Specialty chemical company Air Products and Chemicals Inc. (APD) announced that it will supply nitrogen to Nederlandse Aardolie Maatschappij B.V. (NAM), a joint venture between Shell and Esso. The supply of nitrogen will help extract gas from the depleted fields more easily and efficiently.
Air Products will build and operate a new air separation unit (ASU) for NAM. The company has obtained all the required approvals and the construction is expected to begin shortly. The installation will be done in proximity to De Wijk gas field near Hoogeveen in Drenthe, The Netherlands and is expected to come online in 2013.
The project is set up by NAM under the name Aardgas+ (Natural gas +), which will produce additional gas from the depleted field as a portion of the Netherlands and the Dutch part of the North Sea contain about 175 small oil and gas fields, which are almost depleted. In order to preserve the gas reserves in the field near Slochteren, the government has decided to prioritize the extraction of natural gas from small fields.
The ASU built by Air products will use a cryogenic process to extract nitrogen from the atmosphere, at the existing De Wijk-20 site close to the Hoogeveensche Vaart. The nitrogen will be purified and then brought to a pressure of up to 130 atmospheres using compressors. It will then be injected through various injection units into the gas field to a depth of about 1500 metres.
The ASU will be customized to fit in seamlessly with the environment. The construction of the ASU will be modular so that it can be dismantled when the extraction from the field is completed and can be reassembled at another field.
Air Products is the world’s leading supplier of hydrogen for processing cleaner burning transportation fuels and hydrogen infrastructure and fueling technology. The company also holds a leadership position in liquefied natural gas technology and equipments.
In July 2012, the company released its results for the third-quarter 2012 ended on June 30, 2012. The company reported adjusted (excluding one-time items) earnings from continued operations of $1.41 a share for the quarter, in line with the Zacks Consensus Estimate.
Consolidated net income, as reported, surged 48% year over year to $484.5 million or $2.26 a share compared with $326.5 million or $1.50 a year ago. The increase in profits was attributable to lower costs and one-time gains, which more than offset the impact of lower sales.
Revenues dipped 5% year over year to $2,340.1 million, missing the Zacks Consensus Estimate of $2,455 million. Challenging conditions in Europe and Asia as well as unfavorable currency (stemming from a stronger dollar) weighed on the company’s top line in the quarter.
Air Products’ healthy project backlog and solid bidding activity strongly positions it to achieve its long-term growth target. Given its leading position in the gases business, the company is well positioned to capitalize on the cyclical recovery in its core industrial end markets. Further, new business deals are expected to boost profits in 2012. However, soaring energy and raw material costs are likely to hamper margins.
Air Products, which competes with Praxair Inc. (PX), has a short-term Zacks #3 Rank (Hold) currently and we have a long-term Neutral recommendation on its shares.
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