Cameron International Corporation (CAM)

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Cameron International (CAM)

Q4 2012 Earnings Call

January 31, 2013 9:30 am ET

Executives

Jeffrey G. Altamari - Vice President of Investor Relations

Jack B. Moore - Chairman of The Board, Chief Executive Officer and President

Charles M. Sledge - Chief Financial Officer and Senior Vice President

Analysts

Robin E. Shoemaker - Citigroup Inc, Research Division

Edward Muztafago - Societe Generale Cross Asset Research

Kurt Hallead - RBC Capital Markets, LLC, Research Division

James D. Crandell - Dahlman Rose & Company, LLC, Research Division

Jeffrey Spittel - Global Hunter Securities, LLC, Research Division

Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

James C. West - Barclays Capital, Research Division

Brad Handler - Jefferies & Company, Inc., Research Division

William Sanchez - Howard Weil Incorporated, Research Division

Waqar Syed - Goldman Sachs Group Inc., Research Division

William A. Herbert - Simmons & Company International, Research Division

James Knowlton Wicklund - Crédit Suisse AG, Research Division

Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division

Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division

Presentation

Operator

Greetings, ladies and gentlemen, and welcome to the Cameron Fourth Quarter 2012 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Jeff Altamari, the Vice President of Investor Relations for Cameron. Thank you, Mr. Altamari. You may begin.

Jeffrey G. Altamari

Good morning, and welcome to the Cameron Fourth Quarter Earnings Call. Thank you for joining us today. This morning, you will hear from Jack Moore, Chairman, President and Chief Executive Officer of Cameron; and Chuck Sledge, Senior Vice President and Chief Financial Officer. Jack and Chuck will offer commentary on the results for the quarter. We will then open the line for your questions.

In accordance with the Safe Harbor provisions of the Securities Laws, we caution you that some of the statements made on this call may be forward-looking in nature and, as such, are subject to various factors not under the control of the company. For a more complete description of these factors and the related risks and uncertainties, please refer to Cameron's annual report on Form 10-K, the company's most recent Form 10-Q and the recent earnings news release.

I will now turn the meeting over to Jack.

Jack B. Moore

Thank you, Jeff. Cameron reported record earnings of $0.95 a share in the fourth quarter, excluding charges, an increase of 23% versus Q4 of 2011. Total earnings in 2012 equaled $3.13 a share, excluding charges, up 17% versus last year. We had record revenues in the fourth quarter totaling $2.4 billion and total revenues for 2012 equals $8.5 billion, an increase of 22% versus last year.

Bookings in the quarter were exceptional, coming in at a record $3.4 billion, up from $1.9 billion a year ago and up 50% sequentially. Overall bookings for the year totaled $10.9 billion, an increase of 39% versus 2011. Our backlog ended the year at $8.6 billion. Deepwater bookings were driven by our DPS segment which totaled over $2.5 billion in the quarter. This was driven by Drilling Systems business unit which realized unprecedented bookings in the quarter, totaling $1.5 billion. We also had record bookings in our Surface Systems business unit and healthy subsea bookings in Q4.

International activity and major capital projects drove our record bookings growth. Cash flows in the quarter came in north of $500 million and just shy of $700 million for the year. We also announced the creation of OneSubsea, our joint venture with Schlumberger that will develop products and systems focused on enhancing the recovery of subsea developments through the life of field management. Needless to say, we're very excited about the value this transformational new venture will create for our customers and our shareholders.

Now I'll review our business units' performance in Q4. Surface Systems had another record quarter across the board in revenues, bookings and profits. Orders for the quarter totaled $495 million, an increase of 34% versus a year ago and up 5% sequentially. This is in spite of lower levels of activity in North America. Full year bookings were just shy of $1.8 billion, up 33% versus 2011. We continue to see enormous benefit from executing on internal growth strategy, focused on the unconventional markets in North America and critical service markets globally.

Investments in people, technology and infrastructure focused on delivering higher wellhead side performance have paid off both in share gains and margin improvement. We expect these benefits to drive higher performance in 2013 and beyond.

Our Drilling Systems business unit had extraordinary bookings performance in Q4 to add to an already exceptional year. Q4 bookings finished at just over $1.5 billion and total bookings for 2012 totaled a record $3.6 billion, twice that of our record performance of $1.8 billion in 2011. There are a number of highlights to point out in the quarter.

As we previously announced, Cameron secured its first deepwater total rigs solutions package in the quarter. We also booked 21 new deepwater stacks in Q4 and sold the first ever 18-3/4" 20K deepwater containment system. Cameron booked a total of 39 deepwater stacks in all of 2012. Our major project bookings in the quarter were driven by Transocean's new generation drillships and octers [ph] packages for the Petrobras newbuild programs in Brazil. The magnitude of these newbuild orders underscores the commitment Cameron is making to its OEM aftermarket service programs around world.

Aftermarket bookings totaled $181 million in the quarter and finished with a record year totaling $738 million. While we do not expect to see a repeat of the level of bookings we witnessed in 2012, 2013 will be another active year for Drilling Systems, a broader product and service offering, coupled with continued demand for upgrades to existing fleets and a focus on expanding the next generation of deepwater floaters will provide a number of opportunities for Cameron in 2012.

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