McDermott’s 1Q revenues stirred by weather and delays

McDermott International, an engineering and construction company, has 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. 

According to the company, 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.

McDermott’s first quarter 2015 net loss of $14.5 million narrowed, compared to a net loss of $46.5 million in the prior-year quarter.

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. McDermott says that 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.

“Although we encountered the weather seasonality we anticipated during the quarter, we are committed to executing our backlog safely and efficiently,” said David Dickson.

As of March 31, 2015, the company’s backlog was $3.75 billion, compared to $3.6 billion at December 31, 2014. Approximately 50% of that backlog is related to offshore operations and approximately 50% to subsea operations.

David Dickson, President and Chief Executive Officer of McDermott, said: “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.” 

“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.”

Workforce cut

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 begun, the company has said.

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.

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