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TechnipFMC Inks Deal to Acquire Plexus' Wellhead Business

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Oilfield service provider TechnipFMC plc (FTI - Free Report) recently agreed to buy the Wellhead exploration equipment and services business from Plexus Holding plc for jack-up applications. This will lead to a collaboration between the two companies’ subsidiaries in order to upgrade Plexus’ technology.

Acquisition Details

Per the deal, TechnipFMC will give £15 million ($19.8M) initial gross cash consideration to Plexus. Depending on the future performance of the jack-up business during an earn-out period of three years, TechnipFMC will give up to £27.5 million ($36.3M) more. The earn-out can potentially raise the total cash consideration to £42.5 million ($56.1M). 

TechnipFMC plans to add the new business in its Surface Technologies segment. The key personnel from Plexus will be shifted to TechnipFMC to continue the ongoing services and provide customer support. Per the agreement, the business will still be operated from its existing location of Dyce, Aberdeen, UK.

Moreover, per the deal, TechnipFMC and Plexus’ subsidiaries FMC Technologies Limited and POSL, respectively will collaborate to improve the existing POS-GRIP IP to make it usable outside of jack-up exploration.

Acquisition Rationale

Per TechnipFMC, the acquisition will expand its portfolio in the field of high pressure high temperature (HPHT) and in the mudline. It will help the company to serve better in the global jack up exploration drilling market. With contracts raining for TechnipFMC, we believe this move will help the company to serve its clients more efficiently. It will improve the quality of the products and services it offers. Since June 2017, the company won four contracts from different energy companies.

About the Company

London-based TechnipFMC is a leading manufacturer and supplier of technology solutions for the energy industry. The company was formed following the January 2017 merger between Technip and FMC Technologies. It is engaged in designing, producing and servicing technologically sophisticated systems and products for subsea, onshore and offshore projects.

Price Performance

TechnipFMC has lost 29.4% of its value year to date compared with 30.9% decline of its industry.

Zacks Rank and Stocks to Consider

The company currently has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the oil and energy sector are Northern Oil and Gas, Inc. (NOG - Free Report) , Par Pacific Holdings, Inc. (PARR - Free Report) and Canadian Natural Resources Limited (CNQ - Free Report) . Northern Oil and Gas and Par Pacific sport a Zacks Rank #1 (Strong Buy) while Canadian Natural carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Northern Oil and Gas’ earnings for 2017 are expected to surge 44.1% year over year. The company delivered a positive average earnings surprise of 66.7% in the last four quarters.

Par Pacific’s sales for the third quarter of 2017 are expected to increase 28.5% year over year. The company delivered a positive average earnings surprise of 9.1% in the last four quarters.

Canadian Natural’s sales for the third quarter of 2017 are expected to increase 82.3% year over year. The company delivered a positive earnings surprise of 46.9% in the second quarter of 2017.

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