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Cameron International (NYSE:CAM)

Q2 2010 Earnings Call

August 04, 2010 8:30 am ET

Executives

Jack Moore - Chief Executive Officer, President and Director

R. Amann - Vice President of Investor Relations

Charles Sledge - Chief Financial Officer and Senior Vice President

Analysts

Alan Laws - BMO Capital Markets U.S.

Jeff Tillery - Tudor, Pickering & Co. Securities, Inc.

William Sanchez - Howard Weil Incorporated

Geoff Kieburtz - Weeden & Co. Research

Roger Read - Natixis Bleichroeder Inc.

Brad Handler - Crédit Suisse AG

Kurt Hallead - RBC Capital Markets Corporation

Stephen Gengaro - Jefferies & Company, Inc.

J. Adkins - Raymond James & Associates

Jeffrey Spittel - Madison Williams and Company LLC

David Smith - Johnson Rice & Company, L.L.C.

Joseph Gibney - Capital One Southcoast, Inc.

Robin Shoemaker - Citigroup Inc

Michael Urban - Deutsche Bank AG

Daniel Boyd - Goldman Sachs Group Inc.

Brian Uhlmer - Pritchard Capital Partners, LLC

Operator

Greetings, ladies and gentlemen, and welcome to the Cameron Second Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Mr. Scott Amann, Vice President, Investor Relations for Cameron. Please go ahead, sir.

R. Amann

Good morning, and thank you for joining us today. This morning, you will hear from Jack Moore, President and Chief Executive Officer of Cameron; and Chuck Sledge, Senior Vice President and Chief Financial Officer. Jack and Chuck will offer some commentary on the results for the quarter, and we'll then take time to field your questions.

In accordance with the Safe Harbor provisions of the securities laws, we caution you that some of the statements made on this call may be forward-looking in nature and as such, are subject to various factors not under the control of the company. For a more complete description of these factors and the related risks and uncertainties, please refer to Cameron's annual report on Form 10-K, the company's most recent Form 10-Q and the associated news release.

With that, I will now turn things over to Jack.

Jack Moore

Thank you, Scott. Cameron reported second quarter earnings of $0.58 a share, excluding charges of $0.06. Overall revenues were at $1.45 billion, up 14% versus last year, reflecting increases from NATCO and subsea project shipments. Orders came in at just under $1.4 billion, up 50% versus a year ago and up 15% sequentially, and this is without the benefit of any large project awards. This quarter's order rate demonstrates the benefits of having a diverse line of businesses that touch many aspects of managing the flow of our customers' products, both onshore and offshore. And backlog remains essentially flat with Q1 at just over $4.9 billion.

Our Drilling Production Systems segment bookings were over $900 million for the quarter. This is up over 50% versus last year and over 30% sequentially. Subsea orders were essentially flat versus Q1, again without any major project bookings. Cameron booked seven trees in the quarter, with four of those coming from Petrobras for the Tupi pre-salt development. While Cameron’s share of tree awards year-to-date have lagged previous years, this is driven somewhat by our decisions to not tender given projects. We do continue to track a number of projects that will give us ample opportunities to move this needle over the next 12 months.

We have had no cancellations to our backlog as a result of the Gulf of Mexico drilling moratorium and do not anticipate any, and we see no carryover effect on the Subsea Systems projects we are tracking outside of the United States. We do have or expect delays associated with offshore Gulf of Mexico installation service-related work in the balance of 2010. As for the overall impact on the current moratorium on Cameron, our revenues from the Gulf of Mexico equal less than 5% of our totals.

Process Systems orders were up significantly versus last year. This is obviously driven to a large degree by the NATCO acquisition. While large project awards have been delayed, our custom-engineered systems team was successful in securing the Tupi FPSO separation unit at over $20 million. This is the first-ever CO2 separation project for Cameron with Petrobras and what we feel is the first of many more to come. This win is also a great example of our capability to bundle the competitive strengths of both NATCO and Cameron process technologies, a capability that we are very excited about and are going to share with customers all over the world.

U.S. onshore markets for our broad-based process services technologies are solid, but we see great opportunities for growth that will come in the Middle East and Asia-Pacific markets as we move forward. And Process Systems also has been very active in collaborating with our Surface, our Valves and our Compression business units, targeting new markets where our collective technologies are providing cost-effective well-site solutions.

Surface Systems orders were up for the fourth consecutive quarter, growing about 58% versus last year and 20% sequentially, a great quarter for these guys. Much of the growth was driven by our North American markets, where activity levels have exceeded our initial estimates. A major contributor to our U.S. growth is the activity in the Shell markets, which has trended to higher-pressure fracs and wellhead equipment that has played to Cameron’s strengths in terms of product and service performance. We're also seeing customers move into unconventional liquid rich gas plays, which has sustained these current levels of activity much longer than most of us had predicted. One major surface award of note for Cameron in the quarter was for McMoRan for the Davy Jones 25,000-psi high-pressure, high-temperature development. This project is valued at over $16 million.

Our international markets are holding up as well, with activity in the Middle East tracking above our plans, offset somewhat by softness in North Africa and Mexico.

Drilling Systems had a major milestone achievement in Q2 with a booking of the world's first-ever 18 3/4, 20,000-psi BOP, which we sold to Rowan. This is our new EVO design that we introduced last year as part of our drilling technology development platform, focused on high-pressure, high-temperature developments. Combined with the aforementioned Davy Jones award for McMoRan in Surface Systems, this was a great technical combo achievement for Cameron.

We also built backlog in Drilling Systems this quarter, with overall bookings coming in at $286 million, a 100% increase versus last year. We did book one subsea stack in the quarter. We also have witnessed a significant shift in new aftermarket orders, with a renewed focus on OEM compliance by our customers, both offshore and onshore.

Aftermarket bookings totaled $90 million in the quarter, which is a record for Cameron. As for the outlook for our drilling markets, I'll address the Deepwater Horizon impact on some specific areas on drilling's future shortly, but as for new major project builds, the story is still Brazil. As with many projects in Brazil, timing of these awards is unpredictable. But given our manufacturing and service infrastructure footprint embedded in Brazil, we expect to win our fair share.

Overall, Valves & Measurements followed up an exceptional Q1 order flow with a very strong Q2. Overall orders were up 75% versus last year. Once again, Engineered Valves led the way with $127 million in orders. This was a result of favorable bookings in our North America markets and additional orders from Chevron for the Gorgon Project, totaling $28 million. The total value of the Gorgon Project for Cameron for valves alone will be approximately $120 million once all of the orders are booked, we expect by year end.

Our Process Valves division benefited from project bookings in Russia and Algeria, and orders for our Distributed Valves business continue exceed our estimates due to the robust North America rig activity, which is driving our distributed customers to raise stocking levels. We’re also benefiting from Shell initiatives and a number of smaller projects targeting CO2 injection and gas-gathering system installations.

In our Measurement business, both upstream and midstream posted increased bookings. As we stated last year, we are pleased with the order levels we are seeing in our Valve businesses, and we feel the balance of the year will finish just as strong.

Bookings for Compression came in at $136 million in Q2, which is up 15% versus last year and 18% sequentially. Reciprocal orders are benefiting from our international market focus, but we are seeing some reawakening in North America as utilization of existing units continues to improve.

We see a number of opportunities emerging for recip in both traditional and emerging markets that should prove fruitful in the latter half of 2010, as well as into 2011. Centrifugal orders have rebounded as well from last year's lows. However, we do remain cautious until we see sustainable signs of global economic recovery for a true rebound in centrifugal tap.

Now I would like to talk about Cameron's response to the Deepwater Horizon tragedy. And let me first say kudos to the team this morning, as it looks like the static kill process is going as planned. Our focus remains on supporting BP and Transocean in their efforts to seal and contain this well. Cameron personnel from our Drilling, Subsea, Surface, Valves and Flow Control divisions have been actively engaged in designing, building, installing and operating equipment to meet these efforts. We have provided background information, education and support to the industry and trade associations as well as congressional staff members. We have fully cooperated with those governmental agencies and congressional committees conducting the numerous investigations, and we will continue to do so. But we will not speculate about any aspect of these investigations as it would be inappropriate.

However, looking forward, it is clear that the Deepwater business will change. And this will influence the future actions we must take to support this new regulatory environment. Regulators, both in the U.S. and abroad, will become more engaged in ours and our customers' business, and you can expect Cameron will play a critical role as both a leader and innovator in responding to the challenges of this new environment.

Our customers relied on Cameron as an industry leader for well over 100 years, and they can expect nothing less going forward. With respect to product development, Cameron is committed to step up the pace of what we call the next cycle of deepwater product innovation. It started with our launch of the EVO BOP system in 2008 and then last year, with the 20,000-psi, 18 3/4 BOP system that is targeted at the high pressure our customers experience offshore. While we recently sold the first of these stacks for jack-up application, this system is truly, indeed, designed to built for deepwater applications as well. But given that our industry must respond to new challenges going forward, we have more work to do. Our alternative well kill systems technology, which we launched over a year ago with a major customer; our sea-powered actuation, or SPA, system technology; our modular subsea stacking designs; our BOP intervention systems plus a host of other technologies that address the new regulatory environment must be commercialized. And you can expect that we will leverage our deepwater know-how from all of the various business units within Cameron to drive the completion of these development programs in a timely fashion.

And this is where Cameron has a capability unlike many others in our market today. Cameron has the unique ability to leverage its subsea service infrastructure to support the increased demands on this drilling organization. One of those critical demands will be customers’ needs to ensure OEM conformance and system certification for their equipment, wherever it may be, anywhere in the world. A good number of our subsea service personnel have experienced working in our Drilling Equipment businesses, as many of our aftermarket facilities service both our Drilling and Subsea businesses in many parts of the world where we operate. And another point is that we are increasing our capital investments in those facilities that will support these efforts not just in the U.S., but in our key drilling and subsea markets around the world.

Now this is all that we will say regarding the Deepwater incident today. We appreciate your understanding, and we will communicate to you further information as it is appropriate.

Now let me turn it over to Chuck.

Charles Sledge

Thanks, Jack. Before I get too much in the details of the quarter results, I do want to echo Jack's thoughts on orders. To come within $60 million of achieving a book-to-bill ratio of one in this market without any large projects being books speaks to the strength and balance of our product portfolio. Our operational results for the quarter were $0.58 per share as compared to our original guidance of $0.52 to $0.55 per share. EBITDA margins for the quarter were 18.1%, a 60 basis-point sequential improvement. Margins for the DPS group increased 40 basis points sequentially, reflecting improvement on the cost side of the business. Although it did not happen this quarter, we are still expecting DPS margins will moderate over the remainder of 2010 as we deliver a significant amount of Subsea Systems projects.

V&M margins were down 250 basis points sequentially, reflecting low-margin shipments that were booked in 2009. We expect V&M's margins to decline a little further over the back half of the year before bottoming out as the remainder of this low-margin backlog is shipped.

Compressions EBITDA margins were down 350 basis points sequentially, which should represent the low point for the year. We still expect our overall EBITDA margins to wind up somewhere between 16% and 16.5% for the year. We incurred $0.06 per share of acquisition integration, severance and Deepwater Horizon legal costs during the quarter. We will continue to see integration costs throughout 2010 related to the NATCO acquisition as well as Deepwater Horizon legal costs, and we will call these out separately in future quarters.

We consumed $40 million of cash in the quarter, primarily due to the decrease in cash advances from customers, as we make significant progress on delivering our subsea backlog. And again, just a reminder, we should continue to see an acceleration of this revenue, the subsea project revenue, over the back half of the year.

We ended the quarter with $1.4 billion of cash and $158 million of negative debt, so our balance sheet remains as conservative as ever. We are increasing our 2010 capital spending estimates to $200 million as we continue to see opportunities to invest in ourselves to improve our operations and, ultimately, our financial results. One item to point out on our balance sheet, our 2.5% converts have been reflected as a current liability as they are putable or callable beginning in June of 2011.

Year-to-date, we have bought back approximately 3.2 million shares. However, given the uncertainties created by the litigation surrounding the Deepwater Horizon incident and our conservative nature, we believe it's prudent to temporarily pause our share buybacks. With respect to 2010, we've raised our outlook to $2.30 to $2.35 per share, up from our beginning-of-the-year guidance of $2.10 to 2.20, excluding charges. Our new guidance reflects the current strength of the North American rig count and its impact on our shorter-cycle businesses as well as the exceptional execution in our Drilling business. D&A for 2010 should approximate $190 million. Net interest for 2010 should come in approximately 10% below 2009’s level, due primarily to the $400 million floating-interest-rate swaps we entered into last year. Our effective tax rate should approximate 25%, and our guidance assumes 248 million fully diluted shares outstanding.

With that, let's open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Robin Shoemaker with Citigroup.

Robin Shoemaker - Citigroup Inc

I wanted to ask you to elaborate, if you could, on your comments that you're holding back a little bit on some of the big project awards that have been in the market and seeing perhaps better opportunities in the future. Is it a pricing consideration that leads to that strategy? Or just keeping powder dry? And what is the scope of the opportunity you see that would cause you to be a little bit holding back in the near term?

Jack Moore

Robin, this is Jack. It's really a combination of a little bit of what you said. I wouldn't say we're keeping our powder dry. We have a very large backlog in Subsea. We are in the middle of executing on some significantly large projects. So when you look at the timing of when you make a decision to go after a project, when they're booked, you’ve probably been working it for over a year, in some cases maybe two. Like with the Jack/St. Malo project, probably the last major project we booked in the first quarter. And you can see that most of the projects out there are in a long-lead queue, so while we are working on a lot of projects through the tender phase right now, we will basically have to pick and choose which ones we feel we can be effective at executing on and delivering a decent return. And there is a lot of dynamics at play with that.

Robin Shoemaker - Citigroup Inc

Okay. My follow-up is on the BOP business. In terms of the renewed compliance issues you spoke of, what have you got in terms of BOP enhancements in addition to the new generation of the EVO BOP technology? But taking an existing BOP that maybe 10 or more years old, what are you likely to offer in terms of enhancements that would meet new, more stringent regulatory compliance?

Jack Moore

Well, I think first of all, we have to see exactly what gets put in as the new rule going forward in terms of what we're all going to have to comply to. But I think we all know that the ability to shear tool joints, or avoid shearing tool joints, so dual shear rams in the stack is one given. Dual efforts to go in and operate a BOP from, whether acoustically or through an ROV, is going to be a given. And many of the stacks out there today have some level of capability to be retrofitted, and some don't. It depends on the size and the weight of what we're talking about as to whether it's even practical to do it. But we can go in and add a cavity to an existing stack if the rig can accommodate the weight. We can go in and change what we would call just a pipe ram to a shear ram. That can be done with some relative ease. But if you have a three- or four-cavity stack that's in operation today, and you've got to operate with two shear rams, you're going to have a big challenge on your hand without adding some additional cavities to the existing stack. So whether the rig can hold it, weight-wise or size-wise, is going to be the real challenge for the industry. When I talked about the next wave of technology around deepwater drilling, or at least Drilling Systems technology, the EVO systems, the AWKS systems, the spa systems, modular rig technology. Modular stack technology would be one solution you could look at if you had weight limitations on an existing rate. But all these need to be worked through with our customers and through regulators. We're going to have to dial up the pace to get there.

Robin Shoemaker - Citigroup Inc

But it seems like this is a significant opportunity kind of in the aftermarket arena, but perhaps more than the traditional aftermarket kind of...

Jack Moore

We think it is. You've got to remember, equipment manufacturers, we’re always pushing the next generation and the next technology. I think the audience, having an environment where it's willing to accept and take on these opportunities and help get them to commercialization, I think we're going to see a renewed commitment to that. So we're excited about what the future holds.

Robin Shoemaker - Citigroup Inc

Okay.

Operator

Our next question comes from Brian Uhlmer with Pritchard Capital.

Brian Uhlmer - Pritchard Capital Partners, LLC

I had a question on where you’re going to direct your CapEx and what you're looking at in terms of where you're going to grow and expand. What markets and, specifically, for what product lines?

Charles Sledge

Brian, it's Chuck. A couple of things. I think you'll see us continue to invest in our aftermarket facilities. That's a competitive advantage that Cameron has, given the synergy of our product lines. We've got Surface, we have Subsea, we have Drilling, we have Valves. The ability to leverage all of those product lines and aftermarket facilities around the world is a competitive advantage that we continue to leverage, and you'll see us continue to invest in. We're pretty much through our efficiency investments. We did those over last couple of years, and you're seeing that in our margins. So the primary focus of incremental investment will be in the aftermarket areas in the various places that our customers are going. We firmly believe we have to have a aftermarket presence in all the major locations our customers are exploring for hydrocarbons in.

Jack Moore

And, Brian, I will add that when you look at geographically, at least strategically, it's interesting, because we are looking at making investments everywhere. We just opened a new aftermarket facility in Oman. We're expanding our aftermarket base in West Africa and Angola. We're expanding our aftermarket base in Australia. So North America has been a great surprise for us, and we have a lot of opportunities to expand our businesses here through just what we're seeing with the Shell plays. And we're expanding infrastructure to support that, both in U.S. and Canada. So there is no real -- of course, Brazil is a huge opportunity for us long term, and we're expanding our infrastructure there as well. So there's not one market that I would say we're focusing on. Middle East and Iraq is a huge opportunity for Cameron. There are a few countries we do not operate in that we know we're not investing in. So it's really all over the map.

Brian Uhlmer - Pritchard Capital Partners, LLC

Okay, fair enough. And following up on the BOP, I was just wondering, kind of dovetailing off of that is what is the lead time now for a subsea stack or for a component such your 20k BOP? What is that taking you to churn through your backlog at this point?

Jack Moore

Well, fortunately, I think, we made some decisions in drilling to get ahead of some of this. We put some long-lead items on the ground. When we introduced the 20,000-psi BOP, there was no takers. And kudos to Rowan, who were raising their hand and saying, "Yes, we want to take this into our fleet." And it was already built. We introduced it at OTC last year. And so I would tell you that if we got an order today, we can probably move fairly quickly. If we got multiple orders today, lead times will probably run, I would say, nine to 12 months.

Brian Uhlmer - Pritchard Capital Partners, LLC

So you did sell the floor model off of OTC?

Jack Moore

Yes, I guess you could call it that.

Brian Uhlmer - Pritchard Capital Partners, LLC

Exactly.

Operator

Next, we have Dan Boyd with Goldman Sachs.

Daniel Boyd - Goldman Sachs Group Inc.

When we look at the drilling products groups, just want to follow up on the aftermarket there. When you look at your installed base of BOPs out there, what percent of the market would you say that you have traditionally served or maintained?

Jack Moore

If you want to look at the entire global install base of Cameron, which is well over 2,000 stacks, it's less than 50%. If you want to specifically hone in on just deepwater, it's probably right at about 50%.

Daniel Boyd - Goldman Sachs Group Inc.

And then, so looking at what you've seen so far this quarter, have you seen an increasing market share of those? Have you seen more of your customers coming to you? And did you see something of like sort of a catch-up there in terms of repair or maintenance on BOPs also capturing more of that market share? And is that enough to sustain this business into 2011? Because I know you're still working through some of the backlog on a lot of the new builds.

Jack Moore

Well, let me answer your first question. It’s yes, your second question's yes, I think your third question's yes. We are definitely seeing a renewed commitment to use OEM. The challenge for Cameron is being able to ramp up and support it. What would take customers to go back to using non-OEMs is our inability to respond, and so the expectation is kind of what I mentioned in my opening comments, is that we have to be committed to move forward as quickly as possible with not only the technology going to be demanded from the new regulations, but also being able to support the existing infrastructure that's out there working today that needs to be recertified and re-conformed to what the original manufacturers delivered when it was built. And that doesn't happen just in the U.S. That's going to happen all over the world. We're getting requests in every corner of the world from our customers to support this, and so we have to ramp that up to meet it, both with personnel and with infrastructure on the ground.

Daniel Boyd - Goldman Sachs Group Inc.

Yes. That makes a ton of sense. Have you booked any BOPs since the quarter ended? And how much of the bookings this quarter or maybe non- sort of BP-relief-effort- or containment-related?

Jack Moore

Yes. To answer your first question, we have not booked any new stacks since we closed the quarter.

Charles Sledge

Deepwater stacks.

Jack Moore

Deepwater stacks, yes. There are a lot of things in the works, let's put it that way, including Brazil, but decisions don't happen overnight. The amount of bookings that are not related to the containment efforts, the vast, vast, vast majority of the bookings are non-containment related.

Daniel Boyd - Goldman Sachs Group Inc.

That’s great to hear.

Jack Moore

Remember, some of this containment effort that we’ve worked with, with BP, a little bit of it’s come through the Subsea organization, manifolds and such.

Operator

Our next question comes from Mike Urban with Deutsche Bank.

Michael Urban - Deutsche Bank AG

So recognizing as you said earlier that we just flat out don't know what's going to be required from a pressure-controlled BOP standpoint. That said, are there any customers out there trying to get ahead of the curve and kind of recognizing that, “Hey, there's going to be a lot of retrofits required, a lot of new equipment required, and there's only a certain amount of capacity in the industry.” Is there an ability to say, “Just give me what we think will happen or what will be the state-of-the-art,” and people trying to get to the front of the queue? Or, again, is it just impossible to do that?

Jack Moore

Mike, there's a lot of discussion in that vein. I wouldn't say any one company is getting out there ahead of the curve. I think a lot of them are assessing what their current capabilities are to meet the proposed regulations and trying to look at how they will accommodate that. And they're working with companies like Cameron and others that they have the install base with to see how they can conform. So I wouldn't say any one company is out there saying, “Okay, we’re going to change everything to get ahead of it.” They have quite a bit of capital already committed to their programs, so they're trying to use it in the most efficient way.

Michael Urban - Deutsche Bank AG

Right, right. And related to that, have you thought about or taken a stab at what the retrofit or replacement market might be? And then, what is that, relative either to your own capacity or relative to the industry's capacity?

Jack Moore

Well, we haven't really put a number to it, to be honest with you, but I will tell you that we’re confident that we can respond to it from an infrastructure standpoint. We have put a lot of investments in our drilling infrastructure from a manufacturing standpoint back in 2005 and '06. That was really put in place for that ramp-up cycle. So that hasn't really gone away. So it would be put to good use.

Michael Urban - Deutsche Bank AG

Okay.

Operator

Next, we have Geoff Kieburtz with Weeden & Co.

Geoff Kieburtz - Weeden & Co. Research

You mentioned that DPS margins went up sequentially in the quarter, counter to what you had kind of expected last quarter. Can you give us an idea of what drove that?

Charles Sledge

A couple of things. Number one, some Subsea revenues slid out into third quarter. And then secondly, to be quite frank, our project execution was just better than we thought, and the cost side was lower than we thought.

Geoff Kieburtz - Weeden & Co. Research

And as you think about the margin progression, are some of those things sustainable in your view? I mean, the better-than-expected execution's kind of become a routine thing here.

Charles Sledge

Yes, I think couple things. I think the cost improvements will stay, but the Subsea revenue is going to get delivered. So that's a given. So you're going to see DPS’s margins come down a little bit in the back half of the year.

Geoff Kieburtz - Weeden & Co. Research

But maybe not as far as you had originally thought?

Charles Sledge

Not as far as we thought when we entered the year, but we really haven't changed that 16% to 16.5% overall Cameron. That's what we said last quarter, and that's what we're still saying this quarter.

Geoff Kieburtz - Weeden & Co. Research

Fair enough. And my other question's really around the whole regulatory impact on your business. Hearing from a lot of the drilling contractors, they have been, generally speaking, it seems, relatively, I guess, casual about the capital costs that they may incur. In your view, is it possible for the capital cost impact on your customers to be relatively minor and yet the aggregate opportunity for Cameron to be significant?

Jack Moore

Well, I think when you look at the value of a stack in a total deepwater rig, it is not the most significant element. If you looked, woke up one day if you’re a deepwater driller, and half your fleet is not capable of meeting the new regulations, then that's a bigger challenge than it would be if you just had to replace a number of stacks in your current fleet. So I think that's probably where they may be. I think the retrofits, while we have really don't know what the value or what the impact that would be, I'd say, would probably not be a game-changer for our drilling contractors in terms of looking at their -- as whether this is a big deal or not to change and conform.

Charles Sledge

But it will be impactful to our Drilling business, given the order of magnitude of the numbers involved.

Geoff Kieburtz - Weeden & Co. Research

Okay.

Jack Moore

And the other significant thing is really just the conformance to OEM. This is a big deal to all of us that are the original equipment manufacturers. And I think it's a positive sign, but it's one that I've said we all have to step up and support that and not give our customers a reason to wander off like they have in years past.

Geoff Kieburtz - Weeden & Co. Research

And related to that, that aftermarket, the increased use of OEM for aftermarket support, Jack. Are any of your customers asking you to take on a greater degree of responsibility and, if you will, liability for this equipment as a result of asking you to maybe provide a higher level of support?

Jack Moore

I wouldn't say that. I think we are more than willing to take on the responsibility to maintain our equipment. It's what we do. It's embedded in our culture, if given that opportunity. But that's kind of really where we've been focused in working with our customers. It's encouraging them to use us to comply and conform.

Charles Sledge

But we don't see the risk allocation changing, no.

Geoff Kieburtz - Weeden & Co. Research

Okay.

Operator

Our next question comes from Roger Read with Natixis Bleichroeder.

Roger Read - Natixis Bleichroeder Inc.

Maybe to shift a little bit of direction here from the BOP thing, but your talk in the beginning about how you're trying to be a little bit more selective on some of the big projects you’re looking out there, I presume the deepwater subsea. Could you give me an idea of, maybe, how that's different than, say, two years ago? I mean, I would think you've always would want to be a little bit selective and pursue the projects that make the most sense to you. I mean, what else has changed out there that makes you more, let's say, careful or conservative or whatever the right term is?

Jack Moore

Well, we don't feel there's any project out there we can't be competitive on, whether it be technically or commercially, relative to the markets. However, we do know you can't take them all on, so we have always been selective to some degree on what projects we target. So I wouldn't say, Roger, that we’ve all of a sudden taken a different tact. Our tact has always been the same. We try look at these projects in terms of can we generate an adequate return on the risk and the investment that we have in place? There's projects that will come along where we are the incumbent, makes a whole lot of sense for us to target and work with. There's other projects that come along where we may not have a history. We may not have the technical solution. We may look at the risk of all of that and decide it's not practical to go after it. And then there's some that, quite honestly, like for instance, Club in West Africa, I mean, Total, we are executing their biggest project in West Africa today, called Uson. I would think they would prefer us to stay focused on that and not take on a bunch of other projects that are in their backlog that they're trying to execute on right now. So you're going to get -- timing is not always going to be aligned with your customers’ needs as well. It's a combination of a lot of things.

Roger Read - Natixis Bleichroeder Inc.

Okay. But I guess, since you all pointed it out earlier in the call, I'm just wondering I mean, has anything really changed? Or are you just trying to give us the idea that maybe some of these large project awards going to be a little fewer and farther between, just given the way the market has changed, and maybe a little more selectivity on your part?

Charles Sledge

No, no, we're just saying that we haven't booked any large project this year. Some of it is a function of our bid strategy that we decided a couple of years ago, given where the market was and where our bookings were a couple of years ago. Nothing more.

Roger Read - Natixis Bleichroeder Inc.

Okay. And potential for a large award before the end of this year at this point?

Jack Moore

I'd say it’s always there. We've got a number of projects out there that are working, so timing is always going to be the thing that we can't control.

Roger Read - Natixis Bleichroeder Inc.

Of course. And then the other thing, if we look at surface wellheads that you talked about, the U.S. rig count has held up better in the move, obviously, towards liquids and oil. What are you seeing there, at least in terms of inquiries at this point, as we look at the second half of the year? And we’re clearly see a lot of the E&P companies talking about shifting their budgets. We haven't necessarily it in the rig count just yet. But can you give us an idea of just what the second half looks like for orders in that particular segment?

Jack Moore

Well, we've always kind of telegraphed that we're going to see it soften a little bit. I’m kind of…

Charles Sledge

Gun shy.

Jack Moore

Gun shy about saying that. Because of the liquids side of the business. And gas has held up fairly well. You've got oil over $80. A lot of our surface guides are pretty bullish on North America right now. They see a lot of it rocking, so they're real excited. But we're a global business in Surface Systems, and other parts of the world are going to be driven by more project timing or major tenders. As I mentioned, Mexico and Algeria are a little soft right now. And historically, those have been very good markets for Cameron. So those could offset, to some degree, what we see happening in North America, but I wouldn't expect to see any major change in our outlook for the balance of the year with our Surface Systems.

Roger Read - Natixis Bleichroeder Inc.

Okay.

Operator

Our next question comes from Marshall Adkins with Raymond James Financial.

J. Adkins - Raymond James & Associates

Just to summarize what I've heard on the BOP side, it sounds like the orders are already coming in. The pie is getting bigger, and your piece of the pie is getting bigger as well. Is that a fair summary?

Jack Moore

Well, I think it may be early to say that we know the size of the pie, but I would say...

J. Adkins - Raymond James & Associates

But it's getting bigger, right?

Jack Moore

Well, what we saw in the second quarter is bigger than what we had thought. And I would say around the aftermarket support, the service side of the business is definitely going to get bigger for the OEMs. Whether or not this launches a whole new build cycle, we don't know yet. I think it's too early to predict that. We will see upgrades and modifications, but we don't know, really, the extent of that, either. So I would say, Marshall, yes, the pie probably is going to be bigger than we thought it would be three months ago, but we just don't know the size of it yet.

J. Adkins - Raymond James & Associates

Okay. Are you seeing any pricing in that group due to greater risk or liabilities, and/or in the future, I know you guys have been somewhat reluctant work on other people's stack, some of these stacks are mix stacks. Are you going to work on other people's stacks? Or is it still just Cameron only?

Charles Sledge

We believe in OEM. We believe that's the right thing to do, to make sure that this equipment's reliable. We're going to continue that. So we don't see a need to change that.

J. Adkins - Raymond James & Associates

And pricing?

Jack Moore

Haven't really seen a whole lot of ability to move that needle, and nor have we tried to take advantage of it.

J. Adkins - Raymond James & Associates

V&M, Chuck, you gave a pretty good overview of why margins were down. Could you give us just a little more color? It sounds like a lot of it was due to pricing from '09 and that you expect that pricing to get better as we move into '11? Is that fair? Or is there some mix in throughput issues as well?

Charles Sledge

Yes, there's always a little mix in throughput, but the vast majority is, in fact, the market conditions of '09 now flowing through the P&L in 2010. And just to make sure that our Valve guys that are listening, yes, we expect to '11 to be a lot better.

Jack Moore

Well, one thing, Marshall, is, if you look at projects like Gorgon, where you -- we have a very good working relationship with Chevron, and the same with Exxon and the same with BP, with our Valve groups. They've done a tremendous job of really embedding our guys in with their organization. So when things aren't aggressively tendered, you have the ability to protect and hold some margin. And so hopefully, what we'll see with some of these more recent booking is when they flow out in '11, they’ll have a little healthier margin associated with it.

Charles Sledge

And in return for those, the customer gets better execution. It does the customer do no good to go out and aggressively tender and wind up putting you with someone who can’t deliver the valves.

Jack Moore

Or they don't work.

Charles Sledge

Or they don't work.

Operator

Next, we have Jeff Tillery with Tudor, Pickering, Holt.

Jeff Tillery - Tudor, Pickering & Co. Securities, Inc.

Chuck, as you look at the order pattern that you expect for the rest of the year, orders for the past four quarters have basically been bouncing right around that $1.3 billion per quarter rate. Anything you see in the second half of the year that would change that significantly one way or the other?

Charles Sledge

Well, as Jack alluded to, we'll book as many large projects as we can, and if we're successful, that will move the needle. So I think it's really dependent, Jeff, upon whether we're able to secure any large project bookings in the back half of the year.

Jeff Tillery - Tudor, Pickering & Co. Securities, Inc.

Okay. If I exclude Subsea, there's really not much change in the order pattern you see in the other businesses. It's improved nicely, but nothing big moving either way?

Charles Sledge

I think you could see some improvement in, like, Compressions orders going throughout the rest of the year, but as far as the Surface, they're at a real healthy rate, and same for Valves.

Charles Sledge

And Valves is tracking pretty damn good, relative to historical patterns, with the activity levels that are in place.

Jeff Tillery - Tudor, Pickering & Co. Securities, Inc.

And then, for the Drilling business orders. If I got the numbers right in Jack's prepared remarks, about $200 million this quarter of non-aftermarket-related orders. You’ve got one subsea stack in there, the 20k stack. What else hit in the quarter? That's a pretty big number.

Jack Moore

Well, I'll tell you what, just kind of walk around the world. Land, I mean, we sell a lot of stacks. H&P neighbors, they're focused on expanding their fleets in North America, and some outside of North America, have been very healthy for us.

Charles Sledge

Yes, we booked some riser, and we booked another control system.

Jack Moore

Yes. We also booked some stacks in the Middle East and, also, some equipment in Asia. So it's been a very good story for drilling in quarter two. But I will say to remind you guys, the real story for the new builds and drilling is -- the big stuff is Brazil. And that's just something that we can't predict when it's going to happen. It will happen.

Jeff Tillery - Tudor, Pickering & Co. Securities, Inc.

Jack, you mentioned exploring the standard traditional business from NATCO to the Middle East and Asia. Could you just talk a little bit about the progress you guys have made so far in exporting that business outside the U.S.?

Jack Moore

Yes, good question. And it's been a lot of fun. The thing the guys -- it’s kind of like a new set of toys with the group. And so getting them all to play with the same level of intensity is always the new challenge for the guys running the operations. But it's been interesting to watch the opportunities emerge for them. And when I said the collaboration between Surface, Valves, Compression and Process Systems, we're creating a story that didn't exist before, Jeff. So you can't snap your fingers and get there overnight. But the guys really have done a good job of focusing on the markets that they feel will be most effective in getting that story across to. And a lot of it's in Asia, and a lot of it's in the Middle East, and that's what I said. I think you just stay tuned as this evolves over the end of this year and into next year. You're going to see some things, I think, that are going to be meaningful in terms of where we're going to leverage this piece of the NATCO acquisition that was really primarily focused onshore in the U.S.

Jeff Tillery - Tudor, Pickering & Co. Securities, Inc.

All right.

Operator

Our next question comes from Alan Laws with BMO Capital Markets.

Alan Laws - BMO Capital Markets U.S.

You noted solid wins with NATCO now, I guess, integrated on the FPSO front. Can you talk about the growth opportunities for Cameron in the expanding FPSO business?

Jack Moore

Well, we have a group of guys that have looked at FPSO market in and of itself. And it's kind of like looking at Shell initiatives, or it’s looking at gas storage initiatives. I think, when you look at these markets as they're evolving, we used to go at FPSOs selling a valve package or a compression package or a Process Systems package. So now we're looking at it as what can Cameron do in terms of leveraging the spin on an FPSO? And actually, the number’s north of $100 million. When you look at all the Cameron kit that can go on an FPSO. Now will you get it all? Not necessarily, but it's definitely the expectation I would have for Cameron to shoot to. And so again, like I said, with part of our standard and traditional business that we came over from NATCO, as you put it with other businesses within Cameron, it creates new opportunities. So it's a big number, and I think we're pretty focused on what that number can be. And now it’s just getting the customers, in terms of their buying behavior, to see the value in doing that. And that's where some of the challenges will come from, but we're going to work on it.

Alan Laws - BMO Capital Markets U.S.

Is it a double-, triple-, at all type business, then, for you?

Jack Moore

Again, FPSOs are big projects. They're unpredictable in terms of the timing. Brazil alone, there's going to be dozens of FPSOs that are going to be built over the coming years. So that's a market that getting this Tupi order for the Tupi FPSOs is a big win for us, because they could establish us in that frame of mind with Petrobras.

Alan Laws - BMO Capital Markets U.S.

Would you say that it's similar to a type of business that would replace, say, the rig buildout business through sort of 2006 through today?

Jack Moore

I'm not sure, because the competitive landscape is totally different. In the Rig Equipment business, you have, what, three players, essentially? Ourselves, NOV and GE? And in this market, you have a number of different players, and you have a different buying behavior. So I think it's going to be an interesting evolution, but we're focused on it.

Alan Laws - BMO Capital Markets U.S.

All right. My last question here is going to ask you to speculate a little. On your Well Control segment, given, I guess, what you're seeing from customers and normal expectations from what the new regulations look like, or should probably look like, do you think that the BOP and associated business could become nearly as relevant to, say, profitability as the Subsea Systems segment in the next few years?

Charles Sledge

Well, a couple of things. The Drilling business, given those competitors, is a very profitable business. What we hope to see over time is that the retrofits that may come out of this and the increased aftermarket will help replace the new project bookings that occurred in '06 and '07.

Alan Laws - BMO Capital Markets U.S.

Okay. As far as the aftermarket, or maybe when you think about the BOP business, do you think that you'll see customers investing in BOP or component spares? Or potentially, is there opportunity for you here to like have a rental fleet, when on what it looks like to be a regulated, extended inspection and maintenance cycle?

Charles Sledge

They do some of that now. I think the drilling contractors are going to have to think through what makes the most sense for them. Obviously, they're focus is going to be on how do I keep that BOP operable? And whatever conclusions they reach, that give them the best uptime, that's what they're going to go for.

Jack Moore

We have some of our drilling contractor customers where we rotate our service personnel 24/7. We have others that do all of that work themselves. And so there's not one standard industry approach to how they're going to run with it. Some, we keep spares on the rig. Some, we keep them onshore. It's inconsistent, but it will probably change a little bit going forward.

Alan Laws - BMO Capital Markets U.S.

All right. That sounds good.

Operator

Our next question comes from Stephen Gengaro with Jefferies & Company.

Stephen Gengaro - Jefferies & Company, Inc.

I guess, maybe back to DPS margins for a second. When you think about the impact of some of the drilling equipment and aftermarket on those margins, and then, obviously, the second quarter margin beat, has your thought process on when margins may bottom here changed at all?

Charles Sledge

We are sticking to our guns. Our margins will bottom sometime this year. There's only two quarters left, so it will be the third or the fourth. But we're not changing from that stance.

Stephen Gengaro - Jefferies & Company, Inc.

But it is fair to say, it seems like the mix of order flow in the quarter, and I don't have all the details yet, but the mix of order flow in the quarter seemed a little more heavily skewed away from Subsea than you, maybe, had expected? Is that true?

Charles Sledge

Yes, a little bit.

Stephen Gengaro - Jefferies & Company, Inc.

Okay. And then the follow-up here is, when you look at the Aftermarket business, is there anything out there? Or could you position yourselves in any markets via acquisition? Or do you think your presence, globally, in any organic CapEx is enough to meet your needs?

Jack Moore

That’s a good question. I would say that we're always looking at acquisitions that would be meaningful in terms of supporting this new initiative. But we do have a pretty broad footprint already with respect to our drilling aftermarket infrastructure.

Charles Sledge

But I'll add, we look at the aftermarket holistically with our other businesses as well, and you have seen us in the past go out into acquisitions to increase our geographic coverage. The last one we did, one in the Far East, and that's brought really substantial synergies to us.

Stephen Gengaro - Jefferies & Company, Inc.

Maybe you have to speculate a bit on what the regulators might do, but do you think that they could mandate the OEM providers servicing the units? Or do you think it's more of sort of a certification and a customer preference to use OEMs?

Jack Moore

We wouldn't mind it if they did.

Charles Sledge

I think some of the pressure may come not only from regulators but the leasehold operators as well, since they're the ones kind of writing the checks, so to speak, on the risk. I think you're going to see them -- some of them have been very focused on this for a long, long time, maybe some others, not as focused. But I think my gut would tell me, they're going to be more focused as a group than they have in the past with making sure they're comfortable with what the contractors are doing.

Stephen Gengaro - Jefferies & Company, Inc.

Sounds pretty good for pricing. Okay.

Operator

Our next question comes from Joe Gibney with Capital One Southcoast.

Joseph Gibney - Capital One Southcoast, Inc.

Chuck, I think you referenced this, I want to confirm that the one deepwater stack that you did book in the quarter, was that inclusive of the riser package?

Charles Sledge

No, that was a separate riser we booked.

Joseph Gibney - Capital One Southcoast, Inc.

Okay. And just a different tack on the aftermarket, drilling inbound orders of a record figure here. Just curious, what is the offshore, onshore mix to that number? And has it shifted versus the last several quarters?

Charles Sledge

Well, I would say the increase was heavily weighted to offshore, but we are seeing an increase in onshore. I mean, I think our customers, globally, have kind of taken this whole maintenance issue a little more seriously than they did a quarter ago.

Joseph Gibney - Capital One Southcoast, Inc.

Okay, understood. And the last one on Compression. Jack, I was just curious to get some additional comments. Or you referenced this sort of reawakening in North America. Some more color there would be helpful.

Jack Moore

The deep sleep.

Joseph Gibney - Capital One Southcoast, Inc.

What’s that? It’s bleak, right. Well, I know Compression…

Jack Moore

No, from the deep sleep.

Joseph Gibney - Capital One Southcoast, Inc.

It is the highest order number in seven quarters, by my counts. Are we shifting, maybe, more toward cautious optimism versus broadly cautious across the -- I know GDP-driven growth is slow. But just curious to get your thoughts, there. It seems like things were picking up.

Jack Moore

I wouldn't say that. I think the guys -- again, we've kind of transformed our Compression business to be more global in the way they look at the markets instead of focused just on North America, and that's evolved over the years. And we're seeing a good mix of business come from other parts of the world. Our overall outlook for Compression, still, is going to be a little muted relative to where the global economy is. And there's positive signs out there, and we'll also see some headwinds that are coming at us. So we're well positioned, globally, to take advantage of it when it happens. That's really, I think, the best position we can be in right now.

Charles Sledge

But I'll add that stabilization to a slight uptick in orders in that segment is a win.

Jack Moore

Yes.

Joseph Gibney - Capital One Southcoast, Inc.

Sure. Would concur.

Jack Moore

And their executions work in force as well.

Joseph Gibney - Capital One Southcoast, Inc.

Okay, I appreciate it.

Operator

Our next question comes from Jeff Spittel with Madison Williams.

Jeffrey Spittel - Madison Williams and Company LLC

With regard to the U.S. short cycle businesses, is it safe to say at this point that inventory restocking has fully run its course? And now, in the bookings front, we're benefiting from this migration of liquids plays?

Jack Moore

Well, I think if you look at our Distributed business, Jeff, that is our best barometer for the onshore market. It's held up pretty well. In fact, we track it daily and our order rates. And they're still holding up fairly well. So it would tell you that the inventory levels that our customers -- we had a run on the shelves, here, probably six months ago, and when you came off '09 and you were shutting the valve off because rig counts were falling so precipitously in '08, and now you’ve seen it all come roaring back and stay there, we've all scrambled to get those shelves filled up with some level of confidence. And I think that's kind of where we're at. And working closely with our distributors, it's been a good story for us.

Jeffrey Spittel - Madison Williams and Company LLC

Okay. And then BP is, obviously, an important customer globally, particularly in the Subsea market. With regard to international development projects, have you seen any change in their disposition in terms of appetite or timing, there?

Jack Moore

Not that we've seen.

Jeffrey Spittel - Madison Williams and Company LLC

Okay. Good. LNG liquefaction. You talked a little bit about Gorgon. There are, obviously, a number of projects from that Asia-Pacific area. What's the outlook around those? Do you think we could start to see some orders flow in, maybe early in '11, from some of those projects?

Jack Moore

I think it's very possible. Coal bed methane, I think you're looking at a number of things going on in Australia and in the other parts of the Far East that we've been very much involved in. It's been a long time coming, though, to see, like, Gorgon come to fruition now. We've been talking about it for years. There's other things in that pipeline that I think are going to be meaningful to us, but, again, I think I would always caution you, we're not in control of the timing. It could be an '11 event. It could be a '12 event. But we’re in a good position when it happens.

Jeffrey Spittel - Madison Williams and Company LLC

Fair enough.

Operator

The next question comes from Kurt Hallead with RBC Capital Markets.

Kurt Hallead - RBC Capital Markets Corporation

I just figured I'd beat the BOP thing into the ground if it's going to be the last question. And in any event, let's think outside the box here a little bit. I'm sure you guys have kind of put some pen to the paper. On a broad market opportunity, what do you think the incremental dollar spend is going to be for the industry to meet the potential requirements that have been spelled out so far? I'm not try to pin you down, Cameron, specifically, but I'm trying to get a context from a broader industry standpoint, and any help on that would be much appreciated.

Charles Sledge

We're probably not in the best position to comment on that right now, but I know others have thrown out numbers that sounds pretty reasonable to us. So we’re rooting that those numbers are right.

Kurt Hallead - RBC Capital Markets Corporation

And what are the range of these numbers that others have thrown out?

Charles Sledge

Oh, I think you can go to some of the conference call scripts and pull those out.

Kurt Hallead - RBC Capital Markets Corporation

All right. And then, do you guys have any general sense as to when we may be allowed back in the market to buy back some stock?

Charles Sledge

Oh, we're just going to play that by ear and take the facts as they come. We're very conservative. We're very prudent. You guys have seen that out of Cameron for over a decade. So we'll certainly let you know.

Kurt Hallead - RBC Capital Markets Corporation

Okay, great.

Operator

Next, we have Bill Sanchez with Howard Weil.

William Sanchez - Howard Weil Incorporated

Chuck, I may have missed it, but last quarter, you had mentioned that Subsea revenues and DPS you expected to be up 50% year-on-year. Has that number changed at all?

Charles Sledge

No.

William Sanchez - Howard Weil Incorporated

Okay, that’s still the expectation? And just as a follow-up on the share, on the suspension of the share repurchase program. Was that, Chuck, just a direct response to, I guess, letters that were sent out by the DOJ? Was there a decision made internally that we just need to be more conservative here? I'm just curious in terms of did a reassess of liability, potentially, here, suspend this? Or this just in response to the DOJ?

Charles Sledge

Number one, we did not get a DOJ letter. I do like Halliburton's response to the letter they got. That being said, Bill, we're just conservative. You’ve seen that, again, over a decade from us, and it’s nothing more than that.

William Sanchez - Howard Weil Incorporated

Okay.

Operator

Our next question is from David Smith with Johnson Rice.

David Smith - Johnson Rice & Company, L.L.C.

Did I hear correctly that V&M orders increased in Russia?

Jack Moore

I didn't really specifically call out an increase. We had some projects in Russia booked in the quarter. We’ve had projects booked in the first quarter. We've had projects booked last year as well. So I would say “we continue to participate in the Russian valve market” would probably be the right way to articulate that.

David Smith - Johnson Rice & Company, L.L.C.

Okay. And are you seeing anything change relative to last year or so in regards to maybe gas prompts [ph] (1:16:57) infrastructure requirements?

Jack Moore

No, not really. I think there's a lot of potential, but we have a lot of things that we're tracking, but we haven't seen any significant move relative to doing anything different.

Charles Sledge

One day they are going to have to work on the infrastructure that was placed in the 70s, and so one day, we're going to talk a lot about a lot of orders out of Russia with respect to their infrastructure. But right now, it's all project-related, and we've done quite well in those that are out there.

David Smith - Johnson Rice & Company, L.L.C.

Okay.

Operator

Our next question is from Brad Handler with Credit Suisse Group.

Brad Handler - Crédit Suisse AG

Could you please speak to the separation business, NATCO’s standard and traditional business, in the U.S.? How did it perform in the quarter? And maybe you can educate us a little bit about if there is a lag associated with that as it relates to liquids development here. So speak to some of the trends that might evolve in the U.S., please.

Jack Moore

Yes, they're holding their own. They're doing well. I would say there is a lag. When you kind of look at the stages of Cameron business on the front end, with the drilling and the Distributed Valve businesses and you have the well heads and the trees and then you have separation equipment, then you have the compression equipment. So as, maybe, a lot of these wells are drilled and held, they don't necessarily put any separation equipment on them. So it would still generate a lot of business for us relative to any of the drilling revenue we would get or the wellhead revenue relative to the trees. But to take it and tie it into the networks and the distribution systems, that's where the SNP traditional business was. And so some of that is going to lag until those are brought on-stream or brought into the process. So that's kind of where we're at.

Brad Handler - Crédit Suisse AG

Okay. But can you speak to how the U.S. business did perform in the quarter, maybe relative to rig count growth, then?

Jack Moore

It's tracking right where we would have expected it to. There's no surprises.

Brad Handler - Crédit Suisse AG

Okay. The corporate expense line was sort of backing out the charges. It was a good amount below what we were expecting. Can you speak to that? And then, maybe just a little bit of guidance on the second half of the year, there?

Charles Sledge

Yes, think we still target around $100 million for a year in corporate expenses, excluding any charges. During the quarter, the first quarter were a little high. We do our restricted stock grants beginning of the year, and accounting rules require you to accelerate some of that expense. So you saw that in the first quarter, which you didn't see in the second quarter. And we did have an FX gain during the second quarter as well.

Jack Moore

And a little expense in the first quarter.

Brad Handler - Crédit Suisse AG

Got it. Okay.

Operator

Our next question comes from Michael Blossy [ph] (1:20:10)with Buoyance [ph] (1:20:10).

Unidentified Analyst

You talked about customer advances having a negative impact on cash from operations. I was wondering if you could quantify the impact for me?

Charles Sledge

Oh, I don't have that number in front of me. I'm sorry.

Unidentified Analyst

Okay. And just speaking to the fact that receivables used cash as well. Is that a function of the percentage of completion accounting? Or units of completion accounting?

Charles Sledge

No, that's a function of our shorter-cycle billings.

Unidentified Analyst

Okay, perfect. And did you give the cancellations number for the quarter?

Charles Sledge

We did not, but there were no significant cancellations.

Unidentified Analyst

Okay. Perfect.

Operator

Ladies and gentlemen, there are no further questions at this time. I'll turn the conference back over to management for closing remarks.

R. Amann

Okay, thank you, Diego, and thanks to all of you for joining us today.

Operator

Thank you, sir. This concludes today's conference. All parties may disconnect now. Thank you.

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Source: Cameron International Q2 2010 Earnings Call Transcript
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