TechnipFMC: an overview
TechnipFMC (NYSE:FTI) provides chemistry and services that are used in the oil and gas industries, and in the consumer and industrial markets. In 2018 so far, TechnipFMC's stock price has declined 5% and performed in line with the VanEck Vectors Oil Services ETF (OIH) which declined by 4% during this period. OIH represents the oilfield equipment & services (or OFS) industry. While FTI is unlikely to make a sharp U-turn in 2018, the current developments have been encouraging, indicating a robust recovery in the medium-to-long term.
FTI has a comprehensive product and service portfolio. Before we get into the details, let us understand the business first. FTI's Subsea segment provides integrated design, engineering, procurement, manufacturing, fabrication, and installation (or EPCI) solutions. FTI has two trademarked tools, iFEED (or front-end engineering and design) and iEPCI, in this segment. FTI's Onshore/Offshore segment provides the study, engineering, procurement, construction, and project management for the upstream, midstream, and downstream energy businesses. FTI's Surface Technologies segment offers services and designs and manufactures products and systems for the exploration & production (or E&P) companies in the energy sector.
What makes FTI stand out in the competition?
To understand what ticks the subsea activity, we must look at how energy price downturn of 2014-16 affected the industry dynamics. A steep fall in crude oil price during that period led to decreased profit margins and an investment shake-out in the market. Hence, energy operators were forced to pull back on future exploration spending. These producers also restructured or delayed drilling rig contracts.
In the past year, the crude oil price has bounced back to a considerable extent (nearly 46%). Despite that, investments in subsea E&P have not gone back to the pre-crisis level. What the producers look for from the oilfield equipment services companies is a higher efficiency to
