During the fourth quarter of 2006, on revenue of $342 million, Oceaneering generated net income of $29.8 million, or $0.54 per share. This quarter's net income included a $1.8 million after-tax charge, or $0.03 per share, associated with the previously announced amendment to the Service Agreement with Oceaneering's former Chief Executive Officer. During the corresponding period in 2005, Oceaneering reported revenue of $289 million and net income of $19.7 million, or $0.36 per share.
For the year 2006, Oceaneering reported net income of $124.5 million, or $2.26 per share, on revenue of $1.3 billion. Net income for 2005 was $62.7 million, or $1.17 per share, on revenue of $999 million. Historical share and per share figures have been adjusted for the two-for-one stock split effected in June 2006.
Annual net income rose $61.8 million as a result of record operating income performances from Remotely Operated Vehicles (ROV), Subsea Products, Subsea Projects, and Inspection. Including equity income from the Medusa Spar, Mobile Offshore Production Systems (MOPS) also contributed record pre- tax income.
T. Jay Collins, President and Chief Executive Officer, stated, "Results for the fourth quarter and the year were exemplary, as we achieved the highest net income in Oceaneering's history in both periods. For the third consecutive year we achieved record earnings, just about double those of 2005, on a 28% growth in revenue. We continued to benefit from our strategic focus on deepwater and subsea completion activity.
"All five of our oilfield businesses contributed to our 2006 performance increase and each set annual profit records. These earnings reflect demand growth within our offshore oilfield service and product markets, the business expansion strategy we have in place, and our participation in GOM hurricane damage-related projects. The market environment was such that we were able to achieve strong utilization of our assets at improved prices.
"ROVs achieved record annual results, as our average revenue per day-on- hire surpassed the $7,250 mark. Operating income rose by over 60%. Compared to 2005, our average ROV pricing was up nearly 20% and the number of ROV days on hire grew by 10% as we increased our fleet size and utilization rate.
"Subsea Products operating income nearly quadrupled in 2006 on increased sales of our specialty subsea products and umbilicals. At year-end our backlog was $359 million, up over 80% from $196 million at the beginning of the year. During the year we commenced steel tube umbilical manufacturing at our Panama City, Florida facility and completed five major projects totaling approximately 95 miles in length. Work on another major project totaling nearly 55 miles in length was in process at year-end.
"Subsea Projects operating income more than doubled as we continued to benefit from excellent prices and high utilization for our seven vessels and diving assets. This was attributable to increased demand for hurricane damage projects and deepwater installation and inspection, repair, and maintenance (IRM) work in the Gulf of Mexico. Inspection operating income increased by over 85% due to our successes in selling more value-added services, securing new contracts, and controlling our operating expenses. MOPS pre-tax income contribution improved on higher production throughput at the Medusa Spar.
"During the year we invested approximately $194 million, including $113 million to modernize and increase the size of our ROV fleet and $38 million to expand our Subsea Products manufacturing and rental service capabilities. These capital investments position Oceaneering for increased profitability in the years ahead. At year-end our debt-to-capitalization was 22% and we remain committed to using our resources to continue our growth strategy.
"During 2007 we expect to benefit from our 2006 Subsea Products investments, led by increased manufacturing throughput at our umbilical plants. For ROVs, we anticipate continued pricing improvement and expansion of our fleet to meet rising customer demand. Subsea Projects operating income is projected to be about the same as in 2006 based on our expectations of continued favorable demand for hurricane damage work and deepwater installation and IRM activities.
"We continue to project record EPS for 2007 in the range of $2.60 to $2.90. We anticipate the 2007 growth in EPS will be led by operating income improvements in Subsea Products and ROVs. For the first quarter of 2007 we are forecasting EPS of $0.48 to $0.54."
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.
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