Oceaneering International Inc. (OII) shares climbed after the oilfield services firm posted a 12 percent rise in fourth-quarter profit after the close of trading on Wednesday this week.
Oceaneering, which serves primarily the offshore oil and gas industry with a focus on deepwater applications, said it earned $51 million in the quarter, or 93 cents per share, compared to earnings a year ago of $45.5 million, or 81 cents per share.
Revenue rose to $525.7 million from $481.6 million in the year ago period. For the full year, Oceaneering earned $3.58 per share on $2.0 billion of revenue compared to earnings of $3.24 per share on $1.7 billion of revenue. It marked the fifth consecutive year of increased annual earnings for the company.
President and CEO T. Jay Collins said the annual earnings of nearly $200 million were the highest in Oceaneering’s history, over 10 percent of last year’s record results, noting that “in 2008 we achieved best ever ROV, Subsea Products, and Inspection operating income performances.”
Mr. Collins said that in 2008 the company continued to take actions to position itself for future growth and enhance its financial flexibility. For example, the company invested $252 million to upgrade and expand its service and product line offerings, with nearly 90 percent of the investment being spent on the ROV (Remote Operating Vehicle) and Subsea Products businesses.
Those two businesses are the ones with the most promising long-term prospects, he says, as they are tied to deepwater and subsea completion activity.
One fly in the ointment for Oceaneering is likely to be the price of oil. Back in October the company said it could earn $4 per share or more in fiscal ’09 if oil prices averaged above $70 per barrel. Given that oil prices are currently half that figure, the company’s earnings are sure to take a hit.
The low price of oil is currently being reflected in the company’s guidance of earnings of 60 cents to 70 cents per share for the quarter and $3 to $3.60 per share for all of 2009. Analysts on average were expecting profit of $3.52 per share, before items, according to Reuters Estimates.
Future Demand in Deepwater Exploration
Nevertheless Mr. Collins says the company’s belief remains unchanged that the oil and gas industry will continue to invest in deepwater to counteract high existing reservoir depletion rates. He says deepwater is one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low per barrel finding and development costs.
“Therefore, we anticipate that demand for our deepwater services and products will remain promising for the next several years,” he said.
This article was written by Jamie Dlugosch, contributor to InvestorPlace Media. For more actionable insights likes this, visit www.InvestorPlace.com.
