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FMC Technologies Inc. (FTI - Analyst Report) has agreed to manufacture and supply subsea production equipment to Statoil ASA (STO - Analyst Report). The deal will fetch FMC Technologies approximately $70 million in revenue.
Statoil will utilize the equipment for the development of the Fram H-Nord field that is located at a water depth of approximately 1,200 feet in the Norwegian sector of the North Sea.
Per the agreement, FMC Technologies will deliver one subsea production tree, one manifold and one multiphase meter. The contract also includes the supply of an integrated template structure, one umbilical, two wellheads and additional controls and equipment.
All equipment for the project will be based on a standard fast-track subsea solution drafted by FMC Technologies. Deliveries for the systems are slated to continue throughout 2013.
FMC Technologies and Statoil share a strong business bond that goes back a long way. Last year, both companies signed a number of supply deals for the development of various oil and gas fields.
Over the past two years, this is the sixth fast-track project contract awarded by Statoil to FMC Technologies. We believe that the former exhibits a lot of confidence in the manufacturing expertise of the latter and stands to benefit from these agreements as these will eventually enhance production capability and trim operating costs.
Houston, Texas-based FMC Technologies is a leading manufacturer and supplier of technology solutions for the energy industry and operates 27 manufacturing facilities in 16 countries.
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.
We believe that the company has a diversified product portfolio, specialty service capabilities and proprietary technological expertise. Other positives for FMC Technologies include a strong backlog position, growing international operations and a favorable outlook for subsea activity levels.
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.
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