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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from -------------- to --------------
Commission file number 1-11953
Willbros Group, Inc.
(Exact name of registrant as specified in its charter)
Republic of Panama 98-0160660
(Jurisdiction of incorporation) (I.R.S. Employer Identification Number)
Dresdner Bank Building
50th Street, 8th Floor
P. O. Box 850048
Panama 5, Republic of Panama
Telephone No.: (50-7) 263-9282
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------------- -------------------------
Common stock, $.05 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
-----
As of March 18, 1998, 15,005,280 shares of the Registrant's
Common Stock were outstanding, and the aggregate market value of
the Common Stock held by non-affiliates was approximately
$214,408,480.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders
for the fiscal year ended December 31, 1997, are incorporated by
reference into Parts I and II of this Form 10-K.
Portions of the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held May 4, 1998, are incorporated
by reference into Part III of this Form 10-K.
=================================================================
WILLBROS GROUP, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1997
TABLE OF CONTENTS
Page
-------
PART I
Items 1
and 2. Business and Properties 4
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of
Security Holders 24
Item 4A. Executive Officers of the Registrant 24
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 27
Item 6. Selected Financial Data 27
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk 27
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the
Registrant 27
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial
Owners and Management 28
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 28
Signatures 31
2
Forward-Looking Statements
This Form 10-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical
facts, included or incorporated by reference in this Form 10-K
which address activities, events or developments which the
Company expects or anticipates will or may occur in the future,
including such things as future capital expenditures (including
the amount and nature thereof), oil and gas prices and demand,
expansion and other development trends of the oil and gas
industry, business strategy, expansion and growth of the
Company's business and operations, and other such matters are
forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of
its experience and its perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances.
However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a
number of risks and uncertainties which could cause actual
results to differ materially from the Company's expectations
including the timely award of one or more projects; exceeding
project cost and scheduled targets; failing to realize cost
recoveries from projects completed or in progress within a
reasonable period after completion of the relevant project;
identifying and acquiring suitable acquisition targets on
reasonable terms; the demand for energy diminishing; political
circumstances impeding the progress of work; general economic,
market or business conditions; changes in laws or regulations;
the risk factors listed from time to time in the Company's reports
filed with the Securities and Exchange Commission; and other
factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this
Form 10-K are qualified by these cautionary statements and there
can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if
substantially realized, that they will have the expected
consequences to or effects on the Company or its business or
operations. The Company assumes no obligation to update publicly
any such forward-looking statements, whether as a result of new
information, future events or otherwise.
3
PART I
Items 1 and 2. Business and Properties
General
Willbros Group, Inc. ("the Company") is one of the leading
independent contractors serving the oil and gas industry,
providing construction, engineering and specialty services to
industry and government entities worldwide. The Company places
particular emphasis on projects in developing countries where the
Company believes its experience gives it a competitive advantage.
The Company's construction services include the building and
replacement of major pipelines and gathering systems, flow
stations, pump stations, gas compressor stations, gas processing
facilities, oil and gas production facilities, piers, dock
facilities and bridges. The Company's engineering services
include feasibility studies, conceptual and detailed design,
field services, material procurement and overall project
management. The Company's specialty services include dredging,
pipe coating, pipe double jointing, removal and installation of
flowlines, fabrication of piles and platforms, maintenance and
repair of pipelines, stations and other facilities, pipeline
rehabilitation, general oilfield services and transport of
oilfield equipment, rigs and vessels. The Company's backlog was
$135.8 million at December 31, 1997, compared to $108.8 million
at December 31, 1996.
The Company provides its services utilizing a large fleet of
Company-owned equipment comprised of, among other things, marine
vessels, barges, dredges, pipelaying equipment, heavy
construction equipment, transportation equipment and camp
equipment. At December 31, 1997, the Company had approximately
785 units of heavy construction equipment, 1,146 units of
transportation equipment and 5,207 units of support equipment.
The Company's equipment fleet is supported by warehouses of spare
parts and tools which are located to maximize availability and
minimize cost.
The Company traces its roots to the construction business of
Williams Brothers Company, founded in 1908. Through successors to
that business, Willbros has completed many landmark projects
around the world, including the "Big Inch" and "Little Big Inch"
War Emergency Pipelines (1942-44), the Mid-America Pipeline
(1960), the TransNiger Pipeline (1962-64), the Trans-Ecuadorian
Pipeline (1970-72), the northernmost portion of the Trans-Alaskan
Pipeline System (1974-76), the All American Pipeline System (1984-
86), Colombia's Alto Magdalena Pipeline System (1989-90) and a
portion of the Pacific Gas Transmission System expansion (1992-
93).
Over the years, Willbros has been employed by more than 400
clients to carry out work in over 50 countries. Within the past
10 years, Willbros has worked in Africa, Asia, the Middle East,
North America and South America. Willbros' relatively steady base
of ongoing construction, engineering and specialty services
operations in Nigeria, Oman, the United States and Venezuela has
been enhanced by major construction and engineering projects in
Abu Dhabi, Colombia, Egypt, Gabon, Indonesia, Kuwait, Morocco,
Nigeria, Oman, Pakistan, the United States and Venezuela.
Representative clients (or affiliates of clients) of the
Company include Royal Dutch Shell; Asamera (Overseas) Limited;
Bilfinger & Berger; Conoco; Chevron; Kuwait Oil Company; Abu
Dhabi National Oil Company; U.S. Army; U.S. Navy; Pacific Gas &
Electric; Petroleum Development Oman; Enron; El Paso Energy;
Petroleos de Venezuela S.A. ("PDVSA"); Occidental Petroleum; Duke
Energy; Great Lakes Gas Transmission Company; E.N.I.; The
Williams Companies; Nigerian National Petroleum Corporation
("NNPC"); and the Pak-Arab Refinery, Ltd. ("PARCO"). Private
sector clients such as Royal Dutch Shell have historically
accounted for the majority of the Company's revenues. Government
entities and agencies, such as Kuwait Oil Company, U.S. Army,
U.S. Navy, NNPC and PDVSA, have accounted for the remainder. Ten
clients were responsible for 74% of the Company's total revenues
in 1997 (82% in 1996 and 78% in 1995). Operating units of Royal
Dutch Shell accounted for 13% of the Company's total revenues in
1997 (33% in 1996 and 32% in 1995).
4
The Company is incorporated in the Republic of Panama and
maintains its headquarters at Dresdner Bank Building, 50th
Street, 8th Floor, Panama 5, Republic of Panama; its telephone
number is (50-7) 263-9282. Administrative services for the
Company are provided by Willbros USA, Inc., which is located at
2431 East 61st Street, Suite 700, Tulsa, Oklahoma 74136-1267; its
telephone number is (918) 748-7000.
Current Market Conditions
The Company believes several factors influencing the global
energy market have led to and will continue to result in
increased activity across its primary lines of business. The
factors leading to higher levels of energy related capital
expenditures include (a) rising global energy demand resulting
from economic growth in developing countries, (b) the
privatization of certain state-controlled oil and gas companies,
and (c) the need for larger oil and gas transportation
infrastructures in a number of developing countries.
Accordingly, many significant projects are being undertaken,
particularly in developing countries or regions where energy
infrastructure spending has lagged. These include natural gas,
crude oil and petroleum products pipeline projects, LNG projects
and ancillary projects. Industry sources estimate that total
worldwide pipeline construction expenditures will be
approximately $75.0 billion for projects to be completed in 1998
and beyond.
The Company believes that certain of these projects will meet
its bidding criteria, and that the Company's worldwide pipeline
construction, engineering and specialty services experience place
it in an advantageous position to compete for such projects. The
Company currently has a number of significant bids outstanding
with respect to potential contract awards in Cameroon, Chad,
Egypt, Indonesia, Ivory Coast, Kazakstan, Mexico, Nigeria, Oman,
the United States and Venezuela. The Company is currently
preparing bids with respect to potential contract awards in
Bolivia, Indonesia, Nigeria, Oman, the United States and
Venezuela. Finally, the Company expects to prepare and submit
bids with respect to certain other potential construction and
engineering projects in Africa, Asia, the Middle East, North
America and South America during 1998.
Business Strategy
The Company seeks to maximize stockholder value through its
growth strategy which encompasses geographic expansion, strategic
alliances, acquisitions and quality improvement, while
maintaining a strong balance sheet. In pursuing this strategy,
the Company relies on (a) the competitive advantage gained from
its experience in completing logistically complex and technically
difficult projects in remote areas with difficult terrain and
harsh climatic conditions and (b) its experienced multinational
work force of approximately 4,230 employees, of whom more than
80% are citizens of the respective countries in which they work.
Geographic Expansion. The Company's objective is to maintain
and enhance its presence in regions where it has developed a
strong base of operations, such as Africa, Asia, the Middle East,
North America and South America, by capitalizing on its local
experience, established contacts with local customers and
suppliers and familiarity with local working conditions. In
addition, the Company seeks to establish a presence in other
strategically important areas, such as Bolivia, Cameroon, Canada,
Chad, the Commonwealth of Independent States ("C.I.S.") and
Mexico, as well as certain other selected areas in South America
and Asia. In pursuing this strategy, the Company seeks to
identify a limited number of long-term niche markets in which the
Company can outperform the competition and establish an
advantageous position.
Strategic Alliances. The Company seeks to establish strategic
alliances with companies whose resources, skills and strategies
are complementary to and are likely to enhance the Company's
business opportunities, including the formation of joint ventures
and consortia to achieve competitive advantage
5
and share risks. Such alliances have already been established in
Argentina, Australia, Cameroon, Chad, Indonesia, Malaysia,
Mexico, Russia, Thailand, the United States and Venezuela. As an
example of this strategy, the Company has entered into a Joint
Development Agreement with a unit of British Gas plc to promote
the utilization of an epoxy-filled pipeline repair sleeve
developed by British Gas and offer a full range of pipeline
rehabilitation services to the oil and gas industry, including
assessment and rehabilitation construction services. As a related
strategy, the Company may decide to make an equity investment in
a project in order to enhance its competitive position and/or
maximize project returns.
Acquisitions. The Company seeks to identify, evaluate and
acquire companies that offer growth opportunities and the ability
to complement the Company's resources and capabilities.
Consistent with this strategy, in 1994 the Company acquired
Construcciones Acuaticas Mundiales, S.A. ("CAMSA"). CAMSA
operates in Venezuela and, in addition to performing onshore
construction and specialty services, possesses expertise in
marine construction and the fabrication and installation of
concrete piles and platforms for offshore projects. Further to
this strategy, in 1997 the Company entered into a new credit
agreement, a substantial portion of which can be used for
acquisitions.
Quality Improvements. The Company's quality program enhances
the Company's ability to meet the specific requirements of its
customers through continuous improvement of all its business
processes, while at the same time improving competitiveness and
profitability. One important goal of the quality program is to
obtain ISO 9000 certification for the quality system employed by
the Company as a whole. ISO 9000, an internationally recognized
verification system for quality management, has in recent years
been made a criterion for prequalification of contractors by
certain clients and potential clients, and this trend is expected
to continue. The certification process involves a rigorous review
and audit of the Company's management processes and quality
control procedures. As of December 31, 1997, seven of the
Company's subsidiaries had achieved ISO 9000 certification.
Conservative Financial Management. The Company emphasizes the
maintenance of a conservative balance sheet in order to finance
the development and growth of its business. The Company also
seeks to obtain contracts that are likely to result in recurring
revenues in order to partially mitigate the cyclical nature of
its construction and engineering businesses. For example, the
Company generally seeks to obtain specialty services contracts of
more than one year in duration. Additionally, the Company acts to
minimize its exposure to currency fluctuations through the use of
U.S. dollar-denominated contracts whenever possible, by limiting
payments in local currency to approximately the amount of local
currency expenses, and otherwise by engaging in hedging
activities such as purchasing foreign currency forward contracts.
Willbros Background
The Company is the successor to the pipeline construction
business of Williams Brothers Company which was started in 1908
by Miller and David Williams. In 1949, the business was
reconstituted and acquired by the next generation of the Williams
family. The resulting enterprise eventually became The Williams
Companies, Inc., a major U.S. energy, communications and
interstate natural gas and petroleum products transportation
company ("Williams").
In 1975, Williams elected to discontinue its pipeline
construction activities and, in December 1975, sold substantially
all of the non-U.S. assets and entities comprising its pipeline
construction division to a newly formed Panama corporation
(eventually renamed "Willbros Group, Inc.") owned by employees of
the division. In 1979, Willbros Group, Inc. retired its debt
incurred in the acquisition by selling a 60% equity stake to
Heerema Holding Construction, Inc. ("Heerema"). In 1986, Heerema
acquired the balance of Willbros Group, Inc., which then operated
as a wholly owned subsidiary of Heerema until April 1992.
In April 1992, Heerema sold Willbros Group, Inc. to a
corporation formed December 31, 1991, in the Republic of Panama
by members of the Company's management, certain other investors,
and Heerema. Subsequently, the original Willbros Group, Inc. was
dissolved into the acquiring corporation which was
6
renamed "Willbros Group, Inc." In August 1996, the Company
completed an initial public offering of Common Stock in which
Heerema sold all of its shares of Common Stock, and in October
1997, the Company completed a secondary offering in which such
other investors sold substantially all their shares of Common
Stock.
The term "Willbros," as used in this Form 10-K, includes the
Company, the original Willbros Group, Inc. and their predecessors
in the pipeline construction business, as described above. All
references in this Form 10-K to the "Company" refer to Willbros
Group, Inc. ("WGI") and its consolidated subsidiaries.
Willbros Milestones
The following are selected milestones which Willbros has
achieved:
1915 Began pipeline work in the United States.
1939 Began international pipeline work in Venezuela.
1942-44 Served as principal contractor on the "Big Inch" and
"Little Big Inch" War Emergency Pipelines in the United
States which delivered Gulf Coast crude oil to the
Eastern Seaboard.
1947-48 Built the 370 mile (600 kilometer) Camiri to Sucre and
Cochabamba crude oil pipeline in Bolivia.
1951 Completed the 400 mile (645 kilometer) western segment of
the Trans-Arabian Pipeline System in Jordan, Syria and
Lebanon.
1954-55 Built Alaska's first major pipeline system, consisting of
625 miles (1,000 kilometers) of petroleum products
pipeline, housing, communications, two tank farms, five
pump stations and marine dock and loading facilities.
1956-57 Led a joint venture which constructed the 335 mile (535
kilometer) southern section of the Trans-Iranian
Pipeline, a products pipeline system extending from
Abadan to Tehran.
1958 Constructed pipelines and related facilities for the
world's largest oil export terminal at Kharg Island,
Iran.
1960 Built the first major liquified petroleum gas pipeline
system, the 2,175 mile (3,480 kilometer) Mid-America
Pipeline in the United States, including six delivery
terminals, two operating terminals, 13 pump stations,
communications and cavern storage.
1962 Began operations in Nigeria with the commencement of
construction of the TransNiger Pipeline, a 170 mile (275
kilometer) crude oil pipeline.
1964-65 Built the 390 mile (625 kilometer) Santa Cruz to Sica
Sica crude oil pipeline in Bolivia. The highest altitude
reached by this line is 14,760 feet (4,500 meters) above
sea level, which management believes is higher than the
altitude of any other pipeline in the world.
1965 Began operations in Oman with the commencement of
construction of the 175 mile (280 kilometer) Fahud to
Muscat crude oil pipeline system.
1967-68 Built the 190 mile (310 kilometer) Orito to Tumaco crude
oil pipeline in Colombia, one of five Willbros crossings
of the Andes Mountains, a project notable for the use of
helicopters in high altitude construction.
7
1969 Completed a gas gathering system and 105 miles (170
kilometers) of 42 inch trunkline for the Iranian Gas
Trunkline Project (IGAT) in Iran to supply gas to the
USSR.
1970-72 Built the Trans-Ecuadorian Pipeline, consisting of 315
miles (505 kilometers) of 20 and 26 inch pipeline, seven
pump stations, four pressure reducing stations and six
storage tanks.
1974-76 Led a joint venture which built the northernmost 225
miles (365 kilometers) of the Trans- Alaskan Pipeline
System.
1974-76 Led a joint venture which constructed 290 miles (465
kilometers) of pipeline and two pump stations in the
inaccessible western Amazon basin of Peru.
1974-79 Designed and engineered the 500 mile (795 kilometer)
Sarakhs-Neka gas transmission line in northeastern Iran.
1976-79 Acted as technical leader of a consortium which designed
and supplied six modularized gas compressor stations
totaling 726,000 horsepower for the 56 inch Urengoy to
Chelyabinsk gas pipeline system in western Siberia.
1982-83 Built the Cortez carbon dioxide pipeline system in the
southwestern United States, consisting of 505 miles (815
kilometers) of 30 inch pipe.
1984-86 Constructed, through a joint venture, the All American
Pipeline System, a 1,240 mile (1,995 kilometer), 30 inch
heated pipeline, including 23 pump stations, in the
United States.
1984-95 Developed and furnished a rapid deployment fuel pipeline
distribution and storage system for the U.S. Army which
was used extensively and successfully in Saudi Arabia
during Operation Desert Shield/Desert Storm in 1990/1991
and in Somalia during 1993.
1985-86 Built a 185 mile (300 kilometer) 24 inch crude oil
pipeline from Ayacucho to Covenas in Colombia.
1987 Rebuilt 25 miles (40 kilometers) of the Trans-Ecuadorian
crude oil pipeline within six months after major portions
were destroyed by an earthquake.
1988-92 Performed the project management, engineering,
procurement and field support services to expand the
Great Lakes Gas Transmission System in the northern
United States. The expansion involved modifications to 13
compressor stations and the addition of 660 miles (1,060
kilometers) of 36 inch pipeline in 50 separate loops.
1989-90 Built the Alto Magdalena Pipeline System in Colombia,
consisting of 250 miles (400 kilometers) of 20 inch crude
oil pipeline, one pump station and a tank farm.
1989-92 Provided pipeline engineering and field support services
for the Kern River Gas Transmission System, a 36 inch
pipeline project extending over 685 miles (1,100
kilometers) of desert and mountains from Wyoming to
California in the United States.
1992-93 Rebuilt oil field gathering systems in Kuwait as part of
the post-war reconstruction effort.
1992-93 Built 150 miles (240 kilometers) of 42 inch pipeline in
Oregon to expand the Pacific Gas Transmission System.
1992-94 Resumed activities in the C.I.S. Selected to develop
export pipeline system for Caspian Pipeline Consortium
from Tengiz field in Kazakstan to Black Sea oil terminal
at Novorossiysk, Russia, and established a representative
office and joint stock company in Russia.
8
1994 Re-entered Venezuela oil service market through the
acquisition of CAMSA.
1995 Entered into an agreement with a Japanese trading company
providing for the joint development of projects in
selected markets in Southeast Asia and established an
office in Jakarta, Indonesia, to pursue major projects in
the region.
1995-97 Carrying out two contracts in Pakistan for construction,
material procurement and engineering of the MFM Pipeline
Extension Project, which consists of 225 miles (365
kilometers) of 18 and 16 inch multi-product pipeline and
related facilities.
1996 Listed shares in an initial public offering of Common
Stock on the NYSE under the symbol "WG."
1996 Began design work on an EPC contract with Asamera
(Overseas) Limited to construct pipelines, flowlines and
related facilities for the Corridor Block Gas Project
located in southern Sumatra, Indonesia.
1996-97 Achieved ISO Certification for seven operating companies.
1997 Began work on a contract for the construction of 120
miles (200 kilometers) each of 36 and 20 inch pipelines
in the Zuata Region of the Orinoco Belt in Venezuela.
1997 Began work on a contract with an MW Kellogg joint venture
for the construction of a 35 mile (55 kilometer) gas
pipeline for an LNG plant in Kalimantan, Indonesia,
furthering the Company's efforts to establish Indonesia
as an ongoing work country.
1997 Entered the Mexican market by beginning work on an EPC
contract for El Paso Natural Gas Company and Gasoductos
de Chihuahua, a joint venture between El Paso and PEMEX,
to construct a 45 mile (75 kilometer) gas pipeline system
in Texas and Mexico.
Lines of Business
The Company operates in a single industry segment, primarily
providing contract services to the oil and gas industry. The main
lines of business within this segment include construction,
engineering and specialty services. The following table reflects
the Company's contract revenues by line of business for 1997,
1996 and 1995.
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollar amounts in thousands)
Construction services $118,277 47% $ 41,090 21% $ 69,262 31%
Engineering services 75,674 30 58,841 30 31,414 15
Specialty services 57,926 23 97,757 49 119,830 54
-------- --- -------- --- -------- ---
Total $251,877 100% $197,688 100% $220,506 100%
======== === ======== === ======== ===
Construction Services
The Company is one of the most experienced contractors serving
the oil and gas industry. The Company's construction capabilities
include the expertise to construct and replace large diameter
cross-country pipelines; to construct oil and gas production
facilities, pump stations, flow stations, gas compressor
stations, gas processing facilities and other related facilities;
and to construct piers, docks and bridges.
9
Pipeline Construction. World demand for pipelines results
from the need to move millions of barrels of crude oil and
petroleum products and billions of cubic feet of natural gas to
refiners, processors and consumers each day. Pipeline
construction is capital intensive, and the Company owns, operates
and maintains a fleet of specialized equipment necessary for it
to engage in the pipeline construction business. The Company
focuses on pipeline construction activity in remote areas and
harsh climates where it believes its experience gives it a
competitive advantage. Willbros believes that it has constructed
more miles of pipeline than any other private sector company.
The construction of a cross-country pipeline involves a number
of sequential operations along the designated pipeline right-of-
way. These operations are virtually the same for all overland
pipelines, but personnel and equipment may vary widely depending
upon such factors as the time required for completion, general
climatic conditions, seasonal weather patterns, the number of
road crossings, the number and size of river crossings, terrain
considerations, extent of rock formations, density of heavy
timber and amount of swamp. Construction often involves separate
crews to perform the following different functions: clear the
right-of-way; grade the right-of-way; excavate a trench in which
to bury the pipe; haul pipe to intermediate stockpiles from which
stringing trucks carry pipe and place individual lengths (joints)
of pipe alongside the ditch; bend pipe joints to conform to
changes of direction and elevation; clean pipe ends and line up
the succeeding joint; perform various welding operations; non-
destructively inspect welds; clean pipe and apply anti-corrosion
coatings; lower pipe into the ditch; backfill the ditch; bore and
install highway and railroad crossings; drill, excavate or dredge
and install pipeline river crossings; tie in all crossings to the
pipeline; install mainline valve stations; conduct pressure
testing; install cathodic protection system; and perform final
clean up.
Special equipment and techniques are required to construct
pipelines across wetlands. From a launching station on dry land,
a section of several joints of pipe which have been welded
together may be pushed into a flooded ditch. By securing floaters
to the pipe, it is possible to float the pipe. The next section
is then welded to the end of the previous section, after which it
is pushed into the flooded ditch. The same method can be used
from a properly secured and anchored barge. Another specialized
swamp pipe laying technique is to lay the pipe from a lay barge
which moves along the right-of-way, laying one joint at a time;
each joint is aligned and welded, and the weld non-destructively
inspected and coated before being lowered in. The Company uses
swamp pipelaying methods extensively in Nigeria, where most of
its construction operations are carried out in the Niger River
delta. In addition to primary equipment such as laybarges,
dredges and swamp backhoes, the Company has a substantial
investment in support vessels, including tugboats, barges, supply
boats, and houseboats, which are required in order to maintain a
capability in swamp pipeline construction.
Station Construction. Oil and gas companies require various
facilities in the course of producing, processing, storing and
moving oil and gas. The Company is experienced in and capable of
constructing facilities such as pump stations, flow stations, gas
processing facilities, gas compressor stations and metering
stations. The Company is capable of building such facilities
onshore, offshore or in swamp locations. The construction of
station facilities, while not nearly as capital intensive as
pipeline construction, is generally characterized by complex
logistics and scheduling, particularly on projects in locations
where seasonal weather patterns limit construction options, and
in countries where the importation process is difficult.
Willbros' capabilities have been enhanced by its experience in
dealing with such challenges in numerous countries around the
world.
Marine Construction. The Company constructs and installs
fixed drilling and production platforms in Venezuela, primarily
in Lake Maracaibo. Because of the extremely corrosive conditions,
concrete, rather than steel, piling is driven deep into the
lakebed to support such platforms. The Company is also capable of
building bridges, docks, jetties and mooring or breasting
dolphins. The Company's marine fleet includes pile driving
barges, derrick barges and other vessels which support marine
construction operations.
10
Engineering Services
The Company provides engineering, project management and
material procurement services to the oil and gas industry and
government agencies. The Company specializes in providing
engineering services to assist clients in constructing or
expanding pipeline systems, compressor stations, pump stations,
fuel storage facilities and field gathering and production
facilities. Through experience, the Company has developed
expertise in addressing the unique engineering issues involved
with pipeline systems and associated facilities to be installed
where climatic conditions are extreme, where areas of
environmental sensitivity must be crossed, where fluids which
present extreme health hazards must be transported, and where
fluids which present technical challenges regarding material
selection are transported.
To complement its engineering services, the Company also
provides a full range of field services, including surveying,
right-of-way acquisition, material receiving and control,
construction inspection and facilities startup assistance. Such
services are furnished to a number of oil and gas industry and
government clients on a stand-alone basis; and, in addition, are
provided as part of engineering, procurement and construction
contracts undertaken by the Company.
Climatic Constraints. In the design of pipelines and
associated facilities to be installed in harsh environments,
special provisions for metallurgy of materials and foundation
design must be addressed. The Company is experienced in designing
pipelines for arctic conditions, where permafrost and extremely
low temperatures are prevalent, and for desert conditions,
mountainous terrain and swamps.
Environmental Impact of River Crossings. The Company has
considerable capability in designing pipeline crossings of rivers
and streams in such a way as to minimize environmental impact.
The Company possesses expertise to determine the optimal crossing
techniques (e.g., open cut, directionally drilled or overhead)
and to develop site specific construction methods to minimize
bank erosion, sedimentation and other environmental impacts.
Seismic Design and Stress Analysis. Company engineers are
experienced in seismic design of pipeline crossings of active
faults and areas where liquefaction or slope instability may
occur due to seismic events. Company engineers also carry out
specialized stress analyses of piping systems that are subjected
to expansion and contraction due to temperature changes, as well
as loads from equipment and other sources.
Hazardous Materials. Special care must be taken in the design
of pipeline systems transporting sour gas. Sour gas not only
presents challenges regarding personnel safety (hydrogen sulfide
leaks can be extremely hazardous), but also requires that
material be specified to withstand highly corrosive conditions.
Hydraulics Analysis for Fluid Flow in Piping Systems. The
Company employs engineers with the specialized knowledge
necessary to address properly the effects of both steady state
and transient flow conditions for a wide variety of fluids
transported by pipelines (natural gas, crude oil, refined
petroleum products, natural gas liquids, carbon dioxide and
water). This expertise is important in optimizing the capital
costs of pipeline projects where pipe material costs typically
represent a significant portion of total project capital costs.
Natural Gas Transmission Systems. The expansion of the
natural gas transportation network in the United States in recent
years has been a major contributor to the engineering business of
the Company. The Company believes it has established a strong
position as a leading supplier of engineering services to natural
gas pipeline transmission companies in the United States. Since
1988, Willbros has provided, or is providing, engineering
services for seven major natural gas pipeline projects in the
United States, totaling more than 3,300 miles (5,400 kilometers)
of large diameter pipe for new systems and expansions of existing
systems. During this same period, Willbros was also the
engineering contractor for 15 compressor stations (or additions
to existing stations) for six clients.
11
Liquids Pipelines and Storage Facility Design. Willbros has
engineered a number of crude oil and refined petroleum products
systems throughout the world, and has become recognized for its
expertise in the engineering of systems for the storage and
transportation of petroleum products and crude oil. In recent
years, the Company has been responsible for the engineering of a
major expansion of a products pipeline system in the United
States, involving 395 miles (640 kilometers) of pipeline in New
Mexico and Texas. Currently, the Company is providing engineering
and field services for a major expansion of a crude oil system in
Wisconsin and Illinois, involving over 450 miles (725 kilometers)
of large diameter pipeline to serve the upper midwest refineries
with Canadian crude oil.
U.S. Government Services. Since 1981, Willbros has
established its position with U.S. government agencies as a
leading engineering contractor for jet fuel storage and aircraft
fueling facilities, having performed the engineering for major
projects at seven U.S. military bases including three air bases
outside the U.S. The award of these projects was based on
contractor experience and personnel qualifications.
Design of Peripheral Systems. The Company's expertise extends
to the engineering of a wide range of project peripherals,
including various types of support buildings and utility systems,
power generation and electrical transmission, communications
systems, fire protection, water and sewage treatment, water
transmission, roads and railroad sidings.
Material Procurement. Because material procurement plays such
a critical part in the success of any project, the Company
maintains an experienced staff to carry out material procurement
activities. Material procurement services are provided to clients
as a complement to the engineering services performed for a
project. On engineering, procurement and construction contracts
undertaken by the Company, material procurement is especially
critical to the timely completion of construction. The Company
maintains a computer-based material procurement, tracking and
control system, which utilizes software enhanced to meet the
Company's specific requirements.
Specialty Services
The Company provides a wide range of support and ancillary
services related to the construction, operation, repair and
rehabilitation of pipelines. Frequently, such services require
the utilization of specialized equipment which is costly and
requires operating expertise. Due to the initial equipment cost
and operating expertise required, many companies contract for the
use of such specialized equipment and experienced personnel. The
Company owns and operates a variety of specialized equipment that
is used to support construction projects and to provide a wide
range of oilfield services. The following is a description of the
primary types of specialty services.
Dredging. The Company conducts dredging operations on its own
projects and as a subcontractor for other companies. Dredging
equipment is required to pump sand to establish a land location
in a swamp and to excavate trenches for pipelines in swamps or
offshore locations and for river crossings. Dredging equipment is
also used to maintain required depth of navigation channels for
barges and other water craft. This maintenance dredging is often
performed on annual or multi-year contracts. The Company owns a
fleet of dredges, including cutter suction dredges and grab
dredges, which are routinely used in Nigeria and can be readily
deployed to other projects in the region.
Pipe Coating. The Company owns and operates coating equipment
which applies a variety of protective anti-corrosion coatings to
the external surface of line pipe. The external coating is
required to protect buried pipe in order to mitigate external
corrosion.
Concrete Weight Coating. Pipelines installed in wetlands or
marine environments must be heavy enough to offset the buoyancy
forces on the buried pipeline to keep the pipeline from floating
out of the ditch. The most effective method of achieving the
required negative buoyancy is concrete coating applied
12
over the anti-corrosion coating to a calculated thickness. The
Company owns and operates a facility in Nigeria to apply concrete
weight coating to line pipe.
Pipe Double Jointing. Large diameter pipe for onshore
pipeline projects is normally manufactured in 40 foot (12 meter)
nominal lengths (joints) to facilitate ocean transportation. On
long distance, large diameter pipeline projects, it is usually
economical to weld two joints into an 80 foot (24 meter) double
joint at a location or locations along the pipeline route. This
technique reduces the amount of field welding by 50%, and,
because welding is often the critical operation, it may
accelerate construction of the pipeline. The double joint welds
are made with a semi-automatic submerged arc welding process
which produces high quality, consistent welds at lower costs than
field welding. The Company owns two transportable self-contained
double joint plants which can handle 24 to 48 inch diameter pipe
and are used on both domestic and international projects.
Piling. The Company's subsidiary in Venezuela specializes in
the fabrication and installation of 36 inch concrete piles up to
220 feet (67 meters) in length. These piles are used to construct
marine facilities such as drilling platforms, production
platforms, bridges, docks, jetties and mooring or breasting
dolphins. The Company also owns barges and pile driving equipment
to install piles in Venezuela and Nigeria.
Marine Heavy Lift Services. The primary equipment used for
oil and gas production facilities is usually manufactured on
skids at the vendor's shop and transported to the production site
by ocean-going water craft. The Company owns a variety of heavy
lift barges and tugs to transport such equipment from the
receiving country port to the production location and to install
the equipment on the platforms. Other services include marine
salvage and dry-dock facilities for inland water barges.
Transport of Dry and Liquid Cargo. Exploration and production
operations in marine environments require logistical support
services to transport a variety of liquid and dry cargo to the
work sites. The Company owns and operates a diversified fleet of
marine equipment to provide transportation services to support
these operations in Nigeria and Venezuela.
Rig Moves. Derricks used for drilling oil and gas wells and
for well work-overs require heavy transportation equipment to
move such equipment and tanks and storage vessels between well
locations. The Company owns a fleet of heavy trucks and trailers
and provides transportation services to move rigs for clients in
Oman and Venezuela.
Pipeline Rehabilitation Services. The Company and BG
Inspection Services, Inc., the U.S. pipeline inspection unit of
British Gas plc, have executed a Joint Development Agreement to
pursue pipeline repair and rehabilitation projects in North,
Central and South America. The joint effort will promote the
utilization of the British Gas developed "epoxy-filled repair
sleeve" and will offer a full range of related pipeline
rehabilitation services related to the oil and gas industry,
including inspection, assessment and rehabilitation construction
services. This repair technique permits permanent repairs to be
made to a pipeline without cutting sections of pipe from the
pipeline and without interruption of service. The Company and
British Gas have also used this rehabilitation procedure for a
client in Oman on approximately 790 miles (1,275 kilometers) of 6
through 38 inch crude oil and natural gas pipelines.
Maintenance and Repair Services. The Company provides a wide
range of other services including mechanical, electrical,
instrumentation, civil works, road maintenance and provision of
camp services for operating personnel associated with operation
and maintenance of oil and gas gathering systems and production
equipment.
13
Geographic Regions
The Company currently operates in the following geographic
regions: Africa, Asia, the Middle East, North America and South
America. The following table reflects the Company's contract
revenues by geographic region for 1997, 1996 and 1995.
Year Ended December 31,
---------------------------------------------------
1997 1996 1995
---- ---- ----
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
(Dollar amounts in thousands)
Africa $ 75,982 30% $ 87,283 44% $ 95,972 43%
Asia 42,098 17 35,077 17 31,011 14
Middle East 22,846 9 3,513 12 21,870 10
North America 79,121 31 32,918 17 52,100 24
South America 31,830 13 18,897 10 19,553 9
Total $251,877 100% $197,688 100% $220,506 100%
======== === ======== === ======== ===
See Note 12 to the Consolidated Financial Statements on pages 35
and 36 of the Company's 1997 Annual Report to Stockholders (which
is incorporated by reference herein) for additional information
about the Company's operations in its work countries.
Africa
Africa has been and will continue to be an important strategic
market for the Company. The Company believes that there will be
opportunities to expand its business in Africa, particularly
through the development of natural gas projects. There are large,
potentially exploitable reserves of natural gas in West Africa,
extending from the Ivory Coast to Angola. Depending upon the
world market for natural gas and the availability of financing,
the amount of potential new work could be substantial. The
Company intends to maintain its presence in the region and seeks
to increase its share of available work. Willbros is currently
monitoring or bidding major work prospects in Cameroon, Chad,
Egypt, Ivory Coast, Nigeria and Tanzania.
Over the past 50 years, Willbros has completed major projects
in a number of African countries including Algeria, Egypt, Gabon,
Libya, Morocco and Nigeria. The Company has management staff
resident in Africa, assisted by engineers, managers and craftsmen
with extensive African experience, capable of providing
construction expertise, repair and maintenance services, dredging
operations, pipe coating and engineering support. Strong local
relationships have enabled Willbros to satisfy the varied needs
of its clientele in the region.
Willbros has had a continuous presence in Nigeria since 1962.
The Company's activities in Nigeria are directed from a fully
staffed operational base near Port Harcourt. This 60 acre
compound includes office and living facilities, equipment and
vehicle repair shops, a marine jetty and warehouses for both
Company and client materials and spare parts. The Company has
diversified its range of services by adding dredging and pipe
coating expertise. Having diverse yet complementary capabilities
has often given the Company a competitive advantage on projects
which contain several distinct work elements within the project's
scope of work. For example, the Company believes that it is
currently the only contractor operating in the Nigerian oil and
gas sector capable, on its own, of executing a pipeline
construction project, which requires yard coating of line pipe,
installation of major water crossings and both swamp and cross-
country segments of pipeline. The Company's current activities in
Nigeria include the construction of 20 miles (30 kilometers) of
36 inch gas pipeline, including a river crossing, for the Bonny
LNG project for Saipem and contracts with Shell to provide
dredging services and swamp flowline maintenance services.
The Company's backlog in Africa was $21.7 million at December
31, 1997, compared to $18.5 million at December 31, 1996.
14
Asia
In an effort to take advantage of the rapidly growing economies
and increasing demand for energy infrastructures in Asia, the
Company has made Asia a priority target market for geographic
expansion. Despite the present economic crisis in certain
countries in the region, the Company believes that Asia will
continue to develop and distribute more energy resources to fuel
ongoing modernization programs. The relative abundance of
undeveloped natural gas resources, along with environmental
concerns, favor the use of natural gas for power generation and
industrial and residential usage in the region.
To capitalize on these trends, in March 1995, the Company
established an office in Jakarta, Indonesia, to pursue potential
major projects in Asia. In October 1995, the Company entered into
a cooperation agreement with a major Japanese trading company
providing for the joint development of projects in Indonesia,
Malaysia and Thailand. In November 1996, the Company was awarded
a $33 million contract by Asamera (Overseas) Limited to construct
pipelines, flowlines and related facilities for the Corridor
Block Gas Project in southern Sumatra, Indonesia. In June 1997,
the Company was awarded a $22 million contract by an MW Kellogg
joint venture for the construction of a gas pipeline for an LNG
plant in Kalimantan, Indonesia. The Company is currently
monitoring or bidding work prospects in Australia, India,
Indonesia, Malaysia, Pakistan and Papua New Guinea.
The Company recently completed contracts for Pak-Arab Refinery,
Ltd. relating to the MFM Pipeline Extension Project in Pakistan.
The contracts included the supply of project materials, the
engineering and construction of 225 miles (365 kilometers) of 18
and 16 inch petroleum products pipeline, the expansion of an
existing terminal (including 267,000 barrels of storage
capacity), the addition of a new terminal and pump station
(including 270,000 barrels of storage), the addition of a storage
terminal (including 443,000 barrels of storage) and design of a
future pump station. A small team is currently managing close-
out activities from the Company's project office in Lahore,
Pakistan.
Willbros' activities in the C.I.S. date back to 1976. The
C.I.S. continues to be an area of interest to the Company because
it contains vast reserves of oil and gas and many of the
Company's clients are major oil and gas companies who are
candidates to participate in the development of energy resources
in the C.I.S. The oil reserves contained in the Tengiz Field, the
largest field to be served by the planned Caspian Crude Oil
Export Pipeline System, and the gas reserves contained in the
Bovanenkovskoye Field, the anchor field on the gas-rich Yamal
peninsula, are each generally recognized to be among the largest
in the world. These are but two of many fields which are
candidates for significant exploration and production
investments. The Company is prepared to offer its support
services to such clients. To compete in the Russian market, the
Company has an Accredited Representative Office in Moscow, as
well as a Russian joint stock company licensed to perform a broad
range of engineering and construction services. The Company is
in the process of establishing a branch office in Kazakstan, from
which it intends to carry out business development activities.
The Company's backlog in Asia was $30.2 million at December 31,
1997, compared to $44.6 million at December 31, 1996.
Middle East
The Company believes that increased exploration and production
activity in the Middle East will continue to be the primary
factor influencing the construction of new energy transportation
systems. The majority of future transportation projects in the
region are expected to be centered around natural gas due to
increased regional demand, governments' realization of gas as an
important asset and an underdeveloped gas transportation
infrastructure throughout the region. The Company is aggressively
pursuing business opportunities throughout the Middle East and is
currently bidding work or monitoring prospects in Abu Dhabi,
Kuwait, Oman, Qatar, Saudi Arabia and Yemen.
15
Willbros operations in the Middle East date back to 1948. It
has worked in most of the countries in the region, with
particularly heavy involvement in Iran, Kuwait, Oman and Saudi
Arabia. In Iran, Willbros designed or constructed a substantial
portion of the pipelines and related facilities that exist today.
During 1992 and 1993, following the Gulf War, the Company carried
out a significant program of gathering line replacement in Kuwait
to help Kuwait Oil Company restore its production capacity.
Currently, the Company has ongoing operations in Oman, where
Willbros has been active for more than 30 years. The Company
maintains a fully staffed facility in Oman with equipment repair
facilities and spare parts on site and offers construction
expertise, repair and maintenance services, engineering support,
oil field transport services, materials procurement and a variety
of related services to its clients. Current operations in Oman
include a general oilfield services contract for Occidental of
Oman, a pipeline construction contract and a crane supply and
operation program for Petroleum Development Oman ("PDO"). Work
carried out in Oman during 1997 includes pipeline construction,
pipeline maintenance, mechanical services and flowline work for
Occidental of Oman and PDO.
The Company's backlog in the Middle East was $6.9 million at
December 31, 1997, compared to $8.0 million at December 31, 1996.
North America
Willbros has provided services to the U.S. oil and gas industry
for more than 80 years. The Company believes that the United
States will continue to be an important market for its services.
Recent deregulation of the electric power and natural gas
pipeline industries in the United States has led to the
consolidation and reconfiguration of existing pipeline
infrastructure and the establishment of new energy transport
systems, which the Company expects will result in continued
demand for its services. The demand for natural gas for
industrial and power usage in the Upper Midwest and Northeastern
United States will also fuel the requirement to build new natural
gas transportation infrastructure in the region. Supply to
satisfy such market demand for natural gas will come from
existing and new production in Western Canada, the Gulf of Mexico
and the Canadian Atlantic offshore region. Environmental concerns
will likely continue to require careful, thorough and specialized
professional engineering and planning for all new facilities
within the oil and gas sector. Furthermore, the demand for
replacement and rehabilitation of pipelines is expected to
increase as pipeline systems in the United States approach the
end of their design lives and population trends influence overall
energy needs.
Willbros is recognized as an industry leader in the United
States for providing state-of-the-art engineering and
construction services. The Company maintains a staff of
experienced management, construction, engineering and support
personnel in the United States. Among Willbros' significant
achievements in the United States are (a) the construction of the
two northernmost segments of the Trans-Alaskan Pipeline System
(1974-76), which consisted of a 225 mile (365 kilometer) crude
oil pipeline and a 140 mile (225 kilometer) fuel gas pipeline and
(b) a joint venture to build the All American Pipeline System
(1984-86), a 1,240 mile (1,995 kilometer) heated crude oil
pipeline with 23 pumping and heating stations. The Company was a
construction contractor on the Pacific Gas & Electric-PGT
pipeline expansion project in Oregon and the Tuscarora Gas
Transmission project in Nevada and California. Since 1988,
Willbros has provided engineering services for the Great Lakes
Gas Transmission Company's system expansion, the Kern River Gas
Transmission System, the Northwest Pipeline System expansion, the
NorAm Line AC pipeline project and the Florida Gas pipeline
project. During the same period, Willbros was the engineering
contractor for 15 compressor stations or station expansions on
behalf of six different clients in the United States. Currently,
the Company is providing engineering services for the Northern
Border Natural Gas pipeline extension, the Portland Natural Gas
Transmission project in New England, the KN Energy "Pony Express"
natural gas pipeline from Wyoming to Missouri, and the Lakehead
Pipe Line Company crude oil pipeline expansion project in
Wisconsin and Illinois. Recently, the Company completed a
contract to engineer and construct a 45 mile (75 kilometer) 24
inch gas pipeline system in Texas and Mexico for El Paso Natural
Gas Company and Gasoductos de Chihuahua.
16
Willbros has also provided significant engineering services to
the U.S. Government during the past 15 years, particularly in
fuel storage and distribution systems and aircraft fueling
facilities. Willbros performed the engineering for major projects
on seven U.S. military bases, four of which were located within
the United States. In 1984, Willbros was selected by the U.S.
Army to act as the systems integration contractor for the
Southwest Asia Petroleum Distribution Operational Project.
Willbros was responsible for developing and procuring a tactical
fuel distribution and storage system to support military
operations worldwide. The system was successfully deployed in
Saudi Arabia during Operation Desert Storm. Willbros acted as the
systems integrator for this project until 1996. Currently, the
Company is performing two multi-year contracts with the U.S.
government to (a) prepare operating and maintenance manuals for
fuel storage depots worldwide and (b) conduct integrity
assessments and carry out repair of pipeline and fueling
facilities at military installations worldwide.
The Company's backlog in North America was $31.8 million at
December 31, 1997, compared to $25.4 million at December 31,
1996.
South America
Willbros' first entry into South America was in Venezuela in
1939. Recent developments involving political changes and
privatization efforts in many of the South American countries
make this region especially attractive to the Company. In
particular, privatization and deregulation in this region are
allowing more foreign and domestic private investment in the
energy sector which, until recently, had traditionally been
controlled by state-owned energy companies. In Argentina,
Bolivia, Brazil, Chile and Peru, gas transportation projects will
continue to evolve to meet increasing demand for gas for
industrial and power usage in the rapidly growing urban areas. In
Venezuela, Colombia and Ecuador, crude oil transportation systems
will need to be built and upgraded so that the vast crude
reserves in these countries can be efficiently exported to the
world market. The Company is aggressively pursuing business
opportunities throughout South America and currently bidding work
or monitoring prospects in Argentina, Bolivia, Brazil, Peru and
Venezuela.
Willbros has performed numerous major projects in South
America, where its accomplishments include the construction of
five major pipeline crossings of the Andes Mountains and setting
a world altitude record for constructing a pipeline. Willbros'
largest project in South America was a $134.0 million turn-key
project for the procurement and construction of the Alto
Magdalena Crude Oil Pipeline System in Colombia, awarded to
Willbros in 1989 and completed in 1990.
Venezuela, the largest oil producer in South America, is a
particularly important market for the Company. With conservative
estimates of proven reserves of more than 72 billion barrels of
oil, PDVSA's plans for the future include an increase in oil
production from its current level of approximately 3.0 million
barrels per day to approximately 6.0 million barrels per day by
2006. In addition, the opening of Venezuela's previously
nationalized oil and gas industry to foreign energy company
participation has attracted the interest of most of the world's
major oil and gas companies.
In order to take advantage of perceived opportunities in
Venezuela, the Company acquired CAMSA, a Venezuelan company
located in the city of Maracaibo, in May 1994. When acquired,
CAMSA's primary expertise was marine construction and the
fabrication and installation of cylindrical concrete piles and
platforms for offshore projects. Since the acquisition, the
Company has added onshore construction equipment to complement
the marine fleet, enabling CAMSA to compete for both onshore and
offshore construction projects, as well as specialty services
contracts.
The Company maintains a fully staffed facility including
offices, equipment yard and dock facilities on a 15 acre
waterfront site on Lake Maracaibo, with resident management
personnel assigned who are responsible for estimating and
tendering bids, providing construction expertise, repair and
maintenance services, marine related services, engineering
support and other needed services. Major clients include
international oil companies such as Shell, Occidental Petroleum,
Chevron and operating subsidiaries of PDVSA, including Maraven,
Corpoven and Lagoven. In 1997, the Company was awarded a
contract to
17
construct 120 miles (200 kilometers) each of 36 and 20 inch
pipelines originating from the Zuata region of the Orinoco Belt
for Petrozuata, a joint venture between Conoco and Maraven. This
award is deemed significant because it will position the Company
with the resources and experience to compete more effectively for
additional onshore work in Venezuela.
The Company's backlog in South America was $45.2 million at
December 31, 1997, compared to $12.3 million at December 31,
1996.
Backlog
The Company's backlog (anticipated revenue from the uncompleted
portions of existing contracts and contracts whose award is
reasonably assured) was $135.8 million at December 31, 1997,
compared to $108.8 million at December 31, 1996. The Company
believes the backlog figures are firm, subject only to the
cancellation and modification provisions contained in various
contracts. It is expected that substantially all the backlog
existing at December 31, 1997, will be recognized in revenues
during 1998. Historically, a substantial amount of the Company's
revenues in a given year have not been reflected in its backlog
at the beginning of that year; such revenues may result from
contracts of long or short duration entered into during a year as
well as from various contractual processes, including change
orders, extra work, variations in the scope of work and the
effect of escalation or currency fluctuation formulas. These
revenue sources are not added to backlog until realization of
revenue is assured.
The following is a breakdown of the Company's backlog by
geographic region as of December 31, 1997 and 1996:
1997 1996
---- ----
Amount Percent Amount Percent
------ ------- ------ -------
(Dollar amounts in thousands)
Africa $ 21,686 16% $ 18,455 17%
Asia 30,201 22 44,612 41
Middle East 6,925 5 7,968 7
North America 31,826 24 25,374 23
South America 45,159 33 12,342 12
-------- --- -------- ---
Total $135,797 100% $108,751 100%
======== === ======== ===
The $27.0 million (25%) increase in backlog is due mainly to
the addition of contracts for the construction of 120 miles (200
kilometers) each of 36 and 20 inch pipelines in Venezuela, a 35
mile (55 kilometer) 42 inch pipeline in Kalimantan, Indonesia, a
20 mile (30 kilometer) 36 inch gas pipeline, including a river
crossing in Nigeria, and engineering services in the United
States, offset by work completed on an 85 mile (135 kilometer)
gas gathering system and station in Sumatra, Indonesia, and work
performed on an offshore loading and storage terminal in
Venezuela.
A substantial percentage of the Company's revenues in past
years resulted from contracts entered into during that year or
the immediately preceding year. The following table sets forth
revenues for each of the last five years as a percentage of
backlog at the beginning of each such year:
Revenues for
Backlog at Year Ended
January 1 December 31 Percent
---------- ------------ -------
(Dollar amounts in thousands)
1993 $160,565 $210,011 131%
1994 76,066 145,716 191
1995 97,493 220,506 2264
1996 139,359 197,688 142
1997 108,751 251,877 231
No assurance can be given that future experience will be similar
to historical results in this respect.
18
Competition
The Company operates in a highly competitive environment. The
Company competes against government-owned or supported companies
and other companies that have financial and other resources
substantially in excess of those available to the Company. In
certain markets, there is competition from national and regional
firms against which the Company may not be price competitive.
The Company's primary competitors on construction projects in
developing countries include Entrepose (France), Mannesmann
(Germany), CCC (Lebanon), Nippon Kokan (Japan), Saipem (Italy),
Spie-Capag (France), Techint (Argentina) and Bechtel (U.S.). The
Company believes that it is one of the few companies among its
competitors possessing the ability to carry out large projects in
developing countries on a turn-key basis (engineering,
procurement and construction), without subcontracting major
elements of the work. As a result, the Company may be more cost
effective than its competitors in certain instances.
The Company has different competitors in different markets. In
Nigeria, the Company competes for pipe coating work with Bredero
Price (Netherlands), while its dredging competitors include Bos
Kalis Westminster (Netherlands), Dredging International
(Belgium), Bilfinger & Berger (Germany), Nigerian Dredging &
Marine (Netherlands) and Ham Dredging (Netherlands). In Oman,
competitors in oil field transport services include Desert Line,
Al Ahram, Hamdam and TruckOman, all Omani companies; and in
construction and the installation of flowlines and mechanical
services, the Company competes with Taylor Woodrow Towell
(Britain), CCC (Lebanon), Dodsal (India), Saipem (Italy), Desert
Line (Oman) and Galfar (Oman). In Venezuela, competitors in
marine support services include Raymond de Venezuela, Petrolago,
Flag Instalaciones and Siemogas, all Venezuelan companies. In
Pakistan, major competitors include Saipem (Italy) and Tekfen
(Turkey).
In the United States, the Company's primary construction
competitors on a national basis include Associated, Gregory &
Cook, Henkels & McCoy, Murphy Brothers, H. C. Price, Sheehan, and
Welded. In addition, there are a number of regional competitors.
Primary competitors for engineering services include Bechtel,
Brown and Root, Gulf Interstate, Marmac, Fluor Daniel Williams
Brothers, Mustang Engineering, Stone & Webster, Paragon
Engineering, Trigon Engineering and Universal Ensco.
Contract Provisions and Subcontracting
Most of the Company's revenues are derived from construction,
engineering and specialty services contracts. The Company enters
into four basic types of construction contracts: (a) firm fixed-
price or lump sum fixed-price contracts providing for a single
price for the total amount of work or for a number of fixed lump
sums for the various work elements comprising the total price;
(b) unit-price contracts which specify a price for each unit of
work performed; (c) time and materials contracts under which
personnel and equipment are provided under an agreed schedule of
daily rates with other direct costs being reimbursable; and (d) a
combination of the above (for example, lump sums for certain
items and unit rates for others).
The Company enters into three types of engineering contracts:
firm fixed-price or lump sum fixed-price contracts; time and
materials contracts pursuant to which engineering services are
provided under an agreed schedule of hourly rates for different
categories of personnel, and materials and other direct costs are
reimbursable; and cost-plus-fee contracts, common with U.S.
government clients under which income is earned solely from the
fee received. Cost-plus-fee contracts are often used for material
procurement services.
Specialty services contracts generally are unit-price contracts
which specify a price payable per unit of work performed (e.g.,
per cubic meter, per lineal meter, etc.). Such contracts usually
include hourly rates for various categories of personnel and
equipment to be applied in cases where no unit price exists for a
particular work element. Under a services contract, the client is
typically responsible for supplying all
19
materials; a cost-plus-percentage-fee provision is generally
included in the contract to enable the client to direct the
contractor to furnish certain materials.
The Company usually obtains contracts through competitive
bidding or through negotiations with long-standing clients. The
Company is typically invited to bid on projects undertaken by its
clients who maintain approved bidder lists. Bidders are pre-
qualified by virtue of their prior performance for such clients,
as well as their experience, reputation for quality, safety
record, financial strength and bonding capacity.
In evaluating bid opportunities, the Company considers such
factors as the client, the geographic location and the difficulty
of the work, the Company's current and projected workload, the
likelihood of additional work, the project's cost and
profitability estimates, and the Company's competitive advantage
relative to other likely bidders. The Company uses a computer-
based estimating system. The bid estimate forms the basis of a
project budget against which performance is tracked through a
project cost system, enabling management to monitor projects
effectively. Project costs are accumulated weekly and monitored
against billings and payments to facilitate cash flow management
on the project.
All U.S. government contracts and many of the Company's other
contracts provide for termination of the contract for the
convenience of the client. In addition, many contracts are
subject to certain completion schedule requirements with
liquidated damages in the event schedules are not met as the
result of circumstances within the control of Willbros. The
Company has not been materially adversely affected by these
provisions in the past.
The Company acts as prime contractor on a majority of the
construction projects it undertakes. In its capacity as prime
contractor and when acting as a subcontractor, the Company
performs most of the work on its projects with its own resources
and typically subcontracts only such specialized activities as
hazardous waste removal, non-destructive inspection, tank
erection, catering and security. In the construction industry,
the prime contractor is normally responsible for the performance
of the entire contract, including subcontract work. Thus, when
acting as a prime contractor, the Company is subject to the risk
associated with the failure of one or more subcontractors to
perform as anticipated. The Company has not incurred any
significant loss or liability on work performed by subcontractors
to date.
Employees
The Company believes its employees are its most valuable asset
and that their loyalty, productivity, pioneering spirit, work
ethic and strong commitment in providing quality services have
been crucial elements in the successes Willbros has achieved on
numerous projects in remote, logistically challenging locations
around the world.
At December 31, 1997, the Company employed a multi-national
work force of approximately 4,230 persons, over 80% of whom are
citizens of the respective countries in which they work. Although
the level of activity varies from year to year, Willbros has
maintained an average work force of approximately 3,100 over the
past five years. The minimum employment during that period has
been 1,770 and the maximum 4,750. At December 31, 1997,
approximately 1,610 of the Company's employees were covered by
collective bargaining agreements. The Company believes its
relations with its employees are good.
The following table sets forth an approximate breakdown of the
Company's employees as of December 31, 1997:
20
Number of
Employees Percent
----------- -------
Venezuela 1,280 30%
Nigeria 1,240 29
Oman 530 13
Pakistan 310 7
Indonesia 220 5
U.S. Engineering 500 12
U.S. Administration 120 3
U.S. Construction 20 1
Other Countries 10 -
----- ---
4,230 100%
===== ===
Equipment
The Company owns and maintains a fleet of generally
standardized construction, transportation and support equipment
and spare parts. In 1997 and 1996, expenditures for capital
equipment and spare parts were $47.3 million and $25.0 million,
respectively. At December 31, 1997, the Company's net book value
of property, plant, equipment and spare parts was $85.8 million.
An estimated breakdown of the Company's major capital equipment
at March 1, 1998, is as follows: heavy construction equipment,
785 units; transportation equipment, 1,146 units; and support
equipment, 5,207 units.
Historically, the Company has preferred to own rather than
lease equipment to ensure that equipment is available as needed.
The Company believes that such ownership has resulted in lower
equipment costs. However, depending on market conditions, the
availability of equipment and other considerations, the Company
may from time to time pursue the leasing of equipment to support
projects. The Company attempts to obtain projects that will keep
its equipment fully utilized in order to increase profitability.
All equipment is subject to scheduled maintenance to maximize
fleet readiness. The Company has maintenance facilities at Port
Harcourt, Nigeria; Azaiba, Oman; Maracaibo, Venezuela; and Broken
Arrow, Oklahoma; as well as temporary site facilities on major
jobs to minimize downtime.
Facilities
The Company owns a 14 acre equipment yard/maintenance facility
and an adjoining 29 acre undeveloped industrial site at Broken
Arrow, Oklahoma, a short distance from Tulsa, Oklahoma. In
Venezuela, the Company's offices and construction facilities are
located on 15 acres of land, which it owns, on the shores of Lake
Maracaibo. The Company leases all other facilities used in its
operations, including corporate offices in Panama; administrative
and engineering offices in Tulsa, Oklahoma, and Houston, Texas;
and various office facilities, equipment sites and expatriate
housing units in England, Nigeria, Oman, Pakistan, Russia, Egypt,
Kuwait, Saudi Arabia and Indonesia. The aggregate lease payments
made by the Company for its facilities were $3.0 million in 1997
and $2.1 million in 1996.
Insurance and Bonding
The Company maintains workers' compensation, employers'
liability, general liability, directors' and officers' liability,
automobile liability, aircraft liability, marine liability and
excess liability insurance to provide benefits to employees and
to protect the Company against claims by third parties. Such
insurance is underwritten by A+ or better rated insurance
companies (AM Best rating as to claims paying ability) and, when
possible, in loss-sensitive plans with return premiums for
favorable loss experience. The Company also maintains physical
damage insurance covering loss of or damage to Company property
on a worldwide basis, with special insurance covering loss or
damage caused by political or terrorist risks in
21
locations where such coverage is deemed prudent. Formal risk
management and safety programs are maintained, which have
resulted in favorable loss ratios and cost savings. The Company
believes its risk management, safety and insurance programs are
adequate to meet its needs.
The Company is often required to provide surety bonds
guaranteeing its performance and/or financial obligations. The
amounts of bonding available depend upon experience and
reputation in the industry, financial condition, backlog and
management expertise, among other factors. The Company maintains
relationships with two top-rated surety companies to provide
surety bonds.
Political and Economic Risks; Operational Risks
The Company has substantial operations and assets in developing
countries in Africa, Asia, the Middle East and South America, and
is seeking to increase its level of activity in the C.I.S.
Accordingly, the Company is subject to risks which ordinarily
would not be expected to exist in the United States, Canada,
Japan or western Europe, including foreign currency restrictions
(such as those which existed in Venezuela until 1996), extreme
exchange rate fluctuations (for example, in Russia, Venezuela and
Nigeria), expropriation of assets, civil uprisings and riots,
government instability and legal systems of decrees, laws,
regulations, interpretations and court decisions which are not
always fully developed and which may be retroactively applied.
The Company's operations in developing countries may be adversely
affected in that certain government agencies in such countries
may interpret laws, regulations or court decisions in a manner
which might be considered inconsistent or inequitable in the
United States, Canada, Japan or western Europe. The Company may
be subject to unanticipated income taxes, excise duties, import
taxes, export taxes or other governmental assessments which could
have a material adverse effect on the Company's results of
operations for any quarter or year.
The Company has attempted to mitigate the risks of doing
business in developing countries by separately incorporating its
operations in many such countries; working with local partners in
certain countries; contracting whenever possible with major
international oil and gas companies; obtaining sizeable down
payments or securing payment guarantees; entering into contracts
providing for payment in U.S. dollars instead of the local
currency whenever possible; maintaining reserves for credit
losses; maintaining insurance on equipment against certain
political risks and terrorism; and limiting its capital
investment in each country. The Company retains local advisors
to assist it in interpreting the laws, practices and customs of
the countries in which the Company operates. Given the
unpredictable nature of the risks described in the preceding
paragraph, there can be no assurance that such risks will not
result in a loss of business which could have a material adverse
effect on the Company's results of operations for any quarter or
year.
From time to time, international oil companies operating in
Nigeria, including Royal Dutch Shell, have expressed concern over
the Nigerian government's tardiness in meeting its payment
obligations and have threatened to reduce their planned
investments, and or cut production, in Nigeria. In addition,
indecision by the Nigerian government over agreeing to 1997
budget expenditure plans for oil companies involved in joint
ventures with the Nigerian National Petroleum Corporation may
also lead such companies to curtail their planned investments in
Nigeria. Any such reduction in the level of investment or
production could reduce the amount of contract work awarded in
Nigeria which could materially adversely affect the Company and
its results of operations. The Company cannot predict whether
any such actions will be taken in the future and, if taken, the
extent to which such actions would impact current or future
prospects of the Company in Nigeria.
Due to the limited number of major projects worldwide, the
Company may, at any one time, have a substantial portion of its
resources dedicated to one country. The Company's results of
operations are, therefore, susceptible to adverse events beyond
its control which may occur in a particular country in which the
Company's business may be concentrated.
22
Pipeline construction, dredging, pipeline rehabilitation
services, marine support services and operation of vessels and
heavy equipment involve a high degree of operational risk.
Natural disasters, adverse weather conditions, collisions, and
operator or navigational error can cause personal injury or loss
of life, severe damage to and destruction of property, equipment
and the environment and suspension of operations. The occurrence
of any such event could result in loss of revenue, casualty loss,
increased costs and significant liability to third parties.
Litigation arising from such an occurrence may result in the
Company being named as a defendant in lawsuits asserting
substantial claims.
The Company maintains risk management and safety programs to
mitigate the effects of loss or damage. While the Company
maintains such insurance protection as it deems prudent, there
can be no assurance that any such insurance will be sufficient or
effective under all circumstances or against all hazards to which
the Company may be subject. An enforceable claim for which the
Company is not fully insured could have a material adverse effect
on the Company. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future
at rates that it considers reasonable.
Government Regulations
General
Many aspects of the Company's operations are subject to
government regulations in the countries in which the Company
operates, including those relating to currency conversion and
repatriation, taxation of its earnings and earnings of its
personnel, and its use of local employees and suppliers. In
addition, the Company depends on the demand for its services from
the oil and gas industry and, therefore, is affected by changing
taxes, price controls and laws and regulations relating to the
oil and gas industry generally. The ability of the Organization
of Petroleum Exporting Countries to meet and maintain production
targets also influences the demand for the Company's services.
The adoption of laws and regulations by countries in which the
Company operates, curtailing exploration and development drilling
for oil and gas for economic and other policy reasons, could
adversely affect the Company's operations by limiting demand for
its services. The Company's operations are also subject to the
risk of changes in foreign and domestic laws and policies which
may impose restrictions on the Company, including trade
restrictions, which could have a material adverse effect on the
Company's operations. Other types of government regulation which
could, if enacted or implemented, adversely affect the Company's
operations include expropriation or nationalization decrees,
confiscatory tax systems, primary or secondary boycotts directed
at specific countries or companies, embargoes, extensive import
restrictions or other trade barriers, mandatory sourcing rules
and unrealistically high labor rate and fuel price regulation.
The Company cannot determine to what extent future operations and
earnings of the Company may be affected by new legislation, new
regulations or changes in, or new interpretations of, existing
regulations.
Environmental
The Company's operations are subject to numerous environmental
protection laws and regulations which are complex and stringent.
The Company regularly works in and around sensitive environmental
areas such as rivers, lakes and wetlands. Significant fines and
penalties may be imposed for non-compliance with environmental
laws and regulations, and certain environmental laws provide for
joint and several strict liability for remediation of releases of
hazardous substances, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such
person. In addition to potential liabilities that may be incurred
in satisfying these requirements, the Company may be subject to
claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. Such laws and
regulations may expose the Company to liability arising out of
the conduct of operations or conditions caused by others, or for
the acts of the Company which were in compliance with all
applicable laws at the time such acts were performed. The Company
is not aware of any non-compliance with or liability under any
environmental law that could have a material adverse effect on
the Company's business or operations.
23
Item 3. Legal Proceedings
The Company is a party to a number of legal proceedings. The
Company believes that the nature and number of these proceedings
are typical for a firm of its size engaged in the Company's type
of business and that none of these proceedings is material to the
Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during
the fourth quarter of 1997 through the solicitation of proxies or
otherwise.
Item 4A. Executive Officers of the Registrant
The following table sets forth certain information regarding
the executive officers and key personnel of the Company.
Officers are elected annually by, and serve at the discretion of,
the Board of Directors.
Name Age Position
- ---- --- --------
Larry J. Bump 58 Director, Chairman of the Board of
Directors, President, Chief Executive
Officer, and Chief Operating Officer
Melvin F. Spreitzer 59 Director, Executive Vice President,
Chief Financial Officer and Treasurer
M. Kieth Phillips 55 Director and Vice President; President
of Willbros International, Inc.
James R. Beasley 55 President of Willbros Engineers, Inc.
John N. Hove 50 General Counsel and Secretary
David L.Kavanaugh 50 Senior Vice President of Willbros
International, Inc.
Steve W. Shores 48 Senior Vice President of Willbros
Engineers, Inc.
Joel M. Gall 49 Vice President of Willbros International,
Inc.
Arthur J. West 54 Vice President of Willbros International,
Inc.
Adrian P. Wright 51 Vice President of Willbros International,
Inc.
Lance H. Foster 39 Vice President of Willbros Energy Services
Company
Harold A. Weller 61 Vice President of Willbros Engineering &
Construction Limited
Carlos A. Atik 34 General Manager of Willbros Construction &
Engineering-Egypt, L.L.C.
Monica M. Bagguley 57 Director of Willbros (Overseas) Limited
24
Gordon D.M. Bishop 46 General Manager of Willbros Middle East,
Inc. - Pakistan Branch
Jack F. Furrh, Jr. 57 General Manager of The Oman Construction
Company, LLC
G. Patrick Riga 42 General Manager of Constructora CAMSA,
C.A.
James K. Tillery 39 Managing Director of Willbros (Nigeria)
Limited
Larry J. Bump joined Willbros in 1977 as President and Chief
Operating Officer and was elected to the Board of Directors. He
was named Chief Executive Officer in 1980 and elected Chairman of
the Board of Directors in 1981. He has over 34 years of
international experience in pipeline construction and contracting
industries, all of which were in management positions.
Melvin F. Spreitzer joined Willbros in 1974 as Controller and
was elected Vice President of Finance in 1978. He was elected
Executive Vice President, Chief Financial Officer and Treasurer
in 1987, and a Director in 1992. He was also Secretary from 1987
to 1996. He has over 22 years of corporate finance experience and
is responsible for all aspects of financial management of the
Company.
M. Kieth Phillips joined Willbros in 1978 as Vice President. He
was elected Vice President of Willbros International, Inc.
("WII") in 1979 and was promoted to Senior Vice President of WII
in 1980, Executive Vice President of WII in 1983 and President of
WII in 1988. Most of his more than 30 years of experience in the
pipeline construction industry has been international and in
management positions. Mr. Phillips has been a Director of the
Company since May 1997.
James R. Beasley joined Willbros in 1981 when Willbros
Engineers, Inc. ("WEI") was acquired. He was elected Vice
President of WEI in 1981, Senior Vice President and General
Manager of WEI in 1982 and President of WEI in 1986. Mr. Beasley
has more than 27 years of experience in pipeline engineering and
operations.
John N. Hove became General Counsel of Willbros in 1991. He was
elected Secretary of Willbros in 1996. He has more than 26 years
of experience as a lawyer and has provided legal assistance to
Willbros since 1973. Prior to 1991, he was a shareholder in a law
firm in Tulsa, Oklahoma, where he concentrated his practice on
international business transactions.
David L. Kavanaugh joined Willbros in 1977 as an engineer
assigned to Saudi Arabia. From 1979 until 1988, he served as
Project Engineer and Project Manager in Nigeria. From 1988 to
1991, he managed construction projects in Gabon and Colombia. In
1991, he was elected Vice President of WII, and in 1995 he was
promoted to Senior Vice President of operations and business
development for WII. Mr. Kavanaugh has over 27 years of pipeline
construction experience.
Steve W. Shores joined Willbros in 1981 when WEI was acquired.
He was elected Vice President of WEI in 1986 and Senior Vice
President of WEI in 1991. Mr. Shores has over 22 years of
pipeline engineering experience.
Joel M. Gall joined Willbros in 1978 as an Office Manager in
the Middle East. He was transferred to Nigeria in 1979 where he
served as Administrative Manager, General Manager and Managing
Director until 1991 when he was elected Vice President of WII.
Since 1994, he has been responsible for business development
activities in Southeast Asia. Mr. Gall has over 27 years of
experience in the international pipeline construction industry.
Arthur J. West joined Willbros in 1962 in North Africa. In
1988, he became Vice President of Willbros Middle East, Inc.
("WMEI") and, in 1992, he was elected Vice President of WII and
became responsible
25
for business development and operations for WMEI in the Middle
East. Mr. West has over 32 years of experience in pipeline
construction in the areas of administrative and project
management.
Adrian P. Wright joined Willbros in 1973 as an engineer
assigned to Algeria. From 1974 until 1982, he served as Project
Engineer and Project Manager in Nigeria. From 1982 to 1992, he
served as Project Manager in Oman, Colombia and the United
States. In 1992, Mr. Wright was elected Vice President of WII,
and he is currently responsible for WII's estimating and
technical services. Mr. Wright has over 31 years of experience in
the construction industry.
Lance H. Foster was employed by Willbros Engineers, Inc. ("WEI")
from 1990 to 1992 as a Design Engineer and Project Engineer. He
was Manager of Engineering for EVI Cherrington Environmental from
1992 to 1993, Project Manager for WEI from 1993 to 1994 and Manager
of Pipeline Construction for ARB, Incorporated from 1994 to 1996.
He subsequently joined Willbros USA, Inc. as an estimator/project
manager in 1996 and was promoted to Vice President for Willbros
Energy Services Company in January 1998. Mr. Foster has over 20
years of experience in pipeline construction in the areas of
estimating, planning, administration, and management.
Harold A. Weller joined Willbros in 1975. From 1976 to 1979, he
was Project Director on a project to design and supply gas
compressor stations for a gas pipeline system in western Siberia.
In 1979, he left Willbros to join a major gas compressor
manufacturer until 1984. Following that he operated a private
consulting business until 1991. In 1991, he returned to Willbros
as Director of Business Development for Willbros (Overseas)
Limited ("WOL"). In 1994, he was elected Vice President of
Willbros Engineering & Construction Limited. Mr. Weller has over
37 years of experience in the engineering and management of
petrochemical, oil refinery and pipeline projects in the oil and
gas industry.
Carlos A. Atik joined Willbros in 1991 as an assistant Project
Manager in Egypt. He assumed the duties of Project Manager in
1992 and continued in that role until 1995 when he was named
General Manager of Willbros Construction & Engineering-Egypt,
L.L.C. Mr. Atik has over 13 years of engineering and construction
experience in Africa and the Middle East.
Monica M. Bagguley joined WOL in 1974. Since 1985, she has
served as Director of Personnel and Purchasing for WOL. Ms.
Bagguley has over 22 years of experience in international
personnel management and project procurement.
Gordon D.M. Bishop joined Willbros in 1976 as Senior Surveyor.
He has 20 years of experience in pipeline construction at various
levels of engineering and project management capacities in Iran,
Nigeria and Oman. He is currently General Manager of Willbros
Middle East, Inc. - Pakistan Branch.
Jack F. Furrh, Jr. joined Willbros in 1981 as Administrative
Manager. He left Willbros in 1986 to operate his own business. In
1990, he rejoined the Company as Project Manager and in 1991 he
was promoted to General Manager of The Oman Construction Company,
LLC. He has over 27 years of experience in the energy-related
industry in contracts, safety and administrative management.
G. Patrick Riga joined Willbros in 1981 in Oman as a
warehouseman. From 1985 to 1988, he served in administrative
capacities in Colombia and Ecuador. From 1989 until 1994, he was
employed by HDI, a horizontal drilling company. He rejoined the
Company in 1994 as Assistant General Manager in Venezuela and, in
1995, was promoted to General Manager of Constructora CAMSA, C.A.
Mr. Riga has over 19 years of experience in the pipeline
industry, including operations, quality control and
administrative management.
James K. Tillery joined Willbros in 1983 as a field engineer.
He has over 17 years of experience as an Engineer and Project
Manager working in both U.S. and international pipeline
construction. In 1995, he was named Managing Director of Willbros
(Nigeria) Limited.
26
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The information required by this Item is incorporated by
reference from (a) the section on page 38 of the Company's 1997
Annual Report to Stockholders entitled "Common Stock Information
and Dividend Policy" and (b) the section on page 24 of the
Company's 1997 Annual Report to Stockholders entitled
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Structure, Liquidity and Capital
Resources."
Item 6. Selected Financial Data
The information required by this Item is incorporated by
reference from page 20 of the Company's 1997 Annual Report to
Stockholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this Item is incorporated by
reference from pages 21 through 24 of the Company's 1997 Annual
Report to Stockholders.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
Not applicable.
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated by
reference from pages 25 through 37 of the Company's 1997 Annual
Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item with respect to the
Company's directors is incorporated by reference from the
sections of the Company's definitive Proxy Statement for its 1998
Annual Meeting of Stockholders (the "Proxy Statement") entitled
"Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance." The information required by this Item
with respect to the Company's executive officers appears at Item
4A of Part I of this Form 10-K.
27
Item 11. Executive Compensation
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Principal Stockholders and Security Ownership of Management."
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Certain Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) (1) Financial Statements:
The financial statements of the Company and its subsidiaries
and report of independent auditors listed below are incorporated
by reference from the following pages of the Company's 1997
Annual Report to Stockholders:
1997
Annual Report
Page(s)
-----------
Report of Independent Auditors 25
Consolidated Balance Sheets as of
December 31, 1997 and 1996 26
Consolidated Statements of Income for the years
ended December 31, 1997, 1996 and 1995 27
Consolidated Statements of Stockholders Equity for
the years ended December 31, 1997, 1996 and 1995 28
Consolidated Statements of Cash Flows for the
years ended December 31, 1997, 1996 and 1995 29
Notes to Consolidated Financial Statements 30 - 37
1997
Form 10-K
Page(s)
---------
(2) Financial Statement Schedule:
Independent Auditors' Report 32
Schedule II - Consolidated Valuation and
Qualifying Accounts 33
All other schedules are omitted as inapplicable or because the
required information is contained in the financial statements or
included in the footnotes thereto.
28
(3) Exhibits:
The following documents are included as exhibits to this Form
10-K. Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
3.1 Restated Articles of Incorporation of the Company (Filed as
Exhibit 3.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-5413 (the "S-1 Registration
Statement")).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
S-1 Registration Statement).
4 Form of stock certificate for the Company's Common Stock,
par value $.05 per share (Filed as Exhibit 4 to the S-1
Registration Statement).
10.1 Credit Agreement dated February 20, 1997, by and among the
Company, certain designated subsidiaries, Credit Lyonnais
New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.1 to the Company's report on Form 10-K for the
year ended December 31, 1996, filed March 31, 1997 (the
"1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer Oil
B.V., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 to the 1996 Form 10-K).
10.5* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Larry J. Bump and the Company
(Filed as Exhibit 10.3 to the S-1 Registration Statement).
10.6* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Melvin F. Spreitzer and the
Company (Filed as Exhibit 10.4 to the S-1 Registration
Statement).
10.7* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., M. Kieth Phillips and the
Company (Filed as Exhibit 10.6 to the S-1 Registration
Statement).
10.8* Employment Agreement dated January 1, 1997, by and
among Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
10.9* Form of Indemnification Agreement between the Company
and its officers (Filed as Exhibit 10.7 to the S-1
Registration Statement).
10.10* Form of Indemnification Agreement between the Company
and its directors (Filed as Exhibit 10.16 to the S-1
Registration Statement).
10.11* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit
10.8 to the S-1 Registration Statement).
10.12* Form of Incentive Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.13
to the 1996 Form 10-K).
10.13* Form of Non-Qualified Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.14
to the 1996 Form 10-K).
10.14* Willbros Group, Inc. Director Stock Plan (Filed as
Exhibit 10.9 to the S-1 Registration Statement).
29
10.15* Willbros USA, Inc. Executive Benefit Restoration Plan
(Filed as Exhibit 10.10 to the S-1 Registration Statement).
10.16* Willbros Engineers, Inc. Management Incentive Plan
dated January 1, 1996 (Filed as Exhibit 10.17 to the S-1
Registration Statement).
10.17* Willbros USA, Inc. Management Incentive Plan dated
January 1, 1996 (Filed as Exhibit 10.18 to the S-1
Registration Statement).
10.18* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1995 Management
Personnel Non-Qualified Stock Ownership Plans (Filed as
Exhibit 10.11 to the S-1 Registration Statement).
10.19* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plans (Filed as Exhibit 10.12 to
the S-1 Registration Statement).
10.20 Registration Rights Agreement dated April 9, 1992,
between the Company and Heerema Holding Construction, Inc.,
Yorktown Energy Partners, L.P., Concord Partners II, L.P.,
Concord Partners Japan Limited and certain other
stockholders of the Company (Filed as Exhibit 10.13 to the
S-1 Registration Statement).
10.21* Separation Agreement dated February 20, 1998, by and
between Willbros USA, Inc. and Gary L. Bracken.
11 Computation of Income (Loss) Per Common and Common Equivalent
Share.
13 Portions of the Company's 1997 Annual Report to
Stockholders.
21 Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick.
27 Financial Data Schedule.
- --------------------------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of
1997.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WILLBROS GROUP, INC.
Date: March 27, 1998 By: /s/ Larry J. Bump
--------------------------------
Larry J. Bump
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Larry J. Bump Director, Chairman of the March 27, 1998
- ------------------------ Board, President and
Larry J. Bump Chief Executive Officer
(Principal Executive Officer)
/s/ Melvin F. Spreitzer Director, Executive Vice March 27, 1998
- ------------------------- President, Chief Financial
Melvin F. Spreitzer Officer and Treasurer
(Principal Financial Officer
and Principal Accounting Officer)
/s/ M. Kieth Phillips Director and Vice March 27, 1998
- ------------------------ President
M. Kieth Phillips
/s/ Guy E. Waldvogel Director March 27, 1998
- ------------------------
Guy E. Waldvogel
/s/ Bryan H. Lawrence Director March 27, 1998
- ------------------------
Bryan H. Lawrence
/s/ Peter A. Leidel Director March 27, 1998
- ------------------------
Peter A. Leidel
/s/ John H. Williams Director March 27, 1998
- ------------------------
John H. Williams
/s/ Michael J. Pink Director March 27, 1998
- ------------------------
Michael J. Pink
31
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Stockholders and Board of Directors
Willbros Group, Inc.:
The audits referred to in our report dated January 31, 1998
included the related consolidated financial statement schedule
for each of the years in the three-year period ended December 31,
1997. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statement
schedule based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
KPMG PEAT MARWICK
Panama City, Panama
January 31, 1998
32
WILLBROS GROUP, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Charged
(Credited) Charge
Balance at to Costs Offs Balance
Beginning and and at End
Year Ended Description of Year Expenses Other of Year
- ------------ ------------- ---------- -------- ------ -------
December 31, 1995 Allowance for bad debts $2,442 $ 694 $(144) $2,992
December 31, 1996 Allowance for bad debts $2,992 $(1,024) $(849) $1,119
December 31, 1997 Allowance for bad debts $1,119 $ (8) $(110) $1,001
33
INDEX TO EXHIBITS
The following documents are included as exhibits to this Form
10-K. Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
Exhibit
Number Description
3.1 Restated Articles of Incorporation of the Company (Filed as
Exhibit 3.1 to the Company's Registration Statement on Form
S-1, Registration No. 333-5413 (the "S-1 Registration
Statement")).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
S-1 Registration Statement).
4 Form of stock certificate for the Company's Common Stock,
par value $.05 per share (Filed as Exhibit 4 to the S-1
Registration Statement).
10.1 Credit Agreement dated February 20, 1997, by and among the
Company, certain designated subsidiaries, Credit Lyonnais
New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.1 to the Company's report on Form 10-K for the
year ended December 31, 1996, filed March 31, 1997 (the
"1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer Oil
B.V., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 o the 1996 Form 10-K).
10.5* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Larry J. Bump and the Company
(Filed as Exhibit 10.3 to the S-1 Registration Statement).
10.6* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Melvin F. Spreitzer and the
Company (Filed as Exhibit 10.4 to the S-1 Registration
Statement).
10.7* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., M. Kieth Phillips and the
Company (Filed as Exhibit 10.6 to the S-1 Registration
Statement).
10.8* Employment Agreement dated January 1, 1997, by and
among Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
10.9* Form of Indemnification Agreement between the Company
and its officers (Filed as Exhibit 10.7 to the S-1
Registration Statement).
10.10* Form of Indemnification Agreement between the Company
and its directors (Filed as Exhibit 10.16 to the S-1
Registration Statement).
10.11* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit
10.8 to the S-1 Registration Statement).
10.12* Form of Incentive Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.13
to the 1996 Form 10-K).
10.13* Form of Non-Qualified Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.14
to the 1996 Form 10-K).
10.14* Willbros Group, Inc. Director Stock Plan (Filed as
Exhibit 10.9 to the S-1 Registration Statement).
10.15* Willbros USA, Inc. Executive Benefit Restoration Plan
(Filed as Exhibit 10.10 to the S-1 Registration Statement).
10.16* Willbros Engineers, Inc. Management Incentive Plan
dated January 1, 1996 (Filed as Exhibit 10.17 to the S-1
Registration Statement).
10.17* Willbros USA, Inc. Management Incentive Plan dated
January 1, 1996 (Filed as Exhibit 10.18 to the S-1
Registration Statement).
10.18* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1995 Management
Personnel Non-Qualified Stock Ownership Plans (Filed as
Exhibit 10.11 to the S-1 Registration Statement).
10.19* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plans (Filed as Exhibit 10.12 to
the S-1 Registration Statement).
10.20 Registration Rights Agreement dated April 9, 1992,
between the Company and Heerema Holding Construction, Inc.,
Yorktown Energy Partners, L.P., Concord Partners II, L.P.,
Concord Partners Japan Limited and certain other
stockholders of the Company (Filed as Exhibit 10.13 to the
S-1 Registration Statement).
10.21* Separation Agreement dated February 20, 1998, by and
between Willbros USA, Inc. and Gary L. Bracken.
11 Computation of Income (Loss) Per Common and Common
Equivalent Share.
13 Portions of the Company's 1997 Annual Report to
Stockholders.
21 Subsidiaries of the Company.
23 Consent of KPMG Peat Marwick.
27 Financial Data Schedule.