Oceaneering International's (NYSE: OII) financial results bounced back in the second quarter after the company reported a meager profit and ended a string of losses. While the company expects further improvement in the back half of the year, it still doesn't expect to report more than a marginal profit for the full year because of the continued pressure on the offshore drilling sector.
Oceaneering results: The raw numbers
What happened with Oceaneering this quarter?
Oceaneering's results bounced back off the bottom.
- Revenue from the company's remotely operated vehicles (ROV) segment was up 10% from the first quarter to $103.4 million, though it was down 26% year over year. Driving the sequential improvement was higher utilization, due in part to retiring four ROVs during the quarter while only putting one new ROV into service. That rise in revenue, along with a slight improvement in margin, drove operating income up 75% versus last quarter, though it's still down more than 40% from last year's second quarter.
- Subsea products revenue rose 16% from last quarter to $174 million, though it's still down 8% from the year-ago quarter. Furthermore, despite the sequential improvement in revenue, operating income still fell "due to the continued weakness and competitive nature of the service and rental market."
- The subsea projects segment was one of the brighter spots, delivering a 20% increase in revenue to $75.5 million because of seasonal improvements in the Gulf of Mexico. That helped fuel an eye-catching 1,500% surge in operating income, though that's off a meager base last quarter.
- Asset integrity's sales were up 11% to $58.2 million, primarily due to seasonality, which also drove an increase in operating income.
- Finally, the advanced technology segment delivered a 20% increase in revenue, which came in at $103 million for the quarter because of increased commercial activity and work for the U.S. Navy. That sparked a more than 50% improvement in operating income.
What management had to say
Recently installed CEO Rod Larson commented on the company's second-quarter results, noting that:
As Larson noted, the company continues to navigate through the challenging market environment by keeping its costs down so it can generate cash and strengthen its financial position. This improving liquidity gives it the flexibility to pursue opportunities that "may emerge to grow our company," according to Larson. In particular, he noted that Oceaneering is focusing its attention on capturing more of the operating expenditures of its customers in the production phase, as opposed to its current focus on exploration drilling. That should provide the company with a more stable revenue stream if it's successful in securing those opportunities.
Oceaneering announced that it was successful in securing several longer-term contracts during the quarter. It won a three-year contract with Norway's Statoil (NYSE: STO) to develop and implement an inspection and maintenance program at 14 of its facilities. Furthermore, Statoil can expand that agreement to other fields in the future. Meanwhile, Royal Dutch Shell (NYSE: RDS-A) (NYSE: RDS-B) awarded the company a products and services contract relating to its Appomattox development in the Gulf. Shell expects to start the project later this year and should complete it sometime in 2019. These contract wins support Oceaneering's view that demand for its products and services is starting to improve.
That said, Oceaneering doesn't expect those new agreements to help it this year. Instead, Larson noted that the company's outlook for the year "has not changed," with it continuing to project that it will be "marginally profitable" in 2017.
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