Online

See all articles

CB&I sinks to loss on LNG project charges

Engineering firm takes hit at Cameron and Freeport liquefaction projects

US engineering firm CB&I reported a second-quarter loss largely driven by charges related to two US liquefied natural gas export projects.

The company's engineering and construction unit recorded $367 million in charges at the Sempra-led Cameron LNG plant in Hackberry, Louisiana and the Freeport LNG facility in Freeport, Texas. The company is a partner in the joint ventures handling engineering, procurement and construction work at both projects.

CB&I chief executive Patrick Mullen said on an investor call that the majority of the charges were relayed to Cameron LNG, where the JV is working with Sempra to finalise an updated schedule.

Sempra said last week the start-up date for the facility, originally scheduled to come online next year, could be delayed to 2019.

"The charges represent CB&I's share of forecasted cost increases and were necessary because of lower-than-expected labour productivity, weather-related delays, increased costs for fabrication, and craft labor, subcontractor and indirect costs associated with extensions of schedule," Mullen said. "Some of these factors are within our control and some are not."

In a note, investment firm Tudor Pickering Holt found the fact that a new schedule for the Cameron LNG project a cause for concern.

"CB&I revealed that it is engaged in discussions with Sempra in regards to claims for extension of time and recovery of certain costs but noted it was still early in the process," according to the note. "It is unclear the magnitude of CB&I’s 'ask'. Thus, the uncertainty around who is responsible for the potential higher costs will likely be an overhang for Sempra going forward."

Regarding Freeport LNG, Mullen said the project has experienced "some elements" of quantity growth and material delivery delays, placing some pressure on the schedule for the plant's first train, expected to come online next year.

"These elements are now substantially behind us and, with our construction productivity to-date being largely as expected, we are proceeding aggressively into ramp-up of pipe erection and other key activities," he said.

Overall, CB&I reported a second-quarter net loss of $304.1 million versus net income of $115.6 million in the same period a year ago. The company booked revenues of $1.3 billion, down from $2.2 billion last year.