Good morning. My name is Mike, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2011 Earnings Conference Call. [Operator Instructions] Mr. Jack Jurkoshek, you may begin your conference call.

Thank you. Good morning, everybody. We'd like to thank you for joining us on our 2011 first quarter earnings conference call. As usual, a webcast of this event is being made available through the StreetEvents Network service of Thomson Reuters. Joining me today are Jay Collins, our President and Chief Executive Officer, who will be leading the call; Kevin McEvoy, our Executive Vice President and Chief Operating Officer; and Marvin Migura, our 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 being 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 the call. It's a pleasure to be here with you today to talk about Oceaneering. Our first quarter EPS of $0.77 was above our guidance of $0.65 to $0.70 as we achieved slightly better-than-anticipated operating-income performance by all our Oilfield business segments, and lowered our estimated annual effective tax rate from 34.5% to 31.5%. Our reduced tax rate reflects our intent to invest in international operations, and therefore, we are no longer providing for U.S. taxes on certain of our foreign earnings. We are well-positioned to participate in the next growth stage of Deepwater activity and our outlook for 2011 remains positive. We now believe, it is highly likely that we will achieve record EPS for the year. We are raising our 2011 EPS guidance from the range of $3.45 to $3.75 to a range of $3.65 to $3.90 to account for our lower estimated annual effective tax rate, first quarter operating results and revised outlooks for Subsea Projects and Subsea Products. We now forecast Subsea Projects to have lower operating income than previously anticipated. It appears that our previous projection of demand for our services in the Gulf of Mexico to perform installation projects and inspection, maintenance and repair work during the remaining 3 quarters of 2011 was too high. The extent to which this demand actually materializes is a major factor that will influence our 2011 results. At this time, we're not revising our outlook for ROVs as we anticipate strong international demand will offset weak non-drill support demand in the Gulf. We now project Subsea Products to perform better on the strength of higher tooling and IWOCS service sales. As a result, we anticipate Subsea Products operating income will be higher in 2011 than 2010. The resumption of…

[Operator Instructions] Your first question comes from the line of Brad Handler from Crédit Suisse. Brad Handler - Crédit Suisse AG: If you could go over the ROVs -- rigs that have been ordered, those with contract, those remaining, that'll help me start the process. Sorry to make you go over that again.

Sure. Well, let me do it this way. There are 70 rigs on order. 36 of those have a contract with the oil company. 17 of those have signed an ROV contract. So there's 56 opportunities available -- no I'm sorry, 53 opportunities available for us going forward. Does that help you? Brad Handler - Crédit Suisse AG: That's actually very helpful, right now. Very good. Were there awards in Q1 for ROV contracts?

2 jobs were awarded in Q1. We won 1 job with Statoil, and there was a Russian rig that was awarded that came out, who needs -- I'm not sure what happened with that. We didn't get it. Brad Handler - Crédit Suisse AG: Okay. And what's your sense -- I'm sure this slips to the right like everything else, but what's your sense as to what gets awarded in 2011? How many ROVs might get awarded this year?

I don't know. I mean, [indiscernible]. Brad Handler - Crédit Suisse AG: I'm sure, it's hard, yes.

Yes, it really is. I mean, because we don't know how many of those are contracted.

We've got contracts in hand right now for 8 additional systems, right, the remainder for vehicles.

Those have already been awarded.

Right. Brad Handler - Crédit Suisse AG: That's helpful too, yes.

And we're chasing -- 3 to 8 is what we've got a contract over the rest of the year in order to meet our guidance in '11, 15 to 20 for the year. And we're confident that we're going to be able to do that. Brad Handler - Crédit Suisse AG: Understood. Will you actually build -- do you -- will you build or will you order long-lead items on ROVs that are not under contract?

We got a long supply chain. We always have components coming in, so that we have the ability to move our booked programs up and down depending on the demand that we see. So we're always looking at -- we're really modifying that on a quarterly basis. Brad Handler - Crédit Suisse AG: Got you. Yes, and I figured as much. Okay. I guess, just a sort of a non-operating follow-up for me. I just happened to notice that the D&A line has drifted down the last couple of quarters. Can you comment on that a little bit Marvin and then give us your D&A outlook for 2011, please?

Yes, and I look [indiscernible] and, so it was a little bit below what is expected in the quarter. And it was [indiscernible] including corporate. I think we've [indiscernible]. Did he say, G&A? Brad Handler - Crédit Suisse AG: [Technical Difficulty]

Did you say D&A or G&A? Brad Handler - Crédit Suisse AG: Depreciation and amortization.

Okay. I think if you look what [indiscernible] had in Q1 last year, we had a $5 million impairment charge. And right now we are thinking of depreciation and amortization running -- we haven't change that between $145 million and $150 million for the year. Brad Handler - Crédit Suisse AG: $125 million to $150 million...

$145 million to $150 million. Brad Handler - Crédit Suisse AG: $145 million. Got it. Okay. That's a pretty tight range. Okay. Very Good. All right, guys. I'll turn it back.

Brad, what we expect [indiscernible] on new contracts, [indiscernible] we've talked about, were placed in service in 2011, because, I think, there might have been -- just as much to your interest here. If you take the 27 rigs will be placed in service during 2011, 5 were placed in service during the first quarter. We have an ROV on 1 of those. Of the 22 that are remaining, will be on a contract for 6 more. 6 of those, competitors have 6. That leads to opportunities. 3 of those are going to places, where we probably are not going to like to do work. So we're pursuing the other 7. So I hope that gives you some breakdown. Brad Handler - Crédit Suisse AG: It did. [Technical Difficulty]. Could I ask you to do that again, just because it sounded a little choppy for some reason. [Technical Difficulty].

Okay. 27 rigs will be placed in service during 2011. 5 were put in service the first quarter. We had an ROV on 1 of those. The remaining 22 rigs we have contracts for 6, our competitors have contracts for 6. So at least 10 opportunities. 3 of those, we don't think fit us. And we're pursuing the other 7. Brad Handler - Crédit Suisse AG: Got it.

And Brad, the 3 that don't fit us just for information, they're rigs are most likely going to Russia or China or Cuba, where we can't work. Brad Handler - Crédit Suisse AG: Got it. Okay. That is really helpful.

Your next question comes from the line of Jim Crandell from Dahlman Rose. James Crandell - Dahlman Rose & Company, LLC: Jay, with the demand outlook for ROV looking like it's improving, what is the outlook for pricing in ROVs and what are your thoughts about margins in that business going forward?

Well, you know, margins are depressed a little bit right now, because of the Gulf of Mexico situation. I think, the last 2 years, we had excellent margins. So I would think our outlook is to, this year, we will not get quite where we were before and hopefully by 2012, we will be coming back to those historical margins. I don't see improving those margins immediately in the near term. I think they're excellent margins and being able to pass price increases along to our customers would be a good objective for us. So I think we still have pricing, some pricing counter to pass along and all these talk increases that will be happening. I think getting back to those excellent margins that we had 2009 before pre-Macondo would be our expectation. James Crandell - Dahlman Rose & Company, LLC: Okay. And Jay, with all the new offshore rig water announcements here, could you review with me if you would, your capacity to build ROVs at the current time?

We've been building in the, 20s, going 25 a year. We could easily build 40. We can expand that almost on a quarterly basis. So I think we are very flexible. We can move it up or down. We can do more retrofits of old systems or we can expand more numerous systems almost on a quarterly or a 6-month basis. So we're pretty flexible on that. I think our supply chain has got parts available to it, and a relatively small amount of labor to assemble an ROV in our Morgan City facility.

Jim, we can keep up with demand, whether it comes from vessels or from new rigs we can deliver. That capacity to add is not going to be a problem. James Crandell - Dahlman Rose & Company, LLC: Okay. And Jay, if you would, maybe add -- try to take me through this. If we look since October 1, I think, there has been 31 new floaters ordered, at least according to ODS-Petrodata, when would we expect on average, to see the ROV contracts given for these batch of floaters that's been ordered from over the last 6, 7 months?

I'd say, that really is an interesting question. We see some customers working -- major oil companies tend to move further in advance. When they shut down one of these rigs maybe a year or two in advance they might very well come to us, and we might make a deal on the ROV. Other companies wait until the very last minute, so we don't really have a pattern other than some could be as far as 2 years in advance and others could be 6 months, 90 days, even, for some people.

Some wait till after the rig is delivered. And I think the key date for all these new rig orders, Jim is going to be when are they going to get contracts. When is there going to be an operator identified that we can go chase. James Crandell - Dahlman Rose & Company, LLC: Right. Okay.

Usually, when that happens, there's somebody we can deal with and you would expect their order should be placed a year ahead of time. But not always. James Crandell - Dahlman Rose & Company, LLC: Okay. Got it.

Your next question comes from the line of Jon Donnel from Howard Weil.

I had a question regarding the products. It sounds like the IWOCS results for the quarter as well as the build in the backlog for that group was a lot better than previous expectations. I was wondering if you could talk a little bit about where the demand is coming from that, if that's better with the Gulf of Mexico and expected if that's more of an international focus.

Yes that has been predominantly, the Gulf of Mexico business. And so I think, as all companies have been -- they haven't had permits to drill new wells, they have focused on completing some of the wells that they've had. So I think that has helped our Gulf of Mexico IWOCS business. But we are in the process of expanding that business internationally. But I think the movement that we saw this quarter is really due to, mostly to the Gulf of Mexico business.

We had a large West Africa job that was in product this quarter in IWOCS and it kind of shifted. This quarter was a mix, where there was a lot of IWOCS rentals related to plug and abandonment activity in the Gulf of Mexico. So for a time, we went through this period, where rigs couldn't drill, they were doing completions. And that was like Q4, the early part of Q1, where there was really good utilization of IWOCS. And then the latter part have shifted to being plug and abandonment. But there was a large multi-well completion project off West Africa in Q1.

Okay. That's helpful. And then I guess, that kind of maybe ties in a little bit about the tax rate question. As you do more international investment, with the tax rate coming down in first quarter, is that indicative already of that Norse acquisition? Or is that just a different emphasis on where you reinvest the earnings from international operations?

No Jon. I think it has nothing to do with NCA, but -- it has something to do with NCA. But I mean, what we've noticed is we've been tax effecting all of our foreign earnings as if they were going to be brought home, initially, it was to pay back debt. And then it was to grow the business. And then it's been obvious to us that most acquisitions have been made in international. So it's more tax efficient to keep some of that cash overseas and don't tax it to bring it home. We don't usually bring it home until we actually need it. But we have been providing taxes as if we would ultimately repatriate it. So I think with the emphasis of growth in international water and a significant amount of cash flows, we can now leave some cash in our foreign subsidiaries and grow there and not have to grow through the U.S. parent company. So it really is a change in tax-accounting treatment that says, the money that we're going to reinvest from foreign earnings, we could just leave over there and not tax effect in the U.S.

Okay. So that sounds like it pays more on what you've done in the past. Is there any, I guess, incremental acquisitions internationally that is sort of baked in to get into the 31% number? Or I guess, another would ask, that is, if we see more international acquisitions, could that tax rate come down even further as we go into 2012, maybe?

I think, we've looked at that tax rate and the answer is, it could come down a little bit more. But it just really depends upon how successful we're going to be. I mean, just to be clear when -- from a tax purpose, reinvesting it means just not bringing it home. If it's put in cash in a foreign bank account and it would be "reinvested" in international operations. So it's not going to be tied to acquisitions that we make. However, as more and more of our cash is generated internationally, it could slightly impact our day rate. And as more and more ROVs shift from the Gulf of Mexico to international, I mean, our cash flows are significant internationally, and we just thought it was about time that we stopped tax effecting all of our earnings to bring it home.

Okay. Great. That's helpful.

Your next question comes from the line of Max Barrett from Tudor Pickering. Max Barrett - Tudor, Pickering, Holt & Co. Securities, Inc.: I want to start with Subsea Projects. I'm curious if you could give us a sense as to the vessel utilization you saw in Q1 versus Q4, and now also, could you tell us how many boats are performing work today?

We really don't give out those kind of quarterly numbers. But it was lower, definitely lower in Q1 than it was in Q4. And I really don't know how many of our boats are working today. It's coming to go out. It's a call-out kind of business, so we're in and out on jobs so frequently that I just don't happen to know that they're all -- all of our vessels are active going out and doing work and then -- and coming back to the dock.

And Max, I think, Jay did address it in the opening comments about Q4 was unusually strong in projects, because of umbilical installation, and the pent-up demand for so many vessels being involved in BP Macondo. And now, that's gone away. The Q1 was a bad weather from offshore as everybody's reporting onshore, and there are more vessels competing for work. And it is a very competitive market out there, but we don't give out utilization of our vessel fleets. Innovative status reports. Max Barrett - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay. So for Q2 in that segment, as we kind of think about top line improvement, kind of single digits?

Again, we're just not forecasting those kind of details. We're rather on seasonal increase, but I guess, part of the visibility that we see in this market, it's just lower than we had thought there would be a quarter ago, so we -- as Marvin mentioned, it's a competitive market, and it's also a volatile market. This is one of the things where rates swing up and down. They can go up quickly, they can come down quickly. So we have the double whammy of lower utilization and lower rates, and we thought it would be -- we knew that the first quarter would be tough. We thought it would be -- we'd see a better visibility than we do right now. But right now, it looks like it's going to continue. We'll have some seasonal improvement, but still tough.

I think from the tone of our answers, you can tell that where we had earlier reported the biggest swing factor for 2011 was going to be the resumption of drilling activity in the Gulf of Mexico with the permitting and having as many ROVs on full-day rate as we do now. We hope that will continue and then the big swing factor becomes how much does vessel activity in the Gulf of Mexico pick up. And that's what we tried to articulate in the press release and these call notes. Max Barrett - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay. Fair enough. And switching to Subsea Products, could you give us an update on the sort of outlook for near-term umbilical awards, and then also maybe give us a sense as to the current margin differential between umbilicals and the segment average?

Yes, really the Umbilical business is pretty much what we -- have worked plain out, pretty much as we anticipated, and really, not much change from a quarter ago. I think the market is oversupplied with capacity. It looks like Brazil might be the first market to come into balance if Petrobras continues to grow their demand as they have forecast. There is quite a bit of quoting activity going on in the North Sea at the moment. But some of those awards are still pending out there. But in the U.S. it's the lowest -- by far, the slowest market right now. Our U.S. plant is pretty much living off of jobs that are in sort of West Africa and Brazil. We think that market continues to be the same, and we have hopes that it will continue to improve over time. For us 2011 is better in the Umbilical business than it was in 2010. And I think, next year will likely be better. But no real change in that market, and we just don't give out, as I've said, information on margins.

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

Question on the Products business, how much of that is outside the Gulf of Mexico?

I think, we just can't answer that. Don't have that, I mean -- maybe...

No in the Umbilical business, we have three factories, 1 is in the U.S. and 2 are outside the U.S.

But the 1 in the U.S. is doing West Africa and Brazil. The subsea field development in Houston is working no the Tucson and West Africa projects. IWOCS is split mostly Gulf of Mexico, but some international. So we don't track it that way.

Well, how does that -- just kind of help me understand, how it's -- I guess, because I look at 2011 and you'll do probably about the same top line you did in 2008. But I would assume that '11 is going to be a better international year versus '08, and the Gulf of Mexico is still kind of relatively depressed, because of Macondo. Is that correct?

Well, I'll make sure we understand the question. Are you comparing this to '08?

I guess, top line in the Products division. I mean, you're already kind of at that run rate.

Give me a clue. What was our Products revenue in 2008? Mike, tell me what it was.

$650 million.

How much?

$650 million.

The Umbilical business had a pretty big year, I think. But umbilicals are certainly growing.

But I think it's definite to say that international is stronger relative to domestic in 2011 than it was in 2010, because domestic products in '10 is seriously depressed. I mean, there is no completion activity going on. There's no installation activity. It's all related to the construction. So we are, as Jay said, pretty much living off of the international market when it comes to product. We know with the exception of the stuff we do in plug and abandonment, but even vessel activity and installation, repair -- I'm sorry, Inspection, Repair and Maintenance activities is all kind of down, so -- tooling is down in the Gulf. So most of this is international.

I think your perception is correct.

Okay. Well get in that. And just as a follow-up to that, how long does the work in West Africa last? Will that go into 2012? Or is it...

We're not going to try to [indiscernible]. I think it goes on. I mean...

Our Cameroon, now, they've been through a whole business -- their whole story is West African project. So Cameroon is a big customer. And I think, they've got these projects stretching out for years.

I would add [indiscernible] as well.

Okay. So it's not something you like have to replace in 2012? I mean, the market will be there for it?

I think jobs, specific jobs that we have will have to be replaced.

But I think that outlook for that business is excellent. It's been one of the fastest-growing pieces of our -- of the Product sector is the field development business, and I think its outlook for 2012 is excellent.

Okay. Great.

And your next question comes from the line of Chris Gleysteen from Simmons & Company.

Quickly on Subsea Products, your NCA, that flows through in the Products segment going forward?

Yes, correct.

And how much of your revised outlook for Products is reflective of that acquisition versus organic improvement of IWOCS and tooling?

I mean, let's make sure -- well, yes. Some of it, it is. There is some of it in there. But in relative terms -- what did we say, in our press release, that it had revenues of $50-some-odd million.

$56 million.

That's what we paid for. Did we have $56 million of revenues? But anyway, $50 something million of revenues, Chris, and so we can have for a whole year. So it is when you look at it in the scope of our products, what we did $550 million last year, I mean, it's not for 3 quarters, it's going to be 10% of our top line numbers, because all the other ones are organically growing, particularly on the top line with all that much higher umbilical throughput.

I think it's a piece, but not the largest piece.

It's a small piece.

And do you perchance, can you provide us with either the EBITDA on NCA or the general profitability on that compared to the segment?

No.

Okay. Turning to Subsea Projects, understanding that seasonality, you get an increase in the second quarter, but when you think about Q1 as a seasonal low in terms of activity, vessel additions coming into your fleet, between the Patriot, the Project, is it reasonable to assume that Q1 would mark the low point of the year, understanding that for the year, the assumptions have come down as a whole, but from a progression standpoint, that Q1 would probably be the low point?

I would assume that. I think that's a reasonable assumption.

Okay. And that's helpful. One last one. What portion of your fleet is on Midwater semis? So 1st through 3rd generation semis, ROV fleet.

We don't track that, but we do know something about that.

We do have that for the rigs that have contracts expiring in the rest of this year.

Yes, that will be helpful.

We can take a look at that, and let me see if I can find my notes here. So for the rest of the year, we have 25 ROVs on 57 rigs that have contract expirations. And of those 57 rigs that have contracts that are expiring...

No 25.

25 that are expiring, 3 are 2nd generation and 7 are 3rd generation and 8 are 4rth generation, so hopefully that gives you some...

I will look at it another way. You got 15 of the 25 on 4rth and 5th generation semis for drillships. So if you go looking at 2nd and 3rd, the answer is 10.

Okay. All right. That's very helpful.

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

I'm curious, on Subsea Products as -- well, what percentage of your revenues outside of multiflex at this point are derived from rental-based services?

No. I think, I don't -- we don't know. And mostly, I mean, we go through the lines, the things that we rent are in ROV tooling and IWOCS. And then we got service on that side.

IWOCS is really a service. Really, it's the DTS part. DTS is 1 of 5 businesses in that business, and part of it business is tooling, so...

But we don't rent umbilicals. We don't rent subsea development hardware. We don't rent in Greyloc. We don't rent in rotator. So most of these things are -- I mean, it's an exception in the Tooling business and in IWOCS, where it's a more of a service and rental business than as they say, IWOCS is really, a service. So I hope that gives you an answer without -- or give you a flavor without giving you a number, because we don't have a number.

It might be a low double-digit number. But there's probably not a single digit, but it's probably not much more than a low double-digit number.

So I had to guess. I wouldn't even -- I wouldn't -- I have no idea.

So anyway, we just don't track it that way.

Okay. So it sounds as if we should still expect the vast majority of your new demand to surface in orders, to show up in orders from quarter to quarter?

I would say, the mix will be the same as it has been. Even in the area where we are renting equipment, like in our Subsea ROV Tooling business, that is one of the area, where we're renting new equipment that's come about as of Macondo. So that business is growing as well. So I would say, that the mix is likely to continue to be what it has been.

Tom, if you're looking for kind of a back-of-the-envelope book-to-bill, I mean, if you look, we had, whatever it was, $157 million of revenue, a lot of that goes in and out of backlog within the quarter. So it's not the visibility of such is really in umbilicals and Subsea field developments, where our backlog is mainly, and we've got it in all the other places. But some of our throughput is booked and build within the same quarter. So they're short-term turnover.

Right. Yes, that's -- essentially, what I meant is that, that mixture isn't meaningfully changing.

Correct.

Correct.

Okay. That's helpful. And then on inspection, it often doesn't get as much attention. And I guess historically, there's been good reason for that. But my impression is it is expected to perform nicely this year, internationally. Could you share some color on why? Where exactly do you expect to see growth?

You're right, that's a nice, steady growing business for us.

And it doesn't get much attention, because usually, it's overshadowed by projects. This year, it really is going to be very much more relevant.

I think the U.K., the largest areas for that business are the U.K. and then the new contract we have with BP in the middle of the Caspian area. So I think, that area -- most of those areas have been growing nicely for us.

U.S. shipyard -- I mean, yard activity, where we do some Inspection. The U.S. is picking up on fabrication work. I think the outlook is for a broad base improvement. Most of it will be coming from international. But the U.S. will be improving as well.

Is there anything about the trends that are driving that improvement that would -- that might potentially make you interested in investing and expanding that business including for acquisitions?

Well, we continue to look for small, and what we find throughout the world, generally small inspection companies, and we continue to look for those. I mean, we bought 1 in Australia late last year. So we will continue looking and continue to expect to find small acquisitions that we add to our business in that area. Yes, we hope so.

Okay. That's all I have.

There are no further questions.

All right. thank you very much.

Take care, guys. Goodbye.

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