FMC Technologies Inc (FTI) has entered into a design, manufacture and supply agreement with the Australian unit of Chevron Corporation (CVX). The deal will fetch FMC approximately $325 million in revenue.
Per the deal, the Australian subsidiary of FMC will deliver 11 subsea production trees, 11 wellheads, 3 manifolds, subsea and topside controls and well access systems. These equipments will be utilized in Chevron’s ambitious multibillion dollar Wheatstone liquefied natural gas (LNG) project.
Located about 124 miles north of Onslow, off Western Australia’s Pilbara coast, the Wheatstone venture is proposed to be built with an annual output capacity of 25 million metric tons of LNG. The initial phase will see the construction of two processing units, known as trains, with a combined capacity of 8.9 million tons of LNG a year and a domestic gas plant.
Chevron acts as the operator of the project with a 73.6% interest, while the remaining stake is shared by Apache Corporation (APA) (13%), Kuwait Foreign Petroleum Exploration Co. (7%) and Royal Dutch Shell plc (RDS.A) (6.4%). The Wheatstone project is expected to come online by 2016.
Equipments will be supplied from FMC’s Asia-Pacific operations and deliveries are slated to start in 2013.
FMC remains highly committed to execute this deal that will strengthen its presence on the Australian soil and pave way for further investment opportunities.
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 its total revenue. Subsea products have seen an increase in interest, and we expect earnings from this segment to strengthen in the coming months.
However, the uncertain commodity price outlook and a soft global economy continue to weigh on the company. Additionally, with markets remaining competitive and pricing likely to be weak, we expect FMC Technologies’ growth potential to be restrained and see limited upside from the current level.
Hence, we maintain a long-term Neutral rating on the stock. FMC Technologies currently retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
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