Exterran Holdings Inc (NYSE:EXH) Q1 2015 Earnings Conference Call - Final Transcript

May 05, 2015 • 11:00 am ET


Exterran Holdings Inc (NYSE:EXH) Q1 2015 Earnings Conference Call - Final Transcript


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Good morning. Welcome to the Exterran Holdings' and Exterran Partners' First Quarter 2015 earnings call. At this time, I'd like to inform you this conference is being recorded, and that all participants are in a listen-only mode. We will open the teleconference for questions after the presentation. Earlier today, Exterran Holdings and Exterran Partners released their financial results for the first quarter 2015. If you have not received a copy, you can find the information on the company's website at exterran.com.

During today's call, Exterran Holdings may be referred to as Exterran or EXH, and Exterran Partners as either Exterran Partners or EXLP. Because EXLP's financial results and position are consolidated into Exterran, the discussion of Exterran will include Exterran Partners, unless otherwise noted. Also, the term international will be used to refer to Exterran's operations outside the US and Canada, and the combination of US and Canada will be referred to as North America.

(Forward-Looking Cautionary Statements)

Your host for this morning's call is Bradley Childers, President and CEO. I would now like to turn the call over to him. Mr. Childers, you may begin your conference.

Bradley Childers

Thank you, operator. Good morning, everyone. With me today is Jon Biro, CFO of Exterran Holdings and David Miller, CFO of Exterran Partners. As we usually do, we'll provide a review of both Exterran Holdings and Exterran Partners before we open the call up for questions.

So let me start with some comments about our recent results. Despite the challenges of the current market, I'm pleased with how well our businesses performed in the first quarter. While the industry-wide decline in customer spending has impacted our operations, our more production-related businesses, particularly our North America and international service businesses, delivered very good results in the quarter, highlighted by generally flat operating horsepower levels, and increasing gross margin dollars. Although bookings in our service businesses were lower than we experienced in recent quarters, the performance of these businesses continues to demonstrate stability compared to other businesses that are more closely tied to drilling and completions activity.

For our fabrication business, the high backlog levels we were able to build late last year positioned us to deliver solid operating and financial performance in the first quarter. Fabrication bookings, on the other hand, were substantially reduced by the sequential and year-over-year basis, leading to a reduction in our backlog. While a reduction in bookings was expected given market conditions, the severity of the drop-off, I believe, reflects both reduced activity levels in response to the decline in oil prices, and extreme caution on the part of our customers as they reset capital budgets and aggressively sought to reduce costs during the first quarter.

We expect our customers to increase their activity levels from this very low point, but the timing of that increase is very difficult to predict. As a result, our visibility into the activity levels for our fabrication business in the second half of the year is low. In response, we are aggressively reducing