Technip Stays Strong with Integrated Approach (Interview)

French engineering and construction contractor for the energy industry, Technip, is one of the few companies who managed to tackle a very challenging industry environment caused by the recent oil price decline and intensified pressure on operator budgets.

Technip operates in 48 countries and employs about 38 000 people, with focus on oil and gas market, specializing in three market segments: Subsea, as the company’s recent driving force, Offshore and Onshore.

Technip’s subsea activities cover the design, manufacture and installation of rigid and flexible subsea pipelines and umbilicals. In addition to these activities the company’s subsea segment will be boosted by the recently launched JV with FMC Technologies, Forsys Subsea, which should according to both companies, redefine the way subsea fields are designed, delivered and maintained.

To find out about Technip’s soild performance during the first quarter 2015, despite industry headwinds, Subsea World News asked Technip’s President Subsea Hallvard Hasselknippe, who joined the company’s Executive Committee in January 2014.

Previously Technip’s Managing Director in Norway and COO Subsea Asia-Pacific, talked about the reasons behind success of Technip’s subsea segment, its future plans and what the newly established Forsys Subsea brings to the company.

Technip’s subsea business has been the driving force for the company in the first quarter, how do you explain such good results, despite the challenging market conditions?

In the first quarter, the performance of the Group has been solid despite industry headwinds. More specifically, our Subsea segment outperformed, with adjusted revenue growth at a high level of 28% and significant improvement in profit compared to last year at the same period. In spite of the challenging market conditions, order intake was also robust for this segment, at over 1 billion euros. In overall, our focus on early involvement, our strategic assets and our technologies, combined with our integrated approach, represent key differentiating advantages. Our clients benefit from our subsea vertical integration, which is unique in the industry and provide competitive solutions. In addition to the design and engineering works, Technip is the only player in the world to both fabricate flexible pipes and install them, as well as to manage the installation of rigid pipes. We master the whole value-chain of a project, thus ensuring maximum reliability, which is key to meet deepwater challenges.

By booking around €1 billion in order intakes for the quarter, including Lula Alto, Amethyst and Triton deals, what are the future possible subsea contracts that Technip might be looking to secure and what regions will you focus in the next 2 years?

In the changing environment, Technip has demonstrated operational flexibility as well as strong capex discipline. We also brought down costs. If we do not specifically give our targets, working differently with clients is key to make projects go forwards by brining cost effective solutions. We believe our strategic focus on early engagement, our worldwide presence as well as our diversified portfolio of solutions put us in a strong position to tackle this new challenging environment. Focus areas will include deepwater targets with our alliance partners FMC Technologies and Heerema Marine Contractors (HMC), including East Africa, and larger EPCI where we benefit from our large portfolio, experience and competence basis.

As we can see, Technip is well off in the second quarter as well with the Thunder Horse project award, what are your expectations for the adjusted subsea revenues in Q2 and for the whole year?

For the Subsea segment and for the whole year, our 2015 objectives are adjusted revenue between €5.2 and €5.5 billion and adjusted operating income from recurring activities at around the top of the indicated range of €810 and €840 million.

How do you plan to maintain the current momentum in subsea business considering the industry headwinds?

Close to 10 billion euros at the end of March 2015, our Subsea backlog remains strong and composed of diversified and quality projects. This allows us to remain selective in our bidding strategy in such business environment. We will continue to leverage Group’s capabilities and footprint, and not least lower our cost and increase our efficiency.

You have 6 vessels under construction, including DSV Deep Explorer, Is Technip planning any new investment in subsea?

Along with investments in strategic assets, such as the recent €68 million upgrade of the capacity of our manufacturing plant in Le Trait, France, over the next few years, Technip has shown flexibility in terms of fleet management. While we have a certain margin of flexibility for 2016-17 of 20 to 23 vessels, CAPEX is not the only way to get access to qualitative assets. For instance, we have leased and jointly owned vessels. We have also our alliance with Heerema and leverage several existing programs, as illustrated by our flexible pipelay vessels (PLSVs) on long-term charters in Brazil.

As a President of Subsea at Technip how do you comment the newly established alliance with FMC and the JV Forsys Subsea, and will Forsys be included in Technip’s subsea revenue or will it be treated as a separate unit?

At a time when our clients seek innovative and collaborative ways to decrease the cost of their investments, the alliance we signed with FMC Technologies and our Forsys Subsea joint venture (JV) is an enabler for new projects. Leveraging early involvement in design and a bundled execution model for SURF and SPS, we are convinced that we can significantly reduce development costs for offshore and subsea developments. As far as our JV is concerned more specifically, Forsys Subsea is an incorporated 50/50 JV with FMC Technologies. This entity will be consolidated under equity method, which means that Technip’s P&L will contain its share of the net result of this entity.

With many major offshore Oil & Gas service providers announcing global downsizing, can you say that Technip is well positioned to overcome these tough times the industry’s been facing?

As said earlier, we have a strong backlog, exceeding €20 billion, which needs to be executed and gives us visibility on our activities on 2015 and beyond. This provides us the ability to add new work in a cost efficient manner as well as robustness to be selective. While we maintain our capex discipline and optimize our cost base, we also invested and recruited in 2014 selectively to continue to add specific skills. At a time when the oil services industry is characterized by headwinds with a very challenging business environment, we, of course, remain attentive to market developments.

Hasselknippe added that in this challenging market environment, clients need closer relationships with contractors of choice offering more integrated solutions. “Leveraging our unique subsea vertical integration, we provide differentiating and competitive solutions, from concept phase to execution to our clients. From fabrication to installation, I really believe that our integrated approach sets us apart,” Hasselknippe concluded.