Of late, Forum Energy Technology (FET - Free Report) announced that it will sell its 40% stake in Ashtead Technology, a subsea technology service company. Per the agreement, Forum Energy will be offloading the interest to Buckthorn Partners and other shareholders, who are holding majority of Ashtead’s equity interests, for a consideration of $47.8 million, which comprises $39 million of cash proceeds plus a loan worth $8.5 million with three-year maturity period.
Last January, Forum acquired Ashtead Technology’s 40% interest in exchange of the company’s subsea rental wing. Meanwhile, Ashtead contributed its engineered measurement solutions and asset management services to Forum Energy’s portfolio, thus creating a joint venture (JV). This combined entity with 19,000 rental fleets worth $139 million and 120 employees became one of the biggest subsea hubs and a rental provider of remotely-operated underwater vehicles (ROV).
In the second quarter, Forum Energy’s revenues sequentially dropped $26 million due to a significant fall in their short-cycle product sales in their completion segment. However, this oilfield services company managed to cut its net debt by $30 million in the first half of 2019, backed by the company’s improvement in free cash flow generation. Notably, Forum Energy generated free cash flow of $18 million, a $3-million increase from the previous reported quarter. The company expects to create more free cash flows in the third quarter.
With Forum Energy’s sale of its Ashtead’s stake, which is expected to be completed by Sep 30, 2019, the company’s net debt will be reduced by a substantial amount.
Zacks Rank & Key Picks
Forum carries a Zacks Rank #5 (Strong Sell).
Better-ranked players in the energy space include Enbridge Inc (ENB - Free Report) , Dril-Quip, Inc. (DRQ - Free Report) and World Fuel Services Corporation (INT - Free Report) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Enbridge earnings beat the Zacks Consensus Estimate in three of the last four quarters.
Dril-Quip earnings beat the Zacks Consensus Estimate in three of the previous four quarters.
World Fuel Services earnings beat the Zacks Consensus Estimate in all the trailing four quarters.
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