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Oceaneering (OII) Q2 Loss Narrower Than Expected, Sales Miss

Oceaneering International, Inc. OII reported adjusted second-quarter 2020 loss per share of 14 cents, narrower than the Zacks Consensus Estimate of a loss of 19 cents as well as the prior-year adjusted loss of 32 cents, attributable to benefits from cost- control measures.

However, the company’s revenues of $427.22 million missed the Zacks Consensus Estimate of $452 million and also fell 14% from the year-ago sales of $496 million. This underperformance could be attributed to lower-than-expected revenues from the Remotely Operated Vehicles and the Subsea Products units.

Segmental Information

Remotely Operated Vehicles (ROV): Revenues of $98.78 million compared unfavourably with $120.4 million in second-quarter 2019. Operating income of $5.97 million was lower than $8.68 million in the year-ago quarter due to reduced working drilling rigs. Meanwhile, days on hire fell 12.5% year over year to 13,501 while vessel utilization decreased to 59% from 62% a year ago. 

Subsea Products: Revenues came in at $130.7 million, down from the prior-year figure of $138.9 million due to lower activity. However, operating income of $9.06 million compared favourably with the year-ago income of $7.41 million on sustained cost-reduction efforts. Meanwhile, the backlog dropped to $486 million as of Jun 30, 2020 from the year-ago backlog of $596 million.

Subsea Projects: Revenues dropped 25% to $56.3 million from $75.1 million in the year-ago quarter. However, the unit’s operating income of $845,000 skyrocketed 871.3% from $87,000 in second-quarter 2019, led by project execution and the ongoing cost-saving activity.

Asset Integrity: Revenues of $48.1 million were declined from the year-ago figure of $61.2 million. Due to persistent pricing woes and non-recurring costs of a few finished projects, the segment incurred an operating loss of $2.6 million, wider than the prior-year loss of $1.3 million.

Advanced Technologies: Revenues from this non-energy segment totalled $93.4million, down from $100.2 million in second-quarter 2019.

Operating income of $9.71 million rose from $7.24 million in the year-ago quarter on the back of a favourable impact on government business and cost-management measures.

Oceaneering International, Inc. Price, Consensus and EPS Surprise

Oceaneering International, Inc. Price, Consensus and EPS Surprise

Oceaneering International, Inc. price-consensus-eps-surprise-chart | Oceaneering International, Inc. Quote

Capital Expenditure & Balance Sheet

Capital expenditure in the second quarter including acquisitions summed $10.63 million. As of Jun 30, 2020, Oceaneering had cash and cash equivalents worth $333.5 million, and a long-term debt of $806 million. The total debt to total capital was 56.3%.

Guidance

The company did not issue any segmental financial guidance for the third quarter and the remainder of 2020 due to coronavirus-related uncertainties weighing on the industry. However, Oceaneering projects unallocated expenses in the high $20-million range per quarter.

The company also reiterates its capital expenditure estimate in the $45-$65 million band. Further, Oceaneering expects cash tax payments view in the range of $30-$35 million. The company is targeting expense savings of $125-$160 million, annualized by the end of this year (including $35-$40 million of depreciation expense reduction) and hopes to generate free cash flow for 2020. Of this, Oceaneering already realized $85 million in cost savings (excluding depreciation).

Zacks Rank & Key Picks

Oceaneering currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Halliburton Company HAL, Core Laboratories NV CLB and Pembina Pipeline Corp PBA, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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