Saturday, March 7, 2015

Forum Energy Technologies Faces Significant Drop In Revenues But There's A Silver Lining

This article was first published by Seeking Alpha on February 17, 2015.

By Sarfaraz A. Khan. Research Asst. Adnan Mushtaq

On Wednesday, Oilfield products company Forum Energy Technologies (NYSE:FET) announced its fourth quarter results in which it failed to meet analysts' estimates. Moreover, the Houston, Texas-based company faces a tough road ahead, thanks to the soft oil prices. Analysts have predicted 18% drop in the company's revenues in 2015, as per consensus estimate from Thomson Reuters. There is, however, a silver lining.

During the fourth quarter, Forum reported 11% increase in revenues from the same quarter last year to $438.7 million on the back of 6.4% growth in drilling & subsea and 21.3% increase in production and infrastructure segments. The company's net income increased from $35 million last year to $46 million, led by growth in the smaller production & infrastructure segment. This translated into adjusted earnings of $0.48 a share. However, the company failed to meet the market's revenues and earnings estimates by $26.2 million and $0.01 a share respectively.

Like all drilling equipment manufacturers, Forum is exposed to the weakness in oil prices which have dropped by around 50% over the last seven months. As per estimates from International Energy Agency and analysts, the cheap oil price environment is here to stay, with prices averaging in the mid-$50s a barrel in the current year and slowly growing to mid-$70s by 2020. Oil and gas producers ranging from small cap players such as Swift Energy (NYSE:SFY) to industry titans such as Chevron (NYSE:CVX) have responded by making double-digit cuts to their 2015 capital ...… read fullarticle at Seeking Alpha