All right. Good morning, everybody. We're gonna keep this thing going. My name is Derek Podhaizer. I'm Senior Analyst covering oil field services here at Piper Sandler. Up on stage with me next, we have CEO Doug Pferdehirt of TechnipFMC, ticker FTI. We're gonna be discussing the offshore production cycle with Doug. Look, Doug, I always like when you kick off any fireside chats around framing how you structurally change the landscape of offshore development. You talk about returning certainty to the market and the company's relentless pursuit of reducing cycle times and increasing project economics. Could you provide your comments to the audience on how FTI is leading those efforts?
Sure. First of all, Derek, thank you for having us here, participating in the conference. Thanks to everybody in attendance and to those that are on the webcast for your interest in our company. We deeply appreciate it. Look, a decade ago, we looked at the economics in offshore and realized they were no longer sustainable. The project returns were deteriorating due to the poor performance of the offshore project. Projects were being delivered a year late. Projects were being delivered 100% above the budgetary cost. Just significant time and cost overruns. This was somewhat the norm and actually accepted by our clients. We looked at it as the offshore company and realized this was not sustainable, so something needed to change. We were part of the problem.
You have to acknowledge that, but then it's about developing the solution and being the solution. We're really proud of what we've been able to do over the last decade. It's been 10 years in the making. As we sit here today, we are now driving the cost curve down, or we have a deflationary environment offshore versus other areas of capital flows, which are facing fairly significant inflationary effects. Now, how are we doing that? We're doing it by the relentless pursuit of reduction of cycle time. Shortening the cycle time accelerates time to first oil, dramatically improves our clients' project returns, of which we share a portion of the economic value that's created. We also get the internal benefit of much greater efficiencies because we're doing things faster. We're doing more with the same amount of assets, if you will.
Much higher returns, much better profitability, and build a business that is now truly sustainable to where our customers have the confidence back in investing in the offshore. It's important to understand the reservoirs were always there. I'm a reservoir engineer. The best reservoirs are offshore. The reason why the money was going from the offshore to the onshore was not because of the quality of the reservoir. Far from it. It was just simply because of the performance of the execution of the projects. We fixed that. We redesigned the subsea architecture. We made it to where it's a configurable architecture. Does not require any incremental engineering at the time of order. There's nothing bespoke.
We're going off a catalog using a configurator that allows our clients to be able to have what they need, have the choices that they need, but the certainty of the outcome. In addition, we merged FMC Technologies with Technip back in 2017 to create the only integrated offering. This integrated offering starts all the way at the architectural phase, where we design the architecture, all the way through the building of that architecture, the installation of that architecture, and then a 20- to 30-year life of field or after-market services OEM-style contract to support that architecture. All of these things is what's making offshore extremely attractive to our customers again and what is now we're seeing the capital flows, returning back offshore.
That was great, Doug. I appreciate that. Obviously very exciting and one of the main reasons why your stock is up over 300% over the last few years. We always get kind of pushback on that as far as just the mean reversion and valuation. As you just laid out for us, we are a structurally different market here that you've transformed the offshore. Let's just talk about the growth trajectory from here. You talk about the subsea opportunity outlook. I always like looking at that $1 billion project wedge that continues to grow.
Maybe just in your mind, talk to us a little bit more about, you know, the future outlook with growth and maybe walk around the world for us, pointing to the specific regions, like those are the emerging markets and what's getting you excited with that opportunity list?
Okay. Sure. We publish quarterly the subsea opportunity outlook, you know, to give you all an idea of what's actually happening in the market. We break that down into different categories, projects that'll be above $1 billion and then different increments below that. That list has grown tremendously. It's grown over the prior six quarters. It's now at $29 billion, which is a high-water mark. On the conference call this past quarter, I indicated that that is likely to expand further in 2027. The $1 billion projects, Derek, that you mentioned, have doubled in just the past 24 months. The number of billion-dollar-plus projects has doubled.
That really has to do with, you know, some of the big greenfield opportunities within existing basins, but also new opportunities in emerging basins. Maybe to do that, I'll walk around the world to talk about that. Now, I think given the current events, it's impossible not to start with the Middle East. I really do wanna start there. It's important to understand that our company, although we're an offshore company, and you hear about offshore incidents that are occurring, we do not operate in the shallow water market of the Middle East. Thinking about Qatar, Saudi Arabia, UAE, we don't do subsea work there. As a subsea company, it's shallow water, it's commoditized. We have not done that for decades.
We're not in that market, so we're not impacted by those activities in the shallow water market portion of the Middle East. Just kinda get that on the table upfront. More broadly for the company, we do have a Surface Technologies business. It's a smaller business. We do operate onshore in the Middle East. Just to put things in context, 4% of our revenue is exposed to the region. 4%. Relatively de minimis. Now let's talk about the rest of the world, but I thought, you know, it was important to talk about the Middle East first. It's hard to know where to start, so I'm gonna start with Brazil and just kinda try to go around the world a little bit. It is an exciting time.
There's more going on offshore than there's ever been. There's more new opportunities in offshore than I've ever seen in my career. Let's just start with where we are today, where we're seeing activity, and where activity could be emerging from. If we start with Brazil, it continues to be extremely active in the pre-salt. Not only Petrobras, but also other IOC operators that are now operating in Brazil doing very large projects. In Brazil, there's the exploration work that's being done in the Equatorial Margin. This would be a whole new opportunity set within Brazil. You go to Suriname. Suriname has its first project FID by TotalEnergies, where we're honored to be doing that work for them as an iEPCI 2.0, this integrated offering, 2.0 being this new architecture, in Suriname.
Guyana continues to be extremely robust off of the success of ExxonMobil, where we're humbled to do 100% of the work for ExxonMobil, and very excited to be able to be a partner with ExxonMobil in their activity in Guyana. Let's jump over Venezuela for the moment and Trinidad and Tobago, and we'll jump up into the U.S. Gulf. Probably the most exciting region within the U.S. Gulf, although there's a lot of activity around the mature parts of the mature areas of the U.S. Gulf, is the Paleogene. The Paleogene is the deep high-pressure region. There has been six projects. We are on five of those six projects, and most recently announced two additional projects for BP in the Paleogene, an area that we're very excited about.
Now we'll shift over to the North Sea. Lots of activity in the Norwegian sector of the North Sea. Also a couple of ongoing projects in the U.K. sector of the North Sea, but clearly a focus on developing gas for the continental Europe energy security, and exporting that gas to continental Europe. Lots of activity there. When we look at Africa is an exciting opportunity, and I think over the next decade will really be a driver of activity. It goes from north to west to south to east. You tend to have more oily on the west, more gas on the east, but there's activity in multiple countries, some historical countries that haven't had a new development in over a decade that have recently announced new developments.
On the eastern side, you have emerging areas like Mozambique, which there's now two—one producing asset, two ongoing projects with the potential for additional awards in Mozambique. You have the Orange Basin, which we've all heard about, which is, you know, largely Namibia and South Africa. Very exciting. There is projects that are now being actively in the tender pipeline there that we should start to see some project FIDs occur in that region as well. If we shift over to Asia, it's really about Indonesia. Indonesia, large natural gas deposits, important for LNG, as a source for the LNG, and we're starting to see those be FID'd at a pretty rapid pace.
That has a lot to do with the partnering between the Indonesian regulators and the Indonesian National Oil Company with the IOC operators that are moving those projects forward. Then down in Malaysia, Australia, we see a few more mature properties that we're adding additional wells just due to natural decline rates. Particularly in Australia, where you have a lot of LNG infrastructure, all that LNG is fed from offshore gas, subsea gas. As those wells, you know, decline over time, they have to be replaced and replenished with additional wells. I probably left a few out, to be honest, but that's as quickly as I could get around the world.
It's very exciting right now, the amount of activity, again, within existing basins, new areas within existing basins, and brand-new basins that are being developed at this time.
That was great. I think you hit on all the main regions. Maybe just to follow up, you talked about accelerating FIDs on the Far East side of things. I mean, I think what we're seeing today with current events as far as LNG being, you know, cut out in Qatar, impacting the Southeast Asia, Far East market, would you see almost even a further acceleration of the FID just when we start thinking about energy security, just given what's going on today in the Middle East?
Yeah, look, I think it's hard to say anything definitive at this time. It's obviously an ongoing and a fluid situation which, you know, we hope, you know, resolves itself and, you know, first and foremost, looking out for the safety and well-being of our people and those who work with us. What is true is the risk profile of that region has obviously been elevated, which will force capital to find other opportunities that maybe have a slightly lower risk profile. We firmly believe and what we are seeing and experiencing is that likely to go to other offshore basins around the world.
Right. That makes sense. Just to kind of get this question out of the way that everybody always likes to ask, you kind of laid it out already, but just order outlook as we think about 2026, 2027 on the last call. Reiterated over $10 billion 2026, grow from there in 2027 backed by that subsea opportunity outlook. Then maybe within your answer, talk about margins. I know we don't talk about peak or mid-cycle or anything, just continue to grind higher from here as you flow through more Subsea 2.0. Is that just still the fair way to look at you right now?
I think you summarized it really well. You know, the only color I could really add to that is, you know, clearly we are in a growth mode. You know, the company has been growing inbound, it's been growing backlog, it's been growing revenue, it's been growing margins, it's been growing free cash flow. I think what we laid out with some of the recent updates on the subsea opportunity outlook and some of the commitments that we've already made for 2027. You know, companies are talking about Q1 of 2026, and we're talking about 2027 and making commitments. That's the type of visibility that we have, and that's the strength of the backlog that we have. I think we're in for a period of continued growth.
In terms of the margin, the margin isn't just because of the market growing and the volume growing, it's also because of what we are doing to completely reshape our company. Much of which I talked about at the very beginning about how we've reshaped the company and reshaped the offshore industry to make it, you know, attractive again and to bring certainty, predictability, and to make the economics the most attractive economics for the capital to flow today, which is something we did not have for the past decade, but we've now addressed that. We're doing a lot internally within our own company as well. When I talked about the ability to be able to do things more efficiently or reducing cycle time, I'll give you an example of that.
The new architecture of equipment that we call Subsea 2.0, it's just a new architecture that's configurable. Instead of going from building something the first time or bespoke, engineer to order, we're now doing this configurable product platform like the auto industry does. When you place your order for your most recent automobile, that manufacturer is doing zero engineering at the time you place the order. It's going straight into assembly and test. That's what we have been able to achieve. The cadence, therefore, of the flow through our facilities is 2.5 times the historical cadence. We've created capacity just by having that additional throughput. It's just phenomenal and obviously shows up both in the margins as well as in the returns.
Great. You brought up the two FIDs with BP in the Gulf, Kaskida and Tiber, and I think that was one thing that you really focused on the last call, this portfolio approach by your customers. I do feel like this is an underappreciated new dynamic in the industry that we're seeing today. Maybe help us understand the benefits of running two projects in parallel for you. I know not to speak for BP, but from your perspective, why is this so important?
Derek, I would agree. I mean, it's, you know, this is not business as usual. This is very different. Our customers in the past would initiate a project, wait for that project to be completed, take the learnings from that project, then attempt to reincorporate them into the next project. The reason why in the learnings, and I'm being very gentle when I say learnings, was really because, as I said, it was typically cost overruns or schedule overruns. With certainty that we've been able to bring back into the industry and into our customers has changed the way that they're approaching their developments. They're now saying, "We don't have to wait. We know this project is gonna be delivered on time, on schedule." We have that level of confidence.
They have that transparency and that visibility into our operations. We're doing these in a collaborative way, such that if we just roll into the next project, right now we're doing, if you will, simultaneous engineering or we're doing simultaneous supply chain, what implications would that have from a portfolio approach? The answer is quite profound. Clearly, they see a cost benefit of doing that. We see a cost benefit. We share in that. We also see a much greater benefit in terms of efficiencies, and the continuity is so critical. This will now be done by one joint project team. It used to be you'd stand up a project team, they'd finish the project, they would go away, go do whatever they were going to do in their careers, and you'd stand up a new project team.
When I kind of jokingly talked about knowledge transfer or lessons learned, it didn't happen. There was a deep cavern between the two projects, both in terms of time and in terms of talent. Now we have that continuity. This portfolio approach is something that BP embraced. I think it's absolutely, and it's being looked at by others, and some are, and some others are actually applying it as well. I think we'll continue to see this not only in greenfield developments like BP is doing in the Paleogene, but as importantly in brownfield developments, because these are multiple smaller projects that would benefit from a portfolio approach.
Yeah, no, it's a very interesting and exciting dynamic to see. Obviously we're having evolution of oil versus gas too, offshore. I guess maybe for FTI, how should we think about the calorie count for the company? Maybe the differences in technology for deploying oil development versus gas development.
Yeah, interesting question. We're definitely seeing more of a shift to gas. You know, we talked about Indonesia, but there's multiple regions around the world, you know, East Africa, the Eastern Med. You know, we're seeing more gas offshore developments come into play, which I think makes sense and is something we certainly anticipated and certainly welcome. From a company perspective, let me start by saying we're agnostic, be it oil or be it gas. It's. We're agnostic to it. It doesn't have a large delta from a project cost point of view or revenue recognition point of view from us. What is different between a gas development and an oil development. The requirements of our equipment for a gas development do tend to be higher level, more sophisticated.
This is simply because of the corrosive nature of the gas and also the velocity. I mean, this is being produced at just tremendous velocities. Everything has to go through. We're the pressure-containing portion of the system. Everything goes through our equipment, and therefore it has to be built, in most instances, to a higher standard, and different metallurgies, different coatings, different techniques to be able to deal with that environment. You tend to see a bit higher cost per unit in a gas field versus an oil field development, but you also tend to have fewer wells on a gas development than an oil development. It kinda nets out for us.
Certainly gas, if there was one that I had to pick. We certainly have more differentiation in gas because of the higher technical requirements where we lead the way.
Very exciting. Let's talk about Subsea 2.0, something you've been teasing a little bit here over the last few months. We talked about it at dinner last night. SPS versus SURF, I think it was one-third versus two-thirds as far as overall content for the company. I know it's early stages, but you know, maybe help us and the audience understand how you're thinking about what SURF installation 2.0 could mean and could unlock for FTI going forward?
You made me nervous when you said we talked about it at dinner last night because it was a long dinner and an enjoyable dinner, but we talked about a lot of things. No, this is very important. I just try to, like, kinda simplify it. When you think about a subsea development, we start, remember, back at that architectural phase. We're designing the entire system. The system is really three components. It's what sits on the seabed, it's what's in the water column, and then it's the ability to be able to install, hook up, and commission all of that equipment. Those are really, if you will, the three phases, and somewhat equally split, roughly equally split in terms of, you know, the cost of those three elements.
Back in 2013, a long time ago now, we started on the seafloor architecture, and that's what we initially called Subsea 2.0. That's the Configure-to-Order, like the auto industry. No engineering at the time of order, all pre-engineered configurable components. Everything we talked about earlier. That was the seafloor. And that's all that we looked at because at the time, we were FMC Technologies, and FMC Technologies just had the seafloor. When we saw the opportunity to merge with Technip and create TechnipFMC because we wanted to have that fully integrated system, all three elements of that, you know, that's why we moved forward with the merger, and that's this iEPCI, integrated EPCI that we talk about.
We had not addressed the elements of the other two, which came from Technip, because that merger wasn't until 2017. We had a pandemic to deal with, and we had a major spin-off to deal with of an E&C company, all of which is behind us now. About a year ago, we actually have begun the process to look at the 2.0, which is the industrialization or this you know, Configure-to-Order approach for the other 2/3 of the subsea development. This is what has us hugely excited because, you know, Derek was kind enough to point out the success that we've had thus far, but it's only been on 1/3. We have 2/3 left to go. I can tell you, this is what gets me out of bed every morning. This is what keeps me hugely engaged and motivated.
It's what keeps our clients hugely engaged and motivated with us. It's why they're looking at portfolio approaches, 'cause they know we're gonna continue to innovate and deliver on that other 2/3. That could be as compelling or more compelling than what we've already done.
Super exciting. We got time for two more questions. I do wanna touch on subsea services because this continues to be a pretty big growth tailwind for the company as your installed base continues to increase. You know, how should we think about the growth of that business, the drivers of that business, and just the upside of the business as your installed base continues to increase here?
Yeah, it's really important. I mean, we have the world's largest installed base on the seafloor, and it's growing every day, and it's aging every day. I can say this 'cause I'm at that point now to where every day I feel that I'm aging and I need a little more intervention from the medical field, and this subsea equipment is no different. It's designed for anywhere from a 20- to a 30-year life. This is very sophisticated equipment. It's sitting on the seafloor in very harsh conditions. On top of that, we're typically operating at about 1 mi deep in the water, up to 2 mi deep in the water. Not into the earth, just in the water column. Obviously not being intervened with by a human being like you can on land.
This is all done with very sophisticated automation and control and robotics. We have a bunch of robots down there doing things to maintain the infrastructure that's in place. Imagine designing electronics to work in a saline environment underwater for 25-35 years. You know, ask your IT guy if, you know, they don't like when you spill, you know, water on the keyboard and that's the world that we live under in a saline environment. It is pretty amazing work that we do. We partner with NASA in terms of the development of the automation and control systems because although they're going up in the air and we're going below the water, it's actually very similar conditions that we have to operate in for our automation and control in our electronics.
Look, all of that needs to be maintained, all of that needs to be inspected from time to time. Our subsea services, basically from the time the project delivers the equipment, they're involved in the installation of that equipment all the way through that life of field or aftermarket services contract. That business will be about $2 billion this year. It's a recurring revenue stream. It is high margin. It's an OEM type model. And it is extremely resilient, including when we went through the pandemic. We had very little change in our services activity. Something that is very important to us and something I think that a lot of investors have picked up on starts to look more like an industrial, if you will, than a traditional oilfield services type application or company.
Great. Appreciate that. Last question, and wanna make sure we show Al some love here with this one. Just latest thoughts on capital allocation, free cash flow generation, shareholder returns. I mean, it's been a pristine story for you guys. Just what would you like to leave the audience on that subject?
Well, first and foremost, we are proud to be in the position to be able to generate the free cash flow that we're generating. We're also very proud to be able to redistribute that back to you as shareholders. You entrusted and put confidence in our company as we now have, you know, grown and continue to grow and generate tremendous amounts of free cash flow. We are in a position to redistribute that to you $1 billion last year between share repurchase and dividends. We just announced a $2 billion share repurchase authorization. We said we would deliver no less than 70% of free cash flow back to you as the shareholders, something we are committed to doing. The balance sheet is extremely resilient. We paid down any near term debt that is on the balance sheet.
We're net cash, and we have, you know, we got about $400 million of debt. So, you know, net cash of about $600 million. So we're in a position of strength. Our commitment to you is that we're going to be thoughtful in how we use those, how we use that cash. Very comfortable continuing with the share repurchase and dividend program in terms of the distributions back to our shareholders.
Well, great. We're up on time. I mean, I can spend another hour up here with you, but really appreciate you running the business with us, the outlook of FTI. Super exciting as always. Doug Pferdehirt as CEO FTI, thank you very much. Appreciate your time.