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Quarter Financial Highlights - McDermott International 3Q Highlights

Source: www.gulfoilandgas.com 11/2/2006, Location: North America

McDermott International, Inc. reported net income of $101.7 million, or $0.89 per diluted share, for the 2006 third quarter, compared to net income of $58.5 million, or $0.53 per diluted share, for the corresponding period in 2005. Weighted average common shares outstanding on a fully diluted basis were approximately 114.2 million and 109.9 million for the quarters ended September 30, 2006 and September 30, 2005, respectively. For 2005, the Company's common shares outstanding and earnings per share are adjusted to reflect the 3-for-2 stock split effected in May 2006.

McDermott's revenues in the third quarter of 2006 were $1,118.3 million, compared to $498.2 million in the corresponding period in 2005. Operating income was $123.2 million in the 2006 third quarter, compared to $74.2 million in the 2005 third quarter. The increase in revenues and operating income is primarily attributable to the reconsolidation of The Babcock & Wilcox Company's ("B&W") financial results beginning in March 2006. Between February 2000 and February 2006, B&W was deconsolidated from McDermott's financial statements as a result of B&W's asbestos-related reorganization which was completed this year. In addition, the Government Operations segment contributed substantially to the increase in operating income, largely as a result of the previously announced consolidation of its nuclear equipment and nuclear products divisions.

"Whether it's coal-fired power, oil & gas infrastructure or nuclear activities, the energy markets that McDermott serves continue to be robust," said Bruce W. Wilkinson, Chairman of the Board and Chief Executive Officer of McDermott. "Our focus on project execution and financial discipline enabled the Company to convert strong industry activity into solid quarterly results and record backlog."

At September 30, 2006, McDermott's consolidated backlog was $8.6 billion, compared to $3.2 billion and $3.6 billion, at September 30, 2005 and December 31, 2005, respectively, which did not include backlog from B&W in the 2005 amounts.

RESULTS OF OPERATIONS
2006 Third Quarter Compared to 2005 Third Quarter
Offshore Oil & Gas Construction Segment ("J. Ray")
Revenues in the Offshore Oil & Gas Construction segment were $440.2 million in the 2006 third quarter, compared to $355.3 million for the same period a year ago. The year-over-year increase in revenues resulted primarily from increased activity in worldwide marine projects, the Middle East region and the Asia Pacific region.

Segment income for the 2006 third quarter was $57.3 million, compared to $63.8 million in the 2005 third quarter. Major items contributing to operating income in the 2006 third quarter were projects in the Middle East, Asia Pacific and Caspian regions, as well as in worldwide marine. In addition, the 2006 third quarter benefited by approximately $13.1 million primarily related to project close-outs, compared to approximately $36.4 million of benefit in the 2005 third quarter, primarily related to contract change orders and close-outs of substantially completed projects.

At September 30, 2006, J. Ray's backlog was $4.0 billion, compared to backlog of $1.7 billion and $1.8 billion at September 30, 2005 and December 31, 2005, respectively.

Power Generation Systems Segment ("B&W")
Revenues in the Power Generation Systems segment for the third quarter 2006 were $534.1 million. During 2005, B&W was deconsolidated and therefore there were no revenues reported for this segment during the third quarter of 2005.

Segment income for the 2006 third quarter was $37.0 million, compared to $0.4 million in the 2005 third quarter. The increase in segment income was due to the reconsolidation of B&W beginning in the first quarter 2006.

At September 30, 2006, B&W's backlog was $3.2 billion and was not consolidated during 2005.

Government Operations Segment ("BWXT")
Revenues in the Government Operations segment were $147.3 million in the 2006 third quarter, compared to $143.0 million for the same period a year ago. The increase was primarily due to higher volumes in the manufacture of fuel for research test reactors, fuel development for commercial reactors and the management and operating contract for the Los Alamos National Laboratory which began June 2006.

Segment income for the 2006 third quarter was $34.6 million, compared to $19.3 million in the 2005 third quarter. The increase was primarily due to cost improvements in BWXT's manufacturing activities, including the recognition of cost savings in the backlog associated with the combination of two prior divisions into the Nuclear Operations Division. In addition, segment income also improved with the increases in commercial nuclear environmental services and the management and operating contract at the Los Alamos National Laboratory.

At September 30, 2006, BWXT's backlog was $1.4 billion, compared to backlog of $1.5 billion and $1.8 billion at September 30, 2005 and December 31, 2005, respectively.

Corporate
Unallocated corporate expenses were $5.8 million in the 2006 third quarter, compared to $9.3 million in the 2005 third quarter. The decrease was primarily related to lower departmental expenses and a reduction in stock based compensation expenses compared to a year ago.

Other Income and Expense
The Company's other income for the third quarter of 2006 was $7.5 million, compared to other expense of $5.5 million in the third quarter of 2005. The year-over-year variance is due to a $15.4 million improvement in net interest income/expense resulting from the retirement of substantially all of the Company's debt in June 2006, increased cash balances and the resolution of an open tax matter which increased interest income and reduced the provision for income taxes.

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