Oceaneering International NYSE: OII reported third-quarter 2026 revenue growth across all of its operating segments, with adjusted EBITDA reaching its highest quarterly level since the fourth quarter of 2015.
Revenue rose 6% from a year earlier to $785 million, while operating income increased 7% to $92 million and adjusted EBITDA climbed 7% to $119 million. Net income attributable to Oceaneering declined 26% to $52.6 million, or $0.52 per share, primarily because of a one-time loss associated with refinancing long-term debt during the quarter.
President and Chief Executive Officer Rod Larson said the quarter reflected favorable pricing and project mix, led by Subsea Robotics, resilience in the Offshore Projects Group and improved performance in Integrity Management and Digital Solutions.
Subsea Robotics Margin Improves
Subsea Robotics, or SSR, generated $233 million in revenue and $75.4 million in operating income. The segment’s EBITDA margin reached 39%, its highest level since Oceaneering resegmented its businesses in 2020.
The improvement was driven by stronger remotely operated vehicle, or ROV, pricing in Europe, West Africa and Norway, as well as increased survey activity. Average revenue per utilized ROV day increased to $11,781 from $11,254 a year earlier. A one-time contractual cost recovery tied to U.S. Gulf operations also aided margins.
ROV fleet utilization remained at 65%, as increased activity in Europe, Guyana and West Africa offset lower activity in the U.S. Gulf. As of Sept. 30, Oceaneering had ROV contracts on 80 of the 136 floating rigs under contract, representing a 59% market share. Its fleet remained at 250 ROV systems.
The company secured about $180 million in ROV and survey awards across several regions during the quarter, with contract terms extending into 2031.
Orders, Defense Awards and Cash Generation
Manufactured Products reported operating income of $25.1 million, roughly flat from the prior-year quarter, despite an 8% increase in revenue. Operating margin declined slightly to 15%, largely reflecting lower Grayloc project activity and profitability relative to a particularly profitable order in the prior-year period.
Manufactured Products received approximately $160 million in new awards during the quarter and ended September with backlog of $435 million. Its trailing 12-month book-to-bill ratio was 0.77, though management said it remains confident it can achieve a full-year ratio of 0.9 to 1.0.
In Aerospace and Defense Technologies, or ADTech, revenue increased 7% to $135 million as a previously announced large-scale program reached full staffing for its current phase. Operating income fell 11% to $14.7 million and margin declined to 11%, reflecting greater pass-through activity and certain higher expenses.
ADTech also secured follow-on contracts for two U.S. Navy programs: a dry deck shelter program with potential value of $154 million over five years, and a submarine rescue systems contract with potential value of $67 million over 18 months.
Cash flow from operations totaled $163 million, while capital expenditures were $21.1 million. Free cash flow was $142 million, aided by lower cash taxes and delayed capital spending. Larson said capital expenditures and cash taxes are expected to rise in the fourth quarter, resulting in more moderate free cash flow generation.
Oceaneering ended the quarter with $735 million in cash, more than $1 billion in total liquidity and no borrowings under its revolving credit facility. The company repurchased about $5 million of stock during the quarter, primarily to offset dilution from employee equity grants.
Fourth-Quarter Outlook
For the fourth quarter, Oceaneering expects year-over-year consolidated revenue growth and adjusted EBITDA of $85 million to $95 million.
- SSR revenue is expected to increase on higher ROV day rates and survey activity, though operating income is expected to decline due to geographic mix, rig-relocation mobilization costs and a greater mix of lower-margin survey work.
- Manufactured Products is expected to post higher revenue and operating income.
- Offshore Projects Group revenue is expected to be relatively flat, with lower operating income due to project mix and lower-margin U.S. Gulf work.
- Integrity Management and Digital Solutions is expected to report higher revenue and operating income.
- ADTech is expected to deliver higher revenue and operating income.
Unallocated expenses are projected to be in the $50 million range.
Initial 2027 Outlook Cites Deepwater and Defense Opportunities
Oceaneering initiated 2027 adjusted EBITDA guidance of $430 million to $480 million and said free cash flow should exceed its anticipated 2026 level. Management pointed to an improving global deepwater market, with floating rig activity expected to strengthen as rigs complete moves to new regions and begin drilling programs.
Larson said the broad guidance range primarily reflects the timing of SSR rig movements, potential international project awards in Offshore Projects Group and the timing of ADTech program starts amid the U.S. appropriations process.
“We have to make sure that we’re not overstating when it starts,” Larson said, describing management’s approach as cautious on the timing of expected market improvement rather than a change in its underlying outlook.
For 2027, the company expects SSR revenue and operating income to increase, supported by higher utilization and improved survey and tooling results. It expects Manufactured Products results to be relatively flat; Offshore Projects Group revenue to decline but margins to improve; and increased revenue, operating income and margins in both IMDS and ADTech.
Management identified Brazil, Guyana, the rest of Africa and Mozambique as areas of expected activity growth, while noting that the U.S. Gulf has already slowed and remains an area to monitor. Larson also cited potential opportunities in the Eastern Mediterranean, Norway and subsea tieback projects.
On capital allocation, management said it expects to continue investing in core energy businesses and may pursue selective ADTech acquisitions involving capabilities such as machining, workforce capacity, electronics or sensor technology. Larson said the company does not see a need to acquire high-multiple defense businesses simply to establish customer credibility. Oceaneering plans to continue repurchasing shares in 2027, with about 5 million shares remaining under its current authorization.
About Oceaneering International (NYSE:OII)
Oceaneering International, Inc is a Houston-based global engineering and technology company that provides services, equipment and applied technologies for the energy, defense, aerospace and industrial markets. The company is best known for its subsea capabilities, including remotely operated vehicles, subsea engineering, inspection, maintenance, repair and installation services, and specialized products used in offshore oil and gas operations.
Oceaneering also develops advanced technologies for government and commercial customers.
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