FMC Wins Supply Deal from Statoil - Analyst Blog

Oil drilling equipment maker FMC Technologies (FTI) announced that it has won a supply contract from Statoil ASA (STO). The deal price is valued at $75 million.

Per the deal, FMC Technologies will manufacture and supplyfour subsea trees, one manifold, subsea and topside control systems and an umbilical to Norway-based major Statoil. These equipments will be used for the development of the Vigdis North-East oil and gas field in the Norwegian sector of the North Sea.

All equipments for the project will be based on a standard subsea solution drafted by FMC Technologies. Deliveries are slated for the third quarter of 2011.

This happens to be the fifth contract awarded by Statoil to FMC Technologies in 2010. In January, the latter received a contract to design and supply subsea equipment for the Snorre field, followed by another agreement to manufacture and supply subsea production equipment to support the Marulk field in March.

Joining the list of contracts were the Pan Pandora deal in June and the agreement on the Katla oilfield development project in September.

We believe that the strategic alliance between the two companies is getting stronger with every deal that is being signed. Statoil stands to gain from these agreements as they will eventually reduce the time from discovery to production of oil.

Houston, Texas-based FMC Technologies enjoys the benefits of a diversified product portfolio, specialty service capabilities and proprietary technological expertise. The company has a strong backlog position and growing international footprint. It is also well positioned to capitalize on the favorable outlook of subsea activity levels.

However, the uncertain commodity price outlook along with a soft global economy continues to weigh on the company. As such, we expect FMC Technologies' growth potential to be restrained and see limited upside from current levels.

We are maintaining our long-term Neutral recommendation on the stock. FMC Technologies currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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