Emerson Electric Co. EMR – a pioneer provider of engineering and technical services, has agreed to acquire Yggdrasil, a premium provider of flow assurance and production optimization software. Emerson Process Management, a leading business unit of the company which focuses on automating production, processing and distribution of businesses, has integrated Yggdrasil’s METTE solution with its Roxar reservoir management software portfolio.
Inside the Headlines
Norway-based Yggdrasil and Emerson Process Management partnered to provide operators with an integrated workflow including multiple activities like seismic interpretation, reservoir modeling & simulation, and production optimization. Combined expertise of Roxar reservoir management and METTE production optimization solution will enable the integration of data from predictive reservoir models, production modeling and field instrumentation. This, in turn, will help operators enhance the efficacy of production monitoring as well as take better operational decisions.
Also, operators can simultaneously utilize the information from the field while forecasting future performance, by using the solution developed by the two companies; thereby enhancing the transparency of decision-making process. Leveraging METTE’s flow assurance and production-modeling competency, operators can now better manage their “flow performance” calculations for wells and flow lines, as well as conduct “virtual metering” that helps in allocation of production wells, among other functions.
Adding to its commercial appeal, METTE generated hardware descriptions and outputs, which can be effortlessly linked with leading market reservoir simulators like Emerson’s Tempest MORE simulator.
Bottom Line
Notwithstanding its buoyant liquidity position and its ability for strategic acquisitions, Emerson has experienced a rather dismal performance in second-quarter fiscal 2015 earnings. This Zacks Rank #5 (Strong Sell) stock has been plagued by short-cycle spending in European markets, volatility in oil & gas markets, and strengthening of the U.S. dollar.
However, even in the face of challenges, the promise of profitability coupled with the possibility to enhance client satisfaction makes this acquisition significant for Emerson. With its newest addition, management believes customers will be able to accomplish better performance by optimizing field development and production plans; which will also aid the recovery in oil & gas markets. Moreover, for Emerson, the latest collaboration is a prudent way to harness the dual benefits of portfolio expansion and lucrative asset returns.
We believe this acquisition will help the company tap upstream activities in the particularly challenged oil & gas market. Amid continued volatility in the market, Yggdrasil takeover and its subsequent benefits will likely become a key driver for Emerson’s top-line growth, going forward.
Better-ranked stocks in the industry include AZZ incorporated AZZ, AO Smith Corp. AOS and Albany International Corp. AIN. While AZZ incorporated sports a Zacks Rank #1 (Strong Buy), both AO Smith Corp and Albany International Corp carry a Zacks Rank #2 (Buy).
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