McDermott plunge forces halt in trading
Shares fall 63% after oil field service firm lowers guidance, hires restructuring adviser
Houston oil field service company McDermott International took a wild ride on the stock market Wednesday losing 63 percent of its value in a matter of hours.
Traded on the New York Stock Exchange under the stock ticker symbol MDR, McDermott opened at $5.73 a share but plunged to as low as $1.44 per share after it lowered its financial performance guidance and said it had retained AlixPartners, a firm that specializes in Chapter 11 restructuring work for oil and gas industry clients. The selloff was so fast and sharp that trading in McDermott shares was halted two times before 10 a.m.
McDermott ended the trading day at $2.16 per share, a recordbreaking 63 percent single-day drop. Its stock has not been below $2 per share since December 2002.
Traders blamed the fall on news that McDermott lowered projections for its end-of-the-year earnings. The company previously stated that it would close 2019 with a profit of $1.65 per share but Bloomberg reported that the company is now expecting to close the year with a per-share loss of 32 cents.
Part of those projected losses are being attributed to a $6 billion deal last year to buy rival engineering, procurement and construction company Chicago Bridge & Iron, Bloomberg reported.
“There have been a few operating disappointments and surprises since last year’s combination,” McDermort CEO David Dickson told investors on a Monday afternoon conference call. “But we still expect benefits of the combination to be more evident next year.”
Dickson was scheduled to ap
pear Thursday on a panel at the annual Gastech conference being held at the NRG Center, but the company said late yesterday it would send a surrogate.
The Houston company posted a $2.8 billion loss on $2.1 billion of revenue in 2018 but guided expectations for investors lower on Wednesday.
Some of those losses were attributed to a joint venture with Chiyoda International and Zachry Group that has experienced costly delays in its contract to build the Cameron LNG export terminal in Louisiana and Freeport LNG terminal south of Houston.
It was not immediately clear what type of restructuring work AlixPartners will be doing but the stock sell off suggested investors were nervous.
“McDermott International routinely hires external advisers to evaluate opportunities for the company,” the company said in a statement. “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.”
Founded in 1923, McDermott provides design, engineering and construction services to petrochemical plants, liquefied natural gas plants and offshore oil and natural gas facilities. The company has more than 32,000 employees in 54 nations.