TechnipFMC plc Q1 FY2023 Earnings Call

Thank you for holding, and welcome everyone to the TechnipFMC First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I will now turn the call over to Doug Pferdehirt, TechnipFMC’s Chair and Chief Executive Officer.

Thank you, Matt. Good morning and good afternoon. Thank you for participating in our first quarter earnings call. I am pleased with the solid performance in the quarter, as we successfully delivered on the commitments we made in February. Total Company revenue in the period was $1.7 billion. Total Company adjusted EBITDA was $155 million with an adjusted EBITDA margin of 9% when excluding foreign exchange impacts. Total Company inbound orders in the quarter were $2.9 billion driving sequential growth in backlog to $10.6 billion. In Subsea, we had a very strong start to the year with inbound orders of $2.5 billion representing a book to bill of 1.8. This included four announced awards in the period, as well as a large iEPCI project that received FID in the first quarter. iEPCI accounted for more than 50% of orders in the period. Importantly, the combination of iEPCI Subsea services and all other direct awards totaled 70% of awards. This is a result of our unique commercial model, iEPCI, our demonstrated technology leadership which includes Subsea 2.0 and our long-standing client relationships, which together provide our customers with confidence in the execution capabilities of TechnipFMC. Given the high quality of the work we are pursuing today, and the strength of the broader market, we are confident that Q1 is not the quarterly peak for iEPCI inbound in 2023. We continue to expect iEPCI to post record inbound in 2023. This is enabled by a record level of iFEED activity, which often leads to a direct award for the iEPCI phase of the project. This provides further confidence in our outlook for Subsea orders of more than $8 billion for the full year. Since the creation of TechnipFMC, we have taken bold steps to fundamentally change the way we operate our business. These include the introduction of our integrated commercial model iEPCI, the development of Subsea 2.0 and the formation of our vessel ecosystem which together enable a differentiated approach to project execution that will allow us to successfully capitalize on this period of significant growth. Our integrated commercial model begins with iFEED. This early client engagement allows for the highest degree of integration, innovation, and cost savings. iEPCI then delivers the optimized architecture and solution leading to an acceleration in time to first production. We recently delivered the very first integrated project in Brazil. Our client Karoon Energy has emphasized that the project would not have been economically feasible without our iEPCI execution model. This differentiated outcome underscores our rationale to focus our people and assets on those opportunities that benefit from integration and technology enabling shorter cycle times as well as risk mitigation. We've also reduced complexity and cost with our Subsea 2.0 product portfolio. Delivery schedules for a subsea tree have been shortened more than 50% when utilizing Subsea 2.0 by leveraging our configured to order model. CTO allows us to industrialize our solutions while still addressing the unique requirements of individual projects. This gives us incremental manufacturing capacity without the need for additional capital expenditures. This also eliminates design engineering and redefines our sourcing strategy by utilizing pre-approved suppliers and standard configurations, reducing supply chain risk during the manufacturing process. We have also made strategic decisions in support of our fleet through the creation of our pipelay vessel ecosystem. Here we have extended our capabilities through alliances with Allseas and Saipem providing us the industry's most comprehensive suite of pipelay solutions. This ecosystem expands our iEPCI opportunities while providing greater capital efficiency through collaboration. iEPCI, Subsea 2.0 and the vessel ecosystem are all transformational elements that have reshaped our Company. They have fundamentally changed the way we do business, and provide real and sustainable differentiation for TechnipFMC. In closing, we are confident in continued market strength. We are confident in our ability to execute in this period of growth as the simplification and standardization of our integrated products and services reduce project complexity and execution risk. And our improved commercial success is a direct result of our customers' confidence in our ability to successfully deliver their projects. Our journey is not predicated on the market recovery. It reflects the changes we have made to our business that are already providing tangible benefits today through unique market visibility, improved commercial success and enhanced operational insight. And I am confident these changes will continue to drive improved results for our Company. I will now turn the call over to Alf, to discuss our financial results.

Thanks Doug. Total Company inbound orders were $2.9 billion in the quarter, with Subsea inbound of $2.5 billion and Surface Technologies of $322 million. Total Company backlog increased 13% sequentially to $10.6 billion. Revenue in the quarter was $1.7 billion. Adjusted EBITDA was $155 million excluding a foreign exchange gain of $2 million. When excluding the impact of charges and credits, our adjusted income from continuing operations was $1 million. Now turning to our sequential results. In Subsea, operating results were similar to the fourth quarter, as we suggested back in February. Revenue of $1.4 billion increased 3% with higher project activity in Brazil and the Gulf of Mexico, partially offset by lower activity in Asia Pacific. Our services activity continued to be impacted by seasonal factors. Adjusted EBITDA increased modestly to $142 million with a margin of 10.2%. In Surface Technologies, revenue was $330 million down 6% from the fourth quarter. Revenue decreased primarily due to lower international activity, which was impacted by the timing of backlog conversion. Adjusted EBITDA was $40 million, a 9% decrease primarily due to the lower international activity, partially offset by cost savings. Adjusted EBITDA margin was 12.2%, approximately 150 basis points ahead of our expectations. Turning to corporate and other items in the period, corporate expense was $27 million. Net interest expense was $19 million and is currently trending to the low end of our full year guide of $100 million to $110 million. I expect the remaining interest expense to be fairly evenly distributed over the rest of the year. And lastly, tax expense in the quarter was $37 million. Cash required by operating activities was $386 million. Capital expenditures were $57 million. This resulted in free cash flow consumption of $444 million in the quarter. The outflow follows a typical seasonal pattern of our business, driven by working capital consumption of $485 million related to the timing of project milestones and the payment of annual incentives. We ended the period with cash and cash equivalents of $522 million. Net debt was $868 million. In the quarter, we also repurchased 3.4 million shares amounting to $50 million. Lastly, let me provide some thoughts on the second quarter. For Subsea, we expect to benefit from the typical seasonal uplift as well as improved margins in backlog with sequential revenue growth of approximately 15%, driving margin expansion of approximately 400 basis points. For Surface Technologies, we expect similar revenue to the first quarter with a sequential improvement in EBITDA margin of approximately 50 basis points, which will largely be driven by our international business. I would now like to make a few additional comments with respect to our confidence in 2023 guidance, cash conversion, and shareholder distributions. Let me first speak to guidance. In the quarter, our segments delivered on our financial objectives, with adjusted EBITDA of $155 million when excluding foreign exchange. And as indicated by our second quarter and full year outlook, we expect to capitalize on our momentum. In Subsea, our full year outlook is supported by $3.3 billion of backlog scheduled for execution in 2023. When combined with our anticipated Subsea Services inbound for the remainder of the year, we have more than 90% coverage of our full year revenue at the midpoint of guidance. In Surface Technologies, we started the year modestly above plan and we continue to anticipate all of our growth in the year to come from international markets, much of which currently sits in backlog today. Our confidence in this outlook serves as support for my second takeaway which is the confidence we have in our cash conversion. In the first quarter, we saw the typical seasonal outflow in working capital. Again, following historical patterns, we should see a material improvement in Q2 before we move into a much stronger second half. We remain committed to our free cash flow guidance for the full year, which at the midpoint is $300 million. And this leads to my final takeaway, which is our commitment to shareholder distributions. I want to highlight that even with the anticipated cash outflow experienced in the first quarter, we continue to execute on our share repurchase program. We have now bought back $150 million of our $400 million repurchase authorization representing nearly 40% of the total. We continue to believe that our stock is one of the most attractive investments we can make today. We expect that the structural changes we have made to our business will drive sustainable improvements in our profitability, providing further support to continued buyback activity and future dividend distributions.

Certainly. Your line is open. Arun Jayaram with J.P. Morgan.

Hi, thank you. I first wanted to ask about this guidance here for the second quarter, nice improvement reflected in Subsea. And I know there can be some lumpiness with project timing and closeouts. I'm just kind of curious how you see the second quarter relative to the remainder of the year? Should we assume some modest increase from there and then the typical seasonality down in the fourth quarter?

Yes. Thank you, Mark, for the question. So first of all, as mentioned in my prepared remarks, certainly we expect that the Q2 performance to be up significantly due to the seasonality, talked about 15% revenue increase and 400 basis points uplift in the EBITDA margin. This is obviously coming out of the winter season that primarily is affecting our North Sea operations and really the Q2 will lead to higher offshore services and vessel activity. And also our results continue to be supported by our improving margins in backlog. So, we remain overall, as I said, confident in the full year, and to your question, yes, you should expect the normal seasonal pattern where you see a stronger Q2 and Q3 and then you see it moderating in the fourth quarter.

Okay, great. The other one I had relates to the Subsea opportunities and I saw some news this week about Brazil, delaying some platform start-ups and kind of look at the Subsea opportunities in about a third of them are in Brazil. So, I'm just kind of curious how we should interpret the risk there if that's already kind of baked in to what you're looking for in orders or is that a potential risk?

Thanks, Marc. So, certainly all information that we have as soon as we have it is kind of baked into our outlook and in the outlook slide that we provide for the industry. So, yes, you should assume any known are built into that. Obviously, there's always unknowns, but right now, Marc net-net, there is a stronger pull to the left if you will than a push to the right. And right now there is a significant amount of volume and a significant number of opportunities and clients are competing for availability. It's one of the reasons why we're seeing such an uplift in our integrated work where we can work with a client early on, shortening the cycle time, and they have much greater certainty in project delivery relying upon our proven execution and our proven execution model. So, really things are looking very, very positive.

Chase Mulvehill with Bank of America. Your line is open.

Hi, good morning everybody. So, I guess first, obviously, strong orders and we continue to kind of hear from your peers about higher margins and strength along on the pricing side. So, could you talk a little bit about pricing momentum on recent awards and tenders and kind of what you're seeing out there in the market, if you're able to kind of continue to push pricing even though that you've seen a little bit of oil price volatility of recent?

Good morning, Chase. As you know, I tend to avoid discussing pricing directly. Is there pricing momentum? Yes, it's real and improving. However, since 70% of our work comes from direct awards due to our relationships, technology leadership, and unique integrated commercial model, we focus on project economics when speaking with our customers. We show how we can enhance project economics by accelerating time to first oil, which significantly impacts project returns. This allows us to share a larger portion of the economic value we create. While the trend is positive, if we only focus on pricing, we're merely reacting to supply and demand. Our company has been built to be different and resilient, providing returns throughout cycles. This has transformed our operations and our position in the sector. When we discuss innovations such as iEPCI, Subsea 2.0, and the vessel ecosystem, these reflect our approach. We have been implementing these strategies for up to seven years for Subsea 2.0, and five to six years for the integrated model, alongside the more recent vessel ecosystem initiatives. These strategies show that we are not dependent on market conditions or pricing momentum. While we certainly benefit from market improvements, our business model is designed to be sustainable and to deliver strong returns over time.

That makes sense. Thank you for the insight. Given the strong order momentum not just for you but for your competitors and the industry as a whole, there are always questions regarding the supply chain and its capacity to fulfill all the orders, particularly with the ongoing momentum in the Subsea sector. Could you elaborate on the supply chain situation and any shipyard constraints or factors that might delay PSOs, and how that could affect your Subsea operations?

Sure. Let me first address the supply chain we work with, which does not involve shipyards, but I will answer your question since it is part of the equation. Speaking specifically about our company, if I didn't have Subsea 2.0, I would be extremely worried. You would likely be feeling significant pressure already, and this is why our customers are turning to us. Subsea 2.0 has fundamentally changed not just our operations and throughput capacity, which allows us to increase capacity without additional capital expenditure, but it has also transformed our supply chain. We have a unique group of clients who have been with us exclusively for nearly three decades, and we share close relationships with our supply chain as well. They now have visibility and certainty regarding the type of projects we will engage in, and importantly, what we will require from them. If you're not selling 2.0, every single order becomes a custom request. Each order begins with project or product engineering, which can take nine to twelve months, during which you ask the supply chain to create something they have never made before. This can lead to various challenges, as we've experienced in previous cycles before implementing Subsea 2.0. Currently, we see a more resilient supply chain, which we are fortunate to have, and this is why we don't face the constraints that are affecting the wider industry. Regarding shipyards and PSOs, the situation does not impact brownfield projects or CCUS work. However, for large greenfield projects that require an FPSO, those tend to be the long lead items. As you know, we've been involved in some outstanding projects where our clients have consistently expanded their operations year after year, achieving great success. We will continue to monitor this closely, and it is all factored into our projections. As we mentioned last quarter, we anticipate $25 billion in inbound work over the next three years.

Yes, good morning.

Good morning Scott.

Morning. How should we think about the cadence of vessel utilization improvement this cycle versus past cycles? I imagine it's ramping faster given the shorter cycle time on tieback work and just given the volume of tieback work that's out there. I'm just curious about what’s your perspective on the cadence of vessel utilization improvement.

Scott, that's an interesting question. We often discuss the benefits of shorter cycle times, as they allow us to accomplish more with fewer resources. Demand is increasing, and we can complete more projects as a result. It's important to note that we aren't a vessel company; we don’t focus on day rates or utilization because our primary business is delivering subsea projects. Our goal is to provide the most cost-effective projects with the best returns, which is primarily achieved by delivering on time and within budget, thanks to shorter cycle times. This approach is crucial to our success, the success of the subsea industry, and our clients' success. Currently, we're concentrating on maximizing our efficiency so that every day, week, or month we reduce the project cycle time benefits our company. In contrast, companies that solely own vessels may not prefer shorter cycle times, as it conflicts with their day-rate model; they typically prefer a slower pace. However, our focus is on completing projects quickly and successfully for our clients. Despite our successful track record and future ambitions, we recognize there is a limit to how much we can reduce cycle times in vessel delivery. This realization led us to establish the vessel ecosystem and partner with companies like Allseas and Saipem, allowing us to expand the integrated engineering, procurement, construction, and installation (iEPCI) market efficiently. This is our unique advantage, and we take great pride in it, as it has not been achieved in the industry before. Furthermore, the opportunity to collaborate in this ecosystem is open to any participants, and we are eager to work with others.

That's great. I appreciate all the color. I probably didn't ask the question, in the right manner, because I just mentioned the perspective of kind of getting into the installation phase faster this cycle, it seems to be happening, which I would imagine is good for margins. And, just a follow-up on cash conversion, it is good to hear that, no change in the free cash flow forecast for the year. I'm just curious some of the obviously the terms on contracts can change, as the cycle progresses. I'm just curious whether there is any material change in cash conversion on projects you're signing today versus projects you signed earlier in the cycle or is that all fairly consistent?

Sure, Scott. Let me address the first question. You asked it correctly; I just provided the wrong answer. I'm passionate about this topic. I agree with your premise. When we discuss the quality of inbound, it can be viewed in terms of both commercial and contractual aspects. A crucial part of this is how we are compensated, particularly the cash flow timeline, which is very important to us. In some instances, this has significantly improved in a positive way, and we are actively working on it with our clients. Our clients recognize that by securing certain items or making advance payments, they can better secure slots and long lead roles. This also helps us manage potential inflation impacts throughout the project's duration. For all these reasons, it turns out to be beneficial for both parties.

Good morning. I had some technical issues a few minutes ago. Doug, 70% of your awards were direct award Subsea Services or iEPCI? I was wondering if you could help us think about the margin benefits as more and more of your order book comes towards some of these direct awards and integrated projects. Just trying to think about that under the lens of you've guided kind of on this March from call it 13% Subsea margins this year up to 18%, I believe in 2025?

Sure, Arun, it's great to hear your voice and I'm glad you're okay. To clarify on the margin growth, we are looking at a 650 basis point increase, reaching 18% by 2025, as you noted. Given that 70% of our awards are direct contracts from longstanding client relationships of over 30 years, I hope you understand our sensitivity around pricing. We do not take advantage of our clients; rather, we foster collaboration. Building lasting relationships requires mutual respect, which has been the foundation of our company and its reputation. We have further strengthened this with our integrated model. Yes, we do prefer direct awards, as well as early engagement with clients to access our integrated front-end engineering or iFEED. In those cases, we do require clients to direct award us the projects, as we present a unique integrated approach that sets us apart. After all, we are a projects company focused on delivering successful offshore projects, rather than just boats or trees. We've been anticipating the offshore market's rebound long before the rest of the industry acknowledged it, due to our understanding of how to make offshore economics attractive. We've addressed past issues that made offshore projects less appealing with the iEPCI model and Subsea 2.0, a journey that has spanned nearly a decade. We've made bold moves that are now behind us, and we are fully in execution mode focused on delivering successful projects. When we consider a 650 basis point margin expansion, it's important to note, as I mentioned in my previous remarks, that we are not relying on a market recovery. Our strategy is not contingent upon market conditions or pricing returning to previous levels. We firmly believe the market will remain strong, but we have fundamentally shifted our approach to achieve this margin uplift through internal initiatives that we are beginning to see the benefits of today.

Great. And I was just comparing Doug, your Subsea EBITDA margin guide for this year at 13% midpoint, just to be clear.

Understood.

Just following up, Doug, I've noticed the term vessel ecosystem mentioned frequently during this call. Could you explain more about the competitive advantage of this ecosystem for FTI? Additionally, what do you consider to be some of the tangible benefits of that ecosystem that you highlighted at your Analyst Day a couple of years ago?

Yes, you're correct. We initially announced this a few years ago with Allseas, and more recently we've included Saipem. We are open to welcoming others as well. We don’t see them as competitors; we see them as collaborators. The reason for this is that everyone is adding capacity and capital, and we have observed the negative effects this approach has had on other sectors. We chose a different path, which allows us to avoid consolidation or mergers and acquisitions to achieve scale. Instead, we prefer to work openly with others. We have a significant presence in the iEPCI market, which now constitutes a substantial part of our total market. Consequently, the accessible market has decreased for those lacking iEPCI capabilities. Roughly, about a third of the entire market is now primarily ours, which is evident in our current market position. We can continue to expand by constructing vessels worth hundreds of millions of dollars or leverage existing vessels with similar capabilities and collaborate with other companies. This mutually benefits both parties, as those in our group gain access to the iEPCI market, while we continue to develop it further. Unlike asset-only companies that focus solely on day rate utilization and increasing vessel size, we concentrate on making Subsea project economics the most attractive investment option for our customers, whether they are in hydrocarbons or renewable energy.

Yes. Good afternoon or good morning, Doug. One question, if I may, one of your competitors, let's say, not really a competitor, Halliburton, your partner basically, mentioned the progress on the alliance regarding all-electric completions and seem to be basically quite excited regarding the potential of those technologies to change Subsea infrastructure. So I would like to have your take on that. Could all-electric competition be a genuine game changer going forward?

Hi, Guillaume, good afternoon. Thank you for your question. The short answer is that it's truly an exciting opportunity. We are fortunate to collaborate with Halliburton on this project. Halliburton leads the market in down-hole completions, specifically in all-electric subsurface safety valves. This is crucial because if we electrify the subsea but still rely on hydraulic systems like those of Halliburton's competitors, we can't truly go all-electric. In that case, we'd need to maintain a hydraulic distribution system and hydraulic throughput through our tree to control the subsurface safety valve and down-hole components. Halliburton has worked diligently on this, taking on a leadership role while we also lead in the subsea sector. This partnership is advantageous as we explore the all-electric market. It's important to contextualize the electrification of subsea. Twenty-two years ago, TechnipFMC installed the first subsea electric actuator, and since then, we have installed over 600. When we launched our 2.0 platform, we designed it to be adaptable for either electric over hydraulic or all-electric options, providing our customers with the flexibility to choose and showcasing our ongoing commitment to innovation and technical leadership. We've previously discussed promising opportunities in greenfield developments that enhance total system costs and uptime performance, as well as brownfield opportunities, which significantly extend the tieback radius up to four times around existing hosts. Recently, we've come to understand that all-electric subsea will likely serve as the foundational solution, and in many cases, the sole solution for carbon capture, utilization, and storage (CCUS). This presents an exciting market opportunity for our CO2 injection tree, designed on our 2.0 platform and powered by electricity. For all these reasons, we are indeed very excited.

Thank you, Doug. I apologize for joining a bit late today. My question relates to the broader Subsea market, which has experienced significant structural changes over the past five to ten years, including integration and consolidation, as well as some of your competitors reducing market capacity. I'm curious if this has sparked urgency among your customers to get involved. Is this leading to higher prices for non-iEPCI work that you're pursuing, or could this be a factor in the increased activity we're seeing on the iEPCI side? I'd appreciate your insights on this.

Sure, David. Good morning and thank you for joining the call on such a busy day. I completely agree with you. Recently, a publication highlighted this well. The market is incredibly strong right now. While I wouldn't describe our clients as anxious, they are certainly concerned about capacity and the quality of that capacity. It's one thing to secure capacity, but ensuring it's quality is crucial. In previous cycles, the subsea industry struggled when quality capacity ran low, leading to delays in project deliveries. However, with our iEPCI model, we’re able to deliver projects ahead of schedule, which has resulted in a high repeat order rate. Our clients are noticing the extensive work involved in integrating major work packages and eliminating numerous interfaces, which is a significant technical achievement that builds their confidence. It’s not just about avoiding anxiety; they understand the importance now more than ever. Regarding the supply chain, if you're the bottleneck, the customer suffers regardless. In the past, we discussed variation orders, which indicated problems and resulted in more costs for the customer. That approach undermines trust and repeat business. Our operational changes have fundamentally shifted our clients’ perspectives and the way we conduct business.

Great. Follow-up there just looking at your orders and have you about the next three years. I'm just trying to curious based on what we have coming over the trends and over the next 12 to 18 months, could you reach close to full capacity in your own business or does Subsea 2.0 sort of change that definition of capacity and give you more flexibility?

Thank you, David. We are learning, we are realizing, I guess I should say, the benefits of Subsea 2.0 every single day. Just last night, I was spending time with our Head of Research Engineering, Manufacturing and Supply Chain. And we're getting more out of the plants to date than we thought was possible and we're not meaning that demonstrated capacity or technical capacity, I just mean the efficiency of Subsea 2.0, we're learning ourselves the efficiency of the configured to order, the ability to be able to redeploy our engineers from doing product engineering and coming up with relentless numbers of new item codes that can go into a bid document and doing real exciting engineering like changing the architecture of the Subsea environment. I mean, our engineers are as excited as they've ever been. We've talked about the supply chain before and yes on the manufacturing side, we continue to get more out of less and we're learning as we go and we certainly are not and we have no concern about that affecting our capacity just as importantly on the iEPCI projects is the vessel ecosystem. So the two come together to give us that scalability that quite frankly never existed in this business before. And if you don't have 2.0 and you're not an integrated company and you don't have access via a vessel ecosystem, which means you collaborate well with others, you're not going to get scalability and then you run into the capacity constraints and concerns that you mentioned?

Hey, good morning. Thanks for getting me in.

Good to hear your voice, Kurt.

Excellent. Doug, it's always a great color. So I'm kind of curious here first on subsea, right, you talked about 70% of your business now being iEPCI and you kind of referenced broadly that potentially 70% of the total addressable market is iEPCI. But my question is this, right? So is there a limit to what percentage iEPCI can represent of your specific business. And I say that in the context that we know not all customers necessarily want to do business the way that you would like to do that. So is to give you an opportunity now to focus just on the customers that kind of share your vision? Or do you think you are going to keep some capacity available just to do some of this other work that may not fit into iEPCI, kind of a longer-term question, but kind of curious on how you see it evolving.

That’s a good question, Kurt. If we assume that our goal is to make subsea projects the most economical investment for our customers and to maximize project returns, then iEPCI could and should reach 100%. We know it’s effective, and our customers recognize this as well. Every quarter, we announce new customers and a significant number of repeat clients. The adoption of iEPCI is expanding rapidly, and I don't see any upper limit regarding clients or regions. We recently completed the first iEPCI project successfully in Brazil. Some clients adopt it more quickly than others, but ultimately, I believe the subsea industry as a whole will transition to more integrated solutions. In the future, it would be logical for us to face a fully integrated iEPCI competitor. I don't see any technical barriers hindering the growth of iEPCI or the adoption of Subsea 2.0. In the meantime, we are straightforward with our clients. If they prefer to bid on a day rate for a vessel, that is less appealing to us. However, in certain situations, we will pursue those opportunities if the returns are right. Generally, we've been clear about prioritizing our resources, including our vessels, manufacturing, and especially our subsea engineering capabilities, on partnerships that lead to direct awards, iEPCI contracts, or integrated feeds that result in direct iEPCI awards while applying Subsea 2.0. When we announce projects, they often involve a combination of these elements.

Great. Awesome. Now follow-up question I have is on surface. So as you've referenced many times in the past, all of the growth is coming from international. You have very strong exposure in the Middle East market. So I'm curious here as to as you look at that surface business, you look the success that you've had in the Subsea business. Do you see an opportunity to establish a similar level of intimacy with your customers that you have in Subsea where that surface business can become a direct award business as well, kind of curious of how you think about that?

Kurt, great question. I just got back from Saudi Arabia. And thank you for bringing up surface and thank you for bringing up the Middle East. Both are important to our Company. Just at a high level, reminding everyone 90% of our revenue comes from international. We define international as offshore and principally the Middle East drive the bulk of our business. That's 90%. And the surface international business, indeed benefits from direct award, indeed benefits from a similar because it's more of a project-based business whereas North America is a product-based business and that product has become commoditized, hence 20 plus competitors in the North America market. Internationally, most countries, there's only two of us, in some countries, there's three of us. It's a very different playing field. It tends to be project. It tends to be longer lead orders, larger orders, which is why we have backlog built up in our international business and I will tell you the activity and the relationship with our customers in the Middle East is exemplary.

Yes, that's correct. So first of all, we remain very committed to shareholder distributions overall as I said in the prepared remarks, we've spent 37.5% of our $400 million authorized share buyback program. We achieved this based on successfully deleveraging our balance sheet last year and we're able to accelerate the initiation of this program. And clearly, we believe still that our shares remain undervalued and you have seen it from this quarter's activity and I believe you'll see us remain active in our share buyback program. And also of course as our financial results continue to strengthen, we really believe it's appropriate to initiate a dividend to further really demonstrate our commitment to our shareholders. So you'll hear more about that in the second half of this year.

Yes, thank you for taking my question. Good afternoon everyone. So Doug, I had a question on Mozambique. Back in 2019, TechnipFMC won another $1 billion plus contract, Subsea. Can you update on the status and the remaining portion and the backlog and if total energies were to restart the project this year is – is this will be a straightforward restart or do you have to renegotiate some terms on the contract?

Hi. Good afternoon, Bertrand. Thank you for the question. Indeed, a very large contract at the time of the award, as you may recall, was the largest iEPCI project that was ever awarded to that point. Subsequently, we've actually received larger ones and potentially more in the future. But an important project, one that we have worked tirelessly actually on the Subsea equipment portion and as I have previously mentioned on the call, that is largely done. So what is really left is the installation of that equipment and the tie-ins, etc. Out of respect from TotalEnergies organization, I'm going to let them comment on the timing of the restart of the project. But if that opportunity and when that opportunity presents itself, we will be excited to move forward.

Thank you, Jack. This concludes our first quarter conference call. A replay of the call will be available on our website beginning at approximately 8 PM British summertime today. If you have any further questions, please feel free to reach out to any of the members of the Investor Relations team. Thanks for joining us. Jack you can end the call.

This concludes today's call. We thank you for your participation. You may now disconnect.