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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