Jack Jurkoshek - Director of Investor Relations M. Kevin McEvoy - Chief Executive Officer, President and Director Marvin J. Migura - Executive Vice President.

James Knowlton Wicklund - Crédit Suisse AG, Research Division Michael W.

Urban - Deutsche Bank AG, Research Division Edward Muztafago - Societe Generale Cross Asset Research Waqar Syed - Goldman Sachs Group Inc., Research Division Kurt Hallead - RBC Capital Markets, LLC, Research Division Jonathan Donnel - Howard Weil Incorporated, Research Division Byron K. Pope - Tudor, Pickering, Holt & Co.

Securities, Inc., Research Division Brad Handler - Jefferies LLC, Research Division Brad Handler - Crédit Suisse AG, Research Division.

Good morning. My name is Jessica, and I will be your conference operator today. At this time, I would like to welcome everyone to the 2014 Q3 Earnings Conference Call. [Operator Instructions] I would now like to turn the call to your host Mr. Jack Jurkoshek. Mr. Jurkoshek, you may begin your conference..

Thank you, Jessica. I'd like to thank everybody for joining us on our 2014 third quarter earnings conference call. As usual, a webcast of this event is being made available through the StreetEvents Network service by Thomson Reuters.

Joining me today are Kevin McEvoy, our President and Chief Executive Officer, who will be leading the call; Marvin Migura, our Executive Vice President; and Cardon Gerner, our Senior Vice President and Chief Financial Officer.

Just as a reminder, remarks we make during the course of this call regarding our earnings guidance, 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.

And I'm now going to turn the call over to Kevin..

Good morning, and thanks for joining the call. Today, I will deviate a bit from the normal flow of our opening remarks by beginning with a summary of what I'm about to discuss. We feel the following 6 items represent the take-home value from this call. Number one, we achieved record EPS for the quarter.

Never in Oceaneering's history have we ever generated quarterly net income of $124 million, or EPS of $1.16. Number two, 2014 should be a record earnings year for Oceaneering. We are clearly on track to outperform 2013's record EPS of $3.42. Number three, over the course of Quarter 3, we repurchased 3 million shares of our common stock.

And year-to-date, we've returned $318 million to our shareholders in the form of stock buybacks and cash dividends, not counting the quarterly dividend that was declared yesterday.

Number four, we have 5.4 million shares remaining under our current Board of Directors share repurchase reauthorization, and we intend to repurchase all of these shares in due course. Number five, we have taken steps to provide significant additional financial flexibility through 2 actions.

First, we increased our committed bank facilities to $800 million, exactly double the $400 million we had available at the end of September. And second, yesterday, we filed an S-3 shelf registration statement to enable the issuance of unsecured debt, as we consider adding a layer of long-term debt to our balance sheet.

Number six, we are initiating 2015 EPS guidance with a range of $4.10 to $4.50, based on an average of 105.7 million diluted shares. If we were to achieve the bottom of our guidance range, 2015 would most likely be another record year of earnings, even in view of the much publicized concerns regarding the future deepwater activity.

Of course, there is a great deal of uncertainty in the oil patch as we make these prognostications.

Regardless, we are committed to make the most of our leading niche market positions during the expected slowdown in the deepwater activity growth rate and to be poised to return to double-digit growth when the long-term fundamentals of oil supply and demand get back into balance.

In summary, we are confident that our earnings and cash flow generation, combined with our commitment to growth and to the return of cash to our shareholders, will continue to create value for all of our shareholders. Now I'll go back to my originally prepared comments.

Some of these may be a bit redundant, but still noteworthy, and hopefully, with more color. As I mentioned earlier, we achieved record EPS for the quarter, demonstrating the high level of demand we experienced for our Subsea Services and products.

Year-over-year, quarterly EPS increased by 21% on a strength of operating income improvements from subsea products and remotely-operated vehicles. Sequentially, quarterly EPS was 14% higher on operating income improvements by all business segments, led by ROVs.

Our third quarter results were highlighted by all-time high operating income from our ROV and Subsea Products businesses. We remain on track to achieve record EPS for 2014. For the fourth quarter, we are projecting EPS of $0.94 to $0.99.

Given this outlook and our year-to-date performance, we are narrowing our 2014 EPS guidance range to between $3.95 and $4, from $3.95 to $4.05. During the third quarter, we repurchased 3 million shares of our common stock at a cost of $201 million. Year-to-date, we have repurchased 3.5 million shares at a cost of $237 million.

The decision to repurchase our shares reflects our belief that Oceaneering stock has been undervalued. It also underscores our willingness to return cash to our shareholders and confidence in Oceaneering's financial strength and future business prospects. Year-to-date, we have spent $318 million on share repurchases and cash dividends.

We have 5.4 million shares remaining under our current Board of Directors share repurchase authorization, all of which, we intend to repurchase in due course.

We have taken steps to provide significant additional financial flexibility to invest in organic growth, fund acquisitions and return cash to shareholders through dividends and share repurchases.

As previously announced, we reached agreement for $800 million of committed bank facilities, consisting of a $500 million 5-year revolver and a $300 million 3-year delayed draw term loan.

In addition, yesterday, we filed an S-3 shelf registration statement to enable the issuance of unsecured debt, which gives us the additional option of quickly accessing the public debt markets as we consider adding a layer of long-term debt to our balance sheet.

We intend to maintain our investment quality capital structure, as this is important to retaining a preferred vendor status with our major customers, who are themselves, investment-grade companies. We are initiating 2015 EPS guidance with a range of $4.10 to $4.50, based on an average of 105.7 million diluted shares.

While we are facing widely publicized concerns regarding the future of deepwater activity, our 2015 guidance is based on assumptions that service and product demand to develop new fields and perform life-of-field activities will be higher than in 2014, and global floating rig demand would be about the same.

For 2014 and '15, we anticipate generating at least $845 million and $880 million of EBITDA, respectively. Our balance sheet and projected cash flow provide us resources to invest in Oceaneering's growth and return cash to our shareholders, and we intend to continue doing so. I'll talk more about our 2015 guidance later.

But first, I'd like to review our operations for the third quarter. Year-over-year and sequentially, third quarter ROV operating income increased 18% and 17%, respectively, on higher demand for both drilling and vessel-based services and an improvement in operating margin.

Operating margin increased to 31%, due largely to a change in geographic operations mix, resulting in a higher average revenue per day on hire. Our ROV days on hire for the quarter increased to a record high of over 25,200. Fleet utilization rate was 84%, the same as last quarter, and down slightly from 86% in the third quarter of 2013.

During the quarter, we put 14 new ROVs into service and retired 5. At the end of September, we had 332 systems in our fleet, up from 302 a year ago. 11 of the new ROVs went into drill support.

Our fleet mix during the quarter was 71% on drill support and 29% on vessel-based work, the same mix as last quarter, and about the same as the 72%-28% mix in the third quarter of 2013. Year-to-date, we've added 41 systems to our fleet and retired 13. At the end of the quarter, we had ROVs of 168, or 60% of the 281 floating rigs under contract.

We had ROVs on 69% of the drillships and 6 generation [indiscernible] and 79% of these rigs not contracted to Petrobras in Brazil. Sequentially, the contracted rig count dropped by 3 in a number of rigs on which we had ROVs declined by 2. Year-over-year, the contracted rig count rose by 3, and the number of rigs on which we have ROVs increased by 5.

Since the end of last year, the contracted rig count has remained unchanged, while the number of rigs on which we have ROVs contracted has increased by 8. Year-to-date, our ROV days on hire to support drilling activities has increased 5% over that of the same period last year.

So even in a flat rig demand market, we have been able to grow our drill support days on hire. During the fourth quarter, we expect to place 7 new ROVs into service, and we have contracts for all of these. When they are placed into service depends on the actual commencement dates of each new drilling rig and vessel project.

On a gross basis, we now anticipate adding 48 new systems to our ROV fleet in 2014. Turning to Subsea Products, year-over-year, third quarter operating income improved 35% on a 28% increase in revenue due to a higher demand for each of our major product lines, led by tooling and subsea work systems.

Sequentially, operating income was higher on increased demand for tooling and subsea work systems. Our Subsea Products backlog at quarter end was $768 million compared to our June 30 backlog of $850 million and $857 million 1 year ago.

Year-over-year and sequentially, the backlog decline was primarily attributable to umbilicals, the market for which we continue to note, can be quite lumpy. Now looking at Subsea Projects. Year-over-year, third quarter operating income declined as a result of lower demand for both deepwater intervention and diving services in the U.S. Gulf of Mexico.

The decline in deepwater service demand was partially attributable to the loop current that occurred during the quarter, which caused work delays. Sequentially, operating income rose due to a seasonal uptick in Gulf of Mexico demand for diving services.

During the quarter, we received a 2-year contract extension from BP to expand our feet -- to extend our Field Support Vessel Services contract for work offshore Angola. Under this contract term extension, we will continue to provide project management, engineering and vessel services through January 2017.

2 charter vessels, the Ocean Intervention III and the Bourbon Ocean Team 101, will continue to be supplied during the contract term extension. The contract has a provision for us to continue to provide during extension period a BP's option, a third vessel on a mutually agreed as-needed basis.

The third vessel currently being provided is the Bourbon Evolution 803, which is contracted through January 2015. We also have secured, during the quarter, a contract commitment from BP to commence providing diving services offshore Angola later this year.

These services will be used to perform underwater inspections and move-up dry docking on BPs, FPSOs and comm buoys [ph] located in blocks 18 and 31.

As for our other business segments, Asset Integrity's third quarter operating income improved year-over-year and sequentially, largely on a $2.5 million gain on the sale of a non-core operation that was part of our AGR FO acquisition in 2011. Year-over-year, we also benefited from higher service sales in the United Kingdom and Middle East.

Sequentially, we benefited from higher service sales in the United Kingdom and Australia. Advanced Technologies quarterly operating income declined year-over-year on decreased activity on theme park projects and vessel maintenance work for the U.S. Navy and higher cost on theme park work that we did perform.

Sequentially, operating income increased due to higher profitability on vessel maintenance and engineering services for the U.S. Navy, which is attributable to an increase in award and incentive fees and improved indirect cost recovery. In summary, we are pleased with the third quarter results and EBITDA generation of $241 million during the quarter.

Capital expenditures for the quarter totaled $80 million, of which, $30 million was invested in ROVs, $26 million was spent on Subsea Products and $19 million on Subsea Projects. We are lowering our organic CapEx estimate for this year to $400 million, down from $450 million on lower spending for ROVs. Now let's talk about our year-end outlook.

For the fourth quarter of 2014, we are projecting EPS in the range of $0.94 to $0.99. We expect our fourth quarter EPS to be up year-over-year on operating income improvements from ROVs, Asset Integrity and Advanced Technologies.

Sequentially, all of our oilfield business segments are forecast to have operating income and margin declines due to normal seasonal activity or project timing. Advanced Technologies operating income is forecast to increase significantly. This is attributable to an escalation of industrial project work in engineering services for the U.S.

Navy and improved execution on the work we do perform. Looking forward to 2015, we are initiating EPS guidance with a range of $4.10 to $4.50, based on an average of 105.7 million diluted shares and an effective tax rate of 31.3%.

We have not completed our detailed planning process, but the big picture changes we envision for 2015 compared to 2014 can be summarized as follows. ROV operating income is projected to grow modestly on the strength of greater service demand to support drilling and vessel-based projects.

We are projecting an increase in days on hire to support drilling, even though we are anticipating floating rig demand will be about the same. This is attributable to a full year benefit from the 15 vehicles we have put into service during 2014 on new rigs in the first 3 quarters.

The firm contracts we have on 5 additional vehicles expected to go to work on new rigs in the fourth quarter, and a firm contract we have in place for 9 systems on new rigs in 2015, and additional, ROV work we may secure on the 14 new rigs currently scheduled to be delivered by the end of 2015 that are not yet contracted, assuming some of these eventually will land contracts.

Partially offsetting this new work are jobs we may lose on existing rigs. We had 193 ROVs on 168 floating rigs at the end of September. 80 ROVs were on 71 rigs. They'd have all lost contract by the end of 2015.

For the 80 vehicles on rigs rolling off contract, we currently have around 11,000 days of work in 2015 covered by existing rig contracts and about 18,000 days that are not. Fortunately, 45 of the vehicles are on drilled ships, or 6 generations semis, accounting for more than 10,000 of the 18,000 uncontracted days.

We believe these rigs have an excellent chance of being re-contracted, and therefore, high utilization. We are projecting that our fleet utilization rate will decline to around 80% due to downturn on existing floating rigs as they -- downtime on existing floating rigs as they roll off contract.

We remain committed to growing our fleet and securing as many new builds, floating rigs, investment opportunities as possible with customers that appreciate our value proposition. In pursuing this work, we intend to use existing upgraded systems to satisfy new rig investment work to the extent possible.

We intend to retire systems when they reach the end of their useful lives, and we'll continue to report these only after they have occurred. Given our fleet size, its average age and our strategy of operating a modern fleet, we expect to retire annually about 4% to 5% of our fleet or 13 to 17 ROVs.

We anticipate adding 20 to 25 new vehicles to our fleet in 2015, and expect to manage our cost to achieve an operating margin of between 29% and 30%. Subsea Products operating income is forecasted to improve on the strength of higher demand for tooling and installation and workover control system services.

Products operating margin is expected to be in a range of 20% to 22%, if we are to achieve the midpoint of our EPS guidance. We are anticipating lower umbilical plant throughput in 2015, notably due to a decline in scheduled work for Petrobras at our Brazilian plant.

Subsea Projects operating profit is expected to be better on increased demand for our deepwater intervention service capabilities in the Gulf of Mexico and diving in the Gulf and offshore Angola. Projects operating margin is expected to be slightly higher than in 2014.

During 2015, the operating profit from our Gulf of Mexico deepwater operation is expected to benefit from the addition of another charted multi-service subsea support vessel to our fleet, and contract negotiations for our vessel are currently underway.

We have assumed that we will secure work for the Bourbon Evolution 803, or a similar vessel, either from BP or other operators in the international waters for the entire year.

Diving is forecasted to be up due to the contract we recently secured from BP for offshore Angola and in the Gulf of Mexico on higher utilization for the Ocean Patriot to perform IMR work.

Our Asset Integrity segment profit contribution is forecasted to be higher on increased refinery and offshore production platform service sales in the United States and Australia, and on subsea infrastructure projects worldwide. Asset Integrity operating margin is expected to be similar to 2014.

Advanced Technologies performance is expected to be significantly higher due to the resolution of execution issues on certain U.S. Navy and industrial projects that impacted results in 2014, and additional engineering service work for the U.S. Navy. Operating margin is anticipated to increase to the historical 8% to 9% range.

Unallocated expenses are estimated to increase at a rate greater than our revenue growth as we improve our information technology infrastructure. At the midpoint of our guidance range, we expect our overall operating margin in 2015 to remain in the same 16% to 17% range we anticipate for 2014.

During 2015, we anticipate generating at least $880 million of EBITDA. Our balance sheet and projected cash flow provide us with ample resources to invest in Oceaneering's growth. Our preliminary CapEx estimate for next year is in the range of $300 million to $400 million.

We are expecting lower spending on ROVs and higher spending on Subsea Products, particularly for tooling and Subsea work systems. At this time, as usual, we are not providing quarterly earnings guidance for 2015.

For those of you who intend to publish quarterly estimates, I'd like to remind you that historically, our first quarter is the slowest of the year due to seasonality. On a macro basis, we remain convinced that our strategy to focus on providing services and products to facilitate deepwater exploration and production remain sound.

We believe the oil and gas industry will continue its investment in deepwater, as it remains one of the best frontiers for adding large hydrocarbon reserves with high production flow rates at relatively low finding and development costs.

While we presently expect only modest increases in deepwater capital and operating expenditures by our customers next year, we anticipate our customers CapEx will be directed more to development work and less to exploration activity.

Looking longer term, however, we believe both CapEx and OpEx will increase at a faster pace as new deepwater investments are made and the buildout and aging of the subsea infrastructure continues.

Consequently, we anticipate demand for our deepwater services and products will continue to rise and believe our business prospects for the next several years are promising, as we are well levered to the continued expansion in deepwater development and life-of-field IMR spending.

If this is an accurate assessment, the projected rise and 3 installations and the growing number of subsea completion in service should lead to umbilical and connection hardware sales, demand for IWOCS services and vessel-based ROV and tooling demand.

We are well positioned to supply a wide range of the services and products required to support the safe deepwater efforts of our customers. We believe Oceaneering's business prospects for the long term remain promising.

Our commanding competitive position, technology and leadership and strong balance sheet and cash flow enable us to continue to grow the company, and we intend to do so.

In conclusion, for 2014, we are anticipating that we will achieve another record year of EPS performance, and that 2015 will be better than 2014, even in light of the widely publicized concerns regarding deepwater activity. We appreciate everyone's interest in Oceaneering, and we'll now be happy to take any questions you may have..

[Operator Instructions] And your first question comes from the line of Jim Wicklund..

Kevin, the borrowings are interesting, and we've all read the reasons for them, which is everything possible.

And maybe the question that comes to mind is, are you going shopping? Are you willing and planning to lever up a little bit to buy back stock in your undervalued situation? What takes precedence here, do you think?.

Well, as we have repeatedly said the 4 uses of our cash remain there, some priorities could be shifting based on what's going on in the marketplace right now. But we're not going to give any more color than that. But obviously, we're prepared to be flexible and move forward in each of the 4 areas..

Do you have a predetermined ceiling as to what you're comfortable with the debt to cap rate being longer term?.

No, other than I think, as we stated earlier in the notes, we're going to maintain our investment quality structure..

And your next question comes from the line of Mike Urban..

So you answer the question on the liquidity or sort of did. And on the business side, the backlog in Subsea Products has been coming down for reasons that you talked about, I guess, primarily umbilicals. You also noted that this can be lumpy.

What does the pipeline look like out there, not necessarily just for umbilicals, but potential for order rates to pick up our customers out there, there are projects out there that are yet to be awarded? And if so, how quickly could that stuff flow-through to the P&L once you book it?.

Well, I think generally, the fact that we're giving guidance for next year that is better than our projected results for this year suggests that we believe that the orders are still out there.

The umbilical orders, as we always noted, are very lumpy, particularly when we get a large order from Petrobras who are sort of going into pause mode at the moment. But the big contract we got 2 years ago or so is winding down. And so that's probably one of the things driving that decline.

There's a lot of product work that exists for a very short period of time in our backlog. It may never make the external figure because it flows through pretty quickly. So it's a pretty quick flow-through in most of our hardware products, segment work, except for the umbilicals.

And that's why just looking at the quarter-to-quarter, up-and-down of that is not as meaningful as it might be in some other Subsea Hardware company..

Great. That's very helpful. And following up on Jim's question a little bit.

In terms one of the potential uses of capital, which is M&A or acquisitions, probably too early would be my guess, but have you seen any change in the marketplace based on the weakening we've seen in the macro fundamentals and the oil price in terms of expectations out there or willingness to sell?.

Mike, I think it's too early. This is Marvin. I think it's too early to have seen any significant shift in expectations..

[Operator Instructions] Your next question comes from the line of Ed Muztafago..

You all highlighted, obviously, that there's going to be a bit of shift in mix of your CapEx spending towards lower ROVs and higher products.

Just on the ROV side specifically, could we see the net ROV count for your fall next year due to retirements maybe more than offsetting the addition?.

We don't see that. We said we would add 20 to 25, and historically retire 13 to 17, based on our percentage..

Okay. Fair enough. So not so much risk about things, perhaps, coming off some of the older floaters that might not be as viable as the newer stuff. And then just a very simple question.

Did you all give the share count that underpins your Q4 guidance? I mean, presumably, you're going to continue to purchase shares as we go through here?.

Q4, no. What we are assuming right now is the ending share count and we said 105.7 million for '15, and I think, somebody noted that our share count went down 1 million in Q3, even though we had bought 3 million shares because of the timing of the repurchases. So hopefully, between those two numbers, you can come up with a pretty good share count..

Okay, okay. But presumably there's a decline that underpins that..

No, we are not, in our earnings guidance, assuming repurchases of additional shares, and we're not projecting that. As we said, we'll repurchase the authorized 5.4 million shares in due course without giving a specific time..

[Operator Instructions] And we've a question from the line of Waqar Syed..

So my question deals with subsea intervention market. Kevin, could you talk about the competitive landscape in that market. It seems like it's a high-growth market going forward, and a number of different companies are looking at it.

What segment of the market do you play in? And who are the key competitors in that segment?.

Well, I mean there are more competitors out there, more levered towards the construction and installation side of the business, I will have to say. And obviously, our market is the Gulf of Mexico, aside from the contract work we have offshore Angola. And so we're not operating in the North Sea or any of these other places.

So we feel strongly enough about our market position and prospects for the Gulf of Mexico for next year that, as noted, we are adding another vessel to our fleet. So we're confident in our ability to maintain and grow our market share in light of more competition coming through the Gulf of Mexico.

But again, I think it's important to recognize that most of the companies that are coming here with assets are looking at the construction and installation part of the market, which we do very little in..

And then you have a Jones Act vessel coming in. I believe it's in the first quarter of '16..

That's correct..

And could you talk about the strategy there, why Jones Act vessel and why pursue that?.

Sure. And to be accurate, our expectation for the arrival of this vessel is at the end of the first quarter '16. But nevertheless, I mean, it is becoming more advantageous to have a Jones Act vessel.

We went to the market and evaluated what was available for charter versus buying and determined that to get what we really wanted at a price that made some sense that we would have to buy, and so that's what we did in this case.

And the advantages of having one in your fleet is that, for certain projects, you can take the liberty of hardware that's going to be installed offshore at the U.S. port, and install it and not have to transport it out there on the second vessel to comply with Jones Act law..

And your next question comes from the line of Kurt Hallead..

Thanks for all that great detail on how you guys are viewing the world going out into '15. I wanted to kind of follow-up on that. So it seems predicated on your commentary that you really only think -- predicated on how things are rolling off in 2015 that there was about 7,000 days of contract risk, if you will.

I think there's a difference between 18,000 that's rolling off and the 11,000 that you have equipment on drillships and 6 gen semis [ph]. That means I would happen to share your view that those will get extended.

So when you think about that 80% or when we try to think about that 80% utilization number that you put out there for ROVs, how do we kind of calibrate that back to that 7,000 uncontracted days, like are you assuming that half of that goes back to work? Are you assuming that most of that goes back to work? Can you give us a little bit more color around that on how are you viewing the world?.

Kurt, it's too early. It's Marvin again. It's too early for us to do it on a rig by rig basis. What we have considered in a number of cases is idle time between contracts. And even for the other 11,000 that we believe are most likely to go back to work, and I appreciate that we share the same view, because maybe others don't.

But we think that's a good likelihood of him going back to work. But we don't think it's going to be rolling off and rolling on right away. So we think there's going to be idle time for all of those 18,000 days and we've tried to model that in. And also we believe there may be idle time on vessel activities.

So we're expecting a slower rate of growth next year, and we came up with 80%..

That's fine. I appreciate that, too.

And just for another point of calibration, on that range of $4.10 to $4.50, would you say that the delta, and to get you down to that lower end, would that really predominantly be because of a lower ROV utilization number than at 80% you put forward? If I were to think through that way, would that be the best way to do it?.

No, Kurt. We look at it in a number of different ways, and we can get to $4.10 in several different ways just like we can to $4.50. So we're probably going out there with a little bit more uncertainty than we have in a decade.

But because of the oil price environment, we really don't know what CapEx is going to be and how much shift through development is we expect it's going to occur and the timing of that. But I would say that all of our oilfield segments have a considerable range that helps us to get from $4.10 to $4.50..

And your next question comes the line of Jon Donnel..

I had a question just regarding the products guidance, I just want to make sure I was hearing the numbers correctly. So it sounded like the op income expectations are coming down year-over-year, despite the fact that the growth is going to be led by more of the ROV tooling, which thought of as being more of the higher-margin work.

So I guess, was I hearing that right, and if so, could you reconcile that for us and how we ought to be thinking about that dynamic of the top line coming from a bigger mix of the ROV tooling compared to the op margins moving down little bit?.

John, I think -- first of all, let me just start with, we're projecting at a midpoint, or as we said, for all of our oilfield segments to be up '15 over '14. And the guidance range for profit margin is between 20% and 22%..

But that was to achieve the midpoint of our EPS guidance..

Right. And that's at the midpoint. So I think there's some give in our forecast. But the other thing that we're talking about is while tooling and subsea work practice [ph] are going up, we talked about uncertainty in Brazil in the umbilical plants.

So you do have some moving pieces, and I wouldn't think the shift in mix would be significant enough to take us outside of that intended 20% to 22% margin..

Okay, great. That helps a lot. I mean then regarding the ROVs, you guys clearly continue to add share even in a tough market on the drill support side. And it looks like it's having a positive impact on the day rates that comes back into for the published numbers.

Are those -- are these high day rates here something you think can be sustained through 2015, even in kind of your view of flattish to uncertain market, if you will? Or should we be baking in some of that into our day rate outlook as well?.

It really, quarter-to-quarter, can change on the basis of the geographic mix because these markets are all -- somewhat different. And so it's kind of hard to just take this one data point and move forward with that for rest of the year.

I mean, I think that you could expect to see the same sort of margin generation that we have historically been trying to achieve. And that's hard enough in this world..

Yes. I really think price increases are going to be difficult in this environment. And we believe that the 29% to 30% is the right expectation for ROV margins for '15. And that assumes some serious cost controls..

And your next question comes from the line Byron Pope..

Very helpful color. So I've just got one question. I think about you guys having pretty good breadth across the deepwater markets globally and I look at roughly 1/3 of your revenues coming from the Gulf of Mexico, which feels to us like the one deepwater theater where we should still see activity growth year-over-year.

So as you about the line of sight that you have for work in your ROV segment and Subsea Products and in Subsea Projects, is it reasonable to think about the Gulf of Mexico as being the primary regional driver for Oceaneering next year? Or is it still too early to tell?.

I think it's a little early. I mean, one of the nice things, if you want to look at it this way, about operating in some of the different regions in the world is that you don't have to be able to predict exactly what's going to happen. Things shift around and it's kind of hard to predict precisely.

But -- and certainly, Gulf of Mexico and West Africa and Norway are the 3 big primary areas for us..

And we do believe that Norway is going to slow down, and we share your opinion about the Gulf, particularly because of the, let's just call them nonmajors sanctioning projects and proceeding ahead.

And we think with the lower rig day rates, there will be more opportunity for these players to pick up 1 or 2 well projects that usually or historically in last couple of years have not been available to them..

And there are no further questions at this time. Excuse me, you do have one other question that just came into queue from Brad Handler..

Can you please -- I guess I'm going to come back with same sort of questions, but I wasn't quite clear on the products side. Do you think revenues will be up year-on-year or just operating income? Well, I mean, I think I know the answer to this, but ...

revenues have to pick up year-on-year, right?.

We think revenues will be up..

Revenues are going to be up..

Right, right. It has to be because of the margin.

So the point is that the tools and the IWOCS more than offset the decline in the umbilicals that you're looking for?.

Yes, that's what we see at the midpoint..

Correct..

Okay, yes, simple enough. All right. I just wanted to clarify. And then an unrelated question for me. I think last quarter, I think it was just last quarter, you talked about having a bit -- well, I'll describe it this way, maybe you'll change it.

A bit of a challenge selling or convincing customers to use existing ROVs, yet your prepared comments today talk about doing just that.

So can you talk a little bit about some of the progress you've made in that area in doing that?.

Well, I'm not I would characterize it as progress that we've made. I would characterize it more as a change in the marketplace where previously, operators were taking rigs for 5 to 7 years, a brand new rig, and they wanted a brand new ROV.

Well, in today's world where you see rigs being -- pretty new rigs being taken for much shorter periods of time, we don't think -- our guess is that they're not going to be so adamant about demanding a new ROV, and we are hoping that we will have some opportunities to use like new systems on those opportunities as opposed to having to build another ROV..

Does that make sense?.

Sure, it does..

And there are no further questions at this time..

Okay. Since there are no more questions, I'd like to wrap up by thanking everyone for joining the call. We are very pleased with our best-ever quarterly results, and anticipate producing record EPS for both 2014 and 2015.

In closing, I would like to reiterate our confidence in our earnings and cash flow generation, combined with our commitment to growth and the return of cash to our shareholders, will continue to create value for all of our shareholders.

We suggest you stay tuned to the Oceaneering story, like our Fox News, Houston's affiliate KRIV slogan, you miss a little, you miss a lot. This concludes our third quarter 2014 conference call. Thanks, and have a great day and holiday season..