Oceaneering.com
Investor PresentationMarch 2019
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
Reasons to Own Oceaneering
• Provider of integrated technology solutions
• Strong portfolio of diversified services and products
• Geographically dispersed asset base and revenue streams
• Blue-chip customer base
• Strong market positions
• Growing non-energy segment
• Increasing participation in offshore renewables
• Increasing offshore activity levels
3
Five Operating Segments
4
Remotely Operated Vehicles (ROVs)
Subsea Products
Subsea Projects
Asset Integrity
Advanced Technology
Energy:
Non-Energy:
51% 50%
49% 50%
61%65%
39%
35%
0%
25%
50%
75%
100%
International United States Services Products
Revenue Sources
5
Geographic Area Services and Products
$1.9B $1.9B
2017 2018
$1.9B $1.9B
2017 2018
Financial Overview, Quarterly
6
19% 20% 19%
32% 27% 26%
15% 20%18%
13% 12%13%
21% 21% 24%
0%
25%
50%
75%
100%
2017 Q4 2018 Q3 2018 Q4
Revenue Adjusted Operating EBITDA*
41% 39% 44%
35%
24% 13%
12%
19%
11%
7%
5%
5%
5%13%
27%
0%
25%
50%
75%
100%
2017 Q4 2018 Q3 2018 Q4
Adtech
Subsea Projects
Asset Integrity
Subsea Products
ROV
$495.1M $60.1M$70.5M $73.1M$484.2M $519.3M
*Excludes Unallocated Expenses and the effects of certain specified items. For reconciliation of Adjusted Operating EBITDA to Operating Income, see the Supplemental Information.
Financial Overview, Annual
7
21% 21%
33%27%
15%17%
12%13%
19% 22%
0%
25%
50%
75%
100%
2017 2018
Revenue Adjusted Operating EBITDA*
43% 45%
30% 23%
13%11%
6%
6%
8%15%
0%
25%
50%
75%
100%
2017 2018
Adtech
Subsea Projects
Asset Integrity
Subsea Products
ROV
$1.9B $252.7M$322.9M$1.9B
*Excludes Unallocated Expenses and the effects of certain specified items. For reconciliation of Adjusted Operating EBITDA to Operating Income, see the Supplemental Information.
Oceaneering Operating Segments, Q4 2018
ROV – Lower operating results • on 8% fewer days on hire and 8% less revenues
Subsea Products – Lower operating results • on combined impact of Panama City manufacturing facility offline and execution of lower margin work in Services & Rental
Subsea Projects – Lower operating results • on combined seasonal slowdown in IMR and survey work and lull in Renewables activity and contract awards
• Goodwill impairment largely from protracted downturn in Survey and Vessel activity
Asset Integrity – Lower operating results • due to seasonality
Advanced Technologies – Higher operating results
• from Entertainment on completion of jobs and close-out of contracts; and improvements in Automated Guided Vehicles
8
compared to Q3 2018
We provide ROVs, which are tethered submersible vehicles remotely operated from a vessel and/or onshore, 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
19%
44%
0%
25%
50%
75%
100%
Revenue Adjusted OperatingEBITDA*
Q4 2018
9
* Excludes Unallocated Expenses.
Oceaneering ROV Days on Hire and Fleet UtilizationSequentially, utilization rate weakened to 52% on 8% fewer days on hire during Q4 2018
10
0
7,500
15,000
22,500
30,000
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
0%
25%
50%
75%
100%
RO
V D
ays
on
Hir
e
Fleet Utilizatio
n R
ate
Drill Support Days Vessel-based Days ROV Fleet Utilization
Oceaneering Drill Support Market Share Market share improved to 62% at December 31, 2018
11
0%
25%
50%
75%
100%
0
75
150
225
300
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
% o
f Floatin
g Rigs 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 at December 31, 2018
Oceaneering ROV Average Revenue per Day on Hire~$7,400 for Q4 2018; Regional ROV pricing appears to be stabilizing
12
0%
20%
40%
60%
80%
100%
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
$0
$2,500
$5,000
$7,500
$10,000
$12,500
Ad
justed
EBITD
A M
argin
Ave
rage
Rev
enu
e p
er D
ay o
n H
ire
Revenue / Day on Hire ROV Adjusted EBITDA Margin
ROV TechnologiesEnabling better control and video imaging, precise tool manipulation, and adherence to industry requirements
13
Liberty (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
E-ROV: 2018 OTC Spotlight on New Technology® Award winner
ROV Outlook
Q1 2019 compared to Q4 2018 – Flat results
2019 compared to 2018 – Improved results
• Increased days on hire
• Reduced average revenue per day on hire due to change in geographic deployments
• Fleet utilization in mid 50% range
• Service utilization stable around 65% drill support/35% vessel-based
• ROV adjusted EBITDA margin in the high 20% range
14
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
15
26%
13%
0%
25%
50%
75%
100%
Revenue Adjusted OperatingEBITDA*
Q4 2018
* Excludes Unallocated Expenses.
Subsea Products
16
Production Control Umbilicals
Supply electric and hydraulic power to subsea trees and inject chemicals into 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.
55%
55% of Subsea Products Q4 2018 Revenue
Manufactured Products
Subsea Products
17
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.
45%
45% of Subsea Products Q4 2018 Revenue
Service and Rental
Subsea Products FinancialsExpect Subsea Products book-to-bill ratio to exceed 1.0 for 2019
18
0
0.25
0.5
0.75
1
1.25
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
$0
$200
$400
$600
$800
$1,000
Bo
ok-to
-Bill R
atio, T
TM
Pro
du
cts
Rev
enu
e /
Bac
klo
g (
$ in
Mill
ion
s)
Subsea Products Backlog Subsea Products Revenue Book-to-Bill Ratio, TTM
Note: Book-to-Bill Ratio Data unavailable for Q1 2014 through Q3 2014.
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
19
Riserless Intervention System winner 2017 World Oil Best Well Intervention Technology Award
Subsea Products Outlook
20
Q1 2019 compared to Q4 2018 – Flat results
2019 compared to 2018 – Improved results
• Securing good order intake in early 2019
• Increased throughput in Manufactured Products unit
• Increased activity and contribution from Service and Rental unit
• Operating Income margin in mid-single digit range on increased overall activity and better absorption of fixed costs
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. We also provide seabed preparation, route clearance, and trenching services to the renewable energy and oil and gas industries.
Subsea Projects
21
18%11%
0%
25%
50%
75%
100%
Revenue Adjusted OperatingEBITDA*
Q4 2018
* Excludes Unallocated Expenses.
Subsea Projects Overview
• Jones Act-compliant deepwater Multi-purpose Support Vessels, including Ocean Evolution, supplemented with short-term charters, as necessary
• Diving Support Vessels
• Survey/Autonomous Underwater Vehicle (AUV) Services
• Offshore engineering, seabed preparation, route clearance, and trenching services through Ecosseacquisition
22
Subsea Projects Outlook
23
Q1 2019 compared to Q4 2018 – Flat results
2019 compared to 2018 – Improved results
• Improved results from Survey and Renewables
• Lower results from Vessel activity
• Day rates remain very competitive, but are stabilized
• Ocean Evolution in service in Q2 2019
We deliver asset integrity management, analytics, maintenance and risk management, conventional and advanced non-destructive testing (NDT), and specialist inspection solutions, principally to the oil and gas, power generation, and petrochemical industries.
Asset Integrity
24
13% 5%
0%
25%
50%
75%
100%
Revenue Adjusted OperatingEBITDA*
Q4 2018
* Excludes Unallocated Expenses.
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.
25
Permanently Installed Monitoring Systems
(PIMS)
Rope AccessPipeline InspectionAdvanced Inspection Services
Non-Destructive Testing (NDT) – CapEx / In-
Service
Integrity ManagementInspection and Condition Monitoring
Asset Integrity – Where We WorkWe work onshore and offshore -- upstream, midstream, and downstream -- across the entire energy spectrum, oil and gas, nuclear, and renewables.
26
Onshore Midstream Onshore Downstream Offshore TopsideOnshore Upstream
Integrity ManagementInspection and Condition Monitoring
Asset Integrity Outlook
27
Q1 2019 compared to Q4 2018 – Flat results
2019 compared to 2018 – Flat results
• Contract pricing extremely competitive
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 ride system solutions based on automated guided vehicle technology.
Advanced Technologies
28
24% 27%
0%
25%
50%
75%
100%
Revenue Adjusted OperatingEBITDA*
Q4 2018
* Excludes Unallocated Expenses.
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
29
29
Government Businesses67% of 2018 AdTech Revenues
Commercial Businesses33% of 2018 AdTech Revenues
Automated Guided Vehicle (AGV) Systems
We develop, implement, and maintain innovative, turnkey logistic solutions based on AGV technology.
Advanced Technologies Outlook
30
Q1 2019 compared to Q4 2018 – Lower results
• Fewer job completions and contract close-outs in commercial units
2019 compared to 2018 – Improved results
• Continued high demand in Entertainment unit
• Improvements in automated guided vehicles (AGV) operation
• Modest growth in government-related units
Strong Balance Sheet and Liquidity
Liquidity at December 30, 2018
• $354 million of cash
• $500 million undrawn unsecured revolving credit facility available until
October 2021; thereafter $450 million available until January 2023
• $500 million bond due November 2024 is nearest maturity
Cash Flow from operations, $36.6 million
Capital expenditures• $109 million organic spending
• $ 68 million acquisitions spending, including Ecosse
31
Oceaneering Outlook – Q1 2019
ROVs – Flat operating results
Subsea Products – Flat operating results
Subsea Projects – Flat operating results
Asset Integrity – Flat operating results
Advanced Technologies – Lower operating contribution
Unallocated Expenses – Higher expenses on accruals for incentive compensation
32
Lower compared to Q4 2018
Oceaneering Outlook – 2019
Positive Free Cash Flow on increased activity in all operating segmentsAdjusted EBITDA range of $140 million to $180 million
• Higher activity and stable pricing in Energy segments
• Modest improvement in government service units
• Improved performance in commercial units
Positive EBITDA from all operating segmentsCapital Expenditures, $105 million - $125 million
• Maintenance capex, $40 million - $50 million
• Growth capex, $65 million - $75 million
Higher Unallocated Expenses on increased accruals for incentive compensation Higher Net Interest Expense on full year of debt payments and higher floating rates Income Tax payments, approximately $25 million
33
Improved compared to 2018
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
34
Industry Outlook
• Deepwater/Ultra-deepwater Breakeven prices are down by ~$20 per barrel since mid-2015
• Brent Crude to stabilize in range of $55 to $65 per barrel for the foreseeable future
• Offshore Capex Spending projected to increase by 4% to 9% in 2019
• Contracted Floating Rig count expected to increase in 2019 for the first time since 2014
• Tree Awards expected to be approximately 300 per year for the next several years
• FID is expected for nearly 25 deepwater projects in 2019*• Less than 10 deepwater FID’s in 2018
• Offshore Barrels will continue at approximately 30% of global production
• By 2021, 80% of Shale Investment will be required to maintain flat production**• Expected to push additional investment offshore for better returns
35
Data Points Suggest an Offshore Cycle Inflection is underway
Note: Deepwater = water depths >400m per Wood Mackenzie
Source: * Wood Mackenzie, Pre-FID Tracker, February 2019. **EvercoreISI, February 2019
ConclusionFor 2019, the overall offshore energy markets continue to be challenging. We are, however, encouraged by the early signs of improving activity in the markets and in our businesses as the industry rebounds.
36
Focus: • Generating positive free cash flow
• Maintaining our strong liquidity position
• Improving our returns by:• driving efficiencies in cost and performance throughout our organization;
• engaging with our customers to develop value-added solutions that increase their cash flow; and
• defending, or growing, our market share in each of the markets in which we participate.
And above all,
• Maintaining our superior safety performance and quality.
Supplemental Information
37
Net Income (Loss) Reconciliation to EBITDAEarnings 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:
38* Forecast Net Loss excludes Provision for Income Taxes.** For reconciliation of EBITDA to Adjusted EBITDA, see the Supplemental schedules that follow.
Period Ended 2017 2018 2019F 2019F(USD in millions) Low* High*
Net Income (Loss) $ 166.4 $ (212.3) $ (110.0) $ (70.0)
Depreciation & Amortization 213.5 293.6 212.0 212.0
Subtotal 379.9 81.3 102.0 142.0
Interest Expense/Income, Net 19.3 26.0 38.0 38.0 Income Tax Expense (Benefit) (184.2) 26.5 - -
EBITDA $ 215.0 $ 133.8
Adjusted EBITDA** $ 222.4 $ 142.5 $ 140.0 $ 180.0
39
Operating Income Reconciliation to Adjusted EBITDA and Adjusted Operating EBITDAAdjusted EBITDA excludes the effects of certain specified items, as set forth in the table that follows. Adjusted Operating EBITDA is Adjusted EBITDA before Unallocated Expenses. We believe these are useful measurements for investors to review because it provides a consistent measure of the underlying results of our ongoing business by individual business segment and on a consolidated basis. Furthermore, our management usesthese measurements as a measure of performance of our operations. Adjusted EBITDA and Adjusted Operating EBITDA are non-GAAP financial measures. The following table provides a reconciliation between operating income (a GAAP financial measure) and Adjusted EBITDA and Adjusted Operating EBITDA (non-GAAP financial measures) for Oceaneering’s historical results on a consolidated basis and by segment for the periods indicated.
3 mths Ended Dec 31, 2018(USD in millions)
ROVSubsea
ProductsSubsea Projects
Asset Integrity
Advanced Tech.
Subtotalbefore
Unallocated Expenses
Unallocated Expenses Total
Operating Income(Loss) (GAAP) (1.3) (3.8) (79.4) 1.3 15.4 (67.8) (29.3) (97.1)Depreciation & Amortization 28.0 11.8 85.7 1.6 0.8 127.9 1.0 128.9 Other pre-tax - - - - - - (3.2) (3.2)
EBITDA $ 26.7 $ 8.0 $ 6.3 $ 2.9 $ 16.2 $ 60.1 $ (31.6) $ 28.5 Adjustments for the effects of:
Foreign Currency losses - - - - - - 2.6 2.6 Total Adjustments - - - - - - 2.5 2.5
Adjusted EBITDA $ 26.7 $ 8.0 $ 6.3 $ 2.9 $ 16.2 $ 60.1 $ (29.0) $ 31.1
Adjusted Operating EBITDA, Segment % 44% 13% 11% 5% 27% 100%
40
Operating Income Reconciliation to Adjusted EBITDA and Adjusted Operating EBITDAAdjusted EBITDA excludes the effects of certain specified items, as set forth in the table that follows. Adjusted Operating EBITDA is Adjusted EBITDA before Unallocated Expenses. We believe these are useful measurements for investors to review because it provides a consistent measure of the underlying results of our ongoing business by individual business segment and on a consolidated basis. Furthermore, our management usesthese measurements as a measure of performance of our operations. Adjusted EBITDA and Adjusted Operating EBITDA are non-GAAP financial measures. The following table provides a reconciliation between operating income (a GAAP financial measure) and Adjusted EBITDA and Adjusted Operating EBITDA (non-GAAP financial measures) for Oceaneering’s historical results on a consolidated basis and by segment for the periods indicated.
3 mths Ended Dec 31, 2017(USD in millions)
ROVSubsea
ProductsSubsea Projects
Asset Integrity
Advanced Tech.
Subtotal before
Unallocated Expenses
Unallocated Expenses Total
Operating Income (Loss) (GAAP) 1.0 11.1 0.6 2.2 2.8 17.7 (26.8) (9.1)Depreciation & Amortization 27.5 13.4 8.1 2.3 0.8 52.1 0.9 53.0 Other pre-tax - - - - - - (2.6) (2.6)
EBITDA $ 28.5 $ 24.5 $ 8.7 $ 4.5 $ 3.6 $ 69.8 $ (28.5) $ 41.3 Adjustments for the effects of:
Charge related to prior yearnon-income related taxes 0.6 0.1 - - - 0.7 - 0.7 Foreign Currency losses - - - - - - 1.8 1.8 Total Adjustments 0.6 0.1 - - - 0.7 1.8 2.5
Adjusted EBITDA $ 29.1 $ 24.7 $ 8.7 $ 4.5 $ 3.6 $ 70.5 $ (26.8) $ 43.8 Adjusted Operating EBITDA, Segment % 41% 35% 12% 7% 5% 100%
41
3 mths Ended Sept 30, 2018(USD in millions)
ROVSubsea
ProductsSubsea Projects
Asset Integrity
Advanced Tech.
Subtotalbefore
Unallocated Expenses
Unallocated Expenses Total
Operating Income(Loss) (GAAP) $ 0.8 $ 5.4 $ 6.1 $ 2.3 $ 9.0 $ 23.5 $ (25.0) $ (1.6)Depreciation & Amortization 27.4 12.3 7.5 1.6 0.8 49.6 1.0 50.7 Other pre-tax - - - - - - 3.6 3.6
EBITDA $ 28.2 $ 17.7 $ 13.6 $ 3.9 $ 9.8 $ 73.1 $ (20.4) $ 52.8
Adjustments for the effects of:Gain on sale of investment - - - - - - (9.2) (9.2)Foreign Currency losses - - - - - - 3.7 3.7Total Adjustments - - - - - - (5.5) (5.5)
Adjusted EBITDA $ 28.2 $ 17.6 $ 13.6 $ 3.9 $ 9.8 $ 73.1 $ (25.9) $ 47.2
Adjusted Operating EBITDA, Segment %
39% 24% 19% 5% 13% 100%
Operating Income Reconciliation to Adjusted EBITDA and Adjusted Operating EBITDAAdjusted EBITDA excludes the effects of certain specified items, as set forth in the table that follows. Adjusted Operating EBITDA is Adjusted EBITDA before Unallocated Expenses. We believe these are useful measurements for investors to review because it provides a consistent measure of the underlying results of our ongoing business by individual business segment and on a consolidated basis. Furthermore, our management usesthese measurements as a measure of performance of our operations. Adjusted EBITDA and Adjusted Operating EBITDA are non-GAAP financial measures. The following table provides a reconciliation between operating income (a GAAP financial measure) and Adjusted EBITDA and Adjusted Operating EBITDA (non-GAAP financial measures) for Oceaneering’s historical results on a consolidated basis and by segment for the periods indicated.
42
Operating Income Reconciliation to Adjusted EBITDA and Adjusted Operating EBITDAAdjusted EBITDA excludes the effects of certain specified items, as set forth in the table that follows. Adjusted Operating EBITDA is Adjusted EBITDA before Unallocated Expenses. We believe these are useful measurements for investors to review because it provides a consistent measure of the underlying results of our ongoing business by individual business segment and on a consolidated basis. Furthermore, our management usesthese measurements as a measure of performance of our operations. Adjusted EBITDA and Adjusted Operating EBITDA are non-GAAP financial measures. The following table provides a reconciliation between operating income (a GAAP financial measure) and Adjusted EBITDA and Adjusted Operating EBITDA (non-GAAP financial measures) for Oceaneering’s historical results on a consolidated basis and by segment for the periods indicated.
Year Ended Dec 31, 2018(USD in millions)
ROVSubsea
ProductsSubsea Projects
Asset Integrity
Advanced Tech.
Subtotalbefore
Unallocated Expenses
Unallocated Expenses Total
Operating Income(Loss) (GAAP) $ 1.6 $ 5.6 $ (86.0) $ 8.7 $ 33.9 $ (36.2) $ (109.3) $ (145.5)Depreciation & Amortization 111.3 53.1 114.5 6.9 3.1 288.9 4.7 293.6 Other pre-tax - - - - - - (14.3) (14.3)
EBITDA $ 112.9 $ 58.7 $ 28.5 $ 15.6 $ 37.0 $ 252.7 $ (118.9) $ 133.8
Adjustments for the effects of: Gain on sale of investment - - - - - - (9.3) (9.3)Foreign Currency losses - - - - - - 18.0 18.0 Total Adjustments - - - - - - 8.7 8.7
Adjusted EBITDA $ 112.9 $ 58.7 $ 28.5 $ 15.6 $ 37.0 $ 252.7 $ (110.2) $ 142.5
Adjusted Operating EBITDA, Segment % 45% 23% 11% 6% 15% 100%
43
Operating Income Reconciliation to Adjusted EBITDA and Adjusted Operating EBITDAAdjusted EBITDA excludes the effects of certain specified items, as set forth in the table that follows. Adjusted Operating EBITDA is Adjusted EBITDA before Unallocated Expenses. We believe these are useful measurements for investors to review because it provides a consistent measure of the underlying results of our ongoing business by individual business segment and on a consolidated basis. Furthermore, our management usesthese measurements as a measure of performance of our operations. Adjusted EBITDA and Adjusted Operating EBITDA are non-GAAP financial measures. The following table provides a reconciliation between operating income (a GAAP financial measure) and Adjusted EBITDA and Adjusted Operating EBITDA (non-GAAP financial measures) for Oceaneering’s historical results on a consolidated basis and by segment for the periods indicated.
Year Ended Dec 31, 2017(USD in millions)
ROVSubsea
ProductsSubsea Projects
Asset Integrity
Advanced Tech.
Subtotalbefore
Unallocated Expenses
Unallocated Expenses Total
Operating Income (GAAP) $ 22.4 $ 45.5 $ 10.3 $ 11.2 $ 22.0 $ 111.4 $ (100.8) $ 10.6 Depreciation & Amortization 113.9 52.6 31.9 7.7 3.2 209.3 4.2 213.5 Other pre-tax - - - - - - (9.1) (9.1)EBITDA $ 136.3 $ 98.1 $ 42.2 $ 18.9 $ 25.2 $ 320.7 $ (105.7) $ 215.0
Adjustments for the effects of: Charge related to prior year non-income related taxes
1.9 0.3 - - - 2.2 - 2.2
Foreign Currency losses - - - - - - 5.2 5.2 Total Adjustments 1.9 0.3 - - - 2.2 5.2 7.4
Adjusted EBITDA $ 138.2 $ 98.4 $ 42.2 $ 18.9 $ 25.2 $ 322.9 $ (100.5) $ 222.4 Adjusted Operating EBITDA, Segment % 43% 30% 13% 6% 8% 100%
Free Cash Flow“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 2018(USD in millions)
Net Income (Loss) $ 428.3 $ 231.0 $ 24.6 $ 166.4 $ (212.3)Depreciation & Amortization 229.8 241.2 250.2 213.5 293.6 Other Changes in Cash Provided by Operating Activities 63.7 91.7 64.6 (243.4) (44.7)Cash Provided by Operating Activities 721.8 563.9 339.4 136.5 36.6Purchases of Property & Equipment (386.9) (200.0) (112.4) ( 93.7) (109.5)
Free Cash Flow $ 334.9 $ 363.9 $ 227.0 $ 42.8 $ (72.9)
Oceaneering ROV Fleet – 275 ROVsGeographic profile – December 31, 2018
45
70
47
82
2331
22
21 23 34 114 50
10
20
30
40
50
60
70
80
90
100
GOM Africa North Sea Brazil Asia/Pac Other
RO
Vs
ROV Count Vessel Based, 98
Service utilization was 67% in drill support and 33% in vessel-based activity during Q4 2018
Oceaneering ROV Service Utilization
0%
25%
50%
75%
100%
0
7,500
15,000
22,500
30,000
2014Q1
2014Q2
2014Q3
2014Q4
2015Q1
2015Q2
2015Q3
2015Q4
2016Q1
2016Q2
2016Q3
2016Q4
2017Q1
2017Q2
2017Q3
2017Q4
2018Q1
2018Q2
2018Q3
2018Q4
Service Utilizatio
n R
ate
RO
V D
ays
on
Hir
e
Vessel Based Drill Support ROV Days on Hire
46
* At December 31, 2018. Based on number of actual working days.
Oceaneering ROV Leading Market Position
47
27525%
OII Subsea 7 Fugro DOF Subsea C-Innovations Helix Saipem TMT Technip IKM Group Other
9161%
Ownership Drill Support Market Share*
Source: ROV Ownership – Infield, Wood Mackenzie Business, December 31, 2018. *At December 31, 2018
Breakevens Reduced since 2014
48
Source: Rystad Energy
Ultra Deepwater average breakeven price has decreased by $23/barrel since 2014
Global Liquids Supply Cost Curve – June 2014 Global Liquids Supply Cost Curve – July 2017
Meaningful reductions in Ultra-deep and Deepwater categories
$57
$34
49
Source: Average Breakevens, Rystad Energy. Brent crude, EIA. Project counts, Wood Mackenzie.
$0
$25
$50
$75
$100
$125
$0
$25
$50
$75
$100
$125
2014 2017
Bren
t Cru
de P
rice/barrel
Bre
akev
en P
rice
/bar
rel
Brent Crude $/barrel and Offshore Breakeven $/barrel
Breakeven, ShelfBreakeven, DeepwaterBreakeven, UltradeepHigh close $/bblLow close $/bbl
Offshore Activity is Incentivized by Lower Breakevens and Stable Crude Prices
Major FIDs have doubled.
5 1 13 8 44 ← Sanctioned major projects. →
50
151 149 146 159 161
125 132 136 142 144
$0
$100
$200
$300
$400
$500
2014 2015 2016 2017 2018 2019F 2020F 2021F
Off
sho
re S
pen
din
g, $
in b
illio
ns
CAPEX OPEX
Source: Wood Mackenzie
Offshore Spending Expected to IncreaseSpending is stable since 2017; Capex spend is expected to increase in 2020
Sources: Tree awards, Wood Mackenzie. Contracted Floaters, IHS Petrodata, Wells Fargo LLC, and OII estimates.
146159
287297
0
50
100
150
200
250
300
350
2014 2015 2016 2017 2018 2019F 2020F 2021F
Co
un
t at
Per
iod
En
d
Contracted Floaters Tree Awards
Offshore Drilling Activity is Forecast to Grow in 2019following 2018 inflection in floating rig demand
51
$0
$10,000
$20,000
$30,000
$0
$250
$500
$750
2014 2015 2016 2017 2018
Sub
sea Equ
ipm
ent B
acklog, $
in th
ou
sand
sO
II S
ub
sea
Pro
du
cts
Bac
klo
g, $
in m
illio
ns
Technip FMC TechnipFMC AKER OneSubsea Dril-Quip OII Backlog
Subsea Backlogs of Select Oilfield Companies
Source: Company filings. Note: Aker NOK/USD and Technip EUR/USD conversions are US Treasury conversion rates at period end.52 52
at period end
Over 6,500 on-stream wells installed offshore prior to 2018; averaging 12 years since start-up
3391,229 2,528 3,418 3,4824
285
1,698
3,141 3,238
0
1,500
3,000
4,500
6,000
7,500
pre 1990 1990s 2000s 2010-2017 2018F +
0
10
20
30
40
50
Co
un
t o
f In
stal
led
Wel
ls, o
n s
trea
m
Avg
Years since start-u
p o
f on
stream W
ells
Shelf Wells ≥400M Wells Average Age, >400M Average Age, Shelf
Global Offshore Infrastructure is Aging
53
Source: Well data, Infield, A Wood Mackenzie Business, June 2018.
Investor Relations ContactMark PetersonVice President, Corporate Development and Investor [email protected]
54
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