FTI - Earnings call transcript Q3 2018

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Operator

Good afternoon and welcome to TechnipFMC's third quarter 2018 earnings conference all. My name is Ashley, and I will be your conference operator today. All lines are in a listen-only mode. After the speakers' remarks, we will open the call up for questions, and instructions will be given at that time. At this time, I would like to turn the call over to your host, Mr. Seinsheimer. Matthew Mr. ahead, go Please Seinsheimer.

Matthew Seinsheimer

afternoon and conference quarter earnings TechnipFMC's welcome to call. third XXXX Good

release issued you Our found financial during and news statements website. any statements like this to call. on yesterday I'd to respect caution with forward-looking made our be can

these results or factors recent future statements could to in regarding by in Securities certain actual uncertainties could and material and implied statements. these risks the Exchange and differ U.S. you forward-looking our current results any that Commission, to to Executive beliefs, any will statements, result only wish UK they the reliance they the a date the XX-Q, no made, cause or on materially undue expressed most based and cause and of are and hereof. Although Known to business French from Authority. other to future are our speak TechnipFMC's revise Pferdehirt, forward-looking Financial call conditions, on We Conduct the obligations expectations, after to AMF, as forward-looking assumptions developments results from new subject date our those with periodic the not XX-K, recent our are over actual or most differ are our filings which turn We publicly projected place that undertake to caution statements otherwise. whether now information, events, Officer. I Doug Chief of update as of described

Douglas J. Pferdehirt

the $X.X Adjusted detail million further as on you more earnings of as Total our cost quarter another $XXX Good will in Matt. call. was benefited operational for afternoon. a morning billion. in participating revenue reduction discuss you, execution, and theme call. in of strong today's from well Thank I Thank good quarter EBITDA company third quarter

evidenced the by the strong performance, EBITDA our an on we as at delivered operating Revenue the results to backlog. Surface total America, a period. exceptionally company X. risk with to in Onshore/Offshore Total revenue compared earnings were solid and when demonstrated company flat and margin again $X.X second essentially orders as in call. segments, softer market EBITDA execute above results, activity book-to-bill inbound business Subsea for second billion, despite were quarter Looking on continued quarter well improved margin we the discussed Technologies North

Importantly, this business backlog, compared all year-over-year company to in backlog up prior-year with has a supported quarter, return to X% when total occurring the growth growth in segments.

For opportunities target an project. with previously Onshore/Offshore, and billion, $X petrochemical inbound of communicated we refining, fertilizer, downstream including

this for goal, quarter notable in made plants this towards for and leadership two This refinery Son these and fertilizer the India for first have term. progress quarter, an downstream the the near Sitra our in including anticipate markets, expansion we meeting for Vietnam's venture joint important olefins demonstrates Bahrain, in in an largest project HURL We Chemicals. award Long the award further second quarter, of a in in the in Bapco contracts award

in the remained has theme In Train fourth the evident this and first six Both of days Train just very milestone fashion, largest in have the in key We strong. Yamal quarterly and driver Onshore/Offshore. of size, rapid X. project's part X of train during success our the quarter to drop. ahead performance was in this the improvement in original quarter of performance, to LNG. strong scope, parameters. Despite XXXX, a We continues completed delivered of months location, Turning performance across operating within Train trains schedule. after nameplate XX some been delivered is third second complexity execution their project, project a the This of design the year the we LNG be our reached successfully execution individual portfolio. Onshore/Offshore, inherent reoccurring the most operational X

million As bringing project, Yamal September, cumulative over the LNG shipped of X have we from the to XX cargos from offloaded tons. metric approached been end

another Yamal is commissioning on for and work delivery. continues. Our Construction and early is progressing of X track on Train well

had project Subsea, Nord the delivered and successfully In which the we execution have detail Norwegian Shell Kaikias for In last the come discussed Equinor of for project EPCI the integrated record projects: Gulf shelf. extends factor completion just Trestakk our partner months integrated our beyond the two Nord of third in U.S. and announced TechnipFMC. strong a strong continental important the and that Equinor September, iEPCI capabilities in on was new additional Our Equinor first budget XX success in production, we quarter, ahead took of Onshore/Offshore. schedule. below in selection two now Equinor. partner from Mexico, to on An Project quarter; this collaboration three Visund Visund months projects and fast-track stream concept of with

collaboration increasingly integrated oil. costs, lower which to the economics This remain studies, we with first subsea can cost-effective requiring into operations. that provided pioneered, integrated FEED, interface model Trestakk have that the we marine power time the will Trestakk clearly model. EPCI also single improve made of of possible new system in more risks, partners, successful of only connection developments, we execution we The that choice delivered Through award. months, FEED technology with For which an demonstrates from development, of the integrated our demonstrated clearly commissioned we confident beginning for seabed season the reduced successfully Kaikias, a commercial with integrated Visund lighter, completion through then and integrated XX a was was strong of significantly this Nord, optimized schedule integrated And to solution. accelerated benefited become project a the and an Achieving the directly project production industry. converted

the in investment. CapEx turn The markets. years following positive now me turned trend for overarching Let three E&P for of growth to key has our XXXX outlook declining

began ago. a In XXXX. into are support XXXX. Subsea, exceed nearly as investment book-to-bill trends in the offshore move large XX% for We Favorable saw or to also market been recovery our we expect year, in decision that over expect years broader FIDs we final increase of inbound In projects we inbound clearly and gas two recovery XXXX Subsea of year order Year-to-date oil continue to we positive. lend to and and backlog. have XXXX growth trends continue that to period

line $XXX operators' Although recovery prices, illustrated economics both flows. it's cash related was FIDs seen FIDs supported the fairly have returned in projects last improvement has by to levels been tracking the barrel, in considerable encouraging with slide. in the oil as trough from oil of above and a when XXXX is number project This to that deepwater larger

underpinned in increase these year-to-date, studies over is further by an on Our new with focused XX% approximate projects. confidence studies integrated FEED of XX%

also next-generation incorporate subsea many of technology, importantly studies X.X. these Subsea More now our FEED

China pillar driven expected second stronger in Our projects by wave remains be now consumption continues one near-term an the growth to will new in oil and forecast to of fastest the XXXX need sanctioned suggests than growing LNG LNG Industry oversupplied rebalance of demand markets geographies, gas sector, and and next beyond. the market. in

leave on leadership this us growth. and experience positioned to well capitalize Our

potential project. including X projects, Costa Azul, brownfield Arctic includes several Sempra's X in the well involvement extensions, greenfield expansion Novatek's early as as as and such LNG Our projects Nigeria LNG Train

turbulence, are growth. rapid undergoing pipeline U.S. of constraints near-term capacity Lastly period activity impacting negatively takeaway levels a with unconventionals after

specialized America, anticipate we constraints and And outside increasing transitory. our services. have North to proved these products for However, demand be

been formally captures dispersed January projects projects awards $XXX new Subsea And with project As market broaden partners. project opportunity West half less than for will and Subsea, opportunity direct and encouraged our of orders Subsea brownfield remains we engagement across increasing announced turn business In most to order in are continue the Of expect our activity Subsea smaller and and we excess The broader by to is award. to Services, as since continues in tie-back the in level the also quite slide, projects Africa of and XXXX Pacific. over tender. market for billion reflected than be has large. update the Asia with increase intake opportunity $X slide client the South the received million, more in project mix. only alliance market inbound associated America, the XX% And smaller of that service set recent XXXX, while our to of we a iEPCI,

Although we headwinds asset and differentiated remain deliver can our we driven near-term, where the projects selecting lower unique technology. utilization commercial a and by recognized on next-generation we environment offering remain result, focused integrated

now the Given remain success. more we results outlook over detail. position, to call confident the we the are market turn positioned financial and that Maryann discuss well will to I in our for differentiated

Maryann T. Mannen

Thanks, Doug.

period were diluted some totaled quarter. Let earnings diluted in color tax me share. the charges the quarter $X.XX. million in provide operations per financial in $X.XX performance and credits or on the Adjusted share per from After $X continuing further the

which around losses, partners points against an we do significance of schedules items in EBITDA liability XX interest following: share to detail which release, XX.X%, items. diluted these not I'll guidance per result excluding increase included strong $X.XX impacting that We the basis million have joint or Onshore/Offshore provide highlights. provide Adjusted provided largely segment accompany the the venture Pre-tax expense. tax the discrete for the $XX our quarter of rate quarter, share $XX a of $X.XX of a when on details the to XX.X% foreign the margin diluted balances to in million largely The payable currency included in per business. reflecting was for ability and Angola for related the execution was up more expense, is the which corporate there in effective items. in few cash you quarter included effects receivable hedge, prior-year exchange impact no or

forecast by project offset is revenue Europe, This from primarily South Asia America. a increased the XX% in activity As partially and indicated, Africa, Pacific, quarter. activity our lower Subsea by in prior-year declined driven

the timing to of pronounced prior-year exchange included quarter. Brazilian by more the Adjusted Subsea period, million margin the EBITDA than in competitively orders certain the reduction to resulting $X.X projects EBITDA foreign a was impacted quarter cost priced and as margins in The part was initiatives of was were in negatively billion merger real. quarter for segment. of less anticipated acted other revenue a addition, benefit completion Inbound and In impact our decline and headwind the a offset in by XX.X%. the in X.X in due margin continued synergies achieved. book-to-bill backlog, although, translation impact $XX

X increased strong process moved only of from was XX% prior-year and Train Adjusted projects, the prior for declined revenue the execution decline. Onshore/Offshore down from improved over activity LNG, XXX East, a included in the basis declined Asia-Pacific the Europe, notably quarter but Project group. continued grew activity margin in major book-to-bill Karish XX.X% quarter increased points. completion a EBITDA revenue Key regions by to versus strong led Yamal anticipated, most of technologies order billion EBITDA and resulting FPSO of quarter. projected outside technology. and on projects, the despite performance of had XX% successful the process to modestly $X.X drivers Adjusted X% primarily Onshore/Offshore we prior-year our many in Yamal continued sequentially, the X.X strength the the bonus across growth in prior-year as Middle completion of for LNG. by to quarter year the closer we As versus inbound on Yamal

sales activity to points Surface $XXX the offset prior-year negatively Moving XX% by XX% Surface revenues America, in Surface XXX completions flat quarter. million, the reduced broadly versus and increased more international revenue by Sequentially, margins quarter. basis of was increasing the quarter, in Growth Backlog quarter ended quarter. Adjusted markets XX% quarter. line at versus second driven in lower to impacted for sequentially activity. the flow North Technologies American revenue over where prior-year the with XX% higher prior-year decreased EBITDA North the Technologies Technologies, than

Here visibility you good growth made XXXX show can for see both and we improving Onshore/Offshore. in revenue backlog Subsea progress the and

XX% of growth the For trended Inbound been quarter Onshore/Offshore backlog generating from end third consistently $X.X X.X X% an period. this of was backlog of increase the strongest growth. quarter three above Backlog the Subsea, of over quarterly yearend. fourth at segment, sequential our in book-to-bill activity consecutive over since quarters has billion, had driving XXXX, of

shaded improved we have system is up development, visibility of billion $X.X highlight awards visibility charts, a of Looking in XXXX this Chevron at total much execution year. for Gorgon $X.X for backlog the areas also Subsea for Energean's project include production the $X.X the Stage scheduled at billion of we to earlier XXXX, X beginning the Karish which the for X Liza contributing Phase billion the announced for from darker we the improved two revenues. project now iEPCI SURF work in and this week. ExxonMobil's subsea Key In

in received the with project be in fourth backlog inbound and inbound for should and believe in from XXXX, to in-bound for we year quarter our in current trough in levels above we market the revenue and Combining will service the XXXX that awarded there We remain work revenue that XXXX. achieved factors additional will XXXX. Additionally, be improving growth will total deliver these confident continue Subsea Subsea outlook, an revenues. be anticipate

although to more XXXX largest to before, will as communicated construction projects in Onshore/Offshore, to year as than next decline it our Yamal contributor scheduled moves Yamal the revenues, XXXX for under be LNG, with execution individual have backlog step another Turning will today other we take revenue and have continue down And from to completion. closer project a significant replenished the project we in segment new beyond.

you would non-consolidated other management appendix. strong remind we include are in this awards, not solid to driven $X.X activity have the project and will that scheduled from revenues the expect These, disciplined billion. selectivity, provided billion related risk does project highlighted to and ventures, slide joint for $X also executions. continue nearly which backlog I in XXXX the We inbound backlog benefit that to scheduling from

operations. flow we Turning return in million to generating from period, positive in cash operating $XXX the cash to cash flow,

for an improving receipt detail new In liabilities, quarters. you you, quarter. the flow. see As we the benefited and continue cash were the in suggested can we we and project capital on release, current and to the of disclosures including management to our working change expanded call, of flow the changes now so improvement, on provide clarity working the from more the third awards the statement of cash period second quarter from capital quarter the booked earnings quarter earnings to in capital related that in both in second payments advanced we that In third to effort portion assets have working good show

capital working use capital million the working where of versus quarter, million. use working illustrate For year a ended capital $XXX was nine first months a $XXX the use of of does in the six of was This a million. third months improvement and for $XXX efficiency the the

allocation on will strategy. line, operating the of the focus Beyond drivers I key capital our

First, capital were million quarter. $XXX expenditures the in

to Looking dividends. end. to items, balance date, unchanged million major million share spending net were cash $X.X In shareholders, a discretionary period We expenditures period, quarterly at we payment and $XXX a in balance million both discretionary the for very with capital distributions, the billion. shareholder $XXX spending at the including our at distributed remained the repurchase, total, items sheet $XX $XXX in other for of was quarterly largest these essentially spend the billion. quarter of The $X.X total million of strong Cash ended period. and

a strength revenues guidance of strong range again now for a quarter. for Now the margins updated our are the results on $X.X full once project the in expect include for comment we should to This margin milestone fourth in quarter least XX%. We posted the do in successes. to additional expect third XXXX, we the as not with billion of in trend our operational the year reflects in quarter. at Onshore/Offshore, lower expectations EBITDA results bonuses period, increasing $X.X certain billion,

of margin reduced our full the also Surface updating We North we for Technologies. market at year now anticipate America, Given XX%. guidance activity in are least

Additionally, our net we revising estimate interest are for expense.

than balances. of higher for is of revaluation as we We Yamal in any totaled the in rates range on previously first the unchanged. expense have a result of fourth months supported net year-to-date $XX excluding benefited performance. the to of million revaluation outlook In liability. has remain $XX impact year. of updated XXXX million, net items to quarter Yamal from This impact nine interest cash expect the Excluding now the forecast, underlying $XX liability, is be financial the our further the guidance the of our financial interest million All expense interest other by summary, better

margins, improved quarter from and positive awards. advances the for cash for growth again revenue strong management on cash declined. delivered to supporting flow, Also Our as cash benefiting much execution visibility return in backlog revenue even quarter, a certain Inbound adjusted and and orders beyond. delivered all we revenues XXXX EBITDA the in year-over-year improved higher segments, exceeded operating inbound

XX a our guidance Operator, with follow open provide will questions. We conference the XXXX on on will and December call XX. December may for now call you

Operator

And your first Alsford question Michael comes with Citi. from

Michael J. Alsford

bit wanted good to subsea a activities the but about guess normalized to of I a Hello, environment. you for there around bidding wonder whether at all my thank question a it's just FIDs fact some are just has Clearly, up, Doug, taking get sense, did I sort and market. market. the and the I the Thanks. see could, question, you ill-discipline if on talk on the you picking pricing at firstly current that that

Douglas J. Pferdehirt

we Unfortunately, Thank Clearly, you, We activity is, the positive that the It's term. the are pricing everyone that earlier less And outliers our the if in not think some what in. see to company. are and pricing we the just a a XX% tenders to now TechnipFMC, some for but of of low participate as when will, my It's those as we exposed that in for the conditions refrain real to we you point irrational reiterate who that the our have differentiator still market terms side, challenge less script, on positive question. important our of of to active to we're continuing see that's to recognize well see on over the opportunities our our inbound I convert to that Michael, end. diversity high spread again, for outlook our to irrational forward, partner opportunities near point have awards direct the believe degree on and the iEPCI in separation, been market do are trend time from some just in for that open that to between able integrated that to have. seeing that business, of market. point. FEED so start ability in will the And I for we some low projects about because in and over described, and the Services remains to activity and time said be results going alliance they the from you Subsea that

Michael J. Alsford

and Doug, I could, if on follow-up, Thanks, a just that.

You to talk saying revenues bit XXXX about going a is that Subsea. on in a be trough

So should margins we expect are that therefore XXXX? troughing also Thank in you.

Douglas J. Pferdehirt

we're As know, this sharing going to of December year. in be guidance here you

I in to script, that we headwinds. be some I with more offset obviously continue sharing my you forward, We XXXX and at think activities look December. will detail look but as have to there that, when going in indicated some forward we

Michael J. Alsford

Okay. Thanks, Doug.

Operator

Jud Your question next Wells comes Bailey from Fargo. with

Judson E. Bailey

curious or projects in number opportunities or over your to do the terms you to at rest you and and number you thoughts into year large months hoping Thank of now one, XX I'd you year? how then the get end maybe you mix maybe this outlook you, handicap next guess for how types Doug, mix how another versus of this on some year this of between year? or the booking of XXXX. was evolving thoughts the And I do on materially maybe Does order for morning. thoughts your be next the different award for so. integrated? year, to next project get of early look market I good the the as look in see it maybe see projects looking major odds year of

Douglas J. Pferdehirt

opportunity gives let more answer Thank we Subsea you, slide where And of but color. see slide, you updated a on some me add our bit the Jud. that can

to in belt and few and to forward fourth the an looking our see. XXXX we the of want So a under as more have wait quarter, have to reasons move one guidance. It's we at our have weeks we opportunity

of the XXXX confirm there going That's in XXXX them of of last or very or very mix awards, was being trend flurry integrated cannot being there's clearly recall to towards we Equinor, awarded, think beginning awards, year. a the a is for as clients larger trend At and happen of clearly when may XXXX. or in increasing indicated days Of same are beginning projects, could from year be towards that's that and that in this or a number accounts we to it the the What either a budgetary our next tie-back project of portion considerations. year work the deny of be – year. my subsea the that really (XX:XX:XX) can't there do at of sanctioned. see I integrated the the a at projects, continue to projects end time, in our robust, to they function of if due be probability certain brownfield I in particularly awards a wish secure end continue of our You and is in tie-backs. opportunities to ordinary the of script, smaller and one approach as of we the well to sanction projects significant

Judson E. Bailey

thank bit quarter that. on your the And us follow-up for comment Maryann. for thoughts working maybe Okay, Maryann, for also cash you a little capital. and is give flow operating could fourth maybe on my you

on to some see this quarter capital, working progress some we made You've tailwinds. when start do

think starts as I in working about on turn get As payments. you as positive? Can working any your book more quarters give think in to that to you maybe turn more starts how favor more the would we awards, coming insight capital you capital when us to

Maryann T. Mannen

Sure, thank you.

that working capital I So was you saw, say you use trying know, favorable of will, payments flow. maybe as ability advanced as stay the the we turning from quarter, shared around only a if always the We giving cash try you flow to cash guide in and $XXX think is we the bit of curve. a quarter, receive order on the guidance rather operating ahead demonstrating, to our the those of capital. color step cash we're on flow should million with quarter, saw just Operating the and, In second million. about inbound positive away to as we $XXX specific benefit really you working in of quarter

again the to on quarter, awards, Inbound mentioned in be cash fourth second the expecting positive call, think we I second in operating the Doug mentioned on quarter mentioned the we call, So I of possibility in quarter. are quarter I flow as advanced the the also It's one capital corner for another quarter turning as them potentially certainly payments, in with efficiency carrying certainly the helps further are beneficial working fourth utilization. with fourth inbound.

you So little color that bit hopefully in quarter. third gives the performance of our a in

see in-bound increased our You the that of and can of the benefits effects performance. on

Judson E. Bailey

So for that. thank you

third So in to the cash grow expect for to flow it operating fourth quarter? off reasonable would the be quarter

Maryann T. Mannen

Jud, in there's but can to timing the operating that fourth that and few continue flow pretty think we is that certainly a happen quarter will critical things cash of positive. be

Judson E. Bailey

take I'll it Okay, there. Thanks.

Operator

Your with Exane comes Paribas. next James from BNP question Evans

James Evans

of me LNG. everyone. good to or on for questions morning, couple A good afternoon Yeah,

we're industry far, not of will on be year? additional see shorter-term Is a planned doing but it obviously fair going think deliver period can to ahead, go or XXXX, XX moment. revenue months opportunities smaller of through I'm just in And of is for you actually in sanctioning, if it exciting Train delivery? a the industry bit very you'll that what or all can do sure at about describe the fourth little X? bit of you. then last this, have either a Thank on Firstly, assume you're train within not over secondly market bonus the all bottlenecks it's you you any well, Yamal, term, to million And and your that the in really tons train like there revenue line? engineering XXX next longer about looks LNG, almost your a bit on coming the it terms

Douglas J. Pferdehirt

much, very you Thank James.

all, to in could of the plenty additional Train be be of that extremely performance around and an manner. it's thus are of execution, project. to first we're work of accelerated upon still that recognized X. had LNG, there of the There on delivery, the And done far proud and done on So that delivery the level success the if Yamal our for based we've of left team be delivery opportunity an of

Train the testing, for Beyond being mind commissioning the activity of us individual in train. continue and performance perform, startup and of testing in only but it's ample the the is successful that it's to X, train, keeping delivery and there delivering involved not to

So indeed there opportunity scope and works on Yamal. is additional XXXX in

Looking at think up opportunities, summed the term it you I longer well.

I projects there. think the be market There's more likely being discussed will sanctioned. than is

or projects those have highest choice, importance focus on terms that has think to strategy, our delivered the been product. Our the of we strategic in economics and best

around In So, construction, from each More engineering around the the labor. construction correctly it that will some we of at generally, bottlenecks that be we be to projects lens. out. we're you will that look prioritize be under put those and bottlenecks. as on. going opportunities And our resources geographies, the point Clearly, there will

So, we projects our work our with will closely continue to we projects has therefore, been approach to operating. terms the are business, both in diversify of as that this and partners

LNG the three Prelude are FLNG the but partners. different similar. those projects, FLNG operating we're well as Yamal, cases, also as project. just project of today, some projects, In On know, you As not the other partners Coral there's

the projects think So, in have terms that some high to we'll very those use we be that geographies, secure and individual that the on way But strategic of we partner projects, of of and we awarded have to think economics. projects. strategy very diversification, the will positioned well importance continue or those to we're both good delivered

James Evans

over. Super, I'll Thank it turn you.

Operator

with JPMorgan. Sean comes from question Your next Meakim

Sean C. Meakim

about how saw start, benefit to the seasonal weeks since Well services or there's the can't six performance talk you so, from Subsea, for margin another Riserless of Equinor Light had Doug, we solid context Thanks. in of XQ in and XXXX underlying some for these we deliveries. the drivers Intervention, about taking should think maybe we project some

unchanged? could So, interpret should how more decision and XQ, importantly to for leave the underlying the margin if you drivers about guide investors the there talk then XXXX

Douglas J. Pferdehirt

I I your a think that Sean. the answer was completion well. mentioned off campaign. release Kaombo. question North at FPSO very in of we really is, you on around project the had delivery thing that also very time, actually you, finished The add answered that successful This we Thank could to our only the we press award largest and subsea the

it the timing. So come to does really down

many or in from and the does portfolio activities have quarter-to-quarter milestones certain perspective. closing certain have projects certain We a and/or an projects, reaching impact completing

a outlook events of we type looking of So Again, fourth don't is of that control. seasonal necessarily as QX this It's look some pointed coming our the those on in we best off time, at when that other had out you QX several lines. quarter. that, reoccurring some we were with and see we coupled service forward, at our of we don't something necessarily and timing where impact

Sean C. Meakim

that different the maybe of on some could could Okay. I deeper across all sense. for Subsea, maybe we be inbound makes how trends going pricing And back appreciate, the streams. Doug. circle dig great if it discussion little pricing backlog will And be to into a

there's There's able a for capture? investors SURF, there Subsea and be also margin well. pieces So understand legacy of of versus procurement parts type premium or a of just to unpack to that within better on lot a think X.X. I Is the even directionally basis, great as lot interpret there it to but bidding that relative a SPS you're iEPCI to moving versus

Douglas J. Pferdehirt

it somewhat because us streams. is TechnipFMC having what differentiates versus those the individual Thank you question, as for not Sean,

integrated by you can in done publicly you're down, bidding very study the been the technology, allowed break lowest those the up lowest were not outliers and that it Again, so various to top the see you're between a allowed your you model, much you on significant some open tenders on less is said, we in in apply the the where bottom you and that if that common to was – large was this as projects. and amount. against bidding tendered denominator, what not spreads disclosed competitive So are there to apply see FEED those the an you're to entities across have outliers could on positive now the I between be individuals an not at and still accordingly. going That's a common dispersion see denominator, TechnipFMC. see the generation latest you're agnostic and some that tend cases side the market, and various Unfortunately,

be Our an strategy not to is outlier.

is our strategy success demonstrate by the where by the based of and our of technology, market leadership application project in we Our the and create can to demonstrated upon performance. our model, integrated application

not to last – coming in we these additional deliver considered being projects respectable by now this that two we see manner quarter are and talked were quarter a be Trestakk. were projects projects about. to that You in complicated new records in as cases, able Nord through being Visund were These necessary our Kaikias two and, very clients. the

we'll believe we're we're trend. of So proud we it's just and very continue very, beginning something that and along

able a individual we're lowest breaking performing focused focused we're the So common direct We're as a that's secure down An the and to economics. project to activity that line is FEED direct the on that items on it project. market award denominator. iEPCI able further, the integrated We're competitive or not secure a to award. we're when

able that we're So we're the subsea we terms have economics, other again records lower as in rewarded in of X.X cost of quite margins give advantage far. outcome early. for tender that benefit as sit or thus both outcomes in for We economics, tend associated and applies of industry client technology, cost time set unlocking we're just we to delivering more with economics. use the demonstrated can it Same terms understand first an our become the may with products. in and a down us first oil. us In working we client accelerated product of And are Those Subsea project which may in us importantly recognized for an common We're goal that at our own being potential And project, the economics, achieve slightly give words, that a apply a that able but a it to differentiator the with Subsea oil. many achieve be solution higher or that but it a level the X.X different. to to frankly allows and, a because and our the is to performance. with find client's cases,

As if opposed to will. the Subsea you a competitors who are X.X, bidding at

Subsea XX% out, pricing or represents elasticity advantage We our point that tendered. is result family. current have as a our of will greater that XX% it I that X.X of is although activity, being there still competitively

continue to the integrated of market have in is model favor. our think will benefit percentage the Subsea that we recent demonstrate to going we and/or commercial that successes technology. up, the with the X.X goal Our that's to And drive

Sean C. Meakim

Thanks, very think I that stated. well Doug. was

Operator

with comes question next Your Evercore James ISI. from West

James West

morning, Doug. Good Hey.

Douglas J. Pferdehirt

Good morning, James.

James West

been that acceleration you I continuation made, statement the a curious. What's was curious of but But call of Doug, Sean, has to of we've right here year, year think year? increase XX% certainly in last not that relative on just of studies XX% with competitively trend recovery, time In that say an you a just business guess moving increase I now of mix? the bid. I'm and to the about, seen and that date. the bit FEED this I'd one in this that recovery, XX%, more touched XX% towards

Douglas J. Pferdehirt

FORCE trend studies FEED doing at FEED we the you know, time if integrated as the started back activity, our is, the at look in studies of just Subsea. you So

a to proprietary So were and opportunities of built we're studied position direct others, cases now competitively award. set we have those never in a that a in up many company into our are that convert to by

opportunity in then that sanction have project. us want realize would to how helps gave which on to own higher of I because to Sean, that prioritize dedicate a my because closely deliver the when to projects, to we on that upon FEED to obviously economics. have decide set we we on the deliver to it's we reaching But integrated prefer obviously those do or the We understand client's to our very hand we response can agreed-upon earlier and we margin. study FID When that based resources, watch those so, project projects type

a is We meaningful the that that it's caution in the focus you're as FEED the XX% would the those intimate study not for of conversation where moving our sake say much shifting I So around clearly is. just the Doing and clients of see let's clearly is first in the you point engineering But to level number a acceleration, more really hours But more in overall just production activity. projects be working a you well our – to as to intimate projects in the that would certain that as activity quality FEED of on. levels, say, around accelerated along so the increase direction necessarily it's line. I achieve able caution, out. timing much serious manner, conversation doesn't of as, mix oil more a a is discussion overall

would So quantity therefore, than the improved a important more say the has quality I bit. quite

James West

was point, create you put great me. one when of with for market. follow-up guess and Doug, and – we originally to here the that the and a That's then way Is FORCE FMC, part Technip there with then transaction could together driver quantify course any I of

any is provide or do if downturn you created and you and integrated through sense fully to be quantify weren't all idea we that much obviously there how you things. have a Now market wouldn't any happening, you of have of can think may that you you any do have these in able way went But types these normally projects?

Douglas J. Pferdehirt

question. Thanks, James, a very interesting

evidence. to real me I give because examples to very Let tangible like two point real

James West

Sure.

Douglas J. Pferdehirt

an the that in was wasn't has said the to execution project but necessarily move Equinor a had challenged the was project past, move and looked forward economically that model commercial project right model there to they forward. project, Trestakk

delivered Likewise, and model considered potential. delivered said a unlock has that the As project was be new project, Kaikias significant and indicated, and we on a Equinor. it needed in to ahead Shell budget order to of now a Trestakk that was commercial have schedule, is success its by

have would to the of two delivered, simply of and cycle evidence point potential which clear able now are as projects. to I being So ability projects, full those of successfully been unlock subsea the

would I projects... set number rather our possible about because, that, we not Beyond if of that think the will, proprietary you are talk that's

James West

Fair enough.

Douglas J. Pferdehirt

I opportunity doing have that we ...that those that growth our the on into been three And the see working projects. will, in relative would studies we're you cases as over our to accelerator to that convert some competition. we've to for integrated years if

James West

makes it sense. Thanks, Okay, Doug.

Operator

Mick question next Your from with Pickup Barclays. comes

Mick Pickup

may. two if Good afternoon, everybody, I questions,

same for you've you $X.X got the in the That's billion Firstly, just of on had hand at On/Off, year. for end year. next XXXX this

in in seen that saying the you So trough why aren't you've revenues On/Off?

Maryann T. Mannen

indication trying completion, other say a the there on call is that giving guidance tell the that But hopefully the you year the of to project up backlog, I top look year really about point more line when look of We'll is non-Yamal at trying So, year XX over composition one of composition the backlog, there backlog color see Mick, at now to of and the solid year much provide reach you indicate projects think that made is the as the of slide can of the the just But to December other composition and from backlog Yamal we has coming to well. was as Onshore/Offshore. the continues for from you as we're very we when backlog to get Yamal declined. over the things work.

Mick Pickup

the ramp-up of $X.X previously? just execution $X.X different is than it's billion So the on billion that the

Maryann T. Mannen

That's right, Mick.

got You it.

Mick Pickup

right. Okay, And...

Douglas J. Pferdehirt

because If I I question. could add your appreciate to comment Maryann's

As that a in I in award with downstream there term. quarters really the projects target award keeping in in Bapco award of indicated for and fertilizer Refinery this billion most quarter the the that for the opportunities, for we've had HURL starting in Onshore/Offshore that project. first Petrochemicals each another two against three we and then indicated, that the $X the Son mind clear would large are India, That be we evidence delivering shows the we our recently near put of Long

opportunities be would addition to any in LNG. that In

pleased very our or of inbound call we the GBU, with we're as it, So Onshore/Offshore segment. progression in our

Mick Pickup

a Okay, And follow-up on just in thank XQ Subsea. margin then the you.

to far be quarter. than going greater hasn't is, guidance going your I Your revenue changed all far your guidance by your XX%. if lowest year it it's And it means strongest is to XQ your margin. look And where given guidance, for means be at by

backlog down Now, start part anything seasonal of of flat the or of that there the executed projects being is at state the like new that's is I completing. in is But it else understand just not there spots impacts, it business? driving contract,

Douglas J. Pferdehirt

what on touched and Mick, think milestones I in today the see, and the the of we certain you was we we of each timing and things achieved. sit the have we that that know, as are project includes it's that as and you margin actually many individual of today Subsea. can milestones timing the it control maintain and completion it look again look and don't we and those all certain at a we combination reason we guidance of as at But projects,

Mick Pickup

Doug. you, Thank Cheers. Okay.

Operator

question Your next comes Kurt Hallead from RBC. with

Kurt Hallead

All right. Good afternoon.

Douglas J. Pferdehirt

Good afternoon, Kurt.

Kurt Hallead

similar Doug, to that context increase Subsea earlier the ask wanted in in business little came a FIDs. So, side this the on question the the out talked a one I about of of bit you

resource in project and staffing question. given you some resources any in just the subsea answer of now a kind to and standpoint? could gauge of occurred handle that subsea can given the phase kind recovery the staffing reasonably or with companies, year, the So, however market kind what may want from I'm to of trying downsizing the just you what at I'm levels with marketplace handle oil industry given that in respect curious think we're do right the current major to awards of FIDs, reasonably the current at

Douglas J. Pferdehirt

Kurt. you, Thank you. Thank

from with I there think our new given look the if service the you been the are of integrated in an think what industry. significant some at industry do well operator to think given both vendor-based you impact as the model, I demonstrate is that if people although models able I have side, successfully deliver the have from much to it, this as been or downturn as refer will with like earlier studies, commercial we we to it can FEED resources like the obviously side opportunity solutions projects we have very engagement integrated

to growth it manufacturing capacity, the can industry assets, continue a fleet bit quite there be I terms be capacity, is think of physical it that support. of In or the

we way a a to to – projects look building at single industry, every would say on I always through first is bespoke, an item. in every So, we're responding going we award, to continue question you if meaning are lens that very requirements as do article award have always change traditional and it the your

We used before. has are that architecture using never been a subsea

would We have be heavy every then post the hours project, project associated engineering constraints. I and about concerned with each

We have that. inverted

changed can think done way about right capacity you the able the to a forward. believe be Those to working seasons, we resources with our able season. in ability will and the of the when same at versus profound be we the change going in collaborative and the believe done it to a we And have that means past. have going for do believe of single be that that change of a able to with season we able ability to the resources have We delivered And approaching what Subsea the with to grow lot we're Trestakk that and the from have the in would marine able a with future. to to been manufacturing with market a done to it way engineering projects a like are way that's to be single project be fleet subsea we'll do versus look projects two that's were in because X.X reasonable do technology like approach as historically the of more it to amount that and bespoke be have way When synchronize client, able We market. of in the that single the ability we we and much we project terms over the elasticity in the change operations. we changes, that done to a where what scheduling number our

Kurt Hallead

Brent Are the would level still may price on environment are whatever they companies, $XX being companies, on the oil very in gauging course sense staying $XX I great. about they of, the Think $XX for confident oil economics Subsea what what then or the dynamic, Has up moved oil Brent environment? oil more Doug. the kind projects in and of with comfortable kind time the terms it companies do focusing follow-up in of more lens complex. or companies in oil national of price months? the you of And maybe on a and kind be be, it their That's think do you assessing color say, conservative over of it you helpful, than this economic oil they of the just XX a Are Thanks. through had profile? were? Any major maybe the past that kind

Douglas J. Pferdehirt

enable that at move in forward saying our on clients look with. answer they sub-$XX oil behalf kind that subsea sub-$XX. that we to of projects look having I economic they're is the have with that is many I certainly the which barrel even if want we've that What in valid; those it's projects, around environment say made they're don't I'll our you were I at range. projects speak that let them, And what sub-$XX delivered clients, comfortable of and of at comments the to am and price with have discussions recognize them done the can

find the needed more away able inflation I the manner to well. by move from in development. to a to IOCs, in able oil an independents of We We I as we behaviors in increasing and do our of resources upturn that on potential. were of change unlocking way portion about in are needed terms to our to an applies the radical So as who we away this from an deflation to industry. way, And the And think base the think to differently. engineering much be it's efficient and get downturn. Trestakk our utilize price needed customer a to need things in doing don't the think NOCs take-advantage and bespoke issue We

Kurt Hallead

Thanks, great. appreciate I Doug. it. That's

Operator

comes question Hodée Bertrand from next Your with Kepler.

Bertrand Hodée

my Thank you for Yes. taking Hello, question. everyone.

like the is Total? Exxon, And the are term the getting looking integrated like some from you successfully and you others short the one adoption names? projects big Shell first do that What believe in from model. get of those a The are concept. at could and as you tested oil push-backs integrated Equinor

Douglas J. Pferdehirt

Yes, I we am confident will.

Bertrand Hodée

already your some as Okay. you And are it additional this for follow-up been X or something pursuing? train then a for Is at had now time an a small on Novatek is backlog, in ton near-term that you Yamal. million opportunity talking Yamal. still

Douglas J. Pferdehirt

for have leave would you important the a our to train What train clarify. their be question would project local the it is fourth scope like the third more to train. that I before on and train. be fourth on provide impact us. very the as the think it client smaller the what using discuss we that the I'll Thank much but train has a plans little interconnects are to content was fourth client because would indicated you simply a But on discussed itself a from

of study overall delivering the final on the Novatek, be larger that and very we're and of build economics FEED a the LNG them with closely, So closely working opportunity Yamal stages Arctic project LNG. work success for to very to with us would Novatek X, to improve hopefully project we in the on the continue

Bertrand Hodée

Thank you very much.

Operator

with last Simmons. question Bill comes Herbert from Your

William Herbert

deferred robust I'm margin what's Surface. Surface morning. been the Doug, are would real. which that surprised XX, in for given in with having happen or quick with Good few orders strong is as are are to at these just expect ground orders QX sure the discussions XX level Lower Lower to, on you third both? the the quarter with to has in the which next cancelled a response regard were by what nonetheless you happening to I surprisingly with wrestle being are but you which curious how lower quarters over albeit the are what with and to transient, inbound, we frac, regard was question constraints? I'm or strong dislocations year, very regard customers, the And in unfolding Permian

Douglas J. Pferdehirt

by impacted asset-intensive, our But with Thank you, as Permian activities is of everyone both Basin frank, else model very are than pleased that Surface Bill. is have other one do QX. robustness an the beyond. advantage were We business. again, is our we be and business We level very lower the not Technologies in being let's our – in the too

new we soon. our in XXXX. continued very demonstrating that North to continue offering we that and also we in the slowdown ability to value to international recovery allow move awards business, in a were we of does and move We Very America trend certainly impact. awards, large be to a us our indicated to dampen some that Keep we with to see quarter. frame continue awards market impact exposed to agreement not as the that the international well. awards, forward our look of integrated would and we'll activity basin, from offering have is around We the to seeing America. there, additional North receiving And by that saw segment But our clearly in has into last basin able large type market, of the securing resources look in to assets the business. expect to some of in And forward our mind, the portion that integrated which

William Herbert

Maryann, quick me. And you. ones Thank for two Okay.

think again I you a next quarter? improvement of Thanks. know the we objective, maintained capital implies for think few which the know years? bend I the where in the to serves, guidance when tax CapEx significant was a still secondly imply year, that in it that UK, then one. redomiciled And in low Is free correct, think the flow would that rate to the pretty that's mid-XXs%. for spending lands cash memory once you if fourth QX. Is nice And lot, which the that down to I $XXX to step-down million over ETR, I

Maryann T. Mannen

You're welcome, Bill.

right, $XXX of CapEx. you're year appropriate adjusted feel the we spend level basis, CapEx have full Yes, million's XXXX. question for we still a an not first So so on

have we consciously. changed CapEx So not you're right,

rate, a high a way, right. in absolutely Your on but tax second class question problem call you're this I'll

next in right jurisdictions higher give in rates be as We're Our to that we good coming have tax and success us out areas than those our reach areas years. have domicile the does benefits key fortunate key now domicile. happen to

the future, we're the years. a through a coming our in ultimately in of as that driving jurisdictions. more favorable contract we domicile profitability should to benefit continue higher some seen be rate So ability in way from But lot to

William Herbert

Okay, you. thank

Operator

end We remarks. have for Matthew reached the over Seinsheimer of the Q&A the I turn back to session. call closing will

Matthew Seinsheimer

be replay on call A PM today. British the will available website our at approximately beginning quarter concludes conference This third call. Summer of our X:XX Time

feel If the please you the have us. to very Operator, may for much any end further Investor joining questions, call. free contact team. Relations you Thanks

Operator

you That your concludes for today's conference. Thank participation.

You disconnect. may now

TechnipFMC (FTI) 25 Oct 182018 Q3 Earnings call transcript