2010 KBR Analyst and Investor Day

Transcription

1 2010 KBR Analyst and Investor Day State of KBR Bill Utt Chairman, President, and Chief Executive Officer June 23, 2010 Page 1 of 76

2 Forward Looking Statements This presentation contains forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements include statements about the benefits of the split-off, the discussions of KBR s business strategies and KBR s expectations concerning future operations, profitability, liquidity and capital resources. You can generally identify forwardlooking statements by terminology such as anticipate, believe, continue, could, estimate, expect, forecast, goal, intend, may, objective, plan, potential, predict, projection, should or other similar words. These statements relate to future events or future financial performance and involve known and unknown risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to differ materially from those in the future that are implied by these forward-looking statements. Many of these factors cannot be controlled or predicted. These risks and other factors include those described under Risk Factors in KBR s Annual Report on Form 10-K dated February 25, 2010, Forms 10-Q, recent Current Reports on Forms 8-K, and other Securities and Exchange Commission filings. Those factors, among others, could cause KBR s actual results and performance to differ materially from the results and performance projected in, or implied by, the forward-looking statements. As you read and consider this presentation, you should carefully understand that the forward-looking statements are not guarantees of performance or results. KBR cautions you that assumptions, beliefs, expectations, intentions and projections about future events may and often do vary materially from actual results. Therefore, KBR cannot assure you that actual results will not differ materially from those expressed or implied by forward-looking statements. The forward-looking statements included in this presentation are made only as of the date of this document. New risks and uncertainties arise from time to time, and KBR cannot predict those events or their impact. KBR assumes no obligation to update any forward-looking statements after the date of this presentation as a result of new information, future events or developments, except as required by the federal securities laws. Page 2 of 76

3 KBR Today Organization Transformation Complete Best-in-Class Risk Awareness and Project Execution Delivering Improved Financial Management Selectively Growing Through Acquisitions The Growth Story at KBR Page 3 of 76

4 KBR Executive Leadership Team Bill Utt Chairman, President, and CEO Klaudia Brace Senior VP; Administration Dennis Calton Executive VP; Operations Sue Carter Senior VP and CFO Andrew Farley Senior VP and General Counsel Tom Mumford Senior VP; Commercial John Rose Group President; Hydrocarbons Mark Williams Group President; Infrastructure, Government, and Power David Zimmerman President; Services Page 4 of 76

5 Mission, Vision, and Values Mission We safely deliver any project, any time, in any environment for the benefit of our customers, shareholders, employees, and the communities we serve Vision To be the world s premier contractor delivering projects and services to a global marketplace Values Uncompromising commitment to Quality, Health, Safety and Environment An open relationship with our employees based on mutual trust, respect and success Transparency, Accountability and Discipline in our business Best-in-Class Risk Awareness Integrity in all we do Financial responsibility to our stakeholders Page 5 of 76

6 KBR s Market Facing Organization Structure Hydrocarbons IGP Services Ventures Downstream Infrastructure & Minerals Building Group Gas Monetization International Government and Defense Canada Operations Oil & Gas North America Government and Defense Construction Technology Power & Industrial Industrial Services Page 6 of 76

7 Risk Profile of Backlog 72% 80% 82% 81% 43% 12/31/06 12/31/07 12/31/08 12/31/09 3/31/10 Backlog as of Date Reported Future Reimbursable Backlog Fixed-price Backlog Improved Risk Profile Over Time Page 7 of 76

8 Risk Profile of Backlog Peer Comparison Percentage of Fixed Price Backlog as of Last Reported Period 45% 50% 15% 18% 21% JEC KBR FLR SHAW CBI KBR has one of the lowest risk backlogs amongst peers *Source: Simmons & Company International; May 18, 2010; Energy Infrastructure: Coverage Overview and Energy End Market Analysis Page 8 of 76

9 KBR s Universe of Risk Cover Analysis Our Universe of Risk is measured through Cover Analysis, which provides KBR Executive Management with an objective and transparent assessment of a transaction s risk profile. Our Risk Premium is calculated based on the risks in each of the following segments: Joint Ventures Commercial Risk Execution Risk Financial Risk Intl Business Relationships (ISI/ICI s) External (Geopolitical, environmental) Resources (HOS, HVEC s etc) Project Execution (Vendors, Subs etc) Project Schedule & Cost Bonds, Guarantees Credit (Client, Partner, Subcontractor) Currency, Taxes Cost + Escalation + Risk Premium + Job Margin = Price Contractual Risk Rely Upon & Acceptance of Work Liabilities & Indemnities Performance & Warranties Our Cover comprises our Job Income plus our Risk Premium. We analyze this to determine the impact that any undertaken risks might have, were they to materialize. Page 9 of 76

10 ERC Approved Awards Performance: Q10 KBR 9.0% 10.1% 10.5% HYDROCARBONS 9.3% 8.9% 10.0% I G P 7.9% 9.4% 9.9% SERVICES 11.3% 12.4% 13.2% 0% 5% 10% 15% 20% 25% As Sold Job Margin Current Forecast Job Margin 1Q10 As Sold Job Margin - Risk Adj. Page 10 of 76

11 KBR Project Economic Performance 2008 v Upside and Lost Opportunity Comparison 100% 90% KBR Projects: Cumulative Annual Gross Revenue vs. Job Income Margin % Job Income Margin % 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% -60% -70% -80% -90% -100% Gross Revenue $7,756 MM Gross Revenue $7,049 MM -$500 $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000 $4,500 $5,000 $5,500 $6,000 $6,500 $7,000 $7,500 $8,000 Cumulative Annual Gross Revenue ($MM) Y2008 Y2009 Note: Dataset excludes Ventures Business Unit, Logcap 3, and Pemex settlements and legal cost. Gross revenue excludes inter-business Unit eliminations. Page 11 of 76

12 Delivering Improved Financial Management Cleaned up and made profitable the Ventures portfolio Reduced and seek to maintain a competitive U.S. effective tax rate Effective G&A cost control Continue to maintain financial flexibility and a strong balance sheet Successfully resolving legacy arbitrations, claims and lawsuits Returning to shareholders excess cash not needed in business or to buffer expected financial market volatility Page 12 of 76

13 Selective Growth Through Acquisitions Catalyst Interactive - E-learning and training solutions provider specializing in defense, government, and industry training Sold a simulation training package on the Gorgon LNG project Turnaround Group of Texas, Inc - Specializes in planning and execution of turnarounds and outages for industrial facilities Awarded two turnaround projects in Canada (Suncor and Syncrude) BE&K Accelerated KBR s re-entry into the U.S. domestic construction and maintenance business Continuing to successfully execute work in the North American engineering and construction market Wabi Development Corporation Canadian based general contractor providing maintenance, fabrication, construction, and construction management services CLAC labor expected to be 55% of work in Oil Sands; allows KBR to now access those available markets Page 13 of 76

14 Selective Growth Through Acquisitions Jordan BE&K Joint Venture Purchase of partner s interest in joint venture targeting small capital construction in federal services market Successfully sold and constructing several federal services projects Veba Combi Cracker Technology Formed collaboration with BP to market and commercialize an alternative coking technology taking advantage of the expected future oil to natural gas spread Several prospects identified; Working on one early stage study Energo Engineering Acquisition of a high-end marine civil engineering firm specializing in integrity management and other advanced engineering services Currently marketing Energo Engineering as part of a broader, more integrated suite of KBR services to the offshore community Page 14 of 76

15 The Growth Story at KBR Hydrocarbons Maintain Gas Monetization Scale and Increase Margins Expand Value Chain Presence in Oil & Gas and Downstream Continue to Grow Technology Through Intellectual Property Acquisitions and Joint Ventures Page 15 of 76

16 The Growth Story at KBR Infrastructure, Government and Power Continue to Expand Government Services Offerings Outside of Iraq and Afghanistan Continue to Successfully Manage Litigation and Claims Backlog Continue to Drive Attractive Growth in the Infrastructure, Minerals, Power and Industrial Market Segments Services Continue to Drive Growth and Build on Successes at Building Group and Industrial Services Maintain Capability During Recovery of the U.S. and Canadian Construction Markets Page 16 of 76

17 2010 KBR Analyst and Investor Day Infrastructure, Government, and Power Mark Williams Group President June 23, 2010 Page 17 of 76

18 IGP Leadership Team Mark Williams President; Infrastructure, Government, and Power Colin Elliott President; Infrastructure and Minerals Andrew Pringle President; International Government and Defence Tom Vaughn President; Power and Industrial Mark Williams Interim President; North America Government and Defense 3 Page 18 of 76

19 IGP - Introduction Business Unit Infrastructure, Government, and Power Mark Williams KBR Delivers in six distinct markets: Infrastructure & Minerals, Government & Defense, and Power and Industrial Market Sectors Transportation Water Facilities Minerals U.S. Federal Government Department of Defense U.K. Ministry of Defence Middle East Asia Pacific (APAC) Power Pulp & Paper Alternate Energy Services Product Service Lines Infrastructure & Minerals Colin Elliott Engineering EPCM Project Management Construction Management Event Management N.A. Government & Defense Mark Williams (Interim) Operations and Maintenance Logistics Construction Design/Build International Government & Defence Andrew Pringle Facilities Management Program & Project Management Construction Management Training Power & Industrial Tom Vaughn Engineering EPC Project Management Construction Management Page 19 of 76

20 IGP Business Drivers Business Drivers U.S. Government and Defense spending stable U.K. Ministry of Defence outsourcing GDP growth drives infrastructure, minerals, power Air quality standards and green energy will drive power opportunities Industrial capital expenditure increases planned Page 20 of 76

21 IGP - Outlook Business Aspirations Balanced and growing U.S. and International government services business Broad portfolio of projects that include facilities, transport, water, and minerals Fully integrated EPC domestic power capability Key Business Unit Messages Growing demand in Asia Expanding reach to other U.S. federal clients Iraq oil field camp and life support services Emergence of gas as preferred power source Acquisitions are part of the plan Best-in-Class safety and quality programs Page 21 of 76

22 North America Government and Defense Business Segments Operations, Maintenance, and Logistics Logistics Life support services Installation support services U.S., Middle East and Europe Current Market Environment Federal and Construction Services Rapid response construction Mid-to-Large capital construction Facilities renovations and repair Classified work / Security upgrades U.S. and Middle East Addressable Market KBR will continue to have all work under LogCAP in Iraq All troops expected to withdraw from Iraq by 2012, unless new Status of Forces agreement Operations in Afghanistan will increase in tempo during 2010 and continue into 2011 National Security/Defense budgets for FY2010 and FY2011 remains stable Difficult economic conditions have increased competition in government contracting market and driving to low cost bids; more oversight Estimated Expenditures ($ in billions) $80 $70 $60 $50 $40 $30 $20 $10 $ Page 22 of 76

23 North America Government and Defense Value Proposition and Strategy Premiere leader in the contingency markets for logistics, facility management, base life support Diversify and broaden our sustainment portfolio for U.S. federal clients Identify Identify and target opportunities that yield higher margins Fort Drum Commissary Ft Drum, New York LogCAP Iraq Strategic Aspiration To be a preferred and essential services business among the top 50 U.S. government contractors (~$2B) with a balanced contingency and sustainment portfolio Page 23 of 76

24 International Government and Defence Business Segments U.K. Operations U.K. Ministry of Defence Support U.K. military operations in Afghanistan Allenby/Connaught project Heavy Equipment Transporter Asia Pacific Operations Australian Department of Defence Support Australian forces in Afghanistan Training services Middle East Operations UAE/GCC Defence Logistics and integration services Training solutions Current Market Environment Addressable Market U.K. Strategic Security & Defence Review and Spending Review forthcoming UAE is committed to completing its 10 year military modernization plans UAE/GCC adopting outsourcing to increase defence capabilities Australian Defence committed to capability and logistics transformation Estimated Expenditures ($ in billions) $16 $14 $12 $10 $8 $6 $4 $2 $ Page 24 of 76

25 International Government and Defence Value Proposition and Strategy Continue to build on solid reputation for delivery U.K. U.K. MoD relationship (Top Supplier) Rebalance portfolio to support longer- term peacetime activities Customer diversification Capture Capture logistical support opportunities in the Middle East Grow Grow and enhance defence training offering Emerging opportunities in Southern Iraq Strategic Aspiration KBR Camp Bastion, Afghanistan Heavy Equipment Transporter Leatherhead, England Continue to rebalance and grow the portfolio through non-contingency opportunities Page 25 of 76

26 Infrastructure and Minerals Business Segments Transport Water/Wastewater Facilities Minerals PM / CM Engineering Australia, Texas, Qatar Engineering Water treatment PM / CM Australia, Texas Engineering consulting PM / CM Event management Australia, UAE EPCM Engineering Studies Australia, Indonesia Current Market Environment Minerals sector growing quickly Continuing infrastructure investment in the Middle East Widespread investment in transport sector Estimated Expenditures ($ in billions) $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Addressable Market Page 26 of 76

27 Infrastructure and Minerals Value Proposition and Strategy Local Local customer facing offices with global resource/knowledge reach Technical excellence Project Project management Major Major project delivery Mining Mining and infrastructure acquisitions in U.S. and Australia Laying of world s largest twin pipes using lay barge Sydney, Australia Beltway 8 & I-45 Houston, Texas Strategic Aspiration To be a global engineering firm with >$1B revenue from infrastructure and minerals sectors Page 27 of 76

28 Power and Industrial Business Segments Power Construction services provider Expertise in gas-fired power plants and air quality systems retrofits Currently Southeast United States focused Current Market Environment New power generation continues to be driven by gas-fired projects Annual spend rates for our legacy pulp and paper clients are increasing Biomass opportunities from our traditional pulp and paper clients and from utilities; plays to one of our strong suits Estimated Expenditures ($ in billions) Industrial EPC capability Metals, mineral processing, industrial manufacturing, and forest products Currently Southeast United States focused, with ability to follow existing clients to international locations Addressable Market $60 $50 $40 $30 $20 $10 $ Page 28 of 76

29 Power and Industrial Value Proposition and Strategy Build Build on resume of power construction and move to a fully integrated EPC offering Pursue Pursue emerging technology markets, including biomass Expand Expand power and industrial businesses internationally Enhance industrial positions in specific markets, including forest products, life sciences, advance manufacturing, and metals/minerals Southern Company Plant Franklin Smiths Station, Alabama International Paper Kwidzyn, Poland Strategic Aspiration Grow through expansion beyond traditional Southeastern United States with full EPC capabilities Page 29 of 76

30 2010 KBR Analyst and Investor Day Hydrocarbons John Rose Group President June 23, 2010 Page 30 of 76

31 Hydrocarbons Leadership Team John Rose Group President; Hydrocarbons Tim Challand President; Technology Mitch Dauzat President; Gas Monetization Roy Oelking President; Oil and Gas John Quinn President; Downstream 3 Khaled Abu-Nasrah Senior VP; Downstream Page 31 of 76

32 Hydrocarbons - Introduction Business Group Hydrocarbons John Rose KBR Hydrocarbons Group delivers Licensing, Conceptual Study and Consulting, FEED/PMC, EPC/EPCM and Commissioning for the wide spectrum of Hydrocarbons Value Chain around the World: Market Sectors LNG FLNG Mid-Scale LNG GTL Offshore Onshore Pipelines Refining Petrochemicals Biofuels Fertilizers Refining Petrochemicals Syngas Coal Gasification Services Business Units Risk Mgmt Gas Monetization Mitch Dauzat Study Pre-FEED FEED PMC EPC / EPCM Commissioning Oil & Gas Roy Oelking Field Development Consulting FEED Detail Engineering Project Management Services EPC / EPCM Downstream John Quinn Study/Consulting FEED PMC EPC / EPCM Commissioning Strong Risk Awareness and Double Regard to Risk Management Technology Tim Challand Licensing Basic Engineering Proprietary Equipment Technical Service Agreement Advance Chemical Engineering (ACE) Page 32 of 76

33 Hydrocarbons Macro Drivers Oil Price WTI Price Forward Price Gas Price Asia Japan Price Forward Price Oil Price, $/bbl Canadian Heavy Oil Project Investment Ultra- Deepwater West Africa & GoM Project Investment Brazil Sub-Salt Project Investment Gas Price, $/mmbtu Most Australia LNG can be delivered to Asia Japan, Korea, China, India etc. Average Shale Gas Project Investment Most Middle East, Africa & Latin America LNG can be delivered to US. US Henry Hub Price Q1'10 Q2' Q1'10 Q2' Source: Goldman Sachs, EIA and KBR Analysis Source: CERA and KBR Analysis Downstream Profitability Index Profitability Index Fertilizers Refining Petrochemicals Q1'10 Q2'10 Source: EIA, Chemical Week, Fertecon and KBR Analysis Page 33 of 76

34 Hydrocarbons Business Drivers Business Drivers LNG investment will continue in Asia Decline of existing oil fields and increasing oil demand continue to drive investment in oil & gas Emerging economies and production of higher value petroleum products will drive investment in refineries Population and GDP growth will continue to drive the investment in petrochemical and fertilizer industries Competition Under utilization in EPC hydrocarbons space New players such as Korean and Chinese contractors Page 34 of 76

35 Hydrocarbons - Outlook Strategic Aspirations Expand scope into more EPC elements of projects while maintaining strong risk awareness program Add to our current portfolio of offerings Local operations in key markets Key Business Unit Messages Differentiation Large, Complex, Remote Location, Technical Selective Pick the Right Projects Get in Early Studies, FEED Projects may have 3 to 10 years gestation Page 35 of 76

36 Gas Monetization Business Segments LNG FLNG Mid Scale LNG GTL Industry Leader in Liquefaction plants Currently working on Gorgon, Skikda, Pluto, Ichthys and Browse LNG JV with Hoegh Complementary business with LNG and FPSO strengths Leveraging KBR small to mid projects capability with LNG expertise Leader in GTL: Leading 2 out of 3 projects Pearl GTL and Escravos GTL Current Market Environment Australian investment continues targeting Asian off take West Africa projects impacted by political instability (Nigeria) Multiple Russian projects developing for export markets North American LNG projects target Asian market Industry forecast demand exceeding supply in Estimated Expenditures ($ in billions) $40 $35 $30 $25 $20 $15 $10 $5 $0 Addressable Market Page 36 of 76

37 Gas Monetization Capex & Major Prospects 5 Years Addressable Market Capex Snohvit Train 2 Shtokman 2 Yamal LNG Brazil Santos FLNG $12B North America Kitimat LNG Cheniere LNG Qatargas II, III, IV Debottlenecking Marsa El Brega, Libya Brass LNG, Nigeria NLNG 7, Nigeria Skikda Train 2 Seagas Train 2 $5B Latin America $26B Africa $16B Europe & Eurasia $3B Middle East Ichthys Pluto Train 2&3 Browse LNG Gorgon 4&5 Wheatstone BG Queensland Curtis Shell/PetroChina CSM Scarborough Prelude FLNG $11B Australia Asia Tangguh Train 3 Donggi Senoro Sunrise FLNG $92B Page 37 of 76

38 Gas Monetization Value Proposition and Strategy Maintain leadership in complex remote mega project delivery Large base load revenue generation Combined EPC experience of LNG and FPSO for Floating LNG Leverage GTL experience for new gas developments such as U.S. shale gas conversion to motor fuels Business development coverage in North Africa, West Africa and CIS Next wave Strong global relationships - Partners, Contractors Suppliers and Fabricators to maintain competitiveness Strategic Aspiration Tangguh Papua, Indonesia Demonstrated market leader in remote and mega- project execution with a balanced portfolio of projects and industry leadership in HSE Page 38 of 76

39 Oil & Gas Business Segments KBR Oil & Gas Floating Production Systems Conventional Fixed Platforms Current Projects - Chirag Oil Project, Kashagan Early Dev, Big Foot, Jack St. Malo Current Market Environment Granherne Field development Concept Selection for Deepwater and Subsea Major Centers Houston, London & Perth Caspian region is active in both onshore and offshore Offshore Western Australia s activity is increasing to produce gas for LNG projects Americas (Eastern Canada, US-GoM and Brazil) offers many opportunities West Africa (Angola) continues to be a strong market Iraq presents new opportunities with recent field awards to IOCs Independents investing in North Sea Estimated Expenditures ($ in billions) Energo Integrity Management Advance Structural Engineering $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Addressable Market GVA Semi-submersible Hull Technology FPSO Hull Design Operating centers in Gothenburg Sweden and Houston Page 39 of 76

40 Oil & Gas Capex & Major Prospects 5 Years Addressable Market Capex Hebron, Canada Big Foot, GoM Jack St. Malo, GoM Kaskida, GoM Europe & Eurasia $38B TCO Future Growth Project, Kazakhstan Shah Deniz Phase 2 TNK-BP s VP Field Quad 204 Execute Kashagan FPD Karachaganak Phase 3 Rosebank Ekofisk/Eldfisk North America $35B Majnoon Field, Iraq Rumaila Field, Iraq West Qurna Field, Iraq Umm Lulu & Sarb, UAE Africa $22B Banyu Urip, Indonesia Malukoo Gas Field, Indonesia $14B $31B $25B Middle East Asia Pre-Salt FPSO Topsides, Brazil Drilling Units Design Contract, Brazil 8 FPSO Hull Designs Latin America GVLA Project, Angola South Nemba Aux. Platform, Angola Clov FPSO, Angola Block 32 FPSO Angola Engina FPSO, Nigeria Browse Offshore Wheatstone Ichthys Offshore Scarborough Offshore $18B Australia Page 40 of 76

41 Oil & Gas Value Proposition and Strategy Strong global consulting business Technical Centers of Excellence supported by strategically located High Value Engineering offices Complete deepwater capability including topsides, hulls and subsea GVA license technology semi-submersible hulls and mooring Full project delivery capability Offshore Norway Strategic Aspiration To be a leading and growing global consulting and engineering organization with successful EPC project delivery Page 41 of 76

42 Downstream Business Segments Refining Two major grassroots refineries in progress Yanbu export refinery Sonangol refining, Angola Petrochemicals Executing PMC/FEED for largest ever petrochemical complex, Dow/Aramco Mechanically completed Saudi Kayan Largest single train ethylene plant. Impeccable safety record Current Market Environment Countries with natural resources want to upgrade their value by producing end products and simultaneously provide benefits to their population. Key regions are Middle East, Africa, Latin America and CIS Clients are building large integrated complexes with focus on lower capex/opex Competition remains intense for Lump sum EPC projects especially in the Middle East Biofuels Completed FEL work on an Ineos USA project Have aggressive growth plans for cellulosic routes to ethanol based on developments by major international companies Estimated Expenditures ($ in billions) $80 $70 $60 $50 $40 $30 $20 $10 Addressable Market Fertilizers Historically have provided over 50% of the world s ammonia plants EBIC plant onstream 2009 $ Page 42 of 76

43 Downstream Capex & Major Prospects Biofuels Refinery Modernization Chemicals $30B North America 5 Years Addressable Market Capex Exxon/QP petrochemical complex, Qatar Jizan Refinery, Saudi Kuwait Clean Fuels Dow/Aramco Petchem increased scope Yanbu refinery increased scope Shaybah gas separation, Saudi Chemaweyaat Petchem Complex $61B $102B Europe & Eurasia Rosneft refinery NKNK Ethylene Complex Lukoil Gas Separation/ Ethylene Fertilizers Refinery Modernization Petrobras Ammonia Plant, Brazil Petrobras 2 Grassroot Refineries, Brazil EcoPetrol Petrochemical Project, Colombia $42B Latin America $39B Africa Middle East $39B Asia pacific Sonangol refinery increased scope PetroSA refinery increase scope Page 43 of 76

44 Downstream Value Proposition and Strategy Focus efforts in high growth markets - Middle East, Africa, Latin America, CIS Position KBR for mega and integrated complexes in Middle East, a key growth region of KBR Use our Ventures Business Unit to help develop projects from opportunity into reality Improve competitive position by using more High Value Engineering Centers (HVEC) resources and/or using local content Expand portfolio offering by obtaining larger portion of total project scope Pursue major cellulosic biofuels projects Strategic Aspiration Saudi Kayan Saudi Arabia To grow and capture PMC/FEED opportunities and capture more of the Total Installed Cost (TIC) through EPC Page 44 of 76

45 Technology Business Segments Refining Petrochemicals Syngas Coal Gasification Bottom of barrel technology portfolio VCC & ROSE: tailored for high crude price & low gas price scenario SUPERFLEX & Advanced Catalytic Olefins (ACO): high propylene to ethylene yields, low carbon footprint Leader in phenol and aniline Business Attributes High Margin / Low Risk licensing business Addressing high-growth global markets including China, India, Middle East and Asia Expanding high-value execution capabilities in India and China Strong potential to expand number of technology offerings Estimated Expenditures ($ in billions) Market leader in ammonia technology Lowest energy consumption $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 Addressable Market TRIG: aimed at high ash, low-rank coals of China & India Launched TRIG commercialization $ Page 45 of 76

46 Technology Expenditure & Prospects North America Refining Revamps Coal Gasification Europe & Eurasia Refining Revamps Ammonia Revamps 9% Middle East & Africa Ammonia Petrochemicals Refining China Ammonia Petrochemicals Coal gasification 7% $11B 19% 18% 24% 5 Years Addressable Market Expenditure 12% 11% % Total Addressable Market Regional Distribution Latin America Ammonia Refining India Ammonia Coal Gasification Refining Rest of Asia Ammonia Petrochemicals Page 45 of 76

47 Technology Strategy Expand business offerings Acquire technologies Additional technology alliances Proprietary equipment Technical services In-house technology development Create deal development capability to drive VCC, Superflex and ACO sales Improve operational effectiveness Strategic Aspiration To be world recognized as a premier diversified technology provider to the process industries while continuing to grow at a 20% CAGR Page 47 of 76

48 Technology US Coal Gasification Impact of U.S. Energy Policy! Page 48 of 76

49 2010 KBR Analyst and Investor Day Services David Zimmerman - President June 23, 2010 Page 49 of 76

50 Services Leadership Team David Zimmerman President; Services Luther Cochrane Senior Vice President; Building Group Brian Cole Vice President; Canada Operations Darrell Hargrave Senior Vice President; Industrial Services Randy Walker Senior Vice President; U.S. Construction Page 50 of 76

51 Services - Introduction Business Unit Services Business Unit David Zimmerman KBR Services Business Unit delivers construction, construction management and maintenance services to clients across a variety of industries: Market Sectors Refining Chemicals Oil & Gas Power Pulp and Paper General Industrial Oil Sands Mining Gas Treating Life Sciences Education Government Buildings Healthcare Aerospace Food & Beverage Services Product Service Lines U.S. Construction Randy Walker Construction Management General Contracting Direct Hire Construction Boiler Repair / Upgrades Mechanical Subcontracting Industrial Services Darrell Hargrave Operations and Maintenance Turnarounds, Shutdowns and Outages Electrical, Instrument and Analytics Building Facilities Services On-call Construction Canada Operations Brian Cole Construction Management General Contracting Direct Hire Construction Module Assembly Pipe Fabrication Maintenance / Turnarounds Building Group Luther Cochrane Commercial Construction Management Design-Build General Contracting Public-Private Buildings Preconstruction International Construction Jim Parson International Construction Management Global Resource Supply Construction technologies Plant Commissioning and Start-up Page 51 of 76

52 Services - Business Drivers Business Drivers Alberta oil sand investments proceeding with forecasts predicting oil prices remaining above $65/bbl Multiple environmental bills under review / modification - revamp work upcoming at refineries, power and chemicals plants Many clients having deferred critical work over the past two years driving increased activity in turnarounds and outage projects Renewed focus on process safety improvements New opportunities arising from shale gas discoveries Power capacity increases dominated by gas-fired plants, with environmental regulations affecting most producers Project financing continues to create some uncertainty As uncertainty over healthcare reform is removed we expect to see more "for profit" projects move ahead Page 52 of 76

53 Services - Outlook Business Aspirations Services aspires to be the recognized, preferred supplier of construction and maintenance services around the world Key Product Service Line Messages U.S. Construction will utilize direct hire strengths and a regional delivery model across its traditional markets while diversifying into growth markets Industrial Services will be a global O&M service provider, supplying integrated cost competitive solutions Canada Operations will be a truly national contractor capable of self performing work across all industrial markets in Canada The Building Group will be the leading commercial construction service provider in its operational regions and a top 5 or better player in its specific market sectors Page 53 of 76

54 U.S. Construction Business Segments Boiler Group SW&B $100k - $1m $100k - $15m 1 week - 2 month 1-8 month field field duration duration Growth in Some Master Hydrocarbons Services Agreement work Current Market Environment Houston / Birmingham Ops Large complex projects Operate as the General Contractor Direct Hire COP Sweeny XOM Beaumont Progress Energy Hunt Refining Addressable Market Construction Mgmt. CM resource Northeast focused Experiencing increased activity for smaller sized hydrocarbons projects - sponsored at the facility level US refining utilization rates are on the rise and margins are stabilizing - project spending being driven by regulatory requirements and efficiency improvements Spending for environmental compliance remains strong in the power sector, also expecting medium to large projects to proceed towards late 2010 and early 2011 Estimated Expenditures ($ in billions) $45 $40 $35 $30 $25 $20 $15 $10 $5 $ Page 54 of 76

55 U.S. Construction Key Strategies Continue to move our construction resources closer to our hydrocarbons customers where decisions will be made Maintain Maintain and grow our power market share Continual improvement of our cost competitiveness Further Further position our execution to be technology differentiated Strategic Aspiration Hunt Refining Black Warrior Project Orlando, Florida Eastman Chemicals Longview, Texas Be the preferred U.S. construction provider, utilizing our direct hire strengths and a regional delivery model across traditional and growth markets Page 55 of 76

56 Industrial Services Business Segments ITI* Control Systems Process Services Turnarounds High & Medium Voltage Services Turnaround Services On Call Const. Planning, Scheduling, State, Counties, Cost Analysis Cities Turnaround Mgmt. Universities, Comm. Turnaround Execution Colleges School Systems Current Market Environment International EBIC Poland Russia Canada Addressable Market U.S. Operations DuPont International Paper Exxon Mobil Texas Instruments Shell Single source contracting continues to be a powerful trend across industries Clustering of maintenance sites and minimizing overhead costs Increasing demand for high level capabilities (reliability management, etc.) Increased turnaround activity Estimated Expenditures ($ in billions) $25 $20 $15 $10 $5 *Note: ITI stands for Instrument Technology International Page 56 of 76 $

57 Industrial Services Key Strategies Target Target opportunities to expand the business at existing client sites Continue to develop the breadth of our services to establish single source contract offerings Increase Increase our focus on higher margin specialty service offerings Expand Expand our global operations and maintenance offerings leveraging KBR s global footprint Strategic Aspiration BASF Operations and maintenance Hannibal, Missouri Shell Chemicals Supplemental maintenance, small capital construction Deer Park, Texas To be an expanding global operations and maintenance services provider, supplying integrated cost competitive solutions while leveraging other KBR businesses Page 57 of 76

58 Canada Operations Business Segments Construction Services Module Assembly Fabrication Maintenance General contractor Direct hire BTU and CLAC Canada wide legacy Yard capacity of up to 80 standing modules Throughput of 240 modules annually 5 Bay Spool fab dia inch/week 8 bay structural and misc steel in Ontario Small capital Turnarounds Sustaining capital Current Market Environment Addressable Market Chinese investments in oil sands opening a new export market with emphasis on local upgrading Less capital intensive recovery methods for in situ bitumen deposits being tested and developed Seeing increased Canadian mining investments Forestry products sales increasing on stronger demand for lumber Estimated Expenditures ($ in billions) $25 $20 $15 $10 $5 $ Page 58 of 76

59 Canada Operations Key Strategies Expand Expand our industrial market general contractor capabilities Focus Focus on strong project management teams and efficient construction execution delivery systems Increase Increase our maintenance presence and improve turnaround market share Shell Scotford Refinery A&V / SRC Field Works Fort Saskatchewan, Alberta Strategic Aspiration Diavik Diamond Mines Power Plant II Las de Gras, Northwest Territories Grow KBR s s self-performing capabilities in construction, maintenance, and fabrication across all industrial markets in Canada Page 59 of 76

60 Building Group Business Segments Healthcare Manufacturing & Education Life Science Public Work / Industrial Hospitality / Entertainment Clients: Not-For-Profit Clients: Aerospace Clients: Higher Ed Clients: Research & Clients: Hotels For Profit Food & Beverage K - 12 Development Government Pharma/Chemical Labs Entities Current Market Environment Addressable Market Project planning activity picking up in some sectors Huge market with no shortage of competent competition Construction cost rollbacks make building now more attractive Proven teams and history of delivery still critical to clients Chosen 2009 Contractor of the Year in Southeast U.S. Estimated Expenditures ($ in billions) $250 $200 $150 $100 $50 $ Page 60 of 76

61 Building Group Key Strategies Continue to diversify into additional and growing markets sectors Geographic expansion utilizing KBR s profile, relationships and footprint Expand Expand and further develop our green / sustainable building experience Leverage KBR s s financial strength Growth Growth through additional repeat client relationships and further specialization Strategic Aspiration Sanford-Burnham Institute for Medical Research at Lake Nona Orlando, Florida Duke University School of Law Addition and Renovation Durham, North Carolina Be a growing, top 10 commercial construction service provider and a top 5 or better player in each of our specific market sectors Page 61 of 76

62 2010 KBR Analyst and Investor Day Financial Performance Sue Carter Chief Financial Officer June 23, 2010 Page 62 of 76

63 Indexed Performance Metrics Job Income Performance Index Job Income Backlog Revenue Revenue Backlog Corporate G&A (% of revenue) Effective Tax Rate Page 63 of 76

64 KBR s Improving Metrics Revenue Job Income Operating Income , Year CAGR 11.2% ,000 3 Year CAGR 20.1% 3 Year CAGR 1, % 1, $ in B illions $ in M illions $ in M illions Page 64 of 76

65 Strengthening Backlog Less impact from legacy projects Less impact from LogCAP project Job Income Backlog Performance Index Success from risk focus on new projects Pursuit of selective projects 115 Revenue Backlog Page 65 of 76

66 G&A Expense Revenue $ in Billions % % % 1.8% G&A $ in Millions *Note: Percentages represent the G&A as a percentage of revue for each year specified 0 G&A Flat Despite 38% Revenue Growth Page 66 of 76

67 Effective Tax Rate 100% 75% 73% 50% 25% 40% 37% 32% 0% Focused on Tax Reduction Opportunities Page 67 of 76

68 Creating Shareholder Value Cash Management Earnings Growth Liquidity Shareholder Value Working Capital Risk Management Balance and Discipline in All We Do Page 68 of 76

69 Earnings Growth Drivers Pursue Selective Projects Risk Management Thoughtful review of new proposals Appropriate risk-based pricing on fixed price and cost reimbursable work G&A Reductions Use of Lower Cost Alternatives Transaction centers High Value Engineering Centers Completion of Lower Margin Legacy Projects Page 69 of 76

70 Revolving Credit Facility Size Tenor Maturity Security Commitment Fee Margin Purpose Financial Covenants Distribution Cap $1.075 billion 3 years November 3, 2012 None 0.625% p.a. LIBOR + 3.0% p.a. or Base Rate + 2.0% p.a. Working capital and general corporate purposes Letters of credit/performance Bonds Net Worth $2.0 billion, adjusted by 50% of Net Income Debt/EBITDA 3.5x $400 million (dividends + share repurchases from 11/3/2009) Facility Provides Strong Liquidity to Match Strong Balance Sheet Page 70 of 76

71 Effective Cash Deployment Full Year 2010 Outlook Operating Requirements March 31, 2010 ($ millions) Cash and Cash Equivalents $908 Joint Venture Cash $264 Operating / Discretionary Cash $644 Dividends $32 M Capex with ERP $55 - $95 M Share Repurchase* Up to $220 M Pension Contribution $30 - $40 M Acquisitions $36 M -?? Effective and Thoughtful Cash Deployment in 2010 *Assumes 10 million shares repurchased pursuant to authorization at an average purchase share price of $22 per share Page 71 of 76

72 Share Repurchase Underway Share Repurchase Program initiated June 8, 2010 Repurchase Schedule Expectations: Approximately 20% of new share repurchase authorization executed in June 2010 Open market and Rule 10b5-1 Opportunistic purchases Average Share Count Walk: First Five months of million shares outstanding Full year 2010 Range of million shares outstanding Page 72 of 76

73 KBR Cumulative Cash Deployment Acquisitions ($ in millions) $619 Dividends (through December 2010) $89 Share Repurchases Separation through March 2010* Initiated program in June 2010** $228 $220 $1,156 Since the Separation, KBR Intends to Deploy Over $1B for Shareholder Value *Includes August 2008 share repurchase and on-going sweep-in program to maintain 160 million shares outstanding **Assumes 10 million shares repurchased pursuant to authorization at an average purchase share price of $22 per share Page 73 of 76

74 Current 2010 Guidance Current Guidance as of February 25, 2010 EPS LogCAP Revenue $ $1.80 Range 50% below 2009 levels Effective Tax Rate 35% Capital Expenditures $55M G&A $230 million KBR intends to update on 2Q10 Earnings Call Page 74 of 76

75 Shareholder Returns 25% Year-to-Date through % 15% 10% 5% 0% -5% -10% -15% -20% -25% KBR Peers* DJIA S&P500 KBR Peers* DJIA S&P500 *Peer Average includes Fluor, Jacobs Engineering, Foster Wheeler, McDermott, Chicago Bridge & Iron, Shaw Group, URS, and DynCorp Note: Year-to-Date 2010 (Closing price on 12/31/09 through closing price on 6/19/10); 2006 through 2009 ($17 per share IPO price through closing price 12/31/09) Page 75 of 76

76 KBR Today Organization Transformation Complete Best-in-Class Risk Awareness and Project Execution Delivering Improved Financial Management Selectively Growing Through Acquisitions The Growth Story at KBR Page 76 of 76