Lockheed Martin (NYSE:LMT) has developed a 10-foot long, unmanned submarine that can inspect offshore oil wells and underwater oil pipelines.  The submarine, which has been named Marlin, can be used by oil and gas companies to carry out inspections of their offshore rigs to detect leakages early on. This can replace the time-consuming, expensive and relatively less efficient methods of manual diving and tethered unmanned undersea vehicles. The market is potentially a very large one as there are thousands of offshore platforms and hundreds of thousand miles of underwater pipelines, globally. If Lockheed, which is a pioneer in the field, is able to build a good business model for the industry, then it can partially offset the impact anticipated from US Defense spending cuts.
On the whole, the new product, Marlin can not only generate a new revenue stream for the company, but also prevent environment damage and eliminate human presence in the dangerous task of deep underwater surveillance. We currently have a stock price estimate for $95 for the company, approximately 5% above its current market price.
Marlin, a 10-feet long submarine
Marlin can carry out surveillance up to a depth of 1000 feet from the water surface. It uses sonar and other technologies to build 3D models of an underwater installation and detect any changes in the model overtime to indicate possible damages or leakages. The submarine can carry a payload of up to 250 pounds and operate for up to 24 hours at a stretch.
This provides a much more efficient and accurate inspection in comparison to manual diving or tethered unmanned undersea vehicles, which provide less detailed video images. Marlin can map a 135-foot platform accurately in 27 minutes. The new technology has invoked a lot of interest in oil and gas companies that need to spend millions of dollars on divers and large ships which carry tethered undersea vehicles, to carry out inspections prior to resuming operations in the aftermath of a hurricane. Also, even over normal course government mandates regular inspections of oil rigs to prevent leakages.
The commercial opportunity arising out of the industry requirement is potentially a big one. Industry data reveals that there are over 3,800 oil platforms, over 40,000 miles of underwater pipeline and an estimated 12,000 capped wells in the Gulf of Mexico itself.  Lockheed has not indicated possible future sales of the submarine or its per unit price. Nonetheless, the company does have a big market to take advantage of, and more importantly generate an added revenue stream to reduce the impact of US Defense spending cuts.
The enactment of the Budget Control Act of 2011 will reduce defense spending by $487 billion over a 10-year period starting from fiscal year 2012. Lockheed Martin, which receives more than 80% of its revenues from the U.S. government, is expected to be impacted significantly from the proposed cuts.
The company is currently trying to increase the depth of exploration for the vehicle to 12,000 feet along side a few other additions like addition of a three dimensional laser that would enhance data gathering capabilities of the submarine.
The development program of Marlin is a public-private partnership between Lockheed Martin’s Mission and Unmanned Systems Unit, and Space Florida. The unit has been actively hiring, adding 130 positions over the last 18 months, while other businesses of Lockheed continue to cut jobs. The unit has recently also opened an office in Houston, a hub of the oil and gas industry, to step up marketing for Marlin.Notes:
- Lockheed’s Unmanned Yellow Submarine Set to Sail, www.lockheedmartin.com [↩]
- Weapons maker Lockheed builds submarine for oil rigs, August 3 2012, www.reuters.com [↩]