Recently, energy-focused engineering and construction firm
McDermott International, Inc
) received a major subsea contract from Murphy Sabah Oil Co., Ltd.
Although none of the companies disclosed the financial terms of the
deal, McDermott has included the contract's value in its first
quarter 2012 backlog.
Per the deal, McDermott will provide engineering, procurement,
construction, transportation, installation and commissioning
services to be utilized for the subsea infrastructure of the Siakap
North - Petai ("SNP") Development Project in Malaysia. McDermott
will execute the deal through its Malaysian arm - Berlian McDermott
The scope of the contract includes works of rigid flowlines,
flexible risers, an umbilical and subsea hardware and controls.
McDermott will also set up five water injection and eight
production wells that will be drilled from the manifolds at each of
the four drill centre units.
Located in proximity to the Kikeh field, northwest of Labuan
Island the SNP field is at a water depth of 3,900 - 4,900 feet and
is operated by Murphy Sabah Oil Co. Ltd. The SNP field comprises
two rigid, insulated, pipe-in-pipe production flowlines as well as
one rigid water injection flowline. There is also one main
umbilical system that connects eight new manifolds and subsea
distribution units to existing riser slots on the Kikeh Floating
Production, Storage and Offloading(FPSO) facility.
Extensive engineering and procurement works for the project are
on track. Other works including fabrication of PLETs, jumpers and
other installation aids is slated to start in the third quarter of
McDermott management stated that in-depth knowledge about subsea
engineering and construction vessels along with track record of
fabrication activity at the Batam Island facility aided the
McDermott currently retains a Zacks #3 Rank, which translates
into short-term Hold rating. We are also maintaining a long-term
Neutral recommendation on the stock.
We think McDermott's improving award activity, geographic
footprint in high-growth regions, and continued strong project
execution provide solid visibility into its earnings for 2012 and
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
heightening its risk profile.
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