Market Overview

Helix Reports Second Quarter 2018 Results

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Helix Energy Solutions Group, Inc. (NYSE:HLX) reported net income of
$17.8 million, or $0.12 per diluted share, for the second quarter of
2018 compared to a net loss of $6.4 million, or $(0.04) per diluted
share, for the same period in 2017 and a net loss of $2.6 million, or
$(0.02) per diluted share, for the first quarter of 2018. Net income for
the six months ended June 30, 2018 was $15.2 million, or $0.10 per
diluted share, compared to a net loss of $22.8 million, or $(0.16) per
diluted share, for the six months ended June 30, 2017.

Helix reported Adjusted EBITDA1 of $52.3 million for the
second quarter of 2018 compared to $29.7 million for the second quarter
of 2017 and $27.6 million for the first quarter of 2018. Adjusted EBITDA
for the six months ended June 30, 2018 was $79.8 million compared to
$44.3 million for the six months ended June 30, 2017. The table below
summarizes our results of operations:

 

Summary of Results

($ in thousands, except per share amounts, unaudited)

       
As of and for the Three Months Ended As of and for the Six Months Ended
6/30/2018   6/30/2017   3/31/2018 6/30/2018   6/30/2017
Revenues $ 204,625 $ 150,329 $ 164,262 $ 368,887 $ 254,857
 
Gross Profit $ 42,897 $ 18,367 $ 12,983 $ 55,880 $ 17,542
21 % 12 % 8 % 15 % 7 %
 
Net Income (Loss) $ 17,784 $ (6,403 ) $ (2,560 ) $ 15,224 $ (22,818 )
 
Diluted Earnings (Loss) Per Share $ 0.12 $ (0.04 ) $ (0.02 ) $ 0.10 $ (0.16 )
 
Adjusted EBITDA1 $ 52,269 $ 29,727 $ 27,566 $ 79,835 $ 44,349
 
Cash and cash equivalents $ 288,490 $ 390,435 $ 273,985 $ 288,490 $ 390,435
 
Cash flows from operating activities $ 46,620 $ (13,248 ) $ 41,046 $ 87,666 $ 15,601
 

1Adjusted EBITDA is a non-GAAP measure. See
reconciliation below.

 

Owen Kratz, President and Chief Executive Officer of Helix, stated, "Our
second quarter 2018 results reflect solid performance from our Well
Intervention business and improved performance from our Robotics
business. Our Well Intervention business benefited from the seasonal
pick-up in the North Sea and the continued operational improvements in
Brazil. Our Robotics business improved quarter over quarter, with
increased trenching operations and backlog for the remainder of 2018. We
are encouraged by the improvement in our results compared to last
quarter and remain committed to managing the uncertainties this market
could present in the second half of the year."

 

Segment Information, Operational and
Financial Highlights

($ in thousands, unaudited)

   
Three Months Ended
6/30/2018     6/30/2017     3/31/2018
Revenues:
Well Intervention $ 161,759 $ 113,076 $ 129,569
Robotics 39,060 33,061 27,169
Production Facilities 16,343 15,210 16,321
Intercompany Eliminations   (12,537 )   (11,018 )   (8,797 )
Total $ 204,625   $ 150,329   $ 164,262  
 
Income (Loss) from Operations:
Well Intervention $ 34,470 $ 19,032 $ 13,877
Robotics (4,102 ) (11,642 ) (14,317 )
Production Facilities 6,866 6,140 7,359
Corporate / Other (12,684 ) (8,701 ) (8,256 )
Intercompany Eliminations   222     221     221  
Total $ 24,772   $ 5,050   $ (1,116 )
 

Business Segment Results

  • Well Intervention revenues in the second quarter of 2018 increased
    $32.2 million, or 25%, from the previous quarter due to higher
    utilization and rates in the North Sea, offset in part by lower
    utilization of our vessels in the Gulf of Mexico and our 10K IRS
    rental unit. Overall vessel utilization increased to 88% in the second
    quarter of 2018 from 73% in the first quarter of 2018.

    In
    the North Sea, vessel utilization increased to 95% in the second
    quarter of 2018 from 31% in the previous quarter due to the seasonal
    pick-up in activity. Specifically, the Well Enhancer
    utilization increased to 94% from 34% and the Seawell
    utilization increased to 97% from 28%.

    Vessel utilization
    in the Gulf of Mexico decreased to 74% in the second quarter of 2018
    from 93% in the first quarter of 2018. Q5000 utilization was
    71% in the second quarter of 2018 compared to 87% in the first quarter
    due to an approximate 14 day regulatory underwater inspection as well
    as some unscheduled downtime during the second quarter. Q4000
    utilization in the second quarter of 2018 decreased to 76% from 100%
    in the first quarter due to idle time between projects in the second
    quarter. The 15K IRS rental unit utilization remained at 86%. The 10K
    IRS rental unit was 46% utilized during the quarter compared to full
    utilization in the first quarter of 2018.

    The Siem Helix
    1
    utilization decreased to 92% in the second quarter of 2018 from
    99% in the first quarter of 2018 as a result of scheduled shipyard
    maintenance during the second quarter. The Siem Helix 2
    utilization improved to 99% in the second quarter of 2018 from 88% in
    the first quarter.

    Well Intervention revenues increased 43%
    in the second quarter of 2018 compared to the second quarter of 2017.
    While vessel utilization was similar year over year, total available
    vessel days increased by 105 days in the second quarter of 2018 with
    the introduction of the Siem Helix vessels in 2017.
    Additionally, the second quarter of 2018 included 120 days of IRS
    rental unit utilization, whereas the second quarter of 2017 had zero
    days of utilization.
  • Robotics revenues in the second quarter of 2018 increased $11.9
    million, or 44%, from the previous quarter. The increase was driven
    primarily by the seasonal pick-up in activity and increased trenching
    in the North Sea, offset in part by lower utilization of the Grand
    Canyon II
    . Chartered vessel utilization increased to 70%, which
    includes 54 spot vessel days, in the second quarter of 2018 from 56%,
    which includes 42 spot vessel days, in the first quarter of 2018. ROV
    asset utilization increased to 38%, which includes 146 trenching days,
    in the second quarter of 2018 from 30%, which includes 44 trenching
    days, in the first quarter of 2018.

    Robotics revenue
    increased 18% in the second quarter of 2018 from the second quarter of
    2017. Vessel utilization increased to 70% in the second quarter of
    2018 compared to 57% in the second quarter of 2017. ROV asset
    utilization decreased to 38% in the second quarter of 2018 from 42% in
    the second quarter of 2017; however, the second quarter of 2018
    included 95 additional trenching days compared to the same quarter in
    2017.

Other Expenses

  • Selling, general and administrative expenses were $18.1 million, or
    8.9% of revenue, in the second quarter of 2018 compared to $14.1
    million, or 8.6% of revenue, in the first quarter of 2018. The
    increase was primarily attributable to increased costs associated with
    our employee share-based compensation awards linked to our stock price.
  • Other expense was $3.4 million in the second quarter of 2018 compared
    to other income of $0.9 million in the first quarter of 2018. The
    change was primarily driven by foreign currency losses in the second
    quarter of 2018, offset in part by a write-down of a note receivable
    in the previous quarter.

Financial Condition and Liquidity

  • Cash and cash equivalents at June 30, 2018 were approximately $288
    million. Consolidated long-term debt decreased to $459 million at June
    30, 2018 from $467 million at March 31, 2018. Consolidated net debt at
    June 30, 2018 was $171 million. Net debt to book capitalization at
    June 30, 2018 was 10%. (Net debt and net debt to book capitalization
    are non-GAAP measures. See reconciliation below.)
  • Capital additions (including capitalized interest and dry dock costs)
    totaled $18 million in the second quarter of 2018 compared to $17
    million in the first quarter of 2018 and $47 million in the second
    quarter of 2017.
  • Operating cash flow increased to $47 million in the second quarter of
    2018 compared to $41 million in the first quarter of 2018 primarily
    due to an increase in operating income offset in part by changes in
    working capital. Operating cash flow in the second quarter of 2018
    increased by $60 million year over year due primarily to higher net
    income. Free cash flow was $26 million in the second quarter of 2018
    compared to $20 million in the first quarter of 2018 primarily due to
    higher operating cash flows. Free cash flow increased $76 million year
    over year due to higher operating cash flows in the second quarter of
    2018 and reduced capital expenditures associated with the completion
    of the Siem Helix 1 and Siem Helix 2 vessels during
    2017. (Free cash flow is a non-GAAP measure. See reconciliation below.)

Conference Call Information

Further details are provided in the presentation for Helix's quarterly
teleconference to review its second quarter 2018 results (see the
"Investor Relations" page of Helix's website, www.HelixESG.com).
The teleconference, scheduled for Tuesday, July 24, 2018 at 9:00 a.m.
Central Time, will be audio webcast live from the "Investor Relations"
page of Helix's website. Investors and other interested parties wishing
to dial into the teleconference may join by dialing 1-800-763-6049 for
participants in the United States and 1-212-231-2915 for international
participants. The passcode is "Staffeldt." A replay of the webcast will
be available at "For the Investor" by selecting the "Audio Archives"
link beginning approximately two hours after the completion of the event.

About Helix

Helix Energy Solutions Group, Inc., headquartered in Houston, Texas, is
an international offshore energy services company that provides
specialty services to the offshore energy industry, with a focus on well
intervention and robotics operations. For more information about Helix,
please visit our website at www.HelixESG.com.

Reconciliation of Non-GAAP Financial Measures

Management evaluates Company performance and financial condition using
certain non-GAAP metrics, primarily EBITDA, Adjusted EBITDA, net debt,
net debt to book capitalization and free cash flow. We define EBITDA as
earnings before income taxes, net interest expense, gain or loss on
extinguishment of long-term debt, net other income or expense, and
depreciation and amortization expense. Non-cash losses on equity
investments are also added back if applicable. To arrive at our measure
of Adjusted EBITDA, we exclude gain or loss on disposition of assets. In
addition, we include realized losses from foreign currency exchange
contracts not designated as hedging instruments and other than temporary
loss on note receivable, which are excluded from EBITDA as a component
of net other income or expense. Net debt is calculated as total
long-term debt less cash and cash equivalents. Net debt to book
capitalization is calculated by dividing net debt by the sum of net debt
and shareholders' equity. We define free cash flow as cash flows from
operating activities less capital expenditures, net of proceeds from
sale of assets.

We use EBITDA and free cash flow to monitor and facilitate internal
evaluation of the performance of our business operations, to facilitate
external comparison of our business results to those of others in our
industry, to analyze and evaluate financial strategic planning decisions
regarding future investments and acquisitions, to plan and evaluate
operating budgets, and in certain cases, to report our results to the
holders of our debt as required by our debt covenants. We believe that
our measures of EBITDA and free cash flow provide useful information to
the public regarding our ability to service debt and fund capital
expenditures and may help our investors understand our operating
performance and compare our results to other companies that have
different financing, capital and tax structures. Other companies may
calculate their measures of EBITDA, Adjusted EBITDA and free cash flow
differently from the way we do, which may limit their usefulness as
comparative measures. EBITDA, Adjusted EBITDA and free cash flow should
not be considered in isolation or as a substitute for, but instead are
supplemental to, income from operations, net income or other income data
prepared in accordance with GAAP. Non-GAAP financial measures should be
viewed in addition to, and not as an alternative to, our reported
results prepared in accordance with GAAP. Users of this financial
information should consider the types of events and transactions that
are excluded from these measures.

Forward-Looking Statements

This press release contains forward-looking statements that involve
risks, uncertainties and assumptions that could cause our results to
differ materially from those expressed or implied by such
forward-looking statements. All statements, other than statements of
historical fact, are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, including, without
limitation, any statements regarding our strategy; any statements
regarding visibility and future utilization; any projections of
financial items; any statements regarding future operations
expenditures; any statements regarding the plans, strategies and
objectives of management for future operations; any statements regarding
our ability to enter into and/or perform commercial contracts; any
statements concerning developments; any statements regarding future
economic conditions or performance; any statements of expectation or
belief; and any statements of assumptions underlying any of the
foregoing. The forward-looking statements are subject to a number of
known and unknown risks, uncertainties and other factors that could
cause results to differ materially from those in the forward-looking
statements, including but not limited to the performance of contracts by
suppliers, customers and partners; actions by governmental and
regulatory authorities; operating hazards and delays, which include
delays in delivery, chartering or customer acceptance of assets or terms
of their acceptance; our ultimate ability to realize current backlog;
employee management issues; complexities of global political and
economic developments; geologic risks; volatility of oil and gas prices
and other risks described from time to time in our reports filed with
the Securities and Exchange Commission ("SEC"), including the Company's
most recently filed Annual Report on Form 10-K and in the Company's
other filings with the SEC, which are available free of charge on the
SEC's website at www.sec.gov.
We assume no obligation and do not intend to update these
forward-looking statements except as required by the securities laws.

Social Media

From time to time we provide information about Helix on Twitter (@Helix_ESG)
and LinkedIn (www.linkedin.com/company/helix-energy-solutions-group).

 
HELIX ENERGY SOLUTIONS GROUP, INC.
                               
Comparative Condensed Consolidated Statements of Operations
                 
Three Months Ended Jun. 30,   Six Months Ended Jun. 30,
(in thousands, except per share data) 2018 2017 2018 2017
(unaudited) (unaudited)
 
Net revenues $ 204,625 $ 150,329 $ 368,887 $ 254,857
Cost of sales   161,728     131,962     313,007     237,315  
Gross profit 42,897 18,367 55,880 17,542
Loss on disposition of assets, net - - - (39 )
Selling, general and administrative expenses   (18,125 )   (13,317 )   (32,224 )   (30,158 )
Income (loss) from operations 24,772 5,050 23,656 (12,655 )
Equity in losses of investment (135 ) (152 ) (271 ) (304 )
Net interest expense (3,599 ) (6,639 ) (7,495 ) (11,865 )
Loss on extinguishment of long-term debt (76 ) (397 ) (1,181 ) (397 )
Other income (expense), net (3,441 ) 467 (2,516 ) (68 )
Other income - oil and gas   561     291     3,416     2,893  
Income (loss) before income taxes 18,082 (1,380 ) 15,609 (22,396 )
Income tax provision   298     5,023     385     422  
Net income (loss) $ 17,784   $ (6,403 ) $ 15,224   $ (22,818 )
 
Earnings (loss) per share of common stock:

Basic

$ 0.12   $ (0.04 ) $ 0.10   $ (0.16 )

Diluted

$ 0.12   $ (0.04 ) $ 0.10   $ (0.16 )
 
Weighted average common shares outstanding:
Basic   146,683     145,940     146,668     144,599  
Diluted   146,724     145,940     146,668     144,599  
 
 
                               
Comparative Condensed Consolidated Balance Sheets
 
ASSETS LIABILITIES & SHAREHOLDERS' EQUITY
(in thousands) Jun. 30, 2018   Dec. 31, 2017 (in thousands) Jun. 30, 2018 Dec. 31, 2017
(unaudited) (unaudited)
Current Assets: Current Liabilities:
Cash and cash equivalents (1) $ 288,490 $ 266,592 Accounts payable $ 69,624 $ 81,299
Accounts receivable, net 156,705 143,283 Accrued liabilities 81,087 71,680
Other current assets   51,519   41,768 Income tax payable 1,477 2,799
Total Current Assets 496,714 451,643 Current maturities of long-term debt (1)   46,151     109,861  
Total Current Liabilities 198,339 265,639
 
 
Long-term debt (1) 412,852 385,766
Deferred tax liabilities 106,560 103,349
Property & equipment, net 1,784,307 1,805,989 Other non-current liabilities 46,699 40,690
Other assets, net   85,823   105,205 Shareholders' equity (1)   1,602,394     1,567,393  
Total Assets $ 2,366,844 $ 2,362,837 Total Liabilities & Equity $ 2,366,844   $ 2,362,837  
 
(1) Net debt to book capitalization - 10% at June 30, 2018.
Calculated as net debt (total long-term debt less cash and cash
equivalents - $170,513) divided by the sum of net debt and
shareholders' equity ($1,772,907).
                 
Helix Energy Solutions Group, Inc.
Reconciliation of Non-GAAP Measures
                             
 

Earnings Release:

 
 
 
Three Months Ended Six Months Ended
6/30/2018 6/30/2017 3/31/2018 6/30/2018 6/30/2017
(in thousands)

Reconciliation from Net Income (Loss) to
Adjusted EBITDA:

Net income (loss) $ 17,784 $ (6,403 ) $ (2,560 ) $ 15,224 $ (22,818 )
Adjustments:
Income tax provision 298 5,023 87 385 422
Net interest expense 3,599 6,639 3,896 7,495 11,865
Loss on extinguishment of long-term debt 76 397 1,105 1,181 397
Other (income) expense, net 3,441 (467 ) (925 ) 2,516 68
Depreciation and amortization   27,877     25,519     27,782     55,659     56,377  
EBITDA   53,075     30,708     29,385     82,460     46,311  
Adjustments:
Loss on disposition of assets, net - - - - 39
Realized losses from foreign exchange contracts not designated as
hedging instruments
(806 ) (981 ) (690 ) (1,496 ) (2,001 )
Other than temporary loss on note receivable   -     -     (1,129 )   (1,129 )   -  
Adjusted EBITDA $ 52,269   $ 29,727   $ 27,566   $ 79,835   $ 44,349  
 
 
 

Free Cash Flow:

Cash flows from operating activities $ 46,620 $ (13,248 ) $ 41,046 $ 87,666 $ 15,601
Less: Capital expenditures, net of proceeds from sale of assets   (20,755 )   (36,396 )   (21,214 )   (41,969 )   (84,396 )
Free cash flow $ 25,865   $ (49,644 ) $ 19,832   $ 45,697   $ (68,795 )
 

We define EBITDA as earnings before income taxes, net interest expense,
gain or loss on extinguishment of long-term debt, net other income or
expense, and depreciation and amortization expense. Non-cash losses on
equity investments are also added back if applicable. To arrive at our
measure of Adjusted EBITDA, we exclude gain or loss on disposition of
assets. In addition, we include realized losses from foreign currency
exchange contracts not designated as hedging instruments and other than
temporary loss on note receivable, which are excluded from EBITDA as a
component of net other income or expense. We define free cash flow as
cash flows from operating activities less capital expenditures, net of
proceeds from sale of assets. We use EBITDA and free cash flow to
monitor and facilitate internal evaluation of the performance of our
business operations, to facilitate external comparison of our business
results to those of others in our industry, to analyze and evaluate
financial strategic planning decisions regarding future investments and
acquisitions, to plan and evaluate operating budgets, and in certain
cases, to report our results to the holders of our debt as required by
our debt covenants. We believe that our measures of EBITDA and free cash
flow provide useful information to the public regarding our ability to
service debt and fund capital expenditures and may help our investors
understand our operating performance and compare our results to other
companies that have different financing, capital and tax structures.
Other companies may calculate their measures of EBITDA, Adjusted EBITDA
and free cash flow differently from the way we do, which may limit their
usefulness as comparative measures. EBITDA, Adjusted EBITDA and free
cash flow should not be considered in isolation or as a substitute for,
but instead are supplemental to, income from operations, net income or
other income data prepared in accordance with GAAP. Non-GAAP financial
measures should be viewed in addition to, and not as an alternative to,
our reported results prepared in accordance with GAAP. Users of this
financial information should consider the types of events and
transactions that are excluded from these measures.

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