FMC Technologies: Positioned for a Deepwater Drilling Boom

| About: FMC Technologies, (FTI)

FMC Tech (NYSE:FTI) shares are trading at $26, a far cry from the $75 seen in July, but this fallout in crude prices gives investors a phenomenal opportunity to scoop up cheap shares of oil services stocks because the drilling demand will only continue to boom as supply begins to dwindle and demand picks up again.

FMC shares are trading 9x next year’s earnings, a PEG of 0.43, 5.8x cash, and industry best efficiency ratios with ROE of 39.07%, ROI of 23.22%. FMC also has what analysts like to call a "bullet-proof" balance sheet.

As of Q3 2008, FMC had $4.3 billion in backlog, which can sustain earning during any downturn in crude prices. Subsea systems generates 60% of revenues and is the fastest growing industry in the oil services segment, while value per-well continues to improve. Oil companies have disclosed plans to continue to ramp up CAPEX and increase global E&P spending, which will benefit an industry leader such as FMC.

The deepwater segment is where FMC intends to really expand growth, increasing it’s fleet by 50% through 2012. The recent 45% acquisition of Schilling Robotics will also be accretive to earnings and increase market share in this area. FMC currently has 40% subsea market share, with the next closest competitor, Cameron (NYSE:CAM), near 20%.

FMC Tech will be able to subdue fears of declining production rates and aging wells through innovation and expansion, with many profitable projects on the horizon (Pazflor, Tordis, etc.)

The FMC chart also looks promising as shares break through the mid-Bollinger and approach a critical level at $28, which is not only the 50 day EMA, but also the trend-line resistance needed to bust out of this downtrend. A substantial basing pattern formed near $21.50, so the downside risk is very limited here. I am a buyer of shares at these prices.

Disclosure: Author holds a position in FTI

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