Cameron International Corporation (CAM)

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Cameron International Corporation (CAM)

Q4 2009 Earnings Call

February 9, 2010 8:30 am ET


R. Scott Amann – Vice President Investor Relations

Jack B. Moore – President, Chief Executive Officer

Charles M. Sledge – Senior Vice President, Chief Financial Officer


Brian Uhlmer - Pritchard Capital Partners, LLC

Jeff Tillery - Tudor, Pickering & Holt Co., LLC

William Herbert - Simmons & Company International

Geoff Kieburtz - Weeden & Co.

Daniel Boyd - Goldman Sachs

Brad Handler - Credit Suisse

Stephen Gengaro - Jefferies & Co.

Roger Read - Natixis Bleichroeder

Joseph Gibney - Capital One Southcoast, Inc.

Kurt Hallead - RBC Capital Markets

Andrea Sharkey - Gabelli & Company

Robin Shoemaker - Citigroup

Ole Slorer - Morgan Stanley

[Badula Merze – CBT U.S. Incorporated].

Alan Laws - BMO Capital Markets

Kevin Simpson - Miller Tabak & Co.



Greetings, ladies and gentlemen, and welcome to the Cameron fourth quarter earnings conference call. (Operator Instructions) It is now my pleasure to introduce your host, Mr. Scott Amann, Vice President Investor Relations for Cameron. Thank you. You may begin.

R. Scott Amann

Thank you, Diego. Good morning and thanks to all of you for joining us today. This morning you’ll hear from Jack Moore, President and Chief Executive Officer of Cameron, and Chuck Sledge, Senior Vice President and Chief Financial Officer. Jack and Chuck will offer some commentary on the results for the quarter and we’ll then take time to field 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 associated news release.

With that, I’ll now turn things over to Jack Moore.

Jack B. Moore

Thank you, Scott. Let me first make a few comments on Cameron’s year and fourth quarter results and then share with you our outlook for 2010. Our results in 2009 were much better than we originally anticipated and this was primarily the result of great execution on our projects which resulted in very few surprises, the lack of any meaningful cancellations and focused cost controls by each of our operating divisions.

As for quarter four, earnings per share equal $0.54 before special items related to the restructuring and NATCO acquisition costs. Revenues grew in the quarter 20% sequentially, driven by subsea, process systems including NATCO and compression shipments. Backlog into the fourth quarter pretty much as we began at $5.2 billion. Bookings for Cameron finished Q4 at just under $1.4 billion, our largest bookings quarter for the year, up 17% versus Q4 of ’08 and sequential bookings growth came in our subsea, surface, engineered valves, measurement and distributed valves business units. The highlight of our bookings included the award of Chevron’s Jack St. Milo project in the Gulf of Mexico for subsea systems, valued at over $250 million. The first phase of this development will include 12 high pressure, high temperature subsea trees, controls, manifolds and connection systems.

The other highlight embedded in our Q4 booking numbers is the recovery we saw in our short cycle businesses. Surface systems, flow control, measurement and distributed valves all recorded their highest bookings quarter for the year. Fourth quarter orders in distributed valves, which is primarily dependent on North American activity, were up 50% sequentially. While not a big number overall, this is a good indicator that our customers have worked through a lot of inventory as rig activity rebounded.

Our engineered valve businesses had its highest booking quarter as well for 2009, up 20% versus Q4 of ’08. I’m also pleased to note that Cameron’s engineered valves was just awarded a $65 million contract to supply various sized valves for ExxonMobil’s Barzan project in the Middle East. We hope that this is a good indicator of a positive trend and the sanctioning of several stalled infrastructure projects as we go forward.

The single largest highlight for Cameron in Q4, however, and all of 2009 for that part, was the successful closing of the NATCO acquisition. Although it took a little longer to get across the line than we’d originally planned, all of NATCO businesses are now positioned within Cameron and the fit is impressive, particularly within our surface wellheads, valves, measurement compression and subsea groups. We also opened the industry’s only dedicated process systems R&D facility, which will support both industry and customer joint product and system development programs. Needless to say, we’re excited about the future of this new enterprise and yes, it will be accretive in 2010.

On that note, let me give you a few thoughts on the coming year. We’ll see a number of things influencing our businesses. I should qualify that our outlook by noting that while our customers are coming into 2010 much more confident about oil prices than this time last year, we do have the underlying threat of a worldwide oversupply of gas, coupled with the fragile economy. So 2010 in our view has the earmarks of a fragile recovery. First, deepwater. While many of the projects we track have continued to mature more slowly than many of us would like, we expect the 2010, 2011 timeframe to be better than the last couple of years with respect to project awards. We also expect to see a number of smaller awards, these are less than ten trees, across all of our markets. Our customers concerns with price, demand, project complexity and cost are still factors. The host government’s taxes and politics have not really changed. But our customers appear more confident that oil prices will stabilize in a range that makes these projects sustainable.

We also believe that those customers who had deferred projects over the last several years are concerned about the falling production in reserves and are anxious to move forward on projects. As we all know, deepwater projects will allow our customers to significantly impact the production volumes and Cameron has distinguished itself as a leader in this market for the past two years. We cannot predict the exact timing of the future awards, but with 30 new rigs coming into the market over the coming quarters, this will definitely facilitate the pace.

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