The price of oil has improved significantly over the past year. However, that has yet to drive a rebound in the offshore drilling market since it takes a long time to ramp those projects up. Because of that, Oceaneering International's (NYSE:OII) financial results remained under pressure in the second quarter as it awaits that rebound, which still appears to be a few quarters away. 

Oceaneering results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Change

Revenue

$478.7 million

$515.0 million

(7%)

Adjusted net income

($23.0 million)

$2.2 million

N/M

Adjusted EPS

($0.23)

$0.02

N/M

Data source: Oceaneering International.

Silhouette of an offshore drilling rig at sunset.

Image source: Getty Images.

What happened with Oceaneering this quarter? 

Oceaneering continues to battle through the slow-to-improve offshore drilling market.

  • Compared to last year's second quarter, Oceaneering's financial results took a step backward as revenue sank and the company posted a loss. However, results looked much better versus the first quarter as revenue improved 15% while its net loss narrowed, which matched its expectations heading into the period.
  • Overall, the company saw sequential revenue improvements in four of its five segments, with subsea products the lone laggard. Operating income, likewise, improved in four of its five businesses, though this time the subsea projects segment was the underperformer as its operating loss deepened.

What management had to say 

CEO Rod Larson commented on the quarter, noting that:

The sequential improvement in our adjusted consolidated second quarter 2018 operating results met our expectations, and resulted from profit contributions from each of our operating segments, except Subsea Projects. We are pleased that each of our operating segments generated positive adjusted EBITDA, and our consolidated adjusted EBITDA of $39.0 million was better than consensus published estimates.

Larson went on to detail several highlights that drove the company's improving results. He pointed out that the remotely operated vehicles (ROV) segment reversed its operating loss from the first quarter, thanks to a 26% improvement in revenue due to higher seasonal activity and in an increase in the number of working floating rigs that it provides drill support. That helped improve vessel utilization from 44% to 54%.

The company's subsea products segment, meanwhile, posted better-than-expected numbers due to the timing of contract awards and increased demand for its service and rental business. This stronger showing helped offset weaker results in its subsea projects segment, which experienced the opposite effect from timing as projects got pushed back into the second half of the year.

Looking forward 

For the third quarter, Oceaneering expects "improvement in our overall operating results, compared to the adjusted second quarter," according to Larson. Driving that view is the expectation that its subsea projects segment will return to profitability while the others will be flat to slightly down from the second quarter. Meanwhile, for the full year, the company anticipates generating $140 million to $160 million of adjusted EBITDA, which is down from the range of $140 million to $180 million it provided in the first quarter because some higher-margin service work hasn't materialized.

Matthew DiLallo has no position in any of the stocks mentioned. The Motley Fool recommends Oceaneering International. The Motley Fool has a disclosure policy.