McDermott Secures Shell Deal - Analyst Blog
August 10 2011 - 7:15AM
Zacks
A unit of McDermott
International (MDR) has won a contract from Royal
Dutch Shell plc (RDS.A) to build a West Delta 143 "C"
deck, jacket, piles, and bridge in the Gulf of Mexico. Although the
financial terms of the deal were not disclosed, it will be included
in McDermott’s third quarter 2011 booking.
This construction forms a part of
Shell’s Mars B Development involving Olympus Tension Leg Platform,
West Boreas and South Deimos subsea development and the West Delta
143 "C" Jacket and Deck.
McDermott will execute engineering,
procurement and fabrication at its Morgan City facility in
Louisiana, while other manufacturing and load-out analysis will be
carried out by the New Orleans plant.
McDermott management remains highly
upbeat about its association with Shell and is confident of
completing the venture on schedule with full efficiency. With
construction expected to commence later in 2011, the deck will
likely sail in the first quarter of 2013.
Houston, Texas-based McDermott
International operates as a global engineering, procurement,
construction, and installation company that focuses on designing
and executing complex offshore oil and gas projects. The company
has access to most major offshore oil and gas producing regions,
including the U.S., Mexico, Canada, the Middle East, India, the
Caspian Sea and Asia Pacific.
Last week, McDermott presented
mixed second quarter 2011 results following improved sales and
higher operating costs. The company’s earnings per share from
continuing operations were 27 cents, which came in below the Zacks
Consensus Estimate of 32 cents. However, revenues of $849.8 million
were slightly ahead of our expectation of $841 million.
The quarterly performance was
buoyed by strong contributions from the Asia-Pacific belt
(attributable to increased marine activity on large engineering,
procurement, construction and installation or EPCI projects) and
partially offset by weak activity in the Middle East region.
We believe that McDermott exhibits
a diversified product portfolio, specialty manufacturing and
service capabilities as well as proprietary technological
expertise. The order flow and backlog for the company’s products
and services are expected to remain healthy and trend higher in the
near-to-medium term.
Considering the highly volatile oil
and gas scenario and commodity price fluctuations that the company
faces, we maintain our long-term Neutral recommendation.
MCDERMOTT INTL (MDR): Free Stock Analysis Report
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