Good morning, and welcome to Fluor's Fourth Quarter 2021 Earnings 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 10:30 AM Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for seven days through a registration link, also accessible on Fluor's website at investor.fluor.com. At this time, for opening remarks, it is my pleasure to turn the call over to Mr. Jason Landkamer, Head of Investor Relations. Sir, go ahead Mr. Landkamer.

Thank you, Cynthia. Welcome to Fluor's 2021 fourth quarter conference call. With us today are David Constable, Fluor's Chief Executive Officer; and Joe Brennan, Fluor's Chief Financial Officer. We issued our earnings release earlier this morning and we have posted a slide presentation on our website, which we will reference while making prepared remarks. Before getting started, I'd like to refer you to our Safe Harbor note regarding forward-looking statements, which is summarized on Slide 2. During today's presentation, we'll be making forward-looking statements, which reflect our views of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences, in our 2020 Form 10-K which was filed earlier today. During this call, we may discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com. I'll now turn the call over to David Constable, Fluor's Chief Executive Officer. David?

Thank you, Jason. Good morning, everyone, and thank you for joining us today. Before we move into operational results and our outlook for 2022, I'd like to start by highlighting one of our employees, Annie Lidge, the Director of our Supplier Diversity program in Houston. Fluor’s Supplier Diversity program aligns with corporate and client project goals and standards of the U.S. government regarding small minority- and women-owned businesses. In December, Annie won the Corporate Champion of Diversity Awards at the Houston 2021 Diversity Summit. Mayor Turner also proclaimed December 9, 2021, as Annie Lidge Day in the City of Houston. So on behalf of the company, I'd like to congratulate Annie. This award honors both Annie's commitment to promote supplier diversity and the importance of making a positive social impact through the diversification of Fluor's global spend. Now please turn to Slide 3. It's been a little over 12 months since we launched our new strategy and 2024 EPS target. That strategy is centered around 4 strategic priorities. And just to recap, first, driving growth across the portfolio. At the onset, we said 2021 would be a bridging year. While that was clearly the case, we are now well positioned to meet our strategic goal of growing nontraditional oil and gas revenue to 70% of our portfolio. To better serve our customers and drive growth, we launched a key account management review process, focused on aligning our capabilities directly to our clients' needs. Strengthening our client relationships by communicating Fluor's value differentiators is a key focus area for us going forward. We've also improved our leadership push into professional and technical solutions with a robust front-end backlog and prospect pipeline. We are currently working on or recently completed over 400 feed-and-study packages, representing over $200 billion in total installed cost. Fluor technical fellows and our other subject matter experts are supporting a wide range of projects from mining to semiconductors to energy transition. Speaking of energy transition, we have launched an energy transition offensive. This company-wide effort will provide a uniform marketing approach across all our business segments, and we'll have Fluor's full range of capabilities on display to support our energy transition pursuits. Our second strategic priority, reinforcing financial discipline, has resulted in a significant reduction of outstanding debt and a company-wide effort to systematically and permanently reduce corporate, operating, and real estate costs across the organization. Joe is going to provide an update on our successes in this area a little later. On the NuScale front, it's a very exciting time. Fluor functional teams are fully supporting the business combination with Spring Valley and we are on track for the proposed transaction to close in Q2, subject to regulatory review. I'll provide more color on the NuScale status in just a moment. Now please turn to Slide 4. Moving to our third priority, fair and balanced terms, where it should be noted that at the end of 2021, 95% of Fluor's prospect pipeline was for reimbursable work, furthering our effort to drive predictability in earnings. In addition, 2021 new award gross margins were 120 basis points above our plan. And with our focus on developing strong client relationships, we are working with owners that recognize the value we provide and the deep experience we offer in technical solutions, engineering, supply chain, and construction. And our final strategic priority, a high-performance culture with purpose. During the year, we refreshed the company's core values and established a campaign for new enabling behaviors, highlighting what we do and what we don't do as an organization. With respect to the performance and accountability of our leadership team, we launched performance scorecards in 2021 that included ESG goals. For our net-zero and sustainability commitments, we've made good progress on Scopes 1 and 2 emission plans and have identified our sustainability focus areas for 2022. Last quarter, our Farnborough office in the United Kingdom was the first office to achieve net zero. And importantly, we've expanded our regional inclusion councils and employee resource groups to better support our DE&I journey. Overall, we've made significant progress on our four strategic priorities. But more importantly, the Fluor team has created positive momentum for the company, as we begin a new year. Next up is an overview of fourth quarter highlights and what we see in each of our end markets in the coming year. Please turn to slide five. In Mission Solutions, we finished the year strong with 2021 segment profit up 80% over the prior year. During the year, our team successfully completed their support of LOGCAP IV in Afghanistan, received an extension of the M&O contract at the Savannah River site, and won the integrated mission completion contract there as well. As you will recall, we were also awarded a contract to provide humanitarian support at Holloman Air Force Base in New Mexico for Afghan evacuees as part of Operation Allies Welcome. We completed our Holloman efforts at the end of January, with positive performance reviews from the Air Force and are now demobilizing the site. In the fourth quarter, we were awarded the Pantex/Y-12 Management and Operations contract in Tennessee and Texas. This NNSA contract will result in up to $28 billion in revenue over its 10-year life. We are ready to begin transition and are awaiting direction from the NNSA, as they assess actions that may be warranted with the contract award. For 2022, we anticipate contract extensions at Savannah River and Portsmouth and additional work in the Intelligence Services business. Finally, Mission Solutions continues to look at areas of investment to support opportunities in the defense and intelligence space. Now let's turn to our Urban Solutions business on slide six. Segment profit for the year declined from 2020, primarily as a result of a charge on the Gordie Howe Bridge project in the second quarter. This project continues to progress under its revised cost estimates, and efforts are underway to support our claim position. The segment's results for the fourth quarter were encouraging and included receipt of our second and final payment for the Purple Line project. For 2022, we see a number of exciting opportunities. In mining, we are maintaining our leadership position, particularly in copper and gold. Based on what we're now seeing, we anticipate that awards will ramp up in the second half of the year. In Advanced Technologies and Life Sciences, semiconductor work is really picking up. As you've read, Intel and a number of other chip manufacturers are looking to deploy capital to alleviate supply chain concerns and onshore capacity in the U.S. We are encouraged by our client conversations, as there is keen interest in Fluor's ability to provide a complete solution for their engineering, construction, and project management needs. We continue to build on our success in life sciences. Last year, we won a large-scale biologics manufacturing facility in Europe with Fujifilm and are well-positioned for the next phase. In infrastructure, our focus is twofold. First, we continue to drive the effective delivery of our legacy backlog. During the fourth quarter, there were no material changes in estimated costs to complete these projects. Second, we want to pursue new regional road and bridge work that is aligned with our risk profile. The infrastructure bill passed last fall and the push for U.S. bridge retrofit spending are encouraging developments that support growth in this market. Moving to Energy Solutions on slide seven, segment profit for the year improved from 2020 as we ramped up our efforts on LNG Canada and refinery work in Mexico. Results for the fourth quarter also reflect the reversal of reserves associated with payments of outstanding receivables attached to certain projects in Mexico. We expect to see a couple of interesting trends develop in Energy Solutions during the year. In Chemicals, clients are putting CapEx back to work and we have some sizable chemical projects globally that we are well-positioned for. Our first notable award should be in the next few months. Here, it should be noted that our strategic priority of fair and balanced terms is starting to pay off as all prospects in 2022 are currently reimbursable. For production and fuels, it will be a transition year with clients beginning to focus on decarbonization efforts, renewable fuels, and smaller facility optimization projects. We also see that IOCs are focusing on net-zero commitments and what effect this will have on the pace of capital investment. As I mentioned earlier, you will continue to hear us talk more about energy transition in 2022. While these opportunities are somewhat smaller in nature and early stages, they are consistent with the deliberate approach of our clients in this market. Examples include our ongoing work to support renewable fuels efforts in California and our work with another client as they develop the world's largest carbon-capture storage facility, also in the U.S. Turning to slide eight, our work on LNG Canada continues to advance. During the fourth quarter, we approached the 60% completion mark, up from 50% last quarter. As we mentioned in November, we have begun to ship modules to the site. And in December, the project took delivery of its first process module. Thus far, we have shipped 28 modules, with 21 having been received at the Kitimat site and another seven en route. When complete, the project will have received 215 modules from eight fabrication yards. For 2022, our milestones are primarily related to the delivery and safe installation of modules at the Kitimat site in British Columbia. Our operations on this project continue to be impacted by COVID. The Omicron variant has also increased local quarantine and testing requirements across the project, including our primary fabrication yards and our job site in Kitimat. We are monitoring our progress on our procurement, fabrication, logistics, and construction activities and are working collaboratively with the client to mitigate COVID-related delays and costs. Now, let's turn to NuScale on slide nine. We've had quite a run of good news and developments since our last call. In December, NuScale announced their merger agreement with Spring Valley Acquisition Corporation. This transaction will bolster and accelerate the path to commercialization and deployment of NuScale's industry-leading, small modular nuclear reactor technology. This month, the conditions around Samsung's $30 million pipe investment were satisfied. The total committed pipe investment now stands at $211 million and is in addition to the $193 million in capital contributions from outside investors, which NuScale received in 2021. The transaction is progressing well, and the amended S-4 was filed on February 11. Currently, the deal remains on track to complete the de-SPAC process in the second quarter. When complete, Fluor will own approximately 60% to 70% of NuScale. We will also be in a preferred position to execute NuScale's SMR projects. On that front, Fluor recently completed the fieldwork required to support the combined operating license application for NuScale's first customer, UMs, at their site in Idaho. And last week, NuScale Power and KGHM signed an agreement to initiate the deployment of NuScale SMRs in Poland. Under the agreement, the first power plant could be deployed as early as 2029, which would help Poland avoid up to 8 million tons of CO2 emissions per year. To wrap up, I'm pleased with the progress we've made in 2021, and I can confirm that the management team and broader organization are excited and energized about what 2022 holds in store. And finally, two weeks ago, we announced that Executive Chairman, Alan Boeckmann, would not stand for reelection at our shareholder meeting in May. Alan's contributions to Fluor, and to me personally, have been invaluable. We are all indebted to him and happy to report that he will continue to be in our corner, serving on the Board of NuScale power. Now I'm going to turn the call over to Joe to cover our financial results and 2022 guidance. Joe?

Thanks, David, and good morning, everyone. The main topics I'll discuss today are: one, an overview of our 2021 financial performance; two, an update on our capital structure and financial position; three, an update on our initiatives, including Project Fit, our cost optimization program; and four, our outlook for 2022. Please turn to Slide 10. For 2021, Fluor reported a net loss from continuing operations of $144 million or a loss of $1.46 per diluted share. Excluding the Dutch pension settlement and certain other adjustments, we are reporting adjusted EPS of $0.94 for 2021. In our earnings release and in the appendix to today's presentation, we show a reconciliation of GAAP EPS to this adjusted number. Consolidated segment profit for the year was up 12% to $374 million compared to $333 million in 2020. Corporate G&A expense for 2021 was $216 million, up from $202 million a year ago. The increase is primarily due to the impact of performance and stock price-driven incentive compensation that was partially offset by a gain on sale of real estate. During the fourth quarter, we settled substantially all of our obligations for our largest defined benefit plan, which provided retirement benefits to certain employees in the Netherlands, and recognized a pre-tax loss on settlement of $198 million, substantially all of which is non-cash. Over the past few years, we have now settled our pensions in the United States, the United Kingdom, and the Netherlands. I'm pleased to say that we do not have any material pension obligations remaining. As David mentioned, we made significant progress towards improving our capital structure in 2021. Our balance sheet is stronger today, having reduced outstanding debt from $1.7 billion at the start of the year to $1.2 billion. Our strategic goal was to reduce our debt to capitalization ratio below 40% by 2024, and we are well on our way to reaching that goal. We continue to improve our capital flexibility in 2022. In February, we expanded and extended our credit facility, increasing the total capacity from $1.65 billion to $1.8 billion and extended the maturity to February of 2025. In addition, we added into our agreement the ability to set ESG performance goals to reduce future borrowing costs and added three new lenders to the facility. Please turn to slide 11. New awards for the year were $8.8 billion, up from $7.5 billion in 2020. As anticipated, backlog for continuing operations declined from $23.1 billion to $18.9 billion. Our backlog includes approximately $1.1 billion in legacy projects. We anticipate that we will be substantially complete with these projects by the end of 2023. As a reminder, Pantex/Y-12 is not in backlog at this time. Upon contract finalization, a majority of our backlog would be reimbursable. Moving to slide 12. Our ending cash and marketable securities balance improved to $2.3 billion. Domestic available cash represented 31% of this total. We expect our cash balance will hold steady at these levels for 2022. Operating cash flow in the fourth quarter improved by $180 million and reflects the timing of cash flows between Q3 and Q4. Operating cash flow for the full year was $25 million, which was negatively impacted by increases in working capital on several large projects, offset by settlement payments on Purple Line. For 2022, the cash needs for legacy projects will be approximately $200 million. Early last year, we committed to a plan to sell our Stork and AMECO businesses. The sale of the North American portion of the AMECO equipment business was completed during the second quarter of 2021. We continue to be actively engaged with interested parties on the remaining portions of AMECO. As it relates to Stork, in the fourth quarter, we took an additional impairment to reflect market conditions. Based on the feedback we are receiving from interested parties, our sale of Stork may result in more than one transaction. We are on a path to resolve the sale of Stork and the remaining AMECO operations and the sale of a P3 investment in the first half of 2022. We believe that the aggregate value of Stork and AMECO in our P3 investment being marketed is roughly $250 million to $300 million. Last year, we announced the implementation of Project Fit, which is our cost optimization program. For 2021, we realized a run rate savings of $52 million. For 2022, we anticipate a full-year run rate savings of $97 million. We continue to look at ways to optimize our real estate footprint. At the end of the year, we had owned and leased space of 6.6 million square feet, which represents a 15% reduction from 2020. We will continue to optimize our footprint as part of our ongoing fit process. As a housekeeping item, we will file an S-3 shelf registration statement later today. This filing will give us flexibility and speed to capitalize on opportunities in the future. Please turn to Slide 13. We are introducing our 2022 adjusted EPS guidance of $1.15 to $1.40 per diluted share from continuing operations. Adjusted EPS excludes NuScale-related expenses and any impact from foreign currency gains or losses, restructuring, or impairments. Guidance for 2022 assumes increased opportunities for new awards across all segments and continued progress on the company's cost-optimization program. Our assumptions for 2022 include: an increase in revenue of approximately 10%, adjusted G&A expense of approximately $50 million per quarter and a tax rate of approximately 28%. We anticipate average full-year margins of approximately 5% in Energy Solutions, 3.5% to 4.5% in Urban Solutions, and margins of 3.5% in Mission Solutions. These margins include the remaining impact of legacy work flowing through the business. We also maintain our long-term EPS guidance of $2.50 to $2.90 by 2024. And now I'll turn the call over for questions. Operator, we're ready for our first question.

We will take our first question from Jamie Cook with Credit Suisse. Please go ahead.

Hi good morning. I guess two questions. One, how much was the reversal of the reserve in Energy Solutions? How much did that impact the profitability of the margins in ES, because the margins were pretty good? And obviously, that implies you're implying good margin performance in 2022. So just trying to understand the dynamic there. And then my second question is how much of the guide is dependent on sort of new awards? And to what degree are new awards being deferred because of just macro concerns, or is it more just a function of Fluor being more disciplined on the terms and conditions front? Thank you.

So I'll take the first question. Good morning, Jamie. On the reversal of the reserves, it was approximately $28 million in the fourth quarter and overall for the year, it was $60 million.

Thanks. What is the guidance for 2022 ES margins? A 5% margin seems pretty good for Fluor in ES.

Well, from our perspective, I think we continue to see strength coming from LNG Canada. TCO continues to close out very strongly and positively. And I think David touched on it in his opening comments relative to the quality of earnings that we continue to put into backlog. In terms of where we are in the mix, right? As you look at the feed activity converting into detailed design, detailed engineering as these projects become mature and get into an EPC space, the margin profile is different through the segmentation of the activity around those projects. So we would continue to see that strong margin performance, I think, in Energy Solutions through the balance of 2022.

Jamie, regarding the new awards, the 2022 plan is strong, even without Pantex. We have clear visibility on significant new awards across the top 15, spanning chemicals, fuel production, mining, ATLS, and government. This presents very exciting opportunities for us. In terms of inflation, supply chain, and logistics, the government sector is primarily focused on mission, which somewhat insulates it from inflationary pressures. In the consumer products sector, ATLS prioritizes time to market and is motivated to manufacture in various countries, which benefits their capital expenditures. The impact of macroeconomic factors varies by business line. On the natural resources front, while we are exercising more due diligence to ensure returns, we still anticipate moving forward with several mining projects in 2022. That is the latest update on new awards.

Okay. Thank you.

David, can I add a little bit?

Sorry. Yes. Go ahead.

Jamie, I just wanted to add a little bit too, to maybe give you a little sense of, our book-to-burn heading into the end of 2021 is below 1, and not suggesting that Pantex is not going to come into our backlog into 2022. But even without Pantex coming into 2022, we'll be well above 1 relative to our book-to-burn. So that will kind of give you a sense of the broad-based view of the award opportunities and prospect opportunities that we're pursuing today.

Okay. Thank you. That’s helpful. I’ll get back in queue.

We will take our next question from Michael Dudas with Vertical Research. Please, go ahead.

Good morning, gentlemen.

Good morning, Mike.

Good morning.

David, first on mining. You mentioned before that there have been some delays regarding awards in that sector. Are these delays being pushed to the second half mainly due to the need for recosting and re-evaluating things because of inflation? Are there still issues with government regulations in Latin America affecting some of these projects? Additionally, regarding semiconductors and Intel, what opportunities do you see and how involved is Fluor with various customers in the United States who are aggressively investing in this area? Can we expect to see some bookings coming from this sector as we progress through mid-2022? Thanks, David.

Thanks, Mike. Yes. Regarding mining, as we've discussed in previous calls, the estimates and accuracy around costs and delivery schedules are crucial to ensure our clients achieve the necessary returns moving forward. They are closely examining these factors, especially amidst the uncertainties related to inflation, supply chain logistics, and labor availability, prompting them to conduct more thorough assessments. Additionally, on the Natural Resources front, when host governments manage the reserves, the dynamics differ from being motivated by governments to set up manufacturing in places like Ireland or the US. This creates a unique situation they have to navigate. Furthermore, as you noted, the political challenges and risks in Chile, Peru, and to some extent Argentina are causing some hesitation among mining companies, influencing their decision-making and timelines. Consequently, there’s a bit of a wait-and-see approach regarding certain opportunities. Overall, considering the demand for copper and other minerals necessary for a low-carbon economy, these projects will materialize, not just in South America. Thus, with this pause, we might see commodity prices rise even further. Regarding semiconductors, we are very excited about ATLS's achievements with their customers in the advanced manufacturing and technology sectors, as they are fostering valuable relationships. We currently have collaborations with Intel, including five projects, and we anticipate witnessing further awards, not only from Intel but from other chip manufacturers both in the US and internationally. So, stay tuned on that front, Mike. Thanks.

Thank you, David. Thanks a lot.

Thank you.

We will take our next question from Sean Eastman with KeyBanc Capital Markets. Please go ahead.

Hi team. Thanks for taking my questions. I just wanted to go back to Jamie's question. So, it sounds like there's line of sight on a lot of new award activity, but I'm just curious, how much backlog coverage do we have on this 10% revenue growth guidance for the full year today? I just want to understand exactly what kind of new award activity we need to be seeing coming out over the next couple of quarters to hit that number.

Thank you, Sean. David and I may tackle this together. From my perspective, the situation is quite comprehensive. A vital indicator I assess when reviewing an operating plan is the ratio of identified work to unidentified work in the plan's development. For this year, specifically looking at 2022, the amount of unidentified prospects is very minimal compared to the overall operating plan, and this applies to all our business lines and segments. Therefore, I feel quite confident about our plans at Pantex Y-12, and we firmly believe in its future. Realistically, even excluding that, we are witnessing considerable growth in various areas, including ATLS, mining operations, and other segments of Mission Solutions, as well as Energy Solutions, particularly on the chemical side. As I mentioned, the key indicator in developing an operating plan is the minor level of uncertainty due to unidentified elements. The timing and pace of new awards will be the main risk factor we need to factor into our guidance for 2022.

Yes, Sean, in response to your question, if it hasn't been mentioned, we're anticipating that about 50% of our backlog at the end of 2021 will be utilized in 2022. This will give you an idea of how we plan to achieve our 10% revenue growth on top of that.

Okay. Fantastic. Thanks. And then moving over to Pantex Y-12. What exactly is in the outlook for 2022? I'm just trying to figure out when you've assumed that starts to kick in, how much tailwind is implied there going into 2023 at a full annual run rate? And perhaps just what the next step on the protest is? And whether there's a good chance that's going to go into backlog in the first quarter?

So Sean, no, it's a good question. The plan is built on a Q3 resolution to the protest, a favorable resolution. So when I say favorable, we're looking at Pantex being in at a 100, 100 probabilistic view. The actual impact, because of the transition period and when the award is assumed, is very small in terms of its bottom line impact to the 2022 numbers, both from a top line and from an earnings perspective, and will really begin to ramp up into 2023. I don't know, Dave, if you want to comment on the status of the protest.

No, I think we're talking with the business segment. We're in pretty good shape. We're looking to transition here when we get the green light. So looks good, but we'll have to wait for the NNSA to give us the final go-ahead.

I would like to add that our guidance of 115 to 140 considers whether Pantex might be delayed due to the protest or if it moves forward, which we do not expect to happen. However, we have factored that possibility into our guidance regardless of the outcome.

Okay. Super helpful. I’ll turn it over there.

We will take our next question from Andy Kaplowitz with Citi. Please go ahead.

Good morning, everyone.

Hey, Andy.

Good morning, Andy.

David, I wanted to follow up on your guidance for 2022 for a moment. Can you provide a bit more detail on where the revenue growth is expected to come from? I assume this is related to Q4, where you're still slightly down. Is LNG Canada continuing to ramp up? I know you mentioned Y12 and Pantex. Also, is the latter part of the year expected to be more productive if we consider EPS?

So, I'll start. I believe David and I can collaborate on this. We are seeing growth across Energy Solutions, driven by some of the early activity this year related to chemicals and several investments reaching the market sooner. Mission Solutions has secured a significant amount of work and extensions, leading to a solid base of activity moving into larger awards, with Pantex being a key focus as we approach the year-end. In Urban Solutions, David outlined the developments in the semiconductor chip sector through mining, and the infrastructure bill is bolstering additional investment in our target markets, particularly the Department of Transportation in Texas, South Carolina, and Florida. We are witnessing that capital investment likely reaching the market more quickly due to the infrastructure bill itself. Overall, there is broad-based growth. However, if I break it down, there is growth in Energy Solutions and Urban Solutions. While we are experiencing a slight adjustment in Mission Solutions as operations and work activities conclude, we expect that to begin ramping up in the fourth quarter and continue as we enter 2023 with the kickoff of Pantex/Y12.

Yeah, Andy, I'm reviewing the 2022 plan. It really is broad-based as Joe mentioned. You can apply the 10% growth across all segments. It isn't back-end loaded; instead, it's fairly consistent across all four quarters for Energy Solutions and Urban Solutions, with a slight increase in Mission Solutions in Q3 and Q4. So it remains steady this year.

That's very helpful, guys. And then on LNGC, David, I think you mentioned you're working collaboratively with your client on the Omicron related delays. Could you give us a little more color on what you're seeing there? It seems like you've been able to resolve delays and issues in the past related to the virus, but does the overall project timeline slip at all? Should we expect to see an update from you on how these negotiations are going with the client? How does this sort of keep going here?

Yeah. We're really good relationship with the clients, as was demonstrated with the first agreement that we came to for the engineering and procurement services through February of 2021. That was successfully concluded and did give us some relief on the schedule that we are working to and driving hard to improve schedule and productivity as much as possible to reduce the impacts of COVID on the project. And so that's, I think, a good sign, signaling that on the impacts for fabrication and construction from February 2021 onward, that we will again come together and come to an agreement that is fair and drives the successful conclusion of the project to the timeline that the client is looking for. So yes, I'm pleased with the progress and the modules coming to site and we've got great productivity on the construction site right now and just ready for all that steel and equipment to come in and get erected. So yes, we're looking pretty good right now.

Appreciate it guys.

Thanks.

We will take our next question from Andrew Wittmann with Baird. Please go ahead.

Great. Thanks for taking my question guys. Joe, I thought I would start with you and ask about the cash flow. We heard in your prepared remarks that you're expecting roughly $250 million to $300 million in Stork and AMECO and the 1, 2, 3 aspect and that looks to be a bit more than offset the cash headwinds from the legacy projects. I guess that's associated with the $1.1 billion backlog that you talked about. Yet you guys kind of suggested that your cash position will be unchanged today. So I guess the implication is that the underlying business, everything besides legacy projects, are not going to be delivering a lot of cash flow this year. And I was hoping you could just talk about some of the puts and takes as to why that's the conclusion that there isn't more cash coming out of the rest of the business?

Good question, Andrew. Thanks. Where we're looking at, as we transitioned from '21 into '22, when we book these projects, we are in a phase of the project, which is driven principally through engineering and the timeline of getting into some of the higher dollar activities relative to procurement and into fabrication. And then construction, where you start to see that the numbers ramp up is where you'll start to see some of that much more significant cash flow generation. We feel like with - what's going on here, we have signaled the $200 million that we're servicing from legacy projects within the 300 to – or $250 million to $300 million is – are good numbers. We're showing a slight improvement in cash for the year. But really, as we book and we get the awards into 2022, I would suspect we're going to see a nice bump in backlog. As we move forward, the cash generation does trail 6 to 8 months behind that as we get into the progress on each one of the projects at the end of the day. I think the key that I'm looking at is when – as we move forward is that, backlog number and the quality – and understanding the bidding principles and how we're putting backlog in, I'm very optimistic that in 2022, we're going to see an appreciable growth in our backlog number, which will then generate that cash flow that we're talking about here, Andrew, towards the tail end of '22 and into '23.

That’s helpful, thank you. My follow-up question is regarding the operations update about the expected $97 million run rate compared to the $52 million. Joe, does this indicate that there will be a $45 million drop-through on a year-over-year basis, which is the difference between those two figures? Or is this simply what needs to occur to adjust the business to match the anticipated revenue for 2022? I’m trying to clarify if this is necessary for resizing rather than being an incremental boost to your margins. I'm trying to understand the factors influencing the margins you've shared.

That's a great question, Andrew. Here's my history lesson. Our past overhead attempts have been somewhat top-down and imposed. We have taken a more bottoms-up view of things. We're trying to eliminate activities that aren't generating real value for the company and reviewing systems included in our overhead. This should not be seen as a reduction in volume moving forward. Instead, it’s about optimizing our platform to support projects without compromising the quality we have maintained in the past. It was time to reassess our spending to ensure it aligns with our growth and investment goals as we move forward. I want to emphasize that this is not about cutting overhead for the sake of reducing costs. This is an optimization program we are implementing.

Okay.

Yes. Just adding on to that, Andrew, we called it project fit for a reason, right? It's a Fluor in transition, and it's also talks about being fit for purpose and being lean and streamlined. And to Joe's point, these are sustainable, permanent overhead reductions through structural and decentralized changes in the company and to eliminate busy work and non-value-added activities in the company. So we're well on our way. Our target was 100%, but we're going to go well past that by 2024 on our project fit.

Very helpful. Thank you very much. Have a good day, guys. Thanks.

Yes, thank you.

We will take our next question from Michael Feniger with Bank of America. Please go ahead.

Hey, thanks for taking my questions. Regarding LNG Canada, could you clarify if separating that business shows revenue growth above 10% and profitability exceeding the 5% margin target? It's a significant project, so understanding how much of that is reflected in this outlook would be helpful. Also, referring to what you discussed with Andy, is there a specific date or timeframe for the next agreement on fabrication construction? Will that be in 2022, or is it projected for 2023?

So I'll take the first question, Michael. I don't want to get into the specific margin on a particular project. But I would suggest that if you look at the risk associated with that project, it would be a logical conclusion that we would expect a higher return associated with the risk profile of the project, without getting into specific details. I think, what you're seeing is, also, as we ramp up fabrication through our percentage of completion accounting, we're also recognizing more revenue and we're recognizing more of that risk-based profitability assumption that sits in our forecast today.

Yes. Regarding the timing, the team is currently working on it and there are complex discussions involving various impacts across the project. The project aims to secure this second agreement in 2022, ideally sooner. However, it will take some time to finalize everything. So for now, our target remains 2022.

Anything further, Mr. Feniger? Thank you. In terms of capital allocation guidance, I'm interested in your investments in intelligence and space. Can you provide insight into your current cash position and priorities? Will the cash position remain stable throughout 2022, especially considering the recent extensions of your maturities? Additionally, can you discuss your priorities and whether mergers and acquisitions are on your agenda? What areas might you explore in that regard? Thank you.

Thank you. Yes, continuing to reduce our debt is our top priority for maintaining a healthy balance sheet, but we are also interested in pursuing selective acquisitions for the business when it makes sense, and we will be very cautious in our approach. We have turned down quite a few opportunities, which was the right decision. In Mission Solutions, we are primarily focusing on defense and intelligence community services, where we see very favorable margins in business services. This is the key area we will be looking at for mergers and acquisitions moving forward, and the timing will be determined as appropriate. Joe likely has the best insight on timing.

Yes, regarding timing, I believe we previously discussed cash generation. The main point I want to convey to our audience is that we need to successfully navigate our current financial discipline program, which is progressing well. We are not considering any additional issuance for acquisitions at this time and prefer to rely on our organic operating cash flow for any future needs. This gives a clearer picture of when we might consider niche acquisitions moving forward.

We will take our next question from Zane Karimi with D. A. Davidson. Please go ahead.

Hey good morning gentlemen.

Good morning.

Hey Zane.

Could you talk about the impact of the energy transition projects on the bookings this quarter and the pipeline overall? And then maybe a little bit more as well around the momentum in mining projects? And if you're seeing a movement from fee to full EPC?

Thank you, Zane. I appreciate your question about energy transition. As I mentioned earlier, we are enthusiastic about our focus in this area and consider ourselves a leader. In 2021, we secured 76 projects related to energy transition and currently have over 100 potential projects on the horizon, valued at around $30 billion in total installed cost. To provide some perspective, we are looking at full projects in engineering design, engineering, procurement, and construction, which are valued at over $50 million. Over the next 18 months, we anticipate approximately $57 billion in projects driven by chemicals, downstream, energy transition, mining and metals, advanced technology, and infrastructure, including government projects. Energy transition is gaining traction with real customers and is becoming particularly significant in Europe and the US, especially due to the 45Q tax credits that mandate construction commencement by 2025, boosting our activity. This trend is broad-based, impacting not only our Energy Solutions business but also chemicals, LNG, and production and fuels sectors. Energy transition is also evident in our Mission Solutions and advanced technology segments through battery production, chemicals, and mining with copper and green steel production, as well as lithium production. It’s encouraging to see this momentum across all our business lines, and we have numerous opportunities to engage early with our technical solutions while remaining involved for the entirety of the projects. Energy transition has become a rapidly evolving market sooner than we anticipated, which is promising. As for mining, we see substantial opportunities as well. Our previous front-end work has yielded about $50 billion in potential value currently in-house, with sales teams pursuing that. Furthermore, in the next 18 months, we have identified another $42 billion in front-end work in mining and metals that we are planning to target, aiming to secure more than our fair share. This activity is largely fueled by the shift toward a low-carbon economy and electrification. Thanks Zane.

At this time, there are no further questions. I would now like to turn the call back over to David Constable for any additional or closing remarks.

Thanks, operator. Thanks, Cynthia, and thanks to all of you for participating in our call today. 2021 was a turning point. And today, we're closer to our goal of becoming, as we talked about before, the preeminent leader of professional and technical solutions for our clients, as well as continuing to be a global front-runner in the engineering and construction industry. We appreciate your interest in Fluor Corporation, and thank you again for your time today.

This concludes today's call. Thank you for your participation. You may now disconnect.