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KBR to Provide ROSE Technology at ENAP's Refinery in Chile

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KBR, Inc. (KBR - Free Report) recently announced that it has secured a license and engineering (LBED) contract from ENAP Refinerías SA to offer its ROSE solvent deasphalting technology at the latter’s Bío Bío refinery located in Concepcion, Chile.

Per the deal, KBR will be responsible for providing technology licensing and basic engineering design for ENAP's forthcoming refinery upgrading project, based at Concepcion. KBR's leading ROSE solvent deasphalting technology at ENAP’s 30,000 BPSD plant should enable the refinery to upgrade a greater proportion of its oil intake into high-grade products. Without changing the refinery’s total processing capacity, the new unit is expected to enable a different product mix. Also, the ROSE unit is likely to provide the refinery with more flexibility, in a bid to reduce its products’ environmental footprint and quickly respond to market developments.

Our Take

KBR expects growth across all its key markets driven by continued opportunities across the lifecycle of projects. Moreover, the company foresees decent opportunities in ammonia, petrochemical and refining. Notably, selective opportunities in downstream petrochemical and ethylene projects and a growing number of small-scale LNG projects in North America are expected to boost growth of hydrocarbons. Also, LNG activity is rising on the back of increased demand from China and India for environmental reasons. The company believes that healthy balance between hydrocarbons and government projects positions it well for future growth.

Furthermore, KBR’s penchant for acquisitions and strategic alliances is allowing it to bolster the company’s inorganic growth and expand market share. Some notable acquisitions made by the company include Honeywell Technology Solutions and Wyle. Also, it remains optimistic about backlog growth in the early 2018 due to the pipeline of opportunities. In the past year, this Zacks Rank #3 (Hold) company’s shares have returned 16.5% against the industry’s decline of 3.1%.

Despite these tailwinds, volatility in the oil and gas markets with oversupply are likely to strain the prices and spending levels, which in turn might affect the company’s projects and orders. Also, prolonged softness in the Engineering & Construction sector along with volatility in material & equipment pricing poses threat to the company's growth.

Key Picks

Some better-ranked stocks from the same space include Fluor Corporation (FLR - Free Report) , Willdan Group, Inc. (WLDN - Free Report) and Jacobs Engineering Group Inc. . While Fluor sports a Zacks Rank #1 (Strong Buy), Willdan Group and Jacobs Engineering Group carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Fluor surpassed estimates thrice in the trailing four quarters, with an average positive earnings surprise of 8.4%.

Willdan Group outpaced estimates in the preceding four quarters, with an average earnings surprise of 45.4%.

Jacobs Engineering Group surpassed estimates in the trailing four quarters, with an average positive earnings surprise of 11.4%.

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