Technip Highlights 3Q Results in 2011
Technip's Board of Directors approved the third quarter 2011 consolidated accounts.
Chairman and CEO Thierry Pilenko commented, "The third quarter was active for Technip. Our order intake accelerated to over €2.3 billion, reflecting the positive trends in our industry that we highlighted at the first half of 2011. New orders were well spread across Subsea and Onshore/Offshore segments. They contained a mix of medium-sized projects, as in previous quarters, and some larger contributions, notably the Mariscal Sucre field development in Venezuela and an additional milestone on the Prelude FLNG. Despite the volatile economic backdrop, activity in the month of October has remained robust, as illustrated by the recent letter of award received for the charter and operation in Brazil of two Flex-Lay vessels with a top tension capacity of 550 tons.
"We announced the proposed acquisition of Global Industries on September 12th. The reaction from clients and internal teams to the prospect of the two companies working together was very encouraging. The preliminary proxy statement was filed in the US as part of the merger process, all technical aspects of the transaction are proceeding as planned and therefore it is possible that we will close the acquisition earlier than expected. Within legal constraints, Technip and Global teams have started to discuss the integration process.
"We also maintained our focus on current operations and project delivery, and the performance of our teams is reflected in a good quarter for revenue and profit. Our revenue increased by 12.3% year-on-year, reflecting growth in all our segments. Our Group profit margin was 10.6%, slightly above the level a year ago, with Subsea at 16.9% and Onshore/Offshore just over 7%. We raised our full year profit expectations in July and are therefore able to maintain this positive outlook and to raise slightly our Subsea revenue expectations.
"Looking ahead, our clients continue to invest in projects, through both FEED works and larger final investment decisions, and we therefore continue to see opportunities to expand in nearly all our markets. The risks to this outlook remain the same: the strength of competition should not be underestimated, and general economic and widespread political uncertainties will continue to impact the timetable for some projects, notably those which require financing. Nonetheless, the high oil price, combined with an increasing demand for gas, is driving upstream investments, while strategic and regional imperatives support downstream spending.
"In this context, we seek to maintain our focus on strong operational performance and sustained and diversified order intake, as well as on organic and external growth underpinned by a solid balance sheet, to deliver value to both customers and shareholders."
Subsea business segment's main events were:
- In Africa, the completion of major operations on Pazflor in Angola enabled the operator to start production several weeks ahead of schedule, while offshore operations continued on West Delta Deep Marine Phase 8A in Egypt,
- In Canada, Hibernia project progressed well. In the North Sea, the Apache II completed the installation of 33 km of pipe-in-pipe on Devenick project, spooling of electrically trace heated pipe-in-pipe was completed at the Evanton spoolbase for Islay project, and manufacturing of smoothbore risers for Gjøa project was completed at our flexible pipe plant in Le Trait in France,
- In Brazil, work progressed on Papa Terra Integrated Production Bundles (IPB) and delivery of flexible pipes for the pre-salt Tupi Pilot development continued. Offshore operations with the Brazilian flagged Skandi Niteroi long-term charter started. The Deep Constructor also contracted on long-term charter in Brazil is on her way from Le Trait in France,
- In Asia Pacific, CWLH (Cossack Wanaea Lambert Hermes) was handed over to client in Australia, while offshore operations were completed on Kitan in the Timor Sea, and flexible pipes manufactured by Asiaflex were delivered for Sepat project in Malaysia,
- In the Gulf of Mexico, work on components of the Marine Well Containment System progressed,
- Vessel utilization rate was 93%, compared with 81% a year ago.
Onshore/Offshore business segment's main events were:
- In the Middle East,
- Site delivery of equipment and construction work continued to ramp-up on Jubail refinery in Saudi Arabia, where 11,500 workers are now mobilized on site,
- Civil and mechanical works progressed on Asab 3 in Abu Dhabi, and construction work started on PMP in Qatar,
- Procurement and yard fabrication progressed on Khafji Crude Related offshore project in the ex-Neutral Zone between Kuwait and Saudi Arabia,
- In Asia Pacific,
- Construction progressed on Koniambo nickel smelter unit in New Caledonia,
- Detailed engineering continued on Wheatstone gas processing platform in Australia,
- Engineering work progressed and procurement started on Prelude FLNG in Australia,
- FEED activities continued to progress on Petronas FLNG in Malaysia,
- In Latin America,
- In Brazil, engineering work continued to progress on P58 & P62 FPSOs, while engineering work and procurement activities continued on Cubatão refinery,
- FEED activities progressed on Ethylene XXI in Mexico and Cuba refinery,
- Neste Oil biodiesel project was completed in Rotterdam,
- Second train of Block 1 Gas Development project in Turkmenistan is ready for start-up,
- Engineering and procurement progressed on Ikra in Russia, while mobilization of the supervision team continued,
- Engineering work and procurement activities continued on Algiers refinery,
- Preliminary detailed engineering works started on Lucius Spar for the Gulf of Mexico.
Order Intake and Backlog
Subsea order intake included long-term charters to Petrobras for the Deep Constructor and the newly-built Brazilian-flagged Skandi Niteroi as well as the Subsea portion of Mariscal Sucre field development in Venezuela. Order intake also comprised several small and medium-sized contracts, notably in the North Sea, in the Gulf of Mexico and in China.
Onshore/Offshore order intake included notably an additional contribution from the Prelude FLNG project in Australia, the Onshore/Offshore portion of Mariscal Sucre field development in Venezuela, preliminary works for Lucius Spar in the Gulf of Mexico, Satah brownfield development in Abu Dhabi, a project for a synthetic lubricant base stock plant in the USA and FEEDs for fertilizer plants in Gabon and in Brazil.
Listed in annex II (d) are the main contracts announced since July 2011 and their approximate value, if publicly disclosed.
At the end of third quarter 2011, Technip's backlog was €10,118 million, compared with €9,413 million at the end of second quarter 2011 and €8,502 million at the end of third quarter 2010. Approximately 17% of the backlog is expected to be scheduled in the last three months of 2011.
Capital Expenditures and Investments
Capital expenditures for third quarter 2011 were €105 million, compared with €126 million a year ago. Technip received a letter of award for two 5-year Flex-Lay vessel charters in Brazil, to be built and operated via a Joint Venture with Odebrecht Oil & Gas. Capital expenditure payments for the full year are expected to be around €360 - 380 million.
3Q11 Financial Highlights
Subsea major revenue contributors included Pazflor in Angola, West Delta Deep Marine Phase 8A in Egypt, Tupi Pilot in Brazil, and Hibernia in Canada, as well as various contracts across all continents.
Onshore/Offshore major revenue contributors included Jubail refinery in Saudi Arabia, Asab 3 in Abu Dhabi, PMP in Qatar, Wheatstone platform in Australia and Ikra in Russia, as well as various contracts across all continents.
Foreign exchange had a negative impact estimated at €49 million on Technip's third quarter 2011 revenue.
Financial result on contracts accounted as revenue amounted to €6 million in third quarter 2011.
Operating Income from Recurring Activities
Subsea EBITDA margin3 was 20.9% for third quarter 2011, compared with 22.0% a year ago. Operating margin4 was 16.9%, driven by good execution on projects, notably Pazflor in Angola, Hibernia in Canada, Devenick in the UK and CWLH in Australia.
Onshore/Offshore combined operating margin4 rose from 6.1% a year ago to 7.1% in third quarter 2011, reflecting good progress on a broad range of projects.
Corporate result was relatively stable quarter-on-quarter.
Foreign exchange had a negative impact estimated at €2 million on Technip's third quarter 2011 operating income from recurring activities.
Operating income was €176 million in third quarter 2011 versus €156 million a year ago. A portion of the transaction costs related to the acquisition of Global Industries was recorded in this quarter with a negative impact of €4.7 million.
Financial result in third quarter 2011 included lower debt interest costs and a €3 million positive impact from changes in foreign exchange rates and fair market value of hedging instruments, compared with a €7 million negative impact in third quarter 2010.
Income tax expense was €52 million in third quarter 2011, giving an effective tax rate of 30.0%.
Diluted earnings per share5 grew by 12.3% to €1.07 in third quarter 2011, compared with €0.95 last year.
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