Oceaneering International Inc (OII) 2014 Q1 法說會逐字稿

Good morning. My name is Beth and I will be your conference operator.

(Operator Instructions)

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

Good morning, everybody. Thank you for joining us on our call. As usual a webcast of this event is being made available through the StreetEvents Network Service by Thomson Reuters.

Joining me are Kevin McEvoy, our President and Chief Executive Officer who will be leading the call this morning, Marvin Migura, our Executive Vice President and Cardon Gerner, our Senior Vice President and Chief Financial Officer. Just as a reminder remarks during the call regarding 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. Thanks for joining the call. I'm pleased to be with you here today.

Our record first quarter EPS of $0.84 was above our guidance and was up 22% compared to the first quarter of 2013. All of our business segments performed well relative to our forecast. Year over year all of our oil field business operations achieved higher operating income.

Our outlook for 2014 remains positive. We continue to anticipate global demand growth for our services and products to support deep-water drilling, fuel development, and inspection maintenance and repair activities.

Given this outlook and our first quarter earnings performance, we are reaffirming our previously announced EPS guidance range for the year of $3.90 to $4.10. During the quarter we purchased 500,000 shares of our common stock at a cost of about $35 million. Yesterday we announced a 23% increase in our regular quarterly dividend to $0.27 from $0.22 per share. These actions underscore our confidence in Oceaneering's financial strength and future business prospects.

I would now like to review our operations for the first quarter. Year over year, ROV operating income improved 17% on an increase of days on hire largely to provide drill support services and an improvement in operating margin. Our ROV days on hire increased 10% to approximately 23,900 days, notably on increased demand in the US Gulf of Mexico and offshore Africa and Southeast Asia.

Sequentially although ROV days on hire were flat, operating income increased. This was primarily due to the $3.3 million charge we recorded in the fourth quarter of 2013 to establish an allowance for doubtful accounts related to Brazilian receivables from OGX.

Our fleet utilization rate was 86% compared to 83% a year ago and 87% last quarter. We are still projecting that our fleet utilization for 2014 will be around 85%, but recognize there is risk to this predominantly due to our exposure on floating rigs rolling off contract during the remainder of this year. However, we have possible upside on vessel work so we will see how all of this plays out. We still expect to achieve record ROV segment operating income for the eleventh consecutive year.

Operating margin during the quarter was 30%, up from 29% a year ago and 28% last quarter. We continue to anticipate a 29% to 30% annual margin for ROVs in 2014.

During the quarter we put 14 new ROVs into service and retired four. At the end of March, we had 314 systems available for operation, up from 294 a year ago. Nine of the new ROVs went to work in drill support service and five on board vessels. At the end of the quarter we had ROVs on 167 or 59% of the 283 floating rigs under contract.

Notably during the quarter the number of net floating rigs under contract went up by one and the number of rigs we had ROVs on went up by seven. During the quarter, seven new floaters were added to the global fleet, all had contracts, and we had the ROV work on five of them. We also picked up ROV work on two additional rigs.

Year over year the contracted rig count increased by 12 and the number of rigs we had ROVs on increased by 14. Our fleet mix during the quarter was 75% drill support and 25% on vessel based work, the same as last quarter and about the same as the 74/26 split in the first quarter of 2013. We still anticipate adding 30 to 35 vehicles to our ROV fleet in 2014, 16 to 21 during the remaining three quarters.

We have firm contracts in hand for all of these. Of course the timing of some of these contracted ROVs being placed into service is dependent upon new rig deliveries occurring as currently projected during the balance of this year.

Now turning to subsea products, year over year, first quarter operating income improved 27% due to higher demand for subsea hardware and increased throughput in our umbilical plants. As anticipated, operating income declined sequentially from a record high in the fourth quarter 2013 due to project timing which reduced demand for tooling and subsea hardware and lower umbilical plant throughput.

For the year 2014, we continue to forecast subsea products margin will likely be in the range of 19% to 21%, lower than the 22% of 2013 due to an anticipated change in sales mix featuring a higher percentage of umbilical revenue. However we still expect record segment operating income for the year. Our subsea products backlog at quarter end was $894 million compared to $776 million at the end of March 2013 and $906 million at the end of December 2013. Year over year the backlog increase was attributable to increases in each of our four major product lines led by umbilical and tooling awards.

As for the remaining business operations for the first quarter, subsea projects operating income improved year over year on higher deep-water vessel activity in the US Gulf of Mexico and offshore Angola. In the Gulf of Mexico we benefited from an increase in installation activity, the use of the Norman Flower which we added to our charted vessel fleet in December of 2013 and increased use of the new Ocean Alliance, which was in the shipyard being retrofitted for most of the first quarter in 2013.

Offshore Angola we benefited from the use of Maersk Attender that was released in early February and higher demand for support barges and utility vessels. The Bourbon Evolution 803 which we contracted for work offshore Angola as a replacement vessel for the Maersk Attender went on hire at the end of March.

Sequentially operating income declined as expected but it was better than we had anticipated due to work we secured for deep sea hardware installations in the Gulf of Mexico. Asset integrity income improved year over year on higher service demand in the Middle East and the Caspian Sea area. Sequentially operating income increased due to additional expense recognized in the fourth quarter of 2013 for asset write-offs and to accrue for a former AGR employee past service obligations.

Advanced Technologies operating income was lower year over year on reductions in theme park project work and US Navy submarine maintenance and engineering service activity. Sequentially operating income improved on increases in US Navy and NASA work and better execution on entertainment projects relative to the fourth quarter of 2013.

In summary, our first quarter results were above our expectations and we look forward to realizing a fifth consecutive year of record EPS in 2014. Our focus on providing services and products for deep-water and subsea completions positions us to participate in the continuation of a secular growth trend in oilfield services and products industry.

We were pleased with our flat cash flow generation of $186 million of EBITDA during the quarter. Capital expenditures for the quarter totaled about $104 million, of which $57 million was invested in our ROVs and $30 million was spent on subsea products.

Now let's talk about our 2014 EPS outlook. You might ask since we exceeded our Q1 guidance why are we not raising the 2014 annual guidance. Let me remind you that our earnings estimates contains a considerable amount of uncontracted speculative work and there are nine more months left in the year.

While we feel more confident with our annual earnings guidance with a good Q1 in the record books, we believe it would not be prudent to adjust our annual earnings expectations three months into the year. We are simply reaffirming our 2014 EPS guidance with a range of $3.90 to $4.10.

Compared to 2013, we continue to expect each of our oil field business segments will achieve higher income in 2014. ROVs on greater service demand to support drilling and vessel based projects, subsea products on higher demand for each of our major product lines, subsea projects on growth and deep water service activity and asset integrity on increased demand for our services.

I believe we are well prepared for the opportunities and challenges we face in 2014 and we have both the assets in place and the investment capacity to take advantage of growing demand for our services and products. In 2014, we expect 29 new floating rigs may be placed into service. Six of these occurred in the first quarter and we have the ROV work on four. Of the remaining 23, 12 ROV contracts have been let and we have won 11, leaving 11 opportunities to pursue. However, only one of these 11 rigs has a signed operator contract.

For 2014 we anticipate generating at least $850 million of EBITDA. Our balance sheet and projected cash flow provide us ample resources to invest in Oceaneering's growth. Our organic CapEx estimate for this year is around $450 million.

Of this amount we expect $225 million for adding systems to our ROV fleet and vehicle upgrades, $120 million for enhancing our subsea products capabilities; particularly to expand our IWOCS and tooling rental and service hardware offerings. And $65 million for subsea projects largely to fund the construction progress payments for a new subsea support vessel scheduled to be delivered by the end of the first quarter of 2016. Our focus in 2014 as it was in 2013 will be on earnings growth and investment opportunities.

Moving on to our second quarter outlook, we are projecting EPS in a range of $0.97 to $1.01. Sequentially we anticipate quarterly operating income improvements from all of our business segments led by subsea products on the strength of increased demand for tooling and subsea work systems.

We are also expecting year over year second quarter operating profit increases for each of our business segments with the exception of Advanced Technology. AD Tech operating income is expected to be lower due to a reduction in entertainment project work and incentive fees and a reduction in US Navy engineering services and purchasing activity due to government funding challenges.

On a macro basis we remain convinced that our strategy to focus on providing services and products to facilitate deep-water exploration and production remains sound. We believe the oil and gas industry will continue its investment in deepwater as it remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates and relatively low finding and development costs. We anticipate the demand for deepwater services and products will continue to rise and believe our business prospects for the next several years remain promising.

At the end of March 2014, 116 of the 162 existing high-spec drill ships and fifth and sixth generation semis were contracted to operators other than Petrobras and Brazil. We had ROV contracts on 92 of these for a market share of 79%. There were a total of 100 new floating rigs on order and we expect 72 of these will go to work for operators other than Petrobras and Brazil.

On these, 19 ROV contracts have been let and we have won 17 of them, leaving 53 contracting opportunities to be pursued. So the visibility of growth for this market remains promising despite the fact that some of these new rigs will likely be used to displace existing less technically capable rigs. Looking forward we see no reason why we will not continue to be the dominant provider of ROV services on high spec rigs working for operators other than Petrobras and Brazil.

The outlook for floating rig demand in the Gulf of Mexico remains encouraging. There were 48 rigs under contract in this area at the end of the first quarter, up 10 from a year ago and up 3 from last quarter. We have the ROV work on 42 of them. Furthermore there are six additional floaters scheduled to commence working in the area during the rest of the year and we have the ROV work on all of them.

So even with the possible release of some of the 48 rigs currently under contract, there should be a good level of rig activity for the balance of this year. 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.

Quest Offshore's latest subsea hardware forecast for the period 2014 to 2018 includes an increase in tree orders of about 60% over the previous five years. Although tree orders are projected to decline somewhat in 2014 due to lower demand by Petrobras, tree installations are forecast to continue increasing to an all-time high of about 350, up 8% over 2013, and grow to 420 in 2015, a 20% annual increase.

In addition, Quest is forecasting a 48% increase in umbilical orders for the five-year period 2014 to 2018 compared to the previous five years. While subsea tree orders are a leading indicator of future fuel development activity, it is subsea tree installations outside of Brazil that matter most to Oceaneering. Based on the subsea tree order forecast, Quest Offshore is projecting average annual subsea tree installations of 370 outside of Brazil over the five-year period 2014 to 2018, an increase of over 55% from the previous five years.

The number of subsea completions in service compared to 2013 is projected to increase by around a thousand trees, more than 30% by the end of 2018 in spite of the fact that about 800 wells are forecasted to be removed from service. We believe the projected rise in tree installations and the growing number of subsea completions in service will lead to umbilical and connection hardware sales, demand for IWOCS services and vessel based ROV and tooling demand.

Furthermore, industry and regulatory emphasis on safe and reliable operations is providing additional opportunities for us to demonstrate our capabilities. 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 completive position, technology leadership and strong balance sheet and cash flow enable us to continue to grow the Company and we intend to do so.

In conclusion, for 2014 we are anticipating that we will achieve another record year of EPS performance. We believe this distinguishes Oceaneering from many other oilfield service companies. We appreiciate everyone's interest in Oceaneering and I will now be happy to take any questions you may have.

(Operator Instructions)

The first ones from the line of Jim Crandell.

Good morning.

Good morning.

Kevin, kind of a two-part question on ROVs. I guess nobody doubts that you have firm contracts for this -- these new equipment. But several observers think that a number of the older floaters could go idle, I guess. Do you think there's risk in your overall utilization number at this point from a fairly meaningful number of old floaters going idle over the course of 2014, 2015.

Jim, I want to clarify something before we answer that. When you're talking old floaters, if we're talking the non fifth and sixth generation ones of the lower spec ones, we've quantified that. What we're seeing is that there is more risk being talked about on the fifth generation rigs which we had -- on fifth and sixth generation rigs which we have almost 80% market share of -- outside of Petrobras in Brazil. So yes, to the effect that those rigs stacked or they have idle time between contracts, we do have exposure there more so than we do on the lower spec rigs.

Right. Right. And would you expect at this point that, you know, generation rigs, you know, similar to the Horizon, in that vintage, would go idle here over the course of this year and next year?

I don't think we really have any visibility on that. I mean, so far we're all reading the same stuff. We will see as it unfolds. There is some potential softness there, and we will have to see how it plays out.

Are you seeing any increased pricing pressure on either new contracts or renewals on ROVs? I know there's extreme emphasis on price out there in the oil field. Is that having an effect on your ROV pricing?

Not particularly.

Your next question comes from the line of Jon Donnel, Howard Weil. Your line is open.

Good morning, guys.

Hey, Jon.

A little bit of a follow up question on the ROV and just on the utilization expectations. As we look over the last couple of quarters here, you probably exceeded the expectations, at least from our side of the street. And as we get into the spring and summer months we typically see a pickup in that utilization. Is the continuation on the lower overall full year utilization just a reflection of your thoughts on the risk on the fifth and sixth gen side, or is there more to it that we should be thinking about?

No. There's really not any more to it. We have handicapped the lower end of the older rigs, as Marvin stated earlier, and we really have not tried to guess anything about fifth and sixth gen rigs at this point in time. So as we said, we will just have to see how that plays out.

Is there any meaningful change that, your exposure for those forth gen and older rigs, compared to what you had given us in the last call, or should we be thinking about that in the same order of magnitude?

Same order of magnitude as far as we can see at this point.

Okay. Regarding the capital structure here, with the debt addition and then also the share repurchases here, it looks like there may be a little more room for additional share repurchases, just comparing those two numbers. What's your thoughts, in terms of uses of cash here going forward? And are additional share repurchases something at the forefront for you?

Our cash usages priorities have not changed. It is organic growth, followed by acquisitions. Dividend payment is set, for what we plan to do there. And last is repurchase of shares.

And I think we, you know, have always said that is pretty opportunistic, our main goal is to maintain a fairly constant level of shares outstanding. Beyond that, it would have to be different changes in the market to -- so I wouldn't expect a continuation of that.

Your next question comes from the line of Ian Macpherson, Simmons. Your line is open.

Thanks. Congratulations on another great quarter.

Thank you.

Kevin, I wonder if you can help me understand the mechanics if we get a bad case scenario with sixth gen utilization. Can you explain how that works mechanically for your -- how your idleness unfolds if rigs go, say a fifth gen rig goes idle for two or three months, but a lot of the spread costs stay on it? How does that impact your revenue stream? Do you have --

Pretty dramatically.

(multiple speakers)

-- contemporaneously with the rig, and do you have to mobilize everything off of the rig at that time, and how sticky are your units on the rigs (multiple speakers) contract gaps?

Typically what happens is if the operator is no longer paying for a rig, then we would be off hire. And we have the choice of taking our equipment off and being reimbursed for that by the operator or leaving it on and hoping that the rig will be picked up.

Typically unless it is just a really old rig with very few prospects or it's going to go to cold stack, unless those conditions are there, we leave our equipment on and go with the expectation that they will be recontracted.

And our crews go to the beach, and go home and go off payroll and we close up the ROV control vans and leave it in a secure place on the rig.

Right.

So the revenue stops and depreciation is essentially the only thing that continues.

Okay. Got it. Thanks.

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

Good morning.

Hi.

Could we -- let's move away from ROVs and talk about products and projects. I'm curious if you guys have ever allocated revenues in those two divisions between life of field and installation?

No.

And if so, what the mix is?

We have never done that. Our primary focus is for the projects business now, the primary focus is IMR. We do get involved in installation activities at what I would call the lower end of the spectrum there, below the level of pipe installations and heavy stuff that the big contractors do.

For example, you know, flying leads and connection hardware and that sort of thing, trees we do. We can install trees and we do a fair number of those. But we don't separate those out. But the majority of what we do you could think about in terms of IMR.

Fair enough.

For projects.

For projects. Exactly. And then in products, I guess it's more of an emerging area, right? But some of the -- whether it's acid injection or some of the life of field stuff that you talked about in tooling, is that -- I don't know if you can make a rough allocation for us and think about how that might grow.

I really can't make an allocation on it. I think if you looked at the products sales part of the business, that's all obviously on the construction side of the ledger there. A significant part of the tooling business, that whole group there would -- is more focused towards life of field. And IWOCs could be either.

Your next question comes from the line of Jim Wicklund from Credit Suisse.

Good quarter. Can we talk about the umbilical market for a little bit? How is that going? I know you had gotten some big orders last year. Can we just give a rundown of that market?

Well, the market really has not changed materially. The market conditions are still the same in terms of overcapacity relative to demand. But we do see demand increasing with the forecasts that are out there with Quest and we're continuing to pursue that business.

We're expecting, as we stated earlier to have a better result in the whole product segment this year than we had last year. We also -- we're just pursuing the market as we had been and we're expecting more business from that particular segment, the umbilical part of it this year than we had last year.

And I think the good news -- the good news, Jim, is we had $260 million of product revenue and backlog didn't go down but 12. And I think we expected and do expect during the year to work off of those large umbilical awards that you mentioned that we achieved last year.

In Q1, we were able to replace most of that with another umbilical award. So the thing that I want to remind everybody is umbilical awards are very lumpy, and our quarterly backlog number may vary substantially depending upon timing of those awards.

Okay. And this is -- this is probably a softball question. But I would assume that your umbilicals are as world class as anyone else's?

Absolutely.

Maybe better (laughter).

Your next question comes from the line of Ed Muztafago, Societe Generale. Your line is open.

Hi. Maybe just wanted to stay on the products business a little bit and going back to some of the comments from a couple of the other subsea equipment companies. They highlighted the first quarter as being atypically strong in the Gulf of Mexico on the services side.

I was wondering if you could comment on how you viewed it on a relative basis, and what that might mean for the improvement in 2Q? And secondarily to that, what does it actually take to keep the products business at the high end of your expected margin range?

Well, the margin range, as we articulated pretty consistently, is really all about the mix and how much we have coming from IWOCs and tooling and the higher margin components of the products group relative to umbilicals. And typically, due to the seasonality aspects of those businesses, you expect second and third quarters to be better margin months. Again, bearing in mind, whatever the volume of the umbilical business there is at that time.

From a Gulf of Mexico standpoint, there was nothing notable in our products segment that would spike out the Gulf of Mexico as being particularly good or bad. It was pretty much as expected. And I think there are no implications for Q2 related to how good Q1 was. I mean, we --

I think that is related more to how many trees and things got installed in the first quarter which have service components associated with them. And that's just a timing thing for them.

Okay. Presumably it's the normal uptick in terms of the seasonal pattern in 2Q and 3Q. As a second question, I wanted to try and think on the products business. We had the Maersk vessel come off and the Bourbon vessel come back on late in the quarter. I am not sure how much you know was slack or downtime there was between then.

So just trying to think with respect to the projects business as we go to 2Q and 3Q, can we get back to that 20%, 21% margin level that you guys hit in the middle of last year?

Well, we said margin is going to be slightly improved year over year for the entire year. Notwithstanding quarterly timings. And we indicated that the Maersk Attender went off in the middle of February and the Bourbon Evolution 803 came on at the end of March. And we really mean the end. So there was a little spread there.

Your next question comes from the line of Ole Slorer, Morgan Stanley. Your line is open.

Thanks a lot. I was wondering if you could help us think, or understand how you viewed the opportunity around subsea processing and boosting, and there seems to be some signs that are quite encouraging in terms of projects coming forward there, although of course also things like [orman lung] going on the back burner again. I think we can all understand the opportunity around the drilling rigs.

If that's close to up to 3%, 4% you maintain your market share, that's kind of obvious. But as the industry changes and you're hearing increasingly as you referenced trees, for example, but you're seeing really that the subsea -- the technology players are booking more revenue per tree because there are other things going on, as well.

How do you view this opportunity? What I'm trying to get at, if the industry let's say slows down to a 3%, 4% growth rate on the drilling side rather than the high single digits, how should we -- how do you think about your growth opportunity as you layer in these other opportunities?

Well, I think the life of field or the production cycle is a huge focus for us. I think that stuff goes on for 20, 30 years, however long it goes. With regard to the subsea processing part, we think that is very interesting.

We believe that that would, you know, present a lot more opportunities for our tooling and ROV interface activity for life of field IMR. But having said that, I think that it is -- it is going to happen gradually over time. So I wouldn't see any inflection point there. But I think, you know, it's logical to think that that would provide a lot more opportunities for our businesses just like the relatively dumb iron stuff that is down there now does.

Are you having any discussions with oil company customers, in terms of technology challenges that they need to solve and tools -- dedicated tools and products that you need to develop? You're talking about organic opportunities, is that part of it?

Well, we're always looking at, you know, such organic opportunities. The challenges that the oil companies have -- you know, some of them are pretty large. Like, you know, moving to a 20,000 PSI operating system to, you know, generic problems that are becoming more and more prevalent, like hydro remediation and that sort of thing. So we're talking to them about those specific things. Obviously, it's a whole industry effort to try to get to the 20,000 PSI level.

(Operator Instructions)

Your next question comes from the line of Jim Crandell, Cowen. Your line is open.

I wanted to follow up with a question about ROVs. If you take your non-rig related ROV business, can you give us -- can you give us some sense of the relative importance of the different markets for -- for that, like X percent goes to seismic vessels, X percent OSVs, et cetera?

Okay. Well, 25% of our fleet is engaged in vessel-based activities. And primarily these are on ROV intervention vessels, whether working, you know, directly for us, which is only a few, or working for other folks. And some of that activity is construction related. But that would be probably the smaller share of it all. Primarily directed to intervention activities outside the well bore on the sea bed.

I don't know if we have any in seismic.

No. There's nothing in seismic and we really don't have anything in survey, either.

Okay. My follow-up question is coming back to umbilicals, if we're in for a long subsea cycle here, then we go -- if we go on another three to four years on the upside, is the state of supply-demand in umbilical such that getting better pricing is A, likely, and B, is it a high priority for you, as you think about the business, to try to get better pricing on umbilicals?

We -- there's so much capacity in the marketplace that we don't really see any big opportunity to increase pricing. I think things seem to be getting more technically challenging with cross section designs. We think that favors our high focus on the engineering and technical side of that business.

But unfortunately with so many opportunities for operators to shop around and they're keeping the pricing down. So I really would not expect any big movements in pricing in that.

But, Jim, if we are -- that's really short term. If we are talking about four years of up-cycle and more subsea completions with the technical complexity of umbilicals, I think we will continue to do better as we have over the last three years in getting our share of the market.

So you can -- you can improve your margins and umbilicals from here without pricing primarily because of the increased complexity of the projects?

Well, it's hard to separate pricing and cost. When you get to a more complex umbilical, you're going to have a higher cost and a higher price associated with it.

So I think there's a lot of things moving in the correct direction in umbilicals. But our overriding concern remains the excess capacity. When it's 2X, it's really hard to push pricing.

But volumes definitely help and we are seeing steady increases in volume year to year, at least as far as our business is concerned.

Got it. Thank you.

Yes.

Your next question comes from the line of Daniel Burke, Johnson Rice. Your line is open.

Good morning, guys.

Good morning.

On the projects business, it seems like you all stayed pretty active through the Q4, Q1 period, which can have some seasonal impacts. I was curious, when we look to the step-up in Q2, what portion of that is driven by Angola and the full contribution or near full contribution from the Bourbon vessel, more activity there versus the ability to ramp up more on the Gulf of Mexico side?

I think you're going to see more impact on the Gulf of Mexico between Q1 and Q2, just basically because of seasonality. We said Q1 was a little better than we had expected because we picked up some installation work. So the typical ramp like you saw last year I would not -- I would encourage you to not expect that again next year, because last year we had a lot of ramp-up in Angola between Q1 and Q2.

This year Angola is going full bore with that minor window when the Maersk Attender went off and the Bourbon Evolution came on. So, I would say that the seasonality impact between Q1 and Q2 is going to be in the Gulf.

Okay. Thanks, Marvin. My second question is a little more high level.

I noticed in the press release that you guys had referred to opportunities to add new assets. I don't remember that language having been there in the past. I was curious if that was signaling anything or referencing anything organic or M&A opportunities that you guys feel could be more imminent.

Daniel, thank you for reading our press release all the way to the end. Sometimes attention spans wane when you get near that point. After so many quarters of using the same phrase, we had an enlightening thought or question. If we can meet demand with our existing assets, why are we investing $450 million in CapEx?

So we added a meaningful phrase. We believe we have a great opportunity to continue to grow primarily through organic growth and hopefully some bolt-on acquisitions. We have done this successfully in the past and we expect to continue. That is the full meaning of that new phrase, opportunity add new assets. It just didn't make as much sense to us when we read it again and said, if we have got existing assets to serve demand, that's not the story.

Our story is about sustainable growth. That's what we talk about at all of the conferences. And that's what we just added that phrase in there. I'm glad you read it. Thank you.

We usually try not to be so subtle.

Look, there was a part of me that was hoping there was some signal in there, but I will settle for the more reading comprehension-focused answer.

Okay. Thank you.

Your next question, a follow-up question from the line of Ed Muztafago, Societe Generale. Your line is open.

Hi. Just wondering maybe if you could, on the acquisition topic, talk a little bit. One of the ways that you have grown your business on the ROV side is through occasional acquisition. If we do have slightly lower than expected project activity near term from some of the IOCs pushing CapEx to the right and potentially lower utilization rates on floaters, can you talk about how you see the acquisition markets specifically on the ROV side of the business over maybe next 12 to 18 months?

I don't think we really see any opportunities in the ROV world for acquisitions. Most of the other operators of ROVs have got a core business that they are focused on. You know, Subsea 7 for construction, technique for construction, Fugro, primarily survey, some IMR.

And then there's, you know, a scattering of others. So there really is nobody that would be obvious to buy. So we're not really anticipating that would be in the frame.

And why buy when you can build? I mean, what we have got is a standard fleet. We use our ROVs. They're fungible. Our technicians can run them whether they're in Angola, Brazil, Norway or the Gulf of Mexico or Southeast Asia.

If we add others' ROVs, they would not have been built by Oceaneering, and then you start getting separate crews that can run a 4 versus an SMV or a Shilling. We really see no advantages. If there is a fire sale, which we do not foresee. But our focus is not on ROV acquisitions when we can build them and keep our standard framework for ROVs.

Especially since there aren't really any opportunities.

Right.

Fair enough. Thanks, guys.

All right.

There are no further questions at this time. I'll turn the call back to our presenters. Excuse me.

We do have another question, from the line of Jim Wicklund, a follow-up. Your line is open.

Sorry for keeping you guys later this morning. We talk -- you talked about CapEx for this year. You got the big boat coming in.

Do you have any ideas? Will CapEx, do you think, be higher or lower in 2015? Is there any reason to think you wouldn't keep growing and building and ramping up CapEx as you go?

We're expecting to be able to continue to grow along with the market demand. And so I mean we hadn't really thought what that number would be for 2015. But certainly directionally we think as long as the market continues in the direction it appears to be going, we will have plenty of opportunities to grow organically and hopefully pick up some acquisitions along the way, as well.

Perfect. And the follow-up, if I could. You just raised your dividend.

Yes.

Everybody is doing that. Do you have a yield in mind?

No.

Do you have a goal of raising the dividend every year? What is the dividend plan?

Dividend plan is -- it's been pretty consistent. We look at it, but we have no stated payout or no stated yield objectives or metrics that we are following. But you can look at it and you can see pretty consistently we have been consistent on both.

But I mean we're not a -- we have no stated dividend policy. We review it annually and last three years in a row we have increased it substantially. But I -- you know, past performance should not be indicative of the future.

I have heard that before.

I have too.

Thank you all very much.

Thanks, Jeff.

No further questions. I'll turn the call back to our presenters for closing remarks.

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 record first quarter results and anticipate producing the fifth consecutive year of record EPS for 2014. This concludes our first quarter 2014 conference call. Thanks and have a great day.

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