Zachry Holdings files for bankruptcy, plans to exit $10B LNG terminal project - San Antonio Report
Zachry Holdings files for bankruptcy, plans to exit $10B LNG terminal project
San Antonio-based Zachry Holdings, Inc. is seeking Chapter 11 bankruptcy protection for itself and 20 subsidiaries, the company announced Tuesday, allowing it to make a “structured exit” from its partnership to build a $10 billion liquified natural gas terminal in Sabine Pass.
The company said its difficulties stem from its work as the lead contractor on the Golden Pass LNG terminal, which is owned by QatarEnergy and ExxonMobil just south of Port Arthur.
In a news release, Chairman and CEO John B. Zachry described “significant challenges and disruptions” starting with the pandemic and now including “international geopolitical issues” that have resulted in “significant financial strain while meeting targets and keeping the project appropriately staffed.”
Work at all of Zachry’s other job sites will continue without interruption, according to the release.
Zachry described itself in bankruptcy documents as “a leading provider of turnkey engineering, construction, maintenance and fabrication services” with $5.4 billion in operating revenues in 2023 and 20,000 employees that have worked on “high profile projects across the U.S. and the rest of the world.”
Also known as Zachry Group, Zachry Holdings is distinct from Zachry Construction, which is run by John B. Zachry’s brother David Zachry.
Earlier this month, a Beaumont news station reported that Zachry had furloughed some of its hourly subcontractors at the site, leading Golden Pass to acknowledge “ongoing discussions regarding the role of Zachry within CCZJV” — the joint venture between Chiyoda International Corporation, McDermott International and Zachry Holdings.
Zachry began work on the Golden Pass project in 2019.
“We have been transparent with GPX and its shareholders as we have attempted to reach a mutually agreeable resolution to these issues,” said John B. Zachry in the release. “Because we have been unable to find a path forward, we have been forced to take action to protect our business.”
The bankruptcy allows Zachry “to initiate a structured exit from the GPX project.”
Zachry Holdings and its subsidiaries filed voluntary petitions for a court-supervised restructuring under Chapter 11 of the U.S. Bankruptcy Code in the bankruptcy court for the Southern District of Texas.
“Golden Pass LNG acknowledges the bankruptcy filing by Zachry Industrial, Inc., a party to the EPC contract for construction of our LNG terminal,” said a spokesperson for Golden Pass LNG.
”Work continues on the project with McDermott and Chiyoda, the other two parties to the EPC contract, with thousands of workers on site. The project is already 75% progressed and we are committed to completing the project.”
Related Knowledge Center: Liquefied natural gas
Driven by plentiful natural gas produced from shale plays, the United States began exporting liquefied natural gas in 2016 when the Sabine Pass terminal in Louisiana opened and shipped its first cargo. Since then, additional capacity, or trains, have been added to Sabine Pass, and terminals have become operational in Cameron Parish, La.; Hackberry, La.; Cove Point, Md.; and Corpus Christi, Texas. The Energy Information Administration projects that U.S. LNG export capacity will reach 8.9 billion cubic feet per day (Bcf/d) by the end of 2019, making it the third largest in the world, behind Australia and Qatar. The tariff war with China has the potential to impact some final investment decisions for additional terminals in the coming months.