Fluor Says Project Backlog May Set Record on Demand From Energy Industry

Fluor Corp., the largest publiclytraded engineering and construction company in the U.S., mayreach a record backlog of projects this year on energy industrydemand, Chief Operating Officer David Seaton said.

Mining-related work that included deals in Mongolia andChile were part of $9.3 billion in projects won in the secondquarter, Fluor said today as it reported a profit that beatanalysts’ estimates. The total eclipsed the mark of $8.8 billionfrom the last three months of 2008.

“The real bright spot that I see in the future is oil andgas,” Seaton said in an interview at Fluor’s headquarters inIrving, Texas. “We have the potential to break through thathistoric level during this year.”

Fluor reached a record $36.5 billion of projects in 2008’sthird quarter when oil soared to more than $140 a barrel,unleashing a boom in energy construction. Some projects werecanceled as the recession deepened and credit markets frozelater that year during the global financial crisis.

The backlog at Fluor slumped to $25.7 billion in the firstquarter, the lowest since mid-2007. The second-quarter total was$30.2 billion, the company said today.

Net income for the quarter fell 7.1 percent to $157million, or 87 cents a share, compared with 93 cents a yearearlier, Fluor said today. That beat the 71-cent average of 22estimates compiled by Bloomberg.

Forecast Raised

The company increased the lower range of its full-yearearnings forecast to $2.90 to $3.20 a share, from of $2.80 to$3.20. Sales totaled $5.2 billion, compared with $5.3 billion ayear earlier, Fluor said. That exceeded the average estimate of$4.98 billion, based on 16 analysts surveyed.

Fluor rose $1.30, or 2.7 percent, to $49.15 at 5:20 p.m.after releasing results following the close of regular New YorkStock Exchange composite trading. The shares have gained 6.2percent this year.

“We expect Fluor’s prospect list and balance sheet toremain strong,” Stewart Scharf, a Standard & Poor’s equityanalyst, wrote in a note to clients as he reiterated his “buy”rating on the stock. “Competitive pressures and more lower-margin mining projects should impact margins.”

Acquisition Targets

Fluor is comfortable accumulating cash as it seeksacquisition targets to complement its construction portfolio,such as more capabilities for deepwater work, according toSeaton, 48, who took the COO job in November.

“Our mining group basically ran the table,” Seaton saidof the unit’s growth while oil-and-gas work flagged. The largeprojects booked in the second quarter probably won’t continue toflow in, and probably will be followed by smaller jobs such aswork at copper and iron-ore mines, he said.

Energy companies will resume building facilities such asrefineries, mostly in Asia and Russia, Seaton said. The projectsalso will be smaller than those constructed in the U.S. beforethe slump, and will likely be in the range of $200 million, hesaid.

Fluor has a “huge” project in Iraq in the West Qurnafield, where the company will be the first to buildinfrastructure for oil production, Seaton said.

“It really puts us as the premier go-to engineering andconstruction company for the other companies to use,” Seatonsaid. Exxon Mobil Corp. and Royal Dutch Shell Plc signed acontract with Iraq in January to increase daily production atWest Qurna almost tenfold to 2.33 million barrels.

Should Fluor’s backlog reach a record, it would do so inthe face of “a very cautious marketplace,” Seaton said.

“We’re still going to have a great year at a time when oiland gas is down from where it was,” he said. “We’re at aninflection point on oil and gas.”