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Earnings Analysis: 
McDermott International Third Quarter Earnings Call
Author: Maclintosh Kuhlengisa
123jump.com
Last Update: 12:59 PM EST November 13 2007


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The engineering and construction company realized an 18% growth in revenues to $1.3 billion from $1.1 billion in 2006 driven by offshore construction and power generation segments. Although reserve margins are declining, energy demand continue to exceed supply over the foreseeable future. The firm remains focused on environmental equipment projects, expanding the OEM offerings overseas and increasing its R&D effort and spend on the pursuit of cost effective CO2 solutions.

 
Sam Nicholls (Quillen Securities): Do you think the new more stringent antipollution regulations in China will be strictly enforced and have you quantified the opportunity?

Bruce Wilkinson: We think it is coming. We have recently given them a license for our SCR, believing that the NOx issue is real and that they are going to begin to tighten that.

Sam Nicholls (Quillen Securities): Is the opportunity for licensing revenue exclusive?

Bruce Wilkinson: We have a 50-50 joint venture that we manage and it operates out of the technology licenses that come from B&W back in Ohio. We have successfully built super critical boilers there that we have never build in this country, using our design.

Brad Handler (Wachovia Capital Markets): On the backlog outlook, have you factored in the potential for customer delays and more slippage?

Bruce Wilkinson: We have a project review methodology where every month all the major projects go through a project review that covers productivity target schedules. When we know we have a change order being negotiated, you see no profitability during the time frame that that change order is being negotiated and signed up.

Brad Handler (Wachovia Capital Markets): Any comments on the AP CO2 capture relationship?

Bruce Wilkinson: They and several other utilities are partners in what we are doing at our 30-megawatt test facility up in Alliance, Ohio, and AEP, is very much one of those.
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