Seeking Alpha: The Beginning Of The End, Or The End Of The Beginning For Technip?

Investors have turned on cautious on capex-sensitive energy service and engineering companies, and that has sent the shares of Technip (OTCQX:TKPPY) down more than 10% over the past year. The concerns are not without some basis, as several major projects were delayed in 2013 and major oil and gas companies have issued modest capex growth guidance.

That Technip is in good company with offshore rivals like Saipem (OTCPK:SAPMY) and Subsea 7 (OTCPK:SUBCY), as well as onshore oil & gas engineering companies like McDermott (MDR), is cold comfort. Although Technip has established a reputation as a superior project and risk manager, weak guidance in late 2013 rattled investor confidence and the shares are trading as if oil and gas capital spending growth will be quite modest from here. It is likely true that capex growth will be lower than the bulls expect, but it looks like the bears have taken things a bit far with Technip.

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The Beginning Of The End, Or The End Of The Beginning For Technip?

The Motley Fool: What Comes After “Great” for Oceaneering International?

The worst thing I can find to say about Oceaneering International (NYSE: OII  ) is that I think the company is on a beat-and-raise carousel that eventually has to end. Oceaneering has an excellent ROV fleet that is in position to take advantage of increasing deepwater drilling and production. The company also has a strong products and projects business that will extend the company's growth past the point where subsea hardware orders start to decline. The only problem is that the good times won't last forever, and I'm starting to worry that the Street is already applying peak multiples to the stock.

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What Comes After “Great” for Oceaneering International?

Seeking Alpha: Cal Dive Seems To Be Fighting The Tides

Offshore diving and construction specialist Cal Dive (DVR) is an interesting story. The company's low stock price (close to $2 a share) catches an investor's attention, as does the fact that the shares trade below tangible book value and that there is a sizable short interest in the shares. If Cal Dive can drive better vessel utilization and reap the margin improvements that should come with it, Cal Dive is the sort of story that could spike fairly quickly.

The problem is that I'm not sure how likely that is. Recent awards have swollen the backlog to levels not seen in years, but it remains to be seen just how much they will improve utilization and margins - with weak pricing in the market, did Cal Dive have to surrender margins to secure revenue and cash flow? I'm also concerned that the company is fighting a losing battle with technology as remotely operated vehicles (ROVs) owned by Oceaneering (OII), Helix (HLX), and Saipem (SAPMY.PK) take share away from diving, while energy companies move exploration and production activity from the shallow waters and into the deep.

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Cal Dive Seems To Be Fighting The Tides

GE Adds Another Piece To Its Subsea Business

General Electric (NYSE:GE) had to work a bit on this one, but the American conglomerate was finally able to close a deal to acquire Wellstream, a British manufacturer of flexible pipeline products used in subsea energy development projects. With this deal, GE further rounds out its energy services product portfolio, and positions itself in what is likely to be a major offshore market for many years to come. 

The Terms of the Deal
GE announced that it reached an agreement to acquire Wellstream for $1.3 billion in cash. The deal was based on a price of 780 pence for each share of Wellstream, and Wellstream's stock has moved up about 5% to 786.50 in trading. This is not a case, though, of rampant expectation of a rival bid - part of GE's deal for Wellstream also included a special six pence special dividend above and beyond the bid price. All in all, going back to late September and the time before the company publicly talked about receiving expressions of interest in a buyout, the stock is up about 29%.

Valuing this deal is a little tricky, as Wellstream's 2010 looks to be a down year in a more generally upward trend. On a normalized basis, it looks like GE is paying about 14-times Wellstream's EBITDA - double the current valuation of rival Technip (on a similarly normalized basis), and a pretty healthy multiple relative to U.S. subsea equipment companies like Cameron (NYSE:CAM), National Oilwell Varco (NYSE:NOV) and FMC Technologies (NYSE:FTI).


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McDermott's New Life

For McDermott (NYSE: MDR), it is now all about energy. With the completion of the Babcock and Wilcox (NYSE: BWC) spinoff at the end of July, McDermott is now an EPCI (engineering, procurement, construction, installation) company with a laser focus on the upstream energy market. In particular, the new company focuses on offshore projects in the Middle East and Asia. If Apache (NYSE: APA), Chevron (NYSE: CVX) or OMV want to build a new offshore installation (whether a production rig, subsea field or floating production system), they hire a company like McDermott to build it. 

The First New Quarter In The Books
On the surface, this third quarter was not an auspicious beginning. Revenue dropped 28%, and operating income fell about 14%, though net income from continuing operations was actually up an encouraging 39%. Although there was weak order flow for the quarter, and the company's backlog declined on a sequential and year-over-year basis, McDermott has booked $1.2 billion in new orders for October.

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