MDR McDermott International Inc

A unit of McDermott International (MDR) has won a contract from Royal Dutch Shell plc (RDS.A) to build a West Delta 143 "C" deck, jacket, piles, and bridge in the Gulf of Mexico. Although the financial terms of the deal were not disclosed, it will be included in McDermott’s third quarter 2011 booking.

This construction forms a part of Shell’s Mars B Development involving Olympus Tension Leg Platform, West Boreas and South Deimos subsea development and the West Delta 143 "C" Jacket and Deck.

McDermott will execute engineering, procurement and fabrication at its Morgan City facility in Louisiana, while other manufacturing and load-out analysis will be carried out by the New Orleans plant.

McDermott management remains highly upbeat about its association with Shell and is confident of completing the venture on schedule with full efficiency. With construction expected to commence later in 2011, the deck will likely sail in the first quarter of 2013.

Houston, Texas-based McDermott International operates as a global engineering, procurement, construction, and installation company that focuses on designing and executing complex offshore oil and gas projects. The company has access to most major offshore oil and gas producing regions, including the U.S., Mexico, Canada, the Middle East, India, the Caspian Sea and Asia Pacific.

Last week, McDermott presented mixed second quarter 2011 results following improved sales and higher operating costs. The company’s earnings per share from continuing operations were 27 cents, which came in below the Zacks Consensus Estimate of 32 cents. However, revenues of $849.8 million were slightly ahead of our expectation of $841 million.

The quarterly performance was buoyed by strong contributions from the Asia-Pacific belt (attributable to increased marine activity on large engineering, procurement, construction and installation or EPCI projects) and partially offset by weak activity in the Middle East region.

We believe that McDermott exhibits a diversified product portfolio, specialty manufacturing and service capabilities as well as proprietary technological expertise. The order flow and backlog for the company’s products and services are expected to remain healthy and trend higher in the near-to-medium term.

Considering the highly volatile oil and gas scenario and commodity price fluctuations that the company faces, we maintain our long-term Neutral recommendation.

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