KBR Announces Strong Third Quarter 2015 Earnings

• Earnings significantly improved from 2014 driven by strong operating performance
• On track to deliver strategic plan goals for cost savings / margins by end of 2016

HOUSTON, Texas - November 2, 2015 - KBR, Inc. (NYSE: KBR), a global technology, engineering, procurement and construction company serving the hydrocarbons and government services industries, today announced strong third quarter 2015 financial results.

Net income attributable to KBR was $55 million or $0.38 per diluted share ($0.40 per diluted share excluding $3 million in pre-tax U.S. Government legacy legal fees), in the third quarter of 2015 compared to net income of $30 million or $0.21 per diluted share, in the third quarter of 2014. Consolidated revenue in the third quarter of 2015 was $1.2 billion compared to $1.7 billion in the third quarter of 2014.

"Our third quarter consolidated results reflect continued strength in our operational performance and progress towards achieving the strategic objectives we previously outlined. It was pleasing to see the non-strategic power projects, managed by our E&C organization, perform better than projected and provide incremental earnings. KBR's transformation is well underway and we are on track to achieve the 2016 targets for segment profit margin percentages and $200 million in annual cost savings," said Stuart Bradie, President and Chief Executive Officer of KBR, Inc. "To-date the company has identified and actioned more than $150 million of the $200 million savings target with the identified savings being realized throughout 2015 and 2016. During the quarter we also closed on two strategic partnerships to accelerate growth and earnings in our Industrial Services and pipe fabrication businesses and made continued progress towards closing non-strategic businesses and completing loss making projects," Bradie said.

Bradie continued, "Low oil prices continue to impact client capital expenditures, however, KBR's technology and project delivery capability focused primarily on natural gas derivative products and associated downstream facilities positions us well for this market. We continue in the bidding phase on major gas monetization and U.K. Ministry of Defence project prospects and continue to make good progress in successfully settling a number of legacy U.S. Government contract disputes. Finally, our strong balance sheet provides confidence to our clients and optionality as our markets continue to evolve."

Business Discussion

(All comparisons are third quarter 2015 versus third quarter 2014 unless otherwise noted.)

Technology & Consulting (T&C) Results

Technology & Consulting gross profit was $17 million, roughly flat with the prior year while revenue was $79 million, a decrease of $15 million. Lower revenue is the result of reduced proprietary equipment sales and consulting revenues associated with upstream oil related projects. Gross profit margin was 22 percent, in-line with the company's target for the segment.

Looking forward, while upstream consulting may remain challenged from low oil prices, the company sees continued global technology opportunities for syngas, refining and olefins projects including new builds and revamps to improve efficiencies of existing facilities.

Engineering & Construction (E&C) Results

Engineering & Construction gross profit was $48 million, up $2 million from the prior year. Gross profit in 3Q15 was primarily driven by solid operational performance and lower overheads.

Revenue was $828 million, a decrease of $368 million primarily related to reduced activity on an LNG project as it continues to move toward completion, the winding down of the company's legacy Canadian pipe fabrication and module assembly projects and other North American projects nearing completion.

Equity in earnings of unconsolidated affiliates was $26 million, flat with the prior year.

Looking forward, the company continues to see opportunities for LNG, FLNG, oil & gas, ammonia and chemicals projects, as well as growth in maintenance services and small construction contracts executed by the company's recently formed 50/50 joint venture with Bernhard Capital Partners (BCP), Brown & Root Industrial Services.

Government Services (GS) Results

Government Services gross profit was $8 million, a decrease of $16 million while revenue was $176 million, relatively unchanged from the prior year. The reduction in gross profit was primarily driven by a significant award fee on the legacy LogCAP III contract in 3Q14 that did not reoccur in 3Q15, partially offset by higher profits from increased activity on the company's LogCAP IV and other U.S. Military operating base contracts.

Equity in earnings of unconsolidated affiliates was $9 million, down $3 million, primarily driven by the timing of annual lifecycle maintenance costs associated with a large U.K. MoD project that were incurred in the third quarter of the current year versus the fourth quarter of the prior year. Equity in earnings reflects continued strong performance on joint venture annuity type contracts in the U.K.

Looking forward, KBR remains well placed in sole source negotiations on two large-scale contracts for the U.K. MoD. The company also continues to make good progress in resolving legacy legal issues from the LogCAP III and RIO contracts.

Non-Strategic Business (NSB) Results

Non-Strategic Business gross profit was $14 million, up $72 million, primarily driven by loss provisions taken on power projects in 3Q14 that did not reoccur in 3Q15, favorable settlements with a major subcontractor and from lower overheads. Positive gross profit in NSB was also the result of better than anticipated operational performance on power projects. Revenue was $116 million, down $73 million, primarily related to the sale of the Building Group business unit in 2Q15 which had a quarterly revenue run-rate of approximately $60 million, and lower revenues from two non-strategic power projects. One of the company's three remaining power projects is now largely complete, the second is scheduled to finish in early 2016, and the third project is scheduled for completion in 2017.

Strategic Actions Update

During the third quarter, the company closed two key strategic partnerships with BCP for industrial services activities in North America and a strategic alliance for pipe fabrication business. KBR's 50/50 joint venture with BCP, Brown & Root Industrial Services, provides access to a number of key geographies and customers where KBR previously had a limited presence. The strategic alliance for pipe fabrication provides KBR with access to facilities on the strategic Gulf Coast. Net cash proceeds from the two transactions were $33 million.

The company also incurred $15 million in pre-tax restructuring and asset impairment costs and recorded a $6 million pre-tax gain on the disposition of certain assets during the quarter.

Consolidated backlog of $13.3 billion was unfavorably impacted in the quarter by two significant one-time items. First, only half of KBR's Americas Industrial Services business unit's backlog remains within the E&C segment following the formation of the aforementioned 50 / 50 joint venture with BCP. This reduced E&C segment backlog by $340 million. Second, backlog in the quarter was reduced by $391 million primarily resulting from the strength of the U.S. dollar versus the U.K. Pound Sterling and Australian dollar. Excluding these items consolidated backlog would have been $731 million higher, or $14 billion.

Looking forward, activities on a number of previously communicated sales prospects relating to gas monetization and U.K. MoD contracts continue to progress and client decisions are expected in the near term.

2016 Guidance

The company plans to issue 2016 fiscal year guidance in conjunction with its fourth quarter 2015 earnings call.

About KBR, Inc.

KBR, Inc.is a global technology, engineering, procurement and construction company serving the hydrocarbons and government services industries, employing approximately 25,000 people worldwide with customers in more than 70 countries and operations in 40 countries across three distinct global businesses:

• Technology & Consulting, including proprietary technology in refining, ethylene, ammonia and fertilizers, and gasification; and niche consulting and know-how through subsidiaries Granherne, Energo and GVA
• Engineering & Construction, including Offshore Oil & Gas; Onshore Oil & Gas; LNG/GTL; Refining; Petrochemicals; Chemicals; differentiated EPC, and Industrial Services
• Government Services, including program management and long term annuity contracts

KBR is proud to work with its customers across the globe to provide technology, value-added consulting services, integrated EPC delivery and Long Term Industrial Services to ensure consistent project delivery with predictable results. At KBR, we deliver.

Visit www.kbr.com.

Forward Looking Statements

The statements in this press release that are not historical statements, including statements regarding future financial performance, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control that could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: the outcome of and the publicity surrounding audits and investigations by domestic and foreign government agencies and legislative bodies; potential adverse proceedings by such agencies and potential adverse results and consequences from such proceedings; the scope and enforceability of the company's indemnities from its former parent; changes in capital spending by the company's customers; the company's ability to obtain contracts from existing and new customers and perform under those contracts; structural changes in the industries in which the company operates; escalating costs associated with and the performance of fixed-fee projects and the company's ability to control its cost under its contracts; claims negotiations and contract disputes with the company's customers; changes in the demand for or price of oil and/or natural gas; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements; compliance with laws related to income taxes; unsettled political conditions, war and the effects of terrorism; foreign operations and foreign exchange rates and controls; the development and installation of financial systems; increased competition for employees; the ability to successfully complete and integrate acquisitions; and operations of joint ventures, including joint ventures that are not controlled by the company.

KBR's most recently filed Annual Report on Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other Securities and Exchange Commission filings discuss some of the important risk factors that KBR has identified that may affect the business, results of operations and financial condition. Except as required by law, KBR undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

For further information, please contact:

Investors
Zac Nagle
Vice President, Investor Relations
713-753-5082
Investors@kbr.com

Media
Marit Babin
Director, Global Communications & Government Relations
713-753-3800
Mediarelations@kbr.com

KBR, Inc.: Condensed Consolidated Statements of Income (Millions, except per share data) (Unaudited)

KBR, Inc.: Condensed Consolidated Statements of Income (Millions, except per share data) (Unaudited)

KBR, Inc.: Condensed Consolidated Balance Sheets (Millions)

KBR, Inc.: Condensed Consolidated Statements of Cash Flows (Millions) (Unaudited)

KBR, Inc.: Condensed Consolidated Statements of Cash Flows (Millions) (Unaudited)

KBR, Inc.:  Backlog Information (a) (Millions) (Unaudited)