Cameron International (
) may not be an under-the-radar firm in the oil and gas industry,
but its below-the-surface expertise has resulted in consistent
profits in recent quarters.
The movement of oil exploration into deeper waters fits right
into Cameron's strength. And with demand growing in emerging
markets, oil and gas firms are scrambling to increase
The company makes subsea, pressure control, drilling, and
compression equipment for the oil and gas industry. It operates
in three segments: Drilling and Production Systems; Valves &
Measurement and Process & Compression.
While volatility in oil prices can impact business at some oil
and gas firms, this is not the case with Cameron. "Short-term
fluctuations in oil prices do not necessarily impact companies
that provide services and equipment in deep-water environments,"
said Trey Stolz, lead oilfield services analyst at Iberia Capital
Partners. "These projects tend to be several years in length and
are less susceptible to temporary price weakness."
Growth prospects are solid for Cameron this year and next.
Full-year profit is seen rising 24% in 2013 and 30% in 2014.
"Growth will be driven by future subsea equipment awards," Stolz
Cameron reported fourth-quarter results in late January.
Profit growth accelerated for the second straight quarter, rising
23% from a year ago to $0.95 a share. Sales rose 19% to just over
$2.4 billion. Revenue at its drilling and production systems
segment rose 17% to $1.4 billion; revenue at valves and
measurement increased 22% to $560 million and revenue at process
and compression rose 35% to $475 million.
Perhaps nowhere is demand for Cameron's products and services
more apparent than in its backlog for 2012. Cameron's backlog was
a record $8.6 billion, up 43% from 2011. Average backlog from
2008-11 was $5.4 billion. Backlog is a potential indicator of
Cash flow from operations totaled $544.7 million in the
quarter, up 66% from a year ago.
Cameron is well positioned for more subsea awards. According
to a recent report by Bank of America/Merrill Lynch, Cameron is
in the running for several $100 million-plus awards over the next
15 from the likes ofBP (
) andExxon Mobil (
Subsea trees are an important part of Cameron's business. In
the same report, Bank of America/Merrill Lynch said the company
booked about 15 subsea trees in the fourth quarter, bringing the
full-year total to 92. For 2013, it expects Cameron to book 190
Used in offshore oil and gas fields, subsea trees monitor and
control the production of a subsea well. Fixed to the wellhead of
a completed well, subsea trees can also manage fluids or gas
injected into the well.
Deal flow has been busy in recent months. Earlier this month,
Cameron received a $600 million order from Petrobras for the
supply of 47 subsea trees and associated equipment for the
Pre-Salt and Post-Salt areas in offshore Brazil. Delivery will
commence in 2014.
In February, Cameron signed an agreement with ESSO Exploration
and Production Nigeria Ltd. (EEPNL), an Exxon Mobil affiliate,
for the supply of subsea production systems to the Erha North
Phase 2 development in Nigeria. Terms weren't disclosed, but
Cameron will supply five subsea production trees, two water
injection trees, three manifolds, production and topside controls
and associated equipment.
In the fourth quarter, the company record $3.4 billion in
awards, up 80% from a year ago. The awards did not include a
major partnership withSchlumberger (
) announced in November. Dubbed OneSubsea, the joint venture will
make products, systems and services for the subsea oil and gas
market. Cameron will contribute its existing subsea division to
the project and receive $600 million from Schlumberger.
"Once OneSubsea is up and running this year, (Cameron) should
be well positioned to offer an increased portfolio of products
for deep-water activity," said Stolz.
Also in November, Cameron received an order from STX Offshore
& Shipbuilding for $275 million, to supply a complete
drilling equipment package for a 12,000 foot ultradeepwater
drillship. The order is Cameron's first complete rig package for
a new-build drillship.
BP's Deep Water Horizon oil spill in 2010 was a black eye for
the industry, but new regulation and oversight could be good news
for Cameron. According to Stolz, Cameron booked 21 deep-water
blowout preventers in the fourth quarter, including eight
fromTransocean (RIG). Cameron also cited a growing relationship
withRowan Companies (RDC), a company with four new-build
drillships on order, each with dual BOPs.
Blowout preventers are used to seal, control and monitor oil
and gas wells. They were first developed to combat erratic
pressure and uncontrolled flow seen in well reservoirs during