Oil drilling equipment maker FMC Technologies Inc. (FTI - Free Report) entered into a deal with LLOG Exploration Company, LLC for the supply of subsea equipment. The estimated value of the contract is $114 million.
Per the deal, FMC Technologies will supply nine subsea trees, four subsea manifolds, five multiphase meters, and related topside control and subsea distribution systems for LLOG’s Delta House project. The project is placed in water depths of approximately 5,000 feet in the Gulf of Mexico Mississippi Canyon area.
FMC Technologies is well positioned in the subsea systems market and has received numerous attractive subsea contracts in the recent past. Earlier, in December last year, the company signed a $33 million subsea equipment supply contract with Norwegian oil and gas company Statoil ASA (STO - Free Report) .
Incorporated in 2000, Houston, Texas-based FMC Technologies, Inc. is a leading manufacturer and supplier of technology solutions for the energy industry. The company, which operates 27 manufacturing facilities in 16 countries, is engaged in designing, producing and servicing technologically sophisticated systems and products such as subsea production and processing systems, surface wellhead production systems, high pressure fluid control equipment, measurement solutions, and marine loading systems for the oil and gas industry.
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.