An affiliate of Aegion Corporation’s AEGN Energy Services segment, Brinderson L.P., has inked a contract to provide onsite mechanical and electrical services for oil major ExxonMobil XOM. Aegion will act as the primary services contractor for ExxonMobil at the Billings, Montana, refinery. The transition is expected to be completed in first-half 2020.
This award represents the second major oil refinery maintenance agreement of Brinderson in the Rocky Mountain region in 2020, after it recently finished its transition in Salt Lake City. This is in sync with the company’s geographic expansion strategy into select new markets outside of the West Coast.
Per the contract, Brinderson will provide overall management and provision of mechanical and electrical services. It will also implement many of its proprietary performance improvement tools, including DelayTrak and TimeTrak, which have a proven track record of delivering significant customer savings.
Charles R. Gordon, Aegion’s president and CEO, said, “We continue to pursue additional opportunities in the region to bring our high-quality refinery maintenance services to new customers.”
Aegion’s Energy Services Prospects
Aegion’s Energy Services segment has long-term relationships with oil refinery and industrial customers in the West Coast, and plans to leverage those relationships to expand mechanical maintenance, specialty, electrical and instrumentation services, small capital construction, as well as shutdown and turnaround maintenance activities.
The Energy Services segment delivered the third consecutive year of double-digit adjusted earnings growth in 2019, with demand for core maintenance services (accounting for more than 70% of segment revenues) reaching record highs. Approximately 85% of revenues were generated from the maintenance and rehabilitation of existing infrastructure, which diminishes its dependence on new construction activity and reduces risks in cyclical markets.
In first-quarter 2020, the segment’s revenues were up 12.6% year over year, primarily attributed to turnaround volumes that more than doubled during the quarter, offsetting the impact of reduced March activities as a result of COVID-19 disruptions. The segment’s backlog (excluding the impact of exited or to-be-exited businesses) came in at $215.2 million as of Mar 31, 2020.
Share Price Performance, Zacks Rank & Key Picks
So far this year, shares of the company have declined 41.5% compared with the industry’s 13.1% decline. However, Aegion has been incurring larger-than-expected losses from Corrosion Protection due to COVID-19-related project delays, mainly in the Coatings Services business.
Aegion currently has a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader construction sector include Howmet Aerospace Inc. HWM and James Hardie Industries PLC JHX, each holding a Zacks Rank #2 (Buy).
Howmet Aerospace and James Hardie Industries’ trailing 12-month return on equity is 22.1% and 23.4%, higher than the industry’s 8.2% and 11.8%, respectively.
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