Earlier today, Worleyparsons Limited (ASX: WOR) announced that the company has been awarded a contract from BP. The Worleyparsons share price has since lifted slightly (0.62%) to $16.11 at time of writing.
What was in the announcement?
Worley announced that the company has been awarded a contract from BP for the hook-up and commissioning integration services of BP's Mad Dog Phase 2 project and Argos deep-water platform. Under the contract, Worley will be responsible for preparing the arrival of Argos in the Gulf of Mexico and completing the final systems commissioning in Texas. Worley will also undertake the offshore hook-up at the Mad-Dog field and handover of the platform to BP's Global Operations Organization.
The Mad Dog Phase 2 project is BP's biggest discovery in the Gulf of Mexico, with the operator estimating a production capacity between 120,000 and 140,000boe from the development. In reference to Odysseus's loyal dog from the ancient Greek epic The Odyssey, Argos is BP's latest floating production unit and will be commissioned in 2021.
What's the outlook for Worley?
Worley's provides a wide range of engineering and construction consulting services that cover the full lifecycle of projects in the mining, mineral, oil and chemical sectors. This allows the company to chase contracts that cover the creation of new assets and the management of ongoing operations. Worley has performed strongly in 2019, with the company's share price up more than 38% this year. Shares in the company are currently trading on a price-to-earnings (P/E) ratio of 12x earnings in comparison to its historical average of 17.5x earnings.
Earlier this month analysts at Goldman Sachs issued a buy on Worley's and slapped a $17 price target on the company. Analysts cited that their bullish outlook on the company was based on Worley's completing a $4.55 billion acquisition of the chemicals and resources division of Jacobs Engineering Group, which should provide the company with earnings diversification. Although a broker note should not be a catalyst to buy shares in a company, it does serve as an indication of where institutional sentiment lies in the short to medium term. In addition, Worley's management also believe that the merger could see the company find cost savings between $130 million and $160 million within two years.
Shares in Worleyparsons are up slightly following the announcement.
