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A Corporate Communications Corp. Publication ---- All Rights Reserved
Long-Term Report		May 15, 2003

STRONG BUY
McDermott International Inc. (NYSE) MDR	$ 6.19
52-week range	$2.15-$14.27
Market Cap	$409.1M
Shares Outstanding	64.8M
Book Value	-$6.48
Price/Book	N/A
Average Daily Vol.	452.2K
Target Price	$10.00
Target Percentage	61%


McDermott International is a leading worldwide energy services company. Through one of the company’s two major divisions, McDermott provides engineering, fabrication and installation of offshore oil-exploration platforms. The company is also a major facility management provider to the nuclear industry as well as the Dept. of Energy.

We are attracted to McDermott International as an exciting turnaround situation for the following reasons:

During 2002, the company experienced a number of problems in three large offshore platform contracts. As a result, McDermott significantly reorganized its operations and absorbed a large write-off of about $700 million. Going into 2003, the company has lowered its operating costs and it increased its backlog to a new high of $2.1 billion for oil related services. The company’s BWX Technologies is the preeminent facility and project manager for nuclear and national security programs. 2002 was a banner year with a strong increase in earnings and an increased backlog of $1.7 billion (a historic high) In December 2002, the company reached an agreement to settle all asbestos claims against its Babcock & Wilcox subsidiary. It should be noted that McDermott had put Babcock & Wilcox into voluntary bankruptcy (Chapter 11) because of the asbestos claims. Upon approval, the company will convey its equity in Babcock plus $92 million and $4.7 million shares on 7% of its outstanding stock to claimants. This is a very good settlement from McDermott’s viewpoint and more importantly removes a negative cloud from the company. McDermott International reported first quarter of 2003 earnings of $.13 per share on a more than 30% rise in revenues. These earnings results were very good and are testimony to the reorganization efforts of the company taken during 2002. The company has relatively strong finances and a cash position equal to about $4.40 per share ($283 million). We have initially established a target price of $10 a share.

We consider McDermott International as an undervalued, turnaround investment. The outlook for both offshore oil development and government national security programs continues to be quite strong.

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