Maker of oil drilling equipment, FMC Technologies Inc. (FTI) inked a deal with Exxon Mobil Corporation (XOM), the world’s largest publicly traded oil company.
Per the contract, FMC Technologies will provide six subsea trees, a manifold and related tie-in tool for the development of the Julia oil field. The oil field is based at a water depth of roughly 7,000 feet in the Gulf of Mexico.
FMC Technologies, a leading manufacturer and supplier of technology solutions for the energy industry, conducts its operations in three segments: Subsea Technologies, Surface Technologies and Energy Infrastructure. As of Mar 31, 2013, FMC Technologies’ total order backlog (including intercompany eliminations) was $5,426.8 million compared with $5,599.2 million a year ago. Of this, backlog for Subsea Technologies, Surface Technologies and Energy Infrastructure at the end of the quarter was $4,621.6 million, $522.3 million and $291.9 million, respectively.
Houston, Texas-based FMC Technologies operates 30 manufacturing facilities in 16 countries. The company is engaged in the designing, producing and servicing of technologically-sophisticated systems and products such as subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions, and marine loading systems for the oil and gas industry.
FMC Technologies is particularly well positioned in the subsea systems market. It is the company’s largest and fastest growing business, accounting for about two-thirds of revenues. Subsea products have seen an increase in interest, and we expect earnings in this segment to strengthen – especially due to FMC Technologies’ leading position in subsea production systems, including subsea trees, controls and manifold and tie-in systems.
However, as is the case with other oil services and equipment suppliers, results for FMC Technologies are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. A potential drop in prices could curtail deepwater drilling and subsea equipment demand, thereby affecting the company’s revenues, earnings and cash flow.
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.
Meanwhile, one can consider oil field machinery and equipment suppliers like Natural Gas Services Group Inc. (NGS) and PowerSecure International Inc. (POWR) as attractive investments in the near term. The firms currently sport a Zacks Rank #2 (Buy) and are expected to outperform the broader U.S. equity market over the next one to three months.
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