UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-K
☒ANNUALLY ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 20192021
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-37983
TechnipFMC plc
(Exact name of registrant as specified in its charter)
| United Kingdom | 98-1283037 | ||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
Wincomblee Road | |||||
| United Kingdom | |||||
| (Address of principal executive offices) | (Zip Code) | ||||
+44203-429-3950 191-295-0303
(Registrant’s telephone number, including area code)
| Securities registered pursuant to Section 12(b) of the Act: | ||||||||||||||
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||||||||
| Ordinary shares, $1.00 par value per share | FTI | New York Stock Exchange | ||||||||||||
Securities registered pursuant to Section 12(g) of the Act: None. | ||||||||||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ý No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | ||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | ||||||||
| Emerging growth company | ☐ | ||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ☐ NO ý
The aggregate market value of the registrant’s ordinary shares held by non-affiliates of the registrant, determined by multiplying the outstanding shares on June 28, 2019,30, 2021, by the closing price on such day of $25.94$9.05 as reported on the New York Stock Exchange, was $8.4 billion.
$3.3 billion.
| Class | Outstanding at February | ||||||||
| Ordinary shares, $1.00 par value per share | |||||||||
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement relating to its 20202022 Annual General Meeting of Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K where indicated. The 20202022 Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates.
TABLE OF CONTENTS
| Page | |||||
| PART I | |||||
| PART II | |||||
| PART III | |||||
| PART IV | |||||
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” as defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements usually relate to future events, market growth and recovery, growth of our new energies business and anticipated revenues, earnings, cash flows or other aspects of our operations or operating results. Forward-looking statements are often identified by the words “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “may,” “estimate,” “outlook” and similar expressions, including the negative thereof. The absence of these words, however, does not mean that the statements are not forward-looking. These forward-looking statements are based on our current expectations, beliefs and assumptions concerning future developments and business conditions and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.
All of our forward-looking statements involve risks and uncertainties (some of which are significant or beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Known material factors that could cause actual results to differ materially from those contemplated in the forward-looking statements include unpredictable trends in the demand for and price of crude oil and natural gas; competition and unanticipated changes relating to competitive factors in our industry, including ongoing industry consolidation; the COVID-19 pandemic, its impact on the demand for our products and services and global shipping and logistics challenges caused by it; our inability to develop, implement and protect new technologies and services, including new technologies and services for our New Energy Ventures; the cumulative loss of major contracts, customers or alliances and unfavorable credit and commercial terms of certain contracts; the refusal of DTC to act as depository agency for our shares; disruptions in the political, regulatory, economic and social conditions of the countries in which we conduct business; the United Kingdom’s withdrawal from the European Union; the impact of our existing and future indebtedness and the restrictions on our operations by terms of the agreements governing our existing indebtedness; the risks caused by our acquisition and divestiture activities; our inability to address increasing attention to ESG matters; certainties related to our investments in new energy industries; the risks caused by fixed-price contracts; any delays and cost overruns of new capital asset construction projects for vessels and manufacturing facilities; our failure to deliver our backlog; our reliance on subcontractors, suppliers and our joint venture partners; a failure or breach of our IT infrastructure or that of our subcontractors, suppliers or joint venture partners, including as a result of cyber-attacks; risks of pirates endangering our maritime employees and assets; potential liabilities inherent in the industries in which we operate or have operated; our failure to comply with numerous laws and regulations, including those related to environmental protection, climate change, health and safety, labor and employment, import/export controls, currency exchange, bribery and corruption, taxation, privacy, data protection and data security; the additional restrictions on dividend payouts or share repurchases as an English public limited company; uninsured claims and litigation against us, including intellectual property litigation; tax laws, treaties and regulations and any unfavorable findings by relevant tax authorities; potential departure of our key managers and employees; adverse seasonal and weather conditions and unfavorable currency exchange rates; and risk in connection with our defined benefit pension plan commitments, as well as those set forth in Part I, Item 1A, “Risk Factors” and elsewhere ofin this Annual Report on Form 10-K. We caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise, except to the extent required by law.
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PART I
ITEM 1. BUSINESS
Company Overview
TechnipFMC plc, a public limited company incorporated and organized under the laws of England and Wales, with registered number 09909709, and with registered office at One St. Paul’s Churchyard, London EC4M 8AP,Hadrian House, Wincomblee Road, Newcastle Upon Tyne, NE6 3PL, United Kingdom (“TechnipFMC”,TechnipFMC,” the “Company,” “we,” or “our”) is a global leader in the energy service company with a portfolio of solutions for the productionindustry, delivering projects, products, technologies, and transformation of hydrocarbons and renewable energy sources. These solutions range from discreet products and services to fully integrated solutions based onservices. With our proprietary technologies with a clear focusand production systems, integrated expertise, and comprehensive solutions, we are transforming our customers’ project economics. We have operational headquarters in Houston, Texas, United States, and in 2021 we principally operated across two business segments: Subsea and Surface Technologies.
We are uniquely positioned to deliver greater efficiency across project lifecycles, from concept to project delivery and beyond.
Enhancing our clients’ project economics.
Each of our more than 37,00020,000 employees is driven by a steadfaststeady commitment to clients and a culture of project execution, purposeful innovation, challenging industry conventions, and finding new and better ways of working to unlock possibilities.rethinking how the best results are achieved. This leads to fresh thinking, streamlined decisions, and smarter results, enabling us to achieve our vision of enhancing the performance of the world’s energy industry.
History
In March 2015, FMC Technologies, Inc., a U.S. Delaware corporation (“FMC Technologies”), and Technip S.A., a French société anonyme (“Technip”), signed an agreement to form an exclusive alliance and to launch Forsys Subsea, a 50/50 joint venture, that would unite the subsea skills and capabilities of two industry leaders. This alliance, which became operational on June 1, 2015, was established to identify new and innovative approaches to the design, delivery, and maintenance of subsea fields.
Forsys Subsea brought the industry's most talentedindustry’s most-talented subsea professionals together early in operators’ project concept phase with the technical capabilities to design and integrate products, systems, and installation to significantly reduce the cost of subsea field development and enhance overall project economics.
Based on the success of the Forsys Subsea joint venture and its innovative approach to integrated solutions, in May 2016 Technip and FMC Technologies announced in May 2016 that the companies would combine through a merger of equals to create a global subsea leader, TechnipFMC, that would drive change by redefining the production of oil and gas. The business combination was completed on January 16, 2017 (the “Merger”), and on January 17, 2017, TechnipFMC began operating as a unified, combined company trading on the New York Stock Exchange (“NYSE”) and on the Euronext Paris Stock Exchange (“Euronext Paris”) under the symbol “FTI.”
In 2017, our first year as a merged company, TechnipFMC secured several project awards as many operators moved forward with final investment decisions for major onshore projects and subsea developments. Several of the subsea awards incorporated the use of our integrated approach to project delivery, validating our unique business model aimed at lowering project costs and accelerating the delivery of initial hydrocarbon production. This was made possible by bringing together the complimentarycomplementary subsea work scopes of the merged companies.
In 2018, TechnipFMC delivered the industry'sindustry’s first three full-cycle, integrated projects and realized considerable growth in Subsea order inbound, driven in part by its unique integrated offering, iEPCI™ (“iEPCI”). For all of 2019, the value of integrated subsea awards to TechnipFMC more than doubled versus the prior year, representing more than 50 percent50% of all Subsea project order inbound. The increase was driven by a wider adoption of the integrated business model, particularly withby those clients wherewith whom we have unique alliances. With the industry’s most comprehensive and only truly integrated subsea market offering, we have continued to expand the deepwater opportunity set for our customers.clients.
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On August 26, 2019, the Companywe announced that it willour intention to separate into two diversified pure-play market leaders –- TechnipFMC, focused on subsea and surface hydrocarbon production, and Technip Energies, focused on downstream engineering, procurement, and construction (“EPC”) project execution.
On February 16, 2021, we completed the separation of the Technip Energies business segment. The separation will enable both companiestransaction was structured as a spin-off (the “Spin-off”), which occurred by way of a pro rata dividend (the “Distribution”) to benefitour shareholders of 50.1 percent of the outstanding shares in Technip Energies N.V. Each of our shareholders received one ordinary share of Technip Energies N.V. for every five ordinary shares of TechnipFMC held at 5:00 p.m., New York City time on the record date, February 17, 2021. Immediately following the completion of the Spin-off, we owned 49.9% of the outstanding shares of Technip Energies. During 2021, we sold approximately 75% of the original ownership stake for proceeds of $900.9 million. As of December 31, 2021, we retained 12.2% ownership of Technip Energies’ issued and outstanding share capital. In January 2022, we sold an additional 9.0 million Technip Energies shares for total proceeds of €118.4 million, or $135.1 million. As of February 25, 2022, we retain a direct stake of 12.9 million shares, representing 7.1% of Technip Energies’ issued and outstanding share capital and valued at $155.3 million.
On January 10, 2022, we announced that following a comprehensive review of the Company’s strategic objectives, we were proceeding with the voluntary delisting of our shares from distinctEuronext Paris. The delisting was completed on February 18, 2022.
BUSINESS SEGMENTS
Subsea
We are transforming subsea energy production by safely providing innovative solutions that improve economics, enhance performance, and compelling market opportunities across the energy value chain; dedicated focus of management, resources and capital; and unique value propositions with differentiated investment appeal.
We are an industry leader in front-end engineering and design (“FEED”), subsea production systems (“SPS”), subsea flexible pipe, and subsea umbilicals, risers, and flowlines (“SURF”). and subsea robotics. We also have the capability to install these products and related subsea infrastructure withusing our fleet of highly specialized vessels. By integrating the SPS and SURF work scopes, we are uniquely able to drive greater value to our clients through more efficient field layout and execution of the installation campaign. This capability, in conjunction with our strong commercial focus, has enabled the successful market introduction of an integrated subsea business model, iEPCI, which spans a project’s early phase design through the life of field. Our integrated business model is unlocking incremental opportunities and materially expanding the deepwater opportunity set. Since the first iEPCI project was awarded in 2016, market adoption of the business model has accelerated each year, and in 2019 we secured more than 75 percent of the industry’s integrated project awards.field services.
Through integrated FEED studies, or iFEED™ (“iFEED”), we are uniquely positioned to influence project concept and design. Using innovative solutions for field architecture, including standardized configurable equipment, new technologies, digital services, and simplified installation, we can significantly reduce subsea development costs and accelerate time to first production.
iEPCI is our unique, fully integrated approach to designing, managing, and executing subsea projects. By combining complementary skills with innovative technologies, we boost efficiency, lower costs, and accelerate time to first oil and gas for our clients. As the first and only subsea provider to integrate SPS with SURF and a fleet of installation vessels, we successfully created a new market opportunity in 2016 through our iEPCI offering. iEPCI projects are partnerships based on knowledge sharing and mutual trust. Success is based on early engagement and a collaborative, cooperative approach, both internally and with our clients.
Our first-mover advantage and ability to convert iFEED studies into iEPCI contracts, often as a direct award,awards, creates a unique set of opportunities for the Companyus that are not available to our peers. This allows us to deliver a fully integrated -– and technologically differentiated -– subsea system, and to better manage the complete work scope through a single contracting mechanism and a single interface, yielding meaningful improvements in project economics and time to first oil.
We continue to support our clients following project delivery by offering aftermarket and life of field services. Our wide range of capabilities and solutions, including integrated life of field, or iLOF™ (“iLOF”), allows TechnipFMCus to help clients
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increase oil and gas recovery and equipment uptime while reducing overall cost. Our iLOF offering is designed to unlock the full potential of subsea infrastructures during operations by transforming the way subsea services are delivered and proactively addressing the challenges operators face over the life of subsea fields. We provide production optimization, asset life extension insight, proactive debottlenecking,de-bottlenecking, and condition basedcondition-based maintenance.
Our Subsea business depends on our ability to maintain a cost-effective and efficient production system, achieve planned equipment production targets, successfully develop new products, and meet or exceed stringent performance and reliability standards.
Subsea Segment Products and Services
Subsea Production Systems. Our systems are used in the offshore production of crude oil and natural gas. Subsea production systems are placed on the seafloor and are used to control the flow of crude oil and natural gas from the reservoir to a host processing facility, such as a floating production facility, a fixed platform, or an onshore facility.
Our subsea production systems and products include subsea trees, chokes and flow modules, manifold pipeline systems, controlcontrols and data managementautomation systems, well access systems, multiphase and wetgaswet-gas flow meters, and additional technologies. The design and manufacture of our subsea systems requires a high degree of technical expertise and innovation. Some of our systems are designed to withstand exposure to the extreme hydrostatic pressure of deepwater environments, as well as internal pressures of up to 20,000 pounds per square inch (“psi”("psi") and temperatures of up to 400º F. The development of our integrated subsea production systems includes initial engineering design studies and field development planning and considers all relevant aspects and project requirements, including optimization of drilling programs and subsea architecture.
Subsea Processing Systems. Our subsea processing systems, which include subsea boosting, subsea gas compression, and subsea separation, are designed to accelerate production, increase recovery, extend field life, lower greenhouse gas emissions, and/or lower operators’ production costs for greenfield, subsea tie-backstie-back and brownfield applications. To provide these products, systems, and services, we utilize our engineering, project management, procurement, manufacturing, and assembly and test capabilities.
Subsea Umbilicals, Risers and Umbilical Supply.Flowlines. We are a leading provider of SURF infrastructure. We develop, engineer, manufacture and manufactureinstall umbilicals, rigid pipelines and flexible pipes, as well as steel tube, thermoplastic hose, powerconnections and communicationtie-ins for subsea systems. Our rigid pipes are installed using our fleet of differentiated rigid pipelay vessels and hybrid (a combination of steel tube, thermoplastic hose,are designed to optimize flow assurance through innovative insulation coatings, electric trace heating, plastic liners, and electrical cables) umbilicals. TechnipFMCpipe-in-pipe systems.
Our vessels will typically perform the installation of the flexible pipes and umbilicals, but we also sell these products directly to oilenergy companies or to other vessel operators. We offer a comprehensive range of umbilical systems including steel tube umbilicals, thermoplastic hose umbilicals, power and communication systems and hybrid umbilicals. We are also qualifying a hybrid flexible pipe system, which is highly resistant to corrosive compounds, and will extend the operating envelope of flexible systems while reducing cost and weight.
Vessels. We operatehave a fleet of 18 vessels. Of17 vessels that are used for the 18 vessels currently in operation, weinstallation and servicing of our products. We have sole ownership of tennine vessels, ownership of six vessels as part of joint ventures, and operate two vessels operated under long-term charter.charter agreements.
Subsea Services. We provideSubsea services provides a portfolio of well and asset services that improve uptime, lower lifecycle costsdrive value and increase recovery overefficiency throughout the life of our clients' subsea development cycle. Our vision is to deliver customer service excellence every day, with the field forpurpose of maximizing the performance of our clients’ subsea assets. Thesewell and asset operations.
Well Services include all service offerings for the well:
•ROV Services: remotely operated vehicle ("ROV") drill support services, include: (i) provision of explorationenabled by Schilling Robotics, TechnipFMC’s underwater robotics group;
•Drilling Services: exploration and production wellhead systems and services; (ii) remotely operated vehicle (“ROV”) services; (iii) installationand
•Installation Services: Installation of trees, tubing hangers and well completion rig services; (iv) maintenance servicesof the well.
Asset Services include all service offerings for the asset:
•Maintenance Services: test, modification, refurbishment and upgrade of subsea equipment and tooling; (v) asset integrity services based on product and field data to optimize
•Asset Integrity Services: optimizing the performance of the subsea asset through product and field data, including proactive inspection, maintenance and repair (“IMR”) of subsea infrastructure; (vi) well access and intervention services, both rig-based and vessel-based (riserless light well intervention or “RLWI”("IMR"); (vii) production management services to enhanceand
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•Production Management Services: enhanced well and field production, including subsea multiphase boosting and real timereal-time virtual metering services; and (viii) well plug, abandonmentflow assurance services.
Intervention and decommissioning. Our vision is to transform the customer experience with an agile services culturePlug and grow our business across the life of the field.Abandonment Services:
Subsea Studio™ Digital Platform. Through Subsea Studio™, we connect data, technology, and expertise to grow,optimize the development, execution, and operation of current and future subsea fields. Our open and connected ecosystem can exchange data efficiently with more than 6,500 wells operated globally.suppliers, partners, and clients, providing immediate access to relevant information, and improving efficiency and quality of decisions and planning. Subsea Studio™ establishes a data flow, or a “digital thread,” that connects applications using common data models throughout a project’s lifecycle. Each decision is data-driven and each piece of actionable data is made readily available. We utilize this data to create value for our clients through efficiency gains, optimized productivity, and increased reliability.
•Subsea Studio™ FD, which combines our extensive experience in subsea equipment, our large installed base of subsea production equipment, our broad range of services,expertise and our historical technicaldigital technologies to design, optimize, and manufacturing leadership, we are inselect the best field development, thereby increasing quality and reliability and accelerating time to first oil;
•Subsea Studio™ EX, which increases execution efficiency and speed by using a unique position to offer integrated solutions across the “life of field” services combining asset light solutions (e.g. RLWI), digital services (e.g. data driven monitoring, surveillancedata-centric approach, automation, collaboration, and seamless interfaces; and
•Subsea Studio™ LOF, which enhances performance and production management suite of applications),targets through digitally enabled operations and leading edge automated systems (e.g. Schilling ROVs) to enhance the economics of producing fields through maximization of asset uptime, higher production volumes, and lower operating expense.services.
Research, Engineering, Manufacturing and Supply Chain (“REMS”). REMS is an organization we formed in September of 2019 to support accelerated technology innovation,development and product delivery improvements.manufacturing innovation. We accomplish this by reducing the cycle-time of engineering and manufacturing our products, including working with our suppliers to reduce their costs, and optimizing our processes and how we manage workflow.workflow management. Through REMS, we are focused on challenging the existing technologies and implementing world-class manufacturing practices, including LEAN and process automation, to improve reliability while reducing total product cost and lead time to delivery. Our REMS organization primarily supports both our Subsea segment but is also integrated across ourand Surface Technologies business.segments.
Product Management. In 2019, we established a Product Management function to furtherexpand our capabilities to understand,assess, define, and deliver the technologies and products of the future. This function will provide a complement tohelps our REMS organization and Subsea and Surface business, and willTechnologies businesses to drive the understanding of customer requirements, the competitive landscape, and investment prioritization.
Dependence on Key Customers
Generally, our customers in the Subsea segment are major integrated oil companies, national oil companies, and independent exploration and production companies.
We actively pursue alliances with companies that are engaged in the subsea development of oil and natural gas to promote our integrated systems for subsea production. These alliances are typically related to the procurement of subsea production equipment, although some alliancesof them are related to EPCI services. Development of subsea fields, particularly in deepwater environments, involves substantial capital investments. Operators have also sought the security of alliances with us to ensure timely and cost-effective delivery of subsea and other energy-related systems that provide integrated solutions to meet their needs.
Our alliances establish important ongoing relationships with our customers. While these alliances do not contractually commit our customers to purchase our systems and services, they have historically led to, and we expect that they would continue to result in, such purchases.
The commitment to our customers goes beyond project delivery, and we nurture these alliances with transparency and collaboration to better understand their needs to ensure customer success.
No single Subsea customer accounted for 10% or more of our 20192021 consolidated revenue.
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Competition
We are the only fully integrated company that can provide the complete suite of subsea production equipment, umbilicals, and flowlines with the complete portfolio of installation and LOF services, enabling us to develop a subsea field as a single company. Our company competesWe compete with companies that supply some of the components, as well as installation companies. Our competitors include Aker Solutions ASA, Baker Hughes Company (“Baker Hughes”), Dril-Quip, Inc., McDermott International, Inc. (“McDermott”), National Oilwell Varco, Oceaneering International, Inc., Saipem S.p.A. (“Saipem”), Schlumberger, Ltd. (“Schlumberger”), and Subsea 7 S.A.
Seasonality
In the North Sea, winter weather generally subdues drilling activity, reducing vessel utilization and demand for subsea services as certain activities cannot be performed. As a result, the level of offshore activity in our Subsea segment is negatively impacted in the first quarter of each year.
Market Environment
While still impacted by the pandemic, economic activity improved over the course of 2021. Increased global demand and production systems, integration expertise,curtailments by the OPEC+ countries have resulted in improved oil prices, which in turn support market supply growth. Long-term demand for energy is forecast to rise, and comprehensive solutions, we believe this outlook provides our customers with the confidence to increase investments in new sources of oil and natural gas production.
Strategy
We are transforming our clients’ project economics. We have used these capabilities to develop a new subsea commercial modelenergy production by safely providing innovative solutions that improve economics, enhance performance, and reduce emissions.
The energy landscape is transforming the way we interact with our customers and create value with them.
Through our established Subsea services and our transformative offerings including iEPCI order activity for our Company;and Subsea 2.0™, we are making all types of energy produced offshore more sustainable, economical, and competitive.
•Developing and (iii) increased maintenanceempowering our people;
•Becoming a data-centric organization;
•Advancing automation and intervention activity resulting from an expandingrobotics; and aging installed equipment base;
Product Development
We are industrializing our Subsea business with Subsea 2.0 by using pre-engineered modular architectures to achieve a fully flexible suite of product offerings, while making an evolutionary shift from unique project requirements to a Configure to Order ("CTO") execution model.
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Our Subsea 2.0 configurable product platform consists of pre-engineered products designed to provide the flexibility to accommodate customer needs and functional requirements, combining field-proven and new technologies.
Our CTO execution model requires no product engineering work to deliver these configurable products to our clients, ensuring quality, manufacturing, supply chain, and services are fully industrialized to deliver the value offered with Subsea 2.0.
Our CTO Subsea 2.0 program attributes include:
•Pre-engineered standard configurations;
•Pre-approved and qualified supply chain;
•Pre-defined quality, code, and surveillance requirements;
•Optimized manufacturing with dedicated capacity; and
•Pre-defined and developed services.
Pivoting from bespoke Engineer to Order ("ETO") solutions unique to every project to pre-engineered CTO products, we can leverage the efficiencies our execution model creates and bring value to our clients through reduced lead time, an optimized execution model, and improved predictability and reliability for delivery.
Partnerships and Acquisitions
Acquisitions
In 2014,2018, we entered into a joint development agreementventure with several major operators to develop common standards for subsea production equipment capableIsland Offshore Management AS ("Island Offshore") called TIOS AS. In August 2021, we acquired the remaining 49% interest in TIOS AS at a total price of operating at pressures as high as 20,000 psi and temperatures up to 350º F.$48.6 million. This joint development agreement is delivering standardized design, materials, processes, and interfaces to provide improved reliability and operations over the life of the field. The first major achievement of this joint development effort, and further highlighting our technology-based solutions focused on creating customer success, we delivered a complete production system for Shell’s high-pressure and high-temperature Appomattox field in the Gulf of Mexico in 2018, and Shell began producing from Appomattox in May of 2019.
In February 2018, we signed an agreement with the Island Offshore Group to acquire a 51 percent stake in Island Offshore’s wholly-owned subsidiary, Island Offshore Subsea AS. Island Offshore Subsea AS provides RLWI project management and engineering services for plug and abandonment (“P&A”), riserless coiled tubing, and well completion operations. In connection with the acquisition of the controlling interest, TechnipFMC and Island Offshore entered into a strategic cooperation agreement to deliver RLWI services on a worldwide basis, which also include TechnipFMC’s RLWI capabilities. Island Offshore Subsea AS has been rebranded to TechnipFMC Island Offshore Subsea (“TIOS”) and is now the operating unit for TechnipFMC’s RLWI activities worldwide.
In January 2019,October 2021, we acquired a new dive support vessel, the Deep Discoverer, to replace a vessel we retired in support of our fleet optimization strategy. The acquisition was somewhat opportunistic, but allowed us to obtain a high-quality, top-tier vessel significantly below newbuild cost and without a protracted delivery schedule. The vessel will operate primarily in the dive construction, inspection, maintenance and repair markets in the North Sea and can also support our iEPCI™ initiative in the region.
Surface Technologies
The Surface Technologies segment designs, manufactures, and services products and systems used by companies involved in land and shallow water exploration and production of crude oil and natural gas. Such productsOur Surface Technologies product families include drilling, stimulation, production, measurement, and systems include: (i) wellhead systems, (ii) hydraulic fracturing systems, including fracturing valves, pumps, rigid flowlines, and flexible flowlines, (iii) production, separation, and flow processing systems, and (iv) measurement products and integrated systems.services. We manufacture most of our products internally and onin facilities located worldwide.
Principal Products and Services
Surface Wellheads and Production Trees. Our products are used to control and regulate the flow of crude oil and natural gas from the well. The wellhead is a system of spools and sealing devices from which the entire downhole well string hangs and provides the structural support for surface production trees. Production trees are comprised of valves, actuators and chokes which can be combined into various configurations, depending on customer-specific requirements.
Surface wellheads and production trees are “per-well” systems which are designed for onshore shale, onshore conventional, and offshore shallow water platform applications, and are typically sold directly to exploration and production operators during the drilling and completion phases of the well lifecycle. Our surface wellhead and
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production tree systems are used worldwide, and we are one of the few companies that provide global coverage and a full range of system configurations, including conventional wellheads, Unihead® drill-thru wellheads designed for faster installation and drill-time optimization, and high-pressure, high-temperature (“HPHT”) systems for extreme production applications.
We also provide services associated with our surface wellhead and production tree portfolio, including service personnel and rental tooling for wellhead and production tree installation and life of field repair, refurbishment, and general maintenance. Our wellhead and production tree business relies on our ability to successfully provide the necessary field operations coverage, responsiveness, and reliability to prevent downtime and non-productive time during the drilling and completion phases.
Stimulation and Pressure Pumping. Our iComplete™ (“iComplete”) offering is the first integrated pressure containment kit for the onshore conventional stimulation market. Its CyberFrac™ digital platform reduces manpower in the red zone and enables efficiencies that significantly reduce greenhouse gas (“GHG”) emissions, lower downtime, and eliminate the integration burden for operators.
We are one of the few oilfield service providers that can offer an integrated solution covering the fracturing through flowback phases. iComplete provides our exploration and production customers with an integrated rental and service offering, including fracturing tree and manifold systems, as well as fully assembled separation modulespressure control flowlines, flowback and packages designedwell testing equipment, and fabricated for oil and gas separation, fracturing flowback treatment, solids removal, and primary produced water treatment.field services.
Our equipment (fracturing tree systems, fracturing valve greasing systems, hydraulic control units, fracturing manifold systems, and Digital Systems: TechnipFMC provides hardwarerigid and software solutions to automateflexible flowlines) is temporarily laid out between the wellhead and provide simple human interfacesthe fracturing pump truck during hydraulic fracturing. Exploration and production operators typically rent this equipment directly from us during the hydraulic fracturing activities. Associated with our fracturing equipment rental is fracturing rig-up / rig-down field service personnel as well as oversight and operation of the equipment during the multiple fracturing stages for a shale well.
TechnipFMC’s manifold solutions help increase operational efficiency for a pad site with multiple wells. Our SuperFrac™ manifold provides time savings and pumping efficiencies when stimulating multiple wells on a single pad. The manifolds are installed and connected to multiple trees off the critical path, which allows our customers to fracture more stages per day in a compact footprint and efficiently move operations from one well to another, saving time and money. We also offer conventional and articulating arm manifold trailers, which are used as the connection point between fracturing pump trucks and the fracturing flowline and manifold system.
Our Ground Level Fracturing System is an essential tool for unconventional operators who use simultaneous operations to efficiently run completions in multi-well pads. The innovative system design uses various lengths of trunkline to align the SuperFrac™ manifold and fracturing tree at ground level, which minimizes the number of its critical products. These digital offerings help enableflowline connections for safer operation. We are a significant supplier of flowline pipework (rigid and flexible) that is used to move the removal of personnelfracturing product from critical zones either offshore or onshore. In addition the digital signatures from our products can then be interpreted and usedpump truck, via condition performance monitoring to eliminate unplanned downtime.the manifold, into the fracturing trees.
Pressure Control.Pumping. We design and manufacture equipment used in well completion and stimulation activities by major oilfield seviceservice and drilling companies, as well as by oil and gas exploration and production operators directly.
Flexibles.TechnipFMC isWe have been a leading supplier of flexible lines since the 1970s and have successfully introduced our Coflexip® portfolio of flexible solutions for the onshore market. Our PumpFlex™ and WellFlex™ products can be incorporated into most shale operations and are an integral part of our iComplete system.
Flowline. We are a leading supplier of flowline products and services to the oilfield industry. From the original Chiksan® and Weco® products to our revolutionary equipment designs and integrated services, our family of flowline products and services provides our customers with reliable and durable pressure pumping equipment. Our facilities stock flowline products in the specific sizes, pressures, and materials common to each region. Our commitment is to help our customers worldwide attain maximum value from their pressure pumping assets by guaranteeing that the right products arrive at the job site in top working condition. Our total solutions approach
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includes the InteServ tracking and management system, mobile inspection and repair, strategically located service centers, and genuine Chiksan® and Weco® spare parts.
Well Service PumpsPumps.: TechnipFMC offers We offer a diverse line of well service pumps for use in high-pressure pumping operations such as hydraulic fracturing and stimulation, including triplex and quintuplex pumps, each with its own industry-leading features, including: (i) heavy-duty power ends, paired with main journal roller bearings and heavy-duty rod journal bearings, (ii) heavy-duty crankshafts, (iii) fluid cylinders, with accessible packing and valves, and (iv) made-to-order pumps. Our pumps can withstand some of the harshest operating conditions, with pressure ranges up to 20,000 psi and flow rates up to 1,500 gallons per minute.
Production. Our upstream production offering includes well control, safety and repair services at customer locations around the world. The mobile services include inspection, testing, repair, documentation,integrity systems, multiphase meter modules, in-line separation and certification, with the goal of extending product lifeprocessing systems, and reducing operator costs.
Our iProduction™ system is the first automated integrated production platform for onshore unconventional. Our digital interface enables operators to manage their production operations remotely, leveraging Insitex data-monitoring technology. Our separation portfolio and Production Trees: Our products are usedmeasurement technologies, combined with our expertise in modularization, enable our customers to control and regulate the flow of crude oil and natural gas from the well. The wellhead is a system of spools and sealing devices from which the entire downhole well string hangs and provides the structural support for surfaceachieve first production trees. Production trees are comprised of valves, actuators and chokes which can be combined in both vertical and horizontal configurations, depending on customer-specific requirements.
Flowback and Well Testing Services:. After a shale well is hydraulically fractured, the well moves to the flowback phase in which much of the fracturing fluid pumped into the well flows back out through the wellhead and fracturing tree system. This phase lasts until the wellbore flow is adequate for flow through the production facilities downstream of the wellsite. Our flowback and well testing offering includes chokes, de-sanders,desanders, and advanced well testing equipment and related services which are provided to exploration and production operators during the flowback phase. Our Automated Well Testing Package (“AWT™”) is now widely used in North America, enabling operators to remove personnel from processes and its digital package anticipates service. These offerings enable a substantial reduction in downtime and enhanced safety.
Well Control and Integrity Systems. (“Frac I/O”): We supply control components and safety systems designed to safely and efficiently run a wellpad, modules on an offshore platform, or a production facility. Our systems are onebased on standard, field-proven building blocks and designed for minimal maintenance during life of field operations.
Surface Multiphase Meter. Our multiphase meters (“MPMs”) are a collection of technologically advanced innovations that provide a differentiated approach to multiphase measurement. The patented technology in our MPMs offers many unique features that provide a step change in allocation measurement and allows for continuous surveillance of wells across a full range of operating conditions. Our MPMs provide real-time data to a central facility, or our cloud portal, for production reporting and remote notification and system troubleshooting.
Separation and Processing Systems. TechnipFMC provides industry-leading technology for the few oilfield service providers that can offer an integrated solution coveringseparation of oil, gas, sand, and water. These solutions are used in onshore production facilities and on offshore platforms worldwide. Our family of separation products delivers client success by increasing efficiency and throughput and reducing the fracturing through flowback phases.footprint of processing facilities. Our Frac I/O provides our explorationseparation systems offering includes internal components for oil and production customers with an integrated rentalgas multiphase separation, in-line deliquidizers, and service offering, including fracturing tree and manifold systems,solids removal, as well as fully assembled separation modules and packages designed and fabricated for oil and gas separation, fracturing flowback treatment, solids removal, and primary produced water treatment.
Standard Pumps and Skid Systems. We provide complete skid solutions, from design consultation through startup and commissioning. We offer a diverse line of reciprocating pumps, customized according to the application with pressure ranges available up to 10,000 psi and flow rates up to 1,500 gallons per minute.
Automation and Digital Systems. Our hardware and software solutions automate and provide simple human interfaces for a number of our critical products. These digital offerings help enable the removal of personnel from critical zones, either offshore or onshore. In addition, the digital signatures from our products can then be interpreted and used via condition performance monitoring to eliminate unplanned downtime.
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Our recently launched E-Mission™(“E-Mission”) digital solution is the next level of optimization for surface production facilities. Using process automation and data, the system provides constant monitoring and adjustments in real time to minimize flaring by up to 50% while maximizing oil production. The technology is core to our iProduction™ offering and can be applied in existing facilities globally.
Measurement. We are making measurement smarter with integrated flow measurement and automation solutions, from the wellhead to the final point of sale. We deliver accurate and reliable measurement for the transportation, distribution, and storage of energy products by truck, rail, vessel, aircraft, and pipeline. We have the right products and systems to help with any application challenge. Our customers can reduce complexity by dealing with one supplier as we bring together reliable and accurate measurement and control flowlines, flowbacksystems, automation, and well testing equipment, and field services.key data insights.
Services. We offer our customers a comprehensive suite of service packages to ensure optimal performance and reliability of our equipment. These service packages include all phases of the asset’s life cycle: from the early planning stages through testing and installation, commissioning, and operations, replacement and upgrade, maintenance, storage, preservation, intervention, integrity, decommissioning, and abandonment.
Dependence on Key Customers
Generally, Surface Technologies’ customers are major integrated oil companies, national oil companies, independent exploration and production companies and oil and gas service companies. No single Surface Technologies customer accounted for 10%10 percent or more of our 20192021 consolidated revenue.
Competition
Surface Technologies is a market leader for many of our products and services. Some of the factors that distinguish us from other companies in the same sector include our technological innovation, reliability, product quality, and ability to integrate across a broad portfolio scope. Surface Technologies competes with other companies that supply surface production equipment and pressure control products. Some of our major competitors in Surface Technologies include Baker Hughes, Cactus, Inc., Forum Energy Technologies, Inc., Gardner Denver, Inc., Schlumberger, Haliburton, and The Weir Group plc.SPM Oil and Gas.
Market Environment
Strategy
Technology. We are committed to differentiated core products that enable integrated solutions to leverage the benefits of smarter designs.
Integration. Integrated ecosystems that reduce costs and increase uptime through pre-engineered, modular solutions which drive improvements in greenhouse gas emissions.
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Automation. Intelligent products that are remotely managed using actionable data, reducing manpower in the field, maximizing uptime, and enabling enhanced production.
Carbon reduction
Core competencies and capabilities in technology, innovation, project execution and services position us well as we drive opportunities in decarbonization and the energy transition. We are committed to reducing GHG emissions and our offering by combining four elements – innovative product design, exceptional customer experience, leading digital tools,carbon footprint using lean processes and integrated systems.
Product Development
This ecosystem includes shallow water trees, modular platform solutions, SURF and associated installation, and tie-in solutions, all of testingwhich are designed to be standardized, fit for purpose and lighter weight for faster installation and transportation. Shallow Water iEPCI utilizes one single digital interface by combining our high gas desander, specifically designed for gas shale plays in Canadacontrol and automation platform UCOS and the United Statescloud-based data capabilities of insiteX. Our products stay connected to facilitate full remote control and we have high hopesmonitoring, enabling time-based maintenance and improved safety offshore for unattended installations.
Our approach allows us to reduce complexity with seamless hardware and software systems integration, optimize installation activities, and reduce client risk. This allows us to transform our clients' marginal fields and meaningfully impact the life cycle costs on their projects.
TechnipFMC is the only company that this technology can be utilized in conventional applications. We have introducedconfigure, manufacture, install and service an integrated system from the wellhead to the platform using a numberjackup rig or our owned fleet of products that are specifically orientated to improving the safety and efficiencyvessels.
Our Shallow Water iEPCI differentiators:
•Shallow Water iEPCI™ leverages on the Fracturing Pad, including SAFlex - large bore flexible Fracturing lines, 7” Check Valves, Speedloc Quick Connectorproven success of the Subsea iEPCI model;
•Simplicity of dealing with one supplier;
•Modular platform solutions for wireline intervention. These newa range of applications;
•Proven pre-engineered solutions for the jack-up drilling environment;
•Connected products will all become important element in our integrated fracturing offering. Further, we have expanded our suitethe field, using one single digital interface; and
•Integrated seamless planning for operations, execution and life of high-pressure, high-temperature wellheads and trees, and continue to expand our digital product offering with automated desanding dumps, tank level monitoring, automatic valve greasing units, and automated well testing system, all in an effort to further reduce manning and increase remote oversight of drilling and completion operations.field services.
Acquisitions and Investments
In October 2017,December 2021, we announced an agreement to acquire Plexus Holding plc’s (“Plexus”) wellhead exploration equipment and services business for jack-up applications. In conjunction withofficially inaugurated our global footprint and market presence, this portfolio expansion in the mudline and high-pressure, high-temperature arena has enabled us to be a leading provider of products and services to the global jack-up exploration drilling market. This acquisition fits within our strategy to extend and strengthen our position in exploration drilling products and services while leveraging our global field presence. The acquisition closed in the first quarter of 2018.
Also in December 2021 a 10-year framework agreement for wellheads, trees and associated services by the Abu Dhabi National Oil Company (ADNOC), our largest-ever Surface Technologies contract. Under the framework agreement, TechnipFMC will further grow in-country talent and expand existing manufacturing, assembly and test capabilities in Abu Dhabi in order to deliver the Company’s complete portfolio of surface wellheads and trees locally.
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OTHER BUSINESS INFORMATION RELEVANT TO OUR BUSINESS SEGMENTS
Capitalizing on Energy Transition
Since our inception as an integrated company in 2017, TechnipFMC has been pursuing innovation to reduce emissions within the conventional energy space. We have also been exploring ways to position ourselves in the energy transition by delivering differentiated solutions and leveraging our core competencies and existing resources. We believe offshore will be the next frontier of the energy transition and are ready to accelerate and grow our contribution. This is the role of our New Energy Ventures.
Our goal is to be a key enabler of the offshore renewables industry. To get there, we will leverage our subsea and surface expertise, our technology know-how, our collaborative and innovative mindset, as well as our demonstrated capabilities in project integration.
We will continue collaborating with energy companies and technology providers to bring to market innovative solutions that are best-suited for offshore applications, while maintaining an asset-light model within our business. Utilizing our expertise in integrated projects, we are able to serve as a system architect, from technology development to project delivery and life of field services.
As a result of our evolution in the new energies arena, we are further refining our market approach, which we define through three main pillars:
•Greenhouse gas removal;
•Offshore floating renewables; and
•Hydrogen.
Project integration is perhaps TechnipFMC’s strongest point of differentiation. We see strong integration potential across offshore renewable markets. For example, by combining wind and wave, or wind and hydrogen, we could maximize energy generation and efficiency, since the incremental capital expenditure and operational expenditure needed is much lower than a standalone product for the same energy generation. We will approach these new integration opportunities in renewable energies with a new execution model, which is integrated Offshore Novel Energies, or simply iONE™(“iONE”). iONE builds on the success of our iEPCI model in oil and gas, and leverages that experience in the new energy space. By acting as system integrator in a complex and rapidly changing environment, we can play a meaningful role in enabling offshore renewable solutions.
The Pillars
We will begin addressing greenhouse gas removal with carbon transportation and storage, a key enabler of the energy transition. We believe one of the safest and most efficient storage locations for greenhouse gases is offshore, is naturally occurring reservoirs and saline aquifers. Existing equipment developed by our Surface Technologies and Subsea businesses can be leveraged to achieve this aim. Our efforts in this area include:
•Development of our iCTS™ - Integrated Carbon Transportation and Storage System;
•A strategic alliance with Talos Energy to accelerate carbon capture and storage;
•The acquisition of Magma Global, manufacturer of the key gas transportation technologies thermoplastic composite pipe and hybrid flexible pipe; and
•An agreement to commercialize PETRONAS’ unique natural gas processing membrane which reduces emissions of CO2 and hydrogen sulfide by integrating the technology into our onshore and offshore production portfolio.
TechnipFMC aspires to lead the offshore floating renewables industry by leveraging our differentiated technologies, product standardization, and integrated approach. This emerging market is predicted to grow from near zero to an installed base of 30 gigawatts by 2030. Our efforts in this area include:
•A partnership with Magnora ASA, Magnora Offshore Wind, to develop floating offshore wind projects;
•A partnership with Bombora to develop the InSPIRE™ offshore wind and wave power solution;
•A partnership with Floating Power Plant, a renewable energy technology company, for an offshore green hydrogen pilot for the Canary Islands which will leverage Deep Purple™ (see below); and
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•A strategic investment in Orbital Marine Power, the world's most powerful floating tidal energy turbine, which we believe to be the most mature tidal technology.
We believe hydrogen will become a crucial carrier for the storage and transportation of energy, as well as bringing reliability, stability, and efficiency to renewable sources. Our strategy covers two areas: green hydrogen produced offshore by the electrolysis of water using renewable energy, and off-grid energy systems delivering renewable, stable power to traditional energy installations and remote islands. Our efforts in this area include:
•Deep Purple™ is our system to provide sustainable offshore renewable energy production by integrating wind energy and hydrogen production and storage;
•A partnership with Energias de Portugal (EDP) and others to develop a new platform for green hydrogen production offshore Portugal; and
•Working with renewable energy provider Statkraft towards a trial of large-scale offshore hydrogen storage at Hardanger Hydrogen Hub.
Sources and Availability of Raw Materials
Our business segments purchase carbon steel, stainless steel, aluminum, and steel castings and forgings from the global marketplace. We typically do not use single source suppliers for the majority of our raw material purchases; however, certain geographic areas of our businesses, or a project or group of projects, may heavily depend on certain suppliers for raw materials or supply of semi-finished goods. We believe the available supplies of raw materials are adequate to meet our needs.
Research and Development
We are engaged in research and development (“R&D&D”) activities directed toward the improvement of existing products and services, the design of specialized products to meet customer needs, and the development of new products, processes, and services. A large part of our product development spending has focused on the improved design and standardization of our Subsea and Onshore/Offshore products to meet our customer needs.
Patents, Trademarks, and Other Intellectual Property
We own a number of patents, trademarks, and licenses that are cumulatively important to our businesses. As part of our ongoing R&D focus, we seek patents when appropriate for new products, product improvements, and related service innovations. We have approximately 6,8003,800 issued patents and pending patent applications worldwide. Further, we license intellectual property rights to or from third parties. We also own numerous trademarks and trade names and have approximately 550410 registrations and pending applications worldwide.
We protect and promote our intellectual property portfolio and take actions we deem appropriate to enforce and defend our intellectual property rights. We do not believe, however, that the loss of any one patent, trademark, or license, or group of related patents, trademarks, or licenses would have a material adverse effect on our overall business.
Segment and Geographic Financial Information
The majority of our consolidated revenue and segment operating profits areis generated in markets outside of the United States. Each segment’s revenue is dependent upon worldwide oil and gas exploration, production and petrochemical activity. Financial information about our segments and geographic areas is incorporated herein by reference from Note 7 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Order Backlog
Information regarding order backlog is incorporated herein by reference from the section entitled “Inbound Orders and Order Backlog” in Part II, Item 7 of this Annual Report on Form 10-K.
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Website Access to Reports and Proxy Statement
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and Forms 3, 4, and 5 filed on behalf of directors and executive officers, and amendments to each of those reports and statements, are available free of charge through our website at www.technipfmc.com, under “Investors” as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”). Alternatively, our reports may be accessed through the website maintained by the SEC at www.sec.gov. Unless expressly noted, the information on our website or any other website is not incorporated by reference in this Annual Report on Form 10-K and should not be considered part of this Annual Report on Form 10-K or any other filing we make with the SEC.
HUMAN CAPITAL
People and culture are at the heart of our development strategy. People are our wealth and strength. We are committed to our employees, and our employee guidelines are specified in our Code of Business Conduct, which applies to all employees, regardless of their roles, and no matter where they work.
We believe that all our employees are entitled to fair treatment, courtesy, and respect, wherever they work: in the office, on vessels, on industrial and construction sites, or in client offices. We do not tolerate any form of abuse or harassment, and we will not tolerate any action, conduct, or behavior that is humiliating, intimidating, or hostile.
Furthermore, our hiring and employee development decisions are fair and objective. Employment decisions are based only on relevant qualifications, performance, demonstrated skills, experience, and other job-related factors, with our goal of creating a diverse, tolerant, and inclusive workforce.
Workforce Overview
Our workforce consists of the following:
| As of December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Permanent employees | 19,103 | 19,078 | 21,522 | ||||||||||||||
| Temporary employees (fixed-term) | 1,507 | 1,054 | 1,637 | ||||||||||||||
| Employees on payroll | 20,610 | 20,132 | 23,159 | ||||||||||||||
| Contracted workforce | 1,392 | 635 | 2,560 | ||||||||||||||
| Total workforce | 22,002 | 20,767 | 25,719 | ||||||||||||||
Attracting Talent
To position ourselves as an employer of choice, we continued to bring our Employee Value Proposition ("EVP") to life. We encouraged and included more people from our business to share their inspiring experiences and stories that truly reflects the diversity and plurality we have in the company. People from different cultures, generations, gender, races, disabilities and sexual preferences are represented by what they all have in common: inspiring experiences lived at TechnipFMC. We continue to explore how best we can share these experiences with external candidates as well as internally through different channels. A significant effort in 2021 was to improve the candidate experience when accessing our website’s new career page as well as on our internal EVP-dedicated web page.
The career pages aim to reflect key EVP messages as well as our commitments to Diversity and Inclusion and ESG to attract the right talent to our company.
Our recruitment system is becoming more standardized worldwide to improve the selection process. Global programs are being revised to provide a more dynamic, modern and attractive experience with relevant content. Our onboarding program will be further simplified, with better global alignment and more efficient communication to make the experience of new employees and line managers more efficient and connected. Our graduate program gained more global representation with an increase in participation across our business.
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Key performance indicators linked to talent acquisition are now available and accessible to key stakeholders through our internal tracking platform. These include the results of the exit interview, onboarding program and new employees; and evaluation of the selection process.
Developing and Keeping Talent
In 2021, we have further simplified the design and process of identifying key talents that was launched in 2020. We saw an improvement in our Leadership Succession Planning both in terms of depth and representation of underrepresented nationalities and U.S. minorities and gender. We have continued to work on Talking Talents (a process launched in 2020 to identify and support development of our key talents). As of December 31, 2021, we have 14 percent (an increase from 6 percent in 2020) of our employee population identified as flagged talents in our three main Career Pathways: Leadership, Technology and Project Management. This includes our Technical Expertise Program, which was also launched in 2020, where we welcomed new experts in 2021.
Leadership You was introduced in 2021, which provides leadership development opportunities not only for our leaders, but for all of our employees. We have also made other talent development tools available for all employees. Examples include Individual Development Plan, Continuous Multi Source Feedback and Inclusive Leadership Training.
Employee attrition in 2021 was 6.4 percent compared to 2.5 percent in 2020, attributable to a significant extent to the great reshuffle we witnessed across industries globally. Through dedicated efforts focused on key talents we managed to keep attrition rate lower at 5.6 percent.
In 2022, we will further improve our Performance Process and move from annual performance reviews and ratings to continuous feedback and check-ins between employees and managers thereby enabling an environment where our employees will have boundless opportunities to grow, contribute and their best. This will further improve our business and individual performance and focus on people development for our people.
As we continued to manage the ever-changing COVID-19 landscape, we have carried on sharpening our focus on enabling our people to grow, develop and share knowledge. The importance of being able to offer learning and knowledge-sharing opportunities in a digital, 24/7, and global environment has been key to our success. Building on our solid foundations, we delivered impactful courses, initiatives and solutions across all of our business segments, in addition to being particularly focused on leadership, technology and project management.
Technical Expertise Program
Building on the launch of the global Technical Expertise Program in late 2020, we executed the first-ever application and selection process for the program. It recognizes and rewards employees who have demonstrated technical mastery in their discipline, as well as:
•Technical impact. whether it is operational performance, product development or project management;
•People development. by inspiring others, enabling the full potential of people and teams, mentoring, sharing knowledge and expertise, and attracting other technical talent;
•Business impact. by developing business with existing or new customers, new solutions in existing markets, or new markets altogether; and
•Industry leadership. through internal and external professional visibility as a thought leader, both individually and as a representative of the Company’s technical leadership.
The Technical Expertise Program has more than 650 members, who share their knowledge broadly across the Company’s learning ecosystem, using knowledge management platforms such as The Bridge to connect with employees in almost 40 chartered global knowledge-sharing networks. The related knowledge repository, The Well, has more than 4,000 pages, which received in excess of 600,000 visits in 2021. The Well is connected with the Company’s competency management platform and provides direct access to competency-based content. Employees in all regions access these and other knowledge management social learning tools such as an Experts Explain webinar series and Illuminate podcasts to increase their knowledge about business and technical topics, and to share their own knowledge.
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Engagement in the iLearn learning platform has seen a significant rebound in use in 2021, as we continue to embrace our digital transformation. In 2021, there were more than 26,000 pieces of creative and innovative learning content available, with ongoing releases of new and meaningful courses, to support skills development for our employees and enhance their performance in their role. In 2021, 76 percent of our training hours (up from 50 percent in 2020) and 96 percent of our course completions (up from 95 percent in 2020) were done in a digital or virtual environment, which resulted in 15.5 training hours per employee (up from 5.85 hours per employee in 2020). The areas of learning in 2021 were Health, Safety, Environment and Security; Human Resources; Legal; and Personal Effectiveness.
Promoting Cultural and Ethnic Diversity
We focus on our broad cultural and ethnic diversity, which we constantly promote and develop throughout the Company, through the internationalization of our teams, multicultural programs, and international mobility.
Providing Equal Employment Opportunities
Three of our Foundational Beliefs – integrity, respect, and sustainability – are tangibly embedded in fair employment practices and equal opportunity. The Company’s policy is that our employment decisions related to recruitment, selection, evaluation, compensation, and development, among others, are not influenced by unlawful or unfair discrimination on the basis of race, religion, gender, age, ethnic origin, nationality, sexual orientation, gender or gender reassignment, marital status, or disability.
It is our policy to encourage and give full and fair consideration to applications for employment from disabled people, and to assist with their training and development in light of their aptitudes and abilities. If an existing employee becomes disabled, it is the Company’s policy wherever practicable to provide continuing employment under our usual terms and conditions, and to provide training, career development, promotion opportunities and a safe work environment based on the requested, reasonable needs to disabled employees to the fullest extent possible.
In December 2021, we celebrated International Day of Persons with Disabilities. We had various initiatives to promote inclusion and respect featuring our colleagues throughout the globe, including:
•Inspiring stories featuring perspectives from leadership, disabled individuals and careers of disabled children;
•Creating awareness of invisible disabilities in a podcast; and
•Virtual iVolunteer event for People & Culture where senior managers recorded holiday greetings for Helping Hands for the Deaf through sign language and many other local events.
Strengthening Social Dialogue
The Company has developed a culture that is based on the values of trust, mutual respect, and dialogue. In accordance with local legislation, regular meetings with trade union-appointed and/or works council representatives are organized for information and/or consultation. The Company’s European Works Council (“EWC”) meets regularly and all of our European entities joined the EWC by the end of 2019. In 2021, the EWC elected its new members, who consist of employee representatives from France, Germany, the Netherlands, Norway, Poland, Portugal, and the United Kingdom.
Employee Engagement and Well-being
In 2021, we launched our first Company-wide employee engagement survey, with a remarkable 70 percent response rate.
The results were consistent with the oil and gas industry, but certainly have room for improvement. The results achieved and the commitments made by our Executive Leadership Team and business executives illustrate the importance of the survey initiative to the Company. The robust and analytical platform gives all managers the opportunity to work autonomously on their action plans.
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We continued to build on the strong foundations we laid in 2020, with the launch of our Well-being program in September 2021, in partnership with our Workplace Options platform, to help all employees be more successful at meeting their responsibilities at home and at work. Among the extensive resources available, we focused on mental health and all of our more than 20,000 people now have access to mental health resources and counselling. During the month of September 2021, webinars and Experts Explain webcasts were made available to stimulate discussion on the topic. As committed by our Chair and CEO in 2020, we annually celebrate the month of October as mental health awareness month with several activities to promote awareness. TechnipFMC also celebrates International Women's Day, PRIDE month and International Women in Engineering Day, among others.
Internal Communication
We have a robust internal communications strategy and support communication channels that ensure that we communicate with our employees in a timely and effective way. The effectiveness of internal communication is continually monitored and adjusted based on a focus group feedback program that reaches multiple levels across the Company. New digital tools help us gauge the effectiveness of our digital communication platforms. Employees are regularly consulted and provided with information on changes and events that may affect them through channels such as regular meetings, employee representatives, and the Company’s intranet site. These consultations and meetings ensure that employees are kept informed of the financial and economic factors affecting the Company’s performance and matters of concern to them.
Labor Relations and Collective Agreements
We seek to maintain constructive relationships with works councils and trades unions, and to comply with relevant local laws and collective agreements in relation to collective or individual labor relations. The Company also operates through local subsidiaries in many countries, a number of which, including those in France, Germany, and Norway, have legal requirements for works councils, which include employee representatives. We send regular information to all employees to share information about business success, changes to the organizational structure, and any major impact to the business or the Company. The same approach to sharing information and maintaining a regular dialogue with employees exists at a local level through the action of the local communications teams and managers. In countries where employee representatives or works councils are in place, the Company seeks to maintain an effective and regular dialogue. To get the direct feedback of employees, we performed an employee engagement survey globally in 2021. The results have been communicated and actions are being taken in all of our operations to improve employee relations and engagement. Every quarter, all employees receive a direct message from the Chair and CEO about the financial results of the Company and main business information.
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INFORMATION ABOUT OUR EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding our executive officers called for by Item 401(b) of Regulation S-K is hereby included in Part I, Item 1 “Business” of this Annual Report on Form 10-K.
The following table indicates the names and ages of our executive officers as of March 2, 2020,February 28, 2022, including all offices and positions held by each in the past five years:
| Name | Age | Current Position and Business Experience (Start Date) | ||||||||||||
Douglas J. Pferdehirt | Chief Executive Officer (2017) | |||||||||||||
Executive Vice President and Chief Financial Officer Senior Vice President, Surface Americas (2017) | ||||||||||||||
Executive Vice President, Chief Legal Officer and Secretary Senior Vice President, General Counsel and Corporate Secretary of Executive Counsel, M&A of General Electric (2019) Associate General Counsel of Baker Hughes, a GE Company (2018) Associate General Counsel of GE Oil & Gas (2017) | ||||||||||||||
Luana Duffé (a) | 40 | Executive Vice President, New Energy Ventures (2021) Vice President, Subsea Projects & Commercial and Country Manager for Brazil (2020) Vice President, Subsea Projects and Brazil Country Manager (2019) Vice President, Subsea Strategy (2018) Corporate Development Director (2018) | ||||||||||||
Nisha Rai (a) | 46 | Executive Vice President, People and Culture (2021) Vice President of Total Rewards (2020) Vice President, Head of Human Resources of MRC Global (2017) | ||||||||||||
Justin Rounce | Executive Vice President and Chief Technology Officer (2018) Senior Vice | |||||||||||||
Senior Vice | ||||||||||||||
Barry Glickman | President, | |||||||||||||
Krisztina Doroghazi | Senior Vice President, Controller, and Chief Accounting Officer (2018) Senior Vice President, Financing Planning and Reporting of MOL Group (2015) | |||||||||||||
__________________
No family relationships exist among any of the above-listed officers, and there are no arrangements or understandings between any of the above-listed officers and any other person pursuant to which they serve as an officer. During the past 10 years, none of the above-listed officers was involved in any legal proceedings as defined in Item 401(f) of Regulation S-K. All officers are appointed by the Board of Directors to hold office until their successors are appointed.
ITEM 1A. RISK FACTORS
Important risk factors that could impact our ability to achieve our anticipated operating results and growth plan goals are presented below. The following risk factors should be read in conjunction with discussions of our business and the factors affecting our business located elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC.
Summary Risk Factors
The following is a summary of some of the risks and uncertainties that could materially adversely affect our business, financial condition and results of operations. You should read this summary together with the more detailed description of each risk factor contained below.
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Risks Related to Our Business and Industry
•Demand for our products and services depends on oil and gas industry activity and expenditure levels, which are directly affected by trends in the demand for and price of crude oil and natural gas.
•We operate in a highly competitive environment and unanticipated changes relating to competitive factors in our industry, including ongoing industry consolidation, may impact our results of operations.
•Cumulative loss of several major contracts, customers, or increase pricingalliances may have an adverse effect on us, and the credit and commercial terms of certain contracts may subject us to further risks.
•The COVID-19 pandemic, the United Kingdom’s withdrawal from the European Union, and disruptions in the political, regulatory, economic, and social conditions of the countries in which we conduct business, could adversely affect our business or results of operations.
•DTC may cease to act as a depository and clearing agency for our shares.
•Our existing and future debt may limit cash flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our obligations under our outstanding debt.
•A downgrade in our debt rating could restrict our ability to access the capital markets.
•Our acquisition and divestiture activities involve substantial risks.
•Demands to address Environmental, Social and Governance (“ESG”) matters could surpass our ability to meet demands and thus adversely affect our business.
•Uncertainties with respect to the energy transition may adversely affect our business.
Risks Related to Our Operations
•We may lose money on fixed-price contracts.
•New capital asset construction projects for vessels and manufacturing facilities are subject to risks, including delays and cost overruns.
•Our failure to timely deliver our backlog could affect future sales, profitability, and customer relationships.
•We face risks relating to our reliance on subcontractors, suppliers, and our joint venture partners.
•A failure or breach of our IT infrastructure or that of our subcontractors, suppliers or joint venture partners, including as a result of cyber-attacks, could adversely impact our business and results of operations.
•Pirates endanger our maritime employees and assets.
Risks Related to Legal Proceedings, Tax, and Regulatory Matters
•The industries in which we operate or have operated expose us to potential liabilities, including the installation or use of our products, which may not be covered by insurance or may be in excess of policy limits, or for which expected recoveries may not be realized.
•Our operations require us to comply with numerous laws and services or negotiate favorable contract terms with our customersregulations, including those related to environmental protection and suppliers,climate change, health and safety, privacy, data protection and data security, labor and employment, import/export controls, currency exchange, bribery and corruption, and taxation, violations of which could have a significant negative impactmaterial adverse effect on our financial condition, results of operations, or cash flows. We are unable
•As an English public limited company, we must meet certain additional financial requirements before we may declare dividends or repurchase shares and certain capital structure decisions may require stockholder approval which may limit our flexibility to predict what effect consolidationsmanage our capital structure.
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•Uninsured claims and other competitive factors in the industrylitigation against us, including intellectual property litigation, could adversely impact our financial condition, results of operations, or cash flows.
•The IRS may havenot agree that we should be treated as a foreign corporation for U.S. federal tax purposes and may seek to impose an excise tax on prices, capital spendinggains recognized by our customers, our selling strategies, our competitive position,certain individuals.
•U.S. tax laws and/or guidance could also affect our ability to retain customersengage in certain acquisition strategies and certain internal restructurings.
•We are subject to the tax laws of numerous jurisdictions; and challenges to the interpretation of, or future changes to, such laws could adversely affect us.
•We intend to be treated exclusively as a resident of the United Kingdom for tax purposes, but other tax authorities may seek to treat us as a tax resident of another jurisdiction, and we may not qualify for benefits under tax treaties entered into between the United Kingdom and other countries.
General Risk Factors
•We are a shareholder of Technip Energies and the value of our abilityinvestment in Technip Energies may fluctuate and may result in an impact to negotiate favorable agreementsour results of operations.
•Our businesses are dependent on the continuing services of our key managers and employees.
•Seasonal and weather conditions could adversely affect demand for our services and operations.
•Currency exchange rate fluctuations could adversely affect our financial condition, results of operations, or cash flows.
•We are exposed to risks in connection with our customers.defined benefit pension plan commitments.
•We may be unable to obtain sufficient bonding capacity for certain contracts, and the need for performance and surety bonds could reduce availability under our credit facility.
Risks Related to Our Business and Industry
Demand for our products and services depends on oil and gas industry activity and expenditure levels, which are directly affected by trends in the demand for and price of crude oil and natural gas.
We are substantially dependent on conditions in the oil and gas industry, including (i) the level of exploration, development and production activity and (ii) capital spending, and (iii) the processing of oil and natural gas in refining units, petrochemical sites, and natural gas liquefaction plants by energy companies that are our customers.spending. Any substantial or extended decline in these expenditures may result in the reduced pace of discovery and development of new reserves of oil and gas and the reduced exploration of existing wells, which could adversely affect demand for our products and services and, in certain instances, result in the cancellation, modification, or re-scheduling of existing orders in our backlog. These factors could have an adverse effect on our revenue and profitability. The level of exploration, development, and production activity is directly affected by trends in oil and natural gas prices, which historically have been volatile and are likely to continue to be volatile in the future.
Factors affecting the prices of oil and natural gas include, but are not limited to, the following:
•demand for hydrocarbons, which is affected by worldwide population growth, economic growth rates, and general economic and business conditions;conditions, including reductions in travel and commerce relating to the COVID-19 pandemic;
•costs of exploring for, producing, and delivering oil and natural gas;
•political and economic uncertainty, and socio-political unrest;
•governmental laws, policies, regulations and subsidies related to or affecting the production, use, and exportation/importation of oil and natural gas;
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•the ability or willingness of the Organization of Petroleum Exporting Countries (“OPEC”) and the 10 other oil producing countries, including Russia, Mexico and Kazakhstan (“OPEC+”) to set and maintain production level of oil production by non-OPEC countries;for oil;
•oil refining and transportation capacity and shifts in end-customer preferences toward fuel efficiency and the use of natural gas;
•technological advances affecting energy consumption;
•development, exploitation, relative price, and availability of alternative sources of energy and our customers’ shift of capital to the development of these sources;
•volatility in, and access to, capital and credit markets, which may affect our customers’ activity levels, and spending for our products and services;
•decrease in investors’ interest in hydrocarbon producers because of environmental and sustainability initiatives; and
•natural disasters.
The oil and gas industry has historically experienced periodic downturns, which have been characterized by diminished demand for oilfield services and downward pressure on the prices we charge. WhileThe oil and natural gas prices have partially rebounded from the downturn that began in 2014, the market remains quite volatile, and the sustainability of the price recovery and business activity levels isare dependent on variables beyond our control, such as geopolitical stability, OPEC’sincreasing attention to global climate change resulting in pressure upon shareholders, financial institutions and/or financial markets to modify their relationships with oil and gas companies and to limit investments and/or funding to such companies, increasing likelihood of governmental regulations, enforcement, and investigations and private litigation due to increasing attention to global climate change, OPEC+’s actions to regulate its production capacity, changes in demand patterns, and international sanctions and tariffs. Continued volatility or any future reduction in demand for oilfield services could further adversely affect our financial condition, results of operations, or cash flows.
We operate in a highly competitive environment and unanticipated changes relating to competitive factors in our industry, including ongoing industry consolidation, may impact our results of operations.
We compete on the basis of a number of different factors, such as product offerings, project execution, customer service, and price. In order to compete effectively we must develop and implement innovative technologies and processes, and execute our clients’ projects effectively. We can give no assurances that we will continue to be able to compete effectively with the products and services or prices offered by our competitors.
Our industry, including our customers and competitors, has experienced unanticipated changes in recent years. Moreover, the industry is undergoing consolidation to create economies of scale and to control the value chain, which may affect demand for our products and services because of price concessions from our competitors or decreased customer capital spending. This consolidation activity could impact our ability to maintain market share, maintain or increase pricing for our products and services or negotiate favorable contract terms with our customers and suppliers, which could have a significant negative impact on our financial condition, results of operations or cash flows. We are unable to predict what effect consolidations and other competitive factors in the industry may have on pricing, capital spending by our customers, our selling strategies, our competitive position, our ability to retain customers or our ability to negotiate favorable agreements with our customers and suppliers.
The COVID-19 pandemic has reduced demand for our products and services, and has had, and may continue to have, an adverse impact on our financial condition, results of operations, and cash flows.
The COVID-19 pandemic, including actions taken by governments and businesses, has resulted in a reduction in global economic activity, including increased volatility in global oil and natural gas markets. Measures taken to address and limit the spread of the disease, such as stay-at-home orders, social distancing guidelines, and travel restrictions, have adversely affected the economies and financial markets of many countries. The resulting disruption to our operations, communications, travel, and supply chain may continue or increase in the future, and could limit the ability of our employees, partners, or vendors to operate efficiently or at all, and has had, and is reasonably likely to continue to have, an adverse impact on our financial condition, operating results, and cash flows.
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Uncertainty remains as to the potential impact of the COVID-19 pandemic on our operations, and we are closely monitoring the effects of the pandemic on commodity demands and on our customers. These effects may include adverse revenue and net income effects; disruptions to our operations; potential project delays or cancellations; employee impacts from illness, school closures, and other community response measures, which may lead to disruptions and decreased productivity; and temporary closures of our facilities or the facilities of our customers and suppliers. The pandemic has led to global supply chain challenges, which could adversely impact our ability to acquire certain equipment and materials, impact our ability complete projects and cause delays in completing projects, and materially and negatively impact our business results, operations, revenue, growth and overall financial condition.
COVID-19, and the uncertain regional and global economic conditions stemming from the pandemic, could also aggravate the other risk factors discussed herein, including but not limited to risks related to the demand for oil and gas, which may not recover immediately. The full extent to which the COVID-19 pandemic will impact our results is unknown and evolving and will depend on various factors and consequences beyond our control, such as the severity, duration, and spread of COVID-19; the development of new variants; the success of actions taken by governments and health organizations to combat the disease and treat its effects, including vaccine mandates, acceptance, distribution and efficacy; decisions by our alliance partners and customers regarding their business plans and capital expenditures; and the extent to which, and the timing of, general economic and operating conditions recover.
Our success depends on our ability to develop, implement, and protect new technologies and services.services and the intellectual property related thereto.
Our success depends on the ongoing development and implementation of new product designs, including the processes used by us to produce and market our products.
We continually attempt to develop new technologies for use in our business. However, there is no guarantee of future demand for those technologies because customers may be reluctant or unwilling to adopt our new technologies. In addition, we may also have difficulty negotiating satisfactory terms that would provide acceptable returns on our investment in the research and development of new technologies.
Development of new technology is critical to maintaining our competitiveness. However, we cannot assure that we will be able to successfully develop technology that our customers demand. Demand for our products and services may decline if we cannot keep pace with technological advances. Technology that is unavailable to us or that does not work as we expect, could adversely affect us. New technologies, services or standards could render some of our products and services obsolete, which could reduce our competitiveness and have a material adverse impact on our business, financial condition, cash flows and results of operation.
Additionally, we are exploring opportunities in greenhouse gas removal, offshore floating renewables (wind, wave and tidal energy), and hydrogen. Many technologies involved in those projects are novel and will need to be further developed before we can determine whether a renewable energy project is technologically feasible.
Our success also depends on our ability to protect and maintain critical intellectual property assets related to these developments. If we are not able to obtain patents, maintain trade secrets or obtain other protection of our intellectual property rights, if our patents are unenforceable or the claims allowed under our patents are not sufficient to protect our technology, or if we are not able to adequately protect our patents or trade secrets, we may not be able to continue to develop our services, products and related technologies. Additionally, our competitors may be able to independently develop technology that is similar to ours without infringing on our patents or gaining access to our trade secrets. If any of these events occurs, we may be unable to meet evolving industry requirements or do so at prices acceptable to our customers, which could adversely affect our financial condition, results of operations, or cash flows.
We often enter into large, long-term contracts that, collectively, represent a significant portion of our revenue. These agreements, if terminated or breached, may have a larger impact on our operating results or our financial condition than shorter-term contracts due to the installationvalue at risk. Moreover, the global market for the production, transportation, and transformation of hydrocarbons and by-products, as well as the other industrial markets in which we operate, is
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dominated by a small number of companies. As a result, our business relies on a limited number of customers. If we were to lose several key contracts, customers, or alliances over a relatively short period of time, we could experience a significant adverse impact on our financial condition, results of operations, or cash flows.
Additionally, certain of our customers may require us to provide extended payment terms or other forms of financial support as a condition to obtaining commercial contracts.We have long-term contracts involving significant amounts to be paid by our customers toward the later stage of a project. Pursuant to these contracts, we may deliver products and services representing an important portion of the contract price before receiving any significant payment from the customer. Such arrangements could restrict the use of our cash and other resources for other projects and opportunities and our business could also be adversely affected if the financial condition of our customers erodes.
Disruptions in the political, regulatory, economic, and social conditions of the countries in which we conduct business could adversely affect our business or results of operations.
We operate in various countries across the world. Instability and unforeseen changes in any of the markets in which we conduct business, including economically and politically volatile areas or conflict or rumor of conflict could have an adverse effect on the demand for our services and products, our financial condition, or our results of operations. These factors include, but are not limited to, the following:
•nationalization and expropriation;
•potentially burdensome taxation;
•inflationary and recessionary markets, including capital and equity markets;
•civil unrest, labor issues, political instability, disease outbreaks, terrorist attacks, cyber terrorism, military activity, and wars;
•increasing attention to global climate change resulting in pressure from shareholders, financial institutions and/or financial markets;
•supply disruptions in key oil producing countries;
•the ability of OPEC+ to set and maintain production levels and pricing;
•trade restrictions, trade protection measures, price controls, or trade disputes;
•sanctions, such as prohibitions or restrictions by the United States against countries that are the targets of economic sanctions, or are designated as state sponsors of terrorism;
•foreign ownership restrictions;
•import or export licensing requirements;
•restrictions on operations, trade practices, trade partners, and investment decisions resulting from domestic and foreign laws, and regulations;
•regime changes;
•changes in, and the administration of, treaties, laws, and regulations including in response to public health issues;
•inability to repatriate income or capital;
•reductions in the availability of qualified personnel;
•foreign currency fluctuations or currency restrictions; and
•fluctuations in the interest rate component of forward foreign currency rates.
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DTC may cease to act as the depository and clearing agency for our shares.
Our shares were issued into the facilities of The Depository Trust Company (“DTC”) with respect to shares listed on the NYSE. DTC is a widely used mechanism that allows for rapid electronic transfers of securities between the participants in their respective systems, which mayinclude many large banks and brokerage firms. DTC has general discretion to cease to act as the depository and clearing agency for our shares. If DTC determines at any time that our shares are not eligible for continued deposit and clearance within its facilities, then we believe that our shares would not be covered by insurance oreligible for continued listing on the NYSE, and trading in our shares would be disrupted. Any such disruption could have a material adverse effect on the trading price of our shares.
The United Kingdom’s withdrawal from the European Union may be in excess of policy limits, or for which expected recoveries may not be realized.have a negative effect on global economic conditions, financial markets, and our business.
We are incorporated under the laws of England and Wales and have an operational headquarters in Houston, Texas, United States, with worldwide operations, including material business operations in Europe. The United Kingdom withdrew from the European Union on January 31, 2020 (“Brexit”). In connection with Brexit, the United Kingdom and the European Union agreed on the Trade and Cooperation Agreement (“TCA”) that governs the future trading relationship between the United Kingdom and the European Union in specified areas. The TCA took effect on January 1, 2021. The United Kingdom is no longer in the European Union customs union and is outside of the European Union single market. The TCA addresses trade, economic arrangements, law enforcement, judicial cooperation and a governance framework including procedures for dispute resolution, among other things. Because the agreement merely sets forth a framework in many respects and will require complex additional bilateral negotiations between the United Kingdom and the European Union as both parties continue to work on the rules for implementation, significant political and economic uncertainty remains about whether the terms of the relationship will differ materially from the terms before withdrawal.
These developments could have a material adverse effect on global economic conditions and the stability of the global financial markets and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Asset valuations, currency exchange rates, and credit ratings may be especially subject to potential liabilities arising from, amongincreased market volatility. In addition, there is a lack of clarity about the future United Kingdom laws and regulations as the United Kingdom determines which European Union laws to replicate or replace, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws, employment laws, and other possibilities, equipment malfunctions, equipment misuse, personal injuries,rules that would apply to us and natural disasters, any of which may result in hazardous situations, including uncontrollable flows of gas or well fluids, fires,our subsidiaries, could increase our costs, restrict our access to capital within the United Kingdom and explosions. Our insurance against these risks may not be adequate to cover our liabilities. Further, the insurance may not generally be availableEuropean Union, depress economic activity, and further decrease foreign direct investment in the future or, if available, premiums may not be commercially justifiable. If we incur substantial liability and the damages are not covered by insurance or are in excessUnited Kingdom.
Any of policy limits, or if we were to incur liability at a time when we were not able to obtain liability insurance, such potential liabilitiesthese factors could have a material adverse effect on our business, results of operations, financial condition, or results of operations.
Our existing and future debt may limit cash flows.flow available to invest in the ongoing needs of our business and could prevent us from fulfilling our obligations under our outstanding debt.
We have substantial existing debt. As of December 31, 2021, our total debt was $2.0 billion. We also have the capacity under our debt agreements to incur substantial additional debt.
Our level of debt could have important consequences. For example, it could:
•require us to dedicate a substantial portion of our cash flow from operations to the payment of debt service, reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, distributions, and other general partnership purposes;
•increase our vulnerability to adverse economic or industry conditions;
•limit our ability to obtain additional financing to react to changes in our business; or
•place us at a competitive disadvantage compared to businesses in our industry that have less debt.
Additionally, any failure to meet required payments on our debt or to comply with any covenants in the instruments governing our debt, could result in an event of default under the terms of those instruments. In the event of such
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default, the holders of such debt could elect to declare all the amounts outstanding under such instruments to be due and payable. Such default could also trigger a cross default on our other debt.
Our loans denominated in United States dollars (“USD”), at our option, and sterling-denominated loans, under our Revolving Credit Facility bear interest at an adjusted rate linked to the London Interbank Offered Rate (“LIBOR”) and our euro-denominated loans under the Revolving Credit Facility bear interest at an adjusted rate linked to the Euro Interbank Offered Rate (“EURIBOR”). LIBOR, EURIBOR and certain other interest “benchmarks” may be subject to further regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences. The United Kingdom’s Financial Conduct Authority (the “FCA”), which regulates LIBOR, has announced that the publication of LIBOR on the current basis would cease and no longer be representative immediately after December 31, 2021 (in the case of all sterling, euro, Swiss franc and Japanese yen settings, and one-week and two-month USD settings) and immediately after June 30, 2023 (in the case of all remaining USD settings). Despite this deferral in regard to USD, the FCA has confirmed that use of USD LIBOR will not be permitted in most new contracts after December 31, 2021 and while the FCA is requiring the LIBOR administrator to publish one-, three- and six-month sterling and Japanese yen LIBOR rates for a limited time following December 31, 2021 using a synthetic methodology, such synthetic LIBOR rates are also only permitted for legacy use. If the methods of calculating LIBOR change from their current form while we continue to rely on LIBOR, or if we adopt alternative benchmarks for our current or future debt, interest rates on our debt obligations may be adversely affected.
The terms of the agreements governing our existing indebtedness restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.
The terms of the agreements governing our indebtedness contain a number of restrictive covenants that limit our flexibility in conducting our business and restrict our ability to take specific actions, including (subject to various exceptions) restrictions on incurring indebtedness, paying dividends, making certain loans and investments, selling assets or incurring liens which may limit our ability to compete effectively, or to take advantage of new business opportunities. In addition, the restrictive covenants in the credit agreement, dated February 16, 2021, that governs our $1,000,000,000 three-year senior secured multi-currency revolving credit facility (the “Revolving Credit Facility”) require us to maintain specified financial ratios and satisfy other financial condition tests.
A breach of the covenants or restrictions under our existing indebtedness could result in an event of default under the applicable indebtedness. Such default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. An event of default under our Revolving Credit Facility would also permit the lenders to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable to repay the amounts due and payable under our Revolving Credit Facility, lenders thereunder could proceed against the collateral granted to them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial indebtedness and our credit ratings could adversely affect the availability and terms of our financing.
Our acquisition and divestiture activities involve substantial risks.
We have made and expect to continue to pursue acquisitions, dispositions, or other investments that may strategically fit our business and/or growth objectives. We cannot provide assurances that we will be able to locate suitable acquisitions, dispositions, or investments, or that we will be able to consummate any such transactions on terms and conditions acceptable to us. Even if we do successfully execute such transactions, they may not result in anticipated benefits, which could have a material adverse effect on our financial results. If we are unable to successfully integrate and develop acquired businesses, we could fail to achieve anticipated synergies and cost savings, including any expected increases in revenues and operating results. We may not be able to successfully cause a buyer of a divested business to assume the liabilities of that business or, even if such liabilities are assumed, we may have difficulties enforcing our rights, contractual or otherwise, against the buyer. We may invest in companies or businesses that fail, causing a loss of all or part of our investment. In addition, if we determine that an other-than-temporary decline in the fair value exists for a company in which we have invested, we may have to write down that investment to its fair value and recognize the related write-down as an investment loss.
In connection with the Spin-off, we agreed to indemnify Technip Energies for certain liabilities, and Technip Energies agreed to indemnify us for certain liabilities. If we are required to act on these indemnities to Technip Energies, our
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financial results could be negatively impacted. Additionally, any indemnity from Technip Energies may not be sufficient to insure us against the full amount of liabilities for which we are responsible and Technip Energies may not be able to satisfy its indemnification obligations in the future.
Demands to address ESG matters could surpass our ability to meet demands and thus adversely affect our business.
There has been increasing attention from stakeholders, investors, customers on renewable energy and ESG practices and disclosures, including practices and disclosures related to greenhouse gases and climate change, and diversity and inclusion initiatives and governance standards. If we are unable to meet the ESG standards, investment and/or lending criteria set by these investors, we may lose investment and our reputation may be negatively affected. The increasing attention and pressure from the shareholders, financial institutions and/or financial markets could also increase the likelihood of governmental investigations and private litigation.
We are exploring investments in energy transition, and uncertainties with respect to these markets may adversely affect our business.
Uncertainties with respect to the energy transition may adversely affect our business. As a result of our evolution in the renewable energies arena, we are exploring opportunities in greenhouse gas removal, offshore floating renewables, and hydrogen. While we have subsea and surface expertise, as well as capabilities in project integration, we are exploring opportunities that are new to us, and therefore involve uncertainties and risks.
The market for renewable energy is also intensively competitive and rapidly evolving. If the demand for renewable energy fails to grow sufficiently, if new geopolitical, legislative or regulatory initiatives emerge and governments around the world reduce subsidies and economic incentives on renewable energy projects, or if market opportunities manifest themselves in areas that we do not focus on, our ventures in new energy may not succeed.
Limited operating experience or limited brand recognition in new energy markets may also limit our goals and targets on business expansion.
Risks Related to Our Operations
We may lose money on fixed-price contracts.
As is customary for some of our projects, we often agree to provide products and services under fixed-price contracts. We are subject to material risks in connection with such fixed-price contracts. It is not possible to estimate with complete certainty the final cost or margin of a project at the time of bidding or during the early phases of its execution. Actual expenses incurred in executing these fixed-price contracts can vary substantially from those originally anticipated for several reasons including, but not limited to, the following:
•unforeseen additional costs related to the purchase of substantial equipment, material, and components necessary for contract fulfillment or labor shortages in the markets where the contracts are performed;
•mechanical failure of our production equipment and machinery;
•delays caused by local weather conditions and/or natural disasters (including earthquakes, floods and floods)public health crises such as the COVID-19 pandemic); and
•a failure of suppliers, subcontractors, or joint venture partners to perform their contractual obligations.
The realization of any material risks and unforeseen circumstances could also lead to delays in the execution schedule of a project. We may be held liable to a customer should we fail to meet project milestones or deadlines or to comply with other contractual provisions. Additionally, delays in certain projects could lead to delays in subsequent projects that were scheduled to use equipment and machinery still being utilized on a delayed project.
Pursuant to the terms of fixed-price contracts, we are not always able to increase the price of the contract to reflect factors that were unforeseen at the time our bid was submitted, and this risk may be heightened for projects with longer terms. Depending on the size of a project, variations from estimated contract performance, or variations in multiple contracts, could have a significant impact on our financial condition, results of operations or cash flows.
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Our failure to timely deliver our backlog could affect future sales, profitability, and relationships with our customers.
Many of the contracts we enter into with our customers require long manufacturing lead times due to complex technical and logistical requirements. These contracts may contain clauses related to liquidated damages or financial incentives regarding on-time delivery, and a failure by us to deliver in accordance with customer expectations could subject us to liquidated damages or loss of financial incentives, reduce our margins on these contracts, or result in damage to existing customer relationships. The ability to meet customer delivery schedules for this backlog is dependent upon a number of factors, including, but not limited to, access to the raw materials required for production, an adequately trained and capable workforce, subcontractor performance, project engineering expertise and execution, sufficient manufacturing plant capacity, and appropriate planning and scheduling of manufacturing resources. Failure to deliver backlog in accordance with expectations could negatively impact our financial performance.
We face risks relating to our reliance on subcontractors, suppliers, and our joint venture partners.
We generally rely on subcontractors, suppliers, and our joint venture partners for the performance of our contracts. Although we are not dependent upon any single supplier, certain geographic areas of our business or a project or group of projects may depend heavily on certain suppliers for raw materials or semi-finished goods.
Any difficulty in engaging suitable subcontractors or acquiring equipment and materials could compromise our ability to generate a significant margin on a project or to complete such project within the allocated time frame. If subcontractors, suppliers or joint venture partners refuse to adhere to their contractual obligations with us, or are unable to do so due to a deterioration of their financial condition, we may be unable to find a suitable replacement at a comparable price, or at all. Moreover, the failure of one of our joint venture partners to perform their obligations in a timely and satisfactory manner could lead to additional obligations and costs being imposed on us as we may be obligated to assume our defaulting partner’s obligations or compensate our customers. Additionally, our supply chain, subcontractors, suppliers, and our joint venture partners may be adversely affected by the COVID-19 pandemic, which has created global shipping and logistics challenges such as extended shipping lead times and pricing pressures on transportation and logistics.
Any delay, failure to meet contractual obligations, or other event beyond our control or not foreseeable by us, that is attributable to a subcontractor, supplier or joint venture partner, could lead to delays in the overall progress of the project and/or generate significant extra costs. Even if we are entitled to make a claim for these extra costs against the defaulting supplier, subcontractor or joint venture partner, we may be unable to recover the entirety of these costs and this could materially adversely affect our business, financial condition or results of operations.
The loss of qualified employees or failure to retain and motivate additional highly-skilled employees required for theefficient operation and expansion of our business could hinderis dependent on the security and integrity of our IT systems, physical assets, and data that we process and maintain. Accordingly, we rely upon the capacity, reliability, and security of our IT hardware and software infrastructure and our ability to successfully conduct research activitiesexpand and develop marketable productsupdate this infrastructure in response to changing needs and services.evolving threats. We have been subject to cyber-attacks in the past, including phishing, malware, ransomware and other security incidents. No such attack has had a material adverse effect on our business, however, this may not be the case with future attacks. Our systems and physical assets may be vulnerable to damages from such attacks, as well as from natural disasters, failures in hardware or software, power fluctuations, unauthorized access to data and systems, theft, loss or destruction of data (including confidential customer, employee or contractor information), human error, and other similar disruptions, and we cannot give assurance that any security measures we have implemented or may in the future implement will be sufficient to identify and prevent or mitigate such disruptions. In response to the COVID-19 pandemic, we have transitioned many of our employees to remote working arrangements which presents increased cybersecurity risks. If a cyber-attack, power outage, connectivity issue, or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time.
We rely on third parties to support the operation of our IT hardware, software infrastructure, and weather conditions could adversely affect demand for ourcloud services, and operations.in certain instances, utilize web-based and software-as-a-service applications, across a broad array of services and functions (e.g., human resources, finance, data transmission, communications, risk compliance, among others). The security and privacy measures implemented by such third parties, as well as the measures implemented by any
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entities we acquire or with whom we do business, may not be materially affected by variation from normal weather patterns,sufficient to identify or prevent cyber-attacks, and any such attacks may have a material adverse effect on our business. While our agreements with third parties, such as coolervendors, typically contain provisions that seek to eliminate or warmer summerslimit our exposure to liability for damages from a cyber-attack, we cannot ensure such provisions will withstand legal challenges or cover all or any such damages.
Threats to our IT systems and winters. Adverse weather conditions, such as hurricanes into those of our subcontractors, suppliers and joint venture partners arise from numerous sources, not all of which are within our or their control, including fraud or malice on the Gulfpart of Mexicothird parties, accidental technological failure, electrical or extreme winter conditions in Canada, Russia, and the North Sea, may interrupttelecommunication outages, failures of computer servers or curtail our operations, or our customers’ operations, cause supply disruptions or loss of productivity, and may result in a loss of revenue orother damage to our equipmentproperty or assets, outbreaks of hostilities, terrorist acts, and facilities,social engineering (e.g., phishing). The frequency and magnitude of cyberattacks and other security incidents is expected to increase in the future and attackers are becoming more sophisticated. We, as well as other critical business partners, may be unable to anticipate, detect or prevent future attacks, particularly because the methodologies utilized by attackers change frequently or are not recognized until launched, and attackers are increasingly using techniques and tools designed to circumvent controls, to avoid detection, and to remove or obfuscate forensic evidence. The failure of our or others’ security controls and measures to prevent, detect, contain or remediate cyberattacks or other significant security incidents could disrupt our business and result in numerous adverse consequences, including reduced effectiveness and efficiency of operations, inappropriate disclosure of confidential and proprietary information, including personal data, litigation or regulatory investigations, actions and fines included for a breach of data protection laws, reputational harm, increased overhead costs including due to compliance requirements, and loss of important information, which may or may not be insured. Any of these events or outcomes could have a material adverse effect on our business and results of operations. In addition, we may be required to incur significant costs to protect against or to mitigate damage caused by these attacks, disruptions or other security incidents in the future. Our insurance coverage may not cover all of the costs and liabilities we incur as the result of these events, and if our business continuity and/or disaster recovery plans do not effectively and timely resolve issues resulting from a cyber-attack, we may suffer material adverse effects on our business.
Pirates endanger our maritime employees and assets.
We face material piracy risks in the Gulf of Guinea, the Somali Basin, and the Gulf of Aden, and, to a lesser extent, in Southeast Asia, Malacca, and the Singapore Straits. Piracy represents a risk for both our projects and our vessels, which operate and transport through sensitive maritime areas. Such risks have the potential to significantly harm our crews and to negatively impact the execution schedule for our projects. If our maritime employees or assets are endangered, additional time may be required to find an alternative solution, which may delay project realization and negatively impact our business, financial condition, cash flows, or results of operations.
From time to time, we carry out capital asset construction projects to maintain, upgrade, and develop our asset base, and such projects are subject to risks of delay and cost overruns that are inherent in any large construction project, resulting from numerous factors including, but not limited to, the typesfollowing:
•shortages of contracts we enterkey equipment, materials or skilled labor;
•delays in the delivery of ordered materials and equipment;
•design and engineering issues; and
•shipyard delays and performance issues.
Failure to complete construction in time, or the inability to complete construction in accordance with design specifications, may result in the loss of revenue. Additionally, capital expenditures for construction projects could materially exceed the initially planned investments, or there could be delays in putting such assets into operation.
Risks Related to Legal Proceedings,Tax and the marketsRegulatory Matters
The industries in which we operate or have operated expose us to potential liabilities, including the cumulative lossinstallation or use of several major contracts, customers,our products, which may not be covered by insurance or alliances may be in excess of policy limits, or for which expected recoveries may not be realized.
We are subject to potential liabilities arising from, among other possibilities, equipment malfunctions, equipment misuse, personal injuries, and natural disasters, any of which may result in hazardous situations, including
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uncontrollable flows of oil, gas or well fluids, or other sources of energy, fires, and explosions. Our insurance against these risks may not be adequate to cover our liabilities. Further, the insurance may not generally be available in the future or, if available, premiums may not be commercially justifiable. If we incur substantial liability and the damages are not covered by insurance or are in excess of policy limits, or if we were to incur liability at a time when we were not able to obtain liability insurance, such potential liabilities could have ana material adverse effect on our results of operations.
Our operations require us to comply with numerous regulations, violations of which could have a material adverse effect on our financial condition, results of operations, or cash flows.
Our operations and manufacturing activities are governed by international, regional, transnational, and national laws and regulations in every place where we operate relating to matters such as environmental protection, health and safety, labor and employment, import/export controls, currency exchange, bribery and corruption, and taxation. These laws and regulations are complex, frequently change, and have tended to become more stringent over time. In the event the scope of these laws and regulations expand in the future, the incremental cost of compliance could adversely impact our financial condition, results of operations, or cash flows.
Our international operations are subject to anti-corruption laws and regulations, such as the U.S. Foreign Corrupt Practices Act (“FCPA”), the U.K. Bribery Act of 2010 (the “Bribery Act”), the anti-corruption provisions of French law n° 2016-1691 dated December 9, 2016 relating to Transparency, Anti-corruption and Modernization of the Business Practice (“Sapin II Law”), the Brazilian law nº 12,846/13, or the Brazilian Anti-Bribery Act (also known as the Brazilian Clean Company Act), and economic and trade sanctions, including those administered by the United Nations, the European Union, the Office of Foreign Assets Control of the U.S. Department of the Treasury (“U.S. Treasury”), and the U.S. Department of State. The FCPA prohibits corruptly providing anything of value to foreign officials for the purposes of obtaining or retaining business or securing any improper business advantage. We may deal with both governments and state-owned business enterprises, the employees of which are considered foreign officials for purposes of the FCPA. The provisions of the Bribery Act extend beyond bribery of foreign public officials and are more onerous than the FCPA in a number of other respects, including jurisdiction, non-exemption of facilitation payments, and penalties. Economic and trade sanctions restrict our transactions or dealings with certain sanctioned countries, territories, and designated persons.
As a result of doing business in foreign countries throughout the world, including through partners and agents, we are exposed to a risk of violating anti-corruption laws and sanctions regulations. Some of the international locations in which we currently operate or may operate, in the future, operate, have developing legal systems and may have higher levels of corruption than more developed nations. Our continued expansion and worldwide operations, including in developing countries, our development of joint venture relationships worldwide, and the employment of local agents in the countries in which we operate increasesincrease the risk of violations of anti-corruption laws and economic and trade sanctions. Violations of anti-corruption laws and economic and trade sanctions are punishable by civil penalties, including fines, denial of export privileges, injunctions, asset seizures, debarment from government contracts (and termination of existing contracts), and revocations or restrictions of licenses, as well as criminal fines and imprisonment. In addition, any major violations could have a significant impact on our reputation and, consequently, on our ability to win future business.
We have implemented internal controlspolicies and procedures designed to minimize and detect potential violations of laws and regulations in a timely manner but we can provide no assurance that such policies and procedures will be followed at all times or will effectively detect and prevent violations of the applicable laws by one or more of our employees, consultants, agents, or partners. The occurrence of any such violation could subject us to penalties and material adverse consequences on our business, financial condition, results of operations, or cash flows.
Compliance with environmental and climate change-relatedchange-related laws and regulations may adversely affect our business and results of operations.
Environmental laws and regulations in various countries affect the equipment, systems, and services we design, market, and sell, as well as the facilities where we manufacture our equipment and systems, and any other operations we undertake. We are required to invest financial and managerial resources to comply with environmental laws and regulations, and believe that we will continue to be required to do so in the future. Failure to comply with these laws and regulations may result in the assessment of administrative, civil, and criminal penalties, the imposition of remedial obligations, the issuance of orders enjoining our operations, or other claims and complaints. Additionally, our insurance and compliance costs may increase as a result of changes in environmental laws and regulations or changes in enforcement. These laws and regulations, as well as any new laws and
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regulations affecting exploration and development of drilling for crude oil and natural gas, are becoming increasingly strict and could adversely affect our business and operating results by increasing our costs, limiting the demand for our products and services, or restricting our operations.
Regulatory requirements related to ESG (including sustainability) matters have been, and are being, implemented in the European Union in particular, in relation to financial market participants. Such regulatory requirements are being implemented on a phased basis. We expect regulatory requirements related to, and investor focus on, ESG (including sustainability) matters to continue to expand in the EU, the United States, and more globally. We establish ESG objectives that align with our foundational beliefs and corporate strategy with an aim toward reducing our carbon footprint, while raising awareness and making advancements in inclusion and diversity. If, in relation to ESG (including sustainability) matters, we are not able to meet current and future regulatory requirements, the reporting requirements of regulators, or the current and future expectations of investors, customers or other stakeholders, our business and ability to raise capital may be adversely affected. In addition, negative attitudes toward or perceptions of fossil fuel products and their relationship to the environment and climate change may reduce the demand for production of oil and gas in areas of the world where our customers operate or otherwise limit our customers’ access to capital and thus reduce future demand for our products and services. Any of these trends may, in turn, adversely affect our financial condition, results of operations and cash flows.
Existing or future laws and regulations relating to greenhouse gas emissions and climate change may adversely affect our business.
Climate change continues to attract considerable public and scientific attention. As a result, numerous laws, regulations, and proposals have been made and are likely to continue to be made at the international, national, regional, and state levels of government to monitor and limit emissions of carbon dioxide, methane, and other “greenhouse gases” (“GHGs”). These efforts have included cap-and-trade programs, carbon taxes, GHG reporting and tracking programs and regulations that directly limit GHG emissions from certain sources. Such existing or future laws, regulations,, and proposals concerning the release of GHGs or that concern climate change (including laws, regulations,, and proposals that seek to mitigate the effects of climate change) may adversely impact demand for the equipment, systems and services we design, market and sell. For example, oil and natural gas exploration and production may decline as a result of such laws, regulations,, and proposals,, and as a consequence,, demand for our equipment, systems and services may also decline. In addition, such laws, regulations,, and proposals may also result in more onerous obligations with respect to our operations, including the facilities where we manufacture our equipment and systems. Such decline in demand for our equipment, systems and services and such onerous obligations in respect of our operations may adversely affect our financial condition, results of operations, or cash flows.
As an English public limited company, we must meet certain additional financial requirements before we may declare dividends or repurchase shares and certain capital structure decisions may require stockholder approval which may limit our flexibility to manage our capital structure. We may not be able to pay dividends or repurchase shares of our ordinary shares in accordance with our announced intent, or at all.
Under English law, we will only be able to declare dividends, make distributions, or repurchase shares (other than out of the proceeds of a new issuance of shares for that purpose) out of “distributable profits.” Distributable profits are a company’s accumulated, realized profits, to the extent that they have not been previously utilized by distribution or capitalization, less its accumulated, realized losses, to the extent that they have not been previously written off in a reduction or reorganization of capital duly made. In addition, as a public limited company incorporated in England and Wales, we may only make a distribution if the amount of our net assets is not less than the aggregate of our called-up share capital and non-distributable reserves, and to the extent that the distribution does not reduce the amount of those assets to less than that aggregate.
In addition, the Board of Directors’ determinations regarding dividends and share repurchases will depend on a variety of other factors, including our net income, cash flow generated from operations or other sources, liquidity position, and potential alternative uses of cash, such as acquisitions, as well as economic conditions and expected future financial results. Our ability to declare and pay future dividends and make future share repurchases will
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depend on our future financial performance, which in turn depends on the successful implementation of our strategy and on financial, competitive, regulatory, technical, general economic conditions, demand and selling prices for our products and services, and other factors specific to our industry or specific projects, many of which are beyond our control. Therefore, our ability to generate cash depends on the performance of our operations and could be limited by decreases in our profitability or increases in costs, regulatory changes, capital expenditures, or debt servicing requirements.
Any failure to pay dividends or repurchase shares of our ordinary shares could negatively impact our reputation, harm investor confidence in us, and cause the market price of our ordinary shares to decline.
Uninsured claims and litigation against us, including product liability and claims and intellectual property litigation, could adversely impact our financial condition, results of operations, or cash flows.
We could be impacted by the outcome of pending litigation, as well as unexpected litigation or proceedings. We have insurance coverage against operating hazards, including product liability claims and personal injury claims related to our products or operating environments in which our employees operate, to the extent deemed prudent by our management and to the extent insurance is available. However, our insurance policies are subject to exclusions, limitations, and other conditions and may not apply in all cases, for example, where willful wrongdoing on our part is alleged. Additionally, the nature and amount of that insurance may not be sufficient to fully indemnify us against liabilities arising out of pending and future claims and litigation. Additionally, in individual circumstances, certain proceedings or cases may also lead to our formal or informal exclusion from tenders or the revocation or loss of business licenses or permits. Our financial condition, results of operations, or cash flows could be adversely affected by unexpected claims not covered by insurance.
In addition, the tools, techniques, methodologies, programs, and components we use to provide our services may infringe upon the intellectual property rights of others. Infringement claims generally result in significant legal and other costs. The resolution of these claims could require us to pay damages, enter into license agreements or develop alternative technologies. The development of these technologies or the payment of royalties under licenses from third parties, if available, would increase our costs. If a license were not available, or we are not able to develop alternative technologies, we might not be able to continue providing a particular service or product, which could adversely affect our financial condition, results of operations, or cash flows.
We are subject to governmental regulation and other legal obligations related to privacy, data protection, and data security. Our actual or perceived failure to comply with such obligations could harm our business.
We are subject to international data protection laws, such as the General Data Protection Regulation 2016/679, or GDPR, in the European Economic Area, or EEA.EEA, and the UK equivalent (“UK GDPR”). The GDPR, imposesUK GDPR and implementing legislation in the EEA and UK impose several stringent requirements for controllers and processors of personal data which have increased our obligations, including, for example, by requiring more robust disclosures to individuals, notifications, in some cases, of data breaches to regulators and data subjects, and a record of processing and other policies and procedures to be maintained to adhere to the accountability principle.
In addition, we are subject to the GDPR and UK GDPR’s rules on transferring personal data outside of the EEA and UK (including to the
United States), and somerecent legal developments in Europe have created complexity and uncertainty regarding such transfers. Most recently, on July 16, 2020, the Court of these rulesJustice of the European Union (“CJEU”) invalidated the EU-US Privacy Shield Framework (“Privacy Shield”) under which personal data could be transferred from the European Union to US entities who had self-certified under the Privacy Shield scheme, and the decision cast uncertainly on when transfers could be made under the standard contractual clauses; compliance with such may require us to change processes by which we transfer data outside of the European Union and United Kingdom, including to the United States. As supervisory authorities issue further guidance on personal data export mechanisms, including circumstances where the standard contractual clauses cannot be used, and/or start taking enforcement action, we could suffer additional costs, complaints and/or regulatory investigations or fines, and/or if we are currently being challengedotherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we provide our services, the geographical location or segregation of our relevant systems and operations, and could adversely affect our financial results.
We are also subject to evolving EU and UK privacy laws on cookies and e-marketing. In the European Union and the United Kingdom, regulators are increasingly focusing on compliance with requirements in the courts. online behavioral advertising ecosystem, and current national laws that implement the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-
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compliance. If regulators start to enforce the strict approach in recent guidance, this could lead to substantial costs, and require significant systems changes.
Failure to comply with the requirements of GDPR, UK GDPR and the local laws implementing or supplementing the GDPR could result in fines of(for example, non-compliance with the GDPR or UK GDPR, specifically, may result in administrative fines or monetary penalties, by each regime, up to €20,000,000the greater of €20,000,000/ £17,000,000 or up to 4%4 percent of the total worldwide annual turnover of the preceding financial year, whichever is higher,year). In addition, we may also face regulatory investigations and enforcement action, reputational damage, and civil claims including representative actions and other class action type litigation, potentially amounting to significant compensation or damages liabilities, as well as other administrative penalties. associated costs, diversion of internal resources, and reputational harm.
We are likely to be required to expend significant capital and other resources to ensure ongoing compliance with the GDPR, UK GDPR and other applicable data protection legislation, and we may be required to put in place additional control mechanisms which could be onerous and adversely affect our business, financial condition, results of operations, or cash flows.
The IRS may not agree that we should be treated as a foreign corporation for U.S. federal tax purposes and may seek to impose an excise tax on gains recognized by certain individuals.
Although we are incorporated in the United Kingdom, the U.S. Internal Revenue Service (the “IRS”) may assert that we should be treated as a U.S. “domestic” corporation (and, therefore, a U.S. tax resident) for U.S. federal income tax purposes pursuant to Section 7874 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”). For U.S. federal income tax purposes, a corporation (i) is generally considered a “domestic” corporation (or U.S. tax resident) if it is organized in the United States or of any state or political subdivision therein, and (ii) is generally considered a “foreign” corporation (or non-U.S. tax resident) if it is not considered a domestic corporation. Because we are a U.K. incorporated entity, we would be considered a foreign corporation (and, therefore, a non-U.S. tax resident) under these rules. Section 7874 of the Code (“Section 7874”) provides an exception under which a foreign incorporated entity may, in certain circumstances, be treated as a domestic corporation for U.S. federal income tax purposes.
We do not believe this exception applies. However, the Section 7874 rules are complex and subject to detailed regulations, the application of which is uncertain in various respects. It is possible that the IRS will not agree with our position. Should the IRS successfully challenge our position, it is also possible that an excise tax under Section 4985 of the Code (the “Section 4985 Excise Tax”) may be assessed against certain “disqualified individuals” (including former officers and directors of FMC Technologies, Inc.) on certain stock-based compensation held thereby. We may, if we determine that it is appropriate, provide disqualified individuals with a payment with respect to the Section 4985 Excise Tax, so that, on a net after-tax basis, they would be in the same position as if no such Section 4985 Excise Tax had been applied.
In addition, there can be no assurance that there will not be a change in law or interpretation, including with retroactive effect, that might cause us to be treated as a domestic corporation for U.S. federal income tax purposes.
U.S. tax laws and/or guidance could affect our ability to engage in certain acquisition strategies and certain internal restructurings.
Even if we are treated as a foreign corporation for U.S. federal income tax purposes, Section 7874, U.S. Treasury regulations, and other guidance promulgated thereunder may adversely affect our ability to engage in certain future acquisitions of U.S. businesses or to restructure the non-U.S. members of our group. These limitations, if applicable, may affect the tax efficiencies that otherwise might be achieved in such potential future transactions or restructurings.
In addition, the IRS and the U.S. Treasury have issued final and temporary regulations providing that, even if we are treated as a foreign corporation for U.S. federal income tax purposes, certain intercompany debt instruments issued on or after April 4, 2016 will be treated as equity for U.S. federal income tax purposes, therefore limiting U.S. tax benefits and resulting in possible U.S. withholding taxes. Although recent guidance from the U.S. Treasury, through recent guidance, removes certain documentation requirements that would otherwise be imposed with respect to covered debt instruments, announces an intention to further modify and possibly withdraw certain classification rules relating to covered debt instruments, and further indicates that these rules generally are the subject of continuing study and may be further materially modified, the current regulations may adversely affect our future effective tax rate and could also impact our ability to engage in future restructurings if such transactions cause an existing intercompany debt instrument to be treated as reissued for U.S. federal income tax purposes.
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We are subject to the tax laws of numerous jurisdictions; challenges to the interpretation of, or future changes to, such laws could adversely affect us.
We and our subsidiaries are subject to tax laws and regulations in the United Kingdom, the United States, France, and numerous other jurisdictions in which we and our subsidiaries operate. These laws and regulations are inherently complex, and we are, and will continue to be, obligated to make judgments and interpretations about the application of these laws and regulations to our operations and businesses. The interpretation and application of
these laws and regulations could be challenged by the relevant governmental authorities, which could result in administrative or judicial procedures, actions, or sanctions, which could be material.
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law in the United States, which made extensive changes to the U.S. taxation of multinational companies, and is subject to futurecontinuing regulatory and possible legislative changes.changes, especially given the new Administration and Congress in the United States. In addition, the U.S. Congress, the U.K. Government, the European Union, the Organization for Economic Co-operation and Development (the “OECD”), and other government agencies in jurisdictions where we and our affiliates do business have had an extended focus on issues related to the taxation of multinational corporations. For instance, in October 2021, the OECD released additional proposals under Base Erosion and Profit Shifting that provide for a global minimum tax of 15%, and to date approximately 140 countries have tentatively signed a framework agreeing in principle to this initiative. The implementation of this global minimum tax, however, is contingent upon the independent actions of participating countries and is subject to further negotiation among OECD member states. New tax initiatives, directives, and rules, such as the U.S. Tax Cuts and Jobs Act, the OECD’s Base Erosion and Profit Shifting initiative, and the European Union’s Anti-Tax Avoidance Directives, may increase our tax burden and require additional compliance-related expenditures. As a result, our financial condition, results of operations, or cash flows may be adversely affected. Moreover, the U.S. government, and other jurisdictions in which we do business, may enact significant changes to the taxation of business entities including, among others, the imposition of minimum taxes or surtaxes on certain types of income. The likelihood of these changes being enacted or implemented is unclear. Further changes, including with retroactive effect, in the tax laws of the United States, the United Kingdom, the European Union, or other countries in which we and our affiliates do business could also adversely affect us.
We may not qualify for benefits under tax treaties entered into between the United Kingdom and other countries.
We operate in a manner such that we believe we are eligible for benefits under tax treaties between the United Kingdom and other countries. However, our ability to qualify for such benefits will depend on whether we are treated as a U.K. tax resident, the requirements contained in each treaty and applicable domestic laws, on the facts and circumstances surrounding our operations and management, and on the relevant interpretation of the tax authorities and courts. For example, because of Brexit, we may lose some or all of the benefits of tax treaties between the United States and the remaining members of the European Union, and face higher tax liabilities, which may be significant. Another example is the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (the “MLI”), which entered into force for participating jurisdictions on July 1, 2018. The MLI recommends that countries adopt a “limitation-on-benefit” (“LOB”) rule and/or a “principle purposes“principal purpose test” (“PPT”) rule with regards to their tax treaties. The scope and interpretation of these rules as adopted pursuant to the MLI are presently under development, but the application of eitherthe LOB rule mightor the PPT rule could deny us tax treaty benefits (such as a reduced rate of withholding tax) that were previously available and as such there remains uncertainty as to whether and, if so, to what extent such treaty benefits will continue to be available. The position is likely to remain uncertain for a number of years.
The failure by us or our subsidiaries to qualify for benefits under tax treaties entered into between the United Kingdom and other countries could result in adverse tax consequences to us (including an increased tax burden and increased filing obligations) and could result in certain tax consequences of owning and disposing of our shares.
We intend to be treated exclusively as a resident of the United Kingdom for tax purposes, but French or other tax authorities may seek to treat us as a tax resident of another jurisdiction.
We are incorporated in the United Kingdom. English law currently provides that we will be regarded as a U.K. resident for tax purposes from incorporation and shall remain so unless (i) we are concurrently a resident in another jurisdiction (applying the tax residence rules of that jurisdiction) that has a double tax treaty with the United Kingdom and (ii) there is a tiebreaker provision in that tax treaty which allocates exclusive residence to that other jurisdiction.
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In this regard, we have a permanent establishment in France to satisfy certain French tax requirements imposed by the French Tax Code with respect to the Merger. Although it is intended that we will be treated as having our exclusive place of tax residence in the United Kingdom, the French tax authorities may claim that we are a tax resident of France if we were to fail to maintain our “place of effective management” in the United Kingdom. Any such claim would be settled between the French and U.K. tax authorities pursuant to the mutual assistance procedure provided for by the tax treaty concluded between France and the United Kingdom. There is no assurance that these authorities would reach an agreement that we will remain exclusively a U.K. tax resident; an adverse determination could materially and adversely affect our business, financial condition, results of operations, or cash flows. A failure to maintain exclusive tax residency in the United Kingdom could result in adverse tax consequences to us and our subsidiaries and could result in certain adverse changes in the tax consequences of owning and disposing of our shares.
Our businesses are dependent on the continuing services of our maritime employeeskey managers and assets.employees.
We face material piracy risksdepend on key personnel. The loss of any key personnel could adversely impact our business if we are unable to implement key strategies or transactions in their absence. The loss of qualified employees or failure to retain and motivate additional highly skilled employees required for the operation and expansion of our business could hinder our operation and expansion, as well as our ability to successfully conduct research activities and develop marketable products and services.
Seasonal and weather conditions could adversely affect demand for our services and operations.
Our business may be materially affected by variation from normal weather patterns, such as cooler or warmer summers and winters. Adverse weather conditions, such as hurricanes in the Gulf of Guinea, the Somali Basin,Mexico or extreme winter conditions in Canada, and the GulfNorth Sea, may interrupt or curtail our operations, or our customers’ operations, cause supply disruptions or loss of Aden,productivity, and may result in a loss of revenue or damage to a lesser extent, in Southeast Asia, Malacca,our equipment and the Singapore Straits. Piracy represents a risk for both our projects and our vessels, which operate and transport through sensitive maritime areas. Such risks have the potential to significantly
Currency exchange rate fluctuations could adversely affect our financial condition, results of operations, or cash flows.
We conduct operations around the world in many different currencies. Because a significant portion of our revenue is denominated in currencies other than our reporting currency, the U.S. dollar, changes in exchange rates will produce fluctuations in our revenue, costs, and causeearnings, and may also affect the combined market value of us and Technip Energies after the separation to fall short of the marketbook value of our shares priorassets and liabilities and related equity. We hedge transaction impacts on margins and earnings where a transaction is not in the functional currency of the business unit, but we do not hedge translation impacts on earnings. Our efforts to minimize our currency exposure through such hedging transactions may not be successful depending on market and business conditions. Moreover, certain currencies in which we conduct operations, specifically currencies in countries such as Angola and Nigeria, do not actively trade in the separation. Substantial salesglobal foreign exchange markets and may subject us to increased foreign currency exposures. As a result, fluctuations in foreign currency exchange rates may adversely affect our financial condition, results of operations, or cash flows.
We are exposed to risks in connection with our sharesdefined benefit pension plan commitments.
We have funded and unfunded defined benefit pension plans, which provide defined benefits based on years of service and salary. We are required to recognize the funded status of defined benefit post-retirement plans as an asset or liability in the consolidated balance sheet and recognize changes in that funded status in comprehensive income in the year in which the changes occur. Further, we are required to measure each plan’s assets and its obligations that determine its funded status as of the date of the consolidated balance sheet. Each defined benefit pension plan’s assets are invested in different asset classes and their value may also occurfluctuate in accordance with market conditions. Any deterioration in the value of the defined benefit pension plan assets could therefore increase
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our obligations. Any such increases in our net pension obligations could adversely affect our financial condition due to increased additional outflow of funds to finance the pension obligations.
In addition, applicable law and/or the terms of the relevant defined benefit pension plan may require us to make cash contributions or provide financial support upon the occurrence of certain events. We cannot predict whether, or to what extent, changing market or economic conditions, regulatory changes or other factors will further increase our pension expense or funding obligations. For further information regarding our pension liabilities, see Note 22 for further information.
We may be unable to obtain sufficient bonding capacity for certain contracts, and the need for performance and surety bonds could reduce availability under our credit facility.
In line with industry practice, we are often required to post standby letters of credit to customers or enter into surety bond arrangements in favor of customers. Those letters of credit and surety bond arrangements generally protect customers against our failure to perform our obligations under the applicable contracts. If we are unable to renew or obtain a sufficient level of bonding capacity in the future, we may be precluded from bidding for certain contracts or contracting with certain customers. Additionally, even if we are able to successfully renew or obtain performance or payment bonds, we may be required to post letters of credit in connection with the separation, which could causebonds. The letters of credit would reduce availability under our share pricecredit facility. Furthermore, under standard terms in the surety market, sureties issue bonds on a project-by-project basis and can decline to decline.issue bonds at any time or require the posting of additional collateral as a condition to issuing or renewing any bonds. If we were to experience an interruption or reduction in the availability of bonding capacity as a result of these or any other reasons, we may be unable to compete for or work on projects that require bonding.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Our corporate headquarters is in London,Newcastle, England. We also maintain corporate offices in Houston, Texas, and Paris, France, where significant worldwide global support activity occurs. In addition, we own or lease numerous properties throughout the world.
We believe our properties and facilities are suitable for their present and intended purposes and are operating at a level consistent with the requirements of the industry in which we operate. We also believe that our leases are at competitive or market rates and do not anticipate any difficulty in leasing suitable additional space upon expiration of our current lease terms.
The following table shows our principal properties by reporting segment at December 31, 2019:
2021:
| Location | Segment | |||||||
| Africa | ||||||||
| Hassi Messaoud, Algeria | Surface | |||||||
| Lagos, Nigeria | Subsea | |||||||
| Lobito, Angola | Subsea | |||||||
| Luanda, Angola | Subsea | |||||||
| Malabo, Equatorial Guinea | Subsea | |||||||
| Port Harcourt, Nigeria | Subsea | |||||||
| Takoradi, Ghana | Subsea | |||||||
| Asia | ||||||||
| Chennai, India | Subsea | |||||||
| Hyderabad, India | Surface | |||||||
| Jakarta, Indonesia | Surface | |||||||
| Johor, Malaysia | Subsea | |||||||
| Kuala Lumpur, Malaysia | Subsea | |||||||
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| Segment | ||||||||
| Subsea, Surface | ||||||||
| Subsea, Surface | ||||||||
| Subsea | ||||||||
| Subsea | ||||||||
| Aberdeen, United Kingdom | ||||||||
| Aktau, Kazakhstan | Subsea, Surface | |||||||
| Arnhem, The Netherlands | Surface | |||||||
| Bergen, Norway | Subsea | |||||||
| Courbevoie (Paris - La Défense), France | Subsea | |||||||
| Dunfermline, United Kingdom | Subsea, Surface | |||||||
| Ellerbek, Germany | Surface | |||||||
| Evanton, United Kingdom | Subsea | |||||||
| Horten, Norway | Subsea | |||||||
| Kongsberg, Norway | Subsea, Surface | |||||||
| Krakow, Poland | Subsea | |||||||
| Le Trait, France | Subsea | |||||||
| Lisbon, Portugal | Subsea | |||||||
| Lysaker, Norway | Subsea | |||||||
| Moscow, Russia | Subsea, Surface | |||||||
| Newcastle, United Kingdom | Subsea | |||||||
| Orkanger, Norway | Subsea | |||||||
| Sens, France | Surface | |||||||
| Stavanger, Norway | Subsea, Surface | |||||||
| Veenord, Netherlands | Surface | |||||||
| Westhill, United Kingdom | Subsea | |||||||
| Middle East | ||||||||
| Abu Dhabi, United Arab Emirates | ||||||||
| Dammam, Saudi Arabia | Surface | |||||||
| Surface | ||||||||
| North America | ||||||||
| Brighton (Colorado), United States | Surface | |||||||
| Surface | ||||||||
| Davis (California), United States | Subsea | |||||||
| Erie (Pennsylvania), United States | Surface | |||||||
| Houston (Texas), United States | Subsea, | |||||||
| Odessa (Texas), United States | Surface | |||||||
| Oklahoma City (Oklahoma), United States | Surface | |||||||
| San Antonio (Texas), United States | Surface | |||||||
| Stephenville (Texas), United States | Surface | |||||||
| St. John’s (Newfoundland), Canada | Subsea | |||||||
| Theodore (Alabama), United States | Subsea | |||||||
| South America | ||||||||
| Macaé, Brazil | Subsea | |||||||
| Neuquén, Argentina | Surface | |||||||
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| Location | Segment | |||||||
| Rio de Janeiro, Brazil | Subsea, Surface | |||||||
| São João da Barra, Brazil | Subsea | |||||||
| Yopal, Columbia | Surface | |||||||
The following table shows marine vessels in which we held an interest or operated as of December 31, 2019:2021:
| Vessel Name | Vessel Type | Special Equipment | ||||||||||||
| Deep Blue | PLSV | Reeled pipelay/flexible pipelay/umbilical systems | ||||||||||||
| Deep Energy | PLSV | Reeled pipelay/flexible pipelay/umbilical systems | ||||||||||||
| Apache II | PLSV | Reeled pipelay/umbilical systems | ||||||||||||
North Sea Atlantic | HCV | Construction/installation systems | ||||||||||||
Skandi Africa | HCV | Construction/installation systems | ||||||||||||
| Deep Arctic | DSV/HCV | Diver support systems | ||||||||||||
| Deep Discoverer | DSV/HCV | Diver support systems | ||||||||||||
| Deep Explorer | DSV/HCV | Diver support systems | ||||||||||||
| Skandi Vitória | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Niterói | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Coral do Atlantico | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Deep Star | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Açu | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Búzios | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Olinda | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
| Skandi Recife | PLSV | Flexible pipelay/umbilical systems | ||||||||||||
PLSV: Pipelay Support Vessel
HCV: Heavy Duty Construction Vessel
DSV: Diving Support Vessel
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our ordinary shares are listed on the NYSE and the regulated market of Euronext Paris, in each case tradingtrade under the “FTI” symbol.symbol “FTI.”
For information about dividends, see Item 6 “Selected Financial Data” and Note 18 “Stockholders’ Equity” to the Consolidated Financial Statements in Item 8.
39
As of February 25, 2020,18, 2022, according to data provided by our transfer agent, there were 83105 shareholders of record. However, many of our shareholders hold their shares in "street name" by a nominee of Depository Trust Company, which is a single shareholder of record. We estimate that there were approximately 22,40020,900 shareholders whose shares were held in “street name” by banks, brokers, or other financial institutions at February 25, 2020.as of December 31, 2021.
We had no unregistered sales of equity securities during the year ended December 31, 2019.2021.
Issuer Purchases of Equity Securities
Performance Graph
The graph below compares the cumulative total shareholder return on our ordinary shares for the period from January 17, 2017 to December 31, 20192021 with the Standard & Poor’s 500 Index (“S&P 500 Index”) and PHLX Oil Services Index. The comparison assumes $100 was invested, including reinvestment of dividends, if any, in our ordinary shares on January 17, 2017 and in both of the indexes on the same date. The results shown in the graph below are not necessarily indicative of future performance.
| As of December 31, | |||||||||||||||||||||||||||||
| 2017 | 2018 | 2019 | 2020 | 2021 | |||||||||||||||||||||||||
| TechnipFMC plc | $ | 87.76 | $ | 55.89 | $ | 62.63 | $ | 28.03 | $ | 23.73 | |||||||||||||||||||
| S&P 500 Index | 119.82 | 114.56 | 150.62 | 178.32 | 229.46 | ||||||||||||||||||||||||
| PHLX Oil Services Index | 82.00 | 44.93 | 44.68 | 25.88 | 31.25 | ||||||||||||||||||||||||
| December 31 | |||||||||||
| 2017 | 2018 | 2019 | |||||||||
| TechnipFMC plc | $ | 87.76 | $ | 55.89 | $ | 62.63 | |||||
| S&P 500 Index | 119.82 | 114.56 | 150.62 | ||||||||
| PHLX Oil Services Index | 82.00 | 44.93 | 44.68 | ||||||||
ITEM 6. SELECTED FINANCIAL DATA[RESERVED]
| Year Ended December 31, | |||||||||||||||||||
| (In millions, except per share data) | 2019(a) | 2018 (a) | 2017(b) | 2016 | 2015 | ||||||||||||||
| Statement of income data | |||||||||||||||||||
| Total revenue | $ | 13,409.1 | $ | 12,552.9 | $ | 15,056.9 | $ | 9,199.6 | $ | 11,471.9 | |||||||||
| Total costs and expenses | $ | 14,935.8 | $ | 13,470.5 | $ | 14,091.7 | $ | 8,743.6 | $ | 11,198.3 | |||||||||
| Net income (loss) | $ | (2,412.1 | ) | $ | (1,910.8 | ) | $ | 134.2 | $ | 371.1 | $ | 14.0 | |||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (2,415.2 | ) | $ | (1,921.6 | ) | $ | 113.3 | $ | 393.3 | $ | 14.4 | |||||||
| Earnings (loss) per share from continuing operations attributable to TechnipFMC plc | |||||||||||||||||||
| Basic earnings (loss) per share | $ | (5.39 | ) | $ | (4.20 | ) | $ | 0.24 | $ | 3.29 | $ | 0.13 | |||||||
| Diluted earnings (loss) per share | $ | (5.39 | ) | $ | (4.20 | ) | $ | 0.24 | $ | 3.16 | $ | 0.13 | |||||||
| December 31, | |||||||||||||||||||
| (In millions) | 2019(a) | 2018(a) | 2017(b) | 2016 | 2015 | ||||||||||||||
| Balance sheet data | |||||||||||||||||||
| Total assets | $ | 23,518.8 | $ | 24,784.5 | $ | 28,263.7 | $ | 18,679.3 | $ | 14,953.6 | |||||||||
| Long-term debt, less current portion | $ | 3,980.0 | $ | 4,124.3 | $ | 3,777.9 | $ | 1,869.3 | $ | 2,005.0 | |||||||||
| Total TechnipFMC plc stockholders’ equity | $ | 7,659.3 | $ | 10,357.6 | $ | 13,345.9 | $ | 5,013.8 | $ | 4,947.2 | |||||||||
| Year Ended December 31, | |||||||||||||||||||
| (In millions) | 2019 | 2018 | 2017 (b) | 2016 | 2015 | ||||||||||||||
| Other financial information | |||||||||||||||||||
| Capital expenditures | $ | 454.4 | $ | 368.1 | $ | 255.7 | $ | 312.9 | $ | 325.5 | |||||||||
| Cash flows provided (required) by operating activities | $ | 848.5 | $ | (185.4 | ) | $ | 210.7 | $ | 493.8 | $ | 700.3 | ||||||||
Net cash (c) | $ | 714.8 | $ | 1,348.3 | $ | 2,882.4 | $ | 3,716.4 | $ | 370.4 | |||||||||
Order backlog (d) | $ | 24,251.1 | $ | 14,560.0 | $ | 12,982.8 | $ | 15,002.0 | $ | 18,475.5 | |||||||||
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EXECUTIVE OVERVIEW
We are a global leader in energy projects, technologies, systems and services. We have manufacturing operations worldwide, strategically located to facilitate efficient delivery of these products, technologies, systems and services to our customers. We report our results of operations in the followingtwo segments: Subsea Onshore/Offshore and Surface Technologies. Management’s determination of the Company’sour reporting segments was made on the basis of our strategic priorities and corresponds to the manner in which our Chief Executive Officer reviews and evaluates operating performance to make decisions about resource allocations to each segment.
A summarized description of our products and services and annual financial data for each segment can be found in Part I, Item 1, “Business” and Note 7 to our consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.statements.
We focus on economic-economic and industry-specific drivers and key risk factors affecting our business segments as we formulate our strategic plans and make decisions related to allocating capital and human resources. The results of our segments are primarily driven by changes in capital spending by oil and gas companies, which largely depend upon current and anticipated future crude oil and natural gas demand, production volumes, and consequently, commodity prices. We use crude oil and natural gas prices as an indicator of demand. Additionally, we use both onshore and offshore rig count as an indicator of demand, which consequently influences the level of worldwide production activity and spending decisions. We also focus on key risk factors when determining our overall strategy and making decisions for capital allocation. These factors include risks associated with the global economic outlook, product obsolescence and the competitive environment. We address these risks in our business strategies, which incorporate continuing development of leading edge technologies and cultivating strong customer relationships.
Our Subsea segment is affected by changes in commodity prices and trends in deepwater oil and natural gas production. Our Onshore/Offshore segment is impacted by change in commodity prices, population growthproduction and demand for natural gas, although the onshore market is typically more resilient to these changes impacting the segment. Our Subsea and Onshore/Offshore segments both benefitbenefits from the current market fundamentals supporting the demand for new liquefied natural gas facilities. Onshore/Offshore also benefits from the construction of petrochemical and fertilizer plants.
Our Surface Technologies segment is primarily affected by changes in commodity prices and trends in land-based and shallow water oil and natural gas production. We have developed close working relationships with our customers. Our results reflect our ability to build long-term alliances with oil and natural gas companies and to provide solutions for their needs in a timely and cost-effective manner. We believe that by closely working with our customers, we enhance our competitive advantage, improve our operating results and strengthen our market positions.
As we evaluate our operating results, we consider business segment performance indicators like segment revenue, operating profit and capital employed, in addition to the level of inbound orders and order backlog. A significant proportion of our revenue is recognized under the percentage of completion method of accounting. Cash receipts from such arrangements typically occur at milestones achieved under stated contract terms. Consequently, the timing of revenue recognition is not always correlated with the timing of customer payments. We aim to structure our contracts to receive advance payments that we typically use to fund engineering efforts and inventory purchases. Working capital (excluding cash) and net (debt) cashdebt are therefore key performance indicators of cash flows.
In eachboth of our segments, we serve customers from around the world. During 2019,2021, approximately 7880 percent of our total sales were recognized outside of the United States. We evaluate international markets and pursue opportunities that fit our technological capabilities and strategies.
The Spin-off
On February 16, 2021, we completed the separation of the Technip Energies business segment. The transaction was structured as a Spin-off, which occurred by way of a Distribution to our shareholders of 50.1 percent of the outstanding shares in Technip Energies N.V. Each of our shareholders received one ordinary share of Technip Energies N.V. for every five ordinary shares of TechnipFMC held at 5:00 p.m., New York City time on the record date, February 17, 2021. Technip Energies N.V. is now an independent public company and its shares trade under the ticker symbol “TE” on the Euronext Paris stock exchange. During 2021, we have sold approximately 75 percent of the original ownership stake in Technip Energies N.V. as a public company for proceeds of $900.9 million. As of December 31, 2021, we retained 12.2 percent ownership of Technip Energies’ issued and outstanding share capital. In January 2022, we sold an additional 9.0 million Technip Energies shares for total net proceeds of €118.4 million,
41
or $135.1 million. As of February 25, 2022, we retain a direct stake of 12.9 million shares, representing 7.1% percent of Technip Energies’ issued and outstanding share capital and valued at $155.3 million.
Beginning in the first quarter of 2021, Technip Energies’ historical financial results for periods prior to the Distribution are reflected in our consolidated financial statements as discontinued operations.
BUSINESS OUTLOOK
Overall Outlook - The price of crude oil remains volatile but continued to trade throughout 2019 well above the cyclical trough experienced in early 2016. The continued sustainability of the price recovery and business – Economic activity levels is dependent on several variables, including geopolitical stability, OPEC’s actions to regulate its production capacity, changes in demand patterns, and international sanctions and tariffs. However, as long-term demand is
Long-term demand for energy is forecasted to increase. Our conversations with clients remain constructive, and we believesee continued improvement in the macroeconomic backdrop will provide our customers with greater confidence to increase theirbroader market outlook as investments in new sources of oil and natural gas production.production increase over the intermediate-term. We continueare confident that we have entered a multi-year upcycle for energy demand, with continued strength in inbound orders expected for our Company through at least 2025.
We believe that oil and gas will remain an important part of the energy mix for an extended period of time. We are also committed to the energy transition, where we believe that offshore will play a meaningful role in the transition to renewable energy resources and reduction of carbon emissions.
We are making real progress through our three main pillars of greenhouse gas removal, offshore floating renewables and hydrogen. We have made announcements regarding several strategic agreements and partnerships, some of which have already resulted in real project opportunities. In 2021, we formed a strategic alliance with Talos Energy to develop and deliver technical and commercial solutions for Carbon Capture and Storage projects along the U.S. Gulf Coast. More recently, one of our partnerships in offshore renewables, Magnora Offshore Wind, was successful in the ScotWind Leasing Round Application, where the proposed development project will have a total capacity of approximately 500 megawatts which could power more than 600,000 homes in the United Kingdom. We also acquired the remaining shares of Magma Global, a leader in advanced composite technologies with applications for the transportation of green hydrogen and CO2. These strategic actions will expand our capabilities and provide us with new opportunities to address carbon emissions.
Subsea – Our Subsea inbound orders in 2021 increased more than 20 percent versus the prior year, reflecting the continued offshore market recovery and expansion. Innovative approaches to subsea projects, like our iEPCI solution, have improved project economics, and many offshore discoveries can be developed economically well below today’s crude oil prices. We believe deepwater developments willdevelopment is likely to remain a significant part of our customers’ portfolios in the long-term.
As the subsea industry continues to reduce their capital spending plans and defer new offshore projects. In response to these actions,evolve, we have loweredtaken actions to further streamline our cost base through reductions in workforce as well as in manufacturing. This has helpedorganization, achieve standardization and reduce cycle times. The rationalization of our global footprint will also further leverage the benefits of our integrated offering. We aim to continuously align our operations with the lower activity levels, in order to mitigate some of the negative impact towhile preserving our operating profit. We have taken additional actions in 2019, but we have balanced further reductions with the need to preserve ourcore capacity in order to deliver current projects in backlog and ensurefulfill future orders.
We have experienced renewed operator confidence in advancing subsea activity as a result of the improved economic outlook, higher oil price and more robust project economics. The continued growth in part reflects the strong front-end activity experienced throughout 2021. With crude above $90 per barrel, the opportunity set of large subsea projects to be sanctioned over the next 24 months has expanded.
For the year ahead, our early engagement and client partnerships support our view that subsea tree awards for the total industry are likely to exceed 350 – a level not seen since 2013. For TechnipFMC, we anticipate subsea inbound order growth of up to 30 percent in 2022, with iEPCI projects, direct project awards – many of which may come from our alliance partners – and Subsea services to approach 75 percent of inbound orders.
Our growth expectations highlight the continued expansion in greenfield opportunities. We also expect increased tie-back activity, with growth from these smaller projects to come primarily from the North Sea, Gulf of Mexico and West Africa – all regions in which we have a strong presence and are prepared for increasedwell-positioned due to our extensive installed base.
42
Since 2015, offshore economics have materially improved, and subsea cycle-times have become significantly shorter. This has resulted in new subsea investments coming much earlier in the cycle and more in parallel with U.S. land markets. We believe these changes are fundamental and sustainable as a result of new business models and technology pioneered by our company.
Surface Technologies – Our performance is typically driven by variations in global drilling activity, creating a dynamic environment. Operating results can be further impacted by stimulation activity and the completions intensity of shale applications in North America.
In 2021, our completions-related revenue recovered, driven by the North America market activity increase and higher order inbound as industry activity moves higher.the successful adoption of iComplete – our fully integrated, digitally enabled pressure control system. iComplete has already achieved significant market penetration since its introduction in 2020, with more than 10 different customers utilizing the new integrated system. We also successfully introduced our E-Mission solution for onshore production facilities. The digital offering uses proprietary process automation to provide the industry’s only real-time monitoring and control system that both reduces methane flaring by up to 50 percent and maximizes oil production.
Well count steadily recovered during 2021, which led to increased order activity despite reductionsspending by national oil companies, particularly in both personnelthe Middle East. Our inbound orders outside North America more than doubled when compared to 2020 and manufacturing capacity. These actions are particularly important asincluded the subsea industry continues to have both underutilized manufacturing and vessel capacity, which may lead to continued pricing pressure throughout 2020. We also recognize the need to further develop and invest in our people to ensure we have the core competencies and capabilities necessary for continued success.
International markets represented 65 percent of opportunities, particularly for natural gas monetization projects, as natural gastotal segment revenue in 2021. Our unique capabilities in these markets, which demand higher specification equipment, global services and renewables continue to take a larger share of global energy demand. Despite more recent softness in the spot price for LNG, the long-term outlook continues to remain strong, given the role of natural gas as a critical energy transition fuel. The market experienced a record level of new capacity final investment decisions in 2019, significantly benefitting our Company. We are confident that new LNG investments will continue in the near and intermediate term.
43
CONSOLIDATED RESULTS OF OPERATIONS
This section of this Form 10-K generally discusses 20192021 and 20182020 items and year-to-year comparisons between 20192021 and 2018.2020. Discussions of 20172019 items and year-to-year comparisons between 20182020 and 20172019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’sour Annual Report on Form 10-K for the year ended December 31, 2018.2020.
| Year Ended December 31, | Change | Year Ended December 31, | Change | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | (In millions, except percentages) | 2021 | 2020 | 2019 | 2021 vs. 2020 | 2020 vs. 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Revenue | $ | 13,409.1 | $ | 12,552.9 | $ | 15,056.9 | $ | 856.2 | 6.8 | % | $ | (2,504.0 | ) | (16.6 | )% | Revenue | $ | 6,403.5 | $ | 6,530.6 | $ | 6,950.2 | $ | (127.1) | (1.9) | % | $ | (419.6) | (6.0) | % | ||||||||||||||||||||||||||||||||||||
| Costs and expenses | Costs and expenses | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Cost of sales | 10,950.7 | 10,273.0 | 12,524.6 | 677.7 | 6.6 | % | (2,251.6 | ) | (18.0 | )% | Cost of sales | 5,579.6 | 5,835.8 | 5,892.1 | (256.2) | (4.4) | % | (56.3) | (1.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative expense | 1,228.1 | 1,140.6 | 1,060.9 | 87.5 | 7.7 | % | 79.7 | 7.5 | % | Selling, general and administrative expense | 644.9 | 724.1 | 795.7 | (79.2) | (10.9) | % | (71.6) | (9.0) | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Research and development expense | 162.9 | 189.2 | 212.9 | (26.3 | ) | (13.9 | )% | (23.7 | ) | (11.1 | )% | Research and development expense | 78.4 | 75.3 | 149.5 | 3.1 | 4.1 | % | (74.2) | (49.6) | % | |||||||||||||||||||||||||||||||||||||||||||||
| Impairment, restructuring and other expense | 2,490.8 | 1,831.2 | 191.5 | 659.6 | 36.0 | % | 1,639.7 | 856.2 | % | Impairment, restructuring and other expense | 66.7 | 3,402.0 | 2,456.7 | (3,335.3) | (98.0) | % | 945.3 | 38.5 | % | |||||||||||||||||||||||||||||||||||||||||||||||
| Separation costs | 72.1 | — | — | 72.1 | n/a | — | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Merger transaction and integration costs (a) | 31.2 | 36.5 | 101.8 | (5.3 | ) | (14.5 | )% | (65.3 | ) | (64.1 | )% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Merger transaction and integration costs | Merger transaction and integration costs | — | — | 14.2 | — | — | % | (14.2) | (100.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total costs and expenses | 14,935.8 | 13,470.5 | 14,091.7 | 1,465.3 | 10.9 | % | (621.2 | ) | (4.4 | )% | Total costs and expenses | 6,369.6 | 10,037.2 | 9,308.2 | (3,667.6) | (36.5) | % | 729.0 | 7.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Other income (expense), net | (220.7 | ) | (323.9 | ) | (25.9 | ) | 103.2 | 31.9 | % | (298.0 | ) | (1,150.6 | )% | Other income (expense), net | 46.6 | 25.1 | (181.6) | 21.5 | 85.7 | % | 206.7 | 113.8 | % | |||||||||||||||||||||||||||||||||||||||||||
| Income from equity affiliates | 62.9 | 114.3 | 55.6 | (51.4 | ) | (45.0 | )% | 58.7 | 105.6 | % | Income from equity affiliates | 0.6 | 64.6 | 59.8 | (64.0) | (99.1) | % | 4.8 | 8.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||
| Income from investment in Technip Energies | Income from investment in Technip Energies | 322.2 | — | — | 322.2 | — | % | — | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Loss on early extinguishment of debt | Loss on early extinguishment of debt | (61.9) | — | — | (61.9) | — | % | — | — | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net interest expense | (451.3 | ) | (360.9 | ) | (315.2 | ) | (90.4 | ) | (25.0 | )% | (45.7 | ) | (14.5 | )% | Net interest expense | (143.3) | (81.8) | (91.3) | (61.5) | (75.2) | % | 9.5 | 10.4 | % | ||||||||||||||||||||||||||||||||||||||||||
| Income (loss) before income taxes | (2,135.8 | ) | (1,488.1 | ) | 679.7 | (647.7 | ) | (43.5 | )% | (2,167.8 | ) | (318.9 | )% | Income (loss) before income taxes | 198.1 | (3,498.7) | (2,571.1) | 3,696.8 | 105.7 | % | (927.6) | (36.1) | % | |||||||||||||||||||||||||||||||||||||||||||
| Provision for income taxes | 276.3 | 422.7 | 545.5 | (146.4 | ) | (34.6 | )% | (122.8 | ) | (22.5 | )% | Provision for income taxes | 111.1 | 19.4 | 79.0 | 91.7 | 472.7 | % | (59.6) | (75.4) | % | |||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | (2,412.1 | ) | (1,910.8 | ) | 134.2 | (501.3 | ) | (26.2 | )% | (2,045.0 | ) | (1,523.8 | )% | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income attributable to noncontrolling interests | (3.1 | ) | (10.8 | ) | (20.9 | ) | 7.7 | 71.3 | % | 10.1 | 48.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations | Income (loss) from continuing operations | 87.0 | (3,518.1) | (2,650.1) | 3,605.1 | 102.5 | % | (868.0) | (32.8) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (Income) loss from continuing operations attributable to non-controlling interests | (Income) loss from continuing operations attributable to non-controlling interests | 0.8 | (34.5) | 4.6 | 35.3 | 102.3 | % | (39.1) | (850.0) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from continuing operations attributable to TechnipFMC plc | Income (loss) from continuing operations attributable to TechnipFMC plc | 87.8 | (3,552.6) | (2,645.5) | 3,640.4 | 102.5 | % | (907.1) | (34.3) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income (loss) from discontinued operations | Income (loss) from discontinued operations | (72.6) | 280.2 | 238.0 | (352.8) | (125.9) | % | 42.2 | 17.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income from discontinued operations attributable to non-controlling interests | Income from discontinued operations attributable to non-controlling interests | (1.9) | (15.2) | (7.7) | 13.3 | 87.5 | % | (7.5) | (97.4) | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) attributable to TechnipFMC plc | $ | (2,415.2 | ) | $ | (1,921.6 | ) | $ | 113.3 | $ | (493.6 | ) | (25.7 | )% | $ | (2,034.9 | ) | (1,796.0 | )% | Net income (loss) attributable to TechnipFMC plc | $ | 13.3 | $ | (3,287.6) | $ | (2,415.2) | $ | 3,300.9 | 100.4 | % | $ | (872.4) | (36.1) | % | |||||||||||||||||||||||||||||||||
Results of Operations in the first half of 2019.
Revenue
Revenue increased $856.2decreased by $127.1 million in 20192021 compared to the prior-year period, primarily as a result of improved project activity.2020. Subsea revenue increaseddecreased year-over-year, with higher project-related activity, including increased revenue from integrated project execution (iEPCI) and increased demandprimarily driven by a lower starting backlog due to deteriorated market conditions in subsea services. Onshore/Offshore revenue was stable as a decrease in revenues from projects progressing towards completion, primarily Yamal LNG, was largely offset by increased project activity in the Middle East and Asia Pacific regions.2020 which negatively impacted order intake for future delivery. Surface Technologies revenue increased, primarily as a result of improving order backlog from international markets, primarilythe increase in theoperator activity in Middle East, Latin America and Asia Pacific regions.North America.
Gross profitProfit
Gross profit (revenue less cost of sales) as a percentage of sales increased marginally to 18.3%12.9% in 2019 and 18.2%2021 compared to 10.6% in the prior-year period. Strong project execution and completion of Yamal LNG milestones improved gross profits in Onshore/Offshore offset by lower2020. Subsea gross profit increased due to a more competitively priced Subsea backlogsignificant prior year cost reduction activities and weaker demandincreased services activities. Surface Technologies gross profit improved year-over-year, primarily due to higher operator activity in Middle East, Latin America and North America, for Surface Technologies productsfavorable product mix and services due to a challenged shale market.lower operating costs.
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Selling, generalGeneral and administrative expenseAdministrative Expense
Selling, general and administrative expense increased $87.5decreased by $79.2 million year-over-year, primarily as a result of increaseddecreased corporate expenseexpenses. During the first half of 2020, in response to a deteriorated market environment driven largelyin part by accelerated IT spending as well as additional performance incentive compensation awards.the COVID-19 pandemic, we implemented a series of cost reduction initiatives that resulted in significant reduction in year-over-year selling, general and administrative expense.
Impairment, restructuringRestructuring and other expenseOther Expenses
We incurred $2.5 billion$66.7 million of restructuring, impairment and other expenses in 2019,2021, compared to $3,402.0 million in 2020. Impairment, restructuring and other charges incurred during 2021, included $24.2 million of impairment charges of our operating lease right-of-use assets and $24.9 million impairment of property, plant and equipment. Impairment, restructuring and other charges incurred during 2020, primarily driven by $2.0 billionincluded $3,083.4 million of goodwill impairment, and $495.4$190.4 million of long-lived asset impairment.assets impairment, $57.8 million of COVID-19 related expenses, and $70.4 million for restructuring and severance expenses. See Note 20 for further details.
Other income (expense)Income (Expense), netNet
Other income (expense), net, primarily reflects foreign currency gains and losses, non-recurring expensesincluding gains and resultslosses associated with the remeasurement of disposalsnet cash positions, gains and losses on sales of assets. In 2019,property, plant and equipment and other non-operating gains and losses. The foreign currency impact was a net gain in 2021 and a net loss in 2020, which was offset by gains on sales of property, plant and equipment and other one-off, non-operating type transactions.
Income from Equity Affiliates
For the years ended December 31, 2021 and 2020, we recorded an income of $0.6 million and $64.6 million, respectively, from equity method affiliates. Income generated by our equity method investments during 2021 was offset by a $36.7 million impairment of our Magma Global equity method investment recorded in the third quarter of 2021. See Note 13 to our consolidated financial statements for further details.
Income from Investment in Technip Energies
For the year ended December 31, 2021, we recorded $322.2 million as income as a result of our investment in Technip Energies. The amount recognized $146.9represents a fair value revaluation gain of our investment, partially offset by purchase price discounts on the sales of shares. See Note 13 to our consolidated financial statements for further details.
Loss on Early Extinguishment of Debt
We recognized $(61.9) million of net foreign exchange losses, comparedloss on early extinguishment of debt during the year ended December 31, 2021. The loss on early extinguishment of debt related to premium paid and write-off of bond issuance costs in connection with $116.5 million of net foreign exchange loss in the prior year period, mainly due to the devaluationrepurchase of the Angolan kwanza,2021 Notes and premium paid in connection with the repayment of our 3.45% Senior Notes due 2022. See Note 17 to our consolidated financial statements for which there is no active forwards market, while in 2018 a $280 million legal provision was made.further details.
Net interest expenseInterest Expense
Net interest expense increased $90.4by $61.5 million in 20192021 compared to 2018,2020, primarily due to the change in the fair value of the redeemable financial liability. We revalued the mandatorily redeemable financial liability to reflect current expectations about the obligation and recognized a charge of $423.1 million. See Note 25 for further information regarding the fair value measurement assumptions of the mandatorily redeemable financial liability and related changes in its fair value. Nethigher interest expense in 2019, excludingassociated with the fair value measurement of$1.0 billion senior notes issued during the mandatorily redeemable financial liability, decreased by $10.4 million on a net basis compared to 2018.three months ended March 31, 2021.
Provision for income taxesIncome Taxes
Our provision for income tax provisionstaxes for 20192021 and 20182020 reflected effective tax rates of (12.9)%56.1% and (28.4)(0.6)%, respectively. The year-over-year changeincrease in the effective tax rate was primarily due to the increased impact of losses in jurisdictions with a decrease in the amount of tax expense associated with movements infull valuation allowances, the release of contingent tax accruals due to the favorable resolution of income tax audits, andallowance, a favorable change in actual countryuncertain tax positions, a change in geographical profit mix of earnings,year over year offset in part bywith the impact of nondeductible goodwill impairments.
Our effective tax rate can fluctuate depending on our country mix of earnings, which may change based on changes insince our foreign earnings are generally subject to higher tax rates than those of the jurisdictions in which we operate
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Income (loss) from discontinued operations, net of this Form 10-K generally discusses 2019income taxes, was $(72.6) million and 2018 items and year-to-year comparisons between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K$280.2 million income for the year ended December 31, 2018.2021 and 2020, respectively. Income (loss) from discontinued operations included results for Technip Energies, which was spun-off on February 16, 2021. See Note 2 to our consolidated financial statements for further details.
OPERATING RESULTS OF BUSINESS SEGMENTS
Segment operating profit is defined as total segment revenue less segment operating expenses. Certain items have been excluded in computing segment operating profit and are included in corporate items. Refer toSee Note 7 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for further information.details.
We report our results of operations in U.S. dollars; however, our earnings are generated in various currencies worldwide. In order to provide worldwide consolidated results, the earnings of subsidiaries functioning in their local currencies are translated into U.S. dollars based upon the average exchange rate during the period. While the U.S. dollar results reported reflect the actual economics of the period reported upon, the variances from prior periods include the impact of translating earnings at different rates.
Subsea
| Year Ended December 31, | Favorable/(Unfavorable) | |||||||||||||||||||||
| (In millions, except %) | 2019 | 2018 | 2017(a) | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||||
| Revenue | $ | 5,523.0 | $ | 4,840.0 | $ | 5,877.4 | $ | 683.0 | 14% | $(1,037.4) | (18)% | |||||||||||
| Operating profit (loss) | $ | (1,447.7 | ) | $(1,529.5) | $ | 460.5 | $ | 81.8 | 5% | $(1,990.0) | (432)% | |||||||||||
| Operating profit (loss) as a percent of revenue | (26.2 | )% | (31.6 | )% | 7.8 | % | 5.4 | pts. | n/a | |||||||||||||
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2021 | 2020 | 2019 | 2021 vs. 2020 | 2020 vs. 2019 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 5,329.1 | $ | 5,471.4 | $ | 5,419.5 | $ | (142.3) | (2.6) | % | $ | 51.9 | 1.0 | % | |||||||||||||||||||||||||||
| Operating profit (loss) | $ | 141.4 | $ | (2,815.5) | $ | (1,442.7) | $ | 2,956.9 | 105.0 | % | $ | (1,372.8) | (95.2) | % | |||||||||||||||||||||||||||
| Operating profit (loss) as a percentage of revenue | 2.7 | % | (51.5) | % | (26.6) | % | 54.2 | pts. | (24.9) | pts. | |||||||||||||||||||||||||||||||
Subsea revenue increased $683.0decreased by $142.3 million, year-over-year, primarily due to increased project revenue from iEPCI, particularly projects in Asia, the North Sea and the Mediterranean that progressed towards completion, partially offset by decreased activity in Australia. The increase of Subsea Services activity across the globe further added to the year-over-year growth in revenue.
Subsea operating loss included $1,798.6 million of assetprofit for the year ended December 31, 2021, improved versus the prior year, primarily due to the significant reduction in non-cash impairment charges primarily related to the impairment of goodwill and long-lived assets compared to $1,784.2 million in 2018. Refer to Note 20 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K for additional information related to these asset impairments.as well as benefits from prior year cost reduction activities.
Refer to ‘“Non-GAAP MeasuresMeasures”’ for furthermore information regarding our segment operating results.
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||||||||||||||||||
| (In millions, except %) | 2021 | 2020 | 2019 | 2021 vs. 2020 | 2020 vs. 2019 | ||||||||||||||||||||||||||||||||||||
| Revenue | $ | 1,074.4 | $ | 1,059.2 | $ | 1,530.7 | $ | 15.2 | 1.4 | % | $ | (471.5) | (30.8) | % | |||||||||||||||||||||||||||
| Operating profit (loss) | $ | 42.0 | $ | (429.3) | $ | (662.7) | $ | 471.3 | 109.8 | % | $ | 233.4 | 35.2 | % | |||||||||||||||||||||||||||
| Operating profit (loss) as a percentage of revenue | 3.9 | % | (40.5) | % | (43.3) | % | 44.4 | pts. | 2.8 | pts. | |||||||||||||||||||||||||||||||
| Year Ended December 31, | Favorable/(Unfavorable) | ||||||||||||||||||||||||
| (In millions, except %) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | ||||||||||||||||||||
| Revenue | $ | 6,268.8 | $ | 6,120.7 | $ | 7,904.5 | $ | 148.1 | 2% | $(1,783.8) | (23)% | ||||||||||||||
| Operating profit | $ | 959.6 | $ | 824.0 | $ | 810.9 | $ | 135.6 | 16% | $ | 13.1 | 2% | |||||||||||||
| Operating profit as a percent of revenue | 15.3 | % | 13.5 | % | 10.3 | % | 1.8 | pts. | 3.2 | pts. | |||||||||||||||
Surface Technologies operating profit improved significantly versus the prior year, primarily due to the significant reduction in non-cash impairment charges as well as our Processfavorable product mix and Technology business. The increase was partially offset by lower activity on Yamal LNG as the project nears completion.benefits from prior year cost reduction initiatives.
Refer to ‘“Non-GAAP MeasuresMeasures”’ for furthermore information regarding our segment operating results.
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