OII - Earnings call transcript Q2 2018 | Oceaneering International, Inc.

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Operator

My name is Leandra, and I will be your conference facilitator. At this time, I would like to welcome everyone to Oceaneering Second Quarter 2018 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. With that, I will now turn the call over to Suzanne Spera, Oceaneering's Director of Investor Relations.

Suzanne M. Spera

you, thank and morning, Leandra. Good Oceaneering Welcome call. XXXX conference quarter to the results second Today's replay and on webcast call being is a Oceaneering's will website. available be

and President. will Joining Executive Financial remarks; Officer; on the Migura, are Chief Larson, us Senior Marvin Vice call Alan Curtis, Officer, providing be President who and our prepared Rod Chief

operations our we the XXXX. course future of Before we like industry just plans during would and performance, to remind strategy, call the Act forward-looking make pursuant regarding future Securities are begin, I participants financial business of that Harbor Litigation Reform statements statements the to conditions this Private provisions for made of Safe

Our comments non-GAAP measures. today also include financial

second and directly to welcome the most We you. reconciliations prepared measures your comparable questions details after can call Rod, the to like press in now quarter I would the release. financial Additional to our over statements. turn GAAP be found

Roderick A. Larson

Today XXXX some half Q&A. of year. I before in and second will will of Good provide call, the call the opening quarter remarks details for make then and commentary results I review our third morning. quarter closing the second for our guidance

Projects. And our our estimates. of profit on as by improved improvement better million second operating taxes, leading encouraged levels EBITDA than of were contributions from For except each to amortization, XXXX, or adjusted and each results million $XX consensus depreciation Subsea operating segments operating $XX.X adjusted our consolidated to activity improved the adjusted see quarter our maintained the and results we of earnings operating adjusted EBITDA positive published was segments interest, sequential in consolidated increase before Sequentially, EBITDA.

million and exchange impacts of of the obsolescence, pre-tax currency of business as equipment exiting as survey intangibles the losses. per $X.XX and equipment of loss million foreign of share reported with associated write-offs well $X.X Our land certain included $X.X

what were operations the we results Excluding adjusted was $X.XX. adjusted Overall EBITDA share items, and second these quarter. per about from expected net loss for

cash focus equivalents strong liquidity slightly $XXX continue our to and cash and on quarter-end, At We increased a to maintaining balance sheet. million.

million focused existing facility, loan available We approach liquidity late-XXXX. conservative service or $XXX and to our improving and maintaining financial until our our offerings in businesses. provides discipline maturity also and capital Oceaneering's optionality a deploy undrawn our have on and ample revolving is nearest returns unsecured, not capital broaden product credit

This look guidance. our to operations let's compared and by in activity adjusted million. and from drill on for of for we quarter an the income business at seasonal our segment ROV an services. provide rigs working for prior services $X.X basis resulted second up improvement the higher first which expected as operating was support vessel-based Now, increase and the number improved quarter floating

activity, XX% increased vessel-based compared a Our increase support XX%, was XX% during prior for XX% XX%, revenue improved in drill quarter mix and on mostly for international days respectively, fleet to from XX% utilization as to our XX% the XX% on hire activity. fleet ROV Sequentially, attributable and to quarter. the grew

actually working. rigs segment, upon floating the ROV number our For depends of much

to up time same XXX floating the period over from XXX rigs the is working XXX rigs contracted XXX rigs While three over increased rig number months the from count XX% past the rigs, to rigs. floating of X%

working While our activity the count that is support the for market. step-up within a we count solid improvement in note indicator the sign, positive drill better a contracted is the in

margin ROV adjusted hire Our the EBITDA prior was per of average compared for of flat slightly on day essentially from ROV XX% improved XX% quarter quarter. approximately XXXX. the $X,XXX to first revenue

specification and vehicles systems, two at fleet at end June higher systems lower specification quarter, retired service During XXX of we the size XXXX. the new second our put leaving two into unchanged

on XX of compares of XXX the the ROVs to that support ROVs drill support share and the contracted of XX our at floating end XX XXX quarter, June. rigs under on contract received rigs the contracts drill floating During rigs of share market XX% the This XX%, the early. the had on with having market at with of during to quarter; of or contracts that X rigs rigs were the X terminate March. end We rigs expire improved X

the adjusted Subsea Turning the a to quarter an an revenues on second $X.X compared operating profit reduction realized million Products, on to basis, during in first we quarter. X% of

operating to our offerings. products for our the due business manufactured service execution results in timing rental were of awards and increase and Our demand better-than-expected businesses, in and an

Subsea our backlog backlog of compared was $XXX million. XXXX, XX, June XXXX, Our $XXX to million at Products March XX,

Mexico. continued half moving for book-to-bill field the Projects' services vessel for contract. projects July will end one-month completion projects, year-to-date XXXX. continue provided operating second through U.S. following to expected. management of extension At year results lower-than-anticipated project current to supply will results optional environment that to work Sequentially, into price engineering competitive was the second BP timing quarter support January margins customer's BP and be of the ratio In owner. certain Subsea Ocean XXXX, periods for X.X were services for than the III and time, under more our contract, the and due Services X.XX. scope the Our Support Angola, on and commitment of deepwater XX, declined its to the Pursuant the These was Intervention Gulf vessel a returned services to Vessel in diving both on our will of to Field we the two, exercise

for second the operating traditional on due increase the demand income Integrity, higher inspection For projected, Asset in seasonal during services. revenue, to the quarter as improved

commercial income essentially and segment, quarter, expected, quarter predominantly work non-energy the Technologies, to the increased Unallocated to our in results modestly the businesses. first expenses improved, second government-related between quarter compared Advanced as For were operating flat second due first improved the XXXX. and

our me address let Now, outlook.

return quarter, operating consolidated our compared to improvement second For our the profitability. are to Projects' we XXXX, results in adjusted third quarter Subsea on of an expecting primarily

operating basis, We our half, consolidated second our each results flat Subsea be Subsea Relative we Integrity. other high on improve of expect slightly of segments to increased the results the to to half down. first Projects for or Asset an expect the ROV led with year We anticipate results operating Products and improvements by and and to from on Advanced from similar be Technologies, revenue. adjusted

million. operating pre-tax are positive adjusted We us range of to This EBITDA the $XXX from XXXX $XXX each full-year EBITDA for million $XXX estimated the million, to expense lowering of reflects million interest net our midpoint in prior estimating at million, which depreciation from to high-end narrowing guidance, range; our expense loss updating our $XX million be $XXX of the in full-year low-end million, our from estimate guidance was change by range at the $XX with $XX million of segments. the contributions our and to $XX at

the is are end pre-tax subsea guidance We expected. as as range level the activity of our of we progressing lower raising

lowering achieve We of year. the materialized. includes call-out higher change in upper Evolution service prior that us end later the work higher being delivery for of has Ocean are also the not the the the to of end necessary range as XXXX margin This impact also

most for tax longer generate As during annual that to this guidance rate of two segments allow regard. meaningful providing XXXX will operating as half do guidance the indicated are improved not talk are quarter, XXXX. last expected as the in about second I effective to now results no current conditions we the our

to list driven In For the our Ocean expect improved Projects, to and theme to expected second Subsea increase vehicles from operating remaining backlog in Technologies, contributions items the complete our margins. commercial activity from results levels the our respect field and to park the vessel punch activity recent profit to business our and income to Evolution, be with segment, delivered higher business. is half still With on at non-oil improved due within builder to acquisition increased during deepwater Advanced Ecosse continue automated improve work we due of guided should late-XXXX. the

Turning our segments. to other

ROV, increased to half with our mid-XX% relatively should drill utilization project This approximately and lead at margins activities. range fleet being both For in EBITDA hire continue we in vessel-based days support low to the XX%. on ROV overall second unchanged to

similar Our half projected to fleet first is second to be the ROV mix half.

ROV contracts. begin new XX have XX%. or are them, the received expecting share Of floating additional XX%. of At ROVs same during rigs drilling XX the to XX have June, during approximately our XX the rigs year, at XX%. And XX approximately terms are XX period. contracts have of new on that balance that total remainder XX were to the this of support Of have contracts, For of there maintain XX we or we set XX we of on are market the the end expiring the to year. rolling them drill floaters floating floaters, new contract ROVs There

of current In addition, incremental bid activity. be we will on some anticipate contracting based there rigs

to first half anticipate For Subsea Integrity, Asset of the and similar our XXXX. Products to we results be

Subsea for we Specifically levels of on activity the increased Products, manufacturing lower-margin orders. execution expect

in to half and Integrity, in digit the full of year. to book-to-bill to forecasting still backlog are pricing. Subsea an XXXX, operating mid-single We Products increase we We respect expect for be Asset With the during in which be should result awards our low range second Subsea we in Products ratio low-single exceeding digit the contract margins X.X see in an a still expect range. the until increase margins to

of expecting the upper expenses unallocated be of million the quarter. our range are For guidance $XX the remainder to year, per prior we within

CapEx Turning expectations. to our

to expected We forecasting is to associated expenditures, recent results. million to increase related $XX capital second are levels This markets activity for our late-XXXX. to million million continue XXXX, of total our with estimated increasing the expenditures. by the growth and million includes to in CapEx in overall offshore $XXX $XX a $XX expenditures year $XX estimated half a million cash in This $XXX to improvement be a challenging, million. expenditure range XXXX, capital of we to while in commence of projected capital for contract million approximately our are will and conclusion, maintenance organic in In award $XX growth

in encouraged a improving stabilized the Brent are of In some an barrel oil awards. markets overall the levels industry in signs for market, should continued now. these bidding early And in our prices by In declined. which rebounds. ongoing as of in businesses sanctioned. $XX process businesses, We outlook as and and lower have experiencing being increase prices for offshore inventory per activity the contract oil remained developments we technology energy are result offshore are in And number the and longer-term the above costs, our time continue increase projects to offshore improvements

innovative our in revenue Oceaneering's our the increase existing and develop Additionally, opportunities assets, near-term contractual meet contribute available future. to invest commitments to and to should technologies utilize and market

to well-positioned customers them. offshore energy assist be deploy As we our exploring more we developing and believe into capital resources, will

will and We momentum are cash improved in now deliver interest happy in the flows and be take future. have. confident that questions operating this everyone's results us allow any to you we'll may Oceaneering, appreciate to We

Operator

And question comes with the of your first Jim line Suisse. from Credit Wicklund

open. Your is line

Roderick A. Larson

Morning, Jim. Good

Operator

Jim...

Roderick A. Larson

Good morning, Jim.

Operator

...Wicklund, your open. line is

James Wicklund

I'm sorry. guys. Hey,

Roderick A. Larson

Jim. Hey,

James Wicklund

Marvin, to there It's ago. in for left years glad the still And, still chair. a you're sitting I'm guy who you're great see

Marvin J. Migura

Jim. Thanks,

James Wicklund

You bet.

like bottom quarter So company-wide. the to it revenue first your going be looks is

to of to clearly, in the have of guiding improving, it does to You're you years? I crystal of a kind the than customers. being mean recovery couple of the except The to can unfold own gradual, your but recovery? guess, biggest can I next of everybody we be don't talk I How a it's us expect? the use long going of you you And, a you give know know some an the what's to of over how take we're pace on expect recovery it's pace most What I up the idea back half benchmark? is period Can And that question past the second else get we recovery. track. better as the ball year.

Roderick A. Larson

to of a bit But I a in industry say, right. Jim, as what gradual Trying see bellwether. affects over how just a rig a of we XXXX. contractors hearing peak XXXX following being number XXXX-type would mean, and you're the a that we're We're understand absolutely a offshore. I and lot increase from our

think has I happening like it the what's of better. shale bit efficiency world in a think rig is been little I

I to support our and so, that think sort I going to – to be activity, there's we're better going going that discipline. to they're level more rig And have say drill be of think of

increase, gradual the expect So and geopolitical a it that big other I would to shifts things nice, be nobody predict. can notwithstanding any all

James Wicklund

Exactly.

Roderick A. Larson

was. activity But to level that I going think what would support see return. of I be we're expect below to And XXXX drill somewhat that of sort peak

James Wicklund

then the and and And happens is your the about would, to back-end, the start vessel see the rest clearly, when of get early recovery from talk really start support business ROV contracted you rig if to Can deepwater lag to see later. in really time timing, between and deepwater on you And the your it Okay. timing construction cycle. it the of business you you deepwater? and the the rest it Rigs in first. of rig then exposure? recovery What's front-end business in difference your then

Roderick A. Larson

to the Vessel we're you barrels know, to be going production rigs than to enhance oil more the directly to and more by get go the of and the driven intervention, enhancement, support, is as to because of activity the is to just shore. that opportunity tied do probably production that's of out the well some it number doing the price

to If that'll going you and of oil later that that almost to know, price is I cycle. tends full as can The project – work holds up, So think it's be get the me business, we stay. cycle.

We orders leads completion then to project to the products manufactured the on our to the drill for in, success that exploration that participate business. big see work we and have in start work that

where that an to increase first XX-month you cycle in be in can related increase surge range, see the good behind a in So the think, I activity. drilling that's really

James Wicklund

you improvement. the have We several figure then? So up pace sets this years the out for to just of next

Roderick A. Larson

Exactly.

James Wicklund

gentlemen. right, All

quarter. Thank Appreciate Okay. very you it. much. Nice

Roderick A. Larson

Jim. Thanks,

James Wicklund

Good job.

Operator

the line with JPMorgan. Sean Your Meakim next question from comes of

open. is line Your

James Wicklund

James West them. cover not might

Sean C. Meakim

guys. Thanks, Hey.

Roderick A. Larson

Sean. morning, Good

Sean C. Meakim

the about the points as end about the think say, levels guidance, dependent say, now, more or $XXX performance? bottom that upper the between, the million, How upper on end think the revisions the is thinking we of guidance to hitting just guidance? about that flex do end cost So you and of activity

Roderick A. Larson

this more trite on call-out to quarter, strong some answer, really because you done of getting no, activity in activity getting both. dependent do underway. see, in I third give is say have we the to want But, we I'll it yes. would especially projects the see and

think left lean. I running pretty As pull. mean, levers always, we I don't We've big have been to cost

the So side, within the control now it that is on really execution be we the cost cost the of would project.

own things execute to going underway on expectations and, well. of under some getting got cost. we're So big we've got We've hopefully, deliver have to those projects to that in beat some our

we'll what that's So work on.

Sean C. Meakim

helping just see you progression XQ? seasonally would XQ And mind you then to us with how the

Roderick A. Larson

interesting. It's

both while season, in see this seasonality businesses, the see products we pickup Tech offshore a and For strong offshore the in still our actually the Ad Subsea we businesses, sort of a in manufactured Products.

So QX down be slightly almost levelling off QX flat, QX. it's to really to in

Sean C. Meakim

Interesting.

very That's helpful. Okay.

one. Just one last

for to projects the So vessel think you leads about with vessel outlook the deferral, the maybe some curious newbuild call-out down coming how bit, a guide compared work for the in securing just contracts fixed-term business?

Roderick A. Larson

kind That's of late let great me one, number Well, touch delivery. the a question. on

our rent on have replace While to versus effect paying we're some about to what when have the and that it. to vessel delivered vessel we'd financials think does depreciation it like you

revenue us able and hire vessel to to maintaining the work, to we to on that the a spot been moving As the the committed work as had cover far keep Evolution. ability we've

vessels. more contracts But right now so top line it's a not see a interesting. hasn't into effect. when there's of I boats. that to for much term I to real those to up or like for you people So capacity try develop would fixed lock that contracts there's lot market, spot long-term available motivation think But been that get

able would to probably see it, on down to if lock did vessel you'd we it reduced the appetite to dayrate for be probably means that be offer work. see I more which think owners,

pickup and So, because that attractive it's we've spot the big seen now had right us, not to in activity. a market we've high

that's seen other a that our we'd services, lot I to stuff On to we we've that the big the that, more whether or tooling, would side packages other the like been that real, say, of of of subsea work offer. spot work like subsea-intensive see the hasn't involves

capacity want chartering really our the that, able lot to And using of spot cover we on we richer a So subsea in work. were market.

market the up of in share Gulf So Mexico. is

is Our spot utilizing market that hire because been share we've up ability.

again the little see a of bit don't the but fixed it's I near charters So horizon. a on mix,

Sean C. Meakim

helpful. very That's

Alan R. Curtis

Yeah.

to it's as having vessels benefit ourselves. worked I as a think really not of our well lot

to into being has by think I this able go spot on contract through market the benefited us cycle. really

Sean C. Meakim

Yeah.

Roderick A. Larson

I mean, really boat using job, best the do that. able to each for being

Thanks, for us. So it's good been Sean.

Sean C. Meakim

Excellent. Thank guys. you,

Operator

Scott line Gruber comes from the question Citigroup. next of with Your

is line open. Your

Roderick A. Larson

Good morning, Scott.

Operator

Scott your is Gruber, line open.

Scott A. Gruber

Can you me? hear

Roderick A. Larson

Yeah. We got you now, Scott.

Scott A. Gruber

Okay.

about Can your macro to walk the in that. through question. on sorry Jim's Okay, high-level thoughts response you

more dig potential as about drill potential excited talk to in little are work? excited look support more vessel recovery and Just Are XXXX in a growth plans, customers bit more you about you in about you IMR you getting work, work? to want in a in out the support

Roderick A. Larson

I think drill support steady. but is slow,

like We've suggest. So and successful it. winning our would share rate with than more market market what commensurate we obviously been the

I that's IMR the and of vessel So closer come tied much to other like that. that ability very is on from We support the That's come oil. this to work. hand, to good. But, surge think going to going price and sooner be

invest have Blue can seen – investments stuff and And that our that building some activity continue more capacity we So Ocean increased like made in we in and space, there. that tendering to up. organically business, pick we

like So that well. market I as

Scott A. Gruber

that being turning here. the just higher-margin be What pushed Got is that it. right service to And a work call-out originating geography to bit the back seems to from?

Roderick A. Larson

those in hotspots. of the there about some but to some It's major I just think here is abroad Gulf and well, the as be is Mexico, mean, there going in basins.

Scott A. Gruber

the across or... it Got evenly of in But spread you. is disappointment, kind terms of

Alan R. Curtis

lot we is more you point when And one call a have of that we're problems, Mexico. Gulf bit more do one when typically of the in of at when ability the a little customers about pricing do And that, I that No, have they companies probably speak say time. first. it's would it's to have power

So that's of a work. type

the just the problems during the people first didn't So many half we year, year during of see of least. having as first the half at

Marvin J. Migura

because they going change perceived prices correct out been that's into to work And to choke. the that problems willing oil of there, haven't a worth building out Or backlog that have. the

works of intervention a so, about A well. concept has regarding is been the That the work lot talks of deferred. maintenance Helix also outside And that about deferred lot of well to work. think the is what back flow of levels high-margin that Having remediated about to hydrate talking usually higher-margin get materialized. in optimal we're work is hasn't I part that here

Scott A. Gruber

you. Got color. you. Appreciate the Thank

Roderick A. Larson

Thanks, Scott.

Operator

Pickering Your Tudor, from of the line comes next O'Leary with & question George Company.

is line Your open.

Roderick A. Larson

George. morning, Good

George O’Leary

tendering are It of of think improving, the are guys terms helpful. front curious of have you overall I be side are that is already things to of side where being business would just a the in regards seeing on the seeing what the from the Products and/or equation seems that I'd that. flow. where worse the spoken better, on like perspective, potentially most you the geography and you is kind offshore guys activity things with that super improving, shoots, whether be But on the are be pockets, where ROV Subsea color to commentary green Any bid are hear projects to where where outlook order guys

Roderick A. Larson

quickly. was early most work. Norway work, that's little Equinor Mexico, to think they're little is slowly. bit some back you Gulf ahead Africa, get a places of a and of is of big, the even UK it's so moves mean, to and Sea quickly that I where can react I going while the North those more good sector. get

getting out. Brazil is see And do we well. again, under we good but of coming it, think Brazil, see and as now, legs Petrobras, some things I good its farther things kind happening, of with then too, Brazil some So that's out

as things but good I happening of IOCs you market the there that So can some in by, those will well. a things kind more quickest, are think of again, of gauge dynamic be some those are

Alan R. Curtis

an And sign businesses, we're encouraging quotation around interest so well. that's to and starting activity as hardware in see umbilicals more the

George O’Leary

in that into talk through, the That's I to helpful. of my initial pieces backlog? but some question. more half, the up-cycle progress the lower-price second just year? great. next Okay, I When backlog you So products through? lower-margin and recent understand through guidance Products easily correctly. in backlog is feeds products that about half you the expect through The I lower-margin back flowing we Or the products Subsea flowing this the is price of of it that to that And more a on actually types guess as downturn is just sure or of flowing is that the more digestible, sell of factor stage make want moving

Roderick A. Larson

is is biggest very with in business, that really George, in still So, in pricing there is that the it – all challenged the I number, that. mean, part capacity which umbilical

term. And market, us. price we little the capacity won type enough it's We some absorbed at. won been were because of tightening even available that to So a that products; not projects really to more they that see while it the we're some get projects continue not the just see think near new the there some absorb pricing going overall the haven't projects and necessarily of I to is sanctioned capacity being big capacity, a for to for in in – of of that's going think until

the comes we've a margin. call of talked service that of that already early one can together, into blended rentals the the the one we it see see the you things backlog, upside more us, and when us that an see on we come would recovery ST&R, that And, For mix. with of times things in. that all putting from That a higher of again, is couple

can backlog, more So, that if up. come that you'll in the number see of put we

George O’Leary

guys, color. you, the Thank Great. for very much

Operator

line Ken Robinson. the SunTrust comes Sill question next of with Your from

Your line open. is

Roderick A. Larson

Good Ken. morning,

Ken Sill

works been never going Subsea cycles, Machine business. recovering, supportive to is want really on. I Wayback a talked turned about into that's of morning. step oil of joint workover offshore the or there Well Subsea the In you is in in is upside much, from and that business maybe prices new we've still Good a that little a Since Intervention new and workover activity seen but in little into anything provide designs what's prior deepwater seen couple and pickup we science formed bit just of a for with a the kind A just cycles, ventures could that here project? are projects. guys Is the of bit. haven't

Roderick A. Larson

No. share I it an deployed really having being customer that difference It be definitely we opportunity, And a tied by interested can to in up so so quickly. reduce the not We give asset-light that chance the is. around to that were able approach through working. the a maybe move isn't on the of kind strategy we're on of vessel can we one that system versus system a our to do the can in me intervention. at cost more to world by vessel days others. The Blue is some of mean, that well getting the Ocean looking

I open that – either allows up think, dedicated cost-effective ship. be with, just it vessel to a big a market the say, So a or a addressing us, to wasn't drill part of

more now. things system valuable do the that, So out. proving we We're more adding a We're to the by we're market that because capability it the becomes. so, to like build looking doing the technology, can with

been think in unlock able market past. there will enhance do customer, haven't and some can So really just the the by that getting being price a what there point we we to better for

things coming will market. think change that are do I there yeah, So, that

Ken Sill

to seeing more everything's And mean, that? something we unaddressed a when seems start could I because maybe be need. there efficient, but like obviously big

new a So a of line? kind is be that something of that product meaningful could kind

Roderick A. Larson

Absolutely.

found that we very the of mobilize you equipment introduced get time the you're proving lot look operators to like equipment. that. everything live takes the while spend comfortable. to we before it's And what the think I a even for going when it's designs engineering They again, to often, introducing it especially a out like offshore is into a well

that couple at least already. through a follows starting that the customers major gone with we've we're of So work after to process that And see our develop.

just it's we're but So seeing a that the say I think kind we're equipment edge – would slow work. that of adopt, I on slightly to to go of of matter

Ken Sill

you. Thank Great.

Operator

Your next Joe the Capital of Gibney question from comes with One. line

is open. Your line

Joseph D. Gibney

on had Just a question Ecosse.

that's Ecosse? on you out it some the the trenching know of a Mexico. in it quarter front? a maybe kind called seasonal little lift be useful in thoughts of helping But get within third survey You seasonality refresh I bit black the into in the Are sustainable as Gulf curious projects you quarter. here is also there. back here and seeing side on growth get beyond to on Might some third that of some

Alan R. Curtis

really project-dependent. It's

second we to that we we'll be expect a the have quarter. or with So have quarter we third that backlog complete Ecosse. executing helps associated that in half It really third in the

renewables markets for associated in to we'll doing U.S. as work here that alluded survey the be the work As well you as well.

in and ROVs up the starting the also general seeing but able just that not to survey now. participating renewables and the we're pick business, So Ecosse side we're through of to pull market in

Joseph D. Gibney

here the called mix margin? Products here? boost what sort and component in little steady a In could mix products some the then of the a And just on back that momentum the you sort side you XQ rental the your bit the helping working of see your helping the service component clarification of low-single digit in half profitable. guide stay of helpful. on Okay, out for side, and the on given count just anticipate of rental you and that upward sort year, of of services rig Do somewhat are thoughts the

Alan R. Curtis

been kind bigger rental in Rod in the bit earlier year. the probably want back do a service umbilicals of component on price that and to I But is margin an spoke think down of a we'd expect We'll today, half to the increase fairly bit and pulls lot volume competitive a of has little that see hardware little and through we that the which map. coming more see points the to what

Joseph D. Gibney

Sure.

appreciate back. it. it I'll Okay. Helpful. I turn

Operator

& Cowen from Your next line comes Vebs with Company. question Vaishnav the of

line is Your open.

Vaibhav Vaishnav

first Hey. my for Good like sounds share on ROVs, question. guess more is comment based thanks market morning, on it I taking your the activity. market and improving question and

those Just reconcile in trying XQ? down that flat to to ROV comments segment

Roderick A. Larson

Vebs. Sure,

is it's mean here. this a – – lot think I moving of I pieces there's little bit a

because more the one the had see really it glad yet. haven't just one think we I'm do is QX. vessel So the a seen in that you we We've support. happen support than drill strong person question improvement asked QX, had I

which that support So work we some on call-out is remember to vessel materialize. of that have see

we There's it a when Gulf of little the weather especially the in third risk bit Mexico. in So that quarter, in the we put weight here forecast.

little we've cautious going a put to do So underlying got what drill the we we up. about support it But see drill – on the support, in. be

you'll sort of support be the quarter. to in drill see effect fourth able think of the I

a quarter. vessel the good bit of So out because well activity, which comes vessel And in just that drill some really upmanning strength got the that versus become little a but bit as we've more then will also that the support of softens had had on in support, the side the apparent. with geographic we've we've us second little not of seasonal mix some

in support difference. in I how it the little underlying overall, it's mean, overlaid But where to fast we've seasonality stuff think not that a happens I that got that. bit we've balance just drill some and that – happens. That's second So got masking out half. of It's got with

Vaibhav Vaishnav

quarter? those can that and three help in be you about two think And talk shift business that what XQ? bucket projects, Switching if way profitability returns business gives us May to in just on there's we a or categories? like That's can the to Subsea the to then Projects, confidence lower margins in disappointment third the that about that Okay. a also helpful. them

Alan R. Curtis

Yeah.

key lower-than-anticipated We've obviously our I elements. several hit are QX. think did job. us impacted which margin in a there we about That on talked not margins profile expected

or back So year. don't recurring a in that the we see half as QX the

half have year be higher also that some backlog the the has in margins executing We that in we'll expect back it. we

we how and of earlier and of we're year back So half first the work then in renewable as seeing than the half. activity that back level the the a bit going the of we what year confidence well. about more into half us saw sector the talked And in the gives

gives elements So key have think to, that those line are of that confidence. sight the I Vebs, we us that

Vaibhav Vaishnav

are flow-through with Okay. call in revenues like to based that for quickly business. be book-to-bill the Just million second on on higher half? guys Subsea confidence? it in what the Products, one-time about million-$XXX should second in and implies context And comments it, more the full you gives rental that year order umbilical just $XXX sounds that be, the switching half a And higher talking to going and

Alan R. Curtis

back And in those I in the there's now. too we be a forward orders the into right well think that strong bid we contracts pretty as are looking announce we not have think year. the activity half future, certain of converting to distant as will

Vaibhav Vaishnav

Okay. That's are helpful. squeeze And may XQ? question, one profitable if last not I Any in. that in segments

Alan R. Curtis

I in see them each profitability Vebs. in time, think we point of this at

Vaibhav Vaishnav

you. Thank Thank indulging you for me.

Roderick A. Larson

Vebs. Thanks, Yes.

Operator

Ian Macpherson of question comes the from line with Your Simmons. next

Your line is open.

Ian Macpherson

you. Hey. Thank morning. Good

Roderick A. Larson

Ian. morning, Good

Ian Macpherson

Hi.

you You related a half $XX said a opportunity million Could second that more to little mentioned increase I ramping, describe that's contract next bit year. of for you us? think CapEx

Roderick A. Larson

say because we're it's press it a bit a won't – that, is but dancing than Well, I tap yeah, But, enhanced. little working we're release. more on

watch this space. So

Ian Macpherson

press No We'll wait worries. for the release.

Roderick A. Larson

Yeah.

Ian Macpherson

for or it be to depreciation in and if EBIT is decrease a the EBITDA second implied asking have one late. for both I your reason know significant didn't boring because that on QX I'm got matters. kind I missed over was the But I seems is for there improvement this expense the about QX, accounting in for pretty a EBIT and My five guidance only might other consolidated and half. of if because minutes question And

I out. to wanted Thanks. flesh just So that

Alan R. Curtis

in improvement Yes to both; both.

Ian Macpherson

Okay. up And what's XX% down run with rate the a about depreciation half? the second in on

Alan R. Curtis

a Are on it you basis... at looking adjusted

Ian Macpherson

not million that I quite which obvious of important. Well, bit. implies, for any I in think, It's half, didn't down $XXX was see curious. reasons just the the million year full second depreciation why. a $XXX is I

Alan R. Curtis

Okay.

the I think first the depreciation item of the in some are year. line the adjustments half of hitting component, largest our

Ian Macpherson

Got it.

Thanks. Okay.

Roderick A. Larson

Yeah.

Operator

question Jefferies. comes line of Royes next the Your Eduardo from with

line open. Your is

Eduardo Royes

morning. Hey, guys. Good

third the was often you fourth bit on quarter. we've I as guess, some that's support feel I the a maybe and the in another in the about Just a in if strong little touched and second to third the from vessel and support seen little bit a Vebs' masking weakness bit there's you're then on curious bit fourth I ROVs question a earlier. little quarter historically, a vessel on seen? like, that that follow-up, we've guess, guess quarter, just quarter, I really talking I quarter we sizable think Thanks. maybe falloff

Alan R. Curtis

to is... I guiding Projects we think in what were

Roderick A. Larson

want The about vessel talking you that ROVs? make Eduardo. clear support Are I of sure ROVs? support here, vessel we're to

Eduardo Royes

Yeah.

Roderick A. Larson

are Okay. in vessel Or activity Projects? talking you about

Eduardo Royes

No. Yeah, ROVs. Thanks.

Roderick A. Larson

half, mean, – I that, about we vessel you just like improvement very things hit normal much normal the in we that throughout for we But that to relative business for that underlying out would activity is drill expect maybe fourth that's I for said, third by And year flattish talked the us as can been you say. bolstered say that the traditional mean, falloff, see. year in quarter ROVs you that's second we support rest is what significant that one the expect been call to increasing that when of what very kind the seasonal quarter as don't a is year. forever. trying of of while tell we've support weakness the has the

Eduardo Royes

and it's a difference about and think products on a we you. service help piece? how the like manufactured bit us offset there's on can the but wide It between manufactured between Maybe then could the and rental little think the Products, that it. seems difference perspective should products and pretty you you rental? spread, Got margin about if any offer some. And service Thank

Roderick A. Larson

more other And the of products. is we our service, it's specialty in hard on sometimes I tell the but and or think significant you've a other service manufactured kind some for yeah, manufactured which products actually products. difference, it and is booked than that's better a to the little significantly in rental is a differential that, actually there look nailed product like have out do call manufactured which business, because end, we you backlog have what me for

the all products. are rentals, it things those service and within between what service rentals depend manufactured and proportion of then the on the So will and relative mix and

Eduardo Royes

Thanks.

Alan R. Curtis

have broken it We sub-segment level... out not at

Roderick A. Larson

Yeah.

Alan R. Curtis

this... ...at

Eduardo Royes

then, you related or share know side? I you're rental revenue handy guess, that comes on Got the on think the you. to usually side, if Q. And have I guys I the split out willing don't on the it

Alan R. Curtis

our in be will Q. It

Eduardo Royes

All Okay. you. Thank right.

Operator

Heikkinen the comes Energy Smith from David question of Advisors. line next your with And

open. is line Your

Roderick A. Larson

Good morning, David.

Operator

is David, your line open.

David Christopher Smith

Yeah. okay? can hear you me Hey,

Roderick A. Larson

Yeah. We do, now. David. We got you

David Christopher Smith

Okay.

of color vessels year? on a that at vessels? ROV the announcements how playing mostly QX that vessel-based this give on what's renewables you competitors? you Is related prior Heerema, through the and ROVs fruition appendix vessels the us in displacing give And nicely more end the On Could Maersk the more to in helping you figure of see up vessels presentation, I activity, step of XX you Is QX. the stepped get know to it placed ROVs of do on so, your any quarter. activity? out That XXX up the from figure in in number

Roderick A. Larson

combination. a It's

thing which we So have had hit on days the placement a worked. of I Maersk. number we've But that deployments seeing of have, the it. you you're other on extra couple vessels mean, you the number is

the of of have vessels to we've only worked number relative those not but of increased, vessels we're it's had on drill So is part number of that days days – that has support number the ship. the

activity is for increase. the will of that on drive So we're most just what vessels it's

David Christopher Smith

And and to I Is full Revenues it. I had while for I'm was EBITDA that you QX. survey full the backlog as performance quarter Ecosse a gave you anything up on the on know you this with you work color I QX improvement? guidance know in main Ecosse nice but Or a quarter? sequentially, repeated? specific in some had really circling your are with a Appreciate mentioned in because Ecosse. helped wasn't think quarter little bit margins halved. Projects Was QX, vessel Angola, that QX difference to And dilutive and benefiting there of

Alan R. Curtis

And, we in going yes, it, most to the impacting was lower our at the it margins. the than the have project what look talk anticipated that about Ecosse, in we be in the came what was When than one QX. work half of Yeah. that is year of more back they we

So will backlog. in their it but QX in pick QX, up as a was it we dilutive bit on execute

David Christopher Smith

color. the Great. Appreciate

Alan R. Curtis

Yes.

Roderick A. Larson

David. Thanks,

Operator

to for Rod there no questions CEO, Larson, the this further remarks. I And at time. turn are closing over will back call

Roderick A. Larson

our always great to as are XXXX second I'd a like Since Have up wrap day. everyone there conference by no for the call. thanking joining concludes quarter This questions, more call.

Oceaneering International (OII) 26 Jul 182018 Q2 Earnings call transcript