Mermaid, Macmahon up on LNG work

24/09/2009 - 00:00

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THE green light for the Gorgon gas project has boosted the share prices of most of the contractors vying for a slice of the estimated $43 billion cost to build Australia's single biggest resource project.

Mermaid, Macmahon up on LNG work

THE green light for the Gorgon gas project has boosted the share prices of most of the contractors vying for a slice of the estimated $43 billion cost to build Australia's single biggest resource project.

Nearly two weeks after project partners Chevron, Shell and ExxonMobil gave their blessing, there has been plenty of speculation over which local contractors will win work on the project, which is expected to spend $33 billion on local goods and services over the next 30 years.

Since the final approval was made last week, Clough - through a joint venture led by Kellogg Brown and Root - has secured a key $2.7 billion contract, and there is growing speculation that Leighton Holdings could win its third contract on the project.

Should another contract be awarded to Leighton, it could feed work into West Perth-based Macmahon Holdings, the share price of which has skyrocketed from about 35 cents in mid-June - when Leighton secured its first Gorgon contract - to its last traded price of 74 cents.

Macmahon has secured other contracts during the past three months, and if the company keeps the pace up, chief executive Nick Bowen could be up for a large cash bonus next year.

Mr Bowen recently agreed to stay on as chief executive on an ongoing basis and has the opportunity to earn a bonus of up to 150 per cent on top of his fixed remuneration of $1.15 million.

Another to benefit from a contract win for the Gorgon project was Mermaid Marine Australia's managing director Jeff Weber.

Last week, Mr Weber exercised 600,000 options at 40 cents each on the day Mermaid Marine's share price reached a high of $3.

Late last year, Gorgon operator Chevron signed a $100 million sublease contract to use Mermaid Marine's supply base at Dampier for the project. At the time, Mermaid's share price was trading at about 96 cents.

This week, Mermaid's board recommended that nearly 1.5 million options at an exercise price of $3.05 be issued to Mr Weber as part of a long-term incentive package stretching to 2014.

Under the incentive plan, Mr Weber can only exercise the options from September 2012 subject to Mermaid's total shareholder return exceeding the performance of the All Ordinaries index for a minimum of three years, starting this month.

The options will expire in 2014.

Since Mermaid's share price peaked at $3 last week, the company's share price has slipped to $2.66 at time of publishing as a result of profit taking.

Other likely contractors that may secure work on Gorgon have seen their share prices fare better than Mermaid's, with VDM Group experiencing a 32 per cent surge over the past seven trading days.

Mining services provider NRW Holdings' share price has risen 11.8 per cent, Decmil Group gained 13.7 per cent, Brierty jumped 15.3 per cent, and Emeco Holdings has climbed 12.8 per cent.

Engineering service provider Monadelphous has crept up 4 per cent, while transportable buildings manufacturer Nomad Building Solutions edged up 4.3 per cent.

The share price gains compare with a 4.6 per cent rise in the All Ordinaries index and a 6.3 per cent increase in the S&P/ASX 200.

 

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