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Oceaneering Wins 3 Subsea Umbilical Deals Worth More Than $80M

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Oceaneering International, Inc. OII recently announced that the company has won three contracts related to subsea umbilicals, with a total value of more than $80 million. Per the deals, Oceaneering will provide services in the Mediterranean Sea, the North Sea and the South China Sea.

Two of the contracts require Oceaneering to provide electro-hydraulic, steel tube production control umbilicals, with a length of more than 106 kilometres. The company will also provide associated umbilical distribution hardware for these two contracts.

The third deal requires the company to provide three thermoplastic production control umbilicals of a total measure of around 42 kilometres in length as well as associated umbilical distribution hardware. It expects to commence manufacturing works for the umbilicals in first-quarter 2019 and deliver the contracts in the first half of 2020. Oceaneering, one of the leading suppliers of offshore equipment and technology solutions to the energy industry, intends to reflect 70% of the total award value in its fourth-quarter backlog. Notably, Subsea Products’ backlog at the end of the third quarter was $333 million.

Significance of the Deal

Due to the current oil price volatility, the market for offshore equipment and services is expected to take time to recover. In particular, the industry's excess capacity — possessed during a boom in crude production prior to 2014 — resulted in dwindling subsea inbound orders over the past few years. There has been a slowdown in contract signings and only a few sanctioned field developments since 2016. Given the present scenario, the recent contract wins worth more than $80 million are definitely a positive for the company’s backlog.

Price Performance

Houston, TX-based Oceaneering has declined 29.8% in the past year compared with 39.2% fall of its industry.

Zacks Rank and Stocks to Consider

Currently, the company has a Zacks Rank #4 (Sell). Investors interested in the energy sector can opt for some better-ranked stocks as given below.

Houston, TX-based Shell Midstream Partners, L.P. SHLX is a midstream energy company. For 2019, its bottom line, which has witnessed three upside revisions over the past 60 days, is expected to grow 27.7% year over year. The company currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Luxembourg-based Subsea 7 S.A. SUBCY is an offshore oilfield service provider. The company delivered average positive earnings surprise of more than 329% in the trailing four quarters, missing estimates just once. The stock currently has a Zacks Rank #2.

YPF Sociedad Anonima YPF is a Buenos Aires, Argentina-based integrated energy company. Its bottom line for 2018 is expected to increase more than 27% year over year. The company currently has a Zacks Rank #2.

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Shell Midstream Partners, L.P. (SHLX) : Free Stock Analysis Report
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