FMC Technologies Inc.FTI

Morningstar Rating

Stock Research and Analysis

by Stephen Ellis

FMC Technologies supplies subsea trees and associated systems that are the critical components of offshore oil and natural gas production. Further, the firm's long-term alliances with large oil and gas customers ensure a steady stream of lucrative offshore Read more

Bulls Say

FMC's riserless light well intervention technology allows oil and gas companies to perform subsea well maintenance faster and cheaper than conventional methods. Rather than use an expensive rig to perform the maintenance, the technology lets companies use cheaper vessels to accomplish the same task.

Subsea separation involves separating the oil, gas, and water mixture undersea rather than above ground. It is often cheaper for companies to use subsea technology than add space on the rig or platform. If a few key subsea projects continue to progress smoothly, many new customers will be sold on FMC's technology.

Our FMC tree forecast is supported by a strong demand for offshore rigs. We anticipate the number of offshore rig deliveries in the coming years to be much higher than in the past.

FMC's research and development expenses are low as customers typically pay FMC to develop subsea applications. Read more

Bears Say

Competitors such as Cameron CAM are also working on their own subsea separation and all-electric subsea technology. FMC may sell its concepts to customers, but that doesn't prevent customers from ordering from Cameron if its technology is better.

FMC's loss of alliance partners would hurt the effectiveness of its moat.

FMC accepts fixed-price contracts, which leaves the firm vulnerable to cost overruns. Underestimating labor and material cost increases or having unplanned equipment shortages could hurt profitability.

A significant decline in offshore drilling activity because of a lack of new offshore oil and gas discoveries would hurt demand for FMC's products. Read more

Strategy

FMC Technologies seeks to become a one-stop subsea equipment shop for its customers. One strategic step toward expanding FMC's seabed role is its $116 million investment in December 2008 for 45% of Schilling Read more

Management

FMC's corporate stewardship took a step backward in 2008. Former CEO Joseph Netherland stepped down as CEO in 2007 but retained his position as chairman. However, in October 2008, Netherland relinquished his chairman role to current CEO Peter Kinnear. Read more

Profile

FMC Technologies mostly builds subsea and surface trees that control and regulate the flow of oil and gas from a well. The firm traces its roots back to the 1920s when it Read more

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