CB&I halting investor payouts
CB&I, a local engineering and construction firm specializing in energy projects, said it’s putting its technology business up for sale and suspending investor payouts to help stabilize the bottom line and stave off a potential default or bankruptcy.
With the energy sector’s construction boom largely stalled, The Woodlands-based company on Wednesday reported a $425 million loss in the second quarter and revealed that its revenue fell more than 40 percent from the same period a year earlier.
CB&I said it hopes to sell its technology business, which includes patents and licensing agreements, for more than $2 billion by the end of the year, in an effort to wipe out most of its $1.8 billion in debt.
The shareholder dividend paid 7 cents per share each quarter, and its suspension is expected to save CB&I another
$30 million a year.
CB&I’s goal is to become a smaller, more focused engineering, construction and fabrication company geared toward the liquefied natural gas, petrochemical, refining and gas power generation sectors, new CEO Patrick Mullen said. An undetermined number of layoffs are forthcoming, he said.
Mullen, the former chief operating officer, became CEO in July after longtime chief executive Philip Asherman retired.
“We’ve learned from these mistakes as we move forward. I know we have a lot to prove. My words are just a start,” Mullen said Wednesday. “The key here is that we have a plan.”
CB&I peaked at about 56,000 workers worldwide in 2014 at the height of the oil boom after it nearly doubled in size through the $3 billion acquisition of a competitor, the Shaw Group, of Baton Rouge, La. But that move proved poorly timed as the oil bust got underway. CB&I’s earnings were also dragged down by Shaw’s nuclear construction business, which CB&I has since sold.
CB&I now employs about 32,000, but the number will shrink with the sale of the technology business and its plans to cut another $100 million in annual costs. The technology business includes about 3,000 patents and patent application trademarks and more than 100 licensed technologies in its engineering and fabrication work, according to CB&I.
CB&I’s share price has fallen from a peak of more than $87 a share in 2014 to $16.33 on Wednesday. CB&I reported its earnings and cost-cutting plans after stock markets closed.
For the second quarter, CB&I was weighed down by $548 million in losses from four LNG and power plant projects suffering delays. Sempra Energy’s Cameron LNG project in Louisiana will be delayed almost a year with the initial startup now slated for well into 2019, the companies said.
CB&I also is experiencing delays — although not as serious — with Houston-based Freeport LNG’s export terminal project by Quintana Island. The other problems are with gas-fired power plant projects by Houston-based Calpine in Pennsylvania and with Indianapolis Power & Light.
Mullen said he was frustrated by the delays, noting that it only takes problems with a few projects out of hundreds to hurt the bottom line.
“The results we’re talking about today are not pretty at all,” he said.