Forum Energy Technologies: Navigating the Oil Industry with Niche Strategies and Subsea Backlog

Forum Energy Technologies is a provider of equipment for offshore and onshore drilling, well completion, and production. The company focuses on high-margin niches with limited competition, particularly in subsea equipment, and has a significant backlog of orders. This strategy helps Forum Energy Technologies beat the rig cycle and maintain a competitive edge in the oil and gas industry.

Forum Energy Technologies (FET), a provider of equipment for offshore and onshore drilling, well completion, and production, has been strategically positioning itself to navigate the volatile oil and gas industry. The company's focus on high-margin niches with limited competition, particularly in subsea equipment, has been a key factor in its ability to maintain a competitive edge and beat the rig cycle. This strategy has allowed FET to achieve notable growth despite the challenging global market conditions.

In the second quarter of 2025, FET reported revenue of $199.8 million, which exceeded its guidance despite a decline in global drilling activity. This performance can be attributed to its "Beat the Market" strategy, which involves doubling down on markets with fewer competitors. The company's revenue growth was driven by increased subsea bookings, which reached the highest backlog in a decade. Additionally, FET gained market share in coil line pipe in the US and the Middle East, and expanded its international artificial lift sales.

One of the standout aspects of FET's operations is its significant backlog of orders, particularly in the subsea category. This long-term backlog provides revenue stability and helps mitigate the effects of market fluctuations. The company's diverse portfolio of equipment, including subsea, drilling and production, downhole and completions, intervention, valves & flow controls, and production equipment & process solutions, allows it to cater to various segments of the oil and gas industry.

However, FET is not without its risks. The company's customers include major exploration and production companies and large oilfield service providers, which can exert significant negotiating power. Additionally, tariffs on Chinese imports have increased costs for products like valves, and FET's ability to pass these increased costs to customers remains uncertain. Despite these challenges, FET has been proactive in its cost reduction efforts, aiming to reduce fixed annual costs by $10 million by 2030. The company has already achieved 70%-80% of this target by the second quarter of 2025.

From a valuation perspective, FET trades at a microcap market cap of $260.6 million, with a price-to-book ratio of 0.8. This is significantly lower than the sector's median P/B ratio of 1.3. Additionally, FET is projected to generate approximately $774.8 million in revenues by 2026, with a forward price-to-sales ratio of 0.3, which is substantially lower than its peers' forward P/S ratio of 1.4.

In conclusion, Forum Energy Technologies presents an attractive investment opportunity for investors seeking value in the oil and gas sector. The company's strategic focus on high-margin niches, significant backlog of orders, and proactive cost reduction efforts make it a viable long-term investment. However, investors should remain aware of the risks associated with the company's customer base and tariff uncertainties.

References:
[1] https://seekingalpha.com/article/4813563-forum-energy-technologies-beating-the-rig-cycle-with-niches-and-subsea-backlog