TechnipFMC Announces Fourth Quarter 2019 Results

Full year 2019

  • Subsea orders up 54% versus 2018; iEPCI™ inbound more than doubled
  • Onshore/Offshore orders up 76% versus 2018; LNG awards exceed $8 billion
  • Total Company backlog of $24.3 billion, an increase of 67% versus 2018
  • Separation of Technip Energies on-track for completion in the second quarter
  • 2020 financial guidance initiated

Fourth quarter 2019

  • U.S. GAAP diluted loss per share was $5.40

    • Includes after-tax charges, net of credits, of $5.43 per diluted share
  • Adjusted diluted earnings per share, excluding charges and credits, was $0.03

    • Includes foreign exchange losses of $0.13 per diluted share
    • Includes expense resulting from increased liability to joint venture partners of $0.22 per diluted share

LONDON & PARIS & HOUSTON–(BUSINESS WIRE)–Regulatory News:

TechnipFMC plc (NYSE:FTI) (Paris:FTI) (ISIN:GB00BDSFG982) today reported fourth quarter 2019 results.

Summary Financial Statements – Fourth Quarter 2019

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions, except per share amounts)

December 31,

2019

December 31,

2018

Change

Revenue

$3,726.8

$3,323.0

12.2%

Net income (loss)

$(2,414.0)

$(2,259.3)

n/m

Diluted earnings (loss) per share

$(5.40)

$(5.00)

n/m

 

 

 

 

Adjusted EBITDA

$404.4

$342.4

18.1%

Adjusted EBITDA margin

10.9%

10.3%

60 bps

Adjusted net income (loss)

$15.1

$(39.0)

n/m

Adjusted diluted earnings (loss) per share

$0.03

$(0.09)

n/m

 

 

 

 

Inbound orders

$2,718.4

$2,925.1

(7.1%)

Backlog

$24,251.1

$14,560.0

66.6%

 

Total Company revenue was $3,726.8 million. The Company reported a net loss of $2,414 million, or $5.40 per diluted share. These results included after-tax charges and credits totaling $2,429.1 million of expense, or $5.43 per diluted share. Adjusted net income was $15.1 million, or $0.03 per diluted share.

Total after-tax charges and credits in the quarter of $2,429.1 million (Exhibit 7) were as follows:

1) After-tax charges and credits impacting operating results of $2,321.1 million, which included the following:

  • Impairment and other charges totaling $2,268.6 million for goodwill and fixed assets; and
  • Separation costs, purchase price accounting adjustments, and restructuring and other charges totaling $52.5 million.

2) A tax provision for a valuation allowance of $108 million.

Adjusted EBITDA, which excludes pre-tax charges and credits, was $404.4 million; adjusted EBITDA margin was 10.9 percent (Exhibit 9).

Other significant pre-tax items impacting the quarter, for which we do not provide guidance, included the following:

  • $64.1 million of foreign exchange losses included in corporate expense, or $0.13 per diluted share on an after-tax basis; and
  • $99.1 million of expense resulting from increased liability payable to joint venture partners included in interest expense, or $0.22 per diluted share on an after-tax basis.

Full Year 2019 Results

Summary Financial Statements – Full Year 2019

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Twelve Months Ended

(In millions, except per share amounts)

December 31,

2019

December 31,

2018

Change

Revenue

$13,409.1

$12,552.9

6.8%

Net income (loss)

$(2,415.2)

$(1,921.6)

n/m

Diluted earnings (loss) per share

$(5.39)

$(4.20)

n/m

 

 

 

 

Adjusted EBITDA

$1,529.4

$1,536.8

(0.5%)

Adjusted EBITDA margin

11.4%

12.2%

(80 bps)

Adjusted net income

$330.5

$377.1

(12.4%)

Adjusted diluted earnings per share

$0.74

$0.82

(9.8)%

 

 

 

 

Inbound orders

$22,693.0

$14,291.0

58.8%

Backlog

$24,251.1

$14,560.0

66.6%

 

Total Company revenue was $13,409.1 million. The Company reported a net loss of $2,415.2 million, or $5.39 per diluted share. These results included after-tax charges and credits totaling $2,745.7 million of expense, or $6.13 per diluted share. Adjusted net income was $330.5 million, or $0.74 per diluted share.

Total after-tax charges and credits for the full year of $2,745.7 million (Exhibit 8) were as follows:

1) After-tax charges and credits impacting operating results of $2,558.7 million, which included the following:

  • Impairment and other charges totaling $2,364.2 million for goodwill and fixed assets;
  • Legal provisions, net of $46.3 million; and
  • Separation costs, purchase price accounting adjustments, business combination transaction and integration costs, restructuring and other charges, and reorganization totaling $148.2 million.

2) A tax provision for valuation allowances of $187 million.

Adjusted EBITDA, which excludes pre-tax charges and credits, was $1,529.4 million; adjusted EBITDA margin was 11.4 percent (Exhibit 10).

Other significant pre-tax items impacting the year, for which we do not provide guidance, included the following:

  • $146.9 million of foreign exchange losses included in corporate expense, or $0.27 per diluted share on an after-tax basis; and
  • $423.1 million of expense resulting from increased liability payable to joint venture partners included in interest expense, or $0.94 per diluted share on an after-tax basis.

Doug Pferdehirt, Chairman and CEO of TechnipFMC, stated, “We achieved an unprecedented level of inbound in 2019, including over 50 percent order growth in Subsea. With this success, our backlog now stands at $24 billion, an increase of 67 percent versus 2018. Backlog grew across all segments, with Onshore/Offshore increasing almost 90 percent when compared to the prior year.”

Pferdehirt added, “Our success was driven by an acceleration in the market adoption of our new subsea technologies, our integrated subsea model (iEPCI™) and continued strength in both LNG and downstream project sanctioning. Onshore/Offshore inbound orders grew almost 80 percent versus 2018, driven by more than $8 billion in LNG awards. Subsea integrated award value more than doubled, clearly demonstrating that iEPCI™ has become the model of choice for most of our customers.”

In addition to this tremendous commercial success in 2019, we have been proactively taking actions to better position ourselves for 2020 and beyond. Our announced separation into two industry-leading, diversified pure-play companies is a bold, visible step in this regard. In parallel, we are optimizing our Subsea organization, while transforming our Surface Technologies business in North America. Taken together, these actions support our long-term strategy focused on market leadership and business transformation.”

Pferdehirt continued, “Turning to the subsea market, we anticipate ongoing momentum in activity for small- to mid-sized brownfield projects and a continued healthy outlook for greenfield projects. Strength in project activity, as well as our expectation for double-digit revenue growth in Subsea Services, provides the framework for 2020 Subsea orders to approach the level achieved in 2019. However, this remains dependent on the timing of one or two major project awards.”

For our Onshore/Offshore business, we remain confident that additional LNG projects will be sanctioned in the near-to-intermediate-term despite current weakness in the commodity price. The growth outlook for long-term demand requires this additional capacity. Beyond LNG, we continue to selectively pursue refining, petrochemical, and biofuel project opportunities.”

In Surface Technologies, we anticipate double-digit revenue growth outside North America in 2020, following growth of more than 15 percent in 2019. We expect North American activity to decline 10 percent versus 2019, which assumes improvement in drilling and completions activity in the second half of the year.”

Pferdehirt concluded, “Our significant growth in backlog across all segments validates our strategy and provides us with confidence in our outlook. We continue to demonstrate our global leadership in subsea, LNG, and the international surface market.”

Operational and Financial Highlights – Fourth Quarter 2019

Subsea

Financial Highlights

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions)

December 31,

2019

December 31,

2018

Change

Revenue

$1,486.8

$1,233.3

20.6%

Operating profit (loss)

$(1,512.7)

$(1,739.5)

n/m

Adjusted EBITDA

$185.0

$148.5

24.6%

Adjusted EBITDA margin

12.4%

12.0%

40 bps

 

 

 

 

Inbound orders

$1,172.3

$880.6

33.1%

Backlog

$8,479.8

$6,203.9

36.7%

 

Subsea reported fourth quarter revenue of $1,486.8 million, up 20.6 percent from the prior year. The Company experienced double-digit growth in both project and service activities. iEPCI™ project activity continues to represent an increasing share of revenue, reflective of the well-established market trend towards integrated project development. The increase in services revenue versus the prior-year quarter was driven by higher installation, well intervention and asset refurbishment activities. Service revenue was essentially unchanged versus the sequential quarter despite the seasonal impact of weather.

In the quarter, the Company recorded non-cash impairment and other charges totaling $1,671.7 million in Subsea which includes:

  • Goodwill impairment charge of $1,321.9 million due to the decline in the Company’s market capitalization, which does not reflect a change in our outlook for 2020 or the long term; and
  • Fixed asset impairment charges totaling $349.8 million driven by continued rationalization of our global footprint as we benefit from the market’s accelerated adoption of our integrated offering.

Subsea reported an operating loss of $1,512.7 million; adjusted EBITDA was $185 million with a margin of 12.4 percent, an increase of 40 basis points from the prior-year quarter. Adjusted EBITDA improved modestly from the prior year as cost reduction activities and project completions offset the impact of more competitively priced backlog.

Vessel utilization rate for the fourth quarter was 61 percent, down from 70 percent in the third quarter and 62 percent in the prior-year quarter.

Fourth Quarter Subsea Highlights

  • LLOG Who Dat iEPCI™ (United States)

    Successful installation of subsea multiphase boosting pump.
  • ExxonMobil Liza (Guyana)

    Oil production started ahead of schedule.
  • ENI Jangkrik (Indonesia)

    Successful completion of infill operations using landing string offering.
  • Riserless Light Well Intervention (Norway)

    Subsea services delivered new yearly record of 81 well interventions.

Subsea inbound orders for the quarter were $1,172.3 million, resulting in a book-to-bill of 0.8. Full-year inbound orders were $7,992.6 million, resulting in a book-to-bill of 1.4. The following announced award was included in the period:

  • PetroVietnam Gas Nam Con Son 2 Phase 2 Project (Vietnam)

    Significant* engineering, procurement and construction contract from PetroVietnam for the Nam Con Son 2 Phase 2 gas pipeline development. The contract covers the engineering and installation of 118 kilometers of rigid pipeline as well as the fabrication of subsea structures to tie back the existing Nam Con Son 2 Phase 1 gas pipeline to the Long Hai Landfall Station.

    * A “significant” award ranges between $75 million and $250 million.

 

Subsea

Estimated Backlog Scheduling as of December 31, 2019

(In millions)

Consolidated backlog*

Non-consolidated backlog**

2020

$4,507

$138

2021

$2,472

$136

2022 and beyond

$1,501

$525

Total

$8,480

$799

* Backlog does not capture all revenue potential for subsea services.

** Non-consolidated backlog reflects the proportional share of backlog related to joint ventures that is not consolidated due to our minority ownership position.

Onshore/Offshore

Financial Highlights

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions)

December 31,

2019

December 31,

2018

Change

Revenue

$1,832.4

$1,672.4

9.6%

Operating profit

$245.3

$206.4

18.8%

Adjusted EBITDA

$259.7

$217.2

19.6%

Adjusted EBITDA margin

14.2%

13.0%

120 bps

 

 

 

 

Inbound orders

$1,114.5

$1,609.4

(30.8%)

Backlog

$15,298.1

$8,090.5

89.1%

 

Onshore/Offshore reported fourth quarter revenue of $1,832.4 million. Revenue increased 9.6 percent from the prior-year quarter, primarily driven by higher activity in Europe, Asia and North America as well as in our Process Technology business. Lower activity on Yamal LNG driven by continued progress towards project completion was partially offset by the ramp-up of Arctic LNG 2.

Onshore/Offshore reported operating profit of $245.3 million; adjusted EBITDA was $259.7 million. Operating profit increased 18.8 percent versus the prior-year quarter. Operating results in the period benefited from strength in execution across the portfolio, particularly Yamal LNG. These same factors drove the year-over-year increase in adjusted EBITDA; adjusted EBITDA margin increased 120 basis points from the prior-year results to 14.2 percent.

Fourth Quarter Onshore/Offshore Highlights

  • Novatek Yamal LNG (Russia)

    Awarded “LNG Project of the Year” by Petroleum Economist.
  • Novatek Arctic LNG 2 (Russia)

    First steel cuts for the topsides.
  • Bapco Sitra Refinery Expansion (Bahrain)

    Civil work well advanced and pipe prefabrication ongoing.

Onshore/Offshore inbound orders for the quarter were $1,114.5 million, resulting in a book-to-bill of 0.6. Full-year inbound orders were $13,080.5 million, resulting in a book-to-bill of 2.1. The following announced award was included in the period:

  • Motor Oil Hellas New Naphtha Complex (Greece)

    Significant* engineering, procurement and construction management services contract for the construction of a new naphtha complex in Greece. Upon completion, the complex will allow Motor Oil Hellas Refinery to increase production of Euro 5 gasoline, aligned with its strategy to increase production of clean fuels. This award follows the successful execution of TechnipFMC’s front end engineering design for the same complex.

    * A “significant” award ranges between $75 million and $250 million.

In addition to the announced award in the period, we continue to secure contracts that support our strategy for early engagement as well as increasing our participation in biofuels, green chemistry and other energy alternatives.

 

Onshore/Offshore

Estimated Backlog Scheduling as of December 31, 2019

(In millions)

Consolidated backlog

Non-consolidated backlog*

2020

$6,581

$893

2021

$5,128

$874

2022 and beyond

$3,589

$1,209

Total

$15,298

$2,976

* Non-consolidated backlog reflects the proportional share of backlog related to joint ventures that is not consolidated due to our minority ownership position.

Surface Technologies

Financial Highlights

Reconciliation of U.S. GAAP to non-GAAP financial measures are below and in financial schedules.

Three Months Ended

(In millions)

December 31,

2019

December 31, 2018

Change

Revenue

$407.6

$417.3

(2.3%)

Operating profit (loss)

$(698.2)

$38.8

n/m

Adjusted EBITDA

$55.9

$64.9

(13.9%)

Adjusted EBITDA margin

13.7%

15.6%

(190 bps)

 

 

 

 

Inbound orders

$431.6

$435.1

(0.8%)

Backlog

$473.2

$469.9

0.7%

 

Surface Technologies reported fourth quarter revenue of $407.6 million, a decrease of 2.3 percent from the prior-year quarter. The revenue decline was primarily driven by lower completions related activity in North America, largely offset by revenue growth in international markets.

Significant growth in international markets was mainly driven by higher wellhead equipment sales and demand for pressure control equipment. Fourth quarter revenue outside North America represented more than 50 percent of the total segment as market activity reached low double-digit growth for the full year.

In the quarter, the Company recorded non-cash impairment and other charges totaling $684.9 million in Surface Technologies, which comprised a goodwill impairment charge of $666.8 million and fixed asset impairment charges of $18.1 million. The charges reflect a change in our outlook for the North American market given the challenging near-term environment and reductions to our regional activities focused on improving the economic returns of our business.

Surface Technologies reported an operating loss of $698.2 million; adjusted EBITDA was $55.9 million with a margin of 13.7 percent, a decrease of 190 basis points from the prior-year quarter. Adjusted EBITDA declined versus the prior-year quarter primarily due to further declines in volume and pricing in North America, partially offset by cost reduction activities.

Inbound orders for the quarter were $431.6 million. Backlog increased 0.7 percent versus the prior-year quarter to $473.2 million. Given the short-cycle nature of the business, orders are generally converted into revenue within twelve months.

Fourth Quarter Surface Technologies Award Highlights

  • ConocoPhillips (United States)

    Successful introduction of first Automated Well Testing Unit.
  • Equinor Snorre (North Sea)

    Award for frame contract to replace risers of the tension leg platform.
  • Golden Beach (Australia)

    Award for shallow water system.

Corporate and Other Items

Corporate expense in the fourth quarter was $178.9 million. This includes charges and credits totaling $75.8 million of expense. Excluding charges and credits, corporate expense was $103.1 million which included $64.1 million of foreign exchange losses mainly due to the devaluation of the unhedged Angolan Kwanza.

 

Three Months Ended

Twelve Months Ended

(In millions)

December 31,

2019

December 31,

2019

Corporate expense, reported

$178.9

$540.3

Less charges and (credits) [Exhibits 9,10]

$75.8

$184.5

Corporate expense, adjusted

$103.1

$355.8

Less foreign exchange losses

$64.1

$146.9

Corporate expense, adjusted and excluding foreign exchange losses

$39.0

$208.9

Net interest expense was $106 million in the quarter, which included an increase in the liability payable to joint venture partners of $99.1 million.

The Company recorded a tax provision in the quarter of $179.8 million. The provision was impacted by a valuation allowance of $108 million. The quarterly tax rate was impacted by the non-deductible impairment charges recorded in the quarter.

Total depreciation and amortization for the quarter was $131.1 million, including depreciation and amortization related to purchase price accounting for the merger of $8.5 million.

Cash flow from operations in the quarter was $559.1 million. The Company ended the period with cash and cash equivalents of $5,190.2 million; net cash was $714.8 million.

2020 Financial Guidance1

2020 segment guidance is reflective of the new business perimeters related to the Company’s announced separation. Businesses with approximately $120 million of total revenue in 2019, most of which was in the Surface Technologies segment, were re-allocated to Onshore/Offshore at the beginning of 2020. The revenue of these businesses is now included in Onshore/Offshore guidance for 2020.

2020 Guidance

 

Subsea

 

Onshore/Offshore

 

Surface Technologies

Revenue in a range of $6.2 – 6.5 billion

 

Revenue in a range of $7.5 – 7.8 billion

 

Revenue in a range of $1.4 – 1.6 billion

 

 

 

 

 

EBITDA margin at least 11% (excluding charges and credits)

 

EBITDA margin at least 10% (excluding charges and credits)

 

EBITDA margin at least 12% (excluding charges and credits)

 

 

 

 

 

TechnipFMC

Corporate expense, net $180 – 190 million for the full year (excluding the impact of foreign currency fluctuations)

 

 

 

 

 

Net interest expense $80 – 90 million for the full year (excluding the impact of revaluation of partners’ mandatorily redeemable financial liability)

 

 

 

 

 

Tax rate 28 – 32% for the full year

 

 

 

 

 

Capital expenditures approximately $450 million for the full year

 

Cash flow from operating activities to exceed $1 billion for the full year

__________________________

1 Our guidance measures adjusted EBITDA margin, corporate expense, net (excluding the impact of foreign currency fluctuations), net interest expense (excluding the impact of revaluation of partners’ mandatorily redeemable financial liability), and tax rate are non-GAAP financial measures. We are unable to provide a reconciliation to comparable GAAP financial measures on a forward-looking basis without unreasonable effort because of the unpredictability of the individual components of the most directly comparable GAAP financial measure and the variability of items excluded from each such measure. Such information may have a significant, and potentially unpredictable, impact on our future financial results.

Teleconference

The Company will host a teleconference on Thursday, February 27, 2020 to discuss the fourth quarter 2019 financial results. The call will begin at 1 p.m. London time (8 a.m. New York time). Dial-in information and an accompanying presentation can be found at www.TechnipFMC.com.

Webcast access will also be available on our website prior to the start of the call. An archived audio replay will be available after the event at the same website address. In the event of a disruption of service or technical difficulty during the call, information will be posted on our website.

###

About TechnipFMC

TechnipFMC is a global leader in subsea, onshore/offshore, and surface projects. With our proprietary technologies and production systems, integrated expertise, and comprehensive solutions, we are transforming our clients’ project economics.

We are uniquely positioned to deliver greater efficiency across project lifecycles from concept to project delivery and beyond. Through innovative technologies and improved efficiencies, our offering unlocks new possibilities for our clients in developing their oil and gas resources.

Each of our more than 37,000 employees is driven by a steady commitment to clients and a culture of purposeful innovation, challenging industry conventions, and rethinking how the best results are achieved.

TechnipFMC utilizes its website www.TechnipFMC.com as a channel of distribution of material company information. To learn more about us and how we are enhancing the performance of the world’s energy industry, go to www.TechnipFMC.com and follow us on Twitter @TechnipFMC.

This communication contains “forward-looking statements” as defined in Section 27A of the United States Securities Act of 1933, as amended, and Section 21E of the United States Securities Exchange Act of 1934, as amended. Words such as “guidance,” “confident,” “believe,” “expect,” “anticipate,” “plan,” “intend,” “foresee,” “should,” “would,” “could,” “may,” “will,” “likely,” “predicated,” “estimate,” “outlook” and similar expressions are intended to identify forward-looking statements, which are generally not historical in nature. Such forward-looking statements involve significant risks, uncertainties and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections, including the following known material factors:

  • risks associated with our ability to consummate our proposed separation and spin-off, and our ability to achieve the intended benefits and synergies of the transaction;
  • unanticipated changes relating to competitive factors in our industry;
  • demand for our products and services, which is affected by changes in the price of, and demand for, crude oil and natural gas in domestic and international markets;
  • our ability to develop and implement new technologies and services, as well as our ability to protect and maintain critical intellectual property assets;
  • potential liabilities arising out of the installation or use of our products;
  • cost overruns related to our fixed price contracts or capital as

Contacts

Investor relations

Matt Seinsheimer

Vice President Investor Relations

Tel: +1 281 260 3665

Email: Matt Seinsheimer

Phillip Lindsay

Director Investor Relations (Europe)

Tel: +44 (0) 20 3429 3929

Email: Phillip Lindsay

Media relations

Christophe Bélorgeot

Senior Vice President Corporate Engagement

Tel: +33 1 47 78 39 92

Email: Christophe Belorgeot

Brooke Robertson

Public Relations Director

Tel: +1 281 591 4108

Email: Brooke Robertson

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