Fluor Corp (FLR) 2015 Q4 法說會逐字稿

Good afternoon and welcome to Fluor Corporation's fourth-quarter and year end 2015 conference call. Today's call is being recorded.

(Operator Instructions)

A replay of today's conference call will be available at approximately 8:30 PM Eastern time, accessible on Fluor's website at www.Fluor.com. The web replay will be available for 30 days.

The telephone replay will also be available through 7:30 PM Eastern time on February 24 at the following telephone number: 888-203-1112. The passcode of 5904252 will be required. At this time for opening remarks, I would like to turn the call over to Geoff Telfer, Senior Vice President of Investor Relations.

Welcome to Fluor's fourth-quarter 2015 conference call. With us today are David Seaton, Fluor's Chairman and Chief Executive Officer, and Biggs Porter, Fluor's Chief Financial Officer. Our earnings announcement was released this afternoon after market closed, and we posted a slide presentation on our website which we will reference while making prepared remarks.

But before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on slide 2. During today's call and slide presentation, we will be making forward-looking statements which reflect our current analysis of existing trends and information. However, there is an inherent risk that actual results could differ materially. You can find a discussion of our risk factors which could potentially contribute to such differences in the Company's form 10-K which was filed earlier today.

During today's call, we may also discuss certain non-GAAP financial measures. Reconciliations of these amounts with the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at www.investor. Fluor.com. I will turn the call over to David Seaton, Fluor's Chairman and CEO.

Good afternoon, everyone, thank you for joining us. On today's call, we will review our fourth-quarter and full-year 2015 as well as discuss our outlook for 2016.

Before we talk about our fourth-quarter and full-year results, I do want to spend a few minutes to share my perspective on the markets we serve. Global economic growth continues to be weak, and commodity prices remain low.

Now we expect economic growth for 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 to fund certain projects at the same pace they have done previously. Many of our customers have already announced significant reductions in their capital expenditure budgets for 2016.

However, Fluor serves a diverse portfolio of industries and regions, which provides the Company opportunities even in difficult market environments. While low oil prices may delay some oil and gas projects, Fluor is focused on our clients and their spending priorities.

As I mentioned in the past, we continue to see the FID on large greenfield LNG facilities to move to the right as clients focus on opportunities to improve capital efficiency. By that extension, it is important to note we do not anticipate any material contributions from LNG projects during 2016.

Our power business should experience strong growth this year with the Westinghouse projects now fully transitioned, plus the business has experienced an uptick in gas-related projects. Our government infrastructure markets are also experiencing growth with key recent wins including the $1.4 billion nuclear cleanup project in Idaho and the Arizona Loop 202 project. We also expect to hear shortly the outcome of our bid to build the 16-mile Purple line light rail project in Maryland.

We continue to implement our integrated solution strategy. Our strategy focuses on delivering the full spectrum of capital efficient solutions for our customers. We've taken significant steps in 2015 to broaden our offering, including expanding our global fabrication footprint with the announcement of the COOEC joint venture in China and extending our position in the construction and maintenance markets through the Westinghouse nuclear awards and our upcoming acquisition of Stork.

While we're talking about fabrication investments in the Stork acquisition, let me give you an update on closing status. Our JV with COOEC and the Zhuhai fabrication yard continues to progress. We're receiving final approvals now and expect to make our first payment in the next few months.

Back in December, we announced the intent to acquire Stork, a maintenance modification and asset integrity company based in the Netherlands. Stork enhances not only our current offering but creates tremendous opportunity to leverage our combined capabilities in brands across a broad spectrum of opportunities.

We anticipate this transaction to also close in the next few months. While we expect 2016 to be another challenging year, our focus will be on the things that we can control.

Now let's look at our 2015 full-year results beginning with slide 5 -- slide 3. Excluding a pre-tax non-operating pension settlement expense of $240 million, net earnings attributable to Fluor from continuing operations were $571 million or $3.89 per diluted share compared with $715 million or $4.48 per diluted share a year ago.

Consolidated segment profit for 2015 was $1 billion, which compares to $1.3 billion a year ago. Despite volatile oil prices, our oil and gas segment performed very well during the year, contributing $764 million in segment profit, a 14% increase over 2014. However, this increase was offset by the decline in other segments.

Segment profit margins were 5.7%, which compares with 5.9% a year ago. Consolidated 2015 revenue was $18.1 billion, down from $21.5 billion a year ago. Full year new awards were $21.8 billion including $11 billion in oil and gas, $6 billion in power, $3.2 billion in industrial infrastructure, and $1.4 billion in government.

Consolidated backlog for the year ended -- ending was $44.7 billion, up 5% from $42.5 billion a year ago. Our clients have not given any indication they intend to cancel any ongoing projects with us.

Turning to slide 4, the oil and gas segment booked $2.1 billion in new awards including two Pemex refining projects in Mexico. Ending backlog for that segment was $28.8 billion which compares to $28.5 billion in 2014. Fourth-quarter new awards in industrial and infrastructure were $302 million.

We closed the year with a backlog of $5.6 billion compared to $7.2 billion at the end of 2014, which reflects the reduced mining and metals new award activity. The government group posted fourth-quarter new awards of $352 million, and their ending backlog in 2015 was $3.6 billion.

Turning to slide 5 in the power segment, fourth-quarter new awards were $5.1 billion including award for two reimbursable contracts with Westinghouse Electric Company to manage the construction work force at two nuclear power plants in Georgia and South Carolina. Ending backlog in 2015 was $6.8 billion which compares to $2.1 billion a year ago.

Segment profit for the fourth quarter was impacted by a $31 million charge related to a gas fired power facility in Brunswick County, Virginia. This was primarily related to commissioning taking longer than expected due to changes and challenges associated with the installation of gas turbines that extended past the third quarter. This project has reached mechanical completion, and we anticipate turning this project over to the customer in the spring.

With that, now I will turn the call over to Biggs to review some of the details of our operating performance and the corporate financial metrics for the quarter. Biggs?

Thanks, David, and good afternoon, everyone. Please turn to slide 6 of the presentation. I will start by providing some additional comments on our fourth-quarter performance and then move to the balance sheet.

Revenue for the quarter was $4.4 billion which compares to $5.5 billion a year ago. All segments reported slight year-over-year reductions with the exception of industrial infrastructure which experienced a 41% declined mainly due to the continued reduction in mining activity.

Excluding the pension settlement expense of $231 million or $1.04 per diluted share in the quarter, EPS from continuing operations for the fourth quarter was $0.68 compared to $1.41 a year ago. Including pension settlement expenses, the Company reported a loss of $51 million or $0.36 per diluted share.

This quarter's EPS was negatively impacted by approximately $0.21 per share due to the combined effect of the $31 million charge on the Brunswick power project and higher than expected tax rate due to losses of two foreign subsidiaries that we weren't able to benefit for US tax purposes. These tax effects converts in the future.

Over the course of the year, we received a few questions about the impact of foreign exchange rates on the P&L. Looking at the impact of FX on a quarterly basis, there is very little variation. However, when you look at FX from a yearly impact, 2015 versus 2014, using average rates over both periods, there is a negative impact to EPS of approximately $0.20. Corporate G&A expenses for the fourth quarter was $54 million compared to $53 million a year ago.

Shifting to the balance sheet, Fluor's financial position remains very strong with cash plus current and non-current marketable securities totalling $2.4 billion, flat with a year ago. In 2015, the Company generated $849 million in cash flow from operating activities compared to $643 million in 2014. The Company also returned $635 million in cash to shareholders through share repurchases and dividends.

In the first quarter of 2015, as you recall, we also settled a claim for discontinued operations of $306 million. Absent that, cash flow from operations would be even stronger.

The previously announced $1 billion share repurchase program was completed in the fourth quarter of 2014 through the end of 2015. For the year, we repurchased 10,105 million shares.

On February 4, 2016, the Board of Directors increased our outstanding share repurchase authorization by 10 million shares. However, although our cash position is strong at year end, everyone should keep in mind we have existing near-term commitments for our cash.

Moving to slide 7, Fluor's consolidated backlog at year end was $44.7 billion. The percentage of fixed price contracts in our overall backlog was 22% at quarter end, and the mix by geography was 41% US and 59% non-US. For the year, backlog was negatively impacted by about $3 billion as the result of the strong dollar.

I will conclude my remarks by commenting on our guidance for 2016, which is on slide 8. We are maintaining our guidance for 2016 at $3.50 to $4 per share.

Our guidance for 2016 also assumes G&A expense in the range of $190 million to $200 million and a tax rate of 33% to 35%. Other expectations for 2016 include NuScale expenses of approximately $90 million as we get to DCA submittal later this year, capital expenditures of approximately $300 million, and our payments to fund our joint venture with COOEC of $350 million in the first half and $140 million in the third quarter of this year.

Our guidance does not include any benefit related to our acquisition of Stork, nor any transaction and integration related costs. This transaction is expected to close as early as March.

Our guidance reflects an expectation of gradual quarterly improvement in 2016. With that, operator, we're ready to take questions.

(Operator Instructions)

Andrew Kaplowitz, Citigroup.

Good evening, guys.

Good evening.

How are you doing? David, look, we know new awards are lumpy, but just trying to think about how to think about them going forward. Ex the nuclear projects, you booked close to $3 billion of work with most of that oil and gas.

Maybe you can talk about what you think right now what is the underpinnings of work in a more difficult environment. Should this be the minimum you generally have in any quarter, like the $3 billion number ex nuclear, was 4Q anomalously low and can you average higher in 2016? How should we think about it going forward?

That is a great question. I think it is going to be even more lumpy in 2016 than we have seen in the past. 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 second quarter or second quarter to third quarter. So I think -- I think it's going to be somewhat more lumpy and I believe back end loaded more so this year than in previous years. We still have a -- I mean, it is a robust plan that's synonymous with the former year, in terms of what things we're looking at.

So I feel good about the total number, but it's just going to be a little bit of a dance here at the end of the quarter based on what decisions our customers make. We are getting indications that many of these customers are moving forward to FID on some of these programs and projects, so it gives us confidence we will be able to book these things. But giving a lot of clarity right now in terms of what quarter they will come in, I really can't provide that right now.

Okay. That's helpful, David. You ended up recording 7.6% margin on oil and gas, that is obviously an impressive result. You talked about 2016 a little before. You talked about low 6% oil and gas margins where you can end up in 2016.

If oil and gas stays weaker for longer, can you sustain that margin? How much more cost out opportunity do you have in oil and gas? How do we get a read on these very high margins in a modestly weaker environment for you guys?

Well, I will answer it this way. I think our teams have done an outstanding job in terms of what they have brought into backlog. And the quality of earnings in backlog has not taken a hit -- a significant hit.

I'm really pleased with the way the organization has responded, really pleased with the way the market and, in particular, our customers responded to this integrated solutions model, which gives us confidence, number one, that strategy is working and welcomed by our customers; and, two, is producing the margins we expect to get. So I feel pretty good about the quality of earnings that are in our backlog. Now, that does not mean there hasn't been pricing pressures in certain markets and doesn't mean there won't be pricing pressures going forward, but I think maintaining that kind of level in 2016 is quite doable.

David, is it possible to do better than low sixes if things go right for you in 2016?

I'd rather not get into any more color on the margins than I've ever done, so I think I will just stick with my sixes for you.

A lot of that depends upon mix, so it is hard to get more precise.

Mix and timing.

I will let Jamie place you on that, thanks.

Good try.

Jamie Cook, Credit Suisse.

Go ahead Jamie, give me the question.

I'm not even going to start on power. I will let someone else do that. But, anyway, I guess my first question relates to the guidance for 2016.

I guess I was a bit surprised that you maintained your guide given you don't assume any contribution from Stork, which I get because it hasn't closed yet. But based on your commentary that customers are slowing spend over -- a longer period of time, you knew that you had Westinghouse when you initially gave your guide in the third quarter.

Doesn't seem like tax rate has changed. I'm trying to get a sense, have the puts and takes of the guidance changed relative to, even though we're at the same place, relative to where we were last quarter?

And then, David, I guess my other question to you is, Andy is trying to ask about oil and gas revenue, and operating profit for 2016 or margins. But I guess my concern is, or what I'm trying to understand is, how do I think about the run rate of oil and gas profits as we exit the year?

Because my concern, I guess, is more as we think about 2017, if awards don't materialize this year in oil and gas, which I don't think they do, how do I think about how materially down earnings can be in 2017? Because I can't think of a good reason why, outside of what we know about Westinghouse and Stork, why the other businesses can make up for the decline that we're going to see in oil and gas.

Well Jamie, it's interesting. I don't really want to talk about 2017, yet. I want to make sure we deliver on 2016. But our diversity does provide those puts and takes that you mentioned. And, yes, there have been puts and takes that keeps us at the guidance where we are, which is a value of diversity that we enjoy.

If we were just an oil and gas company, you would have probably seen us reduce things like a lot of other folks have over the last few quarters. But that diversity pays off.

The ability to take on big projects and power helps that earnings stream, our ability to do operations and maintenance work, our ability to work in the pharmaceutical business, in the infrastructure sector, all helps us from a diversity standpoint maintain earnings power. So I think that we've got the opportunity to perform as we suggested at the end of the third quarter.

Relative to oil and gas, right now as we see it, the year will be reasonably strong, and as we enter 2017, assuming that a couple of things happen that we anticipate, 2017 should be equally as strong in terms of oil and gas. So 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 -- and I guess your question leads us towards.

Just to be clear, you said operating profit in oil and gas should still be relatively strong or comparable to what we're going to see in 2016?

Probably down some from, on a whole dollar basis from 2015, Jamie, going into 2016. But as David says, still strong.

It's not a precipitous decline, but it is to some degree a decline there. So as reflected somewhat by the lower margin rate that was already led you to.

No, but I was more interested I guess in his 2017 commentary that it could still be pretty strong. I guess my question would be, there is no big LNG projects hitting, doesn't sound like TCO is going to go any time soon. I'm trying to figure out what I'm missing on what you could book in terms of saying backlog could be flat with where we ended this year as we exit the year.

Jamie, there are a lot of things out there. People are still spending money. Everybody wants to talk about LNG and TCO, but we've won four packages on refineries in Kuwait.

We won two projects in refining in Mexico. We won refining projects in the United States with Tesoro and others. There's a lot of spending going on, and we're not hanging our hat on one or two projects.

We as a company have over 2500 active projects at any given time, and that's what gives us the strength and the confidence to be able to say we've got a good, solid hope. Now, obviously the sky could fall, but assuming that it doesn't, we should be in a good position as we end 2016.

And, sorry, and I promise I won't ask another question, just a clarification. The backlog comment, was that related to oil and gas, or the total company, when you said it could be flat by the end of 2016?

Total company.

Thanks. I will get back in queue.

Thanks.

Steven Fisher, UBS.

Thanks, good afternoon.

Hey, Steve.

Good afternoon.

David, how would you describe the flow of FEED work at the moment? Because that obviously tends to be more steady.

I'm wondering what you experienced in terms of the change in pace of FEED in the last few months. And maybe as you think about the whole Company, which end markets are you seeing the most new FEED work come in and which the least? And that transitions into a question about is there a base level of oil and gas bookings that you think you could see over the next year as a result of FEED and flow work?

Well I think you've got to peel the onion on oil and gas back a bit. Let me talk about the other groups first. We're seeing an uptick in opportunity in the infrastructure group.

They 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 US government focus on infrastructure and the things that are necessary to keep the US economy going. So that is 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 -- off the mark. We're seeing a significant amount of front-end work, steady work on gas-fired power plants. And we see a pretty robust opportunity slate there.

When you look at oil and gas, though, you got to peel the onion and peel it this way. Number one, there is no drilling going on. The rig -- you can read the rig counts like anybody else. We don't have any exposure to that.

You can look at the big deep-water drilling, the horizontal drilling in some difficult places. Absolutely that is slowing. We don't do that, either.

We are seeing, however, a fair amount of work in traditional offshore, in traditional on-shore, upstream oil and gas, and significant FEED work in those areas because the oil companies have taken their deep breath and they're looking at -- okay, what are the priorities? And now those priorities are coming out as studies and FEEDs in those markets, and those are slow, but they're coming.

I think the FEED activity that has picked up is in refining and continues to be in petrochemicals and fine chemicals. You have to peel the onion. And the things we have exposure to we are still seeing a robust slate of front end work that gives us visibility going back to Jamie's question about 2017.

We have good visibility into the priority of the projects that our customers are taking, the economic viability of those projects based on current economic factors. And that is what leads us to say that we will have a pretty robust new awards slate. And 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 is half full for us because of the fact that we have really stuck to our customers and we've answered their call for integrated solutions and capital efficiency.

And to reinforce David's earlier comment, the key variable seems to be one of timing as opposed to expectation.

Right.

Okay. That is helpful. I guess you answered this next question, but it is a bigger picture thing, about what to what extent does this commodity price backdrop and macro outlook causing you to rethink the way you do business versus the cost restructuring you did and making some of the strategic moves that you might have done anyway.

Really just trying to gauge your perspective on how much hunkering down and rethinking your overall business model there needs to be here. It sounds like you said, you're glass half full and there is a lot out there. Do you feel the need to rethink the way things are going or are they that dire? Sounds like not.

That is a great question. I was at an event this morning at the Dallas Fed, and the same discussion was taking place. It is interesting, I remember it and I said this on these calls before and in private meetings with you guys, I sat in Saudi Arabia in 1997, and oil was $17 a barrel, up from $11.

This isn't the first time me or people within our industry or our company have seen these swings and volatility in markets. And they will fix themselves. I mean, we think right now there is an oversupply of oil products. There is an oversupply of gas. There is an oversupply of LNG.

It will take a while for that to clear, but it will clear. And when you think about particularly oil and gas customers, they haven't said they're going to stop spending. They said they're going to cut their capital spending. And that just means that they're going to prioritize and look at those high-value projects, which is one of the litmus tests or selectivity says we use in terms of what projects we actually pursue.

So, again, I think our strategy is sound in terms of how we want to face the market and how we want to deal with the customers, and which projects do we want to prioritize on. But that does not mean that we're not going to continue to look at our strategy, focus on cash management, focus on low continuing to find areas of how we do our projects to lower cost, to meet that demand that the customer is asking for in terms of capital efficiency.

So we're going to continue to work and, as I said in the prepared remarks, focus on the things that we can control. And right now, that's how we focus on the customers and how we sell a different way of doing projects that delivers what they're asking for.

Okay. Thanks a lot.

Thank you.

Andrew Wittmann, Baird.

Great. Thanks for taking my question. There was a comment in the 10-K that you expect 38% of the backlog to burn this year. That implies about $17 billion of revenue.

So I guess two parts from here, how much book and burn do you think is available to you with your current outlook here? And then when we marry that $17 billion number assuming there is any book and burn in it, we know there is, it does imply that margins are probably in the high 4% range. Can you just give your thoughts on the implicit margin from that and the book and burn work that is available to you this year?

Well, that is just a back-end way to get us to give revenue guidance, and there is a fair amount of variability in terms of mix, as we know, as we've experienced over the past couple years on revenue. So I think that we will not go too far in answering your question, but certainly I think that much of what we have in revenue, the substantial majority of it, is already in backlog.

If you looked at how we talked about margins over the last couple months going back to the third-quarter call and then presentation since then, if you aggregate that all together, you're probably on a consolidated basis somewhere in the plus 4% range. But where exactly that lands is a tough call. There is too many variables.

So we feel good about the extent that our revenues are covered significantly by what's in backlog. Yes, there is some book and burn.

I think that as we said, the key variable there, then, is the timing of new awards and how fast that comes in. But we feel really good about the prospects of those new awards. But it is a little early to judge how they're going to play, at what a rate, so that is what we watch as we go through the year.

Got you. And I mean, maybe, Biggs, on cash flow, it was a very good year on cash flow. I guess from here with -- you mentioned I think maybe in the K or in the comments that the equipment business is one of the areas where saw a little bit of weakness.

Do you feel like you monetized some of your assets in that business and shore up the balance sheet? What do you think the puts and takes are and what's the appetite for the newly expanded share repurchase plan as well?

As far as the equipment business goes, we are expecting some pickup in 2016, particularly as water projects transition towards construction. So it has really come down as a result of lower mining activity, it came down year over year as a result of Afghanistan, but most of that was really reflected as lower levels of equipment back to the year 2014. So we will see, but we think that certainly there is prospects for that business to pick up as we support, start our own projects in construction in 2016.

In terms of capital deployment, as I said, initially we've got -- we have a healthy cash balance. We're really happy with how we generated cash last year and expect to do a great job at generating cash again this year, but we have some expenditures right in front of us in terms of the funding of the China fabrication joint venture. As I said my comments, there is $500 million over the course of the year, just under $500 million has to be funded.

Over the near term, I think we have places that we figure generate great returns over time to go invest in. Beyond that, our strategy remains the same as it has in the past typically. We don't expect to preannounce any share repurchase program.

What we expect to do is as we go through time, evaluate our excess capital as it is generated, what to see first if there is some high investment opportunity that will create a good return for shareholders, high investment return opportunity, great return for shareholders. And in the absence of that, we will look to see if we repurchase shares just like we have in the past.

But it is not a near-term analysis we had to go through because we have some near-term opportunities for our cash. Commitments have already been made. We will generate good cash flow in the future. We have the expectations look forward to having to do that analysis going forward.

Thank you.

Michael Dudas, Sterne Agee.

Good evening, everyone.

Michael.

David, your observations of Middle East, you mentioned about 1999 when you were in Saudi at $17 oil. Given the geopolitics, given where oil is today, and some stories you're seeing from the press and such, is that an area that can come back relatively quickly if oil prices come back?

And is that an area where you could see some spring-board for some business in 2017 and beyond with 2016 being more of a wait and see. Are there still opportunities with low gas and chemical and refining side that you can push through more opportunities in that part of the world?

I'd go back to what I said, Michael. They haven't stopped spending. There's still a pretty robust slate of projects, but mostly refining and petrochemical programs just like you're seeing here in the States.

So I think there is near-term opportunities. My experience out there suggests that it depends on how much of a return of the oil price happens, and when. But I have seen them turn on a dime in terms of what they want to do. And I don't want to really call it a herd mentality, but they have these things pinned up on their drawing board and they want to get them going and they can move them pretty rapidly.

As I said, I don't think you're going to see the supply situation change dramatically until as we get into mid-part of the year. But once that -- once that glut clears, I think you're going to see commodity prices stabilize, if not rise, as we get to the back end.

But the other thing that I would warn everybody about is when you think about the long-term nature of oil and gas developments from exploratory well to production is 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 focussed on that further longer view. And they're going to continue to fund those projects that satisfy that need.

So two ways of answering your question. One, they can turn quick. I don't anticipate it in 2016. But you're going to still going to see steady spending on the things that make sense.

David, to follow up on your answer to one of the questions earlier, you said Dallas Fed presentation or something this morning. Given what you see in your business and the diversity that you put forth especially in infrastructure, manufacturing and life science, US pipe opportunities, do you get the sense that your customer base in the diversity trend and even in power is going to allow for some better activity from your US customer allowing you to get more business as we move through 2016? Or is the concern about the economy that we read about in the press and hear on TV all the time is more troublesome?

I think it's -- if I were to put a phrase on things, I would say steady as she goes. I mean, when we think about life sciences and pharmaceuticals, the taxing regimes in places like Ireland and Singapore and other places around the world attracted those businesses. So that is not going to be a US-based business by and large.

I do still see the petrochemical resurgence in the United States continuing, both in terms of additional crackers and the further downstream derivatives. So there is an example of where the US will be there.

The Westinghouse projects skew us back towards almost that 50-50, or 60-40 range in terms of US versus non-US business. But I still see more opportunities outside of the United States than in the United States with the exception of maybe the infrastructure business.

David, thanks for your thoughts.

Brian Konigsberg, Vertical Research Partners.

Good afternoon.

Good afternoon.

Since no one has touched on it yet, maybe you can address the issues on the Brunswick power project. And maybe more specifically, you are saying mechanical activities are done and expect it to be finished by spring. What risk activities might be left between now and then that we should be concerned about or not?

Good question. We're basically done, it's in final throes. The biggest issue is start-up condition where you introduce lube oil and you recycle lube oil and you make that change. The suppliers' program and what we were told by the customers said it took 45 days and it took us 90.

So therein lies the majority -- and it took us past the end of the third quarter obviously, and that was certainly not anticipated. But we were all but done in terms of that project.

I said in the last call that we -- we had it under control, and there were no losses, so I'm not going to say it again. But we're ready to start this thing up. So I don't really anticipate anything that we haven't anticipated happen now.

Got it. Thanks. Just secondly on -- you made some comments on pricing. You are seeing some pressure, doesn't seem like it is overwhelming. Maybe talk about what the assumptions are for 2016 and maybe not just in oil and gas, but what you're seeing across power and infrastructure and some of the other businesses are actually gaining a little momentum as they're becoming increasingly competitive given that oil and gas is falling or becoming weaker?

Well, I think the power market is still a pretty tough market and will be for some time. I would never categorize it as easy. These are -- there is -- there is a lot of competitors, and they like to feed their house, too. And depending on how hungry they are as to how they act in terms of pricing.

So we still see that as pretty tough market, but again, the way we changed, the way we're doing work, applies to power just like it applies to some of the other businesses. So we're changing the game a little bit, and I think we've got a competitive offering.

Infrastructure is a little bit the same way, but we're starting to see some of these things come to fruition, and we're winning. And we're winning in things that we already know how to do, roads and light rail. And we're winning with acceptable margin with our partners. So I feel reasonably okay there.

The other businesses are doing quite fine. We've talked a lot about oil and gas. Our ability and the quality of the margin backlog that I spoke of is I think a testament to the change in the model of how we deliver, which makes us more competitive in the marketplace.

Our government business has done quite well. We really hadn't talked about that. But we won Idaho. A really huge win for us and something we're really pleased with, which again, if you think about it, that adds in with the Stork acquisition, it adds to that non-commodity piece of our business, which should surprise -- provide some stability in earnings over the longer term.

Those are big, long three to five-year contracts. So again, going back to part of my comment to Jamie, that also gives us confidence in our ability to end 2016 and start 2017 with a pretty robust capability in terms of earning potential.

So this is a hard business. I mean, and it's always competitive. It's never easy in terms of what our competition confronts us with or what our client expectations are, and I'm just really proud of our organization, how we respond to that, and how we've responded as an organization to a new way of doing business, that results in better margin performance across the board.

Just to summarize, sounds like you're not assuming anything out of the norm relative to the last couple of years about pricing within the guidance for 2016. Is that a fair statement?

That is a fair statement. We are seeing some of our competitors in little bit of dire straits, which you worry about in terms of what are they going to do next, but we feel good about what we're pursuing and how we're pursuing it and whom we're pursuing it for, if that makes sense.

Yup. Thank you very much.

Thank you.

Jeff Volshteyn, JPMorgan.

Thank you for taking my question. Several questions, actually, just to clarify some of the commentary that was already made. On the LNG comment, I assume you're talking about Kitimat there, but broadly how much of your oil and gas backlog is related to do LNG? And are there any other small projects or maintenance projects that are still likely to be in the pipeline?

My comment about LNG was more global, not necessarily with ours. It is a general comment about LNG. In my prepared remarks, I mentioned there is really no earnings in 2016 for LNG.

And what percentage of the backlog is related to LNG? Is there any?

We don't provide that.

Okay. On the petro chem side of the business, you sound optimistic about the future derivative plants as well as the crackers. What is the status of the projects you're working on right now?

If you look at the three crackers in the US we're working on, Dow and CP Chem are well under way in construction. And on the intended schedules that we were there, there in terms of cost, we're right on target.

Sasol is a little bit behind in terms of schedule. We are in the field but really only on the civil side of the business and feel pretty good about where we are there. So I would say that they're progressing like we planned and progressing quite nicely for those customers.

Great. And then in the power segment, can you update on the NuScale filing timeline, and investments that you put into NuScale?

As we said in the prepared -- I think in Biggs' prepared remarks, we're looking to $80 million to $90 million spend this year leading up to the submittal of the design certification towards the first or middle of the third quarter. We've had great conversations with the DOE and the NRC about their preparedness to review that submittal.

We feel good about the fact that our first customer has gotten an agreement with the DOE for a site for the first one, in Idaho. And just the fact that we won the Idaho project, I think strengthens our ability to deliver on that.

So we're on target. We feel good about what we're going to submit. We feel good about the NRC's readiness to do that review. And we think that opens the door for future investment in this scale from outside of Fluor.

Great. Thank you very much.

Thank you.

Andrew Obin, Bank of America, Merrill Lynch.

Hey, guys, thanks for taking the call from me. You will be glad to know Anna is back in one week.

Great.

Yes, I know. A question of taking a 40,000-foot view. So you use 1990s as a reference to what is happening in the oil and gas cycle. So a lot of discussions we're having with clients, do you think it is more like the 1990s or more like the 1980s, and what do you think the implied difference is in strategy if it is more like the 1980s?

I think the one thing that is not being spoken of is the demand growth in this discussion. And when you look at those demand growths, you're still looking at a million barrels a day growth in the midterm I would say.

So when you think about some of the production that's going -- that is going to naturally come off due to depletion curves, you look at I guess the Saudis and the Russians put of, for lack of a better term, a ceiling on production, you can see where that glut is going to clear pretty quickly. I think what's different this time is in a lot of these producing countries, their cost base has gone up because of the social programs.

So I think they're going to do what they can to turn this more quickly than maybe would have taken place when -- even if you go back into the 1970s in what the embargo did. So I'm not sure you can do a comparison to the 1990s or a comparison to the 1970s or even if you go back into the early 2000s when pricing went down. I think it is a different marker. I will give you an example.

This is the first time in my career where when the sabers rattle between anybody in the Middle East, that threatens the Straits of Hormuz, and I'm speaking specifically about the issue between the Saudis and the Iranians that obviously was in the press. That oil price didn't spike by $10 a barrel the next day. In fact, this time it went down.

So I would argue that the fundamentals are significantly different today in terms of who is producing and how much they're producing and the change in the flow of those products over the last decade. More gas, more LNG, LNG glut right now. Oil is there, coal is bad.

I just think that there's a lot of issues that are different in this cycle than they were in the past. But I think the one thing that's going to drive maybe a quicker recovery than some of the historical times is the need for a cost per barrel that satisfies the social needs of some of these producers.

Thank you for such a great answer. Just to follow up. In talking to a lot of corporates, we're hearing that it is not the price decline per se, but it is also the price volatility inhibiting the ability to plan CapEx.

In your conversations with your customers, how long, how much of a stability do we need to see in oil prices for them to get comfortable with putting plans out. Do you think it is one month? Do you think it is three months, what are you hearing?

I think they're already on a new level. I think that, and I've said this before, I think many of them would say that they were drunk on $100 oil. My term. Don't tell them I said that. And probably wouldn't have made some of the funding decisions that they made if they didn't in their back room believe that $100 oil was there to stay.

So I think in their back rooms now, they're thinking $40, $50 range is the new norm and we have to plan on that basis. And we're already seeing them use a more reasonable number.

I remember back in the day when they used to plan on $14 was the litmus test for capital spend. So it will morph and change, but I think it was a huge wake-up call that $100 isn't something that is there forever.

But I also remember everybody saying the sky would fall and the world would end if it ever went above $100. That didn't happen, either. So what we're hearing from our customers is, there is a new norm, and somewhere between $40 and $70 is probably the sweet spot for the longer term.

Thank you very much.

Tahira Afzal, KeyBanc.

My question is David, you commented earlier on aggregate backlog potentially being flat as possible this year. Are there any segments in particular where you're more comfortable saying that than others?

I think I've provided a little bit of color there. There is some growth opportunities in all of our businesses to a varying degree without -- I would take mining out of that. There is really not any intended new awards in there, and we're finishing a couple of projects.

So I continue to see I&I in terms of backlog drop because mining was such a huge piece of that. But you think -- I mean, $44 billion in backlog is almost an all-time high, and we're -- we have the ability or we stated we have the ability to stay at that level.

I think that speaks volumes of how powerful this company is in terms of satisfying customers and expanding our opportunities. So, again, I wouldn't point to anyone other than mining that's -- that's a bit of a challenge. Each of our groups have opportunities to grow.

And, David, your optimism or upbeat note on oil and gas, with your mix, would you say market share gains you stand pretty well with the fab yards? Is that also playing into your outlook?

We don't really look at it in those terms. I mean, market share in this business is really a magic number. I mean, you got to really understand what goes into that total number to see what market share is.

But what we have seen is a combination of the integrated solutions offering that includes fabrication and includes supply chain, and includes resurgent in our direct hire construction capability, is proving very effective with our customers. And I think the fact that we continue to pull in billions of dollars every quarter in an oil and gas and obviously the other things that we do, is a testimony to the customers' acceptance of our new way of doing business.

You can add to that, our ability to design the product differently.

Yes. But I also think that our ability to continue to create or have positive cash flow in some difficult markets is another testament to the strength of this company and what we can actually deliver. I mean, it provides us with the ability to go places when others can't.

I mean, I go back to what Buffett says, I am not signaling any more acquisitions, but Warren Buffett says he's nervous when people are greedy and greedy when people are nervous. Right now people are nervous. And we have to the power to deal with the things we need to deal with.

Got it. Makes sense, David. I just have a brief last question. If I look at what is making a lot of these projects economical again on the oil and gas side, clearly the costs have come down for the project. Do you think that you're at a point where your back bookings on an annualized basis are down considerably, would it be fair to say the scope at this point, even if it is reduced, it has taken into consideration when you're talking about potentially backlog even in that segment being potentially flat at some point?

I think it is puts and takes and timing. As Biggs said earlier, when you think about the revenue, it is all timing of projects and where they are in their cycle. But I think being having the backlog where we are is interesting, but I would point you back to maybe four years ago when it was half that.

Right.

So I think the way we position the Company and the way we have changed our model, when the markets move, and they will, I think we're in an outstanding position to take advantage of that. And we have significant upside potential, but I just think that that's further out in time than 2016, 2017. But we're ready, and I'm really pleased with the way the organization has responded to this volatility.

Thanks, David.

Thank you.

That does conclude the question-and-answer session. I will now turn the conference back over to you for any additional or closing remarks.

Thank you very much, operator. And thanks to all of you for participating today. As I said in my opening remarks, we do expect commodity prices to stay low, and will continue to drive customers' decisions. But I do know that they're going to continue to spend and focus on these high-quality projects that we have in our sights.

As I mentioned, our integrated solutions approach has met the demand in terms of our customers' need for capital-efficient projects and we will continue to work on that and hopefully continue to drive down those costs. This is not a demand that will subside when commodity prices begin to improve.

To that end, the changes we've made in our business model have prepared us for the next cycle. And that next cycle will come. We have been through this -- I have been in this business a long time and what is now down will go up again.

The evolution of our offerings has provided us with robust cash flow generation, as I mentioned earlier, and just strengthens our balance sheet and our ability to continue to operate. I think our cost management discipline also gives us an advantage and an opportunity to be more successful in the future.

Not to say that 2016 is going to be an easy year. It's going to be a difficult year, but I think there's great opportunity as we go through this to continue to deliver for our shareholders. And with that, I greatly appreciate your interest in our company and the confidence that you provide us, and I wish you all a good day.

Well, thank you. And that does conclude today's conference call. We do thank you for your participation today.