Oil-field services companies have endured a rocky road in recent years, and even though 2018 has seen nice gains in oil prices so far, investors aren't sure whether companies like TechnipFMC (NYSE:FTI) have truly turned the corner. For the provider of energy services both off the coast and at land-based well sites, rising energy prices are just the first step in spurring its exploration and production company customers to utilize more of its services.

Coming into Wednesday's first-quarter financial report, TechnipFMC investors expected to see better earnings, but they weren't sure whether sales gains would be in the cards. TechnipFMC's numbers weren't quite as good as was hoped. The company's progress was nevertheless encouraging, especially in the context of further improvements in the energy industry since the first quarter ended.

Large drillship vessel at sea with large derrick at one side of the vessel.

Image source: TechnipFMC.

What happened with TechnipFMC

TechnipFMC's first-quarter financial results showed signs of progress, but they weren't perfect. Total revenue fell 8% to $3.13 billion, just about perfectly matching what most investors were expecting from the company. Adjusted net income of $131.5 million was 8% higher from year-ago levels, but the corresponding $0.28 per share in adjusted earnings fell short of the consensus forecast of $0.34 among those following the stock.

Unfortunately for TechnipFMC, the company's best-performing segment was also its smallest. The surface technologies unit saw revenue jump almost 50% from year-ago levels, posting 40% growth in its pre-tax operating earnings. Rising land-based activity in North America drove the division's gains, with particular attention to demand for fracking, wellhead, and flow metering equipment. International sales in the segment rose at a modest but still significant pace. Inbound orders were up 70% from the prior year's first quarter to $409.6 million, although backlog of $409.5 million was down about 5% year over year.

Elsewhere, TechnipFMC took hits. In subsea, revenue was down 14%, sending adjusted pre-tax operating earnings down 28%. Inbound orders skyrocketed to $1.23 billion from just $666 million in the year-ago period, but backlogs fell 7% to $6.11 billion. Projects in the African market neared completion, suggesting a further slowdown that could offset good activity levels in Europe. Vessel utilization rates were down to 60%, off 8 percentage points from a year ago. In the onshore/offshore segment, revenue declines came in at 11% as a key liquefied natural gas project approached completion, but profitability improved, and adjusted operating earnings jumped more than 40%. Inbound orders almost tripled to $1.85 billion, although segment backlog fell 17% to $7.49 billion.

What's next for TechnipFMC?

CEO Doug Pferdehirt was happy with how the company did. "Our solid first-quarter results reflect continued strength in operation execution," Pferdehirt said, "as well as the benefits of merger synergies." The CEO was also pleased that the services provider was able to keep adjusted operating margin level despite falling revenue.

TechnipFMC identified some interesting strategic moves. Creating a well intervention services unit for the subsea segment could help many customers with their offshore operations, and new control and automation systems could make the company's subsea offerings easier to use.

Much of TechnipFMC's guidance for the full year remained unchanged. Total revenue companywide should finish between $11.8 billion and $12.6 billion, with surface technologies bringing in between $1.5 billion and $1.6 billion, onshore/offshore at $5.3 billion to $5.7 billion, and subsea at $5 billion to $5.3 billion. Cost savings from merger synergies should reach $400 million in 2018 on the way up to $450 million annually for 2019 and following.

Investors seemed generally satisfied with the numbers, and the stock didn't move in after-hours trading Wednesday following the announcement. TechnipFMC has further to go before it can declare its slump officially over. But as inbound order activity picks up, TechnipFMC will have a good opportunity to cash in as long as oil prices continue to build momentum in rising higher.

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