TechnipFMC Wins EPCI Contract For Mero 1 Field From Petrobras

TechnipFMC plc (NYSE:FTI) recently announced that it has won an engineering, procurement, construction and installation (EPCI) contract for the Mero 1 pre-salt field, located offshore Brazil. The contract was awarded by Brazilian state-run energy company Petróleo Brasileiro S.A. or Petrobras (NYSE:PBR) , the operator of the Libra Consortium.

Petrobras is holding 40% stake in the Libra Consortium, which is partnered by Royal Dutch Shell (LON:RDSa) plc RDS.A, TOTAL S.A. (NYSE:TOT) , CNOOC Limited and CNPC with 20%, 20%, 10% and 10% interests, respectively. Brazilian state-run company Pré-Sal Petróleo is the manager of the production sharing agreement.

The Mero 1 pre-salt field is located in the north-western part of the Libra block, in the prolific Santos Basin, at a water depth of 2,100 meters. Notably, the Mero field has three more vital areas, namely Mero 2, Mero 3 and Mero 4, to be developed separately. Production from Mero 1 is expected to commence in 2021.

Per the contract, TechnipFMC is required to provide engineering, procurement and construction works for all the rigid lines. The company will also support installation and pre-commissioning activities of all the infield riser as well as flowline system for conjugating six production wells and seven water alternate gas wells to the Floating Production Storage and Offloading (FPSO) unit, which is chartered by Modec group. Notably, the FPSO vessel has a production capacity of 180,000 barrels of oil per day along with 12 million cubic meters of gas per day.

The deal fortifies TechnipFMC’s presence in Brazil, where it is operating for more than 60 years. Moreover, the contract — with an estimated value of 500 million to $1 billion — should strengthen the company’s backlog, which came in at $15.2 billion at the end of the third quarter. Finally, the deal will aid TechnipFMC’s subsea segment, which was once the largest and fastest growing unit but is currently facing pressure on revenues and margins due to volatile commodity pricing scenario, to recoup some of its lost ground.

Price Performance & Zacks Rank

London-based TechnipFMC is engaged in designing, producing and servicing technologically sophisticated systems and products for subsea, onshore/offshore, and surface projects. The company has lost 20.4% in the past year compared with 26.6% collective decline of the industry it belongs to. Currently, TechnipFMC has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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