The Woodlands-based CB&I will increasingly eye petrochemical and liquefied natural gas projects along the Texas and Louisiana coasts while riding out the oil bust.
Although CB&I operates worldwide, more than 70 percent of its engineering and construction revenues in 2016 will come in the U.S., the company said Tuesday during an investor day in New York.
Amid a global oil bust, oil and gas growth grinds to a standstill in much of the world. And energy engineering and construction companies become increasingly competitive for the remaining projects.
So CB&I has pivoted to focus on the petrochemical, refining and LNG projects.
“Without question, this year has been a rollercoaster for investors in the E&C space,” CB&I President and CEO Philip Asherman said, arguing “Cheap oil isn’t necessarily a bad thing in this industry.”
CB&I recently sold its struggling Stone & Webster nuclear construction business to the Westinghouse Electric Co. for $229 million. The sale reduced CB&I’s global workforce from 54,000 people to 42,000 workers in recent months.
CB&I’s stock traded at nearly $80 a share two years ago and at about $50 per share in mid-2015. Now the stock is fluctuating near $35 a share over concerns about a slowdown in global energy construction.
When adjusting for the loss of the nuclear business though, CB&I still projects small increases in 2016 in revenues and earnings per share. Revenues last year are expected to come in at $12.9 billion, but less than $11 billion minus nuclear revenues. The 2016 projection is for between $11.4 billion and $12.2 billion in revenues.
When asked whether CB&I is taking on marginal terms to get more contracts and maintain market share during the downturn, Asherman said CB&I can deliver accurately on fixed-term contracts with its efficiencies and lower reliance on subcontractors.
“We’re also making more money than our competitors, so we must be doing something right,” Asherman said.
Patrick Mullen, president of CB&I’s engineering and construction operating group, said CB&I is specifically focused on Gulf Coast growth in 2016.
“There’s a lot ahead of us on that revenue runway,” he said.
CB&I is building a $1.5 billion, ethane cracker petrochemical project near Corpus Christi for Houston-based Occidental Petroleum. CB&I also began working on an ethane cracker plant in Lake Charles, Louisiana in a joint venture between South Korea’s Lotte Chemical Corp. and Atlanta-based Axiall Corp. CB&I is eager to move forward on a $2 billion ethane cracker project for Paris-based Total in Port Arthur.
CB&I is working on LNG units for Houston-based Freeport LNG in Brazoria County and for Cameron LNG in Hackberry, Louisiana.
CB&I also is building a NET Power demonstration plant in Three Rivers, Texas with Exelon Corp. to show off new technology to generate power from fossil fuels while eliminating greenhouse-gas emissions. That project is expected to be done in 2017.
While global growth is down in Asia and Australia, Asherman said CB&I expects to grow in the Middle East in nations like Saudi Arabia and Kuwait.
The biggest recent project is CB&I’s joint venture with Taiwan-based CTCI Corp. taking on a $2.8 billion engineering and construction contract to build a massive petrochemical and plastics complex in Oman. It’s called the Liwa Plastics Industrial Complex Project for the Oman Oil Refineries and Petroleum Industries Company, called Orpic.
In Africa, CB&I also has a lead role in Anadarko Petroleum’s large Mozambique LNG project.