Good morning. My name is Janice and I will be your conference operator today. At this time I would like to welcome everyone to the Third Quarter 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.

Good morning everybody. I would like to thank you for joining us on our 2007 third quarter earnings conference call. And I would like to particularly welcome those of you who maybe participating in the webcast to this event. Joining me this morning is 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 the call regarding our 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.

Good morning and thanks for joining the call. It's a pleasure to be here with you today. During the third quarter of 2007 we again achieved record quarterly earnings. This is evidenced not only of the high demand we are experiencing for our subsea services and product but also our strong operational performance, Earnings of nearly $54 million were 40% above the third quarter of 2006 more than 10% above last quarter. Our earnings were above both our guidance range and the street estimate as all of our operations particularly subsea projects performed above what had been anticipated. Both the year-over-year and sequential quarterly net income improvements were attributable to record operating income performances by our ROV, subsea products, and subsea projects segments. Year-to-date our subsea products, subsea projects, and inspection businesses have earned more operating income than in all of 2006. Consequently on a company wide basis, we have earned more net income in the first three quarters of 2007 than in all of last year and have already achieved record earnings for the fourth consecutive year. Given our third quarter performance and our slightly improved fourth quarter outlook, we are raising our 2007 EPS guidance to a range of $3.15 to $3.25, a growth rate of approximately 40% over our 2006 results. Looking ahead into next year, our business prospects continue to look promising and we are initiating 2008 EPS guidance with the range of $3.50 to $3.80 based on an estimated average of 56.5 million diluted shares. This growth in EPS is anticipated to be led by continued profit contribution increases from our ROV and subsea products businesses. I'll talk more about this later. Now, I will review our operations for the third quarter. Our ROV business achieved record operating income. Year-over-year ROV operating income increased over…

Thank you Jay. Good morning everybody. Our unallocated expense were higher both year-over-year and sequentially due to the higher incentive compensation expenses. Year-over-year restricted stock expense associated with long-term incentive compensation awards granted in 2002 was a primary reason for the increase. As we've explained before, a portion of the expense associated with the restricted stock grants awarded in 2002 fluctuates with the market price of Oceaneering stock which increased $45, nearly 150% from $30.80 at the end of September '06 to $75.80 at the end of 2007. Our current forecast for the fourth quarter anticipates unallocated expenses at the $22 million to $23 million level down from the $26.5 million in the third quarter. Of course this will partially depend on our closing stock price on the last trading day of the year. Now, moving on to cash flow. If you add depreciation back to our operating income we generated over $110 million in cash flow in the third quarter 35% more than the third quarter of 2006 and 12% above last quarter. Year-to-date our cash flow has been nearly $285 million up 38% for the comparable period in 2006. Capital expenditures during the quarter totaled $66 million. These investments were predominantly for upgrading and expanding our ROV fleet, the acquisition of Ifokus which is a Norwegian developer and manufacturer of specialty subsea products including ROV tooling, and facility expansions in Morgan City and Norway. Approximately 85% of our investments during the quarter and 80% year-to-date have been in our ROV and subsea product businesses. The two operations that offer us excellent growth... excellent future growth prospects as they are tied to deepwater and subsea completion activity. We now anticipate investing approximately $220 million this year. This will mainly be for ROV fleet expansion upgrades, facility expansions acquisitions, including Ifokus, maintenance CapEx projects and vessel upgrades. We are continuing to look for additional accretive acquisitions and organic growth opportunities with better than cost to capital return, and intend to use our strong cash flows and balance sheet to further grow our earnings. Because we have been able to put our cash flow to work, namely in capital expenditures and the subsea products raw materials inventory, our debt increased $18 million during the quarter. At the end of September, we had debt of $263 million and equity of $869 million. Our debt to cap percentage was 23%. Our cash balances were about $15 million to $20 million higher than normal at the end of September because of large receipts from customers at the end of the month. Now I am going to turn the call back over to Jay.

Thank you Marvin. In summary we achieved a record quarterly net income in the third quarter and have already realized record annual EPS performance in 2007 for the fourth year in a row. Our focus on providing services and product for deepwater and subsea completions is a good way to play a major secular growth trend currently underway in the oilfield service and products industry. Looking at 2007 EPS outlook. As we said in the press release and as I mentioned earlier in recognition of our performance during the third quarter and an improved fourth quarter outlook we are raising our 2007 EPS guidance range. We now forecast record EPS for 2007 in the range of $3.15 to $3.25 a growth of approximately 40% over our 2006 record. For specific fourth quarter guidance, we're projecting earnings of $0.73 to $0.83 per share and compared to the third quarter, we expect profit contributions from subsea products to increase on the strength of increased throughput on umbilical manufacturing plants. We are forecasting the operating income contribution from our ROV segment to be about the same. We anticipate our subsea projects in inspection business to seasonally decline. Some of our Gulf of Mexico diving work related to hurricane damage projects will end some time in November. Additionally, we will also be putting two of our dive support vessels into dry-dock for regulatory inspections during a portion of this quarter. And we are predicting lower results from our MOPS and ADTECH segments; MOPS due to decline in engineering project work and lower equity income from the Medusa Spar, ADTECH due to completion of a large engineering contract with normal government spending slowdowns. These slowdowns are attributable to the fact the government appropriations for FY 2008 commencing October 1, 2007 are now being put in…

[Operator Instructions]. Your first question comes from the line of Jim Crandell.

Good morning.

Good morning Jim.

Nice quarter Jay.

Thank You.

Jay,could you give us an update on the number of floating rig orders that are out there... floating rigs out there that have now ordered ROVs and how you continue to do in that segment.

Sure Jim, I'd be glad to. Let me just check my notes here on that, find the right numbers here. 40% have... 46% have contracts, 14% have ROV contracts. We won them all to provide 19 ROVs. That's 46 out of the 69 that we now know of. So it's 69 rigs have been ordered, 46 have operating contracts now. And on those 46, there have been 14 ROV contracts placed. We won all 14 of those jobs, and we're going to provide 19 ROVs on those 14 rigs.

How would you characterize the construction and maintenance ROV market Jay?

It's been very strong. I've been surprised that over the last year and a half or two years that actually our mix has shifted a little bit more in favor of the construction and maintenance activities compared to drill supports. So while drill support's been moving up rapidly, the vessel and construction based ROVs has more than kept pace.

Okay. And last question. How would you expect at this point your average price increases in ROVs over the course of lets say '08 to compare with what you've achieved in '06 and '07?

I am always reluctant to predict that number Jim. That's what you guys do. We're just going to keep trying and I think our best advice is to bet on continued same margins that we have that we've been achieving and it is really more of a volume play at this point in time but it's a hard spot with very profitable companies that we work for but we are continuing to raise our prices everyday.

Okay, we'll keep up that 100% market, Jay?

We will keep trying, Jim. Thank you.

Thanks.

Your next question comes from the line of Scott Gill.

Yes, good morning gentlemen.

Good morning Scott.

Good morning.

Jay, if you could just go back to your commentary on your backlog at sub-sea products, I think I may have taken down my notes wrong. I thought I've heard you say that you lost a $65 million order to a competitor, is that right?

Yes, unfortunately, I hate to report things like that but there was an order that we worked very hard for and competitors have got it.

Okay. But then you also said that you expect backlog at end of the December quarter to be back to at roughly $380 million and could be a little bit higher than that. Right?

Sure.

And so, what do you have in hand that you're seeing today... also given the fact that you expect those numbers to be up a little bit here in the fourth quarter that's going to build that much backlog?

We're working on... we've got a whole list of things that we are working on all the time. So we do our internal forecast on a project by project basis and so I said our $380 million we feel like it is a little bit conservative. Let me give you a little bit analysis on the backlog in general here and quickly as it relates to our forecast of 20%, 25% growth as I anticipate that that's of interest to everyone.

Right.

Our 380 million backlog compared to 360, our projection for that is end of this year compared to 360 at the end of '06 is only up 5%. However, let me take you through a little analysis. When we exclude the respective backlog amount that will not be recognized as revenue within the calendar year both starting '07 and starting... and for '08, these numbers would change to $335 million forecast for the end of this year compared to $290 million at the end of '06. So that's a 16% increase that really focuses on the next calendar year. In addition to your question we talked about some additional orders that we think will come right at the end of the year to about $40 million. We did not include those in our backlog figures and whether they may... end of the year or slide into early '08 that's another 14% on the $290 million figure that we had at the end of '06. So I think on a real apples-to-apples basis on what compared to '06 number really 16% increase is more comparable plus the other $40 million would add another 14%. So, either by year-end or shortly after we believe we'll have an order book of the products business totaling $375 million that will be recognized as revenue in 2008 and that's really a 29% from the $290 million we had at the end of '06. So overall we're quite confident with our 20%, 25% revenue growth for this product business.

Okay, Jay. And as you look at the product forecast for 2008 versus 2007 I think you said up 40%. Do you feel pretty confident that that should be reflective of the type of backlog growth you could see for next year?

I am really reluctant to pick backlog growth. Quest is an indicator of the market out there; I really wouldn't use their numbers to forecast our numbers.

Okay. And just my last question then. Any pricing power on your product side or is this still pretty much going to be volume throughput driven.

I think this is mostly a volume story. But we did say in our commentary that we expect some slight margin improvement in our products group and we move through '08... '07 we have seen margins go up in that business a little bit, and we think that will continue into '08. So, we are little more optimistic than we were this time a year ago on product margins.

Okay. Thank you very good quarter guys.

Hey John, Marvin is going to comment.

Let me just make sure, what I am inferring from your question. I just want to clarify for the group. We are talking about current backlog, quarter end backlog of $344 million growing to $380 million. The loss is $65 million isn't coming out of the backlog.

That's right.

Okay, I just wanted to make sure, okay, so what we are talking about is a $36 million growth in backlog during the fourth quarter.

Quite competitive. Had you won that order, it would have been closer to 400 at end of this quarter, right?

And that's why, we have been saying on the prior calls that we expected backlog to be meaningfully up by the end of the year. And now we think it's not going to be; it will be flat with June of '06... '07, sorry.

Thank you.

Okay. Thank you.

Your next question comes from the line of Neal Dingmann. Neal Dingmann - Dahlman Rose & Co.: Good morning guys.

Good morning. Neal Dingmann - Dahlman Rose & Co.: Say on the ROV side, is it fair to say that, is it still a capacity issue meaning that whatever you could get out the door, the market is still... would eat up?

I would say so far we've been able to put all the ROVs that we build to work. I would say there is still... there is a shortage of people as well as equipment and... but I think the market... we are keeping the market just barely supplied, I would describe it. Neal Dingmann - Dahlman Rose & Co.: You...are those directed or going towards different areas or sort of the same core areas that you had the last couple of quarters.

In terms of the... where the ROV are going to work? Neal Dingmann - Dahlman Rose & Co.: Correct.

I don't think...we're not seeing our mix change very much. So, I think we anticipate the mix to stay about the same. Neal Dingmann - Dahlman Rose & Co.: And then on the subsea projects business, obviously with some of that hurricane work going down a little bit, I mean do you... are you shifting and scheduling some things to take the place of that or are we just to going to see that sort slide down a little bit?

I think, we'll just see a smaller amount of shallow water diving work and that's kind of what we are reflecting, in our forecast for lower business. So, I think that there is really no... nothing to take the place of... on the shallow water diving side, nothing to take the place of that hurricane business. On the deepwater side, we see that certainly as a continuing growing market and that's why we're bringing in another deep water vessel that will come in fourth quarter of '08. So we'll... on one hand we see a shallow... slowdown in the shallow market due to... not as much as hurricane work, we see the deep water market continuing to look good.

And we think... as we mentioned the OI III will go from project... hurricane project work to deep water work.

That's right. Thank you, Marvin. Neal Dingmann - Dahlman Rose & Co.: Okay. And then last question. On acquisitions, you mentioned, you are looking at some obviously with your cash position. What are you seeing in the market as far as... now that I guess some at least the land guys have softened; are we seeing any of that with some of the subsea acquisitions and companies you're looking at or is the market still like I guess as frothy as it has been over the previous quarters, just wondering if you can give us some color there?

I think, we still see at pretty strong on the... anything related to subsea area. We don't look much on the land drilling and land sides. So, I think we haven't... we not really anticipating taking advantage of the softness in the land market in our acquisition work. So, we're still looking hard for products and things that stay out and things where we can add enough value to be able to pay the market price for an acquisition. So, that's really the challenge. Neal Dingmann - Dahlman Rose & Co.: Okay. Great guys, thanks and keep up the good work.

You bet. Thank you.

Your next question come from the line of Joe Agular.

Thanks. Jay could you... given say a 40% kind of growth rate in industry orders next year for Multiflex, could you just kind of remind us what your view is of industry wide capacity to handle the kind of order increases that anticipated?

Sure Joe, I would say at the moment there is excess capacity in the industry. We... our UK plant is going all out, it's got all the business it can handle. Brazil there is plenty of business, but it could do a little bit more in the future and we still have excess capacity in our plant in Panama City. So, I believe that instant ramp up to 40%, I don't know if that's excess capacity in the market. But I believe that there is excess capacity in the market and I think we will be able to meet demand throughout '08. At some point if it keeps growing, these lands may get capacity constrained in the next 2 or 3 years. But I don't think that'll happen in '08.

Right. I mean why shouldn't your ROV business be a leading indicator for your products' business 2 or 3 years out?

I think there is no reason that it's not Joe. I mean put all these the 67, 69 drilling rigs to work, I think that's got to generate business for us and all the subsea players.

And just one last point on the products in the quarter. Obviously strong results, you mentioned in your remarks, kind of OIE and Multiflex, both was kind of equal in magnitude in terms of the improvement or did one do a little bit better than you expected?

I better not get into more detailed discussions of the segment. But I'll say OIE continues to do very well. We think they have great business segments in that group.

Okay. Thank you very much.

You bet.

Your next question comes from the line of Bill Sanchez.

Good morning.

Good morning.

Good morning Bill.

Jay I was curious of the 19 ROVs now that have been ordered for the new build construction on the deepwater side. Are all of those... are you attending on delivering all those next year to floaters coming out, is that part of the 30 vehicles that you are taking delivery of in '08?

No, you really can't try some that way. I mean some of these rigs that have committed are once that are not coming out to a later in the cycle. So, you really can't trace them like that. And as you might imagine, we are building ROVs that are having to go to shipyards, they will be put on rigs that may not come out until '09. So, there is lot of logistics going on behind the scene. So we are just reporting to you ROVs that we are trying to put in service.

Okay. So, there is no real consistent lead time between ROV order and the delivery of the... the ultimate delivery of the rig?

Unfortunately not. Some people are happy to work two or three years in advance and other people tend to put it off in the last six months.

Got you. One other question, you've mentioned the '08 forecast of 40%, and I am just curious, if we look to the back... or the balance of '07, 40% now umbilical orders expected to commence for the Quest data. How comfortable you feel in that Jay and do we possibly see that never coming in less and therefore the growth year-over-year '08 versus '07 is actually going to be higher.

You are saying. What if the Quest numbers is wrong and if not umbilical orders really add up 40%.

Yes, I mean... no, that you don't get 40% of the '07 expected orders in the fourth quarter here, I think if I heard you correctly earlier?

Well, we are really looking at real jobs in our numbers. So, we are not really depending on Quest forecast for that kind of answers. So, we are looking at real jobs and Quest can be right or wrong and really it depends on us winning specific jobs.

Fair point. Thank you sir.

You bet.

Your next question comes from the line Joe Gibney.

Good morning guys. How are you?

Fine Joe. Good morning.

Just wanted to follow-up on the earlier question related to the construction and field maintenance side on ROVs.

Okay.

Curious how you see that mix kind of progressing over the next couple of years, it sort of holding the line with the drilling. But it seems to be picking up a little bit, just kind of curious. How you see that shaping up and kind of geographically, how within the construction ROV side your product mix is currently?

Well I mean, let me... it's easier to talk historically. Let me do that first. I guess we were a little surprised over the last year and a half that there was many opportunities for us on the vessel based projects in vessel based services in West Africa. There were several large vessels that would... wanted two ROVs on board. So that area was... grew faster than we thought. Going forward, I think it's difficult to project long-term and that as to how many vessels are going to need ROVs. But there seem to continue to be a field maintenance vessels that get established in these deepwater fields, all need to be serviced. So, I think... we've been pleased at the vessel maintenance business as good as strong it has been. And I think we are expecting that mix to really stay the way it's stayed somewhere in that same range for the next couple of years.

Okay. You guys booked some BOP control system awards during the quarter I was just kind of curious your outlook within that market, it maybe kind of market share expectations, you think you might be able to garner there going forward?

Really don't have any market share information for you. This is a relatively new start up business for us that's been very successful in achieving some new orders in the market. We're really optimistic about this business; I mean it's starting from a low base. But hopefully, it will grow nicely over the next two or three years. We got to get our product out in the market and these full systems and see it work, and let the customers see what we think is going to be the best estimate in the marketplace. A little too early I think for market share and so forth, but let's get out in the market and get a year's of experience and... but we are very optimistic long-term about that business.

Okay. That's helpful. And just one last question. You mentioned the San Jacinto charter obviously you were wrapping up last quarter. Just kind of curious how you are looking at the bottom MOPS segment overall and kind of how that plays into your strategy moving forward, I mean, I guess timeframe and looking at some of your other assets in there and what you plan to do?

Right. Well we do have a tanker that we bought, that is... would be an excellent asset to turn to a MOPS job. We continue to looking around the world to see if we can find a particular job that works for us. This has been a very episodic kind of investment opportunity for us, it's not essential that we find such an investment. But if we conclude, we can't find the appropriate investment; we might sell that tanker in the future. But we are looking for the right investment and maybe we will find it. So, it's an opportunistic kind of play for us and if we find it, fine if not, we'd probably have a gain in the vessel right now.

And the other two assets that we have, the Ocean Legend and the Ocean Producer all are on contract and are significant contributors to [indiscernible].

That's right.

Fair enough, I appreciate it guys. I turn it back, good quarter.

Yes, thank you.

Thanks.

Your next question comes from the line of Thomas Escott.

Good morning fellows.

Good morning Tom.

Good morning Tom.

A couple of more things about the subsea products. Obviously it was just an outstanding quarter with revenues up sequentially from $117 million to $145 million from June to September. Was there one or two big lumpy shipments, big monster projects that got been shipped in the period, that sort of helped to cap for that. Let's say significant performance or was it just a whole multitude of many projects and nothing... no one specific Job.

Tom on the big, huge monster projects. We do those on percentage of completion anyway. So, it wouldn't be a shipment issue. So, I mean just to make sure that we remind everybody that we do use on most of the large or umbilical contracts, we use percentage of completion accounting for those. So, it goes in... it's not tied to shipment dates, it's tied to as we progress the project.

I think that's probably the best answer. So, now we think it... as we said during the year, we forecast $30 million to $45 million improvement in operating profits from products and I think so far two or three quarters, we've delivered $33 million out of that $30 million to $45 million range. So, we anticipate that this would be a growing business segment for us throughout the year.

No doubt. And then you've segued into the next question, as it relates to that and then there's margin issue. Obviously, the headline operating margin goes from 18% to 21% in the period. But just on a sequential basis, incremental gross margin from June to September on the incremental dollars was like 35% incremental margin. Is that indicative of the strong pricing, that you have embedded in the backlog in new orders or was there anything unusual to make these margin be so big in that period.

Well, I wish I could tell you it was some great new pricing figure strategy that we had Tom. But I think it... as Marvin said it... I think it's just a... just a combination of a bunch of small projects that we put together. I will say that we did complete during this quarter two in Multiflex that were just short of $30 million projects. As Marvin said, we do accrual accounting. One of these projects was in the North Sea in Rosette [ph] in Scotland and the other in Panama City where we completed project to our customer satisfaction pretty much on time and within our own financial expectations. So, we had good results, and I think we... as I said earlier, we expect margins to be up slightly in '08.

Underscore slightly.

Underscore slightly, we are talking about...

We are not talking about huge pricing level.

Note huge changes. So, I think it's incremental and I just tell you we had good performance and good execution in the quarter and we are hoping that... we expect that to continue.

So, that's the bottom line on this is one of these two questions gets to that issue and that is that the performance we saw in September, that it was not an unusual strange event and it was not non-recurring items, it was continuing repeatable sustainable business with embedded higher margins in that backlog.

I think if that wasn't the case, we wouldn't be able to project the growth for '08 and expect just like Marvin said slightly increased margins over '07.

Thank you.

You bet.

Your next question comes from the line Waqar Syed.

Hi. I have the... I have a question on the subsea projects, you mentioned that BP has not exercised it's option to extent contracts in the vessel. Now, is it for both vessels or just one vessels?

No, for both vessels... both vessels.

Okay. So now...

Actually, we are going to be... we were pretty much done the work faster than we thought.

Okay. So, it would be fair to assume then that most of the $20 million shortfall is going to be in the second half of '08? That's when these contracts... the contracts expired in May and June of '08, that...

No, I don't think that would be a fair assessment. I know that the contracts do expire in May and June. As Jay said, we're going to release the Maersk Attender in June after the one-year initial term and we're going to put the OI III after the initial term is up in May. We're going to put that into deepwater work. And the OI IV comes in, in the fourth quarter so I wouldn't model it in the second half. I mean looking at the $20 million projected shortfall, one of the things that I want to remind everybody is we're not going to have $3.5 million of the gain that we had on the ocean service and that was in Q1 and then we're estimating about 5 million of dry dock expenses and the remaining 11.5 balance is split between lost profit opportunity while the vessels are out of service and a softer shallow water diving market.

Okay. Now I know it's difficult but to predict into '09 but you think you could level off in '09, '08? Do you see continued declines in this business if you don't see any hurricane... any additional hurricanes?

Well as we said before we obviously have confidence in this deepwater part of this market and we wouldn't be bringing in the OI IV coming in the fourth quarter of the second half of '08. So we see that deepwater support market that we've been part of as a continually growing business here so we're not really making any forecast for '09 but we're very happy with the sort of base level... growing base level business in the project side of... part of our company.

Would it be fair to assume that maybe half of your income in the business comes from the deepwater part and the rest is more than hurricane related work?

Well we're really not going to try to break it down any farther than product groupings that we give you. So, sorry about that.

Okay. And then on the umbilical side, you mentioned that orders could be up according to Quest about 40%. Could you divide that between what's the order flow for... between steel tubes versus thermoplastics?

You'll have to call Quest and buy that from them.

Okay, all right. Thank you very much.

I was just joking.

I know, I know.

That's a pretty good answer Jack.

Your next question comes from the line of Jordan Shinaar [ph].

Good quarter guys. I was just wondering if you can comment at all on the number of hires and where you are at your target in Q2. You talked about on target for the year, 400 people; and where you are at that and if you can give some guidance going forward.

I think that we were talking about needing to hire 400 ROV pilots during the year and we're quite well on target to do that. We're, I think, having a... have an excellent success in what's a very difficult goal of hiring and training ROV pilots and what is even behind that... everyone of these new jobs has to have new supervisors and so you have to promote and train supervisors as well. So, I don't have numerical number for you. But...

We are on track.

We are very much on track to do that and we are manning our jobs and very focused on training and as I've said earlier, previous call, we view this as a competitive advantage that our training programs and the quality of our cruise and that we can hire and train people all over the world in many nationalities to be... to run our ROV businesses. So it's expensive but we view it as a competitive strength.

Do you see no, then issues going forward with the large roll-outs of the ROVs and to man these things.

It's just a lot of hard work and expenses. But we think we are on track and we are comfortable we can accomplish that task.

Okay. And then just on the dry docks, can you just give some exact timing of when you expect those dry docks and how long the expectations are for those?

No, we are not going to get in to vessel-by-vessel comments or any sub-segment discussion.

Okay. All right, super. Thanks guys

Thanks.

[Operator Instructions]. At this time there are no further questions.

All right. Thank you very much.

Thank you.

We look forward to talking to you next quarter.

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