UPDATE: KBR Unveils Plan to Reorganize Into Three New Businesses

Global engineering, construction and servicescompany KBR, Inc. (NYSE: KBR) today announced the results of a major StrategicReview which will see the company become a more streamlined, empowered andaccountable global organization with three strategic focus areas: o Growth through differentiated consulting services and technology targeting oil and gas and chemicals to enhance the technical and financial returns to our customers o Enhanced returns through globalized project delivery and differentiated engineering, procurement, construction, commissioning and maintenance services o Global government services focused on long-term contractsKBR President and Chief Executive Officer Stuart Bradie, who implemented thereview upon his arrival in June 2014, said the new organization is designed tosimplify the structure, reduce overhead costs and create a more market-focusedbusiness."The restructure we are announcing today will create a new KBR focused on itscore strengths structured along delivery lines that will enable us to meet theexpectations of our customers and other stakeholders. This, combined withreduced complexity, will provide a more robust balance sheet and greateraccountability and empowerment for our people. KBR will be well placed to meetthe challenges of the future," Bradie said.Effective December 31, 2014, KBR, Inc. will be reorganized into three newbusinesses that will focus on core strengths in consulting, technology,engineering and construction and government services: o Technology & Consulting combines all proprietary KBR technologies, knowledge-based services and KBR companies Granherne, Energo and GVA under one customer-facing global business to provide licensed technologies and consulting services to the oil and gas value chain, for wellhead to crude refining and to specialty chemicals production. In addition to sharing many of the same customers, these businesses share their approach of early and continuous involvement to deliver the most optimal solution to meet the customer's objectives through early planning and scope definition, advanced technologies and project lifetime support. This focus allows early customer engagement and continuity through to full project delivery. o Engineering & Construction (E&C) is KBR's project delivery business. It will leverage our operational and technical excellence as a global provider of engineering, procurement, construction, commissioning and maintenance for oil and gas, refining, petrochemicals, chemicals and industrial customers. Through a regional structure, E&C has been designed to be closer to its customers and capable to execute global project delivery on a consistent basis throughout the world. o Government Services will focus on long-term services contracts with annuity streams particularly for the United Kingdom, Australian and United States governments. KBR functions at a corporate level will be streamlined. This will result in alean corporate office with responsibility for strategy and governance.As a result of this Strategic Review, KBR will be divesting or exiting thefollowing non-strategic businesses as it works to streamline global operationsand drive efficiency with a goal of reducing annual operating costs of atleast $200 million by 2016: o Fixed Price EPC Power o Fixed Price EPC Infrastructure and U.S. Minerals o Building Group o Fixed Price, stand-alone ConstructionIn addition, options for Canadian module fabrication and U.S. militarydeployed operations support businesses are still under consideration.Financial impact of the changesThe above actions are expected to strengthen KBR's balance sheet by addressingand exiting under-performing and non-strategic businesses. We expect torealize annual operating cost savings of $200 million by 2016, but anticipatetaking a pre-tax charge ranging from $800 million to $1 billion, the majorityof which will be non-cash. The company currently has a cash balance ofapproximately $1 billion and has received approval from its lenders to amendits credit facility for the impact of the anticipated charge.