TechnipFMC plc

Overall Outlook - The global economy remains resilient despite multiple headwinds, including aggressive monetary tightening undertaken to curb high inflation. Inflation has eased, but interest rates remain elevated and central banks remain diligent in their efforts to balance price stability and economic growth. These actions are anticipated to support continued growth in energy demand in 2024.

With long-term energy demand also forecast to increase, the conflicts in Ukraine and Israel have further highlighted the need for greater energy security across the globe. As a result, the energy industry has accelerated its efforts to address the essential need for hydrocarbons today to ensure the continuity of affordable energy while also playing an essential role in the energy transition.

The price of oil has been supported by regional geopolitical tensions and the industry’s more disciplined capital spend, particularly for OPEC+ countries focused on production levels that support both economic growth and energy investment. This includes Aramco’s recent decision to forego an expansion in its production capacity above the current level of 12 million barrels per day (“MMBD”). An extended period of underinvestment also contributed to a supply deficit that has required increased upstream spending, lending support to a constructive view on the longer-term outlook for oil and natural gas prices.

We see continued strength ahead, driven by the resiliency and durability of the current market. The demand for energy will continue to grow. However, we believe the market’s evolution will differ from the past, driven by three major trends. First, a shift in capital flows, which we believe will largely be directed to the offshore and Middle East markets. Second, an increased role for new technologies to drive further innovation and market expansion, particularly in the offshore market. And third, an expanded role for subsea services, driven by the needs of growing and aging infrastructure. These trends allow TechnipFMC to leverage our full suite of integrated solutions, differentiated technologies, and the industry’s most comprehensive subsea services offering.

While we are confident that conventional resources will remain a large part of the energy mix for an extended period, we are also committed to the energy transition. Here, we believe that offshore will play a meaningful role in the transition to renewable energy resources and reduction of carbon emissions. We are making real progress through our three main pillars of greenhouse gas removal, offshore floating renewables and hydrogen solutions. We have also been successful in building on our partnerships and alliances to further position ourselves as the leading architect for offshore energy.

Our leadership in subsea processing, technology innovation, and integrated solutions was recognized earlier this year with the award of the Mero 3 HISEP® project, which is the first iEPCI™ (“iEPCI”) contract ever awarded by Petrobras. The significance of this project for the subsea industry cannot be overstated. This will be the first project to use subsea processing to capture CO 2 rich dense gases directly from the well stream for injection back into the reservoir, with all of the infrastructure residing on the seafloor.

In addition to reducing greenhouse gas emission intensity, HISEP® technologies will increase production capacity by debottlenecking the gas processing plant that currently resides on the floating production storage and offloading unit (“FPSO”). By moving the gas processing entirely to the seafloor, future FPSO and topside designs can be further simplified, driving significant improvement in project economics. With this award, our New Energy business has now achieved more than $1 billion of inbound orders – nearly two years earlier than previously anticipated.

More recently, we were selected to deliver the first all-electric subsea iEPCI for carbon capture and storage from the Northern Endurance Partnership (“NEP”). The partnership, which is a joint venture between bp, Equinor, and TotalEnergies, is building CO 2 transportation and storage infrastructure for carbon capture projects in the U.K.’s East Coast Cluster. Our all-electric solution will collect and feed the pressurized gas into an aquifer for permanent storage. The NEP project demonstrates our ability to leverage our unique combination of innovative technologies and integrated execution as we continue to further refine our positioning and mature our offering, particularly in carbon transportation and storage.

Subsea - Innovative approaches to subsea projects, like our iEPCI solution, have improved project economics through more efficient design and installation of the entire subsea field architecture. Our integrated commercial model, iEPCI, brought together the complementary work scopes of the subsea production system (“SPS”) with the subsea umbilicals, risers, and flowlines (“SURF”) and installation vessels. iEPCI created a new market and helped expand the deepwater opportunity set for our clients and has grown to represent nearly one-third of the addressable subsea market.

As the subsea industry continues to evolve, we are driving simplification, standardization, and industrialization to reduce cycle times and further reduce costs. An example of this is Subsea 2.0 TM, our pre-engineered configurable product offering. This technology provides simplification of unique project requirements by leveraging a configure-to-order (“CTO”) model that further improves the economics of our customers’ projects while driving greater efficiencies for TechnipFMC.

With CTO, we have designed an architecture, process, culture, and tools that are scalable and, more importantly, are transformational to the future of our company. CTO has allowed us to redefine our sourcing strategy and transform our manufacturing flow, resulting in up to 25% lower product cost and a shortened 12-month delivery time for subsea production equipment – savings that are both real and sustainable. This has paved the way for other products to adopt a similar operating model, enabling an enterprise-wide way of working.

Given the significant improvement in project economics, many offshore discoveries can be developed economically well below today’s oil prices. We believe these changes are fundamental and sustainable as a result of new business models and technology pioneered by our company.

There is also exploration activity occurring in new offshore frontiers. In Suriname, five major discoveries have been made through the successful appraisal of two oilfields, with confirmed combined recoverable resources of approximately 700 million barrels of oil. In Namibia, there has also been a major discovery with multiple operators beginning their drilling campaigns. We believe additional countries will become producers of deepwater resources during this decade.

Offshore development is likely to remain a significant part of many of our customers’ portfolios. We estimate over 35 MMBD of new oil production will be required by 2040 to meet future energy demand, including approximately 10 MMBD of new deepwater production.

Our Subsea inbound orders grew to $9.7 billion in 2023, an increase of 45% versus the prior year. The robust inbound benefited from a record level of iEPCI projects, and when including all other direct awards and Subsea Services, the combination represented more than 70% of total segment orders. This growth in orders also drove a 50% increase in Subsea backlog to over $12.2 billion, with high quality inbound supportive of further improvement in our financial returns. Looking ahead, we continue to believe that Subsea inbound orders will reach $30 billion over the three-year period ending 2025.

Surface Technologies - International markets comprise a significant portion of segment revenue, representing 59% of the total in 2023. We continue to benefit from our exposure to the North Sea, Asia Pacific, and the Middle East. TechnipFMC’s unique capabilities in these markets, which demand higher specification equipment, global services, and local content, provide a platform for us to extend our leadership positions.

Drilling activity in international markets is less cyclical than in North America as most activities are undertaken by national oil companies that tend to maintain a longer-term view that exhibits less variability in capital spend. We experienced a continued ramp up in production at our Saudi Arabia facility, as well as successful execution on our 10-year framework agreement with Abu Dhabi National Oil Company.

The shift to renewable energy resources will take time. During this transition, we believe that natural gas will provide a bridge between current conventional energy supply and future renewable energy supply. The transition is expected to drive growth in the surface market, led by large natural gas projects in the Middle East. We also expect North America to play an important role in meeting increased natural gas demand due in part to sanctions placed upon Russian supply.

CONSOLIDATED RESULTS OF OPERATIONS OF TECHNIPFMC PLC

THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Revenue

Revenue increased by $324.6 million during the three months ended March 31, 2024, compared to the same period in 2023. Subsea revenue increased by $347.2 million, driven by conversion of increased backlog, which was 49.6% higher as of December 31, 2023, when compared to December 31, 2022, particularly in Brazil, Guyana, Angola, and the United States from higher installation activities, sales of subsea production equipment and supply of flexible pipe. Surface Technologies revenue decreased by $22.6 million, compared to the same period in 2023 and was driven by the sale of MSB prior to the end of the quarter and lower activity in North America driven by lower levels of drilling and completion activity.

Gross Profit

Gross profit (revenue less cost of sales) increased to $341.4 million in 2024 compared to $220.9 million in 2023. Subsea gross profit increased year-over-year by $114.5 million, of which $70.7 million was due to volume increase and $43.8 million due to favorable activity mix. Surface Technologies gross profit was flat compared to the same period in 2023, as the sale of MSB and lower activity in North America were offset by improved profitability in the rest of the world.

Selling, General and Administrative Expense

Selling, general and administrative expense increased by $5.9 million during the three months ended March 31, 2024, compared to the same period in 2023, as a result of increased activity in both reporting segments.

Other Income (Expense), Net

Other income (expense), net, includes gains and losses associated with the remeasurement of net monetary assets and liabilities, gains and losses on sales of property, plant and equipment and non-operating gains and losses. The netincrease in expense of $11.0 million wasdriven by an increase in net foreign exchange loss of$6.6 million compared to same period in 2023 and other non-operating losses.

Gain on Disposal of Measurement Solutions Business

For the three months ended March 31, 2024, we recognized a gain of $75.2 million from the sale of equity interests and assets of MSB.

Income from Equity Affiliates

For the three months ended March 31, 2024 and 2023, we recorded income from equity method affiliates of $1.4 million and $14.2 million, respectively, driven by a decrease in operat ional activity of our joint ventures.

Net Interest Expense

Net interest expenseof $12.7 million decreased by $6.0 million in the three months ended March 31, 2024, compared to the same period in 2023, due to a reduction in outstanding debt and higher interest income.

Provision for Income Taxes

Our provision for income taxes for the three months ended March 31, 2024 and 2023 reflected effective tax rates of 23.6% and 82.7%, respectively. The change in the effective tax rate was largely due to the change in geographical profit mix year over year, tax adjustments related to the reassessment of prior year tax accruals and changes in valuation allowances on some of our deferred tax assets.

Our effective tax rate can fluctuate depending on our country mix of earnings, since our foreign earnings are generally subject to higher tax rates than in the United Kingdom.

SEGMENT RESULTS OF OPERATIONS OF TECHNIPFMC PLC

THREE MONTHS ENDED MARCH 31, 2024 AND 2023

Subsea

Subsea revenue increased by $347.2 million during the three months ended March 31, 2024, compared to the same period in 2023, driven by increased backlog during 2023, related to higher energy demand and upstream spending, further aided by our unique commercial offerings. $152.6 million of the increase in revenue came from Brazil, $83.8 million from Guyana, $80.9 million from Angola, and $66.5 million from the United States, due to higher installation activities, sales of subsea production equipment, and increased supply of flexible pipe. The increased revenue in these geographies was offset by a net $36.6 million decrease from the rest of the world primarily from lower activity as projects reached completion.

Subsea operating profit for the three months ended March 31, 2024, increased by $89.8 million, of which $70.7 million came from volume, combined with $43.8 million due to a favorable activity mix, partially offset by a $24.7 million increase in operating expense related to the higher activity.

Surface Technologies

Surface Technologies revenue decreased by $22.6 million during the three months ended March 31, 2024, compared to the same period in 2023. $11.7 million of the decrease in revenue was primarily driven by the sale of MSB as well as $15.6 million of lower activity in North America driven by lower levels of drilling and completion activity in the U.S. and the exit of Canadian operations. This revenue decrease was offset by a $4.7 million increase from the rest of the world, primarily in Asia Pacific, driven by higher deliveries this quarter of well service pumps.

Surface Technologies operating profit increased by $81.0 million. $75.2 million of the increase was due to the sale of MSB, $2.6 million was related to business in the Middle East, and $3.2 million from improved operational performance in the rest of the world.

Corporate Expense

Corporate expense increased by $4.8 million, or 17.5%, compared to the same period in the prior year, primarily driven by $5.2 million of transaction costs associated with the sale of MSB.