TechnipFMC—the oil and gas services giant which would be created by the proposed merger between Technip and FMC—would be a subsea-to-surface powerhouse controlling about 27% of the global subsea market.

The two companies have a combined $20 billion contract order backlog and in 2015 their total combined revenues would have been $20 billion.

The new company would also have expected revenues of about $17 billion in 2016. It will supply complete subsea production systems, SURF and subsea life-of-field services in a direct bid to meet operators’ demands for more holistic subsea offerings.

The merger is expected to achieve $200 million in pretax cost synergies in 2018 and $400 million in 2019. TechnipFMC will be headquartered in Paris and Houston and employ 49,000 people in 45 countries.

The tie-up comes on the back of the companies’ initial Forsys Subsea joint venture, which has been up and running for more than a year and which has clearly acted as an important early test bed for how the two companies and their technologies could integrate to reduce both subsea field development costs and timescales.

It is this time and cost saving capability that has apparently driven the deeper tie-up to form TechnipFMC, as well as being a clear warning shot across the bows of Schlumberger-Cameron-OneSubsea.

Thierry Pilenko, who will act as chairman of TechnipFMC, said in a conference call, “The combined offering in subsea is obvious. We can progressively expand our products and system offering, getting those in more possible projects and substantially expanding what we do for our customers over the production life of the assets. But we're also identifying promising areas of investment in onshore/offshore where the addition of FMC’s LNG loading technology will fit well.”

He said TechnipFMC saw opportunities not only in deepwater in the Gulf of Mexico and West Africa, but also in shallow water in areas such as the North Sea as well as offshore Australia.

Meanwhile chairman and CEO of FMC Technologies, John Gremp, said subsea services would remain a growth opportunity for the newly merged company. He said, “The key here is we’re going to be able to unlock potential in subsea services that we could not address as a single entity.

“Often when we talked to our customers about offering life-of-field services they were very favourable, but our offerings do not address their actual need.

“Their actual need was for somebody to address the entire subsea ecosystem or holistically address the subsea, which means it’s not only about the trees and the jumpers and the controls and the automation systems and the manifolds, but it’s also about the flowlines and the risers and the umbilicals. They were looking for somebody who could put together a holistic data driven solution that could allow them to optimize the production and to improve the uptime of the entire Subsea ecosystem. Together we will be able to do that as one company.”

Forsys paves the way

Although Forsys has not been profitable to date because of high start-up costs, the alliance has demonstrated the considerable savings that can be made in subsea projects.

Forsys is working on three contracts—two in the North Sea and one in the Gulf of Mexico—and it is these that have proved the combination of the two companies is a good fit.

One of the most important pieces of work Forsys has been involved in so far is for Statoil’s 75 MMbbl Trestakk (SEN, 33/2) Field off Norway, which is being developed as a subsea tieback to the Åsgard A FPSO.

Henning Gruehagen, the head of Forsys Norway, told SEN that both FMC and Technip saw cost increases in the subsea space as a challenge that had to be solved.

He said that costs had been slashed by 25% on Trestakk by cutting the amount of equipment installed on the seabed and reducing installation costs at the same time with the use of smaller vessels.

Costs were also dragged down by integrating work on the subsea umbilicals, risers and flowlines with the subsea production system.

Gruehagen estimated that the time from concept to first oil could be reduced by six to 12 months through the integrated offering.

Under the terms of the MOU, Technip shareholders will receive two shares of the new company for each share of Technip, and FMC Technologies shareholders will receive one share for each share of FMC Technologies. Each company's shareholders will own close to 50% of the combined company.

There has, however, been a mixed reaction to the proposed merger from analysts, some of whom believe FMC shareholders have got the short end of the stick in the deal.

Bernstein, however, said the deal is a step toward solving the industry’s problem of high costs.