McDermott Provides an Operational Update
March 31 2014 - 4:43PM
Business Wire
McDermott International, Inc. (NYSE: MDR) announced today an
update to certain operational matters. Through working capital
management, the Company maintained its previously reported
liquidity and leverage position at the end of March 2014 compared
to amounts previously reported at the end of February 2014.
Specifically, as of March 31, 2014, the Company had approximately
$320 million of total cash, cash equivalents, restricted cash and
investments and $307 million of total funded debt, including $250
million of borrowings under the Company’s credit facility and $57
million of separate vessel financing.
The Company recently achieved significant operational milestones
on several key projects, including:
- Malaysia (Siakap) Project – Pipe and
subsea structure installation has been completed. The customer
received first oil in February 2014, and the vessel North Ocean 105
has demobilized from the field. The Company expects mechanical
completion in early April 2014. Although this project resulted in
financial losses recorded in 2013, it was a major technical
achievement of complex pipe-in-pipe and subsea structure
installation in over 5,000 feet of water.
- Brazil (Papa Terra) Project – The
installation of the extended tension leg platform was completed in
March 2014 and the vessel DB 50 has demobilized from the field.
This facility is a significant operational achievement because it
includes the first dry tree in deepwater Brazil.
- Azerbaijan (COP) Project – The Company
has progressed work as expected and continues to expect to complete
the limited remaining offshore work by mid-May 2014.
- Australia (Ichthys) Project – The
Company remains on schedule for fabrication operations in the
Batam, Indonesia fabrication yard and anticipates the commencement
of the offshore installation operations in the third quarter of
2014. McDermott’s work has resulted in the customer recognizing us
as a leader among the program contractors, and the Company expects
the work on the project will be a major subsea achievement for the
Company.
In addition, the Company continues to make progress with
customers on commercial matters and, although the Company can
provide no assurance, opportunity remains to improve the financial
outcome from each of the above-mentioned projects.
The Company continues to expect the operating profit margins of
projects in backlog to be in the low single digits, which does not
cover the Company’s restructuring costs or a portion of the
Company’s fixed costs for direct operating expenses and general and
administrative expenses. All ongoing contracts and unresolved
change orders are reviewed at the end of each quarter to assess
performance, progress and likelihood of successful resolution and
it is determined if there is any need for adjustments to estimates.
While this review for the first quarter of 2014 will be conducted
over the next few weeks, the Company is not aware, as a preliminary
matter, of any issues that are believed to give rise to additional
material losses on contracts, due to write-downs of change orders
or otherwise, that, after taking into account offsetting positive
developments, would materially and adversely impact the Company’s
expectations regarding the first quarter of 2014. The Company’s
preliminary estimates are based on various assumptions and on the
Company’s review of preliminary financial results for only two
months of the quarter, and the full quarterly results will be
based, in substantial part, on estimates and assumptions as of
(and, in some cases, particularly with respect to contracts in a
loss position, subsequent to) March 31, 2014. Accordingly, it is
possible that actual first quarter 2014 results will differ
substantially from the Company’s current expectation. In addition,
the Company’s preliminary estimates relating to the first quarter
of 2014 and the related assumptions do not give effect to the
Company’s financial closing procedures. The Company expects to
complete its financial closing procedures for the quarter ended
March 31, 2014 in May 2014, and those procedures may also result in
actual first quarter 2014 results differing substantially from
current expectations. Accordingly, one should not place undue
reliance on the Company’s preliminary statements relative to the
first quarter of 2014.
The Company completed the sale of the DLB KP1 in March 2014 for
a gain of over $5 million.
Approximately $149 million of new orders was booked in the first
quarter of 2014, which includes a marine installation charter
contract for the vessel North Ocean 105 for Petrobras in
Brazil.
The Company is implementing the previously announced plan to
improve internal processes and risk management by increasing
operational efficiency through a new organizational design aimed at
delivering improved and more predictable performance. The new
organizational design orients the Company’s management around
offshore and subsea operations, with highly experienced business
leaders who have responsibility for strategic direction of the
business lines and for aligning operations with customer needs.
These business leaders will also provide oversight and project
execution support for regional operations and will have
responsibility for efficiently allocating assets among the regional
operations. Many of these leaders have been hired from outside
McDermott and bring significant experience in the offshore
industry. The Company recently hired approximately 150 new people
with extensive experience in subsea projects. These new additions
to the Company’s team bring expertise in determining bid levels for
new projects and executing complex subsea work. The Company expects
to continue adding subsea leadership at the executive level and
within global, regional and local operations.
About McDermott
McDermott is a leading provider of integrated engineering,
procurement, construction and installation (EPCI) services for
upstream field developments worldwide. McDermott delivers fixed and
floating production facilities, pipelines and subsea systems from
concept to commissioning for complex Offshore and Subsea oil and
gas projects to help oil companies safely produce and transport
hydrocarbons. Operating in more than 20 countries across the world,
McDermott’s locally focused and globally integrated resources
include approximately 14,000 employees, a diversified fleet of
specialty marine construction vessels, fabrication facilities and
engineering offices.
McDermott International, Inc.Investors, Analysts and Financial
Media:Steven D. Oldham, (281) 870-5147Vice President, Treasurer and
Investor Relationssoldham@mcdermott.com
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