Ahead of the Bell: Engineering and Construction

An analyst said Wednesday that refineries and engineering and construction firms expect little capital spending this year and in 2010, but that project cancellations are likely over.

Analyst Tahira Afzal of KeyBanc Capital Markets said in a note to investors that at a recent conference of the National Petrochemical and Refiners Association in San Antonio, a "more extended pause in capital spending" was more prevalent than optimism.

Some contractors anticipate accelerated layoffs in the industry this year, suggesting that slowing capital spending might be extended, Afzal said.

Representatives of refining, crude and refined product marketing, technology, chemical and other services companies attended the conference, the association said.

Some companies expect maintenance spending to likely be the first to come back as credit markets stabilize, Afzal said.

Federal legislation that would regulate carbon emissions "could be an opportunity for additional capital spending" by some companies if financing is available, she said.

Legislation regulating carbon "will impact contractor activity with a drag, and will likely benefit maintenance-oriented contractors" such as Team Industrial Services Inc. and Furmanite Corp. the most, with some benefits for Jacobs Engineering Group Inc., ENGlobal Corp., Matrix Service Co. and EMCOR Group Inc.'s Ohmstede segment.