FMC Technologies Inc. (FTI: 61.59 +1.43 +2.38%), an offshore oilfield equipment manufacturer, was awarded a contract worth $190 million by Russian state-owned gas major, Gazprom. The deal entails the production and supply of subsea production equipment by FMC to a gas and condensate field. Situated at a water depth of approximately 300 feet, the aforesaid field, Kirinskoye is off the Pacific coast in Russia.As per the agreement, FMC will manufacture and deliver subsea production trees, a manifold, wellheads, multiphase meters, choke modules and subsea control modules. The commencement of the deliveries is scheduled for the second quarter of 2011.
FMC’s facilities in Dunfermline, Scotland, Kongsberg, Norway, and Multi Phase Meters AS (MPM) operation in Stavanger, Norway; will act as the hub for the production of these equipages.
Although this is FMC’s first subsea development project in Russia, the company has actively secured a number of such deals in the first half of 2010. In most recent times, FMC won a $300 million subsea infrastructure contract fromPetroleo Brasileiro S.A., also known as Petrobras ( PBR) to manufacture and supply subsea production systems to the offshore oil and gas deposits in Brazil.
Gazprom’s management is confident of FMC’s expertise in delivering subsea-to-beach solutions and anticipates that this contract will strengthen the former’s position in future subsea projects in Russia.
As a leading manufacturer and supplier of technology solutions for the energy industry, Texas-based FMC strives to upgrade the technologies used in the oil and gas industries. In this attempt, the company signed an agreement with the Federal University of Rio de Janeiro (“UFRJ”) to construct a top-notch technology center in Brazil. With construction expected to start in July, the center will open in the first half of 2011.
This contract will not only solidify FMC’s presence in Brazil but will also play a significant role in upgrading technologies for Brazil’s deepwater and pre-salt environments.
With an expectation that the stock will perform in line with the broader U.S. equity market over the next one to three months, FMC is currently rated as Zacks #3 Rank (Hold).
However, we believe that FMC is poised to benefit from the improving subsea activity levels through 2010 and beyond, based on the impressive market share, technological upgradation and superior execution skills. Moreover, the strong order flow and backlog of subsea products and services will support the rising trend as the year goes by. Hence, our long-term recommendation on the company remains ‘Outperform’.
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