McDermott Signs Major EPC Deals in Middle East, Sees Rapid Backlog Growth in Third-Quarter 2015

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Researched by Industrial Info Resources (Sugar Land, Texas)--McDermott International Incorporated (NYSE:MDR) (Houston, Texas), an engineering, procurement and construction (EPC) company focused on offshore oil and gas projects, notched up solid gains in third-quarter 2015 as it touted a slew of contract wins, particularly a record-setting deal in Saudi Arabia, and significant progress at the closely watched INPEX Ichthys project in Australia. Industrial Info is tracking $3.75 billion in projects involving McDermott.

Among the most positive factors for McDermott during the quarter were strong revenues from the INPEX Ichthys project in Australia, where McDermott and other contractors completed all inline structures for pipelay in a major fabrication yard; completion of the PB Litoral production platform, now set for the Gulf of Mexico; and the awarding of the first lump-sum contract in the company's long-term agreement with Saudi Aramco (Riyadh, Saudi Arabia), which is the single largest award McDermott has received in the Middle East.

Industrial Info is tracking several projects involving McDermott in Saudi Arabia, including $500 million in upgrades and installations at Saudi Aramco's Safaniya Offshore Project. The Phase-II project involves building and installing a new tie-in platform; two auxiliary platforms, jackets and bridges; five observation platforms and jackets; 72 kilometers of pipelines; and 45 kilometers of subsea cables.

Industrial Info is also keeping tabs on the $1.76 billion INPEX Ichthys project, which is expected to be completed toward the end of next year.

McDermott's capital expenditures for the quarter were reported to be $18.13 million, compared with $61.57 million in the same period last year. The company previously had announced that it would pare spending amid market challenges; for more information, see August 12, 2015, article - McDermott Slashes Full-Year Capital Spending Plans as Ichthys, Other EPC Projects Face Delays .

Net income for the quarter was reported to be $3.67 million, compared with a net loss of $30.25 million in third-quarter 2014. Total revenues stood at $805.86 million, compared with $414.6 million in the same period last year.

When excluding restructuring charges for both quarters and a $16.7 million legal settlement in third-quarter 2015, net income stood at $26.7 million for the quarter, compared with a net loss of $25.5 million in third-quarter 2014.

"New work won for the quarter totaled over $2.1 billion and represented one of the company's strongest periods over the past several years," said David Dickson, the president and chief executive officer of McDermott, in a conference call. "This quarter also represents the first time since the first quarter of 2012 that McDermott has substantially increased its backlog, which is now over $4.4 billion as we head into the fourth quarter. These awards and our ability to build backlog in a challenging macro environment are clear indications that the work the company has done on improving execution and enhanced customer engagement are continuing to generate tangible results."

McDermott also was awarded two brownfield projects offshore Qatar: a contract from Qatar Petroleum (Doha, Qatar) for the Bul-Hanine field, and a contract from RasGas (Doha) for a 74-mile pipeline project.

McDermott's backlog stood at $4.42 billion at the end of the third quarter, compared with $3.78 billion at the end of third-quarter 2014. About 73% of last quarter's backlog is related to offshore projects, and about 27% is related to subsea projects.

"Of the $4.4 billion of backlog, $665 million is due to roll off in fourth-quarter 2015, $2.4 billion in 2016, $1 billion in 2017, and $400 million in 2018," said Stuart Spence, the executive vice president and chief financial officer of McDermott, in the conference call.

In a press release accompanying quarterly earnings, McDermott executives said the company is aiming to bid approximately $16.6 billion in projects that it expects to be awarded to the market through the end of 2016. In total, the company's potential revenue pipeline, including backlog, stands at $23.6 billion, according to the release.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.