After a strategic refocus for the business, it’s worth looking at where Worley is now. The acquisition of Jacobs ECR has helped Worley to diversify away from its historical reliance upon hydrocarbons to also include chemicals, mining, modern power solutions and infrastructure.

We are positive on the medium-term outlook for Worley Limited for a number of reasons. They are well-positioned for the transition from fossil fuel to renewable energy. Areas of expertise include energy transition, sustainable technologies, decarbonising, gas (transition fuel), hydropower, solar, microgrids, biofuels and hydrogen.

Already 32% of revenue comes from sustainability work. As Worley (WOR) had substantially right sized their business through the collapse in oil prices in 2015, the demand shock from Covid has had a muted impact upon them. WOR is currently performing to expectations, their growth profile, profitability, and strong balance sheet is not reflected in their valuation given we expect demand conditions to continue to improve as Covid passes and energy prices remain strong.

Operationally, the adoption of digital technology to deliver projects quickly and at better margin should allow WOR to extract more from its existing workforce leading to positive operating leverage.

There has been significant consolidation in the contracting industry over the past 5 years. Less competition combined with strong demand due to the energy transition will allow them to capture greater market share, strong revenue growth and increased margins.

The current low energy prices have deferred capital expenditure on new supply for both oil and gas. As demand returns to near normal, we should see a lift in both the capex and opex cycle, of which Worley is a direct beneficiary.

All companies are trying to reduce their carbon footprint through new technologies, renewables, and efficiency, through the use of data. This will be a multi-decade thematic that Worley’s services & expertise will be required to implement.

Over the past 6 months the sales pipeline has increased 16% with contributions from both traditional (13% ) and sustainability (20%).

If you would like more information please call 1300 ELSTON or contact us to speak to one of our advisers.