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Recently KBR Inc. (KBR) received a front-end engineering and design (FEED) contract from Pacific NorthWest LNG Ltd, a subsidiary of PETRONAS - Malaysia’s state-owned oil company, and Japan Petroleum Exploration Co., Ltd. (JAPEX). The contract will be executed for a world scale LNG project in British Columbia. KBR will also enter into a partnership with JGC Corporation for the project.

The project is targeted towards processing shale gas produced in the North Montney region of British Columbia into LNG and providing detailed engineering work for LNG plant with an annual capacity of 12 million tons. Though the financial details of the contract were not disclosed, the size and volume of the project envision a significant revenue increase for the company. In addition, it will also help KBR with better resource allocation among other projects currently ongoing in British Columbia.

During the last few quarters, a number of new contracts have been showering upon KBR. Two of them were turnaround contracts. These include a contract from a leading chemical company to perform turnaround services for its pyrolysis gasoline (pygas) unit on the US Gulf Coast and another from Suncor Energy Inc. (SU - Analyst Report) to provide turnaround services for its refinery in Edmonton, Canada.

Massive new supplies of natural gas have been discovered in the U.S., which lead the domestic price to fall nearly 70% below international price. These low prices are creating a windfall for businesses that are big consumers of it and thus will also fetch big profits for the companies that help them expand. KBR is an industrial construction and engineering businesses that specialize in hydrocarbon, chemical and petrochemical industries and is benefiting extensively from the demand boost for its services. This demand shows no sign of abating in the near future given the exceptional prospects for additional new contracts over the next 7 to 10 years as demand for low price gasoline continues.

Under such a prospective scenario, we expect KBR stocks to experience a revision and show a rising trend in coming quarters. It is to be noted that KBR also recently hit a 52 week high level on May 15, with a price of $32.82, beating its previous high of $32.65 attained on March 28, 2013.

KBR currently has Zacks Rank #3 (Hold). Other stocks from the same sector that look promising include Michael Baker Corporation with a Zacks Rank #1 (Strong Buy), and Harris & Harris Group, Inc. with a Zacks Rank # 2 (Buy).

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