KBR will pull out of LNG and energy construction lump-sum projects sector in major strategy change

Wednesday, 24 June 2020
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US engineering company KBR, a world leader in liquefaction plant construction projects, said it would exit most of its LNG on-site building ventures and other related projects because of the global reduction in energy investments.

The Houston, Texas-based company will now refocus on its government contracts and technology businesses, according to a conference call statement to investors and letters to employees from Chief Executive Stuart Bradie.

“KBR will no longer engage in lump sum, blue collar construction services,” said Bradie, explaining that the Covid-19 pandemic accelerated the decision to leave fixed-contract energy projects.

KBR holds contracts for engineering and construction services for several LNG export projects, including Freeport LNG’s Train 4 expansion at Quintana Island in Texas, Pieridae Energy’s proposed Goldboro LNG facility in the Canadian province of Nova Scotia and Glenfarne Group's Magnolia LNG project in Louisiana.

Freeport LNG has delayed its expansion project to 2021 and planned to seek new bids for construction.

KBR gave no details of potential impairments in its next earnings because of the LNG and energy construction pull-back, though it said in a recent strategy Webcast on June 16 that it expected the energy business to be “marginally profitable” in 2020.

CEO Bradie is expected to disclose more details when the second-quarter results are released in July

Bradie told investors in the conference call that about 85 percent of the company's forecast earnings for 2020 are expected to come from the government-related contract business, up from about 11 percent in 2015.

KBR said the changes would mean “significant realignment” in some offices as the management transforms the business to the new structure and to new ways of working, while exiting certain markets and regions.

KBR appears to be only existing “construction services” and is expected to continue with its consulting business in the energy and related sectors.

Its most recent energy contract awarded in May 2020, was a master service agreement and feasibility study by Japanese resources company JX Nippon Oil & Gas Exploration Corp.

The contracts will be executed by KBR’s Energy Solutions division, which includes sectors such as onshore oil and gas, LNG liquefaction and regasification, floating LNG and refining.

KBR said it was building on a strong and successful portfolio in the of options for Carbon Capture and Sequestration (CCS), alongside blue hydrogen production relating to oil and gas fields in Southeast Asia.

In the JX Nippon project, KBR will provide technical consultancy services in relation to developing concepts and technology recommendations for the capture of carbon-dioxide (CO2), re-injection and production of blue (carbon free) hydrogen.

The project will be led primarily from KBR's consulting hub in Singapore.

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