As McDemott’s Fortune Nose-dives, Gulf’s EPC Contractors in Strategic Shift

721 views | Akanimo Sampson | June 18, 2019

McDermott, a fully-integrated provider of technology, engineering and construction solutions to the energy industry, released her financial results for 2018, reporting a $2.7bn net loss for the full year.

For more than a century, customers seems to have trusted McDermott to design and build end-to-end infrastructure and technology solutions to transport and transform oil and gas into the products the world needs today.

Her proprietary technologies, integrated expertise and comprehensive solutions deliver certainty, innovation and added value to energy projects around the world. Operating in over 54 countries, McDermott’s locally-focused and globally-integrated resources include approximately 32,000 employees, a diversified fleet of specialty marine construction vessels and fabrication facilities around the world.

Q4 2018 had the strongest impact on the company’s bottom line, as it noted several non-recurring charges, the largest of which include a $2.2 billion goodwill impairment charge and a $190 million reduction in the carrying value of the company’s deferred tax assets, among other multimillion dollar charges.

“Although the headline numbers distract from the Company’s underlying fundamental strength, McDermott is continuing to progress toward the realisation of its full potential as a premier, fully integrated provider of technology, engineering and construction solutions,” said President and CEO David Dickson.

It noted 2018 revenue of $417 million from the Middle East and North Africa, “primarily driven by procurement, fabrication and hook-up activity on several offshore projects, and engineering and procurement activities on various onshore projects.”

Looking ahead to 2019, McDermott cited a “robust order intake of approximately $5.5 billion early in the first quarter of 2019,” which includes two EPCI contracts worth up to $1.00 billion for Saudi Aramco’s $15bn offshore Marjan development project.

The oil and gas sector has seen some drastic changes in the past year, and so have Engineering, Procurement and Construction (EPC) contractors followed suit to cater to an ever-changing industry.

In the Middle-East, as the region’s national oil companies have moved to integrate vertically and boost their downstream portfolios, so, too have EPC contractors.

Last year’s issue featuring the 2018 edition of this list also featured an interview with McDermott CEO David Dickson, who talked about the firm’s then-recent merger with CB&I. Another example, WorleyParsons acquired Jacobs Engineering’s energy, chemicals and resources division earlier this year.

EPC contractors are shifting to adapt to an environment that requires they be more ambitious, and more versatile, while maintaining financial discipline to suit the changing needs of the region’s oil and gas companies.

Some of the region’s major deals this year have been in the downstream segment, but upstream has seen an incredible amount of traction as well, with giants like Saudi Aramco looking to invest billions of dollars into redeveloping ageing assets. Her Long-Term Agreement programme has kept some EPC companies busy and their project pipelines full.

There are some surprise movers among the list, but the top tier has kept many familiar faces among its ranks, all of whom will be recognisable from headlines announcing their major wins in the past year. Those that rose up have generally seen more activity or investment in the region.


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