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TechnipFMC & Saudi Aramco Ink Long-Term Offshore Agreement

Zacks Equity Research

TechnipFMC plc FTI recently announced that it has inked a long-term Offshore Agreement with Saudi Aramco, a state-run Saudi Arabian energy company.

Per the six-year deal, TechnipFMC and its consortium partner — Malaysia Marine and Heavy Engineering SdnBhd — will provide engineering, procurement, fabrication, transportation and installation services for Saudi Aramco’s offshore prospects. It will further strengthen TechnipFMC’s relationship with Saudi Aramco, which has an ambitious offshore development program in the pipeline. The deal also requires TechnipFMC to hire and train engineers from Saudi Arabia.

The long-term deal is a significant one for TechnipFMC, given the present weak oil pricing situation. Oil prices dropped 30% from the October highs in the last few months. The Brent Crude benchmark is currently hovering around $60.30 per barrel. This has made several drilling projects, primarily the offshore ones, less profitable, thereby reducing the demand for equipment and services provided by companies like TechnipFMC. Therefore, the long-term deal will likely provide it a cushion from the blow of lower demand for its services and help the company navigate through an unfavorable business environment.

The London-based TechnipFMC is a leading manufacturer and supplier of technology solutions for the energy industry. The company is engaged in designing, producing and servicing technologically sophisticated systems and products for subsea, onshore/offshore, and surface projects. Notably, TechnipFMC witnessed a major uptick in inbound orders during the last reported quarter, indicating promising prospects. The strong backlog of the company, which stands at $15.2 billion, brightens revenue growth prospects.

Price Performance

The company has lost 31% in the past year compared with 40.2% collective decline of the industry it belongs to.

Zacks Rank and Stocks to Consider

TechnipFMC currently carries a Zacks Rank #3 (Hold). 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 sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Flotek Industries, Inc. FTK develops and delivers chemistry-based technology for oil and gas companies. Its bottom line for 2019 is expected to surge 75% year over year. The stock currently has a Zacks Rank #2 (Buy).

CSI Compressco LP CCLP is a The Woodlands, TX-based oil and gas equipment and services provider. Its bottom line for 2019 is expected to surge 26.5% year over year. The company currently has a Zacks Rank #2.

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