McDermott International Inc. (NYSE:MDR) has enlisted AlixPartners LLP to help stem its heavy losses, with MDR stock plummeting 22%.
McDermott, an American oil and gas engineering firm, has been struggling in recent quarters and posted a net loss of $146 million USD and an operating loss of $61 million USD in its most recent earnings statement in July. Chatter on Wall Street yesterday regarding speculation that the company was to procure the services of external turnaround specialists AlixPartners resulted in MDR stock tanking as much as 70% on Wednesday.
Trading of MDR stock was halted for three hours at midday yesterday and allowed McDermott International to issue a statement explaining events at the company. “McDermott routinely hires external advisors to evaluate opportunities for the Company. The Company is taking positive and proactive measures, as we have done in the past, intended to improve its capital structure and the long-term health of its balance sheet.” The statement did little to appease the market, as MDR shares sink even further today.
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MDR stock has had a torrid 12 months. Having been valued as high as $19.21 this time last year, the troubled Houston firm has since seen over 90% of that value wiped out since. The company has been struggling since the 2014–2016 oil price decline resulted in a fall in new orders and placed a squeezed on cash flow. These losses were compounded by a 2018 acquisition of Chicago Bridge & Iron Co. for $6 billion USD and a ballooning debt burden of $4.3 billion USD, 14 times MDR’s market value.
MDR shares also felt the pinch from the company’s reduced guidance, after CEO David Dickinson warned investors that 2019 will be worse than expected due to delays at some of the company’s biggest projects. The company now expects a net loss of $310 million USD for the full year, compared to the $170 million USD net income previously expected. Dickinson did offer some hope for investors, saying, “we expect to see a sharp improvement in the company’s operating income by the fourth quarter of this year, as we build momentum heading into 2020.”
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