Oil prices bounced back sharply during the first quarter. That benefited Oceaneering International (NYSE: OII) by fueling more demand for its offshore products and services during the period, which enabled it to deliver stronger results. Because of that and its increasingly optimistic view of what lies ahead, the company boosted the low end of its guidance range.
Oceaneering results: The raw numbers
Adjusted net income
Data Source: Oceaneering International. EPS = earnings per share.
What happened with Oceaneering this quarter?
Three of Oceaneering's five segments stood out during the quarter:
- Oceaneering International's revenue rose nearly 19% versus the year-ago period, though sales did slip less than 1% from the fourth quarter due mainly to the seasonality of the oil services business. Driving the company's year-over-year growth were strong results in its remotely operated vehicles (ROVs), subsea projects, and advanced technologies segments.
- ROV revenue jumped 17% from last year's first quarter to $100.3 million, thanks to an improvement in utilization from 44% to 53% as well as higher revenue per day for its vessels. The segment generated about $1.4 million of operating income, which reversed losses in both the sequential and year-ago periods.
- Subsea projects revenue rocketed nearly 58% from the year-ago quarter to $89.7 million, which enabled that segment to post a profit of about $2.9 million. Driving the improvement was a favorable product mix and good execution. Meanwhile, the company's non-energy advanced technologies segment also delivered strong year-over-year revenue growth of 33%.
- The performance of those segments helped offset weakness in the subsea products and asset integrity businesses compared with the year-ago period. Subsea products' operating loss, however, did narrow from the fourth quarter thanks to higher levels of service and rental activities.
- While Oceaneering did post a net loss during the quarter, which reversed its fourth-quarter profit, it generated $30.4 million of EBITDA, surpassing expectations.
Image source: Getty Images.
What management had to say
CEO Rod Larson commented on the quarter by stating that: "We are very pleased that our first-quarter results exceeded expectations. Higher-than-expected activity and good execution within our energy-focused businesses were key factors in achieving this performance."
After several years, the offshore drilling market is finally starting to improve. Oil companies approved several new drilling projects in recent months, which is driving activity levels higher as well as sales of offshore-related products. One area where that's noticeable is in Oceaneering's ROV segment, where utilization and rates continue to improve as more drilling rigs go back to work.
Oceaneering expects continued improvement in its ROV, subsea projects, and advanced technologies segments during the second quarter. That should more than offset the expectation for flat sequential results at subsea products and asset integrity. Meanwhile, the company anticipates that subsea projects' activity levels will accelerate during the second half of 2019 based on the orders it has taken in so far this year. Those factors, along with its better-than-expected first-quarter results, led the company to narrow its guidance range for adjusted EBITDA. It now foresees that number coming in between $150 million to $180 million, a $10 million increase at the low end from its initial view.
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