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Leighton Group wins defence and oil construction projects

Leighton Group (ASX: LEI) started off the week with two new contract wins, expanding its Abu Dhabi and Northern Territory ventures.

On Tuesday, the company’s John Holland Group subsidiary announced a $110 million Northern Territory building project commissioned by the Department of Defence. The project, “Robertson Barracks Defence Logistics Transformation Program, Works Package 4,” will cover 340,000 m2 with 11 buildings, 67,000 m2 of pavements, and a 2.2 km access road.

“John Holland’s relationship with Defence goes back more than 60 years, with our work at the Robertson Barracks in the Northern Territory extending back to the early 90s,” said John Holland Managing Director Glenn Palin in a statement. ““It is this experience that enables John Holland to undertake complex and challenging building and engineering works on live, fully operational Defence bases, on-time and on budget, without disrupting critical activities and services.”

Construction will begin in May 2013, and should be completed by 2015.

On Wednesday, Leighton’s Habtoor Leighton Group subsidiary announced a $68 million contract to design and construct various compound facilities for a new Abu Dhabi Marine Operating Company oilfield.

Leighton has a 45% interest in Habtoor Leighton Group, putting the contract’s direct value at just over $30 million. The oilfield is 120 km away from Abu Dhabi, and the facilities (offices, accommodation, diesel generation, and water treatment) will be built on two artificial islands.

“Oil and gas-related projects such as the SARB project align perfectly with HLG’s building and infrastructure expertise, and the Group’s ability to deliver specialist projects in remote locations,” said Habtoor Leighton Group CEO José Lopez in a statement.

Construction will begin immediately and should be completed by mid-2014.

Foolish takeaway

Leighton is expanding its construction horizons, both geographically and via specialty construction projects. If the past 60 years are any evidence, government contracts tend to provide a more stable and sustainable source of income, and Leighton will do well to keep this relationship positive. At the same time, Habtoor Leighton Group’s announcement marks the third oil and gas contract win in six months, signalling potential for this subsidiary to become a construction company staple for oil and gas companies.

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The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead.  This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. Motley Fool contributor Justin Loiseau has no position in any stocks mentioned in this article. You can follow him on Twitter @TMFJLo.

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