Foster Wheeler Gets New Contract - Analyst Blog

By Zacks | August 24, 2012 AAA

The Global Engineering and Construction Group of Foster Wheeler AG (FWLT) received a contract from Petróleo Brasileiro S.A. (Petrobras) (PBR) for the construction of a world-scale grassroots gas-to-chemicals complex in Linhares, Espirito Santo State, southeast Brazil. It will be called Complexo Gás-Químico UFN-IV. However, the value of the contract was not disclosed. This complex is expected to aid in reducing Brazil's imports of ammonia and urea fertilizers, methanol, acetic acid, plus formic acid and melamine produce. This state-of-the-art complex is expected to have a production capacity in excess of one million tonnes per annum (TPA) of these products.

As per the terms of the contract, Foster Wheeler will be providing basic engineering design (BED) and front-end engineering design (FEED). In addition, the company will also be providing technical assistance and training throughout the engineering, procurement, construction (EPC) phase.

The design part of this contract will be included in the company's third-quarter 2012 order bookings. The BED/FEED phase is expected to be completed by the end of 2013. The provision of technical assistance and training will be included later, once the FEED is complete and Petrobras advises that it is going ahead with the EPC (implementation) phase of the project.

In the recently reported quarter, Foster Wheeler's Global Engineering and Construction Group's operating revenue (FW scope) was $417 million, up 14.3% compared with $365.0 million in the prior-year period. Therefore, the company has a good and a rich experience in executing large, complex integrated chemicals projects, hence proving that it has the ability to support Petrobras through to start-up of this world-scale facility.

Jacobs Engineering Group Inc. (JEC) is a major competitor of Foster Wheeler with a series of contract wins over the past quarter. Foster Wheeler currently has a short term Zacks Rank of # 5 which implies a strong 'Sell'.

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