Oceaneering Announces Third Quarter Earnings

HOUSTON, Oct. 28, 2015 /PRNewswire/ -- Oceaneering International, Inc. (NYSE: OII) today reported earnings for the quarter ended September 30, 2015.  On revenue of $743.6 million, Oceaneering generated net income of $68.5 million, or $0.70 per share.  These results included $9.2 million of pretax foreign currency losses, reported in other income and expenses.

Third quarter 2015 results compared to the corresponding period of 2014 and the second quarter of 2015 are shown in the table below.

Sequentially, quarterly earnings increased on lower Unallocated Expenses due to reductions in performance-based incentive and deferred compensation expenses.  Year over year, quarterly earnings decreased on significantly lower demand and pricing for most of Oceaneering's oilfield services and products.  This was attributable to reductions in oil and gas industry capital and operating expenditures resulting from the steep decline in oil prices.

M. Kevin McEvoy, Chief Executive Officer, stated, "Our EPS for the quarter was within our guidance range, but was not achieved in the manner we initially anticipated.  Compared to our earlier expectations, we experienced demand declines for tooling and Installation Workover and Control System services, as customer projects were either postponed or did not materialize.  Furthermore, contract renewals for floating rigs on which we provide Remotely Operated Vehicle (ROV) drill support services were weaker than forecast.  The unfavorable impacts of these market developments were more than offset by better results from Subsea Projects and lower Unallocated Expenses. 

"Subsea Projects exceeded our expectations for the third quarter due to higher U.S. Gulf of Mexico (GOM) vessel utilization, which included completion of certain projects originally scheduled for the fourth quarter.  Unallocated Expenses were lower as performance-based compensation expenses were reduced based on our current projections of results relative to the respective plan targets.  In addition, during the quarter, we incurred substantial foreign currency losses, which our guidance did not consider.

"Compared to the second quarter, ROV operating income decreased on a 6% decline in average revenue per day on hire and lower global demand to support drilling.  Our fleet utilization rate fell to 68% and operating income margin dropped to 26%.  During the quarter we put five new vehicles into service and retired four.  At the end of September, we had 337 vehicles in our fleet, compared to 332 one year ago.

"Subsea Products operating income was higher despite a decline in revenue, as the second quarter included an inventory write-down of $9.0 million.  Products backlog at quarter-end was $736 million, compared to our June 30 backlog of $703 million and $768 million one year ago.  Our products book-to-bill ratio for the third quarter was 1.15, year to date it was 1.07, and for the trailing twelve months it was 0.97.

"Sequentially, Subsea Projects operating income decreased largely due to declining demand and pricing for deepwater intervention services in the GOM and offshore Angola, and diving services in the GOM.  Asset Integrity income improved due to a change in service mix and actions we took to lower operating costs, primarily a reduction in manning.  Advanced Technologies operating income declined due to execution issues on certain theme park projects.

"We generated EBITDA of $168 million during the quarter, $497 million year to date, and for 2015 we anticipate generating at least $640 million.  At the end of the quarter, we had $271 million in cash and an undrawn $500 million revolver.

"Our outlook for the fourth quarter of this year is down from what we envisioned at the time of our last quarterly earnings release.  We now expect to report fourth quarter EPS in the range of $0.54 to $0.60.  We are expecting sequential quarterly operating income declines from ROV, Subsea Projects, and Asset Integrity, a profit improvement from Advanced Technologies, lower Unallocated Expenses, and a similar profit contribution from Subsea Products.  Given this outlook and our year-to-date performance, we are reducing our 2015 EPS guidance to a range of $2.60 to $2.66 from $2.70 to $2.90, down 6% at the midpoints.

"Based on the current number of floating rigs working and expectations for further reductions in offshore activities due to continued spending cuts by our customers, we believe our 2016 earnings will be lower than our projection for 2015.  We are not, however, prepared to quantify the magnitude of the decline at this time.   

"We continue to take actions to reduce our operating expenses and organic capital expenditures, and believe our cash flow and liquidity position us well to manage our business through the current low commodity price environment.  Longer term, deepwater is still expected to continue to play a critical role in global oil supply growth required to replace depletion and meet projected demand.  Consequently, we intend to continue our strategy to expand our service and product line offerings, as evidenced by our recent investments in survey and satellite-based positioning, data solutions, and subsea asset integrity."

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:  fourth quarter 2015 EPS guidance range; 2015 EPS guidance range; statements about backlog, to the extent it may be an indicator of future revenue or profitability; anticipated minimum 2015 EBITDA; outlook for the fourth quarter of 2015; anticipated sequential quarterly operating income expectations from each of its business segments, and from Unallocated Expenses; expectation for further reductions in offshore activities due to continued spending cuts by its customers; expected 2016 earnings relative to projected 2015 earnings; belief that its cash flow and liquidity position it to manage its business through the current low commodity price environment; expectation of deepwater's continued role in global oil supply growth; and intent to continue its strategy to expand its service and product line offerings.  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.  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 risk factors, please see Oceaneering's latest annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. 

We define EBITDA as net income plus provision for income taxes, interest expense, net, and depreciation and amortization.  EBITDA is a non-GAAP financial measure.  We have included EBITDA disclosures in this press release because EBITDA is widely used by investors for valuation and comparing our financial performance with the performance of other companies in our industry.  Our presentation of EBITDA may not be comparable to similarly titled measures other companies report.  Non-GAAP financial measures should be viewed in addition to and not as an alternative for our reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.  For a reconciliation of our EBITDA amounts to the most directly comparable GAAP financial measures, please see the attached schedule.

Oceaneering is a global 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, entertainment, and aerospace industries.

For further information, please contact Jack Jurkoshek, Director Investor Relations, Oceaneering International, Inc., 713-329-4670, [email protected].  A live webcast of the company's earnings conference call, scheduled for Thursday, October 29, 2015 at 11:00 a.m. Eastern, can be accessed at www.oceaneering.com/investor-relations/.

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SOURCE Oceaneering International, Inc.