* CEO targets $20 bln backlog capability within 5 years
* U.S. military revenue seen down to $300-$500 mln in 2012
By Braden Reddall
Nov 11 KBR Inc expects natural gas
projects to drive its backlog significantly higher in the next
three years as the engineering company's military services work
in Iraq fades away with U.S. troops pulling out.
U.S. military logistics revenue will fall to between $300
million and $500 million next year, or less than a third of the
2011 level, Chief Financial Officer Sue Carter said on Friday.
So KBR's focus in the near term is on "elephant" projects
that include three Australian liquefied natural gas facilities,
an LNG plant in Canada, as well as Angolan refining projects.
While Carter attached no figures to her backlog outlook,
Chief Executive Bill Utt said he would be disappointed if KBR
was not capable of handling a $20 billion backlog of work
within five years, compared with about $12 billion currently.
KBR wants to tap growing demand for mining developments by
splitting off its minerals practice from the infrastructure,
government and power (IGP) group into a new unit with its own
"The minerals market's going to be here until well after
all of us are gone," Utt said at a meeting with analysts in New
York, which was webcast. "We don't have to be the biggest, we
just want to have continued growth in that market."
Larger rival Fluor Corp has seen some large awards
from miners in the past year, while work from the oil and gas
production sector has so far been slow.
KBR is getting closer to the most buoyant energy-producing
regions by opening offices in Rio de Janeiro, Baghdad and
Khobar in Saudi Arabia, which could each ultimately have 500
staff, Utt said.
Shares of KBR were about 5 percent higher at $28.43 on a
day when rising oil prices lifted the sector, with Fluor shares
3.9 percent higher in afternoon trading.
KBR will stay in Iraq through a U.S. State Department
support contract, and Utt sees government as a useful part of
its portfolio, even if it is smaller than the nearly $6 billion
in revenue the company earned from the U.S. military in 2008.
Mark Williams, the IGP group president who spent 25 years
in government and defense support at Jacobs Engineering Group
Inc before joining KBR, said the potential for U.S.
military spending cuts did not worry him much.
Having lived through the reductions of the 1990s, he said a
move from a U.S. military budget of $700 billion to, say, $600
billion still left plenty of scope for the business.
The North American shale gas glut offers ample opportunity
for Houston-based KBR to grow closer to home, whether it is
ethylene and gas-to-liquids projects that rely on cheap natural
gas, or even conversion of LNG import facilities for export.
Williams said early studies were taking place on the latter.
Utt, however, played down the potential of U.S. natural gas
exports because Gulf Coast facilities were badly located for
shipping to Asia, and since such exports from the energy-hungry
United States would likely run into political opposition.
Canada, on the other hand, has a long history of exporting
energy, he said. British Columbia's Kitimat export terminal,
one of the major projects where KBR is doing early design work,
should get approved to start construction in 2012.
Another LNG "elephant" project award, Inpex Corp's
Ichthys in Australia, is due by year-end.