Big New Award Brightens Dim Quarter for Fluor
Fluor Corp. posted a 34% drop in quarterly income as well as lower sales Tuesday, but it also said it will lead a consortium to develop a crude oil upgrading project in eastern Venezuela in a deal worth more than $1 billion.
The Aliso Viejo firm reported that net income for its fiscal third quarter, ended July 31, fell to $33.3 million, or 44 cents a share, including a charge for a project cost overrun and a nonrecurring item. In last year’s third quarter, the company earned $50.2 million, or 66 cents a share.
Quarterly revenue dropped 6% to $2.9 billion from $3.1 billion last year.
The results were released late in the day after the close of business. Fluor’s stock closed Tuesday at $32.19 a share, up 6 cents in New York Stock Exchange trading.
Third-quarter results included a pretax provision of $54 million for Fluor Daniel’s portion of a cost overrun on a Duke/Fluor Daniel power project in Dearborn, Mich., bringing Fluor’s share of the loss to $60 million. Duke/Fluor Daniel is a joint venture between Duke Energy and Fluor Daniel.
The company said it is taking “immediate actions,” along with Duke Energy, to determine what went wrong and what steps should be taken to minimize or eliminate the prospect for such overruns in the future.
The nonrecurring item is a pretax credit of $12 million, which amounted to $8.5 million after tax, or 11 cents a share, from the recovery of excise taxes paid on coal export sales tonnage by Fluor’s A.T. Massey Coal enterprise.
With the project overrun and significant weakness in Massey’s results, the company predicted that its operating earnings for the year will be about 15% below last year’s level. Fluor previously announced plans to spin off Massey and its struggling coal-mining business.
In one bright spot for the third quarter, Fluor said, new awards increased 38% to $2.2 billion from $1.6 billion last year. That does not include the $1-billion Hamaca Crude Upgrader project in Venezuela.
Fluor said in a news release that its Fluor Daniel engineering, procurement and construction unit already is working on the Hamaca heavy oil project under a letter of intent.
The company will book the new award when the definitive project agreements are signed, which is expected within the next 30 days.
Texaco, which holds a 30% interest in the project, and its partners, Petroleos de Venezuela SA, which has a 30% stake, and Phillips Petroleum Co., with 40%, have approved about $1 billion for engineering design, equipment procurement and actual construction of the upgrader facilities.
Located in the hydrocarbon-rich Orinoco Belt of Venezuela, the largest known such deposit in the world, the Hamaca project area contains more than 30 billion barrels of extra-heavy oil, Fluor said.
The company said an estimated 2.1 billion barrels of extra-heavy oil will be recoverable over a 35-year period using current technology.
Upon completion in 2003, the project is expected to produce 190,000 barrels per day of light, refinery feedstock, processed from the area’s extra-heavy crude.
