Positive Financial Results Reported Across All
Business Areas
Strong Execution on Current Project
Portfolio
Revised Guidance for Full Year 2015
Company to Host Conference Call and Webcast
Today at 4:00 pm CDT
McDermott International, Inc. (NYSE: MDR) (“McDermott” or the
“Company”) today announced financial and operational results for
the quarter ended June 30, 2015. The Company reported second
quarter 2015 net income of $11.5 million, or $0.04 per fully
diluted share compared to a net loss of $7.4 million, or $0.03 per
diluted share, in the prior-year quarter. Net of restructuring
charges and one-time losses on the impairment and disposal of
assets, the second quarter income would have been increased by
$24.1 million or $0.08 per fully diluted share.
“This was another positive quarter for McDermott as we
experienced excellent execution on our existing portfolio of
projects and all of our areas returned to profitability. While the
timing of new order intake remains volatile as commodity prices
remain low, we continue to leverage McDermott’s vertically
integrated model and win contracts in our key markets, including a
new project for Saudi Aramco and two new projects in the Americas.
Additionally, we remain disciplined in bidding new projects and
continue to actively manage our cost structure,” said David
Dickson, President and Chief Executive Officer of McDermott. “The
end of the second quarter also marked a significant achievement for
the Company in health and safety. With a continued focus on HSE and
project execution, we exceeded the key milestone of one year
without a loss-time incident in all of McDermott’s global
operations.”
Second Quarter 2015 Operating Results
The Company reported second quarter 2015 revenues of $1.05
billion, an increase of $570.5 million, compared to revenues of
$476.1 million for the prior-year second quarter. Revenues for the
second quarter of 2015 were positively impacted by strong revenue
recognition at the INPEX Ichthys project, Brunei Shell Petroleum
project and three Middle East projects.
McDermott’s operating income was $41.6 million for the second
quarter of 2015 and included $15.4 million of restructuring
expenses and $8.7 million of one-time losses on the impairment and
disposal of assets. These results compare to the 2014 second
quarter operating income of $31.5 million, which included $1.3
million of restructuring expenses and $45.7 million of gains from
the disposal of assets and impairments. Net of the asset gains and
impairments, the operating income for the second quarter of 2014
would have been negative. Operating income for the second quarter
2015 was positively impacted by revenue improvements, a project
close out in Brazil and marine utilization.
Cash used in operating activities in the second quarter 2015 was
$7.6 million, compared to a use of cash of $70.6 million for the
second quarter 2014.
Operational Update
In Americas, Europe and Africa (“AEA”), the Company’s PB Litoral
project is nearing completion with preparations well underway for
the conclusion of the construction, offshore installation, hook-up
and commissioning. The project remains on track with sail-away of
the 7,200-ton structure, from the Company’s Altamira yard, expected
near the end of the third quarter. In May, the Altamira fabrication
yard reached seven million man hours without a Lost Time Injury
(“LTI”). During the quarter, McDermott’s Derrick Barge 50 (“DB 50”)
installed a mobile drilling structure on top of the Pemex Ayatsil A
platform for Drillmec. In addition, the Company was awarded its
fourth contract from Pemex in the Ayatsil field, for the
construction of a replacement jacket and associated deck
installation. The DB 50 also supported Heerema and Anadarko with
the installation of the Heidelberg Spar hull in the U.S. Gulf of
Mexico (“GOM”). Recently, McDermott was awarded the LLOG OTIS
subsea project, to be executed in the GOM. The pipeline to be
installed as part of the OTIS project is expected to be the first
subsea rigid pipe reeling scope to be executed at the McDermott
spoolbase, currently under development in Gulfport,
Mississippi.
In the Middle East (“MEA”), McDermott was awarded a large
brownfield contract by Saudi Aramco for the full engineering,
procurement, construction and installation (“EPCI”) scope of 12
jackets for various offshore oil and gas fields in Saudi Arabian
waters. In addition, Saudi Aramco selected McDermott as one of the
companies for its new Long Term Agreement (“LTA”) award. The LTA
establishes the terms and conditions by which McDermott can bid on
future EPCI opportunities offshore Saudi Arabia. The award is the
second LTA between McDermott and Saudi Aramco. Currently, McDermott
executes work under the prior LTA with Saudi Aramco, which has been
in place since June 2007. At another ongoing project with Saudi
Aramco, McDermott was asked to significantly accelerate the
schedule of the fabrication and marine installation program to
accommodate earlier production from the gas field. McDermott was
able to advance the project forward several months. The project
accomplishment was directly attributable to the Company’s
collaboration with its customer and ability to control the complete
vertical EPCI process. Marine Operations in the area also achieved
two years without a recordable injury and two years LTI free.
In Asia (“ASA”), the INPEX Ichthys project achieved all the
agreed-upon milestones during the quarter, remaining on schedule
and profitable. McDermott’s Construction Support Vessel 108 arrived
infield at the end of the second quarter and commenced its
extensive marine campaign. On the Brunei Shell Petroleum Project,
the Derrick Barge 30 and Emerald Sea completed the installation of
approximately 50 miles of replacement pipelines and also
tied-in 11 flexible pipelines. In Batam, Indonesia, McDermott’s
fabrication facility received two significant recognition awards
during the quarter. The first recognition was from Chevron
Australia for outstanding environmental control on the Gorgon
Project for Western Australia. The second was received from Badan
Penyelenggara Jaminan Sosial Ketenagakerjaan (Workers’ Social
Security Management Agency) for McDermott’s commitment to the
health and safety of its employees.
Other Financial Information
As of June 30, 2015, McDermott reported total assets of $3.5
billion. Included in this amount was $771.0 million in cash and
cash equivalents and restricted cash. At quarter end, the Company
had $854.2 million in debt outstanding, inclusive of $24 million of
debt issuance costs, and total equity of $1.6 billion, or 45% of
total assets.
Weighted average common shares outstanding on a fully diluted
basis were approximately 289.7 million and 237.4 million for the
quarters ended June 30, 2015 and June 30, 2014, respectively.
Common shares for the settlement of the common stock purchase
contracts related to the Tangible Equity Units (“TEUs”)
representing 40.9 million additional shares, as well as other
potentially dilutive shares, were included in the calculation of
diluted weighted average shares for the quarter ended June 30,
2015, due to the Company’s positive Net Income position. For the
quarter ended June 30, 2014, the TEUs and other dilutive shares
were not considered in the fully diluted share count, due to their
anti-dilutive effect.
Contract Backlog Summary
As of June 30, 2015, the Company’s backlog was $3.1 billion,
compared to $3.75 billion at March 31, 2015. Of the June 30, 2015
backlog, approximately 52% related to offshore operations and
approximately 48% related to subsea operations. Order intake in the
second quarter 2015 totaled $428.5 million and included new awards
for Saudi Aramco in the MEA area, as well as PEMEX and LLOG in the
AEA area.
At June 30, 2015, the Company had $7.5 billion in bids and
change orders outstanding, compared to $8.8 billion at March 31,
2015. At June 30, 2015, the Company was targeting to bid
approximately $13.5 billion in projects that it expects to be
awarded to the market through September 30, 2016. In total, the
Company’s potential revenue pipeline was $24.1 billion as of June
30, 2015. A key change in the total quarter-over-quarter revenue
pipeline was the shift of Chevron’s Gendalo Gehem mega project in
Indonesia beyond the five quarters represented in the pipeline.
2015 Full Year Guidance Update
McDermott’s guidance for the full year of
2015 is being updated to the following:
March ‘15
Guidance
Revised
Guidance
Revenues $3.3 - $3.6 billion $3.0 - $3.3 billion Operating Income
$25 - $50 million $50 - $70 million Capex $275 - $295 million $130
- $140 million Year-end Cash $600 - $650 million $700 - $750
million Restructuring Costs $25 - $35 million $40 - $50 million
Revenues for the year are anticipated to be slightly lower than
original 2015 guidance because of the delays at Ichthys during the
first quarter and customer initiated project schedule changes.
Full-year operating income, including restructuring costs and
one-time losses on the impairment and disposal of assets, is
expected to be higher as a result of improved execution and focus
on cost management. Capex, excluding $23 million of capitalized
interest, decreased substantially for the year, as the final spend
for the delivery of the DLV 2000 has shifted into first quarter
2016 due to a slight construction delay on the vessel. Annual
maintenance and project capital expenditures will be in the range
of $30 million - $40 million for 2015. As a result of the delay in
the DLV 2000, year-end cash is anticipated to be higher than
originally forecasted. Costs associated with the Company’s
restructuring efforts have increased due to severance costs,
external consulting support and the final decommissioning costs on
the DB 101 vessel during the second quarter. The foregoing guidance
does not include amounts for unplanned and unreserved
contingencies.
Additional updates to the Company’s 2015 guidance are available
in the Supplemental Slide Deck which can be found on the Investor
Relations section of McDermott’s website at www.mcdermott.com.
Cost Structure Update
The McDermott Profitability Initiative continues to progress and
remains on target for expected full year 2015 annual cash savings
of $50 million. During the first quarter of the year, a majority of
the rightsizing of the organization was completed and
centralization of several of the Company’s support groups has
commenced. Within the marine assets and operations and the
supply-chain groups, McDermott has launched several supplier cost
reduction initiatives. The Company plans to transition to a
balanced outsourced model for some of the non-technical crews on
its vessels, allowing the Company to restructure some of its fixed
costs to be more variable with award activity. Restructuring costs
for the quarter were $15.4 million.
Conference Call
McDermott has scheduled a conference call and webcast related to
its second 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 (855)
859-2056, Passcode #97080471. 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 approximately 20 countries across the
world, our locally focused and globally integrated resources
include approximately 11,700 employees and contractors, 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; the expected scope, execution and timing
associated with certain projects discussed herein; expected
earnings and other financial guidance provided for the full year of
2015; expectations regarding improvements and savings related to
McDermott’s profitability initiative and the timing of such; and
the Company’s plan with respect to certain marine operations.
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; changes in industry norms and adverse outcomes in legal
or other dispute resolution proceedings. 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 June 30, Six Months Ended June 30,
2015 2014 2015 2014 (Unaudited)
(In thousands, except share and per share amounts) Revenues
$ 1,046,537 $ 476,083 $ 1,597,000 $ 1,079,894 Costs and
Expenses: Cost of operations 925,522 432,298 1,400,981 1,023,791
Selling, general and administrative expenses 47,793 53,444 99,469
105,408 (Gain) loss on disposal of assets 1,910 (35,105 ) 1,543
(41,544 ) Impairment loss (gain) 6,808 (10,664 ) 6,808 (10,664 )
Restructuring expenses 15,391 1,263
25,780 7,388 Total costs and expenses
997,424 441,236 1,534,581
1,084,379 Loss from Investments in
Unconsolidated Affiliates (7,481 ) (3,322 )
(14,222 ) (2,199 ) Operating Income (Loss)
41,632 31,525 48,197
(6,684 ) Other Income (Expense): Interest expense, net
(12,985 ) (38,745 ) (25,164 ) (38,684 ) Gain on foreign currency,
net 1,943 6,622 475 2,540 Other expense, net (359 )
(312 ) (456 ) (577 ) Total other expense
(11,401 ) (32,435 ) (25,145 ) (36,721 )
Income (loss) before provision for income taxes and noncontrolling
interests 30,231 (910 ) 23,052
(43,405 ) Provision for income taxes 16,541
4,788 21,410 8,277
Net income (loss) 13,690 (5,698 ) 1,642 (51,682 ) Less: net
income attributable to noncontrolling interest 2,164
1,699 4,623 2,235
Net income (loss) attributable to McDermott International, Inc. $
11,526 $ (7,397 ) $ (2,981 ) $ (53,917 ) Income
(loss) per share Net income (loss) attributable to McDermott
International, Inc.: Basic $ 0.05 $ (0.03 ) $ (0.01 ) $ (0.23 )
Diluted $ 0.04 $ (0.03 ) $ (0.01 ) $ (0.23 ) Shares used in
the computation of income (loss) per share: Basic: 238,332,012
237,395,580 237,918,366 237,178,369 Diluted: 289,689,981
237,395,580 237,918,366 237,178,369
McDERMOTT INTERNATIONAL, INC.
EARNINGS PER SHARE COMPUTATION
Three Months Ended June
30, Six Months Ended June 30, 2015
2014 2015 2014 (In thousands, except
share and per share amounts) Net income (loss) attributable to
McDermott International, Inc. $ 11,526 $ (7,397 ) $ (2,981 ) $
(53,917 ) Weighted average common shares (basic) 238,332,012
237,395,580 237,918,366 237,178,369 Effect of dilutive securities:
Tangible equity units 40,896,300 - - - Stock options, restricted
stock and restricted stock units 10,461,669 -
- -
Adjusted weighted average common shares
and assumed exercises ofstock options and vesting of stock awards
(diluted)
289,689,981 237,395,580 237,918,366
237,178,369
Basic loss per share Net income (loss)
attributable to McDermott International, Inc. $ 0.05 $ (0.03 ) $
(0.01 ) $ (0.23 )
Diluted loss per share: Net income (loss)
attributable to McDermott International, Inc. $ 0.04 $ (0.03 ) $
(0.01 ) $ (0.23 )
SUPPLEMENTARY DATA
Three Months Ended June
30, Six Months Ended June 30, 2015
2014 2015 2014 (In
thousands) Depreciation & amortization expense
26,044 21,645 51,371 46,247 Drydock
amortization 4,386 3,020 9,658 9,966 Capital expenditures 24,013
117,064 47,985 154,957 Backlog 3,130,340 4,063,900 3,130,340
4,063,900
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 2015
December 31, 2014
(Unaudited) (In thousands, except shares and par value
data) Assets Current Assets: Cash and cash equivalents $
576,575 $ 665,309 Restricted cash and cash equivalents 194,427
187,585 Accounts receivable – trade, net 287,264 143,370 Accounts
receivable – other 67,727 79,915 Contracts in progress 400,720
357,617 Deferred income taxes 10,398 7,514 Other current assets
43,837 46,071 Total Current Assets 1,580,948
1,487,381 Property, Plant and Equipment 2,455,604 2,487,815
Less Accumulated depreciation (837,739 ) (830,467 )
Net Property, Plant and Equipment 1,617,865 1,657,348 Accounts
Receivable – Long-Term Retainages 140,867 137,468 Investments in
Unconsolidated Affiliates 28,849 38,186 Deferred Income Taxes
13,713 17,313 Investments 1,056 2,216 Other Assets 101,241
76,967 Total Assets $ 3,484,539 $ 3,416,879
Liabilities and Equity Current Liabilities: Notes payable
and current maturities of long-term debt $ 27,690 $ 27,026 Accounts
payable 326,765 219,384 Accrued liabilities 428,149 369,749 Advance
billings on contracts 113,086 199,865 Deferred income taxes 17,822
19,753 Income taxes payable 24,921 25,165 Total
Current Liabilities 938,433 860,942 Long-Term Debt
826,472 837,443 Self-Insurance 18,793 17,026 Pension Liability
17,253 18,403 Non-current Income Taxes 48,602 49,229 Other
Liabilities 82,180 94,722 Commitments and Contingencies
Stockholders' Equity: Common stock, par value $1.00 per share,
authorized 400,000,000 shares; issued and outstanding 246,682,747
and 245,209,850 shares, respectively 246,683 245,210 Capital in
excess of par value (including prepaid common stock purchase
contracts) 1,684,395 1,676,815 Accumulated Deficit (242,553 )
(239,572 ) Treasury stock, at cost: 7,802,013 and 7,400,027 shares,
respectively (97,076 ) (96,441 ) Accumulated other comprehensive
loss (94,024 ) (97,808 ) Stockholders' Equity -
McDermott International, Inc. 1,497,425 1,488,204 Noncontrolling
interest 55,381 50,910 Total Equity 1,552,806
1,539,114 Total Liabilities and Equity $ 3,484,539 $
3,416,879
McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Month Ended June 30, 2015 2014
(Unaudited) (In thousands) CASH FLOWS FROM
OPERATING ACTIVITIES: Net income (loss) $ 1,642 $ (51,682 )
Non-cash items included in net income (loss): Depreciation and
amortization 51,371 46,247 Drydock amortization 9,658 9,966
Stock-based compensation charges 9,891 10,352 Loss from investments
in unconsolidated affiliates 14,222 2,199 Loss (gain) on asset
disposals 1,543 (41,544 ) Impairment loss (gain) 6,808 (10,664 )
Restructuring expense (gain) 9,153 (982 ) Deferred taxes (1,215 )
(4,375 ) Other non-cash items (495 ) (2,868 ) Changes in assets and
liabilities, net of effects from acquisitions and dispositions:
Accounts receivable (147,293 ) 86,305 Net contracts in progress and
advance billings on contracts (129,932 ) (88,771 ) Accounts payable
120,586 (31,756 ) Accrued and other current liabilities 48,380
(9,706 ) Pension liability and accrued postretirement and employee
benefits (942 ) 9,563 Other assets and liabilities (19,443 )
(15,195 ) TOTAL CASH USED IN OPERATING ACTIVITIES
(26,066 ) (92,911 )
CASH FLOWS FROM INVESTING
ACTIVITIES: Purchases of property, plant and equipment (47,985
) (154,957 ) Increase in restricted cash and cash equivalents
(6,842 ) (166,219 ) Purchases of available-for-sale securities -
(1,997 ) Sales and maturities of available-for-sale securities
2,875 11,303 Investments in unconsolidated affiliates (4,783 )
(2,370 ) Proceeds from asset dispositions 10,510 53,704 Other
(232 ) (2,706 ) TOTAL CASH USED IN INVESTING
ACTIVITIES (46,457 ) (263,242 )
CASH FLOWS
FROM FINANCING ACTIVITIES: Proceeds from debt
-
1,337,500 Repayment of debt (13,402 ) (285,705 ) Debt issuance cost
- (45,521 ) Distribution to noncontrolling interest (24 ) (3,754 )
Other (1,437 ) (1,244 )
TOTAL CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES
(14,863 ) 1,001,276 EFFECTS OF EXCHANGE RATE
CHANGES ON CASH (1,348 ) 209 NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (88,734 ) 645,332 CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 665,309
118,702 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 576,575 $
764,034
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150810006248/en/
McDermott International, Inc.Investors & Financial
MediaDarcey Matthews, 281.870.5147Vice President, Investor
Relationsdmatthews@mcdermott.com
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