Mcdermott International Ltd · OTC:MCDIF
Mcdermott International — Merger or Acquisition (January 2018)
48 slides from Mcdermott International's merger presentation, Jan 8, 2018
Slide 1: McDermott International + CB&I
JANUARY 2018 McDermott International + CB&I Creating a premier global fully vertically integrated onshore-offshore company with a broad EPCI offering, driven by technology and innovation with the scale and diversification to capitalize on global growth opportunities Exhibit 99.1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS McDermott and CB&I caution that statements in this presentation which are forward-looking, and provide other than historical information, involve risks, contingencies and uncertainties that may impact actual results of operations of McDermott, CB&I and the combined busines
Slide 3: Additional Information and Where to Find It
ADDITIONAL INFORMATION AND WHERE TO FIND IT This communication is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any proxy, vote or approval with respect to the proposed transaction or otherwise, nor s
Slide 4: Non-GAAP Disclosures
NON-GAAP DISCLOSURES This presentation includes several “non-GAAP” financial measures as defined under Regulation G of the U.S. Securities Exchange Act of 1934, as amended. Each of McDermott and CB&I reports its financial results in accordance with U.S. generally accepted accounting principles, but
Slide 5: Management Profiles
MANAGEMENT PROFILES McDermott President & Chief Executive Officer DAVID DICKSON McDermott Executive Vice President & Chief Financial Officer STUART SPENCE McDermott Executive Vice President and Chief Financial Officer since August 2014 More than 25 years of financial and operational management exper
Slide 6: Table of Contents
TABLE OF CONTENTS TRANSACTION OVERVIEW INTRODUCTION TO CB&I McDERMOTT’S JOURNEY STRATEGIC RATIONALE FINANCIAL RATIONALE DUE DILIGENCE FINANCIAL APPENDIX 7 10 16 21 29 36 40
Slide 7: Transaction Overview
TRANSACTION OVERVIEW 7
Slide 8: A Transformational Combination
A TRANSFORMATIONAL COMBINATION Creates a premier $10 billion1 global, fully vertically integrated onshore-offshore EPCI provider with a market-leading technology portfolio, better positioned to meet customer needs Combines complementary and diversified capabilities, well positioned globally in attra
Slide 9: Transaction Details
TRANSACTION DETAILS Combined revenues of approximately $9.9Bn2 and a backlog of $14.5Bn3 Expected to generate annualized cost synergies of $250m in 2019 (in addition to the $100m cost reduction program that CB&I has already implemented) Significant revenue synergies expected Expected to be cash accr
Slide 10: Introduction to CB&I
INTRODUCTION TO CB&I 10
Slide 11: CB&I at a Glance
FINANCIAL BREAKDOWN1 BUSINESS OVERVIEW CB&I AT A GLANCE Founded: 1889 Administrative Headquarters: The Woodlands, Texas Employees: 26,000 Vertically integrated in areas of operation Operates in four key segments – Refining, Petrochemical, LNG and Natural Gas-Fired Power Plants Three business lines:
Slide 12: CB&I Technology Business
Primary Business Focus: Process licensing, Related catalysts Employees: ~650 Major Operating Facilities: New Jersey, Germany, India Extensive refinery technologies portfolio Leaders in: Dehydration (#1; Chevron-Lummus JV) Ethylene (#2) Polypropylene (#2) Clean fuels and residuum upgrading (#2) Lever
Slide 13: Fabrication Services and E&C
FABRICATION SERVICES AND E&C E & C Fabrication Services Engineering Procurement Construction Commissioning Engineering, procurement, and construction Petrochemicals LNG Refining Combined cycle Fabrication & erection Process & modularization Pipe fitting and distribution Engineered products Specialty
Slide 14: CB&I Historical Results
E&C CB&I HISTORICAL RESULTS Source: Company filings, presentations, and press releases 1Previously disclosed as discontinued operations beginning Q3 2017 2Excludes Capital Services segment which was sold in Q2 2017 3Adjusted EBITDA and Adjusted EPS are non-GAAP measures. Reconciliations to the most
Slide 15: Adjustments to CB&I's Financial Metrics
ADJUSTMENTS TO CB&I’S FINANCIAL METRICS This deck includes certain non-GAAP financial metrics and adjustments that we believe to be non-recurring, as we believe this provides a better understanding of the underlying business. These adjustments are consistent with those used in McDermott’s adjusted f
Slide 16: McDermott's Journey
McDERMOTT’S JOURNEY G @
Slide 17: McDermott at a Glance
REVENUE BY REGION EBITDA BY REGION2 CONTRACTS MIX 27% Asia Americas, Europe & Africa 7% 16% Middle East 66% 84% Middle East Asia 4% Fixed 96% Cost Plus & Other 1Represents historically reported financial information LTM as of 9/30/17 2Does not take into account McDermott’s Corporate Segment. EBITDA
Slide 18: Transformation Under Current Management
TRANSFORMATION UNDER CURRENT MANAGEMENT 2014 OPTIMIZE TRANSFORM 2015 2016 VALUE 2017 STABILIZE 1Cost of Non Quality is an internal metric used by management 9 loss-making projects in December 2013, reduced to 1 loss-making project (timing of completion dependent on client) Strong management of chang
Slide 19: The One McDermott Way
THE ONE McDERMOTT WAY One McDermott Way Results Bidding McDermott focuses on obtaining a full understanding of the project costs and risks at the bid stage All McDermott bids, offshore and subsea globally, are prepared by a central Proposals & Estimating function Each bid has a suitably qualified Pr
Slide 20: McDermott Historical Performance
REVENUE ($m) McDERMOTT HISTORICAL PERFORMANCE Source: Company filings, presentations, and press releases Note: Adjusted EBITDA by segment not available 1Adjusted EBITDA and Adjusted EPS are non-GAAP measures. A reconciliation to the most comparable GAAP measures is provided in the Financial Appendix
Slide 21: Strategic Rationale
STRATEGIC RATIONALE G @
Slide 22: End-to-End Integrated Offering
END-TO-END INTEGRATED OFFERING UPSTREAM DOWNSTREAM SUBSEA OFFSHORE LNG PETROCHEM POWER REFINING
Slide 23: Fully Vertically Integrated Capabilities
FULLY VERTICALLY INTEGRATED CAPABILITIES CONCEPT / PRE-FEED (IO) FEED TECHNOLOGY LICENSING PROJECT MANAGEMENT START-UP & DEBOTTLENECK UPGRADE & REVAMP TECHNICAL CONSULTING & ENGINEERING DIGITAL TWIN APPRAISE / SELECT EXECUTE BROWNFIELD DECOM DEFINE McDermott CB&I BOTH 15 to 40 year asset lifetime pu
Slide 24: A Complementary Global Portfolio
A COMPLEMENTARY GLOBAL PORTFOLIO... McDermott CB&I ESTIMATED COMBINED REVENUE1 International U.S. Improves ability to capitalize on attractive high-growth markets Leverages relationships, capabilities and offerings to create new, incremental project opportunities Diversifies exposure to individual r
Slide 25: With Diversified Revenue
…WITH DIVERSIFIED REVENUE COMBINED3 McDermott1 CB&I2 GEOGRAPHY + = International U.S Complementary geographic portfolio drives diversity and provides enhanced revenue stability SEGMENT4 ONSHORE OFFSHORE + = Mix of onshore and offshore diversifies exposure and provides more cyclical balance CONTRACT
Slide 26: Positioned to Take Advantage of Market Trends
GLOBAL REFINED PRODUCTS DEMAND (MT / yr) GLOBAL PETROCHEMICAL DEMAND (MT / yr) GLOBAL LNG DEMAND (MT / yr) GLOBAL OIL & GAS DEMAND* (MToe) Source: IHS Markit Source: Nexant Source: Nexant Source: BP Energy Outlook 2017 *Liquids, Gas, Coal, Other POSITIONED TO TAKE ADVANTAGE OF MARKET TRENDS Signific
Slide 27: Creates a More Competitive Global Leader
CREATES A MORE COMPETITIVE GLOBAL LEADER Revenue ($Bn, LTM as of 9/30/17) Source: Public filings 1Estimated sum of McDermott and CB&I LTM as of 9/30/17, does not reflect any pro forma adjustments 0 5 10 15 20 MORE INTEGRATED 1 MITIGATES RISK OF CYCLICALITY INTEGRATED OFFERING ENHANCES COMPETITIVENES
Slide 28: Proven Model for Unlocking Value
PROVEN MODEL FOR UNLOCKING VALUE maximize value of combined company BY Leveraging McDermott’s operational expertise Industry Leading, Vertical Execution Capabilities Rigorous Oversight & Cost Control Strategic Contract Management Customer Focused Standardized Bidding Standards & Project Execution Co
Slide 29: Financial Rationale
FINANCIAL RATIONALE G @
Slide 30: A Strong Financial Profile
A STRONG FINANCIAL PROFILE 12.1 Net Working Capital4 (as of 9/30/17) BACKLOG ($Bn) (as of 9/30/17) 14.5 REVENUE ($Bn) (LTM as of 9/30/17) Combined2 CB&I1 McDermott Adj. EBITDA3 ($m) % of Revenue (LTM as of 9/30/17) CapEx ($m) (LTM as of 9/30/17) EBITDA3 ($m) (LTM as of 9/30/17) GAAP Net Income ($m)
Slide 31: Substantial Cost Synergies
SUBSTANTIAL COST SYNERGIES Operations 22% G&A 34% Other 11% Savings Area Source Total Synergies % of Combined Spend Procurement Combined procurement $84m 1.5% G&A Optimization of headcount and office facilities $84m 12% Operations Cost savings from resource pooling, facility rationalization, alignin
Slide 32: Significant Revenue Synergies
SIGNIFICANT REVENUE SYNERGIES JOINTLY IDENTIFIED MDR vs. CB&I Major Customers Americas Global Middle East Asia Middle East Global Americas Asia Africa McDermott CB&I Opportunity to Provide End-to-End Solutions to our shared customers Opportunities to capture incremental revenue Greater certainty in
Slide 33: Financing
FINANCING Sufficient funded debt being raised to strengthen balance sheet and provide liquidity to manage working capital needs, timing and focus projects Plan to leverage EBITDA growth and strong free cash flow generation to rapidly de-lever Unsecured bridge expected to be taken out by permanent un
Slide 34: Financing (Cont.) - Capital Structures
Amount ($m) Cash & Cash Equivalents 342 $1,150mm Revolver ($100mm LC Sublimit) 554 $800mm Revolver ($100mm LC Sublimit) 343 Second Term Loan 463 Series A Senior Notes 105 Series B Senior Notes 167 Series C Senior Notes 197 Series D Senior Notes 119 Second Senior Notes 143 Unamortized Debt Issuance C
Slide 35: Rapid De-Levering
1Net Leverage, Gross Leverage, and FCF Conversion are internal metrics used by management which include non-GAAP measures. The definition and calculation of each metric, as well as reconciliations to the most comparable GAAP measures, are provided in the Financial Appendix on page 48 2Future perform
Slide 36: Due Diligence
DUE DILIGENCE G @
Slide 37: Due Diligence Conducted Over Period of Months
1Include Shaw, Areva, Mox and Entergy Nola East legacy projects DUE DILIGENCE CONDUCTED OVER PERIOD OF MONTHS Focused on 33 Projects Representing ~80% of Revenue1 33% 16% 45% 6% 33 Projects Overview and Key Findings Strong team of highly experienced E&C risk managers led project due diligence effort
Slide 38: Four Focus Projects: Our Observations
FOUR FOCUS PROJECTS: OUR OBSERVATIONS four focus projects are not representative of entire portfolio and have unique characteristics that will continue to be de-risked significantly in 2018 IPL Eagle Calpine Freeport Cameron Project Type Power Power LNG LNG Original booking value ~$0.5bn ~$0.3bn ~$2
Slide 39: Summary
SUMMARY Creates a premier $10 billion1 global, fully vertically integrated onshore-offshore EPCI provider with a market-leading technology portfolio, better positioned to meet customer needs Combines complementary and diversified capabilities, well positioned globally in attractive high-growth marke
Slide 40: Financial Appendix
FINANCIAL APPENDIX G @
Slide 41: Three Months Ended Nine Months Ended Last Twelve Months Dec 31, 2016 Sept 30,
Three Months Ended Nine Months Ended Last Twelve Months Dec 31, 2016 Sept 30, 2017 Sept 30, 2017 E&C FS Tech CS Total E&C FS Tech CS Res Total E&C FS Tech CS Res Total (Dollars In millions) Operating Income (Loss), as reported2 $(183) $22 $28 $(637) $(769) $(506) $98 $ - $ - $(31) $(439) $(689) $120
Slide 42: Three Months Ended Nine Months Ended Last Twelve Months Dec 31, 2016 Sept 30,
Three Months Ended Nine Months Ended Last Twelve Months Dec 31, 2016 Sept 30, 2017 Sept 30, 2017 (Dollars In millions) GAAP Net Income (Loss) Attributable to CB&I, as reported1 $(666) $(391) $(1,056) Less: Net Income (Loss) Attributable to Capital Services2 645 107 752 GAAP Net Income (Loss) Attribu
Slide 43: Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Dec 31,
Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Dec 31, 2013 Dec 31, 2014 Dec 31, 2015 Dec 31, 2016 E&C FS Tech CS Res Total E&C FS Tech CS Res Total E&C FS Tech CS Res Total E&C FS Tech CS Res Total (Dollars In millions) Operating Income (Loss), as reported2 $317 $28
Slide 44: For the year ended 2013 2014 2015 2016 (Dollars In millions, except share and
For the year ended 2013 2014 2015 2016 (Dollars In millions, except share and per share amounts) GAAP Net Income (Loss) Attributable to CB&I, as reported1 $454 $544 ($504) ($313) Add: Losses (Income) From Discontinued Operations Capital Services2 (9) (37) (43) 621 Nuclear Operations3 (37) (93) (131)
Slide 45: McDermott Non-GAAP Reconciliation by Segment for LTM 9/30/17
McDERMOTT NON-GAAP RECONCILIATION BY SEGMENT FOR LTM 9/30/17 Three Months Ended Nine Months Ended Last Twelve Months Dec 31, 2016 Sept 30, 2017 Sept 30, 2017 AEA MEA ASA Corp Total AEA MEA ASA Corp Total AEA MEA ASA Corp Total (Amounts in millions, except per share amounts) GAAP Net Income (Loss) At
Slide 46: McDermott Non-GAAP Reconciliation for Historical Results
McDERMOTT NON-GAAP RECONCILIATION FOR HISTORICAL RESULTS 2013 – 2016 For the year ended 2013 2014 2015 2016 (Amounts in millions, except per share amounts) GAAP Net Income (Loss) Attributable to McDermott $(508.9) $(76.0) $(18.0) $34.1 Plus: Non-GAAP Adjustments Restructuring Charges1 35.7 18.1 40.8
Slide 47: McDermott and CB&I Net Working Capital and Contract Capital
McDERMOTT AND CB&I NET WORKING CAPITAL AND CONTRACT CAPITAL September 30, 2017 McDermott CB&I As reported1 As reported1 Adjustment for discontinued ops2 Adjusted balance (Amounts in millions, except per share amounts) Current assets (excluding cash, restricted cash, and cash equivalents): Accounts r
Slide 48: McDermott Leverage Ratios Reconciliation
McDERMOTT LEVERAGE RATIOS RECONCILIATION 1Gross Debt represents outstanding debt before netting against debt issuance costs. 2Net Debt is defined as Gross Debt net of of Cash, Restricted Cash, and Cash Equivalents. 3Adjusted EBITDA is a non-GAAP measure defined as net income plus depreciation and am
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