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Oil drilling equipment maker FMC Technologies Inc. (FTI - Analyst Report) has entered into a deal with one of the largest integrated energy firms in the world, Royal Dutch Shell plc (RDS.A - Analyst Report) for the supply of subsea equipment.

Per the deal, FMC Technologies will supply 12 enhanced vertical deepwater trees and controls for Shell’s series of projects in the Gulf of Mexico. FMC Technologies is well positioned in the subsea systems market and has received numerous attractive subsea contracts in the recent past from energy majors Petroleo Brasileiro S.A., or Petrobras (PBR - Analyst Report) and Statoil ASA (STO - Analyst Report).

This is not FMC Technologies’ first deal with Shell. The company has been supplying subsea equipment to Shell for last 20 years. Last month, FMC Technologies signed a contract to supply such equipment to Shell for the Stones field ultra deepwater project. The field is situated at a water depth of roughly 9,600 feet, in the Gulf of Mexico’s Walker Ridge block.

With the success of these supply contracts, FMC Technologies is on an expansion path. It looks forward to more such opportunistic deals in 2013 to gain significant market share. We believe such accomplishments will help FMC Technologies garner profits in the upcoming quarters.

Additionally, FMC Technologies’ strong backlog, which now stands at more than $5 billion, not only reflects steady demand from its customers but also offers long-term earnings and cash flow visibility. This enables the company to navigate uncertainty better than many of its peers.

However, FMC Technologies relies on its ability to develop and acquire essential products and technologies that drive its operational performance and growth. If its technologies or products become obsolete, or if it cannot bring these to market in a timely and competitive manner, it may face severe operational and financial difficulties.

FMC Technologies currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
 

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