Corporate Communications Corp. Publication ---- All
May 15, 2003
Inc. (NYSE) MDR
Average Daily Vol.
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.
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
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
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
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
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.
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.