Technip Bumps Up Backlog to Nearly $11B
On February 16, 2010, Technip's Board of Directors approved the audited full year 2009 consolidated accounts. Chairman and CEO Thierry Pilenko commented: "In 2009 Technip maintained its strategy, focusing on good project execution, selective bidding and conservative cash management. We improved operating profitability, generated strong cash flow and renewed our backlog despite market uncertainty.
"Technip's full-year operating income from recurring activities reached a record 10.5% of revenue, increasing 3% compared with 2008. We delivered major projects for clients around the world in all three operating segments -- Subsea, Onshore and Offshore -- such as the Akpo FPSO, the first four LNG trains in Qatar and installation of the Cascade & Chinook hybrid risers in the Gulf of Mexico. Thanks in part to our improved profitability, we ended the year with €1.78 billion of net cash on our balance sheet.
"New contract wins expanded our backlog to €8 billion at year-end 2009. Key contracts included the Jubail refinery in Saudi Arabia; the Jubilee and Goliat subsea contracts in Ghana and Norway respectively; offshore platforms for Petrobras in Brazil and the frame agreement for floating LNG with Shell.
"Given this performance, the Board of Directors recommends a 12.5% increase in our dividend to €1.35 per share.
"Looking forward, the key drivers of our business environment have not changed significantly over the past few months.
"Bidding activity has held up well in 2009 and early 2010, as stronger oil prices and lower projects costs have encouraged our customers to assess their project portfolio. Yet we have observed delays in final investments decisions, resulting in a low conversion rate of bids and continuous pricing pressure on our industry.
"However, projects cannot be postponed indefinitely. In the period 2007 - 09, the scarcity of final investment decisions was the consequence of high costs and limited resources early in the period and the economic crisis in the latter part. For 2010 and beyond, while uncertainty persists for hydrocarbon demand, reserves and production issues will emerge at some stage, particularly for oil. Assuming relative stability in oil prices and greater certainty on overall project costs, final investment decisions could pick up during the second half of this year.
"Upstream, declining production at more mature oilfields will have to be offset by resources that are increasingly located in frontier areas and require technological innovation, greater risks and possibly extended project execution phases. Downstream, we see an accelerating geographical shift as the industry reduces refining and petrochemical capacity in the developed countries while building more modern and efficient plants closer to resources (Middle East, Latin America) and end-markets (Asia).
"We draw a distinction between markets where projects will depend on nearer-term movements in hydrocarbon prices or other factors, and those with strategic growth.
"The North Sea market may rebound, with smaller operators more confident in their cash flows and credit access. In West Africa, Nigerian activity and bidding will continue to be affected by political uncertainties, while Angola could sanction a few projects in 2010. Onshore North America may see some renewed interest in the Canadian oil sands projects, while US downstream markets will remain depressed by overcapacity, particularly in refining.
"By contrast, deepwater Gulf of Mexico activity should remain robust. Sustained activity is expected in Brazil, with a huge build-up of operational assets needed in particular for the pre-salt developments. Logistics and local fabrication will be key in this market. The Middle East will continue to be strong in the UAE, Saudi Arabia and, to a lesser extent, Qatar. These countries are building up large downstream infrastructures to increase the value of their gas and petroleum products. Iraq will not be a significant market in the short term but represents a significant upside in conventional developments as soon as the security situation improves. Asia-Pacific will be dominated by gas projects of all sizes, led by Australia with new LNG projects.
"Technip is positioned to capitalize on these geographic and segment trends. Technip can differentiate itself through strategic investments, local empowerment, and technology: three attributes capable of generating profitable growth in all our segments.
"First, we will continue to implement plans to expand our global fleet, increase our manufacturing capacity (Asia, Angola) and improve logistics (Brazil).
"Second, we will leverage our regional organizations to increase our local presence, reduce costs and capture complex global projects that require strong global coordination - a key capability for both international operators and national companies that operate abroad.
"Third, we will focus on technological differentiation with offerings such as deepwater, floating LNG and heavy oil refining.
"We enter 2010 with a good degree of visibility as a result of our management priorities over the last three years, such as the management of legacy issues, including the TSKJ matter. We have a solid, recently acquired €8 billion backlog balanced between business segments and locations, and a strong balance sheet.
"We target 2010 revenues in the €5.9 - 6.1 billion range, at year end exchange rates, with Subsea revenues of €2.6-2.7 billion. We target a Subsea operating margin above 15%, and Onshore/Offshore combined operating margin stable year-on-year.
"Accordingly, Technip can focus greater attention in 2010 on positioning its business for long-term profitable growth worldwide."
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