Cameron International Corporation (CAM)

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Cameron International (CAM)

Q3 2012 Earnings Call

October 31, 2012 9:30 am ET


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


Edward Muztafago - Societe Generale Cross Asset Research

James Knowlton Wicklund - Crédit Suisse AG, Research Division

Angeline M. Sedita - UBS Investment Bank, Research Division

Jeffrey Spittel - Global Hunter Securities, LLC, Research Division

J. Marshall Adkins - Raymond James & Associates, Inc., Research Division

Douglas L. Becker - BofA Merrill Lynch, Research Division

William Sanchez - Howard Weil Incorporated, Research Division

Michael W. Urban - Deutsche Bank AG, Research Division

Kurt Hallead - RBC Capital Markets, LLC, Research Division

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

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

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

Judson E. Bailey - ISI Group Inc., Research Division



Greetings, ladies and gentlemen, and welcome to the Cameron Third 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, Vice President, Investor Relations for Cameron. Thank you. Sir, you may begin.

Jeffrey G. Altamari

Good morning, and welcome to the Cameron Third 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. First, let me say our thoughts are with all of you on this call that were impacted by Hurricane Sandy, and I wish you and your family a speedy return to normal. Cameron reported earnings of $0.91 in Q3, excluding charges of $0.01 per share. Revenues for the quarter were a record $2.2 billion, an increase of 32% versus last year. And orders came in at $2.3 billion, a 15% increase versus a year ago. Backlog finished at a record $7.6 billion, up 31% versus last year. Orders were healthy across all 3 business segments with our Drilling and Surface Systems business units leading the way. The diversity of our business segments continues to provide Cameron a healthy window of opportunity in our customers' spending cycles.

Our North America-focused businesses performed very well in spite of the headwinds of falling rig activity. We actually realized sequential growth in our Surface Systems and distributed valve businesses units in Q3, a complement to the focused efforts of our sales and service teams that are dedicated to this market. International onshore markets provided additional growth in the quarter for our Recip Compression, our Process Systems, Engineered Valves and Surface Systems business units.

Surface Systems had another record quarter with respect to bookings, revenues and profits. We saw sequential bookings growth of 10% in the quarter and a gain of 36% versus Q3 of 2011. Surface Systems also achieved record revenues for the quarter, up 23% versus Q3 of 2011. While our North American markets are experiencing downward pressure, our Surface Systems business actually grew in Q3. A great testament to the focus of our employees and the significant levels of investments we have made in the frac valve tree and manifold infrastructure over the past 2 years. With the sharp declines in the gas-driven markets, our teams have done a remarkable job of redeploying those assets to the west basins and continue to do so today.

On the international front, we had record bookings in our APME and EACR markets. These were driven by project-related activity in Saudi, Iraq, Russia and Norway. Iraq operations base has now been commissioned and provide our customers in-country with a dedicated Cameron operating service base and repair center second to none. Our Latin American operations continued to deliver solid results with operations in Venezuela and Mexico and now Brazil, realizing year-over-year improvements.

Subsea orders came in just shy of $300 million for the quarter, or 28% below last year's level. Subsea revenues totaled just under $400 million for the quarter, a 12% increase versus last year. While no projects were booked in the quarter, we expect that major projects will populate our backlog at the beginning of 2013. But we must always be mindful that the timing of project awards is never quick enough for anyone in this space. Tender activity remains very active in the subsea markets and more importantly, we are seeing more selectivity as to the number of bidders participating in these tenders.

While West Africa and Brazil will support near-term opportunities for major awards, the reemergence of the Gulf of Mexico, continued expansion in the gas monetization activities in Australia and expanding markets in East Africa and the Med will drive new projects. The backlog of major projects in Subsea yet to be awarded has caused many of equipment providers become much more selective in the projects they feel they can execute most effectively. This should provide more rational pricing to account for the cost and risk associated with the complexity of these projects.

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