Oceaneering Announces Record Quarterly Earnings

HOUSTON, Oct. 31 /PRNewswire-FirstCall/ -- Oceaneering International, Inc. today reported record quarterly earnings for the sixth consecutive quarter. For the quarter ended September 30, 2006, on revenue of $337 million, Oceaneering earned net income of $38.5 million, or $0.70 per share. During the corresponding period in 2005, Oceaneering reported revenue of $263 million and net income of $17.7 million, or $0.33 per share. Historical per share figures have been adjusted for the two-for-one stock split effected in June 2006.

The year-over-year growth in quarterly earnings of more than 100% was mainly attributable to improvements in Remotely Operated Vehicles (ROV), Subsea Products, and Subsea Projects operating profits. The ROV and Subsea Products improvements reflect Oceaneering's strategic focus on deepwater and subsea completion activity. The Subsea Projects increase was primarily attributable to a higher level of work associated with Gulf of Mexico infrastructure damage caused by hurricanes in 2005.

Summary of Results (in thousands, except per share amounts) Three months ended Nine months ended September 30, June 30, September 30, 2006 2005 2006 2006 2005 Revenue $337,263 $263,111 $311,063 $937,835 $709,818 Gross Margin $88,225 $49,334 $71,957 $220,499 $123,104 Operating Income $60,591 $28,335 $47,899 $146,454 $63,488 Net Income $38,547 $17,714 $30,601 $94,650 $42,979 Diluted Earnings Per Share $0.70 $0.33 $0.56 $1.72 $0.81 Weighted Average Number of Diluted Shares 55,283 53,842 55,088 55,049 53,342

For the second quarter of 2006, Oceaneering reported revenue of $311 million and net income of $30.6 million, or $0.56 per share. The 26% sequential improvement in quarterly net income was primarily due to operating income increases from our ROV and Subsea Products segments and a reduction in Unallocated Expenses.

T. Jay Collins, President and Chief Executive Officer, stated, "We are very pleased with this quarter's record results as demand for our subsea services and products remained at very high levels. Year to date we have earned more net income than in all of 2005 and are on track to nearly double EPS for the year 2006 over 2005.

"ROVs achieved record quarterly operating income as our average revenue per day-on-hire surpassed the $7,500 mark. Our year-to-date ROV pricing is up over 15% and the number of ROV days on hire has increased by more than 10% compared to the first three quarters of 2005.

"Subsea Products had a record quarter as operating income improved on higher umbilical manufacturing throughput and strong demand for our specialty subsea products. Products backlog at the end of September was $281 million, up from $245 million at the end of last quarter and $181 million a year ago.

"Unallocated Expenses for the quarter were sequentially lower as we had anticipated, due to a reduction in restricted stock expense.

"Since our last quarterly financial press release, our earnings assessment for 2006 has improved and we now expect to achieve record EPS in the range of $2.25 to $2.30. For the fourth quarter, we are forecasting EPS of $0.53 to $0.58 in anticipation of normal seasonal declines in our Inspection and Subsea Projects operations, the dry docking of two of our deepwater vessels, a drop in production throughput at the Medusa Spar, and an increase in Unallocated Expenses.

"We are forecasting EPS for 2007 in the range of $2.60 to $2.90. The 2007 growth in EPS is anticipated to be led by profit improvements from ROVs, due to higher average pricing and an increase in average fleet size, and Subsea Products, particularly our umbilical manufacturing operations. The operating income contribution from our Subsea Projects segment is projected to be about the same as in 2006 as we believe there will be continued demand for hurricane damage work and an escalation in deepwater inspection, repair, and maintenance activity."

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: expectation of achieving the estimated record EPS range in 2006; forecasted fourth quarter 2006 EPS range and the factors anticipated to impact the fourth quarter 2006 EPS; expectations of additional EPS growth in 2007 and achieving the estimated record EPS range in 2007; anticipation that 2007 earnings growth will be led by ROV and Subsea Products profit improvements and the factors expected to result in those improvements; and projection that Subsea Projects operating income in 2007 will be about the same as in 2006. 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 latest annual report on Form 10-K and its other periodic filings 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.

For further information, please contact Jack Jurkoshek, Director 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 November 1, 2006 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 Sept. 30, 2006 Dec. 31, 2005 (in thousands) ASSETS Current Assets (including cash and cash equivalents of $33,664 and $26,308) $ 518,925 $ 394,233 Net Property and Equipment 482,661 409,201 Other Assets 192,294 186,134 TOTAL ASSETS $ 1,193,880 $ 989,568 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities $ 276,717 $ 222,667 Long-term Debt 200,000 174,000 Other Long-term Liabilities 64,867 56,783 Shareholders' Equity 652,296 536,118 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,193,880 $ 989,568 CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months For the Nine Months Ended Ended Sept. 30, Sept. 30, June 30, September 30, 2006 2005 2006 2006 2005 (in thousands, except per share amounts) Revenue $ 337,263 $ 263,111 $ 311,063 $ 937,835 $ 709,818 Cost of Services and Products 249,038 213,777 239,106 717,336 586,714 Gross Margin 88,225 49,334 71,957 220,499 123,104 Selling, General and Administrative Expense 27,634 20,999 24,058 74,045 59,616 Income from Operations 60,591 28,335 47,899 146,454 63,488 Interest Income 130 181 62 260 335 Interest Expense (3,528) (2,655) (3,131) (9,450) (7,070) Equity earnings of unconsolidated affiliates, net 2,482 1,829 3,879 10,715 9,877 Other Income (Expense), net (1,213) (225) (1,192) (2,400) 5 Income before income taxes 58,462 27,465 47,517 145,579 66,635 Provision for Income Taxes 19,915 9,751 16,916 50,929 23,656 Net Income $ 38,547 $ 17,714 $ 30,601 $ 94,650 $ 42,979 Diluted Earnings per Share $0.70 $0.33 $0.56 $1.72 $0.81 Weighted average number of common shares and equivalents 55,283 53,842 55,088 55,049 53,342

The above Condensed Consolidated Balance Sheets and 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 For the Nine Months Ended Ended Sept. 30, Sept. 30, June 30, Sept. 30, Sept. 30, 2006 2005 2006 2006 2005 ($ in thousands) Remotely Operated Vehicles Revenue $108,801 $ 85,749 $ 98,641 $296,389 $228,972 Gross margin $ 35,224 $ 27,948 $ 31,856 $ 93,664 $ 65,704 Gross margin % 32% 33% 32% 32% 29% Operating income $ 30,160 $ 24,061 $ 27,270 $ 79,635 $ 54,643 Days available 16,921 15,923 16,384 49,160 46,166 Utilization 86% 88% 85% 85% 82% Subsea Products Revenue $ 98,993 $ 65,430 $ 81,815 $265,326 $155,146 Gross margin $ 22,801 $ 10,522 $ 17,126 $ 58,717 $ 18,868 Gross margin % 23% 16% 21% 22% 12% Operating income $ 15,422 $ 4,020 $ 10,407 $ 38,390 $ 2,305 Backlog $281,000 $181,000 $245,000 $281,000 $181,000 Subsea Projects Revenue $ 38,410 $ 30,023 $ 42,989 $122,519 $ 77,965 Gross margin $ 18,182 $ 8,327 $ 22,130 $ 53,642 $ 17,510 Gross margin % 47% 28% 51% 44% 22% Operating income $ 16,790 $ 7,176 $ 20,800 $ 49,528 $ 13,944 Mobile Offshore Production Systems Revenue $ 12,767 $ 12,898 $ 12,355 $ 38,454 $ 37,008 Gross margin $ 4,055 $ 4,323 $ 3,499 $ 11,756 $ 13,230 Gross margin % 32% 34% 28% 31% 36% Operating income $ 3,727 $ 4,019 $3,260 $ 10,971 $ 12,016 Inspection Revenue $ 45,526 $ 39,972 $ 42,545 $121,494 $120,367 Gross margin $ 8,304 $ 6,058 $ 8,055 $ 21,720 $ 17,627 Gross margin % 18% 15% 19% 18% 15% Operating income $ 4,828 $ 3,085 $ 4,780 $ 11,797 $ 7,712 Advanced Technologies Revenue $ 32,766 $ 29,039 $ 32,718 $ 93,653 $ 90,360 Gross margin $ 5,028 $ 4,636 $ 5,233 $ 13,800 $ 17,045 Gross margin % 15% 16% 16% 15% 19% Operating income $ 3,185 $ 2,779 $ 3,003 $ 7,799 $ 11,108 Unallocated Expenses Gross margin $ (5,369) $(12,480) $(15,942) $(32,800) $(26,880) Operating income $(13,521) $(16,805) $(21,621) $(51,666) $(38,240) TOTAL Revenue $337,263 $263,111 $311,063 $937,835 $709,818 Gross margin $ 88,225 $ 49,334 $ 71,957 $220,499 $123,104 Gross margin % 26% 19% 23% 24% 17% Operating income $ 60,591 $ 28,335 $ 47,899 $146,454 $ 63,488 SELECTED CASH FLOW INFORMATION Capital expenditures, including acquisitions $ 43,824 $12,258 $44,318 $134,346 $ 96,124 Depreciation and amortization $ 20,594 $18,683 $18,750 $ 58,939 $ 54,873