WILLBROS GROUP INC (DE) (WG) filed Quarterly Report for the period ended 2009-09-30.
Willbros Group Inc. is an independent contractor serving the oil gasand power industries providing construction engineering and specialty services to industry and government entities worldwide. They place particular emphasis on projects in developing countries where they believe their experience gives them a competitive advantage. Willbros Group Inc (de) has a market cap of $523 million; its shares were traded at around $13.2 with a P/E ratio of 8.5 and P/S ratio of 0.3.
Highlight of Business Operations:
Our third quarter of 2009 revenue was $247,533 and net income was $1,683 or $0.04 per share from continuing operations. Revenue and net income for the same quarter in 2008 were $490,651 and $18,460, respectively. The 50 percent decline in year-over-year revenue is primarily related to the reduction of large diameter pipeline work and the absence of EPC work that made a positive contribution in the same period in 2008. The third quarter of 2009 earnings were lower than expected primarily because of $4,500 in additional costs on an EPC project that was shutdown by our customer for several months and restarted with different protocols for safety and project execution. The project s revised schedule and work scope have resulted in additional charges to the project. Change orders covering the costs of the delays and scope changes have been or will be submitted to our customer for settlement; however, we cannot estimate at this time the outcome of these negotiations. Also impacting the third quarter s earnings were $2,418 of “other charges” for employee severance and impairment of operating leases relating to the Company s ongoing efforts to align our cost structure with the current and anticipated business environments.
Our backlog as of September 30, 2009 was $501,358, an increase of $114,172 (29.5 percent) from the prior quarter. This is the first successive quarter backlog increase since the second quarter of 2008. As mentioned above, the FEP contract award drove the Upstream Oil & Gas increase of $74,683. Included in the Upstream Oil & Gas backlog increase is a 9 percent increase in our Oman backlog as well as new backlog associated with the Libya Great Manmade River Project, a combined successive quarter increase of $7,328. Downstream Oil & Gas backlog also experienced an increase of $39,489 or 26.1 percent. The Downstream Oil & Gas increase is primarily the result of $21,486 of additional backlog attributable to the acquisition of the engineering business of Wink Companies, LLC. (“Wink”); however, overall Downstream Oil & Gas backlog is trending up as a direct result of the increased proposal activity experienced in the current quarter and customers scheduling previously deferred turnaround work. Turnaround work scheduled for 2010 comprises 43.0 percent of the Downstream Oil & Gas backlog. Because our customers need to complete certain required maintenance work, our Downstream Oil & Gas businesses appear to be recovering earlier than the Upstream Oil & Gas businesses.
For the three months ended September 30, 2009, we achieved net income from continuing operations of $1,683 or $0.04 per basic and diluted share on revenue of $247,533. This compares to net income from continuing operations of $18,460 or $0.48 per basic and $0.46 per diluted share on revenue of $490,651 for the three months ended September 30, 2008.
Operating income for the three months ended September 30, 2009 decreased $25,732 (88.0 percent) to $3,499 from operating income of $29,231 during the same period in 2008, and operating margin decreased 4.6 percentage points to 1.4 percent in 2009 from operating margin of 6.0 percent in 2008. The operating income decrease was primarily a result of the decrease in contract income of $35,588 (58.4 percent) from 2008, other charges of $2,418, partially offset by a year-over-year quarterly improvement of G&A equal to $10,648. Following are the key components of the decrease in operating income:
Consolidated cash flows provided during the nine months ended September 30, 2009, including discontinued operations, increased $1,193 to $35,859 from $34,666 during the same period in 2008. Cash provided by operations was $81,008, attributable primarily to our large diameter pipeline construction projects. The other significant cash transactions for the nine months was the acquisition of Wink, which used $16,311 of cash and the buy-out of capital leases, of $15,304. Combining our plant, property, and equipment purchases and disposals, along with cash used and obtained through acquiring Wink, resulted in a net outflow of $16,091.
Backlog consists of anticipated revenue from the uncompleted portions of existing contracts and contracts whose award is reasonably assured. At September 30, 2009, total backlog from continuing operations increased $114,172 from $387,186 at June 30, 2009 to $501,358. Total backlog decreased $154,136 (23.5 percent) from $655,494 at December 31, 2008. We have transitioned back to a more historically based backlog unlike the past couple of years when the industry operated at or near capacity which led to higher backlog levels as customers reserved available capacity up to a year or more in advance of the project start date. Historically, a substantial amount of our revenue in a given year has not been in our backlog at the beginning of that year. Additionally, due to the short duration of many jobs, revenue associated with jobs performed within a reporting period will not be reflected in quarterly backlog reports. We generate revenue from numerous sources, including contracts of long or short duration entered into during a year as well as from various contractual processes, including change orders, extra work, variations in the scope of work and the effect of escalation or currency fluctuation formulas. In the current market for pipeline construction services, the opportunities for large cost reimbursable pipeline construction projects are minimal as demand has fallen below available capacity. Cost reimbursable contracts comprised 43.9 percent of backlog at September 30, 2009 versus 84.0 percent of backlog at December 31, 2008. We expect that approximately $136,061 or 27.1 percent, of our total backlog at September 30, 2009 will be recognized in revenue during the remainder of 2009.
WG is in the portfolios of John Keeley of Keeley Fund Management.
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