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Oceaneering International, Inc. (OII) today reported record earnings for the third quarter ended September 30, 2014.  On revenue of $973.1 million, Oceaneering generated net income of $124.3 million, or $1.16 per share.

For the third quarter of 2013, Oceaneering reported revenue of $853.3 million and net income of $104.4 million, or $0.96 per share.  For the second quarter of 2014, Oceaneering reported revenue of $927.4 million and net income of $110.3 million, or $1.02 per share.

Summary of Results

(in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

2014

2013

2014

2014

2013

Revenue

$973,089

$853,297

$927,407

$2,740,697

$2,392,221

Gross Margin

241,855

205,492

218,215

649,561

567,731

Income from Operations

181,918

153,736

161,311

476,091

408,363

Net Income

$124,338

$104,407

$110,295

$325,858

$278,067

Diluted Earnings Per Share (EPS)

$1.16

$0.96

$1.02

$3.01

$2.56

Sequentially, quarterly EPS was 14% higher on operating income improvements from all business segments, led by Remotely Operated Vehicles (ROV).  Year over year, quarterly EPS increased by 21% on the strength of operating income improvements from Subsea Products and ROV.  EPS for the first nine months of 2014 was up 18% over the comparable period in 2013.

M. Kevin McEvoy, President and Chief Executive Officer, stated, “We achieved record EPS for the quarter, demonstrating the high level of demand we experienced for our subsea services and products.  Our results were highlighted by all-time high operating income from our ROV and Subsea Products businesses.

“We remain on track to achieve record EPS for 2014.  For the fourth quarter, we are projecting EPS of $0.94 to $0.99.  Given this outlook and our year-to-date performance, we are narrowing our 2014 EPS guidance range to $3.95 to $4.00 from $3.95 to $4.05.

“Compared to the second quarter of 2014, ROV operating income increased on higher global demand to support drilling and vessel-based projects and an improvement in operating margin.  Our ROV days on hire for the quarter increased to a record high of over 25,200 and our operating margin improved to 31% from 28% due largely to a change in geographic operations mix, resulting in a higher average revenue per day-on-hire.  During the quarter we put 14 new vehicles into service and retired five.  At the end of September, we had 332 vehicles in our fleet, compared to 302 one year ago.

“Subsea Products operating income was higher due to increased demand for tooling and subsea work systems.  Products backlog at quarter-end was $768 million, compared to our June 30 backlog of $850 million and $857 million one year ago.

“Subsea Projects operating income increased due to a seasonal uptick in U.S. Gulf of Mexico demand for diving services.  Asset Integrity operating income improved due to activity increases in the United Kingdom and Australia, and a $2.5 million gain on the sale of a non-core operation that was part of our AGR FO acquisition in 2011.  Advanced Technologies income increased due to higher profitability on vessel maintenance and engineering services for the U.S. Navy.

“During the third quarter, we repurchased 3.0 million shares of our common stock at a cost of $201 million.  Year to date, we have repurchased 3.5 million shares at a cost of $237 million.  The decision to repurchase our shares reflects our belief that Oceaneering’s stock has been undervalued.  It also underscores our willingness to return cash to our shareholders and confidence in Oceaneering’s financial strength and future business prospects.  We have 5.4 million shares remaining under our current Board of Directors share repurchase authorization.  Year to date, we have spent $318 million on share repurchases and cash dividends.

“As previously announced, we reached agreement for $800 million of committed bank facilities, consisting of a $500 million five-year revolver and a $300 million three-year delayed-draw term loan, to provide us with increased financial flexibility.

“We are initiating 2015 EPS guidance with a range of $4.10 to $4.50, based on an average of 105.7 million diluted shares.  While we are facing widely publicized concerns regarding the future of deepwater activity, our 2015 guidance is based on assumptions that service and product demand to perform life-of-field activities and develop new fields will be higher than in 2014 and global floating rig demand will be about the same.

“Our liquidity and projected cash flow provide us with resources to invest in Oceaneering’s growth and return cash to our shareholders, and we intend to continue doing so.  We generated EBITDA of $241 million during the quarter and $645 million year to date.  For 2014 and 2015, we anticipate generating EBITDA of at least $845 million and $880 million, respectively.

“Compared to 2014, we anticipate all of our business segments will have higher operating income in 2015, notably:  ROV on greater service demand to support drilling and vessel-based projects; Subsea Products on the strength of higher demand for tooling and installation and workover control system services; and Subsea Projects on growth in deepwater intervention service activity in the GOM and diving in the GOM and offshore Angola.

“For 2015 and beyond, we believe that the oil and gas industry will continue its investment in deepwater projects.  Deepwater remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs.  With our existing assets and opportunities to add new assets, we are well positioned to supply a wide range of the services and products required to safely support the deepwater 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 achieving record EPS in 2014; fourth quarter EPS guidance range; revised 2014 EPS guidance range; statements about backlog, to the extent backlog may be an indicator of future revenue or profitability; belief that its stock has been undervalued; confidence in its financial strength and future business prospects; increased financial flexibility provided by its announced committed bank facilities; 2015 EPS guidance range; projected average diluted shares for 2015; assumptions regarding 2015 market demand relative to 2014; belief that its liquidity and projected cash flow provide resources to invest in the company’s growth and return cash to shareholders, and intention to continue doing so; anticipated minimum 2014 and 2015 EBITDA; anticipation that all its business segments will have higher operating income in 2015, and the basis for such increases in ROVs, Subsea Products, and Subsea Projects; belief that the oil and gas industry will continue its investment in deepwater projects; and belief that deepwater remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs.  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 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, entertainment, and aerospace industries.

For further information, please contact Jack Jurkoshek, Director Investor Relations, Oceaneering International, Inc., 713-329-4670, investorrelations@oceaneering.com.  A live webcast of the company’s earnings release conference call, scheduled for Thursday, October 30, 2014 at 11:00 a.m. Eastern, can be accessed at www.oceaneering.com/investor-relations/.

 

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Sep 30, 2014

Dec 31, 2013

(in thousands)

ASSETS

Current Assets (including cash and cash equivalents of $74,592 and $91,430)

$

1,558,389

$

1,433,275

Net Property and Equipment

1,314,764

1,189,099

Other Assets

518,302

506,126

TOTAL ASSETS

$

3,391,455

$

3,128,500

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current Liabilities

$

725,542

$

727,088

Long-term Debt

250,000

Other Long-term Liabilities

397,040

357,972

Shareholders’ Equity

2,018,873

2,043,440

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

3,391,455

$

3,128,500

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

For the Three Months Ended

For the Nine Months Ended

Sep 30, 2014

Sep 30, 2013

Jun 30, 2014

Sep 30, 2014

Sep 30, 2013

(in thousands, except per share amounts)

Revenue

$

973,089

$

853,297

$

927,407

$

2,740,697

$

2,392,221

Cost of services and products

731,234

647,805

709,192

2,091,136

1,824,490

Gross Margin

241,855

205,492

218,215

649,561

567,731

Selling, general and administrative expense

59,937

51,756

56,904

173,470

159,368

Income from Operations

181,918

153,736

161,311

476,091

408,363

Interest income

130

39

41

250

472

Interest expense

(677)

(851)

(398)

(1,486)

(2,167)

Equity earnings (losses) of unconsolidated affiliates

9

134

8

(19)

109

Other income (expense), net

(392)

(639)

(417)

(515)

(840)

Income before Income Taxes

180,988

152,419

160,545

474,321

405,937

Provision for income taxes

56,650

48,012

50,250

148,463

127,870

Net Income

$

124,338

$

104,407

$

110,295

$

325,858

$

278,067

Weighted average diluted shares outstanding

107,407

108,783

108,421

108,180

108,703

Diluted Earnings per Share

$

1.16

$

0.96

$

1.02

$

3.01

$

2.56

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

Sep 30, 2014

Sep 30, 2013

Jun 30, 2014

Sep 30, 2014

Sep 30, 2013

($ in thousands)

Remotely Operated Vehicles

Revenue

$

285,385

$

254,979

$

268,274

$

809,478

$

726,770

Gross Margin

$

98,511

$

85,193

$

86,685

$

272,386

$

241,527

Operating Income

$

88,350

$

74,710

$

75,825

$

240,915

$

209,764

Operating Income %

31

%

29

%

28

%

30

%

29

%

Days available

30,103

27,567

29,059

87,013

80,666

Days utilized

25,247

23,684

24,510

73,626

67,750

Utilization %

84

%

86

%

84

%

85

%

84

%

Subsea Products

Revenue

$

336,745

$

263,671

$

327,252

$

924,007

$

735,692

Gross Margin

$

105,406

$

80,896

$

99,558

$

280,093

$

225,630

Operating Income

$

83,430

$

61,737

$

79,497

$

217,443

$

166,576

Operating Income %

25

%

23

%

24

%

24

%

23

%

Backlog at end of period

$

768,000

$

857,000

$

850,000

$

768,000

$

857,000

Subsea Projects

Revenue

$

151,560

$

143,132

$

136,199

$

425,949

$

349,782

Gross Margin

$

31,749

$

33,992

$

30,122

$

86,280

$

76,904

Operating Income

$

27,339

$

30,700

$

25,863

$

73,739

$

66,310

Operating Income %

18

%

21

%

19

%

17

%

19

%

Asset Integrity

Revenue

$

134,734

$

118,657

$

130,229

$

389,122

$

358,246

Gross Margin

$

27,687

$

22,094

$

23,207

$

72,760

$

64,662

Operating Income

$

19,583

$

16,373

$

15,915

$

49,583

$

45,351

Operating Income %

15

%

14

%

12

%

13

%

13

%

Advanced Technologies

Revenue

$

64,665

$

72,858

$

65,453

$

192,141

$

221,731

Gross Margin

$

7,439

$

11,170

$

5,597

$

20,763

$

39,423

Operating Income

$

2,863

$

6,400

$

198

$

6,016

$

25,241

Operating Income %

4

%

9

%

%

3

%

11

%

Unallocated Expenses

Gross margin expenses

$

(28,937)

$

(27,853)

$

(26,954)

$

(82,721)

$

(80,415)

Operating income expenses

$

(39,647)

$

(36,184)

$

(35,987)

$

(111,605)

$

(104,879)

TOTAL

Revenue

$

973,089

$

853,297

$

927,407

$

2,740,697

$

2,392,221

Gross Margin

$

241,855

$

205,492

$

218,215

$

649,561

$

567,731

Operating Income

$

181,918

$

153,736

$

161,311

$

476,091

$

408,363

Operating Income %

19

%

18

%

17

%

17

%

17

%

SELECTED CASH FLOW INFORMATION

Capital expenditures, including acquisitions

$

79,788

$

105,119

$

157,450

$

341,276

$

280,434

Depreciation and Amortization

$

59,621

$

50,948

$

56,057

$

169,029

$

150,973

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

For the Three Months Ended

For the Nine Months Ended

Sep 30, 2014

Sep 30, 2013

Jun 30, 2014

Sep 30, 2014

Sep 30, 2013

(in thousands)

Net Income

$

124,338

$

104,407

$

110,295

$

325,858

$

278,067

Depreciation and Amortization

59,621

50,948

56,057

169,029

150,973

Subtotal

183,959

155,355

166,352

494,887

429,040

Interest Income/Expense, Net

547

812

357

1,236

1,695

Provision for Income Taxes

56,650

48,012

50,250

148,463

127,870

EBITDA

$

241,156

$

204,179

$

216,959

$

644,586

$

558,605

2014 Estimates

2015 Estimates

Low

High

Low

High

(in thousands)

(in thousands)

Net Income

$

425,000

$

430,000

$

435,000

$

475,000

Depreciation and Amortization

225,000

230,000

240,000

250,000

Subtotal

650,000

660,000

675,000

725,000

Interest Income/Expense, Net

5,000

5,000

Provision for Income Taxes

195,000

195,000

200,000

215,000

EBITDA

$

845,000

$

855,000

$

880,000

$

945,000