Willbros Announces Third Quarter Earnings of $0.46 per Diluted Share From Continuing Operations
November 10, 2008
-Company reports another profitable quarter.
-Continuing operations third quarter 2008 net income of $19.1 million compares to net income of $10.3 million for third quarter 2007.
-Third quarter 2008 EBITDA(1) of $40.0 million from continuing operations.
-Strong cash position and balance sheet.
Houston, TX – November 5, 2008 -- Willbros Group, Inc. (NYSE: WG) today reported its results for the third quarter of 2008. On revenue of $490.7 million, net income from continuing operations for the third quarter of 2008 was $19.1 million, or $0.46 per diluted share, as compared to net income of $10.3 million, or $0.32 per diluted share, in 2007. Including discontinued operations, Willbros reported third quarter 2008 net income of $20.3 million, or $0.49 per diluted share, compared to net income of $1.1 million, or $0.06 per diluted share from third quarter 2007. Third quarter 2008 revenue from continuing operations of $490.7 million was nearly twice the $246.7 million reported in third quarter 2007. The increase was attributed to additional U.S. large diameter pipeline construction capacity, relative to 2007, and from the addition of the Downstream services unit, InServ, which was acquired late in 2007.
Randy Harl, President and Chief Executive Officer, commented, "Our third quarter 2008 results reflect the predictability and consistency of our business model, which generates a larger portion of revenue from recurring services than before. We continue to shift our business from being primarily a construction company to a company that provides more services. Our model benefits from the recurring maintenance spend and life cycle improvements necessary to maintain and operate complex hydrocarbon transportation and refining facilities.
"Although we are not immune to the current financial and economic events, we are well positioned with our service offerings and geographic presence to take advantage of our markets:
-Our U.S. mainline pipeline and facilities construction businesses are well positioned to take advantage of the development of new sources of natural gas supply which require new infrastructure to monetize these investments. These new sources of supply include the new shale plays such as Haynesville, Fayetteville, Marcellus and others.
-We are positioned to build the take away pipelines from the massive investments in the Canadian oil sands.
-Our maintenance and fabrication businesses are service offerings to the Canadian oil sands that are required to operate the facilities, regardless of the financial environment at any point in time.
-Our diversified Downstream services offering is focused on maintenance and life extension to the process industries which can be robust in any business environment.
-Our EPC offering is unique to our space and allows us to earn more revenue per engineer and to qualify for larger projects, leveraging more revenue and earnings opportunities for our business.
-Our past experience and brand name provides access to international markets.
-And finally, we have turned around the financial condition of the Company and this, together with our strong balance sheet and operating cash flow, should allow us to effectively operate our business and to take advantage of the opportunities that always come during a period of change like we are currently experiencing."
Third Quarter 2008 Segment Results From Continuing Operations
The Company reported that operating income in third quarter 2008 was $28.7 million compared to $18.7 million in the third quarter of 2007.
The Upstream Oil & Gas segment reported $342.1 million in revenue, compared to $196.6 million for the same period in 2007. Third quarter 2008 operating income was $17.0 million, compared to $13.4 million in the third quarter of 2007. The increase is attributed to greater capacity relative to the same period in 2007, despite some delay in ramping up utilization of resources on the Midcontinent Express project. Results also benefited from lower exposure to project cost escalations due to the high percentage of cost reimbursable contracts.
The Downstream Oil & Gas segment reported $86.2 million in revenue and operating income of $4.7 million in the third quarter of 2008. Our downstream business experienced some weakness in demand for maintenance and turnaround activity due to deferrals into the fourth quarter of 2008 and first quarter of 2009 of work previously expected to be performed in the third quarter. The outlook for our Downstream segment remains strong for the specialty services we provide.
The Engineering segment reported $62.3 million in revenue, compared to $50.2 million from third quarter 2007. Third quarter 2008 operating income was $7.0 million, compared to $3.3 million in the third quarter of 2007. The Company had expected awards of significant engineering, procurement and construction projects, ("EPC") that would have increased its backlog during the third and fourth quarters of this year. It now appears these projects have been delayed as a result of the current financial climate. This situation coincides with the completion of some very large EPC projects in 2008. EPC, although a differentiator for Willbros' business, is more susceptible to the current financial crisis due to the longer development cycle as compared to discrete services.
EBITDA(1) from third quarter 2008 was $40.0 million, an improvement of $17.1 million over third quarter 2007.
General and Administrative costs were $29.1 million, or 5.9 percent of revenue, as compared to $17.8 million, or 7.2 percent of revenue in the third quarter of 2007.
Third Quarter 2008 Results From Discontinued Operations
The Company reported net income from discontinued operations of $1.2 million, or $0.03 per basic and diluted share, compared to a loss of $9.1 million or $0.32 per basic share and $0.26 per diluted share in third quarter of 2007.
Backlog(2)
At September 30, 2008, Willbros reported backlog(2) of approximately $1.0 billion compared to $1.3 billion at December 31, 2007. New bookings during the third quarter 2008 improved visibility for our U.S. pipeline construction unit into third quarter 2009. Management now believes, with the more uncertain business environment, that a more normal pattern of work awards will prevail, with a shorter lead time from booking to the generation of revenue in our U.S. large diameter pipeline construction unit. Also, as our model continues to shift to more service oriented revenue, we expect the lead time between project award and recognition of revenue to decrease. At September 30, 2008, approximately 88 percent of contract backlog was cost reimbursable.
Guidance
Willbros revised its guidance for 2008 annual revenue to be approximately $1.9 billion; and for annual G&A to be approximately 6 percent of revenue. For annual EPS the Company revised its guidance from a range of $1.75 to $2.00 to a range of $1.85 to $1.95 per diluted share based on an average share count of approximately 43.8 million shares. Guidance for the expected tax rate for 2008 was revised from 42 percent to 38.5 percent. The Company cited the delayed start on the Midcontinent Express project, which led to more reimbursed stand-by time, shifting some revenue anticipated in the fourth quarter into early 2009.
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.
