Oceaneering International Inc (OII) 2008 Q1 法說會逐字稿

Good morning. My name is Amber, and I will be your conference operator today. At this time, I would like to welcome everyone to the first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(OPERATOR INSTRUCTIONS)

Good morning, everybody, and I'd like to thank you for joining us on our 2008 first quarter earnings conference call. As usual, a webcast of this event is being made available through the Company Boardroom service of Thomson/CCBN.

Joining me this morning is Jay Collins, our President and Chief Executive Officer, who will be leading the call, Marvin Migura, our Chief Financial Officer and Bob Mingoia, our Treasurer.

Jut as a reminder, remarks we make during the course of this call regarding our earnings guidance, 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, and now I'm now going to turn the call over to Jay.

Thank you, Jack. Good morning, and thanks for joining the call. It's a pleasure to be here with you today. Our record first quarter EPS of $0.74 was near the top end of the guidance range we gave last quarter. Earnings of $41 million were nearly 25% more than the first quarter of 2007.

To put this in an even larger historical perspective, we earned more net income in the first quarter of 2008 than we earned during the entire calendar 2004, just three years ago. ROVs achieved record quarterly operating income and inspections quarterly operating income was more than double that of a year ago. We continue to expect to achieve a fifth consecutive year of record EPS in 2008, and our overall guidance range of $3.50 to $3.80 remains unchanged.

The anticipated EPS increase from the $3.24 we earned in 2007 is attributable to our business focus on deepwater and subsea completion activity. Year over year, ROV operating income increased over 50%. This was accomplished by improving our average operating income per day on hire by over 40% through a 19% increase in pricing and growing our days on hire by 7%. Sequentially, ROV revenue and operating income were essentially flat.

Operating income margin during the quarter was 29%, up from 28% last quarter and 27% on average last year. The improved margin was primarily attributable to our success in increasing our average pricing per day on hire and outstanding operational execution. The increase in year over year average revenue per day on hire includes the cumulative effect of all price increases made during the past 12 months and should not be misconstrued to be improved pricing during this quarter.

Likewise, a disproportionate number of systems had rate increases effective in the first quarter of this year, so we do not anticipate continuing to achieve sequential quarterly increases of our average revenue per day on hire in the range of 7%, as we did in the first quarter for the balance of 2008.

In light of our first quarter performance, we now expect we will achieve ROV operating income margin of approximately 28% for 2008, as compared to 27% in 2007. Consequently, we are raising our ROV operating income growth range by $5 million, to $30 million to $40 million. Our fleet utilization rate during the quarter of 80% was lower than we had projected, which was attributable to a slower start to the construction season in both the Gulf of Mexico and the North Sea.

For the balance of 2008, we expect to achieve fleet utilization comparable to the rates reported for the same periods of 2007. During the quarter, we added two systems to our fleet and as of the end of March had 212 systems available for operation, up from 193 a year ago.

Our fleet mix during March was 65% in drill support and 35% in construction and field maintenance, about the same as in December 2007. Our Subsea Product segment operating income was comparable to the first and fourth quarters of last year. On a year-over-year increase in revenue, operating income was flat due to a lower gross margin percentage and to an increase in SG&A expenses incurred to support our planned growth.

Percent gross margin declined due to a change in OIE product mix and a lower profit contribution from our Multiflex umbilical operation. During the first quarter of 2007, the OIE product mix was unusually favorable and featured a disproportionate amount of IWOC's service sales at high margins. Our lower than projected first quarter umbilical contribution was largely due to the fact that we've increased our Multiflex plant staffing in anticipation of higher manufacturing activity, which has yet to materialize.

Consequently, the level of throughput was not sufficient to absorb these costs. Sequentially, revenue, operating income and operating income margin declined due to the lower throughput at our Multiflex plants. At the end of the quarter, our products backlog was $353 million, about the same as at the end of 2007 and March a year ago.

We currently anticipate that our backlog will grow by the end of June. Given our first quarter results, which were lower than we anticipated, we are lowering our annual 2008 operating income growth expectation for Subsea Products by $5 million to a range of $25 million to $35 million.

At the midpoint of this range, we still expect a profit improvement of over 30% compared to last year. While we're projecting substantially improved results for Subsea Products sequentially for the second quarter of 2008, we continue to anticipate that the bulk of the improvement year over year will occur in the second half of 2008. We continue to expect to achieve a slight improvement in the Subsea Products operating income margin for the year.

As expected and discussed in our last earnings call, our Subsea Projects quarterly operating income performance declined both year over year and sequentially. Year over year, the profit decline was attributed to expenses incurred this quarter in dry-docking two of our vessels and a $3.5 million gain we realized on the sale of the sale of the Ocean Service, an ROV support vessel, in the first quarter of 2007.

Sequentially, the lower operating income was primarily due to a normal seasonal decline in demand for shallow-water diving and deepwater vessel project services. Our Company-owned vessels on hire, the days on hire, dropped 40%. In addition, we incurred the dry-dock expense I just mentioned.

Our Inspection segment had its best first quarter performance ever and achieved better-than-expected results. This was due to the fact that a normal first quarter seasonal decline in demand did not occur. Year over year, Inspection operating income more than doubled on an increase in revenue of approximately 25%. The revenue growth came from most of the geographical areas where we operate.

The operating income increase also reflects the benefit of our efforts to sell more value-added services. Sequentially, Inspections operating income improved on flat revenue due to an improved job mix, featuring higher-margin work and higher job incentive bonus payments. I'm now going to turn the call over to Marvin to discuss our cash flow and balance sheet.

Thank you, Jay. Good morning, everybody. If you add depreciation back to our net income, we generated nearly $68 million in cash flow in the first quarter, 23% more than the first quarter of 2007. If you add depreciation back to our operating income, you get $91 million, up 21% from last year. Any way you want to measure our cash generation, you'll find a considerable increase over last year's results.

Capital expenditures, including acquisitions, during the quarter totaled $88 million. We invested $49 million in our Subsea Products business. This included approximately $45 million to acquire GTO Subsea, a rental provider of specialized dredging and excavation equipment, to expand our ROV tooling suite. We also invested $31 million to upgrade and expand our ROV fleet.

At present, we anticipate spending about $200 million in capital expenditures in 2008. The remaining projected expenditures of approximately $112 million consist mainly of additional ROV fleet growth, organic growth investments in Subsea Products and maintenance CapEx. Above and beyond this expected level of capital expenditures, we continue to look for additional accretive acquisitions and organic growth opportunities with better than cost of capital returns.

Primarily, we intend to use our strong cash flows and balance sheet to further grow our earnings. To the extent we do not find suitable investment options, we intend to pay down our debt. Our balance sheet remains in excellent condition.

At the end of March, we had debt of $245 million and equity of $967 million. Our debt-to-cap percentage was 20%. Now I'm turning the call back over to Jay.

Thank you, Marvin. In summary, our first quarter was in line with what we had anticipated, and we're looking forward to achieving record EPS performance in 2008 for the fifth consecutive year.

Our focus on providing products and services for deepwater and subsea completions positions us to participate in a major secular growth trend currently underway in the oilfield services and products industry. Looking forward, we believe deepwater is operation of the best frontiers for adding large hydrocarbon reserves with high productive flow rates at relatively low finding and development costs.

Specific signs of the healthy deepwater market that will drive demand growth in 2008 and beyond for our services and products were evident at the end of March 2008. About two-thirds of the deepwater field discoveries around the world were not yet in production. Over 95% of the existing floating rigs in the world were under contract and over half of these were contracted through 2009.

Seventy-nine additional floating rigs either have been or are scheduled to be delivered during 2008 through 2011, 57 of these have been contracted, 22 ROV commitments have been made on these contracted rigs, and we've won 21 of these jobs and will provide 25 vehicles on these 21 jobs.

Our assessment is that 15 new floating rigs will be placed in service during 2008, all of which are contracted. We've won 12 of the ROV contracts awarded on these and will provide 15 ROVs on these 12 jobs. We are in advanced negotiations on one of the remaining three rigs and the other two are going to work for Petrobras and we will bid for these jobs upon issuance of the bid documents.

During the quarter, one new floating rig was placed in service and one of our ROVs was onboard. According to an international shipbroker, there were about 165 subsea support vessels under construction, with anticipated delivery dates by the end of 2011. Of these, we estimate that at least 100 will likely require at least one ROV.

Based on Quest Offshore's forecast during the next five years, subsea production [tree] orders will be at least 520 per year. Annual demand for umbilicals will exceed $3,500 kilometers. These forecasts represent increases of approximately 35% and 130%, respectively, over the last five years, and that's more than a doubling of umbilical demand.

Orders for umbilicals in 2008 are projected to increase over 70%, to about 2,125 kilometers, equaling the record high set in 2005. With our existing assets, we're well positioned to supply a wide range of the services and products required to support the growing deepwater exploration, development and production efforts of our customers.

Furthermore, we plan on making additional organic growth and acquire investments to expand our ability to participate in this market. We've been successful in reinvesting our cash flow for the past several years and are well on our way to doing the same in 2008. As Marvin previously mentioned, at the end of March, our debt to capitalization was 20% and we remain committed to using our resources to continue to grow the Company. We believe Oceaneering's business prospects over the next several years are very promising.

Once again, our overall business outlook for 2008 remains excellent. We expect our net income to result in record EPS of $3.50 to $3.80, we continue to anticipate this growth in earnings to be led by operating income improvements in Subsea Products and ROVs. For the second quarter of 2008, we are projecting EPS in the range of $0.86 to $0.94, including a pretax gain of approximately $2 million on the sale of the production barge San Jacinto.

At midpoint, this will be slightly higher than last year's second quarter results, which included a $2.8 million settlement related to the contract termination for use of the San Jacinto and more than 20% above our first quarter of 2008. The sequential quarterly earnings improvement is expected to come largely from operating income increases in Subsea Products on the strength of higher sales of OIE and specialty products.

Subsea Projects, due to increased summer season installation and inspection repair and maintenance, demand growth. Sequentially, we also anticipate some operating income growth from ROVs and increase in our [modest] results due to the San Jacinto sale. Our Inspection and Ad Tech operations are projected to be about the same.

In summary, our results continue to demonstrate our ability to generate excellent earnings and cash flow. We believe our business strategy is working well over both the short term and the long term. Our technology gives us operating leverage to take advantage of high level of deepwater and subsea completion activity underway, and the market outlook for our deepwater and subsea services and product offerings is excellent.

We continue to believe that we are in one of the sweet spots of this up cycle. We're expecting record annual earnings for the fifth consecutive year in 2008, and with escalating demand for ROVs and subsea products, 2009 should be even better. We certainly appreciate your interest in Oceaneering and we'll be happy to take your questions.

Amber?

(OPERATOR INSTRUCTIONS). Your first question comes from Scott Gill.

Yes, good morning, gentlemen.

Good morning, Scott.

Good morning.

Jay, I know you get asked this question a lot, but you just went over the Quest numbers for umbilical orders. Why do you think we've yet to see that type of forecast flow through into your orders and backlog at Subsea Products?

That is a good question, Scott. I ask it to everyone that I see around the industry, as well, and I get various different answers. I think one is that while the tree orders get placed a little early -- first of all, I think these projects are slipping to the right, but I think tree orders get placed earlier and I think the umbilical is placed closer to when it's going to be actually installed.

Somewhere in there I think is the truth of the situation. I think that some of these new projects that keep being technically revaluated up until the very last minute and they put off the umbilical order as long as they can, but they seem to be on the way.

You see no signs of market share loss or anything along those lines? It's more of an industry-wide umbilical issue more than anything. Is that what you're saying?

I have to say, I was somewhat pleased to see the Quest numbers come out and show that '07 was actually a down year in umbilical orders because we were experiencing orders sliding to the right and then according to their numbers it was an industry-wide situation. So I see no fundamental change. I will say that the first quarter bid activity for Multiflex was very high, really the highest that we've seen in the last year and a half.

Okay, that's interesting. And my [last one], and then, Jay, is when we look at the ROV market, what did you guide number of units being added to the fleet for Q2 would be?

We don't do it on a quarterly basis. We've said we'll add about 30 for the year, but we've also said that over 20 of these will come in the second half, so it's pretty much of a second half. Again, these rigs are doing the same thing. They're sliding to the right, as well, coming out of these shipyards. So while we think we'll add 30 systems, will go to work, more than 20 of these will be in the second half of the year. You see we only added two in the first quarter.

Okay, so safe to assume somewhere around five to seven in Q2?

I'm not going to predict Q2. Sorry.

All right, thank you.

You bet.

Your next question comes from Neil Dingmann.

Good morning, Neil.

Good morning, guys. Say, two quick questions, this thing with ROVs, is there anything as far as -- utilization obviously looked to be down just a little bit. Is that more just transport, just sort of typical business operations in the first quarter, or should we read anything into that?

I think it just relates -- we've looked and our assessment is that it's just slow construction start in both the Gulf of Mexico and the North Sea. We all know the weather was pretty bad, but I'm not in the construction business so I don't know what causes their projects to start and be delayed a little bit. But I think it was just a slow start in the construction market is our best answer.

Okay, so that doesn't change your thought as far as utilization or anything else going forward?

This is just a very short-term situation.

We did say that we expect utilization for ROV fleet to be very comparable to that of 2007 for the remaining nine months of 2008.

Okay, perfect, thanks, Jack. And then lastly, on the Subsea Products, you did mention in the comments and then in the press release as far as the lower margin due to the mix and the multi-flags. So I was just wondering, sort of as you see going forward, how does that mix look, or what type of products are you seeing in there going forward? Are you back to closer to what we saw last year and then how does sort of Multiflex look this year, next year, on a further-out basis?

I think as we go forward we will see -- we certainly see Multiflex activity picking up as we get into the second half of the year. So I think that mix will slide a little more in their favor in the second half of the year. Otherwise, no significant change on an annual basis. Marvin?

I think the comment that we make where we expect margin to be slightly up year over year 2008 over 2007 really is the best indicator of product mix. I mean, we explained that the first quarter of 2007 had an unusual amount of IWOCs activity at very high margins and that that was really the difference. It wasn't the product mix in '08, it was the product mix in '07 that was the bigger issue because of variance.

So I think year over year we expect product mix to be kind of comparable, margins up slightly with more Multiflex umbilicals throughput.

Good, good. Thanks, guys. I look forward to all the activity.

You bet.

Your next question comes from Waqar Syed.

Hi. I have a question on the backlog. The backlog number that you gave for the end of the quarter, I'm assuming that excludes the $30 million contract that you announced yesterday.

No, actually, that includes those contracts. We were up 4%. We had said last quarter that we thought it was going to be flat, and so we're up 4%. It includes both of these contracts.

Okay.

But I will say since you've asked about backlog that we talked about big jobs slipping from '07 into '08 and then maybe even out of the first quarter and we do have a letter of intent now for a project, almost $40 million, with authorization to begin spending money on the job and we anticipate that purchase order closing in May or, at latest, June. So that was one of the orders we thought we'd actually book in 2007.

So it just indicates the orders are there and they will come, but the yare sliding.

And this $40 million job order, that's not part of the backlog, or it's --

It's not in our backlog. No, we don't put anything in unless we get a PO. So we usually don't talk about something like a letter of intent, but since it's such a large number and we've been talking about orders sliding, I though it would make an expectation in this case.

Okay, great. Thank you very much. That's all I have.

You bet.

Your next question comes from Stephen Gengaro.

Thank you. Good morning, gentlemen.

Good morning.

Really, two things. One, on the ROV side, and I know you mentioned the numbers and the numbers are obviously very positive as far as your market share awards, have you seen some of the nontraditional drill rig support guys, the ROV companies, on the construction side, look or get more aggressive on the drill rig support side of the business.

We have not seen that at all, frankly. We do see some vessel guys deciding to put vessels -- ROVs on a vessel, but we haven't seen those people coming after us on the drill support side.

And then, as a follow on to that, are the terms under the contracts changing at all as far as duration is concerned on some of these ROV contracts? Are there people out there looking for longer deals with locked in price, or is that not an issue?

I don't think we've seen any change in terms. On some of these longer-term rigs, we are happy to lock in equipment rates over time. We retain the right to increase personnel rates as costs go up, but generally no real change in the market on that.

Very good, and then just one final sort of small financial question. When you look at your debt-to-cap ratio, is there an optimal number you shoot for and if it's below that number, would you look at share repurchase as an option for an aggressive use of cash?

Yes, we will. We really don't have -- right now, Stephen, I think the plan, as we said, is to grow earnings and to reinvest our cash flow. Debt's actually going up, it's just that equity is going up and we're okay with that. If we find that repurchasing shares of our money, that is the next-best alternative, in our opinion.

Okay, that's helpful. Thank you.

You bet.

Your next question comes from [Michael Morino].

Good morning, gentlemen.

Good morning, Michael.

Good morning.

Marvin, I guess my first question is for you. I look at, at least my estimate, anyway, for the products group was well below what you all actually reported. And I want to get a handle on where you were internally. I know you lowered your guidance for the product business by 5 million, but versus my estimate the first quarter was 10 million light. Was I just too high, or have you actually increased your outlook for Q2 through Q4, based on the bidding activity you saw in Q1?

Michael, I'm not going to go ahead and comment on your model ,or on anybody's model. I think what we do, we find it very difficult to project product activity quarter by quarter, and what we looked at for the year, it was going to be $30 million to $40 million up and we took $5 million out of that. And since the first quarter was flat, we are expecting to get the balance over the nine months. So I think -- I guess in comment, it was lighter than what we expected and we do see the projects shifting to the right. So we thought the $5 million adjustment in our forecast was the prudent thing to do, but we do believe it's achievable, otherwise we wouldn't have done that.

Based on the first quarter, not on any change in your outlook for Q2 through Q4. Is that fair?

Correct. Yes, absolutely.

Okay, okay. I guess just to follow-up on a backlog question that someone else asked, Jay, you mentioned expectations for an increase in backlog at the end of Q2 and you explained that a little bit with the $40 million LOE. Is there -- are there other projects out there, other than these big ones, that you see breaking loose that could potentially be in the Q2 backlog number?

Well, I really can't comment on any particular job, but we're looking at orders all the time and we've got a long list of things that we're bidding, and so we have a pretty good, detailed list of what we think is going to happen over the quarter. So I guess we feel confident that our backlog is going to be up in the second quarter. So we do a lot of detailed work on the projects that we're bidding, but trying to predict when they close is difficult.

So predicting backlog, I'm reluctant to be in the backlog-predicting business, but I seem to be doing it anyway.

Right, no, I understand that, but do you feel that these things are starting to break loose or getting close?

I really couldn't say that. I think it's a one-at-a-time situation and I wouldn't give you any comfort that the dam has burst here. Every one's a fight to the finish line.

Okay, that's fair enough. One final question. Can you give us some estimates maybe on what you feel your market share is in Brazil on the Multiflex side and the OIE?

Jack, do you have any numbers like that?

Yes, Michael, over time, we believe on the umbilical side it's one-third. There's two other players down there [Perismeum] and a company called MFX, and over time Petrobras pretty much parcels the bids out equally to all the companies.'

Okay, thank you.

Your next question comes from Joe Gibney.

Good morning, everybody.

Good morning, Joe.

Just wanted to follow-up, Jay, just haven't touched on inspection business. Obviously, didn't see the normal seasonal decline. That's certainly well ahead of my expectations, sounds like it was ahead of yours. Just looking for a little bit more color about maybe what the driver was here relative to the abnormal seasonal strength.

I think we did better in West Africa than we thought and that tends not to be as seasonal, but I think some of the turnarounds in problems that we were working on in the UK, those problems just probably started last year and I guess we're doing inspection, we keep finding more problems and the work keeps going on.

Yes, I think the big change was refinery turnaround work in the UK that didn't reflect seasonality because of the reasons that Jay just mentioned, Joe.

Okay, that's helpful. And want to touch a little bit on the [fleet] support vessel queue. You've alluded to this the past several quarters, 165 boats in the new build cycle here, coming through by 2011, 100 or so, requiring one ROV. Any sense of how these stagger annually and I guess how far in front of vessel delivery would you sort of anticipate an ROV award on this work?

I really don't have staggered information for you. We got our information from Fernley, so I would direct you to them. They seem to be the expert on the vessel basis. And we're usually talking to vessel people six, nine months ahead of time, seriously. So maybe that gives you some help on the lead time.

All right, that's helpful. Thanks, guys. I'll turn it back.

Your next question comes from Tom Escott.

Good morning, fellows.

Good morning, Tom.

I think you've touched on this already, but just to confirm what I thought I heard, when you're bidding these ROV projects starting in '09 and 2010 and beyond, you're basically kind of locking in your margins, or you've got pricing protection or inflation protection. Did I understand that correct?

I think if somebody has a drill rig coming out in 2009 or even 2010, we know what our -- we're going to be building the ROV a little bit in advance of that, so we pretty much know what our ROV costs are, so we will negotiate a price, a firm price for the start of that job and then we'll have the ability to escalate particularly the personnel rates as we go forward on those jobs.

Most of these jobs are not much longer than a year or two. Some might extend to two or three years, but we think we have reasonable flexibility to continue to pass along particularly wage costs going forward.

Okay, thank you. And then my other question was kind of a Marvin question. The $1 million of other income in the period, was that foreign exchange, or what was that?

Yes. It was predominantly the real strengthening against the dollar.

Okay, I see that was about a penny right in there, but I'm sure that jumps around each quarter.

Yes, and we don't have much influence over that.

Okay, thank you.

Thank you.

Your next question comes from Sunil Jagwani.

Yes, hi. My question is more I guess longer term in nature. Over the next one to two years, is there any reason for the bulk of your business, which is in ROVs and Subsea Products, is there any reason for those two businesses to not track the installation cycle for subsea trees, as well as the deepwater rig deliveries, which basically will happen even though they're shifting to the right.

Is there any reason for you to not track those, either get delayed along with their delays and grow over time that they're growing?

We don't see any reason. We put that rig utilization, tree orders and subsea completions as the three primary, big-term, macro drivers, leading indicators of our business. So we see no reason that we won't follow that trend, although maybe offset a little bit from -- tree orders seem to happen before umbilical orders do, but rigs going to work, that's a hard drive, direct drive for ROVs going on the rigs and for wells that are going to be drilled and create demand for subsea products. So I think we're right in the middle of the fairway, there.

My associated question, then is you've got visibility on ROV growth partially from day rate strength and we've got 30 ROVs being added this year, but beyond that is it kind of an implicit understanding that you would grow your ROV units also, as these rigs get delivered?

Absolutely, we're trying to win every single job. As I've told you, there were 79 rigs on order, counting '08 through 2011, and we're trying to win every job. We missed one, and we apologize for that, but we're trying to win them all.

And that's the point where I'm lacking the most data. I mean, I can do some rough math, but it is indeed too rough even for me to rely on it. I mean, what's the scope of the number of ROVs that are available for you to be bidding on? Because people do that kind of math for subsea trees all the time, where they look at how many need to be deployed over, say, five years and allocate some towards the market share. I don't think I have those kinds of numbers for ROVs.

I think if you look at our presentation on our webpage, you'll be able to see some pie charts that have market share for Oceaneering and work that we do in drill support. We do about 54% of all the drill support in the world. You can see our win rate on 21 out of 22 contracts. That's quite a bit higher. In the fifth and sixth-generation rigs, there are about 35 rigs in the world today that are operating that are called fifth and sixth generation. We're on 30 of those, so we have a very high market share in the really deepwater drill support. All of these 79 rigs are deepwater-oriented rigs.

So the great news for us is the particular segment where we really have a high share is the market that's decided to grow so rapidly, to go from 35 and add 79 new rigs. So maybe that will help you make some kind of projections there. What's that?

How many ROVs per rig would be a good number?

One plus a little bit. We've got 21 contracts, we're going to provide 25 vehicles. Basically, one to one, plus a little bit more.

And then how much -- I mean, is there any sense of timing as to when these projects are even tendered for? Because we don't hear about that and it seems to be a pretty opaque market, given that there's only a few participants. Just what kind of timing should we be associating with growth beyond the 30 that you're going to bring out in 2008?

Well, I would say we're really not predicting our own ROV fleet multiple years into the future. But, again, I think on our webpage and our presentation you see the delivery schedule projected for the rigs and that's very public information. So I think you could use that to do your own analysis.

And it varies widely because there are some rigs expected to be delivered this year that do not have ROV contracts yet, yet we have some ROVs for rigs to be delivered in future years. So that's a very difficult question to speculate on.

And I would remind you also that it's 65-35 mix, so 35% of our business is supporting construction and vessels, so that's the other part that we talked about. So I would say there's some complication there, but I think you'll be able to make a good analysis with the public information available, plus what's on our webpage and our presentations.

And my last question, the 30 that are coming on this year, they're already all spoken for?

No. The answer to that is no. They're not all under firm contracts.

That's right.

Okay, thank you.

But, so far, by the time we get an ROV built, we always have a pace for it. We don't have any sitting around available today.

Understood, thank you.

(OPERATOR INSTRUCTIONS). Your next question comes from [Victor Marchon].

Good morning, everyone.

Good morning, Victor.

The first question was just on Multiflex as it relates to pricing. If the forecasts do hold for this year and into next as into order flow, at what point do you guys see a positive inflection point on pricing for umbilicals?

Victor, I wish I knew that. I would just say at this point it still remains a competitive market, so we fight for every order. I wish our competitors would raise their prices so we could raise ours, but so far it's still a competitive market and I just don't know.

The second was just on backlog. Of the number that you guys have, 353 million, how much of that is going to be worked off this year?

We said in our 10-K that of the 338, most of it -- all but 10, was going to be worked off. And that's really the only time that we specifically look at our backlog and tried to divide it between what period the backlog is going to be worked off. And the other thing, though, Victor is we get an order and it goes into our backlog because it's a firm order, but yet the customer continues to change engineering specifications, so we're delayed from startup.

And so it really is a complex guess, but we do that once a year. And so, I mean, of the 338 our best estimate was all but 10, you can sort of extrapolate from that when it gets to 353 one quarter later.

Got you. That's all I had. Thank you.

There are no further questions at this time.

All right, guys, thank you very much. Appreciate your interest.

Yes, thank you very much.

This concludes today's conference call. You may now disconnect.