##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D. C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 1-11953
 Willbros Group, Inc.
  Republic of Panama
    
    98-0160660(Jurisdiction of incorporation)
    
    (I.R.S. Employer Identification Number)
 Plaza 2000 Building
50th Street, 8th Floor
P.O. Box 0816-01098
Panama, Republic of Panama
Telephone No.: +50-7-213-0947
 
 þ o
 
 Large accelerated filer þ
Accelerated filer o
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED JUNE 30, 2008
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of June 30, 2008 (Unaudited) and
December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations (Unaudited) for the three
months and six months ended June 30, 2008 and 2007
    
    
    4Condensed Consolidated Statement of Stockholders Equity and Comprehensive
Income (Loss) (Unaudited) for the six months ended June 30, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) for the
six months ended June 30, 2008 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    28Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    41Item 4. Controls and Procedures
    
    
    41PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    42Item 1A . Risk Factors
    
    
    42Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 3. Defaults upon Senior Securities
    
    
    44Item 4. Submission of Matters to a Vote of Security Holders
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    45SIGNATURE
    
    
    46EXHIBIT INDEX
    
    
    47Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906
  2




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##### Table of Contents



WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
(Unaudited)
 
 PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 June 30,
    
    
    December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    119,209
    
    
    $
    92,886Accounts receivable, net of allowance of $1,106 and $1,108
    
    
    278,452
    
    
    
    251,746Contract cost and recognized income not yet billed
    
    
    45,256
    
    
    
    49,233Prepaid expenses
    
    
    19,815
    
    
    
    7,555Parts and supplies inventories
    
    
    3,594
    
    
    
    2,902Assets of discontinued operations
    
    
    2,641
    
    
    
    3,211Total current assets
    
    
    468,967
    
    
    
    407,533Property, plant and equipment, net of accumulated depreciation
of $111,287 and $97,268
    
    
    167,741
    
    
    
    159,766Goodwill
    
    
    143,937
    
    
    
    143,241Other intangible assets
    
    
    44,964
    
    
    
    50,206Deferred tax assets
    
    
    8,239
    
    
    
    7,769Other assets
    
    
    8,599
    
    
    
    10,898Total assets
    
    $
    842,447
    
    
    $
    779,413LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligations
    
    $
    15,428
    
    
    $
    12,132Notes payable and current portion of other long-term debt
    
    
    7,800
    
    
    
    1,040Current portion of government obligations
    
    
    6,575
    
    
    
    8,075Accounts payable and accrued liabilities
    
    
    170,234
    
    
    
    156,342Contract billings in excess of cost and recognized income
    
    
    24,021
    
    
    
    22,868Accrued income taxes
    
    
    6,105
    
    
    
    4,750Liabilities of discontinued operations
    
    
    844
    
    
    
    978Total current liabilities
    
    
    231,007
    
    
    
    206,1852.75% convertible senior notes
    
    
    59,357
    
    
    
    68,0006.5% senior convertible notes
    
    
    32,050
    
    
    
    32,050Capital lease obligations
    
    
    45,065
    
    
    
    39,090Long-term portion of government obligations
    
    
    13,150
    
    
    
    24,225Other long-term debt
    
    
    
    
    
    
    34Deferred tax liabilities
    
    
    7,736
    
    
    
    6,879Long-term liability for unrecognized tax benefits
    
    
    6,788
    
    
    
    6,612Other liabilities
    
    
    237
    
    
    
    237Total liabilities
    
    
    395,390
    
    
    
    383,312Contingencies and commitments (Note 12)Stockholders equity:Class A preferred stock, par value $.01 per share, 1,000,000
shares authorized, none issued
    
    
    
    
    
    
    Common stock, par value $.05 per share, 70,000,000 shares
authorized; 39,320,886 shares issued (38,276,545 at
December 31, 2007)
    
    
    1,965
    
    
    
    1,913Capital in excess of par value
    
    
    569,764
    
    
    
    556,223Accumulated deficit
    
    
    (134,934
    )
    
    
    (175,936
    )Treasury stock at cost, 290,570 shares (222,839 at
December 31, 2007)
    
    
    (4,417
    )
    
    
    (3,298
    )Accumulated other comprehensive income
    
    
    14,679
    
    
    
    17,199Total stockholders equity
    
    
    447,057
    
    
    
    396,101Total liabilities and stockholders equity
    
    $
    842,447
    
    
    $
    779,413
  3




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##### Table of Contents



WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
 Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Contract revenue
    
    $
    467,717
    
    
    $
    156,743
    
    
    $
    959,351
    
    
    $
    363,452Operating expenses:Contract
    
    
    400,755
    
    
    
    141,841
    
    
    
    826,488
    
    
    
    338,758Amortization of intangibles
    
    
    2,586
    
    
    
    
    
    
    
    5,242
    
    
    
    General and administrative
    
    
    28,434
    
    
    
    13,760
    
    
    
    56,801
    
    
    
    25,556Government fines
    
    
    
    
    
    
    24,000
    
    
    
    
    
    
    
    24,000431,775
    
    
    
    179,601
    
    
    
    888,531
    
    
    
    388,314Operating income (loss)
    
    
    35,942
    
    
    
    (22,858
    )
    
    
    70,820
    
    
    
    (24,862
    )Other income (expense):Interest income
    
    
    787
    
    
    
    1,840
    
    
    
    1,793
    
    
    
    3,404Interest expense
    
    
    (2,652
    )
    
    
    (2,027
    )
    
    
    (5,187
    )
    
    
    (4,481
    )Other, net
    
    
    573
    
    
    
    (502
    )
    
    
    146
    
    
    
    (692
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (15,375
    )
    
    
    
    
    
    
    (15,375
    )(1,292
    )
    
    
    (16,064
    )
    
    
    (3,248
    )
    
    
    (17,144
    )Income (loss) from continuing operations
before income taxes
    
    
    34,650
    
    
    
    (38,922
    )
    
    
    67,572
    
    
    
    (42,006
    )Provision for income taxes
    
    
    14,576
    
    
    
    1,457
    
    
    
    28,393
    
    
    
    1,712Net income (loss) from continuing
operations
    
    
    20,074
    
    
    
    (40,379
    )
    
    
    39,179
    
    
    
    (43,718
    )Income (loss) from discontinued operations
net of provision for income taxes
    
    
    (736
    )
    
    
    (3,860
    )
    
    
    1,823
    
    
    
    (12,368
    )Net income (loss)
    
    $
    19,338
    
    
    $
    (44,239
    )
    
    $
    41,002
    
    
    $
    (56,086
    )Basic income (loss) per common share:Income (loss) from continuing operations
    
    $
    0.52
    
    
    $
    (1.47
    )
    
    $
    1.03
    
    
    $
    (1.65
    )Income (loss) from discontinued operations
    
    
    (0.02
    )
    
    
    (0.14
    )
    
    
    0.05
    
    
    
    (0.47
    )Net income (loss)
    
    $
    0.50
    
    
    $
    (1.61
    )
    
    $
    1.08
    
    
    $
    (2.12
    )Diluted income (loss) per common share:Income (loss) from continuing operations
    
    $
    0.49
    
    
    $
    (1.47
    )
    
    $
    0.95
    
    
    $
    (1.65
    )Income (loss) from discontinued operations
    
    
    (0.02
    )
    
    
    (0.14
    )
    
    
    0.04
    
    
    
    (0.47
    )Net income (loss)
    
    $
    0.47
    
    
    $
    (1.61
    )
    
    $
    0.99
    
    
    $
    (2.12
    )Weighted average number of common shares
outstanding:Basic
    
    
    38,378,246
    
    
    
    27,515,593
    
    
    
    38,197,763
    
    
    
    26,505,438Diluted
    
    
    43,874,031
    
    
    
    27,515,593
    
    
    
    43,971,979
    
    
    
    26,505,438
  4




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WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share amounts)
(Unaudited)
 AccumulatedCapital in
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Excess of
    
    
    Accumulated
    
    
    Treasury
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Par Value
    
    
    Deficit
    
    
    Stock
    
    
    Income (Loss)
    
    
    EquityBalance, December 31, 2007
    
    
    38,276,545
    
    
    $
    1,913
    
    
    $
    556,223
    
    
    $
    (175,936
    )
    
    $
    (3,298
    )
    
    $
    17,199
    
    
    $
    396,101Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,002
    
    
    
    
    
    
    
    
    
    
    
    41,002Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,520
    )
    
    
    (2,520
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,482Deferred compensation
    
    
    
    
    
    
    
    
    
    
    4,517
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,517Restricted stock grants
    
    
    527,159
    
    
    
    26
    
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vesting of restricted
stock rights
    
    
    20,269
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additions to treasury stock,
vesting and forfeitures
of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,119
    )
    
    
    
    
    
    
    (1,119
    )Exercise of stock options
    
    
    53,000
    
    
    
    3
    
    
    
    681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684Additional costs of public offering
    
    
    
    
    
    
    
    
    
    
    (251
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (251
    )Stock issued on conversion of
2.75% convertible senior notes
    
    
    443,913
    
    
    
    22
    
    
    
    8,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,643Balance, June 30, 2008
    
    
    39,320,886
    
    
    $
    1,965
    
    
    $
    569,764
    
    
    $
    (134,934
    )
    
    $
    (4,417
    )
    
    $
    14,679
    
    
    $
    447,057
  5




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##### Table of Contents



WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
 Six MonthsEnded June 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    41,002
    
    
    $
    (56,086
    )Reconciliation of net income (loss) to net cash provided by
operating activities:(Income) loss from discontinued operations
    
    
    (1,823
    )
    
    
    12,368Depreciation and amortization
    
    
    22,787
    
    
    
    7,766Amortization of debt issue costs
    
    
    827
    
    
    
    1,007Amortization of deferred compensation, net
    
    
    4,517
    
    
    
    1,922Loss on early extinguishment of debt
    
    
    
    
    
    
    15,375Loss (gain) on sales of property, plant and equipment
    
    
    178
    
    
    
    (847
    )Provision for bad debts
    
    
    1,104
    
    
    
    42Deferred income tax provision
    
    
    1,061
    
    
    
    (5,511
    )Equity in joint ventures
    
    
    (123
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (29,733
    )
    
    
    36,312Contract cost and recognized income not yet billed
    
    
    2,487
    
    
    
    (16,068
    )Prepaid expenses
    
    
    592
    
    
    
    15,252Parts and supplies inventories
    
    
    (708
    )
    
    
    (260
    )Other assets
    
    
    407
    
    
    
    (1,408
    )Accounts payable and accrued liabilities
    
    
    14,977
    
    
    
    80Accrued income taxes
    
    
    1,398
    
    
    
    1,556Contract billings in excess of cost and recognized income
    
    
    1,239
    
    
    
    (5,494
    )Cash provided by operating activities of continuing
operations
    
    
    60,189
    
    
    
    6,006Cash provided by (used in) operating activities of
discontinued operations
    
    
    2,592
    
    
    
    (16,219
    )Cash provided by (used in) operating activities
    
    
    62,781
    
    
    
    (10,213
    )Cash flows from investing activities:Proceeds from the sale of discontinued operations, net
    
    
    
    
    
    
    130,568Proceeds from sales of property, plant and equipment
    
    
    1,401
    
    
    
    1,428Rebates from purchases of property, plant and equipment
    
    
    1,915
    
    
    
    Purchases of property, plant and equipment
    
    
    (13,749
    )
    
    
    (7,938
    )Acquisition of subsidiaries
    
    
    846
    
    
    
    (21,181
    )Cash provided by (used in) investing activities of continuing
operations
    
    
    (9,587
    )
    
    
    102,877Cash used in investing activities of discontinued operations
    
    
    
    
    
    
    Cash provided by (used in) investing activities
    
    
    (9,587
    )
    
    
    102,877Cash flows from financing activities:Payments of government fines
    
    
    (12,575
    )
    
    
    Payments on capital leases
    
    
    (6,845
    )
    
    
    (2,898
    )Repayment of notes payable
    
    
    (6,026
    )
    
    
    (6,020
    )Acquisition of treasury stock
    
    
    (1,119
    )
    
    
    (497
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (12,993
    )Proceeds from exercise of stock options
    
    
    684
    
    
    
    602Additional costs of public offering of common stock
    
    
    (251
    )
    
    
    Costs of debt issues
    
    
    (166
    )
    
    
    (286
    )Cash used in financing activities of continuing operations
    
    
    (26,298
    )
    
    
    (22,092
    )Cash used in financing activities of discontinued operations
    
    
    
    
    
    
    Cash used in financing activities
    
    
    (26,298
    )
    
    
    (22,092
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (573
    )
    
    
    (453
    )Cash provided by all activities
    
    
    26,323
    
    
    
    70,119Cash and cash equivalents, beginning of period
    
    
    92,886
    
    
    
    37,643Cash and cash equivalents, end of period
    
    $
    119,209
    
    
    $
    107,762
 6




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WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
 Six MonthsEnded June 30,2008
    
    
    2007Supplemental disclosures of cash flow information:Cash paid for interest (including discontinued operations)
    
    $
    4,337
    
    
    $
    4,038Cash paid for income taxes (including discontinued operations)
    
    $
    25,843
    
    
    $
    5,782Supplemental non-cash investing and financing transactions:Equipment and property obtained by capital leases
    
    $
    17,874
    
    
    $
    25,125Prepaid insurance obtained by note payable
    
    $
    12,754
    
    
    $
    10,051Common stock issued for conversion of 2.75% convertible senior notes
    
    $
    8,643
    
    
    $
    Deposit applied to capital lease obligation
    
    $
    1,432
    
    
    $
    Receivable obtained by sale of discontinued operations
    
    $
    
    
    
    $
    2,625
  7




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 1. The Company and Basis of Presentation
       2. New Accounting Pronouncements
 SFAS No. 157
   8




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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 2. New Accounting Pronouncements (continued)
  SFAS No. 159
  SFAS No. 141-R
  SFAS No. 160
  FSP No. EITF 03-6-1
  FSP No. APB 14-1
  FSP No. FAS 142-3
  9




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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 3. Contracts in Progress
   June 30,
    
    
    December 31,2008
    
    
    2007Cost incurred on contracts in progress
    
    $
    987,010
    
    
    $
    720,799Recognized income
    
    
    140,492
    
    
    
    74,2281,127,502
    
    
    
    795,027Progress billings and advance payments
    
    
    (1,106,267
    )
    
    
    (768,662
    )$
    21,235
    
    
    $
    26,365Contract cost and recognized income not yet billed
    
    $
    45,256
    
    
    $
    49,233Contract billings in excess of cost and recognized income
    
    
    (24,021
    )
    
    
    (22,868
    )$
    21,235
    
    
    $
    26,365
  4. Goodwill and Other Intangible Assets
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    ConsolidatedBalance as of December 31, 2007
    
    $
    12,818
    
    
    $
    130,423
    
    
    $
    143,241Purchase price adjustments
    
    
    (581
    )
    
    
    1,095
    
    
    
    514Translation adjustments and other
    
    
    182
    
    
    
    
    
    
    
    182Balance as of June 30, 2008
    
    $
    12,419
    
    
    $
    131,518
    
    
    $
    143,937
   Weighted-AverageGross
    
    
    
    
    
    
    
    
    
    
    RemainingCarrying
    
    
    Accumulated
    
    
    Net Carrying
    
    
    AmortizationAmount
    
    
    Amortization
    
    
    Amount
    
    
    PeriodCustomer relationships
    
    $
    40,500
    
    
    $
    1,954
    
    
    $
    38,546
    
    
    11.5 yrsBacklog
    
    
    10,500
    
    
    
    4,082
    
    
    
    6,418
    
    
    0.9 yrsTotal amortizable intangible assets
    
    $
    51,000
    
    
    $
    6,036
    
    
    $
    44,964
  10




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 4. Goodwill and Other Intangible Assets (continued)
  Fiscal year:2008
    
    $
    5,1782009
    
    
    6,2682010
    
    
    3,3522011
    
    
    3,3522012
    
    
    3,3522013
    
    
    3,352Thereafter
    
    
    20,110Total amortization
    
    $
    44,964
 5. Government Obligations
     11




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 6. Long-term Debt
  June 30,
    
    
    December 31,2008
    
    
    2007Capital lease obligations
    
    $
    60,493
    
    
    $
    51,2222.75% convertible senior notes
    
    
    59,357
    
    
    
    68,0006.5% senior convertible notes
    
    
    32,050
    
    
    
    32,050Other long-term debt
    
    
    65
    
    
    
    992007 Credit Facility
    
    
    
    
    
    
    Total long-term debt
    
    
    151,965
    
    
    
    151,371Less: current portion
    
    
    (15,493
    )
    
    
    (12,197
    )Long-term debt, net
    
    $
    136,472
    
    
    $
    139,174
 2007 Credit Facility
     
    
    A minimum net worth in an amount of not less than the sum of $337,706 plus 50 percent of
consolidated net income earned in each fiscal quarter ended after June 30, 2008 plus adjustments
for certain equity transactions;
 12




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 6. Long-term Debt (continued)
 
    
    A maximum leverage ratio of 2.25 to 1.00 for the fiscal quarter ending June 30, 2008 and
two fiscal quarters thereafter and a maximum leverage ratio of 2.00 to 1.00 for each fiscal
quarter ending after December 31, 2008;
    
    A minimum fixed charge coverage ratio of not less than 3.25 to 1.00 for the fiscal
quarter ending June 30, 2008 and two fiscal quarters thereafter and a fixed charge ratio of
not less than 3.50 to 1.00 for each fiscal quarter thereafter; and
    
    If the Companys liquidity during any fiscal quarter falls below $35,000, a maximum
capital expenditure ratio of 1.50 to 1.00 (cost of assets added through purchase or capital
lease) for such fiscal quarter and for each of the three quarters thereafter.
   6.5% Senior Convertible Notes
       13




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 6. Long-term Debt (continued)
 2.75% Convertible Senior Notes
      14




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 6. Long-term Debt (continued)
 Capital Leases
   June 30,
    
    
    December 31,2008
    
    
    2007Construction equipment
    
    $
    71,634
    
    
    $
    56,171Autos, trucks and trailers
    
    
    4,525
    
    
    
    4,282Furniture and office equipment
    
    
    
    
    
    
    535Total assets held under capital lease
    
    
    76,159
    
    
    
    60,988Less: accumulated depreciation
    
    
    (15,727
    )
    
    
    (9,251
    )Net assets under capital lease
    
    $
    60,432
    
    
    $
    51,737
 7. Income (Loss) Per Share
   Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss) from continuing operations (numerator
for basic calculation)
    
    $
    20,074
    
    
    $
    (40,379
    )
    
    $
    39,179
    
    
    $
    (43,718
    )Add: Interest and debt issuance costs amortization
associated with convertible notes
    
    
    1,308
    
    
    
    
    
    
    
    2,513
    
    
    
    Net income (loss) from continuing operations applicable
to common shares (numerator for diluted calculation)
    
    $
    21,382
    
    
    $
    (40,379
    )
    
    $
    41,692
    
    
    $
    (43,718
    )Weighted average number of common shares
outstanding for basic income (loss) per share
    
    
    38,378,246
    
    
    
    27,515,593
    
    
    
    38,197,763
    
    
    
    26,505,438Weighted average number of potentially dilutive
common shares outstanding
    
    
    5,495,785
    
    
    
    
    
    
    
    5,774,216
    
    
    
    Weighted average number of common shares
outstanding for diluted income (loss) per share
    
    
    43,874,031
    
    
    
    27,515,593
    
    
    
    43,971,979
    
    
    
    26,505,438Income (loss) per common share from continuing
operations:Basic
    
    $
    0.52
    
    
    $
    (1.47
    )
    
    $
    1.03
    
    
    $
    (1.65
    )Diluted
    
    $
    0.49
    
    
    $
    (1.47
    )
    
    $
    0.95
    
    
    $
    (1.65
    )
 15




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 7. Income (Loss) Per Share (continued)
  Three Months
    
    
    Six MonthsEnded June 30,
    
    
    Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    20072.75% Convertible senior notes
    
    
    
    
    
    
    3,595,277
    
    
    
    
    
    
    
    3,595,2776.5% Senior convertible notes
    
    
    
    
    
    
    1,825,589
    
    
    
    
    
    
    
    1,825,589Stock options
    
    
    
    
    
    
    741,000
    
    
    
    
    
    
    
    741,000Warrants to purchase common stock
    
    
    
    
    
    
    558,354
    
    
    
    
    
    
    
    558,354Restricted stock and restricted stock rights
    
    
    
    
    
    
    514,815
    
    
    
    
    
    
    
    514,815
    
    
    
    7,235,035
    
    
    
    
    
    
    
    7,235,035
  8. Segment Information
 Upstream O&G, Downstream O&G Engineering.
   Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    296,349
    
    
    $
    112,136
    
    
    $
    59,232
    
    
    $
    467,717Operating expenses
    
    
    278,751
    
    
    
    101,034
    
    
    
    51,990
    
    
    
    431,775Operating income
    
    $
    17,598
    
    
    $
    11,102
    
    
    $
    7,242
    
    
    
    35,942Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,292
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,576Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,074Loss from discontinued operations net of
provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (736
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    19,338
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    113,965
    
    
    $
    
    
    
    $
    42,778
    
    
    $
    156,743Operating expenses
    
    
    114,537
    
    
    
    
    
    
    
    41,064
    
    
    
    155,601Government fines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,000Operating income (loss)
    
    $
    (572
    )
    
    $
    
    
    
    $
    1,714
    
    
    
    (22,858
    )Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,064
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,457Net loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (40,379
    )Loss from discontinued operations net of
provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,860
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (44,239
    )
 16




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 8. Segment Information (continued)
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    640,772
    
    
    $
    192,746
    
    
    $
    125,833
    
    
    $
    959,351Operating expenses
    
    
    600,008
    
    
    
    178,697
    
    
    
    109,826
    
    
    
    888,531Operating income
    
    $
    40,764
    
    
    $
    14,049
    
    
    $
    16,007
    
    
    
    70,820Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,248
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,393Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39,179Income from discontinued operations net of provision for income taxes
    
    
    
    
    
    
    1,823Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    41,002
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    285,550
    
    
    $
    
    
    
    $
    77,902
    
    
    $
    363,452Operating expenses
    
    
    292,622
    
    
    
    
    
    
    
    71,692
    
    
    
    364,314Government fines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,000Operating income (loss)
    
    $
    (7,072
    )
    
    $
    
    
    
    $
    6,210
    
    
    
    (24,862
    )Other expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,144
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,712Net loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43,718
    )Loss from discontinued operations net of provision for income taxes
    
    
    
    
    
    
    (12,368
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (56,086
    )
  June 30,
    
    
    December 31,2008
    
    
    2007Upstream O&G
    
    $
    415,377
    
    
    $
    369,255Downstream O&G
    
    
    138,684
    
    
    
    123,707Engineering
    
    
    54,941
    
    
    
    50,286Corporate
    
    
    230,804
    
    
    
    232,954Total segment assets
    
    $
    839,806
    
    
    $
    776,202
 9. Stockholders Equity
  Stockholder Rights Plan
    17




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 9. Stockholders Equity (continued)
   Stock Ownership Plans
      WeightedNumber of
    
    
    AverageOptions
    
    
    Exercise PriceOutstanding at January 1, 2008
    
    
    418,750
    
    
    $
    14.96Granted
    
    
    
    
    
    
    Exercised
    
    
    53,000
    
    
    
    12.90Forfeited or expired
    
    
    15,000
    
    
    
    15.71Outstanding at June 30, 2008
    
    
    350,750
    
    
    $
    15.25Exercisable at June 30, 2008
    
    
    229,916
    
    
    $
    13.51
   18




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 9. Stockholders Equity (continued)
  WeightedAverage Grant-Shares
    
    
    Date Fair ValueNonvested, January 1, 2008
    
    
    130,834
    
    
    $
    6.86Granted
    
    
    
    
    
    
    Vested
    
    
    
    
    
    
    Forfeited or expired
    
    
    10,000
    
    
    
    5.65Nonvested, June 30, 2008
    
    
    120,834
    
    
    $
    6.96
  WeightedNumber of
    
    
    Average Grant-RSUs
    
    
    Date Fair ValueOutstanding at January 1, 2008
    
    
    548,688
    
    
    $
    20.89Granted
    
    
    610,314
    
    
    
    38.06Vested
    
    
    133,031
    
    
    
    19.72Forfeited
    
    
    43,047
    
    
    
    26.11Outstanding June 30, 2008
    
    
    982,924
    
    
    $
    31.48
   Warrants to Purchase Common Stock
  10. Income Taxes
  11. Foreign Exchange Risk
  19




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 12. Contingencies, Commitments and Other Circumstances
 Contingencies
 Resolution of criminal and regulatory matters
    
    
    The six counts include conspiracy to violate the FCPA, violations of the FCPAs
anti-bribery provisions and violations of the FCPAs books-and-records provisions.
Although the DOJ did not require the Company and WII to plead guilty, they face prosecution
by the DOJ for the charges
alleged in the Information, and possibly other charges as well, if they fail to comply
with the DPA.
    
    The DPA requires, for the three-year term of the DPA, continued full cooperation with
the DOJ in its investigation; continued implementation of a compliance and ethics program
to prevent and detect violations of the FCPA and other anti-corruption laws; and continued
review of existing internal controls, policies and procedures in order to ensure that the
Company and WII maintain adequate controls and a rigorous anti-corruption compliance code.
    
    The DPA also requires the Company and WII, at their expense, to engage an independent
monitor for three years to assess and make recommendations about their compliance with the
DPA. The monitor selection process is now underway with the DOJ having taken under
consideration the candidate for monitor proposed by the Company.
    
    Provided that the Company and WII comply with the DPA, the DOJ has agreed not to
prosecute the Company or WII based on the conduct described in the DPA and to move to
dismiss the Information after three years.
    
    As part of the DPA, the Company will pay $22,000 in fines in four installments,
consisting of $10,000 on signing and $4,000 annually for three years thereafter, with no
interest due on the unpaid amounts.
  
    
    The SEC filed in the Court a Complaint (the SEC Complaint) and a proposed Agreed
Final Judgment against the Company (the Judgment). Without admitting or denying the
allegations in the SEC Complaint, the Company consented to the filing of the SEC Complaint
and entry of the Judgment to resolve the SECs investigation. The SEC Complaint alleges
civil violations of the FCPAs anti-bribery provisions, the FCPAs books-and-records and
internal control provisions and various antifraud provisions of the Securities Act and the
Exchange Act. Since approved by the Court, the Judgment now permanently enjoins the
Company from violating the FCPAs anti-bribery, books-and-records, and internal control
provisions and certain antifraud provisions of the Securities Act and the Exchange Act.
    
    The Judgment requires the Company to pay $8,900 for disgorgement of profits and $1,400
of pre-judgment interest. The disgorgement and pre-judgment interest are payable in four
equal installments of $2,575, first on signing, and annually for three years thereafter.
Post-judgment interest will be payable on the outstanding balance of $7,725. In January
2008, the Company deposited the first installment payment of $2,575 into an escrow
account, as required by the SEC.
 20




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 12. Contingencies, Commitments and Other Circumstances (continued)
   Other
  Commitments
  Other Circumstances
    21




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 12.
Contingencies, Commitments and Other Circumstances (continued)
  13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement
 Strategic Decisions
  Nigeria Assets and Nigeria-Based Operations
 Share Purchase Agreement
     22




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
  Letters of Credit
   Transition Services Agreement
   Residual Equipment in Nigeria
  23




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Venezuela
 Business Disposal
  TXP-4 Plant
 Asset Disposal
   Profit Disgorgement
  Insurance Recovery
  24




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##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Results of Discontinued Operations
  Three Months Ended June 30, 2008DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    439
    
    
    $
    439Operating expenses:Contract
    
    
    
    
    
    
    1,072
    
    
    
    1,072General and administrative
    
    
    
    
    
    
    13
    
    
    
    13Operating loss
    
    
    
    
    
    
    (646
    )
    
    
    (646
    )Other income (expense)
    
    
    (97
    )
    
    
    14
    
    
    
    (83
    )Income (loss) before income taxes
    
    
    (97
    )
    
    
    (632
    )
    
    
    (729
    )Provision for income taxes
    
    
    
    
    
    
    7
    
    
    
    7Net income (loss)
    
    $
    (97
    )
    
    $
    (639
    )
    
    $
    (736
    )
 Three Months Ended June 30, 2007DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    10,719
    
    
    $
    10,719Operating expenses:Contract
    
    
    
    
    
    
    10,285
    
    
    
    10,285General and administrative
    
    
    
    
    
    
    346
    
    
    
    346Operating income
    
    
    
    
    
    
    88
    
    
    
    88Other income (expense)
    
    
    (3,603
    )
    
    
    1
    
    
    
    (3,602
    )Income (loss) before income taxes
    
    
    (3,603
    )
    
    
    89
    
    
    
    (3,514
    )Provision for income taxes
    
    
    
    
    
    
    346
    
    
    
    346Net income (loss)
    
    $
    (3,603
    )
    
    $
    (257
    )
    
    $
    (3,860
    )
 25




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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Six Months Ended June 30, 2008DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    1,669
    
    
    $
    1,669Operating expenses:Contract
    
    
    
    
    
    
    2,530
    
    
    
    2,530General and administrative
    
    
    
    
    
    
    33
    
    
    
    33Operating loss
    
    
    
    
    
    
    (894
    )
    
    
    (894
    )Other income (expense)
    
    
    2,907
    
    
    
    (175
    )
    
    
    2,732Income (loss) before income taxes
    
    
    2,907
    
    
    
    (1,069
    )
    
    
    1,838Provision for income taxes
    
    
    
    
    
    
    15
    
    
    
    15Net income (loss)
    
    $
    2,907
    
    
    $
    (1,084
    )
    
    $
    1,823
 Six Months Ended June 30, 2007DiscontinuedNigeria(1)
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    30,046
    
    
    $
    17,081
    
    
    $
    47,127Operating expenses:Contract
    
    
    34,360
    
    
    
    16,149
    
    
    
    50,509General and administrative
    
    
    3,472
    
    
    
    441
    
    
    
    3,913Operating income (loss)
    
    
    (7,786
    )
    
    
    491
    
    
    
    (7,295
    )Other income (expense)
    
    
    (3,387
    )
    
    
    1
    
    
    
    (3,386
    )Income (loss) before income taxes
    
    
    (11,173
    )
    
    
    492
    
    
    
    (10,681
    )Provision for income taxes
    
    
    1,092
    
    
    
    595
    
    
    
    1,687Net income (loss)
    
    $
    (12,265
    )
    
    $
    (103
    )
    
    $
    (12,368
    )
 
 (1)
    
    Reflects operations through February 7, 2007. 26




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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Financial Position of Discontinued Operations
  June 30, 2008
    
    
    December 31, 2007Current assets:Cash and cash equivalents
    
    $
    308
    
    
    $
    211Accounts receivable, net
    
    
    721
    
    
    
    296Prepaid expenses
    
    
    135
    
    
    
    879Total current assets
    
    
    1,164
    
    
    
    1,386Property, plant and equipment, net
    
    
    841
    
    
    
    1,205Other assets
    
    
    636
    
    
    
    620Total assets
    
    
    2,641
    
    
    
    3,211Current liabilities:
    
    
    844
    
    
    
    978Total current liabilities
    
    
    844
    
    
    
    978Net assets of discontinued operations
    
    $
    1,797
    
    
    $
    2,233
 14. Subsequent Events
  27




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (In
thousands, except share and per share amounts or unless otherwise noted)
  Our Business
   Our Segments
 Upstream O&G
 Upstream O&G
 Downstream O&G
 Downstream O&G
 Engineering
 Engineering
 28




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Our Strategy
  Focus on managing risk
  
    
    Focus resources in markets with the highest risk-adjusted return. We believe North
America currently offers us the highest risk-adjusted returns and the majority of our
resources are focused on this region. For the second quarter of 2008 we earned 95.5
percent of our revenue in North America. However, we continue to seek international
opportunities which can provide superior risk-adjusted returns and believe our extensive
international experience is a competitive advantage. We believe that markets in North
Africa and the Middle East, where we also have substantial experience, may offer attractive
opportunities for us in the future given mid and long-term industry trends.
    
    Maintain a conservative contract portfolio. Our current contract portfolio is composed
of 78.9 percent cost-reimbursable work which provides for a more equitable allocation of
risk between us and our customers. While strong current market conditions have been
beneficial in transitioning our backlog away from higher-risk, fixed-price contracts, we
intend to maintain a balanced risk-to-reward portfolio. The shift to a cost
reimbursable/fixed fee contract structure has protected us from significant cost increases
that could have adversely impacted our income. One project had significant cost
reimbursements in excess of the original contract value. We have passed this cost
escalation to the client, while putting none of our fee at risk. We have also negotiated
significant incentive opportunities with this client that if recognized, will favorably
impact our income and final margin on this project.
    
    Ethical business practices. We demand that all of our employees and representatives
conduct our business in accordance with the highest ethical standardsin compliance with
applicable laws, rules and regulations, with honesty and integrity, and in a manner which
demonstrates respect for others.
 Leverage core capabilities and industry reputation into a broader service offering.
   Establish and maintain financial flexibility.
  29




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##### Table of Contents



Leverage core service expertise into additional full EPC contracts.
  Significant Business Developments
  
    
    We completed our first major Canadian pipeline construction project since last years
acquisition in Canada. This project was a significant success and contributed to our
diluted earnings per share.
    
    We delivered our fourth consecutive quarter of net income from continuing operations,
generating $39,179 of income during the six months ended June 30, 2008. We believe this is
the result of new processes and vision for the Company and the steps that are being taken
to achieve this vision.
    
    We achieved $60,189 of positive operating cash flow for the six months ended June 30,
2008, an improvement of $54,183 over the comparable period a year ago.
    
    We were awarded contracts for the Canadian Mainline Pipeline Project and a segment of
the Alberta Clipper pipeline further solidifying our strategic moves in 2007 to expand our
capabilities and market offerings in Canada.
 Financial Summary
 Results and Financial Position
   
    
    Commencement of work on new engineering and pipeline construction projects in the United
States in addition to the carryover of existing projects commencing late in 2007 and during
the first quarter of 2008; and
    
    Revenue of $112,136 in 2008 from the Downstream O&G segment derived from our acquisition
of InServ in November 2007.
    30




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##### Table of Contents



Other Financial Measures
 Backlog
     June 30, 2008
    
    
    December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentOperating SegmentUpstream O&G
    
    $
    975,443
    
    
    
    75.1
    %
    
    $
    941,301
    
    
    
    72.1
    %Downstream O&G
    
    
    212,378
    
    
    
    16.3
    %
    
    
    199,646
    
    
    
    15.3
    %Engineering
    
    
    112,214
    
    
    
    8.6
    %
    
    
    164,494
    
    
    
    12.6
    %Total, continuing operations
    
    
    1,300,035
    
    
    
    100.0
    %
    
    
    1,305,441
    
    
    
    100.0
    %Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Total backlog
    
    $
    1,300,035
    
    
    
    
    
    
    $
    1,305,441
 June 30, 2008
    
    
    December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentGeographic RegionUnited States
    
    $
    932,932
    
    
    
    71.8
    %
    
    $
    1,014,351
    
    
    
    77.7
    %Canada
    
    
    288,087
    
    
    
    22.2
    %
    
    
    215,527
    
    
    
    16.5
    %Oman
    
    
    79,016
    
    
    
    6.0
    %
    
    
    75,563
    
    
    
    5.8
    %Total backlog
    
    $
    1,300,035
    
    
    
    100.0
    %
    
    $
    1,305,441
    
    
    
    100.0
    %
 31




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##### Table of Contents



EBITDA from Continuing Operations
   Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss) from continuing operations
    
    $
    20,074
    
    
    $
    (40,379
    )
    
    $
    39,179
    
    
    $
    (43,718
    )Interest, net
    
    
    1,865
    
    
    
    187
    
    
    
    3,394
    
    
    
    1,077Provision for income taxes
    
    
    14,576
    
    
    
    1,457
    
    
    
    28,393
    
    
    
    1,712Depreciation and amortization
    
    
    12,083
    
    
    
    4,310
    
    
    
    22,787
    
    
    
    7,766EBITDA
    
    $
    48,598
    
    
    $
    (34,425
    )
    
    $
    93,753
    
    
    $
    (33,163
    )
   Discontinued Operations
   Transition Services Agreement
   32




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##### Table of Contents



Global Settlement Agreement (GSA)
  
    
    A reduction to the purchase price of $25,000, in resolution of all working capital
adjustments as provided for in the Agreement;
    
    Ascot agreed to provide supplemental backstop letters of credit in the amount of
$20,322 issued by a non-Nigerian bank approved by the Company;
    
    Ascot provided specific indemnities related to two ongoing projects that they
acquired as part of the Agreement; and
    
    Except as provided in the GSA, Ascot and the Company waived all of their respective
rights and obligations relating to indemnifications provided in the Agreement
concerning any breach of a covenant or representation or warranty.
        33




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##### Table of Contents



RESULTS OF OPERATIONS
   Three Months Ended June 30, 2008 Compared to Three Months ended June 30, 2007
 Contract Revenue
  Three months ended June 30,Percent2008
    
    
    2007
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    296,349
    
    
    $
    113,965
    
    
    $
    182,384
    
    
    
    160.0
    %Downstream O&G
    
    
    112,136
    
    
    
    N/A
    
    
    
    112,136
    
    
    
    100.0
    %Engineering
    
    
    59,232
    
    
    
    42,778
    
    
    
    16,454
    
    
    
    38.5
    %Total
    
    $
    467,717
    
    
    $
    156,743
    
    
    $
    310,974
    
    
    
    198.4
    %
 Upstream O&G
 Downstream O&G Downstream O&G
 Engineering Engineering
 Operating Income
  Three months ended June 30,Operating
    
    
    
    
    
    
    Operating
    
    
    
    
    
    
    Percent2008
    
    
    Margin %
    
    
    2007(1)
    
    
    Margin %
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    17,598
    
    
    
    5.9
    %
    
    $
    (572
    )
    
    
    (0.5
    )%
    
    $
    18,170
    
    
    
    3,176.6
    %Downstream O&G
    
    
    11,102
    
    
    
    9.9
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    11,102
    
    
    
    100.0
    %Engineering
    
    
    7,242
    
    
    
    12.2
    %
    
    
    1,714
    
    
    
    4.0
    %
    
    
    5,528
    
    
    
    322.5
    %Total
    
    $
    35,942
    
    
    
    7.7
    %
    
    $
    1,142
    
    
    
    (0.7
    )%
    
    $
    34,800
    
    
    
    3,047.3
    %
 
 (1)
    
    This table does not reflect government fines of $24,000 in 2007 which is
included in consolidated operating results. Government fines were characterized as a Corporate
expense and are not allocated to the reporting segments. Upstream O&G Upstream O&G
 34




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##### Table of Contents



Downstream O&G Downstream O&G
 Engineering
 Non-Operating Items
 Interest, net
 Loss on early extinguishment of debt
 Provision for income taxes
 Income (loss) from Discontinued Operations, Net of Taxes
 Income (loss) from discontinued operations, net of taxes
 Six Months Ended June 30, 2008 Compared to Six Months ended June 30, 2007
 Contract Revenue
  Six months ended June 30,Percent2008
    
    
    2007
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    640,772
    
    
    $
    285,550
    
    
    $
    355,222
    
    
    
    124.4
    %Downstream O&G
    
    
    192,746
    
    
    
    N/A
    
    
    
    192,746
    
    
    
    100.0
    %Engineering
    
    
    125,833
    
    
    
    77,902
    
    
    
    47,931
    
    
    
    61.5
    %Total
    
    $
    959,351
    
    
    $
    363,452
    
    
    $
    595,899
    
    
    
    164.0
    %
 Upstream O&G
 Downstream O&G Downstream O&G
 35




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##### Table of Contents



Engineering Engineering
 Operating Income
  Six months ended June 30,2008
    
    
    Operating Margin %
    
    
    2007(1)
    
    
    Operating Margin %
    
    
    Increase
    
    
    Percent ChangeUpstream O&G
    
    $
    40,764
    
    
    
    6.4
    %
    
    $
    (7,072
    )
    
    
    (2.5
    )%
    
    $
    47,836
    
    
    
    676.4
    %Downstream O&G
    
    
    14,049
    
    
    
    7.3
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    14,049
    
    
    
    100.0
    %Engineering
    
    
    16,007
    
    
    
    12.7
    %
    
    
    6,210
    
    
    
    8.0
    %
    
    
    9,797
    
    
    
    157.8
    %Total
    
    $
    70,820
    
    
    
    7.4
    %
    
    $
    (862
    )
    
    
    (0.2
    )%
    
    $
    71,682
    
    
    
    8,315.8
    %
 
 (1)
    
    This table does not reflect government fines of $24,000 in 2007 which is
included in consolidated operating results. Government fines were characterized as a Corporate
expense and are not allocated to the reporting segments. Upstream O&G Upstream O&G
 Downstream O&G Downstream O&G
 Engineering
 Non-Operating Items
 Interest, net .
 Loss on early extinguishment of debt
 Provision for income taxes
 36




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##### Table of Contents



Income (loss) from Discontinued Operations, Net of Taxes
 Income (loss) from discontinued operations, net of taxes
 LIQUIDITY AND CAPITAL RESOURCES
  Additional Source of Capital
 Potential sale of Canadian facility
  2007 Credit Facility
  Cash Flows
  2008
    
    2007Operating activities
    
    $
    60,189
    
    
    $
    6,006Investing activities
    
    
    (9,587
    )
    
    
    102,877Financing activities
    
    
    (26,298
    )
    
    
    (22,092
    )
  Operating Activities
  
    
    an increase in net income from continuing operations of $82,897 to $39,179 of income
during the six months ended June 30, 2008, as compared to a loss from continuing operations
of $43,718 in the same period in 2007;
    
    an increase in the non-cash charges of $10,597, primarily attributable to the increased
depreciation associated with the increased investments made in capital equipment and
amortization of other intangible assets acquired in our acquisition of InServ in 2007, the
increased amortization of stock-based compensation, and the net change in our deferred tax
position;
    
    offset by a decrease in cash flow from the change in working capital accounts of
$39,311. The decrease in cash flow from working capital accounts is primarily attributable
to the increase in accounts receivable partially offset by an increase in accounts payable
and accrued liabilities. The overall increase in these working capital accounts is directly
related to the increased revenue and project activity in 2008.
 37




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##### Table of Contents



Investing Activities
  
    
    disposition of discontinued operations in the six months ended June 30, 2007, which
provided $130,568 of cash as compared to no dispositions in the same period in 2008; and
    
    purchases of property, plant, and equipment during the six months ended June 30, 2008
used $13,749 of cash compared to $7,938 during the same period in 2007. These purchases
consisted primarily of construction equipment to support our increased backlog.
 Financing Activities
  
    
    Significant transactions impacting cash flows from financing activities during the six
months ended June 30, 2008, were $12,575 of payments on government fines, $6,845 of
repayments of capital lease obligations and $6,026 of repayments of other notes payable, as
compared to $12,993 to induce the partial conversion of the 6.5% Notes, $2,898 of
repayments of capital lease obligations and $6,020 of repayments of other notes payable
during the same period in 2007.
 Capital Requirements
  
    
    providing working capital for projects in process and those scheduled to begin;
    
    procuring construction equipment in light of our capital budget for 2008 of
approximately $63,000;
    
    pursuing additional acquisitions that will allow us to expand our service offering; and
    
    making installment payments to the government related to fines and profit disgorgement.
  Contractual Obligations
   NEW ACCOUNTING PRONOUNCEMENTS
  38




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##### Table of Contents



FORWARD-LOOKING STATEMENTS
 This Form 10-Q includes forward-looking
statements. All statements, other than statements of
historical facts, included or incorporated by reference in this Form 10-Q that address activities,
events or developments which we expect or anticipate will or may occur in the future, including
such things as future capital expenditures (including the amount and nature thereof), oil, gas, gas
liquids and power prices, demand for our services, the amount and nature of future investments by
governments, expansion and other development trends of the energy industry, business strategy,
expansion and growth of our business and operations, the outcome of government investigations and
legal proceedings and other such matters are forward-looking statements. These forward-looking
statements are based on assumptions and analyses we made in light of our experience and our
perception of historical trends, current conditions and expected future developments as well as
other factors we believe are appropriate under the circumstances. However, whether actual results
and developments will conform to our expectations and predictions is subject to a number of risks
and uncertainties. As a result, actual results could differ materially from our expectations.
Factors that could cause actual results to differ from those contemplated by our forward-looking
statements include, but are not limited to, the following:
 
    
    difficulties we may encounter in connection with the previous sale and disposition of
our Nigeria assets and Nigeria based operations, including without limitation, obtaining
indemnification for any losses we may experience if, due to the non-performance of Ascot,
claims are made against any parent company guarantees we provided and which remained in
place, in varying degrees, subsequent to the closing;
    
    the consequences we may encounter if the terms and conditions of our final settlements
with the DOJ and the SEC are not complied with, including the imposition of civil or
criminal fines, penalties, enhanced monitoring arrangements, or other sanctions that might
be imposed by the DOJ and SEC;
    
    the commencement by foreign governmental authorities of investigations into the actions
of our current and former employees, and the determination that such actions constituted
violations of foreign law;
    
    the dishonesty of employees and/or other representatives or their refusal to abide by
applicable laws and our established policies and rules;
    
    adverse weather conditions not anticipated in bids and estimates;
    
    project cost overruns, unforeseen schedule delays, and the application of liquidated
damages;
    
    the occurrence during the course of our operations of accidents and injuries
to our personnel, as well as to third parties, that negatively affect our safety record,
which is a factor used by many clients to pre-qualify and otherwise award work to
contractors in our industry;
    
    cancellation of projects, in whole or in part;
    
    failing to realize cost recoveries from projects completed or in progress within a
reasonable period after completion of the relevant project;
    
    inability to hire and retain sufficient skilled labor to execute our current work, our
work in backlog and future work we have not yet been awarded;
    
    inability to execute cost-reimbursable projects within the target cost, thus eroding
contract margin but not contract income on the project;
    
    curtailment of capital expenditures in the oil, gas, power, refining and petrochemical
industries;
    
    political or social circumstances impeding the progress of our work and increasing the
cost of performance;
    
    failure to obtain the timely award of one or more projects;
    
    inability to identify and acquire suitable acquisition targets on reasonable terms;
    
    inability to obtain adequate financing;
    
    inability to obtain sufficient surety bonds or letters of credit;
    
    loss of the services of key management personnel;
    
    the demand for energy moderating or diminishing;
 39




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##### Table of Contents




    
    downturns in general economic, market or business conditions in our target markets;
    
    changes in the effective tax rate in countries where our work will be performed;
    
    changes in applicable laws or regulations, or changed interpretations thereof;
    
    changes in the scope of our expected insurance coverage;
    
    inability to manage insurable risk at an affordable cost;
    
    the occurrence of the risk included in our reports and filings with the SEC; and
    
    other factors, most of which are beyond our control.
 Consequently, all of the forward-looking statements made in the this Form 10-Q are qualified
by these cautionary statements and there can be no assurance that the actual results or
developments we anticipate will be realized or, even if substantially realized, that they will have
the consequences for, or effects on, our business or operations that we anticipate today. We assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events or otherwise. For a more complete description of the circumstances
surrounding the actions of our current and former employees, see the Risk Factors included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2007.
 Unless the context otherwise requires, all references in this Form 10-Q to Willbros, the
Company, we, us and our refer to Willbros Group, Inc., its consolidated subsidiaries and
their predecessors.
 40




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures.
     (b) Remediation of Material Weakness
  
    
    Specific roles and responsibilities surrounding Willbros Canada project controls have
been updated and will be applied to future projects;
    
    The monthly project performance review requirements have been enhanced, and management
participation has also expanded; and
    
    Appropriate staff has been added to address the additional control activities outlined
above.
  (c) Changes in Internal Control Over Financial Reporting
  41




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  We may continue to experience losses associated with our prior Nigeria based operations.
     
    
    Although we believe Ascots provision of supplemental backstop letters of credit has
minimized our letter of credit risk, the same difficulties which led to our leaving
Nigeria continue to exist for Ascot, as well as additional challenges, including
various financial difficulties that we understand Ascot may from time to time be
experiencing. Accordingly, Ascots continued willingness and ability to perform our
former projects in West Africa continue to be important factors to further reducing our
risk profile in Nigeria and elsewhere in West Africa.
    
    We issued parent company guarantees to our former clients in connection with the
performance of some of our contracts in Nigeria and nearby West Africa locations.
Although Ascot is now responsible for completing these projects, our guarantees may
remain in force in varying degrees until the projects are completed. Indemnities are in
place pursuant to which Ascot and its parent company are obligated to indemnify us for
any losses we incur on these guarantees. However, we can provide no assurance that we
will be successful in enforcing our indemnity rights. The guarantees include five
projects under which we estimated that, at February 7, 2007, there was aggregate
remaining contract revenue of approximately $352,107,000 and aggregate cost to complete
of approximately $293,562,000.
    
    In early 2008, we received our first notification asserting various rights under one
of our outstanding parent guarantees. On February 1, 2008, WWAI, the Ascot company
performing the West African Gas Pipeline (WAGP) contract, received a letter from West
African Gas Pipeline Company Limited (WAPCo), the owner of WAGP, wherein WAPCo gave
written notice alleging that WWAI was in default under the WAGP contract, as amended,
and giving WWAI a brief cure period to remedy the alleged default. We understand that
WWAI responded by denying being in breach of its WAGP contract obligations, and
apparently also advised WAPCo that WWAI ...requires a further $55 million, without
which it will not be able to complete the work which it had previously undertaken to
perform. We understand that, on February 27, 2008, WAPCo terminated the WAGP contract
for the alleged continuing non-performance of WWAI, but simultaneously expressed that
WAPCo was willing to re-engage WWAI under a new contract to finish some of the
remaining WAGP contract work, and otherwise provide transition services to facilitate
the
 42




---



##### Table of Contents



handover of other unfinished WAGP contract work to alternative contractors. To our
knowledge, no such new contract has been concluded between WAPCo and WWAI.Also, on February 1, 2008, we received a letter from WAPCo reminding us of our parent
guarantee on the WAGP contract and requesting that we remedy WWAIs default under that
contract, as amended. On previous occasions, we have advised WAPCo that, for a variety of
legal, contractual, and other reasons, we did not consider our prior WAGP contract parent
guarantee to have continued application, and we reiterated that position to WAPCo in our
response to its February 1, 2008 letter. WAPCo disputes our position that we are no
longer bound by the terms of our prior parent guarantee of the WAGP contract and has
reserved all its rights in that regard. We anticipate that this developing dispute with
WAPCo could result in a lengthy arbitration proceeding between WAPCo and WWAI in the
London Court of International Arbitration to determine the validity of the alleged
default notice issued by WAPCo to WWAI, including any resulting damage award, in
combination with a lawsuit between WAPCo and us in the English Courts under English law
to determine the enforceability, in whole or in part, of our parent guarantee, which we
expect to be a lengthy process.We currently have no employees working in Nigeria and we have no intention of returning to Nigeria. If ultimately it is determined by an
English Court that we are liable, in whole or in part, for damages that WAPCo may
establish against WWAI for WWAIs alleged non-performance of the WAGP contract, or if
WAPCo is able to establish liability against us directly under our parent company
guarantee, and, in either case, we are unable to enforce our rights under the indemnity
agreement entered into with Ascot in connection with the WAGP contract, we may experience
substantial losses. However, management cannot, at this time, predict the outcome of any
arbitration or litigation which may ensue in this developing WAGP contract dispute, or be
certain of the degree to which the indemnity agreement given in our favor by Ascot will
protect us. Based upon our current knowledge of the relevant facts and circumstances, we
do not expect that the outcome of the dispute will have a material adverse effect on our
financial condition or results of operations.
    
    Although our current activities in Nigeria are now confined to providing a very
limited array of transition services to Ascot from locations outside of Nigeria, if we
are unable to continue to provide such transition services, or if Ascot is otherwise
unable to perform under our contracts that were in effect as of the closing date, we
may be required to respond under our parent company guarantees discussed above.
    
    We continue to experience difficulty redeploying to our continuing operations
certain owned equipment which is located in West Africa and which was not conveyed to
Ascot at the closing of the sale of our Nigeria operations.
 Our final settlements with the DOJ and SEC, and the prosecution of former employees that will
follow, may negatively impact our ongoing operations.
  Our failure to comply with the terms of settlement agreements with the DOJ and SEC would have a
negative impact on our ongoing operations.
  
    
    our supervision, training and retention of competent employees;
    
    the efforts of our employees to comply with applicable law and our Foreign Corrupt
Practices Act Compliance Manual and Code of Business Conduct and Ethics; and
    
    our continuing management of our agents and business partners.
 43




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Maximum Number (orTotal Number of
    
    
    Approximate DollarShares Purchased as
    
    
    Value) of SharesTotal Number of
    
    
    
    
    
    
    Part of Publicly
    
    
    That May Yet BeShares
    
    
    Average Price Paid Per
    
    
    Announced Plans or
    
    
    Purchased Under thePurchased(1)
    
    
    Share(2)
    
    
    Programs
    
    
    Plans or ProgramsApril 1, 2008  April 30, 2008
    
    
    165
    
    
    $
    33.23
    
    
    
    
    
    
    
    May 1, 2008  May 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    June 1, 2008  June 30, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    165
    
    
    $
    33.23
    
    
    
    
    
    
    
    
 
 (1)
    
    Shares of common stock acquired from certain of our officers and key employees
under the share withholding provisions of our 1996 Stock Plan for the payment of taxes associated
with the vesting of shares of restricted stock granted under such plan.(2)
    
    The price paid per common share represents the closing sales price of a share of our
common stock, as reported in the New York Stock Exchange composite transactions, on the day
that the stock was acquired by us. 
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
   VotesVotes
    
    Against or
    
    
    
    
    
    BrokerFor
    
    Withheld
    
    Abstentions
    
    Non-Votes1.
    
    
    Election of Directors:Michael J. Bayer
    
    
    31,815,849
    
    
    
    1,912,659
    
    
    
    
    
    
    
    William G. Berry
    
    
    33,038,096
    
    
    
    690,412
    
    
    
    
    
    
    
    Arlo B. DeKraai
    
    
    33,158,692
    
    
    
    569,816
    
    
    
    
    
    
    
    2.
    
    
    Adoption of Amendment
Number 6 to Willbros
Group, Inc. 1996
Stock Plan:
    
    
    27,253,734
    
    
    
    2,347,580
    
    
    
    361,479
    
    
    
    3,765,7153.
    
    
    Adoption of Amendment
Number 1 to Willbros
Group, Inc. Amended
and Restated 2006
Director Restricted
Stock Plan:
    
    
    25,804,742
    
    
    
    3,773,181
    
    
    
    384,870
    
    
    
    3,765,7154.
    
    
    Ratification of
Independent
Registered Public
Accounting Firm:
    
    
    33,543,574
    
    
    
    163,362
    
    
    
    21,572
    
    
    
    
 
 Item 5. Other Information
  44




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##### Table of Contents



Item 6. Exhibits
  10.1
    
    Amendment Number 6 to Willbros Group, Inc. 1996 Stock Plan (filed as Exhibit B to our
Proxy Statement for Annual Meeting of Stockholders dated April 23, 2008).10.2
    
    Amendment Number 1 to Willbros Group, Inc. Amended and Restated 2006 Director
Restricted Stock Plan (filed as Exhibit C to our Proxy Statement for Annual Meeting of
Stockholders dated April 23, 2008).10.3
    
    Deferred Prosecution Agreement among the Company, Willbros International, Inc. and the
DOJ filed on May 14, 2008 with the United States District Court, Southern District of
Texas, Houston Division (filed as Exhibit 10 to our current report on Form 8-K dated May
14, 2008, filed on May 15, 2008).31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    Willbros Group, Inc. and Willbros International, Inc. Information document filed on May
14, 2008 by the United States Attorneys Office for the Southern District of Texas and the
United States Department of Justice (filed as Exhibit 99.1 to our current report on Form
8-K dated May 14, 2008, filed on May 15, 2008).99.2
    
    Complaint by the Securities and Exchange Commission v. the Company filed on May 14,
2008 with the United States District Court, Southern District of Texas, Houston Division
(filed as Exhibit 99.2 to our current report on Form 8-K dated May 14, 2008, filed on May
15, 2008).99.3
    
    Consent of the Company (filed as Exhibit 99.3 to our current report on Form 8-K dated
May 14, 2008, filed on May 15, 2008).99.4
    
    Agreed Judgment as to the Company (filed as Exhibit 99.4 to our current report on Form
8-K dated May 14, 2008, filed on May 15, 2008).
 45




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##### Table of Contents



SIGNATURE
  WILLBROS GROUP, INC.Date: August 6, 2008
    By:
    /s/ Van A. WelchVan A. WelchSenior Vice President and Chief
Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) 46




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber
    
    Description10.1
    
    
    Amendment Number 6 to Willbros Group, Inc. 1996 Stock Plan (filed as Exhibit B to our
Proxy Statement for Annual Meeting of Stockholders dated April 23, 2008).10.2
    
    
    Amendment Number 1 to Willbros Group, Inc. Amended and Restated 2006 Director
Restricted Stock Plan (filed as Exhibit C to our Proxy Statement for Annual Meeting of
Stockholders dated April 23, 2008).10.3
    
    
    Deferred Prosecution Agreement among the Company, Willbros International, Inc. and the
DOJ filed on May 14, 2008 with the United States District Court, Southern District of
Texas, Houston Division (filed as Exhibit 10 to our current report on Form 8-K dated May
14, 2008, filed on May 15, 2008).31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.1
    
    
    Willbros Group, Inc. and Willbros International, Inc. Information document filed on May
14, 2008 by the United States Attorneys Office for the Southern District of Texas and the
United States Department of Justice (filed as Exhibit 99.1 to our current report on Form
8-K dated May 14, 2008, filed on May 15, 2008).99.2
    
    
    Complaint by the Securities and Exchange Commission v. the Company filed on May 14,
2008 with the United States District Court, Southern District of Texas, Houston Division
(filed as Exhibit 99.2 to our current report on Form 8-K dated May 14, 2008, filed on May
15, 2008).99.3
    
    
    Consent of the Company (filed as Exhibit 99.3 to our current report on Form 8-K dated
May 14, 2008, filed on May 15, 2008).99.4
    
    
    Agreed Judgment as to the Company (filed as Exhibit 99.4 to our current report on Form
8-K dated May 14, 2008, filed on May 15, 2008).
 47