- Subsea inbound orders of $1.9 billion in the quarter; book-to-bill of 1.5
- Cash and cash equivalents of $1.2 billion
- Completed sale of remaining stake in Technip Energies in April
- Targeting reduction of gross debt of up to $400 million in second quarter
TechnipFMC plc (FTI) reported first quarter 2022 results.
Summary Financial Results from Continuing Operations
Total Company revenue in the first quarter was $1,555.8 million. Loss from continuing operations attributable to TechnipFMC was $42.3 million, or $0.09 per diluted share. These results included after-tax charges and credits totaling $29.3 million of expense, or $0.06 per share, which included the following (Exhibit 6):
- Impairment, restructuring and other charges of $0.8 million; and
- Loss from equity investment in Technip Energies of $28.5 million.
Adjusted loss from continuing operations was $13 million, or $0.03 per diluted share.
Adjusted EBITDA, which excludes pre-tax charges and credits, was $153.5 million; adjusted EBITDA margin was 9.9 percent (Exhibit 7). Included in adjusted EBITDA was a foreign exchange gain of $28.4 million.
Doug Pferdehirt, Chair and CEO of TechnipFMC, stated, “Looking at the first quarter, total Company revenue was $1.6 billion, with adjusted EBITDA of $154 million. Total Company inbound orders were $2.2 billion, driving sequential growth in backlog. With cash and cash equivalents totaling $1.2 billion and our confidence that we will generate strong free cash flow in the second half of the year, we are taking aggressive steps to further reduce debt in the second quarter. This is another important milestone on our path to shareholder distributions.”
Pferdehirt continued, “In Subsea, inbound orders of $1.9 billion increased more than 80 percent when compared to the fourth quarter, resulting in a book-to-bill of 1.5. We announced two awards in the period, including our first iEPCI™ project with Wintershall Dea for the Maria field. The breadth of operators and regional diversification was particularly notable in the quarter, with projects from more than 30 clients across all major offshore basins. We continue to anticipate Subsea order growth of up to 30 percent in 2022, with iEPCI™, direct awards and Subsea services together approaching 75 percent of total inbound.”
“Surface Technologies inbound orders were $291 million, with a book-to-bill above 1.0, driven by strength in the U.S. market. North American sales and profitability grew sequentially, driven by increased drilling and completion activity and an improved pricing environment. Outside of North America, we are investing in new manufacturing capacity in Saudi Arabia to support the strong Middle East outlook. We are now undergoing final production testing and expect final certification of the facility by the end of the second quarter, at which time we anticipate an acceleration of orders in-country. We remain confident in meeting our full-year expectations.”
Pferdehirt added, “First quarter results demonstrated our ability to effectively navigate the ongoing challenges facing the global supply chain. While not immune to the market dislocations, we have taken many strategic actions over the last several years that have mitigated the near-term effects on our Company. Our internal efforts to drive simplification, standardization and industrialization are also transforming our supply chain.”
Pferdehirt concluded, “We are in the midst of a multi-year upcycle for oil and gas investment. Our Subsea Opportunity List highlights this very robust market outlook, representing an opportunity set of larger projects that totals more than $20 billion in potential industry awards over the next 24 months. In the current environment, we are also experiencing improvements in pricing and contractual arrangements that more appropriately balance the terms and conditions needed to support this growth.”
Operational and Financial Highlights
Subsea reported first quarter revenue of $1,289.1 million, an increase of 4.3 percent from the fourth quarter. Revenue increased sequentially primarily due to higher project activity in Australia, North America and Asia, partially offset by reduced activity in Africa. Subsea services revenue was largely unchanged from the fourth quarter due to the seasonal impact of weather in both periods.
Subsea reported an operating profit of $54 million. Sequentially, operating results increased largely due to a $39.8 million reduction in impairment, restructuring and other charges and credits.
Subsea reported adjusted EBITDA of $129 million. Adjusted EBITDA increased 4.4 percent when compared to the fourth quarter, broadly in-line with the sequential increase in revenue. Adjusted EBITDA margin was unchanged at 10 percent.
Subsea inbound orders were $1,893.6 million for the quarter. Book-to-bill in the period was 1.5. The following awards were included in the period:
- Petrobras Búzios 6 Field Project (Brazil)
Large* subsea Engineering, Procurement, Construction and Installation (EPCI) contract by Petrobras for its Búzios 6 field (module 7), a greenfield development in the pre-salt area. The contract covers flexible and rigid pipe, umbilicals, pipeline end terminals, rigid jumpers, umbilical termination assemblies and a mooring system. The flexible pipe, umbilicals and subsea structures, as well as some of the rigid pipe, will be manufactured in Brazil using skills and competencies the Company has developed in-country, while minimizing the carbon footprint associated with transportation and installation. The project will also utilize our established and qualified Brazilian supply chain.
*A “large” contract ranges between $500 million and $1 billion.
- Wintershall Dea Maria iEPCI™ Project (Norway)
Significant* integrated Engineering, Procurement, Construction, and Installation (iEPCI™) contract by Wintershall Dea Norge AS for its Maria revitalization project. The project will boost production at the existing Maria field in the Norwegian Continental Shelf. The contract includes subsea trees, spools, jumpers, and flexible pipes. The revitalization project will tie in an additional lightweight six-slot integrated template structure (ITS). The two existing templates in the Maria field are part of TechnipFMC’s installed base and began production in 2017.
*A “significant” contract ranges between $75 million and $250 million.
Additionally, we secured the following frame agreement in the period:
- TotalEnergies Frame Agreement for Subsea 2.0™ Production Systems (Angola)
Frame Agreement with TotalEnergies to supply subsea production systems for brownfield developments in Block 17 in Angola. Subsea 2.0™ products use standardized components that are pre-engineered and qualified, which allows equipment to be rapidly configured according to each project’s specific requirements. This optimizes the engineering, supply chain, and manufacturing processes, thus reducing the time to first production.
Energy Transition Highlights
- Magnora Offshore Wind signs Option to Lease Agreement with the Crown Estate Scotland for the ScotWind N3 area
Magnora Offshore Wind AS signed the Option to Lease Agreement with the Crown Estate Scotland for the ScotWind N3 area, securing exclusivity for the development of the N3 project.
The project area N3 is situated in the north-western part of Scotland, 40 kilometers offshore Western Isles. The Option to Lease Agreement covers an area of 103 square kilometers in water depths of 106 to 125 meters. The project plans to install 33 floating wind turbines, each with a capacity of 15MW, totaling a wind farm capacity of 495MW.
- Shell Collaboration
TechnipFMC and Shell have signed an agreement to explore synergies with a shared goal of enabling offshore renewable energy generation and reducing total CO2 emissions. This is another example of how our long-standing partnerships extend to all areas of our business.
Surface Technologies reported first quarter revenue of $266.7 million, a decrease of 7.1 percent from the fourth quarter. Revenue decreased sequentially primarily due to lower international activity resulting from the Company’s transition to a new manufacturing facility in Saudi Arabia. The decline in segment revenue was partially offset by growth in North America which benefited from the continued increase in drilling and completion activity.
Surface Technologies reported operating profit of $3.7 million. Sequentially, operating profit decreased primarily due to lower international revenue and the impacts of the manufacturing transition. Operating profit in North America increased sequentially due to higher activity and an improved pricing environment. Operating results also benefited sequentially from lower restructuring, impairment and other charges which totaled $1.6 million in the period.
Surface Technologies reported adjusted EBITDA of $22 million. Adjusted EBITDA decreased 23.9 percent when compared to the fourth quarter. Results were negatively impacted by lower international revenue and the impacts of the manufacturing transition, partially offset by higher activity and an improving pricing environment in North America. Adjusted EBITDA margin decreased 190 basis points to 8.2 percent.
Inbound orders for the quarter were $291.3 million, a decrease of 72.8 percent sequentially. Book-to-bill was 1.1 in the period. Inbound orders decreased sequentially as the fourth quarter benefited from the award of a multi-year framework agreement from Abu Dhabi National Oil Company.
Backlog ended the period at $1,152.8 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, March 31, 2022)
Corporate expense was $29.5 million. Excluding charges and credits totaling $2.8 million of expense, corporate expense was $26.7 million.
Foreign exchange gain was $28.4 million.
Net interest expense was $33.9 million and is expected to decline during the year as the Company achieves its stated objective to reduce gross debt.
The provision for income taxes was $28.5 million.
Total depreciation and amortization was $95.9 million.
Cash required by operating activities from continuing operations was $329.4 million. Capital expenditures were $27.3 million. Free cash flow from continuing operations was $(356.7) million.
The Company ended the period with cash and cash equivalents of $1,203 million; net debt was $802.1 million.
On April 20, 2022, the Company announced that it has commenced a tender offer for $320 million of its outstanding 6.500% Senior Notes due February 1, 2026.
The Company intends to reduce gross debt by up to $400 million in the second quarter. This includes the retirement of €150 million of debt due in June 2022.
Investment in Technip Energies
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.
During the first quarter, the Company sold 17.8 million Technip Energies shares for total proceeds of $238.5 million. As of March 31, 2022, we retained 2.2% ownership of Technip Energies’ issued and outstanding share capital.
In April 2022, we sold the remaining 4 million Technip Energies shares for total proceeds of $49.9 million.
Following the distribution of the majority stake, the Company retained ownership of 49.9% of Technip Energies’ outstanding shares. The Company fully exited its position for total proceeds of $1,189.4 million.
Additional items
On January 10, 2022, the Company announced that following a comprehensive review of its strategic objectives, it would proceed with the voluntary delisting of its shares from Euronext Paris. The delisting was completed on February 18, 2022.
The Company’s shares remain listed on the New York Stock Exchange under the symbol “FTI”.
2022 Full-Year Financial Guidance1
The Company’s full-year guidance for 2022 can be found in the table below. No updates were made to the previous guidance that was issued on February 23, 2022.
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.
