Offshore oil and gas-focused engineering and construction firm McDermott International Inc. (MDR) has closed the sale of its Harbor Island fabrication site for a total consideration of $31.7 million. The asset − located near Corpus Christi, Texas− has been out of operation since 2003.
McDermott reveals that this asset divestment is in sync with its objective to sale non-core underutilized properties. The company intends to focus on assets which can generate significant cash flows for shareholders for a considerable period of time. McDermott added that it expects to gain around $25.0 million by the second quarter of 2014 from the Harbor Island site sale.
Houston, Texas-based McDermott primarily serves the worldwide offshore oil and gas field developments, including the front-end design and detailed engineering, fabrication and installation of offshore drilling and production facilities, marine pipelines and subsea production systems.
On Mar 31, 2014, McDermott declared that its first-quarter 2014 results might not meet its recent projection. Moreover, the company apprehends that its profit margin, from the operation of backlog projects, will not be able to cover its fixed expenses − direct operating costs and general and administrative expenses – and restructuring costs.
Thus, McDermott has a Zacks Rank #5 (Strong Sell), implying that it is expected to significantly underperform the broader U.S. equity market over the next one to three months.
Meanwhile, one can look at better-ranked players in the energy sector like Valero Energy Corporation (VLO), Range Resources Corporation (RRC) and Patterson-UTI Energy Inc. (PTEN). All the stocks sport a Zacks Rank #1 (Strong Buy).