Kbr, Inc. · NYSE:KBR
Kbr — Investor Day (November 2011)
71 slides from Kbr's investor day presentation, Nov 11, 2011
Slide 1: 2011 KBR Analyst and Investor Day: Why KBR?
2011 KBR Analyst and Investor Day Why KBR? Bill Utt – Chairman , President, and Chief Executive Officer November 11, 2011 Page 1 of 71
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation contains “forward-looking statements.” All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include statements about the benefits of the split-off, the discussions of K
Slide 3: KBR – A Leading Global E&C Provider
KBR – A Leading Global E&C Provider ¾ Revenue: Full Year 2010 - $10.1 Billion; Fortune 500 Company #242 ¾ Backlog: September 30, 2011 - $11.7 Billion (77% reimbursable / 23% fixed-price)* ¾ Current 2011 Earnings Guidance - $3.15 to $3.30 per diluted share ¾ Headquarters in Houston, Texas ¾ ~35,000 e
Slide 4: KBR's Global Footprint
KBR’s Global Footprint Gothenburg Edmonton Greenford Moscow Leatherhead Calgary Wilmington Frankfurt Atyrau Arlington Baku Raleigh / Charlotte Algiers Baghdad Houston Atlanta Beijing Kuwait City Birmingham Monterrey Dhahran Dubai New Delhi MMM Abu Dhabi Lagos Singapore Jakarta Angola Rio De Janeiro
Slide 5: KBR Safety Record
KBR Safety Record Recordable Lost Time Incident Rate* Incident Rate* 2009 0.49 0.19 2010 0.39 0.12 2011 YTD 0.37 0.11 Note: Safety statistics include all KBR subcontractors safety performance *Incident Rate defined as number of recordable cases multiplied by 200,000 divided by total work hours Page
Slide 6: KBR SWOT Analysis Update 2009 to 2011
KBR SWOT Analysis Update 2009 to 2011 ¾ Strengths ¾ Breadth of the Franchise ¾ Delivering complex jobs in remote areas of the world ¾ Risk awareness and management processes driving consistent financial performance ¾ Integrated global resource pool ¾ Balance Sheet – no debt, ~$700 million cash, good
Slide 7: KBR SWOT Analysis Update 2009 to 2011
KBR SWOT Analysis Update 2009 to 2011 ¾ Opportunities ¾ Grow project “share of wallet” ¾ Grow direct hire construction offerings ¾ Leverage our financial strength / position ¾ Focus on long-term vs. short-term opportunities ¾ Threats ¾ Maintain status quo ¾ Increased competition from new entrants Pa
Slide 8: KBR 2012 Objectives
KBR 2012 Objectives Page 8 of 71
Slide 9: KBR 2012 Objectives
KBR 2012 Objectives In 2012, KBR Plans to: ¾ Sign up our “Big Elephants” – Inpex LNG, Kitimat LNG, Browse LNG, Pluto LNG and the Angola Refinery projects ¾ Continue to grow KBR’s Power, Mineral, Infrastructure, Services and Other Hydrocarbons Businesses ¾ Successfully manage the transition of our mi
Slide 10: KBR 2012+ Strategy
KBR 2012+ Strategy Page 10 of 71
Slide 11: Broad Market Trends for KBR
Broad Market Trends for KBR ¾ Corporations are healthy and have money to spend; Governments will see increased financial austerity ¾ Global economic, social and political change presents higher risks for non-diversified players ¾ Local content pressures continue to increase and have increasingly lar
Slide 12: KBR Strategy Statement
KBR Strategy Statement KBR Aspiration “To be the world’s Contractor of Choice by consistently delivering successful and innovative capital projects and services anywhere in the world.” Page 12 of 71
Slide 13: KBR Key Strategic Attributes
KBR Key Strategic Attributes KBR will: ¾ Become a more vertically integrated international contractor ¾ Establish additional local operations in important market geographies ¾ Maintain Best-in-Class Risk Awareness and Management ¾ Organically grow existing market positions ¾ Consider acquisitions an
Slide 14: Establish an International Direct Hire Construction Capability
KBR Strategy Establish an International Direct Hire Construction Capability ¾ Expand KBR’s success in domestic direct hire construction projects over the past 3 years to international projects ¾ Increase KBR vertical integration on international projects to reduce risk as well as increase control an
Slide 15: Expand Access to Fabrication Capabilities
KBR Strategy Expand Access to Fabrication Capabilities to Increase Vertical Integration on Both Offshore and Onshore Projects ¾ Expand our alliance with Korea fabricator STX to execute EPC services on FPSO projects ¾ Develop strategic alliances to fabricate modules for LNG projects ¾ Package ancilla
Slide 16: Expand Operational Presence in Key Markets
KBR Strategy Expand Operational Presence in Key Markets to Address Local Content Requirements ¾ Continue to grow recently established offices in Perth, Australia, Luanda, Angola and Atyrau, Kazakhstan ¾ Establish new operations centers in Saudi Arabia (GES+), Brazil and Iraq to position KBR for incr
Slide 17: Continue to Build Out Capability Set in Minerals Market
KBR Strategy Continue to Build Out Capability Set in Minerals Market ¾ Leverage Roberts & Schaefer’s footprint internationally ¾ Establish separate Minerals Business Unit and leadership ¾ Expand relationships with Rio Tinto outside of Australia ¾ Expand Mineral footprint to include Latin America and
Slide 18: What is The Prize for Strategic Initiatives
KBR Strategy What is “The Prize” for pursuing these strategic initiatives: ¾ Increased financial performance, reduced risk and better execution across KBR ¾ Provide our customers with lower cost and more predictable project delivery ¾ Build out larger and more profitable global business across all o
Slide 19: Hydrocarbons – Roy Oelking
2011 KBR Analyst and Investor Day Hydrocarbons Roy Oelking – Group President November 11, 2011 Page 19 of 71
Slide 20: Hydrocarbons Group Business Units
Hydrocarbons Group Hydrocarbons Business Group KBR Hydrocarbons Group delivers Licensing, Conceptual Study and Consulting, FEED/PMC, EPC, EPCM and Commissioning for the wide spectrum of Hydrocarbons Value Chain around the World: LNG Offshore Refining Refining Sectors Market FLNG Onshore
Slide 21: Hydrocarbons – Global Market Drivers
Hydrocarbons – Global Market Drivers Business Unit Indicator Business Impact ¾ Oil stable @ $80-$100/bbl ¾ Global Investment in ¾ Steady demand growth o Onshore Oil & Gas o Shallow Water ¾ Exploration success o Deepwater ¾ High Asia gas price @ $15/mmBtu ¾ International Investment in LNG – ¾ Strong
Slide 22: Hydrocarbons - Aspiration & Strategic Attributes
Hydrocarbons - Aspiration & Strategic Attributes Business Aspirations ‘Tier 1 in all 4 Business Units with Increasing Group Revenue and Job Income by Delivering High Quality Projects and Services Worldwide’ Strategic Attributes ¾ Conceptual Engineering through EPC Business Model ¾ Strong Client Rela
Slide 23: Hydrocarbons Growth Strategy
Hydrocarbons Growth Strategy ¾Luanda ¾Al Khobar GEOGRAPHIC ¾Atryau ¾Baghdad EXPANSION ¾Perth ¾Rio De Janeiro ¾International Direct Hire Construction INCREASE “SHARE OF ¾STX Alliance for Offshore Fabrication THE WALLET” ¾Continued Domestic EPC ¾Technology Alliances/ Acquisitions ADDING CAPABILITIES ¾
Slide 24: Gas Monetization BU – Capex & Major Prospects
Gas Monetization BU – Capex & Major Prospects • Kitimat LNG Tr I&II 2012-2014 Addressable Market Capex • BG Canada LNG Tr I & II • BG Trunkline LA LNG • Cameron LNG • Snohvit LNG Train 2 • Freeport LNG • Sasol/Talisman Canadian GTL • Shell US GTL $17B Europe & • Malaysia LNG Train 9 Eurasia • Tanggu
Slide 25: Gas Mon – Major Project Portfolio
Gas Mon – Major Project Portfolio INPEX ICHTHYS LNG KITIMAT LNG ¾ Client – Inpex ¾ Client – Apache ¾ Location – Darwin, ¾ Location – British Australia Columbia, Canada ¾ Scope – FEED, Open Book Tender and EPC ¾ Scope – FEED and EPC for LNG portion of for two LNG trains each Ichthys field of 5 mmtpa
Slide 26: Oil & Gas BU – Capex & Major Prospects
Oil & Gas BU – Capex & Major Prospects 2012-2014 Addressable Market Capex • Shah Deniz Phase 2 • TCO Future Growth Project Europe & • Karachaganak Phase 3 • Kaskida, GoM • Rumaila Field Eurasia • Pearls Project • Hadrian, GoM • Shell Majnoon Full Field • HOD Redevelopment • White Rose • Umm Lulu • R
Slide 27: Oil & Gas – Major Project Portfolio
Oil & Gas – Major Project Portfolio SHAH DENIZ PH 2 LUCAPA FPSO ¾ Client – BP ( Shah Deniz) ¾ Client – Chevron ¾ Location – Azerbaijan ¾ Location – Offshore, ¾ Scope – Detail Angola Engineering, Procurement Services and Construction ¾ Scope – FEED for a FPSO Management for Onshore Topsides, Hull & M
Slide 28: Downstream BU – Capex & Major Prospects
Downstream BU – Capex & Major Prospects • Corunna Cracker Revamp 2012-2014 Addressable Market Capex • TOTAL Antwerp Refining - • INEOS Olefins ROSE • Shell Grassroots Ethylene • Ustyurt Gas Chemical • Confidential Gulf Coast • Shell/QP Petrochemical Complex Ethylene complex, Qatar $31B • Pavlodar Re
Slide 29: Downstream – Major Project Portfolio
Downstream – Major Project Portfolio SADARA SONAREF ¾ Client – Saudi Aramco ¾ Client – Sonangol ¾ Location – Al-Jubail, ¾ Location – Lobito, Saudi Arabia Angola ¾ Scope – FEED/PMC ¾ Scope – EPCm for a along with complex grassroots refinery to configuration optimization process 200,000 bpd and constr
Slide 30: Technology BU – Capex & Major Prospects
Technology BU – Capex & Major Prospects 2012-2014 Addressable Market Capex • Refining Revamps • Ammonia Revamps • Refining Revamps • Coal Gasification • Ammonia New & Revamps $630MM • Petrochemicals • Refining Revamps • Refining - VCC & ROSE • Ethane Based $400MM Ethylene Crackers • Ammonia Revamps
Slide 31: Technology – Major Project Portfolio
Technology – Major Project Portfolio REFINING PETROCHEMICALS ¾ FCC: ShRaffineria di Milazzo (RAM) FCC Revamp, ¾ Catalytic Olefins: Shaanxi Yanchang Petroleum Italy Yanan Energy and Chemical Co, China ¾ ROSE: Luberef-II ROSE Revamp, Saudi Arabia ¾ Olefins: Multiple Expansions, US/Canada ¾ Olefins: Sa
Slide 32: Why KBR?
Why KBR? ¾ Strong Foundation for Continued Organic Growth ¾ Opportunities to Expand Project “Share of Wallet” ¾ Continued Expansion into High Growth Regions ¾ Great Breadth of the Franchise ¾ Strong Risk Awareness and Double Regard to Risk Management Page 32 of 71
Slide 33: Infrastructure, Government, and Power – Mark Williams
2011 KBR Analyst and Investor Day Infrastructure, Government, and Power Mark Williams – Group President November 11, 2011 Page 33 of 71
Slide 34: Infrastructure, Government & Power Business Unit
Infrastructure, Government & Power Business Unit Infrastructure, Government, and Power KBR Delivers in six distinct markets: Infrastructure, Minerals, Government, Logistics, Power and Industrial Transportation U.S. Federal U.K. Ministry of Power Coal, Iron Ore Sectors Market Water Govern
Slide 35: IGP – Business Drivers
IGP – Business Drivers Business Drivers ¾Increased global demand drives infrastructure, minerals and power investment ¾Government regulations and energy demand will drive power opportunities ¾Forest products capital expenditure increases ¾Government spending to decrease with defense reductions more
Slide 36: Infrastructure, Government & Power - Outlook
Infrastructure, Government & Power - Outlook Business Aspirations ¾Leading and vertically integrated businesses in power, minerals, industrials and infrastructure ¾Balanced and growing U.S. and international government services business Strategic Attributes ¾ Power EPC capability ¾ Premiere logistic
Slide 37: Power and Industrial
Power and Industrial International Paper Value Proposition and Strategy Kwidzyn, Poland ¾Build on full EPC offering in US now to expand internationally ¾Sold $800MM power business in 2011 ¾Opportunities in UK, Middle East ¾Follow industrial customers internationally Southern Company Plant Franklin S
Slide 38: EPC: Southern Company (Mississippi River)
EPC: Southern Company (Mississippi River) ¾ Kemper County IGCC Project ¾ TIC $286MM (KBR $171.6MM) ¾ 582 MW integrated gasification combined-cycle ¾ Clean coal facility ¾ First use of Transport Integrated Gasification (TRIGTM) technology in US ¾ Carbon Capture & Storage of 50 percent of plant’s CO2
Slide 39: Government and Logistics
Government and Logistics Eastern Processing Facility Value Proposition and Strategy Cape Canaveral, Florida ¾Premiere leader in the contingency markets for logistics, facility management, base life support ¾Support US, UK, AUS and NATO forces today ¾Diversify federal and commercial clients ¾Target o
Slide 40: Department of State Iraq Support
Department of State Iraq Support ¾ Base Life Support to U.S. Dept of State Diplomats and advisors in Iraq ¾ Contract: Cost Plus – Fixed Fee, 1 Base year + 1 year Option, over $500M ¾ Scope: Fuels, maintenance, fire protection, camp operation, dining ¾ Focus: Minimize costs, Increase local (Iraqi) co
Slide 41: Infrastructure
Infrastructure First new airport built Value Proposition and Strategy in US since 9\11, ¾Local customer facing offices with Panama City, Florida global resource/knowledge reach ¾Proud history of technical engineering excellence ¾Strong safety culture ¾Industry best risk awareness Regional Rail Link
Slide 42: Minerals
Minerals Value Proposition and Strategy ElkView Coal Washery, British Columbia, Canada ¾Build EPCM/EPC business off global minerals footprint ¾Dedicated leadership team to focus on growth ¾Recognized industry leader for materials handling Rio Tinto Hope Downs, Pilbara Region, Western Australia Strat
Slide 43: Why KBR?
Why KBR? ¾Ability to leverage power in new domestic and international markets ¾Opportunity to build out integrated global minerals footprint ¾Diversification of KBR’s industry leading logistics services capabilities to new customers ¾Positioned to capture growing infrastructure spend in the Middle E
Slide 44: Services – David Zimmerman
2011 KBR Analyst and Investor Day Services David Zimmerman – Group President November 11, 2011 Page 44 of 71
Slide 45: Services Business Lines
Services Business Services Group KBR Services delivers construction, construction management and maintenance services to clients across a variety of industries: Refining Power Oil Sands Life Sciences Healthcare Sectors Market Chemicals Pulp and Paper Mining Education Aerospace
Slide 46: Services – Business Drivers
Services – Business Drivers Business Indicators Business Impact Unit Key ¾ Market Cost Trends effective Ethane feedstock ¾ Increased investment in Petrochemical and Ammonia market ¾ Changes to Federal Clean Air Regulation Act ¾ Increased number of environmentally driven projects Construction ¾ Incre
Slide 47: Services – Aspirations and Strategic Attributes
Services – Aspirations and Strategic Attributes Business Aspirations Services aspires to be the leading provider of global construction and maintenance services on EPC and stand alone projects Strategic Attributes ¾ Expandable construction and maintenance capability into international markets ¾ Abil
Slide 48: Looking Back: Acquisitions Impact to Aspirations
Looking Back: Acquisitions Impact to Aspirations ¾TGI – Specialty Turnaround (TAR) Company – Acquisition April ‘08 ¾Multi-site TAR and International expertise Key Market Trends ¾Management, controls and professional consulting ¾Returned to North America TAR direct hire execution ¾Results: Turnaround
Slide 49: Services – Construction
Services – Construction Key Market Trends 2011 Quarterly Sales New Awards Performance Growing US shale gas production in areas such as 598% Texas, Wyoming, North Dakota, Pennsylvania Significant increase in Downstream market 1405% opportunities due to ethane supply from shale gas estimated at $1
Slide 50: Services – Industrial Services
Services – Industrial Services Key Market Trends Addressable Market - US Only Clients’ multi-site maintenance and strategy continues, e.g., Shell, Dow, LyondellBasell, etc Increasing number of clients are outsourcing facility maintenance, e.g., Exxon Mobil and Shell Increased interest and rene
Slide 51: Services – Canada Operations
Services – Canada Operations Key Market Trends Addressable Market Oil sands investments expected to grow to record levels by 2013 Oil sands and SAGD projects moving from detail design and module fabrication into construction over next two years Major investment in minerals market continues, e.
Slide 52: Services – Building Group
Services – Building Group Key Market Trends Addressable Market Slowdown in commercial building construction Smaller project size Improving residential market in DC area Healthcare consistent Continued investment in manufacturing in the Southeast Key Business Indicators Active Projects Su
Slide 53: Services – Typical Projects
Services – Typical Projects Industrial Services : DuPont – Multi-Site US Construction: Southern Company – Juliette, GA Project: Continuous Construction Project: Plant Scherer & Maintenance Services Scope: Construction of a Flue Scope: Maintenance, Gas Desulfurization (FGD) and Construction &
Slide 54: Why KBR?
Why KBR? ¾Market tested capabilities which deliver differentiated, predictable outcomes for construction and maintenance ¾Well positioned in recovering North American markets ¾People, systems, tools, knowledge and vision to extend our direct hire capabilities to international markets ¾Strong risk aw
Slide 55: Financial Performance – Sue Carter
2011 KBR Analyst and Investor Day Financial Performance Sue Carter – Executive VP & Chief Financial Officer November 11, 2011 Page 55 of 71
Slide 56: 2011 Earnings Guidance
2011 Earnings Guidance Third Quarter 2011 Guidance $3.15 to $3.30 $0.45 for Barracuda/Caratinga arbitration $0.10 to lower end of range for stronger operating performance and G&A expense control Second Quarter 2011 Guidance $2.60 to $2.85 $0.37 for discrete tax items & lower ETR $0.09 for stronger o
Slide 57: KBR Delivers: Historical Earnings Guidance vs. Performance
Historical Earnings Guidance vs. Performance Year Guidance Given Delivered 2008 $1.30 to $1.60 Range $1.84 2009 “In-line with Analyst Expectations” $1.79 Analyst range at that time (January 2011) was $1.59 to $2.00 2010 $1.60 to $1.80 Range $2.07 Raised to $1.75 to $2.00 during 2010 KBR Delivers Not
Slide 58: Strengthening Backlog
Strengthening Backlog 165 Job Income Backlog 160 155 150 145 140 Performance Index 135 In 2011, Job 130 13% CAGR Income Backlog 125 Up 10% Compared 120 to Revenue Backlog Down 3% 115 110 105 100 95 Revenue Backlog 90 2006 2007 2008 2009 2010 9/30/11 Page 58 of 71
Slide 59: Strengthening Backlog Contributing to Margins
Strengthening Backlog Contributing to Margins 13.0% 2011* 12.0% 2010 11.0% Job Income Margin 10.0% 2009 9.0% 2007 2008 8.0% 2006 7.0% 6.0% $8,000 $9,000 $10,000 $11,000 $12,000 $13,000 Revenue (in millions) *Note: Annualized based on First Nine Months of 2011 Actual Reported financials from Form 10-
Slide 60: Backlog Growth Expected
Backlog Growth Expected Prospect List Indicates Backlog Growth for KBR’s 3-Year Planning Horizon 9/30/2011 2012E 2013E 2014E Page 60 of 71
Slide 61: Cash Generation & Cash Deployment
Cash Generation & Cash Deployment $549M $319M 2010 Business Cash $312M $164M Acquisitions $265M Generation & Licensing Arrangements 9 Months 2011 MWKL $119M Business $941M Acquisition Share Cash $120M Generation Repurchases & Dividends Share Repurchases $125M CAPEX; $786M & Dividends Other Investing
Slide 62: Historical Corporate G&A
Historical Corporate G&A $230.0 $220.0 $210.0 Corporate G&A $ in Millions $200.0 $190.0 $180.0 $170.0 $160.0 $150.0 2007 2008 2009 2010 2011 Annualized *Note: Annualized based on First Nine Months of 2011 Actual Reported financials from Form 10-Q dated October 26, 2011 ERP Spend Page 62 of 71
Slide 63: KBR's Financial Strength
KBR’s Financial Strength Working Capital Management ¾ Focused on balance sheet ¾ Cash neutral or greater on projects ¾ Balanced receivables and payables; resolving and collecting on past disputes (EPC-1 and disputed withhold amounts) ¾ Process efficiencies Credit Resources and Leverage Ability ¾ KBR
Slide 64: A Shifting & More Balanced Portfolio
A Shifting & More Balanced Portfolio 10% 13% 28% 46% Revenue 62% 37% 2008 YTD 2011 13% 13% 43% 52% Business Unit Income 44% 35% Hydrocarbons Infrastructure ,Government and Power Services & Other Page 64 of 71
Slide 65: Growing KBR Revenue Excluding LogCAP
Growing KBR Revenue Excluding LogCAP $14.0 $12.0 $10.0 Revenue $ in Billions $8.0 $6.0 $4.0 $2.0 $0.0 2006 2007 2008 2009 2010 2011 Annualized LogCAP KBR Revenue Without LogCAP Page 65 of 71
Slide 66: Shareholder Returns
Shareholder Returns Year-to-Date 2011 2006 through Year-to-Date 2011 40% 30% 20% 10% 0% -10% -20% -30% KBR PEERS DJIA S&P500 KBR PEERS DJIA S&P500 *Peer Average includes Fluor, Jacobs Engineering, Foster Wheeler, McDermott, Chicago Bridge & Iron, Shaw Group, and URS Note: Year-to-Date 2011 (Closing
Slide 67: E&C 2012 Forward P/E Multiples
E&C 2012 Price to Earnings Multiples 15x 12x 2012 Forward P/E Multiples 9x 6x 3x 0x FLR JEC CBI SHAW KBR FWLT URS MDR Note: Based on closing price on November 4, 2011 Source: FirstCall from ThomsonReuters Page 67 of 71
Slide 68: Why KBR?
Why KBR? ¾Backlog continues to strengthen to enhance margin improvement ¾Backlog growth expected through strong prospect list ¾Strong cash generation ¾Corporate G&A control ¾Continued thoughtful and strategic deployment of cash ¾KBR has strong financials to support growth Page 68 of 71
Slide 69: KBR's 2012 Preliminary Guidance Items
KBR’s 2012 Preliminary Guidance Items Preliminary 2012 Guidance Items ¾ Anticipated LogCAP revenue between $300 - $500 million ¾ Effective Tax Rate expected to be approximately 28% Page 69 of 71
Slide 70: Why KBR? – Bill Utt
2011 KBR Analyst and Investor Day Why KBR? Bill Utt – Chairman , President, and Chief Executive Officer November 11, 2011 Page 70 of 71
Slide 71: Why KBR?
Why KBR? ¾ We have a diverse series of growth drivers ¾ Close the “Big Elephant” projects in Hydrocarbons ¾ Continue to organically grow our Breadth of Franchise, including Power, Minerals, Infrastructure, and Services businesses ¾ Expand our “Share of Wallet” by leveraging our North American vertic