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
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, we signed the Option to Lease Agreement for the
ScotWind N3 area through our partnership in offshore renewables, Magnora
Offshore Wind. 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.
•In July, 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
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'
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 nine months of the year, with orders growing to $5.2 billion, a
book-to-bill of 1.3. Our Subsea Opportunities list remains at a record level.
This strong project pipeline and the active dialogue with our large and expanded
customer base gives us continued confidence that our full-year Subsea inbound
will be up as much as 40 percent versus the prior year, with orders approaching
$7.0 billion in 2022. Extending the outlook into 2023, we believe orders over
the next five quarters will be at least $9.0 billion.
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 have also added 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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