Technology Solutions for Energy Development
Forum Energy Technologies (FET) provides technology solutions to the oil, natural gas, industrial, and renewable energy industries. The company’s products are designed to help customers safely increase operational efficiency and reduce the environmental impact of their activities. Product lines in the Drilling & Downhole and Completions segments are positioned to benefit from the E&P industry’s push toward longer lateral horizontal wells requiring more complex completion designs. Service intensity can increase demand for some consumable products and shorten the replacement cycle times for some capital equipment product lines. FET’s innovative technologies are increasing the total addressable market (TAM) for its Iron Roughneck, FASTConnect automated switch technology, and Multilift product families. Management estimates these three lines alone have increased the TAM by $300 million. Its systems suit customers’ goals of operating in a safe and efficient manner to increase economic returns. In January 2024, Forum completed the acquisition of Variperm, a Canadian provider of sand control systems to heavy oil and oilsands producers. The acquisition is expected to drive significantly increased scale and margin accretion. FY23 revenue increased 6% Y/Y, driven primarily by gains in FET’s drilling and production equipment product lines. The US accounted for 62% of FY23 revenue. FET’s revenue is correlated with global capital spending cycles in the oil & gas industry. Against a relatively stagnant environment for industry activity, management guided FY24 adjusted EBITDA to a range of $100-120 million and free cash flow to a range of $40-60 million. FY23 adjusted EBITDA was $67.1 million. The expected Variperm contribution underpins a portion of the expected growth. The scale and margin accretion provided by the Variperm transaction could position FET to refinance its existing 9.00% notes and the term loan issued to Variperm’s sellers later in 2024. Pro forma for the Variperm closing, we estimate total liquidity was ~$103 million as of December 31, 2023.
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