TechnipFMC plc

Thank you for holding and welcome everyone to the Technip FMC fourth quarter 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you'd like to withdraw your question, again, press the star one. Thank you. I will now turn the call over to Matt Seinzheimer. Senior Vice President, Investor Relations and Corporate Development. Mr. Seinzheimer, please go ahead.

Thank you, Jack. Good morning and good afternoon, and welcome to Technip FMC's fourth quarter 2022 earnings conference call. Our news release and financial statements issued earlier today can be found on our website. I'd 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-K, most recent 10-Q, and other periodic filings with the U.S. Securities and Exchange Commission. 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 Ferdihurt, Technip FMC's Chair and Chief Executive Officer.

Thank you, Matt. Good morning and good afternoon. Thank you for participating in our fourth quarter earnings call. It is clear that we are in the midst of a multi-year growth cycle, as evidenced by the continued growth we experienced across our company in 2022. Inbound orders for the full year grew 20 percent to $8.1 billion, driven by subsea inbound of $6.7 billion, which increased 36 percent versus the prior year. The strength of the inbound resulted in 24 percent growth in subsea backlog to $8.1 billion at year end. And as we will discuss in a moment, we anticipate further growth in 2023. For the full year, total company revenue grew 5% to $6.7 billion, while adjusted EBITDA improved to $670 million when excluding the impact of foreign exchange, an increase of nearly 20% when compared to the same metric in the prior year. These results demonstrate continued improvement in revenue and adjusted EBITDA margin in both operating segments and reflect our strong commitment to deliver on our financial objectives. In 2022, we also materially improved our financial position. We generated free cash flow from continuing operations of $194 million for the year, and gross debt was reduced by nearly one-third. At our analyst day in 2021, we announced our intention to begin shareholder distributions in the second half of 2023. Given the significant valuation opportunity we saw in our shares and the steady progress made in reducing our outstanding debt, we accelerated the timeline by a full 12 months with the authorization of a $400 million share buyback program in July. We immediately put the plan in action and repurchased $100 million of our shares by year end. We also remain committed to a quarterly dividend, which we intend to initiate in the second half of this year. Looking beyond 2022, we remain confident in the strength of this upcycle and continue to believe that international markets will lead the next leg of expansion. International can largely be defined as offshore and the Middle East, and Technip FMC is uniquely positioned to take full advantage of this growth. More than 90 percent of our revenue is generated outside the North America land market, and we have leading positions that are geographically levered to many of these important growth markets. Focusing first on offshore, our subsea opportunities list, which highlights larger projects with the potential for award over the next 24 months, continues to represent a record level a potential project activity amongst an expanding customer base in all major offshore basins. The average project size on this list has grown to nearly $750 million, driven by momentum in large greenfield activity. In addition to these more visible opportunities, we continue to forecast strong tieback activity in major markets such as the Gulf of Mexico, the North Sea, and West Africa, many of which are direct awarded to our company. We have announced several projects totaling $1 billion for the first quarter, a solid start to the year. These include AukerBP's very first IEPCI project, a direct award for the Utsera High Development in Norway. This award further highlights the growing list of clients who are choosing the benefits of our integrated commercial model. We expect to see a material increase in the value of IEPCI awards in 2023, leading to a record year for integrated project awards. And as our installed base continues to grow, we are forecasting a further increase in subsea services activity. When taken together, we expect direct awards, IEPCI, and subsidy services to represent more than 70% of our total inbound in 2023. While the strengthening offshore activity is likely to be our primary driver of revenue growth, we also expect significant investment to continue in land-based resources, particularly in the Middle East. Here we have a strong market position, and we have expanded our footprint to further leverage our in-country talent in markets such as the United Arab Emirates and the Kingdom of Saudi Arabia. We have commenced work on our 10-year framework agreement with Abu Dhabi National Oil Company to provide wellheads, trees, and associated services. We also completed the expansion of our manufacturing capabilities in Saudi Arabia. which will support our commitment to develop a diverse and capable local workforce as part of Aramco's in-kingdom total value-add program and Saudi vision 2030. We continue to believe the Middle East represents one of the largest market opportunities this decade. Let me now discuss how this market view impacts our company outlook for 2023 and beyond. Elf will provide more details in his remarks, but the headlines can best be summarized as follows using the midpoint of our guidance range. In 2023, we expect full-year inbound orders for subsea to exceed $8 billion, an increase of at least 20% versus the prior year. In addition to the strong project pipeline, we see subsea services inbound increasing to $1.3 billion, Moving to revenue, we anticipate total company results of approximately $7.5 billion, an increase of 12% versus the prior year. We anticipate similar top-line growth for both segments. However, we expect nearly all of the growth in surface technologies to come from international markets, which represented just over half of the segment total in 2022. Before I turn to call over to Elf to discuss the specific changes, let me first provide context for these material revisions to our prior forecast. One of the primary topics at our Analyst Day in 2021 was the upside potential for subsea margins. The key drivers we outlined at that time are still in place today. Increased operating efficiency, including the transition to the configure-to-order operating model an inflection and backlog margin, increased utilization of plants and vessels, and a stronger contribution from subsea services. However, we find ourselves today in a very different market environment, one that reflects a clear focus on energy security. This new environment has also led to a more collaborative approach toward resource development. The strength of our customer relationships particularly those of our alliance partners, will prove to be of even greater value as the increased volume of work leads to greater project and partner selectivity. We have also seen greater alignment in contract terms and conditions where customers see the value in working with a technology provider that has demonstrated time and again the ability to deliver projects on time and on budget. The comprehensive capabilities of Technip FMC are unmatched and well-suited for this environment. IEPCI and Subsea 2.0 create differentiation, but more importantly, they create value and greater certainty of outcome. They are also supported by ongoing initiatives focused on industrialization within our company that will likely result in even greater efficiencies over time. In summary, we close 2022 having delivered on many notable achievements. We enter 2023 with a strong market outlook and a further step up in our targeted financial performance. Our revised 2025 outlook encompasses our most current view. It reflects the improved environment, the value we can bring to the marketplace, and the operational momentum we see within our business. We now expect $25 billion of subsea inbound through 2025 for our company. And with this, we expect 2025 will demonstrate significant progress on our path to much improved financial returns. Most importantly, 2025 does not mark the endpoint, but rather a major milestone on a more ambitious journey ahead. I will now turn the call over to Elf.