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TechnipFMC: Major projects on the horizon, deepwater looms large

OE Staff Thursday, 26 October 2017 09:05

A steady recovery is in motion in the subsea business with the potential for major subsea awards in the remaining months of this year and throughout 2018, according to TechnipFMC's boss Doug Pferdehirt. 

The firm won US$2.5 billion in new orders in the past quarter - with subsea at nearly $1 billion of that total, putting it on track for 2017 to beat order intake levels from 2016. Furthermore, Pferdehirt expects 2018 orders to also exceed 2017 new orders, driven by the current momentum in project bid activity and an acceleration of integrated project awards.

Pferdehirt says: "We believe that most major subsea projects can move forward at today’s oil prices, with delays in project sanctioning more a function of near-term price uncertainty than project returns. As well as project awards, there will be a strengthening of subsea services, and the growth of brownfield opportunities," says Pferdehirt, outlining TechnipFMC's Q3 results.

In its Q3 presentation, the firm lists major projects it expects to see awards for going forward. These include expected contracts on $1 billion+ projects including Shell's Bonga Southwest and Eni's ZabaZaba, both off Nigeria, west Africa, ONGC's KGD5 98/2, off India, and Anadarko's Golfinho LNG project, offshore Mozambique. Common among all these large projects are that they're in deep water areas. 

Furthermore, it expects a string of projects ranging from $500 million -$1 billion to also yield contracts, including: Statoil's Johan Castberg and Snorre Expansion, in Norway; BP's Tortue project offshore Senegal/Mauritania; ExxonMobil's Neptun Deep; Eni's Zohr phase 2, offshore Egypt; Reliance's KGD6, offshore India; Woodside/Cairn Energy's SNE development, offshore Senegal; Petrobras' Libra, offshore Brazil; and Inpex's Ichthys Phase 2, offshore Australia. 

Projects in the $250-500 million range include VNG's Pil and Bue subsea tieback in Norway, Shell's Vito development in the US Gulf of Mexico, CNOOC's Liuhua 16-2 offshore China, POSCO-DAEWOO's Shwe 2, off Myanmar, and Total's Zinia 2 offshore Angola. 

Pferdehirt says: "The market acceptance of our unique integrated subsea value proposition continues to accelerate. Our iFEED activity is robust, creating a set of proprietary project opportunities that could result in the direct award of iEPCI projects,” he says. 

Making money today is still a challenge, however. TechnipFMC's Q3 revenue, at $4.14 billion was down 17.8% from the same quarter in the prior year. Adjusted EBITDA, which excludes charges and credits, was $536.2 million, a decrease of 23.3% from the prior year.

Oil companies continue to spend less. Announcing its Q3 results, Statoil said that "with an oil price below $52/bbl, we have generated $3.6 billion dollars in free cash flow so far this year, based on good contributions from all business segments." 

But, the firm said it was also reducing its organic capex guidance for 2017, by $1 billion, to around $10 billion. This reduction isn't a reduction in activity, but "Getting more for less," said Statoil CEO Eldar Sætre. "This is the result of hard work from the organization, in close collaboration with our suppliers and partners, and strict capital discipline."

Other are cautiously optimistic. Geoscience firm PGS said this morning that it expects improved cash flows among its clients, combined with growing limitations on streamer availability in the industry, to benefit the marine 3D seismic market fundamentals, longer-term. But, it says: "There is a risk that a market recovery will take some time." 

Meanwhile, analysts Westwood Global Energy suggest much rests on OPEC’s impending decision to potentially extend production restrictions beyond the end of March 2018. Westwood predicts a nine-month extension would lead to a supply-demand equilibrium in 2018, avoiding a return to a significant supply glut. With no such extension currently agreed, Westwood’s base case is an oversupplied market comparable with that of 2015.

Despite TechnipFMC's fall in revenues, Pferdehirt says the company is still increasing investment in the development of next generation subsea systems and integrated technologies. 

Earlier this month, the firm agreed to acquire Plexus’ exploration-drilling products and services business, extending its surface technologies offering. 

“As we look to 2018, we are managing revenue declines against the strategic investments needed to sustain our operational capabilities through the recovery," says Pferdehirt. "We see significant opportunities ahead, and these will be driven by internal initiatives as well as market fundamentals. We will generate further integration savings and operational efficiencies."

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2018-10-19 05:35:36am