Rockford Corporation, a unit of Primoris Services Corporation (PRIM) and part of its West Construction Services segment, has secured three new underground contracts worth over $140 million from major midstream operators.
The first contract comprises 88.6 miles of 36 inches diameter crude oil pipeline which will replace a 24 inches diameter pipeline. The project is located in the Eagle Ford shale region near Houston, TX.
The second project, situated in the Marcellus shale region of northeast Pennsylvania includes installation of approximately 2.5 miles of 24 inches diameter natural gas pipeline. The third project, placed in the same region, consists of approximately 1.1 miles of 12 inches and 2.3 miles of 24 inches diameter natural gas pipeline.
Primoris’ West Construction Services segment comprises the underground and industrial operations and construction services performed by various units, including Rockford. Acquired in 2010, Rockford specializes in the construction of large diameter natural gas and liquid pipeline projects and related facilities throughout the U.S.
For the three months ended Sep 30, 2014, revenue for the West Construction Services segment decreased 20% to $289 million, compared with the same period in 2013. At Rockford, revenues decreased by $64.5 million as new pipeline project revenue was less than that from a large project in 2013 and decrease in revenue from gathering line projects.
Primoris’ total backlog was $1.80 billion as of Sep 30, 2014, compared with $1.94 billion at Dec 31, 2013. During the next four quarters, the company expects to recognize revenues of approximately 95% from the West Construction Services segment’s total backlog, approximately 43% from the East Construction Services segment’s total backlog, and approximately 72% from the Energy segment’s total backlog.
Primoris estimated that 2015 oil-related revenue will be approximately 14% of estimated total revenue, with approximately 2% from upstream projects, 8% from midstream projects, and 4% from downstream projects.
There are many other factors in addition to oil prices that contribute to the continued demand for oil-related projects, including the inadequacy of the current pipeline infrastructure, increasing regulations, and the need for ongoing maintenance of existing facilities. Moreover, the company’s strong balance sheet will provide the flexibility for continuous investment in external and internal opportunities.
Dallas, TX-based Primoris is a specialty contractor and infrastructure company that serves diverse-end markets. The company also provides a wide range of construction, fabrication, maintenance, replacement, water and wastewater as well as engineering services to major public utilities, petrochemical companies, energy companies, municipalities and other customers.
At present, Primoris has a Zacks Rank #4 (Sell). Some better-ranked stocks in the sector include Great Lakes Dredge & Dock Corporation (GLDD), Tutor Perini Corporation (TPC) and Armstrong World Industries, Inc. (AWI). All these stocks carry a Zacks Rank #2 (Buy).
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