10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2019

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 Parkway HOUSTON, TEXAS		77079
(Address of Principal Executive Offices)		(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common stock, par value $1.00 per share	MDR	New York Stock Exchange (NYSE)

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  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).    Yes  ☑    No  ☐

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

Large accelerated filer	☑	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

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

The number of shares of the registrant’s common stock outstanding at July 25, 2019 was 181,729,320.

TABLE OF CONTENTS

McDERMOTT INTERNATIONAL, INC.

INDEX—FORM 10-Q

	PAGE
PART I—FINANCIAL INFORMATION	1
Item 1—Condensed Consolidated Financial Statements	1
Statements of Operations	1
Statements of Comprehensive Income (Loss)	2
Balance Sheets	3
Statements of Cash Flows	4
Statements of Stockholders’ Equity	5
Notes to the Condensed Consolidated Financial Statements	7
Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3—Quantitative and Qualitative Disclosures about Market Risk	73
Item 4—Controls and Procedures	74
PART II—OTHER INFORMATION	75
Item 1—Legal Proceedings	75
Item 1A—Risk Factors	75
Item 6—Exhibits	76
SIGNATURES	77

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

PART I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions, except per share amounts)
Revenues	$	2,137		$	1,735		$	4,348		$	2,343
Costs and Expenses:
Cost of operations		1,949			1,486			3,967			1,962
Project intangibles and inventory-related amortization		10			12			20			12
Total cost of operations		1,959			1,498			3,987			1,974
Research and development expenses		8			5			16			5
Selling, general and administrative expenses		77			75			149			124
Other intangibles amortization		22			10			44			10
Transaction costs		11			37			15			40
Restructuring and integration costs		20			63			89			75
Loss on asset disposals		102			1			103			1
Total expenses		2,199			1,689			4,403			2,229
Income (loss) from investments in unconsolidated affiliates		3			3			12			(1	)
Investment in unconsolidated affiliates-related amortization		(2	)		-			(5	)		-
Operating (loss) income		(61	)		49			(48	)		113
Other expense:
Interest expense, net		(100	)		(72	)		(192	)		(83	)
Other non-operating expense, net		(2	)		(16	)		(1	)		(14	)
Total other expense, net		(102	)		(88	)		(193	)		(97	)
(Loss) income before provision for income taxes		(163	)		(39	)		(241	)		16
Income tax benefit		(49	)		(84	)		(70	)		(63	)
Net (loss) income		(114	)		45			(171	)		79
Less: Net income (loss) attributable to noncontrolling interests		18			(2	)		17			(3	)
Net (loss) income attributable to McDermott	$	(132	)	$	47		$	(188	)	$	82
Dividends on redeemable preferred stock		(10	)		-			(20	)		-
Accretion of redeemable preferred stock		(4	)		-			(8	)		-
Net (loss) income attributable to common stockholders		(146	)		47			(216	)		82
Net (loss) income per share attributable to common stockholders
Basic	$	(0.80	)	$	0.33		$	(1.19	)	$	0.68
Diluted	$	(0.80	)	$	0.33		$	(1.19	)	$	0.68
Shares used in the computation of net (loss) income per share
Basic		182			144			181			120
Diluted		182			144			181			120

See accompanying Notes to these Condensed Consolidated Financial Statements.

1

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)
Net (loss) income	$	(114	)	$	45		$	(171	)	$	79
Other comprehensive (loss) income, net of tax:
Loss on derivatives		(21	)		(12	)		(40	)		(12	)
Foreign currency translation		5			(11	)		(34	)		(12	)
Total comprehensive (loss) income		(130	)		22			(245	)		55
Less: Comprehensive income (loss) attributable to noncontrolling interests		18			(2	)		17			(3	)
Comprehensive (loss) income attributable to McDermott	$	(148	)	$	24		$	(262	)	$	58

See accompanying Notes to these Condensed Consolidated Financial Statements.

2

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

McDERMOTT INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
	June 30, 2019			December 31, 2018
	(In millions, except per share amounts)
Assets	(Unaudited)
Current assets:
Cash and cash equivalents ($252 and $146 related to variable interest entities ("VIEs"))	$	455		$	520
Restricted cash and cash equivalents		327			325
Accounts receivable—trade, net ($45 and $29 related to VIEs)		1,002			932
Accounts receivable—other ($61 and $57 related to VIEs)		235			175
Contracts in progress ($167 and $144 related to VIEs)		932			704
Project-related intangible assets, net		94			137
Inventory		42			101
Other current assets ($31 and $24 related to VIEs)		152			139
Total current assets		3,239			3,033
Property, plant and equipment, net		2,054			2,067
Operating lease right-of-use assets		383			-
Accounts receivable—long-term retainages		68			62
Investments in unconsolidated affiliates		446			452
Goodwill		2,704			2,654
Other intangibles, net		948			1,009
Other non-current assets		156			163
Total assets	$	9,998		$	9,440
Liabilities, Mezzanine Equity and Stockholders' Equity
Current liabilities:
Revolving credit facility	$	379		$	-
Short-term borrowing and current maturities of long-term debt		62			30
Current portion of long-term lease obligations		96			8
Accounts payable ($307 and $277 related to VIEs)		1,206			595
Advance billings on contracts ($389 and $717 related to VIEs)		1,438			1,954
Project-related intangible liabilities, net		38			66
Accrued liabilities ($76 and $136 related to VIEs)		1,467			1,564
Total current liabilities		4,686			4,217
Long-term debt		3,388			3,393
Long-term lease obligations		379			66
Deferred income taxes		46			47
Other non-current liabilities		705			664
Total liabilities		9,204			8,387
Commitments and contingencies
Mezzanine equity:
Redeemable preferred stock		257			230
Stockholders' equity:
Common stock, par value $1.00 per share, authorized 255 shares;
issued 185 and 183 shares, respectively		185			183
Capital in excess of par value		3,549			3,539
Accumulated deficit		(2,935	)		(2,719	)
Accumulated other comprehensive loss		(181	)		(107	)
Treasury stock, at cost: 3 and 3 shares, respectively		(96	)		(96	)
Total McDermott Stockholders' Equity		522			800
Noncontrolling interest		15			23
Total stockholders' equity		537			823
Total liabilities and stockholders' equity	$	9,998		$	9,440

See accompanying Notes to these Condensed Consolidated Financial Statements.

3

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Six Months Ended June 30,
	2019			2018
	(In millions)
Cash flows from operating activities:
Net (loss) income	$	(171	)	$	79
Non-cash items included in net (loss) income:
Loss on disposal of APP		101			-
Depreciation and amortization		137			80
Debt issuance cost amortization		21			17
Stock-based compensation charges		11			28
Deferred taxes		(1	)		(100	)
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable		(164	)		278
Contracts in progress, net of advance billings on contracts		(745	)		(141	)
Accounts payable		545			129
Other current and non-current assets		(71	)		12
Investments in unconsolidated affiliates		-			1
Other current and non-current liabilities		(112	)		52
Total cash (used in) provided by operating activities		(449	)		435
Cash flows from investing activities:
CB&I consideration, net of cash of $498 acquired		-			(2,374	)
Proceeds from asset disposals, net		83			2
Purchases of property, plant and equipment		(33	)		(43	)
Advances related to proportionately consolidated consortiums		(234	)		(45	)
Investments in unconsolidated affiliates		(1	)		(3	)
Other		-			2
Total cash used in investing activities		(185	)		(2,461	)
Cash flows from financing activities:
Revolving credit facility borrowings		1,699			-
Revolving credit facility repayments		(1,320	)		-
Structured equipment financing		32			-
Proceeds from issuance of long-term debt		-			3,560
Repayment of debt and finance lease obligations		(19	)		(515	)
Advances related to equity method joint ventures and proportionately consolidated consortiums		190			(42	)
Debt and letter of credit issuance costs		-			(208	)
Debt extinguishment costs		-			(10	)
Repurchase of common stock		(4	)		(14	)
Distribution to joint venture member		(5	)		-
Total cash provided by financing activities		573			2,771
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(2	)		(15	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(63	)		730
Cash, cash equivalents and restricted cash at beginning of period		845			408
Cash, cash equivalents and restricted cash at end of period	$	782		$	1,138

See accompanying Notes to these Condensed Consolidated Financial Statements.

4

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

McDERMOTT INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
		Common Stock Par Value			Capital in Excess of Par Value			Retained Earnings/ (Accumulated Deficit)			Accumulated Other Comprehensive Loss ("AOCI")			Treasury Stock			Stockholders' Equity			Noncontrolling Interest ("NCI")			Total Equity
	(In millions)
Balance at December 31, 2017		$	98		$	1,858		$	(48	)	$	(51	)	$	(96	)	$	1,761		$	28		$	1,789
Adoption of ASC 606			-			-			20			-			-			20			-			20
Balance at January 1, 2018			98			1,858			(28	)		(51	)		(96	)		1,781			28			1,809
Net income (loss)			-			-			35			-			-			35			(1	)		34
Other comprehensive loss, net of tax			-			-			-			(1	)		-			(1	)		-			(1	)
Common stock issued			1			(1	)		-			-			-			-			-			-
Stock-based compensation charges			-			3			-			-			-			3			-			3
Purchase of treasury shares			-			-			-			-			(7	)		(7	)		-			(7	)
Retirement of common stock			(1	)		(6	)		-			-			7			-			-			-
Balance at March 31, 2018			98			1,854			7			(52	)		(96	)		1,811			27			1,838
Net income			-			-			47			-			-			47			(2	)		45
Other comprehensive loss, net of tax			-			-			-			(23	)		-			(23	)		-			(23	)
CB&I combination			85			1,608			-			-			-			1,693			(5	)		1,688
Stock-based compensation charges			-			25			-			-			-			25			-			25
Purchase of treasury shares			-			-			-			-			(7	)		(7	)		-			(7	)
Retirement of common stock						(7	)		-			-			7			-			-			-
Balance at June 30, 2018		$	183		$	3,480		$	54		$	(75	)	$	(96	)	$	3,546		$	20		$	3,566
Balance at December 31, 2018		$	183		$	3,539		$	(2,719	)	$	(107	)	$	(96	)	$	800		$	23		$	823
Net loss			-			-			(56	)		-			-			(56	)		(1	)		(57	)
Other comprehensive loss, net of tax			-			-			-			(58	)		-			(58	)		-			(58	)
Common stock issued			2			(2	)		-			-			-			-			-			-
Stock-based compensation charges			-			6			-			-			-			6			-			6
Accretion and dividends on redeemable preferred stock			-			-			(14	)		-			-			(14	)		-			(14	)
Conversion of noncontrolling interest			-			2			-			-			-			2			(26	)		(24	)
Purchase of treasury shares			-			-			-			-			(4	)		(4	)		-			(4	)
Retirement of common stock			(1	)		(3	)								4			-			-			-
Other			-			3			-			-			-			3			-			3
Balance at March 31, 2019			184			3,545			(2,789	)		(165	)		(96	)		679			(4	)		675
Net loss (income)			-			-			(132	)		-			-			(132	)	$	18			(114	)
Other comprehensive loss, net of tax			-			-			-			(16	)		-			(16	)		-			(16	)
Common stock issued			1			(1	)		-			-			-			-			-			-
Stock-based compensation charges			-			5			-			-			-			5			-			5
Accretion and dividends on redeemable preferred stock			-			-			(14	)		-			-			(14	)		-			(14	)
Other			-			-			-			-			-			-			1			1
Balance at June 30, 2019		$	185		$	3,549		$	(2,935	)	$	(181	)	$	(96	)	$	522		$	15		$	537

See accompanying Notes to these Condensed Consolidated Financial Statements.

5

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

TABLE OF CONTENTS

	PAGE
Note 1—Nature of Operations and Organization	7
Note 2—Basis of Presentation and Significant Accounting Policies	7
Note 3—Business Combination	10
Note 4—Disposition of Alloy Piping Products, LLC	13
Note 5—Revenue Recognition	14
Note 6—Project Changes in Estimates	16
Note 7— Cash, Cash Equivalents and Restricted Cash	17
Note 8—Accounts Receivable	17
Note 9—Goodwill and Other Intangible Assets	18
Note 10—Joint Venture and Consortium Arrangements	19
Note 11—Restructuring and Integration Costs and Transaction Costs	22
Note 12—Debt	23
Note 13—Lease Obligations	28
Note 14—Pension and Postretirement Benefits	29
Note 15—Accrued Liabilities	30
Note 16—Fair Value Measurements	31
Note 17—Derivative Financial Instruments	32
Note 18—Income Taxes	33
Note 19—Stockholders’ Equity and Equity-Based Incentive Plans	33
Note 20—Redeemable Preferred Stock	35
Note 21—Earnings per Share	37
Note 22—Commitments and Contingencies	37
Note 23—Segment Reporting	41

6

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1—NATURE OF OPERATIONS AND ORGANIZATION

Nature of Operations

McDermott International, Inc. (“McDermott,” “we” or “us”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a fully integrated provider of engineering, procurement, construction and installation (“EPCI”) and technology solutions to the energy industry. We design and build end-to-end infrastructure and technology solutions to transport and transform oil and gas into a variety of products. Our proprietary technologies, integrated expertise and comprehensive solutions are utilized for offshore, subsea, power, liquefied natural gas (“LNG”) and downstream energy projects around the world. Our customers include national, major integrated and other oil and gas companies as well as producers of petrochemicals and electric power, and we operate in most major energy producing regions throughout the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost-reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods.

Organization

Our business is organized into five operating groups, which represent our reportable segments consisting of: North, Central and South America (“NCSA”); Europe, Africa, Russia and Caspian (“EARC”); the Middle East and North Africa (“MENA”); Asia Pacific (“APAC”); and Technology. See Note 23, Segment Reporting, for further discussion. In the second quarter of 2019, we sold Alloy Piping Products LLC (“APP”), the distribution and manufacturing arm of our pipe fabrication business, previously included in our NCSA segment. See Note 4, Disposition of Alloy Piping Products, LLC, for further discussion.

NOTE 2—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (the “Financial Statements”) are unaudited and have been prepared from our books and records in accordance with Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements and are not necessarily indicative of results of operations for a full year. Therefore, they should be read in conjunction with the Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”).

The Financial Statements reflect all wholly owned subsidiaries and those entities we are required to consolidate. See the “Joint Venture and Consortium Arrangements” section of “Note 2—Basis of Presentation and Significant Accounting Policies” in the 2018 Form 10-K for further discussion of our consolidation policy for those entities that are not wholly owned. In the opinion of our management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. Intercompany balances and transactions are eliminated in consolidation. Values presented within tables (excluding per share data) are in millions and may not sum due to rounding.

On May 10, 2018, we completed our combination with Chicago Bridge & Iron Co. N.V. (“CB&I”) through a series of transactions (the “Combination”). See Note 3, Business Combination, for further discussion.

Reclassifications

Loss on asset disposals—In the second quarter of 2019, we sold APP, as discussed in Note 4, Disposition of Alloy Piping Products, LLC. Loss from the disposition of APP is included in Loss on asset disposals in our Condensed Consolidated Statements of Operations (our “Statement of Operations”). To conform to current period presentation, $1 million of loss on asset disposals presented in Other operating expense during the three- and six-month periods ended June 30, 2018 has been reclassified to Loss on asset disposals.

Bidding and Proposal Costs—We began classifying bid and proposal costs in Cost of operations in our Statement of Operations in the second quarter of 2018, as a result of our realignment of commercial personnel within our operating groups in conjunction with the Combination. For periods reported prior to the second quarter of 2018, bid and proposal costs were included in Selling, general and administrative expenses (“SG&A”). For the six months ended June 30, 2019 and 2018, our Cost of operations included $46 million and $17 million of bid and proposal costs, respectively. For the six months ended June 30, 2018, our SG&A expense included bid and proposal expenses of $10 million incurred in the first quarter of 2018.    

7

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Use of Estimates and Judgments

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We believe the most significant estimates and judgments are associated with:

• revenue recognition for our contracts, including estimating costs to complete each contract and the recognition of incentive fees and unapproved change orders and claims;

• determination of fair value with respect to acquired assets and liabilities;

• fair value and recoverability assessments that must be periodically performed with respect to long-lived tangible assets, goodwill and other intangible assets;

• valuation of deferred tax assets and financial instruments;

• the determination of liabilities related to loss contingencies, self-insurance programs and income taxes;

• the determination of pension-related obligations; and

• consolidation determinations with respect to our joint venture and consortium arrangements.

If the underlying estimates and assumptions upon which the Financial Statements are based change in the future, actual amounts may differ from those included in the Financial Statements.

Recently Adopted Accounting Guidance

Leases—In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This ASU requires entities that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. We adopted this ASU effective January 1, 2019 using the modified retrospective application, applying the new standard to leases in place as of the adoption date. Prior periods have not been adjusted.

We elected to apply certain practical expedients allowed upon the adoption of this ASU, which, among other things, allowed us to: not reassess whether any expired or existing contracts contain leases; carry forward the historical lease classification; and not have to reassess any initial direct cost of any expired or existing leases. Adoption of the new standard resulted in the recording of Operating lease right-of-use assets, Current portion of long-term lease obligations and Long-term lease obligations of approximately $424 million, $101 million and $342 million, respectively, as of January 1, 2019. The adoption of this ASU did not have a material impact on our Statement of Operations, Condensed Consolidated Statement of Cash Flows (“Statement of Cash Flows”) or the determination of compliance with financial covenants under our current debt agreements. See Note 13, Lease Obligations, for further discussion.

Income Taxes—In January 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (Topic 220). This ASU gives entities the option to reclassify to retained earnings the tax effects resulting from the U.S. Tax Cuts and Jobs Act related to items in accumulated other comprehensive income (loss) (“AOCI”) that the FASB refers to as having been stranded in AOCI. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements and related disclosures.

Derivatives—In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815). This ASU includes financial reporting improvements related to hedging relationships to better report the economic results of an entity’s risk management activities in its financial statements. Additionally, this ASU makes certain improvements to simplify the application of the hedge accounting guidance. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements. See Note 17, Derivative Financial Instruments, for related disclosures.

In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging: Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of benchmark interest rates permitted in the application of hedge accounting. This ASU permits the use of an OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements and related disclosures. See Note 17, Derivative Financial Instruments.

8

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Significant Accounting Policies

Our significant accounting policies are detailed in “Note 2—Basis of Presentation and Significant Accounting Policies” in the 2018 Form 10-K. The following is an update to those significant accounting policies due to recently adopted accounting guidance.

Leases—We classify an arrangement as a lease at inception if we have the right to control the use of an identified asset we do not legally own for a period of time in exchange for consideration. In general, leases with an initial term of 12 months or less are not recorded on our Balance Sheet unless it is reasonably certain we will renew the lease. All leases with an initial term of more than 12 months, whether classified as operating or finance, are recorded to our Balance Sheet based on the present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires a discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate; therefore, we use an incremental borrowing rate based on information available at the commencement date.    

Our lease terms may include options to extend or terminate the lease. Lease expense for operating leases and the amortization of the right-of-use asset for finance leases are recognized on a straight-line basis over the lease terms, in each case taking into account such option when it is reasonably certain we will exercise that option.

We have lease agreements with lease and non-lease components, which are generally accounted for separately for all leases other than leases at our construction project sites. Non-lease components included in assets and obligations under operating leases are not material to our financial statements.

For our joint ventures, consortiums and other collaborative arrangements (referred to as “joint ventures” and “consortiums”), the right-of-use asset and lease obligations are generally recognized by the party that enters into the lease agreement, which could be the joint venture directly, one of our joint venture members or us. We have recognized our proportionate share of leases entered into by our joint ventures, where the joint venture has the right to control the use of an identified asset.

Derivative Financial Instruments—We utilize derivative financial instruments in certain circumstances to mitigate the effects of changes in foreign currency exchange rates and interest rates, as described below.

• Foreign Currency Rate Derivatives—We do not engage in currency speculation. However, we utilize foreign currency exchange rate derivatives on an ongoing basis to hedge against certain foreign currency related operating exposures. We generally apply hedge accounting treatment for contracts used to hedge operating exposures and designate them as cash flow hedges. Therefore, gains and losses are included in AOCI until the associated underlying operating exposure impacts our earnings, at which time the impact of the hedge is recorded within the income statement line item associated with the underlying exposure. Changes in the fair value of instruments that we do not designate as cash flow hedges are recognized in the income statement line item associated with the underlying exposure.

• Interest Rate Derivatives—Our interest rate derivatives are limited to a swap arrangement entered into on May 8, 2018, to hedge against interest rate variability associated with $1.94 billion of the $2.26 billion Term Facility described in Note 12, Debt. The swap arrangement has been designated as a cash flow hedge, as its critical terms matched those of the Term Facility at inception and through June 30, 2019. Accordingly, changes in the fair value of the swap arrangement are included in AOCI until the associated underlying exposure impacts our interest expense.

See Note 16, Fair Value Measurements, and Note 17, Derivative Financial Instruments, for further discussion.

Accounting Guidance Issued but Not Adopted as of June 30, 2019

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. A valuation account, allowance for credit losses, will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This ASU is effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

Defined Benefit Pension Plans—In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20). This ASU eliminates, modifies and adds disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. We are evaluating the impact of the new guidance on our future disclosures.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Consolidation—In October 2018, the FASB issued ASU No. 2018-17, Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities (“VIE”). This ASU amends the guidance for determining whether a decision-making fee is a variable interest, which requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. The ASU is effective for annual and interim periods beginning after December 15, 2019. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

Collaborative Arrangements—In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In addition, unit-of-account guidance in Topic 808 was aligned with the guidance in Topic 606 (that is, a distinct good or service) when assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. This ASU is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

NOTE 3—BUSINESS COMBINATION

General―On December 18, 2017, we entered into an agreement to combine our business with CB&I, an established downstream provider of industry-leading petrochemical, refining, power, gasification and gas processing technologies and solutions. On May 10, 2018 (the “Combination Date”) we completed the Combination.

Transaction Overview—On the Combination Date, we acquired the equity of certain U.S. and non-U.S. CB&I subsidiaries that owned CB&I’s technology business, as well as certain intellectual property rights, for $2.87 billion in cash consideration that was funded using debt financing, as discussed further in Note 12, Debt, and existing cash. Also, on the Combination Date, CB&I shareholders received 0.82407 shares of McDermott common stock for each share of CB&I common stock tendered in the exchange offer. Each remaining share of CB&I common stock held by CB&I shareholders not acquired by McDermott in the exchange offer was effectively converted into the right to receive the same 0.82407 shares of McDermott common stock that was paid in the exchange offer, together with cash in lieu of any fractional shares of McDermott common stock, less any applicable withholding taxes. Stock-settled equity-based awards relating to shares of CB&I’s common stock were either canceled and converted into the right to receive cash or were converted into comparable McDermott awards on generally the same terms and conditions as prior to the Combination Date. We issued 84.5 million shares of McDermott common stock to the former CB&I shareholders and converted CB&I stock-settled equity awards into McDermott stock-settled equity-based awards to be settled in approximately 2.2 million shares of McDermott common stock.

Transaction Accounting—The Combination is accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. McDermott is considered the acquirer for accounting purposes based on the following facts at the Combination Date: (1) McDermott’s stockholders owned approximately 53 percent of the combined business on a fully diluted basis; (2) a group of McDermott’s directors, including the Chairman of the Board, constituted a majority of the Board of Directors; and (3) McDermott’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer continue in those roles. The series of transactions resulting in McDermott’s acquisition of CB&I’s entire business is being accounted for as a single accounting transaction, as such transactions were entered into at the same time in contemplation of one another and were collectively designed to achieve an overall commercial effect.

Purchase Consideration―We completed the Combination for a gross purchase price of approximately $4.6 billion ($4.1 billion net of cash acquired), detailed as follows (in millions, except per share amounts):

		(In millions, except per share amounts)
CB&I shares for Combination consideration		103
Conversion Ratio: 1 CB&I share = 0.82407 McDermott shares		85
McDermott stock price on May 10, 2018		19.92
Equity Combination consideration transferred	$	1,684
Fair value of converted awards earned prior to the Combination		9
Total equity Combination consideration transferred		1,693
Cash consideration transferred		2,872
Total Combination consideration transferred		4,565
Less: Cash acquired		(498)
Total Combination consideration transferred, net of cash acquired	$	4,067

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Purchase Price Allocation— The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their estimated fair values at the Combination Date, which were based, in part, upon external appraisal and valuation of certain assets, including specifically identified intangible assets and property and equipment. The excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired, totaling approximately $5 billion, was recorded as goodwill.

Our final purchase price allocation, completed in the second quarter of 2019, resulted in adjustments to certain assets and liabilities of approximately $107 million, since our previous estimates as of March 31, 2019, and primarily related to fair value adjustments to accounts receivable and accounts payable associated with acquired contracts.

The following summarizes our final purchase price allocation of the fair values of the assets acquired and liabilities assumed at the Combination Date (in millions):

	May 10, 2018
Net tangible assets:
Cash	$	498
Accounts receivable		791
Inventory		111
Contracts in progress		272
Assets held for sale (1)		70
Other current assets		272
Investments in unconsolidated affiliates (2)		426
Property, plant and equipment		396
Other non-current assets		127
Accounts payable		(499	)
Advance billings on contracts (3)		(2,410	)
Deferred tax liabilities		(16	)
Other current liabilities		(1,237	)
Other non-current liabilities		(453	)
Noncontrolling interest		14
Total net tangible liabilities		(1,638	)
Project-related intangible assets/liabilities, net (4)		150
Other intangible assets (5)		1,063
Net identifiable liabilities		(425	)
Goodwill (6)		4,990
Total Combination consideration transferred		4,565
Less: Cash acquired		(498	)
Total Combination consideration transferred, net of cash acquired	$	4,067

⁽¹⁾ Assets held for sale included CB&I’s former administrative headquarters within Corporate and various fabrication facilities within NCSA. During the third quarter of 2018, we completed the sale of CB&I’s former administrative headquarters for proceeds of $52 million.

⁽²⁾ Investments in unconsolidated affiliates includes a fair value adjustment of $215 million associated with the Combination. Approximately $146 million of the fair value adjustment is attributable to the basis difference between McDermott’s investment and the underlying equity in identifiable assets of unconsolidated affiliates and will be amortized to Investment in unconsolidated affiliates-related amortization over a range of two to 30 years based on the life of assets to which the basis difference is attributed.

⁽³⁾ Advance billings on contracts includes accrued provisions for estimated losses on projects of $374 million, primarily associated with the Cameron LNG and Freeport LNG Trains 1 and 2 projects, the now-substantially completed gas power project for a unit of Calpine Corporation (“Calpine”) and the now-completed gas power project for Indianapolis Power & Light Company.

⁽⁴⁾ Project-related intangible assets/liabilities, net includes intangible asset and liabilities of $259 million and $109 million, respectively. The balances represent the fair value of acquired remaining performance obligations (“RPOs”) and normalized profit margin fair value associated with acquired long-term contracts that were deemed to be lower than fair value (excluding amounts recorded in Advance billings on contracts and Contracts in progress) as of the Combination Date. The project-related intangible assets and liabilities will be amortized as the applicable projects progress over a range of two to six years within Project-related intangibles amortization in our Statements of Operations.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

⁽⁵⁾ Other intangible assets are reflected in the table below and recorded at estimated fair value, as determined by our management, based on available information, which includes valuations prepared by external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

	May 10, 2018
	Fair value		Useful Life Range	Weighted Average Useful Life
	(In millions)
Process technologies	$	511	10-30		27
Trade names		400	10-20		12
Customer relationships		126	4-11		10
Trademarks		26	10		10
Total	$	1,063

⁽⁶⁾ Goodwill resulted from the acquired established workforce, which does not qualify for separate recognition, as well as expected future cost savings and revenue synergies associated with the combined operations. Of the approximately $5 billion of goodwill recorded in conjunction with the Combination, approximately $2.7 billion, $461 million, $50 million, $52 million and $1.7 billion, was allocated to our NCSA, EARC, MENA, APAC and Technology reporting segments, respectively. Approximately $1.7 billion of the opening goodwill balance is deductible for tax purposes.

Impact on RPOs—CB&I RPOs totaled approximately $8.3 billion at the Combination Date, after considering conforming accounting policies and project adjustments for acquired in-process projects.

Supplemental Pro Forma Information (Unaudited)—The following unaudited pro forma financial information reflects the Combination and the related events as if they occurred on January 1, 2018 and gives effect to pro forma events that are directly attributable to the Combination, factually supportable, and expected to have a continuing impact on our combined results, following the Combination. The pro forma financial information includes adjustments to: (1) include additional intangibles amortization, investment in unconsolidated affiliates-related amortization, depreciation of property, plant and equipment and net interest expense associated with the Combination and (2) exclude restructuring, integration and transaction costs that were included in McDermott and CB&I’s historical results and are expected to be non-recurring. This pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the date indicated. Further, the pro forma financial information does not purport to project the future operating results of the combined business operations following the Combination.

	Three Months Ended		Six Months Ended
	June 30, 2018 (1)
	(In millions, except per share amounts)
Pro forma revenue	$	2,492	$	4,845
Pro forma net income attributable to common stockholders		48		81
Pro forma net income per share attributable to common stockholders
Basic		0.27		0.45
Diluted		0.26		0.43
Shares used in the computation of net income per share (2)
Basic	181		181
Diluted	188		188

⁽¹⁾ Adjustments, net of tax, included in the pro forma net income above that were of a non-recurring nature totaled $94 million and $109 million for the three and six months ended June 30, 2018. The adjustments reflect the elimination of (1) restructuring and integration costs ($54 million and $62 million), respectively; and (2) transaction costs ($29 million and $36 million) and debt extinguishment costs ($11 million and $11 million) for the three and six months ended June 30, 2018. These pro forma results exclude the effect of adjustments to the opening balance sheet associated with fair value purchase accounting estimates.

12

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

⁽²⁾ Pro forma net income per share was calculated using weighted average basic shares outstanding during the three and six months ended June 30, 2019. Due to the net loss for the three and six months ended June 30, 2019, the effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share. For the presentation of the pro forma net income for the three and six months ended June 30, 2018, the amount of diluted shares includes the impact of restricted stock and warrants but does not include the impact of the redeemable preferred stock, as those shares were antidilutive.

NOTE 4—DISPOSITION OF ALLOY PIPING PRODUCTS, LLC

We performed a review of our business portfolio, which included businesses acquired in the Combination. Our review sought to determine if any portions of our business are non-core for purposes of our vertically integrated offering model. As a result of our review, we identified our industrial storage tank and pipe fabrication businesses as non-core for purposes of our vertically integrated offering model. On June 24, 2019, we entered into an agreement to sell APP, the distribution and manufacturing arm of our pipe fabrication business, previously included in our NCSA segment. We completed the sale of APP on June 27, 2019.

Loss on the APP sale is included in Loss on asset disposals in our Statement of Operations and is summarized as follows:

	(In millions)
Assets
Inventory	$	69
Property and equipment		25
Goodwill		90
Other assets		11
Assets sold	$	195
Liabilities
Account payable	$	8
Other liabilities		3
Liabilities sold	$	11
Net assets sold	$	184
Sale proceeds (net of transaction costs of $2)		83
Loss on net assets sold	$	101

Results of APP’s operations during the three and six-month periods ended June 30, 2019 and 2018 were not material to McDermott, as a whole.

We are continuing to pursue the sale of the remaining portion of the pipe fabrication business, subject to approval by our Board of Directors.

13

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 5—REVENUE RECOGNITION

RPOs

Our RPOs by segment were as follows:

	June 30, 2019				December 31, 2018
	(Dollars in millions)
NCSA	$	8,123	39	%	$	5,649	52	%
EARC		4,032	20	%		1,378	12	%
MENA		6,538	32	%		1,834	17	%
APAC		1,289	6	%		1,420	13	%
Technology		565	3	%		632	6	%
Total	$	20,547	100	%	$	10,913	100	%

Of the June 30, 2019 RPOs, we expect to recognize revenues as follows:

	2019		2020		Thereafter
	(In millions)
Total RPOs	$	4,768	$	7,372	$	8,407

Revenue Disaggregation

Our revenue by product offering, contract types and revenue recognition methodology was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019 (2)		2018 (2)		2019 (2)		2018 (2)
Revenue by product offering:
Offshore and subsea	$	661	$	653	$	1,266	$	1,261
LNG		411		382		832		382
Downstream (1)		740		496		1,602		496
Power		325		204		648		204
	$	2,137	$	1,735	$	4,348	$	2,343
Revenue by contract type:
Fixed price	$	1,864	$	1,313	$	3,590	$	1,896
Reimbursable		106		269		409		269
Hybrid		106		124		216		124
Unit-basis and other		61		29		133		54
	$	2,137	$	1,735	$	4,348	$	2,343
Revenue by recognition methodology:
Over time	$	2,117	$	1,707	$	4,278	$	2,315
At a point in time		20		28		70		28
	$	2,137	$	1,735	$	4,348	$	2,343

⁽¹⁾ Includes the results of our Technology operating group.

⁽²⁾ Intercompany amounts have been eliminated in consolidation.

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NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Other

For the three and six months ended June 30, 2019, we recognized approximately $74 million and $96 million of revenues resulting from changes in transaction prices associated with performance obligations satisfied in prior periods, primarily in our NCSA segment. Revenues reported for the 2019 periods include $72 million settlement of claims on a substantially complete project.

For the three and six months ended June 30, 2018, we recognized approximately $13 million and $79 million of revenues due to changes in transaction price associated with performance obligations satisfied in prior periods, primarily in our APAC and MENA segments. The changes in transaction prices primarily related to reimbursement of costs incurred in prior periods.

Revenues recognized during the three and six months ended June 30, 2019, with respect to amounts included in our Advance billings on contracts balance as of December 31, 2018, were approximately $579 million and $1.3 billion.

Unapproved Change Orders, Claims and Incentives

Unapproved Change Orders and Claims—As of June 30, 2019, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $388 million, of which approximately $101 million was included in our RPO balance. As of December 31, 2018, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $428 million, of which approximately $130 million was included in our RPO balance.

Incentives—As of June 30, 2019, we had incentives included in transaction prices for our projects aggregating to approximately $126 million, primarily associated with our Cameron LNG project discussed below, of which approximately $25 million was included in our RPO balance. As of December 31, 2018, we did not have any material incentives included in transaction prices for our projects.

The amounts recorded in contract prices and recognized as revenues reflect our best estimates of recovery; however, the ultimate resolution and amounts received could differ from these estimates and could have a material adverse effect on our results of operations, financial position and cash flow.

Loss Projects

Our accrual of provisions for estimated losses on active uncompleted contracts as of June 30, 2019 was $132 million and primarily related to the Cameron LNG project and the Freeport LNG Trains 1 & 2 projects. Our accrual of provisions for estimated losses on active uncompleted contracts as of December 31, 2018 was $266 million and primarily related to the Cameron LNG, Freeport LNG Trains 1 & 2, Calpine and Abkatun-A2 projects. Our Freeport LNG Train 3 project is not anticipated to be in a loss position.

Our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico for Pemex (“Line 1 and Line 10”) was also determined to be in substantial loss position as of June 30, 2019, as discussed further below.

For purposes of the discussion below, when we refer to a percentage of completion on a cumulative basis, we are referring to the cumulative percentage of completion, which includes progress made prior to the Combination Date. In accordance with U.S. GAAP, as of the Combination Date, we reset the progress to completion for all of CB&I’s projects then in progress to 0% for accounting purposes based on the remaining costs to be incurred as of that date.

Summary information for our significant ongoing loss projects as of June 30, 2019 is as follows:

Cameron LNG―At June 30, 2019, our U.S. LNG export facility project in Hackberry, Louisiana for Cameron LNG (being performed by our NCSA operating group) was approximately 78% complete on a post-Combination basis (approximately 93% on a cumulative basis) and had an accrued provision for estimated losses of approximately $58 million. In the second quarter of 2019, NCSA project operating margin was positively impacted by recognition of approximately $110 million of incentives related to the projected achievement of progress milestones.

15

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Freeport LNG―At June 30, 2019, Trains 1 & 2 of our U.S. LNG export facility project in Freeport, Texas for Freeport LNG (being performed by our NCSA operating group) were approximately 87% complete on a post-Combination basis (approximately 96% on a cumulative basis) and had an accrued provision for estimated losses of approximately $19 million. During the three and six months ended June 30, 2019, the project was negatively impacted by $27 million and $54 million, respectively, due to changes in cost estimates resulting from increases in construction and subcontractor costs. These cost estimate increases were partially offset by the recording of approximately $11 million of incentive revenues in the first quarter of 2019.

During the three months ended June 30, 2019, Freeport LNG Train 3 was negatively impacted by $11 million of changes in cost estimates at completion. During the six months ended June 30, 2019, Freeport LNG Train 3 was positively impacted by $5 million of changes in estimates, primarily due to increased productivity and savings in indirect costs in the first quarter. During the six months ended June 30, 2019, the Freeport LNG project taken as a whole had an overall negative $38 million impact on operating margin at completion.

Line 1 and Line 10― As of June 30, 2019, our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico (being performed by our NCSA operating group) was approximately 85% complete and had an accrued provision for estimated losses of approximately $6 million. During the three and six months ended June 30, 2019, the project was negatively impacted by $10 million and $28 million, respectively, of changes in cost estimates associated with unexpected schedule extensions, resulting in additional vessel and labor costs. The project is expected to be completed in the third quarter of 2019.

Summary information for our significant loss projects previously reported in the 2018 Form 10-K that are substantially complete as of June 30, 2019 is as follows:

Calpine Power Project―At June 30, 2019, our U.S. gas turbine power project for Calpine (being performed by our NCSA operating group) was approximately 99% complete on a post-Combination basis (approximately 99.7% on a pre-Combination basis), and the remaining accrued provision for estimated losses was not significant.

Abkatun-A2 Project―At June 30, 2019, our Abkatun-A2 platform project in Mexico for Pemex (being performed by our NCSA operating group) was approximately 99% complete, and the remaining accrued provision for estimated losses was not significant.

NOTE 6—PROJECT CHANGES IN ESTIMATES

Our RPOs for each of our operating groups generally consist of several hundred contracts, and our results may be impacted by changes in estimated margins. The following is a discussion of our most significant changes in cost estimates that impacted segment operating income for the three and six months ended June 30, 2019 and 2018. For discussion of significant changes in estimates resulting from changes in transaction prices, see Note 5, Revenue Recognition.

Three and six months ended June 30, 2019

Segment operating income for the three and six months ended June 30, 2019 was impacted by net unfavorable changes in estimates totaling approximately $135 million and $116 million, respectfully, primarily in our NCSA and MENA segments. Changes in estimates in our EARC and APAC segments were not material.

NCSA—Our segment results for the three and six months ended June 30, 2019 were negatively impacted by net unfavorable changes in cost estimates, recognized during the period, aggregating approximately $131 million and $155 million, respectively. The net unfavorable changes were due to cost increases on:

• the Freeport LNG project taken as a whole - $38 million and $49 million for the three- and six-month periods ended June 30, 2019, respectively;

• Calpine - $11 million for both the three- and six-month periods ended June 30, 2019, respectively;

• Abkatun-A2, Line 1 and Line 10 and Xanab projects for Pemex - $33 million and $47 million for the three- and six-month periods ended June 30, 2019, respectively;

• Downstream petrochemical projects - $11 million for the three months period ended June 30, 2019 and $7 million net favorable changes in the six months ended June 30, 2019;

• Power projects - $39 million and $48 million for the three- and six-month periods ended June 30, 2019, respectively; and

16

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

• various other projects.

See Note 5, Revenue Recognition, for further discussion of our Freeport LNG Trains 1 & 2 and Train 3 and Pemex Line 1 and Line 10 projects.

MENA—Our segment results for the three and six months ended June 30, 2019 were positively impacted by net favorable changes in estimates aggregating approximately $2 million and $35 million. The net favorable changes were primarily due to reductions in costs on various projects in the Middle East.

Three and six months ended June 30, 2018

Segment operating income for the three and six months ended June 30, 2018 was positively impacted by net favorable changes in estimates totaling approximately $84 million and $121 million, respectively, primarily in our MENA (approximately $39 million and $69 million, respectively) and APAC (approximately $46 million and $55 million, respectively) segments.

NOTE 7—CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Balance Sheets that sum to the totals of such amounts shown in our Statements of Cash Flows as of June 30, 2019 and December 31, 2018:  

	June 30, 2019		December 31, 2018
	(In millions)
Cash and cash equivalents	$	455	$	520
Restricted cash and cash equivalents (1)		327		325
Total cash, cash equivalents and restricted cash shown in the Statements of Cash Flows	$	782	$	845

⁽¹⁾ Our restricted cash balances primarily serve as cash collateral deposits for our letter of credit facilities. See Note 12, Debt, for further discussion.

NOTE 8—ACCOUNTS RECEIVABLE

Accounts Receivable—Trade, Net―Our trade receivable balances at June 30, 2019 and December 31, 2018 included the following:

	June 30, 2019			December 31, 2018
	(In millions)
Contract receivables (1)	$	864		$	794
Retainages (2)		155			155
Less allowances		(17	)		(17	)
Accounts receivable—trade, net	$	1,002		$	932

⁽¹⁾ Unbilled receivables for our performance obligations recognized at a point in time are recorded within Accounts receivable-trade, net and were approximately $46 million and $31 million as of June 30, 2019 and December 31, 2018, respectively.

⁽²⁾ Retainages classified within Accounts receivable-trade, net are amounts anticipated to be collected within one year and as to which we have an unconditional right to collect from the customer, subject only to the passage of time. Retainages anticipated to be collected beyond one year are classified as Accounts receivable long-term retainages on our Balance Sheet.

17

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Our goodwill balance is attributable to the excess of the purchase price over the fair value of net assets acquired in connection with the Combination. The changes in the carrying amount of goodwill during the six months ended June 30, 2019 are as follows:

	(In millions)
Balance as of December 31, 2018	$	2,654
Adjustments to finalize purchase accounting estimates (1)		168
Allocated to APP for disposal		(90	)
Currency translation adjustments		(28	)
Balance as of June 30, 2019 (2)	$	2,704

⁽¹⁾ Includes adjustments of $61 million and $107 million identified in the first and second quarters of 2019, respectively. See Note 3, Business Combination for further discussion.

⁽²⁾ At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.  

During the first quarter of 2019 no indicators of goodwill impairment were identified.

In the second quarter of 2019, goodwill was allocated to the APP business. Following its disposal, a goodwill impairment test was performed on the retained portion of goodwill within the NCSA reporting unit. We utilized an income approach (discounted cash flow method), as we believe this is the most direct approach to incorporate the specific economic attributes and risk profiles of our reporting units into our valuation model. We generally do not utilize a market approach, given the lack of relevant information generated by market transactions involving comparable businesses. However, to the extent market indicators of fair value become available, we consider such market indicators as well as market participant assumptions in our discounted cash flow analysis and determination of fair value. The discounted cash flow methodology is based, to a large extent, on assumptions about future events, which may or may not occur as anticipated, and such deviations could have a significant impact on the calculated estimated fair values of our reporting units. These assumptions included the use of significant unobservable inputs, representative of a Level 3 fair value measurement, and included, but were not limited to, estimates of discount rates, future growth rates and terminal values for each reporting unit.

The discounted cash flow analysis for the NCSA reporting unit included forecasted cash flows over a five-year forecast period (2019 through 2023), with our 2019 management budget used as the basis for our projections. These forecasted cash flows took into consideration historical and recent results, the reporting unit’s backlog and near-term prospects and management’s outlook for the future. A terminal value was also calculated using a terminal value growth assumption to derive the annual cash flows after the discrete forecast period. A reporting unit specific discount rate was applied to the forecasted cash flows and terminal cash flows to determine the discounted future cash flows, or fair value, of each reporting unit. Our assessment took into consideration the incremental changes in project estimates discussed above and reflected the increased market risk surrounding the award and execution of future projects and adjusted our cost of capital assumptions to be in-line with recent market indicators for our company and industry. These increases in cost of capital and risk premium assumptions resulted in a significant increase in our discount rates utilized for purposes of determining our discounted cash flows and reduced the estimated fair values of our reporting units.

No impairment of the retained portion of goodwill within the NCSA reporting unit was identified as a result of the assessment.

18

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Project-Related Intangibles

Our project-related intangibles at June 30, 2019 and December 31, 2018, including the June 30, 2019 weighted-average useful lives, were as follows:

			June 30, 2019									December 31, 2018
	Weighted Average Useful Life		Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
	(In years)		(In millions)
Project-related intangible assets		4	$	259		$	(165	)	$	94		$	259		$	(122	)	$	137
Project-related intangible liabilities		2		(109	)		71			(38	)		(109	)		43			(66	)
Total (1)			$	150		$	(94	)	$	56		$	150		$	(79	)	$	71

⁽¹⁾ The decrease in project-related intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $16 million and the impact of foreign currency translation.

Other Intangible Assets

Our other intangible assets at June 30, 2019 and December 31, 2018, including the June 30, 2019 weighted-average useful lives, were as follows:

			June 30, 2019							December 31, 2018
	Weighted Average Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In years)		(In millions)
Process technologies		27	$	507	$	(26	)	$	481	$	514	$	(14	)	$	500
Trade names		12		396		(41	)		355		401		(23	)		378
Customer relationships		10		124		(35	)		89		129		(23	)		106
Trademarks		10		26		(3	)		23		27		(2	)		25
Total (1)			$	1,053	$	(105	)	$	948	$	1,071	$	(62	)	$	1,009

⁽¹⁾ The decrease in other intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $43 million, intangible assets allocated to the disposal of APP and the impact of foreign currency translation.

NOTE 10—JOINT VENTURE AND CONSORTIUM ARRANGEMENTS

We account for our unconsolidated joint ventures or consortiums using either proportionate consolidation, when we meet the applicable accounting criteria to do so, or the equity method. Further, we consolidate any joint venture or consortium that is determined to be a VIE for which we are the primary beneficiary or which we otherwise effectively control.

Proportionately Consolidated Consortiums

The following is a summary description of our significant consortiums that have been deemed to be VIEs where we are not the primary beneficiary and are accounted for using proportionate consolidation:

• McDermott/Zachry Industrial Inc. (“Zachry”)—We have a 50%/50% consortium with Zachry to perform engineering, procurement and construction (“EPC”) work for two LNG liquefaction trains in Freeport, Texas. In addition, we have subcontract and risk sharing arrangements with a unit of Chiyoda Corporation (“Chiyoda”) to support our responsibilities to the venture. The costs of these arrangements are recorded in Cost of operations.

• McDermott/Zachry/Chiyoda—We have a consortium with Zachry and Chiyoda (MDR—33.3% / Zachry—33.3% / Chiyoda—33.3%) to perform EPC work for an additional LNG liquefaction train at the project site in Freeport, Texas, described above.

19

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

• McDermott/Chiyoda—We have a 50%/50% consortium with Chiyoda to perform EPC work for three LNG liquefaction trains in Hackberry, Louisiana.

• McDermott/CTCI—We have a 42.5%/57.5% consortium with a unit of CTCI Corporation (“CTCI”) to perform EPC work for a mono-ethylene glycol facility in Gregory, Texas.

• CCS JV s.c.a.r.l.—We have a joint venture with Saipem and Chiyoda (MDR—24.983% / Saipem— 74.949% / Chiyoda— 0.068%) for the turnkey construction of two liquefaction trains and the relevant supporting structures to be implemented in the Republic of Mozambique.

The following table presents summarized balance sheet information for our share of our proportionately consolidated consortiums:

	June 30, 2019		December 31, 2018
	(In millions)
Current assets (1)	$	377	$	299
Non-current assets		8		10
Total assets	$	385	$	309
Current liabilities	$	596	$	992

⁽¹⁾ Our consortium arrangements may allow for excess working capital of the consortium to be advanced to the consortium participants. Such advances are returned to the ventures for working capital needs as necessary. Accordingly, at a reporting period end a consortium may have advances to its participants which are reflected as an advance receivable within current assets of the consortium. As of June 30, 2019 and December 31, 2018, Accounts receivable-other included $76 million and $44 million, respectively, related to our proportionate share of advances from the consortiums to the other consortium participants.

As of June 30, 2019 and December 31, 2018, Accrued liabilities reflected on the McDermott International, Inc. Consolidated Balance Sheet included $39 million and $53 million, respectively, related to advances from these consortiums.

The following is a summary description of our significant consortium that has been deemed a collaborative arrangement, in which we are not the primary beneficiary and we record our share of the consortium’s revenues, costs and profits:

• McDermott/Zachry/Chiyoda—We have a consortium with Zachry and Chiyoda to perform EPC work for a natural gas liquefaction facility in Sabine Pass, Texas. The collaborative arrangement includes an underlying primary consortium with all three parties sharing equal voting interests. This primary consortium has subcontract relationships with a separate consortium between Zachry and McDermott, with equal voting interests and separate scopes of work to be executed by each consortium party.

The following table presents summarized balance sheet information for our share of that proportionately consolidated collaborative arrangement:

	June 30, 2019
	(In millions)
Current assets	$	107
Non-current assets		-
Total assets	$	107
Current liabilities	$	106

Equity Method Joint Ventures—The following is a summary description of our significant joint ventures accounted for using the equity method:

20

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

• Chevron Lummus Global, L.L.C. (“CLG”)—We have a 50%/50% joint venture with a unit of Chevron Corporation which provides proprietary process technology licenses and associated engineering services and catalyst, primarily for the refining industry. As sufficient capital investments in CLG have been made by the joint venture participants, it does not qualify as a VIE.

• NET Power, LLC (“NET Power”)—We have a joint venture with a unit of Exelon Corporation (“Exelon”), 8 Rivers Capital and Oxy Low Carbon Ventures LLC, a subsidiary of Occidental Petroleum Corporation (“Oxy”), (MDR—32.2% / Exelon—32.2% / 8 Rivers Capital—32.2% / Oxy— 3.3%) to commercialize a new natural gas power generation system that recovers the carbon dioxide produced during combustion. NET Power is building a first-of-its-kind demonstration plant which is being funded by contributions and services from the joint venture participants and other parties. On November 8, 2018, NET Power signed an investment agreement for Oxy to purchase 10% of the company for $60 million over a three-year period, which will dilute future ownership of each of the existing members by 3.3%. On March 8, 2019, Oxy paid the first tranche of $20 million and received a 3.3% interest in NET Power. We have determined the joint venture to be a VIE; however, we are not the primary beneficiary and therefore do not consolidate it.

• McDermott/CTCI—We have a 50%/50% joint venture with CTCI to perform EPC work for a liquids ethylene cracker and associated units at Sohar, Oman. We have determined the joint venture to be a VIE; however, we are not the primary beneficiary and therefore do not consolidate it. Our joint venture arrangement allows for excess working capital of the joint venture to be advanced to the joint venture participants. Such advances are returned to the joint venture for working capital needs as necessary. As of June 30, 2019 and December 31, 2018, Accrued liabilities on our Balance Sheet included $95 million related to advances from this joint venture.

• io Oil and Gas—We co-own several 50%/50% joint venture entities with Baker Hughes, a GE company. These joint venture entities focus on the pre-FEED phases of projects in offshore markets, bring comprehensive field development expertise and provide technically advanced solutions in new full field development concept selection and evaluation.

• Qingdao McDermott Wuchuan Offshore Engineering Company Ltd.—We have a 50%/50% joint venture with Wuhan Wuchuan Investment Holding Co., Ltd., a leading shipbuilder in China. This joint venture provides project management, procurement, engineering, fabrication, construction and pre-commissioning of onshore and offshore oil and gas structures, including onshore modules, topsides, floating production storage, off-loading modules, subsea structures and manifolds.

Amortization expense associated with fair value adjustments recorded to Investments in unconsolidated affiliates in conjunction with the Combination was $2 million and $5 million for the three and six months ended June 30, 2019, respectively.

Consolidated Joint Ventures—The following is a summary description of our significant joint ventures we consolidate due to their designation as VIEs for which we are the primary beneficiary:

• McDermott/Orano— We have a joint venture with Orano, of which we own 70% and Orano owns 30%, relating to a mixed oxide fuel fabrication facility in Aiken, South Carolina. In addition, we have a profit sharing agreement to transfer to Orano 18% of profits attributable to us. The project is currently winding down, with limited activity anticipated for the remainder of 2019. We expect to close out this project by the end of 2019.

• McDermott/Kentz—We have a venture with Kentz Engineers & Constructors, a unit of SNC-Lavalin Group “Kentz” (McDermott—65% / Kentz—35%), to perform the structural, mechanical, piping, electrical and instrumentation work on, and to provide commissioning support for, three LNG trains, including associated utilities and a gas processing and compression plant, for the Gorgon LNG project, located on Barrow Island, Australia. The project is substantially complete. The joint venture remains in operation to complete various post-project activities.

• CB&I Nass Pipe Fabrication W.L.L.—We have a joint venture created in 1993 to support the fabrication and distribution of pipe in the Middle East.

• CB&I SKE&C Middle East Ltd.—We have a joint venture created in 2010 to own and support a pipe fabrication facility in the United Arab Emirates. Through its wholly owned subsidiary, Shaw Emirates Pipes Manufacturing LLC, it supports the fabrication and distribution of pipe in the Middle East.

21

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents summarized balance sheet information for our consolidated joint ventures, including other consolidated joint ventures that are not individually material to our financial results:

	June 30, 2019		December 31, 2018
	(In millions)
Current assets	$	181	$	102
Non-current assets		16		15
Total assets	$	197	$	117
Current liabilities	$	175	$	138

Other—The use of joint ventures and consortiums exposes us to a number of risks, including the risk that the third-party joint venture or consortium participants may be unable or unwilling to provide their share of capital investment to fund the operations of the joint venture or consortium or complete their obligations to us, the joint venture or consortium, or ultimately, our customer. Differences in opinions or views among joint venture or consortium participants could also result in delayed decision-making or failure to agree on material issues, which could adversely affect the business and operations of a joint venture or consortium. In addition, agreement terms may subject us to joint and several liability for the third-party participants in our joint ventures or consortiums, and the failure of any of those third parties to perform their obligations could impose additional performance and financial obligations on us. These factors could result in unanticipated costs to complete the projects, liquidated damages or contract disputes.

NOTE 11—RESTRUCTURING AND INTEGRATION COSTS AND TRANSACTION COSTS

Restructuring and Integration Costs

Restructuring and integration costs for the three and six months ended June 30, 2019 were $20 million and $89 million, respectively, and included change-in-control, severance, professional fees and costs of settlement of litigation, as well as costs to achieve our combination profitability initiative (“CPI”) program. We launched the CPI program in the second quarter of 2018, with the goal of realizing transformative cost savings across our business. The program incorporates the activities of our Fit 2 Grow program previously announced in the fourth quarter of 2017 and targets a significant improvement in cost controls across five main opportunity areas: (1) procurement and supply chain; (2) systems, applications and support; (3) assets and facilities; (4) perquisites, travel and other; and (5) workforce efficiency. Restructuring and integration costs for the three and six months ended June 30, 2018 were $63 million and $75 million, respectively, and primarily related to costs associated with CPI. These costs are recorded within our Corporate operating results.

Transaction Costs

Transaction costs were $11 million and $15 million for the three and six months ended June 30, 2019, respectively, and primarily related to professional fees associated with the development of plans to sell our non-core industrial storage tank and pipe fabrication businesses. Transaction costs were $37 million and $40 million for the three and six months ended June 30, 2018, respectively, and primarily related to professional service fees (including accounting, legal and advisory services) incurred in connection with the Combination. Transaction costs are recorded within our Corporate operating results.

22

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 12—DEBT

The carrying values of our debt obligations are as follows:

	June 30, 2019			December 31, 2018
	(In millions)
Current
Revolving credit facility	$	379		$	-
Structured equipment financing		32
Current maturities of long-term debt		31			31
Less: unamortized debt issuance costs		(1	)		(1	)
Current maturities of long-term debt, net of unamortized debt issuance costs		30			30
Short-term borrowing and current maturities of long-term debt	$	62		$	30
Long-term
Term Facility	$	2,232		$	2,243
10.625% senior notes		1,300			1,300
North Ocean 105 construction financing		12			16
Less: current maturities of long-term debt		(30	)		(30	)
Less: unamortized debt issuance costs		(126	)		(136	)
Long-term debt, net of unamortized debt issuance costs	$	3,388		$	3,393

Credit Agreement

On May 10, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and letter of credit issuers, Barclays Bank PLC, as administrative agent for a term facility under the Credit Agreement, and Crédit Agricole Corporate and Investment Bank, as administrative agent for the other facilities under the Credit Agreement. The Credit Agreement provides for borrowings and letters of credit in the aggregate principal amount of $4.7 billion, consisting of the following:

• a $2.26 billion senior secured, seven-year term loan facility (the “Term Facility”), the full amount of which was borrowed, and $319.3 million of which has been deposited into a restricted cash collateral account (the “LC Account”) to secure reimbursement obligations in respect of up to $310.0 million of letters of credit (the “Term Facility Letters of Credit”);

• a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”); and

• a $1.44 billion senior secured letter of credit facility (the “LC Facility”), which includes a $50 million increase pursuant to an Increase and Joinder Agreement we entered into with Morgan Stanley Senior Funding, Inc. as of May 24, 2019.

The Credit Agreement provides that:

• Term Facility Letters of Credit can be issued in an amount up to the amount on deposit in the LC Account ($320 million at June 30, 2019), less an amount equal to approximately 3% of such amount on deposit (to be held as a reserve for related letter of credit fees), not to exceed $310.0 million;

• subject to compliance with the financial covenants in the Credit Agreement, the full amount of the Revolving Credit Facility is available for revolving loans;

• subject to our utilization in full of our capacity to issue Term Facility Letters of Credit, the full amount of the Revolving Credit Facility is available for the issuance of performance letters of credit and up to $200 million of the Revolving Credit Facility is available for the issuance of financial letters of credit; and

• the full amount of the LC Facility is available for the issuance of performance letters of credit.

Borrowings are available under the Revolving Credit Facility for working capital and other general corporate purposes. Certain existing letters of credit outstanding under our previously existing Amended and Restated Credit Agreement, dated as of June 30, 2017 (the “Prior Credit Agreement”), and certain existing letters of credit outstanding under CB&I’s previously existing credit facilities have been deemed issued under the Credit Agreement, and letters of credit were issued under the Credit Agreement to backstop certain other existing letters of credit issued for the account of McDermott, CB&I and their respective subsidiaries and affiliates.

23

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Credit Agreement includes mandatory commitment reductions and prepayments in connection with, among other things, certain asset sales and casualty events (subject to reinvestment rights with respect to asset sales of less than $500 million). In addition, we are required to make annual prepayments of term loans under the Term Facility and cash collateralize letters of credit issued under the Revolving Credit Facility and the LC Facility with 75% of excess cash flow (as defined in the Credit Agreement), reducing to 50% of excess cash flow and 25% of excess cash flow depending on our secured leverage ratio.

Term Facility—As of June 30, 2019, we had $2.2 billion of borrowings outstanding under the Term Facility. Proceeds from our borrowing under the Term Facility were used, together with proceeds from the issuance of the Senior Notes and cash on hand, (1) to consummate the Combination in 2018, including the repayment of certain existing indebtedness of CB&I and its subsidiaries, (2) to redeem $500 million aggregate principal amount of our 8.000% second-lien notes, (3) to prepay existing indebtedness under, and to terminate in full, the Prior Credit Agreement, and (4) to pay fees and expenses in connection with the Combination, the Credit Agreement and the issuance of the Senior Notes.

Principal under the Term Facility is payable quarterly and interest is assessed at either (1) the Eurodollar rate plus a margin of 5.00% per year or (2) the base rate (the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin of 4.00%, subject to a 1.0% floor with respect to the Eurodollar rate and is payable periodically dependent upon the interest rate in effect during the period. On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on $1.94 billion of the $2.26 billion Term Facility. This resulted in a weighted average interest rate of 7.70%, inclusive of the applicable margin during the three months ended June 30, 2019. The Credit Agreement requires us to prepay a portion of the term loans made under the Term Facility on the last day of each fiscal quarter in an amount equal to $5.65 million.

The future scheduled maturities of the Term Facility are:

	(In millions)
2019	$	11
2020		23
2021		23
2022		23
2023		23
Thereafter		2,129
	$	2,232

Additionally, as of June 30, 2019, there were approximately $309 million of Term Facility letters of credit issued (including $48 million of financial letters of credit) under the Credit Agreement, leaving approximately $1 million of available capacity under the Term Facility.

Revolving Credit Facility and LC Facility—We have a $1.0 billion Revolving Credit Facility which is scheduled to expire in May 2023. As of June 30, 2019, we had approximately $379 million in borrowings and $53 million of letters of credit outstanding (including $49 million of financial letters of credit) under the Revolving Credit Facility, leaving $568 million of available capacity under this facility. During the six months ended June 30, 2019, the maximum borrowing under the Revolving Credit Facility was $639 million. We also have a $1.440 billion LC Facility that is scheduled to expire in May 2023. As of June 30, 2019, we had approximately $1.439 billion of letters of credit outstanding, leaving $1 million of available capacity under the LC Facility. If we borrow funds under the Revolving Credit Facility, interest will be assessed at either the base rate plus a floating margin ranging from 2.75% to 3.25% (3.25% at June 30, 2019) or the Eurodollar rate plus a floating margin ranging from 3.75% to 4.25% (4.25% at June 30, 2019), in each case depending on our leverage ratio (calculated quarterly). We are charged a commitment fee of 0.50% per year on the daily amount of the unused portions of the commitments under the Revolving Credit Facility and the LC Facility. Additionally, with respect to all letters of credit outstanding under the Credit Agreement, we are charged a fronting fee of 0.25% per year and, with respect to all letters of credit outstanding under the Revolving Credit Facility and the LC Facility, we are charged a participation fee of (i) between 3.75% to 4.25% (4.25% at June 30, 2019) per year in respect of financial letters of credit and (ii) between 1.875% to 2.125% (2.125% at June 30, 2019) per year in respect of performance letters of credit, in each case depending on our leverage ratio (calculated quarterly). We are also required to pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement.

24

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Credit Agreement Covenants—The Credit Agreement includes the following financial covenants that are tested on a quarterly basis:

• the minimum permitted fixed charge coverage ratio (as defined in the Credit Agreement) is 1.50 to 1.00;

• the maximum permitted leverage ratio is (i) 4.25 to 1.00 for each fiscal quarter ending on or before September 30, 2019, (ii) 4.00 to 1.00 for the fiscal quarter ending December 31, 2019, (iii) 3.75 to 1.00 for each fiscal quarter ending after December 31, 2019 and on or before December 31, 2020, (iv) 3.50 to 1.00 for each fiscal quarter ending after December 31, 2020 and on or before December 31, 2021 and (v) 3.25 to 1.00 for each fiscal quarter ending after December 31, 2021; and

• the minimum liquidity (as defined in the Credit Agreement, but generally meaning the sum of McDermott’s unrestricted cash and cash equivalents plus unused commitments under the Credit Agreement available for revolving borrowings) is $200 million.

In addition, the Credit Agreement contains various covenants that, among other restrictions, limit our ability to:

• incur or assume indebtedness;

• grant or assume liens;

• make acquisitions or engage in mergers;

• sell, transfer, assign or convey assets;

• make investments;

• repurchase equity and make dividends and certain other restricted payments;

• change the nature of our business;

• engage in transactions with affiliates;

• enter into burdensome agreements;

• modify our organizational documents;

• enter into sale and leaseback transactions;

• make capital expenditures;

• enter into speculative hedging contracts; and

• make prepayments on certain junior debt.

The Credit Agreement contains events of default that we believe are customary for a secured credit facility. If an event of default relating to bankruptcy or other insolvency event occurs, all obligations under the Credit Agreement will immediately become due and payable. If any other event of default exists under the Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Credit Agreement and exercise other rights and remedies. In addition, if any event of default exists under the Credit Agreement, the lenders may commence foreclosure or other actions against the collateral.

If any default exists under the Credit Agreement, or if we are unable to make any of the representations and warranties in the Credit Agreement at the applicable time, we will be unable to borrow funds or have letters of credit issued under the Credit Agreement.

Credit Agreement Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive and financial covenants under the Credit Agreement. The financial covenants as of June 30, 2019 are summarized below:

Ratios		Requirement		Actual
Minimum fixed charge coverage ratio		1.50x		2.46x
Maximum total leverage ratio		4.25x		2.61x
Minimum liquidity	$	200 million	$	1,023 million

25

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Future compliance with our financial and restrictive covenants under the Credit Agreement could be impacted by circumstances or conditions beyond our control, including, but not limited to, the delay or cancellation of projects, decreased letter of credit capacity, decreased profitability on our projects, changes in currency exchange or interest rates, performance of pension plan assets or changes in actuarial assumptions. Further, we could be impacted if our customers experience a material change in their ability to pay us or if the banks associated with the Credit Agreement were to cease operations, or if there is a full or partial break-up of the European Union (“EU”) or its currency, the Euro.

Letter of Credit Agreement

On October 30, 2018, we, as a guarantor, entered into a Letter of Credit Agreement (the “Letter of Credit Agreement”) with McDermott Technology (Americas), Inc., McDermott Technology (US), Inc. and McDermott Technology, B.V., each a wholly owned subsidiary of ours, as co-applicants, and Barclays Bank PLC, as administrative agent. The Letter of Credit Agreement provides for a facility for extensions of credit in the form of performance letters of credit in the aggregate face amount of up to $230 million (the “$230 Million LC Facility”). The $230 Million LC Facility is scheduled to expire in December 2021. The obligations under the Letter of Credit Agreement are unconditionally guaranteed on a senior secured basis by us and substantially all of our wholly owned subsidiaries, other than the co-applicants (which are directly obligated thereunder) and several captive insurance subsidiaries and certain other designated or immaterial subsidiaries. The liens securing the $230 Million LC Facility will rank equal in priority with the liens securing obligations under the Credit Agreement. The Letter of Credit Agreement includes financial and other covenants and provisions relating to events of default that are substantially the same as those in the Credit Agreement. As of June 30, 2019, there were approximately $216 million of letters of credit issued (or deemed issued) under the $230 million LC Facility, leaving approximately $14 million of available capacity.

Letter of Credit Agreement Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive and financial covenants under the Letter of Credit Agreement.

Senior Notes

On April 18, 2018, we issued $1.3 billion in aggregate principal of 10.625% senior notes due 2024 (the “Senior Notes”), pursuant to an indenture we entered into with Wells Fargo Bank, National Association, as trustee (the “Senior Notes Indenture”). Interest on the Senior Notes is payable semi-annually in arrears, and the Senior Notes are scheduled to mature in May 2024. However, at any time or from time to time on or after May 1, 2021, we may redeem the Senior Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Senior Notes to be redeemed) set forth below, together with accrued and unpaid interest to (but excluding) the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on May 1 of the years indicated:

Year	Optional redemption price
2021		105.313	%
2022		102.656	%
2023 and thereafter		100.000	%

In addition, prior to May 1, 2021, we may redeem up to 35.0% of the aggregate principal amount of the outstanding Senior Notes, in an amount not greater than the net cash proceeds of one or more qualified equity offerings (as defined in the Senior Notes Indenture) at a redemption price equal to 110.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to (but excluding) the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), subject to certain limitations and other requirements. The Senior Notes may also be redeemed, in whole or in part, at any time prior to May 1, 2021 at our option, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus the applicable premium (as defined in the Senior Notes Indenture) as of, and accrued and unpaid interest to (but excluding) the applicable redemption date (subject to the right of the holders of record on the relevant record date to receive interest due on the relevant interest payment date).

26

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Senior Notes Covenants—The Senior Notes Indenture contains covenants that, among other things, provide limits around our ability to: (1) incur or guarantee additional indebtedness or issue preferred stock; (2) make investments or certain other restricted payments; (3) pay dividends or distributions on our capital stock or purchase or redeem our subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; (6) create certain liens; (7) sell all or substantially all of our assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create unrestricted subsidiaries. Those covenants are subject to various exceptions and limitations.

Senior Notes Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive covenants under the Senior Notes Indenture. Future compliance with our restrictive covenants under the Senior Notes Indenture could be impacted by circumstances or conditions beyond our control, including, but not limited to, those discussed above with respect to the Credit Agreement.

Other Financing Arrangements

North Ocean (“NO”) Financing―On September 30, 2010, McDermott International, Inc., as guarantor, and NO 105 AS, one of our subsidiaries, as borrower, entered into a financing agreement to pay a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of NO 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of NO 105 AS. As of June 30, 2019, the outstanding borrowing under this facility was approximately $12 million. Future maturities are approximately $4 million for the remainder of 2019 and $8 million in 2020.

Receivables Factoring―During the six months ended June 30, 2019, we sold, without recourse, approximately $62 million of receivables under an uncommitted receivables purchase agreement in Mexico at a discount rate of applicable LIBOR plus a margin of 1.40% - 2.00% and Interbank Equilibrium Interest Rate in Mexico plus a margin of 1.40% - 1.70%. We recorded approximately $2 million of factoring costs in Other operating income (expense) during the six months ended June 30, 2019. Ten percent of the receivables sold are withheld and received on the due date of the original invoice. We have received cash, net of fees and amounts withheld, of approximately $54 million under these arrangements during the six months ended June 30, 2019.

Structured Equipment Financing―In the second quarter of 2019, we entered into a $37 million uncommitted revolving re-invoicing facility for settlement of certain equipment supplier invoices. During the second quarter of 2019, we received approximately $32 million under this arrangement, with repayment obligations maturing in January 2020. Interest expense and origination fees associated with this facility were not material.

Uncommitted Facilities—We are party to a number of short-term uncommitted bilateral credit facilities and surety bond arrangements (the “Uncommitted Facilities”) across several geographic regions, as follows:

	June 30, 2019				December 31, 2018
	Uncommitted Line Capacity		Utilized		Uncommitted Line Capacity		Utilized
	(In millions)
Bank Guarantee and Bilateral Letter of Credit (1)	$	1,627	$	1,062	$	1,669	$	1,060
Surety Bonds (2)	829		567			842		475

⁽¹⁾ Approximately $175 million of this capacity is available only upon provision of an equivalent amount of cash collateral.

⁽²⁾ Excludes approximately $346 million of surety bonds maintained on behalf of CB&I’s former Capital Services Operations, which were sold to CSVC Acquisition Corp (“CSVC”) in June 2017. We also continue to maintain guarantees on behalf of CB&I’s former Capital Services Operations business in support of approximately $29 million of RPOs. We are entitled to an indemnity from CSVC for both the surety bonds and guarantees.

27

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 13—LEASE OBLIGATIONS

The following tables summarize our leased assets and lease liability obligations:

		June 30, 2019		December 31, 2018
		(In millions)
Leases	Classification
Assets
Operating lease assets	Operating lease right-of-use assets	$	383	$	-
Finance lease assets (1)	Property, plant and equipment, net		67		70
	Total leased assets		450		70
Liabilities
Current
Operating	Current portion of long-term lease obligations		88		-
Finance	Current portion of long-term lease obligations		8		8
			96		8
Noncurrent
Operating	Long-term lease obligations		316		-
Finance	Long-term lease obligations		63		66
			379		66
	Total lease liabilities	$	475	$	74

(1) Our finance leases are represented by:

(a) A jack-up barge utilized in our MENA region; and

(b) The Amazon, a pipelay and construction vessel, was purchased by us in February 2017, sold to an unrelated third party (the “Amazon Owner”) and leased back under a long-term bareboat charter that gave us the right to use the vessel and was recorded as an operating lease. On July 27, 2018, we entered into agreements (the “Amazon Modification Agreements”) providing for certain modifications to the Amazon vessel and related financing and amended bareboat charter arrangements. The total cost of the modifications, including project management and other fees and expenses, is expected to be in the range of approximately $260 million to $290 million. The Amazon Owner is expected to fund the cost of the modifications primarily through an export credit-backed senior loan provided by a group of lenders, supplemented by expected direct capital expenditures by us of approximately $58 million over the course of the modifications. The amended bareboat charter arrangement is accounted for as a finance lease, recognizing Property, plant and equipment and Lease obligation for the present value of future minimum lease payments. The cost of modifications will be recorded in Property, plant and equipment with a corresponding liability for direct capital expenditures not incurred by us. The finance lease obligation will increase upon completion of the modifications and funding by the Amazon Owner. As of June 30, 2019, Property, plant and equipment, net included a $50 million asset (net of accumulated amortization of $6 million) and a finance lease liability of approximately $50 million. As of December 31, 2018, Property, plant and equipment, net included a $52 million asset (net of accumulated amortization of $3 million) and a finance lease liability of approximately $53 million.

28

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Our lease cost was as follows:

		Three months ended		Six months ended
		June 30, 2019
	Classification	(In millions)
Operating lease cost (1)	SG&A Expenses	$	21	$	42
Operating lease cost (1)	Cost of operations		11		30
Finance lease cost
Amortization of leased assets	Cost of operations		1		3
Interest on lease liabilities	Net Interest Expense		2		3
Net lease cost		$	35	$	78

⁽¹⁾ Includes short-term leases and immaterial variable lease costs.

Future minimum lease payments for our operating and finance lease obligations as of June 30, 2019 are as follows:

	Operating leases			Finance leases			Total
	(In millions)
2019	$	46		$	6		$	52
2020		86			12			98
2021		77			11			88
2022		69			11			80
2023		58			11			69
After 2023		322			46			368
Total lease payments		658			97			755
Less: Interest		(254	)		(26	)		(280	)
Present value of lease liabilities	$	404		$	71		$	475

Lease term and discount rates for our operating and finance lease obligations are as follows:

Lease Term and Discount Rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	7.2
Finance leases	8.6
Weighted-average discount rate
Operating leases		9.5	%
Finance leases		8.9	%

Supplemental information for our operating and finance lease obligations are as follows:

Other information	June 30, 2019
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(58	)
Financing cash flows from finance leases		(4	)
Leased assets obtained in exchange for new operating lease liabilities		383
Leased assets obtained in exchange for new finance lease liabilities		-

NOTE 14—PENSION AND POSTRETIREMENT BENEFITS

We sponsor various defined benefit pension plans covering eligible employees and provide specific postretirement benefits for eligible retired U.S. employees and their dependents through health care and life insurance benefit programs.

29

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table provides contribution information for our Non-U.S. defined benefit pension plans and other postretirement plans at June 30, 2019:

	Non-U.S. Pension Plans
	(In millions)
Contributions made through June 30, 2019	$	8
Contributions expected for the remainder of 2019		5
Total contributions expected for 2019	$	13

The following table provides a breakdown of the components of the net periodic benefit cost (income) associated with our defined benefit pension plans for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30
	2019			2018			2019			2018
	(In millions)						(In millions)
U.S. pension plans:
Service cost	$	-		$	-		$	-		$	-
Interest cost		5			5			9			9
Expected return on plan assets		(4	)		(5	)		(9	)		(9	)
Amortization of prior service (credits) costs		-			-			-			-
Net periodic benefit cost (1)	$	1		$	-		$	-		$	-
Non-U.S. pension plans:
Service cost	$	3		$	2		$	5		$	2
Interest cost		5			3			9			3
Expected return on plan assets		(6	)		(4	)		(12	)		(4	)
Amortization of prior service (credits) costs		-			-			-			-
Net periodic benefit cost (1)	$	2		$	1		$	2		$	1

⁽¹⁾ The components of net periodic benefit cost (income) other than the service cost component are included in Other non-operating (income) expense, net in our Statements of Operations. The service cost component is included in Cost of operations and SG&A, in our Statements of Operations, along with other compensation costs rendered by the participating employees.

⁽²⁾ Net periodic benefit cost for our other postretirement plans is not material.

We recognize mark-to-market fair value adjustments on defined benefit pension and other postretirement plans in Other non-operating (income) expense, net in our Statements of Operations in the fourth quarter of each year.

NOTE 15—ACCRUED LIABILITIES

	June 30, 2019		December 31, 2018
	(In millions)
Accrued contract costs	$	705	$	796
Advances from equity method and proportionally consolidated joint ventures and consortiums (1)		134		148
Income taxes payable		-		69
Other accrued liabilities (2)		628		551
Accrued liabilities	$	1,467	$	1,564

⁽¹⁾ Represents advances from the joint ventures and consortiums in which we participate. See Note 10, Joint Venture and Consortium Arrangements, for further discussion.

⁽²⁾ Represents various accruals that are each individually less than 5% of total current liabilities.

30

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 16—FAIR VALUE MEASUREMENTS

Fair value of financial instruments

Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is available and significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:

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

• Level 2—inputs are based on 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 following table presents the fair value of our financial instruments as of June 30, 2019 and December 31, 2018 that are (1) measured and reported at fair value in the Financial Statements on a recurring basis and (2) not measured at fair value on a recurring basis in the Financial Statements:

	June 30, 2019
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In millions)
Measured at fair value on recurring basis
Forward contracts (1)	$	(77	)	$	(77	)	$	-	$	(77	)	$	-
Not measured at fair value on recurring basis
Debt and capital lease obligations (2)		(3,647	)		(3,532	)		-		(3,415	)		(117	)
	December 31, 2018
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In millions)
Measured at fair value on recurring basis
Forward contracts (1)	$	(39	)	$	(39	)	$	-	$	(39	)	$	-
Not measured at fair value on recurring basis
Debt and capital lease obligations (2)		(3,633	)		(3,287	)		-		(3,197	)		(90	)

⁽¹⁾ 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 forward contracts. This approach discounts future cash flows based on current market expectations and credit risk.

⁽²⁾ Our debt instruments are generally valued using a market approach based on quoted prices for similar instruments traded in active markets and are classified as Level 2 within the fair value hierarchy. Quoted prices were not available for the NO 105 construction financing, vendor equipment financing or capital leases. Therefore, these instruments were valued 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 and are classified as Level 3 within the fair value hierarchy.

The carrying amounts that we have reported for our other financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and revolving credit facility debt approximate their fair values due to the short maturity of those instruments.

31

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 17—DERIVATIVE FINANCIAL INSTRUMENTS

Foreign Currency Exchange Rate Derivatives—The notional value of our outstanding foreign exchange rate derivative contracts totaled $700 million as of June 30, 2019, with maturities extending through August 2022. These instruments consist of contracts to purchase or sell foreign-denominated currencies. As of June 30, 2019, the fair value of these contracts was in a net liability position totaling approximately $6 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

As of June 30, 2019, we have approximately $9 million of unrealized net losses in AOCI in connection with foreign exchange rate derivatives designated as cash flow hedges, and we expect to reclassify approximately $3 million of deferred losses out of AOCI by June 30, 2020, as hedged items are recognized in earnings.

Interest Rate Derivatives—On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on the Term Facility in an aggregate notional value of $1.94 billion. The swap arrangement has been designated as a cash flow hedge as its critical terms matched those of the Term Facility at inception and through June 30, 2019. Accordingly, changes in the fair value of the swap arrangement are included in AOCI until the associated underlying exposure impacts our interest expense. As of June 30, 2019, the fair value of the swap arrangement was in a net liability position totaling approximately $71 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

As of June 30, 2019, in connection with the interest rate swap arrangement, we have approximately $71 million of unrealized net losses in AOCI, and we expect to reclassify approximately $18 million of deferred losses out of AOCI by June 30, 2020, as the hedged items are recognized in earnings.

The following table presents the total fair value of the derivatives by underlying risk and balance sheet classification:  

	June 30, 2019				December 31, 2018
	Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges		Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges
	(In millions)
Other current assets	$	5	$	1	$	3	$	3
Other non-current assets		1		-		-		-
Total derivatives asset	$	6	$	1	$	3	$	3
Accrued liabilities	$	27	$	-	$	10	$	3
Other non-current liabilities		56		1		32		-
Total derivatives liability	$	83	$	1	$	42	$	3

32

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the total value, by underlying risk, recognized in other comprehensive income and reclassified from AOCI to our Statements of Operations, in connection with derivatives:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)						(In millions)
Amount of gain (loss) recognized in other comprehensive income (loss)
Foreign exchange hedges	$	3		$	(5	)	$	(4	)	$	(5	)
Interest rate hedges		(28	)		(10	)		(43	)		(10	)
Gain (loss) recognized on derivatives designated as cash flow hedges
Foreign exchange hedges
Revenue		(4	)		-			(5	)		-
Cost of operations		2			-			1			-
Interest rate hedges
Interest expense		(2	)		-			(3	)		-
Gain (loss) recognized on derivatives not designated as cash flow hedges
Foreign exchange hedges
Revenue		1			-			2			-
Cost of operations		-			(10	)		-			(10	)

NOTE 18—INCOME TAXES

During the three months ended June 30, 2019, we recognized an income tax benefit of $49 million (effective tax rate of 30%), compared to an income tax benefit of $84 million (effective tax rate of 215%) for the three months ended June 30, 2018. Our income tax provision for the second quarter of 2019 benefited from nondeductible expenses ($19 million).

During the six months ended June 30, 2019, we recognized an income tax benefit of $70 million (effective tax rate of 29%), compared to an income tax benefit of $63 million (effective tax rate of 394%) for the six months ended June 30, 2018. Our income tax provision for the six months ended June 30, 2019 benefited from the settlement of a customer claim ($18 million) and a favorable court ruling on tax matters ($19 million), partially offset by nondeductible, state tax and other expenses ($12 million).

During the six months ended June 30, 2019, our unrecognized tax benefits decreased $19 million, primarily due to the favorable court ruling referenced above. We do not anticipate significant changes to this balance in the next 12 months.

33

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 19—STOCKHOLDERS’ EQUITY AND EQUITY-BASED INCENTIVE PLANS

Shares Outstanding and Treasury Shares―The changes in the number of shares outstanding and treasury shares held by us are as follows (in millions):

	Six Months Ended June 30,
	2019			2018
Shares outstanding
Beginning balance		181			95
Common stock issued		2			2
Shares issued in the Combination (Note 3, Business Combination)		-			85
Purchase of common stock		(1	)		(1	)
Ending balance		182			181
Shares held as Treasury shares
Beginning balance		3			3
Purchase of common stock		1			1
Retirement of common stock		(1	)		(1	)
Ending balance		3			3
Ordinary shares issued at the end of the period		185			183

⁽¹⁾ Amounts in this table may not sum due to rounding.

Combination—As discussed in Note 3, Business Combination, we issued 84.5 million shares of McDermott common stock to the former CB&I shareholders. Additionally, effective as of the Combination Date, unvested and unexercised stock-settled equity-based awards (which included 2.1 million of CB&I restricted stock units and stock options to purchase 0.1 million shares of CB&I’s common stock) were canceled and converted into comparable McDermott stock-settled awards with generally the same terms and conditions as those prior to the Combination Date. The restricted stock units generally vest over a period ranging from three to four years from the original grant date. 

Stock-Based Compensation Expense―During the three months ended June 30, 2019 and 2018, we recognized $5 million and $9 million, respectively, and during the six months ended June 30, 2019 and 2018, we recognized $11 million and $15 million, respectively, of stock-based compensation expense, primarily within SG&A in our Statements of Operations. In addition, we recognized $26 million of expense in the second quarter of 2018 as a result of accelerated vesting for employees terminated in connection with the Combination, which was recorded within Restructuring and integration costs in our Statements of Operations.

In addition, during the three months ended June 30, 2019 and 2018, we recognized $3 million and $1 million, respectively, and during the six months ended June 30, 2019 and 2018, we recognized $5 million and $5 million, respectively, of compensation expense associated with awards classified as liability awards as of the end of those respective periods.

Accumulated Other Comprehensive (Loss) Income―The components of AOCI included in stockholders’ equity are as follows:

	June 30, 2019			December 31, 2018
	(In millions)
Foreign currency translation adjustments ("CTA")	$	(107	)	$	(73	)
Net unrealized loss on derivative financial instruments		(80	)		(40	)
Defined benefit pension and other postretirement plans		6			6
Accumulated other comprehensive loss	$	(181	)	$	(107	)

34

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following table presents the components of AOCI and the amounts that were reclassified during the periods indicated:

	Foreign currency translation adjustments			Net unrealized loss on derivative financial instruments (1)			Defined benefit pension and other postretirement plans		TOTAL
	(In millions)
December 31, 2017	$	(49	)	$	(2	)	$	-	$	(51	)
Other comprehensive income before reclassification		(12	)		(15	)		-		(27	)
Amounts reclassified from AOCI (2)		-			3			-		3
Net current period other comprehensive income		(12	)		(12	)		-		(24	)
June 30, 2018	$	(61	)	$	(14	)	$	-	$	(75	)
December 31, 2018		(73	)		(40	)		6		(107	)
Other comprehensive income before reclassification		(34	)		(47	)		-		(81	)
Amounts reclassified from AOCI (2)		-			7			-		7
Net current period other comprehensive income		(34	)		(40	)		-		(74	)
June 30, 2019	$	(107	)	$	(80	)	$	6	$	(181	)

⁽¹⁾ Refer to Note 17, Derivative Financial Instruments, for additional details.

⁽²⁾ Amounts are net of tax, which was not material during the six months ended June 30, 2019 and 2018.

Noncontrolling Interest―In 2002, P.T. Sarana Interfab Mandiri (“PTSIM”) acquired a 25% participating interest in our subsidiary, PT McDermott Indonesia (“PTMI”). After two years, PTSIM had the option to sell its interest to us for $5 million plus PTSIM’s share of PTMI undistributed earnings to the date of such sale. In January 2019, McDermott and PTSIM entered into framework agreement, restructuring the PTMI shareholders agreement, whereby PTSIM waived its put option right and exchanged its participating interest in PTMI to a non-participating interest in exchange for a payment of approximately $29 million, payable in three installments during 2019. During the six months ended June 30, 2019, we paid approximately $5 million and have a remaining liability of approximately $24 million as of June 30, 2019.

NOTE 20—REDEEMABLE PREFERRED STOCK

On November 29, 2018 (the “Closing Date”), we completed a private placement of (1) 300,000 shares of 12% Redeemable Preferred Stock, par value $1.00 per share (the “Redeemable Preferred Stock”), and (2) Series A warrants (the “Warrants”) to purchase approximately 6.8 million shares of our common stock, with an initial exercise price per share of $0.01, for aggregate proceeds of $289.5 million, before payment of approximately $18 million of directly related issuance costs.

Redeemable Preferred Stock—The Redeemable Preferred Stock will initially have an Accreted Value (as defined in the Certificate of Designation with respect to the Redeemable Preferred Stock (the “Certificate of Designation”)) of $1,000.00 per share. The holders of the Redeemable Preferred Stock will be entitled to receive cumulative compounding preferred cash dividends quarterly in arrears at a fixed rate of 12.0% per annum compounded quarterly (of which 3.0% accrues each quarter) on the Accreted Value per share (the “Dividend Rate”). The cash dividends are payable only when, as and if declared by our Board of Directors out of funds legally available for payment of dividends. If a cash dividend is not declared and paid in respect of any dividend payment period ending on or prior to December 31, 2021, then the Accreted Value of each outstanding share of Redeemable Preferred Stock will automatically be increased by the amount of the dividend otherwise payable for such dividend payment period, except the applicable dividend rate for this purpose is 13.0% per annum. Such automatic increase in the Accreted Value of each outstanding share of Redeemable Preferred Stock would be in full satisfaction of the preferred dividend that would have otherwise accrued for such dividend payment period. Our Board of Directors declared, and we paid cash dividends on the Redeemable Preferred Stock on the first dividend payment date (December 31, 2018), but our Board of Directors did not declare cash dividends on the Redeemable Preferred Stock on the March 31, 2019 and June 30, 2019 dividend payment dates and, as a result, the Accreted Value of the Redeemable Preferred Stock was increased by the amount of the accrued but unpaid dividend (i.e., a paid-in-kind (“PIK”) dividend).

35

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The Redeemable Preferred Stock has no stated maturity and will remain outstanding indefinitely unless repurchased or redeemed by us.

The Redeemable Preferred Stock will have a liquidation preference equal to the then applicable Minimum Return (the “Liquidation Preference”) plus accrued and unpaid dividends. The Liquidation Preference will initially be equal to $1,200.00 per share. The “Minimum Return” is equal to a multiple of invested capital (“MOIC”) (as defined in the Certificate of Designation) as follows, exclusive of cash dividends previously paid:

• prior to January 1, 2020, a MOIC multiple of 1.2;

• on or after January 1, 2020 but prior to January 1, 2022, a MOIC multiple of 1.25;

• on or after January 1, 2022 but prior to January 1, 2023, a MOIC multiple of 1.20;

• on or after January 1, 2023 but prior to January 1, 2025, a MOIC multiple of 1.15; and

• on or after January 1, 2025, a MOIC multiple of 1.20.

We may redeem the Redeemable Preferred Stock at any time for an amount per share of Redeemable Preferred Stock equal to the Liquidation Preference of each such share plus all accrued dividends on such share (such amount per share, the “Redemption Consideration”).

At any time after the seventh anniversary of the Closing Date, each holder may elect to have us fully redeem such holder’s then outstanding Redeemable Preferred Stock in cash, to the extent we have funds legally available for payment of dividends, at a redemption price per share equal to the Redemption Consideration for each share.

Upon a change of control (as defined in the Certificate of Designation), if we have not previously redeemed the Redeemable Preferred Stock and the holders of a majority of the then-outstanding Redeemable Preferred Stock do not agree with us to an alternative treatment, then in connection with such change of control, each holder may elect either: (1) to cause us to redeem all, but not less than all, of its outstanding Redeemable Preferred Stock at a redemption price per share equal to the Redemption Consideration, which would be payable in full in cash or, if any of the Senior Notes are then outstanding, payable partially in cash in an amount equal to 101% of the Share Purchase Price (as defined in the Certificate of Designation) (or such lower amount as may be required under the Senior Notes Indenture) and the remainder in shares of our common stock based on a per share price equal to 96% of the volume-weighted average price of our common stock on the New York Stock Exchange during the 10 trading days prior to the announcement of such change of control; (2) to receive a substantially equivalent security to the Redeemable Preferred Stock in the surviving entity of the change of control; or (3) to continue to hold the Redeemable Preferred Stock if we are the surviving entity in the change of control. However, any such redemption in cash will be tolled until a date that will not result in the Redeemable Preferred Stock being characterized as “disqualified stock,” “disqualified equity interest” or a similar concept under our debt instruments.

The fair value upon issuance represented the net impact of $289.5 million of aggregate proceeds, less $18 million of fees and $43 million of fair value assigned to the warrants described below (separately included within Capital in excess of par value in our Balance Sheet). The fair value measurement upon issuance was based on inputs that were not observable in the market and thus represented level 3 inputs. We will record accretion as an adjustment to Retained earnings (deficit) over the seven years from the Closing Date through the expected redemption date of November 29, 2025 using the effective interest method. From the Closing Date through June 30, 2019, we recorded cumulative accretion of approximately $9 million with respect to the Redeemable Preferred Stock, including approximately $4 million and $8 million during the three and six months ended June 30, 2019, respectively. As of June 30, 2019, the Redeemable Preferred Stock balance was $257 million, adjusted for accretion and PIK dividends of approximately $20 million. During 2018, approximately $3 million of cash dividends were paid to the holders of the Redeemable Preferred Stock.

Warrants—The Warrants are exercisable at any time after the earlier of (1) any change of control or the commencement of proceedings for the voluntary or involuntary dissolution, liquidation or winding up of us and (2) the first anniversary of the Closing Date, and from time to time, in whole or in part, until the tenth anniversary of the Closing Date. The fair value measurement of the Warrants was based on the market-observable fair value of our common stock upon issuance and thus represented a level 1 input.

36

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The exercise price and the number of shares of common stock for which a Warrant is exercisable are subject to adjustment from time to time upon the occurrence of certain events including: (1) payment of a dividend or distribution to holders of shares of our common stock payable in common stock, (2) the distribution of any rights, options or warrants to all holders of our common stock entitling them for a period of not more than 60 days to purchase shares of common stock at a price per share less than the fair market value per share, (3) a subdivision, combination, or reclassification of our common stock, (4) a distribution to all holders of our common stock of cash, any shares of our capital stock (other than our common stock), evidences of indebtedness or other assets of ours, and (5) any dividend of shares of a subsidiary of ours in a spin-off transaction.

NOTE 21—EARNINGS PER SHARE

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2019 (1)			2018 (2)		2019 (1)			2018 (2)
	(In millions, except per share amounts)
Net (loss) income attributable to McDermott	$	(132	)	$	47	$	(188	)	$	82
Dividends on redeemable preferred stock		(10	)		-		(20	)		-
Accretion of redeemable preferred stock		(4	)		-		(8	)		-
Net (loss) income attributable to common stockholders	$	(146	)	$	47	$	(216	)	$	82
Weighted average common stock (basic)		182			144		181			120
Effect of dilutive securities:
Stock-based awards		-			-		-			-
Warrants and preferred stock		-			-		-			-
Weighted average common stock (diluted)		182			144		181			120
Net (loss) income per share attributable to common stockholders
Basic:	$	(0.80	)	$	0.33	$	(1.19	)	$	0.68
Diluted:	$	(0.80	)	$	0.33	$	(1.19	)	$	0.68

⁽¹⁾ The effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2019 due to the net loss for the periods.

⁽²⁾ Approximately 0.5 million shares underlying outstanding stock-based awards for the three and six months ended June 30, 2018 were excluded from the computation of diluted earnings per share during the periods because the exercise price of those awards was greater than the average market price of our common stock, and the inclusion of such shares would have been antidilutive in each of those periods.

NOTE 22—COMMITMENTS AND CONTINGENCIES

Investigations and Litigation

General—Due to the nature of our business, we and our affiliates are, from time to time, involved in litigation or subject to disputes, governmental investigations 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, premises liability claims and other claims.

Based upon our prior experience, we do not expect that any of these other litigation proceedings, disputes, investigations 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 other dispute resolution proceedings and, in some cases, the availability and amount of potentially applicable insurance, we can provide no assurance 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.

37

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Project Arbitration Matters—We are in arbitration (governed by the arbitration rules of the International Chamber of Commerce) entitled Refineria de Cartagena S.A. v. Chicago Bridge & Iron Company N.V., et al., which was commenced on March 8, 2016 in connection with a large, cost reimbursable refinery construction project in Colombia completed by CB&I in 2015. Refineria de Cartagena, the customer on the project, is alleging that we are responsible for certain cost overruns, delays and consequential damages on the project. The customer is claiming total damages in excess of $4.5 billion. We have asserted a counterclaim against the customer for approximately $250 million. The parties submitted final witness statements, expert reports and other filings as of July 3, 2019. Hearings are scheduled to take place between April and June 2020. The current venue for the arbitration hearings is New York, New York. We do not believe a risk of material loss is probable related to this matter, and accordingly, our reserves for this matter were not significant as of June 30, 2019. While it is possible that a loss may be incurred, we are unable to estimate the range of potential loss, if any.

In addition, we are in arbitration (governed by the arbitration rules of the United Nations Commission on International Trade Law) entitled CBI Constructors Pty & Kentz Pty Ltd and Chevron Australia Pty Ltd., which was commenced on or about May 17, 2017, with the customer for one of CB&I’s previously completed consolidated joint venture projects, regarding differing interpretations of the contract related to reimbursable billings. The matter has been bifurcated, with hearings on entitlement held in November 2018 and hearings on the amount of damages scheduled for September 2019. In December 2018, the tribunal issued an interim award on entitlement, finding that the joint venture was not overpaid for its craft labor but that certain overpayments were made to the joint venture for its staff. As a result, we and our joint venture counterparty are asserting claims against the customer of approximately $103 million for certain unpaid invoices and other set-offs, and the customer is asserting that it has overpaid the joint venture by $189 million, less the amounts owed to the joint venture. Accordingly, as of June 30, 2019, we have established a reserve of approximately $55 million in the acquired balance sheet from the Combination, which equates to $85 million at the joint venture level.

Dispute Related to Sale of Nuclear Operations—On December 31, 2015, we sold our Nuclear Operations to Westinghouse Electric Company LLC (“WEC”). In connection with the transaction, a post-closing purchase price adjustment mechanism was negotiated between CB&I and WEC to account for any difference between target working capital and actual working capital as finally determined pursuant to the terms of the purchase agreement. On April 28, 2016, WEC delivered to us a purported closing statement that estimated closing working capital was negative $976.5 million, which was $2.1 billion less than the target working capital amount. In contrast, we calculated closing working capital to be $1.6 billion, which was $427.8 million greater than the target working capital amount. On July 21, 2016, we filed a complaint against WEC in the Court of Chancery in the State of Delaware seeking a declaration that WEC has no remedy for the vast majority of its claims, and we requested an injunction barring WEC from bringing such claims. On December 2, 2016, the Court of Chancery granted WEC’s motion for judgment on the pleadings and dismissed our complaint, stating that the dispute should follow the dispute resolution process set forth in the purchase agreement, which includes the use of an independent auditor to resolve the working capital dispute. We appealed that ruling to the Delaware Supreme Court. Due to WEC’s bankruptcy filing on March 29, 2017, all claim resolution proceedings were automatically stayed pursuant to the Bankruptcy Code. At the parties’ request, the Bankruptcy Court lifted the automatic stay to permit the appeal and dispute resolution process to continue. Oral argument before the Delaware Supreme Court was held on May 3, 2017, and on June 27, 2017, the Delaware Supreme Court overturned the decision of the Court of Chancery and instructed the Court of Chancery to issue an order enjoining WEC from submitting certain claims to the independent auditor. On or about April 29, 2019, the parties executed a settlement agreement, which resolved all claims between the parties in connection with this dispute, and the matter is now closed.

Asbestos Litigation—We are a defendant in numerous lawsuits wherein plaintiffs allege exposure to asbestos at various locations. We review and defend each case on its own merits and make accruals based on the probability of loss and best estimates of potential loss. We do not believe any unresolved asserted claim will have a material adverse effect on our future results of operations, financial position or cash flow. With respect to unasserted asbestos claims, we cannot identify a population of potential claimants with sufficient certainty to determine the probability of loss or estimate future losses. We do not believe a risk of material loss is probable related to these matters, and, accordingly, our reserves were not significant as of June 30, 2019. While we continue to pursue recovery for recognized and unrecognized contingent losses through insurance, indemnification arrangements and other sources, we are unable to quantify the amount that we may recover because of the variability in coverage amounts, limitations and deductibles or the viability of carriers, with respect to our insurance policies for the years in question.

38

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Mercury Litigation—Certain of our subsidiaries are co-defendants in a group of consolidated “toxic exposure” claims, involving 54 plaintiffs who allege they were exposed to mercury while working in a chlorine manufacturing facility located in Muscle Shoals, Alabama. The matter was commenced on December 14, 2011 and is captioned Aretha Abernathy, et al. v. Occidental Chemical Corp., et al., CV 11-900266, Circuit Court of Colbert County, Alabama. The plaintiffs consist of former employees of subsidiaries of CB&I, as well as other defendants. October 21, 2019 has been set for the trials of the claims of the first four plaintiffs in this matter. We do not believe a risk of material loss is probable related to this matter, and accordingly, our reserves were not significant as of June 30, 2019. While it is possible that a loss may be incurred (absent insurance coverage), we are unable at this time, to estimate the range of potential loss, if any. Further, we believe we are entitled to coverage under various insurance policies, though certain carriers have issued letters reserving their rights to contest their obligations to indemnify us.  Discussions between us and the carriers continue over coverage for these matters.

In addition, under the terms of certain insurance policies, additional deductible amounts may be due upon a resolution of these matters, either by settlement or judgment. We do not believe a risk of material loss is probable for additional deductible amounts due upon resolution of these matters, and accordingly, our reserves for this matter were not significant as of June 30, 2019.

Labor Litigation—A former employee of one of our subsidiaries commenced a class action lawsuit under the Fair Labor Standards ACT (“FLSA”) entitled Cantrell v. Lutech Resources, Inc., (S.D. Texas 2017) Case No. 4:17-CV-2679 on or about September 5, 2017, alleging that he and his fellow class members were not paid one and one half times their normal hourly wage rates for hours worked that exceeded 40 hours in a work week. Our subsidiary has yet to answer the allegations in the complaint, as agreed by the parties, in order to allow mediation to take place. The first mediation session commenced in October 2018 and is ongoing, and a tentative settlement has been reached between the parties. We do not believe a risk of material loss is probable related to this matter, and, accordingly, our reserves for this matter were not significant as of June 30, 2019.

Pre-Combination CB&I Securities Litigations—On March 2, 2017, a complaint was filed in the United States District Court for the Southern District of New York seeking class action status on behalf of purchasers of CB&I common stock and alleging damages on their behalf arising from alleged false and misleading statements made during the class period from October 30, 2013 to June 23, 2015. The case is captioned: In re Chicago Bridge & Iron Company N.V. Securities Litigation, No. 1:17-cv-01580-LGS (the “Securities Litigation”). The defendants in the case are: CB&I; a former chief executive officer of CB&I; a former chief financial officer of CB&I; and a former controller and chief accounting officer of CB&I. On June 14, 2017, the court named ALSAR Partnership Ltd. as lead plaintiff. On August 14, 2017, a consolidated amended complaint was filed alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder, arising out of alleged misrepresentations about CB&I’s accounting for the acquisition of The Shaw Group, CB&I’s accounting with respect to the two nuclear projects being constructed by The Shaw Group, and CB&I’s financial reporting and public statements with respect to those two projects. On May 24, 2018, the court denied defendants’ motion to dismiss and the parties are currently engaged in the discovery process. On February 4, 2019, lead plaintiff ALSAR Partnership Ltd. and additional plaintiffs Iron Workers Local 40, 361, & 417 – Union Security Funds and Iron Workers Local 580 – Joint Funds moved for class certification and appointment as class representatives. That motion remains pending before the magistrate-judge. We are not able at this time to determine the likelihood of loss, if any, arising from this matter and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and intend to defend against them vigorously.

On October 26, 2018, two actions were filed by individual plaintiffs based on allegations similar to those alleged in the Securities Litigation. On February 25, 2019, a third action was filed by an individual plaintiff based on similar allegations. All three actions were filed in the United States District Court for the Southern District of New York and are captioned Gotham Diversified Neutral Master Fund, LP, et al. v. Chicago Bridge & Iron Company N.V. et al., Case No. 1:18-cv-09927 (the “Gotham Action”); Appaloosa Investment L.P., et al., v. Chicago Bridge & Iron Company N.V., et al., Case No. 1:18-cv-09928 (the “Appaloosa Action”) and CB Litigation Recovery I, LLC v. Chicago Bridge & Iron Company N.V., et al., Case No. 1:19-cv-01750 (the “CB Litigation Recovery Action”). Besides CB&I, the other defendants in all three cases are the same individual defendants as in the Securities Litigation described above. Plaintiffs assert causes of action based on alleged violations of Sections 10(b), 18 and 20(a) of the Exchange Act and Rule 10b-5 thereunder, along with common law causes of action. On January 25, 2019, the defendants filed in the Gotham and Appaloosa Actions partial motions to dismiss the causes of actions asserted under Section 18 of the Exchange Act and the common law causes of action, which are currently pending. On March 25, 2019, the court entered a stipulation and order staying the CB Recovery Action pending a ruling on the partial motions to dismiss in the Gotham and Appaloosa Actions and making the decision on the partial motions to dismiss the Gotham and Appaloosa Actions applicable to the CB Recovery Action. We are not able at this time to determine the likelihood of loss, if any, arising from these matters and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and intend to defend against them vigorously.

39

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

On or about November 2, 2017, a complaint was filed in the District Court of Montgomery County, Texas by Daniel Cohen and associated individuals and corporations, alleging causes of action under both common and state law for alleged false and misleading statements related to CB&I’s acquisition of The Shaw Group in 2013, particularly with regard to two nuclear projects being constructed by Shaw in South Carolina and Georgia. The case is captioned Daniel Cohen, et al. v. Chicago Bridge & Iron Company, N.V., et al., No. 17-10-12820. The other defendants are the same individual defendants as in the Securities Litigation described above. The plaintiffs alleged that the individual defendants made, or had authority over the content and method of communicating information to the public, including the alleged misstatements and omissions detailed in the complaint, resulting in a financial loss on shares of stock purchased by the plaintiffs. Discovery in this matter is proceeding. We are not able at this time to determine the likelihood of loss, if any, arising from this matter and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and intend to defend against them vigorously.  

Post-Combination McDermott Securities Litigation—On November 15, 2018, a complaint was filed in the United States District Court for the Southern District of Texas seeking class action status on behalf of purchasers of McDermott common stock and alleging damages on their behalf arising from allegedly false and misleading statements made during the class period from January 24, 2018 to October 30, 2018. The case is captioned: Edwards v. McDermott International, Inc., et al., No. 4:18-cv-04330. The defendants in the case are: McDermott; David Dickson, our president and chief executive officer; and Stuart Spence, our chief financial officer. The plaintiff has alleged that the defendants made material misrepresentations and omissions about the integration of the CB&I business, certain CB&I projects and their fair values, and our business, prospects and operations. The plaintiff asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder. On January 14, 2019, a related action was filed in the United States District Court for the Southern District of Texas seeking class action status on behalf of all shareholders of McDermott common stock as of April 4, 2018 who had the right to vote on the Combination, captioned: The Public Employees Retirement System of Mississippi v. McDermott International, Inc., et al., No. 4:19-cv-00135. The plaintiff has alleged the defendants (which include our chief executive officer and chief financial officer) made material misrepresentations and omissions in the proxy statement we used in connection with the Combination. The plaintiff asserted claims under Section 14(a) and 20(a) of the Exchange Act. We filed a motion to consolidate the two actions, and the court granted that motion on February 22, 2019. The court appointed lead plaintiffs in both actions on June 5, 2019. We plan to file motions to dismiss all of the claims once amended pleadings are filed. We are not able at this time to determine the likelihood of loss, if any, arising from these matters and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and we intend to defend against them vigorously.

On March 1, 2019 and March 4, 2019, two essentially identical class action lawsuits were filed in the Harris County (Texas) District Court alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 on behalf of CB&I shareholders who acquired McDermott common stock pursuant or traceable to the Registration Statement on Form S-4 and the related Prospectus we issued in connection with the Combination. These actions were captioned Curti v. McDermott International, Inc., et al., Case No. 2019-15780 and Stremcha v. McDermott International, Inc., et al., Case No. 2019-15473. The defendants, besides McDermott International, Inc., included present officers of McDermott and current and past members of McDermott’s board of directors. On or about July 9, 2019, the plaintiffs in these actions voluntarily filed a notice of nonsuit and the actions have been dismissed without any payment by us.

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.

In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties from whom we have purchased or to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. 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 waste 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.

40

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

We believe we are in compliance, in all material respects, with applicable environmental laws and regulations and maintain insurance coverage to mitigate our exposure to environmental liabilities. We do not anticipate we will incur material capital expenditures for environmental matters or for the investigation or remediation of environmental conditions during the remainder of 2019 and 2020. As of June 30, 2019, we had no environmental reserve recorded.

Asset Retirement Obligations (“ARO”)

On March 26, 2019, we signed an agreement to enter into a long-term land lease agreement with Saudi Aramco to establish a fabrication and maritime facility located in Ras Al-Khair, Saudi Arabia. In connection with the contemplated lease, the closure of our current fabrication facility in Dubai, United Arab Emirates, is expected to occur in 2030. ARO recorded as of June 30, 2019 was equal to the present value of the estimated costs to decommission the current fabrication facility and was not material.

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 those provisions. Those 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 June 30, 2019, we determined that we had approximately $183 million of potential liquidated damages exposure, based on performance under contracts to date, and included $89 million as a reduction in transaction prices related to such exposure. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for the liquidated damages where we have not made a reduction in transaction prices. However, we may not achieve relief on some or all of the issues involved and, as a result, could be subject to liquidated damages being imposed on us in the future.

NOTE 23—SEGMENT REPORTING

We disclose the results of each of our reportable segments in accordance with ASC 280, Segment Reporting. Each of the reportable segments is separately managed by a senior executive who is a member of our Executive Committee (“EXCOM”). Our EXCOM is led by our Chief Executive Officer, who is the chief operating decision maker (“CODM”). Discrete financial information is available for each of the segments, and the EXCOM uses the operating results of each of the reportable segments for performance evaluation and resource allocation.

Upon completion of the Combination, during the second quarter of 2018, we reorganized our operations around five operating segments. This reorganization is intended to better serve our global clients, leverage our workforce, help streamline operations, and provide enhanced growth opportunities. Our five operating groups are: NCSA; EARC; MENA; APAC; and Technology. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources.

41

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Intersegment sales are recorded at prices we generally establish by reference to similar transactions with unaffiliated customers and were not material during the three and six months ended June 30, 2019 or 2018 and are eliminated upon consolidation.

Operating Information by Segment

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)						(In millions)
Revenues:
NCSA	$	1,259		$	995		$	2,639		$	1,093
EARC		192			58			340			74
MENA		399			469			779			814
APAC		133			108			288			257
Technology		154			105			302			105
Total revenues	$	2,137		$	1,735		$	4,348		$	2,343
Operating (loss) income: (1)
Segment operating income (loss):
NCSA	$	15		$	49		$	88		$	51
EARC		4			(8	)		11			(11	)
MENA		29			97			95			167
APAC		2			43			15			116
Technology		35			25			70			25
Total segment operating income		85			206			279			348
Corporate		(146	)		(157	)		(327	)		(235	)
Total operating (loss) income	$	(61	)	$	49		$	(48	)	$	113
Depreciation and amortization:
NCSA	$	14		$	9		$	31		$	16
EARC		3			3			7			3
MENA		13			10			25			16
APAC		2			2			7			9
Technology		18			14			37			14
Corporate		11			20			30			22
Total depreciation and amortization	$	61		$	58		$	137		$	80
Capital expenditures (2):
NCSA	$	2		$	-		$	5		$	2
EARC		1			-			1			-
MENA		4			4			8			7
APAC		-			2			5			5
Technology		-			-			-			-
Corporate		8			18			14			29
Total Capital expenditures	$	15		$	24		$	33		$	43

42

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Assets by Segment

	June 30, 2019			December 31, 2018
	(In millions)
Segment assets:
NCSA	$	3,489		$	3,257
EARC		1,238			1,169
MENA		1,583			1,472
APAC		1,200			1,147
Technology		2,726			2,752
Corporate (3)		(238	)		(357	)
Total assets	$	9,998		$	9,440

(1)    NCSA operating results for the three and six months ended June 30, 2019 included $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC.

Corporate operating results for the three and six months ended June 30, 2019 included:

• $20 million and $89 million of restructuring and integration costs, respectively; and

• $11 million and $15 million of transaction costs, respectively.

Corporate operating results for the six months ended June 30, 2018 included:

• $63 million and $75 million of restructuring and integration costs, respectively; and

• $37 million and $40 million of transaction costs, respectively.

See Note 11, Restructuring and Integration Costs and Transaction Costs, for further discussion.

(2)    Capital expenditures reported represent cash purchases. At June 30, 2019 and 2018, we had approximately $47 million and $14 million, respectively, of accrued and unpaid capital expenditures reported in property, plant and equipment and accrued liabilities.

(3)    Corporate assets at June 30, 2019 and December 31, 2018 include negative cash balances associated with our international cash pooling program.

NOTE 24—SUBSEQUENT EVENT

On July 15, 2019, we entered into an asset purchase agreement to acquire assets of Siluria Technologies, including various intellectual property and research and development assets. The purchase price was not material to McDermott.

The purchase adds complementary process and catalyst technologies to our Technology business, expands our licensing portfolio further into the gas monetization market and expands our research and development capabilities for process development, high-throughput catalyst developments and catalyst scale-up.

43

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, “McDermott,” “MDR,” “we,” “our,” “us” or the “Company” 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 Financial Statements and the Notes thereto included in Item 1 of this report 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, 2018 filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 25, 2019 (the “2018 Form 10-K”).

From time to time, our management or persons acting on our behalf make “forward-looking statements,” within the meaning of the Private Securities Litigation Reform Act of 1995, 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 remaining performance obligations (“RPOs”), revenues, income and capital spending. Forward-looking statements are generally accompanied by words such as “achieve,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “goal,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “strategy” 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.

In addition, various statements in this report, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements. Those forward-looking statements appear in the Notes to our Condensed Consolidated Financial Statements (the “Financial Statements”) in Item 1 of this report, in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, Legal Proceedings in Item 1 of Part II of this report and elsewhere in this report.

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:

• expectations regarding our business combination with CB&I described in Note 3, Business Combination, to the accompanying Financial Statements, and the anticipated benefits of combining CB&I’s business with McDermott’s business;

• future levels of revenues, operating margins, operating income, cash flows, net income or earnings per share;

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

• future project activities, including the commencement and subsequent timing of, and the success of, operational activities on specific projects, and the ability of projects to generate sufficient revenues to cover our fixed costs;

• estimates of revenue over time and contract profits or losses;

• expectations regarding the acquisition or divestiture of assets, including expectations regarding the sales of our industrial storage tanks and the remaining portion of our pipe fabrication businesses and the timing of, and use of proceeds from, those transactions;

• anticipated levels of demand for our products and services;

• global demand for oil and gas and fundamentals of the oil and gas industry;

• expectations regarding offshore development of oil and gas;

• market outlook for the EPCI market;

• expectations regarding cash flows from operating activities;

44

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• expectations regarding RPOs;

• 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;

• interest expense;

• the effectiveness of our derivative contracts in mitigating foreign currency and interest rate risks;

• results of our capital investment program;

• the impact of U.S. and non-U.S. tax law changes;

• 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.

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;

• the volatility of oil and gas prices;

• decisions about capital investment to be made by oil and gas companies and other participants in the energy and natural resource industries, demand from which is the largest component of our revenues;

• other factors affecting future levels of demand, including investments across the natural gas value chain, including LNG and petrochemicals, investments in power and petrochemical facilities and investments in various types of facilities that require storage structures and pre-fabricated pipe;

• the highly competitive nature of the businesses in which we are engaged;

• uncertainties as to timing and funding of new contract awards;

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

• changes in project design or schedule;

• changes in scope or timing of work to be completed under contracts;

• cost overruns on fixed-price or similar contracts or failure to receive timely or proper payments on cost-reimbursable contracts, whether as a result of improper estimates, performance, disputes or otherwise;

• changes in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;

• risks associated with labor productivity;

• cancellations of contracts, change orders and other modifications and related adjustments to RPOs and the resulting impact from using RPOs as an indicator of future revenues or earnings;

• the collectability of amounts reflected in change orders and claims relating to work previously performed on contracts;

45

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• our ability to settle or negotiate unapproved change orders and claims and estimates regarding liquidated damages;

• the capital investment required to construct new-build vessels and maintain and/or upgrade our existing 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 the availability, terms and deployment of capital;

• the unfunded liabilities of our pension and other post-retirement plans, which 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, which could lead to increased costs and affect the quality, costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors and give rise to contractually imposed 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;

• equipment failure;

• 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 U.S. and non-U.S. tax laws or regulations;

• the continued competitiveness and availability of, and continued demand and legal protection for, our intellectual property assets or rights, including the ability of our patents or licensed technologies to perform as expected and to remain competitive, current, in demand, profitable and enforceable;

• our ability to keep pace with rapid technological changes or innovations;

• the risk that we may not be successful in updating and replacing current information technology and the risks associated with information technology systems interruptions and cybersecurity threats;

• the risks associated with failures to protect data privacy in accordance with applicable legal requirements and contractual provisions binding upon us;

• 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 risks associated with forming and operating joint ventures, including exposure to joint and several liability for failures in performance by our co-venturers;

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

• the risks associated with our international operations, including risks relating to local content or similar requirements;

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• foreign currency and interest rate risks and our ability to properly manage or hedge those or similar risks;

• interference from adverse weather or sea 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 new financing arrangements;

• 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 subsidiaries; 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 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 the 2018 Form 10-K. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report and in the 2018 Form 10-K 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.

Overview

We are a fully integrated provider of engineering, procurement, construction and installation (“EPCI”) and technology solutions to the energy industry and design and build end-to-end infrastructure and technology solutions to transport and transform oil and gas into a variety of products. Our customers include national, major integrated and other oil and gas companies as well as producers of petrochemicals and electric power. Our proprietary technologies, integrated expertise and comprehensive solutions are utilized for liquefied natural gas (“LNG”), power, offshore and subsea, and downstream (includes downstream oil and gas processing facilities and licensed technologies and catalysts) energy projects around the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods. Contracts are usually awarded through a competitive bid process.

Business Combination in 2018

On May 10, 2018 (the “Combination Date”), we completed our combination with Chicago Bridge & Iron Company N.V. (“CB&I”) (the “Combination”) (see Note 3, Business Combination, to the accompanying Financial Statements for further discussion). Following completion of the Combination, during the second quarter of 2018, we reorganized our operations into five business segments to better serve our global clients, leverage our workforce, help streamline operations and provide enhanced growth opportunities.

Business Segments

Our five business segments, which represent our reportable segments, are: North, Central & South America (“NCSA”); Europe, Africa, Russia & the Caspian (“EARC”); Middle East & North Africa (“MENA”); Asia Pacific (“APAC”); and Technology. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects costs that are not allocated to our segments. For financial information about our segments, see Note 23, Segment Reporting, to the accompanying Financial Statements.

• NCSA—Our NCSA segment designs, engineers and constructs upstream offshore oil & gas facilities, downstream oil & gas facilities, gas-fired power plants, LNG import and export terminals, atmospheric and refrigerated storage vessels and terminals and water storage and treatment facilities and performs pipe and module fabrication. Our June 30, 2019 RPOs composition by product offering was 53% LNG, 33% Downstream, 8% Offshore & Subsea and 6% Power. We anticipate the majority of future opportunities over the intermediate term are likely to be in the U.S. LNG and petrochemical markets. Our June 30, 2019 RPOs distribution for this segment by contracting type was approximately 92% fixed-price and hybrid and 8% cost-reimbursable and other.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• EARC―Our EARC segment designs, engineers and constructs upstream offshore oil & gas facilities, downstream oil & gas facilities, LNG import and export terminals and atmospheric and refrigerated storage vessels and terminals. Our June 30, 2019 RPOs composition by product offering was 50% LNG, 26% Offshore & Subsea and 24% Downstream and was primarily comprised of fixed-price contracts. We anticipate the majority of future opportunities over the intermediate term are likely to be in the downstream oil & gas markets in Russia and upstream and LNG projects in Africa.

• MENA―Our MENA segment designs, engineers and constructs upstream offshore oil & gas facilities and pipelines, downstream oil & gas facilities, hydrocarbon processing facilities, atmospheric and refrigerated storage vessels and terminals, and performs pipe fabrication and manufacturing. Our June 30, 2019 RPOs composition by product offering was 91% Offshore & Subsea and 9% Downstream and was primarily comprised of fixed-price contracts. We anticipate the majority of future opportunities over the intermediate term are likely to be in the Middle East offshore market.

• APAC—Our APAC segment designs, engineers and constructs upstream offshore oil & gas facilities and pipelines, refining and petrochemical facilities, hydrocarbon processing facilities, LNG import and export terminals and atmospheric and refrigerated storage vessels and terminals. Our June 30, 2019 RPOs composition by product offering was 93% Offshore & Subsea and 7% Downstream, which was primarily comprised of fixed-price contracts. We anticipate the majority of future opportunities over the intermediate term are likely to be in India and Australia.

• Technology―Our Technology segment is a leading technology licensor of proprietary gas processing, refining, petrochemical and coal gasification technologies as well as a supplier of proprietary catalysts, equipment and related engineering services. These technologies are critical in the refining of crude oil into gasoline, diesel, jet fuel and lubes, the manufacturing of petrochemicals and polymers, as well as the gasification of coal into syngas. The Technology segment also has a 50% owned unconsolidated joint venture that provides proprietary process technology licenses and associated engineering services and catalysts, primarily for the refining industry. Our June 30, 2019 RPOs composition for this segment was 100% Downstream and primarily comprised of fixed-price contracts.

Loss Projects

Our accrual of provisions for estimated losses on active uncompleted contracts as of June 30, 2019 was $132 million and primarily related to the Cameron LNG project and the Freeport LNG Trains 1 & 2 projects. Our accrual of provisions for estimated losses on active uncompleted contracts as of December 31, 2018 was $266 million and primarily related to the Cameron LNG, Freeport LNG Trains 1 & 2, Calpine and Abkatun-A2 projects. Our Freeport LNG Train 3 project is not anticipated to be in a loss position.

Our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico for Pemex (“Line 1 and Line 10”) was also determined to be in substantial loss position as of June 30, 2019, as discussed further below.

For purposes of the discussion below, when we refer to a percentage of completion on a cumulative basis, we are referring to the cumulative percentage of completion, which includes progress made prior to the Combination Date. In accordance with U.S. GAAP, as of the Combination Date, we reset the progress to completion for all of CB&I’s projects then in progress to 0% for accounting purposes based on the remaining costs to be incurred as of that date.

Summary information for our significant ongoing loss projects as of June 30, 2019 is as follows:

Cameron LNG―At June 30, 2019, our U.S. LNG export facility project in Hackberry, Louisiana for Cameron LNG (being performed by our NCSA operating group) was approximately 78% complete on a post-Combination basis (approximately 93% on a cumulative basis) and had an accrued provision for estimated losses of approximately $58 million. In the second quarter of 2019, NCSA project operating margin was positively impacted by recognition of approximately $110 million of incentives related to the projected achievement of progress milestones.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Freeport LNG―At June 30, 2019, Trains 1 & 2 of our U.S. LNG export facility project in Freeport, Texas for Freeport LNG (being performed by our NCSA operating group) were approximately 87% complete on a post-Combination basis (approximately 96% on a cumulative basis) and had an accrued provision for estimated losses of approximately $19 million. During the three and six months ended June 30, 2019, the project was negatively impacted by $27 million and $54 million, respectively, due to changes in cost estimates resulting from increases in construction and subcontractor costs. These cost estimate increases were partially offset by the recording of approximately $11 million of incentive revenues in the first quarter of 2019.

During the three months ended June 30, 2019, Freeport LNG Train 3 was negatively impacted by $11 million of changes in cost estimates at completion.  During the six months ended June 30, 2019, Freeport LNG Train 3 was positively impacted by $5 million of changes in estimates, primarily due to increased productivity and savings in indirect costs in the first quarter. During the six months ended June 30, 2019, the Freeport LNG project taken as a whole had an overall negative $38 million impact on operating margin at completion.

Line 1 and Line 10― As of June 30, 2019, our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico (being performed by our NCSA operating group) was approximately 85% complete and had an accrued provision for estimated losses of approximately $6 million. During the three and six months ended June 30, 2019, the project was negatively impacted by $10 million and $28 million, respectively, of changes in cost estimates associated with unexpected schedule extensions, resulting in additional vessel and labor costs. The project is expected to be completed in the third quarter of 2019.

Summary information for our significant loss projects previously reported in the 2018 Form 10-K that are substantially complete as of June 30, 2019 is as follows:

Calpine Power Project―At June 30, 2019, our U.S. gas turbine power project for Calpine (being performed by our NCSA operating group) was approximately 99% complete on a post-Combination basis (approximately 99.7% on a pre-Combination basis), and the remaining accrued provision for estimated losses was not significant.

Abkatun-A2 Project―At June 30, 2019, our Abkatun-A2 platform project in Mexico for Pemex (being performed by our NCSA operating group) was approximately 99% complete, and the remaining accrued provision for estimated losses was not significant.

Review of Business Portfolio

We have performed a review of our business portfolio, which included businesses acquired in the Combination. Our review sought to determine if any portions of our business are non-core for purposes of our vertically integrated offering model. As a result of our review, we identified our industrial storage tank and pipe fabrication businesses as non-core for purposes of our vertically integrated offering model. We completed the sale of Alloy Piping Products, the distribution and manufacturing arm of our pipe fabrication business (“APP”), during the second quarter of 2019. We are continuing to pursue the sale of the remaining portion of our pipe fabrication business. 

We have identified potential buyers for our industrial storage tank business, and sales efforts with respect to that business remain ongoing.  In connection with that contemplated sale, we may retain a continuing minority ownership or other economic interest in the business.  Our anticipated aggregate net cash proceeds from the pipe fabrication and storage tank transactions are now expected to be lower than the approximately $1 billion we previously estimated.  Our ongoing competitive sale processes are now expected to result in closings of the sales in the fourth quarter of 2019; however, we can provide no assurance that either sale process will be completed on the anticipated timeline or at all.  Any potential sale would be subject to approval by our Board of Directors. Our Credit Agreement and the Indenture relating to our Senior Notes (each as defined and described in “—Liquidity and Capital Resources” below) require us to use the net cash proceeds from any sale of a business generating in excess of $500 million in sales proceeds to reduce our outstanding debt.  If the net cash proceeds received are less than $500 million, our Credit Agreement and such Indenture permit us to reinvest those proceeds in long-term assets within 365 days after the receipt of the net proceeds (or enter into binding commitments to do so within such period, and thereafter reinvest such proceeds within 180 days).  Any proceeds not reinvested at the end of such period would be required to be used to reduce our outstanding debt.

The financial results of our industrial storage tank and pipe fabrication businesses are primarily included within our NCSA, MENA and APAC operating groups.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Revenues for our industrial storage tank business as a percentage of our consolidated Revenues were approximately 11% and 8% for the six months ended June 30, 2019 and year ended December 31, 2018, respectively. Property, plant and equipment, net for our industrial storage tank business as a percentage of our consolidated Property, plant and equipment, net was approximately 6% and 3% as of June 30, 2019 and December 31, 2018, respectively. Operating income, including the allocation of the corresponding intangible amortization, for our industrial storage tank business was $26 million and $69 million for the six months ended June 30, 2019 and year ended December 31, 2018, respectively.

Revenues for our pipe fabrication business as a percentage of our consolidated Revenues were less than 1% for the six months ended June 30, 2019 and 1% for the year ended December 31, 2018. Property, plant and equipment, net for our pipe fabrication business as a percentage of our consolidated Property, plant and equipment, net was approximately 5% and 6% as of June 30, 2019 and December 31, 2018, respectively. Operating results for our pipe fabrication business were not material for the six months ended June 30, 2019 and the year ended December 31, 2018, respectively.

We have not included total assets of the two businesses in the above discussion, as the allocation of goodwill resulting from the Combination to these businesses has not been completed. As of June 30, 2019, we have allocated our goodwill at the reporting unit level. Similar to our disposal of APP, if we complete the planned dispositions of the remaining pipe fabrication business and storage tanks business, we will be required to allocate goodwill for purposes of determining and recording any gain or loss on sale.  We expect a significant portion of the remaining goodwill of our NCSA segment will be allocated to the storage tanks business for purposes of determining its carrying value.

RPOs

RPOs represent the amount of revenues we expect to recognize in the future from our contract commitments on projects. RPOs include the entire expected revenue values for joint ventures we consolidate and our proportionate values for consortiums we proportionately consolidate. We do not include expected revenues of contracts related to unconsolidated joint ventures in our RPOs, except to the extent of any subcontract awards we receive from those joint ventures.

RPOs for each of our segments can consist of up to several hundred contracts. These contracts vary in size from less than one hundred thousand dollars in contract value to several billion dollars, with varying durations that can exceed five years. The timing of awards and differing types, sizes and durations of our contracts, combined with the geographic diversity and stages of completion of the associated projects, often results in fluctuations in our quarterly segment results as a percentage of total revenue. RPOs may not be indicative of future operating results, and projects in our RPOs may be cancelled, modified or otherwise altered by customers. We can provide no assurance as to the profitability of our contracts reflected in RPOs. It is possible that our estimates of profit could increase or decrease based on, among other things, changes in productivity, actual downtime and the resolution of change orders and claims with the customers, and therefore our future profitability is difficult to predict.

The timing of our revenue recognition may be impacted by the contracting structure of our contracts. Under fixed-price contracts, we perform our services and execute our projects at an established price. Fixed-price contracts, and hybrid contracts with a more significant fixed-price component, tend to provide us with greater control over project schedule and the timing of when work is performed and costs are incurred, and, accordingly, when revenue is recognized. Under cost-reimbursable contracts, we generally perform our services in exchange for a price that consists of reimbursement of all customer-approved costs and a profit component, which is typically a fixed rate per hour, an overall fixed fee or a percentage of total reimbursable costs. Cost-reimbursable contracts, and hybrid contracts with a more significant cost-reimbursable component, generally provide our customers with greater influence over the timing of when we perform our work, and, accordingly, such contracts often result in less predictability with respect to the timing of revenue recognition. Our shorter-term contracts and services are generally provided on a cost-reimbursable, fixed-price or unit price basis.

Our RPOs by business segment as of June 30, 2019 and December 31, 2018 were as follows: 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	June 30, 2019				December 31, 2018				Change (1)
	(Dollars in millions)
NCSA	$	8,123	39	%	$	5,649	52	%	$	2,474		44	%
EARC		4,032	20	%		1,378	12	%		2,654		193	%
MENA		6,538	32	%		1,834	17	%		4,704		256	%
APAC		1,289	6	%		1,420	13	%		(131	)	-9	%
Technology		565	3	%		632	6	%		(67	)	-11	%
Total	$	20,547	100	%	$	10,913	100	%	$	9,634		88	%

⁽¹⁾ Our RPOs increased by $9.6 billion from December 31, 2018, due to new awards of $13.9 billion exceeding the recognition of revenues of $4.3 billion.

Of the RPOs as of June 30, 2019, we expect to recognize revenues as follows:

	2019		2020		Thereafter
	(In millions)
Total RPOs	$	4,768	$	7,372	$	8,407

Three months ended June 30, 2019 vs three months ended June 30, 2018

Revenue

Revenues increased by 23%, or $402 million, in the second quarter of 2019 compared to the second quarter of 2018, primarily due to our NCSA and EARC segments. Revenues for the second quarter of 2018 included impact of the CB&I activity from the Combination Date.

	Three Months Ended June 30,
	2019		2018		Change
	(In millions)							Percentage
Revenues:
NCSA	$	1,259	$	995	$	264			27		%
EARC		192		58		134			231
MENA		399		469		(70	)		(15	)
APAC		133		108		25			23
Technology		154		105		49			47
Total	$	2,137	$	1,735	$	402			23		%

NCSA—Revenues increased by 27%, or $264 million, compared to the second quarter of 2018.

In the second quarter of 2019, a variety of projects and activities contributed to revenues, including:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• construction progress on our two U.S. LNG export facility projects (approximately $362 million combined), including incentive revenue recognized on our Cameron, Louisiana LNG export facility project;

• construction progress on our ethane projects in Texas and Louisiana (approximately $174 million combined); and

• various power projects in the United States.

In the second quarter of 2018, a variety of projects and activities contributed to revenues, as follows:

• construction progress on our two U.S. LNG export facility projects (approximately $370 million combined);

• construction progress on our ethane cracker projects in Texas and Louisiana (approximately $260 million combined);

• fabrication and marine activity progress on the Abkatun-A2 platform, a turnkey EPCI project in the Gulf of Mexico;

• power projects in the U.S.; and

• various other projects in the U.S.

EARC—Revenues increased by 231%, or $134 million, compared to the second quarter of 2018.  

In the second quarter of 2019, a variety of projects and activities contributed to revenues, including:

• progress on engineering and procurement activities on the Tyra Redevelopment EPCI project, awarded in the fourth quarter of 2017;

• engineering, procurement and supply of process equipment for a deep conversion complex built at a refinery in central Russia; and

• progress on engineering and procurement activities on the BP Tortue EPCI project.

In the second quarter of 2018, a variety of projects and activities contributed to revenues, as follows:

• commencement in 2018 of the Tyra Redevelopment EPCI project;

• mobilization activities for an oil refinery expansion project in Russia;

• commencement and completion of the diving scope project for a refinery off the coast of Durban, South Africa;

• engineering, procurement and supply of process equipment for the deep conversion complex built at a refinery in central Russia; and

• various other projects.

MENA—Revenues decreased by 15%, or $70 million, compared to the second quarter of 2018.  

In the second quarter of 2019, a variety of projects and activities contributed to revenues, including:

• procurement, fabrication and marine and hookup activities on the Saudi Aramco Safaniya Phase 6 project, awarded in the fourth quarter of 2017;

• fabrication, marine and procurement activities on the Bul Hanine EPCI project for Qatar Petroleum, awarded in the fourth quarter of 2017;

• engineering and procurement progress on the Abu Dhabi National Oil Company (“ADNOC”) crude flexibility project in Ruwais, UAE, awarded in the first quarter of 2018; and

• various other projects.

In the second quarter of 2018, a variety of projects and activities contributed to revenues, as follows:

• engineering and fabrication progress and pipelay and spool installation activity by our DB 32 and DB 30 vessels on the Saudi Aramco Safaniya Phase 5 project;

• engineering, fabrication and procurement progress on our Saudi Aramco 13 Jackets project, awarded in the first quarter of 2018;

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• deck installations, tie-ins and hook-up activities by our DB 30 vessel on the Saudi Aramco Header 9 Facilities project;

• engineering, fabrication and procurement progress on the Saudi Aramco Safaniya Phase 6 project;

• marine hook-up activities utilizing a jack-up barge on the lump-sum EPCI project under the Saudi Aramco Long-Term Agreement (the “LTA II”);

• marine installation activities by our Emerald Sea and DB 27 vessels on a pipeline replacement project offshore Qatar; and

• various other projects.

APAC—Revenues increased by 23%, or $25 million, compared to the second quarter of 2018.  

In the second quarter of 2019, a variety of projects and activities contributed to revenues, including:

• substantial completion of initial offshore campaign by our DLV 2000 vessel on a subsea installation project in India;

• the offshore installation campaign by our DB30 vessel for the transportation and installation of offshore structures, pipelines and pre-commissioning project for the Pan Malaysia field development; and

• various other projects.

In the second quarter of 2018, a variety of projects and activities contributed to revenues, as follows:

• substantial completion of the pipelay campaign and offshore construction on the Greater Western Flank Phase 2 project offshore Australia; and

• commencement of activities on a subsea installation project offshore India, awarded in the fourth quarter of 2017.

Technology—Revenues increased by 47%, or $49 million, compared to the second quarter of 2018. Revenues during both the second quarter of 2019 and 2018 were primarily associated with licensing and proprietary equipment activities in the petrochemical and refining market and the sale of catalyst.

Segment Operating Income

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment operating income in the second quarter of 2019 was $85 million compared to segment operating income of $206 million in the second quarter of 2018. Our second quarter 2019 operating results included a $101 million loss associated with the sale of APP in our NCSA segment. Our second quarter 2018 operating results included impact of the CB&I activity from the Combination Date.

	Three Months Ended June 30,
	2019		2018			Change
	(In millions)								Percentage
Segment operating income (loss):
NCSA	$	15	$	49		$	(34	)		(69	)	%
EARC		4		(8	)		12			150
MENA		29		97			(68	)		(70	)
APAC		2		43			(41	)		(95	)
Technology		35		25			10			40
Total	$	85	$	206		$	(121	)		(59	)	%

NCSA—Segment operating income was $15 million and $49 million during the second quarters of 2019 and 2018, respectively. Our second quarter of 2019 operating results included a $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC, to the accompanying Financial Statements.

In the second quarter of 2019, a variety of projects and activities contributed to operating income, including:

• $110 million of incentives recognized on our Cameron, Louisiana LNG export facility project, related to the projected achievement of progress milestones;

• close-out improvements and settlements of claims on our substantially complete projects; and

• construction progress and cost savings on our ethane projects in Texas and Louisiana and various power projects.

These benefits were partially offset by:

• charges resulting from changes in cost estimates on several projects, as discussed in Note 6, Project Changes in Estimates, to the accompanying Financial Statements; and

• the $101 million loss on the sale of APP.

In the second quarter of 2018, a variety of projects and activities contributed to operating income, including:

• construction progress on our ethane cracker projects in Texas and Louisiana; and

• various other projects in the U.S.

During the second quarter of 2018, our two U.S. LNG export facility projects and our gas turbine power projects in the Midwest and Northeast did not materially contribute to our operating margin.

EARC—Segment operating income was $4 million in the second quarter of 2019 compared to a segment operating loss of $8 million in the second quarter of 2018.

In the second quarter of 2019, a variety of projects and activities contributed to operating income, including:

• progress on engineering and procurement activities on the Tyra Redevelopment project; and

• ongoing procurement activities for the oil refinery expansion project in Russia.

In the second quarter of 2018, our project operating results were adversely affected by selling, general and administrative expenses and losses from our investment in the io Oil and Gas unconsolidated joint venture.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MENA—Segment operating income in the second quarters of 2019 and 2018 was $29 million and $97 million, respectively.

In the second quarter of 2019, a variety of projects and activities contributed to operating income, including:

• procurement, fabrication and marine and hookup activities on the Saudi Aramco Safaniya Phase 6 project;

• engineering and procurement progress on the ADNOC crude flexibility project in Ruwais, UAE;

• income from our unconsolidated joint venture with CTCI Corporation (“CTCI”); and

• various other projects.

In the second quarter of 2018, a variety of projects and activities contributed to operating income, including:

• engineering and fabrication progress and pipelay and spool installation activity by our DB 32 and DB 30 vessels on the Saudi Aramco Safaniya Phase 5 project, as well as productivity improvements and cost savings on the project;

• deck installations, tie-ins and hook up activities by our DB 30 vessel on the Saudi Aramco Header 9 Facilities project, as well as productivity improvements and cost savings on the project;

• a favorable settlement on the Saudi Aramco Safaniya Phase 1 project, completed in 2016;

• marine hook-up activities utilizing a jack-up barge on the lump-sum EPCI project under the LTA II;

• a demolition campaign on the Saudi Aramco Marjan power systems replacement project; and

• income from the investment in our unconsolidated joint venture with CTCI.

APAC—Segment operating income in the second quarters of 2019 and 2018 was $2 million and $43 million, respectively. Operating income in the second quarters of 2019 and 2018 was primarily associated with cost savings and close-out activities on completed projects, partially offset by cost increases and weather downtime on various projects.

Technology—Segment operating income during the second quarters of 2019 and 2018 was $35 million and $25 million, respectively. These results were primarily associated with licensing and proprietary equipment activity, as well as the supply of catalyst materials, and included equity income from our unconsolidated joint venture, Chevron Lummus Global, L.L.C. Operating results for the second quarters of 2019 and 2018, also included $17 million and $13 million, respectively, of amortization expense associated with project-related and other intangible assets and investment in unconsolidated affiliates.

Other Items in Operating Income

Corporate and Other

	Three months ended June 30,
	2019			2018			Change
	(In thousands)								Percentage
Corporate and Other	$	(146	)	$	(157	)	$	11		7	%

The decrease in Corporate and Other expenses was primarily due to a decrease of $43 million in restructuring and integration costs, and $26 million in transaction costs (see Note 11, Restructuring and Integration Costs and Transaction Costs, to the accompanying Financial Statements), partially offset by increased selling, general and administrative expenses for the combined organization.

Other Non-operating Items

Interest expense, net—Interest expense, net, was $100 million and $72 million in the second quarter of 2019 and 2018, respectively.  

Interest expense in the second quarter of 2019 primarily consisted of:

• $34 million of interest expense and $3 million of deferred debt issuance costs (“DIC”) amortization associated with the issuance of $1.3 billion principal amount of our 10.625% senior notes due 2024 (the “Senior Notes”);

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• $43 million of interest expense and $3 million of DIC amortization associated with our $2.26 billion senior secured term loan facility (the “Term Facility”); and

• $10 million of interest expense and $3 million of DIC amortization associated with the revolving credit facility under the Credit Agreement.

See Note 12, Debt, to the accompanying Financial Statements for further discussion.

Interest expense, net in the second quarter of 2018 primarily consisted of:

• $28 million of interest expense and $1 million of amortization associated with the issuance of the Senior Notes;

• $29 million of interest expense and $2 million of deferred DIC amortization associated with the Term Facility;

• $8 million of amortization of deferred DIC associated with the revolving credit facility and letter of credit facility under the Credit Agreement; and

• $4 million of interest expense associated with our $500 million principal amount of 8.000% second-lien notes, which were redeemed in May 2018.

Income tax benefit—During the three months ended June 30, 2019, we recognized an income tax benefit of $49 million (effective tax rate of 30%), compared to an income tax benefit of $84 million (effective tax rate of 215%) for the three months ended June 30, 2018. Our income tax provision for the second quarter of 2019 benefited from nondeductible expenses ($19 million).

Six months ended June 30, 2019 vs six months ended June 30, 2018

Revenue

Revenues increased by 86%, or $2 billion, in the six months ended June 30, 2019 compared to the six months ended June 30, 2018, primarily due to an increase in our NCSA segment. Revenues for the six months of 2018 included impact of the CB&I activity from the Combination Date.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	Six Months Ended June 30,
	2019		2018		Change
	(In millions)							Percentage
Revenues:
NCSA	$	2,639	$	1,093	$	1,546			141		%
EARC		340		74		266			359
MENA		779		814		(35	)		(4	)
APAC		288		257		31			12
Technology		302		105		197			188
Total	$	4,348	$	2,343	$	2,005			86		%

NCSA—Revenues increased by 141%, or $2 billion, in the six months ended June 30, 2019 compared to the six months ended June 30, 2018.

In the six months ended June 30, 2019, a variety of projects and activities contributed to revenues, including:

• construction progress on our two U.S. LNG export facility projects (approximately $771 million combined), including incentive revenue recognized on our Cameron, Louisiana LNG export facility project;

• construction progress on our ethane projects in Texas and Louisiana (approximately $509 million combined); and

• various power projects in the United States.

In the six months ended June 30, 2018, a variety of projects and activities contributed to revenues, as follows:

• construction progress on our two U.S. LNG export facility projects (approximately $370 million combined);

• construction progress on our ethane cracker projects in Texas and Louisiana (approximately $260 million combined);

• fabrication and marine activity progress on the Abkatun-A2 platform;

• various power projects in the United States; and

• various other projects in the United States.

EARC—Revenues increased by 359%, or $266 million, in the six months ended June 30, 2019, compared to the six months ended June 30, 2018.  

In the six months ended June 30, 2019, a variety of projects and activities contributed to revenues, including:

• progress on engineering and procurement activities on the Tyra Redevelopment EPCI project;

• ongoing procurement activities for the oil refinery expansion project in Russia;

• progress on engineering and procurement activities on the BP Tortue EPCI project; and

• the engineering, procurement and supply of process equipment for a deep conversion complex built at a refinery in central Russia.

In the second quarter of 2018, a variety of projects and activities contributed to revenues, as follows:

• commencement in 2018 of the Tyra Redevelopment EPCI project;

• mobilization activities for the oil refinery expansion project in Russia;

• commencement and completion of the diving scope project for the refinery off the coast of Durban, South Africa;

• engineering, procurement and supply of process equipment for the deep conversion complex built at a refinery in central Russia; and

• various other projects.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MENA—Revenues decreased by 4%, or $35 million, in the six months ended June 30, 2019, compared to the six months ended June 30, 2018.  

In the six months ended June 30, 2019, a variety of projects and activities contributed to revenues, including:

• procurement, fabrication, marine and hookup activities on the Saudi Aramco Safaniya Phase 6 project, awarded in the fourth quarter of 2017;

• engineering, fabrication, marine and procurement activities on the Bul Hanine EPCI project for Qatar Petroleum, awarded in the fourth quarter of 2017;

• engineering and procurement progress on the ADNOC crude flexibility project in Ruwais, UAE, awarded in the first quarter of 2018; and

• various other projects.

In the six months ended June 30, 2018, a variety of projects and activities contributed to revenues, as follows:

• engineering and fabrication progress and pipelay and spool installation activity by our DB 32 and DB 30 vessels on the Saudi Aramco Safaniya Phase 5 project;

• engineering, fabrication and procurement progress on our Saudi Aramco 13 Jackets project, awarded in the first quarter of 2018;

• deck installations, tie-ins and hook-up activities by our DB 30 vessel on the Saudi Aramco Header 9 Facilities project;

• engineering, fabrication and procurement progress on the Saudi Aramco Safaniya Phase 6 project;

• marine hook-up activities utilizing a jack-up barge on the lump-sum EPCI project for Saudi Aramco under the LTA II;

• marine installation activities by our Emerald Sea and DB 27 vessels on a pipeline replacement project offshore Qatar; and

• various other projects.

APAC—Revenues increased by 12%, or $31 million, in the six months ended June 30, 2019, compared to the six months ended June 30, 2018.  

In the six months ended June 30, 2019, a variety of projects and activities contributed to revenues, including:

• substantial completion of the initial offshore campaign by our DLV 2000 vessel on a subsea installation project offshore India;

• the offshore installation campaign by our DB30 vessel for the transportation and installation of offshore structures, pipelines and pre-commissioning project for the Pan Malaysia field development; and

• close-out activities on a completed project and progress on various other projects.

In the six months ended June 30, 2018, a variety of projects and activities contributed to revenues, as follows:

• commencement and substantial completion of the pipelay campaign and offshore construction on the Greater Western Flank Phase 2 project offshore Australia;

• the Inpex Ichthys project offshore Australia and Vashishta subsea field infrastructure development project offshore India, both of which are substantially complete; and

• commencement of activities on a subsea installation project offshore India, awarded in the fourth quarter of 2017.

Technology—Revenues increased by 188%, or $197 million, in the six months ended June 30, 2019, compared to the six months ended June 30, 2018. Revenues during both the six months ended June 30, 2019 and 2018 were primarily associated with licensing and proprietary equipment activities in the petrochemical and refining market and the sale of catalyst.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Operating Income

Segment operating income decreased by 20%, or $69 million, in the first half of 2019 compared to the first half of 2018. Our first half 2019 operating results included a $101 million loss associated with the sale of APP in our NCSA segment. Our first half of 2018 operating results included impact of the CB&I activity from the Combination Date.

	Six Months Ended June 30,
	2019		2018			Change
	(In millions)								Percentage
Segment operating income (loss):
NCSA	$	88	$	51		$	37			73		%
EARC		11		(11	)		22			200
MENA		95		167			(72	)		(43	)
APAC		15		116			(101	)		(87	)
Technology		70		25			45			180
Total	$	279	$	348		$	(69	)		(20	)	%

NCSA—Segment operating income was $88 million and $51 million during the six months ended June 30, 2019 and 2018, respectively. Our second quarter of 2019 operating results included a $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC, to the accompanying Financial Statements.

In the first half of 2019, a variety of projects and activities contributed to operating income, including:

• incentive revenues recognized on our U.S. LNG export facility projects, including $110 million recognized on Cameron in the second quarter of 2019, related to the projected achievement of progress milestones;

• close-out improvements and settlements of claims on our substantially complete projects; and

• construction progress and cost savings on our ethane projects in Texas and Louisiana and various power projects.

These benefits were partially offset by:

• charges resulting from changes in cost estimates on several projects, as discussed in Note 6, Project Changes in Estimates, to the accompanying Financial Statements; and

• the $101 million loss on the sale of APP.

In the first half of 2018, a variety of projects and activities contributed to operating income, as follows:

• construction progress on our ethane cracker projects in Texas and Louisiana; and

• various other projects in the United States.

During the first of half of 2018, our two U.S. LNG export facility projects and our gas turbine power projects in the Midwest and Northeast did not materially contribute to our operating margin.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EARC—Segment operating income was $11 million in the six months ended June 30, 2019 compared to a segment operating loss of $11 million in the six months ended June 30, 2018.

In the first half of 2019, a variety of projects and activities contributed to operating income, including:

• progress on engineering and procurement activities on the Tyra Redevelopment project;

• ongoing procurement activities for the oil refinery expansion project in Russia; and

• progress on engineering and procurement activities on the BP Tortue EPCI project.

In the first half of 2018, our project operating results were adversely affected by selling, general and administrative expenses and losses from our investment in the io Oil and Gas unconsolidated joint venture.

MENA—Segment operating income in the six months ended June 30, 2019 and 2018 was $95 million and $167 million, respectively.

In the first half of 2019, a variety of projects and activities contributed to operating income, including:

• procurement, fabrication and marine and hookup activities on the Saudi Aramco Safaniya Phase 6 project;

• close-out activities and cost savings on the substantially completed Saudi Aramco Safaniya Phase 5 project;

• engineering and procurement progress on the ADNOC crude flexibility projects in Ruwais, UAE, awarded in the first quarter of 2018;

• income from the investment in our unconsolidated joint venture with CTCI; and

• various other projects.

In the first half of 2018, a variety of projects and activities contributed to operating income, including:

• engineering and fabrication progress and pipelay and spool installation activity by our DB 32 and DB 30 vessels on the Saudi Aramco Safaniya phase 5 project, as well as productivity improvements and cost savings on the project;

• deck installations, tie-ins and hook up activities by our DB 30 vessel on the Saudi Aramco Header 9 Facilities project, as well as productivity improvements and cost savings on the project;

• favorable settlement on the Saudi Aramco Safaniya Phase 1 project, completed in 2016;

• marine hook-up activities utilizing a jack-up barge on the lump-sum EPCI project for Saudi Aramco under the LTA II;

• demolition campaign on the Saudi Aramco Marjan power systems replacement project; and

• income from the investment in our unconsolidated joint venture with CTCI.

APAC—Segment operating income in the six months ended June 30, 2019 and 2018 was $15 million and $116 million, respectively.

In the first half of 2019, cost savings and close-out activities on completed projects contributed to operating income, partially offset by cost increases and weather downtime on various projects.

In the six months ended June 30, 2018, a variety of projects and activities contributed to operating income, as follows:

• cost savings and the close-out of outstanding change orders on active and completed projects; and

• cost savings upon the commencement and substantial completion of pipelay campaign and offshore construction on the Greater Western Flank Phase 2 project offshore Australia, partially offset by the impact of weather-related delays on the project.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Technology—Segment operating income during the six months ended June 30, 2019 and 2018, was $70 million and $25 million, respectively. The results were primarily associated with licensing and proprietary equipment activity, as well as the supply of catalyst materials, and included equity income from our unconsolidated joint venture, Chevron Lummus Global, L.L.C. Operating results for the six months ended June 30, 2019 and 2018, also included $35 million and $13 million, respectively, of amortization expense associated with project-related and other intangible assets and investment in unconsolidated affiliates.

Other Items in Operating Income

Corporate and Other

	Six months ended June 30,
	2019			2018			Change
	(In millions)									Percentage
Corporate and Other	$	(327	)	$	(235	)	$	(92	)		(39	)	%

For the six months ended June 30, 2019 and 2018, Corporate and Other expenses were $327 million and $235 million, respectively. The increase in Corporate and Other expenses was primarily due to the following:

• an increase of $14 million in restructuring and integration costs, primarily related to change-in-control, severance, professional fees and costs of settlement of litigation (see Note 11, Restructuring and Integration Costs and Transaction Costs, to the accompanying Financial Statements); and

• increased selling, general and administrative expenses for the combined organization.

Other Non-operating Items

Interest expense, net—Interest expense, net, was $192 million and $83 million during the six months ended June 30, 2019 and 2018, respectively.  

Interest expense in the six months ended June 30, 2019 primarily consisted of:

• $69 million of interest expense and $5 million of DIC amortization associated with the issuance of the Senior Notes;

• $85 million of interest expense and $6 million of DIC amortization associated with the Term Facility; and

• $13 million of interest expense and $6 million of DIC amortization associated with the revolving credit facility under the Credit Agreement.

See Note 12, Debt, to the accompanying Financial Statements for further discussion.

Interest expense in the six months ended June 30, 2018 primarily consisted of:

• $28 million of interest expense and $1 million of deferred DIC amortization associated with the Senior Notes;

• $29 million of interest expense and $2 million of deferred DIC amortization, associated with the Term Facility;

• $9 million of amortization of deferred DIC associated with our revolving credit facility and letter of credit facility under the Credit Agreement; and

• $14 million of interest expense associated with our 8.000% second-lien notes, which were redeemed in May 2018.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Income tax benefit— During the six months ended June 30, 2019, we recognized an income tax benefit of $70 million (effective tax rate of 29%), compared to an income tax benefit of $63 million (effective tax rate of 394%) for the six months ended June 30, 2018. Our income tax provision for the six months ended June 30, 2019 benefited from the settlement of a customer claim ($18 million) and a favorable court ruling on tax matters ($19 million), partially offset by nondeductible, state tax and other expenses ($12 million).

During the six months ended June 30, 2019, our unrecognized tax benefits decreased $19 million, primarily due to the favorable court ruling referenced above. We do not anticipate significant changes to this balance in the next 12 months.

Inflation and Changing Prices

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), generally using historical U.S. dollar accounting (“historical cost”). Statements based on historical cost, however, do not adequately reflect the cumulative effect of increasing costs and changes in the purchasing power of the dollar, especially during times of significant and continued inflation.

In order to minimize the negative impact of inflation on our operations, we attempt to cover the increased cost of anticipated changes in labor, material and service costs either through an estimate of those changes, which we reflect in the original price, or through price escalation clauses in our contracts.

Liquidity and Capital Resources

Our primary sources of liquidity are cash and cash equivalents on hand, cash flows generated from operations and capacity under our revolving credit and other facilities. Our revolving credit and other facilities are also available to provide letters of credit, which are generally issued to customers in the ordinary course of business to support advance payments and performance guarantees in lieu of retention on our contracts, or in certain cases, are issued in support of our insurance programs. We regularly review our sources and uses of funds and may seek to access capital markets or increase our revolving credit and letter of credit capacity to increase our liquidity position and support our ability to take on larger project awards. We also perform periodic reviews of our business portfolio and may adjust our portfolio to dispose of those portions of our business deemed to be non-core to our vertically integrated offering model.

We believe our cash and cash equivalents on hand, cash flows generated from operations, amounts available under our credit facilities and uncommitted bilateral lines of credit and proceeds from previously announced non-core asset sales will be sufficient to finance our capital expenditures, settle our commitments and contingencies (as more fully described in Note 22, Commitments and Contingencies to the Financial Statements) and address our normal, anticipated working capital needs for the foreseeable future.

As discussed above under “Company Overview – Review of Business Portfolio,” we completed the sale of APP during the second quarter of 2019.  We are continuing to pursue the sale of the remaining portion of the pipe fabrication business.  We have identified potential buyers for our industrial storage tank business, and sales efforts with respect to that business remain ongoing.  In connection with that contemplated sale, we may retain a continuing minority ownership or other economic interest in the business.  Our anticipated aggregate net cash proceeds from the pipe fabrication and storage tank transactions are now expected to be lower than the approximately $1 billion we previously estimated.  Our ongoing competitive sale processes are now expected to result in closings of the sales in the fourth quarter of 2019; however, we can provide no assurance that either sale process will be completed on the anticipated timeline or at all.  Any potential sale would be subject to approval by our Board of Directors. Our Credit Agreement and the Indenture relating to our Senior Notes (each as defined and described in “—Liquidity and Capital Resources” below) require us to use the net cash proceeds from any sale of a business generating in excess of $500 million in sales proceeds to reduce our outstanding debt.  If the net cash proceeds received are less than $500 million, our Credit Agreement and such Indenture permit us to reinvest those proceeds in long-term assets within 365 days after the receipt of the net proceeds (or enter into binding commitments to do so within such period, and thereafter reinvest such proceeds within 180 days).  Any proceeds not reinvested at the end of such period would be required to be used to reduce our outstanding debt.

There can be no assurance that funding sources will continue to be available, as our ability to generate cash flows from operations, our ability to access our credit facilities and uncommitted bilateral lines of credit, our ability to access capital markets and our ability to sell non-core assets, at reasonable terms or at all, may be impacted by a variety of business, economic, legislative, financial and other factors, which may be outside of our control. Additionally, while we currently have significant uncommitted bonding facilities, primarily to support various commercial provisions in our contracts, a termination or reduction of these bonding facilities could result

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

in the utilization of letters of credit in lieu of performance bonds, thereby reducing the available capacity under our credit facilities and uncommitted bilateral lines of credit. Although we do not anticipate a reduction or termination of the bonding facilities, there can be no assurance that such facilities will continue to be available at reasonable terms to service our ordinary course obligations.

Cash, Cash Equivalents and Restricted Cash

As of June 30, 2019, we had $782 million of cash, cash equivalents and restricted cash, as compared to $845 million as of December 31, 2018. Approximately $252 million of our cash and cash equivalents as of June 30, 2019 was within our variable interest entities (“VIEs”) associated with our joint venture and consortium arrangements, which is generally only available for use in our operating activities when distributed to the joint venture and consortium participants. As of June 30, 2019, we had approximately $158 million of cash in jurisdictions outside the U.S., principally in Ireland, Brazil, the United Kingdom, the United Arab Emirates and Saudi Arabia. As of June 30, 2019, approximately 4.5% of our outstanding cash balance is held in countries that have established government-imposed currency restrictions that could impede the ability of our subsidiaries to transfer funds to us.  

Cash Flow Activities

Operating activities―Net cash (used in) provided by operating activities in the six months ended June 30, 2019 and 2018 was ($449) million and $435 million, respectively.

The cash (used in) provided by operating activities primarily reflected our net (loss) income, adjusted for non-cash items and changes in components of our working capital and changes in our current and non-current liabilities. The changes in our working capital during the six months ended June 30, 2019 were primarily driven by accounts receivable, contracts in progress, net of advance billings on contracts, and accounts payable. Fluctuations in working capital are normal in our business. Working capital is impacted by the size of our projects and the achievement of billing milestones on RPOs as we complete different phases of our projects.

As of June 30, 2019 and December 31, 2018, negative working capital associated with the Calpine power project and our aggregate proportionate shares of the Cameron LNG and Freeport LNG consortium projects (collectively, the “Focus Projects”) was approximately $412 million and $815 million, respectively.

In the second quarter of 2019, Cameron LNG projects operating margin was positively impacted by recognition of approximately $110 million of incentives related to the projected achievement of progress milestones. That incentive has two cash components: 

• $75 million expected to be received in the second half of 2019, including $38 million received in July 2019; and

• $35 million expected to be received in 2020.

In the six months ended June 30, 2019, net cash used by working capital was approximately $364 million.

The components of working capital that used cash were:

• Contracts in progress/Advance billings on contracts—a net increase of $745 million, primarily due to the impact of progress on projects within our NCSA segment (including approximately $282 million used for the Focus Projects) and projects within our EARC and MENA segments; and

• Accounts receivable—a net increase of $164 million, primarily due to billings in our NCSA and APAC segments, partially offset by collections within our EARC, MENA and Technology segments.

This increase was partially offset by:

• Accounts payable—an increase of $545 million, primarily driven by project progress across all segments and Corporate.

The net decrease in current and non-current liabilities of $112 million was primarily driven by our NCSA and MENA segments and Corporate, partially offset by our EARC and APAC segments. The net decrease was primarily associated with a decrease in accrued contract costs and tax payments.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In the six months ended June 30, 2018, net cash provided by working capital was approximately $266 million.

The components of working capital that provided cash were:

• Accounts receivable—decrease of $278 million driven by collections primarily within our NCSA segment; and

• Accounts payable—increase of $129 million driven by project progress primarily within our MENA segment.

The increase was partially offset by a $141 million increase in Contracts in progress, net of Advance billings on contracts, primarily due to the impact of progress on projects within our NCSA segment, partially offset by projects within our APAC segment.

Investing activities― Net cash used in investing activities in the six months ended June 30, 2019 was $185 million and was primarily associated with:

• outflows from advances of $234 million with our third-party consortium participants of proportionately consolidated consortiums (see Note 10, Joint Venture and Consortium Arrangements, to the accompanying Financial Statements); and

• capital expenditures of $33 million.

Cash outflows in the six months ended June 30, 2019 were partially offset by $83 million in net proceeds from the sale of APP (see Note 4, Disposition of Alloy Piping Products, LLC).

Net cash used in investing activities in the six months ended June 30, 2018 was $2.5 billion and was primarily associated with:

• the cash portion of the Combination consideration ($2.4 billion, net of cash acquired of $498 million – see Note 3, Business Combination, to the Financial Statements for further discussion);

• net outflows from advances of $45 million with our third-party consortium participants of proportionately consolidated consortiums; and

• capital expenditures of $43 million.

Financing activities―Net cash provided by financing activities in the six months ended June 30, 2019 and 2018 was $573 million and $2.8 billion, respectively.

Net cash provided in the six months ended June 30, 2019 was primarily attributable to:

• $379 million of net borrowings under the revolving credit facility under the Credit Agreement discussed below;

• $190 million of net inflows attributable to advances from our equity method joint ventures and proportionately consolidated consortiums; and

• $32 million provided under structured equipment financing discussed below.

The inflows were partially offset by:

• $11 million of Term Facility, $4 million of North Ocean financing and $4 million of capital lease payments;

• $5 million of distributions to a former joint venture member (see Note 19, Stockholders’ Equity and Equity-Based Incentive Plans, to the accompanying Financial Statements); and

• $4 million of repurchases of common stock tendered by participants in our long-term incentive plans for payment of applicable withholding taxes upon vesting of awards under those plans.

Net cash provided for the six months ended June 30, 2018 was primarily attributable to:

• borrowings of $2.26 billion from our Term Facility; and

• the issuance of $1.3 billion in aggregate principal amount of Senior Notes.

The inflows were partly offset by:

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• redemption of the entire $500 million aggregated principal amount of our 8.000% second-lien notes and a $10 million make-whole associated with the early repayment;

• $208 million of DIC associated with our Credit Agreement and Senior Notes;

• net outflows from advances of $42 million with our equity method and proportionately consolidated joint ventures and consortiums;

• $15 million of other debt repayments; and

• repurchases of common stock of $14 million tendered by participants in our long-term incentive plans for payment of applicable withholding taxes upon vesting of awards under those plans.

Effects of Exchange Rate Changes on Cash, Cash Equivalents and Restricted Cash—During the first six months of 2019, our cash, cash equivalents and restricted cash balance decreased by $2 million, due to the impact of changes in functional currency exchange rates against the U.S. Dollar for non-U.S. Dollar cash balances, primarily for net changes in the Canadian Dollar, Australian Dollar, British Pound and Euro exchange rates. The net unrealized loss on our cash, cash equivalents and restricted cash resulting from these exchange rate movements is reflected in the cumulative translation adjustment component of Other comprehensive income (loss). Our cash, cash equivalents and restricted cash held in non-U.S. Dollar currencies are used primarily for project-related and other operating expenditures in those currencies, and, therefore, our exposure to realized exchange gains and losses is not anticipated to be material.

During the first six months of 2018, our cash and cash equivalents balance decreased by $15 million due to the impact of changes in functional currency exchange rates against the U.S. Dollar for non-U.S. Dollar cash balances, primarily for net changes in the Australian Dollar, British Pound and Euro exchange rates.

Credit and Other Financing Arrangements

Credit Agreement

On May 10, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and letter of credit issuers, Barclays Bank PLC, as administrative agent for a term facility under the Credit Agreement, and Crédit Agricole Corporate and Investment Bank, as administrative agent for the other facilities under the Credit Agreement. The Credit Agreement provides for borrowings and letters of credit in the aggregate principal amount of $4.7 billion, consisting of the following:

• a $2.26 billion senior secured, seven-year term loan facility (the “Term Facility”), the full amount of which was borrowed, and $319.3 million of which has been deposited into a restricted cash collateral account (the “LC Account”) to secure reimbursement obligations in respect of up to $310.0 million of letters of credit (the “Term Facility Letters of Credit”);

• a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”); and

• a $1.44 billion senior secured letter of credit facility (the “LC Facility”), which includes a $50 million increase pursuant to an Increase and Joinder Agreement we entered into with Morgan Stanley Senior Funding, Inc. as of May 24, 2019.

The Credit Agreement provides that:

• Term Facility Letters of Credit can be issued in an amount up to the amount on deposit in the LC Account ($320 million at June 30, 2019), less an amount equal to approximately 3% of such amount on deposit (to be held as a reserve for related letter of credit fees), not to exceed $310.0 million;

• subject to compliance with the financial covenants in the Credit Agreement, the full amount of the Revolving Credit Facility is available for revolving loans;

• subject to our utilization in full of our capacity to issue Term Facility Letters of Credit, the full amount of the Revolving Credit Facility is available for the issuance of performance letters of credit and up to $200 million of the Revolving Credit Facility is available for the issuance of financial letters of credit; and

• the full amount of the LC Facility is available for the issuance of performance letters of credit.

Borrowings are available under the Revolving Credit Facility for working capital and other general corporate purposes. Certain existing letters of credit outstanding under our previously existing Amended and Restated Credit Agreement, dated as of June 30, 2017 (the “Prior Credit Agreement”), and certain existing letters of credit outstanding under CB&I’s previously existing credit facilities have been deemed issued under the Credit Agreement, and letters of credit were issued under the Credit Agreement to

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

backstop certain other existing letters of credit issued for the account of McDermott, CB&I and their respective subsidiaries and affiliates.

The Credit Agreement includes mandatory commitment reductions and prepayments in connection with, among other things, certain asset sales and casualty events (subject to reinvestment rights with respect to asset sales of less than $500 million). In addition, we are required to make annual prepayments of term loans under the Term Facility and cash collateralize letters of credit issued under the Revolving Credit Facility and the LC Facility with 75% of excess cash flow (as defined in the Credit Agreement), reducing to 50% of excess cash flow and 25% of excess cash flow depending on our secured leverage ratio.

Term Facility—As of June 30, 2019, we had $2.2 billion of borrowings outstanding under the Term Facility. Proceeds from our borrowing under the Term Facility were used, together with proceeds from the issuance of the Senior Notes and cash on hand, (1) to consummate the Combination in 2018, including the repayment of certain existing indebtedness of CB&I and its subsidiaries, (2) to redeem $500 million aggregate principal amount of our 8.000% second-lien notes, (3) to prepay existing indebtedness under, and to terminate in full, the Prior Credit Agreement, and (4) to pay fees and expenses in connection with the Combination, the Credit Agreement and the issuance of the Senior Notes.

Principal under the Term Facility is payable quarterly and interest is assessed at either (1) the Eurodollar rate plus a margin of 5.00% per year or (2) the base rate (the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin of 4.00%, subject to a 1.0% floor with respect to the Eurodollar rate and is payable periodically dependent upon the interest rate in effect during the period. On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on $1.94 billion of the $2.26 billion Term Facility. This resulted in a weighted average interest rate of 7.70%, inclusive of the applicable margin during the three months ended June 30, 2019. The Credit Agreement requires us to prepay a portion of the term loans made under the Term Facility on the last day of each fiscal quarter in an amount equal to $5.65 million.

The future scheduled maturities of the Term Facility are:

	(In millions)
2019	$	11
2020		23
2021		23
2022		23
2023		23
Thereafter		2,129
	$	2,232

Additionally, as of June 30, 2019, there were approximately $309 million of Term Facility letters of credit issued (including $48 million of financial letters of credit) under the Credit Agreement, leaving approximately $1 million of available capacity under the Term Facility.

Revolving Credit Facility and LC Facility—We have a $1.0 billion Revolving Credit Facility which is scheduled to expire in May 2023. As of June 30, 2019, we had approximately $379 million in borrowings and $53 million of letters of credit outstanding (including $49 million of financial letters of credit) under the Revolving Credit Facility, leaving $568 million of available capacity under this facility. During the six months ended June 30, 2019, the maximum borrowing under the Revolving Credit Facility was $639 million. We also have a $1.440 billion LC Facility that is scheduled to expire in May 2023. As of June 30, 2019, we had approximately $1.439 billion of letters of credit outstanding, leaving $1 million of available capacity under the LC Facility. If we borrow funds under the Revolving Credit Facility, interest will be assessed at either the base rate plus a floating margin ranging from 2.75% to 3.25% (3.25% at June 30, 2019) or the Eurodollar rate plus a floating margin ranging from 3.75% to 4.25% (4.25% at June 30, 2019), in each case depending on our leverage ratio (calculated quarterly). We are charged a commitment fee of 0.50% per year on the daily amount of the unused portions of the commitments under the Revolving Credit Facility and the LC Facility. Additionally, with respect to all letters of credit outstanding under the Credit Agreement, we are charged a fronting fee of 0.25% per year and, with respect to all letters of credit outstanding under the Revolving Credit Facility and the LC Facility, we are charged a participation fee of (i) between 3.75% to 4.25% (4.25% at June 30, 2019) per year in respect of financial letters of credit and (ii) between 1.875% to 2.125% (2.125% at June 30, 2019) per year in respect of performance letters of credit, in each case depending on our leverage ratio (calculated quarterly). We are also required to pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Credit Agreement Covenants—The Credit Agreement includes the following financial covenants that are tested on a quarterly basis:

• the minimum permitted fixed charge coverage ratio (as defined in the Credit Agreement) is 1.50 to 1.00;

• the maximum permitted leverage ratio is (i) 4.25 to 1.00 for each fiscal quarter ending on or before September 30, 2019, (ii) 4.00 to 1.00 for the fiscal quarter ending December 31, 2019, (iii) 3.75 to 1.00 for each fiscal quarter ending after December 31, 2019 and on or before December 31, 2020, (iv) 3.50 to 1.00 for each fiscal quarter ending after December 31, 2020 and on or before December 31, 2021 and (v) 3.25 to 1.00 for each fiscal quarter ending after December 31, 2021; and

• the minimum liquidity (as defined in the Credit Agreement, but generally meaning the sum of McDermott’s unrestricted cash and cash equivalents plus unused commitments under the Credit Agreement available for revolving borrowings) is $200 million.

In addition, the Credit Agreement contains various covenants that, among other restrictions, limit our ability to:

• incur or assume indebtedness;

• grant or assume liens;

• make acquisitions or engage in mergers;

• sell, transfer, assign or convey assets;

• make investments;

• repurchase equity and make dividends and certain other restricted payments;

• change the nature of our business;

• engage in transactions with affiliates;

• enter into burdensome agreements;

• modify our organizational documents;

• enter into sale and leaseback transactions;

• make capital expenditures;

• enter into speculative hedging contracts; and

• make prepayments on certain junior debt.

The Credit Agreement contains events of default that we believe are customary for a secured credit facility. If an event of default relating to bankruptcy or other insolvency event occurs, all obligations under the Credit Agreement will immediately become due and payable. If any other event of default exists under the Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Credit Agreement and exercise other rights and remedies. In addition, if any event of default exists under the Credit Agreement, the lenders may commence foreclosure or other actions against the collateral.

If any default exists under the Credit Agreement, or if we are unable to make any of the representations and warranties in the Credit Agreement at the applicable time, we will be unable to borrow funds or have letters of credit issued under the Credit Agreement.

Credit Agreement Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive and financial covenants under the Credit Agreement. The financial covenants as of June 30, 2019 are summarized below:

Ratios		Requirement		Actual
Minimum fixed charge coverage ratio		1.50x		2.46x
Maximum total leverage ratio		4.25x		2.61x
Minimum liquidity	$	200 million	$	1,023 million

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Future compliance with our financial and restrictive covenants under the Credit Agreement could be impacted by circumstances or conditions beyond our control, including, but not limited to, the delay or cancellation of projects, decreased letter of credit capacity, decreased profitability on our projects, changes in currency exchange or interest rates, performance of pension plan assets or changes in actuarial assumptions. Further, we could be impacted if our customers experience a material change in their ability to pay us or if the banks associated with the Credit Agreement were to cease operations, or if there is a full or partial break-up of the European Union (“EU”) or its currency, the Euro.

Letter of Credit Agreement

On October 30, 2018, we, as a guarantor, entered into a Letter of Credit Agreement (the “Letter of Credit Agreement”) with McDermott Technology (Americas), Inc., McDermott Technology (US), Inc. and McDermott Technology, B.V., each a wholly owned subsidiary of ours, as co-applicants, and Barclays Bank PLC, as administrative agent. The Letter of Credit Agreement provides for a facility for extensions of credit in the form of performance letters of credit in the aggregate face amount of up to $230 million (the “$230 Million LC Facility”). The $230 Million LC Facility is scheduled to expire in December 2021. The obligations under the Letter of Credit Agreement are unconditionally guaranteed on a senior secured basis by us and substantially all of our wholly owned subsidiaries, other than the co-applicants (which are directly obligated thereunder) and several captive insurance subsidiaries and certain other designated or immaterial subsidiaries. The liens securing the $230 Million LC Facility will rank equal in priority with the liens securing obligations under the Credit Agreement. The Letter of Credit Agreement includes financial and other covenants and provisions relating to events of default that are substantially the same as those in the Credit Agreement. As of June 30, 2019, there were approximately $216 million of letters of credit issued (or deemed issued) under the $230 million LC Facility, leaving approximately $14 million of available capacity.

Letter of Credit Agreement Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive and financial covenants under the Letter of Credit Agreement.

Senior Notes

On April 18, 2018, we issued $1.3 billion in aggregate principal of 10.625% senior notes due 2024 (the “Senior Notes”), pursuant to an indenture we entered into with Wells Fargo Bank, National Association, as trustee (the “Senior Notes Indenture”). Interest on the Senior Notes is payable semi-annually in arrears, and the Senior Notes are scheduled to mature in May 2024. However, at any time or from time to time on or after May 1, 2021, we may redeem the Senior Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Senior Notes to be redeemed) set forth below, together with accrued and unpaid interest to (but excluding) the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on May 1 of the years indicated:

Year	Optional redemption price
2021		105.313	%
2022		102.656	%
2023 and thereafter		100.000	%

In addition, prior to May 1, 2021, we may redeem up to 35.0% of the aggregate principal amount of the outstanding Senior Notes, in an amount not greater than the net cash proceeds of one or more qualified equity offerings (as defined in the Senior Notes Indenture) at a redemption price equal to 110.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to (but excluding) the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), subject to certain limitations and other requirements. The Senior Notes may also be redeemed, in whole or in part, at any time prior to May 1, 2021 at our option, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus the applicable premium (as defined in the Senior Notes Indenture) as of, and accrued and unpaid interest to (but excluding) the applicable redemption date (subject to the right of the holders of record on the relevant record date to receive interest due on the relevant interest payment date).

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Senior Notes Covenants—The Senior Notes Indenture contains covenants that, among other things, provide limits around our ability to: (1) incur or guarantee additional indebtedness or issue preferred stock; (2) make investments or certain other restricted payments; (3) pay dividends or distributions on our capital stock or purchase or redeem our subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; (6) create certain liens; (7) sell all or substantially all of our assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create unrestricted subsidiaries. Those covenants are subject to various exceptions and limitations.

Senior Notes Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive covenants under the Senior Notes Indenture. Future compliance with our restrictive covenants under the Senior Notes Indenture could be impacted by circumstances or conditions beyond our control, including, but not limited to, those discussed above with respect to the Credit Agreement.

Other Financing Arrangements

North Ocean (“NO”) Financing―On September 30, 2010, McDermott International, Inc., as guarantor, and NO 105 AS, one of our subsidiaries, as borrower, entered into a financing agreement to pay a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of NO 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of NO 105 AS. As of June 30, 2019, the outstanding borrowing under this facility was approximately $12 million. Future maturities are approximately $4 million for the remainder of 2019 and $8 million in 2020.

Receivables Factoring―During the six months ended June 30, 2019, we sold, without recourse, approximately $62 million of receivables under an uncommitted receivables purchase agreement in Mexico at a discount rate of applicable LIBOR plus a margin of 1.40% - 2.00% and Interbank Equilibrium Interest Rate in Mexico plus a margin of 1.40% - 1.70%. We recorded approximately $2 million of factoring costs in Other operating income (expense) during the six months ended June 30, 2019. Ten percent of the receivables sold are withheld and received on the due date of the original invoice. We have received cash, net of fees and amounts withheld, of approximately $54 million under these arrangements during the six months ended June 30, 2019.

Structured Equipment Financing―In the second quarter of 2019, we entered into a $37 million uncommitted revolving re-invoicing facility for settlement of certain equipment supplier invoices. During the second quarter of 2019, we received approximately $32 million under this arrangement, with repayment obligations maturing in January 2020. Interest expense and origination fees associated with this facility were not material.

Uncommitted Facilities—We are party to a number of short-term uncommitted bilateral credit facilities and surety bond arrangements (the “Uncommitted Facilities”) across several geographic regions, as follows:

	June 30, 2019				December 31, 2018
	Uncommitted Line Capacity		Utilized		Uncommitted Line Capacity		Utilized
	(In millions)
Bank Guarantee and Bilateral Letter of Credit (1)	$	1,627	$	1,062	$	1,669	$	1,060
Surety Bonds (2)	829		567			842		475

⁽¹⁾ Approximately $175 million of this capacity is available only upon provision of an equivalent amount of cash collateral.

⁽²⁾ Excludes approximately $346 million of surety bonds maintained on behalf of CB&I’s former Capital Services Operations, which were sold to CSVC Acquisition Corp (“CSVC”) in June 2017. We also continue to maintain guarantees on behalf of CB&I’s former Capital Services Operations business in support of approximately $29 million of RPOs. We are entitled to an indemnity from CSVC for both the surety bonds and guarantees.

Finance Lease Obligation

Our significant finance lease obligation is as follows:

The Amazon, a pipelay and construction vessel, was purchased by us in February 2017, sold to an unrelated third party (the “Amazon Owner”) and leased back under a long-term bareboat charter that gave us the right to use the vessel and was recorded as an operating

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

lease. On July 27, 2018, we entered into agreements (the “Amazon Modification Agreements”) providing for certain modifications to the Amazon vessel and related financing and amended bareboat charter arrangements. The total cost of the modifications, including project management and other fees and expenses, is expected to be in the range of approximately $260 million to $290 million. The Amazon Owner is expected to fund the cost of the modifications primarily through an export credit-backed senior loan provided by a group of lenders, supplemented by expected direct capital expenditures by us of approximately $58 million over the course of the modifications. The amended bareboat charter arrangement is accounted for as a finance lease, recognizing Property, plant and equipment and Lease obligation for the present value of future minimum lease payments. The cost of modifications will be recorded in Property, plant and equipment with a corresponding liability for direct capital expenditures not incurred by us. The finance lease obligation will increase upon completion of the modifications and funding by the Amazon Owner. As of June 30, 2019, Property, plant and equipment, net included a $50 million asset (net of accumulated amortization of $6 million) and a finance lease liability of approximately $50 million. As of December 31, 2018, Property, plant and equipment, net included a $52 million asset (net of accumulated amortization of $3 million) and a finance lease liability of approximately $53 million.

Redeemable Preferred Stock

On November 29, 2018 (the “Closing Date”), we completed a private placement of (1) 300,000 shares of 12% Redeemable Preferred Stock, par value $1.00 per share (the “Redeemable Preferred Stock”), and (2) Series A warrants (the “Warrants”) to purchase approximately 6.8 million shares of our common stock, with an initial exercise price per share of $0.01, for aggregate proceeds of $289.5 million, before payment of approximately $18 million of directly related issuance costs.

Redeemable Preferred Stock—The Redeemable Preferred Stock will initially have an Accreted Value (as defined in the Certificate of Designation with respect to the Redeemable Preferred Stock (the “Certificate of Designation”)) of $1,000.00 per share. The holders of the Redeemable Preferred Stock will be entitled to receive cumulative compounding preferred cash dividends quarterly in arrears at a fixed rate of 12.0% per annum compounded quarterly (of which 3.0% accrues each quarter) on the Accreted Value per share (the “Dividend Rate”). The cash dividends are payable only when, as and if declared by our Board of Directors out of funds legally available for payment of dividends. If a cash dividend is not declared and paid in respect of any dividend payment period ending on or prior to December 31, 2021, then the Accreted Value of each outstanding share of Redeemable Preferred Stock will automatically be increased by the amount of the dividend otherwise payable for such dividend payment period, except the applicable dividend rate for this purpose is 13.0% per annum. Such automatic increase in the Accreted Value of each outstanding share of Redeemable Preferred Stock would be in full satisfaction of the preferred dividend that would have otherwise accrued for such dividend payment period. Our Board of Directors declared, and we paid cash dividends on the Redeemable Preferred Stock on the first dividend payment date (December 31, 2018), but our Board of Directors did not declare cash dividends on the Redeemable Preferred Stock on the March 31, 2019 and June 30, 2019 dividend payment dates and, as a result, the Accreted Value of the Redeemable Preferred Stock was increased by the amount of the accrued but unpaid dividend (i.e., a paid-in-kind (“PIK”) dividend).

The Redeemable Preferred Stock has no stated maturity and will remain outstanding indefinitely unless repurchased or redeemed by us.

The Redeemable Preferred Stock will have a liquidation preference equal to the then applicable Minimum Return (the “Liquidation Preference”) plus accrued and unpaid dividends. The Liquidation Preference will initially be equal to $1,200.00 per share. The “Minimum Return” is equal to a multiple of invested capital (“MOIC”) (as defined in the Certificate of Designation) as follows, exclusive of cash dividends previously paid:

• prior to January 1, 2020, a MOIC multiple of 1.2;

• on or after January 1, 2020 but prior to January 1, 2022, a MOIC multiple of 1.25;

• on or after January 1, 2022 but prior to January 1, 2023, a MOIC multiple of 1.20;

• on or after January 1, 2023 but prior to January 1, 2025, a MOIC multiple of 1.15; and

• on or after January 1, 2025, a MOIC multiple of 1.20.

We may redeem the Redeemable Preferred Stock at any time for an amount per share of Redeemable Preferred Stock equal to the Liquidation Preference of each such share plus all accrued dividends on such share (such amount per share, the “Redemption Consideration”).

At any time after the seventh anniversary of the Closing Date, each holder may elect to have us fully redeem such holder’s then outstanding Redeemable Preferred Stock in cash, to the extent we have funds legally available for payment of dividends, at a redemption price per share equal to the Redemption Consideration for each share.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Upon a change of control (as defined in the Certificate of Designation), if we have not previously redeemed the Redeemable Preferred Stock and the holders of a majority of the then-outstanding Redeemable Preferred Stock do not agree with us to an alternative treatment, then in connection with such change of control, each holder may elect either: (1) to cause us to redeem all, but not less than all, of its outstanding Redeemable Preferred Stock at a redemption price per share equal to the Redemption Consideration, which would be payable in full in cash or, if any of the Senior Notes are then outstanding, payable partially in cash in an amount equal to 101% of the Share Purchase Price (as defined in the Certificate of Designation) (or such lower amount as may be required under the Senior Notes Indenture) and the remainder in shares of our common stock based on a per share price equal to 96% of the volume-weighted average price of our common stock on the New York Stock Exchange during the 10 trading days prior to the announcement of such change of control; (2) to receive a substantially equivalent security to the Redeemable Preferred Stock in the surviving entity of the change of control; or (3) to continue to hold the Redeemable Preferred Stock if we are the surviving entity in the change of control. However, any such redemption in cash will be tolled until a date that will not result in the Redeemable Preferred Stock being characterized as “disqualified stock,” “disqualified equity interest” or a similar concept under our debt instruments.

The fair value upon issuance represented the net impact of $289.5 million of aggregate proceeds, less $18 million of fees and $43 million of fair value assigned to the warrants described below (separately included within Capital in excess of par value in our Balance Sheet).  The fair value measurement upon issuance was based on inputs that were not observable in the market and thus represented level 3 inputs. We will record accretion as an adjustment to Retained earnings (deficit) over the seven years from the Closing Date through the expected redemption date of November 29, 2025 using the effective interest method. From the Closing Date through June 30, 2019, we recorded cumulative accretion of approximately $9 million with respect to the Redeemable Preferred Stock, including approximately $4 million and $8 million during the three and six months ended June 30, 2019, respectively. As of June 30, 2019, the Redeemable Preferred Stock balance was $257 million, adjusted for accretion and PIK dividends of approximately $20 million. During 2018, approximately $3 million of cash dividends were paid to the holders of the Redeemable Preferred Stock.

Warrants—The Warrants are exercisable at any time after the earlier of (1) any change of control or the commencement of proceedings for the voluntary or involuntary dissolution, liquidation or winding up of us and (2) the first anniversary of the Closing Date, and from time to time, in whole or in part, until the tenth anniversary of the Closing Date. The fair value measurement of the Warrants was based on the market-observable fair value of our common stock upon issuance and thus represented a level 1 input.

The exercise price and the number of shares of common stock for which a Warrant is exercisable are subject to adjustment from time to time upon the occurrence of certain events including: (1) payment of a dividend or distribution to holders of shares of our common stock payable in common stock, (2) the distribution of any rights, options or warrants to all holders of our common stock entitling them for a period of not more than 60 days to purchase shares of common stock at a price per share less than the fair market value per share, (3) a subdivision, combination, or reclassification of our common stock, (4) a distribution to all holders of our common stock of cash, any shares of our capital stock (other than our common stock), evidences of indebtedness or other assets of ours, and (5) any dividend of shares of a subsidiary of ours in a spin-off transaction.

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 construct, upgrade, acquire or operate vessels or acquire 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.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Capital expenditures for the six months ended June 30, 2019 and 2018 were $33 million and $43 million, respectively, and were primarily attributable to our vessel upgrades (including upgrades to the Amazon) and information technology upgrades. Our capital expenditures in the second quarter included expenditures associated with our new administrative headquarters in Houston, Texas.

During the remainder of 2019, we expect to spend approximately $112 million for capital projects, such as our new administrative headquarters and various vessel upgrades and capital maintenance projects.

Other

Shelf Registration Statement―We filed a shelf registration statement with the SEC in September 2018. The registration statement became effective automatically and is scheduled to expire in September 2021. The shelf registration statement enables us to offer and sell shares of our common or preferred stock and issue debt or other securities from time to time.

Other―A portion of our pension plans’ assets are invested in EU government securities, which could be impacted by economic turmoil in Europe or a full or partial break-up of the EU or its currency, the Euro. However, given the long-term nature of pension funding requirements, in the event any of our pension plans (including those with investments in EU government securities) become materially underfunded from a decline in value of our plan assets, we believe our cash on hand and amounts available under the Revolving Credit Facility would be sufficient to fund any increases in future contribution requirements.

We are a defendant in a number of lawsuits arising in the normal course of business, and we have in place appropriate insurance coverage for the type of work that we perform. As a matter of standard policy, we review our litigation accrual quarterly and, as further information becomes known on pending cases, we may record increases or decreases, as appropriate, for these reserves. See Note 22, Commitments and Contingencies, to the accompanying Financial Statements for a discussion of pending litigation.

Critical Accounting Policies and Estimates

For a discussion of the impact of critical accounting policies and estimates on our Consolidated Financial Statements, refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the 2018 Form 10-K. For a discussion of the impact of the new accounting standards adopted in 2019 on our significant accounting policies, see Note 2, Basis of Presentation and Significant Accounting Policies, to the accompanying Financial Statements.

New Accounting Standards

See Note 2, Basis of Presentation and Significant Accounting Policies, to the accompanying Financial Statements for a discussion of the potential impact of new accounting standards issued but not adopted as of June 30, 2019 on our Financial Statements.

72

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Foreign Currency Exchange Risk

In the normal course of business, our results of operations are exposed to certain market risks, primarily associated with fluctuations in currency exchange rates.

We have operations in many locations around the world and are involved in transactions in currencies other than those of our entity’s functional currencies, which could adversely affect our results of operations due to changes in currency exchange rates or weak economic conditions in foreign markets. We manage these risks associated with currency exchange rate fluctuations by hedging those risks with foreign currency derivative instruments. Historically, we have hedged those risks with foreign currency forward contracts. In certain cases, contracts with our customers may contain provisions under which payments from our customers are denominated in U.S. dollars and in a foreign currency. 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 currency exchange rate fluctuations arising from differences in timing of our foreign currency cash inflows and outflows. The related gains and losses on these contracts are either: (1) deferred as a component of Accumulated Other Comprehensive Income (“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 June 30, 2019, the notional value of our outstanding forward contracts to hedge certain foreign currency exchange-related operating exposures was $700 million. The total fair value of these contracts was a net liability of approximately $6 million at June 30, 2019. The potential change in fair value for our outstanding contracts resulting from a hypothetical ten percent change in quoted foreign currency exchange rates would have been approximately $14 million at June 30, 2019. This potential change in fair value of our outstanding contracts would be offset by the change in fair value of the associated underlying operating exposures.

We are exposed to fluctuating exchange rates related to the effects of translating financial statements of entities with functional currencies other than the U.S. Dollar into our reporting currency. Net movements in the Canadian Dollar, Australian Dollar, British Pound, and Euro exchange rates against the U.S. Dollar unfavorably impacted the cumulative translation adjustment component of AOCI by approximately $42 million, net of tax, and our cash balance by approximately $2 million as of June 30, 2019. We generally do not hedge our exposure to potential foreign currency translation adjustments.

Interest Rate Risk

As of June 30, 2019, we continued to utilize a U.S. dollar floating-to-fixed interest rate swap arrangement to mitigate exposure associated with cash flow variability on the Term Facility in an aggregate notional value of $1.94 billion. The swap arrangement has been designated as a cash flow hedge as its critical terms matched those of the Term Facility at inception and through June 30, 2019. Accordingly, changes in the fair value of the swap arrangement are initially recorded in AOCI and then reclassified into earnings in the period in which corresponding interest payments are made. As of June 30, 2019, the fair value of the swap arrangement was in a net liability position totaling approximately $71 million. The potential change in fair value for our interest rate swap resulting from a hypothetical one percent change in the Eurodollar rate would have been approximately $55 million at June 30, 2019.

Other

As of June 30, 2019, the fair values of the Term Facility and Senior Notes, based on current market rates for debt with similar credit risk and maturities, were approximately $2.2 billion and $1.2 billion, respectively, and were categorized within level 2 on the valuation hierarchy. As of December 31, 2018, the fair values of the Term Facility and Senior Notes, based on current market rates for debt with similar credit risk and maturities, were approximately $2.1 billion and $1.1 billion, respectively, and were categorized within level 2 on the valuation hierarchy. See Note 16, Fair Value Measurements, to the accompanying Financial Statements for further discussion of our financial instruments.

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CONTROLS AND PROCEDURES

Item 4. Controls and Procedures

Disclosure 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 June 30, 2019 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.

Changes in Internal Control Over Financial Reporting—There has been no change in our internal control over financial reporting during the period ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

For information regarding ongoing investigations and litigation, see Note 22, Commitments and Contingencies, to our unaudited Financial Statements in Part I of this report, which we incorporate by reference into this Item.

Item 1A.  Risk Factors

We are updating the risk factor disclosure in “Item 1A.  Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018 by adding the discussion below.

The United Kingdom’s proposed withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

We are a Panamanian corporation with a tax residency in the United Kingdom (“U.K.”) and with worldwide operations, including material business operations in Europe.  In June 2016, a majority of voters in the U.K. voted in favor of the U.K.’s withdrawal from the European Union in a national referendum (“Brexit”).  The referendum was advisory, and the U.K. government served notice under Article 50 of the Treaty of the European Union in March 2017 to formally initiate the withdrawal process.  The U.K. and the European Union have had a two-year period under Article 50 to negotiate the terms for the U.K.’s withdrawal from the European Union, which has been extended until October 31, 2019. The withdrawal agreement and political declaration that were endorsed at a special meeting of the European Council on November 25, 2018 did not receive the approval of the U.K. Parliament in January 2019. Further discussions are ongoing, although the European Commission has stated that the European Union will not reopen the withdrawal agreement. Any further extension of the negotiation period for withdrawal will require the consent of the remaining 27 member states of the European Union. Brexit has created significant uncertainty about the future relationship between the U.K. and the European Union and has given rise to calls for certain regions within the U.K. to preserve their place in the European Union by separating from the U.K.

These developments, or the perception that any of them could occur, could have a material adverse effect on global economic conditions and the stability of the global financial markets and could also significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.  Asset valuations, currency exchange rates and credit ratings may be especially subject to increased market volatility. Lack of clarity about applicable future laws, regulations or treaties as the U.K. negotiates the terms of a withdrawal, as well as the operation of any such rules pursuant to any withdrawal terms, including financial laws and regulations, tax and free trade agreements, intellectual property rights, supply chain logistics, environmental, health and safety laws and regulations, immigration laws, employment laws, and other rules that could apply to us and our subsidiaries, could increase our costs, restrict our access to capital within the U.K. and the European Union, depress economic activity and further decrease foreign direct investment in the U.K. For example, withdrawal from the European Union could, depending on the negotiated terms of such withdrawal, eliminate the benefit of certain tax-related European Union directives currently applicable to U.K.-tax-resident companies such as us, including the Parent-Subsidiary Directive and the Interest and Royalties Directive, which could, subject to any relief under an available tax treaty, raise our tax costs.  

If the U.K. and the European Union are unable to negotiate mutually acceptable withdrawal terms or if other European Union member states pursue withdrawal, barrier-free access between the U.K. and other European Union member states or within the European Economic Area overall could be diminished or eliminated. Any of these factors could have a material adverse effect on our business, financial condition and results of operations.

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EXHIBITS

Item 6. Exhibits

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 Post-Effective Amendment No. 1 on Form S-8 to Registration Statement on Form S-4 filed with the SEC on May 11, 2018 (Reg. No. 333-222662).
3.2*	McDermott International, Inc.’s Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to McDermott International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2014 (file No. 1-08430)).
3.3*	Certificate of Designation of 12% Redeemable Preferred Stock (incorporated by reference to Exhibit 3.1 to McDermott International, Inc.’s Current Report on Form 8-K filed on October 30, 2018 (File No. 1-08430)).
4.1	Third Supplemental Indenture, dated July 8, 2019, among CB&I Storage Tank Solutions LLC, McDermott Technology (Americas), Inc., and McDermott Technology (US), Inc. and Wells Fargo Bank, National Association.
10.1	Form of 2019 Non-Employee Director Restricted Stock Unit Grant Agreement.
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.

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101.DEF XBRL	Taxonomy Extension Definition Linkbase Document

* Incorporated by reference to the filing indicated.

76

SIGNATURES

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.

July 29, 2019
	McDERMOTT INTERNATIONAL, INC.
	By:	/s/ CHRISTOPHER A. KRUMMEL
		Christopher A. Krummel Global Vice President, Finance and Chief Accounting Officer

77

EX-4.1

Exhibit 4.1

Execution Version

THIRD SUPPLEMENTAL INDENTURE AND GUARANTEE

This Third Supplemental Indenture and Guarantee, dated as of July 8, 2019 (this “Supplemental Indenture” or “Guarantee”), among CB&I Storage Tank Solutions LLC, a Delaware limited liability company (the “New Guarantor”), McDermott Technology (Americas), Inc., a Delaware corporation, and McDermott Technology (US), Inc., a Delaware corporation, as the Issuers, and Wells Fargo Bank, National Association, as Trustee, paying agent and registrar under the Indenture referred to below.

W I T N E S S E T H:

WHEREAS, the Issuers, the Guarantors and the Trustee are parties to an Indenture, dated as of April 18, 2018 (as amended, supplemented, waived or otherwise modified, the “Indenture”), providing for the issuance of an unlimited aggregate principal amount of 10.625% Senior Notes due 2024 of the Issuers (the “Notes”);

WHEREAS, Section 4.17 and Article X of the Indenture provide that the Issuers will cause any Restricted Subsidiary that guarantees any Indebtedness of an Issuer or any Guarantor under a Credit Facility consisting of debt for borrowed money (including for the avoidance of doubt, the Credit Agreement) to execute and deliver a Guarantee pursuant to which such Restricted Subsidiary will unconditionally Guarantee, on a joint and several basis, the full and prompt payment of the principal of, premium, if any, and interest on the Notes and all other obligations of the Issuers under the Indenture on the same terms and conditions as those set forth in the Indenture;

WHEREAS, pursuant to Section 9.1(4) of the Indenture, the Trustee and the Issuers are authorized to execute and deliver this Supplemental Indenture to amend the Indenture, without the consent of any Holder, to add an additional Guarantor.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Issuers and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

ARTICLE I
Definitions

SECTION 1.1 Defined Terms. As used in this Supplemental Indenture, capitalized terms defined in the Indenture or in the preamble or recitals thereto are used herein as therein defined. The words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

ARTICLE IIAgreement to be Bound; Guarantee

SECTION 2.1 Agreement to be Bound. The New Guarantor hereby becomes a party to the Indenture as a Guarantor and as such shall have all of the rights and be subject to all of the obligations and agreements of a Guarantor under the Indenture. The New Guarantor agrees to be bound by all of the provisions of the Indenture applicable to a Guarantor and to perform all of the obligations and agreements of a Guarantor under the Indenture.

SECTION 2.2 Guarantee. The New Guarantor hereby fully, unconditionally and irrevocably guarantees, as primary obligor and not merely as a surety, jointly and severally with each other Guarantor, to each Holder and the Trustee, the full and punctual payment when due, whether at maturity, by acceleration, by redemption or otherwise, of the Obligations of the Issuers pursuant to the Notes and the Indenture in accordance with Section 10.1(a) of the Indenture.

ARTICLE III
Miscellaneous

SECTION 3.1 Notices. All notices and other communications to the New Guarantor shall be given as provided in the Indenture to the New Guarantor, at its address set forth below, with a copy to the Issuer as provided in the Indenture for notices to the Issuers.

CB&I Storage Tank Solutions LLC
757 North Eldridge Parkway
Houston, Texas 77079
Attention: Treasurer

SECTION 3.2 Parties. Nothing expressed or mentioned herein is intended or shall be construed to give any Person, firm or corporation, other than the Holders and the Trustee, any legal or equitable right, remedy or claim under or in respect of this Supplemental Indenture or the Indenture or any provision herein or therein contained.

SECTION 3.3 Governing Law. This Supplemental Indenture shall be governed by, and construed in accordance with, the laws of the State of New York.

SECTION 3.4 Service of Process. Each of the Issuers and each non-U.S. Guarantor (including, if applicable, the New Guarantor) hereby appoints McDermott Technology (Americas), Inc. as its agent for service of process in any suit, action or proceeding with respect to this Supplemental Indenture, the Indenture, the Notes or the Guarantees and for actions brought under federal or state securities laws brought in any federal or state court located in The City of New York.

SECTION 3.5 Severability Clause. In case any provision in this Supplemental Indenture shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby and such provision shall be ineffective only to the extent of such invalidity, illegality or unenforceability.

SECTION 3.6 Ratification of Indenture; Supplemental Indentures Part of Indenture; No  Liability of Trustee. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force andeffect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every Holder of a Note heretofore or hereafter authenticated and delivered shall be bound hereby. The Trustee makes no representation or warranty as to the validity or sufficiency of thisSupplemental Indenture or the New Guarantor’s Guarantee. Additionally, the Trustee shall not be responsible in any manner whatsoever for or with respect to any of the recitals or statements contained herein, all of which recitals or statements are made solely by the Issuers, the New Guarantor and the Guarantors, and the Trustee makes no representation with respect to any such matters.

SECTION 3.7 Counterparts. The parties may sign any number of copies of this Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. This Supplemental Indenture may be executed in multiple counterparts, which, when taken together, shall constitute one instrument. The exchange of copies of this Supplemental Indenture and of signature pages by facsimile or PDF transmissions shall constitute effective execution and delivery of this Supplemental Indenture as to the parties hereto and may be used in lieu of the original Supplemental Indenture for all purposes. Signatures of the parties hereto transmitted by facsimile or PDF shall be deemed to be their original signatures for all purposes.

SECTION 3.8 Headings. The headings of the Articles and the sections in this Supplemental Indenture are for convenience of reference only and shall not be deemed to alter or affect the meaning or interpretation of any provisions hereof.

[Signatures on following page]

IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written.

MCDERMOTT TECHNOLOGIES (AMERICAS), INC.
By:	/s/ Kevin Hargrove
Name:	Kevin Hargrove
Title:	Treasurer

MCDERMOTT TECHNOLOGIES (US), INC.
By:	/s/ Kevin Hargrove
Name:	Kevin Hargrove
Title:	Treasurer

CB&I STORAGE TANK SOLUTIONS LLC, as a Guarantor
By:	/s/ Shane P. Willoughby
Name:	Shane P. Willoughby
Title:	Secretary

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Trustee
By:	/s/ Michael Tu
Name:	Michael Tu
Title:	Vice President

[Signature Page – Supplemental Indenture]

EX-10.1

Exhibit 10.1

McDERMOTT INTERNATIONAL, INC.

Director Restricted Stock Unit Grant Agreement

(May 2, 2019)

The Compensation Committee of the Board of Directors (the “Committee”) of McDermott International, Inc. (“McDermott” or the “Company”) has approved a grant to you of 18,541 Restricted Stock Units (“RSUs”) under the 2019 McDermott International, Inc. Long-Term Incentive Plan (the “Plan”), to be made on May 2, 2019 (the “Date of Grant”).  The provisions of the Plan are incorporated herein by reference.A copy of the Prospectus relating to the Plan, which includes a copy of the Plan, has previously been made available to you.  

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, successors, assigns, estate or personal representatives.  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, successors, assigns, 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 Plan, as such may be amended from time to time.  Capitalized terms not defined in this Agreement but that are defined in the Plan shall have the respective meanings ascribed to such terms in the Plan.  

Restricted Stock Units

RSU Award.  Each RSU represents a right to receive one Share on the Vesting Date (as set forth in the “Vesting Requirements” paragraph below), provided the vesting requirements set forth in this Agreement shall have been satisfied.  No Shares are awarded or issued to you hereunder on the Date of Grant.

Vesting Requirements.  Subject to the “Forfeiture of RSUs” paragraph below, the 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 will vest upon the first to occur of: (i) the first anniversary of the Date of Grant or (ii) the date of the Company’s 2020 Annual Meeting of Stockholders, subject to your continued service as a Director through the first of such dates to occur;

• 100% of the RSUs will vest upon (1) the date of your termination of service as a Director due to death or (2) your Disability; and

• If a Change in Control of the Company occurs, Section 14 of the Plan will control (provided that any reference therein to termination of employment shall be deemed to refer to termination of service as a Director, and, for the avoidance of doubt, your resignation at the request of the Company in connection with a Change in Control will result in vesting of 100% of the RSUs).  

Forfeiture of RSUs.  RSUs which are not and do not become vested upon thetermination of your service as a Director pursuant to any of the foregoing provisions shall, coincident therewith, terminate and be of no further force or effect.

Additionally, in the event that, while you are performing services as a Director for or on behalf of the Company, (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 any such matters.

Payment of RSUs.  RSUs shall be paid in Shares, which shall be distributed as soon as administratively practicable, but in any event no later than 30 days, after the applicable Vesting Date.Such Shares will be issued to you in book-entry form in an account in your name with our transfer agent, Computershare, absent other instructions from you, subject to the terms and conditions of the Plan.

Tax Consequences; Withholding.  You are solely responsible for the taxes associated with the Award, and you should consult with and rely on your own tax advisor, accountant or legal advisor as to the tax consequences to you of the Award.  A general description of the tax consequences relating to the type of award provided through the Award is included in the Prospectus referred to above.  Notwithstanding the foregoing, as provided by the Plan, the Company shall have the right to deduct applicable taxes from the Shares otherwise deliverable pursuant to this Award to the extent required by applicable law.  If Shares are used to satisfy tax withholding, such Shares shall be valued at their Fair Market Value on the date when the tax withholding is required to be made.

Securities and Exchange Commission Requirements.  Because 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 are going to reject the Award, you should do so as soon as possible to avoid potential Section 16 liability.  Please advise Kim Wolford and Dennis Edge immediately by e-mail or telephone call if you intend to reject this grant.  Absent such notice of rejection, we will prepare and file the required Form 4 on your behalf (pursuant to your standing authorization for us to do so) within the required two business day deadline.

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.

Other Information

Nothing in this Agreement shall be interpreted as creating an employer/employee relationship between you and the Company. Additionally, neither the action of the Company in establishing the Plan, nor any provision of the Plan, nor any action taken by the Company, the Committee or the Board of Directors under the Plan, nor any provision of this Agreement shall be construed as constituting a commitment, guarantee, agreement or understanding of any kind or nature that you will continue to be elected as a Director.

This Award is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986, as amended, and in its implementing regulations (“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.

By signing below or electronically accepting this Award, you (1) agree to the terms and conditions of this Agreement, (2) confirm receipt of a copy of the Plan, the Prospectus and all amendments and supplements thereto, and (3) appoints the Secretary of the Company and each Assistant Secretary of the Company as your true and lawful attorney-in-fact, with full power of substitution in the premises, granting to each full power and authority to do and perform any and every act whatsoever requisite, necessary, or proper to be done, on your behalf which, in the opinion of such attorney-in-fact, is necessary to effect the forfeiture of the Restricted Stock Units to the Company, or the delivery of the Shares to you, in accordance with the terms and conditions of this Agreement.               

Accepted by:

	Date:
Signature

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, David Dickson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McDermott International, Inc.;

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.

July 29, 2019

/s/ DAVID DICKSON 

David Dickson

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, Stuart Spence, certify that:

1. I have reviewed this quarterly report on Form 10-Q of McDermott International, Inc.;

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.

July 29, 2019

/s/   STUART SPENCE 

Stuart Spence

Executive 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, David Dickson, 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 period ended June 30, 2019 (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: July 29, 2019	/s/ DAVID DICKSON
	David Dickson
	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, Stuart Spence, Executive 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 period ended June 30, 2019 (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: July 29, 2019	/s/ STUART SPENCE
	Stuart Spence
	Executive Vice President and Chief Financial Officer

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 25, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	MDR
Entity Registrant Name	MCDERMOTT INTERNATIONAL INC
Entity Central Index Key	0000708819
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity File Number	001-08430
Entity Tax Identification Number	720593134
Entity Address, Address Line One	757 N. Eldridge Parkway
Entity Address, City or Town	HOUSTON
Entity Address, State or Province	TEXAS
Entity Address, Postal Zip Code	77079
City Area Code	(281)
Local Phone Number	870-5000
Entity Common Stock, Shares Outstanding		181,729,320

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) shares in Millions, $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019		Jun. 30, 2018
Income Statement [Abstract]
Revenues	[1]	$ 2,137	$ 1,735	$ 4,348		$ 2,343
Costs and Expenses:
Cost of operations		1,949	1,486	3,967		1,962
Project intangibles and inventory-related amortization		10	12	20		12
Total cost of operations		1,959	1,498	3,987		1,974
Research and development expenses		8	5	16		5
Selling, general and administrative expenses		77	75	149		124
Other intangibles amortization		22	10	44		10
Transaction costs		11	37	15		40
Restructuring and integration costs		20	63	89		75
Loss on asset disposals		102	1	103		1
Total expenses		2,199	1,689	4,403		2,229
Income (loss) from investments in unconsolidated affiliates		3	3	12		(1)
Investment in unconsolidated affiliates-related amortization		(2)		(5)
Operating (loss) income	[2]	(61)	49	(48)		113
Other expense:
Interest expense, net		(100)	(72)	(192)		(83)
Other non-operating expense, net		(2)	(16)	(1)		(14)
Total other expense, net		(102)	(88)	(193)		(97)
(Loss) income before provision for income taxes		(163)	(39)	(241)		16
Income tax benefit		(49)	(84)	(70)		(63)
Net (loss) income		(114)	45	(171)		79
Less: Net income (loss) attributable to noncontrolling interests		18	(2)	17		(3)
Net (loss) income attributable to McDermott		(132)	47	(188)	[3]	82	[4]
Dividends on redeemable preferred stock		(10)		(20)	[3]
Accretion of redeemable preferred stock		(4)		(8)	[3]
Net (loss) income attributable to common stockholders		$ (146)	$ 47	$ (216)	[3]	$ 82	[4]
Net (loss) income per share attributable to common stockholders
Basic		$ (0.80)	$ 0.33	$ (1.19)	[3]	$ 0.68	[4]
Diluted		$ (0.80)	$ 0.33	$ (1.19)	[3]	$ 0.68	[4]
Shares used in the computation of net (loss) income per share
Basic		182	144	181	[3]	120	[4]
Diluted		182	144	181	[3]	120	[4]

[1] Intercompany amounts have been eliminated in consolidation.

[2] (1)    NCSA operating results for the three and six months ended June 30, 2019 included $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC. Corporate operating results for the three and six months ended June 30, 2019 included:   • $20 million and $89 million of restructuring and integration costs, respectively; and   • $11 million and $15 million of transaction costs, respectively. Corporate operating results for the six months ended June 30, 2018 included:   • $63 million and $75 million of restructuring and integration costs, respectively; and   • $37 million and $40 million of transaction costs, respectively. See Note 11, Restructuring and Integration Costs and Transaction Costs, for further discussion.

[3] ^{The effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2019 due to the net loss for the periods.}

[4] ^{Approximately 0.5 million shares underlying outstanding stock-based awards for the three and six months ended June 30, 2018 were excluded from the computation of diluted earnings per share during the periods because the exercise price of those awards was greater than the average market price of our common stock, and the inclusion of such shares would have been antidilutive in each of those periods.}

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Statement Of Income And Comprehensive Income [Abstract]
Net (loss) income	$ (114)	$ 45	$ (171)	$ 79
Other comprehensive (loss) income, net of tax:
Loss on derivatives	(21)	(12)	(40)	(12)
Foreign currency translation	5	(11)	(34)	(12)
Total comprehensive (loss) income	(130)	22	(245)	55
Less: Comprehensive income (loss) attributable to noncontrolling interests	18	(2)	17	(3)
Comprehensive (loss) income attributable to McDermott	$ (148)	$ 24	$ (262)	$ 58

XML

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Millions		Jun. 30, 2019		Dec. 31, 2018
Current assets:
Cash and cash equivalents ($252 and $146 related to variable interest entities ("VIEs"))		$ 455		$ 520
Restricted cash and cash equivalents	[1]	327		325
Accounts receivable—trade, net ($45 and $29 related to VIEs)		1,002		932
Accounts receivable—other ($61 and $57 related to VIEs)		235		175
Contracts in progress ($167 and $144 related to VIEs)		932		704
Project-related intangible assets, net		94		137
Inventory		42		101
Other current assets ($31 and $24 related to VIEs)		152		139
Total current assets		3,239		3,033
Property, plant and equipment, net		2,054		2,067
Operating lease right-of-use assets		383
Accounts receivable—long-term retainages		68		62
Investments in unconsolidated affiliates		446		452
Goodwill		2,704	[2]	2,654
Other intangibles, net		948		1,009
Other non-current assets		156		163
Total assets		9,998		9,440
Current liabilities:
Revolving credit facility		379
Short-term borrowing and current maturities of long-term debt		62		30
Current portion of long-term lease obligations		96		8
Accounts payable ($307 and $277 related to VIEs)		1,206		595
Advance billings on contracts ($389 and $717 related to VIEs)		1,438		1,954
Project-related intangible liabilities, net		38		66
Accrued liabilities ($76 and $136 related to VIEs)		1,467		1,564
Total current liabilities		4,686		4,217
Long-term debt		3,388		3,393
Long-term lease obligations		379		66
Deferred income taxes		46		47
Other non-current liabilities		705		664
Total liabilities		9,204		8,387
Commitments and contingencies
Mezzanine equity:
Redeemable preferred stock		257		230
Stockholders' equity:
Common stock, par value $1.00 per share, authorized 255 shares; issued 185 and 183 shares, respectively		185		183
Capital in excess of par value		3,549		3,539
Accumulated deficit		(2,935)		(2,719)
Accumulated other comprehensive loss		(181)		(107)
Treasury stock, at cost: 3 and 3 shares, respectively		(96)		(96)
Total McDermott Stockholders' Equity		522		800
Noncontrolling interest		15		23
Total stockholders' equity		537		823
Total liabilities and stockholders' equity		$ 9,998		$ 9,440

[1] ^{Our restricted cash balances primarily serve as cash collateral deposits for our letter of credit facilities. See Note 12, Debt, for further discussion.}

[2] At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Cash and cash equivalents	$ 455	$ 520
Accounts receivable—trade, net	1,002	932
Accounts receivable—other	235	175
Contracts in progress	932	704
Other current assets	152	139
Accounts payable	1,206	595
Advance billings on contracts	1,438	1,954
Accrued liabilities, current	$ 1,467	$ 1,564
Common stock, par value	$ 1.00	$ 1.00
Common stock, shares authorized	255,000,000	255,000,000
Common stock, shares issued	185,000,000	183,000,000
Treasury stock, shares	3,000,000	3,000,000
Variable Interest Entities ("VIEs") [Member]
Cash and cash equivalents	$ 252	$ 146
Accounts receivable—trade, net	45	29
Accounts receivable—other	61	57
Contracts in progress	167	144
Other current assets	31	24
Accounts payable	307	277
Advance billings on contracts	389	717
Accrued liabilities, current	$ 76	$ 136

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Millions		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net (loss) income		$ (171)	$ 79
Non-cash items included in net (loss) income:
Loss on disposal of APP		101
Depreciation and amortization		137	80
Debt issuance cost amortization		21	17
Stock-based compensation charges		11	28
Deferred taxes		(1)	(100)
Changes in operating assets and liabilities, net of effects of businesses acquired:
Accounts receivable		(164)	278
Contracts in progress, net of advance billings on contracts		(745)	(141)
Accounts payable		545	129
Other current and non-current assets		(71)	12
Investments in unconsolidated affiliates			1
Other current and non-current liabilities		(112)	52
Total cash (used in) provided by operating activities		(449)	435
Cash flows from investing activities:
CB&I consideration, net of cash of $498 acquired			(2,374)
Proceeds from asset disposals, net		83	2
Purchases of property, plant and equipment	[1]	(33)	(43)
Advances related to proportionately consolidated consortiums		(234)	(45)
Investments in unconsolidated affiliates		(1)	(3)
Other			2
Total cash used in investing activities		(185)	(2,461)
Cash flows from financing activities:
Revolving credit facility borrowings		1,699
Revolving credit facility repayments		(1,320)
Proceeds from issuance of long-term debt			3,560
Repayment of debt and finance lease obligations		(19)	(515)
Advances related to equity method joint ventures and proportionately consolidated consortiums		190	(42)
Debt and letter of credit issuance costs			(208)
Debt extinguishment costs			(10)
Repurchase of common stock		(4)	(14)
Distribution to joint venture member		(5)
Total cash provided by financing activities		573	2,771
Effects of exchange rate changes on cash, cash equivalents and restricted cash		(2)	(15)
Net (decrease) increase in cash, cash equivalents and restricted cash		(63)	730
Cash, cash equivalents and restricted cash at beginning of period		845	408
Cash, cash equivalents and restricted cash at end of period		782	$ 1,138
Structured Equipment Financing [Member]
Cash flows from financing activities:
Revolving credit facility borrowings		$ 32

[1] Capital expenditures reported represent cash purchases. At June 30, 2019 and 2018, we had approximately $47 million and $14 million, respectively, of accrued and unpaid capital expenditures reported in property, plant and equipment and accrued liabilities.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Parenthetical) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Statement Of Cash Flows [Abstract]
Net of cash acquired	$ 498

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) $ in Millions	Total	Common Stock Par Value [Member]	Capital in Excess of Par Value [Member]	Retained Earnings/(Accumulated Deficit) [Member]	Accumulated Other Comprehensive Loss ("AOCI") [Member]	Treasury Stock [Member]	Stockholder's Equity [Member]	Noncontrolling Interest ("NCI") [Member]
Beginning Balance at Dec. 31, 2017	$ 1,789	$ 98	$ 1,858	$ (48)	$ (51)	$ (96)	$ 1,761	$ 28
Adoption of ASC 606 at Dec. 31, 2017	20			20			20
Beginning Balance at Dec. 31, 2017	1,809	98	1,858	(28)	(51)	(96)	1,781	28
Net (loss) income	34			35			35	(1)
Other comprehensive loss, net of tax	(1)				(1)		(1)
Common stock issued		1	(1)
Stock-based compensation charges	3		3				3
Purchase of treasury shares	(7)					(7)	(7)
Retirement of common stock		(1)	(6)			7
Ending Balance at Mar. 31, 2018	1,838	98	1,854	7	(52)	(96)	1,811	27
Beginning Balance at Dec. 31, 2017	1,789	98	1,858	(48)	(51)	(96)	1,761	28
Adoption of ASC 606 at Dec. 31, 2017	20			20			20
Beginning Balance at Dec. 31, 2017	1,809	98	1,858	(28)	(51)	(96)	1,781	28
Net (loss) income	79
Other comprehensive loss, net of tax					(24)
Ending Balance at Jun. 30, 2018	3,566	183	3,480	54	(75)	(96)	3,546	20
Beginning Balance at Mar. 31, 2018	1,838	98	1,854	7	(52)	(96)	1,811	27
Net (loss) income	45			47			47	(2)
Other comprehensive loss, net of tax	(23)				(23)		(23)
CB&I combination	1,688	85	1,608				1,693	(5)
Stock-based compensation charges	25		25				25
Purchase of treasury shares	(7)					(7)	(7)
Retirement of common stock			(7)			7
Ending Balance at Jun. 30, 2018	3,566	183	3,480	54	(75)	(96)	3,546	20
Beginning Balance at Dec. 31, 2018	823	183	3,539	(2,719)	(107)	(96)	800	23
Net (loss) income	(57)			(56)			(56)	(1)
Other comprehensive loss, net of tax	(58)				(58)		(58)
Common stock issued		2	(2)
Stock-based compensation charges	6		6				6
Accretion and dividends on redeemable preferred stock	(14)			(14)			(14)
Conversion of noncontrolling interest	(24)		2				2	(26)
Purchase of treasury shares	(4)					(4)	(4)
Retirement of common stock		(1)	(3)			4
Other	3		3				3
Ending Balance at Mar. 31, 2019	675	184	3,545	(2,789)	(165)	(96)	679	(4)
Beginning Balance at Dec. 31, 2018	823	183	3,539	(2,719)	(107)	(96)	800	23
Net (loss) income	(171)
Other comprehensive loss, net of tax					(74)
Ending Balance at Jun. 30, 2019	537	185	3,549	(2,935)	(181)	(96)	522	15
Beginning Balance at Mar. 31, 2019	675	184	3,545	(2,789)	(165)	(96)	679	(4)
Net (loss) income	(114)			(132)			(132)	18
Other comprehensive loss, net of tax	(16)				(16)		(16)
Common stock issued		1	(1)
Stock-based compensation charges	5		5				5
Accretion and dividends on redeemable preferred stock	(14)			(14)			(14)
Other	1							1
Ending Balance at Jun. 30, 2019	$ 537	$ 185	$ 3,549	$ (2,935)	$ (181)	$ (96)	$ 522	$ 15

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NATURE OF OPERATIONS AND ORGANIZATION

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

NATURE OF OPERATIONS AND ORGANIZATION

NOTE 1—NATURE OF OPERATIONS AND ORGANIZATION

Nature of Operations

McDermott International, Inc. (“McDermott,” “we” or “us”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a fully integrated provider of engineering, procurement, construction and installation (“EPCI”) and technology solutions to the energy industry. We design and build end-to-end infrastructure and technology solutions to transport and transform oil and gas into a variety of products. Our proprietary technologies, integrated expertise and comprehensive solutions are utilized for offshore, subsea, power, liquefied natural gas (“LNG”) and downstream energy projects around the world. Our customers include national, major integrated and other oil and gas companies as well as producers of petrochemicals and electric power, and we operate in most major energy producing regions throughout the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost-reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods.

Organization

Our business is organized into five operating groups, which represent our reportable segments consisting of: North, Central and South America (“NCSA”); Europe, Africa, Russia and Caspian (“EARC”); the Middle East and North Africa (“MENA”); Asia Pacific (“APAC”); and Technology. See Note 23, Segment Reporting, for further discussion. In the second quarter of 2019, we sold Alloy Piping Products LLC (“APP”), the distribution and manufacturing arm of our pipe fabrication business, previously included in our NCSA segment. See Note 4, Disposition of Alloy Piping Products, LLC, for further discussion.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

NOTE 2—BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (the “Financial Statements”) are unaudited and have been prepared from our books and records in accordance with Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements and are not necessarily indicative of results of operations for a full year. Therefore, they should be read in conjunction with the Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”).

The Financial Statements reflect all wholly owned subsidiaries and those entities we are required to consolidate. See the “Joint Venture and Consortium Arrangements” section of “Note 2—Basis of Presentation and Significant Accounting Policies” in the 2018 Form 10-K for further discussion of our consolidation policy for those entities that are not wholly owned. In the opinion of our management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. Intercompany balances and transactions are eliminated in consolidation. Values presented within tables (excluding per share data) are in millions and may not sum due to rounding.

On May 10, 2018, we completed our combination with Chicago Bridge & Iron Co. N.V. (“CB&I”) through a series of transactions (the “Combination”). See Note 3, Business Combination, for further discussion.

Reclassifications

Loss on asset disposals—In the second quarter of 2019, we sold APP, as discussed in Note 4, Disposition of Alloy Piping Products, LLC. Loss from the disposition of APP is included in Loss on asset disposals in our Condensed Consolidated Statements of Operations (our “Statement of Operations”). To conform to current period presentation, $1 million of loss on asset disposals presented in Other operating expense during the three- and six-month periods ended June 30, 2018 has been reclassified to Loss on asset disposals.

Bidding and Proposal Costs—We began classifying bid and proposal costs in Cost of operations in our Statement of Operations in the second quarter of 2018, as a result of our realignment of commercial personnel within our operating groups in conjunction with the Combination. For periods reported prior to the second quarter of 2018, bid and proposal costs were included in Selling, general and administrative expenses (“SG&A”). For the six months ended June 30, 2019 and 2018, our Cost of operations included $46 million and $17 million of bid and proposal costs, respectively. For the six months ended June 30, 2018, our SG&A expense included bid and proposal expenses of $10 million incurred in the first quarter of 2018.    

Use of Estimates and Judgments

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We believe the most significant estimates and judgments are associated with:

• revenue recognition for our contracts, including estimating costs to complete each contract and the recognition of incentive fees and unapproved change orders and claims;

• determination of fair value with respect to acquired assets and liabilities;

• fair value and recoverability assessments that must be periodically performed with respect to long-lived tangible assets, goodwill and other intangible assets;

• valuation of deferred tax assets and financial instruments;

• the determination of liabilities related to loss contingencies, self-insurance programs and income taxes;

• the determination of pension-related obligations; and

• consolidation determinations with respect to our joint venture and consortium arrangements.

If the underlying estimates and assumptions upon which the Financial Statements are based change in the future, actual amounts may differ from those included in the Financial Statements.

Recently Adopted Accounting Guidance

Leases—In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This ASU requires entities that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. We adopted this ASU effective January 1, 2019 using the modified retrospective application, applying the new standard to leases in place as of the adoption date. Prior periods have not been adjusted.

We elected to apply certain practical expedients allowed upon the adoption of this ASU, which, among other things, allowed us to: not reassess whether any expired or existing contracts contain leases; carry forward the historical lease classification; and not have to reassess any initial direct cost of any expired or existing leases. Adoption of the new standard resulted in the recording of Operating lease right-of-use assets, Current portion of long-term lease obligations and Long-term lease obligations of approximately $424 million, $101 million and $342 million, respectively, as of January 1, 2019. The adoption of this ASU did not have a material impact on our Statement of Operations, Condensed Consolidated Statement of Cash Flows (“Statement of Cash Flows”) or the determination of compliance with financial covenants under our current debt agreements. See Note 13, Lease Obligations, for further discussion.

Income Taxes—In January 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (Topic 220). This ASU gives entities the option to reclassify to retained earnings the tax effects resulting from the U.S. Tax Cuts and Jobs Act related to items in accumulated other comprehensive income (loss) (“AOCI”) that the FASB refers to as having been stranded in AOCI. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements and related disclosures.

Derivatives—In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815). This ASU includes financial reporting improvements related to hedging relationships to better report the economic results of an entity’s risk management activities in its financial statements. Additionally, this ASU makes certain improvements to simplify the application of the hedge accounting guidance. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements. See Note 17, Derivative Financial Instruments, for related disclosures.

In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging: Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of benchmark interest rates permitted in the application of hedge accounting. This ASU permits the use of an OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements and related disclosures. See Note 17, Derivative Financial Instruments.

Significant Accounting Policies

Our significant accounting policies are detailed in “Note 2—Basis of Presentation and Significant Accounting Policies” in the 2018 Form 10-K. The following is an update to those significant accounting policies due to recently adopted accounting guidance.

Leases—We classify an arrangement as a lease at inception if we have the right to control the use of an identified asset we do not legally own for a period of time in exchange for consideration. In general, leases with an initial term of 12 months or less are not recorded on our Balance Sheet unless it is reasonably certain we will renew the lease. All leases with an initial term of more than 12 months, whether classified as operating or finance, are recorded to our Balance Sheet based on the present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires a discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate; therefore, we use an incremental borrowing rate based on information available at the commencement date.    

Our lease terms may include options to extend or terminate the lease. Lease expense for operating leases and the amortization of the right-of-use asset for finance leases are recognized on a straight-line basis over the lease terms, in each case taking into account such option when it is reasonably certain we will exercise that option.

We have lease agreements with lease and non-lease components, which are generally accounted for separately for all leases other than leases at our construction project sites. Non-lease components included in assets and obligations under operating leases are not material to our financial statements.

For our joint ventures, consortiums and other collaborative arrangements (referred to as “joint ventures” and “consortiums”), the right-of-use asset and lease obligations are generally recognized by the party that enters into the lease agreement, which could be the joint venture directly, one of our joint venture members or us. We have recognized our proportionate share of leases entered into by our joint ventures, where the joint venture has the right to control the use of an identified asset.

Derivative Financial Instruments—We utilize derivative financial instruments in certain circumstances to mitigate the effects of changes in foreign currency exchange rates and interest rates, as described below.

• Foreign Currency Rate Derivatives—We do not engage in currency speculation. However, we utilize foreign currency exchange rate derivatives on an ongoing basis to hedge against certain foreign currency related operating exposures. We generally apply hedge accounting treatment for contracts used to hedge operating exposures and designate them as cash flow hedges. Therefore, gains and losses are included in AOCI until the associated underlying operating exposure impacts our earnings, at which time the impact of the hedge is recorded within the income statement line item associated with the underlying exposure. Changes in the fair value of instruments that we do not designate as cash flow hedges are recognized in the income statement line item associated with the underlying exposure.

• Interest Rate Derivatives—Our interest rate derivatives are limited to a swap arrangement entered into on May 8, 2018, to hedge against interest rate variability associated with $1.94 billion of the $2.26 billion Term Facility described in Note 12, Debt. The swap arrangement has been designated as a cash flow hedge, as its critical terms matched those of the Term Facility at inception and through June 30, 2019. Accordingly, changes in the fair value of the swap arrangement are included in AOCI until the associated underlying exposure impacts our interest expense.

See Note 16, Fair Value Measurements, and Note 17, Derivative Financial Instruments, for further discussion.

Accounting Guidance Issued but Not Adopted as of June 30, 2019

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. A valuation account, allowance for credit losses, will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This ASU is effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

Defined Benefit Pension Plans—In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20). This ASU eliminates, modifies and adds disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. We are evaluating the impact of the new guidance on our future disclosures.

Consolidation—In October 2018, the FASB issued ASU No. 2018-17, Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities (“VIE”). This ASU amends the guidance for determining whether a decision-making fee is a variable interest, which requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. The ASU is effective for annual and interim periods beginning after December 15, 2019. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

Collaborative Arrangements—In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In addition, unit-of-account guidance in Topic 808 was aligned with the guidance in Topic 606 (that is, a distinct good or service) when assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. This ASU is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

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BUSINESS COMBINATION

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

BUSINESS COMBINATION

NOTE 3—BUSINESS COMBINATION

General―On December 18, 2017, we entered into an agreement to combine our business with CB&I, an established downstream provider of industry-leading petrochemical, refining, power, gasification and gas processing technologies and solutions. On May 10, 2018 (the “Combination Date”) we completed the Combination.

Transaction Overview—On the Combination Date, we acquired the equity of certain U.S. and non-U.S. CB&I subsidiaries that owned CB&I’s technology business, as well as certain intellectual property rights, for $2.87 billion in cash consideration that was funded using debt financing, as discussed further in Note 12, Debt, and existing cash. Also, on the Combination Date, CB&I shareholders received 0.82407 shares of McDermott common stock for each share of CB&I common stock tendered in the exchange offer. Each remaining share of CB&I common stock held by CB&I shareholders not acquired by McDermott in the exchange offer was effectively converted into the right to receive the same 0.82407 shares of McDermott common stock that was paid in the exchange offer, together with cash in lieu of any fractional shares of McDermott common stock, less any applicable withholding taxes. Stock-settled equity-based awards relating to shares of CB&I’s common stock were either canceled and converted into the right to receive cash or were converted into comparable McDermott awards on generally the same terms and conditions as prior to the Combination Date. We issued 84.5 million shares of McDermott common stock to the former CB&I shareholders and converted CB&I stock-settled equity awards into McDermott stock-settled equity-based awards to be settled in approximately 2.2 million shares of McDermott common stock.

Transaction Accounting—The Combination is accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. McDermott is considered the acquirer for accounting purposes based on the following facts at the Combination Date: (1) McDermott’s stockholders owned approximately 53 percent of the combined business on a fully diluted basis; (2) a group of McDermott’s directors, including the Chairman of the Board, constituted a majority of the Board of Directors; and (3) McDermott’s President and Chief Executive Officer and Executive Vice President and Chief Financial Officer continue in those roles. The series of transactions resulting in McDermott’s acquisition of CB&I’s entire business is being accounted for as a single accounting transaction, as such transactions were entered into at the same time in contemplation of one another and were collectively designed to achieve an overall commercial effect.

Purchase Consideration―We completed the Combination for a gross purchase price of approximately $4.6 billion ($4.1 billion net of cash acquired), detailed as follows (in millions, except per share amounts):

		(In millions, except per share amounts)
CB&I shares for Combination consideration		103
Conversion Ratio: 1 CB&I share = 0.82407 McDermott shares		85
McDermott stock price on May 10, 2018		19.92
Equity Combination consideration transferred	$	1,684
Fair value of converted awards earned prior to the Combination		9
Total equity Combination consideration transferred		1,693
Cash consideration transferred		2,872
Total Combination consideration transferred		4,565
Less: Cash acquired		(498)
Total Combination consideration transferred, net of cash acquired	$	4,067

Purchase Price Allocation— The aggregate purchase price noted above was allocated to the major categories of assets and liabilities acquired based upon their estimated fair values at the Combination Date, which were based, in part, upon external appraisal and valuation of certain assets, including specifically identified intangible assets and property and equipment. The excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired, totaling approximately $5 billion, was recorded as goodwill.

Our final purchase price allocation, completed in the second quarter of 2019, resulted in adjustments to certain assets and liabilities of approximately $107 million, since our previous estimates as of March 31, 2019, and primarily related to fair value adjustments to accounts receivable and accounts payable associated with acquired contracts.

The following summarizes our final purchase price allocation of the fair values of the assets acquired and liabilities assumed at the Combination Date (in millions):

	May 10, 2018
Net tangible assets:
Cash	$	498
Accounts receivable		791
Inventory		111
Contracts in progress		272
Assets held for sale (1)		70
Other current assets		272
Investments in unconsolidated affiliates (2)		426
Property, plant and equipment		396
Other non-current assets		127
Accounts payable		(499	)
Advance billings on contracts (3)		(2,410	)
Deferred tax liabilities		(16	)
Other current liabilities		(1,237	)
Other non-current liabilities		(453	)
Noncontrolling interest		14
Total net tangible liabilities		(1,638	)
Project-related intangible assets/liabilities, net (4)		150
Other intangible assets (5)		1,063
Net identifiable liabilities		(425	)
Goodwill (6)		4,990
Total Combination consideration transferred		4,565
Less: Cash acquired		(498	)
Total Combination consideration transferred, net of cash acquired	$	4,067

^{(1) Assets held for sale included CB&I’s former administrative headquarters within Corporate and various fabrication facilities within NCSA. During the third quarter of 2018, we completed the sale of CB&I’s former administrative headquarters for proceeds of $52 million.}

^{(2) Investments in unconsolidated affiliates includes a fair value adjustment of $215 million associated with the Combination. Approximately $146 million of the fair value adjustment is attributable to the basis difference between McDermott’s investment and the underlying equity in identifiable assets of unconsolidated affiliates and will be amortized to Investment in unconsolidated affiliates-related amortization over a range of two to 30 years based on the life of assets to which the basis difference is attributed.}

^{(3) Advance billings on contracts includes accrued provisions for estimated losses on projects of $374 million, primarily associated with the Cameron LNG and Freeport LNG Trains 1 and 2 projects, the now-substantially completed gas power project for a unit of Calpine Corporation (“Calpine”) and the now-completed gas power project for Indianapolis Power & Light Company.}

^{(4) Project-related intangible assets/liabilities, net includes intangible asset and liabilities of $259 million and $109 million, respectively. The balances represent the fair value of acquired remaining performance obligations (“RPOs”) and normalized profit margin fair value associated with acquired long-term contracts that were deemed to be lower than fair value (excluding amounts recorded in Advance billings on contracts and Contracts in progress) as of the Combination Date. The project-related intangible assets and liabilities will be amortized as the applicable projects progress over a range of two to six years within Project-related intangibles amortization in our Statements of Operations.}

^{(5) Other intangible assets are reflected in the table below and recorded at estimated fair value, as determined by our management, based on available information, which includes valuations prepared by external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.}

	May 10, 2018
	Fair value		Useful Life Range	Weighted Average Useful Life
	(In millions)
Process technologies	$	511	10-30		27
Trade names		400	10-20		12
Customer relationships		126	4-11		10
Trademarks		26	10		10
Total	$	1,063

^{(6) Goodwill resulted from the acquired established workforce, which does not qualify for separate recognition, as well as expected future cost savings and revenue synergies associated with the combined operations. Of the approximately $5 billion of goodwill recorded in conjunction with the Combination, approximately $2.7 billion, $461 million, $50 million, $52 million and $1.7 billion, was allocated to our NCSA, EARC, MENA, APAC and Technology reporting segments, respectively. Approximately $1.7 billion of the opening goodwill balance is deductible for tax purposes.}

Impact on RPOs—CB&I RPOs totaled approximately $8.3 billion at the Combination Date, after considering conforming accounting policies and project adjustments for acquired in-process projects.

Supplemental Pro Forma Information (Unaudited)—The following unaudited pro forma financial information reflects the Combination and the related events as if they occurred on January 1, 2018 and gives effect to pro forma events that are directly attributable to the Combination, factually supportable, and expected to have a continuing impact on our combined results, following the Combination. The pro forma financial information includes adjustments to: (1) include additional intangibles amortization, investment in unconsolidated affiliates-related amortization, depreciation of property, plant and equipment and net interest expense associated with the Combination and (2) exclude restructuring, integration and transaction costs that were included in McDermott and CB&I’s historical results and are expected to be non-recurring. This pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the date indicated. Further, the pro forma financial information does not purport to project the future operating results of the combined business operations following the Combination.

	Three Months Ended		Six Months Ended
	June 30, 2018 (1)
	(In millions, except per share amounts)
Pro forma revenue	$	2,492	$	4,845
Pro forma net income attributable to common stockholders		48		81
Pro forma net income per share attributable to common stockholders
Basic		0.27		0.45
Diluted		0.26		0.43
Shares used in the computation of net income per share (2)
Basic	181		181
Diluted	188		188

^{(1) Adjustments, net of tax, included in the pro forma net income above that were of a non-recurring nature totaled $94 million and $109 million for the three and six months ended June 30, 2018. The adjustments reflect the elimination of (1) restructuring and integration costs ($54 million and $62 million), respectively; and (2) transaction costs ($29 million and $36 million) and debt extinguishment costs ($11 million and $11 million) for the three and six months ended June 30, 2018. These pro forma results exclude the effect of adjustments to the opening balance sheet associated with fair value purchase accounting estimates.}

⁽²⁾ Pro forma net income per share was calculated using weighted average basic shares outstanding during the three and six months ended June 30, 2019. Due to the net loss for the three and six months ended June 30, 2019, the effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share. For the presentation of the pro forma net income for the three and six months ended June 30, 2018, the amount of diluted shares includes the impact of restricted stock and warrants but does not include the impact of the redeemable preferred stock, as those shares were antidilutive.

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DISPOSITION OF ALLOY PIPING PRODUCTS, LLC

6 Months Ended

Jun. 30, 2019

Discontinued Operations And Disposal Groups [Abstract]

DISPOSITION OF ALLOY PIPING PRODUCTS, LLC

NOTE 4—DISPOSITION OF ALLOY PIPING PRODUCTS, LLC

We performed a review of our business portfolio, which included businesses acquired in the Combination. Our review sought to determine if any portions of our business are non-core for purposes of our vertically integrated offering model. As a result of our review, we identified our industrial storage tank and pipe fabrication businesses as non-core for purposes of our vertically integrated offering model. On June 24, 2019, we entered into an agreement to sell APP, the distribution and manufacturing arm of our pipe fabrication business, previously included in our NCSA segment. We completed the sale of APP on June 27, 2019.

Loss on the APP sale is included in Loss on asset disposals in our Statement of Operations and is summarized as follows:

	(In millions)
Assets
Inventory	$	69
Property and equipment		25
Goodwill		90
Other assets		11
Assets sold	$	195
Liabilities
Account payable	$	8
Other liabilities		3
Liabilities sold	$	11
Net assets sold	$	184
Sale proceeds (net of transaction costs of $2)		83
Loss on net assets sold	$	101

Results of APP’s operations during the three and six-month periods ended June 30, 2019 and 2018 were not material to McDermott, as a whole.

We are continuing to pursue the sale of the remaining portion of the pipe fabrication business, subject to approval by our Board of Directors.

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REVENUE RECOGNITION

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

REVENUE RECOGNITION

NOTE 5—REVENUE RECOGNITION

RPOs

Our RPOs by segment were as follows:

	June 30, 2019				December 31, 2018
	(Dollars in millions)
NCSA	$	8,123	39	%	$	5,649	52	%
EARC		4,032	20	%		1,378	12	%
MENA		6,538	32	%		1,834	17	%
APAC		1,289	6	%		1,420	13	%
Technology		565	3	%		632	6	%
Total	$	20,547	100	%	$	10,913	100	%

Of the June 30, 2019 RPOs, we expect to recognize revenues as follows:

	2019		2020		Thereafter
	(In millions)
Total RPOs	$	4,768	$	7,372	$	8,407

Revenue Disaggregation

Our revenue by product offering, contract types and revenue recognition methodology was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019 (2)		2018 (2)		2019 (2)		2018 (2)
Revenue by product offering:
Offshore and subsea	$	661	$	653	$	1,266	$	1,261
LNG		411		382		832		382
Downstream (1)		740		496		1,602		496
Power		325		204		648		204
	$	2,137	$	1,735	$	4,348	$	2,343
Revenue by contract type:
Fixed price	$	1,864	$	1,313	$	3,590	$	1,896
Reimbursable		106		269		409		269
Hybrid		106		124		216		124
Unit-basis and other		61		29		133		54
	$	2,137	$	1,735	$	4,348	$	2,343
Revenue by recognition methodology:
Over time	$	2,117	$	1,707	$	4,278	$	2,315
At a point in time		20		28		70		28
	$	2,137	$	1,735	$	4,348	$	2,343

^{(1) Includes the results of our Technology operating group.}

^{(2) Intercompany amounts have been eliminated in consolidation.}

Other

For the three and six months ended June 30, 2019, we recognized approximately $74 million and $96 million of revenues resulting from changes in transaction prices associated with performance obligations satisfied in prior periods, primarily in our NCSA segment. Revenues reported for the 2019 periods include $72 million settlement of claims on a substantially complete project.

For the three and six months ended June 30, 2018, we recognized approximately $13 million and $79 million of revenues due to changes in transaction price associated with performance obligations satisfied in prior periods, primarily in our APAC and MENA segments. The changes in transaction prices primarily related to reimbursement of costs incurred in prior periods.

Revenues recognized during the three and six months ended June 30, 2019, with respect to amounts included in our Advance billings on contracts balance as of December 31, 2018, were approximately $579 million and $1.3 billion.

Unapproved Change Orders, Claims and Incentives

Unapproved Change Orders and Claims—As of June 30, 2019, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $388 million, of which approximately $101 million was included in our RPO balance. As of December 31, 2018, we had unapproved change orders and claims included in transaction prices for our projects aggregating to approximately $428 million, of which approximately $130 million was included in our RPO balance.

Incentives—As of June 30, 2019, we had incentives included in transaction prices for our projects aggregating to approximately $126 million, primarily associated with our Cameron LNG project discussed below, of which approximately $25 million was included in our RPO balance. As of December 31, 2018, we did not have any material incentives included in transaction prices for our projects.

The amounts recorded in contract prices and recognized as revenues reflect our best estimates of recovery; however, the ultimate resolution and amounts received could differ from these estimates and could have a material adverse effect on our results of operations, financial position and cash flow.

Loss Projects

Our accrual of provisions for estimated losses on active uncompleted contracts as of June 30, 2019 was $132 million and primarily related to the Cameron LNG project and the Freeport LNG Trains 1 & 2 projects. Our accrual of provisions for estimated losses on active uncompleted contracts as of December 31, 2018 was $266 million and primarily related to the Cameron LNG, Freeport LNG Trains 1 & 2, Calpine and Abkatun-A2 projects. Our Freeport LNG Train 3 project is not anticipated to be in a loss position.

Our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico for Pemex (“Line 1 and Line 10”) was also determined to be in substantial loss position as of June 30, 2019, as discussed further below.

For purposes of the discussion below, when we refer to a percentage of completion on a cumulative basis, we are referring to the cumulative percentage of completion, which includes progress made prior to the Combination Date. In accordance with U.S. GAAP, as of the Combination Date, we reset the progress to completion for all of CB&I’s projects then in progress to 0% for accounting purposes based on the remaining costs to be incurred as of that date.

Summary information for our significant ongoing loss projects as of June 30, 2019 is as follows:

Cameron LNG―At June 30, 2019, our U.S. LNG export facility project in Hackberry, Louisiana for Cameron LNG (being performed by our NCSA operating group) was approximately 78% complete on a post-Combination basis (approximately 93% on a cumulative basis) and had an accrued provision for estimated losses of approximately $58 million. In the second quarter of 2019, NCSA project operating margin was positively impacted by recognition of approximately $110 million of incentives related to the projected achievement of progress milestones.

Freeport LNG―At June 30, 2019, Trains 1 & 2 of our U.S. LNG export facility project in Freeport, Texas for Freeport LNG (being performed by our NCSA operating group) were approximately 87% complete on a post-Combination basis (approximately 96% on a cumulative basis) and had an accrued provision for estimated losses of approximately $19 million. During the three and six months ended June 30, 2019, the project was negatively impacted by $27 million and $54 million, respectively, due to changes in cost estimates resulting from increases in construction and subcontractor costs. These cost estimate increases were partially offset by the recording of approximately $11 million of incentive revenues in the first quarter of 2019.

During the three months ended June 30, 2019, Freeport LNG Train 3 was negatively impacted by $11 million of changes in cost estimates at completion. During the six months ended June 30, 2019, Freeport LNG Train 3 was positively impacted by $5 million of changes in estimates, primarily due to increased productivity and savings in indirect costs in the first quarter. During the six months ended June 30, 2019, the Freeport LNG project taken as a whole had an overall negative $38 million impact on operating margin at completion.

Line 1 and Line 10― As of June 30, 2019, our subsea pipeline flowline installation project in support of the Ayatsil field offshore Mexico (being performed by our NCSA operating group) was approximately 85% complete and had an accrued provision for estimated losses of approximately $6 million. During the three and six months ended June 30, 2019, the project was negatively impacted by $10 million and $28 million, respectively, of changes in cost estimates associated with unexpected schedule extensions, resulting in additional vessel and labor costs. The project is expected to be completed in the third quarter of 2019.

Summary information for our significant loss projects previously reported in the 2018 Form 10-K that are substantially complete as of June 30, 2019 is as follows:

Calpine Power Project―At June 30, 2019, our U.S. gas turbine power project for Calpine (being performed by our NCSA operating group) was approximately 99% complete on a post-Combination basis (approximately 99.7% on a pre-Combination basis), and the remaining accrued provision for estimated losses was not significant.

Abkatun-A2 Project―At June 30, 2019, our Abkatun-A2 platform project in Mexico for Pemex (being performed by our NCSA operating group) was approximately 99% complete, and the remaining accrued provision for estimated losses was not significant.

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PROJECT CHANGES IN ESTIMATES

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

PROJECT CHANGES IN ESTIMATES

NOTE 6—PROJECT CHANGES IN ESTIMATES

Our RPOs for each of our operating groups generally consist of several hundred contracts, and our results may be impacted by changes in estimated margins. The following is a discussion of our most significant changes in cost estimates that impacted segment operating income for the three and six months ended June 30, 2019 and 2018. For discussion of significant changes in estimates resulting from changes in transaction prices, see Note 5, Revenue Recognition.

Three and six months ended June 30, 2019

Segment operating income for the three and six months ended June 30, 2019 was impacted by net unfavorable changes in estimates totaling approximately $135 million and $116 million, respectfully, primarily in our NCSA and MENA segments. Changes in estimates in our EARC and APAC segments were not material.

NCSA—Our segment results for the three and six months ended June 30, 2019 were negatively impacted by net unfavorable changes in cost estimates, recognized during the period, aggregating approximately $131 million and $155 million, respectively. The net unfavorable changes were due to cost increases on:

• the Freeport LNG project taken as a whole - $38 million and $49 million for the three- and six-month periods ended June 30, 2019, respectively;

• Calpine - $11 million for both the three- and six-month periods ended June 30, 2019, respectively;

• Abkatun-A2, Line 1 and Line 10 and Xanab projects for Pemex - $33 million and $47 million for the three- and six-month periods ended June 30, 2019, respectively;

• Downstream petrochemical projects - $11 million for the three months period ended June 30, 2019 and $7 million net favorable changes in the six months ended June 30, 2019;

• Power projects - $39 million and $48 million for the three- and six-month periods ended June 30, 2019, respectively; and

• various other projects.

See Note 5, Revenue Recognition, for further discussion of our Freeport LNG Trains 1 & 2 and Train 3 and Pemex Line 1 and Line 10 projects.

MENA—Our segment results for the three and six months ended June 30, 2019 were positively impacted by net favorable changes in estimates aggregating approximately $2 million and $35 million. The net favorable changes were primarily due to reductions in costs on various projects in the Middle East.

Three and six months ended June 30, 2018

Segment operating income for the three and six months ended June 30, 2018 was positively impacted by net favorable changes in estimates totaling approximately $84 million and $121 million, respectively, primarily in our MENA (approximately $39 million and $69 million, respectively) and APAC (approximately $46 million and $55 million, respectively) segments.

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH

6 Months Ended

Jun. 30, 2019

Cash And Cash Equivalents [Abstract]

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

NOTE 7—CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Balance Sheets that sum to the totals of such amounts shown in our Statements of Cash Flows as of June 30, 2019 and December 31, 2018:  

	June 30, 2019		December 31, 2018
	(In millions)
Cash and cash equivalents	$	455	$	520
Restricted cash and cash equivalents (1)		327		325
Total cash, cash equivalents and restricted cash shown in the Statements of Cash Flows	$	782	$	845

^{(1) Our restricted cash balances primarily serve as cash collateral deposits for our letter of credit facilities. See Note 12, Debt, for further discussion.}

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ACCOUNTS RECEIVABLE

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

ACCOUNTS RECEIVABLE

NOTE 8—ACCOUNTS RECEIVABLE

Accounts Receivable—Trade, Net―Our trade receivable balances at June 30, 2019 and December 31, 2018 included the following:

	June 30, 2019			December 31, 2018
	(In millions)
Contract receivables (1)	$	864		$	794
Retainages (2)		155			155
Less allowances		(17	)		(17	)
Accounts receivable—trade, net	$	1,002		$	932

⁽¹⁾ Unbilled receivables for our performance obligations recognized at a point in time are recorded within Accounts receivable-trade, net and were approximately $46 million and $31 million as of June 30, 2019 and December 31, 2018, respectively.

⁽²⁾ Retainages classified within Accounts receivable-trade, net are amounts anticipated to be collected within one year and as to which we have an unconditional right to collect from the customer, subject only to the passage of time. Retainages anticipated to be collected beyond one year are classified as Accounts receivable long-term retainages on our Balance Sheet.

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GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Our goodwill balance is attributable to the excess of the purchase price over the fair value of net assets acquired in connection with the Combination. The changes in the carrying amount of goodwill during the six months ended June 30, 2019 are as follows:

	(In millions)
Balance as of December 31, 2018	$	2,654
Adjustments to finalize purchase accounting estimates (1)		168
Allocated to APP for disposal		(90	)
Currency translation adjustments		(28	)
Balance as of June 30, 2019 (2)	$	2,704

^{(1) Includes adjustments of $61 million and $107 million identified in the first and second quarters of 2019, respectively. See Note 3, Business Combination for further discussion.}

^{(2) At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.}  

During the first quarter of 2019 no indicators of goodwill impairment were identified.

In the second quarter of 2019, goodwill was allocated to the APP business. Following its disposal, a goodwill impairment test was performed on the retained portion of goodwill within the NCSA reporting unit. We utilized an income approach (discounted cash flow method), as we believe this is the most direct approach to incorporate the specific economic attributes and risk profiles of our reporting units into our valuation model. We generally do not utilize a market approach, given the lack of relevant information generated by market transactions involving comparable businesses. However, to the extent market indicators of fair value become available, we consider such market indicators as well as market participant assumptions in our discounted cash flow analysis and determination of fair value. The discounted cash flow methodology is based, to a large extent, on assumptions about future events, which may or may not occur as anticipated, and such deviations could have a significant impact on the calculated estimated fair values of our reporting units. These assumptions included the use of significant unobservable inputs, representative of a Level 3 fair value measurement, and included, but were not limited to, estimates of discount rates, future growth rates and terminal values for each reporting unit.

The discounted cash flow analysis for the NCSA reporting unit included forecasted cash flows over a five-year forecast period (2019 through 2023), with our 2019 management budget used as the basis for our projections. These forecasted cash flows took into consideration historical and recent results, the reporting unit’s backlog and near-term prospects and management’s outlook for the future. A terminal value was also calculated using a terminal value growth assumption to derive the annual cash flows after the discrete forecast period. A reporting unit specific discount rate was applied to the forecasted cash flows and terminal cash flows to determine the discounted future cash flows, or fair value, of each reporting unit. Our assessment took into consideration the incremental changes in project estimates discussed above and reflected the increased market risk surrounding the award and execution of future projects and adjusted our cost of capital assumptions to be in-line with recent market indicators for our company and industry. These increases in cost of capital and risk premium assumptions resulted in a significant increase in our discount rates utilized for purposes of determining our discounted cash flows and reduced the estimated fair values of our reporting units.

No impairment of the retained portion of goodwill within the NCSA reporting unit was identified as a result of the assessment.

Project-Related Intangibles

Our project-related intangibles at June 30, 2019 and December 31, 2018, including the June 30, 2019 weighted-average useful lives, were as follows:

			June 30, 2019									December 31, 2018
	Weighted Average Useful Life		Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
	(In years)		(In millions)
Project-related intangible assets		4	$	259		$	(165	)	$	94		$	259		$	(122	)	$	137
Project-related intangible liabilities		2		(109	)		71			(38	)		(109	)		43			(66	)
Total (1)			$	150		$	(94	)	$	56		$	150		$	(79	)	$	71

^{(1) The decrease in project-related intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $16 million and the impact of foreign currency translation.}

Other Intangible Assets

Our other intangible assets at June 30, 2019 and December 31, 2018, including the June 30, 2019 weighted-average useful lives, were as follows:

			June 30, 2019							December 31, 2018
	Weighted Average Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In years)		(In millions)
Process technologies		27	$	507	$	(26	)	$	481	$	514	$	(14	)	$	500
Trade names		12		396		(41	)		355		401		(23	)		378
Customer relationships		10		124		(35	)		89		129		(23	)		106
Trademarks		10		26		(3	)		23		27		(2	)		25
Total (1)			$	1,053	$	(105	)	$	948	$	1,071	$	(62	)	$	1,009

^{(1) The decrease in other intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $43 million, intangible assets allocated to the disposal of APP and the impact of foreign currency translation.}

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JOINT VENTURE AND CONSORTIUM ARRANGEMENTS

6 Months Ended

Jun. 30, 2019

Equity Method Investments And Joint Ventures [Abstract]

JOINT VENTURE AND CONSORTIUM ARRANGEMENTS

NOTE 10—JOINT VENTURE AND CONSORTIUM ARRANGEMENTS

We account for our unconsolidated joint ventures or consortiums using either proportionate consolidation, when we meet the applicable accounting criteria to do so, or the equity method. Further, we consolidate any joint venture or consortium that is determined to be a VIE for which we are the primary beneficiary or which we otherwise effectively control.

Proportionately Consolidated Consortiums

The following is a summary description of our significant consortiums that have been deemed to be VIEs where we are not the primary beneficiary and are accounted for using proportionate consolidation:

• McDermott/Zachry Industrial Inc. (“Zachry”)—We have a 50%/50% consortium with Zachry to perform engineering, procurement and construction (“EPC”) work for two LNG liquefaction trains in Freeport, Texas. In addition, we have subcontract and risk sharing arrangements with a unit of Chiyoda Corporation (“Chiyoda”) to support our responsibilities to the venture. The costs of these arrangements are recorded in Cost of operations.

• McDermott/Zachry/Chiyoda—We have a consortium with Zachry and Chiyoda (MDR—33.3% / Zachry—33.3% / Chiyoda—33.3%) to perform EPC work for an additional LNG liquefaction train at the project site in Freeport, Texas, described above.

• McDermott/Chiyoda—We have a 50%/50% consortium with Chiyoda to perform EPC work for three LNG liquefaction trains in Hackberry, Louisiana.

• McDermott/CTCI—We have a 42.5%/57.5% consortium with a unit of CTCI Corporation (“CTCI”) to perform EPC work for a mono-ethylene glycol facility in Gregory, Texas.

• CCS JV s.c.a.r.l.—We have a joint venture with Saipem and Chiyoda (MDR—24.983% / Saipem— 74.949% / Chiyoda— 0.068%) for the turnkey construction of two liquefaction trains and the relevant supporting structures to be implemented in the Republic of Mozambique.

The following table presents summarized balance sheet information for our share of our proportionately consolidated consortiums:

	June 30, 2019		December 31, 2018
	(In millions)
Current assets (1)	$	377	$	299
Non-current assets		8		10
Total assets	$	385	$	309
Current liabilities	$	596	$	992

^{(1) Our consortium arrangements may allow for excess working capital of the consortium to be advanced to the consortium participants. Such advances are returned to the ventures for working capital needs as necessary. Accordingly, at a reporting period end a consortium may have advances to its participants which are reflected as an advance receivable within current assets of the consortium. As of June 30, 2019 and December 31, 2018, Accounts receivable-other included $76 million and $44 million, respectively, related to our proportionate share of advances from the consortiums to the other consortium participants.}

As of June 30, 2019 and December 31, 2018, Accrued liabilities reflected on the McDermott International, Inc. Consolidated Balance Sheet included $39 million and $53 million, respectively, related to advances from these consortiums.

The following is a summary description of our significant consortium that has been deemed a collaborative arrangement, in which we are not the primary beneficiary and we record our share of the consortium’s revenues, costs and profits:

• McDermott/Zachry/Chiyoda—We have a consortium with Zachry and Chiyoda to perform EPC work for a natural gas liquefaction facility in Sabine Pass, Texas. The collaborative arrangement includes an underlying primary consortium with all three parties sharing equal voting interests. This primary consortium has subcontract relationships with a separate consortium between Zachry and McDermott, with equal voting interests and separate scopes of work to be executed by each consortium party.

The following table presents summarized balance sheet information for our share of that proportionately consolidated collaborative arrangement:

	June 30, 2019
	(In millions)
Current assets	$	107
Non-current assets		-
Total assets	$	107
Current liabilities	$	106

Equity Method Joint Ventures—The following is a summary description of our significant joint ventures accounted for using the equity method:

• Chevron Lummus Global, L.L.C. (“CLG”)—We have a 50%/50% joint venture with a unit of Chevron Corporation which provides proprietary process technology licenses and associated engineering services and catalyst, primarily for the refining industry. As sufficient capital investments in CLG have been made by the joint venture participants, it does not qualify as a VIE.

• NET Power, LLC (“NET Power”)—We have a joint venture with a unit of Exelon Corporation (“Exelon”), 8 Rivers Capital and Oxy Low Carbon Ventures LLC, a subsidiary of Occidental Petroleum Corporation (“Oxy”), (MDR—32.2% / Exelon—32.2% / 8 Rivers Capital—32.2% / Oxy— 3.3%) to commercialize a new natural gas power generation system that recovers the carbon dioxide produced during combustion. NET Power is building a first-of-its-kind demonstration plant which is being funded by contributions and services from the joint venture participants and other parties. On November 8, 2018, NET Power signed an investment agreement for Oxy to purchase 10% of the company for $60 million over a three-year period, which will dilute future ownership of each of the existing members by 3.3%. On March 8, 2019, Oxy paid the first tranche of $20 million and received a 3.3% interest in NET Power. We have determined the joint venture to be a VIE; however, we are not the primary beneficiary and therefore do not consolidate it.

• McDermott/CTCI—We have a 50%/50% joint venture with CTCI to perform EPC work for a liquids ethylene cracker and associated units at Sohar, Oman. We have determined the joint venture to be a VIE; however, we are not the primary beneficiary and therefore do not consolidate it. Our joint venture arrangement allows for excess working capital of the joint venture to be advanced to the joint venture participants. Such advances are returned to the joint venture for working capital needs as necessary. As of June 30, 2019 and December 31, 2018, Accrued liabilities on our Balance Sheet included $95 million related to advances from this joint venture.

• io Oil and Gas—We co-own several 50%/50% joint venture entities with Baker Hughes, a GE company. These joint venture entities focus on the pre-FEED phases of projects in offshore markets, bring comprehensive field development expertise and provide technically advanced solutions in new full field development concept selection and evaluation.

• Qingdao McDermott Wuchuan Offshore Engineering Company Ltd.—We have a 50%/50% joint venture with Wuhan Wuchuan Investment Holding Co., Ltd., a leading shipbuilder in China. This joint venture provides project management, procurement, engineering, fabrication, construction and pre-commissioning of onshore and offshore oil and gas structures, including onshore modules, topsides, floating production storage, off-loading modules, subsea structures and manifolds.

Amortization expense associated with fair value adjustments recorded to Investments in unconsolidated affiliates in conjunction with the Combination was $2 million and $5 million for the three and six months ended June 30, 2019, respectively.

Consolidated Joint Ventures—The following is a summary description of our significant joint ventures we consolidate due to their designation as VIEs for which we are the primary beneficiary:

• McDermott/Orano— We have a joint venture with Orano, of which we own 70% and Orano owns 30%, relating to a mixed oxide fuel fabrication facility in Aiken, South Carolina. In addition, we have a profit sharing agreement to transfer to Orano 18% of profits attributable to us. The project is currently winding down, with limited activity anticipated for the remainder of 2019. We expect to close out this project by the end of 2019.

• McDermott/Kentz—We have a venture with Kentz Engineers & Constructors, a unit of SNC-Lavalin Group “Kentz” (McDermott—65% / Kentz—35%), to perform the structural, mechanical, piping, electrical and instrumentation work on, and to provide commissioning support for, three LNG trains, including associated utilities and a gas processing and compression plant, for the Gorgon LNG project, located on Barrow Island, Australia. The project is substantially complete. The joint venture remains in operation to complete various post-project activities.

• CB&I Nass Pipe Fabrication W.L.L.—We have a joint venture created in 1993 to support the fabrication and distribution of pipe in the Middle East.

• CB&I SKE&C Middle East Ltd.—We have a joint venture created in 2010 to own and support a pipe fabrication facility in the United Arab Emirates. Through its wholly owned subsidiary, Shaw Emirates Pipes Manufacturing LLC, it supports the fabrication and distribution of pipe in the Middle East.

The following table presents summarized balance sheet information for our consolidated joint ventures, including other consolidated joint ventures that are not individually material to our financial results:

	June 30, 2019		December 31, 2018
	(In millions)
Current assets	$	181	$	102
Non-current assets		16		15
Total assets	$	197	$	117
Current liabilities	$	175	$	138

Other—The use of joint ventures and consortiums exposes us to a number of risks, including the risk that the third-party joint venture or consortium participants may be unable or unwilling to provide their share of capital investment to fund the operations of the joint venture or consortium or complete their obligations to us, the joint venture or consortium, or ultimately, our customer. Differences in opinions or views among joint venture or consortium participants could also result in delayed decision-making or failure to agree on material issues, which could adversely affect the business and operations of a joint venture or consortium. In addition, agreement terms may subject us to joint and several liability for the third-party participants in our joint ventures or consortiums, and the failure of any of those third parties to perform their obligations could impose additional performance and financial obligations on us. These factors could result in unanticipated costs to complete the projects, liquidated damages or contract disputes.

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RESTRUCTURING AND INTEGRATION COSTS AND TRANSACTION COSTS

6 Months Ended

Jun. 30, 2019

Restructuring And Related Activities [Abstract]

RESTRUCTURING AND INTEGRATION COSTS AND TRANSACTIONS COSTS

NOTE 11—RESTRUCTURING AND INTEGRATION COSTS AND TRANSACTION COSTS

Restructuring and Integration Costs

Restructuring and integration costs for the three and six months ended June 30, 2019 were $20 million and $89 million, respectively, and included change-in-control, severance, professional fees and costs of settlement of litigation, as well as costs to achieve our combination profitability initiative (“CPI”) program. We launched the CPI program in the second quarter of 2018, with the goal of realizing transformative cost savings across our business. The program incorporates the activities of our Fit 2 Grow program previously announced in the fourth quarter of 2017 and targets a significant improvement in cost controls across five main opportunity areas: (1) procurement and supply chain; (2) systems, applications and support; (3) assets and facilities; (4) perquisites, travel and other; and (5) workforce efficiency. Restructuring and integration costs for the three and six months ended June 30, 2018 were $63 million and $75 million, respectively, and primarily related to costs associated with CPI. These costs are recorded within our Corporate operating results.

Transaction Costs

Transaction costs were $11 million and $15 million for the three and six months ended June 30, 2019, respectively, and primarily related to professional fees associated with the development of plans to sell our non-core industrial storage tank and pipe fabrication businesses. Transaction costs were $37 million and $40 million for the three and six months ended June 30, 2018, respectively, and primarily related to professional service fees (including accounting, legal and advisory services) incurred in connection with the Combination. Transaction costs are recorded within our Corporate operating results.

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DEBT

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

DEBT

NOTE 12—DEBT

The carrying values of our debt obligations are as follows:

	June 30, 2019			December 31, 2018
	(In millions)
Current
Revolving credit facility	$	379		$	-
Structured equipment financing		32
Current maturities of long-term debt		31			31
Less: unamortized debt issuance costs		(1	)		(1	)
Current maturities of long-term debt, net of unamortized debt issuance costs		30			30
Short-term borrowing and current maturities of long-term debt	$	62		$	30
Long-term
Term Facility	$	2,232		$	2,243
10.625% senior notes		1,300			1,300
North Ocean 105 construction financing		12			16
Less: current maturities of long-term debt		(30	)		(30	)
Less: unamortized debt issuance costs		(126	)		(136	)
Long-term debt, net of unamortized debt issuance costs	$	3,388		$	3,393

Credit Agreement

On May 10, 2018, we entered into a Credit Agreement (the “Credit Agreement”) with a syndicate of lenders and letter of credit issuers, Barclays Bank PLC, as administrative agent for a term facility under the Credit Agreement, and Crédit Agricole Corporate and Investment Bank, as administrative agent for the other facilities under the Credit Agreement. The Credit Agreement provides for borrowings and letters of credit in the aggregate principal amount of $4.7 billion, consisting of the following:

• a $2.26 billion senior secured, seven-year term loan facility (the “Term Facility”), the full amount of which was borrowed, and $319.3 million of which has been deposited into a restricted cash collateral account (the “LC Account”) to secure reimbursement obligations in respect of up to $310.0 million of letters of credit (the “Term Facility Letters of Credit”);

• a $1.0 billion senior secured revolving credit facility (the “Revolving Credit Facility”); and

• a $1.44 billion senior secured letter of credit facility (the “LC Facility”), which includes a $50 million increase pursuant to an Increase and Joinder Agreement we entered into with Morgan Stanley Senior Funding, Inc. as of May 24, 2019.

The Credit Agreement provides that:

• Term Facility Letters of Credit can be issued in an amount up to the amount on deposit in the LC Account ($320 million at June 30, 2019), less an amount equal to approximately 3% of such amount on deposit (to be held as a reserve for related letter of credit fees), not to exceed $310.0 million;

• subject to compliance with the financial covenants in the Credit Agreement, the full amount of the Revolving Credit Facility is available for revolving loans;

• subject to our utilization in full of our capacity to issue Term Facility Letters of Credit, the full amount of the Revolving Credit Facility is available for the issuance of performance letters of credit and up to $200 million of the Revolving Credit Facility is available for the issuance of financial letters of credit; and

• the full amount of the LC Facility is available for the issuance of performance letters of credit.

Borrowings are available under the Revolving Credit Facility for working capital and other general corporate purposes. Certain existing letters of credit outstanding under our previously existing Amended and Restated Credit Agreement, dated as of June 30, 2017 (the “Prior Credit Agreement”), and certain existing letters of credit outstanding under CB&I’s previously existing credit facilities have been deemed issued under the Credit Agreement, and letters of credit were issued under the Credit Agreement to backstop certain other existing letters of credit issued for the account of McDermott, CB&I and their respective subsidiaries and affiliates.

The Credit Agreement includes mandatory commitment reductions and prepayments in connection with, among other things, certain asset sales and casualty events (subject to reinvestment rights with respect to asset sales of less than $500 million). In addition, we are required to make annual prepayments of term loans under the Term Facility and cash collateralize letters of credit issued under the Revolving Credit Facility and the LC Facility with 75% of excess cash flow (as defined in the Credit Agreement), reducing to 50% of excess cash flow and 25% of excess cash flow depending on our secured leverage ratio.

Term Facility—As of June 30, 2019, we had $2.2 billion of borrowings outstanding under the Term Facility. Proceeds from our borrowing under the Term Facility were used, together with proceeds from the issuance of the Senior Notes and cash on hand, (1) to consummate the Combination in 2018, including the repayment of certain existing indebtedness of CB&I and its subsidiaries, (2) to redeem $500 million aggregate principal amount of our 8.000% second-lien notes, (3) to prepay existing indebtedness under, and to terminate in full, the Prior Credit Agreement, and (4) to pay fees and expenses in connection with the Combination, the Credit Agreement and the issuance of the Senior Notes.

Principal under the Term Facility is payable quarterly and interest is assessed at either (1) the Eurodollar rate plus a margin of 5.00% per year or (2) the base rate (the highest of the Federal Funds rate plus 0.50%, the Eurodollar rate plus 1.0%, or the administrative agent’s prime rate) plus a margin of 4.00%, subject to a 1.0% floor with respect to the Eurodollar rate and is payable periodically dependent upon the interest rate in effect during the period. On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on $1.94 billion of the $2.26 billion Term Facility. This resulted in a weighted average interest rate of 7.70%, inclusive of the applicable margin during the three months ended June 30, 2019. The Credit Agreement requires us to prepay a portion of the term loans made under the Term Facility on the last day of each fiscal quarter in an amount equal to $5.65 million.

The future scheduled maturities of the Term Facility are:

	(In millions)
2019	$	11
2020		23
2021		23
2022		23
2023		23
Thereafter		2,129
	$	2,232

Additionally, as of June 30, 2019, there were approximately $309 million of Term Facility letters of credit issued (including $48 million of financial letters of credit) under the Credit Agreement, leaving approximately $1 million of available capacity under the Term Facility.

Revolving Credit Facility and LC Facility—We have a $1.0 billion Revolving Credit Facility which is scheduled to expire in May 2023. As of June 30, 2019, we had approximately $379 million in borrowings and $53 million of letters of credit outstanding (including $49 million of financial letters of credit) under the Revolving Credit Facility, leaving $568 million of available capacity under this facility. During the six months ended June 30, 2019, the maximum borrowing under the Revolving Credit Facility was $639 million. We also have a $1.440 billion LC Facility that is scheduled to expire in May 2023. As of June 30, 2019, we had approximately $1.439 billion of letters of credit outstanding, leaving $1 million of available capacity under the LC Facility. If we borrow funds under the Revolving Credit Facility, interest will be assessed at either the base rate plus a floating margin ranging from 2.75% to 3.25% (3.25% at June 30, 2019) or the Eurodollar rate plus a floating margin ranging from 3.75% to 4.25% (4.25% at June 30, 2019), in each case depending on our leverage ratio (calculated quarterly). We are charged a commitment fee of 0.50% per year on the daily amount of the unused portions of the commitments under the Revolving Credit Facility and the LC Facility. Additionally, with respect to all letters of credit outstanding under the Credit Agreement, we are charged a fronting fee of 0.25% per year and, with respect to all letters of credit outstanding under the Revolving Credit Facility and the LC Facility, we are charged a participation fee of (i) between 3.75% to 4.25% (4.25% at June 30, 2019) per year in respect of financial letters of credit and (ii) between 1.875% to 2.125% (2.125% at June 30, 2019) per year in respect of performance letters of credit, in each case depending on our leverage ratio (calculated quarterly). We are also required to pay customary issuance fees and other fees and expenses in connection with the issuance of letters of credit under the Credit Agreement.

Credit Agreement Covenants—The Credit Agreement includes the following financial covenants that are tested on a quarterly basis:

• the minimum permitted fixed charge coverage ratio (as defined in the Credit Agreement) is 1.50 to 1.00;

• the maximum permitted leverage ratio is (i) 4.25 to 1.00 for each fiscal quarter ending on or before September 30, 2019, (ii) 4.00 to 1.00 for the fiscal quarter ending December 31, 2019, (iii) 3.75 to 1.00 for each fiscal quarter ending after December 31, 2019 and on or before December 31, 2020, (iv) 3.50 to 1.00 for each fiscal quarter ending after December 31, 2020 and on or before December 31, 2021 and (v) 3.25 to 1.00 for each fiscal quarter ending after December 31, 2021; and

• the minimum liquidity (as defined in the Credit Agreement, but generally meaning the sum of McDermott’s unrestricted cash and cash equivalents plus unused commitments under the Credit Agreement available for revolving borrowings) is $200 million.

In addition, the Credit Agreement contains various covenants that, among other restrictions, limit our ability to:

• incur or assume indebtedness;

• grant or assume liens;

• make acquisitions or engage in mergers;

• sell, transfer, assign or convey assets;

• make investments;

• repurchase equity and make dividends and certain other restricted payments;

• change the nature of our business;

• engage in transactions with affiliates;

• enter into burdensome agreements;

• modify our organizational documents;

• enter into sale and leaseback transactions;

• make capital expenditures;

• enter into speculative hedging contracts; and

• make prepayments on certain junior debt.

The Credit Agreement contains events of default that we believe are customary for a secured credit facility. If an event of default relating to bankruptcy or other insolvency event occurs, all obligations under the Credit Agreement will immediately become due and payable. If any other event of default exists under the Credit Agreement, the lenders may accelerate the maturity of the obligations outstanding under the Credit Agreement and exercise other rights and remedies. In addition, if any event of default exists under the Credit Agreement, the lenders may commence foreclosure or other actions against the collateral.

If any default exists under the Credit Agreement, or if we are unable to make any of the representations and warranties in the Credit Agreement at the applicable time, we will be unable to borrow funds or have letters of credit issued under the Credit Agreement.

Credit Agreement Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive and financial covenants under the Credit Agreement. The financial covenants as of June 30, 2019 are summarized below:

Ratios		Requirement		Actual
Minimum fixed charge coverage ratio		1.50x		2.46x
Maximum total leverage ratio		4.25x		2.61x
Minimum liquidity	$	200 million	$	1,023 million

Future compliance with our financial and restrictive covenants under the Credit Agreement could be impacted by circumstances or conditions beyond our control, including, but not limited to, the delay or cancellation of projects, decreased letter of credit capacity, decreased profitability on our projects, changes in currency exchange or interest rates, performance of pension plan assets or changes in actuarial assumptions. Further, we could be impacted if our customers experience a material change in their ability to pay us or if the banks associated with the Credit Agreement were to cease operations, or if there is a full or partial break-up of the European Union (“EU”) or its currency, the Euro.

Letter of Credit Agreement

On October 30, 2018, we, as a guarantor, entered into a Letter of Credit Agreement (the “Letter of Credit Agreement”) with McDermott Technology (Americas), Inc., McDermott Technology (US), Inc. and McDermott Technology, B.V., each a wholly owned subsidiary of ours, as co-applicants, and Barclays Bank PLC, as administrative agent. The Letter of Credit Agreement provides for a facility for extensions of credit in the form of performance letters of credit in the aggregate face amount of up to $230 million (the “$230 Million LC Facility”). The $230 Million LC Facility is scheduled to expire in December 2021. The obligations under the Letter of Credit Agreement are unconditionally guaranteed on a senior secured basis by us and substantially all of our wholly owned subsidiaries, other than the co-applicants (which are directly obligated thereunder) and several captive insurance subsidiaries and certain other designated or immaterial subsidiaries. The liens securing the $230 Million LC Facility will rank equal in priority with the liens securing obligations under the Credit Agreement. The Letter of Credit Agreement includes financial and other covenants and provisions relating to events of default that are substantially the same as those in the Credit Agreement. As of June 30, 2019, there were approximately $216 million of letters of credit issued (or deemed issued) under the $230 million LC Facility, leaving approximately $14 million of available capacity.

Letter of Credit Agreement Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive and financial covenants under the Letter of Credit Agreement.

Senior Notes

On April 18, 2018, we issued $1.3 billion in aggregate principal of 10.625% senior notes due 2024 (the “Senior Notes”), pursuant to an indenture we entered into with Wells Fargo Bank, National Association, as trustee (the “Senior Notes Indenture”). Interest on the Senior Notes is payable semi-annually in arrears, and the Senior Notes are scheduled to mature in May 2024. However, at any time or from time to time on or after May 1, 2021, we may redeem the Senior Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Senior Notes to be redeemed) set forth below, together with accrued and unpaid interest to (but excluding) the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on May 1 of the years indicated:

Year	Optional redemption price
2021		105.313	%
2022		102.656	%
2023 and thereafter		100.000	%

In addition, prior to May 1, 2021, we may redeem up to 35.0% of the aggregate principal amount of the outstanding Senior Notes, in an amount not greater than the net cash proceeds of one or more qualified equity offerings (as defined in the Senior Notes Indenture) at a redemption price equal to 110.625% of the principal amount of the notes to be redeemed, plus accrued and unpaid interest to (but excluding) the date of redemption (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), subject to certain limitations and other requirements. The Senior Notes may also be redeemed, in whole or in part, at any time prior to May 1, 2021 at our option, at a redemption price equal to 100% of the principal amount of the Senior Notes redeemed, plus the applicable premium (as defined in the Senior Notes Indenture) as of, and accrued and unpaid interest to (but excluding) the applicable redemption date (subject to the right of the holders of record on the relevant record date to receive interest due on the relevant interest payment date).

Senior Notes Covenants—The Senior Notes Indenture contains covenants that, among other things, provide limits around our ability to: (1) incur or guarantee additional indebtedness or issue preferred stock; (2) make investments or certain other restricted payments; (3) pay dividends or distributions on our capital stock or purchase or redeem our subordinated indebtedness; (4) sell assets; (5) create restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; (6) create certain liens; (7) sell all or substantially all of our assets or merge or consolidate with or into other companies; (8) enter into transactions with affiliates; and (9) create unrestricted subsidiaries. Those covenants are subject to various exceptions and limitations.

Senior Notes Covenants Compliance—As of June 30, 2019, we were in compliance with all our restrictive covenants under the Senior Notes Indenture. Future compliance with our restrictive covenants under the Senior Notes Indenture could be impacted by circumstances or conditions beyond our control, including, but not limited to, those discussed above with respect to the Credit Agreement.

Other Financing Arrangements

North Ocean (“NO”) Financing―On September 30, 2010, McDermott International, Inc., as guarantor, and NO 105 AS, one of our subsidiaries, as borrower, entered into a financing agreement to pay a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of NO 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of NO 105 AS. As of June 30, 2019, the outstanding borrowing under this facility was approximately $12 million. Future maturities are approximately $4 million for the remainder of 2019 and $8 million in 2020.

Receivables Factoring―During the six months ended June 30, 2019, we sold, without recourse, approximately $62 million of receivables under an uncommitted receivables purchase agreement in Mexico at a discount rate of applicable LIBOR plus a margin of 1.40% - 2.00% and Interbank Equilibrium Interest Rate in Mexico plus a margin of 1.40% - 1.70%. We recorded approximately $2 million of factoring costs in Other operating income (expense) during the six months ended June 30, 2019. Ten percent of the receivables sold are withheld and received on the due date of the original invoice. We have received cash, net of fees and amounts withheld, of approximately $54 million under these arrangements during the six months ended June 30, 2019.

Structured Equipment Financing―In the second quarter of 2019, we entered into a $37 million uncommitted revolving re-invoicing facility for settlement of certain equipment supplier invoices. During the second quarter of 2019, we received approximately $32 million under this arrangement, with repayment obligations maturing in January 2020. Interest expense and origination fees associated with this facility were not material.

Uncommitted Facilities—We are party to a number of short-term uncommitted bilateral credit facilities and surety bond arrangements (the “Uncommitted Facilities”) across several geographic regions, as follows:

	June 30, 2019				December 31, 2018
	Uncommitted Line Capacity		Utilized		Uncommitted Line Capacity		Utilized
	(In millions)
Bank Guarantee and Bilateral Letter of Credit (1)	$	1,627	$	1,062	$	1,669	$	1,060
Surety Bonds (2)	829		567			842		475

^{(1) Approximately $175 million of this capacity is available only upon provision of an equivalent amount of cash collateral.}

^{(2) Excludes approximately $346 million of surety bonds maintained on behalf of CB&I’s former Capital Services Operations, which were sold to CSVC Acquisition Corp (“CSVC”) in June 2017. We also continue to maintain guarantees on behalf of CB&I’s former Capital Services Operations business in support of approximately $29 million of RPOs. We are entitled to an indemnity from CSVC for both the surety bonds and guarantees.}

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LEASE OBLIGATIONS

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

LEASE OBLIGATIONS

NOTE 13—LEASE OBLIGATIONS

The following tables summarize our leased assets and lease liability obligations:

		June 30, 2019		December 31, 2018
		(In millions)
Leases	Classification
Assets
Operating lease assets	Operating lease right-of-use assets	$	383	$	-
Finance lease assets (1)	Property, plant and equipment, net		67		70
	Total leased assets		450		70
Liabilities
Current
Operating	Current portion of long-term lease obligations		88		-
Finance	Current portion of long-term lease obligations		8		8
			96		8
Noncurrent
Operating	Long-term lease obligations		316		-
Finance	Long-term lease obligations		63		66
			379		66
	Total lease liabilities	$	475	$	74

(1) Our finance leases are represented by:

(a) A jack-up barge utilized in our MENA region; and

(b) The Amazon, a pipelay and construction vessel, was purchased by us in February 2017, sold to an unrelated third party (the “Amazon Owner”) and leased back under a long-term bareboat charter that gave us the right to use the vessel and was recorded as an operating lease. On July 27, 2018, we entered into agreements (the “Amazon Modification Agreements”) providing for certain modifications to the Amazon vessel and related financing and amended bareboat charter arrangements. The total cost of the modifications, including project management and other fees and expenses, is expected to be in the range of approximately $260 million to $290 million. The Amazon Owner is expected to fund the cost of the modifications primarily through an export credit-backed senior loan provided by a group of lenders, supplemented by expected direct capital expenditures by us of approximately $58 million over the course of the modifications. The amended bareboat charter arrangement is accounted for as a finance lease, recognizing Property, plant and equipment and Lease obligation for the present value of future minimum lease payments. The cost of modifications will be recorded in Property, plant and equipment with a corresponding liability for direct capital expenditures not incurred by us. The finance lease obligation will increase upon completion of the modifications and funding by the Amazon Owner. As of June 30, 2019, Property, plant and equipment, net included a $50 million asset (net of accumulated amortization of $6 million) and a finance lease liability of approximately $50 million. As of December 31, 2018, Property, plant and equipment, net included a $52 million asset (net of accumulated amortization of $3 million) and a finance lease liability of approximately $53 million.

Our lease cost was as follows:

		Three months ended		Six months ended
		June 30, 2019
	Classification	(In millions)
Operating lease cost (1)	SG&A Expenses	$	21	$	42
Operating lease cost (1)	Cost of operations		11		30
Finance lease cost
Amortization of leased assets	Cost of operations		1		3
Interest on lease liabilities	Net Interest Expense		2		3
Net lease cost		$	35	$	78

^{(1) Includes short-term leases and immaterial variable lease costs.}

Future minimum lease payments for our operating and finance lease obligations as of June 30, 2019 are as follows:

	Operating leases			Finance leases			Total
	(In millions)
2019	$	46		$	6		$	52
2020		86			12			98
2021		77			11			88
2022		69			11			80
2023		58			11			69
After 2023		322			46			368
Total lease payments		658			97			755
Less: Interest		(254	)		(26	)		(280	)
Present value of lease liabilities	$	404		$	71		$	475

Lease term and discount rates for our operating and finance lease obligations are as follows:

Lease Term and Discount Rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	7.2
Finance leases	8.6
Weighted-average discount rate
Operating leases		9.5	%
Finance leases		8.9	%

Supplemental information for our operating and finance lease obligations are as follows:

Other information	June 30, 2019
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(58	)
Financing cash flows from finance leases		(4	)
Leased assets obtained in exchange for new operating lease liabilities		383
Leased assets obtained in exchange for new finance lease liabilities		-

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PENSION AND POSTRETIREMENT BENEFITS

6 Months Ended

Jun. 30, 2019

Compensation And Retirement Disclosure [Abstract]

PENSION AND POSTRETIREMENT BENEFITS

NOTE 14—PENSION AND POSTRETIREMENT BENEFITS

We sponsor various defined benefit pension plans covering eligible employees and provide specific postretirement benefits for eligible retired U.S. employees and their dependents through health care and life insurance benefit programs.

The following table provides contribution information for our Non-U.S. defined benefit pension plans and other postretirement plans at June 30, 2019:

	Non-U.S. Pension Plans
	(In millions)
Contributions made through June 30, 2019	$	8
Contributions expected for the remainder of 2019		5
Total contributions expected for 2019	$	13

The following table provides a breakdown of the components of the net periodic benefit cost (income) associated with our defined benefit pension plans for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30
	2019			2018			2019			2018
	(In millions)						(In millions)
U.S. pension plans:
Service cost	$	-		$	-		$	-		$	-
Interest cost		5			5			9			9
Expected return on plan assets		(4	)		(5	)		(9	)		(9	)
Amortization of prior service (credits) costs		-			-			-			-
Net periodic benefit cost (1)	$	1		$	-		$	-		$	-
Non-U.S. pension plans:
Service cost	$	3		$	2		$	5		$	2
Interest cost		5			3			9			3
Expected return on plan assets		(6	)		(4	)		(12	)		(4	)
Amortization of prior service (credits) costs		-			-			-			-
Net periodic benefit cost (1)	$	2		$	1		$	2		$	1

^{(1) The components of net periodic benefit cost (income) other than the service cost component are included in Other non-operating (income) expense, net in our Statements of Operations. The service cost component is included in Cost of operations and SG&A, in our Statements of Operations, along with other compensation costs rendered by the participating employees.}

^{(2) Net periodic benefit cost for our other postretirement plans is not material.}

We recognize mark-to-market fair value adjustments on defined benefit pension and other postretirement plans in Other non-operating (income) expense, net in our Statements of Operations in the fourth quarter of each year.

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ACCRUED LIABILITIES

6 Months Ended

Jun. 30, 2019

Accrued Liabilities Current [Abstract]

ACCRUED LIABILITIES

NOTE 15—ACCRUED LIABILITIES

	June 30, 2019		December 31, 2018
	(In millions)
Accrued contract costs	$	705	$	796
Advances from equity method and proportionally consolidated joint ventures and consortiums (1)		134		148
Income taxes payable		-		69
Other accrued liabilities (2)		628		551
Accrued liabilities	$	1,467	$	1,564

^{(1) Represents advances from the joint ventures and consortiums in which we participate. See Note 10, Joint Venture and Consortium Arrangements, for further discussion.}

^{(2) Represents various accruals that are each individually less than 5% of total current liabilities.}

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 16—FAIR VALUE MEASUREMENTS

Fair value of financial instruments

Financial instruments are required to be categorized within a valuation hierarchy based upon the lowest level of input that is available and significant to the fair value measurement. The three levels of the valuation hierarchy are as follows:

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

• Level 2—inputs are based on 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 following table presents the fair value of our financial instruments as of June 30, 2019 and December 31, 2018 that are (1) measured and reported at fair value in the Financial Statements on a recurring basis and (2) not measured at fair value on a recurring basis in the Financial Statements:

	June 30, 2019
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In millions)
Measured at fair value on recurring basis
Forward contracts (1)	$	(77	)	$	(77	)	$	-	$	(77	)	$	-
Not measured at fair value on recurring basis
Debt and capital lease obligations (2)		(3,647	)		(3,532	)		-		(3,415	)		(117	)
	December 31, 2018
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In millions)
Measured at fair value on recurring basis
Forward contracts (1)	$	(39	)	$	(39	)	$	-	$	(39	)	$	-
Not measured at fair value on recurring basis
Debt and capital lease obligations (2)		(3,633	)		(3,287	)		-		(3,197	)		(90	)

^{(1) 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 forward contracts. This approach discounts future cash flows based on current market expectations and credit risk.}

^{(2) Our debt instruments are generally valued using a market approach based on quoted prices for similar instruments traded in active markets and are classified as Level 2 within the fair value hierarchy. Quoted prices were not available for the NO 105 construction financing, vendor equipment financing or capital leases. Therefore, these instruments were valued 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 and are classified as Level 3 within the fair value hierarchy.}

The carrying amounts that we have reported for our other financial instruments, including cash and cash equivalents, restricted cash and cash equivalents, accounts receivable, accounts payable and revolving credit facility debt approximate their fair values due to the short maturity of those instruments.

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DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

NOTE 17—DERIVATIVE FINANCIAL INSTRUMENTS

Foreign Currency Exchange Rate Derivatives—The notional value of our outstanding foreign exchange rate derivative contracts totaled $700 million as of June 30, 2019, with maturities extending through August 2022. These instruments consist of contracts to purchase or sell foreign-denominated currencies. As of June 30, 2019, the fair value of these contracts was in a net liability position totaling approximately $6 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

As of June 30, 2019, we have approximately $9 million of unrealized net losses in AOCI in connection with foreign exchange rate derivatives designated as cash flow hedges, and we expect to reclassify approximately $3 million of deferred losses out of AOCI by June 30, 2020, as hedged items are recognized in earnings.

Interest Rate Derivatives—On May 8, 2018, we entered into a U.S. dollar interest rate swap arrangement to mitigate exposure associated with cash flow variability on the Term Facility in an aggregate notional value of $1.94 billion. The swap arrangement has been designated as a cash flow hedge as its critical terms matched those of the Term Facility at inception and through June 30, 2019. Accordingly, changes in the fair value of the swap arrangement are included in AOCI until the associated underlying exposure impacts our interest expense. As of June 30, 2019, the fair value of the swap arrangement was in a net liability position totaling approximately $71 million. The fair value of outstanding derivative instruments is determined using observable financial market inputs, such as quoted market prices, and is classified as Level 2 in nature.

As of June 30, 2019, in connection with the interest rate swap arrangement, we have approximately $71 million of unrealized net losses in AOCI, and we expect to reclassify approximately $18 million of deferred losses out of AOCI by June 30, 2020, as the hedged items are recognized in earnings.

The following table presents the total fair value of the derivatives by underlying risk and balance sheet classification:  

	June 30, 2019				December 31, 2018
	Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges		Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges
	(In millions)
Other current assets	$	5	$	1	$	3	$	3
Other non-current assets		1		-		-		-
Total derivatives asset	$	6	$	1	$	3	$	3
Accrued liabilities	$	27	$	-	$	10	$	3
Other non-current liabilities		56		1		32		-
Total derivatives liability	$	83	$	1	$	42	$	3

The following table presents the total value, by underlying risk, recognized in other comprehensive income and reclassified from AOCI to our Statements of Operations, in connection with derivatives:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)						(In millions)
Amount of gain (loss) recognized in other comprehensive income (loss)
Foreign exchange hedges	$	3		$	(5	)	$	(4	)	$	(5	)
Interest rate hedges		(28	)		(10	)		(43	)		(10	)
Gain (loss) recognized on derivatives designated as cash flow hedges
Foreign exchange hedges
Revenue		(4	)		-			(5	)		-
Cost of operations		2			-			1			-
Interest rate hedges
Interest expense		(2	)		-			(3	)		-
Gain (loss) recognized on derivatives not designated as cash flow hedges
Foreign exchange hedges
Revenue		1			-			2			-
Cost of operations		-			(10	)		-			(10	)

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INCOME TAXES

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 18—INCOME TAXES

During the three months ended June 30, 2019, we recognized an income tax benefit of $49 million (effective tax rate of 30%), compared to an income tax benefit of $84 million (effective tax rate of 215%) for the three months ended June 30, 2018. Our income tax provision for the second quarter of 2019 benefited from nondeductible expenses ($19 million).

During the six months ended June 30, 2019, we recognized an income tax benefit of $70 million (effective tax rate of 29%), compared to an income tax benefit of $63 million (effective tax rate of 394%) for the six months ended June 30, 2018. Our income tax provision for the six months ended June 30, 2019 benefited from the settlement of a customer claim ($18 million) and a favorable court ruling on tax matters ($19 million), partially offset by nondeductible, state tax and other expenses ($12 million).

During the six months ended June 30, 2019, our unrecognized tax benefits decreased $19 million, primarily due to the favorable court ruling referenced above. We do not anticipate significant changes to this balance in the next 12 months.

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STOCKHOLDERS’ EQUITY AND EQUITY-BASED INCENTIVE PLANS

6 Months Ended

Jun. 30, 2019

Stockholders Equity Note [Abstract]

STOCKHOLDERS’ EQUITY AND EQUITY-BASED INCENTIVE PLANS

NOTE 19—STOCKHOLDERS’ EQUITY AND EQUITY-BASED INCENTIVE PLANS

Shares Outstanding and Treasury Shares―The changes in the number of shares outstanding and treasury shares held by us are as follows (in millions):

	Six Months Ended June 30,
	2019			2018
Shares outstanding
Beginning balance		181			95
Common stock issued		2			2
Shares issued in the Combination (Note 3, Business Combination)		-			85
Purchase of common stock		(1	)		(1	)
Ending balance		182			181
Shares held as Treasury shares
Beginning balance		3			3
Purchase of common stock		1			1
Retirement of common stock		(1	)		(1	)
Ending balance		3			3
Ordinary shares issued at the end of the period		185			183

^{(1) Amounts in this table may not sum due to rounding.}

Combination—As discussed in Note 3, Business Combination, we issued 84.5 million shares of McDermott common stock to the former CB&I shareholders. Additionally, effective as of the Combination Date, unvested and unexercised stock-settled equity-based awards (which included 2.1 million of CB&I restricted stock units and stock options to purchase 0.1 million shares of CB&I’s common stock) were canceled and converted into comparable McDermott stock-settled awards with generally the same terms and conditions as those prior to the Combination Date. The restricted stock units generally vest over a period ranging from three to four years from the original grant date. 

Stock-Based Compensation Expense―During the three months ended June 30, 2019 and 2018, we recognized $5 million and $9 million, respectively, and during the six months ended June 30, 2019 and 2018, we recognized $11 million and $15 million, respectively, of stock-based compensation expense, primarily within SG&A in our Statements of Operations. In addition, we recognized $26 million of expense in the second quarter of 2018 as a result of accelerated vesting for employees terminated in connection with the Combination, which was recorded within Restructuring and integration costs in our Statements of Operations.

In addition, during the three months ended June 30, 2019 and 2018, we recognized $3 million and $1 million, respectively, and during the six months ended June 30, 2019 and 2018, we recognized $5 million and $5 million, respectively, of compensation expense associated with awards classified as liability awards as of the end of those respective periods.

Accumulated Other Comprehensive (Loss) Income―The components of AOCI included in stockholders’ equity are as follows:

	June 30, 2019			December 31, 2018
	(In millions)
Foreign currency translation adjustments ("CTA")	$	(107	)	$	(73	)
Net unrealized loss on derivative financial instruments		(80	)		(40	)
Defined benefit pension and other postretirement plans		6			6
Accumulated other comprehensive loss	$	(181	)	$	(107	)

The following table presents the components of AOCI and the amounts that were reclassified during the periods indicated:

	Foreign currency translation adjustments			Net unrealized loss on derivative financial instruments (1)			Defined benefit pension and other postretirement plans		TOTAL
	(In millions)
December 31, 2017	$	(49	)	$	(2	)	$	-	$	(51	)
Other comprehensive income before reclassification		(12	)		(15	)		-		(27	)
Amounts reclassified from AOCI (2)		-			3			-		3
Net current period other comprehensive income		(12	)		(12	)		-		(24	)
June 30, 2018	$	(61	)	$	(14	)	$	-	$	(75	)
December 31, 2018		(73	)		(40	)		6		(107	)
Other comprehensive income before reclassification		(34	)		(47	)		-		(81	)
Amounts reclassified from AOCI (2)		-			7			-		7
Net current period other comprehensive income		(34	)		(40	)		-		(74	)
June 30, 2019	$	(107	)	$	(80	)	$	6	$	(181	)

⁽¹⁾ Refer to Note 17, Derivative Financial Instruments, for additional details.

^{(2) Amounts are net of tax, which was not material during the six months ended June 30, 2019 and 2018.}

Noncontrolling Interest―In 2002, P.T. Sarana Interfab Mandiri (“PTSIM”) acquired a 25% participating interest in our subsidiary, PT McDermott Indonesia (“PTMI”). After two years, PTSIM had the option to sell its interest to us for $5 million plus PTSIM’s share of PTMI undistributed earnings to the date of such sale. In January 2019, McDermott and PTSIM entered into framework agreement, restructuring the PTMI shareholders agreement, whereby PTSIM waived its put option right and exchanged its participating interest in PTMI to a non-participating interest in exchange for a payment of approximately $29 million, payable in three installments during 2019. During the six months ended June 30, 2019, we paid approximately $5 million and have a remaining liability of approximately $24 million as of June 30, 2019.

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REDEEMABLE PREFERRED STOCK

6 Months Ended

Jun. 30, 2019

Redeemable Preferred Stock [Abstract]

REDEEMABLE PREFERRED STOCK

NOTE 20—REDEEMABLE PREFERRED STOCK

On November 29, 2018 (the “Closing Date”), we completed a private placement of (1) 300,000 shares of 12% Redeemable Preferred Stock, par value $1.00 per share (the “Redeemable Preferred Stock”), and (2) Series A warrants (the “Warrants”) to purchase approximately 6.8 million shares of our common stock, with an initial exercise price per share of $0.01, for aggregate proceeds of $289.5 million, before payment of approximately $18 million of directly related issuance costs.

Redeemable Preferred Stock—The Redeemable Preferred Stock will initially have an Accreted Value (as defined in the Certificate of Designation with respect to the Redeemable Preferred Stock (the “Certificate of Designation”)) of $1,000.00 per share. The holders of the Redeemable Preferred Stock will be entitled to receive cumulative compounding preferred cash dividends quarterly in arrears at a fixed rate of 12.0% per annum compounded quarterly (of which 3.0% accrues each quarter) on the Accreted Value per share (the “Dividend Rate”). The cash dividends are payable only when, as and if declared by our Board of Directors out of funds legally available for payment of dividends. If a cash dividend is not declared and paid in respect of any dividend payment period ending on or prior to December 31, 2021, then the Accreted Value of each outstanding share of Redeemable Preferred Stock will automatically be increased by the amount of the dividend otherwise payable for such dividend payment period, except the applicable dividend rate for this purpose is 13.0% per annum. Such automatic increase in the Accreted Value of each outstanding share of Redeemable Preferred Stock would be in full satisfaction of the preferred dividend that would have otherwise accrued for such dividend payment period. Our Board of Directors declared, and we paid cash dividends on the Redeemable Preferred Stock on the first dividend payment date (December 31, 2018), but our Board of Directors did not declare cash dividends on the Redeemable Preferred Stock on the March 31, 2019 and June 30, 2019 dividend payment dates and, as a result, the Accreted Value of the Redeemable Preferred Stock was increased by the amount of the accrued but unpaid dividend (i.e., a paid-in-kind (“PIK”) dividend).

The Redeemable Preferred Stock has no stated maturity and will remain outstanding indefinitely unless repurchased or redeemed by us.

The Redeemable Preferred Stock will have a liquidation preference equal to the then applicable Minimum Return (the “Liquidation Preference”) plus accrued and unpaid dividends. The Liquidation Preference will initially be equal to $1,200.00 per share. The “Minimum Return” is equal to a multiple of invested capital (“MOIC”) (as defined in the Certificate of Designation) as follows, exclusive of cash dividends previously paid:

• prior to January 1, 2020, a MOIC multiple of 1.2;

• on or after January 1, 2020 but prior to January 1, 2022, a MOIC multiple of 1.25;

• on or after January 1, 2022 but prior to January 1, 2023, a MOIC multiple of 1.20;

• on or after January 1, 2023 but prior to January 1, 2025, a MOIC multiple of 1.15; and

• on or after January 1, 2025, a MOIC multiple of 1.20.

We may redeem the Redeemable Preferred Stock at any time for an amount per share of Redeemable Preferred Stock equal to the Liquidation Preference of each such share plus all accrued dividends on such share (such amount per share, the “Redemption Consideration”).

At any time after the seventh anniversary of the Closing Date, each holder may elect to have us fully redeem such holder’s then outstanding Redeemable Preferred Stock in cash, to the extent we have funds legally available for payment of dividends, at a redemption price per share equal to the Redemption Consideration for each share.

Upon a change of control (as defined in the Certificate of Designation), if we have not previously redeemed the Redeemable Preferred Stock and the holders of a majority of the then-outstanding Redeemable Preferred Stock do not agree with us to an alternative treatment, then in connection with such change of control, each holder may elect either: (1) to cause us to redeem all, but not less than all, of its outstanding Redeemable Preferred Stock at a redemption price per share equal to the Redemption Consideration, which would be payable in full in cash or, if any of the Senior Notes are then outstanding, payable partially in cash in an amount equal to 101% of the Share Purchase Price (as defined in the Certificate of Designation) (or such lower amount as may be required under the Senior Notes Indenture) and the remainder in shares of our common stock based on a per share price equal to 96% of the volume-weighted average price of our common stock on the New York Stock Exchange during the 10 trading days prior to the announcement of such change of control; (2) to receive a substantially equivalent security to the Redeemable Preferred Stock in the surviving entity of the change of control; or (3) to continue to hold the Redeemable Preferred Stock if we are the surviving entity in the change of control. However, any such redemption in cash will be tolled until a date that will not result in the Redeemable Preferred Stock being characterized as “disqualified stock,” “disqualified equity interest” or a similar concept under our debt instruments.

The fair value upon issuance represented the net impact of $289.5 million of aggregate proceeds, less $18 million of fees and $43 million of fair value assigned to the warrants described below (separately included within Capital in excess of par value in our Balance Sheet). The fair value measurement upon issuance was based on inputs that were not observable in the market and thus represented level 3 inputs. We will record accretion as an adjustment to Retained earnings (deficit) over the seven years from the Closing Date through the expected redemption date of November 29, 2025 using the effective interest method. From the Closing Date through June 30, 2019, we recorded cumulative accretion of approximately $9 million with respect to the Redeemable Preferred Stock, including approximately $4 million and $8 million during the three and six months ended June 30, 2019, respectively. As of June 30, 2019, the Redeemable Preferred Stock balance was $257 million, adjusted for accretion and PIK dividends of approximately $20 million. During 2018, approximately $3 million of cash dividends were paid to the holders of the Redeemable Preferred Stock.

Warrants—The Warrants are exercisable at any time after the earlier of (1) any change of control or the commencement of proceedings for the voluntary or involuntary dissolution, liquidation or winding up of us and (2) the first anniversary of the Closing Date, and from time to time, in whole or in part, until the tenth anniversary of the Closing Date. The fair value measurement of the Warrants was based on the market-observable fair value of our common stock upon issuance and thus represented a level 1 input.

The exercise price and the number of shares of common stock for which a Warrant is exercisable are subject to adjustment from time to time upon the occurrence of certain events including: (1) payment of a dividend or distribution to holders of shares of our common stock payable in common stock, (2) the distribution of any rights, options or warrants to all holders of our common stock entitling them for a period of not more than 60 days to purchase shares of common stock at a price per share less than the fair market value per share, (3) a subdivision, combination, or reclassification of our common stock, (4) a distribution to all holders of our common stock of cash, any shares of our capital stock (other than our common stock), evidences of indebtedness or other assets of ours, and (5) any dividend of shares of a subsidiary of ours in a spin-off transaction.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 21—EARNINGS PER SHARE

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2019 (1)			2018 (2)		2019 (1)			2018 (2)
	(In millions, except per share amounts)
Net (loss) income attributable to McDermott	$	(132	)	$	47	$	(188	)	$	82
Dividends on redeemable preferred stock		(10	)		-		(20	)		-
Accretion of redeemable preferred stock		(4	)		-		(8	)		-
Net (loss) income attributable to common stockholders	$	(146	)	$	47	$	(216	)	$	82
Weighted average common stock (basic)		182			144		181			120
Effect of dilutive securities:
Stock-based awards		-			-		-			-
Warrants and preferred stock		-			-		-			-
Weighted average common stock (diluted)		182			144		181			120
Net (loss) income per share attributable to common stockholders
Basic:	$	(0.80	)	$	0.33	$	(1.19	)	$	0.68
Diluted:	$	(0.80	)	$	0.33	$	(1.19	)	$	0.68

^{(1) The effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2019 due to the net loss for the periods.}

^{(2) Approximately 0.5 million shares underlying outstanding stock-based awards for the three and six months ended June 30, 2018 were excluded from the computation of diluted earnings per share during the periods because the exercise price of those awards was greater than the average market price of our common stock, and the inclusion of such shares would have been antidilutive in each of those periods.}

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 22—COMMITMENTS AND CONTINGENCIES

Investigations and Litigation

General—Due to the nature of our business, we and our affiliates are, from time to time, involved in litigation or subject to disputes, governmental investigations 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, premises liability claims and other claims.

Based upon our prior experience, we do not expect that any of these other litigation proceedings, disputes, investigations 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 other dispute resolution proceedings and, in some cases, the availability and amount of potentially applicable insurance, we can provide no assurance 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.

Project Arbitration Matters—We are in arbitration (governed by the arbitration rules of the International Chamber of Commerce) entitled Refineria de Cartagena S.A. v. Chicago Bridge & Iron Company N.V., et al., which was commenced on March 8, 2016 in connection with a large, cost reimbursable refinery construction project in Colombia completed by CB&I in 2015. Refineria de Cartagena, the customer on the project, is alleging that we are responsible for certain cost overruns, delays and consequential damages on the project. The customer is claiming total damages in excess of $4.5 billion. We have asserted a counterclaim against the customer for approximately $250 million. The parties submitted final witness statements, expert reports and other filings as of July 3, 2019. Hearings are scheduled to take place between April and June 2020. The current venue for the arbitration hearings is New York, New York. We do not believe a risk of material loss is probable related to this matter, and accordingly, our reserves for this matter were not significant as of June 30, 2019. While it is possible that a loss may be incurred, we are unable to estimate the range of potential loss, if any.

In addition, we are in arbitration (governed by the arbitration rules of the United Nations Commission on International Trade Law) entitled CBI Constructors Pty & Kentz Pty Ltd and Chevron Australia Pty Ltd., which was commenced on or about May 17, 2017, with the customer for one of CB&I’s previously completed consolidated joint venture projects, regarding differing interpretations of the contract related to reimbursable billings. The matter has been bifurcated, with hearings on entitlement held in November 2018 and hearings on the amount of damages scheduled for September 2019. In December 2018, the tribunal issued an interim award on entitlement, finding that the joint venture was not overpaid for its craft labor but that certain overpayments were made to the joint venture for its staff. As a result, we and our joint venture counterparty are asserting claims against the customer of approximately $103 million for certain unpaid invoices and other set-offs, and the customer is asserting that it has overpaid the joint venture by $189 million, less the amounts owed to the joint venture. Accordingly, as of June 30, 2019, we have established a reserve of approximately $55 million in the acquired balance sheet from the Combination, which equates to $85 million at the joint venture level.

Dispute Related to Sale of Nuclear Operations—On December 31, 2015, we sold our Nuclear Operations to Westinghouse Electric Company LLC (“WEC”). In connection with the transaction, a post-closing purchase price adjustment mechanism was negotiated between CB&I and WEC to account for any difference between target working capital and actual working capital as finally determined pursuant to the terms of the purchase agreement. On April 28, 2016, WEC delivered to us a purported closing statement that estimated closing working capital was negative $976.5 million, which was $2.1 billion less than the target working capital amount. In contrast, we calculated closing working capital to be $1.6 billion, which was $427.8 million greater than the target working capital amount. On July 21, 2016, we filed a complaint against WEC in the Court of Chancery in the State of Delaware seeking a declaration that WEC has no remedy for the vast majority of its claims, and we requested an injunction barring WEC from bringing such claims. On December 2, 2016, the Court of Chancery granted WEC’s motion for judgment on the pleadings and dismissed our complaint, stating that the dispute should follow the dispute resolution process set forth in the purchase agreement, which includes the use of an independent auditor to resolve the working capital dispute. We appealed that ruling to the Delaware Supreme Court. Due to WEC’s bankruptcy filing on March 29, 2017, all claim resolution proceedings were automatically stayed pursuant to the Bankruptcy Code. At the parties’ request, the Bankruptcy Court lifted the automatic stay to permit the appeal and dispute resolution process to continue. Oral argument before the Delaware Supreme Court was held on May 3, 2017, and on June 27, 2017, the Delaware Supreme Court overturned the decision of the Court of Chancery and instructed the Court of Chancery to issue an order enjoining WEC from submitting certain claims to the independent auditor. On or about April 29, 2019, the parties executed a settlement agreement, which resolved all claims between the parties in connection with this dispute, and the matter is now closed.

Asbestos Litigation—We are a defendant in numerous lawsuits wherein plaintiffs allege exposure to asbestos at various locations. We review and defend each case on its own merits and make accruals based on the probability of loss and best estimates of potential loss. We do not believe any unresolved asserted claim will have a material adverse effect on our future results of operations, financial position or cash flow. With respect to unasserted asbestos claims, we cannot identify a population of potential claimants with sufficient certainty to determine the probability of loss or estimate future losses. We do not believe a risk of material loss is probable related to these matters, and, accordingly, our reserves were not significant as of June 30, 2019. While we continue to pursue recovery for recognized and unrecognized contingent losses through insurance, indemnification arrangements and other sources, we are unable to quantify the amount that we may recover because of the variability in coverage amounts, limitations and deductibles or the viability of carriers, with respect to our insurance policies for the years in question.

Mercury Litigation—Certain of our subsidiaries are co-defendants in a group of consolidated “toxic exposure” claims, involving 54 plaintiffs who allege they were exposed to mercury while working in a chlorine manufacturing facility located in Muscle Shoals, Alabama. The matter was commenced on December 14, 2011 and is captioned Aretha Abernathy, et al. v. Occidental Chemical Corp., et al., CV 11-900266, Circuit Court of Colbert County, Alabama. The plaintiffs consist of former employees of subsidiaries of CB&I, as well as other defendants. October 21, 2019 has been set for the trials of the claims of the first four plaintiffs in this matter. We do not believe a risk of material loss is probable related to this matter, and accordingly, our reserves were not significant as of June 30, 2019. While it is possible that a loss may be incurred (absent insurance coverage), we are unable at this time, to estimate the range of potential loss, if any. Further, we believe we are entitled to coverage under various insurance policies, though certain carriers have issued letters reserving their rights to contest their obligations to indemnify us.  Discussions between us and the carriers continue over coverage for these matters.

In addition, under the terms of certain insurance policies, additional deductible amounts may be due upon a resolution of these matters, either by settlement or judgment. We do not believe a risk of material loss is probable for additional deductible amounts due upon resolution of these matters, and accordingly, our reserves for this matter were not significant as of June 30, 2019.

Labor Litigation—A former employee of one of our subsidiaries commenced a class action lawsuit under the Fair Labor Standards ACT (“FLSA”) entitled Cantrell v. Lutech Resources, Inc., (S.D. Texas 2017) Case No. 4:17-CV-2679 on or about September 5, 2017, alleging that he and his fellow class members were not paid one and one half times their normal hourly wage rates for hours worked that exceeded 40 hours in a work week. Our subsidiary has yet to answer the allegations in the complaint, as agreed by the parties, in order to allow mediation to take place. The first mediation session commenced in October 2018 and is ongoing, and a tentative settlement has been reached between the parties. We do not believe a risk of material loss is probable related to this matter, and, accordingly, our reserves for this matter were not significant as of June 30, 2019.

Pre-Combination CB&I Securities Litigations—On March 2, 2017, a complaint was filed in the United States District Court for the Southern District of New York seeking class action status on behalf of purchasers of CB&I common stock and alleging damages on their behalf arising from alleged false and misleading statements made during the class period from October 30, 2013 to June 23, 2015. The case is captioned: In re Chicago Bridge & Iron Company N.V. Securities Litigation, No. 1:17-cv-01580-LGS (the “Securities Litigation”). The defendants in the case are: CB&I; a former chief executive officer of CB&I; a former chief financial officer of CB&I; and a former controller and chief accounting officer of CB&I. On June 14, 2017, the court named ALSAR Partnership Ltd. as lead plaintiff. On August 14, 2017, a consolidated amended complaint was filed alleging violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder, arising out of alleged misrepresentations about CB&I’s accounting for the acquisition of The Shaw Group, CB&I’s accounting with respect to the two nuclear projects being constructed by The Shaw Group, and CB&I’s financial reporting and public statements with respect to those two projects. On May 24, 2018, the court denied defendants’ motion to dismiss and the parties are currently engaged in the discovery process. On February 4, 2019, lead plaintiff ALSAR Partnership Ltd. and additional plaintiffs Iron Workers Local 40, 361, & 417 – Union Security Funds and Iron Workers Local 580 – Joint Funds moved for class certification and appointment as class representatives. That motion remains pending before the magistrate-judge. We are not able at this time to determine the likelihood of loss, if any, arising from this matter and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and intend to defend against them vigorously.

On October 26, 2018, two actions were filed by individual plaintiffs based on allegations similar to those alleged in the Securities Litigation. On February 25, 2019, a third action was filed by an individual plaintiff based on similar allegations. All three actions were filed in the United States District Court for the Southern District of New York and are captioned Gotham Diversified Neutral Master Fund, LP, et al. v. Chicago Bridge & Iron Company N.V. et al., Case No. 1:18-cv-09927 (the “Gotham Action”); Appaloosa Investment L.P., et al., v. Chicago Bridge & Iron Company N.V., et al., Case No. 1:18-cv-09928 (the “Appaloosa Action”) and CB Litigation Recovery I, LLC v. Chicago Bridge & Iron Company N.V., et al., Case No. 1:19-cv-01750 (the “CB Litigation Recovery Action”). Besides CB&I, the other defendants in all three cases are the same individual defendants as in the Securities Litigation described above. Plaintiffs assert causes of action based on alleged violations of Sections 10(b), 18 and 20(a) of the Exchange Act and Rule 10b-5 thereunder, along with common law causes of action. On January 25, 2019, the defendants filed in the Gotham and Appaloosa Actions partial motions to dismiss the causes of actions asserted under Section 18 of the Exchange Act and the common law causes of action, which are currently pending. On March 25, 2019, the court entered a stipulation and order staying the CB Recovery Action pending a ruling on the partial motions to dismiss in the Gotham and Appaloosa Actions and making the decision on the partial motions to dismiss the Gotham and Appaloosa Actions applicable to the CB Recovery Action. We are not able at this time to determine the likelihood of loss, if any, arising from these matters and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and intend to defend against them vigorously.

On or about November 2, 2017, a complaint was filed in the District Court of Montgomery County, Texas by Daniel Cohen and associated individuals and corporations, alleging causes of action under both common and state law for alleged false and misleading statements related to CB&I’s acquisition of The Shaw Group in 2013, particularly with regard to two nuclear projects being constructed by Shaw in South Carolina and Georgia. The case is captioned Daniel Cohen, et al. v. Chicago Bridge & Iron Company, N.V., et al., No. 17-10-12820. The other defendants are the same individual defendants as in the Securities Litigation described above. The plaintiffs alleged that the individual defendants made, or had authority over the content and method of communicating information to the public, including the alleged misstatements and omissions detailed in the complaint, resulting in a financial loss on shares of stock purchased by the plaintiffs. Discovery in this matter is proceeding. We are not able at this time to determine the likelihood of loss, if any, arising from this matter and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and intend to defend against them vigorously.  

Post-Combination McDermott Securities Litigation—On November 15, 2018, a complaint was filed in the United States District Court for the Southern District of Texas seeking class action status on behalf of purchasers of McDermott common stock and alleging damages on their behalf arising from allegedly false and misleading statements made during the class period from January 24, 2018 to October 30, 2018. The case is captioned: Edwards v. McDermott International, Inc., et al., No. 4:18-cv-04330. The defendants in the case are: McDermott; David Dickson, our president and chief executive officer; and Stuart Spence, our chief financial officer. The plaintiff has alleged that the defendants made material misrepresentations and omissions about the integration of the CB&I business, certain CB&I projects and their fair values, and our business, prospects and operations. The plaintiff asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 thereunder. On January 14, 2019, a related action was filed in the United States District Court for the Southern District of Texas seeking class action status on behalf of all shareholders of McDermott common stock as of April 4, 2018 who had the right to vote on the Combination, captioned: The Public Employees Retirement System of Mississippi v. McDermott International, Inc., et al., No. 4:19-cv-00135. The plaintiff has alleged the defendants (which include our chief executive officer and chief financial officer) made material misrepresentations and omissions in the proxy statement we used in connection with the Combination. The plaintiff asserted claims under Section 14(a) and 20(a) of the Exchange Act. We filed a motion to consolidate the two actions, and the court granted that motion on February 22, 2019. The court appointed lead plaintiffs in both actions on June 5, 2019. We plan to file motions to dismiss all of the claims once amended pleadings are filed. We are not able at this time to determine the likelihood of loss, if any, arising from these matters and, accordingly, no amounts have been accrued as of June 30, 2019. We believe the claims are without merit and we intend to defend against them vigorously.

On March 1, 2019 and March 4, 2019, two essentially identical class action lawsuits were filed in the Harris County (Texas) District Court alleging violations of Sections 11, 12 and 15 of the Securities Act of 1933 on behalf of CB&I shareholders who acquired McDermott common stock pursuant or traceable to the Registration Statement on Form S-4 and the related Prospectus we issued in connection with the Combination. These actions were captioned Curti v. McDermott International, Inc., et al., Case No. 2019-15780 and Stremcha v. McDermott International, Inc., et al., Case No. 2019-15473. The defendants, besides McDermott International, Inc., included present officers of McDermott and current and past members of McDermott’s board of directors. On or about July 9, 2019, the plaintiffs in these actions voluntarily filed a notice of nonsuit and the actions have been dismissed without any payment by us.

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.

In connection with the historical operation of our facilities, including those associated with acquired operations, substances which currently are or might be considered hazardous were used or disposed of at some sites that will or may require us to make expenditures for remediation. In addition, we have agreed to indemnify parties from whom we have purchased or to whom we have sold facilities for certain environmental liabilities arising from acts occurring before the dates those facilities were transferred. 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 waste 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.

We believe we are in compliance, in all material respects, with applicable environmental laws and regulations and maintain insurance coverage to mitigate our exposure to environmental liabilities. We do not anticipate we will incur material capital expenditures for environmental matters or for the investigation or remediation of environmental conditions during the remainder of 2019 and 2020. As of June 30, 2019, we had no environmental reserve recorded.

Asset Retirement Obligations (“ARO”)

On March 26, 2019, we signed an agreement to enter into a long-term land lease agreement with Saudi Aramco to establish a fabrication and maritime facility located in Ras Al-Khair, Saudi Arabia. In connection with the contemplated lease, the closure of our current fabrication facility in Dubai, United Arab Emirates, is expected to occur in 2030. ARO recorded as of June 30, 2019 was equal to the present value of the estimated costs to decommission the current fabrication facility and was not material.

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 those provisions. Those 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 June 30, 2019, we determined that we had approximately $183 million of potential liquidated damages exposure, based on performance under contracts to date, and included $89 million as a reduction in transaction prices related to such exposure. We believe we will be successful in obtaining schedule extensions or other customer-agreed changes that should resolve the potential for the liquidated damages where we have not made a reduction in transaction prices. However, we may not achieve relief on some or all of the issues involved and, as a result, could be subject to liquidated damages being imposed on us in the future.

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SEGMENT REPORTING

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE 23—SEGMENT REPORTING

We disclose the results of each of our reportable segments in accordance with ASC 280, Segment Reporting. Each of the reportable segments is separately managed by a senior executive who is a member of our Executive Committee (“EXCOM”). Our EXCOM is led by our Chief Executive Officer, who is the chief operating decision maker (“CODM”). Discrete financial information is available for each of the segments, and the EXCOM uses the operating results of each of the reportable segments for performance evaluation and resource allocation.

Upon completion of the Combination, during the second quarter of 2018, we reorganized our operations around five operating segments. This reorganization is intended to better serve our global clients, leverage our workforce, help streamline operations, and provide enhanced growth opportunities. Our five operating groups are: NCSA; EARC; MENA; APAC; and Technology. We also report certain corporate and other non-operating activities under the heading “Corporate and Other.” Corporate and Other primarily reflects corporate expenses, certain centrally managed initiatives (such as restructuring charges), impairments, year-end mark-to-market pension actuarial gains and losses, costs not attributable to a particular reportable segment and unallocated direct operating expenses associated with the underutilization of vessels, fabrication facilities and engineering resources.

Intersegment sales are recorded at prices we generally establish by reference to similar transactions with unaffiliated customers and were not material during the three and six months ended June 30, 2019 or 2018 and are eliminated upon consolidation.

Operating Information by Segment

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)						(In millions)
Revenues:
NCSA	$	1,259		$	995		$	2,639		$	1,093
EARC		192			58			340			74
MENA		399			469			779			814
APAC		133			108			288			257
Technology		154			105			302			105
Total revenues	$	2,137		$	1,735		$	4,348		$	2,343
Operating (loss) income: (1)
Segment operating income (loss):
NCSA	$	15		$	49		$	88		$	51
EARC		4			(8	)		11			(11	)
MENA		29			97			95			167
APAC		2			43			15			116
Technology		35			25			70			25
Total segment operating income		85			206			279			348
Corporate		(146	)		(157	)		(327	)		(235	)
Total operating (loss) income	$	(61	)	$	49		$	(48	)	$	113
Depreciation and amortization:
NCSA	$	14		$	9		$	31		$	16
EARC		3			3			7			3
MENA		13			10			25			16
APAC		2			2			7			9
Technology		18			14			37			14
Corporate		11			20			30			22
Total depreciation and amortization	$	61		$	58		$	137		$	80
Capital expenditures (2):
NCSA	$	2		$	-		$	5		$	2
EARC		1			-			1			-
MENA		4			4			8			7
APAC		-			2			5			5
Technology		-			-			-			-
Corporate		8			18			14			29
Total Capital expenditures	$	15		$	24		$	33		$	43

Assets by Segment

	June 30, 2019			December 31, 2018
	(In millions)
Segment assets:
NCSA	$	3,489		$	3,257
EARC		1,238			1,169
MENA		1,583			1,472
APAC		1,200			1,147
Technology		2,726			2,752
Corporate (3)		(238	)		(357	)
Total assets	$	9,998		$	9,440

(1)    NCSA operating results for the three and six months ended June 30, 2019 included $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC.

Corporate operating results for the three and six months ended June 30, 2019 included:

• $20 million and $89 million of restructuring and integration costs, respectively; and

• $11 million and $15 million of transaction costs, respectively.

Corporate operating results for the six months ended June 30, 2018 included:

• $63 million and $75 million of restructuring and integration costs, respectively; and

• $37 million and $40 million of transaction costs, respectively.

See Note 11, Restructuring and Integration Costs and Transaction Costs, for further discussion.

(2)    Capital expenditures reported represent cash purchases. At June 30, 2019 and 2018, we had approximately $47 million and $14 million, respectively, of accrued and unpaid capital expenditures reported in property, plant and equipment and accrued liabilities.

(3)    Corporate assets at June 30, 2019 and December 31, 2018 include negative cash balances associated with our international cash pooling program.

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SUBSEQUENT EVENT

6 Months Ended

Jun. 30, 2019

Subsequent Events [Abstract]

SUBSEQUENT EVENT

NOTE 24—SUBSEQUENT EVENT

On July 15, 2019, we entered into an asset purchase agreement to acquire assets of Siluria Technologies, including various intellectual property and research and development assets. The purchase price was not material to McDermott.

The purchase adds complementary process and catalyst technologies to our Technology business, expands our licensing portfolio further into the gas monetization market and expands our research and development capabilities for process development, high-throughput catalyst developments and catalyst scale-up.

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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Nature of Operations

Nature of Operations

McDermott International, Inc. (“McDermott,” “we” or “us”), a corporation incorporated under the laws of the Republic of Panama in 1959, is a fully integrated provider of engineering, procurement, construction and installation (“EPCI”) and technology solutions to the energy industry. We design and build end-to-end infrastructure and technology solutions to transport and transform oil and gas into a variety of products. Our proprietary technologies, integrated expertise and comprehensive solutions are utilized for offshore, subsea, power, liquefied natural gas (“LNG”) and downstream energy projects around the world. Our customers include national, major integrated and other oil and gas companies as well as producers of petrochemicals and electric power, and we operate in most major energy producing regions throughout the world. We execute our contracts through a variety of methods, principally fixed-price, but also including cost-reimbursable, cost-plus, day-rate and unit-rate basis or some combination of those methods.

Organization

Organization

Our business is organized into five operating groups, which represent our reportable segments consisting of: North, Central and South America (“NCSA”); Europe, Africa, Russia and Caspian (“EARC”); the Middle East and North Africa (“MENA”); Asia Pacific (“APAC”); and Technology. See Note 23, Segment Reporting, for further discussion. In the second quarter of 2019, we sold Alloy Piping Products LLC (“APP”), the distribution and manufacturing arm of our pipe fabrication business, previously included in our NCSA segment. See Note 4, Disposition of Alloy Piping Products, LLC, for further discussion.

Basis of Presentation

Basis of Presentation

The accompanying Condensed Consolidated Financial Statements (the “Financial Statements”) are unaudited and have been prepared from our books and records in accordance with Rule 10-1 of Regulation S-X for interim financial information. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States (“U.S. GAAP”) for complete financial statements and are not necessarily indicative of results of operations for a full year. Therefore, they should be read in conjunction with the Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018 (the “2018 Form 10-K”).

The Financial Statements reflect all wholly owned subsidiaries and those entities we are required to consolidate. See the “Joint Venture and Consortium Arrangements” section of “Note 2—Basis of Presentation and Significant Accounting Policies” in the 2018 Form 10-K for further discussion of our consolidation policy for those entities that are not wholly owned. In the opinion of our management, all adjustments, consisting only of normal recurring adjustments, considered necessary for a fair presentation have been included. Intercompany balances and transactions are eliminated in consolidation. Values presented within tables (excluding per share data) are in millions and may not sum due to rounding.

On May 10, 2018, we completed our combination with Chicago Bridge & Iron Co. N.V. (“CB&I”) through a series of transactions (the “Combination”). See Note 3, Business Combination, for further discussion.

Reclassifications

Reclassifications

Loss on asset disposals—In the second quarter of 2019, we sold APP, as discussed in Note 4, Disposition of Alloy Piping Products, LLC. Loss from the disposition of APP is included in Loss on asset disposals in our Condensed Consolidated Statements of Operations (our “Statement of Operations”). To conform to current period presentation, $1 million of loss on asset disposals presented in Other operating expense during the three- and six-month periods ended June 30, 2018 has been reclassified to Loss on asset disposals.

Bidding and Proposal Costs—We began classifying bid and proposal costs in Cost of operations in our Statement of Operations in the second quarter of 2018, as a result of our realignment of commercial personnel within our operating groups in conjunction with the Combination. For periods reported prior to the second quarter of 2018, bid and proposal costs were included in Selling, general and administrative expenses (“SG&A”). For the six months ended June 30, 2019 and 2018, our Cost of operations included $46 million and $17 million of bid and proposal costs, respectively. For the six months ended June 30, 2018, our SG&A expense included bid and proposal expenses of $10 million incurred in the first quarter of 2018.    

Use of Estimates and Judgments

Use of Estimates and Judgments

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosures of contingent assets and liabilities. We believe the most significant estimates and judgments are associated with:

• revenue recognition for our contracts, including estimating costs to complete each contract and the recognition of incentive fees and unapproved change orders and claims;

• determination of fair value with respect to acquired assets and liabilities;

• fair value and recoverability assessments that must be periodically performed with respect to long-lived tangible assets, goodwill and other intangible assets;

• valuation of deferred tax assets and financial instruments;

• the determination of liabilities related to loss contingencies, self-insurance programs and income taxes;

• the determination of pension-related obligations; and

• consolidation determinations with respect to our joint venture and consortium arrangements.

If the underlying estimates and assumptions upon which the Financial Statements are based change in the future, actual amounts may differ from those included in the Financial Statements.

Recently Adopted Accounting Guidance

Recently Adopted Accounting Guidance

Leases—In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). This ASU requires entities that lease assets—referred to as “lessees”—to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with lease terms of more than 12 months. We adopted this ASU effective January 1, 2019 using the modified retrospective application, applying the new standard to leases in place as of the adoption date. Prior periods have not been adjusted.

We elected to apply certain practical expedients allowed upon the adoption of this ASU, which, among other things, allowed us to: not reassess whether any expired or existing contracts contain leases; carry forward the historical lease classification; and not have to reassess any initial direct cost of any expired or existing leases. Adoption of the new standard resulted in the recording of Operating lease right-of-use assets, Current portion of long-term lease obligations and Long-term lease obligations of approximately $424 million, $101 million and $342 million, respectively, as of January 1, 2019. The adoption of this ASU did not have a material impact on our Statement of Operations, Condensed Consolidated Statement of Cash Flows (“Statement of Cash Flows”) or the determination of compliance with financial covenants under our current debt agreements. See Note 13, Lease Obligations, for further discussion.

Income Taxes—In January 2018, the FASB issued ASU 2018-02, Reporting Comprehensive Income (Topic 220). This ASU gives entities the option to reclassify to retained earnings the tax effects resulting from the U.S. Tax Cuts and Jobs Act related to items in accumulated other comprehensive income (loss) (“AOCI”) that the FASB refers to as having been stranded in AOCI. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements and related disclosures.

Derivatives—In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815). This ASU includes financial reporting improvements related to hedging relationships to better report the economic results of an entity’s risk management activities in its financial statements. Additionally, this ASU makes certain improvements to simplify the application of the hedge accounting guidance. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements. See Note 17, Derivative Financial Instruments, for related disclosures.

In October 2018, the FASB issued ASU No. 2018-16, Derivatives and Hedging: Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which expands the list of benchmark interest rates permitted in the application of hedge accounting. This ASU permits the use of an OIS rate based on the SOFR as a U.S. benchmark interest rate for hedge accounting purposes. We adopted this ASU effective January 1, 2019. The adoption of this ASU did not have a material impact on the Financial Statements and related disclosures. See Note 17, Derivative Financial Instruments.

Leases

Leases—We classify an arrangement as a lease at inception if we have the right to control the use of an identified asset we do not legally own for a period of time in exchange for consideration. In general, leases with an initial term of 12 months or less are not recorded on our Balance Sheet unless it is reasonably certain we will renew the lease. All leases with an initial term of more than 12 months, whether classified as operating or finance, are recorded to our Balance Sheet based on the present value of lease payments over the lease term, determined at lease commencement. Determination of the present value of lease payments requires a discount rate. We use the implicit rate in the lease agreement when available. Most of our leases do not provide an implicit interest rate; therefore, we use an incremental borrowing rate based on information available at the commencement date.    

Our lease terms may include options to extend or terminate the lease. Lease expense for operating leases and the amortization of the right-of-use asset for finance leases are recognized on a straight-line basis over the lease terms, in each case taking into account such option when it is reasonably certain we will exercise that option.

We have lease agreements with lease and non-lease components, which are generally accounted for separately for all leases other than leases at our construction project sites. Non-lease components included in assets and obligations under operating leases are not material to our financial statements.

For our joint ventures, consortiums and other collaborative arrangements (referred to as “joint ventures” and “consortiums”), the right-of-use asset and lease obligations are generally recognized by the party that enters into the lease agreement, which could be the joint venture directly, one of our joint venture members or us. We have recognized our proportionate share of leases entered into by our joint ventures, where the joint venture has the right to control the use of an identified asset.

Derivative Financial Instruments

Derivative Financial Instruments—We utilize derivative financial instruments in certain circumstances to mitigate the effects of changes in foreign currency exchange rates and interest rates, as described below.

• Foreign Currency Rate Derivatives—We do not engage in currency speculation. However, we utilize foreign currency exchange rate derivatives on an ongoing basis to hedge against certain foreign currency related operating exposures. We generally apply hedge accounting treatment for contracts used to hedge operating exposures and designate them as cash flow hedges. Therefore, gains and losses are included in AOCI until the associated underlying operating exposure impacts our earnings, at which time the impact of the hedge is recorded within the income statement line item associated with the underlying exposure. Changes in the fair value of instruments that we do not designate as cash flow hedges are recognized in the income statement line item associated with the underlying exposure.

• Interest Rate Derivatives—Our interest rate derivatives are limited to a swap arrangement entered into on May 8, 2018, to hedge against interest rate variability associated with $1.94 billion of the $2.26 billion Term Facility described in Note 12, Debt. The swap arrangement has been designated as a cash flow hedge, as its critical terms matched those of the Term Facility at inception and through June 30, 2019. Accordingly, changes in the fair value of the swap arrangement are included in AOCI until the associated underlying exposure impacts our interest expense.

See Note 16, Fair Value Measurements, and Note 17, Derivative Financial Instruments, for further discussion.

Accounting Guidance Issued But Not Adopted

Accounting Guidance Issued but Not Adopted as of June 30, 2019

Financial Instruments—In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU will require a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. A valuation account, allowance for credit losses, will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. This ASU is effective for interim and annual periods beginning after December 15, 2019. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

Defined Benefit Pension Plans—In August 2018, the FASB issued ASU No. 2018-14, Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20). This ASU eliminates, modifies and adds disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. We are evaluating the impact of the new guidance on our future disclosures.

Consolidation—In October 2018, the FASB issued ASU No. 2018-17, Consolidation: Targeted Improvements to Related Party Guidance for Variable Interest Entities (“VIE”). This ASU amends the guidance for determining whether a decision-making fee is a variable interest, which requires companies to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety. The ASU is effective for annual and interim periods beginning after December 15, 2019. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

Collaborative Arrangements—In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. In addition, unit-of-account guidance in Topic 808 was aligned with the guidance in Topic 606 (that is, a distinct good or service) when assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic 606. This ASU is effective for interim and annual periods beginning after December 15, 2019. Early adoption is permitted. We are currently assessing the impact of this ASU on our future consolidated financial statements and related disclosures.

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BUSINESS COMBINATION (Tables)

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Schedule of Purchase Consideration

Purchase Consideration―We completed the Combination for a gross purchase price of approximately $4.6 billion ($4.1 billion net of cash acquired), detailed as follows (in millions, except per share amounts):

		(In millions, except per share amounts)
CB&I shares for Combination consideration		103
Conversion Ratio: 1 CB&I share = 0.82407 McDermott shares		85
McDermott stock price on May 10, 2018		19.92
Equity Combination consideration transferred	$	1,684
Fair value of converted awards earned prior to the Combination		9
Total equity Combination consideration transferred		1,693
Cash consideration transferred		2,872
Total Combination consideration transferred		4,565
Less: Cash acquired		(498)
Total Combination consideration transferred, net of cash acquired	$	4,067

Summary of Final Purchase Price Allocation of Fair Values of Assets Acquired and Liabilities Assumed

The following summarizes our final purchase price allocation of the fair values of the assets acquired and liabilities assumed at the Combination Date (in millions):

	May 10, 2018
Net tangible assets:
Cash	$	498
Accounts receivable		791
Inventory		111
Contracts in progress		272
Assets held for sale (1)		70
Other current assets		272
Investments in unconsolidated affiliates (2)		426
Property, plant and equipment		396
Other non-current assets		127
Accounts payable		(499	)
Advance billings on contracts (3)		(2,410	)
Deferred tax liabilities		(16	)
Other current liabilities		(1,237	)
Other non-current liabilities		(453	)
Noncontrolling interest		14
Total net tangible liabilities		(1,638	)
Project-related intangible assets/liabilities, net (4)		150
Other intangible assets (5)		1,063
Net identifiable liabilities		(425	)
Goodwill (6)		4,990
Total Combination consideration transferred		4,565
Less: Cash acquired		(498	)
Total Combination consideration transferred, net of cash acquired	$	4,067

^{(1) Assets held for sale included CB&I’s former administrative headquarters within Corporate and various fabrication facilities within NCSA. During the third quarter of 2018, we completed the sale of CB&I’s former administrative headquarters for proceeds of $52 million.}

^{(2) Investments in unconsolidated affiliates includes a fair value adjustment of $215 million associated with the Combination. Approximately $146 million of the fair value adjustment is attributable to the basis difference between McDermott’s investment and the underlying equity in identifiable assets of unconsolidated affiliates and will be amortized to Investment in unconsolidated affiliates-related amortization over a range of two to 30 years based on the life of assets to which the basis difference is attributed.}

^{(3) Advance billings on contracts includes accrued provisions for estimated losses on projects of $374 million, primarily associated with the Cameron LNG and Freeport LNG Trains 1 and 2 projects, the now-substantially completed gas power project for a unit of Calpine Corporation (“Calpine”) and the now-completed gas power project for Indianapolis Power & Light Company.}

^{(4) Project-related intangible assets/liabilities, net includes intangible asset and liabilities of $259 million and $109 million, respectively. The balances represent the fair value of acquired remaining performance obligations (“RPOs”) and normalized profit margin fair value associated with acquired long-term contracts that were deemed to be lower than fair value (excluding amounts recorded in Advance billings on contracts and Contracts in progress) as of the Combination Date. The project-related intangible assets and liabilities will be amortized as the applicable projects progress over a range of two to six years within Project-related intangibles amortization in our Statements of Operations.}

^{(5) Other intangible assets are reflected in the table below and recorded at estimated fair value, as determined by our management, based on available information, which includes valuations prepared by external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.}

	May 10, 2018
	Fair value		Useful Life Range	Weighted Average Useful Life
	(In millions)
Process technologies	$	511	10-30		27
Trade names		400	10-20		12
Customer relationships		126	4-11		10
Trademarks		26	10		10
Total	$	1,063

^{(6) Goodwill resulted from the acquired established workforce, which does not qualify for separate recognition, as well as expected future cost savings and revenue synergies associated with the combined operations. Of the approximately $5 billion of goodwill recorded in conjunction with the Combination, approximately $2.7 billion, $461 million, $50 million, $52 million and $1.7 billion, was allocated to our NCSA, EARC, MENA, APAC and Technology reporting segments, respectively. Approximately $1.7 billion of the opening goodwill balance is deductible for tax purposes.}

Schedule of Other Intangible Assets

^{(5) Other intangible assets are reflected in the table below and recorded at estimated fair value, as determined by our management, based on available information, which includes valuations prepared by external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.}

	May 10, 2018
	Fair value		Useful Life Range	Weighted Average Useful Life
	(In millions)
Process technologies	$	511	10-30		27
Trade names		400	10-20		12
Customer relationships		126	4-11		10
Trademarks		26	10		10
Total	$	1,063

Summary of Pro Forma Financial Information

Further, the pro forma financial information does not purport to project the future operating results of the combined business operations following the Combination.

	Three Months Ended		Six Months Ended
	June 30, 2018 (1)
	(In millions, except per share amounts)
Pro forma revenue	$	2,492	$	4,845
Pro forma net income attributable to common stockholders		48		81
Pro forma net income per share attributable to common stockholders
Basic		0.27		0.45
Diluted		0.26		0.43
Shares used in the computation of net income per share (2)
Basic	181		181
Diluted	188		188

^{(1) Adjustments, net of tax, included in the pro forma net income above that were of a non-recurring nature totaled $94 million and $109 million for the three and six months ended June 30, 2018. The adjustments reflect the elimination of (1) restructuring and integration costs ($54 million and $62 million), respectively; and (2) transaction costs ($29 million and $36 million) and debt extinguishment costs ($11 million and $11 million) for the three and six months ended June 30, 2018. These pro forma results exclude the effect of adjustments to the opening balance sheet associated with fair value purchase accounting estimates.}

⁽²⁾ Pro forma net income per share was calculated using weighted average basic shares outstanding during the three and six months ended June 30, 2019. Due to the net loss for the three and six months ended June 30, 2019, the effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share. For the presentation of the pro forma net income for the three and six months ended June 30, 2018, the amount of diluted shares includes the impact of restricted stock and warrants but does not include the impact of the redeemable preferred stock, as those shares were antidilutive.

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DISPOSITION OF ALLOY PIPING PRODUCTS, LLC (Tables)

6 Months Ended

Jun. 30, 2019

Discontinued Operations And Disposal Groups [Abstract]

Summary of Loss on APP Sale Included in Loss on Asset Disposals

Loss on the APP sale is included in Loss on asset disposals in our Statement of Operations and is summarized as follows:

	(In millions)
Assets
Inventory	$	69
Property and equipment		25
Goodwill		90
Other assets		11
Assets sold	$	195
Liabilities
Account payable	$	8
Other liabilities		3
Liabilities sold	$	11
Net assets sold	$	184
Sale proceeds (net of transaction costs of $2)		83
Loss on net assets sold	$	101

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REVENUE RECOGNITION (Tables)

6 Months Ended

Jun. 30, 2019

Revenue Recognition [Abstract]

Summary of RPOs by Segment

Our RPOs by segment were as follows:

	June 30, 2019				December 31, 2018
	(Dollars in millions)
NCSA	$	8,123	39	%	$	5,649	52	%
EARC		4,032	20	%		1,378	12	%
MENA		6,538	32	%		1,834	17	%
APAC		1,289	6	%		1,420	13	%
Technology		565	3	%		632	6	%
Total	$	20,547	100	%	$	10,913	100	%

Summary of RPOs Expected Revenue Recognition

Of the June 30, 2019 RPOs, we expect to recognize revenues as follows:

	2019		2020		Thereafter
	(In millions)
Total RPOs	$	4,768	$	7,372	$	8,407

Summary of Revenue by Product Offering, Contract Types and Revenue Recognition Methodology

Our revenue by product offering, contract types and revenue recognition methodology was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2019 (2)		2018 (2)		2019 (2)		2018 (2)
Revenue by product offering:
Offshore and subsea	$	661	$	653	$	1,266	$	1,261
LNG		411		382		832		382
Downstream (1)		740		496		1,602		496
Power		325		204		648		204
	$	2,137	$	1,735	$	4,348	$	2,343
Revenue by contract type:
Fixed price	$	1,864	$	1,313	$	3,590	$	1,896
Reimbursable		106		269		409		269
Hybrid		106		124		216		124
Unit-basis and other		61		29		133		54
	$	2,137	$	1,735	$	4,348	$	2,343
Revenue by recognition methodology:
Over time	$	2,117	$	1,707	$	4,278	$	2,315
At a point in time		20		28		70		28
	$	2,137	$	1,735	$	4,348	$	2,343

^{(1) Includes the results of our Technology operating group.}

^{(2) Intercompany amounts have been eliminated in consolidation.}

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CASH, CASH EQUIVALENTS AND RESTRICTED CASH (Tables)

6 Months Ended

Jun. 30, 2019

Cash And Cash Equivalents [Abstract]

Reconciliation of Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Balance Sheets that sum to the totals of such amounts shown in our Statements of Cash Flows as of June 30, 2019 and December 31, 2018:  

	June 30, 2019		December 31, 2018
	(In millions)
Cash and cash equivalents	$	455	$	520
Restricted cash and cash equivalents (1)		327		325
Total cash, cash equivalents and restricted cash shown in the Statements of Cash Flows	$	782	$	845

^{(1) Our restricted cash balances primarily serve as cash collateral deposits for our letter of credit facilities. See Note 12, Debt, for further discussion.}

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ACCOUNTS RECEIVABLE (Tables)

6 Months Ended

Jun. 30, 2019

Receivables [Abstract]

Trade Receivable Balances

Our trade receivable balances at June 30, 2019 and December 31, 2018 included the following:

	June 30, 2019			December 31, 2018
	(In millions)
Contract receivables (1)	$	864		$	794
Retainages (2)		155			155
Less allowances		(17	)		(17	)
Accounts receivable—trade, net	$	1,002		$	932

⁽¹⁾ Unbilled receivables for our performance obligations recognized at a point in time are recorded within Accounts receivable-trade, net and were approximately $46 million and $31 million as of June 30, 2019 and December 31, 2018, respectively.

⁽²⁾ Retainages classified within Accounts receivable-trade, net are amounts anticipated to be collected within one year and as to which we have an unconditional right to collect from the customer, subject only to the passage of time. Retainages anticipated to be collected beyond one year are classified as Accounts receivable long-term retainages on our Balance Sheet.

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2019

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Changes in the Carrying Amount of Goodwill by Reporting Segment

The changes in the carrying amount of goodwill during the six months ended June 30, 2019 are as follows:

	(In millions)
Balance as of December 31, 2018	$	2,654
Adjustments to finalize purchase accounting estimates (1)		168
Allocated to APP for disposal		(90	)
Currency translation adjustments		(28	)
Balance as of June 30, 2019 (2)	$	2,704

^{(1) Includes adjustments of $61 million and $107 million identified in the first and second quarters of 2019, respectively. See Note 3, Business Combination for further discussion.}

^{(2) At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.}  

Schedule of Intangible Assets

Our project-related intangibles at June 30, 2019 and December 31, 2018, including the June 30, 2019 weighted-average useful lives, were as follows:

			June 30, 2019									December 31, 2018
	Weighted Average Useful Life		Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount			Gross Carrying Amount			Accumulated Amortization			Net Carrying Amount
	(In years)		(In millions)
Project-related intangible assets		4	$	259		$	(165	)	$	94		$	259		$	(122	)	$	137
Project-related intangible liabilities		2		(109	)		71			(38	)		(109	)		43			(66	)
Total (1)			$	150		$	(94	)	$	56		$	150		$	(79	)	$	71

^{(1) The decrease in project-related intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $16 million and the impact of foreign currency translation.}

Our other intangible assets at June 30, 2019 and December 31, 2018, including the June 30, 2019 weighted-average useful lives, were as follows:

			June 30, 2019							December 31, 2018
	Weighted Average Useful Life		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
	(In years)		(In millions)
Process technologies		27	$	507	$	(26	)	$	481	$	514	$	(14	)	$	500
Trade names		12		396		(41	)		355		401		(23	)		378
Customer relationships		10		124		(35	)		89		129		(23	)		106
Trademarks		10		26		(3	)		23		27		(2	)		25
Total (1)			$	1,053	$	(105	)	$	948	$	1,071	$	(62	)	$	1,009

^{(1) The decrease in other intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $43 million, intangible assets allocated to the disposal of APP and the impact of foreign currency translation.}

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JOINT VENTURE AND CONSORTIUM ARRANGEMENTS (Tables)

6 Months Ended

Jun. 30, 2019

Summarized Balance Sheet Information for Proportionately Consolidated Consortiums

The following table presents summarized balance sheet information for our share of our proportionately consolidated consortiums:

	June 30, 2019		December 31, 2018
	(In millions)
Current assets (1)	$	377	$	299
Non-current assets		8		10
Total assets	$	385	$	309
Current liabilities	$	596	$	992

^{(1) Our consortium arrangements may allow for excess working capital of the consortium to be advanced to the consortium participants. Such advances are returned to the ventures for working capital needs as necessary. Accordingly, at a reporting period end a consortium may have advances to its participants which are reflected as an advance receivable within current assets of the consortium. As of June 30, 2019 and December 31, 2018, Accounts receivable-other included $76 million and $44 million, respectively, related to our proportionate share of advances from the consortiums to the other consortium participants.}

Summarized Balance Sheet Information for Consolidated Joint Venture

The following table presents summarized balance sheet information for our consolidated joint ventures, including other consolidated joint ventures that are not individually material to our financial results:

	June 30, 2019		December 31, 2018
	(In millions)
Current assets	$	181	$	102
Non-current assets		16		15
Total assets	$	197	$	117
Current liabilities	$	175	$	138

Collaborative Arrangement [Member]

Summarized Balance Sheet Information for Proportionately Consolidated Collaborative Arrangement

The following table presents summarized balance sheet information for our share of that proportionately consolidated collaborative arrangement:

	June 30, 2019
	(In millions)
Current assets	$	107
Non-current assets		-
Total assets	$	107
Current liabilities	$	106

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DEBT (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Summary of Long-Term Debt Obligations

The carrying values of our debt obligations are as follows:

	June 30, 2019			December 31, 2018
	(In millions)
Current
Revolving credit facility	$	379		$	-
Structured equipment financing		32
Current maturities of long-term debt		31			31
Less: unamortized debt issuance costs		(1	)		(1	)
Current maturities of long-term debt, net of unamortized debt issuance costs		30			30
Short-term borrowing and current maturities of long-term debt	$	62		$	30
Long-term
Term Facility	$	2,232		$	2,243
10.625% senior notes		1,300			1,300
North Ocean 105 construction financing		12			16
Less: current maturities of long-term debt		(30	)		(30	)
Less: unamortized debt issuance costs		(126	)		(136	)
Long-term debt, net of unamortized debt issuance costs	$	3,388		$	3,393

Summary of Future Scheduled Maturities of the Term Facility

The future scheduled maturities of the Term Facility are:

	(In millions)
2019	$	11
2020		23
2021		23
2022		23
2023		23
Thereafter		2,129
	$	2,232

Summary of Financial Covenants

The financial covenants as of June 30, 2019 are summarized below:

Ratios		Requirement		Actual
Minimum fixed charge coverage ratio		1.50x		2.46x
Maximum total leverage ratio		4.25x		2.61x
Minimum liquidity	$	200 million	$	1,023 million

Summary of Redemption Prices Expressed as Percentage

However, at any time or from time to time on or after May 1, 2021, we may redeem the Senior Notes, in whole or in part, at the redemption prices (expressed as percentages of principal amount of the Senior Notes to be redeemed) set forth below, together with accrued and unpaid interest to (but excluding) the redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period beginning on May 1 of the years indicated:

Year	Optional redemption price
2021		105.313	%
2022		102.656	%
2023 and thereafter		100.000	%

Schedule of Uncommitted Bilateral Credit Facilities and Surety Bond Arrangements

Uncommitted Facilities—We are party to a number of short-term uncommitted bilateral credit facilities and surety bond arrangements (the “Uncommitted Facilities”) across several geographic regions, as follows:

	June 30, 2019				December 31, 2018
	Uncommitted Line Capacity		Utilized		Uncommitted Line Capacity		Utilized
	(In millions)
Bank Guarantee and Bilateral Letter of Credit (1)	$	1,627	$	1,062	$	1,669	$	1,060
Surety Bonds (2)	829		567			842		475

^{(1) Approximately $175 million of this capacity is available only upon provision of an equivalent amount of cash collateral.}

^{(2) Excludes approximately $346 million of surety bonds maintained on behalf of CB&I’s former Capital Services Operations, which were sold to CSVC Acquisition Corp (“CSVC”) in June 2017. We also continue to maintain guarantees on behalf of CB&I’s former Capital Services Operations business in support of approximately $29 million of RPOs. We are entitled to an indemnity from CSVC for both the surety bonds and guarantees.}

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LEASE OBLIGATIONS (Tables)

6 Months Ended

Jun. 30, 2019

Leases [Abstract]

Summary of Leased Assets and Lease Liability Obligations

The following tables summarize our leased assets and lease liability obligations:

		June 30, 2019		December 31, 2018
		(In millions)
Leases	Classification
Assets
Operating lease assets	Operating lease right-of-use assets	$	383	$	-
Finance lease assets (1)	Property, plant and equipment, net		67		70
	Total leased assets		450		70
Liabilities
Current
Operating	Current portion of long-term lease obligations		88		-
Finance	Current portion of long-term lease obligations		8		8
			96		8
Noncurrent
Operating	Long-term lease obligations		316		-
Finance	Long-term lease obligations		63		66
			379		66
	Total lease liabilities	$	475	$	74

(1) Our finance leases are represented by:

(a) A jack-up barge utilized in our MENA region; and

(b) The Amazon, a pipelay and construction vessel, was purchased by us in February 2017, sold to an unrelated third party (the “Amazon Owner”) and leased back under a long-term bareboat charter that gave us the right to use the vessel and was recorded as an operating lease. On July 27, 2018, we entered into agreements (the “Amazon Modification Agreements”) providing for certain modifications to the Amazon vessel and related financing and amended bareboat charter arrangements. The total cost of the modifications, including project management and other fees and expenses, is expected to be in the range of approximately $260 million to $290 million. The Amazon Owner is expected to fund the cost of the modifications primarily through an export credit-backed senior loan provided by a group of lenders, supplemented by expected direct capital expenditures by us of approximately $58 million over the course of the modifications. The amended bareboat charter arrangement is accounted for as a finance lease, recognizing Property, plant and equipment and Lease obligation for the present value of future minimum lease payments. The cost of modifications will be recorded in Property, plant and equipment with a corresponding liability for direct capital expenditures not incurred by us. The finance lease obligation will increase upon completion of the modifications and funding by the Amazon Owner. As of June 30, 2019, Property, plant and equipment, net included a $50 million asset (net of accumulated amortization of $6 million) and a finance lease liability of approximately $50 million. As of December 31, 2018, Property, plant and equipment, net included a $52 million asset (net of accumulated amortization of $3 million) and a finance lease liability of approximately $53 million.

Schedule of Lease Cost

Our lease cost was as follows:

		Three months ended		Six months ended
		June 30, 2019
	Classification	(In millions)
Operating lease cost (1)	SG&A Expenses	$	21	$	42
Operating lease cost (1)	Cost of operations		11		30
Finance lease cost
Amortization of leased assets	Cost of operations		1		3
Interest on lease liabilities	Net Interest Expense		2		3
Net lease cost		$	35	$	78

^{(1) Includes short-term leases and immaterial variable lease costs.}

Schedule of Future Minimum Lease Payments for Operating and Finance Lease Obligations

Future minimum lease payments for our operating and finance lease obligations as of June 30, 2019 are as follows:

	Operating leases			Finance leases			Total
	(In millions)
2019	$	46		$	6		$	52
2020		86			12			98
2021		77			11			88
2022		69			11			80
2023		58			11			69
After 2023		322			46			368
Total lease payments		658			97			755
Less: Interest		(254	)		(26	)		(280	)
Present value of lease liabilities	$	404		$	71		$	475

Schedule of Lease Term and Discount Rates for Operating and Finance Lease Obligations

Lease term and discount rates for our operating and finance lease obligations are as follows:

Lease Term and Discount Rate	June 30, 2019
Weighted-average remaining lease term (years)
Operating leases	7.2
Finance leases	8.6
Weighted-average discount rate
Operating leases		9.5	%
Finance leases		8.9	%

Schedule of Supplemental Information for Operating and Finance Lease Obligations

Supplemental information for our operating and finance lease obligations are as follows:

Other information	June 30, 2019
	(In millions)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	(58	)
Financing cash flows from finance leases		(4	)
Leased assets obtained in exchange for new operating lease liabilities		383
Leased assets obtained in exchange for new finance lease liabilities		-

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PENSION AND POSTRETIREMENT BENEFITS (Tables)

6 Months Ended

Jun. 30, 2019

Compensation And Retirement Disclosure [Abstract]

Schedule of Contribution Information for Plans

The following table provides contribution information for our Non-U.S. defined benefit pension plans and other postretirement plans at June 30, 2019:

	Non-U.S. Pension Plans
	(In millions)
Contributions made through June 30, 2019	$	8
Contributions expected for the remainder of 2019		5
Total contributions expected for 2019	$	13

Net Periodic Benefit Cost (Income)

The following table provides a breakdown of the components of the net periodic benefit cost (income) associated with our defined benefit pension plans for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30
	2019			2018			2019			2018
	(In millions)						(In millions)
U.S. pension plans:
Service cost	$	-		$	-		$	-		$	-
Interest cost		5			5			9			9
Expected return on plan assets		(4	)		(5	)		(9	)		(9	)
Amortization of prior service (credits) costs		-			-			-			-
Net periodic benefit cost (1)	$	1		$	-		$	-		$	-
Non-U.S. pension plans:
Service cost	$	3		$	2		$	5		$	2
Interest cost		5			3			9			3
Expected return on plan assets		(6	)		(4	)		(12	)		(4	)
Amortization of prior service (credits) costs		-			-			-			-
Net periodic benefit cost (1)	$	2		$	1		$	2		$	1

^{(1) The components of net periodic benefit cost (income) other than the service cost component are included in Other non-operating (income) expense, net in our Statements of Operations. The service cost component is included in Cost of operations and SG&A, in our Statements of Operations, along with other compensation costs rendered by the participating employees.}

^{(2) Net periodic benefit cost for our other postretirement plans is not material.}

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ACCRUED LIABILITIES (Tables)

6 Months Ended

Jun. 30, 2019

Accrued Liabilities Current [Abstract]

Summary of Accrued Liabilities

	June 30, 2019		December 31, 2018
	(In millions)
Accrued contract costs	$	705	$	796
Advances from equity method and proportionally consolidated joint ventures and consortiums (1)		134		148
Income taxes payable		-		69
Other accrued liabilities (2)		628		551
Accrued liabilities	$	1,467	$	1,564

^{(1) Represents advances from the joint ventures and consortiums in which we participate. See Note 10, Joint Venture and Consortium Arrangements, for further discussion.}

^{(2) Represents various accruals that are each individually less than 5% of total current liabilities.}

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Financial Instruments Measured at Fair Value on Recurring and Nonrecurring Basis

The following table presents the fair value of our financial instruments as of June 30, 2019 and December 31, 2018 that are (1) measured and reported at fair value in the Financial Statements on a recurring basis and (2) not measured at fair value on a recurring basis in the Financial Statements:

	June 30, 2019
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In millions)
Measured at fair value on recurring basis
Forward contracts (1)	$	(77	)	$	(77	)	$	-	$	(77	)	$	-
Not measured at fair value on recurring basis
Debt and capital lease obligations (2)		(3,647	)		(3,532	)		-		(3,415	)		(117	)
	December 31, 2018
	Carrying Amount			Fair Value			Level 1		Level 2			Level 3
	(In millions)
Measured at fair value on recurring basis
Forward contracts (1)	$	(39	)	$	(39	)	$	-	$	(39	)	$	-
Not measured at fair value on recurring basis
Debt and capital lease obligations (2)		(3,633	)		(3,287	)		-		(3,197	)		(90	)

^{(1) 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 forward contracts. This approach discounts future cash flows based on current market expectations and credit risk.}

^{(2) Our debt instruments are generally valued using a market approach based on quoted prices for similar instruments traded in active markets and are classified as Level 2 within the fair value hierarchy. Quoted prices were not available for the NO 105 construction financing, vendor equipment financing or capital leases. Therefore, these instruments were valued 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 and are classified as Level 3 within the fair value hierarchy.}

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments And Hedging Activities Disclosure [Abstract]

Schedule of Fair Value by Underlying Risk and Balance Sheet Classification

The following table presents the total fair value of the derivatives by underlying risk and balance sheet classification:  

	June 30, 2019				December 31, 2018
	Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges		Derivatives designated as cash flow hedges		Derivatives not designated as cash flow hedges
	(In millions)
Other current assets	$	5	$	1	$	3	$	3
Other non-current assets		1		-		-		-
Total derivatives asset	$	6	$	1	$	3	$	3
Accrued liabilities	$	27	$	-	$	10	$	3
Other non-current liabilities		56		1		32		-
Total derivatives liability	$	83	$	1	$	42	$	3

Schedule of Total Value by Underlying Risk Recognized in Other Comprehensive Income and Reclassified from AOCI to Statement of Operations

The following table presents the total value, by underlying risk, recognized in other comprehensive income and reclassified from AOCI to our Statements of Operations, in connection with derivatives:

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)						(In millions)
Amount of gain (loss) recognized in other comprehensive income (loss)
Foreign exchange hedges	$	3		$	(5	)	$	(4	)	$	(5	)
Interest rate hedges		(28	)		(10	)		(43	)		(10	)
Gain (loss) recognized on derivatives designated as cash flow hedges
Foreign exchange hedges
Revenue		(4	)		-			(5	)		-
Cost of operations		2			-			1			-
Interest rate hedges
Interest expense		(2	)		-			(3	)		-
Gain (loss) recognized on derivatives not designated as cash flow hedges
Foreign exchange hedges
Revenue		1			-			2			-
Cost of operations		-			(10	)		-			(10	)

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STOCKHOLDERS’ EQUITY AND EQUITY-BASED INCENTIVE PLANS (Tables)

6 Months Ended

Jun. 30, 2019

Accumulated Other Comprehensive Income Loss [Line Items]

Changes in the Number of Shares Outstanding and Treasury Shares Held by the Company

Shares Outstanding and Treasury Shares―The changes in the number of shares outstanding and treasury shares held by us are as follows (in millions):

	Six Months Ended June 30,
	2019			2018
Shares outstanding
Beginning balance		181			95
Common stock issued		2			2
Shares issued in the Combination (Note 3, Business Combination)		-			85
Purchase of common stock		(1	)		(1	)
Ending balance		182			181
Shares held as Treasury shares
Beginning balance		3			3
Purchase of common stock		1			1
Retirement of common stock		(1	)		(1	)
Ending balance		3			3
Ordinary shares issued at the end of the period		185			183

^{(1) Amounts in this table may not sum due to rounding.}

Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholders' Equity

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

	June 30, 2019			December 31, 2018
	(In millions)
Foreign currency translation adjustments ("CTA")	$	(107	)	$	(73	)
Net unrealized loss on derivative financial instruments		(80	)		(40	)
Defined benefit pension and other postretirement plans		6			6
Accumulated other comprehensive loss	$	(181	)	$	(107	)

Reclassifications [Member]

Accumulated Other Comprehensive Income Loss [Line Items]

Components of Accumulated Other Comprehensive Income (Loss) Included in Stockholders' Equity

The following table presents the components of AOCI and the amounts that were reclassified during the periods indicated:

	Foreign currency translation adjustments			Net unrealized loss on derivative financial instruments (1)			Defined benefit pension and other postretirement plans		TOTAL
	(In millions)
December 31, 2017	$	(49	)	$	(2	)	$	-	$	(51	)
Other comprehensive income before reclassification		(12	)		(15	)		-		(27	)
Amounts reclassified from AOCI (2)		-			3			-		3
Net current period other comprehensive income		(12	)		(12	)		-		(24	)
June 30, 2018	$	(61	)	$	(14	)	$	-	$	(75	)
December 31, 2018		(73	)		(40	)		6		(107	)
Other comprehensive income before reclassification		(34	)		(47	)		-		(81	)
Amounts reclassified from AOCI (2)		-			7			-		7
Net current period other comprehensive income		(34	)		(40	)		-		(74	)
June 30, 2019	$	(107	)	$	(80	)	$	6	$	(181	)

⁽¹⁾ Refer to Note 17, Derivative Financial Instruments, for additional details.

^{(2) Amounts are net of tax, which was not material during the six months ended June 30, 2019 and 2018.}

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2019

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 June 30,					Six Months Ended June 30,
	2019 (1)			2018 (2)		2019 (1)			2018 (2)
	(In millions, except per share amounts)
Net (loss) income attributable to McDermott	$	(132	)	$	47	$	(188	)	$	82
Dividends on redeemable preferred stock		(10	)		-		(20	)		-
Accretion of redeemable preferred stock		(4	)		-		(8	)		-
Net (loss) income attributable to common stockholders	$	(146	)	$	47	$	(216	)	$	82
Weighted average common stock (basic)		182			144		181			120
Effect of dilutive securities:
Stock-based awards		-			-		-			-
Warrants and preferred stock		-			-		-			-
Weighted average common stock (diluted)		182			144		181			120
Net (loss) income per share attributable to common stockholders
Basic:	$	(0.80	)	$	0.33	$	(1.19	)	$	0.68
Diluted:	$	(0.80	)	$	0.33	$	(1.19	)	$	0.68

^{(1) The effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2019 due to the net loss for the periods.}

^{(2) Approximately 0.5 million shares underlying outstanding stock-based awards for the three and six months ended June 30, 2018 were excluded from the computation of diluted earnings per share during the periods because the exercise price of those awards was greater than the average market price of our common stock, and the inclusion of such shares would have been antidilutive in each of those periods.}

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SEGMENT REPORTING (Tables)

6 Months Ended

Jun. 30, 2019

Segment Reporting [Abstract]

Operating Information by Segment

Operating Information by Segment

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In millions)						(In millions)
Revenues:
NCSA	$	1,259		$	995		$	2,639		$	1,093
EARC		192			58			340			74
MENA		399			469			779			814
APAC		133			108			288			257
Technology		154			105			302			105
Total revenues	$	2,137		$	1,735		$	4,348		$	2,343
Operating (loss) income: (1)
Segment operating income (loss):
NCSA	$	15		$	49		$	88		$	51
EARC		4			(8	)		11			(11	)
MENA		29			97			95			167
APAC		2			43			15			116
Technology		35			25			70			25
Total segment operating income		85			206			279			348
Corporate		(146	)		(157	)		(327	)		(235	)
Total operating (loss) income	$	(61	)	$	49		$	(48	)	$	113
Depreciation and amortization:
NCSA	$	14		$	9		$	31		$	16
EARC		3			3			7			3
MENA		13			10			25			16
APAC		2			2			7			9
Technology		18			14			37			14
Corporate		11			20			30			22
Total depreciation and amortization	$	61		$	58		$	137		$	80
Capital expenditures (2):
NCSA	$	2		$	-		$	5		$	2
EARC		1			-			1			-
MENA		4			4			8			7
APAC		-			2			5			5
Technology		-			-			-			-
Corporate		8			18			14			29
Total Capital expenditures	$	15		$	24		$	33		$	43

Assets by Segment

	June 30, 2019			December 31, 2018
	(In millions)
Segment assets:
NCSA	$	3,489		$	3,257
EARC		1,238			1,169
MENA		1,583			1,472
APAC		1,200			1,147
Technology		2,726			2,752
Corporate (3)		(238	)		(357	)
Total assets	$	9,998		$	9,440

(1)    NCSA operating results for the three and six months ended June 30, 2019 included $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC.

Corporate operating results for the three and six months ended June 30, 2019 included:

• $20 million and $89 million of restructuring and integration costs, respectively; and

• $11 million and $15 million of transaction costs, respectively.

Corporate operating results for the six months ended June 30, 2018 included:

• $63 million and $75 million of restructuring and integration costs, respectively; and

• $37 million and $40 million of transaction costs, respectively.

See Note 11, Restructuring and Integration Costs and Transaction Costs, for further discussion.

(2)    Capital expenditures reported represent cash purchases. At June 30, 2019 and 2018, we had approximately $47 million and $14 million, respectively, of accrued and unpaid capital expenditures reported in property, plant and equipment and accrued liabilities.

(3)    Corporate assets at June 30, 2019 and December 31, 2018 include negative cash balances associated with our international cash pooling program.

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Nature of Operations and Organization - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2019 Segment
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Number of operating groups, which represent our reportable segments	5

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Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) - USD ($)	3 Months Ended			6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Jan. 01, 2019	Dec. 31, 2018	May 08, 2018
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Loss on asset disposals	$ 102,000,000	$ 1,000,000		$ 103,000,000	$ 1,000,000
Cost of operations	1,959,000,000	1,498,000,000		3,987,000,000	1,974,000,000
Selling, general and administrative expenses	77,000,000	75,000,000		149,000,000	124,000,000
Operating lease right-of-use assets	383,000,000			383,000,000
Current portion of long-term lease obligations	96,000,000			96,000,000			$ 8,000,000
Long-term lease obligations	$ 379,000,000			379,000,000			$ 66,000,000
Senior secured long-term borrowing								$ 2,260,000,000
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Interest rate derivatives								$ 1,940,000,000
ASU 2016-02 [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Operating lease right-of-use assets						$ 424,000,000
Current portion of long-term lease obligations						101,000,000
Long-term lease obligations						$ 342,000,000
Other Operating Expense [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Loss on asset disposals		$ (1,000,000)			(1,000,000)
Post-Combination Bid and Proposal Costs [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Cost of operations				$ 46,000,000	$ 17,000,000
Pre-Combination Bid and Proposal Costs [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Selling, general and administrative expenses			$ 10,000,000

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Business Combination - Additional Information (Detail) - USD ($) $ in Millions			3 Months Ended		6 Months Ended
		May 10, 2018	Jun. 30, 2019		Jun. 30, 2018	Dec. 31, 2018	Dec. 18, 2017
Business Acquisition [Line Items]
Number of equity shares issued for business acquisition					85,000,000
Business combination, ownership percentage							53.00%
Business combination, net of cash acquired		$ 4,100			$ 2,374
Estimated fair value of the net tangible and identifiable intangible assets acquired recorded as goodwill			$ 2,704	[1]		$ 2,654
Outstanding RPOs			20,547			$ 10,913
Chicago Bridge & Iron Company N.V. [Member]
Business Acquisition [Line Items]
Business Acquisition, Date of acquisition agreement		Dec. 18, 2017
Business acquisition, combination date		May 10, 2018
Business combination, Consideration		$ 2,870
Number of equity shares issued for business acquisition		84,500,000
Business combination, number of McDermott's shares entitled for each share of CB&I owned		85
Business combination, number of converted shares acquired		2,200,000
Business combination, Gross purchase price		$ 4,565
Business combination, net of cash acquired		4,067
Estimated fair value of the net tangible and identifiable intangible assets acquired recorded as goodwill	[2]	4,990
Adjustments to assets and liabilities			$ 107
Outstanding RPOs		$ 8,300
Chicago Bridge & Iron Company N.V. [Member] | Effect of Reverse Stock Split [Member]
Business Acquisition [Line Items]
Business combination, number of McDermott's shares entitled for each share of CB&I owned		0.82407

[1] At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.

[2] Goodwill resulted from the acquired established workforce, which does not qualify for separate recognition, as well as expected future cost savings and revenue synergies associated with the combined operations. Of the approximately $5 billion of goodwill recorded in conjunction with the Combination, approximately $2.7 billion, $461 million, $50 million, $52 million and $1.7 billion, was allocated to our NCSA, EARC, MENA, APAC and Technology reporting segments, respectively. Approximately $1.7 billion of the opening goodwill balance is deductible for tax purposes.

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Business Combination - Schedule of Purchase Consideration (Detail) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended	6 Months Ended
	May 10, 2018	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition [Line Items]
Equity Combination consideration transferred		$ 1,688
Less: Cash acquired			$ (498)
Total Combination consideration transferred, net of cash acquired	$ 4,100			$ 2,374
Chicago Bridge & Iron Company N.V. [Member]
Business Acquisition [Line Items]
CB&I shares for Combination consideration	103
Business combination, number of McDermott's shares entitled for each share of CB&I owned	85
McDermott stock price on May 10, 2018	$ 19.92
Equity Combination consideration transferred	$ 1,684
Fair value of converted awards earned prior to the Combination	9
Total equity Combination consideration transferred	1,693
Cash consideration transferred	2,872
Total Combination consideration transferred	4,565
Less: Cash acquired	(498)
Total Combination consideration transferred, net of cash acquired	$ 4,067

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Business Combination - Summary of Final Purchase Price Allocation of Fair Values of Assets Acquired and Liabilities Assumed (Detail) - USD ($) $ in Millions			6 Months Ended
		May 10, 2018	Jun. 30, 2019		Jun. 30, 2018	Dec. 31, 2018
Net tangible assets:
Goodwill			$ 2,704	[1]		$ 2,654
Less: Cash acquired			$ (498)
Total Combination consideration transferred, net of cash acquired		$ 4,100			$ 2,374
Chicago Bridge & Iron Company N.V. [Member]
Net tangible assets:
Cash		498
Accounts receivable		791
Inventory		111
Contracts in progress		272
Assets held for sale	[2]	70
Other current assets		272
Investments in unconsolidated affiliates	[3]	426
Property, plant and equipment		396
Other non-current assets		127
Accounts payable		(499)
Advance billings on contracts	[4]	(2,410)
Deferred tax liabilities		(16)
Other current liabilities		(1,237)
Other non-current liabilities		(453)
Noncontrolling interest		14
Total net tangible liabilities		(1,638)
Project-related intangible assets/liabilities, net	[5]	150
Other intangible assets	[6]	1,063
Net identifiable liabilities		(425)
Goodwill	[7]	4,990
Total Combination consideration transferred		4,565
Less: Cash acquired		(498)
Total Combination consideration transferred, net of cash acquired		$ 4,067

[1] At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.

[2] Assets held for sale included CB&I’s former administrative headquarters within Corporate and various fabrication facilities within NCSA. During the third quarter of 2018, we completed the sale of CB&I’s former administrative headquarters for proceeds of $52 million.

[3] Investments in unconsolidated affiliates includes a fair value adjustment of $215 million associated with the Combination. Approximately $146 million of the fair value adjustment is attributable to the basis difference between McDermott’s investment and the underlying equity in identifiable assets of unconsolidated affiliates and will be amortized to Investment in unconsolidated affiliates-related amortization over a range of two to 30 years based on the life of assets to which the basis difference is attributed.

[4] Advance billings on contracts includes accrued provisions for estimated losses on projects of $374 million, primarily associated with the Cameron LNG and Freeport LNG Trains 1 and 2 projects, the now-substantially completed gas power project for a unit of Calpine Corporation (“Calpine”) and the now-completed gas power project for Indianapolis Power & Light Company.

[5] Project-related intangible assets/liabilities, net includes intangible asset and liabilities of $259 million and $109 million, respectively. The balances represent the fair value of acquired remaining performance obligations (“RPOs”) and normalized profit margin fair value associated with acquired long-term contracts that were deemed to be lower than fair value (excluding amounts recorded in Advance billings on contracts and Contracts in progress) as of the Combination Date. The project-related intangible assets and liabilities will be amortized as the applicable projects progress over a range of two to six years within Project-related intangibles amortization in our Statements of Operations.

[6] Other intangible assets are reflected in the table below and recorded at estimated fair value, as determined by our management, based on available information, which includes valuations prepared by external experts. The estimated useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.

[7] Goodwill resulted from the acquired established workforce, which does not qualify for separate recognition, as well as expected future cost savings and revenue synergies associated with the combined operations. Of the approximately $5 billion of goodwill recorded in conjunction with the Combination, approximately $2.7 billion, $461 million, $50 million, $52 million and $1.7 billion, was allocated to our NCSA, EARC, MENA, APAC and Technology reporting segments, respectively. Approximately $1.7 billion of the opening goodwill balance is deductible for tax purposes.

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Business Combination - Summary of Final Purchase Price Allocation of Fair Values of Assets Acquired and Liabilities Assumed (Parenthetical) (Detail) - USD ($) $ in Millions			3 Months Ended	6 Months Ended
		May 10, 2018	Sep. 30, 2018	Jun. 30, 2019		Jun. 30, 2018	Dec. 31, 2018
Business Acquisition [Line Items]
Proceeds from asset dispositions				$ 83		$ 2
Goodwill				$ 2,704	[1]		$ 2,654
Chicago Bridge & Iron Company N.V. [Member]
Business Acquisition [Line Items]
Proceeds from asset dispositions			$ 52
Business combination, fair value adjustment in unconsolidated affiliates		$ 215
Business combination, fair value adjustment in unconsolidated affiliates amortized investment		146
Accrued provisions for estimated losses on projects		374
Project related intangible assets, net		259
Project related intangible liabilities, net		109
Goodwill	[2]	4,990
Goodwill deductible for tax purposes		1,700
Chicago Bridge & Iron Company N.V. [Member] | NCSA [Member]
Business Acquisition [Line Items]
Goodwill		2,700
Chicago Bridge & Iron Company N.V. [Member] | EARC [Member]
Business Acquisition [Line Items]
Goodwill		461
Chicago Bridge & Iron Company N.V. [Member] | MENA [Member]
Business Acquisition [Line Items]
Goodwill		50
Chicago Bridge & Iron Company N.V. [Member] | APAC [Member]
Business Acquisition [Line Items]
Goodwill		52
Chicago Bridge & Iron Company N.V. [Member] | Technology [Member]
Business Acquisition [Line Items]
Goodwill		$ 1,700
Chicago Bridge & Iron Company N.V. [Member] | Minimum [Member]
Business Acquisition [Line Items]
Business combination, fair value adjustment in unconsolidated affiliates related amortization period		2 years
Business combination, Intangible assets amortized liabilities projects progress		2 years
Chicago Bridge & Iron Company N.V. [Member] | Maximum [Member]
Business Acquisition [Line Items]
Business combination, fair value adjustment in unconsolidated affiliates related amortization period		30 years
Business combination, Intangible assets amortized liabilities projects progress		6 years

[1] At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.

[2] Goodwill resulted from the acquired established workforce, which does not qualify for separate recognition, as well as expected future cost savings and revenue synergies associated with the combined operations. Of the approximately $5 billion of goodwill recorded in conjunction with the Combination, approximately $2.7 billion, $461 million, $50 million, $52 million and $1.7 billion, was allocated to our NCSA, EARC, MENA, APAC and Technology reporting segments, respectively. Approximately $1.7 billion of the opening goodwill balance is deductible for tax purposes.

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Business Combination - Summary of Final Purchase Price Allocation of Fair Values of Assets Acquired and Liabilities Assumed (Schedule of Other Intangible Assets ) (Parenthetical) (Detail) - Chicago Bridge & Iron Company N.V. [Member] $ in Millions	May 10, 2018 USD ($)
Finite Lived Intangible Assets [Line Items]
Fair value	$ 1,063
Process Technologies [Member]
Finite Lived Intangible Assets [Line Items]
Fair value	$ 511
Weighted Average Life	27 years
Process Technologies [Member] | Minimum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life Range	10 years
Process Technologies [Member] | Maximum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life Range	30 years
Trade Names [Member]
Finite Lived Intangible Assets [Line Items]
Fair value	$ 400
Weighted Average Life	12 years
Trade Names [Member] | Minimum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life Range	10 years
Trade Names [Member] | Maximum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life Range	20 years
Customer Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Fair value	$ 126
Weighted Average Life	10 years
Customer Relationships [Member] | Minimum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life Range	4 years
Customer Relationships [Member] | Maximum [Member]
Finite Lived Intangible Assets [Line Items]
Useful Life Range	11 years
Trademarks [Member]
Finite Lived Intangible Assets [Line Items]
Fair value	$ 26
Useful Life Range	10 years
Weighted Average Life	10 years

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Business Combination - Summary of Pro Forma Financial Information (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended	6 Months Ended
		Jun. 30, 2018	Jun. 30, 2018
Business Combinations [Abstract]
Pro forma revenue	[1]	$ 2,492	$ 4,845
Pro forma net income attributable to common stockholders	[1]	$ 48	$ 81
Pro forma net income per share attributable to common stockholders
Basic	[1]	$ 0.27	$ 0.45
Diluted	[1]	$ 0.26	$ 0.43
Shares used in the computation of net income per share
Basic	[1],[2]	181	181
Diluted	[1],[2]	188	188

[1] Adjustments, net of tax, included in the pro forma net income above that were of a non-recurring nature totaled $94 million and $109 million for the three and six months ended June 30, 2018. The adjustments reflect the elimination of (1) restructuring and integration costs ($54 million and $62 million), respectively; and (2) transaction costs ($29 million and $36 million) and debt extinguishment costs ($11 million and $11 million) for the three and six months ended June 30, 2018. These pro forma results exclude the effect of adjustments to the opening balance sheet associated with fair value purchase accounting estimates.

[2] Pro forma net income per share was calculated using weighted average basic shares outstanding during the three and six months ended June 30, 2019. Due to the net loss for the three and six months ended June 30, 2019, the effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share. For the presentation of the pro forma net income for the three and six months ended June 30, 2018, the amount of diluted shares includes the impact of restricted stock and warrants but does not include the impact of the redeemable preferred stock, as those shares were antidilutive

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Business Combination - Summary of Pro Forma Financial Information (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]
Net (loss) income	$ (114)	$ (57)	$ 45	$ 34	$ (171)	$ 79
Restructuring and integration costs	20		63		89	75
Transaction costs	$ 11		37		$ 15	40
Debt extinguishment costs						10
Chicago Bridge & Iron Company N.V. [Member]
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]
Restructuring and integration costs			54			62
Transaction costs			29			36
Debt extinguishment costs			11			11
Chicago Bridge & Iron Company N.V. [Member] | Elimination of Restructuring, Integration and Transaction Costs [Member]
Business Acquisition Pro Forma Information Nonrecurring Adjustment [Line Items]
Net (loss) income			$ 94			$ 109

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Disposition of Alloy Piping Products, Llc - Summary of Loss on APP Sale Included in Loss on Asset Disposals (Detail) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Jun. 27, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Liabilities
Sale proceeds (net of transaction costs of $2)				$ 83	$ 2
Loss on asset disposals		$ 102	$ 1	$ 103	$ 1
Alloy Piping Products [Member]
Assets
Inventory	$ 69
Property and equipment	25
Goodwill	90
Other assets	11
Assets sold	195
Liabilities
Account payable	8
Other liabilities	3
Liabilities sold	11
Net assets sold	184
Sale proceeds (net of transaction costs of $2)	83
Loss on asset disposals	$ 101

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Disposition of Alloy Piping Products, Llc - Summary of Loss on APP Sale Included in Loss on Asset Disposals (Parenthetical) (Detail) $ in Millions	Jun. 27, 2019 USD ($)
Alloy Piping Products [Member]
Income Statement Balance Sheet And Additional Disclosures By Disposal Groups Including Discontinued Operations [Line Items]
Disposal group, transaction costs	$ 2

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Revenue Recognition - Summary of RPOs by Segment (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Remaining performance obligations, Total	$ 20,547	$ 10,913
Remaining performance obligations, Percentage	100.00%	100.00%
NCSA [Member]
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Remaining performance obligations, Total	$ 8,123	$ 5,649
Remaining performance obligations, Percentage	39.00%	52.00%
EARC [Member]
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Remaining performance obligations, Total	$ 4,032	$ 1,378
Remaining performance obligations, Percentage	20.00%	12.00%
MENA [Member]
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Remaining performance obligations, Total	$ 6,538	$ 1,834
Remaining performance obligations, Percentage	32.00%	17.00%
APAC [Member]
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Remaining performance obligations, Total	$ 1,289	$ 1,420
Remaining performance obligations, Percentage	6.00%	13.00%
Technology [Member]
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Remaining performance obligations, Total	$ 565	$ 632
Remaining performance obligations, Percentage	3.00%	6.00%

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Revenue Recognition - Summary of RPOs Expected Revenue Recognition (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Total RPOs	$ 20,547	$ 10,913
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2019-07-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Total RPOs	$ 4,768
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2020-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Total RPOs	$ 7,372
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period	1 year
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2021-01-01
Revenue Remaining Performance Obligation Expected Timing Of Satisfaction [Line Items]
Total RPOs	$ 8,407
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Period

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Revenue Recognition - Summary of Revenue by Product Offering, Contract Types and Revenue Recognition Methodology (Detail) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Disaggregation Of Revenue [Line Items]
Revenues	[1]	$ 2,137	$ 1,735	$ 4,348	$ 2,343
Offshore and subsea [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	661	653	1,266	1,261
LNG [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	411	382	832	382
Downstream [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1],[2]	740	496	1,602	496
Power [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	325	204	648	204
Fixed priced [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	1,864	1,313	3,590	1,896
Reimbursable [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	106	269	409	269
Hybrid [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	106	124	216	124
Unit-basis and other [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	61	29	133	54
Over time [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	2,117	1,707	4,278	2,315
At a point in time [Member]
Disaggregation Of Revenue [Line Items]
Revenues	[1]	$ 20	$ 28	$ 70	$ 28

[1] Intercompany amounts have been eliminated in consolidation.

[2] Includes the results of our Technology operating group.

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Revenue Recognition - Additional Information (Detail) - USD ($)		3 Months Ended			6 Months Ended
		Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues recognized due to changes in transaction price	[1]	$ 2,137,000,000		$ 1,735,000,000	$ 4,348,000,000	$ 2,343,000,000
Revenue included from settlement of claims		72,000,000			72,000,000
Advance billings on contracts		579,000,000			1,300,000,000
Unapproved change orders and claims		388,000,000			388,000,000		$ 428,000,000
Unapproved change orders and claims in our RPO balance		101,000,000			101,000,000		130,000,000
Incentives amount included in transaction prices		126,000,000			126,000,000		0
Incentives amount included in our RPO balance		$ 25,000,000			$ 25,000,000
Estimated percentage of in progress as of combination date		0.00%			0.00%
Effect of changes in estimated project cost on operating results				84,000,000		121,000,000
Uncompleted Contracts [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Provisions for estimated losses		$ 132,000,000			$ 132,000,000		$ 266,000,000
Freeport LNG Train 3 Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Effect of changes in estimated project cost on operating results					38,000,000
NCSA [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues recognized due to changes in transaction price		74,000,000			96,000,000
Effect of changes in estimated project cost on operating results		131,000,000			155,000,000
NCSA [Member] | Cameron Liquefied Natural Gas Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Provisions for estimated losses		$ 58,000,000			$ 58,000,000
Percentage of complete acquired on post combination basis		78.00%			78.00%
Percentage of complete acquired on pre combination basis		93.00%			93.00%
Revenue recognized achievement of progress milestones		$ 110,000,000
NCSA [Member] | Line 1 and Line 10 project for Pemex [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Provisions for estimated losses		$ 6,000,000			$ 6,000,000
Percentage of completion		85.00%			85.00%
Effect of changes in estimated project cost on operating results		$ 10,000,000			$ 28,000,000
NCSA [Member] | Freeport LNG Trains 1 and 2 Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Provisions for estimated losses		$ 19,000,000			$ 19,000,000
Percentage of complete acquired on post combination basis		87.00%			87.00%
Percentage of complete acquired on pre combination basis		96.00%			96.00%
Effect of changes in estimated project cost on operating results		$ 27,000,000			$ 54,000,000
Partial offset on estimated costs on project			$ 11,000,000
NCSA [Member] | Freeport LNG Train 3 Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Effect of changes in estimated project cost on operating results		$ 11,000,000			$ 5,000,000
NCSA [Member] | Calpine Power Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Percentage of complete acquired on post combination basis		99.00%			99.00%
Percentage of complete acquired on pre combination basis		99.70%			99.70%
Effect of changes in estimated project cost on operating results		$ 11,000,000			$ 11,000,000
APAC [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Revenues recognized due to changes in transaction price				$ 13,000,000		$ 79,000,000
Pemex [Member] | Abkatun-A2 Project [Member]
Revenue Recognition Multiple Deliverable Arrangements [Line Items]
Percentage of project acquired complete		99.00%			99.00%

[1] Intercompany amounts have been eliminated in consolidation.

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Project Changes in Estimates - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results		$ 84		$ 121
NCSA and MENA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	$ 135		$ 116
NCSA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	131		155
NCSA [Member] | Freeport LNG Project [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	38		49
NCSA [Member] | Calpine [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	11		11
NCSA [Member] | Abkatun A2, Line 1 and Line 10 and Xanab Project for Pemex [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	33		47
NCSA [Member] | Downstream Petrochemical Projects [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	11		7
NCSA [Member] | Power Projects [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	39		48
MENA [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results	$ 2	39	$ 35	69
APAC [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Effect of changes in estimated project cost on operating results		$ 46		$ 55

XML

Cash, Cash Equivalents and Restricted Cash - Reconciliation of Cash, Cash Equivalents, and Restricted Cash (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018	Jun. 30, 2018	Dec. 31, 2017
Cash And Cash Equivalents [Abstract]
Cash and cash equivalents		$ 455	$ 520
Restricted cash and cash equivalents	[1]	327	325
Total cash, cash equivalents and restricted cash shown in the Statements of Cash Flows		$ 782	$ 845	$ 1,138	$ 408

[1] ^{Our restricted cash balances primarily serve as cash collateral deposits for our letter of credit facilities. See Note 12, Debt, for further discussion.}

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Accounts Receivable - Trade Receivable Balances (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018
Accounts Notes And Loans Receivable [Line Items]
Contract receivables	[1]	$ 864	$ 794
Retainages	[2]	155	155
Accounts receivable-trade, net		1,002	932
Contract receivables [Member]
Accounts Notes And Loans Receivable [Line Items]
Less allowances		(17)	(17)
Accounts receivable-trade, net		$ 1,002	$ 932

[1] Unbilled receivables for our performance obligations recognized at a point in time are recorded within Accounts receivable-trade, net and were approximately $46 million and $31 million as of June 30, 2019 and December 31, 2018, respectively.

[2] Retainages classified within Accounts receivable-trade, net are amounts anticipated to be collected within one year and as to which we have an unconditional right to collect from the customer, subject only to the passage of time. Retainages anticipated to be collected beyond one year are classified as Accounts receivable long-term retainages on our Balance Sheet.

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Accounts Receivable -Trade Receivable Balances (Parenthetical) (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Accounts receivable-trade, net [Member] | At a point in time [Member]
Accounts Notes And Loans Receivable [Line Items]
Unbilled receivables	$ 46	$ 31

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Goodwill and Other Intangible Assets - Changes in the Carrying Amount of Goodwill by Reporting Segment (Detail) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2019
Goodwill And Intangible Assets Disclosure [Abstract]
Balance as of December 31, 2018			$ 2,654	$ 2,654
Adjustments to finalize purchase accounting estimates		$ 107	$ 61	168	[1]
Allocated to APP for disposal				(90)
Currency translation adjustments				(28)
Balance as of June 30, 2019	[2]	$ 2,704		$ 2,704

[1] Includes adjustments of $61 million and $107 million identified in the first and second quarters of 2019, respectively. See Note 3, Business Combination for further discussion.

[2] At June 30, 2019, we had approximately $2.2 billion of cumulative impairment charges recorded in conjunction with our impairment analysis performed during the fourth quarter of 2018, as further described in the 2018 Form 10-K.

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Goodwill and Other Intangible Assets - Changes in the Carrying Amount of Goodwill by Reporting Segment (Parenthetical) (Detail) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2019	[1]
Goodwill And Intangible Assets Disclosure [Abstract]
Adjustments to finalize purchase accounting estimates		$ 107	$ 61	$ 168
Cumulative impairment charges	$ 2,200		$ 0

[1] Includes adjustments of $61 million and $107 million identified in the first and second quarters of 2019, respectively. See Note 3, Business Combination for further discussion.

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Goodwill and Other Intangible Assets - Additional Information (Detail) - USD ($) $ in Millions		3 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Mar. 31, 2019
Finite Lived Intangible Assets [Line Items]
Impairment loss	$ 2,200		$ 0
Alloy Piping Products [Member]
Finite Lived Intangible Assets [Line Items]
Impairment loss		$ 0

XML

Goodwill and Other Intangible Assets - Schedule of Project Related Intangibles (Detail) - USD ($) $ in Millions		6 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Goodwill And Intangible Assets Disclosure [Abstract]
Project related intangible assets, Accumulated Amortization		4 years
Project related intangible assets, Gross Carrying Amount		$ 259	$ 259
Project related intangible assets, Accumulated Amortization		(165)	(122)
Project related intangible assets, Net Carrying Amount		$ 94	137
Project related intangible liabilities, Weighted Average Life		2 years
Project related intangible liabilities, Gross Carrying Amount		$ (109)	(109)
Project related intangible liabilities, Accumulated Amortization		71	43
Project related intangible liabilities, Net Carrying Amount		(38)	(66)
Total, Gross Carrying Amount	[1]	150	150
Total, Accumulated Amortization	[1]	(94)	(79)
Total, Net Carrying Amount	[1]	$ 56	$ 71

[1] The decrease in project-related intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $16 million and the impact of foreign currency translation.

XML

Goodwill and Other Intangible Assets - Schedule of Project Related Intangibles (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Finite Lived Intangible Assets [Line Items]
Other intangibles amortization	$ 22	$ 10	$ 44	$ 10
Project Related Intangibles [Member]
Finite Lived Intangible Assets [Line Items]
Other intangibles amortization			$ 16

XML

Goodwill and Other Intangible Assets - Schedule of Other Intangible Assets (Detail) - USD ($) $ in Millions		6 Months Ended
		Jun. 30, 2019	Dec. 31, 2018
Finite Lived Intangible Assets [Line Items]
Net Carrying Amount		$ 948	$ 1,009
Other Intangible Assets [Member]
Finite Lived Intangible Assets [Line Items]
Gross Carrying Amount	[1]	1,053	1,071
Accumulated Amortization	[1]	(105)	(62)
Net Carrying Amount	[1]	$ 948	1,009
Other Intangible Assets [Member] | Process Technologies [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life		27 years
Gross Carrying Amount		$ 507	514
Accumulated Amortization		(26)	(14)
Net Carrying Amount		$ 481	500
Other Intangible Assets [Member] | Trade Names [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life		12 years
Gross Carrying Amount		$ 396	401
Accumulated Amortization		(41)	(23)
Net Carrying Amount		$ 355	378
Other Intangible Assets [Member] | Customer Relationships [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life		10 years
Gross Carrying Amount		$ 124	129
Accumulated Amortization		(35)	(23)
Net Carrying Amount		$ 89	106
Other Intangible Assets [Member] | Trademarks [Member]
Finite Lived Intangible Assets [Line Items]
Weighted Average Useful Life		10 years
Gross Carrying Amount		$ 26	27
Accumulated Amortization		(3)	(2)
Net Carrying Amount		$ 23	$ 25

[1] The decrease in other intangible assets during the six months ended June 30, 2019 primarily related to amortization expense of $43 million, intangible assets allocated to the disposal of APP and the impact of foreign currency translation.

XML

Goodwill and Other Intangible Assets - Schedule of Other Intangible Assets (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Finite Lived Intangible Assets [Line Items]
Other intangibles amortization	$ 22	$ 10	$ 44	$ 10
Other Intangible Assets [Member]
Finite Lived Intangible Assets [Line Items]
Other intangibles amortization			$ 43

XML

Joint Venture and Consortium Arrangements - Additional Information (Detail) $ in Millions			3 Months Ended	6 Months Ended
	Mar. 08, 2019 USD ($)	Nov. 08, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2019 USD ($) Train LNG	Dec. 31, 2018 USD ($)
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Investment in unconsolidated affiliate related amortization			$ 2	$ 5
Chevron-Lummus Global [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
NET Power [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			32.20%	32.20%
McDermott/CTCI [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
io Oil and Gas [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
Qingdao McDermott Wuchuan Offshore Engineering Company Ltd. [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
Accrued Liabilities [Member] | McDermott/CTCI [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Advances to ventures			$ 95	$ 95	$ 95
Accrued Liabilities [Member] | Proportionately Consolidated Joint Ventures [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Advances to ventures			$ 39	$ 39	$ 53
CTCI [Member] | McDermott/CTCI [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
Exelon [Member] | NET Power [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			32.20%	32.20%
8 Rivers Capital [Member] | NET Power [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			32.20%	32.20%
Oxy Low Carbon Ventures LLC [Member] | NET Power [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage	3.30%	10.00%	3.30%	3.30%
Equity method investment, amount sold		$ 60
Percentage of future ownership diluted		3.30%
Cash payment on equity method investment	$ 20
Baker Hughes [Member] | io Oil and Gas [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
Wuhan Wuchuan Investment Holding Co., Ltd. [Member] | Qingdao McDermott Wuchuan Offshore Engineering Company Ltd. [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Equity method investment, percentage			50.00%	50.00%
McDermott/Orano [Member] | McDermott [Member] | Variable Interest Entities ("VIEs") [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage in consolidated joint ventures				70.00%
McDermott/Orano [Member] | Orano [Member] | Variable Interest Entities ("VIEs") [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage in consolidated joint ventures				30.00%
Profit sharing percentage transfer to Orano				18.00%
Mc Dermott And Kentz
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Number of liquefied natural gas trains | LNG				3
Mc Dermott And Kentz | McDermott [Member] | Variable Interest Entities ("VIEs") [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage in consolidated joint ventures				65.00%
Mc Dermott And Kentz | Kentz [Member] | Variable Interest Entities ("VIEs") [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage in consolidated joint ventures				35.00%
McDermott/Zachry [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by parent			50.00%	50.00%
Number of liquefied natural gas trains | Train				2
McDermott/Zachry [Member] | Zachry [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			50.00%	50.00%
McDermott/Zachry/Chiyoda [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by parent			33.30%	33.30%
McDermott/Zachry/Chiyoda [Member] | Zachry [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			33.30%	33.30%
McDermott/Zachry/Chiyoda [Member] | Chiyoda [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			33.30%	33.30%
McDermott/Chiyoda [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by parent			50.00%	50.00%
Number of Liquefied Natural Gas | LNG				3
McDermott/Chiyoda [Member] | Chiyoda [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			50.00%	50.00%
McDermott/CTCI [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by parent			42.50%	42.50%
McDermott/CTCI [Member] | CTCI [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			57.50%	57.50%
CCS JV [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by parent			24.983%	24.983%
Number of liquefied natural gas trains | LNG				2
CCS JV [Member] | Chiyoda [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			0.068%	0.068%
CCS JV [Member] | Saipem [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Ownership percentage by noncontrolling owners			74.949%	74.949%

XML

Joint Venture and Consortium Arrangements - Summarized Balance Sheet Information for Proportionately Consolidated Consortiums (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Current assets		$ 3,239	$ 3,033
Total assets		9,998	9,440
Current liabilities		4,686	4,217
Proportionately Consolidated Joint Ventures [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Current assets	[1]	377	299
Non-current assets		8	10
Total assets		385	309
Current liabilities		$ 596	$ 992

[1] Our consortium arrangements may allow for excess working capital of the consortium to be advanced to the consortium participants. Such advances are returned to the ventures for working capital needs as necessary. Accordingly, at a reporting period end a consortium may have advances to its participants which are reflected as an advance receivable within current assets of the consortium. As of June 30, 2019 and December 31, 2018, Accounts receivable-other included $76 million and $44 million, respectively, related to our proportionate share of advances from the consortiums to the other consortium participants

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Joint Venture and Consortium Arrangements - Summarized Balance Sheet Information for Proportionately Consolidated Consortiums (Parenthetical) (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Accounts Receivable-other [Member] | Proportionately Consolidated Joint Ventures [Member]
Schedule Of Equity Method Investments And Joint Ventures [Line Items]
Advances from ventures	$ 76	$ 44

XML

Joint Venture and Consortium Arrangements - Summarized Balance Sheet Information for Proportionately Consolidated Collaborative Arrangement (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Current assets	$ 3,239	$ 3,033
Total assets	9,998	9,440
Current liabilities	4,686	$ 4,217
Collaborative Arrangement [Member]
Organization Consolidation And Presentation Of Financial Statements Disclosure [Line Items]
Current assets	107
Total assets	107
Current liabilities	$ 106

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Joint Venture and Consortium Arrangements - Summarized Balance Sheet Information for Consolidated Joint Venture (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Current assets	$ 181	$ 102
Non-current assets	16	15
Total assets	197	117
Current liabilities	$ 175	$ 138

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Restructuring and Integration Costs and Transaction Costs - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restructuring And Related Activities [Abstract]
Restructuring and integration costs	$ 20	$ 63	$ 89	$ 75
Transaction costs	$ 11	$ 37	$ 15	$ 40

XML

Debt - Summary of Long-Term Debt Obligations (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Debt Instrument [Line Items]
Revolving credit facility	$ 379
Current maturities of long-term debt	31	$ 31
Less: unamortized debt issuance costs	(1)	(1)
Current maturities of long-term debt, net of unamortized debt issuance costs	30	30
Short-term borrowing and current maturities of long-term debt	62	30
Less: current maturities of long-term debt	(30)	(30)
Less: unamortized debt issuance costs	(126)	(136)
Long-term debt, net of unamortized debt issuance costs	3,388	3,393
Term Facility [Member]
Debt Instrument [Line Items]
Long-term borrowing	2,232	2,243
10.625% Senior Notes [Member]
Debt Instrument [Line Items]
Long-term borrowing	1,300	1,300
North Ocean 105 Construction Financing [Member]
Debt Instrument [Line Items]
Long-term borrowing	12	$ 16
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Revolving credit facility	379
Structured Equipment Financing [Member]
Debt Instrument [Line Items]
Revolving credit facility	$ 32

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Debt - Additional Information (Detail) - USD ($)					3 Months Ended	6 Months Ended
	May 24, 2019	Oct. 30, 2018	May 10, 2018	Apr. 18, 2018	Jun. 30, 2019	Jun. 30, 2019	Dec. 31, 2018	May 08, 2018
Debt Instrument [Line Items]
Senior secured long-term borrowing								$ 2,260,000,000
Letter of credit facility fee percentage						0.50%
Letter of credit outstanding fronting fee percentage					0.25%	0.25%
Minimum fixed charge coverage ratio						1.50%
Maximum permitted leverage ratio					4.25%	4.25%
Debt instrument covenant minimum liquidity					$ 200,000,000	$ 200,000,000
Future maturities 2019					11,000,000	11,000,000
Future maturities 2020					$ 23,000,000	23,000,000
Amount received under credit facility						1,699,000,000
JRM Mexico [Member]
Debt Instrument [Line Items]
Receivables sold						62,000,000
Factoring costs trade receivables						$ 2,000,000
Percentage of receivables sold withheld and received						10.00%
Cash received from receivables, net of fees and amounts withheld						$ 54,000,000
Fiscal Quarter Ending on or Before September 30, 2019 [Member]
Debt Instrument [Line Items]
Maximum permitted leverage ratio					4.25%	4.25%
Fiscal Quarter Ending December 31, 2019 [Member]
Debt Instrument [Line Items]
Maximum permitted leverage ratio					4.00%	4.00%
Fiscal Quarter Ending After December 31, 2019 and on or Before December 31, 2020 [Member]
Debt Instrument [Line Items]
Maximum permitted leverage ratio					3.75%	3.75%
Fiscal Quarter Ending After December 31, 2020 and on or Before December 31, 2021 [Member]
Debt Instrument [Line Items]
Maximum permitted leverage ratio					3.50%	3.50%
Fiscal Quarter Ending after December 31, 2021 [Member]
Debt Instrument [Line Items]
Maximum permitted leverage ratio					3.25%	3.25%
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Debt Instrument [Line Items]
Interest rate derivatives								1,940,000,000
Financial Letters of Credit [Member]
Debt Instrument [Line Items]
Letter of credit participation fee percentage					4.25%	4.25%
Performance Stand By Letters Of Credit [Member]
Debt Instrument [Line Items]
Letter of credit participation fee percentage					2.125%	2.125%
Morgan Stanley Senior Funding Inc
Debt Instrument [Line Items]
Senior secured long-term borrowing	$ 50,000,000
Maximum [Member] | JRM Mexico [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						2.00%
Maximum [Member] | Interbank Equilibrium Interest Rate [Member] | Mexico [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						1.70%
Maximum [Member] | Financial Letters of Credit [Member]
Debt Instrument [Line Items]
Letter of credit participation fee percentage					4.25%	4.25%
Maximum [Member] | Performance Stand By Letters Of Credit [Member]
Debt Instrument [Line Items]
Letter of credit participation fee percentage					2.125%	2.125%
Minimum [Member] | JRM Mexico [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						1.40%
Minimum [Member] | Interbank Equilibrium Interest Rate [Member] | Mexico [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						1.40%
Minimum [Member] | Financial Letters of Credit [Member]
Debt Instrument [Line Items]
Letter of credit participation fee percentage					3.75%	3.75%
Minimum [Member] | Performance Stand By Letters Of Credit [Member]
Debt Instrument [Line Items]
Letter of credit participation fee percentage					1.875%	1.875%
Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing					$ 1,440,000,000	$ 1,440,000,000
Available capacity under credit facility					1,000,000	$ 1,000,000
Facility expire month and year						2023-05
Letters of credit outstanding					1,439,000,000	$ 1,439,000,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing					1,000,000,000.0	1,000,000,000.0
Available capacity under credit facility					568,000,000	$ 568,000,000
Facility expire month and year						2023-05
Borrowing outstanding					379,000,000	$ 379,000,000
Maximum borrowing outstanding						639,000,000
Letters of credit outstanding					53,000,000	$ 53,000,000
Revolving Credit Facility [Member] | Eurodollar Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						4.25%
Revolving Credit Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						3.25%
Revolving Credit Facility [Member] | Maximum [Member] | Eurodollar Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						4.25%
Revolving Credit Facility [Member] | Maximum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						3.25%
Revolving Credit Facility [Member] | Minimum [Member] | Eurodollar Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						3.75%
Revolving Credit Facility [Member] | Minimum [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin						2.75%
Financial Letters of Credit [Member]
Debt Instrument [Line Items]
Letters of credit outstanding					49,000,000	$ 49,000,000
Structured Equipment Financing [Member]
Debt Instrument [Line Items]
Available capacity under credit facility					$ 37,000,000	37,000,000
Debt instrument maturity month and year					2020-01
Amount received under credit facility					$ 32,000,000	32,000,000
Term Facility [Member] | Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Debt Instrument [Line Items]
Interest rate derivatives								$ 1,940,000,000
Term Facility [Member] | Eurodollar Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin					5.00%
Term Facility [Member] | Base Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin					4.00%
Term Facility [Member] | Floor Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin					1.00%
Term Facility [Member]
Debt Instrument [Line Items]
Term facility, borrowings outstanding Amount					$ 2,232,000,000	2,232,000,000	$ 2,243,000,000
Second-lien Notes [Member]
Debt Instrument [Line Items]
Aggregate principal amount redeemed						$ 500,000,000
Debt instrument interest rate						8.00%
Senior Notes [Member]
Debt Instrument [Line Items]
Debt instrument interest rate				10.625%
Issue of second-lien seven-year senior secured notes				$ 1,300,000,000
Debt instrument maturity month and year				2024-05
Redemption price percentage				100.00%
Senior Notes [Member] | One or More Qualified Equity Offerings [Member]
Debt Instrument [Line Items]
Redemption price percentage				110.625%
Senior Notes [Member] | Maximum [Member]
Debt Instrument [Line Items]
Redemption price percentage				35.00%
Credit Agreement [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing			$ 4,700,000,000
Credit Agreement [Member] | Maximum [Member]
Debt Instrument [Line Items]
Debt instrument mandatory commitment reductions and prepayments subject to reinvestment rights with respect to asset sales			500,000,000
Credit Agreement [Member] | Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing			$ 1,440,000,000
Excess cash flow			75.00%
Decrease in excess cash flow			50.00%
Excess cash flow percentage depending on secured leverage ratio			25.00%
Credit Agreement [Member] | Term Facility Letters of Credit [Member]
Debt Instrument [Line Items]
Letter of credit facility fee percentage			3.00%
Credit Agreement [Member] | Term Facility Letters of Credit [Member] | Maximum [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing					$ 320,000,000	$ 320,000,000
Credit Agreement [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing			$ 1,000,000,000.0
Credit Agreement [Member] | Revolving Credit Facility [Member] | Maximum [Member] | Financial Letters of Credit [Member]
Debt Instrument [Line Items]
Available credit facility for issuance			200,000,000
Credit Agreement [Member] | Term Facility [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing			$ 2,260,000,000
Term facility maturity period			7 years
Weighted average interest rate					7.70%	7.70%
Debt instrument periodic payment					$ 5,650,000
Credit Agreement [Member] | Term Facility [Member] | Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Debt instrument issued					309,000,000	$ 309,000,000
Available capacity under credit facility					1,000,000	1,000,000
Credit Agreement [Member] | Term Facility [Member] | Financial Letters of Credit
Debt Instrument [Line Items]
Debt instrument issued					$ 48,000,000	48,000,000
Credit Agreement [Member] | Senior Secured Credit Facility [Member] | Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Deposited cash collateral account to secure reimbursement obligations			$ 319,300,000
Credit Agreement [Member] | Senior Secured Credit Facility [Member] | Term Facility Letters of Credit [Member] | Maximum [Member]
Debt Instrument [Line Items]
Senior secured long-term borrowing			$ 310,000,000.0
Debt Instrument Variable Rate Administrative Agent's Prime Rate [Member] | Term Facility [Member] | Eurodollar Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin					1.00%
Debt Instrument Variable Rate Administrative Agent's Prime Rate [Member] | Term Facility [Member] | Federal Funds Rate [Member]
Debt Instrument [Line Items]
Base rate and applicable margin					0.50%
Letter of Credit Agreement [Member] | Letter of Credit Facility [Member]
Debt Instrument [Line Items]
Available credit facility for issuance					$ 14,000,000	14,000,000
Debt instrument issued					216,000,000	216,000,000
Available capacity under credit facility		$ 230,000,000
Facility expire month and year		2021-12
North Ocean Construction Financing [Member]
Debt Instrument [Line Items]
Term facility, borrowings outstanding Amount					12,000,000	12,000,000	$ 16,000,000
North Ocean Construction Financing [Member] | Secured Debt [Member] | North Ocean 105 [Member]
Debt Instrument [Line Items]
Term facility, borrowings outstanding Amount					12,000,000	12,000,000
Future maturities 2019					4,000,000	4,000,000
Future maturities 2020					$ 8,000,000	$ 8,000,000

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Debt - Summary of Future Scheduled Maturities of the Term Facility (Detail) $ in Millions	Jun. 30, 2019 USD ($)
Debt Disclosure [Abstract]
2019	$ 11
2020	23
2021	23
2022	23
2023	23
Thereafter	2,129
Total debt	$ 2,232

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Debt - Summary of Financial Covenants (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Debt Disclosure [Abstract]
Minimum fixed charge coverage ratio, actual	2.46%
Maximum total leverage ratio, actual	2.61%
Minimum liquidity, actual	$ 1,023
Minimum fixed charge coverage ratio, requirement	1.50%
Maximum total leverage ratio, requirement	4.25%
Minimum liquidity, requirement	$ 200

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Debt - Summary of Redemption Prices Expressed as Percentage (Detail) - Senior Notes [Member]	6 Months Ended
	Jun. 30, 2019
2021 [Member]
Debt Instrument Redemption [Line Items]
Optional redemption price expressed as percentage	105.313%
2022 [Member]
Debt Instrument Redemption [Line Items]
Optional redemption price expressed as percentage	102.656%
2023 and thereafter [Member]
Debt Instrument Redemption [Line Items]
Optional redemption price expressed as percentage	100.00%

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Debt - Schedule of Uncommitted Bilateral Credit Facilities and Surety Bond Arrangements (Detail) - Uncommitted Bilateral Letter of Credit Facilities and Surety Bond Arrangements [Member] - USD ($)		Jun. 30, 2019	Dec. 31, 2018
Bank Guarantee and Bilateral Letter of Credit [Member]
Debt Instrument [Line Items]
Available capacity under current credit agreement	[1]	$ 1,627,000,000	$ 1,669,000,000
Letters of credit utilized	[1]	1,062,000,000	1,060,000,000
Surety Bonds [Member]
Debt Instrument [Line Items]
Available capacity under current credit agreement	[2]	829,000,000	842,000,000
Letters of credit utilized	[2]	$ 567,000,000	$ 475,000,000

[1] ^{Approximately $175 million of this capacity is available only upon provision of an equivalent amount of cash collateral.}

[2] ^{Excludes approximately $346 million of surety bonds maintained on behalf of CB&I’s former Capital Services Operations, which were sold to CSVC Acquisition Corp (“CSVC”) in June 2017. We also continue to maintain guarantees on behalf of CB&I’s former Capital Services Operations business in support of approximately $29 million of RPOs. We are entitled to an indemnity from CSVC for both the surety bonds and guarantees.}

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Debt - Schedule of Uncommitted Bilateral Credit Facilities and Surety Bond Arrangements (Parenthetical) (Detail) $ in Millions	Jun. 30, 2019 USD ($)
Bank Guarantee and Bilateral Letter of Credit [Member]
Debt Instrument [Line Items]
Capacity available upon provision of cash collateral	$ 175
Surety Bonds [Member]
Debt Instrument [Line Items]
Debt instrument, collateral amount	346
Bank Guarantee [Member]
Debt Instrument [Line Items]
Debt instrument, collateral amount	$ 29

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Lease Obligations - Summary of Leased Assets and Lease Liability Obligations (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018
Leases [Abstract]
Operating lease assets		$ 383
Finance lease assets	[1]	$ 67	$ 70
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible List]		us-gaap:PropertyPlantAndEquipmentNet	us-gaap:PropertyPlantAndEquipmentNet
Total leased assets		$ 450	$ 70
Operating liabilities, Current		88
Finance liabilities, Current		8	8
Lease liabilities, Current		96	8
Operating liabilities, Noncurrent		316
Finance liabilities, Noncurrent		63	66
Lease liabilities, Noncurrent		379	66
Total lease liabilities		$ 475	$ 74

[1]   (1) Our finance leases are represented by:   (a) A jack-up barge utilized in our MENA region; and   (b) The Amazon, a pipelay and construction vessel, was purchased by us in February 2017, sold to an unrelated third party (the “Amazon Owner”) and leased back under a long-term bareboat charter that gave us the right to use the vessel and was recorded as an operating lease. On July 27, 2018, we entered into agreements (the “Amazon Modification Agreements”) providing for certain modifications to the Amazon vessel and related financing and amended bareboat charter arrangements. The total cost of the modifications, including project management and other fees and expenses, is expected to be in the range of approximately $260 million to $290 million. The Amazon Owner is expected to fund the cost of the modifications primarily through an export credit-backed senior loan provided by a group of lenders, supplemented by expected direct capital expenditures by us of approximately $58 million over the course of the modifications. The amended bareboat charter arrangement is accounted for as a finance lease, recognizing Property, plant and equipment and Lease obligation for the present value of future minimum lease payments. The cost of modifications will be recorded in Property, plant and equipment with a corresponding liability for direct capital expenditures not incurred by us. The finance lease obligation will increase upon completion of the modifications and funding by the Amazon Owner. As of June 30, 2019, Property, plant and equipment, net included a $50 million asset (net of accumulated amortization of $6 million) and a finance lease liability of approximately $50 million. As of December 31, 2018, Property, plant and equipment, net included a $52 million asset (net of accumulated amortization of $3 million) and a finance lease liability of approximately $53 million.

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Lease Obligations - Summary of Leased Assets and Lease Liability Obligations (Parenthetical) (Detail) - USD ($) $ in Millions	Jul. 27, 2018	Jun. 30, 2019	Dec. 31, 2018
Lessee Lease Description [Line Items]
Finance lease liability		$ 71
Amazon Pipe-lay and Construction Vessel [Member]
Lessee Lease Description [Line Items]
Capital expenditure expected	$ 58
Property, plant and equipment, net		50	$ 52
Accumulated amortization,net		6	3
Finance lease liability		$ 50	$ 53
Amazon Pipe-lay and Construction Vessel [Member] | Minimum [Member]
Lessee Lease Description [Line Items]
Cost of modification including project management and other fees and expenses	260
Amazon Pipe-lay and Construction Vessel [Member] | Maximum [Member]
Lessee Lease Description [Line Items]
Cost of modification including project management and other fees and expenses	$ 290

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Lease Obligations - Schedule of Lease Cost (Detail) - USD ($) $ in Millions		3 Months Ended	6 Months Ended
		Jun. 30, 2019	Jun. 30, 2019
Finance lease cost
Net lease cost		$ 35	$ 78
SG&A Expenses [Member]
Lessee Lease Description [Line Items]
Operating lease cost	[1]	21	42
Cost of operations [Member]
Lessee Lease Description [Line Items]
Operating lease cost	[1]	11	30
Finance lease cost
Amortization of leased assets		1	3
Net Interest Expense [Member]
Finance lease cost
Interest on lease liabilities		$ 2	$ 3

[1] Includes short-term leases and immaterial variable lease costs.

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Lease Obligations - Schedule of Future Minimum Lease Payments for Operating and Finance Lease Obligations (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Operating leases
2019	$ 46
2020	86
2021	77
2022	69
2023	58
After 2023	322
Total lease payments	658
Less: Interest	(254)
Present value of lease liabilities	404
Finance leases
2019	6
2020	12
2021	11
2022	11
2023	11
After 2023	46
Total lease payments	97
Less: Interest	(26)
Present value of lease liabilities	71
Operating and financing leases
2019	52
2020	98
2021	88
2022	80
2023	69
After 2023	368
Total lease payments	755
Less: Interest	(280)
Present value of lease liabilities	$ 475	$ 74

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Lease Obligations - Schedule of Lease Term and Discount Rates for Operating and Finance Lease Obligations (Detail)	Jun. 30, 2019
Weighted-average remaining lease term (years)
Operating leases	7 years 2 months 12 days
Finance leases	8 years 7 months 6 days
Weighted-average discount rate
Operating leases	9.50%
Finance leases	8.90%

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Lease Obligations - Schedule of Supplemental Information for Operating and Finance Lease Obligations (Detail) $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ (58)
Financing cash flows from finance leases	(4)
Leased assets obtained in exchange for new operating lease liabilities	$ 383

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Pension and Post-retirement Benefits - Schedule of Contribution Information for Our Non-U.S. Defined Benefit Pension Plans And Other Postretirement Plans (Detail) - Pension Plans [Member] - Non-U. S. Pension Plans [Member] $ in Millions	6 Months Ended
	Jun. 30, 2019 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Contributions made through June 30, 2019	$ 8
Contributions expected for the remainder of 2019	5
Total contributions expected for 2019	$ 13

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Pension and Post-retirement Benefits - Net Periodic Benefit Cost (Income) (Detail) - Pension Plans [Member] - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
U.S. Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Interest cost		$ 5	$ 5	$ 9	$ 9
Expected return on plan assets		(4)	(5)	(9)	(9)
Net periodic benefit cost	[1]	1
Non-U. S. Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Service cost		3	2	5	2
Interest cost		5	3	9	3
Expected return on plan assets		(6)	(4)	(12)	(4)
Net periodic benefit cost	[1]	$ 2	$ 1	$ 2	$ 1

[1] ^{The components of net periodic benefit cost (income) other than the service cost component are included in Other non-operating (income) expense, net in our Statements of Operations. The service cost component is included in Cost of operations and SG&A, in our Statements of Operations, along with other compensation costs rendered by the participating employees}

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Accrued Liablities - Summary of Accrued Liabilities (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018
Accrued Liabilities Current [Abstract]
Accrued contract costs		$ 705	$ 796
Advances from equity method and proportionally consolidated joint ventures and consortiums	[1]	134	148
Income taxes payable			69
Other accrued liabilities	[2]	628	551
Accrued liabilities		$ 1,467	$ 1,564

[1] Represents advances from the joint ventures and consortiums in which we participate. See Note 10, Joint Venture and Consortium Arrangements, for further discussion

[2] ^{Represents various accruals that are each individually less than 5% of total current liabilities.}

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Accrued Liabilities - Summary of Accrued Liabilities (Parenthetical) (Detail)	Jun. 30, 2019
Maximum [Member]
Accrued Liabilities Current [Line Items]
Percentage of total current liabilities	5.00%

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Fair Value Measurements - Schedule of Financial Instruments Measured at Fair Value on Recurring and Nonrecurring Basis (Detail) - USD ($) $ in Millions		Jun. 30, 2019	Dec. 31, 2018
Carrying Amount [Member]
Measured at fair value on recurring basis
Forward contracts, liability	[1]	$ (77)	$ (39)
Not measured at fair value on recurring basis
Debt and capital lease obligations	[2]	3,647	(3,633)
Fair value [Member]
Measured at fair value on recurring basis
Forward contracts, liability	[1]	(77)	(39)
Not measured at fair value on recurring basis
Debt and capital lease obligations	[2]	3,532	(3,287)
Level 2 [Member]
Measured at fair value on recurring basis
Forward contracts, liability	[1]	(77)	(39)
Not measured at fair value on recurring basis
Debt and capital lease obligations	[2]	3,415	(3,197)
Level 3 [Member]
Not measured at fair value on recurring basis
Debt and capital lease obligations	[2]	$ 117	$ (90)

[1] 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 forward contracts. This approach discounts future cash flows based on current market expectations and credit risk.

[2] Our debt instruments are generally valued using a market approach based on quoted prices for similar instruments traded in active markets and are classified as Level 2 within the fair value hierarchy. Quoted prices were not available for the NO 105 construction financing, vendor equipment financing or capital leases. Therefore, these instruments were valued 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 and are classified as Level 3 within the fair value hierarchy

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Derivative Financial Instruments - Additional Information (Detail) - USD ($)	6 Months Ended
	Jun. 30, 2019	May 08, 2018
Interest Rate Swap [Member]
Derivative [Line Items]
Unrealized net gain (loss) on derivative financial instruments	$ (71,000,000)
Net deferred losses expected to be reclassified from AOCI over next 12 months	(18,000,000)
Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Notional value of outstanding derivative contracts		$ 1,940,000,000
Fair value of swap arrangement in net liability position	71,000,000
Term Facility [Member] | Interest Rate Swap [Member] | Designated as Hedging Instrument [Member] | Cash Flow Hedging [Member]
Derivative [Line Items]
Notional value of outstanding derivative contracts		$ 1,940,000,000
Foreign Exchange Rate [Member]
Derivative [Line Items]
Notional value of outstanding derivative contracts	$ 700,000,000
Derivative contracts, maturity date	Aug. 31, 2022
Fair value of derivative contracts	$ 6,000,000
Unrealized net gain (loss) on derivative financial instruments	(9,000,000)
Net deferred losses expected to be reclassified from AOCI over next 12 months	$ (3,000,000)

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Derivative Financial Instruments - Schedule of Fair Value by Underlying Risk and Balance Sheet Classification (Detail) - Cash Flow Hedging [Member] - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Designated as Hedging Instrument [Member]
Derivatives Fair Value [Line Items]
Total derivatives asset	$ 6	$ 3
Total derivatives liability	83	42
Designated as Hedging Instrument [Member] | Accrued Liabilities [Member]
Derivatives Fair Value [Line Items]
Total derivatives liability	27	10
Derivatives not Designated as Hedges [Member]
Derivatives Fair Value [Line Items]
Total derivatives asset	1	3
Total derivatives liability	1	3
Derivatives not Designated as Hedges [Member] | Accrued Liabilities [Member]
Derivatives Fair Value [Line Items]
Total derivatives liability		3
Other Current Assets [Member] | Designated as Hedging Instrument [Member]
Derivatives Fair Value [Line Items]
Total derivatives asset	5	3
Other Current Assets [Member] | Derivatives not Designated as Hedges [Member]
Derivatives Fair Value [Line Items]
Total derivatives asset	1	3
Other Non-current Assets [Member] | Designated as Hedging Instrument [Member]
Derivatives Fair Value [Line Items]
Total derivatives asset	1
Other Non-current Liabilities [Member] | Designated as Hedging Instrument [Member]
Derivatives Fair Value [Line Items]
Total derivatives liability	56	$ 32
Other Non-current Liabilities [Member] | Derivatives not Designated as Hedges [Member]
Derivatives Fair Value [Line Items]
Total derivatives liability	$ 1

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Derivative Financial Instruments - Schedule of Total Value by Underlying Risk Recognized in Other Comprehensive Income and Reclassified from AOCI to Statement of Operations (Detail) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative Instruments Gain Loss [Line Items]
Amount of gain (loss) recognized in other comprehensive income (loss)		$ (16)	$ (58)	$ (23)	$ (1)
Revenues	[1]	2,137		1,735		$ 4,348	$ 2,343
Cost of operations		1,949		1,486		3,967	1,962
Interest expense, net		(100)		(72)		(192)	(83)
Designated as Hedging Instrument [Member] | Foreign Exchange Hedges [Member]
Derivative Instruments Gain Loss [Line Items]
Amount of gain (loss) recognized in other comprehensive income (loss)		3		(5)		(4)	(5)
Revenues		(4)				(5)
Cost of operations		2				1
Designated as Hedging Instrument [Member] | Interest Rate Hedges [Member]
Derivative Instruments Gain Loss [Line Items]
Amount of gain (loss) recognized in other comprehensive income (loss)		(28)		(10)		(43)	(10)
Interest expense, net		(2)				(3)
Derivatives not Designated as Hedges [Member] | Foreign Exchange Hedges [Member]
Derivative Instruments Gain Loss [Line Items]
Revenues		$ 1				$ 2
Cost of operations				$ (10)			$ (10)

[1] Intercompany amounts have been eliminated in consolidation.

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Disclosure [Abstract]
Income tax benefit	$ (49)	$ (84)	$ (70)	$ (63)
Effective income tax rate	30.00%	215.00%	29.00%	394.00%
Nondeductible expenses	$ 19
Settlement of a client claim			$ 18
Favorable court ruling on tax matters			19
Nondeductible, state tax and other expenses			12
Unrecognized tax benefits decreased			$ 19

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Stockholders' Equity and Equity-Based Incentive Plans - Changes in the Number of Shares Outstanding and Treasury Shares Held by the Company (Detail) - shares shares in Millions	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Shares Outstanding [Abstract]
Beginning balance	181	95
Common stock issued	2	2
Shares issued in the Combination (Note 3, Business Combination)		85
Purchase of common stock	(1)	(1)
Ending balance	182	181
Shares Held as Treasury Shares [Abstract]
Beginning balance	3	3
Purchase of common stock	1	1
Retirement of common stock	(1)	(1)
Ending balance	3	3
Common stock, shares issued	185	183	183

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Stockholders' Equity and Equity-Based Incentive Plans - Additional Information (Detail) shares in Millions, $ in Millions		1 Months Ended	3 Months Ended		6 Months Ended		12 Months Ended
	May 10, 2018 USD ($) shares	Jan. 31, 2019 USD ($) Installment	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($)	Jun. 30, 2019 USD ($)	Jun. 30, 2018 USD ($) shares	Dec. 31, 2002 USD ($)
Accumulated Other Comprehensive Income Loss [Line Items]
Business combination, number of McDermott's shares entitled for each share of CB&I owned | shares						85.0
Stock-based compensation expense			$ 3	$ 1	$ 5	$ 5
P.T. Sarana Interfab Mandiri [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Percentage of participating interest acquired in subsidiary							25.00%
Option to sell interest							$ 5
SG&A [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Stock-based compensation expense			5	9	11	$ 15
Chicago Bridge & Iron Company N.V. [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Business combination, number of McDermott's shares entitled for each share of CB&I owned | shares	84.5
Business combination, Consideration	$ 2,870
Payment during period	$ 4,565
Chicago Bridge & Iron Company N.V. [Member] | Restructuring and Integration Costs [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Stock-based compensation expense				$ 26
Chicago Bridge & Iron Company N.V. [Member] | Restricted Stock Units [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Stock-settled equity-based awards, restricted stock units, unvested | shares	2.1
Chicago Bridge & Iron Company N.V. [Member] | Restricted Stock Units [Member] | Minimum [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Stock-settled equity-based awards, restricted stock units, vesting period	3 years
Chicago Bridge & Iron Company N.V. [Member] | Restricted Stock Units [Member] | Maximum [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Stock-settled equity-based awards, restricted stock units, vesting period	4 years
Chicago Bridge & Iron Company N.V. [Member] | Stock Options [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Stock-settled equity-based awards, stock options, unvested | shares	0.1
PT McDermott Indonesia [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Business combination, Consideration		$ 29
Number of installments payable | Installment		3
Payment during period					5
Remaining liability			$ 24		$ 24

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Stockholders' Equity and Equity-Based Incentive Plans - Components of Accumulated Other Comprehensive Income (Loss) included in Stockholders' Equity (Detail) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Stockholders Equity Note [Abstract]
Foreign currency translation adjustments ("CTA")	$ (107)	$ (73)
Net unrealized loss on derivative financial instruments	(80)	(40)
Defined benefit pension and other postretirement plans	6	6
Accumulated other comprehensive loss	$ (181)	$ (107)

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Stockholders' Equity and Equity-Based Incentive Plans - Components of Accumulated Other Comprehensive Income (Loss) Reclassified (Detail) - USD ($) $ in Millions		3 Months Ended				6 Months Ended
		Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		$ 675	$ 823	$ 1,838	$ 1,789	$ 823	$ 1,789
Net current period other comprehensive income		(16)	(58)	(23)	(1)
Ending Balance		537	675	3,566	1,838	537	3,566
Foreign Currency Translation Adjustments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance			(73)		(49)	(73)	(49)
Other comprehensive income before reclassification						(34)	(12)
Net current period other comprehensive income						(34)	(12)
Ending Balance		(107)		(61)		(107)	(61)
Net Unrealized Loss on Derivative Financial Instruments [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance	[1]		(40)		(2)	(40)	(2)
Other comprehensive income before reclassification	[1]					(47)	(15)
Amounts reclassified from AOCI	[1],[2]					7	3
Net current period other comprehensive income	[1]					(40)	(12)
Ending Balance	[1]	(80)		(14)		(80)	(14)
Defined Benefit Pension and Other Postretirement Plans [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance			6			6
Ending Balance		6				6
Accumulated Other Comprehensive Income (Loss) [Member]
Accumulated Other Comprehensive Income Loss [Line Items]
Beginning Balance		(165)	(107)	(52)	(51)	(107)	(51)
Other comprehensive income before reclassification						(81)	(27)
Amounts reclassified from AOCI	[2]					7	3
Net current period other comprehensive income		(16)	(58)	(23)	(1)	(74)	(24)
Ending Balance		$ (181)	$ (165)	$ (75)	$ (52)	$ (181)	$ (75)

[1] Refer to Note 17, Derivative Financial Instruments, for additional details.

[2] Amounts are net of tax, which was not material during the six months ended June 30, 2019 and 2018.

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Redeemable Preferred Stock - Additional Information (Detail) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended	6 Months Ended			7 Months Ended	12 Months Ended
	Nov. 29, 2018	Jun. 30, 2019	Jun. 30, 2019		Jun. 30, 2018	Jun. 30, 2019	Dec. 31, 2018
Temporary Equity [Line Items]
Shares issued			2,000,000		2,000,000
Dividends paid		$ 10.0	$ 20.0	[1]
Redeemable Preferred Stock [Member]
Temporary Equity [Line Items]
Preferred stock dividend rate			12.00%
Accreted value of redeemable preferred stock		$ 1,000.00	$ 1,000.00			$ 1,000.00
Preferred stock dividend rate per quarter			3.00%
Preferred stock applicable dividend rate when prior dividend unpaid			13.00%
Temporary equity, liquidation preference per share		$ 1,200.00	$ 1,200.00			$ 1,200.00
Percentage of share purchase price for redemption in cash			101.00%
Percentage of volume weighted average price of common stock for redemption in shares			96.00%
Period of accretion adjustment to retained earnings deficit			7 years
Expected redemption date			Nov. 29, 2025
Cumulative catch-up adjustment to opening Retained earnings (Accumulated deficit)		$ 4.0	$ 8.0			$ 9.0
Redeemable preferred stock		257.0	257.0			257.0
Adjusted accretion and PIK on redeemable preferred stock			$ 20.0
Dividends paid							$ 3.0
Number of days to purchase shares of common stock at price per share less than the fair market value per share			60 days
Redeemable Preferred Stock [Member] | Prior to January 1, 2020
Temporary Equity [Line Items]
Multiple of invested capital as minimum return			1.2
Redeemable Preferred Stock [Member] | On or After January 1, 2020 But Prior to January 1, 2022
Temporary Equity [Line Items]
Multiple of invested capital as minimum return			1.25
Redeemable Preferred Stock [Member] | On or After January 1, 2022 But Prior to January 1, 2023
Temporary Equity [Line Items]
Multiple of invested capital as minimum return			1.20
Redeemable Preferred Stock [Member] | On or After January 1, 2023 But Prior to January 1, 2025
Temporary Equity [Line Items]
Multiple of invested capital as minimum return			1.15
Redeemable Preferred Stock [Member] | On or After January 1, 2025
Temporary Equity [Line Items]
Multiple of invested capital as minimum return			1.20
Private Placement [Member] | Redeemable Preferred Stock [Member]
Temporary Equity [Line Items]
Shares issued	300,000
Preferred stock dividend rate	12.00%
Preferred stock par value	$ 1.00
Proceeds from issuance of warrants, net of discount			$ 289.5
Payment of directly related issuance costs			18.0
Fair value of warrants		$ 43.0	$ 43.0			$ 43.0
Private Placement [Member] | Series A Warrants [Member]
Temporary Equity [Line Items]
Warrants to purchase common shares	6,800,000
Initial excise price per share	$ 0.01
Proceeds from issuance of warrants, net of discount	$ 289.5
Payment of directly related issuance costs	$ 18.0

[1] ^{The effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2019 due to the net loss for the periods.}

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Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	[1]	Jun. 30, 2018	[2]
Earnings Per Share [Abstract]
Net (loss) income attributable to McDermott	$ (132)	$ 47	$ (188)		$ 82
Dividends on redeemable preferred stock	(10)		(20)
Accretion of redeemable preferred stock	(4)		(8)
Net (loss) income attributable to common stockholders	$ (146)	$ 47	$ (216)		$ 82
Weighted average common stock (basic)	182	144	181		120
Effect of dilutive securities:
Weighted average common stock (diluted)	182	144	181		120
Net (loss) income per share attributable to common stockholders
Basic:	$ (0.80)	$ 0.33	$ (1.19)		$ 0.68
Diluted:	$ (0.80)	$ 0.33	$ (1.19)		$ 0.68

[1] ^{The effects of stock-based awards, warrants and redeemable preferred stock were not included in the calculation of diluted earnings per share for the three and six months ended June 30, 2019 due to the net loss for the periods.}

[2] ^{Approximately 0.5 million shares underlying outstanding stock-based awards for the three and six months ended June 30, 2018 were excluded from the computation of diluted earnings per share during the periods because the exercise price of those awards was greater than the average market price of our common stock, and the inclusion of such shares would have been antidilutive in each of those periods.}

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Earnings Per Share - Computation of Basic and Diluted Earnings Per Share (Parenthetical) (Detail) - shares shares in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Earnings Per Share [Abstract]
Antidilutive securities excluded from earnings per share computation, shares	0.5	0.5

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Commitments and Contingencies - Additional Information (Detail)			6 Months Ended	12 Months Ended
	Oct. 21, 2019 Plaintiff	Mar. 08, 2016 USD ($)	Jun. 30, 2019 USD ($) Plaintiff	Dec. 31, 2018 USD ($)	Apr. 28, 2016 USD ($)
Commitments And Contingencies Disclosure [Line Items]
Potential environmental liabilities			$ 0
Liquidated damages exposure			183,000,000
Reduction in Transaction Price [Member]
Commitments And Contingencies Disclosure [Line Items]
Liquidated damages exposure			89,000,000
Cost Reimbursable Projects [Member]
Commitments And Contingencies Disclosure [Line Items]
Loss contingency, damages amount		$ 4,500,000,000
Asserted claims against customer		$ 250,000,000
Consolidated Joint Venture Projects [Member]
Commitments And Contingencies Disclosure [Line Items]
Asserted claims against customer				$ 103,000,000
Net of amonts owned to joint venture				$ 189,000,000
Reserve for estimated project losses			55,000,000
Reserve for estimated project losses at joint venture level			$ 85,000,000
Chicago Bridge & Iron Company N.V. Sale of Nuclear Operations [Memeber] | Westinghouse Electric Company LLC [Member]
Commitments And Contingencies Disclosure [Line Items]
Estimated negative closing working capital amount					$ 976,500,000
Amount of working capital less than target working capital					2,100,000,000
Chicago Bridge & Iron Company N.V. Sale of Nuclear Operations [Memeber] | Chicago Bridge & Iron Company N.V. [Member]
Commitments And Contingencies Disclosure [Line Items]
Closing working capital amount					1,600,000,000
Amount of working capital greater than target working capital					$ 427,800,000
Mercury Litigation [Member]
Commitments And Contingencies Disclosure [Line Items]
Number of plaintiffs | Plaintiff			54
Number of plaintiffs set for the trials of the claims | Plaintiff	4
Chicago Bridge & Iron Company N.V. Securities Litigation [Member]
Commitments And Contingencies Disclosure [Line Items]
Loss contingency accrual liability amount			$ 0
Gotham Diversified Neutral Master Fund, LP, et al. v. Chicago Bridge & Iron Company N.V. et al., and Appaloosa Investment L.P., et al., v. Chicago Bridge & Iron Company N.V., et al. [Member]
Commitments And Contingencies Disclosure [Line Items]
Loss contingency accrual liability amount			0
Daniel Cohen, et al. v. Chicago Bridge & Iron Company, N.V., et al. [Member]
Commitments And Contingencies Disclosure [Line Items]
Loss contingency accrual liability amount			0
Edwards v. McDermott International, Inc., et al.. [Member]
Commitments And Contingencies Disclosure [Line Items]
Loss contingency accrual liability amount			$ 0

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Segment Reporting - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2019 Segment
Segment Reporting [Abstract]
Number of operating segments	5

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Segment Reporting - Operating Information by Segment (Detail) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
		Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Segment Reporting Information [Line Items]
Revenues	[1]	$ 2,137	$ 1,735	$ 4,348	$ 2,343
Operating (loss) income	[2]	(61)	49	(48)	113
Depreciation and amortization		61	58	137	80
Capital expenditures	[3]	15	24	33	43
Total assets		9,998		9,998		$ 9,440
NCSA [Member]
Segment Reporting Information [Line Items]
Revenues		74		96
Operating Segments [Member]
Segment Reporting Information [Line Items]
Operating (loss) income	[2]	85	206	279	348
Operating Segments [Member] | NCSA [Member]
Segment Reporting Information [Line Items]
Revenues		1,259	995	2,639	1,093
Operating (loss) income	[2]	15	49	88	51
Depreciation and amortization		14	9	31	16
Capital expenditures	[3]	2		5	2
Total assets		3,489		3,489		3,257
Operating Segments [Member] | EARC [Member]
Segment Reporting Information [Line Items]
Revenues		192	58	340	74
Operating (loss) income	[2]	4	(8)	11	(11)
Depreciation and amortization		3	3	7	3
Capital expenditures	[3]	1		1
Total assets		1,238		1,238		1,169
Operating Segments [Member] | MENA [Member]
Segment Reporting Information [Line Items]
Revenues		399	469	779	814
Operating (loss) income	[2]	29	97	95	167
Depreciation and amortization		13	10	25	16
Capital expenditures	[3]	4	4	8	7
Total assets		1,583		1,583		1,472
Operating Segments [Member] | APAC [Member]
Segment Reporting Information [Line Items]
Revenues		133	108	288	257
Operating (loss) income	[2]	2	43	15	116
Depreciation and amortization		2	2	7	9
Capital expenditures	[3]		2	5	5
Total assets		1,200		1,200		1,147
Operating Segments [Member] | Technology [Member]
Segment Reporting Information [Line Items]
Revenues		154	105	302	105
Operating (loss) income	[2]	35	25	70	25
Depreciation and amortization		18	14	37	14
Total assets		2,726		2,726		2,752
Corporate [Member]
Segment Reporting Information [Line Items]
Operating (loss) income	[2]	(146)	(157)	(327)	(235)
Depreciation and amortization		11	20	30	22
Capital expenditures	[3]	8	$ 18	14	$ 29
Total assets	[4]	$ (238)		$ (238)		$ (357)

[1] Intercompany amounts have been eliminated in consolidation.

[2] (1)    NCSA operating results for the three and six months ended June 30, 2019 included $101 million loss on the sale of APP, discussed in Note 4, Disposition of Alloy Piping Products, LLC. Corporate operating results for the three and six months ended June 30, 2019 included:   • $20 million and $89 million of restructuring and integration costs, respectively; and   • $11 million and $15 million of transaction costs, respectively. Corporate operating results for the six months ended June 30, 2018 included:   • $63 million and $75 million of restructuring and integration costs, respectively; and   • $37 million and $40 million of transaction costs, respectively. See Note 11, Restructuring and Integration Costs and Transaction Costs, for further discussion.

[3] Capital expenditures reported represent cash purchases. At June 30, 2019 and 2018, we had approximately $47 million and $14 million, respectively, of accrued and unpaid capital expenditures reported in property, plant and equipment and accrued liabilities.

[4] Corporate assets at June 30, 2019 and December 31, 2018 include negative cash balances associated with our international cash pooling program.

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Segment Reporting - Operating Information by Segment (Parenthetical) (Detail) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Jun. 27, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Segment Reporting Information [Line Items]
Loss on the sale of APP		$ (102)	$ (1)	$ (103)	$ (1)
Restructuring and integration costs		20	63	89	75
Transaction costs		11	37	15	40
Accrued and unpaid capital expenditures reported in property, plant and equipment and accrued liabilities		47	$ 14	47	$ 14
Alloy Piping Products [Member]
Segment Reporting Information [Line Items]
Loss on the sale of APP	$ (101)
Operating Segments [Member] | NCSA [Member] | Alloy Piping Products [Member]
Segment Reporting Information [Line Items]
Loss on the sale of APP		$ (101)		$ (101)