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McDermott International's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: MDR

As I indicated, we're quite pleased with the first quarter 2012 in many respects. McDermott reported net income from continuing operations of $59.3 million with earnings per share of $0.25. I've always said not to read too much into any one quarter, but it's a lot better saying this when we delivered solid results like this period.

While I don't intend to spend much time on it, I do want to update you on the Atlantic loss projects that impacted the last 2 sequential quarters. Both the PEMEX and Brazilian charter contracts continue to progress and go well. The Agile project has performed well or better than expected. On the PEMEX job, we changed the logistics somewhat and made a decision to release our contracted dynamically positioned vessel and then to perform all the remaining work with our own DB16 vessel. This change results in the contract taking a little longer to wrap up and an additional project charge this quarter of about $5 million, but this amount should be offset through increased utilization benefits through the second quarter.

As I also mentioned earlier, the company's backlog reached record levels at March 31, 2012, with a total of $5.8 billion. Bookings over $2.6 billion don't happen every quarter but we were pleased to be awarded this amount in the 2012 first quarter. Clearly, INPEX Ichthys award was the largest contributor. Even without this award, however, our bookings in the 2012 first quarter would've exceeded the amounts we reported in each of the last 2 sequential quarters. And in fact, the level of bookings in this first quarter alone exceeded the total we had for all quarters last year 2011. So similar to earnings, we're off to a very strong start for this year.

As we discussed in last quarter's conference call, the INPEX Ichthys subsea booking is our largest single award ever at the time of contract signing. Although the reported revenues don't really start flowing until after 2013 and primarily in 2014 and '15, we've already committed about 40% of the total contract costs to procurement orders and subcontracts. And in addition, we've entered into hedges for most of our expected foreign exchange exposures. To say it another way, we believe that we've significantly de-risked a large portion of this project in a fairly short order.

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