Classification of contracts
KBR (KBR) generates revenue directly or indirectly from new contract awards. The deals KBR and peers (XLI) Jacobs Engineering (JEC) and Chicago Bridge & Iron (CBI) enter into are typically long term. KBR’s contracts are broadly classified as
- cost-reimbursable, in that prices can be changed depending on actual costs incurred for supplies, machinery, and labor hours
- fixed-price, which don’t generally involve any price changes, and adjustments in price are allowed under certain conditions
- hybrid, which carry properties of both cost-reimbursable and fixed-price contracts
Fixed-price contracts are considered riskier than cost-reimbursable contracts since most of each project’s risks lie with the customer. Hybrid contracts, on the other hand, aim to balance the advantages and disadvantages of the other two types of contracts. KBR exited fixed-price power projects, reducing risk in the energy (XLE) sector.
Recent notable contracts won
According to a press release, in 3Q17, KBR was awarded two “task order modifications” to provide logistics solutions to the US Army in Europe and the Arabian Peninsula. The contracts are worth $116 million.
KBR received a technology and consulting contract from chemical company Dorogobuzh (DGBZ) to re-equip one of its ammonia facilities in Russia. KBR will provide “licensing and basic engineering design.”
The company also received a contract from JVGAS to provide engineering and project management services. JVGAS is a joint venture between BP, Sonatrach, and Statoil. Continue to the next part for a look at some of KBR’s major clients.