Good morning or afternoon. My name is Jake, and I'll be your conference operator today. At this time, I would like to welcome everyone to the 2013 Annual Q4 Earnings 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. Jack Jurkoshek, you may begin your conference.

Good morning, everybody. We'd like to thank you for joining us on our 2013 fourth quarter and year-end earnings conference call. As usual, a webcast for 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 condition 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. Before I get into my customary review of the quarterly results, I would like to address four key points in our earnings release. First, 2013 is a record earnings year for Oceaneering. Earnings per share increased for the fourth consecutive year and 29% over 2012. Second, we're expecting an even better 2014 and reaffirm our previously announced EPS guidance range for the year of $3.90 to $4.10. We are aware of recent 2014 market reports raising concerns about softening demands for older and less technically capable floating drilling rigs, a slowdown in the overall rate of growth in E&P capital spending by our customers, deepwater field development project deferral and cost overruns on field development projects currently underway. At this time, we believe our guidance range already accounts for these concerns and reflects the potential impact to our 2014 results for the deepwater services and products that we offer. The softening of rig demand in 2014 won't to the greatest extent impact our ROV operation. During 2013, ROVs generated 41% of our operating income and approximately 75% of our days on hire were in drill support. At year-end, we had vehicles on 160 floating drilling rigs or 57% of the contracted fleet. Of the 160 rigs, 103 were higher specification rigs, which we define dynamically-positioned fifth and sixth generation semis and drill ships, and 57 were lower specification rigs. So our drill support ROVs were split 64% on high spec rigs and 36% on lower spec rigs. Of the 57 lower spec rigs, 17 had contracts expiring during 2014 with an average contracted period of 175 days. So basically, our ROV contract exposure to this class of rigs is 8.5 rig years out of a total of 160 rig years or 5%…

(Operator Instructions). Your first question comes from Kurt Hallead from RBC Capital Markets. Your line is open.

It was a great opening commentary and summary to addressing all the issues that have been dogging Oceaneering stock here recently, so kudos I guess for dressing an upfront. In that context, you guys referenced factoring in a lot of these issues into the guide points for 2014. The number of questions that I've been getting over the last few weeks is what is the exposure in terms of rig for Oceaneering, rig downtime, and if you can may be just give some indication to maybe how many rates you expect to go down, you mentioned 17 for contract renewal kind of in the lower spec dynamic, if you give some parameters around how you're risk assessing 2014, I think that'll probably be helpful as well.

Well, I think our comments that we're looking at 8.5 rig years out of a total of 160 puts us into perspective. I don’t think we necessarily know anymore than anyone else as to whether these 17 will continue on or not, but we believe that the uncertainty that might exist here is within a limit what we'll opt for our guidance.

I would surmise predicated on the commentary about subsea tree installations going into next year, another primary concern that some investors have voice was the revenue mix shift go into products, projects and is "being much visible", but predicted on the data set that you provided, it doesn't look like there is any really less visibility in product and project opportunities than there is for ROV. Can comment on that?

I think the visibility is that the analyst community doesn't follow and there is not a well publicized source of tree installation. So like there is rig contracts. So I mean, we feel the same way as you indicated that with a growing subsea installation base and the increase in the rate of installation, it plays well to one of our strengths in products and projects and we don't see that much softening, I mean no one is talking about a decrease ion the number of drilling rates, they're only talking about perhaps temporarily slow down in the growth rate. So I think it may not be as visible, but we feel it still as real.

You guys referenced 30 to 35 ROVs is that a gross number or a net number for the year?

That's the gross number. As we've stated previously we are just going to report on requirement as they occur quarterly. And we also said about 4% to 5% per year of the fleet so that somewhere between 12% and 15% would be kind of a normal year, but we will just see how it goes.

Okay. And then use of cash for free cash flow thought process between share repurchase, dividend increases, what's the mind set there?

No, we haven't really changed our position there. Our first priority is organic growth, second is acquisitions and we stated many times that those are more difficult to come up with. Of course dividend payments are there and we have not -- we do have an authorization for continued share repurchase, but we do that on an episodic basis. And we address our dividend increased annually basically in the spring.

Your next question comes from Jim Wicklund from Credit Suisse. Your line is open.

You beat me, good job. The question I want to talk about Quest tree orders and installations and according to Quest 40% of the trees that are going to be installed over the next several years are all in Brazil. I know you guys don't do much rig work in Brazil, but can you talk about how much tree installation business you have in Brazil?

We don't have any tree installation in Brazil. We don't do that there. I mean that really is more a indication of umbilical orders in our Brazilian market as far as trees there.

Okay. Can you talk about -- you talked about mix in umbilical revenues, margins went up, which is good congratulations. As the umbilical orders go through and finish in sometimes second half of '15, can you kind of walk us through what the mix should do to products margins this year, just so we kind of on the progression?

Jim, we have given the answer, we said that the margin for products is going to be between 19% and 21%.

Okay.

And that excludes that the mix that we foresee and so that's kind of the answer.

Okay. And last question if I could, you guys said on the third quarter conference call, you are going to try and raise prices to offset inflationary pressures to try and keep 30% operating margins. Do you still think you can get pricing?

Well, that relates to the ROV business obviously and that is it was not a new thing that we said at the third quarter; we've been saying that forever and that's something that we were constantly trying to do across are continually going up and we are doing our best to try and raise revenue in order to maintain the margin. And it is not a easy thing to do but that's our strategy, that's our objective.

Okay. Let me put it this way. Do you think the market with a net addition of rigs is strong enough to be able to prices in ROVs over the next year or two?

Well, we're really pretty decoupled from the rig pricing with our ROVs since we work directly for the operators but --

I'm just talking about the net rig additions.

Sorry?

Land apart?

Sorry, say that again, Jim.

Well, I'm just saying that you are talking about the net addition of the rigs, I'm just thinking the demand for ROV is going to go up and I'm just wondering how much pricing potentially you might have over the next two years as demand for ROVs and more rigs go out and demand which you have increased.

Well; I mean we could see it on every one of the contracts visibility is so good on these that there is no supply demand imbalance that everybody knows these are coming. So it is a contract by contract negotiation to try and maintain levels and of course operators on the other side are trying to hold the line, if not decrease. And so that's a dynamic that we live with every day. While we are decoupled from rig pricing per se, it would be a tougher environment, we trying to get increases with rig rates are going down there's no question about that.

Your next question comes from Jeff Spittel from Clarkson Capital Market. Your line is open.

May be if we think about the products business, if I heard you correctly I think you said your revenue mix in terms of umbilicals in 2013 was relatively stable year-on-year yet the margins were up 200 basis points. That would lead me to infer that the margins were moving higher and I watch tooling. If that is inaccurate assessment can you help us kind of understand a) if that is sustainable, and b) how that plays into the guidance with the mix shift going on in the products business in '14?

Well obviously, how this stuff plays in how we figure out what our guidance is going to be. And I think within the non-umbilical part of our products business, we have some pieces that are more profitable than others and I think we just enjoy a mix of the more profitable elements of that and that explains that. But it is short visibility to a large extent and so it just makes it more challenging to try and predict, but we have taken all of this in our judgment into account and given the guidance range that we have for that segment.

All right.

And I think it is very satisfying to have 100 basis point improvement in our product margins because we always used to guide to the high teen and two years in a row we came in at the low 20s. And so as we get more umbilical input and you got your cost covered, you do get a slight up tick in contribution there and so -- as you also indicated with higher margins growing almost propositionally with umbilical group at least through '13. I mean that is what gave us the confidence to set as a high teens. Last quarter we did 19 to 21.

That makes sense. I appreciate it. And then may be if we think about if some of the operators might be inclined to defer some capital spending on development projects, would you foresee them shifting some of their spending maybe a little bit more to less capital intensive stuff i.e., deepwater intervention work this year?

I do not think that's the way it goes. I mean, deepwater intervention work happens as it occurs, a need be done. So it is not something they necessarily plan from that context, but your guess is as good as mine on what they are going to do with their money. I think that maybe they would be more particular about what they pull the trigger on to go forward with perhaps and they are having up to now I do not know. But I still believe with all of the drilling and the prospects that are there there could be plenty of opportunity for development that we can participate in.

I think its too early tell how the Capex is going to come down.

But that Douglas-Westwood report that we cited, I thought very interesting because it was just issued in January and they had an earlier report out but they increased their deepwater CapEx in beginning of 2014 for this five-year look. When they had an opportunity they hold it flat or take it down, with everybody with a speculation, we understand that the IOCs and NOCs are going to cut back, they reportedly going to cut back on CapEx but it does not seem to be occurring or projected to occur in deepwater and that is encouraging.

Your next question comes from Ian Macpherson from Simmons. Your line is open.

Hey, thanks. The one thing that stood out a little bit was the -- in the fourth quarter your ROV fleet size and your revenues were flat sequentially. I wonder how -- if that has had any bearing on the growth trajectory that you envision for ROVs in '14 or if you expect some -- may be if you can just remind us of the cadences that expansion that you are thinking about for this year?

I will start, I think we indicated we are going to add 30 to 35 ROVs gross and retire a few. And we added how many, Jack, 20 --

For the year?

For the year, 26. So I think that those trajectory for '14 is really timing of when rigs go to work, when project start, but we added 26 gross in '13 and we are saying in light of all the market conditions 30 to 35 in '14.

Yes, and just reiterate we have firm contracts in hand for 28 of those.

Right, yes.

That is pretty solid outlook I'd say.

So the flat revenue between third and fourth quarter didn't go in and affect as much or does not affect our growth trajectory.

Okay. The build up in the fleet this year while its dependent on the timing of rigs, is it more smooth or do you think it might be more lumpy from quarter-to-quarter?

I do not know.

Takes a while --

Just I mean --

You'll find out on a quarter to quarter --

You will know when we -- just shortly after we do, I think directionally it is more smooth.

Okay. Would you be willing yet to share more of your CapEx plans for your new installation vessel beyond the $65 million that you are planning to spend this year?

No. We think we can. We do not want to for market reason, I mean it is -- we talked about the progress statements just so you will have a sense of what our CapEx is going to be but I mean, when you looked in the grand scheme of things $3 billion balance sheet and $450 million of projected CapEx, no one particular boat is going to cost -- it's not going to change economics that much.

I know. I'm just curious if this is a $160 million asset or $400 million asset.

Okay. Let me answer that. Without any other comic, it is not $400 million asset. We're not building a construction boat here.

(Operator Instructions). Your first question comes from the line of Jon Donnel from Howard Weil. Your line is now open.

I have a question regarding the products backlog. You've mentioned the four large bulk awards but I think this happened during the first half of the year. Can you give us a little more color on the orders you saw during the second half of the year and specifically Q4 which I think came in well over $300 million, and whether or not there were any umbilical awards in there or this order of $250 million plus per quarter base level orders are sustainable here in your mind, absolutely umbilical awards?

We just have one large umbilical order in Q4. (inaudible). I think that because umbilical awards tend to be large and they're pretty episodic you can't really plan on a run rate on that part of our product business, it just happens when it happens.

Sure. That's why I was wondering if that kind of $250 million range per quarter is kind of the base level we should expect from more of just the hardware and (inaudible) and the tooling kind of operating that segment.

I think you might remember -- you are well aware that most of our other product offerings are of much more short cycle than umbilicals. And now that we've got umbilical backlog, it would be very normal when we talked about being episodic or lumpy, it would be not alarming to see borrowing some of this backlog and we're not going to be so focused on the book to bill because it is episodic. So I wouldn’t get too much involved in the book to bill or order rate. I think we're going to look for is can we deliver that 19% to 21% and products continue to be our fastest growing segment.

Okay. And then on the project side, I was just wondering if you could maybe give us little more details around the kind of margins during fourth quarter revenues, it sounds like you have a couple of expansions on projects in Gulf of Mexico and some installation deepwater work, but outside the cost picked up and even in excess of that I wonder if you could kind of describe what were some of the drivers of that and projecting similar occurrences here as you have some of the vessel turnover in Angola through the first half of the year.

I think what we said in the last quarter is that we expect to show a slight improvement in operating margin for the year, and it comes from a range of things. It is additional (inaudible) in the Gulf of Mexico and decrease in dry docking expenses, all for '14. And project is really large to look at on a quarter by quarter basis especially after you go through the two summer quarters, we do expect a lower margin in Q4 and again a lower one in Q1. On an annual basis, I mean, we've talked about the 100 basis improvement in products we have 100 basis improvement in projects and asset integrity and got it all the down the line. We did pretty good. And I think projects is now has to produce steady run rate, but a lot depends on the timing of the projects and the follow up in with a project market and particularly the seasonality aspect of (inaudible) in the fourth and the first quarters.

Okay. I was just wondering I mean, we didn't really see the top line seasonality in 4Q, so I was just wondering if there were specific costs at one end, there is more maybe one-time in nature or how we should think about is we have the transfer of the vessels. I understand have a larger perspective in the year.

No, I just -- I don’t have a clear answer on why revenues went up and operating income, margin came down. It really had to do probably more with mix within the projects segment of the jobs and the shifting of the vessels. So it wasn’t enough for me to do an analysis on that.

There are no more telephone questions at this time.

Okay. Since there are no more questions, I'd like to wrap up by thanking everyone for joining the call. We're very pleased with our results for 2013 including our 10th consecutive record of the operating income performance. 2014 marks our 50th year in business and I look forward to leading Oceaneering to another record performance. We're anticipating a good first quarter start for 2014 with EPS between $0.75 and $0.80. This concludes our fourth quarter year-end 2013 conference call. Have a great day.

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