10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 001-08430

McDERMOTT INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

REPUBLIC OF PANAMA	72-0593134
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
757 N. ELDRIDGE PKWY HOUSTON, TEXAS	77079
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (281) 870-5000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of shares of the registrant’s common stock outstanding at October 28, 2013 was 236,584,459.

McDERMOTT INTERNATIONAL, INC.

INDEX—FORM 10-Q

	PAGE
PART I—FINANCIAL INFORMATION
Item 1—Condensed Consolidated Financial Statements		3
Condensed Consolidated Statements of Income (Loss)—(Unaudited) Three Months and Nine Months Ended September 30, 2013 and 2012		3
Condensed Consolidated Statements of Comprehensive Income (Loss)—(Unaudited) Three Months and Nine Months Ended September 30, 2013 and 2012		4
Condensed Consolidated Balance Sheets—(Unaudited) September 30, 2013 and December 31, 2012		5
Condensed Consolidated Statements of Cash Flows—(Unaudited) Nine Months Ended September  30, 2013 and 2012		6
Condensed Consolidated Statements of Equity—(Unaudited) Nine Months Ended September 30, 2013 and 2012		7
Notes to Condensed Consolidated Financial Statements—(Unaudited)		8
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations		32
Item 3—Quantitative and Qualitative Disclosures about Market Risk		48
Item 4—Controls and Procedures		48
PART II—OTHER INFORMATION
Item 1—Legal Proceedings		49
Item 2—Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 6—Exhibits		50
SIGNATURES		51

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands, except share and per share amounts)
Revenues	$	686,856		$	1,028,745		$	2,141,594		$	2,645,671
Costs and Expenses:
Cost of operations		686,415			889,823			2,122,488			2,246,961
Selling, general and administrative expenses		46,443			51,834			151,286			145,927
Gain on asset disposals		(763	)		(85	)		(15,492	)		(282	)
Restructuring charges		4,040			—			19,502			—
Total costs and expenses		736,135			941,572			2,277,784			2,392,606
Equity in Loss of Unconsolidated Affiliates		(3,375	)		(4,692	)		(12,967	)		(11,026	)
Operating Income (Loss)		(52,654	)		82,481			(149,157	)		242,039
Other Income:
Interest income, net		363			996			1,133			4,215
Gain on foreign currency—net		4,460			488			10,838			11,185
Other income (expense)—net		1,062			242			1,813			(288	)
Total other income		5,885			1,726			13,784			15,112
Income (loss) from continuing operations before provision for income taxes and noncontrolling interests		(46,769	)		84,207			(135,373	)		257,151
Provision for Income Taxes		12,278			29,916			45,493			87,004
Income (loss) from continuing operations before noncontrolling interests		(59,047	)		54,291			(180,866	)		170,147
Total income from discontinued operations, net of tax		—			—			—			3,497
Net Income (Loss)		(59,047	)		54,291			(180,866	)		173,644
Less: Net Income Attributable to Noncontrolling Interests		5,023			3,679			12,074			7,535
Net Income (Loss) Attributable to McDermott International, Inc.	$	(64,070	)	$	50,612		$	(192,940	)	$	166,109
Earnings (Loss) per Common Share:
Basic:
Income (loss) from continuing operations, less noncontrolling interests		(0.27	)		0.21			(0.82	)		0.69
Income from discontinued operations, net of tax		—			—			—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21			(0.82	)		0.70
Diluted:
Income (loss) from continuing operations, less noncontrolling interests		(0.27	)		0.21			(0.82	)		0.68
Income from discontinued operations, net of tax		—			—			—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21			(0.82	)		0.69
Shares used in the computation of earnings per share:
Basic		236,257,920			235,817,203			236,132,847			235,568,889
Diluted		236,257,920			237,867,000			236,132,847			237,553,463

See accompanying notes to condensed consolidated financial statements.

3

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited) (In thousands)
Net Income (Loss)	$	(59,047	)	$	54,291	$	(180,866	)	$	173,644
Other comprehensive income (loss), net of tax:
Amortization of benefit plan costs		3,438			2,864		10,308			8,590
Unrealized gain on investments		158			580		599			1,708
Translation adjustments		(1,245	)		4,286		(765	)		10,725
Unrealized gain (loss) on derivatives		24,770			19,324		(46,270	)		(4,779	)
Realized loss on derivatives		320			2,978		1,282			5,379
Other comprehensive income (loss), net of tax(1)		27,441			30,032		(34,846	)		21,623
Total Comprehensive Income (Loss)	$	(31,606	)	$	84,323	$	(215,712	)	$	195,267
Less: Comprehensive Income Attributable to Noncontrolling Interests.		5,026			3,679		12,050			7,636
Comprehensive Income (Loss) Attributable to McDermott International, Inc.	$	(36,632	)	$	80,644	$	(227,762	)	$	187,631

(1) The tax impacts on amounts presented in other comprehensive income (loss) are not significant.

See accompanying notes to condensed consolidated financial statements.

4

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2013			December 31, 2012
	(Unaudited) (In thousands, except share and per share amounts)
Assets
Current Assets:
Cash and cash equivalents	$	282,370		$	640,147
Restricted cash and cash equivalents		18,488			18,116
Accounts receivable—trade, net		341,458			428,800
Accounts receivable—other		110,252			75,461
Contracts in progress		586,120			560,154
Deferred income taxes		11,184			9,765
Assets held for sale		1,396			2,679
Other current assets		40,959			54,667
Total Current Assets		1,392,227			1,789,789
Property, Plant and Equipment		2,337,706			2,115,176
Less accumulated depreciation		(865,897	)		(833,385	)
Net Property, Plant and Equipment		1,471,809			1,281,791
Investments		17,282			26,750
Goodwill		41,202			41,202
Investments in Unconsolidated Affiliates		26,753			37,435
Assets Held for Sale		12,243			26,758
Other Assets		195,765			129,902
Total Assets	$	3,157,281		$	3,333,627
Liabilities and Equity
Current Liabilities:
Notes payable and current maturities of long-term debt	$	41,037		$	14,146
Accounts payable		371,674			400,007
Accrued liabilities		393,024			369,418
Advance billings on contracts		312,268			241,696
Deferred income taxes		18,119			10,758
Income taxes payable		29,530			76,986
Total Current Liabilities		1,165,652			1,113,011
Long-Term Debt		53,104			88,562
Self-Insurance		26,696			22,641
Pension Liability		24,057			25,069
Other Liabilities		149,320			132,239
Commitments and Contingencies
Stockholders’ Equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 243,941,008 and 243,442,156 shares at September 30, 2013 and December 31, 2012, respectively		243,941			243,442
Capital in excess of par value		1,405,289			1,391,271
Retained earnings		252,816			445,756
Treasury stock, at cost, 7,665,632 and 7,574,903 shares at September 30, 2013 and December 31, 2012, respectively		(98,690	)		(98,725	)
Accumulated other comprehensive loss		(129,235	)		(94,413	)
Stockholders’ Equity—McDermott International, Inc.		1,674,121			1,887,331
Noncontrolling Interests		64,331			64,774
Total Equity		1,738,452			1,952,105
Total Liabilities and Equity	$	3,157,281		$	3,333,627

See accompanying notes to condensed consolidated financial statements.

5

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
	2013			2012
	(Unaudited)
	(In thousands)
Cash Flows From Operating Activities:
Net income (loss)	$	(180,866	)	$	173,644
Less: Income from discontinued operations, net of tax		—			3,497
Income (loss) from continuing operations	$	(180,866	)	$	170,147
Non-cash items included in net income:
Depreciation and amortization		60,114			65,956
Drydock amortization		14,179			21,606
Equity in loss of unconsolidated affiliates		12,967			11,026
Gain on asset disposals and impairments—net		(15,492	)		(282	)
Restructuring charges		12,940			—
Provision (benefit) from deferred taxes		(3,761	)		3,929
Other non-cash items		14,817			17,779
Changes in assets and liabilities, net of effects from dispositions:
Accounts receivable		50,206			(113,460	)
Net contracts in progress and advance billings on contracts		44,601			(225,340	)
Accounts payable		(27,953	)		58,675
Accrued and other current liabilities		3,038			66,125
Pension liability and accrued postretirement and employee benefits		(29,196	)		17,322
Derivative instruments and hedging activities		(46,270	)		(4,880	)
Other assets and liabilities		(77,434	)		21,046
Net Cash Provided By (Used In) Operating Activities—Continuing Operations		(168,110	)		109,649
Cash Flows From Investing Activities:
Purchases of property, plant and equipment		(225,397	)		(179,284	)
Increase in restricted cash and cash equivalents		(372	)		(1,112	)
Purchases of available-for-sale securities		(9,886	)		(82,735	)
Sales and maturities of available-for-sale securities		39,210			164,807
Proceeds from the sale and disposal of assets		37,189			405
Other investing activities, net		(8,503	)		(2,305	)
Net Cash Used In Investing Activities—Continuing Operations		(167,759	)		(100,224	)
Net Cash Provided By Investing Activities—Discontinued Operations		—			60,671
Total Cash Used In Investing Activities		(167,759	)		(39,553	)
Cash Flows From Financing Activities:
Increase in debt		80,000			19,033
Payment of debt		(88,567	)		(4,482	)
Noncontrolling interests distributions and other		(12,493	)		(15,728	)
Other financing activities, net		(1,033	)		(2,642	)
Net Cash Used In Financing Activities—Continuing Operations		(22,093	)		(3,819	)
Effects of exchange rate changes on cash and cash equivalents		185			1,663
Net increase (decrease) in cash and cash equivalents		(357,777	)		67,940
Cash and cash equivalents at beginning of period		640,147			570,854
Cash and cash equivalents at end of period—Continuing Operations	$	282,370		$	638,794
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Income taxes (net of refunds)	$	90,462		$	58,157

See accompanying notes to condensed consolidated financial statements.

6

McDERMOTT INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

	Common Stock				Capital In Excess of Par Value			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Stockholders’ Equity			Non- Controlling Interests			Total Equity
	Shares		Par Value
	(Unaudited) (In thousands, except share amounts)
Balance December 31, 2011		242,416,424	$	242,416	$	1,375,976		$	239,103		$	(95,827	)	$	(102,030	)	$	1,659,638		$	74,074		$	1,733,712
Net income		—		—		—			166,109			—			—			166,109			7,535			173,644
Other comprehensive income, net of tax		—		—		—			—			—			21,522			21,522			101			21,623
Exercise of stock options		191,984		192		697			—			—			—			889			—			889
Share vesting		810,786		811		(811	)		—			(36	)		—			(36	)		—			(36	)
Purchase of treasury shares		—		—		—			—			(2,862	)		—			(2,862	)		—			(2,862	)
Stock-based compensation charges		—		—		11,449			—			—			—			11,449			—			11,449
Distributions to noncontrolling interests		—		—		—			—			—			—			—			(15,728	)		(15,728	)
Balance September 30, 2012		243,419,194	$	243,419	$	1,387,311		$	405,212		$	(98,725	)	$	(80,508	)	$	1,856,709		$	65,982		$	1,922,691
Balance December 31, 2012		243,442,156	$	243,442	$	1,391,271		$	445,756		$	(98,725	)	$	(94,413	)	$	1,887,331		$	64,774		$	1,952,105
Net income		—		—		—			(192,940	)		—			—			(192,940	)		12,074			(180,866	)
Other comprehensive income, net of tax		—		—		—			—			—			(34,822	)		(34,822	)		(24	)		(34,846	)
Exercise of stock options		54,454		55		93			—			—			—			148			—			148
Share vesting		444,398		444		(444	)		—			—			—			—			—			—
Purchase of treasury shares		—		—		—			—			(1,088	)		—			(1,088	)		—			(1,088	)
Stock-based compensation charges		—		—		14,369			—			1,123			—			15,492			—			15,492
Noncontrolling interests distributions and other		—		—		—			—			—			—			—			(12,493	)		(12,493	)
Balance September 30, 2013		243,941,008	$	243,941	$	1,405,289		$	252,816		$	(98,690	)	$	(129,235	)	$	1,674,121		$	64,331		$	1,738,452

See accompanying notes to condensed consolidated financial statements.

7

McDERMOTT INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(UNAUDITED)

NOTE 1—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

McDermott International, Inc. (“MII”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a leading engineering, procurement, construction and installation (“EPCI”) company focused on designing and executing complex offshore oil and gas projects worldwide. Providing fully integrated EPCI services, we deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning. We support these activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction. Our customers include national, major integrated and other oil and gas companies, and we operate in most major offshore oil and gas producing regions throughout the world. In these notes to our unaudited condensed consolidated financial statements, unless the context otherwise indicates, “we,” “us” and “our” mean MII and its consolidated subsidiaries.

Basis of Presentation

We have presented our unaudited condensed consolidated financial statements in U.S. Dollars, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim reporting. Financial information and disclosures normally included in our financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and the accompanying notes in our annual report on Form 10-K for the year ended December 31, 2012.

We have included all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation. These condensed consolidated financial statements include the accounts of McDermott International, Inc., its consolidated subsidiaries and controlled entities. We use the equity method to account for investments in entities that we do not control, but over which we have significant influence. We generally refer to these entities as “unconsolidated affiliates” or “joint ventures.” We have eliminated all intercompany transactions and accounts.

During the quarter ended March 31, 2013, we acquired Deepsea Group Limited, a United Kingdom-based company that provides subsea and other engineering services to international energy companies, primarily through offices in the United Kingdom and the United States. During the quarter ended June 30, 2013, we commenced a restructuring of our Atlantic segment. See Note 2 for information relating to our acquisition and disposition-related activities.

On March 19, 2012, we completed the sale of our former charter fleet business, which operated 10 of the 14 vessels acquired in our 2007 acquisition of substantially all of the assets of Secunda International Limited (the “Secunda Acquisition”). The condensed consolidated statements of income, comprehensive income, cash flows and equity reflect the historical operations of the charter fleet business as a discontinued operation through March 19, 2012.

We have presented the notes to our condensed consolidated financial statements on the basis of continuing operations. In addition, certain 2012 amounts in the condensed consolidated balance sheet and statement of cash flows have been reclassified to conform to the 2013 presentation.

Business Segments

We operate in four primary operating segments, which consist of Asia Pacific, Atlantic, Caspian and the Middle East. The Caspian and Middle East operating segments are aggregated into the Middle East reporting

8

segment due to the proximity of regions and similarities in the nature of services provided, economic characteristics and oversight responsibilities. Accordingly, we report financial results under reporting segments consisting of Asia Pacific, Atlantic and the Middle East. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects corporate personnel and activities, incentive compensation programs and other costs, which are generally fully allocated to our operating segments. See Note 9 for summarized financial information on our segments.

Revenue Recognition

We determine the appropriate accounting method for each of our long-term contracts before work on the project begins. We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved. We include the amount of accumulated contract costs and estimated earnings that exceed billings to customers in contracts in progress. We include billings to customers that exceed accumulated contract costs and estimated earnings in advance billings on contracts. Most long-term contracts contain provisions for progress payments. We expect to invoice customers and collect all unbilled revenues. Certain costs are generally excluded from the cost-to-cost method of measuring progress, such as significant procurement costs for materials and third-party subcontractors. Costs incurred prior to a project award are generally expensed during the period in which they are incurred. Total estimated project costs, and resulting income, are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. Additionally, external factors such as weather, customer requirements and other factors outside of our control may affect the progress and estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income recognition.

In addition, change orders, which are a normal and recurring part of our business, can increase (and sometimes substantially) the future scope and cost of a job. Therefore, change order awards (although frequently beneficial in the long term) can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit, proportionate to the job percentage of completion in the period when those estimates are revised. Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts management expects to recover or costs incurred. The total unapproved change orders included in our estimates at completion aggregated approximately $468 million, of which approximately $138 million was included in backlog at September 30, 2013. Unapproved change orders that are disputed by the customer are treated as claims.

Deferred Profit Recognition

For contracts as to which we are unable to estimate the final profitability due to their uncommon nature, including first-of-a-kind projects, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these contracts, we only recognize gross margin when reliably estimable and the level of uncertainty has been significantly reduced, which we generally determine to be when the contract is at least 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical as deferred profit recognition contracts. If while being accounted for under our deferred profit recognition policy, a current estimate of total contract costs indicates a loss, the projected loss is recognized in full and the project is accounted for under our normal revenue recognition guidelines.

We currently account for an Atlantic segment project under our deferred profit recognition policy. This project was awarded to one of our joint ventures, and the Atlantic segment’s backlog includes a subcontract from that joint venture, of which $151.3 million relating to this project remains in backlog at September 30, 2013. This project contributed revenues and costs equally, totaling approximately $36.0 million and $16.0 million for the three-month periods ended September 30, 2013 and 2012, respectively, and approximately $79.0 million and $29.0 million for the nine-month periods ended September 30, 2013 and 2012, respectively.

9

Completed Contract Method

Under the completed contract method, revenue and gross profit is recognized only when a contract is completed or substantially complete. We generally do not enter into fixed-price contracts without an estimate of cost to complete that we believe to be accurate. However, it is possible that in the time between contract award and the commencement of work on a project, we could lose the ability to adequately forecast costs to complete based on intervening events, including, but not limited to, experience on similar projects, civil unrest, strikes and volatility in our expected costs. In such a situation, we would use the completed contract method of accounting for that project. We currently do not have any contracts that we account for under the completed contract method.

Claims Revenue

Claims revenue may relate to various factors, including the procurement of materials, equipment performance failures, change order disputes or schedule disruptions and other delays, including those associated with weather conditions. Claims revenue, when recorded, is only recorded to the extent of the lesser of the amounts management expects to recover or the associated costs incurred in our consolidated financial statements. We include certain unapproved claims in the applicable contract values when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Amounts attributable to unapproved change orders are not included in claims. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Claims are generally negotiated over the course of the respective projects and many of our projects are long-term in nature. None of the claims at September 30, 2013 were involved in litigation.

The amount of revenues and costs included in our estimates at completion (i.e., contract values) associated with such claims was $186.3 million and $78.6 million as of September 30, 2013 and 2012, respectively. Approximately 41%, 8% and 51% of those claim amounts at September 30, 2013 were related to our Asia Pacific, Atlantic and Middle East segments, respectively. These amounts are determined based on various factors, including our analysis of the underlying contractual language and our experience in making and resolving claims. For the three months ended September 30, 2013 and 2012, $17.6 million and $7.0 million, respectively, of revenues and costs are included in our financial statements pertaining to claims. For the nine months ended September 30, 2013 and 2012, $56.9 million and $45.0 million, respectively, of revenues and costs are reflected in our financial statements pertaining to claims. Approximately 10%, 11% and 79% of those claim amounts are related to our Asia Pacific, Atlantic and Middle East segments, respectively.

Our unconsolidated joint ventures also included an aggregate of $3.7 million of claims revenue and costs in their financial results for the nine months ended September 30, 2013, with no amounts recognized during the three months ended September 30, 2013. For the three months and nine months ended September 30, 2012, our joint ventures included approximately $9.0 million and $14.0 million, respectively of claims revenue and costs in their financial results.

Loss Recognition

A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, supplier performance, pipeline lay rates or steel and other raw material prices. Increases in costs associated with our fixed-priced contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows.

As of September 30, 2013, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could

10

result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full when determined.

We currently have four active projects in our backlog that are in loss positions at September 30, 2013, whereby future revenues are expected to equal costs when recognized. Included in these projects are a marine project in our Asia Pacific segment, which we began in 2012 and expect to complete by mid-2014, and a five-year charter in Brazil, which we began in early 2012 and we are conducting through our Atlantic segment.

Use of Estimates

We use estimates and assumptions to prepare our financial statements in conformity with GAAP. These estimates and assumptions affect the amounts we report in our financial statements and accompanying notes. Our actual results could differ from these estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, unexpected changes in weather conditions, productivity, unanticipated vessel repair requirements, customer and vendor delays and other costs. We generally expect to experience a variety of unanticipated events, and some of these events can result in significant cost increases above cost amounts we previously estimated. Variations from estimated contract performance could result in material adjustments to operating results.

The following is a discussion of our most significant changes in estimates, which impacted operating income in each of our segments for the three and nine months ended September 30, 2013 and 2012.

Three months ended September 30, 2013

The Asia Pacific segment was primarily impacted by changes in estimates on one subsea project in Malaysia. On that project, we increased our estimated cost at completion by approximately $66.0 million in the three months ended September 30, 2013. The changes in estimates experienced on this project were primarily due to further delays in vessel availability related to downtime for the North Ocean 105 (“NO 105”) resulting from mechanical issues. The changes in estimates on this project were partially offset by approximately $33.0 million of improvements related to arrangements with our customer, resulting in a net decline recognized in the three months ended September 30, 2013 of approximately $33.0 million. This project is currently in a loss position and is expected to be completed by mid-2014.

The Atlantic segment was impacted by changes in estimates on one project in Mexico. On that project, we recognized approximately $9.0 million of project losses in the three months ended September 30, 2013, primarily due to increased fabrication costs associated with increases to the scope of the project and incremental costs associated with productivity. The project is currently in a loss position and is expected to be completed during the second half of 2015.

The Middle East segment was not significantly impacted by changes in estimates during the quarter ended September 30, 2013.

Nine months ended September 30, 2013

The Asia Pacific segment was primarily impacted by changes in estimates on the project in Malaysia described above. On that project, we increased our estimated cost at completion by approximately $132.0 million in the nine months ended September 30, 2013. The changes in estimates experienced on this project were primarily due to delays in vessel availability related to downtime for the NO 105 resulting from mechanical issues. The changes in estimates on this project were partially offset by approximately $33.0 million of improvements related to arrangements with our customer, resulting in a net decline recognized in the nine months ended September 30, 2013 of approximately $99.0 million. This project is currently in a loss position and is expected to be completed by mid-2014.

11

The Middle East segment was impacted by changes in estimates on an EPCI project in Saudi Arabia. On that project, we increased our estimated cost at completion by approximately $38.0 million in the nine months ended September 30, 2013, primarily as a result of revisions to the project’s execution plan, increases in our estimated cost to complete due to an extended offshore hookup campaign requiring multiple vessel mobilizations and, to a lesser extent, delays in the completion of onshore activities. While the project recognized losses in the nine months ended September 30, 2013, it remains in an overall profitable position and is expected to be completed during the first half of 2014, subject to customer deliverables and concurrence on execution plans.

The Atlantic segment was impacted by changes in estimates on two projects. On those projects, we recognized approximately $21.0 million of incremental project losses in the nine months ended September 30, 2013, primarily due to lower than expected labor productivity and incremental fabrication costs. Both projects are currently in loss positions. One project that experienced lower labor productivity is expected to be completed by the end of 2013, while the other project that recognized additional costs associated with fabrication activities is expected to be completed by the third quarter of 2015.

2012 Periods

Operating income for each of the three-month and nine-month periods ended September 30, 2012 was not significantly affected by changes in estimates.

Loss Contingencies

We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We are currently involved in litigation and other proceedings, as discussed in Note 10. We have accrued our estimates of the probable losses associated with these matters, and associated legal costs are generally recognized in selling, general and administrative expenses as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Cash and Cash Equivalents

Our cash and cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. At September 30, 2013, all of our restricted cash was held in restricted foreign-entity accounts.

Investments

We classify investments available for current operations as current assets in the accompanying balance sheets, and we classify investments held for long-term purposes as noncurrent assets. We adjust the amortized cost of debt securities for amortization of premiums and accretion of discounts to maturity. That amortization is included in interest income. We include realized gains and losses on our investments in other income (expense)—net. The cost of securities sold is based on the specific identification method. We include interest earned on securities in interest income.

Investments in Unconsolidated Affiliates

We generally use the equity method of accounting for affiliates in which our investment ownership ranges from 20% to 50%. Currently, most of our significant investments in affiliates that are not consolidated are recorded using the equity method.

12

Accounts Receivable

Accounts Receivable—Trade, Net

A summary of contract receivables is as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Contract receivables:
Contracts in progress	$	159,768		$	273,729
Completed contracts		104,397			38,858
Retainages		95,283			133,619
Unbilled		4,325			4,710
Less allowances		(22,315	)		(22,116	)
Accounts receivable—trade, net	$	341,458		$	428,800

We expect to invoice our unbilled receivables once certain milestones or other metrics are reached, and we expect to collect all unbilled amounts. We believe that our provision for losses on uncollectible accounts receivable is adequate for our credit loss exposure.

Contract retainages generally represent amounts withheld by our customers until project completion, in accordance with the terms of the applicable contracts. The following is a summary of retainages on our contracts:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Retainages expected to be collected within one year	$	95,283	$	133,619
Retainages expected to be collected after one year		83,652		32,085
Total retainages	$	178,935	$	165,704

We have included in accounts receivable—trade, net, retainages expected to be collected within one year. Retainages expected to be collected after one year are included in other assets.

Accounts Receivable—Other

Accounts receivable—other was $110.3 million and $75.5 million at September 30, 2013 and December 31, 2012, respectively. The balance primarily relates to transactions with unconsolidated affiliates, accrued but unbilled revenues, receivables associated with value-added taxes and hedging activities. These amounts are expected to be collected within 12 months, and any allowance for doubtful accounts on our accounts receivable—other is based on our estimate of the amount of probable losses due to the inability to collect these amounts (based on historical collection experience and other available information). As of September 30, 2013 and December 31, 2012, no such allowance for doubtful accounts was recorded.

13

Contracts in Progress and Advance Billings on Contracts

Contracts in progress were $586.1 million and $560.1 million at September 30, 2013 and December 31, 2012, respectively. Advance billings on contracts were $312.3 million and $241.7 million at September 30, 2013 and December 31, 2012, respectively. A detail of the components of contracts in progress and advance billings on contracts is as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Costs incurred less costs of revenue recognized	$	91,401	$	65,321
Revenues recognized less billings to customers		494,719		494,833
Contracts in Progress	$	586,120	$	560,154

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Billings to customers less revenue recognized	$	476,747		$	394,352
Costs incurred less costs of revenue recognized		(164,479	)		(152,656	)
Advance Billings on Contracts	$	312,268		$	241,696

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An established hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect our assumptions about the factors that market participants would use in valuing the asset or liability.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1—inputs are based upon quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques.

The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, accounts receivables and accounts payable approximate their fair values. See Note 6 for additional information regarding fair value measurements.

14

Derivative Financial Instruments

Our worldwide operations give rise to exposure to changes in certain market conditions, which may adversely impact our financial performance. When we deem it appropriate, we use derivatives as a risk management tool to mitigate the potential impacts of certain market risks. The primary market risk we manage through the use of derivative instruments is movement in foreign currency exchange rates. We use foreign currency derivative contracts to reduce the impact of changes in foreign currency exchange rates on our operating results. We use these instruments to hedge our exposure associated with revenues and/or costs on our long-term contracts and other cash flow exposures that are denominated in currencies other than our operating entities’ functional currencies. We do not hold or issue financial instruments for trading or other speculative purposes.

In certain cases, contracts with our customers contain provisions under which some payments from our customers are denominated in U.S. Dollars and other payments are denominated in a foreign currency. In general, the payments denominated in a foreign currency are designed to compensate us for costs that we expect to incur in such foreign currency. In these cases, we may use derivative instruments to reduce the risks associated with foreign currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. See Note 5 for additional information regarding derivative financial instruments.

Foreign Currency Translation

We translate assets and liabilities of our foreign operations, other than operations in highly inflationary economies, into U.S. Dollars at period-end exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax.

Earnings per Share

We have computed earnings per common share on the basis of the weighted average number of common shares, and, where dilutive, common share equivalents, outstanding during the indicated periods. See Note 8 for our earnings per share computations.

Accumulated Other Comprehensive Loss

The components of AOCI included in stockholders’ equity are as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Foreign currency translation adjustments	$	(4,131	)	$	(3,366	)
Net loss on investments		(1,717	)		(2,316	)
Net gain (loss) on derivative financial instruments		(33,229	)		11,735
Unrecognized losses on benefit obligations		(90,158	)		(100,466	)
Accumulated other comprehensive loss	$	(129,235	)	$	(94,413	)

15

The following tables present the components of AOCI and the amounts that were reclassified during the period:

For the three months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, June 30, 2013	$	(1,875	)	$	(58,316	)	$	(2,886	)	$	(93,596	)	$	(156,673	)
Other comprehensive income (loss)		158			24,767			(1,245	)		—			23,680
Amounts reclassified from AOCI		—			320	(3)		—			3,438	(4)		3,758
Net current period other comprehensive income (loss)		158			25,087			(1,245	)		3,438			27,438
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

For the nine months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, December 31, 2012	$	(2,316	)	$	11,735		$	(3,366	)	$	(100,466	)	$	(94,413	)
Other comprehensive income (loss)		599			(46,246	)		(765	)		—			(46,412	)
Amounts reclassified from AOCI		—			1,282	(3)		—			10,308	(4)		11,590
Net current period other comprehensive income (loss)		599			(44,964	)		(765	)		10,308			(34,822	)
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

(1) Refer to Note 5 for additional details

(2) Refer to Note 4 for additional details

(3) Reclassified to cost of operations

(4) Reclassified to selling, general and administrative expenses

Impairment Review

We review goodwill for impairment on an annual basis or more frequently if circumstances indicate that impairment may exist. The annual impairment review involves comparing the fair value to the net book value of each applicable reporting unit and, therefore, is significantly impacted by estimates and judgments.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Income Taxes

We provide for income taxes based on the tax laws and rates in the countries in which we conduct our operations. MII is a Panamanian corporation that earns all of its income outside of Panama. As a result, we are not subject to income tax in Panama. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variations, along with changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

16

Three months ended September 30, 2013

For the three months ended September 30, 2013, we recognized a loss before provision for income taxes of $46.8 million, compared to income of $84.2 million in the three months ended September 30, 2012. In the aggregate, the provision for income taxes was $12.3 million and $29.9 million for the three months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, Mexico and Malaysia).

Nine months ended September 30, 2013

For the nine months ended September 30, 2013, we recognized a loss before provision for income taxes of $135.4 million, compared to income of $257.2 million in the nine months ended September 30, 2012. In the aggregate, the provision for income taxes was $45.5 million and $87.0 million for the nine months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, the United Arab Emirates and Malaysia).

At September 30, 2013, we had foreign net operating loss carryforwards available to offset future taxable income in foreign jurisdictions with a valuation allowance of $76.0 million against $85.0 million of the related deferred taxes. The remaining $9.0 million of foreign deferred taxes is expected to be realized through future foreign taxable income. At September 30, 2013, we had U.S. federal net operating loss carryforwards but had fully reserved the $135.0 million deferred tax asset.

Recently Issued Accounting Standards

On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued an update to the topic Income Taxes. The update clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where these items are not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The update is effective for reporting periods after December 15, 2013 and the adoption of this update is not expected to have a material impact on our condensed consolidated financial statements.

In February 2013, the FASB issued an update to the topic Comprehensive Income. The update requires companies to provide additional information about the nature and amount of certain reclassifications out of AOCI, which impact the income statement. While the amendment does not change current reporting requirements, companies are required to provide information about the amounts reclassified out of AOCI by the respective line item. The update is effective for reporting periods after December 15, 2012 and the adoption of this update did not have a material impact on our condensed consolidated financial statements.

In January 2013, the FASB issued an update to the topic Balance Sheet. This update requires new disclosures presenting detailed information regarding both the gross and net basis of derivatives and other financial instruments that are eligible for offset in the balance sheet or that are subject to a master netting arrangement. The update is effective for the first quarter of 2013 and is to be applied retrospectively. As this new guidance relates to presentation only, the adoption of this update did not have a material impact on our condensed consolidated financial statements.

17

NOTE 2—ACQUISITION, DISPOSITIONS AND ATLANTIC RESTRUCTURING CHARGES

Acquisition

During the quarter ended March 31, 2013, we entered into a share purchase agreement to acquire all of the issued and outstanding shares of capital stock of Deepsea Group Limited, a United Kingdom-based company that provides subsea and other engineering services to international energy companies, primarily through offices in the United Kingdom and the United States. Total consideration was approximately $9.0 million, which includes cash ($6.0 million) and the delivery of 313,580 restricted shares of MII common stock (out of treasury). The transaction is being accounted for using the acquisition method and, accordingly, assets acquired and liabilities assumed are recorded at their respective fair values. The preliminary purchase price allocation has not been completed and is subject to change for a period of one-year following the acquisition. Results of operations and pro forma results have not been presented, as the effects of this transaction were not material to our condensed consolidated financial statements.

Dispositions

Assets Held for Sale

We previously committed to a plan to sell four of our multi-function marine vessels, specifically the Bold Endurance, DB 16, DB 26 and the DLB KP1. Assets classified as held for sale are no longer depreciated. During the quarter ended March 31, 2013, we completed the sale of the Bold Endurance and the DB 26 for aggregate cash proceeds of approximately $32.0 million, resulting in an aggregate gain of approximately $12.5 million. We remain in active discussions with interested parties to sell the DLB KP1 and DB 16.

Charter Fleet Business

On March 19, 2012, we completed the sale of our former charter fleet business, which operated 10 of the 14 vessels acquired in 2007 in the Secunda Acquisition. The cash proceeds from the charter fleet sale were approximately $61.0 million, resulting in a gain on the sale of approximately $0.3 million. For the year ended December 31, 2011, we recognized an approximate $22.0 million write-down of our former charter fleet business.

The following table presents selected financial information regarding the results of operations attributable to our former charter fleet business:

	Nine Months Ended September 30, 2012
	(Unaudited)
	(In thousands)
Revenues	$	8,184
Gain on disposal of discontinued operations		257
Income before provision for income taxes		3,240
Income from discontinued operations, net of tax	$	3,497

Restructuring and Management Charges

We commenced a restructuring of our Atlantic operations during the quarter ended June 30, 2013, which involves our Morgan City, Louisiana, Houston, Texas, New Orleans, Louisiana and Brazil locations. The restructuring involves, among other things, reductions of management, administrative, fabrication and engineering personnel, and a plan to discontinue utilization of the Morgan City facility (after the completion of existing backlog projects, which are currently forecasted to be completed in the second quarter of 2014). Future fabrication operations in the Atlantic segment are expected to be executed using the Altamira, Mexico facility for

18

the foreseeable future. In addition, we have reached an agreement in principle to exit our joint venture operation in Brazil, which was specifically formed to construct and integrate floating, production, storage, off-loading (“FPSO”) modules.

In addition, in October 2013, we announced certain executive management changes that will become effective during the quarter ending December 31, 2013.

Costs associated with our restructuring activities and the management changes will primarily include severance and other personnel-related costs, costs associated with exiting the joint venture in Brazil, asset impairment and relocation costs and future unutilized lease costs. The total costs are expected to range between $55 million to $65 million in the aggregate. Of the total anticipated costs, we incurred approximately $4.0 million during the quarter ended September 30, 2013 and had incurred an aggregate of $19.5 million as of September 30, 2013. We expect to recognize the majority of these costs during the quarters ending December 31, 2013 and March 31, 2014.

NOTE 3—LONG-TERM DEBT AND NOTES PAYABLE

Credit Facility

In May 2010, we entered into a credit agreement with a syndicate of lenders and letter of credit issuers (as last amended in August 2013, the “Credit Agreement”). The Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $950.0 million and is scheduled to mature on August 19, 2016. Proceeds from borrowings under the Credit Agreement are available for working capital needs and other general corporate purposes. The Credit Agreement includes procedures for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder.

In August 2013, we amended the Credit Agreement to, among other things: (1) add certain amounts to EBITDA (as defined in the Credit Agreement) for the fiscal quarters ended December 31, 2012, March 31, 2013 and June 30, 2013; (2) permit us to add to EBITDA certain cash expenses related to the Atlantic segment restructuring for the quarters ended or ending September 30, 2013, December 31, 2013 and March 31, 2014; and (3) increase the maximum permitted leverage ratio of total indebtedness to EBITDA from 3.00:1.00 to 3.75:1.00 for the quarters ended or ending September 30, 2013, December 31, 2013 and March 31, 2014. The August amendment to the Credit Agreement also provides that if we issue senior unsecured notes with a principal amount of at least $300 million, from the date of such issuance until March 31, 2014, the maximum permitted leverage ratio will increase from 3.75:1.00 to 5.00:1.00 and we will have to comply with a maximum permitted secured leverage ratio of total secured indebtedness to EBITDA of 2.00:1.00. The maximum leverage ratio and the minimum interest coverage ratio as defined in the Credit Agreement may differ in the method of calculation from similarly titled measures used by other companies or in other agreements. The Credit Agreement also contains covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt, mergers and capital expenditures.

Other than customary mandatory prepayments in connection with casualty events, the Credit Agreement requires only interest payments on a quarterly basis until maturity. We may prepay all loans under the Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

Our overall borrowing capacity is in large part dependent on maintaining compliance with covenants under the Credit Agreement by generating sufficient income from operations. At September 30, 2013, we were in compliance with our covenant requirements. A comparison of the key financial covenants and compliance is as follows:

	Required		Actual
Maximum leverage ratio		3.75		0.90
Minimum interest coverage ratio		4.00		20.63

19

Loans outstanding under the Credit Agreement bear interest at the borrower’s option at either the Eurodollar rate plus a margin ranging from 1.50% to 2.50% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the 30-day Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 0.50% to 1.50% per year. The applicable margin for revolving loans varies depending on the credit ratings of the Credit Agreement. We are charged a commitment fee on the unused portions of the Credit Agreement, and that fee varies between 0.200% and 0.450% per year depending on the credit ratings of the Credit Agreement. Additionally, we are charged a letter of credit fee of between 1.50% and 2.50% per year with respect to the amount of each financial letter of credit issued under the Credit Agreement and a letter of credit fee of between 0.75% and 1.25% per year with respect to the amount of each performance letter of credit issued under the Credit Agreement, in each case depending on the credit ratings of the Credit Agreement. Under the Credit Agreement, we also pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement. In connection with entering into the Credit Agreement and certain amendments to the Credit Agreement, we paid certain fees to the lenders thereunder, and certain arrangement and other fees to the arrangers and agents for the Credit Agreement, which are being amortized to interest expense over the term of the Credit Agreement.

At September 30, 2013, there were no borrowings outstanding, and letters of credit issued under the Credit Agreement totaled $237.0 million. At September 30, 2013, there was $713.0 million available for borrowings or to meet letter of credit requirements under the Credit Agreement. During the quarter ended September 30, 2013, our outstanding borrowings under the Credit Agreement did not exceed $80.0 million, and our average outstanding borrowings under the Credit Agreement during the period from July 1, 2013 through September 30, 2013 was approximately $40.0 million with an average interest rate of 2.16%. In addition, we had $82.6 million in outstanding unsecured bilateral letters of credit as of September 30, 2013.

At September 30, 2013, based on the credit ratings applicable to the Credit Agreement, the applicable margin for Eurodollar-rate loans was 1.75%, the applicable margin for base-rate loans was 0.75%, the letter of credit fee for financial letters of credit was 1.75%, the letter of credit fee for performance letters of credit was 0.875%, and the commitment fee for unused portions of the Credit Agreement was 0.25%. The Credit Agreement does not have a floor for the base rate or the Eurodollar rate.

North Ocean Financing

North Ocean 102

In December 2009, J. Ray McDermott, S.A. (“JRMSA”), a wholly owned subsidiary of MII, entered into a vessel-owning joint venture transaction with Oceanteam ASA. As a result of this transaction, we had consolidated notes payable of $32.9 million and $37.3 million on our condensed consolidated balance sheets at September 30, 2013 and December 31, 2012, respectively, of which $32.9 million and $6.0 million was classified as current notes payable at September 30, 2013 and December 31, 2012, respectively. JRMSA has guaranteed approximately 50% of this debt based on its ownership percentages in the vessel-owning companies. The outstanding debt bears interest at a rate equal to the three-month LIBOR (which resets every three months) plus a margin of 3.315% and matures in January 2014.

North Ocean 105

On September 30, 2010, MII, as guarantor, and North Ocean 105 AS, in which we have a 75% ownership interest, as borrower, entered into a financing agreement to finance a portion of the construction costs of the North Ocean 105. The agreement provides for borrowings of up to $69.4 million, bearing interest at 2.76% per year, and requires principal repayment in 17 consecutive semi-annual installments, which commenced on October 1, 2012. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of North Ocean 105 AS, a mortgage on the North Ocean 105, and a lien on substantially all of the other assets of North Ocean 105 AS. MII unconditionally guaranteed all amounts to be borrowed under the agreement. There was $61.3 million and $65.4 million in borrowings outstanding under this agreement on our

20

balance sheets at September 30, 2013 and December 31, 2012, respectively, of which $8.2 million was classified as current notes payable at September 30, 2013 and December 31, 2012.

ANZ Reimbursement Agreement

On April 20, 2012, McDermott and one of its wholly owned subsidiaries, McDermott Australia Pty. Ltd. (“McDermott Australia”), entered into a secured Letter of Credit Reimbursement Agreement (the “Reimbursement Agreement”) with Australia and New Zealand Banking Group Limited (“ANZ”). In accordance with the terms of the Reimbursement Agreement, ANZ issued letters of credit in the aggregate amount of approximately $109.0 million to support McDermott Australia’s performance obligations under contractual arrangements relating to a field development project. The obligations of McDermott and McDermott Australia under the Reimbursement Agreement are secured by McDermott Australia’s interest in the contractual arrangements and certain related assets.

Surety Bonds

In 2012 and 2007, JRMSA executed general agreements of indemnity in favor of surety underwriters based in Mexico relating to surety bonds issued in support of contracting activities of J. Ray McDermott de Mèxico, S.A. de C.V., a subsidiary of JRMSA. As of September 30, 2013, the aggregate principal amount of bonds issued under these arrangements totaled $46.5 million.

Long-term debt and notes payable obligations

A summary of our long-term debt obligations are as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Long-term debt consists of:
North Ocean 102 Construction Financing	$	32,867	$	37,349
North Ocean 105 Construction Financing		61,274		65,359
		94,141		102,708
Less: Amounts due within one year		41,037		14,146
Total long-term debt	$	53,104	$	88,562

NOTE 4—PENSION PLANS

Although we currently provide retirement benefits for most of our U.S. employees through sponsorship of the McDermott Thrift Plan, some of our longer-term U.S. employees and former employees are entitled to retirement benefits under the McDermott (U.S.) Retirement Plan, a non-contributory qualified defined benefit pension plan (the “McDermott Plan”), and several non-qualified supplemental defined benefit pension plans. The McDermott Plan and the non-qualified supplemental defined benefit pension plans are collectively referred to herein as the “Domestic Plans.” The McDermott Plan has been closed to new participants since 2006, and benefit accruals under the McDermott Plan were frozen completely in 2010.

We also sponsor a defined benefit pension plan established under the laws of the Commonwealth of the Bahamas, the J. Ray McDermott, S.A. Third Country National Employees Pension Plan (the “TCN Plan”), which provides retirement benefits for certain of our current and former foreign employees. Effective August 1, 2011, new entry into the TCN Plan was closed, and effective December 31, 2011, benefit accruals under the TCN Plan were frozen. Effective January 1, 2012, we established a new global defined contribution plan to provide retirement benefits to non-U.S. expatriate employees who may have otherwise obtained benefits under the TCN Plan.

21

Net periodic benefit cost for the Domestic Plans and the TCN Plan includes the following components:

	Domestic Plans
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
	(In thousands)
Interest cost	$	5,999		$	6,631		$	17,997		$	19,893
Expected return on plan assets		(9,577	)		(8,952	)		(28,730	)		(26,857	)
Recognized net actuarial loss and other		2,932			2,409			8,798			7,227
Net periodic benefit cost	$	(646	)	$	88		$	(1,935	)	$	263

	TCN Plan
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
	(In thousands)
Interest cost	$	466		$	460		$	1,400		$	1,382
Expected return on plan assets		(651	)		(610	)		(1,952	)		(1,832	)
Recognized net actuarial loss		507			446			1,522			1,339
Net periodic benefit cost	$	322		$	296		$	970		$	889

NOTE 5—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into derivative financial instruments primarily to hedge certain firm purchase commitments and forecasted transactions denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either: (1) deferred as a component of AOCI until the hedged item is recognized in earnings; (2) offset against the change in fair value of the hedged firm commitment through earnings; or (3) recognized immediately in earnings. At the inception and on an ongoing basis, we assess the hedging relationship to determine its effectiveness in offsetting changes in cash flows or fair value attributable to the hedged risk. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings are included as a component of gain (loss) on foreign currency—net in our condensed consolidated statements of income.

At September 30, 2013, the majority of our foreign currency forward contracts were designated as cash flow hedging instruments. In addition, we deferred approximately $33.2 million of net losses on these derivative financial instruments in AOCI, and we expect to reclassify approximately $10.2 million of deferred losses out of AOCI by September 30, 2014, as hedged items are recognized in earnings.

The notional value of our outstanding derivative contracts totaled $1.3 billion at September 30, 2013, with maturities extending through 2017. Of this amount, approximately $721.6 million is associated with various foreign currency expenditures we expect to incur on one of our Asia Pacific segment EPCI projects. These instruments consist of contracts to purchase or sell foreign-denominated currencies. At September 30, 2013, the fair value of these contracts was in a net liability position totaling $17.6 million.

22

The following tables summarize our derivative financial instruments:

Asset and Liability Derivatives

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Location
Accounts receivable—other	$	11,270	$	12,311
Other assets		1,349		13,770
Total asset derivatives	$	12,619	$	26,081
Accounts payable	$	13,145	$	3,604
Other liabilities		17,043		1,043
Total liability derivatives	$	30,188	$	4,647

The Effects of Derivative Instruments on our Financial Statements

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Amount of loss recognized in other comprehensive income (loss)	$	24,743		$	19,324	$	(46,270	)	$	(4,880	)
Income (loss) reclassified from AOCI into income: effective portion
Location
Cost of operations	$	(270	)	$	2,867	$	(1,101	)	$	4,837
Loss recognized in income: ineffective portion and amount excluded from effectiveness testing
Location
Gain on foreign currency—net	$	3,136		$	3,546	$	7,578		$	15,011

NOTE 6—FAIR VALUE MEASUREMENTS

The following is a summary of our available-for-sale securities measured at fair value:

	Total at September 30, 2013		Level 1		Level 2		Level 3
	(Unaudited)
	(In thousands)
Mutual funds(1)	$	2,115	$	—	$	2,115	$	—
Commercial paper		7,397		—		7,397		—
Asset-backed securities and collateralized mortgage obligations(2)		7,770		—		2,115		5,655
Total	$	17,282	$	—	$	11,627	$	5,655

23

	Total at December 31, 2012		Level 1		Level 2		Level 3
	(In thousands)
Mutual funds(1)	$	2,023	$	—	$	2,023	$	—
Commercial paper		29,737		—		29,737		—
Asset-backed securities and collateralized mortgage obligations(2)		8,477		—		2,134		6,343
Corporate notes and bonds(3)		5,755		—		5,755		—
Total	$	45,992	$	—	$	39,649	$	6,343

(1) Various U.S. equities and other investments managed under mutual funds

(2) Asset-backed and mortgage-backed securities with maturities of up to 26 years

(3) Corporate notes and bonds with maturities of three years or less

Our Level 2 investments consist primarily of commercial paper, corporate notes and bonds, asset-backed commercial paper notes backed by a pool of mortgage-backed securities and mutual funds. The fair value of our Level 2 investments was determined using a market approach which is based on quoted prices and other information for similar or identical instruments.

Our Level 3 investment consists of asset-backed commercial paper notes backed by a pool of mortgage-backed securities. The fair value of this Level 3 investment was based on the calculation of an overall weighted-average valuation, using the prices of the underlying individual securities. Individual securities in the pool were valued based on market observed prices, where available. If market prices were not available, prices of similar securities backed by similar assets were used.

Changes in Level 3 Instrument

The following is a summary of the changes in our Level 3 instrument measured on a recurring basis for the three months and nine months ended September 30, 2013 and September 30, 2012:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands)
Balance at beginning of period	$	5,902		$	6,338		$	6,343		$	6,030
Total realized and unrealized gains		79			459			307			1,357
Principal repayments		(326	)		(340	)		(995	)		(930	)
Balance at end of period	$	5,655		$	6,457		$	5,655		$	6,457

24

Unrealized Losses on Investments

Our net unrealized loss on investments was $1.7 million and $2.4 million at September 30, 2013 and December 31, 2012, respectively. The investments in an unrealized loss position for twelve months or longer are asset-backed and mortgage-backed obligations. These investments have generally shown a positive trend and continue to perform, and we currently do not have the intent to sell these securities before their anticipated recovery. Based on our analysis of these investments, we believe that none of our available-for-sale securities were other than temporarily impaired as of September 30, 2013. The amount of investments in an unrealized loss position for less than twelve months was not significant for either of the periods presented. The following is a summary of our available-for-sale securities:

	Twelve Months or Greater
	Fair Value		Unrealized Losses
	(Unaudited) (In thousands)
September 30, 2013
Mutual funds	$	2,115	$	—
Commercial paper		7,397		—
Asset-backed securities and collateralized mortgage obligations		7,770		(1,857	)
Total	$	17,282	$	(1,857	)

	Twelve Months or Greater
	Fair Value		Unrealized Losses
	(Unaudited) (In thousands)
December 31, 2012
Mutual funds	$	2,023	$	—
Commercial paper		29,737		—
Asset-backed securities and collateralized mortgage obligations		8,477		(2,376	)
Corporate notes and bonds		5,755		—
Total	$	45,992	$	(2,376	)

Other Financial Instruments

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Cash and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed consolidated balance sheets for cash, cash equivalents and restricted cash and cash equivalents approximate their fair values and are classified as Level 1 within the fair value hierarchy.

Short-term and long-term debt. The fair value of debt instruments is classified as Level 2 within the fair value hierarchy and is valued using a market approach based on quoted prices for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value these instruments based on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms.

Forward contracts. The fair value of forward contracts is classified as Level 2 within the fair value hierarchy and is valued using observable market parameters for similar instruments traded in active markets.

Where quoted prices are not available, the income approach is used to value these forward contracts, which discounts future cash flows based on current market expectations and credit risk.

25

The estimated fair values of certain of our financial instruments are as follows:

	September 30, 2013						December 31, 2012
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(Unaudited)
	(In thousands)
Balance Sheet Instruments
Cash and cash equivalents	$	282,370		$	282,370		$	640,147		$	640,147
Restricted cash and cash equivalents	$	18,488		$	18,488		$	18,116		$	18,116
Investments	$	17,282		$	17,282		$	45,992		$	45,992
Debt	$	(94,141	)	$	(95,919	)	$	(102,708	)	$	(106,324	)
Forward contracts	$	(17,569	)	$	(17,569	)	$	21,434		$	21,434

NOTE 7—STOCK-BASED COMPENSATION

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. Compensation expense is based on awards we expect to ultimately vest. Therefore, we have reduced compensation expense for estimated forfeitures based on our historical forfeiture rates. Our estimate of forfeitures is determined at the grant date and is revised if our actual forfeiture rate is materially different from our estimate.

We use a Black-Scholes model to determine the fair value of certain share-based awards, such as stock options. Additionally, we use a Monte Carlo model to determine the fair value of certain share-based awards that contain market and performance-based conditions. The use of these models requires highly subjective assumptions, such as assumptions about the expected life of the award, vesting probability, expected dividend yield and the volatility of our stock price. Total stock-based compensation expense, net recognized for the three months and nine months ended September 30, 2013 and September 30, 2012 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Unaudited) (In thousands)
Stock Options	$	1,050	$	982	$	3,250	$	2,999
Restricted Stock and Restricted Stock Units		2,702		1,446		7,689		5,164
Performance Shares and Deferred Stock Units		1,630		1,211		4,553		3,286
Total	$	5,382	$	3,639	$	15,492	$	11,449

26

NOTE 8—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited) (In thousands)
Income (loss) from continuing operations less noncontrolling interests	$	(64,070	)	$	50,612	$	(192,940	)	$	162,612
Income from discontinued operations, net of tax		—			—		—			3,497
Net income (loss) attributable to McDermott International, Inc.	$	(64,070	)	$	50,612	$	(192,940	)	$	166,109
Weighted average common shares (basic)		236,257,920			235,817,203		236,132,847			235,568,889
Effect of dilutive securities:
Stock options, restricted stock and restricted stock units(1)		—			2,049,797		—			1,984,574
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards (diluted)		236,257,920			237,867,000		236,132,847			237,553,463
Basic earnings (loss) per share
Income (loss) from continuing operations less noncontrolling interests		(0.27	)		0.21		(0.82	)		0.69
Income from discontinued operations, net of tax		—			—		—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21		(0.82	)		0.70
Diluted earnings (loss) per share:
Income (loss) from continuing operations less noncontrolling interests		(0.27	)		0.21		(0.82	)		0.68
Income from discontinued operations, net of tax		—			—		—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21		(0.82	)		0.69

(1) Approximately 3.1 million and 2.9 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive for the three months and nine months ended September 30, 2013. Approximately 1.7 million and 1.8 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive for the three months and nine months ended September 30, 2012, respectively.

NOTE 9—SEGMENT REPORTING

We report our financial results under a geographic-based reporting structure, which coincides with how our financial information is reviewed and evaluated on a regular basis by our chief operating decision maker. We operate in four primary operating segments, which consist of Asia Pacific, Atlantic, Caspian and the Middle East. The Caspian and Middle East operating segments are aggregated into the Middle East reporting segment due to the proximity of regions and similarities in the nature of services provided, economic characteristics and oversight responsibilities. Accordingly, we have three reporting segments consisting of Asia Pacific, Atlantic and the Middle East. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.”

27

Reporting segments are measured based on operating income, which is defined as revenues reduced by total costs and expenses and equity in income (loss) of unconsolidated affiliates. Summarized financial information is shown in the following tables:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands)
Revenues(1):
Asia Pacific	$	190,231		$	468,200		$	746,122		$	1,103,699
Atlantic		116,871			125,317			451,609			335,225
Middle East		379,754			435,228			943,863			1,206,747
Total revenues	$	686,856		$	1,028,745		$	2,141,594		$	2,645,671
Operating income (loss):
Asia Pacific	$	(37,663	)	$	52,192		$	17,894		$	156,231
Atlantic		(32,390	)		(10,714	)		(97,451	)		(36,749	)
Middle East		17,399			41,003			(69,600	)		122,557
Total operating income (loss)	$	(52,654	)	$	82,481		$	(149,157	)	$	242,039
Capital expenditures(2):
Asia Pacific	$	42,568		$	14,908		$	87,753		$	53,139
Atlantic		4,023			16,454			60,336			80,944
Middle East		25,516			15,286			63,459			41,997
Corporate and Other		8,815			975			13,849			3,204
Total capital expenditures	$	80,922		$	47,623		$	225,397		$	179,284
Depreciation and amortization:
Asia Pacific	$	4,667		$	5,375		$	14,204		$	15,467
Atlantic		5,999			3,554			17,985			16,849
Middle East		8,293			6,929			22,319			21,977
Corporate and Other		1,837			4,224			5,606			11,663
Total depreciation and amortization	$	20,796		$	20,082		$	60,114		$	65,956
Drydock amortization:
Asia Pacific	$	1,927		$	2,241		$	6,976		$	8,230
Atlantic		1,801			4,971			5,617			11,284
Middle East		520			787			1,586			2,092
Total drydock amortization	$	4,248		$	7,999		$	14,179		$	21,606

(1) Intersegment transactions included in revenues were not significant for any of the periods presented.

(2) Total capital expenditures represent expenditures for which cash payments were made during the period. These amounts exclude approximately $38.1 million and $1.2 million in accrued capital expenditures for the nine months ended September 30, 2013 and 2012, respectively.

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Segment assets:
Asia Pacific	$	1,171,837	$	1,402,923
Atlantic		611,111		536,734
Middle East		1,228,812		1,006,284
Corporate and other		145,521		387,686
Total assets	$	3,157,281	$	3,333,627

28

NOTE 10—COMMITMENTS AND CONTINGENCIES

Previously Pending Litigation

The following discussion presents information relating to pending litigation discussed in Note 12—Commitments and Contingencies in our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material subsequent developments relating to these matters.

On or about August 23, 2004, a declaratory judgment action entitled Certain Underwriters at Lloyd’s London, et al. v. J. Ray McDermott, Inc. et al., was filed by certain underwriters at Lloyd’s, London and Threadneedle Insurance Company Limited (the “London Insurers”), in the 23^rd Judicial District Court, Assumption Parish, Louisiana, against MII, J. Ray McDermott, Inc. (“JRMI”) and two insurer defendants, Travelers and INA, seeking a declaration that the London Insurers have no obligation to indemnify MII and JRMI for certain bodily injury claims, including claims for asbestos and welding rod fume personal injury which have been filed by claimants in various state courts. Additionally, Travelers filed a cross-claim requesting a declaration of non-coverage in approximately 20 underlying matters. This proceeding was stayed by the Court on January 3, 2005. We do not believe an adverse judgment or material losses in this matter are probable, and, accordingly, we have not accrued any amounts relating to this contingency. Although there is a possibility of an adverse judgment, the amount or potential range of loss is not estimable at this time. The insurer-plaintiffs in this matter commenced this proceeding in a purported attempt to obtain a determination of insurance coverage obligations for occupational exposure and/or environmental matters for which we have given notice that we could potentially seek coverage. Because estimating losses would require, for every matter, known and unknown, on a case-by-case basis, anticipating what impact on coverage a judgment would have and a determination of an otherwise expected insured value, damages cannot be reasonably estimated.

On December 16, 2005, a proceeding entitled Antoine, et al. vs. J. Ray McDermott, Inc., et al. (“Antoine Suit”), was filed in the 24^th Judicial District Court, Jefferson Parish, Louisiana, by approximately 88 plaintiffs against approximately 215 defendants, including our subsidiaries formerly known as JRMI and Delta Hudson Engineering Corporation (“DHEC”), generally alleging injuries for exposure to asbestos, and unspecified chemicals, metals and noise while the plaintiffs were allegedly employed as Jones Act seamen. This case was dismissed by the Court on January 10, 2007, without prejudice to plaintiffs’ rights to refile their claims. On January 29, 2007, 21 plaintiffs from the dismissed Antoine Suit filed a matter entitled Boudreaux, et al. v. McDermott, Inc., et al. (the “Boudreaux Suit”), in the United States District Court for the Southern District of Texas, against JRMI and our subsidiary formerly known as McDermott Incorporated, and approximately 30 other employer defendants, alleging Jones Act seaman status and generally alleging exposure to welding fumes, solvents, dyes, industrial paints and noise. The Boudreaux Suit was transferred to the United States District Court for the Eastern District of Louisiana on May 2, 2007, which entered an order in September 2007 staying the matter until further order of the Court due to the bankruptcy filing of one of the co-defendants. Additionally, on January 29, 2007, another 43 plaintiffs from the dismissed Antoine Suit filed a matter entitled Antoine, et al. v. McDermott, Inc., et al. (the “New Antoine Suit”), in the 164^th Judicial District Court for Harris County, Texas, against JRMI, our subsidiary formerly known as McDermott Incorporated and approximately 65 other employer defendants and 42 maritime products defendants, alleging Jones Act seaman status and generally alleging personal injuries for exposure to asbestos and noise. On April 27, 2007, the District Court entered an order staying all activity and deadlines in the New Antoine Suit, other than service of process and answer/appearance dates, until further order of the Court. The New Antoine Suit plaintiffs filed a motion to lift the stay on February 20, 2009, which is pending before the Texas District Court. The plaintiffs seek monetary damages in an unspecified amount in both the Boudreaux Suit and New Antoine Suit cases and attorneys’ fees in the New Antoine Suit. We cannot reasonably estimate the extent of a potential judgment against us, if any, and we intend to vigorously defend these suits.

Other Litigation

On August 15, 2013 and August 20, 2013, two separate alleged purchasers of our common stock filed purported class action complaints against MII, Stephen M. Johnson and Perry L. Elders in the United States District Court for the Southern District of Texas. Both of the complaints seek to represent a class of purchasers of

29

our stock between November 6, 2012 and August 5, 2013, and allege, among other things, that the defendants violated federal securities laws by disseminating materially false and misleading information and failing to disclose material information relating to weaknesses in project bidding and execution, poor risk evaluation, poor project management and losses in each of MII’s reporting segments. Each complaint seeks relief, including unspecified compensatory damages and an award for attorneys’ fees and other costs. On October 15, 2013, an alleged purchaser of common stock during the relevant time period filed a motion for consolidation of the two actions, appointment as lead plaintiff, and approval of his choice of lead counsel and liaison counsel. We believe the substantive allegations contained in the complaints are without merit, and we intend to defend against these claims vigorously.

Additionally, due to the nature of our business, we and our affiliates are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including, among other things:

• performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and

• workers’ compensation claims, Jones Act claims, occupational hazard claims, including asbestos-exposure claims, premises liability claims and other claims.

Based upon our prior experience, we do not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows; however, because of the inherent uncertainty of litigation and, in some cases, the availability and amount of potentially applicable insurance, we can provide no assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material effect on our consolidated financial condition, results of operations or cash flows for the fiscal period in which that resolution occurs.

Environmental Matters

We have been identified as a potentially responsible party at various cleanup sites under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”). CERCLA and other environmental laws can impose liability for the entire cost of cleanup on any of the potentially responsible parties, regardless of fault or the lawfulness of the original conduct. Generally, however, where there are multiple responsible parties, a final allocation of costs is made based on the amount and type of wastes disposed of by each party and the number of financially viable parties, although this may not be the case with respect to any particular site. We have not been determined to be a major contributor of wastes to any of these sites. On the basis of our relative contribution of waste to each site, we expect our share of the ultimate liability for the various sites will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows in any given year.

At September 30, 2013 we had no material amounts accrued for environmental reserves. Inherent in our estimates of reserves and recoveries are our expectations regarding the levels of contamination, remediation costs and recoverability from other parties, which may vary significantly as remediation activities progress. Accordingly, changes in estimates could result in material adjustments to our operating results, and the ultimate loss may differ materially from the amounts we have provided for in our consolidated financial statements.

Contracts Containing Liquidated Damages Provisions

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have historically had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of September 30, 2013, it is possible that we may incur liabilities for liquidated damages aggregating approximately $137.0 million, of which approximately

30

$11.0 million has been recorded in our financial statements, based on our actual or projected failure to meet certain specified contractual milestone dates. The dates for which these potential liquidated damages could arise extend to June 2015. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for additional liquidated damages. Accordingly, we believe that no amounts for these potential liquidated damages in excess of the amounts currently reflected in our financial statements are probable of being paid by us. However, we may not achieve relief on some or all of the issues.

Contractual Obligations

At September 30, 2013, we had outstanding obligations related to our new vessel construction contracts on the Lay Vessel 108 and Deepwater Lay Vessel 2000 of $382.4 million in the aggregate, with $41.6 million, $136.5 million and $204.3 million due in the years ending December 31, 2013, 2014 and 2015, respectively.

31

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

In this quarterly report on Form 10-Q, unless the context otherwise indicates, “we,” “us” and “our” mean McDermott International, Inc. and its consolidated subsidiaries.

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords. This information should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included under Item 1 and the audited consolidated financial statements and the related notes and Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2012.

From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our company. These statements may include projections and estimates concerning the scope, execution, timing and success of specific projects and our future backlog, revenues, income and capital spending. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “forecast,” “believe,” “expect,” “anticipate,” “plan,” “seek,” “goal,” “could,” “may,” or “should” or other words that convey the uncertainty of future events or outcomes. Sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.

These forward-looking statements include, but are not limited to, statements that relate to, or statements that are subject to risks, contingencies or uncertainties that relate to:

• future levels of revenues, operating margins, income from operations, net income or earnings per share;

• outcome of project awards and scope, execution and timing of specific projects, including timing to complete and cost to complete these projects;

• anticipated levels of demand for our products and services;

• market outlook for the EPCI market, including subsea;

• future levels of capital, environmental or maintenance expenditures;

• the success or timing of completion of ongoing or anticipated capital or maintenance projects;

• the adequacy of our sources of liquidity and capital resources;

• potential additional financing arrangements;

• the effectiveness of our derivative contracts in mitigating foreign currency risk;

• expectations regarding the acquisition or divestiture of assets;

• the ability to dispose of assets held for sale in a timely manner or for a price at or above net realizable value;

• the restructuring of Atlantic operations, including the expected range of costs and timing of cost recognition;

• the potential effects of judicial or other proceedings on our business, financial condition, results of operations and cash flows; and

• the anticipated effects of actions of third parties such as competitors, or federal, foreign, state or local regulatory authorities, or plaintiffs in litigation.

32

These forward-looking statements speak only as of the date of this report; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

• general economic and business conditions and industry trends;

• general developments in the industries in which we are involved;

• decisions about offshore developments to be made by oil and gas companies;

• the highly competitive nature of our industry;

• our ability to appropriately bid, estimate and effectively perform projects on time, in accordance with the schedules established by the applicable contracts with customers;

• cancellations of and adjustments to backlog and the resulting impact from using backlog as an indicator of future revenues or earnings;

• the capital investment required to maintain and/or upgrade our fleet of vessels;

• the ability of our suppliers and subcontractors to deliver raw materials in sufficient quantities and/or perform in a timely manner;

• volatility and uncertainty of the credit markets;

• our ability to comply with covenants in our credit agreements and other debt instruments and availability, terms and deployment of capital;

• the unfunded liabilities of our pension plans may negatively impact our liquidity and, depending upon future operations, may impact our ability to fund our pension obligations;

• the continued availability of qualified personnel;

• the operating risks normally incident to our lines of business, including the potential impact of liquidated damages;

• natural or man-caused disruptive events that could damage our facilities, equipment or our work-in-progress and cause us to incur losses and/or liabilities;

• changes in, or our failure or inability to comply with, government regulations;

• adverse outcomes from legal and regulatory proceedings;

• impact of potential regional, national and/or global requirements to significantly limit or reduce greenhouse gas and other emissions in the future;

• changes in, and liabilities relating to, existing or future environmental regulatory matters;

• changes in tax laws;

• rapid technological changes;

• the consequences of significant changes in interest rates and currency exchange rates;

• difficulties we may encounter in obtaining regulatory or other necessary approvals of any strategic transactions;

• the risks associated with integrating acquired businesses;

• the risk we may not be successful in updating and replacing current key information technology systems;

33

• social, political and economic situations in foreign countries where we do business;

• the risks associated with our international operations, including local content requirements;

• interference from adverse weather conditions;

• the possibilities of war, other armed conflicts or terrorist attacks;

• the effects of asserted and unasserted claims and the extent of available insurance coverages;

• our ability to obtain surety bonds, letters of credit and financing;

• our ability to maintain builder’s risk, liability, property and other insurance in amounts and on terms we consider adequate and at rates that we consider economical;

• the aggregated risks retained in our captive insurance subsidiary; and

• the impact of the loss of insurance rights as part of the Chapter 11 Bankruptcy settlement concluded in 2006 involving several of our former subsidiaries.

We believe the items we have outlined above are important factors that could cause estimates in our financial statements to differ materially from actual results and those expressed in a forward-looking statement made in this quarterly report or elsewhere by us or on our behalf. We have discussed many of these factors in more detail elsewhere in this report and in our annual report on Form 10-K for the year ended December 31, 2012. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update our description of important factors each time a potential important factor arises, except as required by applicable securities laws and regulations. We advise our security holders that they should (1) be aware that factors not referred to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.

Restructuring and Management Charges

We commenced a restructuring of our Atlantic operations during the quarter ended June 30, 2013, which involves our Morgan City, Louisiana, Houston, Texas, New Orleans, Louisiana and Brazil locations. The restructuring involves, among other things, reductions of management, administrative, fabrication and engineering personnel, and a plan to discontinue utilization of the Morgan City facility (after the completion of existing backlog projects, which are currently forecasted to be completed in the second quarter of 2014). Future fabrication operations in the Atlantic segment are expected to be executed using the Altamira, Mexico facility for the foreseeable future. In addition, we have reached an agreement in principle to exit our joint venture operation in Brazil, which was specifically formed to construct and integrate floating, production, storage, off-loading (“FPSO”) modules.

In addition, in October 2013, we announced certain executive management changes that will become effective during the quarter ending December 31, 2013.

Costs associated with our restructuring activities and the management changes will primarily include severance and other personnel-related costs, costs associated with exiting the joint venture in Brazil, asset impairment and relocation costs and future unutilized lease costs. The total costs are expected to range between $55 million to $65 million in the aggregate. Of the total anticipated costs, we incurred approximately $4.0 million during the quarter ended September 30, 2013 and had incurred an aggregate of $19.5 million as of September 30, 2013. We expect to recognize the majority of these costs during the quarters ending December 31, 2013 and March 31, 2014.

Acquisition

During the quarter ended March 31, 2013, we entered into a share purchase agreement to acquire all of the issued and outstanding shares of capital stock of Deepsea Group Limited, a United Kingdom-based company that

34

provides subsea and other engineering services to international energy companies, primarily through offices in the United Kingdom and the United States. Total consideration was approximately $9.0 million, which includes cash ($6.0 million) and the delivery of 313,580 restricted shares of MII common stock (out of treasury). The transaction is being accounted for using the acquisition method and, accordingly, assets acquired and liabilities assumed are recorded at their respective fair values. The preliminary purchase price allocation has not been completed and is subject to change for a period of one year following the acquisition. Results of operations and pro forma results of operations have not been presented, as the effects of this transaction were not material to our condensed consolidated financial statements.

Assets Held for Sale

We previously committed to a plan to sell four of our multi-function marine vessels, specifically the Bold Endurance, DB 16, DB 26 and the DLB KP1. Assets classified as held for sale are no longer depreciated. During the quarter ended March 31, 2013, we completed the sale of the Bold Endurance and the DB 26 for aggregate cash proceeds of approximately $32.0 million, resulting in an aggregate gain of approximately $12.5 million. We remain in active discussions with interested parties to sell the DLB KP1 and DB 16.

Accounting for Contracts

We execute our contracts through a variety of methods, including fixed-price, cost reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods, with fixed-price being the most prevalent. Contracts are usually awarded through a competitive bid process. Factors that customers may consider include price, facility or equipment availability, technical capabilities of equipment and personnel, efficiency, safety record and reputation.

Fixed-price contracts are for a fixed amount to cover costs and any profit element for a defined scope of work. Fixed-price contracts entail more risk to us because they require us to predetermine both the quantities of work to be performed and the costs associated with executing the work.

We have contracts that extend beyond one year. Most of our long-term contracts have provisions for progress payments. We attempt to cover anticipated increases in labor, material and service costs of our long-term contracts either through an estimate of such charges, which is reflected in the original price, or through risk-sharing mechanisms, such as escalation or price adjustments for items such as labor and commodity prices.

We generally recognize our contract revenues and related costs on a percentage-of-completion basis. Accordingly, for each contract, we regularly review contract price and cost estimates as work progresses and reflect adjustments in profit proportionate to the percentage-of-completion of the related project in the period when we revise those estimates. To the extent that these adjustments result in a reduction or elimination of previously reported profits with respect to a project, we would recognize a charge against current earnings, which could be material.

Our arrangements with customers frequently require us to provide letters of credit, bid and performance bonds or guarantees to secure bids or performance under contracts. While these letters of credit, bonds and guarantees may involve significant dollar amounts, historically, there have been no material payments to our customers under these arrangements.

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have historically had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of September 30, 2013, it is possible that we may incur liabilities for liquidated damages aggregating to approximately $137.0 million, of which

35

approximately $11.0 million has been recorded in our financial statements, based on our actual or projected failure to meet certain specified contractual milestone dates. The dates for which these potential liquidated damages could arise extend to June 2015. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for additional liquidated damages. Accordingly, we believe that no amounts for these potential liquidated damages in excess of the amounts currently reflected in our financial statements are probable of being paid by us. However, we may not achieve relief on some or all of the issues involved and, as a result, could be subject to higher damage amounts.

Change orders, which are a normal and recurring part of our business, can increase (sometimes substantially) the future scope and cost of a job. Therefore, change order awards (although frequently beneficial in the long term) can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit, proportionate to the job percentage of completion in the period when those estimates are revised. Revenue from unapproved change orders is recognized to the extent of amounts management expects to recover or costs incurred. Unapproved change orders that are disputed by the customer are treated as claims.

In the event of a contract deferral or cancellation, we generally would be entitled to recover costs incurred, settlement expenses and profit on work completed prior to deferral or termination. Significant or numerous cancellations could adversely affect our business, financial condition, results of operations and cash flows.

Critical Accounting Policies and Estimates

For a discussion of critical accounting policies and estimates we use in the preparation of our consolidated financial statements, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our annual report on Form 10-K for the year ended December 31, 2012. See Note 1 to our unaudited condensed consolidated financial statements included in this report for information on recently issued accounting standards.

Business Segments and Results of Operations

Business Segments

Our business segments consist of Asia Pacific, Atlantic, Caspian and the Middle East. The Caspian and Middle East operating segments are aggregated into the Middle East reporting segment due to the proximity of regions and similarities in the nature of services provided, economic characteristics and oversight responsibilities. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects corporate personnel and activities, incentive compensation programs and other costs, which are generally fully allocated to our operating segments. Accordingly, we report our financial results under reporting segments consisting of Asia Pacific, Atlantic and the Middle East. The following is a discussion of our segments. For financial information about our segments, see Note 9 to our unaudited condensed consolidated financial statements included in this report.

Asia Pacific Segment

Through our Asia Pacific segment, we serve the needs of customers primarily in Australia, Indonesia, Vietnam, Malaysia and Thailand. Project focus in this segment includes the fabrication and installation of fixed and floating structures and the installation of pipelines and subsea systems. The majority of our projects in this segment are performed on an engineering, procurement, construction and installation (“EPCI”) basis. Engineering and procurement services are provided by our Singapore office and are supported by additional resources located in Chennai, India and Houston, Texas. The primary fabrication facility for this segment is located on Batam Island, Indonesia. Additionally, through our equity ownership interest in a joint venture, we have developed a fabrication facility located in China.

36

Atlantic Segment

Through our Atlantic segment, we serve the needs of customers, primarily in the United States, Brazil, Mexico, Trinidad and Africa. Project focus in this segment includes the fabrication and installation of fixed and floating structures and the installation of pipelines and subsea systems. Engineering and procurement services are provided by our Houston office. The primary fabrication facilities for this segment are located in Altamira, Mexico.

Middle East Segment

Through our Middle East segment, which includes the Caspian region, we serve the needs of customers in Saudi Arabia, Qatar, the United Arab Emirates (U.A.E.), Kuwait, India, Azerbaijan, Russia and the North Sea. Project focus in this segment relates primarily to the fabrication and offshore installation of fixed and floating structures and the installation of pipelines and subsea systems. The majority of our projects in this segment are performed on an EPCI basis. Engineering and procurement services are provided by our Dubai, U.A.E., Chennai, India, Al Khobar, Saudi Arabia and United Kingdom offices and are supported by additional resources from our Houston, Texas and Baku, Azerbaijan offices. The primary fabrication facility for this segment is located in Dubai, U.A.E.

The above-mentioned fabrication facilities in each segment are equipped with a wide variety of heavy-duty construction and fabrication equipment, including cranes, welding equipment, machine tools and robotic and other automated equipment. Project installation is performed by major construction vessels, which we own or lease and are stationed throughout the various regions and provide structural lifting/lowering and pipelay services. These major construction vessels are supported by our multi-function vessels and chartered vessels from third parties to perform a wide array of installation activities that include anchor handling, pipelay, cable/umbilical lay, dive support and hookup/commissioning.

Results of Operations

Selected Financial Data:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(In thousands)
Revenues:
Asia Pacific	$	190,231		$	468,200		$	746,122		$	1,103,699
Atlantic		116,871			125,317			451,609			335,225
Middle East		379,754			435,228			943,863			1,206,747
Total revenues	$	686,856		$	1,028,745		$	2,141,594		$	2,645,671
Operating income (loss):
Asia Pacific	$	(37,663	)	$	52,192		$	17,894		$	156,231
Atlantic		(32,390	)		(10,714	)		(97,451	)		(36,749	)
Middle East		17,399			41,003			(69,600	)		122,557
Total operating income (loss)	$	(52,654	)	$	82,481		$	(149,157	)	$	242,039
Other income (expense):
Interest income, net	$	363		$	996		$	1,133		$	4,215
Gain on foreign currency—net		4,460			488			10,838			11,185
Other income (expense)—net		1,062			242			1,813			(288	)
Total other income	$	5,885		$	1,726		$	13,784		$	15,112
Provision for Income Taxes	$	12,278		$	29,916		$	45,493		$	87,004
Total income from discontinued operations, net of tax	$	—		$	—		$	—		$	3,497
Net Income Attributable to Noncontrolling Interests	$	5,023		$	3,679		$	12,074		$	7,535

37

Three Months ended September 30, 2013 Compared to Three Months ended September 30, 2012

Revenues

Revenues decreased approximately $341.9 million, or 33% due to decreases in each of our segments. Revenues in our Asia Pacific segment decreased $278.0 million, or approximately 59%, to $190.2 million in the three months ended September 30, 2013 from $468.2 million in the corresponding prior-year period. This decrease was driven primarily by lower marine activity on two of our EPCI projects in Australia that had significantly higher marine activity in the three months ended September 30, 2012 but were completed prior to the three months ended September 30, 2013. The decrease was partially offset by increased fabrication and marine activity on continuing and recently commenced projects in Malaysia, Indonesia and Australia.

Revenues in our Middle East segment decreased approximately $55.5 million, or 13%, driven primarily by lower activity on a significant EPCI project in Saudi Arabia for which the primary marine campaign was substantially completed prior to the quarter ended September 30, 2013. In addition, several other projects (including projects in India and Saudi Arabia) had significantly higher marine and fabrication activity during the three months ended September 30, 2012. Those declines were partially offset by increased activity on new and other existing projects, primarily in Saudi Arabia and, to a lesser extent, the Caspian Sea.

Revenues in our Atlantic segment decreased approximately $8.4 million, or 7%, due to lower fabrication activity at our Morgan City fabrication facility, partially offset by increased fabrication activity on projects in Mexico.

Cost of Operations

Cost of operations decreased approximately $203.4 million, or 23%, primarily due to decreases in our Asia Pacific and Middle East segments. Cost of operations in our Asia Pacific segment decreased by $181.1 million, driven primarily by lower marine activity on two of our EPCI projects in Australia. This decrease was partially offset by increased activity on other existing and newly awarded projects. The decrease in our Middle East segment of $34.2 million was primarily attributable to lower marine activity on the EPCI project in Saudi Arabia mentioned above, partially offset by increased activity on other recently awarded and existing projects, primarily in Saudi Arabia and the Caspian Sea. Cost of operations in our Atlantic segment increased $11.9 million, primarily due to increased fabrication activities associated with certain projects in Mexico and cost overruns on certain projects at our Morgan City fabrication facility, driven by lower labor productivity. These cost of operations variances are discussed in more detail below in the discussion regarding operating income (loss).

Operating Income (Loss)

Operating income (loss) decreased approximately $135.2 million to an operating loss of $52.7 million in the quarter ended September 30, 2013 from operating income of $82.5 million in the quarter ended September 30, 2012, attributable to declines experienced in each segment.

The Asia Pacific segment reported an operating loss of $37.7 million in the three months ended September 30, 2013, as compared to operating income of $52.2 million for the corresponding prior-year period. The decrease was primarily due to an approximate $96.0 million decline in operating income associated with two of our EPCI projects in Australia. Those projects had significant marine activity in the three months ended September 30, 2012 and were completed prior to the three months ended September 30, 2013. In addition, we experienced $66.0 million of increased cost estimates on a project in Malaysia, primarily due to mechanical downtime on the Lay Vessel North Ocean 105 (“NO 105”). This was partially offset by approximately $33.0 million of commercial improvements reached with our customer, resulting in a net decline recognized in three months ended September 30, 2013 of approximately $33.0 million from this loss project, which is expected to be completed by mid-2014. The decline in our Asia Pacific segment was partially offset by increased activity on several newly awarded and recently commenced projects.

38

The Atlantic segment reported an operating loss of $32.4 million in the three months ended September 30, 2103, as compared to an operating loss of $10.7 million for the corresponding prior-year period. We recognized approximately $11.0 million of costs for lower than anticipated marine-asset utilization and labor productivity. We also incurred approximately $9.0 million for scope and productivity cost increases on a loss project in Mexico, which is expected to be completed during the second half of 2015. Also, two projects in Brazil contributed revenues but no income in the three months ended September 30, 2013. One of those projects is a five-year charter that began in early 2012. We are accounting for the other project under our deferred profit recognition policy, due to the “first of a kind” nature of the project. We also recognized $4.0 million in restructuring charges in the three months ended September 30, 2013, as discussed previously.

The Middle East segment reported operating income of $17.4 million in the three months ended September 30, 2013, as compared to $41.0 million for the corresponding prior-year period. The decrease was primarily attributable to declines of approximately $54.0 million on two projects that experienced lower fabrication and marine activity. On one of those projects in Saudi Arabia, we experienced lower activity due to the substantial completion of the primary marine campaign. The project remains profitable and is expected to be completed during the first half of 2014, subject to customer deliverables and concurrence with execution plans. On the other project, we experienced significantly higher fabrication and marine activity in the prior-year period. The decrease in operating income was partially offset by increased activity on existing and recently awarded projects.

Operating income is frequently influenced by the resolution of change orders, project close-outs and settlements, which generally can cause operating margins to improve during the period in which these items are approved or finalized, as these items generally contribute higher operating margins. Although we expect change orders, close-outs and settlements to continue as part of our normal business activities, the period in which they are recognized is largely driven by the finalization of agreements with customers and suppliers and, as a result, is difficult to predict. Additionally, the future margin increases or decreases associated with these items are difficult to predict, due to, among other items, the difficulty of predicting the timing of recognition of change orders, close-outs and settlements and the timing of new project awards.

Other Items in Operating Income

Selling, general and administrative expenses decreased $5.4 million, largely as a result of our Atlantic segment restructuring efforts, partially offset by costs associated with our bids and proposals.

Equity in loss of unconsolidated affiliates changed $1.3 million to a loss of $3.4 million for the three months ended September 30, 2013, as compared to a loss of $4.7 million in the three months ended September 30, 2012, primarily attributable to a reduction in equity losses from two of our unconsolidated joint ventures in Brazil and the United States.

Other Items

Results for the quarters ended September 30, 2013 and 2012 were not significantly impacted by interest or other income (expense), due primarily to lower cash and cash equivalents balances, the continuation of low interest rates and the capitalization of interest expense on capital projects.

The net gain on foreign currency increased by $4.0 million, primarily due to foreign currency gains of $1.3 million and gains related to derivative instruments and hedging activities of $3.1 million recognized during the three months ended September 30, 2013, as compared to foreign currency losses of approximately $3.0 million and gains related to derivative instruments and hedging activities of $3.5 million recognized during the three months ended September 30, 2012.

39

Provision for Income Taxes

For the three months ended September 30, 2013, we recognized a loss before provision for income taxes of $46.8 million, compared to income of $84.2 million in the three months ended September 30, 2012. In the aggregate, the provision for income taxes was $12.3 million and $29.9 million for the three months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, Mexico and Malaysia).

Noncontrolling Interests

Net income attributable to noncontrolling interests increased by $1.3 million to $5.0 million in the three months ended September 30, 2013 compared to $3.7 million for the three months ended September 30, 2012, primarily due to increased activity at one of our consolidated joint ventures.

Nine Months ended September 30, 2013 Compared to Nine Months ended September 30, 2012

Revenues

Revenues decreased approximately 19%, or $504.1 million, due to decreases in our Asia Pacific and Middle East segments.

Revenues in our Asia Pacific segment decreased $357.6 million, or approximately 32%, driven primarily by lower marine activity on two of our significant EPCI projects in Australia that had significantly higher marine activity during the nine months ended September 30, 2012 but were at or near completion prior to the nine months ended September 30, 2013 (approximately $593.0 million). Those decreases were partially offset by increased fabrication and marine activity on existing and recently commenced projects in Malaysia, Indonesia and Australia.

Revenues in our Middle East segment decreased $262.9 million, or approximately 22%, driven primarily by lower activity on a significant EPCI project in Saudi Arabia for which the primary marine campaign was substantially completed prior to the nine months ended September 30, 2013. Also contributing to the decrease were several other projects (including projects in India and Saudi Arabia) that had significantly higher marine activities and, to a lesser extent, higher fabrication activities during the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2013. The decline was partially offset by increased activity on continuing and other existing projects, primarily in Saudi Arabia and the Caspian Sea.

Revenues in our Atlantic segment increased approximately $116.4 million, or 35%, primarily due to increased fabrication activity on newly awarded projects in Mexico, partially offset by lower fabrication activity at our Morgan City fabrication facility.

Cost of Operations

Cost of operations decreased approximately 6%, or $124.5 million, primarily attributable to decreases in our Asia Pacific and Middle East segments, partially offset by an increase in our Atlantic segment. Cost of operations in our Asia Pacific segment decreased by $196.9 million, primarily driven by lower marine activity on two of our significant EPCI projects in Australia that were ongoing during the nine months ended September 30, 2012 but were at or near completion during the nine months ended September 30, 2013. The decrease in our Middle East segment of $74.5 million was primarily attributable to reduced marine activities on one of our EPCI projects in Saudi Arabia, partially offset by increased activity on recently awarded and other existing projects, primarily in Saudi Arabia and the Caspian Sea. Cost of operations in our Atlantic segment increased $146.9 million, primarily due to increased fabrication activities associated with certain projects in Mexico and cost overruns on certain projects at our Morgan City fabrication facility. These cost of operations variances are discussed in more detail below in the discussion regarding operating income.

40

Operating Income (Loss)

Operating income (loss) decreased approximately $391.2 million to an operating loss of $149.2 million in the nine months ended September 30, 2013 from operating income of $242.0 million in the nine months ended September 30, 2012, primarily attributable to profitability declines in each segment.

The Middle East segment reported an operating loss of $69.6 million in the nine months ended September 30, 2013, as compared to operating income of $122.6 million for the corresponding prior-year period. The decrease was primarily attributable to changes in estimates on one of our EPCI projects in Saudi Arabia that resulted in a project loss of approximately $38.4 million in the nine months ended September 30, 2013, execution plan changes, an extended offshore hookup campaign and delays in the completion of onshore activities. While that project recognized losses in the nine months ended September 30, 2013 it remains profitable and is expected to be completed during the first half of 2014, subject to customer deliverables and concurrence with execution plans. In addition, two other Middle East projects, which had significantly higher fabrication and marine activity in the prior-year period, resulted in approximately $84.0 million of the decline in operating results. One of those projects (in Saudi Arabia) was completed prior to the nine months ended September 30, 2013, while the other project (near Saudi Arabia) is expected to be completed by the middle of 2014.

The Asia Pacific operating income declined by $138.3 million primarily due to an approximate $118.0 million decline on one of our EPCI projects in Australia, which had significantly higher marine activity in the nine months ended September 30, 2012 and was completed prior to September 30, 2013. In addition, we experienced $132.0 million of increases in cost on a project in Malaysia primarily due to mechanical downtime on the NO 105, partially offset by approximately $33.0 million of improvements related to arrangements reached with our customer, resulting in a net decline recognized in the nine months ended September 30, 2013 of approximately $99.0 million. This project is currently in a loss position and is expected to be completed by mid 2014. The declines in our Asia Pacific segment were partially offset by increased activity on certain newly awarded and recently commenced projects.

The Atlantic segment reported an operating loss of $97.4 million in the nine months ended September 30, 2013, as compared to an operating loss of $36.7 million for the corresponding prior-year period. We recognized approximately $25.0 million of costs for lower than anticipated marine-asset utilization and labor productivity. We also incurred approximately $9.0 million related to changes in estimates on one project in Mexico that experienced increased fabrication costs associated with increases to the scope of the project and incremental costs associated with productivity. This segment also includes two projects in Brazil that contributed revenues but no income in the nine months ended September 30, 2013. One of those projects is a five-year charter that began in early 2012. We are accounting for the other project under our deferred profit recognition policy, due to the “first of a kind” nature of the project. We also recognized $19.5 million in restructuring charges in the nine months ended September 30, 2013.

Other Items in Operating Income

Selling, general and administrative expenses increased $5.4 million primarily due to increased bid and proposal costs in the period and, to a lesser extent, costs incurred in connection with the Deepsea acquisition and costs associated with stock-based compensation.

Equity in loss of unconsolidated affiliates changed $2.0 million to a loss of $13.0 million in the nine months ended September 30, 2013 as compared to a loss of $11.0 million in the nine months ended September 30, 2012, primarily attributable to increased equity losses from two of our unconsolidated joint ventures.

Other Items

Results for the nine months ended September 30, 2013 and 2012 were not significantly impacted by interest or other income (expense).

41

Gain on foreign currency—net decreased by $0.4 million to income of $10.8 million in the nine months ended September 30, 2013 from income of $11.2 million in the nine months ended September 30, 2012, primarily due to gains related to derivative instruments and hedging activities of approximately $7.6 million recognized during the 2013 period, as compared to gains related to derivative instruments and hedging activities of approximately $15.0 million recognized during the 2012 period.

Provision for Income Taxes

For the nine months ended September 30, 2013, we recognized a loss before provision for income taxes of $135.4 million, compared to income of $257.2 million in the nine months ended September 30, 2012. In the aggregate, the provision for income taxes was $45.5 million and $87.0 million for the nine months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, the United Arab Emirates and Malaysia).

At September 30, 2013, we had foreign net operating loss carryforwards available to offset future taxable income in foreign jurisdictions with a valuation allowance of $76.0 million against $85.0 million of the related deferred taxes. The remaining $9.0 million of foreign deferred taxes is expected to be realized through future foreign taxable income. At September 30, 2013, we had U.S. federal net operating loss carryforwards but had fully reserved the $135.0 million deferred tax asset.

Discontinued Operations

On March 19, 2012, we completed the sale of our former charter fleet business for cash consideration of approximately $61.0 million, resulting in a gain on the sale of approximately $0.3 million. Total income from discontinued operations, net of tax was $3.3 million for the nine months ended September 30, 2012.

Noncontrolling Interests

Net income attributable to noncontrolling interests increased by $4.6 million to $12.1 million in the nine months ended September 30, 2013 from $7.5 million in the nine months ended September 30, 2012, primarily due to increased activity at two of our consolidated joint ventures.

Backlog

Backlog represents the dollar amount of revenues we expect to recognize in the future from contracts awarded and those that are in progress. These amounts are presented in U.S. dollars and are based on rates that we have contractually agreed to with our customers. Currency risk associated with backlog contracts that is not naturally mitigated within the contract is generally mitigated with the use of foreign currency derivative (hedging) instruments, when deemed significant. However, these actions may not eliminate all currency risk exposure included within our long-term contracts. Backlog is not a measure defined by generally accepted accounting principles and is not a measure of contract profitability. Our methodology for determining backlog may not be comparable to methodologies used by other companies in determining their backlog amounts. The backlog values we disclose include anticipated revenues associated with: (1) the original contract amounts; (2) change orders for which we have received written confirmations from the applicable customers; (3) change orders for which we expect to receive confirmations in the ordinary course of business; and (4) claims that we have made against our customers. We do not include expected revenues of contracts related to unconsolidated joint ventures in our backlog, except to the extent of any contract awards we may receive from those joint ventures.

We include unapproved change orders for which we expect to receive confirmations in the ordinary course of business in backlog, generally to the extent of the lesser of the amounts management expects to recover or the

42

associated costs incurred. Any revenue that would represent profit associated with unapproved change orders is generally excluded from backlog until written confirmation is obtained from the applicable customer. However, consideration is given to our history with the customer as well as the contractual basis under which we may be operating. Accordingly, in certain cases based on our historical experience in resolving unapproved change orders with a customer, the associated profit may be included in backlog. The total unapproved change orders included in our estimates at completion aggregated approximately $468 million, of which approximately $138 million was included in backlog at September 30, 2013. If an unapproved change order is under dispute or has been previously rejected by the customer, the associated amount of revenue is treated as a claim.

For amounts included in backlog that are attributable to claims, we include those claims in backlog when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Claims revenue is included in backlog to the extent of the lesser of the amounts management expects to recover or associated costs incurred. Total claims revenue included in backlog at September 30, 2013 and December 31, 2012 was approximately $46 million and $85 million, respectively. See Note 1 to our unaudited condensed consolidated financial statements included in this report for a discussion of claims revenue included in our estimates at completion as of September 30, 2013.

Backlog may not be indicative of future operating results, and projects in our backlog may be cancelled, modified or otherwise altered by customers. We can provide no assurance as to the profitability of our contracts reflected in backlog. It is possible that our estimates of profit could increase or decrease based on changes in productivity, actual downtime and the resolution of change orders and claims with the customers. Our backlog currently includes one project that has been placed on hold pending resolution of scope definition and represents approximately 2% of our consolidated backlog. That project is 14% complete and there have been no profits recognized as of September 30, 2013.

Of the September 30, 2013 backlog amount of $4.6 billion, approximately $564.6 million relates to four active projects that are in loss positions, whereby future revenues are expected to be equal to costs when recognized. Approximately $172.9 million of such backlog is associated with a marine project in our Asia Pacific segment, which we expect to complete by the middle of 2014, and approximately $168.8 million pertains to a five-year charter in Brazil, which we began in early 2012 in our Atlantic segment. Additionally, we have a project in the Atlantic segment that we are accounting for under our deferred profit recognition policy, representing $151.3 million of the September 30, 2013 backlog.

The following table summarizes changes to our backlog:

(In thousands)
Backlog at December 31, 2012	$	5,067,164
Bookings from new awards		1,043,062
Additions and reductions on existing contracts		642,043
Less: Amounts recognized in revenues		2,141,594
Backlog at September 30, 2013	$	4,610,675

Our backlog by segment was as follows:

	September 30, 2013				December 31, 2012
	(In thousands)
Asia Pacific	$	2,564,822	55	%	$	3,003,358	59	%
Atlantic		816,076	18	%		978,853	20	%
Middle East		1,229,777	27	%		1,084,953	21	%
Total Backlog	$	4,610,675	100	%	$	5,067,164	100	%

43

Of the September 30, 2013 backlog, we expect to recognize revenues as follows:

	2013		2014		Thereafter
	(In thousands)
Total Backlog	$	798,384	$	2,146,288	$	1,666,003

Liquidity and Capital Resources

Our primary source of liquidity is cash flows generated from operations. Revolving borrowings under the credit agreement we entered into with a syndicate of lenders and letter of credit issuers in May 2010, as last amended in August 2013 (the “Credit Agreement”), provide an additional resource to fund our operating and investing activities. Management believes the sources of liquidity and capital resources described above will be sufficient to fund our liquidity requirements for the next twelve months. However, in consideration of our planned strategic growth initiatives, as discussed below, the favorable interest rate environment and our desire to maintain the financing flexibility provided by the access to funds under our credit facility, we are currently considering additional financing arrangements, which could include a term loan or a long-term debt financing. However, we may not be able to obtain such a new financing on terms we determine to be acceptable.

Capital Expenditures

As part of our strategic growth program, our management regularly evaluates our marine vessel fleet and our fabrication yard construction capacity to ensure our fleet and construction capabilities are adequately aligned with our overall growth strategy. These assessments may result in capital expenditures to upgrade, acquire or operate vessels or upgrade fabrication yards that would enhance or grow our technical capabilities, or may involve engaging in discussions to dispose of certain marine vessels or fabrication yards.

Capital expenditures for the nine months ended September 30, 2013 were $225.4 million, as compared to $179.3 million for the nine months ended September 30, 2012. Capital expenditures for the nine months ended September 30, 2013 were primarily attributable to the construction of the Lay Vessel 108 (“LV 108”), and upgrades to the North Ocean 102 (“NO 102”), the NO 105 and DB 32, as well as costs associated with upgrading the capabilities of other marine vessels. The NO 105 was placed into service in 2012. Capital expenditures in the nine months ended September 30, 2012 were primarily attributable to the construction of the NO 105 and an upgrade of the capabilities of the NO 102, as well as other upgrades to other marine vessels in our fleet.

In addition, based on our expectations relating to the demand in the deepwater market, in December 2012, we entered into a contract to construct another vessel—the Deepwater Lay Vessel 2000 (“DLV 2000”). Like the LV 108, the DLV 2000 is designed for advanced deepwater subsea and marine construction operations. Over the next two years, we expect to incur capital expenditures ranging from approximately $500.0 million to $600.0 million associated with the construction of the LV 108 and DLV 2000 vessels.

Cash, Cash Equivalents and Investments

In the aggregate, our cash and cash equivalents, restricted cash and investments decreased by $386.2 million to $318.1 million at September 30, 2013 from $704.3 million at December 31, 2012.

At September 30, 2013, we had current restricted cash and cash equivalents totaling $18.5 million, all of which was held in restricted foreign-entity accounts.

At September 30, 2013, we had investments with a fair value of $17.3 million. Our investment portfolio consists of commercial paper, corporate notes and bonds, asset-backed commercial paper notes backed by a pool of mortgage-backed securities and mutual funds. Our investments are classified as available for sale and are

44

carried at fair value with unrealized gains and losses, net of tax, reported as a component of other comprehensive income (loss). Our net unrealized loss on investments was $1.7 million and $2.4 million at September 30, 2013 and December 31, 2012, respectively. The major components of our investments in an unrealized loss position are asset-backed and mortgage-backed obligations.

Our current assets, less current liabilities, excluding cash and cash equivalents and current restricted cash decreased by $92.8 million to a liability position of $74.3 million at September 30, 2013 from an $18.5 million asset position at December 31, 2012, primarily due to decreases in receivables and short-term investments and, to a lesser extent, increases in short-term notes payable and accounts payable.

Contracts in Progress and Advanced Billings on Contracts

Our net contracts in progress and advanced billings on contracts decreased by $44.6 million to $273.9 million at September 30, 2013 from $318.5 million at December 31, 2012.

Cash Flow Activities—Continuing Operations

Operating activities. Our net cash used in operating activities was $168.1 million in the nine months ended September 30, 2013, compared to net cash provided by operating activities of $109.6 million in the nine months ended September 30, 2012. This change was primarily attributable to the operating loss in the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012.

Investing activities. Our net cash used in investing activities was $167.8 million in the nine months ended September 30, 2013, compared to cash used in investing activities of $100.2 million in the nine months ended September 30, 2012. This change was primarily attributable to a decrease in the sales and purchases of available-for-sale securities and an increase in the purchases of plant, property and equipment, partially offset by proceeds associated with vessel sales.

Financing activities. Our net cash used in financing activities was $22.1 million in the nine months ended September 30, 2013 as compared to net cash used in financing activities of $3.8 million in the nine months ended September 30, 2012. The change was primarily attributable to increased payments related to the financing for the NO 105 and NO 102.

Credit Agreement

The Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $950.0 million and is scheduled to mature on August 19, 2016. Proceeds from borrowings under the Credit Agreement are available for working capital needs and other general corporate purposes. The Credit Agreement includes procedures for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder.

On August 2, 2013, we amended the Credit Agreement to, among other things: (1) add certain amounts to EBITDA (as defined in the Credit Agreement) for the fiscal quarters ended December 31, 2012, March 31, 2013 and June 30, 2013; (2) permit us to add to EBITDA certain cash expenses related to the Atlantic segment restructuring for the quarters ended or ending September 30, 2013, December 31, 2013 and March 31, 2014; and (3) increase the maximum permitted leverage ratio of total indebtedness to EBITDA from 3.00:1.00 to 3.75:1.00 for the quarters ended or ending September 30, 2013, December 31, 2013 and March 31, 2014. The August amendment to the Credit Agreement also provides that if we issue senior unsecured notes with a principal amount of at least $300 million, from the date of such issuance until March 31, 2014, the maximum permitted leverage ratio will increase from 3.75:1.00 to 5.00:1.00 and we will have to comply with a maximum permitted secured leverage ratio of total secured indebtedness to EBITDA of 2.00:1.00. The maximum leverage ratio and the minimum interest coverage ratio as defined in the Credit Agreement may differ in the method of calculation

45

from similarly titled measures used by other companies or in other agreements. The Credit Agreement also contains covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt, mergers and capital expenditures.

Other than customary mandatory prepayments in connection with casualty events, the Credit Agreement requires only interest payments on a quarterly basis until maturity. We may prepay all loans under the Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

Our overall borrowing capacity is in large part dependent on maintaining compliance with covenants under the Credit Agreement by generating sufficient income from operations. At September 30, 2013, we were in compliance with our covenant requirements. A comparison of the key financial covenants and compliance is as follows:

	Required		Actual
Maximum leverage ratio		3.75		0.90
Minimum interest coverage ratio		4.00		20.63

Loans outstanding under the Credit Agreement bear interest at the borrower’s option at either the Eurodollar rate plus a margin ranging from 1.50% to 2.50% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the 30-day Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 0.50% to 1.50% per year. The applicable margin for revolving loans varies depending on the credit ratings of the Credit Agreement. We are charged a commitment fee on the unused portions of the Credit Agreement, and that fee varies between 0.200% and 0.450% per year depending on the credit ratings of the Credit Agreement. Additionally, we are charged a letter of credit fee of between 1.50% and 2.50% per year with respect to the amount of each financial letter of credit issued under the Credit Agreement and a letter of credit fee of between 0.75% and 1.25% per year with respect to the amount of each performance letter of credit issued under the Credit Agreement, in each case depending on the credit ratings of the Credit Agreement. Under the Credit Agreement, we also pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement. In connection with entering into the Credit Agreement and certain amendments to the Credit Agreement, we paid certain fees to the lenders thereunder, and certain arrangement and other fees to the arrangers and agents for the Credit Agreement, which are being amortized to interest expense over the term of the Credit Agreement.

At September 30, 2013, there were no borrowings outstanding, and letters of credit issued under the Credit Agreement totaled $237.0 million. At September 30, 2013, there was $713.0 million available for borrowings or to meet letter of credit requirements under the Credit Agreement. During the quarter ended September 30, 2013, our outstanding borrowings under the Credit Agreement did not exceed $80.0 million, and our average outstanding borrowings under the Credit Agreement during the period from July 1, 2013 through September 30, 2013 was approximately $40.0 million with an average interest rate of 2.16%. In addition, we had $82.6 million in outstanding unsecured bilateral letters of credit as of September 30, 2013.

At September 30, 2013, based on the credit ratings applicable to the Credit Agreement, the applicable margin for Eurodollar-rate loans was 1.75%, the applicable margin for base-rate loans was 0.75%, the letter of credit fee for financial letters of credit was 1.75%, the letter of credit fee for performance letters of credit was 0.875%, and the commitment fee for unused portions of the Credit Agreement was 0.25%. The Credit Agreement does not have a floor for the base rate or the Eurodollar rate.

North Ocean Financing

North Ocean 102

In December 2009, J. Ray McDermott, S.A. (“JRMSA”), a wholly owned subsidiary of MII, entered into a vessel-owning joint venture transaction with Oceanteam ASA. As a result of this transaction, we had

46

consolidated notes payable of $32.9 million and $37.3 million on our consolidated balance sheets at September 30, 2013 and December 31, 2012, respectively, of which $32.9 million and $6.0 million was classified as current notes payable at September 30, 2013 and December 31, 2012, respectively. JRMSA has guaranteed approximately 50% of this debt based on its ownership percentages in the vessel-owning companies. The outstanding debt bears interest at a rate equal to the three-month LIBOR (which resets every three months) plus a margin of 3.315% and matures in January 2014.

North Ocean 105

On September 30, 2010, MII, as guarantor, and North Ocean 105 AS, in which we have a 75% ownership interest, as borrower, entered into a financing agreement to finance a portion of the construction costs of the North Ocean 105. The agreement provides for borrowings of up to $69.4 million, bearing interest at 2.76% per year, and requires principal repayment in 17 consecutive semi-annual installments, which commenced on October 1, 2012. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of North Ocean 105 AS, a mortgage on the North Ocean 105, and a lien on substantially all of the other assets of North Ocean 105 AS. MII unconditionally guaranteed all amounts to be borrowed under the agreement. There was $61.3 million and $65.4 million in borrowings outstanding under this agreement on our balance sheets at September 30, 2013 and December 31, 2012, respectively, of which $8.2 million was classified as current notes payable at September 30, 2013 and December 31, 2012.

ANZ Reimbursement Agreement

On April 20, 2012, McDermott and one of its wholly owned subsidiaries, McDermott Australia Pty. Ltd. (“McDermott Australia”), entered into a secured Letter of Credit Reimbursement Agreement (the “Reimbursement Agreement”) with Australia and New Zealand Banking Group Limited (“ANZ”). In accordance with the terms of the Reimbursement Agreement, ANZ issued letters of credit in the aggregate amount of approximately $109.0 million to support McDermott Australia’s performance obligations under contractual arrangements relating to a field development project. The obligations of McDermott and McDermott Australia under the Reimbursement Agreement are secured by McDermott Australia’s interest in the contractual arrangements and certain related assets.

Surety Bonds

In 2012 and 2007, JRMSA executed general agreements of indemnity in favor of surety underwriters based in Mexico relating to surety bonds issued in support of contracting activities of J. Ray McDermott de Mèxico, S.A. de C.V., a subsidiary of JRMSA. As of September 30, 2013, the aggregate principal amount of bonds issued under these arrangements totaled $46.5 million.

Derivative Contracts

We previously entered into derivative contracts to mitigate currency exchange movements primarily associated with certain firm purchase commitments and various foreign currency expenditures we expect to incur on one of our Asia Pacific segment’s EPCI projects through 2017. While we currently believe that these contracts will be effective in mitigating the associated currency exchange risks, it is possible that changes in the project may cause reduced effectiveness of these derivative contracts. Therefore, we may experience larger gains or losses on foreign currency movements due to the ineffective portion or the portion excluded from the assessment of effectiveness of these and other derivative contracts.

At September 30, 2013, our derivative financial instruments consisted primarily of foreign currency forward contracts. The notional value of our outstanding derivative contracts totaled approximately $1.3 billion at September 30, 2013, with maturities extending through 2017. Of this amount, approximately $721.7 million is associated with various foreign currency expenditures we expect to incur on the Asia Pacific segment project.

47

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our exposures to market risks have not changed materially from those disclosed in Item 7A included in Part II of our annual report on Form 10-K for the year ended December 31, 2012.

Item 4. Controls and Procedures

As of the end of the period covered by this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) adopted by the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our disclosure controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. You should note that the design of any system of disclosure controls and procedures is based in part upon various assumptions about the likelihood of future events, and we cannot assure you that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote. Based on the evaluation referred to above, our Chief Executive Officer and Chief Financial Officer concluded that the design and operation of our disclosure controls and procedures are effective as of September 30, 2013 to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and such information is accumulated and communicated to management, including our principal executive and principal financial officers or persons performing similar functions, as appropriate to allow timely decisions regarding disclosure. There has been no change in our internal control over financial reporting during the quarter ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

48

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 10 to our unaudited condensed consolidated financial statements in Part I of this report, which we incorporate by reference into this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information on our purchases of equity securities during the quarter ended September 30, 2013, all of which involved repurchases of shares of MII common stock in connection with the vesting of restricted stock units pursuant to the provisions of employee benefit plans that permit the repurchase of common stock to satisfy statutory tax withholding obligations associated with the vesting of restricted stock units:

Period	Total number of shares purchased		Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs		Maximum number of shares that may yet be purchased under the plans or programs
July 1—July 31, 2013		—	$	—		not applicable		not applicable
August 1—August 31, 2013		703		14.22		not applicable		not applicable
September 1—September 30, 2013		—		—		not applicable		not applicable
Total		703	$	14.22		not applicable		not applicable

49

Item 6. Exhibits

Exhibit Number	Description
3.1*	McDermott International, Inc.’s Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-08430)).
3.2*	McDermott International, Inc.’s Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to McDermott International, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 (file No. 1-08430)).
3.3*	Amended and Restated Certificate of Designation of Series D Participating Preferred Stock of McDermott International, Inc. (incorporated by reference to Exhibit 3.3 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-08430)).
4.1*	Amendment No. 3 to Credit Agreement, dated as of August 2, 2013, the parties to which include McDermott International, Inc., as borrower, certain of its wholly owned subsidiaries, as guarantors, certain banks and financial institutions executing the signature pages thereto, as lenders and letter of credit issuers, and Crédit Agricole Corporate and Investment Bank, as administrative agent (incorporated by reference to Exhibit 4.1 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (File No. 1-08430)).
10.1	Letter Agreement dated October 17, 2013 between McDermott International, Inc. and David Dickson.
10.2	Change of Control Agreement among McDermott International, Inc., McDermott, Inc. and David Dickson.
10.3	Retention Restricted Stock Award Grant Agreement dated as of October 31, 2013 between McDermott International, Inc. and David Dickson.
10.4	Form of Retention Restricted Stock Unit Grant Agreement dated as of August 8, 2013 between McDermott International, Inc. and various employees.
10.5	Separation Agreement dated as of October 29, 2013 between McDermott, Inc. and John T. McCormack.
31.1	Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.
32.1	Section 1350 certification of Chief Executive Officer.
32.2	Section 1350 certification of Chief Financial Officer.

* Incorporated by reference to the filing indicated.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

50

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

McDERMOTT INTERNATIONAL, INC.
By:	/s/ PERRY L. ELDERS
	Perry L. Elders Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)

November 4, 2013

51

EXHIBIT INDEX

Exhibit Number	Description
3.1*	McDermott International, Inc.’s Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.1 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 (File No. 1-08430)).
3.2*	McDermott International, Inc.’s Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2 to McDermott International, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 (file No. 1-08430)).
3.3*	Amended and Restated Certificate of Designation of Series D Participating Preferred Stock of McDermott International, Inc. (incorporated by reference to Exhibit 3.3 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2001 (File No. 1-08430)).
4.1*	Amendment No. 3 to Credit Agreement, dated as of August 2, 2013, the parties to which include McDermott International, Inc., as borrower, certain of its wholly owned subsidiaries, as guarantors, certain banks and financial institutions executing the signature pages thereto, as lenders and letter of credit issuers, and Crédit Agricole Corporate and Investment Bank, as administrative agent (incorporated by reference to Exhibit 4.1 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (File No. 1-08430)).
10.1	Letter Agreement dated October 17, 2013 between McDermott International, Inc. and David Dickson.
10.2	Change of Control Agreement among McDermott International, Inc., McDermott, Inc. and David Dickson.
10.3	Retention Restricted Stock Award Grant Agreement dated as of October 31, 2013 between McDermott International, Inc. and David Dickson.
10.4	Form of Retention Restricted Stock Unit Grant Agreement dated as of August 8, 2013 between McDermott International, Inc. and various employees.
10.5	Separation Agreement dated as of October 29, 2013 between McDermott, Inc. and John T. McCormack.
31.1	Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer.
31.2	Rule 13a-14(a)/15d-14(a) certification of Chief Financial Officer.
32.1	Section 1350 certification of Chief Executive Officer.
32.2	Section 1350 certification of Chief Financial Officer.

* Incorporated by reference to the filing indicated.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

52

EX-10.1

EXHIBIT 10.1

Personal & Confidential

October 17, 2013

David Dickson

Dear David:

We are pleased to confirm our offer for you to join McDermott International, Inc. (“McDermott”). The details of our offer, which when accepted by you, will become our agreement (this “Agreement”), are:

1. Date of Commencement of Services and Position

Your employment will begin on October 31, 2013.

Your position initially will be Executive Vice President and Chief Operating Officer of McDermott. Effective on or before December 16, 2013 you will become President and Chief Executive Officer of McDermott. In addition, on the date you become President and Chief Executive Officer, you will be elected as a member of McDermott’s Board of Directors by the Board of Directors (with annual reelection subject to the regular nomination and shareholder vote process).

2. Compensation and Benefits

a. Salary

Your annual salary initially will be $850,000.00, payable on a semi-monthly basis. Your salary will be prorated for 2013 and will be subject to future adjustments as may be determined by the Compensation Committee of McDermott’s Board of Directors (the “Compensation Committee”).

b. Annual Bonus

For 2014 and later years, you will be eligible, pursuant to McDermott’s Executive Incentive Compensation Plan (the “EICP”), for a target bonus equal to your base salary, which for 2014 will be $850,000.00. Currently, the EICP provides for a range of payout of 25% to 200% of target bonus, depending on performance results.

c. Signing Bonus

You will be paid on December 16, 2013 a signing bonus of $480,000.00.

d. Annual Long Term Incentive Compensation

You will be eligible to participate in annual long-term incentive awards, commencing in 2014. Your target annual award opportunity for 2014 will be between $3,500,000.00 and $4,000,000.00 as determined by the Compensation Committee, and for 2015 and later years is

expected to be at least $4,000,000.00. Each annual award could be in one or more awards of performance cash, restricted stock, performance restricted stock, stock options, restricted stock units or performance stock units, as selected by the Compensation Committee. Subject to the approval of the Compensation Committee, your long-term incentive awards will have terms and conditions consistent with those provided to other senior McDermott executives. Your participation in McDermott’s long-term incentive plan will be subject to the terms of the plan and related award agreements.

While there is every reasonable expectation that you would continue to participate in the plan in the future at a level at least as favorable as your initial participation, your continued participation and the level of participation will be determined annually by the Compensation Committee and the plan is subject to amendment, termination or change.

e. Retention Restricted Stock

You will receive a one-time retention award in the form of a grant of restricted stock with a grant date face value of $3,800,000.00, determined by reference to the closing price of McDermott common stock on the date of your commencement of employment with McDermott. A portion of the award with a face value at grant of $1,500,000.00 will vest on June 15, 2014 subject to your continued employment with McDermott. The remaining portion of the award with a face value at grant of $2,300,000.00 will vest in three tranches of $766,666.67 on June 15, 2015, of $766,666.67 on June 15, 2016 and of $766,666.66 on June 15, 2017, subject to your continued employment with McDermott.

f. Perquisites

You will participate in McDermott’s perquisite plan for senior executives at $20,000 per year, commencing in 2014.

g. Change in Control Agreement

You will be offered a Change in Control Agreement substantially in the form of the Change in Control Agreement between McDermott and its current Chief Executive Officer, except that the salary and bonus severance multiplier will be 2.5.

h. SERP

You will be eligible to participate in the McDermott Supplemental Executive Retirement Plan, subject to the terms and conditions thereof.

i. Vacation

You will be entitled to four weeks of annual vacation. Your vacation will be prorated for 2013.

j. Benefits

You will be eligible to participate in McDermott’s health and welfare benefits plans and 401(k) plan generally applicable to senior executives in accordance with the terms of those programs.

2

3. Stock Ownership Policy

You will be subject to McDermott’s policy that requires its senior executives to own McDermott common stock.

4. Code of Ethics and Business Conduct

You will be subject to and expected to comply with McDermott’s Code of Ethics for Chief Executive Officer and Senior Financial Officers and McDermott’s Code of Business Conduct.

5. Indemnification

As an employee and director, you will be eligible for indemnification pursuant to McDermott’s Amended and Restated By-Laws.

6. Additional Terms

You acknowledge that you are not bound by or otherwise subject to any contractual or other restrictions that would prevent you from joining McDermott and providing services to McDermott as an executive officer and director as contemplated under this Agreement. You also will not bring to your McDermott employment or use in connection with your employment any confidential or proprietary information that you used or had access to by reason of any previous employment that is the property of any previous employer, including, but not limited to, passwords, e-mails, business plans, documents, and the like. During our discussions about your proposed employment, you assured us that you would be able to perform your job duties within the guidelines just described.

You will be required to comply with McDermott’s policy on Employee Physicals, Alcohol and Drug Screens.

McDermott will pay or reimburse you for your reasonable out-of-pocket legal fees and expenses incurred in connection with entering into this Agreement, provided that McDermott’s obligation to do so shall not exceed $15,000.00.

Notwithstanding any other term or condition in this Agreement, nothing herein is intended to create a contract for a specified term, and you understand and agree that the relationship between you and McDermott is one of at-will employment. This means that you may terminate your employment with McDermott at any time and for any reason whatsoever simply by notifying the Chairman of the Board of Directors of McDermott. Likewise, McDermott may terminate your employment at any time and for any reason whatsoever, with or without cause or advance notice.

All payments under this Agreement will be subject to any applicable payroll and tax deductions. All general personnel policies existing for employees of McDermott will apply to you, and you are expected to apply strictest confidentiality to all business matters.

Texas law governs this Agreement and the terms of your employment by McDermott. Disputes about this Agreement and your employment will be subject to arbitration under the AAA Commercial Arbitration rules and will be held in Houston, Texas. Any claim or action brought as a result of a breach of this Agreement must be made within one year of such breach.

3

You agree that, other than in this Agreement, McDermott has not made any representations, promises, or commitments concerning your proposed employment. This Agreement constitutes the entire agreement between you and McDermott, including any of its directors, officers, agents or employees, and supersedes all other representations, warranties, agreements, and understandings, oral or otherwise, with respect to the matters contained in this Agreement. You confirm that you have consulted with your counsel in connection with your decision to enter into this Agreement.

7. Severability

In the event that any term or provision of this Agreement shall be finally determined to be superseded, invalid, illegal, or otherwise unenforceable pursuant to applicable law, that determination shall not impair or otherwise affect the validity, legality, or enforceability, to the maximum extent permissible by applicable law, of any of the other terms and provisions of this Agreement.

Sincerely,
McDermott International, Inc.
By:	/s/ Stephen M. Johnson
	Name:	Stephen M. Johnson
	Title:	Chairman, President and Chief Executive Officer

Employment Offer Accepted:

/s/ D. Dickson	17th Oct 2013
David Dickson	Date

4

EX-10.2

EXHIBIT 10.2

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (this “Agreement”) is by and among McDermott International, Inc., a Panamanian corporation (the “Company”), McDermott, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “Employer”), and David Dickson (“Executive”).

The Company and the Employer consider it essential to the interests of the Company’s stockholders to secure the continued employment of key management personnel. The Board of Directors of the Company recognizes that the possibility of a Change in Control (as defined in Exhibit A) exists and that the uncertainty this raises may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. In order to encourage the continued attention and dedication of key management personnel, this Agreement is being entered into by the Company, the Employer and Executive.

The Company, the Employer and Executive agree as follows:

1. DEFINITIONS. Capitalized terms used but not otherwise defined herein are defined in Exhibit A hereto.

2. SEVERANCE BENEFITS.

(a) Entitlement to Benefits If Executive experiences a Covered Termination and executes a Waiver and Release in accordance with Section 2(b) below that is no longer subject to rescission, Executive will be entitled to the following:

(i) Accrued Benefits. The Accrued Benefits, payable on the 60th day after the Covered Termination Date, or such earlier date as may be required by applicable law.

(ii) EDCP. As of the Covered Termination Date, a fully vested and non-forfeitable interest in Executive’s account balance in the EDCP, payable in accordance with the terms of the EDCP.

(iii) Unvested Equity-Based Awards. As of the Covered Termination Date, unless otherwise settled in accordance with the provisions of Section 3 of this Agreement and the plans and agreements referred to therein, a fully vested and non-forfeitable interest in any outstanding unvested equity-based awards, and to the extent applicable, payable on the 60th day after the Covered Termination Date; provided that no such award that is subject to Code Section 409A will be paid on a date earlier than is provided in the applicable plan and award agreement.

(iv) Severance Payment Based on Salary and Target Bonus. An amount equal to 2.5 times the sum of (A) the Salary, and (B) Executive’s target award under the EICP for the year in which the Covered Termination Date occurs, in a lump sum in cash on the 60th day after the Covered Termination Date.

(v) Additional Severance Payments Based on Bonus.

(1) Current Performance Year. An amount equal to the product of (A) the Salary and (B) the Target Bonus Percentage, with the product of (A) and (B) prorated based on the number of days Executive was employed during the bonus year in which Executive’s Covered Termination Date occurs, in a lump sum in cash on the 60th day after the Covered Termination Date.

(2) Prior Performance Year. If a bonus is paid under the EICP after Executive’s Covered Termination Date occurs for the immediately preceding calendar year, then Executive will be entitled to an amount equal to the product of (A) the Salary and (B) the Target Bonus Percentage (or, if greater, the actual amount of the bonus determined under the EICP for such prior calendar year), in a lump sum in cash at the later of (i) the 60th day after the Covered Termination Date and (ii) the time such bonus is paid to other EICP participants.

(vi) Other Compensation. The Other Compensation payable or provided in the manner and time specified in applicable documents governing such amounts.

(b) Waiver and Release. Notwithstanding any provision of this Agreement to the contrary, in order to receive the severance benefits payable under any provision of Section 2(a)(ii), (iii), (iv) and (v) of this Agreement, Executive must first execute an appropriate waiver and release agreement in a form acceptable to the Company (a currently acceptable form is attached hereto as Exhibit B (the “Waiver and Release”)), whereby Executive shall agree to release and waive, in return for such severance benefits, any claims that Executive may have against the Company and the Employer and their respective Affiliates, directors, officers and other customary persons from any claim or liability arising out of or related to Executive’s employment with or termination of employment from the Employer and any of its Affiliates (except for amounts to which Executive is legally entitled pursuant to employee benefit plans and rights to indemnification); provided, however, such Waiver and Release shall not release any claim or cause of action by or on behalf of Executive for any payment or vested benefit that is due under either this Agreement or any employee benefit plan or program of the Company or the Employer until fully paid. Executive shall have 21 days after receipt of the Waiver and Release to consider and timely execute and return it to the Company. After return, Executive shall have an additional seven days in which Executive can revoke the Waiver and Release; thereafter, the Waiver and Release shall be irrevocable. The Company or the Employer shall provide the Waiver and Release to Executive no later than five days after his Termination Date. If the Waiver and

2

Release is not timely executed and returned, or it is revoked within the seven-day revocation period, no benefits shall be paid under this Agreement except those to which the Executive has a vested interest without regard to Section 2(a) of this Agreement.

(c) Reduction to Avoid Parachute Taxes. Exhibit C hereto sets forth the manner of reduction to be applied to avoid parachute taxes.

In no event shall the payments or benefits provided for in Sections 2(a)(i), 2(a)(iii), 2(a)(iv) and 2(a)(v) above that are not subject to (or are exempt from) Code Section 409A be paid later than March 15th of the calendar year immediately following the calendar year in which Executive’s Covered Termination Date occurs.

3. CHANGE IN CONTROL EQUITY-BASED BENEFITS. If a Change in Control occurs, any benefits Executive may be entitled to with respect to any equity-based compensation shall be determined in accordance with the applicable plans and award agreements. In the event of any conflict between the terms of any such plan or award agreement and Section 2(a)(iii) of this Agreement, the terms of such plan or award agreement shall control.

4. INTERNAL REVENUE CODE SECTION 409A.

(a) Compliance. It is the intent of the parties that the provisions of this Agreement either comply with Code Section 409A and the Treasury regulations and guidance issued thereunder or that one or more elements of compensation or benefits be exempt from Code Section 409A. Accordingly, the parties intend that this Agreement be interpreted and operated in a manner consistent with such requirements in order to avoid the application of penalty taxes under Code Section 409A to the extent reasonably practicable. The Company and the Employer shall neither cause nor permit: (i) any payment, benefit or consideration to be substituted for a benefit that is payable under this Agreement if such action would result in the failure of any amount that is subject to Code Section 409A to comply with the applicable requirements of Code Section 409A; or (ii) any adjustments to any equity interest to be made in a manner that would result in the equity interest’s becoming subject to Code Section 409A unless, after such adjustment, the equity interest is in compliance with the requirements of Code Section 409A to the extent applicable. A Covered Termination is an “involuntary separation from service” for purposes of Code Section 409A.

(b) Waiting Period for Specified Employees. Notwithstanding any provision of this Agreement to the contrary, if Executive is a “Specified Employee” (as that term is defined in Code Section 409A) as of Executive’s Covered Termination Date, then any amounts or benefits which are payable under this Agreement upon Executive’s “Separation from Service” (within the meaning of Code Section 409A), which are subject to the provisions of Code Section 409A and not otherwise excluded under Code Section 409A, and would otherwise be payable during the first six-month period following such Separation from Service, shall be paid on the first business day that (i) is at least six months after the date after Executive’s Covered Termination Date or (ii) follows Executive’s date of death, if earlier.

3

5. CONFIDENTIALITY AND NON-DISCLOSURE. Executive acknowledges that the Company and the Employer have agreed to provide Executive with Confidential Information regarding the Company and the Employer and their respective businesses and have previously provided Executive other such Confidential Information. In return for this and other consideration provided under this Agreement, Executive agrees that Executive will not, while employed by the Employer or any of its Affiliates and thereafter, disclose or make available to any other person or entity, or use for Executive’s own personal gain, any Confidential Information, except for such disclosures as required in the performance of Executive’s duties hereunder as may otherwise be required by applicable law or legal process (in which case Executive shall notify the Company and the Employer of such legal or judicial proceeding as soon as practicable following Executive’s receipt of notice of such a proceeding, and permit the Company and the Employer to seek to protect their respective interests and information). For purposes of this Agreement, “Confidential Information” shall mean any and all information, data and knowledge that has been created, discovered, developed or otherwise become known to the Company, the Employer or any of their respective Affiliates or ventures or in which property rights have been assigned or otherwise conveyed to the Company, the Employer or any of their respective Affiliates or ventures, which information, data or knowledge has commercial value in the business in which the Company, the Employer or any of their respective affiliates is engaged, except such information, data or knowledge as is or becomes known to the public without Executive’s violation of any of the terms of this Section 5. By way of illustration, but not limitation, Confidential Information includes business trade secrets, secrets concerning the Company’s and the Employer’s respective plans and strategies, nonpublic information concerning material market opportunities, technical trade secrets, processes, formulas, know-how, improvements, discoveries, developments, designs, inventions, techniques, marketing plans, manuals, records of research, reports, memoranda, computer software, strategies, forecasts, new products, unpublished financial information, projections, licenses, prices, costs, and employee, customer and supplier lists or parts thereof.

6. RETURN OF PROPERTY. Executive agrees that at the time of Executive’s leaving employ with the Employer or any of its Affiliates, Executive will deliver to the Employer (and will not keep in his possession, recreate or deliver to anyone else) all Confidential Information as well as all other devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, customer or client lists or information, or any other documents or property (including all reproductions of the aforementioned items) belonging to the Company, the Employer or any of their respective Affiliates, regardless of whether such items were prepared by Executive.

4

7. NON-SOLICITATION.

(a) For consideration provided under this Agreement, including but not limited to the agreement of the Company and the Employer to provide Executive with Confidential Information (as defined in Section 5 above) regarding the Company, the Employer and their respective businesses, Executive agrees that, while employed by the Employer or any of its Affiliates and for twelve months following a Covered Termination, Executive shall not, without the prior written consent of the Company and the Employer, directly or indirectly, (i) hire or induce, entice or solicit (or attempt to induce, entice or solicit) any employee of the Company, the Employer or any of their respective Affiliates or ventures to leave the employment of the Company, the Employer or any of their respective Affiliates or ventures or (ii) solicit or attempt to solicit the business of any customer or acquisition prospect of the Company, the Employer or any of their respective Affiliates or ventures with whom Executive had any actual contact while employed at the Employer.

(b) Executive acknowledges that these restrictive covenants under this Agreement, for which Executive received valuable consideration from the Company and the Employer as provided in this Agreement, including, but not limited to the agreement of the Company and the Employer to provide Executive with Confidential Information regarding the Company, the Employer and their respective businesses are ancillary to otherwise enforceable provisions of this Agreement that the consideration provided by the Company and the Employer gives rise to the interest of each of the Company and the Employer in restraining Executive and that the restrictive covenants are designed to enforce Executive’s consideration or return promises under this Agreement. Additionally, Executive acknowledges that these restrictive covenants contain limitations as to time and scope of activity to be restrained that are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other legitimate business interests of the Company and the Employer, including, but not limited to, the Company’s and the Employer’s need to protect their Confidential Information.

8. NOTICES. For purposes of this Agreement, notices and all other communications must be in writing and will be deemed to have been given when personally delivered or when mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company or the Employer:	757 N. Eldridge Parkway
	Houston, TX 77079
	ATTN: Senior Vice President and
	Chief Administration Officer
If to Executive:	David Dickson

5

or to such other address as either party may furnish to the other in writing in accordance with this Section.

9. APPLICABLE LAW. The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Texas, but without giving effect to any principles of conflict of laws thereunder which would result in the application of the laws of any other jurisdiction.

10. SEVERABILITY. If any provision of this Agreement is determined to be invalid or unenforceable, then the invalidity or unenforceability of that provision will not affect the validity or enforceability of any other provision of this Agreement and all other provisions of this Agreement shall remain in full force and effect.

11. WITHHOLDING OF TAXES. The Company or the Employer, as applicable, may withhold from any payments under this Agreement all federal, state, local or other taxes as may be required pursuant to any applicable law or governmental regulation or ruling.

12. NO ASSIGNMENT; SUCCESSORS. Executive’s right to receive payments or benefits under this Agreement shall not be assignable or transferable, whether by pledge, creation of a security interest or otherwise, whether voluntarily, involuntarily, by operation of law or otherwise, other than a transfer by will or by the laws of descent or distribution, and in the event of any attempted assignment or transfer contrary to this Section 12 the Company or Employer will have no liability to pay any amount so attempted to be assigned or transferred. Subject to the immediately preceding sentence, this Agreement is binding upon Executive and inures to the benefit of and is enforceable by Executive and Executive’s personal or legal representatives, executors, administrators, and heirs.

This Agreement is binding upon and inures to the benefit of the Company and the Employer and their respective successors and assigns (including, without limitation, any company into or with which the Company may merge or consolidate).

13. NUMBER AND GENDER. Wherever appropriate herein, words used in the singular will include the plural, the plural will include the singular, and the masculine gender will include the feminine gender.

14. CONFLICTS. Except as otherwise specifically provided herein, this Agreement constitutes the entire understanding of the parties hereto with respect to its subject matter and supersedes any other agreement or other understanding, whether oral or written, express or implied, between the parties hereto concerning, related to or otherwise in connection with, the subject matter hereof.

15. AMENDMENT AND WAIVER. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by Executive and such officer as may be specifically designated by the Board. No written waiver by any party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by any other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time (unless specifically provided in such written waiver).

6

16. COUNTERPARTS. This Agreement may be executed in several counterparts, each of which will be deemed to be an original but all of which together will constitute one and the same instrument.

17. TERM. The effective date of this Agreement shall commence as of October 31, 2013 (“Effective Date”) and shall end on the earlier of (a) the date one year after a Change in Control occurs, or (b) the date on which Executive’s employment is terminated under circumstances that do not constitute a Covered Termination; provided that terms of this Agreement which must survive the expiration of the term of this Agreement in order to be given full effect (including the provisions of Sections 5 through this Section 17 and the related definitional provisions) will survive.

[Intentionally Left Blank]

7

McDERMOTT INTERNATIONAL, INC.
By:	/s/ Stephen M. Johnson
Name:	Stephen M. Johnson
Title:	Chairman, President and Chief Executive Officer
Date:	November 1, 2013
McDERMOTT, INC.
By:	/s/ Stephen M. Johnson
Name:	Stephen M. Johnson
Title:	President and Chief Executive Officer
Date:	November 1, 2013
EXECUTIVE
By:	/s/ David Dickson
Name:	David Dickson
Date:	November 1, 2013

8

EXHIBIT A

DEFINITIONS

The following terms have the meanings set forth below.

“Accrued Benefits” means

(i) any portion of Executive’s Salary earned through the Covered Termination Date and not yet paid;

(ii) reimbursement for any and all amounts advanced in connection with Executive’s employment for reasonable and necessary expenses incurred by Executive through the date of Covered Termination in accordance with the Company’s policies and procedures on reimbursement of expenses; and

(iii) any earned vacation pay not theretofore used or paid in accordance with the Company’s policy for payment of earned and unused vacation time.

“Affiliate” means an “affiliate” within the meaning of Rule 12b-2 promulgated under Section 12 of the Exchange Act.

“Board” means the Board of Directors of the Company.

“Cause” means

(i) the continued failure of Executive to perform substantially Executive’s duties with the Company (occasioned by reason other than physical or mental illness death or disability of Executive) after a written demand for substantial performance is delivered to Executive by the Compensation Committee of the Board which specifically identifies the manner in which the Compensation Committee of the Board or the Chief Executive Officer believes that Executive has not substantially performed Executive’s duties, after which Executive shall have 30 days to defend or remedy such failure to substantially perform Executive’s duties;

(ii) the engaging by Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company; or

(iii) the conviction of Executive with no further possibility of appeal for, or plea of guilty or nolo contendere by Executive to, any felony.

The cessation of employment of Executive under subparagraph (i) and (ii) above shall not be deemed to be for “Cause” unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Compensation Committee of the Board at a meeting of such Committee called and held for such

A-1

purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel, to be heard before such Committee), finding that, in the good faith opinion of such Committee, Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail.

A “Change in Control” will be deemed to have occurred upon the occurrence of any of the following:

(a) 30% Ownership Change: Any Person, other than an ERISA-regulated pension plan established by the Company, the Employer, or an Affiliate of either of them, makes an acquisition of Outstanding Voting Stock and is, immediately thereafter, the beneficial owner of 30% or more of the then Outstanding Voting Stock, unless such acquisition is made directly from the Company in a transaction approved by a majority of the Incumbent Directors; or any group is formed that is the beneficial owner of 30% or more of the Outstanding Voting Stock; or

(b) Board Majority Change: Individuals who are Incumbent Directors cease for any reason to constitute a majority of the members of the Board; or

(c) Major Mergers and Acquisitions: Consummation of a Business Combination unless, immediately following such Business Combination, (i) all or substantially all of the individuals and entities that were the beneficial owners of the Voting Stock of the Company outstanding immediately before such Business Combination beneficially own, directly or indirectly, at least 50% of the then outstanding shares of Voting Stock of the parent corporation resulting from such Business Combination in substantially the same relative proportions as their ownership, immediately before such Business Combination, of the shares of Voting Stock of the Company outstanding, (ii) if the Business Combination involves the issuance or payment by the Company of consideration to another entity or its shareholders, the total fair market value of such consideration plus the principal amount of the consolidated long-term debt of the entity or business being acquired (in each case, determined as of the date of consummation of such Business Combination by a majority of the Incumbent Directors) does not exceed 50% of the sum of the fair market value of the shares of Voting Stock of the Company outstanding plus the principal amount of the Company’s consolidated long-term debt (in each case, determined immediately before such consummation by a majority of the Incumbent Directors), (iii) no Person (other than any corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 30% or more of the then outstanding shares of Voting Stock of the parent corporation resulting from such Business Combination and (iv) a majority of the members of the board of directors of the parent corporation resulting from such Business Combination were Incumbent Directors of the Company immediately before consummation of such Business Combination; or

A-2

(d) Major Asset Dispositions: Consummation of a Major Asset Disposition unless, immediately following such Major Asset Disposition, (i) individuals and entities that were beneficial owners of the Voting Stock of the Company outstanding immediately before such Major Asset Disposition beneficially own, directly or indirectly, at least 50% of the then outstanding shares of Voting Stock of the Company (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding shares of Voting Stock of such acquiring entity) and (ii) a majority of the members of the Board (if it continues to exist) and of the entity that acquires the largest portion of such assets (or the entity, if any, that owns a majority of the outstanding voting stock of such acquiring entity) were Incumbent Directors of the Company immediately before consummation of such Major Asset Disposition; or

(e) Other Circumstances: Such other circumstances as may be deemed by the Board in its sole discretion to constitute a change in control of the Company.

For purposes of the definition of a “Change in Control”,

(1) “Person” means an individual, entity or group;

(2) “group” has the same meaning as used in Section 13(d)(3) of the Exchange Act;

(3) “beneficial owner” is used as it is defined for purposes of Rule 13d-3 under the Exchange Act;

(4) “Incumbent Director” means a director of the Company (x) who was a director of the Company on the effective date of this Agreement or (y) who becomes a director after such date and whose election, or nomination for election by the Company’s shareholders, was approved by a vote of a majority of the Incumbent Directors at the time of such election or nomination, except that any such director will not be deemed an Incumbent Director if his or her initial assumption of office occurs as a result of an actual or threatened election contest or other actual or threatened solicitation of proxies by or on behalf of a Person other than the Board;

(5) “Business Combination” means

(x) a merger or consolidation involving the Company or its Voting Stock, or

A-3

(y) an acquisition by the Company, directly or through one or more subsidiaries, of another entity or its Voting Stock or assets;

(6) “parent corporation resulting from a Business Combination” means the Company if its stock is not acquired or converted in the Business Combination and otherwise means the entity which as a result of such Business Combination owns the Company or all or substantially all the Company’s assets either directly or through one or more subsidiaries;

(7) “Major Asset Disposition” means the sale or other disposition in one transaction or a series of related transactions of 50% or more of the assets of the Company and its subsidiaries on a consolidated basis; and any specified percentage or portion of the assets of the Company will be based on fair market value, as determined by a majority of the Incumbent Directors; and

(8) “Voting Stock” means, with respect to the Company or any other entity, outstanding voting securities of such entitled to vote generally in the election of members of the board of directors or other governing body of such entity; and any specified percentage or portion of the Outstanding Voting Stock (or of other voting stock) is determined based on the combined voting power of such securities.

“Code” means the Internal Revenue Code of 1986, as amended.

“Company” means McDermott International, Inc., and, except for purposes of determining whether a Change in Control has occurred, any successor thereto.

“Covered Termination” means a termination of Executive’s employment (such that Executive ceases to be employed by the Employer, the Company or any of their respective Affiliates) that is a “Separation from Service” (as defined in Code Section 409A and the Treasury regulations and guidance issued thereunder) within the one-year period following a Change in Control during the Term of this Agreement due to:

(a) an involuntary termination that does not result from any of the following:

(1) death;

(2) Disability; or

(3) termination for Cause; or

(b) a termination by Executive for Good Reason.

A-4

“Covered Termination Date” means (i) if Executive’s employment is terminated for Cause, the date on which the Company delivers to Executive the requisite resolution, or, with respect to a termination under subparagraph (iii) of the definition of Cause, the date on which the Employer notifies Executive of such termination, (ii) if Executive’s employment is terminated by the Employer for a reason other than Cause or Executive’s death, the date on which the Employer notifies Executive of such termination, (iii) if Executive’s employment is terminated by Executive for Good Reason, the date on which Executive notifies the Employer of such termination (after having given the Company notice and a 30-day cure period), or (iv) if Executive’s employment is terminated by reason of death, the date of death of Executive.

“Disability” means circumstances which would qualify Executive for long-term disability benefits under the Company’s or the Employer’s long-term disability plan, whether or not Executive is covered under such plan.

“EDCP” means the McDermott International, Inc. Director and Executive Deferred Compensation Plan, as in effect on the Covered Termination Date.

“EICP” means the McDermott International, Inc. Executive Incentive Compensation Plan, or any successor plan thereto.

“Employer” means McDermott, Inc., and any successor thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Excise Tax” means any excise tax imposed under Code Section 4999.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Good Reason” means any one or more of the following events which occurs following a Change in Control:

(a) a material diminution in the duties or responsibilities of Executive from those applicable immediately before the date on which a Change in Control occurs;

(b) a material reduction in Executive’s annual Salary as in effect on the Effective Date of this Agreement or as the same may be increased from time to time;

(c) the failure by the Company or the Employer to continue in effect any compensation plan in which Executive participates immediately before the Change in Control which is material to Executive’s total compensation, unless a comparable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company or the Employer to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable than existed immediately before the Change in Control, unless the action by the Company or the Employer applies to all similarly situated employees;

A-5

(d) the failure by the Company and the Employer to continue to provide Executive with material benefits in the aggregate that are substantially similar to those enjoyed by Executive under any of the Company’s (or the Employer’s or their respective Affiliates’) pension, savings, life insurance, medical, health and accident, or disability plans in which Executive was participating immediately before the Change in Control if such benefits are material to Executive’s total compensation, the taking of any other action by the Company or the Employer which would directly or indirectly materially reduce any of such benefits or deprive Executive of any fringe benefit enjoyed by Executive at the time of the Change in Control if such fringe benefit is material to Executive’s total compensation, unless the action by the Company or the Employer applies to all similarly situated employees; or

(e) a change in the location of Executive’s principal place of employment with the Employer or the Company by more than 50 miles from the location where Executive was principally employed immediately before the Change in Control without Executive’s consent.

If a Change in Control occurs and any of the events described above occurs prior to the first anniversary of such Change in Control (an “Event”), Executive shall give the Company written notice (the “Executive Notice”) within 60 days following Executive’s knowledge of an Event that Executive intends to terminate employment as a result. The Company shall have 30 days following receipt of the Executive Notice in which to cure the Event. If the Company does not take such action within that time, the Event shall constitute Good Reason. If Executive does not provide the Executive Notice within 60 days as required above then the Event shall not constitute Good Reason, and thereafter, for purposes of determining whether Executive has Good Reason, Executive’s terms and conditions of employment after the occurrence of the Event shall be substituted for those terms and conditions of Executive’s employment in effect immediately prior to the date of this Agreement.

“Other Compensation” shall mean all payments and benefits to which Executive may be entitled under the terms of any applicable compensation arrangement or benefit plan or program of the Company that do not specify the time of distribution, other than such payments and benefits provided for under Section 2(a)(i) through Section 2(a)(v) of this Agreement; provided that Other Compensation shall not include any entitlement to severance under any severance policy of the Company generally applicable to the salaried employees of the Company.

“Salary” means Executive’s annual base salary as in effect immediately before the Covered Termination Date, if higher, the base salary in effect immediately before the first event or circumstance constituting Good Reason.

A-6

“Target Bonus Percentage” means Executive’s target incentive award opportunity under the EICP in effect immediately before the termination of Executive’s employment or, if higher, immediately before the first event or circumstance constituting Good Reason.

A-7

EXHIBIT B

WAIVER AND RELEASE

FORM WAIVER AND RELEASE

Pursuant to the terms of the Change in Control Agreement made as of                     ,                     , by and among McDermott International, Inc., a Panamanian corporation (the “Company”), McDermott, Inc., a Delaware corporation wholly owned by the Company (the “Employer”), and me (the “Change in Control Agreement”), and in consideration of the payments made to me and other benefits to be received by me pursuant thereto, I, David Dickson, do freely and voluntarily enter into this WAIVER AND RELEASE (the “Release”), which shall become effective and binding on the eighth day following my signing the Release as provided herein (the “Effective Date”). It is my intent to be legally bound, according to the terms set forth below. Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Change in Control Agreement.

In exchange for the payments and other benefits to be provided to me by the Company and the Employer pursuant to Section 2 of the Change in Control Agreement (the “Separation Payment” and “Separation Benefits”), I hereby agree and state as follows:

1. I, individually and on behalf of my heirs, personal representatives, successors, and assigns, release, waive, and discharge the Company and the Employer, their respective predecessors, parents, subsidiaries, merged entities, operating units, Affiliates, divisions, insurers, administrators, trustees, and the agents, representatives, officers, directors, shareholders, employees, attorneys, successors and assigns of each of the foregoing (hereinafter “Released Parties”), from any and all claims, debts, liabilities, demands, obligations, promises, acts, agreements, costs, expenses (including attorney’s fees), damages (including consequential, exemplary and punitive damages), actions, and causes of action, whether in law or in equity, whether known or unknown, suspected or unsuspected, arising from my employment and termination from employment with the Employer and its Affiliates, including any such matter arising from the negligence, gross negligence or willful or wanton misconduct of any of the Released Parties, including but not limited to any and all claims pursuant to: Title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991 (42 U.S.C. § 2000e, et seq.), which prohibits discrimination in employment based on race, color, national origin, religion or sex; the Civil Rights Act of 1866 (42 U.S.C. §§1981, 1983 and 1985), which prohibits violations of civil rights; the Age Discrimination in Employment Act of 1967, as amended, and as further amended by the Older Workers Benefit Protection Act (29 U.S.C. §621, et seq.), which prohibits age discrimination in employment; the Employee Retirement Income Security Act of 1974, as amended (29 U.S.C. § 1001, et seq. ), which protects certain employee benefits; the Americans with Disabilities Act of 1990, as amended (42 U.S.C. § 12101, et seq.), which prohibits discrimination against the disabled; the Family and Medical Leave Act of 1993 (29 U.S.C. § 2601, et seq.), which provides medical and family leave; the Fair Labor Standards Act (29 U.S.C. § 201, et seq.), including the wage and hour laws relating to payment of wages; and all other federal, state and local laws and regulations prohibiting employment discrimination or

B-1

relating to employment. This Release also includes, but is not limited to, a release of any claims for breach of contract, mental pain, suffering and anguish, emotional upset, impairment of economic opportunities, unlawful interference with employment rights, defamation, intentional or negligent infliction of emotional distress, fraud, wrongful termination, wrongful discharge in violation of public policy, breach of any express or implied covenant of good faith and fair dealing, that the Company, the Employer or any of their respective Affiliates has dealt with me unfairly or in bad faith, and all other common law contract and tort claims.

Notwithstanding the foregoing, I am not waiving any rights or claims that may arise after this Release is signed by me. Moreover, this Release does not apply to any claims or rights which, by operation of law, cannot be waived, including the right to file an administrative charge or participate in an administrative investigation or proceeding; however, by signing this Release I disclaim and waive any right to share or participate in any monetary award resulting from the prosecution of such charge or investigation or proceeding. Nothing in this Release shall affect in any way my rights of indemnification and directors and officers liability insurance coverage provided to me pursuant to the Company’s by-laws and/or pursuant to any agreement in effect prior to the effective date of my termination, which shall continue in full force and effect, in accordance with their respective terms, following the effective date of this Release.

2. I forever waive and relinquish any right or claim to reinstatement to active employment with the Company, the Employer, their respective affiliates, subsidiaries, divisions, parent, and successors. I further acknowledge that neither the Company nor the Employer has any obligation to rehire or return me to active duty at any time in the future.

3. I acknowledge that all agreements applicable to my employment respecting noncompetition, nonsolicitation and the confidential or proprietary information of the Company and the Employer and their respective affiliates shall continue in full force and effect in accordance with the terms of such agreements.

4. I agree that I will refrain from any libel, slander, defamation or other disparaging comments about the Company, the Employer, their respective Affiliates, or any current or former officer, director or employee of the Company, the Employer or any of their respective Affiliates; provided, however, that nothing in this paragraph shall apply to or restrict in any way the communication of information by me to any state or federal law enforcement agency or require notice to the Company, the Employer or any of their respective Affiliates thereof, and I will not be in breach of the covenant contained in this paragraph solely by reason of my testimony which is compelled by process of law.

5. I hereby acknowledge and affirm as follows:

a. I have been advised to consult with an attorney prior to signing this Release.

b. I have been extended a period of 21 days in which to consider this Release.

B-2

c. I understand that for a period of seven days following my execution of this Release, I may revoke the Release by notifying Company and the Employer, in writing, of my desire to do so. I understand that after the seven-day period has elapsed and I have not revoked the Release, it shall then become effective and enforceable. I understand that the Separation Payment will not be made under the Change in Control Agreement and I will not be entitled to the Severance Benefits made under the Change in Control Agreement until after the seven-day period has elapsed and I have not revoked the Release.

d. I acknowledge that I have received payment for all wages due at the time of my employment termination, including reimbursement for any and all business related expenses. I further acknowledge that the Separation Payment and the Separation Benefits are consideration to which I am not otherwise entitled under any Company plan, program or prior agreement.

e. I certify that I have returned all property of the Company, the Employer and their respective affiliates, including but not limited to, keys, credit and fuel cards, files, lists, and documents of all kinds regardless of the medium in which they are maintained.

f. I have carefully read the contents of this Release and I understand its contents. I am executing this Release voluntarily, knowingly, and without any duress or coercion.

6. I acknowledge that this Release shall not be construed as an admission by any of the Released Parties of any liability whatsoever, or as an admission by any of the Released Parties of any violation of my rights or of any other person, or any violation of any order, law, statute, duty or contract.

7. I agree that the terms and conditions of this Release are confidential and that I will not, directly or indirectly, disclose the existence of or terms of this Release to anyone other than my attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit me from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.

8. In the event that any provision of this Release should be held void, voidable or unenforceable, the remaining portions hereof shall remain in full force and effect.

9. I hereby declare that this Release constitutes the entire and final settlement between me and the Company and the Employer, superseding any and all prior agreements, and that neither the Company nor the Employer has made any promise or offered any other agreement, except those expressed in this Release, to induce or persuade me to enter into this Release.

B-3

IN WITNESS WHEREOF, I have signed this Release on the      day of             , 20    .

Printed Name

Social Security Number

B-4

EXHIBIT C

Excise Tax Modified Cutback Provisions

Anything in this Agreement to the contrary notwithstanding, in the event the Firm (as defined below) shall determine that Executive shall become entitled to payments and/or benefits provided by this Agreement which would be subject to the excise tax imposed by Code Section 4999 (the “Payments”), the Firm shall determine whether to reduce any of the Payments to the Reduced Amount (as defined below). The Payments shall be reduced to the Reduced Amount only if the Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if the Executive’s Payments were reduced to the Reduced Amount. If such a determination is not made by the Firm, Executive shall receive all Payments to which Executive is entitled under this Agreement.

If the Firm determines that aggregate Payments should be reduced to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Firm under this Exhibit C shall be binding upon the Company and Executive absent manifest error and shall be made as soon as reasonably practicable and in no event later than 15 business days of the receipt of notice from the Company that there has been a Payment, or such earlier time as is requested by the Company. For purposes of reducing the Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. The reduction of the amounts payable hereunder, if applicable, shall be made by reducing, in order, cash payments otherwise due under Sections 2(a)(iv), 2(a)(v)(1) and 2(a)(v)(2) of this Agreement, and then by reducing equity-based compensation otherwise due under Section 2(a)(iii) of this Agreement in chronological order with the most recent equity based compensation awards reduced first.

As a result of the uncertainty in the application of Code Section 4999 at the time of the initial determination by the Firm hereunder, it is possible that amounts will have been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement which should not have been so paid or distributed (“Overpayment”) or that additional amounts which will have not been paid or distributed by the Company to or for the benefit of Executive pursuant to this Agreement could have been so paid or distributed (“Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Company or Executive which the Firm believes has a high probability of success determines that an Overpayment has been made, Executive shall pay any such Overpayment to the Company together with interest at the applicable federal rate provided for in Code Section 7872(f)(2); provided, however, that no amount shall be payable by Executive to the Company if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Code Sections 1 and 4999 or generate a refund of such taxes. In the event that the Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than 60 days following the date on which the Underpayment is determined) by the Company to or for the benefit of Executive together with interest at the applicable federal rate provided for in Code Section 7872(f)(2).

C-1

For purposes hereof, the following terms have the meanings set forth below:

“Firm” shall mean an internationally recognized accounting or employee benefits consulting firm selected by the Company with the input of Executive (but without Executive’s consent) and which shall not, during the one year preceding the date of its selection, have acted in any way on behalf of the Company or its affiliated companies.

“Net After-Tax Receipt” shall mean the present value (as determined in accordance with Code Sections 280G(b)(2)(A)(ii) and 280G(d)(4)) of a Payment net of all taxes imposed on Executive with respect thereto under Code Sections 1 and 4999 and under applicable state and local laws, determined by applying the highest marginal rate under Code Section 1 and under state and local laws which applied to the Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as Executive certifies, in Executive’s sole discretion, as likely to apply to Executive in the relevant tax year(s).

“Reduced Amount” shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Code Section 4999 if the Firm determines to reduce Payments pursuant to the first paragraph of this
Exhibit C.

C-2

EX-10.3

EXHIBIT 10.3

McDermott International, Inc.

Retention Restricted Stock Award Grant Agreement

This Retention Restricted Stock Award Grant Agreement (this “Agreement”) is made and entered into by and between McDermott International, Inc., a Panamanian corporation (“McDermott” or the “Company”), and David Dickson, an individual and employee of the Company (“Grantee”), as of the 31st day of October, 2013 (the “Date of Grant”). The shares of Restricted Stock granted to Grantee pursuant to this Agreement are not being granted under the 2009 McDermott International, Inc. Long-Term Incentive Plan, as it may be amended from time to time hereafter (the “Plan”), but are subject to the terms and conditions as would be applicable if they had been granted under the Plan, except for Sections 4.1 and 4.2 of the Plan. Accordingly, the terms and conditions of the Plan are hereby incorporated herein by this reference and shall apply to this grant of Restricted Stock as if such grant was granted pursuant to the terms of the Plan, except to the extent that this Agreement expressly provides to the contrary. All determinations and interpretations made by the Committee with regard to any question arising hereunder shall be binding and conclusive on you and your beneficiaries, estate or personal representatives. Capitalized terms not otherwise defined in this Agreement shall have the respective meanings given to them in the Plan.

The term “Company,” as used in this Agreement with reference to employment or service, shall include subsidiaries of McDermott. Whenever the words “you” or “your” are used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to any beneficiary, estate, or personal representative to whom any rights under this Agreement may be transferred by will or by the laws of descent and distribution, they shall be deemed to include any such person or estate. This Agreement shall be subject to the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference.

The Compensation Committee of the Board of Directors (the “Committee”) of McDermott has awarded you a grant of Restricted Stock (“Restricted Stock”) on the Date of Grant

Restricted Stock Award

Restricted Stock Award. You have been awarded a grant of Restricted Stock. This grant represents a right to be issued 537,482 shares of McDermott common stock on the Date of Grant, subject to the restrictions contained in this Agreement. Shares evidencing the Restricted Stock will be issued in your name as of the Date of Grant.

Restrictions. Unless and until the vesting requirements and other terms set forth in this Agreement have been satisfied, the Restricted Stock may not be sold, transferred, pledged, assigned or otherwise alienated (the “Restrictions”).

Vesting Requirements. Subject to the “Forfeiture of Restricted Stock” paragraph below, the Restricted Stock will become vested under one or more of the following circumstances (each such date a “Vesting Date”):

• 212,164 shares of Restricted Stock on June 15, 2014 provided you are still employed with the Company on this date;

• 108,439 shares of Restricted Stock on June 15, 2015, 108,440 shares of Restricted Stock on June 15, 2016 and 108,439 shares of Restricted Stock on June 15, 2017, in each case provided you are still employed with the Company on such date; and

• 100% of the outstanding Restricted Stock on the earliest to occur of (1) the date of termination of your employment from the Company due to death, (2) your disability (as defined in the Plan), or (3) the date a Change in Control (as defined in the Plan) occurs.

Upon vesting, the Restrictions with respect to the shares of Restricted Stock will be removed as soon as administratively practicable.

Forfeiture of Restricted Stock. Shares of Restricted Stock which are not and do not become vested upon your termination of employment with the Company for any reason shall, coincident therewith, be forfeited and be deemed to no longer be outstanding.

In the event that, while you are employed by the Company or are performing services for or on behalf of the Company under any consulting agreement, (a) you are convicted of (i) a felony or (ii) a misdemeanor involving fraud, dishonesty or moral turpitude, or (b) you engage in conduct that adversely affects or may reasonably be expected to adversely affect the business reputation or economic interests of the Company, as determined in the sole judgment of the Committee, then all shares of Restricted Stock and all rights or benefits awarded to you under this Agreement shall be forfeited, terminated and withdrawn immediately upon (1) notice to the Committee of such conviction pursuant to (a) above or (2) final determination pursuant to (b) above by the Committee. The Committee shall have the right to suspend any and all rights or benefits awarded to you hereunder pending its investigation and final determination with regard to such matters.

Voting Rights and Dividends. Beginning on the Date of Grant and subject to the forfeiture provisions of this Agreement, you will have full voting rights and will be credited with cash dividends, if any, with respect to the Restricted Stock granted hereunder.

Taxes

You will realize income in connection with this grant of Restricted Stock in accordance with the tax laws of the jurisdictions applicable to you. You should consult your tax advisor as to the U.S. federal income tax consequences associated with this Restricted Stock as it relates to your specific circumstances. McDermott, however, has been advised that the grant awarded hereunder will have the following tax consequences under the present U.S. Federal tax laws and regulations.

For U.S. federal income tax purposes, you will be deemed to have received compensation taxable as ordinary income equal to the fair market value, as of the date of vesting, of the shares of Restricted Stock which vest. Such income will be included in your taxable income and reported on IRS Form W-2 in the tax year in which the shares vest. Alternatively, you may elect to have the fair market value of the shares included in your taxable income and reported on IRS Form W-2 as of the Date of Grant.

In addition, all dividends paid, if any, to you with respect to unvested shares of Restricted Stock will be considered wages paid to you by your employer and, therefore, will be included in your taxable income and reported on IRS Form W-2 in the year in which such shares vest.

By acceptance of this Agreement, you agree that any amount which the Company is required to withhold on your behalf, including state income tax and FICA withholding, in connection with income realized by you under this Agreement will be satisfied by withholding whole shares having an aggregate fair market value as equal in value but not exceeding the amount of such required tax withholding, unless the Committee determines to satisfy the statutory minimum withholding obligation by another method permitted by the Plan.

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax which the Company is required to withhold in connection with the income realized by you in connection with this Agreement, and you hereby authorize the Company to withhold such amount, in whole or in part, from subsequent salary payments, without further notice to you, if the withholding method referred to above is not utilized or does not completely cover such required tax withholding.

Transferability

The shares of Restricted Stock granted hereunder are non-transferable other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.

Securities and Exchange Commission Requirements

If you are a Section 16 insider, this type of transaction must be reported on a Form 4 before the end of the second (2^nd) business day following the Date of Grant. Please be aware that if you intend to reject the grant, you should do so immediately after the Date of Grant to avoid potential Section 16 liability. Please advise Dennis Edge and Kim Wolford immediately by e-mail, fax or telephone if you intend to reject this grant. Absent such notice of rejection, the Company will prepare and file the required Form 4 on your behalf within the required two (2) business-day deadline.

If you are currently subject to these requirements, you will have already been advised of your status. If you become a Section 16 insider at some future date, reporting will be required in the same manner noted above.

Other Information

Neither the action of the Company in entering this Agreement, nor any provision of this Agreement or the Plan, nor any action taken by the Company, your employer, the Committee or the Board of Directors under the Plan, shall be construed as giving to you the right to be retained in the employ of the Company or any of its subsidiaries or affiliates.

This award is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and ambiguous provisions, if any, shall be construed in a manner that is compliant with or exempt from the application of Section 409A, as appropriate.

In witness whereof, this Agreement is hereby approved and executed as of the date first written above.

McDermott International, Inc.
By:	/s/ Stephen M. Johnson
Name:	Stephen M. Johnson
Title:	Chairman, President & CEO
Grantee
/s/ David Dickson
David Dickson

Exhibit A

POLICY NO. 1405-003 — EFFECTIVE DATE: 08/02/13

SUBJECT:	Clawback Policy
AFFECTS:	McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)
PURPOSE:	To govern the clawback of certain compensation awarded to executive officers of the Company.
POLICY:	If the consolidated financial statements of the Company and its subsidiaries are materially restated within three years of the first public release or filing with the U.S. Securities and Exchange Commission (the “SEC”) of such financial statements, and the Compensation Committee of the Board of Directors of the Company (the “Committee”) determines, in its reasonable discretion, that (1) any current or former executive officer (as defined in Rule 3b-7 promulgated by the SEC under the Securities Exchange Act of 1934, as amended) of the Company (an “Executive”) has engaged in intentional misconduct and (2) such misconduct caused or partially caused the need for such restatement, then the Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or return to the Company all or a portion of the compensation vested, awarded or received under any bonus award (including pursuant to the Company’s Executive Incentive Compensation Plan), equity award (including any award of stock options, shares of restricted stock, deferred stock units or restricted stock units) or other award during the period subject to restatement and the 12-month period following the first public issuance or filing with the SEC of the financial statements that were restated (including, with respect to any such award that is subject to a multi-year vesting period, any compensation vested, awarded or received thereunder during such vesting period if such vesting period includes all or part of such 12-month period); provided, however, that any forfeiture and/or return of compensation by an Executive under this policy will, in any event, be limited to any portion thereof that the Executive would not have received if the consolidated financial statements of the Company and its subsidiaries had been reported properly at the time of first public release or filing with the SEC; provided, further, that this policy shall not apply with respect to any restatement of the consolidated financial statements of the Company and its subsidiaries as to which the need for restatement is determined following the occurrence of a Change in Control (as defined in the Company’s Director and Executive Officer Deferred Compensation Plan, as amended and restated November 8, 2010).
	The vesting, payment or other receipt of any rights or benefits awarded by the Company to an Executive which are subject to this policy may be suspended pending an investigation and final determination by the Committee with regard to any alleged misconduct that may be subject to a determination by the Committee under this policy.

By accepting any award as to which this policy applies, each Executive must agree to the foregoing and agree to forfeit and/or return compensation to the Company as provided by this policy, as the same may be modified by, or superseded by a replacement policy adopted by, the Committee, as the Committee may deem necessary to comply with regulations issued by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The terms of this policy shall in no way limit the ability of the Company to pursue forfeiture or reclamation of amounts under applicable law as the Compensation Committee may consider appropriate in its reasonable discretion.

Interpretation Contact for the above policy is the Senior Vice President, Chief Administration Officer and Senior Vice President, General Counsel and Corporate Secretary.

EX-10.4

EXHIBIT 10.4

August 8, 2013 Retention Restricted Stock Unit Grant Agreement

2009 McDermott International, Inc. Long-Term Incentive Plan

On August 8, 2013, the Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (“McDermott” or the “Company”) selected you to receive a grant of Restricted Stock Units (“RSUs”) under the 2009 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”) on August 8, 2013 (the “Date of Grant”). The provisions of the Plan are incorporated herein by reference.

Any reference or definition contained in this RSU Grant Agreement (this “Agreement”) shall, except as otherwise specified, be construed in accordance with the terms and conditions of the Plan and all determinations and interpretations made by the Committee with regard to any question arising hereunder or under the Plan shall be binding and conclusive on you and your beneficiaries, estate or personal representatives. The term “Company,” as used in this Agreement with reference to employment or service, shall include subsidiaries of McDermott. Whenever the words “you” or “your” are used in any provision of this Agreement under circumstances where the provision should logically be construed to apply to any beneficiary, estate, or personal representative to whom any rights under this Agreement may be transferred by will or by the laws of descent and distribution, they shall be deemed to include any such person or estate. This Agreement shall be subject to the Company’s Clawback Policy, which is attached hereto as Exhibit A and is incorporated herein by reference.

Restricted Stock Units

RSU Award. You have been awarded the number of RSUs shown on the Notice of Grant dated August 8, 2013, which is incorporated herein by reference. Each RSU represents a right to receive a share of Company common stock on the Vesting Date (as set forth in the “Vesting Requirements” paragraph below), provided the vesting requirements set forth in this Agreement have been satisfied. No shares of common stock are awarded or issued to you on the Date of Grant.

Vesting Requirements. Subject to the “Forfeiture of RSUs” paragraph below, RSUs do not provide you with any rights or interest therein until they become vested under one or more of the following circumstances (each such date a “Vesting Date”):

• 100% of the RSUs on the third anniversary of the Date of Grant provided you are still employed with the Company on this date;

• 33% of the RSUs if your employment with the Company is involuntarily terminated by reason of a Reduction in Force on or after the first anniversary and prior to the second anniversary of the Date of Grant;

• 66% of the RSUs if your employment with the Company is involuntarily terminated by reason of a Reduction in Force on or after the second anniversary and prior to the third anniversary of the Date of Grant; and

• 100% of the RSUs on the earliest to occur prior to the third anniversary of the Date of Grant of: (1) the date of termination of your employment from the Company due to death, (2) your disability (as defined in the Plan), or (3) the date a Change in Control (as defined in the Plan) occurs.

For purposes of this Agreement, a “Reduction in Force” shall mean a termination of employment with the Company due to elimination of a previously required position or previously required services, or due to the consolidation of departments, abandonment of facilities or offices, technological change or declining business activities, where such termination is intended to be permanent; or under other circumstances which the Compensation Committee, in accordance with standards uniformly applied with respect to all similarly situated employees, designates as a reduction in force.

Forfeiture of RSUs. RSUs which are not and do not become vested upon your termination of employment with the Company for any reason shall, coincident therewith, terminate and be of no further force or effect.

In the event that, while you are employed by the Company or are performing services for or on behalf of the Company under any consulting agreement, (a) you are convicted of (i) a felony or (ii) a misdemeanor involving fraud, dishonesty or moral turpitude, or (b) you engage in conduct that adversely affects or may reasonably be expected to adversely affect the business reputation or economic interests of the Company, as determined in the sole judgment of the Committee, then all RSUs and all rights or benefits awarded to you under this Agreement shall be forfeited, terminated and withdrawn immediately upon (1) notice to the Committee of such conviction pursuant to (a) above or (2) final determination pursuant to (b) above by the Committee. The Committee shall have the right to suspend any and all rights or benefits awarded to you hereunder pending its investigation and final determination with regard to such matters.

Payment of RSUs. RSUs shall be paid in shares of Company common stock, which shares shall be distributed as soon as administratively practicable, but in no event later than 30 days, after the applicable Vesting Date.

Taxes

You will realize income in connection with this grant of RSUs in accordance with the tax laws of the jurisdictions applicable to you.

By acceptance of this Agreement, you agree that any amount which the Company is required to withhold on your behalf, including state income tax and FICA withholding, in connection with income realized by you under this Agreement will be satisfied by withholding whole units or shares having an aggregate fair market value as equal in value but not exceeding the amount of such required tax withholding, unless the Committee determines to satisfy the statutory minimum withholding obligation by another method permitted by the Plan.

Regardless of the withholding method referred to above, you are liable to the Company for the amount of income tax which the Company is required to withhold in connection with the income realized by you in connection with this Agreement, and you hereby authorize the Company to withhold such amount, in whole or in part, from subsequent salary payments, without further notice to you, if the withholding method referred to above is not utilized or does not completely cover such required tax withholding.

Transferability

RSUs granted hereunder are non-transferable other than by will or by the laws of descent and distribution or pursuant to a qualified domestic relations order.

Securities and Exchange Commission Requirements

If you are a Section 16 insider, this type of transaction must be reported on a Form 4 before the end of the second (2^nd) business day following the Date of Grant. Please be aware that if you intend to reject the grant, you should do so immediately after the Date of Grant to avoid potential Section 16 liability. Please advise Dennis Edge and Kim Wolford immediately by e-mail, fax or telephone if you intend to reject this grant. Absent such notice of rejection, the Company will prepare and file the required Form 4 on your behalf within the required two (2) business-day deadline.

If you are currently subject to these requirements, you will have already been advised of your status. If you become a Section 16 insider at some future date, reporting will be required in the same manner noted above.

Other Information

Neither the action of the Company in establishing the Plan, nor any provision of the Plan, nor any action taken by the Company, your employer, the Committee or the Board of Directors under the Plan, nor any provision of this Agreement shall be construed as giving to you the right to be retained in the employ of the Company or any of its subsidiaries or affiliates.

This award is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), and ambiguous provisions, if any, shall be construed in a manner that is compliant with or exempt from the application of Section 409A, as appropriate.

Exhibit A

POLICY NO. 1405-003 — EFFECTIVE DATE: 08/02/13

SUBJECT:	Clawback Policy
AFFECTS:	McDermott International, Inc. and its subsidiaries and affiliated companies (hereinafter referred to as “the Company”)
PURPOSE:	To govern the clawback of certain compensation awarded to executive officers of the Company.
POLICY:	If the consolidated financial statements of the Company and its subsidiaries are materially restated within three years of the first public release or filing with the U.S. Securities and Exchange Commission (the “SEC”) of such financial statements, and the Compensation Committee of the Board of Directors of the Company (the “Committee”) determines, in its reasonable discretion, that (1) any current or former executive officer (as defined in Rule 3b-7 promulgated by the SEC under the Securities Exchange Act of 1934, as amended) of the Company (an “Executive”) has engaged in intentional misconduct and (2) such misconduct caused or partially caused the need for such restatement, then the Committee may, within 12 months after such a material restatement, require that the executive forfeit and/or return to the Company all or a portion of the compensation vested, awarded or received under any bonus award (including pursuant to the Company’s Executive Incentive Compensation Plan), equity award (including any award of stock options, shares of restricted stock, deferred stock units or restricted stock units) or other award during the period subject to restatement and the 12-month period following the first public issuance or filing with the SEC of the financial statements that were restated (including, with respect to any such award that is subject to a multi-year vesting period, any compensation vested, awarded or received thereunder during such vesting period if such vesting period includes all or part of such 12-month period); provided, however, that any forfeiture and/or return of compensation by an Executive under this policy will, in any event, be limited to any portion thereof that the Executive would not have received if the consolidated financial statements of the Company and its subsidiaries had been reported properly at the time of first public release or filing with the SEC; provided, further, that this policy shall not apply with respect to any restatement of the consolidated financial statements of the Company and its subsidiaries as to which the need for restatement is determined following the occurrence of a Change in Control (as defined in the Company’s Director and Executive Officer Deferred Compensation Plan, as amended and restated November 8, 2010).
	The vesting, payment or other receipt of any rights or benefits awarded by the Company to an Executive which are subject to this policy may be suspended pending an investigation and final determination by the Committee with regard to any alleged misconduct that may be subject to a determination by the Committee under this policy.

By accepting any award as to which this policy applies, each Executive must agree to the foregoing and agree to forfeit and/or return compensation to the Company as provided by this policy, as the same may be modified by, or superseded by a replacement policy adopted by, the Committee, as the Committee may deem necessary to comply with regulations issued by the SEC under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The terms of this policy shall in no way limit the ability of the Company to pursue forfeiture or reclamation of amounts under applicable law as the Compensation Committee may consider appropriate in its reasonable discretion.

Interpretation Contact for the above policy is the Senior Vice President, Chief Administration Officer and Senior Vice President, General Counsel and Corporate Secretary.

EX-10.5

EXHIBIT 10.5

SEPARATION AGREEMENT

This Separation Agreement (this “Agreement”) is entered into by and between, and shall inure to the benefit of and be binding upon, the following parties:

JOHN T. McCORMACK, hereinafter referred to as “Employee”; and

MCDERMOTT, INC., a Delaware corporation, hereinafter referred to as the “Company.”

W I T N E S S E T H:

WHEREAS, Employee is currently an employee of the Company;

WHEREAS, pursuant to a resignation letter in the form attached hereto as Exhibit A, Employee has tendered to McDermott International, Inc., a Panamanian corporation of which the Company is a wholly owned subsidiary (“MII”), Employee’s resignation from all positions held as an officer, employee, member of the board of directors or board of managers (and member of any and all committees thereof), of MII and its subsidiaries and joint venture entities, and from any and all positions or capacities with respect to any employee benefit plan sponsored or maintained by any such entity, effective October 31, 2013; provided that Employee shall remain an employee of the Company until the close of business on November 1, 2013 (the “Resignation Date”); and

WHEREAS, Employee and the Company mutually desire to establish and agree on the terms and conditions of Employee’s separation from service;

NOW, THEREFORE, in consideration of the premises and the mutual agreements, covenants and obligations set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Employee and the Company hereby agree as follows:

Section 1. Termination Date and Type. For purposes of interpreting and applying the provisions of compensation arrangements and employee benefit plans of MII or any of its subsidiaries (including the Company) applicable to Employee and subject to Section 2 hereof, (a) Employee’s date of termination of employment shall be the Resignation Date, (b) Employee’s termination of employment is voluntary by Employee and not by the Company, and (c) subject to complying with the requirements of this Agreement, Employee shall be entitled to the compensation and benefits provided in this Agreement.

Section 2. Severance Benefits and Payments. Subject to the execution of this Agreement by Employee and the lapse of the seven (7) day revocation period referenced in Section 7 hereof (the “Revocation Period”) without revocation of the Agreement or any part hereof by Employee, Employee shall be entitled to receive the following payments and benefits, to which Employee would not otherwise be entitled, subject to the terms and conditions set forth in this Agreement:

(a) each currently outstanding award of MII stock options (Stock Options”), restricted stock units (“RSUs”) and performance shares (“Performance Shares”) granted to Employee under the 2009 McDermott International, Inc. Long Term Incentive Plan (the “MII LTIP”) which would, absent Employee’s termination of employment, remain outstanding and, to the extent applicable, continue to vest after the Resignation Date shall remain in full force and effect and, to the extent applicable, continue to vest and shall be settled in accordance with the terms of the MII LTIP and the applicable grant agreement as if Employee’s employment had continued until October 31, 2015, provided, however, that each outstanding award of RSUs that would continue to vest and be settled as if Employee’s employment had continued until October 31, 2015, shall vest and be settled on the earlier to occur of March 15, 2014 or the next anniversary of the Grant Date (as defined in the applicable award agreement) for each such award. Any such Stock Options, whether now vested or upon becoming vested, shall be exercisable until the stated maximum expiration date in the applicable grant agreement notwithstanding any provision in any related grant agreement providing for earlier termination in the event of a termination of employment.

All payments made pursuant to this Section 2 shall be subject to appropriate tax withholding and are subject to all the terms and conditions of this Agreement.

Section 3. Release of Claims.

(a) General Release by Employee. In consideration of the foregoing (including the payments and benefits under Section 2 hereof, which the Company is not required to make or provide under any preexisting agreement, plan or policy), which Employee hereby expressly acknowledges as good and sufficient consideration for the releases provided below, Employee hereby unconditionally and irrevocably releases, acquits and forever discharges, to the fullest extent permitted by applicable law, (i) the Company and all of its predecessors, successors and assigns, (ii) all of the Company’s past, present and future affiliates, parent corporations (including MII), subsidiaries, divisions and joint venture entities and all of their respective predecessors, successors and assigns and (iii) all of the past, present and future officers, directors, managers, shareholders, investors, employee benefit plan administrators, employees, agents, attorneys and other representatives of each of the entities described in the immediately preceding clauses (i) and (ii), individually and in their respective representative capacities (the persons or entities referred to in the immediately preceding clauses (i), (ii) and (iii) being, individually, a “Releasee” and, collectively, the “Releasees”), from any and every action, cause of action, complaint, claim, demand, administrative charge, legal right, compensation, obligation, damages (including consequential, exemplary and punitive damages), liability, cost or expense (including attorney’s fees) that Employee has, may have or may be entitled to from or against any of the Releasees, whether legal, equitable or administrative, in any forum or jurisdiction, whether known or unknown, foreseen or unforeseen, matured or unmatured, accrued or not accrued, which arises directly or indirectly out of, or is based on or related in any way to Employee’s employment with or termination of employment from the Company or Employee’s service for or other affiliation with MII or any of its subsidiaries (including the Company) or joint venture entities, including any such matter arising from the negligence, gross negligence or

- 2 -

reckless, willful or wanton misconduct of any of the Releasees (together, the “Released Claims”); provided, however, that this Release does not apply to, and the Released Claims do not include: (i) any claims arising solely and specifically under the U.S. Age Discrimination in Employment Act of 1967 after the date this Agreement is executed by Employee; (ii) any claim for indemnification (including under MII’s or the Company’s organizational documents or insurance policies) arising in connection with an action instituted by a third party against MII or the Company or any of their affiliates or Employee, in his capacity as an officer, director, manager, employee, agent or other representative of MII or the Company or any of their affiliates; (iii) any claims for vested benefits under the Company’s 401(k) plan or vested benefits under the McDermott International, Inc. Director and Executive Deferred Compensation Plan; (iv) any claims relating to Employee’s eligibility to continue participating in health coverage currently available to Employee in accordance with the U.S. Consolidated Omnibus Reconciliation Act, subject to the terms, conditions and restrictions of that Act; (v) any claim arising from any breach or failure to perform any provision of this Agreement; or (vi) any claim for worker’s compensation benefits or any other claim that cannot be waived by a general release.

(b) Release to be Full and Complete; Waiver of Claims, Rights and Benefits. The parties intend this Release to cover any and all such Released Claims, whether they are contract claims, equitable claims, fraud claims, tort claims, discrimination claims, harassment claims, whistleblower or retaliation claims, personal injury claims, constructive or wrongful discharge claims, emotional distress claims, pain and suffering claims, public policy claims, claims for debts, claims for expense reimbursement, wage claims, claims with respect to any other form of compensation, claims for attorneys’ fees, other claims or any combination of the foregoing, and whether they may arise under any employment contract (express or implied), policies, procedures, practices or by any acts or omissions of any of the Releasees or whether they may arise under any state, local or federal law, statute, ordinance, rule or regulation, including all Texas employment discrimination laws, the Texas Commission on Human Rights Act, the Texas Labor Code, all U.S. federal discrimination laws, the U.S. Age Discrimination in Employment Act of 1967, the U.S. Employee Retirement Income Security Act of 1974, Title VII of the U.S. Civil Rights Act of 1964, the U.S. Civil Rights Act of 1991, the U.S. Rehabilitation Act of 1973, the U.S. Americans with Disabilities Act of 1990, the U.S. Equal Pay Act, the U.S. National Labor Relations Act, the U.S. Fair Labor Standards Act, the U.S. Older Workers Benefit Protection Act, the U.S. Worker Adjustment and Retraining Notification Act, the U.S. Family and Medical Leave Act, the U.S. Sarbanes-Oxley Act of 2002 or common law, without exception. As such, it is expressly acknowledged and agreed that this Release is a general release, representing a full and complete disposition and satisfaction of all of the Company’s and any Releasee’s real or alleged legal obligations to Employee, with the only exceptions being as expressly stated in the proviso to Section 3(a) hereof. Employee understands and agrees, in compliance with any law, statute, ordinance, rule or regulation which requires a specific release of unknown claims or benefits, that this Agreement includes a release of unknown claims, and Employee hereby expressly waives and relinquishes any and all Released Claims and any associated rights or benefits that Employee may have, including any that are unknown to Employee at the time of the execution this Agreement.

- 3 -

(c) Certain Representations of Employee. Employee represents and warrants that: (i) Employee is the sole and lawful owner of all rights, titles and interests in and to all Released Claims; and (ii) Employee has the fully legal right, power, authority and capacity to execute and deliver this Agreement.

(d) Covenant Not to Sue. Employee expressly agrees that neither Employee nor any person acting on Employee’s behalf will file or bring or permit to be filed or brought any lawsuit or other action before any court, agency or other governmental authority for legal or equitable relief against any of the Releasees involving any of the Released Claims. In the event that such an action is filed against any of the Releasees, Employee agrees that such Releasees are entitled to legal and equitable remedies against Employee, including an award of attorney’s fees. However, it is expressly understood and agreed that the foregoing sentence shall not apply to any charge filed by Employee with the Equal Employment Opportunity Commission or to any action filed by Employee that is narrowly limited to seeking a determination as to the validity of this Agreement and enforcement thereof. Should Employee file a charge with the Equal Employment Opportunity Commission, or should any governmental entity, agency or commission file a charge, action, complaint or lawsuit against any of the Releasees based on any Released Claim, Employee agrees not to seek or accept any resulting relief whatsoever.

Section 4. Return of Materials, Nondisparagement and Cooperation Undertakings.

(a) Return of Materials. On or promptly after the Resignation Date, Employee shall return to MII or the Company, with no request being required of MII or the Company: (i) any and all documents, records, files, reports, memoranda, books, papers, plans, letters and any other data in Employee’s possession regardless of the medium maintained, held or stored (whether documentary, computer or other electronic storage or other) that relate in any way to the business or operations of MII or the Company or any of their past or present affiliates, subsidiaries, divisions or joint ventures (such entities being, individually, a “Company Entity” and, collectively, the “Company Entities”) (and Employee shall not retain, recreate or deliver to anyone else such information); and (ii) any credit cards, keys, access cards, calling cards, computer equipment and software, telephone, facsimile or other equipment or property of any of the Company Entities.

(b) Nondisparagement. Employee shall refrain from making, directly or indirectly, in any public or private communication (whether oral, written or electronic), any criticisms or negative or disparaging comments or other statements about the Company or any of the other Releasees, or about any aspect of the respective businesses, operations, financial results or prospects of any of the Company Entities, including comments relating to Employee’s termination of employment. Notwithstanding the foregoing, it is understood and agreed that nothing in this Section 4(b) or in Section 5 hereof is intended to prevent Employee from: (i) testifying truthfully in any legal proceeding brought by any governmental authority or other third party or to interfere with any obligation Employee may have to cooperate with or provide information to any government agency or commission, subject to compliance with the provisions of Section 5(c) hereof, if applicable; (ii) advising Employee’s spouse of the terms and conditions of this Agreement; or (iii) consulting with Employee’s own legal counsel, as contemplated by Section 7 of this Agreement.

- 4 -

(c) Cooperation. Employee agrees to be reasonably available to the Company Entities or their representatives (including their attorneys) to provide information and assistance as requested by MII or the Company. Such information and assistance may include testifying (and preparing to testify) as a witness in any proceeding or otherwise providing information or reasonable assistance to the Company Entities in connection with any investigation, claim or suit, and cooperating with the Company Entities regarding any litigation, government investigation, regulatory matter, claim or other disputed item involving any of the Company Entities that relate to matters within the knowledge or responsibility of Employee during Employee’s employment. Specifically, Employee agrees (i) to meet with the Company Entities’ representatives, their counsel or other designees at reasonable times and places with respect to any matter within the scope of the foregoing provisions of this Section 4(c); (ii) to provide truthful testimony regarding any such matter to any applicable court, agency or other adjudicatory body; (iii) to provide the Company Entities with immediate notice of contact or subpoena by any non-governmental adverse party (known to Employee to be adverse to any of the Company Entities or their interests), and (iv) to not voluntarily assist any such non-governmental adverse party or such non-governmental adverse party’s representatives. Such cooperation required by Employee shall not unreasonably interfere with Employee’s other business endeavors.

(d) Consulting Services. During the period from the November 2, 2013 through the date that is six-months immediately after the Resignation Date, the “Consulting Period”), Employee shall provide such consulting services to the Company Entities as any of the Company Entities may request in accordance with the terms and conditions set forth in Exhibit B hereto, which is incorporated by reference in and shall be deemed to form an integral part of this Agreement. The Consulting Period may be extended by written agreement between the Company and Employee. It is understood and agreed by the parties hereto that in no event will the level of consulting services performed by Employee hereunder exceed 20% of the average level of services (measured by hours) he performed over the 36-month period ending on the Resignation Date (or, if Employee’s period of employment prior to the Resignation Date is a shorter period, then over such shorter period).

(e) Enforcement. The covenants set forth in the foregoing provisions of this Section 4 may be enforced pursuant to the provisions of Section 5(f) hereof.

Section 5. Confidentiality and Non-Competition Agreement.

(a) Definition of Trade Secrets and Confidential Business Information. Employee acknowledges and agrees that any and all non-public information regarding the Company Entities and their customers and suppliers (including any and all information relating to the Company Entities’ respective business plans or practices, products, services, contracts with customers, backlog, bids outstanding, target projects, financial or

- 5 -

operational performance, finances, financial accounting policies, practices or systems, internal controls or internal control systems, financial projections or budgets, board of directors or board committee proceedings, investor relations practices, capital expenditures, equipment, pricing strategies, marketing programs or plans, executive management or other personnel, human resources plans, policies, practices, records or systems, information technology systems or other business systems, project management, business strategy, profits or overhead) is confidential and the unauthorized disclosure of such confidential information could result in irreparable harm to one or more of the Company Entities. Such confidential information, in whatever form maintained, held or stored (whether documentary, computer or other electronic storage or other), includes each Company Entity’s proprietary interest in its trade secrets, including its lists of customers and prospective customers, and other information that has recognized value and that is not generally available through other sources (collectively, “Trade Secrets”), and information regarding each Company Entity’s various services, projects, products, procedures or systems that is treated as confidential by such Company Entity which may not rise to the level of a Trade Secret (collectively, “Confidential Business Information”). Confidential Business Information does not include information that properly and lawfully has become generally known to the public other than as a result of any act or omission of Employee. Collectively, Trade Secrets and Confidential Business Information (and including all the non-public information referred to in the first sentence of this Section 5(a) and all information relating to Employee’s separation from service with the Company) are referred to herein as “Confidential Information.”

(b) Importance of Confidential Information. The parties hereby agree that Employee has been provided with Confidential Information during the period of Employee’s employment. By signing this Agreement, Employee acknowledges delivery to and receipt by Employee of Confidential Information. Employee further acknowledges that the preservation and protection of the Confidential Information was an essential part of Employee’s employment with the Company and that Employee has had a duty of fidelity and trust to the Company Entities in handling the Confidential Information.

(c) Nondisclosure or Misuse. Employee agrees that Employee will not disclose or take away any of the Confidential Information, directly or indirectly, or use such information in any way. Without limiting the generality of the foregoing, Employee will not disclose any of the Confidential Information to any securities analysts, shareholders, prospective investors, customers, competitors or any other third party, including any third party who has or may express an interest in acquiring any of the Company Entities or all or any significant portion of their respective outstanding equity securities or assets. If Employee is legally required to disclose any Confidential Information, Employee shall, to the extent not prohibited by applicable law or legal process, promptly notify the Company in writing of such requirement so that the Company or any of the other Company Entities may seek an appropriate protective order or other relief or waive compliance with the nondisclosure provisions of this Section 5 with respect to such Confidential Information. To the extent not prohibited by applicable law, Employee agrees to cooperate with and not to oppose any effort by the Company or any other Company Entity to resist or narrow such request or to seek a protective order or

- 6 -

other appropriate remedy. In any such case, Employee will: (i) disclose only that portion of the Confidential Information that, according to written advice of Employee’s counsel, is required to be disclosed; (ii) use reasonable best efforts to obtain assurances that such Confidential Information will be treated confidentially; and (iii) to the extent not prohibited by applicable law, promptly notify the Company in writing of the items of Confidential Information so disclosed. The foregoing obligations are in addition to any confidentiality obligations Employee may have under any other agreements or arrangements with any of the Company Entities.

(d) Return of Confidential Information. On or promptly after the Resignation Date, all documents or other information containing or referring to any of the Confidential Information as may be in Employee’s possession, or over which Employee may have control, regardless of whether prepared by Employee, shall be returned by Employee to the Company in accordance with the provisions of Section 4(a) hereof.

(e) Noncompetition Agreement. Employee acknowledges and agrees that information, including the Confidential Information, Employee has acquired will enable Employee to irreparably injure the Company if Employee should engage in competition during the period beginning from the date of this Agreement and extending through the first anniversary of the Resignation Date (the “Non-Compete Period”). Accordingly, as a material and substantial part of the agreements set forth herein, and particularly in consideration of the waiver or removal of selling restrictions or forfeiture provisions with respect to, or vesting of, equity-based awards pursuant to Section 2 hereof, Employee hereby agrees that the following covenants are reasonable and necessary covenants for the protection of the value of the agreements of Employee contained herein:

(i) During the Non-Compete Period, Employee shall not, directly or indirectly, without the prior written approval of the Company’s Chief Executive Officer (which approval shall not be unreasonably withheld), on behalf of the Company, act in any capacity for, be employed by, provide services to, or contract with any other company or entity engaged in Competing Services (a “Competitive Entity”), or acquire any interest of any type in any Competitive Entity; provided, however, that the foregoing shall not prohibit Employee from acquiring, solely as an investment and through market purchases, securities of any Competitive Entity which are registered under Section 12(b) or 12(g) of the Securities and Exchange Act of 1934 and which are publicly traded, so long as Employee is not part of any control group of such Competitive Entity and such securities, including any securities issuable on conversion or exchange of any convertible or exchangeable securities, beneficially owned (as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934) by Employee do not constitute more than one percent of the outstanding voting power of that entity. For the purposes of this Agreement, the phrase “Competing Services” shall mean any services that are the same as or similar to the services currently being provided or offered by any of the Company Entities, in any case in any of the oil and gas producing regions of the world in which the Company Entities operate. Competing Services include engineering, procurement, construction and installation services and project management services for offshore oil and gas field development, including any such services related to fixed or floating production facilities, pipelines or subsea systems.

- 7 -

(ii) During the Non-Compete Period, Employee shall not, directly or indirectly, solicit any Company Entity’s Protected Customers for the purpose of engaging in any business which is the same as or similar to the business in which a Company Entity is engaged. The phrase “Protected Customers” means all persons or entities to whom a Company Entity has sold, or proposed the sale of, any product or service within the period of three (3) years immediately prior to the Resignation Date.

(iii) During the Non-Compete Period, Employee shall not, on Employee’s own behalf or on behalf of any other person or entity, solicit, divert or recruit any person who is, during such time frame, an employee of a Company Entity to leave such employment or in any other manner attempt, directly or indirectly, to influence, induce, or encourage any employee of a Company Entity to leave the employment of that Company Entity.

(f) Enforcement of Covenants. Employee acknowledges that the injury that would be suffered by the Company Entities as a result of a breach or threatened breach of the provisions of Section 4 hereof or this Section 5 would be immediate and irreparable and that, because of the difficulty of measuring economic loss of any such breach or threatened breach, an award of monetary damages to the Company Entities for any such breach would be an inadequate remedy. Accordingly, in the event that the Company determines that Employee has breached or attempted to breach or is threatening to breach any provision of Section 4 hereof or this Section 5, in addition to any other remedies at law or in equity that any of the Company Entities may have available to them, it is agreed that each of the Company Entities shall be entitled, upon application to any court of proper jurisdiction, to temporary or permanent restraining orders or injunctions against Employee prohibiting such breach or attempted or threatened breach, without the necessity of: (i) proving immediate or irreparable harm; (ii) establishing that monetary damages are inadequate or that the Company Entities do not have an adequate remedy at law; or (iii) posting any bond with respect thereto.

(g) Right of Court or Arbitrator to Reform Restrictions. The Company and Employee state that it was their intent to enter into a valid and enforceable agreement. Employee and the Company hereby acknowledge the reasonableness of the restrictions set forth in this Section 5, including the reasonableness of the geographic area, duration as to time and scope of activity restrained. Employee agrees that if an arbitrator or court of competent jurisdiction finds that this Section 5 contains limitations as to geographic area, time or scope of activity to be restrained that are not reasonable and impose a greater restraint than is necessary to protect the goodwill or other business interest of the Company Entities, the arbitrator or court may: (i) reform the covenants to the extent necessary to cause the limitations contained in this Section 5 as to geographic area, time or scope of activity to be reasonable and to impose a restraint that is not greater than necessary to protect the goodwill or business interests of the Company Entities; and (ii) enforce this Section 5 as so reformed.

- 8 -

(h) Repayment and Forfeiture. Employee agrees that in the event that (i) Employee breaches any term of Sections 3 or 4 hereof or this Section 5, or (ii) Employee challenges the validity of all or any part of this Section 5, and all or any part of this Section 5 is found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction or an arbitrator in a proceeding between Employee and a Company Entity, in addition to any other remedies at law or in equity the Company may have available to it, the Company shall not be obligated to make any of the payments and may cease to make such payments or to provide for any of the benefits specified in Section 2 hereof, and shall be entitled to recoup from Employee any and all of the value of the payments and benefits provided pursuant to Section 2 hereof that have vested or been paid pursuant to that Section.

Section 6. Entire Agreement; Amendment; Third-Party Beneficiaries. Employee and the Company agree and acknowledge that this Agreement contains and comprises the entire agreement and understanding between the parties with respect to the subject matter hereof, that no other representation, promise, covenant or agreement of any kind whatsoever has been made to cause either party hereto to execute this Agreement, that all agreements and understandings between the parties with respect to the subject matter hereof are embodied and expressed in this Agreement and that this Agreement supersedes all prior agreements, negotiations, discussions, understandings and commitments, written or oral, between the parties hereto with respect to such subject matter. The parties also agree that the terms of this Agreement shall not be amended or changed except in writing and signed by Employee and a duly authorized agent of the Company. The parties to this Agreement further agree that this Agreement shall be binding on and inure to the benefit of Employee and the Company and the Company’s successors and assigns. Except to the extent otherwise provided in this Agreement with respect to the Company Entities and the Releasees (each such Company Entity and each such Releasee hereby being expressly made a third-party beneficiary of this Agreement), the provisions of this Agreement shall not confer upon any third party any remedy, claim, liability, reimbursement or other right in excess of those existing without reference to this Agreement.

Section 7. Timing and Consultation with Counsel. Employee acknowledges that Employee has been given a reasonable period of time, not less than twenty-one (21) days, within which to consider this Agreement and has been advised to discuss the terms of this Agreement with legal counsel of Employee’s own choosing. Employee acknowledges that this Agreement was offered to Employee on October 21, 2013, and Employee was advised that if accepted (i) it must be executed on or prior to November 11, 2013, and (ii) the Agreement could be revoked, in writing, for up to seven (7) days following the date of such acceptance. If Employee revokes this Agreement, Employee’s resignation shall nevertheless remain effective. Employee represents that Employee has relied on Employee’s own knowledge and judgment and on the advice of independent legal counsel of Employee’s choosing and has consulted with such other independent advisors as Employee and Employee’s counsel deemed appropriate in connection with Employee’s review of this Agreement and Employee’s rights with respect to Employee’s separation from service from the Company and other Company Entities and with respect to this Agreement. Based on Employee’s review, Employee acknowledges that Employee fully and completely understands and accepts all the terms of this Agreement, including the Release in Section 3 hereof, and their legal effects, and Employee is entering into this Agreement voluntarily and of Employee’s own free will, with full consideration of any and all rights which

- 9 -

Employee may currently have. Employee further acknowledges that Employee is not relying on any representations or statements made by the Company or any other Company Entity, or by any of their respective officers, directors, employees, affiliates, agents, attorneys or other representatives, regarding this Agreement, except to the extent such representations are expressly set forth in this Agreement. Employee also acknowledges that Employee is not relying upon a legal duty, if one exists, on the part of the Company or any other Company Entity, or any of their respective officers, directors, employees, subsidiaries, affiliates, agents, attorneys or other representatives, to disclose any information in connection with the execution of this Agreement or its preparation, it being expressly understood that Employee shall never assert any failure to disclose information on the part of any such person or entity as a ground for challenging this Agreement or any provision hereof.

Section 8. Applicable Law; Venue. This Agreement shall be interpreted and construed in accordance with the substantive laws of the State of Texas, without giving effect to any conflicts of laws provisions thereof that would result in the application of the laws of any other jurisdiction. THE EXCLUSIVE VENUE FOR THE RESOLUTION OF ANY DISPUTE RELATING TO THIS AGREEMENT OR EMPLOYEE’S EMPLOYMENT (EXCEPT FOR ANY DISPUTE THAT MAY BE SUBJECTED TO ARBITRATION BY MUTUAL AGREEMENT OF THE PARTIES HERETO AFTER THE DATE HEREOF) SHALL BE IN THE STATE AND FEDERAL COURTS LOCATED IN HARRIS COUNTY, TEXAS AND THE PARTIES HEREBY EXPRESSLY CONSENT TO THE JURISDICTION OF THOSE COURTS.

Section 9. Section 409A; Other Tax Matters. This Agreement is intended to provide payments that are exempt from or compliant with the provisions of Section 409A of the U.S. Internal Revenue Code of 1986 (the “Code”) and related regulations and Treasury pronouncements (“Section 409A”), and the Agreement shall be interpreted accordingly. Notwithstanding any provisions of an RSU to the contrary, no RSU shall be settled by reason of a change in control of McDermott International, Inc. or disability of Employee unless such event is a change in control or disability, as applicable, within the meaning of Section 409A. Notwithstanding anything herein to the contrary, if on the date of Employee’s separation from service Employee is a “specified employee,” as defined in Section 409A, then all or a portion of any severance payments, or benefits under this Agreement that would be subject to the additional tax provided by Section 409A(a)(1)(B) of the Code if not delayed as required by Section 409A(a)(2)(B)(i) of the Code shall be delayed until the first day of the seventh month following Employee’s separation from service date (or, if earlier, Employee’s date of death) and shall be paid as a lump sum (without interest) on such date. For purposes of this Agreement, a termination of Employee’s employment must be a “separation from service” for purposes of Section 409A. Employee acknowledges and agrees that Employee has obtained no advice from the Company or any of the other Company Entities, or any of their respective officers, directors, employees, subsidiaries, affiliates, agents, attorneys or other representatives, and that none of such persons or entities have made any representation regarding the tax consequences, if any, of Employee’s receipt of the payments, benefits and other consideration provided for in this Agreement. Employee further acknowledges and agrees that Employee is personally responsible for the payment of all federal, state and local taxes that are due, or may be due, for any payments and other consideration received by Employee under this Agreement. Employee agrees to indemnify the Company and hold the Company harmless for any and all taxes, penalties or other assessments that Employee is, or may become, obligated to pay on account of any payments made and other consideration provided to Employee under this Agreement.

- 10 -

Section 10. Miscellaneous Provisions.

(a) Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party hereto entitled to the benefit thereof. Any such waiver shall be validly and sufficiently given for the purposes of this Agreement if, as to either party hereto, it is in writing signed by such party or an authorized representative thereof. Failure on the part of the Company or Employee at any time to insist on strict compliance by the other party with any provisions of this Agreement shall not constitute a waiver of the obligations of either party hereto in respect thereof, or of either such party’s right hereunder to require strict compliance therewith in the future. No waiver of any breach of this Agreement shall be deemed to constitute a waiver of any other or subsequent breach.

(b) Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under applicable law, that provision shall be severable and this Agreement shall be construed and enforced as if that illegal, invalid or unenforceable provision never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision, and there shall be added automatically as part of this Agreement a provision as similar in its terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

(c) Further Assurances. Employee shall, on request by the Company from time to time after the date hereof, execute, acknowledge and deliver to the Company such other documents and instruments as the Company may require to give effect to the provisions of this Agreement, including a confirmatory release of the Released Claims as of the Resignation Date.

(d) Section Headings. Titles and headings to Sections and subsections hereof are for the purpose of reference only and shall in no way limit, define or otherwise affect the provisions hereof.

(e) Construction. In this Agreement, unless the context clearly indicates otherwise: (i) words used in the singular include the plural and words used in the plural include the singular; (ii) reference to any gender includes the other gender and the neuter; (iii) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (iv) the words “shall” and “will” are used interchangeably and have the same meaning; (v) the word “or” shall have the inclusive meaning represented by the phrase “and/or”; (vi) the words “this Agreement,” “herein,” “hereunder,” “hereof,” “hereto” and words of similar import shall be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement; (vii) reference to any law (including statutes and ordinances) means such law (including all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining

- 11 -

compliance or applicability; (viii) relative to the determination of any period of time, “from” means “from and including” and “through” means “through and including”; and (ix) all references to dollar amounts herein shall be in respect of lawful currency of the United States. The language this Agreement uses shall be deemed to be the language that the parties hereto have chosen to express their mutual intent, and no rule of strict construction shall be applied against either party hereto.

(f) Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

[Signature page follows]

- 12 -

I HAVE READ THE FOREGOING SEPARATION AGREEMENT, I FULLY UNDERSTAND ITS TERMS AND THAT I MAY BE WAIVING SIGNIFICANT LEGAL RIGHTS BY EXECUTING IT, AND I HAVE VOLUNTARILY EXECUTED IT ON THE DATE WRITTEN BELOW, SIGNIFYING THEREBY MY ASSENT TO, AND WILLINGNESS TO BE BOUND BY, ITS TERMS:

Date: October 29, 2013	/s/ John T. McCormack
	JOHN T. McCORMACK

Before me, a Notary Public in and for Harris County, Texas, personally appeared the above-named Mr. John T. McCormack, who acknowledged that he executed the foregoing instrument for the purposes and consideration therein expressed, and acknowledged the same to be his free act and deed.

IN TESTIMONY WHEREOF, I have hereunto set my hand and official seal, in the County of Harris and State of Texas, this 29th day of October, 2013.

	/s/ Angela Smith
	NOTARY PUBLIC
McDERMOTT, INC.
By:	/s/ Gary L. Carlson
	Name: Gary L. Carlson
	Title: SVP & CAO

Before me, a Notary Public in and for Harris County, Texas, personally appeared the above-named officer of McDermott, Inc., who acknowledged that he executed the foregoing instrument for and on behalf of McDermott, Inc., a Delaware corporation, and for the purposes and consideration therein expressed, and acknowledged the same to be his free act and deed and the free act and deed of said corporation.

IN WITNESS WHEREOF, I have hereunto set my hand and official seal, in the County of Harris and State of Texas, this 29 day of October, 2013.

/s/ Angela Smith

NOTARY PUBLIC

- 13 -

EXHIBIT A

Notice of Resignation

To the Board of Directors of McDermott International, Inc.

Effective as of the open of business on October 31, 2013, the undersigned, John T. McCormack, resigns from all positions held as an officer of McDermott International, Inc., a Panamanian corporation (“McDermott”), and from all positions held as an officer, employee, member of the board of directors or board of managers (and member of any and all committees thereof) of any of McDermott’s subsidiaries (whether corporations, limited liability companies, limited partnerships or other forms of entity) and joint venture entities, and from any and all positions or capacities with respect to any employee benefit plan sponsored or maintained by any such entity; provided, however, that the effectiveness of this resignation from employment with McDermott, Inc., a Delaware corporation and a wholly owned subsidiary of McDermott, shall not be effective until the close of business on November 1, 2013. This resignation is not subject to any condition to effectiveness (including, but not limited to, acceptance by the Board of Directors of McDermott) and is irrevocable.

Dated: October 29, 2013

/s/ John T. McCormack

John T. McCormack

EXHIBIT B

CONSULTING SERVICES

TERMS AND CONDITIONS

1. Description of Services. As requested by the MII or the Company, John T. McCormack (“Consultant”) shall serve as a special consultant furnishing advice, consultation and related services including, but not limited to, special assignments as determined by the President and Chief Executive Officer of MII or his designee.

2. Status. During the Consulting Period, Consultant shall be an independent contractor and shall not be an employee of MII, the Company or any of the other Company Entities. None of the Company Entities shall be entitled to exercise supervision over the details or methods of performance by Consultant hereunder or to require adherence to specific procedures in performing services hereunder, other than procedures or policies to the extent applicable to all independent contractors and consultants of the Company Entities on a general basis, including the most recent McDermott International, Inc. Code of Business Conduct. Except as provided herein, Consultant shall not be subject to rules or regulations applicable to employees of the Company Entities or any established work schedule or routine or other supervision of or direction by any of the Company Entities, as to hours worked or otherwise; provided, however, that all services rendered hereunder shall be so rendered in a diligent, prudent and competent manner and to the satisfaction of MII and the Company. Consultant shall not have authority to obligate any of the Company Entities to any agreement or to exercise any supervision or direction over any employees of any of the Company Entities. Since Consultant is not an employee of the Company, Consultant is not hereby entitled to participate in any of the Company’s employee benefit plans, programs or arrangements; provided, however, the retirement and other payments or benefits that Consultant may be entitled to as a result of previous employment with the Company shall continue uninterrupted in accordance with the terms and conditions of each respective benefit plan or arrangement.

3. Compensation. Consultant’s individual contact shall be the President and Chief Executive Officer of MII or his designee, who shall be responsible for transmitting requests for such advice and consultation from the Company Entities where necessary to enable Consultant to carry out Consultant’s responsibilities hereunder. During the Consulting Period, the Company agrees to pay Consultant $4,500 per day for each day that he performs consulting services to the Company Entities as requested by MII or the Company during the Consulting Period (“Consulting Fees”). The Company also agrees to reimburse Consultant for reasonable costs and expenses of airfare and other travel, meals and lodging actually incurred by Consultant in performance of consulting services hereunder, in accordance with the then-operative and applicable policies of MII and the Company, and reasonable administrative costs, such as costs for telephone calls, internet usage, printing, etc., necessarily incurred by Consultant in rendering consulting services hereunder, but not any other fees, costs, or expenses. Consultant shall submit a statement for each month in which consulting services are rendered, showing costs, expenses and days worked with respect to services rendered during such month, along with documentation substantiating expenses for which reimbursement is sought. The Company agrees to remit to Consultant the appropriate amount promptly following receipt of such statements. Consultant will be responsible for income or other taxes assessed on Consultant’s receipt of fees and expense reimbursements from the Company.

4. Security and Non-Disclosure of Information. Consultant shall be responsible for, and bear the expense of, compliance with governmental laws and regulations applicable to the procurement, utilization or production of information in connection with the furnishing of services hereunder. Consultant agrees that, during the Consulting Period, Consultant will refrain from performing any act or engaging in any course of conduct which has or may reasonably have the effect of demeaning the name or business reputation of the Company or affects adversely or may reasonably affect adversely the Company’s best interests, economic or otherwise. Consultant also acknowledges that applicable securities laws prohibit the trading of Company securities while in possession of any material non-public information, including information concerning the financial condition, results of operations, business or prospects of MII and its subsidiaries.

5. Property and Information. All property and information, including but not limited to reports, findings, recommendations, plans, data, and memoranda of every description, and all copies thereof, furnished to Consultant or developed in the course of or relating to the services rendered hereunder shall be the property of the applicable Company Entities, and Consultant shall not retain copies of any such matter or material. Consultant agrees that all inventions, discovery or improvements (whether patentable or not) made or conceived by Consultant are and will remain the sole property of the applicable Company Entities, and Consultant further agrees to assist the applicable Company Entities in obtaining patents in their names covering any such inventions, discoveries or improvements.

6. Law. Consultant will comply with all applicable laws and regulations in the course of Consultant’s activities on behalf the Company Entities.

7. Code of Business Conduct. Consultant expressly acknowledges that Consultant has received and reviewed the most recent McDermott International, Inc. Code of Business Conduct, and Consultant will conform Consultant’s activities undertaken for or on behalf of the Company Entities consistent with the principles of the highest ethical behavior as described therein.

Signature:	/s/ John T. McCormack	Date:	October 29, 2013
	John T. McCormack

8. Reports. Consultant agrees that, upon request, Consultant will file periodic reports on Consultant’s activities on behalf the Company Entities.

9. Indemnity. The Company agrees to protect, hold harmless, defend, and indemnify Consultant from and against any and all claims, suits, and demands, of any kind whatsoever, by whomsoever asserted, as a result of, or arising from, the consulting services provided by Consultant under this Agreement to the Company Entities; provided, however, that the Company shall have no liability or responsibility under this provision for any such claim, suit, or demand resulting from the gross negligence or intentional misconduct of Consultant.

10. Conflict of Interest. Consultant agrees that Consultant is not presently engaged and will not engage during the term of this Consulting Agreement in any activity which might reasonably create a conflict of interest between Consultant and any of the Company Entities or which might reasonable and adversely affect Consultant’s judgment with respect to the business of the Company Entities. Consultant further agrees that Consultant will accept no payment from any competitor or supplier of materials or services, customer, borrower, or lender of the Company Entities.

11. Consulting Period. The Consulting Period shall begin on November 2, 2013 and continue through April 30, 2014, unless terminated earlier by Consultant upon thirty (30) days advance written notice to the Company or extended by the mutual written agreement of the Company and Consultant. The Consulting Period will be terminated without further liability or obligation on the part of the Company should Consultant breach any of the terms or covenants of this Agreement (including this Exhibit B).

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Stephen M. Johnson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McDermott International, Inc. for the quarterly period ended September 30, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 4, 2013

/s/ Stephen M. Johnson

Stephen M. Johnson

Chairman of the Board of Directors, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Perry L. Elders, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McDermott International, Inc. for the quarterly period ended September 30, 2013;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 4, 2013

/s/ Perry L. Elders

Perry L. Elders

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

MCDERMOTT INTERNATIONAL, INC.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Stephen M. Johnson, Chairman of the Board of Directors, President and Chief Executive Officer of McDermott International, Inc., a Panamanian corporation (the “Company”), hereby certify, to my knowledge, that:

(1) the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 4, 2013

/s/ Stephen M. Johnson

Stephen M. Johnson

Chairman of the Board of Directors, President and Chief Executive Officer

EX-32.2

Exhibit 32.2

MCDERMOTT INTERNATIONAL, INC.

Certification Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

(Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code)

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), I, Perry L. Elders, Senior Vice President and Chief Financial Officer of McDermott International, Inc., a Panamanian corporation (the “Company”), hereby certify, to my knowledge, that:

(1) the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: November 4, 2013

/s/ Perry L. Elders

Perry L. Elders

Senior Vice President and Chief Financial Officer

XML

COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2013

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 10—COMMITMENTS AND CONTINGENCIES

Previously Pending Litigation

The following discussion presents information relating to pending litigation discussed in Note 12—Commitments and Contingencies in our Annual Report on Form 10-K for the year ended December 31, 2012. There have been no material subsequent developments relating to these matters.

On or about August 23, 2004, a declaratory judgment action entitled Certain Underwriters at Lloyd’s London, et al. v. J. Ray McDermott, Inc. et al., was filed by certain underwriters at Lloyd’s, London and Threadneedle Insurance Company Limited (the “London Insurers”), in the 23^rd Judicial District Court, Assumption Parish, Louisiana, against MII, J. Ray McDermott, Inc. (“JRMI”) and two insurer defendants, Travelers and INA, seeking a declaration that the London Insurers have no obligation to indemnify MII and JRMI for certain bodily injury claims, including claims for asbestos and welding rod fume personal injury which have been filed by claimants in various state courts. Additionally, Travelers filed a cross-claim requesting a declaration of non-coverage in approximately 20 underlying matters. This proceeding was stayed by the Court on January 3, 2005. We do not believe an adverse judgment or material losses in this matter are probable, and, accordingly, we have not accrued any amounts relating to this contingency. Although there is a possibility of an adverse judgment, the amount or potential range of loss is not estimable at this time. The insurer-plaintiffs in this matter commenced this proceeding in a purported attempt to obtain a determination of insurance coverage obligations for occupational exposure and/or environmental matters for which we have given notice that we could potentially seek coverage. Because estimating losses would require, for every matter, known and unknown, on a case-by-case basis, anticipating what impact on coverage a judgment would have and a determination of an otherwise expected insured value, damages cannot be reasonably estimated.

On December 16, 2005, a proceeding entitled Antoine, et al. vs. J. Ray McDermott, Inc., et al. (“Antoine Suit”), was filed in the 24^th Judicial District Court, Jefferson Parish, Louisiana, by approximately 88 plaintiffs against approximately 215 defendants, including our subsidiaries formerly known as JRMI and Delta Hudson Engineering Corporation (“DHEC”), generally alleging injuries for exposure to asbestos, and unspecified chemicals, metals and noise while the plaintiffs were allegedly employed as Jones Act seamen. This case was dismissed by the Court on January 10, 2007, without prejudice to plaintiffs’ rights to refile their claims. On January 29, 2007, 21 plaintiffs from the dismissed Antoine Suit filed a matter entitled Boudreaux, et al. v. McDermott, Inc., et al. (the “Boudreaux Suit”), in the United States District Court for the Southern District of Texas, against JRMI and our subsidiary formerly known as McDermott Incorporated, and approximately 30 other employer defendants, alleging Jones Act seaman status and generally alleging exposure to welding fumes, solvents, dyes, industrial paints and noise. The Boudreaux Suit was transferred to the United States District Court for the Eastern District of Louisiana on May 2, 2007, which entered an order in September 2007 staying the matter until further order of the Court due to the bankruptcy filing of one of the co-defendants. Additionally, on January 29, 2007, another 43 plaintiffs from the dismissed Antoine Suit filed a matter entitled Antoine, et al. v. McDermott, Inc., et al. (the “New Antoine Suit”), in the 164^th Judicial District Court for Harris County, Texas, against JRMI, our subsidiary formerly known as McDermott Incorporated and approximately 65 other employer defendants and 42 maritime products defendants, alleging Jones Act seaman status and generally alleging personal injuries for exposure to asbestos and noise. On April 27, 2007, the District Court entered an order staying all activity and deadlines in the New Antoine Suit, other than service of process and answer/appearance dates, until further order of the Court. The New Antoine Suit plaintiffs filed a motion to lift the stay on February 20, 2009, which is pending before the Texas District Court. The plaintiffs seek monetary damages in an unspecified amount in both the Boudreaux Suit and New Antoine Suit cases and attorneys’ fees in the New Antoine Suit. We cannot reasonably estimate the extent of a potential judgment against us, if any, and we intend to vigorously defend these suits.

Other Litigation

On August 15, 2013 and August 20, 2013, two separate alleged purchasers of our common stock filed purported class action complaints against MII, Stephen M. Johnson and Perry L. Elders in the United States District Court for the Southern District of Texas. Both of the complaints seek to represent a class of purchasers of our stock between November 6, 2012 and August 5, 2013, and allege, among other things, that the defendants violated federal securities laws by disseminating materially false and misleading information and failing to disclose material information relating to weaknesses in project bidding and execution, poor risk evaluation, poor project management and losses in each of MII’s reporting segments. Each complaint seeks relief, including unspecified compensatory damages and an award for attorneys’ fees and other costs. On October 15, 2013, an alleged purchaser of common stock during the relevant time period filed a motion for consolidation of the two actions, appointment as lead plaintiff, and approval of his choice of lead counsel and liaison counsel. We believe the substantive allegations contained in the complaints are without merit, and we intend to defend against these claims vigorously.

Additionally, due to the nature of our business, we and our affiliates are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including, among other things:

• performance- or warranty-related matters under our customer and supplier contracts and other business arrangements; and

• workers’ compensation claims, Jones Act claims, occupational hazard claims, including asbestos-exposure claims, premises liability claims and other claims.

Based upon our prior experience, we do not expect that any of these other litigation proceedings, disputes and claims will have a material adverse effect on our consolidated financial condition, results of operations or cash flows; however, because of the inherent uncertainty of litigation and, in some cases, the availability and amount of potentially applicable insurance, we can provide no assurance that the resolution of any particular claim or proceeding to which we are a party will not have a material effect on our consolidated financial condition, results of operations or cash flows for the fiscal period in which that resolution occurs.

Environmental Matters

We have been identified as a potentially responsible party at various cleanup sites under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”). CERCLA and other environmental laws can impose liability for the entire cost of cleanup on any of the potentially responsible parties, regardless of fault or the lawfulness of the original conduct. Generally, however, where there are multiple responsible parties, a final allocation of costs is made based on the amount and type of wastes disposed of by each party and the number of financially viable parties, although this may not be the case with respect to any particular site. We have not been determined to be a major contributor of wastes to any of these sites. On the basis of our relative contribution of waste to each site, we expect our share of the ultimate liability for the various sites will not have a material adverse effect on our consolidated financial condition, results of operations or cash flows in any given year.

At September 30, 2013 we had no material amounts accrued for environmental reserves. Inherent in our estimates of reserves and recoveries are our expectations regarding the levels of contamination, remediation costs and recoverability from other parties, which may vary significantly as remediation activities progress. Accordingly, changes in estimates could result in material adjustments to our operating results, and the ultimate loss may differ materially from the amounts we have provided for in our consolidated financial statements.

Contracts Containing Liquidated Damages Provisions

Some of our contracts contain provisions that require us to pay liquidated damages if we are responsible for the failure to meet specified contractual milestone dates and the applicable customer asserts a claim under these provisions. These contracts define the conditions under which our customers may make claims against us for liquidated damages. In many cases in which we have historically had potential exposure for liquidated damages, such damages ultimately were not asserted by our customers. As of September 30, 2013, it is possible that we may incur liabilities for liquidated damages aggregating approximately $137.0 million, of which approximately $11.0 million has been recorded in our financial statements, based on our actual or projected failure to meet certain specified contractual milestone dates. The dates for which these potential liquidated damages could arise extend to June 2015. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for additional liquidated damages. Accordingly, we believe that no amounts for these potential liquidated damages in excess of the amounts currently reflected in our financial statements are probable of being paid by us. However, we may not achieve relief on some or all of the issues.

Contractual Obligations

At September 30, 2013, we had outstanding obligations related to our new vessel construction contracts on the LV 108 and DLV 2000 of $382.4 million in the aggregate, with $41.6 million, $136.5 million and $204.3 million due in the years ending December 31, 2013, 2014 and 2015, respectively.

XML

Information about Segment Assets by Country (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Segment Reporting Information [Line Items]
Total assets	$ 3,157,281	$ 3,333,627
Asia Pacific
Segment Reporting Information [Line Items]
Assets, continuing operations	1,171,837	1,402,923
Atlantic
Segment Reporting Information [Line Items]
Assets, continuing operations	611,111	536,734
Middle East
Segment Reporting Information [Line Items]
Assets, continuing operations	1,228,812	1,006,284
Corporate and Other
Segment Reporting Information [Line Items]
Assets, continuing operations	$ 145,521	$ 387,686

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Current Assets:
Cash and cash equivalents	$ 282,370	$ 640,147
Restricted cash and cash equivalents	18,488	18,116
Accounts receivable-trade, net	341,458	428,800
Accounts receivable-other	110,252	75,461
Contracts in progress	586,120	560,154
Deferred income taxes	11,184	9,765
Assets held for sale	1,396	2,679
Other current assets	40,959	54,667
Total Current Assets	1,392,227	1,789,789
Property, Plant and Equipment	2,337,706	2,115,176
Less accumulated depreciation	(865,897)	(833,385)
Net Property, Plant and Equipment	1,471,809	1,281,791
Investments	17,282	26,750
Goodwill	41,202	41,202
Investments in Unconsolidated Affiliates	26,753	37,435
Assets Held for Sale	12,243	26,758
Other Assets	195,765	129,902
Total Assets	3,157,281	3,333,627
Current Liabilities:
Notes payable and current maturities of long-term debt	41,037	14,146
Accounts payable	371,674	400,007
Accrued liabilities	393,024	369,418
Advance billings on contracts	312,268	241,696
Deferred income taxes	18,119	10,758
Income taxes payable	29,530	76,986
Total Current Liabilities	1,165,652	1,113,011
Long-Term Debt	53,104	88,562
Self-Insurance	26,696	22,641
Pension Liability	24,057	25,069
Other Liabilities	149,320	132,239
Commitments and Contingencies
Stockholders' Equity:
Common stock, par value $1.00 per share, authorized 400,000,000 shares; issued 243,941,008 and 243,442,156 shares at September 30, 2013 and December 31, 2012, respectively	243,941	243,442
Capital in excess of par value	1,405,289	1,391,271
Retained earnings	252,816	445,756
Treasury stock, at cost, 7,665,632 and 7,574,903 shares at September 30, 2013 and December 31, 2012, respectively	(98,690)	(98,725)
Accumulated other comprehensive loss	(129,235)	(94,413)
Stockholders' Equity-McDermott International, Inc.	1,674,121	1,887,331
Noncontrolling Interests	64,331	64,774
Total Equity	1,738,452	1,952,105
Total Liabilities and Equity	$ 3,157,281	$ 3,333,627

XML

LONG-TERM DEBT AND NOTES PAYABLE

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

LONG-TERM DEBT AND NOTES PAYABLE

NOTE 3—LONG-TERM DEBT AND NOTES PAYABLE

Credit Facility

In May 2010, we entered into a credit agreement with a syndicate of lenders and letter of credit issuers (as last amended in August 2013, the “Credit Agreement”). The Credit Agreement provides for revolving credit borrowings and issuances of letters of credit in an aggregate outstanding amount of up to $950.0 million and is scheduled to mature on August 19, 2016. Proceeds from borrowings under the Credit Agreement are available for working capital needs and other general corporate purposes. The Credit Agreement includes procedures for additional financial institutions to become lenders, or for any existing lender to increase its commitment thereunder.

In August 2013, we amended the Credit Agreement to, among other things: (1) add certain amounts to EBITDA (as defined in the Credit Agreement) for the fiscal quarters ended December 31, 2012, March 31, 2013 and June 30, 2013; (2) permit us to add to EBITDA certain cash expenses related to the Atlantic segment restructuring for the quarters ended or ending September 30, 2013, December 31, 2013 and March 31, 2014; and (3) increase the maximum permitted leverage ratio of total indebtedness to EBITDA from 3.00:1.00 to 3.75:1.00 for the quarters ended or ending September 30, 2013, December 31, 2013 and March 31, 2014. The August amendment to the Credit Agreement also provides that if we issue senior unsecured notes with a principal amount of at least $300 million, from the date of such issuance until March 31, 2014, the maximum permitted leverage ratio will increase from 3.75:1.00 to 5.00:1.00 and we will have to comply with a maximum permitted secured leverage ratio of total secured indebtedness to EBITDA of 2.00:1.00. The maximum leverage ratio and the minimum interest coverage ratio as defined in the Credit Agreement may differ in the method of calculation from similarly titled measures used by other companies or in other agreements. The Credit Agreement also contains covenants that restrict, among other things, debt incurrence, liens, investments, acquisitions, asset dispositions, dividends, prepayments of subordinated debt, mergers and capital expenditures.

Other than customary mandatory prepayments in connection with casualty events, the Credit Agreement requires only interest payments on a quarterly basis until maturity. We may prepay all loans under the Credit Agreement at any time without premium or penalty (other than customary LIBOR breakage costs), subject to certain notice requirements.

Our overall borrowing capacity is in large part dependent on maintaining compliance with covenants under the Credit Agreement by generating sufficient income from operations. At September 30, 2013, we were in compliance with our covenant requirements. A comparison of the key financial covenants and compliance is as follows:

	Required		Actual
Maximum leverage ratio		3.75		0.90
Minimum interest coverage ratio		4.00		20.63

Loans outstanding under the Credit Agreement bear interest at the borrower’s option at either the Eurodollar rate plus a margin ranging from 1.50% to 2.50% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the 30-day Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin ranging from 0.50% to 1.50% per year. The applicable margin for revolving loans varies depending on the credit ratings of the Credit Agreement. We are charged a commitment fee on the unused portions of the Credit Agreement, and that fee varies between 0.200% and 0.450% per year depending on the credit ratings of the Credit Agreement. Additionally, we are charged a letter of credit fee of between 1.50% and 2.50% per year with respect to the amount of each financial letter of credit issued under the Credit Agreement and a letter of credit fee of between 0.75% and 1.25% per year with respect to the amount of each performance letter of credit issued under the Credit Agreement, in each case depending on the credit ratings of the Credit Agreement. Under the Credit Agreement, we also pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement. In connection with entering into the Credit Agreement and certain amendments to the Credit Agreement, we paid certain fees to the lenders thereunder, and certain arrangement and other fees to the arrangers and agents for the Credit Agreement, which are being amortized to interest expense over the term of the Credit Agreement.

At September 30, 2013, there were no borrowings outstanding, and letters of credit issued under the Credit Agreement totaled $237.0 million. At September 30, 2013, there was $713.0 million available for borrowings or to meet letter of credit requirements under the Credit Agreement. During the quarter ended September 30, 2013, our outstanding borrowings under the Credit Agreement did not exceed $80.0 million, and our average outstanding borrowings under the Credit Agreement during the period from July 1, 2013 through September 30, 2013 was approximately $40.0 million with an average interest rate of 2.16%. In addition, we had $82.6 million in outstanding unsecured bilateral letters of credit as of September 30, 2013.

At September 30, 2013, based on the credit ratings applicable to the Credit Agreement, the applicable margin for Eurodollar-rate loans was 1.75%, the applicable margin for base-rate loans was 0.75%, the letter of credit fee for financial letters of credit was 1.75%, the letter of credit fee for performance letters of credit was 0.875%, and the commitment fee for unused portions of the Credit Agreement was 0.25%. The Credit Agreement does not have a floor for the base rate or the Eurodollar rate.

North Ocean Financing

North Ocean 102

In December 2009, J. Ray McDermott, S.A. (“JRMSA”), a wholly owned subsidiary of MII, entered into a vessel-owning joint venture transaction with Oceanteam ASA. As a result of this transaction, we had consolidated notes payable of $32.9 million and $37.3 million on our condensed consolidated balance sheets at September 30, 2013 and December 31, 2012, respectively, of which $32.9 million and $6.0 million was classified as current notes payable at September 30, 2013 and December 31, 2012, respectively. JRMSA has guaranteed approximately 50% of this debt based on its ownership percentages in the vessel-owning companies. The outstanding debt bears interest at a rate equal to the three-month LIBOR (which resets every three months) plus a margin of 3.315% and matures in January 2014.

North Ocean 105

On September 30, 2010, MII, as guarantor, and North Ocean 105 AS, in which we have a 75% ownership interest, as borrower, entered into a financing agreement to finance a portion of the construction costs of the North Ocean 105. The agreement provides for borrowings of up to $69.4 million, bearing interest at 2.76% per year, and requires principal repayment in 17 consecutive semi-annual installments, which commenced on October 1, 2012. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of North Ocean 105 AS, a mortgage on the North Ocean 105, and a lien on substantially all of the other assets of North Ocean 105 AS. MII unconditionally guaranteed all amounts to be borrowed under the agreement. There was $61.3 million and $65.4 million in borrowings outstanding under this agreement on our balance sheets at September 30, 2013 and December 31, 2012, respectively, of which $8.2 million was classified as current notes payable at September 30, 2013 and December 31, 2012.

ANZ Reimbursement Agreement

On April 20, 2012, McDermott and one of its wholly owned subsidiaries, McDermott Australia Pty. Ltd. (“McDermott Australia”), entered into a secured Letter of Credit Reimbursement Agreement (the “Reimbursement Agreement”) with Australia and New Zealand Banking Group Limited (“ANZ”). In accordance with the terms of the Reimbursement Agreement, ANZ issued letters of credit in the aggregate amount of approximately $109.0 million to support McDermott Australia’s performance obligations under contractual arrangements relating to a field development project. The obligations of McDermott and McDermott Australia under the Reimbursement Agreement are secured by McDermott Australia’s interest in the contractual arrangements and certain related assets.

Surety Bonds

In 2012 and 2007, JRMSA executed general agreements of indemnity in favor of surety underwriters based in Mexico relating to surety bonds issued in support of contracting activities of J. Ray McDermott de Mèxico, S.A. de C.V., a subsidiary of JRMSA. As of September 30, 2013, the aggregate principal amount of bonds issued under these arrangements totaled $46.5 million.

Long-term debt and notes payable obligations

A summary of our long-term debt obligations are as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Long-term debt consists of:
North Ocean 102 Construction Financing	$	32,867	$	37,349
North Ocean 105 Construction Financing		61,274		65,359
		94,141		102,708
Less: Amounts due within one year		41,037		14,146
Total long-term debt	$	53,104	$	88,562

XML

FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Available-For-Sale Securities Measured at Fair Value

The following is a summary of our available-for-sale securities measured at fair value:

	Total at September 30, 2013		Level 1		Level 2		Level 3
	(Unaudited)
	(In thousands)
Mutual funds(1)	$	2,115	$	—	$	2,115	$	—
Commercial paper		7,397		—		7,397		—
Asset-backed securities and collateralized mortgage obligations(2)		7,770		—		2,115		5,655
Total	$	17,282	$	—	$	11,627	$	5,655

	Total at December 31, 2012		Level 1		Level 2		Level 3
	(In thousands)
Mutual funds(1)	$	2,023	$	—	$	2,023	$	—
Commercial paper		29,737		—		29,737		—
Asset-backed securities and collateralized mortgage obligations(2)		8,477		—		2,134		6,343
Corporate notes and bonds(3)		5,755		—		5,755		—
Total	$	45,992	$	—	$	39,649	$	6,343

(1) Various U.S. equities and other investments managed under mutual funds

(2) Asset-backed and mortgage-backed securities with maturities of up to 26 years

(3) Corporate notes and bonds with maturities of three years or less

Changes in Level Three Instrument Measured on Recurring Basis

The following is a summary of the changes in our Level 3 instrument measured on a recurring basis for the three months and nine months ended September 30, 2013 and September 30, 2012:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands)
Balance at beginning of period	$	5,902		$	6,338		$	6,343		$	6,030
Total realized and unrealized gains		79			459			307			1,357
Principal repayments		(326	)		(340	)		(995	)		(930	)
Balance at end of period	$	5,655		$	6,457		$	5,655		$	6,457

Summary of Available for Sale Securities

The following is a summary of our available-for-sale securities:

	Twelve Months or Greater
	Fair Value		Unrealized Losses
	(Unaudited) (In thousands)
September 30, 2013
Mutual funds	$	2,115	$	—
Commercial paper		7,397		—
Asset-backed securities and collateralized mortgage obligations		7,770		(1,857	)
Total	$	17,282	$	(1,857	)

	Twelve Months or Greater
	Fair Value		Unrealized Losses
	(Unaudited) (In thousands)
December 31, 2012
Mutual funds	$	2,023	$	—
Commercial paper		29,737		—
Asset-backed securities and collateralized mortgage obligations		8,477		(2,376	)
Corporate notes and bonds		5,755		—
Total	$	45,992	$	(2,376	)

Estimated Fair Values of Financial Instruments

The estimated fair values of certain of our financial instruments are as follows:

	September 30, 2013						December 31, 2012
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(Unaudited)
	(In thousands)
Balance Sheet Instruments
Cash and cash equivalents	$	282,370		$	282,370		$	640,147		$	640,147
Restricted cash and cash equivalents	$	18,488		$	18,488		$	18,116		$	18,116
Investments	$	17,282		$	17,282		$	45,992		$	45,992
Debt	$	(94,141	)	$	(95,919	)	$	(102,708	)	$	(106,324	)
Forward contracts	$	(17,569	)	$	(17,569	)	$	21,434		$	21,434

XML

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

McDermott International, Inc. (“MII”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a leading engineering, procurement, construction and installation (“EPCI”) company focused on designing and executing complex offshore oil and gas projects worldwide. Providing fully integrated EPCI services, we deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning. We support these activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction. Our customers include national, major integrated and other oil and gas companies, and we operate in most major offshore oil and gas producing regions throughout the world. In these notes to our unaudited condensed consolidated financial statements, unless the context otherwise indicates, “we,” “us” and “our” mean MII and its consolidated subsidiaries.

Basis of Presentation

Basis of Presentation

We have presented our unaudited condensed consolidated financial statements in U.S. Dollars, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim reporting. Financial information and disclosures normally included in our financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and the accompanying notes in our annual report on Form 10-K for the year ended December 31, 2012.

We have included all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation. These condensed consolidated financial statements include the accounts of McDermott International, Inc., its consolidated subsidiaries and controlled entities. We use the equity method to account for investments in entities that we do not control, but over which we have significant influence. We generally refer to these entities as “unconsolidated affiliates” or “joint ventures.” We have eliminated all intercompany transactions and accounts.

During the quarter ended March 31, 2013, we acquired Deepsea Group Limited, a United Kingdom-based company that provides subsea and other engineering services to international energy companies, primarily through offices in the United Kingdom and the United States. During the quarter ended June 30, 2013, we commenced a restructuring of our Atlantic segment. See Note 2 for information relating to our acquisition and disposition-related activities.

On March 19, 2012, we completed the sale of our former charter fleet business, which operated 10 of the 14 vessels acquired in our 2007 acquisition of substantially all of the assets of Secunda International Limited (the “Secunda Acquisition”). The condensed consolidated statements of income, comprehensive income, cash flows and equity reflect the historical operations of the charter fleet business as a discontinued operation through March 19, 2012.

We have presented the notes to our condensed consolidated financial statements on the basis of continuing operations. In addition, certain 2012 amounts in the condensed consolidated balance sheet and statement of cash flows have been reclassified to conform to the 2013 presentation.

Business Segments

Business Segments

We operate in four primary operating segments, which consist of Asia Pacific, Atlantic, Caspian and the Middle East. The Caspian and Middle East operating segments are aggregated into the Middle East reporting segment due to the proximity of regions and similarities in the nature of services provided, economic characteristics and oversight responsibilities. Accordingly, we report financial results under reporting segments consisting of Asia Pacific, Atlantic and the Middle East. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects corporate personnel and activities, incentive compensation programs and other costs, which are generally fully allocated to our operating segments. See Note 9 for summarized financial information on our segments.

Revenue Recognition

Revenue Recognition

We determine the appropriate accounting method for each of our long-term contracts before work on the project begins. We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved. We include the amount of accumulated contract costs and estimated earnings that exceed billings to customers in contracts in progress. We include billings to customers that exceed accumulated contract costs and estimated earnings in advance billings on contracts. Most long-term contracts contain provisions for progress payments. We expect to invoice customers and collect all unbilled revenues. Certain costs are generally excluded from the cost-to-cost method of measuring progress, such as significant procurement costs for materials and third-party subcontractors. Costs incurred prior to a project award are generally expensed during the period in which they are incurred. Total estimated project costs, and resulting income, are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. Additionally, external factors such as weather, customer requirements and other factors outside of our control may affect the progress and estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income recognition.

In addition, change orders, which are a normal and recurring part of our business, can increase (and sometimes substantially) the future scope and cost of a job. Therefore, change order awards (although frequently beneficial in the long term) can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit, proportionate to the job percentage of completion in the period when those estimates are revised. Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts management expects to recover or costs incurred. The total unapproved change orders included in our estimates at completion aggregated approximately $468 million, of which approximately $138 million was included in backlog at September 30, 2013. Unapproved change orders that are disputed by the customer are treated as claims.

Deferred Profit Recognition

For contracts as to which we are unable to estimate the final profitability due to their uncommon nature, including first-of-a-kind projects, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these contracts, we only recognize gross margin when reliably estimable and the level of uncertainty has been significantly reduced, which we generally determine to be when the contract is at least 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical as deferred profit recognition contracts. If while being accounted for under our deferred profit recognition policy, a current estimate of total contract costs indicates a loss, the projected loss is recognized in full and the project is accounted for under our normal revenue recognition guidelines.

We currently account for an Atlantic segment project under our deferred profit recognition policy. This project was awarded to one of our joint ventures, and the Atlantic segment’s backlog includes a subcontract from that joint venture, of which $151.3 million relating to this project remains in backlog at September 30, 2013. This project contributed revenues and costs equally, totaling approximately $36.0 million and $16.0 million for the three-month periods ended September 30, 2013 and 2012, respectively, and approximately $79.0 million and $29.0 million for the nine-month periods ended September 30, 2013 and 2012, respectively.

Completed Contract Method

Under the completed contract method, revenue and gross profit is recognized only when a contract is completed or substantially complete. We generally do not enter into fixed-price contracts without an estimate of cost to complete that we believe to be accurate. However, it is possible that in the time between contract award and the commencement of work on a project, we could lose the ability to adequately forecast costs to complete based on intervening events, including, but not limited to, experience on similar projects, civil unrest, strikes and volatility in our expected costs. In such a situation, we would use the completed contract method of accounting for that project. We currently do not have any contracts that we account for under the completed contract method.

Claims Revenue

Claims revenue may relate to various factors, including the procurement of materials, equipment performance failures, change order disputes or schedule disruptions and other delays, including those associated with weather conditions. Claims revenue, when recorded, is only recorded to the extent of the lesser of the amounts management expects to recover or the associated costs incurred in our consolidated financial statements. We include certain unapproved claims in the applicable contract values when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Amounts attributable to unapproved change orders are not included in claims. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Claims are generally negotiated over the course of the respective projects and many of our projects are long-term in nature. None of the claims at September 30, 2013 were involved in litigation.

The amount of revenues and costs included in our estimates at completion (i.e., contract values) associated with such claims was $186.3 million and $78.6 million as of September 30, 2013 and 2012, respectively. Approximately 41%, 8% and 51% of those claim amounts at September 30, 2013 were related to our Asia Pacific, Atlantic and Middle East segments, respectively. These amounts are determined based on various factors, including our analysis of the underlying contractual language and our experience in making and resolving claims. For the three months ended September 30, 2013 and 2012, $17.6 million and $7.0 million, respectively, of revenues and costs are included in our financial statements pertaining to claims. For the nine months ended September 30, 2013 and 2012, $56.9 million and $45.0 million, respectively, of revenues and costs are reflected in our financial statements pertaining to claims. Approximately 10%, 11% and 79% of those claim amounts are related to our Asia Pacific, Atlantic and Middle East segments, respectively.

Our unconsolidated joint ventures also included an aggregate of $3.7 million of claims revenue and costs in their financial results for the nine months ended September 30, 2013, with no amounts recognized during the three months ended September 30, 2013. For the three months and nine months ended September 30, 2012, our joint ventures included approximately $9.0 million and $14.0 million, respectively of claims revenue and costs in their financial results.

Loss Recognition

A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, supplier performance, pipeline lay rates or steel and other raw material prices. Increases in costs associated with our fixed-priced contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows.

As of September 30, 2013, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full when determined.

We currently have four active projects in our backlog that are in loss positions at September 30, 2013, whereby future revenues are expected to equal costs when recognized. Included in these projects are a marine project in our Asia Pacific segment, which we began in 2012 and expect to complete by mid-2014, and a five-year charter in Brazil, which we began in early 2012 and we are conducting through our Atlantic segment.

Use of Estimates

Use of Estimates

We use estimates and assumptions to prepare our financial statements in conformity with GAAP. These estimates and assumptions affect the amounts we report in our financial statements and accompanying notes. Our actual results could differ from these estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, unexpected changes in weather conditions, productivity, unanticipated vessel repair requirements, customer and vendor delays and other costs. We generally expect to experience a variety of unanticipated events, and some of these events can result in significant cost increases above cost amounts we previously estimated. Variations from estimated contract performance could result in material adjustments to operating results.

The following is a discussion of our most significant changes in estimates, which impacted operating income in each of our segments for the three and nine months ended September 30, 2013 and 2012.

Three months ended September 30, 2013

The Asia Pacific segment was primarily impacted by changes in estimates on one subsea project in Malaysia. On that project, we increased our estimated cost at completion by approximately $66.0 million in the three months ended September 30, 2013. The changes in estimates experienced on this project were primarily due to further delays in vessel availability related to downtime for the North Ocean 105 (“NO 105”) resulting from mechanical issues. The changes in estimates on this project were partially offset by approximately $33.0 million of improvements related to arrangements with our customer, resulting in a net decline recognized in the three months ended September 30, 2013 of approximately $33.0 million. This project is currently in a loss position and is expected to be completed by mid-2014.

The Atlantic segment was impacted by changes in estimates on one project in Mexico. On that project, we recognized approximately $9.0 million of project losses in the three months ended September 30, 2013, primarily due to increased fabrication costs associated with increases to the scope of the project and incremental costs associated with productivity. The project is currently in a loss position and is expected to be completed during the second half of 2015.

The Middle East segment was not significantly impacted by changes in estimates during the quarter ended September 30, 2013.

Nine months ended September 30, 2013

The Asia Pacific segment was primarily impacted by changes in estimates on the project in Malaysia described above. On that project, we increased our estimated cost at completion by approximately $132.0 million in the nine months ended September 30, 2013. The changes in estimates experienced on this project were primarily due to delays in vessel availability related to downtime for the NO 105 resulting from mechanical issues. The changes in estimates on this project were partially offset by approximately $33.0 million of improvements related to arrangements with our customer, resulting in a net decline recognized in the nine months ended September 30, 2013 of approximately $99.0 million. This project is currently in a loss position and is expected to be completed by mid-2014.

The Middle East segment was impacted by changes in estimates on an EPCI project in Saudi Arabia. On that project, we increased our estimated cost at completion by approximately $38.0 million in the nine months ended September 30, 2013, primarily as a result of revisions to the project’s execution plan, increases in our estimated cost to complete due to an extended offshore hookup campaign requiring multiple vessel mobilizations and, to a lesser extent, delays in the completion of onshore activities. While the project recognized losses in the nine months ended September 30, 2013, it remains in an overall profitable position and is expected to be completed during the first half of 2014, subject to customer deliverables and concurrence on execution plans.

The Atlantic segment was impacted by changes in estimates on two projects. On those projects, we recognized approximately $21.0 million of incremental project losses in the nine months ended September 30, 2013, primarily due to lower than expected labor productivity and incremental fabrication costs. Both projects are currently in loss positions. One project that experienced lower labor productivity is expected to be completed by the end of 2013, while the other project that recognized additional costs associated with fabrication activities is expected to be completed by the third quarter of 2015.

2012 Periods

Operating income for each of the three-month and nine-month periods ended September 30, 2012 was not significantly affected by changes in estimates.

Loss Contingencies

Loss Contingencies

We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We are currently involved in litigation and other proceedings, as discussed in Note 10. We have accrued our estimates of the probable losses associated with these matters, and associated legal costs are generally recognized in selling, general and administrative expenses as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Cash and Cash Equivalents

Cash and Cash Equivalents

Our cash and cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. At September 30, 2013, all of our restricted cash was held in restricted foreign-entity accounts.

Investments

Investments

We classify investments available for current operations as current assets in the accompanying balance sheets, and we classify investments held for long-term purposes as noncurrent assets. We adjust the amortized cost of debt securities for amortization of premiums and accretion of discounts to maturity. That amortization is included in interest income. We include realized gains and losses on our investments in other income (expense)—net. The cost of securities sold is based on the specific identification method. We include interest earned on securities in interest income.

Investments in Unconsolidated Affiliates

Investments in Unconsolidated Affiliates

We generally use the equity method of accounting for affiliates in which our investment ownership ranges from 20% to 50%. Currently, most of our significant investments in affiliates that are not consolidated are recorded using the equity method

Accounts Receivable

Accounts Receivable

Accounts Receivable—Trade, Net

A summary of contract receivables is as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Contract receivables:
Contracts in progress	$	159,768		$	273,729
Completed contracts		104,397			38,858
Retainages		95,283			133,619
Unbilled		4,325			4,710
Less allowances		(22,315	)		(22,116	)
Accounts receivable—trade, net	$	341,458		$	428,800

We expect to invoice our unbilled receivables once certain milestones or other metrics are reached, and we expect to collect all unbilled amounts. We believe that our provision for losses on uncollectible accounts receivable is adequate for our credit loss exposure.

Contract retainages generally represent amounts withheld by our customers until project completion, in accordance with the terms of the applicable contracts. The following is a summary of retainages on our contracts:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Retainages expected to be collected within one year	$	95,283	$	133,619
Retainages expected to be collected after one year		83,652		32,085
Total retainages	$	178,935	$	165,704

We have included in accounts receivable—trade, net, retainages expected to be collected within one year. Retainages expected to be collected after one year are included in other assets.

Accounts Receivable—Other

Accounts receivable—other was $110.3 million and $75.5 million at September 30, 2013 and December 31, 2012, respectively. The balance primarily relates to transactions with unconsolidated affiliates, accrued but unbilled revenues, receivables associated with value-added taxes and hedging activities. These amounts are expected to be collected within 12 months, and any allowance for doubtful accounts on our accounts receivable—other is based on our estimate of the amount of probable losses due to the inability to collect these amounts (based on historical collection experience and other available information). As of September 30, 2013 and December 31, 2012, no such allowance for doubtful accounts was recorded.

Contracts in Progress and Advance Billings on Contracts

Contracts in Progress and Advance Billings on Contracts

Contracts in progress were $586.1 million and $560.1 million at September 30, 2013 and December 31, 2012, respectively. Advance billings on contracts were $312.3 million and $241.7 million at September 30, 2013 and December 31, 2012, respectively. A detail of the components of contracts in progress and advance billings on contracts is as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Costs incurred less costs of revenue recognized	$	91,401	$	65,321
Revenues recognized less billings to customers		494,719		494,833
Contracts in Progress	$	586,120	$	560,154

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Billings to customers less revenue recognized	$	476,747		$	394,352
Costs incurred less costs of revenue recognized		(164,479	)		(152,656	)
Advance Billings on Contracts	$	312,268		$	241,696

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An established hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect our assumptions about the factors that market participants would use in valuing the asset or liability.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1—inputs are based upon quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques.

The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, accounts receivables and accounts payable approximate their fair values. See Note 6 for additional information regarding fair value measurements.

Derivative Financial Instruments

Derivative Financial Instruments

Our worldwide operations give rise to exposure to changes in certain market conditions, which may adversely impact our financial performance. When we deem it appropriate, we use derivatives as a risk management tool to mitigate the potential impacts of certain market risks. The primary market risk we manage through the use of derivative instruments is movement in foreign currency exchange rates. We use foreign currency derivative contracts to reduce the impact of changes in foreign currency exchange rates on our operating results. We use these instruments to hedge our exposure associated with revenues and/or costs on our long-term contracts and other cash flow exposures that are denominated in currencies other than our operating entities’ functional currencies. We do not hold or issue financial instruments for trading or other speculative purposes.

In certain cases, contracts with our customers contain provisions under which some payments from our customers are denominated in U.S. Dollars and other payments are denominated in a foreign currency. In general, the payments denominated in a foreign currency are designed to compensate us for costs that we expect to incur in such foreign currency. In these cases, we may use derivative instruments to reduce the risks associated with foreign currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. See Note 5 for additional information regarding derivative financial instruments.

Foreign Currency Translation

Foreign Currency Translation

We translate assets and liabilities of our foreign operations, other than operations in highly inflationary economies, into U.S. Dollars at period-end exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax.

Earnings per Share

Earnings per Share

We have computed earnings per common share on the basis of the weighted average number of common shares, and, where dilutive, common share equivalents, outstanding during the indicated periods. See Note 8 for our earnings per share computations.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss

The components of AOCI included in stockholders’ equity are as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Foreign currency translation adjustments	$	(4,131	)	$	(3,366	)
Net loss on investments		(1,717	)		(2,316	)
Net gain (loss) on derivative financial instruments		(33,229	)		11,735
Unrecognized losses on benefit obligations		(90,158	)		(100,466	)
Accumulated other comprehensive loss	$	(129,235	)	$	(94,413	)

The following tables present the components of AOCI and the amounts that were reclassified during the period:

For the three months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, June 30, 2013	$	(1,875	)	$	(58,316	)	$	(2,886	)	$	(93,596	)	$	(156,673	)
Other comprehensive income (loss)		158			24,767			(1,245	)		—			23,680
Amounts reclassified from AOCI		—			320	(3)		—			3,438	(4)		3,758
Net current period other comprehensive income (loss)		158			25,087			(1,245	)		3,438			27,438
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

For the nine months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, December 31, 2012	$	(2,316	)	$	11,735		$	(3,366	)	$	(100,466	)	$	(94,413	)
Other comprehensive income (loss)		599			(46,246	)		(765	)		—			(46,412	)
Amounts reclassified from AOCI		—			1,282	(3)		—			10,308	(4)		11,590
Net current period other comprehensive income (loss)		599			(44,964	)		(765	)		10,308			(34,822	)
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

(1) Refer to Note 5 for additional details

(2) Refer to Note 4 for additional details

(3) Reclassified to cost of operations

(4) Reclassified to selling, general and administrative expenses

Impairment Review

Impairment Review

We review goodwill for impairment on an annual basis or more frequently if circumstances indicate that impairment may exist. The annual impairment review involves comparing the fair value to the net book value of each applicable reporting unit and, therefore, is significantly impacted by estimates and judgments.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Income Taxes

Income Taxes

We provide for income taxes based on the tax laws and rates in the countries in which we conduct our operations. MII is a Panamanian corporation that earns all of its income outside of Panama. As a result, we are not subject to income tax in Panama. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variations, along with changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

Three months ended September 30, 2013

For the three months ended September 30, 2013, we recognized a loss before provision for income taxes of $46.8 million, compared to income of $84.2 million in the three months ended September 30, 2012. In the aggregate, the provision for income taxes was $12.3 million and $29.9 million for the three months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, Mexico and Malaysia).

Nine months ended September 30, 2013

For the nine months ended September 30, 2013, we recognized a loss before provision for income taxes of $135.4 million, compared to income of $257.2 million in the nine months ended September 30, 2012. In the aggregate, the provision for income taxes was $45.5 million and $87.0 million for the nine months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, the United Arab Emirates and Malaysia).

At September 30, 2013, we had foreign net operating loss carryforwards available to offset future taxable income in foreign jurisdictions with a valuation allowance of $76.0 million against $85.0 million of the related deferred taxes. The remaining $9.0 million of foreign deferred taxes is expected to be realized through future foreign taxable income. At September 30, 2013, we had U.S. federal net operating loss carryforwards but had fully reserved the $135.0 million deferred tax asset.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued an update to the topic Income Taxes. The update clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where these items are not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The update is effective for reporting periods after December 15, 2013 and the adoption of this update is not expected to have a material impact on our condensed consolidated financial statements.

In February 2013, the FASB issued an update to the topic Comprehensive Income. The update requires companies to provide additional information about the nature and amount of certain reclassifications out of AOCI, which impact the income statement. While the amendment does not change current reporting requirements, companies are required to provide information about the amounts reclassified out of AOCI by the respective line item. The update is effective for reporting periods after December 15, 2012 and the adoption of this update did not have a material impact on our condensed consolidated financial statements.

In January 2013, the FASB issued an update to the topic Balance Sheet. This update requires new disclosures presenting detailed information regarding both the gross and net basis of derivatives and other financial instruments that are eligible for offset in the balance sheet or that are subject to a master netting arrangement. The update is effective for the first quarter of 2013 and is to be applied retrospectively. As this new guidance relates to presentation only, the adoption of this update did not have a material impact on our condensed consolidated financial statements.

XML

Total Stock-Based Compensation Expense Recognized (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expenses	$ 5,382	$ 3,639	$ 15,492	$ 11,449
Stock Options
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expenses	1,050	982	3,250	2,999
Restricted Stock and Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expenses	2,702	1,446	7,689	5,164
Performance Shares and Deferred Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Stock-based compensation expenses	$ 1,630	$ 1,211	$ 4,553	$ 3,286

XML

Summary of Long-Term Debt Obligations (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Long-term debt consists of:
Long-term borrowing	$ 94,141	$ 102,708
Less: Amounts due within one year	41,037	14,146
Total long-term debt	53,104	88,562
North Ocean Construction Financing | North Ocean 102
Long-term debt consists of:
Long-term borrowing	32,867	37,349
North Ocean Construction Financing | North Ocean 105
Long-term debt consists of:
Long-term borrowing	$ 61,274	$ 65,359

XML

SEGMENT REPORTING (Tables)

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

Information about Operations in Different Segments

Summarized financial information is shown in the following tables:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands)
Revenues(1):
Asia Pacific	$	190,231		$	468,200		$	746,122		$	1,103,699
Atlantic		116,871			125,317			451,609			335,225
Middle East		379,754			435,228			943,863			1,206,747
Total revenues	$	686,856		$	1,028,745		$	2,141,594		$	2,645,671
Operating income (loss):
Asia Pacific	$	(37,663	)	$	52,192		$	17,894		$	156,231
Atlantic		(32,390	)		(10,714	)		(97,451	)		(36,749	)
Middle East		17,399			41,003			(69,600	)		122,557
Total operating income (loss)	$	(52,654	)	$	82,481		$	(149,157	)	$	242,039
Capital expenditures(2):
Asia Pacific	$	42,568		$	14,908		$	87,753		$	53,139
Atlantic		4,023			16,454			60,336			80,944
Middle East		25,516			15,286			63,459			41,997
Corporate and Other		8,815			975			13,849			3,204
Total capital expenditures	$	80,922		$	47,623		$	225,397		$	179,284
Depreciation and amortization:
Asia Pacific	$	4,667		$	5,375		$	14,204		$	15,467
Atlantic		5,999			3,554			17,985			16,849
Middle East		8,293			6,929			22,319			21,977
Corporate and Other		1,837			4,224			5,606			11,663
Total depreciation and amortization	$	20,796		$	20,082		$	60,114		$	65,956
Drydock amortization:
Asia Pacific	$	1,927		$	2,241		$	6,976		$	8,230
Atlantic		1,801			4,971			5,617			11,284
Middle East		520			787			1,586			2,092
Total drydock amortization	$	4,248		$	7,999		$	14,179		$	21,606

(1) Intersegment transactions included in revenues were not significant for any of the periods presented.

(2) Total capital expenditures represent expenditures for which cash payments were made during the period. These amounts exclude approximately $38.1 million and $1.2 million in accrued capital expenditures for the nine months ended September 30, 2013 and 2012, respectively.

Information about Segment Assets by Country

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Segment assets:
Asia Pacific	$	1,171,837	$	1,402,923
Atlantic		611,111		536,734
Middle East		1,228,812		1,006,284
Corporate and other		145,521		387,686
Total assets	$	3,157,281	$	3,333,627

XML

EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

Computation of Basic and Diluted Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited) (In thousands)
Income (loss) from continuing operations less noncontrolling interests	$	(64,070	)	$	50,612	$	(192,940	)	$	162,612
Income from discontinued operations, net of tax		—			—		—			3,497
Net income (loss) attributable to McDermott International, Inc.	$	(64,070	)	$	50,612	$	(192,940	)	$	166,109
Weighted average common shares (basic)		236,257,920			235,817,203		236,132,847			235,568,889
Effect of dilutive securities:
Stock options, restricted stock and restricted stock units(1)		—			2,049,797		—			1,984,574
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards (diluted)		236,257,920			237,867,000		236,132,847			237,553,463
Basic earnings (loss) per share
Income (loss) from continuing operations less noncontrolling interests		(0.27	)		0.21		(0.82	)		0.69
Income from discontinued operations, net of tax		—			—		—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21		(0.82	)		0.70
Diluted earnings (loss) per share:
Income (loss) from continuing operations less noncontrolling interests		(0.27	)		0.21		(0.82	)		0.68
Income from discontinued operations, net of tax		—			—		—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21		(0.82	)		0.69

(1) Approximately 3.1 million and 2.9 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive for the three months and nine months ended September 30, 2013. Approximately 1.7 million and 1.8 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive for the three months and nine months ended September 30, 2012, respectively.

XML

Summary of Available for Sale Securities (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities fair value	$ 17,282	$ 45,992
Available for sale securities Unrealized losses	(1,857)	(2,376)
Mutual funds
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities fair value	2,115	2,023
Available for sale securities Unrealized losses
Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities fair value	7,397	29,737
Available for sale securities Unrealized losses
Asset-backed securities and collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities fair value	7,770	8,477
Available for sale securities Unrealized losses	(1,857)	(2,376)
Corporate notes and bonds
Schedule of Available-for-sale Securities [Line Items]
Available for sale securities fair value		5,755
Available for sale securities Unrealized losses

XML

Acquisition, Dispositions and Atlantic Restructuring Charges - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended			12 Months Ended		3 Months Ended		1 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2013 Vessel	Sep. 30, 2013 Charter Fleet Business	Sep. 30, 2012 Charter Fleet Business	Dec. 31, 2011 Charter Fleet Business	Mar. 19, 2012 Charter Fleet Business Vessel	Jun. 30, 2013 Maximum	Jun. 30, 2013 Minimum	Mar. 19, 2012 Secunda International Limited Vessel
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total purchase consideration			$ 9,000,000
Purchase consideration - cash			6,000,000
Purchase consideration - restricted shares			313,580
Number of vessels held for sale			4
Proceeds from sale of discontinued assets		32,000,000
Gain on sale of the Bold Endurance		12,500,000
Number of vessels operated							10
Number of vessels										14
Cash Proceeds from sale of business				61,000,000
Gain on sale				300,000	257,000
Write-down of charter fleet business						22,000,000
Expected restructuring cost								65,000,000	55,000,000
Restructuring cost incurred	$ 4,000,000		$ 19,500,000

XML

Derivative Financial Instruments - Additional Information (Detail) (USD $)	9 Months Ended
	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Net gain (loss) on derivative financial instruments	$ 33,229,000	$ 58,316,000	$ (11,735,000)
Net deferred gains expected to be reclassified from AOCI over next 12 months	10,200,000
Notional value of outstanding derivative contracts	1,300,000,000
Derivative contracts, maturity date	Dec. 31, 2017
Fair value of Derivative contracts	17,600,000
EPCI projects
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Notional value of outstanding derivative contracts	$ 721,600,000

XML

Computation of Basic and Diluted Earnings Per Share (Detail) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share [Abstract]
Income (loss) from continuing operations less noncontrolling interests	$ (64,070)	$ 50,612	$ (192,940)	$ 162,612
Income from discontinued operations, net of tax				3,497
Net income (loss) attributable to McDermott International, Inc.	$ (64,070)	$ 50,612	$ (192,940)	$ 166,109
Weighted average common shares (basic)	236,257,920	235,817,203	236,132,847	235,568,889
Effect of dilutive securities:
Stock options, restricted stock and restricted stock units	0	2,049,797	0	1,984,574
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards (diluted)	236,257,920	237,867,000	236,132,847	237,553,463
Basic earnings (loss) per share:
Income (loss) from continuing operations less noncontrolling interests	$ (0.27)	$ 0.21	$ (0.82)	$ 0.69
Income from discontinued operations, net of tax				$ 0.01
Net income (loss) attributable to McDermott International, Inc.	$ (0.27)	$ 0.21	$ (0.82)	$ 0.70
Diluted earnings (loss) per share:
Income (loss) from continuing operations less noncontrolling interests	$ (0.27)	$ 0.21	$ (0.82)	$ 0.68
Income from discontinued operations, net of tax				$ 0.01
Net income (loss) attributable to McDermott International, Inc.	$ (0.27)	$ 0.21	$ (0.82)	$ 0.69

XML

Components of Contracts in Progress and Advance Billings on Contracts (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Contractors [Abstract]
Costs incurred less costs of revenue recognized	$ 91,401	$ 65,321
Revenues recognized less billings to customers	494,719	494,833
Contracts in Progress	586,120	560,154
Billings to customers less revenue recognized	476,747	394,352
Costs incurred less costs of revenue recognized	(164,479)	(152,656)
Advance Billings on Contracts	$ 312,268	$ 241,696

XML

Available-for-Sale Securities Measured at Fair Value (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	$ 17,282	$ 45,992
Mutual funds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	2,115	2,023
Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	7,397	29,737
Asset-backed securities and collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	7,770	8,477
Corporate notes and bonds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities		5,755
Level 1
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities
Level 1 | Mutual funds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities
Level 1 | Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities
Level 1 | Asset-backed securities and collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities
Level 2
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	11,627	39,649
Level 2 | Mutual funds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	2,115	2,023
Level 2 | Commercial paper
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	7,397	29,737
Level 2 | Asset-backed securities and collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	2,115	2,134
Level 2 | Corporate notes and bonds
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities		5,755
Level 3
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	5,655	6,343
Level 3 | Asset-backed securities and collateralized mortgage obligations
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale securities	$ 5,655	$ 6,343

XML

STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Total Stock-Based Compensation Expense Recognized

Total stock-based compensation expense, net recognized for the three months and nine months ended September 30, 2013 and September 30, 2012 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Unaudited) (In thousands)
Stock Options	$	1,050	$	982	$	3,250	$	2,999
Restricted Stock and Restricted Stock Units		2,702		1,446		7,689		5,164
Performance Shares and Deferred Stock Units		1,630		1,211		4,553		3,286
Total	$	5,382	$	3,639	$	15,492	$	11,449

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Cash Flows From Operating Activities:
Net Income (Loss)	$ (180,866)	$ 173,644
Less: Income from discontinued operations, net of tax		3,497
Income (loss) from continuing operations	(180,866)	170,147
Non-cash items included in net income:
Depreciation and amortization	60,114	65,956
Drydock amortization	14,179	21,606
Equity in loss of unconsolidated affiliates	12,967	11,026
Gain on asset disposals and impairments-net	(15,492)	(282)
Restructuring charges	19,502
Provision (benefit) from deferred taxes	(3,761)	3,929
Other non-cash items	14,817	17,779
Changes in assets and liabilities, net of effects from dispositions:
Accounts receivable	50,206	(113,460)
Net contracts in progress and advance billings on contracts	44,601	(225,340)
Accounts payable	(27,953)	58,675
Accrued and other current liabilities	3,038	66,125
Pension liability and accrued postretirement and employee benefits	(29,196)	17,322
Derivative instruments and hedging activities	(46,270)	(4,880)
Other assets and liabilities	(77,434)	21,046
Net Cash Provided By (Used In) Operating Activities-Continuing Operations	(168,110)	109,649
Cash Flows From Investing Activities:
Purchases of property, plant and equipment	(225,397)	(179,284)
Increase in restricted cash and cash equivalents	(372)	(1,112)
Purchases of available-for-sale securities	(9,886)	(82,735)
Sales and maturities of available-for-sale securities	39,210	164,807
Proceeds from the sale and disposal of assets	37,189	405
Other investing activities, net	(8,503)	(2,305)
Net Cash Used In Investing Activities-Continuing Operations	(167,759)	(100,224)
Net Cash Provided By Investing Activities-Discontinued Operations		60,671
Total Cash Used In Investing Activities	(167,759)	(39,553)
Cash Flows From Financing Activities:
Increase in debt	80,000	19,033
Payment of debt	(88,567)	(4,482)
Noncontrolling interests distributions and other	(12,493)	(15,728)
Other financing activities, net	(1,033)	(2,642)
Net Cash Used In Financing Activities-Continuing Operations	(22,093)	(3,819)
Effects of exchange rate changes on cash and cash equivalents	185	1,663
Net increase (decrease) in cash and cash equivalents	(357,777)	67,940
Cash and cash equivalents at beginning of period	640,147	570,854
Cash and cash equivalents at end of period-Continuing Operations	282,370	638,794
Cash paid during the period for:
Income taxes (net of refunds)	$ 90,462	$ 58,157

XML

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

NOTE 1—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

McDermott International, Inc. (“MII”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a leading engineering, procurement, construction and installation (“EPCI”) company focused on designing and executing complex offshore oil and gas projects worldwide. Providing fully integrated EPCI services, we deliver fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning. We support these activities with comprehensive project management and procurement services, while utilizing our fully integrated capabilities in both shallow water and deepwater construction. Our customers include national, major integrated and other oil and gas companies, and we operate in most major offshore oil and gas producing regions throughout the world. In these notes to our unaudited condensed consolidated financial statements, unless the context otherwise indicates, “we,” “us” and “our” mean MII and its consolidated subsidiaries.

Basis of Presentation

We have presented our unaudited condensed consolidated financial statements in U.S. Dollars, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim reporting. Financial information and disclosures normally included in our financial statements prepared annually in accordance with accounting principles generally accepted in the United States (“GAAP”) have been condensed or omitted. Readers of these financial statements should, therefore, refer to the consolidated financial statements and the accompanying notes in our annual report on Form 10-K for the year ended December 31, 2012.

We have included all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation. These condensed consolidated financial statements include the accounts of McDermott International, Inc., its consolidated subsidiaries and controlled entities. We use the equity method to account for investments in entities that we do not control, but over which we have significant influence. We generally refer to these entities as “unconsolidated affiliates” or “joint ventures.” We have eliminated all intercompany transactions and accounts.

During the quarter ended March 31, 2013, we acquired Deepsea Group Limited, a United Kingdom-based company that provides subsea and other engineering services to international energy companies, primarily through offices in the United Kingdom and the United States. During the quarter ended June 30, 2013, we commenced a restructuring of our Atlantic segment. See Note 2 for information relating to our acquisition and disposition-related activities.

On March 19, 2012, we completed the sale of our former charter fleet business, which operated 10 of the 14 vessels acquired in our 2007 acquisition of substantially all of the assets of Secunda International Limited (the “Secunda Acquisition”). The condensed consolidated statements of income, comprehensive income, cash flows and equity reflect the historical operations of the charter fleet business as a discontinued operation through March 19, 2012.

We have presented the notes to our condensed consolidated financial statements on the basis of continuing operations. In addition, certain 2012 amounts in the condensed consolidated balance sheet and statement of cash flows have been reclassified to conform to the 2013 presentation.

Business Segments

We operate in four primary operating segments, which consist of Asia Pacific, Atlantic, Caspian and the Middle East. The Caspian and Middle East operating segments are aggregated into the Middle East reporting segment due to the proximity of regions and similarities in the nature of services provided, economic characteristics and oversight responsibilities. Accordingly, we report financial results under reporting segments consisting of Asia Pacific, Atlantic and the Middle East. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects corporate personnel and activities, incentive compensation programs and other costs, which are generally fully allocated to our operating segments. See Note 9 for summarized financial information on our segments.

Revenue Recognition

We determine the appropriate accounting method for each of our long-term contracts before work on the project begins. We generally recognize contract revenues and related costs on a percentage-of-completion method for individual contracts or combinations of contracts based on work performed, man hours, or a cost-to-cost method, as applicable to the activity involved. We include the amount of accumulated contract costs and estimated earnings that exceed billings to customers in contracts in progress. We include billings to customers that exceed accumulated contract costs and estimated earnings in advance billings on contracts. Most long-term contracts contain provisions for progress payments. We expect to invoice customers and collect all unbilled revenues. Certain costs are generally excluded from the cost-to-cost method of measuring progress, such as significant procurement costs for materials and third-party subcontractors. Costs incurred prior to a project award are generally expensed during the period in which they are incurred. Total estimated project costs, and resulting income, are affected by changes in the expected cost of materials and labor, productivity, vessel costs, scheduling and other factors. Additionally, external factors such as weather, customer requirements and other factors outside of our control may affect the progress and estimated cost of a project’s completion and, therefore, the timing and amount of revenue and income recognition.

In addition, change orders, which are a normal and recurring part of our business, can increase (and sometimes substantially) the future scope and cost of a job. Therefore, change order awards (although frequently beneficial in the long term) can have the short-term effect of reducing the job percentage of completion and thus the revenues and profits recognized to date. We regularly review contract price and cost estimates as the work progresses and reflect adjustments in profit, proportionate to the job percentage of completion in the period when those estimates are revised. Revenue from unapproved change orders is generally recognized to the extent of the lesser of amounts management expects to recover or costs incurred. The total unapproved change orders included in our estimates at completion aggregated approximately $468 million, of which approximately $138 million was included in backlog at September 30, 2013. Unapproved change orders that are disputed by the customer are treated as claims.

Deferred Profit Recognition

For contracts as to which we are unable to estimate the final profitability due to their uncommon nature, including first-of-a-kind projects, we recognize equal amounts of revenue and cost until the final results can be estimated more precisely. For these contracts, we only recognize gross margin when reliably estimable and the level of uncertainty has been significantly reduced, which we generally determine to be when the contract is at least 70% complete. We treat long-term construction contracts that contain such a level of risk and uncertainty that estimation of the final outcome is impractical as deferred profit recognition contracts. If while being accounted for under our deferred profit recognition policy, a current estimate of total contract costs indicates a loss, the projected loss is recognized in full and the project is accounted for under our normal revenue recognition guidelines.

We currently account for an Atlantic segment project under our deferred profit recognition policy. This project was awarded to one of our joint ventures, and the Atlantic segment’s backlog includes a subcontract from that joint venture, of which $151.3 million relating to this project remains in backlog at September 30, 2013. This project contributed revenues and costs equally, totaling approximately $36.0 million and $16.0 million for the three-month periods ended September 30, 2013 and 2012, respectively, and approximately $79.0 million and $29.0 million for the nine-month periods ended September 30, 2013 and 2012, respectively.

Completed Contract Method

Under the completed contract method, revenue and gross profit is recognized only when a contract is completed or substantially complete. We generally do not enter into fixed-price contracts without an estimate of cost to complete that we believe to be accurate. However, it is possible that in the time between contract award and the commencement of work on a project, we could lose the ability to adequately forecast costs to complete based on intervening events, including, but not limited to, experience on similar projects, civil unrest, strikes and volatility in our expected costs. In such a situation, we would use the completed contract method of accounting for that project. We currently do not have any contracts that we account for under the completed contract method.

Claims Revenue

Claims revenue may relate to various factors, including the procurement of materials, equipment performance failures, change order disputes or schedule disruptions and other delays, including those associated with weather conditions. Claims revenue, when recorded, is only recorded to the extent of the lesser of the amounts management expects to recover or the associated costs incurred in our consolidated financial statements. We include certain unapproved claims in the applicable contract values when we have a legal basis to do so, consider collection to be probable and believe we can reliably estimate the ultimate value. Amounts attributable to unapproved change orders are not included in claims. We continue to actively engage in negotiations with our customers on our outstanding claims. However, these claims may be resolved at amounts that differ from our current estimates, which could result in increases or decreases in future estimated contract profits or losses. Claims are generally negotiated over the course of the respective projects and many of our projects are long-term in nature. None of the claims at September 30, 2013 were involved in litigation.

The amount of revenues and costs included in our estimates at completion (i.e., contract values) associated with such claims was $186.3 million and $78.6 million as of September 30, 2013 and 2012, respectively. Approximately 41%, 8% and 51% of those claim amounts at September 30, 2013 were related to our Asia Pacific, Atlantic and Middle East segments, respectively. These amounts are determined based on various factors, including our analysis of the underlying contractual language and our experience in making and resolving claims. For the three months ended September 30, 2013 and 2012, $17.6 million and $7.0 million, respectively, of revenues and costs are included in our financial statements pertaining to claims. For the nine months ended September 30, 2013 and 2012, $56.9 million and $45.0 million, respectively, of revenues and costs are reflected in our financial statements pertaining to claims. Approximately 10%, 11% and 79% of those claim amounts are related to our Asia Pacific, Atlantic and Middle East segments, respectively.

Our unconsolidated joint ventures also included an aggregate of $3.7 million of claims revenue and costs in their financial results for the nine months ended September 30, 2013, with no amounts recognized during the three months ended September 30, 2013. For the three months and nine months ended September 30, 2012, our joint ventures included approximately $9.0 million and $14.0 million, respectively of claims revenue and costs in their financial results.

Loss Recognition

A risk associated with fixed-priced contracts is that revenue from customers may not cover increases in our costs. It is possible that current estimates could materially change for various reasons, including, but not limited to, fluctuations in forecasted labor and vessel productivity, vessel repair requirements, weather downtime, supplier performance, pipeline lay rates or steel and other raw material prices. Increases in costs associated with our fixed-priced contracts could have a material adverse impact on our consolidated financial condition, results of operations and cash flows. Alternatively, reductions in overall contract costs at completion could materially improve our consolidated financial condition, results of operations and cash flows.

As of September 30, 2013, we have provided for our estimated costs to complete on all of our ongoing contracts. However, it is possible that current estimates could change due to unforeseen events, which could result in adjustments to overall contract costs. Variations from estimated contract performance could result in material adjustments to operating results for any fiscal quarter or year. For all contracts, if a current estimate of total contract cost indicates a loss, the projected loss is recognized in full when determined.

We currently have four active projects in our backlog that are in loss positions at September 30, 2013, whereby future revenues are expected to equal costs when recognized. Included in these projects are a marine project in our Asia Pacific segment, which we began in 2012 and expect to complete by mid-2014, and a five-year charter in Brazil, which we began in early 2012 and we are conducting through our Atlantic segment.

Use of Estimates

We use estimates and assumptions to prepare our financial statements in conformity with GAAP. These estimates and assumptions affect the amounts we report in our financial statements and accompanying notes. Our actual results could differ from these estimates, and variances could materially affect our financial condition and results of operations in future periods. Changes in project estimates generally exclude change orders and changes in scope, but may include, without limitation, unexpected changes in weather conditions, productivity, unanticipated vessel repair requirements, customer and vendor delays and other costs. We generally expect to experience a variety of unanticipated events, and some of these events can result in significant cost increases above cost amounts we previously estimated. Variations from estimated contract performance could result in material adjustments to operating results.

The following is a discussion of our most significant changes in estimates, which impacted operating income in each of our segments for the three and nine months ended September 30, 2013 and 2012.

Three months ended September 30, 2013

The Asia Pacific segment was primarily impacted by changes in estimates on one subsea project in Malaysia. On that project, we increased our estimated cost at completion by approximately $66.0 million in the three months ended September 30, 2013. The changes in estimates experienced on this project were primarily due to further delays in vessel availability related to downtime for the North Ocean 105 (“NO 105”) resulting from mechanical issues. The changes in estimates on this project were partially offset by approximately $33.0 million of improvements related to arrangements with our customer, resulting in a net decline recognized in the three months ended September 30, 2013 of approximately $33.0 million. This project is currently in a loss position and is expected to be completed by mid-2014.

The Atlantic segment was impacted by changes in estimates on one project in Mexico. On that project, we recognized approximately $9.0 million of project losses in the three months ended September 30, 2013, primarily due to increased fabrication costs associated with increases to the scope of the project and incremental costs associated with productivity. The project is currently in a loss position and is expected to be completed during the second half of 2015.

The Middle East segment was not significantly impacted by changes in estimates during the quarter ended September 30, 2013.

Nine months ended September 30, 2013

The Asia Pacific segment was primarily impacted by changes in estimates on the project in Malaysia described above. On that project, we increased our estimated cost at completion by approximately $132.0 million in the nine months ended September 30, 2013. The changes in estimates experienced on this project were primarily due to delays in vessel availability related to downtime for the NO 105 resulting from mechanical issues. The changes in estimates on this project were partially offset by approximately $33.0 million of improvements related to arrangements with our customer, resulting in a net decline recognized in the nine months ended September 30, 2013 of approximately $99.0 million. This project is currently in a loss position and is expected to be completed by mid-2014.

The Middle East segment was impacted by changes in estimates on an EPCI project in Saudi Arabia. On that project, we increased our estimated cost at completion by approximately $38.0 million in the nine months ended September 30, 2013, primarily as a result of revisions to the project’s execution plan, increases in our estimated cost to complete due to an extended offshore hookup campaign requiring multiple vessel mobilizations and, to a lesser extent, delays in the completion of onshore activities. While the project recognized losses in the nine months ended September 30, 2013, it remains in an overall profitable position and is expected to be completed during the first half of 2014, subject to customer deliverables and concurrence on execution plans.

The Atlantic segment was impacted by changes in estimates on two projects. On those projects, we recognized approximately $21.0 million of incremental project losses in the nine months ended September 30, 2013, primarily due to lower than expected labor productivity and incremental fabrication costs. Both projects are currently in loss positions. One project that experienced lower labor productivity is expected to be completed by the end of 2013, while the other project that recognized additional costs associated with fabrication activities is expected to be completed by the third quarter of 2015.

2012 Periods

Operating income for each of the three-month and nine-month periods ended September 30, 2012 was not significantly affected by changes in estimates.

Loss Contingencies

We record liabilities for loss contingencies when it is probable that a liability has been incurred and the amount of loss is reasonably estimable. We provide disclosure when there is a reasonable possibility that the ultimate loss will exceed the recorded provision or if such loss is not reasonably estimable. We are currently involved in litigation and other proceedings, as discussed in Note 10. We have accrued our estimates of the probable losses associated with these matters, and associated legal costs are generally recognized in selling, general and administrative expenses as incurred. However, our losses are typically resolved over long periods of time and are often difficult to estimate due to various factors, including the possibility of multiple actions by third parties. Therefore, it is possible future earnings could be affected by changes in our estimates related to these matters.

Cash and Cash Equivalents

Our cash and cash equivalents are highly liquid investments with maturities of three months or less when we purchase them. We record cash and cash equivalents as restricted when we are unable to freely use such cash and cash equivalents for our general operating purposes. At September 30, 2013, all of our restricted cash was held in restricted foreign-entity accounts.

Investments

We classify investments available for current operations as current assets in the accompanying balance sheets, and we classify investments held for long-term purposes as noncurrent assets. We adjust the amortized cost of debt securities for amortization of premiums and accretion of discounts to maturity. That amortization is included in interest income. We include realized gains and losses on our investments in other income (expense)—net. The cost of securities sold is based on the specific identification method. We include interest earned on securities in interest income.

Investments in Unconsolidated Affiliates

We generally use the equity method of accounting for affiliates in which our investment ownership ranges from 20% to 50%. Currently, most of our significant investments in affiliates that are not consolidated are recorded using the equity method.

Accounts Receivable

Accounts Receivable—Trade, Net

A summary of contract receivables is as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Contract receivables:
Contracts in progress	$	159,768		$	273,729
Completed contracts		104,397			38,858
Retainages		95,283			133,619
Unbilled		4,325			4,710
Less allowances		(22,315	)		(22,116	)
Accounts receivable—trade, net	$	341,458		$	428,800

We expect to invoice our unbilled receivables once certain milestones or other metrics are reached, and we expect to collect all unbilled amounts. We believe that our provision for losses on uncollectible accounts receivable is adequate for our credit loss exposure.

Contract retainages generally represent amounts withheld by our customers until project completion, in accordance with the terms of the applicable contracts. The following is a summary of retainages on our contracts:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Retainages expected to be collected within one year	$	95,283	$	133,619
Retainages expected to be collected after one year		83,652		32,085
Total retainages	$	178,935	$	165,704

We have included in accounts receivable—trade, net, retainages expected to be collected within one year. Retainages expected to be collected after one year are included in other assets.

Accounts Receivable—Other

Accounts receivable—other was $110.3 million and $75.5 million at September 30, 2013 and December 31, 2012, respectively. The balance primarily relates to transactions with unconsolidated affiliates, accrued but unbilled revenues, receivables associated with value-added taxes and hedging activities. These amounts are expected to be collected within 12 months, and any allowance for doubtful accounts on our accounts receivable—other is based on our estimate of the amount of probable losses due to the inability to collect these amounts (based on historical collection experience and other available information). As of September 30, 2013 and December 31, 2012, no such allowance for doubtful accounts was recorded.

Contracts in Progress and Advance Billings on Contracts

Contracts in progress were $586.1 million and $560.1 million at September 30, 2013 and December 31, 2012, respectively. Advance billings on contracts were $312.3 million and $241.7 million at September 30, 2013 and December 31, 2012, respectively. A detail of the components of contracts in progress and advance billings on contracts is as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Costs incurred less costs of revenue recognized	$	91,401	$	65,321
Revenues recognized less billings to customers		494,719		494,833
Contracts in Progress	$	586,120	$	560,154

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Billings to customers less revenue recognized	$	476,747		$	394,352
Costs incurred less costs of revenue recognized		(164,479	)		(152,656	)
Advance Billings on Contracts	$	312,268		$	241,696

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. An established hierarchy for inputs is used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect our assumptions about the factors that market participants would use in valuing the asset or liability.

Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

• Level 1—inputs are based upon quoted prices for identical instruments traded in active markets.

• Level 2—inputs are based upon quoted prices for similar instruments in active markets, quoted prices for similar or identical instruments in inactive markets and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets and liabilities.

• Level 3—inputs are generally unobservable and typically reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models and similar valuation techniques.

The carrying amounts that we have reported for financial instruments, including cash and cash equivalents, accounts receivables and accounts payable approximate their fair values. See Note 6 for additional information regarding fair value measurements.

Derivative Financial Instruments

Our worldwide operations give rise to exposure to changes in certain market conditions, which may adversely impact our financial performance. When we deem it appropriate, we use derivatives as a risk management tool to mitigate the potential impacts of certain market risks. The primary market risk we manage through the use of derivative instruments is movement in foreign currency exchange rates. We use foreign currency derivative contracts to reduce the impact of changes in foreign currency exchange rates on our operating results. We use these instruments to hedge our exposure associated with revenues and/or costs on our long-term contracts and other cash flow exposures that are denominated in currencies other than our operating entities’ functional currencies. We do not hold or issue financial instruments for trading or other speculative purposes.

In certain cases, contracts with our customers contain provisions under which some payments from our customers are denominated in U.S. Dollars and other payments are denominated in a foreign currency. In general, the payments denominated in a foreign currency are designed to compensate us for costs that we expect to incur in such foreign currency. In these cases, we may use derivative instruments to reduce the risks associated with foreign currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. See Note 5 for additional information regarding derivative financial instruments.

Foreign Currency Translation

We translate assets and liabilities of our foreign operations, other than operations in highly inflationary economies, into U.S. Dollars at period-end exchange rates, and we translate income statement items at average exchange rates for the periods presented. We record adjustments resulting from the translation of foreign currency financial statements as a component of accumulated other comprehensive income (loss) (“AOCI”), net of tax.

Earnings per Share

We have computed earnings per common share on the basis of the weighted average number of common shares, and, where dilutive, common share equivalents, outstanding during the indicated periods. See Note 8 for our earnings per share computations.

Accumulated Other Comprehensive Loss

The components of AOCI included in stockholders’ equity are as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Foreign currency translation adjustments	$	(4,131	)	$	(3,366	)
Net loss on investments		(1,717	)		(2,316	)
Net gain (loss) on derivative financial instruments		(33,229	)		11,735
Unrecognized losses on benefit obligations		(90,158	)		(100,466	)
Accumulated other comprehensive loss	$	(129,235	)	$	(94,413	)

The following tables present the components of AOCI and the amounts that were reclassified during the period:

For the three months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, June 30, 2013	$	(1,875	)	$	(58,316	)	$	(2,886	)	$	(93,596	)	$	(156,673	)
Other comprehensive income (loss)		158			24,767			(1,245	)		—			23,680
Amounts reclassified from AOCI		—			320	(3)		—			3,438	(4)		3,758
Net current period other comprehensive income (loss)		158			25,087			(1,245	)		3,438			27,438
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

For the nine months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, December 31, 2012	$	(2,316	)	$	11,735		$	(3,366	)	$	(100,466	)	$	(94,413	)
Other comprehensive income (loss)		599			(46,246	)		(765	)		—			(46,412	)
Amounts reclassified from AOCI		—			1,282	(3)		—			10,308	(4)		11,590
Net current period other comprehensive income (loss)		599			(44,964	)		(765	)		10,308			(34,822	)
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

(1) Refer to Note 5 for additional details

(2) Refer to Note 4 for additional details

(3) Reclassified to cost of operations

(4) Reclassified to selling, general and administrative expenses

Impairment Review

We review goodwill for impairment on an annual basis or more frequently if circumstances indicate that impairment may exist. The annual impairment review involves comparing the fair value to the net book value of each applicable reporting unit and, therefore, is significantly impacted by estimates and judgments.

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an evaluation is required, the fair value of each applicable asset is compared to its carrying value. Factors that impact our determination of potential impairment include forecasted utilization of equipment and estimates of forecasted cash flows from projects expected to be performed in future periods. Our estimates of cash flow may differ from actual cash flow due to, among other things, technological changes, economic conditions or changes in operating performance. Any changes in such factors may negatively affect our business segments and result in future asset impairments.

Income Taxes

We provide for income taxes based on the tax laws and rates in the countries in which we conduct our operations. MII is a Panamanian corporation that earns all of its income outside of Panama. As a result, we are not subject to income tax in Panama. We operate in various taxing jurisdictions around the world. Each of these jurisdictions has a regime of taxation that varies, not only with respect to nominal rates, but also with respect to the basis on which these rates are applied. These variations, along with changes in our mix of income or loss from these jurisdictions, may contribute to shifts, sometimes significant, in our effective tax rate.

Three months ended September 30, 2013

For the three months ended September 30, 2013, we recognized a loss before provision for income taxes of $46.8 million, compared to income of $84.2 million in the three months ended September 30, 2012. In the aggregate, the provision for income taxes was $12.3 million and $29.9 million for the three months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, Mexico and Malaysia).

Nine months ended September 30, 2013

For the nine months ended September 30, 2013, we recognized a loss before provision for income taxes of $135.4 million, compared to income of $257.2 million in the nine months ended September 30, 2012. In the aggregate, the provision for income taxes was $45.5 million and $87.0 million for the nine months ended September 30, 2013 and 2012, respectively. The decline in the provision for income taxes was principally driven by lower taxable income, which was partially offset by losses in certain tax jurisdictions where we do not expect to receive a tax benefit (primarily the United States, the United Arab Emirates and Malaysia).

At September 30, 2013, we had foreign net operating loss carryforwards available to offset future taxable income in foreign jurisdictions with a valuation allowance of $76.0 million against $85.0 million of the related deferred taxes. The remaining $9.0 million of foreign deferred taxes is expected to be realized through future foreign taxable income. At September 30, 2013, we had U.S. federal net operating loss carryforwards but had fully reserved the $135.0 million deferred tax asset.

Recently Issued Accounting Standards

On July 18, 2013, the Financial Accounting Standards Board (“FASB”) issued an update to the topic Income Taxes. The update clarifies that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if such settlement is required or expected in the event the uncertain tax position is disallowed. In situations where these items are not available at the reporting date under the tax law of the applicable jurisdiction or the tax law of the jurisdiction does not require, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The update is effective for reporting periods after December 15, 2013 and the adoption of this update is not expected to have a material impact on our condensed consolidated financial statements.

In February 2013, the FASB issued an update to the topic Comprehensive Income. The update requires companies to provide additional information about the nature and amount of certain reclassifications out of AOCI, which impact the income statement. While the amendment does not change current reporting requirements, companies are required to provide information about the amounts reclassified out of AOCI by the respective line item. The update is effective for reporting periods after December 15, 2012 and the adoption of this update did not have a material impact on our condensed consolidated financial statements.

In January 2013, the FASB issued an update to the topic Balance Sheet. This update requires new disclosures presenting detailed information regarding both the gross and net basis of derivatives and other financial instruments that are eligible for offset in the balance sheet or that are subject to a master netting arrangement. The update is effective for the first quarter of 2013 and is to be applied retrospectively. As this new guidance relates to presentation only, the adoption of this update did not have a material impact on our condensed consolidated financial statements.

XML

PENSION PLANS

9 Months Ended

Sep. 30, 2013

Compensation And Retirement Disclosure [Abstract]

PENSION PLANS

NOTE 4—PENSION PLANS

Although we currently provide retirement benefits for most of our U.S. employees through sponsorship of the McDermott Thrift Plan, some of our longer-term U.S. employees and former employees are entitled to retirement benefits under the McDermott (U.S.) Retirement Plan, a non-contributory qualified defined benefit pension plan (the “McDermott Plan”), and several non-qualified supplemental defined benefit pension plans. The McDermott Plan and the non-qualified supplemental defined benefit pension plans are collectively referred to herein as the “Domestic Plans.” The McDermott Plan has been closed to new participants since 2006, and benefit accruals under the McDermott Plan were frozen completely in 2010.

We also sponsor a defined benefit pension plan established under the laws of the Commonwealth of the Bahamas, the J. Ray McDermott, S.A. Third Country National Employees Pension Plan (the “TCN Plan”), which provides retirement benefits for certain of our current and former foreign employees. Effective August 1, 2011, new entry into the TCN Plan was closed, and effective December 31, 2011, benefit accruals under the TCN Plan were frozen. Effective January 1, 2012, we established a new global defined contribution plan to provide retirement benefits to non-U.S. expatriate employees who may have otherwise obtained benefits under the TCN Plan.

Net periodic benefit cost for the Domestic Plans and the TCN Plan includes the following components:

	Domestic Plans
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
	(In thousands)
Interest cost	$	5,999		$	6,631		$	17,997		$	19,893
Expected return on plan assets		(9,577	)		(8,952	)		(28,730	)		(26,857	)
Recognized net actuarial loss and other		2,932			2,409			8,798			7,227
Net periodic benefit cost	$	(646	)	$	88		$	(1,935	)	$	263

	TCN Plan
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
	(In thousands)
Interest cost	$	466		$	460		$	1,400		$	1,382
Expected return on plan assets		(651	)		(610	)		(1,952	)		(1,832	)
Recognized net actuarial loss		507			446			1,522			1,339
Net periodic benefit cost	$	322		$	296		$	970		$	889

XML

ACQUISITION, DISPOSITIONS AND ATLANTIC RESTRUCTURING CHARGES

9 Months Ended

Sep. 30, 2013

Discontinued Operations And Disposal Groups [Abstract]

ACQUISITION, DISPOSITIONS AND ATLANTIC RESTRUCTURING CHARGES

NOTE 2—ACQUISITION, DISPOSITIONS AND ATLANTIC RESTRUCTURING CHARGES

Acquisition

During the quarter ended March 31, 2013, we entered into a share purchase agreement to acquire all of the issued and outstanding shares of capital stock of Deepsea Group Limited, a United Kingdom-based company that provides subsea and other engineering services to international energy companies, primarily through offices in the United Kingdom and the United States. Total consideration was approximately $9.0 million, which includes cash ($6.0 million) and the delivery of 313,580 restricted shares of MII common stock (out of treasury). The transaction is being accounted for using the acquisition method and, accordingly, assets acquired and liabilities assumed are recorded at their respective fair values. The preliminary purchase price allocation has not been completed and is subject to change for a period of one-year following the acquisition. Results of operations and pro forma results have not been presented, as the effects of this transaction were not material to our condensed consolidated financial statements.

Dispositions

Assets Held for Sale

We previously committed to a plan to sell four of our multi-function marine vessels, specifically the Bold Endurance, DB 16, DB 26 and the DLB KP1. Assets classified as held for sale are no longer depreciated. During the quarter ended March 31, 2013, we completed the sale of theBold Endurance and the DB 26 for aggregate cash proceeds of approximately $32.0 million, resulting in an aggregate gain of approximately $12.5 million. We remain in active discussions with interested parties to sell the DLB KP1 and DB 16.

Charter Fleet Business

On March 19, 2012, we completed the sale of our former charter fleet business, which operated 10 of the 14 vessels acquired in 2007 in the Secunda Acquisition. The cash proceeds from the charter fleet sale were approximately $61.0 million, resulting in a gain on the sale of approximately $0.3 million. For the year ended December 31, 2011, we recognized an approximate $22.0 million write-down of our former charter fleet business.

The following table presents selected financial information regarding the results of operations attributable to our former charter fleet business:

	Nine Months Ended September 30, 2012
	(Unaudited)
	(In thousands)
Revenues	$	8,184
Gain on disposal of discontinued operations		257
Income before provision for income taxes		3,240
Income from discontinued operations, net of tax	$	3,497

Restructuring and Management Charges

We commenced a restructuring of our Atlantic operations during the quarter ended June 30, 2013, which involves our Morgan City, Louisiana, Houston, Texas, New Orleans, Louisiana and Brazil locations. The restructuring involves, among other things, reductions of management, administrative, fabrication and engineering personnel, and a plan to discontinue utilization of the Morgan City facility (after the completion of existing backlog projects, which are currently forecasted to be completed in the second quarter of 2014). Future fabrication operations in the Atlantic segment are expected to be executed using the Altamira, Mexico facility for the foreseeable future. In addition, we have reached an agreement in principle to exit our joint venture operation in Brazil, which was specifically formed to construct and integrate floating, production, storage, off-loading (“FPSO”) modules.

In addition, in October 2013, we announced certain executive management changes that will become effective during the quarter ending December 31, 2013.

Costs associated with our restructuring activities and the management changes will primarily include severance and other personnel-related costs, costs associated with exiting the joint venture in Brazil, asset impairment and relocation costs and future unutilized lease costs. The total costs are expected to range between $55 million to $65 million in the aggregate. Of the total anticipated costs, we incurred approximately $4.0 million during the quarter ended September 30, 2013 and had incurred an aggregate of $19.5 million as of September 30, 2013. We expect to recognize the majority of these costs during the quarters ending December 31, 2013 and March 31, 2014.

XML

Derivative Financial Instruments (Detail) (Derivatives Designated as Hedges, USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Derivative [Line Items]
Asset derivatives fair value	$ 12,619	$ 26,081
Liability derivatives fair value	30,188	4,647
Accounts receivable-other
Derivative [Line Items]
Asset derivatives fair value	11,270	12,311
Accounts payable
Derivative [Line Items]
Liability derivatives fair value	13,145	3,604
Other assets
Derivative [Line Items]
Asset derivatives fair value	1,349	13,770
Other liabilities
Derivative [Line Items]
Liability derivatives fair value	$ 17,043	$ 1,043

XML

Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended		1 Months Ended	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended						3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended			3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Project	Sep. 30, 2012	Dec. 31, 2012	Sep. 30, 2013 Backlog	Mar. 19, 2012 Secunda International Limited Vessel	Sep. 30, 2013 Unconsolidated joint ventures	Sep. 30, 2012 Unconsolidated joint ventures	Sep. 30, 2013 Unconsolidated joint ventures	Sep. 30, 2012 Unconsolidated joint ventures	Sep. 30, 2013 Claims Revenue	Sep. 30, 2012 Claims Revenue	Sep. 30, 2013 Claims Revenue	Sep. 30, 2012 Claims Revenue	Sep. 30, 2013 Claims Revenue Estimates at Completion	Sep. 30, 2012 Claims Revenue Estimates at Completion	Sep. 30, 2013 Minimum	Sep. 30, 2013 Maximum	Sep. 30, 2013 Atlantic	Sep. 30, 2012 Atlantic	Sep. 30, 2013 Atlantic	Sep. 30, 2012 Atlantic	Sep. 30, 2013 Atlantic Backlog	Sep. 30, 2013 Atlantic Deferred profit recognition contracts	Sep. 30, 2012 Atlantic Deferred profit recognition contracts	Sep. 30, 2013 Atlantic Deferred profit recognition contracts Project	Sep. 30, 2012 Atlantic Deferred profit recognition contracts	Sep. 30, 2013 Asia Pacific	Sep. 30, 2012 Asia Pacific	Sep. 30, 2013 Asia Pacific	Sep. 30, 2012 Asia Pacific	Sep. 30, 2013 Asia Pacific Project One of Two	Sep. 30, 2013 Middle East	Sep. 30, 2012 Middle East	Sep. 30, 2013 Middle East	Sep. 30, 2012 Middle East	Sep. 30, 2013 Middle East EPCI projects	Mar. 19, 2012 Charter Fleet Business Vessel
Organization, Consolidation and Presentation of Financial Statements Disclosure [Line Items]
Number of vessels operated																																							10
Number of vessels							14
Unapproved change orders	$ 468,000,000		$ 468,000,000			$ 138,000,000
Percentage of completion to recognize expected profit	70.00%		70.00%
Number of projects accounted under deferred profit recognition policy																											1
Revenues	686,856,000	1,028,745,000	2,141,594,000	2,645,671,000				0	9,000,000	3,700,000	14,000,000	17,600,000	7,000,000	56,900,000	45,000,000	186,300,000	78,600,000			116,871,000	125,317,000	451,609,000	335,225,000	151,300,000	36,000,000	16,000,000	79,000,000	29,000,000	190,231,000	468,200,000	746,122,000	1,103,699,000		379,754,000	435,228,000	943,863,000	1,206,747,000
Cost of operations	686,415,000	889,823,000	2,122,488,000	2,246,961,000				0	9,000,000	3,700,000	14,000,000	17,600,000	7,000,000	56,900,000	45,000,000	186,300,000	78,600,000								35,000,000	16,000,000	77,000,000	29,000,000
Claim amounts																				8.00%	11.00%	8.00%	11.00%						41.00%	10.00%	41.00%	10.00%		51.00%	79.00%	51.00%	79.00%
Number of Projects in Loss Position			4
Changes in project estimates																													66,000,000		66,000,000		132,000,000					38,000,000
Changes in estimated cost of completion																													33,000,000		33,000,000
Increased estimated costs of project																				9,000,000		21,000,000							33,000,000		99,000,000
Equity method of accounting investment ownership																		20.00%	50.00%
Accounts receivable - other	110,252,000		110,252,000		75,461,000
Allowance for doubtful accounts	0		0		0
Contracts in progress			586,120,000		560,154,000
Advance billing on contracts			312,268,000		241,696,000
Income (loss) from continuing operations before provision for income taxes and noncontrolling interests	(46,769,000)	84,207,000	(135,373,000)	257,151,000
Provision for Income Taxes	12,278,000	29,916,000	45,493,000	87,004,000
Net operating loss carry forwards, valuation allowance	76,000,000		76,000,000
Deferred taxes related to net operating loss carry forwards	85,000,000		85,000,000
Deferred taxes expected to be realized through future taxable income	9,000,000		9,000,000
Deferred taxes related to net operating loss carry forwards	$ 135,000,000		$ 135,000,000

XML

Accumulated Other Comprehensive Loss included in Stockholders' Equity (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Jun. 30, 2013	Dec. 31, 2012
Statement Of Income And Comprehensive Income [Abstract]
Foreign currency translation adjustments	$ (4,131)	$ (2,886)	$ (3,366)
Net loss on investments	(1,717)	(1,875)	(2,316)
Net gain (loss) on derivative financial instruments	(33,229)	(58,316)	11,735
Unrecognized losses on benefit obligations	(90,158)	(93,596)	(100,466)
Accumulated other comprehensive loss	$ (129,235)	$ (156,673)	$ (94,413)

XML

Comparison of Key Financial Covenants and Current Compliance (Detail)	Sep. 30, 2013
Financing Activities and Borrowing Arrangements [Line Items]
Maximum leverage ratio	0.90
Minimum interest coverage ratio	20.63
Covenant Requirement
Financing Activities and Borrowing Arrangements [Line Items]
Maximum leverage ratio	3.75
Minimum interest coverage ratio	4.00

XML

Earnings Per Share - Additional Information (Detail) In Millions, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Earnings Per Share [Abstract]
Antidilutive securities excluded from earnings per share computation, shares	3.1	1.7	2.9	1.8

XML

Changes in Level Three Instrument Measured on Recurring Basis (Detail) (Level 3, USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Level 3
Changes In Level 3 Assets And Liabilities Measured At Fair Value On Recurring Basis [Line Items]
Balance at beginning of period	$ 5,902	$ 6,338	$ 6,343	$ 6,030
Total realized and unrealized gains	79	459	307	1,357
Principal repayments	(326)	(340)	(995)	(930)
Balance at end of period	$ 5,655	$ 6,457	$ 5,655	$ 6,457

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended				9 Months Ended
	Sep. 30, 2013		Sep. 30, 2012		Sep. 30, 2013		Sep. 30, 2012
Statement Of Income And Comprehensive Income [Abstract]
Net Income (Loss)	$ (59,047)		$ 54,291		$ (180,866)		$ 173,644
Other comprehensive income (loss), net of tax:
Amortization of benefit plan costs	3,438		2,864		10,308		8,590
Unrealized gain on investments	158		580		599		1,708
Translation adjustments	(1,245)		4,286		(765)		10,725
Unrealized gain (loss) on derivatives	24,770		19,324		(46,270)		(4,779)
Realized loss on derivatives	320		2,978		1,282		5,379
Other comprehensive income (loss), net of tax	27,441	[1]	30,032	[1]	(34,846)	[1]	21,623	[1]
Total Comprehensive Income (Loss)	(31,606)		84,323		(215,712)		195,267
Less: Comprehensive Income Attributable to Noncontrolling Interests.	5,026		3,679		12,050		7,636
Comprehensive Income (Loss) Attributable to McDermott International, Inc.	$ (36,632)		$ 80,644		$ (227,762)		$ 187,631

[1] The tax impacts on amounts presented in other comprehensive income (loss) are not significant.

XML

STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

STOCK-BASED COMPENSATION

NOTE 7—STOCK-BASED COMPENSATION

Equity instruments are measured at fair value on the grant date. Stock-based compensation expense is generally recognized on a straight-line basis over the requisite service periods of the awards. Compensation expense is based on awards we expect to ultimately vest. Therefore, we have reduced compensation expense for estimated forfeitures based on our historical forfeiture rates. Our estimate of forfeitures is determined at the grant date and is revised if our actual forfeiture rate is materially different from our estimate.

We use a Black-Scholes model to determine the fair value of certain share-based awards, such as stock options. Additionally, we use a Monte Carlo model to determine the fair value of certain share-based awards that contain market and performance-based conditions. The use of these models requires highly subjective assumptions, such as assumptions about the expected life of the award, vesting probability, expected dividend yield and the volatility of our stock price. Total stock-based compensation expense, net recognized for the three months and nine months ended September 30, 2013 and September 30, 2012 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
	(Unaudited) (In thousands)
Stock Options	$	1,050	$	982	$	3,250	$	2,999
Restricted Stock and Restricted Stock Units		2,702		1,446		7,689		5,164
Performance Shares and Deferred Stock Units		1,630		1,211		4,553		3,286
Total	$	5,382	$	3,639	$	15,492	$	11,449

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Statement Of Financial Position [Abstract]
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	400,000,000	400,000,000
Common stock, shares issued	243,941,008	243,442,156
Treasury stock, shares	7,665,632	7,574,903

XML

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Statement [Abstract]
Revenues	$ 686,856	$ 1,028,745	$ 2,141,594	$ 2,645,671
Costs and Expenses:
Cost of operations	686,415	889,823	2,122,488	2,246,961
Selling, general and administrative expenses	46,443	51,834	151,286	145,927
Gain on asset disposals	(763)	(85)	(15,492)	(282)
Restructuring charges	4,040		19,502
Total costs and expenses	736,135	941,572	2,277,784	2,392,606
Equity in Loss of Unconsolidated Affiliates	(3,375)	(4,692)	(12,967)	(11,026)
Operating Income (Loss)	(52,654)	82,481	(149,157)	242,039
Other Income :
Interest income, net	363	996	1,133	4,215
Gain on foreign currency-net	4,460	488	10,838	11,185
Other income (expense)-net	1,062	242	1,813	(288)
Total other income	5,885	1,726	13,784	15,112
Income (loss) from continuing operations before provision for income taxes and noncontrolling interests	(46,769)	84,207	(135,373)	257,151
Provision for Income Taxes	12,278	29,916	45,493	87,004
Income (loss) from continuing operations before noncontrolling interests	(59,047)	54,291	(180,866)	170,147
Total income from discontinued operations, net of tax				3,497
Net Income (Loss)	(59,047)	54,291	(180,866)	173,644
Less: Net Income Attributable to Noncontrolling Interests	5,023	3,679	12,074	7,535
Net income (loss) attributable to McDermott International, Inc.	$ (64,070)	$ 50,612	$ (192,940)	$ 166,109
Basic:
Income (loss) from continuing operations, less noncontrolling interests	$ (0.27)	$ 0.21	$ (0.82)	$ 0.69
Income from discontinued operations, net of tax				$ 0.01
Net income (loss) attributable to McDermott International, Inc.	$ (0.27)	$ 0.21	$ (0.82)	$ 0.70
Diluted:
Income (loss) from continuing operations, less noncontrolling interests	$ (0.27)	$ 0.21	$ (0.82)	$ 0.68
Income from discontinued operations, net of tax				$ 0.01
Net income (loss) attributable to McDermott International, Inc.	$ (0.27)	$ 0.21	$ (0.82)	$ 0.69
Shares used in the computation of earnings per share:
Basic	236,257,920	235,817,203	236,132,847	235,568,889
Diluted	236,257,920	237,867,000	236,132,847	237,553,463

XML

Segment Reporting - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013 Segment	Sep. 30, 2012
Segment Reporting [Abstract]
Number of reporting segments	3
Number of operating segments	4
Accrued Capital Expenditure	$ 38.1	$ 1.2

XML

Contract Receivables (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Retainages	$ 95,283	$ 133,619
Less allowances	0	0
Accounts receivable-trade, net	341,458	428,800
Contract Receivable
Accounts, Notes, Loans and Financing Receivable [Line Items]
Retainages	95,283	133,619
Unbilled	4,325	4,710
Less allowances	(22,315)	(22,116)
Accounts receivable-trade, net	341,458	428,800
Contract Receivable | Contracts in progress
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contracts receivable	159,768	273,729
Contract Receivable | Completed contracts
Accounts, Notes, Loans and Financing Receivable [Line Items]
Contracts receivable	$ 104,397	$ 38,858

XML

DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

The following tables summarize our derivative financial instruments:

Asset and Liability Derivatives

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Location
Accounts receivable—other	$	11,270	$	12,311
Other assets		1,349		13,770
Total asset derivatives	$	12,619	$	26,081
Accounts payable	$	13,145	$	3,604
Other liabilities		17,043		1,043
Total liability derivatives	$	30,188	$	4,647

Effects of Derivative Instruments on Financial Statements

The Effects of Derivative Instruments on our Financial Statements

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Amount of loss recognized in other comprehensive income (loss)	$	24,743		$	19,324	$	(46,270	)	$	(4,880	)
Income (loss) reclassified from AOCI into income: effective portion
Location
Cost of operations	$	(270	)	$	2,867	$	(1,101	)	$	4,837
Loss recognized in income: ineffective portion and amount excluded from effectiveness testing
Location
Gain on foreign currency—net	$	3,136		$	3,546	$	7,578		$	15,011

XML

Fair Values of Financial Instruments - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended	12 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Fair Value Measurements [Line Items]
Net unrealized loss on investment	$ 1.7	$ 2.4
Asset-backed securities and collateralized mortgage obligations
Fair Value Measurements [Line Items]
Asset-backed and mortgage-backed securities with maturities	26 years
Corporate notes and bonds
Fair Value Measurements [Line Items]
Asset-backed and mortgage-backed securities with maturities	3 years

XML

Commitments and Contingencies - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	9 Months Ended	1 Months Ended				9 Months Ended
	Sep. 30, 2013	Dec. 16, 2005 Antoine, et al. vs. J. Ray McDermott, Inc., et al. LegalMatter	Jan. 29, 2007 Antoine, et al. vs. J. Ray McDermott, Inc., et al. Judicial District Court for Harris County, Texas LegalMatter	Jan. 29, 2007 Antoine, et al. vs. J. Ray McDermott, Inc., et al. Judicial District Court for Harris County, Texas Maritime products LegalMatter	Jan. 29, 2007 Boudreaux, et al. v. McDermott, Inc., et al. United States District Court for the Southern District of Texas LegalMatter	Sep. 30, 2013 Class Action Complaints against MII, Stephen M. Johnson and Perry L. Elders United States District Court for the Southern District of Texas LegalMatter
Commitments and Contingencies Disclosure [Line Items]
Legal claims	On December 16, 2005, a proceeding entitled Antoine, et al. vs. J. Ray McDermott, Inc., et al.(“Antoine Suit”), was filed in the 24th Judicial District Court, Jefferson Parish, Louisiana, by approximately 88 plaintiffs against approximately 215 defendants, including our subsidiaries formerly known as JRMI and Delta Hudson Engineering Corporation (“DHEC”), generally alleging injuries for exposure to asbestos, and unspecified chemicals, metals and noise while the plaintiffs were allegedly employed as Jones Act seamen. This case was dismissed by the Court on January 10, 2007, without prejudice to plaintiffs’ rights to refile their claims. On January 29, 2007, 21 plaintiffs from the dismissed Antoine Suit filed a matter entitled Boudreaux, et al. v. McDermott, Inc., et al. (the “Boudreaux Suit”), in the United States District Court for the Southern District of Texas, against JRMI and our subsidiary formerly known as McDermott Incorporated, and approximately 30 other employer defendants, alleging Jones Act seaman status and generally alleging exposure to welding fumes, solvents, dyes, industrial paints and noise. The Boudreaux Suit was transferred to the United States District Court for the Eastern District of Louisiana on May 2, 2007, which entered an order in September 2007 staying the matter until further order of the Court due to the bankruptcy filing of one of the co-defendants.
Number of plaintiffs		88	43		21	2
Number of defendants		215	65	42	30
Environmental reserves, current	$ 0
Aggregate possible liquidated damage due to failure to meet specified contractual milestone dates, offshore oil and gas construction segment	137.0
Liquidated damage contingencies, accrued	11.0
Trigger dates, potential liquidated damages	2013-11
Outstanding obligation in 2013	41.6
Outstanding obligation in 2014	136.5
Outstanding obligation 2015	204.3
Outstanding obligation	$ 382.4

XML

Net Periodic Benefit Cost (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Domestic Plan
Net Period Benefit Cost Assumptions [Line Items]
Interest cost	$ 5,999	$ 6,631	$ 17,997	$ 19,893
Expected return on plan assets	(9,577)	(8,952)	(28,730)	(26,857)
Recognized net actuarial loss and other	2,932	2,409	8,798	7,227
Net periodic benefit cost	(646)	88	(1,935)	263
TCN Plan
Net Period Benefit Cost Assumptions [Line Items]
Interest cost	466	460	1,400	1,382
Expected return on plan assets	(651)	(610)	(1,952)	(1,832)
Recognized net actuarial loss and other	507	446	1,522	1,339
Net periodic benefit cost	$ 322	$ 296	$ 970	$ 889

XML

Selected Financial Information Regarding Results of Operations of Charter Fleet Business (Detail) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total income from discontinued operations, net of tax		$ 3,497
Charter Fleet Business
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Revenues		8,184
Gain on disposal of discontinued operations	300	257
Income before provision for income taxes		3,240
Total income from discontinued operations, net of tax		$ 3,497

XML

Long-Term Debt and Notes Payable - Additional Information (Detail) (USD $)	9 Months Ended		3 Months Ended	9 Months Ended					9 Months Ended			3 Months Ended								1 Months Ended						9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013 Mexico	Sep. 30, 2013 Revolving Credit Facility	Sep. 30, 2013 Revolving Credit Facility	Sep. 30, 2013 North Ocean Construction Financing North Ocean 102	Dec. 31, 2012 North Ocean Construction Financing North Ocean 102	Sep. 30, 2013 Eurodollar rate	Sep. 30, 2013 Base Rate	Sep. 30, 2013 Minimum	Sep. 30, 2013 Maximum	Sep. 30, 2013 Maximum Amended Credit Agreement	Sep. 30, 2013 Maximum Revolving Credit Facility	Sep. 30, 2013 Commitments	Sep. 30, 2013 Financial Letter of Credit	Sep. 30, 2013 Financial Letter of Credit Minimum	Sep. 30, 2013 Financial Letter of Credit Maximum	Sep. 30, 2013 Performance Letters of Credit	Sep. 30, 2013 Performance Letters of Credit Minimum	Sep. 30, 2013 Performance Letters of Credit Maximum	Sep. 30, 2010 Secured Debt North Ocean Construction Financing North Ocean 105 Installment	Sep. 30, 2013 Secured Debt North Ocean Construction Financing North Ocean 105	Dec. 31, 2012 Secured Debt North Ocean Construction Financing North Ocean 105	Sep. 30, 2013 Secured Debt Maximum Amended Credit Agreement	Sep. 30, 2010 Secured Debt Maximum North Ocean Construction Financing North Ocean 105	Apr. 20, 2012 ANZ Reimbursement Agreement	Sep. 30, 2013 Senior Unsecured Note Amended Credit Agreement	Sep. 30, 2013 Senior Unsecured Note Maximum Amended Credit Agreement	Sep. 30, 2013 Unsecured Debt
Debt Instrument [Line Items]
Letters of credit aggregate borrowing capacity										$ 950,000,000
Credit facility, maturity date	Aug. 19, 2016
Leverage ratio of indebtedness to EBITDA										3.00	3.75												2.00				5.00
Principal amount of notes																										300,000,000
Interest on outstanding loan balance	Loans outstanding under the Credit Agreement bear interest at the borrower's option at either the Eurodollar rate plus a margin ranging from 1.50% to 2.50% per year or the base rate (the highest of the Federal Funds rate plus 0.50%, the 30-day Eurodollar rate plus 1.0%, or the administrative agent's prime rate) plus a margin ranging from 0.50% to 1.50% per year. The applicable margin for revolving loans varies depending on the credit ratings of the Credit Agreement.
Interest on loan outstanding, margin over Eurodollar rate	1.00%								1.50%	2.50%
Interest on loan outstanding, margin over Federal Fund rate	0.50%
Interest on loan outstanding, margin over base rate									0.50%	1.50%
Commitment fee on the unused portion of credit agreement									0.20%	0.45%
Letter of credit fee													0.25%	1.75%	1.50%	2.50%	0.875%	0.75%	1.25%
Revolving credit, borrowings outstanding			0	0
Letters of credit outstanding amount			237,000,000	237,000,000																					109,000,000			82,600,000
Credit facility, current borrowing capacity			713,000,000	713,000,000
Credit facility, applicable interest rate				2.16%
Borrowings under Credit Agreement												80,000,000
Borrowings under Credit Agreement, Average outstanding			40,000,000
Applicable margin							1.75%	0.75%
Notes payable					32,900,000	37,300,000
Notes payable, current					32,900,000	6,000,000															8,200,000	8,200,000
Debt description					The outstanding debt bears interest at a rate equal to the three-month LIBOR (which resets every three months) plus a margin of 3.315% and matures in January 2014.
Applicable margin for LIBOR borrowing					3.315%
Debt maturity date					2014-01
Percentage of debt guaranteed by JRMSA					50.00%
Secured debt																								69,400,000
Business acquisition percentage, interests acquired																				75.00%
Secured debt, applicable interest rate																				2.76%
Principal repayment																				The agreement provides for borrowings of up to $69.4 million, bearing interest at 2.76% per year, and requires principal repayment in 17 consecutive semi-annual installments, which commenced on October 1, 2012.
Number of consecutive semi-annual installments																				17
Borrowing outstanding																					61,300,000	65,400,000
Bonds issued related to JRMSA general agreement of indemnity		$ 46,500,000

XML

FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 6—FAIR VALUE MEASUREMENTS

The following is a summary of our available-for-sale securities measured at fair value:

	Total at September 30, 2013		Level 1		Level 2		Level 3
	(Unaudited)
	(In thousands)
Mutual funds(1)	$	2,115	$	—	$	2,115	$	—
Commercial paper		7,397		—		7,397		—
Asset-backed securities and collateralized mortgage obligations(2)		7,770		—		2,115		5,655
Total	$	17,282	$	—	$	11,627	$	5,655

	Total at December 31, 2012		Level 1		Level 2		Level 3
	(In thousands)
Mutual funds(1)	$	2,023	$	—	$	2,023	$	—
Commercial paper		29,737		—		29,737		—
Asset-backed securities and collateralized mortgage obligations(2)		8,477		—		2,134		6,343
Corporate notes and bonds(3)		5,755		—		5,755		—
Total	$	45,992	$	—	$	39,649	$	6,343

(1) Various U.S. equities and other investments managed under mutual funds

(2) Asset-backed and mortgage-backed securities with maturities of up to 26 years

(3) Corporate notes and bonds with maturities of three years or less

Our Level 2 investments consist primarily of commercial paper, corporate notes and bonds, asset-backed commercial paper notes backed by a pool of mortgage-backed securities and mutual funds. The fair value of our Level 2 investments was determined using a market approach which is based on quoted prices and other information for similar or identical instruments.

Our Level 3 investment consists of asset-backed commercial paper notes backed by a pool of mortgage-backed securities. The fair value of this Level 3 investment was based on the calculation of an overall weighted-average valuation, using the prices of the underlying individual securities. Individual securities in the pool were valued based on market observed prices, where available. If market prices were not available, prices of similar securities backed by similar assets were used.

Changes in Level 3 Instrument

The following is a summary of the changes in our Level 3 instrument measured on a recurring basis for the three months and nine months ended September 30, 2013 and September 30, 2012:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands)
Balance at beginning of period	$	5,902		$	6,338		$	6,343		$	6,030
Total realized and unrealized gains		79			459			307			1,357
Principal repayments		(326	)		(340	)		(995	)		(930	)
Balance at end of period	$	5,655		$	6,457		$	5,655		$	6,457

Unrealized Losses on Investments

Our net unrealized loss on investments was $1.7 million and $2.4 million at September 30, 2013 and December 31, 2012, respectively. The investments in an unrealized loss position for twelve months or longer are asset-backed and mortgage-backed obligations. These investments have generally shown a positive trend and continue to perform, and we currently do not have the intent to sell these securities before their anticipated recovery. Based on our analysis of these investments, we believe that none of our available-for-sale securities were other than temporarily impaired as of September 30, 2013. The amount of investments in an unrealized loss position for less than twelve months was not significant for either of the periods presented. The following is a summary of our available-for-sale securities:

	Twelve Months or Greater
	Fair Value		Unrealized Losses
	(Unaudited) (In thousands)
September 30, 2013
Mutual funds	$	2,115	$	—
Commercial paper		7,397		—
Asset-backed securities and collateralized mortgage obligations		7,770		(1,857	)
Total	$	17,282	$	(1,857	)

	Twelve Months or Greater
	Fair Value		Unrealized Losses
	(Unaudited) (In thousands)
December 31, 2012
Mutual funds	$	2,023	$	—
Commercial paper		29,737		—
Asset-backed securities and collateralized mortgage obligations		8,477		(2,376	)
Corporate notes and bonds		5,755		—
Total	$	45,992	$	(2,376	)

Other Financial Instruments

We used the following methods and assumptions in estimating our fair value disclosures for our other financial instruments:

Cash and restricted cash and cash equivalents. The carrying amounts that we have reported in the accompanying condensed consolidated balance sheets for cash, cash equivalents and restricted cash and cash equivalents approximate their fair values and are classified as Level 1 within the fair value hierarchy.

Short-term and long-term debt. The fair value of debt instruments is classified as Level 2 within the fair value hierarchy and is valued using a market approach based on quoted prices for similar instruments traded in active markets. Where quoted prices are not available, the income approach is used to value these instruments based on the present value of future cash flows discounted at estimated borrowing rates for similar debt instruments or on estimated prices based on current yields for debt issues of similar quality and terms.

Forward contracts. The fair value of forward contracts is classified as Level 2 within the fair value hierarchy and is valued using observable market parameters for similar instruments traded in active markets.

Where quoted prices are not available, the income approach is used to value these forward contracts, which discounts future cash flows based on current market expectations and credit risk.

The estimated fair values of certain of our financial instruments are as follows:

	September 30, 2013						December 31, 2012
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
	(Unaudited)
	(In thousands)
Balance Sheet Instruments
Cash and cash equivalents	$	282,370		$	282,370		$	640,147		$	640,147
Restricted cash and cash equivalents	$	18,488		$	18,488		$	18,116		$	18,116
Investments	$	17,282		$	17,282		$	45,992		$	45,992
Debt	$	(94,141	)	$	(95,919	)	$	(102,708	)	$	(106,324	)
Forward contracts	$	(17,569	)	$	(17,569	)	$	21,434		$	21,434

XML

Retainages on Contracts (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Contractors [Abstract]
Retainages expected to be collected within one year	$ 95,283	$ 133,619
Retainages expected to be collected after one year	83,652	32,085
Total retainages	$ 178,935	$ 165,704

XML

Effects of Derivative Instruments on Financial Statements (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Amount of loss recognized in other comprehensive income (loss)	$ 24,743	$ 19,324	$ (46,270)	$ (4,880)
Cost of operations
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Income reclassified from AOCI into income: effective portion	(270)	2,867	(1,101)	4,837
Gain (loss) on foreign currency - net
Derivative Instruments and Hedging Activities Disclosures [Line Items]
Gain (loss) recognized in income ineffective portion and amount excluded from effectiveness testing	$ 3,136	$ 3,546	$ 7,578	$ 15,011

XML

SEGMENT REPORTING

9 Months Ended

Sep. 30, 2013

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 9—SEGMENT REPORTING

We report our financial results under a geographic-based reporting structure, which coincides with how our financial information is reviewed and evaluated on a regular basis by our chief operating decision maker. We operate in four primary operating segments, which consist of Asia Pacific, Atlantic, Caspian and the Middle East. The Caspian and Middle East operating segments are aggregated into the Middle East reporting segment due to the proximity of regions and similarities in the nature of services provided, economic characteristics and oversight responsibilities. Accordingly, we have three reporting segments consisting of Asia Pacific, Atlantic and the Middle East. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.”

Reporting segments are measured based on operating income, which is defined as revenues reduced by total costs and expenses and equity in income (loss) of unconsolidated affiliates. Summarized financial information is shown in the following tables:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited) (In thousands)
Revenues(1):
Asia Pacific	$	190,231		$	468,200		$	746,122		$	1,103,699
Atlantic		116,871			125,317			451,609			335,225
Middle East		379,754			435,228			943,863			1,206,747
Total revenues	$	686,856		$	1,028,745		$	2,141,594		$	2,645,671
Operating income (loss):
Asia Pacific	$	(37,663	)	$	52,192		$	17,894		$	156,231
Atlantic		(32,390	)		(10,714	)		(97,451	)		(36,749	)
Middle East		17,399			41,003			(69,600	)		122,557
Total operating income (loss)	$	(52,654	)	$	82,481		$	(149,157	)	$	242,039
Capital expenditures(2):
Asia Pacific	$	42,568		$	14,908		$	87,753		$	53,139
Atlantic		4,023			16,454			60,336			80,944
Middle East		25,516			15,286			63,459			41,997
Corporate and Other		8,815			975			13,849			3,204
Total capital expenditures	$	80,922		$	47,623		$	225,397		$	179,284
Depreciation and amortization:
Asia Pacific	$	4,667		$	5,375		$	14,204		$	15,467
Atlantic		5,999			3,554			17,985			16,849
Middle East		8,293			6,929			22,319			21,977
Corporate and Other		1,837			4,224			5,606			11,663
Total depreciation and amortization	$	20,796		$	20,082		$	60,114		$	65,956
Drydock amortization:
Asia Pacific	$	1,927		$	2,241		$	6,976		$	8,230
Atlantic		1,801			4,971			5,617			11,284
Middle East		520			787			1,586			2,092
Total drydock amortization	$	4,248		$	7,999		$	14,179		$	21,606

(1) Intersegment transactions included in revenues were not significant for any of the periods presented.

(2) Total capital expenditures represent expenditures for which cash payments were made during the period. These amounts exclude approximately $38.1 million and $1.2 million in accrued capital expenditures for the nine months ended September 30, 2013 and 2012, respectively.

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Segment assets:
Asia Pacific	$	1,171,837	$	1,402,923
Atlantic		611,111		536,734
Middle East		1,228,812		1,006,284
Corporate and other		145,521		387,686
Total assets	$	3,157,281	$	3,333,627

XML

DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2013

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 5—DERIVATIVE FINANCIAL INSTRUMENTS

We enter into derivative financial instruments primarily to hedge certain firm purchase commitments and forecasted transactions denominated in foreign currencies. We record these contracts at fair value on our consolidated balance sheets. Depending on the hedge designation at the inception of the contract, the related gains and losses on these contracts are either: (1) deferred as a component of AOCI until the hedged item is recognized in earnings; (2) offset against the change in fair value of the hedged firm commitment through earnings; or (3) recognized immediately in earnings. At the inception and on an ongoing basis, we assess the hedging relationship to determine its effectiveness in offsetting changes in cash flows or fair value attributable to the hedged risk. We exclude from our assessment of effectiveness the portion of the fair value of the forward contracts attributable to the difference between spot exchange rates and forward exchange rates. The ineffective portion of a derivative’s change in fair value and any portion excluded from the assessment of effectiveness are immediately recognized in earnings. Gains and losses on derivative financial instruments that are immediately recognized in earnings are included as a component of gain (loss) on foreign currency—net in our condensed consolidated statements of income.

At September 30, 2013, the majority of our foreign currency forward contracts were designated as cash flow hedging instruments. In addition, we deferred approximately $33.2 million of net losses on these derivative financial instruments in AOCI, and we expect to reclassify approximately $10.2 million of deferred losses out of AOCI by September 30, 2014, as hedged items are recognized in earnings.

The notional value of our outstanding derivative contracts totaled $1.3 billion at September 30, 2013, with maturities extending through 2017. Of this amount, approximately $721.6 million is associated with various foreign currency expenditures we expect to incur on one of our Asia Pacific segment EPCI projects. These instruments consist of contracts to purchase or sell foreign-denominated currencies. At September 30, 2013, the fair value of these contracts was in a net liability position totaling $17.6 million.

The following tables summarize our derivative financial instruments:

Asset and Liability Derivatives

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Location
Accounts receivable—other	$	11,270	$	12,311
Other assets		1,349		13,770
Total asset derivatives	$	12,619	$	26,081
Accounts payable	$	13,145	$	3,604
Other liabilities		17,043		1,043
Total liability derivatives	$	30,188	$	4,647

The Effects of Derivative Instruments on our Financial Statements

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited)
	(In thousands)
Derivatives Designated as Hedges:
Amount of loss recognized in other comprehensive income (loss)	$	24,743		$	19,324	$	(46,270	)	$	(4,880	)
Income (loss) reclassified from AOCI into income: effective portion
Location
Cost of operations	$	(270	)	$	2,867	$	(1,101	)	$	4,837
Loss recognized in income: ineffective portion and amount excluded from effectiveness testing
Location
Gain on foreign currency—net	$	3,136		$	3,546	$	7,578		$	15,011

XML

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (USD $) In Thousands, except Share data	Total		Common Stock	Capital In Excess of Par Value	Retained Earnings	Treasury Stock	Accumulated Other Comprehensive Income (Loss)	Stockholders' Equity	Non-Controlling Interests
Beginning Balance at Dec. 31, 2011	$ 1,733,712		$ 242,416	$ 1,375,976	$ 239,103	$ (95,827)	$ (102,030)	$ 1,659,638	$ 74,074
Beginning Balance (in shares) at Dec. 31, 2011			242,416,424
Net income	173,644				166,109			166,109	7,535
Other comprehensive income, net of tax	21,623	[1]					21,522	21,522	101
Exercise of stock options (in shares)			191,984
Exercise of stock options	889		192	697				889
Share vesting (in shares)			810,786
Share vesting	(36)		811	(811)		(36)		(36)
Purchase of treasury shares	(2,862)					(2,862)		(2,862)
Stock-based compensation charges	11,449			11,449				11,449
Noncontrolling interests distributions and other	(15,728)								(15,728)
Ending Balance at Sep. 30, 2012	1,922,691		243,419	1,387,311	405,212	(98,725)	(80,508)	1,856,709	65,982
Ending Balance (in shares) at Sep. 30, 2012			243,419,194
Beginning Balance at Dec. 31, 2012	1,952,105		243,442	1,391,271	445,756	(98,725)	(94,413)	1,887,331	64,774
Beginning Balance (in shares) at Dec. 31, 2012			243,442,156
Net income	(180,866)				(192,940)			(192,940)	12,074
Other comprehensive income, net of tax	(34,846)	[1]					(34,822)	(34,822)	(24)
Exercise of stock options (in shares)			54,454
Exercise of stock options	148		55	93				148
Share vesting (in shares)			444,398
Share vesting			444	(444)
Purchase of treasury shares	(1,088)					(1,088)		(1,088)
Stock-based compensation charges	15,492			14,369		1,123		15,492
Noncontrolling interests distributions and other	(12,493)								(12,493)
Ending Balance at Sep. 30, 2013	$ 1,738,452		$ 243,941	$ 1,405,289	$ 252,816	$ (98,690)	$ (129,235)	$ 1,674,121	$ 64,331
Ending Balance (in shares) at Sep. 30, 2013			243,941,008

[1] The tax impacts on amounts presented in other comprehensive income (loss) are not significant.

XML

Information about Operations in Different Segments (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Segment Reporting Information [Line Items]
Revenues	$ 686,856	$ 1,028,745	$ 2,141,594	$ 2,645,671
Operating income	(52,654)	82,481	(149,157)	242,039
Capital expenditures	80,922	47,623	225,397	179,284
Depreciation and amortization	20,796	20,082	60,114	65,956
Drydock amortization	4,248	7,999	14,179	21,606
Asia Pacific
Segment Reporting Information [Line Items]
Revenues	190,231	468,200	746,122	1,103,699
Operating income	(37,663)	52,192	17,894	156,231
Capital expenditures	42,568	14,908	87,753	53,139
Depreciation and amortization	4,667	5,375	14,204	15,467
Drydock amortization	1,927	2,241	6,976	8,230
Atlantic
Segment Reporting Information [Line Items]
Revenues	116,871	125,317	451,609	335,225
Operating income	(32,390)	(10,714)	(97,451)	(36,749)
Capital expenditures	4,023	16,454	60,336	80,944
Depreciation and amortization	5,999	3,554	17,985	16,849
Drydock amortization	1,801	4,971	5,617	11,284
Middle East
Segment Reporting Information [Line Items]
Revenues	379,754	435,228	943,863	1,206,747
Operating income	17,399	41,003	(69,600)	122,557
Capital expenditures	25,516	15,286	63,459	41,997
Depreciation and amortization	8,293	6,929	22,319	21,977
Drydock amortization	520	787	1,586	2,092
Corporate and Other
Segment Reporting Information [Line Items]
Capital expenditures	8,815	975	13,849	3,204
Depreciation and amortization	$ 1,837	$ 4,224	$ 5,606	$ 11,663

XML

Estimated Fair Values of Financial Instruments (Detail) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 31, 2011
Fair Value Disclosures [Abstract]
Cash and cash equivalents, Carrying Value	$ 282,370	$ 640,147	$ 638,794	$ 570,854
Restricted cash and cash equivalents, Carrying Amount	18,488	18,116
Investments, Carrying Amount	17,282	45,992
Debt, Carrying Amount	(94,141)	(102,708)
Forward contracts, Carrying Amount	(17,569)	21,434
Cash and cash equivalents, Fair Value	282,370	640,147
Restricted cash and cash equivalents, Fair Value	18,488	18,116
Investments, Fair Value	17,282	45,992
Debt, Fair Value	(95,919)	(106,324)
Forward contracts, Fair Value	$ (17,569)	$ 21,434

XML

Components of Accumulated Other Comprehensive Income (Loss) included in Stockholders' Equity (Detail) (USD $) In Thousands, unless otherwise specified	3 Months Ended	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2013
Statement Of Income And Comprehensive Income [Abstract]
Unrealized holding gain (loss) on investment, Beginning balance	$ (1,875)	$ (2,316)
Other comprehensive income (loss)	158	599
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)	158	599
Unrealized holding gain (loss) on investment, Ending balance	(1,717)	(1,717)
Deferred gain (loss) on derivatives, Beginning balance	(58,316)	11,735
Other comprehensive income (loss)	24,767	(46,246)
Amounts reclassified from AOCI	320	1,282
Net current period other comprehensive income (loss)	25,087	(44,964)
Deferred gain (loss) on derivatives, Ending balance	(33,229)	(33,229)
Foreign currency gain (loss), Beginning balance	(2,886)	(3,366)
Other comprehensive income (loss)	(1,245)	(765)
Amounts reclassified from AOCI
Net current period other comprehensive income (loss)	(1,245)	(765)
Foreign currency gain (loss), Ending balance	(4,131)	(4,131)
Defined benefit pension plans gain (loss), Beginning balance	(93,596)	(100,466)
Other comprehensive income (loss)
Amounts reclassified from AOCI	3,438
Net current period other comprehensive income (loss)	3,438	10,308
Defined benefit pension plans gain (loss), Ending balance	(90,158)	(90,158)
Accumulated other comprehensive income, Beginning balance	(156,673)	(94,413)
Other comprehensive income (loss)	23,680	(46,412)
Amounts reclassified from AOCI	3,758	11,590
Net current period other comprehensive income (loss)	27,438	(34,822)
Accumulated other comprehensive income, Ending balance	$ (129,235)	$ (129,235)

XML

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2013

Contracts Receivables

A summary of contract receivables is as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Contract receivables:
Contracts in progress	$	159,768		$	273,729
Completed contracts		104,397			38,858
Retainages		95,283			133,619
Unbilled		4,325			4,710
Less allowances		(22,315	)		(22,116	)
Accounts receivable—trade, net	$	341,458		$	428,800

Retainages on Contracts

The following is a summary of retainages on our contracts:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Retainages expected to be collected within one year	$	95,283	$	133,619
Retainages expected to be collected after one year		83,652		32,085
Total retainages	$	178,935	$	165,704

Components of Contracts in Progress and Advance Billings on Contracts

A detail of the components of contracts in progress and advance billings on contracts is as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Costs incurred less costs of revenue recognized	$	91,401	$	65,321
Revenues recognized less billings to customers		494,719		494,833
Contracts in Progress	$	586,120	$	560,154

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Billings to customers less revenue recognized	$	476,747		$	394,352
Costs incurred less costs of revenue recognized		(164,479	)		(152,656	)
Advance Billings on Contracts	$	312,268		$	241,696

Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholders' Equity

The components of AOCI included in stockholders’ equity are as follows:

	September 30, 2013			December 31, 2012
	(Unaudited)
	(In thousands)
Foreign currency translation adjustments	$	(4,131	)	$	(3,366	)
Net loss on investments		(1,717	)		(2,316	)
Net gain (loss) on derivative financial instruments		(33,229	)		11,735
Unrecognized losses on benefit obligations		(90,158	)		(100,466	)
Accumulated other comprehensive loss	$	(129,235	)	$	(94,413	)

Reclassifications

Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholders' Equity

The following tables present the components of AOCI and the amounts that were reclassified during the period:

For the three months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, June 30, 2013	$	(1,875	)	$	(58,316	)	$	(2,886	)	$	(93,596	)	$	(156,673	)
Other comprehensive income (loss)		158			24,767			(1,245	)		—			23,680
Amounts reclassified from AOCI		—			320	(3)		—			3,438	(4)		3,758
Net current period other comprehensive income (loss)		158			25,087			(1,245	)		3,438			27,438
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

For the nine months ended September 30, 2013	Unrealized holding gain (loss) on investment			Deferred gain (loss) on derivatives(1)			Foreign currency gain (loss)			Defined benefit pension plans gain (loss)(2)			Total
	(Unaudited)
	(In thousands)
Balance, December 31, 2012	$	(2,316	)	$	11,735		$	(3,366	)	$	(100,466	)	$	(94,413	)
Other comprehensive income (loss)		599			(46,246	)		(765	)		—			(46,412	)
Amounts reclassified from AOCI		—			1,282	(3)		—			10,308	(4)		11,590
Net current period other comprehensive income (loss)		599			(44,964	)		(765	)		10,308			(34,822	)
Balance, September 30, 2013	$	(1,717	)	$	(33,229	)	$	(4,131	)	$	(90,158	)	$	(129,235	)

(1) Refer to Note 5 for additional details

(2) Refer to Note 4 for additional details

(3) Reclassified to cost of operations

(4) Reclassified to selling, general and administrative expenses

XML

EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2013

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 8—EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per common share:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2013			2012		2013			2012
	(Unaudited) (In thousands)
Income (loss) from continuing operations less noncontrolling interests	$	(64,070	)	$	50,612	$	(192,940	)	$	162,612
Income from discontinued operations, net of tax		—			—		—			3,497
Net income (loss) attributable to McDermott International, Inc.	$	(64,070	)	$	50,612	$	(192,940	)	$	166,109
Weighted average common shares (basic)		236,257,920			235,817,203		236,132,847			235,568,889
Effect of dilutive securities:
Stock options, restricted stock and restricted stock units(1)		—			2,049,797		—			1,984,574
Adjusted weighted average common shares and assumed exercises of stock options and vesting of stock awards (diluted)		236,257,920			237,867,000		236,132,847			237,553,463
Basic earnings (loss) per share
Income (loss) from continuing operations less noncontrolling interests		(0.27	)		0.21		(0.82	)		0.69
Income from discontinued operations, net of tax		—			—		—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21		(0.82	)		0.70
Diluted earnings (loss) per share:
Income (loss) from continuing operations less noncontrolling interests		(0.27	)		0.21		(0.82	)		0.68
Income from discontinued operations, net of tax		—			—		—			0.01
Net income (loss) attributable to McDermott International, Inc.		(0.27	)		0.21		(0.82	)		0.69

(1) Approximately 3.1 million and 2.9 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive for the three months and nine months ended September 30, 2013. Approximately 1.7 million and 1.8 million shares underlying outstanding stock-based awards were excluded from the computation of diluted earnings per share because they were antidilutive for the three months and nine months ended September 30, 2012, respectively.

XML

PENSION PLANS (Tables)

9 Months Ended

Sep. 30, 2013

Compensation And Retirement Disclosure [Abstract]

Net Periodic Benefit Cost

Net periodic benefit cost for the Domestic Plans and the TCN Plan includes the following components:

	Domestic Plans
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
	(In thousands)
Interest cost	$	5,999		$	6,631		$	17,997		$	19,893
Expected return on plan assets		(9,577	)		(8,952	)		(28,730	)		(26,857	)
Recognized net actuarial loss and other		2,932			2,409			8,798			7,227
Net periodic benefit cost	$	(646	)	$	88		$	(1,935	)	$	263

	TCN Plan
	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
	(Unaudited)
	(In thousands)
Interest cost	$	466		$	460		$	1,400		$	1,382
Expected return on plan assets		(651	)		(610	)		(1,952	)		(1,832	)
Recognized net actuarial loss		507			446			1,522			1,339
Net periodic benefit cost	$	322		$	296		$	970		$	889

XML

ACQUISITION, DISPOSITIONS AND ATLANTIC RESTRUCTURING CHARGES (Tables)

9 Months Ended

Sep. 30, 2013

Discontinued Operations And Disposal Groups [Abstract]

Selected Financial Information Regarding Results of Operations

The following table presents selected financial information regarding the results of operations attributable to our former charter fleet business:

	Nine Months Ended September 30, 2012
	(Unaudited)
	(In thousands)
Revenues	$	8,184
Gain on disposal of discontinued operations		257
Income before provision for income taxes		3,240
Income from discontinued operations, net of tax	$	3,497

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 28, 2013
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Trading Symbol	MDR
Entity Registrant Name	MCDERMOTT INTERNATIONAL INC
Entity Central Index Key	0000708819
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		236,584,459

XML

LONG-TERM DEBT AND NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2013

Debt Disclosure [Abstract]

Comparison of Key Financial Covenants and Current Compliance

A comparison of the key financial covenants and compliance is as follows:

	Required		Actual
Maximum leverage ratio		3.75		0.90
Minimum interest coverage ratio		4.00		20.63

Long-Term Debt Obligations

A summary of our long-term debt obligations are as follows:

	September 30, 2013		December 31, 2012
	(Unaudited)
	(In thousands)
Long-term debt consists of:
North Ocean 102 Construction Financing	$	32,867	$	37,349
North Ocean 105 Construction Financing		61,274		65,359
		94,141		102,708
Less: Amounts due within one year		41,037		14,146
Total long-term debt	$	53,104	$	88,562