Oil drilling equipment maker FMC Technologies Inc. (FTI) has won a contract worth $135 million from BG Norge, a subsidiary of BG Group. The deal entails manufacture and supply of subsea production equipment by FMC to the Knarr oil and gas field.
Situated at a water depth of approximately 1,320 feet, the aforesaid field –– formerly known as Jordbaer –– is in the Norwegian block 34/3 of the North Sea.
Per the contract, FMC Technologies will supply three subsea production trees and water injection trees along with six subsea control modules, five wellheads, two manifolds and other related equipment and controls. Delivery of the equipment is expected to start in spring 2013.
This contract forms a part of the multi-year frame agreement signed between the two companies in April 2010. FMC stated that it has completed an extensive evaluation study of the project and is ready to extent support through its subsea systems.
Houston, Texas-based FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry and operates 25 manufacturing facilities in 15 countries.
We believe that FMC Technologies is favorably poised in the subsea systems market. It is the company’s largest and fastest-growing business, accounting for about 70% of total revenue. Subsea products have seen an increase in interest, and we expect earnings from this segment to strengthen in the coming months.
FMC Technologies also enjoys the benefits of a diversified product portfolio, specialty service capabilities and proprietary technological expertise along with a strong backlog position and growing international footprint.
However, the uncertain commodity price outlook and a soft global economy continue to weigh on the company. As such, we expect FMC Technologies’ growth potential to be restrained and see limited upside from the current level. The company also faces stiff competition from peers Cameron International Corp. (CAM) and National-Oilwell Varco (NOV). Hence, we maintain a long-term Neutral rating.
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