Mcdermott International Ltd · OTC:MCDIF
Mcdermott International — Investor Presentation (May 2003)
66 slides from Mcdermott International's investor presentation, May 19, 2003
Slide 1: Slide 1
Slide 2: Agenda
Gay Mayeux e Weicome Bruce Wilkinson e Overview of McDermott e B&W Operations Bob Deason e J. Ray McDermott - Marine Construction Services Operations John Fees ¢ BWXT- Government Operations Frank Kalman e Financial Review and Legal Update Bruce Wilkinson e Wrap Up e Questions & Answers aioe aasntn N
Slide 3: Cautionary Statement/Explanation of Non-GAAP Measurements
Cautionary Statement/Explanation of Non-GAAP Measurements Statements in this presentation which express a belief, expectation or intention, as well as those which are not historical fact, are forward looking. They involve a number of risks and uncertainties which may cause actual results to differ m
Slide 4: Our Beginning
CRA : Mu Our Beginning 1946 J. Ray McDermott & Co., Inc. (now McDermott Incorporated) incorporated in Delaware 1953 private placement R. Thomas MeDermot Founder and President of J. RayMeDermett & C2., Morgan City Fabrication Yard Morgan City, Louisiana 1365 1954 First publicly traded over-the-counte
Slide 5: Our Operations Have a Long History
Our Operations Have a Long History ER. mM MI (Delaware) Incorporated Babcock & Wilcox * Mil (Delaware) (Panama) Acquired in 1978 incorporated in 1959 ‘Government Operations constuction Industrial Operations ‘Services *ncorporatedin 1881 my 1,206
Slide 6: Our Organization Today
Our Organization Today © Mil (Panama) Resulting from corporate inversion in 1982 =(M)" MI (Delaware) J. Ray MeDermott (Panama) fn 1995, formed by merger with Offshore B&W Investment Co. Pipelines, inc. and originally listed on NYSE. (Delaware) ‘Mil acquired the remaining 37% in 1999, BWXxT Baw incor
Slide 7: Learning From Our Past
Learning From Our Past e Exercise of put/call agreement and subsequent repayment of $225 million 9 3/8% notes » Create a corporate structure that allows for financial flexibility e EPIC Spar projects » Establish more business discipline >» Implement a more risk-averse business strategy » Develop a r
Slide 8: Focusing on Our Future
Focusing on Our Future We have the right leadership in place at our two operating businesses The outlook for resolution of the B&W bankruptcy during 2003 looks positive Our customers value J. Ray’s reputation for delivering engineering and construction solutions for the offshore oil and gas market B
Slide 9: Slide 9
Slide 10: B&W Customer Base
B&W Customer Base FrstEney 9} Gonsteliation Ey enone ae Cantons @ Utilities Pulp&Paper @ General Industrial Basch Wier ay 1.208 »
Slide 11: Current Market Environment
Current Market Environment e Utility Environment > “Big Picture” view — weakest financial condition in 50 years >» “Worms eye” view — electricity production is growing e Non-economic Wildcard - Environmental Legislation e Market Demand >» Capital spending at depression levels >» Service opportunitie
Slide 12: B&W Results vs. 3-Year Plan
3 Year 3 Year 2001 2002 2003 Total Goal Operating Income $ 89.2 $ 100.5 $ 90.7 $2804 $286.5 Operating Cash Flow $103.9 $ 2049 $ 39.1 $ 347.9 $ 279.1 Revenues per Employee +19% +29% aioe aasntn Newook Basch Wor ay 1.208 B&W Results vs. 3-Year Plan ¢s minions)
Slide 13: McDermott International, Inc.
Mec DERMOTT INTERNATIONAL, INC
Slide 14: J. Ray's Core Capabilities
J. Ray’s Core Capabilities Providing solutions for offshore field developments worldwide e Engineering and Procurement e Jacket, Hull and Topsides Fabrication e Platform, Hull, Topsides and Pipeline Installation e Subsea/Deepwater Technology ay Mamet ay 1.208
Slide 15: J. Ray operation and fabrication facilities
Lages, Nigeria Jatarta,Indonesia® Perth, Australia. [@ operation Facitties Hl Fabrication Facitties | aay Madam ay 12.208 1
Slide 16: J. Ray's Strengths
J. Ray’s Strengths One of the leading global suppliers of offshore field development solutions 50-plus year legacy for innovative solutions People with strong technical skills Well positioned geographically Reputation with customers as a company that delivers Right market at the right time ay Mamet
Slide 17: Offshore platform types
Fan Plate Compliant — Tower (CT) Mink-TLP Conventional Semifes —— ime fou on oo ee ‘y Tiere ie’ Fre 2, a Subsea Teback in Progress CGrplks compen of0 tor Mapai 2ON20 Hon OE natty DeepNRrSoltons BrCo\cRptSRRC ts Pre ay 700 aioe aasntn Newook aay Madam ay 1.208
Slide 18: Top Priorities
Top Priorities Implement changes necessary to return J. Ray fo its premier position in the offshore oil and gas industry e Bring J. Ray back to profitability over the long- term e Design an organizational structure and install leaders in key areas to increase our business focus and accountability e
Slide 19: Spar projects status
Medusa Est. Project Loss (millions) $70.9 Completion Date 2Q03 Months to Complete 29 Physical % Completion @ 3/31/03: Engineering 99% Hull fabrication 100% Topsides fabrication 98% Marine Installation 49% Total Project 95% aay Madam Devils Tower $42.7 3Q03 25 99% 100% 61% 0% 76% Front Runner $9.3 19
Slide 20: Spar Platform Characteristics
ron Ca) =(M): Water Depth (ft.) Hull Structure Length (ft.) Hull Diameter (ft.) Topsides Weight (tons) Hull Weight (tons) Mooring Lines (number) Oil/day (BbI 000’s) aay Madam Medusa 2,223 586 Spar Platform Characteristics Devils Tower 5,610 586 Front Runner 3,330 586 my 1,206
Slide 21: Medusa, Devils Tower, Front Runner
Medusa Devils Tower Front Runner ‘Shiney Sd Shoe ay 1,208
Slide 22: Successfully Execute on Backlog
Successfully Execute on Backlog $1.8 billion at 3/31/03* Southeast Asia 15% Caspian 30% * Excludes spars projects’ backlog of $281 million aioe aasntn Newook aay Madam my 1,206
Slide 23: Turn Prospects Into Orders
Turn Prospects Into Orders Middle East and Caspian e Phase 3 of AlOC’s (BP) field development project e Dolphin Energy’s development e BP’s Shah Deniz pipeline installation project The Americas e Subsea pipeline and umbilical installation projects in the Gulf of Mexico e Deepwater hub facility prosp
Slide 24: Produce Positive Cash Flow
Produce Positive Cash Flow e Increased focus on project execution Increased focus on management of working capital Right-sizing Morgan City marine operations Selling non-strategic assets aioe aasntn Newook aay Madam ay 1.208
Slide 25: Implement a more risk-averse business strategy
e Implement a more risk-averse business strategy » Identify and manage risks >» Develop a risk-based pricing model e Institute a project selection process Create an independent projects control function Aggressive management of cash aioe aasntn Newook aay Madam ay 1.208 \ increase Business Focus and
Slide 26: Create Global Functions
Create Global Functions Establish more business discipline by implementing guidelines, providing more oversight and instituting best practices « Project management / project controls « Sales, marketing and strategic planning « Engineering « Equipment and machinery « Marine « Risk management aioe aas
Slide 27: Summary
Summary e We have talented and dedicated people; great products and services; and exciting prospects « We still have a lot of work to do to stabilize our operations and position our company for future growth and profitability e We are in the right markets at the right time e We will succeed in build
Slide 28: Slide 28
Slide 29: BWXT's Core Capabilities
BWXT’s Core Capabilities Leader in lifecycle management of special nuciear materials, facilities and technologies primarily for the U.S. government e Technology development, engineering and nuclear component manufacturing for critical U.S. government needs Facilities and operations management of Dep
Slide 30: BWXT's Primary Locations
G BWXT’s Primary Locations © swsrnatesuing rowtons —_—@ Fates hanayenent and remeaton nd etn stes ay 1,206
Slide 31: Nuclear Products
Nuclear Products Division Nuclear Equipment Division Lynchburg, VA Barberton, OH Lynchburg Technology Center aioe aasntn Newook BW chan ge ay 1.208
Slide 32: Manufacturing for Critical National Needs
Manufacturing for Critical National Needs BWXT Provides e Advanced precision manufacturing and metals processing e Uranium processing and blending e Fabrication with nuclear material By Utilizing e State-of-the-art manufacturing facili and equipment e Unique and highly specialized capabilities e Six
Slide 33: National Security Site Management
National Security Site Management Large site and facility management through Management and Operations (“M&O”) contracts Disciplined operations and infrastructure management Maintain and develop skilled workforces Security for strategic materials Nuclear, radiological and industrial safety Nuclear m
Slide 34: Typical M&O Contract
Typical M&O Contract e Five-year contract with a five-year option e Cost reimbursable with government credit line « Assume management of site e Fee based on % of managed costs > Incentive vs. award e Risk management >» Government indemnifies most risks » Price Anderson indemnification — will not acc
Slide 35: Manage and Operate DOE Facilities
Ru SEAMS =(M)" Manage and Operate DOE Facilities PRINS Contract Value: Employees: Location: General Purpose: $35 Billion Five year option available 4,504 Oak Ridge, Tennessee Nuclear Weapons Products Contract Value: Employees: Location: General Purpose: $1.8 Billion Five year option available 3,202
Slide 36: BWXT M&O contracts
Bechtel BWXT idaho, LLC Westinghouse Savannah River Co. BWXT Services, inc. Contract Value: $ 3.7 Billion Contract Value: $ 8.2 Billion Contract Value: $ 14 Nitin ORNL Mound SPRO CH2Mound inc. DyniicDermott Petrofeum Operations Contract Vawe: $ 314 Mition Contract Value: $ 700.iion UT-Battelle Contr
Slide 37: Backlog as of 12/31/02
Backlog as of 12/31/02 ($ billions) Base BWXT's BWXT's Period Share Backlog M&O Contracts: YA2 $ 51% § 1.1 Pantex 48% 0.7 INEEL 30% 0.4 srs 5% 0.3 ORNL 5% 0.1 Mound 30% 0.1 SPRO 30% 0.2 M&O Subtotal $ 2.9 Manufacturing 1.7 Total BWXT Proportionate Backlog $ 4.6 (1) Fees are recorded in revenues rath
Slide 38: Develop Advanced Energy Programs
Develop Advanced Energy Programs SoFCo— Nuclear Products Division — Fuel Celis Downbiending ‘ BW acne ay 1.208 »
Slide 39: BWXT General Statistics as of 3/31/03
Employees (including 7,939 M&O site employees) 10,814 Manufacturing revenue (2003 Forecast) $450 million DOE site budgets managed (2003 Forecast) $1 billion Square feet of nuclear facilities under management 12.5 million Acres of infrastructure managed directly or through partnerships 204 thousand a
Slide 40: BWXT's Strategy
BWXT’s Strategy Maintain leadership position in the lifecycle management of complex, high consequence nuclear and national security operations, projects and programs Maintain customer confidence Generate costs reductions through continuous improvement initiatives Explore growth opportunities worldwi
Slide 41: Financial Review
Financial Review
Slide 42: Simplify Corporate Structure
Simplify Corporate Structure 2001 Revenues 2002 Revenues $3.2 Billion $3.3 Billion i Marine Construction Services (J. Ray) Government Operations (BWXT; McDermott Technology) industrial Operations (Delta Catalytic; Hudson Products) Ml Babcock & Wilcox (deconsolidated from MIl financial statements) No
Slide 43: Segment Financial Information
Segment Financial Information (s mitions; unaudited) JRAY Three Months Ended 3131103 3131102 Revenues $ 4058 $ 2642 Spar Revenues 14 Non-GAAP Revenues $ $ Operating Income $ 190 ¢ Spar Losses : Non-GAAP OperatingIncome $ $ GAAP Operating Income % 47% B.2)% Non-GAAP Operating Income % 57% (0.7)% Depr
Slide 44: Segment Financial Information
Revenues $ Spar Revenues Non-GAAP Revenues $ Operating Income $ Spar Losses Non-GAAP OperatingIncome $ GAAP Operating Income % Non-GAAP Operating Income % Depreciation and Amortization $ Segment Financial Information (s mitions; unaudited) JRAY BWXT Three Months Ended Three Months Ended 3131103 3131
Slide 45: Consolidated Financial Results
I> Revenues $ Spar Revenues Non-GAAP Revenues“? $ Income from Cont. Ops. & Before Acctg. Change” = $ B&W Settlement Costs Spar Losses Non-GAAP Income before Acctg. Change“ @® $ EPS Before Acctg. Change 7 $ EPS Impact of B&W Settlement Costs EPS Impact of Spar Losses Non-GAAP EPS Before Acctg. Change
Slide 46: Revaluation of B&W Settlement Charge
Revaluation of B&W Settlement Charge ¢ mitions) 128102 128102 0103, 38103 Nominal Fair Value Fair Value Value Change Value 4.75 Million Shares of Mil $ 208 $ 208 $ @* §$ 138 Share Price Guarantee 695 42.0 (13.4) ® 288 Note Payable 92.0 834 ea) © 807 Intercompany Note Payable @2.0) 22.0) (13) ° @33)
Slide 47: Qualified Pension Plan Status
Qualified Pension Plan Status ¢ minions MI J. Ray Estimated 2003 Pension Expense $ 72. §$ 15 GAAP Underfunding as of 12/31/02 $ (402) $ (78) ERISA Funding Requirement for 2003 Plan Year: Paid in 2003 $ - §$ 10 Paid in 2004 - 9 Total for 2003 Plan Year $ - $ 19 ( Does not include UK pension plan with
Slide 48: Impact of B&W Pension Plan
a December 31,2002 With Without B&W Spin-Off B&W Spin-Off”) (Unaudited) Income Statement Impact: Baw Pension Settlement (Expense) $ (17) $ : Minimum Pension Liability Charged to Other Comprehensive Income (OCI): McDermott Incorporated Plan $ (198) $ (422) Impact on Stockholders’ Equity @ 12/3102 $ (
Slide 49: Consolidated Backlog
$4 $3 $2 $1 $0 $3.2 1002 $3.8 4Q02 @JRM @ BWXT $3.6 1Q03 Consolidated Backlog ($ billions; unaudited) ay 1,206
Slide 50: New Credit Agreement
New Credit Agreement New Credit Agreement obtained February 11, 2003 e Series A MTN’s of $9.5 million repaid on February 11, 2003 e Facility sized at $180 million » Reduces to $166.5 million on May 13, 2003 > $13.5 million cash collateral returned to Mil e Guaranteed by MIl and various subsidiaries
Slide 51: Current Financing Structure
S, > =(M): Current Financing Structure McDermott International, Inc (Panama) McDermott Inc B&W Investment Company (@elaware) ee ries "B" MTN $64 milion (Delaware) \ IRBs $17 million J. Ray McDermott, SA (Panama) J. Ray McDermott Holdings, Inc @elawarey BWX B&W Technologies atone) (Celaware) ootennol
Slide 52: Current Financing Structure
Sp 6 = foray \ Current Financing Structure McDermott International, Inc (Panama) McDermott In (Delaware) Ic |, pets BT $64 milion IRBs $17 milion Company (@elaware) B&W Investment Jote J. Ray McDermott, SA (Panama) J. Ray McDermott Holdings, Inc @elawarey BWX B&W Technologies atone) (Celaware) ooten
Slide 53: Current Financing Structure
Sp 6 = Sublimite {560 milion oash £960 millon LC | $120 milion rewner fe \ Current Financing Structure = Sublimite {$100 millon LCs & 510 milion cash [iin | —— McDermott International, Inc (Panama) McDermott Inc B&W Investment Company (@elaware) \jeten }—setes “B"MTN $64 milion @staware) IRBs $17 mi
Slide 54: Financing — Next Steps
Financing — Next Steps « Refinance BWXT on a stand-alone basis e Refinance J. Ray on a stand-alone basis e Establish permanent financing structure to facilitate growth aioe aasntn Newook my 1,206
Slide 55: Cash and Marketable Securities
Cash and Marketable Securities Less: Pledged Securities and Escrow Total Free Cash Available Amount Available: New Credit Agreement MIl Credit Facility JRM Credit Facility Total Available Liquidity Replaced by New Credit Agreement on February 11, 2003, 348 $ 242 114 128 49 $ 177 my 1,206
Slide 56: 2003 Earnings Per Share Outlook
2003 Earnings Per Share Outlook e We are estimating non-GAAP earnings per share to be between $0.08 and $0.13 for the full year e This includes anticipated pension expense of $87 million, or $0.88 non-GAAP earnings per share. The anticipated non-cash portion of pension expense is $77 million, or $0.
Slide 57: 2003 Liquidity Outlook
2003 Liquidity Outlook® e Negative operating cash flow before capital expenditures of between $100 million to $120 million e Capital expenditures of approximately $44 million e First three quarters negative cash flow; fourth quarter positive my 1,206
Slide 58: Legal Update
Legal Update
Slide 59: B&W Chapter 11 Settlement
B&W Chapter 11 Settlement e Filed for bankruptcy in February 2000; no longer consolidated e August 2002 announced key terms of settlement e First draft of proposed consensual plan of reorganization filed December 19, 2002 e Disclosure hearings underway e Final disclosure statement and plan of reorga
Slide 60: Asbestos National Trust Legislation
Asbestos National Trust Legislation Proposed legislation being discussed by Senate Judiciary Committee Establishment of a national trust in range of $90 to $120 billion Trust funded 50/50 by industry and insurance companies with asbestos liabilities Would end all asbestos non-workers’ compensation p
Slide 61: Petronius
Petronius e Arbitration hearings commenced on January 13, 2003 and continued through March 14, 2003 e Arbitration hearing will resume on May 26, 2003 and is expected to conclude by year end e Texaco seeks to vacate contractual waiver of consequential damages e Damages sought by Texaco and its insure
Slide 62: Civil Litigation
Civil Litigation J. Ray Anti-Trust Claims e Settled or reached settlements in principle with all parties except those involved with Petronius project aioe aasntn Newook my 1,206
Slide 63: Slide 63
Slide 64: 2003 Key Areas of Focus
2003 Key Areas of Focus e Stabilize J. Ray operations » Complete the spar projects within budget » Install new leadership team » Build profitable backlog e Continue strong performance at BWXT » Pursue growth opportunities e Refinance credit facility » Relieve liquidity pressures » Support business g
Slide 65: Q&A
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Slide 66: Thank You for Joining Us
Thank You for Joining Us
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