Oceaneering Announces Record Fourth Quarter and Annual Earnings

HOUSTON, Feb. 21 /PRNewswire-FirstCall/ -- Oceaneering International, Inc. today reported record fourth quarter and annual earnings for the periods ended December 31, 2005.

During the fourth quarter of 2005, on revenue of $289 million, Oceaneering generated net income of $19.7 million, or $0.72 per share. During the corresponding period in 2004, Oceaneering reported revenue of $226 million and net income of $11.7 million, or $0.45 per share. For the year 2005, Oceaneering reported net income of $62.7 million, or $2.34 per share, on revenue of $999 million. Net income for 2004 was $40.3 million, or $1.57 per share, on revenue of $780 million.

Summary of Results (in thousands, except per share amounts) Three Months Ended Year Ended December 31, Sept. 30, December 31, 2005 2004 2005 2005 2004 Revenue $288,725 $226,038 $263,111 $998,543 $780,181 Gross Margin $ 56,176 $ 39,095 $ 49,334 $179,280 $131,803 Operating Income $ 30,581 $ 19,357 $ 28,335 $ 94,069 $ 63,864 Net Income $ 19,701 $ 11,712 $ 17,714 $ 62,680 $ 40,300 Diluted Earnings Per Share $ 0.72 $ 0.45 $ 0.66 $ 2.34 $ 1.57 Weighted Average Number of Diluted Shares 27,282 25,903 26,921 26,824 25,685

Year over year fourth quarter net income improved $8.0 million as a result of record operating income contributions from Subsea Projects and Subsea Products. The 2005 quarterly operating results included a $6.1 million pre- tax asset write-down related to the retirement of four remotely operated vehicles (ROVs) and other miscellaneous ROV components. Additionally during the fourth quarter, Oceaneering settled certain foreign income tax liabilities for a total of $1.8 million less than the provisions made in prior years. This resulted in a 29.2% effective income tax rate for the fourth quarter and 33.6% for all of 2005, as compared to the 35.5% rate previously estimated.

Annual net income improved $22.4 million due to higher operating income from all of Oceaneering's oilfield segments and equity income from the Medusa Spar. Oceaneering realized record Remotely Operated Vehicle (ROV), Subsea Projects, and Inspection segment operating income. Record Mobile Offshore Production Systems (MOPS) pre-tax income contribution, including equity income from the Medusa Spar, was also achieved. While not a record, Subsea Products' operating income in 2005 was over 25% more than the amount reported for 2004.

John Huff, Chairman and Chief Executive Officer, stated, "Results for the fourth quarter and the year were exceptional. We achieved the highest net income in Oceaneering's history in both periods.

"For the second consecutive year and the fourth time in the past five years we achieved record annual earnings, up 56% over 2004. These earnings reflect the growth strategy we have put in place, the ongoing secular demand growth for our offshore oilfield niche markets, and our participation in Gulf of Mexico hurricane damage inspection and repair projects. In this market environment we were able to increase pricing and utilization of our assets.

"We achieved record annual operating income results from our ROV, Subsea Projects, and Inspection segments. ROV fleet utilization increased to 83%, from 70% in 2004; our average fleet size grew; and we obtained higher average pricing per day on hire. Subsea Projects vessel utilization increased to 84%, up from 66% last year. Furthermore, we were able to provide additional services on three vessels and a barge we chartered on the spot market. Inspection succeeded in selling more value-added services and in reducing expenses. We also earned record MOPS pre-tax income, including over $10 million in equity income from our ownership position in the Medusa Spar.

"Our Subsea Products segment achieved its second best annual operating income result on the strength of increased specialty product sales. At year end our backlog was $196 million, up nearly 150% from $79 million at the beginning of the year. During the year we made significant progress toward installing steel tube umbilical manufacturing capability in our Panama City, Florida facility. We will commence our first major steel tube umbilical job at this plant by the end of the first quarter of 2006.

"During the year we invested nearly $130 million, including $51 million to expand our Subsea Products line and manufacturing capabilities and $56 million to modernize and increase the size of our ROV fleet. These capital investments position Oceaneering for increased profitability in the years ahead. At year end our debt-to-capitalization was 25% and we remain committed to using our resources to continue our growth strategy.

"Looking forward, our 2006 outlook has improved since we last reported earnings and we now expect to achieve record EPS of $2.90 to $3.10. The 2006 EPS growth is anticipated to be driven by profit improvements from: Subsea Products, particularly our steel tube umbilical manufacturing operation; ROVs due to higher pricing, a larger fleet size, and increased utilization; and Subsea Projects as a result of a general escalation in deepwater infrastructure inspection, repair, and maintenance activities and continuation of hurricane pipeline and platform repair work. For the first quarter we are forecasting EPS of $0.65 to $0.75 based on an estimated effective tax rate of 35.5%. We expect our first quarter pre-tax income result to be at least as good as we have reported for the fourth quarter of 2005."

Statements in this press release that express a belief, expectation or intention, as well as those that are not historical fact, are forward looking. The forward-looking statements in this press release include the statements concerning Oceaneering's: assessment of ongoing secular demand growth for its offshore oilfield niche markets; expected time to commence the first major steel tube umbilical job in the U.S.; estimated record EPS range for 2006; and EPS forecast, estimated effective tax rate, and expected pre-tax income for the first quarter of 2006. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are based on current information and expectations of Oceaneering that involve a number of risks, uncertainties, and assumptions. Among the factors that could cause the actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties related to: industry conditions; prices of crude oil and natural gas; Oceaneering's ability to obtain and the timing of new projects; and changes in competitive factors. 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 more fully described in Oceaneering's latest annual report on Form 10-K and its other periodic filings with the Securities and Exchange Commission.

Oceaneering is an advanced applied technology company that provides engineered services and hardware to Customers who operate in marine, space, and other harsh environments. Oceaneering's services and products are marketed worldwide to oil and gas companies, government agencies, and firms in the aerospace, and marine engineering and construction industries.

For further information, please contact Jurkoshek, Manager Investor Relations, Oceaneering International, Inc., 11911 FM 529, Houston, Texas 77041; Telephone 713-329-4670; Fax 713-329-4653; http://www.oceaneering.com/ . A live webcast of the Company's earnings release conference call, scheduled for February 22, 2006 at 10:00 a.m. central time, can be heard at http://www.companyboardroom.com/ (enter ticker OII).

- Tables follow on next page - OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS Dec. 31, 2005 Dec. 31, 2004 (in thousands) ASSETS Current Assets (including cash and cash equivalents of $26,308 and $16,781) $ 394,233 $ 276,876 Net Property and Equipment 409,201 401,054 Other Assets 186,134 141,734 TOTAL ASSETS $ 989,568 $ 819,664 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities $ 222,667 $ 170,672 Long-term Debt 174,000 142,172 Other Long-term Liabilities 56,783 52,383 Shareholders' Equity 536,118 454,437 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 989,568 $ 819,664 CONDENSED CONSOLIDATED STATEMENTS OF INCOME For the Three Months Ended Dec. 31, Dec. 31, Sept. 30, 2005 2004 2005 (in thousands, except per share amounts) Revenue $ 288,725 $ 226,038 $ 263,111 Cost of Services and Products 232,549 186,943 213,777 Gross Margin 56,176 39,095 49,334 Selling, General and Administrative Expense 25,595 19,738 20,999 Income from Operations 30,581 19,357 28,335 Interest Income 170 110 181 Interest Expense (3,032) (1,985) (2,655) Equity Earnings of unconsolidated affiliates, net 533 174 1,829 Other Income (Expense), net (437) (715) (225) Income before income taxes 27,815 16,941 27,465 Provision for Income Taxes (8,114) (5,229) (9,751) Net Income $ 19,701 $ 11,712 $ 17,714 Diluted Earnings per Share $ 0.72 $ 0.45 $ 0.66 Weighted average number of common shares and equivalents 27,282 25,903 26,921 For the Year Ended December 31, 2005 2004 Revenue $ 998,543 $ 780,181 Cost of Services and Products 819,263 648,378 Gross Margin 179,280 131,803 Selling, General and Administrative Expense 85,211 67,939 Income from Operations 94,069 63,864 Interest Income 505 999 Interest Expense (10,102) (8,388) Equity Earnings of unconsolidated affiliates, net 10,410 6,110 Other Income (Expense), net (432) (1,662) Income before income taxes 94,450 60,923 Provision for Income Taxes (31,770) (20,623) Net Income $ 62,680 $ 40,300 Diluted Earnings per Share $ 2.34 $ 1.57 Weighted average number of common shares and equivalents 26,824 25,685

The above Condensed Consolidated Balance Sheets and Consolidated Statements of Income should be read in conjunction with the Company's latest Annual Report,

Quarterly Report on Form 10-Q and Annual Report on Form 10-K. SEGMENT INFORMATION For the Three Months Ended For the Year Ended Dec. 31, Dec 31, Sept. 30, Dec. 31, Dec. 31, 2005 2004 2005 2005 2004 ($ in thousands) Remotely Operated Vehicles Revenue $ 86,206 $ 65,882 $ 85,749 $315,178 $223,914 Gross margin $ 18,715 $ 17,593 $ 27,948 $ 84,419 $ 59,501 Gross margin % 22% 27% 33% 27% 27% Operating income $ 14,319 $ 14,038 $ 24,061 $ 68,962 $ 48,397 Days available 16,263 15,456 15,923 62,429 57,452 Utilization 85% 74% 88% 83% 70% Subsea Products Revenue $ 83,893 $ 53,397 $ 65,430 $239,039 $160,410 Gross margin $ 18,245 $ 8,986 $ 10,522 $ 37,113 $ 26,971 Gross margin % 22% 17% 16% 16% 17% Operating income $ 11,636 $ 3,930 $ 4,020 $ 13,941 $ 10,891 Backlog $196,000 $ 79,000 $181,000 $196,000 $ 79,000 Subsea Projects Revenue $ 43,663 $ 26,070 $ 30,023 $121,628 $ 70,254 Gross margin $ 13,612 $ 4,392 $ 8,327 $ 31,122 $ 10,297 Gross margin % 31% 17% 28% 26% 15% Operating income $ 12,275 $ 3,147 $ 7,176 $ 26,219 $ 5,472 Mobile Offshore Production Systems Revenue $ 13,083 $ 11,879 $ 12,898 $ 50,091 $ 49,387 Gross margin $ 5,100 $ 4,851 $ 4,323 $ 18,330 $ 18,347 Gross margin % 39% 41% 34% 37% 37% Operating income $ 4,780 $ 4,477 $ 4,019 $ 16,796 $ 16,565 Inspection Revenue $ 34,490 $ 35,866 $ 39,972 $154,857 $145,691 Gross margin $ 4,077 $ 3,211 $ 6,058 $ 21,704 $ 16,351 Gross margin % 12% 9% 15% 14% 11% Operating income $ 234 $ 24 $ 3,085 $ 7,946 $ 4,564 Advanced Technologies Revenue $ 27,390 $ 32,944 $ 29,039 $117,750 $130,525 Gross margin $ 3,727 $ 6,368 $ 4,636 $ 20,772 $ 25,016 Gross margin % 14% 19% 16% 18% 19% Operating income $ 1,431 $ 4,441 $ 2,779 $ 12,539 $ 17,515 Unallocated Expenses Gross margin $ (7,300) $ (6,306) $(12,480) $(34,180) $(24,680) Operating income $(14,094) $(10,700) $(16,805) $(52,334) $(39,540) TOTAL Revenue $288,725 $226,038 $263,111 $998,543 $780,181 Gross margin $ 56,176 $ 39,095 $ 49,334 $179,280 $131,803 Gross margin % 19% 17% 19% 18% 17% Operating income $ 30,581 $ 19,357 $ 28,335 $ 94,069 $ 63,864 SELECTED CASH FLOW INFORMATION Capital expenditures, including acquisitions $ 37,394 $ 31,280 $ 7,769 $129,029 $153,184 Depreciation and amortization $ 24,740 $ 17,173 $ 18,683 $ 79,613 $ 65,619