KBR Announces Fourth Quarter and Full Year Results

Source: www.gulfoilandgas.com 2/26/2008, Location: North America

KBR announced that income from continuing operations was $48 million, or $0.28 per diluted share, compared to income from continuing operations of $45 million, or $0.30 per diluted share, in the fourth quarter of 2006. Net income was $71 million, or $0.42 per diluted share, in the fourth quarter of 2007, which included income from discontinued operations of $23 million, or $0.14 per diluted share, primarily due to tax benefits related to a previously uncertain tax position associated with the 2006 sale of Production Services. This compared to net income for the fourth quarter of 2006 of $43 million, or $0.28 per diluted share, which included a loss from discontinued operations of $2 million, or $0.01 per diluted share.

Consolidated revenue in the fourth quarter of 2007 was $2.4 billion, an increase of 4.3% from $2.3 billion in the fourth quarter of 2006.

Consolidated operating income was $82 million in the fourth quarter of 2007 compared to $90 million in the fourth quarter of 2006. Operating income in the fourth quarter of 2007 included positive contributions from various gas monetization projects, the Services business unit, and Iraq-related work. Operating income in the fourth quarter of 2007 was partially offset by $22 million in charges related to potentially disallowable costs incurred under U.S. government contracts in the Middle East for activities dating from 2003.

Income from continuing operations for the full year of 2007 was $182 million, or $1.08 per diluted share, which represents a $128 million, or $0.69 per diluted share, increase from the prior year. Net income in 2007 was $302 million, or $1.79 per diluted share, compared to the 2006 net income of $168 million, or $1.20 per diluted share. Net income in 2007 included $120 million after tax, or $0.71 per diluted share, of income from discontinued operations primarily related to the operations of Devonport Management Limited ("DML"), which we sold our 51% interest in the second quarter of 2007 and the above mentioned tax benefits. Net income for 2006 included $114 million after tax, or $0.81 per diluted share, of income from discontinued operations.

2007 Fourth Quarter Business Unit Results
Government and Infrastructure business unit income was $53 million in the fourth quarter of 2007 compared to business unit income of $88 million in the fourth quarter of 2006. The decrease in business unit income primarily relates to a fourth quarter 2007 charge of $22 million related to potentially disallowable costs incurred under U.S. government contracts in the Middle East for activities dating from 2003. During the fourth quarter of 2007, business unit income had positive contributions from provision of services to the Allenby & Connaught project and work on the CENTCOM project.

Upstream business unit income was $64 million in the fourth quarter of 2007 compared to business unit income of $67 million in the fourth quarter of 2006. Business unit income during the fourth quarter of 2007 had positive contributions from several gas monetization projects, including Skikda LNG, and various offshore projects, including Kashagan.

Services business unit income was $23 million in the fourth quarter of 2007 compared to business unit income of $18 million in the fourth quarter of 2006. Contributing to the business unit income was $11 million and $7 million in actuarially determined insurance adjustments in the fourth quarters of 2007 and 2006, respectively. Also contributing to the increase was work on the Scotford Upgrader project in Canada.

Downstream business unit income was $3 million in the fourth quarter of 2007 compared to business unit income of $5 million in the fourth quarter of 2006. Business unit income during the fourth quarter of 2007 was positively impacted by the Yanbu export refinery project and the Ras Tanura program management project in Saudi Arabia and the EBIC ammonia plant in Egypt.

Technology business unit income was $1 million in the fourth quarter of 2007 compared to business unit income of $6 million in the fourth quarter of 2006. Contributing to the decrease was the delay and cancellation of two projects in the fourth quarter of 2007 which were awarded in 2006. Partially offsetting this decrease was the awarding and work performed for the MAN Ferrostaal ammonia process project in Venezuela.

Ventures business unit loss was $3 million in the fourth quarter of 2007 compared to a business unit loss of $8 million in the fourth quarter of 2006. The improvement was primarily related to lower losses on the Australian rail road project and increased profitability on the Allenby & Connaught investment in the UK.

Corporate general and administrative expense in the fourth quarter of 2007 was $49 million compared to $78 million in the prior year quarter. This decrease was primarily related to lower financial systems and SAP implementation costs, lower real estate expenses, and a $5 million restructuring charge in the fourth quarter of 2006. Interest income in the fourth quarter of 2007 included $4 million related to the Pemex EPC 22 settlement, which was partially offset by lower interest income on cash associated with consolidated joint ventures.

Significant Achievements and Awards
KBR was awarded a Canadian construction and fabrication contract of a gasification unit by Lurgi AG. KBR's scope of work will include the fabrication of nearly 100 modules and will peak at approximately 400 personnel performing field construction and module service work on this 30-month project. The contract has an approximate value of $225 million (CAD).

KBR was awarded a contract by PetroSA to conduct the pre-feasibility study to build a 200,000 barrel per day crude oil refinery in Coega, Port Elizabeth. The pre-feasibility study focuses on determining the economic optimum configuration for the refinery including crude oil type and costs, required product slate, prices and specifications, and capital and operating costs.

KBR subsidiary, Granherne, Inc., was awarded a three-year engineering services contract by Petrobras America. Granherne will provide technical support for design of the hull for the early production system, floating production storage and offloading system (FPSO), and later phase full field development. The FPSO will be located in approximately 2,600 meters of water. The Cascade/Chinook FPSO, when deployed, will be the first in the U.S. Gulf of Mexico, and will be the world's deepest FPSO to date.

KBR announced that its "Eos" joint venture with WorleyParsons, was awarded a contract option worth approximately USD$24 million for the detailed engineering, procurement management and construction management assistance services for Woodside's Pluto LNG Project offshore production platform north west of Karratha, Western Australia.

KBR was awarded a contract by MAN Ferrostaal AG (MFS) to provide basic and detailed engineering services for an 1,800 MTPD ammonia plant for Petroquimica de Venezuela, S.A. (Pequiven). The plant will be the first in Venezuela to utilize KBR's proprietary KAAP(TM) ammonia process technology.

In November 2007, KBR announced that it successfully met all contractual obligations related to the 600,000 ton/year Lanzhou ethylene plant in China. This milestone represents the first facility in China to utilize KBR's proprietary SCORE (Selective Cracking Optimum REcovery) technology for both the furnace cracking and recovery sections.

In January 2008, KBR announced that its joint venture, TSKJ Nigeria Ltd., successfully completed the construction and commissioning phase of the Nigeria LNG Limited (NLNG) Train 6 project on Bonny Island, Nigeria. NLNG awarded TSKJ the lump sum engineering, procurement, and construction contract (EPC) for LNG train six in July 2004.


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Related Categories: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 

Related Articles: Accounting, Statistics  Acquisitions and Divestitures  Asset Portfolio Management  Economics/Financial Analysis  General  Industrial Development  Insurance  Investment  Mergers and Acquisitions  Risk Management 


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