Oceaneering's (OII) Q3 Earnings And Revenues Miss Estimates

Oceaneering International, Inc. (NYSE:OII) incurred third-quarter 2019 adjusted loss per share of 30 cents, wider than the Zacks Consensus Estimate of a loss of 23 cents and also the year-ago loss of 14 cents. This underperformance could be attributed to disappointing results from the ‘Asset Integrity’ and the ‘Advanced Technologies’ units.

Moreover, the company’s revenues of $498 million missed the Zacks Consensus Estimate of $527 million and also declined 4.04% year over year from $519 million.

Segmental Information

Remotely Operated Vehicles (ROV): Revenues were $113.1 million compared with $105 million in third-quarter 2018. Operating income was $10.1 million, up from $0.7 million in the year-ago quarter. Days on hire rose 6.3% year over year to 15,146 while vessel utilization increased to 60% compared with 56% a year ago.

Subsea Products: Revenues came in at $150.8 million, up from the prior-year figure of $137 million. Meanwhile, operating income registered year-over-year growth of 146.3% to $13 million. Robust backlog contributed to stronger results. The backlog surged to $609 million as of Sep 30, 2019 from the year-ago backlog of $333 million.

Subsea Projects: Revenues declined 27.6% to $76 million from $105 million in the year-ago quarter on lower-than-expected call-out work. However, the unit reported operating loss of $0.6 million, narrower than $6 million in third-quarter 2018 owing to better-than-expected income from the service and rental business.

Asset Integrity: Revenues of $59.2 million were lower than the year-ago figure of $62.3 million. Due to persistent pricing competitiveness for Inspection Services, the segment incurred an operating loss of $2.4 million against the prior-year income of $2.2 million.

Advanced Technologies: Revenues from this non-energy segment totalled $98.4 million, slightly lower than $109.8 million in third-quarter 2018 as Oceaneering faced delays and cost overruns on various projects.

Meanwhile, operating income fell to $3 million from $9 million in the year-ago quarter due to lower accruals for incentive-based compensation.

Capital Expenditure & Balance Sheet

Capital expenditure in the third quarter including acquisitions summed $58 million. As of Sep 30, Oceaneering had cash and cash equivalents of $340.3 million, and long-term debt of around $799.8 million. The debt-to-capitalization ratio was 38.03%.

Guidance

Oceaneering projects fourth-quarter EBITDA to be marginally lower than the reported quarter’s EBITDA of $45.4 million due to the less seasonal offshore activity. The company tightens 2019 adjusted EBITDA to $150-$170 million from its earlier view of $150-$180 million. Notably, Oceaneering generated adjusted EBITDA of $70.7 million for the six months ended Jun 30, 2019.

Looking ahead to the fourth quarter, the company expects sequential improvement from its ‘Advanced Technologies’ unit but lower contribution from the ROV and the ‘Subsea Products’ segments. The Asset Integrity segment is likely to generate slightly improved results.

The company raised its capital expenditure guidance for the year to $150 million due to higher spending within its ROV unit. This, in turn, will support the increased levels of activity projected for 2020.

Further, Oceaneering expects to generate EBITDA between $180 million and $220 million in 2020. It anticipates its capital expenditure in the range of $70-$100 million.

Zacks Rank & Key Picks

Oceaneering has a Zacks Rank #4 (Sell).

Some better-ranked players in the energy space are Subsea 7 SA, Inc. (OTC:SUBCY) , Phillips 66 (NYSE:PSX) and TC Energy (TSX:TRP) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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