McDermott’s profit leaps by nearly 60%

The Houston engineering and construction company McDermott International said Tuesday that its profit and revenue jumped in the first quarter, while affirming its commitment to complete a merger with CB&I of The Woodlands.

McDermott, which focuses on the offshore sector, recently rejected a hostile takeover bid from European rival Subsea 7, made just weeks before shareholders are scheduled to vote on the CB&I merger in May. The deal has been characterized as a merger of near equals, but McDermott is the acquiring company. The combined company will maintain the McDermott name and corporate leadership.

McDermott reported that its first-quarter profit soared by nearly 60 percent to $35 million from about $22 million in the first quarter of 2017. Revenue rose 17 percent to $608 million from $519 million a year earlier.

Subsea 7 made its $2 billion bid for McDermott last week, offering $7 a share, about a 15 percent premium over McDermott’s recent stock price, before the bid became public. Some analysts and investors have raised concerns that CB&I would hurt McDermott’s value — an argument emphasized by Subsea 7 — but McDermott CEO David Dickson told analysts Tuesday that the CB&I merger was still the best deal for his company.

“The board concluded that the proposal was not in the best interest of the company or its stockholders as it significantly undervalued McDermott and was not an attractive alternative to our pending combination with CB&I,” Dickson said. “As market conditions improve for our customers, opportunities for the combined (McDermott and CB&I) continue to increase.”

He noted that the company has identified an additional $100 million in cost savings through the merger, in addition to the previously announced $250 million in annual savings. McDermott stock, which jumped more than 15 percent Monday, rose another 1.7 percent or 12 cents Tuesday to close at $7.12 a share.

In other earnings news, struggling energy services company Weatherford International said Tuesday that it narrowed its first-quarter loss as revenue rose modestly.

Weatherford, which operates out of Houston, posted a $245 million loss for the first quarter versus a $448 million loss from the same period a year earlier. Weatherford’s revenue increase 3 percent to $1.42 billion.

“Our results for the first quarter of 2018 reflect our focus on planning and executing tangible actions to improve our position as a strong, viable and innovative organization,” Weatherford CEO Mark McCollum said.

Weatherford recently sold its North American hydraulic fracturing business to industry leader Schlumberger and next plans to sell its land drilling business, which is based primarily in the Middle East.

Weatherford was considered part of the Big Four energy services giants with Schlumberger, Halliburton and Baker Hughes. But the company has struggled for years, running into problems even before the oil bust that devastated the sector.

Weatherford has shrunk to fewer than 29,000 workers worldwide from 67,000 in early 2014.