in defining the difficult pipelay procedure which was performed by the Seven Oceans.

The important contribution from the CoE successfully mitigated potentially costly risks and helped to ensure that installation operations were completed on schedule.

The Subsea 7 project team had to manage a nine-month schedule on this 1.3km pipeline bundle project, which marked Subsea 7s 60th successful pipeline bundle launch.

The partnering strategy developed by Subsea 7s CSN succeeded in negotiating a lead time reduction from 26 to 22 weeks for valves, one of the longest lead time items on the project. The valves were also delivered under budget.

The Pressure Testing and Pre-commissioning CoE devised the novel solution of the first-ever bundle with pre-flooded water injection and production pipelines. This solution reduced the offshore schedule by two days during the highly weather-sensitive December installation window.

Subsea 7 was awarded this EPIC contract in 2008 for installation in 2009 and 2010 which involves laying a 12 pipeline 78km from the Jubarte fi eld to shore. Two main technical risks needed to be addressed in the tender: pipeline on-bottom stability and a horizontally-drilled shore approach.

An excellent example of Subsea 7 teamwork between the CoE, the Seven Oceans VST and CSN, marshalled by the Brazilian team and Gateway, ensured the contract was secured against a robust tender. The pipeline and coating specifications were determined by the respective CoE, the pipelay method and schedule approved by the VST, and costs for key suppliers fixed at the time of main contract award by the CSN. Members of Subsea 7's Sul Capixaba project team

Launch of the Machar bundle from the Wester site near Wick

High-resolution digital terrain model of the Camarupim pipeline route (water depth from 65m - 710m)


Project Execution and Delivery:Putting Business Improvement into Action

BPs Foinaven and Schiehallion fi elds lie in the hostile, deepwater environment West of Shetland (WoS) in the north-east Atlantic Ocean. Subsea 7s long association with these fi elds goes back to pre-sanction days in 1994. Subsea 7s current contract was awarded in 2006 covering all construction, repair and maintenance services for a period of fi ve years.

Robin Davies, Subsea 7s Vice President - North Sea, said: West of Shetland is an excellent example of Subsea 7 establishing a long-term relationship with a client and delivering operating efficiencies with bespoke technical solutions.

Subsea 7s project team works in close cooperation with its BP counterpart, which enables seamless and effective delivery of day-to-day operations.

Extensive knowledge of the fields facilities and environment has been accumulated by Subsea 7 over many years. This is applied to ensure routine tasks are undertaken efficiently and any recurring problems can be resolved as soon as possible.

A further benefit to both Subsea 7 and BP is the opportunity to share this accumulated knowledge with other projects. Lessons learned on WoS are now being implemented on BPs Block 18 project in Angola, for which Subsea 7 has a Life-of-Field (LoF) support services contract.

Subsea 7s ROV Technology and Remote Tasks Centre of Excellence (CoE) has developed a number of novel solutions such as ROV-deployed laser-based inspection to meet the demands and challenges on WoS.

Many years of working in this demanding environment have been achieved by Subsea 7 while maintaining a strong commitment to safety. The Subsea Viking, the vessel which supports the WoS contract, achieved eight years of operations without a single Lost Time Incident (LTI) in November 2008 - a tribute to the exceptional safety culture of her crew and of the whole project.

Duration2007 - 2011

Main scope of workPipeline and umbilical installation, general construction, inspection, repair and maintenance

VesselsSubsea VikingSeven Navica

LocationWest of Shetland

Water depth395m to 455m

ClientBP Exploration Operating Company Ltd.

Life-of-FieldSubsea Construction Services - BP, UK

ROV intervention on production manifold1.

The Subsea Viking at work West of 2. Shetland

11111

22222


Since 2005, Subsea 7 has worked together with Venture Production plc in a unique agreement supporting all Venture's subsea engineering, construction and IRM work in the UK. This award-winning partnership has to date generated total benefi ts to the client, including project cost savings and early production revenues, worth over $300m.

Under the stewardship of Subsea 7s rigid pipelay Vessel Support Team (VST), the Seven Navica pipelay vessel was upgraded to handle flexible as well as rigid pipelay.

The vessels enhanced capabilities were proven on the Stamford project. By using only one vessel to deliver a varied workscope of a flexible flowline, rigid pipeline and a static umbilical, cost savings were achieved.

In 2006, Subsea 7 was awarded two separate six-year contracts by Shell, commencing in 2008. These contracts cover a broad range of manned and unmanned subsea services spanning IRM, light construction and limited well treatment operations for all of Shells European subsea oil and gas infrastructure.

In 2008, work offshore was supported by the Toisa Polaris, the Skandi Bergen and the Skandi Seven. Two new vessels, currently under construction, will support these contracts. The Normand Subsea ROV support vessel will be taken on charter to replace the Skandi Seven. The Seven Atlantic, which will be owned by Subsea 7, will replace the Toisa Polaris and provide a state-of-the-art diving and intervention capability.

Subsea 7 was awarded a contract by BP Angola (Block 18) BV to provide LoF support services for the Block 18 Greater Plutonio development, offshore Angola. This long-term contract (three years plus a two-year option) was one of the fi rst such deepwater LoF contracts to be awarded in Africa.

Subsea 7s scope of work includes ROV-based IRM and light construction. This contract builds upon the relationship Subsea 7 has developed with BP West of Shetland (WoS). The experience gained and the lessons learned there are being applied to Block 18.

The project has already benefited from the valuable support of Subsea 7s CoE. One programme of repair work was successfully completed with key input from the ROV Technology and Remote Tasks CoE and the Geotechnical CoE.

Engineering, Construction, Inspection, Repair and MaintenanceVenture, UK

Block 18 Life-of-FieldBP, Angola

Underwater Services ContractShell, Europe

Overboarding of rigid production jumper

The Skandi Seven mobilising in Norway for Shell operations

Subsea 7 and Venture Production management teams during a visit to the Seven Navica at the Vigra spoolbase, August 2008


Executive Management Team

Mel FitzgeraldChief Executive OfficerBorn: 1950

Mel has been involved in the oil industry since he joined Brown & Root in 1974 as a Project Engineer and has worked in a number of locations including Malaysia, Indonesia, Singapore, Bahrain, Egypt and the UK, progressing through various technical and commercial positions until he joined European Marine Contractors (EMC) in 1988. He held a number of management positions with EMC before joining Halliburton Subsea as a Vice President in 2000, a position he held until January 2001, when he then took up the role of UK Vice President for Halliburtons Energy Services Group. Mel joined Subsea 7 as Chief Executive Officer in July 2004. Mel has a Bachelor of Engineering Degree from Galway University of Ireland and a Masters in Business Administration from the University of Kingston, UK.

John EvansChief Operating OfficerBorn: 1963

John has over 20 years experience in the engineering and contracting sector as a Senior Manager and Chartered Engineer. During 18 years with Kellogg Brown & Root (KBR) and European Marine Contractors (EMC) he built a successful record in general management, commercial and operational roles in the offshore oil and gas industry. Between 2002 and mid-2005 John was Chief Operating Officer for KBR Infrastructure business in Europe and Africa. John joined Subsea 7 as Chief Operating Officer in July 2005. John has a B Eng (Tech) in Mechanical Engineering from the University of Wales, Cardiff and is a Chartered Mechanical and Marine Engineer.

Barry MahonChief Financial OfficerBorn: 1962

Barry has over 25 years' experience in finance and general management. He commenced his professional career with KPMG in Dublin and qualified as a Chartered Accountant in 1987 before moving to Perth, Western Australia where in 1992 he joined an Australian publicly-listed company, Orbital Engine Corporation Ltd, as its Group Financial Controller and then became Company Secretary. In 1996 he joined Halliburton as its Shared Services Manager with responsibility for all business support functions for their operations in Australia and New Zealand. In 2000 he accepted a posting to Aberdeen for Halliburton Subsea as its Shared Services Director. Barry joined Subsea 7 as Chief Financial Officer in July 2004. Barry has a Bachelor of Commerce degree from University College Dublin.

David CassieExecutive Vice President- CommercialBorn: 1956

David is a Chartered Quantity Surveyor with over 25 years oil and gas experience in both commercial and operational roles. He began his career with Construction John Brown and Press & Worley Offshore and from there moved to Britoil before moving into the subsea sector with Wharton Williams in 1985. After joining Stena Offshore in 1987 as Commercial Manager, David held a number of posts including Managing Director for the merged company Coflexip Stena Offshore, and latterly at Technip where he was Senior Executive Vice President, responsible for the North Sea, Canada and Caspian Region. David joined Subsea 7 as Executive Vice President - Commercial, in October 2002.


Global Leadership Team

REGIONAL MANAGEMENT TEAM

GLOBAL MANAGEMENT TEAM

Dave Adams

Vice PresidentProject Management & Engineering

Victor Bomfi m

Vice PresidentBrazil

Jackie Doyle

Head of Communications

Craig Broussard

Vice President Asia Pacific

Nina El-Imad

Group Financial Controller

Ian Cobban

Vice PresidentNorth America

Neill Kelly

DirectorStrategic Development

Dick Martin

Vice PresidentLife-of-Field Services

Steph McNeill

Vice PresidentVessel and Equipment Management Group

Neil Milne

Managing Directori-Tech

Graeme Murray

General Counseland Vice PresidentCommercial & Procurement

Mike OMeara

Vice PresidentHealth, Safety,Environment, Quality

Martin Ridley

Vice PresidentGlobal Business Acquisition

Graham Sharland

Chief Operating OfficerAfrica

Dr Stuart N Smith

Vice PresidentTechnology & Asset Development

Russell Stewart

Vice PresidentHuman Resources

Robin Davies

Vice PresidentNorth Sea

Judith Tocher

Vice PresidentLegal

Tor Espedal

Vice PresidentNorway

Steve Wisely

Vice PresidentBusiness AcquisitionAsia Pacific

Jan Willem van der Graaf

Vice PresidentAfrica

Andy Woolgar

Vice PresidentOperations


Financial Report

CONTENTS

27 Board of Directors

28 Board of Directors Report

31 Corporate Governance Report

35 Directors' Responsibility Statement

36 Report of the Independent Auditor

37 Income Statements

38 Balance Sheets

39 Statements of Changes in Shareholders Equity

41 Cash Flow Statements

42 Notes to the Financial Statements

79 Financial Calendar


Board of DirectorsPursuant to the Companys Articles of Association, the board of directors of Subsea 7 Inc. shall have from three to seven shareholder-elected members. All directors served for the full year.

Mr Siem is the chairman of Subsea 7 Inc. and is also chairman of Siem Offshore Inc., Siem Industries Inc., Siem Industrikapital AB, and a director of Star Reefers Inc., and North Atlantic Smaller Companies Investment Trust plc. Mr Siem is a citizen of Norway.

Mr Fitzgerald, who is also the chief executive officer of Subsea 7 Inc., is a qualified civil/structural engineer and has over thirty years of industry experience, having worked in Malaysia, Indonesia, Singapore, Bahrain, Egypt and the UK for Brown & Root before holding several management positions at European Marine Contractors and Halliburton Subsea. He has an MBA from the University of Kingston and is an Irish citizen.

Mr Delouche is the president and secretary of Siem Industries Inc. and is responsible for the financial and corporate management function. He is in charge of the companys operations at the head office in George Town, Cayman Islands. Mr Delouche holds a civil engineering degree and an MBA and was previously an audit manager with KPMG Peat Marwick LLP. He is a US citizen.

Kristian SiemChairman of the BoardBorn: 1949

Mel Fitzgerald*Board Member (independent)Born: 1950

Michael DeloucheBoard MemberBorn: 1957

Mr Stevens has extensive marine and financing experience, previously holding senior executive positions with Great Lakes Transport Limited, McLean Industries Inc. and Sea-Land Service Inc. Mr Stevens is chairman of Trailer Bridge Inc. He is a graduate of the University of Michigan and Harvard Law School and is a US citizen.

Mr Schultz has been in several leading positions within shipping, chartering and broking and, since 1980, has been conducting his own business within project financing and consulting. He has an MBA from the University of Utah, USA. Mr Schultz is a Norwegian citizen.

Allen L StevensBoard Member (independent)Born: 1943

Arild SchultzBoard Member (independent)Born: 1944

*Independent of the Companys main shareholder but a member of the Companys executive management team


Board of Directors Report

The directors of Subsea 7 Inc. present their report for the year ended 31 December 2008 together with the financial statements of the Group and Company for the year. The financial statements and related notes on pages 37 to 79 were authorised for issue by the board of directors (the board) on 27 March 2009 and will be laid before the shareholders at the Annual General Meeting (the AGM) to be held on 8 May 2009.

Results and dividendIn 2008 the Group recorded revenues of $2,373 million and a net profit of $264 million, compared to revenues of $2,187 million and a net profit of $214 million in 2007.

Net operating profit for the year ended 31 December 2008 was $425 million compared to $316 million for the same period in 2007. Net operating margins as a percentage of revenue increased to 17.9% in 2008 from 14.5% in 2007. Reasons for the year-on-year improvement in margins included improved pricing and good project execution. Net financial expense for the year ended 31 December 2008 was $43 million compared to $3 million for the year ended 31 December 2007. The significant year-on-year increase in expense is primarily due to a charge of $34 million representing changes in the fair value of derivative financial instruments, of which $12 million is related to the marking-to-market of foreign exchange contracts and $22 million is related to the re-measurement at fair value of the embedded option contained within the Acergy S.A. convertible loan notes.

Taxation expense for the year ended 31 December 2008 was $131 million (2007: $101 million) which equates to an effective rate of 33.1% (2007: 32.0%)

Net profit attributable to equity shareholders for the year ended 31 December 2008 was $264 million, or $1.80 per share, compared to a net profit of $214 million, or $1.45 per share, for the year ended 31 December 2007.

The directors do not recommend the payment of a dividend for the year (2007: nil), preferring that the Groups profit is reinvested in the business.

Financing activitiesIn January 2008, the Company repurchased 890,000 of its own shares at an average price of NOK 98.04 per share (equivalent to $17.66 per share). These shares have been cancelled and form part of the authorised but un-issued share capital of the Company.

During the year, the Group negotiated a revolving credit facility with Siem Industries Inc. for $100 million. This facility, which is on market terms, was used to partially fund the investments that were made in Acergy S.A. As at 31 December 2008, $50 million of the Siem Industries Inc. revolving credit facility remained undrawn.

In January 2009 the Group concluded an amendment to its revolving credit and guarantee facilities with DnB NOR Bank ASA dated 20 December 2004, increasing the revolving credit facility from $100 million to $150 million.

Financial risk managementThe Groups multinational operations and debt financing expose it to a variety of financial risks. The Group has in place risk management policies that seek to limit the adverse effects of these risks on the financial performance of the Group. Further details explaining the Groups financial risk management are detailed in note 2 to the financial statements.

Share optionsDuring 2008, no new awards under the share option scheme for employees were made by the board. During the year, 64,400 share options awarded through previous option schemes were exercised. Further details relating to these share options can be found in note 21 to the financial statements.

ShareholdersThe Companys authorised share capital is $2 million divided into 200,000,000 ordinary shares of a nominal value of $0.01 each. The issued share capital at 27 March 2009 was $1,469,194 divided into 146,919,380 shares. The shares of the Company are listed on the Oslo Stock Exchange with the ticker code SUB. Over the course of 2008 the share price fell from NOK 121.50 on the first day of trading to NOK 40.50 on the last.

Earnings per share for 2008 was $1.80 (diluted: $1.74) compared to earnings per share of $1.45 (diluted: $1.44) in 2007.


The Companys 20 largest shareholders at 25 March 2009 were as follows:

ShareholderNumber of shares Owner

interest %

Siem Industries Inc. * 54,109,045 36.83%Clearstream Banking SA 10,281,919 7.00%DNB Nor Bank ASA 5,700,000 3.88%DNB Nor Bank ASA 5,620,000 3.83%Bank of New York 5,088,491 3.46%JPMBLSA 3,784,670 2.58%JP Morgan Chase Bank 3,106,337 2.11%Citibank n.a. New York Branch 2,929,569 1.99%State Street Bank and Trust Co. 2,139,778 1.46%Bank of New York 2,136,591 1.45%MP Pensjon 2,112,500 1.44%Nordea Bank Denmark AS 1,965,669 1.34%RBC Cees Trustee Limited 1,789,990 1.22%Bank of New York 1,614,530 1.10%JP Morgan Chase Bank 1,588,588 1.08%Credit Suisse Securities 989,279 0.67%JP Morgan Chase Bank 959,269 0.65%State Street Bank and Trust Co. 920,985 0.63%Brown Brothers Harriman & Co. 890,953 0.61%Waterman Holding Inc. 845,000 0.58%

Total 20 largest shareholders 108,573,163 73.90%

*Siem Industries Inc. is the beneficial owner of 65,429,045 shares which represent 44.5% of the total issued shares. This excludes 4,680,000 shares in Subsea 7 Inc. that were borrowed by Lehman Brothers International (Europe), which is currently in administration, and have not been redelivered.

Directors and board committeesThe names of the current directors and their biographical details are presented on page 27. The directors are subject to re-election by the shareholders every two years and, accordingly, Mr Siem, Mr Delouche and Mr Schultz will be standing for re-election at the AGM. Information on the audit and compensation committees is included in the corporate governance report on pages 31 to 34.

Health, safety and environmentSubsea 7 is committed to upholding the highest standards of health, safety and environmental protection for the benefit of its employees, the public at large and the environment. The Group has a formal health and safety policy and an environmental policy which are brought to the attention of every employee and contractor. The Groups policy for working on clients sites is that industry best practice is observed as a minimum, even when local requirements fall short of these standards. Safety issues, together with the control measures in place, form part of the Groups risk based internal control system. The board receives regular reports on health and safety issues.

Employees and equal opportunitySubsea 7 promotes equal opportunity and addresses unfair discrimination in every aspect of its operations. This is reflected in the Groups corporate governance, management systems, and operational activities.

The Group recognises that this goal can only be achieved by establishing a clear policy agenda which is then implemented and enforced by systematic management action. The Groups equal opportunities and diversity in employment policy is supported by encouraging open communications through line management, employee forums and environment committees. This is further underpinned by the provision of a confidential whistle-blowing helpline and training which focuses on the application of the Subsea 7 code of business conduct. The Group has invested in open communications with the workforce through a variety of channels including regular newsletters and updates. In addition to day-to-day line manager briefings, this is achieved by formal employee representative and environment committee forums.


Offshore, competence assessment and appraisals are conducted regularly whilst onshore a comprehensive performance management system is deployed.

The Group holds a number of town hall presentations every year which are hosted by the CEO. These meetings are delivered around the organisation. At a local level, there are various meetings to address safety and operational issues as well as localised department and function meetings as appropriate.

Considerable effort is applied to ensure all employees are both informed and aware of organisational performance and goals for the future.

Going concernThe financial statements have been prepared under the assumption of going concern. This assumption is based on the level of cash and cash equivalents at the year end, the credit facilities in place, the forecast cash flows for the Group and the backlog position at 31 December 2008.

Market outlookThe financial crisis and economic downturn during 2008 has created greater uncertainty about the market outlook, however, it remains too early to say with any certainty how this downturn will affect the Groups operations and markets. Whilst the market outlook will retain a larger degree of uncertainty for the medium term as a result of the current economic climate, there has been no dramatic deterioration in the subsea market sector.

Current indications are that national oil companies and major operators are generally maintaining spending levels. However, as expected, the anticipated spending of smaller operators has been reduced and, as a consequence, a number of development plans have been re-evaluated and deferred. This has particularly affected the UK sector of the North Sea and North America where a number of tie-back projects have been postponed.

There are indications of decreases in costs throughout the supply chain and, in conjunction with this, the Group is focused on reducing its costs and improving efficiencies in order to remain competitive in the current market.

Board of Subsea 7 Inc.27 March 2009

Kristian Siem, Chairman Michael Delouche Mel Fitzgerald

Arild Schultz Allen L Stevens


Corporate Governance Report

As a Company incorporated in the Cayman Islands, Subsea 7 Inc. is subject to Cayman Islands laws and regulations with respect to corporate governance. Cayman Islands corporate law is to a great extent based on English law. Further, as a consequence of being listed on the Oslo Stock Exchange, the Company must comply with certain aspects of Norwegian securities law and is also obligated to adhere to the Norwegian Code of Practice for Corporate Governance (the code) on a comply or explain basis.

Subsea 7 Inc. is committed to ensuring that high standards of corporate governance are maintained and supports the principles set out in the code. However, since the Company is governed by Cayman Islands laws and regulations, certain practices are applied which deviate from some of the recommendations of the code.

The Groups corporate governance policies and procedures are explained below, with reference to the principles of corporate governance as set out in the sections identified in the code.

Implementation and reporting on corporate governanceSubsea 7 Inc. acknowledges the division of roles between shareholders, the board of directors and the executive management team. The Group further ensures good governance is adopted by holding regular board meetings which the executive management team attend to present on strategic, operational and financial matters.

BusinessAs stated, Subsea 7 Inc. is subject to Cayman Islands laws and regulations which do not require the objects clause of the Companys Memorandum and Articles of Association to be clearly defined. The Companys Articles of Association can be referred to on the Companys website: www.subsea7.com.

Subsea 7 provides all the products and services required for subsea field development, including project management, design and engineering, procurement, fabrication, survey, installation, and commissioning of production facilities on the seabed and the tie-back of these facilities to fixed or floating platforms or to the shore.

The Group also delivers a suite of services to support the maintenance and integrity management of these assets throughout their producing life including survey, inspection, repair and maintenance, integrity management and decommissioning.

Equity and dividendsEquityTotal shareholders equity at 31 December 2008 was $689,666,000 (2007: $819,757,000) which the directors believe is satisfactory given the Groups strategy and objectives.

Dividend policyIt is Subsea 7s objective to give the Companys shareholders a competitive return on their invested capital over time. The return is to be achieved through a combination of an increase in the value of the shares and dividend payments. In recent years the Company has retained all earnings to support and develop operations and, therefore, has not paid dividends.

Equity mandatesThe board of directors mandate to increase the Companys issued share capital is limited only to the extent of the authorised share capital of the Company in accordance with the Companys Memorandum and Articles of Association which are in accordance with Cayman Islands law.

The board of directors can approve the purchase of Company shares up to a limit of 10% of the issued share capital in any 12 month period in accordance with the Articles of Association. The boards right to acquire the Companys own shares is conditional on such purchases being made in open market transactions through the Oslo Stock Exchange.

Equal treatment of shareholders and transactions with close associatesThe Company has one class of shares which are listed on the Oslo Stock Exchange. Each share carries equal rights including an equal voting right at annual or extraordinary general meetings of shareholders of the Company. The Articles of Association contain no restrictions on voting rights.

Related party transactionsAny transactions between the Group and members of the board of directors, executive management or close associates are detailed as related party transactions in note 32 to the financial statements.


The Groups code of business conduct requires any director or employee to declare if they hold any direct or indirect interest in any transaction entered into by the Group.

Freely negotiable sharesThe Articles of Association contain no form of restriction on the negotiability of shares in the Company.

Annual general meetingThe annual general meeting (AGM) is held each year in the Cayman Islands. The notice of meeting and agenda documents for the AGM are posted on the Groups website at least 21 days prior to the meeting and this information is sent to shareholders at least 14 days prior to the meeting. Documentation from previous AGMs can be found on the Groups website.

All shareholders that are registered with the Norwegian Central Securities Depository System receive a written notice of the AGM. Subject to the procedures described in the Articles of Association all shareholders have the right to submit proposals and may vote either directly or by proxy. The registration deadline is at least 24 hours prior to the commencement of the AGM.

The chairman of the board of directors ordinarily chairs the AGM. However, if a majority of the shareholders request an independent chairman, one would be appointed.

All directors are encouraged to attend the AGM. The AGM of shareholders elects the board of directors, approves the Annual Report and financial statements of the Group and Company, appoints the external auditor and determines the remuneration of the board and auditor. The chairman of the board is elected by the directors annually.

Nomination committeeThe appointment of a nomination committee is not a requirement under Cayman Islands law and the Company has so far not seen sufficient reason to appoint such a committee.

Corporate assembly and board of directors: composition and independenceAs a Cayman Islands registered entity, the Company does not have a corporate assembly.

The board comprises five directors at 27 March 2009, three of whom are independent of the Companys main shareholder. Mr Fitzgerald, the Chief Executive Officer (CEO), was appointed to the board in May 2007. The board operates controls to ensure that no conflicts of interest exist in this regard including, but not limited to, the establishment of the compensation committee and audit committee. Mr Fitzgerald does not sit on either of these committees. The composition of the Companys board of directors, including the controls to avoid conflicts of interest, is in accordance with both Cayman Islands company law and good corporate governance practice.

The board endeavours to ensure that it is constituted by directors with a varied background and with the necessary expertise, diversity and capacity to ensure that it can effectively function as a cohesive body. Prior to proposing candidates to the general meeting for election to the board, the board of directors seeks to consult with the Companys major shareholders. The directors of the board are elected by the shareholders of the Company at the AGM for a two-year term, following which they can stand for re-election. Biographies of the individual directors are detailed on page 27 of this Annual Report.

The directors of the board are encouraged to hold shares in the Company which the board believes promotes a common financial interest between the members of the board and the shareholders of the Company.

The work of the board of directorsEach December the board of directors sets a plan for its work for the following year which includes a review of strategy, objectives and their implementation, the review and approval of the annual budget and review and monitoring of the Groups current year financial performance. The board is scheduled to meet in person approximately four times a year, and four times by telephone conference, but the schedule is flexible to react to operational or strategic changes in the market and Group circumstances.

The board of directors has overall responsibility for the management of the Group and has delegated the daily management and operations of the Group to the CEO, Mr Fitzgerald, who is appointed by and serves at the discretion of the board of directors. The CEO is supported by the other members of the executive management team which consists of Mr Cassie (Executive Vice President - Commercial), Mr Evans (Chief Operating Officer) and Mr Mahon (Chief Financial Officer), further details of whom are available on page 24 of this Annual Report. The executive management team has the collective duty to implement Subsea 7s strategic, financial and other objectives, as well as to safeguard the Groups assets, organisation and reputation.


The board receives appropriate, precise and timely information on the operations and financial performance of the Group from the executive management team, which is imperative for the board to perform its duties.

The board has established a compensation committee and an audit committee, each of which has formal terms of reference approved by the board of directors. Matters are delegated to the committees as appropriate. The directors appointed to these committees are selected based on their experience and to ensure the committees operate in an effective manner. The minutes of all committee meetings are circulated to all directors. The work of these committees is explained in the sections below on Remuneration of the executive management and Auditor respectively.

In the event that the chairman of the board cannot attend a meeting or is conflicted in leading the work of the board, a deputy chairman will be appointed.

Attendance by directors, either in person or via telephone conference, at the meetings of the board and its committees during 2008 is summarised below:

Meeting BoardAudit

committeeCompensation

committeeNumber of meetings 18 2 2Attendance by:Kristian Siem1 2 17 2 2Michael Delouche1 17 2 1*Arild Schultz2 3 14 - 2Allen L Stevens3 17 - -Mel Fitzgerald4 17 - 1*

1 Member of audit committee2 Member of compensation committee3 Independent of the Companys main shareholder and the Companys executive management4 Independent of the Companys main shareholder but a member of the Companys executive management team* Attended part of the meeting

The performance of the board of directors is constantly monitored and reviewed to ensure the composition and the way in which the directors function both individually and as a collegiate body is effective and efficient.

Risk management and internal controlThe board acknowledges its responsibility for the Groups system of internal control and for reviewing its effectiveness. The Groups system of internal control is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable but not absolute assurance against material misstatement or loss.

The Group adopts internal controls appropriate to its business and culture. The key components of the Groups system of internal control are described below.

The Group has in place clearly defined lines of responsibility and limits of delegated authority. Comprehensive procedures provide for the appraisal, approval, control and review of capital expenditure. The executive management team meet with the global leadership team on a regular basis to discuss particular issues affecting each region and business unit, including their key risks, health and safety statistics, legal and financial matters. The Group maintains a comprehensive annual planning and management reporting system and a detailed annual budget is prepared in advance of each year and supplemented by revised forecasts during the course of the year. In addition, a five year strategic plan is updated annually. Actual financial results are reported monthly and compared to budget, revised forecasts and prior year results. The board reviews and approves all reports on projected and actual financial performance.

The board derives further assurances from the reports from the audit committee. The audit committee has been delegated responsibility to review the effectiveness of the internal financial control systems implemented by management and is assisted by internal audit and the external auditors where appropriate.

Remuneration of the board of directorsThe Companys directors receive remuneration in accordance with their individual roles. The remuneration of the CEO is detailed in note 6 to the financial statements. For all other directors, remuneration is not linked to the performance of the Company but is based on participation at meetings and sub-committees. The directors are encouraged to own shares in the Company but do not participate in any incentive or share option schemes, with


the exception of Mr Fitzgerald. The remuneration of the board of directors is approved at the AGM annually and is disclosed in note 6 to the financial statements.

Directors are not permitted to undertake specific assignments for the Group unless this has been disclosed and approved in advance by the full board of directors.

Remuneration of the executive managementThe compensation committee is responsible for determining and reviewing the remuneration and terms and conditions of the members of executive management. Subsea 7 is committed to offering executive management competitive remuneration based on current market conditions, Group and individual performance.

During 2005, the Companys AGM approved the implementation of a share option plan designed to promote value creation and align the interests of executive management and other senior employees with those of the shareholders. Options vest in equal proportions on a quarterly or annual basis over a period of time, generally five years. Options vested cannot be exercised until at least one year after grant. Refer to note 21 to the financial statements for further details of the share option schemes.

All proposals to issue share options under the scheme are presented and approved by the board of directors prior to issue. The number of options awarded is monitored due to the share option plan restriction that options issued within any 12 month period ending on and including the proposed date of issue cannot exceed 1% of the issued share capital of the Company at the proposed date of issue.

Further details on the remuneration of executive management are contained in note 6 to the financial statements.

Information and CommunicationSubsea 7 Inc.s board of directors concurs with the principles of equal treatment of all shareholders and the Company is committed to reporting financial results and other information that is open, accurate and timely. The Company provides information to the market through quarterly and annual reports, investor and analyst presentations which are open to the media, and by making operational and financial information available on the Groups website. Announcements are released through notification to the Oslo Stock Exchange's company disclosure system and simultaneously on the Groups website. As a listed company, the Company complies with the relevant regulations regarding disclosure. Information is only provided in English.

Take-oversSubsea 7 Inc.s board will strive to ensure that complete information is provided in all situations affecting the shareholders interests.

AuditorThe audit committee is responsible for ensuring that the Group has an independent and effective external audit process. The audit committee supports the board of directors in the administration and exercise of its responsibility for supervisory oversight of financial reporting and internal control matters and to maintain appropriate relationships with the Groups auditor. The audit committee charter details the terms of reference for the audit committee. The Groups auditor meets the audit committee annually regarding the planning and preparation of the annual accounts and subsequently to present their report on the internal control procedures. The audit committee members hold separate discussions with the external audit partner once during the year without executive management being present. The scope, resources and the level of fees proposed by the external auditor in relation to the Groups audit are approved by the audit committee.

The audit committee recognises that it is occasionally in the interests of the Group to engage its auditor to undertake certain other non-audit assignments. Fees paid to the auditor for audit and non-audit services are presented and approved at the AGM. The audit committee also requests the Groups auditor to confirm annually in writing that the auditor is independent.


Directors Responsibility Statement

We confirm that, to the best of our knowledge, the financial statements for the period from 1 January to 31 December 2008 have been prepared in accordance with current applicable accounting standards and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Group taken as a whole. We also confirm, to the best of our knowledge, that the Annual Report includes a true and fair overview of the development and performance of the business and the position of the Company and the Group, together with a description of the principal risks and uncertainties facing the Company and the Group.

Board of Subsea 7 Inc.27 March 2009

Kristian Siem, Chairman Michael Delouche Mel Fitzgerald

Arild Schultz Allen L Stevens


Report of the Independent Auditor

We have audited the Group and Parent Company financial statements (the financial statements) of Subsea 7Inc (the Group) for the year ended 31 December 2008 which comprise the Group and Parent Company Income Statements, the Group and Parent Company Balance Sheets, the Group and Parent Company Cash Flow Statements, the Group and Parent Company Statements of Changes in Shareholders Equity and the related notes. These financial statements have been prepared under the accounting policies set out therein.

Respective responsibilities of directors and auditorsThe directors are responsible for preparing the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, in accordance with the regulations of the Oslo Stock Exchange.

Our responsibility is to audit the financial statements in accordance with the relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, has been prepared for and only for the Groups members as a body and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come, save where expressly agreed by our prior consent in writing.

We report to you our opinion as to whether the financial statements give a true and fair view. We also report to you if the Group has not kept proper accounting records, or if we have not received all the information and explanations we require for our audit.

We read other information contained in the Annual Report and consider whether it is consistent with the audited financial statements. The other information comprises only the: Financial Results; Message from the Chairman; Message from the Chief Executive Officer; Board of Directors Report; Corporate Governance Report and all other information listed in the contents on page 3. We consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.

Basis of audit opinionWe conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Groups and Companys circumstances and have been consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

OpinionIn our opinion:

the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Groups affairs as at 31 December 2008 and of its profit and cash flows for the year then ended; the Parent Company financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the Parent Companys affairs as at 31 December 2008 and of its loss and cash flows for the year then ended; andthe financial statements have been properly prepared in accordance with the regulations of the Oslo Stock Exchange.

PricewaterhouseCoopers LLPChartered Accountants and Registered AuditorsAberdeen27 March 2009

Notes:The maintenance and integrity of the Subsea 7 Inc website is the responsibility of the directors; the work carried out by the auditors does not involve(a)

consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.(b)


Income StatementsFor the year ended 31 December 2008

Group Company

(Amounts in $1,000) Note 2008 2007 2008 2007

Revenue 2,373,252 2,187,354 18,478 10,741Project and vessel expenses (1,322,882) (1,300,271) - -Employee benefits 6 (476,200) (425,637) - -Other operating expenses (65,249) (72,086) (8,775) (7,750)Depreciation, amortisation and impairments 11, 12 (95,300) (76,927) - -Profit on disposal of property, plant and equipment

11,671 3,654 - -

Total operating expenses (1,947,960) (1,871,267) (8,775) (7,750)

Net operating profi t 425,292 316,087 9,703 2,991

Changes in fair value of derivative financial instruments

18, 19 (34,177) (2,032) (34,143) 2,547

Net currency gain/(loss) 18,761 14,957 (108,012) (3,793)Finance income 7 5,881 8,843 22,042 23,118Finance expense 7 (33,014) (25,238) (34,704) (25,149)Net fi nancial items (42,549) (3,470) (154,817) (3,277)

Share of post tax profit from joint ventures 14 11,768 1,165 - -Share of post tax (loss)/profit from associates 15 (8) 998 - -Profi t/(loss) before tax 394,503 314,780 (145,114) (286)

Taxation 8 (130,506) (100,659) - -Net profi t/(loss) attributable to equity shareholders

263,997 214,121 (145,114) (286)

Earnings per share, in $ per share- basic- diluted

99

1.801.74

1.451.44


Balance SheetsAs at 31 December 2008

Group Company

(Amounts in $1,000) Note 2008 2007 2008 2007

ASSETSNon-current assetsGoodwill 10 98,533 98,533 - -Other intangible assets 11 1,130 1,780 - -Property, plant and equipment 12 991,408 906,551 - -Deferred tax assets 25 15,113 3,454 - -Investment in subsidiary undertaking 13 - - 113,785 109,145Investments in joint ventures 14 12,582 814 - -Investments in associates 15 1,601 1,609 - -Amounts due from group companies - - 368,715 297,970

1,120,367 1,012,741 482,500 407,115Current assetsInventories 16 22,567 25,209 - -Trade and other receivables 17 659,097 659,139 531,639 2,344,000Available-for-sale financial assets 18 85,414 - 85,414 -Derivative financial instruments 19 1,483 5,120 1,225 2,797Cash and cash equivalents 20 114,066 167,657 49,959 85,966

882,627 857,125 668,237 2,432,763TOTAL ASSETS 2,002,994 1,869,866 1,150,737 2,839,878

SHAREHOLDERS' EQUITY AND LIABILITIESShareholders equityShare capital 21 1,469 1,477 1,469 1,477Share premium reserve 21 271,238 286,508 271,238 286,508Shares held by Employee Share Trust 21 (9,430) - - -Other reserves 22 (225,650) 152,362 11,920 83,721Retained earnings 652,039 379,410 (149,498) (9,024)Total shareholders equity 689,666 819,757 135,129 362,682

Non-current liabilitiesBorrowings 24 559,737 387,301 559,737 387,301Deferred tax liabilities 25 99,610 57,823 - -Retirement benefit obligations 26 1,002 1,789 - -Other non-current liabilities 27 4,237 4,384 37,900 -

664,586 451,297 597,637 387,301Current liabilitiesTrade and other payables 23 605,358 548,770 407,315 2,089,645Current tax liabilities 32,728 47,366 - -Derivative financial instruments 19 10,656 2,282 10,656 250Finance lease obligations 24 - 394 - -

648,742 598,812 417,971 2,089,895Total liabilities 1,313,328 1,050,109 1,015,608 2,477,196TOTAL SHAREHOLDERS EQUITY AND LIABILITIES

2,002,994 1,869,866 1,150,737 2,839,878


Statements of Changes in Shareholders EquityFor the year ended 31 December 2008

Group

(Amounts in $1,000)Share

capitalShare

premium

Shares held by

Employee Share Trust

Other reserves

Retained earnings Total

At 1 January 2008 1,477 286,508 - 152,362 379,410 819,757

Foreign currency translation - - - (302,219) - (302,219)Available-for-sale financial assets fair value adjustment

- - - (71,801) - (71,801)

Total expense recognised directly in equity

- - - (374,020) - (374,020)

Net result for the year - - - - 263,997 263,997Total income and expense for the year

- - - (374,020) 263,997 (110,023)

Share based payments - - - - 4,640 4,640Shares issued exercise of options 1 437 - - - 438Depreciation on re-valued assets - - - (3,992) 3,992 -Purchase of own shares (9) (15,707) - - - (15,716)Shares purchased by Employee Share Trust

- - (9,430) - - (9,430)

At 31 December 2008 1,469 271,238 (9,430) (225,650) 652,039 689,666

At 1 January 2007 1,473 283,682 - 88,196 158,585 531,936

Foreign currency translation - - - 20,066 - 20,066Total income recognised directly in equity

- - - 20,066 - 20,066

Net result for the year - - - - 214,121 214,121Total income for the year - - - 20,066 214,121 234,187

Share based payments - - - - 2,785 2,785Shares issued exercise of options 4 2,826 - - - 2,830Depreciation on re-valued assets - - - (3,919) 3,919 -

Convertible notes 2007-2017 equity component

- - - 48,019 - 48,019

At 31 December 2007 1,477 286,508 - 152,362 379,410 819,757


Statements of Changes in Shareholders Equity - continuedFor the year ended 31 December 2008

Company

(Amounts in $1,000)Share

capitalShare

premiumOther

reservesRetained earnings Total

At 1 January 2008 1,477 286,508 83,721 (9,024) 362,682

Available for sale financial assets fair value adjustment

- - (71,801) - (71,801)

Total expense recognised directly in equity

- - (71,801) - (71,801)

Net result for the year - - - (145,114) (145,114)

Total income and expense for the year - - (71,801) (145,114) (216,915)

Share based paym

Documents

Subsea7_AnnualReport2008.pdf