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  1. 1. ANNUAL REPORT 2000 W h e r e Tr a d i t i o n a n d Te c h n o l o g y C o m e To g e t h e r
  2. 2. COOPER CAMERON Cooper Cameron is a leading international manufacturer of oil Where Tradition and Technology Come Together and gas pressure control equipment, including valves, wellheads, controls, chokes, blowout preventers and assembled systems for oil and gas drilling, production and transmission used in onshore, offshore and subsea applications. Cooper Cameron is also a leading manufacturer of centrifugal air compressors, integral gas compressors and turbochargers. Additional information about the Company is available on Cooper Cameron’s home page at
  3. 3. 1 FINANCIAL HIGHLIGHTS ($ thousands except per share, number of shares and employees) Years ended December 31: 2000 1999 1998 Revenues1 $ 1,386,709 $ 1,475,061 $ 1,893,311 Gross margin 411,912 398,785 552,589 Earnings before interest, taxes, depreciation and amortization (EBITDA)2 214,531 193,051 322,879 EBITDA (as a percent of revenues) 15.5% 13.1% 17.1% Net income 27,660 43,002 136,156 Net income2 84,224 54,688 151,682 Earnings per share Basic 0.52 0.81 2.58 Diluted 0.50 0.78 2.48 Diluted2 1.53 1.00 2.76 Shares utilized in calculation of earnings per share Basic 52,800,000 53,328,000 52,857,000 Diluted 55,013,000 54,848,000 54,902,000 Capital expenditures 66,599 64,909 115,469 Return on average common equity2 10.6% 7.0% 21.7% As of December 31: Total assets $ 1,493,873 $ 1,470,719 $ 1,823,603 Total debt 192,272 210,332 413,962 Total debt-to-capitalization 18.6% 22.8% 34.7% Stockholders’ equity 842,279 714,078 780,285 Shares outstanding 54,011,929 50,567,959 53,259,620 Net book value per share 15.59 14.12 14.65 Number of employees 7,300 7,200 9,300 Revised to reclassify shipping and handling costs from 1 revenues to cost of sales. Calculated excluding nonrecurring/unusual charges. 2 TABLE OF CONTENTS Company Profile . . . . . . . . . . . . . . . . . . . . . . . 2 Letter to Stockholders . . . . . . . . . . . . . . . . . . . 3 Cameron . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Cooper Cameron Valves . . . . . . . . . . . . . . . . . .14 Cooper Energy Services . . . . . . . . . . . . . . . . . .18 Cooper Turbocompressor . . . . . . . . . . . . . . . . .22 Management’s Discussion and Analysis . . . . . .25 Report of Independent Auditors . . . . . . . . . . . .33 Consolidated Financial Statements . . . . . . . . . .34 Notes to Consolidated Financial Statements . . .38 Selected Financial Data . . . . . . . . . . . . . . . . . .55 Stockholder Information . . . . . . . . . . . . . . . . . .56
  4. 4. 2 COMPANY PROFILE CUSTOMERS PRODUCTS Provides pressure control systems, Oil and gas majors, Surface and subsea ® equipment and services for oil independent producers, production systems, and gas drilling and production engineering and blowout preventers, in onshore, offshore and construction companies, drilling and production ® ® subsea applications. drilling contractors, control systems, gate rental companies and valves, actuators, geothermal energy ® chokes, wellheads, ® producers. drilling and production riser and aftermarket parts and services. PRODUCTS CUSTOMERS ® Oil and gas majors, Provides products and services to Gate valves, ball independent producers, the gas and liquids pipelines, oil valves, butterfly valves, engineering and and gas production and industrial Orbit valves, rotary ® construction companies, process markets. process valves, block pipeline operators, & bleed valves, plug drilling contractors valves, actuators, ® ® and major chemical, chokes, and aftermarket petrochemical and parts and services. refining companies. ® PRODUCTS CUSTOMERS Integral engine- Provides products and services to Oil and gas majors, compressors, the oil and gas production, gas independent producers, reciprocating transmission and process markets. gas transmission compressors, companies, equipment turbochargers, leasing companies and control systems independent power and aftermarket producers. parts and services.  PRODUCTS CUSTOMERS Integrally geared Petrochemical and Manufactures and services centrifugal compressors, refining companies, centrifugal air compression compressor systems durable goods equipment for manufacturing ® and controls. Complete manufacturers, basic and process applications. aftermarket services resource, utility, air including spare parts, separation and chemical technical services, process companies. repairs, overhauls and Specific focus on compressor upgrade automotive, glass, engineering. textile, electronics, food, container, pharmaceutical and other companies that require oil-free compressed air.
  5. 5. 3 TO THE STOCKHOLDERS OF COOPER CAMERON We began 2000 with hopes that 1999’s resurgence in oil and gas prices would be sustained at levels that would support a much-anticipated recovery in spending by our customers. Midway through, we were encouraged by the demand/supply scenario that appeared to support a long-term stabilization of prices. By year-end, we were surprised that activity had not accelerated more strongly and that our backlog remained relatively constant, rather than increasing. While our order book did not grow as briskly as we originally expected and would have liked, Cooper Cameron’s profits showed steady improvement during the year. Financial performance improves over prior year Recovery under way, Revenues totaled $1.39 billion for 2000, down but at modest pace almost six percent from 1999’s $1.48 billion. 1999 results, however, included $93 million in rev- Oil and gas prices rose during 2000 to the high- enues from the rotating compressor business, est levels seen in the past decade. Oil prices spent which we sold at the end of last year’s third quarter. most of the second half of the year above $30 per Despite the lower revenue base, earnings before barrel before returning to a more moderate level interest, taxes, depreciation and amortization in the high 20s by year-end. Natural gas prices (EBITDA) were up by approximately 11 percent, rose steadily throughout the year, and with the to $215 million compared with last year’s $193 approaching winter months, broke the $10 per million. Earnings per share, excluding nonrecur- mcf barrier on the futures market. Oil and gas ring items, increased from $1.00 to $1.53, up 53 markets have clearly uncoupled, with oil remain- percent from 1999. The percentage increase in ing a global commodity and North American EPS exceeded that of EBITDA, primarily because natural gas demand being influenced more and of lower interest expense as a result of our having more by growing electric power markets fueled by reduced debt with the proceeds from the sale of natural gas. the rotating business, as well as the absence of Many expected higher prices to be the catalyst depreciation and amortization associated with for a rapid recovery in drilling and development that business. activity by energy producers worldwide. Although that has been true among certain customers focusing on natural gas in North
  6. 6. 4 America, higher oil prices have not generated similar increases in spending in most interna- tional markets. Mergers among major producers, uncertainty about future hydrocarbon prices, cautious economic assumptions on large develop- needs and expectations become the focus of the ment projects and a measured approach to doing manufacturing or service effort; data are accumu- business in new international arenas like West lated to measure performance versus standards, Africa appeared to instill an extreme sense and opportunities are identified for improving of conservatism in many of our customers $1,893 $1,817 that performance; and resources are allocated to during the year. $1,475 $1,395 $1,387 aggressively address the opportunities. We like the feel of this energy market. We The most important resources for the program believe that the current pace of activity is con- are the people who execute the plan. Cooper ducive to a sustained upcycle, and will bring Cameron began training key personnel in Six about a relatively longer-term recovery. Spending Sigma practices in late 2000, and there are already by our primary customers is forecast to increase more than 50 projects under way in the various by approximately 20 percent during 2001; we 96 97 98 99 00 Revenues divisions. expect to capture a reasonable share of that incre- ($ millions) We expect these projects to generate meaning- mental business. ful contributions to earnings over the next several Six Sigma program begins years. This will be an ongoing business practice, not a short-term program. In September 2000, Cooper Cameron initiated This effort, combined with Cooper Cameron’s its Six Sigma program, with a goal of improving long-time emphasis on quality programs and manufacturing and service results across each of “best practices” initiatives, is expected to give rise the Company’s divisions. Six Sigma has been to significant improvements in business processes, successfully implemented in numerous world- $323 $294 customer satisfaction and overall profitability. class companies, and the standards and practices are well-suited to Cooper Cameron’s quality and $215 $193 Restructuring expected to $183 customer service goals. be completed by mid-year 2001 While Six Sigma’s literal definition offers a We recorded significant nonrecurring charges statistical measure of variation from the norm, during 2000 related to ongoing restructuring the program uses selected tools for evaluating, 96 97 98 99 00 activity in our businesses, particularly in the measuring and, most importantly, improving EBITDA Cooper Energy Services (CES) operations. We processes within an organization. Customer ($ millions) recognized more than $77 million in nonrecur- ring charges during the year, including nearly $37 million in non-cash write-offs of assets. About 87 percent of the charges were related to CES. Included were remaining costs from the 1999 decision to close the Grove City, Pennsylvania
  7. 7. 5 Taking advantage of a healthy balance sheet At year-end, our balance sheet was as strong as it’s ever been. Total debt was down to $192 mil- lion, and our debt-to-capitalization ratio was 18.6 facility; the transfer of equipment and operations percent. We will continue to seek out acquisition from Mount Vernon, Ohio to other locations, opportunities, subject to our usual standards of including our new facility in Waller, Texas, west of strategically fitting within the current framework Houston; and our recent decision to exit the of our businesses. Such opportunities are difficult 17.1% 16.2% 15.5% Superior gas engine line and close CES’ to find in a market where the prospects appear so 13.1% 13.1% Springfield, Ohio plant. That process will continue encouraging for potential sellers. into the first half of 2001 and require additional We may also choose to again repurchase our charges along the way. Closing these old and own common shares. We bought approximately expensive facilities clearly benefits us financially, 3.5 million shares at the end of 1999, at an aver- and our product and market positions will be age cost of about $28 per share. One of our stated 96 97 98 99 00 strengthened for the future. Other charges during objectives is to control our share count through EBITDA (as a percent of revenues) 2000 were related to facility closure, restructuring repurchases, and we would certainly look on any and workforce reductions in a variety of Cameron decline in the stock price as an opportunity to locations, and there were some modest costs associ- reenter that market. ated with Cooper Cameron Valves (CCV) and Cooper Turbocompressor (CTC). Encouraging performances We separate these charges from our operating We spend a lot of time dealing with challenges results because they do not represent an ongoing across our businesses, and we sometimes forget to component of doing business and they stem from acknowledge the successes. Examples of these can actions separate from day-to-day operations. $115 be found throughout our operations. Still, we cringe every time we characterize these Cameron remains the primary driver of our items as nonrecurring or unusual, simply because operating and financial performance, and contin- $72 $67 $65 they seem to have become a too-regular part of ues to raise the bar for performance as an indus- our financial reporting. One of our goals during $37 try leader. Cameron’s worldwide aftermarket the first half of 2001 is to record the last of such initiative, CAMSERVTM, has reinforced Cameron’s charges. We can’t guarantee there will be no more role as an industry leader in parts and service, and 96 97 98 99 00 similar charges, but we’ll do our best to wrap up boosted the aftermarket business to more than Capital Expenditures the restructuring process as quickly as possible. ($ millions) one-third of Cameron’s revenues. We remain a Still, when we see substantial opportunities to improve our business, we won’t hesitate to take decisive action.
  8. 8. 6 leading supplier of subsea trees and associated components for deepwater well completions, and our blowout preventers and related drilling con- trols systems are market leaders as well. And in the surface business—which includes production equipment installed both on land and on offshore platforms—we continue to hold the top market share position worldwide. equipment and services was not as robust as we One of the greatest challenges at CES is dealing $1,894 $1,843 expected, our earnings per share increased by with demand for Ajax integral engine-compressor $1,497 $1,406 more than 50 percent during 2000, and we expect units. North American gas activity has stimulated $1,303 our financial performance to improve again dur- customer interest in these gas compression packages. ing 2001. Meanwhile, the pace of activity in the Cooper Turbocompressor (CTC) began an energy business, coupled with OPEC’s apparent active aftermarket development effort last year, discipline and a healthy North American gas market, leveraging off its significant base of installed is fueling what should be an extended upcycle. equipment, and customer response has been 96 97 98 99 00 Orders extremely encouraging. The combination of ($ millions) In closing… maintenance agreements, OEM parts and During Cooper Cameron’s first five years as a enhanced products and services are generating public company, we experienced a full cycle in the revenues in an area previously untapped by CTC. oil service business. We saw activity ramp up Prepared for the recovery (still) quickly from 1995 to 1997; dealt with the slow- down, beginning in late 1997 and extending In my letter last year, I described how we had throughout 1998; and have seen higher prices and taken steps that would prepare us for the growing demand for oil and gas lay the ground- inevitable return to higher activity levels, driven $790 $786 $728 work for the current recovery, which is now into by increased oil and gas prices. Included in that its second year. preparation was nearly $100 million of research $528 $513 While the Cooper Cameron name is a relative and development spending over the past three newcomer to the industry, our products and rep- years. We share the general industry view that utation are not. We have an outstanding base of spending on oil and gas exploration and develop- loyal customers, and we’re grateful for every one ment has not increased as quickly as most of us of them. Similarly, and not coincidentally, we 96 97 98 99 00 had anticipated. While the demand for our Backlog have a very talented group of people who evalu- (at year-end, $ millions) ate, plan and execute our business strategies year after year—and many of them have been doing so through several oil and gas cycles. Most of them are also Cooper Cameron shareholders; so their goals are faithfully aligned with yours and mine. They deserve our collective thanks.
  9. 9. 7 Lastly, I want to express my personal thanks to Sincerely, one of our directors, who will retire from our board at this year’s annual meeting. Michael J. Sebastian has been on our board since Cooper Cameron’s formation in 1995, and we were Sheldon R. Erikson fortunate to reap the benefits of his leadership Chairman of the Board, and experience over the past five years. President and Chief Executive Officer On behalf of Cooper Cameron’s employees, we appreciate your support, and we will do our best to continue the standards of performance and profitability your Company has established.
  10. 10. CAMERON
  11. 11. 9 STATISTICAL/OPERATING 2000 HIGHLIGHTS ($ millions) 2000 1999 1998 Revenues1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $838.3 $817.1 $1,024.7 EBITDA2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148.7 139.3 215.0 EBITDA (as a percent of revenues) . . . . . . . . . . . . . . . . . . . . . . 17.7% 17.0% 21.0% Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.6 38.8 82.0 Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851.4 619.5 1,074.9 Backlog (as of year-end). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372.3 367.0 592.6 Revised to reclassify shipping and handling costs 1 from revenues to cost of sales. Excludes nonrecurring/unusual charges. 2 $1,025 $838 $817 Cameron is one of the world’s leading providers of systems and equipment used to control pressures 98 99 00 and direct flows of oil and gas wells. Products Revenues ($ millions) include wellheads, Christmas trees, controls, chokes, $215 blowout preventers and assembled systems, $149 $139 employed in a wide variety of operating environments—basic onshore fields, highly 98 99 00 EBITDA ($ millions) complex onshore and offshore environments, $1,075 deepwater subsea applications and ultra-high $851 $620 temperature geothermal operations. 98 99 00 Orders ($ millions) $593 < The model “TL” is a lightweight version of the industry’s most popular and widely used ram-type blowout preventer. $372 $367 98 99 00 Backlog (at year-end, $ millions)
  12. 12. 10 Cameron’s drilling business remains committed to providing innovative systems solutions to allow safer, more cost-effective and reliable drilling for its global customers. Financial overview Cameron’s leading market position in Among recent operational successes, this business segment provides a large Shell Shearwater, a High Pressure/High Cameron’s revenues increased to $838.3 installed base requiring aggressive world- Temperature platform in the North Sea, million in 2000, up three percent from wide aftermarket support, which results in was commissioned during 2000 using $817.1 million in 1999. EBITDA (excluding higher margin and better flowthrough Cameron 5″ 15,000 psi surface Christmas nonrecurring charges) was up from sales volume. New business sales will con- trees, including Cameron wellheads, actu- year-ago levels, reaching $148.7 million, tinue to shift from the large-bore subsea ators and chokes. More recently, Cameron compared with 1999’s $139.3 million. and deepwater market, which fueled provided six platform wellheads and trees EBITDA as a percent of revenues was 17.7 major drilling business growth from 1997 and assisted in the engineering and start- percent, up from 17.0 percent. through 1999, to platform, jackup, land, up of Anadarko’s high-profile Hickory and specialty blowout preventer tech- and Tanzanite projects offshore Louisiana. Drilling nology. For example, Cameron recently Equipment for this high-pressure develop- Cameron provides surface and subsea received several orders for large-bore sur- ment was delivered on a fast-track schedule, blowout preventer (BOP) stacks, drilling face-based BOP stacks, including several and production began in December. riser, drilling valves and choke and kill platform stacks to be delivered into the Operators and industry experts alike manifolds, as well as hydraulic and multi- Norwegian market. Orders for this equip- remain bullish on the fundamentals for plexed electro-hydraulic (MUX) control ment are projected to be at the highest natural gas in North America. With con- systems used to operate surface and subsea level since the early 1980s. tinued high levels of drilling activity BOP stacks, to multiple customers in the anticipated in key gas-producing regions drilling business worldwide. Cameron Surface like the Northern Rockies, onshore also provides complete aftermarket services and offshore Louisiana, the Canadian Surface equipment represents the under the CAMSERV™ brand and Foothills and South Texas, Cameron’s largest component of Cameron’s revenue replacement parts for drilling equipment, market presence and quality reputation base, and includes wellheads, Christmas including elastomer products specifically should allow it to take full advantage of trees and chokes used on land or installed designed for drilling applications and increasing demand for surface products. on offshore platforms. Cameron holds manufactured at Cameron’s state-of-the- the leading market position in supplying art Elastomer Technology facility. Subsea this type of equipment. Cameron also Cameron’s drilling business remains Subsea equipment includes systems, recently increased its emphasis on supplying committed to providing innovative systems products and services associated with control systems for surface markets. solutions to allow safer, more cost-effective underwater drilling and production appli- The oil and natural gas price recovery and reliable drilling for its global customers. cations, including subsea wellheads, mod- has driven improving demand for Drilling business revenues decreased in ular Christmas trees, chokes, manifolds, Cameron’s surface products. Both majors 2000 compared with 1999, as large-bore flow bases, modular CAMTROLTM control and independent operators in North subsea BOP stacks, MUX control systems, systems, and flowline connection systems. America spurred an increase in spending and drilling riser orders were substantially The subsea market is another area in which drove U.S. and Canadian rig counts completed and delivered for the recent which Cameron holds a leading share of to new ten-year highs, with natural gas newbuild cycle of Mobile Offshore the installed base worldwide and is one of drilling the main driver. In this environment, Drilling Units. Cameron will continue the primary providers to the industry. Cameron’s market-leading position as the to provide the best value delivered for Highlights of Cameron’s business in this premier supplier of high pressure surface drilling systems, maintain its core compe- market during 2000 included the award wellheads and trees led to record highs in tency in this important business segment, and delivery of the Triton Energy Ceiba North American surface products orders. and look to continuous improvement development off Equatorial Guinea in West Tightening availability of products and with regard to reliability and availability Africa. Cameron’s systems capabilities personnel justified Cameron’s decision to of the overall system. With this in mind, enabled Triton Energy to achieve first oil implement price increases in the North a Six Sigma statistically based quality from Ceiba less than fourteen months American markets during the fourth improvement process has been imple- after field discovery, which set an industry quarter of 2000. This increase should be mented. This process is aimed at break- record for a deepwater development. reflected in the Company’s results begin- through improvements in the performance Cameron’s scope of work includes overall ning in early 2001, and the impact should and product commercialization of the systems engineering and project manage- become more apparent during the year as drilling business. The first such project is previous supply contracts are renewed at scheduled for completion early in 2001. the new price levels. Cameron’s focus on Other projects have been started or are product quality and service responsiveness under review. should assist in the retention of price-sen- sitive customers.
  13. 13. 11 The subsea market is another area in which Cameron holds a leading share of the installed base worldwide and is one of the primary providers to the industry. ment, as well as modular SpoolTrees, facilities in the Gulf. In the international Controls’ CAMTROL production control modular CAMTROL production control arena, Cameron was awarded BG’s system a technical rating higher than all systems, manifolds, flow bases, subsea Scarab/Saffron project, including subsea other major competitors’ subsea production wellheads, and pipeline connection trees and related hardware to be installed control systems. Deliveries were completed systems. The system was designed and offshore Egypt. in 2000 for three major projects: Shell integrated using MOSAICTM philosophy, Order inquiry and project planning Malampaya, Texaco Captain and Triton Cameron’s field-proven modular building activity for large-scale subsea projects has Energy Ceiba. block solution for subsea systems. been at very high levels in 2000 and is Recent new awards for subsea produc- An equally significant project for expected to continue in 2001. Project tion control systems include Repsol’s Cameron is the Shell Malampaya Natural activity has been greatest in deepwater Chipiron project in Spain, and Petrobaltic’s Gas to Power Project, served by Cameron’s areas of the Gulf of Mexico and West development in Poland. Singapore facility. The Malampaya devel- Africa. Project sanction and order book- Cameron Controls’ two primary manu- opment will reliably supply natural gas ings have been delayed in both Nigeria facturing, assembly and testing facilities, directly to three land-based power stations and Angola, however, due to difficulties in in Celle, Germany and Houston, Texas, that provide more than a third of the negotiation with host governments and completed their second full year of opera- power requirements for the Philippines. state oil companies over terms and tion in 2000. The new facilities have This MOSAIC system scope of supply conditions of participation and project succeeded in reducing lead times, increas- includes modular SpoolTrees, modular control. Project potential for Cameron ing on-time deliveries and improving CAMTROL production and workover and other critical equipment suppliers is effective manufacturing capacity. The control systems, subsea wellheads, chokes, unprecedented, with individual projects locations of the two facilities allow manifolds, flow bases, and pipeline con- ranging in size from $50 million to more Cameron Controls to conveniently serve nection systems. The system is designed to than $200 million. and support markets worldwide, including be fault-tolerant so as to ensure a highly West Africa, the North Sea, South America, reliable gas supply. Cameron Controls Asia Pacific and the Gulf of Mexico. Finally, the installation and start of Cameron Controls expects to exploit Although Cameron Controls was operations of the Texaco Captain subsea opportunities in the controls market organized as a separate business unit only development in the United Kingdom sec- in several areas during 2001. CAMTROL four years ago, Cameron has been in the tor of the North Sea represents another will be expanded to include all of controls business since the late 1970s. milestone. Another MOSAIC solution, Cameron’s controls capabilities, including Drawing on a long history of research and Captain’s scope of supply includes production, drilling and workover. field experience, the Cameron Controls Christmas trees, modular CAMTROL Continued product development in sub- organization was formed to design, man- production control systems, subsea well- sea production controls, bolstered by the ufacture and service drilling, production heads, chokes, and a joint venture with successful installation of the projects iden- and workover control systems worldwide. Brown & Root providing a football field- tified above, will strengthen and expand Its early growth was fueled by orders for sized unitized template manifold. the Company’s market position and product MUX subsea drilling controls, combining In each of these endeavors, Cameron’s offerings. The common threads for all Cameron’s reliable hydraulics with elec- responsibilities encompassed overall systems CAMTROL systems are modularity, fault tronic technology to provide the rapid engineering and project execution. tolerance and integrity assurance to pro- actuation needed for BOPs in deepwater In recent activity, Cameron was awarded vide high reliability systems. The drilling drilling applications. Upgrading Cameron’s Marathon’s Camden Hills and Total Fina controls focus will be on maintaining subsea production controls technology Elf ’s Aconcagua projects in the Gulf of Cameron’s leading market position, with the state-of-the-art CAMTROL Mexico. Along with the previously award- attained as a result of providing reliable, system was a logical extension of ed BP King/King’s Peak project, this will cost-effective systems for the BOP market, Cameron’s drilling controls technology. be the deepest subsea development in the and on enhancing that position by further CAMTROL now incorporates Cameron’s world at water depths of more than 7,000 improving the product selection to drilling control systems and industry- feet, marking another Cameron first. include innovative emerging market leading workover control systems. Cameron was also awarded the subsea drilling controls applications. As a logical Cameron Controls’ role as a world-class trees, manifolds and jumpers for BP’s Gulf extension of the above, aftermarket capa- supplier is confirmed by its current of Mexico Infrastructure Lead Exploration bilities will be expanded in several markets, position as the leading supplier of deep- (ILX) project,a program targeted to increase including Brazil and West Africa, in water MUX control systems to the drilling production from numerous pre-existing order to support the growing number of market. E&P operators are beginning to controls systems installations worldwide. recognize Cameron Controls as a signifi- cant and qualified provider of production control systems worldwide. In fact, one of the supermajors awarded Cameron
  14. 14. 12 The oil and natural gas price recovery has driven improving demand for Cameron’s surface products. Cameron Controls’ customer support and the unique position to supply wellheads, response effort will benefit from the related Christmas trees, valves, actuators, chokes CAMSERV efforts and Cameron’s extensive and surface safety systems, the building network of service facilities. As the largest blocks necessary to provide a complete global provider of system maintenance single-well surface-automated system. and support for drilling and production Cameron Willis will continue to grow systems, Cameron provides the depth and with the offshore markets as projects are breadth of facilities, equipment, personnel developed in deeper water, creating an and experience that is required of a cus- ever-increasing demand for this level of tomer-centric organization. technology, experience and breadth of product solutions. As surface and subsea Cameron Willis production activity improves in the wake of higher oil and gas prices, substantial Cameron Willis’ product portfolio opportunities for new orders should includes Cameron and Willis brand develop during 2001. drilling choke systems, and Cameron and Willis brand chokes and choke actuators Aftermarket for the surface and subsea production markets. Cameron Willis was created in Aftermarket revenues, which have order to take advantage of opportunities for consistently produced attractive profit manufacturing consolidation, technology margins (as a result of customers’ willingness improvement and product cost reduc- to share the life cycle cost reductions tions. As a result, Cameron Willis has clearly achieved through the application of established its position as the worldwide CAMSERV), continued to increase as a market share leader in subsea chokes. percent of total revenue. Meanwhile, Gate valve actuator product rationaliza- Cameron’s worldwide market share has tion and manufacturing consolidation, continued to increase, particularly in the processes completed during 1999, have drilling business. resulted in lower manufacturing costs in Cameron continues to enhance its 2000. Surface gate valve actuator manu- market presence worldwide. Construction facturing is primarily provided by the of a new joint venture facility in Saudi Houston operation, which now accounts Arabia will be completed by the end of for half of the Cameron Willis shipments. 2001 and will expand Cameron’s after- Increased focus on actuator manufacturing market capabilities in the Middle East. lead times and consistently high on-time Efforts will continue to grow the aftermarket delivery performance from Cameron business through acquisitions, increased Willis has all but removed the delays penetration of existing markets and identi- caused by commercial actuator manufac- fication of new markets that can be served turers, enabling Cameron to shorten the by Cameron’s extensive worldwide facilities. > lead times of its Christmas trees. Cameron’s CAMSERV initiatives are Function testing of a 4 1/16″ API 15,000 psi Surface Safety Systems that control sur- designed to provide flexible, cost-effective face actuated gate valves and Christmas solutions to customer aftermarket needs Christmas tree, complete with tubing spool trees supplied by Cameron continue to be throughout the world. CAMSERV com- and hanger, prior to shipment to Anadarko a growth market. Cameron’s leading position bines traditional aftermarket services and Petroleum Corporation’s Hickory platform. in the surface production (Christmas tree) products, such as equipment maintenance markets and operators’ desire to automate and reconditioning, with Cameron’s infor- field operations, thereby lowering operating mation technology toolset. As operators expenses, make this a natural extension to continue to look for ways to reduce Cameron’s core business. Cameron is in drilling, completion and production costs, additional opportunities to provide such services to customers will develop.
  15. 15. 13
  17. 17. 15 STATISTICAL/OPERATING 2000 HIGHLIGHTS ($ millions) 2000 1999 1998 Revenues1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $221.1 $233.6 $311.8 EBITDA2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.1 33.4 60.9 EBITDA (as a percent of revenues) . . . . . . . . . . . . . . . . . . . . . . 16.8% 14.3% 19.5% Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0 4.9 5.6 Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228.3 209.8 279.5 Backlog (as of year-end). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.5 32.4 54.4 Revised to reclassify shipping and handling costs 1 from revenues to cost of sales. Excludes nonrecurring/unusual charges. 2 $312 $234 $221 Cooper Cameron Valves (CCV) is a leading provider of valves and related systems primarily used to 98 99 00 Revenues ($ millions) control pressures and direct oil and gas as they are moved from individual wellheads through flow $61 $37 $33 lines, gathering lines and transmission systems to refineries, petrochemical plants and industrial 98 99 00 EBITDA ($ millions) centers for processing. Equipment used in these $280 environments is generally required to meet $228 $210 demanding API 6D and American National Standards Institute (ANSI) standards. 98 99 00 Orders ($ millions) $54 < Orbit high-integrity valves being readied for shipping. $42 Orbit’s unique block valve technology provides absolute $32 positive isolation for a multitude of processes in the gas processing, petrochemical and refining industries. The Orbit design is particularly well-suited for applications demanding long-term performance where frequent 98 99 00 cycling and positive shutoff are of primary importance. Backlog (at year-end, $ millions)
  18. 18. 16 CCV believes that it is well positioned to benefit from future deepwater activity worldwide and is proving to be a leader in technology development in this critical environment. Financial overview Focus on aftermarket continues ductivity improvements in manufacturing contributed to a higher profit percentage. CCV’s orders were up approximately Aftermarket growth continued to be Investment in more efficient equipment, nine percent during the year, driven a priority throughout the year, with as well as ongoing analysis of workflows primarily by growth in the oilfield market. revenues in this area more than doubling and setup times, enabled the Company to Revenues were $221.1 million for the year, over 1999. CCV significantly expanded its further decrease costs. down five percent from 1999’s $233.6 field services efforts throughout the year, million. EBITDA (excluding nonrecurring and also acquired Valve Sales Inc., a 2001 outlook charges) increased to $37.1 million, up 11 Houston-based valve repair company, percent from the $33.4 million of a year in the first quarter of 2000. CCV will In 2001, CCV is prepared for increased ago. EBITDA as a percent of revenues continue to evaluate new aftermarket ini- spending activity in its primary pipeline increased to 16.8 percent, up from 1999’s tiatives, including additional acquisitions market and significant growth in the oil- 14.3 percent. The increased profit margin and grassroots start-ups, in both domestic field. The higher activity levels in CCV’s in 2000 reflects a full year’s impact of the and international markets. traditional markets will be complemented cost reduction initiatives that were started by opportunities in the rapidly growing in 1999, significant productivity improve- Other growth initiatives underway deepwater market, the power generation ments and a price increase that was initiated sector, and initiatives in the aftermarket Activity in the power generation sector in the third quarter of 2000. business. The Company will continue is expected to be robust in 2001. Based on Operations restructuring was essentially its foreign sourcing and productivity a bullish construction outlook, CCV is completed during 2000 in both Europe improvement programs into 2001, including dedicating additional resources to sales and North America. Some minor restruc- an increased capital investment budget efforts in this market segment. In addition, turing continues in the Beziers, France designed to reduce lead times and overall CCV plans to introduce a low-cost butterfly operation, and CCV has targeted the Far manufacturing cost. valve as part of the Company’s efforts to East as a location for future manufacturing broaden its product line. This valve will due to the low cost of labor and material complement CCV’s existing high-per- in that region. formance butterfly valve and will be sold into the industrial and oilfield markets. Emphasis on subsea market CCV’s recent product development Investment in efforts in the subsea market have further web-based technology enhanced the Company’s position as an CCV views web-enabled electronic industry technology leader. Development commerce as a powerful tool in streamlining was completed for a range of ball valves > operations and communicating with the capable of performing at pressures of customer. In addition to its existing web- As subsea production depths have continued to 10,000 psi and in water depths of 10,000 site and participation in the OFS Portal increase, Cooper Cameron Valves has recognized feet. In addition, CCV is part of a consor- initiative, CCV intends to launch a valve the need for subsea ball valves suitable for the tium of industry suppliers who have configurator and quotes management system rigorous demands of high external and internal developed a technology that enables hot for use by both CCV’s internal sales group pressures. To meet these challenging require- tapping of pipelines in water depths down and customers. Both products will enhance ments, CCV has introduced a line of 2″ to 16″ to 10,000 feet. CCV believes that it is well the ease of doing business with CCV. ball valves suitable for 10,000 psi of internal positioned to benefit from future deepwater pressure and for use in water depths of as activity worldwide and is proving to be a Foreign sourcing much as 10,000 feet. leader in technology development in this and productivity improvements critical environment. The prototype shown here utilizes the proven In addition to the Six Sigma program, technology of the industry-leading Cameron CCV has continued to aggressively source welded-body ball valve, and incorporates existing foreign materials in an effort to reduce metal-to-metal seat sealing technology. The product cost while maintaining high compact, lightweight design of the Cameron quality standards. Agreements reached welded-body ball valve make it ideally suited with suppliers in other countries have for subsea applications. contributed to a significant reduction in material purchase prices. Similarly, pro- Orders are currently in production for a subsea project in the Gulf of Mexico and for topside use in South America.
  19. 19. 17 CCV’s recent product development efforts in the subsea market have further enhanced the company’s position as an industry technology leader.
  21. 21. 19 STATISTICAL/OPERATING 2000 HIGHLIGHTS ($ millions) 2000 1999 1998 Revenues1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $224.8 $319.7 $422.5 EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.5 9.9 24.7 2 EBITDA (as a percent of revenues) . . . . . . . . . . . . . . . . . . . . . . 8.7% 3.1% 5.8% Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.3 16.9 20.7 Orders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217.4 378.7 380.8 Backlog (as of year-end). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.2 74.3 93.4 Revised to reclassify shipping and handling costs 1 from revenues to cost of sales. Excludes nonrecurring/unusual charges. 2 (Note: Through September 1999, CES’ results included the rotating compressor business that was sold at the end of the third quarter of 1999.) $422 $320 $225 Cooper Energy Services (CES) is a leading provider of reciprocating compression equipment and 98 99 00 services, including aftermarket parts and services, Revenues ($ millions) for the oil and gas production industry. Customers include major oil and gas companies, large independent $25 $20 oil and gas producers, gas transmission companies $10 and equipment leasing companies. CES’ products include natural gas reciprocating 98 99 00 compressors, turbochargers, control systems, EBITDA ($ millions) replacement parts and services marketed under the Ajax®, Superior®, Cooper-Bessemer® $379 $381 (Reciprocating Products), CB Turbocharger®, $217 Penn™, Enterprise™ and Texcentric® brand names. CES utilizes manufacturing facilities in the U.S. and 98 99 00 sales and service offices around the world to sell Orders ($ millions) and deliver its products and services. $93 < This high-pressure rotary screw compressor developed $74 $69 by Cooper Energy Services provides variable volume ratio and capacity control for maximum efficiency in natural gas production, transmission and fuel gas boosting. 98 99 00 Backlog (at year-end, $ millions)