Recently, KBR Inc. (KBR - Analyst Report) won a front-end engineering and design (FEED) contract from multinational chemicals company INEOS Olefins & Polymers USA (INEOS), to construct a high-density polyethylene (HDPE) plant in the Americas. INEOS is a North American company which manufactures and markets Olefins, High Density Polyethylene and Polypropylene. Though the deal’s financial details were not disclosed, the facility is expected to produce 470 kilotons per annum of bimodal HDPE.
The plant is expected to be situated in the U.S. Gulf coast area and will use indigenous Innovene S process technology to produce polyethylene. As per the agreement, KBR will provide FEED for the inside and outside of the battery limit facilities. Additionally, it will be responsible for developing an appropriation grade cost estimate and ordering long lead equipment for the project. The facility will likely be fully operational from the fourth quarter of 2015.
An abundance of shale gas in North America has generated ample opportunity for Liquefied Natural Gas (LNG), ammonia and ethylene projects. KBR has hugely benefited from the LNG market and has been receiving a steady inflow of orders from the world’s largest refineries as well as oil and gas facilities. The company’s order pipeline primarily comprises FEED analysis of key projects including Chevron-operated Gorgon LNG 4 project and two Canadian LNG projects among others.
A couple of months back, KBR received a similar contract for FEED from Pacific NorthWest LNG Ltd, a subsidiary of Malaysia’s state-owned oil company PETRONAS and Japan Petroleum Exploration Co., Ltd. (JAPEX). The deal involves the execution of a world scale LNG project in British Columbia. The project aims to transform shale gas produced in the North Montney region of British Columbia into LNG. Additionally, it seeks to provide detailed engineering for the proposed LNG plant with an annual capacity of 12 million tons.
KBR is an industrial construction and engineering facility provider, offering services to the hydrocarbon, chemical and petrochemical industries. Going forward, as the demand for shale gas continues to grow, we expect the company to secure more contracts in the long run.
Currently, KBR carries a Zacks Rank #4 (Sell). Better-placed stocks in the same sector that are worth a look include Dycom Industries Inc. (DY - Analyst Report) , Chicago Bridge & Iron Company N.V. (CBI - Analyst Report) and Sterling Construction Co. Inc. (STRL - Snapshot Report) . All the above mentioned stocks carry a Zacks Rank #2 (Buy) each.