Good morning. My name is Kim and I will be your conference operator today. At this time, I would like to welcome everyone to the Oceaneering First Quarter 2016 Earnings Conference 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]. Suzanne Spera, Director of Investor Relations, you may begin your conference.

Thanks you Kim. Good morning and welcome to the Oceaneering first quarter 2016 results conference call. Today’s call is being webcast and a replay will be available on Oceaneering’s website. Joining us on the call are Kevin McEvoy, Chief Executive Officer, who will be providing our prepared comment; Rod Larson, President; Alan Curtis, Chief Financial Officer; and Marvin Migura, Senior Vice President. Before we begin, I would just like to remind the participants that the statements we make during the course of this call regarding our future financial performance, 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. Our comments today also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures can be found in our first quarter press release. We welcome your questions after the prepared statements. I'll now turn the call over to Kevin.

Good morning and thanks for joining in the call today. 2016 is shaping up to be as challenging a year as we envisioned, possibly more so. Much has been written recently about Oceaneering's decision to break a long-standing tradition and not provide earnings guidance for 2016 or even for the first quarter. When we announced our decision we indicated that this change was necessitated by a serious lack of visibility of near-term offshore activity levels. So, now that our first quarter is behind us it is apparent how difficult it is to forecast or even know are unpredictable. Consensus sell side EPS estimates missed our actual EPS. However first quarter results from operations after adding back the impact of 5.9 million of foreign currency losses actually did not turn out much differently than we had internally expected with the exception of a disappointing Advanced Technologies performance. As indicated in the earnings press release we are pleased that each of our operating segments remain profitable and our EBITDA margin of 17% held up relatively well compared to others and our own full year 2015 EBITDA margin of 20%. Reflecting the impact lower oil prices have had on oilfield spending levels, revenue for the first quarter was 23% lower than the corresponding period of 2015 and 16% lower than the immediately preceding quarter. Year-over-year our quarterly earnings were down significantly as a result of lower demand and pricing for all of the oilfield services and products we offer. Sequentially quarterly earnings declined due to a lower level of offshore activity resulting from further weakening market conditions, normal seasonality, and higher unallocated expenses. Normally first quarter has been our low water mark for quarterly EPS driven by the seasonality in certain of our businesses. 2016 may not be a normal year by any…

[Operator Instructions]. And your first question comes from the line of Kurt Hallead with RBC. Your line is open.

Good morning.

Good morning Kurt.

Hey, great job in a challenging market managing through the best that you can needs dynamic so...

I am sorry, thank you for noticing.

Absolutely, yes. I was curious on subsea products you talked about dynamics in the back half of the year getting a little bit weaker as kind of pricing rolls through. As you continue to book backlog in 2016 do you get a sense that the pricing dynamics have stabilized for products yet?

I’d say is we are expecting so little too be on the street at least in terms of open book orders that we could expect some extremely fierce pricing competition for anything that comes to market. So no, I don’t think it is done yet.

Okay, got you and maybe just also trying to gauge the dynamics on ROV. You gave some very good information here in terms of the number of rigs that are coming off contract and we all know there is very little visibility on it. You talked about maintaining market share and a lot of times in other industry sectors, a lot of investors will equate place for market share with aggressive pricing dynamics and giving a position in ROV, is that a kind of a necessary connection that you have to make between market share and pricing, is there something different given your market their -- market share in ROV were you might not have to be so aggressive on price?

No, I think pricing is very aggressive but as we pointed out on the last call there is really not much coming to market right now. So most of the price reductions are collection of discounts that are still aggressively being sort by our customers and the lower margins reflected in the vessel part of the business. In the market as we have always said.

Okay, great and then there was just one more thing if I may. I think on the last call you indicated that the dividend decision at the Board level to be predicated on your outlook for net income for the year. And when I can kind of run through the numbers with your strong cash position and it looks like a very decent cash flow, free cash flow dynamic in 2016, to me it appears like you wouldn’t have to do anything with the dividend if you so opt it, is it can you then help just understand is it dividend absolutely tied into kind of your net income dynamic or do you have some flex on that predicated on your cash position and free cash flow?

We have some flex on that. I think we were trying to give some color around that decision last time but obviously we have some flexibility. But as we also have said it is a Board decision and we’ll just see how the year plays out here. And also what other things may come into play for us for use of cash.

Got it. That’s great color. I appreciate it, thank you.

Sure.

And your next question comes from the line of Waqar Syed with Goldman Sachs. Your line is open.

Thank you very much. My question, first of all in North Sea they’re saying that it’s going to be a pretty heavy maintenance season coming up in the second and third quarters. Would you benefit from that?

A little bit. I mean to the extent that we have ROVs on third-party vessels that are operating, independently chasing that kind of work, yes. I guess the question really is how much of that really is there and I think Norway really needs to see some increase in demand in that regard for it to be noticeable in our results.

And are you also present on the UK side or just mostly just Norway, your Asset Integrity business is that on the UK side?

The Asset Integrity business is heavily -– more heavily weighted to the UK side and the inspection part of it is more heavily weighted to refineries and utilities that maybe a run in at high gear and are wanting to do maintenance, but eventually that is going to have to happen.

Okay. And then on the subsea project side, there -– if you go back historically there's been great variance in operating income year-over-year. So as we look forward to 2016, what year do you think is going to likely resemble, obviously it’s not going to look like 2014 but are we looking at more like 2011 or 2012 or 2010, like how would the operating income resemble?

I don’t know how far you have to go to find a comparison, but I mean there are still a huge oversupply of vessels operating in the markets that we're operating in and there's not enough work. So margins are going to continue to be depressed until those dynamics change and I can’t tell you when that’s going to happen. It really is revolving around again they call our nature of maintenance and repair work that gets carried out. And so it's -– I wouldn’t expect any big change to happen overnight here in that market.

Hey, Waqar this is Marvin. I think it’s very difficult to go back to a comparable year because the whole dynamics of subsea projects changed when we went international with the big BP contract and even though we still have some India work and the BP being curtailed, I think it’s almost impossible to come back and get a apples-to-apples comparison to what we used to be like in the Gulf of Mexico or what year would be a best comparison. Because we have more capable vessels, we have more capable organization. It’s just, as Kevin said, a very challenging vessel market right now.

And in your margins like your margins in the first quarter were in the mid-single digits in the projects business. Do you expect them to go into double-digits as we get into the second half -– into the second and third quarters?

A lots going to depend on callout work, we do expect them to improve. We said the Ocean Alliance being dry docked and as you know it is a double whammy because you have to expense the dry dock and it just so happens to be one of our vessels on term contract. So if you're going to dry dock a boat you hope it’s one that’s on the callout market and not generating revenue every day. So it will be good to have that vessel back in operations and out of the dry dock. And then as we said in -– as Kevin said, in July we’ll be able to charter on the Ocean Intervention IV will expire. So there is some flux in our fixed costs and I think margins should improve. But then so much is dependent upon how effective we're going to be in capturing the callout work.

Okay. And your second vessel -– so you had three vessels with BP, West Africa, one got released and the second one, if I remember correctly, is in May 16?

Correct.

And then the third one, the contract expires in January in 2017. Has BP started any discussions on extension of that contract or is it too early for that?

No, I would say that we fully expect that contract to be renewed.

Okay.

We are in discussions but there have been no decisions yet and we know that they can be pretty variable, but we are –- our expectations are we’ll be able to keep the boat in Angola.

They can’t do without a boat let's put it that way. And we’re there and been operating for several years so, we certainly expect that, that will continue.

Okay, and then in terms of subsea products, obviously the margins as you mentioned could come down as we go through the year, could you ballpark that like what extent of margin erosion could occur there in that business segment?

I don’t think we’re going to get there Waqar.

Okay sir, that’s all I have thank you.

Thank you.

And your next question comes from the line of Blake Hutchinson with Howard Weil. Your line is open.

Good morning. I guess understanding we don’t want to deal with exacts in terms of the margin outlook for products, you've give us good information in terms of the composition of the backlog and the revenue stream in the past. As we think about it, kind of more qualitative I guess is the bigger issue that you deal with throughout the year kind of under absorption on vehicles production side or really should we be thinking more towards the kind of new pricing regime for both tooling and IWOCS and some of those major components?

It's more under absorption. As you appreciate those -- new FIDs [indiscernible] so there is less and less to even chase much less to get and then execute. And then additionally the callout part of the business which can be substantial in good years, for tooling and IWOCS just hasn’t been there. And as we continue to say it you feel like tell me when the phone is going to ring. If I could I would but, you know, so those are the two big pieces that are just pretty hard to predict right now.

And then Kevin I guess following on that commentary around tooling, do you observe a phenomenon in that market where you actually see peer ROV operators or maybe you engage in this yourself or you kind of under order tooling in this market or would you say this is simply more of a one-to-one relationship with activity?

This is really activity and people don’t "order" the tooling so to speak. I mean they have a problem when we go out and solve it using tooling and our combination of our other products and services and that is generally a higher margin sort of activity. Today's market A) there is not very much of that going around and number two, since its all vessel based all of that part of it -- the preponderance of it is mark-to-market and at much lower margins then you would see in a more active year.

Blake remember that our tooling in IWOCS are mostly a rental business so it’s very much a one-to-one activity level base.

They have to have, okay, and then I just want to make sure we are thinking about this correctly too at these levels, is the -- your own internal vessel days usage of ROVs starting to have a more of an impact on what we see quarterly so, we need to be thinking about those businesses moving a little more in tandem with the spot markets or would you say it's still say somewhat immaterial to the ROV business as reported.

Well, I mean I think a spread rate includes everything and so if prices are down I mean they are going to be down. So, I mean the ROV, our own ROV rates on our vessels are pretty comparable to our ROV rates on other peoples vessels out there in the market place because it’s a spread rate at the end of the day. And we would be playing well less discount so they price more so we can have a better price on the ROV. We don’t do it that way, it’s a spread rate.

And Blake if you look at even then we have 318 ROVs and even at -- to pick any number pick them out, make them out of easy and pick 50% utilization and then you compare that to the number of ROVs that we have on our boats. It is inconsequential. It is very relevant to our projects business but as to the ROV business it is not significant.

Thanks that’s it I was going for. I’ll turn it back.

And your next question comes from the line of [indiscernible] with Cowen. Your line is open.

Thanks for taking my question. Wanted to touch on the subsea products, so if we go back let's say 2009 then the quarterly revenues were somewhere around $125 million. The margins dropped somewhere around low double-digits, low teens. Has there been any structural change in the business if we go back to similar level of revenues that margins would be materially different than what we saw then?

I'm not sure that that’s really comparable even with the way the business has changed somewhat. I mean when you go that far back I think we were at the ahead of the curve being able to provide ROVs on demand at short notice because we had products.

Well, your question is about products, right?

Yes, subsea products.

That’s okay.

No, and I used to think that so much has changed, we are really not prepared to be able to comment on the comparability of 2009 levels or margins. I don’t have any of that handy.

I don’t have that.

And significant changes has been made in our product mix. I mean back in 2009 IWOCS and tooling were a relatively small part and it was mostly umbilicals and thermoplastic was a large market share. Now all of that has been flip flopped to where thermoplastic is a very small portion and we've always talked about the higher input cost and lower margins on steel tube umbilicals which are now predominantly the order of the day. So I think it’s almost impossible to go back and do a meaningful variance explanation or analysis of 2009 plus revenue versus and order back then and they’re now.

Right. So there's just a lot of differences.

That’s helpful. That’s what I – that’s the color I was looking for. And number two, we touched upon the dividend. So earlier the commentary was if net income is not more than the dividend you guys would revisit. But it sounds like now that language is more flexible, just wanted to make sure that I got that correct?

I think the whole definition is revisit. I think when we take a look at our earnings expectations, I mean that is an element that we consider. So -– but it wasn’t meant to imply any rigidity. So I think we are revisiting our dividend philosophy, the Board is, quarterly. And I think that’s what Kevin said and Q1 wasn’t much different than what we expected and we're going to see what happens in Q2.

Alright, that’s very helpful. Thank you, sir.

And your next question comes from the line of Igor Levi with Morgan Stanley. Your line is open.

So going back to subsea products you talked about as backlog has converted to reflect the current environment and you’ll see reduced margins. Now when I look back in my model in the past six quarters, every single quarter where we thought those margins could decline you proved us otherwise. So I was wondering first is the decline going to be driven more by pricing or mix and how likely is it or how possible is it that you guys can continue to execute so well that we could see another one or two quarters of flat margins despite the weak expectations?

Well, I think the mix within that group really drove a lot of that. We had a pretty good utilization in our IWOCS business and our tooling business, both, and those are a much higher margin services that we provide and those are not really in the mix at this moment. And we're certainly hoping that we’ll see some uptick in Q2, Q3. But until it happens it hasn’t happened. It’s been much more leveraged due to the umbilical product just with a lower margin and as we shift to execution of projects that were bid in the current downturn environment I think that will come out. Unless, it happens to get offset by increased activity levels which we're not seeing at the moment.

Got it. And on the pricing side, I mean, how severe is the pricing pressure in the different product lines? Is that some you're able to touch on?

Well, on the umbilical side, even when times where we thought were really, really good we always pointed out that there is twice the manufacturing capacity in the industry as there is demand. That’s when it was really, really good. Well, now it’s not so good. And so when you’re looking at trying to just get some kind of recovery on your fixed cost you can expect pricing just to be pretty challenging. So, on IWOCS and tooling, I mean that tends to hold up a little bit better. It is certainly not as good as what it was and it depends on what the project is and the mix of what else is in it as to how good those margins might be. So while we can't tell you, we do try to focus in the areas that we have the best market reputation or whatever to do the higher degree of difficulty jobs requiring higher levels of engineering and what not to plan and execute. And generally you can get -- you can be better off in those parts then on the more commodity stuff. But what's going to fall out of the sky who knows.

And I think one thing we need to remember about umbilical margins regarding pricing is what we commented earlier about absorption. It really depends upon if you can get this level of pricing but keep your plant fully loaded, I mean the margins are acceptable. It is at this level of pricing and less than optimal throughput because of backlog shrinkage, that’s when you really start to see a degradation in margins.

Great and on the order side, what type of orders or what type of mix of orders are you seeing as of late with just over 100 million in orders that you had in the first quarter, is it more geared towards umbilicals or is it a wide range of products?

It’s a wide range. And we think the backlog decline was attributable to the umbilical throughput and tooling. So the 100 million that got us to the point 77 book-to-bill was included all services and products. I am sorry all products within the product line within the segments what I meant to say.

Okay, great and just one last one this is on ROVs. I talked about continued pricing pressure. I mean this quarter revenue per day compared to last quarter was relatively flat and I mean we saw something like that in the second quarter of 2015 before the decline resumed. I mean do we expect repeat or are we seeing any kind of deceleration in the pace of pay rate declines?

I would say no. I mean at times there is still steady pressure, our inboxes are still full of request for lower prices, and it just depends upon how successful we will be in navigating that.

Great, thank you. I will turn it back.

And your next question comes from the line of David Smith with Heikkinen Energy. Your line is open.

Hey, good morning, thank you. I wanted to ask in normal markets kind of when do you start to develop this ability on how the seasonally strong Gulf of Mexico IMR market will shape up or maybe the question is when does that seasonal shift begin to happen, kind of which month do we start to transition from the softer 1Q to a stronger 2Q?

Usually you start seeing May timeframe. It really kind of depends on what the weather pattern is for a given year. If it’s been really bad then they will tend to delay things if they can. So that’s generally around the timeframe mid to end of May.

And is there anything different on that visibility this year compared to last year?

At this point I’d say no.

Appreciate that. And on the projects, I was wondering if you could give us a sense of the margin impact that the Ocean Alliance dry dock had on 1Q results? I know you mentioned the double whammy as revenue and cost but didn’t know if you can help us give us a sense of what that is?

That’s the best we can do. That’s it sorry.

No, I appreciate it. I had to ask. Was the -- all securities have just thinking about potential uses of cash, if you all see the potential for vessel valuations to become distressed enough to raise your interest and maybe add into Oceaneering’s permanent fleet?

I would say no. I can’t get interested in -– I mean there's so many boats available that I don’t see that as being anything strategic that would be helpful for us.

But should we get to needing another vessel we will again do our traditional analysis of lease versus buy and commensurate with vessel values coming down, so our lease rates.

Appreciate it. We saw on the rig market that you can hardly get prices low enough to get anyone interested. I was just curious if MPSV market looked any different. So I’ll wrap up with a little more positive question. I wanted to just say congratulations on being recognized at OTC for the remote piloting and automated control technology. And I was curious on what you're seeing from customer interest or maybe how you think about the timeline or ability for that technology to help preserve or gain market share in the vessel-based ROV market.

Well, first of all thanks for even noticing that we were selected for a spotlight on technology voted O2C again this year. But I mean I think that this is -– we don’t sell our ROVs. We provide the service and so this is something that we will gradually upgrade our existing ROVs probably starting with our vessel-based ROVs to be able to do this. So it’s not a question of selling it say, we’ll provide this enhanced service capability if you give us more of the ROV, I don’t think it works that way. We’ll just continue to hopefully demonstrate superior performance and execution in that business and that will give us the -– keep us in the market share and whenever the pricing does start to recover we’ll be able to command our appropriate share of that.

Alright, appreciate it. Thanks.

And your next question comes from the line of Ken Sill with Seaport Global Securities. Your line is open.

Yes, good morning, guys. And I find it refreshing to talk about earnings, positive earnings, like everyone else here.

Thank you.

Yes, so it’s a unique thing these days. So on the product – subsea product side, I guess I'm trying to get a better feel. So the IWOCS, the tooling or higher margins, it seems like that was probably what was down the most between Q4 and Q1 on the revenue side in products. Is that fair to say?

Tooling was down primarily.

No, IWOCS.

IWOCS. Yes, I think that’s – I think that is…

Yes. Correct.

So I mean just looking at what came out of backlog. Is there an oil price threshold that would see more tooling and IWOCS to come back. I mean the subsea, deepwater well intervention market has been -– one that’s been talked about for 15 years. You have a lot of cheap vessels that can go do it now, I'm just wondering if you think there is an oil price that would stimulate demand for more of the subsea products?

So, I think once things are in production it’s not about the oil price, it’s about their marginal cost to improve production volumes if they have some issues that they could fix. Clearly, if they are shut in for some reason they’re going to spend the money to go correct that problem. So I think the oil price is if you take away the issue of do we have enough cash to spend on doing something, if in a production scenario if there is something that they can do to improve that they’ll generally do it.

I think it’s going to be –- we don’t have a oil price in mind, Ken, but I think it’s going to be whatever price is necessary for them to start spending more OPEX budgets. I mean I think that’s what we're talking about that but with the stabilization in oil price and a little bit higher oil price, we could see a pickup in vessel activity in Brownfield, bringing on this kind of stuff and that would require more tooling and IWOCS. But as opposed to just the emergency fix work I mean we could see production enhancement if the price was right. And so -– well, I don’t know, we don’t have a particular price in mind.

And that’s probably dependent on or particular to each company what their cash flow position is and what their other needs are.

That’s fair enough. It seems like that should be a growing business overtime but right now it is tough. But moving on to Advanced Technologies, that was pretty weak relative to my expectations anyway. How do you think that you guys are saying it is going to get better in the back half of the year on better executions, I mean is there going to be much of a change sequentially, there between Q1 and Q2?

Well, I don’t know what I can say sequentially but I mean I think that we were struggling with a couple of problem jobs all through the year including into the fourth quarter and those are really behind us now and so that’s why we are expecting better improvement. As far as the timing of the projects that we have on the books through this year and when you’ll see that when our results are not sure they could be

Ken, Q2 should be a transition quarter and then the second half should be the better run rate.

Alright, thank you very much.

And your next question comes from the line of Ian Macpherson with Simmons. Your line is open.

Hey, good morning, thanks. Lot of thoughtful questions proceeding so I am going to go down to the -- but I just wanted to clarify the Q2 guidance were flat to down versus Q1 should we top that off of your $0.26 GAAP EPS or should we add back your foreign currency headwinds for the comparable benchmark.

Yes.

That you are referring to?

Tell me what foreign currency is going to do and I’ll tell you the answer. I mean we were talking about from operations being before FX.

Okay, got it and then thanks, the other question I had was another silver lining that struck me with the Q1 results was sequentially flat ROV average price per day. Your mix is being shifting as the market is going down, I think you are having consistently a higher mix of drill support as we’ve gone down, is that positively influencing your average daily revenue ROVs and is that a trend that you think is going to continue as we play out through the year, that will be a buffer or is that not a correct read?

I think given the impairment in the vessel base part of the market right now, it is pretty hard to make a snappy comment about that. I mean clearly the rig business is what it is. The vessel part of the market is oversubscribed and margins are not great but on a day rate basis we certainly hope that we’re near the end of the price reduction asked by operators and that will certainly at least stabilize within the next quarter or so and then move on from there.

Ian traditionally it would be going the other way around because of vessel base services when you get the days have a much larger crew component and therefore you would have a higher average revenue per day work. So, the mix is what I guess is surprising that the vessel base days are going down more they commensurate with drill support days and that’s why the mix has been up. Now that is really a key one and we got to wait to see when we get to a more seasonally active vessel base period to see what happens to our mix in Q2 and Q3, we could see that turning back around to having an increase in vessel base versus a decrease in rig days. But as we said a lot depends upon the rig renewal rates and all things. So I think it is too early to give a clear direction in that silver lining.

Fair enough, I understand it's complicated. Thanks a lot.

And your next question comes from the line of Mike Urban with Deutsche Bank. Your line is open.

So I was just wondering if at any of your business lines given the market that we have out there, are you seeing any competitors with any kind of irrational behavior on activity or pricing or maybe it’s completely rational, given the way the market is that maybe a better way to put it, its unsustainable?

Well, I do think it’s pretty rational from their point of view. I mean whether you have a boat that needs to get some contribution to the fixed costs or the charter or the CAPEX or manufacturing plants that needs somewhat to offset your fixed costs there, I mean that causes you to price whatever you need to, to keep things going. And so I think it is rational and what -– the second part of your….

Well, I guess I would actually agree it is probably rational but is it sustainable, are there any parts of the market where people are pricing below what you think costs are and…?

Well, I think on the vessel base side of it you can see that it is not sustainable for some folks. And I think the same is true on a floating rig side. I mean if you're overleveraged than the rest of it then it is not sustainable for the long-term and those are the ones that are going to fall out. I mean the question is who picks up those assets and at how many pennies on the dollar to come back and try to compete when the market starts to pick up. I mean that’s -– who knows what will happen there. But I do think that it’s been written about the strong companies trying to get stronger and I think that with a good track record of execution, safety, good engineering content etcetera, I think that we will maintain our market position as a quality company to go to for work when the market gets better. And I think I would expect that operators begin to be maybe a little more focused on the risk of getting things done and not having issues and so that should help the top tier companies as well.

Got you. And then going back to the ROV business and understanding the lack of visibility there, was your exit rate on utilization and pricing materially lower than the average that you reported in first quarter?

Year-over-year?

It’s the exit rate in the quarter versus the average.

Mike, I don’t know. Don’t think so.

Okay, so we should think about the traditional metrics, look at rigs rolling up for contract and then it becomes I guess a renewal and then vessels, as you said earlier, who know depends on that with…

Right.

Keen on other factor there.

I mean generally the direction is lower. But I can’t comment on the exit rate versus the average. I just don’t have that, we don’t talk too much about month-to-month.

Okay. That’s all for me, thank you.

And your next question comes from the line of Matthew Marietta with Stephens. Your line is open.

Hi, thanks for getting me in the queue here and congrats on the cash flows. I think obviously the CAPEX there was a little bit less than I had anticipated, but wanted to dig into subsea products a little bit. I'm hoping to get some color on the burn rate and what it may look like going forward. So you’ve reiterated numerous times the backlog build numbers was being brought into backlog. There's really no visibility there, tooling being unpredictable, umbilicals margin erosion. But can you help us a little bit with the burn rate and what you can do there to manage the burn rate of the back log. The back and looked over numerous quarters and it’s rare to see a sub 30% burn rate for the company. So I'm trying to understand what like the delivery times are looking like if supply chains or customers are willing to accept slow returns, just maybe help us understand some of the things that you can control and what you are seeing there?

So, I mean I don’t know that we could help much there. I mean all of the -– particularly umbilical orders are project based and it’s not like a boat under construction that you hope can get delivered later because you don’t want to pay for it now. I mean these are all projects that are going to come together at a certain point in time and they are really needing the delivery for the time they originally ordered it to be delivered. So we’ve worked through, on a project basis, each one of those orders to deliver them at the time that we promised and we don’t really -- if you want to use the term manage the backlog burn, it is managing, executing the project to the schedule that we committed to.

So I guess it is more in the previous question was on the mix and it being consistent. I mean it is more on the mix of what in backlog that’s going to dictate what that burn rate fluctuation will be and is there any reason to think that what you did in 1Q is going to be materially different from the rest of the year?

Well as you said it depends not only -- I mean from an umbilical standpoint which is where most almost all the backlog is in umbilicals first of all and so that will depend within those discreet orders where are we in the production phase of that particular project. And that’s how that get's reflected in our results. So it’s one quarter you know may or may not be reflective of what you see the next quarter, it really is dependent on too many things.

Can you maybe help us if there are any quarters where you have that visibility and when those projects are needing the umbilicals. Is there any lumps in the future quarter so we should consider as we try to get inside of yacht I guess internal crystal ball here?

No, remember that the orders maybe lumpy but since we use percentage of completion accounting as we progress in order that tends to have a more of a smoothing effect. I think the lumpiness of the business is at the order rate.

The order which dictates obviously your backlog and the cost absorption.

Got it okay and I want to go back to the dividend I guess, based on the conversations I’ve had so far I get asked a lot is the dividend safe. I guess your color last quarter was helpful but given the kind of outlook for flat to slightly down I guess I wonder why not just trim the dividend or move the concern and give yourself some breathing room on the payout ratio rather than explore the leveraging I guess, kind of getting back to that same line of questioning but I guess is there a situation where the dividend maybe trimmed and not removed outright, obviously highlighting the optionality that you guys have?

Matt I had the same thought today if everybody is thinking we are going to cut it why don’t we just cut it. But that’s not the way we look at it. We said we considered all the variables, our balance sheet and a strong cash position, our earnings forecast and then at the end it’s a Board decision. So I don’t have the authority to make that decision but if I did I would give some serious consideration to what you said. But it is not up to me and I think we are just going to not give any more color on it. We have a lot of flexibility and we’ll see what next quarter brings.

It sounds good and then one more out of me if you don’t mind. I guess another question that I guess all of us get here is on ROV rates where are we in spot versus what is still being pulled through on what could be backlog on the ROV side. Any help that you can provide there, I mean how do you balance maybe market share defense with day rates there and maybe help us understand is there -- is there effective revenue per day coming through that’s under contract and how does that really reflect versus the spot market maybe and I know you can't be too specific?

Well I think if you think about the rig markets first of all I mean, we have said that we are going to do everything we can to maintain our market share and that it is a spicing idea in this current market. And so we’ll do whatever we think is necessary without being impudent to maintain our position on rigs that are working and/or was stacked with an opportunity to go to work sometime in the reasonable future. And again even the system on the rig is looking better than leaving at any yard some place so to say, so if we had a choice leave it on the rig. On the vessel side it’s a bit less predictable but I don’t think I can really do any better than that.

I think there is very little left in backlog that hasn’t been adjusted somewhat.

That’s very helpful. So similar, is there a similar dynamic at which your customer base is asking for some confessions and maybe helping you guys with the relationship or is that a fair way to think about that?

There are some customers where we have those kinds of discussions but I don’t think that there is anything there that we can plug into a model.

Thanks.

Every day is a new day.

That’s all out of me.

Okay thanks.

And your next question comes from the line of [indiscernible] with Clarkson Capital. Your line is open.

Hi, good morning. Lot of questions there on subsea products so I won't labor that but just taking a step back in Q1 its usually a seasonally weak quarter but you talked about Q2 being flat to down and the limited visibility in rig contracts going forward as well as the vessel coming off with that BP in Brazil and Angola, is it going to feel that Q1 ends up being among the stronger quarters in 2016 in your mind?

Well, I mean is it possible yes, am I thinking about it that way no, because I chose not to. I internally look in for hopefully some sort of uptick in the market in Q2 and Q3.

Alright, okay, that’s fair enough. And I apologize if I missed this but is the Ocean Evolution still plan to be delivered at the end of 2016?

Yeah, end of 2016.

Okay, alright, that’s all for me. Thank you very much.

And your final question comes from the line of Eric [indiscernible] with Guggenheim. Your line is open.

Congrats on your business. What sense do you have for kind of how close we are getting up towards the regulatory requirements or you have to start spending here again?

All the things are staggered both within the asset portfolio of the company and then across the different companies themselves. So I think I made an comment earlier about refineries and utility operations in UK where we have a fairly high concentration. But when times are good they want those things flat out and they are not going to bring them down for maintenance which would be the window of opportunity for us to go and do an inspection work until they absolutely have to because they are making money while the sunshine is there. So, as far as the offshore a part of it I think we have noted in previous calls that we have been surprised that particularly in your way and in order to see that there was such a reduction and in some cases just total sufficient of inspection programs there. I mean our expectation is that at some point they are going to have to get with the plan again and start going but we are still waiting to see that happen.

Makes sense thanks. That's all for me.

Okay.

And there are no further questions at this time. I would like to turn the call back over to the presenter.

Okay, thank you since there are no more questions I'd like to wrap up by thanking everyone for joining the call. This concludes our first quarter 2016 earnings conference call. Have a great day.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.