Helix Energy Solutions Group, Inc. (NYSE: HLX) reported net income of $44.6 million, or $0.42 per diluted share, for the second quarter of 2012 compared with net income of $41.3 million, or $0.39 per diluted share, for the same period in 2011, and net income of $65.7 million, or $0.62 per diluted share, in the first quarter of 2012. The net income for the six months ended June 30, 2012 was $110.4 million, or $1.04 per diluted share, compared with net income of $67.2 million, or $0.63 per diluted share, for the six months ended June 30, 2011.
Second quarter 2012 results were impacted by a $14.6 million pre-tax charge ($0.09 per share after-tax) related to the decision to “cold stack” the Subsea Construction vessel, Intrepid, to reduce the book value to the vessel’s estimated fair value.
In addition, we reached an agreement to acquire the Discoverer 534 drillship ( D534). After closing and delivery to Singapore, the drillship will be converted into a well intervention vessel. The D534 is expected to enter service in the Gulf of Mexico in the first half of 2013.
Owen Kratz, President and Chief Executive Officer of Helix, stated, “notwithstanding that both the Q4000 and the Seawell were out of service for a good portion of the second quarter due to longer than anticipated regulatory dry docks, Helix managed a fairly good second quarter, resulting in much stronger financial performance for the first half of 2012 compared to last year. Activity levels for both our Well Intervention and Robotics businesses remain strong as we continue to grow backlog. The addition of the D534 to our fleet will allow us to address the robust demand for well intervention services in the near term. In addition, we are pleased to report success on our Danny II exploratory well.”
|Summary of Results (in thousands, except per share amounts and percentages, unaudited)|
|Quarter Ended||Six Months Ended|
|June 30,||March 31,||June 30,|
|Gross Profit (Loss):|
|Contracting Services Impairments (1)||(14,590||)||--||--||(14,590||)||--|
|Oil and Gas Impairments (2)||--||(11,573||)||--||--||(11,573||)|
|Exploration Expense (3)||(1,092||)||(7,939||)||(754||)||(1,846||)||(8,285||)|
|Net Income Applicable to Common Shareholders||$||44,641||$||41,313||$||65,727||$||110,368||$||67,170|
|Diluted Earnings Per Share||$||0.42||$||0.39||$||0.62||$||1.04||$||0.63|
|Adjusted EBITDAX (4)||$||151,526||$||175,840||$||208,641||$||360,167||$||325,059|
|Note: Footnotes appear at end of press release.|
|Segment Information, Operational and Financial Highlights (in thousands, unaudited)|
|Three Months Ended|
|June 30,||March 31,|
|Oil and Gas||149,933||172,458||178,085|
|Income (Loss) from Operations:|
|Oil and Gas||51,465||62,576||80,035|
|Ineffectiveness on Oil and Gas Derivative Commodity Contracts||10,069||--||(2,339||)|
|Contracting Services Impairments (1)||(14,590||)||--||--|
|Oil and Gas Impairments (2)||--||(11,573||)||--|
|Exploration Expense (3)||(1,092||)||(7,939||)||(754||)|
|Equity in Earnings of Equity Investments||$||5,748||$||5,887||$||407|
|Note: Footnotes appear at end of press release.|
- Subsea Construction revenues increased slightly in the second quarter of 2012 compared to the first quarter of 2012 primarily due to strong utilization for the Express while working offshore Israel. On a combined basis, Subsea Construction vessel utilization decreased to 73% in the second quarter of 2012 from 94% in the first quarter of 2012 due to the Intrepid being idle for most of the second quarter of 2012. The Caesar worked the entire second quarter of 2012 offshore Mexico on an accommodations project.
- Revenues in our Robotics business unit decreased slightly in the second quarter of 2012, compared to the first quarter of 2012, as a result of utilizing fewer spot vessels. Earnings contribution from Robotics continues to be strong as we expand our capacity in order to meet new long-term service agreements and robust activity levels. Vessel utilization for the second quarter of 2012 was 92%, compared to 93% in the first quarter of 2012.
- Well Intervention revenues decreased in the second quarter of 2012 due to extended regulatory dry dock periods for both the Q4000 and Seawell. Vessel utilization in the North Sea was 78% in the second quarter of 2012 compared to 93% in the first quarter of 2012. Vessel utilization in the Gulf of Mexico ( Q4000) was 45% in the second quarter of 2012 compared to 67% in the first quarter of 2012 due to the extended regulatory dry dock of the vessel. On a combined basis, vessel utilization decreased to 67% in the second quarter of 2012 compared to 84% in the first quarter of 2012.
- The Helix Producer I continued its deployment on the Phoenix field throughout the second quarter of 2012.
- Oil and Gas revenues decreased in the second quarter of 2012 compared to the first quarter of 2012 primarily due to both decreased production and slightly lower realized prices.
- Some of our fields were shut-in briefly in June for Tropical Storm Debby. In addition, oil production at our SMI 130 property was offline approximately 20 days for mandated regulatory repairs in May. Production in the second quarter of 2012 totaled 1.7 MMboe compared to 2.0 MMboe in the first quarter of 2012.
- The average price realized for oil, including the effects of settled oil hedge contracts, totaled $107.51 per barrel in the second quarter of 2012 compared to $109.18 per barrel in the first quarter of 2012. For natural gas and natural gas liquids, including the effect of settled natural gas hedge contracts, we realized $5.76 per thousand cubic feet of gas equivalent (Mcfe) in the second quarter of 2012 compared to $5.82 per Mcfe in the first quarter of 2012.
- Our third quarter oil and gas production has averaged approximately 17.5 thousand barrels of oil equivalent per day (Mboe/d) through July 22, 2012, compared to an average of 18.5 Mboe/d in the second quarter of 2012.
- We currently have oil and gas hedge contracts in place for 2.6 MMBoe (1.6 million barrels of oil and 5.6 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.
- Selling, general and administrative expenses were 7.1% of revenue in the second quarter of 2012, 6.3% in the first quarter of 2012 and 7.0% in the second quarter of 2011.
- Net interest expense and other decreased to $20.3 million in the second quarter of 2012 from $38.8 million in the first quarter of 2012, due primarily to premiums paid in the first quarter of 2012 upon repurchases of $200.0 million of our senior unsecured notes ($9.5 million) and $142.2 million of our convertible senior notes ($1.8 million). In conjunction with these first quarter 2012 transactions, we also expensed a portion of our previously capitalized deferred financing costs ($2.3 million), and accelerated a portion of our unamortized debt discount ($3.5 million). Total impact of these debt extinguishment transactions was approximately $17.1 million in the first quarter of 2012. Net interest expense decreased to $18.6 million in the second quarter of 2012 compared with $21.8 million in the first quarter of 2012.
- Consolidated net debt at June 30, 2012 decreased to $531 million from $560 million as of March 31, 2012. Our total liquidity at June 30, 2012 was approximately $1.1 billion, consisting of cash on hand of $650 million and revolver availability of $454 million. Net debt to book capitalization as of June 30, 2012 was 25%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.)
- We incurred capital expenditures (including capitalized interest) totaling $76 million in the second quarter of 2012, compared to $107 million in the first quarter of 2012 and $75 million in the second quarter of 2011.
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