FTI - Earnings call transcript Q2 2019

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Operator

Good morning. My name is Shelly and I will be your conference operator today. At this time, I would like to welcome everyone to the TechnipFMC Second Quarter 2019 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. Instructions] [Operator

would turn I to call like Seinsheimer. Matt now you. the to over Thank

your conference. begin may You

Matt Seinsheimer

Good welcome call. afternoon earnings XXXX and to TechnipFMC’s quarter second conference

be release on news and statements yesterday Our financial our can website. issued found

to like during made forward-looking call. would respect to caution I this any statements with you

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

TechnipFMC’s Doug now and will I Pferdehirt, Executive Chairman Officer. the to over call Chief turn

Doug Pferdehirt

quarter Thank call. you, for Thank you participating in Matt. afternoon earnings our second morning. Good and good

with the by Conduct matters decade settlement taken This to a values of does Brazil. ago, the United Conduct not we employees back core into former authorities. and of authorities our ago all compliance over reflect close States the in of month Brazilian brings the and resulting investigation company. resolution a This by in under U.S. investigations One announced $XXX million dating

way. to are tolerance right business such doing behavior the zero for and have committed We

dictates be how compliance all with the ongoing impact integrity not In our the of belief recognition monitor we settlement this we company no conjunction everywhere expect a to time. foundational operations. Our business will robust to our of assigned there and operate program, in

our to in an second At throughout new robust level line billion, record setting the total quarter. orders $XX over momentum in order inbound quarter. the strong continued company with business $X.X unprecedented Subsea of company. first the for Turning were billion highlights, represent levels experienced a orders our

year for XX% exceeded year. well orders to In Subsea the are achieved the of levels in positioned fact, for of Subsea the full all we growth half the order of year XXXX and prior over compared first when

of For second new all onshore/offshore, record was in quarter exceeded Arctic business orders LNG segment. X billion to award inbound quarter levels a of unprecedented, that inbound alone. also The of this quarterly $X.X for drove the second XXXX

outlook, result which And the from us execution. an in total the with first our as company orders operational we in XX% backlog end. growth of than billion, confidence backlog and continued of with half XXXX substantial $XX revised inbound in backlog greater of today impact more strong strength is remarkable the increase even provides to approaching higher This a have year our

XXXX in look backlog visibility we the also and provides as period received order new improved to The beyond.

greenhouse while continues last natural shift wave. to LNG been meet helping as the structural an increasing the LNG energy transition fuel towards underpinned on has The Over for lowering months, the the XX to focus demand market gas by considerable gases. there energy be growth market

creates is the value transformation There an iEPCI industry is a leadership called shift awards This Our market was company coming in Subsea that model the by in and pioneered both within resulting entirely occurring growth paradigm important as anticipate TechnipFMC. demonstrated for will continue our that of in operator creation the a result as new LNG of ourselves. the this commercial we additional structural quarters.

now having on total capability impact our integrated unique a both This material business. is the market and

We introduction this XXXX. integrated in our year of growth activity have since model every in seen award

remains having the exceeded XXXX track feed on that we $X in project and for opposed award. the convert are as actual half integrated continued to into simply growth of billion first industry awards referencing The project year in awards in an studies the have to potential

this is time XXX% Even the months has XXXX. secured of number all reaching awarded projects two-thirds that fact TechnipFMC more for with first the compelling six of integrated that over

Mozambique. Anadarko’s During the for quarter, we development Subsea in today project Golfinho awarded were integrated our largest

region offshore clear a Mozambique frontier LNG reserves the have in a in mover demand. and this leadership first increasing significant made Mozambique strengthens further of the was natural in beneficiary position region. of country gas our award hydrocarbons, development is the TechnipFMC

country’s first structure, the initial Africa progressing the are we of development, LNG For for the third with construction a LNG well for our floating company. and

for honored by model. And of are Subsea next much we On country’s scope. using have integrated development to are the unique we contracts executing our been to this the now execute same Subsea project, selected Anadarko also

our expertise. expanding needed country’s These and in this by further year earlier center opened make in local projects ensure investments Maputo to we of further and from having have the local set for engineering a benefiting expanded presence gas the opportunities are all continued we will capabilities developing oil the participation first

driving with is investment This most view in the strategic Golfinho to returns. We this assets approach enables companies. to opportunities secure for through Allseas. project Golfinho to first both collaboration efficient way while cycle significant complementary solar capabilities undertaken as enhanced and world-class delivery our access capital like and partnership access avoiding

Most structural integration of Subsea projects. of is trend the on part importantly, levels award broader greater a towards the Golfinho

was representing in Subsea awarded an adoption since the with year’s acceleration in all project We first clearly market awards. have industry of seen activity XXXX this XX%

adopted Integrated been across impact has of has and in the multiple our XXXX. XX% the iEPCI regions integrated first multiple exceeded For the even been orders profound. of of broadly, inbound with TechnipFMC, more projects model half More clients.

can of which market most result alliances of come TechnipFMC which new opportunities, returns. Several financial and achievement as lead exclusive to awards integrated of subject targeted are to to have our iEPCI a

our DEA, of announce E&P latest additional integrated alliance further iEPCI operators the one integrated to proud are we field Wintershall Europe. our value iEPCI in creating and integrated This by for services Wintershall life through with partnership DEA. expands of newly feed, largest successful already Today, the formed

In the we Arctic inbounded the X second quarter, EPC contract. LNG

for second our in contribute by the the project this opportunity honored Novatek example are to Arctic LNG delivery is We exemplifies award in fabrication environments. region of large-scale major the and of and the experience and development. and confidence trust exciting Novatek’s that This an to harsh an modularized

will extensively tons structures. annum trains project. per capacity This this new XX the comprising stage of metric solution nearly innovative of three The million an of we bring LNG feed on during is onstream engineering worked project on gravity-based

We will lessons our and model learned. recent leverage from leadership, of Yamal successes execution through LNG the continuity

from engineering are We from long footprint. to fabrication advanced a LNG, experience ordered. complex being in is scope FPSOs and integration will module that such our benefit procurement projects The utilize floating as also as lead and items ramp extensive activities continue confined well detailed obtained and gas will

years will execution stream The the expected currently project the of first of extend XXXX. with for several launch in phase

XX reach opportunity very XX strategic on LNG we today, set months. over selective ahead, pursuing to projects that a of the which FID set future focusing remains the some are we to next Looking could continue substantial; be of

closing, TechnipFMC. the unprecedented activity winning we intense experienced of was and quarter very project selectivity, that focus quarter In The with for demonstrates strong level are this an order a differentiation. on in commercial

versus adjusted growth prior and in the billion to Subsea for with company onshore/offshore sequential in versus $XXX both prior and year the the revenue margins all strength adjusted increased XX% segments. $X.X business to total million technologies. Operationally, increased improvement company by And notable surface XX% highlighted total EBITDA EBITDA three in year

with year visibility and The increased in guidance segments strength confidence backlog is us we achieve and greater across results as significant look all beyond. that and provides XXXX our will of assuming we these growth to improved full

financial I turn will call will who to over now the results. cover the Maryann,

Maryann Mannen

Doug. Thanks,

quarter pleased very second are with We results. our

This several total evident well results. and key to execution, benefit is strong from on our in continue risk We mitigation our company both major of as projects. as segment

EBITDA XX.X%. EBITDA prior in quarter $X.XX Total related to primarily $X.XX continuing after-tax million per from and share and the company increase year the adjusted in and to earnings excluding were adjusted Total an compares diluted $XXX million, charges costs provisions, million in to severance integration margins Adjusted operations when share. $XXX diluted was after-tax $XX.X of business per credits quarter legal credits with were and charges. charges

included in Guinea period estimate the legal net – provision the million and following: settlement including a related to in to probable to The historical if investigation the of projects an maintain for $XX $XX.X the which Equatorial Ghana. million provisions

resolve investigations a credit to a for related with charge million favorable the and and U.S. Brazilian to included settlement Unaoil; the net A final $XX.X commercial authorities a Brazil to litigation dispute. that settlement and related

exchange also items in $XX per share diluted partners in included pretax expense; to includes impacting foreign or Adjusted which quarter expense. is joint losses include earnings related other $X.XX share per corporate the guidance. do interest an liability provide payable venture million per to we in million not diluted of $XXX These the increase that share included for or and $X.XX

On of included and an these share after-tax $X.XX. our EPS again, diluted these per adjusted are $X.XX two diluted basis, total items in items

primarily revenue of versus increase segment. year the second award. iEPCI an operational Turning This quarter was project recent by prior XX% work including driven by activity, increased associated our to quarter. performance Subsea delivered $X.X of billion, with

further XX.X% was quarter. was Therefore project utilization projects by nearing second prior line primarily in and margin the risk year strong the with driven execution quarter completion. on XX% in EBITDA Adjusted mitigation

risk X. for EBITDA outperformance year point prior completion onshore/offshore, from Yamal mitigation and results. margins was by Further, we from execution benefited In driven successful guidance milestones improvement on in XXX a Yamal key most project. the strength on LNG This the full notably year continued an XX.X%, bonus incremental improved train to the of receipt on on basis

year Technologies, partially North sales. by And million increased line prior sales of revenue X% in in $XXX services rental versus quarter reduced globally the by driven higher frac flow America wellhead offset and Surface

weaker The quarter low-double-digit North the On unfavorable towards activity sequential trending continued where a EBITDA activity basis, product-line America decline growth. adjusted margins. outside of negatively resulted in X% mix completions first North growth from in revenue is and America impacted increased pricing as

XXX increased Adjusted EBITDA margin basis points more to than XX.X%.

our impacted actions faced that in internal first margins to North the market quarter we reflect the items remains. America challenges Our The results. address took

improvement operational underlying the recover sequentially. performance in margins helped our However,

flow, $XX operating key million receipt benefiting the in of flow Turning the cash we and awards. prepayments from of customer to period positive cash generated project

We flow four the generated quarters. positive last have in of each operating now cash

of period the year full $XX meet million the Beyond guidance with were in transaction impact spend. first the we excluding quarter capital the the Dive expenditures in and approximately track recorded million Support of we our $XX million for to the we Vessel. operating on disciplined sale Capital line, remain of remain leaseback $XXX

We million. ended the period $XXX with a of cash net

the Given from strength our of the positive of increased our the meeting the cash for in and first year, confidence have we full outlook flow year half guidance for operations. remainder

payments the cash Looking the settlements to Brazil the $XXX incur U.S. back related the will in in of to year, the and the half in third million we quarter. authorities with

However, additional will be with expect prepayments also there we awards. associated expected inbound

cash will operating second we of in do by timing flow half the positive. expect be the total quarter, vary to While

disclosures of quarter release. our for venture we Yamal Exhibit the additional joint X shared This in LNG have earnings

the we just XX%. over although ownership XXX% of JV As is financial a our consolidate in our statements reminder,

for contract the liabilities profit project, look QX, at At we the to revenue. think about end $X.X amounted When approximate billion. of future as of an this these we

project our this for profits two completion, be ways one partners to and cost extinguished in amount or vendors or for will reach paid we us. as As as

this quarters, portion execute significant each million. rest we reduce the incremental last to profit to would shared of amount and continue ten partners XXXX, the million well, $XXX of as have Looking we of done approximately our this become to to liability we expect between $XXX ahead by If us. for a

may arise. these reductions post in liabilities. to XXXX, be execution, warranty of anticipated million all continue any XXXX contract The in available in remaining also versus incremental to we result the And anticipate balance strong see incremental obligations should another should For to we profit $XXX million fulfill would cost. $XXX reduction liability that of

the as of mandatory call partner record period, would claims warranty the incremental generate of Once share we liability Similarly, warranty we have MRLs. profit, the also of profit. recognized a the our with redeemable absence

The the million. of balance MRL $XXX is current

any balance one partners distributions MRL of when We the the half in highest partner project this expect the second combined pay to majority level of with current year. XXXX for the of first of payments million. will half in to the $XXX the be year our

We in will payments see a significant step in down XXXX.

we $X.X financial XXXX our full forecast to billion first billion. to the Turning to strong of XXXX revenue guidance year billion $X.X inbound, previous Subsea for the billion versus $X.X guidance, $X.X of now half given

at are our previous XX%. at revising margin versus adjusted EBITDA We least of guidance least also guidance to XX.X%

revision the strength and year execution of the The of the certain the is by and achievement months the milestones six driven on driven in first projects. by

XX% onshore/offshore, EBITDA reflect are adjusted XX.X% second we well least from expectations as least at to first half strong For to increasing the the of margin our half in guidance continued strength for year. the at as our results,

million. $XX anticipated cash income year our primarily of the net expense impact expect $XX This to balances. million of previous now MRL We for driven to the expectations our million expense. on range We a are is excluding than higher range net interest revision to million of earned also in interest versus the for interest the $XX full by guidance reducing be $XX

We have provides certain rate jurisdictions for guidance primarily discrete XX% modified ability full to the assets to associated the tax allowance year. tax the adjustments includes in use valuation now our rate the XX% recovery, future. with it in to the The

synergies have the And remaining $XXX our we $XX the winning total related to achieved to our merger million synergies in million. finally, commitment now of

this for quarter very TechnipFMC. strong In closing, was a

and the a faced market. in both operational improvement and despite challenges Our demonstrated North onshore/offshore Technologies the of in execution Surface operating and in mitigation risk significant performance strong America results Subsea sequential

of in X.X project to-date, and an Golfinho LNG by largest record company our X. inbound the in Order awards acceleration single to-date integrated supported a including inbound total our quarter. accelerated book-to-bill achieved We momentum iEPCI largest second Arctic

of Subsea segments. the All reflected us remainder which for in these onshore/offshore greater is even our year and factors both in give outlook confidence upgraded guidance the our our for

the with beyond While of from look improved year XX% visibility, XXXX. us much total company provides backlog end we growth

Operator, for open now you call may the questions.

Operator

Goldman Instructions] The comes first [Operator Sachs. question Sedita from from Angeline

now Your is open. line

Angeline Sedita

Maryann. and Thanks. Good morning, Doug

First, congratulations year on the a a really order. on to very impressive first start quarter your inbound amazing and

Doug Pferdehirt

much, you Angie. very Thank

Angeline Sedita

You are welcome.

just So, offering what on can awards the and with awards few general, very you Subsea and certainly, Subsea are integrated in at works model TechnipFMC. this compete

think half about think pace into Do of given inbound the Subsea second that we and pace of the strong in orders XXXX the XXXX this about rate into here you the order And XXXX of So, orders? very XXXX half. inbound the even could as if orders be total as then second as will some see in we slowing as in far strong half XXXX inbound first? think we XXXX, Subsea first

Doug Pferdehirt

start, the and all you just participating Thank a, particularly I wanted who earnings entities technically call to a you called And the Thursday very the much, it’s I realize Europe. super recognize bit of of I before today. of Angie. in have guess, for I on

on all to you be call. taking thank So for time our

We support are your humbled our company. by for

thus little have Angie, so materialized bit far. things of let’s a talk how kind about

delivered of QX exceeded of QX whereas Subsea now our last XX or was then we first to on months up and it orders line could So, prior has business in for six that stack similar the a all months of anything QX. question QX the How year. with

second first of into there could continue forward look the see Subsea it of order will of are few is the a to half or large There we one come in out the absolute we strong beginning half or plus billion be the activity. awards dollar right two in a or The second value now that awards. very that As XXXX. function year really the half,

activity We set. But to new publish a and the our including impact both continue we very market have would Obviously, resilient terms those orders. our awards of total the inbound on the a in market. major the market view timing opportunity of see in of material

decreased this awards As result activity see, strong company. has there quarter you our that increased, were where will not as a of very the for some

opportunity see that been in set But and materials. has replenished up can you back largely that our

the of second in a If XXXX. of of well they the timing half it’s couple very So terms function strong XXXX. we outlook if very a occur XXXX a awards. to the move XXXX, in as these of end of continue into they Again, or large have of as

on that are I are integrated proprietary to opportunity opportunity when of the many years another Beyond our we this outlook, activity, for we our a of alliance iEPCI very you exclusive of. publish we to that several with proud that converted we remind DEA set been have Subsea feed which which set developing our including company have announcement Wintershall quarter

is outlook have that say, available, proprietary have and is set. opportunity the others we we market So, participate I’d that in then

in XXXX big the that way upon We see which trend XXXX. – based see and this timing of market occur we the second But this of constructive will of orders a we very of half the the remain in isolated do first will as a we as could So, event. as no half we versus continue. couple see see a

Angeline Sedita

Very Thank beyond margin for I very then helpful. Okay. And you, can a ask on Maryann maybe even first and at then, side Doug. XXXX high level. maybe the

up LNG the margins does progression Or that the X and with does again that side, Arctic that imply XXXX? margin could XXXX With integrated the on Subsea that XXXX change? actually awards award, in changed versus maybe the high in how level

term, a had conversation and Doug then, we’ve And this. about think longer I

peak integrated awards, go into in and and on XXXX coming it vessels with utilization given high As is XXXX Subsea to also XX% we margins XXXX, possible at near beyond but beyond, levels? return to and in close the

Doug Pferdehirt

projects these of clients and and geographies of economically then believe potential investment taken color. choices and and that the other unlocking steps with is that other done have high economics meaning other to to project investment. necessary have our we and competitive start comments structural provide types additional few level a making – a we sustainable Subsea viable let the we Maryann for in Angie, them and Look, change me will add

With very that the we benefit has of been obviously are and seeing that. working well

as the merger We Maryann result operating necessary have full benefited synergies, delivered six of and the the as months now plan. taken we’ve also than earlier guidance around a steps indicated, pretax

delivered So the cost we’ve merger. as a now synergies pretax of $XXX of million full result the

the it’s expectations on that constructive So very when for generation, will the the remain progression next we question develop continue or of and the a our the assets, and Subsea of Subsea beyond you generation, outlook margins. current we next though, that to add current put generation all of our the of margin. I the together for this generation to of innovate progression

as what in utilization improving seeing And out, is certainly XXXX, XXXX, which help the true we is, the capacity point will time. years, you margin that at point out are expansion with of the in

I progression out be in way margin model we it’s have think in to the the just prudent we that Subsea.

the the clearly very caution see first on inbound then I did that half high touch LNG moving confidence again, Arctic we increased margin as get in of margin have tightening contribution are right XXXX. direction will our iEPCI Maryann, want strong onshore/offshore? mainly and quality to progression to bit give reason for second market a and a through in just it’s us of XX% and projects XXXX the the alone over capacity to the overall half very of a inbound being in our XXXX, you on representing outlook. temper XXXX But in the

Maryann Mannen

color And around onshore/offshore. little just Sure, Hello, a thanks, more Doug. maybe Angie.

is frankly a and of portfolio Angie, and risk to the we project take contracts, all management obviously we of very way engineering As get plays approach across in further about heading as project our the piece a portfolios. measured phases stages we of But early through manage completions. to very that it, our think critical we try

if reach ability way Yamal us that So, as similarly at see, model you greater to we in profitability. avoid our very completion, I perhaps risks look even that to project think, as the generate final the you a allows to

the we look risk good profile think we I future Arctic us that get assumption, be we to Arctic. phases in cautious on that’s at when have as through very a will a way that will project allow reasonable and you similar Angie, management those early start large should the

Angeline Sedita

I’ll Thanks. turn Great. it over.

Operator

the Suisse. from line David of next Your question Farrell from comes Credit

now open. is line Your

David Farrell

on is Arctic the the question Hi, quick congratulations terms contract X comparison a I the LNG and in of structured. results. how had to on LNG Yamal

has was encountered the it. Yamal to X whether structured been rates there for tax entity think and I on and the I improvement structured how very high on French was there. rates is Arctic therefore wondering just potential a tax LNG contracts

Doug Pferdehirt

the you, our but men Thank thank just for David it and have the I results. Maryann and company you for the question XX,XXX generated to congratulations, the women goes really who of and will. a view today. the through the taxation LNG representing will French it here large at them Arctic indeed, of X honor of from Yes, also a least portion flow the point entity of

Yamal, of But large in the although a The the is, of overall have sum scope way we reimbursable contract used. is remainder a similar being that lump it structure Yamal a the contract that in ways many is different the the is to contract. to terms structured then is actually technology very similar and scope

David Farrell

just as to of the then, integrated follow-up, it kind Subsea. you wondering, of Thanks. kind tells the for wave I model second when got just am of us look And Okay. a you want on you to the use? kind with at of think now settled you’ve companies suppliers do vendor or the – do they think that’s still that different like base, experimenting

Doug Pferdehirt

Interesting David. question,

You right. see results, the

we’ve XXXX, integrated a received awards. XXX% those year-to-date So, of

ways, some that confident in guess, pack. are will part of I So, the we

other I to bring you We with are the set are companies. and potentially well through that believe obviously opportunities said currently experimenting skill that clients different positioned. as looking same to

installation to because, a a difficult that I or alliance. in David, due We manufacturing I an you, very due project Subsea as complexity trade-offs and little unsuccessful. to integrated to were in tried and bit we deliver venture opinion between the the remind hesitate an our the joint it’s the path. my response,

that activities the a now occurs the clients incredible and this a employees to as under recognize our one result as group demonstrated of real installation of come natural friction value a to having way together the sustainable to and that roof. between We unlock single manufacturing company, generate was the remove

generation system of Subsea next The capability the part R&D of total the systems including integrated is that. of delivery

do additional encourage So, we and believe I integration.

that You clearly it least market way. difficult see I us. was be such to able a in deliver is at to But it very it’s for moving through think happening. structure, difficult The

We now a are much happier as single entity.

David Farrell

very Great. Okay. much. Thanks

Operator

line from question Markets. Daniel from BMO Boyd the comes Capital next your of And

line now open. Your is

Daniel Boyd

Hi, thanks guys to we business half and flow? flow Maryann, targets and you question fantastic this the previously, talked yes, my we Congrats. cash Very the income outlook. think on second quarter. about conversion but of on about as for of clear free normalizing, the year how net we is the cash think about should

as this And order cash progress, as given of continues order flow a those uptake level expect XXXX we and to unfold? higher cycle and things say, free should the

Maryann Mannen

Yes, Dan. Thanks.

to should. the question is we So, answer yes, your

Yamal unwinding XXXX it of down that, pretty significant will about significantly talked we the a the in take of XXXX. is step As piece in

net to Subsea inbound So both free onshore/offshore much to a from and cash the incremental and with conversion we of of side would expect the the addition beyond from awards income see higher XXXX flow.

think, talked last were to we of I range in XX% XX%. about – we talking time in, when

XXXX some mind thing we certainly, across I in expect and free in about opportunities that to income of beyond rest the But much net to we think the higher there. think of conversion that constraint would and as the the we certainly part be keep is portfolio flow. have cash growth, growth

Daniel Boyd

about but recall of the are onshore/offshore in expected we normalized you be synergies I deal in on synergies past, think if segment. about Okay. think correctly, were and I to a the all around that now a Thanks. the the And level, talked portion through on full margins, large those just of the if X% capturing onshore/offshore you then,

big Doug wave as about. talked You also has LNG seeing a are of

So, the taking above range those of talked that that at sort into non-Yamal account, of we about the the least in for for be past. margins as think foreseeable to about all you’ve should sort next future,

Doug Pferdehirt

a Dan, of here considerations. a or So, of couple couple thoughts

it and a a the around First, provide greater complete we of made was the hope contribution – Yamal visibility Yamal not as bit the I clear as increased from project. result disclosure

there a from it’s manner, the point which be a the contribution again hard from highly has this it’s because project to to project. answer question one, So number hard – to successful in continue that forward, been will Yamal

demonstrated margin In this our have that a we outlook ourselves quantity for capacity to on we take we you business the around quality terms as versus run our projects projects again, of very this LNG our the both outcome match successful overall and without the ensure business that managed for clients, ensuring on, and with investors.

priority capacity and to our that that and ensuring in activity the the those have And remains terms some focusing of on deliver and we competency practice projects. our

ex I points our therefore, as revenue contribution So business a see and the LNG, $X for would could we of stick improvement percentage which activity. with XXX to with LNG basis LNG billion of in and billion $X was margin to increasing this X% X% prior said, outlook, a you with LNG with a

was is great. set true is capacity type are providers EPC LNG remaining in that have fiscally is more demonstrated of What projects to limited opportunity and it deliver the past that the the the is these and sound than

be to where on focused we terms best right financial should for that very the So, right projects have can us therefore, the results with the drive our expect company. ensuring you that

Daniel Boyd

Thanks excellent. the for Well, time.

Operator

Your next question line comes of from Evans the from BNP. Exane James

Your James is line is open. now Evans, open. now your line

James Evans

the Yamal, to of the on wanted you very for a questions on call future I couple a Maryann, the about detail LNG. Sorry, Thank ask second row. helpful. very, in

X. Arctic to great obviously, see So,

projects. You of other lot are bidding a

very some cost quite on sort replicate It fabrication the trends? cetera yards, to et like trust approach the successful these of happening Yamal busy, looks to What’s modularization. underlying won’t of your as we

And pricing term up? of expressed, are also that that filling but So, is question, some pressure of second yards is LNG. relates in a this to those there any cost about longer danger concern sorts on sort then downward of obviously, sort

lot We and projects sort hearing of plans. about of are

So, is from absolutely Or just your open? in there yet? clients still acquire any was it steam conversations ahead full

Doug Pferdehirt

you, James. Thank

of of today So They are that the modularized. stick being are considered still many LNG projects a built. things, are not couple

activity focused and onshore/offshore Subsea the success increasing of have we yards. other LNG is have demonstrated projects only I on fabrication not we very there had, where we we but So, we in modularization, experience on Yamal – yards. yes, have and the those with think relationships Because that good on

see projects. I as project other are that considering Culturally, they projects of they choice versus partner in ultimately us potential drives that believe execution success relationship. model-wise, and a when alignment our

a we you it correct is So, out. something of, that good we experience well across optionality having deliver very sense the can by and aware to that different that that ensure yards are yards those therefore we that have fabricators the but of we having believe point projects. It multiple successful will gained are very across and and we select right we partnership

capture I terms will in describe question be sanctioned the of I I projects an it? is way. part second not realizing client how think would there this of all If your accelerated outlook, pace that correctly LNG the

There more capacity of becoming then construction in be manufacturing is U.S. projects some significant - because of constraints geographical Coast, becoming is excuse for sanctioned concern. me the and a the capacity, potentially – instance, can Gulf markets, tightening is some where

in result accelerating other in I world of if think that you will market. parts the the just capacity the the see you queue potentially some overall as projects a of in maybe

So, be widespread continue before. indicated I’ve look, we as to

be are us projects on spread would but we projects If announcements strategic in you the projects have targeted see different to, announced have we Our and world. we future and intend different the certainly geographies. would partners around have

to that able mitigate access we we And We to and right manage those ways all to portfolio in had believe projects. again, the would could those would more talent risk is the somebody ensure environments, approach. who challenged always that deliver we be those have capabilities to with partner this good

I deceleration in seen bit – an of acceleration But say, forward of a a desire especially if the would I projects. of not major anything, have LNG our terms to of the clients sanctioning bring

James Evans

Very you. Thank clear. Super.

Operator

Your Meakim JPMorgan. next question the line from comes Sean from of

open. Your line is now

Sean Meakim

the grow model of despite that Doug, get about enable fact market slice integrated bigger pie a historically. for you. to the share been to FTI few last we’ve you already talking projects as years and the the Thank largest have the potential way

this year of that half really first the strategy. like, validates seems it so, And

to some If were the I a you were trough. remember, go when back ahead order this you of we for cycle heat on talent taking at of couple engineering holding years,

we of And $XX so use billion still more on now got backlog way. – the

to of the how fairway bit the capabilities? just you last few execution throughput you talk a prepare years in the manufacturing terms manage little over Could and and about engineering

Doug Pferdehirt

with Thank hold been project you to very management to have out, continue capability bit be you competency it are of always underabsorption. of decision engineering and to a Sean. made our our we along much, even Indeed, on meant two and and pointed differentiating those our when strengths, as a competency resources capability and

Likewise, if a I could extend with the conversation recall, the same did moment, fleet. for the we

there the the if were will, competitive, very type only the the sizes were our being years, a industry. larger or when set for are more vessel market on back So, many and of substantial therefore you in prior having fleet that contracts C&I problem than bit competitors ourselves

to our as put those flow have on you pricing of those And fleet we projects aggressive going capacity utilization integrated to back recall. we the very and through. to projects. We to out set that were hold will and We said, saw

if don’t remember I am wrong, be I that think of would be it if clear I obviously the we a fleet, will decision. been that projects will poor will capacity the have absorb I announce because then integrated saying, –

as additional and have awards to-date XX% now news earnings projects call, of have The continue to we integrated last total and our we awards. is, you we those we’ve announced received our again since good representing XXX% know, three of and

sight We coming most likely quarters. projects awarded have in a good we integrated the will be additional that on line of

we of will that. see the So benefit

XXXX, will phase to the the of through phase go go can before we installation in because through the have those manufacturing that XXXX, we obviously through Now flow contracts.

So, look, projects company. capacity very, understand we manage that We very at are we the end, closely.

be that able deliver important be have to and to the that we on we are capacity to to comfortable made the projects world-class that for that projects customers. It’s right quite deliver of able have capacity our we these decisions because were

Sean Meakim

near-term. the the half guidance Got of spend little we on more puts margin it. takes and if that. on I for the for more was And hoping implied the could to Subsea Thank a year? XX% then, you the back little a time maybe bit

in that Thus seasonally. good you’d obviously result number. is with It completions sounds But project maybe what XQ. also the expect very So, some line help like in utilization good. quite

what that confidence in and back in the So, for factors that shift half the are have guidance influence floor? the you

Doug Pferdehirt

result implies we ahead the get you Look, back if are mathematically, XX% you look always at always so, half raised And obviously, – least be of at XX% off know, from you good to at – guidance Sean, Yes, game. that our least half margin of to Subsea back that guidance. reach guidance at it XX.X%. to correct, to least

to exceeding above good year to early prior Always by our months start point a the staggering of view. the from Again, XX the way inbound get the just results, whole which XX% of to months look at inbound good six was trough. both

book-to-bill in backlog. reflecting well growth quite and that the So, the obviously as the significant in

we what upon point way full with the approach us this see that utilization things the at And we these are set the XX% based for the we vessel give can believe time, So, out confidence and stick prior prudent the year. guidance we indeed we that increased XX% all how you always we to fact in the and as our and of guidance targets.

We time was So to takes of increase a that, for to just bit the to this a things think those XXXX. guidance effect. it it’s bit place the but happening, a for of positive of indeed develop. right Lot seasonal

Sean Meakim

For a lot. sure. Thanks

Operator

of line question the comes Societe next Your Guillaume from Delaby from Generale.

open. now is line Your

Guillaume Delaby

and afternoon questions I Two if congratulations. Yes, good may.

it’s do decline regarding it First, is Or regarding your little according likely, bit XXXX in the to i.e. the see a XXXX. temporary would maybe spending North as America you Is you? it have to Doug, more which sausage I structural? X like view business,

Maryann. question my question second is for First and

like would than loaded that X? think be I Yamal. cash front-end profile bit Arctic cash about less Just I of to I Because that elaborate flow know, flow profile wrote could more the if a you might thought as LNG somewhere little the

may – according flow to cash lines So it may going on? be a stream balanced more different

Doug Pferdehirt

much. wish one as get Two with interesting I no Maryann, because will very the know, well order you you first to the Thank it right. answering the I reverse could question, questions.

way So, see talk let it. in me America that we market North the the about

approximately So, outside for seeing XX% seen that America. I remind and are North of have Surface That we an business we of pricing. business, an now inflection you is business and to am our going in inflection step back our Technologies in activity

So our of have approximately comprises constructive America a we outlook business XX% the very North of which outside segment. for

will market. market. the serves market I manage the way two the our to the – parts America business America North – think of quite unique. towards business We we turning North of two is, we is Now There parts that that our

terms is pumping One equipment conventional where in services. we North consumable that the the the we fracturing provide very to the the – in efficiently safely market. And pressure and business allow to them high-end part hydraulic provide industry is the America product second the support of provide

will plan will be a We that not conservatively recovery. there significant

way why. are question. as not am of going our to pose saying the the that drilling you versus in it’s the the and activity. to case production business to Much completion tied that tied not second necessarily we believe activity. the and Increasingly, plan I XXXX that But be me I XXXX explain of is half let will

continue move to and us differentiate further more our business to see and completions our a to production-related. related and business will being forward that us put from you So allows drilling strategy heavily

spend the flat and what’s The completion The market production continue called that’s even stacking. that’s about stacking later to the a when North business. can we reason talk will effect our of in market in a activity increase exciting that a more that, opportunity the function for But at drilling just is transform us perhaps is way the will we date. America important and and very – that a Maryann? production

Maryann Mannen

your Yes, first flow, that neutral, very flow second you. all clearly maintain positive and for position large foremost, will, flow for the Arctic operational project. question Arctic our or it a we is for of cash for life objective regarding across but our you obviously as clearly And of cash we X, the cash this a if out thank set projects,

similar phase that in the receiving of have you that, projects said of with several In the that bit to are if will different. quarter, very the the profile, successful expect also early will, us of size Yamal. Having were we we these allow a contract one payments to a

the that as that the its you the will similar may phase, very mechanism, have so, flow terms remember may if And in we or and the profile same you of we structure from in exactly over payments cash will, maintain profile not but life the early of project. Yamal, that advance

Operator

from the RBC. question Hallead comes next from Your Kurt of line

is line Your open. now

Kurt Hallead

Hey, are XX run on in. the over and Congratulations thank where last a good for squeezing you afternoon months. so much phenomenal you me

So, organization kudos well. to everybody and your there you kudos in to as guys

the project just on earlier both you’ve I and one onshore/offshore. for for the awards which of on And so, with Doug, had maybe hit topics along success Subsea backlog and increased

driving within you little walk on more you the the execution in what – about are dynamics how had can through the And that – execution the us at organization you do bit profile maintain past? you front? play a that How to

in terms as business. of backlog you of the have of in you that some lot a it’s in mentioned this Right, unprecedented the

part question. one the of That’s

are with what awards in on, of project part and you increase kind if at cost mitigate that’s that activity, the of all? to Second creeps possible question so is, Hello. doing Hello.

Doug Pferdehirt

had Sorry, my Kurt. button didn’t on. I

question. very to you much mute. got if thank for are practice on the So, I they

that LNG though in I’ll The level it’s terms important So reported – both start are Subsea specifically. of know to below our even as in we that as quite activity robust again. of that have well is inbound capacity in demonstrated the

it and are very will that able to comfortable exceptional continuity to project our direct execution of we leadership be management we we to provide particularly – that with So, continue project clients. will the the to

as and commitment and most only some our and and robust. complex is developed you excellent of on not provide are investment of our periods to in of of where was as confident that to this we we the results terms we take That’s to will that were clients we in activity important that them those and question that with their entrust why earlier maintained portfolio ensure projects community execution our during capacity us what key can their the projects we the and invested

there obviously the we the to is just is There the contracts. that of In escalation in cost our of calculation a or terms tied done of time creep, built general either contract. of in, signing index escalation consider that’s cost all an cost at

Kurt Hallead

Great. me, If for I have one follow-up. time

Given the your of capturing in have are paradigm kind a as you driving awards these of the customers of looking projects. ways at had you success kind guys in and tremendous mentioned shift these project

some a pulled you be the in lack sense Subsea you dynamic can I or the there share a if gains space the get pricing competitors. general here will, What the questionable on that that behavior dynamic on play you do you a result where market sense share, of in might direction market out? may how getting or am part curious, can your just your your might you from give think are us – competitors see within

Doug Pferdehirt

do. think difficult I it’s briefly, Kurt, what the predict will competitors to

of think, behaviors. not execution on much am our Look, about and in I strategy being our focused are so We I successful the type strategy. unpredictable worried

– the this point I’ll are competitors. this what, in you I tell restructuring We that leave to understanding the of like XXXX in of that up really think lead further versus at cycle set glad. ours people major the I back not. markets. we and something will now of growth our did But growth or right our will market think, the to be I maturing understand opportunity considering

Kurt Hallead

very Okay. appreciate Thank the you Thanks. Always insights. much.

Operator

comes have Wong last our we Q&A the session UBS. line question And of Amy our of reached the end from and from

Your open. line is now

Amy Wong

related to and I have Hi, for squeezing business afternoon me questions please. Subsea two thanks good your in.

updates is tree the one pipes facilities, some get Subsea manufacturing more precisely your the manufacturing? and equipment I flexible on first manufacturing just, could Subsea The

what for be could to-date, do are higher year there you or utilization XXXX? orders the the this with rates utilization the in lower think What and

to was, a margins. Subsea that first the going to question. more, That’s get margins my for is asked revisit the bit just in back in XXXX question trough earlier my business? we year question whether A going the a And was second

you and do that questions. if through in earlier feel the the two got my through bookings are the XXXX to the year XXXX the year, see answer is have, all goes time we’ve and kind the of for answered, order way we margins? with how at whether now trough you confident, you flow And you the can Those half that are

Doug Pferdehirt

extend manufacturing question great utilization with give capacity roofline. say don’t very invested our the our the to and and – moving a of plants actually facilities. been individual manufacturing we without to will facilities prudent in way having incorporating into we've extend in I including Amy, we’ve that robotics our

a addition much In we our next to Subsea that, our even us call actually – uses faster much to thus or roofline roofline. a a facilities generation is allowing X.X similar cadence capacity reduction extend which of equipment through through Subsea a demonstrated the in manufacturing

in outlook, point And had expect Specifically, is than the time, to footprint your first XXXX that we’ve or year for we our this would given that the and be question, yes, at Subsea manufacturing of indeed margins. trough to XXXX our utilization half success of indeed the we greater the XXXX. absorption expect in

Amy Wong

That’s much. very Thanks clear. very

Operator

session has Q&A ended. The

Matthew to Now I like would Seinsheimer. Mr. over call to back the turn

Matt Seinsheimer

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

If further free any Thank questions, the team. feel us. please contact you have to Investor joining you for Relations

call. you Operator, the may end

Operator

call. you. conference concludes This today’s Thank

disconnect. now may You

TechnipFMC (FTI) 25 Jul 192019 Q2 Earnings call transcript