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Helix Reports Fourth Quarter And Full Year 2011 Results

Stocks in this article: HLX

Helix Energy Solutions Group, Inc. (NYSE: HLX) reported net income of $16.8 million, or $0.16 per diluted share, for the fourth quarter of 2011 compared with a net loss of $49.8 million, or $(0.48) per diluted share, for the same period in 2010, and net income of $46.0 million, or $0.43 per diluted share, in the third quarter of 2011. Net income for the year ended December 31, 2011 was $129.9 million, or $1.22 per diluted share, compared with a net loss of $127.1 million, or $(1.22) per diluted share, for the year ended December 31, 2010.

Fourth quarter 2011 results included the following items:

  • Impairment charges totaling $107.5 million ($69.9 million after-tax) primarily associated with a reduction in carrying values of certain U.S. oil and gas properties and increases in U.S. and U.K. asset retirement obligations
  • Tax benefit of $31.3 million related to a reorganization of our Australian subsidiaries, offset by impairment charges of $17.1 million associated with the reduction in the fair value of certain Australian assets ($14.2 million after-tax)
  • Gain on sale of an oil and gas property of $4.5 million ($2.9 million after-tax)

The net impact of these items in the fourth quarter, after income taxes, was $(0.50) per diluted share.

Fourth quarter 2011 highlights included:

  • Cash increased by $171 million during the quarter after paying down an additional $18 million in debt, ending the year at $546 million
  • Net debt in the quarter decreased by $187 million for a total net debt decrease in 2011 of $358 million
  • Oil and gas production totaled 2.24 million barrels of oil equivalent, or MMboe (13.4 billion cubic feet equivalent, or Bcfe) in Q4 2011 versus 1.95 MMboe (11.7 Bcfe) in Q3 2011
  • Year-end proved reserve estimates totaled 38.9 MMboe (233.2 Bcfe), 58% of estimated reserves are oil, with a SEC price case PV-10 value of $1.5 billion
  • Total estimated proved and probable reserves as of December 31, 2011 were 58.8 MMBoe (352.9 Bcfe)
  • Sold “Wideberth” gas property for $31 million (5.3 Bcfe of proved reserves)

Owen Kratz, President and Chief Executive Officer of Helix, stated, “when filtering out the impairments, much of which were associated with declining economics on our natural gas properties, Helix booked another strong operational quarter and generated a relatively significant amount of free cash flow.”

Summary of Results

(in thousands, except per share amounts and percentages, unaudited)

 
     

Quarter Ended

       

Twelve Months Ended

December 31

     

September 30

December 31

2011

   

2010

2011

2011

   

2010

Revenues $ 396,185 $ 306,337 $ 372,496 $ 1,398,607 $ 1,199,838
 
Gross Profit (Loss):
Operating $ 139,629 $ 31,790 $ 126,200 $ 474,109 $ 223,031
35 % 10 % 34 % 34 % 19 %
Oil and Gas

Impairments (1), (2)

(107,525 ) (9,212 ) (2,357 ) (132,603 ) (181,083 )
 

Exploration

Expense (3)

  (1,081 )   (6,496 )   (1,548 )   (10,914 )   (8,276 )
Total $ 31,023 $ 16,082 $ 122,295 $ 330,592 $ 33,672
 

Net Income (Loss)Applicable toCommonShareholders (4)

$ 16,753 $ (49,821 ) $ 46,016 $ 129,939 $ (127,102 )
 

Diluted Earnings(Loss) Per Share

$ 0.16 $ (0.48 ) $ 0.43 $ 1.22 $ (1.22 )
 
Adjusted EBITDAX (5) $ 165,601 $ 96,207 $ 178,002 $ 668,662 $ 430,326
 

Note: Footnotes listed at end of press release.

Fourth quarter 2010 results included the following items on a pre-tax basis:

  • Non-cash impairment charge of $16.7 million to write off the carrying value of goodwill and a $7.1 million deferred tax asset valuation allowance attributable to our Southeast Asia well operations subsidiary
  • Impairment charges totaling $9.2 million primarily associated with a reduction in carrying values of certain oil and gas properties and $6.4 million related to expiring offshore leases
  • Loss of $21.4 million associated with the Lufeng contract offshore China related to weather, downhole and mechanical issues.

The net impact of these items in the fourth quarter of 2010, after income taxes, was $(0.54) per diluted share.

 

Segment Information, Operational and Financial Highlights

(in thousands, unaudited)

 
     

Three Months Ended

December 31,

     

September 30,

2011

   

2010

2011

Revenues:

Contracting Services $ 205,378 $ 185,291 $ 229,967
Production Facilities 19,359 20,131 19,986
Oil and Gas 196,072 136,502 159,218
Intercompany Eliminations   (24,624 )   (35,587 )   (36,675 )
Total $ 396,185   $ 306,337   $ 372,496  
 

Income (Loss) from Operations:

Contracting Services $ 25,819 $ (8,148 ) $ 47,363
Goodwill Impairment - (16,743 ) -
Production Facilities 9,545 6,403 10,983
Oil and Gas 93,616 17,048 52,527
Gain on Oil and Gas Derivative
Commodity Contracts - (1,555 ) -
Oil and Gas Impairments (1) (107,525 ) (9,212 ) (2,357 )
Exploration Expense (2) (1,081 ) (6,496 ) (1,548 )
Corporate (14,138 ) (10,367 ) (6,227 )
Intercompany Eliminations   550     (390 )   (528 )
Total $ 6,786   $ (29,460 ) $ 100,213  
Equity in Earnings of Equity Investments $ 5,772   $ 6,537   $ 4,906  
 

Note: Footnotes listed at end of press release.

Contracting Services

  • Subsea Construction and Robotics revenues decreased in the fourth quarter of 2011 compared to the third quarter of 2011 primarily due to decreased utilization of our mobile pipelay equipment and lower activity levels at our onshore spoolbase facility. Overall our utilization rate for our owned and chartered vessels increased to 91% in the fourth quarter of 2011 from 86% in the third quarter of 2011. ROV and trenching utilization increased to 69% in the fourth quarter of 2011 compared to 67% in the third quarter of 2011.
  • Well Intervention revenues decreased in the fourth quarter of 2011 due primarily to lower day rate work performed in the North Sea coupled with the mobilization of the Well Enhancer to West Africa. Vessel utilization in the North Sea decreased to 96% in the fourth quarter of 2011 from 98% in the third quarter of 2011. Vessel utilization in the Gulf of Mexico ( Q4000) was 100% in the fourth quarter of 2011. On a combined basis, vessel utilization decreased slightly to 98% in the fourth quarter of 2011 compared to 99% in the third quarter of 2011.

Production Facilities

  • The Helix Producer I continued its deployment on the Phoenix field throughout the fourth quarter of 2011.

Oil and Gas

  • Oil and Gas revenues increased in the fourth quarter of 2011 compared to the third quarter of 2011 due primarily to slightly higher oil and gas production and higher oil prices. Production in the fourth quarter of 2011 totaled 2.24 MMboe compared to 1.95 MMboe in the third quarter of 2011.
  • The average price realized for oil, including the effects of settled oil hedge contracts, totaled $110.75 per barrel in the fourth quarter of 2011 compared to $100.93 per barrel in the third quarter of 2011. For natural gas and natural gas liquids, including the effect of settled natural gas hedge contracts, we realized $6.16 per thousand cubic feet of gas (Mcf) in the fourth quarter of 2011 compared to $6.15 per Mcf in the third quarter of 2011.
  • Oil and gas production has averaged approximately 24 thousand barrels of oil equivalent per day (Mboe/d) year-to-date through February 21, 2012, compared to an average of 24 Mboe/d in the fourth quarter of 2011.
  • We currently have oil and gas hedge contracts in place totaling 4.6 MMBoe (2.8 million barrels of oil and 11.0 Bcf of gas) in 2012 and 2.1 MMBoe (1.1 million barrels of oil and 6.0 Bcf of gas) in 2013.

Other Expenses

  • Selling, general and administrative expenses were 7.3% of revenue in the fourth quarter of 2011, 5.9% in the third quarter of 2011 and 9.9% in the fourth quarter of 2010.
  • Net interest expense and other decreased to $18.8 million in the fourth quarter of 2011 from $34.8 million in the third quarter of 2011, due primarily to foreign currency gains in the fourth quarter compared to foreign exchange losses and losses associated with premiums paid upon repurchases of senior unsecured notes in the third quarter. Net interest expense decreased to $22.2 million in the fourth quarter of 2011 compared with $24.1 million in the third quarter of 2011, due primarily to our repurchase of $75.0 million of our senior unsecured notes during the third quarter.

Financial Condition and Liquidity

  • We repaid $18.0 million of our Term Loan from proceeds of the sale of an oil and gas property. Since the beginning of 2011 we have repaid $212 million of debt.
  • Consolidated net debt at December 31, 2011 decreased to $609 million from $796 million as of September 30, 2011. We had no outstanding borrowings under our revolver as of December 31, 2011. Our total liquidity at December 31, 2011 was approximately $1.1 billion, consisting of cash on hand of $546 million and revolver availability of $559 million. Net debt to book capitalization as of December, 2011 was 30%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.)
  • On February 21, 2012, we amended our senior credit agreement to allow for an additional $100 million of borrowings under a new term loan committed by a syndicate of banks. Terms and conditions of the new term loan (which is expected to fund in March) are the same as those contained in our revolving credit facility. Proceeds from the term loan together with $100 million of existing liquidity will be used to repay $200 million in principal amount of our senior unsecured notes in late March.
  • We incurred capital expenditures (including capitalized interest) totaling $46 million in the fourth quarter of 2011, compared to $65 million in the third quarter of 2011 and $33 million in the fourth quarter of 2010. For the years ended December 31, 2011 and 2010, capital expenditures incurred totaled $229 million and $179 million, respectively.

Footnotes to “Summary of Results”:

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