Cameron International Corporation (CAM)

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Cameron International Corporation (CAM)

Q1 2010 Earnings Conference Call

April 29, 2010 8:30 AM ET

Executives

Scott Amann – VP, IR

Jack Moore – President and CEO

Chuck Sledge – SVP and CFO

Analysts

James Crandell – Barclays

Stephen Gengaro – Jefferies & Co

Mike Urban – Deutsche Bank Securities

Marshall Adkins – Raymond James

William Herbert – Simmons & Company International

Brian Uhlmer – Pritchard Capital

Juan Chisler [ph] – Credit Suisse

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

Geoff Kieburtz – Weeden & Co

Robin Shoemaker – Citigroup

Roger Read – Natixis Bleichroeder

Presentation

Operator

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

Scott Amann

Thank you. 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 will now turn things over to Jack.

Jack Moore

Thank you, Scott. As you’ve seen by our release this morning Cameron’s Q1 results generated $0.51 a share before special items related to the NATCO integration cost, which equates about $0.03 a share. We’ve also raised our earnings guidance for 2010 to a range of 220 to 230 versus our previous guidance of 210 to 220 excluding any special items. This change reflects the impact of the shorter cycle business primarily North America that is having on our earnings leverage in 2010.

Revenues for the quarter finished at $1.347 billion, which is up 7% versus Q1 of ’09. This is primarily driven by increased shipments in our subsea business unit and the addition of NATCO, which combined offset lower sales in our Valves & Measurement group as well as our compression groups.

Bookings for the quarter came in at just over $1.2 billion which was up 23% versus Q1 of ’09. And that is without any significant projects booked in the quarter. This underscores the breadth of our product lines and our ability to participate across the broad spectrum of the oil and gas markets.

Backlog finished at just under $5 billion for the quarter and we did see the benefit of having a full quarter at NATCO in these numbers. Further to that point integration of NATCO has resulted in substantial year-over-year growth and Process Systems bookings with sequential orders up 140% as well. In addition to our product lines within Value & Measurements saw both year-over-year and sequential bookings growth.

Total bookings for V&M came in at just over $400 million, our largest quarter since Q3 of 2008. This was driven by engineered valves which benefited in the quarter with a booking of Exxon Mobil’s Barzan project in the Middle East. We expect to see a number of engineered valve projects awarded this year and Cameron is in a good position to win its fair share.

We also saw a significant turnaround in our distributive valve orders which grew by 150% versus Q1 of ’09 and 70% sequentially. We are seeing the benefit of many of our distributors restocking their inventory levels that have been worked down with a ramp up in rig activity, plus the build out of infrastructure and the shale plays both gas and oil.

Current order rates continue to run well above last year levels but we expect to see some leveling off as inventories are restocked. Our process valve business was up 20% both last year as well as sequentially. Overall I was optimistic about our valve business in 2010 on the last call and the outlook has not changed. Bookings for our Drilling Production Systems group came in at just under $700 million. We booked just under $200 million in our subsea business unit with a total of 10 trees booked for the quarter.

As we stated in the last call, we see a healthy environment for subsea orders over the course of the next 18 months, as customer enquiries and tender activity remains very active. It’s all about timing and that is something we can never control. Our surface systems bookings were up year-over-year and sequentially with all of the increase coming from our North America region.

Our share continues to pick upstream in the shale plays which is driving a big part of this increase. We also expect to see an increase in our international markets, as the rest of the year unfolds to complement our North America activity level. With recent awards in Iraq from both BP and Schlumberger for surface wellheads and trees will support this increase as well as new projects in the North Sea, the former Soviet Union.

As stated earlier in our proxy systems bookings grew by 140% in the quarter. The integration is going smooth and our teams are focused on leveraging the global footprint to support sales and service activities as well as integrating the joint technologies. One incremental growth opportunity their team are excited about is the expansion of what was formally known as NATCO’s standard and traditional product line.

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