McDermott Back in Black as Revenue Grows
Offshore EPCI player, McDermott, has 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.
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.
“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.”
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.
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, said the company in Q2 report.