KBR Inc. (KBR) recently announced that it has been selected by a major leading chemical company to perform turnaround services for its pyrolysis gasoline (pygas) unit on the US Gulf Coast. As per the terms of the contract, KBR will look after the issues relating to regulatory maintenance, mechanical fixed equipment, piping systems, electrical and instrumentation services for the pygas unit.
In addition, KBR will also be responsible for the entire activities of event management, project controls and subcontractor management, being the general contractor for this pygas unit.
The contract value has not yet been disclosed by either party. KBR expects that this turnaround execution will increase the efficiency and extend the operational life of the unit. KBR is experiencing strong growth opportunities in the area of turnaround project execution.
Recently, KBR won 2 turnaround contracts, the most recent being a three-year agreement from Suncor Energy Inc. (SU) to provide turnaround services for its refinery in Edmonton, Canada. Prior to this, KBRreceived a turnaround services contract from a leading supplier of agricultural products.
Since the last reported quarter, contracts have been pouring in for KBR. The company received a number of multi-million contracts including the recent $145 million contract from VicRoads, a state government agency in Victoria, Australia, for a road and rail project. With this steady inflow of new orders, the company is expected to report an increase in revenue and margins in the coming quarters. As per Zacks Consensus estimates, the company has a positive expected earnings growth of 12%.
The contract will be included in KBR’s services segment. Services business group primarily delivers full-scope construction, construction management, fabrication, operations/maintenance, commissioning/startup and turnaround expertise worldwide to a broad variety of markets including oil and gas, petrochemicals processing, mining, power, alternate energy, pulp and paper, industrial and manufacturing and consumer product industries.
Services revenue increased by $43 million in 2012 as compared to 2011. This increase is primarily driven by increases of $167 million in our Canada product line and $121 million in our U.S. Construction product line due to several new awards and increased activity on new projects
KBR currently holds a Zacks Rank #3 (Hold). Other stocks worth a look in the services sector are Michael Baker Corporation ( BKR ) , holding a Zacks Rank #1 (Strong Buy), Harris & Harris Group, Inc. ( TINY ) carrying a Zacks Rank #2 (Buy) each.
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