$7.72
$22.38
bear $7.72
base $15.28
bull $22.38
margin of safety $8.50
market price* $43.79
What the business is. Oceaneering is a subsea engineering and services company. It says it is the world's largest provider of work-class remotely operated vehicle (ROV) services. In 2025 it earned $2.78 billion of revenue across five segments. Subsea Robotics (ROV services, tooling and survey) had $855 million of revenue and $257 million of operating income. Manufactured Products (subsea hardware) had $569 million and $72 million. The Offshore Projects Group (vessel-based installation and intervention work) had $616 million and $96 million. Integrity Management & Digital Solutions had $284 million and $11 million. Aerospace and Defense Technologies (ADTech), which sells mostly to U.S. government agencies and their prime contractors, had $460 million and $58 million. Corporate costs that are not allocated to a segment were $190 million. The U.S. Government was 12% of 2025 revenue. Apart from ADTech, almost everything depends on how much oil and gas companies spend offshore. The fleet had 91,250 available ROV-days in 2025, which works out to about 250 vehicles, and utilization slipped to 65% from 67% in 2024. The filing also notes that the average number of contracted floating rigs fell 6.2% in 2025 and that many ROV contracts can be cancelled on 30 days' notice. How we measure its cash. We start from operating cash flow and take out working-capital swings, stock-based pay ($14.8 million in 2025) and the capital spending needed to keep the fleet and plants in place. About $105 million of 2025's $111 million capital spending was treated as maintenance. On this basis owner earnings per share were $1.97 in 2016, $0.52 in 2017, -$0.25 in 2018, -$0.63 in 2019, $0.43 in 2020, $0.66 in 2021, $0.72 in 2022, $0.90 in 2023, $1.42 in 2024 and $2.03 in 2025. Starting from operating cash flow means the $140.6 million non-cash tax benefit inside 2025's $354 million net income is left out, and so are the large write-downs taken in 2018-2020: about $435 million of goodwill and about $237 million of other assets. Those write-downs show capital that was lost in the last downturn, and we account for that risk in the bear case rather than in the earnings level. Amortization of acquired intangibles is small ($16 million in 2025), so no separate adjustment was needed for wasting assets. We value the business before its lenders, so we add back interest paid (about $32 million a year). On that basis, cash flow per share over 2016-2025, which covers one full offshore bust and recovery, ranged from -$0.16 to $2.34, with a median of $1.07. Because this is a cyclical business, that full-cycle median is our mid-cycle level. The $2.34 earned in 2025 is a good year, not a normal one. Base case ($15.28 per share). In 2025, cash flow before interest grew 36%. We assume about $2.20 per share in the coming year, which is below 2025 and so does not assume that growth continues. Several facts support a strong but not rising near term. Backlog rose to $2.70 billion at the end of 2025 from $2.44 billion, with $1.64 billion due within a year. ADTech also had $658 million of unfunded government orders, up from $279 million, which are not counted in that backlog. First-half 2026 revenue rose 6% to $1.46 billion, while net income was slightly lower at $101 million against $105 million. Against that, management expects Offshore Projects Group revenue and profit to fall significantly in 2026. We step cash flow down to $1.80 and then $1.40 as the backlog is worked off. After that, cash flow runs at the $1.07 full-cycle median for 17 years. That median already contains both a downturn and a recovery. Then it fades to zero over the following ten years. The fade is there because the subsea wells and equipment being installed now need inspection and repair for their producing lives, but we cannot point to evidence for demand beyond that. We credit no growth beyond the backlog. Higher subsea tree orders forecast for 2026, ADTech's expected growth and any further pricing gains are forecasts rather than secured business, so they are left out. The business is worth about $15.49 per share, it effectively owes about $0.20 per share net, and that leaves $15.28. Bear case ($7.72 per share). A downturn arrives after the current backlog is converted. Cash flow falls from $1.80 next year to $0.25 per share for three years, which matches the 2017-2019 average of $0.27. It then recovers only to $0.72, the 2017-2023 average that excludes the recent upswing, holds there through year 15 and fades to zero over the next ten years. Our evidence is the company's own record, the 30-day cancellation terms, the 2025 drop in contracted rigs, the expected decline in Offshore Projects Group, and the write-offs of the last cycle. The $500 million of 6.000% notes due February 1, 2028 would fall due during the trough. Cash on hand ($629 million at June 30, 2026) covers them, so this case assumes repayment from cash rather than a distressed refinancing. The business is worth about $7.93 per share, it owes about $0.20 per share net, and that leaves $7.72. A dispute with an ADTech customer is disclosed but not quantified and is not in the model. Bull case ($22.38 per share). The backlog converts at today's margins, with $2.40, $2.40 and $2.20 per share over the next three years. After that, the leaner cost base and the larger defense business keep the mid-cycle level at the 2021-2025 average of $1.49 instead of the ten-year median. That level holds through year 25 and then fades over ten years. The business is worth about $22.58 per share, it owes about $0.20 per share net, and that leaves $22.38. Debt and cash. The only borrowing is the $500 million of 6.000% senior notes due February 2028. Their coupon equals our 6% discount rate, so no cost-of-debt adjustment is needed. The $215 million revolving credit facility, which matures April 8, 2027, was undrawn. Its covenants (maximum net leverage of 3.25x and minimum interest coverage of 3.0x) were met at the end of 2025. Against the $629 million of cash at June 30, 2026, we hold back $150 million as operating cash, because cash flow in the first half of the year is seasonally negative (-$3.9 million in the first half of 2026). That leaves net debt of about $20 million, or $0.20 per share on 100.7 million diluted shares. The company has paid no dividend since 2017 and bought back $40 million of stock in 2025 and $10 million in the first half of 2026. What changed since our last look. Our previous estimate was $7.50 / $19.00 / $31.50. That version used higher, risk-adjusted discount rates but assumed cash flows would keep growing forever after year ten. Our current method discounts every case at a flat 6%, values the business before interest and then subtracts net debt, and gives oil-linked earnings a finite life instead of perpetual growth. The bear case is a little higher because the company's large cash balance and the full-cycle evidence are now counted explicitly. The base and bull cases are lower mainly because the assumption of perpetual growth is gone. What would make this wrong. On the upside, ADTech's growing funded and unfunded orders could make up a larger share of a steadier business, or the post-2020 cost base could prove that the old 2017-2019 troughs will not recur. On the downside, a longer or deeper offshore downturn than 2017-2019, or a faster decline in deepwater spending, would push value below the bear case. Margin-of-safety price. The range is wide: the bear case is about half the base case, and the business is cyclical, so the shares may take a full cycle to be valued at the base case. The margin-of-safety price is set where reaching the base case of about $15 within roughly three years implies at least 20% a year, and where the bear case implies only a limited loss. That points to $8.50. From $8.50, reaching the base case in three years implies about 22% a year, and the bear case is about 9% below that price.