MRC Global Turns Primary MRO Supplier on New 3-Year Deal

MRC Global Inc.’s MRC U.S. operating company, McJunkin Red Man Corporation, recently secured a three-year long supply contract from the largest oil and gas producing company of California, Marathon Oil Corporation MRO. The deal, signed for an undisclosed amount, complements the company’s organic growth strategy.

As per the integrated supply agreement, McJunkin Red Man Corporation would supply all the project requisites and provide maintenance, repairing as well as operational services to the largest oil & gas warehouse facility of Marathon Oil at San Joaquin Basin. Thus, the contract would require full-system amalgamation, logistics management and replacement of variable remote inventory sites in the field.

Contract Source

Marathon Oil is a premium multinational production and exploration company in Houston, mainly offering services in the Europe, Africa and North America. The deal, besides extending a 25-year long relationship, also reinforces the position of MRC Global as Marathon Oil’s primary U.S. project service provider.

Insights

In the last reported quarter, MRC Global’s revenues increased 12.5% year over year to $1,512.1 million. The improvement was primarily driven by stronger international sales which rose 38.7% year over year, backed by $84.7 million of sales benefits reaped from acquired businesses.

MRC Global aims to improve the top line mainly on the back of its inorganic growth strategies. However, as such investments involve higher working capital; the company might lack funds to lower its aggregate debt burden in the long run on grounds of such expenses. At 2014-end, the company’s long-term debt, net of current portion, rose to $1,445.7 million from $978.9 million recorded at the end of 2013. Nevertheless, we believe the latest deal with Marathon Oil will support MRC Global’s organic growth initiatives, going forward.

With a market capitalization of $1.36 billion, MRC Global currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Golden Minerals Company AUMN and Akzo Nobel NV AKZOY. Both the companies currently hold a Zacks Rank #2 (Buy).

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