d.a. davidson eighth annual e&c conference · health, safety and environment ... gas...
TRANSCRIPT
Bill Utt – Chairman, President, and CEO
September 17, 2009
D.A. Davidson Eighth Annual E&C Conference
Forward Looking StatementsThis presentation contains “forward-looking statements.” All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include statements about the benefits of the split-off, the discussions of KBR’s business strategies and KBR’s expectations concerning future operations, profitability, liquidity and capital resources. You can generally identify forward-looking statements by terminology such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,”“forecast,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “predict,” “projection,” “should” or other similar words. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. Many of these factors cannot be controlled or predicted. These risks and other factors include those described under “Risk Factors” in KBR’s Annual Report on Form 10-K dated February 25, 2009, Forms 10-Q, recent Current Reports on Forms 8-K, and other Securities and Exchange Commission filings. Those factors, among others, could cause KBR’s actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this presentation, you should carefully understand that the forward-looking statements are not guarantees of performance or results. KBR cautions you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, KBR cannot assure you that actual results will not differ materially from those expressed or implied by forward-looking statements.
The forward-looking statements included in this presentation are made only as of the date of this document. New risks and uncertainties arise from time to time, and KBR cannot predict those events or their impact. KBR assumes no obligation to update any forward-looking statements after the date of this presentation as a result of new information, future events or developments, except as required by the federal securities laws.
KBR – A Leading Global E&C Provider
* For contracts that contain both fixed-price and cost-reimbursable components, KBR classifies the components as either fixed-price or cost-reimbursable according to the composition of the contract, except for smaller contracts that are characterized on the predominate component.
» Revenue: Full Year 2008 - $11.6 Billion; 2008 Fortune 500 Company #234First Half 2009 - $6.3 Billion vs. First Half 2008 - $5.2 Billion
» Backlog: 12/31/08 - $14.1 Billion (80% reimbursable / 20% fixed-price); June 30, 2009 - $12.3 Billion (79% reimbursable / 21% fixed-price)*
» Headquarters in Houston, Texas
» 100+ years of operating history
» ~57,000 employees; 45+ countries
» Extensive service capabilities:
• Engineering, procurement, construction, commissioning, and start-up (EPC-CS) to global oil, gas, petrochemical, and infrastructure customers
• Defense, logistics, and contingency support for defense services
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Our Aspiration: To be the world’s premier engineering, construction and services company
To safely deliver any project, any time, in any environment for the benefit of our customers, shareholders, employees and the communities we serve.
Uncompromising commitment to Health, Safety and Environment An open relationship with our employees based on mutual trust, respect and success Transparency, Accountability and Discipline in our business Best in class Risk Awareness Integrity in all we do Financial Responsibility to our stakeholders
Mission Values
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KBR Operates in 45 Countries
Edmonton
Calgary
Houston
Monterrey
Arlington
MMM
GreenfordLeatherhead
Moscow
Atyrau
Baku
Dubai
CairoAlgiers
Angola
Lagos
Johannesburg
BaghdadKuwait City China
SingaporeJakarta
Perth
Brisbane
SydneyAdelaide Canberra
Melbourne
Gothenburg
Abu Dhabi
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Dhahran
Hydrocarbons
Gas Monetization
Oil & Gas
Downstream
Technology
Gas Monetization – Solid Market
KBR Current Portfolio
EPCm – Gorgon LNG; Skikda LNG; Pearl GTL
EPC – Tangguh LNG; Yemen LNG; Escravos GTL
FEED – Inpex Ichthys LNG
Solid Market and Opportunities
Pluto Train 2
Segas Train 2
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Gas Monetization provides pre-feasibility, front-end engineering and design (FEED), and engineering, procurement, and construction (EPC) and construction management (EPCm) services for large, complex liquefied natural gas and gas-to-liquids projects.
Gas Monetization – Gorgon LNG
Gorgon LNG Project Details
Kellogg Joint Venture Group (KJVG) – KBR led with 30% JV interest
AUD $2.7 billion EPCm services for KJVG (app. US $2.3 billion)
Three 5 MTPA LNG trains (modular construction strategy)
Gas processing and treatment facilities
Product storage and offloading
Complete off-sites, utilities, and accommodations
KBR to perform approximately 50% of project services, engineering, procurement, construction management, fabrication oversight, etc.
Reimbursable with incentives
Utilizes several fabrication yards across South East Asia and Australia
Implementation of “World Class” Quarantine plan for environmental sensitive area
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Oil and Gas – Growing Opportunities
KBR Current Portfolio
North Rankin 2 Platform
BP Chirag Oil Project
Chevron Jack/St. Malo
Chevron Lianzi
Pazflor FPSO Topsides
BP Quad 204 / West of Shetlands
Global Project Opportunities
Caspian, Asia Pacific, GOM, West Africa, North Sea, offshore Brazil
Granherne / GVA Consultancy 7
Oil and Gas provides field development, feasibility, and detailed engineering and design services for onshore and offshore production facilities and pipelines.
Downstream – From Prospects to Projects
KBR Current Portfolio and Prospects
Ras Tanura Integrated Project
Yanbu Export Refinery
PetroSA Coega Refinery FEED
Sonangol Lobito Refinery FEED
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Downstream serves clients in the petrochemical, refining, coal gasification, and syngas markets, executing EPC projects and providing program management consultancy throughout the world.
Technology – A KBR Differentiator
KBR Technology Business Segment offers highly efficient, proprietary, and differentiated process technologies, some of which are the most efficient, value-added solutions available in the market for the coal monetization, petrochemical, refining and syngas markets.
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KBR Technology Portfolio
KAAPplus™ - Ammonia
SUPERFLEX™ - Olefins
ROSE© - Refining
SCORE™ - Ethylene
TRIG™ - Coal Gasification
Various Fluid Catalytic Cracking processes
Government, Defense & Infrastructure
U.S. Government and Defense
International Government and Defense
Global Infrastructure
U.S. Government & Defense – Building on Experience
LogCAP III & IV
Current LogCAP III status
LogCAP IV transition status
Positive Trends On Litigation
Building on Experience
AFRICAP – logistics, engineering and life support services in Africa
AFCAP – LogCAP type work in Kuwait for U.S. Air Force
National Science Foundation – logistics support program in Antarctica 11
U.S. Government & Defense delivers on-demand support services, life sustainment services, and defense support infrastructure across the full military mission cycle and project program cycle for a diverse client base.
KBR Current Portfolio
Allenby & Connaught
Australian Defence construction projects
CONLOG and TDA
Market Opportunities
U.K. MoD Afghanistan infrastructure projects
U.K. MoD integrated fuel supplies management program
Australian Defence Force program and construction management
Outsourced military support and training in friendly Gulf region
International Government & Defense
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International Government & Defense provides support and life sustainment services, and defense support infrastructure for Non-U.S. clients across the globe.
KBR Current Portfolio
Qatar-Bahrain Causeway
Palm Island
Yas Island
Water projects
Australian infrastructure
Global road projects
Global Infrastructure – Design/Build Expertise
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Global Infrastructure serves diverse civil infrastructure markets, including recreational and commercial developments, transportation, waste and water treatment, and minerals throughout the world.
Power, Industrial and Commercial
Power
Increased bidding activity
Progress Energy Carolinas, Inc.
Solid Waste Authority of Palm Beach
Other projects in Georgia and Texas
Industrial and Commercial
Red River Activated Carbon plant
Facility operations and maintenance
Education and healthcare reasonably stable
Canadian Operations
Power, Industrial and Commercial
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KBR Corporate
2007 2008 2009
KBR – Strong Revenue Growth
Most business units reported improved revenue in first six months of 2009 compared to 2008:
Services up 388%
Downstream up 18%
Upstream up 17%
Technology up 2%
G&I down 3%
BE&K acquisition was the main contributor within the Services business unit
2007 2008 2009Six Months Ended June 30,
$4.2B
$5.2B
$6.3B
+ 24%
+ 22%
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2007 2008 2009
KBR – Improving Job Income and Margins
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2007 2008 2009Six Months Ended June 30,
$348M
$457M
$539M
+ 31%
+ 18%
8% 9% 9%
* Note – Percentages represent job income margins
First quarter 2008 included $51 million gain on a favorable arbitration award
Job income growing with revenue
Margin improvement
Benefits from better profitable projects under new management
Zero or lower margin legacy projects completed or nearing completion
Enhanced focus on risk management and execution
KBR – Quality of Earnings
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8% 9% 9%
Potential disallowed costs for U.S. contracts for Middle East work
Charges on Skopje Embassy in Macedonia in (multiple quarters)
Impairment charges on BRC joint venture in Algeria
Gain on sale of BRC joint venture in Algeria
Lease restructuring
U.K. Road project settlement
Charges on Skopje Embassy in Macedonia (multiple quarters)
PEMEX arbitration awards
Unfavorable jury verdict from ASCO litigation (partially reversed)
LNG reduction in profits on timing of change orders (later resolved)
FCPA charges
Increased costs on EBIC project due to equipment failure
Unfavorable arbitration decision related to the In Amenas project
FY 2007
FY 2008
First Half 2009
2007 2008 20092007 2008 2009Quarter Ended June 30,
$9.6B
$12.6B$12.3B
+ 31%
- 2%
No material project cancellations;
Second quarter 2009 impacted by LogCAP III task order extension timing and usual project work-off
Improved portfolio mix* (cost reimbursable to fix priced)
Q209 – 79% / 21%; respectively
Q208 – 76% / 24%; respectively
Q207 – 71% / 29%; respectively
Solid Backlog & Portfolio Risk Profile
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Prudent Financial Management & Focus
Returning Cash to Shareholders
Share repurchase program - $217 million since August 2008
Quarterly dividend – approximately $32 million per year
Balance Sheet Strength for Growth
Strong cash position - $1.1 billion as of June 2009
Debt free
Bonding capacity capabilities
Continued Focus on Cost Saving Initiatives
Scaling back costs through out organization
Lowered FY 2009 G&A – currently expect approximately $230 million for FY09
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We Deliver