Oceaneering International Inc (OII) 2009 Q2 法說會逐字稿

Good morning. My name is Christy and I will be your conference operator today. At this time, I would like to welcome everyone to the Oceaneering Second Quarter 2009 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. (Operator Instructions). Thank you. Mr. Jurkoshek, you may begin your call.

Thank you. Good morning, everybody. We'd like to thank you for joining us on our 2009 second quarter earnings conference call. As usual, a webcast of this event is being made available through the Street Events Network Service by Thomson Reuters.

Joining me today is Jay Collins, our President and Chief Executive Officer, who will be leading the call, and Marvin Migura, our Chief Financial Officer.

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 of 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 our call. It's a pleasure to be here with you today. Our second quarter earnings per share of $0.87 were above the guidance range we gave last quarter and better than our first quarter results. This performance was particularly gratifying at a time when other oilfield service companies have reported substantial sequential and year-over-year quarterly EPS declines.

We've not been immune to the slowdown in industry activity, and have taken proactive steps to align our cost structure in consideration of lower activity levels where appropriate. Consequently, our overall operating income margin performance of 16% was the same as last quarter and the second quarter of 2008. This consistent performance is noteworthy when some in our industry are experiencing significant operating income margin percentage declines.

Our better-than-anticipated second quarter earnings per share of $0.87 were attributable to Subsea Projects operating income performance that surpassed our expectations. This was the result of high demand for our deepwater installation and inspection, repair and maintenance services.

Year over year, ROV operating income increased 10% and set a record high for the second quarter. This was accomplished by growing our days on hire by 6% and improving our average operating income per day on hire by 4%. The daily profit improvement was achieved by our ability to control costs and excellent operational execution, which resulted in a decrease in costs per day on hire.

Sequentially, ROV revenue and operating income improved slightly as we put additional vehicles into service. We achieved a 2% increase in days on hire for our fleet and our quarterly average revenue for day on hire was flat.

ROV quarterly operating income margin of 31% compared favorably to the 28% achieved a year ago and was flat with last quarter. It now seems likely that we will achieve ROV operating margin performance for the year of 2009 comparable to 2008's average of 30%.

Our fleet utilization rate during the quarter was 80%, unchanged from last quarter and down from 84% in the second quarter of 2008. Year over year, we've experienced lower demand for ROV construction support services. For the balance of 2009, we expect to achieve quarterly fleet utilization in the 80 to 84% range.

During the quarter, we added six vehicles to our fleet and retired four. And as of the end of June, had 235 systems available for operation, up from 214 a year ago. Our fleet mix during June was 72% in drill support and 28% in construction and field maintenance, compared to 70/30 in March and 61/39 in June of 2008.

Year over year, our Subsea Products segment quarterly revenue and operating income declined by 30% and 39%, respectively, due to lower market demand for specialty subsea products and lower throughput at our umbilical plants. Sequentially, Subsea Products' financial results were essentially flat with the first quarter.

At the end of the quarter, our products backlog was $350 million, up from $282 million at the end of March, primarily due to two large umbilical orders we secured during the quarter. We've already commenced manufacturing product for the Petrobras award, and will start on the other in 2010 at our Panama City plant. We intend to make a separate announcement on the second contract when our press release draft is approved by our customer.

Competition for each of these umbilical orders was intense, and we expect pricing to remain very competitive on future contract awards until a substantial amount of industry-wide umbilical manufacturing capacity is utilized.

Our Subsea Projects second quarter operating income performance exceeded our forecast. This was attributable to excellent execution and higher demand for our deepwater installation and inspection and repair and maintenance services. Year over year, operating income increased on a rise in demand for our diving services. We achieved higher-saturation diving system use on hurricane damage projects and an increase in our service diving vessel utilization to perform routine inspection, maintenance, and repair work.

Sequentially, quarterly operating income and operating income margin improved as we performed more high-margin deepwater installation services on two large contracts we secured in 2008. As a final note about our Subsea Projects operations, given 2009's market environment, we think it's remarkable that this segment's year-to-date operating income was up 21% from that of 2008. We came within a few dollars of matching our all-time high in 2007.

Year over year, inspection revenue and operating income declined due to a stronger US dollar relative to the British pound and lower demand in the North Sea. Sequentially, inspections results increased due to seasonally stronger service demand.

In our MOPS business, we sold the Ocean Pensador during the quarter and received $7.2 million on its disposal. At the end of June, the Ocean Producer completed its seven-plus-year contract offshore Angola. We are presently receiving a standby rate and demobilization fee to disconnect the production facilities connected to the vessel and are evaluating the merits of selling this asset. We have no immediate job prospects for this MOPS unit.

The year-over-year and sequential quarterly decline in MOPS operating income was largely attributable to asset sales. In the second quarter of 2008, we realized a $2 million gain on the sale of the production barge San Jacinto, compared to an $800,000 loss on the Ocean Pensador sale this quarter.

In summary, we are pleased with our second quarter results and are looking forward to realizing another year of substantial earnings performance in 2009. Given our first half performance and our current outlook for the last half of this year, we narrowed our 2009 EPS guidance to $3.25 to $3.45 from $3.10 to $3.60. At the midpoint, our annual EPS guidance is unchanged.

Compared to the first half of 2009, during the second half of this year, our midpoint EPS expectation is based on achieving continued ROV operating income growth, lower results from Subsea Projects, and comparable results for Subsea Products. The ROV improvement is based on increased days on hire, attributable to more call-out construction service demand, and new systems being put in service and our efforts to control costs.

For the year 2009, we're now projecting that our average ROV revenue per day on hire will be slightly less than in 2008, primarily due to lower construction service demand. We're also anticipating that our annual 2009 fleet utilization will be slightly lower than the 82% we achieved last year.

When compared to an extraordinary first half performance, our forecasted decline in profit contribution from Subsea Projects is based upon a reduction in utilization and rates for our deepwater vessels. Subsea Products' operating income performance is expected to be about flat with the first half on an increase in revenue due to a change in job mix.

If we achieve the midpoint of our EPS guidance range, 2009 will be our second best year ever. And that would be quite an accomplishment given this year's global economic environment. Our focus on providing products and services for deepwater and subsea completions has positioned the Company well and allows us to participate in a major secular growth trend in the oilfield service and product industry.

During this quarter, we continued to invest in our ROV business. ROVs accounted for $41 million of our $45 million quarterly capital expenditures, and $78 million out of the $90 million year to date. We still expect our annual 2009 capital expenditures to be approximately $175 million.

Our cash flow generation capability was demonstrated by $106 million of EBITDA during the quarter. Our liquidity situation continued to improve and remains strong. We prepaid an additional $60 million of our 2009 debt maturities during the quarter.

Our balance sheet's in great shape. At the end of June, we had a debt-to-capitalization percentage of 11%, $49 million in cash, and $20 million of debt maturing within the next 12 months.

As I stated earlier, for 2009 we're forecasting EPS in the range of $3.25 to $3.45. 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 oilfield business operations.

Our ROV business earned 52% of our operating income in the first half of 2009, compared to 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 anticipate adding 24 to 30 vehicles to our ROV fleet in 2009, 12 to 18 during the remaining half of this year, and we have contracts for 17 of these.

I believe we are successfully addressing the challenges presented by the 2009 market environment. We are focused on cash flow generation, cost control, and have been taking action to right-size our workforce where needed. We are focused on improving business processes and the effectiveness of how we work.

Looking forward, we see specific signs of a healthy deepwater and subsea market that will drive demand on a concurrent or delayed basis for our products and services. As of the end of June, over 93% of the 224 floating rigs in the world are under contract. 88% of these are contracted through 2009 and nearly 70% are contracted through 2010. 88 floating rigs were on order and scheduled to be delivered through 2012, and 61 of these have been contracted longer term, for an average term of over six years.

ROV contracts have been let on 21 of these 88 rigs on order and we've won 15 of them. We currently estimate that 19 rigs will be placed in service during the year, of which five went to work in the first half. We had ROV systems on all five of these rigs. Of the remaining 14 rigs, we have 11 ROV contracts. Therefore, we'll have ROVs on 16 of the 19 rigs going to work in 2009.

Given the current macroeconomic environment, it's still quite possible that some of these new rigs currently on order may not be built. Assuming that 25 of these rigs will either be delayed beyond 2012 or cancelled, we're still talking about 63 rigs being added to the current floating rig fleet of 224, representing growth approaching 30%, and growth of about 135% in the high-specification fleet, which currently totals 47 rigs. We believe we are in the pole position to seize the majority of this growth opportunity.

In addition to the current floating rigs on order, various industry sources indicate a substantial number of subsea support vessels which will require ROVs are under construction, with anticipated delivery dates by the end of 2012.

While our ROV business represents our single largest near-term growth opportunity, we like our position in Subsea Products as well as our other business segments. According to Quest Offshore's latest forecast, the average number of subsea tree orders over the next five years is anticipated to grow 55%, to about 675 trees. With our existing assets, we are well positioned to supply a wide range of the services and products required to support the deepwater exploration, development, and production efforts of our customers.

We believe Oceaneering business prospects for the long term remain promising. Our commanding competitive position, technology leadership, and strong balance sheet position us to continue growing the Company, and we intend to do so.

For the third quarter of 2009, we're projecting EPS in the range of $0.82 to $0.90. Year over year, we anticipate our ROV operation will achieve higher operating income, but not enough to offset the expected lower-profit contributions from other oilfield segments.

Sequentially, we anticipate quarterly operating income improvements from ROVs and Subsea Products, ROVs due to an increase on fleet days on hire as we benefit from a pickup in demand for construction work and from new vehicles being put in service, and Subsea Products on the strength of higher multiflex umbilical plant throughput and field development hardware sales. We expect sequentially down profit performances by Subsea Projects, Inspection, and flat MOPs results.

In summary, our results continue to demonstrate our ability to generate excellent earnings and cash flow. We believe our business strategy is working well for both the short term and the long term. We like our competitive position in the '09 oil field service market. Our technology gives us the ability to prosper in a challenging year.

We are leveraged to what we believe will be an inevitable resumption in the growth of deepwater and subsea completion activity. 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 the industry. 2008 was our best year ever, and we're well positioned to have another year of substantial earnings performance in 2009, perhaps our second best year ever.

We appreciate your interest in Oceaneering, and we'll be happy to take your questions now.

(OPERATOR INSTRUCTIONS) Neal Dingmann, Wunderlich Securities.

Morning, guys.

Morning, Neal.

Say Jay, wondered, with the confidence now, what you're seeing with the ROVs. I know you gave some color on the rigs that are coming out. Does the confidence now that you have around margins, etc., maybe for the second half of the year cause you to maybe increase activity in that area at all for (inaudible) as far as potentially bringing out or will you still stay the course?

We feel very good about the rigs coming out the rest of the year. As I said, we've got 17 contracts on systems that we think will be coming out the rest of the year. We're halfway through our build program where we projected 18 to 24 systems for the year. We've produced 12 new systems the first half of the year and put those to work, so we're right on pace with that. So while a few systems may slip into 2010, so far this year developing on the new rigs, fleet has been developing just about like we anticipated.

And then, I just had sort of an unrelated follow-up as far as under the Subsea Projects. Obviously definitely was a bit stronger than you expected, and just wondered-- within a couple of areas there, between the diving and the installation, as you look for the remainder of this year, how has bid activity looked as you kind of look out?

Right. Bid activity is a little weaker on the deepwater vessels at the moment. We still see a pretty good market in our diving area. We have the leading position in terms of repair of platforms using underwater welding, and so we're still working on some damaged platforms. And it's a pretty small niche, but we're very good at that. So we think the diving business still looks okay; there's still repairs to be made. We're just seeing a little less bid activity on the deepwater vessels and more competition with vessels in the marketplace.

(Operator Instructions) Brad Handler, Credit Suisse.

Thanks, good morning.

Good morning, Brad.

Could you please speak to the retirements -- the four ROV retirements in the quarter?

Sure. That's really an operational decision. We don't really predict that, so our operations people look at what systems are not working and what they really don't have good prospects for. In particular, these were older systems, some of which we acquired with the [Kugler] acquisition years ago, and they had been working but finished contracts and our outlook was that we didn't have very good prospects for those older systems, and so we retired them. We continue to look at that all the time, and there will be periodic retirements of some old systems as we go through the year, but we really don't project that number going forward.

Maybe it would be helpful for us to understand kind of the relative age of your ROVs now, just to give us perspective on what might be subject to retirements as they roll off contracts.

I really don't have any detail to give you on that.

And Brad, it really isn't age -- it has a lot to do with capabilities and the market conditions. In a better market, if you were seeing more subsea construction activity, or more field development activity, perhaps these vessels would not have been retired. But what we did is we put six brand new vehicles in the field to work and we took four that hadn't been working out of the system because we didn't see an upcoming need for them. But it really isn't age-wise; it deals with the capabilities, the market, and operational decisions.

[Chris Glasine], Simmons & Company.

Thanks; good morning.

Jay Collins; Good morning, Chris.

Congratulations on the Petrobras award.

Thank you very much.

First question -- how many of your systems are on rigs that are potentially coming off contract in the second half of the year and possibly in 2010?

Okay. We obviously are taking a very close look at this and so if you'll bear with me, I've got some statistics here for you. So far this year, we've had equipment on five rigs that have ended their contract and are no longer working. Of those five, we've demobbed off three of the rigs, and on two of them we're still on board because we think the rig will go back to work. And that's sort of predictive of what we think will happen the whole year.

For the whole year of 2009, there are 33 rigs whose contracts are ending; we're on 12 of these. So I guess first I would say that's 36% market share of this segment, which is significantly lower than our 60% market share of all drill support in total. So we are less of a player in the shallower water -- these are mostly mid-market, shallow-water semis -- than we are the deeper water. So we're a little less affected by that.

But we do have 12 systems in total, counting the ones I just talked about that have happened so far. And as we look at those 12 rigs, we think about the same thing -- about half of those, we think, are likely to keep working, and maybe half will not. So counting the three that we've already demobbed, we think maybe there's another three, so maybe half of that 12, maybe six systems, we'll get back. And we'll use those for something else. Or we may upgrade some of those for new builds for 2010.

Looking ahead to 2010, we have looked at our first quarter and we see four rigs that have contract expiration that we're on and we really think all those rigs will continue working; they're good rigs. So that gets us through the first quarter of 2010, and it kind of gets a little mushier behind then, at that point in time. But hopefully that gives you a sense of it. So maybe six systems this year, three of which we are already dealing with. So not very significant in our total fleet.

Okay; that's very helpful, thank you. The second question is with Petrobras awarding, it looks like, $100 million in umbilicals, are they the only one, really, that's out there currently? Are we still kind of in a moratorium on the larger orders, aside from Petrobras, or is this a sign of the ice starting to break?

I think neither one of those, really. While one of the orders was from Petrobras, one of our orders was not a Petrobras order; we just haven't been able to announce it yet. So I think there are other players out there.

As we continue to look out a year for potential jobs, we almost continue to see the same level of business that we've been seeing for the last year; it's just when these orders are going to actually mature, when these prospects mature into real orders. So it's not all Petrobras, but on the other hand, I don't give you any sign that the dam is breaking. I think we're just still going order by order.

And as we've said before, it's really not the bid activity level that needs to change, because the bid activity remains healthy; it's the actual awarding of work and proceeding on with the job that needs to happen for the dam to break.

Joe Gibney, Capital One.

Thanks; good morning, guys.

Hi, Joe.

Jay, 16 out of 19 rigs delivered this year is a pretty healthy batting average. I was just curious, though -- are you seeing a little bit more competition from some of your peers in trying to break in more aggressively on the drill support side relative to ROVs?

Well, we always have competition. I think what we've seen is a little more difficult for us to win work sometimes in some marginal areas. Let me give you a little bit of a summary here on our win/loss record. The place we've done the poorest-- there are five jobs that are going to be working in Mexico where PEMEX has basically subbed it out to the drilling contractor. And these are usually not to US drilling contractors; they're smaller foreign players. We're oh for five on those. So that was pretty much price -- very low prices.

With Petrobras, we've had about a third of that market share historically, and so far we've won four out of eight jobs and again, that is very price competitive. Beyond that, all other operators outside the PEMEX and Petrobras work, we've won 29 out of 33, or 88%. So I think you'd almost need to break it down into separate segments like that to really get a good view of it, but we certainly do have competition and where price is going to be the determining factor, we're less likely to win.

And those statistics, Joe, were cumulative since the new big rig-building began, and where we've won 33 out of 46 total, and as Jay broke them all down by country and other areas.

Okay, understood. That's helpful; I appreciate it. And just circling back relative to the demob scenario that you just referenced in that previous question, relative to your guidance you're still on the ROV front for kind of down year over year potentially on the utilization front. But I mean, those roll-offs are embedded in that guidance, correct?

Yes. Absolutely. For example, those five rigs, year to date, that aren't working, three of them we demobbed and we either have those systems at our shop or we're working on some other job; they're in our statistics. And the two that are sitting on the rigs are certainly in our statistics. So that's for sure two that are lowering our utilization, but we do think those rigs will go back to work. And all of that scenario is forecast in our future.

All of our forecasts always assumes spec work. So just like these large umbilical awards that we finally landed, those have been in our forecast and have been part of that range, so now that sort of removes some of the uncertainty. And we're always projecting utilization on a moderate case, but we've got spec work in all of our segments in all of our systems every time we do a forecast. All of our segments.

Phil Dodge, Tuohy Brothers.

Good morning, everybody.

Hey, Phil.

Thank you. I just got a little lost in the ROV figures at the beginning. Just to confirm, I think you said you're adding 24 to 30 this year, and of those, you have contracts for 17, which would mean, just arithmetically, that there are seven to 13 that might be contracted as they're available later in the year. Is that--?

Here's the statistics -- 24 to 30 for the year, and we've already put 12 to work. That leaves 12 to 18 for the balance of the year, and we have 17 contracts for the balance of the year.

For the balance of the year.

Keep in mind, we're putting systems to work on existing rigs, we're putting systems to work on vessels--

So there are sources other than the 24 to 30 that you're adding. Is that--?

No--

No. Phil, hang on. Let's go through the 24 to 30. 12 of them went to work already. So of the 24 to 30, the balance that we're talking about for the second half is 12 to 18.

Okay.

And of those 12 to 18, we have 17 contracts.

Oh, all right; okay.

The first 12 already have contracts, so we're not counting those anymore. If you looked at it grossly you would say, "Well, you've got 12 and you've got 17 more." We've got 29 contracts and we intend to use 24 to 30, but we don't count the actuals for the first half because we're six for six in each quarter.

Now, I know when we talk about additions of the 24 to 30, we are talking about gross additions -- I mean, new additions going in. We're not counting them net of retirements. But it is fair to say that we're retiring idle systems and we're putting to work new systems going to contract. But I think that explains--

Yes, I had missed a couple of those moving parts.

It's 17 out of 18 is really the way to look at it, or 17 out of 12 to 18. And as Jay said, some of these may slip. Why we're not saying 17 is because some of these new rig buildings may slip into 2010. So we don't know we're going to get all 17 contracts started in the second half of 2009.

Phil Dodge; Yes, understood. Second question, on the 88 floaters that will be entering the fleet through 2012, you said you had a scenario that 25 of them might not make it for one reason or another. And my question is, is that a scenario or have you done some rig-by-rig analysis?

That's just an example scenario that -- even if that happens, and we're not good at predicting that, we still have good growth. So that was just a scenario; we have no better insight than what everybody reads in the trade journals.

Yes, it's not degree of uncertainty on an individual rig that would get to the 25; okay.

No; I wish we had that insight.

Okay; that's helpful. Thank you.

You bet.

Tom Escott, Pritchard Capital.

Good morning, fellows.

Hey, Tom.

I just want to follow up on a question that was asked a few minutes ago about the umbilical orders. I think you made the comment, Jay, that the bulk of the increase in backlog in the period was two significant orders.

That's correct.

And so my question relates to that, and that is, for all the other projects that you say you're still bidding for the balance of the year, can we characterize that as the opportunities and the jobs are still out there but we shouldn't really-- people should not crank that into a model to sustain that level of new order rate through the third and fourth quarter.

No, absolutely. I think-- first of all, we're not predicting backlog because I got out of that business because it's too lumpy and too difficult to do. But secondly, we've said our financial performance should be about the same in the second half of the year in the products business. So it's still a very lumpy business out there and as I said before, I can't give you any indication that the dam has burst. We just got two good contracts, two big contracts, that are important to us and we're fighting for all these other contracts, just like we have been for the last nine months or so.

With that in mind, fighting all this time, and I think you used the words, "it's very competitive" -- philosophically, should we be plugging in a little lighter profit margins on the revenues from these projects over the next couple of years?

I'm just not going to give you any prediction for 2010. I think as far as I'm willing to go is to say similar profitability for the second half of the year as we've had the first half of the year.

On increased revenues.

On increased revenues. So clearly, we're not anticipating a big change in profitability, even though we do think volume's going to go up a little bit. So clearly it is a competitive market, and there's not going to be any rapid boost in profitability, I don't think, here near term.

We said, Tom, that operating income performance is expected to be flat with the first half on an increase in revenue due to a change in job mix. You could read into that -- you should read into that -- that the percentage of umbilicals of our products revenue is going up. And we've always known that that's the most competitive market in which we compete. But I think that answers your question.

Victor Marchon, RBC Capital Markets.

Thank you, good morning.

Morning, Victor.

Most of my questions have been asked. I just wanted to touch on use of cash. You guys are a very clean balance sheet, a lot of access to capital. I just wanted to see if you could give us an update as to what you're looking at from that end -- what the M&A environment looks like, what areas would you look to get involved in, as well as the bid/ask spreads on some of the acquisitions you may have looked at.

Well, as you can tell, we don't need the cash -- all the cash we're generating -- for internal purposes. So we do have cash available, we are looking for potential acquisitions. I'll say we obviously haven't found anything recently. So I think it's been a difficult market out there so far to find an appropriate acquisition. We're looking at anything that fits with our Subsea Product area, for sure. We're anticipating there's not ROVs to buy, but if there were, that would be fine.

We've had success in the past with Subsea Product offerings that we can add to our tool kit and we continue to look in that area. And I'll tell you, I'll be disappointed if we get to the end of next year and we haven't been able to find some good opportunities. We certainly are going to have the financial strength to do it, and we have some people looking every day. We've seen a couple of deals that went for prices that were higher than we thought were reasonable but we haven't really seen a whole lot of deals.

Not a lot of deal flow in this arena. But Victor, if you or anybody else on the call has a good idea, you all can give me a call. (Laughs)

Absolutely; we appreciate it.

(Laughs) How does a dividend or a share repurchase play into-- how you guys are looking at that?

I think our first priority will be to look to do M&A. We have repurchased shares in the past; we always could decide to do that again, but our M&A's going to be the first place we look. And we have no plans to pay dividends at this time.

Joe Agular, Johnson Rice.

Thank you. You all have covered a lot of ground already here, but maybe-- one of the things I'm curious to find out more on is the products orders that you booked in the quarter. And whether those are projects that were out there of, say, six months or nine months ago and were sort of just on hold, given the environment, or whether these were along a timeline where these would have been awarded given the project schedule.

And the reason I'm asking is because kind of the thinking of the customers that you're dealing with today, you're in-- obviously, oil prices have bounced back; steel costs are a lot lower. It seems like the environment for deepwater field development is actually pretty decent right now. Wondering how that might relate to maybe how orders shake out going into 2010.

It's a really good question, Joe. We have different answers, really, for either one of these contracts. One order, we thought we might have gotten that order early in the year and for various reasons not related to us, it just continued to drag out and we ended up getting just at the end of the quarter.

The second order I think is an oil company taking advantage of a great market. And as I said, we won't be building this product until 2010, but yet the oil company took advantage of current market to nail it down. So I think that's just a smart move on their part. So I'd say they're totally different situations.

Okay. And when you-all-- these shipments of the products, are they kind of equally spaced over-- you mentioned they wrap up kind of by the end of 2010. Is that sort of an equal delivery schedule, or is it heavier in one period or another?

Joe, we do percentage of completion accenting on these large umbilical jobs.

Yes, I was just kind of curious more the timing of when these things actually hit the customer for installation.

I think on the 2010 one, the customer needs them in 2011.

So it'll be late 2010 for the Panama City job and the Brazil job, we'll start manufacturing-- it's a series of quite a few umbilicals, and we're starting to produce those now, so they'll be delivered this year and throughout 2010.

Yes, they'll take them as they get-- I don't know what Petrobras' inventory of umbilicals that they have taken but not installed is, but they will be taking deliveries, as Jay said, throughout '09 and beginning of '10.

(Operator Instructions) Brad Handler, Credit Suisse.

Thanks; hi, again.

Yes, Brad.

On the project side, can you please give some thoughts, or maybe some percentages, of contracted time in your deepwater vessels over all, your visibility on the second half of the year, and how that may be compared to a year ago?

We really don't publish that kind of information. I would say generally we're just a Gulf of Mexico operation. It tends to be not a long backlog business, so we generally are not very much contracted beyond a couple of months. So it is a just-in-time kind of operation. Generally there will be a few projects that are scheduled out over the next six or nine months, but mostly it's a two or three months ahead kind of business.

On a sort of related follow-up, on hurricane repair work in general, I think you made some comments that that was ongoing. But what's your sense as to how long that work might continue? Presumably, that's more of a comment that helps us with the (inaudible) and the surface diving, right?

Let me separate sort of the project of-- big debris-removal projects and so forth, which really have been tailing off, I think, all through maybe even 2008 and certainly in 2009. So we think that work is coming to an end.

What we're really continuing to do is sort of the underwater repair of some shallow platforms using underwater welding techniques that we're pretty good at. So I think there is follow-on work on that that will go through this year and I think into next year. So there are tails on both of these things, but I would say that we're more optimistic about our diving group continuing to do underwater welding and platform repair than we are big debris removal projects, which we think are really pretty much ending at this point of time, with a few exceptions. Does that cover you?

(Operator Instructions) We have no further questions at this time.

Thank you very much; we appreciate your attendance.

Take care, guys.

Thank you so much. This concludes our conference call for today. You may now disconnect your lines.