McDermott chief warns of difficult times ahead

Vol 23, PW 11 (09 Apr 20) Exploration & Production

McDermott chief David Dickson has put on a brave face in an emotional message to staff but acknowledges the company must make "difficult decisions’ in the days ahead.

"As you have seen in the news, many of our customers, as a response to the low oil price and Covid-19, are announcing drastic unplanned cuts to capital expenditure," writes Dickson in a single-page letter to staff on April 2. "These budgets fund the long-term capital projects we specialise in delivering.

As our customers recalibrate, they may delay projects and defer or cancel bids." McDermott currently has two major offshore projects in India.

With partners GE and L&T, McDermott is subsea installation contractor developing the Cluster 2 fields at KG-DWN-98/2 for ONGC, where it has declared Force Majeure. Still unclear is the status of its other subsea installation project at the R-Cluster fields at KG-DWN-98/3 where operator Reliance and partner BP want to produce up to 7m cm/d gas from May (2020).

Dickson stresses: "While our backlog and the long-term fundamentals of our business remain strong, we anticipate that order intake and project backlog - in the short and medium-term - may be impacted by actions our customers take. As a result, we will have difficult decisions to make to protect McDermott’s long-term viability."

On a positive note, Dickson notes the "expediency" of the company’s financial restructuring is evidence it can "face and overcome highly complex challenges."