Monday, December 16, 2013

Forum Energy Technologies: Growth On The Back Of Favorable Secular Trends

The following is a small-cap insight column written for Seeking Alpha on a company with a market cap of $2.4 billion.

Forum Energy Technologies (NYSE:FET) is an oilfield products company that has not delivered an impressive performance so far but the bigger picture on the macro environment and a deeper look into the company’s operations reveals that this company could be poised for significant growth in the long run. 

Houston-based Forum Energy Technologies (FET) is an oilfield products company which designs and manufactures products, as well as provides related services, for drilling, subsea, production, completion and infrastructure segments of the oil and gas industry. The company's competitive advantage lies in the diversity of its product portfolio. It has reported modest revenue growth and a drop in operating income in the first nine months of the current year. However, a closer look at this relatively young corporation reveals that it could be poised for long-term growth.

What is Forum Energy Technologies?

Broadly speaking, Forum Energy makes two kinds of products; the consumable products that are frequently replaced items consumed during exploration, development, production and transportation of oil and natural gas, and highly engineered capital products that are designed for projects involving; new rig installation, upgrade or refurbishment; subsea construction and development; development of new producing wells; and downstream projects. More than 50% of the company's revenue comes from consumables while the rest comes mainly from the capital products.

These products are then divided into two segments; the drilling & subsea segment (D&S), through which the company provides products and services to subsea, drilling, well construction completion and intervention markets; and the production & infrastructure (P&I) segments through which Forum Energy serves the well stimulation, completion, production and infrastructure markets. Historically, over the last three years, Forum Energy has earned around 60% of its revenues from the D&S segment and nearly 40% of its revenues from the P&I segment. .... read full article at Seeking Alpha