When FMC Technologies announced its intent to buy frac flowback service provider Pure Energy Services in late August, industry observers weren’t quite sure what to think of it.
The Houston-based company noted that the deal was part of an effort to grow its shale related business, but the large jump from subsea services titan to subsea services titan dabbling in the low-profile water treatment segment of the unconventional resources space was puzzling to some.
In a note to investors following the announcement, Global Hunter Securities said: "Price looks good for the deal if the estimates are correct, but we are not sold on the street numbers. The acquisition is a NAM land focused company and not the subsea skill set, thus investors and analysts likely question the rationale for the move."
Speaking about the industry observers' thoughts on the deal, EnergyPoint Research Inc. analysts said, "Some tout shale activity as the engine poised to drive the nation's economic recovery, thus viewing the $285 million acquisition as a tiny drip in a very big barrel. Others seemed disappointed FMC would focus incremental resources on anything other than its bellwether subsea equipment business Nonetheless, when a giant moves, it's hard to ignore."
FMC Technologies makes a play in shale
With the impending purchase of Canada's Pure Energy Services, FMC Technologies adds frac flowback treatment and cleanup services to its portfolio of offerings and enters the service-side of the fracing business game "more as waterboy than as athlete," EnergyPoint Research analysts said, noting that FMC Technologies may be working on its position in the space.
"The case can be made that FMC is putting itself in a more noteworthy position than the dollar value of the deal, or the market place's lukewarm response to it, might suggest," they continued.
The handling of flowback in the hydraulic fracturing process is an issue of concern for everyone with a hand in the energy space. According to the EnergyPoint Research analysts,"To the extent FMC can help the industry ameliorate such concerns via better environmental processes and performance – not only in the US and Canada, but internationally – the company effectively could place itself ahead of the field by providing cost-effective solutions that head off stricter regulation."
With the opportunity also comes risk. EnergyPoint Research’s data suggest FMC might take on a additional risk as acquisitions askew from core operations can cause dips in performance and, in turn, customer satisfaction.
"Leaping to the longer view, FMC could be positioning itself to become a serious competitor in the hydraulic fracturing market. Already a subsea leviathan, the company would certainly boost its onshore shale-site presence with a boots-on-the-ground workforce dedicated to flowback and related services," the analysts continued.