Fluor 1Q16 Earnings Call Notes

Fluor (FLR) David Thomas Seaton on Q1 2016 Results

Employees killed in petrochemical plant explosion in Mexico

“I wanted to comment on the tragedy that occurred two weeks ago in Mexico. As you may have read, three ICA Fluor employees and 29 subcontractors were killed in an explosion at PMV petrochemical plant in the State of Veracruz, Mexico. ICA Fluor was performing a revamp project at the site when the explosion occurred. The client is currently conducting their investigation in conjunction with the authorities and engaging with third-party experts into the cause of the accident. At this stage, there is no indication that the event was related to our activities at the site. So if you think I’m a little somber today I’m. This is the worst accident in Fluor’s history. This tragic event serves as a reminder to us all that we must hold our core value of safety at the center of all we do. In this very difficult time our hearts are with the families and the friends of those killed in the tragic event.”

Global economic growth weak

“Global economic growth for the first quarter was weak, setting up another sub-par year. Many economists have lowered their growth expectations for 2016. Crude oil and metal prices remain relatively low, which continues to suppress the cash flows of some of our customers and is causing some of the projects to shift to the right.’

Seeing clients reevaluate projects

“For our commodity influenced businesses, we’re beginning to see clients reevaluate projects through studies and pre-feeds. Going forward, we do expect clients to continue to take a cautious, disciplined approach when they make their capital investment decisions.”

Delays today could mean a boom later

“Well, you know, all those things are in some form or fashion accurate. This isn’t our first rodeo, so to speak. And when industry takes a deep breath like the oil and gas industry has, and they push things to the right, one of the unintended consequences of that is what could end up being a boom as we get into the out years. Because they still got to these developments.”

I can remember oil going to $17 up from $11

“No, I don’t think so. And I’ve said this in previous discussions with some of you. I lived in Saudi Arabia in the 1990s and I remember 1997 oil was $17 a barrel, up from $11. And even though oil is in the places where it’s more difficult to get to than maybe then, they were still – Saudi Aramco was still spending $30 billion a year, right. So they are still going to spend at $40 and $50 and $60 and they don’t need to get back in most cases to the peak for them to be efficient and profitable.’

Biggs C. Porter – Executive Vice President, Chief Financial Officer

No significant cancellations and none expected

“To go ahead and answer a frequent question in advance, there have been no significant cancellations and we do not anticipate any. The burn of backlog is low, as we’ve all observed.”