Oil drilling equipment maker, Cameron International Corp. (CAM), announced the signing of a deal with ExxonMobil Canada Properties – a joint venture between ExxonMobil Canada Ltd. and its fully owned affiliate ExxonMobil Resources Ltd. Notably, upstream energy player Exxon Mobil Corp. (XOM) is the parent company of ExxonMobil Canada Ltd.
Per the multi-year agreement, Cameron is expected to provide wellhead equipment, production trees along with installation and commissioning services primarily for the development of the Hebron project, situated off the coast of Newfoundland. Cameron will also purvey large-bore, high-pressure tools like wellheads, production trees and risers.
ExxonMobil Canada Properties owns 36% of the Hebron development and is also heading operations at the project. Meanwhile, companies like Chevron Canada Limited, Suncor Energy Inc. (SU), Statoil Canada and Nalcor Energy hold 26.7%, 22.7%, 9.7% and 4.9% interests, respectively. Chevron Canada Ltd. is an indirect Canadian affiliate of U.S. energy giant Chevron Corp. (CVX) while Suncor Energy is an integrated energy firm. Also, Statoil Canada is an affiliate of Norwegian energy firm, Statoil ASA (STO).
Along with the multi-year agreement, Cameron will likely manufacture St. John's, Newfoundland based state-of-the-art service center that is anticipated to provide customer support seven days a week.
Houston, TX-based Cameron is a leading manufacturer of pressure control equipment used in onshore, offshore, and subsea applications for oil and gas drilling, production, and transmission. Following the Gulf of Mexico oil spill incident, the company continues to benefit from the near-term requirements for better offshore safety equipment. Interestingly, stricter drilling regulations have opened up new avenues for Cameron.
However, the company enjoyed a leading supplier of subsea production systems (Christmas trees), but lost market share to competitors over the last few years. While new order bookings should help the company gain market traction, we do not expect it to attain its former glory anytime soon.
As a result, Cameron currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
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