Helix Reports Third Quarter 2012 Results

  Helix Reports Third Quarter 2012 Results

Business Wire

HOUSTON -- October 22, 2012

Helix Energy Solutions Group, Inc. (NYSE: HLX) reported net income of $14.9
million, or $0.14 per diluted share, for the third quarter of 2012 compared
with net income of $46.0 million, or $0.43 per diluted share, for the same
period in 2011, and net income of $44.6 million, or $0.42 per diluted share,
in the second quarter of 2012. The net income for the nine months ended
September 30, 2012 was $125.2 million, or $1.18 per diluted share, compared
with net income of $113.2 million, or $1.06 per diluted share, for the nine
months ended September 30, 2011.

Third quarter 2012 results were impacted by the following items:

  *Subsea construction vessel, Intrepid, was sold in September for $14.5
    million resulting in a pre-tax loss of $12.9 million.
  *Impaired certain held-for-sale well intervention assets in Australia in
    September resulting in a pre-tax charge of $4.4 million.
  *Incurred $6.0 million pre-tax of additional abandonment costs associated
    with the final decommissioning of the Camelot oil and gas property located
    offshore in the UK.
  *Production shut-in totaling approximately 130 thousand barrels of oil
    equivalent (MBoe) as a result of Hurricane Isaac (approximately $7.5
    million pre-tax).

The above four items resulted in an after-tax impact of $0.21 per share.

On October 15, 2012, Helix entered into an agreement to sell the pipelay
vessels, Caesar and Express, and related equipment to Coastal Trade Limited
for a total of $238.3 million. The sale of these assets is expected to close
in two stages as each vessel completes its existing contractual backlog. The
Express closing is expected to occur in February 2013 and the Caesar closing
is expected to occur in July 2013. Helix received a $50 million deposit in
connection with this transaction which is only refundable in limited
circumstances. In the fourth quarter of 2012, we expect to take a pre-tax
impairment charge of approximately $160 million, or approximately $100 million
after tax, related to the Caesar and related equipment. In the first quarter
of 2013, we expect to record a pre-tax gain of approximately $14 million, or
approximately $9 million after tax, related to the sale of the Express. The
closing of this transaction is subject to customary closing conditions.

Owen Kratz, President and Chief Executive Officer of Helix, stated, “Our well
intervention and robotics businesses continue to perform at a high level and
the outlook remains robust. Customer interest for well intervention services
is very strong. We are focused on building on our solid foundation for these
two business lines, thus the strategic decision to sell our pipelay fleet.”

                                                                     
Summary of Results

(in thousands, except per share amounts and percentages, unaudited)
                                                             
                   Quarter Ended                             Nine Months Ended
                   September 30                June 30       September 30
                   2012          2011          2012          2012            2011
Revenues           $ 336,234     $ 372,496     $ 347,394     $ 1,091,555     $ 1,002,422
                                                                             
Gross Profit
(Loss):
Operating          $ 100,752     $ 126,200     $ 115,849     $ 379,065       $ 334,480
                     30      %     34      %     33      %     35        %     33        %
Contracting
Services
                     (4,422  )     --            (14,590 )     (19,012   )     --
Impairments
^(1)
Oil and Gas
                     --            --            --            --              (11,573   )
Impairments
^(2)
ARO Overruns
/ Increases          (9,950  )     (2,357  )     (6,942  )     (16,892   )     (13,505   )
^(3)
Exploration
Expense ^           (623    )    (1,548  )    (1,092  )    (2,469    )    (9,833    )
(4)
Total              $ 85,757      $ 122,295     $ 93,225      $ 340,692       $ 299,569
                                                                             
Net Income
Applicable
to Common          $ 14,865      $ 46,016      $ 44,641      $ 125,233       $ 113,186
Shareholders
^(5)
                                                                             
Diluted
Earnings Per       $ 0.14        $ 0.43        $ 0.42        $ 1.18          $ 1.06
Share
                                                                             
Adjusted
EBITDAX ^          $ 127,434     $ 178,002     $ 151,526     $ 487,601       $ 503,061
(6)

Note: Footnotes appear at end of press release.

                                                           
Segment Information, Operational and Financial Highlights

(in thousands, unaudited)
                                                                   
                                   Three Months Ended
                                   September 30,                   June 30,
                                   2012            2011            2012
Revenues:                                                          
Contracting Services               $ 221,491       $ 229,967       $ 209,557
Production Facilities                20,024          19,986          19,963
Oil and Gas                          119,124         159,218         149,933
Intercompany Eliminations           (24,405 )      (36,675 )      (32,059 )
Total                              $ 336,234      $ 372,496      $ 347,394 
                                                                   
Income (Loss) from
Operations:
Contracting Services               $ 50,367        $ 47,363        $ 33,813
Production Facilities                10,180          10,983          9,882
Oil and Gas                          25,540          52,527          58,407
Loss on sale of asset ^(1)           (12,933 )       --              --
Hedge Ineffectiveness and
Non-Hedge
                                     (9,427  )       --              10,069
Gain on Commodity Derivative
Contracts
Contracting Services                 (4,422  )       --              (14,590 )
Impairments ^(2)
ARO Overruns / Increases             (9,950  )       (2,357  )       (6,942  )
^(3)
Exploration Expense                  (623    )       (1,548  )       (1,092  )
Corporate                            (13,396 )       (6,227  )       (11,158 )
Intercompany Eliminations           39            (528    )      98      
Total                              $ 35,375       $ 100,213      $ 78,487  
Equity in Earnings of Equity       $ 1,392        $ 4,906        $ 5,748   
Investments

Note: Footnotes appear at end of press release.

Contracting Services

  *Well Intervention revenues increased in the third quarter of 2012 due to
    100% utilization of both the Q4000 and the Seawell. In addition, the Well
    Enhancer was in regulatory drydock a total of 52 days in the third quarter
    of 2012. The drydock was completed in early October and the Well Enhancer
    returned to service. Vessel utilization in the North Sea was 72% in the
    third quarter of 2012 compared to 78% in the second quarter of 2012.
    Vessel utilization in the Gulf of Mexico (Q4000) was 100% in the third
    quarter of 2012 compared to 45% in the second quarter of 2012 due to the
    extended regulatory dry dock of the vessel in the second quarter. On a
    combined basis, vessel utilization increased to 81% in the third quarter
    of 2012 compared to 67% in the second quarter of 2012.
  *Revenues in our Robotics business unit increased in the third quarter of
    2012, compared to the second quarter of 2012, as a result of increased
    vessel days for spot vessels utilized in the quarter. Two additional ROVs
    were added to the fleet in order to support continued robust activity
    levels. Vessel utilization for the third quarter of 2012 was 98%, compared
    to 92% in the second quarter of 2012.
  *Subsea Construction revenues decreased in the third quarter of 2012
    compared to the second quarter of 2012 primarily due to the Express
    working on a lower day rate project in the North Sea for most of the third
    quarter of 2012. On a combined basis, Subsea Construction vessel
    utilization increased to 93% (excluding the Intrepid) in the third quarter
    of 2012 from 73% (including the Intrepid) in the second quarter of 2012.
    Second quarter 2012 utilization impacted by the Intrepid being idle for
    most of the quarter. The Caesar worked the entire third quarter of 2012
    offshore Mexico on an accommodations project.

Oil and Gas

  *Oil and Gas revenues decreased in the third quarter of 2012 compared to
    the second quarter of 2012 primarily due to both decreased production and
    lower realized prices.
  *Our production was interrupted for approximately 10 days in August for
    Hurricane Isaac, resulting in approximately 130 MBoe of deferred
    production. Production in the third quarter of 2012 totaled 1.5 million
    barrels of oil equivalent (MMboe) compared to 1.7 MMboe in the second
    quarter of 2012.
  *The average price realized for oil, including the effects of settled oil
    hedge contracts, totaled $98.57 per barrel in the third quarter of 2012
    compared to $107.51 per barrel in the second quarter of 2012. For natural
    gas and natural gas liquids, including the effect of settled natural gas
    hedge contracts, we realized $5.69 per thousand cubic feet of gas
    equivalent (Mcfe) in the third quarter of 2012 compared to $5.76 per Mcfe
    in the second quarter of 2012.
  *Our fourth quarter oil and gas production has averaged approximately 14.0
    thousand barrels of oil equivalent per day (Mboe/d) through October 21,
    2012, compared to an average of 16.0 Mboe/d in the third quarter of 2012.
  *We currently have oil and gas hedge contracts in place for 1.2 MMBoe (0.8
    million barrels of oil and 2.7 Bcf of gas) for the remainder of 2012 and
    3.7 MMBoe (2.7 million barrels of oil and 6.0 Bcf of gas) for 2013.

Other Expenses

  *Selling, general and administrative expenses were 8.3% of revenue in the
    third quarter of 2012, 7.1% in the second quarter of 2012 and 5.9% in the
    third quarter of 2011. The increase in the third quarter of 2012 is due
    primarily to office closure-related costs in Holland and Australia.
  *Net interest expense and other decreased to $16.1 million in the third
    quarter of 2012 from $20.3 million in the second quarter of 2012. Net
    interest expense decreased slightly to $18.2 million in the third quarter
    of 2012 compared with $18.6 million in the second quarter of 2012. We
    realized foreign currency gains of $2.1 million in the third quarter of
    2012 compared to a loss of $1.7 million in the second quarter of 2012.

Financial Condition and Liquidity

  *Consolidated net debt at September 30, 2012 increased to $589 million from
    $531 million as of June 30, 2012. The increase was primarily due to
    utilizing $85 million of cash to purchase the Helix 534 (formerly the
    Discoverer 534) from Transocean in August. Our total liquidity at
    September 30, 2012 was approximately $1.0 billion, consisting of cash on
    hand of $584 million and revolver availability of $456 million. Net debt
    to book capitalization as of September 30, 2012 was 27%. (Net debt to book
    capitalization is a non-GAAP measure. See reconciliation attached hereto.)
  *We incurred capital expenditures (including capitalized interest) totaling
    $157 million in the third quarter of 2012, compared to $76 million in the
    second quarter of 2012 and $65 million in the third quarter of 2011.

Footnotes to “Summary of Results”:

                    Third quarter 2012 asset impairment charge of $4.4 million
                    associated with certain held-for-sale well intervention
                    assets in Australia. Second quarter 2012 asset impairment
       (1)  charge related to decision to “cold stack” the Subsea
                    Construction vessel, Intrepid, which was subsequently sold
                    in the third quarter of 2012. Impairment charge reduced
                    vessel’s book value to its then estimated fair value.
                    Nine month 2011 oil and gas impairments of $11.6 million
                    were primarily associated with five of our Gulf of Mexico
                    oil and gas properties. The impairment charges primarily
              (2)   reflect a premature end of these fields’ production lives
                    either through actual depletion or as a result of capital
                    allocation decisions affecting third party operated
                    fields.
                    Third quarter 2012 decommissioning overruns (ARO
                    increases) of $3.9 million and $6.0 million related to GOM
                    properties and our only non-domestic oil and gas property
              (3)   located in the North Sea, respectively. Second quarter
                    2012 decommissioning overruns (ARO increases) related to
                    our only non-domestic oil and gas property located in the
                    North Sea.
              (4)   Nine month 2011 included $6.6 million of exploration costs
                    associated with an offshore lease expiration.
                    Included impact of $12.9 million pre-tax loss ($8.4
              (5)   million after-tax) on sale of the Intrepid in the third
                    quarter of 2012.
              (6)   Non-GAAP measure. See reconciliation attached hereto.

Footnotes to “Segment Information, Operational and Financial Highlights”:

       (1)  Subsea construction vessel, Intrepid, sold in September
                    resulting in pre-tax loss on disposal of $12.9 million.
                    Third quarter 2012 asset impairment charge of $4.4 million
                    associated with certain held-for-sale well intervention
                    assets in Australia. Second quarter 2012 asset impairment
              (2)   charge related to decision to “cold stack” the Subsea
                    Construction vessel, Intrepid, which was subsequently sold
                    in the third quarter of 2012. Impairment charge reduced
                    vessel’s book value to its then estimated fair value.
                    Third quarter 2012 decommissioning overruns (ARO
                    increases) of $3.9 million and $6.0 million related to GOM
                    properties and our only non-domestic oil and gas property
              (3)   in the North Sea, respectively. Second quarter 2012
                    decommissioning overruns (ARO increases) related to our
                    only non-domestic oil and gas property located in the
                    North Sea.
                    

Conference Call Information

Further details are provided in the presentation for Helix’s quarterly
conference call to review its third quarter 2012 results (see the “Investor
Relations” page of Helix’s website, www.HelixESG.com). The call, scheduled for
9:00 a.m. Central Daylight Time on Tuesday, October 23, 2012, will be audio
webcast live from the “Investor Relations” page of Helix’s website. Investors
and other interested parties wishing to listen to the conference via telephone
may join the call by dialing 888-550-1479 for persons in the United States and
+1-954-357-2908 for international participants. The passcode is "Tripodo". A
replay of the conference will be available under "Investor Relations" by
selecting the "Audio Archives" link from the same page beginning approximately
two hours after the completion of the conference call.

Helix Energy Solutions Group, headquartered in Houston, Texas, is an
international offshore energy company that provides development solutions and
other key life of field services to the open energy market as well as to our
own oil and gas business unit.

Reconciliation of Non-GAAP Financial Measures

Management evaluates Company performance and financial condition using certain
non-GAAP metrics, primarily Adjusted EBITDAX, net debt and net debt to book
capitalization. We calculate Adjusted EBITDAX as earnings before net interest
expense, taxes, depreciation and amortization and exploration expense. Net
debt is calculated as the sum of financial debt less cash and equivalents on
hand. Net debt to book capitalization is calculated by dividing net debt by
the sum of net debt, convertible preferred stock and shareholders’ equity.
These non-GAAP measures are useful to investors and other internal and
external users of our financial statements in evaluating our operating
performance because they are widely used by investors in our industry to
measure a company’s operating performance without regard to items which can
vary substantially from company to company, and help investors meaningfully
compare our results from period to period. Adjusted EBITDAX should not be
considered in isolation or as a substitute for, but instead is 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 which are excluded.

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 projections of financial items;
the timing of the closing of our pipelay vessel sales; future production
volumes, results of exploration, exploitation, development, acquisition and
operations expenditures, and prospective reserve levels of property or wells;
any statements of the plans, strategies and objectives of management for
future operations; any statement 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 including but not limited to
the performance of contracts by suppliers, customers and partners; actions by
governmental and regulatory authorities; delays, costs and difficulties
related to the pipelay vessel sales; operating hazards and delays; employee
management issues; uncertainties inherent in the exploration for and
development of oil and gas and in estimating reserves; 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.

HELIX ENERGY SOLUTIONS GROUP, INC.
                                                                   
Comparative Condensed Consolidated Statements of Operations
                                                                      
                          Three Months Ended Sep. 30,             Nine Months Ended Sep. 30,
(in thousands,
except per                2012                2011                2012                  2011
share data)
                          (unaudited)                             (unaudited)
                                                                                        
Net revenues:
Contracting               $ 217,110           $ 213,278           $ 644,413             $ 501,887
services
Oil and gas                119,124           159,218           447,142             500,535   
                            336,234             372,496             1,091,555             1,002,422
Cost of sales:
Contracting                 148,731             147,614             452,855               371,042
services
Contracting
services                    4,422               -                   19,012                -
impairments
Oil and gas                 97,324              102,587             278,996               320,238
Oil and gas                -                 -                 -                   11,573    
impairments
                            250,477             250,201             750,863               702,853
                                                                                        
Gross profit                85,757              122,295             340,692               299,569
Loss on sale of             (12,933 )           -                   (14,647   )           (6        )
assets, net
Hedge
ineffectiveness
and non-hedge
gain on
commodity
derivative                  (9,427  )           -                   (1,697    )           -
contracts
Selling,
general and                (28,022 )          (22,082 )          (78,289   )          (70,821   )
administrative
expenses
Income from                 35,375              100,213             246,059               228,742
operations
Equity in
earnings of                 1,392               4,906               7,547                 16,443
investments
Net interest
expense and                (16,125 )          (34,828 )          (75,245   )          (80,429   )
other
Income before               20,642              70,291              178,361               164,756
income taxes
Provision for              4,967             23,465            50,720              49,186    
income taxes
Net income,
including                   15,675              46,826              127,641               115,570
noncontrolling
interests
Net income
applicable to              (800    )          (800    )          (2,378    )          (2,354    )
noncontrolling
interests
Net income
applicable to               14,875              46,026              125,263               113,216
Helix
Preferred stock            (10     )          (10     )          (30       )          (30       )
dividends
Net income
applicable to             $ 14,865           $ 46,016           $ 125,233            $ 113,186   
Helix common
shareholders
                                                                                        
Weighted Avg.
Common Shares
Outstanding:
Basic                      104,256           104,700           104,450             104,616   
Diluted                    104,729           105,154           104,897             105,061   
                                                                                        
Earnings Per
Share of Common
Stock:
Basic                     $ 0.14             $ 0.43             $ 1.19               $ 1.07      
Diluted                   $ 0.14             $ 0.43             $ 1.18               $ 1.06      
                                                                                                    

                                                                 
Comparative Condensed Consolidated Balance Sheets
                                                                     
ASSETS                                        LIABILITIES & SHAREHOLDERS' EQUITY
(in          Sep. 30,      Dec. 31,      (in            Sep. 30,      Dec. 31,
thousands)    2012            2011            thousands)      2012            2011
              (unaudited)                                     (unaudited)
Current                                       Current
Assets:                                       Liabilities:
Cash and                                      Accounts
equivalents   $ 583,794       $ 546,465       payable         $ 164,110       $ 147,043
(1)
Accounts        247,645         276,156       Accrued           196,289         239,963
receivable                                    liabilities
Other                                         Income taxes
current         131,897         121,621       payable           -               1,293
assets
                                              Current mat
                                      of L-T debt     13,120       7,877
                                              (1)
Total                                         Total Current
Current         963,336         944,242       Liabilities       373,519         396,176
Assets
                                                                              
                                                                              
Net                                           Long-term
Property &                                    debt (1)          1,159,958       1,147,444
Equipment:
Contracting     1,571,204       1,459,665     Deferred          455,266         417,610
Services                                      income taxes
                                              Asset
Oil and Gas     860,623         871,662       retirement        136,293         161,208
                                              obligations
Equity                                        Other
investments     169,318         175,656       long-term         8,336           9,368
                                              liabilities
                                              Convertible
Goodwill        62,769          62,215        preferred         1,000           1,000
                                              stock (1)
Other         84,707       68,907      Shareholders'   1,577,585    1,449,541
assets, net                                   equity (1)
Total                                         Total
Assets       $ 3,711,957   $ 3,582,347   Liabilities &  $ 3,711,957   $ 3,582,347
                                              Equity

      Net debt to book capitalization - 27% at September 30, 2012. Calculated
(1)  as total debt less cash and equivalents ($589,284) divided by sum of
      total net debt, convertible preferred stock and shareholders' equity
      ($2,167,869).


Helix Energy Solutions Group, Inc.
Reconciliation of Non GAAP Measures
Three and Nine Months Ended September 30, 2012
                                                                              
Earnings
Release:
                                                                                                    
Reconciliation
From Net Income
to Adjusted
EBITDAX:
                                                                                                    
                                                                                                    
                         3Q12              3Q11              2Q12                2012              2011
                          (in thousands)
                                                                                                    
Net income
applicable to             $ 14,865          $ 46,016          $ 44,641            $ 125,233         $ 113,186
common
shareholders
Non-cash                    4,422             -                 14,590              19,012            11,573
impairments
Loss (gain) on              12,933            -                 236                 14,647            (747    )
sale of assets
Preferred stock             10                10                10                  30                30
dividends
Income tax                  4,967             23,465            18,476              50,720            49,186
provision
Net interest
expense and                 16,125            34,828            20,319              75,245            81,171
other
Hedge
ineffectiveness
on commodity                10,060            -                 (10,069 )           2,330             -
derivative
contracts
Depreciation
and                         63,429            72,134            62,231              197,915           238,829
amortization
Exploration                623          1,549        1,092         2,469        9,833   
expense
                                                                                                    
Adjusted                  $ 127,434     $ 178,002     $ 151,526      $ 487,601     $ 503,061 
EBITDAX
                                                                                                              

We calculate adjusted EBITDAX as earnings before net interest expense, taxes,
depreciation and amortization, and exploration expense. These non-GAAP
measures are useful to investors and other internal and external users of our
financial statements in evaluating our operating performance because they are
widely used by investors in our industry to measure a company's operating
performance without regard to items which can vary substantially from company
to company and help investors meaningfully compare our results from period to
period. Adjusted EBITDAX should not be considered in isolation or as a
substitute for, but instead is 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
which are excluded.

                                                                     
Helix Energy Solutions Group, Inc.
Reconciliation of Non GAAP Measures
Three Months Ended September 30, 2012
                                     
                                                                             
Earnings Release:
                                                                             
Reconciliation of
significant items:
                                                                             
                                                                             
                                                  3Q12
                                (in thousands, except earnings per share data)
                                                                             
Loss on Intrepid sale                             $  12,933
Australia well
intervention asset                                   4,422
impairment
Camelot (UK)                                         6,038
abandonment cost
Hurricane Isaac                                      7,500
impact
Tax benefit of the                                  (9,265  )
above
Nonrecurring items,                               $  21,628  
net:
                                                                             
Diluted shares                                      104,729 
Net after income tax                              $  0.21    
effect per share
                                                                             

Contact:

Helix Energy Solutions Group, Inc.
Director, Finance & Investor Relations
Terrence Jamerson, 281-618-0400
 
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