##### Table of Contents



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




---



##### 



WILLBROS GROUP, INC.
FORM 10-Q
FOR QUARTER ENDED SEPTEMBER 30, 2008
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsCondensed Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and
December 31, 2007
    
    
    3Condensed Consolidated Statements of Operations (Unaudited) for the three
months and nine months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statement of Stockholders Equity and Comprehensive
Income (Loss) (Unaudited) for the nine months ended September 30, 2008
    
    
    5Condensed Consolidated Statements of Cash Flows (Unaudited) for the
nine months ended 
September 30, 2008 and 2007
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    39Item 1A . Risk Factors
    
    
    39Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3. Defaults upon Senior Securities
    
    
    41Item 4. Submission of Matters to a Vote of Security Holders
    
    
    41Item 5. Other Information
    
    
    41Item 6. Exhibits
    
    
    41SIGNATURE
    
    
    42EXHIBIT INDEX
    
    
    43EX-31.1EX-31.2EX-32.1EX-32.2
  2




---



##### 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 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    127,552
    
    
    $
    92,886Accounts receivable, net of allowance of $1,217 and $1,108
    
    
    266,985
    
    
    
    251,746Contract cost and recognized income not yet billed
    
    
    81,815
    
    
    
    49,233Prepaid expenses
    
    
    14,683
    
    
    
    7,555Parts and supplies inventories
    
    
    3,381
    
    
    
    2,902Assets held for sale
    
    
    13,607
    
    
    
    Assets of discontinued operations
    
    
    2,673
    
    
    
    3,211Total current assets
    
    
    510,696
    
    
    
    407,533Property, plant and equipment, net of accumulated depreciation
of $118,032 and $97,268
    
    
    159,186
    
    
    
    159,766Goodwill
    
    
    143,653
    
    
    
    143,241Other intangible assets
    
    
    42,378
    
    
    
    50,206Deferred tax assets
    
    
    7,227
    
    
    
    7,769Other assets
    
    
    7,882
    
    
    
    10,898Total assets
    
    $
    871,022
    
    
    $
    779,413LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligations
    
    $
    12,880
    
    
    $
    12,132Notes payable and current portion of other long-term debt
    
    
    4,275
    
    
    
    1,040Current portion of government obligations
    
    
    6,575
    
    
    
    8,075Accounts payable and accrued liabilities
    
    
    200,200
    
    
    
    156,342Contract billings in excess of cost and recognized income
    
    
    21,943
    
    
    
    22,868Accrued income taxes
    
    
    1,131
    
    
    
    4,750Liabilities of discontinued operations
    
    
    637
    
    
    
    978Total current liabilities
    
    
    247,641
    
    
    
    206,1852.75% convertible senior notes
    
    
    59,357
    
    
    
    68,0006.5% senior convertible notes
    
    
    32,050
    
    
    
    32,050Capital lease obligations
    
    
    36,683
    
    
    
    39,090Long-term portion of government obligations
    
    
    13,150
    
    
    
    24,225Other long-term debt
    
    
    
    
    
    
    34Deferred tax liabilities
    
    
    9,345
    
    
    
    6,879Long-term liability for unrecognized tax benefits
    
    
    6,154
    
    
    
    6,612Other liabilities
    
    
    237
    
    
    
    237Total liabilities
    
    
    404,617
    
    
    
    383,312Contingencies and commitments (Note 12)Stockholders equity:Class A preferred stock, par value $.01 per share, 1,000,000
shares authorized, none issued
    
    
    
    
    
    
    Common stock, par value $.05 per share, 70,000,000 shares
authorized; 39,570,886 shares issued (38,276,545 at
December 31, 2007)
    
    
    1,978
    
    
    
    1,913Capital in excess of par value
    
    
    575,591
    
    
    
    556,223Accumulated deficit
    
    
    (114,664
    )
    
    
    (175,936
    )Treasury stock at cost, 372,803 shares (222,839 at
December 31, 2007)
    
    
    (8,084
    )
    
    
    (3,298
    )Accumulated other comprehensive income
    
    
    11,584
    
    
    
    17,199Total stockholders equity
    
    
    466,405
    
    
    
    396,101Total liabilities and stockholders equity
    
    $
    871,022
    
    
    $
    779,413
  3




---



##### 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 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Contract revenue
    
    $
    490,651
    
    
    $
    246,716
    
    
    $
    1,450,002
    
    
    $
    610,168Operating expenses:Contract
    
    
    430,192
    
    
    
    212,237
    
    
    
    1,256,680
    
    
    
    550,995Amortization of intangibles
    
    
    2,586
    
    
    
    
    
    
    
    7,828
    
    
    
    General and administrative
    
    
    29,138
    
    
    
    17,757
    
    
    
    85,939
    
    
    
    43,313Government fines
    
    
    
    
    
    
    (2,000
    )
    
    
    
    
    
    
    22,000461,916
    
    
    
    227,994
    
    
    
    1,350,447
    
    
    
    616,308Operating income (loss)
    
    
    28,735
    
    
    
    18,722
    
    
    
    99,555
    
    
    
    (6,140
    )Other income (expense):Interest income
    
    
    799
    
    
    
    1,029
    
    
    
    2,592
    
    
    
    4,433Interest expense
    
    
    (2,484
    )
    
    
    (2,071
    )
    
    
    (7,671
    )
    
    
    (6,552
    )Other, net
    
    
    58
    
    
    
    (1,327
    )
    
    
    204
    
    
    
    (2,019
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,375
    )(1,627
    )
    
    
    (2,369
    )
    
    
    (4,875
    )
    
    
    (19,513
    )Income (loss) from continuing operations
before income taxes
    
    
    27,108
    
    
    
    16,353
    
    
    
    94,680
    
    
    
    (25,653
    )Provision for income taxes
    
    
    8,057
    
    
    
    6,081
    
    
    
    36,450
    
    
    
    7,793Net income (loss) from continuing
operations
    
    
    19,051
    
    
    
    10,272
    
    
    
    58,230
    
    
    
    (33,446
    )Income (loss) from discontinued operations
net of provision for income taxes
    
    
    1,219
    
    
    
    (9,126
    )
    
    
    3,042
    
    
    
    (21,494
    )Net income (loss)
    
    $
    20,270
    
    
    $
    1,146
    
    
    $
    61,272
    
    
    $
    (54,940
    )Basic income (loss) per common share:Income (loss) from continuing operations
    
    $
    0.50
    
    
    $
    0.36
    
    
    $
    1.52
    
    
    $
    (1.22
    )Income (loss) from discontinued operations
    
    
    0.03
    
    
    
    (0.32
    )
    
    
    0.08
    
    
    
    (0.78
    )Net income (loss)
    
    $
    0.53
    
    
    $
    0.04
    
    
    $
    1.60
    
    
    $
    (2.00
    )Diluted income (loss) per common share:Income (loss) from continuing operations
    
    $
    0.46
    
    
    $
    0.32
    
    
    $
    1.41
    
    
    $
    (1.22
    )Income (loss) from discontinued operations
    
    
    0.03
    
    
    
    (0.26
    )
    
    
    0.07
    
    
    
    (0.78
    )Net income (loss)
    
    $
    0.49
    
    
    $
    0.06
    
    
    $
    1.48
    
    
    $
    (2.00
    )Weighted average number of common shares
outstanding:Basic
    
    
    38,313,997
    
    
    
    28,804,907
    
    
    
    38,236,508
    
    
    
    27,421,927Diluted
    
    
    43,803,235
    
    
    
    34,844,482
    
    
    
    43,864,307
    
    
    
    27,421,927
  4




---



##### Table of Contents



WILLBROS GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
 AND COMPREHENSIVE INCOME (LOSS)
 (In thousands, except share and per share amounts)
 (Unaudited)
 AccumulatedOtherCapital in
    
    
    
    
    
    
    
    
    
    
    Comprehen-
    
    
    TotalCommon Stock
    
    
    Excess of
    
    
    Accumulated
    
    
    Treasury
    
    
    sive Income
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Par Value
    
    
    Deficit
    
    
    Stock
    
    
    (Loss)
    
    
    EquityBalance, December 31, 2007
    
    
    38,276,545
    
    
    $
    1,913
    
    
    $
    556,223
    
    
    $
    (175,936
    )
    
    $
    (3,298
    )
    
    $
    17,199
    
    
    $
    396,101Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61,272
    
    
    
    
    
    
    
    
    
    
    
    61,272Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,615
    )
    
    
    (5,615
    )Total comprehensive
income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    55,657Deferred compensation expense
    
    
    
    
    
    
    
    
    
    
    7,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,080Deferred compensation tax
benefit
    
    
    
    
    
    
    
    
    
    
    3,277
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,277Deferred restricted stock rights
issuance
    
    
    225,000
    
    
    
    11
    
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock grants
    
    
    552,159
    
    
    
    28
    
    
    
    (28
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Vesting of restricted
stock rights
    
    
    20,269
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Additions to treasury stock,
vesting and forfeitures
of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,786
    )
    
    
    
    
    
    
    (4,786
    )Exercise of stock options
    
    
    53,000
    
    
    
    3
    
    
    
    681
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    684Additional costs of public offering
    
    
    
    
    
    
    
    
    
    
    (251
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (251
    )Stock issued on conversion of
2.75% convertible senior notes
    
    
    443,913
    
    
    
    22
    
    
    
    8,621
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,643Balance, September 30, 2008
    
    
    39,570,886
    
    
    $
    1,978
    
    
    $
    575,591
    
    
    $
    (114,664
    )
    
    $
    (8,084
    )
    
    $
    11,584
    
    
    $
    466,405
  5




---



##### Table of Contents



WILLBROS GROUP, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands, except share and per share amounts)
 (Unaudited)
 Nine MonthsEnded September 30,2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    61,272
    
    
    $
    (54,940
    )Reconciliation of net income (loss) to net cash provided by operating activities:(Income) loss from discontinued operations
    
    
    (3,042
    )
    
    
    21,494Depreciation and amortization
    
    
    33,988
    
    
    
    13,223Amortization of deferred compensation, net
    
    
    7,080
    
    
    
    3,010Amortization of debt issuance costs
    
    
    1,189
    
    
    
    1,557Deferred compensation tax benefit
    
    
    (3,277
    )
    
    
    Deferred income tax provision
    
    
    6,885
    
    
    
    1,063Loss (gain) on sales of property, plant and equipment
    
    
    206
    
    
    
    (716
    )Provision for bad debts
    
    
    1,215
    
    
    
    181Equity in joint ventures
    
    
    (123
    )
    
    
    Government fines
    
    
    
    
    
    
    22,000Loss on early extinguishment of debt
    
    
    
    
    
    
    15,375Changes in operating assets and liabilities:Accounts receivable, net
    
    
    (19,931
    )
    
    
    (36,923
    )Contract cost and recognized income not yet billed
    
    
    (35,405
    )
    
    
    (15,226
    )Prepaid expenses
    
    
    5,706
    
    
    
    11,239Parts and supplies inventories
    
    
    (512
    )
    
    
    (704
    )Other assets
    
    
    758
    
    
    
    (879
    )Accounts payable and accrued liabilities
    
    
    45,188
    
    
    
    3,466Contract billings in excess of cost and recognized income
    
    
    (783
    )
    
    
    (6,772
    )Accrued income taxes
    
    
    (3,590
    )
    
    
    608Long-term liability for unrecognized tax benefits
    
    
    (330
    )
    
    
    315Cash provided by (used in) operating activities of continuing
operations
    
    
    96,494
    
    
    
    (22,629
    )Cash provided by operating activities of
discontinued operations
    
    
    3,531
    
    
    
    2,980Cash provided by (used in) operating activities
    
    
    100,025
    
    
    
    (19,649
    )Cash flows from investing activities:Purchases of property, plant and equipment
    
    
    (28,122
    )
    
    
    (15,890
    )Rebates from purchases of property, plant and equipment
    
    
    1,915
    
    
    
    Proceeds from sales of property, plant and equipment
    
    
    1,418
    
    
    
    1,428Acquisition of subsidiaries
    
    
    846
    
    
    
    (24,154
    )Proceeds from the sale of discontinued operations, net
    
    
    
    
    
    
    105,568Cash provided by (used in) investing activities of continuing
operations
    
    
    (23,943
    )
    
    
    66,952Cash used in investing activities of discontinued operations
    
    
    
    
    
    
    Cash provided by (used in) investing activities
    
    
    (23,943
    )
    
    
    66,952Cash flows from financing activities:Payments on capital leases
    
    
    (17,550
    )
    
    
    (7,507
    )Payments of government fines
    
    
    (12,575
    )
    
    
    Repayment of notes payable
    
    
    (9,550
    )
    
    
    (8,665
    )Acquisition of treasury stock
    
    
    (4,786
    )
    
    
    (513
    )Deferred compensation tax benefit
    
    
    3,277
    
    
    
    Proceeds from exercise of stock options
    
    
    684
    
    
    
    1,519Additional costs of public offering of common stock
    
    
    (251
    )
    
    
    Costs of debt issues
    
    
    (166
    )
    
    
    (286
    )Loss on early extinguishment of debt
    
    
    
    
    
    
    (12,993
    )Cash used in financing activities of continuing operations
    
    
    (40,917
    )
    
    
    (28,445
    )Cash used in financing activities of discontinued operations
    
    
    
    
    
    
    Cash used in financing activities
    
    
    (40,917
    )
    
    
    (28,445
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (499
    )
    
    
    2,208Cash provided by all activities
    
    
    34,666
    
    
    
    21,066Cash and cash equivalents, beginning of period
    
    
    92,886
    
    
    
    37,643Cash and cash equivalents, end of period
    
    $
    127,552
    
    
    $
    58,709
 6




---



##### Table of Contents



WILLBROS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except share and per share amounts)
(Unaudited)
 Nine MonthsEnded September 30,2008
    
    2007Supplemental disclosures of cash flow information:Cash paid for interest (including discontinued operations)
    
    $
    6,287
    
    
    $
    5,659Cash paid for income taxes (including discontinued operations)
    
    $
    34,651
    
    
    $
    8,438Supplemental non-cash investing and financing transactions:Equipment and property obtained by capital leases
    
    $
    17,863
    
    
    $
    29,780Prepaid insurance obtained by note payable
    
    $
    12,754
    
    
    $
    10,051Common stock issued for conversion of 2.75% convertible senior notes
    
    $
    8,643
    
    
    $
    Deposit applied to capital lease obligation
    
    $
    1,432
    
    
    $
    Deferred government obligation payments
    
    $
    
    
    
    $
    32,300
  7




---



##### Table of Contents



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




---



##### Table of Contents



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




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 3. Contracts in Progress (continued)
   September 30,
    
    
    December 31,2008
    
    
    2007Cost incurred on contracts in progress
    
    $
    1,088,970
    
    
    $
    720,799Recognized income
    
    
    140,789
    
    
    
    74,2281,229,759
    
    
    
    795,027Progress billings and advance payments
    
    
    (1,169,887
    )
    
    
    (768,662
    )$
    59,872
    
    
    $
    26,365Contract cost and recognized income not yet billed
    
    $
    81,815
    
    
    $
    49,233Contract billings in excess of cost and recognized income
    
    
    (21,943
    )
    
    
    (22,868
    )$
    59,872
    
    
    $
    26,365
  4. Goodwill and Other Intangible Assets
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    ConsolidatedBalance as of December 31, 2007
    
    $
    12,818
    
    
    $
    130,423
    
    
    $
    143,241Purchase price adjustments
    
    
    (581
    )
    
    
    1,095
    
    
    
    514Translation adjustments and other
    
    
    (102
    )
    
    
    
    
    
    
    (102
    )Balance as of September 30, 2008
    
    $
    12,135
    
    
    $
    131,518
    
    
    $
    143,653
   CustomerRelationships
    
    
    Backlog
    
    
    TotalGross carrying amount
    
    $
    40,500
    
    
    $
    10,500
    
    
    $
    51,000Less: accumulated amortization
    
    
    (2,791
    )
    
    
    (5,831
    )
    
    
    (8,622
    )Total amortizable intangible assets, net
    
    $
    37,709
    
    
    $
    4,669
    
    
    $
    42,378Weighted average remaining amortization period
    
    11.3 yrs

        
    0.7 yrs
 Downstream O&G
 10




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 4. Goodwill and Other Intangible Assets (continued)
  Fiscal year:2008
    
    $
    2,5882009
    
    
    6,2682010
    
    
    3,3522011
    
    
    3,3522012
    
    
    3,3522013
    
    
    3,352Thereafter
    
    
    20,114Total amortization
    
    $
    42,378
 5. Government Obligations
    6. Long-term Debt
  September 30,
    
    
    December 31,2008
    
    
    2007Capital lease obligations
    
    $
    49,563
    
    
    $
    51,2222.75% convertible senior notes
    
    
    59,357
    
    
    
    68,0006.5% senior convertible notes
    
    
    32,050
    
    
    
    32,050Other long-term debt
    
    
    49
    
    
    
    992007 Credit Facility
    
    
    
    
    
    
    Total long-term debt
    
    
    141,019
    
    
    
    151,371Less: current portion
    
    
    (12,929
    )
    
    
    (12,197
    )Long-term debt, net
    
    $
    128,090
    
    
    $
    139,174
 2007 Credit Facility
  11




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 6. Long-term Debt (continued)
    
    
    A minimum net worth in an amount of not less than the sum of $223,819 plus 50 percent of
consolidated net income earned in each fiscal quarter ended after September 30, 2008 plus
adjustments for certain equity transactions;
    
    A maximum leverage ratio of 2.25 to 1.00 for the fiscal quarter ending September 30,
2008 and one fiscal quarter thereafter and a maximum leverage ratio of 2.00 to 1.00 for
each fiscal quarter ending after December 31, 2008;
    
    A minimum fixed charge coverage ratio of not less than 3.25 to 1.00 for the fiscal
quarter ending September 30, 2008 and one fiscal quarter thereafter and a fixed charge
ratio of not less than 3.50 to 1.00 for each fiscal quarter ending after December 31, 2008;
and
    
    If the Companys liquidity during any fiscal quarter falls below $35,000, a maximum
capital expenditure ratio of 1.50 to 1.00 (cost of assets added through purchase or capital
lease) for such fiscal quarter and for each of the three quarters thereafter.
   6.5% Senior Convertible Notes
      12




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 6. Long-term Debt (continued)
 2.75% Convertible Senior Notes
     Capital Leases
   September 30,
    
    
    December 31,2008
    
    
    2007Construction equipment
    
    $
    60,413
    
    
    $
    56,171Autos, trucks and trailers
    
    
    4,458
    
    
    
    4,282Furniture and office equipment
    
    
    
    
    
    
    535Total assets held under capital lease
    
    
    64,871
    
    
    
    60,988Less: accumulated depreciation
    
    
    (14,968
    )
    
    
    (9,251
    )Net assets under capital lease
    
    $
    49,903
    
    
    $
    51,737
 7. Income (Loss) Per Share
  13




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 7. Income (Loss) Per Share (continued)
  Three Months
    
    
    Nine MonthsEnded September 30,
    
    
    Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss) from continuing operations (numerator
for basic calculation)
    
    $
    19,051
    
    
    $
    10,272
    
    
    $
    58,230
    
    
    $
    (33,446
    )Add: Interest and debt issuance costs amortization
associated with convertible notes
    
    
    1,129
    
    
    
    780
    
    
    
    3,642
    
    
    
    Net income (loss) from continuing operations applicable
to common shares (numerator for diluted calculation)
    
    $
    20,180
    
    
    $
    11,052
    
    
    $
    61,872
    
    
    $
    (33,446
    )Weighted average number of common shares
outstanding for basic income (loss) per share
    
    
    38,313,997
    
    
    
    28,804,907
    
    
    
    38,236,508
    
    
    
    27,421,927Weighted average number of potentially dilutive
common shares outstanding
    
    
    5,489,238
    
    
    
    6,039,575
    
    
    
    5,627,799
    
    
    
    Weighted average number of common shares
outstanding for diluted income (loss) per share
    
    
    43,803,235
    
    
    
    34,844,482
    
    
    
    43,864,307
    
    
    
    27,421,927Income (loss) per common share from continuing
operations:Basic
    
    $
    0.50
    
    
    $
    0.36
    
    
    $
    1.52
    
    
    $
    (1.22
    )Diluted
    
    $
    0.46
    
    
    $
    0.32
    
    
    $
    1.41
    
    
    $
    (1.22
    )
  Nine MonthsEnded September 30,2008
    
    
    20072.75% Convertible senior notes
    
    
    
    
    
    
    3,595,2776.5% Senior convertible notes
    
    
    
    
    
    
    1,825,589Stock options
    
    
    
    
    
    
    686,750Warrants to purchase common stock
    
    
    
    
    
    
    558,354Restricted stock and restricted stock rights
    
    
    
    
    
    
    612,637
    
    
    
    7,278,607
  8. Segment Information
 Upstream O&G, Downstream O&G Engineering.
 14




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 8. Segment Information (continued)
   Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    342,064
    
    
    $
    86,249
    
    
    $
    62,338
    
    
    $
    490,651Operating expenses
    
    
    325,036
    
    
    
    81,526
    
    
    
    55,354
    
    
    
    461,916Operating income
    
    $
    17,028
    
    
    $
    4,723
    
    
    $
    6,984
    
    
    
    28,735Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,627
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,057Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,051Income from discontinued operations net of
provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,219Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    20,270
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    196,554
    
    
    $
    
    
    
    $
    50,162
    
    
    $
    246,716Operating expenses
    
    
    183,121
    
    
    
    
    
    
    
    46,873
    
    
    
    229,994Government fines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,000
    )Operating income
    
    $
    13,433
    
    
    $
    
    
    
    $
    3,289
    
    
    
    18,722Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,369
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,081Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,272Loss from discontinued operations net of
provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,126
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,146
  UpstreamO&G
    
    
    Downstream O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    982,836
    
    
    $
    278,995
    
    
    $
    188,171
    
    
    $
    1,450,002Operating expenses
    
    
    925,044
    
    
    
    260,223
    
    
    
    165,180
    
    
    
    1,350,447Operating income
    
    $
    57,792
    
    
    $
    18,772
    
    
    $
    22,991
    
    
    
    99,555Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,875
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,450Net income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,230Income from discontinued operations net of
provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,042Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    61,272
 15




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 8. Segment Information (continued)
  Upstream
    
    
    DownstreamO&G
    
    
    O&G
    
    
    Engineering
    
    
    ConsolidatedRevenue
    
    $
    482,104
    
    
    $
    
    
    
    $
    128,064
    
    
    $
    610,168Operating expenses
    
    
    475,743
    
    
    
    
    
    
    
    118,565
    
    
    
    594,308Government fines
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,000Operating income (loss)
    
    $
    6,361
    
    
    $
    
    
    
    $
    9,499
    
    
    
    (6,140
    )Other expense, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,513
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,793Net loss from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,446
    )Loss from discontinued operations net of
provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,494
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (54,940
    )
  September
    
    
    December 31,30, 2008
    
    
    2007Upstream O&G
    
    $
    423,661
    
    
    $
    369,255Downstream O&G
    
    
    138,914
    
    
    
    123,707Engineering
    
    
    51,352
    
    
    
    50,286Corporate
    
    
    254,422
    
    
    
    232,954Discontinued operations
    
    
    2,673
    
    
    
    3,211Total segment assets
    
    $
    871,022
    
    
    $
    779,413
 9. Stockholders Equity
  Stockholder Rights Plan
     Stock Ownership Plans
  16




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 9. Stockholders Equity (continued)
     WeightedNumber of
    
    
    AverageOptions
    
    
    Exercise PriceOutstanding at January 1, 2008
    
    
    418,750
    
    
    $
    14.96Granted
    
    
    
    
    
    
    Exercised
    
    
    53,000
    
    
    
    12.90Forfeited or expired
    
    
    31,000
    
    
    
    13.36Outstanding at September 30, 2008
    
    
    334,750
    
    
    $
    15.44Exercisable at September 30, 2008
    
    
    228,916
    
    
    $
    14.07
    WeightedAverage Grant-Shares
    
    
    Date Fair ValueNonvested, January 1, 2008
    
    
    130,834
    
    
    $
    6.86Granted
    
    
    
    
    
    
    Vested
    
    
    15,000
    
    
    
    7.44Forfeited or expired
    
    
    10,000
    
    
    
    5.65Nonvested, September 30, 2008
    
    
    105,834
    
    
    $
    6.89
 17




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 9. Stockholders Equity (continued)
  WeightedNumber of
    
    
    Average Grant-RSUs
    
    
    Date Fair ValueOutstanding at January 1, 2008
    
    
    548,688
    
    
    $
    20.89Granted
    
    
    635,314
    
    
    
    38.24Vested
    
    
    145,489
    
    
    
    20.30Forfeited
    
    
    81,879
    
    
    
    27.84Outstanding September 30, 2008
    
    
    956,634
    
    
    $
    31.91
   Warrants to Purchase Common Stock
  10. Income Taxes
  11. Foreign Exchange Risk
  12. Contingencies, Commitments and Other Circumstances
 Commitments
 Resolution of criminal and regulatory matters
  18




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 12. Contingencies, Commitments and Other Circumstances (continued)
    
    
    The six counts include conspiracy to violate the FCPA, violations of the FCPAs
anti-bribery provisions and violations of the FCPAs books-and-records provisions. WGI and
WII face prosecution by the DOJ for the charges contained in the Information, and possibly
other charges as well, if they fail to comply with the DPA.
    
    The DPA requires, for the three-year term of the DPA, continued full cooperation with
the DOJ in its investigation; continued implementation of a compliance and ethics program
to prevent and detect violations of the FCPA and other anti-corruption laws; and continued
review of existing internal controls, policies and procedures in order to ensure that WGI
and WII maintain adequate controls and a rigorous anti-corruption compliance code.
    
    The DPA also requires WGI and WII, at their expense, to engage an independent monitor
for three years to assess and make recommendations about their compliance with the DPA. The
independent monitor selection process is now underway with the DOJ having taken under
consideration the candidate proposed by the Company.
    
    Provided that WGI and WII comply with the DPA, the DOJ has agreed not to prosecute WGI
or WII based on the conduct described in the DPA and to move to dismiss the Information
after three years.
    
    As part of the DPA, the Company will pay $22,000 in fines in four installments,
consisting of the $10,000 payment made at signing on May 14, 2008, and $4,000 annually for
three years thereafter, with no interest due on the unpaid amounts.
  
    
    The SEC filed in the Court a Complaint (the SEC Complaint) and a proposed Agreed Final
Judgment against the Company (the Judgment). Without admitting or denying the allegations
in the SEC Complaint, the Company consented to the filing of the SEC Complaint and entry of
the Judgment to resolve the SECs investigation. The SEC Complaint alleges civil violations
of the FCPAs anti-bribery provisions, the FCPAs books-and-records and internal control
provisions and various antifraud provisions of the Securities Act and the Exchange Act.
Since approved by the Court, the Judgment now permanently enjoins the Company from
violating the FCPAs anti-bribery, books-and-records, and internal control provisions and
certain antifraud provisions of the Securities Act and the Exchange Act.
    
    The Judgment requires the Company to pay $8,900 for disgorgement of profits and $1,400
of pre-judgment interest. The disgorgement and pre-judgment interest are payable in four
equal installments of $2,575, first on signing, and annually for three years thereafter.
The first payment was made at signing on May 14, 2008. Post-judgment interest will be
payable on the outstanding balance of $7,725. In January 2008, the Company deposited the
first installment payment of $2,575 into an escrow account, as required by the SEC.
   Other
  19




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 12. Contingencies, Commitments and Other Circumstances (continued)
  Other Circumstances
     13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement
 Strategic Decisions
  20




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Nigeria Assets and Nigeria-Based Operations
 Share Purchase Agreement
       21




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Letters of Credit
  Transition Services Agreement
  Residual Equipment in Nigeria
  Insurance Recovery
  22




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Results of Discontinued Operations
  Three Months Ended September 30, 2008DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    418
    
    
    $
    418Operating expenses:Contract
    
    
    
    
    
    
    665
    
    
    
    665General and administrative
    
    
    13
    
    
    
    (1
    )
    
    
    12Operating loss
    
    
    (13
    )
    
    
    (246
    )
    
    
    (259
    )Other income (expense)
    
    
    1,486
    
    
    
    (3
    )
    
    
    1,483Income (loss) before income taxes
    
    
    1,473
    
    
    
    (249
    )
    
    
    1,224Provision for income taxes
    
    
    
    
    
    
    5
    
    
    
    5Net income (loss)
    
    $
    1,473
    
    
    $
    (254
    )
    
    $
    1,219
 Three Months Ended September 30, 2007DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    4,825
    
    
    $
    4,825Operating expenses:Contract
    
    
    
    
    
    
    4,868
    
    
    
    4,868General and administrative
    
    
    
    
    
    
    124
    
    
    
    124Profit disgorgement
    
    
    10,300
    
    
    
    
    
    
    
    10,300Operating 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
    )
 Nine Months Ended September 30, 2008DiscontinuedNigeria
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    
    
    
    $
    2,087
    
    
    $
    2,087Operating expenses:Contract
    
    
    
    
    
    
    3,195
    
    
    
    3,195General and administrative
    
    
    13
    
    
    
    32
    
    
    
    45Operating loss
    
    
    (13
    )
    
    
    (1,140
    )
    
    
    (1,153
    )Other income (expense)
    
    
    4,393
    
    
    
    (178
    )
    
    
    4,215Income (loss) before income taxes
    
    
    4,380
    
    
    
    (1,318
    )
    
    
    3,062Provision for income taxes
    
    
    
    
    
    
    20
    
    
    
    20Net income (loss)
    
    $
    4,380
    
    
    $
    (1,338
    )
    
    $
    3,042
 23




---



##### Table of Contents



WILLBROS GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
(Unaudited)
 13. Discontinuance of Operations, Asset Disposals, and Transition Services Agreement (continued)
 Nine Months Ended September 30, 2007DiscontinuedNigeria(1)
    
    
    Nigeria TSA
    
    
    OperationsContract revenue
    
    $
    30,046
    
    
    $
    21,906
    
    
    $
    51,952Operating expenses:Contract
    
    
    34,360
    
    
    
    21,016
    
    
    
    55,376General and administrative
    
    
    3,472
    
    
    
    566
    
    
    
    4,038Profit disgorgement
    
    
    10,300
    
    
    
    
    
    
    
    10,300Operating 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
    )
 
 (1)
    
    Reflects operations through February 7, 2007. Financial Position of Discontinued Operations
  September 30,
    
    
    December 31,2008
    
    
    2007Current assets:Cash and cash equivalents
    
    $
    309
    
    
    $
    211Accounts receivable, net
    
    
    960
    
    
    
    296Prepaid expenses
    
    
    130
    
    
    
    879Total current assets
    
    
    1,399
    
    
    
    1,386Property, plant and equipment, net
    
    
    641
    
    
    
    1,205Other assets
    
    
    633
    
    
    
    620Total assets
    
    
    2,673
    
    
    
    3,211Current liabilities:
    
    
    637
    
    
    
    978Total current liabilities
    
    
    637
    
    
    
    978Net assets of discontinued operations
    
    $
    2,036
    
    
    $
    2,233
 24




---



##### 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
   Segments
  Upstream O&G
  Downstream O&G
  25




---



##### Table of Contents



Engineering
  Changing Business Environment
    
    
    Our U. S. mainline pipeline and facilities construction businesses are well positioned
to take advantage of the development of new sources of natural gas supply which require new
infrastructure to monetize these investments. These new sources of supply include the new
shale plays such as Haynesville, Fayetteville, Marcellus and others.
    
    We are positioned to build the take away pipelines from the significant development and
investments made in the Canadian oil sands.
    
    In the Canadian oil sands, our maintenance and fabrication businesses are service
offerings that are required to operate the facilities even in the current financial
environment.
    
    Our diversified Downstream O&Gservice offering is focused on asset life extension and
maintenance projects for the process industries, which can be robust even in the current
business environment.
    
    Our EPC offering is unique to our space and allows us to earn more revenue per engineer
and to qualify for larger projects, leveraging our revenue and increasing earnings
opportunities.
    
    Our past experience and brand name provides us access to international markets.
    
    And finally, we have strengthened our financial position. Our strong balance sheet and
operating cash flow should allow us to effectively operate our business and to take
advantage of the potential opportunities that may occur during a period of change like we
are currently experiencing.
  Strategy
  Focus on Managing Risk
  
    
    Safety first culture.Our core values emphasize safety as the foremost value in our
culture and safety is the driver for all other values. Our focus is on 100 percent
involvement by all employees in providing a safe accident-free workplace. This core value
demands that 100 percent of our employees, from executive
management to field labor, be trained in our safety first culture and safety-first
performance at every level in the organization. Every action must meet our safety criteria.
 26




---



##### Table of Contents




    
    Focus resources in markets with the highest risk-adjusted return. We believe North
America currently offers us the highest risk-adjusted returns and the majority of our
resources are focused on this region. For the third quarter of 2008, we earned 94.8
percent of our revenue in North America. However, we continue to seek international
opportunities which can provide superior risk-adjusted returns and believe our extensive
international experience is a competitive advantage. We believe that markets in North
Africa and the Middle East, where we also have substantial experience, may offer attractive
opportunities for us in the future given mid and long-term industry trends.
    
    Maintain a conservative contract portfolio. Our current contract portfolio is composed
of 88.4 percent cost-reimbursable work which provides for a more equitable allocation of
risk between us and our customers. We
intend to maintain a balanced risk-to-reward portfolio.
    
    Ethical business practices. We demand that all of our employees and representatives
conduct our business in accordance with the highest ethical standardsin compliance with
applicable laws, rules and regulations, with honesty and integrity, and in a manner which
demonstrates respect for others.
 Leverage Industry Position and Reputation into a Broader Service Offering.
   Maintain Financial Flexibility.
  Leverage Core Service Expertise into Additional Full EPC Contracts.
  Financial Summary
 Third Quarter Results and Financial Position
  27




---



##### Table of Contents




    
    Revenue earned on pipeline construction and EPC projects in the United States; and
    
    Revenue of $86,249 in 2008 from the Downstream O&G segment derived from our acquisition
of InServ in November 2007.
      Other Financial Measures
 Backlog
    28




---



##### Table of Contents



September 30, 2008
    
    
    December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentOperating SegmentUpstream
O&G
    
    $
    795,103
    
    
    
    76.5
    %
    
    $
    941,301
    
    
    
    72.1
    %Downstream O&G
    
    
    178,249
    
    
    
    17.2
    %
    
    
    199,646
    
    
    
    15.3
    %Engineering
    
    
    65,092
    
    
    
    6.3
    %
    
    
    164,494
    
    
    
    12.6
    %Total, continuing operations
    
    
    1,038,444
    
    
    
    100.0
    %
    
    
    1,305,441
    
    
    
    100.0
    %Discontinued operations
    
    
    
    
    
    
    
    
    
    
    Total backlog
    
    $
    1,038,444
    
    
    
    
    
    
    $
    1,305,441
 September 30, 2008
    
    
    December 31, 2007Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentGeographic RegionUnited States
    
    $
    778,153
    
    
    
    74.9
    %
    
    $
    1,014,351
    
    
    
    77.7
    %Canada
    
    
    206,411
    
    
    
    19.9
    %
    
    
    215,527
    
    
    
    16.5
    %Oman
    
    
    53,880
    
    
    
    5.2
    %
    
    
    75,563
    
    
    
    5.8
    %Total backlog
    
    $
    1,038,444
    
    
    
    100.0
    %
    
    $
    1,305,441
    
    
    
    100.0
    %
 EBITDA from Continuing Operations
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Net income (loss) from continuing operations
    
    $
    19,051
    
    
    $
    10,272
    
    
    $
    58,230
    
    
    $
    (33,446
    )Interest, net
    
    
    1,685
    
    
    
    1,042
    
    
    
    5,079
    
    
    
    2,119Provision for income taxes
    
    
    8,057
    
    
    
    6,081
    
    
    
    36,450
    
    
    
    7,793Depreciation and amortization
    
    
    11,201
    
    
    
    5,457
    
    
    
    33,988
    
    
    
    13,223EBITDA
    
    $
    39,994
    
    
    $
    22,852
    
    
    $
    133,747
    
    
    $
    (10,311
    )
   29




---



##### Table of Contents



Discontinued Operations
   Transition Services Agreement
       RESULTS OF OPERATIONS
   30




---



##### Table of Contents



Three Months Ended September 30, 2008 Compared to Three Months Ended September 30, 2007
 Contract Revenue
  Three months ended September 30,Percent2008
    
    
    2007
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    342,064
    
    
    $
    196,554
    
    
    $
    145,510
    
    
    
    74.0
    %Downstream O&G
    
    
    86,249
    
    
    
    N/A
    
    
    
    86,249
    
    
    
    100.0
    %Engineering
    
    
    62,338
    
    
    
    50,162
    
    
    
    12,176
    
    
    
    24.3
    %Total
    
    $
    490,651
    
    
    $
    246,716
    
    
    $
    243,935
    
    
    
    98.9
    %
 Upstream O&G
 Downstream O&G Downstream O&G
 Engineering Engineering
 Operating Income
  Three months ended September 30,Operating
    
    
    
    
    
    
    Operating
    
    
    
    
    
    
    Percent2008
    
    
    Margin %
    
    
    2007(1)
    
    
    Margin %
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    17,028
    
    
    
    5.0
    %
    
    $
    13,433
    
    
    
    6.8
    %
    
    $
    3,595
    
    
    
    26.8
    %Downstream O&G
    
    
    4,723
    
    
    
    5.5
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    4,723
    
    
    
    100.0
    %Engineering
    
    
    6,984
    
    
    
    11.2
    %
    
    
    3,289
    
    
    
    6.6
    %
    
    
    3,695
    
    
    
    112.3
    %Total
    
    $
    28,735
    
    
    
    5.9
    %
    
    $
    16,722
    
    
    
    6.8
    %
    
    $
    12,013
    
    
    
    71.8
    %
 
 (1)
    
    This table does not reflect a reduction in government fines of $2,000 in 2007 which
is included in consolidated operating results. Government fines were characterized as a Corporate
expense and are not allocated to the reporting segments. Upstream O&G Upstream O&G
 Downstream O&G Downstream O&G
 Engineering
 31




---



##### Table of Contents



Non-Operating Items
 Provision for income taxes
  Discontinued Operations
 Income (loss) from discontinued operations, net of taxes
 Nine Months Ended September 30, 2008 Compared to Nine Months Ended September 30, 2007
 Contract Revenue
  Nine months ended September 30,Percent2008
    
    
    2007
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    982,836
    
    
    $
    482,104
    
    
    $
    500,732
    
    
    
    103.9
    %Downstream O&G
    
    
    278,995
    
    
    
    N/A
    
    
    
    278,995
    
    
    
    100.0
    %Engineering
    
    
    188,171
    
    
    
    128,064
    
    
    
    60,107
    
    
    
    46.9
    %Total
    
    $
    1,450,002
    
    
    $
    610,168
    
    
    $
    839,834
    
    
    
    137.6
    %
 Upstream O&G
 Downstream O&G Downstream O&G
 Engineering Engineering
 32




---



##### Table of Contents



Operating Income
  Nine months ended September 30,Operating
    
    
    
    
    
    
    Operating
    
    
    
    
    
    
    Percent2008
    
    
    Margin %
    
    
    2007(1)
    
    
    Margin %
    
    
    Increase
    
    
    ChangeUpstream O&G
    
    $
    57,792
    
    
    
    5.9
    %
    
    $
    6,361
    
    
    
    1.3
    %
    
    $
    51,431
    
    
    
    808.5
    %Downstream O&G
    
    
    18,772
    
    
    
    6.7
    %
    
    
    N/A
    
    
    
    N/A
    
    
    
    18,772
    
    
    
    100.0
    %Engineering
    
    
    22,991
    
    
    
    12.2
    %
    
    
    9,499
    
    
    
    7.4
    %
    
    
    13,492
    
    
    
    142.0
    %Total
    
    $
    99,555
    
    
    
    6.9
    %
    
    $
    15,860
    
    
    
    2.6
    %
    
    $
    83,695
    
    
    
    527.7
    %
 
 (1)
    
    This table does not reflect government fines of $22,000 in 2007 which is included in
consolidated operating results. Government fines were characterized as a Corporate expense and are
not allocated to the reporting segments. Upstream O&G Upstream O&G
 Downstream O&G Downstream O&G
 Engineering
 Non-Operating Items
 Interest, net .
 Loss on early extinguishment of debt
 Provision for income taxes
 Discontinued Operations
 Income (loss) from discontinued operations, net of taxes
 33




---



##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
  Cash Flows
  2008
    
    2007Operating activities
    
    $
    96,494
    
    
    $
    (22,629
    )Investing activities
    
    
    (23,943
    )
    
    
    66,952Financing activities
    
    
    (40,917
    )
    
    
    (28,445
    )
  Operating Activities
  
    
    an increase in net income from continuing operations of $91,676 to $58,230 of income
during the nine months ended September 30, 2008, as compared to a loss from continuing
operations of $33,446 in the same period in 2007;
    
    an increase in cash flow from the change in working capital accounts of $35,977. The
increase in cash flow from working capital accounts is primarily attributable the change in
working capital accounts that generally trend with project activity levels. These include
accounts receivable, contract cost and recognized income not yet billed, inventory,
accounts payable and accrued liabilities and contract billings in excess of cost and
recognized income. The increase associated with these working capital accounts are
partially offset by the cash flow associated with prepaid expenses and accrued income
taxes; and
    
    a decrease in non-cash charges of $8,530. This decrease is primarily attributable to the
non-recurring $22,000 government fine and $15,375 loss on early extinguishment of debt
recognized during the nine months ended 2008. This decrease is partially offset by
increased depreciation and amortization of $20,765 and increased deferred compensation
expense of $4,070. The increase in depreciation is reflective of the significant amount of
capital additions to support the growth of our business and project activity level.
Additionally, $7,828 of amortization of intangible assets is included in the nine months
ended 2008 which were acquired in the acquisition on InServ in the fourth quarter of 2007.
The increase in deferred compensation amortization is primarily a result of significant
restricted stock awards granted in 2008.
 Investing Activities
  
    
    disposition of discontinued operations in the nine months ended September 30, 2007,
which provided $105,568 of cash as compared to no dispositions in the same period in 2008;
    
    acquisition of a subsidiary in the nine months ended September 30, 2007, which used cash
of $24,154 as compared to $846 of cash provided (working capital adjustment net of
additional acquisition costs) during the same period in 2008; and
 
    
    purchases of property, plant, and equipment during the nine months ended September 30,
2008 used $28,122 of cash compared to $15,890 during the same period in 2007, an increase
of $12,232. These purchases consisted primarily of construction equipment to support our
increased project activity.
 34




---



##### Table of Contents



Financing Activities
  
    
    repayments of capital lease obligations during the nine months ended September 30, 2008
of $17,550 as compared to $7,507. We have accelerated repayment and retired certain capital
lease obligations early as a part of our financial flexibility and financial management
strategy;
    
    repayments of $12,575 of government fines during the nine months ended September 30,
2008 as compared to no repayments during the same period in 2007; and
    
    the two previous increased cash outflows in 2008 are partially offset by a non-recurring
cash use in 2007 of $12,993. This amount relates to the cash used in inducing the
conversion of part of our 6.5% senior convertible notes in 2007. No similar inducement has
occurred in 2008.
 Additional Sources of Capital
 Assets
Held for Sale
  2007 Credit Facility
  Capital Requirements
  
    
    providing working capital for projects in process and those scheduled to begin;
    
    procuring construction equipment;
    
    pursuing additional acquisitions that will allow us to expand our service offering; and
    
    making installment payments to the government related to fines and profit disgorgement.
  Contractual Obligations
   NEW ACCOUNTING PRONOUNCEMENTS
  35




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS
 This Form 10-Q includes forward-looking statements. All statements, other than statements of
historical facts, included or incorporated by reference in this Form 10-Q that address activities,
events or developments which we expect or anticipate will or may occur in the future, including
such things as future capital expenditures (including the amount and nature thereof), oil, gas, gas
liquids and power prices, demand for our services, the amount and nature of future investments by
governments, expansion and other development trends of the energy industry, business strategy,
expansion and growth of our business and operations, the outcome of government investigations and
legal proceedings and other such matters are forward-looking statements. These forward-looking
statements are based on assumptions and analyses we made in light of our experience and our
perception of historical trends, current conditions and expected future developments as well as
other factors we believe are appropriate under the circumstances. However, whether actual results
and developments will conform to our expectations and predictions is subject to a number of risks
and uncertainties. As a result, actual results could differ materially from our expectations.
Factors that could cause actual results to differ from those contemplated by our forward-looking
statements include, but are not limited to, the following:
 
    
    curtailment of capital expenditures in the oil, gas, power, refining and petrochemical
industries;
    
    cancellation of projects, in whole or in part;
    
    the consequences we may encounter if the terms and conditions of our final settlements
with the DOJ and the SEC are not complied with, including the imposition of civil or
criminal fines, penalties, enhanced monitoring arrangements, or other sanctions that might
be imposed by the DOJ and SEC;
    
    the occurrence during the course of our operations of accidents and injuries to our
personnel, as well as to third parties, that negatively affect our safety record, which is
a factor used by many clients to pre-qualify and otherwise award work to contractors in our
industry;
    
    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;
    
    difficulties we may encounter in connection with the previous sale and disposition of
our Nigeria assets and Nigeria based operations, including without limitation, obtaining
indemnification for any losses we may experience if, due to the non-performance of Ascot,
claims are made against any parent company guarantees we provided and which remained in
place, in varying degrees, subsequent to the closing;
    
    the 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;
    
    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;
    
    political or social circumstances impeding the progress of our work and increasing the
cost of performance;
    
    failure to obtain the timely award of one or more projects;
    
    inability to identify and acquire suitable acquisition targets on reasonable terms;
    
    inability to obtain adequate financing;
    
    inability to obtain sufficient surety bonds or letters of credit;
    
    loss of the services of key management personnel;
    
    the demand for energy moderating or diminishing;
 36




---



##### Table of Contents




    
    downturns in general economic, market or business conditions in our target markets;
    
    changes in the effective tax rate in countries where our work will be performed;
    
    changes in applicable laws or regulations, or changed interpretations thereof;
    
    changes in the scope of our expected insurance coverage;
    
    inability to manage insurable risk at an affordable cost;
    
    the occurrence of the risk factors included elsewhere in thisForm 10-Qor in our other
reports and filings with the SEC; and
    
    other factors, most of which are beyond our control.
 Consequently, all of the forward-looking statements made in the this Form 10-Q are qualified
by these cautionary statements and there can be no assurance that the actual results or
developments we anticipate will be realized or, even if substantially realized, that they will have
the consequences for, or effects on, our business or operations that we anticipate today. We assume
no obligation to update publicly any such forward-looking statements, whether as a result of new
information, future events or otherwise. For a more complete description of the circumstances
surrounding the actions of our current and former employees, see the Risk Factors included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2007.
 Unless the context otherwise requires, all references in this Form 10-Q to Willbros, the
Company, we, us and our refer to Willbros Group, Inc., its consolidated subsidiaries and
their predecessors.
 37




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
 (a) Disclosure Controls and Procedures
   (b) Changes in Internal Control Over Financial Reporting
  38




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Our business is highly dependent upon the level of capital expenditures by oil, gas and power
companies on infrastructure.
  
    
    current and projected oil, gas and power prices as well as refining margins;
    
    the demand for electricity;
    
    the abilities of oil, gas and power companies to generate, access and deploy
capital;
    
    exploration, production and transportation costs;
    
    the discovery rate of new oil and gas reserves;
    
    the sale and expiration dates of oil and gas leases and concessions;
    
    regulatory restraints on the rates that power companies may charge their customers;
    
    local and international political and economic conditions;
    
    the ability or willingness of host country government entities to fund their
budgetary commitments; and
    
    technological advances.
 We may continue to experience losses associated with our prior Nigeria based operations.
   39




---



##### Table of Contents




    
    The same difficulties which led to our leaving Nigeria continue to exist for Ascot,
as well as additional challenges, including various financial difficulties that we
understand Ascot may from time to time be experiencing. Accordingly, Ascots continued
willingness and ability to perform our former projects in West Africa continue to be
important factors to further reducing our risk profile in Nigeria and elsewhere in West
Africa.
    
    We issued parent company guarantees to our former clients in connection with the
performance of some of our contracts in Nigeria and nearby West Africa locations.
Although Ascot is now responsible for completing these projects, our parent company
guarantees may remain in force in varying degrees until the projects are completed.
Indemnities are in place pursuant to which Ascot and its parent company are obligated
to indemnify the Company for any losses we incur on these parent company guarantees.
However, we can provide no assurance that we will be successful in enforcing our
indemnity rights. The guarantees include five projects under which we estimated that,
at February 7, 2007, there was aggregate remaining contract revenue of approximately
$352.1 million and aggregate cost to complete of approximately $293.6 million.
    
    In early 2008, we received our first notification asserting various rights under one
of our outstanding parent guarantees. On February 1, 2008, WWAI, the Ascot company
performing the West African Gas Pipeline (WAGP) contract, received a letter from West
African Gas Pipeline Company Limited (WAPCo), the owner of WAGP, wherein WAPCo gave
written notice alleging that WWAI was in default under the WAGP contract, as amended,
and giving WWAI a brief cure period to remedy the alleged default. We understand that
WWAI responded by denying being in breach of its WAGP contract obligations, and
apparently also advised WAPCo that WWAI ...requires a further $55 million, without
which it will not be able to complete the work which it had previously undertaken to
perform. We understand that, on February 27, 2008, WAPCo terminated the WAGP contract
for the alleged continuing non-performance of WWAI.Also, on February 1, 2008, we received a letter from WAPCo reminding us of our parent
guarantee on the WAGP contract and requesting that we remedy WWAIs default under that
contract, as amended. On previous occasions, we have advised WAPCo that, for a variety of
legal, contractual, and other reasons, we did not consider our prior WAGP contract parent
guarantee to have continued application, and we reiterated that position to WAPCo in our
response to its February 1, 2008 letter. WAPCo disputes our position that we are no
longer bound by the terms of our prior parent guarantee of the WAGP contract and has
reserved all its rights in that regard. Currently, the WAGP project is at a stand still
for a variety of technical and commercial issues unrelated to WAPCos termination of the
WAGP contract.We anticipate that this potential dispute with WAPCo may result in a lengthy arbitration
proceeding between WAPCo and WWAI in the London Court of International Arbitration to
determine the validity of the alleged default notice issued by WAPCo to WWAI, including
any resulting damage award, in combination with a lawsuit between WAPCo and us in the
English Courts under English law to determine the enforceability, in whole or in part, of
our parent guarantee, which we expect to be a lengthy process.We currently have no employees working in Nigeria and we have no intention of returning
to Nigeria. If ultimately it is determined by an English Court that we are liable, in
whole or in part, for damages that WAPCo may establish against WWAI for WWAIs alleged
non-performance of the WAGP contract, or if WAPCo is able to establish liability against
the Company directly under our parent company guarantee, and, in either case, we are
unable to enforce our rights under the indemnity agreement entered into with Ascot in
connection with the WAGP contract, we may experience substantial losses. However,
management cannot, at this time, predict the outcome of any arbitration or litigation
which may ensue in this developing WAGP contract dispute, or be certain of the degree to
which the indemnity agreement given in our favor by Ascot will protect the Company. Based
upon our current knowledge of the relevant facts and circumstances, we do not expect that
the outcome of the potential dispute will have a material adverse effect on our financial
condition or results of operations.
 Our common stock, which is listed on the New York Stock Exchange, has from time to time experienced
significant price and volume fluctuations. These fluctuations are likely to continue in the future,
and you may not be able to resell your shares of common stock at or above the purchase price paid
by you.
 40




---



##### Table of Contents




    
    the risk factors described in this Form 10-Q and in our other reports and filings
with the SEC;
    
    a shortfall in operating revenue or net income from that expected by securities
analysts and investors;
    
    changes in securities analysts estimates of our financial performance or the
financial performance of our competitors or companies in our industry generally;
    
    general conditions in our customers industries; and
    
    general conditions in the securities markets.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number
    
    
    Maximumof Shares
    
    
    Number (orPurchased as
    
    
    ApproximatePart of
    
    
    Dollar Value) ofTotal
    
    
    
    
    
    
    Publicly
    
    
    Shares That MayNumber of
    
    
    Average Price
    
    
    Announced
    
    
    Yet Be PurchasedShares
    
    
    Paid Per
    
    
    Plans or
    
    
    Under the PlansPurchased (1)
    
    

Share (2)
    
    
    Programs
    
    
    or ProgramsJuly 1, 2008  July 31, 2008
    
    
    78,750
    
    
    $
    43.54
    
    
    
    
    
    
    
    August 1, 2008  August 31, 2008
    
    
    3,246
    
    
    
    42.38
    
    
    
    
    
    
    
    September 1, 2008  September 30, 2008
    
    
    237
    
    
    
    30.25
    
    
    
    
    
    
    
    Total
    
    
    82,233
    
    
    $
    43.46
    
    
    
    
    
    
    
    
 
 (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 or delivery of shares underlying vested restricted stock
rights 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
  
 Item 5. Other Information
  
 Item 6. Exhibits
  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.
 41




---



##### Table of Contents



SIGNATURE
  WILLBROS GROUP, INC.Date: November 5, 2008
    By:
    /s/ Van A. WelchVan A. WelchSenior Vice President and Chief Financial Officer
(Principal Financial Officer and Principal
Accounting Officer) 42




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber
    
    Description31.1
    
    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.
 43