McDermott Provides an Operational Update

  McDermott Provides an Operational Update

Business Wire

HOUSTON -- March 31, 2014

McDermott International, Inc. (NYSE: MDR) announced today an update to certain
operational matters. Through working capital management, the Company
maintained its previously reported liquidity and leverage position at the end
of March 2014 compared to amounts previously reported at the end of February
2014. Specifically, as of March 31, 2014, the Company had approximately $320
million of total cash, cash equivalents, restricted cash and investments and
$307 million of total funded debt, including $250 million of borrowings under
the Company’s credit facility and $57 million of separate vessel financing.

The Company recently achieved significant operational milestones on several
key projects, including:

  *Malaysia (Siakap) Project – Pipe and subsea structure installation has
    been completed. The customer received first oil in February 2014, and the
    vessel North Ocean 105 has demobilized from the field. The Company expects
    mechanical completion in early April 2014. Although this project resulted
    in financial losses recorded in 2013, it was a major technical achievement
    of complex pipe-in-pipe and subsea structure installation in over 5,000
    feet of water.
  *Brazil (Papa Terra) Project – The installation of the extended tension leg
    platform was completed in March 2014 and the vessel DB 50 has demobilized
    from the field. This facility is a significant operational achievement
    because it includes the first dry tree in deepwater Brazil.
  *Azerbaijan (COP) Project – The Company has progressed work as expected and
    continues to expect to complete the limited remaining offshore work by
    mid-May 2014.
  *Australia (Ichthys) Project – The Company remains on schedule for
    fabrication operations in the Batam, Indonesia fabrication yard and
    anticipates the commencement of the offshore installation operations in
    the third quarter of 2014. McDermott’s work has resulted in the customer
    recognizing us as a leader among the program contractors, and the Company
    expects the work on the project will be a major subsea achievement for the
    Company.

In addition, the Company continues to make progress with customers on
commercial matters and, although the Company can provide no assurance,
opportunity remains to improve the financial outcome from each of the
above-mentioned projects.

The Company continues to expect the operating profit margins of projects in
backlog to be in the low single digits, which does not cover the Company’s
restructuring costs or a portion of the Company’s fixed costs for direct
operating expenses and general and administrative expenses. All ongoing
contracts and unresolved change orders are reviewed at the end of each quarter
to assess performance, progress and likelihood of successful resolution and it
is determined if there is any need for adjustments to estimates. While this
review for the first quarter of 2014 will be conducted over the next few
weeks, the Company is not aware, as a preliminary matter, of any issues that
are believed to give rise to additional material losses on contracts, due to
write-downs of change orders or otherwise, that, after taking into account
offsetting positive developments, would materially and adversely impact the
Company’s expectations regarding the first quarter of 2014. The Company’s
preliminary estimates are based on various assumptions and on the Company’s
review of preliminary financial results for only two months of the quarter,
and the full quarterly results will be based, in substantial part, on
estimates and assumptions as of (and, in some cases, particularly with respect
to contracts in a loss position, subsequent to) March 31, 2014. Accordingly,
it is possible that actual first quarter 2014 results will differ
substantially from the Company’s current expectation. In addition, the
Company’s preliminary estimates relating to the first quarter of 2014 and the
related assumptions do not give effect to the Company’s financial closing
procedures. The Company expects to complete its financial closing procedures
for the quarter ended March 31, 2014 in May 2014, and those procedures may
also result in actual first quarter 2014 results differing substantially from
current expectations. Accordingly, one should not place undue reliance on the
Company’s preliminary statements relative to the first quarter of 2014.

The Company completed the sale of the DLB KP1 in March 2014 for a gain of over
$5 million.

Approximately $149 million of new orders was booked in the first quarter of
2014, which includes a marine installation charter contract for the vessel
North Ocean 105 for Petrobras in Brazil.

The Company is implementing the previously announced plan to improve internal
processes and risk management by increasing operational efficiency through a
new organizational design aimed at delivering improved and more predictable
performance. The new organizational design orients the Company’s management
around offshore and subsea operations, with highly experienced business
leaders who have responsibility for strategic direction of the business lines
and for aligning operations with customer needs. These business leaders will
also provide oversight and project execution support for regional operations
and will have responsibility for efficiently allocating assets among the
regional operations. Many of these leaders have been hired from outside
McDermott and bring significant experience in the offshore industry. The
Company recently hired approximately 150 new people with extensive experience
in subsea projects. These new additions to the Company’s team bring expertise
in determining bid levels for new projects and executing complex subsea work.
The Company expects to continue adding subsea leadership at the executive
level and within global, regional and local operations.

About McDermott

McDermott is a leading provider of integrated engineering, procurement,
construction and installation (EPCI) services for upstream field developments
worldwide. McDermott delivers fixed and floating production facilities,
pipelines and subsea systems from concept to commissioning for complex
Offshore and Subsea oil and gas projects to help oil companies safely produce
and transport hydrocarbons. Operating in more than 20 countries across the
world, McDermott’s locally focused and globally integrated resources include
approximately 14,000 employees, a diversified fleet of specialty marine
construction vessels, fabrication facilities and engineering offices.

Contact:

McDermott International, Inc.
Investors, Analysts and Financial Media:
Steven D. Oldham, (281) 870-5147
Vice President, Treasurer and Investor Relations
soldham@mcdermott.com
 
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