##### 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 September 30, 2007
 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
  (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o þ o
 o þ




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##### 



WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2007
 PagePART I - FINANCIAL INFORMATIONItem 1 - Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2007 (Unaudited) and
December 31, 2006
    
    
    3Condensed Consolidated Statements of Operations (Unaudited) for the three
months and nine months ended September 30, 2007 and 2006
    
    
    4Condensed Consolidated Statement of Stockholders Equity and Comprehensive
Income (Loss) (Unaudited) for the nine months ended September 30, 2007
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended September 30, 2007 and 2006
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    8Item 2 - Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    41Item 3 - Quantitative and Qualitative Disclosures About Market Risk
    
    
    57Item 4 - Controls and Procedures
    
    
    57PART II - OTHER INFORMATIONItem 1 - Legal Proceedings
    
    
    58Item 1A - Risk Factors
    
    
    58Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    69Item 3 - Defaults upon Senior Securities
    
    
    69Item 4 - Submission of Matters to a Vote of Security Holders
    
    
    69Item 5 - Other Information
    
    
    70Item 6 - Exhibits
    
    
    70SIGNATURE
    
    
    71EXHIBIT INDEX
    
    
    72Global Settlement AgreementAgreement to Terminate Consulting Services AgreementCertification of CEO Pursuant to Rule 13a-14(a)Certification of CFO Pursuant to Rule 13a-14(a)Certification of CEO Pursuant to Section 1350Certification of CFO Pursuant to Section 1350
  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
 September 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    58,709
    
    
    $
    37,643Accounts receivable, net of allowance for bad debts of
$789 and $598
    
    
    181,733
    
    
    
    137,104Contract cost and recognized income not yet billed
    
    
    29,029
    
    
    
    11,027Prepaid expenses
    
    
    16,322
    
    
    
    17,299Parts and supplies inventories
    
    
    2,773
    
    
    
    2,069Assets of discontinued operations
    
    
    4,658
    
    
    
    294,192Total current assets
    
    
    293,224
    
    
    
    499,334Deferred tax assets
    
    
    7,978
    
    
    
    6,792Property, plant and equipment, net of accumulated depreciation and
amortization
of $89,028 and $78,941
    
    
    120,393
    
    
    
    65,347Goodwill
    
    
    13,184
    
    
    
    6,683Other assets
    
    
    9,075
    
    
    
    11,826Total assets
    
    $
    443,854
    
    
    $
    589,982LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable and current portion of long-term debt
    
    $
    11,237
    
    
    $
    5,562Current portion of government obligations
    
    
    8,075
    
    
    
    Accounts payable and accrued liabilities
    
    
    134,425
    
    
    
    122,352Contract billings in excess of cost and recognized income
    
    
    7,891
    
    
    
    14,947Accrued income taxes
    
    
    4,671
    
    
    
    3,556Liabilities of discontinued operations
    
    
    4,639
    
    
    
    182,092Total current liabilities
    
    
    170,938
    
    
    
    328,5092.75% convertible senior notes
    
    
    70,000
    
    
    
    70,0006.5% senior convertible notes
    
    
    32,050
    
    
    
    84,500Long-term debt
    
    
    26,085
    
    
    
    7,077Long-term portion of government obligations
    
    
    24,225
    
    
    
    Long-term liability for unrecognized tax benefits
    
    
    6,492
    
    
    
    Deferred tax liabilities
    
    
    7,369
    
    
    
    1,728Other liabilities
    
    
    237
    
    
    
    237Total liabilities
    
    
    337,396
    
    
    
    492,051Contingencies and commitments (Note 13)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; 29,337,338 shares issued (25,848,596 at
December 31, 2006)
    
    
    1,467
    
    
    
    1,292Capital in excess of par value
    
    
    273,840
    
    
    
    217,036Accumulated deficit
    
    
    (181,912
    )
    
    
    (120,603
    )Treasury stock at cost, 205,507 shares (167,844 at
December 31, 2006)
    
    
    (2,667
    )
    
    
    (2,154
    )Accumulated other comprehensive income
    
    
    15,730
    
    
    
    2,360Total stockholders equity
    
    
    106,458
    
    
    
    97,931Total liabilities and stockholders equity
    
    $
    443,854
    
    
    $
    589,982
  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
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Contract revenue
    
    $
    246,716
    
    
    $
    125,466
    
    
    $
    610,168
    
    
    $
    352,181Operating expenses:Contract
    
    
    207,089
    
    
    
    113,418
    
    
    
    538,790
    
    
    
    320,628Depreciation and amortization
    
    
    5,457
    
    
    
    3,265
    
    
    
    13,223
    
    
    
    9,180General and administrative
    
    
    17,448
    
    
    
    11,092
    
    
    
    42,295
    
    
    
    33,133Government fines
    
    
    (2,000
    )
    
    
    
    
    
    
    22,000
    
    
    
    227,994
    
    
    
    127,775
    
    
    
    616,308
    
    
    
    362,941Operating income (loss)
    
    
    18,722
    
    
    
    (2,309
    )
    
    
    (6,140
    )
    
    
    (10,760
    )Other income (expense):Interest income
    
    
    1,029
    
    
    
    337
    
    
    
    4,433
    
    
    
    1,350Interest expense
    
    
    (2,071
    )
    
    
    (3,046
    )
    
    
    (6,552
    )
    
    
    (7,482
    )Other  net
    
    
    (1,327
    )
    
    
    432
    
    
    
    (2,019
    )
    
    
    105Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (15,375
    )
    
    
    (2,369
    )
    
    
    (2,277
    )
    
    
    (19,513
    )
    
    
    (6,027
    )Income (loss) from continuing
operations before income taxes
    
    
    16,353
    
    
    
    (4,586
    )
    
    
    (25,653
    )
    
    
    (16,787
    )Provision for income taxes
    
    
    6,081
    
    
    
    379
    
    
    
    7,793
    
    
    
    1,811Net income (loss) from continuing
operations
    
    
    10,272
    
    
    
    (4,965
    )
    
    
    (33,446
    )
    
    
    (18,598
    )Loss from discontinued operations
net of provision for income taxes
    
    
    (9,126
    )
    
    
    (17,136
    )
    
    
    (21,494
    )
    
    
    (46,249
    )Net income (loss)
    
    $
    1,146
    
    
    $
    (22,101
    )
    
    $
    (54,940
    )
    
    $
    (64,847
    )Basic income (loss) per common share:Income (loss) from continuing
operations
    
    $
    0.36
    
    
    $
    (0.23
    )
    
    $
    (1.22
    )
    
    $
    (0.87
    )Loss from discontinued operations
    
    
    (0.32
    )
    
    
    (0.80
    )
    
    
    (0.78
    )
    
    
    (2.15
    )Net income (loss)
    
    $
    0.04
    
    
    $
    (1.03
    )
    
    $
    (2.00
    )
    
    $
    (3.02
    )Diluted income (loss) per common share:Income (loss) from continuing
operations
    
    $
    0.32
    (1)
    
    $
    (0.23
    )
    
    $
    (1.22
    )
    
    $
    (0.87
    )Loss from discontinued operations
    
    
    (0.26
    )
    
    
    (0.80
    )
    
    
    (0.78
    )
    
    
    (2.15
    )Net income (loss)
    
    $
    0.06
    
    
    $
    (1.03
    )
    
    $
    (2.00
    )
    
    $
    (3.02
    )Weighted average number of common
shares outstanding:Basic
    
    
    28,804,907
    
    
    
    21,557,695
    
    
    
    27,421,927
    
    
    
    21,480,730Diluted
    
    
    34,844,482
    
    
    
    21,557,695
    
    
    
    27,421,927
    
    
    
    21,480,730
 
 (1)
    
    See Note 8  Income (Loss) Per Share for a reconciliation of the numerator for the
diluted income per share calculation.  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
    
    
    Comprehen-
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Par Value
    
    
    Deficit
    
    
    Stock
    
    
    sive Income
    
    
    EquityBalance,
January 1, 2007
    
    
    25,848,596
    
    
    $
    1,292
    
    
    $
    217,036
    
    
    $
    (120,603
    )
    
    $
    (2,154
    )
    
    $
    2,360
    
    
    $
    97,931Cumulative effect of
adoption of
FIN 48
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,369
    )
    
    
    
    
    
    
    
    
    
    
    (6,369
    )Balance January 1, 2007,
as adjusted
    
    
    25,848,596
    
    
    
    1,292
    
    
    
    217,036
    
    
    
    (126,972
    )
    
    
    (2,154
    )
    
    
    2,360
    
    
    
    91,562Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,940
    )
    
    
    
    
    
    
    
    
    
    
    (54,940
    )Realization of loss on
sale of Nigeria assets
and operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,773
    (1)
    
    
    3,773Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,597
    
    
    
    9,597Total comprehensive
loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,570
    )Deferred compensation
    
    
    
    
    
    
    
    
    
    
    3,010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,010Restricted stock grants
    
    
    384,077
    
    
    
    19
    
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vesting of restricted
stock rights
    
    
    9,583
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additions to treasury stock,
vesting restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (513
    )
    
    
    
    
    
    
    (513
    )Exercise of stock options
    
    
    107,500
    
    
    
    6
    
    
    
    1,544
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,550Stock issued on conversion
of 6.5% senior convertible
notes
    
    
    2,987,582
    
    
    
    149
    
    
    
    52,301
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,450Additional costs of private
placement
    
    
    
    
    
    
    
    
    
    
    (31
    )(2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31
    )Balance, September 30, 2007
    
    
    29,337,338
    
    
    $
    1,467
    
    
    $
    273,840
    
    
    $
    (181,912
    )
    
    $
    (2,667
    )
    
    $
    15,730
    
    
    $
    106,458
 
 (1)
    
    Removal of previously recorded foreign currency translation adjustments associated
with the Companys Nigeria operations.(2)
    
    Private placement completed October 26, 2006.  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)
 Nine MonthsEnded September 30,2007
    
    
    2006Cash flows from operating activities:Net loss
    
    $
    (54,940
    )
    
    $
    (64,847
    )Reconciliation of net loss to net cash used in operating activities:Government fines
    
    
    22,000
    
    
    
    Loss from discontinued operations
    
    
    21,494
    
    
    
    46,249Depreciation and amortization
    
    
    13,223
    
    
    
    9,180Amortization of debt issue costs
    
    
    1,557
    
    
    
    1,911Amortization of deferred compensation
    
    
    3,010
    
    
    
    3,054Amortization of discount on notes receivable for stock
purchases
    
    
    
    
    
    
    (12
    )Loss on early extinguishment of debt
    
    
    15,375
    
    
    
    Gain on sales of property, plant and equipment
    
    
    (716
    )
    
    
    (4,563
    )Provision for bad debts
    
    
    181
    
    
    
    181Deferred income tax provision
    
    
    1,063
    
    
    
    90Equity in joint ventures
    
    
    
    
    
    
    (753
    )Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (36,923
    )
    
    
    (17,630
    )Contract cost and recognized income not yet billed
    
    
    (15,226
    )
    
    
    (7,344
    )Prepaid expenses
    
    
    11,239
    
    
    
    5,055Parts and supplies inventories
    
    
    (704
    )
    
    
    224Other assets
    
    
    (879
    )
    
    
    (1,503
    )Accounts payable and accrued liabilities
    
    
    3,466
    
    
    
    13,830Accrued income taxes
    
    
    608
    
    
    
    (1,446
    )Long-term liability for unrecognized tax benefits
    
    
    315
    
    
    
    Contract billings in excess of cost and recognized income
    
    
    (6,772
    )
    
    
    5,604Other liabilities
    
    
    
    
    
    
    3Cash used in operating activities of continuing operations
    
    
    (22,629
    )
    
    
    (12,717
    )Cash
provided by (used in) operating activities of discontinued
operations
    
    
    2,980
    
    
    
    (59,585
    )Cash used in operating activities
    
    
    (19,649
    )
    
    
    (72,302
    )Cash flows from investing activities:Proceeds from the sale of discontinued operations, net
    
    
    105,568
    
    
    
    32,082Proceeds from sales of property, plant and equipment
    
    
    1,428
    
    
    
    8,243Increase in restricted cash
    
    
    
    
    
    
    (1,500
    )Purchases of property, plant and equipment
    
    
    (15,890
    )
    
    
    (12,389
    )Acquisition of subsidiary
    
    
    (24,154
    )
    
    
    Cash provided by investing activities of
continuing operations
    
    
    66,952
    
    
    
    26,436Cash used in investing activities of
discontinued operations
    
    
    
    
    
    
    (2,191
    )Cash provided by investing activities
    
    
    66,952
    
    
    
    24,245Cash flows from financing activities:Proceeds from issuance of 6.5% senior convertible notes
    
    
    
    
    
    
    19,500Loss on early extinguishment of debt
    
    
    (12,993
    )
    
    
    Proceeds from issuance of common stock, net
    
    
    1,519
    
    
    
    2,226Repayment of notes payable
    
    
    (8,665
    )
    
    
    (9,385
    )Costs of debt issues
    
    
    (286
    )
    
    
    (3,776
    )Acquisition of treasury stock
    
    
    (513
    )
    
    
    (554
    )Repayments of long-term debt
    
    
    
    
    
    
    (134
    )Payments on capital leases
    
    
    (7,507
    )
    
    
    (36
    )
 6




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##### Table of Contents



Nine MonthsEnded September 30,2007
    
    
    2006Cash provided by (used in) financing activities of
continuing operations
    
    $
    (28,445
    )
    
    $
    7,841Cash provided by financing activities of
discontinued operations
    
    
    
    
    
    
    Cash provided by (used in) financing activities
    
    
    (28,445
    )
    
    
    7,841Effect of exchange rate changes on cash and cash equivalents
    
    
    2,208
    
    
    
    (241
    )Cash provided by (used in) all activities
    
    
    21,066
    
    
    
    (40,457
    )Cash and cash equivalents, beginning of period
    
    
    37,643
    
    
    
    55,933Cash and cash equivalents, end of period
    
    $
    58,709
    
    
    $
    15,476Supplemental disclosures of cash flow information:Cash paid for interest (including discontinued operations)
    
    $
    5,659
    
    
    $
    4,601Cash paid for income taxes (including discontinued operations)
    
    $
    8,438
    
    
    $
    10,790Supplemental
non-cash investing and financing transactions:Prepaid insurance obtained by note payable (including discontinued operations)
    
    $
    10,051
    
    
    $
    9,385Equipment and property obtained by capital leases
    
    $
    29,780
    
    
    $
    11,635Settlement of officer note receivable for stock
    
    $
    
    
    
    $
    243Deferred government obligation payments (including discontinued operations)
    
    $
    32,300
    
    
    $
    
  7




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WILLBROS GROUP, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (In thousands, except share and per share amounts)
(Unaudited)
 1. Basis of Presentation
         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
 SFAS No. 157
  SFAS No. 159
  FIN 48
    Effect of adopting FIN 48 at January 1, 2007
    
    $
    6,369Income tax liabilities recognized prior to adoption of FIN 48
    
    
    158Change in measurement of existing tax positions
    
    
    (1,931
    )Additions based on tax positions related to the current year
    
    
    110Newly identified tax positions
    
    
    1,786Balance at September 30, 2007
    
    $
    6,492
  9




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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)
 3. Acquisitions
   Current assets
    
    $
    7,610Property,
plant and equipment
    
    
    18,258Goodwill
    
    
    5,734Current liabilities
    
    
    (3,692
    )Deferred income tax liability
    
    
    (3,756
    )Net assets acquired
    
    $
    24,154
  4.
Discontinuance of Operations, Asset Disposals, and Transition
Services Agreement
 Strategic Decisions
  Nigeria
Assets and Nigeria Based Operations
 Share Purchase Agreement
   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. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Global Settlement Agreement (GSA)
  
    
    A reduction to the purchase price of $25,000;
    
    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 Ascot
acquired as part of the Agreement;
    
    Ascot and the Company agreed that all working capital adjustments as provided for
in the Agreement were resolved; 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 February 7, 2007 Share Purchase Agreement
concerning any breach of a covenant or any representation or warranty.
  Letters of Credit
   Transition Services Agreement
   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)
 4. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Residual Equipment in Nigeria
  Venezuela
 Business Disposal
  TXP-4 Plant
 Asset Disposal
   12




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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 4. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Results of Discontinued Operations
  Three Months Ended September 30, 2007DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    Venezuela
    
    
    Opal TXP-4
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    4,825
    
    
    $
    
    
    
    $
    
    
    
    $
    4,825Operating expenses:Contract
    
    
    
    
    
    
    4,690
    
    
    
    
    
    
    
    
    
    
    
    4,690Depreciation and amortization
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    178General and administrative
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    124Profit disgorgement
    
    
    10,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,30010,300
    
    
    
    4,992
    
    
    
    
    
    
    
    
    
    
    
    15,292Operating loss
    
    
    (10,300
    )
    
    
    (167
    )
    
    
    
    
    
    
    
    
    
    
    (10,467
    )Other income
    
    
    1,441
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    1,495Loss before income taxes
    
    
    (8,859
    )
    
    
    (113
    )
    
    
    
    
    
    
    
    
    
    
    (8,972
    )Provision for income taxes
    
    
    
    
    
    
    154
    
    
    
    
    
    
    
    
    
    
    
    154Net loss
    
    $
    (8,859
    )
    
    $
    (267
    )
    
    $
    
    
    
    $
    
    
    
    $
    (9,126
    )
 Three Months Ended September 30, 2006DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    Venezuela
    
    
    Opal TXP-4
    
    
    OperationsContract revenue
    
    $
    102,304
    
    
    $
    
    
    
    $
    43
    
    
    $
    
    
    
    $
    102,347Operating expenses:Contract
    
    
    112,432
    
    
    
    
    
    
    
    114
    
    
    
    
    
    
    
    112,546Depreciation and amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    General and administrative
    
    
    7,184
    
    
    
    
    
    
    
    46
    
    
    
    
    
    
    
    7,230119,616
    
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    119,776Operating loss
    
    
    (17,312
    )
    
    
    
    
    
    
    (117
    )
    
    
    
    
    
    
    (17,429
    )Other income (expense)
    
    
    3,478
    
    
    
    
    
    
    
    (1
    )
    
    
    
    
    
    
    3,477Loss before income taxes
    
    
    (13,834
    )
    
    
    
    
    
    
    (118
    )
    
    
    
    
    
    
    (13,952
    )Provision for income taxes
    
    
    3,184
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,184Net loss
    
    $
    (17,018
    )
    
    $
    
    
    
    $
    (118
    )
    
    $
    
    
    
    $
    (17,136
    )
 13




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 4. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Nine Months Ended September 30, 2007DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    Venezuela
    
    
    Opal TXP-4
    
    
    OperationsContract revenue
    
    $
    30,046
    
    
    $
    21,906
    
    
    $
    
    
    
    $
    
    
    
    $
    51,952Operating expenses:Contract
    
    
    34,360
    
    
    
    20,527
    
    
    
    
    
    
    
    
    
    
    
    54,887Depreciation and amortization
    
    
    
    
    
    
    490
    
    
    
    
    
    
    
    
    
    
    
    490General and administrative
    
    
    3,472
    
    
    
    565
    
    
    
    
    
    
    
    
    
    
    
    4,037Profit disgorgement
    
    
    10,300
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,30048,132
    
    
    
    21,582
    
    
    
    
    
    
    
    
    
    
    
    69,714Operating income (loss)
    
    
    (18,086
    )
    
    
    324
    
    
    
    
    
    
    
    
    
    
    
    (17,762
    )Other income (expense)
    
    
    (1,946
    )
    
    
    55
    
    
    
    
    
    
    
    
    
    
    
    (1,891
    )Income (loss) before income taxes
    
    
    (20,032
    )
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    (19,653
    )Provision for income taxes
    
    
    1,092
    
    
    
    749
    
    
    
    
    
    
    
    
    
    
    
    1,841Net loss
    
    $
    (21,124
    )
    
    $
    (370
    )
    
    $
    
    
    
    $
    
    
    
    $
    (21,494
    )
 Nine Months Ended September 30, 2006DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    Venezuela
    
    
    Opal TXP-4
    
    
    OperationsContract revenue
    
    $
    375,275
    
    
    $
    
    
    
    $
    257
    
    
    $
    
    
    
    $
    375,532Operating expenses:Contract
    
    
    372,487
    
    
    
    
    
    
    
    562
    
    
    
    
    
    
    
    373,049Depreciation and amortization
    
    
    3,607
    
    
    
    
    
    
    
    378
    
    
    
    
    
    
    
    3,985General and administrative
    
    
    20,339
    
    
    
    
    
    
    
    322
    
    
    
    
    
    
    
    20,661396,433
    
    
    
    
    
    
    
    1,262
    
    
    
    
    
    
    
    397,695Operating loss
    
    
    (21,158
    )
    
    
    
    
    
    
    (1,005
    )
    
    
    
    
    
    
    (22,163
    )Other income (expense)
    
    
    (11,022
    )
    
    
    
    
    
    
    164
    
    
    
    2,033
    
    
    
    (8,825
    )Income (loss) before income taxes
    
    
    (32,180
    )
    
    
    
    
    
    
    (841
    )
    
    
    2,033
    
    
    
    (30,988
    )Provision for income taxes
    
    
    14,427
    
    
    
    
    
    
    
    143
    
    
    
    691
    
    
    
    15,261Net income (loss)
    
    $
    (46,607
    )
    
    $
    
    
    
    $
    (984
    )
    
    $
    1,342
    
    
    $
    (46,249
    )
 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)
 4. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Financial Position of Discontinued Operations
  September 30, 2007DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    Venezuela
    
    
    Opal TXP-4
    
    
    OperationsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    130
    
    
    $
    
    
    
    $
    
    
    
    $
    130Accounts receivable, net
    
    
    
    
    
    
    1,602
    
    
    
    
    
    
    
    
    
    
    
    1,602Prepaid expenses
    
    
    
    
    
    
    1,065
    
    
    
    
    
    
    
    
    
    
    
    1,065Total current assets
    
    
    
    
    
    
    2,797
    
    
    
    
    
    
    
    
    
    
    
    2,797Property, plant and equipment, net
    
    
    
    
    
    
    1,228
    
    
    
    
    
    
    
    
    
    
    
    1,228Other noncurrent assets
    
    
    
    
    
    
    633
    
    
    
    
    
    
    
    
    
    
    
    633Total assets
    
    
    
    
    
    
    4,658
    
    
    
    
    
    
    
    
    
    
    
    4,658Current liabilities
    
    
    
    
    
    
    4,639
    
    
    
    
    
    
    
    
    
    
    
    4,639Total current liabilities
    
    
    
    
    
    
    4,639
    
    
    
    
    
    
    
    
    
    
    
    4,639Net assets of discontinued operations
    
    $
    
    
    
    $
    19
    
    
    $
    
    
    
    $
    
    
    
    $
    19
 December 31, 2006DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    Venezuela
    
    
    Opal TXP-4
    
    
    OperationsCurrent assets:Cash and cash equivalents
    
    $
    12,964
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,964Restricted cash
    
    
    36,683
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,683Accounts receivable, net
    
    
    76,673
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76,673Contract cost and recognized income not
yet billed
    
    
    79,364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,364Prepaid expenses
    
    
    16,017
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,017Parts and supplies inventories
    
    
    21,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,645Total current assets
    
    
    243,346
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    243,346Property, plant and equipment, net
    
    
    50,723
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,723Other noncurrent assets
    
    
    123
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    123Total assets
    
    
    294,192
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    294,192Current liabilities
    
    
    148,135
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,135Loss provision on contracts
    
    
    33,957
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,957Total current liabilities
    
    
    182,092
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182,092Net assets of discontinued operations
    
    $
    112,100
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    112,100
 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)
 4. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Profit Disgorgement
  Cash and Cash Equivalents
  Parts and Supplies Inventories
  Loss Provision on Contracts
  Contingencies, Commitments and Other Circumstances
  5. Contracts in Progress
   September 30,
    
    
    December 31,2007
    
    
    2006Contract cost and recognized income not yet billed
    
    $
    29,029
    
    
    $
    11,027Contract billings in excess of cost and recognized income
    
    
    (7,891
    )
    
    
    (14,947
    )$
    21,138
    
    
    $
    (3,920
    )
 16




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 5. Contracts in Progress (continued)
  6. Government Obligations
     7. Long-term Debt
  September 30,
    
    
    December 31,2007
    
    
    20062.75% convertible senior notes
    
    $
    70,000
    
    
    $
    70,000Capital lease obligations
    
    
    34,797
    
    
    
    11,6016.5% senior convertible notes
    
    
    32,050
    
    
    
    84,500Other obligations
    
    
    113
    
    
    
    512006 Credit Facility
    
    
    
    
    
    
    Total debt
    
    
    136,960
    
    
    
    166,152Less current portion
    
    
    (8,825
    )
    
    
    (4,575
    )Long-term debt
    
    $
    128,135
    
    
    $
    161,577
 2006 Credit Facility
  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)
 7. Long-term Debt (continued)
       
    
    A consolidated tangible net worth in an amount of not less than the sum of $116,561 plus
50 percent of consolidated net income earned in each quarter ended after December
31, 2006;
    
    A maximum senior leverage ratio of 1.00 to 1.00 for the quarter ending September
30, 2007, and for each quarter thereafter;
    
    A fixed charge coverage ratio of not less than 3.00 to 1.00, for the quarter
ended September 30, 2007, and for each quarter
thereafter; and
    
    A prohibition on capital expenditures (cost of assets added through purchase or capital
lease) if the Companys liquidity falls below $50,000.
 18




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 7. Long-term Debt (continued)
  
    
    The Companys consolidated tangible net worth was $151,934, which was approximately
$35,373 in excess of the tangible net worth the Company was required to maintain under the credit
facility;
    
    The Company is in compliance with the maximum senior leverage
ratio because it has
incurred no revolving advance or other senior debt;
    
    The Companys fixed charge coverage ratio was 6.17 to
1.00; and
    
    The Companys cash balance as of September 30, 2007 was $58,709, which allowed the
Company to add $53,926 of fixed assets to the balance sheet during the previous 12 months.
  6.5% Senior Convertible Notes
      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)
 7. Long-term Debt (continued)
     2.75% Convertible Senior Notes
  20




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 7. Long-term Debt (continued)
     2004 Credit Facility
   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)
 7. Long-term Debt (continued)
 Capital Leases
   September 30,
    
    
    December 31,2007
    
    
    2006Construction equipment
    
    $
    40,681
    
    
    $
    10,662Land and buildings
    
    
    
    
    
    
    1,446Furniture and office equipment
    
    
    535
    
    
    
    535Total assets held under capital lease
    
    
    41,216
    
    
    
    12,643Less accumulated depreciation
    
    
    (6,743
    )
    
    
    (1,572
    )Net assets under capital lease
    
    $
    34,473
    
    
    $
    11,071
 8. Income (Loss) Per Share
  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)
 8. Income (Loss) Per Share (continued)
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income (loss) from continuing operations
    
    $
    10,272
    
    
    $
    (4,965
    )
    
    $
    (33,446
    )
    
    $
    (18,598
    )Add: Interest and debt issuance costs associated
with convertible notes
    
    
    780
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss) from continuing operations
applicable to common shares
    
    $
    11,052
    
    
    $
    (4,965
    )
    
    $
    (33,446
    )
    
    $
    (18,598
    )Weighted average number of common
shares outstanding for basic income (loss) per
share
    
    
    28,804,907
    
    
    
    21,557,695
    
    
    
    27,421,927
    
    
    
    21,480,730Weighted average number of dilutive potential
common shares outstanding
    
    
    6,039,575
    
    
    
    
    
    
    
    
    
    
    
    Weighted average number of common
shares outstanding for diluted income (loss) per
share
    
    
    34,844,482
    
    
    
    21,557,695
    
    
    
    27,421,927
    
    
    
    21,480,730Income (loss) per common share from continuing
operations:Basic
    
    $
    0.36
    
    
    $
    (0.23
    )
    
    $
    (1.22
    )
    
    $
    (0.87
    )Diluted
    
    $
    0.32
    
    
    $
    (0.23
    )
    
    $
    (1.22
    )
    
    $
    (0.87
    )
  Three Months
    
    Nine MonthsEnded September 30,
    
    Ended September 30,2007
    
    2006
    
    2007
    
    20062.75% Convertible senior notes
    
    
    
    
    
    
    3,595,277
    
    
    
    3,595,277
    
    
    
    3,595,2776.5% Senior convertible notes
    
    
    
    
    
    
    4,813,171
    
    
    
    1,825,589
    
    
    
    4,813,171Stock options
    
    
    
    
    
    
    833,900
    
    
    
    686,750
    
    
    
    833,900Warrants to purchase common stock
    
    
    
    
    
    
    
    
    
    
    558,354
    
    
    
    Restricted stock and restricted stock rights
    
    
    
    
    
    
    248,000
    
    
    
    612,637
    
    
    
    248,000
    
    
    
    9,490,348
    
    
    
    7,278,607
    
    
    
    9,490,348
  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)
 9. Segment Information
 Construction Engineering, Engineering, Procurement and
Construction EPC). U.S. & Canada International
   Construction
    
    
    Engineering
    
    
    EPC
    
    

Corporate
    
    
    ConsolidatedContract revenue
    
    $
    193,984
    
    
    $
    25,584
    
    
    $
    27,148
    
    
    $
    
    
    
    $
    246,716Operating expenses:Contract
    
    
    163,404
    
    
    
    19,034
    
    
    
    24,651
    
    
    
    
    
    
    
    207,089Depreciation and amortization
    
    
    4,996
    
    
    
    170
    
    
    
    291
    
    
    
    
    
    
    
    5,457General and administrative
    
    
    12,216
    
    
    
    3,349
    
    
    
    1,883
    
    
    
    
    
    
    
    17,448Government fines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )
    
    
    (2,000
    )180,616
    
    
    
    22,553
    
    
    
    26,825
    
    
    
    (2,000
    )
    
    
    227,994Operating income:
    
    $
    13,368
    
    
    $
    3,031
    
    
    $
    323
    
    
    $
    2,000
    
    
    
    18,722Interest and other income
(expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,369
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,081Net income from continuing operations
    
    
    
    
    
    
    10,272Net loss from discontinued operations, net of provision for income taxes
    
    
    
    
    
    
    (9,126
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,146
  Construction
    
    
    Engineering
    
    
    EPC
    
    
    Corporate
    
    
    ConsolidatedContract revenue
    
    $
    91,204
    
    
    $
    20,216
    
    
    $
    14,046
    
    
    $
    
    
    
    $
    125,466Operating expenses:Contract
    
    
    82,912
    
    
    
    17,292
    
    
    
    13,214
    
    
    
    
    
    
    
    113,418Depreciation and amortization
    
    
    2,325
    
    
    
    230
    
    
    
    710
    
    
    
    
    
    
    
    3,265General and administrative
    
    
    8,549
    
    
    
    2,144
    
    
    
    399
    
    
    
    
    
    
    
    11,09293,786
    
    
    
    19,666
    
    
    
    14,323
    
    
    
    
    
    
    
    127,775Operating income (loss):
    
    $
    (2,582
    )
    
    $
    550
    
    
    $
    (277
    )
    
    $
    
    
    
    
    (2,309
    )Interest and other income
(expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,277
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    379Net loss from continuing operations
    
    
    
    
    
    
    (4,965
    )Net loss from discontinued operations, net of provision for income taxes
    
    
    
    
    
    
    (17,136
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (22,101
    )
 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)
 9. Segment Information (continued)
  Construction
    
    
    Engineering
    
    
    EPC
    
    
    Corporate
    
    
    ConsolidatedContract revenue
    
    $
    476,638
    
    
    $
    66,040
    
    
    $
    67,490
    
    
    $
    
    
    
    $
    610,168Operating expenses:Contract
    
    
    427,966
    
    
    
    49,166
    
    
    
    61,658
    
    
    
    
    
    
    
    538,790Depreciation and amortization
    
    
    11,629
    
    
    
    511
    
    
    
    1,083
    
    
    
    
    
    
    
    13,223General and administrative
    
    
    31,083
    
    
    
    7,063
    
    
    
    4,149
    
    
    
    
    
    
    
    42,295Government fines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,000
    
    
    
    22,000470,678
    
    
    
    56,740
    
    
    
    66,890
    
    
    
    22,000
    
    
    
    616,308Operating income (loss):
    
    $
    5,960
    
    
    $
    9,300
    
    
    $
    600
    
    
    $
    (22,000
    )
    
    
    (6,140
    )Interest and other income
(expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,513
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,793Net loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    (33,446
    )Net loss from discontinued operations, net of provision for income taxes
    
    
    
    
    
    
    
    
    
    
    (21,494
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (54,940
    )
  Construction
    
    
    Engineering
    
    
    EPC
    
    
    Corporate
    
    
    ConsolidatedContract revenue
    
    $
    257,587
    
    
    $
    55,621
    
    
    $
    38,973
    
    
    $
    
    
    
    $
    352,181Operating expenses:Contract
    
    
    238,172
    
    
    
    46,598
    
    
    
    35,858
    
    
    
    
    
    
    
    320,628Depreciation and amortization
    
    
    6,450
    
    
    
    672
    
    
    
    2,058
    
    
    
    
    
    
    
    9,180General and administrative
    
    
    25,460
    
    
    
    6,390
    
    
    
    1,283
    
    
    
    
    
    
    
    33,133270,082
    
    
    
    53,660
    
    
    
    39,199
    
    
    
    
    
    
    
    362,941Operating income (loss):
    
    $
    (12,495
    )
    
    $
    1,961
    
    
    $
    (226
    )
    
    $
    
    
    
    
    (10,760
    )Interest and other income
(expense), net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,027
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,811Net loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    (18,598
    )Net loss from discontinued operations, net of provision for income taxes
    
    
    
    
    
    
    
    
    
    
    (46,249
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (64,847
    )
  September 30,
    
    
    December 31,2007
    
    
    2006Construction
    
    $
    326,025
    
    
    $
    198,528Engineering
    
    
    27,525
    
    
    
    15,342EPC
    
    
    7,881
    
    
    
    13,336Corporate
    
    
    77,765
    
    
    
    68,584Total segment assets
    
    $
    439,196
    
    
    $
    295,790
 25




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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)
 10. Stockholders Equity
  Stock Ownership Plans
      26




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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)
 10. Stockholders Equity (continued)
  Nine Months Ended September 30,2007
    
    2006Weighted average grant date fair value
    
    $
    9.69
    
    
    $
    6.72Weighted average assumptions used:Expected volatility
    
    
    40.13
    %
    
    
    45.66
    %Expected lives
    
    
    3.51
    yrs
    
    
    3.46
    yrsRisk-free interest rates
    
    
    4.42
    %
    
    
    4.66
    %Expected dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
   WeightedAverageNumber of
    
    
    ExerciseOptions
    
    
    PriceOutstanding at January 1, 2007
    
    
    806,750
    
    
    $
    13.46Granted
    
    
    10,000
    
    
    
    27.80Exercised
    
    
    107,500
    
    
    
    14.40Forfeited
    
    
    22,500
    
    
    
    8.09Outstanding at September 30, 2007
    
    
    686,750
    
    
    $
    13.69Exercisable at September 30, 2007
    
    
    512,583
    
    
    $
    12.22
   27




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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)
 10. Stockholders Equity (continued)
  WeightedAverageGrant-DateShares
    
    
    Fair ValueNonvested, January 1, 2007
    
    
    202,500
    
    
    $
    6.40Granted
    
    
    10,000
    
    
    
    9.69Vested
    
    
    38,333
    
    
    
    5.97Forfeited or expired
    
    
    
    
    
    
    Nonvested, September 30, 2007
    
    
    174,167
    
    
    $
    6.68
  WeightedAverageNumber of
    
    
    Grant-DateRSUs
    
    
    Fair ValueOutstanding at January 1, 2007
    
    
    300,116
    
    
    $
    17.85Granted
    
    
    430,985
    
    
    
    21.70Vested
    
    
    105,586
    
    
    
    17.57Forfeited
    
    
    12,878
    
    
    
    20.63Outstanding September 30, 2007
    
    
    612,637
    
    
    $
    20.55
   Warrants to Purchase Common Stock
  28




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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)
 10. Stockholders Equity (continued)
 Induced Conversion of 6.5% Notes
  11. Income Taxes
  12. Foreign Exchange Risk
  13 Contingencies, Commitments and Other Circumstances
 Resolution
of criminal and regulatory matters
   
    
    A twelve-count criminal information will be filed against WGI and WII as part of the
execution of the DPAs between the DOJ and each of WGI and
WII. The twelve counts include substantive violations of the anti-bribery provisions of the
FCPA, and violations of the FCPAs books-and-records provisions.
All twelve counts relate to
operations in Nigeria, Ecuador and Bolivia during the period from
1996 to 2005.
    
    Provided that WGI and WII fully comply with the DPAs for a
period of approximately three years, the DOJ will agree not to
continue the criminal prosecution and, at the conclusion of that
time, will move to dismiss the criminal information.
    
    The DPAs will require, for each of their three year terms,
among other things, full cooperation with the
government; compliance with all federal criminal law, including but not limited to the
FCPA; and a three year monitor for WGI and its subsidiary companies, primarily focused on
international operations outside of North America, the costs of which are payable by WGI.
    
    The Company will be subject to $22,000 in fines related to FCPA violations. The fines are
payable in four equal installments of $5,500, first on signing, and
annually for approximately three
years thereafter, with no interest payable on the unpaid amounts.
 29




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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 Contingencies, Commitments and Other Circumstances (continued)
  
    
    The Company will consent to the filing in federal district court of a complaint by the SEC (the
Complaint), without admitting or denying the allegations in the Complaint, and to the
imposition by the court of a final
judgment of permanent injunction against us. The Complaint will allege civil violations of
the antifraud provisions of the Securities Act and the Securities Exchange Act, the FCPAs
anti-bribery provisions, and the reporting, books and records and internal controls
provisions of the Securities Exchange Act. The final judgment will not take effect until it
is confirmed by the court, and will permanently enjoin us from future violations of those
provisions.
    
    The final judgment will order the Company to pay $10,300, consisting of $8,900 for disgorgement
of profits and approximately $1,400 of pre-judgment interest. The disgorgement and
pre-judgment interest is payable in four equal installments of $2,575, first on signing,
and annually for approximately three years thereafter. Post-judgment interest will be payable on the
outstanding balance.
      Class-action Lawsuit
  30




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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 Contingencies, Commitments and Other Circumstances (continued)
 Other Circumstances
    /
 Commitments
  31




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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 Contingencies, Commitments and Other Circumstances (continued)
 st
     32




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WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements
    33




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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)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements (continued)
 September 30, 2007 and December 31, 2006
Willbros Group, Inc. and Subsidiaries
 Condensed Consolidating Balance Sheets
 September 30, 2007WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,029
    
    
    $
    1,178
    
    
    $
    20,502
    
    
    $
    
    
    
    $
    58,709Accounts receivable, net
    
    
    70
    
    
    
    83,709
    
    
    
    97,954
    
    
    
    
    
    
    
    181,733Contract cost and recognized income not yet
billed
    
    
    
    
    
    
    25,599
    
    
    
    3,430
    
    
    
    
    
    
    
    29,029Prepaid expenses
    
    
    4
    
    
    
    15,744
    
    
    
    574
    
    
    
    
    
    
    
    16,322Parts and supplies inventories
    
    
    
    
    
    
    535
    
    
    
    2,238
    
    
    
    
    
    
    
    2,773Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    5,294
    
    
    
    (636
    )
    
    
    4,658Receivables from affiliated companies
    
    
    243,318
    
    
    
    
    
    
    
    
    
    
    
    (243,318
    )
    
    
    Total current assets
    
    
    280,421
    
    
    
    126,765
    
    
    
    129,992
    
    
    
    (243,954
    )
    
    
    293,224Deferred tax assets
    
    
    
    
    
    
    7,892
    
    
    
    86
    
    
    
    
    
    
    
    7,978Property, plant and equipment, net
    
    
    
    
    
    
    56,522
    
    
    
    63,871
    
    
    
    
    
    
    
    120,393Investment in subsidiaries
    
    
    (40,171
    )
    
    
    
    
    
    
    
    
    
    
    40,171
    
    
    
    Other assets
    
    
    3,007
    
    
    
    9,878
    
    
    
    9,374
    
    
    
    
    
    
    
    22,259Total assets
    
    $
    243,257
    
    
    $
    201,057
    
    
    $
    203,323
    
    
    $
    (203,783
    )
    
    $
    443,854LIABILITIES
AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable and current portion of long-term debt
    
    $
    8,075
    
    
    $
    8,685
    
    
    $
    2,552
    
    
    $
    
    
    
    $
    19,312Accounts payable and accrued liabilities
    
    
    2,449
    
    
    
    74,476
    
    
    
    57,500
    
    
    
    
    
    
    
    134,425Contract billings in excess of cost and
recognized income
    
    
    
    
    
    
    6,300
    
    
    
    1,591
    
    
    
    
    
    
    
    7,891Accrued income taxes
    
    
    
    
    
    
    1,211
    
    
    
    3,460
    
    
    
    
    
    
    
    4,671Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    4,639
    
    
    
    
    
    
    
    4,639Payables to affiliated companies
    
    
    
    
    
    
    50,204
    
    
    
    193,750
    
    
    
    (243,954
    )
    
    
    Total current liabilities
    
    
    10,524
    
    
    
    140,876
    
    
    
    263,492
    
    
    
    (243,954
    )
    
    
    170,938Long-term debt
    
    
    126,275
    
    
    
    20,780
    
    
    
    5,305
    
    
    
    
    
    
    
    152,360Long-term liability for unrecognized tax benefits
    
    
    
    
    
    
    4,062
    
    
    
    2,430
    
    
    
    
    
    
    
    6,492Deferred tax liabilities
    
    
    
    
    
    
    1,672
    
    
    
    5,697
    
    
    
    
    
    
    
    7,369Other liabilities
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    237Total liabilities
    
    
    136,799
    
    
    
    167,390
    
    
    
    277,161
    
    
    
    (243,954
    )
    
    
    337,396Stockholders equity:Common stock
    
    
    1,467
    
    
    
    8
    
    
    
    33
    
    
    
    (41
    )
    
    
    1,467Capital in excess of par value
    
    
    273,840
    
    
    
    89,156
    
    
    
    8,526
    
    
    
    (97,682
    )
    
    
    273,840Accumulated deficit
    
    
    (181,912
    )
    
    
    (55,497
    )
    
    
    (95,054
    )
    
    
    150,551
    
    
    
    (181,912
    )Other stockholders equity components
    
    
    13,063
    
    
    
    
    
    
    
    12,657
    
    
    
    (12,657
    )
    
    
    13,063Total stockholders equity
    
    
    106,548
    
    
    
    33,667
    
    
    
    (73,838
    )
    
    
    40,171
    
    
    
    106,458Total liabilities and stockholders equity
    
    $
    243,257
    
    
    $
    201,057
    
    
    $
    203,323
    
    
    $
    (203,783
    )
    
    $
    443,854
 34




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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)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements (continued)
 Condensed Consolidating Balance Sheets
 December 31, 2006WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    

Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCurrent assets:Cash and cash equivalents
    
    $
    24,776
    
    
    $
    4,895
    
    
    $
    7,972
    
    
    $
    
    
    
    $
    37,643Accounts receivable, net
    
    
    32
    
    
    
    81,004
    
    
    
    56,068
    
    
    
    
    
    
    
    137,104Contract cost and recognized income not yet
billed
    
    
    
    
    
    
    2,225
    
    
    
    8,802
    
    
    
    
    
    
    
    11,027Prepaid expenses
    
    
    3
    
    
    
    16,092
    
    
    
    1,204
    
    
    
    
    
    
    
    17,299Parts and supplies inventories
    
    
    
    
    
    
    560
    
    
    
    1,509
    
    
    
    
    
    
    
    2,069Assets of discontinued operations
    
    
    
    
    
    
    
    
    
    
    294,192
    
    
    
    
    
    
    
    294,192Receivables from affiliated companies
    
    
    280,853
    
    
    
    
    
    
    
    
    
    
    
    (280,853
    )
    
    
    Total current assets
    
    
    305,664
    
    
    
    104,776
    
    
    
    369,747
    
    
    
    (280,853
    )
    
    
    499,334Deferred tax assets
    
    
    
    
    
    
    6,755
    
    
    
    37
    
    
    
    
    
    
    
    6,792Property, plant and equipment, net
    
    
    
    
    
    
    33,115
    
    
    
    32,232
    
    
    
    
    
    
    
    65,347Investment in subsidiaries
    
    
    (42,228
    )
    
    
    
    
    
    
    
    
    
    
    42,228
    
    
    
    Other assets
    
    
    6,344
    
    
    
    5,007
    
    
    
    7,158
    
    
    
    
    
    
    
    18,509Total assets
    
    $
    269,780
    
    
    $
    149,653
    
    
    $
    409,174
    
    
    $
    (238,625
    )
    
    $
    589,982LIABILITIES
AND STOCKHOLDERS EQUITYCurrent liabilities:Notes payable and current portion of
long-term debt
    
    $
    
    
    
    $
    4,382
    
    
    $
    1,180
    
    
    $
    
    
    
    $
    5,562Accounts payable and accrued liabilities
    
    
    17,349
    
    
    
    63,120
    
    
    
    41,883
    
    
    
    
    
    
    
    122,352Contract billings in excess of cost and
recognized income
    
    
    
    
    
    
    14,779
    
    
    
    168
    
    
    
    
    
    
    
    14,947Accrued income taxes
    
    
    
    
    
    
    1,657
    
    
    
    1,899
    
    
    
    
    
    
    
    3,556Liabilities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    353,980
    
    
    
    (171,888
    )
    
    
    182,092Payables to affiliated companies
    
    
    
    
    
    
    22,923
    
    
    
    86,042
    
    
    
    (108,965
    )
    
    
    Total current liabilities
    
    
    17,349
    
    
    
    106,861
    
    
    
    485,152
    
    
    
    (280,853
    )
    
    
    328,509Long-term debt
    
    
    154,500
    
    
    
    7,077
    
    
    
    
    
    
    
    
    
    
    
    161,577Deferred tax liability
    
    
    
    
    
    
    1,611
    
    
    
    117
    
    
    
    
    
    
    
    1,728Other liabilities
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    237Total liabilities
    
    
    171,849
    
    
    
    115,549
    
    
    
    485,506
    
    
    
    (280,853
    )
    
    
    492,051Stockholders equity:Common stock
    
    
    1,292
    
    
    
    8
    
    
    
    32
    
    
    
    (40
    )
    
    
    1,292Capital in excess of par value
    
    
    217,036
    
    
    
    89,156
    
    
    
    8,526
    
    
    
    (97,682
    )
    
    
    217,036Accumulated deficit
    
    
    (120,603
    )
    
    
    (55,060
    )
    
    
    (84,177
    )
    
    
    139,237
    
    
    
    (120,603
    )Other stockholders equity components
    
    
    206
    
    
    
    
    
    
    
    (713
    )
    
    
    713
    
    
    
    206Total stockholders equity
    
    
    97,931
    
    
    
    34,104
    
    
    
    (76,332
    )
    
    
    42,228
    
    
    
    97,931Total liabilities and stockholders equity
    
    $
    269,780
    
    
    $
    149,653
    
    
    $
    409,174
    
    
    $
    (238,625
    )
    
    $
    589,982
 35




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements (continued)
 Condensed
Consolidating Statements of Operations
 Three Months Ended September 30, 2007WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedContract revenue
    
    $
    
    
    
    $
    162,305
    
    
    $
    91,667
    
    
    $
    (7,256
    )
    
    $
    246,716Operating expenses:Contract
    
    
    
    
    
    
    127,262
    
    
    
    79,827
    
    
    
    
    
    
    
    207,089Depreciation and amortization
    
    
    
    
    
    
    3,418
    
    
    
    2,039
    
    
    
    
    
    
    
    5,457General and administrative
    
    
    5,119
    
    
    
    14,840
    
    
    
    4,745
    
    
    
    (7,256
    )
    
    
    17,448Government fines
    
    
    (2,000
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )3,119
    
    
    
    145,520
    
    
    
    86,611
    
    
    
    (7,256
    )
    
    
    227,994Operating income (loss)
    
    
    (3,119
    )
    
    
    16,785
    
    
    
    5,056
    
    
    
    
    
    
    
    18,722Other income (expense):Equity in income of consolidated subsidiaries
    
    
    13,748
    
    
    
    
    
    
    
    
    
    
    
    (13,748
    )
    
    
    Interest  net
    
    
    (543
    )
    
    
    (653
    )
    
    
    154
    
    
    
    
    
    
    
    (1,042
    )Other  net
    
    
    (22
    )
    
    
    (1,175
    )
    
    
    (130
    )
    
    
    
    
    
    
    (1,327
    )Income from continuing operations
before income taxes
    
    
    10,064
    
    
    
    14,957
    
    
    
    5,080
    
    
    
    (13,748
    )
    
    
    16,353Provision (benefit) for income taxes
    
    
    
    
    
    
    7,159
    
    
    
    (1,078
    )
    
    
    
    
    
    
    6,081Income from continuing operations
    
    
    10,064
    
    
    
    7,798
    
    
    
    6,158
    
    
    
    (13,748
    )
    
    
    10,272Income
(loss) from discontinued operations, net of
provision for income taxes
    
    
    (8,918
    )
    
    
    11
    
    
    
    (219
    )
    
    
    
    
    
    
    (9,126
    )Net income
    
    $
    1,146
    
    
    $
    7,809
    
    
    $
    5,939
    
    
    $
    (13,748
    )
    
    $
    1,146
 Three Months Ended September 30, 2006WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedContract revenue
    
    $
    
    
    
    $
    77,699
    
    
    $
    55,600
    
    
    $
    (7,833
    )
    
    $
    125,466Operating expenses:Contract
    
    
    1
    
    
    
    65,456
    
    
    
    47,961
    
    
    
    
    
    
    
    113,418Depreciation and amortization
    
    
    
    
    
    
    2,236
    
    
    
    1,029
    
    
    
    
    
    
    
    3,265General and administrative
    
    
    983
    
    
    
    11,478
    
    
    
    6,464
    
    
    
    (7,833
    )
    
    
    11,092984
    
    
    
    79,170
    
    
    
    55,454
    
    
    
    (7,833
    )
    
    
    127,775Operating income (loss)
    
    
    (984
    )
    
    
    (1,471
    )
    
    
    146
    
    
    
    
    
    
    
    (2,309
    )Other income (expense):Equity in loss of consolidated subsidiaries
    
    
    (19,015
    )
    
    
    
    
    
    
    
    
    
    
    19,015
    
    
    
    Interest  net
    
    
    (2,102
    )
    
    
    (335
    )
    
    
    (272
    )
    
    
    
    
    
    
    (2,709
    )Other  net
    
    
    
    
    
    
    (18
    )
    
    
    450
    
    
    
    
    
    
    
    432Income (loss) from continuing operations
before income taxes
    
    
    (22,101
    )
    
    
    (1,824
    )
    
    
    324
    
    
    
    19,015
    
    
    
    (4,586
    )Provision for income taxes
    
    
    
    
    
    
    (650
    )
    
    
    1,029
    
    
    
    
    
    
    
    379Loss from continuing operations
    
    
    (22,101
    )
    
    
    (1,174
    )
    
    
    (705
    )
    
    
    19,015
    
    
    
    (4,965
    )Loss from
discontinued operations, net of
provision for income taxes
    
    
    
    
    
    
    (570
    )
    
    
    (16,566
    )
    
    
    
    
    
    
    (17,136
    )Net loss
    
    $
    (22,101
    )
    
    $
    (1,744
    )
    
    $
    (17,271
    )
    
    $
    19,015
    
    
    $
    (22,101
    )
 36




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements (continued)
 Condensed
Consolidating Statements of Operations
 Nine Months Ended September 30, 2007WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedContract revenue
    
    $
    
    
    
    $
    391,298
    
    
    $
    233,430
    
    
    $
    (14,560
    )
    
    $
    610,168Operating expenses:Contract
    
    
    
    
    
    
    337,128
    
    
    
    201,662
    
    
    
    
    
    
    
    538,790Depreciation and amortization
    
    
    
    
    
    
    8,695
    
    
    
    4,528
    
    
    
    
    
    
    
    13,223General and administrative
    
    
    6,820
    
    
    
    37,035
    
    
    
    13,000
    
    
    
    (14,560
    )
    
    
    42,295Government fines
    
    
    22,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,00028,820
    
    
    
    382,858
    
    
    
    219,190
    
    
    
    (14,560
    )
    
    
    616,308Operating income (loss)
    
    
    (28,820
    )
    
    
    8,440
    
    
    
    14,240
    
    
    
    
    
    
    
    (6,140
    )Other income (expense):Equity in loss of consolidated subsidiaries
    
    
    4,721
    
    
    
    
    
    
    
    
    
    
    
    (4,721
    )
    
    
    Interest  net
    
    
    (2,011
    )
    
    
    (605
    )
    
    
    497
    
    
    
    
    
    
    
    (2,119
    )Other  net
    
    
    (16,402
    )
    
    
    (408
    )
    
    
    (584
    )
    
    
    
    
    
    
    (17,394
    )Income (loss) from continuing operations
before income taxes
    
    
    (42,512
    )
    
    
    7,427
    
    
    
    14,153
    
    
    
    (4,721
    )
    
    
    (25,653
    )Provision for income taxes
    
    
    
    
    
    
    4,316
    
    
    
    3,477
    
    
    
    
    
    
    
    7,793Income (loss) from continuing operations
    
    
    (42,512
    )
    
    
    3,111
    
    
    
    10,676
    
    
    
    (4,721
    )
    
    
    (33,446
    )Loss from
discontinued operations, net of
provision for income taxes
    
    
    (12,428
    )
    
    
    (599
    )
    
    
    (8,467
    )
    
    
    
    
    
    
    (21,494
    )Net income (loss)
    
    $
    (54,940
    )
    
    $
    2,512
    
    
    $
    2,209
    
    
    $
    (4,721
    )
    
    $
    (54,940
    )
 Nine Months Ended September 30, 2006WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedContract revenue
    
    $
    
    
    
    $
    219,027
    
    
    $
    159,326
    
    
    $
    (26,172
    )
    
    $
    352,181Operating expenses:Contract
    
    
    1
    
    
    
    177,868
    
    
    
    142,759
    
    
    
    
    
    
    
    320,628Depreciation and amortization
    
    
    
    
    
    
    5,930
    
    
    
    3,250
    
    
    
    
    
    
    
    9,180General and administrative
    
    
    6,354
    
    
    
    39,311
    
    
    
    13,640
    
    
    
    (26,172
    )
    
    
    33,1336,355
    
    
    
    223,109
    
    
    
    159,649
    
    
    
    (26,172
    )
    
    
    362,941Operating loss
    
    
    (6,355
    )
    
    
    (4,082
    )
    
    
    (323
    )
    
    
    
    
    
    
    (10,760
    )Other income (expense):Equity in loss of consolidated subsidiaries
    
    
    (53,569
    )
    
    
    
    
    
    
    
    
    
    
    53,569
    
    
    
    Interest  net
    
    
    (4,922
    )
    
    
    (698
    )
    
    
    (512
    )
    
    
    
    
    
    
    (6,132
    )Other  net
    
    
    (1
    )
    
    
    (14
    )
    
    
    120
    
    
    
    
    
    
    
    105Loss from continuing operations before
income taxes
    
    
    (64,847
    )
    
    
    (4,794
    )
    
    
    (715
    )
    
    
    53,569
    
    
    
    (16,787
    )Provision for income taxes
    
    
    
    
    
    
    361
    
    
    
    1,450
    
    
    
    
    
    
    
    1,811Loss from continuing operations
    
    
    (64,847
    )
    
    
    (5,155
    )
    
    
    (2,165
    )
    
    
    53,569
    
    
    
    (18,598
    )Income
(loss) from discontinued operations, net of
provision for income taxes
    
    
    
    
    
    
    1,800
    
    
    
    (48,049
    )
    
    
    
    
    
    
    (46,249
    )Net loss
    
    $
    (64,847
    )
    
    $
    (3,355
    )
    
    $
    (50,214
    )
    
    $
    53,569
    
    
    $
    (64,847
    )
 37




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements (continued)
 Condensed Consolidating Statement of Cash Flows
 Nine Months Ended September 30, 2007WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash used in operating activities
of continuing operations
    
    $
    (12,329
    )
    
    $
    (6,850
    )
    
    $
    (3,450
    )
    
    $
    
    
    
    $
    (22,629
    )Net cash
provided by (used in) operating activities of
discontinued operations
    
    
    (2,128
    )
    
    
    (599
    )
    
    
    5,707
    
    
    
    
    
    
    
    2,980Cash provided by (used in) operating activities
    
    
    (14,457
    )
    
    
    (7,449
    )
    
    
    2,257
    
    
    
    
    
    
    
    (19,649
    )Cash flows from investing activities:Proceeds from sale of discontinued operations, net
    
    
    105,568
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,568Purchases of property, plant and equipment
    
    
    
    
    
    
    (10,613
    )
    
    
    (5,277
    )
    
    
    
    
    
    
    (15,890
    )Acquisition of Midwest
    
    
    (24,154
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,154
    )Proceeds from sales of property, plant and
equipment
    
    
    
    
    
    
    1,393
    
    
    
    35
    
    
    
    
    
    
    
    1,428Cash provided by (used) in investing activities
of
continuing operations
    
    
    81,414
    
    
    
    (9,220
    )
    
    
    (5,242
    )
    
    
    
    
    
    
    66,952Cash provided by (used in) investing
activities of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash provided by (used in) investing activities
    
    
    81,414
    
    
    
    (9,220
    )
    
    
    (5,242
    )
    
    
    
    
    
    
    66,952Cash flows from financing activities:Loss on early extinguishment of debt
    
    
    (12,993
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,993
    )Proceeds from issuance of common stock, net
    
    
    1,519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,519Advances from (repayments to) parent/affiliates
    
    
    (42,684
    )
    
    
    27,281
    
    
    
    15,403
    
    
    
    
    
    
    
    Repayment of bank and other debt
    
    
    
    
    
    
    (8,647
    )
    
    
    (18
    )
    
    
    
    
    
    
    (8,665
    )Payments on capital leases
    
    
    
    
    
    
    (5,428
    )
    
    
    (2,079
    )
    
    
    
    
    
    
    (7,507
    )Costs of debt issuance and other
    
    
    (546
    )
    
    
    (253
    )
    
    
    
    
    
    
    
    
    
    
    (799
    )Cash provided by (used in) financing activities
of continuing operations
    
    
    (54,704
    )
    
    
    12,953
    
    
    
    13,306
    
    
    
    
    
    
    
    (28,445
    )Cash provided by (used in) financing activities
of discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash provided by (used in) financing activities
    
    
    (54,704
    )
    
    
    12,953
    
    
    
    13,306
    
    
    
    
    
    
    
    (28,445
    )Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    2,208
    
    
    
    
    
    
    
    2,208Cash provided by (used in) all activities
    
    $
    12,253
    
    
    $
    (3,716
    )
    
    $
    12,529
    
    
    $
    
    
    
    $
    21,066
 38




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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)
 14. Parent, Guarantor and Non-Guarantor Condensed Consolidating Financial Statements (continued)
 Condensed Consolidating Statement of Cash Flows
 Nine Months Ended September 30, 2006WUSAI
    
    
    Non-Parent
    
    
    (Guarantor)
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedNet cash used in operating activities
of continuing operations
    
    $
    (6,940
    )
    
    $
    (3,533
    )
    
    $
    (2,244
    )
    
    $
    
    
    
    $
    (12,717
    )Net cash used in operating activities of
discontinued operations
    
    
    
    
    
    
    (880
    )
    
    
    (58,705
    )
    
    
    
    
    
    
    (59,585
    )Cash used in operating activities
    
    
    (6,940
    )
    
    
    (4,413
    )
    
    
    (60,949
    )
    
    
    
    
    
    
    (72,302
    )Cash flows from investing activities:Proceeds from sale of discontinued operations, net
    
    
    
    
    
    
    25,082
    
    
    
    7,000
    
    
    
    
    
    
    
    32,082Purchases of property, plant and equipment
    
    
    
    
    
    
    (2,242
    )
    
    
    (10,147
    )
    
    
    
    
    
    
    (12,389
    )Increase in restricted cash
    
    
    (1,500
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,500
    )Proceeds from sales of property, plant and
equipment
    
    
    
    
    
    
    
    
    
    
    8,243
    
    
    
    
    
    
    
    8,243Cash provided by (used in) investing activities
of continuing operations
    
    
    (1,500
    )
    
    
    22,840
    
    
    
    5,096
    
    
    
    
    
    
    
    26,436Cash used in investing activities of
discontinued operations
    
    
    
    
    
    
    
    
    
    
    (2,191
    )
    
    
    
    
    
    
    (2,191
    )Cash provided by (used in) investing activities
    
    
    (1,500
    )
    
    
    22,840
    
    
    
    2,905
    
    
    
    
    
    
    
    24,245Cash flows from financing activities:Proceeds from issuance of convertible notes
    
    
    19,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,500Proceeds from issuance of common stock, net
    
    
    2,226
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,226Advances from (repayments to) parent/affiliates
    
    
    (52,714
    )
    
    
    (6,741
    )
    
    
    59,455
    
    
    
    
    
    
    
    Repayment of bank and other debt
    
    
    
    
    
    
    (9,519
    )
    
    
    (36
    )
    
    
    
    
    
    
    (9,555
    )Costs of debt issuance and other
    
    
    (4,296
    )
    
    
    
    
    
    
    (34
    )
    
    
    
    
    
    
    (4,330
    )Cash provided by (used in) financing activities
of continuing operations
    
    
    (35,284
    )
    
    
    (16,260
    )
    
    
    59,385
    
    
    
    
    
    
    
    7,841Cash provided by financing activities of
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cash provided by (used in) financing activities
    
    
    (35,284
    )
    
    
    (16,260
    )
    
    
    59,385
    
    
    
    
    
    
    
    7,841Effect of exchange rate changes on cash and cash
equivalents
    
    
    
    
    
    
    
    
    
    
    (241
    )
    
    
    
    
    
    
    (241
    )Cash provided by (used in) all activities
    
    $
    (43,724
    )
    
    $
    2,167
    
    
    $
    1,100
    
    
    $
    
    
    
    $
    (40,457
    )
 39




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 15. Subsequent Events
 Acquisition
     Related Party Relationships
  Financing Activities
 Credit Facility
  40




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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)
  OVERVIEW
 Business Description
  Business Strategy
  Focus
on managing risk.
  Focus resources in markets with the highest risk-adjusted return. North America currently
offers us the best risk-adjusted returns and the majority of our resources are focused on this
region. 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 may offer attractive
opportunities for us given mid-and long-term industry trends, and we have relevant experience
in these regions. Since August of 2006, we have exited Bolivia, Ecuador, Nigeria and
Venezuela to reduce our exposure to political and security risks and we have redeployed the
proceeds from the sale of assets in these countries to North America, where we have acquired
Midwest, a mainline pipeline constructor in Canada, and we also have acquired additional
capital equipment to participate in the financially attractive energy markets. We have
planned the Integrated Services Company, LLC (Inserv) acquisition to diversify our service offerings and to generate a more
continuous and consistent revenue stream to offset the lumpiness of pipeline construction
projects. The August 2007 Global Settlement Agreement (GSA) with Ascot, the purchaser
of our Nigeria interests, settled most of the remaining contractual issues, including working capital
adjustments, and eliminated any future obligations under the indemnity provisions of the Share
Purchase Agreement except as provided in the GSA. Maintain a prudent contract portfolio. Our current contract portfolio is comprised of
over 75 percent costreimbursable work which provides for a more equitable distribution of
risk between us and our customers. While the 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 going forward. New processes and procedures
have been implemented to rigorously evaluate the characteristics of prospective projects
including the contractual terms and conditions such as the required financial instruments,
corporate guarantees, payment terms, and project cash flows.
 41




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##### Table of Contents



 Ethical business practices. Willbros demands that all of its employees and representatives
conduct the business of the Company 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. Willbros tradition of doing the right thing and abiding by
the rule of law is reflected in its longstanding Code of Business Conduct and Ethics. The
sale of the Nigeria interests not only removed our presence from a
problematic and otherwise corrupt business environment, but we have also reduced residual risks and uncertainties related to
Nigeria through our reaching of an agreement in principle to settle the
DOJ and SEC investigations into possible
violations of the Foreign Corrupt Practices Act.
 Leverage core service expertise into additional full EPC contracts.
 Leverage core capabilities and industry reputation into broader service offering.
 Pursue financial flexibility.
 Market Demand
  42




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##### Table of Contents



EPC Engineering
 Construction EPC
  Significant Business Developments
 InServ Acquisition
   43




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##### Table of Contents



Resolution of regulatory matters
   Canada Pipeline Construction Company Acquisition
  U.S. Construction Major Contract
  Induced 6.5% Note Conversions
  Credit Facility
  44




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##### Table of Contents



Financial
Summary (continuing operations)
  Construction EPC
 Construction Engineering Engineering Construction EPC
 Depreciation and amortization Construction
 G&A
 Non-Operating
  Discontinued Operations
  Transition Services Agreement
   Global Settlement Agreement (GSA)
  
    
    A reduction to the purchase price of $25,000;
    
    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;
 45




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##### Table of Contents




    
    Ascot provided specific indemnities related to two ongoing projects that Ascot acquired
as part of the Agreement;
    
    Ascot and the Company agreed that all working capital adjustments as provided for in the
Agreement were resolved; 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 February 7, 2007 Share Purchase Agreement concerning any
breach of a covenant or any representation or warranty.
  CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  
    
    FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,
    
    FASB Staff Position No. AUG AIR-1, Accounting for Planned Major Maintenance
Activities, and
  
    
    SFAS No. 157, Fair Value Measurements,
    
    SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities.
 46




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##### Table of Contents



OTHER FINANCIAL MEASURES
 EBITDA
   Nine Months EndedSeptember 30,2007
    
    
    2006Net loss from continuing operations
    
    $
    (33,446
    )
    
    $
    (18,598
    )Interest, net
    
    
    2,119
    
    
    
    6,132Provision for income taxes
    
    
    7,793
    
    
    
    1,811Depreciation and amortization
    
    
    13,223
    
    
    
    9,180EBITDA
    
    $
    (10,311
    )
    
    $
    (1,475
    )
 BACKLOG
  September 30, 2007
    
    
    December 31, 2006Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentBacklogConstruction
    
    $
    883,365
    
    
    
    80.4
    %
    
    $
    320,461
    
    
    
    53.2
    %Engineering
    
    
    89,527
    
    
    
    8.1
    %
    
    
    92,956
    
    
    
    15.4
    %EPC
    
    
    125,992
    
    
    
    11.5
    %
    
    
    188,855
    
    
    
    31.4
    %Total, continuing operations
    
    
    1,098,884
    
    
    
    100.0
    %
    
    
    602,272
    
    
    
    100.0
    %Discontinued operations
    
    
    
    
    
    
    
    
    
    
    406,780Total backlog
    
    $
    1,098,884
    
    
    
    
    
    
    $
    1,009,052
   47




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##### Table of Contents



RESULTS OF OPERATIONS
   Three Months Ended September 30, 2007 Compared to Three Months Ended September 30, 2006
 Contract Revenue
  Three Months Ended September 30,Percent2007
    
    
    2006
    
    
    Increase
    
    
    ChangeConstruction
    
    $
    193,984
    
    
    $
    91,204
    
    
    $
    102,780
    
    
    
    112.7
    %Engineering
    
    
    25,584
    
    
    
    20,216
    
    
    
    5,368
    
    
    
    26.6
    %EPC
    
    
    27,148
    
    
    
    14,046
    
    
    
    13,102
    
    
    
    93.3
    %Total
    
    $
    246,716
    
    
    $
    125,466
    
    
    $
    121,250
    
    
    
    96.6
    %
 Construction
 Engineering
 EPC
 Contract Income
  Three Months Ended September 30,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    Percent2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    Increase
    
    
    ChangeConstruction
    
    $
    30,580
    
    
    
    15.8
    %
    
    $
    8,292
    
    
    
    9.1
    %
    
    $
    22,288
    
    
    
    268.8
    %Engineering
    
    
    6,550
    
    
    
    25.6
    %
    
    
    2,924
    
    
    
    14.5
    %
    
    
    3,626
    
    
    
    124.0
    %EPC
    
    
    2,497
    
    
    
    9.2
    %
    
    
    832
    
    
    
    5.9
    %
    
    
    1,665
    
    
    
    200.1
    %Total
    
    $
    39,627
    
    
    
    16.1
    %
    
    $
    12,048
    
    
    
    9.6
    %
    
    $
    27,579
    
    
    
    228.9
    %
 Construction
 Engineering
 EPC
 Other Operating Expenses
 Depreciation and amortization
 48




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G&A
 Government fines
 Non-Operating Items
 Interest income
 Interest expense
 Other  net
 Income tax 
 Nine Months Ended September 30, 2007 Compared to Nine Months Ended September 30, 2006
 Contract Revenue
 Construction
 Nine Months Ended September 30,Percent2007
    
    
    2006
    
    
    Increase
    
    
    ChangeConstruction
    
    $
    476,638
    
    
    $
    257,587
    
    
    $
    219,051
    
    
    
    85.0
    %Engineering
    
    
    66,040
    
    
    
    55,621
    
    
    
    10,419
    
    
    
    18.7
    %EPC
    
    
    67,490
    
    
    
    38,973
    
    
    
    28,517
    
    
    
    73.2
    %Total
    
    $
    610,168
    
    
    $
    352,181
    
    
    $
    257,987
    
    
    
    73.3
    %
 Construction
 49




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##### Table of Contents



Engineering
 EPC
 Contract Income
  Nine Months Ended September 30,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    Percent2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    Increase
    
    
    ChangeConstruction
    
    $
    48,672
    
    
    
    10.2
    %
    
    $
    19,415
    
    
    
    7.5
    %
    
    $
    29,257
    
    
    
    150.7
    %Engineering
    
    
    16,874
    
    
    
    25.6
    %
    
    
    9,023
    
    
    
    16.2
    %
    
    
    7,851
    
    
    
    87.0
    %EPC
    
    
    5,832
    
    
    
    8.6
    %
    
    
    3,115
    
    
    
    8.0
    %
    
    
    2,717
    
    
    
    87.2
    %Total
    
    $
    71,378
    
    
    
    11.7
    %
    
    $
    31,553
    
    
    
    9.0
    %
    
    $
    39,825
    
    
    
    126.2
    %
  Construction
 Engineering
 EPC
 Other Operating Expenses
 Depreciation
and amortization
 G&A
 Government fines
 Non-Operating Items
 Interest income 
 50




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Interest expense 
 Other  net
 Loss on early extinguishment of debt
 Income tax 
 LIQUIDITY AND CAPITAL RESOURCES
  Additional sources and uses of capital
 Financing of Pending Acquisition
   2007 Credit Facility
  51




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2006 Credit Facility
    
    
    A consolidated tangible net worth in an amount of not less than the sum of $116,561 plus
50 percent of consolidated net income earned in each fiscal quarter ended after December
31, 2006;
    
    A maximum senior leverage ratio of 1.00 to 1.00 for the fiscal quarter ending September
30, 2007 and for each fiscal quarter thereafter;
    
    A fixed charge coverage ratio of not less than 3.00 to 1.00, for the fiscal quarter
ended September 30, 2007, and for each quarter thereafter;
    
    A prohibition on capital expenditures (cost of assets added through purchase or capital
lease) if our liquidity falls below $50,000.
  
    
    Our consolidated tangible net worth was $151,934, which was approximately $35,373 in
excess of the tangible net worth we were required to maintain under the credit facility;
    
    We are in compliance with the maximum senior leverage ratio because we have incurred no
revolving advance or other senior debt;
    
    Our fixed charge coverage ratio was 6.17 to 1.00;
    
    Our cash balance as of September 30, 2007 was $58,709,
which allowed us to add $53,926 of fixed assets to
our balance sheet during the previous 12 months.
 
 52




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##### Table of Contents



Cash Flows
  2007
    
    2006Operating Activities
    
    $
    (22,629
    )
    
    $
    (12,717
    )Investing Activities
    
    
    66,952
    
    
    
    26,436Financing Activities
    
    
    (28,445
    )
    
    
    7,841
  Operating Activities
  
    
    a decrease in cash as a result of an increase in other
working capital of $41,669 due primarily to increased receivables as
a result of higher revenues; and
    
    an increase of $31,757 in cash generated by operations
excluding non-cash charges of $33,612.
 Investing Activities
  
    
    disposition of discontinued operations, for the nine months ended September 30, 2007
provided $105,568 of cash compared to $32,082 in the nine months ended September 30, 2006.
In 2007 the proceeds were from the sale of our Nigeria assets and operations, while in 2006
the proceeds were from the sale of the Opal gas facility and the sale of our Venezuela
assets and operations;
    
    disposition of property, plant, and equipment for the nine months ended September 30,
2007 provided $1,428 of cash compared to $8,243; and
    
    the acquisition of Midwest in 2007 used $24,154 of cash.
 Financing Activities
  
    
    $12,993 of cash used to induce the conversion of $52,450 of the 6.5% Notes;
    
    cash used in payments on capital leases of $7,507; and
    
    cash used in payments on notes payable of $8,665.
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##### Table of Contents



Capital Requirements
  
    
    We believe that we will be able to support our ongoing working capital needs through
operating cash flows as well as the availability of the 2007 Credit Facility.
    
    We expect to fund the cash portion of the acquisition of InServ in its entirety with the
proceeds from our impending public offering of common stock.
    
    We expect to use any remaining net proceeds form the public offering to acquire
additional construction equipment instrumental to completing our existing backlog of work
at the highest return available.
    
    We intend to fund the future payments that we will make to the SEC and the DOJ under the
proposed terms of our settlements in principle from operating cash flow.
 Contractual Obligations
   NEW ACCOUNTING PRONOUNCEMENTS
  54




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FORWARD-LOOKING STATEMENTS
 This Form 10-Q includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. 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 recently completed sale and
disposition of our Nigeria assets and Nigeria based operations, including without limitation,
obtaining indemnification for any losses we may experience if claims are made against any
corporate parent guarantees we provided and which remained in place subsequent to the closing;§
    
    the consequences we may encounter if our settlements in principle with the DOJ and the
SEC are finalized, including the imposition of civil or criminal fines, penalties,
disgorgement of profits, monitoring arrangements, or other sanctions that might be imposed as a result of government investigations;§
    
    the consequences we may encounter if our settlements in principle with the DOJ and the
SEC are not finalized, including the loss of eligibility to bid for
and obtain U.S.
government contracts, and other civil and criminal sanctions which may exceed the current
amount we have estimated and reserved in connection with the settlements in principle;§
    
    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;§
    
    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 and power industries;§
    
    political or social circumstances impeding the progress of our work and increasing the
cost of performance;
 
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§
    
    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;§
    
    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 factors listed elsewhere in this
Form 10-Q; 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
Part II. Other Information, Item 1A. Risk Factors of this Form 10-Q, beginning on
page 58.
 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.
 56




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
    57




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  We may continue
    to experience losses associated with our prior activities in
    Nigeria.
          Ø
    We issued parent company guarantees to our former clients in
    connection with the performance of our Nigeria contracts.
    Although the buyer will now be responsible for completing these
    projects, our guarantees will remain in force
    in varying degrees until the projects are completed. Indemnities
are in place pursuant to which the purchaser 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 against the
purchaser. The guarantees include five projects under which we
    estimate that, at December 31, 2006, there was aggregate
    remaining contract revenue of approximately $374.8 million,
    and aggregate cost to complete of approximately
    $316.0 million. At December 31, 2006, we estimated
    that only one of the contracts covered by the guarantees was in
    a loss position and have accrued for such loss in the amount of
    approximately $33.2 million on our December 31, 2006
    balance sheet. If we are required 58




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##### Table of Contents



start-up
  Ø
    Although our current activities in Nigeria are confined to
    providing transition services to the new owner, we may find it
    difficult to provide those services to the buyer if we
    experience high levels of employee turnover or for other
    reasons. If we are unable to provide adequate transition
    services or if the buyer is otherwise unable to perform under
    our contracts that were in effect as of the closing date, we may
    be required to perform under our parent company guarantees
    discussed above.Ø
    We may experience difficulty redeploying certain equipment to
    our continuing operations that we previously leased for our
    Nigeria projects and that was not conveyed to the buyer at
    closing.  We have reached
    agreements in principle with the DOJ and the SEC to settle
    investigations involving possible violations of the FCPA and
    possible violations of the Securities Act of 1933 and the
    Securities Exchange Act of 1934. If a final settlement is not
    approved, our liquidity position and financial results could be
    materially adversely affected.
  and/or




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The terms of
    final settlements with the DOJ and SEC may negatively impact our
    ongoing operations.
      Ø
    our supervision, training and retention of competent employees;Ø
    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; andØ
    our continuing management of our agents and business partners.




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Special risks
    associated with doing business in highly corrupt environments
    may adversely affect our business.
    Our management
    has concluded that we did not maintain effective internal
    controls over financial reporting as of December 31, 2006,
    2005 and 2004. We believe that the material weaknesses reported
    as of December 31, 2006 were eliminated in February 2007 as
    a result of the sale of our Nigerian assets and operations.
    However, our inability to remediate these material weaknesses
    prior to February 2007, or any control deficiencies that we may
    discover in the future, could adversely affect our ability to
    report our financial condition and results of operations
    accurately and on a timely basis. As a result, our business,
    operating results and liquidity could be harmed.
  Form 10-K
  Ø
    Nigeria accounting: During the fourth quarter of 2006, we
    determined that a material weakness in our internal controls
    over financial reporting existed related to the Companys
    management control environment over the accounting for our
    Nigeria operations. This weakness in management control led to
    the inability to adequately perform various control functions
    including supervision over and consistency of: inventory
    management; petty cash disbursements; accounts payable
    disbursement approvals; account reconciliations; and review of
    timekeeping records. This material weakness resulted primarily
    from our inability to maintain a consistent and stable internal
    control environment over our Nigeria operations in the fourth
    quarter of 2006.Ø
    Nigeria project controlsestimate to complete: A material
    weakness existed related to controls over the Nigeria project
    reporting. This weakness existed throughout 2006 and is a
    continuation of a material weakness reported in our 2005
    Form 10-K.
    The weakness primarily impacted one large Nigeria project with a
    total contract value of approximately $165.0 million, for
    which cost estimates were not updated timely in the fourth
    quarter of 2006 due to insufficient measures being taken to
    independently verify and update reliable cost estimates. This
    material weakness specifically resulted in material changes to
    revenue and cost of sales during the preparation of our year-end
    financial statements by our accounting staff prior to their
    issuance.    Ø
    reviewing and monitoring our accounting department structure and
    organization, both in terms of size and expertise;




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##### Table of Contents



Ø
    hiring additional senior accounting personnel at our corporate
    administrative offices;Ø
    increasing our supervision of accounting personnel;Ø
    recruiting candidates in order to expeditiously fill vacancies
    in our accounting, finance and project management
    functions; andØ
    developing documentation and consistent execution of controls
    over our financial statement close process.    Ø
    initiating efforts to expand operations and accounting
    supervisory controls over consistency in the project reporting
    process and documentation for Nigeria contracts through the
    addition of supervisory personnel; andØ
    developing more standardized documentation related to project
    management reporting and management review processes.    Our business is
    highly dependent upon the level of capital expenditures by oil,
    gas and power companies on infrastructure.
    Ø
    current and projected oil, gas and power prices;Ø
    the demand for electricity;Ø
    the abilities of oil, gas and power companies to generate,
    access and deploy capital;Ø
    exploration, production and transportation costs;Ø
    the discovery rate of new oil and gas reserves;Ø
    the sale and expiration dates of oil and gas leases and
    concessions;Ø
    regulatory restraints on the rates that power companies may
    charge their customers;Ø
    local and international political and economic conditions;Ø
    the ability or willingness of host country government entities
    to fund their budgetary commitments; and




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##### Table of Contents



Ø
    technological advances.  If we are not
    able to renegotiate our surety bond lines, our ability to
    operate may be significantly restricted.
  case-by-case
  Our international
    operations are subject to political and economic risks of
    developing countries.
      Ø
    civil uprisings, riots and war, which can make it impractical to
    continue operations, adversely affect both budgets and schedules
    and expose us to losses;Ø
    repatriating foreign currency received in excess of local
    currency requirements and converting it into dollars or other
    fungible currency;Ø
    exchange rate fluctuations, which can reduce the purchasing
    power of local currencies and cause our costs to exceed our
    budget, reducing our operating margin in the affected country;Ø
    expropriation of assets, by either a recognized or unrecognized
    foreign government, which can disrupt our business activities
    and create delays and corresponding losses;Ø
    availability of suitable personnel and equipment, which can be
    affected by government policy, or changes in policy, which limit
    the importation of skilled craftsmen or specialized equipment in
    areas where local resources are insufficient;Ø
    government instability, which can cause investment in capital
    projects by our potential customers to be withdrawn or delayed,
    reducing or eliminating the viability of some markets for our
    services;Ø
    decrees, laws, regulations, interpretations and court decisions
    under legal systems, which are not always fully developed and
    which may be retroactively applied and cause us to incur
    unanticipated
    and/or
    unrecoverable costs as well as delays which may result in real
    or opportunity costs; andØ
    terrorist attacks such as those which occurred on
    September 11, 2001 in the United States, which could impact
    insurance rates, insurance coverages and the level of economic
    activity, and produce instability in financial markets.




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##### Table of Contents



We may be
    adversely affected by a concentration of business in a
    particular country.
    Our backlog is
    subject to unexpected adjustments and cancellations and is,
    therefore, an uncertain indicator of our future
    earnings.
    Our failure to
    recover adequately on claims against project owners for payment
    could have a material adverse effect on us.
    Our business is
    dependent on a limited number of key clients.




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Our use of
    fixed-price contracts could adversely affect our operating
    results.
    Percentage-of-completion
    method of accounting for contract revenue may result in material
    adjustments that would adversely affect our operating
    results.
    Terrorist attacks
    and war or risk of war may adversely affect our results of
    operations, our ability to raise capital or secure insurance, or
    our future growth.
    Our operations
    are subject to a number of operational risks.




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We may become
    liable for the obligations of our joint ventures and our
    subcontractors.
      Governmental
    regulations could adversely affect our business.
      Ø
    expropriation or nationalization decrees;Ø
    confiscatory tax systems;Ø
    primary or secondary boycotts directed at specific countries or
    companies;Ø
    embargoes;Ø
    extensive import restrictions or other trade barriers;Ø
    mandatory sourcing and local participation rules;




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Ø
    oil, gas or power price regulation; andØ
    unrealistically high labor rate and fuel price regulation.    Our strategic
    plan relies in part on acquisitions to sustain our growth.
    Acquisitions of other companies present certain risks and
    uncertainties.
    Ø
    difficulties relating to combining previously separate
    businesses;Ø
    diversion of managements attention from day-to-day
    operations;Ø
    the assumption of liabilities of an acquired business, including
    unforeseen liabilities;Ø
    failure to realize anticipated benefits, such as cost savings
    and revenue enhancements;Ø
    potentially substantial transaction costs associated with
    business combinations;Ø
    difficulties relating to assimilating the personnel, services
    and systems of an acquired business and to integrating marketing
    and other operational capabilities; andØ
    difficulties in applying and integrating our system of internal
    controls to an acquired business.    Our operations
    expose us to potential environmental liabilities.




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##### Table of Contents



Our ability to
    increase our revenues and operating profits is partly dependent
    on our ability to secure additional specialized pipeline
    construction equipment, either through lease or purchase. The
    availability of such equipment in the current market is highly
    limited.
    Our industry is
    highly competitive, which could impede our growth.
    Our operating
    results could be adversely affected if our
    non-US
    operations became taxable in the United States.
  non-US subsidiaries
  We are dependent
    upon the services of our executive management.




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  MaximumTotal Number
    
    
    Number (orof Shares
    
    
    ApproximatePurchased as
    
    
    Dollar Value) ofPart of
    
    
    Shares That MayPublicly
    
    
    Yet BeTotal Number
    
    
    Average
    
    
    Announced
    
    
    Purchasedof Shares
    
    
    Price Paid
    
    
    Plans or
    
    
    Under the PlansPurchased
    
    
    Per Share
    
    
    Programs
    
    
    or ProgramsJuly 1, 2007  July 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    August 1, 2007  August 31, 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    September 1, 2007  September 30, 2007
    
    
    269
    (1)
    
    
    33.86
    (2)
    
    
    
    
    
    
    Total
    
    
    269
    
    
    $
    33.86
    
    
    
    
    
    
    
    
 
 (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
  69




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##### Table of Contents



Item 5. Other Information
  
 Item 6. Exhibits
  10.1
    
    Global Settlement Agreement dated as of August 15, 2007, among Ascot Offshore Nigeria
Limited, Willbros Group, Inc., Willbros International Services (Nigeria) Limited and
Berkeley Group PLC.10.2
    
    Agreement to Terminate Consulting Services Agreement dated as of September 11, 2007,
between Willbros USA, Inc. and Michael F. Curran.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.
 
 70




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##### Table of Contents



SIGNATURE
  WILLBROS GROUP, INC.Date: October 31, 2007
    By:
    /s/ Van A. WelchVan A. WelchSenior Vice President and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer) 71




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber
    
    Description10.1
    
    
    Global Settlement Agreement dated as of August 15, 2007, among Ascot Offshore Nigeria
Limited, Willbros Group, Inc., Willbros International Services (Nigeria) Limited and
Berkeley Group PLC.10.2
    
    
    Agreement to Terminate Consulting Services Agreement dated as of September 11, 2007,
between Willbros USA, Inc. and Michael F. Curran.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.
 72