McDermott Inks Gulfport Spoolbase Deal - Analyst Blog

An affiliate of the offshore oil and gas-focused engineering and construction firm, McDermott International Inc. MDR has entered into an agreement with the Mississippi Development Authority and Mississippi State Port Authority. The deal entails McDermott exclusive rights to run a spoolbase and a marine operation base, located in the port of Gulfport.  

The new facility, expected to be operational in early 2016, will manufacture steel pipe stalklines to be used in offshore Reeled pipelay activities. Located on the coast of Mississippi and spread across a 50-acre area, the facility would be home to a fabrication building, stalk racks and a dock to support McDermott's fleet.

The coastline location will be a strategic advantage for the facility, by making it easy to work on projects from the Gulf of Mexico.

Houston, TX-based McDermott is an engineering and construction company, solely focused on the offshore oil and gas business. The company has a diversified product portfolio, specialty manufacturing and service capabilities as well as proprietary technological expertise.

However, several factors remain drags on the company's results. These include steep operating expenses, a disappointing earnings trend over the last few quarters and uncertainty regarding the timing of lucrative contracts. McDermott has failed to meet earnings estimates for four consecutive quarters. For the last reported quarter, the company posted a loss of 21 cents per share, significantly wider than the Zacks Consensus Estimate of loss 12 cents.

In keeping with these views, 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 consider better-ranked players in the same industry like Matrix Service Co. MTRX, Cameron International Corp. CAM and USA Compression Partners, LP USAC. While Matrix sports a Zacks Rank #1 (Strong Buy), Cameron and USA Compression hold a Zacks Rank #2 (Buy). 

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