Good morning. My name is Christie , and I will be your conference operator today. At this time, I would like to welcome everyone to the Oceaneering second quarter 2009 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. Jurkoshek, you may begin your call.

Thank you. Good morning everybody, we’d like to thank you for joining us on our 2009 second quarter earnings conference call. As usual a webcast to this event has been made available to the StreetEvents Network Service by Thomson 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. This is a reminder before we start, 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 our call. It’s a pleasure to be here with you today. Our second quarter earnings per share of $0.87 were above the guidance range we gave last quarter and better than our first quarter result. This performance was particularly gratifying at a time when other oilfield service companies have reported substantial, sequential and year-over-year quarterly EPS declines. We’ve not been immune to the slowdown in the industry activity and have taken proactive steps to align our cost structure in consideration of lower activity levels where appropriate. Consequently our overall operating income margin performance of 16% was the same as last quarter in the second quarter of 2008. This consistent performance is noteworthy when some in our industry are experiencing significant operating income margin percentage declines. Our better than anticipated second quarter earnings per share of $0.87 were attributable to Subsea Projects operating income performance has surpassed our expectation. This was a result of high demand for our deepwater installation and inspection repair and maintenance services. Year-over-year, ROV operating income increased 10% and set a record high for the second quarter. This was accomplished by growing our days on hire by 6% and improving our average operating income per day on hire by 4%. The daily profit improvement was achieved by our ability to control cost and excellent operational execution, which resulted in a decrease in cost per day on hire. Sequentially, ROV revenue and operating income improved slightly, as we put additional vehicles into services. We achieved a 2% increase in days on hire for our fleet, and our quarterly average revenue per day on hire was flat. ROV quarterly operating income margin of 31%, compared favorably to the 28% achieved a year ago, and was flat with last quarter. It…

(Operator Instructions). Our first question comes from Neal Dingmann with Wunderlich Securities. Your line is open.

Jay, I was wondering with the confidence now what your seeing on the ROVs and you gave some color on the rigs that are coming out, does the confidence now that you have around margins et cetera maybe for the second half of the year cause you to maybe increase activity in that area at all for you all as far as potentially bringing out or will you still stay the course?

We feel very good about the rigs coming out the rest of the year. As I said, we’ve got 17 contracts on systems that we think will be coming out for rest of the year. We’re half way through our build program, where we projected 18 to 24 systems for the year. We produced 12 new systems in the first half of the year and put those to work, so we’re right on pace with that. So while a few systems may slip into 2010, so far this year is developing on the new rigs, fleet has been developing just about like we anticipated.

And I have sort of unrelated follow-up, as far as under the Subsea Projects, obviously definitely it was a bit stronger than you expected and just wondering within a couple of areas there between the diving and the installation, as you kind of look for the remainder of this year, how has bid activity looked as you kind of look out?

Right. Bid activity is a little weaker on the deepwater vessels at the moment. We still see a pretty good market in our diving area, but we have the leading position in terms of repair of platforms using underwater welding. And so we’re still working on some damaged platforms, and it’s a pretty small niche, but we’re very good at that, so we think the diving business still looks okay and there’s still repairs to be made. We’re just seeing little less bid activity on the deepwater vessels, and more competition with vessels in the marketplace.

(Operator Instructions). Our next question comes from the line of Brad Handler with Credit Suisse. Your line is open.

Could you please speak to the retirements, the four ROV retirements in the quarter?

Sure. That’s really an operational decision. We don’t really predict that. Though it’s our operations people look at what systems are not working and what they really don’t have good prospects for, in particular these were older systems that some of which we acquired with (inaudible) acquisition years ago and they had been working, but finished contracts and our outlook was that we didn’t have very good prospects for those older systems and so we retired them. We continue to look at that all the time and there will be periodic retirements of some old systems as we go through the year, but we really don’t project that number going forward.

Maybe it will be helpful for us understand kind of the relative age of your ROVs now, just to give us perspective on what might be subject to retirements as they roll off contracts.

I really don’t have any detail to give you on that.

And Brad, it really isn’t age, it has a lot to do with capabilities and the market conditions. I mean in a better market, if you are seeing more subsea construction activity, a more field development activity perhaps these vessels would not have been retired. But, what we do is we put six brand new vehicles in the field to work and we took four that hadn’t been working out of the system because we didn’t see a upcoming need for them. But it really isn’t age wise, it deals with the capabilities, the market and operational decisions.

And our next question comes from the line of [Chris Glaseem] from Simmons & Company. Your line is open. Chris Glaseem - Simmons & Company : Congratulations on the Petrobras award.

Thank you very much. Chris Glaseem - Simmons & Company : First question is, how many of your systems are on rigs that are potentially coming off contract in the second half of the year and possibly in 2010?

Okay. We obviously are taking a very close look at this and so if you’ll bear with me, I’ve got some statistics here for you. Chris Glaseem - Simmons & Company : Yeah.

So far this year we’ve had equipment on five rigs that have ended their contract and are no longer working. Of those five, we’ve demobbed three of the rigs, and on two of them we’re still on board, because we think the rig will go back to work. And that’s sort of predictive of what we think will happen the whole year. For the whole year of 2009, there are 33 rigs whose contracts are ending. We’re on 12 of these. So I guess, first I would say that’s 36% market share of this segment, which is significantly lower than our 60% market share of drill support in total. So, we are less of a player in the shallower water, these are mostly mid-market shallow water semis, than we are in the deeper water, so we’re a little less affected by that, but we do have 12 systems in total, counting the ones I just talked about, that have happened so far. And as we look at those 12 rigs, we think about the same thing, about half of those, we think are likely to keep working and maybe half will not. So counting the three that we’ve already demobbed, we think maybe there’s another three. So maybe half of that 12, maybe six systems we’ll get back and we’ll use those for something else, or we may upgrade some of those for new builds for 2010. Looking ahead to 2010, we have looked at our first quarter and we see four rigs that have contract exploration that were on, and we really think all of those rigs will continue working, they’re good rigs. So that gets us through the first quarter of 2010 and kind of gets a little mushier behind then at that point in time. But hopefully that gives you a sense of it. So maybe six systems this year, three of which we’re already dealing with, so not very significant than our total fleet. Chris Glaseem - Simmons & Company : Okay, that’s very helpful. Thank you.

You bet. Chris Glaseem - Simmons & Company : The second question is with Petrobras awarding, it looks like $100 million in umbilicals, are they the only one really that’s out there currently? Are we still kind of in a moratorium on the larger orders aside from Petrobras or is this a sign of things, the ice starting to break?

I think neither one of those, really. One of the orders was from Petrobras, one of our other orders was not a Petrobras order, we just haven’t been able to announce it yet. Chris Glaseem - Simmons & Company : Right.

So, I think there are other players out there and if we continue to look out a year for potential job, we almost continue to see the same level of business that we’ve been seeing for the last year, it’s just when these orders are going to actually when these prospects mature into real orders. So it’s not all Petrobras, but on the other hand, I don’t give you any sign that the dam is breaking. I think we’re just still going order by order.

And as we’ve said before, it’s really not the bid activity level that needs to change, because the bid activity level remains healthy, its the actual awarding of work and proceeding on with the job that would -- needs to happen for the dam to break.

And the next question comes from the line of Joe Gibney from Capital One, and your line is open.

Jay, 16 out of the 19 rigs you had delivered this year is a pretty healthy batting average, just curious though, are you seeing a little bit more competition from some of your peers in trying to break in more aggressively on the drill support side relative to ROVs?

Well, we always have competition. I think what we’ve seen is, it’s a little more difficult for us to win work sometimes in some marginal areas. Let me give you a little bit of a summary here on our win-loss record. We’re going to be working in Mexico where Pemex has basically subbed it out to the drilling contractor, and these are usually not the U.S. drilling contractors. They are smaller foreign players and we’re zero for five on those. So that was pretty much priced at very low prices. With Petrobras, we’ve had about a third of that market share historically, and so far we’ve won four out of eight jobs. And again that is very price competitive. Beyond that all other operators outside the Pemex and Petrobras work. We won 29 out of 33 or 88%. So I think you’d almost need to break it down into separate segments like that to really get a good view of it. But, we certainly do have competition and the price is going to be the determining factor, where you’re less likely to win.

And those statistics Joe were cumulative since the new big rig building began and where we won 33 out of 46 total. And as Jay broke them all down by country and other areas.

Okay, I understood, that’s helpful, I appreciate it. And just circling back relative to the demob scenario that you just referenced in that previous question, relative to your guidance, you’re still on the ROV front for kind of down year-over-year potentially on the utilization front, but I mean, those roll offs are embedded in that guidance, correct?

Yes. Well absolutely.

Yeah, absolutely

Sure. For example those five rigs year-to-date that aren’t working, three of them we demobbed and we either have those system at our shop or we’re working on some other job, they’re in our statistics. And the two that are sitting on the rigs are certainly in our statistics, so that’s for sure, two of that that are lowering our utilization, but we do think those rigs will go back to work. And all of that scenario is forecast in our future .

All of our forecast, always assumes spec work. So just like these large umbilical awards that we finally landed, I mean those have been in our forecast and they have been part of that range. So now, that has sort of removed some of the uncertainty, and we’re always projecting utilization on a moderate case, but we’ve got spec work in all of our segment, in all of our systems, every time we do a forecast, all of our segments.

And our next question comes from the line of Phil Dodge with Tuohy Brothers. Your line is open.

Thank you. I just got little lost on the ROV figures at the beginning – just to confirm – I think you said, you’re adding 24 to 30 this year, and of those you have contracts for 17, which would mean just arithmetically that there are seven to 13 that might be contracted as they are available later in the year, is that...?

Here is the statistics. The 24 to 30 for the year, and we have already put 12 to work.

Yeah.

That leaves 12 to 18 for the balance of the year, and we have 17 contracts.

Yeah, I’ve got a 17 figure here...

On the balance. No, for the balance of the year.

For the balance of the year?

Right.

Keep in mind, we’re putting systems to work on existing rigs, we’re putting systems to work on vessels.

So there are sources other than the 24 to 30 that you are adding, is that...?

No, no.

Phil, hang on. Let’s go through the 24 to 30.

Yeah, okay.

12 of them went to work already. So of the 24 to 30, the balance that we are talking about for the second half is 12 to 18.

Yeah, okay.

And of those 12 to 18, we have 17 contracts.

Oh, all right, okay.

Okay, see the first 12 already have contracts, so we’re not counting those anymore.

Yeah.

If you looked at it grossly, you would say, well, you got 12, and you got 17 more, we’ve got 29 contracts, and we intend to use 24 to 30, but we don’t count the actuals for the first half. So we’re six for six in each quarter. Now, I know when we talk about additions of the 24 to 30, we are talking about gross additions. I mean, new additions going in, we’re not counting them net of retirements. But it is fair to say that we’re retiring idle systems and we’re putting to work new systems going to contract. But I think that explains --

Yeah, I had missed a couple of those --

It’s 17 out of 18, is really the way to look at it or 17 out of 12 to 18, as Jay said, some of these may slip. Why we’re not saying 17 is because some of these new rig buildings may slip into 2010. So we don’t know we’re going to get all 17 contracts started in the second half of 2009.

Yes. Understood. And then, second question, on the 88 floaters that will be entering the fleet through 2012, you said you had a scenario that 25 of them might not make it for one reason or another, and my question is, is that a scenario or have you done some rig-by-rig analysis to --

That’s just an example scenario. Even if that happens, and we’re not good at predicting that, we still have good growth. So, that was just a scenario, we have no...

Yeah.

...better insight than what everybody reads in the trade journals.

It’s not a degree of uncertainty on an individual rig that would get to...

No.

...all the 25?

I wish we had that insight.

Our next question comes from the line of Tom Escott with Pritchard Capital. Your line is open.

I just want to follow up on a question that was asked a few minutes ago about the umbilical orders. I think you made the comment, Jay that the bulk of the increase in backlog in the period was two significant orders.

That’s correct.

And so my question relates to that and that is for all these other projects that you say you are still bidding for the balance of the year. Can we characterize that as the opportunities in the jobs are still out there, but people should not crank that into a model to sustain that level of new order rate through the third and fourth quarter?

Well first of all, we’re not predicting backlog because I get out of that business because it’s too lumpy and too difficult to do. But, secondly we’ve said our financial performance should be about the same in the second half of the year in the products business. So it’s still a very lumpy business out there and, as I said before, I can’t give you any indication that the dam has burst, we just got two good contracts, two big contracts, that are important to us and we’re fighting for all these other contracts just like we have been for the last nine months or so.

Now with that in mind that you’ve been fighting all this time and I think you used the words, it’s very competitive, philosophically should we be plugging in little lighter profit margins on the revenues from these projects over the next couple of years?

Well I’m just not going to give you any prediction for 2010. I think as far as I’m willing to go is to say similar profitability for the second half of the year as we’ve had the first half of the year.

On the increased revenue.

On increased revenues, so clearly we’re not anticipating a big change in profitability even though we do think volume is going to go up a little a bit. So clearly, it is a competitive market and there’s not going to be any rapid boost in profitability, I don’t think here in near term.

We said, Tom that operating income performance is expected to be flat with the first half on a increase in revenue due to a change in job mix. You can read into that, you should read into that, that the percentage of umbilicals of our products revenue is going up, and we’ve always known that that’s the most competitive market in which we compete, but I think that answers your question.

And our next question comes from the line of Victor Marchon with RBC Capital Markets. Your line is open.

Most of my questions have been asked. I just want to touch on use of cash. You guys had very clean balance sheet, a lot of access to capital. I just want to see if you can give us an update as to what you’re looking at from that end, what the M&A environment looks like, what areas would you look to get involved in and as well as the bid-ask spreads on some of the acquisitions you may have looked at?

Well, as you can tell, we don’t need the cash. All the cash we’re generating for our internal purposes, so we do have cash available. We are looking for potential acquisitions. I’ll say we obviously haven’t found anything recently. So I think, it’s been a difficult market out there so far to find a appropriate acquisition. We’re looking at anything that fits with our Subsea Product area for sure. We’re anticipating there is not ROVs to buy, but if they were there, that would be fine, but I think that we’ve had success in the past with the Subsea Product offerings that we can add to our tool kit and we continue to look in that area, and say I’ll be disappointed if we get to the end of next year and we haven’t been able to find some good opportunities. We certainly are going to have the financial strength to do it, and we have some people looking every day. We’ve seen a couple of deals that went for prices that were higher than we thought were reasonable, but we haven’t really seen a whole lot of deals.

Not a lot of deal flow in this arena. But Victor if you or anybody else on the call has a good idea, you all can give me a call.

Absolutely. We’d appreciate it.

How does the dividend or a share repurchase play into that? How you guys are looking at that?

I think as I said, our first priority will be to look to do M&A, and we have repurchased shares in the past, we always could decide to do that again, but our M&A is going to be the first place we look. We have no plans to pay dividends at this time.

And our next question comes from the line of Joe Agular with Johnson Rice. Your line is open.

Oh, thank you. You all have covered a lot of ground already here, but maybe one of the things is I’m curious to find out more on is the products orders that you booked in the quarter, and whether those are projects that were out there of say, six months or nine months ago, were sort of just on hold, given the environment, or whether these were along the timeline where these would have been awarded, given the project schedule? And the reason I’m asking is because, kind of, just thinking of the customers that you’re dealing with today, you’re in a – obviously oil prices have bounced back, steel costs are a lot lower. It seems like the environment for deepwater field development is actually pretty decent right now, and I’m wondering how that might relate to maybe how orders shake out going into 2010.

It’s a really a good question, Joe. We have different answers really for either one of these contracts. One order, we thought we might have gotten that order early in the year. And just for various reasons they’re not related to us, it just continued to drag out and so, we ended up getting just at the end of the quarter. The second order, I think is an oil company taking advantage of a great market, and to say we won’t be building this product until 2010, but yet the oil company took advantage of current market to nail it down. So I think that’s just a smart move on their part, and so I’ll tell you they’re totally different situations.

Okay. And I guess when these shipments of the products, are they kind of equally spaced over? I mean, you mentioned they wrap up kind of by the end of 2010, is it sort of an equal delivery schedule, is it heavier in one period or a another?

Joe, we do percentage of completion accounting on these large umbilical jobs.

Yeah. I was just kind of curious more than timing of when these things actually hit the customer for installation.

I think on the 2010 one, the customer needs them in 2011.

It’s going to be late 2010 for the Panama City job and Brazil job. We’ll stop manufacturing, and it’s a series of quite a few umbilicals, and we’re starting to produce those now. So they’ll be delivered this year and throughout 2010.

Yeah, they’ll take them as they get. I don’t know what Petrobras inventory of umbilicals that they have taken, but not yet installed is, but they will be taking deliveries as Jay said throughout ‘09 and beginning of ‘10.

(Operator Instructions). Our next question comes from the line of Brad Handler with Credit Suisse. Your line is open.

On the project side, can you please give some thoughts or some, may be percentages of contracted time in your deepwater vessels overall, i.e. visibility on the second half of the year and how that may be compared to a year ago?

We really don’t publish that kind of information, I would say generally – this is the Gulf of Mexico operation, it tends to be not a long backlog business. So we generally are not very much contracted beyond couple months. So it is a just in time kind of operation. Generally, there’ll be a few projects that are scheduled out over the next six or nine months, but mostly it’s two or three months ahead kind of business.

And sort of related follow-up. On hurricane repair work in general, I think you made some comments that that was ongoing, but what’s your sense as to sort of how long that work might continue, presumably that’s more but comment on this helps us with the SAT and the surface diving, right?

Well, let me separate sort of the big project, the big debris removal projects and so forth, which really have been tailing off, I think all through, maybe even 2008 and certainly in 2009. So we think that work is coming to an end. What we are really continuing to do is sort of the underwater repair of some shallow platforms using underwater welding techniques that we’re pretty good at. So I think there is follow-on work on that that we’ll go through this year, and I think into next year. So there are tails on both of these things, but I would say that, we’re more optimistic about our diving group continuing to do underwater welding and platform repair, then big debris removal projects, which we think are really pretty much ending at this point in time with a few exceptions. Does that cover you? Okay.

(Operator Instructions). We have no further questions at this time.

Thank you very much, we appreciate your attendance.

Take care guys.

Thank you so much. This concludes our conference call for today. You may now disconnect your lines.