The deepening oil market downturn is having a significant impact on Oceaneering International's (NYSE:OII) financial results. The company experienced a big year-over-year decline in revenue and earnings after its deepwater customers cut back on activity. The company expects further deterioration in 2016, so much so that it's unable to give any forward guidance for 2016, other than it intends to maintain its quarterly dividend. 

Oceaneering results: The raw numbers

Metric

Q4 2015 Actuals

Q4 2014 Actuals

Growth (YOY)

Revenue

$722.0 million

$918.9 million

(21%)

Net Income

$27.5 million

$102.5 million

(73%)

Adjusted EPS

$0.58

$0.99

(41%)

Data source: Oceaneering International.

What happened with Oceaneering this quarter? 
Oceaneering felt the sting from the slowdown in the offshore drilling market.

  • Revenue in all but one of the company's five segments declined. The biggest decline was in the Remotely Operated Vehicles segment, which experienced a 33% year-over-year revenue decline driven by lower demand for drill support services and a reduction in average revenue per day on hire.
  • The Advanced Technologies segment was the only one to turn in higher year-over-year revenue, which rose 6%. However, its operating income was negative for the quarter. Profitability in Oceaneering's Asset Integrity segment was also weak, with it basically running break-even after revenue slumped 25% year over year.
  • Despite this weakness, earnings were right in the middle of the company's guidance range of $0.54 to $0.58 per share. However, that's on an adjusted basis and removes the impact from inventory writedowns, restructuring expenses, allowance for bad debts, fixed asset write-offs, and other items. Without these adjustments, earnings would have only been $0.28 per share.

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

The severe deterioration in oil prices and the resulting slowdown in deepwater activity since last year affected our fourth quarter and full year results. We have undertaken a series of initiatives to align our operations with current and anticipated declining activity and pricing levels. Unfortunately, these restructuring steps required us to reduce our workforce, incur unusual expenses, and make certain accounting adjustments.

Operating conditions in the oil industry are pretty brutal. National Oilwell Varco (NYSE:NOV) CEO Clay Williams summed up the current malaise in his company's earnings release, noting that "tumbling oil prices brought capital austerity and sharply lower oilfield activity, which is intensifying as we enter 2016." That capital austerity is evident from the deep reductions in capital expenditures the oil companies are making, which is leading to weaker sales at service and equipment providers such as National Oilwell Varco and Oceaneering. That's forcing those industry suppliers and service companies to adapt by cutting costs to right-size their businesses to match weaker industry activity levels. 

Looking forward 
Right now, it's anyone's guess when conditions will improve. In fact, things could get worse before they get better, with National Oilwell Varco's CEO warning that "we nevertheless recognize that the timing of the recovery remains uncertain and that we face additional headwinds in the year ahead." Those headwinds are blowing so fiercely right now that Oceaneering CEO Kevin McEvoy readily admits that he has absolutely no visibility. That's clear by reading his outlook, where he noted:

For 2016, we are expecting lower demand for our services and products, and continued pricing pressure and spending cuts from our customers. Consequently, we are projecting that all of our oilfield business segments will have lower operating income in 2016 than in 2015. With our limited market visibility on how weak 2016 may actually be, we are not prepared to quantify the magnitude or duration of the decline or give annual and quarterly EPS guidance ranges.

In other words, he's pretty sure that business conditions will be rough and that Oceaneering's profits will be down. He just doesn't have any idea how far those profits will fall.

Matt DiLallo owns shares of National Oilwell Varco. The Motley Fool owns shares of and recommends National Oilwell Varco. 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.