Oil drilling equipment maker FMC Technologies Inc. (FTI - Free Report) entered into a deal with Statoil ASA (STO - Free Report) for the supply of subsea equipment. Estimated value of the contract is $39 million.
Per the deal, FMC Technologies will supply two subsea trees and three choke modules for the Tyrihans field, located offshore northern Norway. The company is already supplying equipments to Statoil for Tyhiran and other fields in Halten Bank area of the Norwegian Sea.
The field consists of Tyrihan south and Tyrihan north and is similar to Kristin and Asgard fields in terms of installation and infrastructure.
Engineering and manufacturing work of the equipment will be carried out at FMC Technologies’ facilities in Norway and Scotland. It is expected that the subsea equipment will be delivered in 2013.
FMC Technologies is particularly well positioned in the subsea systems market and has received numerous attractive subsea contracts in the recent past. Earlier, in March, the company signed a four-year subsea equipment supply pact with Brazilian oil major Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) .
Subsea products have seen an increase in interest and we expect earnings in this segment to strengthen – especially due to FMC Technologies’ leadership position in subsea production systems, including subsea trees, controls and manifold and tie-in systems.
However, as is the case with other oil services and equipment suppliers, results for FMC Technologies are directly exposed to oil and gas prices, which are inherently volatile and subject to complex market forces. A potential drop in prices could curtail deepwater drilling and subsea equipment demand, thereby affecting the company’s revenues, earnings and cash flow.
FMC shares currently retain a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.