FMC Technologies Inc. (
Q3 2010 Earnings Conference Call
October 28, 2010 9 AM ET
Rob Cherry – Director, IR
Peter Kinnear – Chairman and CEO
Bill Schumann – EVP and CFO
John Gremp – President and COO
Bob Potter – EVP, Energy Systems
Bill Sanchez – Howard Weil
Rob Mackenzie – FBR Capital Markets
Stephen Gengaro – Jefferies & Co.
Collin Gerry – Raymond James
Kurt Hallead – RBC Capital Markets
Kevin Simpson – Miller Tabak
Bill Herbert – Simmons & Co.
Brad Handler – Credit Suisse
Geoff Kieburtz – Weeden
Joe Hill – Tudor Pickering
Brian Allmar (ph) – Global Hunter
Previous Statements by FTI
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Good morning and welcome to the FMC Technologies third quarter 2010 earnings release teleconference. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. (Operator Instructions) Thank you. Your host is Rob Cherry, Director of Investor Relations. Mr. Cherry, you may begin your conference.
Thank you operator. Good morning, and welcome to FMC Technologies third quarter 2010 earnings conference call. Our news release and financial statements issued yesterday can be found on our website.
I would like to caution you with respect to any forward-looking statements made during this call. Although these forward-looking statements are based on our current views and assumptions regarding future events, future business conditions and the outlook for us based on currently available information, these forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by these statements. I refer you to our disclosures regarding risk factors in our SEC filings.
I will now turn the call over to Peter Kinnear, FMC Technologies Chairman and CEO.
Good morning. Welcome to our third quarter 2010 conference call. With me today are Bill Schumann, our CFO, John Gremp, our President and COO and Bob Potter, our Executive Vice President.
First I will share with you some highlights from the quarter. Bill will then provide you with details on our financial performance, and our outlook for the fourth quarter, and then finally, we’ll open up the call for your questions.
We had solid earnings and another quarter of strong inbound orders. Our diluted earnings per share were $0.66. The total company backlog rose 28 percent to $3.6 billion. The backlog increase was led by $1.2 billion in subsidy orders including orders for 65 subsea (freeze). The subsea book to bill ratio in the quarter was 1.9 and our subsea backlog increased for the third consecutive quarter.
Our year to date subsea inbound of $3 billion is already our second highest annual total in the company’s history. The subsea orders this quarter were a good reflection on how we developed our business through our strong customer relationships.
We received a $520 million award from (Potel) for the CLOV project in Angola. We believe our strong local presence and in-country manufacturing were key differentiators in winning this order. We have performed work for (Potel) in Angola before on a number of projects including (Jurisol), Rosa and (Passfor).
We also secured $190 million order with (Gasfrom) for the (Kiran Skoya) project offshore (Sackland) Island, our first subsea project in Russia, and we’re very pleased to add (Gasfrom) to our list of subsea customers.
In the North Seas, Statoil has placed a second fast track order with us for the (Katla) project offshore Norway. This $75 million subsea award is our second in a series of expected subsea projects from Statoil that utilized our standard subsea solution.
As a result of our strong year to date subsea order activity, we have grown our subsea backlog from $2 billion at the end of the year to $3.1 billion at the end of the third quarter. We achieved this level of order activity despite the impact from the drilling moratorium in the Gulf of Mexico.
New orders from the Gulf have significantly slowed, and our offshore customer support activity has declined, but we have had no project cancellations or suspensions in our existing subsea backlog.
The slowdown of new project orders and customer service activity in the Gulf did impact our subsea revenue and profits in the third quarter, and we expect this to continue into the fourth quarter and into 2011. We do not expect a meaningful positive impact on our subsea orders from the lifting of the Gulf of Mexico drilling moratorium until sometime next year.
Despite this, the Gulf of Mexico situation, we continue to expect our subsea orders in the fourth quarter to be strong and our backlog to grow and our surface well head business North America activity remains strong, drive by both liquid and gas shale activity.
Combined with our international activity, we recorded increases in orders, revenue and profits in surface well head compared to the second quarter of this year.
Shifting to our energy processing businesses, the ongoing strength of North America rig count and pressure pumping activity continued to drive our growth and our fluid control business. In fact, we had record fluid control revenue in the quarter and its backlog is at an all-time high.
The near term outlook for this business remains relatively positive, but is still subject to fluctuations in the rig count.
As for our other businesses, our performance has generally been in line with our expectations.
So in summary, we had record revenue and backlog in fluid control. We had solid execution in subsea along with near record orders, and we raised our full year EPS guidance.
Now let me turn the call over to Bill Schumann.
Thanks Peter. Energy production sales for the quarter were $770 million, down 17 percent from last year. The decrease was mainly driven by subsea which was impacted by a lower beginning backlog level than a year ago, the timing of new projects and the effect of the recently lifted drilling moratorium in the Gulf of Mexico.