Chevron's Gorgon the hope of the west CRITERION: Tim Boreham | May 07, 2009 Article from: The Australian
IF the rhetoric of West Australian Premier Colin Barnett holds true, Chevron's $50 billion Gorgon LNG export project will save, single-handedly, the resource-dependent state from one of its periodic lulls.
"It really has this huge multiplier effect and is a huge economic stimulus project in its own right," Barnett says.
Then there's Woodside with its $12 billion Pluto project and proposed Kimberley Browse development. Easterners, stop sniggering at those State of Excitement number plates.
Chevron has won (grudging) environmental consent for its Barrow Island facility and Gorgon is due to start in 2012, subject to a final investment decision in September.
Although most of the plant is expected to be fabricated offshore, there's plenty of local contracts to be doled out in disciplines such as rig maintenance, dock facilities, workers' accommodation and tugs and supply ships.
"Any number of companies could be in the running to win those tenders but they are going to be hotly contested," Argonaut Securities research director Ian Christie says.
The likely suspects are Clough (CLO, 61c), Mermaid Marine (MRM, $1.64), Neptune Marine Services (NMS, 58.5c) and Tox Free Solutions (TOX, $1.65). Portable accommodation providers Fleetwood (FWD, $6.96) and Nomad (NOD, 61c) are in the running to build housing for 3000 workers on Barrow Island, until now home to flatback turtles and other endangered fauna.
Clough shares have doubled over the past three months from their 25c low, at least some of the fizz attributed to Gorgon.
Clough has front-end design and engineering jobs already and hopes to win further Gorgon work, including building an LNG jetty at Dampier.
Similarly, fleet operator Mermaid Marine has a (steel-capped) boot in the door because it has signed long-term leases with Chevron to build a $40 million supply base at Dampier.
"Gorgon certainly has an impact on the company," chief Mermaid Jeffrey Weber says.
"A lot of the cargoes to Barrow Island will come through this supply base, so we are very keen to get it up and running."
Neptune is building a supply base at Broome in a joint venture with Toll Holdings, to service the Browse Basin, where there's a welter of activity.
In the "same but different" camp, Neptune provides services such as underwater welding.
Neptune has already a "chunky" slice of Woodside's Pluto work.
"We have participated in various forms in all of the LNG projects which have got off the ground in Australia," managing director Christian Lange says.
"With respect to Gorgon, as a domestic player we have a better than even chance of securing work."
Barrow Island's environmentally touchy status is a boon for Tox, which runs Western Australia's only liquid waste incinerator at Port Hedland. Tox has already a waste management deal with Woodside. Blaming the effect of the Victorian bushfires on its Barrie Brothers industrial services arm, Tox warned last week that its full-year profit would fall short of the forecast $26 million by $2 million to $4million.
Mermaid posted a 63 per cent net first-half profit boost to $12.2million. If there's any looming nasties, management hasn't mentioned them.
'We think the second half will be fairly in line with the first half," Weber says.
Criterion will ascribe a buy to Mermaid, which has $44 million of cash and comfortable gearing.
We last rated Neptune a buy at 41.5c on April 1 and retain the call. Neptune reported last week net March quarter cash flow of $8.2 million on revenue of $54 million.
"I am very comfortable with our earnings," Lange says.
Many investors had decided already that Tox wouldn't get to the $26 million and had discounted the stock accordingly. This presumably explains the mute market reaction, the stock returning to pre-downgrade levels. Tox is a long-term buy.
Finally, Clough shares have surged since a solid half-year result and the sale of its $130 million stake in Indonesian coal miner Petrosea. Clough plans to stick with the winning sector and plough the proceeds into its oil and gas operations.
We'll place a hold on Clough and an evens bet on West Australian succession talk re-emerging in the next three years.
NMS Price at posting:
23.9¢ Sentiment: Buy Disclosure: Held
