Rod Larson President and CEO Scotia Howard Weil 46 th Annual Energy - - PowerPoint PPT Presentation

Oceaneering.com

Rod Larson

President and CEO

Scotia Howard Weil 46th Annual Energy Conference March 27, 2018 New Orleans, Louisiana

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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

• ur most recent Reports on Forms 10-K and 10-Q.

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Why Oceaneering?

• Provider of integrated technology solutions
• Strong portfolio of diversified services and

products

• Geographically dispersed asset base and

revenue streams

• Serves blue chip customers
• Strong market positions
• Solid balance sheet, and the financial

flexibility to invest and grow the company

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Phase Exploration Development Production Decommissioning

Market Driver Operating Floating Drilling Rigs Subsea Tree Installations Subsea Trees In Service Field Abandonments

• ROV Services
• Survey (SP)
• Tooling (SSP)
• ROV Services
• Survey (SP)
• Tooling (SSP)
• IWOCS – Installation &

Workover Control Systems (SSP)

• Subsea Hardware (SSP)
• Umbilicals (SSP)
• Vessel-based Installation

Services (SP)

• Inspection Services (AI)
• Seabed Preparation/

Trenching (SP)

• ROV Services
• Tooling (SSP)
• Subsea Work

Systems (SSP)

• IWOCS – (SSP)
• Subsea Hardware

(SSP)

• Vessel-based

Installation Services (SP)

• Inspection Services

(AI)

• ROV Services
• Tooling (SSP)
• Subsea Work

Systems (SSP)

• IWOCS – (SSP)

Business Segment Product and Service Revenue Streams KEY ROV = Remotely Operated Vehicles SSP = Subsea Products SP = Subsea Projects AI = Asset Integrity

In All Phases of the Offshore Oilfield Lifecycle

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Five Operating Segments

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Remotely Operated Vehicles (ROVs) Subsea Products Subsea Projects Asset Integrity Advanced Technology

Energy: Non-Energy:

Financial Overview

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23% 20% 16% 20% 30% 33% 49% 41% 21% 15% 22% 9% 12% 12% 5% 10% 14% 20% 8% 20% 0% 25% 50% 75% 100%

Adtech Asset Integrity Subsea Projects Subsea Products ROV

Revenue Operating Income

$1.9B $2.3B 2016 2017 $10.7M $2.3M 2016 2017

0% 25% 50% 75% 100% International United States Services Products

Revenue Overview

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Geographic Area Services and Products

43% 49% 34% 39% 66% 61% 57% 51% $2.3B $1.9B $2.3B $1.9B 2016 2017 2016 2017

2018 Outlook

• Decreases in three energy segments, partially offset by increases in Asset Integrity

and Advanced Technologies

• EBITDA guidance is $140 million to $180 million, with positive EBITDA contributions

from each operating segment

• $12 million to $18 million increase in Unallocated Expenses, and to be in the upper-

$20 million range per quarter

• Higher net interest expense
• Effective tax rate about 5% before discrete items and any potential adjustments to
• ur provisional estimates related to the recently passed U.S. tax reform recorded in

2017

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Lower 2018 operating income than 2017 on slightly lower revenue

We provide ROVs, which are tethered submersible vehicles remotely

• perated from the surface, 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

20% 20%

0% 25% 50% 75% 100% Revenue Operating Income

2017

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Floating Rig Demand History

Oceaneering has 56% drill support market share as of December 31, 2017

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0% 25% 50% 75% 100% 50 100 150 200 250 300 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 % with OII ROVs Contracted Floating Rigs at Period End Contracted Floaters, Working Contracted Floaters, Not Working % of Contracted Floaters with OII ROVs

Source: Rig data, IHS Petrodata, December 2017

Oceaneering ROV Drill Support/Vessel-Based Fleet Mix

Fleet mix was 64% in drill support and 36% in vessel-based activity for 2017

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25,000 50,000 75,000 100,000 0% 25% 50% 75% 100% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 ROV Days on Hire Drill Support / Vessel Fleet Mix Drill Support Vessel Based ROV Days on Hire

* Based on number of actual working days.

Oceaneering ROV Days on Hire and Fleet Utilization

Approximately 80% of our ROVs earned revenue at some point during 2017

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25,000 50,000 75,000 100,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 0% 20% 40% 60% 80% 100% Days on Hire Fleet Utilization Rate Drill Support Days Vessel Based Days ROV Fleet Utilization

Source: Rig data, IHS Petrodata, December 31, 2017

Oceaneering ROV Average Revenue per Day on Hire

Impacted by geographic mix

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0% 25% 50% 75% 100% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 $10,000 $11,000 Average Revenue per Day on Hire Revenue / Day on Hire ROV EBITDA Margin

ROV Technologies

Enabling better control and video imaging, precise tool manipulation, and adherence to industry requirements

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E-ROV Resident ROV Traditional 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

ROVs – Increase in Activity, Lower Operating Income

Reduced average pricing

• Shift in geographic mix
• Continued competitive pricing

More fleet days on hire

• Slight shift in fleet mix more towards drill-support utilization

Increase in ROV market share for drill support Fleet utilization in the low 50% range ROV EBITDA margin in the low 30% range

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2018 outlook versus 2017

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

33% 41%

0% 25% 50% 75% 100% Revenue Operating Income

2017

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Subsea Products

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Production Control Umbilicals

Supply electric and hydraulic power to subsea trees and inject chemicals into reservoirs and 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.

64%

% of Total Subsea Product 2017 Revenue Manufactured Products

Subsea Products

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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.

36%

% of Total Subsea Product 2017 Revenue Service and Rental

Subsea Products Financials

Backlog $276 million at December 31, 2017

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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 $0 $300 $600 $900 $1,200 $1,500 Subsea Products ($ in Millions)

Subsea Products Revenue Subsea Products Backlog

Optimism in More Final Investment Decisions (FIDs)

• FIDs recovered strongly in 2017
• Globally, 25 major offshore projects* (>50 mmboe) were sanctioned in

2017, and nearly half were for deepwater

• Wood MacKenzie estimates 39 pre-FID offshore projects* (>50 mmboe) in

2018, and about 40% are for deepwater

• Based on the above, along with discussions with customers and bid activity,

we envision our book-to-bill for 2018 exceeding 1.0

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* Offshore Projects = >+400 Meters (1320 feet)

Subsea Installations Forecast

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305 349 319 295 280 243 243 267 282

2013 2014 2015 2016 2017 2018F 2019F 2020F 2021F 100 200 300 400 500 Subsea Trees Onstream

Source: Tree data - Infield, A Wood Mackenzie Business, December 2017.

Trees Onstream Y/Y Growth % 2017: -5% 2018F: -13% 2019F: No Change 2020F: +10% 2021F: +7%

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

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Riserless Intervention System winner 2017 World Oil Best Well Intervention Technology Award

Subsea Products – Stronger Book-To-Bill, Lower Operating Income

Underutilized plant capacity

• Lower manufacturing throughput as we enter 2018 with less backlog

compared to 2017, and the natural lag between FIDs and order awards

Lower pricing Margins weaken into the low- to mid-single digit range Envision book-to-bill to exceed 1.0

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2018 outlook versus 2017

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.

Subsea Projects

15% 9%

0% 25% 50% 75% 100% Revenue Operating Income

2017

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Subsea Projects Overview

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• Deepwater Multi-Purpose Supply Vessels**

Spot or Contract Location Charter End

3 Owned

*Ocean Intervention *Ocean Intervention II *Ocean Evolution (delivering 2018 Q2)

Spot Spot Spot GOM GOM GOM N/A N/A N/A

• Diving Support Vessels
• Survey/Autonomous Underwater Vehicles (AUV) Services
• ECOSSE SCAR Seabed System (acquired March 2018)
• Global Data Solutions

* Jones Act Vessel ** Supplemented with short-term vessel charters, as necessary

Acquired Ecosse Subsea Limited

Provider of offshore engineering, seabed preparation, route clearance and trenching services Benefits:

• Expand service line capabilities
• Grow market position
• Optimize customer’s installation projects with proven

tools

Accretive to 2018 cash flow and earnings Results included in Subsea Projects segment

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Subsea Projects – Lower Operating Income

Continued competitive pressures on vessel dayrates in the spot call out market in the U.S. GOM Reduced international vessel and diving activity Entering 2018 with no meaningful fixed-term vessel contracts Partially mitigated by operating income from Ecosse Subsea Limited acquisition

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2018 outlook versus 2017

We provide asset integrity management, corrosion management, inspection and nondestructive testing services, principally to the oil and gas, power generation, and petrochemical industries.

Asset Integrity

12% 10%

0% 25% 50% 75% 100% Revenue Operating Income

2017

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Asset Integrity – What We Do

Our optimized, industry-leading inspection services and integrity management solutions assure our customers are equipped with the data required to make informed, value-adding decisions.

29 Permanently Installed Monitoring Systems (PIMS) Rope Access Pipeline Inspection Advanced Inspection Services Non-Destructive Testing (NDT) – CapEx / In-Service

Subsea Inspection Integrity Management Inspection and Condition Monitoring

Asset Integrity – Where We Work

We work onshore and offshore -- upstream, midstream and downstream, encompassing the entire energy spectrum, oil and gas, nuclear, and renewables.

30 Onshore Midstream Onshore Downstream Offshore Topside Offshore Subsea Onshore Upstream

Subsea Inspection Integrity Management Inspection and Condition Monitoring

Asset Integrity Increase in Operating Income

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Continuing to respond to the needs

• f our customers for a more cost-

effective method of ensuring the integrity and availability of their critical infrastructure.

2018 outlook versus 2017

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 logistic solutions based on automated guided vehicle technology.

Advanced Technologies

20% 20%

0% 25% 50% 75% 100% Revenue Operating Income

2017

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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

• verhauls, 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

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Government Businesses Commercial Businesses

Automated Guided Vehicle (AGV) Systems We develop, implement, and maintain innovative, turnkey logistic solutions based on AGV technology.

Advanced Technologies Increase in Operating Income

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• Increased activity in entertainment

group within Commercial businesses

• Stable activity levels within

Government businesses 2018 outlook versus 2017

Strong Balance Sheet and Liquidity

Liquidity at December 31, 2017

• $430 million of cash
• $500 million undrawn revolving credit facility, $500 million available until October 2021, and

$450 million available until January 2023

• First debt maturities - $500 million in November 2024

Organic capital expenditures

• Expect to range from $80 million to $120 million in 2018, and include $40 million to $50 million maintenance

Acquisitions

• Continue to strengthen our portfolio of services and products by investing in our current and adjacent market niches,

with more focus on our customers’ operating expenditures

Dividends

• Suspended until we see significant improvement in market outlook and projected free cash flow

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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

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Long Term - Offshore Oil Remains Essential

Incremental production growth through 2020 requires significant investment in both on- and offshore

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50 60 70 80 90 100 110 2016 2017F 2018F 2019F 2020F Total Liquids MMB/D

Offshore is 23% of total incremental barrels to 2020 Current Sources of Production

Other Onshore Offshore Shale

Source: Morgan Stanley Research , Wood Mackenzie, Rystad Energy, and Company Data – June 2017.

Mobile Robotics ROV Advanced Technologis Subsea Projects Riserless Intervention & P&A Subsea Products Subsea Projects Offshore Renewables ROV Subsea Products Subsea Projects Asset Integrity Subsea Products Subsea Projects Asset Integrity Pipeline Solutions Subsea Products Subsea Projects Asset Integrity

Potential Growth Areas

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Expanding into Offshore Renewable Energy Markets

Applying existing Oceaneering technologies to provide innovative solutions to the offshore wind market Expecting pull through in demand from integrated solutions and technologies offerings Awarded survey services contract for Maryland Offshore Wind Project Winner in the Carbon Trust Wind Accelerator competition

• Selected for our techniques to address the inspection of

welds on monopiles and jacket foundations

Awarded three-year agreement with Van Oord Offshore Wind B.V.

• Providing ROV and trenching support services

Acquired Ecosse Subsea Limited

• Providing offshore engineering, seabed preparation,

route clearance and trenching services

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Offshore Wind Global Market Size

Represents a large investment and growth opportunity

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10,000 20,000 30,000 40,000 50,000 60,000 70,000 2017 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F Cumulative Megawatts Northern Europe Rest of Europe USA Rest of World

Source: Renews Global Offshore Wind Report 2017 – Nov 2017

12% 34% 20% CAGR % from 2017

Conclusion

• 2018 will be challenging, but the offshore oilfield markets seem to be showing signs of

resilience

• Encouraged by certain improvements in long-term industry drivers and fundamentals
• Maintaining a strong balance sheet
• Looking for opportunities to invest and grow the company
• Maintaining or growing our market share
• Gaining efficiencies through continuous improvement and controlling costs
• Continuing to innovate and deliver value added solutions to our customers
• Continuing superior safety performance

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Supplemental Information

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EBITDA Reconciliation to Net Income

Earnings 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:

43 * Forecast Net Income excludes Provision for Income Taxes

Period Ended 2014 2015 2016 2017 2018F 2018F

(USD in millions)

Low* High* Net Income $ 428.3 $ 231.0 $ 24.6 $ 166.4 $(110.0) $ (80.0) Depreciation & Amortization 229.8 241.2 250.2 213.5 210.0 220.0 Subtotal 658.1 472.2 274.8 379.9 100.0 140.0 Interest Expense/Income, Net 4.4 23.4 20.3 19.3 40.0 40.0 Income Tax Expense 195.2 105.3 18.8 (184.2)

• EBITDA

$ 857.7 $ 600.9 $ 313.9 $ 215.0 $ 140.0 $180.0

Free Cash Flow (Through the Cycle)

“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.

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Period Ended 2014 2015 2016 2017

(USD in millions)

Net Income $ 428.3 $ 231.0 $ 24.6 $ 166.4 Depreciation & Amortization 229.8 241.2 250.2 213.5 Other Changes in Cash Provided by Operating Activities 63.7 88.2 65.7 (243.4) Cash Provided by Operating Activities 721.8 560.4 340.5 136.5 Purchases of Property & Equipment (386.9) (200.0) (112.4) (93.7) Free Cash Flow $ 334.9 $ 360.4 $ 228.1 $ 42.8

Oceaneering ROV Fleet – 279 ROVs

Geographic profile – December 31, 2017

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78 52 75 21 34 19 20 16 32 6 7 8 10 20 30 40 50 60 70 80 90 100

GOM Africa North Sea Brazil Asia/Pac Other

ROVs

ROV Count Vessel Based, 89

Oceaneering ROV Leading Market Position

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279 28%

OII Subsea 7 Fugro DOF Subsea C-Innovations Helix Saipem TMT Technip IKM Group Other

82 56%

Ownership Drill Support Market Share

Source: ROV Ownership - Infield, A Wood Mackenzie Business, December 2017.

Investor Relations Contact

Suzanne Spera Director, Investor Relations 713.329.4707 InvestorRelations@oceaneering.com

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