Engineering
We specialize in providing a broad array of engineering, project management, pipeline integrity and field services. Our engineering services cover from front-end engineering design and feasibility analysis to detailed design to assist our clients in conceptualizing, evaluating, designing, routing, permitting and managing the construction or expansion of pipelines, compressor stations, pump stations, fuel storage facilities, field gathering facilities and production facilities. In addition, we provide a full range of pipeline management and maintenance services, program engineering services including managing and performing our clients annual engineering programs, project management and field services including acquiring and administering right-of-way acquisition for projects, environmental services, site surveying and mapping. Changing Business Environment
Tightening credit markets have resulted in a worldwide credit crisis that has triggered substantial uncertainty with respect to the funding of capital expenditures by our customers. Prices for oil and natural gas have fallen approximately 50 percent from their highs in mid-summer 2008. These changes have impacted general business conditions and reduced visibility for certain aspects of our business. However, our backlog is over $1 billion as of September 30, 2008 and provides visibility into the third quarter of 2009 for our mainline U.S. pipeline construction unit. While we have evidence that certain prospects may be delayed, we believe none of our contracts in backlog are at risk.
We continue to shift our business from being primarily a construction company to a company that provides more diversified services. Our model benefits from recurring maintenance expenditures and life cycle improvements necessary to maintain and operate complex hydrocarbon transportation and refining facilities.
Although we are not immune to the current financial and economic events, we are well positioned with our service offerings and geographic locations to take advantage of our markets as further detailed below:
• Our U. S. mainline pipeline and facilities construction businesses are well positioned to take advantage of the development of new sources of natural gas supply which require new infrastructure to monetize these investments. These new sources of supply include the new shale plays such as Haynesville, Fayetteville, Marcellus and others.

• We are positioned to build the take away pipelines from the significant development and investments made in the Canadian oil sands.

• In the Canadian oil sands, our maintenance and fabrication businesses are service offerings that are required to operate the facilities even in the current financial environment.

• Our diversified Downstream O&G service offering is focused on asset life extension and maintenance projects for the process industries, which can be robust even in the current business environment.

• Our EPC offering is unique to our space and allows us to earn more revenue per engineer and to qualify for larger projects, leveraging our revenue and increasing earnings opportunities.

• Our past experience and brand name provides us access to international markets.

• And finally, we have strengthened our financial position. Our strong balance sheet and operating cash flow should allow us to effectively operate our business and to take advantage of the potential opportunities that may occur during a period of change like we are currently experiencing.

During the nine months ended September 30, 2008, our continuing operations provided $96,494 of cash. Our September 30, 2008 cash and cash equivalents balance was $127,552 and we have increased our working capital $61,904 to $261,019 from $199,115 at December 31, 2007. Our operations are not dependent on external short-term funding and we have not utilized the cash borrowing base available under our revolving credit facility during 2008. We believe that our strong balance sheet will provide us opportunities to pursue our strategy as discussed in the following section.
Strategy
We work diligently to increase stockholder value by leveraging our competitive strengths to focus on profitability and risk mitigation in the changing global energy infrastructure market and to position ourselves for sustained long-term earnings growth.
Focus on Managing Risk.
We have implemented a core set of business practices and policies which have fundamentally improved our risk profile. We have implemented our risk management policy by exiting higher risk countries, focusing our activity on higher margin opportunities in lower risk countries, diversifying our service offerings and end markets, practicing rigorous financial management and managing contract execution risk. Risk management is emphasized throughout all levels of the organization and covers all aspects of a project from strategic planning and bidding to contract management and financial reporting.
• Safety first culture. Our core values emphasize safety as the foremost value in our culture and safety is the driver for all other values. Our focus is on 100 percent involvement by all employees in providing a safe accident-free workplace. This core value demands that 100 percent of our employees, from executive management to field labor, be trained in our safety first culture and safety-first performance at every level in the organization. Every action must meet our safety criteria.

• Focus resources in markets with the highest risk-adjusted return. We believe North America currently offers us the highest risk-adjusted returns and the majority of our resources are focused on this region. For the third quarter of 2008, we earned 94.8 percent of our revenue in North America. However, we continue to seek international opportunities which can provide superior risk-adjusted returns and believe our extensive international experience is a competitive advantage. We believe that markets in North Africa and the Middle East, where we also have substantial experience, may offer attractive opportunities for us in the future given mid and long-term industry trends.

• Maintain a conservative contract portfolio. Our current contract portfolio is composed of 88.4 percent cost-reimbursable work which provides for a more equitable allocation of risk between us and our customers. We intend to maintain a balanced risk-to-reward portfolio.

• Ethical business practices. We demand that all of our employees and representatives conduct our business in accordance with the highest ethical standards-in compliance with applicable laws, rules and regulations, with honesty and integrity, and in a manner which demonstrates respect for others.

Leverage Industry Position and Reputation into a Broader Service Offering. We believe the global energy infrastructure market will continue to provide opportunities; however, the current business environment will require increased focus on projects with a high probability of moving forward in the near term. We believe our core capabilities can be expanded beyond the global energy infrastructure market and we are selectively evaluating these prospects. Our established platform and track record positions us to capitalize on these opportunities by leveraging our expertise into a broader range of related service offerings. We intend to leverage our project management, engineering and construction skills to establish additional service offerings, such as instrumentation and electrical services, turbo-machinery services, environmental services and pipeline system integrity services.
Additionally, we intend to pursue selective strategic acquisitions to complement our organic expansion strategies and to minimize our cyclical dependence on the large-diameter cross-country pipeline construction market. For example, in 2007, we completed two acquisitions that expanded our service offerings as well as the regions where we effectively deliver those services. Our November 2007 acquisition of Integrated Service Company LLC ("InServ"), complemented our service offerings in the midstream market while our July 2007 acquisition of Midwest significantly enhanced our presence in Western Canada, including the growing oil sands regions.
Maintain Financial Flexibility.
As we continue to grow and diversify our service offerings we must possess the financial flexibility to meet material, equipment and personnel needs to support our project commitments. We view financial strength and flexibility as a fundamental requirement to fulfilling our strategy. As of September 30, 2008, we had cash and cash equivalents of $127,552 and $50,000 of unutilized cash borrowing capacity under our revolving credit facility to address our current capital requirements with no short-term borrowings or commercial paper outstanding. For the nine months ended September 30, 2008, we increased our working capital position, for continuing operations, by $61,904 (31.1 percent) to $261,019 from $199,115 at December 31, 2007. We continue to focus on surety bonds in lieu of letters of credit as performance security for the completion of our projects thereby replacing the relatively high-cost letters of credit with lower cost surety bonding. In addition, our $150,000 senior secured revolving credit facility (the "2007 Credit Facility") provides us additional financial flexibility to pursue our growth strategy. The combination of our strong cash position, the availability of our 2007 Credit Facility, and our working capital position will allow us to focus on the highest return projects available during uncertain economic times as well as pursue our strategy of diversification as opportunities present themselves. The limited availability of credit in the market has not affected our credit facility; nor do we believe that it will impact our ability to access surety bonding in the future.
Leverage Core Service Expertise into Additional Full EPC Contracts. Our core expertise and service offerings allow us to provide our customers with a single source EPC solution which creates greater efficiencies to the benefit of both our customers and our company. In performing integrated EPC contracts, we establish ourselves as overall project managers from the earliest stages of project inception and are therefore better able to efficiently determine the design, permitting, procurement and construction sequence for a project in connection with making engineering decisions. Our customers benefit from a more seamless execution; while for us, these contracts often yield higher profit margins on the engineering and construction components of the contract compared to stand-alone contracts for similar services. Additionally, this contract structure allows us to deploy our resources more efficiently and capture the engineering, procurement and construction components of these projects.
Financial Summary
Third Quarter Results and Financial Position For the three months ended September 30, 2008, we achieved net income from continuing operations of $19,051 or $0.50 per basic share and $0.46 per diluted share on revenue of $490,651. This compares to net income from continuing operations of $10,272 or $0.36 per basic and $0.32 per diluted share on revenue of $246,716 for the three months ended September 30, 2007.

Revenue for the three months ended September 30, 2008 increased $243,935 (98.9 percent) to $490,651 from $246,716 during the same period in 2007. Following are the key components of the increase in revenue:
• Revenue earned on pipeline construction and EPC projects in the United States; and

• Revenue of $86,249 in 2008 from the Downstream O&G segment derived from our acquisition of InServ in November 2007.

Operating income for the three months ended September 30, 2008 increased $10,013 (53.5 percent) to $28,735 from $18,722 during the same period in 2007. The favorable operating income results were driven primarily by increased revenue. Operating margin decreased 1.7 percent to 5.9 percent in 2008 from 7.6 percent in 2007. The operating margin decrease was driven by lower contract margin, the inclusion of intangible amortization resulting from the InServ acquisition, and partially offset by lower general and administrative ("G&A") expense as a percent of revenue.
Other non-operating, net expense for the three months ended September 30, 2008 decreased $742 (31.3 percent) to $1,627 from $2,369 during the same period in 2007. The decrease in net expense is primarily a result of a $1,071 charge recorded in third quarter of 2007 related to a non-recurring legal settlement offset by an increase in interest expense of $413.
The provision for income taxes for the three months ended September 30, 2008 increased $1,976 to $8,057 on income from continuing operations before income taxes of $27,108 (an effective tax rate of 29.7 percent) as compared to a provision for income taxes of $6,081 on income from continuing operations before income taxes of $16,353 (an effective tax rate of 37.2 percent) during the same period in 2007. The increase in the provision for income taxes is due to improved operating results in the U.S., thereby generating more taxable income in third quarter of 2008 as compared to the third quarter of 2007. The increase was partially mitigated by a downward revision and related third quarter catch-up adjustment of the estimated 2008 effective tax rate for the year from 42.0 percent to 38.5 percent. The reduction in the 2008 estimated effective tax rate is primarily attributed to tax positions taken in connection with costs associated with certain contracts and the deductibility of these costs. We continue to refine our corporate structure and its overall tax strategy to increase tax efficiency.
Working capital as of September 30, 2008, for continuing operations, increased $61,904 (31.1 percent) to $261,019 from $199,115 at December 31, 2007. The increase in working capital was primarily driven by positive cash flow of $31,135 generated from continuing operations during the nine months ended September 30, 2008. Working capital increased $13,607 due to the reclassification of property, plant and equipment to assets held for sale. This is related to a facility in Canada that was formerly classified as property, plant and equipment and is currently being held for sale with an expected closing date by year-end. Additionally, working capital accounts that generally trend with the increase of project activity increased $5,367, net. These accounts include accounts receivable, contract costs and income not yet billed, inventory, accounts payable and accrued liabilities and contract billings in excess of cost and recognized income. We also had an increase of $7,128 in prepaid expenses primarily due to the timing of our umbrella and general liability insurance policy renewal.
Our debt to equity ratio as of September 30, 2008, decreased to 0.31:1 from 0.38:1 at December 31, 2007. Our aggregate outstanding debt has decreased $7,101 to $145,245 at September 30, 2008 from $152,346 at December 31, 2007, while we have significantly increased our stockholders' equity $70,304 to $466,405 at September 30, 2008 from $396,101 at December 31, 2007. Other Financial Measures
Backlog
In our industry, backlog is considered an indicator of potential future performance because it represents a portion of the future revenue stream. Our strategy is focused on backlog additions and capturing quality backlog with margins commensurate with the risks associated with a given project.
Backlog consists of anticipated revenue from the uncompleted portions of existing contracts and contracts whose award is reasonably assured. At September 30, 2008, total backlog from continuing operations decreased $266,997 (20.5 percent) to $1,038,444 from $1,305,441 at December 31, 2007. There was no backlog for discontinued operations at September 30, 2008 and December 31, 2007, respectively. We consider the composition of our backlog between fixed-price and cost reimbursable contracts just as important as the overall growth of backlog. Cost reimbursable contracts comprised 88.4 percent of backlog at September 30, 2008 versus 74.9 percent of backlog at December 31, 2007. We expect that approximately $441,688 or approximately 43.0 percent, of our existing total backlog at September 30, 2008 will be recognized in revenue during the remainder of 2008.
We believe the backlog figures are firm, subject only to the cancellation and modification provisions contained in various contracts. Historically, a substantial amount of our revenue in a given year has not been 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 quarterly backlog reports. 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.

The following tables show our backlog by operating segment and geographic location as of September 30, 2008 and December 31, 2007:

                                       September 30, 2008           December 31, 2007
                                      Amount        Percent        Amount        Percent
     Operating Segment
     Upstream O&G                   $   795,103         76.5 %   $   941,301         72.1 %
     Downstream O&G                     178,249         17.2 %       199,646         15.3 %
     Engineering                         65,092          6.3 %       164,494         12.6 %

     Total, continuing operations     1,038,444        100.0 %     1,305,441        100.0 %

     Discontinued operations                  -                            -

     Total backlog                  $ 1,038,444                  $ 1,305,441




                                 September 30, 2008           December 31, 2007
                                Amount        Percent        Amount        Percent
          Geographic Region
          United States       $   778,153         74.9 %   $ 1,014,351         77.7 %
          Canada                  206,411         19.9 %       215,527         16.5 %
          Oman                     53,880          5.2 %        75,563          5.8 %

          Total backlog       $ 1,038,444        100.0 %   $ 1,305,441        100.0 %

   EBITDA from Continuing Operations
   Earnings before net interest, income taxes, depreciation and amortization
("EBITDA") is a non-GAAP measure that we use as a part of our overall assessment
of financial performance 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.
A reconciliation of EBITDA from continuing operations to GAAP financial
information follows:

                                                      Three Months Ended                Nine Months Ended
                                                        September 30,                     September 30,
                                                     2008             2007            2008             2007
Net income (loss) from continuing operations      $   19,051        $ 10,272        $  58,230        $ (33,446 )
Interest, net                                          1,685           1,042            5,079            2,119
Provision for income taxes                             8,057           6,081           36,450            7,793
Depreciation and amortization                         11,201           5,457           33,988           13,223

EBITDA                                            $   39,994        $ 22,852        $ 133,747        $ (10,311 )

EBITDA from continuing operations for the three months ended September 30, 2008 increased $17,142 (75.0 percent) to $39,994 from $22,852 during the same period in 2007. The increase in EBITDA during the three months ended September 30, 2008, is primarily a result of increased net income and depreciation and amortization. The primary cause of the increased net income is increased contract income of $28,859 (excluding depreciation) resulting from the growth of our project activity level and the execution of those projects. The increase in contract income (excluding depreciation) is partially offset by a decrease in contract margin of 2.0 percentage points to 13.8 percent during the three months ended September 30, 2008, from 15.8 percent during the same period in 2007. The increase in depreciation and amortization is primarily a result of our increased capital additions and capital expenditures incurred to support the growth of our business and project activity levels. Additionally, the three months ended 2008 include $2,586 of amortization of intangible assets related to our acquisition of InServ in the fourth quarter of 2007. These increases in contract income and depreciation/amortization expense are partially offset by an increase in G&A of $11,102 (excluding depreciation).
EBITDA from continuing operations for the nine months ended September 30, 2008 increased $144,058 (1,397.1 percent) to $133,747 from $(10,311) during the same period in 2007. The increase in EBITDA during the nine months ended September 30, 2008, is primarily a result of increased net income, provision for income taxes and depreciation and amortization. The primary factor driving increased net income is increased contract income of $145,526 (excluding depreciation) resulting from the growth of our project activity level and the execution of those projects. The increase in contract income (excluding depreciation) reflects an increase in contract margin of 3.5 percentage points to 14.8 percent during the nine months ended September 30, 2008, from 11.4 percent during the same period in 2007. The $28,657 increase in the provision for income taxes is primarily due to our improved operating results in the U.S. thereby resulting in more taxable income in the nine months ended 2008. The increase in depreciation and amortization is primarily a result of capital additions and capital expenditures in late 2007 and through the nine months ended 2008 to support the growth of our business and project activity levels. Additionally, the nine months ended September 30, 2008, include $7,828 of amortization of intangible assets related to our acquisition of InServ in the . . .