McDermott Set to Offer Senior Notes, Inks Deal - Analyst Blog

Offshore oil and gas-focused engineering and construction firm, McDermott International Inc. MDR, is set to offer senior secured notes worth $500.0 million. The company added that the second-lien notes, anticipated to mature by 2021, will be offered to selected institutional investors.  The offering depends on market and certain other conditions.

McDermott reveals that the proceeds from the note offering will likely be utilized for refinancing revolving credit facility under its present credit contract. The funds will also be spent on normal corporate activities.

On March 27, 2014, McDermott declared a deal between its China-based joint venture firm, Qingdao McDermott Wuchuan Offshore Engineering Co., Ltd. (QMW), and Jord Oil & Gas Systems B.V. Per the contract, QMW is expected to provide services like fabrication, pre-commissioning along with load-out of three process modules. Moreover, the deal will likely be added in the first quarter 2014 backlog of QMW.  

Houston, Texas-based McDermott primarily serves the worldwide offshore oil and gas field developments, including the front-end design and detailed engineering, fabrication and installation of offshore drilling and production facilities.

The company reported weak bottom-line results all through 2013, missing the Zacks Consensus Estimate in all the four quarters. For the most recently reported quarter, McDermott reported a loss of 80 cents against the Zacks Consensus Estimate of earnings of 16 cents. Things do not look too good for the company in the near term either.

Thus, McDermott currently has a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the energy sector like Clayton Williams Energy Inc. CWEI, Valero Energy Corp. VLO and Range Resources Corp. RRC. All the stocks sport a Zacks Rank #1 (Strong Buy).