It has been yet another disappointing day of trade for the WorleyParsons Limited (ASX: WOR) share price.
At one stage on Tuesday the engineering company's shares were down as much as 2% to a 52-week low of $12.15. This brought its two-month decline to a sizeable 35%.
Why is the WorleyParsons share price down 35% in two months?
The WorleyParsons share price has come under pressure over the last couple of months largely due to the collapse in oil prices.
Although the company isn't an energy producer like Beach Energy Ltd (ASX: BPT), Santos Ltd (ASX: STO), or Woodside Petroleum Limited (ASX: WPL), its key Professional Services segment generates significant revenue from the oil and gas sector.
Over the last two months the WTI crude oil price has fallen 30% to US$51.18 a barrel and the Brent crude oil price has dropped 27.5% to US$60.21 a barrel.
This sharp decline has led to concerns over global economic growth and ultimately demand for oil. The latter could be a negative for WorleyParsons if it leads to a decline in oil and gas capital expenditure.
Are there any other reasons for the decline?
In addition to this, a recent note out of Ord Minnett suggested that the share price decline could also have been caused by underwriters offloading excess shares following its entitlement offer to part fund the acquisition of Jacobs Engineering Group's Energy, Chemicals and Resources division.
The retail entitlement offer raised approximately $1.1 billion at $15.56 per share. But only $571 million of applications were received, resulting in a take-up rate of 51%. The shortfall stock was then allotted to sub-underwriters of the entitlement offer.
Should you invest?
While I'd suggest investors wait for oil prices to bottom before picking up shares, Ord Minnett appears to believe that now is the time to buy shares.
According to the note, the broker has a buy rating and $21.00 price target on WorleyParsons' shares. This price target implies potential upside of over 72% for its shares over the next 12 months.
