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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- --- SECURITIES EXCHANGE ACT OF 1934
For the transition period from
--------- to ----------
Commission file number 1-11953
Willbros Group, Inc.
(Exact name of registrant as specified in its charter)
Republic of Panama 98-0160660
(Jurisdiction of incorporation) (I.R.S. Employer Identification Number)
Dresdner Bank Building
50th Street, 8th Floor
P. O. Box 850048
Panama 5, Republic of Panama
Telephone No.: (50-7) 263-9282
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common stock, $.05 Par Value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--------- ---------
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
---------
As of March 18, 1999, 10,717,539 shares of the Registrant's
Common Stock were outstanding, and the aggregate market value of
the Common Stock held by non-affiliates was approximately
$61,625,849.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders
for the fiscal year ended December 31, 1998, are incorporated by
reference into Parts I and II of this Form 10-K.
Portions of the Registrant's Proxy Statement for the Annual
Meeting of Stockholders to be held May 6, 1999 are incorporated
by reference into Part III of this Form 10-K.
================================================================
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WILLBROS GROUP, INC.
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
TABLE OF CONTENTS
Page
PART I
Items 1
and 2. Business and Properties 4
Item 3. Legal Proceedings 24
Item 4. Submission of Matters to a Vote of
Security Holders 24
Item 4A. Executive Officers of the Registrant 24
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 27
Item 6. Selected Financial Data 27
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 27
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 27
Item 8. Financial Statements and Supplementary Data 27
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 27
PART III
Item 10. Directors and Executive Officers of the
Registrant 28
Item 11. Executive Compensation 28
Item 12. Security Ownership of Certain Beneficial
Owners and Management 28
Item 13. Certain Relationships and Related Transactions 28
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 28
Signatures 32
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Forward-Looking Statements
This Form 10-K includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical
facts, included or incorporated by reference in this Form 10-K
which address activities, events or developments which the
Company expects or anticipates will or may occur in the future,
including such things as future capital expenditures (including
the amount and nature thereof), oil and gas prices and demand,
expansion and other development trends of the oil and gas
industry, business strategy, expansion and growth of the
Company's business and operations, and other such matters are
forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of
its experience and its perception of historical trends, current
conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances.
However, whether actual results and developments will conform
with the Company's expectations and predictions is subject to a
number of risks and uncertainties which could cause actual
results to differ materially from the Company's expectations
including the timely award of one or more projects; exceeding
project cost and scheduled targets; failing to realize cost
recoveries from projects completed or in progress within a
reasonable period after completion of the relevant project;
identifying and acquiring suitable acquisition targets on
reasonable terms; the demand for energy diminishing; political
circumstances impeding the progress of work; general economic,
market or business conditions; changes in laws or regulations;
the risk factors listed from time to time in the Company's
reports filed with the Securities and Exchange Commission; and
other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements
made in this Form 10-K are qualified by these cautionary
statements and there can be no assurance that the actual results
or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected
consequences to or effects on the Company or its business or
operations. The Company assumes no obligation to update publicly
any such forward-looking statements, whether as a result of new
information, future events or otherwise.
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PART I
Items 1 and 2. Business and Properties
General
Willbros Group, Inc. ("the Company") is one of the leading
independent contractors serving the oil and gas industry,
providing construction, engineering and specialty services to
industry and government entities worldwide. The Company places
particular emphasis on projects in developing countries where the
Company believes its experience gives it a competitive advantage.
The Company's construction services include the building and
replacement of major pipelines and gathering systems, flow
stations, pump stations, gas compressor stations, gas processing
facilities, oil and gas production facilities, piers, dock
facilities and bridges. The Company's engineering services
include feasibility studies, conceptual and detailed design,
field services, material procurement and overall project
management. The Company's specialty services include dredging,
pipe coating, pipe double jointing, removal and installation of
flowlines, fabrication of piles and platforms, maintenance and
repair of pipelines, stations and other facilities, pipeline
rehabilitation, general oilfield services and transport of
oilfield equipment, rigs and vessels. The Company's backlog was
$286.5 million at December 31, 1998, compared to $135.8 million
at December 31, 1997.
The Company provides its services utilizing a large fleet of
Company-owned equipment comprised of, among other things, marine
vessels, barges, dredges, pipelaying equipment, heavy
construction equipment, transportation equipment and camp
equipment. At February 11, 1999, the Company had approximately
811 units of heavy construction equipment, 1,171 units of
transportation equipment and 5,399 units of support equipment.
The Company's equipment fleet is supported by warehouses of spare
parts and tools, which are located to maximize availability and
minimize cost.
The Company traces its roots to the construction business of
Williams Brothers Company, founded in 1908. Through successors
to that business, Willbros has completed many landmark projects
around the world, including the "Big Inch" and "Little Big Inch"
War Emergency Pipelines (1942-44), the Mid-America Pipeline
(1960), the TransNiger Pipeline (1962-64), the Trans-Ecuadorian
Pipeline (1970-72), the northernmost portion of the Trans-Alaskan
Pipeline System (1974-76), the All American Pipeline System (1984-
86), Colombia's Alto Magdalena Pipeline System (1989-90) and a
portion of the Pacific Gas Transmission System expansion (1992-
93).
Over the years, Willbros has been employed by more than 400
clients to carry out work in over 50 countries. Within the past
10 years, Willbros has worked in Africa, Asia, the Middle East,
North America and South America. Willbros' relatively steady
base of ongoing construction, engineering and specialty services
operations in Nigeria, Oman, the United States and Venezuela has
been enhanced by major construction and engineering projects in
Abu Dhabi, Cameroon, Colombia, Egypt, Gabon, Indonesia, Ivory
Coast, Kuwait, Morocco, Nigeria, Oman, Pakistan, the United
States and Venezuela.
Representative clients (or affiliates of clients) of the
Company include Royal Dutch Shell; Asamera (Overseas) Limited;
Apache Cote D'lvoire; Pecten Cameroon; Bilfinger & Berger;
Conoco; Chevron; Kuwait Oil Company; Abu Dhabi National Oil
Company; U.S. Army; U.S. Navy; Pacific Gas & Electric; Petroleum
Development Oman; Enron; El Paso Energy; Petroleos de Venezuela
S.A. ("PDVSA"); Occidental Petroleum; Duke Energy; Great Lakes
Gas Transmission Company; E.N.I.; The Williams Companies;
Nigerian National Petroleum Corporation ("NNPC"); and the Pak-
Arab Refinery, Ltd. ("PARCO"). Private sector clients such as
Royal Dutch Shell have historically accounted for the majority of
the Company's revenues. Government entities and agencies, such as
Kuwait Oil Company, U.S. Army, U.S. Navy, NNPC and PDVSA, have
accounted for the remainder. Ten clients were responsible for
78% of the Company's total revenues in 1998 (74% in 1997 and 82%
in 1996). Operating units of Northern Border Pipeline Company
and Conoco accounted for 22% and 18%, respectively, of the
Company's total revenues in 1998.
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The Company is incorporated in the Republic of Panama and
maintains its headquarters at Dresdner Bank Building, 50th
Street, 8th Floor, Panama 5, Republic of Panama; its telephone
number is (50-7) 263-9282. Administrative services for the
Company are provided by Willbros USA, Inc., which is located at
2431 East 61st Street, Suite 600, Tulsa, Oklahoma 74136-1267; its
telephone number is (918) 748-7000.
Current Market Conditions
In spite of the collapse in the growth of many
regions of the world followed by the economic downturns and
volatility in the global capital markets, all of which
contributed to the current low oil and gas price levels,
many significant projects are being undertaken, particularly in
developing countries or regions where energy infrastructure
spending has lagged. These include natural gas, crude oil and
petroleum products pipeline projects, LNG projects and ancillary
projects. Industry sources estimate that total worldwide pipeline
construction expenditures will be approximately $75.0 billion for
projects to be completed in 1999 and beyond.
The Company believes that certain of these projects will meet
its bidding criteria, and that the Company's worldwide pipeline
construction, engineering and specialty services experience place
it in an advantageous position to compete for such projects. The
Company currently has a number of significant bids outstanding
with respect to potential contract awards in Bolivia, Cameroon,
Chad, Egypt, Indonesia, Ivory Coast, Nigeria, Oman, Qatar,
Russia, the United States and Venezuela. The Company is
currently preparing bids with respect to potential contract
awards in Australia, Indonesia, Nigeria, Oman, Qatar, the United
States and Venezuela. Finally, the Company expects to prepare
and submit bids with respect to certain other potential
construction and engineering projects in Africa, Asia, the Middle
East, North America and South America during 1999.
Over the long term, the Company believes several factors
influencing the global energy market have led to and will
continue to result in increased activity across its types of
service. The factors leading to higher levels of energy
related capital expenditures include (a) rising global energy
demand resulting from economic growth in developing countries,
(b) the privatization of certain state-controlled oil and
gas companies, and (c) the need for larger oil and gas
transportation infrastructures in a number of developing
countries.
Business Strategy
The Company seeks to maximize stockholder value through its
growth strategy, which encompasses geographic expansion,
strategic alliances, acquisitions and quality improvement, while
maintaining a strong balance sheet. In pursuing this strategy,
the Company relies on (a) the competitive advantage gained from
its experience in completing logistically complex and technically
difficult projects in remote areas with difficult terrain and
harsh climatic conditions and (b) its experienced multinational
work force of approximately 2,280 employees, of whom more than
80% are citizens of the respective countries in which they work.
The core elements of the Company's business strategy are to
concentrate on projects and prospects in areas where it can be
most competitive and obtain the highest profit margins, pursue
engineer-procure-construct contracts with a renewed vigor
because they can often yield higher profit margins than
construction-only contracts, focus on performance and project
execution in order to maximize the profit potential on each
contract awarded, maintain its commitment to safety and
quality, and develop alliances with companies who will enhance
its capability and competitiveness in markets throughout the
world.
The Company continues to invest in its employees to ensure that
they have the training and tools needed to be successful in
today's challenging environment. For example, during the present
business cycle downturn, the Company is making a significant
effort to convert all of its worldwide information
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systems to a new, fully integrated enterprise system that will
help standardize the way operations are managed in different
areas and make it easier for people to move between locations.
The Company's short-term strategy during this cycle is to
reduce operating and overhead costs to a level that is justified
by expected revenues, evaluate and consider closing operations or
offices in work countries where expected returns have not
materialized, and identify and sell surplus equipment. To
prepare for the future, a new President and Chief Operating
Officer was hired. The Company's long-term strategies, summarized
below, remain unchanged.
Geographic Expansion. The Company's objective is to maintain
and enhance its presence in regions where it has developed a
strong base of operations, such as Africa, Asia, the Middle East,
North America and South America, by capitalizing on its local
experience, established contacts with local customers and
suppliers and familiarity with local working conditions. In
addition, the Company seeks to establish a presence in other
strategically important areas, such as Bolivia, Cameroon, Chad
and the Commonwealth of Independent States ("C.I.S."), as well as
certain other selected areas in South America and Asia. In
pursuing this strategy, the Company seeks to identify a limited
number of long-term niche markets in which the Company can
outperform the competition and establish an advantageous
position.
Strategic Alliances. The Company seeks to establish strategic
alliances with companies whose resources, skills and strategies
are complementary to and are likely to enhance the Company's
business opportunities, including the formation of joint ventures
and consortia to achieve competitive advantage and share risks.
Such alliances have already been established in Argentina,
Australia, Cameroon, Chad, Indonesia, Malaysia, Russia, Thailand,
the United States and Venezuela. As a related strategy, the
Company may decide to make an equity investment in a project in
order to enhance its competitive position and/or maximize project
returns. In 1998, this strategy led to the Company's Venezuelan
subsidiary taking a 10% equity stake in a 16-year contract to
operate, maintain and refurbish water injection facilities in
Lake Maracaibo, Venezuela.
Acquisitions. The Company seeks to identify, evaluate and
acquire companies that offer growth opportunities and the ability
to complement the Company's resources and capabilities.
Consistent with this strategy, in 1994 the Company acquired
Construcciones Acuaticas Mundiales, S.A. ("CAMSA"). CAMSA
operates in Venezuela and, in addition to performing onshore
construction and specialty services, possesses expertise in
marine construction and the fabrication and installation of
concrete piles and platforms for offshore projects. Further to
this strategy, in 1997 the Company entered into a new credit
agreement, a substantial portion of which can be used for
acquisitions.
Quality Improvements. The Company's quality program enhances
the Company's ability to meet the specific requirements of its
customers through continuous improvement of all its business
processes, while at the same time improving competitiveness and
profitability. ISO 9000, an internationally recognized
verification system for quality management, has in recent years
been made a criterion for prequalification of contractors by
certain clients and potential clients, and this trend is expected
to continue. The certification process involves a rigorous
review and audit of the Company's management processes and
quality control procedures. As of December 31, 1998, seven of
the Company's subsidiaries had achieved ISO 9000 certification.
Conservative Financial Management. The Company emphasizes the
maintenance of a conservative balance sheet in order to finance
the development and growth of its business. The Company also
seeks to obtain contracts that are likely to result in recurring
revenues in order to partially mitigate the cyclical nature of
its construction and engineering businesses. For example, the
Company generally seeks to obtain specialty services contracts of
more than one year in duration. Additionally, the Company acts
to minimize its exposure to currency fluctuations through the use
of U.S. dollar-denominated contracts whenever possible, by
limiting payments in local currency to approximately the amount
of local currency expenses, and otherwise by engaging in hedging
activities such as purchasing foreign currency forward contracts.
The Company had no forward contracts at December 31, 1998.
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Willbros Background
The Company is the successor to the pipeline construction
business of Williams Brothers Company, which was started in 1908
by Miller and David Williams. In 1949, the business was
reconstituted and acquired by the next generation of the Williams
family. The resulting enterprise eventually became The Williams
Companies, Inc., a major U.S. energy, communications and
interstate natural gas and petroleum products transportation
company ("Williams").
In 1975, Williams elected to discontinue its pipeline
construction activities and, in December 1975, sold substantially
all of the non-U.S. assets and entities comprising its pipeline
construction division to a newly formed Panama corporation
(eventually renamed "Willbros Group, Inc.") owned by employees of
the division. In 1979, Willbros Group, Inc. retired its debt
incurred in the acquisition by selling a 60% equity stake to
Heerema Holding Construction, Inc. ("Heerema"). In 1986, Heerema
acquired the balance of Willbros Group, Inc., which then operated
as a wholly owned subsidiary of Heerema until April 1992.
In April 1992, Heerema sold Willbros Group, Inc. to a
corporation formed December 31, 1991, in the Republic of Panama
by members of the Company's management, certain other investors,
and Heerema. Subsequently, the original Willbros Group, Inc. was
dissolved into the acquiring corporation which was renamed
"Willbros Group, Inc." In August 1996, the Company completed an
initial public offering of Common Stock in which Heerema sold all
of its shares of Common Stock; and in October 1997, the Company
completed a secondary offering in which such other investors sold
substantially all their shares of Common Stock.
The term "Willbros," as used in this Form 10-K, includes the
Company, the original Willbros Group, Inc. and their predecessors
in the pipeline construction business, as described above. All
references in this Form 10-K to the "Company" refer to Willbros
Group, Inc. ("WGI") and its consolidated subsidiaries.
Willbros Milestones
The following are selected milestones which Willbros has
achieved:
1915 Began pipeline work in the United States.
1939 Began international pipeline work in Venezuela.
1942-44 Served as principal contractor on the "Big Inch" and
"Little Big Inch" War Emergency Pipelines in the United
States which delivered Gulf Coast crude oil to the Eastern
Seaboard.
1947-48 Built the 370-mile (600-kilometer) Camiri to Sucre and
Cochabamba crude oil pipeline in Bolivia.
1951 Completed the 400-mile (645-kilometer) western segment of
the Trans-Arabian Pipeline System in Jordan, Syria and
Lebanon.
1954-55 Built Alaska's first major pipeline system, consisting
of 625 miles (1,000 kilometers) of petroleum products
pipeline, housing, communications, two tank farms, five
pump stations and marine dock and loading facilities.
1956-57 Led a joint venture which constructed the 335-mile
(535-kilometer) southern section of the Trans-Iranian
Pipeline, a products pipeline system extending from Abadan
to Tehran.
1958 Constructed pipelines and related facilities for the
world's largest oil export terminal at Kharg Island, Iran.
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1960 Built the first major liquefied petroleum gas pipeline
system, the 2,175-mile (3,480-kilometer) Mid-America
Pipeline in the United States, including six delivery
terminals, two operating terminals, 13 pump stations,
communications and cavern storage.
1962 Began operations in Nigeria with the commencement of
construction of the TransNiger Pipeline, a 170-mile (275-
kilometer) crude oil pipeline.
1964-65 Built the 390-mile (625-kilometer) Santa Cruz to Sica
Sica crude oil pipeline in Bolivia. The highest altitude
reached by this line is 14,760 feet (4,500 meters) above
sea level, which management believes is higher than the
altitude of any other pipeline in the world.
1965 Began operations in Oman with the commencement of
construction of the 175-mile (280-kilometer) Fahud to
Muscat crude oil pipeline system.
1967-68 Built the 190-mile (310-kilometer) Orito to Tumaco
crude oil pipeline in Colombia, one of five Willbros
crossings of the Andes Mountains, a project notable for the
use of helicopters in high altitude construction.
1969 Completed a gas gathering system and 105 miles
(170 kilometers) of 42-inch trunkline for the Iranian Gas
Trunkline Project (IGAT) in Iran to supply gas to the USSR.
1970-72 Built the Trans-Ecuadorian Pipeline, consisting of 315 miles
(505 kilometers) of 20- and 26-inch pipeline, seven
pump stations, four pressure reducing stations and six
storage tanks.
1974-76 Led a joint venture which built the northernmost 225 miles
(365 kilometers) of the Trans-Alaskan Pipeline System.
1974-76 Led a joint venture, which constructed 290 miles
(465 kilometers) of pipeline and two pump stations in the
inaccessible western Amazon basin of Peru.
1974-79 Designed and engineered the 500-mile (795-kilometer)
Sarakhs-Neka gas transmission line in northeastern Iran.
1976-79 Acted as technical leader of a consortium which
designed and supplied six modularized gas compressor
stations totaling 726,000 horsepower for the 56-inch
Urengoy to Chelyabinsk gas pipeline system in western
Siberia.
1982-83 Built the Cortez carbon dioxide pipeline system in the
southwestern United States, consisting of 505 miles
(815 kilometers) of 30-inch pipe.
1984-86 Constructed, through a joint venture, the All American
Pipeline System, a 1,240-mile (1,995-kilometer), 30-inch
heated pipeline, including 23 pump stations, in the
United States.
1984-95 Developed and furnished a rapid deployment fuel pipeline
distribution and storage system for the U.S. Army which
was used extensively and successfully in Saudi Arabia
during Operation Desert Shield/Desert Storm in 1990/
1991 and in Somalia during 1993.
1985-86 Built a 185-mile (300-kilometer) 24-inch crude oil
pipeline from Ayacucho to Covenas in Colombia.
1987 Rebuilt 25 miles (40 kilometers) of the Trans-Ecuadorian
crude oil pipeline within six months after major portions
were destroyed by an earthquake.
1988-92 Performed the project management, engineering, procurement
and field support services to expand the Great Lakes Gas
Transmission System in the northern United States. The
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expansion involved modifications to 13 compressor stations
and the addition of 660 miles (1,060 kilometers) of 36-inch
pipeline in 50 separate loops.
1989-90 Built the Alto Magdalena Pipeline System in Colombia,
consisting of 250 miles (400 kilometers) of 20-inch crude
oil pipeline, one pump station and a tank farm.
1989-92 Provided pipeline engineering and field support
services for the Kern River Gas Transmission System, a
36-inch pipeline project extending over 685 miles
(1,100 kilometers) of desert and mountains from Wyoming to
California in the United States.
1992-93 Rebuilt oil field gathering systems in Kuwait as part
of the post-war reconstruction effort.
1992-93 Built 150 miles (240 kilometers) of 42-inch pipeline
in Oregon to expand the Pacific Gas Transmission System.
1992-94 Resumed activities in the C.I.S. Selected to develop
export pipeline system for Caspian Pipeline Consortium from
Tengiz field in Kazakstan to Black Sea oil terminal at
Novorossiysk, Russia, and established a representative
office and joint stock company in Russia.
1994 Re-entered Venezuela oil service market through the
acquisition of CAMSA.
1995 Entered into an agreement with a Japanese trading company
providing for the joint development of projects in selected
markets in Southeast Asia and established an office in
Jakarta, Indonesia, to pursue major projects in the region.
1995-97 Executed two contracts in Pakistan for construction,
material procurement and engineering of the MFM Pipeline
Extension Project, which consists of 225 miles
(365) kilometers) of 18- and 16-inch multi-product pipeline
and related facilities.
1996 Listed shares in an initial public offering of Common Stock
on the NYSE under the symbol "WG."
1996-97 Achieved ISO Certification for seven operating companies.
1996-98 Performed an EPC contract with Asamera (Overseas) Limited
to design and construct pipelines, flowlines and
related facilities for the Corridor Block Gas Project
located in southern Sumatra, Indonesia.
1997-98 Carried out a contract for the construction of 120 miles
(200 kilometers) each of 36- and 20-inch pipelines in
the Zuata Region of the Orinoco Belt in Venezuela.
1997-98 Executed a contract with an MW Kellogg joint venture
for the construction of a 35-mile (55-kilometer) gas
pipeline for a LNG plant in Kalimantan, Indonesia,
furthering the Company's efforts to establish Indonesia
as an ongoing work country.
1997-98 Completed an EPC contract for El Paso Natural Gas
Company and Gasoductos de Chihuahua, a joint venture
between El Paso and PEMEX, to construct a 45-mile (75-
kilometer) gas pipeline system in Texas and Mexico.
1998 Made a 10% equity investment in a consortium which was
awarded a 16-year contract to build, operate and transfer
water injection facilities on Lake Maracaibo in Venezuela.
1998 Acquired a multi-purpose marine construction barge
to pursue shallow water pipelay, utility and maintenance
opportunities in offshore West Africa.
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Services Provided
The Company operates in a single operating segment providing
contract construction, engineering and specialty services to the oil
and gas industry. The following table reflects the Company's
contract revenues by type of service for 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1998 1997 1996
---- ---- ----
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Construction services $185,995 66% $118,277 47% $ 41,090 21%
Engineering services 63,258 22 75,674 30 58,841 30
Specialty services 32,365 12 57,926 23 97,757 49
-------- --- -------- --- -------- ---
Total $281,618 100% $251,877 100% $197,688 100%
======== === ======== === ======== ===
</TABLE>
Construction Services
The Company is one of the most experienced contractors serving
the oil and gas industry. The Company's construction
capabilities include the expertise to construct and replace large
diameter cross-country pipelines; to construct oil and gas
production facilities, pump stations, flow stations, gas
compressor stations, gas processing facilities and other related
facilities; and to construct piers, docks and bridges.
Pipeline Construction. World demand for pipelines results
from the need to move millions of barrels of crude oil and
petroleum products and billions of cubic feet of natural gas to
refiners, processors and consumers each day. Pipeline
construction is capital intensive, and the Company owns, operates
and maintains a fleet of specialized equipment necessary for it
to engage in the pipeline construction business. The Company
focuses on pipeline construction activity in remote areas and
harsh climates where it believes its experience gives it a
competitive advantage. Willbros believes that it has constructed
more miles of pipeline than any other private sector company.
The construction of a cross-country pipeline involves a number
of sequential operations along the designated pipeline right-of-
way. These operations are virtually the same for all overland
pipelines, but personnel and equipment may vary widely depending
upon such factors as the time required for completion, general
climatic conditions, seasonal weather patterns, the number of
road crossings, the number and size of river crossings, terrain
considerations, extent of rock formations, density of heavy
timber and amount of swamp. Construction often involves separate
crews to perform the following different functions: clear the
right-of-way; grade the right-of-way; excavate a trench in which
to bury the pipe; haul pipe to intermediate stockpiles from which
stringing trucks carry pipe and place individual lengths (joints)
of pipe alongside the ditch; bend pipe joints to conform to
changes of direction and elevation; clean pipe ends and line up
the succeeding joint; perform various welding operations; non-
destructively inspect welds; clean pipe and apply anti-corrosion
coatings; lower pipe into the ditch; backfill the ditch; bore and
install highway and railroad crossings; drill, excavate or dredge
and install pipeline river crossings; tie in all crossings to the
pipeline; install mainline valve stations; conduct pressure
testing; install cathodic protection system; and perform final
clean up.
Special equipment and techniques are required to construct
pipelines across wetlands. From a launching station on dry land,
a section of several joints of pipe, which have been welded
together, may be pushed into a flooded ditch. By securing
floaters to the pipe, it is possible to float the pipe. The next
section is then welded to the end of the previous section, after
which it is pushed into the flooded ditch. The same method can
be used from a properly secured and anchored barge. Another
specialized swamp pipe laying technique is to lay the pipe from a
lay barge which moves along the right-of-way, laying one joint at
a time; each joint is aligned and welded, and the weld non-
destructively inspected and coated
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before being lowered in. The Company uses swamp pipelaying
methods extensively in Nigeria, where most of its construction
operations are carried out in the Niger River delta. In addition
to primary equipment such as laybarges, dredges and swamp
backhoes, the Company has a substantial investment in support
vessels, including tugboats, barges, supply boats, and
houseboats, which are required in order to maintain a capability
in swamp pipeline construction.
Station Construction. Oil and gas companies require various
facilities in the course of producing, processing, storing and
moving oil and gas. The Company is experienced in and capable of
constructing facilities such as pump stations, flow stations, gas
processing facilities, gas compressor stations and metering
stations. The Company is capable of building such facilities
onshore, offshore or in swamp locations. The construction of
station facilities, while not nearly as capital intensive as
pipeline construction, is generally characterized by complex
logistics and scheduling, particularly on projects in locations
where seasonal weather patterns limit construction options, and
in countries where the importation process is difficult.
Willbros' capabilities have been enhanced by its experience in
dealing with such challenges in numerous countries around the
world.
Marine Construction. The Company constructs and installs
fixed drilling and production platforms in Venezuela, primarily
in Lake Maracaibo. Because of the extremely corrosive
conditions, concrete, rather than steel, piling is driven deep
into the lakebed to support such platforms. The Company is also
capable of building bridges, docks, jetties and mooring or
breasting dolphins. The Company's marine fleet includes pile
driving barges, derrick barges and other vessels, which support
marine construction operations. During 1998, the Company
purchased a multi-purpose marine construction barge to pursue
shallow water pipelay, utilities and maintenance opportunities in
offshore West Africa.
Engineering Services
The Company provides engineering, project management and
material procurement services to the oil and gas industry and
government agencies. The Company specializes in providing
engineering services to assist clients in constructing or
expanding pipeline systems, compressor stations, pump stations,
fuel storage facilities and field gathering and production
facilities. Through experience, the Company has developed
expertise in addressing the unique engineering issues involved
with pipeline systems and associated facilities to be installed
where climatic conditions are extreme, where areas of
environmental sensitivity must be crossed, where fluids which
present extreme health hazards must be transported, and where
fluids which present technical challenges regarding material
selection are transported.
To complement its engineering services, the Company also
provides a full range of field services, including surveying,
right-of-way acquisition, material receiving and control,
construction inspection and facilities startup assistance. Such
services are furnished to a number of oil and gas industry and
government clients on a stand-alone basis; and, in addition, are
provided as part of engineering, procurement and construction
contracts undertaken by the Company.
Climatic Constraints. In the design of pipelines and
associated facilities to be installed in harsh environments,
special provisions for metallurgy of materials and foundation
design must be addressed. The Company is experienced in
designing pipelines for arctic conditions, where permafrost and
extremely low temperatures are prevalent, and for desert
conditions, mountainous terrain and swamps.
Environmental Impact of River Crossings. The Company has
considerable capability in designing pipeline crossings of rivers
and streams in such a way as to minimize environmental impact.
The Company possesses expertise to determine the optimal crossing
techniques (e.g., open cut, directionally drilled or overhead)
and to develop site-specific construction methods to minimize
bank erosion, sedimentation and other environmental impacts.
Seismic Design and Stress Analysis. Company engineers are
experienced in seismic design of pipeline crossings of active
faults and areas where liquefaction or slope instability may
occur due to
11
<PAGE>
seismic events. Company engineers also carry out specialized
stress analyses of piping systems that are subjected to expansion
and contraction due to temperature changes, as well as loads from
equipment and other sources.
Hazardous Materials. Special care must be taken in the design
of pipeline systems transporting sour gas. Sour gas not only
presents challenges regarding personnel safety (hydrogen sulfide
leaks can be extremely hazardous), but also requires that
material be specified to withstand highly corrosive conditions.
Hydraulics Analysis for Fluid Flow in Piping Systems. The
Company employs engineers with the specialized knowledge
necessary to address properly the effects of both steady state
and transient flow conditions for a wide variety of fluids
transported by pipelines (natural gas, crude oil, refined
petroleum products, natural gas liquids, carbon dioxide and
water). This expertise is important in optimizing the capital
costs of pipeline projects where pipe material costs typically
represent a significant portion of total project capital costs.
Natural Gas Transmission Systems. The expansion of the
natural gas transportation network in the United States in recent
years has been a major contributor to the engineering business of
the Company. The Company believes it has established a strong
position as a leading supplier of engineering services to natural
gas pipeline transmission companies in the United States. Since
1988, Willbros has provided, or is providing, engineering
services for seven major natural gas pipeline projects in the
United States, totaling more than 3,300 miles (5,400 kilometers)
of large diameter pipe for new systems and expansions of existing
systems. During this same period, Willbros was also the
engineering contractor for 15 compressor stations (or additions
to existing stations) for six clients.
Liquids Pipelines and Storage Facility Design. Willbros has
engineered a number of crude oil and refined petroleum products
systems throughout the world, and has become recognized for its
expertise in the engineering of systems for the storage and
transportation of petroleum products and crude oil. In recent
years, the Company has been responsible for the engineering of a
major expansion of a products pipeline system in the United
States, involving 395 miles (640 kilometers) of pipeline in New
Mexico and Texas. Currently, the Company is providing
engineering and field services for a major expansion of a crude
oil system in Wisconsin and Illinois, involving over 450 miles
(725 kilometers) of large diameter pipeline to serve the upper
Midwest refineries with Canadian crude oil.
U.S. Government Services. Since 1981, Willbros has
established its position with U.S. government agencies as a
leading engineering contractor for jet fuel storage and aircraft
fueling facilities, having performed the engineering for major
projects at seven U.S. military bases including three air bases
outside the U.S. The award of these projects was based on
contractor experience and personnel qualifications.
Design of Peripheral Systems. The Company's expertise extends
to the engineering of a wide range of project peripherals,
including various types of support buildings and utility systems,
power generation and electrical transmission, communications
systems, fire protection, water and sewage treatment, water
transmission, roads and railroad sidings.
Material Procurement. Because material procurement plays such
a critical part in the success of any project, the Company
maintains an experienced staff to carry out material procurement
activities. Material procurement services are provided to
clients as a complement to the engineering services performed for
a project. On engineering, procurement and construction
contracts undertaken by the Company, material procurement is
especially critical to the timely completion of construction.
The Company maintains a computer-based material procurement,
tracking and control system, which utilizes software enhanced to
meet the Company's specific requirements.
12
<PAGE>
Specialty Services
The Company provides a wide range of support and ancillary
services related to the construction, operation, repair and
rehabilitation of pipelines. Frequently, such services require
the utilization of specialized equipment, which is costly and
requires operating expertise. Due to the initial equipment cost
and operating expertise required, many companies contract for the
use of such specialized equipment and experienced personnel. The
Company owns and operates a variety of specialized equipment that
is used to support construction projects and to provide a wide
range of oilfield services. The following is a description of
the primary types of specialty services.
Dredging. The Company conducts dredging operations on its own
projects and as a subcontractor for other companies. Dredging
equipment is required to pump sand to establish a land location
in a swamp and to excavate trenches for pipelines in swamps or
offshore locations and for river crossings. Dredging equipment
is also used to maintain required depth of navigation channels
for barges and other watercraft. This maintenance dredging is
often performed on annual or multi-year contracts. The Company
owns a fleet of dredges, including cutter suction dredges and
grab dredges, which are routinely used in Nigeria and can be
readily deployed to other projects in the region.
Pipe Coating. The Company owns and operates coating
equipment, which applies a variety of protective anti-corrosion
coatings to the external surface of line pipe. The external
coating is required to protect buried pipe in order to mitigate
external corrosion.
Concrete Weight Coating. Pipelines installed in wetlands or
marine environments must be heavy enough to offset the buoyancy
forces on the buried pipeline to keep the pipeline from floating
out of the ditch. The most effective method of achieving the
required negative buoyancy is concrete coating applied over the
anti-corrosion coating to a calculated thickness. The Company
owns and operates a facility in Nigeria to apply concrete weight
coating to line pipe.
Pipe Double Jointing. Large diameter pipe for onshore
pipeline projects is normally manufactured in 40-foot (12-meter)
nominal lengths (joints) to facilitate ocean transportation. On
long distance, large diameter pipeline projects, it is usually
economical to weld two joints into an 80-foot (24-meter) double
joint at a location or locations along the pipeline route. This
technique reduces the amount of field welding by 50%, and,
because welding is often the critical operation, it may
accelerate construction of the pipeline. The double joint welds
are made with a semi-automatic submerged arc welding process,
which produces high quality, consistent welds at lower costs than
field welding. The Company owns two transportable self-contained
double joint plants, which can handle 24- to 48-inch diameter
pipe and are used on both domestic and international projects.
Piling. The Company's subsidiary in Venezuela specializes in
the fabrication and installation of 36-inch concrete piles up to
220 feet (67 meters) in length. These piles are used to
construct marine facilities such as drilling platforms,
production platforms, bridges, docks, jetties and mooring or
breasting dolphins. The Company also owns barges and pile
driving equipment to install piles in Venezuela and Nigeria.
Marine Heavy Lift Services. The primary equipment used for
oil and gas production facilities is usually manufactured on
skids at the vendor's shop and transported to the production site
by ocean-going water craft. The Company owns a variety of heavy
lift barges and tugs to transport such equipment from the
receiving country port to the production location and to install
the equipment on the platforms. Other services include marine
salvage and dry-dock facilities for inland water barges.
Transport of Dry and Liquid Cargo. Exploration and production
operations in marine environments require logistical support
services to transport a variety of liquid and dry cargo to the
work sites. The Company owns and operates a diversified fleet of
marine equipment to provide transportation services to support
these operations in Nigeria and Venezuela.
13
<PAGE>
Rig Moves. Derricks used for drilling oil and gas wells and
for well work-overs require heavy transportation equipment to
move such equipment and tanks and storage vessels between well
locations. The Company owns a fleet of heavy trucks and trailers
and provides transportation services to move rigs for clients in
Oman and Venezuela.
Maintenance and Repair Services. The Company provides a wide
range of other services including mechanical, electrical,
instrumentation, civil works, road maintenance and provision of
camp services for operating personnel associated with operation
and maintenance of oil and gas gathering systems and production
equipment.
Geographic Regions
The Company currently operates in the following geographic
regions: Africa, Asia, the Middle East, North America and South
America. The following table reflects the Company's contract
revenues by geographic region for 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1998 1997 1996
---- ---- ----
Amount Percent Amount Percent Amount Percent
-------- ------- -------- ------- -------- -------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Africa $ 64,180 23% $ 75,982 30% $ 87,283 44%
Asia 32,481 12 42,098 17 35,077 17
Middle East 17,806 6 22,846 9 3,513 12
North America 91,801 33 79,121 31 32,918 17
South America 75,350 26 31,830 13 18,897 10
-------- --- -------- --- -------- ---
Total $281,618 100% $251,877 100% $197,688 100%
======== === ======== === ======== ===
</TABLE>
See Note 14 to the Consolidated Financial Statements on page 41
of the Company's 1998 Annual Report to Stockholders (which is
incorporated by reference herein) for additional information
about the Company's operations in its work countries.
Africa
Africa has been and will continue to be an important strategic
market for the Company. The Company believes that there will be
opportunities to expand its business in Africa, particularly
through the development of natural gas projects. There are
large, potentially exploitable reserves of natural gas in West
Africa, extending from the Ivory Coast to Angola. Depending upon
the world market for natural gas and the availability of
financing, the amount of potential new work could be substantial.
The Company intends to maintain its presence in the region and
seeks to increase its share of available work. Willbros is
currently monitoring or bidding major work prospects in Cameroon,
Chad, Egypt, Ghana, Ivory Coast, Nigeria and Tanzania.
Over the past 50 years, Willbros has completed major projects
in a number of African countries including Algeria, Egypt, Gabon,
Libya, Morocco and Nigeria. The Company has management staff
resident in Africa, assisted by engineers, managers and craftsmen
with extensive African experience, capable of providing
construction expertise, repair and maintenance services, dredging
operations, pipe coating and engineering support. Strong local
relationships have enabled Willbros to satisfy the varied needs
of its clientele in the region.
Willbros has had a continuous presence in Nigeria since 1962.
The Company's activities in Nigeria are directed from a fully
staffed operational base near Port Harcourt. This 60-acre
compound includes office and living facilities, equipment and
vehicle repair shops, a marine jetty and warehouses for both
Company and client materials and spare parts. The Company has
diversified its range of services by
14
<PAGE>
adding dredging and pipe coating expertise. Having diverse yet
complementary capabilities has often given the Company a
competitive advantage on projects that contain several distinct
work elements within the project's scope of work. For example,
the Company believes that it is currently the only contractor
operating in the Nigerian oil and gas sector capable, on its own,
of executing a pipeline construction project, which requires yard
coating of line pipe, installation of major water crossings and
both swamp and cross-country segments of pipeline. During 1998,
the Company purchased a multi-purpose marine construction barge
to further diversify its range of services by pursuing shallow
water pipelay, utility and maintenance opportunities in
offshore West Africa. In late 1998, the Company successfully
completed an offshore project in Cameroon for the
installation of decks and other production facilities on two
offshore platforms and the construction of approximately five
miles (7.5 kilometers) of 8-inch and 10-inch pipelines. The
Company's current activities in Nigeria include the construction
of 20 miles (30 kilometers) of 36-inch gas pipeline, including a
river crossing, for the Bonny LNG project for Saipem and
contracts with Shell to provide dredging services and swamp
flowline maintenance services. The Company was awarded two
projects by Shell in late 1998: (a) an engineer, procure
and construct contract for the Nembe Creek gas gathering
pipeline system, and (b) a contract to construct four concrete
barge-mounted gas compressor facilities. These projects will
be carried out between early 1999 and late 2000.
The Company's backlog in Africa was $220.7 million at December 31,
1998, compared to $21.7 million at December 31, 1997.
Asia
Despite the present economic difficulties in certain countries
in the region, the Company believes that these countries will
recover and Asia will continue to develop and distribute more
energy resources to fuel ongoing modernization programs. The
relative abundance of undeveloped natural gas resources, along
with environmental concerns, favor the use of natural gas for
power generation and industrial and residential usage in the region.
To capitalize on these trends, in March 1995, the Company
established an office in Jakarta, Indonesia, to pursue potential
major projects in Asia. In October 1995, the Company entered
into a cooperation agreement with a major Japanese trading
company providing for the joint development of projects in
Indonesia, Malaysia and Thailand. In November 1996, the Company
was awarded a $33 million contract by Asamera (Overseas) Limited
to construct pipelines, flowlines and related facilities for the
Corridor Block Gas Project in southern Sumatra, Indonesia. In
June 1997, the Company was awarded a $22 million contract by an
MW Kellogg joint venture for the construction of a gas pipeline
for an LNG plant in Kalimantan, Indonesia. The Company is
currently monitoring or bidding work prospects in Australia,
India, Indonesia, Malaysia, Pakistan and Papua New Guinea.
The Company recently completed contracts for Pak-Arab Refinery,
Ltd. relating to the MFM Pipeline Extension Project in Pakistan.
The contracts included the supply of project materials, the
engineering and construction of 225 miles (365 kilometers) of 18-
and 16-inch petroleum products pipeline, the expansion of an
existing terminal (including 267,000 barrels of storage
capacity), the addition of a new terminal and pump station
(including 270,000 barrels of storage), the addition of a storage
terminal (including 443,000 barrels of storage) and design of a
future pump station. A small team is currently managing closeout
activities and tracking new work prospects from the Company's
project office in Lahore, Pakistan.
Willbros' activities in the Commonwealth of Independent
States ("C.I.S.") date back to 1976. The C.I.S. continues
to be an area of interest to the Company because
it contains vast reserves of oil and gas and many of the
Company's clients are major oil and gas companies who are
candidates to participate in the development of energy resources
in the C.I.S. To compete in the Russian market, the Company has
an Accredited Representative Office in Moscow, as well as a
Russian joint stock company licensed to perform a broad range of
engineering and construction services.
The Company's backlog in Asia was $3.2 million at December 31,
1998, compared to $30.2 million at December 31, 1997.
15
<PAGE>
Middle East
The Company believes that increased exploration and production
activity in the Middle East will continue to be the primary
factor influencing the construction of new energy transportation
systems. The majority of future transportation projects in the
region are expected to be centered around natural gas due to
increased regional demand, governments' realization of gas as an
important asset and an underdeveloped gas transportation
infrastructure throughout the region. The Company is
aggressively pursuing business opportunities throughout the
Middle East and is currently bidding work or monitoring prospects
in Abu Dhabi, Kuwait, Oman, Qatar, Saudi Arabia and Yemen.
Willbros operations in the Middle East date back to 1948. It
has worked in most of the countries in the region, with
particularly heavy involvement in Iran, Kuwait, Oman and Saudi
Arabia. In Iran, Willbros designed or constructed a substantial
portion of the pipelines and related facilities that exist today.
During 1992 and 1993, following the Gulf War, the Company carried
out a significant program of gathering line replacement in Kuwait
to help Kuwait Oil Company restore its production capacity.
Currently, the Company has ongoing operations in Oman, where
Willbros has been active for more than 30 years. The Company
maintains a fully staffed facility in Oman with equipment repair
facilities and spare parts on site and offers construction
expertise, repair and maintenance services, engineering support,
oil field transport services, materials procurement and a variety
of related services to its clients. Current operations in Oman
include a general oilfield services contract for Occidental of
Oman and an ad hoc services contract for Petroleum Development
Oman ("PDO"). Work carried out in Oman during 1998 includes a
crane supply and operation program, pipeline construction,
pipeline maintenance, mechanical services and flowline work for
Occidental of Oman and PDO.
Although the Company reported no backlog in the Middle East as
of December 31, 1998, compared to $6.9 million at December 31,
1997, the Company has active call out service contracts in place
under which it performs work for such clients as Occidental and
PDO.
North America
Willbros has provided services to the U.S. oil and gas industry
for more than 80 years. The Company believes that the United
States will continue to be an important market for its services.
Recent deregulation of the electric power and natural gas
pipeline industries in the United States has led to the
consolidation and reconfiguration of existing pipeline
infrastructure and the establishment of new energy transport
systems, which the Company expects will result in continued
demand for its services. The demand for natural gas for
industrial and power usage in the Upper Midwest and Northeastern
United States will also fuel the requirement to build new natural
gas transportation infrastructure in the region. Supply to
satisfy such market demand for natural gas will come from
existing and new production in Western Canada, the Gulf of Mexico
and the Canadian Atlantic offshore region. Environmental
concerns will likely continue to require careful, thorough and
specialized professional engineering and planning for all new
facilities within the oil and gas sector. Furthermore, the
demand for replacement and rehabilitation of pipelines is
expected to increase as pipeline systems in the United States
approach the end of their design lives and population trends
influence overall energy needs.
Willbros is recognized as an industry leader in the United
States for providing state-of-the-art engineering and
construction services. The Company maintains a staff of
experienced management, construction, engineering and support
personnel in the United States. Among Willbros' significant
achievements in the United States are (a) the construction of the
two northernmost segments of the Trans-Alaskan Pipeline System
(1974-76), which consisted of a 225-mile (365-kilometer) crude
oil pipeline and a 140-mile (225-kilometer) fuel gas pipeline and
(b) a joint venture to build the All American Pipeline System
(1984-86), a 1,240-mile (1,995-kilometer) heated crude oil
pipeline with 23 pumping and heating stations. The Company was a
construction contractor on the Pacific Gas & Electric-PGT
pipeline expansion project in Oregon and the Tuscarora Gas
Transmission project in Nevada and California. Since 1988,
Willbros has provided engineering services for the Great Lakes
Gas Transmission
16
<PAGE>
Company's system expansion, the Kern River Gas Transmission
System, the Northwest Pipeline System expansion, the NorAm Line
AC pipeline project and the Florida Gas pipeline project. During
the same period, Willbros was the engineering contractor for 15
compressor stations or station expansions on behalf of six
different clients in the United States. Currently, the Company
is providing engineering services for Northern Border Pipeline
Company's expansion/extension project in Iowa and Illinois; CMS
Gas Transmission's Tri-State Project in Illinois, Indiana and
Michigan; Explorer Pipeline Company's proposed project to expand
their products pipeline from Houston to Chicago; various
compressor station projects for Great Lakes Gas Transmission
Company in the upper Midwest; and Colorado Interstate Gas
Company's Medicine Bow Lateral project in Colorado and Wyoming.
The Company is also the managing partner of a joint venture
constructing a water pipeline to serve a power project being
constructed by Tenaska Frontier Partners, Ltd. in Texas.
Willbros has also provided significant engineering services to
the U.S. Government during the past 15 years, particularly in
fuel storage and distribution systems and aircraft fueling
facilities. Willbros performed the engineering for major
projects on seven U.S. military bases, four of which were located
within the United States. In 1984, Willbros was selected by the
U.S. Army to act as the systems integration contractor for the
Southwest Asia Petroleum Distribution Operational Project.
Willbros was responsible for developing and procuring a tactical
fuel distribution and storage system to support military
operations worldwide. The system was successfully deployed in
Saudi Arabia during Operation Desert Storm. Willbros acted as
the systems integrator for this project until 1996. Currently,
the Company owns and operates two fueling facilities at Ft.
Bragg, North Carolina, which were constructed in 1998 by the
Company. The Company is also carrying out the engineering and
construction of an airfield lighting project for the U.S. Army
Corps of Engineers at an airbase in Ismalia, Egypt.
The Company's backlog in North America was $14.8 million at
December 31, 1998, compared to $31.8 million at December 31,
1997.
South America
Willbros' first entry into South America was in Venezuela in
1939. Recent developments involving political changes and
privatization efforts in many of the South American countries
make this region especially attractive to the Company. In
particular, privatization and deregulation in this region are
allowing more foreign and domestic private investment in the
energy sector which, until recently, had traditionally been
controlled by state-owned energy companies. In Argentina,
Bolivia, Brazil, Chile and Peru, gas transportation projects will
continue to evolve to meet increasing demand for gas for
industrial and power usage in the rapidly growing urban areas.
In Venezuela, Colombia and Ecuador, crude oil transportation
systems will need to be built and upgraded so that the vast crude
reserves in these countries can be efficiently exported to the
world market. The Company is aggressively pursuing business
opportunities throughout South America and currently bidding work
or monitoring prospects in Argentina, Bolivia, Brazil, Ecuador,
Peru and Venezuela.
Willbros has performed numerous major projects in South
America, where its accomplishments include the construction of
five major pipeline crossings of the Andes Mountains and setting
a world altitude record for constructing a pipeline. Willbros'
largest project in South America was a $134.0 million turnkey
project for the procurement and construction of the Alto
Magdalena Crude Oil Pipeline System in Colombia, awarded to
Willbros in 1989 and completed in 1990.
Venezuela, the largest oil producer in South America, is a
particularly important market for the Company. With conservative
estimates of proven reserves of more than 72 billion barrels of
oil, PDVSA's plans for the future include an increase in oil
production from its current level of approximately 3.0 million
barrels per day to approximately 6.0 million barrels per day by
2006. In addition, the opening of Venezuela's previously
nationalized oil and gas industry to foreign energy company
participation has attracted the interest of most of the world's
major oil and gas companies.
17
<PAGE>
In order to take advantage of perceived opportunities in
Venezuela, the Company acquired CAMSA, a Venezuelan company
located in the city of Maracaibo, in May 1994. When acquired,
CAMSA's primary expertise was marine construction and the
fabrication and installation of cylindrical concrete piles and
platforms for offshore projects. Since the acquisition, the
Company has added onshore construction equipment to complement
the marine fleet, enabling CAMSA to compete for both onshore and
offshore construction projects, as well as specialty services
contracts.
The Company maintains a fully staffed facility including
offices, equipment yard and dock facilities on a 15-acre
waterfront site on Lake Maracaibo, with resident management
personnel assigned who are responsible for estimating and
tendering bids, providing construction expertise, repair and
maintenance services, marine related services, engineering
support and other needed services. Major clients include
international oil companies such as Shell, Occidental Petroleum,
Chevron and operating subsidiaries of PDVSA, including Maraven,
Corpoven and Lagoven. In 1998, the Company successfully
completed a contract to construct 120 miles (200 kilometers) each
of 36- and 20-inch pipelines originating from the Zuata region of
the Orinoco Belt for Petrozuata, a joint venture between Conoco
and Maraven. Also during 1998, a consortium in which CAMSA holds
a 10% equity interest was awarded a 16-year contract valued at
$785.0 million to operate, maintain and refurbish the Lake
Maracaibo water injection program for PDVSA Gas.
The Company's backlog in South America was $47.8 million at
December 31, 1998, compared to $45.2 million at December 31,
1997.
Backlog
The Company's backlog (anticipated revenue from the uncompleted
portions of existing contracts and contracts whose award is
reasonably assured) was $286.5 million at December 31, 1998,
compared to $135.8 million at December 31, 1997. The Company
believes the backlog figures are firm, subject only to the
cancellation and modification provisions contained in various
contracts. It is expected that approximately $100.0 million
(35%) of the backlog existing at December 31, 1998 will be
recognized in revenues during 1999. Historically, a substantial
amount of the Company's revenues in a given year have not been
reflected in its backlog at the beginning of that year; such
revenues may result from contracts of long or short duration
entered into during a year as well as from various contractual
processes, including change orders, extra work, variations in the
scope of work and the effect of escalation or currency
fluctuation formulas. These revenue sources are not added to
backlog until realization is assured.
The following is a breakdown of the Company's backlog by
geographic region as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
---- ----
Amount Percent Amount Percent
---------- ---------- ---------- ----------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
Africa $ 220,688 77% $ 21,686 16%
Asia 3,223 1 30,201 22
Middle East - - 6,925 5
North America 14,763 5 31,826 24
South America 47,799 17 45,159 33
---------- --- ---------- ---
Total $ 286,473 100% $ 135,797 100%
========== === ========== ===
</TABLE>
The $150.7 million (111%) increase in backlog is due mainly to
additions for the engineering, procurement and construction of
the Nembe Creek AG Gathering Pipelines Project in Nigeria
consisting of pipelines varying from 12 to 28 inches in diameter
and 2 to 13 miles (3 to 21 kilometers) in length and four
concrete barge-mounted compressor stations, a three-year dredging
contract in Nigeria, a 10% equity interest in a 16-year water injection
project in Venezuela, and the construction and installation of five
concrete water injection platforms in Venezuela, offset by work
performed on 120 miles (200 kilometers)
18
<PAGE>
each of 36-inch and 20-inch pipelines in Venezuela, a
20-mile (30-kilometer) 36-inch gas pipeline including
a river crossing in Nigeria, an 85-mile (135-kilometer) gas
gathering system and station in Sumatra, Indonesia,
and engineering performed on the Great Lakes Pipeline
project in the United States.
A substantial percentage of the Company's revenues in past
years resulted from contracts entered into during that year or the
immediately preceding year. The following table sets forth
revenues for each of the last five years as a percentage of backlog
at the beginning of each such year:
<TABLE>
<CAPTION>
Revenues for
Backlog at Year Ended
January 1 December 31 Percent
---------- ------------ ---------
(Dollar amounts in thousands)
<S> <C> <C> <C>
1994 $ 76,066 $ 145,716 191%
1995 97,493 220,506 226
1996 139,359 197,688 142
1997 108,751 251,877 231
1998 135,797 281,618 207
</TABLE>
No assurance can be given that future experience will be
similar to historical results in this respect.
Competition
The Company operates in a highly competitive environment. The
Company competes against government-owned or supported companies
and other companies that have financial and other resources
substantially in excess of those available to the Company. In
certain markets, there is competition from national and regional
firms against which the Company may not be price competitive.
The Company's primary competitors on construction projects in
developing countries include Entrepose (France), Mannesmann
(Germany), CCC (Lebanon), Nippon Kokan (Japan), Saipem (Italy),
Spie-Capag (France), Techint (Argentina) and Bechtel (U.S.). The
Company believes that it is one of the few companies among its
competitors possessing the ability to carry out large projects in
developing countries on a turnkey basis (engineering, procurement
and construction), without subcontracting major elements of the
work. As a result, the Company may be more cost effective than
its competitors in certain instances.
The Company has different competitors in different markets. In
Nigeria, the Company competes for pipe coating work with Bredero
Price (Netherlands), while its dredging competitors include Bos
Kalis Westminster (Netherlands), Dredging International
(Belgium), Bilfinger & Berger (Germany), Nigerian Dredging &
Marine (Netherlands) and Ham Dredging (Netherlands). In Oman,
competitors in oil field transport services include Desert Line,
Al Ahram, Hamdam and TruckOman, all Omani companies; and in
construction and the installation of flowlines and mechanical
services, the Company competes with Taylor Woodrow Towell
(Britain), CCC (Lebanon), Dodsal (India), Saipem (Italy), Desert
Line (Oman) and Galfar (Oman). In Venezuela, competitors in
marine support services include Raymond de Venezuela, Petrolago,
Flag Instalaciones and Siemogas, all Venezuelan companies. In
Indonesia, major competitors include Saipem (Italy), Spie Capag
(France), McConnell Dowell (Australia) and Mannesmann (Germany).
In the United States, the Company's primary construction
competitors on a national basis include Associated, Gregory &
Cook, Henkels & McCoy, Murphy Brothers, H. C. Price, Sheehan and
Welded. In addition, there are a number of regional competitors.
Primary competitors for engineering services include Bechtel,
Brown and Root, Gulf Interstate, Marmac, Fluor Daniel Williams
Brothers, Mustang Engineering, Stone & Webster, Paragon
Engineering, Trigon Engineering and Universal Ensco.
19
<PAGE>
Contract Provisions and Subcontracting
Most of the Company's revenues are derived from construction,
engineering and specialty services contracts. The Company enters
into four basic types of construction contracts: (a) firm fixed-
price or lump sum fixed-price contracts providing for a single
price for the total amount of work or for a number of fixed lump
sums for the various work elements comprising the total price;
(b) unit-price contracts which specify a price for each unit of
work performed; (c) time and materials contracts under which
personnel and equipment are provided under an agreed schedule of
daily rates with other direct costs being reimbursable; and (d) a
combination of the above (for example, lump sums for certain
items and unit rates for others).
The Company enters into three types of engineering contracts:
firm fixed-price or lump sum fixed-price contracts; time and
materials contracts pursuant to which engineering services are
provided under an agreed schedule of hourly rates for different
categories of personnel, and materials and other direct costs are
reimbursable; and cost-plus-fee contracts, common with U.S.
government clients under which income is earned solely from the
fee received. Cost-plus-fee contracts are often used for
material procurement services.
Specialty services contracts generally are unit-price
contracts, which specify a price payable per unit of work
performed (e.g., per cubic meter, per lineal meter, etc.). Such
contracts usually include hourly rates for various categories of
personnel and equipment to be applied in cases where no unit
price exists for a particular work element. Under a services
contract, the client is typically responsible for supplying all
materials; a cost-plus-percentage-fee provision is generally
included in the contract to enable the client to direct the
contractor to furnish certain materials.
The Company usually obtains contracts through competitive
bidding or through negotiations with long-standing clients. The
Company is typically invited to bid on projects undertaken by its
clients who maintain approved bidder lists. Bidders are pre-
qualified by virtue of their prior performance for such clients,
as well as their experience, reputation for quality, safety
record, financial strength and bonding capacity.
In evaluating bid opportunities, the Company considers such
factors as the client, the geographic location and the difficulty
of the work, the Company's current and projected workload, the
likelihood of additional work, the project's cost and
profitability estimates, and the Company's competitive advantage
relative to other likely bidders. The Company uses a computer-
based estimating system. The bid estimate forms the basis of a
project budget against which performance is tracked through a
project control system, enabling management to monitor projects
effectively. Project costs are accumulated weekly and monitored
against billings and payments to facilitate cash flow management
on the project.
All U.S. government contracts and many of the Company's other
contracts provide for termination of the contract for the
convenience of the client. In addition, many contracts are
subject to certain completion schedule requirements with
liquidated damages in the event schedules are not met as the
result of circumstances within the control of Willbros. The
Company has not been materially adversely affected by these
provisions in the past.
The Company acts as prime contractor on a majority of the
construction projects it undertakes. In its capacity as prime
contractor and when acting as a subcontractor, the Company
performs most of the work on its projects with its own resources
and typically subcontracts only such specialized activities as
hazardous waste removal, non-destructive inspection, tank
erection, catering and security. In the construction industry,
the prime contractor is normally responsible for the performance
of the entire contract, including subcontract work. Thus, when
acting as a prime contractor, the Company is subject to the risk
associated with the failure of one or more subcontractors to
perform as anticipated. The Company has not incurred any
significant loss or liability on work performed by subcontractors
to date.
20
<PAGE>
Employees
The Company believes its employees are its most valuable asset
and that their loyalty, productivity, pioneering spirit, work
ethic and strong commitment in providing quality services have
been crucial elements in the successes Willbros has achieved on
numerous projects in remote, logistically challenging locations
around the world.
At December 31, 1998, the Company employed a multi-national
work force of approximately 2,280 persons, over 80% of who are
citizens of the respective countries in which they work.
Although the level of activity varies from year to year, Willbros
has maintained an average work force of approximately 3,260 over
the past five years. The minimum employment during that period
has been 1,770 and the maximum 4,750. At December 31, 1998,
approximately 1,040 of the Company's employees were covered by
collective bargaining agreements. The Company believes its
relations with its employees are good.
The following table sets forth an approximate breakdown of the
Company's employees as of December 31, 1998:
<TABLE>
<CAPTION>
Number of
Employees Percent
---------- ----------
<S> <C> <C>
Nigeria 840 37%
Oman 380 17
Venezuela 300 13
Indonesia 190 9
Ivory Coast 90 4
U.S. Engineering 300 13
U.S. Administration 140 6
U.S. Construction 20 1
Other Countries 20 -
----- ---
2,280 100%
===== ===
</TABLE>
Equipment
The Company owns and maintains a fleet of generally
standardized construction, transportation and support equipment
and spare parts. In 1998 and 1997, expenditures for capital
equipment and spare parts were $36.1 million and $47.3 million,
respectively. At December 31, 1998, the Company's net book value
of property, plant, equipment and spare parts was $94.7 million.
An estimated breakdown of the Company's major capital equipment
at February 11, 1999 is as follows: heavy construction equipment,
811 units; transportation equipment, 1,171 units; and support
equipment, 5,399 units. The Company has adopted a plan to
dispose of surplus equipment, and equipment sales are expected to
be conducted in March and April 1999. A preliminary
identification of eligible equipment indicates that the net book
value of equipment that may be sold is approximately $15.0 to
$25.0 million.
Historically, the Company has preferred to own rather than
lease equipment to ensure that standardized equipment is
available as needed. The Company believes that ownership of
standardized equipment has resulted in lower equipment costs.
However, depending on market conditions, the availability
of equipment and other considerations, the Company may from
time to time pursue the leasing of equipment to support
projects and may dispose of surplus equipment. The Company
attempts to obtain projects that will keep its equipment fully
utilized in order to increase profitability. All equipment is
subject to scheduled maintenance to maximize fleet readiness.
The Company has maintenance facilities at Port Harcourt, Nigeria;
Azaiba, Oman; Maracaibo, Venezuela; and Broken Arrow, Oklahoma;
as well as temporary site facilities on major jobs to minimize
downtime.
21
<PAGE>
Facilities
The Company owns a 14-acre equipment yard/maintenance facility
and an adjoining 29-acre undeveloped industrial site at Broken
Arrow, Oklahoma, a short distance from Tulsa, Oklahoma. In
Venezuela, the Company's offices and construction facilities are
located on 15 acres of land, which it owns, on the shores of Lake
Maracaibo. The Company leases all other facilities used in its
operations, including corporate offices in Panama; administrative
and engineering offices in Tulsa, Oklahoma, and Houston, Texas;
and various office facilities, equipment sites and expatriate
housing units in England, Nigeria, Oman, Pakistan, Russia, Egypt,
Kuwait, Saudi Arabia and Indonesia. The aggregate lease payments
made by the Company for its facilities were $3.3 million in 1998
and $3.0 million in 1997.
Insurance and Bonding
The Company maintains workers' compensation, employers'
liability, general liability, directors' and officers' liability,
automobile liability, aircraft liability, marine liability and
excess liability insurance to provide benefits to employees and
to protect the Company against claims by third parties. Such
insurance is underwritten by A+ or better rated insurance
companies (AM Best rating as to claims paying ability) and, when
possible, in loss-sensitive plans with return premiums for
favorable loss experience. The Company also maintains physical
damage insurance covering loss of or damage to Company property
on a worldwide basis, with special insurance covering loss or
damage caused by political or terrorist risks in locations where
such coverage is deemed prudent. Formal risk management and
safety programs are maintained, which have resulted in favorable
loss ratios and cost savings. The Company believes its risk
management, safety and insurance programs are adequate to meet
its needs.
The Company is often required to provide surety bonds
guaranteeing its performance and/or financial obligations. The
amounts of bonding available depend upon experience and
reputation in the industry, financial condition, backlog and
management expertise, among other factors. The Company maintains
relationships with two top-rated surety companies to provide
surety bonds.
Political and Economic Risks; Operational Risks
The Company has substantial operations and assets in developing
countries in Africa, Asia, the Middle East and South America, and
is seeking to increase its level of activity in the C.I.S.
Accordingly, the Company is subject to risks which ordinarily
would not be expected to exist in the United States, Canada,
Japan or western Europe, including foreign currency restrictions
(such as those which existed in Venezuela until 1996), extreme
exchange rate fluctuations (for example, in Russia, Venezuela and
Nigeria), expropriation of assets, civil uprisings and riots,
government instability and legal systems of decrees, laws,
regulations, interpretations and court decisions which are not
always fully developed and which may be retroactively applied.
The Company's operations in developing countries may be adversely
affected in that certain government agencies in such countries
may interpret laws, regulations or court decisions in a manner
which might be considered inconsistent or inequitable in the
United States, Canada, Japan or western Europe. The Company may
be subject to unanticipated income taxes, excise duties, import
taxes, export taxes or other governmental assessments, which
could have a material adverse effect on the Company's results of
operations for any quarter or year.
The Company has attempted to mitigate the risks of doing
business in developing countries by separately incorporating its
operations in many such countries; working with local partners in
certain countries; contracting whenever possible with major
international oil and gas companies; obtaining sizeable down
payments or securing payment guarantees; entering into contracts
providing for payment in U.S. dollars instead of the local
currency whenever possible; maintaining reserves for credit
losses; maintaining insurance on equipment against certain
political risks and terrorism; and limiting its capital
investment in each country. The Company retains local advisors
to assist it in interpreting the laws, practices and customs of
the countries in which the Company operates. Given the
unpredictable nature
22
<PAGE>
of the risks described in the preceding paragraph, there can be
no assurance that such risks will not result in a loss of
business which could have a material adverse effect on the
Company's results of operations for any quarter or year.
From time to time, international oil companies operating in
Nigeria, including Royal Dutch Shell, have expressed concern over
the Nigerian government's tardiness in meeting its payment
obligations, and have threatened to reduce their planned
investments and/or cut production in Nigeria. Any such reduction
in the level of investment or production could reduce the amount
of contract work awarded in Nigeria, which could have a material
adverse affect on the Company and its results of operations. The
Company cannot predict whether any such actions will be taken in
the future and, if taken, the extent to which such actions would
impact current or future prospects of the Company in Nigeria.
Due to the limited number of major projects worldwide, the
Company may, at any one time, have a substantial portion of its
resources dedicated to one country. The Company's results of
operations are, therefore, susceptible to adverse events beyond
its control, which may occur in a particular country in which the
Company's business may be concentrated.
Pipeline construction, dredging, pipeline rehabilitation
services, marine support services and operation of vessels and
heavy equipment involve a high degree of operational risk.
Natural disasters, adverse weather conditions, collisions, and
operator or navigational error can cause personal injury or loss
of life, severe damage to and destruction of property, equipment
and the environment and suspension of operations. The occurrence
of any such event could result in loss of revenue, casualty loss,
increased costs and significant liability to third parties.
Litigation arising from such an occurrence may result in the
Company being named as a defendant in lawsuits asserting
substantial claims.
The Company maintains risk management and safety programs to
mitigate the effects of loss or damage. While the Company
maintains such insurance protection as it deems prudent, there
can be no assurance that any such insurance will be sufficient or
effective under all circumstances or against all hazards to which
the Company may be subject. An enforceable claim for which the
Company is not fully insured could have a material adverse effect
on the Company. Moreover, no assurance can be given that the
Company will be able to maintain adequate insurance in the future
at rates that it considers reasonable.
Government Regulations
General
Many aspects of the Company's operations are subject to
government regulations in the countries in which the Company
operates, including those relating to currency conversion and
repatriation, taxation of its earnings and earnings of its
personnel, and its use of local employees and suppliers. In
addition, the Company depends on the demand for its services from
the oil and gas industry and, therefore, is affected by changing
taxes, price controls and laws and regulations relating to the
oil and gas industry generally. The ability of the Organization
of Petroleum Exporting Countries to meet and maintain production
targets also influences the demand for the Company's services.
The adoption of laws and regulations by countries in which the
Company operates, curtailing exploration and development drilling
for oil and gas for economic and other policy reasons, could
adversely affect the Company's operations by limiting demand for
its services. The Company's operations are also subject to the
risk of changes in foreign and domestic laws and policies which
may impose restrictions on the Company, including trade
restrictions, which could have a material adverse effect on the
Company's operations. Other types of government regulation which
could, if enacted or implemented, adversely affect the Company's
operations include expropriation or nationalization decrees,
confiscatory tax systems, primary or secondary boycotts directed
at specific countries or companies, embargoes, extensive import
restrictions or other trade barriers, mandatory sourcing rules
and unrealistically high labor rate and fuel price regulation.
The Company
23
<PAGE>
cannot determine to what extent future operations and earnings of
the Company may be affected by new legislation, new regulations
or changes in, or new interpretations of, existing regulations.
Environmental
The Company's operations are subject to numerous environmental
protection laws and regulations, which are complex and stringent.
The Company regularly works in and around sensitive environmental
areas such as rivers, lakes and wetlands. Significant fines and
penalties may be imposed for non-compliance with environmental
laws and regulations, and certain environmental laws provide for
joint and several strict liability for remediation of releases of
hazardous substances, rendering a person liable for environmental
damage without regard to negligence or fault on the part of such
person. In addition to potential liabilities that may be
incurred in satisfying these requirements, the Company may be
subject to claims alleging personal injury or property damage as
a result of alleged exposure to hazardous substances. Such laws
and regulations may expose the Company to liability arising out
of the conduct of operations or conditions caused by others, or
for the acts of the Company which were in compliance with all
applicable laws at the time such acts were performed. The
Company is not aware of any non-compliance with or liability
under any environmental law that could have a material adverse
effect on the Company's business or operations.
Item 3. Legal Proceedings
The Company is a party to a number of legal proceedings. The
Company believes that the nature and number of these proceedings
are typical for a firm of its size engaged in the Company's type
of business and that none of these proceedings is material to the
Company's financial position.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during
the fourth quarter of 1998 through the solicitation of proxies or
otherwise.
Item 4A. Executive Officers of the Registrant
The following table sets forth certain information regarding
the executive officers and key personnel of the Company.
Officers are elected annually by, and serve at the discretion of,
the Board of Directors.
Name Age Position
- ---- --- --------------------------------------------------
Larry J. Bump 59 Director, Chairman of the Board of Directors
and Chief Executive Officer
Paul A. Huber 42 Director, President and Chief Operating Officer
Melvin F. Spreitzer 60 Director, Executive Vice President, Chief
Financial Officer and Treasurer
M. Kieth Phillips 56 Vice President; President of
Willbros International, Inc. (1)
James R. Beasley 56 President of Willbros Engineers, Inc.
John N. Hove 51 General Counsel and Secretary
24
<PAGE>
David L. Kavanaugh 51 Senior Vice President of Willbros
International, Inc.
Steve W. Shores 49 Senior Vice President of Willbros
Engineers, Inc.
Joel M. Gall 50 Vice President of Willbros International, Inc.
Arthur J. West 55 Vice President of Willbros International, Inc.
Adrian P. Wright 52 Vice President of Willbros International, Inc.
Lance H. Foster 40 Vice President of Willbros Energy Services
Company
Carlos A. Atik 35 General Manager of Willbros Construction &
Engineering-Egypt, L.L.C.
Monica M. Bagguley 58 Director of Willbros (Overseas) Limited
Jack F. Furrh, Jr. 58 General Manager of The Oman Construction
Company, LLC
G. Patrick Riga 43 General Manager of Constructora CAMSA, C.A.
James K. Tillery 40 Managing Director of Willbros (Nigeria)
Limited
- ------------------
(1) Retired as of March 31, 1999
Larry J. Bump joined Willbros in 1977 as President and Chief
Operating Officer and was elected to the Board of Directors. He
was named Chief Executive Officer in 1980 and elected Chairman of
the Board of Directors in 1981. He has over 35 years of
international experience in pipeline construction and contracting
industries, all of which were in management positions.
Paul A. Huber joined Willbros in September 1998 as President
and Chief Operating Officer. He was elected to the Board of
Directors in October 1998. Prior to joining Willbros, Mr. Huber
had served as President of the Americas for Kvaerner Process, an
engineering and construction services company serving the energy
industry, from June 1998 to September 1998. From 1991 to 1998,
he was employed in various executive and operational capacities
by Kvaerner John Brown and its affiliates and predecessors in
London, Houston and Tulsa. From 1979 to 1991, he was employed in
various executive and operational capacities by Davy McKee and
its affiliates and predecessors in Tulsa and Houston. He has
over 19 years of experience in the construction and contracting
industry.
Melvin F. Spreitzer joined Willbros in 1974 as Controller and
was elected Vice President of Finance in 1978. He was elected
Executive Vice President, Chief Financial Officer and Treasurer
in 1987, and a Director in 1992. He was also Secretary from 1987
to 1996. He has over 23 years of corporate finance experience and
is responsible for all aspects of financial management of the
Company.
M. Kieth Phillips joined Willbros in 1978 as Vice President.
He was elected Vice President of Willbros International, Inc.
("WII") in 1979 and was promoted to Senior Vice President of WII
in 1980, Executive Vice President of WII in 1983 and President of
WII in 1988. Most of his more than 31 years of experience in the
pipeline construction industry has been international and in
management positions. Mr. Phillips served as a Director of the
Company from May 1997 to February, 1999. Mr. Phillips is retiring
from Willbros on March 31, 1999.
James R. Beasley joined Willbros in 1981 when Willbros
Engineers, Inc. ("WEI") was acquired. He was elected Vice
President of WEI in 1981, Senior Vice President and General
Manager of WEI in 1982 and President of WEI in 1986. Mr. Beasley
has more than 28 years of experience in pipeline engineering and
operations.
25
<PAGE>
John N. Hove became General Counsel of Willbros in 1991. He
was elected Secretary of Willbros in 1996. He has more than 27
years of experience as a lawyer and has provided legal assistance
to Willbros since 1973. Prior to 1991, he was a shareholder in a
law firm in Tulsa, Oklahoma, where he concentrated his practice
on international business transactions.
David L. Kavanaugh joined Willbros in 1977 as an engineer
assigned to Saudi Arabia. From 1979 until 1988, he served as
Project Engineer and Project Manager in Nigeria. From 1988 to
1991, he managed construction projects in Gabon and Colombia. In
1991, he was elected Vice President of WII, and in 1995 he was
promoted to Senior Vice President of operations and business
development for WII. Mr. Kavanaugh has over 28 years of pipeline
construction experience.
Steve W. Shores joined Willbros in 1981 when WEI was acquired.
He was elected Vice President of WEI in 1986 and Senior Vice
President of WEI in 1991. Mr. Shores has over 23 years of
pipeline engineering experience.
Joel M. Gall joined Willbros in 1978 as an Office Manager in
the Middle East. He was transferred to Nigeria in 1979 where he
served as Administrative Manager, General Manager and Managing
Director until 1991 when he was elected Vice President of WII.
Since 1994, he has been responsible for business development
activities in Southeast Asia. Mr. Gall has over 28 years of
experience in the international pipeline construction industry.
Arthur J. West joined Willbros in 1962 in North Africa. In
1988, he became Vice President of Willbros Middle East, Inc.
("WMEI") and, in 1992, he was elected Vice President of WII and
became responsible for business development and operations for
WMEI in the Middle East. Mr. West has over 33 years of
experience in pipeline construction in the areas of
administrative and project management.
Adrian P. Wright joined Willbros in 1973 as an engineer
assigned to Algeria. From 1974 until 1982, he served as Project
Engineer and Project Manager in Nigeria. From 1982 to 1992, he
served as Project Manager in Oman, Colombia and the United
States. In 1992, Mr. Wright was elected Vice President of WII,
and he is currently responsible for WII's estimating and
technical services. Mr. Wright has over 32 years of experience
in the construction industry.
Lance H. Foster was employed by Willbros Engineers, Inc.
("WEI") from 1990 to 1992 as a Design Engineer and Project
Engineer. He was Manager of Engineering for EVI Cherrington
Environmental from 1992 to 1993, Project Manager for WEI from
1993 to 1994 and Manager of Pipeline Construction for ARB,
Incorporated from 1994 to 1996. He subsequently joined Willbros
USA, Inc. as an estimator/project manager in 1996 and was
promoted to Vice President of Willbros Energy Services Company in
January 1998. Mr. Foster has over 21 years of experience in
pipeline construction in the areas of estimating, planning,
administration, and management.
Carlos A. Atik joined Willbros in 1991 as an assistant Project
Manager in Egypt. He assumed the duties of Project Manager in
1992 and continued in that role until 1995 when he was named
General Manager of Willbros Construction & Engineering-Egypt,
LLC. Mr. Atik has over 14 years of engineering and
construction experience in Africa and the Middle East.
Monica M. Bagguley joined Willbros (Overseas) Limited ("WOL")
in 1974. Since 1985, she has served as Director of Personnel
and Purchasing for WOL. Ms. Bagguley has over 23 years of
experience in international personnel management and project
procurement.
Jack F. Furrh, Jr. joined Willbros in 1981 as Administrative
Manager. He left Willbros in 1986 to operate his own business.
In 1990, he rejoined the Company as Project Manager and in 1991
he was promoted to General Manager of The Oman Construction
Company, LLC. He has over 28 years of experience in the energy-
related industry in contracts, safety and administrative
management.
26
<PAGE>
G. Patrick Riga joined Willbros in 1981 in Oman as a
warehouseman. From 1985 to 1988, he served in administrative
capacities in Colombia and Ecuador. From 1989 until 1994, he was
employed by HDI, a horizontal drilling company. He rejoined the
Company in 1994 as Assistant General Manager in Venezuela and, in
1995, was promoted to General Manager of Constructora CAMSA, C.A.
Mr. Riga has over 20 years of experience in the pipeline
industry, including operations, quality control and
administrative management.
26
<PAGE>
James K. Tillery joined Willbros in 1983 as a field engineer.
He has over 18 years of experience as an Engineer and Project
Manager working in both U.S. and international pipeline
construction. In 1995, he was named Managing Director of
Willbros (Nigeria) Limited.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The information required by this Item is incorporated by
reference from (a) the section on page 44 of the Company's 1998
Annual Report to Stockholders entitled "Common Stock Information
and Dividend Policy" and (b) the section on pages 23 and 24 of
the Company's 1998 Annual Report to Stockholders entitled
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Capital Structure, Liquidity and Capital
Resources."
Item 6. Selected Financial Data
The information required by this Item is incorporated by
reference from page 18 of the Company's 1998 Annual Report to
Stockholders.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The information required by this Item is incorporated by
reference from pages 19 through 25 of the Company's 1998 Annual
Report to Stockholders.
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk
The information required by this item is incorporated by
reference from page 24 of the Company's 1998 Annual Report to
Stockholders entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Financial Risk
Management."
Item 8. Financial Statements and Supplementary Data
The information required by this Item is incorporated by
reference from pages 26 through 43 of the Company's 1998 Annual
Report to Stockholders.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
27
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this Item with respect to the
Company's directors is incorporated by reference from the
sections of the Company's definitive Proxy Statement for its 1999
Annual Meeting of Stockholders (the "Proxy Statement") entitled
"Election of Directors" and "Section 16(a) Beneficial Ownership
Reporting Compliance." The information required by this Item
with respect to the Company's executive officers appears at Item
4A of Part I of this Form 10-K.
Item 11. Executive Compensation
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Executive Compensation."
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Principal Stockholders and Security Ownership of Management."
Item 13. Certain Relationships and Related Transactions
The information required by this Item is incorporated by
reference from the section of the Proxy Statement entitled
"Certain Transactions."
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) (1) Financial Statements:
The financial statements of the Company and its subsidiaries
and report of independent auditors listed below are incorporated
by reference from the following pages of the Company's 1998
Annual Report to Stockholders:
1998
Annual Report
Page(s)
-------------
Report of Independent Auditors 26
Consolidated Balance Sheets as of
December 31, 1998 and 1997 27
Consolidated Statements of Income
for the years ended December 31,
1998, 1997 and 1996 28
Consolidated Statements of Stockholders'
Equity for the years ended
December 31, 1998, 1997 and 1996 29
Consolidated Statements of Cash Flows
for the years ended December 31,
1998, 1997 and 1996 30
Notes to Consolidated Financial Statements 31-43
28
<PAGE>
1998
Form 10-K
Page(s)
---------
(2) Financial Statement Schedule:
Independent Auditors' Report 33
Schedule II - Consolidated Valuation
and Qualifying Accounts 34
All other schedules are omitted as inapplicable or because the
required information is contained in the financial statements or
included in the footnotes thereto.
(3) Exhibits:
The following documents are included as exhibits to this Form 10-K.
Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
3.1 Amended and Restated Articles of Incorporation of the Company
(Filed as Exhibit 3.2 to the Company's report on Form 10-Q
for the quarter ended September 30, 1998, filed November 16,
1998).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
the Company's Registration Statement on Form S-1,
Registration No. 333-5413 (the "S-1 Registration Statement")).
4 Form of stock certificate for the Company's Common Stock,
par value $.05 per share (Filed as Exhibit 4 to the
S-1 Registration Statement).
10.1 Credit Agreement dated February 20, 1997, by and among the
Company, certain designated subsidiaries, Credit Lyonnais
New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.1 to the Company's report on Form 10-K for the
year ended December 31, 1996, filed March 31, 1997 (the
"1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer Oil
B.V., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 to the 1996 Form 10-K).
10.5* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Larry J. Bump and the Company
(Filed as Exhibit 10.3 to the S-1 Registration Statement).
10.6* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Melvin F. Spreitzer and the
Company (Filed as Exhibit 10.4 to the S-1 Registration
Statement).
10.7* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., M. Kieth Phillips and the
Company (Filed as Exhibit 10.6 to the S-1 Registration
Statement).
10.8* Employment Agreement dated January 1, 1997, by and
among Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
10.9* Form of Indemnification Agreement between the Company
and its officers (Filed as Exhibit 10.7 to the
S-1 Registration Statement).
29
<PAGE>
10.10* Form of Indemnification Agreement between the Company
and its directors (Filed as Exhibit 10.16 to the
S-1 Registration Statement).
10.11* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit
10.8 to the S-1 Registration Statement).
10.12* Form of Incentive Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.13
to the 1996 Form 10-K).
10.13* Form of Non-Qualified Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.14
to the 1996 Form 10-K).
10.14* Willbros Group, Inc. Director Stock Plan (Filed as
Exhibit 10.9 to the S-1 Registration Statement).
10.15* Willbros USA, Inc. Executive Benefit Restoration Plan
(Filed as Exhibit 10.10 to the S-1 Registration Statement).
10.16* Willbros Engineers, Inc. Management Incentive Plan
dated January 1, 1996 (Filed as Exhibit 10.17 to the
S-1 Registration Statement).
10.17* Willbros USA, Inc. Management Incentive Plan dated
January 1, 1996 (Filed as Exhibit 10.18 to the
S-1 Registration Statement).
10.18* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1995 Management
Personnel Non-Qualified Stock Ownership Plans (Filed as
Exhibit 10.11 to the S-1 Registration Statement).
10.19* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plans (Filed as Exhibit 10.12 to
the S-1 Registration Statement).
10.20 Registration Rights Agreement dated April 9, 1992,
between the Company and Heerema Holding Construction, Inc.,
Yorktown Energy Partners, L.P., Concord Partners II, L.P.,
Concord Partners Japan Limited and certain other
stockholders of the Company (Filed as Exhibit 10.13 to the
S-1 Registration Statement).
10.21* Separation Agreement dated February 20, 1998, by and
between Willbros USA, Inc. and Gary L. Bracken. (Filed as
Exhibit 10.21 to the Company's report on Form 10-K for the
year ended December 31, 1997, filed March 27, 1998).
10.22* Willbros Group, Inc. Severance Plan dated January 1, 1999.
10.23* Separation Agreement and Release dated March 31, 1999,
by and between Willbros USA, Inc. and M. Kieth Phillips.
10.24* Consulting Services Agreement dated April 1, 1999, by
and between Willbros International, Inc. and M. Kieth Phillips.
10.25 First Amendment to Credit Agreement dated April 2, 1998, by and
among the Company, certain designated subsidiaries, Credit
Lyonnais New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent.
10.26 Second Amendment to Credit Agreement dated October 1, 1998,
by and among the Company, certain designated subsidiaries,
Credit Lyonnais New York Branch, as co-agent, certain
financial institutions, and ABN AMRO Bank N.V., as agent.
30
<PAGE>
13 Portions of the Company's 1998 Annual Report to Stockholders.
21 Subsidiaries of the Company.
23 Consent of KPMG.
27 Financial Data Schedule.
- --------------------------
* Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1998.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WILLBROS GROUP, INC.
Date: March 29, 1999 By: /s/ Larry J. Bump
------------------------------------
Larry J. Bump
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
Signature Title Date
- --------- ----- ----
/s/ Larry J. Bump Director, Chairman of the Board March 29, 1999
- ------------------------- and Chief Executive Officer
Larry J. Bump (Principal Executive Officer)
/s/ Paul A. Huber Director, President and March 29, 1999
- ------------------------- Chief Operating Officer
Paul A. Huber
/s/ Melvin F. Spreitzer Director, Executive Vice March 29, 1999
- ------------------------- President, Chief Financial
Melvin F. Spreitzer Officer and Treasurer
(Principal Financial Officer
and Principal Accounting
Officer)
/s/ Guy E. Waldvogel Director March 29, 1999
- -------------------------
Guy E. Waldvogel
/s/ Peter A. Leidel Director March 29, 1999
- -------------------------
Peter A. Leidel
/s/ John H. Williams Director March 29, 1999
- -------------------------
John H. Williams
/s/ Michael J. Pink Director March 29, 1999
- -------------------------
Michael J. Pink
/s/ James B. Taylor, Jr. Director March 29, 1999
- -------------------------
James B. Taylor, Jr.
32
<PAGE>
INDEPENDENT AUDITORS' REPORT ON
CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
The Stockholders and Board of Directors
Willbros Group, Inc.:
The audits referred to in our report dated February 5, 1999
included the related consolidated financial statement schedule
for each of the years in the three-year period ended December 31,
1998. This consolidated financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statement
schedule based on our audits. In our opinion, such consolidated
financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
KPMG
Panama City, Panama
February 5, 1999
33
<PAGE>
WILLBROS GROUP, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION
Charged
(Credited)
Balance at to Costs Charge Balance
Beginning and Offs and at End
Year Ended Description of Year Expenses Other of Year
---------- ------------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
December 31, 1996 Allowance for
bad debts $ 2,992 $ (1,024) $ (849) $ 1,119
December 31, 1997 Allowance for
bad debts $ 1,119 $ (8) $ (110) $ 1,001
December 31, 1998 Allowance for
bad debts $ 1,001 $ 72 $ (85) $ 988
</TABLE>
34
<PAGE>
INDEX TO EXHIBITS
The following documents are included as exhibits to this Form
10-K. Those exhibits below incorporated by reference herein are
indicated as such by the information supplied in the
parenthetical thereafter. If no parenthetical appears after an
exhibit, such exhibit is filed herewith.
Exhibit
Number Description
- ------- -----------
3.1 Amended and Restated Articles of Incorporation of the Company
(Filed as Exhibit 3.2 to the Company's report on Form 10-Q
for the quarter ended September 30, 1998, filed November 16,
1998).
3.2 Restated By-laws of the Company (Filed as Exhibit 3.2 to the
Company's Registration Statement on Form S-1, Registration
No. 333-5413 (the "S-1 Registration Statement")).
4 Form of stock certificate for the Company's Common Stock,
par value $.05 per share (Filed as Exhibit 4 to the
S-1 Registration Statement).
10.1 Credit Agreement dated February 20, 1997, by and among the
Company, certain designated subsidiaries, Credit Lyonnais
New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.1 to the Company's report on Form 10-K for the
year ended December 31, 1996, filed March 31, 1997 (the
"1996 Form 10-K")).
10.2 Parent Pledge Agreement dated February 20, 1997, by the
Company, in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.2 to the 1996 Form 10-K).
10.3 Pledge Agreement dated February 20, 1997, by Musketeer Oil
B.V., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.3 to the 1996 Form 10-K).
10.4 Pledge Agreement dated February 20, 1997, by Willbros USA,
Inc., in favor of ABN AMRO Bank N.V., as agent (Filed as
Exhibit 10.4 to the 1996 Form 10-K).
10.5* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Larry J. Bump and the Company
(Filed as Exhibit 10.3 to the S-1 Registration Statement).
10.6* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., Melvin F. Spreitzer and the
Company (Filed as Exhibit 10.4 to the S-1 Registration
Statement).
10.7* Employment Agreement dated January 1, 1996, by and
among Willbros USA, Inc., M. Kieth Phillips and the
Company (Filed as Exhibit 10.6 to the S-1 Registration
Statement).
10.8* Employment Agreement dated January 1, 1997, by and
among Willbros Engineers, Inc., James R. Beasley and the
Company (Filed as Exhibit 10.9 to the 1996 Form 10-K).
10.9* Form of Indemnification Agreement between the Company
and its officers (Filed as Exhibit 10.7 to the
S-1 Registration Statement).
10.10* Form of Indemnification Agreement between the Company
and its directors (Filed as Exhibit 10.16 to the
S-1 Registration Statement).
10.11* Willbros Group, Inc. 1996 Stock Plan (Filed as
Exhibit 10.8 to the S-1 Registration Statement).
10.12* Form of Incentive Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.13
to the 1996 Form 10-K).
<PAGE>
10.13* Form of Non-Qualified Stock Option Agreement under the
Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.14
to the 1996 Form 10-K).
10.14* Willbros Group, Inc. Director Stock Plan (Filed as
Exhibit 10.9 to the S-1 Registration Statement).
10.15* Willbros USA, Inc. Executive Benefit Restoration Plan
(Filed as Exhibit 10.10 to the S-1 Registration Statement).
10.16* Willbros Engineers, Inc. Management Incentive Plan
dated January 1, 1996 (Filed as Exhibit 10.17 to the
S-1 Registration Statement).
10.17* Willbros USA, Inc. Management Incentive Plan dated
January 1, 1996 (Filed as Exhibit 10.18 to the
S-1 Registration Statement).
10.18* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1995 Management
Personnel Non-Qualified Stock Ownership Plans (Filed as
Exhibit 10.11 to the S-1 Registration Statement).
10.19* Form of Secured Promissory Note under the Willbros
International, Inc. and Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plans (Filed as Exhibit 10.12 to
the S-1 Registration Statement).
10.20 Registration Rights Agreement dated April 9, 1992,
between the Company and Heerema Holding Construction, Inc.,
Yorktown Energy Partners, L.P., Concord Partners II, L.P.,
Concord Partners Japan Limited and certain other
stockholders of the Company (Filed as Exhibit 10.13 to the
S-1 Registration Statement).
10.21* Separation Agreement dated February 20, 1998, by and
between Willbros USA, Inc. and Gary L. Bracken. (Filed as
Exhibit 10.21 to the Company's report on Form 10-K for the
year ended December 31, 1997, filed March 27, 1998).
10.22* Willbros Group, Inc. Severance Plan dated January 1, 1999.
10.23* Separation Agreement and Release dated March 31, 1999,
by and between Willbros USA, Inc. and M. Kieth Phillips.
10.24* Consulting Services Agreement dated April 1, 1999, by
and between Willbros International, Inc. and M. Kieth Phillips.
10.25 First Amendment to Credit Agreement dated April 2, 1998, by and
among the Company, certain designated subsidiaries, Credit
Lyonnais New York Branch, as co-agent, certain financial
institutions, and ABN AMRO Bank N.V., as agent.
10.26 Second Amendment to Credit Agreement dated October 1, 1998, by
and among the Company, certain designated subsidiaries,
Credit Lyonnais New York Branch, as co-agent, certain
financial institutions, and ABN AMRO Bank N.V., as agent.
13 Portions of the Company's 1998 Annual Report to Stockholders.
21 Subsidiaries of the Company.
23 Consent of KPMG.
27 Financial Data Schedule.
<PAGE>
EXHIBIT 10.22
WILLBROS GROUP, INC.
SEVERANCE PLAN
---------------------------
(Effective January 1, 1999)
Introduction
The Board of Directors of Willbros Group, Inc. (the
"Company") recognizes that, as is the case with many publicly
held companies, there always exists the possibility of a change
in control of the Company. This possibility and the uncertainty
it creates may result in the loss or distraction of key employees
of the Company and its subsidiaries to the detriment of the
Company and its stockholders.
The Board considers the avoidance of such loss and
distraction to be essential to protecting and enhancing the best
interests of the Company and its stockholders. The Board also
believes that when a change in control is perceived as imminent,
or is occurring, the Board should be able to receive and rely on
disinterested service from key employees regarding the best
interests of the Company and its stockholders without concern
that such employees might be distracted by the personal
uncertainties and risks created by a change in control.
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company of the continued
employment, attention and dedication to duty of certain key
employees of the Company and its subsidiaries and to ensure the
availability of their continued service, notwithstanding the
possibility, threat or occurrence of a change in control. In
addition, the Board has determined that such key employees should
have protection in connection with certain involuntary
terminations of employment under change in control circumstances
and other situations.
In order to fulfill the above purposes, and recognizing that
designated participants shall be entitled to rely on the various
benefits described herein, the Board hereby adopts the Willbros
Group, Inc. Severance Plan, effective January 1, 1999.
<PAGE>
ARTICLE 1. DEFINITIONS
1.1 Definitions. In addition to the terms defined
elsewhere herein, the following words and phrases, when used
herein with initial capital letters, shall have the following
respective meanings:
1.1.1 "Act" means the United States Securities and
Exchange Act of 1934, as amended.
1.1.2 "Annual Base Compensation" means the amount a
Participant is entitled to receive as wages or salary on an
annualized basis, excluding all bonus, overtime and
incentive compensation, payable by an Employer as
consideration for the Participant's services, as determined
on the date immediately preceding termination of employment,
except that, in the case of a termination of employment for
Good Reason, Annual Base Compensation shall be determined as
of the date immediately before the event which gave rise to
the Participant's right to terminate his employment and
collect a Severance Benefit.
1.1.3 "Board" means the Board of Directors of Willbros
Group, Inc.
1.1.4 "Change in Control" means and shall be deemed to
have occurred if (i) any Person, other than the Company or a
Related Party, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing thirty
percent (30%) or more of the total voting power of all the
then outstanding Voting Securities, or (ii) any Person,
other than the Company or a Related Party, purchases or
otherwise acquires under a tender offer, securities
representing thirty percent (30%) or more of the total
voting power of all the then outstanding Voting Securities,
or (iii) the individuals (a) who as of the Effective Date
(with respect to the Company) constitute the Board or
(b) who thereafter are elected to the Board and whose
election, or nomination for election, to the Board was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors as
of the Effective Date (with respect to the Company) or whose
election or nomination for election was previously so
approved, cease for any reason to constitute a majority of
the members of the Board, or (iv) the stockholders of the
Company approve a merger, consolidation, recapitalization or
reorganization of the Company or an acquisition by the
Company, or any such transaction is consummated if stockholder
2
<PAGE>
approval is not obtained (other than any such
transaction which would result in the Voting Securities
outstanding immediately prior thereto continuing to
represent, either by remaining outstanding or by being
converted into voting securities of the surviving entity, at
least sixty percent (60%) of the total voting power
represented by the voting securities of the surviving entity
outstanding immediately after such transaction and in or as
a result of which the voting rights of each Voting Security
relative to the voting rights of all other Voting Securities
are not altered), or (v) the stockholders approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets, other than any such transaction
which would result in a Related Party owning or acquiring
more than fifty percent (50%) of the assets owned by the
Company immediately prior to the transaction, or (vi) the
Board or the appropriate committee thereof adopts a
resolution to the effect that a Change in Control has
occurred.
1.1.5 "Code" means the United States Internal Revenue
Code of 1986, as amended.
1.1.6 "Company" means Willbros Group, Inc. and any
successor thereto.
1.1.7 "Disability" means a physical or mental
incapacity of a Participant which substantially prevents the
Participant, after reasonable accommodation, from performing
the essential functions of his duties as they existed
immediately prior to a Change in Control on a full-time
basis for a period of six (6) calendar months out of any
twelve (12) consecutive calendar month period and which
could reasonably be expected to continue for a period of at
least eighteen (18) months following such twelve (12) month
period.
1.1.8 "Effective Date" means, the date, specified on
the signature page, that this Plan is to be effective;
provided, that if a Subsidiary adopts the Plan after the
date specified on the signature page, the Effective Date for
such Subsidiary and its Employees who are Participants shall
be the date specified in the document by which the
Subsidiary adopts the Plan.
1.1.9 "Employee" means an officer and employee of an
Employer.
3
<PAGE>
1.1.10 "Employer" means the Company or a
Subsidiary which has adopted the Plan pursuant to Article 4
hereof.
1.1.11 "ERISA" means the United States Employee
Retirement Income Security Act of 1974, as amended.
1.1.12 "Good Reason" means the occurrence,
within one (1) year following a Change in Control, of any of
the following events, unless the Participant has consented
thereto: (i) reduction of the Participant's Annual Base
Compensation by more than ten percent (10%), or
(ii) amendment or termination of any of the Incentive Plans
so as to provide for incentive opportunities and awards
significantly less favorable to the Participant than those
provided in the plan being amended.
1.1.13 "Incentive Plan" means any of the
Company's stock option plans, management incentive plans,
sales incentive plans and other incentive plans in existence
on the Effective Date or any additional or successor plans
in effect on or before the relevant date of termination and
providing substantially equivalent or better incentive
opportunities for Employees.
1.1.14 "Participant" means an Employee selected
for participation in the Plan pursuant to Section 2.1
hereof.
1.1.15 "Pension Plan" means the Willbros USA,
Inc. Pension Plan or any successor plan providing comparable
benefits.
1.1.16 "Person" shall have the meaning assigned
in the Act.
1.1.17 "Plan" means the Willbros Group, Inc.
Severance Plan.
1.1.18 "Potential Change in Control" means and
shall be deemed to have arisen if (i) the Company enters
into an agreement, the consummation of which would result in
the occurrence of a Change in Control, or (ii) any Person
(including the Company) publicly announces an intention to
take actions which if consummated would constitute a Change
in Control, or (iii) any Person, other than the Company or a Related
Party, files with the Federal Trade Commission a notification and
report form pursuant to the United States Hart-Scott-Rodino
Antitrust Improvements Act of 1976 with respect to
4
<PAGE>
any Voting Securities or a major portion of the
assets of the Company, or (iv) the Board or the appropriate
committee thereof adopts a resolution to the effect that,
for purposes of this Plan, a Potential Change in Control has
arisen. A Potential Change in Control shall be deemed to
continue (a) with respect to an agreement within the purview
of clause (i) of the preceding sentence, until the agreement
is canceled or terminated, or (b) with respect to an
announcement within the purview of clause (ii) of the
preceding sentence, until the Person making the announcement
publicly abandons the stated intention or fails to act on
such intention for a period of twelve (12) calendar months,
or (c) with respect to the filing of a notification and
report form within the purview of clause (iii) of the
preceding sentence with respect to Voting Securities, until
the Person involved publicly announces that its ownership or
acquisition of such Voting Securities is for investment
purposes only and not for the purpose of seeking a Change in
Control, or (d) with respect to any Potential Change in
Control, until a Change in Control has occurred or the Board
or the appropriate committee thereof, on reasonable belief
after due investigation, adopts a resolution that the
Potential Change in Control has ceased to exist.
1.1.19 "Related Party" means (i) a Subsidiary,
or (ii) an employee or group of employees of the Company or
any Subsidiary, or (iii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any Subsidiary, or (iv) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportion as their ownership of
stock of the Company.
1.1.20 "Severance Benefit" means the amounts
payable and benefits continued in accordance with
Section 3.3 hereof.
1.1.21 "Severance Administration Committee"
means the committee appointed by the Board to administer the
Plan.
1.1.22 "Subsidiary" means any corporation,
partnership, limited liability company or joint venture in
which the Company, directly or indirectly, holds a majority
of the voting power of such corporation's outstanding shares
of capital stock or a majority of the capital or profits
interests of such partnership, limited liability company or
joint venture.
1.1.23 "Voting Securities" means any securities
of the Company which carry the right to vote generally in
the election of directors.
5
<PAGE>
ARTICLE 2. ELIGIBILITY
2.1 Participation. An Employee shall be entitled to be a
Participant if he is selected for participation by the Board and
signs a letter any time prior to the time a Change in Control
occurs agreeing to the terms of the Plan, including, but not
limited to, the Plan provisions precluding the Participant from
competing with the Employers and their respective Subsidiaries
for specified periods following termination of employment.
2.2 Duration of Participation. A Participant shall cease
to be a Participant when he ceases to be an Employee, unless such
Participant is then entitled to payment of a Severance Benefit.
A Participant entitled to payment of a Severance Benefit shall
remain a Participant until the full amount of the Severance
Benefit has been paid to such Participant.
ARTICLE 3. SEVERANCE BENEFIT AND NONCOMPETITION
3.1 Right to Severance Benefit. Subject to the obligations
of each Participant under Section 3.5 hereof, a Participant shall
be entitled to receive a Severance Benefit from his Employer (or
the Company in accordance with Article 4 hereof) the
Participant's employment by the Employer shall terminate for any
reason specified in Subsection 3.2.1 hereof.
3.2 Termination of Employment.
3.2.1 Terminations Which Give Rise to a Severance
Benefit Under This Plan.
3.2.1.1 Except as set forth in Subsection 3.2.2
hereof, any involuntary termination of employment of a
Participant by action of the Employer prior to a
Change in Control (excluding any transfer to another
Employer) shall entitle the Participant to a Severance
Benefit under Subsection 3.3.1 hereof.
3.2.1.2 Except as set forth in Subsection 3.2.2
hereof, any termination of employment of a Participant
with an Employer by action of the Employer during a
Potential Change in Control or within three (3) years
6
<PAGE>
following a Change in Control (excluding any transfer
to another Employer) shall entitle the Participant to
a Severance Benefit under Subsection 3.3.2.
3.2.1.3 Any termination of employment of a
Participant with an Employer by the Participant for
Good Reason within one (1) year following a Change in
Control shall entitle the Participant to a Severance
Benefit under Subsection 3.3.3 hereof.
3.2.2 Terminations Which Do Not Give Rise to a
Severance Benefit Under This Plan. If a Participant's
employment with an Employer is terminated for cause (as
defined below), retirement (except as otherwise provided in
Subsection 3.3.4 hereof) or the sale of a business (as
defined below), the Participant shall not be entitled to a
Severance Benefit, regardless of the occurrence of a Change
in Control.
3.2.2.1 A "termination for cause" shall have
occurred when a Participant is terminated for
(i) willful failure by the Participant to
substantially perform his duties, other than any such
failure resulting from a Disability, which results in
a significantly adverse effect upon the Company or a
Subsidiary, (ii) gross negligence or willful
misconduct of the Participant which results in a
significantly adverse effect upon the Company or a
Subsidiary, or (iii) willful violation or disregard by
the Participant of any published policy of the Company
or his Employer which results in a significantly
adverse effect upon the Company or a Subsidiary.
3.2.2.2 A "termination due to the sale
of a business" shall have occurred when the Company or
Participant's Employer has sold or otherwise disposed
of a Subsidiary, branch or other business unit (or all
or substantially all of the assets thereof), in which
the Participant was employed before such sale or
disposition, to any Person, other than the Company or
a Related Party (except an employee or group of
employees of the Company or a Subsidiary), and the
Participant has been offered employment with the
acquiror of such Subsidiary, branch or unit on
substantially the same terms and conditions under
which he worked for his Employer. Such terms and
conditions shall include an agreement or plan binding
on such acquiror, providing that, upon any termination
of employment with the acquiror of the sort described
in Subsection 3.2.1 hereof within one (1) year after
such sale or disposition, the acquiror shall pay to the
7
<PAGE>
former Participant an amount equal to the Severance
Benefit that such former Participant would have
received under the Plan had he been a Participant
at the time of such termination. For purposes of this
Subsection 3.2.2.2, the acquiror's agreement or plan
must treat service with the Company, its Subsidiaries
and the acquiror as continuous service for purposes of
calculating any Severance Benefit.
3.3 Severance Benefit.
3.3.1 If a Participant's employment is terminated under
circumstances described in Subsection 3.2.1.1 hereof, the
Participant's Employer shall pay such Participant without
the necessity of a claim being made under Section 7.8
hereof, within sixty (60) business days after the date such
termination takes effect, an amount equal to one hundred
percent (100%) of the Participant's Annual Base
Compensation.
3.3.2 If a Participant's employment is terminated under
circumstances described in Subsection 3.2.1.2 hereof, the
Participant's Employer shall pay such Participant, without
the necessity of a claim being made under Section 7.8
hereof, within ten (10) business days after the date such
termination takes effect, an amount equal to: (i) three
hundred percent (300%) of the average of the Participant's
W-2 compensation during the five (5) calendar years prior to
the Change in Control (provided that, if the Participant
does not work for an Employer during all of the five (5)
year period, the average annual W-2 compensation for his
period of employment with an Employer shall be used) less
eight and 33/100 percent (8.33%) of such average annual W-2
compensation for each month the Participant's age exceeds 62
years at the date of termination; and (ii) if and only if
such Participant has attained age fifty-five (55) and
qualified for early retirement under the Pension Plan, the
Special Retirement Benefit (as defined in Section 3.4.1
hereof).
3.3.3 If a Participant's employment is terminated under
circumstances described in Subsection 3.2.1.3 hereof, the
Participant's Employer shall pay such Participant, without
the necessity of a claim being made under Section 7.8
hereof, within ten (10) business days after the date such
termination takes effect, an amount equal to: (i) two
hundred percent (200%) of the average of the Participant's
W-2 compensation during the five (5) calendar years prior to
the Change in Control (provided that, if the Participant
does not work for an Employer during all of the five (5)
year period, the average annual W-2 compensation for his
period of employment with an Employer shall
8
<PAGE>
be used) less eight and 33/100 percent (8.33%) of such average
annual W-2 compensation for each month the Participant's age
exceeds 63 years at the date of termination; and (ii) if and
only if such Participant has attained age fifty-five (55) and
qualified for early retirement under the Pension Plan, the
Special Retirement Benefit (as defined in Section 3.4.2
hereof).
3.3.4 The Severance Benefit shall be payable in
addition to, and not in lieu of, all other accrued or vested
or earned but deferred compensation, rights, options and
other benefits which may be owed to a Participant following
termination (which are not contingent on any Change in
Control preceding such termination), including but not
limited to accrued vacation or sick pay, amounts or benefits
payable under any bonus or other compensation plans, any
life insurance plan, health plan, disability plan, or any
similar or successor plans.
3.3.5 If the Participant is eligible under the terms of
the Pension Plan for "early retirement" (as such term is
used in the Pension Plan), the Participant may elect such
"early retirement" in connection with a termination under
Subsection 3.2.1.1, 3.2.1.2 or 3.2.1.3 hereof without
prejudice to the Participant's entitlement to any payments
and benefits provided for under this Section 3.3.
3.3.6 The Participant shall not be required to mitigate
damages or the amount of his Severance Benefit by seeking
other employment or otherwise, nor shall the amount of his
Severance Benefit be reduced by any compensation earned by
the Participant as a result of employment after his
termination of employment with an Employer; provided,
however, that if a Participant accepts employment with an
Employer during the period beginning on the date of
termination and ending on the last day of the thirty-sixth
(36th) month thereafter, any compensation the Participant
receives from such Employer during such period (less any
taxes withheld) shall be paid by the Participant to the
Employer which paid the Severance Benefit.
3.3.7 This Plan is intended to be a welfare plan under
Section 3(1) of ERISA, and if this Plan were found to be a
pension plan under Section 3(2) of ERISA, the Plan is
intended to qualify as a plan maintained for the purpose of
providing deferred compensation for a select group of
management or highly compensated employees, within the
meaning of Sections 201(2), 301(3) and 401(a)(1) of ERISA.
9
<PAGE>
3.4 Special Retirement Benefit.
3.4.1. For purposes of Subsection 3.3.2 hereof,
the term "Special Retirement Benefit" means an amount
calculated such that, when added to any benefits payable to
the Participant under the Pension Plan and the Willbros USA,
Inc. Executive Benefit Restoration Plan (collectively, the
"Other Retirement Benefits"), the total retirement benefits
the Participant receives from the Employer will at least
equal the amount which the aggregate of the Other Retirement
Benefits would have been if the Participant retired on a
date three (3) years following the date of his termination
of employment with the relevant Employer or at age 65,
whichever is earlier, and the Percentage of Early Pension
Payable (as described in the Pension Plan) was calculated
using a discount percent per year not exceeding one and one-
half percent (1-1/2%) from age sixty-five (65). For
purposes of calculating the Special Retirement Benefit and
the Other Retirement Benefits under this Agreement, the
following will apply:
(i) The Participant will be deemed to
have continued his employment for a three (3)
year period beginning on the date of his
termination, or until age 65, whichever is less,
at his base salary in effect on the date of
termination; and
(ii) The Participant will be deemed to
have received compensation under the Incentive
Plan (or a similar successor incentive plan) for
each year of such deemed employment continuation
in an amount equal to the average annual
incentive payment earned under the Incentive
Plan for the three (3) full calendar years
preceding his termination of employment.
3.4.2 For purposes of Subsection 3.3.3 hereof, the term
"Special Retirement Benefit" means an amount calculated such
that, when added to any benefits payable to the Participant
under the Pension Plan and the Willbros USA, Inc. Executive
Benefit Restoration Plan (collectively, the "Other
Retirement Benefits"), the total retirement benefits the
Participant receives from the Employer will at least equal
the amount which the aggregate of the Other Retirement
Benefits would have been if the Participant retired on a
date two (2) years following the date of his termination
of employment with the relevant Employer or at
age 65, whichever is earlier, and the Percentage of
Early Pension Payable (as described in the Pension
Plan) was calculated using a discount
10
<PAGE>
percent per year not exceeding one and one-half percent
(1-1/2%) from age sixty-five (65). For purposes of
calculating the Special Retirement Benefit and the Other
Retirement Benefits under this Agreement, the following
will apply:
(i) The Participant will be deemed to
have continued his employment for a two (2) year
period beginning on the date of his termination,
or until age 65, whichever is less, at his base
salary in effect on the date of termination; and
(ii) The Participant will be deemed to
have received compensation under the Incentive
Plan (or a similar successor incentive plan) for
each year of such deemed employment continuation
in an amount equal to the average annual
incentive payment earned under the Incentive
Plan for the two (2) full calendar years
preceding his termination of employment.
3.5 Non-Competition.
3.5.1 In consideration for any severance payments under
Subsection 3.3.1 hereof, each Participant agrees that, for a
period of twelve (12) months after his termination of
employment, he will not compete, directly or indirectly,
with the businesses being conducted by the Employers (and
their respective Subsidiaries) on the date of his
termination of employment in the countries where the
Employers (and their respective Subsidiaries) are then
conducting business.
3.5.2 In consideration for any severance payments under
Subsection 3.3.2 or 3.3.3 hereof, and Section 3.4 hereof, if
applicable, each Participant agrees that, for a period of
twenty-four (24) months after his termination of employment,
he will not compete, directly or indirectly, with the
businesses being conducted by the Employers (and their
respective Subsidiaries) on the date of his termination of
employment in the countries where the Employers (and their
respective Subsidiaries) are then conducting business.
3.5.3 In the event a Participant terminates his
employment or retires during the term of this Agreement
under circumstances where he is not entitled to payments
under Subsection 3.3.1 or 3.3.2 hereof, an Employer may, by
written notice provided to
11
<PAGE>
Participant on or within thirty (30) days after the
effective date of Participant's termination, elect to
require Participant to comply with the non-competition
provisions of this Subsection 3.5.3. If an Employer
provides such notice, Participant, for a period of
one (1) year from the date of his termination or retirement,
will not compete, directly or indirectly, with the
businesses being conducted by the Employers (and their
respective Subsidiaries) on the date of such termination or
retirement in the countries where the Employers (and their
respective Subsidiaries) are then conducting business, and
the Employers will pay Participant on the first business day
of each month during such one (1) year non-compete period an
amount equal to one twenty-fourth (1/24) of Participant's
Annual Base Compensation in effect on Participant's date of
termination or retirement. Such payments shall be regarded
solely as consideration for Participant's compliance with
the requirements of this Subsection 3.5.3 and shall not
constitute salary or severance pay. Notwithstanding the
foregoing, if an Employer requires a Participant to comply
with the non-competition provisions hereof, a Participant
shall not be prohibited from owning (other than in a
managerial capacity) up to ten percent (10%) of the publicly
traded stock of a corporation trading on a recognized
securities exchange or in an over-the-counter market, which
corporation is in competition with any of the Employers (or
any of their respective Subsidiaries). It is expressly
understood and agreed that the Employers and each
Participant consider the restrictions contained in this
Subsection 3.5.3 to be reasonable and necessary for the
purposes of preserving and protecting the goodwill and
proprietary information of the Employers (and their
respective Subsidiaries). The provisions of this Subsection
3.5.3 shall survive expiration or termination of this
Agreement.
ARTICLE 4. PARTICIPATING EMPLOYERS
This Plan may be adopted by any Subsidiary. Upon such
adoption, the Subsidiary shall become an Employer and the
provisions of the Plan shall be fully applicable to the Employees
of that Subsidiary who are designated Participants by the Board.
This Plan establishes and vests in each Participant a contractual
right to the relevant benefits hereunder, enforceable by the
Participant against his Employer. The Company agrees
unconditionally to guarantee the performance by, and obligation
of, each Employer under the Plan.
12
<PAGE>
ARTICLE 5. SUCCESSOR TO EMPLOYER
This Plan shall bind any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) which
becomes such after a Change in Control of the Company has
occurred to all or substantially all of the business and/or
assets of any Employer in the same manner and to the same extent
that the Employer would be obligated under this Plan if no
succession had taken place. In the case of any transaction in
which a successor (which becomes such after a Change in Control
of the Company has occurred) would not by the foregoing provision
or by operation of law be bound by this Plan, the Employer shall
require such successor expressly and unconditionally to assume
and agree to perform the Employer's obligations under this Plan,
in the same manner and to the same extent that the Employer would
be required to perform if no such succession had taken place.
The terms "Company" and "Employer," as used in this Plan, shall
mean the Company or an Employer, respectively, as hereinbefore
defined and any successor or assignee to the business or assets
which by reason hereof becomes bound by this Plan.
ARTICLE 6. DURATION AND AMENDMENT
6.1 Duration. The Plan shall continue for a period of five
(5) years from the Effective Date.
6.2 Amendment. The Plan may not be amended except for: (i)
an amendment that increases the benefits payable under the Plan
or otherwise constitutes a bona fide improvement of a
Participant's rights under the Plan, or (ii) an amendment which
decreases the benefits of a Participant that is consented to in
writing by such Participant.
ARTICLE 7. ADMINISTRATION
7.1 Fiduciaries. Under certain circumstances, the Board or
the Severance Administration Committee may be determined by a
court of law to be a fiduciary with respect to a particular
action under the Plan. As authorized by ERISA, to prevent any
two parties to the Plan from being deemed co-fiduciaries with
respect to a particular function, the Plan is intended, and
should be construed, to allocate to each party to the Plan only
those specific powers, duties, responsibilities, and obligations
as are specifically granted to it under the Plan.
13
<PAGE>
7.2 Allocation of Responsibilities.
7.2.1 Board of Directors. The Board shall have
exclusive authority and responsibility for:
(i) The amendment or termination of
this Plan in accordance with Section 6.2 hereof;
and
(ii) The delegation to the Severance
Administration Committee of any authority and
responsibility reserved herein to the Board.
7.2.2 Severance Administration Committee. The
Severance Administration Committee shall serve as plan
administrator and shall have exclusive authority and
responsibility for those functions set forth in Section 7.3
hereof, in other provisions of this Plan, and in provisions
of a trust used to pay benefits under this Plan.
7.3 Provisions Concerning the Severance Administration
Committee.
7.3.1 Membership and Voting. The Severance
Administration Committee shall serve as plan administrator.
The Severance Administration Committee shall consist of not
less than three (3) members. The Severance Administration
Committee shall act by a majority of its members at the time
in office, and such action may be taken by a vote at a
meeting, in writing without a meeting, or by telephonic
communications. Attendance at a meeting, in person or by
telephone, shall constitute waiver of notice thereof. A
member of the Severance Administration Committee who is a
Participant of the Plan shall not vote on any question
relating specifically to such Participant. Any such action
shall be voted or decided by a majority of the remaining
members of the Severance Administration Committee. The
Severance Administration Committee shall designate one of
its members as the Chairman and shall appoint a Secretary
who may, but need not, be a member thereof. The Severance
Administration Committee may appoint from its members such
subcommittees with such powers as the Severance
Administration Committee shall determine.
7.3.2 Duties of the Severance Administration Committee.
The Severance Administration Committee shall administer the
Plan in accordance with its terms and shall have all the
powers necessary to carry out such terms. The Severance
14
<PAGE>
Administration Committee shall execute any certificate,
instrument or other written direction on behalf of the Plan
and may make any payment on behalf of the Plan. All
interpretations of the Plan, and questions concerning its
administration and application, shall be determined by the
Severance Administration Committee (or its delegate). The
Severance Administration Committee may appoint such
accountants, counsel, specialists, and other persons as it
deems necessary or desirable in connection with the
administration of the Plan. Such accountants and counsel
may, but need not, be accountants and counsel for the
Company or a Related Party.
7.4 Delegation of Responsibilities; Bonding.
7.4.1 Delegation and Allocation. The Board and the
Severance Administration Committee, respectively, shall have
the authority to delegate or allocate, from time to time, by
a written instrument, all or any part of their
responsibilities under the Plan to such person or persons as
each may deem advisable and in the same manner to revoke any
such delegation or allocation of responsibility. Any action
of a person in the exercise of such delegated or allocated
responsibility shall have the same force and effect for all
purposes hereunder as if such action had been taken by the
Board or the Severance Administration Committee, as the case
may be. Neither the Company, any Employer, the Board, the
Severance Administration Committee nor any member thereof
shall be liable for any acts or omissions of any such
person, who shall periodically report to the Board or the
Severance Administration Committee, as applicable,
concerning the discharge of the delegated or allocated
responsibilities.
7.4.2 Bonding. The members of the Severance
Administration Committee shall serve without bond (except as
expressly required by federal law) and without compensation
for their services as such.
7.5 No Joint Fiduciary Responsibilities. This Plan is
intended to allocate to each named fiduciary the individual
responsibility for the prudent execution of the functions
assigned to it, and none of such responsibilities and no other
responsibility shall be shared by two or more of such named
fiduciaries unless such sharing is provided for by a specific
provision of the Plan. Whenever one named fiduciary is required
herein to follow the directions of another named fiduciary, the
two named fiduciaries shall not be deemed to have been assigned a
shared responsibility, but the responsibility of a named
fiduciary receiving such directions shall be to follow them
insofar as such instructions are on their face proper under
applicable law.
15
<PAGE>
7.6 Information to be Supplied by Employer. Each Employer
shall provide to the Severance Administration Committee or its
delegate such information as it shall from time to time need in
the discharge of its duties.
7.7 Fiduciary Capacity. Any person or group of persons may
serve in more than one fiduciary capacity with respect to the
Plan.
7.8 Claims Procedure.
7.8.1 Initial Claim for Benefits. Each Participant or
beneficiary of a Participant may submit a claim for benefits
to the Severance Administration Committee (or to such other
person as may be designated by the Severance Administration
Committee) in writing in such form as is permitted by the
Severance Administration Committee. A Participant shall
have no right to seek review of a denial of benefits, or to
bring any action in any court to enforce a claim for
benefits prior to his filing a claim for benefits and
exhausting his rights to review under Subsections 7.8.1 and
7.8.2 hereof.
When a claim for benefits has been filed properly, such
claim for benefits shall be evaluated and the claimant shall
be notified of the approval or the denial within ninety (90)
days after the receipt of such claim unless special
circumstances require an extension of time for processing
the claim. If such an extension of time for processing is
required, written notice of the extension shall be furnished
to the claimant prior to the termination of the initial
ninety (90) day period which shall specify the special
circumstances requiring an extension and the date by which a
final decision will be reached (which date shall not be
later than one hundred and eighty (180) days after the date
on which the claim was filed). A claimant shall be given a
written notice in which the claimant shall be advised as to
whether the claim is granted or denied, in whole or in part.
If a claim is denied, in whole or in part, the claimant
shall be given written notice which shall contain (a) the
specific reasons for the denial, (b) references to pertinent
plan provisions upon which the denial is based, (c) a
description of any additional material or information
necessary to perfect the claim and an explanation of why
such material or information is necessary, and (d) the
claimant's rights to seek review of the denial.
7.8.2 Review of Claim Denial. If a claim is denied, in
whole or in part, the claimant shall have the right to
request that the Severance Administration Committee
16
<PAGE>
review the denial, provided that the claimant files a written
request for review with the Severance Administration
Committee within sixty (60) days after the date on which the
claimant received written notification of the denial. A
claimant (or his duly authorized representative) may review
pertinent documents and submit issues and comments in
writing to the Severance Administration Committee. Within
sixty (60) days after a request for review is received, the
review shall be made and the claimant shall be advised in
writing of the decision on review, unless special
circumstances require an extension of time for processing
the review, in which case the claimant shall be given a
written notification within such initial sixty (60) day
period specifying the reasons for the extension and when
such review shall be completed (provided that such review
shall be completed within one hundred and twenty (120) days
after the date on which the request for review was filed).
The decision on review shall be forwarded to the claimant in
writing and shall include specific reasons for the decision
and references to plan provisions upon which the decision is
based. If a claimant shall fail to file a request for
review in accordance with the procedures herein outlined,
such claimant shall have no rights to review and shall have
no right to bring action in any court and the denial of the
claim shall become final and binding on all persons for all
purposes.
ARTICLE 8. MISCELLANEOUS
8.1 Payment Obligations Absolute. Each Employer's
obligation to pay any amounts or to provide benefits continuation
or any other benefits described in Section 3.3 hereof shall be
absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company or any of its Subsidiaries may have against any
Participant.
8.2 Indemnification. If a Participant institutes any legal
action in seeking to obtain or enforce, or is required to defend
in any legal action the validity or enforce ability of, any right
or benefit provided by the Plan, his Employer shall, if the
Participant prevails in such action, pay for all reasonable legal
fees and expenses incurred by such Participant.
8.3 Employment Status. The Plan does not constitute a
contract of employment or impose on the Participant or the
Participant's Employer any obligation to retain the Participant
as an Employee, any restriction on changing the status of the
Participant's employment, or any restriction on changing the
policies of the Company or its Subsidiaries regarding termination
of employment.
17
<PAGE>
8.4 Validity and Severability. The invalidity or
unenforceability of any provision of the Plan shall not affect
the validity or enforceability of any other provision of the
Plan, which shall remain in full force and effect, and any
prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other
jurisdiction.
8.5 Governing Law. The validity, interpretation,
construction and performance of the Plan shall in all respects be
governed by the laws of the United States and, to the extent not
preempted by such laws, by the laws of the State of Delaware,
without regard to choice of law principles.
8.6 Withholding and Payment of Taxes. The Company or the
Subsidiaries may withhold from any amounts payable under the Plan
all federal, state, local and/or other taxes as shall be legally
required. In addition, each Participant shall be solely
responsible for the payment of all income, excise and other taxes
which are individually levied on him by any taxing authority with
respect to any amount paid to such Participant under the Plan.
8.7 Obligations Unfunded. All benefits due a Participant
under the Plan are unfunded and unsecured and are payable out of
the general funds of the Employers. One or more Employers may
establish a "grantor trust" for the payment of benefits and
obligations hereunder, the assets of which shall be at all times
subject to the claims of creditors as provided for in such trust.
8.8 Construction. For purposes of the Plan, the following
rules of construction shall apply:
8.8.1 No act or failure to act on a Participant's part
shall be considered "willful" unless done or omitted to be
done by the Participant not in good faith and without
reasonable belief that such act or omission was in the best
interest of the Company or a Subsidiary.
8.8.2 The word "or" is disjunctive but not necessarily
exclusive.
8.8.3 Words in the singular include the plural; words
in the plural include the singular; and words in the neuter
gender include the masculine and feminine genders and words
in the masculine or feminine gender include the other and
neuter genders.
18
<PAGE>
The Plan has been adopted by the Company to be effective as
of the 1st day of January, 1999.
WILLBROS GROUP, INC.
/s/ Larry J. Bump
By: ---------------------------
Larry J. Bump
Chairman of the Board and
Chief Executive Officer
19
<PAGE>
EXHIBIT 10.23
SEPARATION AGREEMENT AND RELEASE
--------------------------------
THIS SEPARATION AGREEMENT AND RELEASE ("Agreement") is made
and entered into this 31st day of March, 1999, by and between
WILLBROS USA, INC. ("Employer") and M. KIETH PHILLIPS ("Employee").
WITNESSETH:
-----------
WHEREAS, Employee is currently employed by Employer; and
WHEREAS, Employee will retire from his employment with
Employer effective March 31, 1999 ("Retirement Date"); and
WHEREAS, Employer and Employee wish to achieve a final and
amicable resolution of all issues related to their employment
relationship;
NOW, THEREFORE, for and in consideration of the mutual
covenants and promises set forth below, as well as other good and
valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. Employee's Retirement. Employee and Employer confirm and
---------------------
agree that Employee is retiring from employment with Employer as
of the Retirement Date and that the employment relationship which
existed between Employee and Employer and/or any of Employer's
affiliated companies shall cease as of the Retirement Date.
However, nothing contained herein, shall prevent or interfere
with the ability of the parties to enter into future agreements
for Employee to provide consulting services and advice to
Employer or Employer's affiliates on an independent contractor
basis ("Subsequent Agreement"). Except as provided in any
Subsequent Agreement, all of Employer's obligations to Employee
on or after the Retirement Date are set forth herein.
Accordingly, except as otherwise provided herein or in a
Subsequent Agreement, Employer shall have no further obligations
whatsoever to Employee after the Retirement Date. Similarly,
except as provided in any Subsequent Agreement, all of Employee's
obligations to Employer on or after the Retirement Date are set
forth herein. Accordingly, except as otherwise provided herein or
in a Subsequent Agreement, Employee shall have no further
obligations to Employer after the Retirement Date. Employer
shall cause its personnel records to reflect that Employee
retired from employment with Employer effective on the Retirement
Date.
2. Prior Agreements Superseded. Except as otherwise
---------------------------
specifically provided herein, this Agreement supersedes and
replaces all other prior agreements, written or oral, relating to
Employee's employment with Employer and/or any of Employer's
affiliated companies.
3. Management Incentive Plan. Prior to the Retirement Date,
-------------------------
Employee participated in the Willbros USA, Inc. Management
Incentive Plan dated January 1, 1996 ("Incentive Plan").
<PAGE>
Employee acknowledges that the Incentive Plan terminated
December 31, 1998 and that Employee is not entitled to any
further payments or benefits under the Incentive Plan.
4. Medical Insurance Continuation. After the Retirement Date,
------------------------------
Employee and Employee's spouse will be entitled to continue group
medical coverage under Employer's Retiree Medical Plan ("Retiree
Medical Plan"). Employer reserves the right, pursuant to the
terms of its Retiree Medical Plan, to amend or terminate any or
all provisions of the Retiree Medical Plan in the future. If
Employee is not entitled to Medicare benefits and does not elect
coverage under the Retiree Medical Plan, Employee will be
entitled to continue participation for a limited period of time
in Employer's Group Medical Plan, Group Dental Plan and/or
Executive Medical Plan under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"). Detailed information
concerning the costs and procedures applicable to such alternate
insurance coverage will be provided separately by Employer.
5. Life Insurance Conversion. Employee has the right to
-------------------------
convert Employee's life insurance coverage under Employer's Group
Life Plan and dependent life insurance coverage obtained by the
Employee under Employer's Dependent Life Plan to individual life
insurance policies. Conversion forms and premium rates applicable
to such conversion programs will be provided separately by the
relevant insurer.
6. Pension Plan. As a vested participant in the Willbros USA,
------------
Inc. Pension Plan ("Pension Plan") maintained by Employer for the
benefit of eligible employees, Employee is or will become
entitled to certain retirement benefits. Nothing contained in
this Agreement shall affect Employee's rights to such benefits as
provided by the terms of the Pension Plan. Employee acknowledges
that Employer has separately provided Employee a specific
description of Employee's payment options under the Pension Plan.
7. Executive Benefit Restoration Plan. In addition to the
----------------------------------
Pension Plan, Employee also participated prior to the Retirement
Date in the Willbros USA, Inc. Executive Benefit Restoration Plan
("Restoration Plan"). On the Retirement Date, Employee shall
receive Two Hundred Thirty Four Thousand Fifteen U.S. Dollars
(U.S. $234,015), less applicable payroll tax withholding, under
the Restoration Plan as a lump sum payment of all accumulated
benefits due Employee under the Restoration Plan as of the
Retirement Date. Effective upon receipt of such payment,
Employee releases the Employer, the Restoration Plan Trust, the
Restoration Plan Trustee, and the Restoration Plan administrators
from any further claims for benefits under the Restoration Plan.
8. Incentive Stock Options. Employee is vested in certain
-----------------------
incentive stock options and certain non-qualified stock options
provided by Employer's parent company, Willbros Group, Inc.
("WGI") pursuant to the Willbros Group, Inc. 1996 Stock Plan
("Stock Plan"). Except as otherwise provided in this Paragraph 9,
nothing in this Agreement shall affect any rights or
obligations of Employee or WGI under the Incentive Stock Option
Agreement or the Non-Qualified Stock Option Agreements entered
into between Employee and WGI pursuant to
2
<PAGE>
the Stock Plan. Employer hereby confirms that WGI has
accelerated the vesting of certain stock options previously
awarded to Employee under the Plan with the effect that
the portions of Employee's previous stock option awards
pursuant to the Stock Plan which are otherwise not vested
as of March 31, 1999 will be deemed to be fully vested
as of that date. Employee acknowledges that any of Employee's
incentive stock options awarded under the Stock Plan which
are exercised more than three (3) months after the Retirement
Date will be treated as non-qualified stock options for
U.S. federal income tax purposes.
9. Employer Stock Ownership Plans. Employee is indebted to
------------------------------
Employer pursuant to certain secured promissory notes issued to
Employer by Employee in connection with Employee's purchase of
stock pursuant to the Willbros USA, Inc. 1992 Employee Non-
Qualified Stock Ownership Plan and the Willbros USA, Inc. 1996
Management Personnel Non-Qualified Stock Ownership Plan.
Employee's obligations and Employer's rights under such
promissory notes shall not be affected by this Agreement, except
that Employer waives its rights to accelerate the due dates of
such promissory notes on account of Employee's retirement.
10. Employer Investment Plan. Employee is fully vested in
------------------------
Employer's 401(k) Investment Plan ("Investment Plan"). Employee
has the option of receiving a lump-sum distribution of Employee's
total account balance in the Investment Plan, transferring such
account balance to another tax-qualified plan or to an Individual
Retirement Account or leaving such account balance in the
Investment Plan. Election forms and detailed information
concerning Employee's options with respect to Employee's account
balance in the Investment Plan will be provided separately by
Employer.
11. Director and Officer Matters. Nothing in this Agreement
----------------------------
shall affect any of Employee's rights or obligations with respect
to indemnification or director and officer liability insurance
coverage to which Employee is entitled or subject in his capacity
as a former director and officer of Employer, WGI and certain of
their affiliates, whether under that certain Indemnification
Agreement between WGI and Employee dated May 2, 1997, or
otherwise.
12. Accrued Vacation Pay. On the Retirement Date, Employee
--------------------
shall receive Thirty Six Thousand Seven Hundred Sixty Six U.S.
Dollars (U.S.$36,766), less applicable payroll tax withholding,
as compensation for all of Employee's accrued vacation time
through the Retirement Date.
13. Other Benefits. Except as specifically set forth herein,
--------------
all employment benefits previously made available to Employee by
Employer or any of its affiliates, including, without limitation,
those made available under Employer's Executive Compensation
Program, shall cease to be available to Employee as of the
Retirement Date. Employee acknowledges that he is not entitled
to receive any compensation, severance payment or retirement
enhancement payment under the Employer's 1999 Reduction-In-Force
Plan or WGI's Severance Protection Plan.
3
<PAGE>
14. Lump Sum Payment. On the Retirement Date, Employer shall
----------------
pay to Employee a lump sum amount of One Hundred Ninety Three
Thousand Dollars (U. S. $193,000), less applicable payroll tax
withholding, in consideration of the release specified below and
the acknowledgements, waivers, representations and undertakings
specified herein.
15. Release. Except for the obligations of Employer specifically
-------
set forth or referenced in this Agreement, Employee fully and
forever relieves, releases, and discharges Employer, WGI and
all of their respective representatives, officers, directors,
shareholders, predecessors, successors, parents, subsidiaries,
operating units, affiliates, divisions, employees and attorneys
from any and all claims, debts, liabilities, demands,
obligations, promises, acts, agreements, costs, expenses,
damages, actions, and causes of action, whether in law or in
equity, whether known or unknown, suspected or unsuspected,
arising from Employee's employment with and termination from
Employer, including but not limited to any and all claims
pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C.
Section 2000e, et seq., as amended by the Civil Rights Act of
1991, which prohibits discrimination in employment based on race,
color, national origin, religion or sex; the Civil Rights Act of
1966, 42 U.S.C. Sections 1981, 1983 and 1985, which prohibits
violations of civil rights; the Age Discrimination in Employment
Act of 1967, as amended, and as further amended by the Older
Workers Benefit Protection Act, 29 U.S.C. Section 621, et seq.,
which prohibits age discrimination in employment; the Employment
Retirement Income Security Act of 1974, as amended, 29 U.S.C.
Section 1001, et seq., which protects certain employee benefits;
the Americans with Disabilities Act of 1990, as amended, 42
U.S.C. Section 12101, et seq., which prohibits discrimination
against the disabled; the Family and Medical Leave Act of 1993,
29 U.S.C. Section 2601, et seq., which provides medical and
family leave; the Fair Labor Standards Act, 42 U.S.C. Section 201,
et seq., including the Wage and Hour Laws relating to
payment of wages; 85 O.S. 1991 Sections 5, 6 and 7, which
prohibits discharge in retaliation for exercising rights under
Oklahoma's Workers' Compensation Act; and all other federal,
state or local laws or regulations prohibiting employment
discrimination. This release also includes, but is not limited
to, a release by Employee of any claims for breach of contract,
mental pain, suffering and anguish, emotional upset, impairment
of economic opportunities, unlawful interference with employment
rights, defamation, intentional or negligent infliction of
emotional distress, fraud, wrongful termination, wrongful
discharge in violation of public policy, breach of any express or
implied covenant of good faith and fair dealing, that Employer
has dealt with Employee unfairly or in bad faith, and all other
common law contract and tort claims. Employee is not waiving any
rights or claims that may arise after the Retirement Date.
16. Confidentiality. For a period of five (5) years after the
---------------
Retirement Date, Employee shall not, except as otherwise required
by law, furnish, disclose or make accessible to any person,
entity or government authority, any knowledge, trade secrets,
customer information, supplier information, plans, opportunities,
procedures, data, techniques or other information relating to the
businesses or finances of Employer or any of its affiliates. The
prohibitions of this Paragraph 16 shall not apply, however, to
information in the public domain (but only if the
4
<PAGE>
same becomes part of the public domain through a means other
than a disclosure prohibited hereunder).
17. Remedies. The parties recognize that, because of the nature
--------
of the subject matter of Paragraph 16 above, it would be
impracticable and extremely difficult to determine the actual
damages suffered by Employer in the event of a material breach of
Employee's obligations thereunder. Accordingly, if Employee
commits a material breach, or threatens to commit a material
breach, of any of the provisions of Paragraph 16, Employer or any
of its successors or assigns shall give Employee written notice
of such violation and, if Employee has not cured such violation
or otherwise ceased to act in violation of Paragraph 16 within
ten (10) days after the giving of such notice, Employer or any of
its successors or assigns shall have the following rights and
remedies:
(a) to have the provisions of Paragraph 16 specifically
enforced by any court having equity jurisdiction,
without the posting of bond or other security, it
being acknowledged and agreed by Employee that any
such breach or threatened breach will cause
irreparable injury to Employer and that an injunction
may be issued against Employee to stop or prevent any
such breach or threatened breach; and
(b) to recover such actual damages as Employer or its
affiliates may incur as a result of such breach or
threatened breach.
The curing of a violation of the requirements of Paragraph 16
shall not preclude Employer from seeking the recovery of
its actual damages resulting from such violation.
18. Independent Legal Advice. Employee acknowledges that he has
------------------------
been represented by independent legal counsel of his choice with
respect to the advisability of signing this Agreement and
providing the releases, waivers, acknowledgements,
representations and undertakings specified herein, and with
respect to his rights and obligations under the terms of this
Agreement.
19. Knowledge of Contents. Both parties acknowledge that they
---------------------
have carefully read this Agreement and that the contents hereof
are known and understood by them. This Agreement is signed
freely by each party hereto.
20. Review and Revocation Period. Employee acknowledges that he
----------------------------
has been extended a period of twenty-one (21) days within which
to consider this Agreement. For a period of seven (7) days
following Employee's execution of the Agreement, Employee may
revoke this Agreement by notifying Employer, in writing, of his
desire to do so. After the seven (7) day period has elapsed,
this Agreement shall be binding and enforceable.
21. Obligation to Return Funds. In the event Employee exercises
--------------------------
his right to revocation set forth in Section 20 above, Employee
shall immediately return to Employer all amounts paid
5
<PAGE>
to Employee as consideration under this Agreement. The
duty to return funds under this Agreement shall survive the
revocation of the Agreement and shall constitute a separately
enforceable obligation between Employee and Employer.
22. No Admission of Liability. This Agreement and compliance
-------------------------
with this Agreement shall not be construed as an admission by
Employer or Employee of any liability whatsoever, or as an
admission by Employer of any violation of the rights of Employee
or any other person, or any violation of any order, law, statute,
duty or contract.
23. Severability. In the event that any provision of this
------------
Agreement should be held to be void, voidable, or unenforceable,
the remaining portions hereof shall remain in full force and
effect.
24. Governing Law. This Agreement will be interpreted and
-------------
enforced in accordance with the laws of the State of Oklahoma.
25. Entirety and Integration. Upon the execution hereof by all
------------------------
of the parties hereto, this Agreement shall constitute a single,
integrated contract expressing the entire agreement of the
parties relative to the subject matter hereof and supersedes all
prior negotiations, understandings and/or agreements, if any, of
the parties. No covenants, agreements, representations, or
warranties of any kind whatsoever have been made by any party
hereto, except as specifically set forth in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first mentioned above.
EMPLOYEE EMPLOYER
Willbros USA, Inc.
/s/ M. Kieth Phillips /s/ Larry J. Bump
- --------------------------- By: -----------------------------
M. Kieth Phillips Larry J. Bump
Chairman and
Chief Executive Officer
6
<PAGE>
EXHIBIT 10.24
CONSULTING SERVICES AGREEMENT
-----------------------------
THIS CONSULTING SERVICES AGREEMENT ("Agreement") is entered
into as of the 1st day of April, 1999, by and between WILLBROS
INTERNATIONAL, INC. ("Willbros"), a Republic of Panama
corporation, and M. KIETH PHILLIPS ("Consultant"), an individual
who resides at Jenks, Oklahoma.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Willbros and its affiliates are engaged in the
provision of construction, engineering and other specialty
services to the petroleum industry at various locations
throughout the world; and
WHEREAS, Consultant has significant experience and expertise
in the provision of construction, engineering and other specialty
services to the petroleum industry throughout the world; and
WHEREAS, Willbros and its affiliates wish to obtain certain
advice and assistance from Consultant in connection with their
business activities and Consultant is willing to provide such
advice and assistance to Willbros and its affiliates on the terms
specified herein;
NOW, THEREFORE, for and in consideration of the premises and
the mutual promises and covenants hereinafter set forth, the
parties hereto agree as follows:
1. Services to be Performed. The services to be provided by
------------------------
Consultant shall consist of advice and assistance in
connection with the business activities conducted by
Willbros and/or its affiliates ("Services"). All Services
shall be rendered at the request and under the general
direction of senior management of Willbros. Subject to
Paragraph 16 below, Willbros will provide Consultant such
information about the business activities of Willbros and
its affiliates as Consultant may reasonably require in order
to carry out the Services.
2. Standard of Performance. All Services will be performed by
-----------------------
Consultant with a level of skill and care generally
exercised by other professional consultants engaged in
performing the same or similar services. In performing the
Services, Consultant will comply fully with all applicable
laws, including, without limitation, the United States
Foreign Corrupt Practices Act of 1977, as amended.
3. Relationship. The relationship between Willbros and
------------
Consultant shall be that of independent contractors and
Consultant shall not be or be deemed to be a partner, agent
or employee of Willbros or any of its affiliates. Unless
otherwise expressly authorized in writing, Consultant shall
have no authority to enter into any contract or agreement on
behalf of Willbros or any of its affiliates or otherwise to
bind Willbros or its affiliates in any manner whatsoever.
Consultant shall not be eligible to participate in any
employee pension, insurance, medical, retirement or other
fringe benefit plan of Willbros or any of
<PAGE>
its affiliates on account of the provision of Services
pursuant to this Agreement. Consultant shall be free
to organize the performance of his obligations under
this Agreement in any manner which he, in his sole
discretion, may determine to be the most effective
manner of accomplishing the objectives of this Agreement,
provided such performance is in good faith and is not
inconsistent with any other provision of this Agreement.
4. Term. This Agreement shall become effective on April 1,
----
1999, and shall continue in force until March 31, 2003,
unless sooner terminated in accordance with Paragraph 15 or
17 below. The term of this Agreement shall be divided into
four, equal contract year ("Contract Year") periods as
follows:
Contract Year 1: April 1, 1999 - March 31, 2000
Contract Year 2: April 1, 2000 - March 31, 2001
Contract Year 3: April 1, 2001 - March 31, 2002
Contract Year 4: April 1, 2002 - March 31, 2003
5. Availability. Upon at least ten (10) days advance notice,
------------
Consultant shall be available to perform Services for
periods up to the cumulative limits specified below:
Contract Year 1: 125 days
Contract Year 2: 100 days
Contract Year 3: 75 days
Contract Year 4: 50 days
Consultant shall, at Willbros' request, perform Services at
any location in the world where work is then being performed
by Willbros or a Willbros affiliate, has recently been
performed by Willbros or a Willbros affiliate or may be
performed by Willbros or a Willbros affiliate in the
foreseeable future.
6. Compensation. Willbros shall pay Consultant a fee of Two
------------
Thousand U.S. Dollars (U.S.$2,000) for each day devoted by
Consultant to provision of the Services. Consultant's
expenditure of four (4) or more hours in the provision of
Services during a single calendar day, including requested
travel to a specified location, shall constitute a day
devoted by Consultant to the provision of Services for
purposes of this Agreement. Consultant acknowledges that it
may occasionally be necessary to spend short periods of less
than four (4) hours during a calendar day responding to
telephone inquiries, reading reports or other background
information, preparing reports, invoices or other written
correspondence, making travel arrangements, or otherwise
engaging in activities ancillary to the provision of the
Services. Consultant agrees that there will be no
additional charge for such ancillary activities and that the
daily fee specified above and payable for more significant
expenditures of time will be deemed to be adequate
compensation for such activities.
7. Estimated Fee Payments. On the last day of each calendar
----------------------
quarter which occurs while this Agreement is in force,
Willbros shall pay Consultant an estimated payment in respect
2
<PAGE>
of fees earned or to be earned by Consultant for the
provision of the Services during the term of this Agreement,
as follows:
Contract Year 1: U.S.$62,500 per quarter
Contract Year 2: U.S.$50,000 per quarter
Contract Year 3: U.S.$37,500 per quarter
Contract Year 4: U.S.$25,000 per quarter
The last days of calendar quarters occurring during each
Contract Year shall be June 30, September 30, December 31
and March 31. The estimated fee payments made pursuant to
this Paragraph 7 shall be applied as a credit against the
cumulative fees due Consultant pursuant to Paragraph 6
above. If, upon expiration of this Agreement, total
estimated fee payments made pursuant to this Paragraph 7
exceed the compensation actually earned by Consultant
pursuant to Paragraph 6 above, Consultant shall be entitled
to retain such excess payments.
8. Expenses. Willbros shall reimburse Consultant for all
--------
reasonable business expenses paid or incurred by Consultant
directly in connection with the performance of the Services,
provided the relevant activity which necessitated the
expenditure has been approved in advance by Willbros.
9. Invoices. Consultant shall submit invoices monthly to
--------
Willbros for Services performed and expenses incurred during
the preceding month. All invoices shall identify the
Services performed during the preceding month, shall specify
the number of days expended and expenses incurred in
connection with provision of such Services, shall specify
the balance due Consultant for fees, taking into account the
fees earned by Consultant pursuant to Paragraph 6 above and
the estimated fee payments made by Willbros pursuant to
Paragraph 7 above, and shall specify the balance due
Consultant for business expenses incurred in connection with
the provision of Services. Invoices which include business
expenses shall be accompanied by appropriate supporting
documentation. Amounts due Consultant for properly incurred
business expenses shall be paid to Consultant within fifteen
(15) days after receipt of the relevant invoice by Willbros.
The balance due Consultant for fees, if any, shall be
payable only at the end of Contract Year 2 and Contract Year
4. In the event there is a balance due Consultant for fees
in connection with Services provided at the end of Contract
Year 2 or Contract Year 4, Willbros shall pay such balance
due within fifteen (15) days after receipt of the relevant
invoice.
10. Records. Consultant shall maintain, on a consistent basis,
-------
such books and records as may be reasonably necessary to
reflect the basis upon which the fees and expenses invoiced
were calculated. Consultant shall, upon reasonable notice,
make available to Willbros or its representatives such books
and records for the purposes of verifying any amounts
invoiced Willbros. Consultant shall retain such books and
records for a period of three (3) years after expiration or
termination of this Agreement.
3
<PAGE>
11. Taxes. Consultant will pay, be fully responsible for and
-----
indemnify Willbros and its affiliates against all taxes
attributable to the compensation payable to Consultant
hereunder, including, without limitation, income,
unemployment, social security and medicare taxes. If
Willbros so requests, Consultant will provide evidence or
verification that such taxes have been paid in full.
12. Insurance. While this Agreement remains in effect,
---------
Consultant will maintain in force or cause to be maintained
in force with respect to any automobile operated by
Consultant automobile liability insurance with limits of not
less than One Hundred Thousand U.S. Dollars (U.S. $100,000)
for any one person for bodily injury or death, Three Hundred
Thousand U.S. Dollars (U.S. $300,000) for any one accident
for bodily injury or death and Fifty Thousand U.S. Dollars
(U.S. $50,000) for property damage. Consultant will provide
Willbros evidence of such insurance upon its request. While
performing consulting services under this Agreement,
Consultant will be an insured person under such accidental
death and dismemberment and kidnap and ransom insurance
policies as Willbros maintains in force with respect to
certain of its employees and consultants who are engaged in
international business travel. However, Willbros reserves
the right to modify or terminate such insurance policies at
any time.
13. Indemnification. Consultant will be fully responsible for
---------------
and indemnify Willbros and its affiliates against any injury
(including death) which Consultant may sustain in connection
with the performance of the Services. Consultant will also
be responsible for, and will indemnify Willbros and its
affiliates against any liability for any injury to other
persons or damage to the property of other persons which
occurs as a result of Consultant's negligence or willful
misconduct in connection with the performance of Services
and for any liability which arises as a result of
Consultant's failure to comply with his obligations
hereunder. Willbros will indemnify Consultant against any
liability which arises as a result of Consultant's provision of
the Services, provided such liability is not attributable to
Consultant's negligence, willful misconduct or failure to
comply with the provisions of this Agreement and does not
constitute a cost or expense Consultant has specifically
agreed to bear pursuant to the terms of this Agreement.
14. Confidentiality. Except with Willbros' prior written
---------------
consent or as otherwise required by law, Consultant will
hold in confidence, not disclose to any other person or
entity or use for Consultant's own personal benefit or the
benefit of any other person or entity all information
regarding Willbros, its affiliates, their respective
employees, and the business activities conducted by Willbros
or its affiliates which Consultant obtains or becomes aware
of during the course of providing the Services, unless such
information has become publicly available other than as a
result of a breach of this Agreement by Consultant. Any
work product produced by Consultant in connection with the
performance of the Services shall be and remain the property
of Willbros, and Consultant shall have no right, title or
interest in such work product and shall not retain any
copies thereof. Upon Willbros' request, Consultant will
return or destroy all copies of written information provided
to Consultant by Willbros. The requirements of this
Paragraph 14 shall survive expiration or termination of this
Agreement for a period of five (5) years.
4
<PAGE>
15. Non-Compete. While this Agreement remains in force,
-----------
Consultant will not compete with Willbros or its affiliates,
or provide advice or assistance to any enterprise or entity
which is engaged or intends to engage in competition with
Willbros or its affiliates, in or with respect to any
geographic location where or in respect of which Willbros or
any of its affiliates (a) is, at the relevant time, actively
carrying out work, (b) has, at the relevant time, made a
proposal to carry out work or (c) reasonably expects, at the
relevant time, to carry out work in the foreseeable future.
For purposes of this Agreement, the term "geographic
location" shall, with respect to the United States, mean a
particular state or, in respect of a particular project or
activity, the region or group of states in which the
relevant project or activity is being or will be carried
out. With respect to the remainder of the world, the term
"geographic location" shall mean a particular country.
Prior to providing advice or assistance to any enterprise or
entity engaged in any aspect of the pipeline construction,
engineering or ancillary services business, Consultant shall
inform the Chief Executive Officer or, if he is not
available, the Chief Operating Officer of Willbros of the
identity of the proposed recipient of such advice or
assistance and the scope and nature of the proposed
services. Consultant shall not proceed with the proposed
activity unless and until he receives confirmation from such
Officer that the proposed activity does not violate the
restrictions set forth in this Paragraph or Paragraph 14
above. The Chief Executive Officer or Chief Operating
Officer of Willbros shall respond to Consultant's request
not more than ten (10) days after the request is received.
Subject to the restrictions set forth above, the
confirmation requested by Consultant shall not be
unreasonably withheld. Consultant's failure to provide the
information required by this Paragraph 15 or to obtain the
confirmation required by this Paragraph 15 or to comply with
the restrictions set forth in this Paragraph 15 and
Paragraph 14 above, shall be deemed to be a voluntary
termination of this Agreement by Consultant and, in the
event of such voluntary termination, Consultant shall be
deemed to have waived all further compensation hereunder.
Such termination shall be without prejudice to all other
rights and remedies available to Willbros.
16. Solicitation of Employees. During the term of this
-------------------------
Agreement, Consultant will not seek to employ or assist any
other enterprise or entity with an effort to employ any
employee of Willbros or its affiliates.
17. Termination. Either party may terminate this Agreement for
-----------
cause with immediate effect if the other of them fails to
comply with its obligations under this Agreement and does
not cure such failure within ten (10) days after notice of
such failure has been provided.
18. Death or Disability. This Agreement contemplates
-------------------
performance of all Services by M. Kieth Phillips personally.
Accordingly, if Consultant is unable to perform his duties
hereunder due to his death or a permanent physical
disability, this Agreement shall, except as specifically
provided below, terminate immediately and no further
compensation shall be due Consultant hereunder. However,
Willbros recognizes that Consultant may be required to
forego various consulting or employment opportunities during
at least Contract Year 1 in order to comply with his
obligations hereunder. In consideration of Consultant's
willingness to forego such opportunities and in order to
5
<PAGE>
induce Consultant to make his personal services available to
Willbros, Willbros agrees that, in the event of Consultant's
death or permanent physical disability preventing
performance of the Services during Contract Year 1, Willbros
will, upon termination of this Agreement due to such death
or permanent physical disability, pay to Consultant's
estate, in the case of Consultant's death, or to Consultant
or his legal representative, in the case of a permanent
physical disability, the difference between (a) Two Hundred
Fifty Thousand U.S. Dollars (U.S.$250,000) and (b) the
amount already paid to Consultant in respect of Contract
Year 1.
19. Notices. Any notice required or permitted to be given under
-------
this Agreement shall be in writing and shall be effective
upon delivery to the party at the party's address or
facsimile number stated herein. Either party may change
such party's address stated herein by giving notice of the
change in accordance with this Paragraph 17.
If to Willbros: Willbros International, Inc.
c/o Willbros USA, Inc.
2431 East 61st Street
Tulsa, Oklahoma 74136
Facsimile: (918) 748-7004
Attention: President
If to Consultant: M. Kieth Phillips
P.O. Box 480
Jenks, Oklahoma 74037-480
Facsimile:
20. Assignment. All rights and obligations herein contained
----------
shall inure to the benefit of and be binding upon Willbros,
Consultant, their successors and their permitted assigns.
Consultant shall not assign any rights or obligations under
this Agreement without the prior written consent of
Willbros.
21. Governing Law. This Agreement shall be governed and
-------------
construed in accordance with the laws of the Republic of
Panama, excluding any conflict of law or other provision
referencing the laws of another jurisdiction.
22. Entire Agreement and Waiver. This Agreement constitutes the
---------------------------
entire agreement between the parties hereto with respect to
the subject matter hereof and supersedes any other
understanding entered into by or on account of the parties
with respect to the subject matter hereof to the extent
inconsistent herewith. This Agreement may not be changed,
modified or amended except in writing signed by the parties
hereto. The failure of either party to exercise any rights
under this Agreement for a breach thereof shall not be
deemed to be a waiver of such rights or a waiver of any
subsequent breach.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
CONSULTANT WILLBROS
Willbros International, Inc.
/s/ M. Kieth Phillips /s/ David L. Kavanaugh
- --------------------------- By:--------------------------
M. Kieth Phillips David L. Kavanaugh
Senior Vice President
7
<PAGE>
EXHIBIT 10.25
FIRST AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
This FIRST AMENDMENT TO CREDIT AGREEMENT is made and entered
into effective as of April 2, 1998 (this "Amendment") among
---------
WILLBROS GROUP, INC., a Republic of Panama corporation ("WGI" or
---
the "Company"); the Designated Subsidiaries from time to time
-------
(WGI and such Designated Subsidiaries collectively, the
"Borrowers" and individually, a "Borrower"); CREDIT LYONNAIS NEW
--------- --------
YORK BRANCH, as a Bank and as Co-Agent; the several financial
institutions from time to time parties to the Credit Agreement
defined below (collectively, the "Banks" and individually, a
-----
"Bank"), and ABN AMRO BANK N.V., individually ("ABN AMRO") as a
---- --- ----
Bank and as agent for the Banks (in such capacity, the "Agent").
-----
R E C I T A L S
- - - - - - - -
A. The Borrowers, the Agent, the Co-Agent and the Banks
previously entered into that certain Credit Agreement dated as of
February 20, 1997 (the "Credit Agreement"), pursuant to which the
----------------
Lenders agreed to make certain loans to and extensions of credit
on behalf of the Borrowers upon the terms and conditions as
provided therein.
B. Pursuant to Section 2.1(b), the Company hereby requests
that the Commitment Termination Date be extended for an
additional one year, and the Banks are agreeable to such request.
C. The Borrowers, the Agent, the Co-Agent and the Banks
now desire to make certain amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration and the mutual benefits,
covenants and agreements herein expressed, the parties hereto now
agree as follows:
1. All capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings ascribed to such
terms in the Credit Agreement.
2. The definitions of "Agreement" and "Commitment
--------- ----------
Termination Date" in Section 1.1 of the Credit Agreement are
- ----------------
hereby amended to read as follows:
"Agreement" means this Credit Agreement, as
---------
amended by the First Amendment and as the same may be
amended, modified, supplemented or restated from time
to time.
"Commitment Termination Date" means the earlier to
---------------------------
occur of (a) February 20, 2003, as such date may be
extended pursuant to Section 2.1(b) or (b) the date on
--------------
which the Commitments shall otherwise terminate in
accordance with the provisions of this Agreement.
<PAGE>
3. Section 1.1 of the Credit Agreement is hereby
supplemented, where alphabetically appropriate, with the
addition of the following definition:
"First Amendment" means that certain First
---------------
Amendment to Credit Agreement dated effective as of
April 2, 1998 among the Borrowers, the Agent, the Co-
Agent and the Banks.
4. Each of the undersigned Subsidiaries hereby expressly
(i) acknowledge the terms of this Amendment, (ii) ratify and
affirm its obligations under the Credit Documents to which it is
a party, (iii) acknowledges, renews and extends its continued
liability under the Credit Documents to which it is a party and
(iv) agrees that the Credit Documents to which it is a party
remain in full force and effect with respect to the Indebtedness.
5. This Amendment shall become binding when the Agent
shall have received counterparts of this Amendment executed by
the Borrowers and the Banks and such other documents as the Agent
or its counsel may reasonably request.
6. The parties hereto hereby acknowledge and agree that,
except as specifically supplemented and amended, changed or
modified hereby, the Credit Agreement shall remain in full force
and effect in accordance with its terms.
7. The Borrowers hereby reaffirm that as of the date of
this Amendment, the representations and warranties made by the
Borrowers in Article V of the Credit Agreement as amended hereby
are true and correct on the date hereof as though made on and as
of the date of this Amendment.
8. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
9. This Amendment may be executed in two or more counter
parts, and it shall not be necessary that the signatures of all
parties hereto be contained on any one counterpart hereof; each
counterpart shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery
of an executed signature page by facsimile transmission shall be
as effective as delivery of a manually executed counterpart
hereof.
10. THE CREDIT AGREEMENT AS AMENDED BY THIS AMENDMENT
TOGETHER WITH THE OTHER CREDIT DOCUMENTS EMBODIES THE ENTIRE
AGREEMENT AND UNDERSTANDING AMONG THE PARTIES TO IT AND
SUPERSEDES ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS AND
UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO
THE SUBJECT MATTER HEREOF EXCEPT FOR THE FEE LETTER AND ANY PRIOR
ARRANGEMENTS MADE WITH RESPECT TO THE PAYMENT BY ANY BORROWER OF
(OR ANY INDEMNIFICATION FOR) ANY FEES, COSTS OR EXPENSES PAYABLE
TO OR INCURRED (OR TO BE INCURRED) BY OR ON BEHALF OF THE AGENT
OR THE BANKS.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed effective as of the date first
above written.
BORROWER: WILLBROS GROUP, INC.
By: /s/ Melvin F. Spreitzer
Name: Melvin F. Spreitzer
Title: Executive Vice President
AGENT AND BANK: ABN AMRO BANK N.V.
By: /s/ W. Bryan Chapman
Name: W. Bryan Chapman
Title: Group Vice President
By: /s/ Stephanie Balette
Name: Stephanie Balette
Title: Assistant Vice President
CO-AGENT AND BANK: CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Pascal Poupelle
Name: Pascal Poupelle
Title: Executive Vice President
BANKS: NATIONSBANK, N.A. (formerly known
as Boatmen's National Bank of
Oklahoma)
By: /s/ Brad S. Thompson
Name: Brad S. Thompson
Title: Vice President
-3-
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ A.S. Norsworthy
Name: A.S. NORSWORTHY
Title: SR. TEAM LEADER-LOAN OPERATIONS
ARAB BANKING CORPORATION
(B.S.C.)
By: /s/ Grant E. McDonald
Name: GRANT E. McDONALD
Title: VICE PRESIDENT
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LTD.
By: /s/ Kyle Loughlin
Name: Kyle Loughlin
Title: Vice President
BANK AUSTRIA
AKTIENGESELLSCHAFT - GRAND
CAYMAN BRANCH
By: /s/ J. Anthony Seay
Name: J. Anthony Seay
Title: First Vice President
BANK AUSTRIA, AG
BANK OF OKLAHOMA, N.A.
By: /s/ Pam Perrin Schloeder
Name: PAM PERRIN SCHLOEDER
Title: VICE PRESIDENT
-4-
<PAGE>
THE BANK OF TOKYO-MITSUBISHI,
LTD.-HOUSTON AGENCY
By: /s/ John W. McGhee
Name: John W. McGhee
Title: Vice President and Manager
WILLBROS USA, INC.
By: /s/ Melvin F. Spreitzer
Name: Melvin F. Spreitzer
Title: Executive Vice President
WILLBROS ENGINEERING &
CONSTRUCTION LIMITED
By: /s/ Adrian P. Wright
Name: Adrian P. Wright
Title: Vice President
MUSKETEER OIL B.V.
By: /s/ Wolbert H. Kamphuijs
Name: Wolbert H. Kamphuijs
Title: HOLLAND INTERTRUST CORPORATION B.V
Managing Director
-5-
<PAGE>
EXHIBIT 10.26
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
This SECOND AMENDMENT TO CREDIT AGREEMENT is made and
entered into effective as of October 1, 1998 (this "Amendment")
---------
among WILLBROS GROUP, INC., a Republic of Panama corporation
("WGI" or the "Company"); the Designated Subsidiaries from time
--- -------
to time (WGI and such Designated Subsidiaries collectively, the
"Borrowers" and individually, a "Borrower");
--------- --------
CREDIT LYONNAIS NEW YORK BRANCH, as a Bank and as Co-Agent; the
several financial institutions from time to time parties to the
Credit Agreement defined below (collectively, the "Banks" and
-----
individually, a "Bank"), and ABN AMRO BANK N.V., individually
----
("ABN AMRO") as a Bank and as agent for the Banks (in such
--------
capacity, the "Agent").
-----
R E C I T A L S
- - - - - - - -
A. The Borrowers, the Agent, the Co-Agent and the Banks
previously entered into that certain Credit Agreement dated as of
February 20, 1997, as amended by First Amendment to Credit
Agreement dated as of April 2, 1998 (such Credit Agreement as
amended called the "Credit Agreement"), pursuant to which the
----------------
Lenders agreed to make certain loans to and extensions of credit on
behalf of the Borrowers upon the terms and conditions as provided
therein.
B. The Company desires to purchase outstanding shares of
its common stock, and the Banks are agreeable to such request.
C. In connection with that request, the Borrowers, the
Agent, the Co-Agent and the Banks now desire to make certain
amendments to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration and the mutual benefits,
covenants and agreements herein expressed, the parties hereto now
agree as follows:
1. All capitalized terms used in this Amendment and not
otherwise defined herein shall have the meanings ascribed to such
terms in the Credit Agreement.
2. The definition of "Agreement" in Section 1.1 of the
---------
Credit Agreement is hereby amended to read as follows:
"Agreement" means this Credit Agreement, as amended
---------
by the First Amendment and the Second Amendment and as
the same may be amended, modified, supplemented or restated
from time to time.
3. Section 1.1 of the Credit Agreement is hereby
supplemented, where alphabetically appropriate, with the addition
of the following definition:
"Second Amendment" means that certain Second Amendment
----------------
to Credit Agreement dated effective as of October 1, 1998
among the Borrowers, the Agent, the Co-Agent and the Banks.
<PAGE>
4. Section 8.10 of the Credit Agreement is hereby amended
to add the following after the end of clause (d) of Section 8.10:
; further provided that (e) during the period commencing
on October 1, 1998 and ending on December 31, 1999,
the Company may purchase or acquire shares of its capital
stock, in addition to the amounts heretofore permitted
pursuant to clause (d), so long as the aggregate purchase
price of such shares does not exceed $8,800,000.
5. Each of the undersigned Subsidiaries hereby expressly
(i) acknowledge the terms of this Amendment, (ii) ratify and
affirm its obligations under the Credit Documents to which it is
a party, (iii) acknowledges, renews and extends its continued
liability under the Credit Documents to which it is a party and
(iv) agrees that the Credit Documents to which it is a party
remain in full force and effect with respect to the Indebtedness.
6. This Amendment shall become binding when the Agent
shall have received counterparts of this Amendment executed by
the Borrowers and the Banks and such other documents as the Agent
or its counsel may reasonably request.
7. The parties hereto hereby acknowledge and agree that,
except as specifically supplemented and amended, changed or
modified hereby, the Credit Agreement shall remain in full force
and effect in accordance with its terms.
8. The Borrowers hereby reaffirm that as of the date of
this Amendment, the representations and warranties made by the
Borrowers in Article V of the Credit Agreement as amended hereby
are true and correct on the date hereof as though made on and as
of the date of this Amendment.
9. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
10. This Amendment may be executed in two or more
counterparts, and it shall not be necessary that the signatures
of all parties hereto be contained on any one counterpart hereof;
each counterpart shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery
of an executed signature page by facsimile transmission shall be
as effective as delivery of a manually executed counterpart
hereof.
11. THE CREDIT AGREEMENT AS AMENDED BY THIS AMENDMENT
TOGETHER WITH THE OTHER CREDIT DOCUMENTS EMBODIES THE ENTIRE
AGREEMENT AND UNDERSTANDING AMONG THE PARTIES TO IT AND
SUPERSEDES ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS AND
UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, RELATING TO
THE SUBJECT MATTER HEREOF EXCEPT FOR THE FEE LETTER AND ANY PRIOR
ARRANGEMENTS MADE WITH RESPECT TO THE PAYMENT BY ANY BORROWER OF
(OR ANY INDEMNIFICATION FOR) ANY FEES, COSTS OR EXPENSES PAYABLE
TO OR INCURRED (OR TO BE INCURRED) BY OR ON BEHALF OF THE AGENT
OR THE BANKS.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed effective as of the date first
above written.
BORROWER: WILLBROS GROUP, INC.
By: /s/ Melvin F. Spreitzer
Name: Melvin F. Spreitzer
Title: Executive Vice President
AGENT AND BANK: ABN AMRO BANK N.V.
By: /s/ W. Bryan Chapman
Name: W. Bryan Chapman
Title: Group Vice President
By: /s/ Stuart Murray
Name: Stuart Murray
Title: Vice President
CO-AGENT AND BANK: CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/ Xavier Ratouis
Name: Xavier Ratouis
Title: Senior Vice President
BANKS: NATIONSBANK, N.A. (FORMERLY
KNOWN AS BOATMEN'S NATIONAL
BANK OF OKLAHOMA)
By: /s/ Brad S. Thompson
Name: Brad S. Thompson
Title: Vice President
-3-
<PAGE>
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. Ashby
Name: F.C.H. Ashby
Title: Senior Manager
Loan Operations
ARAB BANKING CORPORATION
(B.S.C.)
By: /s/ Sheldon Tilney
Name: Sheldon Tilney
Title: Deputy General Manager
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LTD.
By: /s/ Illegible
Name:
Title: Vice President
BANK AUSTRIA
AKTIENGESELLSCHAFT - GRAND
CAYMAN BRANCH
By: /s/ Michael T. Wiegand
Name: MICHAEL T. WIEGAND
Title: SENIOR VICE PRESIDENT
BANK OF OKLAHOMA, N.A.
By: /s/ Pam Perrin Schloeder
Name: Pam Perrin Schloeder
Title: Vice President
-4-
<PAGE>
THE BANK OF TOKYO-MITSUBISHI,
LTD.-HOUSTON AGENCY
By: /s/ Michael Meiss
Name: Michael Meiss
Title: Vice President
WILLBROS USA, INC.
By: /s/ Melvin F. Spreitzer
Name: Melvin F. Spreitzer
Title: Executive Vice President
WILLBROS ENGINEERING &
CONSTRUCTION LIMITED
By: /s/ Adrian P. Wright
Name: Adrian P. Wright
Title: Vice President
MUSKETEER OIL B.V.
By: /s/ Wolbert H. Kamphuijs
Name: Wolbert H. Kamphuijs
Title: HOLLAND INTERTRUST CORPORATION B.V
Managing Director
-5-
<PAGE>
EXHIBIT 13
WILLBROS GROUP, INC.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(Dollar amounts in thousands, except per share data)
<TABLE>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Statement of Income Data:
Contract revenues $ 281,618 $ 251,877 $ 197,688
Operating expenses:
Contract cost 220,360 182,435 145,812
Depreciation and amortization 25,552 18,936 13,932
General and administrative 32,383 29,118 25,803
Compensation from changes
in redemption value of
common stock (1) - - 6,122
---------- ---------- ----------
Operating income 3,323 21,388 6,019
Net interest income (expense) (484) 304 (215)
Minority interest (1,132) (1,911) (2,220)
Other income (expense) (1,502) 58 1,472
---------- ---------- ----------
Income before income taxes 205 19,839 5,056
Provision (credit) for income taxes 4,567 5,723 2,332
---------- ---------- ----------
Net income (loss) $ (4,362) $ 14,116 $ 2,724
========== ========== ==========
Earnings (loss) per share (2):
Basic $ (.30) $ .97 $ .09
Diluted $ (.30) $ .96 $ .09
Cash Flow Data:
Cash provided by (used in):
Operating activities $ 15,199 $ 45,788 $ 29,961
Investing activities (34,684) (46,386) (24,072)
Financing activities (15,506) 19,747 (1,630)
Other Data:
EBITDA (3) $ 26,241 $ 38,471 $ 19,203
Capital expenditures $ 36,112 $ 47,272 $ 24,957
Backlog (at period end) $ 286,473 $ 135,797 $ 108,751
Number of employees (at
period end) 2,280 4,230 3,700
Balance Sheet Data (at period end):
Cash and cash equivalents $ 8,247 $ 43,238 $ 24,118
Working capital 13,495 39,563 36,723
Total assets 159,939 201,202 147,465
Total debt 758 8,574 1,340
Redemption value of common
stock held by plan participants - - -
Redeemable preferred stock - - -
Stockholders' equity 106,934 118,986 92,386
</TABLE>
<TABLE>
Year Ended December 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Statement of Income Data:
Contract revenues $ 220,506 $ 145,716
Operating expenses:
Contract cost 161,584 98,700
Depreciation and amortization 15,193 14,598
General and administrative 27,937 24,261
Compensation from changes
in redemption value of
common stock (1) 2,100 1,681
---------- ----------
Operating income 13,692 6,476
Net interest income (expense) 144 835
Minority interest (1,589) (1,758)
Other income (expense) (381) 113
---------- ----------
Income before income taxes 11,866 5,666
Provision (credit) for income taxes (75) (4,146)
---------- ----------
Net income (loss) $ 11,941 $ 9,812
========== ==========
Earnings (loss) per share (2):
Basic $ .84 $ .70
Diluted $ .84 $ .70
Cash Flow Data:
Cash provided by (used in):
Operating activities $ (8,396) $ (3,771)
Investing activities (18,558) (13,169)
Financing activities (2,321) (1,271)
Other Data:
EBITDA (3) $ 26,915 $ 19,429
Capital expenditures $ 18,946 $ 7,171
Backlog (at period end) $ 139,359 $ 97,493
Number of employees (at
period end) 3,110 2,030
Balance Sheet Data (at period end):
Cash and cash equivalents $ 19,859 $ 49,142
Working capital 38,767 28,390
Total assets 149,954 131,188
Total debt 3,119 5,828
Redemption value of common
stock held by plan participants 7,918 5,430
Redeemable preferred stock 36,200 36,200
Stockholders' equity 39,273 27,340
</TABLE>
(1) Under the Company's stock ownership plans established in
1992 and 1995, the Company had an obligation to purchase,
under certain conditions and at a formula price, Common Stock
held by retiring or terminating employees. The Company
recorded as non-cash compensation expense the change in the
redemption value at the end of each period using the maximum
formula price. In addition, in the third quarter of 1996, the
Company recognized a non-cash compensation expense of $4,695
for the difference between the maximum redemption value of the
shares subject to redemption and the initial public offering
price. The Company's stock redemption obligations terminated
in the fourth quarter of 1996.
(2) Earnings per share for the year ended December 31, 1996
is calculated after deducting $1,448 ($.10 per common share)
of dividends on the Company's Preferred Stock.
(3) EBITDA represents earnings (net income) before interest,
income taxes, depreciation and amortization. Non-cash
compensation expenses have not been added back in calculating
EBITDA. EBITDA is not intended to represent cash flows for
the period, nor has it been presented as an alternative to
operating income as an indicator of operating performance. It
should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally
accepted accounting principles. See the Company's
Consolidated Statements of Cash Flows in the Company's
Consolidated Financial Statements included elsewhere in this
Annual Report. EBITDA is included in this Annual Report
because it is a basis upon which the Company assesses its
financial performance.
WILLBROS 18
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company derives its revenue from providing construction,
engineering and specialty services to the oil and gas industry
and government entities worldwide. The Company obtains contracts
for its work primarily by competitive bidding or through
negotiations with long-standing clients. Bidding activity,
backlog and revenue resulting from the award of contracts to the
Company may vary significantly from period to period.
A number of factors relating to the Company's business affect
the Company's recognition of contract revenue. Revenue from fixed-
price construction and engineering contracts is recognized on the
percentage-of-completion method. Under this method, estimated
contract revenue is accrued based generally on the percentage
that costs to date bear to total estimated costs, taking into
consideration physical completion. Generally, the Company does
not recognize income on a fixed-price contract until the contract
is approximately 10% complete. Costs which are considered to be
reimbursable are excluded before the percentage-of-completion
calculation is made. Accrued revenue pertaining to reimbursables
is limited to the cost of the reimbursables. If a current
estimate of total contract cost indicates a loss on a contract,
the projected loss is recognized in full when determined. Revenue
from unit-price contracts is recognized as earned. Revenue from
change orders, extra work, variations in the scope of work and
claims is recognized when realization is assured.
The Company derives its revenue from contracts with durations
from a few weeks to several months or in some cases more than a
year. Unit-price contracts provide relatively even quarterly
results; however, major projects are usually fixed-price
contracts that may result in uneven quarterly financial results
due to the nature of the work and the method by which revenue is
recognized. These financial factors, as well as external factors
such as weather, client needs, client delays in providing
approvals, labor availability, governmental regulation and
politics, may affect the progress of a project's completion and
thus the timing of revenue recognition. The Company believes that
its operating results should be evaluated over a relatively long
time horizon during which major contracts in progress are
completed and change orders, extra work, variations in the scope
of work and cost recoveries and other claims are negotiated and
realized.
Low oil prices and the uncertainty as to when prices will
improve have recently had and continue to have a negative
influence on the Company's clients' capital spending plans. As a
direct result, the Company is experiencing reduced demand for its
services, especially specialty services. While the longer term
effect of lower oil prices on future construction activity is
unclear, the Company does not anticipate that any of the projects
in its current backlog will be deferred or cancelled. However, a
number of projects the Company has been following have been
delayed, and the Company expects revenue in 1999 to be below that
of 1998.
Under the Company's stock ownership plans established in 1992
and 1995, the Company had an obligation to purchase, under
certain conditions and at a formula price, Common Stock held by
retiring or terminating employees. The Company recorded as non-
cash compensation expense the change in the redemption value at
the end of each period using the maximum formula price. In
addition, in the third quarter of 1996, the Company recognized a
non-cash compensation expense of $4.7 million for the difference
between the maximum redemption value of the shares subject to
redemption and the initial public offering price. These non-cash
compensation expenses have not been added back in calculating
EBITDA. The Company's stock redemption obligations terminated in
the fourth quarter of 1996.
As previously noted, the Company uses EBITDA as part of its
overall assessment of financial performance by comparing EBITDA
between accounting periods. Management believes that EBITDA is
used by the financial community as a method of measuring
performance and of evaluating the market value of companies
considered to be in similar businesses to those of the Company.
19 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company recognizes anticipated contract revenue as backlog
when the award of a contract is reasonably assured. Anticipated
revenue from post-contract award processes, including change
orders, extra work, variations in the scope of work and the
effect of escalation or currency fluctuation formulas, is not
added to backlog until realization is reasonably assured. New
contract awards totaled $436.8 million during the year ended
December 31, 1998. Additions to backlog during the year are as
follows: construction, $285.1 million; engineering,
$41.0 million; and specialty services, $110.7 million. Backlog
decreases by line of business are as follows: construction,
$187.5 million; engineering, $65.0 million; and specialty
services, $33.6 million. Backlog at the end of the year was up
$150.7 million (111%) to 286.5 million and consisted of the
following: (a) construction, $198.8 million, up $97.6 million
(96%); (b) engineering, $7.9 million, down $24.0 million (75%);
and (c) specialty services, $79.8 million, up $77.1 million.
Construction backlog consists primarily of an engineering,
procurement and construction project in Nigeria. Specialty
services backlog is primarily attributable to two major
contracts: a sixteen year water injection contract awarded to a
consortium in which the Company has a 10% interest in Venezuela
and a three year dredging contract in Nigeria.
RESULTS OF OPERATIONS
The Company's contract revenue and contract costs are primarily
related to the timing and location of development projects in the
oil and gas industry worldwide. Contract revenue and cost
variations by country from year to year are the result of (a)
entering new countries as part of the Company's strategy for
geographical diversification, (b) the execution of new contract
awards, (c) the completion of contracts, and (d) the overall
level of activity in the Company's services.
The Company's ability to be successful in obtaining and
executing contracts can be affected by the relative strength or
weakness of the U.S. dollar compared to the currencies of its
competitors, its clients and its work locations. The Company
does not believe that its revenue or results of operations were
adversely affected in this regard during the years ended
December 31, 1998 or 1997.
YEAR ENDED DECEMBER 31, 1998, COMPARED TO
YEAR ENDED DECEMBER 31, 1997
CONTRACT REVENUE.
Contract revenue increased $29.7 million (12%) to
$281.6 million due to (a) an increase in construction
services revenue of $67.6 million related to work in Venezuela,
the United States and the Ivory Coast; offset by (b) a decrease
in specialty services revenue of $25.4 million associated with a
reduction of specialty services work primarily in Nigeria; and
(c) a decrease in engineering services of $12.5 million due to
decreased engineering, principally in the United States. Revenue
from Venezuela increased $43.6 million (137%) due to work on the
construction of 120 miles (200 kilometers) each of 36-inch and
20-inch pipelines. Revenue in the Ivory Coast increased
$14.5 million due to beginning work on 46 miles (74 kilometers)
of dual 4-inch and 12-inch pipelines and an 8-mile (13-kilometer)
12-inch pipeline. United States revenue increased $6.8 million
(8%) primarily due to work performed on a 94-mile (150-kilometer)
36-inch natural gas pipeline in Iowa. Revenue from Nigeria
decreased $27.3 million (36%) primarily in specialty services
work as a result of delays in funding to our clients from the
Nigerian government and low oil prices which have caused the
Company's clients to defer maintenance activities. The Company
has seen early indications that the Nigerian government is taking
steps toward resolving the funding issues; but if low oil prices
persist, it is unclear as to when specialty services activities
in Nigeria will return to historical levels. Oman revenue
decreased $5.0 million (22%) due to decreased specialty services
work. Indonesian revenue decreased $2.2 million (8%) due to the
substantial completion of pipeline projects in that country.
CONTRACT COST.
Contract cost increased $37.9 million (21%) to $220.4 million
due to an increase of $57.2 million
WILLBROS 20
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
in construction services cost, resulting from an increase in costs
on construction projects in the United States, Venezuela and the
Ivory Coast, offset by a decrease of $17.8 million in engineering
services cost and a decrease of $1.4 million in specialty
services cost. Variations in contract cost by country were
closely related to the variations in contract revenue.
DEPRECIATION AND AMORTIZATION.
Depreciation and amortization increased $6.6 million
to $25.5 million, primarily due to additions made to the
equipment fleet in 1997 to prepare for new contracts in
Indonesia and Venezuela and additions in 1998 to
prepare for a new contract in the Ivory Coast.
GENERAL AND ADMINISTRATIVE.
General and administrative expense increased $3.3 million
to $32.4 million to support the growth in worldwide activities
and promote expansion into new work countries, such as Mexico.
OPERATING INCOME.
Operating income decreased $18.1 million (85%) to
$3.3 million. The decrease is primarily due to a significant
decrease in specialty service activity, an increase in costs
not recoverable (some of which may be recoverable at a
later date) on certain projects including construction projects
in Pakistan, the United States and Venezuela and start-up costs
associated with an offshore construction project in Cameroon.
NET INTEREST INCOME (EXPENSE).
Net interest income decreased $0.8 million to a net expense
of $0.5 million, due to increased borrowings to meet working
capital requirements.
MINORITY INTEREST EXPENSE.
Minority interest expense decreased $0.8 million to
$1.1 million, due to a reduction in revenue and operating income
in certain work countries.
OTHER INCOME (EXPENSE).
Other income decreased $1.6 million resulting in $1.5 million
of other expense in 1998. The decrease was primarily due to
$1.9 million in net foreign exchange losses arising from
remeasuring assets and liabilities in countries with
highly inflationary economies, primarily Venezuela.
PROVISION FOR INCOME TAXES.
Provision for income tax expense decreased $1.1 million to
$4.6 million, principally due to reduced taxable income in
certain work countries in 1998 and a tax refund. The effective
income tax rate in 1998 exceeds 100% of income before income taxes
due to the fact that income taxes in certain countries are
based on revenue and also due to the fact that losses in certain
countries cannot be used to offset taxable income in other
countries.
YEAR ENDED DECEMBER 31, 1997, COMPARED TO
YEAR ENDED DECEMBER 31, 1996
CONTRACT REVENUE.
Contract revenue increased $54.2 million (27%) to
$251.9 million due to (a) $77.2 million of additional
construction revenue, reflecting a pickup in worldwide pipeline
construction activity; and (b) $16.8 million of additional
engineering services related to execution of Engineering,
Procurement, Construction (EPC) contracts and strong demand for
engineering services, especially in the United States; offset by
(c) a $39.8 million decrease in specialty services revenue due
primarily to a lack of funding by certain clients. United States
revenue increased $45.9 million (140%) primarily due to
engineering services associated with a proposed major gas
pipeline project and for work performed under an EPC contract for
a 45-mile (75-kilometer) 24-inch gas pipeline. Revenue from
Nigeria decreased $11.3 million (13%) primarily due to a
reduction of specialty services work attributable to delays in
funding from the Nigerian government to certain clients which has
caused a slowdown in the award of specialty services projects,
offset by an increase in construction services revenue primarily
resulting from work on a 20-mile (30-kilometer) 36-inch gas
pipeline and river crossing. Venezuela revenue increased
$12.9 million (68%) primarily due to increased construction services,
including work on an offshore loading and storage terminal and
work begun on 120 miles (200 kilometers) each
21 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
of 36-inch and 20-inch pipelines, offset by a decrease in specialty
services due to the completion of two contracts in 1996.
Revenue from Indonesia increased $26.5 million (1,790%) due to
work on an 85-mile (135-kilometer) gas gathering system and
station in Sumatra. Oman contract revenue decreased $0.7 million
(3%) as a result of a reduction of specialty services, offset by
an increase in construction work. Pakistan revenue decreased
$18.8 million (58%) primarily due to the substantial completion of the
engineering and procurement portion of an EPC contract.
CONTRACT COST.
Contract cost increased $36.6 million (25%) to $182.4 million
due to an increase of $47.4 million in construction services cost
and an increase of $18.9 million in engineering services cost,
offset by a decrease of $29.7 million in specialty services cost.
Variations in contract cost by country were closely related to
the variations in contract revenue.
DEPRECIATION AND AMORTIZATION.
Depreciation and amortization increased $5.0 million to
$18.9 million in 1997 due to additions made to the equipment
fleet to prepare for new contracts in Indonesia and Venezuela.
GENERAL AND ADMINISTRATIVE.
General and administrative expense increased $3.3 million
to $29.1 million to support the growth in worldwide activities.
COMPENSATION FROM CHANGES IN REDEMPTION VALUE OF COMMON STOCK.
Compensation from changes in redemption value of common stock
decreased $6.1 million to zero in 1997 because the Company's
stock redemption obligations terminated in the fourth quarter of
1996.
OPERATING INCOME.
Operating income increased $15.4 million (255%) to
$21.4 million. The increase was primarily attributable
to (a) a $7.2 million increase in Indonesia primarily resulting
from work performed on a project in Sumatra; (b) a $6.9 million
increase in Oman due to increased construction services work and
a favorable winding up of a specialty services contract; (c) a
$5.9 million increase in Nigeria from the realization of certain
cost recoveries related to services associated with activities
already completed; and (d) a $4.1 million increase in the United
States due to increased engineering services and elimination of
compensation from changes in the redemption value of common
stock; offset by (e) a $10.9 million decrease in Venezuela due to
decreased specialty services.
NET INTEREST INCOME (EXPENSE).
Net interest income (expense) increased $0.5 million to
income of $0.3 million due to reduced interest expense on
borrowings under foreign credit lines to mitigate exchange risk.
MINORITY INTEREST EXPENSE.
Minority interest expense decreased $0.3 million to
$1.9 million due to a reduction of activity in countries
where minority interest partners are involved.
OTHER INCOME (EXPENSE).
Other income (expense) decreased $1.4 million to
$0.1 million due primarily to a reduction in foreign
exchange gains and an increase in loss on retirements of
equipment.
PROVISION FOR INCOME TAXES.
Provision for income taxes increased $3.4 million to
$5.7 million due primarily to an increase in taxable income
in certain work countries and a lesser reduction in 1997
than in 1996 in previous estimates of income taxes in certain
work countries.
WILLBROS 22
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
EFFECT OF INFLATION AND CHANGING PRICES
The Company's operations are affected by increases in prices,
whether caused by inflation, government mandates or other
economic factors, in the countries in which it operates. The
Company attempts to recover anticipated increases in the cost of
labor, fuel and materials through price escalation provisions in
certain of its major contracts or by considering the estimated
effect of such increases when bidding or pricing new work.
CAPITAL STRUCTURE, LIQUIDITY AND
CAPITAL RESOURCES
The Company's primary requirements for capital are to fund the
acquisition, upgrade and maintenance of its equipment, provide
working capital for current projects, finance the mobilization of
employees and equipment to new projects, establish a presence in
countries where the Company perceives growth opportunities and
finance the possible acquisition of new businesses and equity
investments. Historically the Company has met its capital
requirements primarily from operating cash flows.
Cash and cash equivalents decreased $35.0 million (81%) to
$8.2 million at December 31, 1998, from $43.2 million at December 31,
1997. The decrease is due to positive cash flows of
$15.2 million from operations (net of a $6.2 million increase in
working capital required to support construction projects),
offset by $34.7 million in net capital expenditures for the
purchase of equipment and spare parts and $15.5 million used in
financing activities (including $8.6 million used to repurchase
927,716 shares of common stock).
The Company has a $150.0 million credit agreement that matures
on February 20, 2003 and may be extended annually in one year
increments, subject to certain approvals, for up to two
additional years, with a syndicated bank group including ABN AMRO
Bank N.V., as agent, and Credit Lyonnais, New York Branch, as co-
agent. The credit agreement provides for a $100.0 million
revolving credit facility, part of which can be used for
acquisitions and equity investments. The entire facility, less
amounts used under the revolving portions of the facility, may be
used for standby and commercial letters of credit. Principal is
payable at termination on all revolving loans except qualifying
acquisition and equity investment loans which are payable
quarterly over the remaining life of the credit agreement.
Interest is payable quarterly at prime or other alternative
interest rates. A commitment fee is payable quarterly based on
an annual rate of 1/4% of the unused portion of the credit
facility. The Company's obligations under the credit agreement
are secured by the stock of the principal subsidiaries of the
Company. The credit agreement requires the Company to maintain
certain financial ratios, restricts the amount of annual dividend
payments to the greater of 25 cents per share or 25% of net
income and limits the Company's ability to purchase its own
stock. At December 31, 1998, outstanding letters of credit
totaled $39.3 million and there were no borrowings, leaving
$110.7 million available under this facility.
The Company has unsecured credit facilities with banks in
certain countries outside the United States. Borrowings under
these lines, in the form of short-term notes and overdrafts, are
made at competitive local interest rates. Generally, each line
is available only for borrowings related to operations in a
specific country. Credit available under these facilities is
approximately $12.2 million at December 31, 1998.
The Company does not anticipate any significant collection
problems with its customers, including those in countries
presently experiencing economic and/or currency difficulties,
such as Indonesia. All trade accounts receivable related to work
in that country are from U.S. or Canadian based companies and are
based in U.S. dollars. Since the Company's customers generally
are major oil companies and government entities, and the terms
for billing and collecting for work performed are generally
established by contracts, the Company historically has a very low
incidence of collectability problems.
The Company believes that cash flows from operations and
borrowing under existing credit
23 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
facilities will be sufficient to finance working capital and
capital expenditures for ongoing operations at least through
the end of 1999. The Company estimates capital expenditures for
equipment and spare parts to be approximately $10.0 to
$15.0 million in 1999, and expects to conduct sales of surplus
equipment having a net book value of approximately $15.0 to
$25.0 million during 1999.
In February 1998, the Company's Board of Directors approved a
plan to buy back approximately 750,000 shares of its Common Stock
from time to time in the open market or through negotiated
transactions. In October 1998, the Company's Board of Directors
approved, and the Company's credit agreement was amended to
permit, the buy back of an additional $8.8 million of its Common
Stock. As of December 31, 1998, 927,716 shares have been
purchased at an average price of $9.26 per share. Subsequent to
December 31, 1998 an additional 1,247,600 shares have been
purchased at an average price of $6.07 per share.
NEW ACCOUNTING STANDARDS
In May 1998, the American Institute of Certified Public
Accountants issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities," which is effective for fiscal
years beginning after December 15, 1998. This statement requires
that start-up costs and organization costs be expensed as they
are incurred. The Company does not believe this statement will
have a material impact on its consolidated financial statements.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," which is
effective for fiscal years beginning after June 15, 1999. This
standard requires that all derivatives be recognized on the
balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through earnings. Derivatives
that are hedges must be adjusted to fair value, depending on the
nature of the hedge, either through earnings as an offset against
the change in fair value of the hedged assets, liabilities, or
firm commitments or recognized in other comprehensive income
until the hedged item is recognized in earnings. The Company
does not believe adoption of this standard will have a material
impact on its consolidated financial statements.
FINANCIAL RISK MANAGEMENT
The Company's primary market risk is its exposure to changes in
non-U.S. currency exchange rates. The Company attempts to
negotiate contracts which provide for payment in U.S. dollars,
but it may be required to take all or a portion of payment under
a contract in another currency. To mitigate non-U.S. currency
exchange risk, the Company seeks to match anticipated non-U.S.
currency revenue with expenses in the same currency whenever
possible. To the extent it is unable to match non-U.S. currency
revenue with expenses in the same currency, the Company may use
forward contracts, options or other common hedging techniques in
the same non-U.S. currencies. The Company had no forward
contracts or options at December 31, 1998.
The carrying amounts for cash and cash equivalents, accounts
receivable, notes payable and accounts payable and accrued
liabilities shown in the consolidated balance sheets approximate
fair value at December 31, 1998, due to the generally short
maturities of these items. The Company invests primarily in
short-term dollar denominated bank deposits, and at December 31,
1998 did not have any investment in instruments with a maturity
of more than a few days or in any equity securities. The Company
has the ability and expects to hold its investment to maturity.
YEAR 2000 COMPLIANCE
During 1997, the Company initiated an enterprise-wide program
to prepare its computer systems and applications for the Year 2000.
Certain critical applications have been identified that
may not be able to accurately process information containing
dates beginning in the Year 2000. The Company plans to modify,
replace or outsource these applications before the Year 2000.
The cost of
WILLBROS 24
<PAGE>
WILLBROS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
modification or outsourcing is expensed; the cost of
replacement is capitalized.
The Company is utilizing both internal and external resources
to identify, correct, and test its applications for Year 2000
compliance. The Company anticipates that the majority of its
reprogramming and testing will be substantially completed by
September 30, 1999, and that all critical applications will be
Year 2000 compliant prior to the end of the 1999 calendar year.
Because third party failures could effect the Company's
ability to conduct business, the Company is making every
reasonable effort to assess the Year 2000 readiness of its
business-critical suppliers and customers, including obtaining
certifications providing evidence of their readiness to handle
Year 2000 issues. These certifications are being assessed by the
Company, and are being categorized based on Year 2000 compliance
and prioritized in order of significance to the business of the
Company. To the extent possible, contingency plans will be
developed for business-critical suppliers and customers.
The Company has completed an assessment of the Year 2000
compliance status of substantially all of its information
technology and non-information technology equipment, and does not
anticipate that any will require upgrade or replacement in order
to accurately process information containing dates beginning in
the Year 2000.
Testing and remediation of the Company's critical applications
are anticipated to cost approximately $3.3 million from inception
in calendar year 1997 through substantial completion in calendar
year 1999, of which approximately $2.1 million is expected to be
capitalized. Of these costs, approximately $1.2 million was
incurred through fiscal 1998, with the remaining $2.1 million
expected to be incurred in 1999. All estimated costs have been
budgeted and are expected to be funded by cash flows from
operations.
The Company believes that Year 2000 failures affecting its
business will most likely be limited to interruptions of business
at individual Company locations or operations around the world,
and be caused by failures of third parties, including customers,
suppliers, and local governments. The Company is unable to
determine the likelihood of such failures and interruptions
occurring at its locations, but there is a possibility that such
an occurrence could cause the Company to be unable, at least
temporarily, to perform services under its contracts at the
affected location. The failure of the Company, its customers,
suppliers or others upon whom the Company relies to achieve
Year 2000 readiness could also adversely affect the Company's
business, which could have a material adverse effect on the
Company's financial condition and results of operations.
As part of its Year 2000 project, the Company is exploring
alternatives and developing contingency plans to address the
possibility that the Company and third parties, including local
governments, with whom it has material relationships will not be
Year 2000 compliant on a timely basis. Contingency plans are
expected to be completed for any remaining areas of Year 2000
risk by September 30, 1999.
The anticipated cost and planned completion date of the Year 2000
compliance project are based on management's best estimates,
which were derived utilizing numerous assumptions of future
events including the availability of internal and external
resources and other factors, some of which are outside the
control of the Company. Unanticipated failures by critical
suppliers and customers, as well as the failure by the Company to
timely execute its own remediation efforts or outsourcing, could
have an adverse effect on the cost of the Year 2000 project and
its completion date. Because of these uncertainties, there can
be no assurance that these forward-looking estimates will be
achieved.
These disclosures constitute a "Year 2000 Readiness Disclosure"
and "Year 2000 Statement" within the meaning of the Year 2000
Information and Readiness Disclosure Act of 1998. The Year 2000
Information and Readiness Disclosure Act of 1998 does not
insulate the Company from liability under the federal securities
laws with respect to disclosures relating to Year 2000
information.
25 WILLBROS
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Stockholders and Board of Directors
Willbros Group, Inc.:
We have audited the accompanying consolidated balance
sheets of Willbros Group, Inc. and subsidiaries (the "Company") as
of December 31, 1998 and 1997 and the related consolidated
statements of income, stockholders' equity, and cash flows for each
of the years in the three-year period ended December 31, 1998.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards in the United States. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the aforementioned consolidated financial
statements present fairly, in all material respects, the financial
position of Willbros Group, Inc. and subsidiaries as of December 31,
1998 and 1997 and the results of their operations and their
cash flows for each of the years in the three-year period ended
December 31, 1998, in conformity with generally accepted accounting
principles in the United States.
KPMG
Panama City, Panama
February 5, 1999
WILLBROS 26
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,247 $ 43,238
Accounts receivable 40,018 57,005
Contract cost and recognized income not yet billed 8,022 8,159
Prepaid expenses 3,963 4,022
---------- ----------
Total current assets 60,250 112,424
Spare parts, net 9,666 7,385
Property, plant and equipment, net 85,010 78,420
Other assets 5,013 2,973
---------- ----------
Total assets $ 159,939 $ 201,202
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 758 $ 5,341
Accounts payable and accrued liabilities 35,352 41,287
Accrued income taxes 5,654 5,171
Contract billings in excess of cost and
recognized income 4,991 21,062
---------- ----------
Total current liabilities 46,755 72,861
Long-term debt - 3,233
Other liabilities 6,250 6,122
---------- ----------
Total liabilities 53,005 82,216
Stockholders' equity:
Class A preferred stock, par value $.01 per
share, 1,000,000 shares authorized, none issued - -
Common stock, par value $.05 per share, 35,000,000
shares authorized and 15,071,715 shares issued at
December 31, 1998 (14,992,320 at December 31, 1997) 753 750
Capital in excess of par value 67,613 66,857
Retained earnings 49,914 54,276
Treasury stock at cost, 927,716 shares at
December 31, 1998 (8,590) -
Notes receivable for stock purchases (982) (2,084)
Accumulated other comprehensive income (loss) (1,774) (813)
---------- ----------
Total stockholders' equity 106,934 118,986
---------- ----------
Total liabilities and stockholders' equity $ 159,939 $ 201,202
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements. 27 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Contract revenues $ 281,618 $ 251,877 $ 197,688
Operating expenses:
Contract 220,360 182,435 145,812
Depreciation and amortization 25,552 18,936 13,932
General and administrative 32,383 29,118 25,803
Compensation from changes in
redemption value of common stock - - 6,122
---------- ---------- ----------
278,295 230,489 191,669
---------- ---------- ----------
Operating income 3,323 21,388 6,019
Other income (expense):
Interest income 851 1,118 1,063
Interest expense (1,335) (814) (1,278)
Foreign exchange gain (loss) (1,934) 257 705
Minority interest (1,132) (1,911) (2,220)
Other - net 432 (199) 767
---------- ---------- ----------
(3,118) (1,549) (963)
---------- ---------- ----------
Income before income taxes 205 19,839 5,056
Provision for income taxes 4,567 5,723 2,332
---------- ---------- ----------
Net income (loss) $ (4,362) $ 14,116 $ 2,724
========== ========== ==========
Earnings (loss) per common share:
Basic $ (.30) $ .97 $ .09
========== ========== ==========
Diluted $ (.30) $ .96 $ .09
========== ========== ==========
Weighted average number of common
shares outstanding:
Basic 14,744,622 14,540,137 14,151,532
========== ========== ==========
Diluted 14,744,622 14,688,372 14,162,490
========== ========== ==========
</TABLE>
WILLBROS 28 See accompanying notes to consolidated financial statements.
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
<TABLE>
<CAPTION>
Common Stock Capital in
-------------------- Excess
Par of Par Retained Treasury
Shares Value Value Earnings Stock
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1996 3,000,000 $ 150 $ 10,731 $ 39,956 $ (485)
--------- -------- -------- -------- --------
Comprehensive income
(loss):
Net income - - - 2,724 -
Preferred dividends - - - (1,448) -
Purchase of treasury stock - - - - (2,531)
Exercise of stock options - - - (1,072) 3,016
Sale of common stock, net
of offering cost 525,980 26 2,965 - -
Conversion of preferred
stock 10,860,000 543 35,657 - -
Payment of notes
receivable - - - - -
Increase in redemption
value of common stock - - 1,427 - -
Compensation expense at
initial public
offering date - - 4,695 - -
Termination of
redemption obligation - - - - -
---------- -------- -------- -------- --------
Balance, December 31, 1996 14,385,980 719 55,475 40,160 -
---------- -------- -------- -------- --------
Comprehensive income
(loss):
Net income - - - 14,116 -
Foreign currency
translation
adjustments - - - - -
Total comprehensive
income (loss)
Payment of notes
receivable - - - - -
Sale of common stock,
net of offering cost 590,641 31 11,168 - -
Issuance of common stock
under employee benefit
plan 14,199 - 200 - -
Exercise of stock options 1,500 - 14 - -
---------- -------- -------- -------- --------
Balance, December 31, 1997 14,992,320 750 66,857 54,276 -
---------- -------- -------- -------- --------
Comprehensive income
(loss):
Net loss - - - (4,362) -
Foreign currency
translation
adjustments - - - - -
Total comprehensive
income (loss)
Payment of notes
receivable - - - - -
Purchase of treasury
stock - - - - (8,590)
Issuance of common stock
under employee benefit
plan 32,945 1 331 - -
Exercise of stock options 46,450 2 425 - -
---------- -------- -------- -------- --------
Balance, December 31, 1998 15,071,715 $ 753 $ 67,613 $ 49,914 $ (8,590)
========== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated Redemption
Notes Other Value of
Receivable Compre- Common Total
For hensive Stock Held Stock-
Stock Income By Plan holders'
Purchases (Loss) Participants Equity
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ (2,377) $ (784) $ (7,918) $ 39,273
---------- ---------- ---------- ----------
Comprehensive income
(loss):
Net income - - - 2,724
Preferred dividends - - - (1,448)
Purchase of treasury stock - - 63 (2,468)
Exercise of stock options (1,715) - - 229
Sale of common stock, net
of offering cost - - - 2,991
Conversion of preferred stock - - - 36,200
Payment of notes receivable 908 - (897) 11
Increase in redemption value
of common stock - - (1,427) -
Compensation expense at
initial public offering date - - - 4,695
Termination of redemption
obligation - - 10,179 10,179
---------- ---------- ---------- ----------
Balance, December 31, 1996 (3,184) (784) - 92,386
---------- ---------- ---------- ----------
Comprehensive income (loss):
Net income - - - 14,116
Foreign currency
translation adjustments - (29) - (29)
----------
Total comprehensive
income (loss) 14,087
Payment of notes receivable 1,100 - - 1,100
Sale of common stock, net
of offering cost - - - 11,199
Issuance of common stock
under employee benefit plan - - - 200
Exercise of stock options - - - 14
---------- ---------- ---------- ----------
Balance, December 31, 1997 (2,084) (813) - 118,986
---------- ---------- ---------- ----------
Comprehensive income (loss):
Net loss - - - (4,362)
Foreign currency
translation adjustments - (961) - (961)
----------
Total comprehensive
income (loss) (5,323)
Payment of notes receivable 1,102 - - 1,102
Purchase of treasury stock - - - (8,590)
Issuance of common stock
under employee benefit plan - - - 332
Exercise of stock options - - - 427
---------- ---------- ---------- ----------
Balance, December 31, 1998 $ (982) $ (1,774) $ - $ 106,934
========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements. 29 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (4,362) $ 14,116 $ 2,724
Reconciliation of net income (loss)
to cash provided by operating
activities:
Depreciation and amortization 25,552 18,936 13,932
Compensation from changes in redemption
value of common stock - - 6,122
Loss (gain) on sales and retirements
of property and equipment 261 814 (96)
Changes in operating assets and
liabilities:
Accounts receivable 16,987 (3,249) 11,896
Contract cost and recognized
income not yet billed 137 (4,516) 7,872
Prepaid expenses and other assets (1,981) (216) (2,784)
Accounts payable and accrued
liabilities (5,935) 8,419 (8,147)
Accrued income taxes 483 1,121 (868)
Contract billings in excess of cost
and recognized income (16,071) 9,960 (97)
Deferred income taxes - - (1,158)
Other liabilities 128 403 565
---------- ---------- ----------
Cash provided by operating
activities 15,199 45,788 29,961
Cash flows from investing activities:
Proceeds from sales of property and
equipment 1,428 886 885
Purchase of property and equipment (24,861) (38,932) (18,474)
Purchase of spare parts (11,251) (8,340) (6,483)
---------- ---------- ----------
Cash used in investing activities (34,684) (46,386) (24,072)
Cash flows from financing activities:
Proceeds from long-term debt 37,000 3,000 -
Proceeds from notes payable to banks 7,160 6,858 13,291
Collection of notes receivable
for stock purchases 1,102 1,100 908
Proceeds from common stock 759 11,413 3,220
Proceeds from notes payable to former
shareholders - - 1,401
Repayment of long-term debt (40,000) - -
Repayment of notes payable to banks (11,509) (2,157) (16,237)
Purchase of treasury stock (8,590) - (2,531)
Repayment of notes payable to former
shareholders (467) (467) (234)
Payment of dividends on preferred stock - - (1,448)
---------- ---------- ----------
Cash provided by (used in)
financing activities (14,545) 19,747 (1,630)
Effect of exchange rate changes on cash
and cash equivalents (961) (29) -
---------- ---------- ----------
Cash provided by (used in) all activities (34,991) 19,120 4,259
Cash and cash equivalents, beginning
of year 43,238 24,118 19,859
---------- ---------- ----------
Cash and cash equivalents, end of year $ 8,247 $ 43,238 $ 24,118
========== ========== ==========
</TABLE>
WILLBROS 30 See accompanying notes to consolidated financial statements.
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies
Principles of Consolidation - The consolidated financial
statements include the accounts of Willbros Group, Inc. ("WGI"), a
Republic of Panama corporation, and all of its majority-owned
subsidiaries (the "Company"). All material intercompany accounts
and transactions are eliminated in consolidation. The ownership
interest of minority participants in subsidiaries that are not
wholly owned (principally in Nigeria and Oman) is included in
accounts payable and accrued liabilities and is not material. The
minority participants' share of the net income of those
subsidiaries is included in other expense.
The consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United States
and include certain estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities and the reported amounts of
revenues and expenses. Actual results could differ from those
estimates.
Accounts Receivable - Accounts receivable include retainage, all
due within one year, of $6,304 in 1998 and $1,620 in 1997 and are
stated net of allowances for bad debts of $988 in 1998 and $1,001
in 1997. The provision (credit) for bad debts was $72 in 1998,
$(8) in 1997 and $(1,024) in 1996.
Spare Parts - Spare parts (excluding expendables), stated net of
accumulated depreciation of $16,247 in 1998 and $12,874 in 1997,
are depreciated over three years on the straight-line method.
Property, Plant and Equipment - Depreciation is provided on the
straight-line method using principally estimated lives of four to
six years. When assets are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized in income for
the period. Normal repair and maintenance costs are charged to
expense as incurred. Major overhaul costs are accrued and allocated
to contracts based on estimates of equipment condition.
Significant renewals and betterments are capitalized.
Long-lived assets held and used are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the
carrying amount of the asset to future net cash flows expected to
be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount
by which the carrying amount of the assets exceeds the fair value
of the assets. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell.
Revenues - Construction and engineering fixed-price contracts
are accounted for using the percentage-of-completion method. Under
this method, estimated contract revenues are accrued based
generally on the percentage that costs to date bear to total
estimated costs, taking into consideration physical completion.
Estimated contract losses are recognized in full when determined.
Revenues from unit-price contracts are recognized as earned.
Revenues from change orders, extra work, variations in the scope of
work and claims are recognized when realization is assured.
31 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (continued)
Income Taxes - The Company accounts for income taxes by the
asset and liability method under which deferred tax assets and
liabilities are recognized for the future tax consequences of
operating loss and tax credit carryforwards and differences between
the financial carrying values of assets and liabilities and their
tax bases.
Retirement Plans and Benefits - The Company has defined benefit
and defined contribution retirement plans and a postretirement
medical benefits plan that provide retirement benefits to
substantially all regular employees. Qualified plans are
contributory on the part of employees. Pension costs are funded in
accordance with annual actuarial valuations. The Company records
the cost of postretirement medical benefits, which are funded on
the pay-as-you-go basis, over the employees' working lives.
Common Stock Options - The Company follows the intrinsic value
method of accounting for common stock options granted to employees.
Foreign Currency Translation - All significant asset and
liability accounts stated in currencies other than United States
dollars are translated into United States dollars at current
exchange rates. Translation adjustments are accumulated in other
comprehensive income (loss). Revenue and expense accounts are
converted at prevailing rates throughout the year. Foreign
currency transaction adjustments and translation adjustments in
highly inflationary economies are recorded in income.
Cash Flows - In the determination of cash flows, all highly
liquid debt instruments with maturities of less than three months
are considered to be cash equivalents. The Company paid interest
of $1,309 in 1998, $817 in 1997 and $1,280 in 1996 and income taxes
of $4,084 in 1998, $4,685 in 1997 and $3,676 in 1996.
Earnings (Loss) per Share - Basic earnings (loss) per share is
calculated by dividing net income, less any preferred dividend
requirements, by the weighted-average number of common shares
outstanding during the year. Diluted earnings (loss) per share is
calculated by including the weighted-average number of all dilutive
potential common shares with the weighted-average number of common
shares outstanding.
Derivative Financial Instruments - The Company may use
derivatives such as forward contracts, options or other financial
instruments as hedges to mitigate non-U.S. currency exchange risk
when the Company is unable to match non-U.S. currency revenues with
expenses in the same currency. The unrealized gains or losses on
such financial instruments are deferred and recognized when
realized as an adjustment to contract revenue. The Company had no
derivative financial instruments as of December 31, 1998 or 1997.
New Accounting Standards - The Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," in 1998. The standard requires reporting of
comprehensive income, which includes all changes in stockholders'
equity other than additional investments by stockholders or
distributions to stockholders. There are no related tax effects
associated with the Company's calculation of comprehensive income.
WILLBROS 32
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. Summary of Significant Accounting Policies (continued)
The Company adopted SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," in 1998. This
standard revises the requirements for disclosures about pension and
other postretirement benefit plans. Disclosures for previous years
have been restated.
2. Concentration of Credit Risk
The Company has a concentration of customers in the oil and gas
industry which exposes the Company to a concentration of credit
risk within an industry. The Company seeks to obtain advance and
progress payments for contract work performed on major contracts.
Receivables are generally not collateralized. The Company believes
that its allowance for bad debts is adequate.
3. Contracts in Progress
Most contracts allow for progress billings to be made during
performance of the work. These billings may be made on a basis
different from that used for recognizing revenue. Contracts in
progress for which cost and recognized income exceed billings or
billings exceed cost and recognized income consist of:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Costs incurred on contracts in progress $ 235,088 $ 197,700
Recognized income 55,635 2,301
---------- ----------
290,723 200,001
Progress billings and advance payments 287,692 212,904
---------- ----------
$ 3,031 $ (12,903)
========== ==========
Contract cost and recognized income not
yet billed $ 8,022 $ 8,159
Contract billings in excess of cost and
recognized income (4,991) (21,062)
---------- ----------
$ 3,031 $ (12,903)
========== ==========
</TABLE>
4. Property, Plant and Equipment
Property, plant and equipment, none of which are used to secure
debt or are subject to lien, at cost, consist of:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Construction equipment $ 61,236 $ 55,495
Marine equipment 43,431 34,484
Transportation equipment 31,997 29,134
Land, buildings, furniture and equipment 17,274 13,112
---------- ----------
153,938 132,225
Less accumulated depreciation and amortization 68,928 53,805
---------- ----------
$ 85,010 $ 78,420
========== ==========
</TABLE>
33 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
5. Notes Payable
The Company has unsecured credit facilities with banks in
certain countries outside the United States. Borrowings under
these lines of $525 at December 31, 1998 ($4,874 at December 31,
1997), in the form of short-term notes and overdrafts, are made at
competitive local interest rates. Generally, each line is
available only for borrowings related to operations in a specific
country. Credit available under these facilities is approximately
$12,200 at December 31, 1998.
6. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consist of:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
Trade payables $ 17,018 $ 22,850
Payrolls and payroll liabilities 14,524 14,832
Equipment reconditioning and overhaul reserves 3,810 3,605
---------- ----------
$ 35,352 $ 41,287
========== ==========
</TABLE>
7. Long-term Debt
The Company has a $150,000 credit agreement that matures on
February 20, 2003 and may be extended annually in one year
increments, subject to certain approvals, for up to two additional
years, with a syndicated bank group including ABN AMRO Bank N.V.,
as agent, and Credit Lyonnais, New York Branch, as co-agent. The
credit agreement provides for a $100,000 revolving credit facility,
part of which can be used for acquisitions and equity investments.
The entire facility, less amounts used under the revolving portion
of the facility, may be used for standby and commercial letters of
credit. Principal is payable at termination on all revolving loans
except qualifying acquisition and equity investment loans which are
payable quarterly over the remaining life of the credit agreement.
Interest is payable quarterly at prime or other alternative
interest rates. A commitment fee is payable quarterly based on an
annual rate of 1/4 percent of the unused portion of the credit
facility. The Company's obligations under the credit agreement are
secured by the stock of the principal subsidiaries of the Company.
The credit agreement requires the Company to maintain certain
financial ratios, restricts the amount of annual dividend payments
to the greater of 25 cents per share or 25 percent of net income
and limits the Company's ability to purchase its own stock. At
December 31, 1998, outstanding letters of credit totaled $39,323
and there were no borrowings, leaving $110,677 available under this
facility.
The Company has notes payable to two former shareholders
requiring quarterly payments of $117 plus interest at the Company's
rate for senior debt to be made through April 15, 1999. The current
portion of these notes, included in notes payable, is $233 at
December 31, 1998 and $467 at December 31, 1997; and the long-term
portion is $233 at December 31, 1997.
WILLBROS 34
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. Retirement Benefits
The Company has defined benefit plans (pension plans) covering
substantially all regular employees which are funded by employee
and Company contributions. The Company's funding policy is to
contribute at least the minimum required by the Employee Retirement
Income Security Act of 1974 in accordance with annual actuarial
valuations. Benefits under the plans are determined by employee
earnings and credited service. The Company has a postretirement
medical benefits plan which covers substantially all regular
employees and which is funded by Company and retiree contributions
based on estimated cost. Benefit expense for these plans include
the following components:
<TABLE>
<CAPTION>
Pension Benefits
----------------------------------
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Service cost $ 1,658 $ 1,180 $ 1,229
Interest cost 2,225 2,032 1,841
Expected return on plan assets (2,560) (2,247) (2,024)
Recognized net actuarial loss (gain) - (11) -
Amortization of transition asset (29) (29) (29)
Amortization of prior service cost 145 142 143
---------- ---------- ----------
$ 1,439 $ 1,067 $ 1,160
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Postretirement Medical Benefits
----------------------------------
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Service cost $ 179 $ 237 $ 242
Interest cost 296 326 347
Expected return on plan assets - - -
Recognized net actuarial loss (gain) (81) (52) -
Amortization of transition asset - - -
Amortization of prior service cost (22) - -
---------- ---------- ----------
$ 372 $ 511 $ 589
========== ========== ==========
</TABLE>
The retirement benefit obligations are determined using a
weighted-average discount rate of 6.75 percent at December 31, 1998
(7.0 percent at December 31, 1997 and 7.5 percent at December 31,
1996). For pension benefits the rate of increase in future pay
increases is 5.5 percent at December 31, 1998 (6.0 percent at
December 31, 1997 and December 31, 1996) and assets are expected to
have a long-term rate of return of 8.5 percent. The transition
asset is amortized over 15 years.
The following table sets forth the changes in benefit
obligations and plan assets and the reconciliation of the funded
status of the plans to the accrued benefit cost:
<TABLE>
<CAPTION>
Pension Benefits
----------------------------------
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Change in benefit obligations:
Benefit obligations, beginning
of year $ 32,407 $ 27,651 $ 26,815
Service cost 1,658 1,180 1,229
Interest cost 2,225 2,032 1,841
Plan participants' contribution 493 468 385
Amendments - - -
Actuarial loss (gain) (1,035) 2,184 (1,646)
Benefits paid (1,470) (1,108) (973)
---------- ---------- ----------
Benefit obligations, end of year 34,278 32,407 27,651
---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Postretirement Medical Benefits
----------------------------------
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Change in benefit obligations:
Benefit obligations, beginning
of year $ 4,236 $ 4,355 $ 4,950
Service cost 179 237 242
Interest cost 296 326 347
Plan participants' contribution 86 84 79
Amendments - (243) -
Actuarial loss (gain) (494) (347) (1,098)
Benefits paid (246) (176) (165)
---------- ---------- ----------
Benefit obligations, end of year 4,057 4,236 4,355
---------- ---------- ----------
</TABLE>
35 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. Retirement Benefits (continued)
<TABLE>
<CAPTION>
Pension Benefits
----------------------------------
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Change in plan assets:
Plan assets at fair value,
beginning of year 30,514 26,995 23,660
Actual return on plan assets 4,823 4,159 3,325
Employer contribution - - 598
Plan participants' contribution 493 468 385
Benefits paid (1,131) (1,108) (973)
---------- ---------- ----------
Plan assets at fair value,
end of year 34,699 30,514 26,995
---------- ---------- ----------
Reconciliation:
Funded status, plan assets over
(under) benefit obligations 421 (1,893) (656)
Unrecognized net actuarial gain (5,391) (2,093) (2,376)
Transition asset at January 1, 1987 (86) (115) (143)
Unrecognized prior service cost 816 961 1,102
Adjustment for minimum liability (50) (97) (147)
---------- ---------- ----------
Accrued benefit cost $ (4,290) $ (3,237) $ (2,220)
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Postretirement Medical Benefits
----------------------------------
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Change in plan assets:
Plan assets at fair value,
beginning of year - - -
Actual return on plan assets - - -
Employer contribution 160 92 86
Plan participants' contribution 86 84 79
Benefits paid (246) (176) (165)
---------- ---------- ----------
Plan assets at fair value,
end of year - - -
---------- ---------- ----------
Reconciliation:
Funded status, plan assets over
(under) benefit obligations (4,057) (4,236) (4,355)
Unrecognized net actuarial gain (1,735) (1,322) (1,027)
Transition asset at January 1, 1987 - - -
Unrecognized prior service cost (221) (243) -
Adjustment for minimum liability - - -
---------- ---------- ----------
Accrued benefit cost $ (6,013) $ (5,801) $ (5,382)
========== ========== ==========
</TABLE>
Plan assets of the pension plans consist primarily of listed
stocks and bonds. Contributions of assets to a trust established
by the Company to fund benefit payments under the Executive Benefit
Restoration Plan are irrevocable but are subject to creditor claims
under certain conditions and are, therefore, excluded from the
determination of funded status. Assets held in trust, included in
other assets, are $1,329 at December 31, 1998, $1,367 at
December 31, 1997, and $974 at December 31, 1996.
The non-current portion of the postretirement medical benefit
liability, $5,810 at December 31, 1998 ($5,703 at December 31,
1997), is included in other liabilities.
The weighted-average annual assumed rate of increase in the per
capita cost of covered postretirement medical benefits is 7 percent
for 1998 and is assumed to decrease to 5.5 percent by the year 2007
and to remain at that level. Increasing the assumed health care
cost trend rates by one percentage point in each year would
increase the postretirement medical benefits liability at
December 31, 1998 by $606 and expense for 1998 by $82.
The Company has a defined contribution plan which is funded by
participating employee contributions and the Company. The Company
matches employee contributions up to a maximum of 4 percent of
salary in cash or beginning in 1997, if the participant so elects,
up to 5 percent of salary in WGI common stock. Company
contributions for this plan were $689 (including $332 of WGI common
stock) in 1998, $636 (including $200 of WGI common stock) in 1997,
and $569 in 1996.
WILLBROS 36
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
9. Income Taxes
The provision (credit) for income taxes represents income taxes
arising as a result of operations and credits for revision of
previous estimates of income taxes payable in a number of
countries. The Company is not subject to income tax in Panama on
income earned outside of Panama. All income has been earned
outside of Panama; therefore, there is no expected relationship
between income (loss) before income taxes and the provision
(credit) for income taxes. The effective consolidated tax rate
differs from the statutory tax rate in each country because taxable
income and operating losses from different countries cannot be
offset and tax rates and methods of determining taxes payable are
different in each country.
Income (loss) before income taxes and the provision (credit) for
income taxes in the consolidated statements of income consist of:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Income (loss) before income taxes:
Other countries $ 3,036 $ 20,038 $ 12,888
United States (2,831) (199) (7,832)
---------- ---------- ----------
$ 205 $ 19,839 $ 5,056
========== ========== ==========
Provision (credit) for income taxes:
Currently payable:
Other countries $ 4,567 $ 5,723 $ 3,696
United States:
Federal - - -
State - - (206)
---------- ---------- ----------
4,567 5,723 3,490
Deferred, other countries - - (1,158)
---------- ---------- ----------
$ 4,567 $ 5,723 $ 2,332
========== ========== ==========
</TABLE>
The Company has a deferred tax asset in the United States of
$16,316 at December 31, 1998, and $18,635 at December 31, 1997,
relating to United States net operating loss and credit
carryforwards and employee benefit expense, and a deferred tax
liability of $1,146 at December 31, 1998, and $1,584 at December
31, 1997, relating to excess tax depreciation. The net deferred
tax asset is reduced to zero by a valuation allowance. The Company
has a deferred tax liability in other countries of $200 at December 31,
1998 and 1997, related to temporary differences, principally in
contract revenues and expenses.
The Company has $32,963 in United States net operating loss
carryforwards and $830 of United States investment tax credit
carryforwards at December 31, 1998. The United States net
operating loss carryforwards will expire, unless utilized,
beginning in 1999 and ending December 31, 2011. The carryforwards
available on an annual basis are limited. At December 31, 1998,
the Company has nonexpiring operating loss carryforwards in the
United Kingdom of $30,800 (Pounds 18,800),
37 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
9. Income Taxes (continued)
and a net operating loss carryforward expiring over three years in
Venezuela of $6,000 (Bolivars 3,400,000). The deferred tax asset
applicable to these operating loss carryforwards has been reduced
to zero by a valuation allowance.
10. Stock Ownership Plans
During May 1996, the Company established the Willbros Group,
Inc. 1996 Stock Plan (the "1996 Plan") with 1,125,000 shares of
common stock authorized for issuance to provide for awards to key
employees of the Company, and the Willbros Group, Inc. Director
Stock Plan (the "Director Plan") with 125,000 shares of common
stock authorized for issuance to provide for the grant of stock
options to non-employee directors.
Options granted under the 1996 Plan vest 25 percent at the date
of grant and 25 percent each January 1 thereafter. Options granted
under the Director Plan vest immediately. At December 31, 1998,
the 1996 Plan has 30,000 shares and the Director Plan has
79,000 shares available for grant.
The per share weighted-average fair value of options granted is
calculated using the Black Scholes option-pricing model, assuming
the options have a life of three years, the weighted-average risk-
free interest rate at the dates of grant is 4.63 percent in 1998
(5.84 percent in 1997 and 6.01 percent in 1996) and the weighted-
average volatility is 59.12 percent in 1998 (36.37 percent in 1997
and 35.15 percent in 1996).
The Company's stock option activity and related information
consist of:
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------
1998
----------------------
Weighted-
Average
Exercise
Shares Price
---------- ----------
<S> <C> <C>
Outstanding, beginning of year 484,500 $ 9.19
Granted 655,000 9.50
Exercised 46,450 9.19
---------- ----------
Outstanding, end of year 1,093,050 $ 9.37
========== ==========
Exercisable at end of year 517,550 $ 9.30
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------
1997
----------------------
Weighted-
Average
Exercise
Shares Price
---------- ----------
<S> <C> <C>
Outstanding, beginning of year 481,000 $ 9.08
Granted 5,000 18.95
Exercised 1,500 9.13
---------- ----------
Outstanding, end of year 484,500 $ 9.19
========== ==========
Exercisable at end of year 310,750 $ 9.22
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31,
----------------------
1996
----------------------
Weighted-
Average
Exercise
Shares Price
---------- ----------
<S> <C> <C>
Outstanding, beginning of year - $ -
Granted 481,000 9.08
Exercised - -
---------- ----------
Outstanding, end of year 481,000 $ 9.08
========== ==========
Exercisable at end of year 148,000 $ 9.21
========== ==========
</TABLE>
WILLBROS 38
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
10. Stock Ownership Plans (continued)
The weighted-average fair value of options granted during the
year was $3.75 in 1998 ($5.98 in 1997, $2.85 in 1996). Exercise
prices for options outstanding, weighted-average remaining life and
weighted-average exercise price by ranges of exercise prices at
December 31, 1998 are:
<TABLE>
<CAPTION>
Weighted- Weighted-
Average Average
Range of Options Remaining Exercise
Exercise Prices Outstanding Life Price
--------------- ----------- --------- ---------
<S> <C> <C> <C>
$6.63 428,000 9.8 years $ 6.63
$8.67 - $11.75 435,550 7.8 years $ 9.09
$14.94 - $19.44 229,500 9.1 years $ 15.02
---------
$6.63 - $19.44 1,093,050 8.9 years $ 9.37
=========
</TABLE>
The number of vested options and weighted-average exercise price
by ranges of exercise prices at December 31, 1998 are:
<TABLE>
<CAPTION>
Weighted-
Average
Range of Vested Exercise
Exercise Prices Options Price
--------------- ------- --------
<S> <C> <C>
$6.63 108,500 $ 6.63
$8.67 - $11.75 348,300 $ 9.08
$14.94 - $19.44 60,750 $ 15.27
-------
$6.63 - $19.44 517,550 $ 9.30
=======
</TABLE>
No compensation expense for the options granted under the
1996 Plan and the Director Plan is recorded. Had compensation expense
for vested options been recorded, the Company's net income (loss) would
have been reduced to $(5,234) in 1998 ($13,624 in 1997 and $2,310
in 1996), basic earnings per share would have been reduced to
$(.35) in 1998 ($.94 in 1997 and $.06 in 1996), and diluted
earnings per share would have been reduced to $(.35) in 1998 ($.93
in 1997 and $.06 in 1996).
Under employee stock ownership plans established in 1992 and
1995, certain key employees were issued options to purchase common
stock at a discount from fair value and were allowed to finance up
to 90 percent of the option price with three-year non-interest
bearing recourse notes. During May 1996, options were issued to
purchase 273,000 shares of common stock, all from treasury stock,
at $4.53 per share and 5,192 shares of preferred stock, all from
treasury, at $136 per share. All options were exercised shortly
after issuance. The Company had an obligation to purchase, under
certain conditions and at a formula price, stock held by retiring
or terminating employees, and recorded as compensation expense the
change in the redemption value at the end of each period using the
maximum formula price. The Company recognized a non-cash
compensation expense of $4,695 for the difference between the
maximum redemption value of the shares subject to redemption and
the initial public offering price upon the effectiveness of the
initial public offering. The Company's redemption obligation
terminated in the fourth quarter of 1996.
39 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
11. Fair Value of Financial Instruments
The carrying value of financial instruments does not materially
differ from fair value.
12. Public Offerings
A secondary offering of the Company's common stock was completed
in October 1997, with the sale of 4,528,250 shares of common stock,
consisting of 590,641 newly issued shares resulting in net proceeds
to the Company of $11,699 before offering costs and 3,937,609 shares
sold by certain stockholders of the Company for which the
Company did not receive any proceeds.
An initial public offering of the Company's common stock was
completed in August 1996, with the sale of 5,490,500 shares of
common stock, consisting of 525,980 newly issued shares resulting
in net proceeds to the Company of $4,892 before offering costs and
4,964,520 shares sold by a stockholder of the Company for which the
Company did not receive any proceeds.
13. Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share are computed as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net income (loss) $ (4,362) $ 14,116 $ 2,724
Preferred dividends - - (1,448)
---------- ---------- ----------
Net income (loss) applicable to
common shares $ (4,362) $ 14,116 $ 1,276
========== ========== ==========
Weighted-average number of
common shares outstanding
for basic earnings per share 14,744,622 14,540,137 14,151,532
Weighted average number of
dilutive potential common
shares outstanding - 148,235 10,958
---------- ---------- ----------
Weighted-average number of
common shares outstanding for
diluted earnings per share 14,744,622 14,688,372 14,162,490
========== ========== ==========
Earnings (loss) per common share:
Basic $ (.30) $ .97 $ .09
========== ========== ==========
Diluted $ (.30) $ .96 $ .09
========== ========== ==========
</TABLE>
WILLBROS 40
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
13. Earnings (Loss) Per Share (continued)
At December 31, 1998, there were 1,093,050 potential common shares
excluded from the computation of diluted earnings (loss) per share
because of their anti-dilutive effect.
14. Segment Information
The Company operates in a single operating segment providing
construction, engineering and specialty services to the oil and gas
industry. Due to a limited number of major projects and clients,
the Company may at any one time have a substantial part of its
operations dedicated to one project, client and country. Customers
with more than 10% of contract revenue are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Customer A 22 % - % - %
Customer B 18 - -
Customer C - 13 33
Customer D - 10 -
Customer E - 10 -
Customer F - - 16
-- -- --
40 % 33 % 49 %
== == ==
</TABLE>
Information about the Company's operations in its significant
work countries is shown below:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Contract revenues:
United States (1) $ 91,151 $ 78,849 $ 32,918
Venezuela 75,350 31,830 18,897
Nigeria 48,743 75,982 87,283
Indonesia 25,804 27,951 1,477
Oman 17,806 22,846 23,513
Ivory Coast 14,511 - -
Pakistan 6,764 13,889 32,732
Other 1,489 530 868
---------- ---------- ----------
$ 281,618 $ 251,877 $ 197,688
========== ========== ==========
Long-lived assets:
United States $ 15,088 $ 10,882 $ 9,891
Venezuela 26,495 30,433 10,451
Nigeria 33,005 27,106 27,325
Indonesia 7,246 8,077 985
Oman 6,602 8,382 9,148
Ivory Coast 4,213 - -
Other 2,027 925 1,369
---------- ---------- ----------
$ 94,676 $ 85,805 $ 59,169
========== ========== ==========
(1) Net of inter-country revenues of $1,463 in 1998, $4,365 in
1997 and $3,052 in 1996.
</TABLE>
41 WILLBROS
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
15. Contingencies, Commitments and Other Circumstances
The Company provides construction, engineering and specialty
services to the oil and gas industry. The Company's principal
markets are currently Africa, Asia, the Middle East, South America
and the United States. Operations outside the United States may be
subject to certain risks which ordinarily would not be expected to
exist in the United States, including foreign currency restrictions,
extreme exchange rate fluctuations, expropriation of assets, civil
uprisings and riots, government instability and legal systems of
decrees, laws, regulations, interpretations and court decisions
which are not always fully developed and which may be retroactively
applied. Management is not presently aware of any events of the
type described in the countries in which it operates that have not
been provided for in the accompanying consolidated financial
statements. Based upon the advice of local advisors in the various
work countries concerning the interpretation of the laws, practices
and customs of the countries in which it operates, management
believes the Company has followed the current practices in those
countries; however, because of the nature of these potential risks,
there can be no assurance that the Company may not be adversely
affected by them in the future. The Company insures substantially
all of its equipment in countries outside the United States against
certain political risks and terrorism.
The Company has the usual liability of contractors for the
completion of contracts and the warranty of its work. Where work
is performed through a joint venture, the Company also has possible
liability for the contract completion and warranty responsibilities
of its joint venturers. Management is not aware of any material
exposure related thereto which has not been provided for in the
accompanying consolidated financial statements.
Certain post contract completion audits and reviews are being
conducted by clients and/or government entities. While there can be
no assurance that claims will not be received as a result of such
audits and reviews, management does not believe a legitimate basis
for any material claims exists. At the present time it is not
possible for management to estimate the likelihood of such claims
being asserted or, if asserted, the amount or nature thereof.
The Company has certain operating leases for office and camp
facilities. Rental expense, excluding daily rentals and
reimbursable rentals under cost plus contracts, was $3,254 in 1998,
$2,962 in 1997, and $2,112 in 1996. Minimum lease commitments
under operating leases as of December 31, 1998, total $8,187 and
are payable as follows: 1999, $2,383; 2000, $1,825; 2001, $1,679;
2002, $1,445; 2003, $358; and later years, $497.
16. Subsequent Event
Subsequent to December 31, 1998 the Company adopted a plan to
dispose of surplus equipment, and equipment sales are expected to
be conducted in March and April, 1999. A preliminary
identification of eligible equipment indicates that the net book
value of equipment that may be sold is approximately $15,000 to
$25,000. The actual amount will depend upon the adequacy of offers
received and requirements for equipment that may arise prior to the
scheduled sales. No significant loss is expected upon disposal of
these assets.
WILLBROS 42
<PAGE>
WILLBROS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
17. Quarterly Financial Data (Unaudited)
Selected unaudited quarterly financial data for the years ended
December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
First Second Third
Quarter Quarter Quarter
---------- ---------- ----------
<S> <C> <C> <C>
December 31, 1998:
Contract revenues $ 61,835 $ 78,752 $ 65,962
Operating income (loss) 3,129 6,618 (9,673)
Income (loss) before
income taxes 3,756 5,102 (10,897)
Net income (loss) 3,040 3,788 (11,478)
Earnings (loss) per share,
basic and diluted .20 .25 (.78)
December 31, 1997:
Contract revenues $ 51,165 $ 57,280 $ 72,815
Operating income 4,800 4,615 5,244
Income before income taxes 4,503 4,174 4,995
Net income 2,454 3,025 3,883
Earnings per share:
Basic .17 .21 .27
Diluted .17 .21 .27
</TABLE>
<TABLE>
<CAPTION>
Fourth
Quarter Total
---------- ----------
<S> <C> <C>
December 31, 1998:
Contract revenues $ 75,069 $ 281,618
Operating income (loss) 3,249 3,323
Income (loss) before income taxes 2,244 205
Net income (loss) 288 (4,362)
Earnings (loss) per share,
basic and diluted .02 (.30)
December 31, 1997:
Contract revenues $ 70,617 $ 251,877
Operating income 6,729 21,388
Income before income taxes 6,167 19,839
Net income 4,754 14,116
Earnings per share:
Basic .32 .97
Diluted .31 .96
</TABLE>
The Company derives its revenues from contracts with durations
from a few weeks to several months or in some cases, more than a
year. Unit-price contracts provide relatively even quarterly
results; however, major projects are usually fixed-price contracts
that may result in uneven quarterly financial results due to the
method by which revenues are recognized.
There was a favorable variance in revenue and there were
unfavorable variances in operating income and net income in the
fourth quarter of 1998 compared to the fourth quarter of 1997.
Revenue increased due primarily to construction work in the
United States and the Ivory Coast. Operating income and net income
decreased because of reduced specialty services work in Nigeria and
Oman, substantial completion of construction activities on two
projects in Indonesia, and increased depreciation expense resulting
from additions to the equipment fleet in 1997 and 1998.
43 WILLBROS
<PAGE>
COMMON STOCK INFORMATION
AND DIVIDEND POLICY
The Company's common stock trades on the New York Stock Exchange
under the symbol WG. As of December 31, 1998, there were
176 stockholders of record. The table below sets forth the
common stock trading price by quarter for 1997 and 1998.
<TABLE>
<CAPTION>
1997 1998
HIGH LOW HIGH LOW
----------------------------------------------
<S> <C> <C> <C> <C>
FIRST QUARTER $10-5/8 $8-7/8 $17 $13-1/2
SECOND QUARTER $16 $9 $19-13/16 $15-5/16
THIRD QUARTER $21-3/4 $14-5/8 $16-1/8 $5-3/16
FOURTH QUARTER $24-7/16 $14-3/8 $6-7/8 $5-1/2
</TABLE>
WILLBROS 44
<PAGE>
EXHIBIT 21
WILLBROS GROUP, INC.
Jurisdiction
Company Name of
and Incorporation
Name Under Which it is or
Doing Business (if applicable) Organization
- -------------------------------------------------- ------------------
Arctic Constructors Limited Canada
Associated Contractors Equipment Corporation Panama
Construcciones Acuaticas Mundiales, S.A. Venezuela
Constructora CAMSA, C.A. Venezuela
Contratistas Transandinos, S.A. d/b/a/ COTRA Colombia
Cruzamientos Direccionales Orizzon, S.A. de C.V. Mexico
"ESCA" Equipment Service Compania Anonima Venezuela
International Pipeline Equipment, Inc. Panama
Interproject Engineers Limited Cayman Islands
Inversiones CAMSA, C.A. Venezuela
Inversiones Willbros del Ecuador, S.A. Panama
Kompaniya Willbros ZAO Russia
Monastere Inc. Delaware, USA
Musketeer Oil B.V. Netherlands
Osage Oilfield Services, Inc. Oklahoma, USA
Pipeline Contractors Inc. Panama
Pipelines & Logistics, Inc. Delaware, USA
Pretensado S.A. Venezuela
Servicios Petroleros Willbros, S.A. de C.V. Mexico
Shield Constructors, Inc. Panama
Shield International Engineering, Inc. Panama
The Oman Construction Company, LLC Oman
Vessel MWB 403, Inc. Delaware, USA
Vintondale Corporation N.V. Netherlands Antilles
Willbros Alaska, Inc. Delaware, USA
Willbros Al-Rushaid Limited Saudi Arabia
Willbros Andina Pipeline Investments, L.L.C. Delaware, USA
Willbros Azerbaijan Limited Cayman Islands
Willbros Bolivia, S.A. Panama
Willbros Butler International, Inc. Panama
Willbros Chile, S.A. Chile
Willbros Construction & Engineering - Egypt, LLC Egypt
Willbros Constructors, Inc. Panama
Willbros Constructors, Inc. Cayman Islands
Willbros Contracting Limited Cyprus
Willbros Energy Services Company Delaware, USA
Willbros Engineering & Construction Limited Canada
Willbros Engineers, Inc. Delaware, USA
<PAGE>
Jurisdiction
Company Name of
and Incorporation
Name Under Which it is or
Doing Business (if applicable) Organization
- ---------------------------------------------- ------------------
Willbros Far East, Inc. Vanuatu
Willbros Far East (PNG) Pty Ltd Papua New Guinea
Willbros Far East Sdn. Bhd. Malaysia
Willbros Gabon, S.A. Panama
Willbros, Inc. Delaware, USA
Willbros International (Germany) G.m.b.H. Germany
Willbros International, Inc. Panama
Willbros International Pty Limited Australia
Willbros Iran, Inc. Panama
Willbros Kuwait Gas & Oil Field Services Co. (K.C.S.C.) Kuwait
Willbros Latina, S.A. Panama
Willbros (Malaysia) Sdn. Bhd. Malaysia
Willbros Middle East, Inc. Panama
Willbros (Nigeria) Limited Nigeria
Willbros Operating Services, Inc. Delaware, USA
Willbros (Overseas) Limited United Kingdom
Willbros Suramerica, S.A. Panama
Willbros (U.K.) Limited United Kingdom
Willbros USA, Inc. Delaware, USA
Willbros West Africa, Inc. Panama
Willgrande, L.L.C. Oklahoma, USA
Willsip, L.L.C. Oklahoma, USA
<PAGE>
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Willbros Group, Inc.:
We consent to incorporation by reference in the registration
statements Nos. 333-18421 and 333-21399 on Form S-8 of Willbros
Group, Inc. of our reports dated February 5, 1999, relating to the
consolidated balance sheets of Willbros Group, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31,
1998, and the related schedule, which reports are incorporated
by reference or appear in the December 31, 1998 annual report on
Form 10-K of Willbros Group, Inc.
KPMG
Panama City, Panama
March 29, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S DECEMBER 31, 1998 FORM 10-K AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,247
<SECURITIES> 0
<RECEIVABLES> 41,006
<ALLOWANCES> 988
<INVENTORY> 0
<CURRENT-ASSETS> 60,250
<PP&E> 153,938
<DEPRECIATION> 68,928
<TOTAL-ASSETS> 159,939
<CURRENT-LIABILITIES> 46,755
<BONDS> 0
0
0
<COMMON> 753
<OTHER-SE> 106,181
<TOTAL-LIABILITY-AND-EQUITY> 159,939
<SALES> 281,618
<TOTAL-REVENUES> 281,618
<CGS> 220,360
<TOTAL-COSTS> 278,295
<OTHER-EXPENSES> 3,118
<LOSS-PROVISION> 72
<INTEREST-EXPENSE> 1,335
<INCOME-PRETAX> 205
<INCOME-TAX> 4,567
<INCOME-CONTINUING> (4,362)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,362)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
