Good morning. My name is Jessica, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2014 Q3 Earnings Conference Call. [Operator Instructions] I would now like to turn the call to your host Mr. Jack Jurkoshek. Mr. Jurkoshek, you may begin your conference.

Thank you, Jessica. I'd like to thank everybody for joining us on our 2014 third quarter 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 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 Kevin.

Good morning, and thanks for joining the call. Today, I will deviate a bit from the normal flow of our opening remarks by beginning with a summary of what I'm about to discuss. We feel the following 6 items represent the take-home value from this call. Number one, we achieved record EPS for the quarter. Never in Oceaneering's history have we ever generated quarterly net income of $124 million, or EPS of $1.16. Number two, 2014 should be a record earnings year for Oceaneering. We are clearly on track to outperform 2013's record EPS of $3.42. Number three, over the course of Quarter 3, we repurchased 3 million shares of our common stock. And year-to-date, we've returned $318 million to our shareholders in the form of stock buybacks and cash dividends, not counting the quarterly dividend that was declared yesterday. Number four, we have 5.4 million shares remaining under our current Board of Directors share repurchase reauthorization, and we intend to repurchase all of these shares in due course. Number five, we have taken steps to provide significant additional financial flexibility through 2 actions. First, we increased our committed bank facilities to $800 million, exactly double the $400 million we had available at the end of September. And second, yesterday, we filed an S-3 shelf registration statement to enable the issuance of unsecured debt, as we consider adding a layer of long-term debt to our balance sheet. Number six, we are initiating 2015 EPS guidance with a range of $4.10 to $4.50, based on an average of 105.7 million diluted shares. If we were to achieve the bottom of our guidance range, 2015 would most likely be another record year of earnings, even in view of the much publicized concerns regarding the future deepwater activity. Of course, there is a…

[Operator Instructions] And your first question comes from the line of Jim Wicklund. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Kevin, the borrowings are interesting, and we've all read the reasons for them, which is everything possible. And maybe the question that comes to mind is, are you going shopping? Are you willing and planning to lever up a little bit to buy back stock in your undervalued situation? What takes precedence here, do you think?

Well, as we have repeatedly said the 4 uses of our cash remain there, some priorities could be shifting based on what's going on in the marketplace right now. But we're not going to give any more color than that. But obviously, we're prepared to be flexible and move forward in each of the 4 areas. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Do you have a predetermined ceiling as to what you're comfortable with the debt to cap rate being longer term?

No, other than I think, as we stated earlier in the notes, we're going to maintain our investment quality structure.

And your next question comes from the line of Mike Urban.

So you answer the question on the liquidity or sort of did. And on the business side, the backlog in Subsea Products has been coming down for reasons that you talked about, I guess, primarily umbilicals. You also noted that this can be lumpy. What does the pipeline look like out there, not necessarily just for umbilicals, but potential for order rates to pick up our customers out there, there are projects out there that are yet to be awarded? And if so, how quickly could that stuff flow-through to the P&L once you book it?

Well, I think generally, the fact that we're giving guidance for next year that is better than our projected results for this year suggests that we believe that the orders are still out there. The umbilical orders, as we always noted, are very lumpy, particularly when we get a large order from Petrobras who are sort of going into pause mode at the moment. But the big contract we got 2 years ago or so is winding down. And so that's probably one of the things driving that decline. There's a lot of product work that exists for a very short period of time in our backlog. It may never make the external figure because it flows through pretty quickly. So it's a pretty quick flow-through in most of our hardware products, segment work, except for the umbilicals. And that's why just looking at the quarter-to-quarter, up-and-down of that is not as meaningful as it might be in some other Subsea Hardware company.

Great. That's very helpful. And following up on Jim's question a little bit. In terms one of the potential uses of capital, which is M&A or acquisitions, probably too early would be my guess, but have you seen any change in the marketplace based on the weakening we've seen in the macro fundamentals and the oil price in terms of expectations out there or willingness to sell?

Mike, I think it's too early. This is Marvin. I think it's too early to have seen any significant shift in expectations.

[Operator Instructions] Your next question comes from the line of Ed Muztafago.

You all highlighted, obviously, that there's going to be a bit of shift in mix of your CapEx spending towards lower ROVs and higher products. Just on the ROV side specifically, could we see the net ROV count for your fall next year due to retirements maybe more than offsetting the addition?

We don't see that. We said we would add 20 to 25, and historically retire 13 to 17, based on our percentage.

Okay. Fair enough. So not so much risk about things, perhaps, coming off some of the older floaters that might not be as viable as the newer stuff. And then just a very simple question. Did you all give the share count that underpins your Q4 guidance? I mean, presumably, you're going to continue to purchase shares as we go through here?

Q4, no. What we are assuming right now is the ending share count and we said 105.7 million for '15, and I think, somebody noted that our share count went down 1 million in Q3, even though we had bought 3 million shares because of the timing of the repurchases. So hopefully, between those two numbers, you can come up with a pretty good share count.

Okay, okay. But presumably there's a decline that underpins that.

No, we are not, in our earnings guidance, assuming repurchases of additional shares, and we're not projecting that. As we said, we'll repurchase the authorized 5.4 million shares in due course without giving a specific time.

[Operator Instructions] And we've a question from the line of Waqar Syed.

So my question deals with subsea intervention market. Kevin, could you talk about the competitive landscape in that market. It seems like it's a high-growth market going forward, and a number of different companies are looking at it. What segment of the market do you play in? And who are the key competitors in that segment?

Well, I mean there are more competitors out there, more levered towards the construction and installation side of the business, I will have to say. And obviously, our market is the Gulf of Mexico, aside from the contract work we have offshore Angola. And so we're not operating in the North Sea or any of these other places. So we feel strongly enough about our market position and prospects for the Gulf of Mexico for next year that, as noted, we are adding another vessel to our fleet. So we're confident in our ability to maintain and grow our market share in light of more competition coming through the Gulf of Mexico. But again, I think it's important to recognize that most of the companies that are coming here with assets are looking at the construction and installation part of the market, which we do very little in.

And then you have a Jones Act vessel coming in. I believe it's in the first quarter of '16.

That's correct.

And could you talk about the strategy there, why Jones Act vessel and why pursue that?

Sure. And to be accurate, our expectation for the arrival of this vessel is at the end of the first quarter '16. But nevertheless, I mean, it is becoming more advantageous to have a Jones Act vessel. We went to the market and evaluated what was available for charter versus buying and determined that to get what we really wanted at a price that made some sense that we would have to buy, and so that's what we did in this case. And the advantages of having one in your fleet is that, for certain projects, you can take the liberty of hardware that's going to be installed offshore at the U.S. port, and install it and not have to transport it out there on the second vessel to comply with Jones Act law.

And your next question comes from the line of Kurt Hallead.

Thanks for all that great detail on how you guys are viewing the world going out into '15. I wanted to kind of follow-up on that. So it seems predicated on your commentary that you really only think -- predicated on how things are rolling off in 2015 that there was about 7,000 days of contract risk, if you will. I think there's a difference between 18,000 that's rolling off and the 11,000 that you have equipment on drillships and 6 gen semis [ph]. That means I would happen to share your view that those will get extended. So when you think about that 80% or when we try to think about that 80% utilization number that you put out there for ROVs, how do we kind of calibrate that back to that 7,000 uncontracted days, like are you assuming that half of that goes back to work? Are you assuming that most of that goes back to work? Can you give us a little bit more color around that on how are you viewing the world?

Kurt, it's too early. It's Marvin again. It's too early for us to do it on a rig by rig basis. What we have considered in a number of cases is idle time between contracts. And even for the other 11,000 that we believe are most likely to go back to work, and I appreciate that we share the same view, because maybe others don't. But we think that's a good likelihood of him going back to work. But we don't think it's going to be rolling off and rolling on right away. So we think there's going to be idle time for all of those 18,000 days and we've tried to model that in. And also we believe there may be idle time on vessel activities. So we're expecting a slower rate of growth next year, and we came up with 80%.

That's fine. I appreciate that, too. And just for another point of calibration, on that range of $4.10 to $4.50, would you say that the delta, and to get you down to that lower end, would that really predominantly be because of a lower ROV utilization number than at 80% you put forward? If I were to think through that way, would that be the best way to do it?

No, Kurt. We look at it in a number of different ways, and we can get to $4.10 in several different ways just like we can to $4.50. So we're probably going out there with a little bit more uncertainty than we have in a decade. But because of the oil price environment, we really don't know what CapEx is going to be and how much shift through development is we expect it's going to occur and the timing of that. But I would say that all of our oilfield segments have a considerable range that helps us to get from $4.10 to $4.50.

And your next question comes the line of Jon Donnel.

I had a question just regarding the products guidance, I just want to make sure I was hearing the numbers correctly. So it sounded like the op income expectations are coming down year-over-year, despite the fact that the growth is going to be led by more of the ROV tooling, which thought of as being more of the higher-margin work. So I guess, was I hearing that right, and if so, could you reconcile that for us and how we ought to be thinking about that dynamic of the top line coming from a bigger mix of the ROV tooling compared to the op margins moving down little bit?

John, I think -- first of all, let me just start with, we're projecting at a midpoint, or as we said, for all of our oilfield segments to be up '15 over '14. And the guidance range for profit margin is between 20% and 22%.

But that was to achieve the midpoint of our EPS guidance.

Right. And that's at the midpoint. So I think there's some give in our forecast. But the other thing that we're talking about is while tooling and subsea work practice [ph] are going up, we talked about uncertainty in Brazil in the umbilical plants. So you do have some moving pieces, and I wouldn't think the shift in mix would be significant enough to take us outside of that intended 20% to 22% margin.

Okay, great. That helps a lot. I mean then regarding the ROVs, you guys clearly continue to add share even in a tough market on the drill support side. And it looks like it's having a positive impact on the day rates that comes back into for the published numbers. Are those -- are these high day rates here something you think can be sustained through 2015, even in kind of your view of flattish to uncertain market, if you will? Or should we be baking in some of that into our day rate outlook as well?

It really, quarter-to-quarter, can change on the basis of the geographic mix because these markets are all -- somewhat different. And so it's kind of hard to just take this one data point and move forward with that for rest of the year. I mean, I think that you could expect to see the same sort of margin generation that we have historically been trying to achieve. And that's hard enough in this world.

Yes. I really think price increases are going to be difficult in this environment. And we believe that the 29% to 30% is the right expectation for ROV margins for '15. And that assumes some serious cost controls.

And your next question comes from the line Byron Pope. Byron K. Pope - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Very helpful color. So I've just got one question. I think about you guys having pretty good breadth across the deepwater markets globally and I look at roughly 1/3 of your revenues coming from the Gulf of Mexico, which feels to us like the one deepwater theater where we should still see activity growth year-over-year. So as you about the line of sight that you have for work in your ROV segment and Subsea Products and in Subsea Projects, is it reasonable to think about the Gulf of Mexico as being the primary regional driver for Oceaneering next year? Or is it still too early to tell?

I think it's a little early. I mean, one of the nice things, if you want to look at it this way, about operating in some of the different regions in the world is that you don't have to be able to predict exactly what's going to happen. Things shift around and it's kind of hard to predict precisely. But -- and certainly, Gulf of Mexico and West Africa and Norway are the 3 big primary areas for us.

And we do believe that Norway is going to slow down, and we share your opinion about the Gulf, particularly because of the, let's just call them nonmajors sanctioning projects and proceeding ahead. And we think with the lower rig day rates, there will be more opportunity for these players to pick up 1 or 2 well projects that usually or historically in last couple of years have not been available to them.

And there are no further questions at this time. Excuse me, you do have one other question that just came into queue from Brad Handler.

Can you please -- I guess I'm going to come back with same sort of questions, but I wasn't quite clear on the products side. Do you think revenues will be up year-on-year or just operating income? Well, I mean, I think I know the answer to this, but ... revenues have to pick up year-on-year, right?

We think revenues will be up.

Revenues are going to be up.

Right, right. It has to be because of the margin. So the point is that the tools and the IWOCS more than offset the decline in the umbilicals that you're looking for?

Yes, that's what we see at the midpoint.

Correct.

Okay, yes, simple enough. All right. I just wanted to clarify. And then an unrelated question for me. I think last quarter, I think it was just last quarter, you talked about having a bit -- well, I'll describe it this way, maybe you'll change it. A bit of a challenge selling or convincing customers to use existing ROVs, yet your prepared comments today talk about doing just that. So can you talk a little bit about some of the progress you've made in that area in doing that?

Well, I'm not I would characterize it as progress that we've made. I would characterize it more as a change in the marketplace where previously, operators were taking rigs for 5 to 7 years, a brand new rig, and they wanted a brand new ROV. Well, in today's world where you see rigs being -- pretty new rigs being taken for much shorter periods of time, we don't think -- our guess is that they're not going to be so adamant about demanding a new ROV, and we are hoping that we will have some opportunities to use like new systems on those opportunities as opposed to having to build another ROV.

Does that make sense? Brad Handler - Crédit Suisse AG, Research Division: Sure, it does.

And there are no further 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 are very pleased with our best-ever quarterly results, and anticipate producing record EPS for both 2014 and 2015. In closing, I would like to reiterate our confidence in our earnings and cash flow generation, combined with our commitment to growth and the return of cash to our shareholders, will continue to create value for all of our shareholders. We suggest you stay tuned to the Oceaneering story, like our Fox News, Houston's affiliate KRIV slogan, you miss a little, you miss a lot. This concludes our third quarter 2014 conference call. Thanks, and have a great day and holiday season.