oceaneering overview 2016s22.q4cdn.com/369103554/files/doc_presentations/...mar 03, 2018 ·...
TRANSCRIPT
Oceaneering.com
Rod LarsonPresident and CEO
Scotia Howard Weil 46th Annual Energy ConferenceMarch 27, 2018New Orleans, Louisiana
1
Forward-Looking Statements
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 other words that convey the uncertainty 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, 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.
2
Why Oceaneering?
• Provider of integrated technology solutions
• Strong portfolio of diversified services and products
• Geographically dispersed asset base and revenue streams
• Serves blue chip customers
• Strong market positions
• Solid balance sheet, and the financial flexibility to invest and grow the company
3
Phase Exploration Development Production Decommissioning
Market Driver Operating Floating Drilling Rigs
Subsea Tree Installations
Subsea Trees In Service
Field Abandonments
• ROV Services
• Survey (SP)
• Tooling (SSP)
• ROV Services
• Survey (SP)
• Tooling (SSP)
• IWOCS – Installation & Workover Control Systems (SSP)
• Subsea Hardware (SSP)
• Umbilicals (SSP)
• Vessel-based Installation Services (SP)
• Inspection Services (AI)
• Seabed Preparation/ Trenching (SP)
• ROV Services
• Tooling (SSP)
• Subsea Work Systems (SSP)
• IWOCS – (SSP)
• Subsea Hardware (SSP)
• Vessel-based Installation Services (SP)
• Inspection Services (AI)
• ROV Services
• Tooling (SSP)
• Subsea Work Systems (SSP)
• IWOCS – (SSP)
Business Segment Product and Service Revenue Streams
KEY
ROV = Remotely Operated Vehicles
SSP = Subsea Products
SP = Subsea Projects
AI = Asset Integrity
In All Phases of the Offshore Oilfield Lifecycle
4
Five Operating Segments
5
Remotely Operated Vehicles (ROVs)
Subsea Products
Subsea Projects
Asset Integrity
Advanced Technology
Energy:
Non-Energy:
Financial Overview
6
23% 20% 16% 20%
30% 33%
0
49% 41%
21%15%
0
22%
9%
12%12%
0
5%
10%
14%20%
0
8%20%
0%
25%
50%
75%
100%
Adtech
Asset Integrity
Subsea Projects
Subsea Products
ROV
Revenue Operating Income
$1.9B$2.3B
2016 2017
$10.7M $2.3M
2016 2017
0%
25%
50%
75%
100%
International United States Services Products
Revenue Overview
7
Geographic Area Services and Products
43% 49%
34% 39%
66% 61%57% 51%
$2.3B $1.9B $2.3B $1.9B
2016 2017 2016 2017
2018 Outlook
• Decreases in three energy segments, partially offset by increases in Asset Integrity and Advanced Technologies
• EBITDA guidance is $140 million to $180 million, with positive EBITDA contributions from each operating segment
• $12 million to $18 million increase in Unallocated Expenses, and to be in the upper-$20 million range per quarter
• Higher net interest expense
• Effective tax rate about 5% before discrete items and any potential adjustments to our provisional estimates related to the recently passed U.S. tax reform recorded in 2017
8
Lower 2018 operating income than 2017 on slightly lower revenue
We provide ROVs, which are tethered submersible vehicles remotely operated from the surface, to customers in the energy industry for drilling support and vessel-based services, including subsea hardware installation, construction, pipeline inspection, survey and facilities inspection, maintenance and repair.
Remotely Operated Vehicles
20% 20%0%
25%
50%
75%
100%
Revenue Operating Income
2017
9
Floating Rig Demand HistoryOceaneering has 56% drill support market share as of December 31, 2017
10
0%
25%
50%
75%
100%
0
50
100
150
200
250
300
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
% w
ith O
II RO
Vs
Co
ntr
acte
d F
loat
ing
Rig
s at
Per
iod
En
d
Contracted Floaters, Working Contracted Floaters, Not Working % of Contracted Floaters with OII ROVs
Source: Rig data, IHS Petrodata, December 2017
Oceaneering ROV Drill Support/Vessel-Based Fleet MixFleet mix was 64% in drill support and 36% in vessel-based activity for 2017
11
0
25,000
50,000
75,000
100,000
0%
25%
50%
75%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
RO
V D
ays on
Hire
Dri
ll Su
pp
ort
/ V
esse
l Fle
et M
ix
Drill Support Vessel Based ROV Days on Hire
* Based on number of actual working days.
Oceaneering ROV Days on Hire and Fleet UtilizationApproximately 80% of our ROVs earned revenue at some point during 2017
12
0
25,000
50,000
75,000
100,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
0%
20%
40%
60%
80%
100%
Days o
n H
ireFl
eet
Uti
lizat
ion
Rat
e
Drill Support Days Vessel Based Days ROV Fleet Utilization
Source: Rig data, IHS Petrodata, December 31, 2017
Oceaneering ROV Average Revenue per Day on HireImpacted by geographic mix
13
0%
25%
50%
75%
100%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
$9,000
$10,000
$11,000
Ave
rage
Rev
enu
e p
er D
ay o
n H
ire
Revenue / Day on Hire ROV EBITDA Margin
ROV TechnologiesEnabling better control and video imaging, precise tool manipulation, and adherence to industry requirements
14
E-ROV
Resident ROVTraditional ROV system
Mission support centers Stavanger (Norway), Houston (Texas), and
Morgan City (Louisiana)
Communications via 4G, fiber, and satellite
E-ROV concept winner 2017 World Oil New Horizons Idea Award
Freedom ROV Concept
ROVs – Increase in Activity, Lower Operating Income
Reduced average pricing• Shift in geographic mix
• Continued competitive pricing
More fleet days on hire• Slight shift in fleet mix more towards drill-support utilization
Increase in ROV market share for drill support
Fleet utilization in the low 50% range
ROV EBITDA margin in the low 30% range
15
2018 outlook versus 2017
While most of our subsea products
are sold, we also rent tooling, and
provide IWOCS and subsea work
systems as a service, including
hydrate remediation, riserless light
well intervention, well stimulation,
dredging, and decommissioning.
Subsea Products
33%41%
0%
25%
50%
75%
100%
Revenue Operating Income
2017
16
Subsea Products
17
Production Control Umbilicals
Supply electric and hydraulic power to subsea trees and inject chemicals into reservoirs and well streams.
Specialty Subsea Hardware
Field development hardware used to connect production trees to umbilicals and flow lines. Also includes connectors and valves - Oceaneering Grayloc, Oceaneering Pipeline Connection & Repair Systems (PCRS) and Oceaneering Rotator.
64%
% of Total Subsea Product 2017 Revenue
Manufactured Products
Subsea Products
18
Installation and Workover Control Systems (IWOCS)
A temporary control system designed for both rig- and vessel-based operations used for tree installation, completion, workover, intervention and decommission of subsea wells.
Tooling and Subsea Work Systems
Provide more than 4,000 ROV tools for rental. Supports well intervention, drilling, construction, field maintenance, and plugging and abandonment activities.
36%
% of Total Subsea Product 2017 Revenue
Service and Rental
Subsea Products FinancialsBacklog $276 million at December 31, 2017
19
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017$0
$300
$600
$900
$1,200
$1,500
Sub
sea
Pro
du
cts
($ in
Mill
ion
s)
Subsea Products Revenue Subsea Products Backlog
Optimism in More Final Investment Decisions (FIDs)
• FIDs recovered strongly in 2017
• Globally, 25 major offshore projects* (>50 mmboe) were sanctioned in 2017, and nearly half were for deepwater
• Wood MacKenzie estimates 39 pre-FID offshore projects* (>50 mmboe) in 2018, and about 40% are for deepwater
• Based on the above, along with discussions with customers and bid activity, we envision our book-to-bill for 2018 exceeding 1.0
20
* Offshore Projects = >+400 Meters (1320 feet)
Subsea Installations Forecast
21
305
349319
295 280243 243
267282
2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F0
100
200
300
400
500
Sub
sea
Tree
s O
nst
ream
Source: Tree data - Infield, A Wood Mackenzie Business, December 2017.
Trees OnstreamY/Y Growth %2017: -5%2018F: -13%2019F: No Change2020F: +10%2021F: +7%
Proven Well Access Capabilities
• IRIS and BORIS - rigless, riserless light well intervention systems
• Reliably perform in depths to 10,000 feet and pressures to 10,000 psi
• Maximize production and increase the recovery rate from offshore oil and gas reservoirs or, alternatively, prepare wells to be plugged and abandoned
22
Riserless Intervention System winner 2017 World Oil Best Well Intervention Technology Award
Subsea Products – Stronger Book-To-Bill, Lower Operating Income
Underutilized plant capacity• Lower manufacturing throughput as we enter 2018 with less backlog
compared to 2017, and the natural lag between FIDs and order awards
Lower pricing
Margins weaken into the low- to mid-single digit range
Envision book-to-bill to exceed 1.0
23
2018 outlook versus 2017
We provide project management, survey, subsea installation and inspection, maintenance, and repair services. We service deepwater projects with dynamically positioned vessels that have our ROVs onboard, and shallow water projects with our manned diving operations, utilizing dive support vessels and saturation diving systems.
Subsea Projects
15%9%
0%
25%
50%
75%
100%
Revenue Operating Income
2017
24
Subsea Projects Overview
25
• Deepwater Multi-Purpose Supply Vessels**
Spot or Contract Location
CharterEnd
3 Owned
*Ocean Intervention
*Ocean Intervention II
*Ocean Evolution (delivering 2018 Q2)
Spot
Spot
Spot
GOM
GOM
GOM
N/A
N/A
N/A
• Diving Support Vessels
• Survey/Autonomous Underwater Vehicles (AUV) Services
• Ecosse SCAR Seabed System (acquired March 2018)
• Global Data Solutions
* Jones Act Vessel** Supplemented with short-term vessel charters, as necessary
Acquired Ecosse Subsea Limited
Provider of offshore engineering, seabed preparation, route clearance and trenching services
Benefits:• Expand service line capabilities
• Grow market position
• Optimize customer’s installation projects with proven tools
Accretive to 2018 cash flow and earnings
Results included in Subsea Projects segment
26
Subsea Projects – Lower Operating Income
Continued competitive pressures on vessel dayrates in the spot market in the U.S. GOM
Reduced international vessel and diving activity
Entering 2018 with no meaningful fixed-term vessel contracts
Partially mitigated by operating income from Ecosse Subsea Limited acquisition
27
2018 outlook versus 2017
We provide asset integrity management, corrosion management, inspection and nondestructive testing services, principally to the oil and gas, power generation, and petrochemical industries.
Asset Integrity
12% 10%
0%
25%
50%
75%
100%
Revenue Operating Income
2017
28
Asset Integrity – What We DoOur optimized, industry-leading inspection services and integrity management solutions assure our customers are equipped with the data required to make informed, value-adding decisions.
29
Permanently Installed Monitoring Systems (PIMS)
Rope AccessPipeline InspectionAdvanced Inspection Services Non-Destructive Testing (NDT) – CapEx / In-Service
Subsea InspectionIntegrity ManagementInspection and Condition Monitoring
Asset Integrity – Where We WorkWe work onshore and offshore -- upstream, midstream and downstream, encompassing the entire energy spectrum, oil and gas, nuclear, and renewables.
30
Onshore Midstream Onshore Downstream Offshore Topside Offshore SubseaOnshore Upstream
Subsea InspectionIntegrity ManagementInspection and Condition Monitoring
Asset Integrity Increase in Operating Income
31
Continuing to respond to the needs
of our customers for a more cost-
effective method of ensuring the
integrity and availability of their
critical infrastructure.
2018 outlook versus 2017
We provide engineering services and related manufacturing, principally to the U.S. Department of Defense, NASA and its prime contractors, and the commercial theme park industry. We also develop, implement, and maintain innovative, turnkey logistic solutions based on automated guided vehicle technology.
Advanced Technologies
20% 20%
0%
25%
50%
75%
100%
Revenue Operating Income
2017
32
Dry Deck Shelter Planning Yard/ Maintenance & Submarine
Maintenance
We support the U.S. Navy’s Deep Submergence community by performing complex overhauls, planned maintenance, and emergency repair tasks for the Navy’s six dry deck shelters.
U.S. Navy Submarine Rescue System
We perform major, complex overhauls, repairs, and modernization of all submarine classes forward and aft, from the top of the sail to the keel.
Entertainment Systems “Dark Ride” Vehicles
We developed and patented an evolutionary motion-based system capable of delivering high-energy thrills in fully immersive 3D media-based attractions at a fraction of the cost of other ride vehicles.
Advanced Technologies Overview
33
33
Government Businesses Commercial Businesses
Automated Guided Vehicle (AGV) Systems
We develop, implement, and maintain innovative, turnkey logistic solutions based on AGV technology.
Advanced Technologies Increase in Operating Income
34
• Increased activity in entertainment group within Commercial businesses
• Stable activity levels within Government businesses
2018 outlook versus 2017
Strong Balance Sheet and Liquidity
Liquidity at December 31, 2017• $430 million of cash
• $500 million undrawn revolving credit facility, $500 million available until October 2021, and $450 million available until January 2023
• First debt maturities - $500 million in November 2024
Organic capital expenditures• Expect to range from $80 million to $120 million in 2018, and include $40 million to $50 million maintenance
Acquisitions • Continue to strengthen our portfolio of services and products by investing in our current and adjacent market niches,
with more focus on our customers’ operating expenditures
Dividends• Suspended until we see significant improvement in market outlook and projected free cash flow
35
Key Enablers to Offshore Energy
• Shortened project development life cycles
• Reduced development costs
• Recognized efficiency gains from technology advancements
• Customer focus on developing high-graded “core of the core” offshore assets
• Customer confidence in commodity price stabilization
36
Long Term - Offshore Oil Remains Essential Incremental production growth through 2020 requires significant investment in both on- and offshore
37
50
60
70
80
90
100
110
2016 2017F 2018F 2019F 2020F
Tota
l Liq
uid
s M
MB
/D
Offshore is 23% of total incremental barrels to 2020
Current Sources of Production
Other Onshore
Offshore
Shale
Source: Morgan Stanley Research , Wood Mackenzie, Rystad Energy, and Company Data – June 2017.
Mobile Robotics
ROVAdvanced Technologies
Subsea Projects
Riserless
Intervention & P&A
Subsea ProductsSubsea Projects
Offshore
Renewables
ROVSubsea ProductsSubsea Projects
Asset Integrity
Subsea ProductsSubsea ProjectsAsset Integrity
Pipeline Solutions
Subsea ProductsSubsea Projects
Asset Integrity
Potential Growth Areas
38
Expanding into Offshore Renewable Energy Markets
Applying existing Oceaneering technologies to provide innovative solutions to the offshore wind market
Expecting pull through in demand from integrated solutions and technologies offerings
Awarded survey services contract for Maryland Offshore Wind Project
Winner in the Carbon Trust Wind Accelerator competition• Selected for our techniques to address the inspection of
welds on monopiles and jacket foundations
Awarded three-year agreement with Van Oord Offshore Wind B.V.
• Providing ROV and trenching support services
Acquired Ecosse Subsea Limited• Providing offshore engineering, seabed preparation,
route clearance and trenching services39
Offshore Wind Global Market SizeRepresents a large investment and growth opportunity
40
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2017 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
Cu
mu
lati
ve M
egaw
atts
Northern Europe Rest of Europe USA Rest of World
Source: Renews Global Offshore Wind Report 2017 – Nov 2017
12%
34%
20%
CAGR % from 2017
Conclusion
• 2018 will be challenging, but the offshore oilfield markets seem to be showing signs of resilience
• Encouraged by certain improvements in long-term industry drivers and fundamentals
• Maintaining a strong balance sheet
• Looking for opportunities to invest and grow the company
• Maintaining or growing our market share
• Gaining efficiencies through continuous improvement and controlling costs
• Continuing to innovate and deliver value added solutions to our customers
• Continuing superior safety performance
41
Supplemental Information
42
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 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:
43
* Forecast Net Income excludes Provision for Income Taxes
Period Ended 2014 2015 2016 2017 2018F 2018F(USD in millions) Low* High*
Net Income $ 428.3 $ 231.0 $ 24.6 $ 166.4 $(110.0) $ (80.0)
Depreciation & Amortization 229.8 241.2 250.2 213.5 210.0 220.0
Subtotal 658.1 472.2 274.8 379.9 100.0 140.0
Interest Expense/Income, Net 4.4 23.4 20.3 19.3 40.0 40.0
Income Tax Expense 195.2 105.3 18.8 (184.2) - -
EBITDA $ 857.7 $ 600.9 $ 313.9 $ 215.0 $ 140.0 $180.0
Free Cash Flow (Through the Cycle)“Free Cash Flow” (FCF) is a non-GAAP financial measurement. FCF represents cash flow provided by operating activities less organic capital expenditures (i.e., purchases of property and equipment other than those in business acquisitions. Management believes that this is an important measure because it represents funds available to reduce debt and pursue opportunities that enhance shareholder value, such as making acquisitions and returning cash to shareholders through dividends or share repurchases.
44
Period Ended 2014 2015 2016 2017(USD in millions)
Net Income $ 428.3 $ 231.0 $ 24.6 $ 166.4
Depreciation & Amortization 229.8 241.2 250.2 213.5
Other Changes in Cash Provided by
Operating Activities 63.7 88.2 65.7 (243.4)
Cash Provided by Operating
Activities 721.8 560.4 340.5 136.5
Purchases of Property & Equipment (386.9) (200.0) (112.4) (93.7)
Free Cash Flow $ 334.9 $ 360.4 $ 228.1 $ 42.8
Oceaneering ROV Fleet – 279 ROVsGeographic profile – December 31, 2017
45
78
52
75
21
34
19
20 16 32 6 7 80
10
20
30
40
50
60
70
80
90
100
GOM Africa North Sea Brazil Asia/Pac Other
RO
Vs
ROV Count Vessel Based, 89
Oceaneering ROV Leading Market Position
46
27928%
OII Subsea 7 Fugro DOF Subsea C-Innovations Helix Saipem TMT Technip IKM Group Other
8256%
Ownership Drill Support Market Share
Source: ROV Ownership - Infield, A Wood Mackenzie Business, December 2017.
