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McDermott Q3 Earnings Call Transcript
Author: 123jump.com Staff
123jump.com
Last Update: 11:46 AM ET December 01 2008


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And that''s all working in accordance with what we anticipated. What we expected from a deployment of the Secunda assets and our operations is doing what we really wanted it to do on the basis that we put the acquisition together. But the majority of the work in and around these pipelines are for core J. Ray vessels that were owned before Secunda.

Stephen Gengaro - Jefferies & Co.

Okay. And then as a follow-up; it seems like and I fear there is more to this, but it seems like there was some level of breakdown in the way these projects were bid and my sense has been the company has done a very good job over the last three plus years bidding this work well. Is that a breakdown of that...is it a break down that''s being addressed, and how should we think about the bidding process here because it seems like you bid it on pretty clean execution, you didn''t get that, there wasn''t proper contingencies built there, is that the way we have to think about it?

John A. Fees

I think the way to think about it is there are assumptions for somewhat aggressive based upon prior successfully completed projects that were executed in fairly good weather when there is not a lot of the complications and the back-to-back scheduling that we''ve seen as these projects developed. And so, I think that''s where the track came in. We have certainly taken all of that experience that we have now learned through the analysis of these projects forward into our bidding base and this we are evaluating and projects that we are considering, have fully considered the impacts that we are seeing across these types of projects.

Michael S. Taff

Yes. And Stephen, I think as John said in his prepared comments, he said, you really can view these issues in kind of the three buckets that he mentioned. One was productivity, which really gets down to how many joints of pipe we can lay a day. But the other two relates to these schedule delays, there is no doubt we had...we were planning on laying these projects all with the same vessel and we basically had this special schedule out for about a year-and-a-half period, with not a lot of slack in it and cushion. We had cushion built under but it just proved that we got behind in the first job and then we had the snowball effect and then had to bring in...substitute other vessels in.

And then the third it''s just excessive downtime. We''ve had a lot of downtime, some mechanical downtime, some by the customer and then just a nominal amount of weather in the region as well.

Stephen Gengaro - Jefferies & Co.

Okay, now that''s a helpful clarification. Thank you.

John A. Fees

Thanks.

Operator

And your next question comes from the line of Martin Malloy of Johnson Rice. Please proceed.

Marty Malloy - Johnson Rice

Good morning.

Michael S. Taff

Hey, good morning Marty.

Marty Malloy - Johnson Rice

Give us any additional comfort that you''ve been conservative with your assumptions here that the cost are not going to further increase on these projects over next four or five quarters as they move along. Big contingencies or anything you put in the current estimates?


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