Deutsche Bank analyst Mike Urban initiated coverage of Forum Energy Technologies Inc. (NYSE:FET), an oilfield products company, with a "Buy" rating and $30 price target.
Urban said FET fills a significant void in the oil service space by offering investors a high quality SMID cap name with leverage to some of the strongest secular growth themes in the industry and one of the highest quality management teams we have seen in a company this size.
In particular, management has positioned FET to benefit from the growth in deepwater/ subsea, rising well complexity and higher service intensity. Deepwater discoveries have outnumbered shallow by 3 to 1 in recent years.
When combined with the 30% growth (via newbuilds) in the deepwater fleet, growth in products related to deepwater/ subsea is becoming increasingly visible. Well complexity has grown steadily with non-vertical wells growing from 20% of rig activity in the early 90's to over 70% today with a particularly sharp rise in the last five years.
Service intensity is likewise moving higher with pressure pumping revenue per rig more than doubling over the last 5 years, even adjusting for cost/ price inflation. While FET competes against much larger players in most of its product lines, these markets are generally highly consolidated and disciplined.
FET generally seeks to compete for customers and/ or in market verticals that are underserviced by these larger players while benefitting from the "pricing umbrella" they provide as market leaders. FET is also more leveraged to recurring revenue consumables/ shorter-cycle business versus its capital equipment peers.
FET is trading down 0.66% at $21.20 on Thursday. Providing quality reviews, articles and writings on crude oil, energy and gas online.
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