Forum Energy Technologies (NYSE:FET) is a U.S.-based oilfield equipment manufacturing company that we think will benefit significantly from the pending upturn in drilling and well completion activity in the U.S. and Canada. It is our opinion that the long downturn in drilling and completion activity came to an end in the second quarter of this year and we expect to see rising levels of activity into year end and throughout 2017. Many of Forum’s products are critical consumable components that are used during the well completion and hydraulic fracturing process, and some of its capital equipment products are in high demand as customers seek to upgrade and refurbish equipment that has either been idled or cannibalized for parts. We believe that industry inventories of these products have been depleted in the past two years, which should lead to a quicker turnaround in Forum’s business than in other oilfield equipment and service business, which are still dealing with capacity and inventory overhangs. Not only are we interested in Forum because of the likelihood that its business is one of the first responders to an upturn in activity, but we have been impressed with the cost cutting and organizational restructuring management completed in the past two years to strengthen the company and improve its mid-cycle margins.
From Baron Energy and Resources third quarter 2016 commentary.
