Slide 1: Q2 2018 Supplemental Information
Q2 2018 SUPPLEMENTAL INFORMATION July 31, 2018
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS In accordance with the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, McDermott cautions that statements in this presentation which are forward-looking, and provide other than historical information, involve risks, contingencies and uncerta
Slide 3: 2018 Focus Areas
2018 FOCUS AREAS INTEGRATE Complete integration successfully to establish top tier, vertically integrated EPC company, competitively differentiated in technology, customer relationships, culture and geographic footprint DISCIPLINE Exercise disciplined bidding through thorough evaluation and assessme
Slide 4: Quarterly Results
QUARTERLY RESULTS
Slide 5: Q2 2018 Financial Highlights
Q2 2018 FINANCIAL HIGHLIGHTS $ in millions except for per share data Q2’18 Q1’18 Q2’17 Orders $842 $321 $188 Backlog 10,186 3,387 3,298 Revenues 1,735 608 789 Financial Metrics (Adjusted as Indicated)1 Gross Profit and Margin % $237 13.7% $132 21.7% $138 17.5% Operating Income and Margin % $49 2.8%
Slide 6: Q2 2018 Segment Reporting and Product Offering
Q2 2018 SEGMENT REPORTING AND PRODUCT OFFERING $ in millions OPERATING SEGMENTS $ in millions NCSA EARC MENA APAC TECH CORP Total Orders $462 ($4) $69 $245 $71 $ - $842 Backlog 5,182 1,250 2,630 637 487 - 10,186 Revenues 995 58 469 108 105 - 1,735 Operating Income and Margin % $49 4.9% $(8) (13.8%)
Slide 7: Purchase Accounting and Intangible Amortization
PURCHASE ACCOUNTING AND INTANGIBLE AMORTIZATION $ in millions PURCHASE PRICE ALLOCATION1 Purchase Price Allocation Total equity consideration 1,693 Cash consideration transferred 2,872 Total Combination consideration transferred 4,565 Net tangible assets acquired (including cash) (522) Intangible as
Slide 8: Combination Profitability Initiative (CPI)
COMBINATION PROFITABILITY INITIATIVE (?CPI?) Previously announced cost synergies of $350 million, $ in millions CATEGORY SOURCE TOTAL CPI SAVINGS Savings actioned / costs Consolidate buying power to negotiate improved pricing or rebates with suppliers incurred to date SUPPLY CHAIN Improved category
Slide 9: Q2 2018 Summary Cash Flow
Q2 2018 SUMMARY CASH FLOW $ in millions $419 million cash, cash equivalents & restricted cash as of Mar. 31, 20181 398 (24) (2,433) 2,778 719 CASH FLOWS FROM CASH FLOWS CASH FLOWS USED FOR CASH FLOWS FROM NET INCREASE OPERATING ACTIVITIES FOR CAPEX OTHER INVESTING FINANCING ACTIVITIES IN CASH ACTIVI
Slide 10: Q2 2018 EBITDA to Free Cash Flow
Q2 2018 EBITDA TO FREE CASH FLOW $ in millions $500 $101 $475 $450 $411 $(33) $398 ($24) $400 $374 $350 $300 $250 $200 $150 $100 $92 ($54) $50 ($18) $0 1 Q2’18 EBITDA Cash Paid for Cash Paid for Changes in Changes in Q2’18 Cash Capex Q2’18 Free1 Transaction Q2’18 Adjusted Interest Taxes Current Asse
Slide 11: Net Working Capital Trend Comparison
NET WORKING CAPITAL TREND COMPARISON $ in millions Q1 2018 Q2 2018 3,000 2,000 1,000 384 0 (1,000) (1,444) (2,000) (3,000) (4,000) Accounts receivable Contract assets Other assets Accounts payable Contract liabilities Other liabilities Net Working Capital Negative working capital acquired from the c
Slide 12: Projects > $500M, Percent of Completion
PROJECTS > $500M, PERCENT OF COMPLETION (?POC?)1 PROJECT NAME1 PROJECT SIZE2 Saudi Aramco Marjan Power System Substantial Saudi Aramco LTA II Mega Saudi Aramco Safaniya Phase 5 Substantial Shintech Mega Cameron LNG Mega Entergy #1 - St. Charles Substantial LACC Ethylene Production Facility Mega F
Slide 13: IPL Eagle & Calpine – Power Projects
IPL EAGLE & CALPINE – POWER PROJECTS IPL EAGLE CALPINE Cumulative POC1 Substantially Complete 89% Gross Profit Loss Loss Final settlement executed w ith customer on June 30. Remaining scope of w ork includes piping and electrical Currently w orking on final punchlist items. installation. Operational
Slide 14: Freeport & Cameron – LNG Projects
FREEPORT & CAMERON – LNG PROJETS FREEPORT3 CAMERON Cumulative POC1 83% 88% Gross Profit Profitable Loss In Train 1, all critical process and utility pow erhouses are In Phase 1, all process and utility pow erhouses are energized energized and pipe testing is progressing. and pipe testing is substant
Slide 15: Asset Utilization Summary
ASSET UTILIZATION SUMMARY UNALLOCATED ONSHORE OFFSHORE ONSHORE OFFSHORE/SUBSEA DIRECT OPERATING CONSTRUCTION1 VESSELS FABRICATION1 FABRICATION EXPENSES (Wkhr 000s) (Days) (in millions) (Wkhr 000s) (Wkhr 000s) 47% 73% 128% 81% $37 Actual: 638 Actual: 3,298 Actual: 5,061 Actual: 557 Q1?18 $42 Standard
Slide 16: Credit Facility and Bond Snapshot
CREDIT FACILITY AND BOND SNAPSHOT Funded Debt $ in millions Size $2.26 billion B Loan Maturity 7 years2 Term Pricing LIBOR + 500bps Security Secured Size $1.3 billion Notes Maturity 6 years Year Six - Coupon 10.625% Security Unsecured Liquidity Facilities Letter of Credit Facility $1.39 billion Revo
Slide 17: Q2 2018 Capital Structure, Revolver and LC Availability
Q2 2018 CAPITAL STRUCTURE, REVOLVER AND LC AVAILABILITY $ in millions CAPITALIZATION June 30, 2018 Cash, Cash Equivalents and Restricted Cash $1,138 Senior Secured Term Loan 2,254 10.625% Six-Year Senior Unsecured Notes 1,300 North Ocean 105 Loan 21 Vendor Equipment Financing (?VEF?) 10 Other, Inclu
Slide 18: Upgrading the Amazon Vessel
UPGRADING THE AMAZON VESSEL State-of-the-art Ultra-deepwater J-Lay System Details MDR’s Estimated Direct Capex1 ~$58 million Amounts To Be Recorded at Signing ~$56 million property, plant & equipment of Lease Amendment in Q3’18 ~$56 million capital lease liability ~$333 million property, plant & equ
Slide 19: QHSES: Driving Toward Industry Leading Performance
QHSES: DRIVING TOWARD INDUSTRY LEADING PERFORMANCE Total Recordable Incident Rate 1.1 1 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 OGP IMCA Construction Industry Institute McDermott 0.36 International Marine 0.32 Construction 0.29 McDermott 0.21 Intern
Slide 20: Order Intake, Backlog & Bid Pipeline
ORDER INTAKE, BACKLOG & BID PIPELINE 20
Slide 21: Q2 2018 Backlog & Expected Roll-Off
Q2 2018 BACKLOG & EXPECTED ROLL-OFF $ in millions Details of $10.2B Backlog as of June 30, 2018 BACKLOG BACKLOG BACKLOG By Product Offering By Segment Roll-Off by Year $4.4 $4.2 APAC Power $0.6, 6% $1.4 14% Off/Sub MENA TECH $3.1 30% $2.6 26% $0.5, 5% $1.5 Downstream EARC NCSA $4.2 41% LNG $1.3 12%
Slide 22: Q2 2018 Backlog by Segment and Product Offering
Q2 2018 BACKLOG BY SEGMENT AND PRODUCT OFFERING $ in millions NCSA - $5.2B EARC - $1.3B MENA - $2.6B APAC - $0.6B TECH - $0.5B Off/Sub $0.2 4% Down Down Power $0.1 15% $0.6 44% $1.4 27% LNG Down $1.0 38% Down $1.5 29% $0.5 100% Off/Sub Off/Sub Down Off/Sub $0.7 56% $1.6 62% $2.1 40% $0.5 85% Our NCS
Slide 23: Revenue Pipeline Quarter Look-Back
REVENUE PIPELINE 5 QUARTER LOOK-BACK $ in billions, except $/Bbl $77 $67 $69 $78.5 $57 $47 $49.3 $24.5 $25.0 $20.1 $20.4 $16.2 $14.1 $19.0 $12.6 $15.4 $1.4 $5.4 $4.4 $7.5 $10.2 $3.3 $2.4 $3.9 $3.4 2Q’17 3Q’17 4Q’17 1Q’18 2Q’18 Backlog Bids & COs 1 Targets 1 Brent Spot $/Bbl Revenue opportunity p
Slide 24: Bids & Change Orders Outstanding and Target Projects
BIDS & CHANGE ORDERS OUTSTANDING AND TARGET PROJECTS $68.3 billion as of Jun. 30, 2018 compared to $21.6 billion as of Mar. 31, 2018 PRODUCT OFFERING RESOURCE GREENFIELD / BROWNFIELD $27.1 $21.5 $21.6 $42.3 $17.2 $47.6 $23.5 $20.6 $15.1 $9.9 $11.7 $2.5 $6.5 $2.5 Greenfield Brownfield Off/Sub LNG
Slide 25: Q2 2018 Revenue Pipeline by Project Size
Q2 2018 REVENUE PIPELINE BY PROJECT SIZE as of June 30, 2018, contract values in millions ESTIMATED TOTAL CONTRACT VALUES Q2?18 Pipeline Q1?18 Pipeline Delta from Sequential Quarter Bids Target Bids Target Projects Bids Target Projects Description Range Backlog1 Outstanding 2,3 Projects2,3,4 Backlog
Slide 26: Second Half 2018 Guidance
SECOND HALF 2018 GUIDANCE |MCDERMOTT,
Slide 27: Second Half 2018 Guidance
Second Half Earnings Metrics 2018 Guidance SECOND HALF 2018 GUIDANCE Revenues $4.8B - 5.1B Operating Income $235 - 265 $ in millions, except per share amounts, or as indicated Operating Margin 4.9% - 5.2% Net Interest Expense1 ~$170 Income Tax Expense ~$20 Net Income $60 - 70 Diluted Net Income, Per
Slide 28: Frequently Asked Questions
FREQUENTLY ASKED QUESTIONS 28
Slide 29: Frequently Asked Questions
FREQUENTLY ASKED QUESTIONS Question Response 1) What are the long-term prospects McDermott is on track to be a market leader in key upstream and downstream markets. We have made enormous for the McDermott and CB&I progress in integrating the two organizations and our focus is now on optimizing o
Slide 30: Frequently Asked Questions
FREQUENTLY ASKED QUESTIONS Question Response 5) Do you have plans to reduce Yes. Our objective is to reduce the ratio of total debt to EBITDA to 2.0x by the end of 2020. your debt level over time? 6) What kind of feedback have you The feedback from customers has been extremely positive since we anno
Slide 31: Financial Appendix
Be LN, e, cy o FINANCIAL APPENDIX |MCDERMOTT,
Slide 32: Additional Disclosures – Quarterly Reconciliations
ADDITIONAL DISCLOSURES ? QUARTERLY RECONCILIATIONS Three Months Ended Reconciliation of Non-GAAP to GAAP financial measures Jun 30, 2018 Mar 31, 2018 Jun 30, 2017 (Dollars in millions, except share and per share amounts) Net Income (Loss) Attributable to MDR $47 $35 $36 Less: Adjustments Transaction
Slide 33: Additional Disclosures – Segment Reconciliations
ADDITIONAL DISCLOSURES ? SEGMENT RECONCILIATIONS Reconciliation of Non-GAAP to GAAP financial measures $ in millions NCSA EARC MENA APAC TECH CORP Total Revenues $995 $58 $469 $108 $105 $ - $1,735 GAAP Operating Income (Loss) 49 (8) 97 43 25 (157) 49 GAAP Operating M argin 4.9% -13.8% 20.7% 39.8% 23
Slide 34: Additional Disclosures – EBITDA Reconciliations
ADDITIONAL DISCLOSURES ? EBITDA RECONCILIATIONS Reconciliation of Non-GAAP to GAAP financial measures Three Months Ended Jun 30, 2018 Mar 31, 2018 Jun 30, 2017 (Dollars in millions) Net income (loss) attributable to McDermott $47 $35 $36 Add: Depreciation & amortization 57 23 28 Interest expense
Slide 35: Additional Disclosures – 2018 Guidance Reconciliations
ADDITIONAL DISCLOSURES ? 2018 GUIDANCE RECONCILIATIONS Reconciliation of Forecast Non-GAAP to US GAAP financial measures Second Half 2018 Guidance (Dollars in millions) Revenues $4.8B - 5.1B Operating Income $235 - 265 Operating Margin 4.9% - 5.2% Costs to Achieve CPI ~85 Intangibles Amortization ~8
Slide 36: M
M 36