Oceaneering International Inc (OII) 2009 Q1 法說會逐字稿

Good morning. My name is Marlene, 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)

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

Good morning, everybody. I'd like to thank you for joining us on our 2009 first quarter earnings conference call. As usual, the webcast to this event is being made available StreetEvents Network Service by Thomson Reuters. Joining me this morning is Jay Collins, our President and Chief Executive Officer, who will lead in 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 earnings guidance, business strategy, plans for future operations, and industry conditions are forward-looking statements made pursuant to the Safe Harbor provisions that the Private Securities Litigations Reform Act of 1995. And 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 of EPS of $0.80 were above the guidance range we gave last quarter and better than last year's first quarter results. This is a tribute to our business focus on Deepwater and Subsea completion activity and our expertise in underwater platform and pipeline repair.

This performance was particularly gratifying giving the sharp downturn in market demand many companies in the oil field service industry are experiencing. We raised the bottom of our previous 2009 EPS guidance range by $0.10 to account for our excellent performance in the first quarter, resulting in a range of $3.10 to $3.60.

Much uncertainty remains in predicting the rate of Subsea field development order flow for the balance of this year, which includes demand for ROV construction support services, the timing of subsidy hardware orders, and requirements for our Deepwater vessels installation services. Given our first quarter performance and outlook for the rest of the year, we're now anticipating that our EPS in 2009 will not follow our historical quarterly pattern. Instead of our Q1 being in the 17% to 21% range as it has been for several years, we expect it'll be in the range of 22% to 26% of our 2009 results.

It is customary in determining our earnings guidance we consider many factors, including the reduced market demand for many of our services and products with a notable exception now of the requirements for our ROVs and pricing pressure we're experiencing from customers and competitors. Despite these headwinds, Oceaneering is positioned to prosper in 2009.

Although not immune to the slowdown of industry activity, we believe that Deepwater markets we serve will be among the least vulnerable to our customer's exploration and development spending cuts. I believe it is based on the inherent side and long term nature of Deepwater project that our expectation to oil prices will inevitably rebound to a level that will make these projects economical.

While work on most authorized Deepwater projects has and is likely to continue, the urgency to start on new projects remains in question. In fact, they've already been announced, with some planned Deepwater projects being cancelled or delayed beyond 2011. While project delays are generally not good news, the scenario unfolding may actually prove to be beneficial to us longer term as our customers are reportedly changing the field architect on several of the delayed Deepwater project from standalone developments to Subseas tie-backs.

Our record first quarter EPS of $0.80 were attributable to achieving ROV and Subsea projects operating income performances that surpassed our expectations. ROV results for better on exceptional execution, which resulted in lower than anticipated operating expenses. Subsea projects exceeded our projections as a result of performing more Deepwater installation works and shallow water diving projects on hurricane damaged facilities.

Year-over-year, ROV operating income increased to 18%, which was accomplished by improving our average operating income per day on hire by 10% due to better operational execution that resulted in the decrease in cost per day on hire and growing our days on hire by 7%. Sequentially, ROV revenue and operating income declined due to customary seasonal reduction in demand for construction support services.

Operating income margin during the quarter was 31%, compared to 29% of year ago, 33% last quarter, and 30% on average last year. There's no trend story here as our quarterly results for ROVs do fluctuate for a variety of reasons, as much as 4% at any given year. We're still anticipating a flat to down ROV margin performance for the year 2009, compared to 2008.

Our fleet utilization rate during the quarter was 80%, unchanged from the first quarter of 2008, which in both years was attributable to a slow start to the construction season. For the balance of 2009, we expect to achieve quarterly fleet utilization in the low to mid 80% range. During the quarter, we added six systems to our fleet, and as of the end of March, had 233 systems available for operation, up from 212 a year ago.

Our fleet mix during March was 70% in drill support and 30% in construction and field maintenance, about the same as in December 2008 and compared to a 65/35 mix in March of 2008.

Our Subseas product segment revenue and operating income were lowered in the first and fourth quarters of last year. Operating income margin was comparable in all periods.

Year-over-year and sequentially, the revenue declines were largely attributable to lower umbilical plant throughput. The operating income decline was largely due to the OIE product mix. To a lesser extent, umbilical operating income also declined, but not commensurate with the reduction in revenue.

Compared to 2008, we benefited from reducing our labor force at our Scotland and US plants, and did a better job of controlling costs and executing the jobs we did perform. We have adopted lean manufacturing practices, which focused on reducing costs by intently scrutinizing our operating efficiency. Examples include, reduced manning requirements, shorter job start up times, and better link measurement to lower material scrap costs.

At the end of the quarter, our products backlog was $282 million, down from $298 million at the end of 2008, primarily due to a lower umbilical backlog. Discussions with our customers indicate we should see an improved order flow rate for the balance of 2009 and perhaps beyond. Pricing, however, is expected to remain very competitive until a substantial amount of industry wide umbilical manufacturing capacity is utilized. Predicated on our ability to timely secure additional orders, we're hopeful that we will achieve substantially improved results for umbilical operations in the second half of 2009.

As expected and discussed at our last earnings conference call, our Subsea projects quarterly operating income performance improved year-over-year. This was attributable to higher demand for our shallow water vessel and diving services, which was mostly a result of platform and pipeline damage caused by Hurricane Ike. Increased requirements for our Deepwater vessel utilization services and lower vessel dry dock expense.

During the first quarter of 2008, four of our vessels were dry dock for part of the period, compared to one in the first quarter of this year. Sequentially, Subsea projects operating income declined due to normal seasonal decline in demand following an exceptionally good performance in the fourth quarter of 2008.

Year-over-year, inspection service and operating income declined due to a stronger US dollar relative to the British pound and lower service demand in the North Sea. Operating income margin improved slightly due to a favorable change in service mix on work performed in West Africa. Sequentially, inspections revenue declined due to a stronger dollar relative to the pound and lower service demand in US Gulf of Mexico on facilities exposed to Hurricanes Gustav and Ike.

Operating income margin improved due to a favorable change in service mix on West Africa work and our ability to reduced our overhead expense to this geographic area. As of the top $5.7 million impairment charge we recorded in the fourth quarter of 2008 are maps operating income here in the quarter was basically flat with the first and fourth quarters of last year.

In summary, we achieved record first quarter results and are looking forward to realizing another year of substantial earnings performance in 2009. Our focus on providing products and services for Deepwater and Subsea completions positions us to participate in a major (inaudible) of growth trend in the oil field services and product industry. We are pleased with our cash flow generation capability as demonstrated by our 98 million of EBITDA during the quarter. Our liquidity situation remains strong and actually improved to as we prepaid the portion of our 2009 debt maturities. Our balance sheet remains in great shape.

As I stated earlier for 2009, we are forecasting EPS in a range of $3.10 to $3.60. Compared to 2008, our forecast assumptions are that we will achieve profit growth from our ROV business and experience declines in operating income from the rest of our oil field service operations. While we are achieving efficiency gains and our Subsea products manufacturing processes, these will likely not offset the anticipated 2009 demand declines for our product lines. We anticipate flat to down margin percentages from all our business segments.

Our ROV business are in 53% of our operating income in Q1, compared to 48% Q1 of last year, and 47% for all of 2008. This is consistent with our expectation that ROVs for the year 2009 will contribute a larger percentage of operating income than in 2008.

We still anticipate adding 24 to 30 vehicles to our ROV fleet in 2009, 18 to 24 during the remaining three quarters. And we have contracts for 22 of these. I believe we are well prepared for the challenges we face in 2009. We're focused on cash flow generation and cost control, and have already taken actions to right-size our work force where needed. We are intensifying our efforts to improve business processes and the effectiveness of how we work.

Looking forward, we see specific signs of a healthy deep water in Subsea market that will drive demand on a concurrent or delayed basis for our products and services. As of the end of March, over 95% of the existing 220 floating rigs in the world were under contract. Over 85% of these are contracted through 2009 and more than 60% are contracted through 2010.

Ninety-one floating rigs were on order and scheduled to be delivered for 2012 and 63 of these have been contracted longer term, for an average term of over six years. Petrobras also announced earlier this month their intention to tender for 28 additional new built floating rigs for deliveries commencing in 2013.

ROV contracts have been let on 25. There are 91 rigs on order, and we want 15 of them to provide 60 ROVs. We currently estimate that 24 rigs will be placed in service during the year, of which two went to work in the first quarter, and we have ROV systems on both of them. On the remaining 22 rigs, we have ROV contracts on 16 of these rigs to provide 17 vehicles.

Given the current macroeconomic environment, it is still quite possible that some of the new rigs currently on order may not be built. In fact, construction has not yet started on 34 of the 91 rigs on order as of the end of March. Assuming that 20 of these rigs will either be delayed beyond 2012 or canceled, we are still talking about 71 rigs to be added to the current floating fleet of 220, representing growth of over 30%, a growth of 160% in the High Specification fleet, which currently totals 44. This is the ROV service market we dominate and currently believe we are in the pole position to safe majority of this growth opportunity.

In addition to the current rigs being built, an international ship broker reports that about 210 Subsea support vessels are under construction with anticipated delivery dates by the end of 2011. Of these, we estimate that a minimum of 145 will likely require at least one ROV each.

While our ROV business represents our single largest near-term growth opportunity, we lack our position in Subsea products as well as our other business segments. With our existing assets, we are well positioned to supply a wide range of the services and products required to support the deep water exploration development and production efforts of our customers.

We believe Oceaneering's business prospects for the longer time remain promising. We have the financial resources to continue our growth and intend to do so, be it on a tempered basis until we have a better quality of how 2009 unfolds. For the second quarter of 2009, we are projecting EPS in the range of $0.75 to $0.85, down from last year's second quarter results and flat with our first quarter of 2009. Year-over-year, we anticipate our ROV operation will achieve higher operating income, but not enough to offset expected lower profit contributions from our other oil field business segments.

Sequentially, we anticipate quarterly operating income improvements from ROV and Subsea products; ROVs due to an increase in fleet days on higher as we benefit from seasonal pickup in demand for construction work and from new vehicles being put in service, and Subsea products on the strength of higher sales of OIE specialty products. Sequentially, we expect flat to down margins -- flat to down profit performances by Subsea projects, inspection, and MOPS. AdTech is anticipated to be up.

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 long term. We like our competitive position in the '09 oil field service market. Our technology gives us the ability to prosper in what is a challenging year.

We are leveraged to what we believe will be an inevitable resumption in the growth of Deep Water and Subsea completion activity. A longer term market outlet for Deep Water 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, and we are well positioned to have another year of substantial earnings performance in 2009. We appreciate your interest in Oceaneering and now we will be happy to take your questions.

Marlene, we are ready for the Q&A now.

(Operator Instructions). Your first question comes from the line of [Eric Patmon]. Your line is open.

Hey, guys. Great quarter.

Thank you. Good morning.

Morning. A couple of quick questions for you on Subsea products. First, I was hoping that you could give us just a rough breakdown of order intake in 1Q products and between Multiflex and OIE.

No, I'm sorry we just don't give that breakdown. As you can see, our back log was down about 5% over in total. So, I think we'll just leave it at that.

Ok. That's fair. So, we're also hearing that there are a lot of these - a lot about these upcoming Petrobras tenders for Subsea trees and manifolds some time in May. Can you talk about potential near-term umbilical orders maybe associated with these tenders and then more generally about the opportunity for Subsea products in Brazil?

We see Brazil as an excellent market going forward, probably the fastest growing place in the next five years. And we think the demand for umbilicals there will be very strong. We are working with Petrobras on potential orders and we have a plant that's in Brazil basically designed to work for Petrobras so they are a primary customer. And we think they will have significant later in this year and for the next several years.

Okay. Thanks so much.

Your next question comes from the line of Chris Lasine. Your line is open.

Thanks. Good morning.

Good morning, Chris.

First question is - I was wondering if you could give us a little color looking at product back log and order intake. Do you have a general figure as to what you expect in yearly order flow?

No, I'm sorry. I really don't keep up with that number. We try to keep up with back log but we don't really project order flow as such. I think we did say that we anticipate back log improving throughout the year, but I don't have a number for you.

OK. Along similar lines, revenue out of back log. How would you expect to progress over the year or just for the year in general?

We only do that analysis that you're talking about Chris, once a year. And we don't do it at year end. I'd have to go back and double check, but I think the number was 90%.

90%..

Our year-end back log is expected to be booked in 2009.

Okay. And then switching to ROVs, was the sequential decline in implied day rate -- was that a factor primarily of foreign exchange?

And job mix.

And job mix? And would you expect that as you see some of these new units come on over the course of the year, are they coming on at higher pricing than what we're seeing now?

I don't think we really want to go in public. We've said over the year that our outlets for ROV business through the year was predicated on increase in days on hire.

We really don't comment on specific contracts, whether they are for new build rigs or for existing work.

I would say that it currently is generally true that the newer contracts have -- generally newer bigger higher spec equipment which would have higher day rates. And then also just to make a point about -- we do get higher revenue per day on construction jobs, which were down in the first quarter, compared to maybe the second or third quarter. And so, that does affect the mix. Hopefully, that answers the question.

Yes. Thank you very much.

The next question comes from the line of Neal Dingmann. Your line is open.

Morning, guys.

Morning, Neal.

I was wondering, on the guidance that's out there, is most of that just already ingrained as far as back log and sort of contracts that you've already seen or just sort of getting the sense of -- you've given pretty good color as far as what you expect on the ROVs, products, projects, et cetera. I just wonder how much sort of assumptions you based on that, if that's possible?

Well, I can't really give you a sort of risk-adjusted really is what you're looking for, Neal. And I would say that a lot of our work is booked and built as we go along. A lot of our service work is a call-out basis so by no means is anything a given. We have a lot of jobs to do during -- for the remaining part of the quarter. So, I would say it's not any more than our normal risk. But I certainly wouldn't tell you that, 'Hey, the second quarter's in the bag'.

So I think we have a lot of work to book and execute. But we're not just stamping out widgets. We've got lots of interesting things happening and a lot of jobs to book and build for the remaining quarter. But this is the normal way that we operate.

Got it. Then a follow-up on the projects, Jay, what did you say or have you said as far as dry back going fourth for the remainder of the year -- have you -- will you announce that? What does that look like on--

We only have the one dry back this year, there's nothing else -- no other dry back happening in this year.

Okay, perfect. Thanks, guys. Great quarter.

You bet.

Your next question comes from the line of Stephen Gengaro, your line is open

Thanks. Good morning, gentlemen.

Good morning, Steven

Good morning, Steven.

A couple of quick things. The first, when you -- talking about Petrobras and the umbilical side, do they -- on the umbilical side, do they have the same constraints on local content as they do with Subsea trees. I think they do. Is that correct?

I'm only sure the tree market, Petrobras there are several umbilical manufacturers in Brazil and they provide by far the large majority of umbilical that are sold the Petrobras by -- but not all of them. So Petrobras team has the ability to buy outside the country whenever they want.

Okay. Okay. That's helpful. And then I think you mentioned in your prepared remarks that you have won contract on 15 of 25 rigs, which have been -- which has been left so far, is that right?

On remaining new build rigs that have not yet been delivered.

On the remaining 22 rigs that haven't been delivered this year, we've contract from 16 of those rigs and we'll provide 17 vehicles on those 16 rigs. That's correct.

Okay. Okay. And then on the contracts, you said -- I think you said you have 22 contracts on our list. Is that for the four year or is that of the 18 to 24 that are going to work over the next three quarters.

Ask that again, Steven. I'm sorry.

You've said that you had 24 to 30 ROVs that we're being delivered this year into your fleet, 18 to 24 over the next three quarters. But then you mentioned you have 22 new contracts? Is that for the next nine months or is that a full year '09 number?

That's on the next nine months.

Great. Okay. I just wanted to clarify.

And Steve, you were correct that we did say and is true that the 25 rigs that -- out of the 91 that have ROV contracts let, we won 15 of those to provide 16 ROV.

Great. Okay and my question were going to be around that point and that is, is the trend negative? It sounded like you were way ahead of the game and that number seems to be more -- more reasonably down to your traditional market share. People have been getting more competitive on price, should we read anything into that or just kind of -- sort of a normal vacant of market share.

Well, I think the key thing to know is that four of these jobs were in the Brazil where we traditionally had about a third of the market share. And we've won about half the jobs in Brazil for new rigs as opposed to the high percent that we've had in the rest of the world. So our key to -- no. I'll give you another number. On accumulative total of all the new bills since we started in 2007, we've won 30 out of 40 or 75%. And in Brazil, we won half the year working in Brazil.

Good. That helps clarify --

And just to add to that and we've won 80% of the rest.

I think Steven had it exactly correct. It is part of pricing pressure and it is normalization of market share. When you start out betting a thousand, you don't really don't expect to end the season that way.

(inaudible) make sense, I just wanted to understand --

Yes, particularly in Brazil (inaudible) matters most.

Very good. Now, that does help, thank you.

You bet.

Your next question comes from the line of Joe Gibney. Your line is open.

Good morning, everybody.

Good morning, Joe.

I just want to follow up a little bit on the lack of seasonality -- your comments there about a little bit of shift from your typical seasonality in particular on the project side, you estimated that it will down a little bit in the second quarter. You see a little bit of the seasonality up take in terms of the utilization of the gulf. Just curious what the -- for what is the shift I guess this year versus your typical seasonal pattern that has changed?

I think the main thing is the extraordinarily good first quarter, we did have Hurricane Carrie [ph] overworked and we had almost 80% utilization in the project business which is a very high number for the first quarter. So I would say we just had an extra ordinarily good first quarter and some of that related to the carry-over hurricane work.

And in respect to ROVs, we don't count on having always lower than anticipated daily operation cost. So I think the exceptional performance by the -- exceptional execution by the ROV group -- additional hurricane work and high utilization of our gulf and Mexico vessels as well as -- we just had a very quiet, very good quarter and we don't expect to be able to maintain that consistently. It was above average performance in Q1.

Okay that's very much appreciated. Anything new on the map side development to the ocean producer roll-off, what is the timing specifically of that and any incumbent [ph] outlook for work there in the back after year?

No, nothing to comment there, we are clearly coming into the end of that contract and I've nothing to report about future work.

It would be highly unlikely that it would rollover from one contract that has been on for seven years and go to another contract without a serious retro fit.

Sure, understood. And allows us (inaudible) for use, thinking about the remaining debt pay down here, you said you prepaid $25 million in the quarter, how should we think about, I guess (inaudible) that pay down $305 million schedule to mature this year and radically throughout the year is the best way to approach it?

You know it really is -- yes, we expect with our cash flows to be able to pay that down. We're not going to wait till September and hold cash until that debt is due. You did see any increase in our cash balances from 1231, but I expect we are going to play it conservative and look at our cash flow forecast and pay down debt when we think that makes the most sense. Hold cash when we see liquidity issues like bills coming up so we think that our debt is going to rapidly go down (inaudible) near.

Okay. Thanks guys, I appreciated it.

Your next question comes from the line of Brad Handler, your line is open.

Thanks, good morning.

Good morning Brad.

Could you guys just speak please more to the Gulf of Mexico and the hurricane recovery. What's the Q1 may have -- (inaudible) the Q1 may have a little bit stronger than you thought it would be three months ago or four months ago. What --tell us a little bit what happening now in the field?

I would say we have competing forces, on the one hand we have more vessels competing and it is highly competitive market, but we do have hurricane repair work and salvage work that is left over from the last hurricanes, and if that will continue through out this year and into 2010. So we have the tail of the hurricane work, but we also have a generally increasingly competitive market.

That's helpful. So that sound like maybe there was ultimately there's more work on the repair side than you were thinking awhile ago, is that fair?

I think that's probably about to view -- usually we're busier than we thought -- it's kind of hard to judge -- you there's a lot of pipe forms got damaged, but it's not quite sure when it will fly out and when we'll do it and how concentrated it will be, but (inaudible) produce how utilization for us and out. (inaudible) there ours to major project out there that we're talking in quiets about that we'll go on some period of time.

And I think we captured the lines this year of the work because of our ability to do this underwater specialty jobs, so we had a better first quarter and as they said it is going be tougher to repeat in Q2 because of competing forces and the work is declining as we completed.

Okay, so it is rolling off and there's more vessels working (inaudible) down the rest of the --

Right you got it.

I guess this is unrelated follow up, it's witching gears to your activities and West Africa, I guess you mentioned (inaudible) mix on the inspection side, but can you just fill in a little bit what do see there, how's visible is work through the balance of 09 there and (inaudible)

Africa business seems to be pretty steady at the moment. There was some growth continuing there, but I would say it's not moving like Brazil as of the moment. The inspection change was we exhibited our manpower related business that was relatively low margin and we're able to eliminate some overheads and so that was a better product mix for us. So that's what was happening there. Otherwise, I would say it's a good strong market, but not a boom at the moment.

Okay that's helpful, thanks guys.

Your next question comes from the line of Joe Agular, your line is open.

Good morning.

Good morning Joe.

I just want (inaudible) that the orders, I know you don't want to get in the numbers necessarily, but could you maybe discuss orders in 2009 relative to 2008 overall? Are you expecting flat down? Up?

Up from what? This is Jack

Subsea products.

Well, okay. I think our call on that right now would be lower

Okay, and then just remind again sort of the lead time in terms of --between orders turning into revenues?

I'd say our thermoplastic umbilical -- we could start on a thermoplastic umbilical in probably 90 days from when we receive orders. Steel tube might be longer if we have to order the steel tubes. Clearly, on our ROE type work, we could start probably even smaller jobs -- even building -- making it even sooner. And of course some of our stuff is -- we can begin work almost immediately. I'd say the longer lead times would be steel tube jobs, which is probably getting to three, four, five, six months on some cases, and other things -- 90 days down to start work pretty quickly.

Okay. I'm just trying to understand it just because you get towards the back half of this year entering to 2010, potentially, if some orders do start to shake loose, how soon they could impact the -- impact your numbers in?

Hey Joe, I'm going to go ahead and clarify what Jack said. We expect revenues to be down year-over-year from -- 2009 will be lower in products revenue than 2008. Our order flow, I think we have a different view on -- we do -- I mean what Jay said in his opening comments is that based on discussions with customers, we are hopeful that we will see improved order flow and operating results in the second half of 2009.

So it is something that we are monitoring very closely because we know it can impact us reasonably quickly. Our booked-to-bills -- since on the big jobs we do percentage completion, it is as soon as we get -- I mean there's a time lag, A, after you get the order; and B, instructions that they are allowing you to commence production until the final design is -- specifications are satisfied.

So I'm going to say that we are hopeful that we're going to see an increase in order flow. And we know, and you know that we don't predict backlog anymore because it seems like there's been inexplicable delays in it. But I think we are more hopeful looking forward than we have been in the last two quarters.

That's interesting. Thank you, Marvin. One other question if I could. I don't know if you mentioned this, but do you -- have you all mentioned a number of ROV startups that you expect to have in 2010 from the new rig contracts?

No. We have not.

We haven't. We won't predict that number for a while.

Right. Okay. Thank you.

You bet. Any more questions?

Are we still live?

Your next question comes from the line--

Thank you. Okay.

Your next question comes from the line of Joe Agular. Your line is open.

Hey, Joe. You went blank on me there.

Hey, Marlene?

Yes, I'm here. Can you hear me?

Yes, we just talked to Joe Agular.

Maybe he had another question. Joe, do you have another question?

Your next question comes from the line -- sorry, he must have still been on queue. Your next question comes from the line of Brad Handler. Your line is open.

Thanks. I got back in queue.

Morning, Brad.

Hi, again. Maybe I could just ask you to follow-up on that last comment, you did say it, and we didn't really follow-up on it in our Q&A. But would you say that the discussions that are leading you to be more hopeful to the extent that you have visibility on the project, I guess? Is this a little bit of some of the logical catch up on the umbilical side relative to the trees that we've talked about so much? Or rather is it some optimism about the projects pursuing -- some new projects coming down the pipe that would be maybe counter to the pessimism in the market place?

I don't think we're breaking any new ground on the new projects starting up. I think this is just the lag of lack of orders in the past and the fact that the first quarter was potentially poor in booking umbilical orders. So I think there is some momentum building. Some backlog of orders to be placed and while we've been discussing some of these orders with clients we haven't got them to the finish line yet.

We continue to look out a year in advance and save about the same number of orders out there that we have for the last 18 months, maybe even two years. So when we have a particular low booking quarter like we have in the first quarter, we do think that there will be second -- the rest of the year will be better than that. But I think we're not trying to break any new grounds here.

And we're not trying to signal anything other than we are hopeful and we said -- we qualified that we could get better results predicated on timely securing these additional orders. So it's still and Jay was very clear on how competitive is the pricing is until a lot more of these over capacity in the industry gets utilized. But I think it is fair to say that we are optimistic.

Marlene, are you still there? (inaudible) Marlene?

Your next question comes from the line of [John Donnell]. Your line is open.

Morning, guys. Just want to circle back on the guidance update here. Given the better than expected results in first quarter and the prospects for potential better results in both of products and ROVs going forward, it kind of suggest that there might be some of a -- in order to get the downside of this guidance there will be -- there have some pretty steep decline in the other product lines and segments.

What environment macro-wise do you see that would take that -- have that happened? I know, originally that your $4 guidance was based on $70 a barrel -- per barrel oil and cutting it down to the rate from last conference call. And oil is more on the $40 range. Do you see -- there have to be big re-transmit in oil prices? Or is there something else that you're seeing that would potentially have some rifts to the downside of this guidance range?

John, I'm going to try that. One of the things that we -- we started at the very opening remarks about how much uncertainty remains in predicting the subsea field development order flow rate for the balance of the year. And that includes, as Jay articulated, ROV construction support, the timing of hardware, subsea hardware orders, and the requirements for our deep water vessel installation services. I think our range is very achievable in any kind of normal market.

We don't go ahead and tie our range to oil prices specifically like that one day, when we say was predicated on a $70 whole, we'd make poor dollars. We're not doing that now, and we're not looking at it. I don't think -- I mean, if all it takes is a few project delays and as Jay said, we don't bring these subsea hardware orders to the finish line. And you can see the lower end of it. We think we've framed it. And we think either end is possible at this time.

Okay, great. Thanks, guys.

You bet.

Your next question comes from the line of Stephen Gengaro. Your line is open.

Thank you. Just a quick follow-up and it's back to the umbilical question. You obviously -- the two years were disappointing, right, or poor perspective. Have you seen -- have you guys been able to explain it maybe better that you could over here because notice some we struggle with. And where these trees are being ordered? I know your market shares were real good last year. I'm just trying to get a (inaudible), Internally, you've kind of come up with maybe an answer.

I'm sorry. We don't have any better thought than we've had in the past. I think it does seem clear to us that as long as these field architectures keep changing at all, the umbilical will be -- were the last things ordered. But now, as we have people delaying and being very cautious on this startup on these projects, we added that into the mix as well. But sorry, we don't have any new great insights for you there.

But they still won't work without the umbilicals. We know that, right?

Yes. That's right.

Yes. Sooner or later we have to have umbilical.

Okay, thank you.

Your next question comes from the line of Victor Marchon. Your line is open.

Thanks. Good morning, everyone.

Good morning, Victor.

Just a question on the backlog. I want to see what you guys got to say just from an OIE perspective. You talked a lot about the multi-flex business, I just want to get a chance, as you progress to the year, how do you see the OIE order flow? Is it going to be more steady than multi-flex or is it a somewhat type of outlook where it's more like the second half of that where you start to see things pick up?

I'm going to say that has been a steadier backlog, overall. We have several businesses there that all contribute to that backlog. So I would say in tends to be steadier, but certainly not without risks, but not without opportunities as well. So while there's uncertainty there, it has less variation than we see on the umbilical side.

And usually, it is shorter term of book-to-bill. So if the order flow rate does have a hiccup yield more -- you'll see it quicker and the revenue recognition than in the umbilical was for longer term.

Okay. Thanks for that. And then, another one that I have was just on the producer. Did that contract end in the second quarter?

Most likely. It ends when the field runs out of oil. It's kind of on a day-to-day, month-to-month sort of rolling thing. And so, we really don't know -- we'll just get the call one day and say, it's over.

Okay.

We'd got it in our forecast ending during second quarter.

All right. Good day. Thank you, guys. It's all I had.

There are no further questions at this time.

All right. Well, thank you very much.

Take care, guys.

This concludes today's conference call, you may now disconnect.