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KBR and Baker Hughes Team Up on Mid-Scale LNG Technology

Zacks Equity Research

KBR, Inc. KBR has collaborated with Baker Hughes, a GE company BHGE to use the latter’s proven gas turbine driver technologies, featuring LM2500+G5 and LM6000PF gas turbines, for its standardized mid-scale Liquefied Natural Gas (“LNG”) design.

Per the deal, Baker Hughes will be part of the ongoing development of KBR's LNG design. The new technology will provide perfect power ratings, speed, power flexibility, long maintenance intervals and industry-leading competences.

The partnership will allow both the companies to provide standardized, and low-CAPEX LNG solutions for grassroots and existing LNG assets. Also, it will enhance KBR’s cost-effective standardized approach to LNG design, while minimizing clients’ CAPEX and OPEX.

KBR has already been in the LNG industry for more than 40 years and has been contributing nearly one third of the world's total LNG production. On Sep 17, 2018, KBR partnered with ConocoPhillips COP, a major global exploration and production (E&P) company, in a bid to utilize the latter’s Optimized Cascade technology in LNG plants.

KBR has a diversified business portfolio, which helps combat cyclicality associated with any single market. The company’s backlog level of $13.5 billion (as of Dec 31, 2018) serves as a testimony to the fact.

Notably, KBR believes that it will witness a mix of both Brownfield and Greenfield opportunities for the Hydrocarbons Services segment (especially in the consulting sector in the upstream area), largely attributable to rising commodity prices and underlying global demand. Selective opportunities in downstream petrochemical and ethylene projects, and a growing number of small-scale LNG projects in North America are expected to boost the growth of hydrocarbons. Notably, LNG activity is rising on the back of increased demand from China and India for environmental reasons.

Coming to price performance, shares of KBR have gained 15% in the past year, outperforming the S&P 500 composite and its industry’s average growth of 9% and 2.7%, respectively. Its contract winning spree underscores KBR's strong ability to safely and efficiently deliver projects in operating facilities.

Zacks Rank & Key Pick

Currently, KBR carries a Zacks Rank #2 (Buy). Another top-ranked stock in the same space is Quanta Services, Inc. PWR, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Quanta Services’ earnings for the current year are expected to increase 25.3%.

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Quanta Services, Inc. (PWR) : Free Stock Analysis Report
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Baker Hughes, a GE company (BHGE) : Free Stock Analysis Report
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