Emerson Secures Automation Contract From Shell Prelude

Emerson Electric Co. (NYSE:EMR) has secured an automation maintenance and reliability services contract for Shell’s Prelude Floating Liquefied Natural Gas (“FLNG”) facility. Emerson has been acting as Main Automation Contractor on the Prelude project for half a decade.

Prelude is the world’s largest offshore production facility ever built and is about as big as six aircraft carriers put together. It will process natural gas collected from subsea wells 475 km offshore from Broome, Western Australia.

As Main Automation Contractor, Emerson has been in charge of process control and monitoring technologies that aid Shell (LON:RDSa) in operating Prelude FLNG safely and efficiently. Per the new multi-year support contract, Emerson professionals will work onshore and offshore, and offer reliability and maintenance services for a wide range of equipment.

Along with its local business partner – Western Process Controls – Emerson will provide equipment monitoring, diagnostic services, spares support, and maintenance for the facility’s control and safety systems.

Emerson will also monitor the facility’s automation remotely from Shell’s operations center in Perth. Emerson’s team will leverage the centre’s high-tech Collaborative Work Environment to identify potential concerns, devise corrective actions and enable delivery of required equipment to the facility.

At present, Prelude is under construction in Geoje, South Korea, which will shift to Australia to commence operations. The facility is likely to remain on station for at least 25 years as Shell and its partners develop gas reserves in the Browse Basin’s Concerto and Prelude fields.

Of late, the company has been winning lucrative contracts which are likely to prove conducive to its top-line growth.

However, Emerson’s business has been deeply hurt by the slowdown in oil and gas markets. This has affected both capital spending and operational expenditure of clients, thus marring Emerson’s prospects. Also, the issue of oversupply continues to affect prices and spending levels in the oil and gas sector, adding to the company’s challenges. With the current economic factors at play, Emerson expects the dull prospects to persist till fiscal 2017.

Emerson also believes that global economic conditions may take a turn for the worse on account of political uncertainty which will keep spending levels considerably low for the rest of fiscal 2016. Given such tough economic conditions and dwindling order numbers the company projects underlying sales to be down 5–6% in fiscal 2016.

We expect the company’s performance to remain under pressure in the coming quarters, as it contends with critical headwinds including sustained weak global economic circumstances, depressed industrial spending along with soft emerging and mature economies.

Emerson currently has a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the same space include Schneider Electric (PA:SCHN) SE (OTC:SBGSY) , AO Smith Corp. (NYSE:AOS) and EnerSys (NYSE:ENS) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>