BP Ropes In KBR For Pre-FEED & Project Support At Tortue

Integrated oil giant BP plc (LON:BP) (NYSE:BP) recently granted pre-front end engineering design (FEED) and project support services contracts to engineering service provider, KBR, Inc. (NYSE:KBR) for the development of the Tortue field located offshore Mauritania and Senegal.

KBR's Role in Tortue

KBR will be responsible for providing pre-FEED and project support for the Tortue project from its early stages, based on which the final investment decision will be made by 2018. The contract includes designs of the subsea, pre-treatment floating production storage and offloading (FPSO) facility, inshore LNG hub and interfaces for floating liquefied natural gas (FLNG).

The pre-FEED work will be carried out by KBR based on the concept phase work for the development of Tortue field, which has been built by Granherne, a subsidiary of KBR for Kosmos Energy Ltd. (NYSE:KOS) , a partner of BP in the field. Over the next six months, KBR will perform the pre-FEED work. KBR's London office will be responsible for the execution of the plan. Monetary terms of the contract are yet to be disclosed.

In this context, we will like to state that BP aims to deliver first gas from the Tortue field by 2021. The field is estimated to contain more than 15 trillion cubic feet of discovered gas resources. The investment in the Tortue field is in line with BP’s strategy of shifting to gas production. The company expects gas to make up approximately 60% of total production by mid-2020s.

BP’s Strong Relation with Tortue

Investors should know that before the Tortue pre-FEED contract, KBR has worked on many other projects of BP including the Mad Dog Phase II in the Gulf of Mexico, Glen Lyon FPSO in the UK and the Shah Deniz Phase II project in Azerbaijan.

We note that in 2016 BP had awarded KBR with two global agreements for the provision of conceptual engineering services and the provision of pre-FEED and FEED engineering services. The contractual duration of each agreement was three years, which can be later extended for two more years.

About the Company

BP is one of the largest integrated energy firms in the world with a strong and diversified portfolio of development projects. During second-quarter 2017, BP reported better-than-expected earnings, primarily owing to higher liquid and gas prices realizations.

However, the oil spill incident of 2010 in the BP-operated Macondo Prospect is still affecting the company. Although BP has cleared the huge litigation expenses related to the spill, it had to divest some of its best operating properties. The asset sales might hinder BP’s future cash generating opportunities going forward. It is to be noted that the lost reserves and production from the group's asset sales cannot be ignored either.

The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price Performance

BP has gained 2% in the last six months against the 1.7% loss of its industry. Another company operating in this industry is Braskem S.A. (NYSE:BAK) .

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