Oceaneering International Inc (OII) 2013 Q2 法說會逐字稿

Good morning, my name is Tatum and I will be your conference operator today. At this time, I would like to welcome everyone to the Oceaneering Q2 2013 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, Tatum. Good morning, everybody.

I'd like to thank you for joining us on our 2013 second quarter earnings conference call. As usual, a webcast of this event is being made available to the Street Events network service by Thomson Reuters. Joining me today are Kevin McEvoy, our President and Chief Executive Officer, who will be leading the call; Marvin Migura, our Executive Vice President; and Cardon Gerner, our Senior Vice President and Chief Financial Officer. Just as a reminder, 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 Litigation Reform Act of 1995.

And I'm now going to turn the call over to Kevin.

Good morning, and thanks for joining the call. I am very pleased to be here with you today.

Our record quarterly EPS of $0.91 was above our guidance range of $0.81 to $0.86 and was up 32% over the first quarter of this year, and up 36% compared to the second quarter of 2012. Our above guidance performance was attributable to sales in subsea hardware, demand for asset integrity services offshore Norway, and early completion of a theme park project. Year-over-year and sequentially, quarterly EPS increased as all our business segments achieved higher operating income led by subsea products and subsea projects. We achieved record quarterly operating income from ROVs, subsea products, asset integrity, and advanced technologies.

Our outlook for the second half of this year remains very positive and essentially unchanged from last quarter. We continue to believe we will achieve record results for the year and our new 2013 EPS guidance range is $3.20 to $3.35. Our previous guidance was $3.10 to $3.30. Compared to 2012, we continue to forecast income growth for all of our operating segments in 2013.

Relative to the first half of 2013, we expect to generate higher operating income during the second half, led by ROV and subsea projects. ROV profits are expected to be up on an increase in days on hire as we place approximately 20 new vehicles into service and a slightly higher operating margin as we benefit from additional days worked and a favorable change in geographic mix to more work off Africa and in the Gulf of Mexico. For subsea projects, we are forecasting higher contribution from our Gulf of Mexico and Angolan operations. Due to project timing, we anticipate that advanced technologies will have considerably less results during the second half of 2013 relative to the first half.

For 2013 we anticipate generating at least $710 million of EBITDA. Our balance sheet and projected cash flow provide us ample resources to continue to invest in Oceaneering's growth and we intend to do so. We are increasing our 2013 CapEx range estimate, excluding acquisitions, to $325 million to $350 million. Of this amount, approximately $200 million is anticipated to be spent on adding systems to our ROV fleet and vehicle upgrades. About $100 million is for enhancing our subsea products' capabilities. Our focus in 2013 continues to be on earnings growth and investment opportunities, both organically and through acquisitions.

I would now like to review our second-quarter segment results. Year-over-year, second quarter subsea products operating income improved nearly 70% on a 35% increase of revenue due to higher demand for all of our major product lines. Operating margin improved 5%, principally due to indirect support costs being spread over a larger revenue base and a slightly favorable change in product mix due to increased subsea hardware sales. Sequentially, operating income rose 45% on a 21% increase in revenue on the strength of higher demand for tooling and subsea hardware. Operating margin consequently increased 4%.

For the second half of 2013, we continue to forecast subsea products' operating margin will be lower than the 22% of the first-half. This is due to an anticipated change in sales mix featuring a higher percentage of umbilical revenue. Our subsea products backlog at quarter end was a record $902 million, compared to $621 million at the end of June 2012 and $776 million at the end of March of this year. Year-over-year and sequentially, the backlog increases were predominantly attributable to umbilical awards. During the quarter we announced two large umbilical contracts, one for offshore Egypt and one for the US Gulf of Mexico.

Now turning to subsea projects. Segment operating income was 50% higher year-over-year on an improvement in international operations, which included a subsea well stimulation service project included in the second quarter offshore Ghana utilizing a customer-provided vessel, and an escalation of work on our field support vessel services contract offshore Angola. The increase in work offshore Angola included provision of another charted vessel, the Maersk Attender, for half the quarter, the supply of two crew boats, two tugs and a cargo barge to support the operations of the chartered vessels, and a full quarter contribution of the Ocean Intervention III which commenced work in the middle of April 2012.

The charter term on the Maersk Attender runs through September of this year, followed by two 45-day renewal options subject to our customer's work program. The charters on the crew boats, tugs and cargo barge are also short-term and will continued to be supplied on an as-needed basis at the discretion of our customer.

Sequentially, subsea projects' operating income increased 35% due to a seasonal uptick in the Gulf of Mexico demand for deep-water intervention and the increase in work offshore Angola that I just described. During the quarter, we entered into a three-year charter for use of a multi-service subsea support vessel, the Normand Flower. The charter term is now expected to commence in mid December 2013 and the vessel is anticipated to go to work in the Gulf of Mexico in early 2014. This charter reflects our belief that the deep-water subsea intervention market has a promising and sustainable future.

As for our remaining business operations in the second quarter, year-over-year ROV operating income improved on higher demand to provide drill support and vessel-based services. Our ROV days on hire increased 9% to approximately 22,400 days. Sequentially, operating income improved on higher demand for drill support services and an increase in average revenue per day-on-hire.

Our fleet utilization rate during the quarter was 83%, flat sequentially and up from 81% year-over-year. We still expect that our fleet utilization for the year 2013 will be at about the 83% level. Operating margin during the quarter was 29%, flat sequentially and down from 31% a year ago. The margin decline from a year ago is attributable to higher operating costs, including associated with establishing new foreign areas of operation. During the second half of this year, we should benefit from more new systems being placed into service with a favorable geographic mix to more work off Africa and in the Gulf of Mexico. As a result, we anticipate quarterly operating margins to return to 30% or perhaps slightly higher.

During the quarter, we put four new ROVs into service and retired two. At the end of June, we had 296 systems available for operation, up from 280 a year ago. Three of the new ROVs went into drill support service and one went to work on board a vessel. Our fleet mix during the quarter was 74% on drill support and 26% on vessel-based work, the same as last quarter. This compares to a 75%, 25% mix in the second quarter 2012. We expect to add about 30 vehicles to our fleet in 2013, approximately 20 during the remaining half of the year.

Year-over-year asset integrity operating income was about the same as last year. Sequentially, operating income increased on higher service sales in most of the geographic areas we serve. Advanced technologies' operating income improved year-over-year and sequentially on increased activity and operating margin on theme park projects. The operating margin improvement was attributable to incentive fees for meeting scheduled completion dates.

In summary, our second quarter results were above our expectations and up appreciably, both sequentially and year-over-year. We look forward to realizing another year of record EPS performance in 2013. Our focus on providing products and services for deep-water and subsea completions positions us to participate in a major secular growth trend in the oil-field service and products industry. We were pleased with our cash flow generation capability, as demonstrated by $170 million of EBITDA during the quarter. Capital expenditures for the quarter totaled about $81 million, of which $56 million was invested in ROVs and $21 million was spent on subsea products.

Moving on to our third-quarter outlook, we are projecting EPS in a range of $0.90 to $0.95. Sequentially, we anticipate quarterly operating income improvements from ROVs due to increase in fleet days on hire and some margin improvement, and subsea projects on a seasonal demand increase in the Gulf of Mexico for deep-water intervention and shallow water diving services and additional vessel activity offshore Angola. Due to project timing, we are anticipating that subsea products and advanced technologies will have lower results.

Looking beyond 2013, we remain convinced that our strategy to focus on providing services and products that facilitate deep-water exploration and production remain sound. We believe the oil and gas industry will continue to invest in deep-water as it remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates, at relatively low finding and development costs.

An early 2013 industry report by Douglas-Westwood forecasts global capital expenditure spending on deep-water oil and gas projects will double over the next five years. We anticipate that demand for our deep-water services and products will continue to rise and believe our business prospects for the next several years remain promising.

At the end of June 2013, there were a total of 99 new floating rigs on order. 70 of these rigs are not contracted to work for Petrobras in Brazil and we expect all of them will go to work for other operators. On these 70 rigs, 20 ROV contracts have been let and we have won 17, or 85% of them, leaving 50 non-Petrobras ROV contracting opportunities to be pursued. So, the visibility of the secular growth outlook for this market remains very promising. And looking forward, we see no reason why we will not continue to be the dominant provider of ROV services on these rigs.

At the end of June, 102 of the 145 existing high spec drill ships and fifth and sixth generation semis were contracted to operators other than Petrobras in Brazil. We had ROV contracts on 78 of these, for a market share of 76%. If all 70 of the non-Petrobras rigs I mentioned are placed into service, this fleet of 102 will grow nearly 70% to 172 rigs and our ROV fleet supporting the rig market should grow by 50 to 55 vehicles. As the use of floating rigs grows, we believe it is inevitable that discoveries will eventually drive orders for subsea hardware to levels not previously experienced. And demand for ROVs to support vessel-based activities should follow.

The current trend indicates that there will be approximately two vessel-based ROVs for every floating rig in operation. So the 99 rigs under construction should represent incremental demand for approximately 200 ROVs on vessels. We estimate Oceaneering's market share of the vessel-based ROV fleet at 20%, and see no reason we will not at least maintain this share in the future. This incremental demand should result in our ROV fleet supporting the vessel market growing by some 40 vehicles.

In summary, by maintaining our current market share of the visible growing rig and vessel service requirements, we are forecasting we will add 90 to 95 incremental ROVs to our fleet. We anticipate the ROVs to support the rigs on order will be in service by 2017. The in-service timing for the vessel-based ROVs cannot be predicted at this time, but will likely lag those required to support drilling.

Quest Offshore's latest subsea hardware forecast for the period 2013 to 2017 includes an increase in tree orders of about 60% over the previous five years. In 2013, tree orders are projected to rise over 2012 by more than 25% to 531, an all-time high, eclipsing the previous record of 426 trees in 2006.

While we don't make trees, orders for subsidy trees drive demand for a substantial amount of the ancillary subsea production hardware that we manufacture. For example, Quest is forecasting more than 35% increase in umbilical orders for the five-year period 2013 to 2017, compared to the previous five years. Umbilical orders in 2013 are forecast to rise to about 1635 kilometers, up over 40% from the 1140 kilometer level of 2012.

Based on our subsea tree order forecast, Quest Offshore is projecting average annual subsea tree installations over the five year period 2013 to 2017 will increase by 140, or about 45% from the previous five years. The number of subsea completions in service compared to 2012 is projected to increase by a third by the end of 2017. We believe the projected rise in tree installations, and the growing level of subsea completions in service, will act as catalysts for further growth in our subsea products and subsea projects operations and profits.

Furthermore, industry and regulatory emphasis on safe and reliable deep-water operations is providing additional opportunities for us to demonstrate our capabilities. With our existing assets, we are well-positioned to supply a wide range of the services and products required to safely support the deep-water efforts of our customers. We believe Oceaneering's business prospects for the long term remain promising. Our commanding competitive position, technology and leadership, and strong balance sheet and cash flow enable us to continue to grow the Company and we intend to do so.

In conclusion, 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 and long-term. We like our position in the oil-field services market and are leveraged to the growth of deep-water and subsea completion activity that is currently underway.

The longer term market outlook for our deep-water and subsea service and product offerings remains promising. Industry and regulatory emphasis on reliable equipment and redundant safety features at deep-water operations elevates the importance of the utility and reliability of our ROV services and related product line offerings, and reinforces the benefit of our value sell. For 2013 we're anticipating that we will achieve another record year of EPS performance. We believe this distinguishes Oceaneering from many oil-field service companies. We appreciate everyone's interest in Oceaneering and I will now be happy to take any questions you may have.

(Operator Instructions)

Edward Muztafago.

Hi, guys, thanks. I was wondering if you could just talk a little bit about the -- I was particularly intrigued by your indication in the number of ROVs that you might add to the fleet in the coming future. And I was wondering if we think about just the drilling support side through 2015, if you might hazard a guess as to potentially how many ROVs you might add to the fleet through that timeframe?

50 to 55 through '17 when most of the rigs get delivered. To separate that into a timeframe of 2015. We do not have that with us right now. It would really depend on -- we have got rigs going to work, deliveries and going to work scheduled out, but I do not think it is very accurate year by year. So what we did is we took a look, as Kevin explained, the 70 non-Petrobras rigs under construction and said we will get our 76% share of that.

Right. So there may be on the order of 40-some through that timeframe. Offhand I do not know how many of those might be going to Petrobras or not.

Presumably the bulk of those rigs are coming by the end of 2015. I think my thought process was that, that would just represent the bulk of the ROV adds, with the tail end sort of being a little bit more de minimis. Can you also talk about, with respect to the projects margin in the quarter, I know you certainly aren't going to give us any granularity that is very specific in terms of how things impacted. But could you just rank order Angola, the well stimulation contract, Gulf of Mexico, sort of how those things impacted the margin increase in the quarter?

I think you've got the order right.

Okay, and sort of any thought processes to, is the preponderance of it Angola and the rest more de minimis or --?

We are not going to go there now.

Okay. Okay. Thanks, guys, I appreciate that.

Thank you.

Ian Macpherson.

Thank you, congratulations on the results. My question was along a similar vein. I was wondering if the expanded scope of the project in Angola has had a material bearing on you raising your guidance. And whether we should contemplate the exercise of the options on that additional vessel in Q4 as also being potentially accretive to the outlook as you have updated it with these results.

Ian, let me start off by directly addressing our guidance raise. Our guidance raise was based on the first half year of performance. Kevin emphasized that our outlook for the second half was essentially unchanged and remains very positive. And so, I don't think the Angola short-term charter for the Maersk vessel and this other spot work is very relevant to our second half. Otherwise, we would've changed our outlook for the second half. And as you can tell, as you do the numbers, you will see that we basically left our second half guidance intact.

So to clarify one point that may not be clear, the Maersk Attender, while that is -- happens to be the third vessel that is working in Angola on that contract, it is not really the third long-term vessel that there is an option for under the contract. So we are viewing that at this point in time as a short-term idea just catching up work for the customer. Obviously, the customer is in control of that and we will just have to wait and see how that plays out. But right now, we are not considering that the third long-term potential vessel under charter under that contract.

Okay. That's clear. And then as a follow-up, I know you had exceptional results from the Products segment in Q2 and you've indicated an expected down tick in Q3, and probably a structurally lower margin as the umbilical mix rises. But notwithstanding those adjustments, is it fair to say that you are seeing -- the question is, are you seeing the underlying business, the sales, apart from umbilicals, developing in line with your expectations for the year? Or do the Q2 results reflect something a little bit better than what you were expecting as you came into the year?

Pretty much in line. A little better. The results are better but I'm talking about from a pricing standpoint, I think its activity levels are good. From a pricing standpoint, I would say it is as expected. I think volume has surprised us a little to the upside.

And when you think about the total backlog for that segment and think that the non-umbilical part of that is much shorter term, shorter-term visibility and shorter-term throughput in terms of execution. So that is why that segment is always a little bit harder to predict what is going to happen in the future because we just don't have the same kind of visibility.

Got it. Okay. Thanks very much.

Ryan Fitzgibbon.

Good morning, guys and heck of a quarter.

Thanks.

Maybe if I can follow on Ian's question on the Subsea Products business, that $900 million that you have in backlog. Can you give us a sense as to how much is umbilicals and how much is tooling?

We don't segment that on a quarterly basis.

We do not give that detail out. We did say that the large umbilical awards that we announced in the quarter and previously is driving our backlogs. It is -- a lot of the other work when you look into tooling and IWOCS may or may not ever make it -- it can be converted -- ordered and converted into revenue within a quarter. So most of the other stuff is not as long term as the umbilicals.

Okay, that's helpful. Appreciate that, Marvin. And as we think of that backlog, can you give us a sense as to what normalized margins may be as we forecast numbers going forward in 2014, et cetera?

I don't know. The mix really drives it. And what we said over time is, if we didn't think we would be able to do the same margin that we did in '12 in Products and now we are running ahead of that, but we are not expecting to -- we are still maintaining our forecast of what we said for the second half. It is going to be substantially -- or going to be lower. Substantially lower from the 24% achieved this quarter. But, no, I think normal margins, if we look at high teens, we're pretty comfortable with that.

Okay, that is what I thought. Then my second question relates to the Subsea Projects business. Can you talk about what you're seeing in the deep-water subsea intervention market here in the Gulf of Mexico and potentially expand on what that vessel could mean on a revenue basis in 2014, for modeling purposes?

I will speak to the market. I think that we see a fair amount of project work in 2014, 2015, which is why we have chartered the vessel. But again, the Gulf of Mexico, as we always like to remind people, is a spot market and there really is no long-term backlog there. This is just our view of the market for projects that we see out there in '14 and '15 that caused us to want to increase our asset base to take advantage of that.

Okay.

We are not going to give any revenue forecast for '14 and '15 for a specific vessel, or for anything.

I appreciate it, guys. Thank you very much.

Thank you.

Mike Urban.

Thanks, good morning, guys. Your results would certainly suggest this, but I think we are seeing this in some of the other subsea-related businesses and companies out there -- these projects are notorious for sliding to the right -- but it does seem like some of this stuff, both in the relative near term but also longer term, as evidenced by some of these tree orders coming out, does seem to be beginning to shake loose. As you talk to your customers, is that the sense you are getting? Or is it still kind of the pattern that we have been in for the last few years here where everything just continues to delay?

I think it is kind of a mix thing. When you look at some of the reasons that things are sliding to the right, some of it is cost. Some of it is regulatory and just trying to get through the bureaucracy of foreign governments in particular to get things approved. Some of it is -- has been that the oil quality or quantity was not what they expected so they need to go back to the drawing board and figure out another scenario for production. So, it is hard for me to say from what I read and hear that there is some systemic, industry-wide slowdown because of anything.

Another way to put it is these things always have a tendency to slide because of the things that you highlighted, but we have had other concerns out there, whether it is macro, oil price, geopolitics, whatever. Maybe this is just anecdotal or maybe just wishful thinking, but it seems like those kind of things might be easing a little bit. And I don't know if, even anecdotally or gut feel, there was a change in sense of urgency on the part of your customers.

Mike, we have been talking about deja vu all over again with the number of project delays. They get different names but it continues to occur. And it has been occurring and maybe different reasons, slightly different reasons, about the complexity of the geological formation, all that kind of stuff. But all in all, we see our products growing substantially '13 over '12. Part of it is market. Part of it is winning more work. Part of it is better execution. We see a -- we look at epic contractor backlogs and we see our backlog, their backlog, rising for a better '13, '14 and '15. I'm saying that even with project delays, the number of projects are going to be continuing to increase over time.

Okay. That's helpful.

Most of the focus on delays seems to be on tree orders and whatnot which is a much longer horizon than we are talking about here for stuff that we are seeing in -- coming in the Gulf of Mexico. So that is another aspect of it, I would say.

Okay, got you. And then more of a housekeeping question. I apologize if I missed it, I think the guidance is pretty clear on everything. I don't know if you have anything out there, or if I missed it, on asset integrity, both Q3 and second half.

No, I think it -- you didn't miss it. It wasn't mentioned. It is not going to move one way or the other. We think it's just going to be a pretty much in-line quarter.

Okay, so fairly flattish over the balance of the year?

Nothing noteworthy. No, I am talking about sequentially, 2 to 3, and then you would expect a fourth quarter substantial drop as seasonality starts to kick in and then a lower Q1 as -- that is just the normal seasonal pattern. What we're saying is 2 and 3 should be similar.

Great, that is all for me. Thank you.

Yes.

Byron Pope.

Good morning, guys. Just one question from me and it relates to the Subsea Projects segment. And I am thinking at a high level conceptually about -- you are looking at an environment in the Gulf over the next couple of years of increasing deep-water activity. So my question is, from a mix perspective, I am assuming that the opportunities that you see in the Gulf are probably going to be more skewed toward the deep-water versus the shelf. And, again, on a conceptual level, is it fair to think about that as having positive margin implications in terms of Gulf of Mexico mix for Subsea Projects as we think out over the next couple of years?

We would hope so.

Okay.

Yes.

Okay, that is all I had. Thanks.

That was good. Thank you. Byron, just to follow up on it, we would say that the shelf work, the diving work in the Gulf of Mexico is still extremely challenged. So that would very much translate into if the mix shifts to more deep-water that would help our margins.

Okay. Very helpful. Thanks, guys. Appreciate it.

Waqar Syed.

Thank you for taking my question. My question relates to ROV retirements. Could you provide us some guidance on what your plan is for retirements for the remainder of the year?

We really have stopped predicting retirements and we report them quarterly as they occur. Because it was just getting too difficult to do that and so we don't really have any further guidance on that.

Remember, Waqar, what we said is 4% to 5% annually over time. So that would be --

Which could vary from year to year.

No, no, right. Over time. We may not hit 12 to 15 every year.

Secondly, if you look back in the past, around 2007, I believe ROV utilization had gone up to about 87%, 88%. Is anything structurally different this time around? Or can we still go up to that 87%, 88% utilization, at least for some portion of the year?

I think there is something structurally different now versus that period of time when we had all the unforeseen works surrounding the hurricane damage that was in the Gulf of Mexico and there was a huge demand that allowed for pricing increases in that couple of years that that occurred. That is not the case in today's world. There is pretty good visibility of additional systems coming to market that support the rigs and the vessels. And whether we would get to that kind of a utilization again, I do not see that in the near term. 83% to 85% is what we normally consider to be about as high a utilization factor as you can manage, given the stops and starts of some projects and that sort of thing. So, that's what I would say about that.

2007 was an anomaly because we had a lot of ROVs working in shallow water on balance platforms in the Gulf.

Good. And then finally, in your Subsea Products, in your non-umbilical business, are you aware of anything that would lead you to say that the revenues in that part of the business would be lower or flat or would be lower in the third quarter versus second quarter? Just that part of the business, Subsea Products.

There is moving pieces. I do not know. We expect, just for some color, that IWOCS business had a phenomenal first half and there is not work for that at that level in the second half. So that is going down, but tooling and other service product lines are expected to go up. So I really can't give you any more granularity and quantify it right now. I just don't have that information in front of me. And I don't know we are giving out below the segment line anyway. But just directionally, I know what you are asking. Is the base business going to continue to run? And we think it is. The pick up in umbilicals. But there is some other mix items going on, notably IWOCS.

Okay. And is IWOCS your highest-margin product and service line within the Products business?

Yes. Yes. As a percentage margin basis because of the service component in it.

Yes. Yes. Okay, great. Thank you very much.

Jon Donnel.

Good morning, guys. I was wondering if we could just dig deeper into the sequential guidance for the second half of the year. Kind of given the third quarter numbers that are out there, it presumes a pretty big ramp down in 4Q and I know there's traditionally the seasonal elements from Gulf of Mexico weather, et cetera, which hits most of the main product lines. But it seemed that there's a lot of mitigation from the additional ROVs being added to the fleet, the products backlog which I presume is more of a percentage of completion with the larger umbilicals, as well as the BP Angola project for the Projects segment. Could you help us with what is driving that rather large ramp down in 4Q versus 3Q compared to what we've seen over the last couple of years from that seasonality?

I think it is the other three segments that you didn't mention. I think while it is on -- Products is on a percentage of completion, directionally you are correct. There is other volume activity that associates it and project timing is really key because there's a lot of products that we do not do on a percentage of completion, mainly it's umbilicals that we do. But I think Projects, you start to get seasonality in the Gulf. And Asset Integrity, seasonality hits pretty hard. And in Ad Tech, it was all project timing that moved the theme park work into the first half and it came out of the second half. So ROVs, it should mitigate -- the additional ROVs should mitigate any seasonality in the vessel-based work. But there are other segments that we are expecting to come down.

Okay. I presume that the recent large umbilical awards, are those -- especially the Burullus one, that'll be recognized on a percentage-of-completion basis?

Yes.

Okay, and is the same true for the power cables versus the umbilicals within that award?

Almost all of our umbilical contracts are on a percentage-of-completion accounting basis.

Okay. Great, that is helpful. Thanks, guys.

Tom Curran.

Good morning, guys. I have had to hop on and off the call so apologies if this has been clarified. But I want to make sure I am clear. Marvin, if the two remaining 45-day renewal options on the Maersk Attender were exercised, that would or would not be incremental to your existing second-half assumptions?

I don't know what the forecast has in it. I know we have made some assumptions.

We have enough speculative work in the forecast that I do not think. We don't want to advertise whether we have assumed the options are going to be -- (multiple speakers)

I think the answer is, it might be. But again, it might just be replacing speculative work that we have in the rest of our Projects business. I think Kevin gave the exact right answer.

Okay. Helpful. Thank you for that. And then, looking at the work you are doing for BP, what is the maximum potential scope there? I understand that the Attender is sort of a shorter-term solution while BP decides whether or not it wants to commit to the long-term true third vessel. But beyond just this contract, just how big could the scope of your work there potentially get? And then, have you seen any indications yet of other similar opportunities, be it with BP or another customer?

First of all, the Angola contract I think we have articulated what the scope of that is and what we expect, and the only thing that is really kind of out there undefined at the moment is when or if, in fact, they will take a long-term third boat for that. Right now, they are still doing construction activity, if you will -- tree setting, jumpers and that sort of thing -- and depending on how long that carries on and how much inspection and maintenance work that they have, that really is going to determine whether they take the long-term vessel or not. I think that contract has been well articulated in terms of scope of working and what one could expect. The only big variable is going to be that long-term third vessel, if they decide to take it, and we don't know. As far as other similar opportunities elsewhere, we are always looking but we don't have anything at this moment in time.

Okay. Kevin, I was struck by, within your remarks in the press release, your reassertion of how firm your commitment remains to pursuing acquisition opportunities. Could you give us an update on the M&A pipeline and just how it has evolved over the last few months here?

We never really discuss the pipeline. And what we have continued to say, and still say, is that we are always looking and that the opportunities that, A, fit our business direction and strategy and, B, the economic price that one has to pay for very highly valued subsea and deep-water companies, just means that there are very few that you can actually end up bringing home.

Okay. I will turn it back. Thanks, guys.

Yes.

Brad Handler.

Thanks, guys. Excuse me. Maybe just one last quick one for me. Are you still working in Ghana?

No.

No, the project was -- well, the answer is yes, we are still working in Ghana, but not that project.

Okay, so that specific project has run its course. You are still doing some other project-related work in Ghana?

(multiple speakers) in Ghana which is what we have been on. We have ROV work there, we have some tooling work associated with that and this was just a specific project campaign and it is over.

Okay, okay, understood. Maybe just a point of clarification that is probably obvious. But I was not sure. So, you expect to have work for the Attender through September. In other words, the charter of the vessel ties with how much work and revenue opportunities for you distinctly?

Yes.

Okay. And there the renewal options, obviously, only are related to BP saying please stay with us for another 45 days or 90 days?

Right.

And (inaudible) with those other tugs and barges and what not.

Right. Right. Understood. Okay, thanks. That's it for me. Thank you.

Michael Marino.

Thanks. Quick one to clarify. Kevin, the 20 ROV units you expect to add in the back half of the year, that is a gross number?

Yes. Correct.

Okay. And then one just kind of bigger picture. If you look out 18, 24 months and you continue to book umbilical awards and maybe the industry does as well, is there any chance that that business maybe isn't margin dilutive to Products looking out long term?

Not as we see it right now. There is still such a large amount of available capacity in the market that we just don't see that happening.

And there's such high input costs to manufacturing of a steel tube umbilical or a power umbilical that your percent of materials is such a large percent relative to our other products and services within our Products segment.

Okay.

I think it will be dilutive in a very good umbilical market.

Okay. Great. Thanks.

Ian Macpherson.

Thanks. This might strike you as being completely out of left field. It is not a deep-water question, but a Gulf of Mexico question. There has been a rig with a blowout that is burning on the shelf right now. I wonder if you could say, on a scale of 1 to 10, how concerned you are with this incident and what it might mean with regard that that sea -- becoming, once again, more circumspect with regard to safety standards and what this could or may not mean with regard to permits across the Gulf of Mexico. That is one part of it. And then, do you think that you, Oceaneering -- have you been contacted to play any role in the remediation of this, and do you see it having any bearing on your quarter?

As far as what effect this might have on permitting and the rest of that, I'd be totally speculating. I don't think enough is known about the cause of this at this point in time. Obviously, it is a plus for the industry that it's not oil. So we do not have at least a huge environmental thing. It is a huge plus that everybody was safely evacuated and there was no loss of life or, as far as I have read anyway, no injuries either, no severe injuries. Those are a good things. I think it is a little premature to speculate how that could affect permitting or whatever. The shelf is one particular area, deep-water is another particular area. Obviously in other incidents, not a good thing for the industry. And there could be additional oversight or whatever. I don't know.

People will push their own agendas until there are more facts.

In this shallow water there is nothing to be done until the only -- probably the only way to turn the gas off is to drill a release well and so there really is no part that we would play in a situation like this in a couple hundred feet of water and surface tree on a burning jack up.

Good. Okay. Thanks for those comments.

Yes. Thank you.

Edward Muztafago.

Hi, guys. Just one quick one from me. I wanted to kind of pick your brain a little bit on the Products business again. And, if we sort of look back to last, Products in terms of backlog hit a new run rate if you would in the second quarter. Looks like we are there again this year in terms of a new run rate. I just want to think about, are we potentially looking at another year where the Products business can continue to build revenue, even through the fourth quarter despite the seasonality?

Let me -- that is possible. Yes. I think what we talked about was increasing revenue for the year with going into it with the base of umbilical backlog that we have. Yes, I look for a larger throughput in the second half. That was -- if I understood your question.

Yes, yes, that is fair. Presumably, second half and potentially even through the fourth quarter was really a key point of the question. But it sounds like you are saying that is certainly possible.

That is possible.

Okay. I appreciate that. Thanks.

There are no further questions at this time.

Okay. Since there are no more questions, I would like to wrap up by thanking everyone for joining the call. We are very pleased with our best-ever quarterly results and anticipate producing another record year of EPS for 2013. This concludes our second-quarter 2013 conference call. Thanks, and have a great day.

Bye-bye.

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