Oceaneering International, Inc. today reported record fourth quarter and annual earnings for the periods ended December 31, 2008. Fourth quarter and annual earnings increased for the fifth consecutive year.
During the fourth quarter of 2008, on revenue of $525.7 million, Oceaneering generated net income of $51.0 million, or $0.93 per share. During the corresponding period in 2007, Oceaneering reported revenue of $481.6 million and net income of $45.5 million, or $0.81 per share. For the year 2008, Oceaneering reported net income of $199.4 million, or $3.58 per share, on revenue of nearly $2.0 billion. Net income for 2007 was $180.4 million, or $3.24 per share, on revenue of over $1.7 billion.
Annual and quarterly net income increased year over year, $19.0 million and $5.5 million respectively, as a result of higher operating income performances from Remotely Operated Vehicles (ROV), Subsea Products, and Inspection. This quarter's results included, in Mobile Offshore Production Systems gross margin, a $5.7 million impairment charge to reduce our investment in the Ocean Pensador, an oil tanker held for possible conversion, to its fair value.
T. Jay Collins, President and Chief Executive Officer, stated, "Results for the fourth quarter and the year were exceptional. Annual earnings of nearly $200 million were the highest in Oceaneering's history, over 10% above last year's record result. In 2008 we achieved best ever ROV, Subsea Products, and Inspection operating income performances.
"Compared to 2007, we grew annual ROV operating income by expanding our fleet and increasing average revenue per day-on-hire for our services. Subsea Products profit improved on the strength of increased ROV tooling sales and higher throughput at our umbilical plants. Inspection results rose as we secured additional work associated with offshore production platforms, LNG and petrochemical facilities, and pipelines at higher margins.
"In 2008 we continued to take actions to position the company for future growth and enhance our financial flexibility. We invested $252 million to upgrade and expand our service and product line offerings. Nearly ninety percent of this investment was spent on our ROV and Subsea Products businesses. These two operations offer promising long-term prospects, as they are tied to deepwater and subsea completion activity. We entered into a one-year, unsecured, $85 million term loan agreement to augment our existing $300 million revolving credit facility. As of December 31, 2008, we had $229 million of debt and $196 million available under our credit facilities.
"At this time, we face a deteriorating macroeconomic environment that threatens a prolonged worldwide recession, oil prices not seen since 2004, and an exceptionally tight credit market. These conditions are having a negative impact on oil and gas exploration and development spending plans and, consequently, our earnings prospects for 2009. We do not pretend to have a "bulletproof" business strategy. It would, therefore, be presumptuous to claim we know the exact impact our customers' spending cuts will have on demand for our services and products. However, we believe the deepwater market will be among the least vulnerable to these cuts. This belief is based on the inherent size and long-term nature of deepwater projects and our expectation that oil prices will inevitably rebound to a level that will make these projects more economical. While work on most authorized deepwater projects is likely to continue, the urgency to start new projects is in question.
"We are forecasting our 2009 EPS to be in the range of $3.00 to $3.60. Compared to 2008, our forecast assumptions are that we will achieve profit growth from our ROV business and declines in operating income from our Subsea Projects, Inspection, and MOPS operations. We expect the profit contribution from Subsea Products to be similar to 2008, as the efficiency gains we plan to achieve in our manufacturing processes may be offset by a decline in demand for some of our product lines. Further development project delays would dampen our expectation for Subsea Products profit in 2009. For the first quarter of 2009, we are forecasting EPS of $0.60 to $0.70.
"During 2009 we anticipate generating $290 million to $325 million of cash flow, defined simply as net income plus depreciation expense. This projected cash flow and our existing revolving debt availability should give us ample liquidity to fund our estimated $175 million of capital expenditures and repay the $105 million of debt scheduled to mature in 2009.
"Looking longer term, our belief remains unchanged that the oil and gas industry will continue to invest 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 per barrel finding and development costs. Therefore, we anticipate that demand for our deepwater services and products will remain promising for the next several years."