UPDATE 1-Subsea 7 beats forecast in Q2, markets seen strong

(Adds details, shares)

OSLO, July 22 (Reuters) - Norwegian offshore engineering group Subsea 7 SUB.OL reported second-quarter core earnings above forecast on Tuesday and said its markets were expected to remain strong until 2012, boosting its shares sharply.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose to $147 million in April-June from $91 million in the same period a year ago.

The result topped all nine forecasts from a Reuters poll of analysts, whose highest prediction was $141 million.

"Our recent major contract award in Africa and ongoing high levels of tendering activity provide further support for a strong market through to 2012," Subsea 7 said in a statement.

Its shares had jumped 10.9 percent to 120 crowns by 0739 GMT, while Oslo's main index .OSEBX was up 1.1 percent.

Subsea 7 is a supplier of oilfield services, such as engineering work and pipeline production. The sector has been lifted by soaring oil prices, even though costs are also on the rise due to capacity constraints.

Subsea 7, worth roughly $3.1 billion, said its order backlog shrank to $3.7 billion at the end of June from $3.9 billion at the end of March.

Since the end of June, Subsea 7 has been awarded a $460 million contract offshore Africa, and a number of North Sea projects worth some $137 million, the company said.

The company said the risks it faced over the rest of 2008 were typical for the industry where projects are often delayed or over budget.

"Significant risks faced by the group over the remaining half of the year relate to project execution, especially with regards to Shell's (RDSa.L) BC10 project in Brazil and Chevron's (CVX.N) Tombua Landana project in Angola," it said. (Reporting by Wojciech Moskwa; editing by Rory Channing)