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McDermott (MDR) Boosts Saudi Exposure With New Tank Contract

Zacks Equity Research

McDermott International, Inc. MDR recently announced that it has received a contract from Daelim Saudi Arabia Company Ltd. Per the deal, the services to be provided by McDermott will be used at Ma'aden Ammonia Plant located in Ras Al-Khair of the Kingdom of Saudi Arabia.

The contract requires McDermott to provide engineering, procurement and fabrication works for four Ammonia Tanks at the site along with nine CB&I storage tanks. The company intends to execute the contract from its facilities located in Saudi Arabia.

The contract work is likely to start promptly and will be incorporated in McDermott’s fourth-quarter 2018 backlog. The company had a backlog of $11.5 billion as of Sep 30. With deals like the latest one, the company’s revenue pipeline is expected to grow even bigger. The contract, which is worth between $1 million and $50 million, further deepens McDermott’s presence in Saudi Arabia.

Notably, the deal from Daelim Saudi Arabia marks its second tank-related contract this month. Last week, the company received a contract from Puma Energy (Australia) Fuels Pty Ltd., a vertically integrated midstream and downstream global oil company. Per the contract, McDermott will support engineering, procurement and construction works for 11 fuel tanks that are located at an import terminal in Kwinana, near Perth, Western Australia. While onsite works are expected to start in the first quarter of 2019, the project is expected to be completed in the third quarter of 2020.

Houston, Texas-based McDermott is a leading global engineering and construction firm that has a diversified product portfolio, specialty manufacturing and service capabilities, along with proprietary technological expertise. Unlike other engineering and construction companies, it is well entrenched in major offshore energy projects and is one of the few global contractors that can provide a complete array of services — from design to construction.

Price Performance

McDermott has lost 63.7% in the past year compared with 39.9% collective fall of the industry it belongs to.



Zacks Rank and Stocks to Consider

McDermott currently carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below:

Houston, TX-based Shell Midstream Partners, L.P. SHLX is a midstream energy company. For 2019, its bottom line, which has witnessed three upside revisions over the past 60 days, is expected to grow 27.7% year over year. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Calgary, Canada-based Gran Tierra Energy Inc. GTE is an international oil and gas exploration and production company. Its bottom line for 2018 is expected to surge more than 300% year over year. The company delivered average positive earnings surprise of 24% in the trailing four quarters. The stock currently has a Zacks Rank #2 (Buy).

NOW Inc. DNOW is a Houston, TX-based oil and gas equipment service provider. Its bottom line for 2019 is expected to surge more than 86% year over year. The company currently has a Zacks Rank #2.

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