Shares in Plexus Holdings PLC (AIM:POS) rose 14% to 3.37p on Monday after the oil equipment engineer announced an agreement with Cactus Wellhead to develop and qualify a range of surface wellhead products for offshore energy applications.
The two-year deal brings an up-front payment of £1 million, secured by a debenture, followed by up to a further £1.5 million of revenue during the agreed programme.
Work is to begin immediately, and Plexus said there is scope for additional workflows to be agreed, which could generate further revenue.
Cactus Wellhead is a leading designer and manufacturer of pressure control equipment for oil and gas drilling, completion and production, supplying wellhead products to a large share of active US onshore drilling rigs.
Under the agreement, Plexus will design and test new products for Cactus, drawing on its patented POS-GRIP engineering method for surface and subsea wellheads and connectors.
Cavendish, the company's broker, called the arrangement a significant deal and a strong endorsement of Plexus's engineering expertise and years of know-how in developing and qualifying wellhead solutions.
Qualification is a structured, phased process that ensures safety, reliability and compliance with industry standards such as API 6A and ISO 10423, moving products from concept through to commercial readiness.
Cavendish said delayed projects remain in the pipeline and should commence next financial year if market uncertainty subsides, adding that the Cactus deal could develop into a substantial longer-term relationship.
The broker maintained its forecasts and kept its buy rating and 22p target price.
