Perceived as a barren wasteland just a few months ago, a couple of rich oases are emerging on the mining services landscape as the dust begins to settle on the end of the mining boom.
Worley Parsons (WOR) is the latest to have clawed its way back into investor favour with its share price now within reach of its levels in May before it warned of a modest downturn in earnings that sparked an exodus from the company.
The stock eased about 1.1% this morning to $22.70 after plunging below $19 in June as fears of a collapse in mining investment swept the market.
The company this morning announced a $400 million contract for the construction of a bitumen plant in Alberta Canada for China Petroleum and Engineering. That follows a contract win a fortnight ago for a rail link in Mozambique for Vale and an extension of some Canadian improvement contracts.
A global operator with a solid balance sheet and a broad exposure to resources, Worley Parsons is expected to suffer from reduced margins in some of its businesses as mining investments slows.
But most analysts believe there is plenty of upside in the share price as investors have yet to price in the growth from contract wins. It has also significantly reduced costs in response to the contraction in mining investment.
At the opposite end of the spectrum is Boart Longyear, which last week was forced into a debt refinancing by its banking consortium that would lead to higher rates and which earned the company a credit rating downgrade.
A vast gulf is emerging between mining services groups with broad exposure to energy and resources and those that have concentrated purely on minerals, particularly those that have ridden the coal boom (see Brendon Lau's Mining for a ROE revival).