Oceaneering International (OII) Q2 2010 Earnings Call July 29, 2010 11:00 a.m. ET Executives Jack Jurkoshek - IR Jay Collins - President and CEO Marvin Migura - SVP and CFO Analyst Max Barrett Brad Handler Neil Dingmann - Wunderlich Securities Stephen Gengaro - Jefferies and Company John Donald Chris Glaseem Jim Crandell Waqar Syed Daniel Burke Presentation Operator
On April 22, the day after Macondo well incident, we began working at a site for BP with one vessel and two ROVs and has had a substantially greater involvement in BPs spill controller and relief well effort since then. As of yesterday we were providing two vessels, 13 ROVs, ROV tooling Iwax services and engineering and project management at Macondo. Over 300 Oceaneering employees are supporting the project, hopefully to a positive final outcome in the near future.On the basis of our expected level of services and products to be provided at the Macondo well site and an overall improved outlook for Subsea Products we are now expecting a better second half of 2010 in addition when we issued our revised guidance on June the 7th. Our new outlook combined with our second quarter performance has lead us to raise 2010 annual EPS guidance to a range of $3.20 to $3.40 from $2.80 to $3.10. This is 35% EPS improvement midpoint-to-midpoint consist of $0.13 per share higher earnings in the second quarter and $0.22 per share improved second half outlook. Most of our Q2 for out performance out of that one half of our improved outlook is attributable to Macondo. The impact of U.S. Department of Interiors moratorium we'll have on our business activities beyond 2010 remains to be determined. There were 35, 40 drilling rigs in the Gulf of Mexico at the end of June, this in drilling contractors have announced that two of these rigs will be relocated to other market areas, to Macondo and Egypt. We have all these on board both of these rigs and have secured contracts to keep our vehicles working at these locations. Even though we have global reach with our services and products we feel strongly that the industry and our long term interest will be best served by exemption of deepwater expiration activities in the Gulf of Mexico. We believe the regulatory changes arriving from Macondo well incident will generate additional opportunities to ROV tooling. New equipment may include such items as higher flow like hot spans, our established skeptical and valves, ROV accumulator reservoir skins to conduct C4 of BOP test and back the accumulator bottle sketch.
We also believe there are possibilities in the future for additional demand for our BOP control system and perhaps emergency backup ROVs. At this time it would pure speculation to attempt to quantify the financial magnitude for these possible opportunities.Now moving to a discussion of the significant elements of our second quarter results. Excluding the $3.5 million insurance gain related to the ROV system on board to deepwater horizon, ROV operating incomes for the second quarter increased 9% year-over-year. On this adjusted basis ROV operating income was flat with the first quarter and an operating margin of 32% was in line with our expectation. Our fleet utilization rate here in the quarter was 78% up from 75% last quarter down from 80% in second quarter of 2009. Sequentially our days on hire increased 5% due to growth in construction demand notably Norway and the Gulf of Mexico. Year-over-year our days on hire also increased about 5% due growth in both construction and drill support demand. During the quarter we add three vehicles to our fleet last month and retired six. As of the end of June we had 249 systems available for operations from 235 year ago. Our fleet mix during June was 72% in drill support and 28% construction and field maintenance. The situation in the Gulf of Mexico deepwater remains quite dynamic. At the end of march we had ROV on board 31 of the 36 floating rigs in the Gulf of Mexico and all were on hire. Read the rest of this transcript for free on seekingalpha.com