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Double Deal for McDermott

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Energy-focused engineering and construction firm McDermott International Inc. (MDR) announced that two of its subsidiaries have won contracts for two different offshore projects across the globe. The company will include both the contracts’ value in its second quarter 2012 backlog.

The first contract was awarded by Heerema Marine Contractors Nederland BV for a fabrication work to be used in a deepwater platform that is located 225 miles south of New Orleans in the Gulf of Mexico. The work, which is slated to begin during the second quarter of 2012, involves the construction of 16 tendon buoyancy modules (TBMs). McDermott will conduct the procurement, fabrication and loadout of the TBM facilities from its Morgan City facility in Louisiana.

As for the second contract – awarded by VAALCO Gabon Inc, an affiliate of Vaalco Energy Inc. (EGY) – McDermott will execute a design, engineering and procurement management work for the Etame platform. Houston, Texas-based McDermott will also carry out a design engineering contract for a potential Southeast Etame/North Tchibala (:SEENT) platform. Both these projects are located offshore Gabon, West Africa. As per the contract details, McDermott will set up a safe, reliable and conventional production facility that will have low operational and maintenance issues.

Supported by efficient manpower and a high technological base, the projects are expected to show profitable results.

McDermott currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

Given its geographic footprint in high-growth regions, technology leadership and efficient execution skills, the company is poised to benefit from strong industry fundamentals for offshore construction activities through 2012 and beyond.

However, the transfer of the ‘Power Generation Systems’ and ‘Government Operations’ segments into a separate, independent and publicly traded entity The Babcock & Wilcox Company (BWC) has left McDermott with a less diversified business, thereby heightening its risk profile.

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