President & CEO es de & C O Oceaneering International, Inc. · 2010-12-09 · 2010 Energy...
Transcript of President & CEO es de & C O Oceaneering International, Inc. · 2010-12-09 · 2010 Energy...
2010 Energy ConferenceDecember 7, 2010
New Orleans, LA
T. Jay CollinsPresident & CEO
Safe Harbor Statement
es de & C OOceaneering International, Inc.
Safe Harbor Statement
Statements we make in this presentation that express a belief, expectation, or intention are forward looking. Forward-looking statements are generally accompanied by words such as “estimate,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “forecast,” “budget,” “goal,” or p , p , p , , g , g ,other words that convey the uncertainly of future events or outcomes. These forward-looking statements are based on our current information and expectations that involve a number of risks, uncertainties, and assumptions. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are: industry conditions prices of crude oil and natural gas ourindustry conditions, prices of crude oil and natural gas, our ability to obtain and the timing of new projects, and changes in competitive factors. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated.
For additional information regarding these and other factors, see our periodic filings with the Securities and Exchange Commission, including our most recent Reports on Forms 10-K and 10-Q.
WHY OII?
• Leveraged to Deepwater• Leveraged to Deepwater
– Secular Growth
– Positioned to Rebound
– Secular Growth
– Positioned to ReboundPositioned to Rebound
• Leading Market Positions
Positioned to Rebound
• Leading Market Positions
– ROVs and Specialty Subsea Products– ROVs and Specialty Subsea Products
• Strong Earnings, Balance Sheet & Cash Flow• Strong Earnings, Balance Sheet & Cash Flow
Leveraged to Deepwater
• Projects Take Years to Develop• Projects Take Years to Develop
• Largely Oil Reservoirs• Largely Oil Reservoirs
– With High Production Flow Rates– With High Production Flow Rates
• Well Capitalized Customer Base• Well Capitalized Customer Base
• Investment Based on Long-Term Commodity Price• Investment Based on Long-Term Commodity Price• Investment Based on Long-Term Commodity Price• Investment Based on Long-Term Commodity Price
Long-Term Deepwater OutlookInvest Where the Oil IsInvest Where the Oil Is
• Western IOCs Have Little Choice– Restricted Access to World Class Onshore Reserves
• Exploration Success Bodes Well for the Future
• Drilling Intensity is Rising
5Source: Wood Mackenzie and Deutsche Bank
Near-Term Deepwater OutlookPending DOI RegulationsPending DOI Regulations• Lower Activity in the U.S. Gulf of Mexico
L t M k t f
• Lower Activity in the U.S. Gulf of MexicoL t M k t f– Largest Market for
• ROV Services
• ROV Tooling & IWOCS
– Largest Market for• ROV Services
• ROV Tooling & IWOCS• ROV Tooling & IWOCS
– Sole Market for Subsea Projects Operations• ROV Tooling & IWOCS
– Sole Market for Subsea Projects Operations
• Additional Subsea Product Opportunities• Additional Subsea Product Opportunities– ROV Tooling
– BOP Control Systems
– ROV Tooling
– BOP Control Systems
Earnings Per Share Guidance2010 Estimate $3 57 - $3 62; 2011 Estimate $3 45 - $3 75Earnings Per Share Guidance2010 Estimate $3 57 - $3 62; 2011 Estimate $3 45 - $3 75
Actual Low Estimate High Estimate
2010 Estimate $3.57 $3.62; 2011 Estimate $3.45 $3.752010 Estimate $3.57 $3.62; 2011 Estimate $3.45 $3.75
$3 00
$3.50
$4.00
hare
$2.00
$2.50
$3.00
ngs
Per S
h
$0 50
$1.00
$1.50
Earn
i
$0.00
$0.50
2007 2008 2009 2010E 2011E
OII 2010 and 2011 Guidance Ranges as of October 26, 2010.
Combined EPS – OSX CompaniesExcluding OIICombined EPS – OSX CompaniesExcluding OIIExcluding OIIExcluding OII
Actual Consensus Estimate
$60
$75
hare
$45
ngs
Per
Sh
$15
$30
Earn
i
$02007 2008 2009 2010E 2011E
2010E & 2011E – Based on First Call Mean Estimates as of October 29, 2010
Relative EPS PerformanceTo Recent 2008 PeakRelative EPS PerformanceTo Recent 2008 PeakTo Recent 2008 PeakTo Recent 2008 Peak
OII OSX w/o OII
0%
10%
-20%
-10%
-40%
-30%
-50%2008 2009 2010E 2011E
Based on First Call Historical Numbers and Consensus 2010 & 2011 Estimates @ October 29, 2010
2011 EPS Guidance The Big Picture2011 EPS Guidance The Big PictureThe Big PictureThe Big Picture
SEGMENT OPERATING INCOMESEGMENT OPERATING INCOME
ROV > 2010 ROV > 2010
Subsea Products ≈ 2010Subsea Products ≈ 2010
Subsea Projects < 2010
I ti > 2010
Subsea Projects < 2010
I ti > 2010Inspection > 2010
Advanced Tech ≈ 2010
Inspection > 2010
Advanced Tech ≈ 2010
Strong Balance Sheet & Cash Flow
• September 30, 2010– $148 MM in Cash
• September 30, 2010– $148 MM in Cash
– No Debt
– $300 MM Revolving Credit Available
– No Debt
– $300 MM Revolving Credit Available$300 MM Revolving Credit Available$300 MM Revolving Credit Available
• Strong Cash Flow– Over $325 MM Expected in 2011
• Strong Cash Flow– Over $325 MM Expected in 2011
• Ample Resources to Invest in Growth• Ample Resources to Invest in Growth• Ample Resources to Invest in Growth• Ample Resources to Invest in GrowthCash Flow is defined as Net Income + Depreciation & Amortization
Plans For Cash
• Organic Growth$
• Organic Growth$– Q4 2010 Capex ≈ $35 MM
• 2010 Total ≈ $200 MM
2011 C $1 0 / $1
– Q4 2010 Capex ≈ $35 MM• 2010 Total ≈ $200 MM
2011 C $1 0 / $1– 2011 Capex $150 MM / $175 MM– 2011 Capex $150 MM / $175 MM
• Acquisitions• Acquisitions
• Share Repurchases• Share Repurchases
Acquisition Targets
• Within our Market Niches– Expand Subsea Products
• Within our Market Niches– Expand Subsea Products– Expand Subsea Products
• International Focus
– Expand Subsea Products
• International Focus• International Focus
• Reasonably Priced
• International Focus
• Reasonably PricedReasonably Priced– Accretive to Earnings
Reasonably Priced– Accretive to Earnings
Worldwide Deepwater DiscoveriesOver Two-Thirds to be DevelopedWorldwide Deepwater DiscoveriesOver Two-Thirds to be Developed
600Production Development Evaluation
Over Two Thirds to be DevelopedOver Two Thirds to be Developed
500
600
elds
502
352300
400
umbe
r of F
ie
230 150100
200
Nu
1500
Production Eval. / Dev.
Source: ODS-Petrodata – September 2010Deepwater 600 Meters
Floating Rig Supply and Demand
Floater Demand Floating Rigs Available
245250
300
Rig
s
221200
erag
e #
of R
150
uart
erly
Ave
At Sept 30Supply 247Demand 222
At Sept 30Supply 247Demand 222
100
Qu
Source: ODS-Petrodata
Floating Rig Fleet Expansion: 2010 - 2014
• 64 Rigs On Order at September 30, 2010• 64 Rigs On Order at September 30, 2010
• 41 Contracted• 41 Contracted
– Average length 7 years– Average length 7 years
• Expected to be Placed In Service
30 in 2010
• Expected to be Placed In Service
30 in 2010– ≈ 30 in 2010
– ≈ 30 in 2011
– ≈ 30 in 2010
– ≈ 30 in 2011
Source: OII Estimates Based On ODS-Petrodata Data, September 30, 2010.
35%
Remotely Operated VehiclesRevenue by Business SegmentRemotely Operated VehiclesRevenue by Business SegmentRevenue by Business SegmentRevenue by Business Segment
September YTD 2010
OII ROV Fleet Size
252250
300
En
d
150
200
t @ P
erio
d
125
50
100
hic
le C
ou
nt
0
Veh
September 2010
ROV Operating LeverageROV Operating Leverage
Revenue / Day on Hire Fleet Utilization
80%
100%
$9,000
$11,000
60%$7,000
20%
40%
$3,000
$5,000
0%$1,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010*
* September YTD
2010 & 2011 ROV Overview
• Increase in Days On Hire– Add at Least 18 New Systems in 2010
• Increase in Days On Hire– Add at Least 18 New Systems in 2010Add at Least 18 New Systems in 2010
– Add 15 New Systems in 2011
Add at Least 18 New Systems in 2010
– Add 15 New Systems in 2011
ROV Expansion Opportunities
• Both Drill Support and Construction & Field • Both Drill Support and Construction & Field
Maintenance ServiceMaintenance Service
• Rigs on Order without ROV Contracts• Rigs on Order without ROV Contracts
– 37 as of September 2010– 37 as of September 2010
• Subsea Service Vessels Under Construction• Subsea Service Vessels Under Construction
Operating Income – ROV2010 Estimate ≈ 2009; 2011Estimate > 2010Operating Income – ROV2010 Estimate ≈ 2009; 2011Estimate > 2010
(in millions)Actual Estimate
2010 Estimate 2009; 2011Estimate 2010 2010 Estimate 2009; 2011Estimate 2010
$200
$250
≈
$150
$50
$100
$02007 2008 2009 2010E 2011E
OII 2010 and 2011 Guidance Ranges as of October 26, 2010.
Worldwide Subsea CompletionsThis Decade Expected to Grow 45%Worldwide Subsea CompletionsThis Decade Expected to Grow 45%
Completed Estimated
This Decade Expected to Grow 45% This Decade Expected to Grow 45%
4,000
5,000
mpl
etio
ns 4442
3,000
Subs
ea C
om 3071
1,000
2,000
Num
ber o
f S
1111
090s 00s 10s
N
Source: Quest Offshore Resources – August 2010
Subsea Tree OrdersForecasted at Historically High LevelsSubsea Tree OrdersForecasted at Historically High LevelsForecasted at Historically High LevelsForecasted at Historically High Levels
800
1000
rs
20% Growth
600
Tree
Ord
er
200
400
0'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10F '11F '12F '13F '14F
Source: Quest Offshore Resources – Mean Case Forecast - September 2010
Subsea ProductsRevenue by Business SegmentSubsea ProductsRevenue by Business SegmentRevenue by Business SegmentRevenue by Business Segment
ROV Tooling
Field Development Umbilicals
ROV Tooling & Work Packages
September YTD 2010
e d e e op e tHardware
Subsea ProductsSubsea Products
• Required for Every Subsea Completion• Required for Every Subsea Completion
• Subsea Hardware– Umbilicals
• Subsea Hardware– Umbilicals– ROV Tooling– Field Development
IWOCS
– ROV Tooling– Field Development
IWOCS– IWOCS– Connectors & Valves – BOP Control Systems
– IWOCS– Connectors & Valves – BOP Control Systems y
• Highly Engineered
W ld id C
y
• Highly Engineered
W ld id C• Worldwide Coverage• Worldwide Coverage
Additional Subsea Product OpportunitiesMacondo Incident Safety ConcernsAdditional Subsea Product OpportunitiesMacondo Incident Safety Concerns
• ROV Tooling • ROV Tooling
Macondo Incident Safety Concerns Macondo Incident Safety Concerns
– Hot Stabs with Higher Flow Rates
– Hot Stab Receptacles & Valves
– Hot Stabs with Higher Flow Rates
– Hot Stab Receptacles & Valves
– ROV Accumulator Reservoir Skids
– Backup Accumulator Bottle Skids
– ROV Accumulator Reservoir Skids
– Backup Accumulator Bottle SkidsBackup Accumulator Bottle Skids
• BOP Control Systems
Backup Accumulator Bottle Skids
• BOP Control Systems BOP Intervention Accumulator Skid
– Acoustically Actuated
– Dead Man Control
– Acoustically Actuated
– Dead Man Control
Subsea Products BacklogAt Period EndSubsea Products BacklogAt Period EndAt Period EndAt Period End
$308$300
$400
s
$200
$
$ M
illio
ns
$100
$02006 2007 2008 2009 2010*
*September 2010
Operating Income – Subsea Products2010 Estimate > 2009; 2011 Estimate ≈ 2010Operating Income – Subsea Products2010 Estimate > 2009; 2011 Estimate ≈ 2010
(in millions)Actual Estimate
2010 Estimate 2009; 2011 Estimate 2010 2010 Estimate 2009; 2011 Estimate 2010
$75
$100( )
≈
$50
$75
$25
$02007 2008 2009 2010E 2011E
OII 2010 and 2011 Guidance Ranges as of October 26, 2010.
Gulf of Mexico Deepwater Discoveries50% to be DevelopedGulf of Mexico Deepwater Discoveries50% to be Developed
Production Development Evaluation
50% to be Developed50% to be Developed
150
200
elds
160
154109100
150
umbe
r of F
ie
154
5150
Nu
50
Production Eval. / Dev.
Source: ODS-Petrodata – September 2010Deepwater 600 Meters
Subsea Completions – Gulf of Mexico Historical and ProjectedSubsea Completions – Gulf of Mexico Historical and Projected
Completed Estimated
Historical and ProjectedHistorical and Projected
227800
1000
plet
ions
600
ubse
a C
omp
210426
725
200
400
umul
ativ
e Su
2100
1999 2004 2009 2014P
Cu
Source: Quest Offshore Resources – August 2010. Historical through 2009.
Subsea ProjectsRevenue by Business SegmentSubsea ProjectsRevenue by Business Segment
13%
Revenue by Business SegmentRevenue by Business Segment
DivingDivingPage 16
DeepwaterDeepwater
September YTD 2010
Subsea Projects – Ocean ProjectReplacement VesselSubsea Projects – Ocean ProjectReplacement VesselReplacement VesselReplacement Vessel
• U.S. Flagged 200’ x 46’ DSV • U.S. Flagged 200’ x 46’ DSV
• 3000 sq ft Deck Space• 3000 sq ft Deck Space
• 4-Point Mooring System
• Built in Below Deck Equipment
• 4-Point Mooring System
• Built in Below Deck Equipment• Built-in Below Deck Equipment
• Available Q1 2011
• Built-in Below Deck Equipment
• Available Q1 2011
Subsea Projects – Ocean PatriotDMT Sapphire AcquisitionSubsea Projects – Ocean PatriotDMT Sapphire AcquisitionDMT Sapphire Acquisition DMT Sapphire Acquisition
• Acquired for $16.5 MM in June 2010• Acquired for $16.5 MM in June 2010
• Renamed Ocean Patriot • Renamed Ocean Patriot
• Will Be Outfitted with a new SAT System [Neptune]
• Available Q1 2011
• Will Be Outfitted with a new SAT System [Neptune]
• Available Q1 2011• Available Q1 2011
• Expected to be Accretive to
• Available Q1 2011
• Expected to be Accretive to 2011 Earnings2011 Earnings
2011 Subsea Projects OverviewGOM Shallow Water Installation & IRM2011 Subsea Projects OverviewGOM Shallow Water Installation & IRMGOM Shallow Water Installation & IRM GOM Shallow Water Installation & IRM
• OII Vessels Available for this Market • OII Vessels Available for this Market – Ocean Quest
– Ocean Inspector
– Ocean Quest
– Ocean InspectorOcean Inspector
– Ocean Project
Ocean Patriot
Ocean Inspector
– Ocean Project
Ocean Patriot– Ocean Patriot
• Saturation Diving Systems
– Ocean Patriot
• Saturation Diving Systems− Nemo
− Nautilus
− Nemo
− Nautilus
− Neptune− Neptune
2011 Subsea Projects OverviewGOM Deepwater Installation & IRM2011 Subsea Projects OverviewGOM Deepwater Installation & IRM
• OII Vessels Available for this Market • OII Vessels Available for this Market
GOM Deepwater Installation & IRMGOM Deepwater Installation & IRM
– Ocean Intervention
– Ocean Intervention II
– Ocean Intervention
– Ocean Intervention IIOcean Intervention II
– Ocean Intervention III
Ol mpic Inter ention IV
Ocean Intervention II
– Ocean Intervention III
Ol mpic Inter ention IV– Olympic Intervention IV– Olympic Intervention IV
Operating Income – Subsea Projects2010 Estimate < 2009; 2011 Estimate < 2010Operating Income – Subsea Projects2010 Estimate < 2009; 2011 Estimate < 2010
(in millions)Actual Estimate
2010 Estimate 2009; 2011 Estimate 20102010 Estimate 2009; 2011 Estimate 2010
$100
$120( )
$60
$80
$20
$40
$02007 2008 2009 2010E 2011E
OII 2010 and 2011 Guidance Ranges as of October 26, 2010.
OII Summary
• Diversified OFS Company• Diversified OFS CompanyDiversified OFS Company
Le eraged to Deep ater
Diversified OFS Company
Le eraged to Deep ater• Leveraged to Deepwater• Leveraged to Deepwater
• Leading Market Positions in Technical Niches • Leading Market Positions in Technical Niches
• Strong Earnings, Balance Sheet & Cash Flow• Strong Earnings, Balance Sheet & Cash Flow
®®
Supplemental Financial Information
Net Income + Depreciation & Amortization
$400
Actual Low Estimate High Estimate
$300
$400
s)s)
$200
($ m
illio
ns($
mill
ions
$100
$0 2007 2008 2009 2010* 2011*
*2010 - $345MM-$350MM, *2011 - $325MM-$350MM - Based on OII EPS Guidance Range October 26, 2010.
EBITDA
$500
Actual Low Estimate High Estimate
$400
$500
s)s)
$200
$300
($ m
illio
ns($
mill
ions
$100
$200
$0 2007 2008 2009 2010* 2011*
* 2010 - $455MM-$460MM, *2011 - $425MM-$460MM, Based on OII EPS Guidance Range October 26, 2010.See Next Slide For Non-GAAP Reconciliation to Net Income
EBITDA Reconciliation to Net IncomeEarnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measurement. Oceaneering’s management uses EBITDA because we believe that this measurement is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance, and that this measurement may be used by some investors and others to make informed investment decisions. You should not consider EBITDA in isolation from or as a substitute for net income or cash flow measures prepared in
Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measurement. Oceaneering’s management uses EBITDA because we believe that this measurement is a widely accepted financial indicator used by investors and analysts to analyze and compare companies on the basis of operating performance, and that this measurement may be used by some investors and others to make informed investment decisions. You should not consider EBITDA in isolation from or as a substitute for net income or cash flow measures prepared inshould not consider EBITDA in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company. The following table provides a reconciliation between net income (a GAAP financial measure) and EBITDA (a non-GAAP financial measure) for Oceaneering’s historical and projected results on a consolidated basis for the periods indicated:
should not consider EBITDA in isolation from or as a substitute for net income or cash flow measures prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. EBITDA calculations by one company may not be comparable to EBITDA calculations made by another company. The following table provides a reconciliation between net income (a GAAP financial measure) and EBITDA (a non-GAAP financial measure) for Oceaneering’s historical and projected results on a consolidated basis for the periods indicated:
Period Ended December 31, 2007 2008 2009 2010E 2010E 2011E 2011E(in millions of $) LOW HIGH LOW HIGH
Net Income 180.4 199.4 188.4 195 200 185 205
Depreciation & Amortization 93.8 115.0 122.9 150 150 140 145
Subtotal 274.2 314.4 311.3 345 350 325 350
Interest Expense/Income, Net 14.1 12.6 7.1 5 5 0 0
Income Tax Expense 97.1 107.8 101.4 105 105 100 110
EBITDA 385.4 434.8 419.8 455 460 425 460
OII Balance Sheet(in millions)
D 31 D 31 D 31 D 31 S t 30
( )
Dec 31, 2006
Dec 31, 2007
Dec 31, 2008
Dec 31, 2009
Sept 30, 2010
E it $697 $915 $968 $1 224 $1 338Equity $697 $915 $968 $1,224 $1,338
Debt 194 200 229 120 0
Cash 26 27 11 162 148
Debt/Cap 22% 18% 19% 9% 0%
Capital Investments by Type: 2005 - 2009
Organic Growth Acquisitions
12%
88%
Oilfield Capital Investments*: 2005 - 2009> 85% on ROVs and Subsea Products
ROV Subsea Products All Other Oilfield Segments
60%60%27%
* Capital Expenditures
Capital Investments*: 2009> 90% on ROVs and Subsea Products
* Capital Expenditures - December 2009
Capital Investments*: 2010> 75% on ROVs and Subsea Products
ROV Subsea Products Subsea Projects Other
4%
19%
57%21%
* Capital Expenditures – September YTD 2010
Business Segment Revenue
% of Oilfield% of Oilfield
ROV - 40%
>85%Products - 32%
87%Projects - 15%
Inspection - 13%
Oilfield Non Oilfield
September 2010
Business Segment Operating Income
% of Oilfield% of Oilfield
ROV - 55%
>90%Products - 26%
95%Projects - 12%
Inspection - 7%
Oilfield Non Oilfield
September 2010
Supplemental Market Information
Oilfield ROV FleetOwnership Profile – December 2009
35%
p
35%
OII
Subsea 7OII Subsea 7
Saipem
Acergy
248
ce gy
Fugro
Other
706 Vehicles
Source: OII Estimates – December 2009
OII ROV FleetGeographic Profile –September 2010g p p
927 68
18
GOM
Africa
35
18 ca
Norway
Brazil
5144
U.K.
Asia/Pac
Other NA
252 Vehicles
September 2010
Oilfield ROV Drill Support MarketSeptember 2010p
OII
Subsea 758% Subsea 7
Fugro
Sonsub
Other
167 Floating Rigs In Service
Source: ODS-Petrodata and OII Estimates
OII ROV FleetConstruction/Field Maintenance Locations
7GOM
Af i24
10
Africa
Norway
Oth15
Other
56 Vehicles
September 2010
OII ROV FleetConstruction/Field Maintenance Customers
O
33
23Operators
Contractors33
56 Vehicles
September 2010
Global Subsea Production Umbilicals Market Share By Length Awarded – 2009 y g
Source: Quest Offshore Resources – February 2010
Worldwide Umbilical Market OverviewForecasted at Historically High Levels
Umbilicals Tree Orders
y g
20% Growth Trees 3,000750
ers -
KM
ers
51% Growth - Umbilicals20% Growth - Trees
2,000500
mbi
lical
Ord
e
Tree
Ord
e
1,000250
U
00
Source: Quest Offshore Resources – Mean Case Forecast - November 2010
Umbilical Products
Steel Tube UmbilicalsSteel Tube UmbilicalsThermoplastic Hose UmbilicalsThermoplastic Hose Umbilicals
OIE Products
ROV Tooling & Work Packages
Production Control Valves
g
Installation Workover & Control Systems Field Development HardwareConnectors & Repair Systems
Annual Price PerformanceOII vs. OSX [Oilfield Service Index]
120
OII vs. OSX [Oilfield Service Index]20102010
OII up 21%OII up 21%OSX up 15%OSX up 15%
60
80
100
ange
0
20
40
ual %
Cha
-60
-40
-20
Ann
u
-80
OII OSXOII OSX
*Through November 9, 2010: Source – NYSENet
Annual Price PerformanceOII vs. OSX [Oilfield Service Index]
700
OII vs. OSX [Oilfield Service Index]20102010
OII up 21%OII up 21%OSX up 15%OSX up 15%
500
600
ange
200
300
400
ual %
Cha
0
100
Ann
u
-100
OII OSXOII OSX
*Through November 9, 2010: Source – NYSENet