Good morning. My name is Melissa, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2012 First Quarter Earnings Release Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to your host, Jack Jurkoshek. You may begin your conference.

Good morning. I would like to thank you for joining us and our first quarter 2012 earnings conference call. As usual, a webcast of this event is being made available through the StreetEvents Network service by Thomson Reuters. Joining me today are Kevin McEvoy, our President and Chief Executive Officer, who will be leading the call; Marvin Migura, our Executive Vice President; and Cardon Gerner, our Senior Vice President and Chief Financial Officer. Just as a reminder, remarks we make during the course of the 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 Kevin.

Good morning, and thanks for joining the call. I'm happy to be here with you today. Our record first quarter EPS of $0.47 was above our guidance range of $0.44 to $0.46 and was up over 20% compared to the first quarter of 2011. Year-over-year, all of our business segments achieved higher operating income led by remotely operated vehicles. We are well-positioned to participate in the next growth stage of Deepwater and subsea completion activity. And our outlook for 2012 remains very positive. We are maintaining our 2012 EPS guidance range of $2.45 to $2.65, another record earnings year. For our services and products, we expect continued international demand growth and a moderate rebound in overall activity in the Gulf of Mexico. Yesterday, we announced an increase in our regular quarterly cash dividend to $0.18 from $0.15 a share. This underscores our confidence in Oceaneering's financial strength and future business prospects. I'd now like to review our first quarter oilfield segment results. Year-over-year, ROV operating income improved on the strength of higher demand in most areas of the world, particularly in the Gulf of Mexico and off West Africa. Our ROV days on hire increased 17%. Sequentially, operating income declined slightly due to geographic mix changes and normal seasonality. Our fleet utilization rate during the quarter was 79%, up from 71% in the first quarter of 2011 and flat with the fourth quarter of 2011. We continue to expect that our fleet utilization for the year will be 80% or more. Operating margin during the quarter was 29%, the same as a year ago and last quarter and slightly down from the 30% average last year. We continue to anticipate our ROV operating margin for the year 2012 may be slightly higher than that of 2011. During the quarter, we…

[Operator Instructions] Your first question comes from the line of Jo (sic) [Jon] Donnell with Howard Weil.

I had a question on the project segment. Clearly, a very good quarter for you here. It came in well above our expectations. I was wondering if you could maybe break that down a little bit for us. I know you had the ramp up of the BP Angola project, but my understanding was, that was going to be more gradual over the course of the year. Could you kind of just break out how much of the contribution came from that? And kind of where that project stands relative to your expectations when it's fully running?

Jon, most of the improvement came from the BP Angola contract. And we do -- I mean in -- it's pretty much on course for what we had expected, and we do expect it to ramp up in Q2 and hit full stride in Q3.

Okay. And at that point, will all the -- will you have all your vessels working for it there that are scheduled for it, with all the corresponding ROVs as well?

We should have everything in service, working by the end of Q2.

Okay. That's helpful. And then, I guess, sort of related to that too, typically we see the seasonal slowdown in Gulf of Mexico in that segment as well. Was that maybe less impactful this quarter than we've seen in the past? And I know it's a callout market here but could you talk a little bit about how you see that unfolding as we go out into the summer months?

I think we did have the seasonal slowdown, just exactly as normal. And the weather was pretty bad, but we did have another asset. So the Ocean Patriot made a contribution, and also the operations in Australia acquired from AGR FO.

Okay. And then -- but your outlook is that, that seasonality will reverse itself as is typical here as well, just from the best of your limited visibility right now?

That is our expectation, but as you say, it is a callout, and visibility is not real strong. But we do expect it to pick up, yes.

Your next question comes from the line of Brian Uhlmer with Global Hunter.

I have a question. You're discussing a moderate uptick and ramp-up in the Gulf of Mexico in '12. Are we expecting to see some pent-up demand as we move into '13, that would -- should accelerate that a little bit more?

Well, it's hard to say. I think that the drilling side is clear, is going well. And that's not an issue. The other activity is still a little weak. I think that independence activity is still very, very low, and I don't see anything that looks -- that will change in the near term. I think in the longer term, it is very good outlook with the larger projects that are in the stream there, but that'll be a little ways down the road. But hopefully, it will pick up more than -- it'll certainly be better than it was last year, no question.

And Brian, I think it's very important that we underscore what Kevin said. When we're talking about a gradual recovery in the Gulf of Mexico, we're talking about non-drill support activity.

On -- so on the project side more so?

Projects and products and ROVs, and own vessel base.

Right, right. Now do you guys have an internal forecast for Gulf of Mexico floaters that you're willing to share, that you expect for 2012 and moving into 2013 that kind of drives those estimates?

Wait, we do have some statistics there. They're public.

But just again, you're just asking -- I mean, I just want to be clear on this Brian, the floaters are all drill support and then yes, so what we -- so what we do have -- yes, we've got some good stats.

Okay, fair enough...

Hey, Kevin was jumping in.

Yes, I mean, as of yesterday, there were 32 floating rigs under contract in the Gulf, and we had the ROV contracts on 31 of them which included 34 systems. In comparison, pre-Macondo, we had 31 ROVs on 31 of the 36 rigs working in the Gulf. So that is as of today and right now, the expectation is that 8 more rigs are coming to the Gulf of Mexico during the course of the year and right now, we have contracts on 5 of those.

For how many ROVs? Are they all one per or you have some...

Yes, no. I think we should just -- yes, just consider that.

Okay, good enough.

So there'll be 39 rigs working in the Gulf of Mexico if those all come as currently announced and scheduled, and we'll have ROVs on 35 of them.

Perfect. And an unrelated follow-up. You mentioned integration and acquisition and how that's coming along, could you maybe provide a little more detail on some of the initiatives that you have; specifically, you've talked about targeting the Australian market previously. And how those initiatives are coming along? And if we can start to try and model that into our 2013 estimates? Or back path to '12 and into '13?

I don't think we're prepared to give any more detail or color on that. I mean it's a -- it was a large acquisition, a lot of moving pieces. And as we did state, we're confident that we will be back on stride in the second, third, fourth quarters of this year. And it's really just the normal stuff that goes on in trying to acquire and integrate a large company like that.

Your next question comes from the line of Waqar Syed from Goldman Sachs.

Just on Petrobras, you mentioned, low probably market share, but is that 30% kind of market share sustainable for new rigs with Petrobras? Or you think going forward it could be much less than that?

Jack, you got some stats on that.

Yes. I mean, as the Petrobras ROV fleet continues to grow and we're winning these large tranche orders that they're having out there, our market share is going to decrease. No question about that. What it will ultimately get to, I don't know. I mean because there is another bid on the Street that has been opened, and we are third bidder in that. And as it stands right now we do not expect to win that and now there are 2 others ahead of us. And so that is anywhere from 12 to 24 but how that all plays out, we'll just have to see.

And just to give you some color, we were third, and the price we offered was about 25% higher than that of a low bidder, which was a local Brazilian company that, to our knowledge, doesn't own any ROVs. And according to the bid document, 11 of the ROVs of that 12 to 24 will be used to replace older vehicles on named existing rigs. And we happen to be on 4 of those 11. And our contracts for those 4 expire in the third quarter of 2013, and we don't know, the bid was not specific as to: a, whether it was 12 or 24; or b, what was going to do -- what Petrobras intended to do with the remaining 13, after you account for the 11. So as long as we're not winning the global tenders because we're not willing to take our price down to where it makes no sense for us, I would expect our ROV market share for Petrobras in Brazil, and we're being very specific about that. We love Petrobras outside of Brazil. We love non-Petrobras operators in Brazil because we think they buy in to the value proposition that we offer. So we're focused on the -- those opportunities excluding Petrobras in Brazil, and that's why we're starting to report on that now.

That makes sense. That's helpful. The other thing I wanted to address is, for the new builds that are coming in, the new build deepwater rigs, you probably could imagine demand growth about 1 to 1.2 or so, on the drill support side. What incremental -- and can you quantify like what incremental or what the past patterns have been in incremental demand for ROV has been created on the construction side with the new build rigs coming in?

It's really hard to draw a correlation. I mean, most of the vessel-based activity goes in to field maintenance and installation support. That type of light construction or intervention -- subsea intervention. So I -- we don't have a correlation between new builds, rig deliveries and increase in vessel-based activity. I think it's much later, when the rigs find something and there's a field to work on, is when they put ROVs on boats.

Right. But if you look at the historical pattern, and if you see how the rig count has increased and how the ROV per rig has changed, is there a certain number that has happened? Or has it gone from...

I don't think we look at the business that way. We don't evaluate it that way and don't anticipate it that way. So I don't think that -- we don't see that as a correlation that we would ever do any kind of business planning on. We watch the market day by day, opportunity by opportunity. And we build ROVs to match up with those opportunities as they come. And so guessing about what it might be past that is not helpful to us.

And we really maintain 2 separate lists. We have a list of new builds and existing rigs that we track who's on it. And then, we have a list of new vessels and vessel tenders for ROVs that are coming out or operator tenders. And I mean, the vessel list is very long. But it's a much wider open field for ROV providers.

Your next question comes from the line of Tom Curran from Wells Fargo.

So while we're on Brazil, I guess 2 questions there. The first pertains to the ROV's business. Given Petrobras' expanding weight of incremental demand related to Brazil, how much could that constrain potential weighted average pricing power for you with the ROVs? And one of the reasons I'm asking is because, over the course of the last up cycle, many of us were positively surprised by the pricing power you ended up demonstrating for ROVs globally. And so I'm curious how much Petrobras in Brazil's increasing weight could potentially limit the pricing power you might see over the balance of this up cycle.

Not much if we're out winning the work, right? I mean, it really is a different market. I mean...

Most of that variability is also in the vessel base part of our business where increased utilization and spot market type pricing can contribute to higher margins if you get strong enough continued utilization there because it's shorter-term work. So that really is something that's totally outside of Brazil in terms of our business.

And if we had taken a different philosophy and said we're going to maintain market share, and we're going to go after work for Petrobras and we're going to win and be the low-cost provider, and cut our rates 25% and add 12 to 24 ROVs to a fleet of 300, then there really would be an impact. And that would be noticeable. But since our philosophy is just the opposite, that we will not bid work that's not economic, then I don't see how Petrobras is -- wait, I think the growing market, and that's what we're trying to show today, that still more than half of the rigs on order are not going to Petrobras. And the high-spec fleet that's not with Petrobras, we have 76% of, it continues to grow and will continue to grow. So no doubt that PBR in Brazil has increasing but...

Weight. I don't think that affects anything outside of Brazil, if that's where you were going now.

Yes. I don't think it does.

Okay. And then turning to the umbilicals market. Could you provide us an update on #1 in Brazil, for pre-salt, does it still look as if they're going to attempt to develop much of that with armor wire reinforced thermoplastic as opposed to steel tube? And then #2 on a global basis, what are your thoughts and what was your reaction to Aker's latest announced investment in a new plant in Pekan, Malaysia?

Okay, the answer to your first question is yes. They are sticking with their non-steel tube designs. There are some different hose elements in there and higher pressures that have to be qualified in terms of the new cross-section. But they are still holding to their philosophy of high collapse resistant hoses as opposed to steel tube. On the second question, of course, since we've been saying for some time that there is twice the capacity in the marketplace as demand, it was not a cause for celebration here that there's yet another plant being built somewhere. And I can only imagine that their strategy is, it's closer to Australia, and so that is going to help them. Although, it can't be helping them where they have their other plants, so I don't know, we're wondering why they did buy that.

Okay, helpful. And then last one for me, turning to Subsea Projects, could you give us an update, just broadly in terms of the slate of international opportunities out there, specifically obviously, for the 1 DP vessel that's idle and is eligible to redeployed and then perhaps others, that might not be readily obvious.

The one that's idle, I'm not sure I'm with you.

I thought you saw the -- an idle DP vessel in the Gulf of Mexico within Subsea Projects?

We have -- we added a DP vessel in the diving side of the business in the Gulf of Mexico. Our other several vessels are in the callout market. And in any given day, they might be idle, but they are working actively in the marketplace, all of them.

And it is true that the OI-IV could go international, easier than the other, intervention 1 and 2. But right now, we continue to look for term work. And we don't have -- I mean, we have a prospect list but we're not going to share with you what specific jobs we're chasing and...

I think the main thing to think about here is that while we are looking for the right opportunities that fit our business model for wanting to work internationally with a vessel, I would not be expecting this to be some big growth bang in a short term that's going to affect this business. We have what we have. And if we get another job internationally, fine, but there are few and far between that really fit the model that we are trying to follow here.

Right and we are chasing those few but I really don't think that's something that we should be anticipating. I mean, we're help -- we're -- we want to make sure we execute very well for BP in Angola, so that we can build this book of work. But right now, we're looking for the right next job.

Sure and that makes sense. And if BP were to exercise its option it has to expand the scope of that contract, what would be the earliest, you'd expect them to do that?

That's pretty hard to say. I mean, I think our expectation currently is that, that would be a 2013 event. But they've given us no color on that, and so that's as good as we know at the moment.

And we don't think that would be one of our boats.

No, no, no. It would not be one of our boats more than likely. But it would be more ROVs and the rest of it so.

Right.

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

I'm just wondering on the Subsea Project segment, obviously, the BP project in Angola ramped up, it seems like maybe a bit quicker than we expected. Wondering if you could just kind of help us understand or think about what the potential for margin uplift there is, over the next couple quarters as that project kind of gets to its full run rate.

Real hard to -- I mean, you got -- it is too many variables and including what's the pickup going to be in the Gulf of Mexico. So we have it modeled, but we're not willing to share that, because we're just -- we're not confident enough that we can give guidance on margin. And we just know it's going be better than last year.

Okay. Maybe can ask it a little different way. In terms of the overall cost that you have to absorb from the project, do you guys think you -- that you've absorbed more than half of the costs already?

Not sure. Not sure I got that understood, but I mean, most of the cost that we incur or just job or project related and expensed is part of the work. And the other cost such as the mobilization, that can be deferred over the life of the contract. And then the CapEx is going to be depreciated over the normal. So the ROVs that we bill for -- I mean it's -- I mean, the answer is we've incurred way more than half of the cost we needed to, to get the project started, but it's really not kind of like flowing through at any -- not a normal basis. And so, I can't really go too much further than that.

Okay. That's helpful. And then, just as kind of a second question. We obviously have the Central Gulf lease sale, now planned for the middle of the year. And just wondering, in your minds, if we see a very strong central lease sale, how could that potentially change your outlook for the back half of the year? Or is that really more of a 2013 type event for Oceaneering this year?

It would not change our outlook for this year at all and I doubt it would change it for 2013. Because typically, once operators get a new lease, they're going to spend some period of time: a, before they get around to even doing anything with it; and b, once they do start doing some drilling and whatnot, projects are several years out. So I wouldn't expect that to impact us at all.

And we really do have a pretty good outlook for Gulf of Mexico drilling, if we're going to have 39 rigs drilling at the end of the year. So I think that's a strong -- and maybe some will slip into '13, but there are 31 here today and 8 more on the way.

And I think the time lag is, what it is for these big projects. I mean the majors seem to be targeting the deeper water parts of the Gulf of Mexico these days, and they are making discoveries. And I mean, you know the names of all the ones that are out there, and generally, we are not participating on the installation of those facilities. But it offers a building book of potential intervention business for us, which is really our core business in the Gulf of Mexico on the ROV vessel-based project work that we do. So we see that as a very positive sign. And whenever this really starts up in terms of the Subsea intervention aspect of it, it looks like there's going to be a good run of projects out there to keep it going.

That's fair. And then, you obviously get a -- sort of a seasonal decline off the boats in the first quarter on the ROV side of the business. But given where the field construction and maintenance side of business is in the Gulf, was that reasonably de minimis in the first quarter of this year?

I mean...

No, no. I mean we had serious as normal seasonality in our vessel-based ROV utilization as normal, I mean we...

Okay.

Is that what you were asking?

Yes, yes, just trying to understand, I mean obviously, the utilization rate was basically flat from quarter to quarter. But absent that seasonal decline, the core utilization rate would've been higher than that. So that's all I was trying to understand.

Okay.

I think there's a lot of mix going in to the geographic mix in there. It's not just Gulf of Mexico vessel based. I wouldn't jump to that conclusion.

Right.

Your next question comes from the line of Josh Jayne from Simmons & Company. Joshua W. Jayne - Simmons & Company International, Research Division: Quick one on projects, I know we've talked about it a lot but just to ask it a little bit differently. I just want to understand the revenue side from a seasonality standpoint because we've gone from a business that was predominantly Gulf of Mexico, now with a lot more international weighting. Could you just talk about if we sort of stripped out the BP contract, what we would be expecting in a normal year from a seasonality standpoint?

No. We would be then be talking about how much -- there's too much granularity. If we talk about that, we would be talking about exactly how much revenue we're billing BP and we prefer -- and we don't disclose individual contract details. Sorry about that. Joshua W. Jayne - Simmons & Company International, Research Division: Just directionally. I mean because now there's the AGR component. I mean could you provide a little bit of color around that, differences between Q1 and then, how it might progress over the year? Or you guys aren't going to give that out?

We're not going to give that.

I think it's -- we're just…

We're not going to give it out. We're going to wait to see how things develop and unfold. And I know right now, there were a lot of moving pieces. And I appreciate the difficulty to model, and it's difficult to project as well. Joshua W. Jayne - Simmons & Company International, Research Division: All right. A quick one on the ROV side. Could you update us on how many firm contracts you have for the new ROVs that you're going to put in service for the balance of the year?

I think Kevin said we have 19. Of the 15 to 20 that we expect to add, but we're...

Some could slip into '13 before they get started though but currently, they're -- we're -- they're on schedule for this year. But that's a moving target, as you know.

Your next question comes from the line of John Lawrence from Tudor, Pickering, Holt. John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Just to follow up on umbilicals, I think Brazil and Scotland are doing a little better. I'd imagine Panama City is still the weak link. Could you just, kind of talk about the outlook for Panama City and the outlook for more throughput there?

Well, the Panama City plant is -- the outlook is not great. There's not exactly a lot of activity in the Gulf of Mexico on umbilical orders at the moment. We are sized accordingly for that plant. We are looking for, as we always do, orders from outside the Gulf of Mexico, either Brazil or non-Petrobras operators or West Africa. But it's a very, very challenging market in the Gulf of Mexico right now for the umbilical business. John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: So it's still slow. Would you consider shutting that plant down at all? Or it's just still a long-term asset?

Long term. John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Long term, got it. Okay and then just one more follow-up on ROVs. Given the...

And John, let me just say something about -- I mean, we talked about how drilling ramp up is occurring in Deepwater, Gulf of Mexico. I think the long-term outlook for Deepwater products in the Gulf is just strong. And so it would be very shortsighted to say, why don't we lose all that talent and shutter the plant and then, well, you're not going to get orders when the orders come to the market if you don't have a plant. So we are -- I think we've got a really talented group of people who as Kevin said, have right sized that operation. And I think we're doing the -- not only the economic thing, but we're keeping it alive and well, so that we can do some of the big projects that come along. We are not thinking about shutting down Panama City at all. John D. Lawrence - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay, great. Makes sense. And then, Kevin, just given the visibility you have on the ROV side, for '13 just on ROV additions. I mean, very bullish out there, would kind of a same addition amount as 2012 be reasonable to assume for '13?

It's just too early.

Yes. Yes, it would. Yes, it would.

Your next question comes from the line of Michael Marino from Stephens.

Guys, has your outlook for the IWOCS business kind of changed beyond 2012 -- I guess 2012 is going to be a down year, but beyond that, what's your outlook for IWOCS? I guess what I'm trying to get to, has the market changed with maybe a bit of a customer shift to bigger boys in the Gulf of Mexico being less likely to use you guys for the IWOCS? Or is 2012 just a function of activity and kind of timing?

Well, I think if anything, 2012 is more of a normal year than we experienced last year where there was very heavy demand when actually a good portion of that we didn't really see coming. But it was there, and we were fortunately able to take advantage of it. So last year was a particularly good year and we're back to maybe some more normal levels here right now. So there, from our point of view, has been no shift in market demand or our place in the market in the Gulf of Mexico.

Okay. And you would kind of expect that business to increase with Gulf of Mexico rig count going up and no kind of change to the way you'll track the market.

Well, eventually. But I -- bear in mind that IWOCS units are used for -- in some instances for setting trees, but generally, the drilling rigs are doing that -- more of that than not. And then it's an intervention activity. So it's a question of how much P&A work and/or, well intervention work is there going on. That's really when the IWOCS units are strongest at play.

Have you all seen any or had any success outside the Gulf of Mexico? I know you've been trying to ramp that business for a while, how is that tracking?

Well, we continue work on that. It is a more difficult market outside of the U.S. We do have a number of units in various locations around the world. So we have had some success in that, over the course of the last couple years. If we -- we would certainly like to grow that business further and are trying to do that. And we are adding some systems that have availability to do that. But it's a kind of a slow process, and there aren't -- the opportunities are not as many. And there's a lot more competition outside the Gulf of Mexico.

[Operator Instructions] Your next question comes from the line of Waqar Syed from Goldman Sachs.

Just quickly, on the Subsea Products business, could you provide us with a split -- revenue split, between OII, OIE and Emeritus?

No Waqar, we never split all that stuff out. It would be way, way too confusing for all of us if we started doing that.

Okay. Just quantitatively versus the last year 2011 fourth quarter and the first one, in the split shift -- did the split remain the same? Or is it shift more in one direction or other?

We said that umbilical throughput that products for the balance of the year was going to go up because of increased umbilical throughput. And that margins were likely to go down because of change in mix. I think those 2 go hand-in-hand.

And there are no further questions in queue at this time. I turn the call back over to the presenters.

All right, thank you very much. We appreciate everyone's interest in Oceaneering. Have a great day.

Take care.

Thank you, ladies and gentlemen. This concludes today's conference call. You may now disconnect.