Successful Quarter of New Order Intake in the
Middle East and Americas
Continued Focus on Efficient Execution of Key
Projects Across All Areas
Company to Host Conference Call and Webcast
Today at 4:00 p.m. CT
McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today announced financial and operational results for
the quarter ended March 31, 2015. The Company reported first
quarter 2015 net loss of $14.5 million, or $0.06 per fully diluted
share including restructuring charges, compared to a net loss of
$46.5 million, or $0.20 per diluted share, in the prior-year
quarter. Net of restructuring charges, the first quarter 2015 loss
would have been reduced by $10.4 million or $0.04 per fully diluted
share.
“We are very pleased to have been awarded several important new
projects during the first quarter of the year. While the macro
industry environment continues to be challenging, McDermott has
received three new brownfield EPCI projects in the Middle East, the
Marjan Power Supply System from Saudi ARAMCO, the Qatar Petroleum
award for a wellhead jacket and deck, as well as a new platform and
two bridges from Al-Khafji Joint Operations. As one of our core
markets, these new awards reinforce the ongoing activity in the
region. We have also been awarded new projects in the Americas,
including the SURF scope of a greenfield development for a new
customer off the coast of Brazil,” said David Dickson, President
and Chief Executive Officer of McDermott. “Although we encountered
the weather seasonality we anticipated during the quarter, we are
committed to executing our backlog safely and efficiently. We also
remain focused on prioritizing our bidding activities on
opportunities where we have competitive differentiators to win new
awards.”
First Quarter 2015 Operating Results
The Company reported first quarter 2015 revenues of $550.5
million, a decrease of $53.3 million compared to revenues of $603.8
million for the prior-year first quarter. Revenues for the first
quarter 2015 were affected by weather and third-party performance
delays on the Company’s INPEX project, as well as customer
initiated changes on Middle East brownfield projects that impacted
the timing of vessel mobilization.
The Company’s operating income was $6.6 million for the first
quarter 2015 and included $10.4 million of restructuring expenses.
These results compare to the prior-year period first quarter
operating loss of $38.2 million, which included $6.1 million of
restructuring expenses. Operating income for the first quarter 2015
was positively impacted by favorable changes in cost estimates and
revenue recovery, due to an ongoing focus on execution and improved
customer relationships.
Cash flow from operations for the first quarter 2015 was a use
of cash of $18.5 million compared to a use of cash of $22.3 million
for the first quarter 2014.
Operational Update
In Americas, Europe and Africa (“AEA”), the Company’s execution
of the PB Litoral-A project remains on track with sail-away of the
7,200 ton structure expected to be complete in the third quarter of
the year. During the quarter, McDermott’s Derrick Barge 50 (“DB50”)
completed the successful installation of Ayatsil A for Pemex in the
Gulf of Mexico. In addition, the Altamira fabrication yard
completed its first export project for a major operator with a
successful sail-away of the 2,760 ton, seven-story quarters
structure to offshore Angola, West Africa in February 2015.
McDermott was also awarded a second transportation and installation
contract for Chevron’s Jack and St. Malo fields in the U.S. Gulf of
Mexico building on the execution success of the greenfield
development work in 2014.
In the Middle East (“MEA”), McDermott was awarded a large
contract amendment by Al-Khafji Joint Operations (“KJO”) for a
platform in the Hout field located in the Kuwait/Saudi Arabia
neutral zone. McDermott was awarded the original work scope in
2012. In addition to significant modifications at the existing
complex, the new work includes EPCI work on a new platform and two
bridges with a total weight of approximately 3,300 tons. Also in
the region, the Company received an EPCI contract from Qatar
Petroleum’s (“QP”) North Field Alphafor a wellhead jacket, deck and
umbilical project. McDermott last worked for QP as a prime
contractor in the early 2000’s. In January, McDermott was awarded
“Industrial Operations Company of the Year” by Jebel Ali Free Zone
Authority. As one of the first tenants of the Jebel Ali Free Zone
in 1980, this award signifies McDermott’s continued HSE Leadership
and the ability to build long-term partnerships in the MEA region.
At the end of March, the Middle East area completed 20 million
man-hours without experiencing a Lost Time Incident (“LTI”).
In Asia (“ASA”) on the INPEX Ichthys project, McDermott has
completed 10 million man-hours without a LTI and fabrication of 70%
of the approximately 27,000 tons of subsea structures. The
Construction Support Vessel 108 remains on schedule to begin its
marine campaign at the end of the second quarter of 2015. The
Company has also completed the mobilization of the installation
vessels for the Brunei Shell Petroleum (“BSP”) project. During
April, the Derrick Barge 30 commenced the installation of
approximately 64 miles of replacement pipelines in the field. In
addition, BSP added further work scope that will utilize the
Company’s vessel, the Emerald Sea, to perform additional
installation and tie in work through the fourth quarter of
2015.
Other Financial Information
As of March 31, 2015, McDermott reported total assets of $3.5
billion. Included in this amount was $800.4 million in cash and
cash equivalents and restricted cash. At quarter end, the Company
had $861.3 million in debt outstanding and total equity of $1.5
billion, or 43% of total assets.
Weighted average common shares outstanding on a fully diluted
basis were approximately 237.5 million and 237.0 million for the
quarters ended March 31, 2015 and March 31, 2014, respectively.
Common shares for the settlement of the common stock purchase
contracts related to the Tangible Equity Units or “TEUs”, as well
as other potentially dilutive shares were not considered in the
calculation of diluted weighted average shares for the quarter
ended March 31, 2015 or March 31, 2014, due to the anti-dilutive
effect.
Contract Backlog Summary
As of March 31, 2015, the Company’s backlog was $3.75 billion,
compared to $3.6 billion at December 31, 2014. Of the March 31,
2015 backlog, approximately 50% related to offshore operations and
approximately 50% related to subsea operations. Order intake in the
first quarter 2015 totaled $697.8 million and included new awards
for Saudi ARAMCO, QP and KJO in the MEA area, as well as Chevron
and QGEP in the AEA area.
At March 31, 2015, the Company had $8.8 billion in bids and
change orders outstanding compared to $8.6 billion at December 31,
2014. At March 31, 2015, the Company was targeting to bid
approximately $16.8 billion in projects that it expects to be
awarded to the market through June 30, 2016. In total, the
Company’s potential revenue pipeline was $25.6 billion as of March
31, 2015.
Cost Structure Update
At the beginning of 2015, McDermott announced the results of a
major review of the Company’s cost structure, with a focus on
driving improvements in profitability and flexibility through
reducing fixed and variable costs.
The plan included three key components:
- Increased organizational efficiency,
commencing in the first quarter of this year, with expected savings
starting in the second quarter of 2015
- Centralization of various front- and
back-office functions
- Operational cost initiatives leveraging
McDermott’s global scale and the outsourcing of some non-core
business activities
Through the end of March, McDermott has decreased its employee
count by 475 positions from increased organizational efficiencies
resulting in expected 2015 cash savings of $27.6 million.
Initiatives on centralization and operational costs have also
commenced.
Restructuring charges for the quarter were $10.4 million, as
part of the Company’s previous guidance of $25 million to $35
million for the full year 2015. McDermott remains on track to
achieve the expected annual cash savings of $50 million in 2015,
before restructuring charges.
In addition to the profitability initiatives and as a result of
the Company’s regular work activity and the sequencing of projects,
over 1,200 additional positions have been released from the
Company. These positions are primarily related to craft labor in
McDermott’s fabrication yards.
Conference Call
McDermott has scheduled a conference call and webcast related to
its first quarter 2015 results today at 4:00 p.m. U.S. Central
Daylight Savings Time. Interested parties may listen over the
Internet through a link posted in the Investor Relations section of
the Company’s Web site. A replay of the webcast will be available
for seven days after the call and may be accessed by dialing (888)
286-8010, passcode #99076136. In addition, a presentation will be
available on the Investor Relations section of the Company’s Web
site that contains supplemental information on our operations and
our business outlook.
About the Company
McDermott is a leading provider of integrated engineering,
procurement, construction and installation (EPCI) services for
upstream field developments worldwide. The Company delivers fixed
and floating production facilities, pipelines and subsea systems
from concept to commissioning for complex Offshore and Subsea oil
and gas projects to help oil companies safely produce and transport
hydrocarbons. Our clients include national and major energy
companies. Operating in more than 20 countries across the world,
our locally focused and globally integrated resources include
approximately 11,700 employees, a diversified fleet of specialty
marine construction vessels, fabrication facilities and engineering
offices. We are renowned for our extensive knowledge and
experience, technological advancements, performance records,
superior safety and commitment to deliver. McDermott has served the
energy industry since 1923 and is listed on the New York Stock
Exchange.
To learn more, please visit our website at www.mcdermott.com
Forward-Looking Statements
In accordance with the Safe Harbor provisions of the Private
Securities Litigation Reform Act of 1995, McDermott cautions that
statements in this press release which are forward-looking, and
provide other than historical information, involve risks,
contingencies and uncertainties that may impact McDermott's actual
results of operations. These forward-looking statements include,
but are not limited to, statements about: backlog, bids and change
orders outstanding, projects McDermott expects to bid and the
expected timing of award of such, and revenue pipeline, to the
extent to which these may be viewed as indicators of future
revenues or profitability; continued focus on the prioritization of
bidding activities; the expected scope, execution and timing
associated with certain projects discussed herein; expectations
regarding improvements, savings and costs related to McDermott’s
profitability initiative and the timing of such; expected 2015 cash
savings from decreased employee counts; the expected range of costs
for restructuring charges and the expected 2015 annual cash
savings. Although we believe that the expectations reflected in
those forward-looking statements are reasonable, we can give no
assurance that those expectations will prove to have been correct.
Those statements are made by using various underlying assumptions
and are subject to numerous risks, contingencies and uncertainties,
including, among others: adverse changes in the markets in which we
operate or credit markets, our inability to successfully execute on
contracts in backlog, changes in project design or schedules, the
availability of qualified personnel, changes in the terms, scope or
timing of contracts, contract cancellations, change orders and
other modifications and actions by our customers and business
partners. If one or more of these risks materialize, or if
underlying assumptions prove incorrect, actual results may vary
materially from those expected. You should not place undue reliance
on forward-looking statements. For a more complete discussion of
these and other risk factors, please see McDermott's annual and
quarterly filings with the Securities and Exchange Commission,
including its annual report on Form 10-K for the year ended
December 31, 2014 and subsequent quarterly reports on Form 10-Q.
This news release reflects management's views as of the date
hereof. Except to the extent required by applicable law, McDermott
undertakes no obligation to update or revise any forward-looking
statement.
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF
OPERATIONS
Three Months Ended March 31,
2015 2014 (Unaudited) (In
thousands, except share and per share amounts)
Revenues $ 550,463 $ 603,811 Costs and Expenses: Cost of
operations 475,459 591,493 Selling, general and administrative
expenses 51,676 51,964 Gain on disposal of assets (367 ) (6,439 )
Restructuring expenses 10,389 6,125 Total costs and
expenses 537,157 643,143 (Loss)
Income from Investments in Unconsolidated Affiliates (6,741
) 1,123 Operating Income (Loss) 6,565
(38,209 ) Other Income (Expense): Interest
income (expense), net (12,179 ) 61 Loss on foreign currency, net
(1,468 ) (4,082 ) Other expense, net (97 ) (265 )
Total other expense (13,744 ) (4,286 )
Loss before provision for income taxes and noncontrolling interests
(7,179 ) (42,495 ) Provision for income taxes
4,869 3,489 Net loss
(12,048 ) (45,984 ) Less: net income attributable to
noncontrolling interest 2,459 536
Net loss attributable to McDermott International, Inc. $
(14,507 ) $ (46,520 ) Loss per share Net loss
attributable to McDermott International, Inc.: Basic $ (0.06 ) $
(0.20 ) Diluted $ (0.06 ) $ (0.20 ) Shares used in
the computation of losses per share: Basic: 237,504,719 236,961,158
Diluted: 237,504,719 236,961,158
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months Ended March 31,
2015 2014 (In thousands, except
share and per share amounts) Net loss attributable to
McDermott International, Inc. $ (14,507 ) $ (46,520 )
Weighted average common shares (basic) 237,504,719 236,961,158
Effect of dilutive securities: Stock options, restricted stock and
restricted stock units -
Adjusted weighted average common shares
and assumed exercises ofstock options and vesting of stock awards
(diluted)
237,504,719 236,961,158
Basic loss
per share Net loss attributable to McDermott International,
Inc. $ (0.06 ) $ (0.20 )
Diluted loss per share: Net loss
attributable to McDermott International, Inc. $ (0.06 ) $ (0.20 )
SUPPLEMENTARY DATA
Three Months EndedMarch
31,
2015 2014 (In
thousands) Drydock amortization $ 5,272 $ 6,946
Depreciation & amortization expense 25,327 24,602 Capital
expenditures 23,972 37,893 Backlog 3,748,384 4,364,422
McDERMOTT INTERNATIONAL, INC CONSOLIDATED BALANCE
SHEETS March 31, 2015
December 31, 2014 (Unaudited) (In thousands,
except shares and par value data) Assets Current Assets:
Cash and cash equivalents $ 600,636 $ 665,309 Restricted cash and
cash equivalents 199,764 187,585 Accounts receivable – trade, net
213,144 143,370 Accounts receivable – other 73,837 81,088 Contracts
in progress 380,756 357,617 Deferred income taxes 12,646 7,514
Assets held for sale 14,253 14,253 Other current assets
49,971 44,898 Total Current Assets
1,545,007 1,501,634 Property, Plant and
Equipment 2,479,797 2,473,563 Less Accumulated depreciation
(850,378 ) (830,467 ) Net Property, Plant and Equipment
1,629,419 1,643,096 Accounts Receivable – Long-Term Retainages
136,908 137,468 Investments in Unconsolidated Affiliates 36,206
38,186 Deferred Income Taxes 17,034 17,313 Investments 2,151 2,216
Other Assets 93,306 76,966 Total Assets
$ 3,460,031 $ 3,416,879
Liabilities and
Equity Current Liabilities: Notes payable and current
maturities of long-term debt $ 27,092 $ 27,026 Accounts payable
374,927 251,924 Accrued liabilities 330,889 337,209 Advance
billings on contracts 162,004 199,865 Deferred income taxes 19,265
19,753 Income taxes payable 29,813 25,165
Total Current Liabilities 943,990
860,942 Long-Term Debt 834,247 837,443 Self-Insurance 18,140
17,026 Pension Liability 18,079 18,403 Non-current Income Taxes
48,442 49,229 Other Liabilities 85,707 94,722 Commitments and
Contingencies Stockholders' Equity: Common stock, par value $1.00
per share, authorized 400,000,000 shares; issued and outstanding
246,199,889 and 245,209,850 shares, respectively 246,200 245,210
Capital in excess of par value (including prepaid common stock
purchase contracts) 1,679,631 1,676,815 Accumulated Deficit
(254,079 ) (239,572 ) Treasury stock, at cost: 7,700,580 and
7,400,027 shares, respectively (96,972 ) (96,441 ) Accumulated
other comprehensive loss (116,690 ) (97,808 )
Stockholders' Equity - McDermott International, Inc. 1,458,090
1,488,204 Noncontrolling interest 53,336
50,910 Total Equity 1,511,426 1,539,114
Total Liabilities and Equity $ 3,460,031 $ 3,416,879
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH
FLOWS
Three Month Ended March 31,
2015 2014 (Unaudited) (In
thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net
Loss $ (12,048 ) $ (45,984 ) Non-cash items included in net loss:
Depreciation and amortization 25,327 24,602 Drydock amortization
5,272 6,946 Stock-based compensation charges 4,278 4,387 Losses
(gains) from Investments in unconsolidated affiliates 6,741 (1,123
) Gain on asset disposals (367 ) (6,439 ) Restructuring expense
4,169 675 Deferred taxes (5,341 ) (2,628 ) Other non-cash items
(1,472 ) 1,752 Changes in assets and liabilities, net of effects
from acquisitions and dispositions: Accounts receivable (69,214 )
26,365 Net contracts in progress and advance billings on contracts
(61,021 ) (5,974 ) Accounts payable 110,785 32,727 Accrued and
other current liabilities (5,723 ) 15,046 Pension liability and
accrued postretirement and employee benefits (555 ) 5,880 Other
assets and liabilities (19,370 ) (78,560 ) TOTAL CASH
USED IN OPERATING ACTIVITIES (18,539 ) (22,328 )
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of
property, plant and equipment (23,972 ) (37,893 ) (Increase) in
Restricted cash and cash equivalents (12,179 ) (19,634 ) Purchases
of available-for-sale securities - (1,997 ) Sales and maturities of
available-for-sale securities 1,775 10,055 Investments in
unconsolidated affiliates (4,696 ) - Proceeds from asset
dispositions - 8,370 Other 76 (1,950 ) TOTAL
CASH USED IN INVESTING ACTIVITIES (38,996 ) (43,049 )
CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from
debt - 250,000 Repayment of debt (4,706 ) (31,373 ) Other
(1,323 ) (3,858 )
TOTAL CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
(6,029 ) 214,769 EFFECTS OF EXCHANGE
RATE CHANGES ON CASH (1,109 ) 36 NET INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS (64,673 )
149,428 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
665,309 118,702 CASH AND CASH
EQUIVALENTS AT END OF PERIOD $ 600,636 $ 268,130
McDermott International, Inc.Investors & Financial
MediaDarcey Matthews, 281-870-5147Vice President, Investor
Relationsdmatthews@mcdermott.com
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