Foster Wheeler Wins Contract - Analyst Blog

The Global Engineering and Construction Group of  Foster Wheeler AG (FWLT) received a contract from Petróleo Brasileiro S.A. (Petrobras) for basic engineering design and front-end engineering design (FEED) for two grassroots refineries in Brazil. The contract value is undisclosed.

One of the refineries, located in Maranhao State,  will be a dual train 600,000 barrels per stream day (BPSD) facility and will be called the Premium I Refinery. The other one, Premium II Refinery, will be located in Ceara State and will be a single-train 300,000 BPSD facility.

Honeywell group company UOP LLC is the licensor of the managing process technology used in the project and Foster Wheeler will be working as a prime subcontractor to it. The contract has been included by Foster Wheeler in its fourth-quarter 2010 bookings.

The refinery trains will be using Foster Wheeler's SYDEC technology for its coker and hydrogen production technology for its hydrogen unit. The refineries are intended to process diesel.

The project provides Foster Wheeler an opportunity to expand its presence in Brazil. Foster Wheeler continues to be successful in booking contracts of varying types and sizes in key end markets, including a large award for the engineering, procurement and construction of a new refinery in India. The company's success in this regard is a reflection of its technical expertise, its long-term relationships with clients and its selective approach in pursuit of new prospects, where it has significant differentiators.

Longer term, Foster Wheeler believes that world demand for electrical energy will continue to grow and solid-fuel-fired steam generators will continue to fill a significant portion of this incremental generating capacity. The clients will continue to invest in new and upgraded capacity to meet the demand for energy. 

However, as the company's operations are concentrated in four industries (oil & gas, oil refining, chemical/petrochemical and power), it may be adversely affected by economic or other developments within these industries. The company is also subject to various environmental laws and regulations in the countries in which it operates. If it fails to comply with these laws and regulations, it may incur significant costs and penalties that could adversely impact its business, financial condition, results of operations and cash flows. Its business may be adversely impacted by regional, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in future.

Foster Wheeler AG is based in Zug Switzerland, but its operational headquarters are in Clinton NJ USA. The majority of Foster's revenues and new businesses originate from outside the United States.  The company serves the following industries: Oil and Gas; Oil Refining; Chemical & Petrochemical; Pharmaceutical; Environmental; Power Generation; and Power Plant Operation and Maintenance. Major competitors of Foster Wheeler are Fluor Corporation (FLR) and Jacobs Engineering Group Inc. (JEC).

We continue to maintain a Neutral rating on Foster Wheeler, with a Zacks #4 Rank (Sell recommendation) over the next one-to-three months.

 
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