WILLBROS GROUP INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

OR

[ ] 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.
(Exact name of registrant as specified in its charter)

REPUBLIC OF PANAMA 98-0160660
(Jurisdiction of incorporation) (I.R.S. Employer Identification Number)

PLAZA 2000 BUILDING
50TH STREET, 8TH FLOOR
APARTADO 6307
PANAMA 5, REPUBLIC OF PANAMA
TELEPHONE NO.: (507) 213-0947
(Address, including zip code, and telephone number, including
area code, of principal executive offices of registrant)

Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange
Title of each class on which registered
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Common stock, $.05 Par Value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

The aggregate market value of the Registrant's Common Stock held by
non-affiliates of the Registrant as of June 28, 2002, the last business day of
the Registrant's most recently completed second fiscal quarter, was
$314,740,567.

As of March 21, 2003, 20,633,903 shares of the Registrant's Common
Stock were outstanding.

Documents incorporated by reference

Portions of the Registrant's Proxy Statement for the Annual Meeting of
stockholders to be held May 15, 2003 are incorporated by reference into Part III
of this Form 10-K.

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WILLBROS GROUP, INC.

FORM 10-K

YEAR ENDED DECEMBER 31, 2002

TABLE OF CONTENTS

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FORWARD-LOOKING STATEMENTS

THIS FORM 10-K 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 IN THIS FORM 10-K WHICH 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 AND POWER PRICES, DEMAND FOR
OUR SERVICES, THE AMOUNT AND NATURE OF FUTURE INVESTMENTS BY FOREIGN AND
DOMESTIC GOVERNMENTS, EXPANSION AND OTHER DEVELOPMENT TRENDS OF THE OIL, GAS AND
POWER INDUSTRIES, BUSINESS STRATEGY, EXPANSION AND GROWTH OF OUR BUSINESS AND
OPERATIONS, AND OTHER SUCH MATTERS ARE FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE BASED ON CERTAIN 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
IN THE CIRCUMSTANCES. HOWEVER, WHETHER ACTUAL RESULTS AND DEVELOPMENTS WILL
CONFORM WITH OUR EXPECTATIONS AND PREDICTIONS IS SUBJECT TO A NUMBER OF RISKS
AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
OUR EXPECTATIONS INCLUDING:

o CURTAILMENT OF CAPITAL EXPENDITURES IN THE OIL, GAS, AND POWER INDUSTRIES;

o POLITICAL CIRCUMSTANCES IMPEDING THE PROGRESS OF OUR WORK;

o THE TIMELY AWARD OF ONE OR MORE PROJECTS;

o CANCELLATION OF PROJECTS;

o INCLEMENT WEATHER;

o PROJECT COST OVERRUNS AND UNFORESEEN SCHEDULE DELAYS;

o FAILING TO REALIZE COST RECOVERIES FROM PROJECTS COMPLETED OR IN PROGRESS
WITHIN A REASONABLE PERIOD AFTER COMPLETION OF THE RELEVANT PROJECT;

o IDENTIFYING AND ACQUIRING SUITABLE ACQUISITION TARGETS ON REASONABLE TERMS;

o OBTAINING ADEQUATE FINANCING;

o THE DEMAND FOR ENERGY DIMINISHING;

o DOWNTURNS IN GENERAL ECONOMIC, MARKET OR BUSINESS CONDITIONS IN OUR TARGET
MARKETS;

o CHANGES IN THE EFFECTIVE TAX RATE IN COUNTRIES WHERE THE WORK WILL BE
PERFORMED;

o CHANGES IN LAWS OR REGULATIONS;

o THE RISK FACTORS LISTED IN THIS FORM 10-K AND IN OUR OTHER FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME; AND

o OTHER FACTORS, MOST OF WHICH ARE BEYOND OUR CONTROL.

CONSEQUENTLY, ALL OF THE FORWARD-LOOKING STATEMENTS MADE IN THIS FORM 10-K
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.

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UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS FORM 10-K TO
"WILLBROS", THE "COMPANY", "WE", "US" AND "OUR" REFER TO WILLBROS GROUP, INC.,
ITS CONSOLIDATED SUBSIDIARIES AND THEIR PREDECESSORS.

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PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

WEBSITE ACCESS TO REPORTS

Our public internet site is http://www.willbros.com/. We make available
free of charge through our internet site, via a link to Edgar Online, our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form
8-K and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Securities and Exchange Act of 1934, as amended, as soon as
reasonably practicable after we electronically file such material with, or
furnish it to, the SEC.

In addition, we currently make available on http://www.willbros.com/ our
annual reports to stockholders. You will need to have on your computer the Adobe
Acrobat Reader software to view these documents, which are in the .PDF format.
If you do not have Adobe Acrobat, a link to Adobe Systems Incorporated's
internet site, from which you can download the software, is provided.

GENERAL

We are one of the leading independent contractors serving the oil, gas and
power industries, providing construction, engineering and specialty services to
industry and government entities worldwide. We place particular emphasis on
projects in countries where we believe our experience gives us a competitive
advantage, including several developing countries.

Our construction services include the building and replacement of:

o major pipelines;

o gathering systems;

o flow stations;

o pump stations;

o gas compressor stations;

o gas processing facilities;

o oil and gas production facilities;

o piers;

o pressure vessels;

o dock facilities; and

o bridges.

Our engineering services include:

o feasibility studies;

o conceptual and detailed design; and

o field services, material procurement and overall project management.

Our specialty services include:

o dredging;

o pipe coating;

o pipe double jointing;

o removal and installation of flowlines;

o fabrication of piles and platforms;

o maintenance and repair of pipelines, stations and other facilities;

o pipeline rehabilitation;

o general oilfield services;

o transport of oilfield equipment, rigs and vessels;

o facility operations; and

o fabrication of pressure vessels.

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We provide our services utilizing a large fleet of company-owned and leased
equipment that includes marine vessels, barges, dredges, pipelaying equipment,
heavy construction equipment, transportation equipment and camp equipment. Our
equipment fleet is supported by an extensive inventory of spare parts and tools,
which we strategically position and maintain throughout the world to maximize
availability and minimize cost.

We trace our roots to the construction business of Williams Brothers
Company, founded in 1908. Through successors to that business, we have completed
many landmark projects around the world, including the "Big Inch" and "Little
Big Inch" War Emergency Pipelines (1942-44), the Mid-America Pipeline (1960),
the TransNiger Pipeline (1962-64), the Trans-Ecuadorian Pipeline (1970-72), the
northernmost portion of the Trans-Alaskan Pipeline System (1974-76), the All
American Pipeline System (1984-86), Colombia's Alto Magdalena Pipeline System
(1989-90), and a portion of the Pacific Gas Transmission System expansion
(1992-93). In September 2000, through a joint venture led by a subsidiary of
ours, we were awarded yet another landmark project, the scope of which includes
the engineering, procurement and construction, or "EPC" of a 665-mile
(1,070-kilometer), 30-inch crude oil pipeline from the Doba Fields in Chad to an
export terminal on the coast of Cameroon in Africa, which we refer to as the
"Chad-Cameroon Pipeline Project."

Over the years, we have been employed by more than 400 clients to carry out
work in 55 countries. Within the past 10 years, we have worked in Africa, Asia,
Australia, the Middle East, North America and South America. We have
historically had a steady base of operations in Nigeria, Oman, the United States
and Venezuela, which has been enhanced by major projects in Australia, Bolivia,
Cameroon, Chad, Egypt, Gabon, Indonesia, Ivory Coast, Kuwait, and Pakistan.

Private sector clients have historically accounted for the majority of our
revenue. Government entities and agencies have accounted for the remainder. Ten
clients were responsible for 75% of our total revenue in 2002 (81% in 2001 and
86% in 2000). Operating units of ExxonMobil and Explorer accounted for 29% and
16% of our total revenue in 2002, respectively.

CORPORATE STRUCTURE

We are incorporated in the Republic of Panama and maintain our headquarters
at Plaza 2000 Building, 50th Street, 8th Floor, Apartado 6307, Panama 5,
Republic of Panama; our telephone number is (507) 213-0947. Panama's General
Corporation Law is substantially modeled on the New York and Delaware corporate
laws as they existed in 1932. Panama does not tax income derived from activities
conducted outside Panama. The principal subsidiaries of Willbros Group, Inc. are
Willbros International, Inc., Rogers & Phillips, Inc., MSI Energy Services
Inc.("MSI") and Willbros USA, Inc.. As the result of an acquisition in the
fourth quarter of 2002, four additional principal subsidiaries were added: Mt.
West Fabrication Plants and Stations, Inc., Process Electric and Control, Inc.,
Process Engineering Design, Inc., and Pacific Industrial Electric, Inc.
(collectively referred to as the "Mt. West Group"). All significant operations
outside North America are carried out by material subsidiaries of Willbros
International, Inc., which is also a Panamanian corporation. Such material
subsidiaries include Willbros West Africa, Inc., Willbros (Nigeria) Limited,
Willbros (Offshore) Nigeria Limited, Constructora CAMSA, C.A., the Oman
Construction Company LLC, and Willbros Transandina, S.A. All significant
operations in North America are carried out either by Rogers & Phillips, Inc., a
Delaware corporation, the Mt. West Group, all Colorado corporations, with the
exception of Process Electric and Control, Inc., which is an Oregon corporation,
MSI Energy Services Inc., an Alberta, Canada corporation, or by the material
subsidiaries of Willbros USA, Inc., which is also a Delaware corporation. Such
material subsidiaries of Willbros USA, Inc. include Willbros Engineers, Inc.,
Willbros Energy Services Company and Willbros Operating Services, Inc. The
Willbros corporate structure is designed to comply with jurisdictional and
registration requirements associated with work bid and performed and to minimize
worldwide taxation of operating income. Additional subsidiaries may be formed in
specific work countries where necessary or useful for compliance with local laws
or tax objectives. Administrative services are provided by Willbros USA, Inc.,
whose administrative headquarters are located at 4400 Post Oak Parkway, Suite
1000, Houston, Texas 77027 telephone number (713) 403-8000.

CURRENT MARKET CONDITIONS

We believe the fundamentals supporting the demand for new pipeline
infrastructure have remained strong over the past 12 to 18 months, and that they
will continue to be strong in the mid to long-term.

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However, the following five issues have caused the short-term outlook for our
business to be weaker than in 2001 or 2002:

o Stagnant or recessionary global economic conditions have diminished the
growth in demand for oil and gas, resulting in fewer oil, gas and power
projects.

o Scandals associated with the energy trading business together with other
factors have caused many of the energy transportation companies involved in
the energy trading business, chiefly in the United States, to curtail their
capital expenditures planned for 2003 and to sell assets to improve their
liquidity.

o A number of pipeline projects originally scheduled for 2003 have been
postponed until 2004.

o Political disruptions in Venezuela have caused supply concerns in markets
served by Venezuelan oil production and have interrupted the safe and
orderly conduct of work in that country.

o The threat of hostilities in the Middle East has created greater than
normal uncertainty in the global oil markets. We believe this uncertainty
has caused extreme caution among oil and gas producers with respect to
their planned capital expenditure programs for 2003, notwithstanding the
recent run-up in oil and gas prices.

As a result of these factors, in the short-term through 2003, we expect our
revenue to decline approximately 10% to 15% from the 2002 level. In the mid to
long-term, we believe several factors influencing the global energy markets will
result in increased activity across our primary lines of business. The
fundamental factors that we expect will lead to higher levels of energy-related
capital expenditures include:

o rising global energy demand resulting from economic growth in developing
countries;

o the need for larger oil and gas transportation infrastructures in a number
of developing countries;

o some state-controlled oil and gas companies seeking foreign investment;

o the increasing role of natural gas as a fuel for power generation and other
uses in producing countries;

o initiatives to reduce natural gas flaring;

o efforts to bring stranded natural gas reserves to market; and

o aging of energy infrastructure.

Industry surveys of pipeline construction suggest that planned worldwide
pipeline construction has decreased from planned pipeline construction in 2002.
These reports indicate slightly more than $15 billion is planned to be spent
worldwide in 2003 on pipeline construction and related infrastructure compared
to approximately $25 billion planned to have been spent in 2002. We expect more
than $1.5 to $2.0 billion of these projects to meet our bidding criteria in
2003, and we expect to aggressively pursue these opportunities.

We currently have a number of significant bids outstanding with respect to
potential contract awards in Nigeria, Oman, and the United States. We are also
preparing bids with respect to potential contract awards in Mexico, Nigeria,
Oman, and the United States. Finally, we expect to prepare and submit bids with
respect to various other potential construction and engineering projects in
Africa, Asia, the Middle East, North America and South America during 2003.

BUSINESS STRATEGY

We seek to maximize stockholder value through our business strategy. The
core elements of this strategy are to:

o concentrate on projects and prospects in areas where we can be most
competitive and obtain the highest profit margins;

o pursue EPC contracts with a renewed vigor because they can often yield
higher profit margins on the engineering and construction components of the
contract than stand alone contracts for similar services;

o maintain our commitment to safety and quality;

o focus on performance and project execution in order to maximize the profit
potential on each contract awarded;

o develop alliances with companies who will enhance our capabilities and
competitiveness in markets throughout the world;

o pursue growth through expansion and acquisitions while maintaining a strong
balance sheet;

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o pursue alliances and equity investment opportunities with clients to secure
long-term contracts which provide greater stability in our future revenue
and income streams; and

o maintain operating and overhead costs commensurate with anticipated levels
of revenue.

In pursuing this strategy, we rely on the competitive advantage gained from
our experience in completing logistically complex and technically difficult
projects in remote areas with difficult terrain and harsh climatic conditions,
and our experienced multinational work force of approximately 4,600 employees
(including those of our joint ventures), of whom more than 66 percent are
citizens of the respective countries in which they work. Recognizing them as our
most sustainable competitive advantage, we continue to invest in our employees
to ensure that they have the training and tools needed to be successful in
today's challenging environment.

Over the past three years we have been able to manage and maintain
operating and overhead costs commensurate with a level that is justified by
expected revenue. To accomplish this objective, we downsized operations or
offices in work countries where expected returns have not materialized and
identified and sold surplus equipment. In addition, we terminated certain
employee benefit plans and in some cases replaced them with other benefits which
controlled our costs and enhanced our competitive position in recruiting and
retaining experienced personnel. We remain committed to maintaining overhead
costs justified by anticipated revenue run rates.

In carrying out the core elements of our long-term strategies, we build
from the following:

Geographic Area. Our objective is to maintain and enhance our presence in
regions where we have developed a strong base of operations, such as Africa, the
Middle East, North America and South America, by capitalizing on our local
experience, established contacts with local customers and suppliers, and
familiarity with local working conditions. In pursuing this strategy, we seek to
identify a limited number of long-term niche markets in which we can outperform
the competition and establish an advantageous position. In 2001, to establish
our presence in Canada, we acquired MSI Energy Services Inc., a Canadian
contractor active in the oil sands producing area of Northern Alberta. In 2002,
we acquired the Mt. West Group to increase and complement our engineering and
construction, and EPC capabilities. The acquisition of the Mt. West Group brings
high quality gas processing and facilities engineering and construction services
to improve our services capabilities worldwide. The Mt. West Group acquisition
also enhances our presence in the northwestern United States. We also seek to
establish or enhance our presence in other strategically important areas, such
as Algeria, Bolivia, Cameroon, Chad, Ecuador, Saudi Arabia and other selected
areas.

EPC Contracts. We will continue to pursue EPC contracts because they can
often yield higher profit margins on the engineering and construction components
of the contract compared to stand alone contracts for similar services. In
performing EPC contracts, we participate in numerous aspects of a project. We
are therefore able to efficiently determine the design, permitting, procurement
and construction sequence for a project in connection with making engineering
decisions. EPC contracts enable us to deploy our resources more efficiently and
capture those efficiencies in the form of improved margins on the engineering
and construction components of these projects. We intend to capitalize on being
one of the few pipeline construction companies worldwide with the ability to
provide the full range of EPC services in order to capture more of this
business.

Focus on Superior Project Execution. We will continue to focus on
performance and project execution in order to maximize customer satisfaction and
the profit potential on each contract awarded. By doing so, we also enhance our
potential for repeat business and/or add-on engineering or specialty service
contracts.

Quality Improvements. Our quality program enhances our ability to meet the
specific requirements of our customers through continuous improvement of all our
business processes, while at the same time improving competitiveness and
profitability. ISO 9000, an internationally recognized verification system for
quality management, has in recent years been made a criterion for
prequalification of contractors by various clients and potential clients, and
this trend is expected to continue. The certification process involves a
rigorous review and audit of our management processes and quality control
procedures. Currently, four of our key operating subsidiaries have ISO 9000,
(1994) certification. We expect to begin recertification to ISO 9000, (2000)
requirements, recently accepted as the new industry standard, as those
certifications are renewed.

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Strategic Alliances. We seek to establish strategic alliances with
companies whose resources, skills and strategies are complementary to and are
likely to enhance our business opportunities, including the formation of joint
ventures and consortia to achieve a competitive advantage and share risks. Such
alliances have already been established in a number of countries and we
currently have alliances to pursue or perform work in Bolivia, Cameroon, Canada,
Chad, Ecuador, Saudi Arabia, the United States, and Venezuela. As a related
strategy, we may decide to make an equity investment in a project in order to
enhance our competitive position and/or maximize project returns. This strategy
led in 1998 to our Venezuelan subsidiary taking a 10 percent equity interest in
a joint venture which was awarded a 16-year contract to operate, maintain and
refurbish water injection facilities in Lake Maracaibo, Venezuela.

Acquisitions. We seek to identify, evaluate and acquire companies that
offer growth opportunities and that complement our resources and capabilities.
Consistent with this strategy, in January 2000, we acquired Rogers & Phillips,
Inc., or "RPI," a closely held pipeline construction company in Houston, Texas
with an experienced management team and a strong market position in the U.S.
Gulf Coast area. In 2001, we acquired MSI, a closely held facility maintenance
and pipeline construction company based in Alberta, Canada. In October 2002, we
acquired Mt. West Group, a group of four closely held engineering and
construction companies operating principally in the western half of the United
States.

Conservative Financial Management. We emphasize the maintenance of a strong
balance sheet in financing the development and growth of our business. We also
seek to obtain contracts that are likely to result in recurring revenue in order
to partially mitigate the cyclical nature of our construction and engineering
businesses. For example, we generally seek to obtain specialty services
contracts of more than one year in duration. Additionally, whenever possible we
act to minimize our exposure to currency fluctuations through the use of U.S.
dollar-denominated contracts and by limiting payments in local currency to
approximately the amount of local currency expenses. We continue to exercise a
disciplined approach to controlling costs at both project and administrative
levels.

WILLBROS BACKGROUND

We are the successor to the pipeline construction business of Williams
Brothers Company, which was started in 1908 by Miller and David Williams. In
1949, the business was reconstituted and acquired by the next generation of the
Williams family. The resulting enterprise eventually became The Williams
Companies, Inc., a major U.S. energy and interstate natural gas and petroleum
products transportation company ("Williams").

In 1975, Williams elected to discontinue its pipeline construction
activities and, in December 1975, sold substantially all of the non-U.S. assets
and international entities comprising its pipeline construction division to a
newly formed Panama corporation (eventually renamed Willbros Group, Inc.) owned
by employees of the division. In 1979, Willbros Group, Inc. retired its debt
incurred in the acquisition by selling a 60 percent equity interest to Heerema
Holding Construction, Inc. In 1986, Heerema acquired the balance of Willbros
Group, Inc., which then operated as a wholly owned subsidiary of Heerema until
April 1992.

In April 1992, Heerema sold Willbros Group, Inc. to a corporation formed on
December 31, 1991 in the Republic of Panama by members of the company's
management at the time, certain other investors, and Heerema. Subsequently, the
original Willbros Group, Inc. was dissolved into the acquiring corporation which
was renamed "Willbros Group, Inc." In August 1996, we completed an initial
public offering of common stock in which Heerema sold all of its shares of
common stock; and in October 1997 we completed a secondary offering in which the
other investors sold substantially all of their shares of common stock. In May
2002, we completed a third public offering of common stock, which was used to
repay debt and to provide cash for general corporate purposes.

WILLBROS MILESTONES

The following are selected milestones which we have achieved:

1915 Began pipeline work in the United States.

1939 Began international pipeline work in Venezuela.

1942-44 Served as principal contractor on the "Big Inch" and "Little Big
Inch" War Emergency Pipelines in the United States which delivered
Gulf Coast crude oil to the Eastern Seaboard.

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1947-48 Built the 370-mile (600-kilometer) Camiri to Sucre and Cochabamba
crude oil pipeline in Bolivia.

1951 Completed the 400-mile (645-kilometer) western segment of the
Trans-Arabian Pipeline System in Jordan, Syria and Lebanon.

1954-55 Built Alaska's first major pipeline system, consisting of 625 miles
(1,000 kilometers) of petroleum products pipeline, housing,
communications, two tank farms, five pump stations, and marine dock
and loading facilities.

1956-57 Led a joint venture which constructed the 335-mile (535-kilometer)
southern section of the Trans-Iranian Pipeline, a products pipeline
system extending from Abadan to Tehran.

1958 Constructed pipelines and related facilities for the world's largest
oil export terminal at Kharg Island, Iran.

1960 Built the first major liquefied petroleum gas pipeline system, the
2,175-mile (3,480-kilometer) Mid-America Pipeline in the United
States, including six delivery terminals, two operating terminals, 13
pump stations, communications and cavern storage.

1962 Began operations in Nigeria with the commencement of construction of
the TransNiger Pipeline, a 170-mile (275-kilometer) crude oil
pipeline.

1964-65 Built the 390-mile (625-kilometer) Santa Cruz to Sica Sica crude oil
pipeline in Bolivia. The highest altitude reached by this line is
14,760 feet (4,500 meters) above sea level, which management believes
is higher than the altitude of any other pipeline in the world.

1965 Began operations in Oman with the commencement of construction of the
175-mile (280-kilometer) Fahud to Muscat crude oil pipeline system.

1967-68 Built the 190-mile (310-kilometer) Orito to Tumaco crude oil pipeline
in Colombia, one of five Willbros crossings of the Andes Mountains, a
project notable for the use of helicopters in high-altitude
construction.

1969 Completed a gas gathering system and 105 miles (170 kilometers) of
42-inch trunkline for the Iranian Gas Trunkline Project (IGAT) in
Iran to supply gas to the USSR.

1970-72 Built the Trans-Ecuadorian Pipeline, crossing the Andes Mountains,
consisting of 315 miles (505 kilometers) of 20- and 26-inch pipeline,
seven pump stations, four pressure-reducing stations and six storage
tanks. Considered the most logistically difficult pipeline project
ever completed at the time.

1974-76 Led a joint venture which built the northernmost 225 miles (365
kilometers) of the Trans-Alaskan Pipeline System.

1974-76 Led a joint venture which constructed 290 miles (465 kilometers) of
pipeline and two pump stations in the difficult to access western
Amazon basin of Peru. Another logistics challenge which required
lightering from shipping on the Amazon River.

1974-79 Designed and engineered the 500-mile (795-kilometer) Sarakhs-Neka gas
transmission line in northeastern Iran.

1982-83 Built the Cortez carbon dioxide pipeline system in the southwestern
United States, consisting of 505 miles (815 kilometers) of 30-inch
pipeline.

1984-86 Constructed, through a joint venture, the All American Pipeline
System, a 1,240-mile (1,995-kilometer), 30-inch heated pipeline,
including 23 pump stations, in the United States.

1984-95 Developed and furnished a rapid deployment fuel pipeline distribution
and storage system for the U.S. Army which was used extensively and
successfully in Saudi Arabia during Operation Desert Shield/Desert
Storm in 1990/1991 and in Somalia during 1993.

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1985-86 Built a 185-mile (300-kilometer), 24-inch crude oil pipeline from
Ayacucho to Covenas in Colombia, another Andean challenge.

1987 Rebuilt 25 miles (40 kilometers) of the Trans-Ecuadorian crude oil
pipeline mobilizing to Ecuador in two weeks and completing work
within six months after major portions were destroyed by an
earthquake.

1988-92 Performed project management, engineering, procurement and field
support services to expand the Great Lakes Gas Transmission System in
the northern United States. The expansion involved modifications to
13 compressor stations and the addition of 660 miles (1,060
kilometers) of 36-inch pipeline in 50 separate loops.

1989-92 Provided pipeline engineering and field support services for the Kern
River Gas Transmission System, a 36-inch pipeline project extending
over 685 miles (1,100 kilometers) of desert and mountains from
Wyoming to California in the United States.

1992-93 Rebuilt oil field gathering systems in Kuwait as part of the post-war
reconstruction effort.

1996 Listed shares upon completion of an initial public offering of Common
Stock on the NYSE under the symbol "WG."

1996-97 Achieved ISO Certification for seven operating companies.

1996-98 Performed an EPC contract with Asamera (Overseas) Limited to design
and construct pipelines, flowlines and related facilities for the
Corridor Block Gas Project located in southern Sumatra, Indonesia.

1997-98 Carried out a contract for the construction of 120 miles (200
kilometers) each of 36- and 20-inch pipelines in the Zuata Region of
the Orinoco Belt in Venezuela.

1997-98 Completed an EPC contract for El Paso Natural Gas Company and
Gasoductos de Chihuahua, a joint venture between El Paso and PEMEX,
to construct a 45-mile (75-kilometer) gas pipeline system in Texas
and Mexico.

1999-00 Carried out a contract through a joint venture to construct a
492-mile (792-kilometer), 18-inch gas pipeline in Australia.

2000 Acquired Rogers & Phillips, Inc., a United States pipeline
construction company.

2000 Awarded an EPC contract for the 665-mile (1,070-kilometer), 30-inch
crude oil Chad-Cameroon Pipeline Project, through a joint venture
with another international contractor.

2000 Relocated the Willbros USA, Inc. administrative headquarters from
Tulsa, Oklahoma to Houston, Texas.

2001 Acquired MSI, an Alberta, Canada based contractor, working in the oil
sands area and establishing a presence in Canada.

2001 Ended year with record backlog of $407.6 million.

2001-02 Continued work on the Explorer Pipeline Mainline expansion project,
adding 12 new pump stations and additional storage to this products
pipeline from the Gulf Coast to central Illinois.

2002 Acquired Mt. West Group to enhance presence in the western United
States, and to improve our service capabilities worldwide.

2002 Completed engineering and project management of the Gulfstream
project, a $1.6 billion natural gas pipeline system from Mobile,
Alabama crossing the Gulf of Mexico and serving markets in central
and southern Florida.

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2002 Elected Michael F. Curran CEO, succeeding Larry Bump, who retired
after 22 years as Willbros CEO.

2002 Completed the Centennial Pipeline Project: FERC application support,
engineering, procurement, construction and construction management of
new-build and conversion to refined products service of a natural gas
system from Gulf Coast to Midwest United States, 797 miles (1,275
kilometers) of 24-inch and 26-inch pipelines and facilities.

SERVICES PROVIDED

We operate in a single operating segment providing contract construction,
engineering and specialty services to the oil, gas and power industries. The
following table reflects our contract revenue by type of service for 2002, 2001
and 2000.

CONSTRUCTION SERVICES

We are one of the most experienced contractors serving the oil, gas and
power industries. Our construction capabilities include the expertise to
construct and replace large-diameter cross-country and offshore pipelines; to
construct oil and gas production facilities, pump stations, flow stations, gas
compressor stations, gas processing facilities and other related facilities; and
to construct offshore platforms, piers, docks and bridges.

Pipeline Construction. World demand for pipelines results from the need to
move millions of barrels of crude oil and petroleum products and billions of
cubic feet of natural gas to refiners, processors and consumers each day.
Pipeline construction is capital-intensive, and we own, lease, operate and
maintain a fleet of specialized equipment necessary for us to engage in the
pipeline construction business. We focus on pipeline construction activity in
remote areas and harsh climates where we believe our experience gives us a
competitive advantage. We believe that we have constructed more miles of
pipeline than any other private sector company.

The construction of a cross-country pipeline involves a number of
sequential operations along the designated pipeline right-of-way. These
operations are virtually the same for all overland pipelines, but personnel and
equipment may vary widely depending upon such factors as the time required for
completion, general climatic conditions, seasonal weather patterns, the number
of road crossings, the number and size of river crossings, terrain
considerations, extent of rock formations, density of heavy timber and amount of
swamp.

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Onshore construction often involves separate crews to perform the following
different functions:

o clear the right-of-way;

o grade the right-of-way;

o excavate a trench in which to bury the pipe;

o haul pipe to intermediate stockpiles from which stringing trucks carry pipe
and place individual lengths (joints) of pipe alongside the ditch;

o bend pipe joints to conform to changes of direction and elevation;

o clean pipe ends and line up the succeeding joint;

o perform various welding operations;

o non-destructively inspect welds;

o clean pipe and apply anti-corrosion coatings;

o lower pipe into the ditch;

o backfill the ditch;

o bore and install highway and railroad crossings;

o drill, excavate or dredge and install pipeline river crossings;

o tie in all crossings to the pipeline;

o install mainline valve stations;

o conduct pressure testing;

o install cathodic protection system; and

o perform final clean up.

Special equipment and techniques are required to construct pipelines across
wetlands and offshore. We use swamp pipelaying methods extensively in Nigeria,
where a significant portion of our construction operations are carried out in
the Niger River delta. In addition to our primary offshore and swamp equipment
such as laybarges, dredges and swamp backhoes, we have a substantial investment
in support vessels, including tugboats, barges, supply boats and houseboats,
which are required in order to maintain our capabilities in offshore and swamp
pipeline construction.

Station Construction. Oil and gas companies require various facilities in
the course of producing, processing, storing and moving oil and gas. We are
experienced in and capable of constructing facilities such as pump stations,
flow stations, gas processing facilities, gas compressor stations and metering
stations. The acquisition of the Mt. West Group, which provides a full range of
services for the engineering, design, procurement and construction of
processing, pumping, compression, and metering facilities, has substantially
enhanced our expertise in this area. We are capable of building such facilities
onshore, offshore in shallow water or in swamp locations. The construction of
station facilities, while not nearly as capital-intensive as pipeline
construction, is generally characterized by complex logistics and scheduling,
particularly on projects in locations where seasonal weather patterns limit
construction options, and in countries where the importation process is
difficult. Our capabilities have been enhanced by our experience in dealing with
such challenges in numerous countries around the world.

Marine Construction. Our marine fleet includes lay barges, pile driving
barges, derrick barges and other vessels, which support marine construction
operations, including the "Willbros 318" combination derrick/lay barge which
performs shallow water pipelay and maintenance projects in offshore West Africa.
This 300-foot (91-meter) barge is capable of laying up to 24-inch diameter pipe
in up to 200-foot water depths. During 2001, we purchased the "WB82"
work/derrick barge to complement our West Africa marine construction operations.
The WB82 work/derrick barge is a 253-foot (78-meter) barge with accommodations
for 135 personnel. The WB82 is equipped with a 100-ton revolving crane and is
configured to support the construction, maintenance and repair of marine
facilities. In Venezuela, we construct and install fixed drilling and production
platforms in Lake Maracaibo and near shore locations, and we are also capable of
building bridges, docks, jetties and mooring facilities.

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ENGINEERING SERVICES

We provide project management, engineering, and material procurement
services to the oil, gas and power industries and government agencies. We
specialize in providing engineering services to assist clients in constructing
or expanding pipeline systems, compressor stations, pump stations, fuel storage
facilities, and field gathering and production facilities. Over the years, we
have developed expertise in addressing the unique engineering challenges
involved with pipeline systems and associated facilities to be installed where
climatic conditions are extreme, areas of environmental sensitivity must be
crossed, fluids which present extreme health hazards must be transported, and
fluids which present technical challenges regarding material selection are to be
transported.

To complement our engineering services, we also provide a full range of
field services, including:

o surveying;

o right-of-way acquisition;

o material receiving and control;

o construction inspection; and

o facilities startup assistance.

These services are furnished to a number of oil, gas, power and government
clients on a stand alone basis and are also provided as part of EPC contracts
undertaken by our company.

The buying process of our customers includes close scrutiny of our
experience and capabilities with respect to project requirements. Some of those
requirements are:

Climatic Constraints. In the design of pipelines and associated facilities
to be installed in harsh environments, special provisions for metallurgy of
materials and foundation design must be addressed. We are experienced in
designing pipelines for arctic conditions, where permafrost and extremely low
temperatures are prevalent, desert conditions, mountainous terrain, swamps and
offshore.

Environmental Impact of River Crossings/Wetlands. We have considerable
capability in designing pipeline crossings of rivers, streams and wetlands in
such a way as to minimize environmental impact. We possess expertise to
determine the optimal crossing techniques, such as open cut,
directionally-drilled or overhead, and to develop site-specific construction
methods to minimize bank erosion, sedimentation and other environmental impacts.

Seismic Design and Stress Analysis. Our engineers are experienced in
seismic design of pipeline crossings of active faults and areas where
liquefaction or slope instability may occur due to seismic events. Our engineers
also carry out specialized stress analyses of piping systems that are subjected
to expansion and contraction due to temperature changes, as well as loads from
equipment and other sources.

Hazardous Materials. Special care must be taken in the design of pipeline
systems transporting sour gas. Sour gas not only presents challenges regarding
personnel safety since hydrogen sulfide leaks can be extremely hazardous, but
also requires that material be specified to withstand highly corrosive
conditions. Our engineers have extensive natural gas experience which includes
design of sour gas systems.

Hydraulics Analysis for Fluid Flow in Piping Systems. We employ engineers
with the specialized knowledge necessary to address properly the effects of both
steady state and transient flow conditions for a wide variety of fluids
transported by pipelines, including natural gas, crude oil, refined petroleum
products, natural gas liquids, carbon dioxide and water. This expertise is
important in optimizing the capital costs of pipeline projects where pipe
material costs typically represent a significant portion of total project
capital costs.

We have developed significant expertise with respect to each of the
following:

Natural Gas Transmission Systems. The expansion of the natural gas
transportation network in the United States in recent years has been a major
contributor to our engineering business. We believe we have established a strong
position as a leading supplier of project management and engineering services to
natural gas pipeline transmission companies in the United States. Since 1988, we
have provided engineering services for over 19 major natural gas pipeline
projects in the United States, totaling more than 7,000 miles (11,200
kilometers) of large diameter pipe for new systems and expansions of existing
systems.

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During this same period, we were also the engineering contractor for over 80
compressor stations, including new stations and additions to existing stations
for 17 clients.

Liquids Pipelines and Storage Facility Design. We have engineered a number
of crude oil and refined petroleum products systems throughout the world, and
have become recognized for our expertise in the engineering of systems for the
storage and transportation of petroleum products and crude oil. In 2001, we
provided engineering and field services for conversion of a natural gas system
in the Midwest United States, involving over 794 miles (1,279 kilometers) of 24
to 26-inch diameter pipeline to serve the upper Midwest with refined petroleum
products. Currently we are providing EPC services for the expansion of another
petroleum products pipeline to the Midwest involving 12 new pump stations,
modifications to another 13 pump stations and additional storage.

U.S. Government Services. Since 1981, we have established our position with
U.S. government agencies as a leading engineering contractor for jet fuel
storage and aircraft fueling facilities, having performed the engineering for
major projects at seven U.S. military bases including three air bases outside
the U.S. The award of these projects was based largely on contractor experience
and personnel qualifications. In the past three years, we have won four of six
so-called "Build, Own, and Operate", or "BOO" projects to provide fueling
facilities at four military bases in the United States for the U.S. Defense
Energy Support Center.

Design of Peripheral Systems. Our expertise extends to the engineering of a
wide range of project peripherals, including various types of support buildings
and utility systems, power generation and electrical transmission,
communications systems, fire protection, water and sewage treatment, water
transmission, roads and railroad sidings.

Material Procurement. Because material procurement plays such a critical
part in the success of any project, we maintain an experienced staff to carry
out material procurement activities. Material procurement services are provided
to clients as a complement to the engineering services performed for a project.
Material procurement is especially critical to the timely completion of
construction on the EPC contracts we undertake. We maintain a computer-based
material procurement, tracking and control system, which utilizes software
enhanced to meet our specific requirements.

SPECIALTY SERVICES

We provide a wide range of support and ancillary services related to the
construction, operation, repair and rehabilitation of pipelines. Frequently,
such services require the utilization of specialized equipment, which is costly
and requires operating expertise. Due to the initial equipment cost and
operating expertise required, many client companies hire us to perform these
services. We own and operate a variety of specialized equipment that is used to
support construction projects and to provide a wide range of oilfield services.
The following is a description of the primary types of specialty services:

Dredging. We conduct dredging operations on our own projects and as a
subcontractor to other companies. Dredging equipment is required to pump sand to
establish land locations in swamps and to excavate trenches for pipelines in
swamps or offshore locations and for river crossings. Dredging equipment is also
used to maintain required depth of navigation channels for barges and other
watercraft. This maintenance dredging is often performed under annual or
multi-year contracts. We own a fleet of dredges, including cutter suction
dredges and grab dredges, which are routinely used in Nigeria and can be readily
deployed to other projects in the region.

Pipe Coating. We own and operate coating equipment, which applies a variety
of protective anti-corrosion coatings to the external surface of line pipe. The
external coating is required to protect buried pipe in order to mitigate
external corrosion.

Concrete Weight Coating. Pipelines installed in wetlands or marine
environments must be heavy enough to offset the buoyancy forces on the buried
pipeline to keep the pipeline from floating out of the ditch. The most effective
method of achieving the required negative buoyancy is concrete coating applied
over the anti-corrosion coating to a calculated thickness. We own and operate a
facility in Nigeria to apply concrete weight coating to line pipe.

Pipe Double-Jointing. Large diameter pipe for onshore pipeline projects is
normally manufactured in 40-foot (12-meter) nominal lengths, or joints, to
facilitate ocean transportation. On long distance, large

14

diameter pipeline projects, it is usually economical to weld two joints into an
80-foot (24-meter) double-joint at a location or locations along the pipeline
route. This technique reduces the amount of field welding by 50 percent, and,
because welding is often the critical operation, it may accelerate construction
of the pipeline. The double-joint welds are made with a semi-automatic submerged
arc welding process, which produces high quality, consistent welds at lower
costs than field welding. We own two transportable self-contained double-joint
plants, which can handle 24- to 48-inch diameter pipe and are used worldwide.

Piling. Our subsidiary in Venezuela specializes in the fabrication and
installation of 36-inch concrete piles up to 220 feet (67 meters) in length.
These piles are used to construct marine facilities such as drilling platforms,
production platforms, bridges, docks, jetties and mooring dolphins. We also own
barges and pile driving equipment to install piles in Venezuela and Nigeria.

Pressure Vessels. Our Mt. West Group maintains an approved facility in
Fruita, Colorado which designs and fabricates pressure vessels for the oil and
gas processing market.

Marine Heavy Lift Services. The primary equipment used for offshore oil and
gas production facilities is usually manufactured on skids at the vendor's shop
and transported to the production site by ocean-going water craft. We own a
variety of heavy lift barges and tugs to transport such equipment from the
receiving country port to the production location and to install the equipment
on the offshore platforms. Other services include marine salvage and dry-dock
facilities for inland water barges.

Transport of Dry and Liquid Cargo. Exploration and production operations in
marine environments require logistical support services to transport a variety
of liquid and dry cargo to the work sites. We own and operate a diversified
fleet of marine equipment to provide transportation services to support these
operations in Nigeria and Venezuela.

Rig Moves. Derricks used for drilling oil and gas wells and for well
work-overs require heavy transportation equipment to move such equipment, tanks
and storage vessels between well locations. We own a fleet of heavy trucks and
trailers, and provide transportation services to our clients in Oman and
Venezuela.

Maintenance and Repair Services. We provide a wide range of other services
including mechanical, electrical, instrumentation, civil works, road maintenance
and provision of camp services for operating personnel associated with operation
and maintenance of oil and gas gathering systems and production equipment. With
the acquisition of MSI, we have expanded our maintenance and repair services to
include multi-year maintenance contracts servicing the oil sands and tailings
slurry pipelines in Northern Alberta.

Facility Operations. Subsequent to the design, commissioning and start-up
phases of contracts, we provide facility operations services to those clients
desiring third party operations of facilities.

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GEOGRAPHIC REGIONS

We operate, or have operated, in the following geographic regions: Africa,
North America, South America, the Middle East, Asia and Australia. The following
table shows our contract revenue by geographic region for 2002, 2001 and 2000.

See Note 14 of the Notes to the Consolidated Financial Statements included in
Item 8 of this report for additional information about operations in our work
countries.

Africa

Africa has been and will continue to be an important strategic market for
us. We believe that there will be opportunities to expand our business in
Africa, particularly through the development of natural gas projects. There are
large, potentially exploitable reserves of natural gas in West Africa, extending
from the Ivory Coast to Angola. Depending upon the world market for natural gas
and the availability of financing, the amount of potential new work could be
substantial. We intend to maintain our presence in Africa and seek to increase
our share of available work. Currently, we are monitoring or bidding major work
prospects in Algeria, Cameroon, Chad, Gabon, and Nigeria.

Over the past 50 years, we have completed major projects in a number of
African countries including Algeria, Cameroon, Egypt, Gabon, Ivory Coast, Libya,
Morocco and Nigeria. We have management staff resident in Africa, assisted by
engineers, managers and craftsmen with extensive African experience, capable of
providing construction expertise, repair and maintenance services, dredging
operations, pipe coating and engineering support. Strong local relationships
have enabled us to satisfy the varied needs of our clientele in this region.

We have maintained a continuous presence in Nigeria since 1962. Our
activities in Nigeria are directed from a fully staffed operational base near
Port Harcourt. This 150-acre site includes office and living facilities,
equipment and vehicle repair shops, a marine jetty, warehouses and fabrication
and lay-down areas for both the client's and our materials and spare parts. We
have diversified our range of services by adding dredging and pipe coating
expertise and drydock facilities. Having diverse yet complementary capabilities
has often given us a competitive advantage on projects that contain several
distinct work elements within a project's scope of work. For example, we believe
that we are currently the only contractor operating in the Nigerian oil and gas
sector capable, with our own resources, of executing EPC projects for pipelines
and related facilities for onshore, swamp, and offshore locations.

Since our purchase of the Willbros 318 in 1998 and the WB82 in 2001, we
have successfully completed several offshore projects, including repair and
maintenance, installation of decks and other production facilities on offshore
platforms, multiple offshore pipeline construction projects, the installation of
a single-point mooring, and various other services for our clients.

In September 2000, through a joint venture with another international
contractor, we were awarded a contract to construct the Chad-Cameroon Pipeline
Project. The project scope includes engineering, procurement, and construction
of a 665-mile (1,070-kilometer), 30-inch crude oil pipeline and fiber optic
cable from the Doba fields in Chad to an export terminal on the coast of
Cameroon. Engineering and procurement activities began in 2000. The mobilization
of the construction and the project management team to West Africa began in the
second quarter of 2001. Pipelay activities commenced in the fourth quarter of
2001 and continued in 2002. We expect the project to be substantially completed
in the second quarter of 2003.

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North America

We have provided services to the U.S. oil and gas industry for more than 80
years. We believe that the United States will continue to be an important market
for our services. Market conditions for the short-term are expected to be weaker
in 2003 than in 2002 or 2001, due in part to the poor financial condition of
many of the energy transportation companies. In order to improve their
liquidity, some of our traditional clients have sold pipeline assets in some
cases to new industry participants. We do not expect these new owners to begin
to release their capital budgets until the second half of 2003 as they complete
their evaluation of the newly acquired assets and finalize their strategies for
maximizing the return on their investments in these assets. Deregulation of the
electric power and natural gas pipeline industries in the United States has led
to the consolidation and reconfiguration of existing pipeline infrastructure and
the establishment of new energy transport systems, which we expect will result
in continued demand for our services in the mid to long-term. The demand for
natural gas for industrial and power usage in the United States should increase
the demand for additional new natural gas transportation infrastructure. We
anticipate that additional supply to satisfy such market demand for natural gas
will come from existing and new production in western Canada, the Rocky Mountain
region, the Gulf of Mexico and the Canadian Atlantic offshore region.
Environmental concerns will likely continue to require careful, thorough and
specialized professional engineering and planning for all new facilities within
the oil, gas and power sectors. Furthermore, the demand for replacement and
rehabilitation of pipelines is expected to increase as pipeline systems in the
United States approach the end of their design lives and population trends
influence overall energy needs.

We are recognized as an industry leader in the United States for providing
state-of-the-art project management, engineering, procurement and construction
services. We maintain a staff of experienced management, construction,
engineering and support personnel in the United States. Currently, we are
providing project management and engineering services for the Blue Atlantic
Pipeline Project which is envisioned to bring natural gas from offshore
northeast Canada to Nova Scotia, New York and New Jersey via submarine pipeline
and for El Paso's Seafarer Project, which will transport gas from a
regasification plant in the Bahama Islands to Florida. We are also under
contract to provide project management, engineering, procurement and
construction services for the Explorer Pipeline Mainline Expansion Project, to
increase annual throughput to over 47 million barrels, transporting refined
products from the Texas Gulf Coast to the Chicago area. We are providing
engineering services for the capital budget items for the third consecutive year
to the Panhandle Company (currently a unit of CMS Energy, with sale pending to
Southern Union), and we are providing project management, engineering and
construction services, under various contracts, to Southern Natural Gas
Company's Southern Expansion Project to increase the capacity to transport
natural gas in their existing system in Mississippi, Alabama and Georgia.

We have also provided significant engineering services to the U.S.
Government during the past 15 years, particularly in fuel storage and
distribution systems and aircraft fueling facilities. Currently, we own and
operate two fueling facilities at Ft. Bragg, North Carolina, which were
constructed by us in 1998 and a similar facility completed in 2000 at Twentynine
Palms Marine Corps Base in California. In 2001, we were awarded contracts for
similar facilities at Ft. Stewart, Georgia and Ft. Gordon, Georgia; these
facilities were completed and operational in 2002. In 2003 we expect to bid on
six similar facilities at various U.S. government bases.

On January 24, 2000, we acquired Rogers & Phillips, Inc., a closely held
pipeline construction company in Houston, Texas, with an experienced management
team and a strong market position in the U.S. Gulf Coast area. On October 12,
2001, we acquired MSI Energy Services Inc., a Canadian contractor with a strong
position in the oil sands area of northern Alberta; an area in which production
is projected to expand from 600,000 barrels per day in 2000 to more than 1.8
million barrels per day by 2010. On October 23, 2002, we acquired the Mt. West
Group to enhance our gas processing and facilities engineering and construction
services. Our MSI Energy Services Inc. subsidiary in Canada has maintenance
contracts with producers in the oil sands area of Northern Alberta. The Mt. West
Group is providing engineering, design and construction services to clients in
the Rocky Mountain region. These acquisitions add technical management
capabilities to improve and enhance our service offerings to our clients
worldwide. Additionally, these acquired companies extend Willbros' presence to
new geographic areas.

South America

We have been active in South America since 1939. Developments involving
political changes and privatization efforts in some of the South American
countries make this region attractive to us. In particular,

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privatization and deregulation in this region are allowing more foreign and
domestic private investment in the energy sector which, until recently, had
traditionally been controlled by state-owned energy companies. The medium to
long-term market outlook has not changed, but in the short-term, the market in
Venezuela has been disrupted by political instability. We expect gas
transportation projects in Bolivia, Brazil, Chile, Peru and Venezuela to
continue to evolve to meet increasing demand for gas for industrial and power
usage in the rapidly growing urban areas. In Venezuela, Colombia and Ecuador,
crude oil transportation systems will likely need to be built and upgraded so
that the vast crude reserves in these countries can be efficiently exported to
the world market. We are aggressively pursuing business opportunities throughout
South America and currently bidding work or monitoring prospects in Bolivia,
Brazil, Ecuador, Peru and Venezuela.

We have performed numerous major projects in South America, where our
accomplishments include the construction of five major pipeline crossings of the
Andes Mountains and setting a world altitude record for constructing a pipeline.
Our largest project in South America was a turnkey project for the procurement
and construction of the Alto Magdalena Crude Oil Pipeline System in Colombia,
awarded to us in 1989 and completed in 1990.

Venezuela is the largest oil producer in South America and conservative
estimates place proven reserves at more than 77 billion barrels of oil and 146
trillion cubic feet of natural gas. Venezuela has redirected its energy
initiatives to include development of its significant natural gas reserves. The
government of Venezuela, under Presidente Hugo Chavez, has separated the natural
gas initiative from the oil interests of Petroleos de Venezuela, S. A., or
"PDVSA", the government owned oil company, to place natural gas projects on an
equal footing with oil projects. This new emphasis on natural gas projects
should translate into more demand for natural gas engineering and construction
capabilities such as ours; however, at present, the timing of such projects is
uncertain. The Chavez government has also experienced extreme civil unrest
culminating in a national strike beginning in December 2002. This strike
resulted in a decision by us in mid-December 2002, to suspend all work in
Venezuela until satisfactory conditions resume for the safe and efficient
conduct of project activities. In mid-March 2003, the impact of the strike had
moderated, but business and commercial activity had not yet returned to
pre-strike levels. It is difficult to estimate the impact of this situation on
our revenue and earnings quarter to quarter and for the year ended December 31,
2003 at this time. While we have seen some reductions in revenue and earnings in
the first quarter of 2003, we are not able to determine if these delays in
project completion will be made up by year end. The outcome of negotiations
between the government and opposition groups is uncertain, and significant new
foreign investment is unlikely until these negotiations are satisfactorily
completed.

In Venezuela, we maintain a fully staffed facility including offices,
equipment, yard and dock facilities on a 15-acre waterfront site on Lake
Maracaibo. We also have a representation office in Caracas. Resident personnel
provide services for both onshore and offshore projects. Services include
pipeline construction, repair and maintenance services, fabrication and
installation of concrete piles and platforms, marine related services,
engineering support and other needed services. In 1998, a consortium in which we
hold a 10 percent equity interest was awarded a 16-year contract valued at
$785.0 million to operate, maintain and refurbish the Lake Maracaibo water
injection program for PDVSA Gas. In 2000, we completed the construction of a
major crude oil pumping station for Petrozuata. Current activities include
operations, maintenance and refurbishment services for the above-mentioned
consortium and recurring service and maintenance work for various clients. In
2002, in a joint contract with a Venezuelan company, we were awarded a project
for the engineering, procurement and construction of a marine loading terminal
for Petrolera Ameriven, a joint venture of Conoco Phillips, Chevron Texaco and
PDVSA.

Early in 2002, we were selected, in an alliance with another international
contractor, to construct a 144-mile (230-kilometer) 32-inch natural gas pipeline
in Bolivia for the Transierra consortium. At December 31, 2002, this project was
approximately 93% complete with the remainder of the work to be finished in the
first half of 2003.

Middle East

The threat of hostilities in the Middle East has caused the short-term
outlook for projects to be very limited. However, we continue to believe that
increased exploration and production activity in the Middle East will be the
primary factor influencing the construction of new energy transportation systems
in that region. The majority of future transportation projects in the region are
expected to be centered around natural gas due to increased regional demand,
governments' recognition of gas as an important asset and an underdeveloped gas
transportation infrastructure throughout the region. We continue to monitor
project

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opportunities throughout the Middle East and are currently investigating
prospects in Abu Dhabi, Egypt, Jordan, Kuwait, Qatar, Saudi Arabia and Yemen,
and bidding on projects in Oman.

Our operations in the Middle East date back to 1948. We have worked in most
of the countries in the region, with particularly heavy involvement in Iran,
Kuwait, Oman and Saudi Arabia. Currently, we have ongoing operations in Oman,
where we have been active for more than 35 years. We maintain a fully staffed
facility in Oman with equipment repair facilities and spare parts on site and
offer construction expertise, repair and maintenance services, engineering
support, oil field transport services, materials procurement and a variety of
related services to our clients. In November 1999, we were awarded a five-year
contract by Oman LNG for general maintenance services. Other current operations
in Oman include a general oilfield services contract for Occidental of Oman and
an ad hoc service contract for Petroleum Development Oman. Work carried out in
Oman during 2002 and 2001 includes pipeline construction, pipeline maintenance,
mechanical services and flowline work.

Asia and Australia

Australia and Asia continue to be geographic areas of interest due to the
relative abundance of undeveloped natural gas resources. That abundance, and
environmental concerns, favor the use of natural gas for power generation and
industrial and residential usage in Australia and Asia. However, economic and
political difficulties in certain countries in the region caused us to close our
Jakarta, Indonesia office in 2001. We are currently conducting marketing and
business development activities in this market.

BACKLOG

Backlog consists of anticipated revenue from the uncompleted portions of
existing contracts and contracts whose award is reasonably assured. At December
31, 2002, backlog was $216.0 million, compared to $407.6 million at December 31,
2001. We believe the backlog figures are firm, subject only to the cancellation
and modification provisions contained in various contracts. We expect that
approximately $187.0 million, or approximately 87%, of our existing backlog at
December 31, 2002, will be recognized in revenue during 2003. Historically, a
substantial amount of our revenue in a given year has not been reflected in our
backlog at the beginning of that year. Additionally, due to the short duration
of many jobs, revenue associated with jobs performed within a reporting period
will not be reflected in backlog. We generate revenue from numerous sources,
including contracts of long or short duration entered into during a year as well
as from various contractual processes, including change orders, extra work,
variations in the scope of work and the effect of escalation or currency
fluctuation formulas. These revenue sources are not added to backlog until
realization is assured.

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The following is a breakdown of our backlog by geographic region as of
December 31, 2002 and 2001:

The $191.6 million (47%) decrease in backlog is due mainly to the
substantial progress made toward completion of the Chad Cameroon Project and the
Explorer Pipeline Mainline Expansion Project during 2002. At December 31, 2001
these two projects represented $271.3 million of our backlog. At December 31,
2002 these same projects represented only $65.2 million of our backlog.

A substantial percentage of our revenue in past years resulted from
contracts entered into during that year or the immediately preceding year. The
following table sets forth revenue for each of the last five years as a
percentage of backlog at the beginning of each such year:

No assurance can be given that our future experience will be similar to our
historical results in this respect.

COMPETITION

We operate in a highly competitive environment. We compete against
government-owned or supported companies and other companies that have financial
and other resources substantially in excess of those available to us. In certain
markets, we compete against national and regional firms against which we may not
be price competitive.

Our primary competitors for international onshore construction projects in
developing countries include Technip (France), CCC (Lebanon), Saipem (Italy),
Spie-Capag (France), Techint (Argentina), Bechtel (U.S.), Stroytransgaz
(Russia), Tekfen (Turkey), and Nacap (Netherlands). We believe that we are one
of the few companies among our competitors possessing the ability to carry out
large projects in developing countries on a turnkey basis (engineering,
procurement and construction), without subcontracting major elements of the
work. As a result, we may be more cost effective than our competitors in certain
instances.

We have different competitors in different markets. In Nigeria, we compete
for pipe coating work with Bredero Price (Netherlands), while our dredging
competitors include Bos Kalis Westminster (Netherlands), Dredging International
(Belgium), Bilfinger + Berger (Germany), Nigerian Dredging & Marine
(Netherlands) and Ham Dredging (Netherlands). In offshore West Africa, we
compete with SaiBos, Stolt Offshore, Global Industries, Inc., and Adamac Group.
In Oman, competitors in oil field transport services include Desert Line, Al
Ahram, Hamdam and TruckOman, all Omani companies; and in construction and the
installation of flowlines and mechanical services, we compete with Taylor
Woodrow Towell (Britain), CCC (Lebanon), Dodsal (India), Saipem (Italy), Desert
Line (Oman) and Galfar (Oman). In Venezuela, competitors in marine support
services include Raymond de Venezuela, Petrolago, and Siemogas, all Venezuelan
companies. In the Southern Cone of South America, major competitors include
Techint (Argentina), Conduto (Brazil), Odebrecht (Brazil), and Contreras
Hermanos (Argentina).

20

In the United States, our primary construction competitors on a national
basis include Associated Pipeline Contractors, Gregory & Cook, Murphy Brothers,
H. C. Price, Sheehan Pipeline Construction, U.S. Pipeline and Welded
Construction. In addition, there are a number of regional competitors, such as
Sunland, Dyess, Flint, and Jomax.

Primary competitors for engineering services include:

o Alliance Engineering;

o Bechtel;

o Colt Engineering;

o Fluor;

o Gulf Interstate;

o Jacobs Engineering;

o Kellogg Brown and Root;

o Mustang Engineering;

o Paragon Engineering;

o Snamprogetti;

o Technip;

o Trigon Sheehan; and

o Universal Ensco.

JOINT VENTURES

From time to time in the ordinary course of our business, we enter into
joint venture agreements with other contractors for the performance of specific
projects. Typically, we seek one or more joint venture partners when a project
requires local content, equipment, manpower or other resources beyond those we
have available to complete work in a timely and efficient manner or when we wish
to share risk on a particularly large project. Our joint venture agreements
identify the work to be performed by each party, procedures for managing the
joint venture work, the manner in which profits and losses will be shared by the
parties, the equipment, personnel or other assets that each party will make
available to the joint venture and the means by which any disputes will be
resolved. We currently are constructing the onshore pipeline for the Chad
Development Project in Chad and Cameroon, jointly with Spie-Capag (Jersey) Ltd.

We are the managing partner for the joint venture for the performance of
the Chad pipeline project. We expect to complete this project, which involves
the construction of a 1,070 kilometer crude oil pipeline, in the second quarter
of 2003.

CONTRACT PROVISIONS AND SUBCONTRACTING

Most of our revenue is derived from construction, engineering and specialty
services contracts. We enter into four basic types of construction contracts:

o firm fixed-price or lump sum fixed-price contracts providing for a single
price for the total amount of work or for a number of fixed lump sums for
the various work elements comprising the total price;

o unit-price contracts which specify a price for each unit of work performed;

o time and materials contracts under which personnel and equipment are
provided under an agreed schedule of daily rates with other direct costs
being reimbursable; and

o a combination of the above (such as lump sums for certain items and unit
rates for others).

We enter into three types of engineering contracts:

o firm fixed-price or lump sum fixed-price contracts;

o time and materials contracts pursuant to which engineering services are
provided under an agreed schedule of hourly rates for different categories
of personnel, and materials and other direct costs are reimbursable; and

o cost-plus-fee contracts, common with U.S. government clients under which
income is earned solely from the fee received. Cost-plus-fee contracts are
often used for material procurement services.

Specialty services contracts generally are unit-price contracts, which
specify a price payable per unit of work performed (e.g., per cubic meter, per
lineal meter, etc.). Such contracts usually include hourly rates for

21

various categories of personnel and equipment to be applied in cases where no
unit price exists for a particular work element. Under a services contract, the
client is typically responsible for supplying all materials; a
cost-plus-percentage-fee provision is generally included in the contract to
enable the client to direct the contractor to furnish certain materials.

Changes in scope of work are defined by change orders agreed to by both
parties. These changes can affect our contract revenue either positively or
negatively.

We usually obtain contracts through competitive bidding or through
negotiations with long-standing clients. We are typically invited to bid on
projects undertaken by our clients who maintain approved bidder lists. Bidders
are pre-qualified by virtue of their prior performance for such clients, as well
as their experience, reputation for quality, safety record, financial strength
and bonding capacity.

In evaluating bid opportunities, we consider such factors as the client,
the geographic location, the difficulty of the work, our current and projected
workload, the likelihood of additional work, the project's cost and
profitability estimates, and our competitive advantage relative to other likely
bidders. We give careful thought and consideration to the political and
financial stability of the country or region where the work is to be performed.
We use a computer-based estimating system. The bid estimate forms the basis of a
project budget against which performance is tracked through a project control
system, enabling management to monitor projects effectively.

All U.S. government contracts and many of our other contracts provide for
termination of the contract for the convenience of the client. In addition, many
contracts are subject to certain completion schedule requirements that include
liquidated damages in the event schedules are not met as the result of
circumstances within our control.

We act as prime contractor on a majority of the construction projects we
undertake. In our capacity as prime contractor and when acting as a
subcontractor, we perform most of the work on our projects with our own
resources and typically subcontract only such specialized activities as
hazardous waste removal, non-destructive inspection, tank erection, catering and
security. In the construction industry, the prime contractor is normally
responsible for the performance of the entire contract, including subcontract
work. Thus, when acting as a prime contractor, we are subject to the risk
associated with the failure of one or more subcontractors to perform as
anticipated.

A substantial portion of our projects are currently performed on a
fixed-price basis. Under a fixed-price contract, we agree on the price that we
will receive for the entire project, based upon specific assumptions and project
criteria. If our estimates of our own costs to complete the project are below
the actual costs that we may incur, our margins will decrease, and we may incur
a loss. The revenue, cost and gross profit realized on a fixed-price contract
will often vary from the estimated amounts because of unforeseen conditions or
changes in job conditions and variations in labor and equipment productivity
over the term of the contract. If we are unsuccessful in mitigating these risks,
we may realize gross profits that are different from those originally estimated
and may incur losses on projects. Depending on the size of a project, these
variations from estimated contract performance could have a significant effect
on our operating results for any quarter or year. In general, turnkey contracts
to be performed on a fixed-price basis involve an increased risk of significant
variations. This is a result of the long-term nature of these contracts and the
inherent difficulties in estimating costs and of the interrelationship of the
integrated services to be provided under these contracts whereby unanticipated
costs or delays in performing part of the contract can have compounding effects
by increasing costs of performing other parts of the contract.

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EMPLOYEES

We believe our employees are our most valuable asset and that their
loyalty, productivity, pioneering spirit, work ethic and strong commitment in
providing quality services have been crucial elements in the successes we have
achieved on numerous projects in remote, logistically challenging locations
around the world.

At December 31, 2002, we employed directly or through our joint ventures, a
multi-national work force of approximately 4,620 persons, of which 66% are
citizens of the respective countries in which they work. Although the level of
activity varies from year to year, we have maintained an average work force of
approximately 3,370 over the past five years. The minimum employment during that
period has been 2,010 and the maximum 6,020. At December 31, 2002, approximately
28% of our employees were covered by collective bargaining agreements. We
believe our relations with our employees are satisfactory.

The following table sets forth the location of employees by work countries
as of December 31, 2002:

(1) Includes joint ventures

EQUIPMENT

We own, lease, and maintain a fleet of generally standardized construction,
transportation and support equipment and spare parts. In 2002 and 2001,
expenditures for capital equipment and spare parts were $30.2 million and $28.8
million, respectively. At December 31, 2002, the net book value of our property,
plant, equipment and spare parts was $83.9 million.

Historically, we have elected to own rather than lease equipment to ensure
that standardized equipment is available as needed. We believe the
standardization of equipment has resulted in lower equipment costs. We are
constantly evaluating the availability of equipment and may from time to time
pursue the leasing of equipment to support projects. In recent years the leasing
market for heavy construction equipment in international locales has become much
more competitive. As a result, we make more significant use of leasing to
support our project equipment requirements. We continue to evaluate expected
equipment utilization, given anticipated market conditions, and may dispose of
underutilized equipment from time to time. During 2002, surplus equipment with a
net book value of $0.9 million was sold or retired for approximately $0.6
million. All equipment is subject to scheduled maintenance to maximize fleet
readiness. We have maintenance facilities at Port Harcourt, Nigeria; Azaiba,
Oman; Maracaibo, Venezuela; Houston, Texas; Fruita, Colorado and Ft. McMurray,
Canada as well as temporary site facilities on major jobs to minimize downtime.

FACILITIES

We own a 14-acre equipment yard/maintenance facility and an adjoining
29-acre undeveloped industrial site (that is under lease to a third party) at
Broken Arrow, Oklahoma, a short distance from Tulsa, Oklahoma and a similar
facility in Channelview, Texas, near Houston, that is comprised of 19 acres.
Also, in Tulsa, Oklahoma we own a 100,000 square foot office building. In
Canada, we own a 10,000 square foot fabrication shop on 3 acres of land in Ft.
McMurray, Canada. In Venezuela, our offices and construction facilities are
located on 15 acres of land, which we own, on the shores of Lake Maracaibo. In
addition, our subsidiary, Pacific Industrial Electric, Inc. owns an
office/shop/warehouse facility which is in Gillette,

23

Wyoming, and consists of a 50 foot by 150 foot building on a 4.5 acre site. We
lease all other facilities used in our operations, including corporate offices
in Panama; administrative and engineering offices in Houston, Texas; Fruita,
Colorado; Portland, Oregon; Salt Lake City, Utah and various office facilities,
equipment sites and expatriate housing units in the United States, Bolivia,
Canada, England, Nigeria, Oman, and Venezuela. Rent expense for these facilities
was $1.8 million in 2002 and $2.6 million in 2001.

INSURANCE AND BONDING

Operational risks are analyzed and categorized by our risk management
department and are insured through a major national insurance broker under a
comprehensive insurance program, which includes commercial insurance policies,
consisting of the types and amounts typically carried by companies engaged in
the worldwide construction industry. We maintain worldwide master policies
written through A-rated insurers. These policies cover our land and marine
property, plant, equipment and cargo against all normally insurable risks,
including war risk, political risk and terrorism, in third-world countries.
Other policies cover our workers and liabilities arising out of our operations.
Primary and excess liability insurance limits are consistent with the level of
our asset base. Risks of loss or damage to project works and materials are often
insured on our behalf by our clients. On other projects, "builders all risk
insurance" is purchased. All insurance is purchased and maintained at the
corporate level, other than certain basic insurance, which must be purchased in
some countries in order to comply with local insurance laws.

The insurance protection we maintain may not be sufficient or effective
under all circumstances or against all hazards to which we may be subject. An
enforceable claim for which we are not fully insured could have a material
adverse effect on our results of operations. In the future, our ability to
maintain insurance, which may not be available at rates we consider reasonable,
may be affected by events over which we have no control, such as those that
occurred on September 11, 2001.

We often are required to provide surety bonds guaranteeing our performance
and/or financial obligations. The amount of bonding available to us depends upon
our experience and reputation in the industry, financial condition, backlog and
management expertise, among other factors. We maintain relationships with two
highly rated surety companies to provide surety bonds. We also use letters of
credit in lieu of bonds to satisfy performance and financial guarantees on some
international projects.

POLITICAL AND ECONOMIC RISKS; OPERATIONAL RISKS

We currently have substantial operations and assets in developing countries
in Africa, the Middle East and South America. Approximately 58% of our contract
revenue from 2002 were derived from activities in developing countries, and
approximately 63% of our long-lived assets as of December 31, 2002 were located
in developing countries. For a list of revenue and assets by location, see Note
14 of "Notes to Consolidated Financial Statements" included elsewhere in this
Form 10-K. Accordingly, we are subject to risks which ordinarily would not be
expected to exist in the United States, Canada, Japan or Western Europe.

Some of these risks include:

o Foreign currency restrictions, which may prevent us from repatriating
foreign currency received in excess of local currency requirements and
converting it into dollars or other fungible currency.

o 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.

o Expropriation of assets, by either a recognized or unrecognized foreign
government, which can disrupt our business activities and create delays and
corresponding losses.

o Civil uprisings, riots and war, which can make it impractical to continue
operations, adversely affect both budgets and schedules and expose us to
losses.

o 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.

o 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;

o Legal systems of decrees, laws, regulations, interpretations and court
decisions 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. In Venezuela, for

24

example, a new hydrocarbons law, which went into effect on January 1, 2002
and which increases royalty rates from approximately 17% to between 20% and
30%, is expected to reduce investment in that country.

o Terrorist attacks such as those which occurred on September 11, 2001, which
could impact insurance rates, insurance coverages, the level of economic
activity and produce instability in financial markets. The terrorist
attacks on September 11, 2001, and the changes in the insurance markets
attributable to the terrorist attacks, have resulted in increased insurance
premiums and have made it difficult for us to obtain certain types of
insurance coverage. We may be unable to secure the levels and types of
insurance we would otherwise have secured prior to September 11, 2001. A
lower level of economic activity could also result, and instability in the
financial markets could also affect our ability to raise capital.

Our operations in developing countries may be adversely affected in the
event any governmental agencies in these countries interpret laws, regulations
or court decisions in a manner which might be considered inconsistent or
inequitable in the United States, Canada, Japan or western Europe. We may be
subject to unanticipated taxes including income taxes, excise duties, import
taxes, export taxes, sales taxes, or other governmental assessments, which could
have a material adverse effect on our results of operations for any quarter or
year.

Given the unpredictable nature of the risks described in the preceding
paragraph, we cannot assure you that such risks will not result in a loss of
business which could have a material adverse effect on our results of
operations. We have attempted to mitigate the risks of doing business in
developing countries by separately incorporating our operations in many such
countries; working with local partners in certain countries; contracting
whenever possible with major international oil and gas companies; obtaining
sizeable down payments or securing payment guarantees; entering into contracts
providing for payment in U.S. dollars instead of the local currency whenever
possible; maintaining reserves for credit losses; maintaining insurance on
equipment against certain political risks and terrorism; and limiting our
capital investment in each country. We retain local advisors to assist us in
interpreting the laws, practices and customs of the countries in which we
operate.

Over the years, we have experienced periodic interruptions on some
projects. However, we have successfully operated in Nigeria for the past 40
years with very favorable relationships with the local communities, and believe
that we can continue to operate in the area. In Venezuela, we have completed
several projects and believe that our Venezuelan organization can continue to
meet project requirements in this market. Worldwide, we have historically been
able to remain neutral with respect to local political issues. We have also
observed that, due to the importance of the oil and gas markets to local
economies in developing countries, changes in government have resulted in only
short-term interruptions in these markets.

Due to the limited number of major projects worldwide, we may, at any one
time, have a substantial portion of our resources dedicated to projects located
in a few countries. Our results of operations are, therefore, susceptible to
adverse events beyond our control, which may occur in a particular country in
which one of our businesses may be concentrated.

Our operations include pipeline construction, dredging, pipeline
rehabilitation services, marine support services and the operation of vessels
and heavy equipment. These operations involve a high degree of operational risk.
Natural disasters, adverse weather conditions, collisions, and operator or
navigational error could cause personal injury or loss of life, severe damage to
and destruction of property, equipment and the environment and suspension of
operations. In locations where we perform work with equipment that is owned by
others, our continued use of the equipment can be subject to unexpected or
arbitrary interruption or termination. The occurrence of any of these events
could result in work stoppage, loss of revenue, casualty loss, increased costs
and significant liability to third parties. Litigation arising from the
occurrence of any of these events could result in our being named as a defendant
in lawsuits asserting substantial claims.

We maintain risk management and safety programs to mitigate the effects of
loss or damage. While we maintain such insurance protection as we deem prudent,
there can be no assurance that any such insurance will be sufficient or
effective under all circumstances or against all hazards to which we may be
subject. An enforceable claim for which we are not fully insured could have a
material adverse effect on our financial condition and results of operations.
Moreover, no assurance can be given that we will be able to maintain adequate
insurance in the future at rates that we consider reasonable.

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GOVERNMENT REGULATIONS

General

Many aspects of our operations are subject to government regulations in the
countries in which we operate, including those relating to currency conversion
and repatriation, taxation of our earnings and earnings of our personnel, and
our use of local employees and suppliers. In addition, we depend on the demand
for our services from the oil, gas and power industries and, therefore, our
business is affected by changing taxes, price controls and laws and regulations
relating to the oil, gas and power industries generally. The ability of the
Organization of Petroleum Exporting Countries to meet and maintain production
targets also influences the demand for our services. The adoption of laws and
regulations by the countries or the states in which we operate for the purpose
of curtailing exploration and development drilling for oil and gas or the
development of power generation facilities for economic and other policy
reasons, could adversely affect our operations by limiting demand for our
services. Our operations are also subject to the risk of changes in foreign and
U.S. laws and policies which may impose restrictions on our business, including
trade restrictions, which could have a material adverse effect on our
operations.

Other types of government regulation which could, if enacted or
implemented, adversely affect our operations include:

o expropriation or nationalization decrees;

o confiscatory tax systems;

o primary or secondary boycotts directed at specific countries or companies;

o embargoes;

o extensive import restrictions or other trade barriers;

o mandatory sourcing rules; and

o unrealistically high labor rates and fuel price regulation.

Our future operations and earnings may be adversely affected by new
legislation, new regulations or changes in, or new interpretations of, existing
regulations and the impact of these changes could be material.

Environmental

Our operations are subject to numerous environmental protection laws and
regulations, which are complex and stringent. We regularly perform work in and
around sensitive environmental areas such as rivers, lakes and wetlands.
Significant fines and penalties may be imposed for non-compliance with
environmental laws and regulations, and certain environmental laws provide for
joint and several strict liability for remediation of releases of hazardous
substances, rendering a person liable for environmental damage without regard to
negligence or fault on the part of such person. In addition to potential
liabilities that may be incurred in satisfying these requirements, we may be
subject to claims alleging personal injury or property damage as a result of
alleged exposure to hazardous substances. Such laws and regulations may expose
us to liability arising out of the conduct of operations or conditions caused by
others, or for our own acts including those which were in compliance with all
applicable laws at the time such acts were performed. We are not aware of any
non-compliance with or liability under any environmental law that could have a
material adverse effect on our business or operations.

26

ITEM 3. LEGAL PROCEEDINGS

We are a party to a number of legal proceedings. We believe that the nature
and number of these proceedings are typical for a firm of our size engaged in
our type of business and that none of these proceedings is material to our
financial position.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders during the fourth
quarter of 2002 through the solicitation of proxies or otherwise.

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth information regarding our executive
officers. Officers are elected annually by, and serve at the discretion of, our
Board of Directors:

Michael F. Curran joined Willbros in March 2000 as a Director, Vice
Chairman of the Board of Directors, President and Chief Operating Officer. In
May 2002, Mr. Curran was elected Chief Executive Officer, in addition to his
other duties. Mr. Curran served from 1972 to March 2000 as Chairman and CEO of
Michael Curran & Associates, a mainline pipeline constructor in North America
and West Africa, prior to joining Willbros. He has over 40 years of diversified
experience in pipeline construction around the world, including 31 years as
President and Chief Executive Officer of various domestic and international
pipeline construction firms. Mr. Curran also served as President of the Pipe
Line Contractors Association.

John K. Allcorn joined Willbros in May 2000 as Senior Vice President of
Willbros International, Inc. and was elected Executive Vice President of
Willbros Group, Inc. and Willbros USA, Inc. in 2001. Mr. Allcorn was employed at
U.S. Pipeline, Inc., a North American pipeline construction company, as Senior
Vice President, from July 1997 until joining Willbros in May 2000. He served as
Vice President at Gregory & Cook Construction, Inc., an international pipeline
construction company from June 1996 to July 1997. Mr. Allcorn has over 15 years
of pipeline industry experience including an established record in operations
management, finance, and business development.

Warren L. Williams joined Willbros in July 2000 as Vice President, Finance
and Accounting, for Willbros USA, Inc. In 2001, he was elected Vice President,
Chief Financial Officer and Treasurer of Willbros Group, Inc. In 2002, Mr.
Williams was elected Senior Vice President of Willbros Group, Inc. Prior to
joining Willbros, Mr. Williams was employed at TransCoastal Marine Services,
Inc., a marine construction company, from April 1998 to July 2000. Mr. Williams
served as Vice President during the entire period of his employment at
TransCoastal and was named Chief Financial Officer in early 2000. TransCoastal
declared bankruptcy under Chapter 7 of the U.S. Bankruptcy Code in June 2000.
Mr. Williams worked as an independent financial consultant from 1994 to April
1998. Prior to 1994, Mr. Williams worked at the public accounting firm of Ernst
& Young, the last four years as a partner.

James R. Beasley joined Willbros in 1981 when Willbros Engineers, Inc. was
acquired. He was elected Vice President of Willbros Engineers, Inc. in 1981,
Senior Vice President and General Manager in 1982, President in 1986 and Senior
Vice President of Willbros USA, Inc. in 2001. Mr. Beasley has more than 30 years
of experience in pipeline engineering and operations.

27

James K. Tillery joined Willbros in 1983 as a field engineer. He has over
20 years of experience as an engineer and project manager working in both U.S.
and international pipeline construction. In 1995, he was named Managing Director
of Willbros (Nigeria) Limited and in 2001, he was named Senior Vice President -
Operations of Willbros International, Inc. and Senior Vice President of Willbros
USA, Inc.

Jay T. Dalton joined Willbros in November 2002 and was elected Senior Vice
President and General Counsel. Mr. Dalton served previously as outside counsel
to the Company with responsibility for contracts, since 1993. Between 1980 and
1993, Mr. Dalton was employed by Occidental Petroleum Corporation where he
served as an officer and chief legal counsel to various business units in
Occidental's oil and gas division, both domestically and internationally in
Colombia, Pakistan and the United Kingdom. Before entering private practice in
1993, Mr. Dalton's last position with Occidental was Vice President and General
Counsel of Island Creek Corporation in Lexington, Kentucky.

28

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock commenced trading on the New York Stock Exchange on August
15, 1996, under the symbol "WG." The following table sets forth the high and low
sale prices per share of our common stock, as reported in the New York Stock
Exchange composite transactions, for the periods indicated:

Substantially all of our stockholders maintain their shares in "street
name" accounts and are not, individually, stockholders of record. As of
March 21, 2003, our common stock was held by 78 holders of record and an
estimated 2,132 beneficial owners.

In order to fund the development and growth of our business, we intend to
retain our earnings rather than pay dividends in the foreseeable future. Since
1991, we have not paid any dividends, except dividends in 1996 on our
outstanding shares of preferred stock, which were converted into shares of
common stock on July 15, 1996. Subject to restrictions under credit
arrangements, the payment of any future dividends will be at the discretion of
our board of directors and will depend upon, among other things, our financial
condition, funds from operations, the level of our capital expenditures and our
future business prospects. Our present credit agreement prohibits us from paying
cash dividends on our common stock.

29

ITEM 6. SELECTED FINANCIAL DATA

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

(1) We acquired Mt. West Group, a collection of four companies providing
design-build services to the western U.S. energy industry, on October 23,
2002. Accordingly, its results of operations since that date are
consolidated with our results of operations. See Management's Discussion
and Analysis of Financial Condition and Results of Operations - General and
our Consolidated Financial Statements included elsewhere herein.

(2) We acquired MSI Energy Services Inc., a general contractor in Alberta,
Canada, on October 12, 2001. Accordingly, its results of operations since
that date are consolidated with our results of operations. See Management's
Discussion and Analysis of Financial Condition and Results of Operations -
General and our Consolidated Financial Statements included elsewhere
herein.

(3) We acquired Rogers & Phillips, Inc., a U.S. pipeline construction company,
on January 24, 2000. Accordingly, its results of operations since that date
are consolidated with our results of operations. See Management's
Discussion and Analysis of Financial Condition and Results of Operations -
General and our Consolidated Financial Statements included elsewhere
herein.

(4) EBITDA represents earnings before net interest, income taxes, depreciation
and amortization. EBITDA is not intended to represent cash flows for the
respective period, nor has it been presented as an alternative to operating
income as an indicator of operating performance. It should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with accounting principles generally accepted in the
United States. See our Consolidated Statements of Cash Flows in our
Consolidated Financial Statements included elsewhere in this Form 10-K.
EBITDA is included in this Form 10-K because it is one of the measures
through which we assess our financial performance. EBITDA as presented may
not be comparable to other similarly titled measures used by other
companies.

(5) Backlog is anticipated contract revenue from contracts for which award is
either in hand or reasonably assured.

(6) Includes joint ventures in 2001 and 2002.

30

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the
consolidated financial statements for the years ended December 31, 2002, 2001
and 2000, included in Item 8 of this Form 10-K.

GENERAL

We derive our revenue from providing construction, engineering and
specialty services to the oil, gas and power industries and government entities
worldwide. We obtain contracts for our work primarily by competitive bidding or
through negotiations with long-standing or prospective clients. Bidding
activity, backlog and revenue resulting from the award of contracts to us may
vary significantly from period to period. Contracts have durations from a few
weeks to several months or in some cases more than a year.

Operations outside the United States may be subject to certain risks which
ordinarily would not exist in the United States, including foreign currency
restrictions, extreme exchange rate fluctuations, expropriation of assets, civil
uprising and riots, availability of personnel and government audit. However, we
have successfully operated in Nigeria for the past 40 years with very favorable
relationships with the local communities, and believe that we can continue to
operate in the area. We have been active in South America since 1939. Venezuela
is the largest oil producer in South America and has redirected its energy
initiative to include development of its significant natural gas reserves. This
new initiative should translate into more demand for our natural gas pipeline
capabilities. However, the Venezuelan economy can be highly inflationary and the
government of Venezuela, under Presidente Hugo Chavez, has experiended extreme
civil unrest culminating in a national labor strike beginning in December, 2002.
We suspended all work in Venezuela in December 2002. We resumed work in February
2003 when the impact of the strike had moderated although business and
commercial activity had not yet returned to pre-strike levels.

CRITICAL ACCOUNTING POLICIES

Revenue Recognition: Percentage-of-Completion Method - A number of factors
relating to our business affect the recognition of contract revenue. Revenue
from fixed-price construction and engineering contracts is recognized on the
percentage-of-completion method. Under this method, estimated contract income
and resulting revenue is generally accrued based on costs incurred to date as a
percentage of total estimated costs, taking into consideration physical
completion. Total estimated costs, and thus contract income, are impacted by
changes in productivity, scheduling, and the unit cost of labor, subcontracts,
materials and equipment. Additionally, external factors such as weather, client
needs, client delays in providing permits and approvals, labor availability,
governmental regulation and politics, may affect the progress of a project's
completion and thus the timing of revenue recognition. Generally, we do not
recognize income on a fixed-price contract until the contract is approximately
5% to 10% complete, depending upon the nature of the contract. Costs which are
considered to be reimbursable are excluded from the percentage-of-completion
calculation. Accrued revenue pertaining to reimbursables is limited to the cost
of the reimbursables. If a current estimate of total contract cost indicates a
loss on a contract, the projected loss is recognized in full when determined.
Revenue from change orders, extra work and variations in the scope of work is
recognized when agreement is reached with clients as to both the scope of work
and price. Revenue from claims is recognized when agreement is reached with
clients as to the value of the claims, which in some instances may not occur
until after completion of work under the contract. Revenue from unit-price
contracts is recognized as earned. We believe that our operating results should
be evaluated over a relatively long time horizon during which major contracts in
progress are completed and change orders, extra work, variations in the scope of
work and cost recoveries and other claims are negotiated and realized.

All U.S. government contracts and many of our other contracts provide for
termination of the contract for the convenience of the client. In the event a
contract would be terminated at the convenience of the client prior to
completion, we will typically be compensated for progress up to the time of
termination and any termination costs. In addition, many contracts are subject
to certain completion schedule requirements with liquidated damages in the event
schedules are not met as the result of circumstances that are within our
control.

An example of a project involving many of the above factors is our project
in Australia. The project in Australia was completed after July 1, 2000, the
date on which liquidated damages were scheduled to commence under the contract.
Due primarily to productivity and other labor issues, and anticipated liquidated
damages, we recognized a contract loss of $14.5 million in 2000. However, during
2001, the

31

client accepted claims for extension of the scheduled completion date, accepted
other claims and requested additional services, resulting in contract amendments
and the realization in 2001 of $4.2 million of contract income on the project.

Income Taxes - The determination of our tax provision is complex due to
operations in several tax jurisdictions outside the United States which may be
subject to certain risks which ordinarily would not be expected in the United
States. Tax regimes in certain jurisdictions are subject to significant changes
which may be applied on a retroactive basis. If this were to occur, our tax
expense could be materially different than the amounts reported. Furthermore, in
determining the valuation allowance related to deferred tax assets, we estimate
taxable income into the future and determine the magnitude of deferred tax
assets which are more likely than not to be realized. Future taxable income
could be materially different than amounts estimated, in which case the
valuation allowance would need to be adjusted.

Joint Venture Accounting - From time to time, we seek one or more joint
venture partners when a project requires local content, equipment, manpower or
other resources beyond those we have available to complete work in a timely and
efficient manner or when we wish to share risk on a particularly large project.
We have investments, ranging from 10 percent to 50 percent, in joint ventures
that operate in similar lines of business as ours. Investments consist of a 10
percent interest in a consortium for work in Venezuela, a 35 percent interest in
a joint venture for work in Australia and a 50 percent interest in a joint
venture for work in Africa. Interests in these unconsolidated ventures are
accounted for under the equity-method in the consolidated balance sheets and on
a proportionate consolidation basis in the consolidated statements of
operations. This presentation is consistent with construction industry practice.
Alternatively, if we were to account for these interests using the equity-method
in the consolidated statement of operations, revenue and contract cost would be
materially lower; however, net income would not change.

SIGNIFICANT BUSINESS DEVELOPMENTS

On January 24, 2000, we acquired Rogers & Phillips, Inc., a closely held
pipeline construction company in Houston, Texas with an experienced management
team and a strong market position in the U.S. Gulf Coast area. Founded in 1992,
RPI provides a full range of construction services for pipeline operating
companies, including station and piping projects in congested urban areas and
inside plants, as well as cross-country pipelines. The consideration included
1,035,000 shares of our common stock and approximately $1.7 million in cash and
acquisition costs. The transaction was accounted for as a purchase.

In September 2000, through a joint venture led by a subsidiary of ours, we
were awarded a significant project, the scope of which includes the engineering,
procurement and construction of a 665-mile (1,070-kilometer), 30-inch crude oil
pipeline from the Doba Fields in Chad to an export terminal on the coast of
Cameroon in Africa. Engineering and procurement activities began in late 2000.
Pipeline construction began in November 2001 and is expected to be completed in
2003.

During 2000, our activities in Nigeria included work on two major EPC
contracts for Shell: (a) the Nembe Creek gas gathering pipeline system, and (b)
four concrete barge-mounted gas compressor facilities for Shell's Nembe Creek
Associated Gas project (collectively, the "Nembe Creek Projects"). At the end of
2001, both projects were nearing completion.

During 2000, Willbros USA, Inc. relocated its administrative headquarters
and some construction support services from Tulsa, Oklahoma, to Houston, Texas.
The cost of the move, termination benefits, and office lease termination costs
totaled approximately $4.5 million.

On October 12, 2001, we completed the purchase of MSI Energy Services Inc.,
a Canadian general contractor whose common shares were listed on The Canadian
Venture Exchange. MSI provides pipeline construction, pipeline integrity and
maintenance services in addition to pipe storage and handling services,
specialty metal fabrication services, pipeline equipment rentals and concrete
construction products in the oil sands region of Northern Alberta, Canada. The
aggregate purchase price, including transaction costs, was $8.3 million. In
conjunction with the acquisition the Company sold 144,175 common shares from
treasury for $1.9 million to certain MSI shareholders and the net cash paid of
$6.4 million to purchase MSI was funded through borrowings under our principal
credit agreement. The transaction was accounted for as a purchase.

During 2001, our engineering group executed an alliance agreement with
Explorer Pipeline Company to provide project management, engineering,
procurement and construction services for their Mainline

32

Expansion Project in Texas, Oklahoma, Missouri, Illinois, and Indiana (the
"Explorer Pipeline Project"). This project includes construction of 12
grassroots pump stations, modifications at 13 existing pump stations, the
addition of 500,000 barrels of storage at the Wood River, Illinois terminal and
modifications at two other terminals. The project is scheduled for completion in
2003.

On May 14, 2002, we completed a public offering of our common shares at
$17.75 per share; 4,356,750 shares were sold by us. The underwriters exercised
options to purchase all shares available for over-allotments. We received $71.9
million in proceeds, after the underwriting discount and offering costs, which
were used to repay indebtedness under the prior credit agreement and for working
capital and general corporate purposes.

In June 2002, we completed a new $125.0 million credit agreement with a
syndicated bank group, replacing the existing facility that was due to expire in
February 2003. The new facility has terms similar to the prior facility, and
will expire in June 2005.

On October 23, 2002, we completed the acquisition of Mt. West Fabrication
Plants and Stations, Inc., Process Electric and Control, Inc., Process
Engineering Design, Inc. and Pacific Industrial Electric, Inc. (collectively,
"Mt. West Group"). Mt. West Group provides design-build services, including
engineering, procurement and construction services to the energy industry,
primarily in the western United States. The purchase price of $13.7 million
consisted of $4.6 million cash and acquisition costs and 950,000 shares of
common stock valued at $9.1 million. In addition, the purchase price will be
adjusted by an earn-out amount equal to 25 percent of the combined net income of
Mt. West Group for the 24-month period following the date of acquisition. Any
earn-out amounts due shall be payable in cash upon completion of the earn-out
period. The transaction was accounted for as a purchase.

OTHER FINANCIAL MEASURES

We use EBITDA (earnings before net interest, income taxes, depreciation and
amortization) as part of our overall assessment of financial performance by
comparing EBITDA between accounting periods. We believe that EBITDA is used by
the financial community as a method of measuring our performance and of
evaluating the market value of companies considered to be in businesses similar
to ours. EBITDA for the year 2002 was $60.1 million, up $8.5 million from $51.6
million for 2001.

We define anticipated contract revenue as backlog when the award of a
contract is reasonably assured, generally upon the execution of a definitive
agreement or contract. Anticipated revenue from post-contract award processes,
including change orders, extra work, variations in the scope of work and the
effect of escalation or currency fluctuation formulas, is not added to backlog
until realization is reasonably assured. New contract awards totaled $392.1
million during the year ended December 31, 2002. Additions to backlog during the
year were as follows: construction, $269.5 million; engineering, $46.2 million;
and specialty services, $76.4 million. Backlog decreases by type of service as a
result of services performed during the period were as follows: construction,
$344.8 million; engineering, $177.2 million; and specialty services, $61.7
million. Backlog at the end of 2002 decreased $191.6 million (47%) from the
previous year end to $216.0 million and consisted of the following: (a)
construction, $132.4 million, down $75.3 million (36%); (b) engineering, $23.7
million, down $131.0 million (85%); and (c) specialty services, $59.9 million,
up $14.7 million (33%). Construction backlog consists primarily of the
Chad-Cameroon Pipeline Project and construction projects in Offshore West
Africa. Engineering backlog consists primarily of the Explorer Pipeline Project
and other engineering and procurement projects in the United States. Specialty
services backlog is largely attributable to a 16-year water injection contract
awarded in 1998 to a consortium in which we have a 10 percent interest in
Venezuela, contracts to build, own and operate four fueling facilities for the
United States government, and service contracts in Oman and Canada.

RESULTS OF OPERATIONS

Our contract revenue and contract costs are primarily related to the timing
and location of development projects in the oil, gas and power industries
worldwide. Contract revenue and cost variations by country from year to year are
the result of (a) entering and exiting work countries; (b) the execution of new
contract awards; (c) the completion of contracts; and (d) the overall level of
activity in our services.

Our ability to be successful in obtaining and executing contracts can be
affected by the relative strength or weakness of the U.S. dollar compared to the
currencies of our competitors, our clients and our work locations. During 2002,
as a result of economic and political events in Venezuela, the Venezuelan
Bolivar

33

experienced significant devaluation relative to the U.S. Dollar. Included in
foreign exchange loss in 2002 is a $0.9 million loss resulting from the
translation of our Venezuelan Bolivar denominated monetary assets and
liabilities into U.S. Dollars. We do not believe that our revenue or results of
operations in other areas were adversely affected in this regard during the
years ended December 31, 2002 or 2001.

FISCAL YEAR ENDED DECEMBER 31, 2002, COMPARED TO FISCAL YEAR
ENDED DECEMBER 31, 2001

CONTRACT REVENUE

Contract revenue increased $193.6 million (50%) to $583.7 million due to
(a) $130.4 million (60%) of increased construction revenue due primarily to
construction on the Chad-Cameroon Pipeline Project, work on a project in Bolivia
and increased activity in Offshore West Africa, net of reduced activities on the
Nembe Creek Projects in Nigeria as they neared completion and reduced
construction activity in the United States; (b) increased engineering revenue of
$56.9 million (47%) due to an increase of engineering and procurement services
in the United States primarily related to the Explorer Pipeline Project; and (c)
an increase of $6.3 million (11%) in specialty services revenue principally from
revenue generated by MSI in Canada, which was acquired in October 2001, offset
by reduced activity in Venezuela. Revenue in the United States increased $26.3
million (13%) due primarily to an increase in engineering and procurement
services and the acquisition of Mt. West Group in October 2002, offset by a
decrease in construction activity. Chad-Cameroon revenue increased $101.3
million resulting from construction work begun in the fourth quarter of 2001 on
the Chad-Cameroon Pipeline Project. Revenue from Offshore West Africa increased
$15.3 million as a result of increased vessel utilization on several projects
during the first six months of 2002. Work that began in 2002 on a project in
Bolivia resulted in $47.4 million in revenue in that country. A project in the
Dominican Republic during 2002 produced $17.7 million in revenue, and revenue in
Canada increased $10.4 million resulting from the acquisition of MSI in October
2001. Nigeria revenue decreased $19.5 million (29%) due primarily to reduced
activity on the Nembe Creek Projects. The combined revenue in all other areas
decreased $5.3 million (15%).

CONTRACT COSTS

Contract costs increased $171.1 million (54%) to $488.3 million due to an
increase of $107.7 million (62%) in construction services cost, $54.9 million
(56%) in engineering services cost and $8.5 million (19%) in specialty services
cost. Variations in contract cost by country were closely related to the
variations in contract revenue.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization increased $3.8 million (19%) due primarily to
the addition of equipment for the Chad-Cameroon Pipeline Project and the project
in Bolivia.

GENERAL AND ADMINISTRATIVE

General and administrative expense increased $3.9 million (13%) to $33.9
million. This increase is due to higher staff compensation and administrative
services necessary to support the 50% increase in revenue. As a percent of
revenue, general and administrative expense decreased from 7.7% in 2001 to 5.8%
in 2002.

OPERATING INCOME

Operating income increased $5.6 million (17%) from $32.7 million in 2001 to
$38.3 million in 2002. Excluding a gain of $9.2 million in 2001 associated with
the termination of benefit plans, operating income increased $14.8 million
(63%). Excluding the gain in 2001, operating income increased largely as a
result of higher revenue resulting from greater activity in North America,
construction activity on the Chad-Cameroon Pipeline Project and marine
maintenance and construction in Offshore West Africa, partially offset by
reduced income in Nigeria resulting from a 29% decrease in revenue in that area.
The increased income from this 50% increase in revenue was offset by higher
depreciation, amortization and general and administrative costs.

34

NET INTEREST INCOME (EXPENSE)

Net interest expense decreased $1.0 million (40%) to $1.6 million expense.
In May 2002 we completed a common stock offering in which we received $71.9
million in net proceeds. Borrowings under our prior credit agreement were paid
in full. Interest expense in 2002 includes amortization of debt issue costs of
$0.9 million compared to $0.5 million in 2001.

FOREIGN EXCHANGE LOSS

Foreign exchange loss increased $0.9 million to $1.0 million due primarily
to the effect of the devaluation of the Venezuelan Bolivar in 2002 on our
Venezuelan Bolivar denominated monetary assets and liabilities.

PROVISION FOR INCOME TAXES

The provision for income taxes decreased $4.9 million (47%) due primarily
to the difference between $6.6 million of changes to estimated income tax
liabilities and deferred tax assets during 2002 compared to $3.2 million of
similar changes during 2001. In addition, during 2002, we recorded a $1.1
million deferred income tax benefit associated with operating losses outside the
United States. Changes to the 2002 income tax liabilities include a $1.2 million
reduction due to annual settlements of income tax liabilities outside the United
States and a $1.0 million reduction resulting from changes in current year
estimated tax liabilities outside the United States as a result of the above
settlements. In addition, we reduced income taxes in the United States by $1.1
million as a result of the refinement of the allocation of expenses among
operating entities and other items affecting estimated tax liabilities in the
United States and a $3.3 million reduction in the deferred tax assets valuation
allowance. We reduced our U.S. valuation allowance as a result of our assessment
of our United States operations including past earnings history and projected
future earnings considering the scheduled expiration of our tax net operating
losses. Changes in 2001 resulted from a $2.3 million reduction in the deferred
assets valuation allowance in the United States and a $0.9 million reduction
from annual settlements income taxes outside the United States. The provision
for income taxes is also impacted by the differing income tax rates in the
various countries in which we operate, including for example Nigeria where
income taxes are largely based on deemed profit rather than taxable income as
well as a tax holiday in Cameroon for income earned on the Chad-Cameroon
Pipeline Project.

FISCAL YEAR ENDED DECEMBER 31, 2001, COMPARED TO FISCAL YEAR
ENDED DECEMBER 31, 2000

CONTRACT REVENUE

Contract revenue increased $75.8 million (24%) to $390.1 million as a
result of (a) increased engineering revenue of $61.6 million due to an increase
in engineering and procurement services in the United States; and (b) increased
construction revenue of $22.1 million due primarily to increased construction
activity in the United States, Offshore West Africa and Cameroon partially
offset by reduced activities on the Nembe Creek Projects in Nigeria as they
neared completion in 2001 and the completion in the third quarter of 2000 of the
construction contract in Australia. These increases in engineering and
construction revenue were partially offset by a decrease of $7.9 million in
specialty services revenue. Revenue in the United States increased $112.3
million (121%) due to an increase in engineering, procurement and construction
services. Cameroon revenue increased $34.0 million as work on the Chad-Cameroon
Pipeline Project moved from the engineering, procurement and mobilization phases
into the construction phase in November 2001. Offshore West Africa revenue
increased $26.3 million (149%) due to higher utilization of the combination
barge "Willbros 318" as well as utilization of the derrick barge "WB82" acquired
in 2001. Revenue in Oman increased $1.4 million (11%). Canada revenue, from the
MSI acquisition on October 12, 2001, was $3.3 million. Nigeria revenue decreased
$75.6 million (53%) due to reduced activity on the Nembe Creek Projects.
Australia revenue decreased $16.7 million (81%) due to the construction contract
that was completed in 2000, net of $4.0 million from contract amendments and
settled claims during 2001. Revenue in Venezuela decreased $9.2 million (35%).

CONTRACT COSTS

Contract costs increased $47.8 million (18%) to $317.2 million due to an
increase of $51.9 million in engineering services cost and an increase in
construction services cost of $7.2 million, partially offset by a decrease of
$11.3 million in specialty services cost. Variations in contract cost by country
were closely related to the variations in contract revenue, with the exception
of Australia. Contract costs in Australia

35

decreased by $35.4 million or $18.7 million more than the decrease in revenue
primarily as a result of a $14.5 million loss recognized during 2000, offset by
$4.2 million of settled claims in 2001.

TERMINATION OF BENEFIT PLANS

During 2001 we terminated two employee benefit plans which resulted in
non-taxable gains of $9.2 million. These plans were costly to maintain and had
become ineffective in the recruitment and retention of an experienced and
qualified workforce.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization decreased $2.9 million to $19.5 million due
primarily to the sale in 2000 of excess equipment in Venezuela, Indonesia, the
United States and Oman, accelerated amortization of excess spare parts in
Indonesia in 2000 and accelerated amortization of leasehold improvements of $0.8
million related to termination of our administrative office space in Tulsa,
Oklahoma as a result of relocation of those offices to Houston, Texas.

GENERAL AND ADMINISTRATIVE

General and administrative expense, as a percentage of revenue, decreased
to 7.7% in 2001 from 9.6% in 2000. On a dollar basis, general and administrative
expenses decreased $0.2 million to $30.0 million in 2001. This reduction is the
result of the non-recurrence of the $3.6 million in expenses that were incurred
in 2000 that were associated with the relocation of the administrative office to
Houston, Texas. This reduction was offset by increased general and
administrative expenses in 2001 as expansion in staffing and support services
were necessary to support the 24% increase in revenue during the year.

OPERATING INCOME

Operating income increased $40.5 million from an operating loss of $7.8
million in 2000 to operating income of $32.7 million in 2001. For the reasons
described above, operating income increased in Australia by $19.4 million (from
an operating loss of $15.4 million in 2000), the United States by $14.8 million,
Offshore West Africa by $9.2 million and Cameroon by $5.0 million. Additionally,
we recognized $9.2 million of gains related to the termination of certain
employee benefit plans. These improvements were offset by reduced operating
income in Nigeria and Venezuela totaling $18.7 million. All other areas combined
accounted for an increase of $1.6 million.

NET INTEREST INCOME (EXPENSE)

Net interest income (expense) decreased $0.7 million to $2.6 million net
interest expense due primarily to lower interest rates during the period offset
by higher average debt levels.

FOREIGN EXCHANGE LOSS

Foreign exchange loss decreased $1.0 million to $0.1 million primarily due
to the write-off during 2000 of cumulative translation adjustments associated
with substantially reduced operations in certain work countries.

OTHER INCOME (EXPENSE)

Other income decreased $0.9 million to a $0.4 million expense primarily due
to gains on disposals of equipment in 2000 compared to losses on disposals of
equipment in 2001.

PROVISION FOR INCOME TAXES

The provision for income taxes increased $5.1 million while pretax income
increased $39.8 million. This is the result of increased taxes on higher taxable
income in the United States offset by lower income taxes in Nigeria due to a
decrease in taxable revenue in that country, an adjustment to the deferred tax
assets valuation allowance in the United States by $2.3 million and settlement
of $0.9 million of prior year

36

taxes in Nigeria. The valuation allowance for deferred tax assets was reduced in
each of 2000 and 2001 as a result of significant increases in revenue, earnings,
contract awards, backlog and forecasted earnings for some of our U.S. entities.
In addition, we had $9.2 million of non-taxable gains in 2001 associated with
the termination of benefit plans. The provision for income taxes is impacted by
income taxes in certain countries, primarily Nigeria, being based on deemed
profit rather than taxable income and the fact that losses in one country cannot
be used to offset taxable income in another country.

EFFECT OF INFLATION AND CHANGING PRICES

Our operations are affected by increases in prices, whether caused by
inflation, government mandates or other economic factors, in the countries in
which we operate. We attempt to recover anticipated increases in the cost of
labor, fuel and materials through price escalation provisions in certain of our
major contracts or by considering the estimated effect of such increases when
bidding or pricing new work.

LIQUIDITY AND CAPITAL RESOURCES

Our primary requirements for capital are to acquire, upgrade and maintain
equipment, provide working capital for current projects, finance the
mobilization of employees and equipment to new projects, establish a presence in
countries where we perceive growth opportunities and finance the possible
acquisition of new businesses and equity investments. Historically, we have met
these capital requirements primarily from operating cash flows, and more
recently from borrowings under our credit facility.

Cash and cash equivalents increased $30.2 million (156%) to $49.5 million
at December 31, 2002, from $19.3 million at December 31, 2001. The increase was
due to cash flows of $28.9 million from operations and $33.1 million from
financing activities resulting from net proceeds from sale of our common stock
of $75.2 million, reduced by net repayments of debt of $42.1 million. These
increases were offset by $31.6 million of investing activities primarily for the
purchase of $30.2 million of equipment and spare parts and $2.0 million for the
acquisition of Mt. West Group (net of cash acquired), and $0.2 million from the
effect of exchange rate changes on cash and cash equivalents. Working capital
increased $44.9 million during 2002 to $90.9 million at December 31, 2002.
Stockholders' equity increased $114.2 million to $210.8 million at December 31,
2002.

CONTRACTUAL OBLIGATIONS

On June 14, 2002, we completed a new $125.0 million credit agreement with a
syndicated bank group, replacing the existing facility that was due to expire in
February 2003. The facility may be used for standby and commercial letters of
credit, borrowings or a combination thereof. Borrowings are limited to the
lesser of 40% of the borrowing base or $50.0 million and are payable at
termination on June 14, 2005. Interest is payable quarterly at a Base Rate plus
a margin ranging from 0.75% to 2.00% or a Eurodollar Rate plus a margin ranging
from 1.75% to 3.00%. A commitment fee on the unused portion of the credit
agreement is payable quarterly ranging from 0.50% to 0.75%. The credit agreement
is collateralized by substantially all of our assets, including stock of our
principal subsidiaries, restricts the payment of cash dividends and requires us
to maintain certain financial ratios. The borrowing base is calculated using
varying percentages of cash, accounts receivable, accrued revenue, contract cost
and recognized income not yet billed, property, plant and equipment, and spare
parts. Debt issue costs of $3.0 million net of accumulated amortization of $0.9
million, associated with the new credit agreement are included in other assets
at December 31, 2002 and are being amortized over 24 months.

As of December 31, 2002, there were no amounts borrowed under the credit
agreement. We had $52.8 million of letters of credit outstanding, leaving $72.2
million available for letters of credit or $44.0 million for borrowings or a
combination thereof.

We have various other obligations totalling $1.2 million, including notes
payable, generally related to equipment and insurance financing, and local
revolving credit facilities. All are at market rates, are collateralized by
certain vehicles, equipment and/or real estate, and mature in 2003.

In addition we have unsecured credit facilities with banks in certain
countries outside the United States. Borrowings under these lines, in the form
of short-term notes and overdrafts, are made at competitive local interest
rates. Generally, each line is available only for borrowings related to
operations in a specific country. Credit available under these facilities is
approximately $6.3 million at December 31, 2002. There were no outstanding
borrowings at December 31, 2002.

37

We have certain operating leases for office and camp facilities. Minimum
lease commitments under operating leases as of December 31, 2002, totaled $4.7
million and are payable as follows: 2003, $1.3 million; 2004, $1.1 million;
2005, $1.0 million; 2006, $0.6 million; 2007, $0.2 million and later years, $0.5
million.

Based upon the above, our total cash obligations are payable as follows:
2003, $2.5 million; 2004, $1.1 million and later years, $2.3 million.

COMMERCIAL COMMITMENTS

From time to time we enter into commercial commitments, usually in the form
of commercial and standby letters of credit, insurance bonds and financial
guarantees. Contracts with our customers may require us to provide letters of
credit or insurance bonds with regard to our performance of contracted services.
In such cases, the commitments can be called upon in the event of our failure to
perform contracted services. Likewise, contracts may allow us to issue letters
of credit or insurance bonds in lieu of contract retention provisions, in which
the client withholds a percentage of the contract value until project completion
or expiration of a warranty period. Retention commitments can be called upon in
the event of warranty or project completion issues, as prescribed in the
contracts. In connection with the Chad-Cameroon Pipeline Project joint venture,
we issued a letter of credit to an equipment leasing company equal to 50% of
total lease payments, our share of the joint venture. The letter of credit
reduces as lease payments are made and expires in June 2003. The commitment can
be called upon as a result of failure to make lease payments.

In connection with our 10% interest in a joint venture in Venezuela, we
issued a corporate guarantee equal to 10% of the joint venture's outstanding
borrowings with two banks. The guarantee reduces as borrowings are repaid, and
expires in March 2004. The commitment as of December 31, 2002 totals $3.3
million, the maximum amount of future payments we could be required to make.

In 1997 we entered into lease agreements with a special-purpose leasing
partnership for land and an office building for our engineering group in Tulsa,
Oklahoma. In July 2002, we acquired the assets for $5.5 million, thereby
eliminating the lease agreements and related commercial commitments.

A summary of our off-balance sheet commercial commitments as of December
31, 2002 is as follows:

These commercial commitments totaling $62.3 million represent the maximum
amount of future payments we could be required to make. We had no liability
recorded as of December 31, 2002, related to these commitments.

38

In connection with our 50% interest in a joint venture related to the
Chad-Cameroon Pipeline Project, we are joint and severally liable for the
performance of our joint venturer. In the event our joint venturer were unable
to fulfill their responsibilities associated with the project, we would be
required to fulfill their duties. In doing so, we would recognize the income or
losses, if any, associated with our fulfilling the duties of our joint venturer.
At December 31, 2002, the project is approximately 80% complete and is estimated
to produce contract income. However, there is no limitation to the maximum
future potential payments we could be required to make in the event the project
were to result in contract losses. We have no liability recorded as of December
31, 2002, related to this commitment.

We do not anticipate any significant collection problems with our
customers, including those in countries that may be experiencing economic and/or
currency difficulties. Since our customers generally are major oil companies and
government entities, and the terms for billing and collecting for work performed
are generally established by contracts, we historically have a very low
incidence of collectability problems.

We believe that cash flows from operations and borrowing capacity under
existing credit facilities will be sufficient to finance working capital and
capital expenditures for ongoing operations. We estimate capital expenditures
for equipment and spare parts to be approximately $35.0 to $40.0 million in
2003. In analyzing our cash flow from operations, we believe that while there
are numerous factors that could and will have an impact on our cash flow, both
positively and negatively; there is not one or two events that should they occur
could not be funded from our operations or borrowing capacity. For a list of
events which could cause actual results to differ from our expectations and a
discussion of risk factors that could impact cash flow, please refer to the
section entitled "Political and Economic Risks; Operational Risks" contained in
Items 1 and 2 of this Form 10-K.

During 1998 and 1999, we repurchased and held in treasury 2,175,371 shares
of Common Stock for $16.1 million. We did not repurchase any shares in 2000,
2001 or 2002. In January 2000, 1,035,000 shares of treasury stock were issued in
connection with the acquisition of RPI. In October 2001, 144,175 shares of
treasury stock were issued in connection with the acquisition of MSI. In October
2002, 950,000 shares of treasury stock were issued in connection with the
acquisition of Mt. West Group. As of December 31, 2002, a total of 46,196 shares
remain in treasury stock at an average price of $7.43 per share.

NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 requires that an asset retirement cost should be
capitalized as part of the cost of the related long-lived asset and subsequently
allocated to expense using a systematic and rational method. We will adopt SFAS
No. 143 effective January 1, 2003. The transition adjustment, if any, will be
reported as a cumulative effect of a change in accounting principle. At this
time, we do not anticipate that the effect of the adoption of this statement
will be material to either our financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of SFAS No. 4, 44,
and 64, Amendment of SFAS No. 13 and Technical Corrections". SFAS No. 145
provides guidance for income statement classification of gains and losses on
extinguishment of debt and accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. We will adopt
SFAS No. 145 in January 2003 and do not expect adoption to materially affect our
consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses accounting for
restructuring and similar costs. SFAS No. 146 supersedes previous accounting
guidance, principally Emerging Issues Task Force Issue No. 94-3. We will adopt
the provisions of SFAS No. 146 for restructuring activities initiated after
December 31, 2002. SFAS No. 146 requires that the liability for costs associated
with an exit or disposal activity be recognized when the liability is incurred.
Under Issue 94-3, a liability for an exit cost is recognized at the date of the
Company's commitment to an exit plan. SFAS No. 146 also establishes that the
liability should initially be measured and recorded at fair value. Accordingly,
SFAS No. 146 may affect the timing of recognizing future restructuring costs as
well as the amounts recognized.

In November 2002, the FASB issued Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness to Others, an interpretation of FASB Statements No.
5, 57 and 107 and a rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under guarantees
issued. The Interpretation also clarifies that a guarantor is required to

39

recognize, at inception of a guarantee, a liability for the fair value of the
obligation undertaken. The initial recognition and measurement provisions of the
Interpretation are applicable to guarantees issued or modified after December
31, 2002 and are not expected to have a material effect on the Company's
financial statements. The disclosure requirements are effective for financial
statements of interim and annual periods ending after December 15, 2002.

In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, an amendment of FASB Statement No.
123. This Statement amends FASB Statement No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a voluntary
change to the fair value method of accounting for stock-based employee
compensation. In addition, this Statement amends the disclosure requirements of
Statement No. 123 to require prominent disclosures in both annual and interim
financial statements. Certain of the disclosure modifications are required for
fiscal years ending after December 15, 2002 and are included in the notes to our
consolidated financial statements included in Item 8 of this Form 10-K.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk is our exposure to changes in non-U.S. currency
exchange rates. We attempt to negotiate contracts which provide for payment in
U.S. dollars, but we may be required to take all or a portion of payment under a
contract in another currency. To mitigate non-U.S. currency exchange risk, we
seek to match anticipated non-U.S. currency revenue with expenses in the same
currency whenever possible. To the extent we are unable to match non-U.S.
currency revenue with expenses in the same currency, we may use forward
contracts, options or other common hedging techniques in the same non-U.S.
currencies. We had no forward contracts or options at December 31, 2002 and
2001.

The carrying amounts for cash and cash equivalents, accounts receivable,
notes payable and accounts payable and accrued liabilities shown in the
consolidated balance sheets approximate fair value at December 31, 2002 due to
the generally short maturities of these items. We invest primarily in short-term
dollar denominated bank deposits, and at December 31, 2002 did not have any
investment in instruments with a maturity of more than a few days or in any
equity securities. We have the ability and expect to hold our investments to
maturity.

Our exposure to market risk for changes in interest rates relates primarily
to our long-term debt. In May 2002, subsequent to completing our public offering
of common shares, we paid all borrowings on our credit facility and as such at
December 31, 2002, none of our indebtedness was subject to variable interest
rates. At December 31, 2002, our fixed rate debt approximated fair value based
upon discounted future cash flows using current market rates.

40

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

41

INDEPENDENT AUDITORS' REPORT

The Stockholders and Board of Directors
Willbros Group, Inc.:

We have audited the accompanying consolidated balance sheets of Willbros Group,
Inc. as of December 31, 2002 and 2001, and the related consolidated statements
of operations, stockholders' equity and comprehensive income and cash flows for
each of the years in the three-year period ended December 31, 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Willbros Group, Inc.
as of December 31, 2002 and 2001, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 1 to the consolidated financial statements, as of July 1,
2001, the Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 141, "Business Combinations" and certain provisions from SFAS No. 142,
"Goodwill and Other Intangible Assets", and effective January 1, 2002, adopted
the remaining provisions of SFAS No. 142.

/s/ KPMG LLP

Houston, Texas
February 12, 2003

42

WILLBROS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

See accompanying notes to consolidated financial statements.

43

WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)

See accompanying notes to consolidated financial statements.

44

WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In thousands, except share amounts)

See accompanying notes to consolidated financial statements.

45

WILLBROS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

See accompanying notes to consolidated financial statements.

46

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company - Willbros Group, Inc. ("WGI"), a Republic of Panama corporation,
and all of its majority-owned subsidiaries (the "Company") provide construction,
engineering and specialty services to the oil, gas and power industries. The
Company's principal markets are Africa, Asia, Australia, the Middle East, South
America, Canada and the United States.

Principles of Consolidation - The consolidated financial statements of
the Company include the accounts of WGI and all of its majority-owned
subsidiaries. Intercompany accounts and transactions are eliminated in
consolidation. The ownership interest of minority participants in subsidiaries
that are not wholly owned (principally in Nigeria and Oman) is included in
accounts payable and accrued liabilities and is not material. The minority
participants' share of the net income of those subsidiaries is included in
contract expenses. Interests in unconsolidated joint ventures are accounted for
on the equity method in the consolidated balance sheets and on a proportionate
consolidation basis in the consolidated statements of operations.

The consolidated financial statements are prepared in accordance with
generally accepted accounting principles in the United States and include
certain estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and the
reported amounts of revenue and expenses. Actual results could differ
significantly from those estimates.

Reclassifications - Minority owners of certain non U.S. subsidiaries
(operating principally in Nigeria and Oman) earn a percentage of net contract
receipts rather than sharing in the net income or losses of the subsidiaries'
operations. Due to the nature of these minority interests and the basis on which
the entitlement is earned, amounts attributable to the minority interests are
included in contract costs. Prior to March 31, 2002, the minority interest
amounts were presented as a separate line item in other expenses. Accordingly,
reclassifications have been made to the 2001 and 2000 balances to conform to the
2002 presentation. Amounts due to the minority participants continue to be
included in accounts payable and accrued liabilities. In addition, certain other
reclassifications have been made to the 2001 and 2000 balances in order to
conform with the 2002 presentation.

Accounts Receivable - Accounts receivable include retainage, all due
within one year, of $5,470 in 2002 and $1,819 in 2001 and are stated net of
allowances for bad debts of $725 in 2002 and $734 in 2001. The provision
(credit) for bad debts was $(58) in 2002, $(290) in 2001 and $(154) in 2000.

Spare Parts - Spare parts (excluding expendables), stated net of
accumulated depreciation of $13,826 in 2002 and $10,882 in 2001, are depreciated
over three years on the straight-line method.

Property, Plant and Equipment - Depreciation is provided on the
straight-line method using estimated lives as follows:

Construction equipment 4-6 years
Marine equipment 10 years
Transportation equipment 3-4 years
Buildings, furniture and equipment 3-20 years

When assets are retired or otherwise disposed of, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in income for the period. Normal repair and maintenance costs
are charged to expense as incurred. Major overhaul costs are accrued in advance
of actual overhaul activities and are allocated to contracts based on estimates
of equipment condition. Significant renewals and betterments are capitalized.

Long-lived assets are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held

47

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

and used is measured by a comparison of the carrying amount of the asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell.

Goodwill - Goodwill represents the excess of purchase price over fair
value of net assets acquired. Goodwill acquired prior to July 1, 2001 was being
amortized on a straight-line basis over twenty years, until adoption of the
non-amortization of goodwill provision of Statement of Financial Accounting
Standards ("SFAS") No. 142 "Goodwill and Other Intangible Assets" in 2002. The
Company adopted SFAS No. 141, "Business Combinations" and certain provisions of
SFAS No. 142 as of July 1, 2001, and the remaining provisions regarding the
non-amortization of goodwill acquired prior to July 1, 2001, effective January
1, 2002. At December 31, 2002, goodwill of $8,689, is included in other assets.

In accordance with SFAS No. 142, the Company assesses the carrying amount
of goodwill by testing goodwill for impairment. The impairment test requires
allocating goodwill and all other assets and liabilities to reporting units. The
fair value of each reporting unit is determined and compared to the book value
of the reporting unit. If the fair value of the reporting unit is less than the
book value, including goodwill, then the goodwill is reduced to the implied fair
value of the goodwill through a charge to expense. The Company's transitional
goodwill impairment test as of January 1, 2002, was performed and no goodwill
impairment was indicated. The annual goodwill impairment test was performed as
of December 31, 2002, and no goodwill impairment was indicated.

The effect of the elimination of amortization of goodwill on the
Company's net income as if SFAS No. 142 had been in effect in prior periods
would have been to increase net income by $54 in 2001 and $31 in 2000.

Revenue - Construction and engineering fixed-price contracts and cost
plus fixed-fee contracts are accounted for using the percentage-of-completion
method. Under this method, estimated contract revenue is generally accrued based
on the percentage the costs to date bear to total estimated costs, taking into
consideration physical completion. Estimated contract losses are recognized in
full when determined. Revenue from unit-price contracts and from time and
material contracts is recognized as earned. Revenue from change orders, extra
work and variations in the scope of work is recognized when agreement is reached
with clients as to both the scope of work and price. Revenue from claims is
recognized when agreement is reached with clients as to the value of the claims,
which in some instances may not occur until after completion of work under the
contract. Costs incurred for bidding and obtaining contracts are expensed as
incurred.

Income Taxes - The Company accounts for income taxes by the asset and
liability method under which deferred tax assets and liabilities are recognized
for the future tax consequences of operating loss and tax credit carryforwards
and temporary differences between the financial statement carrying values of
assets and liabilities and their respective tax bases. The provision for income
taxes is impacted by income taxes in certain countries, primarily Nigeria, being
based on deemed profit rather than taxable income as well as a tax holiday in
Cameroon for income earned on the Chad-Cameroon Pipeline Project.

Retirement Plans and Benefits - During 2001, the Company terminated its
defined benefit retirement plans and postretirement medical benefits plan that
provided retirement benefits to substantially all regular employees. Pension
costs were funded in accordance with annual actuarial valuations. The Company
recorded the cost of postretirement medical benefits, which were funded on the
pay-as-you-go basis, over the employees' working lives. The Company has a
voluntary defined contribution retirement plan that is qualified, and is
contributory on the part of the employees.

Common Stock Options - The Company measures stock-based compensation
using the intrinsic value method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
related interpretations, and provides pro-forma disclosure as required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation. " As

48

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

such, compensation cost for stock options is measured as the excess, if any, of
the quoted market price of the Company's stock at the date of grant over the
exercise price.

If compensation cost for the Company's stock options plans had been
determined using the fair value method in SFAS No. 123, the Company's net income
and income per share would have been as shown in the pro forma amounts below:

The fair value of granted options was estimated on the date of grant
using the Black-Sholes option pricing model with the following exemptions:

Foreign Currency Translation - All significant monetary asset and
liability accounts stated in currencies other than United States dollars are
translated into United States dollars at current exchange rates for countries in
which the local currency is the functional currency. Translation adjustments are
accumulated in other comprehensive income (loss). Non-monetary assets and
liabilities in highly inflationary economies are translated into United States
dollars at historical exchange rates. Revenue and expense accounts are converted
at prevailing rates throughout the year. Foreign currency transaction
adjustments and translation adjustments in highly inflationary economies are
recorded in income. During 2000, $854 was transferred from cumulative
translation adjustments in stockholders' equity to foreign exchange loss due to
the substantial reduction of operations in certain countries.

Concentration of Credit Risk - The Company has a concentration of
customers in the oil, gas and power industries which exposes the Company to a
concentration of credit risks within an industry. The Company seeks to obtain
advance and progress payments for contract work performed on major contracts.
Receivables are generally not collateralized. The Company believes that its
allowance for bad debts is adequate.

Fair Value of Financial Instruments - The carrying value of financial
instruments does not materially differ from fair value.

49

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Cash Flows - In the determination of cash flows, all highly liquid
investments with maturities of less than three months are considered to be cash
equivalents. The Company paid interest of $1,132 in 2002, $2,858 in 2001 and
$2,216 in 2000 and income taxes of $11,315 in 2002, $8,650 in 2001 and $7,249 in
2000.

Income (Loss) per Share - Basic income (loss) per share is calculated by
dividing net income, less any preferred dividend requirements, by the
weighted-average number of common shares outstanding during the year. Diluted
income (loss) per share is calculated by including the weighted-average number
of all potentially dilutive common shares with the weighted-average number of
common shares outstanding.

Derivative Financial Instruments - The Company may use derivative
financial instruments such as forward contracts, options or other financial
instruments as hedges to mitigate non-U.S. currency exchange risk when the
Company is unable to match non-U.S. currency revenue with expenses in the same
currency. The Company had no derivative financial instruments as of December 31,
2002 or 2001.

2. ACQUISITIONS

On October 23, 2002, the Company acquired all outstanding shares of Mt.
West Fabrication Plants and Stations, Inc., Process Electric and Control, Inc.,
Process Engineering Design, Inc. and Pacific Industrial Electric, Inc.
(collectively, "Mt. West Group"). Mt. West Group provides design-build services,
including engineering, procurement and construction services to the energy
industry, primarily in the western United States, thereby expanding the
Company's services in the United States. The purchase price of $13,711 was based
on a multiple of cash flow and consisted of $4,591 cash and acquisition costs
and 950,000 shares of common stock valued at $ 9,120 (based on the average
market price of the Company's common shares over the two-day period before and
after the date a definitive purchase agreement was signed). In addition, the
purchase price will be adjusted by an earn-out amount equal to 25 percent of the
combined net income of Mt. West Group for the 24-month period following the date
of acquisition. Any earn-out amounts due shall be payable in cash upon
completion of the earn-out period. The transaction was accounted for as a
purchase.

On October 12, 2001, the Company successfully completed its tender offer
for all outstanding shares of MSI Energy Services Inc. ("MSI"), a general
contractor in Alberta, Canada. The acquisition establishes the Company's
presence in Canada. The aggregate purchase price, including transaction costs,
was $8,295. Concurrently, the Company sold to certain MSI shareholders 144,175
common shares of treasury stock with an assigned value of $1,850, the market
price at the date the transaction was announced. The net cash of $6,445 paid to
purchase MSI was funded through borrowings under the Company's principal credit
agreement. The transaction was accounted for as a purchase.

On January 24, 2000, the Company acquired Rogers & Phillips, Inc.
("RPI"), a closely held United States pipeline construction company. The
consideration included 1,035,000 shares of treasury stock valued at $5,511 and
approximately $1,710 in cash and transaction costs. The transaction was
accounted for as a purchase.

None of the goodwill created as a result of these acquisitions is
expected to be deductible for tax purposes.

50

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

1. ACQUISITIONS (CONTINUED)

The fair value of the net assets acquired from these acquisitions was as
follows:

The unaudited pro forma results of operations for the RPI acquisition,
had the acquisition occurred January 1, 2000, would not have been materially
different from reported results.

The unaudited pro forma results of operations including the Mt. West
Group, as if the acquisition occurred January 1, 2001, and MSI, as if the
acquisition occurred January 1, 2000, would have been:

3. CONTRACTS IN PROGRESS

Most contracts allow for progress billings to be made during the
performance of the work. These billings may be made on a basis different from
that used for recognizing revenue. Contracts in progress for which cost and
recognized income exceed billings or billings exceed cost and recognized income
consist of:

During the year ended December 31, 2000, the costs to complete a project
in Australia exceeded the cost to complete estimate at December 31, 1999, by
$14,500. This resulted in a loss on the project in 2000 of the same amount.

51

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, which are used to secure debt or are
subject to lien, at cost, consist of:

5. JOINT VENTURES

The Company has had investments during the past three years, ranging from
10 percent to 50 percent, in joint ventures that operate in similar lines of
business as the Company. Investments consist of a 10 percent interest in a
consortium for work in Venezuela, a 35 percent interest in a joint venture for
work in Australia and a 50 percent interest in a joint venture for work in
Africa. Interests in these unconsolidated ventures are accounted for under the
equity-method in the consolidated balance sheets and on a proportionate
consolidation basis in the consolidated statements of operations.

The Company's proportionate share of revenue and contract cost included
in the consolidated statements of operations from these ventures consist of:

The Company's investments in and advances to these ventures consist of:

52

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

5. JOINT VENTURES (CONTINUED)

Summarized balance sheet information for the significant joint venture in
Africa (accounted for under the equity-method in the consolidated balance
sheets) is as follows:

6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of:

7. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consist of the following:

On June 14, 2002, the Company completed a new $125,000 credit agreement
with a syndicated bank group, replacing the existing facility that was due to
expire in February 2003. The facility may be used for standby and commercial
letters of credit, borrowings or a combination thereof. Borrowings are limited
to the lesser of 40% of the borrowing base or $50,000 and are payable at
termination on June 14, 2005. Interest is payable quarterly at a Base Rate plus
a margin ranging from 0.75% to 2.00% or a Eurodollar Rate plus a margin ranging
from 1.75% to 3.00%. A commitment fee on the unused portion of the credit
agreement is payable quarterly ranging from 0.50% to 0.75%. The credit agreement
is collateralized by substantially all of the Company's assets, including stock
of the principal subsidiaries, restricts the payment of cash dividends and
requires the Company to maintain certain financial ratios. The borrowing base is
calculated using

53

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

7. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)

varying percentages of cash, accounts receivable, accrued revenue, contract cost
and recognized income not yet billed, property, plant and equipment, and spare
parts. Debt issue costs of $3,019, net of accumulated amortization of $881,
associated with the new credit agreement are included in other assets at
December 31, 2002 and are being amortized over 24 months.

As of December 31, 2002, there were no amounts borrowed under the credit
agreement. We had $52,838 of letters of credit outstanding, leaving $72,162
available for letters of credit or $43,984 for borrowings or a combination
thereof.

Other obligations include various notes payable, generally related to
equipment and insurance financing, and local revolving credit facilities. All
are at market interest rates, and are collateralized by certain vehicles,
equipment and/or real estate.

The Company has unsecured credit facilities with banks in certain
countries outside the United States. Borrowings in the form of short-term notes
and overdrafts are made at competitive local interest rates. Generally, each
line is available only for borrowings related to operations in a specific
country. Credit available under these facilities is approximately $6,307 at
December 31, 2002. There were no outstanding borrowings at December 31, 2002 or
2001.

8. RETIREMENT BENEFITS

The Company had two defined benefit plans (pension plans) covering
substantially all regular employees which were funded by employee and Company
contributions. The Company's funding policy was to contribute at least the
minimum required by the Employee Retirement Income Security Act of 1974 in
accordance with annual actuarial valuations. Benefits under the plans were
determined by employee earnings and credited service. The Company had a
post-retirement medical benefits plan that covered substantially all regular
employees and was funded by Company and retiree contributions based on estimated
cost. The defined benefit plans and the post-retirement medical benefit plan
were terminated during 2001.

Plan assets of the pension plans consisted primarily of listed stocks and
bonds. Pension plan assets totaling $494 in 2002 and $35,985 in 2001 were
distributed to plan participants. By December 31, 2002, all assets had been
distributed to plan participants. The post-retirement medical benefit plan had
no assets. Upon termination of these plans in 2001, all benefits ceased and the
liabilities relating to the accrued cost of future benefits were reversed
resulting in non-cash, non-taxable gains of $9,204, which are reflected as a
reduction of operating expenses in the 2001 consolidated statements of
operations.

54

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

8. RETIREMENT BENEFITS (CONTINUED)

Benefit expense for these plans included the following components:

The retirement benefit obligations were determined using a
weighted-average discount rate 7.75 percent at December 31, 2000. For pension
benefits the rate of increase in future pay increases was 5.5 percent at
December 31, 2000, and assets were expected to have a long-term rate of return
of 8.5 percent. The transition asset was being amortized over 15 years.

55

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

8. RETIREMENT BENEFITS (CONTINUED)

The following table sets forth the changes in benefit obligations and
plan assets and the reconciliation of the funded status of the plans to the
accrued benefit cost:

The Company has a defined contribution plan that is funded by
participating employee contributions and the Company. The Company matches
employee contributions, up to a maximum of 4 percent of salary in the form of
cash or WGI common stock, as elected by the employee. Company contributions for
this plan were $1,038 (including $422 of WGI common stock) in 2002, $905
(including $306 of WGI common stock) in 2001, and $616 (including $243 of WGI
common stock) in 2000.

56

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

9. INCOME TAXES

The provision for income taxes represents income taxes arising as a
result of operations, credits for revision of previous estimates of income taxes
payable in a number of countries and a credit recognizing the tax benefit of a
portion of the Company's tax losses carried forward. The Company is not subject
to income tax in Panama on income earned outside of Panama. All income has been
earned outside of Panama. The relationship between income (loss) before income
taxes and the provision for income taxes is affected by the method of
determining income taxes in the countries in which the Company operates. The
effective consolidated tax rate differs from the U.S. federal statutory tax rate
as taxable income and operating losses from different countries cannot be offset
and tax rates and methods of determining taxes payable are different in each
country.

Income (loss) before income taxes and the provision for income taxes in
the consolidated statements of operations consist of:

The Company's provision for income taxes differed from the United States
statutory federal income tax rate of 34% due to the following:

57

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

9. INCOME TAXES (CONTINUED)

The principal components of the Company's net deferred tax assets are:

The net deferred income tax assets (liabilities) is as follows:

The Company has $14,405 in United States net operating loss carryforwards
at December 31, 2002. The United States net operating loss carryforwards will
expire, unless utilized, beginning in 2005 and ending December 31, 2013. The
carryforwards available on an annual basis are limited. The Company has assessed
its United States operations including past earnings history and projected
future earnings, and the limitations and expiration dates of the U.S. net
operating loss carryforwards and other tax assets, and has determined that it is
more likely than not that the $4,019 of U.S. net deferred tax assets at December
31, 2002, will be realized.

At December 31, 2002, the Company has nonexpiring operating loss
carryforwards in the United Kingdom of $31,105 (Pound Sterling19,320), and a net
operating loss carryforward expiring over three years in Venezuela of $3,392
(Bolivars 4,752,000). The deferred tax assets applicable to these operating loss
carryforwards at December 31, 2002 and 2001 are fully reserved by a valuation
allowance. At December 31, 2002, the Company has nonexpiring operating loss
carryforwards in Bolivia of $4,441 (Bolivars 33,532). The Company has assessed
its Bolivia operations and has determined it is more likely than not that the
$1,110 deferred tax asset related to these net operating loss carryforwards at
December 31, 2002, will be realized.

In connection with the acquisitions of Mt. West Group in 2002 and MSI in
2001, the Company recorded $808 and $482, respectively, of deferred tax
liabilities relating primarily to differences between the financial statement
carrying values of the assets acquired and their tax bases.

58

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

10. STOCKHOLDER RIGHTS PLAN

On April 1, 1999, the Company adopted a Stockholder Rights Plan and
declared a distribution of one Preferred Share Purchase Right ("Right") on each
outstanding share of the Company's common stock. The distribution was made on
April 15, 1999 to stockholders of record on that date. The Rights expire on
April 14, 2009.

The Rights are exercisable only if a person or group acquires 15 percent
or more of the Company's common stock or announces a tender offer the
consummation of which would result in ownership by a person or group of 15
percent or more of the common stock. Each Right entitles stockholders to buy one
one-thousandth of a share of a series of junior participating preferred stock at
an exercise price of $30.00 per share.

If the Company is acquired in a merger or other business combination
transaction after a person or group has acquired 15 percent or more of the
Company's outstanding common stock, each Right entitles its holder to purchase,
at the Right's then-current exercise price, a number of acquiring company's
common shares having a market value of twice such price. In addition, if a
person or group acquires 15 percent or more of the Company's outstanding common
stock, each Right entitles its holder (other than such person or members of such
group) to purchase, at the Right's then-current exercise price, a number of the
Company's common shares having a market value of twice such price.

Prior to the acquisition by a person or group of beneficial ownership of
15 percent or more of the Company's common stock, the Rights are redeemable for
one-half cent per Right at the option of the Company's Board of Directors.

11. STOCK OWNERSHIP PLANS

During May 1996, the Company established the Willbros Group, Inc. 1996
Stock Plan (the "1996 Plan") with 1,125,000 shares of common stock authorized
for issuance to provide for awards to key employees of the Company, and the
Willbros Group, Inc. Director Stock Plan (the "Director Plan") with 125,000
shares of common stock authorized for issuance to provide for the grant of stock
options to non-employee directors. The number of shares authorized for issuance
under the 1996 Plan, and the Director Plan, was increased to 3,125,000, and
225,000, respectively, by shareholder approval.

Options granted under the 1996 Plan vest over a three to four year
period. Options granted under the Director Plan vest six months after the date
of grant. At December 31, 2002, the 1996 Plan had 567,088 shares and the
Director Plan had 139,000 shares available for grant. Certain provisions allow
for accelerated vesting based on increases of share prices.

The Company's stock option activity and related information consist of:

59

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

11. STOCK OWNERSHIP PLANS (CONTINUED)

The weighted-average fair value of options granted during the year was
$4.05 in 2002 ($6.47 in 2001 and $2.56 in 2000). Exercise prices for options
outstanding, weighted-average remaining life and weighted-average exercise price
by ranges of exercise prices at December 31, 2002 are:

The number of vested options and weighted-average exercise price by
ranges of exercise prices at December 31, 2002 are:

In March 2002, certain officers of the Company borrowed a total of $1,307
under the Employee Stock Purchase Program, which permitted selected executives
and officers (exclusive of the Chief Executive Officer) to borrow from the
Company up to 100% of the funds required to exercise vested stock options. The
loans are full recourse, noninterest-bearing for a period of up to 5 years and
are collateralized by the related stock. The difference of $553 between the
discounted value of the loans and the fair market value of the stock on the date
of exercise was recorded as compensation expense. The loans receivable are
presented as a reduction of stockholders' equity. The maximum loan amount any
one officer may have outstanding under the Employee Stock Purchase Program is
$250.

12. COMMON STOCK OFFERING

On May 14, 2002, the Company completed a public offering of its common
shares at $17.75 per share; 4,356,750 shares were sold by the Company. The
underwriters exercised options to purchase all shares available for
over-allotments. The Company received $71,902 in proceeds, after the
underwriting discount and offering costs, which were used to repay indebtedness
under the prior credit agreement and for working capital and general corporate
purposes.

60

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

13. EARNINGS (LOSS) PER SHARE

Basic and diluted earnings (loss) per share are computed as follows:

At December 31, 2002, there were 405,092 potential common shares (449,750
at December 31, 2001 and 1,859,550 at December 31, 2000) excluded from the
computation of diluted earnings (loss) per share because of their anti-dilutive
effect.

14. SEGMENT INFORMATION

The Company operates in a single operating segment providing
construction, engineering and specialty services to the oil, gas and power
industries. Due to a limited number of major projects and clients, the Company
may at any one time have a substantial part of its operations dedicated to one
project, client and country.

Customers representing more than 10 percent of total contract revenue are
as follows:

61

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

14. SEGMENT INFORMATION (CONTINUED)

Information about the Company's operations in its significant work
countries is shown below:

(1) Net of intercountry revenue of $25,849 in 2002, $59,284 in 2001 and
$6,481 in 2000.

62

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

15. CONTINGENCIES, COMMITMENTS AND OTHER CIRCUMSTANCES

The Company provides construction, engineering and specialty services to
the oil, gas and power industries. The Company's principal markets are currently
Africa, the Middle East, South America and North America. Operations outside the
United States may be subject to certain risks which ordinarily would not be
expected to exist in the United States, including foreign currency restrictions,
extreme exchange rate fluctuations, expropriation of assets, civil uprisings and
riots, war, unanticipated taxes including income taxes, excise duties, import
taxes, export taxes, sales taxes or other governmental assessments, availability
of suitable personnel and equipment, termination of existing contracts and
leases, government instability and legal systems of decrees, laws, regulations,
interpretations and court decisions which are not always fully developed and
which may be retroactively applied. Management is not presently aware of any
events of the type described in the countries in which it operates that have not
been provided for in the accompanying consolidated financial statements.

Based upon the advice of local advisors in the various work countries
concerning the interpretation of the laws, practices and customs of the
countries in which it operates, management believes the Company has followed the
current practices in those countries; however, because of the nature of these
potential risks, there can be no assurance that the Company may not be adversely
affected by them in the future. The Company insures substantially all of its
equipment in countries outside the United States against certain political risks
and terrorism.

The Company has the usual liability of contractors for the completion of
contracts and the warranty of its work. Where work is performed through a joint
venture, the Company also has possible liability for the contract completion and
warranty responsibilities of its joint venturers. Management is not aware of any
material exposure related thereto which has not been provided for in the
accompanying consolidated financial statements.

Certain postcontract completion audits and reviews are being conducted by
clients and/or government entities. While there can be no assurance that claims
will not be received as a result of such audits and reviews, management does not
believe a legitimate basis for any material claims exists. At the present time
it is not possible for management to estimate the likelihood of such claims
being asserted or, if asserted, the amount or nature thereof.

In connection with the Company's 10% interest in a joint venture in
Venezuela, the Company issued a corporate guarantee equal to 10% of the joint
venture's outstanding borrowings with two banks. The guarantee reduces as
borrowings are repaid, and expires in March 2004. The commitment as of December
31, 2002 totals approximately $3,300, the maximum amount of future payments the
Company could be required to make.

From time to time the Company enters into commercial commitments, usually
in the form of commercial and standby letters of credit, insurance bonds and
financial guarantees. Contracts with the Company's customers may require the
Company to provide letters of credit or insurance bonds with regard to the
Company's performance of contracted services. In such cases, the commitments can
be called upon in the event of failure to perform contracted services. Likewise,
contracts may allow the Company to issue letters of credit or insurance bonds in
lieu of contract retention provisions, in which the client withholds a
percentage of the contract value until project completion or expiration of a
warranty period. Retention commitments can be called upon in the event of
warranty or project completion issues, as prescribed in the contracts. In
connection with the Chad-Cameroon Pipeline Project joint venture, the Company
issued a letter of credit to an equipment leasing company equal to 50% of total
lease payments, the Company's share of the joint venture. The letter of credit
reduces as lease payments are made and expires in June 2003. The commitment can
be called upon as a result of failure to make lease payments. At December 31,
2002, the Company had $62,301 of letters of credit and insurance bonds
outstanding, representing the maximum amount of future payments the Company
could be required to make. The Company had no liability recorded as of December
31, 2002, related to these commitments.

63

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

15. CONTINGENCIES, COMMITMENTS AND OTHER CIRCUMSTANCES

In connection with our 50% interest in a joint venture related to the
Chad-Cameroon Pipeline Project, we are joint and severally liable for the
performance of our joint venturer. In the event our joint venturer were unable
to fulfill their responsibilities associated with the project, we would be
required to fulfill their duties. In doing so, we would recognize the income or
losses, if any, associated with our fulfilling the duties of our joint venturer.
At December 31, 2002, the project is approximately 80% complete and is estimated
to produce contract income. However, there is no limitation to the maximum
future potential payments we could be required to make in the event the project
were to result in contract losses. We have no liability recorded as of December
31, 2002, related to this commitment.

In 1997 the Company entered into lease agreements with a special-purpose
leasing partnership for land and an office building for the engineering group in
Tulsa, Oklahoma. In July 2002, the Company acquired the assets for $5,500,
thereby eliminating the lease agreements and related commercial commitments.

The Company is a party to a number of legal proceedings. Management
believes that the nature and number of these proceedings are typical for a firm
of similar size engaged in a similar type of business and that none of these
proceedings is material to the Company's financial position.

The Company has certain operating leases for office and camp facilities.
Rental expense, excluding daily rentals and reimbursable rentals under cost plus
contracts, was $1,782 in 2002, $2,596 in 2001, and $3,166 in 2000. Minimum lease
commitments under operating leases as of December 31, 2002, totaled $4,727 and
are payable as follows: 2003, $1,288; 2004, $1,088; 2005, $1,051; 2006, $566;
2007, $187 and later years, $555.

64

WILLBROS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except share and per share amounts)

16. QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected unaudited quarterly financial data for the years ended December
31, 2002 and 2001, is as follows:

(a) Included in Fourth Quarter 2002 is a $3,309 deferred income tax
benefit resulting from a reduction in the deferred tax valuation allowance.
Included in Fourth Quarter 2001 are non-taxable gains of $3,626 on termination
of benefit plans.

The Company derives its revenue from contracts with durations from a few
weeks to several months or in some cases, more than a year. Unit-price contracts
provide relatively even quarterly results. However, major projects are usually
fixed-price contracts that may result in uneven quarterly financial results due
to the method by which revenue is recognized.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

65

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this Item with respect to our directors is
incorporated by reference from the sections of our definitive Proxy Statement
for our 2003 Annual Meeting of Stockholders (the "Proxy Statement") entitled
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance." The information required by this Item with respect to our executive
officers appears in Item 4A of Part I of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this Item is incorporated by reference from
the section of the Proxy Statement entitled "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

The information required by this Item, other than the information
required by Item 201(d) of Regulation S-K, is incorporated by reference from the
sections of the Proxy Statement entitled "Principal Stockholders and Security
Ownership of Management. The information required by Item 201(d) of Regulation
S-K is set forth below.

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2002,
concerning shares of our common stock authorized for issuance under our existing
equity compensation plans.

(1) Represents the total number of shares available for issuance under (a)
our 1996 Stock Plan pursuant to stock options, stock appreciation rights
or restricted stock and (b) our Director Stock Plan pursuant to stock
options. All of the 567,088 shares available for issuance under our 1996
Stock Plan may be awarded as restricted stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is incorporated by reference from
the sections of the Proxy Statement entitled "Certain Transactions."

66

ITEM 14. CONTROLS AND PROCEDURES

Within the 90 days prior to the filing date of this report, we carried
out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon that evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective. Disclosure controls and procedures are designed to ensure that
information required to be disclosed in our reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms. Subsequent to the date of their evaluation, there were no significant
changes in our internal controls or in other factors that could significantly
affect these controls.

67

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) (1) Financial Statements:

Our financial statements and those of our subsidiaries and independent
auditors' report are listed in Item 8 of this Form 10-K.

All other schedules are omitted as inapplicable or because the required
information is contained in the financial statements or included in the
footnotes thereto.

(3) Exhibits:

The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.

3.1 Amended and Restated Articles of Incorporation of Willbros Group, Inc.
(Filed as Exhibit 3.1 to our report on Form 10-Q for the quarter ended
September 30, 2002, filed November 14, 2002).

3.2 Restated By-Laws of Willbros Group, Inc. (Filed as Exhibit 3.2 to our
Registration Statement on Form S-1, Registration No. 333-5413 (the "S-1
Registration Statement")).

4.1 Form of stock certificate for our Common Stock, par value $.05 per
share (Filed as Exhibit 4 to the S-1 Registration Statement).

4.2 Rights Agreement, dated April 1, 1999, between us and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent (Filed as an Exhibit to
our Registration Statement on Form 8-A, dated April 9, 1999).

4.3 Certificate of Designation of Series A Junior Participating Preferred
Stock (Filed as Exhibit 3 to our report on Form 10-Q for the quarter
ended March 31, 1999, filed May 17, 1999).

10.1 Credit Agreement dated June 14, 2002, by and among us, certain
designated subsidiaries, Credit Lyonnais New York Branch, as
administrative agent, certain financial institutions, and Canadian
Imperial Bank of Commerce, as syndication agent (Filed as Exhibit 10.1
to our report on Form 10-Q for the quarter ended June 30, 2002, filed
on August 14, 2002).

10.2* Form of Indemnification Agreement between our officers and us (Filed as
Exhibit 10.7 to the S-1 Registration Statement).

10.3* Form of Indemnification Agreement between our directors and us (Filed
as Exhibit 10.16 to the S-1 Registration Statement).

10.4* Willbros Group, Inc. 1996 Stock Plan (Filed as Exhibit 10.8 to the S-1
Registration Statement).

10.5* Amendment Number 1 to Willbros Group, Inc. 1996 Stock Plan dated
February 24, 1999 (Filed as Exhibit A to the Company's Proxy Statement
for Annual Meeting of Stockholders dated March 31, 1999).

10.6* Amendment Number 2 to Willbros Group, Inc. 1996 Stock Plan dated March
7, 2001, (Filed as Exhibit B to our Proxy Statement for Annual Meeting
of Stockholders dated April 2, 2001).

68

10.7* Form of Incentive Stock Option Agreement under the Willbros Group, Inc.
1996 Stock Plan (Filed as Exhibit 10.13 to our report on Form 10-K for
the year ended December 31, 1996, filed March 31, 1997 (the "1996 Form
10-K")).

10.8* Form of Non-Qualified Stock Option Agreement under the Willbros Group,
inc. 1996 Stock Plan (Filed as Exhibit 10.14 to the 1996 Form 10-K).

10.9* Willbros Group, Inc. Director Stock Plan (Filed as Exhibit 10.9 to the
S-1 Registration Statement).

10.10* Amendment Number 1 to Willbros Group, Inc. Director Stock Plan dated
January 1, 2002 (Filed as Exhibit 10.13 to our report on Form 10-K for
the year ended December 31, 2001, filed February 20, 2002 (the "2001
Form 10-K")).

10.11* Amendment Number 2 to the Willbros Group, Inc. Director Stock Plan
dated February 18, 2002 (Filed as Exhibit 10.2 to our report on Form
10-Q for the quarter ended June 30, 2002, filed August 14, 2002).

10.12* Form of Secured Promissory Note under the Willbros Group, Inc. Employee
Stock Purchase Program (Filed as Exhibit 10.5 to our report on Form
10-Q for the quarter ended June 30, 2002, filed August 14, 2002).

10.13* Willbros Group, Inc. Severance Plan dated January 1, 1999 (Filed as
Exhibit 10.22 to our report on Form 10-K for the year ended December
31, 1998, filed March 31, 1999).

10.14 Registration Rights Agreement dated April 9, 1992, between us and
Heerema Holding Construction, Inc., Yorktown Energy Partners, L.P.,
Concord Partners II, L.P., Concord Partners Japan Limited and certain
other stockholders of the Company (Filed as Exhibit 10.13 to the S-1
Registration Statement).

10.15* Separation Agreement and Release dated May 30, 2002, between Willbros
USA, Inc. and Larry J. Bump (Filed as Exhibit 10.3 to our report on
Form 10-Q for the quarter ended June 30, 2002, filed August 14, 2002).

10.16* Consulting Services Agreement dated June 1, 2002, between Larry J. Bump
and us (Filed as Exhibit 10.4 to our report on Form 10-Q for the
quarter ended June 30, 2002, filed August 14, 2002).

21. Subsidiaries.

23. Consent of KPMG LLP, included on page 73 of this Form 10-K.

99.1 Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

- ----------

* Management contract or compensatory plan or arrangement.

Reports on Form 8-K.

(b) No reports on Form 8-K were filed during the fourth quarter of 2002.

69

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

WILLBROS GROUP, INC.

Date: March 24, 2003 By: /s/ Michael F. Curran
--------------------------------------
Michael F. Curran
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

70

CERTIFICATIONS

I, Michael F. Curran, certify that:

1. I have reviewed this annual report on Form 10-K of Willbros Group,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date March 24, 2003
----------------------------------------------------

/s/ Michael F. Curran, Chief Executive Officer
- ---------------------------------------------------------

71

I, Warren L. Williams, certify that:

1. I have reviewed this annual report on Form 10-K of Willbros Group,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date March 24, 2003
---------------------------------------------

/s/ Warren L. Williams, Chief Financial Officer
- --------------------------------------------------

72

INDEPENDENT AUDITORS' REPORT ON CONSOLIDATED FINANCIAL STATEMENT SCHEDULE
AND CONSENT

The Stockholders and Board of Directors
Willbros Group, Inc.:

The audits referred to in our report dated February 12, 2003 included the
related consolidated financial statement schedule as of December 31, 2002 and
for each of the years in the three-year period ended December 31, 2002. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statement schedule based on our audits. In our opinion, such
consolidated financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

We consent to the incorporation by reference in the registration statements
(Nos. 333-18421, 333-21399, 333-53748 and 333-74290) on Form S-8 and (Nos.
333-96201, 333-63096 and 333-101448) on Form S-3 of Willbros Group, Inc. of our
reports dated February 12, 2003, relating to the consolidated balance sheets of
Willbros Group, Inc. and subsidiaries as of December 31, 2002 and 2001, and the
related consolidated statements of operations, stockholders' equity and
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 2002 and the related financial statement schedule,
which reports appear in the December 31, 2002 annual report on Form 10-K of
Willbros Group, Inc. Our report on the consolidated financial statements refers
to the adoption of Statement of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations" and certain provisions from SFAS No. 142, "Goodwill and
Other Intangible Assets" in 2001 and the remaining provisions of SFAS No. 142 in
2002.

/s/ KPMG LLP

Houston, Texas
March 21, 2003

73

WILLBROS GROUP, INC.
SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

(In thousands)

74

INDEX TO EXHIBITS

The following documents are included as exhibits to this Form 10-K. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.

75

10.12* Form of Secured Promissory Note under the Willbros Group, Inc. Employee
Stock Purchase Program (Filed as Exhibit 10.5 to our report on Form
10-Q for the quarter ended June 30, 2002, filed August 14, 2002).

10.13* Willbros Group, Inc. Severance Plan dated January 1, 1999 (Filed as
Exhibit 10.22 to our report on Form 10-K for the year ended December
31, 1998, filed March 31, 1999).

10.14 Registration Rights Agreement dated April 9, 1992, between us and
Heerema Holding Construction, Inc., Yorktown Energy Partners, L.P.,
Concord Partners II, L.P., Concord Partners Japan Limited and certain
other stockholders of the Company (Filed as Exhibit 10.13 to the S-1
Registration Statement).

10.15* Separation Agreement and Release dated May 30, 2002, between Willbros
USA, Inc. and Larry J. Bump (Filed as Exhibit 10.3 to our report on
Form 10-Q for the quarter ended June 30, 2002, filed August 14, 2002).

10.16* Consulting Services Agreement dated June 1, 2002, between Larry J. Bump
and us (Filed as Exhibit 10.4 to our report on Form 10-Q for the
quarter ended June 30, 2002, filed August 14, 2002).

21. Subsidiaries.

23. Consent of KPMG LLP, included on page 73 of this Form 10-K.

99.1 Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

99.2 Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.