KBR Analyst Day Review

By Eric Fox | June 29, 2010 AAA

KBR (NYSE:KBR) used a recent analyst meeting to outline the benefits the company would receive from the build out of the infrastructure needed to support increased energy development over the next decade. (For related reading, check out Do-It-Yourself Analyst Predictions.)

IN PICTURES: Eight Ways To Survive A Market Downturn

The Company
KBR provides engineering, construction and other services to large companies and governments all over the world. The company had revenues of $12.1 billion in 2009, and a contract backlog of $13.3 billion as of the end of the first quarter of 2010.

Hydrocarbons Business Group
KBR's Hydrocarbons Business Group consists of construction and engineering services for upstream and downstream oil and gas projects.

The company sees a particularly large opportunity in the increase in Liquefied Natural Gas (LNG) facilities as many countries seek to monetize natural gas assets. KBR estimates that the value of LNG projects over the next five years will be $ 165 billion.

KBR won a contract in September 2009 to work on the Gorgon LNG project located in Australia. Gorgon is a large project being built by Chevron (NYSE:CVX), along with partners Exxon Mobil (NYSE:XOM) and Royal Dutch Shell (RDS.A, RDS.B). The downstream portion of the project involves the construction of three LNG trains with annual capacity of 15 million tons.

Other opportunities in the Hydrocarbons Business Group include Gas To Liquids (GTL) facilities, offshore oil and gas development, refineries and petrochemicals. Business here is obviously driven by the price of oil and natural gas and this business should have a decent growth rate as long as commodity prices stay high. (Learn more about the industry in the Oil And Gas Industry Primer.)

Infrastructure, Government, and Power Business Group
Another important segment for KBR is the Infrastructure, Government, and Power Business Group, which provide engineering, construction and other services mostly for the U.S. government and other sovereign nations. This business is levered to government spending, in particular that of the U.S. and United Kingdom.

The company provides services to the U.S. military in Iraq under the Logistics Civil Augmentation Program (LOGCAP), but is seeing this business reduced as U.S. forces withdraw from the country. KBR also gets business from the building of infrastructure and power generation projects.

Recent Contracts
KBR has reported some recent contract wins on various projects. The company announced two contracts with DuPont (NYSE:DD) to provide construction management services on projects that the company is building. One project is for a production facility in Ohio, and the other is for the expansion of DuPont's office complex in Delaware.

Petrobras (NYSE:PBR) chose KBR for engineering and construction services at a new ammonia plant that the company is building in Brazil.

Bottom Line
KBR will be a beneficiary of the increased demand for energy and the accompanying infrastructure needed to support that development. The company is also a critical contractor to the U.S. and other governments. (For more stock analysis, take a look at 3 Utilities With A Decade's Double-Digit EPS Growth)

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