Oceaneering (NYSE: OII) reported Q1 EPS of $0.04, $0.24 better than the analyst estimate of ($0.20). Revenue for the quarter came in at $536.67 million versus the consensus estimate of $538.6 million.

• Reported a net loss of $368 million, or $(3.71) per share, on revenue of $537 million for the three months ended March 31, 2020.
• Adjusted net income was $3.5 million, or $0.04 per share, reflecting the impact of $393 million of pre-tax adjustments, including $379 million associated with goodwill impairments, asset impairments and write-offs during the quarter.

Roderick A. Larson, President and Chief Executive Officer of Oceaneering, stated, "I am very pleased that, even with the unprecedented global uncertainties presented during the first quarter, our adjusted results exceeded expectations. The key factor in achieving these results was better-than-anticipated performance within our energy-focused businesses, which included the benefit from cost reduction measures implemented during the fourth quarter of 2019 and the first quarter of 2020. Each of our operating segments generated positive adjusted operating results and adjusted EBITDA, and our consolidated adjusted EBITDA of $51.6 million surpassed both our outlook and published consensus estimates.

"As anticipated, our cash balance decreased during the quarter, primarily as a result of a difference in timing associated with customer progress milestone cash collections and payments to vendors on several large contracts. Additionally, during the quarter, we disbursed accrued employee incentive payments related to attainment of specific performance goals in prior periods.

"During the quarter, primarily as a result of the negative market impacts from COVID-19 and significantly lower crude oil prices, we recognized certain non-cash impairment charges, mostly related to goodwill. We also recognized additional restructuring costs as we continued to adjust our staffing levels and geographic footprint.

"Sequentially, both our first quarter ROV revenue and average revenue per day on hire decreased 4% on flat days on hire. As expected, ongoing cost control measures and efficiencies, along with fewer installations and mobilizations, resulted in improved adjusted operating performance and adjusted EBITDA. Adjusted EBITDA margin increased to 32%. At the end of March, our ROV fleet count remained at 250 vehicles and, for the first quarter, fleet utilization was 65%. Our fleet use during the quarter was 68% in drill support and 32% in vessel-based activity. At the end of March, we had ROV contracts on 95 of the 153 floating rigs under contract, resulting in a drill support market share of 62%.

"Subsea Products first quarter adjusted operating results exceeded expectations and were comparable to the results of the fourth quarter of 2019. Manufactured products revenue and operating results met expectations. Service and rental results exceeded expectations, largely due to higher activity in Norway and West Africa. Our Subsea Products backlog at March 31, 2020 was $528 million, compared to our December 31, 2019 backlog of $630 million. Reflecting the higher level of throughput and a lower level of market activity, our book-to-bill ratio for the first quarter was 0.5.

"Sequentially, Subsea Projects adjusted operating results declined as expected on materially lower revenue, as a result of lower seasonal vessel and survey activity. Asset Integrity adjusted operating results improved, benefiting from cost reduction activities undertaken in the fourth quarter of 2019 and first quarter of 2020.

"For our non-energy segment, Advanced Technologies, our first quarter 2020 adjusted operating results were sequentially flat. Adverse impacts of COVID-19 to our entertainment business results offset gains from our government service businesses. As compared to the fourth quarter of 2019, Unallocated Expenses declined as a result of lower accruals for incentive-based compensation.

"During the first quarter, primarily due to the increase in non-cash working capital referenced above, we used $32.2 million of cash in our operating activities. We also used $27.2 million of cash for growth and maintenance capital expenditures. These two items were the largest contributors to a $66.2 million cash decrease during the quarter.

"For the second quarter and full year of 2020, we are not providing operating or EBITDA guidance due to the lack of visibility into the majority of our businesses. Many of the markets we serve are being profoundly affected by the effects of and the associated responses to COVID-19, as well as the significant reductions in our oil and gas customer spending as a result of the lower crude oil price environment. We maintain our guidance that Unallocated Expenses are forecast to be in the high-$20 million range per quarter. We are further revising our capital expenditures guidance by lowering the range to $45 million to $65 million, and our cash tax payments guidance by lowering the range to $30 million to $35 million.

"Preserving our liquidity and balance sheet remains a high priority in the current environment and, as mentioned on our last earnings call, we are taking decisive actions to reduce expenses. We are currently targeting a reduction of annualized expenses in the range of $125 million to $160 million by the end of 2020, inclusive of $35 million to $40 million of reduced depreciation expense. Cost reduction actions being taken include efficiency-enabling projects, simplification of our operating structure including headcount reductions and rationalizing facilities, compensation reductions for senior leadership, a 50% reduction in the Company's 401(k) plan match, supply chain savings and elimination of non-productive assets. Any volume related direct cost reductions are not included in these estimated savings. Since launching this effort, approximately $70 million of annualized cost reductions have been initiated. Additional savings are expected to be achieved throughout the remainder of the year, with the majority occurring in the second and third quarters. We expect the cash costs associated with these actions to approximate $15 million.

"While we currently are not able to provide operating or EBITDA guidance, we still believe that we should generate positive free cash flow during 2020. This belief is based on the following: actions we are taking to achieve cost reductions; reduced capital spending levels; lower cash taxes; our expectation for $16 million to $34 million in CARES Act tax refunds; and cash expected to be generated from working capital for the remainder of the year."

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