TechnipFMC PLC Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Arun Jayaram - JPMorgan Chase & Co - Analyst : Yes, good morning. My first question is just on the 2025 subsea outlook which you raised. At the midpoint of the range, your margin guidance implies 250 basis points of margin expansion year over year and over 300 at the top end of the range. I was wondering if you could discuss some of the drivers of the higher margins? In particular, I was wondering if you could provide some insights on the mix of Subsea 2.0, direct awards, integrated projects '25, how that mix changes in '25 versus 24.

Question: Arun Jayaram - JPMorgan Chase & Co - Analyst : Great. My follow-up is, judging by some of the commentary and earnings seasons thus far from SLB, Baker, as well as your results, SURF appears to be one of the strongest parts of the OFS food chain, but this will include obviously a tightening market for vessels. Doug, I was wondering if you could talk about, your thoughts on just managing through a tighter vessel market, because this is one of the recent concerns I've heard from the buy side is how is FTI going to execute some of these projects, given the sense that the vessel market is quite tight today. I was wondering if you could elaborate on that.

Question: Scott Gruber - Citigroup Inc - Analyst : Good morning. I wanted to start off, I was looking at your subsea opportunities list. I couldn't help but notice that there's four Petrobras projects that were increased in their scope. So I just want to get some color, those projects getting bigger from a well count perspective or is there more scope being added from a technology perspective? Just some color on what's driving the award value potential upsizing would be great.

Question: Scott Gruber - Citigroup Inc - Analyst : That's great. Just a question on what we're hearing from the offshore drillers. A lot of questions we're getting today is around this white space issue for the offshore drillers. And if there's any read-through for FTI and the order cadence that you guys are looking at in 2025. Doug, you reiterated confidence in that $30 billion over three years. I guess, can you just kind of provide some color on what you're seeing on the market and why it's different from the offshore drillers the white space issues that they're having?

Question: Scott Gruber - Citigroup Inc - Analyst : Part of the issue that the offshore rigs are drilling faster, we've heard about that, to be honest. Is that part kind of what bridges the gap?

Question: Scott Gruber - Citigroup Inc - Analyst : Offshore rig efficiency seems to be improving in certain locations. Is that part of what bridges the gap between some extra white space for a few offshore drillers versus the well count and project count that you execute on?

Question: Kurt Hallead - Benchmark Energy Corp - Analyst : Hey, good morning, Doug, everybody. So Doug, I'm glad you brought up the dynamics at play where you've traveled around the globe and met with varying customers. I want to extend upon that dynamic, right? So there seems to be a disconnect between some short-term concerns about maybe oil demand vis-a-vis oil supply, yet the customer base that you're talking to and you're dealing with seems to have a more constructive outlook relative to the investor base. So with that as a backdrop, when you're having your conversations with these executives and they're going through their thought process on executing on their programs, what are you learning from that dynamic in terms of how they're viewing the demand prospects, supply demand balances, and what's giving them the conviction to continue to push forward?

Question: Kurt Hallead - Benchmark Energy Corp - Analyst : Yes, no, that's good context, and I appreciate that. So the second thing maybe to follow up here, and for either you or Alf, is on the increased share repurchase, right? And obviously you mentioned you're going to double the distribution of shareholders this year. So how do you guys think about the timing of that dynamic? Are you thinking programmatic, share repo, opportunistic? And do you have a sense that given what you expect to generate in terms of free cash flow into 2025 that, the bulk of that billion-dollar share repo will be exhausted in 2025?

Question: Waqar Syed - ATB Capital Markets - Analyst : Thank you. First of all, congrats on a great quarter and for raising guidance. Thank you very much. Doug, my question relates to the surface business. Some of your larger peers have guided the Street to low single digits to mid-single digits type upstream spending increase in international markets in 2025. Now, for your surface business, do you think that it could grow next year in the same kind of range, or do you have any opportunities for market share gains in Saudi Arabia because of your new manufacturing setup there?

Question: Waqar Syed - ATB Capital Markets - Analyst : And on the same topic, as they move towards unconventional gas, does that provide any opportunity for unit price improvement, or things like that in the Middle East?

Question: Marc Bianchi - TD Cowen - Analyst : Hey, thanks. So it looks like 50% of the backlog in subsea is scheduled to ship beyond 2025. And I think you said you expect a higher proportion of direct awards during '25. So can you help us understand how representative the 2025 margin outlook is for margins in 2026 and beyond?

Question: Marc Bianchi - TD Cowen - Analyst : Right. Okay. Thanks, Alf. Maybe while you've got the mic, on cash conversion, so you've got this, tax assets that's releasing and you've got some better EBITDA outlook for '25, I'm just curious how we should be thinking about conversion of EBITDA to free cash in light of these upticks.

Question: Saurabh Pant - Bank of America - Analyst : Hi, good morning, Doug and Alf. Doug, if you don't mind, maybe I would like to start on the flexible side of things. The orders, the project, the opportunity is pretty strong. And we saw that for you, we saw that for a couple of your peers. Maybe, Doug, spend a little time on the flexible market. We know Petrobras is a big opportunity, but other than that, what are the key drivers for that flexible market over the next couple of years?

Question: Saurabh Pant - Bank of America - Analyst : Right. Right. No, that's fantastic. And if I can continue with that point on visibility and switching to the overall backlog in subsea that you have, obviously a record backlog. But if I just zero in on how you staged that backlog, you give those numbers in the press release. 2025 backlog staging went up by $1 billion, which is very impressive. And if you do the numbers, it gives you a lot better backlog coverage for next year versus at least the prior two to three years. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 24, 2024 / 12:30PM, FTI.N - Q3 2024 TechnipFMC PLC Earnings Call So if we just talk about everything other than that's your backlog for the implied revenue, guidance, and subsea, how should we think about the book and turn business, the shorter cycle business that you would book and deliver in 2025? How should we think about that in light of the macro uncertainty and any risk associated with that?