Oceaneering International Inc (OII) 2005 Q4 法說會逐字稿

Good morning. At this time, I would like to welcome everyone to the fourth quarter earnings release conference call.

[OPERATOR INSTRUCTIONS].

Thank you Mr. Huff. You may begin your conference.

Yes, good morning, everybody. This is Jack [Jurkoshek]. I would like to thank you for joining us on our 2005 fourth quarter earnings call, and I would like to particularly welcome those who may be participating in the webcast of this event.

Joining me this morning is John Huff, our Chairman and Chief Executive Officer, who is going to lead the call, Marvin Migura, our Chief Financial Officer and Bob [Nagoya], our Treasurer.

Just as a reminder before we start that remarks we make during the course of the call regarding our business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Furthermore, a reconciliation of non-GAAP financial measures is posted to our website at oceaneering.com under the Investor Relations section.

I'm now going to turn the call over to John.

Good morning. Thank you for joining the call. It's a pleasure to be with you today, and it's always a pleasure when you report record results.

Our record quarterly earnings were above both our guidance range and the consensus street estimate, both Subsea projects and Subsea products had all-time high operating income performance. Earnings of $20 million were 65% better than fourth quarter of '04 and more than 10% above our previous quarterly record reporting in the third quarter of '05. Quite a bit of our above guidance performance was attributable to our Subsea project segments, where we had a higher level of hurricane damage work than we forecast in November.

Two unusual items mentioned in the press release impacted reported results for quarter. The first was a $6.1 million pretax asset write-down in ROV segment, recorded in gross margins. These non-cash charges were taken as part of our policy to operate the most modern work class fleet in the industry. We wrote off and retired four ROVs and other miscellaneous ROV components we believe were not consistent with the overall quality of our fleet going forward.

The second was the final settlement of certain foreign income tax liabilities for a total of $1.8 million less than the tax provisions made in prior years. This reduction in income tax expense lowered our tax rate for the year from 35.5% to 33.6%, and using the actual tax rate for the year caused the effective tax rate in the fourth quarter to decline to 29.2%. Adjusting for these two items, our fourth quarter net income would have been approximately $22 million, or diluted EPS of $0.80. We realize this is a non-GAAP measure, however, we think it's noteworthy.

For year-over-year and sequentially, our quarterly earnings improved largely on the strength of higher operating income from our projects and product segments, and more indicative of our accomplishment was each of our oil field business segment generated more operating income in 2005 then they did in 2004. I believe this speaks very well for the technical niche, products and service offerings we provide.

Operational highlights of the fourth quarter were many. Subsea projects continued to achieve extraordinary results due to hurricane damage-related work. Pricing for our diving and deepwater vessel services increased dramatically due to equipment personal shortages immediatly following hurricanes Katrina and Rita.

Operating income of $12.3 million was up over 70% compared to the third quarter and up nearly fourfold compared to the fourth quarter of last year. This quarter operating income was even surpassed the prior annual records set in 2002. Subsea products operating income of $11.6 million was the highest it's ever been. It was almost three times the results we reported in the third quarter, and last year's fourth quarter, due to increased profit contributions from both OIE and Multiplex. This quarter's operating income was nearly double the previous quarterly record reported in the second quarter of 2002. We booked over $100 million of new orders for the second consecutive quarter and finished the year with almost $200 million of backlog, a record high.

As I previously mentioned, or ROV operating income was impacted by a $6 million write-down. Furthermore, during the quarter we incurred approximately $1.5 million of additional expense as a result of preparing maintenance needed to prepare two vehicles to take advantage of market opportunities in the Gulf of Mexico, overtime pay and hiring retention costs associated with increasing the size of our work force, and an adjustment of our Norwegian pension liability. Despite these expenses and the write down, quarterly operating income from our ROV business was still the third best in our history.

We added three systems to our fleet during the quarter and retired six, including the four we wrote off. Our quarter end fleet count was 175 vehicles. During mid 2005, we announced an ROV fleet expansion program of 24 systems. 12 systems remain to be put in service, all of which are expected to be working by the middle of 2006. We anticipate ROV demand will continue to grow faster than the delivery of Deepwater rigs and boats, and we intend to add more systems as these opportunities appear.

Our financial review for the 2005 for the second consecutive year and the fourth time in the past five years, we achieved record annual earnings up 56% over 2004. These earnings reflect the growth strategy we have put in place, the ongoing sector of demand for our off-shore oil field niche markets and the participation in Gulf of Mexico hurricane-damage inspection and repair projects. While perhaps not the perfect storm, this market environment allowed to us increase pricing and utilization of our assets. Like our fourth quarter results the $22.4 million year-over-year improvement in net income was broad based with all of our oil field business segments and equity income from the Medusa Spar contributing to the increase.

We achieved record ROV Subsea projects and inspection segment operating income. Our ROV days on hour improved by 28% to over 51,500 as we increased our fleet utilization rate to 83%. We also increased revenue per day on hire by 10% over $6,100. Operating income improved by over $20 million or 40%. Approximately $13 million was attributable to the increase in days on hire, and $7 million of it resulted in improvement and average pricing.

Subsea projects vessel utilization increased to 84%, up from 66% last year, and we benefited from the third party spot market charter of three vessels and a barge. Pricing for our diving and Deepwater project services increased substantially, particularly after the hurricanes. Segment operating income increased nearly five fold over 2004 and was more than double the previous annual record set in 2002. Inspections succeeded in selling more value added services, thereby raising gross margin percentages and creating their record. Our MOPS business earned a record pre-tax profit contribution with $10 million of equity income, up 20% from our ownership position in the Medusa Spar.

Subsea products operating income increased more than 25% on the strength of specialty product sales by OIE, particularly ROV tooling, installation work-over and control systems, valves and clamps. The clamp contribution was due to the Grayloc acquisition at the end of June. Our year-end backlog of nearly $200 million was up almost 150% from the beginning of the year.

We grew the business through acquisition and organic capital investments. During the year we invested over $130 million, including 51 million to expand our Subsea product line and manufacturing capabilities and 56 million to modernized and increase the size of our ROV fleet. Each capital investment should significantly benefit Oceaneering's future financial performance.

Our investment in Subsea products included the $42 million Grayloc acquisition at the end of the June and completing the installation of steel tube, umbilical manufacturing capability, in our Panama City, Florida plant. At year end, we had over $20 million of steel tube umbilical backlog for this plant, and we will commence the first steel tube job using the new cabling equipment next month. Based on data from Quest Offshore, 2005 market demands for umbilicals was over 2200 kilometers. This is up 45% over 2004, and 30% more than the previous record year in 2001.

Our overall market ranking for total awards was number one, with 28% of the market due to the fact we secured over 40% of the thermal plastic tube orders; however, our market ranking in orders received for steel tube-based products, which constituted over half the total 2005 market demand was only fourth with a 16% market share. This was a consequence be of the delay in bringing our Panama City plant steel tube cabling equipment online and therefore not having the capacity to compete. With our enhanced production capabilities, we anticipate doing much better in a significantly improving market over the next few years.

The 45% increase in the umbilical demand in 2005 contrasts sharply with an 18% increase in free orders, reflecting a trend towards longer offset distances and Subsea completions. According to go Quest's forecast, the average of 3.2 miles of umbilical per tree order is expected to continue over the next few years.

The ROV investment enabled us to increase our fleet size from 168 to 175 vehicles, while retiring nine systems during the year. We are the largest and most technically advanced ROV company in the world. We continue to be the number one supplier for ROV drill support services in the Gulf of Mexico, Norway, West Africa, Mexico, and Canada, and the number two supplier in Brazil, only two vehicles behind the leader. The Gulf of Mexico, West Africa, Brazil, and the North Sea are the largest markets in the world.

In summary, we believe our record annual 2005 earnings performance was exemplary. We achieved increased profit contributions from all five of our oil field business operations and set records in four of them. Our focus on providing products and services for Deepwater and Subsea completion is a good way to play the entire offshore life cycle from exploration through production. Offshore, and especially Deepwater, is definitely one of the best frontiers for the industry to lower its finding and development costs.

All in all, I think we have created an excellent business model and have executed our strategies very confidentially. If you had to [inaudible] back to our operating income, we generated a record $174 million in cash flow for the year, 34% more than 2004, and our balance sheet is in excellent condition. At year-end we had data of 174 million and equity of 536 million. Our debt-to-cap percentage was 25%, giving us considerable additional debt capacity.

We are continuing to look for accretive acquisitions or organic growth opportunities when better than cost of capital returns. We intend to use our strong cash flows and balance sheet to further grow Oceaneering's earnings.

Now, on to 2006. As we said in the press release, we expect to achieve a new record in '06 and are estimating EPS of $2.90 to $3.10. This estimate is based on achieving and improving in profit contributions to new record levels from four of our five oil field business activity led by Subsea products and ROVs. This guidance takes into account our assessment of fourth quarter 2005 operating income run rates from Subsea projects and Subsea products, will not be sustainable during every quarter in 2006.

The property contribution from our ROV segment is expected to improve, as we increase the average fleet size, fleet utilization, and pricing. We expect to accomplish this by increasing the number of vehicles we have in use to support construction and production, maintenance on a growing number of Deepwater field developments, and by providing vehicles on board additional floating drilling rigs.

For Subsea products fourth quarter results benefited from profits reported on umbilical sales, particularly on [inaudible] order in our Brazilian plant and OIE specialty product sales for floating production systems and hurricane-damage repair hardware.

For 2006, we expect significantly more operating income overall than 2005. Profits will be driven by a continuation of a high level of Subsea completion activity, which drives an improvement in our umbilical sales, as well as general sales increase in each of OIE's product lines, including a four-year contribution from Grayloc.

Total market demand for umbilicals in the 2006 to 2008 time frame, based on Quest's offshore forecast, is expected to increase by 2900 kilometers to over 7700 kilometers in total, up 60% from the prior three years. In 2006, demand for steel tube umbilicals is expected to grow by 350 kilometers or30% led by growth in West Africa. The demand in the Gulf of Mexico is forecast to continue at the record pace of approximately 500 kilometers set in 2005.

The outlook for '06 is for a larger number of jobs, as the third of the Gulf of Mexico market in 2005 was associated with one project, the Atwater Valley Field Development. With the start-up of our steel tube cabling line in Panama City, we should be well positioned to secure a significant part of this work.

For Subsea projects, we anticipate the urgency to undertake hurricane damage inspection and repair work will abate from the frenzied level of activity in the fourth quarter. Furthermore we believe the local Gulf of Mexico shortage of personnel and equipment will be addressed by bringing additional assets and personnel into this market. We definitely expect hurricane damage repair work will remain at a very high level, at least through 2007, just not at the same frenzied pace of activity as we experienced in the fourth quarter of '05.

Overall, Subsea projects is expected to do better in 2006 than 2005, because of the continued strength of the hurricane pipeline, platform repair work, and a general escalation in Deepwater infrastructure inspection repair and maintenance activities. Our ability to perform this work will be augmented by the addition of a second saturation diving system and the transfer of the Performer, a large multi service vessel we have used for years in our deep ocean search and recovery business from our Advanced Technologies business to our Gulf of Mexico oil field projects group. We expect to have the performer available for oil field work in the Gulf of Mexico by mid-March, and we will continue to charter third-party assets as opportunities present themselves in the gulf.

MOPS pre-tax income contribution is expected to decline as a result of a lower dive rate going in effect for mid-May for use of the Ocean Legend, offset some by a slight increase in equity income from the Medusa Spar. Inspection profitability is expected to improve by securing work with higher profit margins, rationalization of less profitable operations, and continued facility consolidation segments. We anticipate the financial contribution from Adtech to be a little lower than '05 as we are transferring the use of the Performer to the more profitable Gulf of Mexico projects group.

Results from the remainder of these business activities are anticipated to show some improvement, especially for the U.S. Navy, where it pertained to general engineering services.

We believe our 2006 EPS guidance is very attainable. We are positioned to achieve additional upside earnings contributions from organic growth and acquisition investments. Our intent is to first grow the company's profitability by making sound investments. Finding such opportunities will consider additional share buybacks in the open market.

Personally, I think four records in the last five years is indicative of our ability to profitably grow our niche markets, and we will concentrate our energies on executing this strategy. As an example, using $3 of 2006 EPS, we will generate about $100 million of free cash to internally fund growth initiatives. This is after an estimated CapEx -- maintenance CapEx of $25 million. Over $25 million of capital will complete our organic growth initiatives announced in 2005 and a $20 million debt principal payment.

In addition, as I previously mentioned we have extra additional debt capacity. So clearly we have the financial capability, and I believe the business skills to continue our profitable growth.

Looking further ahead, we believe there's a trend for our customers to invest our enormous cash flows in offshore and Subsea projects, and consequentially our 2007 earnings are expected to be even better than 2006. The current inventory of Deepwater fields yet to be developed, the extent to which flooding ridges are already firm contracts, and the market outlook for Subsea trade and umbilicals are all signs of healthy future demand for our products and services. Our assessment underpinned by the expectation in the hydrocarbon commodity price declines will not break below the $40 a barrel level.

For specific quarter one guidance, we are projecting earnings in a range of $0.65 to $0.75. Simply stated, the possible sequential decline in first quarter earnings from the fourth quarter of '05 is expected to come from a single activity, that is a higher tax rate, 35% in the first quarter versus 29.2% in quarter four. This is based on our assessment, pre-tax income will be at least as good as the fourth quarter with some operations improving and some declining.

The following is a segment-by-segment review of our first quarter outlook. We expect the quarterly profit contribution from our ROV business to be higher than the fourth quarter, due to the absence of the $6 million write-off. We do anticipate a normal seasonal decline in activity in certain foreign areas of operation.

We are expecting another great quarter from our Subsea projects operations, although down somewhat from the fourth quarter due to moderation in hurricane damage, inspection and repair work.

We expect to see a sequential quarterly increase in financial contributions in our inspection business, although still at a fairly low level due to the seasonality of the demand for such services in Europe, where over half of our activities are located.

For Subsea products, we are forecasting a good quarter, although somewhat down from the record results we reported for the fourth quarter of '05. This is attributable primarily to an expected drop in profit contribution from our Brazil umbilical manufacturing plant, which had an unusually high activity level in the fourth quarter and some decline in OIE results. We expect the products group to gain additional momentum by the second half of '06.

For our MOPS business, we're anticipating comparable financial results as all three of our 100% owned units are under contract. Equity income from our investment in the Medusa Spar is expected to be higher, as we anticipate the spar to be online for the entire quarter. Our Adtech business for the fourth quarter is expected to improve somewhat due to the pickup in Navy engineering services.

In summary, our record results for the fourth quarter and the year 2005 continue to demonstrate our ability to generate excellent earnings from our technical niche market strategy. Our cash flow is strong and our ability to invest our money wisely is in place. 2001, to 2005, which includes a wide variety of market conditions have been the best five years in Oceaneering's history. We believe it's clear our technical niche market business strategy is working very well over the long term, as well as the short term.

Our technology gives us operating leverage to take advantage of the upturn in Deepwater and Subsea completion activity currently underway. The longer-term market outlook for our Deepwater and Subsea service and products offerings is excellent. These frontier areas have the lowest mining and development costs outside of the Middle East and former Soviet states in the world. Our belief is the majors and the super majors will continue to focus their resources in these areas. Broader, deeper, longer, any way you describe the current environment, we think we're in one of the sweet spots of this up cycle. We believe 2006 will be our best year to date and 2007, even better.

I appreciate everyone's interest in Oceaneering, and we'll be happy to answer questions and entertain any comments. Thank you.

[OPERATOR INSTRUCTIONS].

Your first question comes from Waqar Syed.

Congratulations, gentlemen. Great quarter. First some housekeeping. What is your DD&A, G&A, and CapEx guidance for the first quarter and for '06?

I'm going to let Jack give you some details on that, and if --

Well, the CapEx plan for the year, like John mentioned, is that we are going to spend all of our cash flow. But right now we have 100 million that we don't have any particular thing that we are going to invest in. We are going to spend 25 million on maintenance CapEx. We'll spend a little more than 25 million to complete the announced CapEx program 2005, and the $20 million bond payment.

Okay.

That leaves us $100 million of discretionary cash flow to invest.

Yeah, I think he was really referring mostly to the frist quarter.

For the first quarter.

I think he was trying to get some run rates in there. I think it's a good question, an excellent question. The real point I was trying to make is that we've got $100 million of free cash, and we've got multiple opportunities to invest that in both organic growth and some acquisitions that we are looking at. We just haven't announced all of those. We don't normally announce and discuss in the public all of the different opportunities that we have and so forth.

I was just trying to sort of tie that together by saying that in the past we have spent more than our cash flow. Our cash flow is more than adequate to cover maintaining our capacity, and so each of the prior years we have actually spent a little more than the cash flow, because we found investment opportunities that have continued to improve our profitability. So actually that's really the message I was trying to make.

Okay.

I think regarding depreciation and amortization for the year was about $80 million. And that included the 6 million. So I would think with the additional assets, if you assume 80 to 85 over the year, I think that would be a safe assumption.

Okay.

And I don't think that's going to vary much quarter to quarter. It ought to increase as we bring these assets into service.

It will increase with the spending the $100 million.

Right.

Right. And the G&A?

I think we've looked at that, and I believe we're going to estimate that it will average about $24 million a quarter.

Okay. Now, my understanding was that starting September, you have about $20 million per quarter debt repayment, so for the year as a whole it will be a little over $20 million. Is that correct, or is my understanding incorrect?

It's $20 million for the year.

$20 million for the year. Okay. It's not $20 million per quarter?

No.

Okay. Now there are a number of floaters that are being built for delivery in the next three years, and there are some that are being upgraded for Deepwater applications. Around what time do you start negotiating to put ROVs on those floaters? The discussions for the floater that are scheduled for delivery no wait, are they going to start late '07, or are they going to start earlier that that?

I think this year is one, next year is two, and '08 is, I think eight or nine. You know, we are already discussing --

New rigs.

These are new rigs.

Right.

There's a lot of refurbishments that's going on. We are already discussing this with the drawing contractors and operators. That's what I was referring to in the opening comments is that a lot of these rigs are already contracted.

Right.

Our customer is going to be the same as the drilling contractor's customer, particularly on the new rigs, we have been very successful with the last ramp up in new rigs that we delivered. We got most of our systems, we got most of the rig contracts because we built in our systems to the rigs, a lot of cursor systems. Improved the efficiency of how we operated ROV in conjunction with the drilling contractor. So I would anticipate that we would get a very high percentage of all of these new rigs and refurbishments.

Yeah. Okay. And your ROV operating costs were higher, like you mentioned. Now you mentioned there's $1.5 million additional expense that was -- that showed up in the fourth quarter. Anything else which could be -- any nonrecurring costs you showing up in the first quarter of '06 on the ROV side?

Shouldn't be anything of any great significance.

No. The answer is no.

I really just added that in there to kind of show you the impact on the margins in the fourth quarter. There's really some cleanup in the fourth quarter. I think we had some umbilical adjustments. I mean that's the one thing that would cause our margins on the expense side to jump around a little bit, is when we tear up an umbilical. Those are very large. Those are nearly $1 million a piece. We've got 175 of these things in operation, and so that's really sort of the one nonrecurring but -- Yeah, recurring. We don't mention that, because they sort of happen episodically instead of periodically. We've chosen to expense them as they occur, rather than trying to amortize them and show a little smoother number here. But I think that's an appropriate accounting for it.

Right.

Okay. And be then the [inaudible-accent] you mentioned about end of third quarter, it should be up and running. That steel fabrication facility, you feel pretty good about it. Initially my impression was it was to start in January or so. So is has that been pushed back?

It's been pushed back about six weeks.

Okay.

But I'm real comfortable and we've got orders on the books for steel tube umbilicals that are going to be installed in the Gulf of Mexico, and I'm very comfortable that we'll be in business this quarter.

Now --

Jack,I hate to cut you off here but we would like to try to limit the number of questions to two or three at a time.

Okay. I appreciate all of your assistance.

Again, that would be great, or I handle can it after the call, but we would like to give other people an opportunity to ask questions.

A appreciate that. Thank you very much.

Your next question comes from Andrew O'Connor.

Hi, John, Marv, and Jack, nice quarter. From this point on, how high do you guys think ROV utilization can go? It looked like utilization came in a little bit from the third quarter, 88% to 85% in the fourth quarter.

Yeah, I would say that 90 is obtainable. It really depends on the mix of the number of systems on the construction barges, construction vessels, versus the drilling rigs. Drilling rigs are steady state and it -- and that's roughly three-quarters of our marketplace. So you will see the thing have a little seasonality because of the construction operations, and the second and third quarters are probably going to be a little better than fourth and first quarters. But I think that notionally, we should be approaching the 90% number.

Okay. John, are there opportunities to redeploy ROVs from lower use geographic areas to higher use areas currently?

I think so. I mean, that's some of the things that we are doing.

Are there any active redeployments underway?

We have a few. Some of the mobilizations were in the fourth quarter. For instance, India has picked up a little bit. Norway has been a really great place for us. We've actually lost some equipment in Brazil. That's why we went down from tied for first to being second, because we just couldn't get some of the rate increases that we felt were appropriate in that marketplace.

And not all of our equipment is rated to work in Deepwater. So some of the lesser horsepower equipment, older equipment is ideally suited for the shallower water markets of Southeast Asia.

Right.

So I -- I shutter to use this analogy, but let's assume that during the hey day of General Motors, where they had sort of the Chevrolet and the Cadillac lines, we can offer Chevrolets at a point that people don't need as sophisticated a vehicle. These are traditionally have been the ones that are older, and then, of course, what we do is we refurbish those to a Cadillac level and put them into the ultra Deepwater service. So it is a lot like maintaining a fleet of aircraft. These things will last a long time, but it's not the same airplane that you started with.

Okay. Thanks for that. And then lastly, is it possible to say, would you guys expect yet another surge in Subsea product backlog, at the end of the first quarter?

Oh, I don't feel that right now. And I guess, that's probably a better answer than trying quantify that for you. I don't -- unless something comes in strong in March and it -- those things can flip flop a couple of weeks and it makes a difference. But I don't sense that right now, that we are going to have the same surge that we had in the third and the fourth quarters. I do think though that during '06, we're going to have some additional surges. And whether that's the second quarter or the third quarter or the fourth quarter, I don't know.

I sense that we've got a pretty hot market, and a lot of this is going to be scheduling of installation contractors. This is going to be last-minute changes by the customers, trying to come up to their optimum and trying to cycle in. You remember be from our last up cycle years ago, a lot of things got changed because of the scheduling sequences.

Right. There was a significant amount of quite activity, but some of the major jobs may be pushed back or be put on a fast track. So it really is too early to tell, but I agree with John, I don't feel like it's going to go up a lot in the first quarter. One of the nice things about where we are positioned in this is that I think the tree manufacturers are the long lead time, and so I think the operators are going out there and capturing that capacity, and then they are looking at what their genuine needs are. And we are further down that critical path item, and so that's going to have an effect on the length of umbilicals, it's going to have an effect on the plumbing arrangements, manifolds, the termination facilities, and the jumpers, those types of things that OIE builds. So it really gives us a great opportunity to sort of be a little bit at the end of the line here and can -- I wouldn't say pick and choose, but I would use a term that was a little bit less than that. That we can certainly get a little better look at the market, and we know a little bit more about what all the alternatives are.

Okay. How quickly will the $196 million of backlog be worked off again in Subsea products?

Oh. That's a great question. I mean, a bunch of it is for '07 delivery.

Okay.

And -- or some of it is, I guess, but Jack just pointed out that 160 million of it is expected to be realized in revenue during 2006.

Yeah. So that's a lot.

And there is some of that that is going to be work in progress during 2006 is for 2007 delivery. But it's a good long-term backlog. And we have room for additional orders, so, I mean, we are not tapped out.

Yeah, I think that's good to have capacity in this market. I think that that's a good thing, not a bad thing.

Okay. Thanks for the color. Again, congratulations on your quarter.

Thank you.

Your next question comes from Philip Dodge.

Good morning, everybody. John, just following up on the steel tube umbilicals, you mentioned that your objective was to increase your market share to more than the 16% in 2005 now that Panama city is going to be up and running. How much would this major contract that you mentioned in the press release help you on that, in terms of kilometers?

Phil, this is Jack. That was last year. That was awarded in 2005. We didn't get it.

That was at Atwater job.

No, no I'm not talking about that.

What that's done is it's pretty well filled up one of our competitors in the regional built market.

Let's let Phil -- you said you are not talking about that?

No, I'm just reading here from the press release. It says we will commence our major steel tube umbilical job at this plant by the end of the first quarter of 2006. So you were confused on that.

I'm sorry, that is a job for Gulf of Mexico operator, and it's going to commence on time, a lot of issues, but it's a great job. It's a big, independent company and we are real comfortable.

What I was saying, is that something that's going to be relatively important, increasing your steel tube market share for the full year or would you need quite a few others to get above the 16%?

We need more.

Yeah. Okay.

I think what confused me, the question, and apologize, it was probably my --

Maybe I didn't ask it correctly.

No, I just missed it. I'm sorry.

And then just one other question, on the 12 ROVs that you have scheduled for availability by the middle of the year, are there places for all of those to go immediately after they are completed?

I think we have contracts currently on 11 out of the 12, and we're just looking at a whole lot of opportunities for the 12th, and we want to be sure that we don't make the wrong choice.

Yeah. Okay. Thanks very much.

We are comfortable that hopefully we'll be announcing some more additions. What I was referring again to in my opening remarks is that that market is rolling a little faster than the delivery of high specification vessels and Deepwater rigs, and that's because a lot of vessels are being retrofitted with this type of equipment for this installation, repair, and maintenance type market. So we will be rolling a little faster than our friends in the drilling business and our friends in the boat business.

Okay. Thanks.

Should be, at least.

I'm only going to ask two questions, Jack. That's it for me.

Thanks, Phil.

At this time, sir, there are no further questions.

Okay. Well, I want to thank everybody for being on the call, and I appreciate it, and if you have any additional questions if you could call Jack, we'll look forward to your comments as well. Thank you.

Take care.

Thank you this concludes today's teleconference. You may all disconnect.