Despite energy prices trending
lower in recent months, oil and gas industry focused EPCM (engineering,
procurement, and construction management) specialists ENGlobal (NASDAQ: ENG)
has managed to lock down solid Q1 2015 financials according to last week’s 10-Q
filing. A strong cash position, with working capital of around $24.4 million
and revenues in the neighborhood of $23.1 million on gross profit margins of
17.8%, underlies a honed logistical footprint and shored-up cost structures
that have enabled the company to stay cash flow positive, despite choppy seas
for their core automation and engineering markets.
Working capital is actually up
over 56% from the same period last year and the company’s overall cash position
has also improved during the same interval by roughly 9%. With $5.1 million in
notes receivable also having come in the door after the quarter’s close,
ENGlobal – whose automation and engineering division, as well as government
services division, both benefit from long-term relationships with key industry
players and a relatively stable environment permeated by lucrative maintenance
contracts – is well positioned for growth in the remainder of this year, and
the company also enjoys zero outstanding borrowings under their current credit
facility. The fact that ENGlobal has managed to trim the fat logistically and
stay cash flow positive in this market, continuing to pull down deals with some
of the sector’s top players, is a clear sign of the company’s robust health
that investors should take note of.
A track record of success is
often the deciding factor in the EPCM industry and ENGlobal’s 5-year
Professional Services Agreement extension with major domestic electric and
natural gas company, Xcel Energy, is a hallmark of the kinds of bedrock relationships
which are driving ENGlobal’s continued success. With numerous collaborative
efforts already under their belts, representing massive capital programs
covering hundreds of miles of natural gas pipeline infrastructure, ENGlobal and
Xcel look to have a bright future together. Which is great news for ENG
shareholders, considering that Minneapolis-based Xcel has over 3.5 million
electricity customers throughout the U.S., representing some $9.5 billion in
revenues last year sent out over nearly 300k miles of distribution and
transmission lines, as well as 2 million natural gas customers, a market worth
$2.1 billion to Xcel in 2014 that is fed by 36k miles of distribution and
transmission pipelines. That is a huge footprint of infrastructure to maintain
and with the persistent demand to implement new pipelines amid domestic
production that even substantially lower prices cannot seem to stop, ENGlobal
should continue to see profits from their relationship with Xcel for well on
into the future.
Ranked 31st for EPS growth on
Houston Chronicle’s top 100 last year and number 1 in overall market return,
with total return to shareholders on a dividend-reinvested basis beating out
all the other top 100 companies featured from the Houston market, ENGlobal is
an established player in key regional energy markets like Houston. The large
hydrodesulfurization (the process whereby sulfur and nitrogen-containing
impurities are cleaned out of crude feedstock and fuel) unit design and
engineering contract awarded to ENGlobal in April this year for a major
midcontinent refiner – an extension of an already firm relationship with this
important regional client – which is focused on allowing the refiner to expand
clean, environmentally friendly motor fuels production, is just one example of
how important ENGlobal is to the Houston area energy market.
With over three decades of
successful collaborative efforts in specialty engineering, automation and EPCM,
ENGlobal has the kind of unquestionable track record that makes them an easy
choice for major capital projects that simply cannot be put into the hands of
less experienced players.
Learn more about the company by
visiting www.englobal.com
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