The downturn in the oil market is hitting nearly everything oil related pretty hard, including Oceaneering International (NYSE:OII). While the company's third-quarter results, which it reported Wednesday after the closing bell, were in-line with its expectations, the path it took to get there was not. Further, the company showed just how little visibility it has by taking down its guidance once again.

Oceaneering results: The raw numbers

 

Q3 2015 Actuals

Q3 2014 Actuals

Growth (YOY)

Revenue

$743.6 million

$973.1 million

-24%

Net Income

$68.5 million

$124.3 million

-45%

Adjusted EPS

$0.70

$1.16

-40%

Source: Oceaneering International.

What happened with Oceaneering this quarter? 
Oceaneering was hit hard by the slowdown in the offshore drilling market.

  • Revenue declined primarily due to weakness in the company's Remotely Operated Vehicles (ROV) and Subsea Products segments. The ROV segment, in particular, was hurt by weaker-than-forecasted contract renewals.
  • Revenue in all but one of the company's five segments declined, with Advanced Technologies the only segment to deliver a year-over-year gain. However, that segment's operating income was lower after its margins were cut in half.
  • Earnings were right in the middle of the company's guidance range of $0.65 to $0.75 per share. That was largely due to strength in the company's Subsea Projects segment, which saw its operating income increase year over year, as well as lower unallocated expenses.

What management had to say 
CEO Kevin McEvoy summed up the quarter by saying,

Our EPS for the quarter was within our guidance range, but was not achieved in the manner we initially anticipated. Compared to our earlier expectations, we experienced demand declines for tooling and Installation Workover and Control System services, as customer projects were either postponed or did not materialize. Furthermore contract renewals for floating rigs on which we provide Remotely Operated Vehicle (ROV) drill support services were weaker than forecast. The unfavorable impacts of these market developments were more than offset by better results from Subsea Projects and lower Unallocated Expenses.

McEvoy specifically noted that the company's ROV segment was weak, which actually might be more company specific than an industrywide issue. That's after competitor Helix Energy Solutions (NYSE:HLX) noted in its third-quarter release that its Robotics segment enjoyed an 11% sequential increase in revenue.

Further, Helix's vessel utilization increased to 87%, with ROV asset utilization only marginally lower quarter over quarter. Because of this, Helix's CEO Owen Kratz noted that, "Improved activity levels in our robotics segment... led the way for the improved quarter over quarter results." Clearly, that wasn't the case at Oceaneering.

Looking forward 
Oceaneering expects the weakness in its ROV segment to continue, which is one of the reasons why it's now reducing its full-year guidance again. McEvoy noted in the earnings release that,

Our outlook for the fourth quarter of this year is down from what we envisioned at the time of our last quarterly earnings release. We now expect to report fourth quarter EPS in the range of $0.54 to $0.60... Given this outlook and our year-to-date performance, we are reducing our 2015 EPS guidance to a range of $2.60 to $2.66 from $2.70 to $2.90, down 6% at the midpoints.

To make matters worse, he doesn't expect conditions to improve next year, but instead, to further decline. He noted that:

Based on the current number of floating rigs working and expectations for further reductions in offshore activities due to continued spending cuts by our customers, we believe our 2016 earnings will be lower than our projection for 2015. We are not, however, prepared to quantify the magnitude of the decline at this time.

This outlook could change if oil prices -- and therefore offshore oil and gas activity -- improve, but at the moment, that's not what anyone in the industry is expecting to see.

Matt DiLallo has no position in any stocks mentioned. The Motley Fool recommends Oceaneering International. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.