OII - Earnings call transcript Q1 2019 | Oceaneering International, Inc.

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Operator

My name is Jody and I will be your conference operator. At this time, I would like to welcome everyone to Oceaneering's First Quarter 2019 Conference Call. [Operator instructions] After the speakers’ remarks, there will be a question-and-answer period. With that, I will now turn the call over to Mark Peterson, Oceaneering's Vice President of Corporate Development and Investor Relations. Please go ahead.

Mark Peterson

morning. Good Peterson Oceaneering's Mark Results Quarter welcome Call. Conference and is First to XXXX This being a webcast available is call Today's and website. on replay Oceaneering's be will

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

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

Our comments also non-GAAP today include financial measures.

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

Rod Larson

thanks joining results like morning have Good quarter business performance. and today. Higher-than-expected are by exceeded first factors repeating, good I'd start expectations. to determining our achieving activity in for pleased our segments energy-focused within we this levels and very that execution the were call

$XX.X $XXX the continue the quarter, million EBITDA to previous for EBITDA we range by project share million raising amortization XXXX, guidance Each or first a the expect low the free year. interest, cash of our million surpassed year. remainder $XXX and million we expectations moving $XXX of depreciation results for range between segments to and consensus before narrowing $X.XX midpoint for By million taxes, and of of published on guidance, on these the of generated to $XXX from now and adjusted flow our we EBITDA reported $XXX the adjusted operating adjusted of to end $XX.X For and loss our of generate or net million revenues our estimates. EBITDA we are positive narrowing of EBITDA our per minus million. the are Based positive our earnings

at Average and first by business fourth revenues. margin operating look on with to EBITDA ROV increased segment. of improved largely mobilizations revenue higher XX% the associated installations. increased adjusted to to day-on-hire let's XX%. results per our reimbursement quarter, for utilization Now, of ROV quarter ROV the Compared XXXX, due segments to increased costs and quarter,

XXX year-end During was the quarter, vehicles our it first XXXX. fleet of same of we at kept as size the

support the under rigs during of compared and use XX% to of on activity XX%. share of drill respectively fleet contract, the XXXX. had support in and end resulting Our ROV market the contracts March, XX% was in drill the XXX a of we XX in XX% XX% vessel-based for quarter fourth quarter At floating

Subsea to first achieved due higher to Turning improved closing out service operating results projects. margins This good successfully Products. improved levels on quarter quarter, the flat was several revenues. and largely to fourth activity Compared including and rental execution, by of improvement

from revenue rental quarter. fourth first in XX% of Accordingly, products XX% of XX% fourth manufactured service compared revenues grew QX segment represented the the segment total total in XX% For to and in quarter, the to the quarter. the

to related largely attributable $XXX Subsea hardware was increased million increase manufactured at XXXX. business. XXXX products backlog $XXX December and our Our XX, in Products' order was XX, backlog intake March compared at This to million umbilical

trailing the X.X. XX for ratio book-to-bill Our was months

an on operating as awards. with Sequentially, us project good Subsea procure order execution quarter, flat letters step and favorable intake expected During long pending a lead intent improving of revenues, to allowed dates. and meet of contract mix unusual binding improved results This survey customers' time items significant market. the unannounced two Projects' our included to result associated delivery

delivery took preparation the we in for of the project work. Port outfitting During final Evolution the in is and Ocean Fourchon, quarter, currently completing vessel first

revenue. slightly income on near breakeven was operating Integrity Asset lower

first our in number commercial Technologies, and segment, For job non-energy expected, contract due operating to of primarily our quarter Advanced completions businesses. XXXX results closeouts as a lower declined

first of expenses unallocated were As higher quarter fourth anticipated, XXXX. quarter that than

During the by use in in million activities $XX quarter, capital net operating maintenance of and $XX.X we $XX.X generated of utilized expenditures, cash million million resulting million growth for cash a provided and of had available during million cash end the cash equivalents, we quarter. near-term and unsecured, and the quarter, revolving maturities. loan cash credit no undrawn $XXX facility under the of At our of $XXX

basis, improvement relatively Moving flat business Subsea and in we operating results and anticipate Asset to improve quarter-to-quarter our line on quarter segments. in Projects results our with quarterly in EBITDA expect our Sequentially, public a consensus Advanced Products we the substantially consolidated Subsea to in estimates prior with our release. quarterly On operating outlook. sequential ROV profitability Integrity earnings and Technologies to second place and segments our being

vessel-based are to quarter. days both and increases general remain relatively Revenues due projecting day the are increases. to hire support with forecast as increase seasonal in to hire For market on stable cost per drill on activities normal to along ROVs, first in we compared

seasonal we in results and diving the For activity in continued US Mexico. increases Subsea our a anticipate to of operating improve pickup demand for Projects, survey services work in our by driven Gulf and vessel

and in expect our non-energy both Technologies, For improvement relatively moderate our commercial operating Advanced businesses on in revenues. government results we segment, flat

business. revenue to in we Subsea from flat results throughput mix higher due increased expecting products are changing manufactured For Products, relatively our on operating

contract frame. We hardware will into during intake believe continue this we to quarter final mentioned second converted time LOIs order and umbilical previously during as expect the awards good be our

for We and market share our and flat. ROV EBITDA the forecast the range the for for ROV expect overall. XXXX hire XX% we operations estimate be drill overall vessel-based for support fleet we revenue relatively flat segment, services and XXXX relatively ROVs, by we our respectively. the results remain in increased remain to and upper operating XX% our utilization be in Asset margin days drill that expect, to foreseeable We Directionally, full market support to range Integrity, for future. our on mix will project maintain XX% expect to for year in XXXX XX% fleet range the generally For and

by indicating bidding longer durations. We activity encouraged are recent contract

these into However, we number to continue costs. until and hire become of of days on will rigs, opportunities we the a churn see materialize contract and working rig-related a associated higher higher percentage the experience

increase primarily intake activity manufactured year. For expect of a products half XXXX, the Subsea second of business order we half substantial in Products, the in the of as result good first during a during our

the Subsea will of XXXX. and our full of Any manufactured Products' to the fixed in the expected to timing X.X products year. in X.XX range ratio good business service the in awards Continued book-to-bill are mid-single-digit for expected our change business ratio these of rental could forecast performance better margins impact in We be our result for for and in operating that absorption costs book-to-bill year.

to Subsea of activity our and we business. the still For Mexico expecting year-over-year a Gulf months improvement Projects, seasonal are summer in callout pickup the in due during survey

to the during As Ocean be mentioned, the putting we her time for quarter we took first delivery Evolution first and the of will work June. during

the during vessel, the capabilities good for Given half project we this anticipate the second of her of opportunities high-end year.

second operating competitive. uptick during be slight we the a very Integrity, income and revenues to project the in Asset of pricing year half For continuing with

in operating For the low expect the margins be single-digit to year, range. we

to businesses project businesses. Technologies, year XXXX, overall continued levels non-energy commercial in in For compared our Advanced we government results segment, marginal overall improved high with growth the activity for our and our

within to we of For forecasting year, the million be $XX average to expenses are the our quarter. unallocated guidance and remainder prior per

FIDs for this and levels that include Many of and most macro expectation support markets total includes rig for activity has These growth of $XX our increasing offshore and analysts improving expenditures complement pricing will have. now remains organic generating in represent increasing. Oceaneering summary, that in to capital the the the $XXX On raise market range. the Our in deepwater. To million year activity be expectation be enough a to we the feel $XXX $XX feel increased capital industry demand our for million and million for $XX you forecast that We early interest cash million fact XXXX that And annual floating returns. part. expenditures. expenditure midpoint of we million raise the estimated questions approximately in any pleased million. to is appreciate offshore flow our guidance for $XX energy capital that signs happy see the our confident results very quarter This offshore stabilized drilling activity first in our levels in and inflected continues to these encouraging a and we're project first everyone's expectations, to belief basis, and between observations Oceaneering. to with have we maintenance EBITDA In XXXX, this and may positive answer may particularly and our in our focus free on year continued

Operator

Instructions] of [Operator from the ahead. line Please of question Hallead first RBC. Kurt comes Your go

Your line is open.

Kurt Hallead

good Hi, morning.

Rod Larson

Kurt. Good morning,

Kurt Hallead

Hey, things about. to always talk positive good some

it downturn. through making done well the So

Rod Larson

Thanks.

Kurt Hallead

trouble. No

exceeding the of side, have XXXX infer right? wanted I obviously time off You for the some just provided XX% of second would ROV That during utilization guidance aggregate. XX% half start So in to to maybe on guys in point XXXX. at upper utilization

would up seems as the increased went have on on rates to contracts. pricing of hire. start flat We've you two the to year of increased kind on. ultra-deepwater well indication things seen you days yet, pricing, tend be to utilization, for maybe bode for So, which means move day Those recent have rigs the now

and segment? you be have may for little you there ROV dynamics you just occur us pricing for more power better need the around can a may what give to -- then to the maybe So pricing what insight to think

Rod Larson

dynamics, letting. we're a basis, we're just I I that on of mean, Sure. in contracts case-by-case we're pricing would say still, kind

where you like Angola there. differentiated, got like established where So, great into facilities. places well for we've We're get you're us places shore

more we units spares Those are places of little crews with more there, where places North locally. would than you coming our where say and opportunity in flushed are Our markets the feel see you replacement and Sea a if those like competitors. do the activity increases Mexico Gulf pricing or are

of depend mean, So just what Guyana an where going to I the we've I rigs happening. our what the Guyana. covered example, activity -- on in are all as think excitement it's and got levels levels drilling of happens

point high things. for so we those a like us, that's So

generally opportunity there's that think that -- coming. and more more I of

start I because see not give trend improving to little But generally as will is to people let, bit commitment that really be of but longer-term bit up more willing little a long-term on price the think a be overall, stress get to there'll price of contracts little we for vehicles. a fast.

Kurt Hallead

by Pacific I And Thank that. think of on, an other and That's the up that to for that give like I how yesterday basically terms Drilling Okay. there digital with follow service a And color. with you looks good to digital thing they announcement agreement was, some have Could could them. agreement that in profitability? color of came translate revenue them, on sort some what you want us about?

Rod Larson

Sure.

call company there. we got that solutions. a of that we've operate borne it business the lot So was crisis and we global communications separately really during out data we did a support of inside the group [indiscernible] work helping And

bandwidth. So because work and operations, more doing and all ROV, are it to rig. of communications, a for putting of the that remote these exciting rigs, requires that solutions combined us for fits kind survey, to and remote customers But more do is work we've the project in down some right we're more it's very our requires accessibility, accessibility while. the wheelhouse emphasis manning what been we that more finding It on

kind our of our of kind we've is And technology of also provide operations that the one new but in services of for. bring enable work our those contracts some premier that remote so this invested together to this

Alan Curtis

Right.

lot we at our then that. a into ROV and the and Kurt talk about video And streaming time. ROV when other up this into the will So component things same segment like the of survey segment capabilities roll up project rolls

Kurt Hallead

good. that's And

some companies. that's else be can't service something that we might more I would with the or -- might, larger integrated of speak So for this might associated anybody be I

what this competition of -- of kind is you And be what's unique So, about out there is level what this? may providing?

Rod Larson

that we've with is what's bandwidth reselling think things. here unique well the and ourselves positioned I

enable where rig companies So finding whole We're combining they're way a say closer light some the the up and to higher a off of them than really their service data the and for get provide services to are service to we're that. maybe and rig. trying a of more their level satellite the

Kurt Hallead

in 'XX deal? -- be on going going see to to And it is XXXX then this, of or the is incremental a are it revenue it you more

Rod Larson

a depends really can't go much contract. it, how rigs I about work it to of it's win. But these talk many and on all discrete because too

Marvin Migura

only There's right one Kurt. now, working

Kurt Hallead

you Okay. Thank that color. for

Operator

line JPMorgan. of Meakim Your next the question ahead. of Sean comes from Please go

line is Your open.

Sean Meakim

Thank morning. good you. Hey,

Rod Larson

Good morning, Sean.

Sean Meakim

give Projects, in. overall what on comments can Subsea quarter? the the more constructive in were of I us maybe So a bit mix And you drove think coming XXXX favorable for little Evolution certainly the the with

talked first as versus second profitability. the you maybe in as the half think about I far slight a half uptick

Just how could that's look pretty improved that Just of in think on the would different what about, customer In important. like -- How little I a color terms to because a do are we seeing like? broad projects more competitive the there? competition of more out give terms are out I pretty that what think of there? you get little types still outlook detail of the does you're market, in opportunities

Rod Larson

Sure, Sean.

me sort lower favorable we that asked QX. had stood mix a you in and of and in they QX couple especially us. out, time highlight were for talked a against activity question a We kind mix they of of projects with because -- about Let start project about of

into So seasonal they'll a while will XQ, become picks the the as up. of part smaller continue they mix activity

uplift we've of So be We That's do QX. Gulf Good little QX in price. and for seasonal wind of to IMR a Mexico IMR into QX our bit to of sort creates activity. back in a it good. a expect in particularly a season, activity strong the going got

do we they're improve the during and to pricing QX QX and work busy. boats as see So go

So that's we will Evolution on. kind come Ocean what of see.

better While cash a paying us, for else because in us it's that boat. their doesn't margin just said change create a on from big depreciation for perspective for before, like we're somebody we've versus

from mention inside as also cash So, there's to up out that, or survey is leading more we're bringing picking now project and that But often aside too. business effect. indicator, is think I trying that a a survey of

So the will showing well. that of really up that's us for part in as year

increase the be also is should of to productivity be year what going So over good forward. and that indicator a going

Sean Meakim

you. Thank

that's helpful. think I

maybe were tenders how like longer mean, back these last think up and I umbilical that is go today compared as to service solid book-to-bill How maybe are really talked here orders seeing activity How as that the On nice the backlog quarter pick come expectation build terms about they the some in competitors? Products the I the shifting quarter, you're there a you're year business, absorption. of higher about an And backlog we you're think among in But will lead for into progression where half through in, competitively these. what last in should was that just nice about, looks cost compared this you year. do in is a year? help time dynamic second talking we from 'XX? as of of your the expecting bid

Rod Larson

Sure.

-- say while, I the for Sean seen already mix. in been backlog me is attractive it, so way would you some nice what working on for we've to you've what's the a tell less So that

already there. So that's

when of compare half going of there's half back So to 'XX, a you two. big 'XX, difference first in be those not

manufacturing when for way, it's projects to should forward, the get lower fight come they saying steady if -- But fairly them as get not should directionally, we I'm going done. crazy. try pressure we create to slots upward sort more over of we to want see go at to price, should especially that slots. people that availability done if Going a on still rate, pressure FIDs I see mean, It

Alan Curtis

of a the start say, of end half back that I'll XXXX, to you'd flow think more of when XXXX second of that to statement. more income start see through the I be on

the of and I to most you start that's through, going be better this looking of is when think first at of the into part the today half backlog the year. going year of next flowing end

Sean Meakim

That could. if make piece sense. I that more Got one on it. And

toward just as Can in these projects. their Just the And bid shifted integrated have and can how dynamics had that change influences to quite maybe think a about how your different bit? up fill folks sort projects? you on a a that such that push to ability capacity of you've competitive about talk space bit how

Rod Larson

bidding get because chances we are on multiple people thing, bidding one Well, more we with win that to are epic project. the

to So we're epic more bidding than provider. one

And some more us so market. to in ways, that gives access

the of pretty kind book-to-bill by so and that well has far out ratio. tell can borne So you

think put on seem further too may now, much us I doesn't right to but OK see, there's So, it's squeeze now. only can thing pressure. it that a for The us, consolidation be I if

Sean Meakim

interesting. Very

Okay, great. you. Thank

Operator

question Weil. line of the Please next go Howard from comes of Vebs Your Vaishnav ahead.

open. is line Your

Vebs Vaishnav

Hey, morning. good

Rod Larson

Vebs. morning, Good

Vebs Vaishnav

So talking on to products, have mid-single I it's the quarter high quarter, then digits. get understand guess negative, about what to to you about good just help are driving, almost but driving I margins that think that can it were flattish. second are that And confidence, improvement? just by XXXX, about gives you Product exit what's first orders, help think like Subsea we call you assume if what's Can the much single digits, you me us getting just

Rod Larson

we and be the throughput a throughput you -- to last year, plant-by-plant the at seeing our to heard Vebs. on throughout our enough us and really each It's of of manufacturing just is we're we're because facilities the things a facilities. of now on one the distribution with respective basis, backlog better we cost structure, lack we're didn't have pushed of us through plants, really that talk Yes. talked that lot a When absorption about achieve the able times, absorption going the encouraged

make levels in cost absorption we So with of the XXXX. profile really to help that's our appropriate really that helping have certain us

year, book our part to expect that this back booked what feel the back So to XXXX, up half into we going with in of the what we've first half in single-digit year. the single-digit, really going upper propel of and that's into this of the half margins help remaining we range

would get bit beyond think be to I frothy a that. little it

Vebs Vaishnav

of what to $XX as And maintenance Okay. I the think spoke million business, intensity, think of intensity kind capital think business? So, CapEx. capital should million we the you about about how the we $XX about

-- other, about If plus pin number, business? and say, I'm let's to the of of to a capital you that for that is not like of but a fair trying million way some thinking about intensity you $XX million think $XX down maintenance is

Rod Larson

Yes. Yes.

I four of that riser the year then equipment going past, forward about that being on to has I years this personnel to for The we've capital. been maintenance talked being supplying And midpoint part remainder $XXX that our pipe latter on that required the think was year, of $XX contract of in of what we've we'll million our CapEx be Ocean drill in Brazil. it on out. majority of guidance this talked and a with needs Evolution the and the associated $XX Vebs, related we've the million the think with million got remaining CapEx And and growth. bringing

most was for growth Evolution the as have. on of as contract the this that commitment the that So we defined year a CapEx. remaining specific It was was for well

Vebs Vaishnav

for one last me. maybe And Okay.

cash of free of cash pretty about a source us Just for how Can on your neutral? you are a positive help or capital, cash or use think if about thinking it's capital, working working you guidance flow.

Alan Curtis

source Yes. is, us. it for We're be question. a Great should looking at

progress big associated to and some of significant outcome. a these will awards be on awards related this timing payments umbilical influence the However,

be timing will related. it So

Operator

Urban of ahead. line will from question Mike Seaport of next Your go the Please Global. come

open. line is Your

Mike Urban

morning, Good Thanks. guys.

Rod Larson

Mike. morning, Good

Mike Urban

looking targeting? addressable or here? a what guess, but it I could you. I to what solutions wanted contract all just think realistically set Does for market scope up And to you it's thinking you have about in it's opportunity I nice you're it rigs early do the Is kind data what of, your here? a the are group. for what be customers? I And customers? of you was be theory, A kind mean, recognizing follow bit days, on floating little win

Rod Larson

proposition doesn't the already customers. whether on It have that's But to value or helps through be we're a ROV. our particularly when obviously, lot Yes. survey the rig

with with first we're operators. contracts you the with contracts for services got So, people target are the got these that's because especially Which there is, the those great largely contracts is to remember are drillers our good. where and we've often

customer, there, So existing with necessarily while just already somebody a rig. you're more got isn't because on the relationship your it you've you're it's

Mike Urban

Got you.

you is drive are OK, there you opposed And fee or as this to going do use So over Oceaneering a with differentiation just Is source and positive -- some to so a you those something might from think competitor time capture that net we're can say, to -- is using these be time you this higher manning, higher kind reduced over think? I net and able cost savings of do mean from your for of to revenue revenue margin you better efficiency, kind things. of here?

Alan Curtis

pull-through the the for think us biggest I was part. and the differentiation

that's the we contract mention operations rig. very beyond try How why about can great above can it's I of that deman a really say many and and beyond it. that remote much it's to combine think we operation how this excited But to have we we do? get I above I we're differentiated think is these and when earlier and

rig. better are a delivering like We a to positioned the a more service And take this we have see, if in of want well-connected advantage that. you the a offshore -- believe advantage competitive drilling say of I that that we to

Mike Urban

just Evolution? delivery update if apologize Do you took of could of then D&A on I And couple housekeeping you the the missed an given questions, guidance I I a it. if have that

Rod Larson

I'm missed sorry I the…

Mike Urban

vessel? I Depreciation. that, think you an delivery that on of don't the gave given just the update

Rod Larson

expectations any at in this D&A or out decreases given point. not specific on have increases We

Mike Urban

your for cash then taxes? And expectation Okay.

Rod Larson

$XX year. for the To remain about million

Mike Urban

Okay. you. That's all for me. Thank

Operator

line George and comes question Please TPH next O'Leary go Your the instructions] Company. of of [Operator from ahead.

open. is line Your

George O'Leary

certainly is The ROV guidance utilization of kind encouraging.

like drive are that going front? pretty if regions We the any through is color regions secondarily, that are provide that doing we on the that lines progress in year? you're And then of escalation increases seeing out as year. well. you geographically might on maybe through can as signs to of aware was Sea guys anything progress not seems the surprising curious where the maybe emerging I expecting you It utilization utilization we are which pops here recovery. some just activity we North be But offshore

Rod Larson

think we're probably and increase in I I Angola. Mexico it's mean, seeing of so But an activity bid interest all in Gulf less over, really widespread. and

point, to that encouraging. particularly So your that's

George O'Leary

in And then of an following any tooling the Okay. on drivers you carried on increase volume historically, are questions on Sean's to the Subsea color the one side, seeing Great. realize earlier improvement think mix as or I both you -- guys, bureau the and utilization is I provide on Products just fairly into an and particular digging side -- seeing for ROV but uptick tooling margins ROVs, tooling there? you're in you could has there are the just high improvement,

Rod Larson

tooling, Subsea tooling always ROV the basic with an make the and ROVs put rental margin is with we as some a but goes associated mean, there good packages the I business. correction of service a uptick that work is. There not small as the out with is

and on and of these some So really rental what for like business. especially us service the well we've will that Intervention, really now that jobs the move looking got needle we're bigger for

the so that back year. half package looking of in of the activity And some particular, in for heels we more success this on with hopefully are

Alan Curtis

type activities. where hydrate so and higher you more that's well as well remediation, intervention get IWOCS stimulation, see work, IMR Yes, type you the

George O'Leary

helpful Very guys. Thanks, color.

Operator

ahead. comes Your Sullivan next Cole the Please go Fargo. of question from of line Wells

line is open. Your

Cole Sullivan

Hi, good morning.

like are in some XQ, that reported guys convert products You in strong quarters and in in sounded had XQ to happened that I correctly? did that guys first really LOIs it the you hear likely quarter

Rod Larson

That's correct.

Cole Sullivan

and the from be is half sort see of year the orders? What products obviously strong And in comments order it first for sounds for of peers, your the going Okay. some wise and your guys. you do to of industry rest you the across pipeline pretty like

Rod Larson

through more to coming are going elephants. see things this still we think I half were I that in, big in first but mean, you're some some of projects the coming have year. really there

won't look big So, think activity. be horizon, these but be there of ones, the at I many when really you there as will

Alan Curtis

gave in comments. We prepared guidance Yeah. the Rod's

be X.X our for the to We expect X.XX range. book-to-bill year to

a help year. on little should the that So bit back of the half

Cole Sullivan

last the in more increased All quarter first I on sounded then like guidance and year-over-year revenue do of in rest that on it some was it a Is 'XX guidance average we that, kind of kind were the the day the think it of for have basically year? XQ. issue? about do quickly call there the just, and lower the that? right. we quarter, And impacted per on flattish How first ROVs, the believe the about was think is XQ of mix How moves

Alan Curtis

don't We see are year seeing it I any so major changes. flatten out for the right now. mean, I

well looks like be around we bid it's when going again world. pretty activity distributed to the just So said

these about that, any don't and that coming. talked but So we a see of shift of regional lot shouldn't we've like mix see big, things

kind see can of think it say that changes, we I So, any other be leveled. fairly we barring should

Cole Sullivan

all right. have. All I you. Thank That's

Operator

in questions for queue. the no turn I back are to over remarks. final call the Rod Larson will further There

Rod Larson

All right. wrap XXXX call. everybody. up call the quarter Well just by since for conference questions, I'll thanking no we concludes joining more and Thanks our have everybody this first

Operator

This call. concludes today's conference

now disconnect. may You

Oceaneering International (OII) 30 Apr 192019 Q1 Earnings call transcript