UPDATE 2-Huntington Ingalls seeks energy sector orders for Avondale

Tue Feb 5, 2013 7:31pm EST

* Company eyes orders from $10 mln to over $100 mln

* Avondale did commercial work two decades ago

* Will reevaluate plan to close Avondale later this year

By Andrea Shalal-Esa

WASHINGTON, Feb 5 (Reuters) - Huntington Ingalls Industries Inc is actively pursuing infrastructure orders from the oil and natural gas industry for its Avondale shipyard near New Orleans, which had been slated to close at the end of 2013.

The shipbuilder for the U.S. Navy said on Tuesday it is opening an office in Houston to chase orders and is in active discussions with various companies in the oil and gas sector. It plans advertisements in Gulf Coast newspapers on Wednesday.

Chris Kastner, corporate vice president and general manager of corporate development, told Reuters Huntington Ingalls would reevaluate plans to close the Avondale facility, or lay off more workers, depending on how the new business did this year.

He declined to give a target for how much revenue would be needed to keep the facility open, saying the company was more focused at the moment on validating its business model for the energy sector.

Ron Ault, president of the metal trades department of the AFL-CIO, welcomed the news and said the union would continue to work closely with company management on the new endeavor.

"While the success of this new business endeavor is not set in stone, the Metal Trades Department, AFL-CIO applauds Huntington Ingalls Industries for its unwavering commitment to keep Avondale Shipyard operational," Ault said.

He said Avondale's shipbuilding workforce had many of the same skills needed in the energy sector.

Citing over capacity in the shipbuilding market, Northrop Grumman Corp announced plans to close the 268-acre Louisiana shipyard in 2010, later deciding to spin off its entire shipbuilding business into Huntington Ingalls.

Mike Petters, chief executive of Huntington Ingalls, said the workforce at Avondale, which numbers around 2,000 now, had unique engineering and manufacturing capabilities that would help the company compete in the energy sector.

Petters first raised the possibility of changing the focus of the shipyard during an analyst call in November. Last month, he told reporters he was "under no illusions ... about the challenges that something like this would present."

On Tuesday, Petters sounded more upbeat as he highlighted Avondale's location in a region where manufacturing demand is outstripping supply, especially in the energy markets.

"Coupling this talent with our world-class facilities leads us to believe we have everything in place at Avondale to excel in this market," Petters said in a statement announcing the company's thrust into energy infrastructure work.

Kastner told Reuters the company would bid for projects in the $10 million to $100-million range.

He said Huntington Ingalls could bid for orders covering above-water equipment for offshore oil rigs to downstream facilities for processing natural gas, such as a big liquefied natural gas (LNG) facility in Lake Charles, Louisiana.

About $60 billion in such downstream energy projects have been announced in recent years, company officials said.

Kasten said the company was open to a possible partnership for the Avondale facility, but did not view that as necessary to start bidding for smaller orders.

The Avondale shipyard has worked on other commercial projects in the past. About two decades ago, it built equipment for a hydroelectric plant in Vidalia, Louisiana, which is still operating, as well as a prison barge in New York, Kastner said.

The company's Newport News shipbuilding division also has two units that work on nuclear energy projects and alternative energy, but they are small compared with the company's main work building destroyers and aircraft carriers for the U.S. Navy.

"Avondale has a rich history in competing for a very diverse amount of work," he said.

Huntington Ingalls shares closed four cents lower at $44.17 on the New York Stock Exchange on Tuesday.

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