Two key members of the oil and gas industry brought the 2017 year to a close with major news. McDermott International and Chicago Bridge & Iron Company announced that they would be combining.
A Significant Merge
The fact that two companies are merging is major news for the oil and gas industry. The deal is extremely large, estimated to be a $6 billion-dollar all-stock transaction. The companies have indicated that they will together create an onshore-offshore company that is fully vertically integrated. This company will broaden both firms’ endeavors in construction, procurement, engineering, and installation services.
Analysts are already predicting that the new company will be responsible for $10 billion in revenue and a backlog of roughly $14.5 billion.
One of the main reasons for the merge could be CG&I’s financial struggles since the oil price downturn. Company shares lost nearly 44% of their value in 2017, in a time where overall the market performed very well. Every company earnings report over the past year failed to meet expert’s predictions for revenue and profit. The company had already begun selling assets, selling its capital services business in February 2017.
Results Of The Merge
McDermott President and CEO David Dickson will retain his current title with the new company. Stuart Spence, executive vice president and CFO of McDermott, will also retain his role. President and CEO of CB&I Patrick Mullen will be integral during the transition phase and will maintain his role during that time. There will also be an operational leadership transition team composed of highly-valued members of both companies.
Dickson stated that the merge was beneficial because it combined two businesses who were highly complementary in an effort to create the leading onshore-offshore EPCI company. Dickson stressed that the new company will be driven by innovative technology and will look to expand globally.