McDermott Strikes Twin Deals - Analyst Blog
April 09 2013 - 1:30PM
Zacks
A subsidiary of the energy-focused engineering and construction
firm McDermott International Inc. (MDR) has inked
two contracts for a client in the Arabian Gulf. Estimated at $900
million, the contracts will form part of McDermott's first quarter
2013 backlog.
Per the first contract, McDermott is entitled to engineering,
procurement, construction and installation of a new tie-in
platform, a 3,200-ton topside and six-pile jacket, two auxiliary
platforms, jackets and bridges. The company will also be
responsible for five observation platforms, 72 kilometers of
pipelines and 45 kilometers of subsea cables. Water depth of the
same will be between 10–30 meters.
McDermott will also carry out brownfield work which includes
upgrades to five platforms with new main, mezzanine, cellar and
helicopter decks and new boat landings. This contract is expected
to be over by the third quarter of 2015.
With respect to the second contract, McDermott will be responsible
for the fabrication, transportation and installation of five drill
support structures. Total weight of the facility is 7,993 tons in
water depth of between 30 meters to 65 meters. This contract is
expected to be completed in first quarter of 2014 with hookup and
commissioning work.
McDermott’s Al-Khobar and Dubai engineering offices will undertake
the engineering work while construction will be carried out at its
fabrication facility in Jebel Ali, United Arab Emirates.
These contract wins are suggestive of McDermott’s expansion mode.
It looks forward to more such opportunities in the coming years. We
believe such accomplishments will garner profits for McDermott in
the upcoming quarters.
However, the transfer of the Power Generation Systems and
Government Operations segments into a separate, independent and
publicly traded entity – The Babcock & Wilcox
Company (BWC), has left McDermott with a less diversified
business, thereby making its profile riskier.
McDermott currently retains a Zacks Rank #4 (Sell), implying that
it is expected to underperform the broader U.S. equity market over
the next one to three months.
Meanwhile, there are other engineering firms that are performing
better and are worth considering at the current level. These
include Matrix Service Company (MTRX) and
Natural Gas Services Group Inc. (NGS). Both these
stocks sport a Zacks Rank #2 (Buy).
BABCOCK&WILCOX (BWC): Free Stock Analysis Report
MCDERMOTT INTL (MDR): Free Stock Analysis Report
MATRIX SERVICE (MTRX): Free Stock Analysis Report
NATURAL GAS SVC (NGS): Free Stock Analysis Report
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