McDermott Wins Technology Contract for a European PDH Unit

McDermott International, Inc. MDR recently reported that the company has received a technological contract from a U.K.-based privately owned chemicals company, INEOS. The deal marks the first major grass-root investment from INEOS. Per the contract, McDermott will provide a Northern European propane dehydrogenation (PDH) unit’s license and engineering services.

Lummus Technology CATOFIN dehydrogenation process of McDermott will be used in the world-class unit as an operating technology, which will enable it to produce 750,000 metric tons of propylene per annum. Specialty chemicals manufacturing company, Clariant’s CATOFIN catalyst and heat generating material will also be used in the PDH unit, which is expected to come online in 2023. This project will provide INEOS with a high transformation rate of propane to propylene, in turn reducing operating and investment costs. The PDH will use shale gas produced in the United States.

The value of the deal with INEOS is projected in the range of $1-$50 million. The deal will be incorporated in McDermott’s backlog in the third quarter of 2018. At the end of the second quarter, McDermott had a backlog of $10.2 billion compared with $3.3 billion a year ago.

The Lummus Technology of McDermott, having around 3,100 patents and patent applications, is a provider of diversified technology portfolios to clients. It is a licensor of proprietary technologies related to gasification, gas processing, petrochemicals and refining. Notably, Lummus is used as the brand name for Chicago Bridge & Iron's business section, acquired by McDermott, which supplies its clients with associated engineering services, catalysts and engineered products, as well as proprietary process technology licenses. McDermott's merger with Chicago Bridge & Iron has enabled the company to secure this award, which has added onshore services to the offshore focused portfolio of the company.

Price Performance

Houston, TX-based McDermott, which provides engineering and construction solutions to energy firms, has lost 11.2% in the past six months against 9.5% collective rally of its industry.

 

 

Zacks Rank and Stocks to Consider

McDermott currently carries a Zacks Rank #3 (Hold). Some better-ranked players in the oil and gas sector are Petroleo Brasileiro S.A. PBR or Petrobras, Shell Midstream Partners, L.P. SHLX and Chevron Corporation CVX, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Petrobras is the largest integrated energy firm in Brazil and one of the major players in Latin America. It pulled off an average positive earnings surprise of 10.4% in the last four quarters.

Shell Midstream Partners is involved in owning, operating, developing and acquiring pipelines, and other midstream assets. The partnership delivered an average positive earnings surprise of 7.9% in the trailing four quarters.

Chevron is an integrated energy company based in San Ramon, CA. The company’s top line for 2018 is expected to grow 17.7% year over year.

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