SLB Schlumberger Ltd

Oil drilling equipment maker Cameron International Corp. (CAM) recently received a supply contract from South Korea-based STX Offshore & Shipbuilding Co. Ltd. Per the contract, Cameron will provide an entire drilling equipment package to be used by a 12,000 foot ultra deepwater drillship

The deal, estimated at around $275 million, will be the first complete rig package by Cameron for a new drillship.

Cameron management highlights that this contract will strengthen the company’s business of providing complete drilling equipment packages for drillships. Prior to this contract, Cameron successfully delivered full equipment packages for jackup drilling rigs to TTS Energy.

Houston, Texas-based Cameron is a leading manufacturer of pressure control equipment used in onshore, offshore, and subsea applications for oil and gas drilling, production, and transmission.  The company operates through three segments: Drilling & Production Systems; Valves & Measurement; and Process & Compression Systems.

The company stands to benefit from improving subsea activity levels in the near future. In this regard, Cameron has signed numerous subsea equipment deals with industry giants like BP plc (BP), Petroleo Brasileiro S.A. or Petrobras (PBR), Statoil ASA (STO) and Chevron Corporation (CVX).

Earlier this month, Cameron with Schlumberger Limited (SLB) announced the formation of OneSubsea – a joint venture (JV) between the subsea units of both the companies to capitalize on the growing demand for deepwater drilling.

Shares of the company are fairly valued at current levels, considering the sensitivity of Cameron’s business to gas/oil price volatility, as well as exploration and production spending patterns, costs, geo-political risks, competition and the advent of new technologies.

Hence, we are maintaining our long-term Neutral recommendation on the stock. Cameron is currently a Zacks #3 Rank stock with a Hold rating over the next one to three months.
 

 
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