Cameron International Corporation (CAM)

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Cameron International (CAM)

Q2 2011 Earnings Call

July 28, 2011 9:30 am ET

Executives

Jack Moore - Chairman of the Board, Chief Executive Officer, President and Director

John Carne - Chief Operating Officer, Executive Vice President and President of Drilling & Production Systems

Charles Sledge - Chief Financial Officer and Senior Vice President

Jeffrey Altamari - Vice President of Investor Relations

Analysts

Collin Gerry - Raymond James & Associates, Inc.

Kurt Hallead - RBC Capital Markets, LLC

William Herbert - Simmons & Company International

William Sanchez - Howard Weil Incorporated

Brad Handler - Crédit Suisse AG

Geoff Kieburtz - Weeden & Co., LP

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

James West - Barclays Capital

Michael LaMotte - Guggenheim Securities, LLC

Douglas Becker - BofA Merrill Lynch

Michael Urban - Deutsche Bank AG

Presentation

Operator

Greetings, ladies and gentlemen, and welcome to the Cameron Second Quarter 2011 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, Vice President, Investor Relations for Cameron. Thank you. Mr. Altamari, you may begin.

Jeffrey Altamari

Good morning, and thank you for joining us today. This morning, you'll hear from Jack Moore, Chairman and Chief Executive Officer of Cameron; and Chuck Sledge, Senior Vice President and Chief Financial Officer. We're also joined by John Carne, Executive Vice President and Chief Operating 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.

Jack Moore

Thank you, Jeff. As you've seen, Cameron reported earnings of $0.66 a share in quarter 2 excluding charges related to litigation and restructuring cost. Revenues came in at $1.7 billion for the quarter, with gains being realized in all 3 of our operating segments versus Q1 of 2011 and Q2 of 2010. Net income for the quarter was $148 million, and I think more impressively, Cameron had an exceptional quarter for bookings with a total of $2.4 billion in orders, up $1 billion versus last year in our second-largest quarter ever. All 3 operating segments realized the sequential quarter and year-over-year gains in bookings. Orders for the year stand at just under $4 billion, and our backlog now exceeds $5.5 billion. Obviously, we cannot predict the timing of major project awards, but given our first half performance, 2011 is on pace to be a record bookings year for Cameron. Our bookings results reflect the breadth of our product diversity. Cameron serves 9 market segments in the oil and gas equipment services space, both onshore and offshore, as well as upstream and downstream. The ability to touch our customers across these multiple segments has created numerous opportunities to leverage our products and services to offer broader solutions than in the past.

The emergence of the shales was a perfect example. Historically, we focused on the well-hidden tree sales, but now we market a system that brings our frac, our critical service valves, our Measurement, our Process and our Compression businesses into the mix. And likewise, in Deepwater, we now put target projects for more than just traditional subsea trees, controls and manifold systems. We now have a full suite of valves, connectors, chokes and process equipment that give us multiple bites at the apple.

The Husky Liwan project is a great example of where we recently pulled through our MEG reclamation processing unit, along with a number of critical service valves to complement our award of the traditional subsea hardware. Our ability to support these solutions is a result of acquisitions such as NATCO, Eagle, and more recently, Vescon and TS-Technologies. Couple this with our own internal product development actions within each of the business units, we're now better aligned to leverage the Cameron enterprise.

Our order mix also reflects the benefits we were seeing from our geographic expansion in markets such as the Caspian, Brazil, Iraq and China, and serve both onshore and offshore markets. Plus we continue to invest in additional capacities to support the growing demand for our global aftermarket services that reached record levels of bookings in Q2.

Now let me add a little more granularity to our orders in the quarter. Our DPS operating segment had total bookings in excess of $1.4 billion, up 76% sequentially versus Q1. Our Drilling Systems business unit had a record quarter with over $780 million in total orders. We booked 9 deepwater stacks, 7 of which included our LoadKing riser system and 5 jack-up stacks. To put this quarter in perspective, our bookings totaled $750 million in all of 2010. Total Drilling Systems bookings for the year exceed $1 billion and our Drilling Systems backlog now stands at over $1 billion. These levels of orders says a lot about the confidence and trust our customers place in Cameron to build, deliver and support their future needs.

Our drilling aftermarket services bookings totaled $190 million in Q2 and have surpassed the $300 million mark year-to-date. As mentioned in our release, we have and will continue to invest heavily into CapEx to add capacity to our global drilling aftermarket support infrastructure to sustain our commitment to this business. We also saw healthy bookings from onshore customers in both the U.S. and international markets for both new equipment and upgrades to existing fleets. Overall, quote activity for both onshore and offshore equipment remains very high, including numerous inquiries for our 20,000 psi BOP system.

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