Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oceaneeering Second Quarter Earnings Release Conference Call. All lines have been place on mute to prevent any background noise. After the speakers' remarks there will be a question-and-answer session. [Operator Instructions]. In consideration of other participants, please limit your questions to two to three questions per queue. You may queue in again for additional question. Thank you. Mr. Jurkoshek, you may begin your conference.

Good morning everybody. This is Jack, and I'd like to thank you for joining us this morning. And I'd like to particularly welcome those of you who may be participating in the webcast of this event, which is being made available through the company boardroom services conference CCBN. Joining me this morning are Jay Collins, our President and Chief Executive Officer, who will be leading the call; Marvin Migura, our Chief Financial Officer; and Bob Mingoia, our Treasurer. Just as a reminder before we start, remarks we make during the course of this 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 am now going to turn the call over to Jay.

Thank you, Jack. Good morning, and thanks for joining the call. It's a pleasure to be here with you today. During the second quarter of 2007, we achieved record quarterly earnings, almost 25% higher than our previous best reported for the third quarter of 2006. This is evidenced not only of the high demand we are experiencing for our Subsea services and products but also our strong operational performance. Net income of $47.9 million was more than 55% above the second quarter of 2006 and nearly 45% above last quarter. Our record quarterly earnings were substantially above our guidance range and the street consensus estimates. Both the year-over-year and sequential quarterly net income improvements were broad based. All six of our business segments contributed to the increases. As stated in the press release, our above guidance performance was led by our ROV Subsea projects and inspection businesses with each realizing record operating income results. Given our second quarter performance, and our improved annual operating income outlook for Subsea projects and inspection, we're raising our 2007 EPS guidance to a range of $2.95 to $3.10, a growth rate of more than 30% over our 2006 record results. The low end of our current range is higher than the high end of our previous range which was $2.70 to $2.90. This is based upon expectations that during the second half of this year we will achieve continued earnings growth for ROVs and Subsea products and comparable results from Subsea projects. This annual guidance range increase is attributable to our business focus on deepwater and Subsea completion activity and our participation in hurricane damage related platform decommissioning projects. For the quarter our ROV business was even better than we had anticipated as we achieved higher average pricing and more days on higher than…

Thank you, Jay. Good morning everybody. Regarding cash flow: if you add depreciation back to our operating income, we generated almost $100 million of cash flow in the second quarter, nearly 50% more than the second quarter of 2006 and 30% above the last quarter. For the first half of 2007, operating income plus depreciation was approximately $175 million up 40% from the first half of 2006. Capital expenditures during the quarter totaled $61 million. These investments were predominantly for upgrading and expanding our ROV fleet and facility expansions in the UK, Norway, Houston, and Morgan City. Approximately 75% of our investments both during the quarter and year-to-date have been in our ROV and Subsea products operations. We now anticipate investing approximately $200 million this year. This will mainly be for ROV fleet expansion and upgrades, facility expansions, acquisitions, including our recently announced purchase of Ifokus, maintenance CapEx projects and vessel upgrades. We are continuing to look for additional accretive acquisitions and organic growth opportunities with better than cost of capital returns, and we intend to use our strong cash flows and balance sheet to further grow our earnings. Because we've been able to find ways to put our cash flow to work, namely in capital expenditures and Subsea products, raw material inventory, our debt increased $8 million during the quarter. At the end of June, we had debt of $245 million and equity of $793 million. Our debt-to-cap percentage was 24%. Thank you. Jay, now I will turn the call back over to you.

Thank you, Marvin. In summary, our second quarter performance exceeded our expectations and we are looking forward to achieving record EPS performance in 2007 for the fourth consecutive year. Our focus on providing products and services for deepwater and Subsea completions positions us to participate in a major secular growth trend currently underway in the oilfield services and product industry. As we said in the press release and as I mentioned earlier, our business outlook for 2007 has improved since our last earnings release. In recognition of our performance during the second quarter and our improved outlook for Subsea projects and inspection, we are raising our 2007 EPS guidance range. We now forecast record EPS for 2007 in the range of $2.95 to $3.10; a growth of more than 30% over our 2006 record. For specific third quarter guidance, we are projecting earnings of $0.80 to $0.88 per share. After taking into account the production barge San Jacinto contract settlement, we are expecting our third quarter earnings to be about the same as in the second quarter. Compared to the second quarter, we expect profit contributions from our Subsea products operation to increase on the strength of a rise in contribution from our Multiflex umbilical operations, and anticipate the operating income contribution from our ROV business to show a continued improvement, forecast the Subsea project's profit to be about to be the same, and forecast lower results from MOPS inspection and ADTECH segments. Looking beyond 2007, we expect worldwide demand for oil will continue to escalate, production from existing fields will deplete, and the price of oil will remain at high levels. Recent announcements of disappointing oil production growth from several major oil companies highlight the difficulty the producers are having growing production. Pemex's declaration that it intends to spend…

[Operator Instructions]. Your first question comes from Stacy Nieuwoudt [Pickering Energy Partners, Inc.].

Good morning, guys.

Good morning.

Good morning, Stacy.

During the quarter you built 13 ROVs, is this kind of build rate sustainable going forward?

I think our best forecast is what we continue to say is that we believe that on balance we will increase our fleet by about two vehicles a month. If we look at the last 12 months, we've increased by 20 vehicles net and we think that's the best forecast going forward. So, I think in '07, we would see about the same net increase by the end of the year.

Okay. That's helpful. And then pricing momentum on ROV day rates, can you kind of walk us through how you expect this to unfold during Q3 and Q4?

Again, it's a fight everyday to pass along cost increase to our clients, so far we've been successful in doing that, and we continue to expect to maintain our margins in this business. So far we've been able to do that and that's our expectation. These are tough guys we deal with though, so it's not an easy task.

That's helpful. I will turn it back over. Thanks guys.

Your next question comes from Neal Dingmann [Dahlman Rose & Co.]. Neal Dingmann - Dahlman Rose & Co.: Good morning, guys.

Good morning, Neal. Neal Dingmann - Dahlman Rose & Co.: Say, on Stacy's question I am wondering on the ROVs how many disposals are you all looking at or have you said anything publicly for the reminder of the year?

We really don't predict that that's why I just sort of given you the net to a month, is really your best... I think the best forecast for you. Particularly if you look at 2007 as a whole, we got a little ahead of the game by being up 16, but I think by the end of the year 2 a month will be a pretty good forecast net. Neal Dingmann - Dahlman Rose & Co.: Okay. And then obviously Subsea projects had just a stellar quarter, and you did give us some color on that, we are just wondering for the remainder of the year, similar type projects out there or what are you seeing on sort of the bid activity?

Activity is still strong. Obviously, we are in the middle of the BP project on the platform decommissioning and abandonment. We will see continued revenue along that same lines, maybe up a little bit in the third quarter but margins will go down as there is a lot of pass-through cost in that BP project. And I think we had just a tremendous execution in the second quarter, probably better than our average and better than we can expect on an average basis. So, we see continued good market in that world and just to remind you that we are in the RIM business Inspection, Repair and Maintenance and there are more things being put on the ocean floor every day and every one of those things presents an opportunity for us to either help put it there or go back later and check on it. We really like that long term market as well as the short term hurricane-related market. Neal Dingmann - Dahlman Rose & Co.: Sure. And to follow that up, when you are looking at, I guess, pricing... you discussed a little bit on the ROV but on the Subsea products or projects. Are there... are you putting sort of additional, I guess for a lack of better word, bells and whistles on things that you are able to pass through some pricing. I guess, what I'm trying to get a sense of maybe the services versus the actual products. If you are able to sort of pass-through on both sides or is it more on one or the other.

I think on the services side, particularly in the Gulf of Mexico and project I think we provide particular value to the client in that we've got the engineering, the ability to make Subsea tools as well as the operational skill, the vessels to do a complete job for our client. So, I think that package really adds value to the client. And we also have tool rentals in the same kind of services on the... in our Subsea tool and rental business as well. On the product side, I think we're just solving the Subsea, the needs of our client routinely, and we're not necessarily adding bells and whistles on the product side but we're solving problems everyday for our clients. Neal Dingmann - Dahlman Rose & Co.: Okay. And then my last question, obviously, you are generating a nice amount of cash, as you mentioned on discretionary... if you don't see any acquisitions, you see... I guess, that you deem attractive, would you decide to maybe pay down debt or buy shares or... what would be the next in order?

I think we've always said internal investment is the first priority, acquisitions are second, and if we're build up too much cash we have authorization to buyback our shares, but always... and that's always a possibility. We have done it historically in the past.

And in the interim we would pay down debt, so we won't build up cash until our revolver gets paid off, but I mean. Neal Dingmann - Dahlman Rose & Co.: Okay.

And the way they rank up opportunities is exactly what we will do. Neal Dingmann - Dahlman Rose & Co.: Okay, okay, thanks guys, keep up the good work.

Thank you.

Thank you.

Your next question comes from Stephen Gengaro [Jefferies and Company].

Thanks. Good morning. Two questions. The first is on the, I guess, somewhat sensitive topic of ROV pricing and it seems like, if things continue to progress very well... can you give us some indication of the new ROV awards that you've won, I guess, I think you mentioned 18 new ROVs on 12 rigs, are they... how are they priced, is it a long term contract, is it pricing, change on a periodic basis, how does that work exactly. And could you also give us a sense, for kind of directionally where we are going.

Well, we really can't release any information on individual contracts. We negotiate every opportunity individually with the clients. In some cases, we can get some term contract but many of these contracts are relatively short cancellations, but the truth is once we get on rigs we almost never leave the rig. So, I would say you should think of it as continuation of our continued profitability in that sector.

Okay and...

And if we do have long term contracts, we do have opportunities to increase prices periodically. We continue to pass along personnel increases in our contracts.

Okay. Now that's fair, is personnel availability, I mean it's obviously one of your competitive advantages, is that still a big issue in the industry right now?

Well I think it's a tremendous issue. And let's say we have four training schools going in the world and without that we wouldn't be able to support this growth at all. So, there are no excess people in the industry to hire at all. So, it's all dependant upon training your own people and we continue to do that as a strategic advantage to us.

And I think it underscores with... with all the new people and the new equipment, it underscores our focused on execution because there are a lot of moving pieces out there, and it takes a lot of effort to maintain the margins that we have achieved.

Okay. And then on the umbilicals front; as we look at... you've obviously, you've won a lot of work. There seems to be a tremendous amount of work ahead of you to possibly when. When you look at your current capacity, would you hazard a guess on kind of the what level of utilization or how close you are running to full capacity right now, and how that kind of plays out as we try to look out into '08 as far as revenue potential?

I really don't have a good figure on that. I would say that... we said we are going to have bigger business in the second half of the year. We've completed our expansion of our UK facility to increase its capacity by about 50%, and we've been ramping up there during this quarter for a stronger second half in throughput up there, in that business and we very much like our position in Panama City in Brazil for the second half of the year. So, it's not really a easy question to answer, and on total capacity, but I think that we expect continued growth in that market in the second half of this year and in '08.

And we have ample capacity in Panama City, and Brazil.

And we do, that's correct.

Okay. Very good. Thank you.

Your next question comes from Scott Gill [Simmons and Company].

Yes. Good morning gentlemen.

Good morning, Scott.

Good morning.

Hey, let me go back to the ROV pricing. Just refreshing my memory here a little bit on ROVs, is there a difference in the pricing between those ROVs used in construction and those used in drilling applications?

Not necessarily, Scott. They do operate on a little bit different model. In the ROVs on construction, we get lower utilization because they typically, they're dead spots between construction barges. So there we achieve lower utilization but we also usually have higher manning, maybe a six-man crew instead of a three-man crew. So, we achieve higher revenue per day. At the end of the day, we make about the same amount of money from the two different services.

And what about, if you were to contrast a new ROV versus an old one, kind of a day rate difference between those?

Often the new ROV may have some higher spec equipment on it and have a higher capital cost. So, generally would have a higher day rate than the old one, but not in all cases.

And the people component would be about the same.

That's correct.

And like Jay said, with additional crew on all construction jobs the average revenue per day on construction is higher than it is on drill support. However, when you take utilization into... factor in utilization for the year, the profitability is about the same, so we're pretty indifferent.

I guess, I was just trying to look at the third quarter, and given that the nice up-tick you had in the margins on the ROVs, if the mix was going to influence that at all in the third quarter, but it sounds like, Jay, from what you're saying just kind of keep it... keep those margins kind of flattish, is that right?

I think, we're really have said all along that '07 margins we thought would be pretty much flat with '06, as we pass along price increases to our customers.

And Marvin, did I hear you say that '07 CapEx is now expected to be $200 million, is that right?

Yes sir. You did.

And you spent what, 1... a little over $110 million in the first half of the year?

That's correct. And we've got the $20 million announced for Ifokus.

Right that... so, I guess, I am trying to figure what the back half of the year looks like, is that $20 million part of the $200 million?

Yes.

Okay. So we're going to see a significant slowdown in capital spend?

We should, unless new opportunities come up.

Okay. All right and then my last question, Jay, on the project work, can you give us some sort of visibility what 2008 might look like, and is Oceaneering ready to make some commitments to the capital or leases for that business next year?

The BP work that we announced already, those contracts go to the middle of 2008. So that's really the long term contract that we have... the Gulf of Mexico construction project business really is a relatively short-term turnover type work. So, that didn't end up with long-term contracts. So, I think other than the BP jobs that we've announced there isn't any visibility that we can give you. And with regard to... we're always looking at the market and looking at our capacity need. So, I don't have anything to announce at this point in time but that we're always looking around to see how supply and demand are matching up and where we can, sort of our customers need. So, good question, just don't have anything for you right now.

And that's about as close as we are going to get to quantifying 2008 on this call.

I had to make a stab at it.

Good question.

Well, thanks gentlemen. Good quarter.

Thank you.

Your next question comes from Thomas Escott [Pritchard Capital Partners].

Good morning fellas.

Good morning, Tom.

I think all the questions have been asked about ROV pricing and it's... everything that's been said is pretty stout. I mean up 6% quarter-to-quarter sequentially. It sounds like that was spread both from price increases on existing equipment and then some pretty stout new day rates on brand new equipment. Is that a fair characterization?

You know it's a combination of everything, Tom. We take our total revenue and divide it by our total days. So, everything you mentioned, it would be in that mix.

Okay.

Plus there is a change in fleet mix to more construction mix. So, you've really got three things.

Okay. So that it's all in there, and so it's higher, it's probably significantly higher day rates on a brand new ROV being delivered and going to work, plus mix of more construction related work plus price increases on older existing ROVs with other customers.

I think all those things are in there. That's right.

Yes. That's there.

Okay. Thank you. And then on the Subsea products. You've said in the past, and it was true again this quarter that the margins on that kind of move around because of mix issues, and I guess my question is to, do umbilical typically carry a greater mix than say Subsea products or hardware? That's, kind of, one part of that, and then secondly, with all this new backlog. You are up to $370 million new backlog and whatever, is can we anticipate that a lot of that new orders in that new backlog typically across the board are going to carry higher margins than the Company is posting currently?

Tom there is lot of different discussions that we can do. So, what we did in Jay's remarks was we gave you the answer. We think product margins for the year is going to be 17% to 18%. And, yes, generally umbilical, depending upon mix between thermoplastic and steel tube, umbilical margins are lower than the specialty products. And generally our backlog has better margins than historical backlog did, but all those things taken into consideration, and the way we see our Tee leaves for '07, we're going to wind out between 17% and 18%, operating income margin.

Okay. That's a good answer. Thank you.

Your next question comes from Waqar Syed [Petrie Parkman].

Good morning, gentlemen. Great quarter.

Thank you.

Couple of questions. First on the ROV side, the four systems that you disposed off, I would assume that they were idle ROVs?

Not necessarily. I know of one system right now that's working and just finishing its last job and that will be its last job. Generally the older ROVs that probably had the lowest utilization but not necessarily idle.

Okay.

If they've been idle for a long time, we probably would have disposed of them before.

Or it was... and what Jay is taking about is, we look at when a system comes off of a long time job that it may have been on it's remarketibility and if it is remarketibility is low then... and its net book value is fully depreciated, these were old systems generally, and we look at the future value not whether it's idle, and I agree with Jay, if it been idle for a long time, it would have been retired in quarters past.

Okay. So you had crews associated with those four systems already, you had on the payroll?

Again, I don't have the specific numbers but to the extent that they work, which I assume they did some of the time, they would have had some crews working on them.

Okay. So, I just want to understand of the 13 new ROVs that you added, how many new crews were you able to train during the quarter?

Well, we really don't release that number. I think we've said in the past that we were trying to hire in the range of 400 people for the year. So, we are out there doing, hiring people as much as we can but we really don't release quarterly numbers on that, but keep in mind that we got to... for all the systems go to work, we have to hire people and hire people for attrition as well.

And our crews are fungible, I mean, they are not dedicated to one system. And we take a supervisor or we promote somebody on the existing crew to a supervisor and we put him on a new system and we train him. So, I mean the... how many we hire during... and train during a specific quarter, I don't think it's giving you a very valid information that you can use other than we have put 13 systems to work with crews.

Right. Because in the past you've said that the biggest obstacle to increasing capacity over two a month has been crews, and this time you've either... you've added about 13 new, so you could potentially add 13 if you... a quarter if you see the demand so that... on a recurring basis is that correct then?

I would say, keep in mind that when we put... in order to put an ROV to service. First, we have to build it and then it has to go, probably being installed on a rig somewhere in a shipyard. So, there is a lag between when things might be built and when it actually comes into service, and so there are also shortages of equipment in our ability to build the equipment. We think the net two a month is really pretty good balance of both hardware and people. So, and we think we're basically keeping our customers satisfied, we're not really passing on any great jobs that we want.

And I think if we look at Jay's statistics that he gave, we added 20 over the past 12 months, net.

Right.

And we expect to add an average of two a month for the year. The fact that we did 13 in one quarter is pretty short term and is not relevant.

Okay. Sounds good. There have been a number of new drilling rigs announcements, new construction deepwater rigs, have you received any new contracts to provide BOP control systems to these rigs?

I think.

In the last three months or so --?

I think in our backlog we --

We have the one that we announced. And I think -- [Multiple Speakers].

We are not going to make any public announcements about... I am sorry. We're not going to comment on that unless we make a public announcement.

Okay. Fair enough. And then, Jay, just a strategic question; MOPS business, do you really have to be in that business and then the tanker that you have, what are the prospects of converting into FPSO and would you be better served just to outright sell it?

First of all, the MOPS, the rest of our business is certainly not dependent upon the MOPS business. We have historically liked that business and that it gave us a chance to invest significant amount of capital, when we were able to find suitable big project. Clearly it's been an episodic situation where we found a project that fit us. We like owning this tanker at the moment, we are looking at potential jobs. If those jobs don't come through and we always can sell the tanker, and I think we would have a gain in the tanker at the moment. So, we are feeling no pressure really to make any change in our... in operations right there and we will just see what happens.

Okay. Great. Thank you very much.

Your last question comes from Victor Marchon [RBC Capital Markets].

Thank you. Good morning, and congratulations on the quarter.

Thank you, Victor. Good morning.

The first... I actually had two questions on backlog. I wondered if you had the number split for '07 and '08.

No, we do not, Victor. Sorry.

And second part is, Jay, you had mentioned that you expect backlog to occupy in the second half of the year, can you give us any sense as into is that OIE or Multiflex or is it a combination of both.

Well, I think, it's probably... particularly in Multiflex. In our Quest number that we used show us that Quest view is that only less than a quarter of the jobs that they expect to be left in 2007, actually were sold in the first half of this year. So, that 75% of the business, according to Quest, will be transaction in the second half of the year. And maybe it's the second half of '07, could be the same size as all of '06. So, that seems to be driving, I guess, that's one of the thing we see out there. There seems to be a lot of quotes out there, and we think this... some of the business will close in '07, the second half, and that is a major driver of increasing our backlog in the second half of the year.

The bids are outstanding; it's just a question of timing of the awards.

That's right. Correct.

Okay. And that's really, all I had. The rest of the questions, I had were answered. I appreciate it. Thank you.

Okay.

Thank you.

You bet.

There are no further questions at this time.

Excellent. Thank you guys.

Thank you very much. We appreciate your attention.

Bye-bye.

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