A subsidiary of the energy-focused engineering and
McDermott International Inc.
) 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.
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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
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
), 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
Matrix Service Company
Natural Gas Services Group Inc.
). Both these stocks sport a Zacks Rank #2 (Buy).