Earnings call: Helix Energy Solutions anticipates growth in 2024

Helix Energy Solutions (NYSE:) reported its fourth quarter and full year 2023 earnings with revenues at $335 million and a net loss of $28 million. Despite the loss, the company’s EBITDA for the year increased to $273 million.

Helix’s Well Intervention business and Robotics division performed strongly, with high utilization rates and contracts extending into 2024 and beyond. The company expects incremental improvements in 2024 and a potential step change in 2025, with a focus on energy transition and offshore wind market opportunities.

Key Takeaways

• Q4 and full year 2023 revenues stood at $335 million; net loss reported at $28 million.
• EBITDA increased to $273 million in 2023.
• Well Intervention vessels, Well Enhancer and Seawell, achieved 100% utilization.
• The Q7000 vessel is contracted for well abandonment work with Shell (LON:) in Brazil until 2025, with possible extensions into 2026.
• Robotics division had a successful year with high utilization rates and strong revenue.
• 2024 guidance includes flat to slightly positive revenue, improved EBITDA, and positive free cash flow.
• Capital expenditure for 2024 projected between $70 million and $90 million.
• Debt refinanced, simplifying capital structure with no significant maturities until 2029.
• Growth expected in deepwater intervention and shallow water abandonment, particularly in the Gulf of Mexico.

Company Outlook

• Incremental improvements anticipated in 2024 with a potential step change in 2025.
• Focus on energy transition, including offshore abandonment and support for offshore wind projects.
• Significant growth expected in offshore wind industry, benefiting the company’s niche areas.

Bearish Highlights

• Net loss of $28 million in Q4.
• Seasonal weather impacts, particularly in the North Sea and Gulf of Mexico, expected to slow Q1 activities.
• Uncertainty due to Cox bankruptcy proceedings affecting market conditions.

Bullish Highlights

• High vessel and robotics segment utilization rates, with some assets fully contracted for multiple years.
• Strong market demand for well intervention and robotics segments.
• Positive outlook for deepwater intervention and shallow water abandonment segments.

Misses

• The company is cautious about providing guidance for 2024 due to market uncertainties.

Q&A Highlights

• The Q4000 move to Nigeria was based on favorable rates and terms.
• Non-competitive contract with Exxon (NYSE:) for riser-based intervention work in the Gulf of Mexico.
• EBITDA expected to be $50 million to $60 million for 2024, with upside potential in 2025.
• Well intervention pricing expected to increase by 20-25% in 2025.
• Siem Helix 1 repricing projected to add $25 million to $30 million of EBITDA in 2025.

InvestingPro Insights

Helix Energy Solutions (HLX) may have reported a net loss for Q4, but the company’s focus on energy transition and offshore wind market opportunities could signal a brighter future. Here are some insights based on real-time data and InvestingPro Tips:

InvestingPro Data:

• With a market capitalization of $1.38 billion and a notable revenue growth of 64.79% over the last twelve months as of Q3 2023, Helix is showing signs of significant expansion.

• The company’s P/E ratio stands at a high 25.6, reflecting investor expectations for near-term earnings growth.

• Helix’s price is currently at 86.32% of its 52-week high, with a previous close at $10.25, indicating that the stock is trading closer to its yearly peak.

InvestingPro Tips:

• Analysts have revised their earnings downwards for the upcoming period, which could be indicative of challenges ahead. Nonetheless, they predict the company will be profitable this year.

• Helix is trading at a low P/E ratio relative to its near-term earnings growth, suggesting that the stock may be undervalued based on future earnings potential.

For those interested in a deeper dive into Helix Energy Solutions’ financial health and future prospects, more InvestingPro Tips are available at https://www.investing.com/pro/HLX. There are a total of 10 additional tips listed, providing a comprehensive analysis for investors. To get an extra 10% off a yearly or biyearly Pro and Pro+ subscription, use the coupon code PRONEWS24.

Full transcript – Helix Energy Solutions Group Inc (HLX) Q4 2023:

Operator: Greetings. And welcome to the Helix Energy Solutions Fourth Quarter and Year End 2023 Earnings Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Tuesday, February 27, 2024. I would now like to turn the conference over to Arriaga, Chief Accounting Officer. Please go ahead.

Brent Arriaga: Good morning, everyone. And thanks for joining us today on our conference call for our fourth quarter 2023 earnings release. Participating on this call for Helix today are Owen Kratz, our CEO; Scotty Sparks, our COO; Erik Staffeldt, our CFO; Ken Neikirk, our General Counsel; and myself. Hopefully you’ve had an opportunity to review our press release and the related slide presentation released last night. If you don’t have a copy of these materials, both can be accessed through the For The Investor page on our website at www.helixesg.com. The press release can be accessed under the Press Releases tab and the slide presentation can be accessed by clicking on Today’s Webcast icon. Before we begin our prepared remarks, Ken Neikirk will make a statement regarding forward-looking information. Ken?

Ken Neikirk: During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations and assumptions as of today. Such forward-looking statements may include projections and estimates of future events, business or industry trends, or business or financial results. All statements in this conference call or in the associated presentation, other than statements of historical fact, are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of risks, uncertainties, assumptions, and factors, including those set forth in slide two of our presentation and our most recently filed annual report on Form 10-K, our quarterly reports on Form 10-Q and in our other filings with the SEC. You should not place undue reliance on forward-looking statements and we do not undertake any duty to update any forward-looking statement. We disclaim any written or oral statements made by any third-party regarding the subject matter of this conference call. Also during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation provide reconciliation of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations, along with this presentation, the earnings press release, our annual report on Form 10-K and a replay of this broadcast will be available under the For The Investor section of our website at www.helixesg.com. Please remember that this conference call speaks only as of today, February 27, 2024, and therefore, you are advised that any time-sensitive information may no longer be accurate as of any replay of this call. Owen?

Owen Kratz: Good morning. We hope everyone out there and their families are doing well. This morning we’ll review the fourth quarter and full year 2023 results, performance and operations. We’ll provide our outlook for the market, both what we currently are experiencing, as well as our expectations beyond that and we’ll provide our guidance for 2024. Moving to the presentation, slides six through nine provide a high-level summary of our results and key highlights for the quarter. During the fourth quarter, activity levels across all segments were very strong, with the increased activity from the global — solid global offshore energy market driving improved rates. Highlights for the quarter include; strong activity and utilization in the Gulf of Mexico; a resilient North Sea Market Well Intervention, including a seasonal project in the Mediterranean; completion of our New Zealand Well Intervention campaign; Robotics and Helix Alliance solid seasonal adjusted contribution; production facilities continues to be a steady performer; and on the sales front, the Helix Producer I was extended an additional year to June 2025. In addition, we were awarded a 12-month extension with Trident in Brazil for the SH1. We expect to benefit from the market rate contract in 2025. We also secured a minimum six-month contract for the Q4000 in West Africa at favorable economics, and we just recently established a five-year joint frame agreement with TELUS for their offshore decommissioning requirements, primarily on the Gulf of Mexico shelf. Revenues for the quarter were $335 million, a decrease of $61 million from third quarter results. Our net loss was $28 million, primarily driven by a $37 million loss associated with the refinancing of our 2026 convertible senior note. Adjusted EBITDA for the quarter was $71 million. Our fourth quarter results were overall in line with expectations, driven by our core Well Intervention markets in the North Sea and Gulf of Mexico, with our Robotics and Shallow Water Abandonment segments providing good performance given the impact of the winter weather. For 2023, revenues improved by over $400 million year-over-year to $1.29 billion. Our growth profit improved by $150 million to $200 million. We reported a net loss of $11 million in 2023, which included a $42 million loss on the earn out associated with our Shallow Water Abandonment acquisition and another $37 million loss associated with our refinancing efforts. Without these two losses, our net income would have been significantly positive in 2023. Nonetheless, net loss still decreased by $77 million to $11 million, despite the aforementioned losses. Our EBITDA increased to $273 million in 2023 from $121 million in 2022. Operating cash flow of the year was $152 million, resulting in free cash flow of $134 million, with both results representing significant improvements compared to 2022. The fundamental improvements in the offshore market, both domestically and internationally, continue to support the foundation of a multiyear recovery for our business. With the market recovery taking shape, we expect to build on our 2023 performance with incremental improvements for 2024 and a potential step change in 2025. Our expansion into Shallow Water Abandonment services has solidified our leadership position in this reemerging market. Helix continues to execute on its strategy of becoming the preeminent offshore energy transition company. I’d like to thank our employees for their efforts and high level of execution in 2023. Executing safe and efficient operations for our customers has established us as a leader in our industry. On to slide 10. During the fourth quarter, we executed on our express desire to restructure our balance sheet, moving away from convertible notes to a more traditional debt instrument. We issued $300 million senior notes due in 2029, and following that, we repurchased $160 million of our convertible notes. In early January, we issued a redemption notice for the remaining balance of our convertible notes, a transaction we expect to close during the first quarter. This restructuring effort extends our maturity, simplifies our debt structure, eliminates dilution risk from the convertible notes and mitigates the ultimate cost of replacing our convertible notes. We believe these efforts provide clarity and predictability to our balance sheet and position our investors to benefit from the improvement in the offshore market. On to slide 11. From a balance sheet perspective, our cash balance at year end was $332 million, with liquidity of $431 million. For the year, our operating cash flow was $152 million, including $63 million of dry dock and recertification costs. We spent $20 million on CapEx, resulting in $134 million in free cash flow. At year end, we were in a net debt position of $30 million. I’ll now turn the call over to Scotty for a more in-depth discussion of our operations. Scotty?

Scotty Sparks: Thanks, Owen, and good morning. Moving on to slide 13. The team’s offshore and onshore outperformed again, producing another very well-executed quarter, completing a very strong 2023. In the fourth quarter of 2023, we continue to operate globally with minimal operational disruption, with operations in Europe, Asia-Pacific, Brazil, the Gulf of Mexico and off the U.S. East Coast. We continue to operate at high standards, again, with strong uptime efficiency for the quarter. During the fourth quarter, we generated revenue of $335 million and a gross profit of $49 million, a gross profit margin of 15%, compared to gross profits of $31 million in the fourth quarter of 2022, significantly improved year over year. For the year, we generated revenue of $1.29 billion and a gross profit of $200 million and a gross profit margin of 16%, very much improved compared to a gross profit of $51 million in 2022. 2023 has been a solid year for Helix, vastly improved over 2022 and we finished the year very strong, with the fourth quarter being our best fourth quarter since 2013. Visibility in 2024 and beyond is looking very positive. We have recently secured some good contracts at better market rates compared to our legacy contracts. That also sets up 2025 potentially for further improvement. Tender activity remains strong and our client base is increasing. Slide 14 provides a more detailed review of our Well Intervention business in the Gulf of Mexico during the fourth quarter. The Q5000 had excellent utilization of 96%. The vessel performed very well conducting production enhancements and abandonment campaigns, utilizing our Helix SLB jointly-owned 15K subsea system. The vessel then completed work on a single production enhancement well for Shell, and finished the year conducting abandonment work on one well. The vessel has numerous wells contracted for 2024 and we expect the vessel to achieve high utilization at stronger rates. The Q4000 had solid utilization of 98% in the fourth quarter. The vessel continued a multi-well production enhancement campaign for one customer and then undertook a production enhancement project for another client. The vessel then commenced production enhancement works on our Thunder Hawk field. The Q4000 also has numerous wells contracted in 2024, and again, we expect high utilization at better rates. In the second half of the year, the vessel is scheduled to commence a paid transit to Nigeria to undertake a minimum six-month project, performing production enhancement works with a paid transit back to the Gulf of Mexico after. Both Q vessels continue to operate under the integrated Helix SLB subsea services alliance package and we expect this to continue with the Q4000 whilst in Nigeria. Moving to slide 15, our North Sea Well Intervention business continues to respond well to the increased demand in the region, having a very strong fourth quarter considering the winter periods that would usually lead to a seasonal slowdown or warm stacking periods for the vessels. For the quarter, we achieved 100% utilization for both vessels. The Well Enhancer performed very well, working for two customers, performing production enhancement work on three wells, followed by decommissioning operations on two wells. The Seawell also had a good quarter, working for two customers, performing decommissioning works on two wells and the vessel then completed a paid 22-day transit to the Western Mediterranean to conduct a longer term decommissioning campaign expected to last into the summer of 2024. Demand for our services continues to improve. As mentioned, the Seawell is fully contracted well into the summer of 2024 and following its approximate 50-day to 60-day dry dock in Q1, the Well Enhancer has contracted and awarded works through Q3 of 2024, starting to fill out the year with further increased rates. The Q7000 was 68% utilized, conducting the decommissioning contract in New Zealand throughout most of the fourth quarter. On completion of the works in New Zealand, the vessel has completed a paid transit to Australia to undertake several intervention scopes for three clients commencing in the fourth quarter. The Q7000 is then contracted for 12 months plus options to undertake well abandonment work with Shell in Brazil, including the paid transit to Brazil. The work is estimated to commence towards the end of 2024, so the Q7000 is contracted for most of 2025, with options that could potentially have it working in Brazil into 2026. Moving to slide 16. In Brazil, we had good utilization of 99% for the fourth quarter. The Siem Helix 1 had a strong quarter and was 100% utilized in Q4, undertaking work for Trident Energy, performing decommissioning works on six wells and production enhancement work on one well. We have recently extended our contract with Trident to take a further year and much increased market rates, commencing at the end of 2024 and for most of 2025. The Siem Helix 2 had 98% utilization in Q4, completing decommissioning activity on three wells and one production enhancement well with Petrobras. We again in 2023 won the Petrobras Rig of the Year Award, so congratulations to our teams both onshore and offshore in Brazil. We keep enhancing our position in Brazil by further extending contracts at increased market rates, so as the legacy contracts roll off, this should lead to much better results in 2025 and we look forward to bringing the Q7000 to Brazil and commencing the Shell decommissioning contract, again at improved market rates. Slide 17 provides detail of our Well Intervention fleet utilization. Moving on to slide 18 for our Robotics review. Robotics continued their good performance and had another strong quarter, closing out a very solid year being the best performing year in terms of revenue and EBITDA since 2015. The business performed at high standards with strong utilization, operating six vessels globally during the quarter, primarily working between trenching, ROV support and site survey work on oil and gas and renewables-related projects. In the APAC region, the Grand Canyon II had 100% utilization in Q4. The vessel completed a long-term decommissioning project in Thailand and then finished the year on an ROV support project in Malaysia. T1400-1 trenching system on board the Siem Topaz, a project-charted vessel, continued work on a renewable trenching project in Taiwan, undertaking 92 days of trenching utilization in the quarter that is expected to continue into mid-Q4 of 2024. In the North Sea, the Grand Canyon III was utilized 95%, performing an oil and gas trenching project for one customer prior to commencing a lump-sum renewable trenching project for another customer. The Horizon Enabler had 100% vessel utilization, completing oil and gas trenching works for two customers, then performing works on a renewables trenching project for another customer. Also in the North Sea, the Glomar Wave completed 15 days of operations, undertaking an ROV support project for a renewables customer. In the USA, the Shelia Bordelon, the Jones Act compliant vessel, was utilized 92% in Q4. The vessel performed works in the Gulf of Mexico on an ROV survey project for an oil and gas customer, followed by a seismic node installation project for another customer. The vessel then took a paid transit to the U.S. East Coast for an ROV support project on renewables works. Helix Robotics performed very well in 2023. We have a good backlog visibility globally and we are expecting further strong performance in 2024. Slide 19 details our Robotics vessels ROV and trenching utilization. Slide 20 provides an overview of our Shallow Water decommissioning business, Helix Alliance, for the fourth quarter. Helix Alliance had a strong quarter, considering the expected seasonal slowdown. Due to better weather conditions, many of the units worked further into the fourth quarter than what we had expected. The offshore division had nine liftboats operating in Q4, with a combined utilization of 80% performing decommissioning services. Offshore also supplied six OSVs and one crewboat, with a combined utilization of 71%. The Energy Services division had operations of 1,188 days of utilization for 20 pre-enabled systems deployed conducting decommissioning services. The division had operations of 198 days of utilization for six coiled tubing systems. In Q4, the diving and heavy lift division had reduced combined utilization of 46% across the three diving vessels, due to the sensitivity of diving operations in the winter season. The Hedron heavy lift barge had utilization of 76% undertaking decommissioning activities. Last quarter, we reported that we had commenced work on our largest decommissioning contract to-date to decommission 39 wells, abandon 15 pipelines and remove and dispense of seven platform structures. We’ve been performing well on this contract thus far. However, as planned, the work has been suspended for the winter months and we expect to recommence work on the project with some units later in Q1 and the heavy lift work to recommence in Q2. At the end of December, our season did finally come to an end, due to the winter weather conditions, leading to the stacking of a good portion of the fleet’s P&A systems and coiled tubing systems. We expect the first quarter of 2024 to be slow, until weather conditions start to improve, leading to a slow ramp up of the fleet in Q1 and into Q2. Slide 21 provides detail of Helix Alliance vessels and systems utilization. Looking back at 2023, we had a very good year, and yes, the market has improved, but more importantly, our global employees, offshore and offshore, excelled not only exceeding expectations in 2023, but also setting up a strong 2024, and with the recently awarded contracts, we expect an even stronger 2025. So I’d like to put out a big thank you to our employees and partners. Stay safe and keep up the good work. I’ll now turn the call over to Brent.

Brent Arriaga: Thanks, Scotty. Moving to slide 23, it outlines our debt instruments and maturity profile as of December 31. During Q4, we initiated a refinancing of our convertible securities. We issued $300 million senior notes due 2029 and repurchased approximately $160 million principal amount of our 2026 convertible senior notes. Our fund debt at year-end was $373 million. In January, we issued a redemption notice for the remainder of our 2026 convertible notes, which we expect to settle in March. Following that settlement, we will have no significant maturities until 2029. The refinancing brings us to a simplified capital structure that eliminates dilution, overhang and potential higher costs to settle those convertible notes in the future. Moving on, slide 24 provides an update on key balance sheet metrics, including cash, long-term debt, liquidity and net debt levels. At year-end, we had cash of $332 million and availability under the ABL credit facility of $99 million, with resulting liquidity of $431 million. Our net debt position at year-end was $30 million. As mentioned earlier, we are settling the remaining $40 million principal amount of our 2026 convertible notes. We anticipate the final redemption cost will exceed the carrying amount of those notes and any premium paid will increase our net debt. Slide 25 presents a five-year performance trend for certain financial metrics. 2023 not only marks our sixth straight year of positive free cash flow, but also represents our highest annual EBITDA since 2014 and our highest level of free cash flow since we began presenting this metric. Slide 26 presents our diversified revenue mix by segment, geography and by the three components of our energy transition strategy for your reference. I will now turn the call over to Eric for a discussion on our outlook for 2024 and beyond.

Erik Staffeldt: Thanks, Brent. Based on the continued strength of the offshore energy market, our contracted work and the pipeline of bids and projects, we’re providing guidance of key financial metrics from our forecast. Revenue in the range of $1.2 billion to 1.4 billion. We do expect revenues to be flat to slightly positive in 2024. EBITDA range of $270 million to 330 million. Overall, we expect slight improvement from 2023, with improvements in the Well Intervention partially upset by a softer Shallow Water market — Shallow Water Abandonment market. Free cash flow of $65 million to 115 million. This number includes an expected $58 million impact from the earn out payment scheduled in the second quarter of 2024. Capital spend in the $70 million to 90 million range. Based on our expectations of the mix of regulatory maintenance on our vessels and fleet renewal Robotics ROV. Moving on to slide 30. Our CapEx forecast for 2024 is also impacted by dry dock maintenance periods on our vessels and systems. The Well Enhancer is currently in dry dock undertaking an expected 50-day to 60-day program. The HP1 is scheduled for dry dock in Q2 and the Q7000 will have a maintenance period during its mobilization in Brazil. Our CapEx range for 2024 is currently $70 million to $90 million. The majority of the CapEx forecast continues to be maintenance and project related, which primarily falls into our operating cash flows. Reviewing our balance sheet, our funded debt of $373 million is expected to decrease by $49 million in 2024, with the redemption of our 2026 convertible notes and scheduled principal payments on our merit debt. We expect to continue our share of a purchase program with target repurchases in the $20 million to $30 million range in 2024. Our forecast ranges include some key assumptions and estimates. Any significant variations from these key assumptions and estimates could cause our results to fall outside of the ranges provided. Our quarterly results will continue to be impacted by seasonal weather in the North Sea and Gulf of Mexico shelf, primarily the first quarter and fourth quarter. In addition, the timing of our vessel maintenance periods and project mobilizations will cause variations between quarters. Our quarterly financial performance in 2024 is expected to follow a similar cadence as our results in 2023, with the second quarter and third quarter being our most active quarters and first and fourth quarters impacted by winter weather. Overall, we expect the second half of 2024 to be stronger than the first half. With seasonal quarter impacts, the timing of our free cash flow generation is likely skewed to the latter part of the year. Providing key assumptions by segment and region starting on slide 31. First, our Well Intervention in [ph] Gulf of Mexico continues to be a very strong market, supported by improving rates and expected strong utilization on the Q4000 and Q5000. The Q5000 has contracted work in every quarter, with limited white space to fill in its schedule. The Q4000 is contracted to work into Q2 in the Gulf of Mexico. The vessel is scheduled to then transit to West Africa for a minimum six-month contract in Nigeria with a paid mobilization and demobilization. In the U.K. North Sea, we expect both vessels, the Well Enhancer and the Seawell, to have very good utilization for most of the year. The Well Enhancer is currently completing an approximate 50-day to 60-day regulatory docking, followed by contracted work into Q3. The Seawell is currently working in the Mediterranean into Q2 before it is scheduled to return to the North Sea for contracted work. Since mid-2022, the activity levels in the North Sea Well Intervention market have significantly increased with limited seasonal impact in 2022 and 2023. We are anticipating a return to a seasonally adjusted utilization in the winter months in the North Sea in 2024. The Q7000 is currently working in Australia with projects scheduled for three different operators. Projects are expected to continue to midyear, followed by a scheduled transit to Brazil and mobilization for its contracted work in Brazil. In Brazil, the Siem Helix 2 is contracted into mid-December 2024 with Petrobras. The Siem Helix 1 is contracted to perform well abandonment work for Trident with the recent contract extending work to Q4 of 2025. We expect to benefit from the contract extension at market rates in 2025. Moving to our Robotics segment, slide 32. The Robotics segment continues to benefit from a tight market where both oil and gas market and renewables market are extremely active competing for assets. In the APAC region, the Grand Canyon II is under contract supporting renewables projects in Taiwan into the second half of 2023 with expected good utilizations for the balance of the year. The Siem Topaz and the T1400-1 trencher are contracted and expected to remain in Taiwan through mid-Q4 2024. In the North Sea, the Grand Canyon III is currently undergoing battery pack installation. The vessel is expected to begin trenching in April and have strong utilization into Q4. The Horizon Enabler has contracted trenching projects in Q3 and Q4. The Glomar Wave is forecasted to have good seasonal utilization performing site clearance operations. In the U.S., the Shelia Bordelon is working in the Gulf of Mexico and expected to transit to the U.S. East Coast to provide wind support. Moving to production facilities, the HP1 is on contract for the balance of 2024, recently extended to June of 2025 with no currently expected change. We have expected variability with the production as the Droshky Field continues to deplete. Thunder Hawk Field is producing after completion of a well clean-out in January. Continuing on slide 33, we are expecting to have a more traditional season in our Shallow Water Abandonment segment with greater seasonal impacts during Q1 and Q4. After a robust 18-month to 24-month period of activity, we’re seeing operators scale back to mitigate the impact of winter weather. We expect the second and third quarters to be very active with potential for competition for assets if and as schedules fill out. We expect the Offshore Marine business to maintain good utilization on five to seven liftboats with some variability on the OSVs and crewboats. Energy Services should have good utilization on 12 to 14 P&A spreads and one to three coiled tubing units. There is seasonality in diving and heavy lift business where the Epichedran is currently idle with limited opportunities, but we do expect a very active season during Q2 and Q3. I’ll skip the remaining slides starting with 35 and leave them for your reference. This time I’ll turn the call back to Owen for a discussion on our outlook beyond 2024 and closing comments.

Owen Kratz: Thanks, Eric. As we begin a new year, I thought it would be appropriate if we just restate what Helix does. As you’re aware, since 2012, the Helix business model has been focused on the late-life aspects of the oil and gas market and providing specialty support to the development of offshore wind renewables energy. As a result, we offer services in three areas key to our energy transition focus. First is maximizing existing reserves that remain, avoiding new drilling. This incorporates subsea access for production enhancement, Well Intervention, marginal field production processing with our FPU, blowout containment contingency services and end-of-life operating and reservoir management with the potential for owning and operating end-of-life fields. Second is our offshore abandonment. This includes Shallow Water full field abandonment of wells, pipelines and facilities, and deepwater subsea decommissioning, including well P&A. The third leg is specialty support services for development of renewable energy projects, namely offshore wind farms. This includes jet and cutter trenching of the cables, boulder site clearance, and recently UXO clearance. Combined, our focus is on the energy transition and sustainable energy from end-of-life reserves through abandonment to development of offshore wind farms. Our strategy is to remain focused on these areas where we have expertise and efficiencies with a significant market position with ample growth opportunities within each of these niches. For deepwater production enhancement and well abandonment, Helix is an efficient purpose-built alternative to the use of drill rigs for non-drilling activities. For field abandonment, Helix offers an integrated service, including all required engineering, planning, management and assets. For both of these, we have support of our Robotics and diving, depending on water depth. Our Robotics has evolved over time, allowing Helix to become a global leader in jet and cutter trenching of the wind farm cables. We’ve also evolved our Robotics to perform site clearance for wind farms and recently added in-house UXO removal capabilities. So let’s look at the market outlook for each of these segments. First, Deepwater Well Intervention. In 2023, about 60% of our revenues were generated from our assets that compete for work historically done and largely still done by drill rigs and non — in non-drilling mode. There’s a sizable market share still done by drilling rigs. Helix pricing is understandably sensitive to drill rig rates, which are driven by market supply and demand. Drill rig rates and utilization have been rising and are expected to continue rising, as many analysts have indicated. To summarize the recent rig report, the long duration up cycle remains healthy and solid growth is anticipated in most regions globally. Significant ultra-deepwater demand is expected in the Gulf of Mexico, Brazil, Africa and Mediterranean. Slower than expected reactivation of cold stack rigs and a lack of new builds is expected to further drive opportunities for offshore drilling. And leading edge day rates for ultra-deepwater floaters are expected to exceed $500,000 per day in 2025. To put this into perspective, current ultra-deepwater rates are over $400,000 a day now, with harsh environment rigs that discount to this in the $350,000 a day range, which is the rate that Helix currently prices to. In our forecast, there are legacy rates that are still working — that we’re still working through, but our average day rate is currently around $300,000 a day. All to say there are still meaningful increases in our rates that we expect to come over time. With blended with ongoing longer term legacy rates, in 2025 there could be as much as a 20 to 25 increase in rates over our current average rate. Next, let me say a few things about abandonment. I’ve covered deepwater abandonment as part of what we compete for against rigs. I would add that the volume of work and the pressure both from the public, as well as the regulatory bodies is increasing. Primary basins for Helix are the U.K., Brazil, Australia and the U.S. Gulf, all of which have substantial work for years to come. In July of 22, we acquired Alliance as a reentry into the Gulf of Mexico Shallow Water Abandonment to complement our deepwater abandonment. The year prior to the acquisition, Alliance generated low $20 million EBITDA. Our expectations were for the Shallow Water Abandonment market to significantly become active in the wake of the Fieldwood bankruptcy and accelerate further following a bankruptcy of Cox. Both of these have occurred. After generating roughly $50 million of EBITDA for the full year of 2022, we initially forecasted 2023 to be $60 million with an earnings potential for that business at $70 million EBITDA. Actual results for 2023 came in at more than $85 million of EBITDA due to a greater volume of work than expected from multiple major recipients of properties from the Fieldwood bankruptcy. We can’t guide to this level of activity for 2024 as clients may slow their work for 2024 and we cannot be certain that we’ll recapture another large turnkey project this year, although the potential remains there. The Cox bankruptcy did occur in 2023, but it’s taking time to run through the courts. We had expected this work to come to market in 2024, but that may be a bit delayed. We’re forecasting the Shallow Water market to generate similar EBITDA levels that we guided to for 2023, which is a meaningful reduction in EBITDA contribution year-over-year. However, we do expect a meaningful increase from there in 2025 and believe there’ll be a strong Shallow Water market in the Gulf of Mexico for years to come. Finally, let’s take a quick look at the offshore wind market. With increased costs of capital and higher costs along the entire supply chain, we’re seeing some projects delayed or canceled. This market is sustainable and will grow, but we’ve always tempered expectations that the growth may be less than the exponential forecast some previously thought. We’re also seeing that it’s a challenge to achieve margins among the contractors that rushed into the market. We prudently decided to stay within our core competencies and leverage our Robotics expertise to participate as a specialty niche provider for cable, burial and site clearance. We believe there’s significant growth ahead for offshore wind as a whole to generate growth for Helix in the two niches as we explore other peripheral niches. We’re continuing to grow and our renewables work as a percentage of revenue is technically decreasing, but only because of the greater rate of growth from our other business lines. I’d like to take a few minutes and touch on points that illustrate why Helix is differentiated and has such a positive multiyear outlook. First, again, is deepwater intervention. While there’s competition in light Well Intervention that comes and goes, Helix created the light intervention market and has been at it for 20 — over 25 years. Many competitors have tried, but few have succeeded. It’s just not that simple and Helix is the leader. In rig alternative riser-based intervention, Helix is the undisputed leader and operator of five of the seven assets globally that are capable of non-rig riser-based intervention. This market is growing as the mature deepwater fields become more plentiful. Competitive encroachment is not likely, first because it’s not that simple to do, and second, Helix has decades of experience in refining the technology and enhancing efficiencies. Third, a majority of the work is still done by drill rigs, which are more expensive, have a larger carbon footprint and are about 30% less efficient at work that Helix does, and, of course, the drilling rigs are being used to meet drilling needs. These are expensive assets. The high cost of capital, high shipyard pricing and the time required to deliver, we continue to be well placed in the market. Turning to Shallow Water Abandonment, we believe the Gulf of Mexico should be a strong demand-driven market for at least the next seven years. To perform the full abandonment of fields requires a mix of a number of differing assets, resources and capabilities. Over the downturn years, the Shallow Water contracting community collapsed to a great extent. It’s populated by Shallow Water contractors, rarely having the requisite ownership of assets that can perform fully integrated field abandonment. As the properties come out of bankruptcy and flow back to the successor ownership, largely the majors, they also no longer have the — the majors no longer have the requisite teams in-house to manage the work and do this and — excuse me, to manage their work and are — but some will reconstitute shelf deco teams and tender work through their supply chains, while others will contract project management consultants to tender and manage the work on an outsourced basis. Either way, these clients don’t have all the assets. We believe the market will be strong enough that most, if not all, Gulf of Mexico assets will be utilized, as they were in 2023 and the market will be even tighter going forward. Helix Alliance is well positioned with a meaningful market share of all classes of assets. We’re capable of working under any of these above contracting methods. Helix is the only contractor capable of providing the guarantee of availability to offer a truly integrated service. Managing all aspects of a full field abandonment is much simpler under a single contract with a single contractor that can guarantee the availability of the assets. We believe in the integrated value proposition we offer clients, backed by Helix’s decades of delivering efficient results. This capability and expertise is also scalable globally, as we see strong markets developing, especially in Brazil and Australia. The last segment I’d like to comment on is Robotics, specifically as we’re positioned to provide offshore wind farm support. The forecasted rate for growth for the offshore wind farm work appears to be at a slower rate than most were forecasting, but it is still growing. We see this growth as being sustainable for multiple years. Helix is the global leader for jet and cutter trenching of cables and we see continuing demand in this niche. We have one trencher system that’s yet to be deployed. We also have actively — we’re also actively renewing our work class ROV fleet to maintain quality, operational credibility and continued strong performance. In 2019, we began to enter the boulder removal market for site clearance. We’re adding our second Robotic boulder grab and recently added an in-house capability for UXO removal. We’ve established our credibility and see further growth building off this credibility. Our strength — our strategy is to be patient and prudent with progressive growth in this market. To close, let me highlight a few things impacting 2024 as compared to our longer term outlook. First, since the summer of 2022, the North Sea has been active throughout the full year. We can’t be certain that the market won’t return to a seasonal market, which could impact 2024. Second, we don’t expect the — we do expect the Q7000, SH1 and SH2 to work in Brazil for multiple years to come. The Q7000 and SH1 have now been successfully contracted through 2025. All three vessels should show significant improvements in rates for 2025. As a result, we’ve extended the charters on the SH1 and SH2. The accounting treatment to blend and extend the charter rates have a negative impact on 2024 of somewhere around $6 million EBITDA, which has been included in our guidance for 2024. But the positive impact for Brazil in 2025 is estimated to be close to $25 million to $30 million EBITDA for just the SH1 alone. Third point is the Q7000 is expected to complete its work in APAC over the course of 2024. The past year, the vessel has been working under legacy rates, resulting in actually a loss for 2023. The contracts in hand for 2024 are all in APAC at a mixture of legacy rates and new rates. We extract — we expect strong improvement of the EBITDA contribution in the range of $40 million, with another meaningful rate increase for 2025 as the vessel transfers to Brazil for its contract there. Fourth, the Gulf of Mexico was a strong market for our riser-based Well Intervention in 2023. The next year should be even better for our well-opt U.S. division. Over the past few years, we focused on expanding our geographic footprint and were successful in establishing our credibility in West Africa. Demand for our services remains strong there in this market we’d like to maintain. With the Q7000 contracted elsewhere, we made a decision to take a contract in Nigeria, primarily because of much improved rates and terms, and performed this work with the Q4000. The result of this will be an even better year for well-ops U.S. division, as the Nigeria work will report through the well-ops U.S. The Q4000 is scheduled to begin transit to Nigeria in August and anticipated to return to the Gulf of Mexico in 2025. So while the Gulf of Mexico has been a strong market for us recently, it’s good to have opportunity to go where the rates and terms take us. Fifth point is Robotics. They had a great year in 2023 and we expect this should continue again in 2024 and 2025. We do have one trencher that could be deployed that was idle in 2023. We also have our startup UXO offering for the market. Sixth point is that I have covered the Gulf of Mexico Shallow Abandonment market and the reasons for not expecting the over performance of 2023 to repeat in 2024. Our expectations for 2024 are consistent with the initial guidance we gave for 2023, but with the possibility of repeating the stellar 2023 again in 2025. And as I mentioned earlier, we just recently established a five-year joint frame agreement with TELUS for their offshore decommissioning requirements, primarily on the shelf in the U.S. Gulf of Mexico, which we believe establishes the foundation for work for years to come. In summary, we’re expecting a one-year pullback in Shallow Water Abandonment, more than offset by the strength of our other business groups. We’re anticipating further meaningful growth for 2025, all of this based on just our existing assets and operating leverage. As I mentioned earlier, we recognize losses in 2023 related to the earn-out payment for Shallow Water Abandonment acquisition and related to our refinancing efforts, without which we would have been significantly higher earnings. In 2024, we’ll be making the final earn-out payment of $85 million for the Alliance acquisition. We’ll have some noise in the accounting and P&L as a result of completing the resumption of the remaining convertible notes that are still outstanding. Following this, we have positioned ourselves to have a strong balance sheet and be meaningfully free cash flow positive. Helix should be enjoying growth from the existing operating leverage, from existing assets with many market opportunities. So that’s it, Eric. Back to you.

Erik Staffeldt: Thanks. Thanks, Owen. And Operator, at this time, we’ll take any questions.

Operator: Thank you. [Operator Instructions] And our first question comes from James Schumm. Please proceed.

James Schumm: Hey. Good morning, guys.

Owen Kratz: Good morning.

James Schumm: Thanks for all — good morning. Thanks for all the detail. I think, you partially answered this. I wanted to — I wanted you guys to quantify the increase in expenses on the blend and extend for the Siem Helix 1 and 2. You said $6 million of EBITDA. Is that per vessel or is that total?

Erik Staffeldt: That is total in 2024.

James Schumm: Total in 2024. Is there a different number for 2025?

Erik Staffeldt: Yes. There will be different numbers for 2025.

James Schumm: But, like, in 2024, are we just capturing, is it the delta on one of the vessels or is it, like, the full impact? So — and — so maybe I’ll ask that, but I’ll also ask, is it fair to think about a cash OpEx of those vessels of close to $200,000 per day, including the new charter costs?

Erik Staffeldt: So I’ll say this, that obviously the extension of those charters, given the strength of the market, is something that we pursued. The impact that we’re seeing in 2024 is primarily related, obviously, to the return in value associated with the vessel itself. There will be some incremental increases in the services that are provided associated with that charter going forward. So there will be additional impacts in 2025.

James Schumm: Okay. Is — and maybe this is for Scotty, but, like, does that sound right, Scotty? Are we pushing close to $200,000 per day of OpEx on these vessels?

Scotty Sparks: OpEx — I think your number’s a bit high there.

James Schumm: Okay. Okay. And then maybe just shifting over to, I think, you partially or maybe fully answered this question, but I can’t remember the last time the Q4000 was out of the Gulf of Mexico. So, I mean, is this driven by a really strong contract and a really good day rate in Nigeria or is it some softness in the Gulf of Mexico? I know that, for the offshore drilling market, the — we might have seen a little bit of an air pocket here. Day rates have been sort of healthy, very good, but sort of flat lined here for at least a year. So just didn’t know if you’re seeing any softness this year in the Gulf of Mexico.

Owen Kratz: No. We’re seeing a strong market in the Gulf of Mexico. As usual going into the year, there’s a bit of white space in the schedule, but nothing that we didn’t expect to fill up. The move to Nigeria with the Q4000 was strictly driven by the rates and the terms that we were able to get there, as well as wanting to maintain our footprint in West Africa, which we believe is going to be a strong market for years to come and after establishing our credibility, we’d like to sort of maintain that presence.

Erik Staffeldt: I’ll just add to that. Exxon came to us for this contract and single-sourced it to us. It wasn’t a competitive tender. So we’re getting paid a very healthy mob fee and decent day rate for the works over there. But if you look back three years or four years ago, Exxon did no intervention work other than based on rigs. So this is quite a big relationship builder to keep supporting Exxon in riser-based intervention, non-rig-based intervention.

James Schumm: Okay. Great and thanks for that. And just a quick clarification on the Alliance. I just want to be clear. The EBITDA that you’re guiding to for this year is what is it exactly? Is it $60 million or $70 million? What’s the expectation there?

Erik Staffeldt: I think it’s in that $50 million to $60 million range. I think, as Owen mentioned, similar to what, that’s what we had expected at the start of 2023, and obviously, it came in much stronger. But I think we’re expecting something in that range for 2024 with the potential upside in 2025.

Owen Kratz: I can give a little more color on that.

James Schumm: Okay.

Owen Kratz: There was one major recipient of properties from Fieldwood that did an extraordinary amount of work in 2023. That tightened the market up quite a bit and drove utilization. In addition to that, we had a very large lump sum contract that we performed very well on. I think we mentioned that during the notes and we’ll be finishing that up early this year. That major that had all of the work last year is pulling back for 2024 and sort of regrouping with the intentions of beginning work again in 2025. Then we also had Cox bankruptcy got held up in the courts for a little while and that work will be flowing back to the successor owners by everyone’s guess a little later than what everyone expected. That’s causing a pullback in our expectations on the Shallow Water Abandonment for 2024, but then returning to an all-out demand-driven market for 2025.

James Schumm: Okay. Great. Thanks for all the color, guys. Appreciate it.

Operator: Our next question is from David Smith. Please proceed with your question.

David Smith: Hey. Good morning and thank you for taking my question.

Erik Staffeldt: Good morning.

David Smith: I don’t want to beat this one to death, but just revisiting the Shallow Water Abandonment guidance. I mean, 2023 was a great year with revenue coming in 30% ahead of the guidance midpoint provided a year ago. So I just wanted to make sure I understand. If you could kind of compare the visibility you have for that segment today compared to a year ago and maybe how much of that outlook is dialing in more seasonality or really just less demand visibility?

Erik Staffeldt: So I’ll get some high levels and pass it on to Owen. But, overall, once again, it is a call-off business. I think what we’ve seen so far this year is the first quarter, with the winter weather, we’ve seen pullback in activity. I think we started to see that right at the end of December. So I think on a year-over-year basis, we definitely expect the first quarter to be slower. I think with that, I think, we also expect activities to ramp up significantly in the second quarter and third quarter. As we view it, obviously, is really the fourth quarter is one, are they going to continue at the pace that they’re doing or is there going to be seasonality there? So there’s some variability there. But I would say at least here at the start, first quarter, we’re definitely seeing more of a seasonal impact than we did last year.

Owen Kratz: I’ll just add a little bit to that. Besides the major producers that had a lot of work last year pulling back on their expectations for this year, there’s the uncertainty of the Cox bankruptcy proceedings. I think this week there’s a hearing for the courts to finally approve Chapter 7. That’s a little later. That’s much later than what everyone was expecting the pace of it to move. We’re just uncertain as to how fast that work comes to the market. It could be later on in 2024, but we don’t want to guide to something that you can’t bank on. So we’re sort of taking the same view as we did going into 2023 and we’ll see what happens with the Cox work.

David Smith: Okay. Understood and appreciated. And a follow-up was hoping to revisit the commentary about potential Well Intervention pricing in 2025. I think I heard the comment that we could see a 20 to 25 increase in rates versus the current average. I wanted to make sure if that 20 to 25 was referring to average day rate and not a percentage increase.

Erik Staffeldt: It compared to our average day rate, which we’ve talked about, we have I think three sort of legacy contracts that are holding our rates back.

David Smith: That 20 to 25 was that $1,000 per day or was that a percentage?

Erik Staffeldt: A percentage. And those legacy contracts…

David Smith: Excellent. Thank you.

Erik Staffeldt: … roll off in 2024 and have already been replaced with much better market rates for 2025.

David Smith: Perfect. I appreciate that. If I could ask one clarifying question. Did I hear correctly? Owen, you all say that the Siem Helix 1 repricing should add $25 million to $30 million of EBITDA in 2025 versus 2024?

Owen Kratz: Yes. That’s correct. Yeah.

David Smith: Okay. Thank you very much.

Owen Kratz: We expect $25 million for the Siem Helix 1, most likely for the $25 million for the Siem Helix 2, and certainly for the Q7000.

David Smith: Great. That’s all I have. Thank you.

Operator: And there are no further questions on the phone at this time. I’ll call back to you for closing remarks.

Owen Kratz: Okay. Thank you very much for joining us today. We very much appreciate your interest and participation. I look forward to having you on our first quarter 2024 call in April. Thank you very much.

Operator: That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.

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