The company sees opportunities to expand its activities in the Caspian and it was seeing more activity in the Gulf of Mexico. The Gulf includes activities that are not only from the traditional offshore work, but also some module activity for refinery and power projects similar to what J Ray is currently doing for Babcock & Wilcox.

J. Ray’s fabrication utilization was about its 2006 standard. This achievement was driven by substantial activity in Asia-pacific and Middle-East markets, which more than offset the below standard average in Morgan City. J. Ray’s marine vessels also worked about 20% more days in standard, continuing a trend that began last year.

J. Ray signed its long-term lease for a fabrication facility in Altamira, Mexico and the company will begin breaking ground and moving into very soon. J. Ray should be in a position to commence construction projects in this new facility by late summer next year. Subsequent to the close of the quarter, the company finalized the dissolution of its joint venture in Mexico known as CMM and thereby giving the new facility an opportunity for a fresh thought in this country.

The company just received board approval to commence construction of a new fabrication facility in Kazakhstan, which will allow similar phase step at a time approach followed in Mexico.

Government Operations (BWXT)

Government operations generated segment income of about $34.6 million, about $15 million higher than a year ago. This 80% improvement from a year ago occurred primarily due to cost savings in the nuclear manufacturing activities. A little more than half of this improvement was related to the consolidation of BWXT’s equipment and products division.

BWXT delivered record income this quarter on revenues in excess of $547 million.

The transition of the single manufacturing division is likely to delay the year end awarded new projects which might now fall into the first quarter of 2007. Government backlog will probably decline in the fourth quarter before jumping up again in early 2007.

The activities on the site management and operations are continuing. The company is forming partnership and putting bids together on some of the new work in the United Kingdom. The recent success for MNO opportunities has been good, and the company looks forward to continuing to extend the presence in this market.

B&W and BWXT are combining under common management to be called the Babcock & Wilcox companies beginning in 2007.

The plan is to return to an earlier organizational structure that builds upon B&W’s name and reputation in the utility market both fossil and neutral and to restrict the BWXT name to the government and be a remarket focus. There are numerous benefits to this action, but best positioning McDermott for an evolving power market was the driving force. By presenting a common face to the utility market particularly with regard to commercial nuclear the company will be in better position to deliver the most value from its resources.

Power Generation Systems Segment (B&W)

Power generation systems were B&W resides reported segment income of about $37 million versus modest income that was in this reported segment a year ago. Although B&W was not consolidated last year, the company reported at that time that B&W produced non-GAAP operating income of $26.7 million, which excluded restructuring expenses on revenues of about $373 million.

Power generation systems produced solid results on $534 million of revenue. B&W grew its backlog again this year by signing almost $700 million of new work and bids outstanding remain strong in the $3.1 million range. Quarter ending backlog with $3.2 billion is clearly at the high end at recent memory and is primarily boiler island projects including boilers, scrubbers and SCR. Nuclear projects in Canada plant enhancements and service contract.

The power group continues to be on the cutting edge of technology development. Earlier this week it was announced that B&W and Air Liquide will be joining SaskPower on its clean coal project. At this time the project is in a precommitment feasibility study, but the ultimate goal is to build a 300 megawatt clean coal plant that would capture all of the CO2 emissions which would be sequestered or sold for enhanced oil recovery. This would represent the world’s first nearly emission free pulverize coal plant and it would utilizing B&W’s oxygen-firing process. The project is still in the early phase but it’s another example of B&W’s strong ongoing R&D efforts. With the power generation markets in an upstream, the primary focus will continue to be on selectivity, risk management, and building on the strengths.

Key questions and answers from the third quarter fiscal 2006 earnings call conducted by McDermott International, Inc. on November 3, 2006.

Could you talk about the activity levels and potential activity levels at Morgan City?

The activity level has been growing. There are good numbers from Babcock & Wilcox, flows and docks. Other thing that has been developing is the considerable interest in modular fabrications for downstream and refinery work. The picture for Morgan City is a slow and steady growing of the backlog and at the second half of 2007 it should be back to breakeven or better.

Could you talk about demand and pricing that you are seeing for J. Ray’s vessels?

The company is operating at about 120% of the standard bar day costing approach. There is a big amount of rotation of the vessels going from the Asian market to the Mid East market. The company has DB101 for South Africa. The company was taking it to Asia to do a one short dry dock in Asia, then put it to work in Asia and then by 2008 it will bring it into the Arabian Gulf.