Analyst: Oil, Gas Prices Benefiting McDermott

HARTFORD, Conn. (AP) — Rising oil and gas prices are expected to help drive business for engineering and construction company McDermott International Inc., an analyst said Thursday.

Chase Jacobson, an analyst for Sterne Agee, initiated a "Buy" rating for the Houston company. He set a $32 price target.

"In the near- to intermediate-term, McDermott's business is likely to be driven by the offshore oil and gas segment," he said in a client note.

With a rebound in the price of oil, bidding by McDermott has picked up over the last several months and will likely drive more contract awards through this year and early 2010 because projects deferred last year are expected to soon start, Jacobson said.

Jacobson also initiated a "Neutral" rating on engineering and construction company URS Corp. and set a six-to-12 month price target of $48.

The San Francisco company is in a strong position to benefit from U.S. public works spending in the long term, he said in a note to investors.

In addition, URS has exposure to energy, power, transportation, environmental and industrial infrastructure, he said. But less state and local spending and reluctance by government agencies to spend money on energy and transportation projects could limit URS' potential for earnings growth and rising share price, Jacobson said.

Shares of McDermott rose 56 cents, or 2 percent, to $27.22 in afternoon trading. URS rose 38 cents, to $44.66.