MTQ

MTQ: Cameron Int’l and National Oilwell Varco (NOV), the two top makers of blow-out preventers, are racing to meet the biggest wave of investment in the 90-yr history of the 400-ton fail-safe device that attaches to the well head on the ocean floor. The surge comes as growing demand for deep- water rigs has spurred record rental rates and safety concerns put greater emphasis on time-consuming maintenance. Blow-out preventers, known as BOPs, monitor pressure levels during drilling, and are designed to pinch off the well in the case of an uncontrolled blast of oil or gas. They are used by oil companies as insurance against explosive blow-outs such as the one that destroyed BP’s Macondo well in the Gulf of Mexico two years ago. Some drillers have begun doubling up on the US$45m machinery to minimize maintenance delays and shorten drilling time for the most modern rigs that can cost more than US$600k/ day. The expanding search for oil is sending explorers into offshore waters where they require the newest rigs engineered to handle greater depths, higher pressures and more extreme temperatures. A total of 88 deep-water rigs are expected to be delivered between 2013-19, the fattest pipeline of orders since the advent of deep-water drilling in the 1970s. That compares to 39 rigs ordered from 2003 to 2009. Each new rig will require a new BOP – most provided by NOV and Cameron -- and as many as half of the new rigs will get a second device. The backup valve can be immediately lowered to replace the one brought up for maintenance, allowing drilling to continue. Older rigs may be another source of new business for BOP makers. Most of the world’s existing rigs weren’t built to hold a second BOP, which can weigh ~ 800k pounds. As older deep-water rigs come back to the shipyard for major servicing every five years, some may be upgraded to accommodate a backup BOP. Or an old device may be swapped out for a newer one. Cameron and NOV also are seeing more requests from rig operators who want to use the original manufacturers to service their equipment. Barclays estimates this after-market business could represent US$1b a year in sales for Cameron alone. The newflow is positive for SGX-listed MTQ, an oilfield engineering services provider, and likely the only one listed that deals with blow out preventers. MTQ does most of the BOP module assembly here before it is shipped elsewhere for installation. It also handles most of the repair, refurbishment and testing of BOPs for this region. It counts Cameron and NOV amongst its biggest customers. Although thinly traded, the co last wk recorded an impressive 20 fold jump in 1QFYMar13 net profit to $4.7m. The co trades at 4.4x trailing P/E, 0.9x P/B.