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Helix Reports Fourth Quarter and Full Year 2018 Results

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Helix Energy Solutions Group, Inc. ("Helix") (NYSE:HLX) reported a net
loss of $13.7 million, or $(0.09) per diluted share, for the fourth
quarter of 2018 compared to net income of $50.6 million, or $0.34 per
diluted share, for the same period in 2017 and net income of $27.1
million, or $0.18 per diluted share, for the third quarter of 2018. Net
income for the year ended December 31, 2018 was $28.6 million, or $0.19
per diluted share, compared to net income of $30.1 million, or $0.20 per
diluted share, for the year ended December 31, 2017. Net income in the
fourth quarter of 2017 included a non-cash benefit of approximately
$51.6 million, or $0.35 per diluted share, related to the U.S. tax law
changes enacted in December 2017.

Helix reported Adjusted EBITDA1 of $23.2 million for the
fourth quarter of 2018 compared to $32.4 million for the fourth quarter
of 2017 and $58.6 million for the third quarter of 2018. Adjusted EBITDA
for the year ended December 31, 2018 was $161.7 million compared to
$107.2 million for the year ended December 31, 2017. The table below
summarizes our results of operations:

Summary of Results

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

       
Three Months Ended Year Ended
12/31/2018   12/31/2017   9/30/2018 12/31/2018   12/31/2017
Revenues $ 158,356 $ 163,266 $ 212,575 $ 739,818 $ 581,383
 
Gross Profit $ 13,811 $ 23,483 $ 51,993 $ 121,684 $ 62,166
9 % 14 % 24 % 16 % 11 %
 
Non-cash Losses on Equity Investment $ (3,430 ) $ (1,800 ) $ - $ (3,430 ) $ (1,800 )
 
Net Income (Loss) $ (13,747 ) $ 50,580 $ 27,121 $ 28,598 $ 30,052
 
Diluted Earnings (Loss) Per Share $ (0.09 ) $ 0.34 $ 0.18 $ 0.19 $ 0.20
Adjusted EBITDA1 $ 23,238 $ 32,415 $ 58,636 $ 161,709 $ 107,216
 
Cash and cash equivalents $ 279,459 $ 266,592 $ 325,092 $ 279,459 $ 266,592
Cash flows from operating activities $ 45,917 $ 20,315 $ 63,161 $ 196,744 $ 51,638
1   Adjusted EBITDA is a non-GAAP measure. See reconciliation below.
 
 

Owen Kratz, President and Chief Executive Officer of Helix, stated,
"Despite the continued challenging energy market and the seasonal
slowdown in the North Sea, our results for the quarter and year reflect
our continued efforts at improving operations and reducing costs. In
2018, the increase in revenue and income from operations was driven by a
full year of activity in Brazil and cost reductions and execution of
operations in Robotics and throughout the company. In 2019, we will
continue our efforts to improve our operations, reduce our costs and
seek opportunities to stimulate customer activity in this challenging
market."

Segment Information, Operational and
Financial Highlights

($ in thousands, unaudited)

     
Three Months Ended Year Ended
12/31/2018   12/31/2017   9/30/2018 12/31/2018   12/31/2017
Revenues:
Well Intervention $ 114,799 $ 107,122 $ 154,441 $ 560,568 $ 406,341
Robotics 38,420 50,677 54,340 158,989 152,755
Production Facilities 15,859 16,387 15,877 64,400 64,352
Intercompany Eliminations   (10,722 )   (10,920 )   (12,083 )   (44,139 )   (42,065 )
Total $ 158,356   $ 163,266   $ 212,575   $ 739,818   $ 581,383  
 
Income (Loss) from Operations:
Well Intervention $ 4,869 $ 15,377 $ 34,427 $ 87,643 $ 52,733
Robotics (1,236 ) (4,976 ) 5,601 (14,054 ) (42,289 )
Production Facilities 6,344 7,448 6,694 27,263 28,172
Corporate / Other / Eliminations   (13,467 )   (11,091 )   (15,345 )   (49,309 )   (39,746 )
Total $ (3,490 ) $ 6,758   $ 31,377   $ 51,543   $ (1,130 )
 
 

Fourth-Quarter Results

Well Intervention

Well Intervention revenues in the fourth quarter of 2018 decreased $39.6
million, or 26%, from the previous quarter. The decrease in revenues was
primarily the result of lower vessel utilization and rates in the Gulf
of Mexico and the seasonal slowdown in the North Sea. These reductions
were partially offset by an increase in revenues due to higher vessel
utilization in Brazil. Overall utilization decreased to 79% in the
fourth quarter of 2018 compared to 91% in the third quarter of 2018.

Well Intervention revenues increased $7.7 million, or 7%, in the fourth
quarter of 2018 compared to the fourth quarter of 2017. The increase was
primarily due to 75 additional vessel days in the fourth quarter of 2018
compared to the fourth quarter of 2017 with the introduction of the Siem
Helix 2
in that quarter as well as increased utilization and rates
in the North Sea compared to the fourth quarter of 2017. These increases
were partially offset by a decrease in revenues in the Gulf of Mexico
due to lower vessel utilization and rates in the fourth quarter of 2018
compared to the fourth quarter of 2017.

Robotics

Robotics revenues in the fourth quarter of 2018 decreased by $15.9
million, or 29%, from the previous quarter. The decrease was driven by a
reduction in trenching work in the North Sea and lower chartered vessel
and ROV utilization compared to the previous quarter. Chartered vessel
utilization decreased to 78% in the fourth quarter of 2018, which
includes 60 spot vessel days, from 98% in the third quarter of 2018,
which includes 113 spot vessel days. ROV asset utilization decreased to
36%, including 151 trenching days, in the fourth quarter of 2018 from
42%, including 219 trenching days, in the third quarter of 2018.

Robotics revenues decreased $12.3 million, or 24%, in the fourth quarter
of 2018 from the fourth quarter of 2017. Vessel utilization was 78% in
the fourth quarter of 2018 compared to 85% in the fourth quarter of
2017. ROV asset utilization decreased to 36% in the fourth quarter of
2018 from 41% in the fourth quarter of 2017, and the fourth quarter of
2018 included 26 fewer trenching days compared to the same quarter in
2017. One ROV and one ROVDrill were retired during the fourth quarter
2018. Robotics operating income improved by $3.7 million in the fourth
quarter of 2018 compared to the fourth quarter of 2017 due to cost
reductions year over year.

Selling, General and Administrative

Selling, general and administrative expenses were $17.3 million, or
10.9% of revenue, in the fourth quarter of 2018 compared to $20.8
million, or 9.8% of revenue, in the third quarter of 2018. The decrease
in expenses was principally attributable to decreased costs associated
with our employee share-based compensation awards linked to our stock
price, offset in part by increased costs related to employee incentive
compensation and other employee benefits compared to the third quarter.

Other Income and Expenses

During the fourth quarter of 2018 we recognized losses on our investment
in Independence Hub LLC of $3.4 million compared to losses of $1.8
million in the fourth quarter of 2017. Other expense, net was $3.1
million in the fourth quarter of 2018 compared to $0.7 million in the
third quarter of 2018. The increase was primarily due to an increase in
net foreign currency losses quarter over quarter.

Cash flows

Capital expenditures and dry dock costs totaled $81.7 million and $1.6
million, respectively, in the fourth quarter of 2018 compared to $13.5
million and $0.2 million in the third quarter of 2018 and $99.7 million
and $0.0 million in the fourth quarter of 2017. Our capital expenditures
in the fourth quarter of 2018 and 2017 each included a $69.2 million
installment payment to the shipyard for the Q7000.

Operating cash flow decreased to $45.9 million in the fourth quarter of
2018 compared to $63.2 million in the third quarter of 2018, primarily
due to a decrease in operating income offset in part by net reductions
in working capital. Operating cash flow in the fourth quarter of 2018
increased by $25.6 million year over year due primarily to higher net
income and changes in working capital.

Free cash flow was $(35.7) million in the fourth quarter of 2018
compared to $49.7 million in the third quarter of 2018. The decrease was
primarily due to lower operating cash flow and higher capital
expenditures in the fourth quarter, including a $69.2 million shipyard
payment for the Q7000. Free cash flow in the fourth quarter of
2018 increased $43.7 million year over year due to higher operating cash
flow on higher earnings and reduced capital expenditures resulting from
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.)

Full-Year Results

Well Intervention

Well Intervention revenues of $560.6 million grew by $154.2 million, or
38%, from 2017 levels, driven primarily by a full year of operations in
Brazil by the Siem Helix 1 and Siem Helix 2, improved
utilization in the North Sea, and higher IRS rental unit revenues,
partially offset by decreased vessel utilization in the Gulf of Mexico.
Overall vessel utilization improved to 83% in 2018 compared to 77% in
2017.

Robotics

Robotics revenues of $159 million grew by $6.2 million, or 4%, from 2017
levels. The increase was the result of higher trenching activity in the
North Sea and overall vessel utilization growth, offset in part by lower
ROV utilization. Trenching days increased to 560 days in 2018 from 350
days in 2017, and overall vessel utilization was 76% in 2018 compared to
69% in 2017. Overall ROV utilization decreased to 37% in 2018 compared
to 42% in 2017. Robotics operating loss decreased by $28.2 million in
2018 due to a reduction in operating costs and an increase in revenues.

Selling, General and Administrative

Selling, general and administrative expenses were $70.3 million, or 9.5%
of revenue, in 2018 compared to $63.3 million, or 10.9% of revenue, in
2017. The increase was primarily related to increased costs related to
employee incentive compensation and other employee benefits.

Cash flows

Capital expenditures and dry dock costs totaled $137.1 million and $4.1
million, respectively, in 2018 compared to $231.1 million and $10.1
million in 2017. Capital expenditures decreased primarily due to the
completion of the Siem Helix 1 and Siem Helix 2 vessels in
2017.

Operating cash flow increased to $196.7 million in 2018 compared to
$51.6 million in 2017, primarily due to an improvement in operating
income and reductions in working capital. Free cash flow was $59.7
million in 2018 compared to $(169.5) million in 2017. The increase was
due to higher operating cash flows in 2018 and lower capital
expenditures 2018. (Free cash flow is a non-GAAP measure. See
reconciliation below.)

Financial Condition and Liquidity

Cash and cash equivalents at December 31, 2018 were $279.5 million.
Consolidated long-term debt decreased to $440.3 million at December 31,
2018 from $448.0 million at September 30, 2018. Consolidated net debt at
December 31, 2018 was $160.9 million. Net debt to book capitalization at
December 31, 2018 was 9%. (Net debt and net debt to book capitalization
are non-GAAP measures. See reconciliation below.)

Conference Call Information

Further details are provided in the presentation for Helix's quarterly
teleconference to review its fourth quarter 2018 results (see the
"Investor Relations" page of Helix's website, www.HelixESG.com).
The teleconference, scheduled for Tuesday, February 19, 2019 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 participate in the teleconference may join by dialing
1-800-926-6734 for participants in the United States and 1-212-231-2939
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 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, cash flows from
operating activities, other income or cash flow 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 market conditions; results from
acquired properties; demand for our services; 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 Helix's most
recently filed Annual Report on Form 10-K and in Helix'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 Dec. 31, Year Ended Dec. 31,
(in thousands, except per share data)     2018 2017 2018 2017
(unaudited) (unaudited)
 
Net revenues $ 158,356 $ 163,266 $ 739,818 $ 581,383
Cost of sales   144,545     139,783     618,134     519,217  
Gross profit 13,811 23,483 121,684 62,166
Gain (loss) on disposition of assets, net - - 146 (39 )
Selling, general and administrative expenses   (17,301 )   (16,725 )   (70,287 )   (63,257 )
Income (loss) from operations (3,490 ) 6,758 51,543 (1,130 )
Equity in losses of investment (3,540 ) (1,911 ) (3,918 ) (2,368 )
Net interest expense (3,007 ) (3,298 ) (13,751 ) (18,778 )
Loss on extinguishment of long-term debt - - (1,183 ) (397 )
Other expense, net (3,099 ) (815 ) (6,324 ) (1,434 )
Other income - oil and gas   563     539     4,631     3,735  
Income (loss) before income taxes (12,573 ) 1,273 30,998 (20,372 )
Income tax provision (benefit)   1,174     (49,307 )   2,400     (50,424 )
Net income (loss) $ (13,747 ) $ 50,580   $ 28,598   $ 30,052  
 
Earnings (loss) per share of common stock:
Continuing operations Basic $ (0.09 ) $ 0.34   $ 0.19   $ 0.20  
Discontinued operations Diluted $ (0.09 ) $ 0.34   $ 0.19   $ 0.20  
 
Weighted average common shares outstanding:
Basic   146,769     146,001     146,702     145,295  
Diluted   146,769     146,081     146,830     145,300  
 
 
                                 
Comparative Condensed Consolidated Balance Sheets
 
ASSETS LIABILITIES & SHAREHOLDERS' EQUITY
(in thousands) Dec. 31, 2018 Dec. 31, 2017 (in thousands)   Dec. 31, 2018 Dec. 31, 2017
(unaudited) (unaudited)
Current Assets: Current Liabilities:
Cash and cash equivalents (1) $ 279,459 $ 266,592 Accounts payable $ 54,813 $ 81,299
Accounts receivable, net 119,875 143,283 Accrued liabilities 85,594 71,680
Other current assets   51,594   41,768 Income tax payable 3,829 2,799
Total Current Assets 450,928 451,643 Current maturities of long-term debt (1)   47,252     109,861  
Total Current Liabilities 191,488 265,639
 
 
Long-term debt (1) 393,063 385,766
Deferred tax liabilities 105,862 103,349
Property & equipment, net 1,826,745 1,805,989 Other non-current liabilities 39,538 40,690
Other assets, net   70,057   105,205 Shareholders' equity (1)   1,617,779     1,567,393  
Total Assets $ 2,347,730 $ 2,362,837 Total Liabilities & Equity $ 2,347,730   $ 2,362,837  

(1)

  Net debt to book capitalization - 9% at December 31, 2018.
Calculated as net debt (total long-term debt less cash and cash
equivalents - $160,856) divided by the sum of net debt and
shareholders' equity ($1,778,635).
 
 

Helix Energy Solutions Group, Inc.

Reconciliation of Non-GAAP Measures

 
             

Earnings Release:

 
Three Months Ended Year Ended
12/31/2018 12/31/2017 9/30/2018 12/31/2018 12/31/2017
(in thousands)
Reconciliation from Net Income (Loss) to Adjusted EBITDA:
Net income (loss) $ (13,747 ) $ 50,580 $ 27,121 $ 28,598 $ 30,052
Adjustments:
Income tax provision (benefit) 1,174 (49,307 ) 841 2,400 (50,424 )
Net interest expense 3,007 3,298 3,249 13,751 18,778
Loss on extinguishment of long-term debt - - 2 1,183 397
Other expense, net 3,099 815 709 6,324 1,434
Depreciation and amortization 27,183 26,075 27,680 110,522 108,745
Non-cash losses on equity investment   3,430     1,800     -     3,430     1,800  
EBITDA   24,146     33,261     59,602     166,208     110,782  
Adjustments:
(Gain) loss on disposition of assets, net - - (146 ) (146 ) 39
Realized losses from foreign exchange contracts not designated as
hedging instruments
(908 ) (846 ) (820 ) (3,224 ) (3,605 )
Other than temporary loss on note receivable   -     -     -     (1,129 )   -  
Adjusted EBITDA $ 23,238   $ 32,415   $ 58,636   $ 161,709   $ 107,216  
 
 
 
Free Cash Flow:
Cash flows from operating activities $ 45,917 $ 20,315 $ 63,161 $ 196,744 $ 51,638
Less: Capital expenditures, net of proceeds from sale of assets   (81,652 )   (99,699 )   (13,437 )   (137,058 )   (221,127 )
Free cash flow $ (35,735 ) $ (79,384 ) $ 49,724   $ 59,686   $ (169,489 )
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,
cash flows from operating activities, other income or cash flow 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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