UBS Update

Addressing questions about Worley's role in the Energy Transition...We hosted Worley's CEO/MD, Chris Ashton, for a fireside chat at our UBS Australasia Conference and used this as an opportunity to discuss a number of areas of investor focus following our recent upgrade to Buy (HERE). A key theme from the conference was addressing the challenge of achieving global decarbonisation targets, and followed COP26 in Glasgow, where Chris had met with several of his energy customer CEO counterparts, reinforcing their shared strategic alignment which straddles both traditional and transitional energy investment...."They can not do it with out us"Chris noted that Worley has an asset base of around 50,000 project engineering staff that help clients solve complex technical problems (which is exactly what the Energy Transition represents), so he is not concerned about Worley's ability to support its clients going forward. He's also investing A$100mn over three years to further support staff training/development. Chris noted that, in his view, the IOCs/ NOCs can't achieve their decarbonisation objectives without a global project engineering firm like Worley, and the company's global scale is a key competitive advantage in an engineering market that is not as deep as it was five years ago. Chris also noted that M&A and strategic partnerships are an option to help boost Worley's niche project skill sets alongside the development of an internal Technology Solutions division (complementing its existing technology assessment skills).

Will the investor day be a catalyst for the stock?Worley will host its Investor Day on 1 December and we expect it to provide further detail on its nine sustainability focus areas for growth, which are likely to include: hydrogen, carbon capture/storage, offshore wind, industrial hubs, water stewardship, decarbonisation advisory and the "greening" of existing refinery assets. We also expect to hear more about how Worley plans to achieve its 5yr target of realising 75% of its revenues from Sustainability activities (currently 32%, incl. LNG). Recent AGM comments indicated that 1H22 trading was tracking in line with the prior proceeding period and that there would be further improvement in 2H22 on recent project awards.Valuation: 12m TP of A$13.20 (EV/EBITDA and DCF). BuyWe rate Worley a Buy with the stock offering leverage to a potential four-fold increase in global sustainable energy and decarbonisation investment. The company is a leading global energy project delivery firm with a well defined transition strategy which is aligned with its customers' decarbonisation objectives.Notes:Source: This is an extract from UBS research published on 18 November 2021