Formerly known as Cooper Cameron, Cameron is the industry leader inblowout protection for oil and gas wells, just one of many products offered by this leader in oil and gas services. Ironically, the re-branded firm is reporting blowout earnings these days. Writers William Bunch and Dan Harvey explain why.
For a company with roots going all the way back to the early 19th century, 2006 has been a particularly exciting year for Cameron, the company that established itself as a leading name in the oil-field supply business under its more recent name of Cooper Cameron Corporation.
Just before the start of the new year Cooper Cameron Corp. doubled the size of its Valves & Measurement group through the acquisition of Dresser’s On/Off Flow Control segment, which makes valves and other products for the oil and gas markets.
The firm then shortened its name simply to Cameron as part of a broader re-branding effort. But perhaps most significantly, all the changes at Cameron are coming at a time when the firm’s specialty areas are booming. With oil prices hovering around the all-time record $75 a barrel mark, the world’s leading oil companies are spending more money on exploration and on expanding refinery capacity than ever before. And that has been a boon to the Texas-based company.
“Currently, it’s a very good time for us,” said Rem Moreland, the Vice President of Marketing for Cameron’s Valves & Measurement group. “Our valve business is good primarily from the expansion of LNG – liquefied natural gas production and processing, as well as the worldwide expansion of pipelines for transportation of oil & gas.” However, Moreland concedes that the high-cost-per-oil-barrel trend includes a reality that we’ll all have to live with. “It appears likely that the high cost [of oil] is here to stay. As the world’s population continues to grow, the demand for oil and natural gas will continue to increase.”
As the United States consumes more natural gas than it produces, importation will become increasingly important. “Natural gas produced in one part of the world but not actually consumed there is called stranded gas – it’s produced in a given region but may not be consumed in that region,” Moreland says. Thus, the trend toward LNG. “Natural gas is easy to transport if you have a pipeline but more complex to move if you don’t have a pipeline between continents,” says Moreland. “Because of the law of supply and demand, to a great extent, the market is moving toward LNG. LNG is natural gas which chilled to a liquid state, put aboard a vessel in one part of the world and transported to another part of the world where it is transformed back into a gaseous state and put into a pipeline.”
Cameron is heavily involved in all parts of the LNG process – from drilling and production to processing and transportation.
The U.S. Federal Energy Regulatory Commission (FERC) is helping the country move in that direction. In June of this year, FERC simultaneously approved applications for five LNG receiving projects. Completion of the projects would increase LNG regasification capacity in the continental United States by more than eight billion cubic feet per day, according to Cambridge Energy Research Associates (CERA), a leading advisor to international energy companies, governments, financial institutions, and technology providers. The recent federal approvals, CERA believes, strongly suggests the growing role that LNG will play in North America’s gas supply complex. Further, CERA says global liquefaction capacity will be the pacing item for North American LNG import growth through the end of the decade.
But Moreland noted that oil and gas companies are spending heavily right now in every type of infrastructure. “Drilling activity is at an all-time high, both in the oil and gas drilling arenas, but in addition, the oil and gas companies are expanding production and processing facilities worldwide,” he says. “So, spending is directed at more than just drilling. The companies also need to increase their production and processing capabilities.”
Earlier this year, Cameron reported that its earnings for the fourth quarter of 2005 have soared by a whopping 89 percent, fueled both by the acquisition of the Dresser On/Off valve unit and the booming economy in the oil patch. The surging revenues mean that Cameron is now a $3-billion-a-year company.
Moreland said that company officials are enthusiastic about the impact of the Dresser On/Off purchase, which not only takes Cameron’s annual valve business from approximately $600 million to $1.2 billion annually but also gives the Houston-based firm access to several state-of-the-art manufacturing facilities in Italy. “This really improves our ability to serve the international market,” he said.
Cameron accomplished the acquisition in December 2005, as Moreland indicates, to better serve customers in the global oil and gas production, pipeline and process markets. Following the purchase, Cameron immediately began integrating the former Dresser operations with its valve operations, a process expected to be completed by early 2007, thanks to the complementary nature of the manufacturing plants and associated product lines.
“What they were doing and what we were doing was more complementary than competitive,” Moreland points out. “Because of that, we will now be able to meet more of our customers’ needs with specific products that address their particular application requirements. Previously, we had a very wide product line, but it wasn’t as broad as we would have liked. The acquisition gives us the added scope.”
In addition, the Dresser On/Off acquisition provides Cameron’s Valve & Measurement group with new manufacturing and testing facilities, which rounds out its capabilities for its customer base.
Even before the Dresser acquisition, Cameron had been packing on the muscle as a growing organization. In fact, the company has been growing steadily for a long, long time. Its history dates all the way back to 1833, and the foundry that Charles and Elias Cooper established in Mt. Vernon, Ohio. A leading maker of steam engines at the height of the Industrial Revolution, the company eventually established itself in the 20th century as the leader in blowout prevention for oil wells. The Cameron name comes from the Cameron Iron Works, which opened in Houston in 1920, in the early years of the oil boom.
The name Cooper Cameron, which the company had been known under for the last decade, was the result of spinning off the firm as a publicly traded company on the New York Stock Exchange in 1995. Today, this global leader includes 12,000 employees, 275 manufacturing and service locations worldwide and 52 product brands. The firm also has joint-venture plants in India and China.
It has two operating groups – Drilling & Production Systems (DPS) and Valves & Measurements (V&M) that include four divisions each. The DPS group includes Drilling Systems, Surface Systems, Subsea Systems and Flow Control. The V&M group includes Distributed Valves, Engineered Valves, Process Valves, and Measurement Systems. In addition, the company has two other divisions – Petreco Processing Systems and Compression Systems. All divisions work with drilling contactors, oil and gas producers, pipeline operators, refiners and other process owners to control, direct, adjust, process, measure and compress pressures and flows.
Moreland noted that the company has acomplished a number of acquisitions over the years, including a number of valves and associated products that have been marketed under a variety of names. He said that the Valve & Measurement group has more than 100 offerings sold under an array of 20 different names. This has helped Cameron achieve the distinction of being the world’s largest flow control company in the oil and gas market. “In terms of flow control, from the well head, through production and processing and on to transportation, we probably have the largest product offering of valves and measurement components in the world,” reveals Moreland.
In addition to its industry leading oil and gas products, Cameron’s Compression Systems division is a leading manufacturer of centrifugal air compressors, integral and separable gas compressors and turbochargers.
That is one reason why the firm has so aggressively launched its re-branding as Cameron in 2006, advertising the new name and focus in the leading trade journals. The trend, he noted, has been to add product lines that have made Cameron a full-service, one-stop supplier to its customers in the oil and natural gas sectors. The new name better communicates the company’s identity. “True, Cooper is the name of some of our founders, but our profile has evolved over the years,” explains Moreland. “As we now service more in the oil and gas sector, we believe the Cameron name carries more recognition in that sector.”
The name also underscores the company’s unflagging focus on high quality over price. “We’ve assumed a number of different products and brands in order to provide our customers with better product offerings from a single source of supply,” Moreland explained.
In the area of oil and gas production that has meant adding or developing internally a number of new products including sub-sea systems to service the growing market for offshore exploration.
Products that have earned the company its reputation include retrievable subsea chokes. The company’s Cameron Willis retrievable subsea chokes are designed with a retrievable insert. The choke body is mounted on the Christmas tree or manifold. The insert, a unitized trim cartridge and actuator assembly, is retrievable to the surface, leaving the choke body subsea. Cameron Willis retrievable subsea chokes are available with two types of insert connectors: crown connector and clamp connector. The crown connector is a single-piece cylindrical collet with slots, machined to form locking fingers. In this design compression loading reduces potential for stress corrosion and cracking. This design features minimal clearance for installing and retrieving the choke insert. It also features a clamp connector, a three-piece, double-hinged, single-bolt design based on field proven hum/clamp technology – simple rotary clamp make-up can be performed by either a diver or an ROV.
This innovation not only decreases downtime but provides flexibility to change trims based on well profile.
Another premier product is the Cameron H2I Choke, available in positive and adjustable configurations that accept the same beans and seats as the H2 choke. However, the bean/seat is recessed in the body below the inlet flow path to extend the life of the H2I. Each H2I body is equipped with a port for monitoring pressure. Bonnet-to-body connection threads are designed for easy access and cleaning. The H2I is also available in an H2IMS design with a metal-to-metal sealing bonnet. Features include long life and low maintenance.
With this technology and innovative spirit, the company has garnered many contracts. Earlier this year, Cameron was awarded a contract worth approximately $340 million to provide sub-sea systems for the initial phase of Total’s Akpo, a 44-well sub-sea development project offshore Nigeria. Cameron’s role in that project includes providing sub-sea systems engineering and project management, along with sub-sea Christmas trees, production and intervention control systems, manifolds, flow-line connection systems, installation support and associated spares for Total’s Nigerian subsidiary, Total Upstream Nigeria Ltd.
Moreland said that one reason the pipeline business has become such a major part of the focus at Cameron is that federal regulatory agencies, including the Environmental Protection Administration (EPA) and the Occupational Safety and Health Administration (OSHA), have mandated a series of improvements to the oil and gas transportation firms.
“There is specific legislation mandating that the pipeline transportation companies improve the integrity of the pipelines,” he said. However, Cameron’s growing expertise in the area of process valves is likely to mean increasing business in the area of refineries expansions as well.
Said Moreland: “That might be the next frontier for us in the United States because there hasn’t been a grassroots refinery built in this country for 25 years.” He noted that Cameron’s Valve & Measurement group is manufacturing valves for a huge refinery expansion that’s currently underway in the Port Arthur-Beaumont area. Additionally, the damage caused by 2005’s Hurricanes Katrina and Rita is causing major infrastructure spending in the region as well.
Although Cameron’s product lines have grown dramatically, the area where it still really stands out is in blowout protectors, or BOP devices. The Cameron U BOP, available in a wide variety of sizes, is the most widely used ram-type BOP for land, platform and sub-sea applications worldwide. Like all other Cameron preventers, the rams in the U BOP are pressure-energized.
Now, the Dresser On/Off acquisition will add 1,700 employees with nine worldwide manufacturing locations and annual revenue of over $400 million. Dresser‘s brands including Grove, Ring-O Valve, Texsteam, TK Valve, Wheatley, Tom Wheatley, and Ledeen actuators. Cameron has developed an ambitious plan to integrate the Dresser unit, expected to be completed by the end of 2006.
All the while, the company will continue its longstanding policy of reinvestment. “What probably separates us from the competition is our belief in capital reinvestment to improve our throughput,” says Moreland.
Specifically, Cameron invests a significant portion of capital into machine tools and process improvements, which better allows it to control the throughput of its manufacturing facilities. This gives the company a leg up over competitors, who tend to rely heavily on outsourcing. “The trend in this industry, as with many other industries, is to outsource, outsource, outsource,” Moreland emphatically states. “It is true that we do some outsourcing ourselves but, for the past five years, we’ve focused on investing in our internal manufacturing capacity and throughput.”
This, he points out, enables Cameron to be much more flexible than its competition, which tends to rely too heavily on outsourcing. Moreland adds that another problem with that ubiquitous trend, specifically as it relates to valve industry in general, is that there’s only a finite set of resources. “Because of that, many of our competitors use the same set of outsourcing resources,” he explains. “When those resources get clogged up, our competition can’t be as responsive and flexible as we are.” As such, Cameron has opted to buck the trend, a decision that appears much more prudent and logical. “After all, customer demands are ever-changing. We’d rather reinvest in our own resources to be more responsive to those changes,” says Moreland.
In turn, this approach only increases the level of quality that characterizes Cameron. “Because we’re buying equipment today, we are buying state-of-the-art capabilities,” says Moreland. “Consequently, the machine tools we use to manufacture our products are more efficient and more productive.” And so, while Cameron may specialize in preventing blowouts, it seems that little will prevent a future of blowout earnings for the re-branded company.