FMC Technologies Management Discusses Q2 2012 Results - Earnings Call Transcript

U.S. rig counts are essentially unchanged sequentially and remain at levels that provide some confidence in the sustainability of the repair and replacement portion of our fluid control business and our surface wellhead business in North America.

Looking at the Subsea results, revenue for the quarter in Subsea Technologies increased 18% over the prior year quarter and 6% sequentially.

For the year, we continue to expect to generate approximately $4 billion in Subsea revenue. Subsea margins increased in the quarter as project execution improved.

The Laggan-Tormore project in the North Sea reached a critical milestone when the Subsea manifolds were delivered in May, as required by the customer. This project is now near completion.

Subsea Technologies inbounded $878 million of orders in the quarter, which included 17 subsea trees. Our backlog now stands at $4.3 billion.

Following the end of the quarter, we received a $200 million award for Statoil's Gullfaks South field development in the North Sea. The project includes 7 subsea production trees and 2 manifolds. This development has potential extensions for an additional estimated 30 subsea trees, with the possible additional value exceeding $600 million.

In addition to Statoil, conversations with our frame agreement customers remain very positive, and are focused on their large multi-year portfolios of offshore assets and how to best develop these projects.

With $55 to $60 per barrel, appearing to be the level many operators are using to justify these deepwater developments, and access to international reserves for most international oil companies, continuing to be largely limited to deepwater basins, we remain optimistic on the prospects for the subsea market over the coming years.

When we look at the subsea market regionally, both Africa and the Gulf of Mexico activity will be substantial, and many of our frame agreement partners have major developments in these areas.

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