Oceaneering Reports First Quarter 2018 Results

HOUSTON, April 25, 2018 /PRNewswire/ -- Oceaneering International, Inc. ("Oceaneering") (NYSE:OII) today reported a net loss of $49.1 million, or $(0.50) per share, on revenue of $416 million for the three months ended March 31, 2018.  Excluding the impacts of $9.0 million of adjustments, comprised of foreign currency exchange losses and tax adjustments related to discrete tax items, adjusted net loss was $40.2 million, or $(0.41) per share.

For the fourth quarter of 2017, Oceaneering reported net income of $174 million, or $1.76 per share, on revenue of $484 million.  Adjusted net loss was $8.0 million, or $(0.08) per share, reflecting the impact of $182 million of adjustments, primarily a $189 million noncash tax benefit due to the United States tax reform.

Adjusted operating income (loss), operating margin, net income (loss) and earnings (loss) per share, EBITDA and adjusted EBITDA (as well as EBITDA and adjusted EBITDA margins and forecasted 2018 EBITDA) and free cash flow are non-GAAP measures that exclude the impacts of certain identified items.  Reconciliations to the corresponding GAAP measures are shown in the tables Adjusted Net Income (Loss) and Diluted Earnings (Loss) per Share (EPS), EBITDA and EBITDA Margins, 2018 EBITDA Estimates, Free Cash Flow, Adjusted Operating Income and Margins by Segment, and EBITDA and Adjusted EBITDA and Margins by Segment.  These tables are included below under the caption Reconciliations of Non-GAAP to GAAP Financial Information.

Roderick A. Larson, President and Chief Executive Officer of Oceaneering, stated, "Our consolidated first quarter operating results met our expectations, and reflected the seasonality and timing of projects within our energy services businesses.  We are pleased that each of our operating segments generated positive EBITDA, and our consolidated adjusted EBITDA of $25.2 million was in line with consensus published estimates.

"During the quarter, we generated $5.6 million of cash flow provided by operating activities, and utilized $25.7 million of cash to organically grow our portfolio of services and products.  Our recent $68.4 million acquisition of Ecosse reflects our commitment to expand our service line capabilities, grow our market position within the offshore renewable energy market, and provide our customers with proven tools to optimize installation projects.

"We recorded a $5.9 million tax provision during the quarter, that included $2.4 million of discrete items, primarily related to the accounting for share-based compensation. Our tax expense varied from our guidance primarily due to the geographic mix of operating revenues and results that generated taxes in certain jurisdictions that exceeded the tax benefit from losses and credits in other jurisdictions.

"Operationally, compared to the adjusted fourth quarter of 2017, first quarter ROV operating income declined as expected.  Excluding the impact of the fourth-quarter equipment sale, average ROV revenue per day on hire decreased, due primarily to a shift in geographic mix.  Our average daily cost increased due to additional costs associated with reactivating and mobilizing ROVs.  ROV adjusted EBITDA margin declined to 29%.

"Days on hire increased 2% as our fleet utilization improved to 44% from 42%.  At the end of March 2018, our fleet size remained at 279 vehicles.  Our fleet use mix during the quarter was 70% in drill support and 30% vessel-based activity.  At the end of March, we had ROVs on 85, or 58%, of the 147 floating rigs under contract.  This compares to having ROVs on 56% of the 147 floating rigs contracted at the end of December 2017.

"Compared to the fourth quarter, Subsea Products first quarter operating income declined less than expected on a 19% reduction in quarterly revenues.  Our better-than-expected operating results were achieved by manufactured products being able to pull forward certain projects into the first quarter.  Our Subsea Products backlog at March 31, 2018 was $240 million, compared to our December 31, 2017 backlog of $276 million.  The backlog decline was largely attributable to manufactured products' low umbilical order intake.  Our book-to-bill ratio for the first quarter was 0.71 and for the trailing twelve months was 0.72.

"Sequentially, Subsea Projects revenue and operating results decreased, resulting from timing of projects and lower seasonal U.S. Gulf of Mexico demand for vessels, offset somewhat by increased vessel activity offshore Angola.  Asset Integrity operating income was near breakeven, as projected, on slightly lower revenue, due to seasonality.

"For our non-energy segment, Advanced Technologies, first quarter 2018 operating income declined compared to the fourth quarter 2017 due to lower government related work, as expected.  However, we did not achieve the improvement in operating income that we projected in the first quarter 2018 due to unanticipated costs in our automated guided vehicles commercial business.  In addition, as expected, Unallocated Expenses were higher in the first quarter 2018, compared to the fourth quarter 2017.

"For the second quarter, compared to the first quarter, we anticipate quarterly operating profitability and improvements from all of our business segments, with the exception of Subsea Products, due to the pull-forward of projects into the first quarter, as previously mentioned.  Unallocated Expenses are expected to continue to be in the upper-$20 million range.

"Based on our first quarter results, and our expectations for the remainder of the year, we are reaffirming our prior guidance for 2018.  For the year, we anticipate generating $140 million to $180 million of EBITDA, with positive EBITDA contributions from each of our operating segments.  While we expect our recent acquisition of Ecosse to be accretive to 2018 cash flow and earnings, we are maintaining our prior 2018 EBITDA guidance range.  At the segment level, we still expect our overall ROV fleet utilization to improve to the low 50% range and ROV EBITDA margin to be in the low 30% range.  For Subsea Products, we continue to project full-year operating margins in the low- to mid-single digit range.

"We continue to project an increase in offshore activities and contract awards during the second half of 2018, which should result in a Subsea Products book-to-bill ratio exceeding 1.0 for the full year.  This expectation, along with an improvement in Advanced Technologies commercial businesses, gives us confidence in maintaining our 2018 EBITDA guidance.  However, we are no longer providing guidance as to our 2018 annual effective tax rate due to the short-term nature of much of our work and a continuous shifting of geographic mix of our operating revenues and results.  These conditions do not allow for meaningful guidance on an effective tax rate."

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 Oceaneering. More specifically, the forward-looking statements in this press release include the statements concerning Oceaneering's: belief that the acquisition of Ecosse will help grow Oceaneering's market position within the renewable energy market and provide its customers with proven tools to optimize their offshore installation projects; expected contributions to cash flow and earnings from Ecosse; outlook and EBITDA guidance for the full year and second quarter of 2018; anticipated EBITDA, EBITDA contributions from each of its segments, expected contributions of its segments to 2018 operating results; expectations of ROV fleet utilization and EBITDA margins; expectations of Subsea Products margins and book-to-bill ratio; and overall view of the markets.  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: 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; future global economic conditions; the loss of major contracts or alliances; future performance under our customer contracts; and the effects of competition. For a more complete discussion of these and other risk factors, please see Oceaneering's latest annual report on Form 10-K and subsequent 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 energy industry.  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

RECONCILIATIONS 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, 2018 EBITDA Estimates 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.