SOURCE: Willbros Group, Inc.

Willbros Group, Inc.

November 04, 2009 18:02 ET

Willbros Reports Profitable Third Quarter 2009, Increased Backlog and Improved Visibility for 2010

HOUSTON, TX--(Marketwire - November 4, 2009) - Willbros Group, Inc. (NYSE: WG)

-- Third quarter results reflect:
   -- Positive performance in Upstream despite loss ($0.08 per share) on an
      EPC project
   -- Cost reduction charges of $2.4 million, which along with additional
      cost saving initiatives anticipated in Q4, are expected to save $17.6
      million on an annual basis
-- Backlog increased to $501 million
-- Awarded construction of 2 spreads of the Fayetteville Express Pipeline
-- Executed NiSource Alliance Agreement
-- Formed Joint Venture with Nacap to pursue major projects in Australia
-- Annual guidance for continuing operations for 2009 reduced to $0.50-0.60
   per diluted share

Willbros Group, Inc. (NYSE: WG) announced results for the third quarter 2009: revenue of $247.5 million and net income of $1.7 million or $0.04 per diluted share. Third quarter results reflect completion of a major large diameter pipeline project, a loss on an engineering, procurement and construction ("EPC") project, as well as charges associated with meaningful cost savings initiatives. While current markets remain challenging, Willbros continues to be optimistic about 2010 based upon its increase in backlog, the first increase in five quarters, and significantly higher levels of bid activity across its business lines. As a result, management is proactively keeping in place key resources, despite the negative near term financial impact, in order to fully capitalize on an anticipated improvement in business activity beginning in the first quarter of 2010.

Third quarter results were also impacted by lower than anticipated utilization rates due to delays and cancellations of anticipated projects, higher levels of non-project chargeable staff required to address increasing levels of bid activity, as well as inclement weather which reduced the potential to convert project contingencies into income. The EPC project which incurred additional charges has now achieved mechanical completion. Randy Harl, President and Chief Executive Officer, explained, "While the third quarter results were impacted by charges on an EPC job, we are confident the issue is not systemic, and we are pleased with our overall execution and job performance reflecting our continuing progress with our processes and system improvements."

Segment Operating Results

The Upstream Oil & Gas segment reported operating income of $5.5 million on revenue of $190.2 million. Operating results were driven by successful execution on large diameter pipeline construction projects, offset by charges (approximately $4.5 million or $0.08 per diluted share) on an EPC project awarded in late 2006 that experienced schedule delays and scope changes, subsequent to a 2009 workplace incident, and charges associated with cost savings initiatives (approximately $0.9 million or $0.02 per diluted share). The Downstream Oil & Gas segment reported an operating loss of $2.0 million, impacted by charges associated with cost savings initiatives (approximately $1.6 million or $0.03 per diluted share) and continued customer curtailment of spend for maintenance and capital projects in the refining sector. Regarding the previously mentioned strategic retention of key resources, management believes this decision should ensure critical equipment and personnel are available for commitments, many of which are included in current backlog, beginning in early 2010 and assure future performance levels.

Cost Reductions

In the third quarter, Willbros significantly advanced its plan to reduce staff and indirect expenses in order to realign its costs with the reduced level of activity in its markets. Given the significant process and systems improvements the Company has made over the last two years, management believes many of these cost reductions can be sustained once market activity increases. Third quarter includes pre-tax charges of $2.4 million associated with cost reductions and anticipated additional charges of approximately $1.3 million in the fourth quarter, which are primarily related to office and facility leases, are anticipated to generate annualized savings of $17.6 million. Total savings related to cost reductions over the last twelve months should result in annualized savings of approximately $56.1 million.

Van Welch, Senior Vice President and CFO, commented, "Our expectations for 2009 results have been impacted by continued delays and cancellations of anticipated work as the macroeconomic environment caused our customers to reevaluate every aspect of their businesses. Accordingly, we have reassessed the cost structure of our business units and taken actions to appropriately size the Company for the market conditions we anticipate, for our current and future commitments, and for the strategic growth we plan going forward. We have maintained discipline with respect to our cash management and capital spending and our leaner structure will contribute significant savings in 2010."

Awards Improve Visibility

Willbros noted that its focus on diversification of its business model continues to provide new revenue opportunities as bid and work volumes increase in the Government Services, Pipeline Manage & Maintain and Pipeline Specialty Services businesses. Increased bid activity in these areas, as well as recent awards across business segments, has improved management's visibility into the first half of 2010. In separate press releases today, Willbros announced the award of significant new work on the Fayetteville Express Pipeline project, which is included in third quarter backlog, and the execution of a long term alliance agreement with NiSource Gas Transmission & Storage.

Downstream Market Outlook

Willbros remains well positioned for refinery maintenance and turnarounds, small capital and life cycle extension projects, and is expecting to see improvement in Downstream activity as early as the first quarter of 2010. Refinery turnarounds, where early planning activity has already begun, are expected to be executed in early 2010. Downstream construction groups are experiencing increased levels of inquiry activity over the previous quarter, while the Wink engineering business is continuing to position the Company for engineering work at the plant level as well as for EPC projects. In the past two months Downstream units have successfully competed for and won assignments for turnarounds, tank services work and plant engineering, displacing incumbent service providers at sites in Cushing, Oklahoma, Baton Rouge, Louisiana and Whiting, Indiana. The Downstream unit has also won new project work for heater services to support operations in a large Gulf Coast refinery. At September 30, 2009 turnaround projects comprised forty-three percent of the Downstream segment backlog. Willbros believes the traditional U.S. market for its Downstream segment will continue to improve, augmented by increasing opportunities in Canada and Libya.

Upstream Market Outlook

Willbros continues to believe the fundamentals supporting additional global hydrocarbon infrastructure build out are positive. New bidding opportunities for EPC and construction projects in North American, North African, Middle Eastern and Australian markets are characterized by oil field development and gas monetization activities which require significant new investment in pipelines to transport hydrocarbons to shipping points or end markets. Development of shale gas in the United States and oil sands in Canada continues to attract capital and should drive additional infrastructure build-out. In Australia, Willbros has aligned itself with Nacap, a well-known international pipeline contractor with operations in Australia, to leverage our complementary capabilities and experience in pursuit of multiple large diameter pipeline EPC opportunities associated with delivery of the coal seam methane gas feedstock for proposed LNG liquefaction plants. The Company noted that development plans in Canada, Australia and Abu Dhabi anticipate expenditures, which align with the Company's service offerings, in excess of $60 billion over the next ten years, representing significant opportunities for Willbros Upstream units.

Randy Harl, President and CEO, commented, "Our view of the opportunity for Willbros remains positive as we work through the pause in activity brought on by recent economic events and we expect to see improvement across our business lines beginning in the Downstream segment in the first quarter of 2010. In our Upstream segment, we are currently bidding on over $1.0 billion of pipeline opportunities, beyond the FEP project we were recently awarded, for projects planned to be conducted in 2010 and 2011. To put this in perspective, and to emphasize the increased level of visibility we are seeing in the business, at this time last year we were bidding only $200 million in similar projects, or approximately twenty percent of the opportunity we see today. The Company's strong balance sheet enables us to continue to advance our strategy to diversify our business and expand our geographic footprint, both of which are generating new, quality opportunities and we will continue our efforts to convert them into backlog."

Backlog(1)

At September 30, 2009, Willbros reported backlog(1) from continuing operations of $501.4 million compared to $387.2 million at June 30, 2009; approximately 44 percent of backlog was cost reimbursable contracts.

Guidance

In light of current market conditions, the charges associated with cost reduction initiatives, margin erosion primarily in the Upstream segment, and the decision to maintain resource levels for the anticipated improvement in 2010 activity, Willbros is now forecasting 2009 earnings per fully diluted share to be in a range of $0.50-0.60.

Conference Call

In conjunction with this release, Willbros has scheduled a conference call, which will be broadcast live over the Internet on Thursday, November 5, 2009 at 9:00 a.m. Eastern Time (8:00 a.m. Central).

What:   Willbros Group, Inc. Third Quarter 2009 Earnings Conference Call
When:   Thursday, November 5, 2009 - 9:00 a.m. Eastern Time
Where:  Live via phone by dialing 866-550-6338 or 347-284-6930, passcode
        9209847, and asking for the Willbros call at least 10 minutes prior
        to the start time.
Where:  Live over the Internet by logging onto www.willbros.com on the home
        page under Events.

A telephonic replay of the conference call will be available through November 12, 2009 and may be accessed by calling 888-203-1112 or 719-457-0820 and using the passcode 9209847. Also, an archive of the webcast will be available shortly after the call on www.willbros.com for a period of 12 months.

Willbros Group, Inc. is an independent contractor serving the oil, gas, power, refining and petrochemical industries, providing engineering, construction, turnaround, maintenance, life cycle extension services and facilities development and operations services to industry and government entities worldwide. For more information on Willbros, please visit our web site at www.willbros.com.

This announcement contains forward-looking statements. All statements, other than statements of historical facts, which address activities, events or developments the Company expects or anticipates will or may occur in the future, are forward-looking statements. A number of risks and uncertainties could cause actual results to differ materially from these statements, including the potential for additional investigations; the disruptions to the global credit markets; the current global recession; fines and penalties by government agencies; new legislation or regulations detrimental to the economic operation of refining capacity in the United States; the identification of one or more other issues that require restatement of one or more prior period financial statements; the existence of material weaknesses in internal controls over financial reporting; availability of quality management; availability and terms of capital; changes in, or the failure to comply with, government regulations; ability to remain in compliance with, or obtain waivers under, the Company's loan agreements and indentures; the promulgation, application, and interpretation of environmental laws and regulations; future E&P capital expenditures; oil, gas, gas liquids, and power prices and demand; the amount and location of planned pipelines; the refinery crack spread and planned refinery outages and upgrades; the effective tax rate of the different countries where the work is being conducted; and development trends of the oil, gas, power, refining and petrochemical industries; changes in the political and economic environment of the countries in which the Company has operations; as well as other risk factors described from time to time in the Company's documents and reports filed with the SEC. The Company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise.

TABLE TO FOLLOW


                           WILLBROS GROUP, INC.
                 (In thousands, except per share amounts)


                           Three Months Ended         Nine Months Ended
                              September 30              September 30
                        ------------------------  ------------------------
                            2009         2008         2009         2008
                        -----------  -----------  -----------  -----------
Income Statement
   Contract revenue
      Upstream O&G      $   190,172  $   404,402  $   854,066  $ 1,171,007
      Downstream O&G         57,361       86,249      211,875      278,995
                        -----------  -----------  -----------  -----------
                            247,533      490,651    1,065,941    1,450,002


   Operating expenses
      Upstream O&G          184,712      379,894      807,086    1,088,839
      Downstream O&G         59,322       81,526      210,366      260,223
                        -----------  -----------  -----------  -----------
                            244,034      461,420    1,017,452    1,349,062


   Operating income
    (loss)
      Upstream O&G            5,460       24,508       46,980       82,168
      Downstream O&G         (1,961)       4,723        1,509       18,772
                        -----------  -----------  -----------  -----------
   Operating income           3,499       29,231       48,489      100,940


   Other expense
      Interest - net         (1,977)      (2,359)      (6,093)      (7,075)
      Other - net              (126)          58          (18)         204
                        -----------  -----------  -----------  -----------
                             (2,103)      (2,301)      (6,111)      (6,871)
                        -----------  -----------  -----------  -----------
   Income from
    continuing
    operations before
    income taxes              1,396       26,930       42,378       94,069
   Provision (benefit)
    for income taxes           (659)       8,057       13,257       36,450
                        -----------  -----------  -----------  -----------
   Income from
    continuing
    operations before
    noncontrolling
    interest                  2,055       18,873       29,121       57,619
   Less: Income
    attributable to
    noncontrolling
    interest                   (372)        (413)      (1,543)      (1,433)
                        -----------  -----------  -----------  -----------
   Income from
    continuing
    operations
    attributable to
    Willbros Group,
    Inc.                      1,683       18,460       27,578       56,186
   Income (loss) from
    discontinued
    operations net of
    provision for
    income taxes                (27)       1,219       (1,527)       3,042
                        -----------  -----------  -----------  -----------
   Net income
    attributable to
    Willbros Group,
    Inc.                $     1,656  $    19,679  $    26,051  $    59,228
                        ===========  ===========  ===========  ===========

   Basic income (loss)
    per share
    attributable to
    Company
    shareholders:
      Continuing
       operations       $      0.04  $      0.48  $      0.71  $      1.47
      Discontinued
       operations                 -         0.03        (0.04)        0.08
                        -----------  -----------  -----------  -----------
                        $      0.04  $      0.51  $      0.67  $      1.55
                        ===========  ===========  ===========  ===========

   Diluted income
    (loss) per share
    attributable to
    Company
    shareholders:
      Continuing
       operations       $      0.04  $      0.46  $      0.71  $      1.41
      Discontinued
       operations                 -         0.03        (0.04)        0.07
                        -----------  -----------  -----------  -----------
                        $      0.04  $      0.49  $      0.67  $      1.48
                        ===========  ===========  ===========  ===========
Cash Flow Data
Continuing operations
   Cash provided by
    (used in)
      Operating
       activities       $    13,263  $    35,867  $    81,230  $    97,193
      Investing
       activities           (14,533)     (14,356)     (16,091)     (23,943)
      Financing
       activities            (2,836)     (14,181)     (32,203)     (41,616)
      Foreign exchange
       effects                2,580           74        3,145         (499)
Discontinued operations        (143)         939         (222)       3,531

Other Data (Continuing
 Operations)
   Weighted average
    shares outstanding
      Basic                  38,722       38,314       38,657       38,237
      Diluted                38,919       43,803       38,817       43,864
   EBITDA(2)            $    12,516  $    40,077  $    78,010  $   133,699
   Capital expenditures       3,710       14,362       10,369       45,985

Reconciliation of
 Non-GAAP Financial
 Measure

   EBITDA (2)
      Net income from
       continuing
       operations
       attributable to
       Willbros Group,
       Inc.             $     1,683  $    18,460  $    27,578  $    56,186
      Interest - net          1,977        2,359        6,093        7,075
      Provision
       (benefit) for
       income taxes            (659)       8,057       13,257       36,450
      Depreciation and
       amortization           9,515       11,201       31,082       33,988
                        -----------  -----------  -----------  -----------
      EBITDA            $    12,516  $    40,077  $    78,010  $   133,699
                        ===========  ===========  ===========  ===========




Balance Sheet Data        9/30/2009    6/30/2009    3/31/2009   12/31/2008
                        -----------  -----------  -----------  -----------
   Cash and cash
    equivalents         $   243,723  $   245,392  $   255,562  $   207,864
   Working capital          327,259      321,419      307,164      285,166
   Total assets             758,290      779,096      793,421      787,344
   Total debt               104,967      102,263      117,723      120,514
   Stockholders' equity     487,439      477,566      457,770      442,556
Backlog Data (1)
   By Reporting Segment
      Upstream O&G      $   310,407  $   235,724  $   383,795  $   484,068
      Downstream O&G        190,951      151,462      154,410      171,426
                        -----------  -----------  -----------  -----------
                        $   501,358  $   387,186  $   538,205  $   655,494
                        ===========  ===========  ===========  ===========

   By Geographic Area
      North America     $   465,259  $   358,415  $   512,347  $   621,313
      Middle East &
       North Africa          36,099       28,771       25,858       34,181
                        -----------  -----------  -----------  -----------
                        $   501,358  $   387,186  $   538,205  $   655,494
                        ===========  ===========  ===========  ===========

(1)  Backlog is anticipated contract revenue from projects for which
     award is either in hand or reasonably assured.
(2)  EBITDA is earnings before net interest, income taxes and
     depreciation and amortization and intangible asset impairments.
     EBITDA as presented may not be comparable to other similarly titled
     measures reported by other companies. The Company believes EBITDA is a
     useful measure of evaluating its financial performance because of its
     focus on the Company's results from operations before net interest,
     income taxes, depreciation and amortization. EBITDA is not a measure
     of financial performance under generally accepted accounting
     principles. However, EBITDA is a common alternative measure of
     operating performance used by investors, financial analysts and rating
     agencies. A reconciliation of EBITDA to net income is included in the
     exhibit to this release.

Contact Information

  • CONTACT:
    Michael W. Collier
    Vice President Investor Relations
    Sales & Marketing
    Willbros
    713-403-8038

    Connie Dever
    Director Strategic Planning
    Willbros
    713-403-8035