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Edited Transcript of OII earnings conference call or presentation 25-Feb-20 4:00pm GMT

·48 mins read

Q4 2019 Oceaneering International Inc Earnings Call HOUSTON Feb 27, 2020 (Thomson StreetEvents) -- Edited Transcript of Oceaneering International Inc earnings conference call or presentation Tuesday, February 25, 2020 at 4:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Alan R. Curtis Oceaneering International, Inc. - Senior VP & CFO * Mark E. Peterson Oceaneering International, Inc. - VP of Corporate Development & IR * Marvin J. Migura Oceaneering International, Inc. - SVP * Roderick A. Larson Oceaneering International, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Blake Geelhoed Gendron Wolfe Research, LLC - SVP of Equity Research * Coleman Wayne Sullivan Wells Fargo Securities, LLC, Research Division - Senior Analyst * George Michael O'Leary Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research * Ian MacPherson Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service * Kurt Kevin Hallead RBC Capital Markets, Research Division - Co-Head of Global Energy Research & Analyst * Michael James Sabella BofA Merrill Lynch, Research Division - Research Analyst * Scott Andrew Gruber Citigroup Inc, Research Division - Director and Senior Analyst * Sean Christopher Meakim JP Morgan Chase & Co, Research Division - Senior Equity Research Analyst * Vaibhav D. Vaishnav Scotiabank Global Banking and Markets, Research Division - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- My name is Jason, and I will be your conference operator. I would like to welcome everyone to Oceaneering's Fourth Quarter and Full Year 2019 Earnings Conference Call. (Operator Instructions) With that, I will now turn the call over to Mark Peterson, Oceaneering's Vice President of Corporate Development and Investor Relations. -------------------------------------------------------------------------------- Mark E. Peterson, Oceaneering International, Inc. - VP of Corporate Development & IR [2] -------------------------------------------------------------------------------- Thank you, Jason. Good morning, everyone, and welcome to Oceaneering's Fourth Quarter and Full Year 2019 Results Conference Call. Today's call is being webcast, and a replay will be available on Oceaneering's website. With me on the call today are Rod Larson, President and Chief Executive Officer, who will be providing our prepared comments; Alan Curtis, Chief Financial Officer; and Marvin Migura, Senior Vice President. Before we begin, I would just like to remind participants that statements we make during the course of this call regarding our future financial performance, business strategy, plans for future operations and industry conditions are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our comments today are also -- also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our fourth quarter press release. We welcome your questions after the prepared statements. I will now turn the call over to Rod. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Good morning, and thanks for joining the call today. I'm happy to note that 2019 is the first year since 2014, where we have seen improved consolidated adjusted operating results and adjusted EBITDA as compared to the prior year. Free cash flow also improved in 2019, the first year-over-year increase we have seen in this measure since 2015. Today, I'll focus our comments on our performance for the fourth quarter and the full year of 2019, our market outlook for 2020, our continuing commitment to capital discipline, operational improvement and expectation to generate significant positive free cash flow in 2020. And our business segment outlook for the first quarter and full year of 2020. Now moving to our results. In our press release for the fourth quarter, we reported a net loss of $263 million or minus $2.66 per share on revenue of $561 million. These results included the impact of $255 million of pretax adjustments, primarily $240 million associated with asset impairments, write-downs and write-offs recognized during the quarter. Adjusted net income was $2.5 million or $0.03 per share. We were pleased our consolidated fourth quarter adjusted earnings before interest, taxes, depreciation and amortization or adjusted EBITDA of $48.7 million exceeded both our guidance and consensus estimates. Our fourth quarter results reflect higher activity levels, and we were encouraged that 4 of our 5 operating segments recorded sequential improvements in adjusted operating results and adjusted EBITDA. As a result of $26.6 million in free cash flow generated during the fourth quarter, our cash position as of December 31, 2019, increased to $374 million. During the quarter, we recognized certain noncash charges totaling $240 million related to impairments to the carrying value of several of our vessels and certain other assets including goodwill and intangible assets as market conditions no longer support the prior valuations for these assets. These $240 million of charges related predominantly to our Subsea Projects and Asset Integrity segments. The portion of the asset write-downs relating to the retirement of 30 world-class ROVs from our fleet was relatively insignificant. Additionally, we recognized $12 million of restructuring and other costs as we continue to focus our efforts to adapt our asset base, geographic footprint and staffing levels to be sized and positioned appropriately for the markets we serve. Looking at our business operations for the fourth quarter and compared -- as compared to the third quarter. Despite seasonality, we were pleased that our adjusted consolidated operating results were relatively flat to the third quarter, improving slightly by $2.8 million and that our adjusted consolidated EBITDA of $48.7 million improved by $3.2 million from the prior quarter. We generated $45.4 million of cash from operating activities and after deducting $18.8 million of capital expenditures, our free cash flow was $26.6 million for the quarter. For ROVs, revenue increased and adjusted operating results declined from the third quarter. Sequentially, ROV days-on-hire declined as expected by 2%, however, a 5% increase in average revenue per day on hire resulted in a 3% revenue increase for the fourth quarter. Adjusted operating results declined due to costs incurred to prepare our fleet for an anticipated increase in activity during 2020. These preparation costs were the leading contributor to the decline in our ROV quarterly adjusted EBITDA margin to 27% from the 31% achieved during the first 9 months of 2019. Our fleet utilization for the fourth quarter was 58%, down from 60% in the third quarter, primarily due to normal seasonality associated with global vessel market. Our fourth quarter fleet use was 64% in drill support and 36% for vessel-based activity compared to 63% and 37%, respectively, during the third quarter. At the end of December, we had ROV contracts on 98 of the 156 floating rigs under contract or 63%. This compares to the ROV contracts on 97 of the 159 floating rigs under contract or 61% at the end of September. During the quarter, we were on 5 of the 9 rigs whose contracts ended or terminated early and 6 of the 9 rigs for which new ROV contracts were awarded. During the fourth quarter, we added 4 new ROVs to our fleet and retired 30, ending the year with an ROV fleet size of 250 vehicles. The removal of these 30 vehicles resulted from an in-depth analysis of our fleet to determine underutilized and older units that were not making a meaningful contribution to segment results. The retired ROVs provided approximately 2% of the total days worked during the fourth quarter. Pro forma fourth quarter utilization, reflecting these vehicles as if they had been retired effective as of the beginning of the quarter, was 64%. Now turning to Subsea Products. Our fourth quarter adjusted operating results were essentially flat with the third quarter on higher revenue. As projected, higher revenue within our manufactured products business was partially offset by lower revenue from our service and rental business on typical seasonal activity. Our revenue mix for the quarter was 72% in manufactured products and 28% in service and rental compared to a 59-41 split, respectively, in the prior quarter. The difference in revenue mix between our manufactured products business and service and rental business resulted in a quarterly adjusted operating margin decline to 8% for the fourth quarter from 8.8% for the third quarter of 2019. Our Subsea Products backlog at December 31, 2019, was $630 million compared to our September 30, 2019, backlog of $609 million. As mentioned in our February 20 press release, BP awarded Oceaneering a contract during the fourth quarter to provide comprehensive riserless light well intervention services in Blocks 18 and 31 offshore Angola. Revenue for this activity is expected to fall primarily within the second and third quarters of 2020. Most of the revenue and operating results generated by the performance for this contract will be reported in our Subsea Products segment. However, the associated ROV work will be reported in our ROV segment. Our book-to-bill ratio of 1.5 for the full year of 2019 was slightly favorable to our guidance range, partially due to the BP service and rental contract. Sequentially, Subsea Projects adjusted operating results improved substantially on higher revenue. This improvement was primarily due to better-than-anticipated Gulf of Mexico intervention, maintenance and repair or IMR activity, and higher survey services activity from several geoscience and marine construction projects. Looking at Asset Integrity, adjusted operating results improved on a modest increase in revenue. Our non-Energy segment, advanced technologies posted improved adjusted operating results on higher revenue. However, these results were disappointing as performance fell short of our guidance because the expected improvement in our entertainment business operating margins was not achieved. This underperformance was chiefly due to cost overruns on certain completed projects, postponement in project awards and customer-requested delays in project progression. During the fourth quarter, our government-related businesses performed well as anticipated. Unallocated expenses were in line with our expectations. Now I'd like to turn my focus to our year-over-year results of 2019 as compared to 2018. For the full year 2019, Oceaneering reported a net loss of $348 million or negative $3.52 per share on a revenue of $2 billion. Adjusted net loss was $83 million or minus $0.84 per share, reflecting the impact of $258 million of pretax adjustments, primarily $240 million associated with asset impairments, write-downs and write-offs recognized during the quarter. This compared to a 2018 net loss of $212 million or minus $2.16 per share on revenue of $1.9 billion and adjusted net loss of $69.7 million or minus $0.71 per share. The full year 2019 consolidated financial results were consistent with our guidance, but were achieved in a manner different than expected. Activity levels and operating performance within our energy segments exceeded our original expectations, led by our ROV and Subsea Products segments. Operating performance within our Advanced Technology segment fell well short of expectations, primarily due to execution issues and customer-driven project delays and cancellations within our entertainment business. Compared to 2018, our 2019 consolidated revenue increased 7% to $2 billion, with revenue increases in ROV, Subsea Products, Advanced Technologies being partially offset by revenue decreases in Subsea Projects and Asset Integrity. For the year, consolidated adjusted operating results increased $22.4 million, led by our Subsea Products and ROV segments. In 2019, each of our operating segments, except Asset Integrity, contributed positive operating income as adjusted and all of our operating segments contributed positive EBITDA as adjusted. Overall, we generated adjusted EBITDA of $165 million. Cash flow from operations was $158 million, and we invested $148 million on capital expenditures, resulting in the generation of $9.9 million of free cash flow for the year. In 2019, we continued to adapt to the challenges posed in our markets as we led innovation efforts that are enabling our customers to more efficiently and safely meet their sustainability requirements. We maintained our competitive position in the offshore energy services and products market. We drove efficiencies in costs and performance and continued to identify new opportunities for improvement. We focused on capital and pricing discipline to position ourselves to earn a return in the current market, and we maintain focus on our core values. We are pleased with the following notable achievements accomplished during 2019. We successfully deployed our Liberty ROV system with Equinor to provide a resident battery-powered, remotely-operated vehicle to support subsea inspection, maintenance and repair activities. We developed and deployed Isurus, a new work-class ROV capable of working in high currents to service the offshore renewables market, thereby helping customers reduce vessel time. We developed and initiated testing on Freedom, a next-generation hybrid ROV AUV, which is scheduled to have its first commercial application in 2020. We increased ROV days-on-hire by 12%, with year-over-year increases in both drill support and vessel support days. We successfully performed our first significant multi-well deepwater riserless light well intervention campaign for BP and Angola. As previously mentioned, secured a contract for a new multi-well campaign in 2020. We secured a substantial increase in bookings within our Subsea Products segment, highlighted by the subsea umbilical and hardware awards for Total's Mozambique project and ONGC's KG-DWN 98/2 project, allowing us to achieve a book-to-bill ratio of 1.5 for the year. We took delivery of our environmentally efficient deepwater multiservice Jones Act vessel Ocean Evolution during the second quarter and saw good customer acceptance and activity during the second half of the year. We achieved or modestly beat our financial goals by generating $165 million of adjusted EBITDA and positive free cash flow of $9.9 million. We also increased our balance sheet cash position by $19.4 million to $374 million. We have made information on our ESG initiatives more accessible by adding a sustainability page to our Investor Relations tab on the oceaneering.com website. I am pleased to report that since 2017, MSCI's ESG rating for Oceaneering has improved from BBB to A. Turning to our 2020 outlook for the markets we serve. The offshore energy industry has undergone significant rationalization and structural change over the last 5 years. These changes have been challenging, however, it has positioned the offshore industry, inclusive of emerging offshore renewables wind market to compete effectively with most U.S. shale plays. Offshore activity has been trending higher over the last few years, evidencing the ability of this sector to compete and most analysts and research data points we track suggest a continued modest improvement in the markets we serve. Most analysts' Brent pricing forecasts are in the low $60 per barrel range for 2020 and conversations with customers suggest that the gradual recovery in offshore energy activity should continue as long as Brent pricing remains above $55 per barrel. Analyst projections for the key metrics we track remain supportive of increasing offshore activity levels, including international and offshore spending is projected to increase by a low to mid-single-digit percentage in 2020. The contracted floating rig count increased from 146 at the end of 2018 to 156 at the end of 2019, a 7% increase with many industry analysts projecting continued modest mid-single-digit growth over the next few years. There were 3 -- over 300 tree awards in 2019 and many sources forecast for 2020 tree awards to remain above 300. According to Rystad, offshore projects with an aggregate value of over $100 billion were sanctioned in 2019, a more than 60% increase over 2018 with sanction levels expected to remain at or above this level for the next several years. We agree with published reports that offshore production will continue to be a meaningful component of global supply, representing approximately 30% of total global supply for the foreseeable future. And finally, the government-related markets we serve are expected to remain relatively stable with continued slow growth. So turning to our overall 2020 outlook for Oceaneering. We expect our financial results to improve year-over-year due to our expectations for higher activity and operating margins in each of our segments. Total 2020 consolidated revenue is expected to increase approximately 10% with the majority of the increase attributable to our Subsea Products segment. For the year, we anticipate generating $180 million to $220 million of EBITDA, with positive operating income and EBITDA contributions from each of our operating segments. At the midpoint of this range, our EBITDA for 2020 would represent a 21% increase from our 2019 adjusted EBITDA. Apart from seasonality, we view pricing and margins in the current energy and government markets to be stable with increasing opportunities for improvement. The coronavirus situation is on the minds of many people, and it may have a financial impact on Oceaneering's forecast. The potential direct impact to Oceaneering would relate primarily to our entertainment projects in China. However, we also have work being performed by our ROV segment and our service and rental business in the region. We are keeping an eye on the situation for potential economic consequences related to these activities. From a macro perspective, our guidance does not currently assume any impact on hydrocarbon demand from the coronavirus, but we continue to stay in close contact with our customers and are monitoring the commodity situation for potential impacts to our 2020 outlook. And now turning to our liquidity. Our expectation to generate significant positive free cash flow and our capital discipline in 2020. We believe we currently have good liquidity through our cash position of $374 million as well as our undrawn $500 million revolver available until October 2021. And thereafter, $450 million available until January 2023. Adding to this, we expect to generate substantial free cash flow in 2020. However, the timing of certain contract awards and related payments on progress milestones can have a material impact on our projected cash flows. It is our intention to use the cash generated to strengthen our balance sheet to ensure that we are well positioned to deal with our nearest debt maturity in November 2024. For 2020, we expect our organic capital expenditures to total between $75 million and $105 million. This includes approximately $40 million to $50 million of maintenance capital expenditures and $35 million to $55 million of growth capital expenditures, including approximately $5 million of carryover CapEx from 2019. We have significantly reduced our planned capital expenditures for 2020 as compared to 2019 and expect this reduction to be a major contributor to our ability to generate significant free cash flow in 2020. We will be closely scrutinizing incremental maintenance and growth capital expenditures, focusing on opportunities that will provide near-term revenue, cash flow and return. In 2020, interest expense, net of interest income, is expected to be approximately $40 million, and our cash tax payments are expected to be approximately $40 million. Cash taxes include taxes incurred in countries that impose tax on the basis of in-country revenue and bear no relationship to the profitability of such operations. At this time, we do not foresee realizing a current year tax benefit from our projected consolidated pretax loss. So any discussion of an estimated effective tax rate would not be meaningful. I also want to point out that free cash flow in 2020 will benefit from approximately $25 million of noncash accruals for incentive-based compensation and approximately $5 million to $10 million of working capital improvements tied to inventory reduction. Directionally, in 2020, for our operations by segment, we expect improved results for ROVs based on increased days-on-hire in both drill support and vessel-based services, minor shifts in geographic mix and generally stable pricing. We project fewer installations and demobilizations in 2020, which is forecast to result in lower operating costs as compared to 2019. We expect our 2019 service mix of 65% drill support and 35% vessel support to generally stay the same through 2020 as we anticipate improvements to both the number of floating rigs under contract and increased vessel utilization. Our overall ROV fleet utilization is expected to be in the high 60% to low 70% range throughout the year. We expect to generally sustain our ROV market share in the 60% range for drill support. At the end of 2019, there were approximately 27 Oceaneering ROVs, onboard 23 floating drilling rigs with contract terms expiring during the first 6 months of 2020. During the same period, we expect to place 31 of our ROVs on 26 floating rigs beginning new contracts. Based on our anticipated levels of utilization, combined with our fleet use expectations, worldwide global locations where ROVs may work and cost structure, we expect our ROV EBITDA margin to average approximately 30% for the full year. With the recent rationalization and preparation of our fleet, we feel well prepared to service our customers in 2020 and beyond. For Subsea Products, we expect segment performance to improve as a result of increased throughput and better absorption of fixed costs within our manufactured products business unit as well as higher activity levels and contribution from our service and rentals business unit. We anticipate that our operating income margins will improve slightly and average in the mid-single-digit range for the year. Based on the expectation for substantially higher revenue recognized recent FIDs, current bid activity and anticipated award dates, we envision our book-to-bill for 2020 to be in the range of 0.8 to 0.9 for the year. For Subsea Projects, we expect operating results to improve slightly in 2020, primarily due to lower depreciation expense as compared to 2019. EBITDA is forecast to decline modestly in anticipation of reduced international and Gulf of Mexico vessel activity. Vessel day rates remain competitive but stable, and we expect to see opportunities for pricing improvements during periods of high activity. Similar to 2019, this segment has the highest amount of speculative work contained in our guidance. The Ocean Evolution has experienced good customer demand since it was added to our fleet in the second quarter last year and has a good amount of project backlog through the first quarter of 2020, albeit at much lower day rates than we originally expected. We continue to complement our fleet with third-party vessels, which gives us the ability to react to a changing market condition. For Asset Integrity, we forecast results to improve on relatively flat revenue as the benefits from cost control measures implemented in late 2019 and early 2020, should be realized beginning in the second quarter of 2020. Our 2020 advanced technologies results are expected to increase on higher revenue with operating margins expected to be in the high single-digit range for the year. We expect a modest improvement in operating results within our government-related units and an operating improvement within our commercial units on improved execution and expected project awards and progression. However, as evidenced over the past several years, the impact from timing of project awards and customer delays can lead to variability in quarterly results. Additionally, we are currently monitoring the impact to ongoing and anticipated projects in China due to the coronavirus situation. For 2020, we anticipate unallocated expenses to increase to an average of $35 million per quarter, as we expect full accrual rates for projected short- and long-term performance-based incentive compensation expense as compared to 2019. For our first quarter 2020 outlook, our first quarter 2020 EBITDA is forecasted to be in the range of $36 million to $42 million. As compared to our fourth quarter of 2019, we anticipate materially lower revenue and operating results in our Subsea Projects segment due to seasonally lower demand and IMR activity. A slight increase in ROV operating results on a nominal decrease in revenue with EBITDA margins returning to the 30% range. Subsea Products revenue to increase and operating results to decline due to the project timing of lower-margin projects within our manufactured products business, and Asset Integrity and Advanced Technologies operating results are expected to be essentially flat and marginally lower revenue. In closing, our focus continues to be generating substantial positive free cash flow in 2020, maintaining our strong liquidity position, improving our returns by driving efficiencies and cost and performance throughout our organization, engaging with our customers to develop value-added solutions that increase their cash flow and remaining disciplined in our pricing decisions and capital deployment strategies. I also want to let you know that we are continuing our efforts to define additional strategies and actions to better position our businesses for future success and expect to be able to share specifics regarding these efforts with you on our next quarterly call. Finally, I want to thank our employees and management teams for their continued hard work in transforming our business to succeed in the foreseeable market. We appreciate everyone's continued interest in Oceaneering, and we'll now be happy to take any questions you might have. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from the line of Vebs Vaishnav from Scotiabank. -------------------------------------------------------------------------------- Vaibhav D. Vaishnav, Scotiabank Global Banking and Markets, Research Division - Analyst [2] -------------------------------------------------------------------------------- Congratulations on a good quarter. I guess, Rod, you just brought up China couple of times. So just trying to see or trying to think through. In your EBITDA guidance, how much of EBITDA improvement, if you will, is coming from China? Or what could be at risk? Just trying to think about that impact. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- It's challenging to say right now, Vebs. I mean if you look at Q1, we feel like we've sort of risked that, right? So what you see in Q1 is what we think is going to happen just for sort of the temporary work stoppages. I would say, for the remainder of the year because we have some ability to scale up and scale down. We believe it's mitigable within our current guidance range. So it shouldn't blow us out one way or the other, but we're going to have to work hard on managing the capacity associated with that work, should it slow down. -------------------------------------------------------------------------------- Vaibhav D. Vaishnav, Scotiabank Global Banking and Markets, Research Division - Analyst [4] -------------------------------------------------------------------------------- That's helpful. In Subsea Products, as you talked about, the revenue growth in 2020, mostly will come from Subsea Products. Your orders grew 60%, backlog almost doubled, but I understand there are some longer lead -- longer lead items in the backlog, if the conversion could be slow. But is there a way you can help us think about how much revenue growth -- like is 30%, 35% revenue growth for Subsea Products, a good bogey for now for 2020? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [5] -------------------------------------------------------------------------------- Probably more like 20%, Vebs, would be closer. -------------------------------------------------------------------------------- Vaibhav D. Vaishnav, Scotiabank Global Banking and Markets, Research Division - Analyst [6] -------------------------------------------------------------------------------- Okay. That's very helpful. And if I can sneak in one last question. So on -- in the CapEx, you have about $35 million to $55 million of growth CapEx. Can you just help us think through what is that growth Capex? And how recurring that is as we think about 2021 and beyond? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [7] -------------------------------------------------------------------------------- Some of it will be related to some of the work in our ST&R. So we're related to putting those assets to work for light well intervention. And the other side, I would say, would be through -- think about the new vehicles that we're putting on for ROVS. And that's pretty exciting. We may have more demand for that as we see market uptake. You think we put -- last year, we really reached commerciality on the Liberty, I think, and Isurus, they're both -- I think they're both very commercial right now. Freedom is a pretty nascent technology, and we'll get the first commercial jobs on that this year. So we'll see how fast the market uptake is on Freedom. But the first two, I think, Isurus is going to be one that would come into market fairly quickly. But again, some of that is converting current assets. So it lowers the capital requirements to get that done. -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [8] -------------------------------------------------------------------------------- Yes, I think the one other component, Vebs, is going to be some of the things we're working on within our global data solutions group, within the digital side and software that they're working on. We'll spend a few dollars there as well this year. -------------------------------------------------------------------------------- Operator [9] -------------------------------------------------------------------------------- Your next question comes from the line of Kurt Hallead from RBC Capital. -------------------------------------------------------------------------------- Kurt Kevin Hallead, RBC Capital Markets, Research Division - Co-Head of Global Energy Research & Analyst [10] -------------------------------------------------------------------------------- Thank you for all that good color and information, I appreciate that. I wanted to just kind of check in here on a follow-up on one of Vebs' questions on Subsea Products. And again, just to make sure I heard it correctly. So prospect for Subsea Product revenue to be up potentially about 20% given the order intake that you've taken through 2019. Just want to make sure I heard that correctly. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [11] -------------------------------------------------------------------------------- Spot on. -------------------------------------------------------------------------------- Kurt Kevin Hallead, RBC Capital Markets, Research Division - Co-Head of Global Energy Research & Analyst [12] -------------------------------------------------------------------------------- Yes. Okay. Thank you for that clarity. And then as you look out on the ROV type business and the expectations for lower churn, why -- and with increasing utilization, why the commentary about maybe stable pricing versus the possibility to start to see some improved pricing. Just want to get your feel for the market around that, if I could. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [13] -------------------------------------------------------------------------------- I think part of it is rig utilization, expected pricing, there's a sort of -- I used this joke about, we need to tell the rig marker, have the rig market tell the customers that it's winter before we can start selling winter coats. There's -- they set a lot of the expectation for budget and budget increases because we're a smaller part. And I don't believe with the ability to put some of the assets, we don't know exactly what utilization is for everybody else's assets, but I don't think we're going to be pressed for somebody to find an incremental ROV at 156 -- at 156 range. -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [14] -------------------------------------------------------------------------------- And I think when you look at the backlog as we move into this next year, a lot of it's already work that we have bid and contracted on for this year. So most of the stuff where you'd be able to move price, would be more on the vessel market, which is the shorter duration type contracts, Kurt. -------------------------------------------------------------------------------- Kurt Kevin Hallead, RBC Capital Markets, Research Division - Co-Head of Global Energy Research & Analyst [15] -------------------------------------------------------------------------------- Okay, that's helpful. And then just maybe just on the capital allocation. I think you kind of made it pretty clear that you want to continue to build a very strong balance sheet kind of going towards your 2024 kind of maturities, but is there an opportunity, do you think? Why -- what is the distinct opportunity to potentially start taking down some debt or refinancing debt between, say, now and end of 2020? -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [16] -------------------------------------------------------------------------------- I think that's something that we'll be evaluating as we go through the year. -------------------------------------------------------------------------------- Operator [17] -------------------------------------------------------------------------------- Your next question comes from the line of Sean Meakim from JP Morgan. -------------------------------------------------------------------------------- Sean Christopher Meakim, JP Morgan Chase & Co, Research Division - Senior Equity Research Analyst [18] -------------------------------------------------------------------------------- So Rod, you noted your guidance doesn't incorporate any potential impact of customer decisions tied to coronavirus and the potential read-through on oil prices, of course, entirely reasonable. But could we touch on how those risks specifically could have an influence on the level of callout work that you'll see in 2Q and 3Q, just how much that callout work influences the range of your EBITDA guidance? I guess I'm just trying to gauge how customer decisions get made for that type of work. And to what extent is that portion more or less at risk of macro events, stretching great second quarter? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [19] -------------------------------------------------------------------------------- I think I can give you some color there. So you're spot on. I mean just like last quarter and the quarter before, the biggest part of our guidance range really falls on that callout work. And so think about the biggest part of that being projects, and most of our projects work being in the Gulf of Mexico and some in the North Sea. And we do a little bit in APAC and some of those areas. So what I -- the way I'd kind of put that is, I don't think there's a high probability of coronavirus having a significant impact on that callout work. It would have to be a pretty hard pushdown on commodity price, where the customers are -- I mean, this early in the year, are starting to conserve capital. And then the other side would be that somehow we have outbreaks that interrupt rig activity in the Gulf of Mexico. I think that's less likely to happen. So I don't see it being a big impact on the project work near term. -------------------------------------------------------------------------------- Sean Christopher Meakim, JP Morgan Chase & Co, Research Division - Senior Equity Research Analyst [20] -------------------------------------------------------------------------------- We just touched on this a little bit, but within ROVs, we've been watching the offshore drillers trying to push to get more term, and they've had some success, but probably not as much as they would have liked. In that type of environment, how does that translate to the ROV business and across drilling versus vessels, just how you're trying to manage term versus price within your portfolio of contracts? I'm trying to get a better sense of beyond just kind of a static price question, trying to understand how you're managing those incremental contracts that are rolling off, as you mentioned, versus those that you've recontracted. How you're managing that churn of contracts? What you're emphasizing and what may be less important as you go through the year? I think that would be helpful. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [21] -------------------------------------------------------------------------------- I think you've got it, Sean, that we're kind of in that same position. Generally, our terms are matched up to the rig, so we don't get a lot of opportunity to push the contract terms. And so what we're looking at the same thing that was on longer-term contracts. We need the ability to drive price up whether it's through triggers within the contract or just overall average day rates. So we expect that we don't want to get locked into anything that's static at current rates because we do think that, again with utilization, there's an opportunity to move there. One of the things we continue to push on, when we get these contracts, is to bring more services to the rig, especially as they rollover. So -- and we're continuing to look at getting this work where we can bring the survey with the ROV, along with the IWOCS work, along with the data communications work and the tooling work. And that integrated rig services that we've been offering, I guess, it's one of the best ways we can sort of make that case for price because we offer them the savings of less POB on board. -------------------------------------------------------------------------------- Sean Christopher Meakim, JP Morgan Chase & Co, Research Division - Senior Equity Research Analyst [22] -------------------------------------------------------------------------------- Got it. And then just to clarify, would you characterize the vessel market as being materially different? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [23] -------------------------------------------------------------------------------- No, no. I think it's very similar. And they're walking hand-in-hand as we start to see that split between utilization. We don't see any big shift between how many vessels are out there versus the drilling rigs. So the split remains pretty consistent. -------------------------------------------------------------------------------- Operator [24] -------------------------------------------------------------------------------- Your next question comes from the line of Scott Gruber from Citigroup. -------------------------------------------------------------------------------- Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [25] -------------------------------------------------------------------------------- Did I hear correctly at the end of the prepared remarks that you'll provide more color on additional cost restructuring benefits on the next call? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [26] -------------------------------------------------------------------------------- Yes, you did. -------------------------------------------------------------------------------- Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [27] -------------------------------------------------------------------------------- Got it. And then just thinking about that in the context of the EBITDA guidance that has already been provided. Is there much additional cost savings embedded in that guidance? Or is it all upside from the $180 million to $220 million that you put out there? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [28] -------------------------------------------------------------------------------- I think it's within guidance. I think what it does -- one of the things I -- one of the ways I'd colored it is, I think it's definitely a pretty significant hedge against coronavirus sort of effects, if you think it that way. So all the things that have happened in the last few days, I wouldn't want to step outside of what our current guidance range is, but there's some good savings available there. -------------------------------------------------------------------------------- Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [29] -------------------------------------------------------------------------------- Okay. We'll wait for the color. Back on ROVs, the EBITDA margin last year was basically 30% even with a weaker 4Q given the start-up costs. And I realize there's no pricing yet, but just with an improving backdrop, why not more margin uplift in 2020? -------------------------------------------------------------------------------- Alan R. Curtis, Oceaneering International, Inc. - Senior VP & CFO [30] -------------------------------------------------------------------------------- I think some of it is going to be related to ongoing efforts to look at our cost structure, Scott. I mean some of it's going to be the regions in which we work. I mean it is going to be truly down to mix, is the primary component of where the ROV activity takes place this next year. So I think the team feels more confident at the 30% level at this point in time given what they have on their plate. And as I alluded to in my earlier response, a lot of the work on these rigs, I mean, it's already been bid. So it's not that we're moving price that much on most of these contracts currently. And that's a key component that I see right now is the vessel side. Yes, that's an area we continue to try and work on price and move it up. But I would characterize price is pretty flat right now. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [31] -------------------------------------------------------------------------------- I mean the -- and to give you a feel that the majority of the pricing for ROVs for 2020 is already set. -------------------------------------------------------------------------------- Scott Andrew Gruber, Citigroup Inc, Research Division - Director and Senior Analyst [32] -------------------------------------------------------------------------------- Yes, so it sounds like the volume benefit is going to get offset by some mix with pricing? -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [33] -------------------------------------------------------------------------------- No. And we do have -- I mean, you do have to look at where you have inflation that's going to come into play. We do have cost, I mean, of employees that we have to pay. So there are headwinds associated with inflation that we have in the mix as well. -------------------------------------------------------------------------------- Operator [34] -------------------------------------------------------------------------------- Your next question comes from the line of Ian MacPherson from Simmons. -------------------------------------------------------------------------------- Ian MacPherson, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [35] -------------------------------------------------------------------------------- Rod, I'm not surprised that you're not really specifying a demand shock impact in your guidance broadly at this point because it's just too early. I might have thought that you would have seen it already in AdTech, just given that direct Chinese market exposure within entertainment. Can you talk a little bit more about why that is, why you haven't seen it or been able to quantify any type of impact you had; that just caught me a little bit by surprise. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [36] -------------------------------------------------------------------------------- No, I think -- Ian, I might not have said it clearly enough. We do see that. We've had some of the projects, at least temporarily, the on the ground work, [the pullback]. And so we did make the adjustments. I just said, what we did have and what has come down is already baked into the first quarter. And so we'll have to see how long that persists before we talk about the remainder of the year. -------------------------------------------------------------------------------- Ian MacPherson, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [37] -------------------------------------------------------------------------------- Okay. So probably, since we spoke last quarter, embedded guidance for AdTech has come in a bit, and you feel comfortable backfilling that a bit with your cost restructurings, and I would imagine a little bit of accretion that you've gotten from the BP Angola contract as well. Just to not to put words in your mouth, but -- so the embedded outlook for AdTech has come down a bit? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [38] -------------------------------------------------------------------------------- You've nailed it. I mean if we would have talked more specifically about breaking out what was going on in the first quarter, there would have been a little more AdTech in for that work and oilfield has been able to kind of fill the gap. So it's -- that is exactly what's going on. -------------------------------------------------------------------------------- Ian MacPherson, Simmons & Company International, Research Division - MD & Senior Research Analyst of Oil Service [39] -------------------------------------------------------------------------------- Okay. And then the other question I wanted to ask was just on the 30 ROV retirements. Are those scrap? Are -- is that a pool of parts for lower maintenance expenditures going forward or a combination of the 2 or maybe something else? -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [40] -------------------------------------------------------------------------------- Pretty much scrap. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Your next question comes from the line of George O'Leary from Tudor, Pickering, Holt and Company. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [42] -------------------------------------------------------------------------------- George? -------------------------------------------------------------------------------- Operator [43] -------------------------------------------------------------------------------- Your next question comes from the line of George O'Leary. Your next question comes from the line of Mike Sabella from Bank of America. -------------------------------------------------------------------------------- Michael James Sabella, BofA Merrill Lynch, Research Division - Research Analyst [44] -------------------------------------------------------------------------------- If we could kind of swing back to, I guess, sort of -- just more broadly, the state of equipment in the ROV market, you all took some opportunities to get rid of some older assets. Kind of talk to the average age of your fleet today, maybe versus where it was prior to the retirement. And is this kind of a broader opportunity that we should consider amongst the peer groups as well that we could potentially start seeing some attrition in the assets? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [45] -------------------------------------------------------------------------------- I've got to believe. I mean I'll just use the rig example, and I know we've had some of the rig companies out there talking about there's got to be assets out there that are going to be so expensive to put back in the business that are put back to work, but it's not really cost-effective to do so at the current pricing. So I think whether we've actually taken the fleet out or whether they're effectively out of circulation, I think there's some of that that's already gone on. -------------------------------------------------------------------------------- Michael James Sabella, BofA Merrill Lynch, Research Division - Research Analyst [46] -------------------------------------------------------------------------------- And then kind of around -- just around the -- I guess, it was a 0.8%, 0.9% book-to-bill for 2020 in Subsea Products. Can you kind of talk to cadence around that and how we should expect it to progress throughout the year? -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [47] -------------------------------------------------------------------------------- Yes. I think most of it is going to be more centered in the Q2, Q3 time frame. That's certain project awards are expected to be coming out and awarded at that point in time. I mean we'll have our usual base that happens throughout the year. But I mean, more of the project lumpiness that we see is more in Q2, Q3 at this point. -------------------------------------------------------------------------------- Operator [48] -------------------------------------------------------------------------------- Your next question comes from the line of Blake Gendron from Wolfe Research. -------------------------------------------------------------------------------- Blake Geelhoed Gendron, Wolfe Research, LLC - SVP of Equity Research [49] -------------------------------------------------------------------------------- Just one from me on the AdTech business. It was our understanding that the company is trying to standardize or rationalize its off-the-shelf software offering in the segment to maybe mitigate some of the cost overruns that you saw on the bespoke side, maybe in 4Q. So just higher level, if you could characterize for us how much is off-the-shelf software in this business versus bespoke projects? And then maybe longer term, China weakness notwithstanding. Should we expect that maybe margins stabilize at somewhat of a higher level? And how much revenue or growth opportunity do you think you'd have to sacrifice if you were to make this concerted pivot? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [50] -------------------------------------------------------------------------------- So let me hit the AdTech business. That's a great question. I don't think -- we don't talk about that a lot. The software is very standard. I mean the software, generally there's a tracked vehicle we do and trackless vehicle. But within those 2 categories, they're very, very similar. We have some very standard vehicles that we put out. And again, when you think about the change of what we do, really, it's more the variation in the vehicles than it is the software. So we do some vehicles that are small, probably 8 -- roughly 6- to 8-passenger vehicle, and then we do some larger bespoke things. And so it does, as you would expect, it gets more challenging when we start stepping out into something that's a very special form factor for a customer. And that is what was challenging in the fourth quarter. But one of the things we've done is we've kind of made some, I would say, some significant organizational changes to give better access to the broader Oceaneering for that group, so that they've got a little more support as they go into some of these businesses. So what you see in the first quarter is our expectation that we've passed that hurdle, and we're moving ahead. And again, part of that's because of the degree of completion on some of those more difficult projects. And I'm sorry, I lost the second half of the question. So if you'll remind me, the China question. -------------------------------------------------------------------------------- Blake Geelhoed Gendron, Wolfe Research, LLC - SVP of Equity Research [51] -------------------------------------------------------------------------------- Yes. Just longer term, if you made this concerted push toward more off-the-shelf software sales. I don't know if it's a margin target or just trying to understand maybe what you would gain in terms of stability in that business versus the growth opportunity that you would potentially have to step away from and walk in line on that margin. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [52] -------------------------------------------------------------------------------- Sure. If I were to characterize, what happens when we do some of the other business. And I won't just speak specifically to China, but I'll talk about sort of what we would call sort of the midsized theme parks and some of the other businesses. They actually are good because they tend to be more off the shelf. They like -- they can take our base vehicle, and then they can just enhance it with what we call the creative part. They can surround it with their own body, chassis design. They can put in different video and music and themes to the vehicles. So in one sense, they become much more predictable because we're building a standard product. In the other sense, they become less predictable because you're dealing outside our -- kind of our short-range of U.S. theme park providers and you're operating in different countries where we have to kind of cross the hurdle of importation and regulation and all the other things. So I would say those 2 things offset. I think the -- it's mostly on those other side. On the outside of our standard customer range, it's -- that's where we get more of the timing issues, probably than the execution issues. -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [53] -------------------------------------------------------------------------------- And the issues Rod spoke about, were not on the standard product line that we were talking about where we -- as the bespoke system that we had more of the overrun on. -------------------------------------------------------------------------------- Blake Geelhoed Gendron, Wolfe Research, LLC - SVP of Equity Research [54] -------------------------------------------------------------------------------- Understood. That's helpful color. And then just one follow-up on the BP Angola contract. I just want to clarify that, that was incremental versus the prior guidance that you gave out for book-to-bill. And then if you could just help us quantify maybe the ROV opportunity outside of that in addition to what you booked on the subsea side? And then maybe any potential follow-on work in the region, if this goes successfully? -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [55] -------------------------------------------------------------------------------- Well, you're correct on the BP Angola work, it was incremental to the guidance we had given. And we just didn't know what time it would -- we -- if it's going to be late Q4, if it's going to be early Q1, we're confident in it. We just -- we're uncertain as to the timing of when we would book that. So it was incremental to the guidance we had given for Q4. Your other question is it related to BP Angola work on ROVs? Or is it -- -------------------------------------------------------------------------------- Blake Geelhoed Gendron, Wolfe Research, LLC - SVP of Equity Research [56] -------------------------------------------------------------------------------- Yes, just -- you mentioned ROV work around this contract being separate, obviously in that segment. Just wondering if we could -- if you could help us quantify maybe one versus the other? -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [57] -------------------------------------------------------------------------------- Typically 2 ROVs working for the duration of the contract. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [58] -------------------------------------------------------------------------------- So it's not going to make a big blip in the forecast for ROVs to your point. -------------------------------------------------------------------------------- Marvin J. Migura, Oceaneering International, Inc. - SVP [59] -------------------------------------------------------------------------------- Correct. -------------------------------------------------------------------------------- Operator [60] -------------------------------------------------------------------------------- Your next question comes from the line of George O'Leary from Tudor, Pickering and Holt (sic) [Tudor, Pickering, Holt & Co.]. -------------------------------------------------------------------------------- George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [61] -------------------------------------------------------------------------------- Sorry, I was having some technical headset issues. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [62] -------------------------------------------------------------------------------- Glad you made it. -------------------------------------------------------------------------------- George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [63] -------------------------------------------------------------------------------- You guys tend to have pretty good insight into the exploration side of the market via the AUV survey business. I was just curious what you saw in the back half of 2019 and how the outlook is in 2020 for that AUV kind of survey oriented type work that might give us some insight into how exploration activity is progressing? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [64] -------------------------------------------------------------------------------- It was one of the better stories. So I would say that, that, again, if we don't have any big disruptions from what's going on in the world right now, that would indicate that there -- the level of activity we've been forecasting for both rigs and FIDs is on track. It also gives us a good feel that some renewable projects are moving forward. So while they're farther out, we've got -- I think we see some good renewable projects coming up in the North Sea in that and in the kind of what would be the traditional area for offshore wind. Those look good that maybe they will progress in 2020 as expected. And then the East Coast of the United States is probably beyond survey work. Anything else would happen is probably 2021 at the earliest. -------------------------------------------------------------------------------- George Michael O'Leary, Tudor, Pickering, Holt & Co. Securities, Inc., Research Division - MD of Oil Service Research [65] -------------------------------------------------------------------------------- And then just on the Subsea Products side of the business, 2019's strong year for backlog build and order flow. You mentioned some third-party data sources that discuss trees and E&P spending. But I'm just curious what you guys are seeing on the -- from a shots on goal perspective, from a bids and order flow perspective for 2020, just for your own -- from Oceaneering, in particular, is there an increased level of shots on goal this year, such that orders could be up year-over-year or is the base case kind of flattish? Is that kind of what's implied by guidance? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [66] -------------------------------------------------------------------------------- I think it's flattish. I mean that's kind of when we talk about the -- especially the book-to-bill and Alan talked about the shots on goal, to your point. We're thinking that some of these things are going to be more midyear. So we don't -- it will be kind of second quarter, third quarter or we see some of those bigger things come through. So -- but yes, the level of activity, I think, is right in line with -- we feel comfortable that we're actually seeing the things that they're talking about. -------------------------------------------------------------------------------- Alan R. Curtis, Oceaneering International, Inc. - Senior VP & CFO [67] -------------------------------------------------------------------------------- Yes. I think what you're saying is more shots on goal. They're just going to be midsized goals versus big epic game winning that we had during 2019. -------------------------------------------------------------------------------- Operator [68] -------------------------------------------------------------------------------- (Operator Instructions) Your next question comes from the line of Cole Sullivan from Wells Fargo. -------------------------------------------------------------------------------- Coleman Wayne Sullivan, Wells Fargo Securities, LLC, Research Division - Senior Analyst [69] -------------------------------------------------------------------------------- You mentioned 20% revenue growth and products is a pretty fair expectation for 2020. Can you help us think about the kind of growth on the manufacturing side of that versus service and rentals? Particularly, when we looked at the manufacturing side in 4Q was particularly strong. Was there any lumpiness there? Or is that a reasonable kind of expectation to kind of model going forward as we progress over 2020 and throughput increases? -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [70] -------------------------------------------------------------------------------- I think, Cole, one of the things to think about is, if you remember, we were -- think about the first half of 2019 when we were under -- we were under-absorbed there. And so we have a lot of underutilized capacity. If you think about getting to more of a Q4 run rate for all of 2020. That's where a lot of that products growth comes from. It's just getting a full year of better utilization. -------------------------------------------------------------------------------- Coleman Wayne Sullivan, Wells Fargo Securities, LLC, Research Division - Senior Analyst [71] -------------------------------------------------------------------------------- All right. And then on ROVs. We had a little bit of a sort of average rate improvement in the fourth quarter. And you may have mentioned something earlier and I just missed it, but -- and then some impacts on the cost side in the quarter. Can you quantify the cost impact there? And then as we look at kind of going into the first quarter, could we maintain that level of rate, and that could be mix driven, I guess, and then maybe pull back some on costs there. Is that the expectation? -------------------------------------------------------------------------------- Alan R. Curtis, Oceaneering International, Inc. - Senior VP & CFO [72] -------------------------------------------------------------------------------- Yes, the expectation is that we will get back to the 30% EBITDA margin. So a lot of that is going to be on the cost side from not having the cost to prepare the assets and put them in place to begin to work that we incurred in Q4. So that's going to be one of the big drivers in improving our EBITDA margin. As far as the increase or the lift in Q4, average revenue per day on hire, a lot of that had to do with the geography in which we operated the assets more in rest of Africa, or the African market as well as in the Far East was a nice uplift for us in fourth quarter. Those were the 2 areas that propelled us. -------------------------------------------------------------------------------- Operator [73] -------------------------------------------------------------------------------- There are no further questions at this time. I'll turn the call to the presenters for closing comments. -------------------------------------------------------------------------------- Roderick A. Larson, Oceaneering International, Inc. - President, CEO & Director [74] -------------------------------------------------------------------------------- Great. Well, since there are no more questions, I'd just like to wrap up by thanking everyone for joining. And this concludes our fourth quarter and full year 2019 conference call. Have a great day. -------------------------------------------------------------------------------- Operator [75] -------------------------------------------------------------------------------- That concludes the conference call. You may now disconnect.