Zacks_Analysts' Blog : National Oilwell Buys STSA - Analyst Blog

Oilfield services firm National Oilwell Varco (NOV) acquired Singapore based drilling equipment maker STSA Pte Ltd (“STSA”) in an all-cash transaction. However, financial terms of the deal were not disclosed.

With this acquisition, National Oilwell will capture STSA’s leading position in the blowout preventers (BOP) refurbishment market and continue to render services of subsea BOP and related pressure control equipment for offshore drilling rigs in the Asia-Pacific belt. The former company will also gain access to STSA’s two main manufacturing facilities and control operations in Singapore and India.

National Oilwell management believes that this acquisition will boost its business model and strengthen its position in the BOP and pressure control equipment sector. The company’s consistent emphasis on lapping up attractive investment opportunities highlights its strategic moves to gain a competitive edge over other industry players.  

National Oilwell Varco, formerly National Oilwell, is a world leader in design, manufacture and sale of comprehensive systems, components, products and equipment used in oil and gas drilling and production worldwide. The company operates in three business segments: Rig Technology, Petroleum Services & Supplies, and Distribution Services.

On July 26, the company will release its second quarter 2011 results, before the opening bell. The Zacks Consensus earnings estimate is $1.01 per share, with an upside potential of 0.99%, on revenue of $3,233 million.

We remain optimistic about Houston, Texas-based National Oilwell’s results in the to-be-reported quarter, owing to its impressive asset base, continuous technology innovationand strength in international operations, particularly in the Middle East and Brazil. The company’s large installed base of rigs worldwide provides for a steady recurringrevenue stream through demand for maintenance, parts and other expendable products.

However, we maintain a long-term Neutral rating on the stock, considering risk factors such as gas/oil price volatility, as well as exploration and production spending patterns, costs, geo-political hindrances, competition from peer Cameron International Corp. (CAM) and the advent of new technologies.