Q3 2020 TechnipFMC PLC Earnings Call

Third quarter 2020 earnings conference call.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone leads.

Please limit questions to one question and one follow up if you will.

If you require any further assistance. Please press star zero I would now like to hand, the conference over to your speaker today, Matt Seinsheimer. Thank you. Please go ahead.

Thank you Lisa good morning, and good afternoon, and welcome to take me, let them see third quarter 2020 earnings conference call.

Our news release and financial statements issued yesterday 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.

Other periodic filings with the U.S. Securities and Exchange Commission, the French MF and the UK financial conduct authority.

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, Technip, FMC is chairman and Chief Executive Officer.

Thank you, Matt good afternoon, and good morning. Thank.

Thank you for participating in our third quarter earnings call.

On the call with me today are Maryann, Mannen, Chief financial Officer, and aren't Opiatowski, President and CEO elect of techniques energies.

We delivered solid operational results in the third quarter.

Just months after the store to one of the most challenging periods the global community has ever faced.

I want to once again, thank our entire workforce for the resilience and dedication that they have shown throughout these unprecedented times.

Our success is evident in our ability to continue winning two.

To continue executing and to continue accelerating our business transformation.

While remaining steadfast in our focus on health and safety.

In the quarter inbound orders exceeded $2.2 billion, largely driven by sub sea.

This was our strongest quarter, thus far in 2020 and represented a sequential increase of 45%.

Our strong results stem from the success of working collaboratively with our clients were.

Our innovative solutions.

Demonstrated excellence in execution and financial health provider customers with confidence to move forward projects during such challenging times.

Total company adjusted EBITDA was $321 million with a margin of 9.6%.

Importantly, all three segments showed sequential margin improvement as the execution momentum continued across the portfolio.

And looking at our business transformation, we continue to accelerate our cost reduction efforts and have already achieved the full targeted run rate savings of more than $350 million.

As we leverage our new business models innovative technologies and digital solutions.

We will continue to drive further cost reduction and efficiency gains across the organization.

Taken together, our inbound orders, our operational results and our cost reduction initiatives provide us the confidence to reaffirm our full year guidance for 2020.

As our clients continue to reprioritize their portfolio of investments, we have seen an improvement in our award activity.

Having announced six projects globally since July.

Totaling 2.8 billion in aggregate contract value.

Well most of these projects are already in our backlog the APC contract for the ASU Hydro cracking complex Technip Energy's award that exceeds $1 billion is anticipated to be inbound in the fourth quarter.

We also announced an award from shell for the revamp of their more dike plant, where we will provide proprietary equipment and related services for a ethylene furnaces.

This award further demonstrates our leadership in ethylene technology. It helps drive a reduction in Seattle to emissions.

In addition, our LNG opportunity set remains strong.

As we have been awarded two major projects, which will inbound upon if I'd by the client.

For one of these projects Sempra energy, a coastal who the client is indicated a likely if I'd by year end.

We are actively tendering a major project in Qatar.

Prospect with good momentum as evidenced by recent award announcements for several project work scopes.

While we believe Technip FMC is well positioned for this opportunity the APC contract is being competitively tender.

In surface technologies, we continue to leverage the strength and resilience of our leading international franchise with two important growth opportunities captured in the quarter both in the middle East.

In Kuwait, we received an award for high pressure gas equipment and in country services.

And in Oman, we secured a five year frame agreement with petrol gas, an operator that a significant drilling plans in the country.

We believe these awards provide us the opportunity to further expand our market share across the region.

And in subsea we were awarded our latest MPCI project.

With shell in Malaysia.

It incorporates our subsea 2.0 technology.

As well as a diverse set of other projects and some of the most active basins in the world.

In Brazil, the Petrobras Merrill two project in Norway, The bridal Blick project for Ecuador and.

And the Exxon Mobil Pyra project in Guiana.

50% of these projects were the result of a direct award to our company due to our unique capabilities, our competitiveness and our technology leadership.

These awards clearly demonstrate the resilience of strategic offshore basins, we're through cycle economics are highly competitive within our clients' investment portfolios.

We remain on track to secure approximately $4 billion of subsea inbound for the full year.

Looking ahead, we see a healthy set of subsea opportunities.

And we continue to grow our proprietary market opportunities.

Focusing on long term strategic relationships with our partners to optimize project economics and returns.

Utilizing our unique and proven high feed.

Hi, and I lost capabilities.

Therefore, I am pleased to announce another exclusive alliance with an operator in the UK North Sea.

Leveraging our integrated sub sea business model.

Hi to support and optimize future development opportunities from the early concept phase through production and life of field services.

Additionally, our front end engineering teams remain very active.

In fact, we have seen an acceleration in study awards in recent months with.

With double digit growth now expected above our prior expectation.

And half of our study today's are integrated which leverage the benefits of our digital sub sea studio offering and positions us well for future.

Awards.

Digital is another key enabler of our business transformation and our digital strategy is focused on three pillars.

Becoming a data centric company.

Developing intelligent products and assets and driving towards autonomous operations.

Sub sea studio and our recently introduced I complete offering or two solutions that exemplify these pillars and further expand our leadership position.

Let me start with sub sea studio.

This solution is transforming the conventional concept feed and tendering phases of subsea projects.

Working with our clients, we are now able to develop ultrafast digital field architectures that bring together decades of engineering knowledge with artificial intelligence and machine learning to optimize product configurations accelerate execution and maximize value.

Sub sea studio has an open architecture that allows integration with other engineering and manufacturing systems, eliminating the need for multiple handoffs and resulting in as much as a 50% reduction in the time required for front end engineering.

And we are extending the platform beyond subsea system design to incorporate the execution and field management phases of the project one.

Once fully implemented will have a complete digital thread from concept design all the way through to the life of the field.

And we are taking our learnings and sub sea and applying those online.

I complete.

Is a revolutionary approach to shale completions.

And we're the only company to focus on making a completions pad that is truly integrated efficient and simplified with.

With digital automation and control.

I complete as 50% fewer components and reduces operating expenditures by 30%.

The integrated system also removes 80% of connections across the well site improving efficiency, while reducing risk.

Digital integration is a key element of the complete package.

All of the data gathered at the site is available in real time.

It is actionable information that enables operators to make evidenced based decisions at every step of the process.

And when combined with the automation features it reduces personnel required on site.

Up to two thirds.

I complete is experiencing broad market acceptance with awards secured from operators in all major us basins lead.

Leading to increased market share.

Earlier this month, we announced that our Nokia tone will assume the role of president and CEO elect of techniques energies and I would like to welcome him to the call with us today.

Arnaud has been with the company for over 15 years, and a valued member of our executive leadership team since the formation of Technip FMC.

He has extensive project related experience. He most recently led our subsea business, taking it to new levels of commercial and technological success.

Simply put he is a seasoned professional and an integral part of the foundation of the company we know today.

Or no were undoubtedly bring new energy and new ideas to his new role he and I are fully aligned on business strategy and committed to realizing a successful future for technip energies.

And what an exciting start to his new role.

Just last week, we announced a strategic partnership and investment in the Green hydrogen arena with MC fee.

A leading manufacturer of equipment used in the production and distribution of green hydrogen.

We are already a leader in hydrogen today and with me fee, we will leverage our established brand and customer relationships as well as our core competencies in engineering technology integration and project execution to develop large scale and competitive green hydrogen solutions from production.

All the way to Liquification storage and distribution.

We are also joined by chart industries, whose Ics expertise and equipment development is complimentary to our process technology and project capabilities.

We firmly believe that both innovative technologies and partner collaboration will be needed for the rural to achieve net zero carbon targets.

And this collaboration between the chart industries and ourselves stands as a real example of the many ways in which Technip FMC will play a material role in the energy transition.

I will now turn the call over to Maryann to discuss our financial results in more detail.

Thanks Deb total.

Total company revenue was 3.3 billion in the quarter with adjusted EBITDA of 321 million.

Backlog at the end of the period was 19.6 billion with $12.2 billion scheduled for execution through the end of Twentytwenty one.

The size and duration of our backlogs have remained resilient throughout the current downturn and provide us with strong visibility over the next several years.

I will focus my comments today on our sequential performance.

In this environment. It is important for us to more clearly demonstrate the underlying improvement in the quarter.

Total company revenue increased 6% sequentially driven by higher activity in sub sea.

Adjusted EBITDA improved more than 30% versus the second quarter.

Driven by strong project execution.

Higher asset utilization and increased benefit from our cost reduction activities.

As Doug discussed earlier, we completed our targeted run rate cost savings of more than 350 million ahead of schedule.

We see the benefits of this in our indirect cost including corporate functions.

Cash flow from operations was $168 million in the quarter capped.

Capital expenditures were 73 million, resulting in free cash flow of 95 million.

Net cash improved sequentially to 384 million and benefited from significant debt reduction activities during the period net liquid.

Net liquidity stood at 6.6 billion.

Adjusted earnings per share was 16 cents in the quarter when excluding after tax charges and credits and 17 cents per diluted share.

In the period, we identified direct COVID-19 expenses totaling 36 million down 35% sequentially over.

Over the course of this year, we have adapted quickly to mitigate the incremental cost impacts of the virus on our business.

Included in our reported results were foreign exchange gains of $6 million or two cents per diluted share.

The expense, resulting from increased liability to joint venture partners at $62 million or 14 cents per diluted share.

These two items impacted earnings per share by 12 cents in the period and if excluded our adjusted earnings would have been 28 cents per diluted share.

Let me turn to the segment highlights.

The information in the accompanying slide on segment results provide operating highlights when comparing to the third quarter of 2019, but here again I will focus my comments on our sequential performance.

Third quarter sub sea revenue increased 9% sequentially to $1.5 billion.

Due to continued improvement in operational performance.

We experienced increased project activity in the U.S. Asia and Africa, as well as increased activity in subsea services.

Sequentially steps the adjusted EBITDA margin of 9.7% increase 250 basis points, driven by project completions improved asset utilization and increased efficiency.

In Technip Energys revenue of 1.6 billion increased 5%, primarily driven by the improvement in operational efficiency within our supply chain and construction site input.

Importantly, our projects are progressing well.

These same factors as well as the continued strength in execution across our portfolio of projects also benefited adjusted EBITDA, which increased 7% sequentially to $175 million with a margin of 10.9%.

In surface technologies revenue of $226 million declined sequentially due to lower market activity in North America how.

However, revenue outside North America was largely unchanged and accounted for nearly 70% of our total segment revenue.

Despite the decline in segment revenue adjusted EBITDA margin of 7.7% increase.

430 basis points sequentially.

This significant improvement was primarily due to a favorable product mix.

The benefit of our accelerated cost reduction initiative and improved manufacturing execution in our international business.

Adjusted corporate expense in the period was 24 million driven by the acceleration of our cost reduction initiatives year to date corporate expense stands at $89 million.

We revised our corporate expense guidance last quarter to a range of 130 to 150 million for the full year.

Given the actions we have taken we continued to trend towards the low end of this range.

Our financial guidance is unchanged from our second quarter update we remain.

We remain confident in achieving our full year outlook in each of our business segments, assuming no further material degradation from COVID-19 related impacts.

Turning to cash flow cash.

Capital expenditures were $73 million and now total $250 million in the first nine months of this year.

We remain committed to disciplined capital investment and are confident in our full year capital spend of approximately $300 million.

The improved operational momentum experienced throughout the quarter supports our confidence in achieving our free cash flow guidance of neutral to $150 million for the full year.

In the quarter, we reduced debt by $647 million with net reductions in both commercial paper and fixed maturity debt.

These actions have reduced our absolute funding cost while lowering our blended interest rate we.

We ended the period with cash and cash equivalents of 4.2 billion net cash improved 81 million sequentially to $384 million.

In summary.

We delivered solid operational result, with all segments showing sequential improvement in adjusted EBITDA margin.

We continued winning new awards, despite the very challenging market backdrop with the sequential increase in sub sea backlog.

And we have achieved our targeted run rate savings of more than $350 million ahead of schedule.

Beyond the operating line, we significantly reduce debt in the period and we remain intently focused on managing the balance sheet.

Sequentially, our net cash position increased and we expect further improvement in the fourth quarter as implied by our full year cash flow commitment.

All of these successes give us confidence that we will deliver on our financial guidance for 2020.

Operator, you May now open up the call for questions.

Thank you as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound or fast key please.

Please allow one question and one follow up.

Please standby will be compiled its una roster.

And our first question comes from the line of Sean Meakim from JP Morgan Your line is open.

Thanks, everyone.

Good morning, Sean.

So maybe we could start with a little more on the free cash flow guide it seems to be really the credit.

The critical piece.

Reiterating that guide for the fourth quarter.

Maybe just walk through a couple of the moving pieces as you see it and then just.

Just thinking about the about working capital implications and if we think about free cash flow.

And the mandatory redeemable liability what could cash look like as we exit 2020.

Sure Sean Thank you and thanks for the question so.

With one quarter remaining obviously, we have strengthened conviction in operating performance. So that will deliver obviously increased cash flow as you seen working capital is improving from our middle of the year and we expect to see continued working capital improvement in the back half of the year I think as we discuss.

Maybe last quarter, we've identified a range of outcomes that.

That would potentially deliver the neutral to our $150 million, we still see a clear path.

Given the opportunity for performance in the back three and in the fourth quarter I think your second question was around the payment for the Yamal.

Redeemable liability and we continue to expect in the fourth quarter that will have approximately 100 million payable as you know thats below the working capital line and below that free cash flow from operations. So.

So we do expect as we head into 2021.

That obviously, we'll see that free cash flow improvement and net cash as I mentioned in my comments, and we will see improvement as well.

Okay.

Got it. Thank you for that I appreciate the explanation and then I think the other really critical piece for the stock today is getting to a resolution on technip energies and so clearly Doug your commitment to the spin has been unwavering could we maybe just get.

A little more transparency around the gating items to executing the spin and are there any other together.

Dual tracks that you're running around value creation with this business.

Just looking to really I guess get as much granularity as we cannot on how we get to the finish line on that on that piece. Thank you.

Certainly Sean to thank you for the question.

You're absolutely right I remain steadfast in my.

Conviction to the creation of Technip energies as an independent company.

The strategic rationale remains unchanged and I would say if anything it has become clear.

The importance of moving forward with such a transaction.

I think it's important though when we think about.

Your question around would could be triggers et cetera is to reflect back on.

What led to the decision a difficult decision at the time to defer the two.

The transaction and out to me either.

To me there is really three factors that went into that decision one was complete panic.

In the financial markets.

Driven by both the pandemic as well as the commodity price.

There was a lot of secondly, there was a lot of uncertainty in our clients plans at the time.

And finally, it really came down to ensuring that we had put an environment.

That was conducive to what I'd like to see us leaning in versus us leaning out in terms of our position within the industry.

So when we fast forward to today, certainly theres still anxiety and uncertainty in the market and there always will be but I think we've come past that point of just come to a complete fear and panic and.

Concerned about where the bottom could actually be.

In terms of the industry I think it's been quite remarkable.

And as evidenced in our Q3 results here in the inbound numbers that we just shared with you for subsea.

If anyone's done them had an opportunity to look at the math, It's a 1.1 book to Bill for.

For the third quarter for sub C, which was quite a substantial substantial win and winning very important and strategic projects and 50% of those being direct awarded to our company.

We're in a really unique position.

That really takes us to the third part which is we're leaning in we're winning so.

So when you kind of put those three together I would say we feel we're in a very different environment than we were in at the time that we suspended where we didnt know what our customers plans, we're going to be for instance, we weren't sure would impact it was going to have on our backlog I can reaffirm today there have been no cancellations in our backlog.

We didnt know would impact it was going to have on our supply chain and our ability to be able to execute and deliver some of the world's most.

Complex and strategic projects and as our financial results indicated across all three of our business segments, we continue to execute very well.

So we're in a different situation now Sean will continue to look at what is the right timing and what is the right.

Scenario and structure to move this transaction forward, but it would be our intent to continue to move in that direction.

Fair enough. Thanks, Doug.

Our next question comes from the line of Amy Wong from mute your line is open.

Hi, good afternoon guys.

Couple of questions from me the first one relates to just some news flow recently that the French government is proposing to end export guarantees for the oil and gas industry.

I apologize for that I understand it's not overnight, but theres going to be dependent upon oil projects from 2025 and gas projects from from 335. So just wondering like how that might impact you see in terms of maybe your clients that may rely on export credit or or.

Furthermore, a maybe when you guys tried to help clients arrange export credit facilities.

That impact your ability to win win some of these projects.

Yes, good afternoon, Amy interesting question.

And I think you really use the key word there which was held for assist.

We don't do project financing.

But it is true that from time to time, we were in a position that we can try to if you will.

Link link the two parties together, but that we do nothing more than that and that's the only role that we play in project financing.

It is true we're reading the same things that you are reading and we're not privy to any additional.

Facts or were timeline than you are.

But I think it's also realistic to assume with the project.

As good returns for the client the project will source funding and.

In any single project there tends to be multiple sources of funding it doesn't rely on any particular single source of funding. So my assumption.

Me and I will.

We don't have we'll own none of us can predict the future on this but.

But I feel quite certain as we've seen over time that the funding has evolved on these major projects from different sources.

That a project with good economics would be able which source funding.

Every way.

The most appropriate so.

So, we'll wait and we'll see how things play out.

And we will continue to play our role which is nothing more than to help or assist which we normally don't do but when asked we certainly do what we can to to support or assist but again, we're not in the project financing game.

Great. That's helpful to get your thoughts on that just just a follow up and it's still along the lines of understanding your order intake potential order intake pipeline I mean, you think youre conversion.

Conversion of orders.

Second half have been pretty good, particularly at for both subsea and for for energy.

But to what degree some of those projects kind of.

Were initially.

Initiated from a converter from projects that were you already in discussions pre the cobot pandemic and and then also the question here is really to understand maybe some early thoughts on 2021.

What projects and have you started new negotiations of clients or is it becoming more difficult to the pandemic environment just to understand your thoughts on Directionally, how 2021 is going to look like.

Sure Amy.

I knew we were going to get to 2021 quickly we got there on the second question. So thank you.

No. Thank you may be no look Amy will will give you as much I'll give.

I'll give you some kind of qualitative thoughts obviously quantitative thoughts at this time would be pre mature our customers are still developing their budgets. Their plans for 2021, so to do anything quantitative I think would be.

Would be a bit premature but in the spirit of of your question I'll be I'll be willing to give you some qualitative outlook.

I want to cover subs C.

Surface International and then I'm going to ask or no to make some comments on his thoughts on the subject regarding technip energies. So let's start with surface International look we are.

Continuing to see very strong momentum in our order outlook for service surface International and I keep emphasizing international only because in North America as you know, it's a book and turn business. So.

So the inbound that we expect to come from the surface International will continue to pick up.

I know, that's a little a bit contrary into some of the other comments. It may have been made to both the international market, but I think it's important to understand our position in surface international it's actually quite unique the level.

When the specifications and technology required for that equipment.

Far exceeds that thats used for French.

For instance, the North America market there.

Theres really us and maybe one other supplier of that high spec equipment.

It's totally vertically integrated we do it all in house, it's not outsourced to China or anywhere else.

As as it is in the North American market and it requires very very sophisticated machine tooling.

In materials to be able to provide that equipment very similar to subsea. Hence the reason were so successful so we.

So we see that continuing to expand I mentioned in my prepared remarks, we've always had a strong position in the middle East North Africa, We just extended our leadership position in the Middle East I noticed a couple of New awards and we continue to work very very closely with all of the key the key players in the region.

And expect continued success in growing success in Twentytwenty one.

In terms of sub sea or.

Orders.

What I would say at this point Amy is.

It seems like forever, but it was just so just a few months ago, a few quarters ago.

I mentioned that I felt we could achieve $4 billion of order inbound for sub sea and Twentytwenty I think for the largest part it was discounted and.

There's a lot of skepticism around that.

Obviously, we've come a long way to achieving that already and we have one quarter left to complete and we remain committed to that and I think as I say at this point look towards 2021, I could see kind of a similar.

I could see 2021 resemble 2020.

Again, it's a bit early theres, some moving pieces still we're trying to lock down with our customers to really understand the timing and as always any one large project shifting from Q4 of 2021 and the Q1 to 2022 could change things.

And Thats why Im saying, we just don't have that level of granularity yet from our clients, but when I look at the success.

The success of our execution when I look at our growing activity in our fee, which I mentioned in my prepared remarks, it's now it's grown double digit to mid.

The majority of that being feeds the majority of our IP feeds or direct awarded to our company. This is that proprietary opportunity set that the rest of the market does not have access to.

Again, why we were able to do 4 billion. This year, which is the majority of the subsea market.

We expect that to continue on next year again with probably more more.

Projects and more direct awards and then finally, it's important not to forget the strength and resilience of our subsea services business that continues to be a strong foundation that we continue to build from so when you put all that together again, we have to really understand would project.

You are going to move forward and the timing of those projects.

But I expect that to can I expect 2021 to resemble 2020, and just maybe one last thought.

You may have picked up in my prepared remarks, but if you didn't and we signed another exclusive alliance for subsea. So we're really proud of the progress we're making are no.

Yes, Thank you, Doug and thanks, Jami so for for taking synergies.

And with that.

It was exposed by Doug in his previous season.

Hi, Doug news good remarks, there is the potential to inbounds, hoping energy's too.

Projects prospects exceeding 1 billion each before the end of the quarter before the end of the year. So it's.

I think this alone is given.

Can you a good idea of what the year John will play for us all to deepen energys inbound full year.

And also.

Maybe some thing that I'd like to share is that or take Ethernet is.

LNG wave isn't over yet for us and there is a very solid pipeline of opportunities into next year as well.

We'll all building blocks are in place of unsafe for and forward thinking you're going to need to have a similar so the so the year in terms of inbound next year and one part of your question was also about how we are giving you a conversation so new types of conversations and or are we just we lay on the noble conversations Pico visa and converting.

Opportunities, but in actual fact, yes, we are having new types of conversations and new conversations about new.

Prospects and opportunities and very interestingly, including in the traditional markets or but I'm going to call traditional markets nobody's going to I don't know.

Good weather than the green hydrogen, but there is an energy transition perspective as well.

All the conversations we're having with our customers, including in the more traditional markets with a quite a huge emphasis on being played.

Being placed on.

Decarbonization by our customers so.

There is a real opportunity set here for us in the greed when I was growing field.

It can be said for us I think you are going to do so.

Nice mix of conversation is let me say for people to keep and hedges going forward.

Thank you.

Doug.

Your comments thank you.

Our next question comes from the line of Marc Bianchi from Cowen Your line is open.

Thank you.

I guess I feel like we always end up in this in this situation.

The way you guys put the guidance out where we've got an annual target.

And we can kind of solve for fourth quarter.

I know you you don't want to get into too much detail, but it would be great to hear just.

Just any kind of thoughts on the progression from third quarter across the three segments.

Particularly in sub sea.

How much of health was was realized in the third quarter related to the project close out what do we think seasonality could do in the fourth quarter.

Sure Mark I'll cover sub sea as indicated.

We had a very solid third quarter, we provide annual guidance.

It's not necessarily quarterly guidance and therefore, one can imply the fourth quarter before.

The fourth quarter will be a bit softer in sub sea. This is the way it always is.

Fourth quarter with the exception of maybe one or two instances is always a bit later for us and this has to do with the reduced amount of activity.

Particularly in the North sea related to our vessel activity in our project activity in the North Sea.

But the way that I would maybe summarize it is that we remain very confident in our full year guidance and market add to that that keep in mind that we're saying at least 8.5% and we are very confident in that.

And did you did you want more than that Mark on the others, Yes, certainly I mean to the extent to the extent you can talk about the other businesses I mean for for example surface I would suspect that there's potential for some revenue improvement from third to fourth just kind of given the momentum that we're seeing in.

In North America, but.

Perhaps that the international exposure is something that could offset.

Mark surface North America is a bit hard as you know a lot of times the running the budgetary constraints at the end of the year and you actually see a bit of softening.

In North America in terms of the revenue trend in the fourth quarter, but right now I would say, it's a very fluid situation, but were.

But we're very proud of our international franchise and the strength of our international franchise and our new.

And our noted you want to make a comment on technical synergies.

Yeah. Thank you look I mean, nothing that really isn't much to add a little then yes, we remain confident in delivering the guidance for the year. So.

Your next three quarters and hence now so it's yes, and just just constant for the rest of the year. So.

Right, Okay, well, maybe if I could just ask a follow on to 21 is we just think about the progression of subsea margin I think.

I think last time, we talked there was some expectation that you wouldnt quite be the level of utilization where.

We could really see a nice uptick in margins, but you did mention here in the third quarter, you had had some nice utilization.

Kind of curious how that factor plays out in 21, just based on what you know right now.

Yes, Mark indeed.

Industry wide utilization utilization next year will not be good.

So don't don't anticipate that there is.

Theres going to be a big uptick in the utilization and I'm talking cross industry still way too much capacity price.

Projects had gotten deferred as a.

As a result of dependent make that's push some things to the right.

Push maybe some of the utilization recovery for the industry to the right now.

Now as you know we've been selling vessels will continue to pursue that path.

And it may be cold stacking it may be selling it just depends upon with the opportunities present, and we're not building new vessels and I would encourage the industry to quit building new vessels, we need to learn to work together and we're going to be the we're going to be the leader in that and we're going to lead by example, and we're going to continue to fall.

Strategic alliances.

Work with others and make sure that we can.

Our very healthy integrated projects and ensure that we have the capability to deliver and continue to grow those integrated projects and we're very happy to do that through co.

Through collaboration verse.

Versus through direct ownership and adding capacity into the market. So this is a big change we're leading that change is the right thing to do for the industry and its certainly the right thing to do for our company and its most definitely the right thing to do for our investors.

Yes. Thanks.

Thanks for that Doug I'll turn it back.

Our next question comes from the line of John Lake Romain from CBC market solutions. Your line is open.

Hi, good lesson.

Yes.

So moving.

Prince for them.

And then Jay project before we sanction.

This division could you.

No.

You folks.

Sorry, we were having a bit of trouble here, we added some audio issues here.

I believe you were asking regarding some of the recent.

Media coverage in discussions around the room of project is that correct.

That's correct.

Sorry, Thank you very much look.

As you know we remain very in very close collaboration and working very closely with Exxon Mobil on this project an important project for us and for our partners. We remain very excited about this project and an hour.

Our singular focus is to work with Exxon Mobil.

Along with our partners to ensure that we can reach the best project economics for the project that's been the way since the very beginning its why we were selected in our consortium was selected and we you should expect that we would continue to do so I don't think there's much more to read into some of the media coverage than just good news.

Normal project practice and project engineering.

Thank you.

And our next question comes from the line of Kurt Hallead from RBC. Your line is open.

Hey, good morning, Doug and Marianne rest of the team are you.

Good morning, Kurt went very well thank you.

Excellent.

Doug I'm really curious with the push here that's going on from the industry on reducing decarbonizing.

Not just the energy industry, but other industries.

A lot of hype around the hydrogen opportunity and.

Your your participation with MC fees I'm curious about what do you what do you see is the potential addressable market opportunity.

For both technique vendor GCE and four.

FDIC.

C piece of the business as if there is one that exists so just looking for some additional.

Context insight anything you can provide on that would be very helpful.

Sure Kurt you can't see me, but I've, a big Smile on my face.

But you're not going to fully like my answer I know that.

We have the answer but I have a keynote presentation I think.

I think two weeks' time little less than two weeks time and I read.

I really don't want to steal my Thunder or the Thunder for the company.

Kurt I think what we're going to have to say it will be very very compelling.

The opportunities are our most definitely apply across the portfolio.

And we're going to show Kurt.

Just our style.

Not suggest.

The best but it's what we do.

We tend to really build our credit build up and have some real credible.

Examples, we say, making it real.

Versus just kind of going out, let's say with pure ambition and belief.

And you've heard us do more and more of that Youve heard me talk about high production, reducing future to greenhouse gas emissions by 50% you've heard me talk about sub sea 2.0, reducing greenhouse gases by 47% and you saw us make our strategic investment in green hydrogen with the recent.

Yes, but we made a mic fee, which I'm going to ask are new to tick to tell you a bit more about the hydrogen market, but they occurred I apologize to you, but I promise.

It's a very compelling message I'd like to deliver that message and the proper setting.

And the work has been done we actually we will talk about what we have done where we've been investing because in some of these areas. We've been investing for over five years. This isn't anything new we are going.

We're going to talk about the fact that we're doing it because we believe it's the right thing to do not be.

Not because it's.

Because of popular demand you have to believe in what you're doing and we're going to show real examples of the impact that we're having we're going to set forth. The ambition overlooked and is also set forth a three three year measurable plan at a score card that our progress can be judged against and we're going to focus on those more.

On those markets, where we can actually generate good returns. So we're going to be selective and you've heard me say that before there are some very popular offshore markets right now that.

That that people were pursuing but.

But when you really look at it and does it doesn't take long to analyze it there's just not enough left for the installation company to make a decent return so.

So these packages are being split up upwards of eight eight contractors, which would typically be done between one or two contractors. So if you're the eighth on the list. If you don't have the technology, if you're not bringing together the integration if you're not the.

If you're just doing the installation.

That we don't believe we can generate the type of returns that our shareholders expect from US. So were looking at other things and you're going to hear me talk about some things in a couple of weeks that I think will really be surprising, but there will be backed up by the facts.

It will be backed up by real examples of what we were doing and it will be an ambition.

That is will be very very compelling I'd liked.

I'd like to let her know talk a bit about the hydrogen market. This is a market we've been in for quite a while and we're very excited about our recent investment in green hydrogen or no.

Yes. Thank you the other thing. Thank you couple them for the question. So as stated we do have studied the FMC into given that he's a very rich history in hydrogen no we basically.

Basically we have an installed base that is.

270, plus utilizing our proprietary.

Technology and.

When you combine that with our leading soon to management capabilities. One can say that we have pretty much everything we need to be a very credible player in the blue Jays industry space as it evolves.

So.

Louise going to mature green is not to the same issue between mature as well and this investment in maxis basically a way for us to position to keep than it used to be continue to be a leader on no large scale.

Driven markets, including agreements as well of course. This is the beginning with the with Mcafee and there might be other reports, we do use going forward, but to also bring with the with Mcafee is bought all three with a tier one electrolyzer.

Electrolyzer supplier.

And we will.

Helps with the IP development helped escape and accelerate the technology and we're super excited about it because it's a way to be forward looking and continue on the hydrogen Joe that we we started the many decades ago and where we do have a leadership position. So it's about preparing for future already.

Great. Thanks, Thanks for that and Doug that teaser alone should probably be worth about four to five multiple points on the stock so looking forward to that presentation.

Our next question comes from the line of Mark Wilson from Jefferies. Your line is open.

Thank you good morning, gentlemen.

I was going to ask you on energy transition, but I think you've answered that very clearly and look forward to that presentation. So maybe I'm just.

Cover off on that firstly about the alliance you've announced in the North Sea did you give a name for that.

Your line spot.

The most definitely have a name it is a very well known name.

But they would like to let's say.

Have a bit more.

They they want they want to wait for an event and the event is when we will announce our first integrated project with them. We are right now in the integrated feed phase on their portfolio.

And we would expect that to become the coming to be.

One of those at least one of those to convert into an integrated project, which is when we would then let's see formally announce along with the our client partners name.

At the same time.

We've done that a few times I again for us.

We like that as well it again it makes it more real it's not about marketing, it's about reality and I think once again the industry will be surprised that projects that are moving forward and the economics that are move and it's enabled by the economics because of our unique integrated offering. So we're working on these on a pro.

Tori basis.

All we have to do is moving from the feed to the PCI.

They convert their ours is a direct awarded an exclusive relationship long term relationship with yet another subsea operator, we could not be more proud.

Okay. Thank you and Larry and then become Brooklyn, your mouth could I ask.

What is the the.

The profile, we should expect those remaining contract liabilities to roll off is that it's a two year period.

Sure.

Thank you.

Thank you for the question Mark So I would say certainly no more than two years as we are in the warranty phase and as you know those trains had multiple warranty period.

This year you saw last fairly significant unwind, we've had multiple successive quarters of project improvement.

We continue to have a high degree of confidence in the execution excellence and the ability to avoid risk and therefore that on line should be no more than two years, but certainly quite successful as we see the project progression. So we expect that to be a positive results mark.

Okay and those those revenues will still pass through the the top line and the MHRA rail as as you work off the warranty.

That's correct they will they will come through as as revenue just as you've seen absolutely correct and unwind the contract liability yes.

Okay. Thank you very much.

You're most welcome.

Our next question comes from the line of George O'leary from TPH and company. Your line is open.

Good morning, good morning team.

Good morning, George.

And.

I know you guys have historically had a position in the biodiesel fronts, but renewable diesel seems to be catching more headlines is I wonder if you could lay out for us if there's any opportunity for it to move FMC renewable diesel side of the equation to what you guys are kind of seeing in that end market.

So youre right Theres been a lot of focus both on biodiesel as well as renewable diesel.

Thank the renewable diesel market. We all know it's still very very early stages I think we all need to spend just a little more time.

Before we make too strong of any any comments regarding.

The renewable diesel market, but as you know the biodiesel market is it is an area of strength for our company, we couldn't be more proud of the relationship that we have with necessary to continue projects that we have with nasty and there's very strong execution that we've had along the way so I'd like to turn it over to our new to add a few.

His own comments regarding regarding.

Regarding the Soviet.

Yes. Thank you Doug can you draw so yes just.

It's going to be.

In addition to add to Doug's comments, that's all been answered, but yes. We do have we are enjoying enjoying a very strong market position today and biodiesel and we undertake no.

We undertake no duty to know how and.

We have got long history, and we witnessed the we are their profit partners and the projects.

With many references to digital video time, nobody would Jason.

There is a technology and that obviously is going to continue to bear fruit. If I may say, so I don't have much to add other than just we're very very pleased and very happy about the collaboration annuities. These deep.

And it is a recurring when a recurring one which which we are enjoying and that's when we can have these type of relationship and make.

Can you give us a leader in the in bio diesel in both you know.

We are we happy and we are going to we have not sharing it because if anything for us, but we have many references as you may know and we continue to work with them on skating.

Each and every time, we can do there.

Okay. Appreciate the color there and then Doug you mentioned the.

I complete system earlier and I appreciate the 50% reduction in equipment and I realize that probably helps from connections point in having to have less people out on the wealth side, just by virtue of having less equipment, but I wondered if you could.

Explain the offering just a little bit more to better help us conceptualize, how why reduces labor on site and some of the efficiencies to drive.

Even if at a high level, just going to help us better understand offering now is differentiated versus the competition in the market. It sounds like you're making good headway on.

No systems into into every major us basin. So any color there would be extremely helpful.

Sure and it will be.

I'm going to maybe use.

And an analogy it might not be a great analogy, but I think it helps visualize it.

One hasn't been on one of these multi stage 24, seven kind of operating environments that is happening in most of the U.S. shale today.

It's kind of hard to appreciate so I'll try to.

Visualize it for you.

There's just a story of activity.

And then and then there's the actual execution or if you will the pumping of the stage.

Which point everybody goes back and it's it's highly automated and its really managed quite efficiently.

But it's what happens between those stages.

That is at best orchestrated and at worst chaotic.

I describe it as a bunch of ants, just just scurrying around a bunch of simultaneous operations you are dealing with high pressure regions you are dealing with very trip hazards.

It's just it's very call its very complicated, but it's the way that the industry has been doing it for ever.

I'd say forever since since I've been around.

But we did is we.

We looked at it and we consider ourselves to be an integrated architect.

And it's what we do it's what we do in the sub sea everything in subsea uses automation and control you don't have people running around in between operations. Because obviously they are unable to because it's at the bottom of the ocean. So we so why can't we do that on surface and of course, we initially people sale, it's not possible, it's not applicable et cetera.

But when you put really smart people on it and we have a tremendous amount of really smart people and talented people and give them. The challenge, it's amazing what they're able to do and what they were able to do was to look at it and take that part of the activity that nobody owns its owned by many different contractors and say why why doesn't somebody.

Got to take charge here and really find a way to make most of this activity automated.

Removing that interface removing all of those.

Activities and at the same time accelerate in improving the overall efficiency and most importantly, the safe environment in which to operate and it's really quite amazing I don't know if I'm, giving a justice the way that I'm describing it to you.

We went from from it best orchestrated a worst case loss to know something that's remotely operated decline controls everything from an ipod.

All of those activities that have to happen in between are now are now we're now fully automated and it's it's quite meaningful and the market acceptance.

Is barely introduced I know, it's a first time, we're talking about I complete aren't on an earnings call. It's really because it's relatively new we've been working on it for a while but it's just amazing how quickly it spread because again, it's just one of these things if you come up with the right solution that makes sense that the customer can get real.

Real upfront benefit from that we get tremendous benefit from in terms of our operating efficiency in this case our market share.

These things tend to be very successful so don't make them overly complex focus on the things that matter and deliver real results. That's our company.

Thanks, Doug Thanks Arnaud.

And our final question today will come from the line of Golan deleverage from Associate General Your line is open.

Yes, good morning, Doug. Thank you for taking my question.

The final question, but if we go back to the last six months.

What is the man also two men listens.

You would drill from six months.

And from that.

From that's less than our source less than our current key Reshipping vision.

Vision of the company for the next two to four years.

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What is different now do you see no keep FMC in two to four years thus.

So how will you use to see six months ago.

That's a that's a great question, it's hard to get it down to two lessons learned.

But for the sake of time I will do my best there's quite a few lessons that have been learned over the last six months.

If I just tried if I just try to pick two.

The first one is do do what is right now.

New it is right.

If it if it's got to feel right in the mind and it's got to feel right in the heart. So what do I mean by that.

Be it you know the way that we reacted to the pandemic by putting 100 per cent of focus on the health and well being of our of our employees our partners and our contractors trusting them, giving them the tools that they need helping them through this very difficult period and.

And then allowing them to perform and it's just amazing to me.

What was done during this period of time when many many other companies failed when many other companies have struggled.

Because the complexity of.

GAAP, adding to the number of changes that were being thrown at us on a weekly daily and in some cases, our early basis.

Our project Directors and project teams and our manufacturing staff at our crews that route on the vessels I just I can't say enough. So if there is a lesson learned there take care of them keep them healthy given the tools they need to do the job and have faith and trust and confidence and it's amazing it's amazing with people.

We will do.

The second one is really around the change in behaviors.

You know.

Becoming too internally focused not staying close to your customer I think has really hurt a lot of companies, we remain very close to our customers we.

We weren't pestering them. They obviously had to work through their own challenges that were coming at them, but letting them know that we were there we would support them in whatever way that we could and we did in some very unique ways in terms of helping them mobilize people in terms of helping them with.

With some early koby testing kits whatever that would ever was required just pills. So much loyalty and so much trust and they also we're now extending to us even greater let's say.

Latitude to operate so I see in the future, where we've always wanted to get but when it comes to remote inspections versus onsite inspections when it comes to more.

More integration versus less integration look I think this is the new reality. It is proven it is creating value and I think that this very.

Very terrible crisis that we went through in some cases probably.

Probably accelerated some of this adoption adoption and adoption by the industry I would argue by maybe as much as five years.

And I think I do think it's here to stay I don't think it will revert we're talking to clients very seriously now about how they're going to operate their major projects going forward, both in technical synergies as well as in sub sea and I think you'll find our company playing a much more prominent role.

We have historically.

Thank you very much for that.

I would now like to turn the call back over to Matt Seinsheimer for closing remarks.

This concludes our third quarter conference call a replay of the call will be available on our website beginning at approximately ATM British summertime today.

If you have any further questions. Please feel free to contact any member of the Investor Relations team. Thank you so much for joining US operator, Lisa you may end the call.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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