Daniel Pickering

Dan Pickering from Pickering Energy Partners sought clarification on the share repurchase program's impact on shares outstanding, the drivers behind the increased free cash flow guidance, the strategy for expanding into new markets with low CapEx, and the role of M&A in the company's long-term vision.

Answer

EVP & CFO D. Lyle Williams detailed that another 10% of shares could be repurchased by year-end, with a meaningful net decline despite stock compensation. He attributed the higher free cash flow forecast primarily to significant working capital reductions in the second half. President & CEO Neal Lux explained that growth market penetration is driven by sales efforts and customer adoption of proven technologies, not capital investment. Lux also positioned M&A as an opportunistic part of the strategy, balanced against debt reduction and compelling share buybacks.

Dan Pickering of Pickering Energy Partners asked for clarification on expected shares outstanding after the repurchase program, the key drivers for reaching the high end of the free cash flow guidance, how the company plans to penetrate new markets with minimal CapEx, and where M&A fits into the 'Vision 2030' strategy.

Answer

CFO D. Lyle Williams detailed the share repurchase mechanics, noting that with leverage below the 1.5x threshold, the company could repurchase another 10% of shares, potentially reducing the year-start count by 15%. He identified working capital reduction as the primary driver for second-half free cash flow. President and CEO Neal Lux explained that growth market penetration requires minimal CapEx as it leverages the existing global footprint and commercial teams, focusing on sales efforts and customer trials. Regarding M&A, Lux stated it is an opportunistic part of the strategy, but the company will remain disciplined, balancing acquisitions against compelling share buybacks and debt reduction.

Daniel Pickering from Pickering Energy Partners asked for clarification on the mechanics of the share repurchase program relative to the leverage covenant, the timing of the $10 million cost-saving benefits, the key indicators FET is watching for a slowdown, and the market reaction to price increases, particularly for valves.

Answer

CFO Lyle Williams clarified that the leverage test for buybacks is measured intra-quarter, not just at quarter-end, creating windows of opportunity. President and CEO Neal Lux added that the $10 million in cost savings will begin to materialize in Q2 and ramp up in Q3. He noted they are proactively managing costs based on macro indicators like oil prices rather than waiting for activity to drop. Regarding pricing, Lux explained the valve 'buyer strike' is a unique situation driven by tariff uncertainty and concentrated Chinese sourcing, while also mentioning FET is exploring alternative sourcing strategies.

Daniel Pickering sought clarification on Variperm's Q3 performance, the impact of project delays on its outlook, and the specifics of the balance sheet post-refinancing. He also asked about product lines with strong momentum for 2025 and the potential for further portfolio rationalization.

Answer

CFO Lyle Williams confirmed Variperm's 2% sequential revenue growth and explained that project delays, caused by a tubular supply chain lag after the TMX pipeline opening, are pushing some activity into 2025, with Q4 expected to be flattish. CEO Neal Lux identified the subsea business and consumables as having strong momentum heading into 2025. He also affirmed that portfolio rationalization is a continuous effort to achieve the company's goal of mid-teen EBITDA margins.