Fluor To Offer Engineering Services To Neptune's Dutch Assets

Stork — a unit of Fluor Corporation’s (NYSE:FLR) Diversified Services business — has received a four-year framework contract from Neptune Energy for the latter’s brownfield and decommissioning project.

Per the agreement, Stork’s joint venture company — Stork Worley Integrated Solutions — will provide engineering, procurement, construction, installation and commissioning, and decommissioning services to Neptune Energy's Dutch assets in the North Sea for a brownfield modification. The integrated partnership between Stork and Worley will drive performance in safety, excellence, teamwork, operations and project value for this purpose.

Neptune is part of an independent global exploration and production company — Neptune Energy Group. It is the largest producer of offshore gas and oil in the Dutch sector of the North Sea.

Notably, Fluor will book its portion of the undisclosed contract value in first-quarter 2020.

New Awards to Revive Fluor’s Diversified Services

Fluor’s Diversified Services segment, which accounts for more than 13% of total revenues, is set to benefit from contract wins. On Dec 11, 2019, Stork received a contract from HES Hartel Tank Terminal — a project of HES International — to support the construction of the new tank terminal. Notably, Fluor’s fourth-quarter 2019 backlog will reflect the contract value.

Over the past few quarters, Fluor has been posting dismal results due to lower segmental performance. Its Diversified Services segment’s revenues in third-quarter 2019 dropped 11% from the year-ago period. The downside was primarily due to lower contribution from the power services business, completion of certain large projects in the equipment business, a lower maintenance project in Australia, and the cancellation of a large operations and maintenance project in North America.

Nonetheless, the said business is expected to improve in the upcoming quarters as clients have already started increasing maintenance spending. The company initiated certain restructuring activities to optimize costs and improve operational efficiency in the Stork business during first-quarter 2019.

Shares of Fluor have gained 8% in the past month, outperforming the industry's 2.6% growth. We believe new contract wins and the above-mentioned initiatives will help revive the company’s performance. Over the last few quarters, major contract wins have allowed Fluor to expand long-term recurring revenue opportunities. During third-quarter 2019, quarter-end backlog was $2.4 billion compared with nearly $2 billion a year ago. Solid backlog level will aid the company to generate higher revenues in the near term.

Zacks Rank

Fluor — which shares space with Gates Industrial Corporation plc (NYSE:GTES) , Quanta Services, Inc. (NYSE:PWR) and AECOM (NYSE:ACM) in the same industry — currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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