Oceaneering International, Inc. today reported record earnings for the third quarter ended September 30, 2008. On revenue of $516 million, Oceaneering generated net income of $55.0 million, or $0.99 per share.
Oceaneering reported revenue of $485 million and net income of $53.9 million, or $0.96 per share, for the third quarter of 2007. For the second quarter of 2008, Oceaneering reported revenue of $500 million and net income of $52.1 million, or $0.93 per share.
Year-over-year and sequentially, quarterly earnings increased due to growth in ROV operating profits and a reduction in Unallocated Expenses.
T. Jay Collins, President and Chief Executive Officer, stated, "Our record quarterly net income results demonstrate the healthy demand we are experiencing for our subsea services and products. Year-to-date we are on track to achieve a fifth consecutive year of record earnings in 2008.
"Our ROV business achieved record operating income. We attained all-time high days on hire and average operating income per day-on-hire. During the quarter we placed nine new ROVs into service to meet rising market demand. At the end of September we had 223 ROVs in our fleet.
"Compared to the second quarter of this year, Subsea Products operating income improved on the strength of best-ever throughput by our Multiflex umbilical manufacturing operation. At quarter-end our products backlog was $334 million, compared to $372 million at June 30, 2008.
"Year-over-year and sequentially, Unallocated Expenses declined on lower incentive plan costs, particularly those related to a long-term plan adopted in 2002 that fluctuate with the price of our stock. Other Expense consisted primarily of currency translation losses as the U.S. dollar strengthened relative to the real in Brazil, where we use the U.S. dollar as the functional currency.
"During the quarter we purchased approximately one million shares of our common stock at a cost of about $55 million. This completed the stock repurchase program previously authorized by our Board.
"To enhance our future financial flexibility, we entered into a one-year, unsecured, $85 million term loan agreement to augment our existing $300 million revolving credit facility. As of September 30, 2008, we had $303 million of debt and $122 million available under our credit facilities. With $981 million of equity on our balance sheet, our debt-to-capitalization percentage was 24%.
"We are narrowing our annual 2008 EPS guidance to a range of $3.53 to $3.61, up slightly at the midpoint from last quarter. We expect to report record fourth quarter earnings.
"Heading into 2009, the financial markets are in turmoil, oil prices have plummeted, and economists write about a global recession. Under these conditions, the expected level of deepwater and subsea activity next year is uncertain and dependent upon a number of factors outside our control or influence. It would be presumptuous to claim we know the impact this environment will have on our business, particularly with regard to commodity prices, the level of our customers' capital spending on deepwater exploration and development, and the timing of sanctioned projects. Consequently, at this time, we are not giving our customary detailed annual earnings guidance for the upcoming year.
"To date we have not seen any reduction in the demand for our services and products. And, given the current expressed view of a considerable number of energy analysts that oil prices during 2009 should average above $70 per barrel, we believe the deepwater and subsea completion markets we serve will be least impacted by the current global uncertainty. Under this scenario, we currently believe that we will achieve record earnings in 2009 for the sixth consecutive year, with EPS of $4.00 or more.
"At this earnings level, we should generate at least $340 million of cash flow, defined simply as projected net income plus depreciation expense. At this time, as a cautionary step, we are slowing the rate of our capital spending. We project our 2009 capital expenditures, including potential acquisitions, to total approximately $175 million, which is considerably reduced from recent years. We will build new ROVs to meet firm demand; we will not add further capacity into our Subsea Products segment; and we will be more selective in our acquisition efforts. With our ability to generate significant annual cash flow and our decision to reduce capital expenditures, we expect to generate a substantial amount of cash, which will be available to pay down our debt in 2009.
"We will, of course, revisit our earnings estimate and our plans for 2009 as we gain greater clarity on the oil price outlook and the overall macro environment.
"Looking beyond 2009, our belief remains unchanged that the oil and gas industry will continue to increase its investment in deepwater to counteract high existing reservoir depletion rates. Deepwater is one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs. Therefore, we still anticipate that demand for our deepwater services and products will continue to rise and believe our business prospects for the next several years remain promising."