Oceaneering (OII) Clinches $75 Million Contract From Petrobras
Oceaneering International, Inc.’s OII subsidiary, Marine Production Systems do Brasil Ltda., secured a five-year contract from Petrobras PBR for the operation of three existing drill pipe riser (DPR) systems to support intervention and completion operations in Brazil. The deal could be worth up to $75 million in revenues during the contract’s tenure.
Let’s delve into the details of the contract, its implications for the industry, and how Oceaneering International, Inc. is poised to redefine offshore operations in Brazil.
The Contract Overview
The primary objective of this deal is to support intervention and completion operations in the Brazilian offshore landscape. Per the terms of the agreement, Oceaneering's Brazil subsidiary will operate three existing DPR systems, equipped with installation workover control systems. Additionally, the company will provide Petrobras with project management, engineering and support services, ensuring seamless and efficient operations throughout the contract period.
A Potential Expansion
What makes this contract even more intriguing is Petrobras' option to include a fourth DPR system. To exercise this option, PBR must notify Oceaneering prior to mid-December 2023. This expansion could be a game-changer for both companies and the offshore industry as a whole.
If Petrobras chooses to add the fourth system, the contract's total value could surge significantly, potentially reaching a staggering $75 million in revenues over the five-year contract duration.
A Closer Look at Oceaneering's Role
OII's responsibilities under the contract go beyond the operation of DPR systems. They encompass the replacement of umbilicals on the existing systems, which is slated for 2024. These crucial components will be manufactured at Oceaneering's state-of-the-art facility in Niteroi, Brazil, highlighting the company's commitment to local production and job creation.
Timelines and Expectations
Field operations under the contract are projected to commence when the current contract expires or 18 months after its award. If Petrobras selects to add a fourth system, Oceaneering will have an additional 18 months to build and prepare the same. If everything goes as planned, the fourth system is expected to be ready for hire by June 2025.
Industry Impact
The significance of this contract cannot be overstated. Oceaneering has consistently demonstrated its prowess in delivering top-tier underwater services, and this agreement further solidifies its position as an industry leader. As Brazil continues to be a strategic hub for offshore operations, OII’s involvement is poised to have a far-reaching impact on the country's energy sector.
Zacks Rank and Key Picks
Oceaneering is a global provider of engineered services and products to the offshore energy industry. The company's services include remotely operated vehicle services, inspection, repair and maintenance (IRM) services, and asset integrity management services. OII's products include subsea umbilicals, risers, flowlines (SURF), and remote monitoring and control systems.
Petrobras is a Brazilian multinational petroleum and natural gas corporation. The company is the largest oil and gas company in Latin America and the largest in Brazil in terms of revenues. PBR is responsible for approximately 90% of Brazil's oil and gas production.
Currently, OII has a Zacks Rank #3 (Hold) while PBR sports a Zacks Rank #1 (Strong Buy).
A couple of better-ranked stocks in the energy sector are CVR Energy CVI and USA Compression Partners USAC, each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CVR Energy is valued at $3.08 billion. In the past year, its shares have lost 6%.
CVI currently pays a dividend of $2 per share or 6.52% on an annual basis. Its payout ratio currently sits at 30% of earnings.
USA Compression Partners is valued at around $2.49 billion. USAC currently pays a dividend of $2.10 per unit, or 8.28% on an annual basis.
USAC provides natural gas compression services. The company offers compression services to oil companies and independent producers, processors, gatherers, and transporters of natural gas and crude oil. It also operates stations.
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Petroleo Brasileiro S.A.- Petrobras (PBR) : Free Stock Analysis Report
Oceaneering International, Inc. (OII) : Free Stock Analysis Report
CVR Energy Inc. (CVI) : Free Stock Analysis Report
USA Compression Partners, LP (USAC) : Free Stock Analysis Report
