FMC Technologies Inc. (FTI) has entered into an agreement, worth $40 million, with LLOG Exploration Company, LLC. Per the deal, the former will design, manufacture and deliver subsea production systems that will be utilized to develop the Who Dat project in the U.S. Gulf of Mexico.
The scope of the contract involves the supply of seven subsea production trees and control systems. Equipments will be supplied from FMC’s Houston operations and deliveries are slated to start in 2012.
Located at a water depth of 3,000 feet, the Who Dat field is in the Mississippi Canyon Blocks 503 and 547. LLOG is the operator of the project with a 67.5% interest.
FMC Technologies has collaborated with LLOG on various ventures, since 2008 and remains committed to support the Gulf of Mexico endeavors of the latter.
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 positioned 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.
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.
FMC Technologies currently retains a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
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