Good morning. My name is Natasha, and I will be your conference operator today. At this time, I would like to welcome everyone to the Oceaneering International third quarter earnings conference call. [Operator Instructions] 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 third quarter earnings call. As usual, a webcast of this event is being made available through 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; Marvin Migura, our Chief Financial Officer; and Bob Mingoia, our Treasurer. 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 being made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. 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 for me to be here with you today to talk about Oceaneering. Our third quarter earnings per share of $0.90 were at the top end of our guidance range we gave last quarter, above the Thomson One consensus estimate and sequentially better than our second quarter result. This performance was highlighted by achieving record ROV operating income. We now expect that our annual 2009 EPS performance will be the second best in Oceaneering history, an accomplishment that will be particularly gratifying at a time when other oilfield service companies are expected to report substantial earnings declines. We're narrowing our annual EPS guidance range to $3.32 to $3.38. Looking into next year, we believe deepwater drilling activity will continue to grow as new floating rigs currently under construction are added to the worldwide fleet. We do not, however, expect deepwater construction activity to increase, as we anticipate project deferrals to continue until there is a recovery in hydrocarbon demand. Consequently, we are forecasting our 2010 EPS to be relatively flat with 2009, in the range of $3.25 to $3.55. Our 2010 forecast assumptions include unit volume growth and increased operating profits from ROVs, improved operating efficiencies and results in Subsea Products, declines in Subsea Projects, activity levels and operating income, and a lower contribution from MOPS due primarily to the expected retirement of the FPSO Ocean Producer. I'll talk more about our 2010 guidance later. Now I'd like to review our operations for the third quarter. Our ROV business achieved all time high quarterly operating income as we obtained a record high days on hire of nearly 17,500 and an operating income margin of 33%. Sequentially, quarterly operating income rose 9% on a 3% increase in days…

[Operator Instructions] Your first question comes from line of Neil Dingmann from Wunderlich Securities. Your line is open.

On the Subsea Products side, I saw the backlog just declined slightly. Do you see that kind of staying on a flat level or possibly increasing in 2010, as you guys start to look at 2011 and building that (inaudible)?

No. It's a good question, Neil. Unfortunately, I've really gotten out of backlog predicting business. As you know, it's just a very lumpy world and big orders swing it from quarter to quarter. We continue to see a lot of work potentially out there, but the timing of these projects is just unpredictable. So I'm not going to give you a prediction on our net result, I think next year will be a better year for products, and we'll have more business. But I'm out of the backlog predicting business.

That's fair. That's a fair point. Just on the ROV side, have you seen much pricing pressure? Or it looks like the margins are staying really strong. Are guys coming back to you and trying to lower the prices? Or are they still staying at a good level?

Well, I think our results continue to be excellent. The net result, all of our customers are interested in pricing discounts, and there certainly is competition out there. But I think we offer the best value, and we continue to sell on value, and we continue to make that argument with our customers. So it's a daily fight. I'm really proud of our guys for achieving what they've accomplished so far. But we expect, I think, to continue what we're doing right now.

Your next question comes from the line of Chris Glaseem from Simmons & Company. Your line is open. Chris Glaseem - Simmons & Company: Firstly, talking about Subsea Projects. I was wondering if you could give us some general color as to what you're seeing in the Gulf of Mexico right now. Just thinking generally, if activity is flat to down next year, how competitive can it get given the number of deepwater construction vessels that are in the Gulf?

Well, I think we are seeing more vessels appear on the world scene and so there is an excess supply of vessels. But keep in mind this is not just a vessel business. We are selling a service. So we're selling project management, safety, tooling, offshore operations, ROV skilled personnel, and the ability to go out and do the job quickly and efficiently and safely. So it's not just a vessel. Having said that, we are anticipating, as you see, lower profits from the Project business next year, because, first of all, we didn't have any hurricanes this year, and that business has dwindled. Now we're coming back to a more normal shallow water diving business, as well as a competitive deepwater market. So I don't think I can really quantify it for you, but I would point out that we're not just selling vessel time. We're selling a service, and we think our service is very unique. Chris Glaseem - Simmons & Company: Then turning to the ROV side, I was wondering the last quarter we talked about the number of units that you had on idle rigs and units that you had removed from idle rigs. Also, how many you saw in the near term that were potential candidates to go idle. Could you give us an update there?

Sure. I'd be happy to do that. Let me just find my notes here. I have that. Let me be sure. Okay, well, let's talk about 2009, we are on 13 rigs throughout the year that have contract expirations. During the first quarter, we had ROVs on eight rigs that became idle. We demobbed off of three of those. Three of the remaining five went back to work, and two of those are still idle and we think they will go back to work sometime in 2010. During Q4, we were on five rigs that have contract expirations, and we expect that three of those will continue to work, and we probably will demob off the other two. So for the year, we would have really received five systems back from those 13 rigs. Looking ahead to 2010, we're on 16 rigs that have contract expirations. Of those 16, eight are fourth and fifth generation rigs, semis or DP drill ships, and we would expect those to continue working with little or no down time. We're obviously watching all of these very closely, and particularly those other eight. But I would say those other eight, even if they all went idle, which we don't think will happen, would only be 3% of our current fleet. So that gives you, I think, some good parameters on that.

Your next question comes from the line of Max Barrett from Tudor Pickering Holt. Your line is open.

You've recently talked about potentially beefing up your Subsea Products segment via M&A. Any updates on that front, specifically around timing and size?

No. I wish I could. That's a world that we look every day. We have people working 100% on that. Clearly, we've got cash in the bank and dry powder on the balance sheet. So we are looking at that, and that will be a major focus for us over the next 18 months. So all I can tell you is we're working at it very hard. We're trying, and it's certainly part of our objectives is to make something happen in that area. But I can only tell you if and when I got something. Right now, I don't have anything to tell you.

Then sticking with Subsea Products, could you give us a sense as to whether you're seeing any signs of pricing stabilizing or improving in the umbilicals?

I haven't seen any difference in that market so far. I think it still remains oversupplied and very competitive.

Then last question on the BOPs. Do you expect some more cost overruns in Q4? Or do you think that's behind us?

I believe it's behind us, but then I believed it was behind us before. But I think we are truly at the end of these projects. I think we see all the costs right now. That wasn't really the case earlier in the year. But we will be delivering one system at the end of the year, and we see all those costs now. The other one will be substantially completed and delivering in Q1. So I truly don't believe we'll see any more cost overruns there, but it is embarrassing to have further cost overruns. But I will say that we're committed to growing the Company and trying new things and doing serial number one projects. You know you're taking risk. Its unfortunate when it bites you, but on the other hand, that's the only way you get to new products and services is to try new things and take risk. We are committed to growing the Company. So you know this just comes along with trying new things.

Your next question comes from the line of Joe Gibney from Capital One Southcoast. Your line is open.

I just want to talk about some of your other segments commentary on 2010, the Inspection and Ad Tech. Obviously, you're referencing down MOPS, down Projects, Products up, ROVs up. Can we assume that Inspection and Ad Tech are just kind of holding the line for now? Is that fair?

Ad Tech, while it's this relatively small piece of our business, we would expect that to be up a little bit next year. I think we'll have a little more work for the U.S. Navy, our Entertainment System is doing some projects that will have more business next year. Then, of course, if the government fully funds the Constellation Space Suit contract that we're heading up that consortium that would also increase activity. So I think, again, while Ad Tech is relatively small, it will be up. Inspection, I would expect that to be relatively flat on a year-to-year basis.

The 3Q delta, just a little bit of pick up there in Ad Tech. Was that some of the incremental work with the Navy that you just referenced?

Yes. That was the same things I just talked about.

Okay. Fair enough. Then just on the MOPS side, I understood down year-over-year. That's pretty consistent with some of your prior commentary. The margins tend to dance around a fair amount here. What is a reasonable run rate, I guess, to be thinking about from a modeling standpoint, Marvin, as we think about MOPS? It's danced a fair amount here in the last few quarters.

I mean, yeah, it may dance around a little bit. There was a demobilization fee earned on the Ocean Producer in Q3 that impacted it. I really think that with the expected retirement of the Ocean Producer, maybe we ought to not spend a lot of time on MOPS because with the Ocean Legend in operating income and Medusa in equity income, it's just not going to be significant going forward. The other thing that we did have in the historical numbers is we had the Pensador sale in Q2, and we wrote it down in Q4 of last year. So I appreciate your observation, but I really think that from a earnings modeling perspective, taking MOPS out of the equation is probably the most sane and rational thing to do.

Being sane and rational is a good thing.

Your next question comes from the line of Phil Dodge from Tuohy Brothers Investments. Your line is open.

In the press release, you say that you're forecasting that deepwater construction activity not to increase in 2007. Then in the presentation in that segment, you said that the manufacturing utilization of umbilicals could increase in 2010. I'm just wondering whether that means that you're increasing market share, or whether there are other variables that account for that.

Well, you keep in mind that in the second quarter of last year we did receive two large contracts...

Of this year.

I'm sorry. This year. The second quarter of this year. We just received two large contracts which one will not even start this year, so it's all about 2010. The others will be partly this year and partly 2010. So like I said, these big orders cross over yearly boundaries, and so we do have a better backlog than we did coming into 2009.

Timing of the large contracts is what...

Right. Absolutely.

Your next question comes from the line of Yvonne Lüscher from Credit Suisse. Your line is open. Yvonne Lüscher - Credit Suisse: Hi. Can you remind us when the Performer's contract in Angola ends and what opportunities you may be seeing for that vessel there?

It's ending now. It was to end at the end of the third quarter and it is just kind of rolling forward on a day-by-day sort of basis. We are pursuing all kinds of opportunities in Angola and elsewhere. Really we have nothing further to say. There's nothing firm on the books right now, and we're looking at all of our options in regards to that vessel. Yvonne Lüscher - Credit Suisse: Then as a follow-up, if I could ask on the ROV side. You talk about the weakness in deepwater construction? I'm just wondering how worried about that are you on the ROV side relative to the exposure there, and what you may have baked in to your guidance and conservatism on the construction end?

Well, as you see, this has been a weak year for the construction market, and particularly ROV support came in quite a bit lower than we had anticipated. As our utilization has come down to 79, 80%. We are not anticipating much improvement in that next year and, consequently, you can see we're planning to build a few new ROVs next year, as we think we can serve some of the increasing deepwater drilling demand with our existing fleet. So we think construction will come back at some point in time, but we are being pretty cautious right now about next year. If it turns out we need more vehicles, we certainly can build more than we're planning right now. So we have upside capability there, but we're being very cautious at the moment.

[Operator Instructions] Your next question comes from the line of Victor Marchon from RBC Capital Market. Your line is open.

The first question I had, Jay, can you just talk to us about the tone from your customers on the umbilical side of the business. Has the tone been better recently with oil prices staying at elevated levels for the last few months? Are you getting a sense from customers that the confidence at these levels are going to be sustained? Can you sort of maybe walk through a little bit the body language from customers and any shift in tone that you would see on the umbilical side.

I really don't have any good news to report there. I think that we still sort of see a very competitive market there. I think, clearly, if prices stay up, and particularly the mid-level companies who generate cash from selling product at 75 or $80 and $5 gas, and they put that money in the bank, then I think that will help to move projects forward. But I think everybody is playing it pretty cautious at the moment. So I don't think it swings around just on even a month or so of pricing. I think we then have to see this stay with good pricing for a while, and then I think money will get spent. But I think it's going to be earned money, not projected money. Marvin you may have a comment on that.

Yeah. I think we try to address that, and our view is that until demand for hydrocarbon kind of starts to equate to supply, we don't see any sense of urgency in Projects or the progression of Projects. So what we have forecasted is that project deferrals will continue to persist in 2010. That's really the only comment I would add.

Just as it relates on the ROV side in utilization, are you guys sensing that we're at a bottom here on the construction side, outside of seasonal factors? Or is there some more downside going forward?

The construction companies sure seem to be talking about 2011 a lot. So everybody is kind of thinking about 2010 being pretty stagnant, and then construction activity picks up in 2011. Ours has shorter visibility than they do, so we're just taking our cue, I think, from them.

Yeah. We really can't give you much independent analysis of that construction market. We just don't play it in that detail. But that is exactly what we hear from most people still.

So flattish next year, and they're a little bit more positive on 2011?

Right.

Right.

There are no further questions at this time.

Okay. Well, thank you very much.

We look forward to talking to you at our fourth quarter call. Bye-bye.

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