Oceaneering Announces Record Quarterly Earnings

- Raises 2010 EPS Guidance Range to $3.57 to $3.62

- Initiates 2011 EPS Guidance Range of $3.45 to $3.75

Oct 26, 2010, 16:45 ET from Oceaneering International, Inc.

HOUSTON,  Oct. 26 /PRNewswire-FirstCall/ -- Oceaneering International, Inc. (NYSE: OII) today reported record earnings for the third quarter ended September 30, 2010.  On revenue of $516 million, Oceaneering generated net income of $59.2 million, or $1.09 per share.

Oceaneering reported revenue of $484 million and net income of $49.8 million, or $0.90 per share, for the third quarter of 2009.  For the second quarter of 2010, Oceaneering reported revenue of $464 million and net income of $54.3 million, or $0.98 per share.

Summary of Results

(in thousands, except per share amounts)

Three months ended

Nine months ended

September 30,

June 30,

September 30,

2010

2009

2010

2010

2009

Revenue

$516,274

$484,036

$464,303

$1,415,747

$1,369,819

Gross Margin

125,619

114,045

123,503

348,827

329,992

Operating Income

88,055

76,306

85,374

235,758

219,984

Net Income

$59,177

$49,839

$54,317

$152,737

$142,295

Diluted Earnings Per Share

$1.09

$0.90

$0.98

$2.77

$2.57

Year over year, quarterly earnings improved largely due to an increase in Subsea Products operating income.  This was primarily attributable to higher demand for IWOCS services and Field Development Hardware and our successful efforts to lower manufacturing costs.  

Sequentially, quarterly earnings increased mainly on better Subsea Products and Subsea Projects operating income results.  Subsea Products improved on the strength of higher demand for IWOCS services and Field Development Hardware.  Subsea Projects increased on additional vessel work for BP at the Macondo well site.

T. Jay Collins, President and Chief Executive Officer, stated, “We are extremely pleased with our record EPS performance for the quarter.  This result is especially noteworthy in light of the low level of U.S. Gulf of Mexico (GOM) deepwater rig activity.  Our EPS exceeded our guidance range and the First Call consensus estimate.

“During the quarter, we put four new ROVs into service and retired one.  At the end of September, we had 252 vehicles in our fleet, compared to 243 a year ago.  We expect to add at least six new ROVs to our fleet during the fourth quarter of 2010 to meet contract commitments.  Our Subsea Products backlog at quarter-end was $308 million, compared to $347 million at the end of June and $328 million one year ago.  In mid-October we secured a significant umbilical contract and anticipate our year-end 2010 products backlog will be higher than at the end of 2009.  

“During the quarter we paid $20 million to retire our senior notes, invested $69.4 million in capital expenditures, and purchased 100,000 shares of our common stock at a cost of approximately $5.0 million.  We also reduced our tax provision based on our 2010 estimated tax rate of 34.3%.  At the end of the quarter, we had $148 million of cash, no debt, $300 million available under our revolving credit facility, and $1.3 billion of equity.

“Given our third quarter results and an improved fourth quarter outlook we now believe that our annual 2010 EPS performance will likely be the best in Oceaneering’s history and are raising our guidance range to $3.57 to $3.62 from $3.20 to $3.40.  Compared to 2009, in 2010 we expect an increased profit contribution from Subsea Products, relatively flat ROV results, and lower Subsea Projects operating income.

“For the fourth quarter of 2010, we are forecasting EPS of $0.80 to $0.85.  Our improved fourth quarter outlook since our last earnings call is based on our current forecast of additional: product throughput at our umbilical plants; IWOCS completion and workover service activity; and installation and inspection, repair and maintenance work for our deepwater vessels.  The increased demand for deepwater vessel services is primarily attributable to work that was postponed while the BP Macondo project was underway.

“We are initiating 2011 EPS guidance with a range of $3.45 to $3.75, with the possibility of another record year.  For our services and products, we anticipate international demand growth may more than offset lower demand in the GOM.  Our assessment of international demand is that deepwater drilling and construction activity will increase, particularly in West Africa and Brazil.  The major uncertainties we face heading into 2011 are when, at what pace, and to what level permits for GOM deepwater drilling projects will rebound.

“Compared to 2010, we anticipate ROV operating income will be higher in 2011 as we benefit from an increase in international demand for drill support services.  We forecast Subsea Products operating income will be about the same year over year, as increased throughput at our umbilical plants is offset by lower sales of IWOCS services in the GOM.  We expect Subsea Projects operating income will be lower in 2011 due to the completion in 2010 of BP Macondo project work.

“For 2011 we anticipate generating at least $325 million of cash flow, simply defined as net income plus depreciation and amortization.  Our balance sheet and projected cash flow provide us with ample resources to invest in Oceaneering’s growth.

“Looking beyond 2011, our belief that the oil and gas industry will continue to invest in deepwater remains unchanged.  There will undoubtedly be greater regulatory scrutiny and higher costs associated with finding and developing hydrocarbon reserves in deepwater, particularly in the Gulf of Mexico.  However, the deepwater play remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates.  With our existing assets, we are well positioned to supply a wide range of the services and products required to support safe deepwater exploration, development, and production efforts of our customers.”

Statements in this press release that express a belief, expectation, or intention are forward looking.  The forward-looking statements in this press release include the statements concerning Oceaneering’s: expectation of adding at least six new ROVs to its fleet during the fourth quarter of 2010 to meet contract commitments; anticipation that its year-end 2010 products backlog will be higher than at the end of 2009; 2010 estimated tax rate of 34.3%; belief that its annual 2010 EPS performance will likely be the best in Oceaneering’s history based on third quarter results and an improved fourth quarter outlook; expectation that compared to 2009, there will be an increased profit contribution from Subsea Products, relatively flat ROV results, and lower Subsea Projects operating income; forecasted EPS of $0.80 to $0.85 for the fourth quarter of 2010;  forecast for the fourth quarter of additional  product throughput at its umbilical plants, IWOCS completion and workover service activity, and installation and inspection, repair and maintenance work for its deepwater vessels; 2011 EPS guidance range of $3.45 to $3.75, with the possibility of another record year; anticipation that, for its services and products, international demand growth in 2011 may more than offset lower demand in the GOM; assessment of 2011 international demand that deepwater drilling and construction activity will increase, particularly in West Africa and Brazil; anticipation that compared to 2010, its 2011 ROV operating income will be higher on an increase in international demand for drill support services; forecast that Subsea Products operating income will be about the same year over year, as increased throughput at its umbilical plants will be offset by lower sales of IWOCS services in the GOM; expectation that Subsea Projects operating income will be lower in 2011 due to the completion of BP Macondo project work in 2010; anticipation of generating, during 2011, at least $325 million of cash flow, as defined, and the expectation that its balance sheet and this cash flow will provide ample resources to invest in the company’s growth; belief that the oil and gas industry will continue to invest in deepwater; belief that there will be greater regulatory scrutiny and higher costs associated with finding and developing hydrocarbon reserves in deepwater, particularly in the Gulf of Mexico; and belief that the deepwater play remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates.  These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on current information and expectations of Oceaneering that involve a number of risks, uncertainties, and assumptions.  Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to:  industry conditions; prices of crude oil and natural gas; Oceaneering’s ability to obtain, and the timing of, new projects; changes in customers’ operational plans or schedules; contract cancellations or modifications; difficulties executing under contracts; and changes in competitive factors.  Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated.  For a more complete discussion of these and other risk factors, please see Oceaneering’s annual report on Form 10-K for the year ended December 31, 2009 and subsequent quarterly reports on Form 10-Q  filed with the Securities and Exchange Commission.  

Oceaneering is a global oilfield provider of engineered services and products, primarily to the offshore oil and gas industry, with a focus on deepwater applications.  Through the use of its applied technology expertise, Oceaneering also serves the defense and aerospace industries.

For further information, please contact Jack Jurkoshek, Director Investor Relations, Oceaneering International, Inc., 11911 FM 529, Houston, Texas 77041; Telephone 713-329-4670; Fax 713 329 4653; E-Mail investorrelations@oceaneering.com.  A live webcast of the company’s earnings release conference call, scheduled for Wednesday, October 27, 2010 at 11:00 a.m. Eastern, can be accessed at www.oceaneering.com/investor-relations/.

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Sept. 30, 2010

Dec. 31, 2009

(in thousands)

ASSETS

Current Assets (including cash and cash equivalents of $148,250

   and $162,351)

$     900,295

$     874,139

Net Property and Equipment

786,058

766,361

Other Assets

251,983

239,787

TOTAL ASSETS

$  1,938,336

$  1,880,287

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities

$     440,051

$     388,547

Long-term Debt

--

120,000

Other Long-term Liabilities

160,750

147,417

Shareholders' Equity

1,337,535

1,224,323

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$  1,938,336

$  1,880,287

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended

For the Nine Months Ended

Sept. 30,

Sept. 30,

Jun. 30,

Sept. 30,

Sept. 30,

2010

2009

2010

2010

2009

(in thousands, except per share amounts)

Revenue

$ 516,274

$     484,036

$     464,303

$ 1,415,747

$ 1,369,819

Cost of services and products

390,655

369,991

340,800

1,066,920

1,039,827

Gross Profit

125,619

114,045

123,503

348,827

329,992

Selling, general and administrative expense

37,564

37,739

38,129

113,069

110,008

Income from Operations

88,055

76,306

85,374

235,758

219,984

Interest income

123

287

111

337

513

Interest expense

(117)

(1,714)

(3,878)

(5,636)

(6,303)

Equity earnings of unconsolidated affiliates, net

702

768

450

1,717

2,417

Other income (expense), net

(280)

1,028

1,507

245

2,304

Income before Income Taxes

88,483

76,675

83,564

232,421

218,915

Provision for income taxes

29,306

26,836

29,247

79,684

76,620

Net Income

$   59,177

$       49,839

$       54,317

$    152,737

$    142,295

Net Income Attributable to Diluted Common Shares

$   58,988

$       49,491

$       54,147

$    152,181

$    141,298

Weighted Average Number of Diluted Common Shares

54,332

55,058

55,185

54,910

54,999

Diluted Earnings per Share

$1.09

$0.90

$0.98

$2.77

$2.57

The above Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income should be read in conjunction with the Company's latest Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

SEGMENT INFORMATION

For the Three Months Ended

For the Nine Months Ended

Sept. 30,

Sept. 30,

Jun. 30,

Sept. 30,

Sept. 30,

2010

2009

2010

2010

2009

($ in thousands)

Remotely Operated Vehicles

Revenue

$ 164,727

$     166,010

$     166,677

$    490,351

$    481,648

Gross Profit

$   59,807

$       61,694

$       65,583

$    187,153

$    173,730

Operating income

$   51,514

$       53,994

$       57,537

$    162,787

$    152,525

Operating margin

31%

33%

35%

33%

32%

Days available

23,084

22,011

22,668

68,150

63,803

Utilization

73%

79%

78%

75%

80%

Subsea Products

Revenue

$ 160,194

$     132,748

$     124,889

$    396,486

$    363,259

Gross Profit

$   48,176

$       27,798

$       38,808

$    115,269

$      86,725

Operating income

$   35,247

$       14,054

$       25,833

$      76,735

$      45,433

Operating margin

22%

11%

21%

19%

13%

Backlog

$ 308,000

$     328,000

$     347,000

$    308,000

$    328,000

Subsea Projects

Revenue

$   75,002

$       75,821

$       51,763

$    184,589

$    220,913

Gross Profit

$   19,367

$       22,000

$       12,601

$      41,283

$      68,054

Operating income

$   17,101

$       19,483

$       10,313

$      34,472

$      60,323

Operating margin

23%

26%

20%

19%

27%

Inspection

Revenue

$   57,330

$       57,582

$       58,213

$    166,049

$    162,401

Gross Profit

$   11,146

$       11,208

$       11,721

$      31,612

$      32,272

Operating income

$     7,504

$         7,296

$         7,873

$      20,097

$      20,874

Operating margin

13%

13%

14%

12%

13%

Advanced Technologies

Revenue

$   59,021

$       51,875

$       62,761

$    178,272

$    141,598

Gross Profit

$     6,837

$         7,713

$       11,333

$      26,072

$      19,430

Operating income

$     2,858

$         4,375

$         7,342

$      14,464

$      10,378

Operating margin

5%

8%

12%

8%

7%

Unallocated Expenses

Gross Profit

$ (19,714)

$     (16,368)

$     (16,543)

$     (52,562)

$     (50,219)

Operating income

$ (26,169)

$     (22,896)

$     (23,524)

$     (72,797)

$     (69,549)

TOTAL

Revenue

$ 516,274

$     484,036

$     464,303

$ 1,415,747

$ 1,369,819

Gross Profit

$ 125,619

$     114,045

$     123,503

$    348,827

$    329,992

Operating income

$   88,055

$       76,306

$       85,374

$    235,758

$    219,984

Operating margin

17%

16%

18%

17%

16%

SELECTED CASH FLOW INFORMATION

Capital expenditures

including acquisitions

$   69,377

$       54,953

$       58,675

$    164,251

$    145,051

Depreciation and Amortization,

including impairment charge

$   41,051

$       31,798

$       34,099

$    114,183

$      89,512

RECONCILIATION of GAAP to NON-GAAP FINANCIAL INFORMATION

For the Three Months Ended

For the Nine Months Ended

Sept. 30,

Sept. 30,

Jun. 30,

Sept. 30,

Sept. 30,

2010

2009

2010

2010

2009

($ in thousands)

Earnings Before Interest, Tax, Depreciation and

Amortization (EBITDA)

Net Income

$   59,177

$       49,839

$       54,317

$    152,737

$    142,295

Depreciation and Amortization,

including impairment charge

41,051

31,798

34,099

114,183

89,512

Subtotal

100,228

81,637

88,416

266,920

231,807

Interest Income/Expense, Net

(6)

1,427

3,767

5,299

5,790

Provision for Income Taxes

29,306

26,836

29,247

79,684

76,620

EBITDA

$ 129,528

$     109,900

$     121,430

$    351,903

$    314,217

2010 Estimates

2011 Estimates

Low

High

Low

High

(in thousands)

(in thousands)

Net Income

$ 195,000

$     200,000

$    185,000

$    205,000

Depreciation and Amortization,

including impairment charge

150,000

150,000

140,000

145,000

Subtotal

345,000

350,000

325,000

350,000

Interest Income/Expense, Net

5,000

5,000

0

0

Provision for Income Taxes

105,000

105,000

100,000

110,000

EBITDA

$ 455,000

$     460,000

$    425,000

$    460,000

SOURCE Oceaneering International, Inc.



RELATED LINKS

http://www.oceaneering.com