Maker of oil drilling equipment, FMC Technologies Inc. (FTI - Free Report) , entered into a subsea equipment deal with Brazil's state-run energy giant, Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) . The estimated value of the contract is roughly $500 million.
Per the contract, FMC Technologies will supply 49 subsea trees, tooling, and related subsea controls for the development of pre-salt fields, based off the coast of Brazil. The company has planned to design and manufacture the tools at its Brazilian facilities.
FMC Technologies added that, this deal represents the second order from Petrobras after the two companies signed a four-year subsea tools supply agreement on Mar 29, 2012. The first order involved the delivery of 78 subsea trees and was valued at $900 million. The total order comprises 130 subsea trees, subsea multiplex controls and associated tools and equipment, which is expected to fetch FMC Technologies approximately $1.5 billion in revenues.
FMC Technologies has long-standing business ties with Petrobras and has supported many of the latter’s operational achievements over the last 30 years.
FMC Technologies is well positioned in the subsea systems market. It is the company’s largest and fastest-growing business, accounting for about two-thirds of revenues. FMC Technologies has received numerous attractive subsea contracts in the recent past from energy majors like Royal Dutch Shell plc (RDS.A - Free Report) and Total SA (TOT - Free Report) .
Moreover, FMC Technologies’ strong backlog, which now stands at more than $5.0 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.
Houston, Texas-based FMC Technologies currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next 1 to 3 months.