Jackets similar to those contracted by Saudi Aramco. Source: McDermott via Business Wire.
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What:Offshore engineering and construction companyMcDermott International stock jumped more than 15% in early trading today, and is still up about 12% as of this writing.
So what:McDermott International, which specializes in projects for offshore oil and gas development, announced that it has been awarded a contract from Saudi Arabian state oil company Saudi Aramco to construct and install 12 offshore jackets (underwater structures for long-term oil or gas rig installations). The contract calls for installation to be completed by the end of the first quarter of 2016.
Now what:This is great news for McDermott International, but investors shouldn't jump the gun on any one single deal. The global demand for crude continues to grow at a slow pace, and this will continue to weigh on demand for the kinds of services that McDermott provides. In many ways, offshore work remains under the most pressure due to the higher costs associated with offshore production, versus onshore.
While this is certainly good news for current shareholders, I encourage anyone considering buying shares of McDermott consider the bigger picture and the competitive landscape, as well as the aforementioned risk that slow demand growth creates for the company.
The article McDermott International (MDR) Stock Jumped 15% Today on Positive News originally appeared on Fool.com.
Jason Hall has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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