Even with some bumps, Fluor Corp. reported gains in results for 2021, with the energy transition set to drive a 10% revenue boost this year, executives told analysts Feb. 22. The company reported a fourth-quarter net loss of $145 million, a larger loss than in fourth quarter 2020, but attributed it to a one-time, defined-benefit pension settlement in Holland. Excluding that, Fluor’s $0.31 Q4 per share earnings topped analysts’ combined estimates.
The firm’s backlog drop included a cancelled chemicals plant but also completion of nearly $3 billion in fixed-price legacy projects. "We anticipate that we will be substantially complete with these projects by the end of 2023," said CEO David Constable. Fluor reported new 2021 awards rose to $8.8 billion, from $7.5 billion in 2020.
Fluor has not included its award late last year to a team it heads that includes contractor Amentum, of a 10-year management and operations contract for the US Energy Dept. Pantex site in Texas and Y-12 site in Tennessee and Texas, valued at $28 billion, after the contract was paused in January due to bid protests by losing teams headed by Bechtel and BWXT. The Fluor team had been set to take over the sites at the end of March.
While DOE has not yet announced if it will award or rebid the contract, CFO Joe Brennan expressed optimism of a positive result. "I get a very good level of comfort ... and we believe Pantex/Y12 is going forward," he told analysts. "So let's be realistic there."
Brennan predicted "a favorable resolution" by the third quarter.
Fluor’s giant LNG Canada gas export terminal complex is now about 60% complete, Constable noted, with delivery last December of the project's first process module. A total of 28 had been shipped from offsite fabrication yards as of Feb. 22, he said.
But LNG Canada and TC Energy, which is building the 670-km Coastal GasLink pipeline to carry natural gas to the project site in Kitimat, B.C., are in a dispute over that project's delays and cost overruns, according to a Canadian Press report.
A TC Energy executive told analysts last month that the firm "continues to expect project costs to increase significantly along with a delay to project completion compared to the original project cost and schedule. The firm, which said the project also is 60% complete, noted a “constructive dialogue” with LNG Canada to resolve the dispute and said construction would continue.
LNG Canada is a joint venture of Royal Dutch Shell plc, Petronas, PetroChina Co. Ltd., Mitsubishi Corp. and Korea Gas Corp. A spokeswoman said in a statement that it remains concerned about Coastal GasLink’s cost and schedule but is working toward a “mutually agreeable solution.”
Meanwhile, Constable called 2022 “a transition year with clients beginning to focus on decarbonization efforts, renewable fuels and smaller facility optimization projects.” He noted a "good line of sight on significant new awards" in sectors that include chemicals, production of fuels, mining, technology, life sciences and government. Credit Suisse lead industry analyst Jamie Cook said that “95% of the prospect list is cost plus."
Andrew Wittmann, Baird Equity lead sector analyst, upgraded Fluor's investment rating to outperform, saying “a bottom is now in place after years of challenges.” Cook said Fluor “continues to make strong progress de-risking the portfolio while regaining a track record of execution.”
Constable also said that Fluor Executive Chairman Alan Boeckmann will depart its board at the firm's shareholder meeting in May but will remain a director of its NuScale Power LLC, a small nuclear reactor developer of which the contractor is majority owner. It said in December if is set to go public by mid year.
