Company Quick10K Filing
Oceaneering
Price13.92 EPS-1
Shares99 P/E-16
MCap1,377 P/FCF12
Net Debt460 EBIT-33
TEV1,837 TEV/EBIT-56
TTM 2019-09-30, in MM, except price, ratios
10-K 2020-12-31 Filed 2021-02-26
10-Q 2020-09-30 Filed 2020-11-02
10-Q 2020-06-30 Filed 2020-08-03
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-04
10-Q 2019-06-30 Filed 2019-07-30
10-Q 2019-03-31 Filed 2019-05-01
10-K 2018-12-31 Filed 2019-02-28
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-01
10-Q 2018-03-31 Filed 2018-05-03
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-02
10-Q 2017-06-30 Filed 2017-08-03
10-Q 2017-03-31 Filed 2017-05-03
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-07-27
10-Q 2016-03-31 Filed 2016-04-29
10-K 2015-12-31 Filed 2016-02-19
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-07-30
10-Q 2015-03-31 Filed 2015-04-29
10-K 2014-12-31 Filed 2015-02-19
10-Q 2014-09-30 Filed 2014-11-04
10-Q 2014-06-30 Filed 2014-07-31
10-Q 2014-03-31 Filed 2014-04-30
10-K 2013-12-31 Filed 2014-02-20
10-Q 2013-09-30 Filed 2013-10-31
10-Q 2013-06-30 Filed 2013-07-31
10-Q 2013-03-31 Filed 2013-05-02
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-30 Filed 2012-11-01
10-Q 2012-06-30 Filed 2012-08-01
10-Q 2012-03-31 Filed 2012-05-03
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-11-02
10-Q 2011-06-30 Filed 2011-08-03
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-05
10-K 2009-12-31 Filed 2010-02-24
8-K 2020-10-28
8-K 2020-09-28
8-K 2020-09-24
8-K 2020-09-02
8-K 2020-08-20
8-K 2020-07-29
8-K 2020-06-16
8-K 2020-05-13
8-K 2020-05-08
8-K 2020-04-28
8-K 2020-04-24
8-K 2020-03-31
8-K 2020-03-25
8-K 2020-03-02
8-K 2020-02-27
8-K 2020-02-24
8-K 2020-01-17
8-K 2019-11-19
8-K 2019-10-30
8-K 2019-08-13
8-K 2019-07-24
8-K 2019-05-13
8-K 2019-05-08
8-K 2019-04-29
8-K 2019-03-19
8-K 2019-02-28
8-K 2019-02-13
8-K 2019-01-07
8-K 2018-10-24
8-K 2018-08-27
8-K 2018-07-25
8-K 2018-05-16
8-K 2018-05-04
8-K 2018-04-25
8-K 2018-03-26
8-K 2018-03-01
8-K 2018-02-22
8-K 2018-02-21
8-K 2018-02-16
8-K 2018-02-01

OII 10K Annual Report

Part I
Item 1.Business.
Item 1A.Risk Factors.
Item 1B.Unresolved Staff Comments.
Item 2.Properties.
Item 3.Legal Proceedings.
Item 4.Mine Safety Disclosures.
Part II
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data.
Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 7A.Quantitative and Qualitative Disclosures About Market Risk.
Item 8.Financial Statements and Supplementary Data.
Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Part III
Item 10.Directors, Executive Officers and Corporate Governance.
Item 11.Executive Compensation.
Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13.Certain Relationships and Related Transactions, and Director Independence.
Item 14.Principal Accounting Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules.
EX-4.01 oii_exhibit401x12312020.htm
EX-10.18 oii_exhibit1018x12312020.htm
EX-10.19 oii_exhibit1019x12312020.htm
EX-21.01 oii_exhibit2101x12312020.htm
EX-23.01 oii_exhibit2301x12312020.htm
EX-31.01 oii_exhibit3101x12312020.htm
EX-31.02 oii_exhibit3102x12312020.htm
EX-32.01 oii_exhibit3201x12312020.htm
EX-32.02 oii_exhibit3202x12312020.htm

Oceaneering Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
3.62.92.21.40.70.02012201420172020
Assets, Equity
1.00.80.60.30.1-0.12012201420172020
Rev, G Profit, Net Income
0.40.30.1-0.0-0.2-0.32012201420172020
Ops, Inv, Fin

oii-20201231
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2020
OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to       
Commission File Number: 1-10945
____________________________________________
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
oii-20201231_g1.jpg

Delaware
95-2628227
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
11911 FM 529
Houston,
Texas
77041
(Address of principal executive offices)(Zip Code)
(713329-4500
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed from last report)
____________________________________________

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of exchange on which registered
Common stock, par value $0.25 per share
OII
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
____________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes   No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes   No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated Filer
Non-accelerated FilerSmaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the company has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report).    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No
Aggregate market value of the voting stock held by nonaffiliates of the registrant computed by reference to the closing price of $6.39 of the Common Stock on the New York Stock Exchange as of June 30, 2020, the last business day of the registrant's most recently completed second quarter: $624 million.
Number of shares of Common Stock outstanding at February 19, 2021: 99,308,363.
Documents Incorporated by Reference:
Portions of the proxy statement relating to the registrant's 2021 annual meeting of shareholders, to be filed within 120 days of December 31, 2020 pursuant to Regulation 14A of the Securities Exchange Act of 1934, are incorporated by reference to the extent set forth in Part III, Items 10-14 of this report.


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Oceaneering International, Inc.
Form 10-K
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PART I
 
Item 1.Business.
GENERAL DEVELOPMENT OF BUSINESS
Oceaneering International, Inc. is a global provider of engineered services and products, primarily to the offshore oil and gas industry. Oceaneering also serves the offshore renewables, defense, aerospace and commercial theme park industries. Oceaneering was organized as a Delaware corporation in 1969 out of the combination of three diving service companies founded in the early 1960s. Since our establishment, we have concentrated on the development and marketing of underwater services and products to meet customer needs requiring the use of advanced technology. We believe we are one of the world's largest underwater services contractors. The services and products we provide to the energy industry include remotely operated vehicles, specialty subsea hardware, engineering and project management, subsea intervention services, including manned diving, survey and positioning services, seabed preparation and asset integrity and nondestructive testing services. Our foreign operations, principally in the North Sea, Africa, Brazil, Australia and Asia, accounted for approximately 53% of our revenue, or $967 million, for the year ended December 31, 2020.
Realignment of Reportable Segments
As described in Note 11—“Operations by Business Segment and Geographic Area” in the Notes to Consolidated Financial Statements included in this report, in the third quarter of 2020, we changed our organizational structure as part of the transformation to realign our businesses to achieve greater cost efficiencies and to bring together business units that frequently work together and promote increased synergies in bidding, project management and the use of offshore technicians. As a result, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, for the years ended December 31, 2019 and December 31, 2018, we are reporting our financial results consistent with our newly realigned operating segments and have recast certain prior period amounts to conform to the way we internally manage our businesses and monitor segment performance. Our new structure aligns our company around five reportable segments: (1) Subsea Robotics; (2) Manufactured Products; (3) Offshore Projects Group; (4) Integrity Management & Digital Solutions; and (5) Aerospace and Defense Technologies.
Our business segments are contained within two businesses – services and products provided primarily to the oil and gas industry, and to a lesser extent, the offshore renewables and mobility solutions industries (“Energy Services and Products”) and services and products provided to non-energy industries (“Aerospace and Defense Technologies”). Our four business segments within the Energy Services and Products business are Subsea Robotics, Manufactured Products, Offshore Projects Group and Integrity Management & Digital Solutions. We report our Aerospace and Defense Technologies business as one segment. Unallocated Expenses are expenses not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses.
Energy Services and Products. The primary focus of our Energy Services and Products business over the last several years has been toward leveraging our asset base and capabilities for providing services and products for offshore energy operations and subsea completions, inclusive of our customers' operating expenses and the offshore renewable energy market.
Subsea Robotics. Our Subsea Robotics segment consists of our Remotely Operated Vehicles (“ROVs”), survey services and ROV tooling businesses, merging our underwater robotics and automation capabilities with our subsea delivery systems. Our Subsea Robotics segment consists of our prior ROV segment, and ROV tooling (previously in our Subsea Products segment) and survey services (previously in our Subsea Projects segment).
We provide ROVs, which are tethered submersible vehicles remotely operated from the surface, to customers in the energy industry for drilling support and vessel-based services, including subsea hardware installation, construction, pipeline inspection, survey and facilities inspection, maintenance and repair (“IMR”). We design, build, retrofit and upgrade our new and existing ROVs at in-house facilities, the largest of which is in Morgan City, Louisiana. In 2020, we added three ROVs to our fleet and retired three. Our work-class ROV fleet size was 250 as of December 31, 2020 and 2019, and 275 as of December 31, 2018.
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Manufactured Products. Our Manufactured Products segment consists of our manufactured products business (previously in our Subsea Products segment), as well as theme park entertainment systems and automated guided vehicles (“AGV”) (both previously in our Advanced Technologies segment).
Our Manufactured Products segment provides distribution systems such as production control umbilicals and connection systems made up of specialty subsea hardware, and provides turnkey solutions that include program management, engineering design, fabrication/assembly and installation to the commercial theme park industry and mobile robotics solutions, including AGV technology to a variety of industries.
We provide various types of subsea umbilicals through our Umbilical Solutions division from plants in the United States, Scotland and Brazil. Offshore operators use umbilicals to control subsea wellhead hydrocarbon flow rates, monitor downhole and wellhead conditions and perform chemical injection. Subsea umbilicals are also used to provide power and fluids to other subsea processing hardware, including pumps and gas separation equipment.
Offshore Projects Group. Our Offshore Projects Group (“OPG”) segment consists of: (1) our prior Subsea Projects segment, less survey services and global data solutions; and (2) our service and rental business, less ROV tooling (previously in our Subsea Products segment). This combination brings together business units that frequently work together and promotes increased efficiency in bidding, project management, and the use of offshore technicians.
Our OPG segment provides a broad portfolio of integrated subsea project capabilities and solutions. Our OPG segment provides the following:
subsea installation and intervention, including riserless light well intervention (“RLWI”) services and inspection, maintenance and repair (“IMR”) services, utilizing owned and chartered vessels;
installation and workover control systems (“IWOCS”) and ROV workover control systems (“RWOCS”);
project management and engineering; and
seabed preparation, route clearance and trenching services for submarine cables for the renewable energy markets.
Our OPG segment provides services principally in the U.S. Gulf of Mexico and offshore Angola, utilizing a fleet consisting of three owned and three chartered dynamically positioned deepwater vessels with integrated high-specification work-class ROVs onboard, and two owned shallow water diving support and survey vessels, other spot-chartered vessels and other assets. Our owned vessels are Jones Act-compliant. The dynamically positioned vessels are equipped with thrusters that allow them to maintain a constant position at a location without the use of anchors. They are used in the IMR of subsea facilities, pipeline or flowline tie-ins, pipeline crossings and installations. These vessels can also carry and install equipment or umbilicals required to bring subsea well completions into production (tie-back to production facilities). With our acquisition of Ecosse Subsea Limited (“Ecosse”) in 2018, further described below, we provide route clearance and trenching services.
We previously had several deepwater vessels under long-term charter. The last of our long-term charters expired in March 2018. With the current vessel market conditions, we have entered into some minimum-day, short-term, time charter party agreements and, for specific projects, we continue to charter on a back-to-back basis with the vessel owners. This generally minimizes our contract exposure by closely matching our obligations with our revenue.
In March 2018, we acquired Ecosse for approximately $68 million. Ecosse builds and operates tools for seabed preparation, route clearance and trenching for the installation of submarine cables and pipelines. These services are offered on an integrated basis that includes vessels, ROVs and survey services. Enabling technologies acquired in the transaction include Ecosse's modular seabed system, capable of completing the entire trenching work scope (route preparation, boulder clearance, trenching and backfill), and its newly developed trenching system. These systems primarily serve the shallow water offshore renewables market.
In the second quarter of 2019, we placed our new-build, Jones Act-compliant, multiservice vessel (“MSV”), the Ocean Evolution, into service. The Ocean Evolution is U.S.-flagged and documented with a coastwise endorsement by the U.S. Coast Guard. The vessel has an overall length of 353 feet, a Class 2 dynamic positioning system, accommodations for 110 personnel, a helideck, a 250-ton active heave-compensated crane, a working moonpool, and two of our high specification 4,000 meter work-class ROVs. The vessel has five low-emission Environmental Protection Agency (“EPA”) Tier 4 diesel engines. The Tier 4 rating is the EPA’s strictest emission requirements for non-road diesel engines. The vessel is also equipped with a satellite communications system capable of transmitting streaming video for real-time work observation by shore-based personnel. The vessel is being used to
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augment our ability to provide subsea intervention services in the U.S. Gulf of Mexico. These services are required to perform IMR projects and hardware installations.
Integrity Management & Digital Solutions. Our IMDS segment consists of our prior Asset Integrity segment plus our global data solutions (“GDS”) and maritime shipping businesses (both previously in our Subsea Projects segment). The inclusion of GDS in this segment facilitates optimized digital and software solutions to our integrity management services. Maritime shipping, an emerging business in GDS, provides essential vessel asset, scheduling and transportation data required by customers shipping cargo by sea to make informed, value-added decisions.
Through our IMDS segment, we provide asset integrity management, corrosion management, inspection and non-destructive testing services, principally to customers in the oil and gas, power generation, and petrochemical industries. We perform these services on both onshore and offshore facilities, both topside and subsea. We also provide software, digital and connectivity solution for the energy industry and software and analytical solutions for the bulk cargo maritime industry.
Aerospace and Defense Technologies. Our Aerospace and Defense Technologies (“ADTech”) segment consists of our government business (previously in our Advanced Technologies segment), focused on defense subsea technologies, marine services, and space systems.
Our ADTech segment provides government services and products including engineering and related manufacturing in defense and space exploration activities, principally to U.S. government agencies and their prime contractors.
General. During the last five years, we have also made several small acquisitions to add complementary technology or serve niche markets. We intend to continue our strategy of acquiring, as opportunities arise, additional assets or businesses, to improve our market position or expand into related service and product lines. However, our primary focus continues to be on capital discipline and generating positive free cash flows.
DESCRIPTION OF BUSINESS
Energy Services and Products
Our Energy Services and Products business consists of the Subsea Robotics, Manufactured Products, Offshore Projects Group and Integrity Management & Digital Solutions segments.
Subsea Robotics. ROVs are tethered submersible vehicles remotely operated from the surface. We use our ROVs in the offshore energy industry to perform a variety of underwater tasks, including drill support, vessel-based IMR, installation and construction support, pipeline inspection and surveys, and subsea production facility operation and maintenance. Work-class ROVs are outfitted with manipulators, sonar and video cameras, and can operate specialized tooling packages and other equipment or features to facilitate the performance of specific underwater tasks. As of December 31, 2020, we owned 250 work-class ROVs. We believe we own and operate the largest fleet of work-class ROVs in the world. We also believe we are the industry leader in providing ROV services for offshore drill support, with an estimated 58% market share of the contracted floating drilling rigs at the end of 2020.
Subsea Robotics revenue: 
AmountPercent of Total Revenue
 (in thousands) 
2020493,332 27 %
2019 *583,652 28 %
2018 *513,701 27 %
* Recast to reflect segment changes.
ROV tooling provides an additional operational interface between an ROV and equipment located on the sea floor. We also provide survey services, including hydrographic survey and positioning services and autonomous underwater vehicles for geoscience.
Manufactured Products. We provide advanced technology product development, manufacturing and project management for a variety of industries. These include:
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various types of subsea umbilicals utilizing steel tubes and thermoplastic hoses, along with termination assemblies;
production control equipment;
clamp connectors;
pipeline connector and repair systems;
subsea and topside control valves;
subsea chemical injection valves;
mobile robotics solutions, including AGV technology; and
entertainment systems for theme parks.
Our primary focus over the last several years has been toward leveraging our asset base and capabilities for providing services and products for offshore energy operations and subsea completions, as well as the offshore renewable energy market. Offshore well operators use subsea umbilicals and production control equipment to control subsea wellhead hydrocarbon flow, monitor downhole and wellhead conditions and perform chemical injection. They are also used to provide power and fluids to other subsea processing hardware, including pumps and gas/oil separation equipment. We also provide turnkey solutions that include program management, engineering design, fabrication/assembly and installation to the commercial theme park industry and mobile robotics solutions, including automated guided vehicle technology, to a variety of industries. For both domestic and international markets, we provide engineering services and we manufacture patented motion-based “dark ride” vehicle systems and innovative customized robotic and mechanical solutions to the commercial theme park industry. We also develop, implement and maintain innovative, turnkey logistic solutions based on automated guided vehicle technology primarily for automotive manufacturers and retail warehousing markets.
Manufactured Products revenue: 
AmountPercent of Total Revenue
 (in thousands) 
2020$477,419 26 %
2019 *498,350 24 %
2018 *431,459 23 %
* Recast to reflect segment changes.
Offshore Projects Group. We provide subsea hardware installation, intervention and IMR services for the offshore oil and gas markets. We provide seabed preparation, route clearance and trenching services for submarine cables in renewable energy markets.
We perform subsea IMR, intervention and hardware installation services, primarily in the U.S. Gulf of Mexico and offshore Angola from multiservice vessels that typically have Oceaneering ROVs onboard. Our services include: subsea well tie-backs; pipeline/flowline tie-ins and repairs; pipeline crossings; umbilical and other subsea equipment installations; subsea interventions; and IMR activities.
We provide services for shallow water projects (depths less than 1,000 feet) in the U.S. Gulf of Mexico and offshore Angola with our manned diving operations utilizing the traditional diving techniques of air, mixed gas and saturation diving, all of which use surface-supplied breathing gas. We supply our diving services from our owned diving support vessels, offshore facilities and chartered vessels.
We provide RLWI services to support subsea well intervention projects and subsea work packages that facilitate hydrate remediation and well stimulation solutions. We also provide IWOCS and RWOCS that support completions, tree installation, workovers, intervention, and plug and abandonment operations.
Offshore Projects Group revenue: AmountPercent of Total Revenue
 (in thousands) 
2020$289,127 16 %
2019 *380,966 19 %
2018 *413,598 22 %
* Recast to reflect segment changes.
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Integrity Management & Digital Solutions. Through our Integrity Management & Digital Solutions segment, we offer a wide range of asset integrity services to customers worldwide to help ensure the safety of their facilities onshore and offshore, while reducing their unplanned maintenance and repair costs. We also provide third-party inspections to satisfy contractual structural specifications, internal safety standards or regulatory requirements. We provide these services principally to customers in the oil and gas, petrochemical and power generation industries. In the U.K., we provide Independent Inspection Authority services for the oil and gas industry, which include first-pass integrity evaluation and assessment and nondestructive testing services. We use a variety of technologies to perform pipeline inspections, both onshore and offshore. We also provide maritime shipping and global data solutions. In our digital services, we focus on maritime and energy software offerings and forming key partnerships to expand our capabilities and market reach.
Integrity Management & Digital Solutions revenue: 
AmountPercent of Total Revenue
 (in thousands) 
2020$226,938 12 %
2019 *266,086 13 %
2018 *273,575 14 %
* Recast to reflect segment changes.
Aerospace and Defense Technologies. Our Aerospace and Defense Technologies segment provides engineering services and manufacturing to the U.S. Department of Defense, NASA and major government contractors. We work with our customers to understand their specialized requirements, identify and mitigate risks, and provide them value-added, maintainable, safe and certified solutions. The segment's largest customer is the U.S. Navy, for whom we perform engineering services, prototype design building services and repair and maintenance services on submarines and surface ships. We support space exploration and technology development by providing our products and services to NASA and aerospace contractors. Our U.S. Navy and NASA-related activities substantially depend on continued government funding.
Aerospace and Defense Technologies revenue: 
AmountPercent of Total Revenue
 (in thousands) 
2020$341,073 19 %
2019 *319,070 16 %
2018 *277,149 14 %
* Recast to reflect segment changes.
MARKETING
Energy Services and Products. Oil and gas exploration and development expenditures fluctuate from year to year. In particular, budgetary approval for more expensive drilling and production in deepwater, an area in which we have a high degree of focus, may be postponed or suspended during periods when exploration and production companies reduce their offshore capital spending. In recent years, we have focused on increasing our service and product offerings toward our oil and gas customers' operating expenses and the offshore renewable energy market.
We market our Subsea Robotics, Manufactured Products, Offshore Projects Group and Integrity Management & Digital Solutions services and products to domestic, international and foreign national oil and gas companies engaged in offshore exploration, development and production. We also provide services and products as a subcontractor to other oilfield service companies operating as prime contractors. In addition, we market our Manufactured Products mobile robotic solutions to domestic and international theme park operators, automotive manufacturers and retail warehousing operators. Customers for these services typically award contracts on a competitive-bid basis. These contracts are typically less than one year in duration, although we enter into multi-year contracts from time to time.
In connection with the services we perform in our Energy Services and Products business, we generally seek contracts that compensate us on a dayrate basis. Under dayrate contracts, the contractor provides the ROV, vessel or equipment and the required personnel to operate the unit and compensation is based on a rate per day for each day the unit is used. The typical dayrate depends on market conditions, the nature of the operations to be performed, the duration of the work, the equipment and services to be provided, the geographical areas involved
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and other variables. Dayrate contracts may also contain an alternate, lower dayrate that applies when a unit is moving to a new site or when operations are interrupted or restricted by equipment breakdowns, adverse weather or water conditions or other conditions beyond the contractor's control. Contracts for our product sales are generally for a fixed price.
Aerospace and Defense Technologies. We market our engineered products and services primarily to U.S. government agencies and their prime contractors in defense and space exploration activities.
Major Customers. Our top five customers in 2020, 2019 and 2018 accounted for 32%, 32% and 39%, respectively, of our consolidated revenue. In 2020, 2019 and 2018, four of our top five customers were oil and gas exploration and production companies served by our Energy Services and Products business segments, with the other one being the U.S. Navy or other parts of the U.S. Government, which is served by our Aerospace and Defense Technologies segment. No individual customer accounted for more than 10% of our consolidated revenue during 2020. During 2019, revenue from one customer, BP plc and subsidiaries, accounted for 10% of our total consolidated annual revenue. During 2018, revenue from Royal Dutch Shell and subsidiaries accounted for 10% of our total consolidated annual revenue.
Although we do not depend on any one customer, the loss of one of our significant customers could, at least on a short-term basis, have an adverse effect on our results of operations and cash flows.
RAW MATERIALS
Most of the raw materials we use in our manufacturing operations, such as steel in various forms, copper, electronic components and plastics, are available from many sources. However, some components we use to manufacture subsea umbilicals are available from limited sources. With the exception of certain kinds of steel tube, where we are limited in the number of available suppliers, we can offer alternative materials or technologies in many cases, which depends on the requisite approval of our customers. We believe we have secured a sufficient amount of steel tubes to satisfy existing backlog and anticipated orders to be produced in 2021.
COMPETITION
Our businesses operate in highly competitive industry segments.
Energy Services and Products
We are one of several companies that provide underwater services and specialty subsea hardware on a worldwide basis. We compete for contracts with companies that have worldwide operations, as well as numerous others operating locally in various areas. We believe that our ability to safely provide a wide range of underwater services and products on a worldwide basis enables us to compete effectively in all phases of the offshore oilfield life cycle. In some cases involving projects that require less sophisticated equipment, small companies have been able to bid for contracts at prices uneconomical to us. Additionally, in some jurisdictions we are subject to foreign governmental regulations favoring or requiring the awarding of contracts to local contractors or requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These regulations may adversely affect our ability to compete.
The adverse impacts of the coronavirus (“COVID-19”) pandemic and the resulting supply and demand imbalance along with lower crude oil prices are resulting in lower levels of activity and profitability. As we expect a recovery will take time to restore profitability and generate satisfactory returns, we have been reviewing our cost structure and aggressively implementing cost improvement initiatives.
Subsea Robotics. We believe we are the world's largest owner/operator of work-class ROVs employed in energy related operations. As of December 31, 2020, we owned 250 work-class ROVs. We compete with several major companies on a worldwide basis and with numerous others operating locally in various areas. Competition for ROV services, including ROV tooling, historically has been based on equipment availability, location of or ability to deploy the equipment, quality of service and price. The relative importance of these factors can vary over time based on market conditions. The ability to develop improved equipment and techniques and to train and retain skilled personnel is also an important competitive factor in our markets.
Our survey and positioning services, along with our seabed preparation, route clearance and trenching services, operate in a competitive environment as one of several companies that provide these services.
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Manufactured Products. With our manufactured products business, we are one of several companies that compete on a worldwide basis for the provision of steel tube and thermoplastic control umbilicals, and, compared to current and forecasted market demand for the currently foreseeable future, we are faced with some overcapacity in the umbilical manufacturing market.
Within our mobility solutions businesses, there are many competitors offering specialized services and products, both on a regional and global basis.
Offshore Projects Group. We perform subsea intervention and hardware installation services, principally in the U.S. Gulf of Mexico and offshore Angola, from multiservice deepwater vessels. We are one of many companies that offer these services. In general, our competitors can move their vessels to where we operate from other locations with relative ease. We also have many competitors that supply commercial diving services to the oil and gas industry in the U.S. Gulf of Mexico. Within our service and rental business, there are many competitors offering specialized services and products both on a regional and global basis.
Integrity Management & Digital Solutions. The worldwide asset integrity and inspection markets consist of a wide range of inspection and certification requirements in many industries. We currently compete in only selected portions of this market. We are expanding our integrity management services into adjacent markets and are developing our digitization services. We believe that our broad geographic sales and operational coverage, long history of operations, technical and safety reputation, application of various inspection technologies and accreditation to international quality standards enable us to compete effectively in our selected asset integrity and inspection services market segments.
Aerospace and Defense Technologies
Engineering services is a very broad market with a large number of competitors. We compete in specialized areas in which we can combine our extensive program management experience, mechanical engineering expertise and the capability to continue the development of conceptual project designs into the manufacture of custom equipment for customers.
SEASONALITY AND BACKLOG
We generate a material amount of our consolidated revenue from contracts for services in the U.S. Gulf of Mexico in our Offshore Projects Group segment, which is usually more active in the second and third quarters, as compared to the rest of the year. The European operations of our Integrity Management & Digital Solutions segment are also seasonally more active in the second and third quarters. Revenue in our Subsea Robotics segment is subject to seasonal variations in demand, with our first quarter generally being the low quarter of the year. The level of our Subsea Robotics seasonality depends on the number of ROVs we have engaged in vessel-based subsea infrastructure IMR and installation, which is more seasonal than drilling support. Revenue in each of our Manufactured Products and Aerospace and Defense Technologies segments generally has not been seasonal.
The amounts of backlog orders we believed to be firm as of 2020 and 2019 were as follows (in millions):
 
 As of December 31, 2020As of December 31, 2019 *
 Total1+ yr †Total1+ yr †
Energy Services and Products
Subsea Robotics$538 $215 $600 $205 
Manufactured Products266 41 570 132 
Offshore Projects Group160  170 64 
Integrity Management & Digital Solutions413 — 246 246 71 
Total Energy Services and Products1,377 511 1,586 472 
Aerospace and Defense Technologies144 12 131 18 
Total$1,521 $523 $1,717 $490 
* Recast to reflect segment changes.
† Represents amounts that were not expected to be performed within one year.
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No material portion of our business is subject to renegotiation of profits or termination of contracts by the U.S. Government.
PATENTS AND LICENSES
We currently hold numerous U.S. and foreign patents and pending patent applications. We have acquired patents and licenses and granted licenses to others when we have considered it advantageous for us to do so. Although in the aggregate our patents and licenses are important to us, we do not regard any single patent or license or group of related patents or licenses as critical or essential to our business as a whole. In general, we depend on our technological capabilities and the application of know-how rather than patents and licenses in the conduct of our operations.
REGULATION
Our operations are affected from time to time and in varying degrees by foreign and domestic political developments and foreign, federal and local laws and regulations, including those relating to:
operating from and around offshore drilling, production and marine facilities;
national preference for local equipment and personnel;
marine vessel safety;
protection of the environment, including pollution and climate change;
workplace health and safety;
data privacy;
taxation;
license requirements for exportation of our equipment and technology; and
currency conversion and repatriation.
In addition, our Energy Services and Products business primarily depends on the demand for our services and products from the oil and gas industry and, therefore, is affected by changing taxes, price controls and other laws and regulations relating to the oil and gas industry generally. The adoption of laws and regulations curtailing offshore exploration and development drilling for oil and gas for economic and other policy reasons would adversely affect our operations by limiting demand for our services. We cannot determine the extent to which new legislation, new regulations or changes in existing laws or regulations may affect our future operations.
Our operations and properties are subject to a wide variety of increasingly complex and stringent foreign, federal, state and local environmental laws and regulations, including those governing discharges into the air and water, the handling and disposal of solid and hazardous wastes, the remediation of soil and groundwater contaminated by hazardous substances and the health and safety of employees. Sanctions for noncompliance may include revocation of permits, corrective action orders, administrative or civil penalties and criminal prosecution. Some environmental laws provide for strict, joint and several liability for remediation of spills and other releases of hazardous substances, as well as damage to natural resources. In addition, companies may be subject to claims alleging personal injury or property damage as a result of alleged exposure to hazardous substances. These laws and regulations may also expose us to liability for the conduct of or conditions caused by others, or for our acts that were in compliance with all applicable laws at the time such acts were performed.
Environmental laws and regulations that apply to our operations include the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act (each, as amended) and similar laws that provide for responses to, and liability for, releases of hazardous substances into the environment. Environmental laws and regulations also include similar foreign, state or local counterparts to the above-mentioned federal laws, which regulate air emissions, water discharges, hazardous substances and waste, and require public disclosure related to the use of various hazardous substances. Our operations are also governed by laws and regulations relating to workplace safety and worker health, primarily, in the United States, the Occupational Safety and Health Act and regulations promulgated thereunder.
Compliance with federal, state and local provisions regulating the discharge of materials into the environment or relating to the protection of the environment has not had a material impact on our capital expenditures, earnings or competitive position. We cannot predict all of the environmental requirements or circumstances that will exist in the future but anticipate that environmental control and protection standards will become increasingly stringent and
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costly. Based on our experience to date, we do not currently anticipate any material adverse effect on our business or consolidated financial position, results of operations or cash flows as a result of future compliance with existing environmental laws and regulations. However, future events, such as changes in existing laws and regulations or their interpretation, more vigorous enforcement policies of regulatory agencies, or stricter or different interpretations of existing laws and regulations, may require additional expenditures by us, which may be material. Accordingly, there can be no assurance that we will not incur significant environmental compliance costs in the future.
Our quality management systems are registered as being in conformance with ISO 9001:2015 and cover:
our Subsea Robotics operations in the U.S. Gulf of Mexico, the United Kingdom (“U.K.”), Norway, Angola, Ghana, Brazil, Canada, India, the Middle East, Australia, Indonesia and Malaysia;
our Integrity Management & Digital Solutions operations in the U.S. Gulf of Mexico, the U.K., Norway, Angola, the United Arab Emirates, Oman, Qatar, Australia, Malaysia and Indonesia;
our Offshore Projects Group operations in the U.S. Gulf of Mexico, the U.K., Norway, Brazil, Canada, India, the Middle East, Australia, Indonesia, Singapore, Thailand and Malaysia;
our Manufactured Products operations in Brazil, Canada, the U.S., the Netherlands, including (1) Rotator in Norway and (2) Grayloc in the United States, Canada, the U.K. and Malaysia; and
the Oceaneering Space Systems, Oceaneering Technologies and Marine Services divisions of our Aerospace and Defense Technologies segment.
ISO 9001 is an internationally recognized system for quality management established by the International Standards Organization, and the 2015 edition emphasizes customer satisfaction, risk assessment and continual improvement.
HUMAN CAPITAL RESOURCES
As of December 31, 2020, we had approximately 8,300 employees, of whom approximately 40% were employed in the United States and approximately 60% were employed outside of the United States. Our workforce varies seasonally and typically peaks during the second and third quarters of each year. In 2020, we worked in approximately 50 countries across six continents and employed people representing over 100 different nationalities.
We believe that our future success largely depends on our continued ability to attract and retain highly skilled employees. We provide our employees with competitive compensation packages, development programs that enable continued learning and growth, and comprehensive and competitive benefit packages worldwide. Our compensation and benefits arrangements generally are tailored to local markets of operation. Employee benefits, therefore, typically depend on role and work location.
As part of our retention and promotion efforts, we invest in ongoing leadership development. We have a strong history of internal promotion. We regularly provide our employees with training, including health, safety and environmental (“HSE”) awareness training, technical courses, management development seminars, and leadership and supervisory training.
Our core values and culture reflect our commitments to safety, diversity and inclusion, human health, the environment, ethical business practices and responsible corporate citizenship in the communities in which we live and work around the world. All employees are responsible for upholding our core values. We believe our core values and culture foster employee engagement and innovation, and allow us to draw on our employees' skills and aspirations in a mutually beneficial way.
Safety is a key focus of all Oceaneering operations. We have a strong HSE program that includes processes implemented by our operating groups that are aimed at preventing injuries to our employees and others with whom we work, as well as preventing damage to equipment and the environment. We hold our employees, and those of our subcontractors and vendors who appear in our workplaces or job sites, accountable for compliance with our safety standards.
As a global company, much of our success is rooted in the diversity of our workforce and our commitment to inclusion. We value diversity at all levels and continue to focus on extending our diversity and inclusion initiatives across our entire workforce. We have established an internal Diversity & Inclusion Council, made up of 19 employees, to listen, guide and support our efforts in this area.
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect our company and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords.
From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our company. These statements may include projections and estimates concerning the timing and success of specific projects and our future orders, revenue, income and capital spending. Forward-looking statements are generally accompanied by words such as “estimate,” “plan,” “project,” “predict,” “believe,” “expect,” “anticipate,” “plan,” “forecast,” “budget,” “goal,” “may,” “should,” or other words that convey the uncertainty of future events or outcomes. In addition, sometimes we will specifically describe a statement as being a forward-looking statement and refer to this cautionary statement.
In addition, various statements this report contains, including those that express a belief, expectation or intention are forward-looking statements. Those forward-looking statements appear in Part I of this report in Item 1—“Business,” Item 2—“Properties” and Item 3—“Legal Proceedings” and in Part II of this report in Item 7—“Management's Discussion and Analysis of Financial Condition and Results of Operations,” Item 7A—“Quantitative and Qualitative Disclosures About Market Risk” and in the Notes to Consolidated Financial Statements incorporated into Item 8 and elsewhere in this report. These forward-looking statements speak only as of the date of this report, we disclaim any obligation to update these statements, and we caution you not to rely unduly on them. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:
factors affecting the level of activity in the energy industry, including worldwide demand for and prices of oil and natural gas, oil and natural gas production growth and the supply and demand of offshore drilling rigs;
actions by members of the Organization of Petroleum Exporting Countries, or OPEC, and other oil exporting countries;
decisions about offshore developments to be made by oil and gas exploration, development and production companies;
decisions about offshore developments to be made by offshore renewables companies;
the use of subsea completions and our ability to capture our share of the associated market;
factors affecting the level of activity in each of our government and entertainment businesses, including decisions on spending and funding by the U.S. Government and capital expenditure decisions by entertainment business customers, such as theme park operators;
general economic and business conditions and industry trends, including the ongoing transition to alternative sources of energy to reduce worldwide emissions of carbon dioxide and other “greenhouse gases”;
the strength of the industry segments in which we are involved;
the continuing effects of the coronavirus (“COVID-19”) pandemic and the governmental, customer, supplier and other responses to the pandemic;
cancellations of contracts, change orders and other contractual modifications and the resulting adjustments to our backlog;
collections from our customers;
our future financial performance, including as a result of the availability, terms and deployment of capital;
the consequences of significant changes in currency exchange rates;
the volatility and uncertainties of credit markets;
our ability to comply with covenants in our credit agreements and other debt instruments and the availability, terms and deployment of capital;
changes in tax laws, regulations and interpretation by taxing authorities;
changes in, or our ability to comply with, other laws and governmental regulations, including those relating to the environment (including pollution and climate change);
the continued availability of qualified personnel;
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our ability to obtain raw materials and parts on a timely basis and, in some cases, from limited sources;
operating risks normally incident to offshore exploration, development and production operations;
hurricanes and other adverse weather and sea conditions;
cost and time associated with drydocking of our vessels;
the highly competitive nature of our businesses;
adverse outcomes from legal or regulatory proceedings;
the risks associated with integrating businesses we acquire;
the risks associated with the transition to a more remote workforce;
the risks associated with the use of complex information technology systems, including cybersecurity risks and the risks associated with failures to protect data privacy in accordance with applicable legal requirements and contractual provisions binding upon us;
rapid technological changes; and
social, political, military and economic situations in foreign countries where we do business and the possibilities of civil disturbances, war, other armed conflicts or terrorist attacks.
We believe the items we have outlined above are important factors that could cause our actual results to differ materially from those expressed in a forward-looking statement made in this report or elsewhere by us or on our behalf. We have discussed most of these factors in more detail elsewhere in this report. These factors are not necessarily all the factors that could affect us. Unpredictable or unanticipated factors we have not discussed in this report could also have material adverse effects on actual results of matters that are the subject of our forward-looking statements. We do not intend to update our description of important factors each time a potential important factor arises. We advise our security holders that they should (1) be aware that important factors we do not refer to above could affect the accuracy of our forward-looking statements and (2) use caution and common sense when considering our forward-looking statements.
AVAILABLE INFORMATION
Our website address is www.oceaneering.com. We make available through this website under “Investor Relations — SEC Financial Reports,” free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, amendments to those reports and Section 16 filings by our directors and executive officers as soon as reasonably practicable after we, or our executive officers or directors, as the case may be, electronically file those materials with, or furnish those materials to, the SEC. In addition, the SEC maintains a website, www.sec.gov, which contains reports, proxy and other information statements, and other information regarding issuers that file electronically with the SEC.
We have adopted, and posted on our website: our corporate governance guidelines; a code of ethics for our Chief Executive Officer and Senior Financial Officers; charters for the Audit, Nominating and Corporate Governance and Compensation Committees of our Board of Directors; and a code of business conduct and ethics that applies to all of our directors, officers and employees.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
Executive Officers. The following information relates to our executive officers as of February 19, 2021: 
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NAMEAGEPOSITIONEXECUTIVE
OFFICER
SINCE
EMPLOYEE
SINCE
Roderick A. Larson54President and Chief Executive Officer and Director20122012
Charles W. Davison, Jr.52Chief Operating Officer20192019
Earl F. Childress55Senior Vice President and Chief Commercial Officer20202020
Alan R. Curtis55Senior Vice President and Chief Financial Officer20151995
Holly D. Kriendler56Senior Vice President and Chief Human Resources Officer20202016
David K. Lawrence61Senior Vice President, General Counsel and Secretary20122005
Eric A. Silva61Senior Vice President and Chief Transformation Officer20172014
Philip G. Beierl62Senior Vice President, Aerospace and Defense Technologies20182005
Benjamin M. Laura42Senior Vice President, Offshore Projects Group20202014
Witland J. LeBlanc, Jr.50Vice President and Chief Accounting Officer20192010
Martin J. McDonald57Senior Vice President, Subsea Robotics20151989
Shaun R. Roedel53Senior Vice President, Manufactured Products20202009
Kishore Sundararajan59Senior Vice President, Integrity Management and Digital Solutions20202020
Each executive officer serves at the discretion of our Board of Directors and is subject to reelection or reappointment each year after the annual meeting of our shareholders. We do not know of any arrangement or understanding between any of the above persons and any other person or persons pursuant to which they were selected or appointed as an officer.
Business Experience. The following summarizes the business experience of our executive officers. Except where we otherwise indicate, each of these persons has held his or her current position with Oceaneering for at least the past five years.
Roderick A. Larson joined Oceaneering in 2012 as Senior Vice President and Chief Operating Officer, became President in February 2015 and became President and Chief Executive Officer and Director in May 2017. Mr. Larson previously held positions with Baker Hughes Incorporated from 1990 until he joined Oceaneering, serving most recently as President, Latin America Region from January 2011. Previously, he served as Vice President of Operations, Gulf of Mexico Region from 2009 to 2011, Gulf Coast Area Manager from 2007 to 2009, and Special Projects Leader Technical Training Task from 2006 to 2007.
Charles W. Davison, Jr., Chief Operating Officer, joined Oceaneering most recently in June 2019. After leaving Oceaneering in June 2015, he served as Chief Executive Officer and President of Fairfield Geotechnologies (“Fairfield”). He continues to serve as nonexecutive chairman of the board of directors of Magseis Fairfield ASA, a position he has held since the acquisition by Magseis ASA of Fairfield’s seismic technologies business in December 2018. He first joined Oceaneering in November 2007 as Vice President, Umbilical Solutions. He was appointed Senior Vice President, Subsea Products, in January 2014 and served in that position until June 2015. Prior to November 2007, he spent eight years with General Electric Company, holding various roles in operational and supply chain management.
Earl F. Childress, Senior Vice President and Chief Commercial Officer, joined Oceaneering in March 2020 as Senior Vice President, Business Development and assumed his current role in May 2020. From 2015 to 2020, he served as Executive Vice President of Strategy and Business Development for Teledyne Marine, and as General Manager of Teledyne Seismic and Teledyne RD Instruments. Prior to 2015, Mr. Childress served in sales, marketing and strategy roles for Teledyne, including mergers and acquisitions in marine instrumentation markets. Mr. Childress is a member of Petroleum Equipment and Services Association and the National Ocean Industries Association.
Alan R. Curtis, Senior Vice President and Chief Financial Officer, joined Oceaneering in 1995 as the Financial and Operations Controller for our Subsea Products segment, and became Vice President and Controller of Subsea Products in 2013 and Senior Vice President, Operations Support in 2014. He was appointed to his current position in August 2015.
Holly D. Kriendler, Senior Vice President and Chief Human Resources Officer, joined Oceaneering in October 2016 as Vice President, Human Resources and was appointed as its Chief Human Resources Officer in 2018 and to her current position in March 2020, with responsibility for Oceaneering’s human resources, global mobility and
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operations training functions. Prior to joining Oceaneering, Ms. Kriendler served in human resources leadership positions from 2006 to 2016 at affiliates of Tyco International Ltd. and successor entities, including most recently as Vice President, Human Resources for The ADT Corporation from 2012. Ms. Kriendler has more than 25 years of experience in human resources management.
David K. Lawrence, Senior Vice President, General Counsel and Secretary, joined Oceaneering in 2005 as Assistant General Counsel. He was appointed Associate General Counsel effective January 2011, Vice President, General Counsel and Secretary in January 2012 and to his current position in February 2014. Mr. Lawrence has more than 30 years of experience as in-house counsel in the oil and gas and manufacturing industries.
Eric A. Silva, Senior Vice President, Operations Support, joined Oceaneering in 2014 as Chief Information Officer and Vice President. He was appointed to his current position in August 2015 and was appointed an executive officer in 2017. Prior to joining Oceaneering, Mr. Silva was a consultant from May 2012 to February 2014 and served as the Chief Information Officer at El Paso Corporation from 2010 to May 2012. Prior to such time, he was Vice President of Information Technology of LyondellBasell Industries N.V. (formerly LyondellBasell Industries AF S.C.A.) from December 2007 to 2010, and was Vice President of Information Technology of Lyondell Chemical Company from 2002 to 2007.
Philip G. Beierl, Senior Vice President, Aerospace and Defense Technologies, joined Oceaneering in 2005 and held leadership positions in the Oceaneering Technologies business unit, most recently as its Vice President and General Manager from 2014. Mr. Beierl was appointed as Oceaneering's Senior Vice President, Advanced Technologies in 2018 and to his current position in August 2020. Before joining Oceaneering, he served in the U.S. Navy for over 25 years.
Benjamin M. Laura, Senior Vice President, Offshore Projects Group, joined Oceaneering as Director of Subsea Services in 2014, was appointed as its as Vice President of Service, Technology & Rentals in 2015, as its Senior Vice President, Service and Rental in March 2020 and to his current position in May 2020. Prior to joining Oceaneering, Mr. Laura worked for Baker Hughes as the Vice-President and Managing Director for Baker Hughes do Brasil.
Witland J. LeBlanc, Jr., Vice President and Chief Accounting Officer, joined Oceaneering in 2010 as the Vice President, Tax, and became Vice President, Tax and Treasurer in July 2017. He was appointed to his current position in March 2019. He began his career in public accounting and transitioned to industry prior to joining Oceaneering.
Martin J. McDonald, Senior Vice President, Remotely Operated Vehicles, joined Oceaneering in 1989. He held a variety of domestic and international positions of increasing responsibility in our ROV segment and most recently served as Vice President and General Manager for our ROV operations in the Eastern Hemisphere from 2006 until being appointed to his current position effective January 2016.
Shaun R. Roedel, Senior Vice President, Manufactured Products, joined Oceaneering in 2009 as Assistant General Manager/Group Project Manager of the umbilical plant in Panama City, Florida, and became Vice President, Subsea Manufactured Products in 2017. He was appointed to his current position in March 2020. Prior to joining Oceaneering, Mr. Roedel was the head of project management for Siemens Dematic from 1997 to 2004 and the head of project management and construction for Vanderlande Industries from 2004 to 2009. Mr. Roedel served in the U.S. Navy from 1990 to 1997.
Kishore Sundararajan, Senior Vice President, Integrity Management and Digital Solutions, joined Oceaneering in March 2020 as Senior Vice President, Asset Integrity and assumed his current role in May 2020. Before joining Oceaneering, he served as President of Engineering and Product Management, Oil Field Services with Baker Hughes from 2017 to 2019. Prior to that time, he was employed by General Electric in its oil and gas business as Vice President of Engineering and Technology from 2015 to 2017 and as Chief Technology Officer, Measurement and Control from 2014 to 2015. From 1988 to 2014, Mr. Sundararajan held positions of increasing responsibility in automation, robotics and power conversion with the ABB Group, culminating in leadership of its global industrial solutions business.
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Item 1A.Risk Factors.
We are subject to various risks and uncertainties in the course of our business. The following summarizes the risks and uncertainties that we consider to be material and that may materially and adversely affect our business, financial condition, results of operations or cash flows and the market value of our securities. Investors in our company should consider these matters, in addition to the other information we have provided in this report and the documents we incorporate by reference.
Business and Operational Risks
We derive most of our revenue from companies in the offshore oil and gas industry, a historically cyclical industry with levels of activity that are significantly affected by the levels and volatility of oil and gas prices.
We derive most of our revenue from customers in the offshore oil and gas exploration, development and production industry. The offshore oil and gas industry is a historically cyclical industry characterized by significant changes in the levels of exploration and development activities. Oil and gas prices, and market expectations of potential changes in those prices, significantly affect the levels of those activities. Worldwide political, economic and military events have contributed to oil and gas price volatility and are likely to continue to do so in the future. Since the general decline in the price of oil from mid-2014, many oil and gas companies made significant reductions in their capital and operating expenditures, which have adversely impacted demand for the services and products provided by our Energy Services and Products business. During this period, exploration expenditures in the U.S. Gulf of Mexico, particularly in deepwater sectors, have dropped significantly. This situation was exacerbated in 2020 by further reductions in expenditures by oil and gas companies due to the impact of the coronavirus (“COVID-19”) pandemic, including the resulting significant reduction in global demand for oil and natural gas, coupled with the sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of the Organization of Petroleum Exporting Countries, or OPEC, and other foreign, oil-exporting countries, as discussed below. So far in 2021, although oil and gas prices have recovered somewhat, there is new uncertainty regarding the long-term outlook for the U.S. Gulf of Mexico, as a result of a temporary ban on leasing of U.S. federal lands imposed by the new administration. Any prolonged reduction in the overall level of offshore oil and gas exploration and development activities, whether resulting from changes in oil and gas prices, limitations on access to capital for such activities, governmental actions or regulatory developments or otherwise, could materially and adversely affect our financial condition and results of operations in our operating segments within our Energy Services and Products business. Some factors that have affected and are likely to continue affecting oil and gas prices and the level of demand for our services and products include the following:
worldwide demand for oil and gas;
general economic and business conditions and industry trends;
the ability of OPEC to set and maintain production levels;
the level of production by non-OPEC countries, including U.S. shale oil;
the ability of oil and gas companies to generate funds for capital expenditures;
the cost of exploring for, developing and producing oil and gas;
domestic and foreign tax policy;
laws and governmental regulations that restrict exploration and development of oil and gas in various offshore jurisdictions;
technological changes;
the political environment of oil-producing regions;
the changing environmental and social landscape; and
the price and availability of alternative energy.
The ongoing COVID-19 outbreak has adversely affected, and could continue to adversely affect, our business, financial condition and results of operations.
The ongoing COVID-19 outbreak, which the World Health Organization declared a pandemic and the U.S. Government declared a national emergency in March 2020, has resulted in widespread adverse impacts on the global economy and financial markets, and on our employees, customers, suppliers and other parties with whom we have business relations. We have experienced some resulting disruptions to our business operations. For example,
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since mid-March, we have had to restrict access to our administrative offices around the world and quarantine personnel and assets as required by various governmental authorities, our customers’ and our own safety protocols. There is considerable uncertainty regarding the extent to which COVID-19 and its variants will continue to spread, the widespread availability and efficacy of vaccines and the extent and duration of governmental and other measures implemented to try to slow the spread, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, delays in the delivery of materials and supplies that are sourced from around the globe, and have caused, and may continue to cause, milestones or deadlines relating to various projects to be missed. Further, the impact of the pandemic, including the resulting significant reduction in global demand for oil and natural gas, coupled with the sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of OPEC and other foreign, oil-exporting countries has led to significant global economic contraction generally and in our industry in particular. Despite recent improvements in commodity prices, oil and natural gas prices are expected to continue to be volatile as a result of these events and the ongoing COVID-19 outbreak, and as changes in oil and natural gas inventories, industry demand and economic performance are reported. We cannot predict whether and the extent to which prices will continue to improve and stabilize.
We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences) and implemented new protocols to promote social distancing and enhance sanitary measures in our offices and facilities to conform to government restrictions and best practices encouraged by governmental and regulatory authorities. However, the quarantine of personnel or the inability to access our facilities or customer sites could adversely affect our operations. Also, we have a limited number of highly skilled employees for some of our operations. If a large proportion of our employees in those critical positions were to contract COVID-19 or be quarantined as a result of the virus, at the same time, we would rely upon our business continuity plans in an effort to continue operations at our facilities and customer sites and onboard our vessels, but there is no certainty that such measures will be sufficient to mitigate the adverse impact to our operations that could result from shortages of highly skilled employees. Many of our suppliers and other business counterparties have made similar modifications. The resources available to those of our employees who are working remotely may not enable them to maintain the same level of productivity and efficiency, and those and other employees may face additional demands on their time, such as increased responsibilities resulting from school closures or the illness of family members. Although we have experienced only limited absenteeism from employees who are required to be on-site to perform their jobs, absenteeism may increase in the future and may harm our productivity. Further, our increased reliance on remote access to our information systems increases our exposure to potential cybersecurity breaches. We may take further actions as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, suppliers and other business counterparties. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, in which case our employees or other individuals may become sick, our ability to perform critical functions could be harmed, and we may be unable to respond to some of the needs of our global business.
We have also received various notices from some of our suppliers and other business counterparties, and provided notices to several customers, regarding performance delays resulting from the pandemic. These actions may result in some disputes and could strain our relations with customers and others. If and to the extent these actions were to result in material modifications or cancellations of the underlying contracts, we could experience reductions in our currently reported backlog and in the anticipated conversion of backlog into revenue in future periods. In addition, worsening economic conditions could result in reductions in backlog over time, which would impact our future financial performance.
Due to the ongoing impact of COVID-19, certain projects that were in process have been delayed in our Manufacturing Products segment. As of December 31, 2020, we had outstanding accounts receivable and contracts assets of approximately $51 million for these projects. We continue to believe these accounts receivable and contract assets are realizable and the projects will resume.
Additionally, to the extent that access to the capital and other financial markets is adversely affected by the effects of COVID-19, we may need to consider alternative sources of funding for some of our operations and for working capital, which may increase our cost of, as well as adversely impact our access to, capital. These uncertain economic conditions may also result in the inability of our customers and other counterparties to make payments to us, on a timely basis or at all, which could adversely affect our business, cash flows, liquidity, financial condition and results of operations.
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We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments beyond our control, which are highly uncertain and cannot be predicted, including, among others, the ultimate geographic spread of the virus, the consequences of governmental and other measures designed to prevent the spread of the virus, the ongoing development and distribution of vaccines and therapeutic treatments, the duration of the pandemic, actions taken by members of OPEC and other foreign, oil-exporting countries, actions taken by governmental authorities, customers, suppliers and other third parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.
Our international operations involve additional risks not associated with domestic operations.
A significant portion of our revenue is attributable to operations in foreign countries. These activities accounted for approximately 53% of our consolidated revenue in 2020. Risks associated with our operations in foreign areas include risks of:
regional and global economic downturns;
public health threats, such as COVID-19, Severe Acute Respiratory Syndrome, severe influenza and other highly communicable viruses or diseases, that could limit access to customers', vendors' or our facilities or offices, impose travel restrictions on our personnel or otherwise adversely affect our operations or demand for our services;
disturbances or other risks that may limit or disrupt markets;
expropriation, confiscation or nationalization of assets;
renegotiation or nullification of existing contracts;
foreign exchange restrictions;
foreign currency fluctuations, particularly in countries highly dependent on oil revenue;
foreign taxation, including the application and interpretation of tax laws;
the inability to repatriate earnings or capital;
uncertainties relating to the United Kingdom's withdrawal from the European Union, including uncertainties about applicable future laws, regulations and treaties regarding tax and free trade agreements, intellectual property rights and supply chain logistics, as well as environmental, health and safety laws and regulations, immigration laws, employment laws, and other rules that could apply to us and our subsidiaries;
changing political conditions;
changing foreign and domestic monetary policies; and
social, political, military and economic situations in foreign areas where we do business and the possibilities of civil disturbances, war, other armed conflict, terrorist attacks or acts of piracy.
Additionally, in some jurisdictions we are subject to foreign governmental regulations favoring or requiring the awarding of contracts to local contractors or requiring foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These regulations may adversely affect our ability to compete.
Our exposure to the risks we described above varies from country to country. In recent periods, economic conditions, political instability and civil unrest in Africa and Azerbaijan have been among our greatest concerns. There is a risk that a continuation or worsening of these conditions could materially and adversely impact our future business, operations, financial condition and results of operations.
Our backlog is subject to unexpected adjustments and cancellations and is, therefore, an uncertain indicator of our future revenue and earnings.
There can be no assurance that the revenue included in our backlog will be realized or, if realized, will result in profits. Because of project cancellations or potential changes in the scope or schedule of our customers' projects, we cannot predict with certainty when or if backlog will be realized. Material delays, suspensions, cancellations or payment defaults could materially affect our financial condition, results of operations and cash flows. We may be at risk of delays, suspensions and cancellations in the current market environment.
Reductions in our backlog due to cancellation by a customer or for other reasons would adversely affect, potentially to a material extent, the revenue and earnings we actually receive from contracts included in our backlog. Many of our ROV contracts have 30-day notice termination clauses. Some of the contracts in our backlog provide for
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cancellation fees in the event customers cancel projects. These cancellation fees usually provide for reimbursement of our out-of-pocket costs, revenue for work performed prior to cancellation and a varying percentage of the profits we would have realized had the contract been completed. However, under limited circumstances, such as certain bankruptcy events, no cancellation fee would be owed to us. Further, even if a cancellation fee is owed to us, a customer may be unable or may refuse to pay the cancellation fee. We typically have no contractual right upon cancellation to the total contract revenue as reflected in our backlog. If we experience significant project terminations, suspensions or scope adjustments to contracts reflected in our backlog, our financial condition, results of operations and cash flows may be adversely impacted.
Our offshore oilfield operations involve a variety of operating hazards and risks that could cause losses.
Our operations are subject to the hazards inherent in the offshore oilfield business. These include blowouts, explosions, fires, collisions, capsizings and severe weather conditions. These hazards could result in personal injury and loss of life, severe damage to or destruction of property and equipment, pollution or environmental damage and suspension of operations. We may incur substantial liabilities or losses as a result of these hazards. While we maintain insurance protection against some of these risks, and seek to obtain indemnity agreements from our customers requiring the customers to hold us harmless from some of these risks, our insurance and contractual indemnity protection may not be sufficient or effective to protect us under all circumstances or against all risks. The occurrence of a significant event not fully insured or indemnified against or the failure of a customer to meet its indemnification obligations to us could materially and adversely affect our results of operations and financial condition.
Legal and Regulatory Risks
Our operations could be adversely impacted by the effects of new regulations.
During 2010, the U.S. Government established new regulations relating to the design of wells and testing of the integrity of wellbores, the use of drilling fluids, the functionality and testing of well control equipment, including blowout preventers, and other safety and environmental regulations. The U.S. Government requires that operators demonstrate their compliance with those regulations before commencing deepwater drilling operations. In addition, increasing attention to issues concerning climate change as a result of the emission of carbon dioxide and other “greenhouse gases” may result in the imposition of additional environmental or other legislation or regulations that seek to restrict, or otherwise impose limitations or costs upon, the emission of greenhouse gases. We cannot predict when or whether any of these various legislative and regulatory proposals may be enacted or adopted or what their effects will be on us or our customers, particularly with respect to offshore oil and gas exploration and development projects. These and other legislative or regulatory developments could increase costs for us and our customers or, in some cases, prevent projects from going forward, thereby potentially reducing the need for our products and services.
Employee, agent or partner misconduct or our overall failure to comply with laws or regulations could weaken our ability to win contracts, which could result in reduced revenue and profits.
Misconduct, fraud, non-compliance with applicable laws and regulations, or other improper activities by one or more of our employees, agents or partners could have a significant negative impact on our business and reputation. Such misconduct could include the failure to comply with the U.S. Foreign Corrupt Practices Act ("FCPA"), which prohibits companies and their intermediaries from making improper payments to non-U.S. officials, as well as the failure to comply with government procurement regulations, regulations on lobbying or similar activities, regulations pertaining to the internal controls over financial reporting and various other applicable laws or regulations, including the U.K. Bribery Act. We operate in some countries that international corruption monitoring groups have identified as having high levels of corruption. Our activities create the risk of unauthorized payments or offers of payments by one of our employees or agents that could be in violation of the FCPA or other applicable anti-corruption laws. The precautions we take to prevent and detect misconduct, fraud or non-compliance with applicable laws and regulations may not be effective, and we could face unknown risks or losses. Our failure to comply with applicable laws or regulations or acts of misconduct could subject us to fines, penalties or other sanctions, which could have a material adverse effect on our business and our consolidated financial condition, results of operations and cash flows.
Laws and governmental regulations may add to our costs or adversely affect our operations.
Our business is affected by changes in public policy and by federal, state, local and foreign laws and regulations relating to the offshore oil and gas industry. Offshore oil and gas exploration and production operations are affected by tax, environmental, safety and other laws, by changes in those laws, application or interpretation of existing laws,
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and changes in related administrative regulations. It is also possible that these laws and regulations may in the future add significantly to our operating costs or those of our customers or otherwise directly or indirectly affect our operations.
Environmental laws and regulations can increase our costs, and our failure to comply with those laws and regulations can expose us to significant liabilities.
Risks of substantial costs and liabilities related to environmental compliance issues are inherent in our operations. Our operations are subject to extensive federal, state, local and foreign laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of materials into the environment. Permits are required for the operation of various facilities, and those permits are subject to revocation, modification and renewal. Governmental authorities have the power to enforce compliance with their regulations, and violations are subject to fines, injunctions or both. In some cases, those governmental requirements can impose liability for the entire cost of cleanup on any responsible party without regard to negligence or fault and impose liability on us for the conduct of or conditions others have caused, or for our acts that complied with all applicable requirements when we performed them. It is possible that other developments, such as stricter environmental laws and regulations, and claims for damages to property or persons resulting from our operations, would result in substantial costs and liabilities. In particular, increasing attention to issues concerning climate change as a result of the emission of carbon dioxide and other “greenhouse gases” may result in the imposition of additional environmental legislation or regulations that seek to restrict, or otherwise impose limitations or costs upon, the emission of greenhouse gases. We cannot predict when or whether any of these various legislative and regulatory proposals may become law or what their effect will be on us or our customers. Such legislation or regulations could increase costs for us and our customers or, in some cases, prevent projects from going forward, thereby potentially reducing the need for our products and services. Our insurance policies and the contractual indemnity protection we seek to obtain from our customers may not be sufficient or effective to protect us under all circumstances or against all risks involving compliance with environmental laws and regulations.
Financial Risks
Foreign exchange risks and fluctuations may affect our profitability on certain projects.
We operate on a worldwide basis with substantial operations outside the U.S. that subject us to U.S. dollar translation and economic risks. In order to manage some of the risks associated with foreign currency exchange rates, we may enter into foreign currency derivative (hedging) instruments, especially when there is currency risk exposure that is not naturally mitigated via our contracts. However, these actions may not always eliminate all currency risk exposure, in particular for our long-term contracts. A disruption in the foreign currency markets, including the markets with respect to any particular currencies, could adversely affect our hedging instruments and subject us to additional currency risk exposure. Based on fluctuations in currency, the U.S. dollar value of our backlog may from time to time increase or decrease significantly. We do not enter into derivative instruments for trading or other speculative purposes. Our operational cash flows and cash balances, though predominately held in U.S. dollars, may consist of different currencies at various points in time in order to execute our contracts globally. Non-U.S. asset and liability balances are subject to currency fluctuations when measured period to period for financial reporting purposes in U.S. dollars.
Maintaining adequate letter of credit and bonding capacity is necessary for us to successfully bid on and win various contracts.
In line with industry practice, we are often required to post standby letters of credit to customers or enter into surety bond arrangements in favor of customers. Those letters of credit and surety bond arrangements generally protect customers against our failure to perform our obligations under the applicable contracts. However, the terms of those letters of credit, including terms relating to the customer’s ability to draw upon the letter of credit and the amount of the letter of credit required, can vary significantly. If a letter of credit or surety bond is required for a particular project and we are unable to obtain it due to insufficient liquidity or other reasons, we may not be able to pursue that project. We have limited capacity for letters of credit, and we rely substantially on bilateral letters of credit from various issuing banks in a number of markets. Moreover, due to events that affect the credit markets generally, letters of credit may be more difficult to obtain in the future or may only be available at significant additional cost. Letters of credit, including through our bilateral arrangements (which are cancelable in the discretion of the issuing banks), may not continue to be available to us on reasonable terms. Our inability to obtain adequate letters of credit and surety bonds and, as a result, to bid on new work could have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
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Changes in the method of determining the U.S. Dollar London Interbank Offered Rate (“LIBOR”), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest rates and increase our cost of capital.
On July 27, 2017, the Financial Conduct Authority in the United Kingdom announced that it would phase out LIBOR as a benchmark rate by the end of 2021. On November 30, 2020, the ICE Benchmark Administration, the current administrator of LIBOR, announced that it intends to cease publication of 1-week and 2-month LIBOR at the end of 2021 and, subject to compliance with applicable regulations, including as to representativeness, it does not intend to cease publication of the remaining tenors until June 30, 2023. However, it is possible that LIBOR’s regulator may determine to cease publication as of an earlier date, if the information used to calculate LIBOR degrades to the degree that it is no longer representative of the underlying market. We expect that different benchmark rates used to price indebtedness will continue to be developed over time. Revolving credit borrowings under our principal credit agreement, which is described in Part II of this report in Item 7—“Management's Discussion and Analysis of Financial Condition and Results of Operations” (the “Credit Agreement”), bear interest at rates tied to LIBOR. In the future, we may need to renegotiate the Credit Agreement or incur indebtedness under other credit arrangements, and the phase-out of LIBOR may negatively impact the terms of such indebtedness. We have not yet pursued an amendment of the Credit Agreement or other contractual alternative to address this matter and are currently evaluating the impact of the potential replacement of LIBOR. If no such amendment or other contractual alternative is established on or prior to the phase-out of LIBOR, interest on revolving credit borrowings under the Credit Agreement may bear interest at higher rates based on the prime rate, which could increase our cost of capital in the event we borrow against the Credit Agreement. Furthermore, the overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR. Disruption in the financial market could have an adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
A global financial crisis could impact our business and financial condition in ways that we currently cannot predict.
A recurrence of the credit crisis and related turmoil in the global financial system that occurred in 2008 and 2009 could have an impact on our business and our financial condition. In particular, the cost of capital increased substantially while the availability of funds from the capital markets diminished significantly. Although the capital markets have recovered, in a recurrence, our ability to access the capital markets in the future could be restricted or be available only on terms we do not consider favorable. Limited access to the capital markets could adversely impact our ability to take advantage of business opportunities or react to changing economic and business conditions and could adversely impact our ability to continue our growth strategy. Ultimately, we could be required to reduce our future capital expenditures substantially. Such a reduction could have a material adverse effect on our business and our consolidated financial condition, results of operations and cash flows. A recurrence of such a global financial crisis could have further impacts on our business that we currently cannot predict or anticipate.
A global financial crisis or economic recession could have an impact on our suppliers and our customers, causing them to fail to meet their obligations to us, which could have a material adverse effect on our revenue, income from operations and cash flows.
If one or more of the lenders under our revolving credit facility were to become unable or unwilling to perform their obligations under that facility, our borrowing capacity could be reduced. Our inability to borrow under our revolving credit facility could limit our ability to fund our future operations and growth.
In addition, we maintain our cash balances and short-term investments primarily in accounts held by major banks and financial institutions located principally in North America, Europe, Africa and Asia, and some of those accounts hold deposits that exceed available insurance. It is possible that one or more of the financial institutions in which we hold our cash and investments could become subject to bankruptcy, receivership or similar proceedings. As a result, we could be at risk of not being able to access material amounts of our cash, which could result in a temporary liquidity crisis that could impede our ability to fund operations.
Strategic Risks Related to our Business
Our business strategy contemplates future acquisitions. Acquisitions of other businesses or assets present various risks and uncertainties.
We may pursue growth through the acquisition of businesses or assets that will enable us to broaden our service and product offerings and expand into new markets. We may be unable to implement this element of our growth
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strategy if we cannot identify suitable businesses or assets, reach agreement on potential strategic acquisitions on acceptable terms or for other reasons. Moreover, acquisitions involve various risks, including:
difficulties relating to the assimilation of personnel, services and systems of an acquired business and the assimilation of marketing and other operational capabilities;
challenges resulting from unanticipated changes in customer and other third-party relationships subsequent to acquisition;
additional financial and accounting challenges and complexities in areas such as tax planning, treasury management, financial reporting and internal controls;
assumption of liabilities of an acquired business, including liabilities that were unknown at the time the acquisition transaction was negotiated;
possible liabilities under the FCPA and other anti-corruption laws;
diversion of management's attention from day-to-day operations;
failure to realize anticipated benefits, such as cost savings and revenue enhancements;
potentially substantial transaction costs associated with acquisitions; and
potential impairment resulting from the overpayment for an acquisition.
Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms. Moreover, to the extent an acquisition transaction financed by non-equity consideration results in goodwill, it will reduce our tangible net worth, which might have an adverse effect on credit availability.
Additionally, an acquisition may bring us into businesses we have not previously conducted and expose us to additional business risks that are different from those we have previously experienced.
Our business strategy also includes development and commercialization of new technologies to support our growth. The development and commercialization of new technologies require capital investment and involve various risks and uncertainties.
Our future growth will depend on our ability to continue to innovate by developing and commercializing new service and product offerings. Investments in new technologies involve varying degrees of uncertainties and risk. Commercial success depends on many factors, including the levels of innovation, the development costs and the availability of capital resources to fund those costs, the levels of competition from others developing similar or other competing technologies, our ability to obtain or maintain government permits or certifications, the effectiveness of production, distribution and marketing efforts, and the costs to customers to deploy and provide support for the new technologies. We may not achieve significant revenue from new service and product investments for a number of years, if at all. Moreover, new services and products may not be profitable, and, even if they are profitable, our operating margins from new services and products may not be as high as the margins we have experienced historically.
The loss of the services of one or more of our key personnel, or our failure to attract, assimilate and retain trained personnel in the future, could disrupt our operations and result in loss of revenue.
Our success depends on the continued active participation of our executive officers and key operating personnel. The unexpected loss of the services of any one of these persons could adversely affect our operations.
Our operations require the services of employees having the technical training and experience necessary to obtain the proper operational results. As a result, if we should suffer any material loss of personnel to competitors or be unable to employ additional or replacement personnel with the requisite level of training and experience to adequately operate our equipment, our operations could be adversely affected. A significant increase in the wages paid by other employers could result in a reduction in our workforce, increases in wage rates, or both.
We may not be able to compete successfully against current and future competitors.
Our businesses operate in highly competitive industry segments. Some of our competitors or potential competitors have greater financial or other resources than we have. Our operations may be adversely affected if our current competitors or new market entrants introduce new products or services with better features, performance, prices or other characteristics than those of our services and products. This factor is significant to our segments' operations, particularly in the operating segments within our Energy Services and Products business, where capital investment is critical to our ability to compete.
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Risks Related to Intellectual Property, Information Technology and Data Privacy
We rely on intellectual property law and confidentiality agreements to protect our intellectual property. We also rely on intellectual property we license from third parties. Our failure to protect our intellectual property rights, or our inability to obtain or renew licenses to use intellectual property of third parties, could adversely affect our business.
We rely on a variety of intellectual property rights that we use in our services and products, and our success depends, in part, on our ability to protect our proprietary information and other intellectual property. Our intellectual property could be challenged, invalidated, circumvented or rendered unenforceable. In addition, effective intellectual property protection may be limited or unavailable in some foreign countries where we operate.
Our failure to protect our intellectual property rights may result in the loss of valuable technologies or adversely affect our competitive business position. We rely significantly on proprietary technology, information, processes and know-how that are not subject to patent or copyright protection. We seek to protect this information through trade secret or confidentiality agreements with our employees, consultants, subcontractors or other parties, as well as through other security measures. These agreements and security measures may be inadequate to deter or prevent misappropriation of our confidential information. In the event of an infringement of our intellectual property rights, a breach of a confidentiality agreement or divulgence of proprietary information, we may not have adequate legal remedies to protect our intellectual property.
In some instances, we have augmented our technology base by licensing the proprietary intellectual property of third parties. However, it is possible that the tools, techniques, methodologies, programs and components we use to provide our services or products may infringe on the intellectual property rights of others. In the future, we may not be able to obtain necessary licenses on commercially reasonable terms. Royalty payments under licenses from third parties, if available, or developing non-infringing technologies could materially increase our costs. Additionally, if a license or non-infringing technology were not available, we might not be able to continue providing a particular service or product, which could materially and adversely affect our financial condition, results of operations and cash flows.
Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert management's attention away from other aspects of our business. In addition, our trade secrets may otherwise become known or be independently developed by competitors.
Our information technology systems are subject to interruption and cybersecurity risks that could adversely impact our operations.
Our operations (both onshore and offshore) are highly dependent on information technology systems, including systems that collect, organize, store or use personally identifiable data and other sensitive information about our customers, employees, suppliers and others. Threats to information technology systems associated with cybersecurity risks and cyber incidents or attacks continue to grow. In addition, breaches to our systems or third-party systems utilized by us could go unnoticed for some period of time. Risks associated with these threats include disruptions of certain systems on our vessels or utilized to operate our ROVs; other impairments of our ability to conduct our operations; loss of or damage to intellectual property, proprietary information or employee or customer data; disruption of our customers’ operations; loss or damage to our customer data delivery systems; damage to our reputation or customer or other business relationships; regulatory investigations or other actions by governmental authorities and associated costs, fines or penalties; and increased costs to prevent, respond to or mitigate cybersecurity incidents. If such a cyber incident were to occur, it could have a material adverse effect on our business and our consolidated financial condition, results of operations and cash flows.
While we continue to evaluate potential replacements or upgrades of existing key information technology systems, the implementation of new information technology systems or upgrades to existing systems subjects us to inherent costs and risks associated with replacing or changing these systems, including potential disruption of our internal control structure, substantial capital expenditures, demands on management time and other risks. Our possible new information technology systems implementations or upgrades may not result in productivity improvements at the levels anticipated, or at all. In addition, the implementation of new or upgraded information technology systems may cause disruptions in our business operations. Any such disruption, and any other information technology system disruptions, if not anticipated and appropriately mitigated, could have a material adverse effect on our operations.
Changes in data privacy laws, regulations and standards may cause our business to suffer.
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Personal privacy and data security have become significant regulatory issues and the subject of rapidly evolving laws globally and in the United States. For example, Europe’s General Data Protection Regulation (“GDPR”) went into effect in 2018 and enforcement is still evolving. Furthermore, federal, state and local government bodies or agencies have in the past adopted, and may in the future adopt, more laws and regulations affecting data privacy. For example, the state of California enacted the California Consumer Privacy Act of 2018 (“CCPA”) and California voters recently approved the California Privacy Rights Act (“CPRA”). The CCPA, which went into effect on January 1, 2020, creates individual privacy rights for California residents and places increased privacy and security obligations on entities handling certain personal data of consumers or households, including new disclosures and protections to California residents. The CPRA modifies the CCPA and imposes additional data protection obligations on companies doing business in California. GDPR and the CCPA and other data privacy regulations may significantly impact our business activities and require substantial compliance costs that adversely affect business, operating results, prospects and financial condition.
Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable privacy and data security laws, regulations and policies, could result in additional cost and liability to us, damage our reputation, inhibit sales and adversely affect our business. Furthermore, the costs of compliance with, and other burdens imposed by, the laws, regulations, and policies that are applicable to our business may limit the use and adoption of, and reduce the overall demand for, our solutions. If we are not able to adjust to changing laws, regulations and standards related to privacy or security, our business may be harmed.
In addition, the regulatory environment surrounding data privacy and protection is evolving and can be subject to significant change. New laws and regulations relating to data privacy and the unauthorized disclosure of confidential information, including the European Union General Data Protection Regulation and recent legislation and regulations adopted in various U.S. jurisdictions, pose complex compliance challenges and may result in increased costs, and any failure to comply with those laws and regulations (or contractual provisions requiring similar compliance), including as a result of security and privacy breaches, could result in negative publicity and significant penalties or other liabilities. Additionally, if we acquire an entity that has violated or is not in compliance with applicable data privacy and protection laws or regulations (or contractual provisions), we may experience similar adverse consequences.
Risks Related to our Organization and Structure
We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.
Our certificate of incorporation authorizes us to issue, without the approval of our shareholders, one or more classes or series of preferred stock having such preferences, powers and relative, participating, optional and other rights, including preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of preferred stock could adversely impact the voting power or value of our common stock. For example, we might grant holders of preferred stock the right to elect some number of our directors in all events or on the happening of specified events or the right to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock.
Provisions in our corporate documents and Delaware law could delay or prevent a change in control of our company, even if that change would be beneficial to our shareholders.
The existence of some provisions in our corporate documents and Delaware law could delay or prevent a change in control of our company, even if that change would be beneficial to our shareholders. Our certificate of incorporation and bylaws contain provisions that may make acquiring control of our company difficult, including:
provisions relating to the classification, nomination and removal of our directors;
provisions regulating the ability of our shareholders to bring matters for action at annual meetings of our shareholders;
provisions requiring the approval of the holders of at least 80% of our voting stock for a broad range of business combination transactions with related persons; and
the authorization given to our board of directors to issue and set the terms of preferred stock.
In addition, the Delaware General Corporation Law imposes restrictions on mergers and other business combinations between us and any holder of 15% or more of our outstanding common stock.
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 General Risks
Our internal controls may not be sufficient to achieve all stated goals and objectives.
Our internal controls and procedures were developed through a process in which our management applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding the control objectives. The design of any system of internal controls and procedures is based, in part, on various assumptions about the likelihood of future events. We cannot assure that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
The use of estimates could result in future adjustments to our assets, liabilities and results of operations.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires that our management make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from those estimates.
Item 1B.Unresolved Staff Comments.
None.
Item 2.Properties.
We maintain office, shop and yard facilities in various parts of the world to support our operations. We consider these facilities, which we describe below, to be suitable for their intended use and adequate for our current operations. In these locations, we typically own or lease office facilities for our administrative and engineering staff, shops equipped for fabrication, testing, repair and maintenance activities and warehouses and yard areas for storage and mobilization of equipment to work sites. All sites are available to support any of our business segments as the need arises. The groupings that follow associate our significant offices with the primary business segment they serve.
Energy Services and Products. In general, our Energy Services and Products business segments share facilities. Our location in Morgan City, Louisiana consists of ROV manufacturing and training facilities, vessel docking facilities, open and covered warehouse space and offices. The Morgan City facilities primarily support operations in the United States. We have regional support offices for our North Sea, Africa, Brazil and Southeast Asia operations in: Aberdeen, Scotland; Stavanger and Bergen, Norway; Abu Dhabi and Dubai, United Arab Emirates; Rio de Janeiro and Macaé, Brazil; Luanda, Angola; Chandigarh, India; Perth, Australia; Kuala Lumpur, Malaysia; Baku, Azerbaijan; and Singapore. We also have operational bases in various other locations.
We use workshop and office space in Houston, Texas in our Manufactured Products, Offshore Projects Group and Integrity Management & Digital Solutions business segments. Our principal manufacturing facilities for our Manufactured Products segment are located in or near: Houston, Texas; Panama City, Florida; Aberdeen and Rosyth, Scotland; Nodeland and Stavanger, Norway; Perth, Australia; Luanda, Angola; the Netherlands; and Niterói and Macaé, Brazil. We also have an office in Orlando, Florida, which supports our commercial theme park animation activities. Each of these manufacturing facilities is suitable for its intended purpose and has sufficient capacity to respond to increases in demand for our subsea and theme park products and that may be reasonably anticipated in the foreseeable future.
For a description of the vessels we use in our Offshore Projects Group operations, see the discussion in Item 1. “Business” under the heading “GENERAL DEVELOPMENT OF BUSINESSEnergy Services and Products—Offshore Projects Group.”
Aerospace and Defense Technologies. Our primary facilities for our Aerospace and Defense Technologies segment are leased offices and workshops in Hanover, Maryland. We have regional offices in Chesapeake, Virginia; Bremerton, Washington; Pearl Harbor, Hawaii; Cataumet, Massachusetts; Charleston, South Carolina; and San Diego, California, which support our services for the U.S. Navy. We also have facilities in Houston, Texas, to support our space industry activities.
Item 3.Legal Proceedings.
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For information regarding legal proceedings, see the discussion under the caption “Litigation” in Note 10—“Commitments and Contingencies” in the Notes to Consolidated Financial Statements included in this report, which discussion we incorporate by reference into this Item.
Item 4.Mine Safety Disclosures.
Not applicable.

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Part II 
Item 5.Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common stock is listed on the New York Stock Exchange under the symbol OII. Our company website address is www.oceaneering.com
On February 19, 2021, there were 474 holders of record of our common stock. On that date, the closing sales price, as quoted on the New York Stock Exchange, was $9.95. Our Board has not declared quarterly dividends since 2017, after considering the need to focus our resources on growth and positioning us for the future. Although we will continue to review our dividend position on a quarterly basis, we do not anticipate our Board reinstating a quarterly cash dividend until we see a significant improvement in both our market outlook and projected free cash flow.
In December 2014, our Board of Directors approved a share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. The program calls for the repurchases to be made in the open market, or in privately negotiated transactions from time to time, in compliance with applicable laws, rules and regulations, including Rule 10b-18 under the Securities Exchange Act of 1934, as amended, subject to market and business conditions, levels of available liquidity, cash requirements for other purposes, applicable legal requirements and other relevant factors. The timing and amount of any repurchases will be determined by management based on its evaluation of these factors. We expect that any shares repurchased under the program will be held as treasury stock for future use. The new program does not obligate us to repurchase any particular number of shares. Under the program, we had repurchased 2.0 million shares of our common stock for $100 million through December 31, 2015. We have not repurchased any shares under the program since December 31, 2015.
EQUITY COMPENSATION PLAN INFORMATION
The following presents equity compensation plan information as of December 31, 2020:
Plan CategoryNumber of securities to be issued upon exercise of
outstanding options, warrants and rights
Weighted-average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity  compensation plans (excluding securities reflected
in the first column)
Equity compensation plans approved by security holders1,955,345 N/A4,488,842 
Equity compensation plans not approved by security holders— N/A— 
Total1,955,345 N/A4,488,842 
In the table above, the number of securities to be issued upon exercise of outstanding options, warrants and rights shown as of December 31, 2020 are restricted stock units and shares of restricted stock granted under our 2010 incentive plan, as amended.
As of December 31, 2020, there were: (1) no shares of Oceaneering common stock under equity compensation plans not approved by security holders available for grant; and (2) 4,488,842 shares of Oceaneering common stock under equity compensation plans approved by security holders available for grant in the form of stock options, stock appreciation rights or stock awards. We have not granted any stock options since 2005 and the Compensation Committee of our Board of Directors has expressed its intention to refrain from using stock options as a component of employee compensation for our executive officers and other employees for the foreseeable future. Additionally, our Board of Directors has expressed its intention to refrain from using stock options as a component of nonemployee director compensation for the foreseeable future. For a description of the material features of our equity compensation arrangements, see the discussion under the caption “Incentive Plan” in Note 12—“Employee Benefit Plans” in the Notes to Consolidated Financial Statements included in this report.
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PERFORMANCE GRAPH
The following graph compares our total shareholder return to the Standard & Poor's 500 Stock Index (“S&P 500”) and the PHLX Oil Service Sector Index from December 31, 2015 through December 31, 2020. The PHLX Oil Service Sector Index is designed to track the performance of a set of companies involved in the oil services sector.
It is assumed in the graph that: (1) $100 was invested in Oceaneering Common Stock, the S&P 500 and the PHLX Oil Service Sector Index on December 31, 2015; and (2) any Oceaneering dividends are reinvested. The shareholder return shown is not necessarily indicative of future performance.
oii-20201231_g2.jpg
December 31,
201520162017201820192020
Oceaneering International, Inc.100.00 77.77 59.31 33.95 41.83 22.31 
S&P 500 Index100.00 111.96 136.40 130.42 171.49 203.04 
PHLX Oil Service Sector Index100.00 118.98 98.51 53.97 53.67 31.09 



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Item 6.    Selected Financial Data.
The following table sets forth certain selected historical consolidated financial data and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operation and our Consolidated Financial Statements and Notes included in this report. The following information may not be indicative of our future operating results.
Results of Operations:
 Year Ended December 31,
(in thousands, except per share amounts)20202019201820172016
Revenue$1,827,889 $2,048,124 $1,909,482 $1,921,507 $2,271,603 
Cost of services and products1,663,948 1,949,880 1,780,256 1,726,897 1,992,376 
Gross margin163,941 98,244 129,226 194,610 279,227 
Selling, general and administrative expense195,695 214,891 198,259 183,954 208,463 
Long-lived assets impairments70,445 159,353 — — — 
Goodwill impairment343,880 14,713 76,449 — — 
Income (loss) from operations$(446,079)$(290,713)$(145,482)$10,656 $70,764 
Net income (loss)$(496,751)$(348,444)$(212,327)$166,398 $24,586 
Cash dividends declared per Share$— $— $— $0.45 $0.96 
Diluted earnings (loss) per share$(5.01)$(3.52)$(2.16)$1.68 $0.25 
Depreciation and amortization, including goodwill impairment$528,895 $263,427 $293,590 $213,519 $250,247 
Capital expenditures, including business acquisitions$60,687 $147,684 $178,038 $104,958 $142,513 
Other Financial Data:
 As of December 31,
(dollars in thousands)20202019201820172016
Working capital ratio2.68 2.07 2.52 2.72 2.48 
Working capital$733,147 $643,480 $750,148 $751,605 $754,231 
Total assets$2,045,842 $2,740,663 $2,824,998 $3,023,950 $3,130,315 
Long-term debt$805,251 $796,516 $786,580 $792,312 $793,058 
Shareholders' equity$552,094 $1,069,346 $1,409,235 $1,659,164 $1,516,643 
Goodwill as a percentage of Shareholders' equity%38 %29 %27 %29 %
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Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations.
Certain statements in this annual report on Form 10-K, including, without limitation, statements regarding the following matters, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995:
our business strategy;
industry conditions;
seasonality;
the impacts of the coronavirus (“COVID-19”) pandemic on the U.S. and global economy, as well as on our business;
our expectations about 2021 results of operations, items below the operating income line and segment operating results, and the factors underlying those expectations, including our expectations about demand and pricing for our energy services and products as a result of the factors we specify in “Overview” and “Results of Operations” below;
the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") and other tax refunds;
our backlog;
projections relating to floating rig demand and subsea tree installations;
the adequacy of our liquidity, cash flows and capital resources to support our operations and internally generated growth initiatives;
our projected capital expenditures for 2021;
our plans for future operations (including planned additions to and retirements from our remotely operated vehicle (“ROV”) fleet;
our ability and intent to redeem Angolan bonds and repatriate cash;
our expectations regarding shares that may be repurchased under our share repurchase plan;
our expectations regarding the implementation of new accounting standards and related policies, procedures and controls;
our expectations about our ROV fleet utilization in the future; and
our expectations regarding the effect of inflation in the near future.
These forward-looking statements are subject to various risks, uncertainties and assumptions, including those we refer to under the headings “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” in Part I of this report. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industries in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information.
Recent Developments Affecting Industry Conditions and Our Business
The ongoing COVID-19 outbreak, which the World Health Organization declared a pandemic and the U.S. Government declared a national emergency in March 2020, has resulted in widespread adverse impacts on the global economy and financial markets, and on our employees, customers, suppliers and other parties with whom we have business relations. We have experienced some resulting disruptions to our business operations. For example, since mid-March, we have had to restrict access to our administrative offices around the world and quarantine personnel and assets as required by various governmental authorities, our customers’ and our own safety protocols.
Our first priority in our response to this crisis has been the health and safety of our employees and those of our customers and other business counterparties. We have implemented preventative measures and developed corporate and regional response plans to minimize unnecessary risk of exposure and prevent infection, while supporting our customers’ global operations to the best of our ability in the circumstances. Our preventative measures and response plans were developed based on guidance received from the World Health Organization, Centers for Disease Control and Prevention, International SOS and our corporate medical advisor. We have modified certain business and workforce practices (including those related to employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences) and implemented new
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protocols to promote social distancing and enhance sanitary measures in our offices and facilities to conform to government restrictions and best practices encouraged by governmental and regulatory authorities.
There is considerable uncertainty regarding the extent to which COVID-19 and its variants will continue to spread, the widespread availability and efficacy of vaccines and the extent and duration of governmental and other measures implemented to try to slow the spread, such as large-scale travel bans and restrictions, border closures, quarantines, shelter-in-place orders and business and government shutdowns. Restrictions of this nature have caused, and may continue to cause, us, our suppliers and other business counterparties to experience operational delays, delays in the delivery of materials and supplies that are sourced from around the globe, and milestones or deadlines relating to various projects to be missed.
We have also received various notices from some of our suppliers and other business counterparties, and provided notices to several customers, regarding performance delays resulting from the pandemic. These actions may result in some disputes and could strain our relations with customers and others. If and to the extent these actions were to result in material modifications or cancellations of the underlying contracts, we could experience reductions in our currently reported backlog and in the anticipated conversion of backlog into revenue in future periods. In addition, worsening economic conditions could result in reductions in backlog over time, which would impact our future financial performance.
One of the impacts of the pandemic has been a significant reduction in global demand for oil and natural gas. This significant decline in demand was met with a sharp decline in oil prices following the announcement of price reductions and production increases in March 2020 by members of the Organization of Petroleum Exporting Countries ("OPEC"), and other foreign, oil-exporting countries. The resulting supply/demand imbalance has had, and is continuing to have, disruptive impacts on the oil and natural gas exploration and production industry and on other industries that serve exploration and production companies. OPEC and other foreign, oil-producing countries implemented production cuts during the second quarter and, though somewhat eased in August, extended the production cuts in the third quarter, in an effort to address the supply/demand imbalance. As a result, crude oil prices improved somewhat. However, as noted by the International Energy Agency, global crude oil demand for the full year of 2020 fell by approximately 8.8 million barrels per day compared to 2019. Recent increases in COVID-19 cases in various regions around the world and the resulting governmental and other restrictions imposed in response to those increases, have resulted in more volatility and less predictability in industry conditions. These conditions have led to significant global economic contraction generally and in our industry in particular.
Despite recent improvements in commodity prices, we expect to see continued volatility in oil and natural gas prices for the foreseeable future, which could, over the long term, adversely impact our business. A significant decline in exploration and development activities and related spending by our customers, whether due to decreases in demand or prices for oil and natural gas or otherwise, would have a material adverse effect on our business, cash flows, liquidity, financial condition and results of operations.
As of the date of this report, our efforts to respond to the challenges presented by the conditions described above and minimize the impacts to our business have yielded results, as we have largely been able to maintain operational continuity on a worldwide basis. Our manufacturing, services operations, and other operating facilities have remained operational and our vessels have continued to perform. We have moved quickly to reduce costs, increase operational efficiencies and lower our capital spending. In addition, as of December 31, 2020, we had $452 million of cash and cash equivalents on our balance sheet and our $500 million revolving credit facility was undrawn and remains available to support our operations. We have not required any loans under any COVID-19-related program, and we do not expect to have to utilize any such loans. We have experienced some increased absenteeism in our hourly workforce, but, so far, we have not experienced any resulting problems that have been unmanageable. We are continuing to address concerns to protect the health and safety of our employees and those of our customers and other business counterparties, which includes implementing changes as needed to comply with health-related guidelines as they may be modified and supplemented from time to time.
We cannot predict the full impact that COVID-19 or the significant disruption and volatility currently being experienced in the oil and natural gas markets will have on our business, cash flows, liquidity, financial condition and results of operations at this time, due to numerous uncertainties. The ultimate impacts will depend on future developments beyond our control, which are highly uncertain and cannot be predicted, including, but not limited to, the ultimate geographic spread of the virus, the efficacy of governmental and other measures designed to prevent the spread of the virus, the ongoing development and distribution of vaccines and therapeutic treatments, the duration of the pandemic, actions taken by members of OPEC and other foreign oil-exporting countries,
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governmental authorities, customers, suppliers and other thirds parties, workforce availability, and the timing and extent to which normal economic and operating conditions resume.
Overview of our Results and Guidance
The table that follows sets out our revenue and operating results for 2020, 2019 and 2018.
 Year Ended December 31,
(dollars in thousands)202020192018
Revenue$1,827,889 $2,048,124 $1,909,482 
Gross Margin163,941 98,244 129,226 
Gross Margin %%%%
Operating Income (Loss)(446,079)(290,713)(145,482)
Operating Income (Loss) %(24)%(14)%(8)%
Net Income (Loss)(496,751)(348,444)(212,327)
Our business segments are contained within two businesses - services and products provided primarily to the oil and gas industry and, to a lesser extent, the offshore renewables industry (“Energy Services and Products”) and services and products provided to non-energy industries (“Aerospace and Defense Technologies”). Our four business segments within the Energy Services and Products business are Subsea Robotics, Manufactured Products, Offshore Projects Group (“OPG”) and Integrity Management & Digital Solutions (“IMDS”). We report our Aerospace and Defense Technologies (“ADTech”) business as one segment. Unallocated Expenses are expenses not associated with a specific business segment. These consist of expenses related to our incentive and deferred compensation plans, including restricted stock and bonuses, as well as other general expenses.
Our business primarily depends on the level of spending on offshore developments and related operating activities by our customers in the energy industry. During 2020, we generated approximately 81% of our revenue from services and products we provide to the energy industry. Our results for 2020 reflect the impact of pre-tax charges of $467 million recognized during the year, most notably in the first quarter. Activity levels and operating performance within our energy segments were lower than expected. The COVID-19 pandemic negatively impacted operator investments in oil and gas projects, due to a decline in crude oil demand and pricing, and entertainment business spending, due to limited theme park attendance. Activity levels and performance within our ADTech segment met expectations for the year. Overall, our 2020 revenue decreased 11% to $1.8 billion, with revenue decreases in each of our four energy segments being partially offset by a revenue increase in our ADTech segment.
In 2020, on a consolidated level, we had a net loss of $497 million, or diluted loss of $5.01 per share, compared to net loss of $348 million, or diluted loss of $3.52 per share, in 2019. The $148 million increase in net loss as compared to 2019 was primarily attributable to pre-tax charges of $467 million recorded in 2020 for impairments, write-downs and write-offs of certain equipment, intangible assets, goodwill and inventory, and other expenses, most notably in our Subsea Robotics, Manufactured Products, OPG and IMDS segments. This compares to pre-tax charges recorded in 2019 of $252 million, for impairments, write-downs and write-offs of certain equipment, intangible assets, goodwill and inventory, and other expenses, most notably in our Subsea Robotics, OPG and IMDS segments.
We had operating losses of $446 million and $291 million, including charges of $467 million and $252 million in 2020 and 2019, respectively. More information about these charges is described below. Due to lower profit contributions for our Manufactured Products, Subsea Robotics and IMDS segments, partially offset by increased profit contributions from our OPG and ADTech segments, operating results decreased $155 million from 2019. The changes in operating results occurred in our:
Subsea Robotics segment, which had a $77 million decrease in operating results, primarily as a result of charges of $122 million in 2020 as compared to charges of $31 million in 2019. These charges were principally due to a goodwill impairment in 2020 of $102 million, largely based on market conditions and lower pricing levels. Both 2020 and 2019 charges included asset write-offs and inventory write-downs, largely resulting from impairment and obsolescence.
Manufactured Products segment, which had a $94 million decrease in operating results, primarily as a result of charges of $116 million in 2020 as compared to charges of $3.3 million in 2019. These charges in 2020 included impairments and write-downs of certain equipment of $61 million and goodwill impairments of
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$52 million, both largely based on market conditions and lower pricing levels. This compared with long-lived assets write-offs of $0.5 million and inventory write-downs of $2.1 million in 2019.
OPG segment, which had a $64 million increase in operating results, primarily as a result of decrease in charges from $168 million in 2019 to $100 million in 2020. The long-lived asset impairment charges of $161 million in 2019 were principally the result of several vessel impairments, as market conditions no longer supported the prior valuations for these assets. This compared with a goodwill impairment of $66 million and long-lived asset impairments and write-offs of $25 million in 2020.
IMDS segment, which had a $69 million decrease in operating results, primarily as a result of charges of $128 million in 2020 as compared to charges of $49 million in 2019. These charges in 2020 included a goodwill impairment of $123 million, largely based on market conditions and lower pricing levels. This compared with charges including impairments and write-offs of long-lived assets and inventory write-downs of $32 million and a goodwill impairment of $15 million in 2019.
ADTech segment, which had an $13 million increase in operating income on higher levels of revenue in both defense subsea technologies and space systems.
In 2020, 2019 and 2018 we incurred charges of $467 million, $252 million and $84 million, respectively, primarily due to market conditions that no longer supported the prior valuations. Additionally, we recognized other costs, as we adapted our geographic footprint and staffing levels to the conditions of the markets we serve, along with asset write-downs relating to the retirement of 30 ROVs from our fleet in 2019. Charges for 2020, 2019 and 2018 are summarized as follows (in thousands):
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Year Ended December 31, 2020
Subsea RoboticsManufactured ProductsOffshore Projects GroupIntegrity Management & Digital SolutionsAerospace and Defense TechnologiesUnallocated ExpensesTotal
Charges for the effects of:
Long-lived assets impairments$— $61,074 $8,826 $545 $— $— $70,445 
Long-lived assets write-offs7,328 — 16,644 170 — — 24,142 
Inventory write-downs7,038 — — — — — 7,038 
Goodwill impairment102,118 52,263 66,285 123,214 — — 343,880 
Other5,055 2,266 8,590 4,272 572 455 21,210 
Total charges$121,539 $115,603 $100,345 $128,201 $572 $455 $466,715 
Year Ended December 31, 2019 *
Subsea RoboticsManufactured ProductsOffshore Projects GroupIntegrity Management & Digital SolutionsAerospace and Defense TechnologiesUnallocated ExpensesTotal
Charges for the effects of:
Long-lived assets impairments$— $— $142,615 $16,738 $— $— $159,353 
Long-lived assets write-offs11,340 482 18,723 14,108 — — 44,653 
Inventory write-downs15,433 2,107 2,771 719 255 21,285 
Goodwill impairment— — — 14,713 — — 14,713 
Other4,228 757 3,526 3,082 102 56 11,751 
Total charges$31,001 $3,346 $167,635 $49,360 $357 $56 $251,755 
Year Ended December 31, 2018 *
Subsea RoboticsManufactured ProductsOffshore Projects GroupIntegrity Management & Digital SolutionsAerospace and Defense TechnologiesUnallocated ExpensesTotal
Charges for the effects of:
Long-lived assets write-offs$617  $1,531  $5,543  $— $— $— $7,691 
Goodwill impairment51,168 — 17,750 7,531 — — 76,449 
Total charges$51,785 $1,531 $23,293 $7,531 $ $ $84,140 
* Recast to reflect segment changes.
We expect our 2021 operating results to approximate those of 2020. Based on our backlog as of December 31, 2020 and anticipated order intake, we anticipate generally flat consolidated revenue, with higher revenue in ADTech and IMDS to offset substantially lower revenue from our Manufactured Products segment. We expect relatively flat revenue in our Subsea Robotics and OPG segments assuming no significant incremental COVID-19 impacts and generally stable oil and gas prices. We expect positive operating income contributions from each of our operating segments. Apart from seasonality, we generally view pricing and margins in the current energy markets to be stable. We anticipate improved annual operating results in our Subsea Robotics, OPG, IMDS and ADTech segments, and lower operating results in our Manufactured Products segments.
We use our ROVs to provide drilling support, vessel-based inspection, maintenance and repair, subsea hardware installation, construction, and pipeline inspection services to customers in the energy industry. Most of our ROVs have historically been used to provide drill support services. Therefore, the contracted number of floating drilling rigs is a leading market indicator for this business. The following table shows average floating rigs under contract and our ROV utilization.
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202020192018
Average number of floating rigs under contract139154148
ROV days on hire (in thousands)545852
ROV utilization59%58%51%
Demand for floating rigs is the primary leading indicator of the strength of the deepwater market. According to industry data published by IHS Petrodata, excluding rigs under construction, at the end of 2020 there were 212 floating drilling rigs in operation or available for work throughout the world, with 129 of those rigs under contract. The average contracted offshore floating rig count in 2020 declined to approximately 139 rigs.
In addition to floating rig demand, the number of subsea tree orders and installations is another leading indicator, and the primary demand driver for our Manufactured Products lines. According to data published by Rystad Energy in December 2020, there are projected to be 277 subsea tree installations in 2021, compared to 296 in 2020, 286 in 2019 and 280 in 2018.
In 2021, we expect interest expense, net of interest income, to be approximately $40 million. We do not anticipate capitalizing interest on any long-lived assets in 2021.
In 2021, our income tax payments, estimated to total between $35 million and $40 million, are expected to relate primarily to taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the profitability of such operations. These cash tax payments do not include the impact of approximately $28 million of CARES Act tax refunds expected to be received in 2021.
Results of Operations
Realignment of Reportable Segments. In the third quarter of 2020, we changed our organizational structure as part of the transformation to realign our businesses to achieve greater cost efficiencies and to bring together business units that frequently work together and promote increased synergies in bidding, project management and the use of offshore technicians. As a result, information that our chief operating decision maker regularly reviews for purposes of allocating resources and assessing performance changed. Therefore, for the year ended December 31, 2020, we are reporting our financial results consistent with our newly realigned operating segments and have recast certain prior period amounts to conform to the way we internally manage our businesses and monitor segment performance. Our new structure aligns our company around five reportable segments: (1) Subsea Robotics; (2) Manufactured Products; (3) Offshore Projects Group; (4) Integrity Management & Digital Solutions; and (5) Aerospace and Defense Technologies. Additional information on our business segments is shown in Note 11—“Operations by Business Segment and Geographic Area” in the Notes to Consolidated Financial Statements included in this report.
Energy Services and Products. The table that follows sets out revenue and profitability for the business segments within our Energy Services and Products business. In the Subsea Robotics section of the table that follows, “ROV Days Available” includes all days from the first day that an ROV is placed in service until the ROV is retired. All days in this period are considered available days, including periods when an ROV is undergoing maintenance or repairs. Our ROVs do not have scheduled maintenance or repair that requires significant time when the ROVs are not available for utilization.
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 Year ended December 31,
(dollars in thousands)
20202019 *2018 *
Subsea Robotics
Revenue$493,332 $583,652 $513,701 
Gross Margin78,952 57,601 46,151 
Gross Margin %16 %10 %%
Operating Income (Loss)(65,817)11,627 (46,572)
Operating Income (Loss)%(13)%%(9)%
ROV Days Available91,499 100,480 101,464 
ROV Days Utilized54,411 58,347 52,084 
ROV Utilization %59 %58 %51 %
Manufactured Products
Revenue477,419 498,350 431,459 
Gross Margin62,962 48,865 53,937 
Gross Margin %13 %10 %13 %
Operating Income (Loss)(88,253)5,730 14,028 
Operating Income (Loss)%(18)%%%
Backlog at end of period266,000 548,000 351,000 
Offshore Projects Group
Revenue289,127 380,966 413,598 
Gross Margin1,265 4,339 8,401 
Gross Margin %— %%%
Operating Income (Loss)(105,680)(170,013)(36,909)
Operating Income (Loss)%(37)%(45)%(9)%
Integrity Management & Digital Solutions
Revenue226,938 266,086 273,575 
Gross Margin29,772 15,361 36,652 
Gross Margin %13 %%13 %
Operating Income (Loss)(121,675)(52,527)546 
Operating Income (Loss)%(54)%(20)%— %
Total Energy Services and Products
Revenue$1,486,816 $1,729,054 $1,632,333 
Gross Margin172,951 126,166 145,141 
Gross Margin %12 %%%
Operating Income (Loss)(381,425)(205,183)(68,907)
Operating Income (Loss)%(26)%(12)%(4)%
* Recast to reflect segment changes.
Subsea Robotics. Historically, we built new ROVs to increase the size of our fleet in response to demand to support deepwater drilling and vessel-based IMR and installation work. These vehicles are designed for use around the world in water depths of 10,000 feet or more. In 2015, as a result of declining market conditions, we began building fewer ROVs, generally limiting additions to meet contractual commitments. We added three, 13 and six ROVs in 2020, 2019 and 2018, respectively, while retiring 51 units over the three-year period. Our ROV fleet size was 250 as of December 31, 2020 and 2019, and 275 as of December 31, 2018. We have decreased our ROV fleet size since 2015 in response to lower market demand.
We believe we are the world's largest provider of ROV services and, generally, this business segment has been the largest contributor to our Energy Services and Products business operating income. Our Subsea Robotics segment revenue reflects the utilization percentages, fleet sizes and average pricing in the respective periods. Our survey
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services business provides survey and positioning, and geoscience services. The following table presents revenue from ROV services as a percentage of total Subsea Robotics revenue:
Year Ended December 31,
 
2020
2019 *
2018 *
ROV
81 %77 %77%
Other
19 %23 %23%
* Recast to reflect segment changes.
For the year ended December 31, 2020, our Subsea Robotics operating income decreased as compared to 2019, primarily due to charges of $122 million and $31 million for the years ended December 31, 2020 and 2019, respectively, for goodwill impairment, write-downs and write-offs of certain equipment, intangible assets and inventory, and other expenses. Exclusive of those charges, Subsea Robotics operating income for the year ended December 31, 2020 increased as compared to the corresponding period of the prior year on higher margins and improved cost controls. We had a 7% decrease in days on hire and year-over-year decreases in both drill support and vessel support days. Dayrates and costs per days on hire decreased on a slight increase in utilization.
For the year ended December 31, 2019, our Subsea Robotics operating income increased compared to 2018. We generated higher revenue, due to a 12% increase in days on hire and year-over-year increases in both drill support and vessel support days. Both dayrates and costs per days on hire increased slightly on increased utilization. The operational benefits of this increased activity were offset by $31 million of charges for write-downs and write-offs of certain equipment, intangible assets, inventory, and other expenses. 2018 operating results included $52 million of charges primarily for goodwill impairment.
For our Subsea Robotics in 2021, we expect improved results based on essentially flat ROV days on hire with higher vessel-based service days balancing a decline in drill support days, minor shifts in geographic mix and generally stable pricing. Results for tooling-based services are expected to be flat, with activity levels generally following ROV days on hire. Survey operating results are expected to improve on higher geoscience activity. We project fewer installations and demobilizations in 2021, which should lower operating costs as compared to 2020. Our overall ROV fleet utilization is expected to be in the mid- to high-50% range for the full year of 2021, with higher seasonal activity during the second and third quarters. Subject to quarterly variances, we continue to expect our drill support market share to generally approximate 60%.
Manufactured Products. For the year ended December 31, 2020, our Manufactured Products operating results decreased, as compared to 2019, primarily due to charges in 2020 of $116 million for asset and goodwill impairments, and other expenses as compared to $3.3 million of charges in 2019 for write-offs of certain equipment, intangible assets and inventory, and other expenses. Exclusive of charges, Manufactured Products adjusted operating income for the year ended December 31, 2020 increased as compared to the corresponding period of the prior year. Our energy-related businesses year over year had increased volume and operating margins due to better execution and improved operating efficiencies. Our mobility solutions businesses had significantly less volume and lower operating margins as a result of declines in activity attributable to the COVID-19 pandemic.
For the year ended December 31, 2019, our Manufactured Products operating results decreased, on higher revenue as compared to 2018, as a result of an increase in subsea umbilical and hardware awards and related throughput, partially offset by lower revenue and operating results from our mobility solutions businesses. Operating results in 2019 and 2018 were partially offset by $3.3 million and $1.5 million, respectively, of charges for write-offs of certain equipment and inventory, and other expenses.
We expect our Manufactured Products segment operating results in 2021 to decline, primarily as a result of the decreased order intake in our energy businesses during 2020. We continue to closely monitor the impact of the COVID-19 pandemic on our mobility solutions businesses, and currently expect to see marginally higher activity and contribution from these businesses in 2021. Our Manufactured Products backlog was $266 million as of December 31, 2020, a $282 million, or 51%, decrease over December 31, 2019.
Offshore Projects Group. Our OPG operating results for the year ended December 31, 2020 increased as compared to 2019 primarily due to decreased charges in 2020 of $100 million for vessel and other asset impairments and write-offs, goodwill impairment, and other charges as compared to 2019 charges of $168 million for vessel and intangible impairments, write-downs and write-offs of certain equipment and inventory, and other
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expenses. Exclusive of those charges, our OPG operating results were lower for the year ended December 31, 2020, as compared to the prior year, on lower revenue due to reduced activity levels in the areas of IMR, decommissioning and intervention services.
Our OPG operating results for the year ended December 31, 2019 decreased on lower revenue as compared to 2018 primarily due to 2019 charges of $168 million for vessel and intangible impairments, write-downs and write-offs of certain equipment and inventory, and other expenses. This segment's 2018 results included charges of $23 million related to goodwill impairment and write-offs of obsolete equipment and intangible assets associated with exiting the land survey business.
In 2021, we expect operating results for our OPG segment to improve, on generally stable offshore activity and margins as compared to the last half of 2020. Operating results are expected to improve largely due to the efficiency and cost improvement measures implemented in 2020 and improved year-over-year contribution from our Angola riserless light well intervention campaign. Vessel day rates remain competitive but stable, and we expect to see opportunities for pricing improvements during periods of higher activity. We also anticipate reduced charter obligations and increased flexibility on third-party vessels combined with an overall improvement in fleet utilization.
Integrity Management & Digital Solutions. For the year ended December 31, 2020, compared to 2019, our IMDS operating results were lower primarily due to 2020 charges of $128 million for goodwill impairment, asset impairment and write-offs, and other expenses as compared to 2019 charges of $49 million for goodwill and asset impairments, write-downs and write-offs of certain equipment, intangible assets and inventory, and other expenses. Exclusive of those charges, operating results for the year ended December 31, 2020 were higher, as compared to the prior year, due to improved operating efficiencies instituted in the fourth quarter of 2019 and in the first three quarters of 2020.
For the year ended December 31, 2019, compared to 2018, our IMDS operating results were lower, primarily due to 2019 charges of $49 million for goodwill and asset impairments, write-downs and write-offs of certain equipment, intangible assets and inventory, and other expenses. 2018 operating income included charges of $7.5 million for write-down of intangible assets.
We anticipate our 2021 operating results for IMDS to improve on higher revenue, with operating income margins averaging in the high-single digit range for the year as compared to 2020. Good order intake at the end of 2020 is expected to begin benefiting the business in the second quarter of 2021.
Aerospace and Defense Technologies.
Revenue, gross margin and operating income information for our ADTech segment are as follows:
 Year ended December 31,
(dollars in thousands)20202019 *2018 *
Revenue$341,073 $319,070 $277,149 
Gross Margin71,794 60,462 51,045 
Gross Margin %21 %19 %18 %
Operating Income56,023 42,574 32,734 
Operating Income %16 %13 %12 %
* Recast to reflect segment changes.

For the year ended December 31, 2020, compared to 2019, our ADTech segment operating results were higher on higher levels of revenue due to increased activity in both defense subsea technologies and space systems.
For the year ended December 31, 2019, compared to 2018, our ADTech segment operating results were higher on higher levels of revenue.
We project our ADTech 2021 revenue to be higher, producing improved results with operating income margins consistent with those achieved in 2020. Growth in this segment is expected to be broad-based, with revenue growth in our government-focused businesses.
Unallocated Expenses. Our unallocated expenses, (i.e., those not associated with a specific business segment), within gross margin consist of expenses related to our incentive and deferred compensation plans, including
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restricted stock units, performance units and bonuses, as well as other general expenses. Our unallocated expenses within operating expenses consist of those expenses within gross margin plus general and administrative expenses related to corporate functions.
The following table sets forth our unallocated expenses for the periods indicated:
 Year ended December 31,
(dollars in thousands)202020192018
Gross margin expenses$(80,804)$(88,384)$(66,960)
% of revenue%%%
Operating expenses(120,677)(128,104)(109,309)
% of revenue%%%
Our unallocated expenses for the year ended December 31, 2020 decreased compared to 2019, primarily as a result of reduced accruals in 2020 for incentive-based compensation.
Our unallocated expenses for the year ended December 31, 2019 increased compared to 2018, primarily due to higher 2019 expenses related to both short- and long-term performance based incentive compensation expense.
We anticipate unallocated expenses in 2021 to average in the low- to mid-$30 million range per quarter, as we forecast higher accrual rates for projected short- and long-term performance-based incentive compensation expense, as compared to 2020.
Other. The following table sets forth our significant financial statement items below the income (loss) from operations line:
 Year ended December 31,
(dollars in thousands)202020192018
Interest income$3,083 $7,893 $9,962 
Interest expense, net of amounts capitalized(43,900)(42,711)(37,742)
Equity earnings (loss) of unconsolidated affiliates2,268 1,331 (3,783)
Other income (expense), net(14,269)(6,621)(8,788)
Provision (benefit) for income taxes(2,146)17,623 26,494 
Interest income for the year ended December 31, 2020 decreased as compared to 2019, primarily due to lower interest rates. Interest income for the year ended December 31, 2019 decreased as compared to 2018, primarily due to lower amounts held in Angolan bonds in 2019.
Interest expense increased for the year ended December 31, 2020 compared to 2019, and for the year ended December 31, 2019 compared to 2018, due to a decrease in our capitalized interest. We capitalized none, $3.4 million, and $7.3 million of interest in 2020, 2019 and 2018, respectively, associated with the new-build vessel, the Ocean Evolution, described under “Liquidity and Capital Resources” below.
In addition to interest on borrowings, interest expense includes amortization of loan costs and hedge accounting adjustments, fees for lender commitments under our revolving credit agreement and fees for standby letters of credit and bank guarantees that banks issue on our behalf for performance bonds, bid bonds and self-insurance requirements.
In 2021, we expect interest expense, net of interest income, to be approximately $40 million. We do not anticipate capitalizing interest on any long-lived assets in 2021.
Included in other income (expense), net are foreign currency transaction losses of $14 million, $6.3 million, and $18 million for 2020, 2019 and 2018, respectively. The currency losses in 2020 primarily related to the Angolan kwanza and Brazilian real. Foreign currency losses in 2020 related to the Angolan kwanza were primarily due to declining exchange rates for the Angolan kwanza, which devalued its currency by 36%. Foreign currency losses in 2020 related to the Brazilian real were primarily due to the remeasurement of our U.S. dollar denominated liability balances to the Brazilian real. The currency losses in 2019 and 2018 primarily related to declining exchange rates for the Angolan kwanza, which devalued its currency by 55% and 46% in 2019 and 2018, respectively. We could incur further foreign currency exchange losses in Angolan kwanza, the Brazilian real and other currencies, if currency devaluations occur.
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In 2018, other income (expense), net also included a pre-tax gain of $9.3 million resulting from the sale of our cost method investment in ASV Global, LLC in September 2018. The total consideration from the sale was $15 million.
Our tax provision is based on (1) our earnings for the period and other factors affecting the tax provision and (2) the operations of foreign branches and subsidiaries that are subject to local income and withholding taxes. Factors that affect our tax rate include our profitability levels in general and the geographic mix in the sources of our results. The effective tax rate for the 12-month periods ended December 31, 2020 and 2019 was different than the U.S. federal statutory rate of 21%, primarily due to the 2020 enactment of the U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act"), the geographic mix of operating revenue and results, and changes in uncertain tax positions and other discrete items. Therefore, we do not believe a discussion of the annual effective tax rate is meaningful. We continue to make an assertion to indefinitely reinvest the unrepatriated earnings of any foreign subsidiary that would incur incremental tax consequences upon the distribution of such earnings.
On March 27, 2020, the CARES Act was signed into law in the United States. In accordance with the recently established rules and procedures under the CARES Act, we filed a 2014 refund claim to carry back our U.S. net operating loss generated in 2019 and amended our 2012 and 2013 federal income tax returns impacted by the net operating loss carryback. Prior to enactment of the CARES Act, such net operating losses could only be carried forward. As a result, we expect to receive combined refunds of approximately $33 million, of which we have received $5.6 million as of December 31, 2020. The remaining refunds are classified as accounts receivable, net, in our consolidated balance sheet as of December 31, 2020. We also realized a non-cash tax benefit of $8.4 million due to the carryback provision of the CARES Act recognized as a reduction in long-term liabilities.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was enacted, most notably reducing the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018, and creating a quasi-territorial tax system with a one-time mandatory transition tax on applicable previously-deferred earnings of foreign subsidiaries. In 2018, based on regulations issued by the U.S. Department of the Treasury and additional accounting analysis, we reflected the effects of the Tax Act in our financial statements to include the tax impact of $8.8 million related to the one-time mandatory transition tax. In 2019, we identified additional available business credits, which are reflected in our 2018 income tax return as filed, thereby reducing the effects of the Tax Act in our financial statements by $8.2 million, for a total liability of $0.6 million.
We determined it was more likely than not that we would not be able to utilize our remaining unvalued deferred tax assets. In accordance with applicable accounting standards, we recorded an increase in income tax expense of $315 million and $74 million in 2020 and 2019, respectively, related to the establishment of a valuation allowance on those deferred tax assets.
In 2021, our income tax payments, estimated to total between $35 million and $40 million, are expected to relate primarily to taxes incurred in countries that impose tax on the basis of in-country revenue, without regard to the profitability of such operations. These cash tax payments do not include the impact of approximately $28 million of CARES Act tax refunds expected to be received in 2021.

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Liquidity and Capital Resources
We consider our liquidity and capital resources adequate to support our operations and growth initiatives. As of December 31, 2020, we had working capital of $733 million, including cash and cash equivalents of $452 million. Additionally, we had $500 million available through our revolving credit facility under a credit agreement further described below.
Our nearest maturity of indebtedness is our $500 million of 2024 Notes (as defined below) due in November 2024. Given that the 2024 Notes are currently trading at a market discount to principal amount, we may, from time to time, complete limited repurchases of the 2024 Notes, via open-market or privately negotiated repurchase transactions or otherwise, prior to their maturity date. We can provide no assurances as to the timing of any such repurchases or whether we will complete any such repurchases at all. We do not intend to disclose further information regarding any such repurchase transactions, except to the extent required in our subsequent periodic filings on Forms 10-K or 10-Q, or unless otherwise required by applicable law.
Cash flows for the years ended December 31, 2020, 2019 and 2018 are summarized as follows:
Year ended December 31,
(in thousands)202020192018
Changes in Cash:
Net Cash Provided by Operating Activities$136,647 $157,569 $36,567 
Net Cash Used in Investing Activities(52,590)(134,787)(98,842)
Net Cash Used in Financing Activities(1,699)(2,299)(5,628)
Effect of exchange rates on cash(3,997)(1,087)(8,154)
Net Increase (Decrease) in Cash and Cash Equivalents$78,361 $19,396 $(76,057)
Operating activities
Our principal source of cash from operating activities is our net income (loss), adjusted for noncash items. Our primary sources and uses of cash flows from operating activities for the years ended December 31, 2020, 2019 and 2018 are as follows:
Year ended December 31,
(in thousands)202020192018
Cash Flows from Operating Activities:
Net income (loss)$(496,751)$(348,444)$(212,327)
Noncash adjustments:
Depreciation and amortization, including goodwill impairment528,895 263,427 293,590 
Loss on impairment of long-lived assets70,445 159,353 — 
Deferred income tax provision (benefit)(4,158)