Oceaneering (NYSE:OII) is heavily leveraged to the exploration and development of the deepwater area, both in the United States and in the international arena, and will benefit from the increased industry activity here over the next decade.
IN PICTURES: 9 Simple Investing Ratios You Need To Know

Deepwater Growth
Despite the short term regulatory problems with developing the deepwater in the United States, the company believes that much future development will occur here as the energy industry tries to find oil and gas to meet growing demand from the developing world.

There are 230 deepwater fields that are currently producing, and another 502 being evaluated or under development by the industry. There are 64 rigs under construction that are capable of drilling in the deepwater as of September 30, 2010, and 41 of these rigs are under contract with various companies. Oceaneering expects 30 new deepwater rigs to be delivered in 2011.

Balance Sheet
Oceaneering also has a strong balance sheet to handle the volatility of the businesses with which the company is involved. Oceaneering has no debt, and $148 million in cash as of September 30, 2010. The company also has access to a $300 million credit facility if it is needed.

Remotely Operated Vehicles (ROV)
The ROV business is Oceaneering's largest business segment, and represented 35% of revenue during the first nine months of 2010. The company has 252 ROV's in its fleet currently, and the fleet had average utilization of 75% during the first nine months of 2010. This fleet is spread across all geographies, with the highest concentration in the Gulf of Mexico, where 68 are located. Another 51 ROV's operate in the waters off Africa.

Sub Sea Systems and Products
Oceaneering second largest segment is Subsea Products, which comprised 28% of revenue during the first nine months of 2010. Products here include umbilicals and blowout preventer control systems. The company reported a backlog of $308 million at September 30, 2010. The company was recently awarded several contracts to supply umbilicals to major offshore projects, and was awarded a contract with Royal Dutch Shell (NYSE:RDS.A) for a project located offshore Brazil. Oceaneering also signed a deal to supply BHP Billiton (NYSE:BHP) for subsea equipment to be used for a natural gas project located offshore Australia.

Other companies are expanding business in the subsea market due to higher growth rates here. General Electric (NYSE:GE) just announced the purchase of Wellstream Holdings, an English oil services company that is active in the subsea area.

The Bottom Line
Oceaneering recently raised its guidance for earnings for 2010. The company now expects to earn between $3.57 and $3.62 per share in 2010, up from the previous guidance of $3.20 to $3.40 per share. Oceaneering also initiated earnings guidance for 2011 at between $3.45 and $3.75 per share.

Investors that believe in the growth of deepwater exploration and development should take a look at Oceaneering as the company has a diverse line of businesses and products that are levered to this segment of the energy industry. (To learn more about guidance, see Can Earnings Guidance Accurately Predict The Future?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  2. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  3. Stock Analysis

    The Biggest Risks of Investing in Pfizer Stock

    Learn the biggest potential risks that may affect the price of Pfizer's stock, complete with a fundamental analysis and review of other external factors.
  4. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  5. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  6. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  7. Markets

    PEG Ratio Nails Down Value Stocks

    Learn how this simple calculation can help you determine a stock's earnings potential.
  8. Stock Analysis

    What Exactly Does Warren Buffett Own?

    Learn about large changes to Berkshire Hathaway's portfolio. See why Warren Buffett has invested in a commodity company even though he does not usually do so.
  9. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  10. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  1. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  2. Do hedge funds invest in commodities?

    There are several hedge funds that invest in commodities. Many hedge funds have broad macroeconomic strategies and invest ... Read Full Answer >>
  3. What does low working capital say about a company's financial prospects?

    When a company has low working capital, it can mean one of two things. In most cases, low working capital means the business ... Read Full Answer >>
  4. Do nonprofit organizations have working capital?

    Nonprofit organizations continuously face debate over how much money they bring in that is kept in reserve. These financial ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center