Oceaneering International Continued to Muddle Along in Q2

The offshore service and product company is further narrowing its full-year guidance range.

Matthew DiLallo
Matthew DiLallo
Jul 25, 2019 at 10:03AM
Energy, Materials, and Utilities

Oceaneering International (NYSE:OII) continues to battle through a challenging oil-field services market. Oil prices remain volatile, which was on full display during the second quarter as crude plunged by more than 20% for the second time in a year. That's leading oil producers to be much more cautious, which is impacting oil-field service activity levels.

However, despite that turbulence, Oceaneering's financial results came in about where it expected during the quarter. The company did further narrow its guidance range, though, this time cutting a bit off the top end as some project work failed to materialize.

Oceaneering results: The raw numbers

Metric

Q2 2019

Q2 2018

Year-Over-Year Change

Revenue

$495.8 million

$478.7 million

4%

Adjusted net income

($35.2 million)

($33.1 million)

N/M

Adjusted EPS

($0.36)

($0.34)

N/M

Data source: Oceaneering International.

What happened with Oceaneering this quarter? 

Oceaneering's energy-related segments met expectations:

  • Oceaneering International's revenue not only improved by 3.6% versus the year-ago period but also rose 0.4% from the first quarter. The sequential improvement met the company's expectations. Overall, each of the company's four energy-related segments performed within its forecasts, which offset weaker-than-anticipated results in its non-energy business unit.
  • The company's remotely operated vehicles (ROVs) and subsea products segments led the way, with revenue jumping 12% and 14.1%, respectively, compared to last year's second quarter. Driving the growth in ROVs was higher seasonal activities and an increase in the number of offshore drilling rigs it supports thanks to an overall improvement in that market over the past year. Meanwhile, subsea products benefited from a substantial increase in revenue from its manufactured products business. It also booked a large number of new subsea orders during the quarter thanks in large part to the approval of a large-scale LNG project in Mozambique.
  • The strong showing in those two segments helped offset weaker results in its other two energy-related businesses. Subsea projects revenue slipped 3.8%, though the unit's net loss evaporated. In the meantime, asset integrity's sales dropped 9.3% because pricing for inspection service remains very competitive. While both segments reported weaker results, they still met expectations.
  • The non-energy segment, advanced technologies, posted a sequential decline in income. The company didn't secure a large U.S. Navy contract that it expected and experienced production timing issues associated with some of its theme park projects.
  • While Oceaneering posted a net loss during the quarter, it did generate $40.3 million EBITDA, which met expectations. Furthermore, it produced $12.7 million of free cash flow.
A ship near an offshore drilling rig at sunset.

Image source: Getty Images.


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What management had to say 

About the quarter, CEO Rod Larson said, "Overall, the sequential improvement in our second quarter 2019 operating results met our expectations. Our energy segments, as a whole, performed well, while our non-energy segment, Advanced Technologies, fell short of our expectations."

The highlight of the quarter was the ROV segment. Revenue jumped 20% sequentially thanks to an improvement in utilization from 53% in the first quarter to 62% during the second quarter. That helped boost the segment's profitability by an impressive 513% off the first quarter's low baseline.

However, the company experienced a few setbacks during the period. As noted previously, it did not secure a large contract with the U.S. Navy as it had anticipated. Also, an expected increase in subsea project call-out work didn't come to fruition.

Looking forward 

Because of these items, Oceaneering is reducing the top end of its full-year adjusted EBITDA guidance from $180 million to $170 million. That will narrow the company's forecast range to between $150 million and $170 million. On a more positive note, it did reaffirm its expectation that it will generate free cash flow for the full year.