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Chicago Bridge & Iron Company (NYSE:CBI)

Q1 2012 Earnings Call

April 24, 2012 5:00 pm ET

Executives

Philip Asherman - President and CEO

Lasse Petterson - COO

Dan McCarthy - President, Lummus Technology

Ron Ballschmiede - CFO

Analysts

Joe Ritchie - Goldman Sachs

Steven Fisher - UBS Securities, LLC

Alan Fleming - Barclays Capital

Jamie Cook - Credit Suisse

Michael Dudas - Sterne Agee

Bryce Humphrey - BB&T Capital Markets

Scott Levine - JPMorgan

John Rogers - D. A. Davidson & Company

Avi Fisher - BMO Capital Markets

Operator

Good afternoon, ladies and gentlemen. At this time, I would like to welcome everyone to the conference call. (Operator Instructions)

Before beginning today's call, the company would like to caution you regarding forward-looking statements. Any statements made or discussed today that do not constitute or are not historical facts, particularly comments regarding the company's future plans and expected performance are forward-looking statements that are based on assumptions the company believes are reasonable, but are subject to a range of risk of uncertainties that are summarized in the company's press release and SEC filing.

While forward-looking statements represent management's best current judgment as to what may occur in the future, the actual outcome or results may differ materially from what is expressed or implied in any such statements.

Now, I would like to turn the call over to Mr. Philip Asherman, President and CEO at CB&I.

Philip Asherman

Good afternoon, and thank you for joining us as we report Chicago Bridge & Iron's results for the first quarter of 2012. With me today are CB&I's Chief Operating Officer, Lasse Petterson, who will report on the activities in our Project Engineering and Construction as well as our Steel Plate Structures sectors; Dan McCarthy, President of Lummus Technology, reporting on that sector's results and outlook; and our Chief Financial Officer, Ron Ballschmiede, who will discuss our first quarter financial performance.

Summarizing first quarter results and as my colleagues will discuss in further detail, I am pleased to report that this first quarter resulted in significant year-over-year growth in revenue, operating income, backlog and cash balances. I am also very pleased to report that we continue to record outstanding safety performance around the world.

In this first quarter, we've executed nearly 60 million hours with only one lost-time incident and in March alone that number was zero. There is also a zero for even recordable incidents. We believe that this core value and our goal of nobody gets hurt at CB&I is not only a tremendous competitive advantage for us, but it drives recruiting, retention and client confidence. And most importantly, it's just the right thing to do for our employees.

So we can get the under metrics, overall, margin levels performed as expected and we're very encouraged by the new awards in the quarter across all of our business sectors, including the Williams petrochemical project in Louisiana, which bundles all of our services from technology to construction.

Also the next expansion phase of Kearl for ExxonMobil oil sands project in Canada. The FEED work for the Freeport LNG export facility in Texas with our joint venture partner Zachry Construction. In addition, refineries here in Russia are provided by our Lummus Technology.

While over 85% of the backlog value is still outside of the United States, we are beginning to experience a very positive rebalancing of our work load, with approximately 75% of the quarter one awards located in North America. And with a strong international position in key end-markets, there's exciting development of new energy infrastructure driven by shale gas and non-conventional oil production presents a great opportunity for CB&I to sustain growth well into the future.

And so for 2012 we remain confident and the guidance we provided during our Investor Day last November and anticipate another solid year ahead for Chicago Bridge and Iron Company.

I'll now turn the call over to Lasse to discuss the current backlog and new awards for our Project Engineering and Construction and our Steel Plate Structures business sectors. Lasse?

Lasse Petterson

Thank you, Phil, good afternoon. I would first give my comments on new awards this quarter and then provide a brief update on some of our larger ongoing projects. Global market trends are positive in all of our end-markets. LNG trade is projected to continue growing at a rate twice as fast as natural gas production with the LNG portion of gas supply forecasted to increase approximately 20% over the next two decades.

In North America, shale gas production and low gas prices has resulted in several LNG import terminals, planned to be converted in to export terminals. The shale gas production has further increased the demand for gas processing facilities such as our Dominion project. The liquid rich gas has also resulted in a search of new petrochemical projects in the U.S.

And additionally, global offshore, oil and gas markets are strong with large developments planned particularly in Brazil and the North Sea. Offshore gas developments may also bring opportunities for CB&I to design and build floating LNG facilities.

Our first quarter new award total approximately $1.7 billion, which includes the Kearl expansion project in Canada, a Williams Olefins expansion in the U.S., the FEED for status Luva project and the Ethel Engineering for Talisman in the North Sea, and several contracts for conventional storage tanks in the U.S., Canada, Middle East and Australia.

We were also awarded the Freeport LNG FEED contract for two 4.4 million tons per annum process trains at the existing Freeport LNG import facility, which brings our current active LNG FEED and pre-FEED studies to five, including the previously announced Browse, Arrow, Yamal and Shtokman studies. Our backlog remains solid at $9.6 billion with a good mix between the reimbursable and lump-sum contracts.

Moving to our existing projects. I will start with our Project Engineering and Construction business sector. The construction work on the REFICAR's new 150,000 barrels per day refinery in Cartagena, Colombia is progressing well. 21 of 84 process modules fabricated at our yard in Beaumont have been received and installed at site.

Engineering is more than 90% complete and the engineering personnel would now gradually be transferred to our other Houston-based projects. Procurement is a joint task between CB&I and the client and we are currently on schedule for all major equipment on order. Our manpower at the site currently exceeds 5,800.

In Canada, the Kearl construction work is approximately 80% complete. We have received a first of the client supplied equipment modules and we expect to receive the remaining modules shortly. Engineering works on the Kearl expansion project has started in our Houston offices.

The FEED work on Browse and Arrow LNG liquefaction facilities are close to be completed in Yokohama. And we are hard at work compiling the EPC tender for the full LNG plant development on Browse. In London, the FEED engineering work on the Yamal project in Russia is also close to be completed. And we are hopeful that we can continue to support our client Novatech on this challenging and exciting project as they proceed into the later execution phases.

As mentioned in our last earnings call, we were awarded the FEED for the Freeport LNG liquefaction trains. On this project we are designing new process trains on an existing U.S. LNG import terminal changing it to an export facility, which will produce LNG from abundant sources or conventional and shale gas.

In Papua New Guinea, on Exxon's Hides gas conditioning plant in the highlands, construction is ongoing. Engineering is complete and procurement, materials and equipment has been finalized and ready to be transported to the site. In the U.S., the Occidental's Elk Hills gas processing plant in California is close to completion. And Dominion's gas processing plant in West Virginia, which will receive gas for the Marcellus and Utica Shale gas fields, construction is underway. Piling is close to be completed and the foundation work is progressing according to plan.

Our offshore projects are also progressing well. The engineering work for Nexen's two platforms on the Golden Eagle Field is on schedule and we are now mobilizing for the Talisman's project in our London Office. The FEED for the Luva Spar platform has won in January and we mobilized the project team in our Hague offices. As I mentioned in our last earnings call, we will be continuing to expand our position in offshore, oil and gas, and specifically in the North Sea, where we see a several of new project opportunities.

Shifting to our Steel Plate Structures business sector, progress on our two nuclear projects Vogtle and Summer has been good in the period. And at the Vogtle site erection of the first subcomponent of the containment vessel was completed on plan. Direction of a similar self component will be delivered on plan at the Summer site in the second quarter of 2012.

In the Middle East, the GASCO project in Abu Dhabi is scheduled to be finished in late 2012 which is a well ahead of the original schedule. Construction approach 90% complete at the end of March.

Additionally, we have several large conventional storage tank projects underway in the Saudi Arabia and Abu Dhabi including 90 tanks as part of Takreer's refinery expansion project in Ruwais and Mustafa. Construction and fabrication are in progress and on scheduled to be completed in '12 and '13.

On Gorgon MEI, we have mobilized the core project management in Perth and our busy preparing the detailed construction plans for the project. This is a construction only process for us, all engineering materials and process modules are supplied by the client. We have mobilized to the Barrow Island site but the majority of the construction will be perform in 2013 and 2014 and at peak more than 4,000 CB&I employees will be engaged on the project.

We're also constructing two LNG tanks for the Gorgon project on the Island. We are on scheduled with our construction work as welding of the tank shells and bullet tanks has started and the tank roofs are being erected.

In Papua New Guinea, we're building the LNG storage tanks Exxon's LNG project on the coast at Port Moresby. The gas from the PNG gas plant in the highlands will be processed here and then shipped to market. The LNG tank foundation has been poured, shell construction has begun, and prefabricated structures and equipment are being delivered from our yard in Thailand. Progress on the LNG tanks stands at 33% which is as scheduled.

I will close by saying that our end markets are continuing to provide us with new opportunities as seen by the recent awards and as demonstrated by our work on all these projects. CB&I has the ability to participate globally across the entire oil and gas value chain.

I'll now hand over to Dan to comment on Lummus Technology.

Dan McCarthy

Thank you, Lasse. Good afternoon. As expected the technology markets which Lummus technology sensors continue to exhibit strong demand in the first quarter. New awards in earnings were very solid. We now see significant heat transfer equipment order in Russia.

In addition there were a number of smaller projects that were awarded but not announced. The mix of business activity did not generate as much revenue as first quarter of 2011 because we had period where transfer projects were winding down and the new awards were still ramping up.

With a greater percentage of the revenue derived from licensing activities, the return on sales was a little higher. Petrochemicals led by Olefins continue to generate numerous opportunities. When we talk about Olefins, we are speaking about three core building blocks, ethylene, propylene, and butadiene.

Markets dynamic made ethylene plants an attractive investment worldwide. We have previously discussed that the United States and Canada would benefit from lower energy and ethane feedstock costs, which should result in future investment such as the plan recently announced Shell. However, that your global business and we believe that there will be significant investment commitment over the seas during the remainder of the 2012 as well.

Propylene supply continues to remain tight also with much as the new ethylene capacity based on ethylene feedstock there is a requirement supplement propylene supply with on purpose propylene plans based on technology such as the CATOFIN propane dehydrogenation process in the Lummus olefins conversion technology.

Last but not the least is butadiene, a key component for rubber. This commodity has produced as byproduct as Tupac ethylene plants and i supply has also been negatively impacted by the transition towards gas feedstocks. We have benefited from this by building butadiene extraction plans to recover more of the byproduct butadiene and also have seen a spike in interest in our CATADIENE process, which converts butane to butadiene.

Since many of the petrochemical plant investments are located in markets where project engineering in construction sector has ongoing activities. We believe CBI is well positioned to not only sell lights and heat transfer equipment but also to participate in EPC of these upcoming projects.

The recently announced Williams ethylene project is a good example of the strategy. The economics of the refining industry are bifurcated by both by region and product line. U.S. and European refiners remain vary of making refining investments while refiners in other regions continue to invest in capacity and refinery upgrades.

Secondly, refiners find gasoline to be a difficult product line, while distillates are quite profitable. So even in these challenging times, new projects continue to emerge. These are primarily focused on heavy oil upgrading middle distillate production. We have a started a number of new delayed coking projects and have enjoyed awards in resid hydrotreating as well as hydrocracking.

With operating rates stable our improving the catalyst recharge business is active as well. Similar to last year, many of the catalyst orders will be shipped in the fourth quarter, so the earnings for Lummus Technology will be somewhat back-end loaded.

In summary, we believe our main product line is a gas processing, refining the petrochemicals. We'll provide good opportunities throughout this year and most likely next year as well. We are tracking our plan and we forecast to be within the guidance range previously given Lummus Technology.

Thank you and I will turn it over to Ron.

Ron Ballschmiede

Thanks Dan and good afternoon everyone. With that overview of our major activities around the world, let me take you through our strong financial performance for the quarter those included in the press release.

Revenues for the first quarter were $1.2 billion, up $247 million or 26% from the fourth quarter of 2011. The revenues increase reflects the increasing activity of our large projects and the execution of our higher beginning of the year backlog. We expect this increasing project activity to continue throughout 2012 providing sequential or quarterly revenue growth assisted with the underpinning our our previously announced full year revenue guidance of $5.2 billion to $5.6 billion.

The increase in gross profit for the quarter was primarily driven by higher revenues from project engineering and construction sector and totaled a $153 million, the second highest in our history. Gross profit totaled $137 million in the comparable 2011 quarter. Each of our sectors continues to benefit from the solid project execution and perform consistent with our expectations.

The decline in our first quarter gross profit percentage to 12.8% from 14.3% in the first quarter of 2011 reflects the changing relative revenue volumes of our sectors. Specifically as we expected, more than 80% of our quarter-over-quarter revenue increase came from our project engineering and construction sector. That sector accumulate for approximately 57% of our consolidated revenue compared to 49% in 2011.

I'll come back and discuss the changes in our revenue when operating income by business sector in a moment. Continuing on the consolidated results, selling and administrative expenses increased to $63 million from $58 million at 2011. There are several items contributing to this increase.

First, the amount of stock-based compensation increased year-over-year by approximately $2 million, just will speak to more about in a minute. A balance of the increase reflects higher selling and administrative class supporting our higher volume and global infrastructure.

Back to stock-based compensation. Consistent with past years, the first quarter has a grater amount of stock-based compensation class due to the economy requirement to expense stock-based compensation in the period of the grant for those individuals who are eligible to retire rather than amortize such class over the likely vesting period.

A consolidated expense for the first quarter of 2012 which is predominantly classified as selling and administrative expense totaled $22 million, an increase from $20 million in the comparable quarter of 2012.

Due to the demographics of our employee participant, the expense in the first quarter of 2012 reflects 63% of the total expected 2012 expense compared to 56% in the first quarter of 2011. Stock-based compensation for the balance of the year is expected to be generally consistent with a final three quarters of 2011.

This equates to the expense in the first quarter of 2012 incrementally exceeding a stock-based compensation expense at each of the second, third and fourth quarters by approximately $0.11 per share.

Stepping back a bit after that large installation, which I believe is important to understand, we continue to expect our full year S&A expense to approximately 4% of revenues down from 4.57% in 2011.

First quarter income from operations was $86 million or 7.1% of revenues compared to $75 million in the first quarter of 2011. Our income tax rate at the quarter was 29% consistent with the 28% to 32% range to step historically and consistent with our expectations for the full year.

The summation of all that results in our first quarter net income of $59.5 million or $0.16 per diluted share, both representing our strongest first quarter in our history. Our full year EPS guidance remains unchanged at $2.75 to $3.05. EBITDA in the quarter totaled $102.5 million or 8.5% of revenues.

Now let me take you through the sector's first quarter results. Sector's 2012 results were consistent with our expected annual range of operating results which we have discussed previously specifically our performance expectations, our operating income in the range of 7% to 10% for Steel Plate Structure, 3% to 6% for Project Engineering and Construction and the annual operating income for Lummus Technology of $100 million plus or minus 10%.

Also for the first quarter incremental stock-based compensation generally reduces the sector's first quarter operating margin by roughly a full percentage point when compared to the annual ranges of sector of I just described.

Phil, Lasse, and Dan spoke to our new awards and prospect activity. So I'll provide just some overall comments. Our new awards for the quarter totaled $1.7 billion for a book-to-burn ratio of 141% compared to just over $ 1 billion of new awards for the 2011 comparable period.

Awards in access of $40 million totaled just over $1.2 billion. The balance of new awards are approximately $500 million reflects the awards putting nicely between our sectors and project types around the world.

Our strong first quarter new awards supports our confidence in our previously commuted 2012 new award guidance of $5.5 billion to $7.0 billion. Steel Plate Structure reported first quarter 2012 revenues of $420 million, an increase of 14% from $369 million in 2011.

The increase was primarily attributed to construction activities on our LNG tank and the mechanical erections project in Australia.

Operating income totaled $38 million or 9.1% of revenues compared to $37 million or 10% of revenues in 22012. Our 2012 results benefited from higher revenue volume and related leverage of our operating cost offset by the impact of a higher percentage of revenue being drive from our cross reimbursable mechanical erection project in Australia and other changes in mix of the projects and process.

Project Engineering and Construction totaled is $681 million, in 2012 an increase of $2.17 million or 47% over the first quarter of 2011. The most significant revenue increase related to increased activities on replica refinery project which Lasse discussed earlier.

Increased revenues were also generated from our three large gas processing plants in Papua New Guinea and the United States. Income from operations totaled $25 million or 3.7% of revenues in the first quarter of 2012 compared to $15 million or 3.2% in 2011. Factors contributing to this change in operating margins include the benefit from higher revenue volume and the related leverage of our operating class, partially offset by the impact of a higher percentage of revenue being drive from our cross-reversible projects at Papua New Guinea in Columbia.

Finally, Lummus Technology had a strong quarter reporting revenue of $100 million compared to a $121 million in the first quarter of 2011. The change in this revenue reflected normal variations and mix and timing of executing our technology backlog. As Dan, mentioned the first quarter operating income totaled $23 million consistent with a comparable quarter of 2011 with the lower revenue volume was offset by better margin realized in our licensing activity.

Now a few comments on our balance sheet cash flow, our balance sheet liquidity remains strong with the cash balance of $640 million, no revolver borrowings and cash note that of $600 million.

During the question, we return a $110 billion to our shareholders through share repurchases of $105 million or 2.3 million and 5 million through cash dividend. Cash returned to our shareholders through repurchases and dividend over the trailing four quarters totaled $223 million/.

Our investment at contract capital remains well controlled. Contract capital reflects the combination of balances of our receivables contracts and progress and accounts payable and it stands at $672 million negative at the end of the quarter compared to $701 million negative at the year.

In closing, our significant backlog, consistent project execution and strong financial position provides us with a necessary financial flexibility to deliver our projects up to our owners and take advantage of the energy and infrastructure opportunities in front of us. We remain well position for opportunities to grow our company and continue to provide strong returns through our shareholders/

Phillip Asherman

Thank you, Ron. We'll now open the call to your questions.

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from the line of Joe Ritchie.

Joe Ritchie - Goldman Sachs

Phil, first I want to touch on your comments, the positive rebalancing of what are you seeing towards North America, perhaps you can talk maybe more specifically about the increase in enquiries or the bids outstanding over the last six months in North America. I guess, what I'm really trying to get at is, what's the pace of change going look like from the award side in the short-term, medium-term and long-term based on what you're hearing from your customers today?

Philip Asherman

Well I'll get Dan and Lasse to add the comments as well, but generally I mean Joe as you know just the export facilities opportunity, there are probably eight that are being discussed out there. There is probably four that people are thinking look pretty good and we're probably certainly well-positioned for at least two of those I think.

So on the next year or so we should start seeing some real activity beyond Freeport or many of those. And of course the recent announcement on Cheniere was good news for everyone as far as getting some traction on that business.

If you look at the petrochemical market, I guess if you look at just the addressable market globally and talking about a $90 billion market, but what we see as far as CB&I as far as projects that we can address over the next year or two. We're looking in the range of about $16 billion worth of capital investment out there that certainly we might be able to participate and are heavy concentrate of that is in the U.S.

So when we look at overall portfolio work going forward the next two to five years, we're very encouraged with the continuation and the development of certainly the Australian LNG market. Some interesting developments in the offshore and a lot of diversity in our engineering offices and continuing development of the shale gas drive project and petrochemical projects. So we think it was good.

Joe Ritchie - Goldman Sachs

And just a follow-up to that question is, so the opportunity you're seeing here in the U.S. on the petrochem side is a predominantly expansion projects. And then maybe we start to see the crackers come through a little bit later or how should we think about that?

Dan McCarthy

I think that you're right to cracker is probably a little bit later, because they are huge investments. And for some of these plans like the one that shell would like to build is probably a gas plant in front of it, then their downstream units behind it and an infrastructure around it. So it's going to take a while for that to come to fruition.

I do think though that specific projects in areas such as propylene and butadiene are easier to get your arms around. And we'll see things like that begin to emerge this year. And then they have substantial investments as well.

Joe Ritchie - Goldman Sachs

I guess one last question, maybe Ron you can touch on. The revenues were a little later than expected or at least a little later than we expected this quarter. I guess the mid-point of your guidance for the year would imply about $1.4 billion per quarter. So maybe you can comment a little bit. Did revenues come in as expected for your guys or where there any delays in projects that maybe can ramp up later in the year?

Ron Ballschmiede

No, I think the overall was pretty close to our expectation. As we've talked about, we do expect our projects to continue to ramp up each quarter this year much like it did last year. And certainly to get to a mid-point of guidance we need a 20% growth over each quarter last year and starting out with 26% was pretty good.

So I think we would expect to see double digit growth on top of prior year and sequentially the fourth quarter will be the largest right behind the third, thirdly behind the second and et cetera. So pretty close to where we thought.

Operator

Your next question comes from the line of Steven Fisher.

Steven Fisher - UBS Securities, LLC

I was a bit surprise that you bought so much stock back this earlier in the year. So I'm just wondering how we should think about the motivations there, and the timing, and potential for further buybacks over the rest of the year?

Ron Ballschmiede

Sure. As we've talked in the past our number choice of our liquidity and our cash is to grow our business in. And I think when we don't have an eminent opportunity to do that, we look at our capital structure and believe it's appropriate to return some money to our shareholders.

Certainly our view is, in the first quarter it was a time to put some of our money to work and we did that. And we'll go quarter-by-quarter on that Steve, just to make sure that we're ultimately satisfied in your objective to have the power and availability to take on these big projects. But more importantly to grow our company through opportunities that may arise.

Steven Fisher - UBS Securities, LLC

And then just continuing the discussion on the U.S. chemicals opportunities, when you think about those bigger projects that you said Dan, I guess it'd be a little bit later. Can you just talk about what are the main hurdles or factors you think that need to be addressed before some of those projects can move forward?

Dan McCarthy

Well, I think that there is probably multiple factors here. First is of course the logistics of gathering the feedstock. And then you have to process it to extract it from the natural gas. And then what you're looking at, you're finding a home for the products. And I think what's going to happen is you might find some of these plants being built in the northern part of the country, which will move to domestic markets. But those along the gulf coast, I think will really be focused on export and that usually takes some time to range.

Operator

Your next question comes from the line of Andy Kaplowitz.

Alan Fleming - Barclays Capital

This is Alan Fleming standing in for Andy this afternoon, good evening. I wanted to ask you about steel plate revenue fell off a little bit. I know it seems like it's a little bit of a seasonally weaker quarter, but just wanted to see if there are any delays in projects ramping up in that segment in particular, and if you could just comment on that?

Philip Asherman

No, I wouldn't say that. I think what Ron said just overall as far as we look at the backlog and revenue burn would certainly apply to steel plate. One major component of that backlog certainly is Gorgon MEI which as Lasse told is still in the planning phase.

We had originally forecast that we would be farther along into construction that we are. It's not CB&I risk if you will, but certainly one that we're helping to find resolution with the owner. But it's getting off to a little slower start, so that probably was one of the main contributors.

And overall, the backlog and Steel Plate Structures is performing extremely well. And of note, primarily as major project was coming in the last stages of gas going over in Abu Dhabi, which is exceeding of our expectations on progress. So there was a bit of a lagging factor. It would probably be Gorgon, but again, that's a matter timing and all that backlog is still in front of us which is good news.

Dan McCarthy

And I think as Lasse mentioned, Gorgon is interesting one for Steel Plate Structure, one we haven't had of that magnitude before. So it's a four plus year job. So you won't see the plateau of that job until sometime in '13, '14. So it's a nice ramp up period of time before it plateaus for a couple of years.

Alan Fleming - Barclays Capital

And then if I could follow-up on LNG export. You have the Freeport award, very nice award. I was wondering if you could give us some more information on kind of what you're hearing from your customer around timing. And then second to that, do you guys see that these types of opportunities in the U.S. could potentially cannibalize some other LNG opportunities in Australia, kind of how are you thinking about the market globally balancing these opportunities in North America?

Dan McCarthy

Well, that certainly is a question. To get to your first question, what we are hearing is that certainly there is a lot of activity on the permitting side with major producers that are planning these export facilities. Obviously, Cheniere was first in that queue.

I think others that have been mentioned, certainly right behind that is Freeport, Dominion, Cove Point and certainly I think there has been some discussion on BG as part of that initial wave. All talking about very large capital investments on at least two trains around $4.2 million tons per annum. All subject to FERC and all subject to Department of Energy export rules. So that's all coming into play. But we still see again especially with Cheniere going forward and Freeport we think is close behind.

We're very encouraged by the pace, but these things have a long cycle time. You're talking about at least a year in engineering, before you start to see any substantial construction in the field. So that you could take then about another three years of construction, before we actually see any gas produced. So it's a long cycle time, but we are encouraged by the activity that we see.

So your other question about cannibalization. There is a lot of speculation over and around all that. We haven't seen any distant from our perspective. We've not seen any slowing down of the developments in Australia. When you look at the supply demand for all primary energy sources, they all lead you to convergence somewhere out in 2030.

I'm not sure, if that's just the end of the chart. But some of you really knows that's going to be happen. But certainly the demand particularly in the non-OCD countries rather would certainly indicate that the demand is there and the production it requires for that. So we don't see that necessarily. And all these projects seem to have traction at various cases and are subject to factor such as local regulations and other constraints. But we see it going forward.

Operator

Your next question comes from the line of Jamie Cook.

Jamie Cook - Credit Suisse

Two questions, one, Phil, can you just talk about, obviously there is a research into the U.S. market or excitement that hasn't been there in a while. Can you talk about sort of your win rate or how we should view profitability of these types of projects, as they're more in your backyard versus overseas? And just competitively as we jump around the globe, are there any markets at where you're seeing capacity starting to tighten or where some other players are starting to have issues, meaning, they are having time constraints or having problems meeting cost that they agree to? Because we're hearing some noise, so I was wondering if you heard the same?

Philip Asherman

In any particular market you're referring to Jamie.

Jamie Cook - Credit Suisse

Specifically on the LNG side or just more broadly, whatever you hearing.

Philip Asherman

Let's just go back to where we were talking about the petrochemical market and the opportunities there. You know I think there is going to be a broad competitive field that all the usual suspects in terms of people that have engineering capacity and construction capability to deal with those jobs, certainly would be in consideration.

Our primary access point into those projects is through our technology. And our ability to bundle our technology with our EPC offering, I think gives us if not a competitive aim, certainly an opportunity, virtually all these petrochemical facilities that we choose to chase.

I've not heard any capacity constraints in other markets or particular companies that are feeling constrain, although that hasn't been the public that we talk about that I really know about. The LNG competitive slate tends to be the same players regardless of whatever world you're talking about. And certainly we tend to be spoken in that discussion or we refer to in that discussion. But I've not heard that there is particular strain in any part of the world with any major contractor that I am aware of.

Jamie Cook - Credit Suisse

At what point do you start to talk about at all the bidding margin starting to get better. Do you think that's a scenario we could see in 2013 with some of the projects that are expected to move forward or do you think it's later than that, given that there is just generally everyone has market capacity?

Dan McCarthy

In our industry, with all those normal dictates and rules around supply and demand and margins. You know we're seeing some (inaudible) that maybe for the top of our range, but certainly not well beyond the range of what we've given you in terms of those better margins. We haven't seen that. It's not to say that as capacity constraints tighten up, we could be seeing some of that. But it still is extremely competitive landscape out there. So I don't see that changing dramatically over the next couple of years.

Operator

Our next question comes from the line of Michael Dudas.

Michael Dudas - Sterne Agee

When you look at the new business taking and your overall backlog as of the end of the quarter, how do you feel about the risk adjusted margin and risk adjusted business that you've taken in?

Philip Asherman

Well, the overall risk profile it still seems to be or still it's going to be around the 50-50 split if you will, in reimbursable versus risk. We still concentrate most of our fixed price work in our Steel Plate Structure with the exception of the Gorgon MEI project is the majority of our fixed price work.

What's driving our ability to exceed in some cases are at least to meet SO expectations is a lot of that is just stability in their supply market. Steel prices seem to be holding their own, in fact right down the line or as far as all the commodity pricing that we see that's important in our fixed pricing or a lump-sum bidding, we see a lot of stability in the supply market. As long as that continues and we adhere to our own procurement and execution standards, we expect that surely Steel Plate Structures will provide some premium opportunities as long as we perform.

On the other types of work, on the heavier process work that tends to be a mixed bag between some fixed price and also reimbursement, but we're seeing holding that 50-50 mix of reimburse and fixed price and we don't see that change in dramatically in near future.

Michael Dudas - Sterne Agee

And so my thought would be, when looking back November Investor Day and where are you look today, would it be safe to say that U.S. market seems to be the biggest change or difference of more improvement or are their areas that have look a lot better, are there any that have actually slipped a little bit in the past six seven months?

Lasse Petterson

I will say that the U.S. was excited in November and it's even more exciting now I think primarily because we're enthused by the timing of so many of developments, and certainly and what we see three quarter to first quarter and certainly what we're seeing in the petrochemical market as well as the award of the expansion of the oil sands.

So all those things that we are anticipating back in November, it's as we planned. And you know in this business Michael that's about as best as you can do cases but we're very encouraged by what we see and the timing of these major awards.

Operator

The next question comes from the line of Rob Norfleet.

Bryce Humphrey - BB&T Capital Markets

This is actually Bryce Humphrey on for Rob. Follow-up on an earlier question, new awards were also a little bit lighter than we were modeling and you had a decent amount by our count of press release work during the quarter, so if you could talk about maybe the smaller non-press release work you book in the quarter, was that lighter than usual.

Philip Asherman

No, not necessarily. We're very pleased to the see the timing of these awards, well over billion dollars, pretty good. But I think we've talked about in most of our calls that the continuing reliance on small work in our company. It's about a $0.5 billion. Typically that's been ranging anywhere from $500 million to $750 million, sometimes up. So we're pleased that we had a good balance in that.

It wasn't all concentrated on one big energy award or others, I mean we had LNGP. We had small awards of about $0.5 billion. We had tank work. So it's across the board. And certainly petrochemical, that was a huge step forward for us. So we like the balance, we like the mix, the values we were, as far as our guidance, we think we're tracking right on our plans.

Bryce Humphrey - BB&T Capital Markets

And then just another follow-up on another of your questions, where your comments regarding using cash to grow the business returning it to shareholders, any indication that you don't see any immediate target opportunities or did I misunderstand that and then if so would you just reiterate your target markets as high of highest interest?

Philip Asherman

It's a matter of utilizing cash and the opportunity to have it in front or so it certainly doesn't preclude anything we that we might in horizon that would be an opportunity to grow, again, I think what Ron was describing is our priorities for cash would always be grow the company but we're not just going to let it sit, idle when we can return that wage of the shareholder.

Ron Ballschmiede

I think that's right. I think when you step back and look at the cash balance that we have and the liquidity that we have and just to get to a very safe debt-to-capital ratio that we probably have, somewhere north of a $1 billion of powder, without stretching and even thinking about an equity market transaction. So that's plenty of powder for opportunities out there that they were looking at anyways.

Operator

Your next question comes from the line of Scott Levine.

Scott Levine - JPMorgan

So question on the LNG and the US opportunities, can you help us understand obviously we've done some import facilities in understanding the potential scope that's available to you guys on those types of job, whether you would expect to be available and decide that, relative to some of the other jobs you've worked on, not just in Australia per se but in South America to understand what the addressable market opportunity might look like as they move forward?

Lasse Petterson

Well I t think the job could be seen as a fairly model if we see it out there, we're certainly qualifying to be and selected as a field contractor, then working towards an EPC contract would be our preferred approach. During that phase we work very closely with the owners and the participants to develop scale and pricing and planning and looking at labor market locally and before we come up with the final estimate cost for the work and that would be tomorrow, I think realistically probably we're positioned for at least two of the four that seems to be the first in line but we might get others but I think that certainly in terms of engineering capacity we think certainly there is enough engineering capacity. I think Lasse had referenced back that we were now coming down of (inaudible) reassigning the engineers to other works certainly here in Houston as far as direct labor capacity in this part of the world although the unemployment is around in 8% the construction business about 16%.

So there certainly are workers out there and we anticipate that we play and work for the construction industry here as we go forward. That would mean the model. So we're thinking certainly if you look at Peru as a model and the price of Peru, couple of billion dollars of capital investment minus the infrastructure that's already in place there because of the previous work we had done on some of those sites. You're looking at capital investments of $5 billion to $6 billion I guess.

Scott Levine - JPMorgan

And then maybe the follow-up on that and so the infrastructure already being in place and how much would that, can you give us a sense of how much would that reduce the potential scope versus whether you guys were attacking without this you know import type infrastructure already.

Philip Asherman

I don't think I can tell you that precise right now.

Lasse Petterson

Well on these import terminals, you already have the Marine facilities and the tank is there. So this full of the process and modules, if you're looking at two times 4.4, that is two through trains. So it's a major EPC project and it out, not just a process modules.

Dan McCarthy

And maybe you're asking most of majority that work would be certainly in scope for us, if that's your question.

Scott Levine - JPMorgan

One quick follow-up on cash deployment, Dan, obviously an active quarter for you on buybacks, maybe it's sounds like no real change to the thought process going forward, if you can just confirm if that true and if you know there is been any change in your M&A profile interest that would be helpful.

Dan McCarthyb

I think we will continue to look for opportunities to grow our business. We talked a lot about there first choice adding to our technology business so those are difficult to do but I think we've four to five in the last few years and would hope to continue to do those and this is the right thing comes along that' the in a different sectors or otherwise that fits our requirements of many things, but being accretive that will do something different, but no change in our side.

Operator

Our next question comes from the line of John Rogers.

John Rogers - D. A. Davidson & Company

Philip, just following up on some of the comments related to LNG market in the U.S. and if we look at this projects here, we are tens of billions of dollars. Can you size that for CB&I relative to the opportunity, I guess the upstream oil in that downstream chemical side of the business in the U.S. I mean is it multiples what those other market opportunities are?

Philip Asherman

No, the LNG is multiple

John Rogers - D. A. Davidson & Company

Yes.

Philip Asherman

Well, we talked about potential market for us for these LNG export, you can take $8 billion of investment, it certainly would at least equal the amount of capital investment we're going to see in petrochemicals over the next several years. So you're talking a big bundle out there over the excess of $20 billion to $40 billion in those two markets.

John Rogers - D. A. Davidson & Company

I mean it's fair to say that petrochemical market I mean I don't know about upstream oil market, but there are similar in size the LNG opportunity for yet over the next longer term?

Philip Asherman

Well, actually Dan obviously made that announcement last week. And I think they were using numbers in the $4 billion range, it was certainly great approach the approximate values of an export facility that either Cheniere or Freeport are contemplating.

John Rogers - D. A. Davidson & Company

And I guess just to be clear I mean you would have the opportunity to do the entire EPC on some of these chemical project or will they left in that manner?

Philip Asherman

Well, I don't think it's really been determined whether they'll use PMCs and general contractors, we're certainly approaching out from a technology and planning standpoint. We're pretty far from where the execution of plans are being discussed. Certainly, we could but we just don't know what they're going to tender specifically.

Dan, do you have anymore insights on that.

Dan McCarthy

No, it's four or five different units and whether they package them or separate then, we just don't know at this stage.

Philip Asherman

And that's probably a feasible approach too where you might have some kind of PMC role for firm and then take a vertical scope of the major units, that might be a possible approach. But these vertical scopes would be of the hundreds of million of dollars so they would be sizable.

John Rogers - D. A. Davidson & Company

Ron, you mentioned, it sound like your cash usages and working capital requirement continues on course, but specifically as it relates to a floating LNG project. Are there different requirements; is the collection cycle any different?

Ron Ballschmiede

If I didn't mean floating LNG, John.

John Rogers - D. A. Davidson & Company

Yes, it was floating.

Ron Ballschmiede

I think particularly in United States. So I think there is probably more opportunity to take pick some one, saw the opportunity on those and compare to some other places in the world. Generally lumpsum does better from our cash flow standpoint, but I wouldn't say it's going to move the needle in short term, certainly in 2012 and beyond that we'll have to watch out these things developed.

Dan McCarthy

It's clear that there is a better opportunity to do some incremental lumpsum work at this stage, which will be good for our margins.

Operator

The final question comes from the line of Avi Fisher.

Avi Fisher - BMO Capital Markets

When are your stockman going to move ahead.

Ron Ballschmiede

You've been saving that one for him, haven't you?

Avi Fisher - BMO Capital Markets

Reading and following on the financing evident is delay decisions, I guess also I wonder like while you wait for to move ahead, is there a lot of engineering component to it or has the project change?

Ron Ballschmiede

No, I think there was some new start on the stockman today in upstream, there was an uptick, but they're confident that this is ahead as an LNG project and that is seems to be abandoning the piping all the gas into Europe by the pipelines. But this is things that there are clients are planning and working on and we are following their plans and we are at their service when they need our services. It's clear that there is a lot engineering work on these major EPC projects and there is a lot of scope for companies such as CB&I on these LNG developments both for engineering and for the procurement services and also construction management services.

Lasse Petterson

Some of you might be that what moves them all closer to its goals is really just capital investment. I mean the gas is there. It certainly is feasible to extract it. I mean from a tangible standpoint, your (inaudible) seems to be the clear choice. Stockman has few more challengers as far as the just the actual production values and extracting the gas. So it's not really capital investment issue at stockman as much as and more tangible challenge, would you agree with that?

Ron Ballschmied

I think our opportunity clearly on both project we’ll so see how I (inaudible).

Avi Fisher - BMO Capital Markets

Well, have you lost that you'd mentioned I think the gas scale completion is coming earlier that is expected, do we expected an award on the early completion?

Lasse Petterson

You mean a bonus?

Avi Fisher - BMO Capital Markets

Any benefit, bonus, yes.

Lasse Petterson

No is the answer. It would be unusual for us to have a big incentive-related payment on that project. We like our margin a little bit more steadier than that.

Avi Fisher - BMO Capital Markets

And then, Lasse, I also heard you mentioned something about delayed coking opportunities. And I wonder if I could drill into that and think sort of where you're seeing the opportunities?

Dan McCarthy

It's interesting we're seeing delayed coking opportunities pop-up in various places. And so you can't really say it's focused in one area or not. Some of the areas and regions where we would typically do EPC activity, so there's some follow-on activity there. Another aspect of this coking business is interest in producing specialty grades of coal. And we've been active in that and have seen opportunities emerge there, which is more interesting, because typically people look at delayed coking and they say how am I going to get rid of the coke. Here we are making the coke with specific application.

Avi Fisher - BMO Capital Markets

While I have you, Dan, your 10-K had kind of a lot more detail than usual on backlog. And so it showed Lummus Technology backlog that was substantially higher than what's kind of I had estimated or tried to back into and to kind of reverse engineer it. You're showing burn rates that are substantially slower than we normally see. Are we going to see a ramp in the quote unquote backlog burn in Lummus Tech? Are we just in low between the completion and starts of new heater projects?

Dan McCarthy

Well I think my job is to definitely see the improvement in backlog burn rate and growth in the business. But also you have to appreciate that within our backlog it takes a while to go through the backlog. A lot of things take a walk through backlog, not just the engineering side that happens fast.

But many of our customers will have us do the engineering, finalize this agreements, but then we're not sure we're going ahead with this project until we have a firmer quotation from a contractor. So we don't take any profit on anything that's contingent right. So it's hung-up on the backlog, it's always a lot of catalyst orders. So we do have probably a higher backlog than people would project just while looking at the fact that we do our engineering in six months.

Ron Ballschmiede

I think you know we talked about revenue recognition in addition to the catalyst being recognized when it shipped. There is also some waiting for the plants to be completed and finishing the final revenue step, which is achieving what the plant was designed to do. And that of course delay some revenue also.

Avi Fisher - BMO Capital Markets

And Ron, while I have you, one last question on just the PNG project, there have been some issues there in the past there, but on again, off again, with the timing of the work. How far are we away from being full ramp on that?

Ron Ballschmiede

I'll let Lasse answer that one.

Lasse Petterson

With the PNG project, as I said we're finished with the engineering and all the materials and equipment has been procured and has been transported to the site. It is a difficult location. You either have to fly in all the equipments into the airport that's being built up out there in the highlands or there is a long road that comes upward through the mountain.

So that's been some issues with logistics. But going forward we are ramping up at the site. The site is fully mobilized. Piling is almost complete. We are in pouring the foundations. So the project is going forward. And I would say that once we get into later quarters of this year, we are ramping up the construction.

Philip Asherman

Well, I think that conclude our call. But let me just summarize. We're really pleased with the result this quarter from each of our business sectors. And we certainly anticipate that this performance will continue throughout the year, as we capitalize in opportunities throughout the world.

We'll continue to look for ways to grow, not only from current end-markets we serve, but potentially in areas where we can extend our presence through acquisition, joint ventures or some other form of collaboration that leverages the skill of CB&I with other global companies that share our core values and have a reputation for solid performance.

So thank you for your time and attention this afternoon. And I will conclude our call.

Operator

This concludes today's conference call. You may now disconnect.

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