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Shale Could Boost U.S. Manufacturing

Fluor Corp. (NYSE: FLR) CEO Expects Growth

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By Swagato Chakravorty
Monday, December 3rd, 2012

According to Fluor Corp. (NYSE: FLR), national chemical and manufacturing industries in the United States should see increasing growth rates as the shale output begins to scale up.

Fluor is the country’s biggest public engineering and construction company, so it’s worth seeing what they have to say on this topic.

From Businessweek:

“Shale gas, and the downstream derivatives of that, is what’s going to drive a resurgence of manufacturing in the U.S.,” he [Fluor CEO David Seaton] said. Seaton described the U.S. as the only developed economy with an opportunity “to really grow.”

As the developers and producers of shale-related products expand their operations and industries that use these products respond, contractors like Fluor stand to gain. According to Seaton, for example, some $30 billion of projects over in the U.S. Gulf of Mexico coast are currently in development, all of which relate to shale production in some way.

But a factor to consider is the decline of capital liquidity and investment in new projects that are both consequences of the financial crisis.

On the other hand, the emerging industries of India, China, and other developing economies promise to require more and more industrial production and consumer goods.

Fluor has $2.8 billion in cash holdings, of which $1 billion is earmarked for projects currently underway, and another $1 billion projected to be used for company operations, according to Businessweek.

Fluor currently has a project pipeline of about $40 billion, with two projects planned in Qatar. It’s also bidding on two refinery contracts in Kuwait, something that it will hear a final decision on by the end of this year.

Fluor is also involved in oilfield operations at the West Qurna field in Iraq for Exxon Mobil (NYSE: XOM). It has paired up with Royal Dutch Shell (NYSE: RDS.A) on initial studies on the viability of natural gases in Iraq’s southern oil fields.

All of this lends a fair bit of credibility to Fluor’s expectation that the engineering and construction sector should see hefty growth alongside the growth of shale operations not just within the U.S., but worldwide.

Shares of Fluor rose 0.6 to hit $53.40 in New York on Monday morning; shares have increased 6.3 percent in 2012.

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