Forum Energy Technologies (FET) Initial Public Offering
Forum Energy Technologies Inc. is pricing 15.8 million shares of its common stock for listing on the New York Stock Exchange. The proposed symbol for the new stock is FET and Forum Energy Technologies expects to receive between $18.00 and $20.00 per share on or about 4/12. The company is trying to raise $300 million, which at the midpoint of the range, gives the company a total market cap of $1.6 billion and makes it one of the larger IPOs in the past few weeks.
This profile of Forum Energy Technologies was created from an analysis of the company's S1 filings and amendments which can be viewed here.
Forum Energy Technologies' Business
Forum Energy Technologies' primary business is oil and natural gas drilling equipment and services. They sell a wide line of products, encompassing materials from the wellhead to the refinery. FET generates revenue through the sale of new equipment and after-market activities (sales of replacement parts and repairs of installed equipment). Forum Energy Tech claims to have a balanced split between frequently replaced expendable products that are consumed during normal well operations and upgrades and new construction of drilling rigs and wells.
Their product line includes production and infrastructure equipment and drilling and subsea equipment, including subsea remote vehicles and specialty products to provide solutions to the increasing complexity of well design. Their primary customers are assemblers of drilling and well servicing equipment, onshore and offshore drilling contractors, oilfield service companies and drilling equipment rental companies.
The Oil Well Equipment and Services Industry
This increase in complexity in well design is one of the primary reasons that Forum Energy Technologies believes they are in a space with growth that will outpace other types of companies. Another reason they believe they are well positioned is the increase in development of unconventional resources like shale which is typically harder to drill through and is very demanding on service equipment. This requires new, stronger and more adaptive equipment and also may shorten the life of the equipment used.
Forum Energy Technologies has been trying to go public for quite a while. This S1 filing which was originally completed back in September of last year has been on the shelf for a few months. This is most likely because of several factors related to the energy sector as a whole. Some factors are probably lower natural gas prices, unfavorable government legislation and an overall drop in energy stocks.
However, last year was not the first time they attempted to go public. Forum Energy Technologies also filed way back in 2007. Back then the company only had 691 employees, a far cry from the 3150 they boast now. That IPO was officially withdrawn on October 17th, 2007.
Forum Energy Technologies' Main Competitors
While the $1.6 billion market cap makes Forum Energy Technologies one of the biggest IPOs in the past few weeks, it pales in comparison to some of the company's primary competitors. Some firms in the same space like Dril-Quip, Inc. (NYSE:DRQ), Weatherford International Ltd (NYSE:WFT), and SeaDrill Limited (NYSE:SDRL) have market caps in the neighborhoods of $2.68 billion, $10.78 billion and $17.41 billion respectively.
Several companies in this sector also pay high dividends, some as high as 8%, an added bonus that Forum Energy Technologies says they won't be doing for the foreseeable future.
The Oil Well Services & Equipment Index was tracking the S & P Index for much of the year, up over 9%. Then in mid-March the energy sector as a whole had a correction and the Oil Services Index gave up most of its year-to-date gains, finishing March higher by about 1.6%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.