TechnipFMC plc

Ladies and gentlemen, thank you for standing by and welcome to the TechNIP FMC fourth quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to hand the conference over to your first speaker today, Mr. Matthew Feinheimer. Thank you. Please go ahead, sir.

Matthew Feinheimer Thank you, Nneka. Good morning and good afternoon, and welcome to Technip FMC's fourth quarter 2020 earnings conference call. Our news release and financial statements issued yesterday can be found on our website. I would like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current expectations, beliefs, and assumptions regarding future developments and business conditions, they are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. Known material factors that could cause our actual results to differ from our projected results are described in our most recent 10 , most recent 10 , and other periodic filings with the US Securities and Exchange Commission, the French AMF, and the UK Financial Conduct Authority. We wish to caution you not to place undue reliance on any forward-looking statements which speak only as of the date hereof. We undertake no obligation to publicly update or revise any of our forward-looking statements after the date they are made, whether as a result of new information, future events, or otherwise. I will now turn the call over to Doug Ferdihart, Technip FMC's chairman and chief executive officer.

Thank you, Matt. Good morning and good afternoon. Thank you for participating in our fourth quarter earnings call. I am delighted to be joined by Elf Moline, our chief financial officer. Today, I'll start by highlighting the tremendous successes of our company over the course of 2020 in the face of one of the most challenging years on record. First, we protected our people. Our success has always been the result of the tireless efforts and unwavering commitment of the women and men of Technip FMC. What they accomplished in 2020 was nothing short of exceptional, given the hardship and difficulties that occurred across the globe. Health and safety is our top priority and drives every decision we make. We took the steps necessary to protect our workforce as well as our fellow employees of our customers, contractors, and suppliers. And these actions won praise from clients and ensured that their projects moved forward safely. Second, the initial outlook we provided last February was clearly impacted by a multitude of events, but our teams quickly responded with a revised view that we provided in July. Our aggressive cost reduction plan, focus on project execution, and resilient backlog provided us the confidence and visibility to issue guidance at a time when few others in the energy sector were willing to guide for the next quarter. And we delivered on our revised plan with full year revenue and adjusted EBITDA margin meeting or exceeding guidance for all operating segments. And third, we protected our backlog. Importantly, this speaks more to the relationships we share than the contractual terms of any one project. We all face challenges, our suppliers, our customers, and Technip FMC. By working together, we found solutions that help mitigate, if not eliminate, many of the obstacles we face together. While no projects were canceled from backlog, the more enduring impact to our company will be the strength in relationships that have resulted from the collaborative engagements with our partners during this unpredictable operating environment. And beyond these successes were many other notable achievements with regards to our ongoing business transformation. First was our separation. Throughout 2020, we continued to work to separate Technip FMC into two industry-leading pure-play companies, with the transaction now completed through the partial spin-off of Technip Energies. We took specific actions in response to investor feedback that were incorporated in the final spin process. We accelerated the spin timeline, closing the transaction just 40 days after announcement. We added an ADR that will trade over the counter in the U.S., broadening the base of eligible shareholders for Technip Energies while also creating additional liquidity. And we addressed investor concerns regarding share flow back and capital structure with the addition of BPI France as a long-term reference shareholder and our near-term retention of a minority stake in the new company. February 16th marked day one for an independent technique energies. But its real significance is the expanded opportunities and enhanced focus of management, resources, and capital that will serve to benefit stakeholders of both organizations. Beyond the separation, we also accelerated our cost reduction efforts across the entire company in 2020. We announced targeted cost savings of more than $350 million. which we achieved on an annualized run rate basis well before the end of the year. Additionally, we delivered on our commitment to reduce capital expenditures for the full year by one-third versus our original plan, with the current spend at a level that is sustainable over the middle term. In November, we provided a comprehensive overview of our efforts around ESG. Technip FMC was created with the vision to drive real and sustainable change in the energy industry. This included the introduction of a three-year sustainability roadmap that has resulted in a number of successes for our company. We have progressed well in reducing our own emissions of greenhouse gases and are committed to helping our customers reduce their carbon footprint with innovative solutions and technologies like Subsea 2.0 and iProduction. We are driving inclusion in the workplace as demonstrated by our initiatives advancing fair and diverse representation and ensuring equity of our rewards. We are supporting the development of the local communities in which we live and work through educational programs focused on science, technology, engineering, and mathematics. And we will continue to ensure that our actions are aligned with shareholders through executive compensation programs that are focused on driving behavior that creates sustainable shareholder value. We also established an extensive set of new commitments to be realized through 2023 that will have real impacts and will be measured using an annual scorecard to provide transparency on our progress. At the core of our environmental initiatives is 50 by 30, a bold commitment to realize a 50% reduction in Scope 1 and 2 equivalent emissions by 2030. That's a 50% reduction before the end of this decade. Over this very same time period, we will continue to deliver real solutions for the energy transition, including lower carbon alternatives such as our all-electric production system for subsea and I production for surface markets, both of which are available today. We will also introduce zero carbon alternatives, such as our Deep Purple initiative, which I will discuss shortly. Technip FMC has a strong history of challenging industry convention to develop, design, and integrate new innovations. And digital is a key enabler for continued success. We introduced elements of our digital transformation over the course of 2020 with a particular focus on Subsea Studio. Subsea Studio was initially developed solely for subsea system design, but we have since extended the platform beyond the front end to incorporate the execution and field management phases of a project. Once fully implemented, we'll have a seamless digital thread from concept design to tendering, manufacturing, and delivery, and continuing all the way through the life of the field. These digital initiatives improve economics, enhance performance, and reduce emissions, driving sustainable change that makes us the partner of choice for our customers. And once again, we are leveraging our subsea expertise by bringing digital innovation into the surface arena that enhance the customer experience for both iComplete and iProduction. iComplete is a fully integrated, digitally enabled well site operations and control system It creates a seamless digital experience with fully autonomous maintenance and remote data access, initially from the completions phase and ultimately extending through the production phase. iComplete significantly improves efficiency with 50% faster rig up and rig down times, a 66% reduction in the personnel required on site, and cost savings that exceed 30% for our traditional work scope. More importantly, it also increases safety by eliminating thousands of red zone interventions on a typical completions pad by using automation and control to engineer out risks and hazards. iComplete has already achieved significant market penetration since its introduction in the third quarter, with 10 customers utilizing the new integrated system. iComplete is a real example of business transformation. and its early success supports our expectations for growth and our completions revenue in 2021 to outperform the overall market. Turning to the key drivers of our 2021 outlook for surface technologies, international revenue has grown to become an even more significant portion of our business mix. For the current year, we expect a gradual and steady recovery and well count to drive modest international market growth with spending increases led by national oil companies, particularly in the Middle East. Our unique capabilities in this market, which demands higher specification equipment, global services, and local content, provides a platform for us to extend our leadership positions. For North America, we anticipate full-year revenue will likely be flat to down modestly versus 2020. Overall, Surface Technologies continues to benefit from the adoption of our digital solutions and the broader market recovery. We remain levered to more resilient international markets where we expect to source approximately 65% of our full year revenue. Moving to the subsea outlook, the subsea opportunity list has expanded since our last update, reflecting our view of renewed customer confidence given the improved economic outlook, lower market volatility, and higher oil price. Four new projects were added in the period, increasing the total estimated value of the opportunity list by more than 15%. Two of the projects came back on the list after being extended beyond our 24-month view during the height of the pandemic. We experienced strong momentum in front end activity in the second half of last year, and we expect this to continue throughout 2021, creating an environment for a more sustainable deep water recovery. Additionally, we expect at least 60% of the projects undergoing feed studies in the current year to include an IEPCI solution, many of which will be direct awarded to our company. As we have said before, we are increasingly less dependent on the larger publicly tendered projects. In 2020, just over 25% of our inbound came from projects on the opportunity list, and in 2021, that number will likely be lower. Much of our 2021 inbound sits beyond the opportunity list. We expect we will be awarded more IEPCI and more subsea services. And we expect we will see more direct awards to our company than in the prior year. This will include project work from our newest alliance partner, Repsol Sinopec, where we have recently formed an exclusive five-year alliance to support oil and gas development in the United Kingdom. deploying both IFEED and IEPCI and leveraging our extensive installed base across the region. For 2021, we are very confident that orders will exceed the $4 billion achieved in 2020. We anticipate Brazil will be the most active region of the world for new projects driven by continued investment, and we see additional market growth potential coming from the North Sea, Asia Pacific, and Africa. The strong front-end activity we are experiencing today should support a multi-year outlook driving our expectation for continued subsea order growth in 2022. Looking beyond the near term subsea outlook, we are excited for the role Technip FMC will play in the energy transition. With significant opportunities including novel wind wave energy, carbon storage, and green hydrogen. With over 70% of the world's surface covered by water, we view offshore, and more specifically subsea, as the next frontier for the energy transition. Offshore opportunities will require more technology innovation, involve an expanding list of players, and necessitate a higher level of collaboration. Our core competencies allow us to transform new technologies into commercially viable renewables projects. We are well positioned to serve as system architect from technology development to project delivery and life at field services for these large scale renewables ventures. Last year we introduced Deep Purple. Deep Purple is a collaborative effort between Technip FMC our clients and partners. Our common goal is to integrate offshore renewable electricity and subsea hydrogen storage to provide power to subsea infrastructure and when at scale to provide clean energy to consumers. We have made significant progress with the conceptual and technical phases of this project. This includes the optimization of a hydrogen flexible flow line and riser qualification. We have secured an innovation grant in Norway for a three-year pilot project where we will lead the efforts to develop and optimize offshore wind, hydrogen, and advanced energy management. And we will also develop a dynamic model and digital twin, further contributing to our overall digital strategy. And Deep Purple is just the beginning for us. Further success in the energy transition will come from collaborations. Partnerships will be instrumental in this transformation. We recently partnered with Floating Power Plant, a clean technology company, for an EU grant deal application to fund an offshore green hydrogen pilot for the Canary Islands. And we have also partnered with EDP Energias de Portugal on the Beyond Hydrogen Project Study Offshore Portugal. The ultimate path to commercialization for these and other opportunities will be driven by our ability to provide innovative and proprietary technologies that are unique to Technip FMC, partner with our clients as the architect and integrator of the new energy system, and build new partner alliances that leverage our expertise in integrated project execution. Importantly, these are the same core capabilities that have driven our success in the traditional energy markets. And we will also invest in early phase projects and solutions that accelerate the role of our technologies in the energy transition as we continue to redefine offshore energy. I will now turn the call over to Elf to discuss our financial results in more detail and provide you with our outlook for 2021.