Emerson Electric Co.EMR has penned a new 10-year deal with the global energy giant - BP p.l.c. BP . As per the deal, Emerson's chief operating arm - Emerson Process Management - will provide automation technologies and aftercare services for the latter's upstream oil and gas operations. Notably, this new deal is an extension of Emerson-BP's existing agreement.
With the deal expansion, Emerson will now augment the scope of its technological services to BP and use its expertise in aiding secured completion of projects and support the Future program of BP meant for boosting the operating efficiency and oil recovery.
Technically speaking, the new agreement scope entails Emerson to continue its automation system technologies supply comprising distributed control systems and safety instrumented systems. In addition to this, the company will now offer valves and measurement instruments along with technologies related to asset management, machinery health monitoring and supervisory control and data acquisition.
Additionally, as a main automation contractor for BP, Emerson will carry on with its range of project and support services such as installation, configuration, testing and system engineering as well as ongoing maintenance of existing systems.
Besides its role as automation contractor, Emerson proficiently offers services and technologies to BP and other integrated oil and gas companies for trimming their project costs and risks, which in turn enhances reliability and ensures smooth ongoing operations.
We are encouraged with the extension of the collaboration between Emerson and BP and believe that the latest deal will further strengthen the relationship of both the companies. Both the firms have previously allied on several major upstream projects throughout the world.
Presently, Emerson is providing automation services to BP for a number of significant projects such as the Clair Ridge offshore platform and a floating production, storage, and offloading vessel for the Quad 204 development in the North Sea; and the Chirag Oil Project and Shah Deniz Stage 2 project in the Caspian Sea. Additionally, we believe the agreement will help the company witness a rebound in the weak oil & gas market.
However, Emerson continues to suffer from the current volatility in the oil and gas market, with oversupply continuing to pressure the prices and spending levels. This negatively affected the company's order rates in power generating alternators and electrical distribution businesses during third-quarter fiscal 2015. Moreover, the company has a bearish outlook for the remainder of fiscal 2015 and anticipates oil and gas market uncertainties to persist in the year ahead through the first half of fiscal 2016. Owing to these negatives, the company currently carries a Zacks Rank #5 (Strong Sell).