Chicago Bridge & Iron Company N.V. (CBI)
Q2 2010 Earnings Conference Call
July 27, 2010 5:00 PM ET
Philip Asherman – President and CEO
Lasse Petterson – COO and EVP
Dan McCarthy – President of Lummus Technology
Ron Ballschmiede – CFO and EVP
Andrew Kaplowitz – Barclays Capital
Joe Ritchie – Goldman Sachs
Michael Dudas – Jefferies
Scott Levine – JPMorgan
Barry Bannister – Stifel Nicolaus
Martin Molloy – Johnson Rice & Company
Joseph Gibney – Capital One Southcoast
Avi Fisher – BMO Capital Markets
Graham Mattison – Lazard Capital Markets
John Rogers – D.A. Davidson
Brian Uhlmer – Pritchard Capital
Good afternoon, my name is Channel and I will be your conference operator today. At this time, I would like to welcome everyone to the CB&I 2010 Second Quarter Earnings Conference Call. (Operator Instructions)
Before beginning today’s call, the company would like to caution you regarding forward-looking statements. Any statements made or discussed today that do not constitute or not historical facts, particularly comments regarding the company’s future plans and expected performance are forward-looking statements that are based on assumptions the company believes are reasonable that are such into a range of uncertainties and risks that are summarized in the company’s press release and SEC filings. While forward-looking statements represent management’s best current judgment as to what may occur in the future, the actual outcome or results may differ materially from what is expressed or implied in any such statements.
Now I would like to turn the cal lover to Mr. Philip Asherman, President and CEO of CB&I.
Good afternoon, and thank you for joining us to discuss our results in the second quarter. With me today are Ron Ballschmiede, CB&Is Chief Financial Officer; Lasse Petterson, our Chief Operating Officer; and, Dan McCarthy, President of Lummus Technology. After some brief comments from management, we will open the call for your questions.
For today’s agenda, we’ll begin a summary report from Lasse, who will highlight this quarter’s results for CB&I Lummus and Steel Plate Structure business sectors, followed by Dan who will discuss the performance of Lummus Technology and provide a view of recent trends affecting our global end markets. Ron will then provide a summary of financial results, and I’ll conclude with a few brief comments before we respond to your questions.
I’ll now turn the call over to Lasse, for a discussion of our CB&I Lummus’ and Steel Plate Structure’s business sectors. Lasse?
Thank you, Phil. Good afternoon. A brief we’ll discuss some of the major projects in the backlog, which totals $6.8 billion as of June 30. The highlights of the quarter was the start of our (Liquid) production at the PERU LNG product. The first cargo was loaded and shipped in June and we have shipped two additional cargos in July. The project has been a tremendous success and the client is very pleased with the project and our performance. We are assisting the client for the first six months of operations, during this time we will complete the final flood test and performance testing.
The project was completed on time and below budget and are a lower cost per ton of product than any other recent LNG production facility, according to the owner. Our successful execution after LNG will position CB&I well for future liquefaction projects.
Let me just give you some additional information on the project. The side covers more than 4 square miles on a cliff 500 feet above the Pacific Ocean. The project is located in an active seismic zone and was build to withstand an earthquake with a magnitude of 8 on the Richter scale. The gas is coming from the Camisea field in the eastern part of Peru through a 500-mile pipeline to the flat, which has a production capacity of 4.5 million tons of LNG per year.
A workforce at the site beat that 5,600 and we provided 1 million hours of training to more than 13,000 Peruvian workers in welding, pipe fitting and other sustainable skills. The work out through that LNG was executed safely and at a very high level of productivity and quality.
At the REFICAR Refinery expansion project in Colombia, the detail engineering work is progressing as planned and construction is underway in (Capaena). To date, more than 50% of the (tide) equipment has been procured and the major reactors arrived at site last week. We are heavily recruiting craft labor and have initiated an extensive training program in preparation for hiring more than 5,000 workers at the job site, a similar exercise to that in Peru.
In Chile, final phase completion test are being conducted on the second and final tank for the Quintero LNG input project. First production began in August, 2009 and the plant has been since operating with 99.7 reliability performance. We’ve been very pleased with the success of this fast-tracked project and we are preparing to demobilize from the site later this quarter.
In the U.S., we were awarded a $280 million contract by Occidental petroleum for new gas processing plants at the Elk Hills field in California. Engineering is well under way and we plan to mobilize at the project site by the end of the year. The project is scheduled for completion in 2012.
The conventional tank building activity is continuing well in the U.S. (Engerion) pre-awarded a contract for Chevron for approximately $30 million for multi-tank projects in the Southeast of U.S. And in Canada, we have worked on the engineering and procurement for the (Curl all signs) project for the last 18 months. We continue to be a released on multiple aspects of the project and are waiting for the release.