Shares of McDermott International Spike Today on Saudi Contract Award

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What happened

Shares of engineering and construction firm McDermott International (NYSE: MDR) were up 9% as of 11:30 a.m. EDT on Wednesday and were as high as 18% in early morning trading. The stock move comes on the heels of two major contract awards.

So what

Earlier today, Bloomberg reported that Saudi Aramco had awarded $18 billion in various contracts designed to increase production at two of its offshore oil and gas facilities. According to McDermott’s press releases, it received two of those contracts for the engineering, procurement, construction, and installation (EPCI) of a gas-oil separation plant as well as ancillary facilities and pipelines for Saudi Aramco’s Marjan field in the Arabian Gulf. The combined value of the two Marjan contracts is in excess of $4.5 billion.

oil and gas pipes in a manifold.

Image source: Getty Images.

This was a much-needed win for a company that has been struggling to integrate its acquisition of Chicago Bridge & Iron, a company teeming with projects that had cost overruns and were behind schedule. On top of that, spending from oil and gas producers on major projects — one of McDermott’s specialties — has been low for years.

Now what

One new project isn’t going to completely turn McDermott’s prospects around overnight, but significant contract awards like these are a step in the right direction. For investors, this is helping the buy case, but it is going to take a lot more of these to make the stock worth buying.

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Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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