McDermott Closing CB&I Deal
Offshore engineering firm McDermott International Inc will close its acquisition of Chicago Bridge and Iron Co NV on Thursday, creating an integrated onshore and offshore services group that will expand its presence in the Middle East.
McDermott's offshore engineering and construction work will combine with CB&I's onshore skills including liquefied natural gas (LNG) and power plants. McDermott will bolster its service offerings in Saudi Arabia, where it is already adding facilities and has contracts with national oil company Saudi Aramco.
David Dickson, McDermott's chief executive officer who this week met with Saudi Aramco executives in Houston, said on Tuesday the kingdom "is going to be a big part of our future. It always will be, for both McDermott and CB&I."
Last year, McDermott signed a memorandum of understanding with Aramco for a marine fabrication complex at Ras Al Khair. With the exception of an existing fabrication facility, McDermott's dealings with Aramco are focused so far on offshore, upstream partnerships.
The offshore sector was hard hit by the 2014 downturn in global oil prices, and while prices this year have recovered to over $70 a barrel, offshore activity remains subdued, Dickson said.
"The industry will be cautious for quite a long period of time. I think we're in a new world where it just takes longer for projects to get to FID [final investment decision]," Dickson said.
The deal, which the companies said is valued at $6 billion including debt, will give McDermott access to major U.S. LNG infrastructure projects, fueled by a massive output of natural gas from shale fields. CB&I is a part of teams handling development of the Freeport LNG project in Texas and the Cameron LNG export plant in Louisiana.
Both projects have been delayed. In December, CB&I said it reached a settlement with Cameron LNG resolving claims against the engineering firm and waiving schedule-related damages.
"Joining forces with CB&I will create a stronger midstream presence. It's a good mix if you think that oil prices will be low for longer," said Audun Martinsen, a senior analyst with consultancy Rystad Energy.
Dickson, who took the top job at McDermott in 2013, said the "problem projects" are on better footing now.
"If you look at onshore downstream and onshore LNG, there are some big opportunities coming up," he said, pointing to projects in Mozambique and the U.S. Gulf Coast.
(Reporting by Liz Hampton Editing by Jeffrey Benkoe)