FMC Technologies (FTI)
Q3 2011 Earnings Call
October 26, 2011 9:00 am ET
Robert L. Potter - Executive Vice President of Energy Systems
William Henry Schumann - Chief Financial Officer and Executive Vice President
Bradley Alexander -
John T. Gremp - Chief Executive Officer, President and Director
Collin Gerry - Raymond James & Associates, Inc., Research Division
Douglas L. Becker - BofA Merrill Lynch, Research Division
Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division
William A. Herbert - Simmons & Company International, Research Division
Kurt Hallead - RBC Capital Markets, LLC, Research Division
John David Anderson - JP Morgan Chase & Co, Research Division
Robert MacKenzie - FBR Capital Markets & Co., Research Division
Robin E. Shoemaker - Citigroup Inc, Research Division
William Cornelius Conroy - Pritchard Capital Partners, LLC, Research Division
Brad Handler - Crédit Suisse AG, Research Division
William Sanchez - Howard Weil Incorporated, Research Division
Previous Statements by FTI
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Good morning, and welcome to the FMC Technologies' Third Quarter 2011 Earnings Release Teleconference. [Operator Instructions] In the event of technical difficulties during this call, we will post updates at www.fmctechnologies.com/earnings. Thank you. Your host is Brad Alexander, Director of Investor Relations. Mr. Alexander, you may begin your conference.
Thank you, Jamal. Good morning, and welcome to FMC Technologies' Third Quarter 2011 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 our outlook 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 John Gremp, FMC Technologies' President and CEO.
John T. Gremp
Good morning, and welcome to our third quarter 2011 conference call. With me today are Bill Schumann, our CFO; and Bob Potter, our Executive Vice President. I'll share with you some highlights from the quarter, Bill will provide specifics on our financial performance and expectations for the remainder of the year, and then we'll open up the call for your questions. First, the results for the quarter.
Earnings were $0.50 per diluted share. We recorded $1.3 billion in orders during the third quarter, of which $731 million was for subsea systems and included 31 subsea trees. Subsea backlog now stands at $3.8 billion. For the quarter, total company revenue was $1.3 billion and subsea revenue for the quarter was $824 million. Subsea sales increased 33% over last year and 4% sequentially. While this volume was a record, it was below our expectations. Margins were also below our expectations due to both volume and execution. We continue to expect our subsea sales will reach $3.3 billion for the full year as our fourth quarter subsea revenue should approach $1 billion. This expectation is consistent with the fourth quarter typically being our strongest of the year.
Surface Wellhead revenue was up 16% from the third quarter of 2010, driven largely by North American activity. We're starting to see some of the international timing and execution issues we've experienced in prior quarters improve and believe results going forward will continue to reflect this improvement. While we won't be able to fully recover from these issues in 2011, they will possibly impact our 2012 results. Fluid Control continues to see record demand, driven by North America pressure pumping activity, as orders for both our WECO/Chiksan Flowline Products and our Well Service Pumps are at unprecedented levels. We're continuing to expand our capacity in these areas to better serve this market.
Results on our other processing businesses grew sequentially at almost the same rate as Fluid Control and margins improved. Entering the fourth quarter in 2011, we expect quarterly earnings to be between $0.46 and $0.51 as improved operational results are offset by less favorable corporate items, therefore, increasing our full year earnings guidance image of $1.70 to $1.75 per diluted share.
During the quarter, we saw increased volatility in the oil and natural gas prices. At the current price levels, however, offshore developments remain economically attractive for our customers. Subsea is a long-cycle business with the operators taking a longer-term view and therefore, remaining committed to their subsea developments. Operators are now at the stage in the tendering process, where they typically begin to announce subsea awards. Usual operator patterns give us confidence that 2012 should be a very strong year for inbound in the subsea industry. We inbounded $731 million in subsea orders during the quarter with no orders in excess of $150 million. Our year-to-date subsea inbound is now at $2.6 billion. We continue to believe we will approach $4 billion in subsea orders for the year as we inbound the remaining portion of Shell's Prelude project, along with an expected additional large award before year end.
We're starting to see improvement in our Gulf of Mexico order activity. It also appears the pace of permitting is improving. During the quarter, 15 new deepwater permits were issued or 70% of the pre-Macondo average. Large operators have proceeded with development plans in the Gulf of Mexico, and we're now seeing the independents gain more confidence as well. Deepwater recounts are also trending favorably. Approximately 20 deepwater rigs were working in the Gulf of Mexico at the end of the quarter or about 2/3 of the pre-Macondo total. I'd now like to turn to the subsea processing market and discuss the Petrobras Marlim project.