McDermott International Inc. (MDR), through one of its subsidiaries, received a Contract Release Purchase Order from Saudi Arabian Oil Company, Saudi Aramco. As per the deal, McDermott will work for the Abu Safah, Safahniyah, and Berri fields under the Offshore Maintain Potential Project.
McDermott will be working on the installation of infield flow lines, flexible laterals, power and control cables and sleds in the aforesaid fields. There will be installation of pipelines covering a total area of 16 miles with the aid of three intra-field pipelines.
The company will set up subsea power and fiber optic composite cables totaling 21 miles along with a total of 2.8 miles of flexible pipelay and 8 valve skids to be tied into the newly laid flow lines connecting to the existing platforms.
It received the contract as part of the Long Term Agreement (“LTA”) with Saudi Aramco. The company will execute the contract through the crews of DB27 and Thebaud Sea.
This contract, which was included in McDermott’s second quarter 2010 backlog, will go on the floors in the fourth quarter of 2010.
Texas-based McDermott is a leading engineering, procurement, construction and installation (“EPCI”) company involved in executing complex offshore oil and gas projects globally. In August 2010, the company completed the spin-off of its ‘Power Generation Systems’ and ‘Government Operations’ segments into a separate, independent and publicly traded company Babcock & Wilcox Co. (BWC).
We believe McDermott currently has a less diversified business portfolio, following the split of the power generation and government operations. As a result, the company demonstrates a heavy business risk profile than that of the predecessor corporation.
Hence, this contract stands out to be of significant value to the company, particularly given the present difficult scenario.
We have a Zacks Rank of #5 (short-term Strong Sell recommendation) on the shares. We also reiterate our long-term Underperform rating.
MCDERMOTT INTL (MDR): Free Stock Analysis Report
Zacks Investment Research
