BUSINESS OUTLOOK
Overall Outlook - The growth in global energy demand has been driven by increased economic activity. Oil prices have been further 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.
The shift from the pandemic-led contraction to economic growth has resulted in
high inflation and logistical bottlenecks. The energy transition and the Russian
invasion of
We have entered a multi-year upcycle for energy demand. We believe that investments in new sources of oil and natural gas production will increase over the intermediate-term, resulting in strong inbound orders for our Company through at least 2025. We are confident that these conventional resources will remain an important part of the energy mix for an extended period of time.
We are also committed to the energy transition, where we believe that offshore will play a meaningful role in the transition to renewable energy resources and reduction of carbon emissions. We are making real progress through our three main pillars of greenhouse gas removal, offshore floating renewables and hydrogen.
We have been successful in building on our partnerships and alliances to further position ourselves as the leading offshore energy architect.
•During the first quarter, one of our partnerships in offshore renewables,
Magnora Offshore Wind, signed the Option to Lease Agreement for the ScotWind N3
area, where the proposed development project will install 33 floating wind
turbines with total capacity of approximately 500 megawatts - which could power
more than 600,000 homes in the
•More recently,
We have experienced renewed operator confidence in advancing subsea activity as
a result of the robust economic outlook, improved project economics and more
recent concerns regarding the security of energy supply. With crude above
For the current year, our early engagement and client partnerships support our
view that subsea tree awards for the total industry are likely to exceed 350 - a
level not seen since 2013. We experienced continued strength in
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As the subsea industry continues to evolve, we are driving simplification,
standardization, and industrialization to reduce cycle times. The
industrialization of our project business through the introduction of
configure-to-order (CTO) is another way in which we are driving real change in
our industry that further improves the economics of our customer's projects
while driving greater efficiencies for
With CTO, we have designed an environment, process, culture and tools which are scalable and, more importantly, are transformational to the future of our company. Our customers require a product platform that provides them with choices which meet their unique and evolving needs, but also provides them with the significant speed, cost and efficiency benefits that come with product and process standardization. CTO has allowed us to redefine our sourcing strategy and transform our manufacturing flow, resulting in up to 25 percent lower product cost and a shortened 12 month delivery time for subsea production equipment - savings that are both real and sustainable. This has paved the way for other products to adopt a similar operating model, enabling an enterprise-wide way of working.
Since 2015, offshore economics have materially improved, and subsea cycle times
have become significantly shorter. This has resulted in new subsea investments
coming much earlier in the cycle and more in parallel with the short cycle
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
Activity in
International markets will continue to represent a significant portion of total segment revenue in 2022. Our unique capabilities in these markets, which demand higher specification equipment, global services and local content, provide a platform for us to extend our leadership positions.
The
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