KBR Inc.KBR

Morningstar Rating

Stock Research and Analysis

by Joung Park

KBR is working to strengthen its engineering and construction (E&C) and maintenance service businesses to offset anticipated declines in its overseas military contracts.

During the last few years, more than 50% of KBR's revenue stemmed from the Read more

Bulls Say

KBR has recently signed number of front-end engineering and design (FEED) contracts, which the company hopes will lead to EPC contracts. These FEED contract awards are for: a drilling platform for the Chirag Oil Project in Azerbaijan, two refineries in Africa, an LNG facility in Papua New Guinea, and an LNG plant in Darwin, Australia.

KBR, as part of a joint venture, has managed to initially secure a portion of the construction work for the Gorgon LNG project on Barrow Island in Australia. The firm could win additional E&C work as the project moves forward. The Gorgon LNG project is expected to cost about $40 billion and would be the largest resource project in Australia.

The company also has done preliminary work at Ras Tanura and Yanbu, two planned large-scale projects in Saudi Arabia, and could also win additional work should these projects move forward. Read more

Bears Say

KBR will no longer be the sole service provider under LOGCAP IV and will have to compete with two other services providers for task orders. LOGCAP-related revenue could be volatile during the 10-year duration of the contract.

Many of KBR's large upstream projects are in politically unstable areas around the world (such as Algeria, Nigeria, and Yemen), and the company could face unexpected risks and costs.

KBR is facing a more competitive pricing environment as demand for E&C services slows because of the ongoing recession. The company said it would be comfortable increasing fixed-price contracts in its backlog to up to 50%. This would increase the risk profile of KBR. Read more

Strategy

During the last decade, KBR's primary business was providing construction and operational services to the U.S. government in Iraq. Currently, KBR is working to expand its E&C and maintenance services Read more

Management

William Utt was appointed CEO a few months before KBR's IPO in 2006 and chairman in 2007. Most of his senior management team has been at KBR for more than 10 years. Executive compensation is in line with industry practices. Allegations of KBR engaging Read more

Profile

KBR is a global engineering and construction company that primarily serves the U.S. government and companies in the energy industry. Revenue from operations in Iraq accounted Read more

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