Oceaneering Buys Ecosse Subsea To Improve Product Offerings

Oceaneering International, Inc. (NYSE:OII) recently announced that it has bought Scotland-based Ecosse Subsea Limited through one of its subsidiaries for around £50 million or $69 million.

The acquisition is expected to extend Oceaneering's service line skills directed toward the expanding renewable energy market, and oil and gas industries, with improved technologies. Oceaneering, in its press release made it clear that, "Ecosse builds and operates seabed preparation, route clearance and trenching tools for submarine cables and pipelines on an integrated basis that includes vessels, ROVs and survey services."

The move from the $1.849-billion market cap company is expected to strengthen its product offerings, which will in turn improve the company’s financial state in the future. Notably, the company’s revenues declined since 2014. Also, it has a debt-to-capitalization ratio of 32.2%, higher than the industry’s ratio of 30.4%.

The acquisition also provides the company with Ecosse's modular SCAR Seabed System, which can finish a complete trenching work scope (route preparation, boulder clearance, trenching and backfill), along with the new SCARJet trenching system. The addition of Ecosse's technologies with that of Oceaneering is also expected to increase efficiency.

Moreover, Oceaneering expects the acquisition to be accretive to the company’s cash flow and earnings in 2018. Per the company, its Subsea Projects segment will include the financial results of Ecosse in the future. It will help the company to improve segmental results that were expected to fall, primarily due to anticipated lower pricing and manufacturing throughput. The company’s guidance for 2018 stated that without a rise in Subsea Products backlog and throughput, their margins will drop in the “low-to mid-single digit range.”

Price Performance

Oceaneering has lost 29.4% in the last year compared with 26.9% fall of its industry.

About the Company

Oceaneering is an international provider of engineered products and services. The Company develops products and services for use throughout the lifecycle of an offshore oilfield. They operate the world's premier fleet of work class ROVs. Additionally, the Houston, TX-based company also serves the aerospace, defense and entertainment industries.

The company’s 2017 revenue from the Subsea Projects fell to $292 million from 2016’s figure of $473 million.

Zacks Rank and Stocks to Consider

Oceaneering has a Zacks Rank #4 (Sell).

A few better-ranked stocks in the oil and energy sector are Continental Resources, Inc. (NYSE:CLR) , ConocoPhillips (NYSE:COP) and Pioneer Natural Resources Company (NYSE:PXD) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Oklahoma City, OK, Continental Resources is an upstream energy company. Its revenues for first-quarter 2018 are anticipated to improve 53% from the prior-year quarter. The company witnessed a positive average earnings surprise of 64.9% in the trailing four quarters.

Houston, TX-based ConocoPhillips is an upstream energy player. Its revenues for first-quarter 2018 are anticipated to improve 9.6% from the prior-year quarter. The company witnessed a positive average earnings surprise of 144.5% in the trailing four quarters.

Irving, TX-based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its revenues for first-quarter 2018 are expected to improve 22.8% from the year-ago quarter. For 2018, the bottom line is anticipated to be up 185.7%.

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