Oceaneering Posts Record Annual Profit in 2010
Oceaneering reported fourth quarter and record annual earnings for the periods ended December 31, 2010.
For the fourth quarter of 2010, on revenue of $501.3 million, Oceaneering generated net income of $47.8 million, or $0.88 per share. During the corresponding period in 2009, Oceaneering reported revenue of $452.3 million and net income of $46.1 million, or $0.83 per share. For the year 2010, Oceaneering reported net income of $200.5 million, or $3.65 per share, on revenue of $1.9 billion. Net income for 2009 was $188.4 million, or $3.40 per share, on revenue of $1.8 billion.
Annual net income increased from 2009 as a result of record segment operating income performances from Remotely Operated Vehicles (ROV), Subsea Products, and Advanced Technologies. Quarterly net income improved on the strength of higher Subsea Products operating income.
T. Jay Collins, President and Chief Executive Officer, stated, "Our annual earnings of over $200 million and EPS of $3.65 were the highest in Oceaneering's history. These were remarkable accomplishments as most oilfield service companies are reporting 2010 results substantially below their peak earnings levels. Our performance in this environment was largely attributable to our business focus on deepwater activity and our successful efforts to control expenses, which enabled us to maintain the 16% operating income margin we attained in 2009 and 2008.
"We achieved record ROV operating income for the seventh consecutive year, despite lower demand in the U.S. Gulf of Mexico (GOM) due to the U.S. Department of the Interior's drilling moratorium. Year over year, we earned more ROV operating income by slightly increasing our average revenue per day-on-hire while maintaining our operating margin through good cost controls in a tough market. During 2010 we put 22 new ROVs into service and retired 10. At year-end we had 260 vehicles in our fleet.
"Subsea Products operating income increased to a record level due to manufacturing process improvements and cost reductions, improved umbilical plant throughput, and higher demand for subsea field development hardware, ROV tooling rentals, and Installation, Workover, and Control System (IWOCS) services. Products backlog at the end of 2010 was $384 million, up $63 million from the end of 2009.
"Subsea Projects profit decreased in 2010 due to lower demand for our services on hurricane damage projects and our decision to exit the Mobile Offshore Production System business. Inspection results were similar to those of 2009. Advanced Technologies operating income improved to a record level due to increased work on entertainment industry contracts, U.S. Navy engineering services, and Department of Defense manufacturing projects.
"In 2010 we continued to take actions to position the company for future growth and increased earnings. Our capital expenditures were $207 million, of which $109 million was spent on growing and upgrading our ROV fleet. We also repaid $120 million of debt and repurchased 1.1 million shares of our common stock at a cost of approximately $50 million.
"Our balance sheet remained in great shape at year-end. We had $245 million of cash, no debt, $300 million available under our revolving credit facility, and $1.4 billion of equity.
"We are forecasting our 2011 EPS to be in the range of $3.45 to $3.75, with the possibility of another record year. For our services and products, we anticipate international demand growth may more than offset lower demand in the GOM. Our assessment is that deepwater drilling and field development and production activity will increase, particularly in West Africa and Asia. The major uncertainties we face in 2011 are when, at what pace, and to what level permits for GOM deepwater drilling projects will rebound in light of additional environmental and safety regulations that have been implemented by the U.S. Department of the Interior as a result of the Macondo well incident.
"Compared to 2010, we anticipate ROV operating income will be higher in 2011 as we benefit from an increase in international demand for drill support services and a larger fleet size. We forecast Subsea Products operating income will be about the same year over year, as increased throughput at our umbilical plants is offset by lower sales of IWOCS services in the GOM. We expect Subsea Projects operating income will be lower in 2011 due to the completion in 2010 of Macondo project work and a reduced level of subsea activity in the GOM. For the first quarter of 2011, we are forecasting EPS of $0.65 to $0.70.
"For 2011 we anticipate generating at least $435 million of EBITDA. Our balance sheet and projected cash flow provide us with ample resources to invest in Oceaneering's growth.
"Looking beyond 2011, our belief that the oil and gas industry will continue to invest in deepwater projects remains unchanged. Deepwater remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates. With our existing assets, we are well positioned to supply a wide range of the services and products required to support safe deepwater efforts of our customers."
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