McDermott Secures SURF Deal - Analyst Blog
08 July 2011 - 2:04AM
Zacks
The Australian unit of McDermott International
Inc. (MDR) has won a deepwater offshore contract for the
Macedon Gas Project in Western Australia. Per the terms of the
deal, the company would be involved in engineering and construction
of the project along with structural transportation and
installation of subsea infrastructure.
This happens to be McDermott’s first SURF (Subsea, Umbilicals,
Risers and Flowlines) venture in Australia. The scope of the deal
includes thorough engineering, procurement, fabrication,
transportation and installation of a 47.7-mile long and 20-inch
diameter pipeline.
The company will also set up subsea umbilicals and flexible
flowlines using vessels from its fleet operating in water depths up
to 590.5 feet.
Located in the Pilbara region, the $1.5 billion Macedon Gas
Project is operated by BHP Billiton (BHP) with a
71.43% interest, while the remaining stake of 28.57% is controlled
by Apache Corporation (APA). The project revolves
around four offshore production wells, an onshore gas plant, sales
gas pipeline and onshore infrastructure. With recoverable reserves
of up to 750 billion cubic feet of gas, Macedon is expected to come
online in 2013.
McDermott management remains highly upbeat regarding this
endeavor in the Asia Pacific belt and stated that the contract will
be included in its second quarter 2011 backlog. With this deal, the
company expects to boost its presence in the subsea construction
market and is confident of delivering proficient services within a
specified time limit.
Houston, Texas-based McDermott is a leading global engineering
and construction firm that has a diversified product portfolio,
specialty manufacturing and service capabilities, and proprietary
technological expertise. The company operates in most major
offshore oil and gas producing regions, including the U.S., Mexico,
Canada, the Middle East, India, the Caspian Sea and Asia
Pacific.
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. Additional positives include continued success
on big awards, growing international operations and a solid balance
sheet.
However, we expect the company’s growth potential to be
restrained by fluctuating commodity prices, operational hindrances
and a less diversified business profile. Hence, we maintain our
long-term Neutral rating on the stock.
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