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Cameron's STX Drillship on Hold

Zacks Equity Research

Oil drilling equipment maker Cameron International Corp. (CAM) has reported an update to the Drillship Package contract received from South Korea-based STX Offshore & Shipbuilding Co. Ltd. on Nov 26, 2012.

Per the 2012 deal, Cameron was to provide an entire drilling equipment package to be used for the construction of the 12,000 foot ultra deepwater drillship. The drillship is being constructed by STX Offshore for Norway-based Sigma Drilling Ltd. a part of Vantage Drilling Company (VTG). However, owing to ongoing restructuring process, the South Korean shipbuilder has temporarily stopped manufacturing of the drillship.

Vantage along with Sigma Drilling is in talks with STX Offshore to resume work on the construction. As of now, work on the drillship is expected to be completed by the first or second quarter of 2016.

Houston, Texas-based Cameron is a manufacturer of pressure control equipment used in onshore, offshore and subsea applications for oil and gas drilling, production and transmission.

Cameron has lost its leading market position as a supplier of subsea production systems (Christmas trees) to competitors in the last few years. While new order bookings are projected to improve the company’s market share, we do not expect it to regain its leading position.

Cameron currently retains a Zacks Rank #5 (Sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-performing oil field machinery and equipment suppliers like Dril-Quip Inc. (DRQ), and Profire Energy Inc. (PFIE) that offer value. Both, Dril-Quip and Profire Energy carry a Zacks Rank #1 (Strong Buy).

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