Oceaneering International : 2023 Annual Report

2023 Annual Report

Freedom™ ROV

Robotics, from Sea to Space

Oceaneering International, Inc.

LETTER TO SHAREHOLDERS

In 2023, we delivered on our expectation to achieve improved financial results. Our consolidated revenue increased 17% to $2.4 billion, with growth in each of our operating segments. Our Subsea Robotics (SSR), Offshore Projects Group (OPG), and Aerospace and Defense Technologies (ADTech) segments generated the highest levels of revenue since 2018 based on our realigned reporting segment structure. Adjusted EBITDA increased significantly as compared to 2022, our fifth consecutive year of improvement, and we generated free cash flow that was more than double that of 2022.

Additional financial highlights of 2023 include:

• • Growing net income to $97.4 million, a year-over-year improvement of $71.5 million;

• • Achieving positive adjusted EBITDA in all of our operating segments, with gains in SSR, Manufactured Products, OPG, and ADTech segments more than offsetting a decline in our Integrity Management and Digital Solutions (IMDS) segment;

• • Generating consolidated operating income of $181 million, a year-over-year improvement of $70.5 million;

• • Growing our consolidated backlog to $2.3 billion at the end of 2023, a 20% increase over year-end 2022;

• • Retiring our 2024 senior notes using proceeds from our 2023 debt offering together with cash on hand;

• • Reducing our long-term debt from $700 million at the end of 2022 to $500 million at the end of 2023, while extending our nearest debt maturity to February 2028; and

• • Growing our enterprise value to $2.2 billion at the end of 2023, as compared to $1.9 billion at the end of 2022.

We continued to develop innovative solutions using our digital and core robotics expertise to increase operational and personnel efficiencies, reduce costs, minimize risks, and lower the environmental impact of operations in offshore and onshore environments. In 2023, we achieved operational milestones with several of our digital and automated solutions:

• » We performed our first commercial project utilizing Freedom™, our hybrid remotely operated vehicle (ROV)/autonomous underwater vehicle (AUV), which successfully demonstrated its ability to collect significantly improved and more complete data sets than are obtainable through traditional AUV inspection techniques.

• » We successfully completed initial deployments of our MaxMover™ autonomous counterbalance forklifts at customer facilities.

• » We conducted the successful field trial of Ocean Perception™, a first-of-its-kind monitoring software for the offshore wind and renewables industry to mitigate negative impacts to marine mammals.

• » We expanded a strategic relationship in connection with our PeopleMover automated guided transit vehicle, which provides us with exclusive sales, manufacturing, and operating rights in key markets.

Other notable operational achievements in 2023 include:

• • Our SSR segment continued to achieve outstanding drill-support ROV performance with 99% uptime achieved during the year.

• • Our Manufactured Products segment received orders for over 200 MaxMover™ autonomous counterbalance forklifts, a 266% increase in orders over 2022. Manufactured Products' overall order intake for 2023 increased to $649 million, a 22% increase over 2022.

• • Our ADTech segment secured a contract to produce the solid rocket booster thermal curtains and produced multiple Crew Module Uprighting Systems (CMUS) in support of multiple Artemis missions, and received significant orders for submarine rescue, large and small ROVs, and manned deep submergence systems.

• • Our OPG segment solidified its strategic presence in Brazil by securing a five-year contract for the operation of three existing drill pipe riser (DPR) systems and the production of one new system to support intervention and completion operations.

• • The Oceaneering team remained steadfastly focused on life-saving rules, with a significant increase in the number of self-verification audits and the implementation of engineered improvements across the enterprise to mitigate risks.

We remained sharply focused on sustainability. Our 2023 Task Force on Climate-Related Financial Disclosures (TCFD) Report outlines our continued commitment to managing the risks and opportunities from climate change, including our 2022 Scope 1 and Scope 2 greenhouse gas emissions data and our 2030 emission reduction targets against a 2022 baseline. We created a Director of Sustainability position in 2023 to ensure consistent focus and leadership on sustainability issues. More recently, we strengthened the technology expertise on our Board of Directors by appointing Ms. Reema Poddar, an experienced innovator, as an independant director.

Looking ahead to 2024, we expect to see continued strong offshore energy activity and stability in our government-related markets. We forecast our 2024 consolidated revenue to grow steadily by more than 5%, with increased revenue in each of our operating segments, except OPG. Our focus remains on safely delivering innovative solutions to our customers' most difficult challenges, both in our traditional offshore energy businesses and our growing mobile robotics, aerospace and defense, and renewables businesses.

Achieving success is a team sport. I am proud to lead our talented and innovative Oceaneers as we celebrate Oceaneering's 60th anniversary this year. Finally, I want to thank our shareholders for their continued trust and support.

Rod Larson

President and Chief Executive Officer

March 2024

2023 Annual Report

Form 10-K

2023 Financial Highlights

Revenue and Gross Margin

Revenue

($ in millions)

Gross Margin

$2,425

$2,500

$2,048

$2,066

$2,000 $1,500

$1,828

$1,869

$1,000

$500

Cash Flow from Operations and Cash

($ in millions)

• $500 $750

• $400 $600

• $0$0 $0

2019

2020

2021

2022

RevenueGross Margin

2023

• $300 $450

• $200 $300

• $100 $150

  $569

  $452 $538 $462

  $374

  2020

  Oceaneering International, Inc. Oceaneering International, Inc.

  2019

  2021

  2022

  Year End Cash and Cash Equivalents

  Net Cash Provided by Operating Activities

  2023

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

• ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the fiscal year ended December 31, 2023

  OR

• ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  For the transition period from to

Commission File Number: 1-10945 ____________________________________________

OCEANEERING INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

(713) 329-4500

(Registrant's telephone number, including area code)

____________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

None ____________________________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☑ Yes ☐ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☑ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☑ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the company has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report). ☑

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☑ No

Aggregate market value of the voting stock held by nonaffiliates of the registrant computed by reference to the closing price of $18.70 of the Common Stock on the New York Stock Exchange as of June 30, 2023, the last business day of the registrant's most recently completed second quarter: $1.8 billion.

Number of shares of Common Stock outstanding as of February 16, 2024: 100,813,143.

Documents Incorporated by Reference:

Portions of the proxy statement relating to the registrant's 2024 annual meeting of shareholders, to be filed within 120 days of December 31, 2023 pursuant to Regulation 14A of the Securities Exchange Act of 1934, are incorporated by reference to the extent set forth in Part III, Items 10-14 of this report.

Oceaneering International, Inc.

Form 10-K

Table of Contents

Index to Financial Statements and Schedules

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Statements of Cash Flows

Consolidated Statements of Equity

Notes to Consolidated Financial Statements

PART I

Item 1. Business.

GENERAL DEVELOPMENT OF BUSINESS

Oceaneering International, Inc. ("Oceaneering," "we," "us" or "our") is a global technology company delivering engineered services and products and robotic solutions to the offshore energy, defense, aerospace, manufacturing and entertainment industries. Oceaneering was organized as a Delaware corporation in 1969 out of the combination of three diving service companies founded in the early 1960s. Since our establishment, we have concentrated on the development and marketing of underwater services and products to meet customer needs requiring the use of advanced technology. The continued evolution of applying our advanced technologies has expanded our presence into numerous adjacent markets focused on autonomous robotics. We believe we are one of the world's largest underwater services contractors. The services and products we provide to the energy industry include remotely operated vehicles, survey and positioning services, specialty subsea hardware, engineering and project management, subsea intervention services, including manned diving and asset integrity and non-destructive testing services. Our foreign operations, principally in Africa, Asia and Australia, United Kingdom, Brazil, and Norway accounted for approximately 58% of our revenue, or $1.4 billion, for the year ended December 31, 2023.

Our business segments are contained within two businesses-services and products provided primarily to the oil and gas industry, and to a lesser extent, the mobility solutions and offshore renewables industries, among others ("Energy"), and services and products provided to non-energy industries ("Aerospace and Defense Technologies"). Our four business segments within the Energy business are Subsea Robotics, Manufactured Products, Offshore Projects Group and Integrity Management & Digital Solutions. We report our Aerospace and Defense Technologies business as one segment. Unallocated Expenses are expenses not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses, including corporate administrative expenses.

Energy. The primary focus of our Energy business over the last couple of years has been toward continuing our operational efficiency programs, as well as hiring, training and retaining personnel to meet the increased demands of offshore energy operations. Our efforts in our Energy business have always focused on efficiency and safety, which in turn has led to environmental and other benefits, including assisting our customers to reduce their carbon emissions in exploring for, developing and producing oil and natural gas and in addressing the ongoing energy transition. We are also focusing on opportunities to develop and deploy our capabilities to grow business in mobile robotics, offshore wind installations (both fixed and floating), nuclear, hydrogen and carbon-capture-and-sequestration ("CCS") markets and tidal energy solutions, as well as expanding our asset integrity management and digital solutions for those markets.

Subsea Robotics. Our Subsea Robotics segment consists of our remotely operated vehicles ("ROVs"), survey services and ROV tooling businesses. We provide ROVs, which are tethered submersible vehicles remotely operated from the surface, to customers in the offshore energy industry for drill support and vessel-based services, including subsea hardware installation, construction, pipeline inspection, survey and facilities inspection, maintenance and repair ("IMR"). We design, build, retrofit and upgrade our new and existing ROVs at in-house facilities, the largest of which is in Morgan City, Louisiana. In 2023, we retired eleven of our conventional work-class ROV systems and replaced them with eleven upgraded conventional work-class ROV systems.

Our work-class ROV fleet size was 250 as of December 31, 2023, 2022 and 2021 and included six IsurusTM work-class ROV systems (which are capable of operating in high-current conditions and are ideal for renewables projects and high-speed surveys) and our battery-operated Liberty electric ROV ("E-ROV") system, which we developed to address customer objectives regarding cost efficiencies, safety, personnel shortages and environmental considerations. The E-ROV system allows our customers to reduce carbon dioxide and other "greenhouse gas" ("GHG") emissions associated with offshore production operations. This system does not require a dedicated vessel to be on standby during ROV operations and reduces the need for ROV and other vessel-based personnel to be transported to and from marine vessels and offshore platforms, making the system more cost-efficient and safer for customer personnel. Additionally, our newest development is Freedom, a hybrid autonomous underwater vehicle ("AUV") and ROV that can complete surveys, commissioning, inspections, maintenance, and repairs without the need for a pilot to monitor and control the entire operation. We intend to continue to expand our remote service offerings in this segment given the potentially significant savings both financially and in CO₂ emissions available from the Liberty and the IsurusTM systems and other E-ROV and hybrid systems we are developing.

Manufactured Products. Our Manufactured Products segment provides distribution systems, such as production control umbilicals and connection systems made up of specialty subsea hardware, along with clamp connectors and subsea and topside control valves. We also provide turnkey solutions that include project management, engineering design, fabrication/assembly and installation of autonomous mobile robotic technology to industrial, manufacturing, healthcare, warehousing and commercial theme park markets.

We provide various types of subsea umbilicals through our Umbilical Solutions division from plants in the United States, Scotland and Brazil. Offshore operators use umbilicals to control subsea wellhead hydrocarbon flow rates, monitor downhole and wellhead conditions and perform chemical injection. Subsea umbilicals are also used to provide power and fluids to other subsea processing hardware, including pumps and gas separation equipment.

Offshore Projects Group. Our Offshore Projects Group ("OPG") segment provides a broad portfolio of integrated subsea project capabilities and solutions as follows:

• • subsea installation and intervention, including riserless light well intervention ("RLWI") services, IMR services, principally in the United States ("U.S.") Gulf of Mexico and offshore Angola, utilizing owned and chartered vessels;

• • installation and workover control systems ("IWOCS") and ROV workover control systems ("RWOCS");

• • diving services;

• • decommissioning services;

• • project management and engineering; and

• • drill pipe riser services and systems and wellhead load relief solutions.

Our OPG segment provides vessel-based services principally in the U.S. Gulf of Mexico and offshore Angola, utilizing a fleet consisting of three owned and six chartered dynamically positioned deepwater vessels with integrated high-specification work-class ROVs onboard, and one owned survey vessel, other spot-chartered vessels and other assets. Our owned vessels are Jones Act-compliant. The dynamically positioned vessels are equipped with thrusters that allow them to maintain a constant position at a location without the use of anchors. They are used in the IMR of subsea facilities, pipeline or flowline tie-ins, pipeline crossings and installations. These vessels can also carry and install equipment or umbilicals required to bring subsea well completions into production (tie-back to production facilities).

Integrity Management & Digital Solutions. Our Integrity Management & Digital Solutions ("IMDS") segment provides asset integrity management, corrosion management, inspection and nondestructive testing services, principally to customers in the oil and gas, power generation and petrochemical industries. We perform these services on both onshore and offshore facilities, both topside and subsea. We also provide software, digital and connectivity solutions for the energy industry and software and analytical solutions for the maritime industry.

Aerospace and Defense Technologies. Our Aerospace and Defense Technologies ("ADTech") segment provides government services and products, including engineering and related manufacturing in defense and space exploration activities, principally to U.S. government agencies and their prime contractors. Many of the services and products utilized in ADTech are applied technologies based on our core competencies and knowledge derived from decades of working in the offshore markets and solving complex problems in harsh environments.

General. We intend to continue our strategy of acquiring, as opportunities arise, additional assets or businesses, to improve our market position or expand into related service and product lines. Our ability to generate substantial cash flow over the last several years has allowed us to reduce our consolidated long-term debt balance and, as a result, provides us with more financial flexibility. In 2021, we repurchased $100 million of our 4.650% Senior Notes due 2024 (the "2024 Senior Notes") in open-market transactions and in the fourth quarter of 2023, we completed a private placement of $200 million aggregate principal amount of additional 6.000% Senior Notes due 2028 (the "New 2028 Senior Notes") and used the proceeds, together with cash on hand, to repurchase all of the remaining $400 million principal amount outstanding of the 2024 Senior Notes. With this optimism comes our firm commitment to maintain our financial and capital discipline.

We continue to focus on generating significant free cash flow and spending capital prudently to leverage our core competencies in new and existing markets. We will continue to develop and deliver technologies to help our customers produce hydrocarbons in a cleaner, safer and more cost-effective manner while increasing our investments into new markets including energy transition, mobility solutions, digital asset management, and aerospace and defense solutions.

DESCRIPTION OF BUSINESS

Energy

Our Energy business consists of the Subsea Robotics, Manufactured Products, Offshore Projects Group and Integrity Management & Digital Solutions segments. Our primary focus over the last couple of years has been toward continuing our operational efficiency programs, as well as hiring, training and retaining personnel to meet the increased demands of offshore energy operations and subsea completions, as well as to a lesser extent, the offshore renewables energy market. The continuing increase in global demand for energy is resulting in improved offshore activity, which in turn leads to more demand for our Energy business services.

Subsea Robotics. ROVs are tethered submersible vehicles remotely operated from the surface. We use our ROVs in the offshore energy industry to perform a variety of underwater tasks, including drill support, vessel-based IMR, installation and construction support, pipeline inspection and surveys, and subsea production facility operation and maintenance. Work-class ROVs are outfitted with manipulators, sonar and video cameras, and can operate specialized tooling packages and other equipment or features to facilitate the performance of specific underwater tasks. As of December 31, 2023, we owned 250 work-class ROVs. We believe we own and operate the largest fleet of work-class ROVs in the world. We also believe we are the industry leader in providing ROV services for offshore drill support, with an estimated 61% market share of the contracted floating drilling rigs at the end of 2023.

Percent of Total

Subsea Robotics revenue:

Amount Revenue (in thousands)

ROV tooling provides an additional operational interface between an ROV and equipment located subsea. We also provide survey services, including hydrographic survey and positioning services and autonomous underwater vehicles for geoscience.

Manufactured Products. We provide advanced technology product development, manufacturing and project management to industrial, manufacturing, healthcare, warehousing and commercial theme park markets. These include:

• • various types of subsea umbilicals utilizing steel tubes, thermoplastic hoses, and power and communication cables, along with termination assemblies;

• • production control equipment;

• • clamp connectors;

• • pipeline connector and repair systems;

• • subsea and topside control valves;

• • subsea chemical injection valves; and

• • autonomous mobile robotic technology, including entertainment systems for theme parks.

Offshore well operators use subsea umbilicals and production control equipment to control subsea wellhead hydrocarbon flow, monitor downhole and wellhead conditions and perform chemical injection. They are also used to provide power and fluids to other subsea processing hardware, including pumps and gas/oil separation equipment. We also provide mobile robotics solutions, including autonomous mobile robot technology, and turnkey solutions that include program management, engineering design, fabrication/assembly and installation utilizing our autonomous mobile robotic technology, to a variety of industries.

Attachments

• Original Link
• Original Document
• Permalink

Disclaimer

Oceaneering International Inc. published this content on 27 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 March 2024 11:56:05 UTC.