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TECHNIPFMC PLC

(FTI)
  Report
Delayed Nyse  -  04:00 2022-09-23 pm EDT
8.350 USD   -6.81%
09/23SECTOR UPDATE : Energy Stocks Decline Pre-Bell Friday
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09/23TechnipFMC Awarded a Significant Subsea Contract for Shell's North Sea Development
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09/22TechnipFMC Gets Subsea Contract for Shell's North Sea Development
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TECHNIPFMC PLC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

07/29/2022 | 04:14pm EDT

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 Ukraine have further exacerbated these trends, with the invasion disrupting access to several key commodities and supply routes. With long-term demand for energy forecast to increase, the conflict has highlighted the need for greater energy security for countries across the globe.

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 United Kingdom. We also signed an agreement with Shell to explore synergies with a shared goal of enabling offshore renewable energy generation and reducing total CO2 emissions - another example of how our long-standing partnerships extend to all areas of our business.

•More recently, Orbital Marine Power, which is collaborating with TechnipFMC to accelerate the global commercialization of its tidal stream turbine, was awarded two contracts for difference in the UK Allocation Round 4 multi-turbine projects in Eday, Orkney. Capable of delivering 7.2MW of predictable clean energy to the grid once completed, these Orbital tidal stream energy projects will support the UK's security of supply, energy transition and broader climate change objectives.

Subsea - Innovative approaches to subsea projects, like our iEPCI solution, have improved project economics, and many offshore discoveries can be developed economically well below today's crude oil prices. We believe deepwater development is likely to remain a significant part of many of our customers' portfolios.

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 $90 per barrel, the opportunity set of large subsea projects to be sanctioned over the next 24 months has expanded, driven in part by new greenfield opportunities in Brazil and Guyana. We also expect increased tie-back activity, with growth from these smaller projects to come primarily from the North Sea, Gulf of Mexico and West Africa - all regions in which we have a strong presence and are well-positioned due to our extensive installed base.

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 Subsea inbound in the first half of the year, with orders growing to $3.8 billion, a book-to-bill of 1.4. iEPCI, direct awards and subsea services represented approximately 70 percent of total orders. We now expect our full-year Subsea orders will be up as much as 40 percent versus the prior year, above our previous forecast of 30 percent, with orders now approaching $7 billion in 2022.


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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 TechnipFMC.

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 U.S. land market. We believe these changes are fundamental and sustainable as a result of new business models and technology pioneered by our company.

Surface Technologies - Our performance is typically driven by variations in global drilling activity, creating a dynamic environment. Operating results can be further impacted by stimulation activity and the completions intensity of shale applications in North America.

Activity in North America is expected to increase in 2022, driven by higher drilling and completion activity and an improved pricing environment. Our completions-related revenue continues to benefit from the successful adoption of iComplete - our fully integrated, digitally enabled pressure control system. We also recently introduced our E-Mission solution for onshore production facilities. This digital offering uses proprietary process automation to provide the industry's only real-time monitoring and control system that both reduces methane flaring by up to 50 percent and maximizes oil production.

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 Middle East remains one of our largest market opportunities in the current decade. In December 2021, Surface Technologies' received a multi-year contract from Abu Dhabi National Oil Company - its largest ever award - to provide wellheads, trees and associated services. We are also adding new manufacturing capabilities in Saudi Arabia where the country is expected to increase its sustainable oil capacity and significantly increase its production of natural gas over the next decade.



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© Edgar Online, source Glimpses

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