Ladies and gentlemen, thank you for standing by and welcome to the TechnipFMC Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions].

I would now like to hand the conference over to your first speaker today, Mr. Matthew Seinsheimer. Thank you. Please go ahead, sir..

Thank you, Mika. Good morning and good afternoon and welcome to TechnipFMC's fourth 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 and other periodic filings with the U.S. Securities and Exchange Commission, the French AMF, 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, TechnipFMC's Chairman and Chief Executive Officer..

Thank you, Matt. Good morning and good afternoon. Thank you for participating in our fourth quarter earnings call. I'm delighted to be joined by Alf Melin, our Chief Financial Officer. Today, I'll start by highlighting the tremendous successes of our company over the course of 2020 in the face of one of the most challenging years on record.

First, we protected our people. Our success has always been the result of the tireless efforts and unwavering commitment of the women and men of TechnipFMC. What they accomplished in 2020 was nothing short of exceptional, given the hardship and difficulties that occurred across the globe.

Health and safety is our top priority, and drives every decision we make. We took the steps necessary to protect our workforce, as well as our fellow employees of our customers, contractors and suppliers. And these actions won praise from clients and ensure that their projects move forward safely.

Second, the initial outlook we provided last February was clearly impacted by a multitude of events. But our teams quickly responded with a revised view that we provided in July.

Our aggressive cost reduction plan focused on project execution, and resilient backlog provided us the confidence and visibility to issue guidance at a time when few others in the energy sector are willing to guide for the next quarter.

We delivered on our revised plan with full-year revenue and adjusted EBITDA margin, meeting or exceeding guidance for all operating segments. And third, we protected our backlog. Importantly, this speaks more to the relationships we share than the contractual terms of any one project. We all face challenges, our suppliers, our customers and TechnipFMC.

By working together, we found solutions that help mitigate if not eliminate, many of the obstacles we face together.

While no projects were canceled from backlog, the more enduring impact to our company will be the strengthened relationships that have resulted from the collaborative engagements with our partners during this unpredictable operating environment.

And beyond these successes were many other notable achievements with regards to our ongoing business transformation. First was our separation. Throughout 2020, we continue to work to separate TechnipFMC into two industry-leading pure play companies with the transaction now completed through the partial spin-off of Technip Energies.

We took specific actions in response to investor feedback that were incorporated in the final spin process. We accelerated the spin timeline, closing the transaction just 40 days after announcement. We added an ADR that will trade over-the-counter in the U.S.

broadening the base of eligible shareholders for Technip Energies, while also creating additional liquidity. And we addressed investor concerns regarding share flowback and capital structure with the addition of Bpifrance as a long-term reference shareholder, and our near-term retention of a minority stake in the new company.

February 16th marked day one for an independent Technip Energies. But its real significance is the expanded opportunities and enhanced focus of management, resources and capital that will serve to benefit stakeholders of both organizations. Beyond the separation, we also accelerated our cost reduction efforts across the entire company in 2020.

We announced targeted cost savings of more than $350 million, which we achieved on an annualized run rate basis well before the end of the year. Additionally, we delivered on our commitment to reduce capital expenditures for the full-year by one-third versus our original plan with the current spend at a level that is sustainable over the middle-term.

In November, we provided a comprehensive overview of our efforts around ESG. TechnipFMC was created with the vision to drive real and sustainable change in the energy industry. This included the introduction of a three-year sustainability roadmap that has resulted in a number of successes for our company.

We have progressed well in reducing our own emissions of greenhouse gases, and are committed to helping our customers reduce their carbon footprint with innovative solutions and technologies like Subsea 2.0 and iProduction.

We're driving inclusion in the workplace as demonstrated by our initiatives, advancing fair and diverse representation and ensuring equity of our rewards. We're supporting the development of the local communities in which we live and work through educational programs focused on science, technology, engineering and mathematics.

And we'll continue to ensure that our actions are aligned with shareholders through executive compensation programs that are focused on driving behavior that creates sustainable shareholder value.

We also established an extensive set of new commitments to be realized through 2023 that will have real impacts and will be measured using an annual scorecard to provide transparency on our progress. At the core of our environmental initiatives is 50 by 30, a board commitment to realize a 50% reduction in Scope 1 and 2 equivalent emissions by 2030.

That's a 50% reduction before the end of this decade. Over this very same time period, we'll continue to deliver real solutions for the energy transition, including lower carbon alternatives, such as our all electric production system for Subsea and iProduction for surface markets, both of which are available today.

We'll also introduce zero carbon alternatives, such as our Deep Purple initiative, which I will discuss shortly. TechnipFMC has a strong history of challenging industry convention to develop, design and integrate new innovations, and Digital is a key enabler for continued success.

We introduced elements of our digital transformation over the course of 2020, with a particular focus on Subsea Studio. Subsea Studio was initially developed solely for Subsea system design. We have since extended the platform beyond the front-end to incorporate the execution and field management phases of our project.

Once fully implemented, we'll have a seamless digital thread from concept design, to tendering, manufacturing and delivery and continuing all the way through the life of the field. These digital initiatives improve economics, enhance performance, and reduce emissions, driving sustainable change that makes us the partner of choice for our customers.

And once again, we're leveraging our Subsea expertise by bringing digital innovation into the surface arena that enhance the customer experience for both iComplete and iProduction. iComplete is a fully integrated, digitally enabled wellsite operations and control system.

It creates a seamless digital experience with fully autonomous maintenance and remote data access initially from the completion phase, and ultimately extending through the production phase.

iComplete significantly improves efficiency, with 50% faster rig-up and rig down times and 66% reduction in the personnel required on site and cost savings that exceed 30% for our traditional work scope.

More importantly, it also increases safety by eliminating thousands of red zone interventions on a typical completions pad by using automation and control to engineer out risks and hazards. iComplete has already achieved significant market penetration since its introduction in the third quarter, with 10 customers utilizing the new integrated system.

iComplete is a real example of business transformation and its early success supports our expectations for growth in our completions revenue in 2021 to outperform the overall market. Turning to the key drivers of our 2021 outlook for Surface Technologies. International revenue has grown to become an even more significant portion of our business mix.

For the current year, we expect a gradual and steady recovery in well count to drive modest international market growth with spending increases led by National Oil companies, particularly in the Middle East.

Our unique capabilities in this market, which demands higher specification equipment, global services, and local content provides a platform for us to extend our leadership positions. For North America, we anticipate full-year revenue will likely be flat to down modestly versus 2020.

Overall, Surface Technologies continues to benefit from the adoption of our digital solutions and the broader market recovery. We remain levered to more resilient international markets, where we expect to source approximately 65% of our full-year revenue. Moving to the Subsea outlook.

The Subsea opportunity list has expanded since our last update, reflecting our view of renewed customer confidence, given the improved economic outlook, lower market volatility and higher oil price. Four new projects were added in the period, increasing the total estimated value of the opportunity list by more than 15%.

Two of the projects came back on the list after being extended beyond our 24 month view, during the height of the pandemic. We experienced strong momentum in front-end activity in the second half of last year and we expect this to continue throughout 2021, creating an environment for a more sustainable deepwater recovery.

Additionally, we expect at least 60% of the projects undergoing field studies in the current year to include an iEPCI solution, many of which will be direct awarded to our company. As we have said before, we're increasingly less dependent on the larger publicly tendered projects.

In 2020, just over 25% of our inbound came from projects on the opportunity list, and in 2021, that number will likely be lower. Much of our 2021 inbound sits beyond the opportunity list. We expect we'll be awarded more iEPCI and more Subsea services and we expect we’ll see more direct awards to our company than in the prior-year.

This will include project work from our newest Alliance partner, Repsol Sinopec, where we have recently formed an exclusive five-year alliance to support oil and gas development in the United Kingdom, deploying both iFEED and iEPCI and leveraging our extensive installed base across the region.

For 2021, we're very confident that orders will exceed the $4 billion achieved in 2020. We anticipate Brazil will be the most active region of the world for new projects driven by continued investment, and we see additional market growth potential coming from the North Sea, Asia Pacific and Africa.

The strong front-end activity we're experiencing today should support a multi-year outlook, driving our expectation for continued Subsea order growth in 2022.

Looking beyond the near-term Subsea outlook, we're excited for the role TechnipFMC will play in the energy transition with significant opportunities including novel wind, wave energy, carbon storage and green hydrogen.

With over 70% of the world's surface covered by water, we view offshore, and more specifically, Subsea, as the next frontier for the energy transition. Offshore opportunities will require more technology innovation, involve an expanding list of players, and necessitate a higher level of collaboration.

Our core competencies allow us to transform new technologies into commercially viable renewables projects. We're well positioned to serve as system architect from technology development to project delivery and life of field services for these large scale renewables ventures. Last year, we introduced Deep Purple.

Deep Purple is a collaborative effort between TechnipFMC, our clients and partners. Our common goal is to integrate offshore renewable electricity and Subsea hydrogen storage to provide power to Subsea infrastructure and win at scale to provide clean energy to consumers.

We have made significant progress with the conceptual and technical phases of this project. This includes the optimization of a hydrogen flexible flowline and riser qualification.

We have secured an innovation grant in Norway for a three-year pilot project, where we will lead the efforts to develop and optimize offshore wind, hydrogen and Advanced Energy Management. And we'll also develop a dynamic model in digital twin, further contributing to our overall digital strategy and Deep Purple is just the beginning for us.

Further success in the energy transition will come from collaboration. Partnerships will be instrumental in this transformation. We recently partnered with Floating Power Plant, a clean technology company for an EU grant deal application to fund an offshore green hydrogen pilot for the Canary Islands.

And we have also partnered with EDP Energias de Portugal on the beyond hydrogen project study Offshore Portugal. The ultimate path to commercialization for these and other opportunities will be driven by our ability to provide innovative and proprietary technologies that are unique to TechnipFMC.

Partner with our clients is the architect and integrator of the new energy system, and build new partner alliances that leverage our expertise in integrated project execution. Importantly, these are the same core capabilities that have driven our success in the traditional energy markets.

And we'll also invest in early phase projects and solutions that accelerate the role of our technologies in the energy transition as we continue to redefine offshore energy. I'll turn the call over to Alf to discuss our financial results in more detail and provide you with our outlook for 2021..

$200 million in proceeds from the sale of shares in Technip Energies to Bpifrance which we now have received.

In early March, we will receive approximately $80 million in settlements associated with foreign exchange hedges related to debt repayments made at the time of the spend and free cash flow of approximately $200 million to be generated post separation when assuming the mid-point of free cash flow guidance for the year.

Additionally, at the time of separation, and prior to the sale of shares to Bpifrance, we hold a 49.9% stake in Technip Energies that is currently valued at approximately $1.2 billion, which we intend to monetize subsequent to the 60-day lockup period and continuing over the next 18 months..

Thank you, Alf. Before we move to Q&A, I just want to close by expressing once again, how much excitement has been generated by the creation of both Technip Energies and TechnipFMC. We're very optimistic about the future for TechnipFMC and uniquely position as an international company with over 90% of revenue generated outside North America.

An industry pure play highly levered to the Subsea market, which we believe is poised for a multi-year recovery; a fully integrated technology and services provider, supporting both the traditional and renewable energy industries; and a company that is focused on providing innovative solutions to meet the world's demand for energy, with innovative low carbon offerings like iProduction and all-electric Subsea; as the partner of choice, leveraging our extensive references as an architect and integrator, as our customers look offshore and Subsea to achieve the scale required for the new energy system.

And through investment in early phase projects and solutions that accelerate the role of our technologies in the energy transition.

And we'll remain, we will maintain an intense focus on capital discipline and cash flow generation to accelerate the improvement in our capital structure as we continue to drive material and sustainable change in the markets we serve. Operator, you may now open the line for questions..

[Operator Instructions]. Your first question comes from the line of George O'Leary from TPH & Co. Your line is now open..

Just wanted to start-off with the competitive landscape in the Subsea space and the acceleration you guys have seen in awards as of late is included in the press release and the presentation. You guys have clearly kind of changed the game in the Subsea space taking costs way down adding in more digital and kind of automated technologies.

And it seems like the competitors have stagnated a bit there. So just curious if it's really mostly the international paradigm that's led to you guys taking share in that market and changing paradigm there or the competitors that just kind of dropped the ball.

How do you view that competitive landscape overall in the Subsea side?.

Thanks, George for the question. No, look I'm not going to comment on the competitors and their strategy. I think it's just important to reflect back on our strategy. We had a very clear vision and what you're seeing is the manifestation of that vision.

First and foremost, it begins with our people looking out for the health and wellbeing providing the tools necessary to do their job, and letting them execute in just a phenomenal way. Secondarily, it's our partners.

And you notice I'm not saying clients, I'm saying partners, many of our clients are partners in either Alliance agreements or Frame agreements, that that give us a unique capacity in the marketplace that others simply don't have access to. And again, it's really just seeing the vision become a reality.

This started with FORCE at Subsea quite some time ago, when we first launched the concept of an Integrated FEED study.

Then the transition to create the company on the 17th of January 2017 allowing us to actually to deliver integrated projects, the only company that can deliver an integrated project as a single company, having all the levers within their own control and we call that iEPCI.

Keeping in mind this whole time we were developing the next-generation of Subsea Equipment Subsea 2.0.

And I gave updates in the many quarters preceding this, that talked about how we were progressing and how much of the FEED studies were integrated, how the increase in the integrated projects and the delivery of those projects, how Subsea 2.0 was beginning to saturate and become a large portion of our backlog.

So with all that in hand, and a whole lot of discipline, because let's not forget, in 2018, I was having to defend why we weren't chasing market share for vessel utilization.

And we made it very clear at that time, we believed in our vision, we believed in our model, it would show up, and we did not want to load our backlog with a low priced no-profit or very low profit backlog as a result of chasing market share, particularly on vessel-only contracts, where vessel day rates were at an unacceptable level in our opinion.

So we suffered for a short period of time, lower utilization, but now we're beginning to see all that manifest into the margins of the company and our ability to set ourselves up for continuous outperformance as you have indicated earlier. And that's really it. It sounds simple, but this was a multi-year journey. It was difficult at times.

But we are -- we could not be more thrilled in the position we have put our company. And right now, we also believe and obviously outside of our control, but certainly welcome an inflection point for the offshore and Subsea market that we believe will have a multiyear runway ahead of us..

Thanks for the color there, Doug. And then just thinking about the Surface business, you guys provided the margin targets range for the 2021 timeframe.

I assume through time, even the top end of the range, you want to get EBITDA margins above those levels? What's the long-term target from an EBITDA margin perspective for that business? And what's kind of the roadmap in your mind to get more there?.

Yes, very good question. Again, as I always talk about when I talk about the Surface business, in the Surface market, it's really a tale of two cities, international and North America. As we've indicated, we continue to progress our differentiation market share and presence in the international market.

We actually added two key markets in the Middle East. And our presence in the Middle East through two very strategic contracts, and continue to benefit from the activity going on in the Kingdom, where we have a very important, long-established relationship, footprint and local content. So if you will, that side of the equation is doing well.

And when we look forward, we see -- it's always been quite stable, much less cyclical, much higher margins, why is that, the equipment we provide is just at a much higher standard than the equipment we supply in the North American market.

And that's just due to the demands of the market, the demands of the types of reservoirs, flow rates, et cetera are very different between the international, most of the international market and the U.S. market. And much less competitive, we have much further differentiation.

The North American market, as we pointed out in the prepared remarks, we see the market having some signs of recovery. We're transforming the market with our iComplete offering, which is having significant market penetration and continue to drive our iProduction initiative in the North American market as well.

When we look forward in our ambition around the margins, we'll continue to do the right things and expand the market, the margins in the international market. But in the U.S.

market, we're going to need a whole lot of help in terms of higher level of activities, absorption of capacity, et cetera before we see any real expansion in the North American market..

Your next question comes from the line of Amy Wong from UBS. Your line is now open..

Hi, good morning Doug. I had a few questions about the all-electric Subsea production systems. Firstly, I'd like to understand from a pricing perspective, or kind of more discussions with your clients. How different is the pricing of using an electric system versus more conventional traditional systems.

And when you're discussing with your clients, what are some of the key kind of pressure points of getting them to adopt an electric Subsea production system?.

Good afternoon, Amy. Thank you. Look, we're super excited. I think I said this last quarter, or maybe two quarters ago, we think this transformation could and should happen very quickly. First and foremost, we'll come to pricing; I'll answer your question. But first and foremost, the discussion with the client is around greenhouse gas emissions.

And it's not just greenhouse gas emissions, but there are other emissions associated when you're using hydraulic power versus electric power. There's a lot more generation on the top side in terms of greenhouse gas emissions. And then there's also the reality of using a hydraulic fluid versus electric and associated risks of such.

Operationally, it's preferred because you remove the latency that you have with hydraulically operated systems. And from our point of view, where it gets really exciting, Amy, is we can increase a tieback distance up to four times, four times.

So imagine the opportunity set when we have 50% -- over 50% of the world's infrastructure on the seabed today and growing as our market share continues to grow.

Imagine the capacity that brings to our company for very high return projects for our clients to tieback satellite fields their own or others like in the recently announced alliance we formed with Repsol Sinopec back to their producing platform. So again, the discussion is around helping them reach their ambitions around the energy transition.

This is a key enabler, allowing us to move forward and expand the opportunity in the market set, leveraging our installed base and helping our customers improve their returns, and then, finally, pricing.

When you put it all together, you would expect that we would receive a higher level of pricing on these type of our projects, because our customers are receiving significant benefit. So it's a win-win situation..

Very clear.

Just a quick related follow-up, care to take a stab at, let's say by 2025, or some timeframe, you pick what your penetration is going to be and have the new system enrolled what's going to be electric versus non-electric?.

You'll hear about some awards for sure, in that timeframe. I won't go too far. I don't want to get too far ahead of myself here. But you will definitely hear from us. We have the most let me back up just one second, Amy, we have electric in Subsea today, we have electrically operated in controls in Subsea today.

And we have by far -- by far, more than the rest of the industry combined times a multiplier, the number of all-electric activated controls in Subsea today.

And one that we've talked about before that we continue to be very excited about is not just all-electric, and not just replacing the hydraulic with the electric controls, but the inclusion of robotics and using robotics for actuation much further simplifying the infrastructure as well. We call that our Subsea robotic manifold.

They’re on the seabed operating today in Brazil for Petrobras. And we're excited to say we just received another award to build more subsea robotic manifolds which are just, we're talking Subsea 4.0 now, Amy, this is just well ahead of 2.0, as we continue to expand and develop.

So you'll hear more awards, we'll call them out, and what's the level of penetration, there's a large installed base out there. So it's not something that you can just flip overnight.

But I think anybody looking at Greenfield projects today, or any sort of long distance tiebacks today would be well served, and certainly our clients and our partners are looking at all-electric as an option..

Thank you, it's very, very exciting. I'll turn it over..

Your next question comes from the line of Sean Meakim from J.P. Morgan. Your line is now open..

Thank you. And congrats on getting the spin completed..

Good morning, Sean, and thank you very much. We're excited for ourselves. And we're excited for our friends at Technip Energies..

So maybe just to start on the guidance. One of the biggest investor push backs coming into this release was margin progression in 2021 after the challenges in 2020, so I think there has been a lot of skepticism regarding your ability to improve margins if revenue is down year-on-year.

And so there are a lot of moving parts, we've got costs have been taken out, COVID impacts are hopefully receding as the year goes on, Subsea services mix can be a help, vessel calendar has been a challenge.

So you maybe just help us unpack those pieces that drive the margin guidance, including the upside and downside of that range?.

Sure, Sean. It's a little -- I won't repeat everything that I mentioned when I was responding to George's question a bit earlier, but the same playbook applies, right? This is the manifestation of the vision and our steadfast determination to deliver it.

So, you heard in Alf's prepared remarks, I don't think you've heard that from us before or certainly from anyone else that our margins in backlog are improving.

So, this has to do with the fact of an intense amount of discipline, not chasing projects at any cost, walking away from the table, you see this on the large public tenders that are made public, the results are made public, you see where we typically fall.

When you have almost 50% of your revenue being direct awarded to your company through your alliance partners, Subsea Services where the conversion of integrated FEED studies to direct award iEPCI, both of which we said will grow in 2021.

That's a very different environment than being out there bidding competitive day rates for vessels in a market that is, that has too much capacity in the market today. As I mentioned earlier, we took a -- we took some hard comments back in 2018 because of our surf market share, which was shrinking at the time.

We said we were doing that, because we believed in our vision. We believed that we would get the iFEED studies converted with the iEPCI projects, which would flow through and provide a higher margin and higher returns.

But to do that, we needed to maintain the capacity of the fleet, and not fill it up with these low day rate, no margin or zero margin contracts. So we passed on those. And now what you're seeing is the benefit of that. So look, I appreciate what you said, Sean, it's the secret sauce.

It shows we're doing something; we're not sitting back and waiting for revenue to recover, for margins to recover. We're a company that is extremely disciplined that has a vision that has an absolutely unique operating model, and an incredibly favorable client and partner base that we respect and honor and cherish and support every single day..

Yes, I appreciate that. And I think it's certainly good to see the turn unfolding. Maybe just turning to cash flow, some one-time cash items are impacting free cash flow this year. But the CapEx guidance is 4% of revenue.

Is that a good run rate for capital intensity for the business now? And how do we think about normalized free cash flow for this business? I mean, it could be a free cash flow margin of sales; it could be conversion of EBITDA, some type of metrics that you point us to think about what this business can look like when we get through the transition period here?.

This is Alf here. So let me start with I think the capital expenditure question, as you mentioned. I think it's a fair level that you're seeing a data $250 million right now, where we can sustain our business model as we see it. And you don't expect significant growth CapEx above that as we go-forward.

In terms of cash flow, I don't know that I can commit to a certain level as a ratio. But clearly, what we are embarking on as a company, given our profile of our balance sheet et cetera is that we are going to be committed to generating cash.

So, as you see us operating from this year and onwards, we're going to be intensely focused on generating cash. And in that, we obviously expect to drive up these ratios over time as we progress..

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

Thank you. Sticking with cash, the bridge from the old, the pro forma capital structure to what was most recently announced you talked about now you've got an expectation for $200 million of free cash flow post-close.

And I'm just wondering if you could square that with the guidance for the year of $50 million to $100 million or $150 million excuse me, $50 million to $150 million for the year?.

Yes. So let me try to keep it pretty simple in this. So first of all, without going through maybe all the details of what I said before, getting from the current capital structure that we had now with the Bpi funds in hand.

And then with some of the proceeds from the foreign exchange hedges that were mentioned, the reality is that we've had about $100 million of outflow in the first -- maybe [ph] during the year and we're going to get $200 million in the back half of the year. And that's the way we get back to the capital structure..

Got it, got it. That's very helpful. Thank you. And then the other question relates to Surface and the margin that you're guiding to here down from fourth quarter as the range is down from where you were in the fourth quarter.

And Doug, I know your commentary about the international being better margin, it looks like international is going to be higher mix for you in 2021. So I'm just curious, I would have expected that margin to be improving from where you were.

So maybe you could provide some commentary around that?.

Sure. So look, in the fourth quarter, particularly in our international business, we had some very favorable settlements or recent favorable milestones and therefore was able to recognize that in the fourth quarter.

But really nothing to add beside the earlier comments, we're well positioned, we have the right, we believe we're in the right locations, at least that's, I think playing well -- playing out very well.

We have very long-term relationships where we have very high-levels of local content and expanding some of that local content in some of those key countries. And again, it is really important to emphasize, a surface tree is not a surface tree.

And you can have a surface tree in West Texas, you can have one in the Kingdom of Saudi Arabia, and you can want to have one offshore on top of the platform. And they are very different, very different in terms of their technical content, in terms of who the qualified companies that are able to bid on those type of projects.

And the fact that in the international business, for our Surface Technologies, we're almost entirely vertically integrated. Everything flows to our manufacturing facility in Singapore; we're not relying so much on third-party. And certainly we're out of the commoditized market that we face in a lot of North America.

So, consider Q4 an exceptional quarter. I don't think you can take Q4 times for unexpected, it could have expected us to deliver that versus the full-year of 2020. It's already a substantial step-up full-year versus full-year.

We're real proud of the work that our team is doing in Surface Technologies, not only around the international market, but as I said, really beginning to imply digital solutions and transform the North American market at the same time..

Your next question comes from the line of Waqar Syed from ATB Capital Markets. Your line is now open..

Good morning, and Doug, congrats on a successful spin-off. So, my first question is with respect to Brazil looks like in the Subsea side in new orders, Brazil is going to be a big part of the new orders.

So as you look forward over the next 12 to 18 months, do you think that if you win some awards there, would that be dilutive to overall Subsea kind of margins, Brazil are neutral or additive? How do you think about that?.

Great question, Waqar. And let me just start by saying, yes, Brazil is a country, but it's really South America. And I've said this in prior calls for the next decade, it's really -- it's very much going for us and that this is unique to us, it's very much going to be about Brazil, Guyana and Suriname and other countries in South America.

And why do I say unique to us? I think, you know, our position in Brazil; I think you know our position in Guyana which we're very proud of. And again, makes it a bit -- some of it differentially beneficial to our company. We have a phenomenal capacity in Brazil, phenomenal capacity.

We've installed manufacturing installed more Subsea equipment for Petrobras than the competition. We have an incredible services team that supports that. And we have manufacturing for Subsea equipment as well as for rigid and flexible flowlines that is best-in-class in the country.

So, we're well positioned, we understand the market, we understand the client. We have deep long-term relationships with Petrobras. Petrobras has been a leading adopter of our technology. I just -- I talked about Subsea compact robotic actuated all-electric manifolds earlier, they've done some really amazing things.

We're working on a Subsea seabed CO2 separation reinjection, which will really be a key enabler for the future production. And we're working on our hybrid flexible pipe, which is advancing very well in terms of the qualification along with Petrobras to address the stress corrosion issues that the industry has faced.

So all that being said, I think they deeply respect us. They understand that we have a certain expectation that we need to deliver to our shareholders and it has not created an issue for us to be able to do that. Now, beyond Petrobras, we also have two other tiers of customers in Brazil.

We have the IOCs who have invested heavily, heavily into assets, sub-surface assets in Brazil. They're moving pretty aggressively towards plans to develop those. And I think you know this but I already might have stated this in the past but we've pretty much done all the IOC Subsea projects to-date.

So we have a track record really across the board with all of them and experiences with all of them in Brazil. And they deep field that is obviously that beneficial when you move from the pre-sold to the post-sold now with those same clients.

And then finally, the third-tier is a group of -- a group at a fast growing group of independents, both Brazilian independents and non-Brazilian independents that are beginning to look at deepwater developments in Brazil. We're really the partner of choice for them. Some have extensive footprints in Brazil, some do not.

Some have extensive experience in deepwater, some do not. So when they know they can come to TechnipFMC is the only company who can provide them a fully integrated end-to-end solution from concept to pre-FEED all the way through the life appealed and supported their assets, positions us very well. So I know a long answer to your question.

So I'll stop there and I apologize..

No, no, that was a great answer. Thank you.

And then just like a follow-up, on the services side Subsea, how do you think of revenue opportunity in 2021 versus 2020, in terms of directionally what the magnitude of the change could be?.

So referring to Subsea services, correct Waqar?.

That is correct, yes..

That is correct, yes..

Yes, look we certainly expect that to grow in not only in 2021 but in 2022, that's being driven by let's just face it, our installed base is growing. If you just look at the market share that we have gained since the creation of TechnipFMC and the only company offering a true integrated offering. I mean, it's been substantial.

As you know, back in 2019, it was 50% of our inbound or $4 billion of just integrated projects. And so all these projects come along with most I should say most, if not all of these projects come along with a very long-term service contract associated, we're installing more, and certainly we'll be installing more in 2022, 2023.

So that goes up, we are servicing more of the installed base, because it's growing, our installed base is growing, plus it's aging. And on top of that, we expect to see a lot more Subsea well intervention wellbore, I should say Subsea wellbore intervention.

There's a lot of Subsea wells that are offline today, because something is failed in the wellbore.

As you know, we don't do wellbores, that's not our scope, but something down there under the ground, something happened and the way that the customer accesses that is to, we go out with them either on the rig or on one of our vessels, to be able to retrieve the Subsea tree, put in place the controls so that they can enter into the wellbore, perform the remedy that's required, and then reinstall our equipment.

And that's a very important part of our Subsea services. So I kind of what I'm alluding to is a lot of OpEx growth, followed by CapEx growth, driving our Subsea Services growth..

Our last caller comes from the line of Chris Voie from Wells Fargo. Your line is now open..

Thanks. Good morning. Maybe just to try a little bit on cash flow one more time. So excluding the separation costs of $70 million, I think guidance suggests about 20% to 40% of EBITDA conversion in 2021.

If I think about lower interest expense, and probably an opportunity for cost efficiency, and maybe tax efficiency, should future years gravitate higher compared to that 20% to 40% or is there any kind of one-time benefits this year that maybe aren't visible that could be a headwind?.

So let me start and say, there aren't any material one-time benefits really to this year first of all. I think you're right about that we have certain costs that are detracting a little bit from our current ability to generate the capital that we would like.

So if you look at things like interest expense, as you mentioned, if we can continue with our plan to deleverage our balance sheet, get the interest expense down, that's an important component. I think we have to work on optimizing our tax positions a little bit more. Those are a couple of items that our detractors at this point.

But there's no reason that we could grow cash flow generation after considering those items as an example. And then of course, on the back of where we think the markets could be going in the long-term and generating further EBITDA would set us up for future cash flow generations..

And Alf, you stated earlier but I know how pleased we are that we've received the $200 million payment from Bpifrance and the $80 million on the reversal or the benefit from the hedges will be coming as you said in early March. So, it's not something in the distance. It's right in front of us. It's happening today. It's exactly what we said.

There was some near-term, short-term capacities due to the fact that we accelerated the spin schedule from 90 days to 40 days. But we're getting back to exactly the levels that we had discussed earlier, and I couldn't be more proud of the work that is being done. So thank you, Alf..

Okay, thanks. That's helpful. And maybe just specifically on corporate expense, I guess it's tracking about $90 million to $100 million ex-D&A this year.

How do we think about the opportunity to streamline those costs as you normalize in 2022 plus?.

Yes, so first of all, of course, if you look at the corporate expense for 2021 and obviously, we have streamlined them a little bit already from the removal of incremental expenses associated with Technip Energies. We also further have had some cost reductions in spite of our programs in 2020. We also have some headwinds into 2021.

Corporate expense that is not as visible maybe, but that includes some increase in pension liability expense, that actually is driving up the expense. So when you kind of look at that, there are going to be continued opportunities to look at driving down this cost.

I'm not going to give you an exact number, but clearly it's a number that we're looking at to make sure we continue to streamline as we run this business..

At this time, I'll turn it over to Mr. Seinsheimer for any closing remarks..

This concludes our fourth quarter conference call. A replay of the call will be available on our website beginning at approximately 8 P.M. Greenwich Mean Time today. If you have any further questions, please feel free to contact the Investor Relations team. Thanks for joining us. Operator, you may now end the call..