Oceaneering reported fourth quarter and annual earnings for the periods ended December 31, 2009.
For the fourth quarter of 2009, on revenue of $452.3 million, Oceaneering generated net income of $46.1 million, or $0.83 per share. During the corresponding period in 2008, Oceaneering reported revenue of $525.7 million and net income of $51.0 million, or $0.92 per share. For the year 2009, Oceaneering reported net income of $188.4 million, or $3.40 per share, on revenue of $1.8 billion. Net income for 2008 was $199.4 million, or $3.56 per share, on revenue of nearly $2.0 billion.
Annual and quarterly net income declined from 2008 as a result of lower operating income performances from Subsea Products, Subsea Projects, and Inspection. ROV operating income performances were record highs for both periods.
Results for the fourth quarter of 2009 included, in Mobile Offshore Production Systems (MOPS) gross margin, a $1.9 million gain on the sale of the Ocean Producer, a recently retired floating production storage and offloading unit. MOPS results in the fourth quarter of 2008 included a $5.7 million impairment charge to reduce our investment in the Ocean Pensador, an oil tanker that was sold in the second quarter of 2009.
T. Jay Collins, President and Chief Executive Officer, stated, "Our earnings of over $188 million were the second highest in Oceaneering's history and EPS of $3.40 was only 4% below last year's record results. This was a remarkable accomplishment and particularly gratifying during a time of global economic recession, tight credit markets, and declining oil consumption. Our performance in this environment was largely attributable to increased demand for ROV drill support services and the success of our efforts to control expenses, which enabled us to maintain the operating income margin we realized in 2008.
"We achieved record ROV operating income performance for the sixth consecutive year. Year over year, we grew ROV operating income by increasing our vehicle days on hire and controlling our expenses. During 2009 we put 30 new ROVs into service and retired nine. At year-end we had 248 vehicles in our fleet.
"Compared to 2008, Subsea Products operating income decreased due to demand declines for our specialty subsea products, lower umbilical plant throughput, and unanticipated manufacturing costs we incurred on two BOP control systems. Subsea Projects profit declined due to lower demand for our shallow-water vessel and diving services and competitive pressure in our deepwater vessel market due to an increase in industry vessel availability. Inspection results decreased due to the unfavorable currency impact of a stronger U.S. Dollar relative to the British Pound and lower demand for services.
"In 2009 we continued to take actions to position the company for future growth and increased earnings. Our capital expenditures were $175 million, of which $147 million was spent on growing and upgrading our ROV operations.
"Our balance sheet remained in great shape at year end. We had $162 million of cash, $120 million of debt, $200 million available under our revolving credit facility, and $1.2 billion of equity.
"For 2010 the International Energy Agency forecasts a global surplus supply of oil due to a reduction in demand stemming from the 2009 global economic recession. We therefore anticipate some deepwater construction projects will continue to be deferred until there is a meaningful recovery in hydrocarbon demand. We believe, however, that deepwater drilling activity will keep growing in 2010 as new floating rigs currently under construction are added to the worldwide fleet.
"We are forecasting our 2010 EPS to be relatively flat with 2009, in the range of $3.25 to $3.55. Compared to 2009, our forecast assumptions include unit volume growth and increased operating profit from ROVs, improved operating efficiencies and results for Subsea Products, declines in Subsea Projects activity levels and operating income, and a lower contribution from MOPS, due primarily to the retirement and sale of the Ocean Producer. For the first quarter of 2010, we are forecasting EPS of $0.65 to $0.75.
"For 2010 we anticipate generating in excess of $300 million of cash flow, simply defined as net income plus depreciation and amortization. This projected cash flow will provide ample resources to invest in Oceaneering's growth.
"Looking longer term, our belief that the oil and gas industry will continue to invest in deepwater to counteract high existing reservoir depletion rates remains unchanged. Deepwater is one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low per barrel finding and development costs. Therefore, we anticipate demand for our deepwater services and products will remain promising. With our existing assets, we are well positioned to supply a wide range of the services and products required to support the deepwater exploration, development, and production efforts of our customers."
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