Q1 2021 Oceaneering International Inc Earnings Call
My name is Tabitha and I'll be your conference operator, I would like to welcome everyone to the Oceaneering first quarter 2021 earnings conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period with that I will now turn the call over to Mark Petersen Oceaneering, Vice President of corporate development and Investor Relations.
Thank you talked about.
Morning, everyone and welcome to Oceaneering first quarter 2021 of the results conference call today's call be available promotion of this website.
Joining us on the call today are Rod Larson, President and Chief Executive Officer, who will be providing our prepared comments and Alan Curtis Senior Vice President Financial Officer.
Before we begin I would just like to remind participants that statements. We make during the course of this call regarding <unk> and our future financial performance business strategy plans for future operations and industry conditions are forward looking statements made pursuant to the safe Harbor provisions of the private Securities litigation.
And Reform Act of 1995, our comments today also include non-GAAP financial measures additional details and reconciliations to the most recent directly comparable GAAP financial measures can be found in our first quarter press release, we welcome your questions. After the prepared statements.
I will now turn the call over to Rod.
Thanks, Mark and good morning, everybody. Thanks for joining the call today.
We're pleased to be sharing with you today, our first quarter 2021 results, which reflect another quarter of operating discipline and incremental efficiency gains while significant challenges remain with regard to the capable of COVID-19 confidence is returning to the markets as demonstrated by increasing demand and with continued OPEC plus discipline has created more stable industry.
And the metals, thereby supporting the expectation of increasing levels of activity for most of our traditional services and products over the next several years.
Today I'll focus my comments on our performance for the first quarter of 2021.
Our consolidated and business segment outlook for the second quarter of two of them.
2021 and our.
And proved consolidated 2021 outlook as well as thoughts on how we're supporting our customers with their lower carbon and energy transition needs and efforts.
Now for the results.
For the first quarter, we reported a net loss of $9 $4 million or <unk> <unk> per share on revenue of $438 million. These results included the impact of $3 2 million of pre tax adjustments associated with restructuring and other expenses and foreign exchange losses recognized during the quarter.
Adjusted net income was $2 $8 million or <unk> <unk> per share.
We've continued to improve our operating performance by driving operational efficiency led by focusing on safety quality and value based solutions for our customers.
I am pleased with the rate of progress made during the first quarter 2021, which enabled each of our operating segments to generate positive adjusted operating income and adjusted EBITDA and our adjusted consolidated EBITDA of $52 8 million.
Cash flow and our guidance and published consensus estimates.
Based on our first quarter results and revised outlook, we are narrowing of our expected adjusted EBITDA range to $180 million to $210 million for 2021.
Now, let's look at our business operations by segment for the first quarter of 2021.
Subsea robotics or SSR adjusted operating income was flat on slightly higher revenue or SSR quarterly adjusted EBITDA margin of 32% and was consistent with recent prior quarters as pricing remains stable.
Operating activity and our SSR segment exceeded our original expectation due to higher than forecast and row drill support days and survey activity.
The revenue split between our remotely operated vehicle of Aro business, and our combined tooling and survey of businesses as a percentage of our total SSR revenue was 78% and 22% respectively compared to the 80 20 split and the immediate prior quarter.
As we had anticipated our <unk> days on hire declined as compared to the fourth quarter due to expected lower seasonal activity days on hire were 11887 as compared to $12 456 during the fourth quarter of 2020, with an increase and drill support days on hire only slightly offsetting the decline.
And vessel based services days.
Our fleet use was 64% and drill support and 36% and vessel based services versus fourth quarter fleet use of 60% and 40% respectively.
For the first quarter, we maintained our fleet count of 250, <unk> systems, and our fleet utilization was 53% down slightly from 54% and the fourth quarter of 2020 <unk>.
Average <unk> revenue per day on hire of set.
Seven $874 was 7% over $7325 achieved during the fourth quarter.
The sequential increase and revenue per day, and higher was primarily due to favorable geographic mix and higher mandate of associated with certain work Scopes for example, installation and reactivation activities overall, we continue to characterize pricing as stable.
At the end of March we had RV contracts on 78 of the 135 floating rigs under contract or 58% flat with 58% of December 31, 2020, when we had RMB contracts on 75 of the 129 floating rigs under contract.
The quarterly variances, we continue to expect our drill support market share two of generally approximate 60%.
Turning to manufactured products.
Our first quarter 2021, adjusted operating income declined as expected from the fourth quarter on lower segment revenue and.
Adjusted operating income margin decreased to 4% and the first quarter of 2021 from 9% and the fourth quarter of 2020, which had benefited from favorable contract Closeouts and negotiated supply chain savings that did not occur and the first quarter active.
The activity in our mobility solutions business has remained weak during the first quarter of 2021.
Our manufactured products backlog at March 31, 2021 was $248 million compared to our December 31, 2020 backlog of $266 million, our book to Bill ratio was <unk> six for the.
And so as compared with a book to Bill ratio of <unk> four for the year ended December 31 2020.
Offshore projects group of LPG first quarter 2021, adjusted operating income increased on substantially higher revenue.
Revenue benefited from the startup of field activities on the rise of <unk> light well intervention project and Angola.
The sequential increase and adjusted operating income margin from 2% and the fourth quarter of 2020% to 10% and the first quarter of 2021 was due to increased utilization of assets and personnel, while holding indirect cost stable.
The Gulf of Mexico, or gum activity during the first relatively flat with the fourth quarter of 2020 as higher amounts of installation work were offset by lower amounts of intervention maintenance and repair or <unk> work.
For integrity management, and digital solutions or <unk>.
First quarter 2021, adjusted operating income was higher than fourth quarter of 2020 on flat revenue.
The improvement and adjusted operating income margin from 3% and the fourth quarter of 2022, 5% and the first quarter of 2021 and benefited from the New Inc. Transformation of how and where work is performed which is driving more effective use of personnel.
Our aerospace and defense technologies or AD Tech first quarter 2021, adjusted operating income marginally improved from the fourth quarter on 20 of 2020 on flat revenue.
Adjusted operating income margin of 19% was consistent with that achieved for the fourth quarter of 2020.
Unallocated expenses of $31 $7 million were lower as compared to the fourth quarter.
During the first quarter, we utilized $1 $7 million of cash and operating activities as the annual payment of accrued employee incentive awards related to the attainment of specific performance goals and prior periods was mostly offset by good operating performance and addition, $10 $7 million of cash.
Cash was used for maintenance and growth capital expenditures. These two items were the largest contributors to our $9 $3 million cash reduction during the quarter.
And at the end of the quarter, we had $443 million of cash and cash equivalents no borrowings under our $500 million revolving credit facility and no loan maturities until November 2024.
Now I will address our outlook for the second quarter of 2021.
On a consolidated basis, we expect our second quarter 2021 results to improve with adjusted EBITDA and the range of $55 million to $60 million on sequentially higher revenue.
For our second quarter 2021 operations by segment as compared to the first quarter 2021, we anticipate.
And for SSR, we are projecting higher seasonal activity and our RV survey and tooling businesses to drive higher operating profitability.
<unk> days on hire of expected to increase and both drill support and vessel based activities.
Our adjusted EBITDA margin is forecast to remain consistent as compared to the first quarter.
For manufactured products, we anticipate lower revenue and operating profitability. We are encouraged by recent award activity and our energy products business. However, we continue to expect muted activity and our mobility solutions businesses.
For <unk>, we anticipate higher revenue and adjusted operating results, we expect of seasonal pickup and <unk> activity and the Gulf of Mexico and in addition work on the riser lifts light well intervention project in Angola is expected to continue through the second quarter.
And for India.
Higher revenue and relatively flat operating results with operating margins being relatively consistent with the first quarter of 2021.
Per AD Tech, we expect higher revenue and relatively flat operating results, we expect to change and project mix with growth in engineering and operational and submarine repair services from the U S Navy and lower contribution from our space business.
Unallocated expenses are expected to be and the low to mid $30 million range.
Yes.
Directionally per our full year 2021 operations by segment as compared to 2020, we expect for SSR, We expect adjusted operating results to improve on slightly higher revenue.
The <unk> days on hire are projected to remain relatively flat with some minor shifts and geographic mix results for tooling based services are expected to be flat with activity levels generally following the <unk> days on hire.
Results are expected to improve and higher levels of activity SSR forecasted adjusted EBITDA margins are expected to remain consistent with those achieved in 2020.
For the Rovs, we expect our 2020 service mix of 62% drill support and 38% vessel based services to generally remain the same for 2021 with higher vessel based percentages during the seasonally higher second and third quarters.
We estimate overall RV fleet utilization to be in the mid to high 50% range again with higher seasonal activity during the second and third quarters.
We continue to forecast that our market share from the drill support market will remain and the 60% range for the foreseeable future.
As of March 31, 2021, there were approximately 14 oceaneering rovs onboard 13 floating drilling rigs with contract terms expiring before the third quarter. During the same period, we expect 35 of our Rovs on 29 floating rigs to begin new contracts.
The manufactured products, we expect segment revenue and adjusted operating performance to decline year over year, primarily as a result of the decreased order intake and our energy businesses during 2020.
We are encouraged however, with over $135 million and contract wins during the first four months of 2021, which is expected to drive increased activity and the second half of 2021.
We continue to see marginally higher activity and contribution from our mobility solutions businesses in 2021, but order activity is expected to remain muted until 2022.
We forecast that our operating income margins will be and the low to mid single digit range for the year and segment book to Bill ratio will be and the range of one one to one five for the full year.
For <unk>, we expect a meaningful improvement and adjusted operating results on higher revenue the biggest contributor to the expected increase in activity and this segment is the resumption of business to a more normalized level, which was adversely impacted in 2020 due to uncertainty and low oil prices coupled with the impacts of COVID-19 most.
Noticeably the rise of <unk> light well intervention project in Angola, which was delayed and 2020 is expected to continue through the second quarter of 2021.
And based on a more stable and higher oil price, we expect the seasonal pickup and <unk> activity and the Gulf of Mexico, which was muted in 2020.
Utilization of our vessels, both owned and chartered has improved to the point that may lead us to enter into spot charters on and as needed basis. This year.
As has been the case over the past several years much of our Gulf of Mexico work continues to be callout and nature, and therefore sensitive the current oil price.
For the MBS, we expect an increase in revenue and adjusted operating income, we expect higher revenue and the back half of the year as we work on incremental contracts booked during the fourth quarter of 2020, and the first quarter of 2021 ramp up.
We forecast that our adjusted operating income margin will increase throughout the year as we continue to drive more efficiency of this business.
Adjusted operating margins are expected to average in the high single digit range for the year.
And operating results.
And operating results with operating income margins consistent with those achieved in 2020.
We continue to see good growth opportunities and our subsea defense technologies business.
And we were disappointed that the dynamics team did not win the recently announced human landing system contract with NASA.
Lots of potential.
To work on this project does not change our overall expectations per segment improvement in 2021.
Our estimated organic capital expenditure total for 2021 remains between 50 and $70 million.
And this includes approximately $35 million to $40 million of maintenance capital expenditures and $15 million to $30 million of growth capital expenditures.
Sure.
We forecast, our 2021 income tax payments to be and the range of 40% to $45 million. In addition, we expect to receive cares act tax refunds of $28 million during the year unallocated.
<unk> expenses are expected to average and the low to mid $30 million range.
Now turning to our balance sheet with $443 million of cash at the end of March and and the expectation of generating 2021 free cash flow and excess of that generated in 2020, we are well positioned to address our 2024 debt maturity.
We continue to actively review the situation to formulate our strategy on how and when we will address this pending maturity.
And as a reminder, we continue to have four of $500 million Undrawn revolver available to us until November 2021, and $450 million available until January 2023.
And now I would like to make a few comments on how we are enabling necessary changes and the energy industry.
The continued expected energy demand increase will open up numerous opportunities for companies focused on delivering the cleanest safest forms of energy on a reliable and sustainable basis throughout the whole supply chain.
There are inherent challenges with each form of energy, but is oceaneering has done throughout 50 plus years, we will continue to adapt and lead the.
And the past few years, we've made significant strides and developing enabling technologies to assist our customers and attaining their stated net neutral carbon growth such as from.
The remote piloting and machine vision and machine learning applications commercialization.
Commercialization of our Liberty and interest class robotic vehicles the.
The development of the soon to be commercial freedom robotic vehicle.
Facility footprint optimization and more efficient facilities.
Transforming the manner, and how and where we work.
Focusing integrity management and digital solutions of our MBS on digital and software enabled predictive analytical models and <unk>.
And of our recent Jones Act vessel outfitted with the most fuel efficient engines and Additionally, we're leveraging all of these capabilities and growing our government based and other non energy businesses just to name a few items.
Most if not all of these play an important role in assisting our customers and achieving their stated carbon goals, especially as it is related work and developing and maintaining their offshore assets, regardless of whether the energy. They are producing comes from oil and gas wind or hydrogen IMD.
<unk> also plays a pivotal role in maintaining our customers' onshore facilities.
As you can see we are continuing to evolve to support our customers and societies clean energy goals.
In summary.
Our first quarter performance and refreshed outlook for the year give us confidence to narrow our 2021 adjusted EBITDA guidance to a range of one of $180 million to $210 million.
The general macro environment for our energy businesses has improved and we're cautiously optimistic that activity levels will also improve and the back half of this year and in 2022, assuming that the commodity price remains sufficiently strong and stable.
Growing our business profitably remains a primary focus for us and we're continually looking for ways to demonstrate the quality of our services and products, while increasing the value proposition for our customers.
I am proud of the resiliency that our management and employees have shown and navigating navigating the changes and challenges of the past several years.
Despite these challenges we have strengthened our service and product offerings and balance sheet to position the company to succeed and the evolving market environments.
And I would also like to recognize the notion of Eric who has left an indelible footprint on oceaneering.
As many of you have seen John Haugh will be rolling off.
Of our board of directors in May and will be succeeded by Jay Collins as chairman of the board John's leadership and vision helped transform us into the respected and recognized services and product leadership company. We are today never compromising on safety and always committed to increasing the net wealth of our shareholders. Thank you John.
And the final reminder, our focus continues to be generating positive free cash flow and 2021, maintaining our strong liquidity position and improving our returns.
We appreciate everyone's continued interest and oceaneering and will now be happy to take any questions you might have.
At this time of your like Todd The question simply press Star one on your telephone keypad.
The first question comes from the line of Mike Sabella with Bank of America.
Hey, good morning, everyone.
And Mike.
Good morning, and so I was wondering if you could maybe just talk just kind.
A little bit on the guide.
And narrowing the range of like bringing up the bottom and.
But if we just kind of look at the second half and take what what you all did and <unk> and <unk> guide.
It looks like the bottom of the range Mike you.
And you might imply kind of a step down from where we are today can you just talk us through some of the things that could potentially bring.
Bringing it to the bottom end of that under the end of the range and you know kind of how we should be thinking about that.
Yes, I think we're really and Mike.
It's not really of new story, I guess, I and Theres, a couple of new things, but first of all.
And the standard stuff the callout work and the Gulf of Mexico of something were to happen and of course, we have seen so far everything has been going well with permitting and work getting done and the Gulf of Mexico, but with the administration. We we take a cautious look at that make sure that our customers can continue working but as long as that happens and we've got a good a good commodity price I think.
See good activity so while that that's out there is a possibility I think we do feel good that that activity will stay strong the.
Other thing that we're looking at is how much can we put into the plants.
And we've got the umbilical plants, which generally have a longer lead time and manufactured products, but we've also got the other businesses Greylock and particular the connector businesses.
And they can do of fast return. So if we can get more and more throughput there that day.
And again brings us up so theres a little bit of there is a little bit of risk weighting, there, but and then just generally and.
Again kind of going back to some of the same old story is we've got some big deliveries.
From manufactured products and the back half of the year and we just need to make sure that the customers are ready to take those on and I think I'm not questioning whether or not we can get that out of it.
And it's just what happens with new are finished so we got we got some fourth quarter of the stuff going there and of course, just the total level of activity in Q3, and I think thats that should give you a pretty good feel for where we see the uncertainty at least in the back half of the year.
I would call it more to the upside maybe than the downside but.
But those are the those are the variables Alan would you add anything.
No I think it's just really the uncertainty.
Right now, we certainly see a stable oil price.
Benefiting us.
Should something happen and we've talked about OPEC plus the ability that's really brought to the markets that's something that and.
And the event something change like we saw last year, whether it's COVID-19 or OPEC plus that.
And that could drive markets down and.
And some of those things that we traditionally say move the fastest typically our LPG business would be impacted if that was the case so.
And we see the continued.
Ability and net price.
And with what I think.
And looking more towards the upper end.
Got it understood and then if we could just kind of switch gears and maybe maybe just the longer term question around subsea robotics margins.
And we don't have a whole lot of history to go off of given the re segmentation last year.
Yeah, all right now are kind of.
And we're sort of sort of near where the orders so far.
If we think about that segment sort of longer term.
And where can margins get to and subsea robotics.
He is more normal new units.
And the medium term for that segment.
I think the a lot of the upside the I don't think comes from some big strong.
Market, driven rebound, where there's scarcity and prices moved up I Wouldnt look for big movement, there I'd look for incremental improvements with technology and <unk>.
As we start to offer more of the differentiated products like <unk> like <unk>.
And freedom and and more survey work and the mix I think those are the things are going to drive margins up and but it's not going to be wild swings like like when the rigs were scarce and Rovs were scarce. Thank you watch the technology improvements I think that's what's delivering value for our customers and it's and it's not just on the net.
Just on the down Manning and some of the other things that we see from those products or available vessel days.
Theres, a carbon and say here thats really important to think about with Liberty and freedom, where we can offer our customers. The solution that really does reduce their carbon footprint and and if youre if youre buying carbon credits to offset that that has a real financial value. So I think that's where I see the changes happening, but those are slow steady changes theyre not.
Theyre not some whipsaw market kind of thing that I'd be looking for.
Understood. Thanks, everyone.
Thanks, Mike.
The next question comes from the line of Ian Macpherson with Simmons.
Thanks, Good morning, Rod good morning, Ian.
And ill repeat the same question around the potential conservatism with the <unk>.
Guidance.
And debate.
Exclude the possibility that the the world relapses that and your base case.
Not that one.
What else besides the lwr contracts expiring in Q2.
What else is the and rvs.
And the second half versus the first half I just don't see it and then any of the segments, maybe a little bit and products, but.
The follow up on that point.
And you know our story really well so I'll just say the last couple of years, we had some nice long season work.
The.
All of it was hurricane activity and others that drove some <unk> work from third quarter to fourth quarter and gave us the back half of it is just stronger with the longer season.
It was kind of unique to the last couple of years, we havent seen that every time.
It's about about how much fourth quarter activity will have so that's the that's probably the biggest thing when you're trying to compare year over year and Youre looking at that I would just say and we're gonna have to see if we get it.
The benefits and along.
Along with a strong steady oil price right and that's another thing of more stable oil price could also help us from the back half of the year, but we're going to have to see how that plays out. So we are we are being cautious and you kind of pick the right side.
So really really focus on OTT is the biggest wildcard that I'll LPG and subsidy of robotics due to the same extent because they get that they get that boost from from weather and seasonality and just some of the same work that LPG does also affects them, especially here in the Gulf.
Okay. Okay.
Caught your press release recently on the Jan through April of orders and.
And products of $1 35.
I, either misheard or with confused by your comment and the prepared remarks on book to Bill per products for this year, if I could ask for a repeat on that sorry.
Yes, we guided two of one one to one five for the full year.
Book to Bill.
Okay.
So quite quite an acceleration there from true.
Mailing order rates.
And one thing you continue to see and it's a.
A lot of these awards are very lumpy.
<unk>.
We continue to see our customers.
Congrats with the <unk>.
A couple of these are pretty substantial and in nature. So.
And when we get the bigger awards Thats when Youll see the inflection point yet.
Okay.
Thanks, Alan and thanks, Rob.
Got it.
The next question from the line of Tyler Thanks, Sharon.
And I had hoped.
Hey, good morning, and thank you that the.
Manufactured products and where is it and you talked about are obviously really encouraging to see and and just more broadly and your deepwater oriented segments could you help us think about where youre seeing the most shots on goal as we progressed through 2021, it feels like Brazil and probably.
At the top.
Right spot right now and Thats likely to continue but are you seeing any any sort of green shoots activity and other regions around the world like free.
Particularly west Africa, and even in the Gulf of Mexico from a deepwater activity perspective.
I would say, yes, we see.
And one thing is the Norwegian Continental shelf continues to be pretty steady. So thats been good of projects there have been have been holding and green shoots.
Things that Spike out, obviously, you said, Brazil, but Latin America I mean the.
The northern Latin and the Northern South America up and Guyana and.
And that can continue continues to be a very positive thing.
Thinking about the whole Gulf for example.
There is the energy reform has been strong and there's been good things happening in both Mexico and the United States. So I would think about some of the projects that are happening there.
So west Africa, as there's good things happen.
What I would call just all of Africa.
And we've got we've got some some things going there, but again there is there are some challenges and Africa. So I kind of all the you take the puts and takes it's hard to say that as an overall, it's it's going to be really strong I would say, it's more of the more of the other places that we talked about.
And you've probably caught at the Lake.
The sales force measure and Mozambique is they've got to get some things clean up there, but that's that's not unusual from that part of the world that we've got we've got some rebalancing all the time, but.
And we'll watch that space to see if they if they could get to the right side of that it could be good.
Okay, that's helpful and and my follow ups, and Mds and realize it's a small smaller earnings contributor but at the margin progression on basically flattish revenue has been a really nice to see in the past you've talked about.
The building pipeline of opportunities and that segments I was just wondering if you could.
Give us an update as to what Youre seeing.
The segment and maybe talk a little bit about how you.
Transforming the way Youre doing work such that margins continue to improve moving forward.
Yeah sure and.
And thanks for asking I mean, it is it is one of those things that we haven't talked as much about in the past, but it is moving from just being and inspection.
More inspection work to more of that integrity management work more predictive modeling.
<unk> talked about bringing the work to people, we're doing more of a more remote access to.
To the assets and then sending the data to be worked onshore.
So instead of bringing people from the asset we're bringing the asset data to the people and that efficiency change has been great but that also.
We've got I think of stronger handle on the value proposition from the customers, we've been able to penetrate new customers and grow and different markets. So I think getting a more global footprint has been and opportunity for growth there.
But the real price to me is moving up the value chain and its really moving from inspection to integrity management, and we talked about machine vision machine learning artificial intelligence predictive modeling, that's where that that's where the business needs to continue to grow and we've got great people and place to do that talk about both the technology and the application of the.
<unk> technology. So that's that's what we see as the promise to keep moving the margins there and to continue to grow the business.
Alright, good to hear thank you.
Thank you.
The next question comes from the line of Blake Gendron with Wolfe Research.
Thanks, and good morning.
Yeah, Thanks, and just want to come back to the LPG segment.
And some variability and sounds like some upside.
Potential nice handoff between Angola, and the EMR callout work potentially here in the back half of the year I'm just wondering.
First on the profitability profile of those two things, we see Angola roll off and to the EMR pick up is that kind of meaningfully change segment margins and then.
Seasonally or otherwise with strength and commodity.
Kind of flow through it will be potentially C&I EMR in 2022, I know youre one of the new companies that endeavors further our guidance. So maybe you have some some visibility into this.
Let me start with the handoff of I don't see dramatic shifts there.
And the margin shifts I do think that until we do need the we do need the the activity levels to make that to make that so so we've got to get we have to get the utilization of assets and thats really where that that manage of cabins and we mentioned that a little bit about getting the assets that we currently have under contract pretty full.
The allocated and then being able to to add to that capacity with with spot charters and we will be a big part of of hitting those kind of the high end of Obg's possibilities for the second half of the year.
The farther out I, just wouldn't say it I mean.
And the campaigns tend to be.
And of tend to be hard to predict and when they come they are good the work on them, but but a lot of times there they are price sensitive and their budget sensitive so I.
And I wouldn't I wouldn't venture to predict the amount too many quarters, but.
Allen anything you'd want to add to that.
Yes, I would add one thing.
I was remiss in saying earlier was when you look at the first half of the year versus the back half and LPG not only the the well intervention project that we have the generates a lot of revenue here and the first half, but we also have the field support services contract and we're executing that.
Predominantly in the first half of the year two of.
The end of July we kind of look at the revenue step down in the back half of those are two per day.
Actual projects and we're working on and the first half of the year the.
And certainly does not replicate itself and the back half and we need to see more of the callout nature of RMR type activity and the back half of it.
Supplement it.
So.
And that kind of is.
Part of why we don't have this is Greg.
The visibility into those.
And those markets right now.
They tend to be a little bit shorter duration.
Phone calls of the yet.
That's totally fair and I appreciate the detail.
Wanted to come back to capital allocation, you mentioned, the 2020 fours and some of the Optionality of it.
Youre going to be looking to attack that maturity you noticed or you called out of the step down and borrowing capacity on the revolver I think you mentioned late 2021.
Obviously, you got some great organic growth avenues here, especially in your non energy segments with.
And would M&A be a reason to potentially get after that maturity or not.
Sooner rather than later are there any opportunities say and some of your non energy businesses, where M&A could be a.
The foremost.
Capital allocation driver for you.
Yeah.
I think there I think there is Blake and when we think about those.
They tend to be they don't tend to be big transformational things they tend to be ways that we can go pick up technology that we can use kind of within our core competencies, particularly marine.
So I think those are the kinds of things we'd be looking at there.
It always I mean optionality of preserving Optionality is always a big part of what were what were thinking about when we talk about.
The retiring debt early addressing the debt.
Adjusting.
And in adjusted maturities things like that so.
And so access to capital, but I, but I think we still are operating on first and foremost getting to a leverage ratio that the investors are comfortable with.
And then kind of setting that is of our new normal as we go and pursue growth opportunities.
Makes sense appreciate the time thanks.
Net.
Your next question comes from the line of Samantha Hoh with Evercore ISI.
Hey, guys. Thanks for taking my question.
Couple of real quick ones on the SSR.
And you called out higher survey work and the first quarter and.
And I was just wondering if you could elaborate on what that is being driven by.
And kind of curious and this year, our traditional oil and gas customers.
And also benefiting from maybe some of the transition.
Thanks Mark.
No right now most of this is and our traditional businesses.
We have done work and the offshore.
Arena for that transition in the wind and east coast, when specifically, but the work we're doing here is predominantly whats traditional customers.
And the customer experience.
And advantage of Jeff Miller of Pricey Alright. Thank you. Thank you that maybe came back.
My question really offshore.
I would say, it's I would say it's more of it.
Moving activity, Samantha then and it has any sort of kind of opportunistic capture of price.
It's the first step so I think and bodes well for the rest of our businesses as well.
Okay, great and and.
And the other question.
And your <unk>.
<unk>.
And that you highlighted.
I'm curious where it shows <unk> IR of working right now.
And what sort of costs that would keep you to have more of the sort of the liberty and freedom.
Net.
Sure well, let me start with.
Let me start with Liberty Liberty is being used primarily in the north sea and and it's an opportunity for the customers who know that they have got installed asset base subsea that they can they can leave the liberty system without having a boat there to attend it if you will and it.
And it can communicate via a bleed of the surface. It's got battery power. There continue to do work and do monitoring exercises, while other things are happening in the field and while Theyre doing production test or what have you. So so that reduces the cost.
Quite a bit by allowing them to to to not have the cost of that vote or the carbon footprint of having that boat. There. So that's the that's an opportunity there that system.
Because of the handling system and everything else and.
And the fact that almost all of these vehicles are in some way shape or form of verse compatible with the exception of freedom. We utilize a lot of spares of lot of a lot of existing vehicles to build the system. So the the cost is pretty manageable, it's not a huge capital expense given the kind of the options. So that's that's going on and.
And it's good news when it happens if I use the interest interest was ending and interesting one because it is it has got a lot of re repurposed equipment and our system. So the cost for us to put and interest system is very cost effective and it's a great benefit to our customers because they see the value and it can it can actually operate and high.
Your current which means if Europe and most of the is our offshore wind installers and so there were leasing these directly to the vessel owners and the and the installers themselves and we can get them more days of operation per year by being able to operate the rovs and higher weather conditions so that.
Obviously, you can see where that would be a huge value if you've got a vessel out there that otherwise would only work.
I'd say two year, if you can get them to 250 days of year that utilization is much much better. So so we're looking at things like that.
Freedom is step.
Step change, it's a whole different thing, where we where we leave of vehicle resident and a lot of cases or we're using it.
And to do different types of survey.
Where you get a lot more value for your survey you get a lot more work done where you can do.
You can do what we call, adding and measurement surveys at the same time you are not just doing surveillance you can actually go back and do spot measurements as well and.
And that allows you to only deploy once rather than deploying twice once for scanning and once for contract measurements. So they all have high and back to our customers and they all have what I would call reasonable.
Capital demands comparable.
Comparable to the rest of our fleet.
Thanks for all of that.
Your next question comes from the line of David Smith with pack and energy.
Okay. Thank you and good morning.
Morning, David.
I was hoping to touch on the guidance real quick.
Similar margin sequentially really sort of margin.
Full year margin guidance look.
The trial.
And the fed right now.
Year over year and.
Mistake and that implies a step down of the <unk>.
And right and the second half of 'twenty, one and.
Some of that yes, there is some of that and now and might jump in here too but.
A lot due to mix, we picked up some of the big like the bigs some rescue contract.
Short of a mobilization, which we don't hope of mobilizations of the sub rescue, but sort of the mobilization that as that is.
Our bulk business with lower margins, so that mix change does affect the AD tech as well.
Alan would you add Inc.
Yes, I think the other components you said the mix change with the human Lander system.
And that we benefited from last year and tends to be more.
Value engineering type work.
And that was going through the first quarter of this year. So.
And with.
And the dynamics between not being successful or at least they are appealing I think along with new origin.
But the expectation is that's not going to materialize in the second half.
We had hoped one stage share.
Makes perfect sense and.
Is it reasonable to think about the second half.
Margin run rate is kind of a normalized level for the business.
I think it's going to be kind of the the more new normal yes.
And.
And the clear thank you very much.
And at this time there are no further questions I will turn it back over to Rod Martin for closing remarks.
Stab of the since there are no more questions I'd, just like the wrap up by thanking everybody for joining the call. This concludes our first quarter 2021 conference call and have a great day.
Thank you ladies and gentlemen, you may now disconnect.
Okay.
Okay.
And.
[music] zone.