Good day. My name is Lisa, and I will be your conference operator today. At this time, I would like to welcome everyone to the TechnipFMC Third Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. I would now like to turn the call over to Mr. Matt Seinsheimer. Please go ahead, sir.

Thank you, Lisa. Good morning and good afternoon and welcome to TechnipFMC’s third quarter 2021 earnings conference call. Our news release and financial statements issued yesterday can be found on our Web site. 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 and the French AMF. 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 Pferdehirt, TechnipFMC’s Chairman and Chief Executive Officer.

Thank you, Matt. Good morning and good afternoon. Thank you all for participating in today’s call. Joining me today is Alf Melin, our Chief Financial Officer. Results in the quarter reflect continued strength in operational performance and further support our confidence in achieving full year financial guidance. Total company revenue in the period was $1.6 billion. Total company adjusted EBITDA was 141 million, with an adjusted EBITDA margin of 8.9%. Total company inbound orders in the quarter were $1.3 billion. Subsea inbound orders were 1.1 billion, bringing the year-to-date segment total to $3.9 billion. The strength of our inbound in the quarter was driven by direct awards, subsea services, alliance partners, and several long-term vessel charters. Additionally, our Subsea Opportunity List expanded for the fourth consecutive quarter and now shows project opportunities totaling 19 billion for potential award over the next 24 months when assuming the midpoint of the project ranges. Inbound orders for Surface Technologies were 250 million in the third quarter. It is important to note that we expect a significant increase in order activity in the fourth quarter, as we anticipate several multiyear awards will be made in the Middle East. Subsea inbound growth in 2021 partly reflects the momentum we are seeing in Brazil. This has always been an important region for TechnipFMC. We have been present in the country for over five decades, with a well established supply chain and over 98% local content, contributing significantly to our success. Additionally, an important part of our global research and development is carried out at our technology center in Rio de Janeiro. This year, our Brazil teams have achieved several impressive milestones. We received two contract awards from Petrobrass, the first for the Marlim and Voador Fields, where we will provide Subsea manifolds, utilizing our second generation…

Thank you, Doug. We had another solid quarter, led by total company inbound orders of 1.4 billion. Revenue in the quarter was 1.6 billion, with adjusted EBITDA of 141 million. Total company backlog was 7 billion at the end of the period. Backlog for Subsea stands at 6.7 billion, of which just over 5.7 billion is scheduled for execution beyond 2021. We ended the quarter with cash and cash equivalents of 1 billion and net debt of 1.2 billion. During the quarter, we recognized charges and credits that netted to an expense of 16 million and included the following items. Expenses totaling 44 million related to impairment, restructuring and other charges, primarily related to a 37 million non-cash impairment to our initial investment in Magma Global. These items were partially offset by income of 29 million on our equity ownership in Technip Energies, which primarily relates to the favorable change in market value during the period. Loss from continuing operations was $0.09 per diluted share in the quarter. When excluding the impact of charges and credits that netted to an after tax expense of $0.03 per share, the adjusted loss from continuing operations per share was $0.06. The adjusted loss from continuing operations also included the following items; a loss on an early extinguishment of debt of 16 million and a foreign exchange loss of 6 million. Now, let me turn to the segment results. I will focus on our sequential performance comparing the third quarter to our second quarter results. In Subsea, revenue of 1.3 billion decreased 6% driven by lower activity in the North Sea and Asia. Adjusted EBITDA was 141 million, with an adjusted EBITDA margin of 11.2%, a sequential increase of 10 basis points despite the revenue decline. Inbound orders were 1.1 billion in the period,…

Thank you, Alf. Before we move to Q&A, I want to close with a few remarks. Our third quarter results reflect a continuation of the strong operational performance that we demonstrated over the first half of the year, as Alf stated. We remain very confident in achieving our full year financial guidance. Subsea orders have nearly matched the 4 billion inbound in all of 2020. And we remain on track to achieve solid double digit growth. And the acquisition of Magma and our strategic alliance with Talos service tangible progress and further demonstrate the impactful role we will play in the energy transition. Finally, I would like to remind everyone that on Tuesday, November 16, we will host our Analyst Day. During the event, we will demonstrate how we are leveraging and extending our core competencies of innovation, integration and collaboration to develop both new and novel energy resources offshore. We will provide updates on how we are using new commercial models and new technologies to further improve project economics and reduce carbon intensity in our conventional business, while also transforming the way we fundamentally operate today. We will also have real examples on display to show you how TechnipFMC continues to drive change in the energy industry. And we hope to see you all there. Operator, you may now open the line for questions.

[Operator Instructions]. Your first question comes from the line of Arun Jayaram with JPMorgan Chase.

Yes. Good morning. My first question is for Alf. I wanted to talk a little bit about the balance sheet improvement. You talked about 185 million of debt reduction. And I just wanted to get your thoughts on how your leading edge conversations are going with the rating agencies? And is it reasonable to assume that you can be in line for an upgrade to IG status in the next year or so?

Sure. Thank you for the question. So first of all, it remains one of our primary objectives, of course, to continue our deleveraging, as we have stated in previous calls. We were successful in reducing our net debt by 400 million from 1.6 to 1.2 in the quarter. We have continued to realize our Technip Energies shares and we have started our debt reduction process with a tender offer this quarter, which netted about 164 million in debt reduction. In terms of looking ahead at the rating agency question that you just raised, a little bit more complicated to give you a straight answer on how fast we can move on that. We are first and foremost really dedicated to our debt production, and we're going to let that play out. And as these metrics, the leverage metrics improve, we clearly expect to get into a range where it's possible to get back to investment grade. Now exact timing of that, I'm not going to go and say that I have an exact timing, but it's not going to happen, let's say, in the short term, at least in the near term. So it will be something that is more on an intermediate term basis.

Great. And then just my follow up. Doug, what type of visibility are you seeing in Subsea orders into 2023, just given the improvement in the outlook for just commodity prices? And then just maybe on the Analyst Day, it sounds like we're going to get to see a lot of -- it sounds like it's going to be a relatively media update. Can you maybe highlight on the financial side anything we can look forward to in terms of longer term outlook comments for you guys next month?

Sure. Good morning, Arun. Let's start with the Analyst Day question first. Indeed, you're going to see some longer term projections that I think will be quite inspiring for many people. So we'll leave it at that. We'll have more to say here in just a few weeks at Analyst Day. But yes, you should expect some additional longer term outlook as we really begin to see the full leverage and potential of this pure-play company. Let me pivot to your second question, or the first question you had for me, which was around the outlook around inbound orders for Subsea. Let me break it down. You said to 2023, that's a bit further than we've provided any sort of guidance or any sort of commentary on. But in fairness, we are getting close to 2022. So let me give you kind of my best outlook as we see things stacking up. First and foremost, our frontend engineering activity continues to ramp up. We have exceeded the level that we anticipated for this year. And what's really interesting about what's going on is all of those proprietary projects that we're working on. Again, we had another solid quarter inbound in Q3, certainly when you compare it to the rest of the market. And the question is how can we do that? And again, it comes back to the direct awards that we receive by being the only company that has a fully integrated offering as well as the strength of our alliance partners. So just to give you an example of that, in those frontend engineering studies that we're currently performing, approximately two thirds of those are integrated projects, of which 75% will be direct awarded to our company. They'll never go out into the competitive marketplace. So it gives…

Great color. Thanks a lot.

[Operator Instructions]. Your next question comes from the line of Waqar Syed with ATB Capital Markets.

Thank you for taking my question. Could you maybe talk about some supply chain disruptions if they had any impact on the quarter or in the coming quarters, both on the Surface side and Subsea side? And then, Doug, you talked about some of the competitive landscape and how you’re positioned on the Subsea side. But could you talk about on the Surface side what the competitive landscape is, and what the pricing dynamics may be in that segment of the market?

Sure. Thank you, Waqar. Again, I'll start with the second one first. So our surface business is very different, as we have pointed out many times between Surface International and Surface Americas. Surface International is a much larger business for us than Surface Americas. And it's a market in which we are the industry leader. It's driven by technology. It's driven by projects. And we have a very unique vertically integrated supply chain. And we're going to talk more about that at Analyst Day. As a matter of fact, we're going to show you a demonstration between a Surface International tree system versus a Surface Americas tree system. And I think it will help everybody understand what we've been talking about and how different they are. I've often said it's about a 10x difference. So that's our SI business, Surface International business. We have really strong positions, particularly in the Middle East as well as North Africa. I mentioned in my prepared remarks, we're anticipating a really strong fourth quarter in inbound orders for Surface International mainly being driven by the Middle East, two or three countries in the Middle East. And we couldn't be more excited about that. Surface Americas is very different. Surface Americas, there's lots and lots of competition. And we're not the market leader. We have a strong team and a strong reputation. And we have some very important clients, tends to be the larger clients that we work for. And we're real proud of the work that we perform. But it is more of a commoditized product market, which is not necessarily where we are -- we really differentiate as a technology company. In terms of pricing, in both markets, we continue to see additional volumes coming through. When additional volumes come through, that tends…

Thank you very much.

Your next question comes from the line of David Anderson with Barclays.

Hi. Good morning, guys. That $7 billion number on orders that you just put out there, was that a Subsea number or was that a total order number?

Subsea.

Wow. And then on that Subsea side, can you just talk a little bit about how much of that you think is Brazil as kind of the one area we're starting to see a lot out of you? You noted a couple of awards recently. Can you maybe just talk about that market and kind of how you see kind of Petrobras getting back to kind of maybe where they were before? Obviously, there were a big chunk of offshore rigs at one time and kind of how they're coming back. Can you just kind of talk a little bit about some of the dynamics that are going down there and how you see the order book there? I'm just kind of curious how much of that $7 billion could be a Brazilian number.

Sure. So let me expand it just slightly, David, and say South America, right. So South America is by far the most important market for our Subsea business this decade. But it's not just Brazil. Don't forget Guyana. Guyana is hugely important to us. We are deeply grateful for the relationship that we have with ExxonMobil and Hess in the country and the ability that we've been able to supply all of the Subsea equipment in Brazil to date and continue to drive project performance and hopefully future awards in Guyana. So Guyana is very important. We know that Suriname and other areas are beginning to develop later in the decade. I would say, towards the end of the decade, we would anticipate Mexico as well as being potentially a very important country in South America in terms of Subsea of business. Now turning to Brazil, clearly the largest. As I’ve pointed out in my prepared remarks, we've been there for five decades. We have 98% local content. We have more capabilities in Brazil than we have in any other country in terms of manufacturing, the fleet, R&D, the people, so forth and so on, and just a long rich history. We manufactured -- we reached the manufacturing of our 700th tree in Brazil. I believe that's more or less than more of all the rest combined. So it's a very, very significant market for us. We're very, very proud. We feel very privileged. We have a great relationship and a very long relationship with Petrobras. We've done a lot of new technology development with Petrobras. We talked about a Robot Valve Controlled manifold. This is amazing technology. We're already on our second generation of this technology in Brazil, and it really feeds our all electric ambitions around the world. So a very important partnership or well established partnership. And yes, Brazil will play a major role both in the 2022 inbound, but I would expect it to play a major role beyond that as well.

And, Doug, in your prepared remarks, you were talking about the Surface orders kind of coming up here. You said there's a couple of big tenders that are coming up or a couple of big contracts. So can you expand a little bit about that? I believe you're talking about the Surface side in the Middle East. Could -- a little more on there would be much appreciated. Thanks.

Sure, David. And yes, thanks for clarifying. I want to be -- we were talking to the significant increase in Q4 orders was in reference to Surface Technologies, specifically in the Middle East and more specifically in Abu Dhabi from ADNOC and in Saudi Arabia from Saudi Aramco.

Okay, great. Thank you very much.

Your next question comes from the line of Ian Macpherson with Piper Sandler.

Thanks. Good morning, Doug.

Good morning.

Hi. I was curious if you -- we've seen that your pipeline slide has expanded over the past couple of quarters with a couple of major projects; well, two very large and one -- and several medium sized projects being added to the visible pipeline. Would we be crazy to extrapolate a trend from that and expect more accretion and that opportunity to come into your view as you update that over the next several quarters? Would that be as you expect or do you think that maybe we've seen some bottled up projects come back into focus, and maybe that's more of a one-off phenomenon?

Ian, thank you. That's a very interesting question. First of all, four quarters does make a trend, although I would caution not just to extrapolate, and I'll explain why here in just a second. Prior to explaining that, I'll comment on the latter part of the question. I know when I look at this Opportunity List, look, there's a couple, let's be candid, that have been on this list for quite some time, that have not yet moved to project FID. But the vast majority that are on this list are relatively new, if you will, within the recent quarter. So I wouldn't think of it as a -- I don't know, I think you said as bottled up kind of projects coming through the pipeline. Certainly not when I think back to the comment I made and when we look at our frontend activity, which, again, is somewhat a reflection of the pre-opportunity, Subsea Opportunity List, right, things that may not yet be on the Subsea Opportunity List. And speaking of things that may not yet be on the Subsea Opportunity List, I think it's also important to remember for our company, all of that integrated direct awards never show up on the Subsea Opportunity List. Obviously, it would be a huge competitive disadvantage for me to give that information freely to the market. So again, like this quarter, when we have 1.1 billion in inbound and not really a name specific project in a press release, we had the vessel charters, but not necessarily a project. That's a strong foundation that we built. But again, that comes through this proprietary set of opportunities that isn't on the Subsea Opportunity List. Now all the way back to the beginning of your question, and the reason I said I’d just be a little bit cautious, you've seen press releases or you -- maybe not press releases, but you've seen news articles and there's certain market intelligence out there around a couple of the Búzios projects that are likely to be FID’ed in the coming quarters, potentially other projects that you may have heard about in the North Sea. So I could see quite a few of these, because once they're awarded, then we take them off of the Subsea Opportunity List. Are there other projects to backfill? Absolutely, as I indicated earlier, but I just wouldn't want to leave the impression that one could just extrapolate quarter-over-quarter-over-quarter of growth, even though we have experienced that for the past four quarters. I'm just being very conservative, and saying if in a particular quarter, two or three or four of these were awarded, that could be several billion coming off the list, and maybe being replaced by more than several billion but not necessarily in the same quarter.

Great, very clear. Thank you. For a follow up, maybe I don't necessarily want to completely front run your content for next month. But I know you'll talk about positioning for new energy projects, Deep Purple and otherwise. But just curious what timeframe you think that type of work becomes material in your Subsea backlog? Is that -- are we going to start to see the beginnings of that in your orders in '22, or does maybe the reawakening, the quickening of conventional Subsea oil projects come in at the deferment or the expense of energy transition projects being accelerated?

Sure. Thank you, Ian. For sure, you're going to hear much more about that here in a few weeks. But since you asked the question, I'll give you something to think about in anticipation of the Analyst Day. As we pointed out, we're very much focused on wind, wave, hydrogen and carbon transportation and storage. By the way, potentially some other offshore energy sources are not named in those four as well. But just sticking to those four, as we've said, we believe our role is to be the enabler. We want to advance and accelerate the energy transition. But as a system integrator, which is deep in the DNA of our company, that's what we do. We integrate various technologies, we create the -- we’re the architect who brings together all of those elements and creates a very unique system, where we're somewhat agnostic to which of those energy sources, if you will, generates revenue the quickest, or even which one generates the most revenue for our company. We just want to help the world and help the industry drive the energy transition by bringing 70% of the surface area of the globe and making it available to them, i.e. offshore. That's our domain. That's what we know. That's what we know very, very well. And because of that, more and more companies are coming to us, and you see us announcing one, two, three of these per quarter, announcing new investments that we've made, new relationships that we formed in this particular area. So let me just talk about one in particular, which is carbon capture and storage. So we couldn't be more proud of the announcement we made just within the last few days of an alliance that we formed with Talos Energy for doing carbon capture and storage in the Gulf of Mexico. As indicated in my prepared remarks, there's a significant amount of activity around the Gulf Coast region that would benefit from carbon capture and storage, and is a way to really advance the objectives that we share and much of the world shares in really driving down greenhouse gas emissions. So in that particular area, again, and having announced the alliance, it is possible that in 2022 already, we could begin to see potential award of projects moving forward in the area of carbon capture and storage.

That's great. Thanks. I look forward to hearing more in a few weeks. Thanks for the perspectives this morning.

[Operator Instructions]. Your next question comes from Vaibhav Vaishnav with Coker Palmer.

Hi. Good morning and thank you for taking my question. Doug, just to try to put in context of that 7 billion potential awards over the next 12 months, is that fair to think that could be around 1x book to bill, or am I at least in the ballpark when I say that?

So let me clarify just one thing. It was over the next five quarters, so that would be over the next 15 months, right? What I was saying was it's hard to pinpoint exactly Q4 versus Q1, because some things will move back and forth. So I said based on five quarters or 15 months, we see a lot at this time. And look, it will change and we'll provide an update as we have more visibility. But we have a line of sight right now up to $7 billion of orders in the next five quarters or the next 15 months. Certainly, if you do the math behind that and make an assumption for Q4, you're looking at a book to bill above 1.0 for sure for 2022, which is exciting and certainly speaks volumes for where we are as a company and our position in this industry.

Got it. And as we think about revenues improving next year and over next few years, how should we think about CapEx? Is like this 250 million CapEx good enough like a starting point, or do we need to think about if the revenues increase, does our CapEx also need to increase?

Yes, let me just start by reiterating our philosophy, right. So our philosophy is to focus on through cycle returns. We've done some very unique things. I believe you've seen us really, let's say, do things differently from the past in terms of how we manage and operate the assets of our company. We have actually reduced the size of our fleet while growing the company. And we do that through forming very important relationships and being a company that works well with others. And we can do that through alliances, for example, like we have an alliance with Allseas, and we now work with them and look for opportunities together with them, benefiting both companies but also benefiting the broader industry. So a real discipline, if you will. And I'm going to turn it over to Alf to give a bit more insight into kind of what you should be thinking about in terms of the actual CapEx numbers.

Yes, thank you, Doug. And with the background of what Doug said, clearly this number is not expected to grow relative to revenue. So if you look at the ratio that we're at right now, it will certainly not be expected to grow over that ratio for any extended periods of times. If you also further look at our business and what Doug was saying, more as we grow further in revenue and with the support of third party alliances, we believe that the incremental CapEx can actually be at the lower level for some of our core business. You also look at some of the other things we're doing in our business, we are investing in our Subsea 2.0 product technology, it’s driving more standardization and also allows us for actually investing in less incremental CapEx per manufacturing unit, if you will. So there are a couple of drivers that can be helpful for the long term. But right now, if you want to stay at a relative ratio, I think you should be fairly safe instead of staying at that relative ratio between revenue and CapEx as it is stated today.

That's very helpful. Thank you for taking my questions.

At this time, there are no further questions. I would like to turn the call over to Matt Seinsheimer for closing remarks.

This concludes our third quarter conference call. A replay of the call will be available on our Web site, beginning at approximately 8 PM British summer time today. If you have any further questions, please feel free to contact the Investor Relations team. Thank you very much for joining us. Operator, you may now end the call.

This concludes today's conference. You may now disconnect.