Weeks after CEO David Dickson warned investors that 2019 would be the worst year for the company, McDermott International Inc. stock soared Sept. 20 after the company announced it is considering a recent unsolicited bid to acquire all or part of its Lummus Technology LLC business.
McDermott stock on the New York Stock Exchange climbed to a high of $2.77 per share in early Sept. 20 trade — up 65% on the day — and was still up 32% at $2.06 per share at 1:00 p.m. ET. The 52-week high for the company's stock price was $19.44 per share, reached on Sept. 20, 2018.
The value of McDermott's technology business could exceed $2.5 billion and the company, based on the recent solicitation, hired external advisers to evaluate the opportunities for the company.
"The company is taking positive and proactive measures, as we have done in the past, intended to improve its capital structure and the long-term health of its balance sheet," McDermott said in a Sept. 20 statement.
McDermott previously announced processes to sell the remaining portion of its pipe fabrication business and its industrial storage tank business. Those efforts are ongoing.
After reporting a net loss in revenue of $146 million, or 80 cents per diluted share, in the second quarter and an operating loss of $61 million, the company reduced its full-year revenue guidance to $9.5 billion.
The lower guidance was attributed to reduced revenues and higher unallocated operating expenses due to the "slippage in certain new awards and customer changes to schedules on several projects," Dickson said. Further, the performance of legacy Chicago Bridge & Iron Co. projects in North, Central, and South America was lower than anticipated. The timing of remaining incentives on the Cameron LNG export terminal project in Louisiana, for which McDermott is the lead construction contractor, has also shifted from the fourth quarter to 2020, the CEO said.
In August Sempra Energy reached an agreement with McDermott that provides performance-based payments for hitting certain milestones on the second and third trains.
S&P Global Ratings on Aug. 6 downgraded McDermott's issuer credit rating to B- from B, with a negative outlook. Ratings also lowered its issue-level ratings on McDermott's senior secured term loan to B from B+ and its unsecured debt to CCC from CCC+.
The rating agency said the downgrade occurred because it now expects McDermott's cash outflows in 2019 to be higher than previous assumptions. Ratings said McDermott's second-quarter operating results were "weaker than expected" and that the firm "continued to incur costs on a number of its projects and some new awards bookings that have taken longer than expected."
McDermott's troubles began with the 2014 oil market collapse and accelerated with the 2018 acquisition of Chicago Bridge & Iron Co. that increased the company's debt burden to about $4.3 billion.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.
