Energy-focused engineering and construction firm McDermott International Inc. (MDR) announced that one of its affiliates has won a contract from Mexico’s state oil monopoly Petroleos Mexicanos, or Pemex.
Per the agreement, McDermott will be involved in the construction of the new Ayatsil-B drilling platform located in the Ayatsil field in the Bay of Campeche. The scope of the contract includes engineering, procurement, fabrication, pre-commissioning, load-out and sea fastening of the Ayatsil-B eight-leg jacket and deck.
McDermott will also execute the transportation and installation analysis of the structure and impart necessary training to the Pemex staff for facility operation and maintenance.
The agreement, financial terms of which were not disclosed, will be taken into account in McDermott's second quarter 2012 backlog. The contract work is expected to be completed during the third quarter of 2013.
McDermott management remains highly confident about the execution and performance of this contract that came in after successful completion of the Pemex Kuil-A project.
Houston, Texas-based McDermott primarily serves the worldwide offshore oil and gas field development activities, including front-end design and detailed engineering, fabrication and installation of offshore drilling and production facilities, as well as installation of marine pipelines and subsea production systems.
Given its geographic footprint in high-growth regions, technology leadership and efficient execution skills, the company is poised to benefit from strong industry fundamentals for offshore construction activities through 2012 and beyond.
We believe order flow and backlog for McDermott’s products and services will continue to be healthy and trend higher in the near-to-medium term.
However, due to McDermott’s exclusive focus on the offshore oil and gas business and the tentative commodity price outlook, we harbor a cautious sentiment for the company over the next few quarters. We further believe that the transfer of the ‘Power Generation Systems’ and ‘Government Operations’ segments into a separate, independent and publicly traded entity The Babcock & Wilcox Company (BWC) has left McDermott with a less diversified business, thereby heightening its risk profile.
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.
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