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For the third quarter of 2008, Oceaneering reported revenue of $516 million and net income of $55.0 million, or $0.98 per share. For the second quarter of 2009, Oceaneering reported revenue of $451 million and net income of $48.1 million, or $0.87 per share.
Summary of Results
(in thousands, except per share amounts)
Three months ended Nine months ended
------------------ -----------------
September 30, June 30, September 30,
--------------- -------- ----------------
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
Revenue $484,036 $515,795 $450,683 $1,369,819 $1,451,730
Gross Margin 114,045 127,596 110,145 329,992 344,552
Operating
Income 76,306 89,697 74,298 219,984 235,932
Net Income $ 49,839 $ 54,975 $ 48,111 $ 142,295 $ 148,377
Net Income
Attributable
to Diluted
Common Shares * $ 49,491 $ 54,396 $ 47,774 $ 141,298 $ 146,820
Weighted
Average
Number of
Diluted
Common Shares * 55,058 55,399 55,041 54,999 55,592
Diluted
Earnings Per
Share * $ 0.90 $ 0.98 $ 0.87 $ 2.57 $ 2.64
* 2008 period amounts have been restated to comply with current year
accounting rules.
Sequentially, quarterly earnings improved on solid growth in ROV operating income. Year-over-year, quarterly earnings declined primarily due to lower Subsea Products operating income on a decrease in umbilical plant throughput and higher BOP Control System development and manufacturing costs.
T. Jay Collins, President and Chief Executive Officer, stated, "Our third quarter performance was highlighted by record ROV operating income. Earnings per share were at the top end of our guidance range.
"All of our business segments had operating income performances in line with or better than what we had expected, with the exception of Subsea Products. In Subsea Products, we incurred $5.5 million of unanticipated costs on two BOP control systems that are in the final stages of manufacturing.
"Our all-time high quarterly ROV profit performance was attributable to achieving a record number of days on hire. During the quarter, we put 11 ROVs into service and retired three. At the end of September, we had 243 vehicles in our fleet, compared to 223 a year ago.
"During the quarter our capital expenditures were $55 million, of which $47 million was in support of growing and upgrading our ROV fleet. We also repaid the remaining $20 million of our 2009 debt maturities. As of September 30, 2009, we had $120 million of debt, over $80 million of cash, and $200 million available under our revolving credit facility. With $1.2 billion of equity on our balance sheet, our debtto-capitalization percentage was 9%, down from 24% a year ago.
"Despite reductions in exploration and production spending by our customers, overall demand in the first three quarters of 2009 for our deepwater services and products has held up remarkably well. During the quarter, our Subsea Products backlog declined slightly and was $328 million at September 30, 2009. We have taken proactive steps to align our cost structure with lower activity levels where appropriate. As a result, our year-to-date EPS is only 3% below that of the corresponding period in 2008. We now expect that our annual 2009 EPS performance will be the second best in Oceaneering's history and are narrowing our annual guidance range to $3.32 to $3.38. For the fourth quarter of 2009, we are forecasting EPS of $0.75 to $0.81.
"According to the International Energy Agency, there is a surplus supply of oil due to a reduction in demand stemming from the 2009 global economic recession. Heading into 2010, we believe deepwater drilling activity will continue to grow as new floating rigs currently under construction are added to the worldwide fleet. However, we do not expect deepwater construction activity to increase next year, as we anticipate project deferrals to continue until there is a recovery in hydrocarbon demand. Consequently, we are forecasting 2010 EPS to be relatively flat with 2009, in the range of $3.25 to $3.55. Our 2010 forecast assumptions include unit volume growth and increased operating profits from ROVs, improved operating efficiencies and results in Subsea Products, declines in Subsea Projects activity levels and operating income, and a lower contribution from MOPS due primarily to the expected retirement of the FPSO Ocean Producer.
"For 2010, we anticipate generating in excess of $300 million of cash flow, simply defined as net income plus depreciation and amortization. This projected cash flow would provide ample resources to invest in Oceaneering's growth, either organically or through acquisitions.
"Looking longer term, our belief remains unchanged that the oil and gas industry will continue to invest in deepwater to counteract high existing reservoir depletion rates. Deepwater is one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low per barrel finding and development costs. Therefore, we anticipate demand for our deepwater services and products will remain promising."
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 that its annual 2009 EPS performance will be the second best in its history; 2009 EPS guidance range of $3.32 to $3.38; fourth quarter forecasted EPS range of $0.75 to $0.81; belief that deepwater drilling activity will continue to grow in 2010 as new floating rigs currently under construction are added to the worldwide fleet; expectation that deepwater offshore construction activity will not increase next year as we anticipate project deferrals to continue until there is a recovery in hydrocarbon demand; forecasted 2010 EPS to be relatively flat with 2009 and in the range of $3.25 to $3.55; 2010 forecast assumptions, including that it will achieve unit volume growth and increased operating profits from ROVs, improved operating efficiencies and results in Subsea Products, declines in Subsea Projects activity levels and operating income, and a lower contribution from MOPS due primarily to the expected retirement of the FPSO Ocean Producer; anticipation of generating, during 2010, in excess of $300 million of cash flow, as defined and the expectation that this cash flow would provide ample resources to invest in the company's growth; belief that the oil and gas industry, over the long term, will continue to increase its investment in deepwater to counteract high existing reservoir depletion rates; anticipation that demand for its deepwater services and products will remain promising; and forecasted EBITDA for 2009 and 2010 and the related reconciliations thereof to forecasted net income. 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, 2008 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.
A live webcast of the Company's earnings release conference call, scheduled for Thursday, October 29, 2009 at 10:00 a.m. Central, can be accessed at www.oceaneering.com/index.asp.
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
Sept. 30, 2009 Dec. 31, 2008
-------------- -------------
(in thousands)
ASSETS
Current Assets (including cash
and cash equivalents of
$81,434 and $11,200) $ 783,653 $ 747,705
Net Property and Equipment 769,651 697,430
Other Assets 237,336 224,885
-------------- -------------
TOTAL ASSETS $ 1,790,640 $ 1,670,020
============== =============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities $ 359,026 $ 357,327
Long-term Debt 120,000 229,000
Other Long-term Liabilities 137,683 116,039
Shareholders' Equity 1,173,931 967,654
-------------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,790,640 $1,670,020
============== =============
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Nine Months Ended
----------------------------- -------------------------
September 30,
Sept. 30, Sept. 30, June 30, ------------------------
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
(in thousands, except per share amounts)
Revenue $484,036 $515,795 $450,683 $1,369,819 $1,451,730
Cost of
Services and
Products 369,991 388,199 340,538 1,039,827 1,107,178
-------- -------- -------- ---------- ----------
Gross
margin 114,045 127,596 110,145 329,992 344,552
Selling, General
and
Administrative
Expense 37,739 37,899 35,847 110,008 108,620
-------- -------- -------- ---------- ----------
Income from
operations 76,306 89,697 74,298 219,984 235,932
Interest
Income 287 304 91 513 512
Interest
Expense, net (1,714) (3,070) (2,208) (6,303) (9,882)
Equity Earnings
of
Unconsolidated
Affiliates 768 444 766 2,417 1,897
Other Income
(Expense),
net 1,028 (2,887) 1,070 2,304 (276)
-------- -------- -------- ---------- ----------
Income
before
income
taxes 76,675 84,488 74,017 218,915 228,183
Provision for
Income Taxes 26,836 29,513 25,906 76,620 79,806
-------- -------- -------- ---------- ----------
Net Income $ 49,839 $ 54,975 $ 48,111 $ 142,295 $ 148,377
======== ======== ======== ========== ==========
Net Income
Attributable
to Diluted
Common Shares* $ 49,491 $ 54,396 $ 47,774 $ 141,298 $ 146,820
Weighted
Average
Number of
Diluted
Common
Shares* 55,058 55,399 55,041 54,999 55,592
Diluted
Earnings per
Share* $ 0.90 $ 0.98 $ 0.87 $ 2.57 $ 2.64
* 2008 period amounts have been restated to comply with current year
accounting rules.
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 For the Nine
Months Ended Months Ended
---------------------------- ---------------------
Sept. 30, Sept. 30, June 30, Sept. 30, Sept. 30,
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
($ in thousands)
Remotely Operated
Vehicles
Revenue $166,010 $161,710 $160,040 $ 481,648 $ 465,668
Gross margin $ 61,694 $ 58,764 $ 56,332 $ 173,730 $ 160,461
Operating income $ 53,994 $ 50,617 $ 49,735 $ 152,525 $ 137,452
Operating income % 33% 31% 31% 32% 30%
Days available 22,011 20,057 21,121 63,803 58,403
Utilization 79% 84% 80% 80% 83%
Subsea Products
Revenue $132,748 $176,086 $115,587 $ 363,259 $ 478,728
Gross margin $ 27,798 $ 40,612 $ 29,416 $ 86,725 $ 111,391
Operating income $ 14,054 $ 27,708 $ 15,591 $ 45,433 $ 73,857
Operating income % 11% 16% 13% 13% 15%
Backlog $328,000 $334,000 $350,000 $ 328,000 $ 334,000
Subsea Projects
Revenue $ 65,861 $ 59,801 $ 63,908 $ 192,766 $ 166,205
Gross margin $ 19,274 $ 19,853 $ 22,500 $ 61,168 $ 54,799
Operating income $ 17,128 $ 17,771 $ 20,259 $ 54,547 $ 48,782
Operating income % 26% 30% 32% 28% 29%
Inspection
Revenue $ 57,582 $ 65,336 $ 55,746 $ 162,401 $ 192,856
Gross margin $ 11,208 $ 12,880 $ 10,713 $ 32,272 $ 38,243
Operating income $ 7,296 $ 8,170 $ 6,948 $ 20,874 $ 25,044
Operating income % 13% 13% 12% 13% 13%
Mobile Offshore
Production Systems
Revenue $ 9,960 $ 9,687 $ 9,421 $ 28,147 $ 29,885
Gross margin $ 2,726 $ 2,974 $ 1,441 $ 6,886 $ 10,410
Operating income $ 2,355 $ 2,553 $ 1,088 $ 5,776 $ 9,148
Operating income % 24% 26% 12% 21% 31%
Advanced Technologies
Revenue $ 51,875 $ 43,175 $ 45,981 $ 141,598 $ 118,388
Gross margin $ 7,713 $ 5,799 $ 6,768 $ 19,430 $ 17,163
Operating income $ 4,375 $ 2,883 $ 3,950 $ 10,378 $ 8,323
Operating income % 8% 7% 9% 7% 7%
Unallocated Expenses
Gross margin $(16,368) $(13,286) $(17,025)$ (50,219)$ (47,915)
Operating income $(22,896) $(20,005) $(23,273)$ (69,549)$ (66,674)
TOTAL
Revenue $484,036 $515,795 $450,683 $1,369,819 $1,451,730
Gross margin $114,045 $127,596 $110,145 $ 329,992 $ 344,552
Operating income $ 76,306 $ 89,697 $ 74,298 $ 219,984 $ 235,932
Operating income % 16% 17% 16% 16% 16%
SELECTED CASH
FLOW INFORMATION
Capital expenditures,
including acquisitions $ 54,953 $ 52,393 $ 44,711 $ 145,051 $ 198,427
Depreciation and
amortization $ 31,798 $ 27,967 $ 29,691 $ 89,512 $ 82,007
The above should be read in conjunction with the Company's latest Annual
Report on Form 10-K and Quarterly Report on Form 10-Q.
RECONCILIATION of GAAP to NON-GAAP FINANCIAL
INFORMATION
For the Three For the Nine
Months Ended Months Ended
---------------------------- -------------------
Sept. 30, Sept. 30, June 30, Sept. 30, Sept. 30,
2009 2008 2009 2009 2008
---- ---- ---- ---- ----
(in thousands)
Earnings
Before Interest,
Taxes, Depreciation
and Amortization
(EBITDA)
Net Income $ 49,839 $ 54,975 $ 48,111 $142,295 $148,377
Depreciation
and
Amortization 31,798 27,967 29,691 89,512 82,007
-------- -------- -------- -------- --------
Subtotal 81,637 82,942 77,802 231,807 230,384
Interest Income/
Expense, Net 1,427 2,766 2,117 5,790 9,370
Provision for
Income Taxes 26,836 29,513 25,906 76,620 79,806
-------- -------- -------- -------- --------
EBITDA $109,900 $115,221 $105,825 $314,217 $319,560
======== ======== ======== ======== ========
2009 Estimates 2010 Estimates
----------------- ------------------
Low High Low High
--- ---- --- ----
(in thousands)
Net Income $184,000 $187,000 $181,000 $197,000
Depreciation
and
Amortization 123,000 123,000 130,000 135,000
-------- -------- -------- --------
Subtotal 307,000 310,000 311,000 332,000
Interest Income/
Expense, Net 7,000 7,000 6,000 6,000
Provision for
Income Taxes 99,000 101,000 97,000 106,000
-------- -------- -------- --------
EBITDA $413,000 $418,000 $414,000 $444,000
======== ======== ======== ========
SOURCE Oceaneering International, Inc.
http://www.oceaneering.com
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