OII’s Utilization To Trend Lower

Analysts at Pritchard Capital Partners upgrade Oceaneering International OII from "neutral" to "buy," while reducing their estimates for the company. The target price for OII is set to $52. Shares of OII underperformed yesterday. According to Pritchard Capital Partners, “Of OII's 32 ROVs on GOM floaters, eight are on idle rigs, 13 are on rigs expected to be down within two-weeks, and 11 are on rigs expected to work beyond mid-June. As additional units are laid down, utilization will trend lower and OII will be forced to eat fixed costs, adversely impacting margins during the quarter.” “Discussions with regulators and operators (have) led us to believe that redundant control systems will be required on all floaters, adding products that OII could sell. Even more beneficial, one aspect that could be mandated is an additional ROV per rig that has the sole purpose of manually closing the BOP upon any BOP control failures. If enacted, this would have a material impact to OII's forward earnings,” the analysts mention. Pritchard Capital Partners has lowered its EPS estimates for 2010 and 2011 from $3.35 to $2.90 and from $4.00 to $3.50, respectively on “anticipated activity levels.” More Analyst Ratings here