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:

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.

Overview

The table that follows sets out our revenue and operating results for 2016 , 2015 and 2014 .

Our business substantially depends on the level of spending on offshore developments by our customers in the oil and gas industry. During 2016 , we generated approximately 86% of our

revenue, and 92% of our operating income before Unallocated Expenses, from services and products we provided to the oil and gas industry. In 2016 , our revenue decreased by 26% , with the larger percentage decreases occurring in our ROV, Subsea Products and Asset Integrity segments, all of which decreased from lower oilfield activity resulting from the general decline in crude oil prices from mid 2014. Starting in 2015, we have taken initiatives to align our operations with current and anticipated declining activity and pricing levels. These initiatives required us to reduce our workforce, incur unusual expenses, and make certain accounting adjustments.

The $25 million  consolidated net income we earned in 2016 was substantially less than the $231 million we earned in 2015 , and the $0.25 earnings per diluted share was the lowest we made since 2000. The $206 million decrease from 2015 net income was attributable to lower profit contributions from all of our oilfield business segments, most notably:

In 2016 , we invested in the following capital projects:

In 2015, we exited the business of manufacturing subsea blow out preventer ("BOP") control systems.

We expect our 2017 diluted earnings per share to be less than the $0.25 we reported in 2016 . With our limited market visibility resulting from the uncertain energy market, we are not providing earnings per share guidance for 2017 . We anticipate lower global demand for deepwater drilling, field development, and inspection, maintenance and repair activities due to the current and anticipated oil price environment, which has led to spending cuts from our customers and pricing pressure. Compared to 2016 , in 2017 we are forecasting that we will be marginally profitable at the operating income line. Below the operating income line, we expect:

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 oil and gas industry. The largest percentage of our ROVs has historically been used to provide drill support services. Therefore, the number of floating drilling rigs on hire is a leading market indicator for this business. The following table shows average floating rigs under contract and our ROV utilization.

Demand for floating rigs is the primary leading indicator of the strength of the deepwater market. According to industry data published by IHS Petrodata, at the end of 2016 , there were 336 floating drilling rigs in operation or available for work throughout the world, with 151 of those rigs under contract. Of the 151 rigs under contract, 91 are contracted through the end of 2017 . Recent industry forecasts of floating rig demand point to an expectation that demand in 2017 will decline by approximately 25%.

In addition to floating rig demand, the number of subsea tree completions is another leading indicator, and the primary demand driver for our Subsea Products lines. According to industry data published by Infield Systems Limited in January 2017, there will be 200 subsea tree installations in 2017 , down from 305 in 2016, 308 in 2015 and 349 in 2014. Subsea tree installations are forecast to increase to 227 in 2018.

Critical Accounting Policies and Estimates

We have based the following discussion and analysis of our financial condition and results of operations on our consolidated financial statements, which we have prepared in conformity with accounting principles generally accepted in the United States. These principles require us to make various estimates, judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the periods we present. We base our estimates on historical experience, available information and other assumptions we believe to be reasonable under the circumstances. On an ongoing basis, we evaluate our estimates; however, our actual results may differ from these estimates under different assumptions or conditions. The following discussion summarizes the accounting policies we believe (1) require our management's most difficult, subjective or complex judgments and (2) are the most critical to our reporting of results of operations and financial position.

Revenue Recognition. We recognize our revenue according to the type of contract involved. On a daily basis, we recognize revenue under contracts that provide for specific time, material and equipment charges, which we bill periodically, ranging from weekly to monthly.

We account for significant fixed-price contracts, which we enter into mainly in our Subsea Products segment, and to a lesser extent in our Subsea Projects and Advanced Technologies segments, using the percentage-of-completion method. In 2016 , we accounted for 16% of our revenue using the percentage-of-completion method. In determining whether a contract should be accounted for using the percentage-of-completion method, we consider whether:

Under the percentage-of-completion method, we generally recognize estimated contract revenue based on costs incurred to date as a percentage of total estimated costs. Changes in the expected cost of materials and labor, productivity, scheduling and other factors affect the total estimated costs. Additionally, external factors, including weather or other factors outside of our control, may also affect the progress and estimated cost of a project's completion and, therefore, the timing of income and revenue recognition. We routinely review estimates related to our contracts and reflect revisions to profitability in earnings immediately. If a current estimate of total contract cost indicates an ultimate loss on a contract, we recognize the projected loss in full when we determine it. In prior years, we have recorded adjustments to earnings as a result of revisions to contract estimates. Although we are continually striving to accurately estimate our contract costs and profitability, adjustments to overall contract costs could be significant in future periods.

We recognize the remainder of our revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, price is fixed or determinable and collection is reasonably assured.

Property and Equipment and Long-lived Intangible Assets. We periodically and upon the occurrence of a triggering event review the realizability of our property and equipment and long-lived intangible assets to determine whether any events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. For long-lived assets to be held and used, we base our evaluation on impairment indicators such as the nature of the assets, the future economic benefits of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such impairment indicators are present or other factors exist that indicate that the carrying amount of an asset may not be recoverable, we determine whether an impairment has occurred through the use of an undiscounted cash flows analysis of the asset at the lowest level for which identifiable cash flows exist. If an impairment has occurred, we recognize a loss for the difference between the carrying amount and the fair value of the asset. For assets held for sale or disposal, the fair value of the asset is measured using fair market value less cost to sell. Assets are classified as held-for-sale when we have a plan for disposal of certain assets and those assets meet the held for sale criteria.

We charge the costs of repair and maintenance of property and equipment to operations as incurred, while we capitalize the costs of improvements that extend asset lives or functionality.

Goodwill. In our annual evaluation of goodwill for impairment, we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, we determine it is more likely than not that the fair value of a reporting unit exceeds its carrying amount, performing the two-step impairment test is unnecessary. However, if we conclude otherwise, then we are required to perform the first step of the two-step impairment test. We estimate fair value of the reporting units using both an income approach, which considers a discounted cash flow model, and a market approach. Reductions in estimates of our future cash flows or adverse changes in market comparable information may result in goodwill impairments in the future.

For reporting units with goodwill, we do not believe our goodwill will be impaired during 2017 .

Income Taxes. Our tax provisions are based on our expected taxable income, statutory rates and tax-planning opportunities available to us in the various jurisdictions in which we operate. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws. We are at risk that a taxing authority's final determination of our tax liabilities may differ from our interpretation. Our effective tax rate may fluctuate from year to year as our operations are conducted in different taxing jurisdictions, the amount of pre-tax income fluctuates, the amounts of foreign income we anticipate will be repatriated and our estimates regarding the realizability of items such as foreign tax credits may change. We consider $623 million of unremitted earnings of our foreign subsidiaries to be indefinitely reinvested. We believe we have the ability to indefinitely reinvest these foreign earnings based on our expectations of profitability for our U.S. operations over the long term, our significant U.S. liquidity, and the amount of unremitted earnings of our foreign subsidiaries not considered indefinitely reinvested, for which we have provided deferred income taxes.

We account for any applicable interest and penalties on uncertain tax positions as a component of our provision for income taxes on our financial statements. Current income tax expense represents either nonresident withholding taxes or the liabilities expected to be reflected on our income tax returns for the current year, while the net deferred income tax expense or benefit represents the change in the balance of deferred tax assets or liabilities as reported on our balance sheet.

We establish valuation allowances to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized in the future. While we have considered estimated future taxable income and ongoing prudent and feasible tax-planning strategies in assessing the need for the valuation allowances, changes in these estimates and assumptions, as well as changes in tax laws, could require us to provide for valuation allowances for our deferred tax assets. Provisions for valuation allowances impact our income tax provision in the period in which such adjustments are identified and recorded. We established a deferred tax asset valuation allowance of $4.2 million in 2016 related to the realizability of loss carryforwards in certain of our foreign jurisdictions.

In March 2016, the FASB issued ASU 2016-09, " Compensation – Stock Compensation Improvements to Employee Share-Based Payment Accounting ." This update requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. Currently, an entity must determine, for each award, whether the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes results in either an excess tax benefit or a tax deficiency. The amendments in this update are effective for us beginning January 1, 2017. Through December 31, 2016, we recognized excess tax benefits in additional paid-in capital, and tax deficiencies have been recognized as an offset to accumulated excess tax benefits. In 2017, we expect a tax deficiency in the first quarter and, under this new standard, we will recognize it as a discrete item in the income statement rather than in additional paid-in capital. We do not anticipate that this update will have a material effect on our consolidated financial statements.

For a summary of our major accounting policies and a discussion of recently adopted accounting standards, please see Note 1 to our Consolidated Financial Statements.

Liquidity and Capital Resources

We consider our liquidity and capital resources adequate to support our operations and growth initiatives. At December 31, 2016 , we had working capital of $754 million , including cash and cash equivalents of $450 million . Additionally, we had $500 million available through our revolving credit facility under a credit agreement (as amended, the "Credit Agreement"), which is scheduled to expire on October 25, 2021 .

In October 2014, we entered into the Credit Agreement with a group of banks to replace our prior principal credit agreement. The Credit Agreement provides for a $300 million three-year term loan (the "Term Loan Facility") and a $500 million five-year revolving credit facility (the "Revolving Credit Facility"). Subject to certain conditions, the aggregate commitments under the Revolving Credit Facility may be increased to up to $800 million at any time upon agreement between us and existing or additional lenders. Borrowings under the Revolving Credit Facility and the Term Loan Facility may be used for general corporate purposes. Simultaneously with the execution of the Credit Agreement and pursuant to its terms, we repaid all amounts outstanding under, and terminated, the prior credit agreement.

In November 2015, we entered into an Agreement and Amendment No. 1 to Credit Agreement ("Amendment No. 1"). Amendment No. 1 amended the Credit Agreement to (1) replace the maximum leverage ratio financial covenant with a new financial covenant restricting the maximum total capitalization ratio (defined in Amendment No. 1 to be the ratio of consolidated debt to total capitalization) to 55% and (2) extend the maturities of the Term Loan Facility and the Revolving Credit Facility by one year each, which maturity terms have since been superseded by amendment, as described below.

In November 2016, we entered into Agreement and Amendment No. 2 to Credit Agreement ("Amendment No. 2"). Amendment No. 2 amended the Credit Agreement to, among other things, extend the maturities of the Term Loan Facility and the Revolving Credit Facility to October 25, 2019 and October 25, 2021, respectively, with the extending Lenders, which represent 90% of the existing commitments of the Lenders, such that (a) the total commitments for the Revolving Credit Facility will be $500 million until October 25, 2020 and thereafter $450 million until October 25, 2021, and (b) the outstanding term loan maturities pursuant to the Term Loan Facility will be $300 million until October 27, 2018 and thereafter $270 million until October 25, 2019.

Borrowings under the Credit Agreement bear interest at an Adjusted Base Rate or the Eurodollar Rate (both as defined in the Credit Agreement), at our option, plus an applicable margin initially based on our Leverage Ratio (as defined in the Credit Agreement) and, at our election, based on ratings of our senior unsecured debt by designated ratings services, thereafter to be based on such debt ratings. The applicable margin varies: (1) in the case of advances bearing interest at the

Adjusted Base Rate, from 0.125% to 0.750% for borrowings under the Revolving Credit Facility and from 0% to 0.500% for borrowings under the Term Loan Facility; and (2) in the case of advances bearing interest at the Eurodollar Rate, from 1.125% to 1.750% for borrowings under the Revolving Credit Facility and from 1.000% to 1.500% for borrowings under the Term Loan Facility. The Adjusted Base Rate is the highest of (1) the per annum rate established by the administrative agent as its prime rate, (2) the federal funds rate plus 0.50% and (3) the daily one-month LIBOR plus 1%. We pay a commitment fee ranging from 0.125% to 0.300% on the unused portion of the Revolving Credit Facility, depending on our Leverage Ratio. The commitment fees are included as interest expense in our consolidated financial statements.

The Credit Agreement contains various covenants that we believe are customary for agreements of this nature, including, but not limited to, restrictions on our ability and the ability of each of our subsidiaries to incur debt, grant liens, make certain investments, make distributions, merge or consolidate, sell assets, enter into transactions with affiliates and enter into certain restrictive agreements. We are also subject to a maximum total capitalization ratio of 55%, as noted above. The Credit Agreement includes customary events of default and associated remedies. As of December 31, 2016 , we were in compliance with all the covenants set forth in the Credit Agreement.

In November 2014, we completed the public offering of $500 million aggregate principal amount of 4.650% Senior Notes due 2024 (the "Senior Notes"). We pay interest on the Senior Notes on May 15 and November 15 of each year, beginning on May 15, 2015. The Senior Notes are scheduled to mature on November 15, 2024. We may redeem some or all of the Senior Notes prior to maturity at specified redemption prices. We used the net proceeds from the offering for general corporate purposes, including funding the acquisition described below, other capital expenditures and repurchases of shares of our common stock.

Our maximum outstanding indebtedness during 2016 under the Credit Agreement and Senior Notes was $800 million, and our total interest costs, including commitment fees, were $29.1 million .

Our capital expenditures, including business acquisitions, for 2016 , 2015 and 2014 were $143 million , $424 million and $427 million , respectively. Our capital expenditures in 2016 included $50 million in our ROV segment, $57 million in our Subsea Products segment and $26 million in our Subsea Projects segment. Our capital expenditures in 2015 included our acquisition of C & C Technologies, Inc. ("C&C") for approximately $224 million. C&C is a global provider of ocean-bottom mapping services in deepwater utilizing customized autonomous underwater vehicles and provides marine construction surveys for both surface and subsea assets, as well as satellite-based positioning services for drilling rigs and seismic and construction vessels. C&C also provides land and near-shore survey services along the U.S. Gulf Coast and in Mexico, and performs shallow water conventional geophysical surveys in the U.S. Gulf of Mexico. In addition to the C&C acquisition, our capital expenditures in 2015 included: $58 million for upgrading and expanding our ROV fleet; $69 million in our Subsea Products segment, principally for growth of our tooling and installation and workover control systems capabilities; and $52 million in our Subsea Projects segment, including $43 million related to a new subsea support vessel scheduled for delivery in 2017. Our capital expenditures in 2014 included: $189 million for upgrading and expanding our ROV fleet; $113 million in our Subsea Products segment, principally for growth of our tooling and installation and workover control systems capabilities, expansion of our Houston manufacturing facilities and establishment of manufacturing capabilities in Angola; and $92 million in our Subsea Projects segment, including $40 million related to a new subsea support vessel scheduled for delivery in 2017.

For 2017 , we expect our capital expenditures to be in the range of $90 million to $120 million , exclusive of business acquisitions. This estimate includes $25 million in our Subsea Projects segment to complete the new-build subsea support vessel, the Ocean Evolution , scheduled for delivery in the middle of 2017. During the third quarter of 2013, we signed an agreement with a shipyard for the construction of the Ocean Evolution . We intend for the vessel to be U.S.-flagged and documented with a coastwise endorsement by the U.S. Coast Guard. It is expected to have 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, and a working moonpool. We expect to outfit the vessel with two of our high specification work-class ROVs. The vessel will also be equipped

with a satellite communications system capable of transmitting streaming video for real-time work observation by shore personnel. We anticipate the vessel will be used to augment our ability to provide subsea intervention services in the U.S. Gulf of Mexico. These services are required to perform inspection, maintenance and repair projects and hardware installations.

Our capital expenditures during 2016 , 2015 and 2014 included $50 million , $58 million and $189 million , respectively, in our ROV segment, principally for additions and upgrades to our ROV fleet to expand the fleet and replace units we retired and for facilities infrastructure to support our growing ROV fleet size. We currently plan to add new ROVs only to meet contractual commitments. We added 6 , 16 and 49 ROVs to our fleet and retired 41 , 36 , and 17 units during 2016 , 2015 and 2014 , respectively, and transferred one to our Advanced Technologies segment in 2015 , resulting in a total of 280 work-class systems in the fleet at December 31, 2016 . Over the past two years, we retired a greater number of ROVs than we have added due to market conditions and outlook.

Unless indicated otherwise, each of the vessels discussed below is a deepwater multiservice subsea support vessel outfitted with two of our high-specification work-class ROVs.

Beginning in the third quarter of 2008, we chartered a vessel, the Olympic Intervention IV , for an initial term of five years. Following extension periods, the charter expired in July 2016, and we released the vessel to its owner. We had been using the Olympic Intervention IV in the U.S. Gulf of Mexico.

In 2012, we moved the chartered vessel Ocean Intervention III to Angola and also chartered the Bourbon Oceanteam 101 to work on a three-year field support vessel services contract for a unit of BP plc. We had extended the charter of the Bourbon Oceanteam 101 to January 2017. However, in early 2016, the customer exercised its right, under the field support vessel services contract, to terminate its use of the Bourbon Oceanteam 101 at the end of May 2016. Under the terms of the contract, the costs incurred by us associated with the early release and demobilization of the vessel were reimbursed by the customer. Following the release of the vessel, we redelivered it to the vessel supplier. Under the field support vessel services contract, which has been extended through January 2019, we are continuing to supply project management, engineering and the Ocean Intervention III , which we have under charter on a month-to-month basis through July 2017. We also provide ROV tooling, asset integrity services and installation and workover control system services. We also have provided other chartered vessels and barges as requested by the customer.

In March 2013, we commenced a five-year charter for a Jones Act-compliant multi-service support vessel, the Ocean Alliance , we have been using in the U.S. Gulf of Mexico. In January 2015, we commenced a two-year contract with a customer for the use of the Ocean Alliance . The contract expired in January 2017, and we are marketing the vessel for spot market work in the U.S. Gulf of Mexico.

In December 2013, we commenced a three-year charter for the Normand Flower, a multi-service subsea marine support vessel. We made modifications to the vessel and used the vessel in the U.S. Gulf of Mexico to perform inspection, maintenance and repair projects and hardware installations. In December 2016, we declined our option to extend the charter and the vessel was released.

In November 2015, we commenced a two-year charter for the use of the Island Pride, a multi-service subsea marine support vessel. We are using the vessel under a two-year contract to provide field support services off the coast of India for an oil and gas customer based in India. We have options to extend the charter for up to two additional years.

We also charter or lease vessels on a short-term basis as necessary to augment our fleet.

Our principal source of cash from operating activities is our net income, adjusted for the non-cash expenses of depreciation and amortization, deferred income taxes and noncash compensation under our restricted stock plans. Our $341 million , $560 million and $722 million of cash provided from operating activities in 2016 , 2015 and 2014 , respectively, were affected by cash increases/(decreases) of: (1) $123 million , $179 million and $(8) million , respectively, of changes in accounts receivable; (2) $18 million , $33 million and $66 million , respectively, of changes in inventory; and (3) $(117) million , $(45) million and $(44) million , respectively, of changes in accounts payable and

accrued liabilities. In 2016 and 2015 , our accounts receivable, inventory and accounts payable and accrued liabilities all decreased as a result of lower revenue and activity in general from each year's preceding year. The 2016 and 2015 decreases in inventory were in addition to write-downs totaling $30 million and $26 million , respectively, in our ROV and Subsea Products segments discussed below. In 2014 , our inventory decreased as a result of the use of inventory in progressing and completing projects that had been in our Subsea Products backlog at December 31, 2013 and our expectation of lower Subsea Products demand in 2015 as compared to 2014.

In 2016 , we used a net of $169 million in investing activities, with $143 million used to fund the capital expenditures described above and $39 million used to purchase Angolan central bank bonds indexed to the U.S. dollar. In 2015 , we used a net of $437 million in investing activities, with $424 million used to fund the capital expenditures and business acquisitions described above. In 2014 , we used a net of $419 million in investing activities, with $427 million used to fund the capital expenditures and business acquisitions described above.

In 2016 , we used $97 million in financing activities, primarily for the $94 million of cash dividends we paid. In 2015 , we used $157 million in financing activities. We borrowed $50 million , repurchased 2 million shares for $100 million and paid cash dividends of $106 million . In 2014 , we generated $45 million in financing activities. We borrowed $742 million , net of associated expenses and debt discount, repurchased 8.9 million shares for $590 million and paid cash dividends of $110 million .

In February 2010, our Board of Directors approved a program to repurchase up to 12 million shares of our common stock. In 2014, we completed the purchase of the shares authorized under that program by repurchasing the remaining 8.9 million shares for $590 million . The total cost for the repurchase of the 12 million shares of our common stock was $677 million .

In December 2014, following completion of the February 2010 program, our Board of Directors approved a new share repurchase program under which we may repurchase up to 10 million shares of our common stock on a discretionary basis. The December 2014 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 our management based on its evaluation of these factors. We expect that any shares repurchased under the new program will be held as treasury stock for future possible use. The new program does not obligate us to repurchase any particular number of shares. Through December 31, 2015 under the new program, we repurchased 2 million shares of our common stock for $100 million . We did not repurchase any shares in 2016 .

As of December 31, 2016 , we retained 12.8 million of the shares we had repurchased. We expect to hold the shares repurchased for future use.

Because of our significant foreign operations, we are exposed to currency fluctuations and exchange rate risks. We generally minimize these risks primarily through matching, to the extent possible, revenue and expense in the various currencies in which we operate. Cumulative translation adjustments as of December 31, 2016 relate primarily to our net investments in, including long-term loans to, our foreign subsidiaries. A stronger U.S. dollar against the U.K. pound sterling, Norwegian kroner and Brazilian real would result in lower operating income. See Item 7A – "Quantitative and Qualitative Disclosures About Market Risk."