investor presentation · johan sverdrup oil and gas field project has commenced – norway, north...

Investor

Presentation

November / December

2015

Stuart Bradie – President and Chief Executive Officer Brian Ferraioli – EVP and Chief Financial Officer Zachary Nagle – VP, Investor Relations

Forward-Looking Statements

2

This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the

Securities Exchange Act of 1934. These forward-looking statements include statements regarding our plans, objectives, goals, strategies, future events,

future financial performance and backlog information and other information that is not historical information. When used in this presentation, the words

“estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” or future or conditional verbs such as “will,” “should,” “could,” or

“may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based

upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is

a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, and projections will be achieved.

There are numerous risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from the forward-

looking statements contained in this presentation. These risks and uncertainties include, but are not limited to: current or future economic conditions; our

ability to obtain and perform under contracts from existing and new customers, including the U.S. Government; exposure to cost overruns, operating

cost inflation and potential liability claims and contract disputes; access to trained engineers and other skilled workers; risks relating to operating through

joint ventures and partnerships; risks inherent in doing business internationally; potential tax liabilities; maritime risks; changes in the demand for our

services and increased competition; protection of intellectual property rights; risks associated with possible future acquisitions; risks related to our

information technology systems; impairment of goodwill and/or intangible assets; reduction or reversal of previously recorded revenues; risks relating to

audits and investigations, including by governments; compliance with laws and regulations, and changes thereto, including those relating to the

environment, trade, exports and bribery; our creditworthiness and ability to comply with the financial covenants in our credit agreement; and other risk

factors discussed in our most recently filed Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other Securities and Exchange Commission filings.

All forward-looking statements attributable to us, or persons acting on our behalf, apply only as of the date made and are expressly qualified in their

entirety by the cautionary statements in this presentation. Except as required by law, we undertake no obligation to revise or update forward-looking

statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.

This presentation contains the financial measure “EBITDA,” which is not calculated in accordance with generally accepted accounting principles in the

U.S. (“GAAP”). A reconciliation of the non-GAAP financial measure EBITDA to the most directly comparable GAAP financial measure has been

provided in the Appendix to this presentation.

KBR’s Zero Harm 24/7

0.39 0.37

0.35

0.39

0.30

0.22

0.26 0.23

0.21 0.19 0.18

0.34 0.35 0.35 0.32

0.31

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

2010 2011 2012 2013 2014 2015

KBR TRIR IOGP Top Q IOGP Average

5-Year TRIR Performance

3

4

• KBR, Inc. is a global technology, engineering,

procurement and construction company serving the

hydrocarbons (predominantly Gas Monetization) and

government services industries.

• More than 100 year proud history.

• #424 in Fortune 500 rankings.

• ~ 25,000 employees in more than 40 countries.

• Customers in more than 70 countries.

KBR Overview

5

• Focus on differentiated offerings in core markets /

clients with emphasis on global sales, commercial

rigor and consistent delivery

• Streamline operations and significantly reduce costs

• Rebalance business portfolio

• Continue efforts to proactively resolve commercial

disputes – i.e. less litigation

• Retain strong balance sheet and employ a balanced

capital allocation policy

Strategic Objectives

5

6

Strategic Priorities

Priority Markets

Global Hydrocarbons (Gas) &

International Government

Services

Early project involvement

via differentiated technology

(gas monetization) &

specialized consultancy

services

Pursue Fixed Price EPC

when differentiated by: - KBR Technology

- Related experience

- Ability to self-perform

construction

(predominantly gas monetization)

Global project delivery focus

organized with regional

accountability

Re-focus

Growth

Strategy

1 2

3 4

7

Framework to Support Core Focus

Exit non-strategic businesses:

- Stand-alone Fixed Price EPC Power

- Fixed Price U.S. Infrastructure &

U.S. Minerals

- Building Group

- Fixed Priced Stand-alone Construction

One KBR: Consistent use & application of

standard policies, processes, systems,

tools & procedures to deliver

consistency and efficiency

Allocate capital

in an efficient

and balanced

manner

Efficiencies: Be cost competitive;

$200 million reduction in annual

operating costs by 2016; > $150 million

in savings already identified / actioned

Streamline

Operations

1 2

3 4

Note: All statements current as of KBR’s 3Q15 earnings call on 11/02/2015

8

Old KBR operating segment structure (16 business units)

New streamlined operating segment structure (5 business units)

Structure – Streamlined / Focused

KBR

Gas Monetization

Hydrocarbons Infrastructure, Government &

Power Services Operations

KBR

Technology & Consulting

Engineering &

Construction

Government

Services

9

Global Leadership Team

Engineering & Construction John Derbyshire

Technology & Consulting

37 Years of Industry

Experience

Engineering & Construction Andrew Pringle

Government Services


Experience (37 Years

Military Experience)

Graham Hill

Global Sales & Strategy


Experience

Roy Oelking

E&C Americas


Experience

Jan Egil Braendeland

E&C EMEA


Experience

Ivor Harrington

E&C APAC


Experience

David Zelinski

E&C Americas (Onshore)


Experience

Stuart Bradie

President and CEO

E&C Group President


Experience

Brian Ferraioli

CFO


Experience

Jay Ibrahim

E&C MENA


Experience

Farhan Mujib

Commercial


Experience

Eileen Akerson

General Counsel


Experience

Nick Anagnostou

HSSE


Experience

10

Technology and Consulting Business

Broad Range of Technologies and Solutions from Wellhead to

Specialty Chemicals – Primarily Gas Focused

Proprietary

Technologies

Consulting

and Services

Upstream

Semi-submersible hull design

Monohull vessels

Downstream

Refining (VCC, ROSE, FCC, Hydroprocessing, Distillation)

Olefins (SCORE, K-COT)

Ammonia (KRES, KAAP, Purifier)

Chemicals (Phenol, BPA, Acetic Acid, PVC, specialty technologies)

Coal Gasification

Upstream

Field development planning

Project assurance

Integrity management Structural analysis

Downstream

Downstream consulting

Feasibility and revamp studies

Technical services

Automation consulting and project management

11

E&C Core Sectors – Full Service Offering

OFFSHORE

Fixed Platforms

Floating Facilities

Hulls, Moorings & Risers

SURF

BP Thunderhorse

LNG / GTL

Liquefaction

Regasification

FLNG

FSRU

BP Tangguh

ONSHORE Oil & Gas

Refining

Petrochemicals

Chemicals

Ammonia & Fertilizers

Gasification

Saudi Kayan

ASSET SERVICES

Maintenance

Modifications

Small Capex Projects

Asset Integrity

Maintenance

GDF Suez Bonaparte

Total Pazflor EBIC Ammonia Plant

MMM

Full service EPC with primary focus on Natural Gas related projects

12

Bahrain Life Support

Government – Core Services

AMERICAS

International Base Operations Support

Remote Life Support Services

Logistics

EMEA

Home Base Operational Support

Overseas Operational Support

Programme Management Services

Resilience Planning & Execution

Training

APAC

Asset Management

Systems Engineering

Integrated Logistics Support

Capability Risk Management

Training

Djibouti BOS

Embassy Security Upgrades

Heavy Equipment Transporter

Police Firearms Training

Met Police Facilities Management Integrator FCO Embassy Life Support

National Emergency Mortuary Arrangements Land 121

Landing Helicopter Dock Capability Support Contractor

Joint eHealth Data and Information

Amphibious and Afloat Support System

PMKeyS Technical Refresh Training and User Support

Project Allenby/Connaught

http://portal.kbr.com/corp/sites/dgs/sales/Graphics and Images/Picture 1112.1.jpg

13

KBR Global Operations

Mexico City

Houston

Gothenburg

London

Moscow

Delhi

Dubai Pune

Jakarta

Tokyo

Seoul

Singapore

Beijing

Caracas

Perth Rio de Janeiro

Kuala Lumpur Monterrey

Wilmington

Birmingham

Edmonton

Luanda

Atyrau

Baku

Saudi Arabia

Bahrain

Chennai

Melbourne

Arlington

Canberra

Baghdad

Kabul

Freetown

Sydney

~25,000 Employees in more than 40 Countries

Customers in more than 70 Countries

14

Strategic Objective Progress to date

Exit non-strategic businesses Stand-Alone EPC Power The first of three power plants is largely complete. The second will be completed in 1Q 2016. The third is targeted for 1Q 2017 completion. U.S. Minerals & U.S. Infrastructure Closed U.S. Minerals office Sold Infrastructure business Building Group Sale closed 2Q 2015 realizing cash of $23 million and a gain of $28 million. Fixed Priced Stand Alone Construction Completed existing contracts and team is integrated into E&C Americas

Businesses under review Canadian Module Fabrication Business transferred to announced JV with BCP

Focus on specific key prospects Won Magnolia LNG EPC 1, Yara/BASF Ammonia EPC, Johan Sverdrup EPC, Maersk Culzean Engineering

Cost reduction initiatives of $200 million by 2016 More than $150 million in savings identified/actioned to date

Resolve outstanding disputes Significant progress in closing legacy U.S. Military audits; efforts continue on remaining third party cases

Balanced capital allocation policy $22 million and $35 million in share repurchases and dividends paid, respectively, in 2015

Progress Report on Strategic Objectives

Note: All statements current as of KBR’s 3Q15 earnings call on 11/02/2015 1 Press release issued 11/16/2015

Market Outlook: Technology & Consulting

Technology market opportunities led by ammonia, refining and olefins, particularly

revamps – Middle East, North Africa, Eastern Europe & Asia.

Opportunities in Eastern Europe for VCC (Veba Combi-Cracker) technology and

converting heavy Hydrocarbons into lighter fuels, esp. diesel.

Increased consulting opportunities in upstream oil and gas, and downstream (LNG,

refining, petrochemicals, fertilizers) albeit market remains tight.

Continue to look for additional opportunities to expand T&C technology portfolio into new

products and services.

15


Market Outlook: E&C

Recent strategic developments:

Growing industrial services / maintenance business with N.A. Brown & Root joint venture.

Strategic alliance for pipe fabrication & module assembly – key for EPC prospects in North America.

1 EPC contract award for multi-billion dollar Magnolia LNG project in Gulf Coast (progressing towards FID)

See 11/16/2015 press releases by KBR and Magnolia LNG

Continue to capture previously identified large offshore projects:

Johan Sverdrup oil and gas field project has commenced – Norway, North Sea.

Won detailed engineering and design award for Maersk Culzean offshore gas development in October – U.K., North

Sea (Q4 booking).

Continued strong base of large projects in backlog through 2015 & 2016:

Executing two mega-LNG projects – Gorgon and Ichthys, with expected earnings from LNG projects to remain

significant components of earnings through 2016; favorable resolution of pending change orders continues to

provide opportunity for 2016 LNG income to be comparable to 2015.

Significant backlog of ammonia / urea, refining and oil & gas projects.

Note: All statements current as of KBR’s 3Q15 earnings call on 11/02/2015 1 Press release issued 11/16/2015

16

Market Outlook: E&C (Continued)

Good pipeline of near-term and long-term prospects:

Increased focus on Middle East opportunities (refining and petrochemicals).

Onshore upstream opportunities in Middle East & Caspian remain positive due to low cost to develop. JV with

National Oil Company of Azerbaijan (SOCAR) announced in 1Q15 also positions us well for offshore brownfield.

Offshore developments continue in GoM, North Sea, Azerbaijan and Thailand.

Pursuing a ~$2B fertilizer complex in the Midwest U.S. (confidential client).

Major LNG developments continue to evolve providing add’l support for backlog growth in 2016 and beyond:

• KBR/SK JV awarded EPC contract for multi billion dollar Magnolia LNG project on U.S. Gulf Coast – 4 train

(8mtpa) LNG facility; Limited notice to proceed for early procurement and engineering only booked into

backlog in Q4.1

• Bearhead mega-LNG project in Canada - potential follow-on opportunity to Magnolia (same customer /

technology as Magnolia LNG); also expected to be a sole source negotiation.

• KBR/JGC/Rekayasa JV continue FEED and EPC bid opportunity for Tangguh Train 3. Award expected 2016.

• Continue to work on Shell Global LNG Agreement, with assignments underway.

• Four add’l FERC FEEDs in North America (clients confidential).

• Pre-FEED work and tendering ongoing for two major FLNG projects.

• Continued pursuit of LNG developments in North America where economics are promising given low forecasted

cost of development versus most other regions of the world.

17 Note: All statements current as of KBR’s 3Q15 earnings call on 11/02/2015

1 Press release issued 11/16/2015

18

Market Outlook: Government Services

Confirmed preferred bidder for U.K. MoD Fixed Wing Training (MFTS) contract – another

long-term annuity type project. Award expected Q4.

U.K. Army re-basing – discussions continue on a sole source basis.

Strong operational performance continues for U.K. PFI contracts – primarily MoD long-

term facilities maintenance.

A number of U.S. overseas base operations support opportunities under tender; e.g.,

Kuwait.

Services in Iraq under LogCap IV contract grew in the period with further growth

possible.

Continued progress in successfully closing U.S. Gov’t audits of legacy LogCap III and

RIO billings.


Consolidated Results: Q3 2015 vs Q3 2014

Commentary

Third consecutive quarter of solid earnings and

operational performance, following strategic

restructuring charges in 4Q14.

Backlog impacted by 50% sale of Americas Industrial

Services ($340M) and FX on strong dollar ($391M).

Revenues reflect winding down of Canadian pipe

fabrication and N.A. construction projects, reduced

activity on an LNG project, and sale of the Building

Group in Q2 (~$60M quarterly run-rate).

Gross profit and equity in earnings reflects improved

business performance and reduced operational costs.

G&A reflects cost reduction initiatives.

Restructuring charges and impairment of long-lived

assets related to strategy implementation and cost

reduction initiatives partially offset by gain on

disposition of certain assets.

Net Income reflects improved operational

performance and cost reduction initiatives.

*Consolidated EBITDA reconciliation provided in the Appendix.

Quarter Ending

($ in millions, except EPS) Sep 30, 2015 Sep 30, 2014

New awards $272 $ 1,099

Backlog of Unfilled Orders $ 13,300 $ 12,144

Revenues $ 1,199 $ 1,657

Gross profit $ 87 $ 30

Equity in earnings $ 35 $ 38

General & administrative expenses ($38) ($58)

Asset impairment and restructuring charges ($15) $ 0

Gain on disposition of assets $ 6 $ 0

Benefit (provision) for income taxes ($19) $ 1

Net income attributable to KBR $ 55 $ 30

EPS (diluted) $ 0.38 $ 0.21

EBITDA* $ 86 $ 45

Note: All statements current as of KBR’s 3Q15 earnings call on 11/02/2015 19

Segment Reporting: Q3 2015 vs Q3 2014

*Consolidated EBITDA reconciliation provided in the Appendix.

Revenue

T&C reflects less proprietary equipment and reduced upstream oil

related project consulting activity; E&C reflects winding down of

Canadian pipe fabrication and N.A. construction projects and

reduced activity on an LNG project. Non-Strategic down on sale

of Building Group in Q2 (~$60M quarterly run-rate) and wind down

of power projects.

Gross Profit and Equity in Earnings

E&C reflects solid underlying business performance / lower

overheads.

GS reflects solid operational performance, increased activity on

the company’s LogCAP IV and other U.S. Military operating base

contracts and reduced overheads. 3Q14 included an award fee

on LogCAP III of $21M that did not recur.

Non-Strategic Business reflects stronger than anticipated

operational performance on the company’s power projects versus

significant charges in 3Q14, favorable settlements with a major

subcontractor and lower overheads.

EBITDA largely reflects improvements noted above; Other

EBITDA primarily reflects gain on settlement with former parent of

$24M in the prior year that did not recur in 2015, partially offset by

lower G&A.

Quarter Ending ($ in millions) Sep 30, 2015 Sep 30, 2014

Revenues

Technology & Consulting 79 94

Engineering & Construction 828 1,196

Government Services 176 178

Non-Strategic Business 116 189

Consolidated Revenues 1,199 1,657

Gross profit (Loss) and equity in

earnings


Engineering & Construction 74 72


Non-Strategic Business 14 (58)

Consolidated Gross profit & equity in

earnings 122 68

EBITDA


Engineering & Construction 61 50


Non-Strategic Business 11 (56)

Other (18) (5)

Consolidated EBITDA* 86 45


Cash / Capital Allocation

KBR Cash Balance Return of Cash to Shareholders

($ in millions) Q3 2015 Q2 2015

Domestic $304 $289

International $395 $381

JV $69 $61

Total $768 $731

Key Impacts to Cash in Q3 2015 ($M)

Cash from close of BCP transactions (net) 33

Previously announced loss projects cash exp. (18)

Settlement payment to former parent (12)

Dividends (12)

U.K. Pension (11)

FX impact on cash (16)

Subtotal (36)

• Maintained strong balance sheet and cash

position, providing confidence to our clients

and optionality as our markets continue to

evolve.

($ in millions) Q3 2015 YTD 2015

Since Jan

Jan-07

Share Repurchases $5 $22 $753

Dividends $12 $35 $274

Total $17 $57 $1,027

*

Final net cash payment * Note: All statements current as of KBR’s 3Q15 earnings call on 11/02/2015 21

Summary

Third consecutive quarter of solid earnings and operational performance, following

strategic restructuring charges in 4Q14.

E&C management has made good progress de-risking the business through strong

performance on Non-Strategic power projects and closing out Canadian pipe fab /

mod assembly projects.

We continue to capture previously identified key sales prospects.

New credit facility in place.

Strong balance sheet provides optionality in challenging markets.

Good near-term prospects – backlog growth opportunities.

Our strategy is progressing on plan.


Appendix

Consolidated EBITDA Reconciliation Q3 2015

Note: EBITDA is defined as earnings before interest, income tax, depreciation and amortization

Quarter Ending

($ in millions) Sep 30, 2015 Sep 30, 2014

Net Income Attributable to KBR $55 $30

Add Back:

Interest Income (Expense) ($2) $3

Provision for Income Taxes ($19) $1

Depreciation & Amortization ($10) ($19)

Consolidated EBITDA $86 $45

24

investor presentation · johan sverdrup oil and gas field project has commenced – norway, north...

Documents