Oceaneering International Inc (OII) 2008 Q4 法說會逐字稿

At this time I would like to welcome everyone to the fourth 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)

Thank you, Mr. Jurkoshek, you may begin your conference.

Thank you, good morning everybody. We'd like to thank you for joining us on our fourth quarter call. As usual a webcast of this event is being made available through the Street Events network service by Thomson Royders. Joining me this morning is Jay Collins, our President and Chief Executive Officer, who will lead the call, Marvin Migura, our Chief Financial Officer and Bob Mingoia, our Treasurer. Just as a reminder before we start, 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. And I'm now going to turn the call over to Jay.

Good morning and thanks for joining the call. It's a pleasure to be here with you today. We achieved record earnings for the fifth consecutive year in 2008, up more than 10% over last year's results. This was attributable to best ever performances by our ROV, Subsea products and inspection business segments. Compared to 2007, ROV operating income growth was accomplished by expanding our fleet and increasing average revenue per day on hire for our services. Subsea products profit grew on the strength of increased ROV tooling sales and higher throughput at our umbilical plants. Inspection results rose as we secured additional work associated with offshore production platforms, LNG and petrochemical facilities and pipelines at higher margins. We succeeded in improving inspection profits in each of the major geographic markets we serve. Absent the impairment charge we recorded on our investment in the ocean Pensador, we finished the year stronger than we had anticipated at the time of our last call, largely due to better fourth quarter performance by our Subsea project business.

As you are aware, we are facing a deteriorating macro economic environment that threatens a prolonged worldwide recession, oil prices not seen since 2004 and an exceptionally tight credit market. These conditions are having a negative impact on oil and gas exploration and development spending plans and consequently our earnings prospects for 2009. Our current EPS guidance range for 2009 is $3.00 to $3.60. This reflects our assessment of first reduced market demand for many of our services and products with a notable exception of requirements for our ROVs. Pricing pressure that we expect to face during the year and for our inspection business and unfavorable currency impact of a stronger US dollar, relative to the British Pound. Despite these head wells, Oceaneering is positioned to prosper in 2009. Although not immune to the slow down of industry activity, we believe the deepwater markets we serve will be among the least vulnerable to our customers exploration and development spending cuts. Our belief is based on the inherent size and long-term nature of deepwater projects and our expectation that oil prices will inevitably rebound to a level that will make these projects more economical. While the work on most authorized deepwater projects is likely to continue, the urgency to start new projects is in question. Our fourth quarter EPS of $0.93 was 15% better than the fourth quarter of 2007, due to an increase in profit contributions from ROVs. Our ROV business had an all-time high quarterly operating income performance of nearly $53 million. We achieved a record number of 16,900 days on hire for our fleet and a record operating income per day on hire of over $3,100. Compared to 2007, operating income increased more than 30%. During the quarter, we put five vehicles into service and retired one older system. At year end we have 227 vehicles in our fleet. Our fleet mix usage during December was 69% in drill support and 31% in construction and field maintenance, versus a 66%/34% mix a year ago. Our subsidy projects business had a stronger fourth quarter performance than we anticipated for three reasons. First, we did more Hurricane Ike related work than expected and achieved a higher use for third party short term chartered vessel. Second, we achieved higher utilization for one of our saturation diving systems on a pipeline installation and third, we received more diving work orders related to the use of the performer, offshore Angola.

Looking back over the entire year, our 2008 annual earnings growth was attributable to achieving profit records from our ROV, Subsea products and inspection businesses. Our ROV operating income rose by 32% or $46 million over 2007 results to an all-time high of $190 million. Average ROV revenue per day on hire improved in 2008 to over $9,600, 14% more than 2007. We also increased our ROV days on hire to over 65,000 days as we expanded our fleet. Operating income margin was a record high 30%. During the year we grew our fleet size to 227 vehicles, up from 210 at the beginning of the year. We added 21 new vehicles and disposed of four older systems as it is our strategy to operate a modern work class ROV fleet. About half of the new vehicles initially went to work in drill support service and the others were used for construction or maintenance on the growing number of Deepwater fields under development or production. In 2008, seven new floating drilling rigs were placed in service and we have ROVs on all of them with two on one rig for a total of eight vehicles. At year end we estimate that we continue to be the largest ROV owner with 35% of the industry's work class vehicles, over twice the size of the next largest ROV fleet. We remain the primary provider of ROV drill support service with an estimated market share approaching 60%, three times that of the second largest supplier. By our count we also continue to be the largest global provider of construction and field maintenance ROV services.

During 2008, our Subsea products achieved record operating income on higher ROV tooling sales and increased throughput at our umbilical manufacturing plants. Our year end subsidy products backlog of $298 million, declined 12% from $338 million at the end of 2007 as our OIE backlog was offset by a decline in multi-flex backlog. Based on preliminary data from Quest offshore, 2008 demand for umbilicals was about 1100 kilometers or 685 miles. While our 2008 award market share was 30%, up from 21% in 2007, the total industry demand for umbilicals dropped about 10% compared to 2007. We achieved a record inspection operating income by improving profits in all the major geographic markets we served. Operating income increased over 35% on a 13% increase in revenue as we improved margins due to our success in selling more value added services and realized higher profits in each of the major geographic markets we serve. I'm now going to turn the call over to Marvin to discuss our annual, unallocated expenses, cash flow, CapEx and year end balance sheets.

Good morning, everyone. Thank you, Jay. Unallocated expenses were basically flat with 2007 as an increase in information technology related costs to support the company's growth was offset by lower incentive compensation, planned expenses and corporate overhead. Moving on to cash flow, if you add depreciation and the impairment charge back to our net income, we generated a record $314 million in cash flow for the year, $40 million or 15% more than we did in 2007. If you add depreciation and the impairment charge back to our operating income, you get $433 million, which is up 13% over 2007 results. Anyway you want to measure our 2008 record cash generation, you will find a meaningful increase over last year's results.

During 2008, we continue to find organic growth in acquisition opportunities. Our capital expenditures totaled $252 million, and included ROV fleet growth and upgrades, the acquisition of GTOs, Subsea AS, a Norwegian rental provider of specialized Subsea dredging and excavation equipment and expansion of our Subsea products manufacturing capabilities. Nearly 90% of our CapEx was spent on our ROV and Subsea products businesses. These investments demonstrate our focus on providing services and products to support Deepwater and Subsea completion activities and position Oceaneering for increased earnings in the years ahead. Our balance sheet remains in excellent condition, at year end, we had total debt of $229 million and equity of $968 million. Our debt-to-Cap percentage was 19%. Now, I'm turning the call back over to Jay. Thank you.

Thank you, Marvin. In summary, we believe our record annual 2008 earnings performance and cash generation were significant. We achieved increased profit contributions from three of our oil field business operations and set records in each of them. Our focus on providing service and products for Deepwater and Subsea completions positions to us participate in a major (inaudible) growth trend in the oil field service and products industry. As I stated earlier, for 2009, we are forecasting EPS in the range of $3.00 to $3.60 on an estimated average of 55.2 million shares outstanding. Compared to 2008, our forecast assumptions are that we will achieve profit growth from our ROV business, December profit contribution from Subsea products and declines in operating income from our Subsea projects, inspection and MOPS operations. Further delays in offshore development projects would of course dampen our expectation for Subsea products profit in 2009. We anticipate flat to down margin percentages from all of our business segments. Our ROV business earned 47% of our total operating income in 2008, and we expect to contribute even a larger percentage in 2009.

The annual 2009 versus 2008 budget segment changes we envision are as follows. ROV operating income will go primarily due to increased drill support activity on new floating rigs as they are put into service. We expect to add between 24 and 30 vehicles to our fleet in 2009. These are anticipated to be added fairly evenly during the year based on the projected timing of new rig deliveries. We've already secured contract commitments for 22 of our anticipated 2009 ROV additions. This reflects the growing market demand for ROV services and our status as a premier supplier. We currently expect to put 18 of our 2009 vehicle additions into drill support service. We do have some exposure to some ROV downtime on existing rigs, having contract expirations during the year, the possibility of lower demand for construction work and pricing pressure from our customers and competitors. For Subsea products, operating income could be about the same as efficiency gains we plan to achieve in our manufacturing processes, and they'd be offset by a decline in demand for some of our product lines. Further development project delays would impact our profit outlook for both OIE and multiplex.

Given the uncertainty of whan our umbilical order flow rate will increase we've implemented steps to reduce costs and improve our manufacturing efficiencies. This has included reductions in workforce at our UK and Panama City umbilical plants. This right sizing is not expected to diminish our abilities to respond to our customers' needs in 2009. It has been apparent for sometime that industry Subsea umbilical manufacturing capacity exceeds current market demand. We believe a more efficient manufacturing operation will make us more competitive and serve us well in the intermediate and long term. Subsea project operating income is expected to be lower. We foresee a continuation of declining demand for our shallow water services and reduced demand for the Deepwater boats due to an increase in industry vessel availability. We expect inspection operating income to decline, due to the unfavorable currency impact of a stronger US dollar relative to the British Pound and lower demand for our services. Our MOPS segment operating income is expected to decrease as there is a high likelihood that ocean producer will be idle for an extended period of time after it completes its seven year contract of the coast off Angola early in the year. In addition to these segment outlooks, we are planning to have modest growth in our SG&A expenses. Depreciation and amortization expense, excluding the impairment charge is expected to be about $20 million higher and we anticipate our tax rate to be about 35%.

During 2009, we anticipate generating $290 million to $325 million of cash flow. Simply defined as net income plus depreciation. This projected cash flow and our existing revolving debt availability of $196 million at the end of 2008 should give us approximately $500 million of cash resources available to fund our estimated $175 million of capital expenditures and repay our $105 million of debt obligations scheduled to mature during the year. The the majority of our planned capital projects are to support growth of our RO fleet to meet firm demand. I believe we are well prepared for the challenges we face in 2009. We are focused on cash flow generation, cost control, and have already taken actions to right size our workforce where needed. We are intensifying efforts to improve business processes in the effectiveness of how we work. Market conditions may change but our commitment to deliver results to our shareholders remains the same. We have a seasoned management team in place that has experienced serious oil field service down cycles before and we are confident in our ability to quickly adjust our business plan and take advantage of the opportunities that may be dictated by the market.

Looking forward, we see specific signs of a healthy Deepwater and Subsea market that will drive demand growth on a concurrent or delayed basis for our services or products. At the end of December, over 95% of the existing 211 floating rigs in the world were under contract. Over 80% of these are contracted through 2009 and nearly 60% are contributed through 2010. 98 additional floating rigs were on order and scheduled to be delivered through 2012, and 70 of these have been contracted for long term for an average period of over six years. ROV contracts have led on 23 of the 98 rigs on order and we have won 18 of them to provide 21 ROVs. In 2009, according to ODS Petrodata, 31 new rigs are scheduled for delivery. We currently estimate that 21 of these rigs actually will be placed in service during the year. We have the ROV contracts on 14 of these rigs to provide 17 vehicles. The competitor has the ROV contracts on two of these rigs. We are pursuing the remaining five, 2009 ROV contracts, yet to be awarded. Four of these rigs are going to work for Petrobras, three in Brazil and one is West Africa, and the remaining rig is going to work for Reliance in India. Given the recent deterioration of the global credit markets, the decline in the price of oil and the threat of a global recession, it's quite possible that some of these new rigs currently on order may not be built. In fact construction has now started on 33 of the 98 rigs on order, as of the end of December. Assuming that 20 of these rigs will either be delayed beyond 2012 or canceled, we are still talking about 78 rigs to be added to the current floating rig fleet of 211, a growth of over 35%. A growth of 180% in the high speck fleet, which currently totals 43 rigs. This is the ROV service market we dominate and we believe we are in the pole position to seize this growth opportunity. Moreover, the delays or cancellations being in vision should not effect 2009 or our projected ROV drill support growth this year.

In addition to the current rigs being built, an international ship broker reports that about 210 Subsea support vessels are under construction with an anticipated delivery dates by the end of 2011. Of these, we estimate that a minimum of 145 will likely require at least one ROV. Quest's latest forecast for Subsea trees is for an annual increase of 40% in 2009 versus 2008 and a five-year demand increase of more than 80% in the 2009 to 2013 period compared to the previous five years. Pre-orders are the primary driver for our Subsea product line offerings. Umbilical demand is forecasted to increase 18% in 2009 and 65% in the five year period. While our ROV business represents our single largest near term growth opportunity, we lock our position in Subsea products as well as our other business segments. With out existing assets, we are well positioned to supply a wide range of the services and products required to support the Deepwater exploration, development and the production efforts of our customers.

We believe Oceaneering's business prospects longer term remain promising. We had the financial resources and continue -- to continue our growth and intend to do so. Albeit on a tempered basis until we have better clarity as to how 2009 unfolds. Our first quarter 2009 EPS guidance range of $0.60 to $0.70, this is consistent with our historical quarterly earnings percentage distribution and the fact that our first quarter earnings are usually lower than the fourth quarter of the previous year. Our Q1 '09 guidance is down from the first quarter of last year as we expect declines in operating income from inspections, Subsea products and MOPS operations. These declines are forecasted to more than offset the higher profit contributions from our ROV and Subsea projects.

In summary our record results continue to demonstrate our ability to generate excellent earnings in cash flow. We believe our business strategy is working well over both the short and long term. We like our competitive position in the '09 oil field service market. Our technology gives us the ability to prosper in what we believe will be a challenging year. We are leveraged to what we believe will be an inevitable resumption in the growth of Deepwater and Subsea completion activities. The longer term market outlook for our Deepwater and Subsea service and product offerings remains promising. We continue to believe we are in one of the sweet spots of this secular up cycle. 2008 was our best year ever, we are well positioned to have another year of substantial earnings performance in 2009. We appreciate your interest in Oceaneering and will be happy to take your questions.

(Operator Instructions) As a courtesy to others we ask that you please limit yourself to two questions and then you are free to reenter the queue for an opportunity to ask more. Your first question comes from Jim Crandell with Barclays. Your line is open.

Okay, thank you, good morning.

Good morning.

Good morning.

I sense you've -- you've -- have altered your views on the market, not just over the last quarter, but over the last month. Have you become, I guess, more cautious on the earnings outlook for all five of your business segments over the past month? And I guess how would you characterize your thinking on how your view has changed towards the likely profit outlook for your businesses just recently?

I don't know necessarily over the last month, Jim, but it does seem like almost in the last -- every month, or the -- just oil prices continue to slide lower, that the outlook gets a little bit worse. We're now seeing, I guess, a few mid water floater or two, that doesn't have a job, which we didn't see a month or so ago. So, I wouldn't say it's drastically different, but it just seems to me that there hasn't really been any good news in last 90 days and just continues to slide a little bit south all the time, although not drastically different than what we've been thinking.

So, yes, I think, yes, we are a little bit more cautious, because I mean, as Jay said, we really haven't seen any good news, Jim. It just seems like its all been -- and we do read what the analysts write. And it seems to be very cautionary. So, I think it's prudent.

I mean -- its amazing that three, four months ago, we thought the $70 outlook was a reasonable basis to make a forecast and clearly that's changed dramatically since then.

And Marvin, if you're reading what the analysts write, thats why you're probably confused.

Let me share with you a story, Jim. When we asked our -- one of our operating guys what scares him the most, his answer has been, talking to you guys because we don't see it in the operating markets that are existing today what you're wondering and worrying about.

Maybe you guys are scaring us too.

So, yes -- but we are a little bit more cautious.

Okay, I just had a couple of specific questions. On the ROV side, it appears you're seeing more vessels in service and the implication is lower utilization and lower average pricing at least in the quarter. Is this -- is there any sort of reading into this? And I ask the question because you did allude to possible pricing pressure in the ROV market, Jay.

I think that pricing difference really relates to currency issues. You know we have a big operation in Norway, and smaller operation in the North Sea and that currency change has resulted in lower prices in those sectors. We -- it's not the result of any lowering prices in 2008.

And I think there's been a change -- a slight change in mix to where we've had more increased drilling days in the fourth quarter, relative to -- I mean our mix right now is 69/31. It had -- we had slightly more construction work and that always reduces the day rate. I mean, as you noted also, though, I mean, the operating income margin was unusually high, because of good cost controls as Jay indicated.

Okay, but on a good forward basis, would you expect pressure on ROV rates from rigs going idle and a more competitive situation?

Well, you know, one of the things on the rigs going idle, if the rigs -- well, on the -- with regard to pricing in general, while we do have customers asking for discounts. We do have -- we are asking for increases in many cases. The personnel prices have gone up, and some of these new rigs, new equipment is going out and its getting in some cases higher prices than older equipment works. So, it's a complete mix. We're in discussions with clients about, you know, their requests for rate reductions and in some cases, we're asking for rate increases. So, there's full discussions going on, but we really don't foresee an over supplied ROV market in the near future.

My last question Jay, and then I will ask these questions together about the Subsea products and if you could address them. Could you discuss whether you think there's any change in the way the umbilical business is done? To what extent are you seeing the bundling up umbilicals with trees, what this means for Oceaneering and can you also comment on whether you think you kept your share of the market in 2008 and what the magnitude of the price competition is to win some of the big umbilical jobs that are out there?

Sure, Jim. With regard to bundling, I don't think that has changed any. We always are up against some competitors that do bundle and so I think that has not changed. That's part of the market that we face all the time. With regard to market share, the requested information shows that we increased our market share from 20%. These are awards made during the year from 20% in '07 to 31% in '08. So, I think we did gain some on that basis. And with regard to pricing pressure, there certainly is some. The umbilical market is very competitive right now. And so, you are quite accurate that that is true.

And can you give us some sense, Jay, is the magnitude of the pricing pressure on some of the bigger jobs in terms of a range in percentages on what you're having to discount to win the jobs?

No, I really would rather not comment on that, Jim, sorry.

Okay, thank you very much.

You bet.

Bye-bye.

Your next question comes from Kevin Pollard with JP Morgan. Your line is open.

Thanks, good morning.

Hello, Kevin.

Hello, I wanted to ask you a little bit about the -- more about the product side of the business. Your guidance is for flat operating income, but it sounds like you're kind of expecting the revenue to actually decline and the cost cutting to offset that. Is that a fair interpretation of your comments?

Well, that's true. I mean, we -- we're saying we are trying to achieve flat results, clearly if revenue goes down and the margins need to come up a little bit. If we can keep revenue up and we can make it with flat margins. So, some combination of revenue and margins, we are telling that our expectation is for flat results. So, we are doing a lot of things to reduce costs and increase efficiency which should lead to higher margins and which should protect us against some revenue decline, but we are working both sides of that. But somewhere in there, we -- I guess, our expectation is for at least flat results.

Okay. And your guidance is on -- you know, range is pretty wide, which I think is understandable, given the current environment. Would you say that the big swing factor in that wide range in your guidance, comes from the most part from that product side of the business and how that unfolds as the year progresses?

I think that certainly is an area that has the most swing possibility and I guess also our Gulf of Mexico project business certainly has a possibility of wider swings as well, given what pricing might turn out to be in that industry.

You know, given the lack of visibility, Kevin, into the second half, I think -- you know, I just want to underscore exactly what Jay said, because of the size of products. We -- we had that sentence in there that further delays would dampen our expectation and that causes us to be prudent and give a wider range, and I think the other is -- exactly as Jay said, Gulf of Mexico project work in the second half.

Okay. And last question, have you been -- I know you've been cutting, you know, costs pretty aggressively on the umbilical side of the business and products. Have you been doing anything on the OIE side either?

Only minor adjustments, as -- you know, each one of those business segments is different. But in some cases, we have -- not good backlogs. And -- so anyway, we're trying to make sure that each business is sized to the business that we actually do have. So, we have not seen the need for significant changes in that, although that we have had some smaller changes.

Okay. And Marvin, could you just give me that CapEx figure for '09 again. I'm sorry. I missed it.

It's $175 million.

Okay, thanks. Thanks a lot, guys.

You bet.

Your next question comes from Chris Glicine with Simmons & Company. Your line is open.

Thanks, good morning, guys.

Good morning, Chris.

Good morning.

The first question is, where do we stand today in terms of Gulf of Mexico hurricane repair work? In terms of how much is left, do you think, and how much opportunity is still there, you know, say, for first six months of this year?

I would say we -- we are involved in some of that repair work in the first quarter, but then we see it tailing off throughout the rest of the year. But, you know, some of it is longer term. It will take, you know into -- certainly in through the summer and so forth, to work on some of that work. So, I would say, you know, first quarter ended -- some tailing off into the second quarter, we should get most of it done. But, you know, there are still tails of work to be done from previous hurricanes in prior years. So, some of these things -- most are short term but there are some longer term projects.

Okay. And then switching to ROVs, do you anticipate given -- with what you ENP companies are doing budget wise, do you anticipate a greater shift towards dilling from here or maintenance and construction at this point?

You know, it looks like our growth is now more predicted to be in the drilling side as we see these new rigs coming out and so far, I don't see that the number of boat jobs increasing quite in proportion to the number of rigs for '09 and early '10. But the -- on the other hand, the vessels are a little harder to predict, and that tends to be shorter term as well. So, sometime vessel jobs show up without much warning, whereas rig jobs you can see two or three years in advance. But I would say as you saw this year -- this quarter, the mix moved towards drilling and I would expect that to probably go a little bit further over the next couple of quarters.

Yes, I think as Jay said, Chris, in the opening remarks, that we secured 22 contract commitments for our 2009 anticipated ROV additions, and 18 of those are expected to be in drill support service. So, I think that's directionally where we see it right now, but as Jay said, vessels are a little harder to forecast.

Okay. That's helpful. One final, if I may. Have you begun to think about 2010 in your preparations for unit additions on the ROV side.

Oh, sure. We -- you know, we're looking out at least two years on the ROV build program, and you know, we're trying to win those jobs and plan for those -- that utilization, trying to look to see what might roll-off of other jobs, so we're doing that simply on a monthly basis, looking two years ahead. So, we're quite involved in that.

Okay, thank you very much.

You bet.

Your next question comes from Joe Gibney with Capitol One. Your line is open.

Thanks, good morning, everybody.

Hello, Joe.

I wanted to circle around a little bit on the product side. I was curious if your could you give us an update on where we stand on some of the BOP control systems and what development costs we run through there, at those systems? (Inaudible) been shift to kind of what the status is there?

Our first two systems are on rigs. The rigs haven't quite gone to work yet so that's the status on the first two jobs. We are working on two other jobs that will both be delivered this year. I think we are pretty much through the -- we are through with the development costs that really hurt us last year. And moving towards, you know, a product that's designed and we're looking for other jobs that we can -- that we can sell now given that we've developed what we think this is a really great product. So, it costs us more money to develop, and it took us longer but we think its a great product and we are out in the market trying to sell it right now.

Okay. And just a little charity on the first quarter guidance, on the MOPS side in particular. When does the producer roll off or has it rolled off? I think you'd previously characterized this as roughly 10 million year-over-year change in MOPS in the income side with these producer rolling. Is that still fairly accurate way to look at it?

Yes, that's correct. We are confident that it will work through March.

Okay.

Which is not very long from now, of course, but it could continue to work a few more months after that, once it finishes that job, there will be some pail on that, for (inaudible) field cleanup, but then it will be stacked, I believe, and while we are looking for some other jobs, I wouldn't think that it would work '08 it would -- I mean in '09, it would be '10 before it would go back to work if we find another job for it.

Okay, thats helpful. And then Marvin, just one for you, just relative to some of debt maturities this year, how should we be thinking about this roughly $105 million that you've got scheduled to mature this year in terms of the timing of payback. More (inaudible) half waited or general expectations there.

It's all due, Joe, in September.

Okay.

We have the ability to prepay the $85 million under the 364 day facility and it has gotten a little higher interest rate associated with it. A little higher spread over LIBOR. It's LIBOR based, its short term so it's pretty low interest rates right now, but that's what we'll be doing with our cash. And sure enough our balance sheet, reducing our leverage and waiting to see, you know, how the year unfolds, but the maturities come in September, in the third quarter. And as Jay said, right now we've got 105 coming up in maturities. We've got 196 available in -- you know, we should have $300 million of cash. So, if you take the $500 million, if you add the 196 plus the 300, and you subtract from it 175 of CapEx and 105 from debt maturities you see that we just do not have a liquidity issue.

True.

The revolver is not due until --

The revolver is due in 2012. And -- I mean, there's a good likelihood that the banks will be willing to extend a 364-day facility but we really just don't see the need for it right now.

Got you. Appreciate it guys. I'll turn it back.

Your next question comes from Victor Marchon with RBC Capital. Your line is open.

Thank you, good morning.

Hello, Victor.

Hello, Victor.

The first question I have, and I apologize if I missed this, but you guys had said how many of your 2009 ROVs already have contracts, what was the number?

We said 22 have commitments and we expect to add somewhere between 24 and 30 during the year and of the 22, 18 are going on drilling rigs or in drill support.

Okay, thank you for that. The second one I have was just on projects. I just wanted to see if you guys can talk about potentially additional international opportunities knowing that you have the performer in West Africa and your comments just regarding the market this year in the Gulf of Mexico. I wanted to see if there was an opportunity to move addition assets out of the Gulf, if there were any opportunities?

I would say at the moment we're planning to keep our -- the fleet we have in the Gulf for the rest of the year. We do look around for other opportunities, but I'm not anticipating that we'll move any of our equipment out to the Gulf this year. And while we say we think there's more competition, becoming more competitive in the Gulf, so we think we will achieve reasonable utilization this year and have another good year, although not quite as good as last year. So, we like the Gulf of Mexico for our services.

And last one, just Marvin on the CapEx question, how much of that is maintenance versus growth? Do you guys split that out?

Well, yes, we do. Well, notionally we expect to spend -- in the 175, we would expect to spend $30 million of maintenance CapEx. And that really depends. I mean, maintenance CapEx really depends a lot upon the market and the utilization of our assets. So, in a good market, we'll spend $30 million or so, and in a tighter market, we will be able to reduce that amount because if you've got equipment that is being stacked, you don't spend a lot of money maintaining it, unless you have an opportunity to put it back to work.

Great. That's all I had. Thank you guys.

Your next question comes from Joe Agular with Johnson Rice. Your line is open.

Thank you. Good morning.

Good morning, Joe.

I want to ask you a question on your guidance for 2009 of $3.00 to $3.60 and specifically the comment that you all make on the Subsea projects and potential development delays. Is that what would -- you know, if there are delays would push it more towards $3.00? Or -- you know, I guess I'm trying to get at is some your thinking of what's at the top and bottom end of that range?

Alright, well, I think we -- as we've said, if we get more delays of projects, particularly, I guess in the North Sea, smaller independent umbilical -- pull smaller jobs and those umbilicals don't get ordered, that could certainly reduce our outlook. General delays of Gulf of Mexico-type projects where we sell OIE, where we rent and sell products and services for Deepwater Gulf of Mexico, those things get more delayed than we see at the moment. So, I think that creates some -- some of the downside and as we mentioned earlier, just the second half of the year, the Gulf of Mexico project market, we don't really -- that's not a business that has long-term backlogs. So, a few months ahead is about as far as we usually can see, and so if that market were to slow down more than we forecast, to be more competitive -- yes, so that's a kind of thing that could happen. You know, we're chasing some big orders in multiplex. If those big orders were to be delayed, you know that could have an impact on us as well.

Okay, so, those -- but those are the things that would push you towards that $3.00 number, I guess is --

That's correct.

That is the -- you know, what -- what we said is that ROVs are going to be up. Inspections are going to be down, primarily because of currency. MOPS is going to be down because of the ocean producer contract going away. But all of that is sort of small compared to the variability of products and then the second half of projects.

Right. Well, I just wanted to make sure I was not misreading something there that that could change to $3.00 to $3.60 range. But what you're saying is that that's sort of the low end boundary.

That's what moves us along that range and that's why the range is a little bit larger, but I mean if you look at the midpoint, as a lot of you have a tendency to do, then it's really is 10% up or down.

Correct. Okay. Another question, maybe a little bit minor, I guess, but in the ROV side, do you all have any number of ROVs going into production facilities this year?

Like on a spar?

Yes, don't you all sometimes get contracts?

We do -- well I think -- I can think of one that we have going on to a spar. It could be another one or so. But yes, absolutely. We do that and -- yes.

Okay.

At least one I can think of, yes.

Yes, okay. That's it for me. Thank you very much.

Thank you.

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