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Subsea Equipment Providers See Boom Ahead

14 September 2012

Oil and gas service companies are increasingly seeing subsea equipment as one of the best opportunities for growth, according to recent analyst reports.

Schlumberger, one the largest Houston-based onshore and offshore equipment companies, is eyeing the potential for subsea equipment to capitalize on the industry’s push to move the separation process, which separates out the oil from natural gas and water, from the surface to the ocean floor.

"Schlumberger believes the key to unlocking the recovery potential of subsea will be to design and to optimize the entire subsea production system,” Barclay’s wrote in a recent analyst note. Schlumberger has estimated that improving subsea technology could increase global oil reserves by 10 percent and "sees a massive opportunity if it can overcome these challenges in a cost effective way”.

Cameron, another Houston-based onshore and offshore equipment provider, continues to be one of the leading providers of blowout preventers for the offshore market, and the company has noted that its BOP "aftermarket business has tripled since 2005, and on a rolling basis is more than double pre-Macondo levels,” according to a recent Barclay’s research note on the company.

More stringent safety requirements have led more offshore drillers to use dual BOP systems, leading to a continued boom for Cameron. The company is also optimistic about demand for subsea trees, and working towards developing a complete subsea equipment package, gambling that deep-water drilling will continue to grow in the coming years.

Houston-based National Oilwell Varco, which also provides oil and gas equipment, is also expected to benefit from the increased demand for BOPs, as it vies with Cameron for market dominance.

"We remain buyers of the stock as we believe National Oilwell Varco is one of the best ways to invest in the oilfield equipment revolution, which is unfolding in both onshore and especially offshore markets,” wrote Barclay’s in a recent analyst note on National Oilwell Varco.