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April 11, 2024, ST. PETERSBURG, FL – Water Tower Research (www.watertowerresearch.com) has published an Initiation of Coverage Report on Forum Energy Technologies, Inc. (NYSE: FET) titled, “Technology Solutions for Energy Development.” The report can be accessed here.
Forum Energy Technologies (FET) provides technology solutions to the oil, natural gas, industrial, and renewable energy industries. The company’s products are designed to help customers safely increase operational efficiency and to reduce the environmental impact of their activities. Product lines in the Drilling & Downhole and Completions segments are positioned to benefit from the E&P industry’s push toward longer lateral horizontal wells requiring more complex completion designs. Service intensity can increase demand for some consumable products and shorten the replacement cycle times for some capital equipment product lines.
FET reports its operations in three reportable segments: Drilling & Downhole, Completions, and Production. Each segment includes multiple product lines designed to meet specific customer needs and assist their efforts to increase operational efficiency and economic returns. A number of FET’s technology solutions can also help customers reduce the environmental intensity of their oil & gas activities through reduced emissions and can support renewable natural gas and offshore wind initiatives. Its products are supplied to customers from major manufacturing/distribution facilities in six countries, including the US, Canada, Germany, Saudi Arabia, the United Arab Emirates, and the United Kingdom. FET also serves customers in South America and Southeast Asia from dedicated regional sales offices.
FET’s innovative technologies are increasing the total addressable market (TAM) for its Iron Roughneck, FASTConnect automated switch technology, and Multilift product families. Management estimates these three lines alone have increased the TAM by $300 million. Its systems suit customers’ goals of operating in a safe and efficient manner to increase economic returns. In January 2024, Forum completed the acquisition of Variperm, a Canadian provider of sand control systems to heavy oil and oilsands producers. The acquisition is expected to drive significantly increased scale and margin accretion.
Against a relatively stagnant environment for industry activity, management guided FY24 adjusted EBITDA to a range of $100-120 million and free cash flow to a range of $40-60 million. FY23 adjusted EBITDA was $67.1 million. The expected Variperm contribution underpins a portion of the expected growth. The scale and margin accretion provided by the Variperm transaction could position FET to refinance its existing 9.00% notes and the term loan issued to Variperm’s sellers later in 2024.
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