Halliburton to spin off controversial KBR contractor
Friday, January 27th 2006, 11:26 am
By: News On 6
DALLAS (AP) _ Halliburton Co. said Friday it plans to spin off a minority stake in its engineering and construction unit KBR, which has generated enormous controversy over how it has become the largest U.S. contractor in Iraq. Halliburton shares rose more than 5 percent.
Halliburton, whose chief executive was Vice President Dick Cheney from 1995 to 2000, has been criticized since the beginning of the war in Iraq for multibillion-dollar government contracts. Halliburton is an oilfield services company based in Houston.
The KBR unit posted $3 billion in overall revenue in the fourth quarter.
Halliburton President and CEO Dave Lesar told analysts the company will file for an initial public offering of shares in KBR with the Securities Exchange Commission.
``We believe the IPO market in general and the public market for engineering and construction companies in particular is very attractive and the public valuation of KBR will benefit Halliburton's stock price,'' Lesar said in a conference call.
Halliburton chief financial officer Cris Gaut said the plan is to spin off a minority stake in the engineering unit with the parent company holding on to the rest.
``Our plan at this point is a 20 percent IPO of KBR; however, in response to interest we have received, we may consider selling some pieces of KBR, but we would not expect such sales to change our IPO plans,'' he said.
Halliburton shares rose $3.92, or 5.2 percent, to $79.07 in midday trading on the New York Stock Exchange.
The announcement on KBR came a day after Halliburton said it swung to a profit in its fourth quarter on robust sales and increased rig activity, and called last year the best in its 86-year history.
Net income was $1.1 billion, or $2.08 a share, compared to a net loss of $203 million, or 46 cents a share last year. Revenue rose 12 percent to $5.8 billion, largely from the performance of its energy services group, which saw sales increase 31 percent.
Revenue at KBR fell 3 percent to $3 billion, which the company said resulted from reduced military work in Iraq.
Halliburton has been taking heat since the beginning of the war in Iraq for receiving multibillion-dollar, noncompetitive government contracts.
Congressional Democrats have contended that the Bush administration has long played favorites to Halliburton because of its ties to Cheney.
The latest round of controversy surfaced this week when former Halliburton officials claimed water for a U.S. base was contaminated and that the company failed to notify troops and civilians. Halliburton denied any contamination troubles at Camp Junction City in Ramadi, Iraq.
For the year, Halliburton earned $2.4 billion, or $4.54 per share, compared to a loss of $1 billion, or $2.22 per share, from 2004 that included a loss of $1.4 billion, or $3.09 per share, related to the settlement of asbestos and silica liabilities.
Revenue for 2005 reached nearly $21 billion, a record that also beat analysts expectations of $20.4 billion.