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Cameron International Corp.

Wed, 18 Mar 2009|


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Thanks a lot -- It's always good to come up and speak to our customers a little bit about Cameron. I got mine at 25 year award last week there was a kind of a milestone and obviously it Cameron. And it occurred to me that when I started with Cameron. You got a golden stainless steel Rolex. As -- 25 year award. Last week I got a very nice set of kitchen -- But -- you know it just doesn't seem to matter that much anymore right -- saw it wasn't too bad. Let me say that in accordance with safe harbor provisions of the security laws please note that some of the remarks today it may be forward looking in nature and as such are subject -- factors. Not under my control our our control certainly not -- I have to say it was a very very impressive discussions we've had over these couple of days you know I I feel if more shareholders were attending this meeting. You know -- -- a recent read in the newspaper that they would appreciate. Excellent value. They do you guys have built over 2000 and I coming here last year and then have -- real good energy prices last year. Have -- have -- this year have ever really made some impressive improvements. So what it is good to see those impressive results. So Cameron. More than 161000 people worldwide. Facilities in seven -- country's. Growing organically and through acquisitions. Focused on converting. Record backlog to revenues and earnings. And leaders in marketshare and technology. My discussion today is about creating value for investors after all this is an investor conference. Employees and also our customers you guys. First let's talk about some Cameron specific issues in the current market environment. You know we ended our third quarter with one point four billion in cash which exceeded our outstanding debt the financial flexibility. Positions us well. To take advantage of opportunities as they come up it's always good to have a lot of dry powder in your war chest. -- -- into this kind of environment. Our backlog is at a record six point two billion at the end of the quarter. Or quarter three. Of this a total of four point three billion is targeted for deep water sub -- development. You know Cameron booked its largest project ever in the third quarter. It was for BP Angola. 850 million dollars. It is the first of four identified projects. Under a frame agreement for Angola. All of our backlog represents firm contracts with our customers. And we are protected by agreed cancellation provisions in our projected. In our project related backlog and that means -- cash ahead on that backlog so. I cannot imagine a better position to be yen in terms of our balance sheet. And you know -- order book going into this period of uncertainty. Now some of the market issues tonight. I thank you guys have address these very well over the last few days some are gonna get -- toot toot too much -- become commodity price impact. And spending plans that boils down to the commodity price and how long it's gonna say is this of the RU shaped downturn. You guys are familiar with that access to financing obviously that's what we're here to talk about. Number three suppliers with credit issues. Who will some of our customers ask for credit and what will we say when they do. Well I think this needs -- handle on a case by case basis we're very comfortable with this you've got a customer with -- management team. And a good portfolio of acreage. You know it just makes sense because of course Cameron would realize the sale. And we would build long term customer loyalty so so we're comfortable having those discussions. The year over year trend in raw material costs you know it is is still up even considering any recent corrections. And you know our quest to improve our supply chain continues. What's important is that we're not making low cross country initiatives. To places that you know might. Sacrifice equality so I'm gonna talk about that a little further -- and in a few minutes an amendment any deal flow is obviously slowing down. I think it's gonna improve I hope it's gonna improve -- sellers and buyers you know come and alignment on their sense of value. For sure. For North America we see supply outpacing demand short term but if there's a cold winner. You know production -- -- decline rates will drive early recovery and I guess that's what we're all hoping for. Now let's get them down -- some specifics about Cameron this is our our current portfolio of operating businesses. If you see those red bets on the left. That's in the upstream if you look here at the bottom. You can see I don't think this is working. -- -- You can see along the bottom upstream and downstream businesses. And the classic kind of Cameron. That came up through the forties and fifties and that you guys are familiar with are probably the drilling surface and sub -- portions that's what we split -- In -- different divisions about 23 years ago. And then in the middle we have separation. Compression. And going over towards the right. We have a quarter turn businesses where our ball valves and -- transmission -- valves are. How about company revenue overall. It looks like first nine months through. 2008. Are already exceeding our record level. Of orders from 2007. So the order look at as I -- in the back courts are strong. Okay where do we do business this interest and slide it used to be in 2002. About -- half. With the rest of the world. Versus. North America. -- concede that skinny down to about 36%. Of our business that's the business on the surface systems -- -- responsible for. But he can also notice the size of the far -- has increased quite a bit. Per -- one point five to four point six. Billion. Okay uses a funds. This is just talking about our share repurchases acquisitions and capex. We made a record investment and 2007. And we're on track to exceed this in 2008. We should end the year with about 260 million. In capex. And for 09 obviously were not through planning where -- Planning process of our budget which is -- always it tough time right now especially with kind of the current environment so this is our record of investing in our own business. So let's get down to the surface systems part of this is this -- -- part -- you can see. For the nine months of 2000 -- -- we're tracking well to to exceed 2007. As far as sales and and orders. And also our market share I just wanted to talk about market -- just briefly. You see a lot of you know manufacturers and service companies thrown around market shares are our market share we have a special system. That uses. Data from wells permitted in North America to validate it from outside. So -- pretty feel pretty good that we're still growing market share. But it seems like it's going to be tough amendment and the next year to keep that up so. That's going to be a challenge. So the second section I wanted to talk about is creating value for our employees. And this kind of a fun section. It just talks about our leadership programs. We have a leadership program that takes people off line for a couple of weeks takes him down -- -- -- school at Rice University. It's a great program they just got some great people down their rights and -- -- program for us and we run that once or twice a year. We also have quarterly management development programs for our people anybody that's getting some new direct reports. With all of a short service employees we have that are coming and you know and help -- them. We also have engineering manufacturing and sales management programs I I did get to talk to a bunch of new graduates last week. You know the demographics are changing in our industry and those programs will continue here -- Cameron. We also have six sigma it's also a good thing to bring some of those new. New people into so they can you know use statistical tools to solve some of -- problem in our. And our business and -- and that in our manufacturing. I just wanted to talk briefly about Cameron DNA this is another you know program. For our employees. And it was founded by some of our recent college graduates about five years ago. And encourages. All our new employees of of all ages to take part in a monthly rotation of activities. DNA is the development and networking association. So they do stock community outreach. They do professional development and also networking. And it's -- great it's a great program they came up with -- themselves that wasn't our idea as management. And it's very it's very busy in fact were supposed to go on Saturday and build a new playground for the -- on north main. So that state they -- for 150 people -- gonna get about sixty out there to help them with that playground construction. So -- so -- really good program. So finally -- creating value for for you guys I'm gonna talk about Cameron targeted service and technologies. For independence active in oil and gas markets in North America. So this is my slide coming to a gas played near you. There's -- some of our new facilities in North America such -- -- Arkansas. We have one and -- not North Dakota. This picture was taken just last week. Don't don't you think some of those new graduates are gonna look forward to going up there in line. So there in the -- which we still consider very very new you know it's old area but it. -- its upcoming. And also du bois Pennsylvania for the -- this is our facility there and your boys. And also we spent the last a couple years expanding our existing facilities this year is our facility in Rock Springs, Wyoming. -- kind of a hub of -- -- business which is just a huge business for us out there and Iraqis. This is our Grand Junction, Colorado are -- really nice town there on the western slope and we've just -- this facility about six months ago. And and finally this is our -- you talked facility that we're just moving -- to. And all of these facilities when we open -- we have a standard template for the facility design what's in the and in the facility and also we -- -- standard. Procedures and systems for -- are excessive C management system is the same countrywide. And we -- to it. And make sure that people are aligned with your -- -- expectations. So this is justice shale resource map and obviously you guys seen this map a lot of petitioners. -- you that we are where you guys are. You know one thing we like to say of course is that -- -- Cameron people are greatest asset. You know and it's not just equality. And the knowledge of the people that sets him apart. But but I like to thank -- that that's also our organizational design. It it puts these people and he's knowledgeable people closer to you as a customer. For instance when you place an order with Cameron chances are it'll happen from your field operations office directly. With our facility with a knowledgeable guy that understands your standard operating procedures. Understand your Reza war. You know we we like to say these people have environmental intelligence. Then that's not the green kind it's about the kind of environment they're working and and your needs so that's very that's and very important we think to make your operation a success. In fact I asked -- HR folks. And they told me that outside of Houston we have 58. Inside sales people. Working to deliver your orders -- -- North America so those are people are centralized here they're actually out in the field. So when you pass -- Cameron facility. This is what you'll see inside of -- these guys working. Okay let's just talk about some equipment. You know Cameron I'll put blocking units and our facilities this is something and usually see it viewers who -- -- a casing company. That we don't -- to have to send those pops over you know mountain range in the middle of the winner so we can put them together right there are facilities. Our customer property. If you go by a lot of competition you'll see kind of what looks like kind of a junkyard -- -- we try to avoid data Cameron. RCP is well capped its on computerized system. And we realize it's waste in the supply chain. So this is stuff we've got to get back on your wells and it's our first priority to get it on your wells rather than selling new equipment. For sure. The pressure test bunkers this is just a little bit more about H a C. And they've been designed especially for the pressures and the different and I incidents that -- occur inside these pressure test bunkers and their standard all over the United States. And also -- tree in -- assets you'll see those that are at our facilities. How does this all come together and I just want to talk about you know the piceance basin for instance this is just -- so many different bases. -- -- basins Cameron has a right people and first rate facilities closed your operations. You know in this environmentally sensitive area what happens is for environmental reasons -- they bring the wells together on a single pad. -- -- -- -- Four to six directional wells per location. Using sim -- to drill -- complete. And produce all of the same time so you need total reliability. In terms of service and deliver ability. And that's what we're here to provide so you see here's here's a so I'm not going on at their in the piceance. And I did -- -- put this little picture of one solder and it just proves that there are forests in -- -- Wyoming. And I went up there -- few weeks ago and it was it was getting pretty bad so -- I don't look forward to going there in January. -- -- let's talk a little bit out about supply chain. You know material costs are big concern going into 09 and many well -- vendors are turning to low cost countries in order to cut costs. China and several overseas countries well while China in particular has added 14100. Eight PR licensed shops in the last five years that's an increase in 600%. Of their API licensed. Shops. It's very easy for a US. Supplier. To get on the telephone and call and order generic well head equipment from overseas with little or no investment in quality. When equipment is unloaded here in the states. There is a high potential for casting defects you know -- forging other problems like this you know for instance on our first round. I know we're very interested and monitoring and also. You know harnessing this low cross country. For you guys so we did it we went out and we bought five generic gate valves from -- API shops and we put him through the testing. And of those -- none of them could -- twenty pressure cycles. And only and two -- right away instantly. So it's a very difficult thing and -- -- you know outsourcing isn't necessarily bad. But you don't want to outsource your quality. Your responsibility. To provide safe equipment. So I just wanted to talk a little bit about what Cameron's doing. You know we take a little bit more cautious approach to low cost country manufacturing. We -- acquired a large plant in Romania in 2005. And when we bought it walking around this place we saw all these old tired machines. But interview in the machinists we found a lot of bomb or. Agreed engineers we even had some master degree engineers remaining and guys running these machines. So after an aggressive. Capital investment campaign we now have a totally modern facility with excellent quality and productivity. And to build on our success. About -- and a half ago we decided to build a new critical services plant. -- between Bucharest and -- and the last day so we're just -- and installing this sixty million dollar investment. In Romania for -- -- plan and this -- to make critical services blocks for you know Europe. Also Asia and also I would imagine Samir -- trees for next year might come through this facility those large -- seven inch tire pressure stuff. So it's it's such as investing in -- future. Well Cameron guy always. Asked to talk about technology. And I'm gonna put on some -- music that I found in February -- -- it's gonna come back around here. This is typical of animations that we used to train our personnel and also our clients. In fact -- this video in particular. Last night or the night before last won an award of excellence from the Houston business marketing association. It's specifically talking about an MBS well -- system. It's a compact unit ties will head which can be used in time savings alternatives to regular conventional well it. It's a multi bold design which reduces installation time. And improve safety by running landings and ceiling to strings without ever remove in the -- It's available and 101000 PSI applications. And it's quite it's very popular in the -- we run this on a lot of -- -- -- -- -- was uncomfortable when they -- Take the -- -- above your head but that's what happens. There's a Christmas -- going on. So we have good training. Our for our clients we can get -- in the field and show these videos right there on the Reagan is quite an effective tool. So in general I just -- -- thank you very much and sincerely for all all your support over the years for Cameron for our products and services and very good luck with your quest on. On this financing weakened and going into this tough period -- a lot of us have been there before so. We're not totally uncomfortable with it and we know we're gonna come out on the other side -- okay. So thank you very much.

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