McDermott Bags $350M Oilfield Deal - Analyst Blog

Energy-focused engineering and construction firm McDermott International (MDR) announced that one of its units has received a water injection system upgradation and enhancement contract from Abu Dhabi Marine Operating Company (also known as ADMA-OPCO). The transaction, valued at approximately $350 million, has been included in McDermott's second-quarter 2010 bookings.
 
The project, encompassing two parts – pressure upgrade and capacity upgrade – will help ADMA-OPCO raise production capacity of the offshore Zakum oilfield, located 48 miles northwest of Abu Dhabi in the United Arab Emirates. Water injection is a method that is used to increase oil recovery from an existing reservoir.  
 
As per the agreement terms, McDermott’s pressure upgrade work will involve the installation of new pumps, piping and transformers, the modification of existing instrumentation and equipment and structural reinforcement work of the existing water injection modules, which are used to maintain pressure in the surrounding wells.
 
The capacity upgrade consists of the engineering, procurement and construction of a new 3,250-ton deck that will house the new water treatment and injection system, power generation equipment and six-legged jacket.
 
McDermott is due to commence engineering work immediately, with contract completion expected during the second quarter of 2012. The order is part of McDermott’s strong and longstanding relationship with ADMA-OPCO, a joint venture that pumps crude from some of Abu Dhabi’s biggest offshore oilfields.
 
The Texas-based engineering-to-project management service provider described the award as recognition of its sound technical skills, backed by strong regional capabilities.
 
McDermott shares are currently rated as Zacks #3 Rank ('Hold'), implying that the stock is expected to perform in line with the broader U.S. equity market over the next one to three months. This is supported by our long-term Neutral recommendation.