Fluor Corporation Keeps Eyes on NGL, NGCC Projects as Backlog Dips

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Researched by Industrial Info Resources (Sugar Land, Texas)--Engineering, procurement and construction (EPC) giant Fluor Corporation (NYSE:FLR) (Irving, Texas) is optimistic about the future of natural gas liquids (NGL), natural gas-fired, combined-cycle (NGCC) and other energy markets in North America, despite a decline in project awards in the first quarter of the year. Industrial Info is tracking more than $231 billion in active projects involving Fluor.

Fluor's first-quarter revenues of $4.8 billion were 9% higher than those of the same period last year, but new awards for the quarter were $2.3 billion, a 51% decline. In a press release announcing its quarterly results, the company blamed "progression of our current projects from higher-margin engineering activities to lower-margin construction activities." It also cited a pre-tax charge of about $30 million related to unanticipated cost increases on projects in the Industrial, Infrastructure & Power segment.

Consolidated ending backlog of $41.6 billion compares to $46 billion a year ago. "The lack of engineering and new awards is unprecedented, and lower than what we expected to see when we initially issued guidance for 2017 last November," said David Thomas Seaton, the chairman and chief executive officer of Fluor, in a quarterly earnings conference call. "Within the Energy, Chemicals & Mining segment, commodity prices are supportive of investments in downstream, petrochemicals and mining, and we continue to track multiple large projects, including derivative and LNG plants in North America and downstream projects in the Middle East."

Fluor executives are optimistic that the NGL market has a strong future, as they expect non-U.S. investors will take bigger stakes in the U.S. Gulf Coast and other parts of North America. As part of the massive buildout along the Gulf Coast, Fluor is expected to perform engineering services for Sasol Limited's (NYSE:SSL) (Johannesburg, South Africa) proposed, $7 billion ECHO-1 gas-to-liquids plant in Westlake, Louisiana. As currently envisioned, the facility would process natural gas from Haynesville Shale to produce 48,000 barrels per day (BBL/d) of clean diesel, jet fuel and other liquid fuels. For more information, see Industrial Info's project report.

Fluor also is attached to Sasol's $450 million in base-oil unit additions and $300 million in wax unit additions at ECHO-1 in Westlake. The expanded facilities, as part of the ECHO-1 project, would produce base oils and hard Fischer-Tropsch waxes for use in both food grade and non-food grade lubricants and oil products. For more information, see Industrial Info's project reports on the base-oil and wax additions.

The Industrial, Infrastructure & Power segment reported a net loss for the quarter, largely due to the $30 million pre-tax charge. Nonetheless, Fluor expects to wrap up Duke Energy Corporation's (NYSE:DUK) (Charlotte, North Carolina) $1.5 billion Citrus County Power Station in Crystal River, Florida, toward the middle of next year. The NGCC power station will consist of four 270-MW Mitsubishi combustion turbine generator sets, with inlet air chilling and supplemental-fired heat-recovery steam generators (HRSG), and two 280-MW steam turbine generator sets, for a total output of 1,640 MW. The gas-fired power will offset the loss of nuclear power from another Duke facility in the area that is closing down. For more information, see Industrial Info's project report.

Two other NGCC projects that currently have Fluor attached are from CME Energy LLC (Boston, Massachusetts): the estimated $860 million Oregon Clean Energy Center in Oregon, Ohio, and the estimated $860 million Trumbull Energy Center in Lordstown, Ohio. The facilities, as presently envisioned, would use Siemens combustion and steam turbine sets to generate 955 and 940 MW, respectively. For more information, see Industrial Info's project reports on the Oregon and Lordstown projects.

Fluor also is involved in a number of nuclear projects that are facing seemingly infinite delays, as market conditions prove highly unfavorable. In particular, Westinghouse Electric Corporation LLC's (Cranberry Township, Pennsylvania) decision to file for Chapter 11 bankruptcy protection in March has put one of Fluor's largest projects, the estimated $16.2 billion in unit additions at Alvin W. Vogtle Nuclear Power Station in Waynesboro, Georgia, into doubt. For more information, see Industrial Info's project report, and April 25, 2017, article - Westinghouse Chapter 11 Filing Roils Labor Markets in Georgia and Beyond.

Fluor's Government segment was the only one to report a higher profit, compared with first-quarter 2016. New awards included a multi-year services contract and additional funding for the U.S. Department of Energy's $500 million Paducah Gaseous Diffusion Plant in Paducah, Kentucky. The project, which is part of an ongoing effort to remediate a former gaseous diffusion plant built in the 1950s, includes deactivation activities such as the removal of radioactive and hazardous material, the shutdown of facility systems and the de-energizing of equipment in preparation for long-term maintenance and cleanup. For more information, see Industrial Info's project report.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at https://www.industrialinfo.com/.