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Fluor 2Q17 Earnings Call Notes

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David T. Seaton – Fluor Corp.

The current market environment is the worst I’ve seen in 30 years

“the current market environment is perhaps the worst I’ve seen in my 30-plus years. The market has contracted since 2014. The good news is that we’re starting to see prospects come back in some of our end markets including mining, which includes the Anglo American Quellaveco project in Peru and the Salares Norte project in Chile for Gold Fields, and our recent announcement of the BHP South Flank project. Having said that, creating and maintaining a diverse portfolio of work has been and continues to be a core strategy of Fluor.”

Some upstream projects that may get dusted off in 2018/2019

“I don’t see upstream spending a whole lot of money in the industry as we finish this year. But I do think there are some large upstream developments that are kind of being dusted off by our customers because they’re in a need of that capacity. So I think as we get into 2018, 2019, we’ll start to see upstream spend a little bit more than they’re spending now. And that comment, excludes LNG. I think there’s going to be a lot of study work on LNG, but I really don’t think there’s going to be a lot of projects go to the EPC phase this year or most of next year. So I think we’re just going to have to wait and see what happens. But I do see a pretty robust slate of opportunities in refining and petrochemicals.”

Feeling good about infrastructure group

“I feel pretty good about infrastructure and what’s going to happen. I would caution though, the rhetoric we all hear from the press and where it emanates from, whether it’s a federal government or state government. As you’ve heard me say, there is no such thing as a shovel-ready project. But what I’m very eager to see is that at least the dialogue is around identifying in the United States, identifying the priorities and those priorities around toll roads, bridges, ports, airports fit well into our portfolio. And I think those things are going to bode well for us. But I believe that our infrastructure group will continue to be a bright spot in our organization and continue to add to their backlog as we go through the next probably six quarters.”

A lot of these projects get held up because of regulatory

“I think the capital is there. I agree with you 100%. I think the problem is, you got to look at the Purple Line in Baltimore. Project passed all the hurdles environmentally, financially, everything else and then the regulatory environment slowed it down and actually stopped it for a while. So even though the capital is ready, some of the projects, I think, are at least to a point where you get to that next stage. I think the regulatory reform that the government is talking about has to come through before the timing of those things actually improve. And I’d put pipelines in that category.”

Cabinet is twiddling their thumbs because government hasn’t been able to give their team

“So one of the frustrations I see, and this is kind of a political commentary, there’s 2,200 – and you’ve read the same things I’ve read. There’s 2,200 Senate candidates that have to – candidates have to go through Senate approval. I think the last count was 55. And you’ve got people like Elaine Chao in transportation. You’ve got Rick Perry in energy, Rex in State. These people that we know and know well are sitting there twiddling their thumbs, so to speak, because we haven’t been able – the government hasn’t been able to give their team. So I think that is why you saw things screech to a halt. And I don’t see a whole lot of improvement until that phenomenon is behind us and the efforts that the administration are putting forth in terms of the regulatory reform actually see light of day. A lot of good intent, a lot of good thought and strategies to people that I’ve talked to, including the folks I just mentioned, but until we get those things ,done you’re not going to see these permits that are absolutely necessary to go forward actually awarded.”

Acquisitions in this market are difficult

“Acquisitions in this market are always difficult. You’re dealing with cultures. You’re dealing with people. And it’s not like a manufacturing facility or a manufacturing company where you can sell off one manufacturing facility that doesn’t fit the new strategy. These things deal with culture and individual capabilities of scale. So we’re going to continue to look at things that add to our offering. But I would say, we’ve already got the breadth to do just about any project that’s presented to us that again meets our expectations in terms of risk and profitability.”

Fluor 1Q17 Earnings Call Notes

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David Thomas Seaton – Fluor Corp.

Lowered guidance

“Let me get started off by addressing the guidance. First quarter admittedly got us off to a slow start for the year on earnings. That and the potential for slow burn on a couple of key projects put pressure on the lower end of our previous guidance range. The upper end of the range would have required new awards coming in at a faster pace than we’ve recently experienced. For these reasons, we have lowered our guidance for the year.”

We continue to believe a gradual recovery is underway

“While first quarter economic data has been relatively soft, we continue to believe a gradual recovery of our markets is underway, driven by improvements in the global economic activity. Some of the leading indicators for future capital spending like industrial production, capacity utilization are improving in several regions and industries, which provides us confidence that our clients are beginning to increase their spending.”

However the lack of engineering awards is unprecedented

“However, the lack of engineering and new awards is unprecedented and lower than we expected to see when we initially issued guidance for 2017 last November. Let me emphasize that we believe that we have good insight into what is coming and that the opportunities remain robust.”

Projects are being pushed out

“In fact, everything is pushed to the right where when you think about the guidance that we set last year in November, we were expecting some significant awards in the third and fourth quarter of last year that would have been really in the peak of burning their engineering scope now. We still are scheduled to put those projects into backlog in the coming quarters but, as you can see, you missed basically three quarters of earnings on those projects, or at least the ramp up, it pushes everything to the right.”

We’re late cycle and this cycle is no different

“Thank you, and thank you to everyone for participating on our call today. As I said, although we’re disappointed on where we are at this point in 2017, all indications are that this is unprecedented contraction in the capital spending of our customers and that it is coming to a close and optimism is there. Our industry has always been a late cycle industry and this cycle is no different.”

Fluor 4Q16 Earnings Call Notes

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David Thomas Seaton

Energy and chemicals pipeline probably coming off the bottom

“Looking back, 2015 and 2016 represent one of the most difficult times in our industry. In fact, Energy and Chemical awards during this two-year period were the lowest they’ve been since 2009-2010. Even with that headwind, we were able to grow our backlog and focus our resources on non-commodity markets and opportunities. So what does that mean for 2017? I think it means that our Energy and Chemicals pipeline of opportunities will be coming off the bottom of the cycle. Clients focused on higher return projects and capital efficiency match well with what our talents provide.”

We think we’re at the bottom of the cycle

“I think as my prepared remarks suggest, we think we’re at the absolute bottom of the cycle and what we see is an improving slate of things to chase. And we’re not changing our selectivity sieve at all from a quality of project perspective, but we’re seeing that what I predicted two years ago, and that is, there’ll be pent-up demand on things because customers have kind of delayed projects for their own financial reasons, but now reached to the point where they’ve got to spend again.”

A sustained positive capital cycle

” I think we’re kind of in the beginning stages of what I would argue would be a sustained positive capital cycle that we’ve seen in the past. And I believe we’re positioned as good as anybody to win better than our fair share of those projects.”

We’re seeing an increase in projects but maybe with a little more prudent gating

“In terms of going forward, I mean, as I said, just in E&C alone we see a 50% rise in what we’re looking at during 2017 over 2016. So those projects are moving forward, but as we’ve said in the past, they move forward at their own pace. And even though the customers are a little more eager to get some of these things done, they’re still going through what I would argue is a more detailed gating process than they’ve gone through maybe in that last boom. And I think prudently so, because I think there were some projects that our oil & gas friends would have probably avoided had they not believed that $100 oil was there forever. So I think it’s just a matter of good, prudent gating processes. But as I said, we’re seeing an increase in activity.”

Haven’t seen a dramatic shift in inflation

” I would have thought that some of the pressures would have already started to creep up in terms of cost of commodities, cost of engineered equipment items and the like. But we’re in a middle of a couple of significant mid-cycles and we haven’t seen any dramatic increase or expectation of increase in terms of the bid validity from some of these vendors. In lot of cases, when you start to see inflationary pressures, you’ll start to see the bid validity on some of these things shorten. And we have not seen that phenomenon yet in the marketplace.”

Business will do what business needs to do to perform

“I was on a panel back in October, it was before the election. And a question from the audience was, under which presidential candidate would business be more successful under. And my answer was simply it doesn’t matter. Business will do what business needs to do to perform given any of the regulatory issues, changes that are there. Border tax may have some impact on our customers, very little on us. We have the ability to fabricate in a lot of different places. With our work right now being 52%, I think it is, U.S. based business, it would have very little impact in terms of the short-term.”

Biggs Porter

Engineering is much higher margin rate than construction

“engineering is just a much higher margin rate than construction is as it goes through the books. So, what you’re looking at in 2017 is just the burn-off of the engineering on the projects that we got new awards in ECM over the last few years, and transitioning more fully to construction on those projects which should have had enough inflow of new engineering work to sustain the mix for now. ”

Fluor 3Q16 Earnings Call Notes

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Fluor (FLR) Q3 2016 Results
David Seaton

Seen significant increase in industry infrastructure

“Through the first three quarters of 2016, overall global economic growth has underperformed our expectations. We continue to experience greater than anticipated headwinds from the commodities and related markets, which impact our Energy, Chemicals, Mining and Maintenance Modification Asset Integrity segments. On a more positive note, we’ve seen significant increase in industry infrastructure in power new awards and backlog which should contribute to our growth next year. Looking forward, we do expect a modest improvement in the economic growth next year, which should lead to greater consumer spending and growth in industrial production”

Expecting better economic activity in 2017

“We expect these increases and economic activity will lead to greater project opportunities for Fluor. We do believe that in order to maintain supply demand balances in key commodities like crude oil and copper, our customers will need to move forward with major capital projects, but it will be gradual. We also expect infrastructure and government spending to continue.

Lower for longer mindset on commodity prices is distorting the E&C contracting market

“As we move into 2017, I remain concerned that this longer – lower for longer mindset on the commodity prices – is starting to distort the E&C contracting market. We were now seeing customers not only expecting lower prices without addressing capital efficiencies, but also demanding contractors take on risk that is in some cases outside of the contractor’s control. This along with an increased level of irrational bidding in feed pricing creates an unusual and challenging marketplace. But we’ve seen this cycle before. Having said all that, it’s imperative that we maintain the discipline in our approach to pricing and risk management. That means not only seeking the right clients, but the right projects with the right clients. It means making sure we appropriately price for risk, advise our clients on the benefits of an integrated solutions approach, and when we win the contract, intentionally focus on execution and project completion.”

Competition is extremely tight

“When you look at 2017, I would say, it’s just in a couple of places. One is there’s been a delay in the award of some of the projects, even with the TCO project. So it’s a book and burn issue that drives us to – and not the number we presented. The other issue is I think the competition is extremely tight. And we’re probably, maybe a little bit more conservative in terms of the win rate that we look to get – because we are going to maintain that discipline in terms of risk and pricing.

Stay disciplined

“So, as I said, this isn’t the first time we’ve seen this behavior, both on our customers’ sides and on our customers’ sides. But I think we’re going to maintain that discipline and I think that’s where our diversity is part of the answer for continuing to grow. We’re able to skate to where the puck’s going to be, and not – not have to rely on, going back to a previous – previous question, not rely on a must-win project. We’re going to maintain our discipline.

Lower for longer creates some opportunities because people are comfortable with it

“Now, I would like to comment on the lower for longer piece. When you think about our oil and gas customers as well as our mining customers, I think they’ve gotten their head around the fact that the commodity prices are going to be maintained at current levels for a long, long time; and they have in fact changed their business model to deal with a lower for longer oil price as an example. So, when you look at what’s out there, they’re prioritizing those projects. They – you can argue they’ve taken a longer deep breath here – not having the confidence that the oil prices were going to moderate. And therefore, that pushes even the high quality projects out in time, and that’s what we’re experiencing now. I would also say that the conversations we’re having with our customers is they’ve gotten comfortable with their new model; they’ve gotten comfortable with the lower prices and they’re starting to move forward with projects that are critical in terms of their growth trajectory. So, we’re seeing many, many of these customers moving these projects towards FID as we get through next year into 2018, 2019, 2020. So, where lower for longer can be seen as a negative, I actually see it as a positive. Because we’re seeing much better behavior from customers in terms of the priorities that they’re doing, and these high value projects are typically the most critical and most complicated projects, which I think feeds right into our value proposition with those customers and what those customers expect us to deliver. So, I kind of denoted a little bit of negativity in the way you used the term – the phrase, lower for longer, but in fact I actually see that as an opportunity now.”

It becomes a buyer’s market when this cycle happens

“It’s a great question. We’ve seen, as I’ve said, I’ve seen these cycles before. And when there is movement in terms of lack of capital programs, it becomes a buyers’ market, and we see a lot of customers across the board looking for benefits from that. So I wouldn’t say, it’s just oil and gas, it’s across the board in terms of competitiveness.”

Fluor 2Q16 Earnings Call Notes

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Fluor (FLR) David Thomas Seaton on Q2 2016 Results

Expect continued slow recovery but are seeing capital spending return

“Generally speaking, we expect continued slow recovery in the global economy and modest improvement in the EPs and EC&M markets specifically. However, with that negative note, we are seeing capital spending return. We expect customers to award projects at a moderate pace as evidenced by our award of a bauxite project in the second quarter in mining and the award of the recently-announced Tengiz project which we’ll book in the third quarter.”

None of our customers makes plans based on spot oil prices

“It’s a good question. I would say we look at the volatility the same way our customers do, that it’s never as bad as it seems. It is never as good as it seems and none of us use spot oil prices or spot commodity prices in our long term planning process. So as I said, I think we’ve got good visibility into what – obviously what’s in our backlog now and good visibility into the things that we think we’ll take into backlog for the remaining part of the year. So I would argue that the latest oil price drop, I mean it was back up again today. So it lost what it lost and it gains what it gains and we just keep moving on. I think that the point I’ll make is that our customers particularly oil and gas customers, they’re basically re-entrenched in terms of $40 oil and those priority projects are still moving forward evidenced by the decision on TCO.”

No spending pattern changes from Brexit, but the end of Brexit wont occur for another two years

Fluor 1Q16 Earnings Call Notes

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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.”

Fluor 4Q15 Earnings Call Notes

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David Thomas Seaton – Chairman & Chief Executive Officer

Global economic growth is weak but we serve a diverse set of markets

“Global economic growth continues to be weak and commodities prices remain low. We expect economic growth of the year to be similar of the past few years. Yet we also expect commodity prices to stabilize during this year and perhaps even begin to improve in the last part of the year. The lower commodity prices obviously continue to impact our customers’ cash flows and, therefore, their ability on fund certain new projects at the same pace as they’ve done previously. Many of our customers have already announced significant reductions in their capital expenditure budget of 2016. However, Fluor serves a diverse portfolio of industries and regions, which provides the company opportunities even in difficult market environments.”

This year will probably be more lumpy and back end loaded than previous years

” I think it’s going to be even more lumpy in 2016 than we’ve seen in the past. The – what we’re going to see is that many of the customers are still taking an extra quarter or so to make their decisions. So we run the risk of having a project go from first quarter to the second quarter or second quarter to the third quarter. So I think it’s going to be somewhat more lumpy and I believe backend loaded more so this year than in previous years.”

I don’t see the doom and gloom that a lot of people see out there

“I guess there’s a bit of a bearish tone in terms of the overall, and most of that bearish tone is coming from the press. I’m fairly bullish about our ability to deliver on 2016. I’m pretty bullish about our position in the marketplace to add backlog as – at least stay flat with backlog as we enter 2017. So the glass is half full, and I don’t see the doom and gloom that a lot of people are and I guess your question kind of leads us towards.”

Seeing opportunities in infrastructure, pharma/biotech and gas fired power plants

“We’re seeing an uptick in opportunity in the Infrastructure group. They kind of hit a lull as you ended 2014 and early 2015. And we’re seeing a significant slate of opportunities that are there, and part of that is I think the U.S. government focus on infrastructure and the things that are necessary to keep the U.S. economy going. So that’s a bright spot. We’re seeing an uptick in terms of pharmaceutical and biotech opportunities. With the FDA approving drugs, some of those projects are getting off of the mark. We’re seeing a significant amount of frontend work, study work on gas-fired power plants, and we see a pretty robust opportunity slate there.”

The awards slate is pretty robust heading into 2017 and the glass is half full

“we’ve got good visibility into – the priority of the projects that our customers were taking, the economic viability of those projects based on current economic factors, and that’s what leads us to say that we’ll have a pretty robust – the award slate that’s – in robust to me means equal to this year, and certainly provides some visibility into the opportunities of 2017. So again I go back to what I said during Jamie’s question, the glass is half full. And it’s half full for us because of the fact that we’ve really stuck to our customers, and we’ve answered their call for integrated solutions and capital efficiency.”

Swings in energy prices will fix themselves

“This isn’t the first time me or people within our industry or our company have seen these kind of swings and volatility in markets. And they will fix themselves. I mean when you think – right now, there’s an oversupply of oil products. There’s an oversupply of gas. There’s an oversupply of LNG. It’s going to take a while for that to clear, but it will clear.’

I don’t think you’re going to see the supply situation change until the middle part of the year

“As I said, I don’t think you’re going to see the supply situation change dramatically until as we get into the mid part of the year. But once that glut kind of clears, I think you can see commodity prices kind of stabilize if not rise as we get to the backend. But the other thing that I’d warn everybody about is when you think about the long-term nature of Oil & Gas developments, from exploratory well to production, it’s a decade. So they’re not thinking about spending today for tomorrow. They’re thinking about spending today so that either the reserve base or their product mix or whatever is just focused on that further longer view”

Taxing regimes mean that pharma is not going to be a US based business by and large

“I mean, when you think about life sciences, pharmaceuticals, well, the taxing regimes in places like Ireland and Singapore and some of the other places around the world have attracted those businesses, so that’s not going to be a U.S.-based business by and large.”

People aren’t focusing enough on demand growth

“I think the one thing that’s not being spoken off is the demand growth in this discussion. And when you look at those demand growths, we’re still looking at 1 million barrels a day kind of growth in the midterm, I would say. So when you think about some of the production that’s going to naturally come off due to depletion curves, you look at – I guess, the Saudis and the Russians kind of put, for lack of a better term, a ceiling on production. You can see where that glut’s going to clear pretty quickly.”

Right now people are nervous

“I go back to what Buffett says, and I am not signaling any more acquisitions. But Warren Buffett says that he’s nervous when people are greedy, and he’s greedy when people are nervous. Well, right now people are nervous.”

Fluor 4Q14 Earnings Call Notes

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Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

Oil and gas pipeline hasn’t diminished

“The pipeline of projects is not diminished. Back in June of last year, I mentioned that we had pipeline of Oil & Gas projects totaling some $50 billion. Even though we’ve booked a number of those in the second half of 2014, a pipeline the prospects today is still roughly the same size.”

“To summarize, 10 billion projects of the original list were awarded to us, 2 billion was lost or canceled and 10 billion of new prospects have been added. With that we feel confident that are opportunities that remains in very good shape.”

There is still a tailwind in low gas prices

“More importantly, there is still tailwind – sorry – more importantly, there is still a tailwind for longer term growth is just blowing a bit softer and will cause a time over which the spending occurs to extend. Low cost gas is still a positive driver and there are customer decisions that are effected by all they see current pricing in temporary. Although there will be some delays in some cases, customers will ultimately make the decision based on those long term expectations.”

Backlog up 22%

“Full year new awards were record $28.8 billion including $19.7 billion in Oil & Gas, $4.7 billion in Government, $3.3 in Industrial & Infrastructure and $1.1 in Power. Consolidated backlog at year end was $42.5 billion, up 22% from $34.9 billion a year ago.’

Guidance 4.40-5

“We are accordingly expanding the 2015 guidance range slightly to $4.40 to $5 per diluted share. This guidance is closely effects the previously announced termination settlement of Flour GS to find benefit pension plan later in 2015.”

Some of these projects are moved into 16-17

“However, when you look at what is not in our backlog but we anticipated to be in our backlog, as we get into the first half of the year, some of it has been push to the right. So maintaining the record backlog and improving upon that in ’15, we don’t have as good feel for that. But again that really does an impact ’15, it more impact ’16 and ’17 when you think about the burn of some of these projects.”

Oil and gas customers are still feeling bullish about their plans, the only question is when. They have to answer to their shareholder base

“I’ve been in front of a lot of customers over the last couple of week, particularly in the Oil & Gas business. And for the types of things that we’re chasing, they feel pretty bullish about them going forward. It’s just a matter of when. I think they’ve got their challenges with their investor based that they are dealing with and they are taking one more look in a deep breath before they start pulling the trigger on some of these programs”

Work pending all over the globe

“I would say that in the near term and still heavily weighted towards North America, but the opportunity set is very global. I mean three or four countries in South America, three of four countries in the Middle East, China the non-sanctioned piece of Russia, the South East Asia, I mean there is just a lot of work out there that’s pending.’

Gestation period is longer, but I feel pretty good about energy still

“lot of these project are getting bigger, so the gestation period is longer which kind of speak to that lumpiness that we mentioned earlier. But as we go over the next 12 quarters, I feel pretty good about solid growth in that market place over that longer period of time. And that’s Oil & Gas.”

It wasn’t that long ago that our customers were prepping for $50 oil

“I’d remind the audience here that it was only four-five years ago that our oil company customers are making the same capital decisions on $50 oil. So that’s not that long ago’

Oil and gas customers are still going to replace their reserves, continue to improve their businesses

“I had a conversation with one customers last week as a matter of fact, they said, you know we still got to add 200,000 barrels just away to tread water. So these companies are going to continue to replace their reserved based, they are going to continue to look at a value added products, they are going to continue to improve their businesses. They are just going to be a little bit more thoughtful in which projects go forwards and which projects need a little bit work.”

You can’t paint us with the same brush as the rest of the oil market

“So yeah, I think drilling rig count is a problem, but we don’t do that business. I think some marginal field developments may take a little bit of a breath but again that’s not something that our backlog is exposed to. But at the same token, low prices are really exciting to the chemical producers, so as an example. So again I think that you really can’t paint Fluor or our market with the same brush as the – as this painted for the oil and gas market”

Real money is in the supply chain and construction implementation

We’ve had some customer that have asked for unit rate that kind of reductions but not significantly so. And to be honest, I believe that’s a little short sighted because that’s not where the real money is, real money is in the supply chain and how we implement construction.”

Fluor 2Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

After today’s 2% drop hopefully you’re not on a ledge

“After today’s market performance, I hope you’re not joining us from a ledge somewhere, and those of you that are, I know who you are.”

Revenue down because mining weak

“Consolidated revenue for the quarter was $5.3 billion, which was down from our $7.2 billion a year ago, mainly due to a significantly lower revenue base in Mining business line.”

Backlog up though

“New awards for the quarter were $5.9 billion, including $3.1 billion in government, $1.5 billion in oil and gas, $1.2 billion in Industrial & Infrastructure bookings. Consolidated backlog for the quarter rose to $40.3 billion, which is up 9% from $37 billion a year ago.’

Mining showing some signs of return

” the Mining & Metals business line is showing some signs of return, and we could see modest awards for projects later this year, as well as into next year. ”

Customers want integrated solution not just services

“Fluor’s always been known as a company that can build large complex projects for our clients anywhere in the world. The execution of these projects under the typical EPCM model has served us well. What we see today, however, is an increasing demand for our firm to partner with our customers and provide an integrated solution, not just services.”

Analyst comment: seems like some E&Cs have done well, some haven’t

“there’s been mixed messages about the cycle. I’m listening to your competitors, which I’m sure you’ve heard. Some guys have done well; some guys, maybe not so much”

Not that much has changed from customers

“We really haven’t seen, aside from mining, any change in the decision-making process of our customers over the last little while. Some things are moving quarter — like this quarter to next quarter and next quarter to fourth quarter. But FID decisions are still being made in pretty much the timely manner that we anticipated.”

Our reorganization has flattened the business to help us be more responsive to customers

“what we did is we flattened the organization. And we’ve put some really talented people in business lines that are closer to our markets, closer to our customers and in a better position to be more fleet of foot and answer — be more responsive to our customers. And I think that’s resonating. And I think that’s — that, by and large, is the reason why we’re seeing the win rates that we are because we’re listening better. And we’re tailoring those offerings specifically to what the clients need. But I think rapid response to those customer needs is really what’s driving the success.”

Old business got too siloed

“I think if you look at the older organization, which frankly, I was an architect of with my predecessor and frankly, created some silos that weren’t healthy.”

willing to partner with competitors

“in some cases, we’re actively partnering with many of the competitors that we’ve talked about in the past, and we’re finding out how best to utilize their supply chain, how to better utilize some of their abilities around technologies. And again, I think case in point is the Kuwait project that was awarded in the first quarter where you see us team with 2 Korean companies there. So I feel really good about the value proposition that we’re developing and the ability for us to articulate such that our customers choose us over the competition.”

Mining projects might start to come back middle of next year

” think that we are seeing a pickup. I think I talked about last quarter and again this quarter about increased study work and FEED work in mining, which is encouraging. But if you just stay on those normal schedules, you’re kind of middle of next year before you start to see the EPC projects come back.’

Light at the end of the tunnel

“I think we’re starting to see the light at the end of the tunnel, if you will, relative to mining.”

Tough to see a boom in construction by utilities

“I think that even if you look at the EPA rules, it’s still 20 years before they have to comply, give or take, completely. And I think they’re still going to take time to kind of rationalize what they have. Most of our customers have to deal with a rate base, and going back to the rate base for additional money isn’t something that they relish. So I think they’re going to be very measured in how they go forward relative to not only the coal cleanup fees but also in terms of gas. I do think that we’ve got the potential to maybe surprise a little bit, a little bit, in power as we go into next year.”

Kitimat still getting done even without Apache

“I still think that, that project, from a business model perspective, from a regulatory perspective, is still very solid.”

Competition has always been fierce in this business

“look guys, I mean, there’s no time in my history in this company where I’ve seen the competition not fierce. And I think you will always be fierce in this business. And that’s just incumbent upon us to continue to improve and continue to be cost-effective, but at the same time, make sure that we’re demanding the profitability that we need to return to the shareholders as they expect.”

Fluor 3Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings.

“New awards for the quarter were $5.6 billion, including $2.4 billion in Oil & Gas, $1.9 billion in Government, $846 million in Power.

Consolidated backlog for the quarter was $36.5 billion. This compares with $37 billion last quarter.”

“In addition to petrochemicals, we continued to be optimistic about prospects for a number of LNG projects, including the ongoing FEED for Anadarko’s Mozambique project. As well as in North America, we expected to hear decisions in the next few quarters on our bids, both for the Kitimat project in Canada and the Cameron project in Louisiana.

In downstream, we continue to track several key prospects, including refinery work in Mexico, Canada, as well as in Middle East.”

“We continued to expect the demand for FEED work will translate into significant EPC awards over the next year, 1.5 years. Ending Oil & Gas backlog for the quarter was $18 billion, which is leveled with last quarter.”

“Moving to Industrial & Infrastructure. New awards for the quarter were $472 million. Backlog stood at $13.8 billion, continuing its downward trend from $18 billion a year ago. While a number of the new awards during the quarter were modest, the group is pursuing a number of road and rail infrastructure projects in North America and several developing opportunities in Mining & Metals.

“I’m pleased to announced that the San Francisco-Oakland Bay Bridge was completed and opened for traffic during the third quarter, which was on time. I want to commend our project team for its outstanding performance in delivering this complex project to our customer.”

“Ending backlog for the Government segment was $1.8 billion. This compares with $1.6 billion a year ago.”

“mining is not dead, regardless of what people say. So there’s a lot of opportunity there.”

“I’m very bullish on where Oil & Gas is and I feel confident that they can eclipse the former high.”

” I think what you’re seeing is the thirst for the PPP model, Public-Private Partnership model, I think, is only going to increase.”

“I think you’re going to continue to see margin in our Oil & Gas segment continue to rise every quarter over the next little while. But I’d caution you because a lot of those projects are fixed-price and they’re going to have a different curve than the refining boom that we enjoyed in the last cycle where there was pretty steady growth quarter-over-quarter. It’s going to look like a lot of the patterns of some of the Industrial & Infrastructure programs, where a lot of the profitability will fall out when we’ve mitigated the risk or passed that risk and have the ability to drop more profitability to the bottom line.”

“I think we have the ability over time — and I’m talking about the back-end of next year and as we get into ’15 and even into ’16 — that we will get back to those peak margins in Oil & Gas.”