Good morning. My name is Michelle and I will be your conference operator today. At this time I would like to welcome everyone to the Q3, 2010 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. We’d like to thank you for joining us on our 2010 third quarter earnings conference call. As usual, a webcast of this event is being made available to the Street Events Network Service by Thompson Reuters. Joining me today is Jay Collins, our President and Chief Executive Officer, who will be leading the call, and Marvin Migura, our Chief Financial Officer. Just as a reminder, 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’m 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. A record quarterly EPS performance of $1.09 exceeded our guidance range and a first call consensus estimate. This result is especially noteworthy in light of the low level of U.S. Gulf of Mexico deep water activity. Given our third quarter results and an improved fourth quarter outlook, we now expect that our annual 2010 EPS performance will likely be the best in Oceaneering’s history and are raising our guidance range to $3.57 to $3.62 from the $3.20 to $3.40. All things being considered, that will be quite an accomplishment. For the fourth quarter 2010, we are forecasting EPS of $0.80 to $0.85. Our improved fourth quarter outlook since our last earnings call is based on our current forecast of additional product through put at our umbilical plants, additional IWOCS completion and work over service activity, and additional installation inspection and repair maintenance work for our deep water vessels. The increased demand for deep water vessel services is primarily attributable to work that was postponed while the BP Macondo project was underway. We are initiating 2011 annual EPS guidance with a range of $3.45 to $3.75 with the possibility of another record year. Our assessment of international demand is that deep water drilling and construction activity will increase particularly West Africa and Brazil. For our services and products, we anticipate that this demand growth may more than offset lower demand in the Gulf of Mexico. The major uncertainties we face heading into 2011 are when, at what pace and what level permit the Gulf of Mexico deep water projects will rebound. We are anticipating a slow start and a strong finish. Compared to 2010, in 2011, we are forecasting a lower…

(Operator Instructions) Your first question comes from Jim Crandall. Your line is open.

Morning guys. Jay, great job.

Thank you Jim. Good morning.

Jay, my first question is about your umbilical business. My recollection is about a year ago that you know we were looking at low capacity utilization, at least in some regions, pricing pressure, and although you won big contracts, you cautioned about that those might have been won at big price or low prices and not to really be too optimistic about margins. Now you know, you’ve improved profitability. You’re announcing another contract win here, but none of those cautionary statements. Can you talk about what’s really driven the improvement of the business? Is it utilization? Is it just your internal cost cutting or some combination?

I mean first of all Jim, we did right size the business to the level that we could achieve presently, and I think that certainly has helped. I think other fundamentals that you talked about are still problematic. There still is excess capacity in the industry. There still is the relatively low pricing. Our business has been running very well. I think we predictably produced the high on time delivery rates, but I would say this business while it is recovering, there is no – the flood gates have not opened and the real improvement in our product business, you know multiplex has certainly improved, but we’ve also had excellence performance and BPX and IWOCS so I would say multiplex is just one of the components of an improving story, but the flood gates have not at all opened. We’re very pleased by this one award that we’ve received for a large project, but you know, and again, longer term, we’re still looking for margins in sort of the 15 to 18 percent range. We did benefit from this special Macondo situation. So I’d say we’re looking for gradual improvement, but it’s not a total game changer yet.

Jay the Subsea equipment business, can you give at least a ball part estimate as to the relative percentage that Subsea umbilical or multiflex accounts for?

We’ll do that at year end, Jim.

Second question Jay is, on your ROV’s in the Gulf of Mexico, seven getting paid the full day rate, six partial and ten zero I guess. Is the, first of all are you involved in any disputes on what you should be getting from your customers at the present time and secondly, does the different status of your fleet, the differentiated status really have to do more with the contract or the customers, or why is it that, why is it what it is?

Well first of all Jim, we have no disputes with our clients on those matters, and I think some oil companies are, I think the ROV is a critical piece of operation. The crew is a critical part to that service, so I think there are particularly some large majors that are expecting to be able to go back to work in the near future and they want that same crew. They want the ROV on board. I think now the ROV is going to be essential to testing the BOP either on the surface and down maybe when it’s first landed on the ocean floor. So I think they’re considered to be an essential part of the crew, and these companies want to maintain that capability. So I think that is the decision. It’s their decision based on readiness and maintaining crews.

Okay. Good. That’s it for me. Thank you Jay.

You bet.

Next question comes from Jason Wangler. Your line is open.

Morning guys. Nice quarter.

Morning. Thank you Jason.

Just curious as far as with the guidance and what it sounds like you guys keep seeing better and better international work. Do you think the split from essentially 50/50 what you saw last year in terms of work will move higher on the international side maybe going something like 60/40?

At the end of the year I wouldn’t think it would be that much difference. Obviously a little bit of impaired Gulf of Mexico you know, move the number a little bit, but I think that will be just a temporary situation I think.

Okay. And then just maybe for Marvin on buy backs. It sounds like you bought quite a few shares back. Do you expect to continue doing that the rest of this year and into next year?

Jason, we don’t go ahead and we will not predict when we buy back. We bought back 100,000 shares this quarter and you know, we do have a significant amount of cash, and it is our second best use of cash in our minds after growth. Our first focus is going to be growth and you know, we’ll report quarterly on any shares repurchased.

Great. Thanks guys.

You next question comes from Brad Handler. Your line is open.

Thanks, good morning.

Morning Brad.

Could you speak to maybe a couple of different questions. I’ll take them one at a time, but they’re sort of related to Macondo or knock on effects. First, very interesting opportunities you’re talking about in terms of these accumulator skids and the like, but is there a way for you to help us think about the opportunity set that results from this increased safety-mindedness maybe on a given rig relative to what you had in the past?

I think it’s, for Oceaneering as a whole, this is not a needle moving event, but as I was saying, we have been able to replace the Macondo tooling business that we had that was excellent, with these new orders. So I think on an individual rig, this is not a huge investment, and for Oceaneering as a whole, it doesn’t really move the needle, but it is just incrementally very you know, very good business and something that we’re well suited to do. So you know, the skid for example that we’re talking about is something that will rent to the oil company as part of our ROV tooling equipment and this will allow the ROV to function a BOP Subsea. So it’s just an additional piece of equipment, but we’re not only renting this in the Gulf of Mexico, but operators all over the world are seeing that this is a better way to operate the BOP so it’s not just the Gulf of Mexico market. So that’s a nice piece of it. It’s not just in response to U.S. regulations. It’s the industry deciding that this would be a better way to operate.

That makes sense. But your renting, it’s more of a temporary need as part of a ...

No, I think it’s a permanent need. This will be the way that ROV’s interface with the BOP for the future.

Right. That makes more sense. But what you’re trying to say is it’s not a big, it’s not a big number or it’s not a big ...

I’m just saying you know, we’re not talking about hundreds of millions of dollars here. I mean we’re not inventing a new, a totally new business here. It’s just an incremental improvement in a business that we already are doing.

Right. Understand. Okay. And then maybe a separate line of questioning. Can you calibrate for us in the third quarter perhaps how much EPS came in effect from Macondo relief efforts and other things specifically related to Macondo?

I will tell you that there’s 12 percent of our revenue. And truly, we decided not to go back and even try to figure out the Macondo EPS effect. You can imagine that one, it involves all kind of allocations and indirect costs. Secondly, what would we have been doing anyway if we hadn’t had Macondo? I think now in retrospect if we look back on it and see where the Gulf was, where the international market has moved to, my view is that if Macondo had never happened, we would still be having essentially the same earnings results for the year. I think we would have had, I think we’d be right about where we would be right now if Macondo had never happened. So I think it makes the incremental portion of that you know, problematic to even figure out and I think less meaningful.

And to put Macondo in perspective, we think at the end of the year it will have accounted for approximately five percent of our estimated total revenue for 2010.

About $100 million.

Interesting. Very interesting. Okay. Thanks guys. I’ll turn it back to you.

Your next question comes from Michael Marino. Your line is open.

Good morning guys.

Morning Michael.

Question on 2011 guidance. You know obviously the Gulf of Mexico is going to be weaker which would imply record Oceaneering kind of results from international markets. Is that a function of what you all have kind of laid out at the contract level and visibility on or is that a function of maybe your outlook on international construction activity for 2011?

I think not so much international construction activity. It’s just the ROV business as a whole for example. Keep in mind that Macondo was a negative to our ROV business as it decreased the Gulf of Mexico. Next year we think we’ll have increased days of service overall as company, but we’ll have declining days of service in the Gulf of Mexico. So we see increased drilling activity perhaps more rigs and perhaps better utilization internationally. We’re seeing increased demand from vessels that have, where people need additional vessels working in the deep water areas. So those, the combination of those things together all over the world, we believe will have more, more days of service increase there than we’ll be losing in the Gulf of Mexico.

I guess my question is more specific to the construction side. I guess I’m trying to get a feel for what your basic outlook of the global construction market is for 2011 or is maybe your implication that this is you all have some stuff maybe booked like in West Africa for instance that you’ve talked about that it’s more Oceaneering specific and you’re not kind of banking on a real recovery in the global construction market with your guidance.

Michael, on the global construction market recovery, I mean when Jay talks about additional vessels, whether they be for field maintenance, or when we talked – or actual construction activity, that’s how we mainly participate. So we’re not necessarily forecasting a construction activity increase. When we mentioned it in the press release, we’re talking about our call notes, but we’re talking about non-drill support activity, and we see that growing internationally.

Okay. And that’s more Oceaneering specific I guess.

That’s correct.

Okay.

Actually we’re not really saying that the whole construction is somehow booming back.

Okay. That’s what I just wanted to make sure.

That upside is still out there for 2012 or who knows when.

Yes, exactly. That’s where it’s getting. And then to clarify on the tooling benefits in 2011, offsetting the Macondo work, that tooling benefit, is that one time or that’s a recurring revenue stream because it’s a rental product?

Well on the rental product it will be a recurring revenue stream, so we mentioned the accumulator banks themselves that we I think have taken a couple of orders. Maybe one’s a rental. One’s a sale. But our basic tooling thing that we’re talking about is a, will be a recurring, will be part of the new equipment that we’ll be renting on a daily basis all over the world.

Okay. But there’s nothing significant in 2011 guidance that’s, we should consider one time in nature, like one time sales or anything.

No.

Okay. Great. That’s all. Thanks.

You bet.

Your next question comes from Tom Curran (ph). Your line is open.

Good morning guys.

Morning Tom.

Too bad you didn’t buy back more of your stock, huh?

Absolutely. (Inaudible) money poured it back (inaudible). Wish we had.

A few follow up questions on the Gulf of Mexico ROV outlook. Did I hear correctly you expect the floater recount to end 2011 at 25?

Between 20 and 25. That’s our base case.

Okay. And in terms of what that means for ROV’s working should I assume that the construction count remains flat and then you know, what multiplier should I use for drill support on that floater count?

You know we generally have about 85 to 90 percent of the Gulf of Mexico market, so if 20 or 25 rigs are working, we’d be expecting to serve 85 to 90 percent of that fleet with ROV’s, generally one per rig. So that probably answers that question.

Okay. And among the additional new regulations I understand are being considered based on comments Salazar and (Romwich) have made, is it true that they’re considering either making it mandatory or you know, highly advantageous to move to two ROV’s on average per floater so you have a stand by back up one from one?

We do not anticipate that being the case. None of that’s built – nothing like that’s built into our forecast. I’m not, I don’t expect that to happen.

Okay. Is, are you seeing any, because of the increase in risk consciousness and hypersensitivity to it, are you seeing any customers move to do that voluntarily?

I have not seen that so far. Keep in mind that our Oceaneering goal in the Gulf of Mexico is 99 percent uptime, and oil companies often have ROV’s on vessels that they can access pretty quickly. So I would think that could well be covered by the combination of one, we have very high uptime, and two, they have access to ROV’s on vessels that are probably serving their field or supplying services to the boat – to the rig. So we’re not anticipating a structural change like that.

We wouldn’t oppose it should such change occur, but we don’t think it’s necessary.

Okay. My last question on this topic then, it’s maybe where I should have started, but is there anything on the ROV services side then, any kind of benefits or increased revenue potential per floater in the Gulf that you expect to see as a result of the changing rule book.

No.

Not in the ROV segment, no.

That would show up in our tooling sector that we talked about already.

That’s in products.

Yes, that’s in products.

Okay. Thanks guys.

Your next question comes from Chris Blascene (ph). Your line is open.

Thanks. Good morning guys.

Morning.

First question quickly, can you expand a little on your ‘11 guidance range in terms of what your assumptions are for the low end and also with regards to the base case, what your thoughts are in terms of how we progress throughout the year given the anemic permitting that’s going on right now?

You know, I would just tell you that we’re going to stick with our picture that we presented which is you go from where you are now, gradually increasing toward that 20, 25 at the end of the year, and let that be about as granular as we get right now. Keep in mind we haven’t completed even our budgeting process thoroughly. I think we’re not going to give any more detail on that really. I think that’s about as far as we’re going to go on that. Was there another half of that question?

How do we get to the bottom end. Look Chris, we’re not going to go, I mean we said we ran a range of scenarios and there is a lot of variability looking out 15 months to what’s going to happen in the world, so I would say lower utilization, lower margins and less international expansion would get you to the lower end.

Okay. And with the latest departures out of the Gulf of Mexico on the drill support side, how many total ROV’s do you have working in the Gulf now?66, would that be a fair number?

You mean vehicles that are located in the Gulf?

Located in the Gulf currently, yes.

We’ll look that up for you.

It would be close.

That’s about right.

Okay. And anyway you could provide us the break out in terms of utilization outside the Gulf?

No.

No.

We don’t go regional on ROV utilization. We talk about it – we think that since the fleet is mobile, that a global perspective is a better one to look at over time.

Okay. Just one last one if I could. Could you guys update us as to contracts, anything that you might have won in the quarter and things that you see on the near term?

Well there were five ROV jobs awarded on new floating rigs during the quarter and we won four. Jack, do you have the number?

I do. The total number in the Gulf was 32 plus 26 plus 11. 69

So our count is 69 ROV’s in the Gulf of Mexico.

At that date, September 30th.

Okay. Thank you very much.

You bet.

Your next question comes from Jeff Spittel. Your line is open.

Hey good morning guys.

Morning Jeff.

I guess first starting off, could you help us for any opportunities you look forward with the remaining new build rigs that are out there under construction set to come out for the ROV business?

Sure. There are 64 floating rigs on order. 41 of these by our count have been contracted for an average term of seven years. 27 have signed an ROV contract, so that leaves 37 that are still up for grabs. Of the 27 contracts that have been awarded, we’ve won ten of those, the difference being the big Petro (inaudible) that we missed. So 37 opportunities still up for grabs.

Okay. Is there any concentration of those opportunities either with (PemEx) or with (Petrograph) out of the remaining 37 that’s noteworthy or are they pretty evenly spread from a geographic and client standpoint.

Yes, they’re spread.

They’re pretty well spread all over the world.

Sure. And then I guess secondly, touching on the spill response team that some of the majors have put into place, I wouldn’t assume there’s been a lot of traction or movement on that front yet. Any update there as to what you’re hearing?

No, we’re in discussion with that team and I think they’re working hard and as urgently as they can to put their play together and we’re talking with them you know, pretty frequently.

You’re absolutely right. There’s no traction as to orders you know, that have been placed.

Right. Okay. All right, fair enough. Great quarter. Thanks guys.

Thank you.

Your next question comes from John Donald. Your line is open.

Hey John.

Good morning. Most of my questions have been answered already. One more I had on the ROV’s was I think by ODS’s count there are about 30 floaters internationally right now that are under contract but that are going to be rolling off by the first half of ‘11. I was wondering what your exposure might be to those on the ROV side and kind of what your assumptions are for ‘11 in terms of whether those rigs will continue to work and presumably your ROV’s will continue to work on those rigs as well.

Sure. During the third quarter we were on two rigs that came off contract. We’ve left our ROV’s on there. We think, we’re watching. We think they’ll have a reasonable chance to go back to work. We’re watching those. For the rest of 2010 we’re on four rigs that have contract expirations. Three of these are third generation semi’s and one is a fifth generation semi, so we’re certainly watching those closely. If we look at all of 2011, there’s 62 rigs that have contract expirations and we’re on 30 of those. I hope that helps you.

Okay. Yes, that’s helpful. And then in terms of the balance sheet, you guys have been debt free now and obviously have a lot of cash and operating income going forward here. Do you have any target debt to cap ratio that you’d look at either in terms of making a large acquisition or you know, other ways of expanding the business that you’d be comfortable with now, or are you trying to keep that debt level down at zero still going forward.

We are definitely not trying to keep the debt level down at zero. We feel very comfortable with you know, if we could make a large acquisition and use cash, we would do so. We do not have a specific leverage ratio in mind.

We ran for years at something around the 20 percent level. The truth is our cash flow is very secure. Our ROV business is a very strong cash flow generator, so if we needed to leverage up a little more for a significant acquisition that had great cash flow, we’d certainly consider it.

Going back much further, we could get to a debt to cap ratio of 41 percent in one year, and then because of project cash flow and we were building assets for contracted needs, we’d bring it back to 25 within a couple of years. So we see that position with our cash flow generation has only been enhanced, but no, we have no specific debt to cap targets in mind, anything other than above zero.

Okay. Are there any specific assets or services or geographic focuses that you all would be looking at in terms of acquisitions at this point or is it just opportunistic as individual projects come up?

We’re looking everywhere in the world, and I think certainly the moratorium did cause us to think seriously of look at our worldwide distribution. I think we would love to find some more international acquisitions if we can.

Okay. All right. Thanks for your comments.

Tell your bankers to bring some to us.

Will do.

All right. Thank you.

Thanks guys.

There are five questions left in the queue. The next question comes from Stephen Gengaro. Your line is open.

Thanks, good morning gentlemen.

Hi Stephen.

I guess two things I want to hit on. The first, in the quarter sort of the implied day rate on the ROV’s was up. Is that a function of rig support versus construction mix mainly?

I think what happened during the quarter, we seemed to have, you know, we generally have a three-men crew. And then often, our fourth man is called out. And so on a worldwide basis, we had more people working on our average crew per day or men per day. Number of men per day was up. And I think that probably was the biggest single factor around the world that just kind of comes and goes. And it’s sort of a random factor. This was a quarter where there were the higher numbers.

But that’s not a trend, that’s just the noise?

I think that’s correct.

And then you mentioned crews. It actually ties into my next question. What are you going to do with the – are you moving personnel internationally with the ROVs or how does it work? I know you’re expertise on the ROV pilot side is critical. What are you doing with the Gulf folks? Are they moving internationally or are they going to other assets? How does it – are you going to end up…

We’re doing all those things, everything that we can. We have moved quite a few people and fairly more than a hundred people internationally. We have also looked at our other business units that needed expertise and needed some help in their short-term. And we’ve moved people into those business units. We did trim some people off the bottom of our ROV ranks. So we’re doing all those things. We’ve done a good job of protecting our key people and maintaining the expertise that we’ve developed over time because you’re exactly right. Our 99% up time is a function of a well-trained crew. And so we’re not giving up these people easily.

Okay.

And we continue to train non-U.S. personnel who are – if you look in West Africa, the level of expertise in non-U.S. personnel is as high as it is in the Gulf of Mexico. So it’s not – but we’re doing that to protect these positions and these jobs so we don’t lose that expertise during this level of inactivity.

Okay, that’s helpful. And then, just as a final follow-up, what I thought about the sort of the outlook, one of the things that I sort of think about is that rigs in the Gulf generally are more of a positive to ocean area than rigs outside the Gulf. And as we go forward here, and I think we’ve had that discussion. But as we go forward here, is this evolving where that’s less the case going forward? And if so, why? And if not, are you thinking about trying to change that?

I think we really don’t care for sure whether rig works. I think we’d probably do just as bad as well. I mean, there are differences between areas. But rig – one location versus the other is not a big deal to us on the ROV side. I think the bigger difference is our other Gulf of Mexico businesses. So we would rather have 35 or 40 rigs working as if these projects – for it feeds our project business, it feeds our Gulf of Mexico Iwax business. It feeds more of the callout tooling business in the Gulf of Mexico. These are the things that bill that benefit more from a 30 to 40-rig floater (ph) leaving the Gulf of Mexico. I think that’s where it makes the most difference. I think on the rig side, on the ROV side itself, pretty much overwashed depending on where it goes and then we’re all…

I think historically, Steve, and if you look at the composition of the Gulf fleet has had more high-end deeper water assets. And therefore, it’s probably a little bit more profitable than the general mix of the rest of the world. But when you compare like for like equipment, you really see very little difference between whether ROV on drill support or is in the Gulf of Mexico versus West Africa. You have pockets in Southeast Asia with less deep-water-focused equipment. We’re going to learn less. And Brazil, you know, was a very competitive place. And Norway’s rather high cost but I think we’re indifferent as days end when you compare like for like.

You know, I think the question was really beyond the ROV, the other oceaneering services benefit more from Gulf activity. And I was just speaking in terms of are you thinking about ways to change that going forward?

Well, I think some of it is even more transportable than others. But we certainly, you know, our Iwax (ph) business has already, over the last several years expanded to West Africa. We’ve expanded into the UK. We haven’t bidded some contracts but has not one independent contract yet in Brazil. But we are looking to expand that business as we can to get opportunities around the world. Our project-based, our vessel-based project business is particularly designed for the Gulf of Mexico callout although we did put that one vessel in the Gulf (ph) for years. So we’re looking for opportunities that might fit our skill set. But duplicating our callout business into one of the places I’ve discussed that fit quite as well. So you know, we would rather have a stronger Gulf than are not. That’s just the bottom line.

And we are trying all those things that you mentioned or asked about to, you know, moderate the effect but definitely benefit from the strong growth.

Great, that’s really helpful. Thank you.

Next question comes from Joe Gibney. Your line is open.

Thanks. Good morning, guys.

Hey, Joe.

Just a quick question. I just wanted to grill down a little bit more on sequentially what changed in your fourth quarter guidance versus kind of where we were coming out of 2Q. I know directionally, Jay answered this for the most part. But you know, we are sort of heading for more of a 60 to kind of 55 spend guidance for the fourth quarter if I looked at the midpoints of where we were. What is the single biggest factor, I guess, that changed come 2Q between the point to ROV tooling and the escalating safety concerns that you alluded to as being the single largest factor. I certainly know you’ve got a reduced manufacturing cost you brightsized. And you obviously pulled it towards from this deepwater installing work that was postponed. But is that the single biggest factor that we could point to this sort of changed substantially from where we work come out of 2Q?

You know, I’m just thinking about all of our businesses and I think like all of our businesses had just had a little bit better outlook. I mean, I think you mentioned our certainly crew. Even within our project business, I guess we are uncertain as to part of the project activity that we would see and that seems, too, was held up as some of the work that were delayed from a condo is still there. Our Iwax business has continued to be strong as completions are one of the things that’s allowed. And so people argue with these completions. And that one is visible to us, you know, a quarter ago. And our other businesses, though, I think all of them are just doing a little better than we thought. Why would you have a continental (ph)…

You know, I think it was broad-based. And I don’t have a specific segment to point out.

Okay, fair enough. I appreciate that. Just one last one for you on your projects outlook next year, just curious. Thoughts on any incremental doubts (ph) for demand or vessel utilization associated with park abandonment (ph) or wrecker mover. Could you share a certain degree of skepticism as we all do about the BOEM (ph) on the rest of that outlook?

Well, we certainly, we don’t think it’s a game changer for us. But we do think that it’s a plus for the Gulf of Mexico market. You know, it’ll maintain a pretty high level of decommissioning activity over the next years. But you know, if we look at the facts, you know, 3,400 wells to be abandoned and 650 structure by our account, the industry did 1,600 abandonments just last year and 200 structures. So that will happen, you know, if you stay at this level, that will happen over the next three year. We participate in this primarily as a subcontractor. We’re set diving with ROVs, vessel services, ROV tooling. So we’ll continue to do that. I guess the one new thing is we are bringing a new vessel, the Ocean Patriot, with the new status of the Neptune that will be perfect fit for this market. So we think that will be another asset that will play right in this area. So I guess it’s a plus for us but not a game changer. We are certainly talking to our customers in trying to understand what we can do for them and particularly focus on these hundred and fifteen structures that are in water depths greater than 500 feet where we may need a little more deepwater services. So I guess it’s an incremental of small plus, not a game changer.

All right, fair enough. That’s helpful. I appreciate the alternate. Bye.

We now have four questions right in the queue. Your next question comes from Daniel Burke. Your line is open.

Good morning, guys.

Hey, Daniel.

Hey, Daniel.

I had a question actually following up just on that one on the project side looking into next year. Jay, you’ve referenced the Patriot coming into the market. You also have the new Shell water vessel and ocean, I guess, the OI2 back from most of the year. So seems like you have a lot more capital deployed in that business so year-over-year. I was wondering how to think about what kind of year-over-year decrement to expect in terms of operating income on the project side, 11 versus 10.

We’re not going to quantify that.

You know, we’re working on that on our own budget and process at the moment. And you’re right. We have more capital employed in that market. But we do think it’s going to be a down year. Well, at least that’s our view at the moment. But we’re going to be looking to say, you know, more detail into that. But I doubt that we will predict it for you other than giving you a directional information.

And one of the things we see the absence of third-party vessels that we were able to charter in and use in 2010 in support of Macondo. So we see a softer vessel market. Internationally, there is a lot of tonnage being added into the fleet and some of that’s going to migrate to the Gulf of Mexico. So we think it’s going to be – we’ve got a better sweet of assets as you said going into 2011 than we had in 2010. But directionally it will be down.

I think in the big picture, we have more capacity, so if there is opportunity there, I think we’ll be able to take advantage of it, perhaps even better than we have in the past. But we’ll just have to wait and see what happens on that, see what evolves.

Okay. And then, believe it or not, I did have a clarifying question on ROV tooling.

Sure.

The – you said that the ROV tooling revenue stream associated with some of these post response accumulator type items, just to clarify, does that replace the ROV tooling specific revenue you generated at Macondo or is it sufficient to replace the incremental Macondo stream that was fully included in the subsea products?

No, no. There is a tooling revenue.

Component, there is tooling component of that.

There is tooling component of this business unit. Deepwater technical systems that that business unit provides all the tooling. And that business unit is being able to replace its earnings into – that it made from Macondo with these new orders in 2011.

A good clarification question, thanks.

And then I did – one last question, just philosophically, the guidance range for next year’s $0.30 in terms of spread, last year you had a similar $0.30 spread, difference being this year I guess the Gulf of Mexico injects a pretty big variable into the outlook for next year. And I guess I was just wondering if that implies that you actually have a higher underlying level of conviction in sort of your growth opportunities internationally looking into next year?

I don’t know.

Well, we do feel good about the international arena. I wouldn’t talk too much into it though. I think we just thought somehow we felt like one or the other that that was a good range.

That range kept coming up in a variety of scenarios.

I appreciate it. Thanks guys.

Yes.

Next question comes from Waqar Syed. Your line is open.

Good morning, Jay, and congratulations on a great quarter.

Thank you, Waqar.

The question is on the BOP control systems. In the past, you had been one of the best systems in the marketplace. And all has not been in very profitable in the past, but now there are changes in the number of sheer RAMs on the BOPs. Do you see any hope for some incremental sales in the coming years?

No, we’re going to pushing, I would say – if we can may – if we can get a significant order next year for new BOP control system, it wouldn’t be delivered next year, so it really wouldn’t have a big effect on our earnings in 2011. But we are going to be out selling upgrades, incremental improvements that we need more functions, we can certainly help you with that if you need a completely new system, we’re happy to do that. We do think that we’ve got extraordinarily good system that’s modern and capable of handling all the new requirements. So we’re going to be out selling it. And [inaudible] not really a big mover for 2011, but we like this business longer term.

And one of the things Waqar you know that we bring to the table that few others do is working expertise in ROVs, a significant amount of ROV tooling or deepwater technical solutions group and BOP control. So the interface of that is we think going to be very important in our value sale, but as Jay said, any BOP controls would be a 2012 revenue and earnings event.

I would like to comment that the combination of those three business units working diligently with our customers and with OEM equipments provider since Macondo happened and trying to figure out what we were going to need and what we’ll anticipate what the industry would want and then getting that to market and being able to – I think that was a unique combination of skills that allowed to us figure this out, work with our customers, and be able to delivering product now. So I think that was the – that was good combination of skills and now I think that adds a lot of value to our customers.

And that’s what allowed us to get the orders on the ROV tooling side.

Which we are delivering right now.

Sure. Now on this BOP control systems the individual orders can be fairly sizable in terms of revenues. Is $20 million to $25 million something to think about even if for single unit?

I think that’s too high.

25 is too bigger number.

The largest…

But 20 probably is inline, I think last time it was around $15 million but you didn’t make much money, so that’s why I thought probably a little higher than that.

$25 million is rather probably a little too big.

It will be more than $15 million but I think.

$25 million is quite little higher.

Little too high.

Okay.

We haven’t bowled one yet, so I can’t really say what the clearing price is going to be.

Okay, sounds good. Thank you sir.

You bet.

Your next question comes from Victor Marchon. Your line is open.

Thank you. Good morning guys.

Hi Victor.

Hi Victor.

Just two quick ones. First for the Gulf of Mexico, the non-drill support work that you guys see for 2011. Is it fair to assume that you see a similar path of activity as you’re seeing on the drill support side?

That one is a mix bag. It really is – if there is one with less visibility, than drill support because we know when those rigs are going to go back to work. But there is a significant amount of project work that is on the books for 2011 and it really is not as clear as, not as granular as we might think. So one of the things we’re constantly looking at is what vessels are we on and how many more are going to work and what – how can we improve our non-drill support, construction support activity in the Gulf.

I think it is lot lumpier, what projects that are out there that are ready to go maybe they’re ready to go now, maybe they need one more well drilled. But I think it’s not quite as steady growth type deal, I think it’s much more lumpy and it depends on much more on the past work that’s been done ‘09 and ‘10.

Thank you for that. And the second was just clarification and make sure I got the numbers right. The ROV breakdown that you gave at the beginning of 23 ROVs. Was that as of the end of the quarter or was that more of a current number?

It was the number at the end of the quarter. There have been no changes up until today so we’ll reaffirm that number.

Okay, great. Thank you guys. I appreciate it.

Your final question comes from Tom Curran. Your line is open.

Just jumping back into queue here guys with one follow-up. So do I understand correctly that if you’re going to meaningfully expand some of the subsea products related work you do in the Gulf, I’m thinking here I guess more call out in services type work. How much can you grow that truly on an organic basis and then how much would beyond that would it require acquisitions. And I’m trying to get an understanding of how key acquisitions are going to be to meaningfully expanding your subsea products offerings internationally?

Well we’ve had great experience both ways, I mean most of our growth really has been organic I guess in the last few years, but before that we did significant acquisition activity. I think it will be both. Keep in mind, if we end up with 300 plus floating rigs working in the world, that will generate significant more product opportunities than 150, 175 rigs we had in the past decade. So I think organic growth will have significant growth opportunities. But I don’t think we will consume all the cash we’re going to generate. So we will be – that’s why we’re looking for acquisitions as well.

I think the one is we have been talking about today in the ROV tooling side are all related to organic growth, but however I will remind you that we have grown ROV toolings with acquisition of technology and augmenting our offerings by making acquisitions particularly in Norway. We bought a couple of ROV tooling companies and we look to add to that, but in our 2011 guidance we’re talking about organic growth.

I think a significant growth possibility if you look at 2011, 2012. It doesn’t depend on acquisitions. So I think acquisitions are longer term view but I think there is a lot of spring loaded upside in the offshore drilling world as is obvious to everyone at the moment.

Yes, I would agree. Thanks for the color guys. It’s helpful.

You bet.

I have no further questions at this time. Jurkoshek, I turn the call back over to you,

Okay, we would like to thank everybody for joining us this morning and we’ll look forward to talk and see you again towards the end of February. Have a great day.

Thanks a lot.

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

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