Oceaneering Announces Record Fourth Quarter and Annual Earnings

HOUSTON, Feb. 21 /PRNewswire-FirstCall/ -- Oceaneering International, Inc. today reported record fourth quarter and annual earnings for the periods ended December 31, 2004.

During the fourth quarter of 2004, on revenue of $226.0 million, Oceaneering generated net income of $11.7 million, or $0.45 per share. During the corresponding period in 2003, Oceaneering reported revenue of $162.1 million and net income of $6.1 million, or $0.25 per share. For the year 2004, Oceaneering reported net income of $40.3 million, or $1.57 per share, on revenue of $780.2 million. Net income for 2003 was $29.3 million, or $1.20 per share, on revenue of $639.2 million.

Summary of Results (in thousands, except per share amounts) Three months ended Year ended Dec. 31, Sept. 30, Dec. 31, 2004 2003 2004 2004 2003 Revenue $226,038 $162,065 $192,862 $780,181 $639,249 Gross Margin $39,095 $28,023 $34,205 $131,803 $110,784 Operating Income $19,357 $11,747 $18,719 $63,864 $53,997 Net Income $11,712 $6,142 $12,846 $40,300 $29,301 Diluted Earnings Per Share $0.45 $0.25 $0.50 $1.57 $1.20 Weighted Average Number of Diluted Shares 25,903 24,539 25,871 25,685 24,453

Fourth quarter net income improved $5.6 million as the result of higher operating income from five of six business segments and an increase in equity income contribution from the Medusa Spar. The quarter also included $1.9 million of pre-tax write-downs related to Oceaneering's investment in a subsea telecommunication cable service joint venture reported in equity income of unconsolidated affiliates. The effective income tax rate for 2004 was approximately 34%, as compared to the 35% rate previously estimated. Using the actual determined tax rate resulted in a 31% tax rate for the fourth quarter's tax provision.

Annual net income improved $11.0 million due to higher operating income from four of Oceaneering's six business segments and equity income from the Medusa Spar. Oceaneering achieved record Remotely Operated Vehicle (ROV) and Advanced Technologies (ADTECH) segment operating income. Record Mobile Offshore Production Systems (MOPS) pre-tax income contribution, including equity income from the Medusa Spar, was also realized. While not a record, Subsea Products' operating income in 2004 was more than double the amount reported for 2003.

John Huff, Chairman and Chief Executive Officer, stated, "Results for the fourth quarter and the year were exemplary. In 2004 we achieved the highest Net Income in Oceaneering's history. This was accomplished in spite of $3.7 million of specific non-recurring pre-tax charges: $1.8 million for a terminated acquisition effort in the first quarter and $1.9 million of write- downs related to our investment in a cable-related joint venture in the fourth quarter.

"Annual ROV operating income was the best ever. The Stolt and Fugro ROV fleet acquisitions we completed in February and September propelled this segment to record profits, significantly increased our international market presence, and enhanced our leadership position as a worldwide ROV service provider. In our MOPS business we added a new dimension through our investment in the Medusa Spar, and achieved a record level of pre-tax income contribution. Equity income from this investment was $8.2 million.

"Subsea Products operating income increased by nearly 150%, largely due to higher profit contribution from specialty product sales. During the year we added steel tube umbilical manufacturing capability in our Brazil plant and we placed in service during December a new, world-class U.S. facility in Panama City, Florida. At year-end our backlog was $78 million, up 65% from $47 million at the beginning of the year.

"ADTECH achieved record operating income performance culminating from our efforts over the past few years to secure additional U.S. Navy and NASA work.

"During the year we invested over $150 million, including $88 million to modernize and increase the size of our ROV fleet and $38 million to expand our umbilical manufacturing capabilities. These capital investments position Oceaneering for increased profitability in the years ahead. At year-end our debt-to-capitalization was 24% and we remain committed to using our resources to make accretive investments.

"Looking forward, our 2005 outlook is to achieve record EPS of $1.85 to $2.15 by increasing the earnings contribution from each of our oilfield business activities, led by an improvement in ROV profitability. For the first quarter we are forecasting EPS of $0.30 to $0.40 due to seasonality issues and lower margins in our current umbilical backlog. We are projecting a substantial earnings improvement in the second half of 2005."

Statements in this press release that express a belief, expectation or intention, as well as those that are not historical fact, are forward looking. The forward-looking statements in this press release include the statements concerning Oceaneering's estimated record earnings range for 2005, the EPS forecast for the first quarter of 2005, and the projected substantial earnings improvement in the second half of 2005. 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; 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. These and other risks are more fully described in Oceaneering's annual report on Form 10-K for the year ended December 31, 2004 and its other periodic filings with the Securities and Exchange Commission.

Oceaneering is an advanced applied technology company that provides engineered services and hardware to Customers who operate in marine, space, and other harsh environments. Oceaneering's services and products are marketed worldwide to oil and gas companies, government agencies, and firms in the telecommunications, aerospace, and marine engineering and construction industries.

For further information, please contact Jack Jurkoshek, Manager Investor Relations, Oceaneering International, Inc., 11911 FM 529, Houston, Texas 77041; Telephone 713-329-4670; Fax 713-329-4653; http://www.oceaneering.com/ . A live webcast of the Company's earnings release conference call, scheduled for February 22, 2005 at 10:00 a.m. central time, can be heard at http://www.companyboardroom.com/ (enter ticker OII).

OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Dec. 31, 2004 Dec. 31, 2003 (in thousands) ASSETS Current Assets (including cash and cash equivalents of $16,781 and $18,396) $283,765 $224,765 Net Property and Equipment 401,054 329,070 Other Assets 141,734 109,021 TOTAL ASSETS $826,553 $662,856 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities $172,452 $132,972 Long-Term Debt 142,172 122,324 Other Long-Term Liabilities 57,492 48,185 Shareholders' Equity 454,437 359,375 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $826,553 $662,856 CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended For the Year Ended Dec. 31, Dec. 31, Sept. 30, Dec. 31, 2004 2003 2004 2004 2003 (in thousands, except per share amounts) Revenue $226,038 $162,065 $192,862 $780,181 $639,249 Cost of Services and Products 186,943 134,042 158,657 648,378 528,465 Gross Margin 39,095 28,023 34,205 131,803 110,784 Selling, General and Administrative Expenses 19,738 16,276 15,486 67,939 56,787 Income from Operations 19,357 11,747 18,719 63,864 53,997 Interest Income 110 192 767 999 573 Interest Expense (1,985) (1,855) (2,141) (8,388) (7,811) Equity Earnings (losses) of unconsolidated affiliates, net 174 226 2,480 6,110 40 Other Expense, net (715) (861) (61) (1,662) (1,720) Income before income taxes 16,941 9,449 19,764 60,923 45,079 Provision for Income Taxes (5,229) (3,307) (6,918) (20,623) (15,778) Net Income $ 11,712 $ 6,142 $ 12,846 $ 40,300 $ 29,301 Diluted Earnings per Share $ 0.45 $ 0.25 $ 0.50 $ 1.57 $ 1.20 Weighted average number of common shares and equivalents 25,903 24,539 25,871 25,685 24,453

The above Condensed Consolidated Balance Sheets and Consolidated Statements of Income should be read in conjunction with the Company's latest Annual Report, Quarterly Report on Form 10-Q and Annual Report on Form 10-K.

SEGMENT INFORMATION For the Three Months Ended For the Year Ended Dec. 31, Dec. 31, Sept. 30, Dec. 31, Dec. 31, 2004 2003 2004 2004 2003 ($ in thousands) Remotely Operated Vehicles Revenue $ 65,882 $ 43,772 $ 56,546 $223,914 $160,359 Gross Margin $ 17,593 $ 11,968 $ 16,407 $ 59,501 $ 42,037 Gross Margin % 27% 27% 29% 27% 26% Operating Income $ 14,038 $ 9,985 $ 13,692 $ 48,397 $ 34,925 Days Available 15,456 11,530 14,689 57,452 45,655 Utilization 74% 72% 69% 70% 70% Subsea Products Revenue $ 53,397 $ 25,873 $ 37,162 $160,410 $107,540 Gross Margin $ 8,986 $ 4,096 $ 5,612 $ 26,971 $ 18,416 Gross Margin % 17% 16% 15% 17% 17% Operating Income $ 3,930 $ (261) $ 2,002 $ 10,891 $ 4,466 Subsea Projects Revenue $ 26,070 $ 17,520 $ 15,278 $ 70,254 $ 68,796 Gross Margin $ 4,392 $ 3,819 $ 2,406 $ 10,297 $ 10,946 Gross Margin % 17% 22% 16% 15% 16% Operating Income $ 3,147 $ 2,743 $ 1,238 $ 5,472 $ 6,626 Mobile Offshore Production Systems Revenue $ 11,879 $ 11,747 $ 11,613 $ 49,387 $ 46,836 Gross Margin $ 4,851 $ 4,444 $ 4,536 $ 18,347 $ 18,213 Gross Margin % 41% 38% 39% 37% 39% Operating Income $ 4,477 $ 3,807 $ 4,076 $ 16,565 $ 15,712 Inspection Revenue $ 35,866 $ 33,670 $ 37,719 $145,691 $136,599 Gross Margin $ 3,211 $ 3,192 $ 4,883 $ 16,351 $ 16,557 Gross Margin % 9% 9% 13% 11% 12% Operating Income $ 24 $ 156 $ 1,887 $ 4,564 $ 5,246 Advanced Technologies Revenue $ 32,944 $ 29,483 $ 34,544 $130,525 $119,119 Gross Margin $ 6,368 $ 4,899 $ 6,682 $ 25,016 $ 22,115 Gross Margin % 19% 17% 19% 19% 19% Operating Income $ 4,441 $ 2,807 $ 4,975 $ 17,515 $ 15,067 Unallocated Expenses Gross Margin $ (6,306) $ (4,395) $ (6,321) $(24,680) $(17,500) Operating Income $(10,700) $ (7,490) $ (9,151) $(39,540) $(28,045) TOTAL Revenue $226,038 $162,065 $192,862 $780,181 $639,249 Gross Margin $ 39,095 $ 28,023 $ 34,205 $131,803 $110,784 Gross Margin % 17% 17% 18% 17% 17% Operating Income $ 19,357 $ 11,747 $ 18,719 $ 63,864 $ 53,997 SELECTED CASH FLOW INFORMATION Capital expenditures, including acquisitions $ 31,280 $ 11,955 $ 36,460 $153,184 $100,370 Depreciation and amortization $ 17,173 $ 14,810 $ 16,484 $ 65,619 $ 56,963