Oceaneering's Quarterly Earnings Increase 65%

Oceaneering International, Inc. (NYSE: OII) reported record fourth quarter and annual earnings for the periods ended December 31, 2005.

During the fourth quarter of 2005, on revenue of $289 million, Oceaneering generated net income of $19.7 million, or $0.72 per share. During the corresponding period in 2004, Oceaneering reported revenue of $226 million and net income of $11.7 million, or $0.45 per share. For the year 2005, Oceaneering reported net income of $62.7 million, or $2.34 per share, on revenue of $999 million. Net income for 2004 was $40.3 million, or $1.57 per share, on revenue of $780 million.

Year over year fourth quarter net income improved $8.0 million as a result of record operating income contributions from Subsea Projects and Subsea Products. The 2005 quarterly operating results included a $6.1 million pre- tax asset write-down related to the retirement of four remotely operated vehicles (ROVs) and other miscellaneous ROV components. Additionally during the fourth quarter, Oceaneering settled certain foreign income tax liabilities for a total of $1.8 million less than the provisions made in prior years. This resulted in a 29.2% effective income tax rate for the fourth quarter and 33.6% for all of 2005, as compared to the 35.5% rate previously estimated.

Annual net income improved $22.4 million due to higher operating income from all of Oceaneering's oilfield segments and equity income from the Medusa Spar. Oceaneering realized record Remotely Operated Vehicle (ROV), Subsea Projects, and Inspection segment operating income. Record Mobile Offshore Production Systems (MOPS) pre-tax income contribution, including equity income from the Medusa Spar, was also achieved. While not a record, Subsea Products' operating income in 2005 was over 25% more than the amount reported for 2004.

John Huff, Chairman and Chief Executive Officer, stated, "Results for the fourth quarter and the year were exceptional. We achieved the highest net income in Oceaneering's history in both periods.

"For the second consecutive year and the fourth time in the past five years we achieved record annual earnings, up 56% over 2004. These earnings reflect the growth strategy we have put in place, the ongoing secular demand growth for our offshore oilfield niche markets, and our participation in Gulf of Mexico hurricane damage inspection and repair projects. In this market environment we were able to increase pricing and utilization of our assets.

"We achieved record annual operating income results from our ROV, Subsea Projects, and Inspection segments. ROV fleet utilization increased to 83%, from 70% in 2004; our average fleet size grew; and we obtained higher average pricing per day on hire. Subsea Projects vessel utilization increased to 84%, up from 66% last year. Furthermore, we were able to provide additional services on three vessels and a barge we chartered on the spot market. Inspection succeeded in selling more value-added services and in reducing expenses. We also earned record MOPS pre-tax income, including over $10 million in equity income from our ownership position in the Medusa Spar.

"Our Subsea Products segment achieved its second best annual operating income result on the strength of increased specialty product sales. At year end our backlog was $196 million, up nearly 150% from $79 million at the beginning of the year. During the year we made significant progress toward installing steel tube umbilical manufacturing capability in our Panama City, Florida facility. We will commence our first major steel tube umbilical job at this plant by the end of the first quarter of 2006.

"During the year we invested nearly $130 million, including $51 million to expand our Subsea Products line and manufacturing capabilities and $56 million to modernize and increase the size of our ROV fleet. These capital investments position Oceaneering for increased profitability in the years ahead. At year end our debt-to-capitalization was 25% and we remain committed to using our resources to continue our growth strategy.

"Looking forward, our 2006 outlook has improved since we last reported earnings and we now expect to achieve record EPS of $2.90 to $3.10. The 2006 EPS growth is anticipated to be driven by profit improvements from: Subsea Products, particularly our steel tube umbilical manufacturing operation; ROVs due to higher pricing, a larger fleet size, and increased utilization; and Subsea Projects as a result of a general escalation in deepwater infrastructure inspection, repair, and maintenance activities and continuation of hurricane pipeline and platform repair work. For the first quarter we are forecasting EPS of $0.65 to $0.75 based on an estimated effective tax rate of 35.5%. We expect our first quarter pre-tax income result to be at least as good as we have reported for the fourth quarter of 2005."

                              Summary of Results
                   (in thousands, except per share amounts)

                         Three Months Ended                  Year Ended

                            December 31,      Sept. 30,      December 31,
                          2005       2004       2005       2005       2004

    Revenue             $288,725   $226,038   $263,111   $998,543   $780,181
    Gross Margin        $ 56,176   $ 39,095   $ 49,334   $179,280   $131,803
    Operating Income    $ 30,581   $ 19,357   $ 28,335   $ 94,069   $ 63,864
    Net Income          $ 19,701   $ 11,712   $ 17,714   $ 62,680   $ 40,300

    Diluted Earnings
     Per Share          $   0.72   $   0.45   $   0.66   $   2.34   $   1.57

    Weighted Average
     Number of Diluted
     Shares               27,282     25,903     26,921     26,824     25,685