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Explore the challenges and opportunities in the offshore market, government regulations, technology advancements, and customer relations. Discover strategies for success and prepare for the future.
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Every Challenge is an Opportunity Bob Deason President & CEO 1
EPCI of offshore facilities & pipelines US & Atlantic Basin, Asia Pacific, Caspian, Middle East $4.7 billion - backlog Q2 ’09 $3.2 billion - revenue 2008 17,000+ employees worldwide 95% non-US citizens 89% work outside of US 21 vessels (7 DLBs; 14 multi-functional) 6 engineering offices 6 fabrication/marine bases J. Ray McDermott 6 2
Offshore Market unprecedented growth spending decline rapid growth 3 3 Source: The World Offshore Oil & Gas Production & Spend Forecast 2009-2013 Douglas-Westwood and Energyfiles
Offshore Market • 2003 - 2008 Rapid Growth: • Repair balance sheets • Dramatic cost increases • Problem projects – cost / schedule • Technological challenges • Subsea • Floaters • Resources • Major new competitors • Growth in protectionism • Investments failed to adequately replace resources 4
Offshore Market • 2009 - 2011 Spending Decline: • Managing downturn • Right size asset base • Business stress • Address execution • Extreme cost pressure • Under-investment by operators • Inconsistent globally 5
Offshore Market • 2012 onwards – Unprecedented Growth: • Catch up under investment • Expanded asset base available • Aging workforce • Will we manage projects better? 6
Government Related Challenges • US • OCSLA manning requirements • Jones Act reinterpretation • Income tax – draft legislation • Aggressive administration • International • Protectionism • Unclear tax and customs regimes • Ethics and compliance • Sanctity of contracts 7
Technology Related Challenges • Floating solutions • Subsea infrastructure • More extreme environments • Deeper water depths • More remote locations • More challenging reservoirs 8 7
Customer Related Challenges • Unhealthy contracting environment • Intensive cost pressure • Long and complicated tendering process • Bureaucratic organizations • NOC’s vs. IOC’s • Questionable contract award criteria 9 7
Near-term Opportunities • Right-sizing company • Upgrading company expertise • Adding people / assets through attractive opportunities • Improving cost position • Resetting growth strategies • Actively working with trade associations 10 8
Longer-term Opportunities • Bringing assets in line with future market requirements • Developing new technical solutions • Partnering in areas requiring local content • Expand geographical footprint • Upgrade execution 11 8
Summary • We are in a cyclic business • Bottom of cycle 2010-2011 • Relatively mild downturn • Time to reset cost • Upgrade execution strategies • Prepare for upturn 12 8
J. Ray McDermott Engineering – Procurement – Construction - Installation 13