Foster Wheeler Gets Contract – Analyst Blog

The Global Engineering and Construction Group of Foster Wheeler AG (FWLT) has won a project management contract in Iraq. The contract was awarded by South Oil Company and envisages the setting up of two new onshore and offshore pipelines plus associated metering platform in Southern Iraq.

 

The project is scheduled for completion in July 2013 and is expected to enhance oil export capacity by 4.5 million barrels per day starting from 2014. Financial terms and conditions pertaining to the contract were not disclosed.

 

The consultancy portion of the work includes monitoring the procurement process which includes critical equipment like valves and pipeline. The company will also take up the administration and management work leading to the implementation of the contract.

The company’s Global Engineering & Construction Group operates worldwide and designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, chemical and petrochemical, pharmaceutical and biotechnology facilities and related infrastructure, including power generation and distribution facilities, and gasification facilities.

 

The Global E&C Group provides engineering, project management and construction management services, and purchases equipment, materials and services from third-party suppliers and contractors.

 

We believe that the world demand for energy will continue to grow over the long term and customers will continue to invest in new and upgraded capacities to meet that demand. In that regard, FWLT was successful in booking contracts for front-end engineering work, which is frequently the precursor to significant work for engineering, procurement and construction.

 

FWLT continues to be successful in booking contracts of varying types and sizes in key end markets. The company’s success in this regard is a reflection of its technical expertise, its long-term relationships with clients, and its selective approach in identifying new prospects where it believes it has significant differentiators.

 

In the Long-term, the company believes that world demand for electrical energy will continue to grow and solid-fuel-fired steam generators will continue to fill a significant portion of this incremental generating capacity. CFB steam generators have the flexibility to burn a variety of fuels other than coal and produce carbon-neutral electricity when fired by biomass. In addition, the company’s steam generators can be designed to incorporate supercritical technology, which can significantly improve efficiency and reduce emissions.

 

The company’s operations are concentrated in four particular industries (oil & gas, oil refining, chemical/petrochemical and power) and it may be adversely impacted by economic or other developments in these industries.

 

Worldwide operations involve risks that may limit or disrupt operations, limit repatriation of cash, increase taxation or otherwise adversely affect its business, financial condition, results of operations and cash flows.

 

We currently have a Neutral recommendation on Foster Wheeler.