Overall Outlook - The short-term outlook for crude oil has improved. Economic
activity continues to expand, driven by strong fiscal stimulus, COVID
vaccinations and the re-opening of local economies. Oil prices have been
supported by the industry's more disciplined capital spend, particularly for
OPEC+ countries which appear to be focused on realizing a price that supports
both economic growth and continued energy investment. These conditions could
also provide greater price stability over the intermediate term.
Long-term demand for energy is forecast to increase. Our conversations with
clients remain constructive, and we see continued improvement in the broader
market outlook as investments in new sources of oil and natural gas production
increase over the intermediate-term. Looking beyond the strength of these
traditional markets, we believe that offshore will continue to play a meaningful
role in the total energy mix, including, in renewable energy resources.
Subsea - The strength of our inbound orders in the first half of the year has
been indicative of the continued offshore market recovery and expansion.
Innovative approaches to subsea projects, like our iEPCI™ solution, have
improved project economics, and many offshore discoveries can be developed
economically at today's crude oil prices. We believe deepwater development is
likely to remain a significant part of many of our customers' portfolios.
As the subsea industry continues to evolve, we have taken actions to further
streamline our organization, achieve standardization and reduce cycle times. The
rationalization of our global footprint will also further leverage the benefits
of our integrated offering. We aim to continuously align our operations with
activity levels, while preserving our core capacity in order to deliver current
projects in backlog and future order activity.
We have experienced renewed operator confidence in advancing subsea activity as
a result of the improved economic outlook, lower market volatility and higher
oil price. With crude above $60 per barrel, the opportunity set of large subsea
projects to be sanctioned over the next 24 months has expanded.
Front-end engineering and design ("FEED") activity continues to improve. FEED
activity in the current year is expected to return to the more robust levels
seen in 2019, which further supports our view of a sustainable recovery for
deepwater. We expect at least 60% of the projects undergoing studies in 2021 to
include an iEPCI™ solution, many of which could be directly awarded to our
Company upon reaching final investment decision.
TechnipFMC is increasingly less dependent on larger, publicly tendered projects.
•We anticipate that an increasing share of our inbound orders will result from
projects that will be directly
awarded to us, many of which may
come from our alliance partners;
•We anticipate higher activity in subsea services, with the industry's largest
installed base; and
•We expect a higher mix of iEPCI™ project awards, demonstrating strong
geographic diversity and new adopters of our unique, integrated approach to
We are confident that Subsea inbound orders in 2021 will exceed the $4 billion
achieved in the prior year. We expect Brazil to be the most active region of the
world for new project orders, driven by continued investment in the pre-salt
field discoveries. We anticipate additional market growth potential coming from
the North Sea, Asia Pacific and Africa. The strong front end activity we are
experiencing today should further support project award momentum into 2022.
Surface Technologies - Our performance is typically driven by variations in
global drilling activity, creating a dynamic environment. Operating results can
be further impacted by stimulation activity and the completions intensity of
shale applications in North America.
In 2021, we expect our completions-related revenue to outperform the overall
market, driven by increased market adoption of iComplete™ - our fully
integrated, digitally enabled pressure control system. iComplete™ has already
achieved significant market penetration since its introduction in the third
quarter of 2020, with more than 10 different customers utilizing the new
Drilling activity in international markets is less cyclical than North America
as most activity is driven by national oil companies, which tend to maintain a
longer term view that exhibits less variability in capital spend. Additionally,
we continue to benefit from our exposure to the Middle East, the North Sea and
In recent years, our international revenue has become a greater proportion of
total segment revenue. We expect a gradual and steady recovery in well count in
2021 to drive modest international market growth, with spending increases led by
national oil companies, particularly in the Middle East.
Our unique capabilities in the international markets, which demand higher
specification equipment, global services and local content, provide a platform
for us to extend our leadership positions. We remain levered to these more
resilient markets where we expect to source approximately 65% of our full year
Surface Technologies revenue in 2021.
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