McDermott encouraged by record-setting backlog despite $146 million loss

U.S.-based EPCI company McDermott International booked a loss of $146 million for the second quarter of 2019, but the company is encouraged by its record-setting level of backlog. 

McDermott on Monday reported revenues of $2.1 billion for the second quarter of the year. In the same period last year, McDermott recorded revenues were $1.7 billion.

Furthermore, the company recorded operating loss of $61 million for the second quarter of 2019 compared to operating income of $49 million.

Finally, the company posted a net loss of $146 million for 2Q 2019 compared to a profit of $47 million in the second quarter of 2018.

Excluding a $101 million non-cash loss on the sale of its Alloy Piping Products (APP) business, as well as restructuring, integration and transaction costs of $31 million, McDermott’s adjusted net loss for the second quarter of 2019 was $14 million and its adjusted operating income was $71 million.

David Dickson, President and Chief Executive Officer of McDermott, said: “Although the company reported mixed results for the second quarter of 2019, we are encouraged by the record-setting level of backlog and new awards. We are also pleased with the visibility we have into expected 2020 revenues, of which $7.4 billion was already in backlog as of the end of the second quarter of 2019. This is well above the $4.2 billion of 2019 revenues we had in backlog this time last year. This strong market posture continues to demonstrate the benefits of our combination with CB&I and the opportunities available in a strong market environment. McDermott has booked more than $19 billion of awards since the May 2018 combination with CB&I, demonstrating continued customer confidence and healthy end markets. Importantly, as of the end of the second quarter of 2019, legacy CB&I projects represented only about 14% of the current backlog.”

The company’s backlog at the end of 2Q 2019 was $20.5 billion compared to $15.4 billion at the end of 1Q 2019 and $10.2 billion at the end of 2Q 2018.

Dickson added: “Nevertheless, the company today has updated its guidance for 2019. The reduction in our guidance is due to four main factors:  1) the weaker than expected operating results for the second quarter of 2019; 2) the impact of reduced revenues and higher unallocated operating expenses due to slippage in certain new awards and customer changes to schedule on several projects; 3) changes in our assumptions about the expected performance of legacy CB&I projects in our NCSA operating segment; and 4) a shift from the fourth quarter of 2019 to 2020 in the assumed timing of remaining incentives on the Cameron LNG project. Even so, we expect to see a sharp improvement in the company’s operating income by the fourth quarter of this year, as we build momentum heading into 2020.

“Looking ahead, our revenue opportunity pipeline remains near a historic high and, more specifically, we are seeing steady upward momentum in a number of key areas.”

McDermott’s revenue guidance for 2019 is about $9.5 billion and net loss of about $310 million.

Offshore Energy Today Staff

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