Oceaneering Reports Third Quarter 2016 Results

HOUSTON, Oct. 27, 2016 /PRNewswire/ -- Oceaneering International, Inc. ("Oceaneering") OII today reported a net loss of $11.8 million, or $(0.12) per share, on revenue of $549 million for the three months ended September 30, 2016.  Adjusted net income was $16.6 million, or $0.17 per share, excluding $43.6 million of pre-tax charges recognized during the quarter and the related tax effects of those charges.  These charges included $36.0 million related to the Remotely Operated Vehicles ("ROV") segment and $8.2 million related to the Subsea Products segment.

During the prior quarter ended June 30, 2016, Oceaneering reported net income of $22.3 million, or $0.23 per share, on revenue of $626 million; adjusted net income was $26.8 million, or $0.27 per share.

Adjusted operating income, net income and earnings per share are non-GAAP measures which exclude the impacts of certain identified items.  Reconciliations to the corresponding GAAP measures are shown in the tables Adjusted Net Income and Diluted Earnings per Share (EPS) and Adjusted Operating Income and Margins by Segment.  These tables are included below under the caption Reconciliation of Non-GAAP to GAAP Financial Information.

Sequentially, adjusted operating income declined 27% due to reduced profit contributions from Subsea Products and ROV, partially offset by improved results from Subsea Projects and Asset Integrity.

M. Kevin McEvoy, Chief Executive Officer of Oceaneering, stated, "On an adjusted basis, our third quarter operating results were in line with our expectations and the consensus estimate.  However, the leading indicator for deepwater activity, contracted floating rigs, continued to decline, as the rate of rigs being idled, either by contract termination or expiration, continued unabated.  This prevailing market condition required us to reassess the number of ROVs we have in our fleet, as well as the associated inventory.   As a result of our reassessment, we recorded a $36.0 million charge related to our retirement of 39 ROVs this quarter (for a net book value of $10.8 million) and established a $25.2 million reserve for excess inventory.  We also scrutinized assets in our Subsea Products segment and recorded an $8.2 million charge, related predominantly to tools and inventory in our portfolio used to support deepwater drilling and operations.

"Compared to the second quarter, ROV adjusted operating income was down substantially, due to a 4% reduction in revenue per day-on-hire and 6% fewer days utilized.  For the third quarter, ROV adjusted operating income and EBITDA margins were 10% and 36%, respectively, compared to (19)% and 16% on an unadjusted basis.

"At the end of September, we had 279 vehicles in our fleet and utilization for the quarter was 52%.  The 39 ROVs retired worked a total of 349 days in the third quarter; pro forma quarterly utilization, reflecting these vehicles as if they had been retired effective as of the beginning of the quarter was 58%.

"We held our share of the contracted floating drill support market with 56% of the 162 contracted rigs.  In light of the current shrinking available drill support market, we remain focused on maintaining our ROV market share on contracted rigs and the rigs most likely to return to work.  We are also actively working with vessel owners to increase the number of ROVs onboard third-party vessels.

"Sequentially, Subsea Products operating income, on an adjusted basis, declined as expected, due to a combination of lower pricing in our Service and Rental business unit, and lower margins on Manufactured Products as we processed backlog and new orders with lower pricing.  Our Subsea Products backlog at September 30, 2016 was $457 million, compared to our June 30, 2016 backlog of $503 million.  The backlog decline was primarily related to our Service and Rental business unit.  We expect our Subsea Products operating margin to further weaken into the low single-digit territory on considerable backlog pricing degradation, lower throughput, and softer demand for short-cycle services and rentals.  Our book-to-bill ratio for the third quarter was 0.71, and year-to-date it was 0.64.

"Compared to the second quarter, Subsea Projects operating income was higher despite a decline in revenue, as a result of some seasonal increase for diving services and survey work in the Gulf of Mexico and a reduction of our vessel fixed costs when the Olympic Intervention IV charter obligation expired in July.  Asset Integrity operating income improved, primarily as a result of a smaller workforce, and due to the fact that the second quarter results included a significant bad debt expense.  Advanced Technologies operating income was down slightly on flat revenues.  Unallocated Expenses were slightly lower.

"Looking forward, we believe our fourth quarter results will be considerably lower than our adjusted third quarter results due to a continuation of weak demand for our services and products, exacerbated by seasonality.  We expect sequentially lower operating income from each of our oilfield business segments, and slightly improved results from our non-oilfield segment Advanced Technologies.

"With limited visibility, our outlook for 2017 can be characterized as marginally profitable at the operating income level on a consolidated basis.  We expect the largest decline in profitability, year over year, to occur in Subsea Products and ROVs.  Of course, we intend to continue managing our operations to optimize returns by tailoring costs and resources to match our current demand profile as we prepare for the industry recovery we expect.

"Today we also announced that we have reduced our quarterly dividend to $0.15 per share.  While our ability to generate substantial free cash flow remains strong, our balance sheet is very sound, and we have ample liquidity, we believe it was prudent to lower our cash distribution to shareholders to a sustainable level, in light of the projected low level of offshore activity through 2017.

"We remain committed to growing the company organically and through bolt-on acquisitions.  Our recent purchase of the assets of Blue Ocean Technologies, LLC underscores our strategy of increasing our services and products offerings focused on the production phase of the offshore oilfield life cycle.  We believe this strategy will position Oceaneering well for the eventual offshore and subsea market upcycle we expect."

This release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, including, without limitation, statements as to the expectations, beliefs and future expected business, financial performance and prospects of the Company. More specifically, the forward-looking statements in this press release include the statements concerning Oceaneering's: expectation to continue to focus on maintaining ROV market share on contracted rigs and rigs most likely to return to work; expectation to actively work with vessel owners to increase the number of ROVs onboard third-party vessels; statements about backlog, to the extent it may be an indicator of future revenue or profitability; expectation about Subsea Products' margins; outlook for the fourth quarter of 2016 and for 2017 and expected contributions of its segments to the operating results; operating strategy; expectation for an industry recovery; and belief that its strategy to grown the company organically and through bolt-on acquisitions positions it well for the eventual offshore and subsea market cycle recovery. The forward-looking statements included in this release are based on our current expectations and are subject to certain risks, assumptions, trends and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. Among the factors that could cause actual results to differ materially include backlog, costs, capital expenditures, future earnings, capital allocation strategies, dividend levels, sustainability of dividend levels, liquidity, competitive position, financial flexibility, debt levels, forecasts or expectations regarding business outlook; growth for Oceaneering as a whole and for each of its segments (and for specific products or geographic areas within each segment); factors affecting the level of activity in the oil and gas industry; supply and demand of drilling rigs; oil and natural gas demand and production growth; oil and natural gas prices; fluctuations in currency markets worldwide; the loss of major contracts or alliances; future global economic conditions; and future results of operations. 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.

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 more information on Oceaneering, please visit www.oceaneering.com.

Contact:
Suzanne Spera
Director, Investor Relations
Oceaneering International, Inc.
713-329-4707
investorrelations@oceaneering.com

 

 

 

 

 

RECONCILIATION OF NON-GAAP TO GAAP FINANCIAL INFORMATION

In addition to financial results determined in accordance with U.S. generally accepted accounting principles ("GAAP"), this Press Release also includes non-GAAP financial measures (as defined under SEC Regulation G).  We have included Adjusted Net Income and Diluted Earnings per Share, each of which excludes the effects of certain specified items, as set forth in the tables that follow.  As a result, these amounts are non-GAAP financial measures.  We believe these are useful measures for investors to review because they provide consistent measures of the underlying results of our ongoing business.  Furthermore, our management uses these measures as measures of the performance of our operations.  We have also included disclosures of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), EBITDA Margins and Free Cash Flow, as well as the following by segment:  Adjusted Operating Income and Margins, EBITDA, Adjusted EBITDA and Adjusted EBITDA Margins.  We define EBITDA margin as EBITDA divided by revenue.  Adjusted EBITDA and Adjusted EBITDA Margins as well as Adjusted Operating Income and Margin and related information by segment exclude the effects of certain specified items, as set forth in the tables that follow.  EBITDA and EBITDA margins, Adjusted EBITDA and Adjusted EBITDA margins, and Adjusted Operating Income and Margin and related information by segment are each non-GAAP financial measures.  We define Free Cash Flow as cash flow provided by operating activities less organic capital expenditures (i.e., purchases of property and equipment other than those in business acquisitions).  We have included these disclosures in this press release because EBITDA,  EBITDA margins and Free Cash Flow are widely used by investors for valuation and comparing our financial performance with the performance of other companies in our industry, and the adjusted amounts thereof (as well as Adjusted Operating Income and Margin by Segment) provide more consistent measures than the unadjusted amounts.  Furthermore, our management uses these measures for purposes of evaluating our financial performance.  Our presentation of EBITDA, EBITDA margins and Free Cash Flow (and the Adjusted amounts thereof) may not be comparable to similarly titled measures other companies report.  Non-GAAP financial measures should be viewed in addition to and not as substitutes for our reported operating results, cash flows or any other measure prepared and reported in accordance with GAAP.   The tables that follow provide reconciliations of the non-GAAP measures used in this press release to the most directly comparable GAAP measures.

 

 

 

 

 

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/oceaneering-reports-third-quarter-2016-results-300353117.html

SOURCE Oceaneering International, Inc.