Sprint Pipeline Services, a unit of the East Construction Services segment of Primoris Services Corporation (PRIM) has secured a new underground contract from an important midstream oil and gas customer worth $10 million. The deal covers pipeline installation work in Texas.
Acquired in 2012, Sprint Pipeline provides a comprehensive range of pipeline construction, maintenance, upgrade, fabrication and specialty services primarily in the Southeast U.S.
The contract work of Sprint Pipeline includes boring three new pipelines that will be fixed into the existing setup. These pipelines will be connected to one of the largest oil refineries in the U.S., located along the Gulf Coast of Texas. The construction work has commenced and is expected be concluded in the third quarter of 2014.
In Oct 2013, Sprint awarded around $90 million new contracts and work authorizations. Majority of the work has been completed in the first quarter of 2014, while several will be finished in the second quarter.
Primoris’ East Construction Services segment recorded a sales increment of 17.3% year over year to $223 million in the first quarter of 2014. Revenues at Sprint Pipeline division increased $9.4 million from pipeline projects in south Texas.
East Construction segment’s gross profit rose 6.8% year over year to $16 million. During the next four quarters, Primoris will realize revenues of around 43% of the East Construction Services segment backlog.
Various tailwinds such as the aging pipeline system, oil and natural gas pricing differentials and environmental regulation will drive demand in Primoris’ end-markets providing growth opportunities both in the near and mid-term.
The company expects that production from the shale formations will continue to increase. And the distance between production and processing locations will provide opportunities for underground construction operations, primarily Rockford and Sprint.
In addition, Primoris’ strong balance sheet will allow flexible continuation of investment in external and internal opportunities. However, volatility in oil & gas prices remains headwinds in the near term.
Dallas, TX-based Primoris is a specialty contractor and infrastructure company that serves diverse end-markets. The company also provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater as well as engineering services to major public utilities, petrochemical companies, energy companies, municipalities and other customers.
At present, Primoris has a Zacks Rank #3 (Hold). Some better-ranked stocks in the building and heavy construction industry include EMCOR Group Inc. (EME), Sterling Construction Co. Inc. (STRL) and Tutor Perini Corp. (TPC). All these stocks carry a Zacks Rank #2 (Buy).
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