TechnipFMC Announces Second Quarter 2021 Results

Source: 7/21/2021, Location: North America

- Solid financial performance in both Subsea and Surface Technologies
- Total Company inbound orders of $1.6 billion; Subsea inbound orders of $1.3 billion
- Full-year guidance updated, supported by strength of first half results and market outlook

TechnipFMC plc reported second quarter 2021 results.

Summary Financial Results from Continuing Operations Total Company revenue in the second quarter was $1,668.8 million. Loss from continuing operations attributable to TechnipFMC was $174.7 million, or $0.39 per diluted share.

After-tax charges and credits totaled $148.7 million of charges, or $0.33 per diluted share. Reported results included a loss from the Company’s equity investment in Technip Energies of $146.8 million primarily related to the change in market value in the quarter.

Adjusted loss from continuing operations was $26 million, or $0.06 per diluted share (Exhibit 6).

Adjusted EBITDA, which excludes pre-tax charges and credits, was $144.3 million; adjusted EBITDA margin was 8.6 percent (Exhibit 8). Included in adjusted EBITDA was a foreign exchange loss of $10.7 million.

Doug Pferdehirt, Chairman and CEO of TechnipFMC, stated, “Second quarter results reflect another strong quarter for our Company. Total Company revenue improved sequentially to $1.7 billion, with both Subsea and Surface Technologies segments reporting an adjusted EBITDA margin of 11 percent.”

Pferdehirt added, “In Subsea, we demonstrated our ability to continue winning, with inbound totaling $1.3 billion for the quarter. The order strength in the first half of the year has been indicative of the continued market progression we outlined last year. Year-to-date, we have announced ten awards, of which 50 percent will be executed as integrated projects. This included the addition of two new iEPCI™ clients in the quarter.”

“In Surface Technologies, inbound orders increased 32 percent from the first quarter driven by our international business where well completion activity continued to recover from the prior year decline. International growth was driven by the Middle East, the North Sea and China. Orders in the Americas also increased, reflecting continued momentum in completion and drilling activity and the success of our iComplete™ offering.”

Pferdehirt continued, “We have increased our full-year expectations for both operating segments given our strong year-to-date results and continued improvement in the broader market outlook. Subsea inbound orders of $2.8 billion in the first half of the year were strong. We continue to see a healthy list of prospects and remain very confident in our full-year guidance for Subsea orders of more than $4 billion. Furthermore, growth in 2022 is supported by an increasing set of opportunities. When using the midpoint value of our Subsea Opportunity List, the project award potential has increased by nearly 20 percent to $17 billion over the next 24 months.”

“Looking beyond the traditional market, we believe that offshore will continue to play a meaningful role in the total energy mix. We are building partnerships in support of new energy, leveraging our differentiated technologies, and capitalizing on our integrated project execution and expertise as the subsea architect.”

“We are making steady progress in our partnerships focused on wind and wave opportunities. The market momentum for wind development continues to support increased investment in this abundant source of renewable energy. And when combined with wave technology, we can generate even greater energy output and reduced intermittency utilizing integrated offshore solutions.”

Pferdehirt added, “Our Deep Purple™ solution is centered around technology development and integration capabilities that convert this renewable energy into hydrogen, enabling economies of scale that were previously unattainable by offshore renewables projects. An example of this is our recently announced partnership with Portuguese energy utility EDP, as well as several notable research partners, in a concept study for the development of green hydrogen production from offshore wind power through a project called BEHYOND.”

Pferdehirt concluded, “Our success is driven by our core competencies, having pioneered and delivered next generation subsea technologies and the industry’s only fully integrated commercial model. We are demonstrating that these unique capabilities are completely transferable to the renewable energy space, giving us confidence in our ability to extend our leadership in subsea to the development of new and novel energy resources offshore.”

Operational and Financial Highlights

Financial Highlights
Subsea reported second quarter revenue of $1,394.3 million, a modest improvement from the first quarter. Revenue increased sequentially due to seasonal improvement in installation and services, largely offset by lower project activity in the quarter.

Subsea reported an operating profit of $72.4 million. Sequentially, operating results benefited from lower charges, improved margins in backlog and increased installation and services activity.

Subsea reported adjusted EBITDA of $154.1 million. Adjusted EBITDA increased 14.1 percent when compared to the first quarter, benefiting from higher margins in backlog and increased installation and services activity. Adjusted EBITDA margin improved 140 basis points to 11.1 percent.

Subsea inbound orders were $1,291.3 million for the quarter, reflective of the continued market improvement. Book-to-bill in the period was 0.9.

The following awards were included in the period:
- Ithaca Energy Captain EOR Project (North Sea)
Significant* Engineering, Procurement, Construction and Installation (EPCI) contract from Ithaca Energy (UK) Limited for the Captain Enhanced Oil Recovery (EOR) Project in the UK North Sea. TechnipFMC will design, manufacture, deliver and install subsea equipment including a rigid riser caisson, water injection flexible flowline, umbilicals and associated equipment.

*A “significant” award ranges between $75 million and $250 million.

Karoon Patola iEPCITM Project (Brazil)
TechnipFMC’s first integrated Engineering, Procurement, Construction and Installation (iEPCITM) contract in Brazil by Karoon Energy for the Patola field development. The contract covers engineering, procurement, construction and installation of subsea trees, flexible pipes and umbilicals. TechnipFMC was chosen based on its recognized technical excellence and capability to deliver complete and integrated solutions. The Company will leverage its assets and significant local content in Brazil, including its subsea equipment and flexible pipe plants and its logistics base.

Petrobras Buzios 6-9 Fields Project (Brazil)
Substantial* contract from Petrobras for the Buzios 6-9 fields. Located in the Santos basin offshore Brazil, these fields are part of the pre-salt area, with a water depth of 2,000 meters. TechnipFMC will supply subsea trees with controls, electrical and hydraulic distribution units, topside systems, and installation and intervention support services with rental tooling. All of the subsea trees will be manufactured at our facilities in Brazil, which are powered entirely from renewable energy sources.

*A “substantial” award ranges between $250 million and $500 million.

Equinor Kristin Sør Project (North Sea)
Significant* EPCI contract by Equinor for the Kristin Sør Field in the North Sea. TechnipFMC will supply rigid pipelines, static and dynamic umbilicals, as well as pipeline and marine installation of the subsea production facilities. The project will be executed by TechnipFMC’s operating center in Oslo, Norway, with fabrication occurring in the Company’s facilities in Norway and the United Kingdom.

*A “significant” award ranges between $75 million and $250 million.

Tullow Jubilee South East Development iEPCITM Project (Ghana) Significant* iEPCI™ contract for the Jubilee South East development, located offshore Ghana. It will be the Company’s first iEPCI™ project with Tullow Ghana Ltd. The contract builds upon TechnipFMC’s established relationship with Tullow and covers supply and offshore installation of all major subsea equipment, including manifolds and associated controls, flexible risers and flowlines, umbilicals, and subsea structures. At the pre-tendering stage, TechnipFMC utilized its Subsea Studio™ digital solutions to help optimize field layout.

*A “significant” award ranges between $75 million and $250 million.

Partnership and Alliance Highlights
BEHYOND: Concept study for green hydrogen production from offshore wind power
EDP, TechnipFMC and other research partners are joining forces to develop a conceptual engineering and economic feasibility study for a new offshore system for green hydrogen production from offshore wind power, called the BEHYOND project. The study will include innovative integration of equipment for the production and conditioning of green hydrogen and infrastructure that allows for its transportation to the coast. The goal is to create a unique concept that can be standardized and implemented worldwide, allowing for large-scale green hydrogen production offshore.

Each member of the consortium brings specific competencies that are complementary. TechnipFMC brings its extended history in subsea engineering, expertise developed on its Deep Purple™ green hydrogen project, and essential system integration abilities.

TechnipFMC and Halliburton’s Subsea Fiber Optic Solution selected by OTC and ExxonMobil
TechnipFMC and Halliburton received an OTC Spotlight on New Technology Award® for their Odassea™ Subsea Fiber Optic Solution, an advanced downhole fiber optic sensing system.

ExxonMobil selected the solution for its Payara development project in Guyana, the industry’s largest subsea fiber optic sensing project. The award followed completion of front-end engineering and design studies and qualifications.

The Odassea™ system integrates hardware and digital solutions to strengthen capabilities in subsea reservoir monitoring and production optimization. Halliburton provides the fiber optic sensing technology and analysis for reservoir diagnostics. TechnipFMC provides the optical connectivity from the topside to the completions. Through this collaboration, operators can accelerate full field subsea fiber optic sensing, design, and execution.

TechnipFMC and Halliburton are delivering Odassea™ solutions to multiple other subsea projects at all stages, from conceptual design to execution.

Surface Technologies

Financial Highlights
Surface Technologies reported second quarter revenue of $274.5 million, an increase of 11.8 percent from the first quarter. The sequential increase was primarily driven by higher activity in North America, increased international services and strong project execution. The Company also benefited from further adoption of its iComplete™ ecosystem.

Surface Technologies reported operating profit of $12.9 million. Operating profit increased sequentially primarily due to lower charges and higher sales volume.

Surface Technologies reported adjusted EBITDA of $30.2 million. Adjusted EBITDA increased 12.3 percent when compared to the first quarter, driven by higher sales volume. Adjusted EBITDA margin was unchanged at 11 percent.

Inbound orders for the quarter were $268.2 million, an increase of 31.9 percent sequentially driven by the Middle East, including Saudi Arabia, United Arab Emirates, Bahrain and Qatar, as well as the North Sea and North America. Book-to-bill improved to 1.0 in the period.

Backlog ended the period at $360.4 million. Given the short-cycle nature of the business, orders are generally converted into revenue within twelve months.

Corporate and Other Items (three months ended, June 30, 2021):
- Corporate expense was $30.3 million.
- Foreign exchange loss was $10.7 million.
- Net interest expense was $35.2 million.
- The Company recorded a tax provision of $34.9 million.
- Total depreciation and amortization was $98 million.
Cash required by operating activities from continuing operations was $85.9 million. Capital expenditures were $39.7 million. Free cash flow from continuing operations was $(125.6) million (Exhibit 11).

The Company ended the period with cash and cash equivalents of $854.9 million; net debt was $1,623 million.

The Company completed the partial spin-off of Technip Energies on February 16, 2021. Financial results for Technip Energies are reported as discontinued operations. The Company’s investment in Technip Energies is reflected in current assets at market value.

The Company recognized a loss in the second quarter of $146.8 million from its equity ownership in Technip Energies. The loss was primarily related to the change in market value in the period.

On April 27, 2021, the Company sold 26.8 million shares from its retained stake in Technip Energies for proceeds of $358.1 million. As of June 30, 2021, the Company’s ownership stake was 55.5 million shares, or approximately 31 percent of Technip Energies’ outstanding shares.

2021 Full-Year Financial Guidance1
Updates to the Company’s full-year guidance for 2021 are as follows:
Subsea revenue in a range of $5.2 - 5.5 billion, which increased from the previous guidance range of $5.0 - 5.4 billion.

Surface Technologies EBITDA margin in a range of 10 - 12% (excluding charges and credits), which increased from the previous guidance range of 8 - 11%.

Net interest expense in a range of $135 - 140 million, which increased from the previous guidance range of $130 - 135 million.

Tax provision, as reported, in a range of $85 - 95 million, which increased from the previous guidance range of $70 - 80 million.

All segment guidance assumes no further material degradation from COVID-19-related impacts. Guidance is based on continuing operations and thus excludes the impact of Technip Energies, which is reported as discontinued operations.

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