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ENGlobal Corp. (ENG) Easily Weathers Energy Market Turbulence Thanks to Glowing Track Record, Strong Industry Relationships
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
