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Released February 27, 2019 | SUGAR LAND
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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) giant, enjoyed revenues for full-year 2018 that were more than double those of 2017, but saw its profits eradicated by a series of heavy impairment charges and other expenses at some of its highest-profile energy projects, including the Cameron LNG and Calpine complexes. Industrial Info is tracking about $130 billion in active projects involving McDermott, including more than $82 billion in the U.S. and Canada.
Click on the image at right for a graph detailing the top 10 U.S. states and Canadian provinces for active McDermott projects, by investment value.
McDermott's fourth-quarter net loss was reported to be $2.8 billion, which was driven by $2.2 billion in impairment costs attributed Sempra Energy's (NYSE:SRE) (San Diego, California) Cameron LNG project in Louisiana; ConocoPhillips' (NYSE:COP) (Houston, Texas) Freeport LNG Liquefaction and Export Plant in Texas; and Calpine Corporation's (Houston) unit addition at the York Energy Center in Delta, Pennsylvania. McDermott also recorded $199 million of estimated cost increases on the Cameron LNG and Calpine projects.
The $10 billion Cameron LNG Liquefaction Plant near Hackberry, Louisiana, which has been under construction since late 2014, is scheduled to see construction completed in the coming weeks. The complex comprises three liquefaction trains, each with a capacity of 5 million metric tons per year; a 160,000-cubic-meter LNG storage tank; and related facilities. Sempra expects one of the trains to be fully operational within weeks; the other two trains are to be operational by the end of the year. Tolling agreements with GDF Suez, Mitsubishi Corporation and Mitsui & Company Limited have been signed for the total yearly capacity for 20 years.
McDermott executives acknowledged that Cameron LNG is incurring larger-than-expected costs "due to unfavorable labor productivity, and subcontract, commissioning and construction management costs." It is one of many projects McDermott inherited from Chicago Bridge & Iron (CB&I) following its acquisition early last year. For more information, see Industrial Info's project report.
"Unfortunately, over the course of the fourth quarter, we saw that some of the improvements we made at [Cameron LNG] were taking longer than expected to achieve, and we intend to have some issues in the commissioning activity for Train 1," said David Dickson, the chief executive officer of McDermott, in an earnings-related conference call.
Higher cost estimates on the $760 million combined-cycle turbine addition at Calpine's York Energy Center were attributed to increased labor costs associated with commissioning, including efforts to reach substantial completion within the next few weeks. Executives said these issues are largely in the rear-view mirror. The addition includes two combustion turbines and a steam turbine, all from General Electric (NYSE:GE), which will generate 760 MW. For more information, see Industrial Info's project report.
Separately, McDermott now expects to see a $102 million reduction in its recovery of costs from 2017's Hurricane Harvey at the Freeport LNG project; otherwise, there are no assumed changes in schedule or cost. The $5.5 billion first train for the Freeport LNG Liquefaction and Export Plant in Quintana, Texas, which is expected to be operational later this year, comprises three trains that each will produce 5 million tons per year of LNG. The 730 million standard cubic feet per day of natural gas feedstock will be sourced from the Eagle Ford Shale. Tolling agreements for the product have been signed with Osaka Gas and Chubu Electric. For more information, see Industrial Info's project report.
Outside the U.S., McDermott noted it incurred $54 million of expense on Petroleos Mexicanos' (PEMEX) (Mexico City) $380 million crude oil and natural gas production platform in the Campeche Basin, caused by a change in the fabrication plan for carrying work offshore; weather delays; and a lack of contractually promised accommodations for offshore crew. Dickson said the issue is "a disappointment because it's our first kind of black mark in our offshore business since going back to 2013." The project is expected produce 200,000 barrels per day (BBL/d) of crude and 380 million standard cubic feet per day of natural gas. For more information, see Industrial Info's project report.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
Click on the image at right for a graph detailing the top 10 U.S. states and Canadian provinces for active McDermott projects, by investment value.McDermott's fourth-quarter net loss was reported to be $2.8 billion, which was driven by $2.2 billion in impairment costs attributed Sempra Energy's (NYSE:SRE) (San Diego, California) Cameron LNG project in Louisiana; ConocoPhillips' (NYSE:COP) (Houston, Texas) Freeport LNG Liquefaction and Export Plant in Texas; and Calpine Corporation's (Houston) unit addition at the York Energy Center in Delta, Pennsylvania. McDermott also recorded $199 million of estimated cost increases on the Cameron LNG and Calpine projects.
The $10 billion Cameron LNG Liquefaction Plant near Hackberry, Louisiana, which has been under construction since late 2014, is scheduled to see construction completed in the coming weeks. The complex comprises three liquefaction trains, each with a capacity of 5 million metric tons per year; a 160,000-cubic-meter LNG storage tank; and related facilities. Sempra expects one of the trains to be fully operational within weeks; the other two trains are to be operational by the end of the year. Tolling agreements with GDF Suez, Mitsubishi Corporation and Mitsui & Company Limited have been signed for the total yearly capacity for 20 years.
McDermott executives acknowledged that Cameron LNG is incurring larger-than-expected costs "due to unfavorable labor productivity, and subcontract, commissioning and construction management costs." It is one of many projects McDermott inherited from Chicago Bridge & Iron (CB&I) following its acquisition early last year. For more information, see Industrial Info's project report.
"Unfortunately, over the course of the fourth quarter, we saw that some of the improvements we made at [Cameron LNG] were taking longer than expected to achieve, and we intend to have some issues in the commissioning activity for Train 1," said David Dickson, the chief executive officer of McDermott, in an earnings-related conference call.
Higher cost estimates on the $760 million combined-cycle turbine addition at Calpine's York Energy Center were attributed to increased labor costs associated with commissioning, including efforts to reach substantial completion within the next few weeks. Executives said these issues are largely in the rear-view mirror. The addition includes two combustion turbines and a steam turbine, all from General Electric (NYSE:GE), which will generate 760 MW. For more information, see Industrial Info's project report.
Separately, McDermott now expects to see a $102 million reduction in its recovery of costs from 2017's Hurricane Harvey at the Freeport LNG project; otherwise, there are no assumed changes in schedule or cost. The $5.5 billion first train for the Freeport LNG Liquefaction and Export Plant in Quintana, Texas, which is expected to be operational later this year, comprises three trains that each will produce 5 million tons per year of LNG. The 730 million standard cubic feet per day of natural gas feedstock will be sourced from the Eagle Ford Shale. Tolling agreements for the product have been signed with Osaka Gas and Chubu Electric. For more information, see Industrial Info's project report.
Outside the U.S., McDermott noted it incurred $54 million of expense on Petroleos Mexicanos' (PEMEX) (Mexico City) $380 million crude oil and natural gas production platform in the Campeche Basin, caused by a change in the fabrication plan for carrying work offshore; weather delays; and a lack of contractually promised accommodations for offshore crew. Dickson said the issue is "a disappointment because it's our first kind of black mark in our offshore business since going back to 2013." The project is expected produce 200,000 barrels per day (BBL/d) of crude and 380 million standard cubic feet per day of natural gas. For more information, see Industrial Info's project report.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
