Houston firms benefit as West Africa deep water heats up

West Africa deep-water drilling activity is on the rise and Houston offshore equipment companies are happy beneficiaries, judging from multimillion-dollar orders for equipment that came through this week.

Aker Solutions announced on Monday the largest deal in West Africa in years. Total awarded an $850 million for the Moho Nord project of the coast of the Republic of Congo, Barclays wrote. The project will include 28 vertical trees, as well as wellhead systems, subsea control and tie-in systems.

“This is a major contract award for Aker Solutions,” said Alan Brunnen, head of Aker Solutions’ subsea business, in a written statement. “We are investing and growing internationally and Aker Solutions is committed to developing the oil and gas industry in the Republic of the Congo through knowledge sharing and local content.”

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The awards are spread throughout the offshore equipment industry, with Aker Solutions, FMC Technologies and Cameron all vying for the flurry of contracts coming through for 2013.

“We believe these recent awards are evidence that the logjam of projects in West Africa is easing,” Barclays wrote in a Monday analyst’s report, assessing the market.

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While West Africa – along with the Gulf of Mexico and Brazil – has long been considered part of the Golden Triangle for deepwater drilling, operators responded to the economic crisis of 2008 by putting big projects on hold as they waited for the economy to rebound.

“What we saw happening in the last couple of years is that you didn’t see many of the big projects get awarded – they just kept sliding to the right,” said Byron Pope, an analyst with Tudor Pickering, explaining that higher oil prices has encouraged operators to return to projects that had been put on hold for several years.

Initially, offshore equipment providers were eager for the contracts, and operators could play competitors off in a seller’s market, but as more contracts are being awarded, the market has matured, Pope said.

“Now that some of the players have now started to win their fair share of awards in the last six to nine months, we are likely to see much more disciplined bidding behavior,” Pope said. “Both the customers are starting to get more constructive and confident in the midterm commodity and more rational bidding and pricing behavior on the part of the subsea players.”

In mid-February, Cameron was awarded a $480 million subsea contract from ExxonMobil for the Erha North Phase 2 development off the coast of Nigeria. Erha and Erha North is made up of 32 subsea wells that are tied to a floating production, storage and offloading (FPSO) unit. The project uses control umbilicals to connect the vessel to each drilling site and provide the electric power and signals, fluids, injection capabilities and other services.

The largest anticipated deal, however, is a deal with Total for drilling equipment for the Nigerian Engina. FMC Technologies said in its annual earnings call that it is confident it will win the $1 billion award sometime in the first quarter.