WorleyParsons Shares Jump on a Smarter Focus

What Happened to the WorleyParsons Share Price?

WorleyParsons Ltd [ASX:WOR] closed the day higher, up by 4.43% to $10.48 per share.

Why Did This Happen to WorleyParsons?

WorleyParson’s is an oil and gas engineering firm. Since July 2014, its share price has been hammered by nearly 50%. Combined with weaker earnings, the lower crude oil price certainly hasn’t helped the company’s fortunes.

WORLEY


Recently, WorleyParsons said that it will pay US$78 million to settle a dispute with Exxon Neftegas, an affiliate of Exxon Mobil.

Furthermore, outlined yesterday in an investor day presentation, WorleyParsons said its net profit in the third quarter fell 18.9% to AU$35.6 million. Its sinking profit margins continued to weigh down profits. Looking at the lower priced oil environment, this shouldn’t be surprising.

Earnings before interest and taxation (EBIT) dropped 17.5% to $70.5 million during the quarter; whilst EBIT margins fell from 4.7% to 4.1%.

The bad news has been brushed off by shareholders.

WorleyParsons has committed to making ‘fundamental changes’ to its business model to adapt to a lower oil price environment. Adding to the more conservative focus, we’ve seen the oil price tick up above the US$60 dollar level today…giving way to today’s share price bounce.

What Now for WorleyParsons?

WorleyParsons has identified five long-term goals:
1. building a world-class consulting business;
2. becoming the leading global project management consultant;
3. creating a leading asset services and maintenance business;
4. being the most “agile” local service provider;
5. and developing low-cost, local delivery centres

Given the company’s aggressive history, this is a good start.

Yet, the company has told shareholders that 2016 will be another ‘though year’. The Chief Executive Officer, Andrew Wood, said ‘anyone that’s expecting significant margin improvement in this environment is being more optimistic than me.’

The conservative focus should see the share price consolidate for some time. A higher oil price will be good for the company, potentially seeing it bounce towards or above the $12 per share level. I explained to my readers what they can expect from oil over the coming months, this and last week. If you’re interested in seeing this research, check out Resource Speculator here.

In Resource Speculator, I’ll give you analysis on resource sectors, macroeconomics, and geopolitics. You’ll know which sectors to buy and avoid. And when to buy and when not to buy.

Beware of the coming sovereign debt defaults that will ripple world financial markets in 2016/17. The next crash will be far worse than the GFC, sending the world into a Depression worse than experienced in the nineteen thirties. Resource Speculator is only a small price to pay to survive and profit from the future. You can check out the publication here.

Jason Stevenson
Resources Analyst, Money Morning

Join Money Morning on Google+


Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read. Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


Leave a Reply

Your email address will not be published. Required fields are marked *

Money Morning Australia