Maker of oil drilling equipment, FMC Technologies Inc. (FTI) inked a deal with Royal Dutch Shell plc (RDS.A), one of the largest integrated energy firms in the world.
Per the agreement, FMC Technologies will purvey eight subsea trees, a subsea manifold, topside and subsea controls and related tools for the development of the Royal Dutch Shell operated Stones field ultra deepwater project. The field is situated at a water depth of roughly 9,600 feet, in the Gulf of Mexico’s Walker Ridge block.
Houston, Texas-based FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry. FMC Technologies conducts its operations in three segments: Subsea Technologies, Surface Technologies and Energy Infrastructure.
With a major portion of its total revenue coming from outside the U.S., FMC Technologies’ international operations are expected to be a key growth driver, going forward. This will also play an offsetting role to the relatively soft domestic drilling scene. We have identified Latin America, Asia Pacific and the Middle East as the key markets in this regard.
Moreover, FMC Technologies’ strong backlog, which now stands at more than $5 billion, not only reflects steady demand from its customers but also offers long-term earnings and cash flow visibility. This enables the company to navigate uncertainty better than many of its peers.
On the flip side, oilfield service stocks are extremely volatile and the correlation of their movement with underlying business fundamentals is sometimes difficult to establish. As such, the shares of FMC Technologies may not be suitable for investors who are not comfortable with often substantial day-to-day volatility.
FMC Technologies currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
However, two oil field machineries and equipment makers that are expected to outperform the broader U.S. equity market over the next one to three months are Natural Gas Services Group Inc. (NGS) and PowerSecure International Inc. (POWR). Both the firms sport a Zacks Rank #2 (Buy).
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