Willbros refocuses business strategy

Willbros Group, Inc. has announced that it is refocusing its business strategy under the leadership of John T. McNabb, II, newly elected Chief Executive Officer, and a restructured management team.

The Company has identified approximately US$ 22 to US$ 24 million in deterioration of a significant pipeline construction project in the Company's Northeast regional business within the oil and gas segment. This deterioration consists of the reversal of approximately US$ 8 million in pre-tax income previously recognised and the recognition of approximately US$ 14 to US$ 16 million in estimated pre-tax losses at project completion.

Although some of the project deterioration related to the third quarter of 2014, the Company has determined that a majority of these estimated charges should have been recognised in the second quarter of 2014. As a result, the Company expects to restate its second quarter of 2014 results and such results should no longer be relied upon. Additional information relating to the restatement is being disclosed in a Form 8-K being filed with the SEC. The Company now expects to report operating income of approximately US$ 26 to US$ 28 million for the nine months ended 30 September, 2014, subject to the completion of its quarterly close procedures.

In addition, management, with oversight from the Company's Audit Committee, is evaluating any impact on its prior conclusions of the adequacy of internal control over financial reporting and disclosure controls and procedures. The Company will amend, as necessary, any disclosures pertaining to its evaluation of such controls and procedures.

The Company's Audit Committee is also overseeing an additional evaluation of this deterioration to determine its root cause and any impact on prior conclusions.

Mr. McNabb, Chief Executive Officer, commented, "The disappointing performance in the oil and gas segment is unacceptable. The senior management team, with active support from the Board, is taking immediate and decisive action. In addition to simplifying the structure of the oil and gas segment, we are bringing in new operations management and executive oversight with industry experience specific to the projects we currently have booked and the opportunities we are targeting. Our objective is to establish a stronger correlation between our work commitments and our execution resources in order to generate operating margins at or above our peer group.

"Management is currently evaluating the operating structure of the oil  and gas segment with the objectives of reducing the number of business units and optimising the utilisation of our project teams and equipment resources. We intend to exit the construction field service business in the regional shale oil/gas markets and continue to meet customer expectations for delivery of pipeline and facilities projects with a simplified and more profitable operating structure."This bolstering of operations and executive staff has already allowed oil and gas segment senior management to focus additional attention on improving the pipeline and related facilities construction business.

"These changes should enable us to return margins to acceptable levels on a consolidated basis. Along with this new approach, we intend to generate between US$ 100 million and US$ 125 million, primarily for debt reduction, from the sale of assets and to reduce general and administrative costs across the Company by at least US$ 30 million on an annual basis. We expect this leaner and more profitable entity to generate US$ 1.6 billion to US$ 1.7 billion in annual revenue. Our markets are robust and we need to take advantage of this environment to generate greater returns for our shareholders. Our Board of Directors has endorsed the restructuring in order to support focused and sustainable growth for the Company."

Mr. McNabb continued, "In his expanded role as President and Chief Operating Officer, Mike Fournier is directing the oil and gas segment leadership to accomplish these changes. Oversight of all Willbros construction operations will continue to be the responsibility of Mike. His demonstrated performance in the successful turn-around of the Willbros Canada operation gives us confidence we can meet the goals we've outlined."

Mr. McNabb added, "To further reinforce our intention to improve our pipeline construction performance, John Allcorn has been promoted to Executive Vice President of Willbros Group and Product Line Executive - Pipeline Services. John, a pipeline construction executive with 30 years of experience in the cross-country pipeline sector, is working directly with pipeline business units in both the oil and gas and Canada segments to bolster their capabilities and take advantage of strong markets. With John's guidance, expertise and contacts in the industry, we expect to reinforce existing project teams and repeat the many successes Willbros has achieved, most recently the NET Mexico project in South Texas."

Concurrent with the changes in management responsibilities, Johnny Priest has been promoted to Executive Vice President of Willbros Group and Product Line Executive - Utility Transmission & Distribution. Ed Wiegele, Executive Vice President of Willbros Group and President of Willbros Engineering & Technology has taken on executive responsibility for integrated EPC and pipeline integrity services, in addition to his responsibilities for project services and engineering business units. In addition to Messrs. Fournier and Allcorn, Messrs. Priest, Wiegele and the balance of the Executive Leadership Team will report to John McNabb.

Mr. McNabb continued, "We are positioned favourably, with a great brand, great customers and strong markets. The oil and gas segment will focus on the Willbros service offerings of pipeline and facilities construction, both large diameter and mid-size. We intend to correct the shortcomings in our oil and gas segment to bring it up to the level of our Canada segment operations, which are performing well and will not be impacted by these changes. The Utility T&D segment will continue to execute its previously announced transition strategy, expanding its markets and customer base. The Professional Services segment will continue to concentrate on its core services, technological advantages and successful offices."

Adapted from press release by Hannah Priestley-Eaton

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