LNG

McDermott International, the leading LNG and energy project engineering company, has decided to invest in Lummus Technology Holdings, the company it sold as part of its restructuring to help emerge from financial difficulties over the last several years.

Under the terms of the asset purchase agreement for the sale of Lummus Technology, entered into with a joint partnership between Haldia Petrochemicals Ltd., a flagship company of The Chatterjee Group, and Rhône Capital, in January 2020, McDermott was provided the option to purchase a minority common equity ownership interest.

The Houston, Texas-based company said it had now exercised this option.

Lummus is a leading licensor of proprietary petrochemical, refining, gasification and gas processing technologies, and a supplier of catalysts, other equipment and related engineering services.

It became part of McDermott after the ill-timed takeover of CB&I, which itself had acquired Lummus for $950 million in 2007 from Swiss-Swedish power and automation company ABB.

“This agreement not only reinforces our already-robust and active relationship, but also reflects our support of, and belief in the Lummus long-term strategic plan,” said David Dickson, President and Chief Executive of McDermott.

“Together, we will continue to combine McDermott's iEPC delivery with Lummus's innovative technology solutions to our customers across the globe,” added Dickson.

The sale of Lummus was part of McDermott's comprehensive restructuring process, which McDermott successfully completed on June 30 in 2020 to help it emerge from Chapter 11 bankruptcy protection.

Since the sale, McDermott and Lummus have continued to work together through their strategic agreement to connect customers to technology solutions.

McDermott is involved in some of the world’s leading LNG construction projects, including on the US Gulf Coast and the North Field Expansion in Qatar.

McDermott has additionally been engaged as a contractor on the Golden Pass LNG export project for Qatar Petroleum and ExxonMobil.

Qatar Petroleum announced in January 2021 that its North Field South (NFS) project front-end engineering and design contract had been awarded to McDermott.

McDermott has executed projects in Qatar's North Field for more than 30 years and said it would leverage its experience and resources for this contract.

The contract scope includes the replication of five offshore wellhead platforms.

The FEED contract will be executed from McDermott's office in the Qatari capital Doha and work would begin immediately.

Qatar’s LNG expansion involves production increasing from the current 77 million tonnes per annum to 110 MTPA and then to 126 MTPA by 2027.

Qatar has already started developing its drilling campaign for the Arab Gulf feed-gas from the North Field that will underpin the liquefaction needs at the Ras Laffan plant in Qatar.

McDermott International, the US energy and LNG engineering company, said that first gas had flowed from a field development of India's Oil and Natural Gas Corp. (ONGC) in the offshore Krishna Godavari Basin in the Bay of Bengal.

McDermott was awarded the offshore contract for ONGC’s 98/2 Block in the KG Basin in October 2018.

The KG 98/2 block is situated offshore the Godavari River delta, about 35 kilometres off the East Coast state of Andhra Pradesh and extends for 7,290 square kilometres in water depths ranging from 300 metres to 3,200 metres.

It is currently one of the largest subsea projects in India and included the supply of a package including production systems (SPS), including 26 deepwater trees, and the installation of subsea umbilicals, risers and flowlines.

The early first gas involved the tie-back of a single well to the existing Vashishta facility.

At 4,265 feet (1,300 metres), the first well that has been opened for early first gas is the deepest water depth opened by ONGC.

The ONGC gas field will further help satisfy India's growing natural gas demand, about half of which is made up of domestic pipeline gas supplies from areas like the KG Basin, wile the other half comes from LNG imports.

“McDermott is a leader in the subsea space and we have worked incredibly hard to fast-track the production to early first gas,” said Ian Prescott, McDermott's Senior Vice President for Asia Pacific.

“To deliver this accelerated schedule is an exceptional achievement and testament to the benefits of the collaborative commercial model put forward to ONGC,” Prescott explained.

“Production from a deepwater well in less than 14 months is an outstanding achievement for the exploration and production industry,” he stated.

McDermott said that in line with the “Made in India' approach for the 98/2 project, a substantial amount of engineering and project management has been led from McDermott's operations in Chennai.

“This local approach is a new initiative in the deepwater subsea space for McDermott,” said the Houston-based company.

“We look forward to continuing our work in the Bay of Bengal as we help ONGC meet India's growing energy demands,” it added.

McDermott has been conducting business as usual while having to ease its financial concerns in mid-March when a US bankruptcy court in Texas approved the sale of its Lummus Technology business to global equity funds.

Under the terms of the Chapter 11 plan, McDermott will complete a comprehensive restructuring forced on it by financial problems, including those that arose from takeover of CB&I.

McDermott is involved in some of the world’s leading LNG construction projects, including several on the US Gulf Coast and the North Field Expansion in Qatar.

Currently McDermott is working with other firms on both the Cameron LNG project at Hackberry in Louisiana and the Freeport export facility at Quintana Island in Texas.

McDermott has additionally been engaged as a contractor on the Golden Pass LNG export project for Qatar Petroleum and ExxonMobil venture in Texas.

McDermott International, the US LNG and energy engineering company overhauling its finances after Chapter 11 bankruptcy protection proceedings, said it was moving forward with the previously agreed sale of its Lummus Technology business.

McDermott said it had received no higher bids for Lummus and would now execute the previously announced share and asset purchase agreement to sell all of Lummus to a joint partnership between The Chatterjee Group, the New York-based investment fund, and Rhône Capital, a global private equity firm with offices in London and New York.

“McDermott did not receive a higher or better bid during the solicitation period, and the auction previously scheduled for Monday, March 9, 2020, will not occur,” explained the Houston-based company .

Subsidiaries of McDermott had entered into an agreement in January 2020 to sell Lummus to The Chatterjee Group and Rhône Capital for a base purchase price of $2.72 billion, subject to higher or otherwise better bids received through the court-supervised auction process. 

Under the terms of the agreement, McDermott will have the option to retain or purchase, as applicable, a 10 percent common equity ownership interest in the entity purchasing Lummus Technology.

McDermott said the sale hearing to confirm the sale of Lummus Technology to the joint partnership will take place on Thursday, March 12, 2020, at 9:00 am.

The equity-for-debt plan agreed with the court would eliminate more than $4.6Bln of McDermott’s debt.

The restructuring transaction has been implemented through a pre-packaged Chapter 11 process, which under US law gives protection from bankruptcy.

It is being financed by a debtor-in-possession (DIP) financing facility of $2.81 billion. 

“Proceeds from the sale of Lummus Technology are expected to repay McDermott's DIP financing in full, as well as fund emergence costs and provide cash to the balance sheet for long-term liquidity,” said the company.

McDermott is involved in some of the world’s leading LNG construction projects, including several on the US Gulf Coast and the North Field Expansion in Qatar.

Currently McDermott is working with other firms on both the Cameron LNG project at Hackberry in Louisiana and the Freeport export facility at Quintana Island in Texas.

McDermott has additionally been engaged as a contractor on the Golden Pass LNG export project for Qatar Petroleum and ExxonMobil venture in Texas.

The company has suffered financial problems since it completed the $6 billion deal in 2018 to buy LNG rival engineering, procurement and construction company Chicago Bridge & Iron (CB&I).

The restructuring transaction will strengthen its balance sheet and normalize its trade debt.

All of McDermott's businesses have operated as normal during the financial restructuring.