Oceaneering Switches Views, Now Sees Boost From Gulf Disaster

29th Jul 2010 18:08

By David Benoit Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--While other deepwater oil-field services companies operating in the Gulf of Mexico have expressed caution, Oceaneering International Inc. (OII) reversed course late Wednesday, saying its robotic vehicles and deep-sea services are experiencing, and will continue to see, better-than-expected demand. Oceaneering handily topped expectations for earnings in its second quarter and raised its full-year earnings guidance back above Wall Street's consensus figure, results that it credited to the BP PLC (BP, BP.LN) well disaster in the Gulf. Since the day after a rig exploded there in late April, BP has used Oceaneering's deepwater equipment and robotic-operated vehicles to help try to plug the Macondo well and drill relief wells. Chief Executive Officer T. Jay Collins said on a conference call that as of Wednesday, Oceaneering had provided two above-water vessels, 13 robotic vehicles, tools and other services, as well as 300 employees, according to a transcript from FactSet Research. That proved enough work to calm earlier fears that the disaster would hamper results and eased worries stemming from a June warning. Shares climbed 5.1% to $49.60 in recent trading on more than twice the typical volumes for Oceaneering, helping it outperform much of a down market. While Collins also said on the call that it remains to be seen if the effect of the moratorium on drilling in the Gulf, Oceaneering's boosted forecast and increased Gulf demand set it far apart from other deep-sea oil-services companies. It also represented a switch from just a month earlier, when Oceaneering had slashed its forecasts because of the moratorium. The industry has been fighting the moratorium and consistently warned during quarterly reports that it would lead to reduced earnings, and, at the extreme ends, may lead to abandoning the Gulf. Among the biggest names warning of the costs of the drilling ban, Halliburton Co. (HAL) said earlier this month it expects the ban to cost it 5 cents to 8 cents in earnings per share each quarter for the rest of the year, while Weatherford International Ltd. (WTF) predicted a 3-cent impact each quarter and Diamond Offshore Drilling Inc. (DO) slashed its special dividend. But for the second quarter, Oceaneering's profit climbed 13% to $54.3 million, or 98 cents a share, compared with the prior-year's $48.1 million, or 87 cents a share, and easily beating the 81 cents expected by analysts polled by Thomson Reuters. Revenue rose 3% year over year, and 6.7% sequentially, to $464.3 million and gross margin climbed to 26.6% from 24.4%. The strong results and expectations that it will still be needed during the coming months to help finalize the work in the Gulf calmed Oceaneering's earlier fears about the moratorium. For the third quarter, Oceaneering is now predicting earnings of 90 cents to $1, well above the 72-cent forecast Wall Street expected. And it boosted its full-year guidance to $3.20 to $3.40 a share, which now well exceeds the view from June, when Oceaneering cut the forecast to $2.80 to $3.10, though it is still short of its forecast from April, when it had predicted $3.25 to $3.55. Jefferies analysts referred to Oceaneering as "down but not dead" in the Gulf, saying the quarter reinforced the company's dominance in robotic vehicles and the its positive outlooks. -By David Benoit, Dow Jones Newswires; 212-416-2458; [email protected] (END) Dow Jones Newswires July 29, 2010 13:08 ET (17:08 GMT)