WDS getting high on gas

Engineering contractor WDS (WDS) finished the week with a bang following news that its joint venture has secured a contract with Arrow Energy that’s worth up to $80 million.

The two-year contract is for field development, operations and construction at Arrow’s domestic gas business that supplies four power stations and two mineral refining facilities in Queensland.

The stock jumped 4.7%, or 5 cents, to $1.12, although WDS will have to split the spoils of the project that are worth between $40 million to $80 million with its equal joint venture partner, China Petroleum Engineering & Construction Corporation.

WDS has been a standout among contractors with its share price nearly doubling since I highlighted the stock on August 14. Growing demand from coal seam gas companies in Queensland is more than offsetting the slowdown in its coal mining services division.

It also didn’t hurt that management had lifted its dividend payout policy in recent months to “at least” 80% of net profit from between 40% and 60%, and moved to pay its dividend on a quarterly basis instead of twice a year.

The joint venture will commence mobilisation for the contract next month, although WDS is sticking to its original net profit guidance of $12 million to $14 million for the current financial year.

You can read more about WDS here.