SOURCE: Willbros Group, Inc.

October 31, 2007 18:36 ET

Willbros Reports Third Quarter Earnings and Announces Definitive Agreement to Acquire InServ

HOUSTON, TX--(Marketwire - October 31, 2007) - Willbros Group, Inc. ("WGI") (NYSE: WG)

--  Net income for continuing operations of $10.3 million, or $0.32 per
    fully diluted share
--  Revenue increased 57 percent compared to second quarter 2007 and 97
    percent compared to third quarter 2006
--  Contract margins improved to 16.1 percent
--  75 percent of $1.1 billion backlog is cost reimbursable
--  Entered into a definitive agreement to acquire Integrated Service
    Company LLC (InServ)
--  $150 million commitments from bank group to replace existing credit
--  Reached agreements in principle to resolve the DOJ/SEC investigations
    relating to former operations
--  Updates 2007 and provides 2008 guidance

Willbros Group, Inc. ("WGI") (NYSE: WG) today reported its results for the third quarter 2007. Revenue from continuing operations for the third quarter 2007 was $246.7 million. Net income from continuing operations for the third quarter was $10.3 million or $0.32 per fully diluted share compared to a net loss from continuing operations of $40.4 million, or $1.47 per share, in the second quarter 2007 and a net loss of $5.0 million, or $0.23 per share, in the third quarter 2006. Willbros also announced that it had executed a definitive agreement to acquire Tulsa-based InServ, a leading specialty contractor serving downstream markets, specifically, the refinery and petrochemical markets. Willbros also reported it has received commitments from a bank group, led by Calyon, for a new three year revolving credit facility to replace its existing synthetic credit facility.


The Company reported revenue from continuing operations of $246.7 million, up 57 percent from the second quarter 2007 and up 97 percent from the third quarter 2006. The increase in revenue resulted from higher utilization of personnel and equipment in the U.S. pipeline construction market and increased revenue from multiple station construction projects in North America compared to both second quarter 2007 and third quarter 2006. Contract income for the third quarter 2007 was $39.6 million, resulting in a contract margin of 16.1 percent compared to contract income of $18.9 million and contract margin of 12.0 percent in the second quarter 2007. Contract income and contract margin for third quarter 2006 were $12.0 million and 9.6 percent, respectively.

General and Administrative ("G&A") costs from continuing operations were $17.4 million, or 7.1 percent of revenue, in the third quarter 2007. For the first nine months of 2007, G&A expense was $42.3 million, or 6.9 percent of revenue. The Company maintains its annual guidance that G&A is expected to be in the range of 6 to 8 percent of revenue.

Randy Harl, President and Chief Executive Officer, commented, "The third quarter results are evidence that our strategic initiatives are gaining traction. Our business is now operating at levels which will sustain the growth platform we have sought, and we are able to act on strategic transactions which will transform the business model. Key take-aways from the third quarter results are:

--  Achieved contract margins of 16.1 percent which is a significant
    improvement from 8.7 percent during the first six months of 2007
--  Approached the billion dollar annual revenue run rate and maintained a
    backlog of over $1 billion
--  Received $150 million of commitments for a new revolving credit
    facility to replace our existing facility and to support additional growth
--  Reached agreements in principle to settle the DOJ and SEC
    investigations, which included an additional disgorgement charge."

Mr. Harl further commented, "We believe we are in the early innings of a strong energy infrastructure build-out and continue to anticipate improving performance which will open additional new opportunities for us."


Backlog from continuing operations at September 30, 2007 was $1.09 billion, an 83 percent increase from the $602.3 million backlog at December 31, 2006. Willbros now has 94 percent of its backlog in North America. The Company's backlog at September 30, 2007 was 75 percent cost reimbursable compared to 45 percent at the end of 2006.


On October 31, 2007, Willbros entered into a definitive agreement to acquire Integrated Service Company LLC for $225 million, including $202.5 million in cash and the balance in Willbros stock issued to existing InServ shareholders. The transaction is expected to close in mid-November 2007, and is subject to certain closing conditions and necessary regulatory approvals.

InServ is an integrated, full-service industrial specialty contractor providing construction, turnaround, repair and maintenance services to the downstream energy infrastructure market. The acquisition of InServ will further extend Willbros fully integrated service offerings to the downstream hydrocarbon value chain, and expand Willbros ability to market operations, maintenance and capital projects to new and existing clients.

"The addition of InServ is very complementary to our existing strong position in the midstream energy infrastructure market. InServ's strong management team averages over thirty years of industry experience and has developed an equally strong position in its core market. We are pleased to have this caliber of management join our team," said Randy Harl, President and Chief Executive Officer of Willbros. "InServ allows us to offer new service lines to our existing customers, brings us new customer contacts through existing InServ relationships, and also delivers a new facet, gaining end market exposure to refineries and other downstream facilities."

Arlo DeKraai, President and Chief Executive Officer of InServ, commented, "We are excited to join the Willbros organization, which has a great history and reputation for exceptional service and customer satisfaction. I believe there is a strong cultural fit and similarity of operating philosophy between InServ and Willbros, which will greatly assist the integration process. InServ will benefit from operating on the larger Willbros platform and the combined company will be well positioned to capture an increasing share of the growing energy infrastructure market."

Willbros believes that the acquisition of InServ has compelling long term strategic and financial rationale, including:

--  The integration of complementary service offerings
--  Expansion of InServ's service offerings in geographic regions where
    Willbros has significant presence
--  Enhancement of relationships with existing Willbros customers, many of
    whom are also current InServ customers
--  Similar cost reimbursable and fixed price contract mix --
    approximately 75% cost reimbursable

The transaction is expected to be accretive to Willbros earnings in 2008.


Willbros has received commitments from a group of lenders, led by Calyon, to replace its existing synthetic credit facility with a $150 million revolving credit facility with improved terms and conditions. The credit facility can be increased to $200 million with lender approval. The entire facility will be available for performance letters of credit and 33 percent of the facility will be available for cash borrowings and financial letters of credit. Willbros expects to close the facility in mid-November 2007.

Commenting on the transactions, Van Welch, Chief Financial Officer, said, "With our successes in recent project awards and operational performance demonstrated by third quarter results, and the ability to execute on the series of transactions we are announcing today, we are positioning Willbros to be able, both financially and strategically, to capture more of the energy infrastructure market."


Willbros and its subsidiary, Willbros International, Inc. ("WII"), have reached an agreement in principle with representatives of the United States Department of Justice (the "DOJ"), subject to approval by the DOJ, to settle its previously disclosed investigation into possible violations of the Foreign Corrupt Practices Act (the "FCPA"). In addition, the Company has reached an agreement in principle with the staff of the United States Securities and Exchange Commission (the "SEC") to resolve its previously disclosed investigation of possible violations of the FCPA and possible violations of the Securities Act of 1933 and the Securities Exchange Act of 1934. These investigations stem primarily from its former operations in Bolivia, Ecuador and Nigeria. As described more fully in the Company's third quarter 2007 10-Q filed with the SEC, if accepted by the DOJ and the SEC and approved by the court, the settlements together will require Willbros to pay over approximately three years, a total of $32.3 million in penalties and disgorgement. In addition, WGI and WII will, for a period of approximately three years, each be subject to Deferred Prosecution Agreements ("DPAs") with the DOJ. Finally, the Company will be subject to a permanent injunction barring future violations of certain provisions of the federal securities laws.

As a result of the settlements in principle, Willbros has increased its reserves related to these investigations by $8.3 million, bringing the aggregate reserves for these matters to $32.3 million. The increase to the reserve is comprised of: (i) a $2 million reduction in the Company's 2007 second quarter estimate of $24 million in fines resulting from the DOJ actions that was recorded as a charge to continuing operations, and (ii) an additional charge to discontinued operations of $10.3 million of profit disgorgement, inclusive of accrued interest on the disgorgement profit, resulting for the SEC actions. The aggregate reserves reflect the Company's estimate of the expected probable loss with respect to these matters, assuming the settlements are finalized. If the settlements are not finalized, the amount reserved may not reflect eventual losses.


Due to the positive results in the third quarter, Willbros raised its revenue guidance for 2007 to the $800 - $900 million range. The Company maintains its annual guidance for contract margins to be in the range of 11 to 13 percent and expects G&A to be in the range of 6 to 8 percent of revenue.

The Company's base plan for 2008 projected earnings per share to range from $1.40 to $1.50. As a result of the transactions announced today, including the acquisition, earnings per share in 2008 should increase 10 to 15 percent relative to the Company's base plan. Supported by strong backlog announced in the third quarter, and including the InServ acquisition, Willbros expects to generate revenue in 2008 in the range of $1.4 to $1.6 billion.


Willbros has scheduled a conference call, which will be broadcast live over the Internet on Thursday, November 1, 2007 at 9:00 a.m. Eastern Time (8:00 a.m. Central).

What:      Willbros Group, Inc.  Third Quarter 2007 Conference Call
When:      Thursday, November 1, 2007 - 9:00 a.m. Eastern Time
Where:     Live via phone by dialing 888-575-8232 and using the passcode
           3240754 or asking for the Willbros call at least 10 minutes
           prior to the start time. Or live over the Internet by logging on
           to the web address below.
Where: The webcast can be accessed from the
           home page.

A telephonic replay of the conference call will be available through November 14, 2007 and may be accessed by calling 800-408-3053 and using the passcode 3240754. An archive of the webcast will be available shortly after the call on for a period of 12 months.

Willbros Group, Inc. is an international contractor serving the energy industries, providing engineering, construction, engineering, procurement and construction ("EPC"), and operations and maintenance services to industry and government entities worldwide. For more information on Willbros, please visit our web site at

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 those discussed above and such things as the possible losses arising from the discontinuation of operations and the sale of the Nigeria assets; failure to finalize the agreements in principle with the Securities and Exchange Commission and the Department of Justice; the potential for additional investigations; the identification of one or more other issues that require restatement of one or more prior period financial statements; 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; future refining and petrochemical capital and maintenance expenditures; oil, gas, gas liquids, motor fuel and power prices and demand; the amount and location of planned pipelines; the effective tax rates of the different countries where the work is being conducted; development trends of the oil, gas and power 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.

                           WILLBROS GROUP, INC.
                 (In Thousands, Except Per Share Amounts)

                                Three Months Ended     Nine Months Ended
                                  September 30,          September 30,
                              ---------------------  ---------------------
                                 2007       2006        2007       2006
                              ---------- ----------  ---------- ----------
Statement of Operations Data
  Contract revenue
    Construction              $  193,984 $   91,204  $  476,638 $  257,587
    Engineering                   25,584     20,216      66,040     55,621
    EPC                           27,148     14,046      67,490     38,973
                              ---------- ----------  ---------- ----------
                                 246,716    125,466     610,168    352,181
  Contract cost
    Construction                 163,404     82,912     427,966    238,172
    Engineering                   19,034     17,292      49,166     46,598
    EPC                           24,651     13,214      61,658     35,858
                              ---------- ----------  ---------- ----------
                                 207,089    113,418     538,790    320,628
  Contract income
    Construction                  30,580      8,292      48,672     19,415
    Engineering                    6,550      2,924      16,874      9,023
    EPC                            2,497        832       5,832      3,115
                              ---------- ----------  ---------- ----------
                                  39,627     12,048      71,378     31,553
    Depreciation and
     amortization                  5,457      3,265      13,223      9,180
    General and administrative    17,448     11,092      42,295     33,133
    Government fines              (2,000)         -      22,000          -
                              ---------- ----------  ---------- ----------
  Operating income (loss)         18,722     (2,309)     (6,140)   (10,760)
  Other income (expense):
    Interest - net                (1,042)    (2,709)     (2,119)    (6,132)
    Other - net                   (1,327)       432      (2,019)       105
    Loss on early
     extinguishment of debt            -          -     (15,375)         -
                              ---------- ----------  ---------- ----------
                                  (2,369)    (2,277)    (19,513)    (6,027)
                              ---------- ----------  ---------- ----------
  Income (loss) before income
   taxes                          16,353     (4,586)    (25,653)   (16,787)
  Provision for income taxes       6,081        379       7,793      1,811
                              ---------- ----------  ---------- ----------
  Income (loss) from
   continuing operations          10,272     (4,965)    (33,446)   (18,598)
  Loss from discontinued
   operations                     (9,126)   (17,136)    (21,494)   (46,249)
                              ---------- ----------  ---------- ----------
  Net income (loss)           $    1,146 $  (22,101) $  (54,940)$  (64,847)
                              ========== ==========  ========== ==========
  Basic income (loss) per share
    Continuing operations     $     0.36 $    (0.23) $    (1.22)$    (0.87)
    Discontinued operations        (0.32)     (0.80)      (0.78)     (2.15)
                              ---------- ----------  ---------- ----------
                              $     0.04 $    (1.03) $    (2.00)$    (3.02)
                              ========== ==========  ========== ==========
  Diluted income (loss) per share
    Continuing operations     $     0.32 $    (0.23) $    (1.22)$    (0.87)
    Discontinued operations        (0.26)     (0.80)      (0.78)     (2.15)
                              ---------- ----------  ---------- ----------
                              $     0.06 $    (1.03) $    (2.00)$    (3.02)
                              ========== ==========  ========== ==========

Cash Flow Data
Continuing operations:
  Cash provided by (used in):
    Operating activities      $  (28,635)$   (2,291) $  (22,629)$  (12,717)
    Investing activities         (35,925)     5,124      66,952     26,436
    Financing activities          (6,353)    (3,340)    (28,445)     7,841
    Foreign exchange effects       2,661       (123)      2,208       (241)
Discontinued operations           19,199    (15,910)      2,980    (61,776)

Other Data (continuing operations)
  Weighted average shares
    Basic                         28,805     21,558      27,422     21,481
    Diluted                       34,844     21,558      27,422     21,481
  EBITDA                      $   22,852 $    1,388  $  (10,311)$   (1,475)
  Capital expenditures           (12,561)    (7,268)    (23,397)   (12,425)

Reconciliation of Non-GAAP
 Financial Measure

  EBITDA (2)
    Net income (loss),
     continuing operations    $   10,272 $   (4,965) $  (33,446)$  (18,598)
    Interest - net                 1,042      2,709       2,119      6,132
    Income taxes                   6,081        379       7,793      1,811
    Depreciation and
     amortization                  5,457      3,265      13,223      9,180
                              ---------- ----------  ---------- ----------
    EBITDA                    $   22,852 $    1,388  $  (10,311)$   (1,475)
                              ========== ==========  ========== ==========

  Net income (loss) before
   special items (3)
    Net income (loss),
     continuing operations    $   10,272 $   (4,965) $  (33,446)$  (18,598)
    Government fines              (2,000)         -      22,000          -
    Loss on early
     extinguishment of debt            -          -      15,375          -
                              ---------- ----------  ---------- ----------
    Income (loss) before
     special items            $    8,272 $   (4,965) $    3,929 $  (18,598)
                              ========== ==========  ========== ==========

  Basic income (loss) per
   share before special items
    Continuing operations     $     0.36 $    (0.23) $    (1.22)$    (0.87)
    Government fines               (0.07)         -        0.80          -
    Loss on early extinguishment
     of debt                           -          -        0.56          -
                              ---------- ----------  ---------- ----------
    Income (loss) per share
     before special items     $     0.29 $    (0.23) $     0.14 $    (0.87)
                              ========== ==========  ========== ==========

Balance Sheet Data             9/30/2007  6/30/2007   3/31/2007 12/31/2006
                              ---------- ----------  ---------- ----------
  Cash and cash equivalents   $   58,709 $  107,762  $  145,439 $   37,643
  Working capital                122,286    112,823     161,046    170,825
  Total assets                   443,854    406,568     410,714    589,982
  Total debt                     136,960    136,420     167,789    166,152
  Stockholders' equity           106,458     98,552      84,569     97,931

Backlog Data (1)
  By Reporting Segment:
    Construction              $  883,365 $  808,617  $  397,080 $  320,461
    Engineering                   89,527     90,943      92,615     92,956
    EPC                          125,992    144,686     158,594    188,855
                              ---------- ----------  ---------- ----------
                              $1,098,884 $1,044,246  $  648,289 $  602,272
                              ========== ==========  ========== ==========
  By Geographic Area:
    North America             $1,032,400 $1,009,524  $  611,630 $  565,408
    Middle East                   66,484     34,722      36,659     36,864
                              ---------- ----------  ---------- ----------
                              $1,098,884 $1,044,246  $  648,289 $  602,272
                              ========== ==========  ========== ==========

(1) Backlog is anticipated contract revenue from projects for which
    award is either in hand or assured.
(2) EBITDA is earnings before net interest, income taxes and depreciation
    and amortization. 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.
(3) Loss before special items (and the related amounts per share), a
    non-GAAP financial measure, excludes special items that management
    believes affect the comparison of results for the periods presented.
    Management also believes results excluding these items are more
    comparable to estimates provided by securities analysts and therefore
    are useful in evaluating operational trends of the company and its
    performance relative to other engineering and construction companies.

Contact Information

    Michael W. Collier
    Vice President
    Investor Relations
    Willbros USA, Inc.
    (713) 403-8016

    Connie Dever
    Strategic Planning
    Willbros USA, Inc.
    (713) 403-8035