KBR

KBR had their 1Q15 earnings call yesterday. Some excerpts below relating to Magnolia LNG...

Stuart Bradie - President & CEO
…. And Magnolia, we’ve talked about this before it’s a medium sized new technology and we’re in a so-so position there sort of working to get up pricing together by Q3 and I guess the better news there is they were working towards finalizing the EPC terms and conditions later this month. And that’s very close to finalization and I guess the other piece that Magnolia have announced recently is they’ve signed I guess the first off take agreement for one of the trains which is really a key milestone in allowing these projects to go ahead…

Tahira Afzal - KeyBanc Capital Markets
I think a lot of my free cash flow questions have been taken care of. So I’ll go to the LNG side and just wanted to find out, if I look at Magnolia LNG and the sponsors it seems like one of your key assets over there’s been on the technology side given the technology they’re using could lift we’re out to get some thoughts I know those guys have also are proposing a project they’ve had LNG in Canada. Does that sound like an opportunity on the mix sized project there as well and some of the small to mid-sized LNG projects you’re seeing emerging in the U.S. potentially in more interesting for yourself from a risk perspective?

Stuart Bradie - President & CEO
We think that the mid-sized LNG opportunities are attractive. I think the capital requirements make them a little bit more attractive that we can get there the technology to work, it becomes we feel quite compelling from a return perspective. I think that the opportunity beyond this is clear because the capital intensity is lower if you can think about how you can actually replicate or motorize easy you can add a train after you can start offer 1 million tonne, 2 million tonne train and then add another and then add another and so that there’s ways to do that and there’s ways to get more and more efficient doing as well for the time so we think that this is a good opportunity, we think it could be very attractive to KBR’s future.

Tahira Afzal - KeyBanc Capital Markets
Got it okay and just in terms of some modeling new increase, I know typically E&C companies when they built in large projects, a building domain on a probability basis, so when I look at your flat backlog commentary, does that view magnolia and as a whole in terms of how you see it, does not exclude it, would love to get a little more color around that.

Stuart Bradie - President & CEO
What I said earlier, it’s a portfolio of opportunities and it doesn’t hinge on one particular opportunity.

Tahira Afzal - KeyBanc Capital Markets
So hypothetically speaking if you do in booking Magnolia, this mean could we apart from your UK opportunities let assume you get those two, is there is a scenario of backlog potentially being after you through it.

Stuart Bradie - President & CEO
I would rather stand behind the statement and the backlog is flat and you guys can do that, you can think that too and there are lot of moving parts out there and we are working hard in all of them but as of you know you can’t win everything and not everything go and so I think we would rather stand behind our statement.

Jerry Revich - Goldman Sachs
Stuart I’m wondering if you could just say more about the technology path on Magnolia LNG. You mentioned that it allows for a single train, but I think there’s also the operators talking about significantly lower liquefaction cost as well. Can you just flush-out here for us your offering there and whether the competitive landscape is more narrow on that specific type of technology, any sort of color that you’re comfortable sharing with us?

Stuart Bradie - President & CEO
Yes I mean I think I said before I mean the component parts of the technology have all been proven before just not in combination I guess. And so that the liquefaction pieces as no different I think that’s accruing piece that comes into this through the ammonia it’s driven by ammonia. And if anyone in the world can really understand that I would say the KBR is as good as anyone in the ammonia technology, so I think we’re kind of uniquely positioned to really understand the technology and understand what it can and cannot do. In terms of the sort of it will produce LNG like any other LNG facilities, so in terms of its offering to the marketplace there’ll be no difference there.

I think the attraction is that the operating cost and the capital cost are highly competitive and if we get that right, it will be a compelling piece in the market place and I think that’s been proven out by the recent sort of announcement around signing the uptake. I think the other piece in this a little, I think the commitment the technology they are looking at it is these are 2 million ton train around new typical 5 million ton trains and Magnolia its first phase is looking at 4 million tons of two trains. But there are opportunities to do more than that, it’s something that’s being explored and for that side in particular and then you can actually replicate that model elsewhere in the world.

Jerry Revich - Goldman Sachs
And where else do you think it could be the closest to being replicated?

Stuart Bradie - President & CEO
I think as mentioned that L&G limited to the owners of Magnolia, they have a got the beginnings of our project in Canada called bear head. So they are already looking as you can actually replicate this elsewhere and they sort of moved that project along a little bit and they certainly feel there is a market for this beyond Magnolia.

Jerry Revich - Goldman Sachs
Okay and then how would you characterize the competitive landscape on Pacific North West L&G, I guess on the Japanese press there is discussions about your competitors being really aggressive on price and I’m just wondering if you could just comment broadly on how the discussions they are going?

Stuart Bradie - President & CEO
I mean again that’s a very-very delicate stage of bidding cycle is probably inappropriate to comment and sorry but that’s the truth of it and I guess the statement that we would make is that we will only take on projects where we feel we can make a fair return for a shareholders and we will do in a way that we feel that we manage the risk and if we force them to situations like Charles that we announced that we feel uncomfortable and in KBR JV - [indiscernible]. So they didn’t proceed. I think that’s probably the statement to make but I don’t think we can see specifically how we feel about Pacific North West at the moment.