Oceaneering International
Annual Report 2022

Plain-text annual report

2022 Annual Report Oceaneering at a Glance Oceaneering is a global technology company delivering engineered services and products and robotic solutions to the offshore energy, defense, aerospace, manufacturing, and entertainment industries. At year-end 2022, Oceaneering employed approximately 9,200 people worldwide. Courtesy of NASA Subsea Robotics (SSR) SSR merges our underwater robotics and automation capabilities by combining Remotely Operated Vehicles (ROV), ROV Tooling, and Survey Services businesses. ROV- Remotely operated, tethered submersible vehicles for services, including subsea hardware installation, construction, pipeline inspection, survey, and facilities inspection, maintenance and repair (IMR). Our premier fleet of 250 work-class ROVs remained a leading provider of ROV services to the offshore energy industry for drilling support, offshore wind, and vessel-based ROV services in 2022. ROV Tooling- ROV skid-mounted tools, for rental, to support well intervention, drilling, construction, field maintenance, and plugging and abandonment activities. Survey Services- Mapping; Geoscience and Autonomous Underwater Vehicles (AUV); Positioning; and Remote Survey Services for drilling rigs, pipeline lay and derrick barges, and dynamically positioned, multi-purpose construction vessels for the marine construction process. Manufactured Products Manufactured Products leverages our expertise and competencies around advanced technology product development, manufacturing, and project management skills by aligning our energy manufactured products businesses with our mobility solutions products, which include entertainment systems and autonomous mobile robotic systems (AMR). Energy Manufactured Products • Distribution Systems- Production control umbilicals supply electric and hydraulic power to subsea trees and inject chemicals into well streams. • Connection Systems- Connectors, clamps, and valves used to connect production trees to umbilicals and flow lines; and Pipeline Connection & Repair Systems (PCRS). Mobility Solutions Products • Entertainment Systems- Evolutionary, motion-based ride systems capable of delivering high-energy thrills in fully immersive 3D media-based theme park attractions. • AMR Systems- Innovative, turnkey technology-based logistic solutions on load carriers traveling the floor of a facility, minus an onboard operator. Offshore Projects Group (OPG) OPG provides a broad portfolio of integrated subsea project capabilities and solutions, including: project management; engineered solutions; subsea installation and intervention; IMR; IWOCS (Installation and Workover Control Systems); RWOCS (ROV Workover Control Systems); drill pipe riser (DPR systems); riserless light well intervention; hydrate remediation; well stimulation; and dredging and decommissioning. OPG provides seabed preparation and route clearance to the renewable energy and oil and gas industries. Project scopes are supported by: • our five Jones Act-compliant vessels, including three dynamically positioned, multi-service vessels (MSVs) and two other diving and support vessels • chartered, third-party vessels • manned diving equipment and operations for special services. Integrity Management & Digital Solutions (IMDS) IMDS leverages software, analytics and services that promote the safety, efficiency, cost effectiveness, and sustainability programs of our energy and maritime customers. Integrity Management- A range of integrity services for energy customers throughout the procurement, fabrication, installation, commissioning, and operation of assets. We establish inspection and maintenance programs, plan and execute inspections, and evaluate, report and make recommendations to facilitate customers’ decision-making. Energy Intelligence- Software solutions that range from data collection to storage, organization, analysis, and reporting. We also deliver inspection, corrosion, vibration, coating, insulation, and maintenance management, along with risk-based inspection planning. Maritime Intelligence- Software and consulting solutions aimed at peer benchmarking, vessel performance, voyage routing, and port-operations analysis for bulk-cargo maritime customers. Aerospace and Defense Technologies (ADTech) ADTech provides engineering services and related manufacturing, principally for the U.S. Department of Defense and NASA and their prime contractors. Defense Subsea Technologies- Design, build, and operate unique maritime and specialized harsh-environment systems for governmental and commercial customers. Marine Services- Full-service ship repair capabilities for U.S. Navy vessels, including submarines, surface ships and craft, and deep submergence systems. Design, repair, maintenance, modification, and installation of hull, mechanical, and electrical (HM&E) systems. Space Systems- Turnkey design, development, manufacturing, certification, maintenance, testing, and life-sustaining engineering for space-based robotics and automation, satellite servicing, human spaceflight systems, and thermal protection systems. About the Cover Top: The EXploration Space Suit (EXS), devised to enable safe and efficient extravehicular activity (EVA), was designed and developed by the C-SAFE team, led by Oceaneering, as part of NASA’s Constellation Space Suit System (CSSS) Program for human exploration of our solar system. Center: The MaxMover™ CB D 2000 is a robotic counterbalance forklift designed to lift and transport a variety of load types for a range of industry applications, including the automotive, healthcare, manufacturing, and intralogistics industries, moving autonomously with a software platform designed to integrate with new and existing facility environments while accommodating future upgrades. Bottom: The Isurus™ ROV is a work-class system designed to meet the needs of offshore hydrocarbon and renewable energy customers operating in harsh environments, enabling operational continuity in high-current environments and shortening project durations, resulting in reduced carbon emissions and lower project costs. Oceaneering International, Inc. 2022 Annua Letter to Shareholders 2022 marked Oceaneering’s fourth consecutive year of improved adjusted EBITDA performance, in addition to net income that was positive for the first time since 2017. Our improved results were primarily due to growth in energy markets that spurred increased offshore activity in our Subsea Robotics (SSR) and Offshore Projects Group (OPG) segments, which realized improved pricing and increased utilization in the second half of the year. Compared to 2021, our 2022 consolidated revenue increased 11% to $2.1 billion, with revenue growth in our OPG, SSR, and Manufactured Products segments being partially offset by revenue declines in our Integrity Management and Digital Solutions (IMDS) and Aerospace and Defense Technologies (ADTech) segments.  Rod Larson  We generated $121 million in cash flow provided by operating activities and invested $81.0 million in capital, while generating positive free cash flow and increasing our cash balance at year end by $30.6 million to $569 million. We are pleased with the following notable achievements of 2022: • The entire Oceaneering organization remained focused on life-saving rules, identifying high hazard tasks and developing engineered solutions to mitigate risks. This resolve led to a decline in total recordable incident rate (TRIR) from 0.4 in 2021 to 0.3 in 2022.  • Each of our five operating segments achieved positive operating income and positive adjusted EBITDA. • Our combined SSR and OPG segments achieved meaningful year-over-year improvements in revenue and EBITDA. • Our SSR business continued to achieve outstanding drill-support ROV performance, with 99% average uptime achieved during the year.   • We achieved commercial technical readiness for our Freedom™ system, a hybrid remotely operated vehicle (ROV) / autonomous underwater vehicle (AUV).    • Our Oceaneering Mobile Robotics business launched its MaxMoverTM autonomous counterbalance forklift product; we have seen strong industrial interest since its introduction to the market, as evidenced by significant contracts with a major manufacturer to deliver 85 forklifts in 2023 and 2024.  • Our ADTech segment secured several meaningful contracts during the year, despite a decline in revenue caused by delays stemming from the U.S. federal government budget approval process, including a multi-year contract by the U.S. Navy to provide subsea systems to support the modified Virginia-class submarine platform, and a multi-year contract to develop next-generation extravehicular spacesuits as part of a team led by Collins Aerospace. Many of our annual financial metrics improved sequentially in 2022. Here are a few:  • GAAP net income was positive for the first time since 2017.  • Consolidated backlog grew by 15%, from $1.7 billion on December 31, 2021 to $1.9 billion on December 31, 2022.  • One-year backlog conversion expected at the beginning of 2023 increased significantly as compared to the expectations at the beginning of 2022.   • Cash and cash equivalents increased by $30.6 million to $569 million. • Our enterprise value grew to $1.9 billion at the end of 2022, as compared to $1.3 billion at the end of 2021, on the strength of our increasing share price.  Sustainability remains a core focus. We have made additional progress on our environmental, social and governance initiatives, including: improving climate-related disclosures; fostering employee career development, as evidenced by internal promotions to senior management; diversifying perspectives of the executive leadership team with the appointment of our new Chief Legal Officer; and preparing for compliance with proposed SEC rules to standardize disclosures around climate and cybersecurity risks. Importantly, we continue to develop and evolve technologies using our digital and core robotics expertise to help our customers address personnel shortages, safety, and cost efficiencies, while also mitigating carbon emissions. We anticipate 2023 to be another year with sequential improvement in our financial results. We are forecasting our 2023 consolidated revenue to grow by more than 10% based on year-end 2022 backlog, the expected meaningful increase in backlog conversion, anticipated 2023 order intake, and current market fundamentals. We forecast increased revenue in each of our operating segments, led by Manufactured Products and SSR. Based on current market conditions, we expect good opportunities for improved pricing and margins in our energy-focused businesses and stable pricing and margins in our government-focused businesses. Our ability to increase our cash position over the last several years gives us significant flexibility to manage our $400 million debt maturity in November 2024. I am extremely excited about the positive market indicators for our businesses, including the opportunity to improve our prices and margins in our traditional businesses and the growing prospects to leverage our robotics experience into new markets. We remain committed to generating cash, which allows us to continue developing and delivering technologies that help our customers produce hydrocarbons in a cleaner and safer manner while increasing our investments into new markets, including renewables, digital asset management, aerospace and defense solutions, and mobility solutions.  Achieving success requires a team effort, and none of our accomplishments would have been possible without our dedicated and passionate employees and management team. I want to personally thank our employees for driving our successes at Oceaneering. I also want to thank our shareholders who have shown increasing confidence in our ability to grow and transform our company.  President and Chief Executive Officer March 2023  2022 Annual Report Form 10-K Financial Highlights Revenue $2,500 $2,000 $1,500 $1,000 $500 $0 Revenue and Gross Margin ($ in millions) Gross Margin Cash Flow from Operations and Cash ($ in millions) $2,048 $1,828 $1,869 $2,066 2019 2020 2021 2022 Revenue Gross Margin Revenue $2,066 million Mfd Products 19% SSR 30% OPG 24% ADTech 16% IMDS 11% $500 $400 $300 $200 $100 $0 $750 $600 $450 $300 $150 $0 $538 $569 $452 $374 2019 2020 2021 2022 Year End Cash and Cash Equivalents Net Cash Provided by Operating Activities Segment Operating Income $238 million Mfd Products 5% SSR 50% OPG 21% IMDS 6% ADTech 18% Oceaneering International, Inc. Environmental, Social & Governance • We continue to develop and evolve technologies using our digital and core robotics expertise to create efficiencies for our customers while mitigating carbon emissions. • In 2022, we filed our first climate Change Report informed by the Task Force on Climate- Related Financial Disclosures. We also filed our annual sustainability report using the disclosure methodology outlined by the Sustainability Accounting Standards Board. Both reports are posted on our website. • The addition of our new Chief Legal Officer in early 2023 expands the diversity of experience and perspective of our executive leadership team while increasing the gender diversity of our C-Suite. • In 2022, we created an Employee Experience group reporting directly to our Chief Human Resources Officer, to put additional emphasis on connecting with our employees, supporting their development, and expanding their access to various career opportunities. Our expressed desire to develop and promote future leadership from within the company was manifested with one promotion to the executive leadership team and two promotions into segment leadership positions. • We have taken steps to comply with the proposed SEC rules requiring certain climate- and cybersecurity- related disclosures. • Oceaneering continues to hold an “A” rating on the MSCI ESG index. Left top and Right: ISURUSTM ROV, windmill inter-array and export cable installations in the Taiwan Strait. Left bottom: Magnum® ROV, anode installations in southern North Sea. 2022 Annual Report 2022 Annual Report Directors T. Jay Collins Chairman Director of Murphy Oil Corporation and Pason Systems Inc. Deanna L. Goodwin Director of Arcadis NV and Kosmos Energy Ltd. Karen H. Beachy Principal Consultant of Think B3 Consulting, LLC; Associate of The Alliance Risk Group, LLC; and Director of Pangaea Logistics Solutions Ltd. Roderick A. Larson Director of Newpark Resources, Inc. William B. Berry Director (Ret.) of Continental Resources, Inc. M. Kevin McEvoy Director of EMCOR Group, Inc. Paul B. Murphy, Jr. Executive Vice Chairman of Cadence Bank; and Director of the general partner of Natural Resource Partners L.P. Jon Erik Reinhardsen Chairman of Equinor ASA; and Director of Telenor ASA Steven A. Webster   Managing Partner of AEC Partners L.P.; Trust Manager of Camden Property Trust; and Director of Callon Petroleum Company Senior Management Roderick A. Larson President and Chief Executive Officer Philip G. Beierl Senior Vice President, Aerospace and Defense Technologies Earl F. Childress Senior Vice President and Chief Commercial Officer Christopher J. Dyer Senior Vice President, Offshore Projects Group Alan R. Curtis Senior Vice President and Chief Financial Officer Leonardo P. Granato Senior Vice President, Integrity Management and Digital Solutions Holly D. Kriendler Senior Vice President and Chief Human Resources Officer Martin J. McDonald Senior Vice President, Subsea Robotics Benjamin M. Laura Senior Vice President and Chief Innovation Officer Shaun R. Roedel Senior Vice President, Manufactured Products Jennifer F. Simons Senior Vice President, Chief Legal Officer and Secretary Witland J. LeBlanc, Jr. Vice President and Chief Accounting Officer MaxMoverTM Panama City Facility Oceaneering International, Inc. Oceaneering International, Inc. Forward-Looking Statements General Information All statements in this report that express a belief, expectation, or intention, as well as those that are not historical fact, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements in this report include the statements in the Letter to Shareholders about Oceaneering’s: expected consolidated and segments revenues; references to backlog, backlog conversion expectations, and order intake, to the extent backlog and order intake may be an indicator of future revenue, profitability, or cash flows; expectation of opportunities to improve pricing and margins in its energy-focused businesses and stable pricing and margins in its government-focused businesses; characterization of its flexibility regarding debt maturity in 2024, market indicators for our businesses, prospects to leverage our robotics experience into new markets as significant, positive, and growing, respectively; allowances to develop and deliver technologies provided from our commitment to generating cash and the proposed help to its customers; and characterization of market fundamentals and opportunities, and financials as meaningful, good, and positive. These forward- looking statements are based on current information at the time this report was written, and are subject to certain risks, assumptions, and uncertainties that could cause actual results to differ materially from those indicated by the forward-looking statements. The factors that could cause actual results to differ materially include: factors affecting the level of activity in the oil and gas industry, including worldwide demand for and prices of oil and natural gas, oil and natural gas production growth and the supply and demand of offshore drilling rigs; actions by members of OPEC and other oil exporting countries; decisions about offshore developments to be made by oil and gas exploration, development and production companies; the use of subsea completions and our ability to capture associated market share; general economic and business conditions and industry trends; the strength of the industry segments in which we are involved; the continuing effects of the COVID-19 pandemic and variants thereof, and the governmental, customer, supplier, and other responses thereto; cancellations of contracts, change orders and other contractual modifications, force majeure declarations and the exercise of contractual suspension rights and the resulting adjustments to our backlog; collections from our customers; our future financial performance, including as a result of the availability, terms and deployment of capital; the consequences of significant changes in currency exchange rates; the volatility and uncertainties of credit markets; changes in tax laws, regulations and interpretation by taxing authorities; changes in, or our ability to comply with, other laws and governmental regulations, including those relating to the environment; the continued availability of qualified personnel; our ability to obtain raw materials and parts on a timely basis and, in some cases, from limited sources; operating risks normally incident to offshore exploration, development and production operations; hurricanes and other adverse weather and sea conditions; cost and time associated with drydocking of our vessels; the highly competitive nature of our businesses; adverse outcomes from legal or regulatory proceedings; the risks associated with integrating businesses we acquire; rapid technological changes; and social, political, military and economic situations in foreign countries where we do business and the possibilities of civil disturbances, war, other armed conflicts or terrorist attacks. Should one or more of these risks or uncertainties materialize, or should the assumptions underlying the forward-looking statements prove incorrect, actual outcomes could vary materially from those indicated. These and other risks are fully described in Oceaneering’s annual report on Form 10-K for the year ended December 31, 2022 and other periodic filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements. Except as required by applicable law, Oceaneering undertakes no obligation to update or revise any forward-looking statement. Form 10-K The entire Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission, is incorporated herein by reference. The report also is available through the “SEC Filings” link on the Investor Relations page of the Oceaneering website, oceaneering.com, or upon written request to: Jennifer F. Simons Secretary Oceaneering International, Inc. 5875 N. Sam Houston Pkwy. W., Suite 400 Houston, TX 77086 Annual Shareholders’ Meeting Date: May 16, 2023 Time: 8:30 a.m. CDT Location: Oceaneering International, Inc. 5875 N. Sam Houston Pkwy. W. Houston, TX 77086 Corporate Office Oceaneering International, Inc. 5875 N. Sam Houston Pkwy. W., Suite 400 Houston, TX 77086 Telephone: 713.329.4500 www.oceaneering.com Stock Symbol: OII Stock traded on NYSE CUSIP Number: 675232102 Please direct communications concerning stock transfer requirements or lost certificates to our transfer agent. Transfer Agent and Registrar Computershare P.O. Box 43006 Providence, RI 02940-3006 Overnight Deliveries: Computershare 150 Royall Street, Suite 10101 Canton, MA 02021 OII Account Information www.computershare.com/investor Telephone: 781.575.2879 or 877.373.6374 Fax: 781.575.3605 Hearing Impaired/TDD: 800.952.9245 Independent Registered Public Accounting Firm Ernst & Young LLP 5 Houston Center 1401 McKinney Street Houston, TX 77010-4034 Counsel Baker Botts L.L.P. 910 Louisiana Street Houston, TX 77002-4995 al Report 2022 Annual Report 2022 Annual Report Oceaneering International, Inc. 5875 N. Sam Houston Pkwy. W., Suite 400 I Houston, Texas I 77086 713.329.4500 | oceaneering.com 

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