Water in lower unit gear case of Blackmax

[Ulf]

When I drained the lower unit oil it was full of water.

Late '80s Merc 150 Blackmax. I put fresh oil in at beginning of last season, and new nylon washers on both screws. The oil that came out at looked ok. Also put on new water pump kit at that time. Had no problems all season.

When I was winterizing boat a few months ago I noticed the water when I went to change the gear oil.

I removed the L/U when I found the water.

So how do I fix this problem?

Could it be from a bad gasket/seal in water pump housing?

Or is it more likely to be a seal at the propshaft side?

Not sure how long I was running it with the water in the gear case either. Do I have to worry about the gears in lower getting destroyed from the salt water?

Thanks,
Scott