Energy

Worley surges to multi-year high: Touted as key beneficiary of ‘renewables revival’

Wed 25 May 22, 11:11am (AEST)
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Key Points

  • Worley's shares recently exceeded their previous their highest mark since 2020
  • Share price up 3.12% at the open today
  • Macquarie recently upgraded Worley to Outperform from Neutral

In addition to having multiple growth drivers across its diversified range of core business activities, Worley (ASX: WOR) has also been touted as an early beneficiary of the new Labor government’s commitment to turbocharging renewable energy.

Given the continuum of news flow emanating from Worley it’s hard for investors to second guess how or why any single update will move the price forward.

For example, news of a strategic partnership with Avantium Renewable Polymers [flagship facility in Delfzijl, the Netherlands] progressing to the next phase did little to ignite the stock’s fortunes on last week.

But yesterday saw shares in Worley exceed their previous highest mark since 2020.

Worley’s share price has been bouncing progressively higher since hitting a low of $9.36 late November 2021 and is now up 36.57% for the year.

Two new deals

The group’s share price was up 3.12% at the open today after the global engineering group revealed the details of a new contract with Heartwell Renewables, a joint venture between The Love’s Family of Companies and Cargill, to provide services for a greenfield renewable diesel plant in Hastings, Nebraska, US.

The new plant will produce an estimated 302m litres of renewable diesel per year from feedstocks such as vegetable oils and tallow. This renewable diesel can be used as a drop-in fuel in diesel-powered vehicles without any engine modifications.

Worley has also been awarded a contract by Borouge 4 LLC, a joint venture between ADNOC and Borealis, for the fourth expansion of Borouge’s integrated polyolefins complex in Ruwais, United Arab Emirates.

The Borouge 4 expansion will boost Borouge’s production capacity of polyolefins – including polyethylene and polypropylene – to 6.4m tonnes annually from its current 5m tonnes annual capacity, making it the largest single-site polyolefins complex in the world by 2025.

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Worley's share price performance over five years.

What brokers think

Consensus on Worley is Strong Buy.

Based on Morningstar’s value of $14.70, the stock appears to be fairly valued.

Based on the brokers that cover Worley (as reported on by FN Arena) the stock is currently trading with -10.80% downside to the target price of $13.15.

Late April Macquarie upgraded Worley to Outperform from Neutral and expects the company to  benefit from the redeployment of Russian oil and gas to other regions as governments are imposing bans on Russian imports, as well as from the new energy transition. Target price increases to $15.26 from $12.60. 

By comparison, Ord Minnett recently (12/04/22) retained its Lighten rating and $10.80 target price.

Written By

Mark Story

Editor

Mark is an award-winning investigative financial journalist and editor who started his career working for Marathon Oil in London. He has a degree in politics/economics, a diploma in journalism and has completed the Institute of Directors course. Mark has worked on 70-plus newspapers and financial publications across Australia, NZ, the US, and Asia including: The Australian Financial Review, Money Magazine, Australian Property Investor and Finance Asia. Mark is passionate about improving the financial literacy of all Australians through the highest quality content.

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