KBR-SOCAR Joint Venture Secures FEED Contract In Azerbaijan

KBR Inc. (NYSE:KBR) recently announced that the SOCAR-KBR Limited Liability Company (“SKLLC”) joint venture (JV) has clinched a Front-End Engineering Design (“FEED”) contract. SKLLC was awarded the FEED contract for the topsides of the Absheron Early Production Project. The platform, which will deliver gas and condensate into the SOCAR network, will be situated at SOCAR's Oil Rocks facility.

The value of the project will be booked as unfilled orders in KBR’s Engineering & Construction business segment’s backlog in fourth-quarter 2017.

SKLLC was formed in mid-2015 as a JV between KBR and SOCAR to support Azerbaijan's aim of creating a leading engineering company based in Azerbaijan. Per the framework agreement signed by SOCAR and Total, last year, the first phase of development of the Absheron field includes drilling one well at a depth of 450 meters. This will result in extraction of 1.5 billion cubic meters of gas per year, which will be delivered to Azerbaijan’s domestic market. The extraction will also generate a large amount of condensate. The project is expected to begin production of gas in 2019.

Other Notable Contract Wins

Some other notable contracts clinched recently by KBR’s Engineering & Construction business segment include an engineering and project management services contract from JVGAS and a pre- FEED and project support services deals from BP (LON:BP).

Moreover, the business secured a contract from Sydney Desalination Plant Pty Limited and services contract by international pager products maker, International Paper Company (NYSE:IP). This apart, the business secured a project management services contract for Oman Liquefied Natural Gas LLC in Qalhat, Oman.

Our Take

We anticipate KBR’s Engineering & Construction segment to benefit from growing client operational expenditure. Going forward, backlog of this segment is anticipated to improve, primarily owing to increased work in consulting areas.

In the past six months, this Zacks Rank #2 (Buy) company has returned 23.5%, outperforming the industry’s average growth of 14.9%. The company is banking on the strength and momentum of its Government Services businesses to optimize growth potential. Further, it remains bullish about prospects, primarily driven by lucrative contracts from the U.S. military and the new wins on work with the U.K. Ministry of Defense.

This apart, the company anticipates growth across all its key markets in the United States, UK and Australia, backed by continued opportunities across the lifecycle of projects. KBR remains bullish that the present economic conditions in the Middle East, particularly in Iraq and Eastern Europe will offer lucrative prospects for its government business.

Other Stocks to Consider

Some other top-ranked stocks from the same space include Thor Industries, Inc. (NYSE:THO) , Willdan Group, Inc. (NASDAQ:WLDN) and Toll Brothers Inc. (NYSE:TOL) . While Thor Industries sports a Zacks Rank #1 (Strong Buy), Willdan Group and Toll Brothers carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Thor Industries has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 11.9%.

Willdan Group has outpaced estimates in the preceding four quarters, with an average earnings surprise of 44.8%.

Toll Brothers has surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 8.5%.

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