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Oceaneering Aims to Curb 2020 Costs by $125-$160 Million

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In a recent presentation, Oceaneering International, Inc. (OII - Free Report) announced that it is aiming to cut back $125-$160 million in costs this year. It even initiated annualized cost savings of $70 million.

Further, the company plans to concentrate more on remote operations to trim the workforce employed offshore; rightsizingthe number of facilities; focusing on quality enhancement.It also plans to discard non-productive assets to reduce inventories and carrying expenses.

Notwithstanding the ailing economy, Oceaneering holds healthy liquidity as of Mar 31 with $307.5 million in cash and cash equivalents and a $500-million worth undrawn unsecured revolving credit facility until Oct 21 while its notes will not mature before November 2024. Moreover, the company is looking forward to generate positive free cash flow in 2020. It also slashed capital spending by $45-65 million and estimates a reduction of $30-$35 million in tax payments.

As the unexpected drop in oil prices and a dent in global demand due to the novel coronavirus outbreak take a toll on oil and energy companies, the industry players are forced to delay expansion plans and decrease capital expenditures to preserve liquidity.

Therefore in March, Oceaneering announced that it withdrew its 2020 guidance, minimized its current-year capital budget to $60-$80 million and also announced plans to contain its unallocated costs and expenses within the $20-million range per quarter after reckoning the persistent commodity price plunge. This apart, in May, this Houston, TX-based company notified that executive officers will face a temporary pay cut of 10% while other senior officers will get a 7.5% reduction in remuneration. Meanwhile, Chief Executive Roderick Larson will forego 15% of his base salary. Management also approved a 20% cutback in the remaining 2020 base cash retainer payments for its board members to preserve money amid the coronavirus outbreak as well as the continued steep decline in commodity prices.

By dint of these strategic cost-controlling measures, the Zacks Rank #2 (Buy) Oceaneering joined other oilfield service players including Halliburton Company (HAL - Free Report) , Schlumberger Limited (SLB - Free Report) and ProPetro Holding (PUMP - Free Report) . These industry participants intend to overcome the tough times by maintaining financial flexibility and operational excellence. Notably, strengthening the companies’ cash- position at a time when oil prices promise no profits for most producers is indeed a smart move. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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