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Oil drilling equipment maker Cameron International Corporation (CAM - Analyst Report) has announced that it has renewed and extended its CAMSERV aftermarket services contract with Petroleo Brasileiro S.A. or Petrobras (PBR - Analyst Report). The original deal was signed in 2007.

Per the agreement, Cameron will render the aftermarket services and support, including inspection, maintenance, repair and remanufacturing, storage and offshore installation for the development of Petrobras’ fields offshore Brazil.

Cameron, which will execute the deal from its upgraded service center in Macae (Brazil), expects to reap more than $150 million in revenue over the next three years.

Headquartered in Houston, Texas, Cameron shares long-standing business ties with the Brazilian state controlled energy giant with the former lending immense support to manufacturing, service and research and development (R&D) projects in that country. Cameron’s association with Petrobras is highlighted through various agreements over the latter’s exploration and production programs.

In mid-January 2011, Cameron received 27 subsea trees and a related equipment supply order worth $74 million from Petrobras, to be used for the development of offshore fields in Brazil. This was followed by Cameron’s plans to invest approximately $30 million in two R&D plants in Brazil and a Memorandum of Understanding with Petrobras in March.

We believe that Cameron has a diversified product portfolio, specialty service capabilities and proprietary technological expertise. Other positives for Cameron include a strong backlog position, growing international operations and a favorable outlook for subsea activity levels.

However, shares of the company are fairly valued at current levels, considering the sensitivity of Cameron’s business to gas/oil price volatility, as well as exploration and production spending patterns, costs, geo-political risks, competition and the advent of new technologies.

Hence, we expect Cameron to perform at par with other industry players and maintain our long-term Neutral recommendation.

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