Oceaneering International, Inc. (OII): A Bull Case Theory

We came across a bullish thesis on Oceaneering International, Inc. on Compound & Fire’s Substack. In this article, we will summarize the bulls’ thesis on OII. Oceaneering International, Inc.'s share was trading at $24.78 as of September 30th. OII’s trailing and forward P/E were 12.96 and 18.76 respectively according to Yahoo Finance.

Oceaneering International (NYSE: OII) is one of the world’s largest underwater services contractors, with a primary focus on subsea robotics and offshore oil and gas services. Headquartered in Houston, Texas, the company generated 42% of its 2024 revenue from North America, with the remainder spread across Africa, the UK, Norway, Brazil, Asia, and Australia. With a market capitalization of $2.5 billion and 102 million shares outstanding, Oceaneering’s financial profile reflects the cyclical nature of the offshore CapEx environment.

Its stock historically exhibits strong correlation with offshore investment cycles, delivering a total return of 842% during the 2005–2013 upcycle but experiencing a 96.7% drawdown in the subsequent downturn. The company maintains a conservative balance sheet, with net debt to EBITDA of 1.0x, low intangibles at 3.5% of assets, and capital expenditures of 4% of sales, allowing significant free cash flow generation even in volatile market conditions. Cash conversion is strong at 138% of net income, though gross margin and net profit margin remain modest at 18.2% and 5.5%, reflecting the service-heavy and competitive nature of the business.

Revenue has grown at a 10-year CAGR of 5.7%, constrained by extended downcycles and a tepid upcycle in recent years. Share dilution is minimal at 0.5% of revenue, but management ownership is low at 2.1%, offering limited alignment with shareholders. Overall, Oceaneering provides stability and reliable cash flow in the offshore services sector but lacks significant growth potential, with performance largely driven by the offshore CapEx cycle. Its conservative financial structure and global footprint make it a resilient player, but investors seeking long-term compounding may view it as a lower-growth, steady-return option.

Previously we covered a bullish thesis on Halliburton Company (HAL) by Buffet_fromTemu in October 2024, which highlighted potential gains from increased drilling activity, geopolitical tensions, and HAL’s strong drilling and well completion capabilities. The company's stock price has depreciated approximately by 11.54% since our coverage. The thesis still stands as multiple catalysts support future profitability. Compound & Fire shares a similar perspective but emphasizes Oceaneering International’s (OII) subsea robotics focus and offshore service cyclicality.

Oceaneering International, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held OII at the end of the second quarter which was 31 in the previous quarter. While we acknowledge the potential of OII as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.