Contract Wins Continue for Foster Wheeler

Zacks Equity Research

Foster Wheeler AG (FWLT) recently announced that its subsidiary Global Engineering and Construction Group have received a study contract from Statoil Petroleum AS, subsidiary of Statoil ASA (STO). The contract requires Foster Wheeler to provide a comprehensive report for the liquefied natural gas (LNG) facility, Snøhvit Improvement Project 2 at Melkøya, near Norway.

However, the financial terms of the deal remain undisclosed and the deal will be recorded in the company’s fourth-quarter 2013 bookings.

The study, scheduled to complete by third-quarter 2014, is intended to provide long-term solutions to expand the production capacity of the plant while also increasing its operational efficiency. Apart from these, it will also focus on improving the flexibility of the feed gas at the plant. It is designed to complement the partnership objectives of Snøhvit and Statoil.

Separately, Foster Wheeler’s Global Engineering and Construction Group received another contract from a subsidiary of Maire Tecnimont S.p.A., Tecnimont USA Inc. to provide diverse services for petrochemicals, chemicals and fertilizer companies spread in the region of United States, Canada, and Mexico.

The scope of this deal requires Foster Wheeler to provide front-end engineering design (FEEDQ) apart from the integrated engineering, procurement and construction (:EPC) services. Per the agreement, the two companies are required to collaborate for upgrading and setting up the facilities. 

The collaboration is intended to enhance the strengths of the two companies.  Foster Wheeler aims to tap the potential of the booming oil and gas industry in North America via this contract.

These deals come after Foster Wheeler’s recent announcement of its acquisition by AMEC plc on Feb 13. Per the agreement, AMEC will be acquiring all the issued and to be issued share capital of Foster Wheeler for about $3.3 billion or $32.69 per share.

Foster Wheeler has been a market leader in the mid-stream and down-stream oil and gas industry, which provided it with the competitive advantage. However, the company was witnessing a growing need for capacity additions in a number of developing countries. AMEC’s strength in the upstream exploration will perfectly complement Foster Wheeler’s strengths to drive up both top and bottom lines.

These contracts, while boosting investors’ confidence, will further enhance the company’s presence in the oil and gas industry and add to the combined entity’s strengths.

Foster Wheeler’s solid fundamentals continue to help it win contracts and execute them well, retaining credibility to earn more contracts even after it signed a definitive sell-off agreement with its rival.

Foster Wheeler currently carries a Zacks Rank #3 (Hold). Other better-ranked players in the engineering and heavy industry worth a look include AECOM Technology Corp. (ACM) and Fluor Corp. (FLR), both of which carry a Zacks Rank # 2 (Buy).

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