U.S.-based technology, engineering, procurement and construction company KBR, Inc.'sKBR joint venture SOCAR-KBR recently won a major project management consultancy ("PMC") contract for lending its services for the Heydar Aliyev Baku oil refinery modernization project. Though the value of the contract has been kept under wraps, KBR will book this into the backlog of unfilled orders under its Engineering & Construction business segment, in the first quarter of 2016.
The Heydar Aliyev Baku oil refinery modernization project is already underway and is expected to be completed by 2018. SOCAR-KBR's work entails expanding the overall refinery capacity from 6 to 7.5 million tons per year ("MYPY"), increasing the catalytic cracking unit capacity from 2 to 2.5 MTPY and establishing Euro 5 standards for all the refined products.
SOCAR-KBR Limited Liability Company, a joint venture between KBR and the state-owned national oil company of Azerbaijan Republic, was set up in mid-2015. It was formed to offer engineering, construction supervision and project management services for all brownfield and greenfield projects across upstream, midstream and downstream oil and gas sectors for the Azerbaijan-Georgia-Turkey ("AGT") region.
The formation of this joint venture was in line with the Azerbaijan government's vision of creating a highly modernized engineering company by leveraging on KBR's state-of-the-art technical know-how and profound market knowledge. KBR, which has been reigning successfully in Azerbaijan since 1994, has supported multiple projects achieving more than 17 million man-hours.
This is the first major contract for the joint venture since it came into inception and given the Azerbaijan government's ambitious plan for the Heydar Aliyev Baku oil refinery, we believe further lucrative projects are in the offing. However, along with its recently released fourth quarter results, the company declared that the Engineering & Construction segment will likely face significant headwinds during 2016 as major projects approach completion and LNG activities reduce across the globe.
KBR currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Acacia Research Corporation ACTG , Cinedigm Corp. CIDM and Convergys Corporation CVG . All the three stocks sport a Zacks Rank #1 (Strong Buy).
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