Geoff Telfer - Vice President, Corporate Finance and Investor Relations David Thomas Seaton - Chairman & Chief Executive Officer Biggs C. Porter - Chief Financial Officer & Senior Vice President.

Jamie L. Cook - Credit Suisse Securities (USA) LLC (Broker) Jerry David Revich - Goldman Sachs & Co. Steven Michael Fisher - UBS Securities LLC Brian Konigsberg - Vertical Research Partners LLC Alex J. Rygiel - FBR Capital Markets & Co. Michael S. Dudas - Sterne Agee CRT Tahira Afzal - KeyBanc Capital Markets, Inc. Andrew J. Wittmann - Robert W.

Baird & Co., Inc. (Broker) Chad Dillard - Deutsche Bank Securities, Inc. Yuri J. P. Lynk - Canaccord Genuity Corp. Jeffrey Y. Volshteyn - JPMorgan Securities LLC Anna Kaminskaya - Bank of America Merrill Lynch Robert Connors - Stifel, Nicolaus & Co., Inc..

Please standby. We're about to begin. Good afternoon and welcome to Fluor Corporation's Second Quarter 2015 Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. A question-and-answer session will follow management's presentation.

A replay of today's conference call will be available at approximately 8:30 p.m. Eastern Time today, accessible on Fluor's website at www.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available through 7:30 p.m. Eastern Time on August, the 5th at the following telephone number, 888-203-1112.

The passcode of 9523230 will be required. At this time, for opening remarks, I would like to turn the call over to Geoff Telfer, Senior Vice President of Investor Relations. Please go ahead, Mr. Telfer..

Thank you, Matt, and welcome to Fluor's second quarter 2015 teleconference. With us today are David Seaton, Fluor's Chairman and Chief Executive Officer; and Biggs Porter, Fluor's Chief Financial Officer. Our earnings announcements was released this afternoon after market closed.

And we have posted a slide presentation on our website, which we'll reference while making prepared remarks. But before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on slide two.

During today's call and slide presentation, we'll be making forward-looking statements which reflect our current analysis of existing trends and information. However, there is an inherent risk that actual results could differ materially.

You can find a discussion of our risk factors, which could potentially contribute to such differences in the company's Form 10-Q, which was filed earlier today. During today's call, we may also discuss certain non-GAAP financial measures.

Reconciliations of these amounts with the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com. Now I'd turn the call over to David Seaton, Fluor's Chairman and CEO.

David?.

Thanks, Geoff. Good afternoon, everyone and thank you for joining us here today. Before we get into specifics on our second quarter performance, I'd like to share a bit about our perspective on the markets we serve and the actions we're taking, continue to take, strengthen our performance, and strengthen our competitiveness.

At the time of our April earnings call, commodity prices were recovering and expectations of a gradually improving global economy gave us confidence that we could achieve the financial goals for strong growth that we set out last October.

Since then we've seen a shift in the supply and demand curves leading to lower pricing, especially on crude oil and some specific metals. This is a result of excess supply compounded by slow economic growth and uncertainty in multiple markets.

Even with these challenges, we continued to record oil and gas backlog near all-time highs and are well-positioned for robust slate of opportunities. In fact, today we received an award letter for two packages for the new KNPC al-Zour refinery and we expect to book our portion of this $5.8 billion project into backlog during the third quarter.

While I'm particularly pleased with the performance and results in oil and gas, weakness in our non-oil and gas end markets persist. In mining and metals, ongoing weakness in iron core and copper are now pushing opportunities that we considered 2015 prospects into 2016.

With regard to infrastructure, competition continues to be aggressive and a lack of long-term funding solutions is limiting the near-term opportunities. In power, we continued to win our fair share of U.S. combined cycle build out even in a highly competitive environment.

And we are optimistic about the improved regulatory uncertainty that it will drive a number of opportunities over the next several years. Overall, there is a slower pace of project awards. The end result is a relatively flat backlog in the aggregate as opposed to the growth we had planned for in October.

While it's not what anyone wants, we will manage through this. That's why the path we've been on for the last three years to improve Fluor's competitiveness and why an improved offering of truly integrated solutions is so important. This is an environment we have prepared for.

The measures we have taken – have been taken have been well-planned and well executed. We made fundamental shifts in our construction and fabrication offerings to drive profitable growth for our company and to improve control and delivery at the project level.

Of equal importance, we've aligned our businesses leadership and employees to offer broader, more cost-effective array of Fluor assets and capabilities to our customers. We will continue to look for opportunities to enhance the offerings we provide to our customers and provide profitable growth for Fluor.

I'm pleased to say that this approach has helped us change over time. As a result, we're not faced with the need to take extreme measures driven by economic uncertainty, which I believe can be disruptive. This afternoon, we announced the strategic joint venture with Sacyr in Spain.

This new JV will – allows us to expand geographically into select regions with a proven construction partner. Historically, we've been successful in expanding work through joint ventures including our highly productive JV in Mexico, and expect to do more in the future.

In many cases, this requires investment on our part, however, with Sacyr, this was achieved by selling 50% of our interest in our Spanish-based business. Now let's look at the second quarter results and begin on slide three. Net earnings attributable to Fluor for continuing operations were $149 million or $1 a share – diluted share.

Consolidated segment profit for the quarter was $282 million. Segment profit represents a 21% increase in Oil & Gas results compared to a year ago, offset by the decline in our Industrial & Infrastructure, Power and Global Services segments. Segment profits – segment profit margins were 5.9% level with our 6% a year ago.

With Oil & Gas margins at 7.4%, up from 5.9% in the second quarter 2014, and consistent with the results from last quarter. Margins in Oil & Gas reflect favorable performance on projects progressing towards completion and an increase in higher margin engineering and design activities. Revenues for the quarter were $4.8 billion.

New awards for the quarter were $4.3 billion including $2.7 billion in Oil & Gas, $726 million in Government, and $607 million in Industrial & Infrastructure. Consolidated backlog at quarter-end improved to $41.6 billion compared to the $41.2 billion last year.

We have had no cancellations on major projects this quarter and only a minimal impact on backlog due to foreign exchange fluctuations. Our financial results are summarized on the table in slide four, and I'll continue my remarks on slide five.

In the second quarter, the Oil & Gas segment booked $2.7 billion in new awards, as I mentioned, including additional refining work in Europe and a new production and chemical programs in Canada. Ending backlog for Oil & Gas segment rose 18% from a year ago to $28.7 billion.

New awards for the quarter in Industrial & Infrastructure were $607 million, primarily related to new work for the industrial services customer. Ending backlog for Industrial & Infrastructure declined to $6.7 billion from $9.1 billion a year ago, as we continue to work off the existing mining projects.

Commodity prices remain a challenge for this business line, and we are seeing some prospects that were slated as I said for 2015 award pushed into 2016.

On the Infrastructure side, although a long-term federal funding solution continues to be abated, (8:33) I'm pleased to report that a Flour led JV won the Bergstrom Expressway Project in Austin, Texas. We expect to book this project in the third quarter as well.

Turning to slide six, revenue for the Government group was $607 million, similar to the results a year ago. Second quarter new awards were $726 million, and included another task order award for services we provide under the LOGCAP IV contract in Afghanistan. Ending backlog was $4.3 billion, down from $5.2 billion a year ago.

In the Power segment, second quarter awards were $253 million, and included a new maintenance services contract for Luminant's Comanche Peak nuclear facility in Texas. Ending backlog is $1.9 billion, which was comparable to $1.7 billion a year ago.

With that I'll now turn the call over to Biggs to review some of the details of our operating performance, and corporate financial metrics for the quarter.

Biggs?.

Thanks, David. Good afternoon, everyone. I want to start by providing some additional comments on our performance for the second quarter, then move to the balance sheet. Please turn to slide seven. As David mentioned, EPS from continuing operations for the second quarter was $1 compared to $1.02 a year ago.

Foreign exchange rates were slight negative on earnings for the quarter. Corporate G&A expense for the second quarter was $48 million compared to $57 million a year ago. This year-over-year decline was primarily due to lower stock-based compensation expense.

Shifting to the balance sheet, Fluor's financial condition remains strong with cash plus current and non-current marketable securities totaling $2.1 billion. This compares to $2.7 billion a year ago. Cash flow from operations was $165 million for the quarter.

During the quarter, the company returned over $134 million in cash to shareholders through share repurchases and dividends. Over the last three quarters, we have repurchased $700 million of shares. We remain on track to complete our $1 billion share repurchase program by the end of this year.

Moving to slide 8, Fluor's consolidated backlog at quarter end was $41.6 billion. The percentage of fixed price contracts in our overall backlog was 16% at quarter end and a mix by geography was 34% U.S., and 66% non-U.S. Before we take questions, I'll conclude my remarks by commenting on our guidance for the remainder of 2015, which is on slide 9.

We continue to win a number of front-end engineering awards, particularly in Oil & Gas. However, relatively low new awards this year and the deferral of investment decisions due to volatile commodity prices is placing pressure on our expected results for 2015.

After taking into consideration these factors, the company is reducing its 2015 guidance range of $4.50 to $5 per diluted share to $4.05 to $4.35 per diluted share.

The range presumes completion of our announced $1 billion share repurchase program by end of the year, an effective tax rate of 33% to 35%, G&A for the full year of $180 million to $190 million, and the closing of our sale of 50% of Fluor Spain. The guidance excludes the effects of previously announced termination and settlement of Fluor's U.S.

defined benefit pension plan, which is expected in the latter part of 2015. With that, operator, we're ready to take questions..

Thank you. At this time, we'll take our first question from Jamie Cook with Credit Suisse..

Hi. Good evening..

Good evening..

I guess a couple questions. One, the Oil & Gas revenues we've seen declines over the past couple of quarters; I think you're expecting sort of more flattish.

If you could just comment on what's going on there; is it the projects that are in backlog, the burn rate is lower than what you would have thought? Is it push outs in – what's in backlog? Just if you could give more color there in how we think about that for the remaining half of the year? The second question relates to profitability in Oil & Gas and Industrial & Infrastructure, which on the positive continues to surprise on the upside.

David, I think, last quarter you said high 6% for Oil & Gas; it's – at third quarter we're at 7%. And I think you also said I&I margins from 4% to 5%, where again you guys are consistently above that range. So I'm wondering if we structurally should think about profits at higher levels than you've been guiding to.

And then sorry, my last question is for you, David, with regards to – obviously you don't want to talk about 2016 right now, but I think the market is embedding or assumes that numbers are going to be down – EPS will be down next year, which I agree, just given the push outs we're seeing in backlog.

But the question is, we can make our own assumptions on the market, is there anything you're considering or that you can do internally to help the EPS growth or actions that you can take, whether it's some restructuring on the G&A line, whether it's we should think about you guys continuing to be disciplined buying back your stock or perhaps there's other markets you're more optimistic on, that could help the top-line? Thanks..

Those are lots of questions..

I know. I know. Sorry..

I think, in terms of revenue, I think it's just the time of where we are in those projects. We've got a fair amount of projects that are just going to the field, where you're going to see the revenues I think tick up in terms of Oil & Gas in the second half of the year and as we go into 2016, so it's basically a timing thing.

As I said, we have had no cancellations. It's just where we are in the cycle of these projects. So I would just – I wouldn't read anything into that; I think you'll see Oil & Gas revenues improve. In terms of margin, and I'm going to answer part of the last question first. We've spent the last three years really looking at our competitiveness.

And as I've mentioned, we took over $100 million out of our overhead last year in terms of becoming more competitive, and we did it in a very measured way, and we didn't take a restructuring charge.

We just did these things as a normal course of our business, which puts us I think in a much better position to weather this storm in terms of the other businesses, but also be more competitive in the marketplace. And I think we're seeing that. Embedded in that higher level of competitiveness is, I think, just a difference in our profit expectations.

So, yes, I kind of gave you the high 6%s and we're obviously over the 7%. I think that going forward, you're going to see us continue to perform very well in that segment.

I think in terms of Industrial & Infrastructure, we've had some completions, and again it's just operating off of a smaller base, and you don't have the huge mining projects going through with the CFM burning as well, and obviously that's one way that the margins in Industrial & Infrastructure stay at a much higher level than the traditional number, when you've got mining blowing through there.

So I think we're in a great position, in terms of being able to deliver profitability. Unfortunately it's on a much smaller base in the non-oil and gas pieces of our business. I'm really proud of what we've done in terms of kind of rightsizing this company and preparing for these types of situations.

It's just that, as I said, the mining projects and some of the other things that are pushed out have created a little bit of headwind in terms of where we thought we would be. But I am very pleased with what we've done in terms of structure. I am very pleased with the way we're performing.

And the fact that we have no cancellations I think also kind of speaks to the conservatism that we have in taking projects in and the things we need to see before we put those things into backlog. So, I think all-in-all we kind of changed the company to where we should deliver a higher level of profitability going forward.

I'm not going to suggest a percent specific in terms of Oil & Gas or anything else, but I don't think you'll see us return to those low-margin days of five or so years ago. We've really been disciplined in how we're going forward and we'll continue to do so..

And I know I'm pushing the limit here, but any – just broadly 2016 – my question there in terms of repurchase or any actions that you can take to help the bottom line or – I mean, it doesn't sound there's much more you can do on the restructuring side because that's been done?.

That's been done, Jamie. I wouldn't really want to get into 2016. I think, it's clear that if our new awards in the other businesses are down in 2015, the earnings in 2016 will be challenged.

But I think from a margin perspective and being good stewards of that money and making sure we're doing the rights things and being balanced and not making silly decisions that we tend to see in this type of a market circumstance, you'll continue to see us perform..

All right. Thanks so much. I'll get back in queue..

This time we'll take a question from Jerry Revich with Goldman Sachs..

Good afternoon and good evening..

Hi, Jerry..

David, I wonder if you could just update us on your views on the ethylene cycle.

How many more crackers do you think move forward this year, and next year it feels like we're having one wave after another at least coming to the forefront, how many more do you think move forward and how many of them are you folks bidding on?.

Well, we're focused on all of them. When you look at that next wave, I think, there's a good three or four of them in that next wave, and then I think there is a wave after that.

I think, the interesting thing is we're in the middle of building three of them right now and it's going to take some time for us to finish those, so the gas starts to get used.

But I see our petrochemical customers being very bullish on CapEx, but again they're in the same markets that the oil and gas guys are, and in some cases it's the same companies and they're curtailing capital. So I think there's a little bit of a timing element in when these things come to market that maybe we didn't see a year ago.

But I think there is that end, as well as the derivative chemical plants that we're focused on are also things that we're obviously keen to win. So, I think, it's a good market for us, and I think, we're well positioned to get hopefully more than our fair share..

And David, in Power you mentioned now that the uncertainty has gone, projects are moving forward.

Can you just give us a sense of your views on the cadence, how many projects do you think move forward within the next 12 months to 24 months, just flesh out you visibility for us, if you could?.

There is numerous gas-fired combined cycle plants being planned and we're focused on a lot of them. We've got three that we're working on right now in varying stages, two with Duke and one with Dominion that the final notice to procedure on that project is not even in backlog yet.

So I would argue that there is 10 to 20 on the books that will happen over the next probably five years, or at least, they'll go to limited notice to proceed in the next five years. So, I think we've got kind of a good solid earnings stream ahead of us in terms of gas plants, and the replacement of some of the coal fleet that's been planned.

When you look at the power margin there – power production margin, it still hasn't gotten to the point where it's putting pressure on these companies to put more capacity online. So I think we got to see some macro things happen in terms of the economy and people starting to build other things to use up the power margin to where they have to do that.

So it's kind of replacing coal and it's also capacity and the capacity side isn't supporting a rapid advance of those projects..

Okay.

And lastly, any opportunities on the wind and solar side as a result of that increased visibility too, I know you folks have a pretty good market share when those projects move forward?.

Yeah. We're looking at potential solar, there's not a whole lot of wind under bid right now, and I think the reality of the cost curves on wind is kind of taking the wind out of their sails so to speak, but – sorry for that pun..

That was good..

I think, the solar side is continuing to do quite well, we're kind of finishing up on that first wave now..

Okay. Thank you..

At this time, we'll move to Steven Fisher with UBS..

Thanks. Good afternoon..

Hello..

Clearly you still have some chunky Oil & Gas projects coming in like KNPC.

I mean what do you see as the trajectory of Oil & Gas backlog over the next several quarters? I mean it sounds like it – probably we should be expecting it to come down if your revenue burn is going to be picking up, but I guess I'll start with that and then, what's the kind of visibility you have to when it could start to tick back up again?.

I think it could tick back up by the end of the year, I wouldn't say demonstrably so, but certainly there is things that we see right now that could provide an increase in backlog year-over-year.

I think, as I mentioned, you're going to see revenues increase, but I don't think it's going to increase as fast as maybe you think in terms of depleting backlog. KNPC's big project, there're several other things there, there's big programs that will be – will go to FID this year.

Obviously, going to backlog either late this year, early next year that could actually grow backlog in Oil & Gas..

Is Tengizchevroil, one of the key prospects that you're still kind of including in that list to move the needle, for this year?.

Yeah, that's in there for that period of time, I wouldn't say when they're going to go to FID, because that's really up to our customer..

Okay.

And then, maybe broadening up Jerry's question how would you characterize the activity and prospects in the Gulf Coast at this point relative to other parts of the world? Is there still more confidence in this region given sort of the feedstock dynamics or is it just sort of broad customer caution everywhere?.

I think, it's broad caution everywhere. I think, the programs and plans that for the Gulf Coast that have been planned, some of them have been pushed to the right. But they've been pushed to the right because of the macroeconomic stuff, not because of a cooling on the region specifically. That's a great place for us to work.

We've got a great workforce, access to some of the best and brightest on the craft side. And with those projects under construction right now, we're actually growing our capability quite well, which bodes well for us longer-term in other industries when we got that kind of labor force available to us.

The Texas, Louisiana specifically are two really great states to – for people to invest in economically. So I don't see anything slowing. The attitude around that region is just that broad fear factor that's out there in terms of capital deployment..

Okay. Thanks very much..

Thank you..

At this time, we will move to Brian Konigsberg with Vertical Research Partners..

Yes. Hi. Good afternoon..

Good afternoon..

Hey, Biggs, just a question about the backlog, when I just do the natural math taking previous quarters backlog, I add the orders that you recognize, take out the revenue; suggest that the Q2 balance sheet should be about $900 million to a $1 billion less than what you reported.

And I think it's specifically in Oil & Gas, was there any scope changes in the quarter that we should be aware of, or what might be the other drivers to that?.

Yeah, you need to – and we laid out in the 10-Q when we do the roll forwards on backlog, you can see what adjustments to backlog are. Though still on the difference between new awards and what's burned, but there's numbers of adjustments, that almost always are..

So, it's probably just scope changes that don't show up in orders?.

Typically, yeah. Typically, there's scope changes that roll in there..

Okay. Got it.

And just secondly, clarification just on the projects you announced that you discussed will be booked in Q3, the al-Zour and Bergstrom, the $5.8 billion is that the total scope for the consortium or is that your take?.

No. That's total consortium..

And your take would be how much?.

Between 35% and 40%..

Okay.

And same thing with the Texas project?.

Yes, we're I think 50% of that..

Got you. If I could just ask one more question, just there's been more discussion about oil staying lower for longer rather than – a more meaningful recovery that had been hoped for previously.

Have you kind of stressed your backlog if that is, in fact, the case do you see any vulnerabilities to projects that are currently in backlog or projects that are in the pipeline?.

None in backlog. Going forward, I think, this goes back to some discussion that we've had in previous calls and in our Investor Day stuff. We're pretty – we're pretty focused on the projects that have a high degree of go.

They'll actually be approved in an FID and that – those things are going to be based on the economics of low oil prices or high oil prices.

So, when I look at what's in front of us, I think, if it shifts further to the right, it's more the macro fear factor in terms of capital deployment, not because these projects that we're chasing don't – no longer – they no longer meet the financial hurdles in their models.

So we feel pretty good about the pipeline that's in front of us and certainly there is nothing in our backlog that we really have a fear in being cancelled..

Yeah. Thank you very much..

Moving forward, we'll hear from Alex Rygiel with FBR..

Thank you. Good evening, David..

Hi, Alex..

Could you give us a quick update on NuScale, and then also talk a little bit about pipeline opportunities? I know you're working on one in Mexico, but anything else that's developing in the market of pipelining?.

Yeah. I mean, we're also working on one in Canada as well, and I think that's going to be a pretty good market going forward. There are some really big pipelines around the globe and we've got a group that's specifically focused on that. So we see that as part of that growth story in Oil & Gas.

I'm sorry the first question?.

NuScale, just give us an operational and financial update..

Yeah. We're on target for our submission of our design certification in mid to late 2016. We've got an Investor Day coming up in October – August, in August, sorry. In August, that I hope you folks can go to. I know some people have visited there.

We've had, I would say, very good interaction with our advisory group, which is made up of many of our customers. There are several customers that are looking at deploying our technology as it works through the system.

We've had conversations, at least early conversations with some people that have expressed interest in investing in NuScale, and we're also looking at opportunities of deploying it outside the United States. So the interest is growing, we're on target for what we've done.

The spin rate is about the same this year as last year, and will be again next year as we close in on submission of the design certification. So we're on target is the way I would categorize it..

That's great. Thank you..

I would just add that the spin rate is up this year, but it is covered significantly by the DOE, so when you look at it on a net basis, it's not as much of an increase..

At this time, we'll take a question from Michael Dudas with Sterne Agee..

Good evening, everybody..

Hey, Michael..

David, could you – I don't know if you want to parse it this way, but as you readjust your expectations for the second half of the year and into 2016, do you think it's more global macro or more oil price?.

I think it's more global macro. I mean oil price is – you can argue that you would have seen a significant drop in our Oil & Gas backlog, and you wouldn't have seen the new awards that we've been able to produce in Oil & Gas and we wouldn't have won KNPC if the Oil & Gas guys were just sitting on their hands, doing nothing.

They're still looking at the projects that make good economic sense at the pricing that they have.

So you would – intuitively you would think that you would see a significant drop in oil and gas that we're frankly not seeing and as my previous comment earlier on the call, we anticipate to see backlog actually grow over the next three quarters to four quarters in Oil & Gas.

So, it's more the commodity prices in mining, it's some of the timing of some of the other capital around global services, a large piece of that is AMECO, which is very heavily – our equipment company is very heavily involved in the mining sector.

So it's more the global macro that we're dealing with than one specific market, and specifically the oil and gas market..

I appreciate that. And I guess, a follow-up, are you – you seem to be obviously have been pleased with the cost restructuring and the selling efforts of your company.

But is there prospect for the non-energy side of your business to position itself to better participate when the global macro gets to feel better maybe in 2016 and beyond, and any strategies on to do that?.

Absolutely. We've right-sized, I think, the organization. We've made some changes in personnel. We've streamlined decision making such that I think we're in a much better position to more rapidly address those opportunities when they come along. We don't pull-in our – we don't pull-in when we get to a bad market like this.

This is when our clients need us and this is when we step-up our efforts with our customers that are in challenging situations. So I feel good about where we are and where we will be when those things change, but I'm – it's interesting, Michael, I've been through these cycles before and I actually see this cycle like I've seen the others.

This is actually an opportunity that we're going to seize and it's in terms of how we deal with our customers and bettering those relationships. It's sharpening our approach and delivery. It's adding to our repertoire of skill set.

So I'm always been a glass is half-full guy, and that kind of leads some of my thinking, but I look at this as a buying opportunity as opposed to some dark cloud..

I appreciate it. Thank you, David..

Next question will be from Tahira Afzal with KeyBanc..

Hi. Thank you. Hi, folks..

Tahira, how are you?.

I'm fine, thank you. Got a bit of interference going on, sorry. The first question is, if you look at your infrastructure project pipeline and you've seen quite a few large, nice awards over there as well.

To the extent there's an infrastructure bill that does get approved, David, does that really serve as a swing factor on – within your Industrial & Infrastructure business; could it really help into the next year?.

Absolutely. Well, I don't know about into the next year, but it absolutely helps our Infrastructure business. It all depends on the timing. I think a Highway Bill is way overdue. The question I think that's in front of everybody is who is going to pay for it, and I think that debate is going to take some time to shake out.

But clearly that would really help us, in terms of the number of projects that are out there and the timing of those would be helpful.

So again, just like my – part of my answer to Michael, we're prepared and are actually actively in discussion with several of the entities that'll be first movers, if in fact there's some funding available for those programs.

So, we feel good about where we are from a position standpoint, but that's one of those markets where it's been highly competitive and I think people have had to do some things in terms of pricing that simply we're not willing to do. So, I feel good about our position..

Got it, David. And second question is BP had a pretty interesting call the other day and it seemed to concur with what you're saying in terms of the economics of projects at $60. It seems that they're pretty close to really pulling the trigger even to some extent. But within that, it seems that there's a lot of deflation on average for each project.

It seems a lot of that is not really tied to what you all do on the services side. But we'd love to get an idea from you, to the extent you can, as you're helping all these companies out with the supply chain, clearly the scope of these projects might be coming down.

So, how should we think about the optics of backlog? Does that – could you see backlog sort of slide down, but the dollar profitability within that hold out for yourselves?.

I think there is – I think, projects – any time you're in this kind of cycle, projects get cheaper due to supply chain, and I think, we'll see some of that in the near-term, but I don't see that impacting how that flows in our books other than the revenue side. It doesn't impact really the profitability per se.

I think the maturity of our supply chain and what we've done over the last few years, I believe, puts us in a better position to be more competitive as well as deliver lower cost projects to our customers.

So again, I go back to what we've been focused on in the last three years, is actually fortuitous in terms of how we will be able to face the marketplace.

But I think that many of these projects when the shocks of the $60 oil or $50 oil is over, they start to look at well, I think, we can get these things done cheaper and that's kind of what we're focused on trying to be able provide to our customers..

Got it. Thank you, David..

Thank you.

Operator, are there any more question?.

At this time, we'll take a question from Andy Wittmann with Robert W. Baird..

Hi. I was wondering if the $40 million gain that was mentioned in the Q for the sale of the Spanish joint venture is included in the guidance range – in the updated guidance range or if that's excluded..

I had it in my comments that the sale of Fluor Spain is considered in the guidance range.

The – it's maybe a little more complex than just taking the $40 million number as an EBIT number and that's really tax affected of course, but as we disclosed in the Q, the final gain is subject to a determination of the fair value of the business and there really that's the fair value of the joint venture going forward.

So there is some work to be done there, and the appraisal has to take place, before we probably determine what that gain is..

Got it.

Is that tax rate closer to like a 20% numbers or is that more done at the corporate average tax rate?.

Well, that's a good question, that's one of the things that has to be nailed down between now and when we finally record it. The easy thing to do is tax affected at the U.S. statutory rate, but that's not necessarily going to be the final answer..

Yeah. Okay. That makes sense. And then just given the moving pieces inside of I&I backlog, Biggs, I was hoping you could give us just an update about that. How much of the I&I backlog is still mining versus transportation versus the other work that you do in there just to give us some sense about with the mining market being what it is.

How long that could be an overhang?.

Sure, the mining number is around $1.4 billion. So that is way down from what it was a couple of years ago, reflective of how much that has fallen off and back to David's point earlier that that's one of the reasons why margin rate in the business is in that 5% to 6% range for the year..

Yeah. And then David you started your comments at the beginning of the call talking about that you're seeing kind of oversupply that's affecting price.

Could you maybe just talk a little bit more about those price and maybe even the risk terms that are in the marketplace today, maybe on jobs that you've decided to not be as fully aggressive as others have been. And what the potential downside would be if you chase those.

I think given the market conditions, I think, this is something that long-term shareholders should be focused on.

And like to hear your perspective on that?.

Yeah. I mean, my earlier comments were more around the commodity supply and demand..

Okay..

Price issues that we're dealing with and the eagerness or lack thereof of our customers actually take some of these projects to FID in the short-term.

I think that just like in other times, we see some people that are not as diverse as us, make decisions to take risks or to take projects at pricing that is lower than we're interested at doing, that's a norm in this industry. I wouldn't say that I've seen it in as be as predatory as I have seen it in past cycles.

So, hopefully there's a little bit more discipline in the industry in terms of getting the kind of return you should expect to the services that we provide our customers. But going any deeper than that I don't think is something I'd like to do..

All right, I'll leave it there. Thank you very much..

Thank you..

At this time, we'll take a question from Vishal Shah with Deutsche Bank..

Hi, this is Chad Dillard on for Vishal. Just wanted to dig more into the Power margins.

They are a bit negative for this quarter and just want to see what you have in your backlog and whether you can drive it back positive and if not do you have any latitude to take some cost out of the business to right size that?.

Well, you really need to look at the Power margins with and without NuScale, the NuScale expenses are what creates the fluctuation there. Without those the power margins are positive and we would expect them to stay positive. Of course they are a little bit lower than historical.

For Power, we think over time they'll come back up as projects mature, as new projects come online, but for right now, they're going to run a little bit lower than traditional..

Got it. Okay.

And just moving to the Government side of the business, can you just talk about what you're seeing in your pipeline and how many opportunities that you expect to have on bid and what the timing is for that?.

Yeah. They've been very active on the construction side in terms of the DOE and DOD. As we said in previous calls, I mean coming off of LOGCAP highs is a big hole to fill. But I think that organization has done a really good job of kind of changing the model and adding more of the DOE type projects in.

I think, the strategic petroleum reserve is probably the best example of that as well as Paducah that we've taken in over the last two quarters. So I think we're in a kind of a steady state kind of a position right now. We are one of the – we continue to be one of the key suppliers to the U.S. military in several places around the globe.

Obviously, Afghanistan and the troop head count that has been discussed by the U.S. is staying higher than was at least initially discussed, and that bodes well for us. They're also kind of moving things around which is also additional work for us.

So I feel pretty good about where they are in terms of being able to provide a pretty steady state business going forward and unfortunately when we have very positive spikes, it's because of some strife in the world.

I don't think the strife in the world is going to be reduced over the next little while, and I think that we're there to support the U.S. and other country militaries when they deploy..

Great. Thank you very much..

Thank you..

Yuri Lynk with Canaccord Genuity has the next question..

Hi. Good evening, guys..

Good evening..

David, you booked some Canadian work in the quarter in Oil & Gas, which I thought was interesting given kind of ground zero for the oil price impact. How would you characterize activity in Canada right now in terms of prospects and pricing.

And specifically could you give us an update on Kitimat and your activity there?.

First on Kitimat, we're continuing to help Chevron with the scoping and early design, some of the early works is continuing, but clearly that project's full FID is sometime out, but we continue to work and support that customer.

And I think when you listen to the Chevron calls, they're still bullish on the project, and I guess their new partner is in and participating with us as well. So it's a slow go, but it's still moving along as we anticipated.

You know, Canada, you're right, it's kind of ground zero, but what we're seeing is some of the heavy crude upgrading still going forward and actually using the existing capacities that have been built.

I think in term of new developments on oil sands it's probably not going to happen in the near term, but it's still – there's a still big robust refining and petrochemical market there, that will continue to serve us.

But I think Canada, I mean in general, as you said, it's kind of ground zero, from an oil play standpoint and we don't see a whole lot of head room in term of new capacity, oil sands capacity there in the near term..

Okay. That's great color. Maybe if I could sneak another one in on the government section segment obviously, great job rebuilding the backlog there. The margins have been a little bit weaker than I was expecting, but we did see last year a nice tick up in the back half of the year.

So, number one is there some seasonality to those margins, such that we might see some sequential improvement. And secondly, just is the overall margin profile of backlog that much lower than what we would have had in the past? Thanks..

Okay. On the – it's Biggs. On the first question of Government margins, the Afghanistan work was a higher margin business that got converted to a fixed rate basis several quarters back and that reduced some of the fluctuation that had occurred over time in that business. The other thing is it created some fluctuation in that businesses.

There is always a set of issues to be resolved with respect to regulatory matters on the Government side, and we've been very successful with respect to those, but those create blips in time that we have to talk about from quarter-to-quarter, periodically.

From a going forward basis then, yes, the margin rates right now, I think, over the near-term are going to be lower than what they have been on average historically, because the Afghanistan work has come out.

And then, it varies a lot based upon the mix and whether or not we have joint ventures, whether we're sharing the profit, whether it's offline through for us or not, so there's, it ends up being a little bit complex to dive into not just to say generally expecting to be at the kind of level you're seeing in that 2% to 3% range here over the near-term, and then we'll see after that as some of the new projects come in and others mature.

Certainly construction work, as we expand that effort, could produce higher margins going forward..

Thanks..

Was there (52:17) I didn't answer?.

Mr.

Lynk, did you have anything further?.

No. Thank you..

We'll take a question from Jeff Volshteyn with JPMorgan..

Good evening and thank you for taking my question.

My first question is really on the petrochemical side of the business that's within Oil & Gas, can you help us size that within the segment and really discuss how the mix has changed in the recent quarters as far as revenues and backlog?.

Well, I mean, the three – obviously the three biggest things we've got are the big ethylene complexes and two of them are well underway on the construction side and one of them is really just starting. So those are big long projects, and so when you think about the revenue flow, really the big revenue hasn't started to flow.

We're finishing PDH at Dow and we're starting with the cracker layer. CP Chem is well underway and SASOL is just kind of starting. So we've got – those are three very, very large projects that are really in the early stages of the revenue burn and obviously the profitability that goes with that.

CP Chem has been converted to lump sum, so it'll have a little bit of a back end loading in terms of profitability just because it's lump sum project. So, I think that when you look at those projects and you say that next wave that I mentioned before, that'll probably start to occur in terms of feed work next year.

You can see that we've kind of got a long journey ahead of us relative to those projects and the earnings power of those over the longer term. Embedded in those projects are also some derivative programs that are there in PDHs.

There's several of those kind of projects that we're pursuing, but it's a pretty robust list of petrochemicals that we're pursuing and again we're either doing the feed on some of them or are in a good pretty good position to take those projects..

And collectively, approximately, what portion of the overall Oil & Gas segment do they represent?.

I'd say there's – I don't know that exactly, but I think the petrochemical side is about 20% – right around 20%..

Okay. That's helpful. One more question on the Power side, revenues grew impressively and last quarter, there was a decline in revenues in Power.

For the year in 2015, could we see growth in the Power segment and what needs to happen for that?.

Well, we're kind of in the normal – like I mentioned on the – on two of the gas fired power plants, we're really only going to the field now. So that you're in the early stages of those projects, but you'll start to see them grow over the next few quarters and clearly they're lump sum projects as well.

So you'll see a little backend loading in terms of dropping profit to the bottom line on those..

All right. Thank you very much..

Thank you..

At this time, we'll move to Anna Kaminskaya with Bank of America Merrill Lynch..

Hi, guys. Thanks for taking my question.

Just a follow-up question on outlook; in terms of buyback what was in the previous guidance versus current guidance, has anything changed?.

Now we're still on – if I understand your question right, we're still on the path to complete the $1 billion share repurchase program that we announced the fourth quarter of last year. There is about $300 million left on that to be executed over the third quarter and fourth quarter..

Okay.

So it's the same as in the old outlook, correct?.

That's correct..

Yeah..

Okay. And then I'm not sure if you'll provide more details on kind of how much of those big upstream projects in Australia and Canada contributed to your Oil & Gas P&L, but when do they rollover completely? When are they completely out of your Oil & Gas business? And I'm not sure if you'll be able to kind of provide any more color..

Well, the big Oil & Gas stuff in Australia is out of backlog and....

Okay..

...and the stuff we're working on in Canada is all refining and upgrading stuff, so – and it's not a real significant piece of backlog, but it's not at risk..

I was talking more from the profitability; I think, you highlighted that they contributed from – just more profitability standpoint that they're coming to completion and you had some of the kind of risk reversal and that contributed to your profitability in Oil & Gas segment, or – unless I read it incorrectly?.

I think you read that incorrectly. And, specifically, there is nothing in there relative to Canada or Australia that would impact that..

Okay..

So, I'm afraid you misread that..

Okay.

And then I mean I guess lastly my question on kind of buyback versus acquisition, have you changed any sort of view on how to allocate cash? Do you have any more appetite particularly with some of the, I don't know, LNG projects not going through into your backlog, about buying kind of LNG backlog versus organically growing the business in the future?.

Well, I think buying backlog is a bad business. I think that what we're going to focus on is the same sort of capital deployment strategy that we've communicated before.

I think that with the markets the way they are, there probably are some opportunities that we're going to look at in terms of adding to the capabilities we've already mentioned in terms of construction, fabrication, and supply chain.

So we'll be looking at some things as we go forward, but without a really good eye towards that we're going to continue to provide a robust dividend to our shareholders, and we're going to continue to buy back shares as cash is available to us – excess cash is available to us..

Yes. So the bottom line is, no change..

Okay. Thank you very much..

Our last question today will be from Robert Connors with Stifel..

Hey, guys.

Can you hear me?.

Yeah..

Okay, great.

Yeah I just wanted to touch base on, has there been any sort of update on possibly the ExxonMobil refinery coming back to the market given that refinery profits are still strong here, if you've heard anything there and then also two projects that seemed to continue to move forward, but stay below the radar a little bit are the Alaska LNG project as well as Shell's Pennsylvania cracker, just wondering what you're hearing from those?.

Well, I prefer not to talk about those, I will say that we stay pretty close to ExxonMobil and their capital and they've got I think some robust plans ahead of them that we'll participate in, and as I've said in a previous answer I think there's a next wave of petrochemical facilities and I think we're participating in most of those as well in some form or fashion..

Okay. And then I'm trying to just think on the potential buyback if it does carry forward into 2016, and one of the things that could keep you guys from buying back more stock is possibly like the working capital build particularly on the Oil & Gas side as you guys moved more to field on some of this North America work.

So just wondering, Biggs, do you still expect to stay fairly working capital neutral or could we see a little bit of a build in 2016?.

Well, it's – we're not giving guidance on earnings on 2016, it's even harder to talk about timing of cash flows on work that might be won in the future, but generally speaking, we don't see any big shifts occurring in the relationship of working capital with revenue, which is what I've been saying for a few quarters, and I think, it's still true..

Okay. Thanks..

And that does conclude the question-and-answer portion. At this time, I will turn things back over to our speakers for any additional or closing remarks..

Thank you, operator, and also thank you to all the participants for being with us today. As I said, while I am pleased with what our Oil & Gas group has done from a performance standpoint, I'm disappointed in the current end market realities of the non-oil and gas markets that we serve.

The challenges these groups are experiencing, especially in mining and metals as an example, is a reflection of the commodity pricing and the related capital spending in those markets.

In prior calls, we mentioned the actions that we took last year to strengthen our competitiveness, and I am really pleased with that because this include reducing our overhead, refining the business model we provide to our customers, providing a much more capital efficient solution for our customers, and strengthening our cash discipline throughout the company.

We've made those changes proactively last year and I think they positioned us extremely well for future growth. With that, I greatly appreciate your interest in our company and your confidence that you show in Fluor. So, thank you very much and good day..

And again, this concludes today's conference call. Thank you all for your participation..