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Helix Reports Fourth Quarter And Full Year 2012 Results

Stocks in this article: HLX

Helix Energy Solutions Group, Inc. (NYSE: HLX) reported a net loss of $171.6 million, or $(1.64) per diluted share, for the fourth quarter of 2012 compared with net income of $16.8 million, or $0.16 per diluted share, for the same period in 2011, and net income of $14.9 million, or $0.14 per diluted share, in the third quarter of 2012. Net loss for the year ended December 31, 2012 was $46.3 million, or $(0.44) per diluted share, compared with net income of $129.9 million, or $1.23 per diluted share, for the year ended December 31, 2011.

Fourth quarter 2012 results were impacted by the following items:

  • An impairment charge of $157.8 million related to the pending sale of the Caesar and related mobile pipelay equipment.
  • An impairment charge of $138.6 million related to the February 2013 sale of our oil and gas business (included in discontinued operations).
  • Net realized loss of $3.3 million ($10.5 million loss in continuing operations and $7.2 million gain in discontinued operations) due to the discontinuance of hedge accounting on our commodity contracts as a result of the sale of our oil and gas business.

The above three items resulted in an after-tax impact of $(1.87) per diluted share – $(1.05) per diluted share continuing operations and $(0.82) per diluted share discontinued operations.

Fourth quarter 2012 highlights included:

  • In October, entered into an agreement to sell the Caesar, Express, and related equipment for $238 million. Express closing is expected in May and Caesar closing is expected in July.
  • In December, we entered into an agreement to sell our wholly-owned U.S. oil and gas subsidiary, Energy Resource Technology GOM, Inc. (ERT). The sale closed on February 6, 2013 for $620 million in cash plus future overriding royalties.

Owen Kratz, President and Chief Executive Officer of Helix, stated, “The divestiture of our oil and gas business and the pending sale of our pipelay vessels represent watershed events in the development of Helix. We are better positioned to advance our strategy of growing our Well Intervention and Robotics businesses.”

Summary of Results

(in thousands, except per share amounts and percentages, unaudited)
 
      Quarter Ended     Year Ended
12/31/2012     12/31/2011     9/30/2012 12/31/2012     12/31/2011
Revenues $ 201,696 $ 200,113 $ 217,110 $ 846,109 $ 702,000
 
Gross Profit (Loss)
Operating $ 49,026 $ 32,837 $ 62,513 $ 227,050 $ 156,247
24 % 16 % 29 % 27 % 22 %
Contracting Services Impairments (1)   (157,951 )   (6,564 )   (4,594 )   (177,135 )   (6,564 )
Total $ (108,925 ) $ 26,273 $ 57,919 $ 49,915 $ 149,683
 

Net Income (Loss) Applicable to Common Shareholders

Income (Loss) from continuing operations (2) $ (99,679 ) $ 17,487 $ 10,362 $ (70,018 ) $ 34,718
Income (Loss) from discontinued operations (3)   (71,888 )   (734 )   4,503     23,684     95,221  
Total $ (171,567 ) $ 16,753   $ 14,865   $ (46,334 ) $ 129,939  
 
Diluted Earnings (Loss) Per Share
Income (Loss) from continuing operations $ (0.95 ) $ 0.17 $ 0.10 $ (0.67 ) $ 0.33
Income (Loss) from discontinued operations $ (0.69 ) $ (0.01 ) $ 0.04   $ 0.23   $ 0.90  
Total $ (1.64 ) $ 0.16   $ 0.14   $ (0.44 ) $ 1.23  
 
Adjusted EBITDA from continuing operations $ 47,699 $ 34,467 $ 62,895 $ 233,612 $ 178,953
Adjusted EBITDAX from discontinued operations   65,528     131,134     64,539     367,216     489,709  
Adjusted EBITDAX (4) $ 113,227   $ 165,601   $ 127,434   $ 600,828   $ 668,662  
 
Note: Footnotes appear at end of press release.
 

Segment Information, Operational and Financial Highlights

(in thousands, unaudited)
 
      Three Months Ended
12/31/2012     12/31/2011     9/30/2012

Continuing Operations:

Revenues:
Contracting Services $ 224,201 $ 205,378 $ 221,491
Production Facilities 20,082 19,359 20,024
Intercompany Eliminations   (42,587 )   (24,624 )   (24,405 )
Total $ 201,696   $ 200,113   $ 217,110  
 
Income (Loss) from Operations:
Contracting Services $ 39,433 $ 32,383 $ 50,539
Production Facilities 9,971 9,545 10,180
Loss on sale of asset (1) (543 ) - (12,933 )
Contracting Services Impairments (2) (157,951 ) (6,564 ) (4,594 )
Corporate/Other (31,551 ) (35,948 ) (23,015 )
Intercompany Eliminations   (4,995 )   550     39  
Total $ (145,636 ) $ (34 ) $ 20,216  
Equity in Earnings of Equity Investments $ 887   $ 5,772   $ 1,392  
 
Discontinued Operations (Oil and Gas):
Revenues $ 110,089 $ 196,072 $ 119,124
Income (Loss) from Operations (3) $ (103,611 ) $ 6,820 $ 15,159
 
Note: Footnotes appear at end of press release.
 

Contracting Services

  • Well Intervention revenues increased in the fourth quarter of 2012 compared to the third quarter of 2012 due to higher overall vessel utilization of the fleet. The Well Enhancer returned to service early October after a 52 day regulatory dry dock. Vessel utilization in the North Sea was 91% in the fourth quarter of 2012 compared to 72% in the third quarter of 2012. Vessel utilization in the Gulf of Mexico ( Q4000) was 100% in both the third and fourth quarters of 2012. On a combined basis, vessel utilization increased to 94% in the fourth quarter of 2012 compared to 81% in the third quarter of 2012.
  • Robotics revenues decreased in the fourth quarter of 2012 compared to the third quarter of 2012 as a result of a decrease in utilization across all assets in the fourth quarter. Chartered vessel utilization in the fourth quarter of 2012 was 87% compared to 98% in the third quarter of 2012. The utilization decrease was primarily due to the mobilization of vessels from the Gulf of Mexico to the North Sea.
  • Subsea Construction revenues decreased in the fourth quarter of 2012 compared to the third quarter of 2012 due to low utilization of the Express as a result of customer permitting issues in the Gulf of Mexico resulting in delays that pushed the scheduled work into the first quarter of 2013. The Caesar worked the entire fourth quarter of 2012 offshore Mexico on an accommodations project. On a combined basis, Subsea Construction vessel utilization decreased to 78% in the fourth quarter of 2012 from 93% in the third quarter of 2012.

Oil and Gas (Discontinued Operations)

  • Oil and Gas revenues decreased in the fourth quarter of 2012 compared to the third quarter of 2012 primarily due to decreased oil production.
  • Production in the fourth quarter of 2012 totaled 1.4 million barrels of oil equivalent (MMboe) compared to 1.5 MMboe in the third quarter of 2012.
  • The average price realized for oil, including the effects of settled oil hedge contracts, totaled $99.32 per barrel in the fourth quarter of 2012 compared to $98.57 per barrel in the third quarter of 2012. For natural gas and natural gas liquids, including the effect of settled natural gas hedge contracts, we realized $3.38 per thousand cubic feet of gas equivalent (Mcfe) in the fourth quarter of 2012 compared to $5.69 per Mcfe in the third quarter of 2012. The differential in our realized gas prices between the third and fourth quarters of 2012 was due to the fact that we discontinued hedge accounting on our commodity contracts in December as a result of the sale of ERT.
  • On February 6, 2013 we sold ERT, our former oil and gas subsidiary, for $620 million purchase price plus future overriding royalties.

Other Expenses

  • Selling, general and administrative expenses were 12.7% of revenue in the fourth quarter of 2012, 11.4% in the third quarter of 2012 and 13.1% in the fourth quarter of 2011. Spending levels primarily remained flat, while revenues decreased in the fourth quarter of 2012 compared to the third quarter of 2012.
  • Net interest expense and other increased to $11.9 million in the fourth quarter of 2012 from $9.2 million in the third quarter of 2012. Net interest expense decreased slightly to $10.8 million in the fourth quarter of 2012 compared to $11.3 million in the third quarter of 2012 due to an increase in capitalized interest over the same period. We realized foreign currency losses of $1.1 million in the fourth quarter of 2012 compared to gains of $2.1 million in the third quarter of 2012.

Financial Condition and Liquidity

  • Consolidated net debt at December 31, 2012 decreased to $582 million from $589 million as of September 30, 2012. Our total liquidity at December 31, 2012 was approximately $0.9 billion, consisting of cash on hand of $437 million and revolver availability of $488 million. Net debt to book capitalization as of December 31, 2012 was 29%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.) Following the sale of ERT, on February 7, 2013 we repaid $318.4 million of debt under our Credit Agreement ($293.9 million of our term loans and $24.5 million of our revolver).
  • We incurred capital expenditures (including capitalized interest) totaling $157 million in both the third and fourth quarter of 2012, compared to $46 million in the fourth quarter of 2011. For the years ended December 31, 2012 and 2011, capital expenditures incurred totaled $497 million and $229 million, respectively.
Footnotes to “Summary of Results”:
             
(1)

Fourth quarter 2012 asset impairment charge of $157.8 million related to the pending sale of the Caesar and related mobile pipelay equipment. 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 charge related to decision to “cold stack” the Subsea Construction vessel, Intrepid, which was subsequently sold in the third quarter of 2012. Fourth quarter 2011 $6.6 million impairment charge related to our well intervention equipment in Australia.

 
(2)

Fourth quarter 2012 included impact of $157.8 million asset impairment charge related to the pending sale of the Caesar and related mobile pipelay equipment.

 
(3) Fourth quarter 2012 included $138.6 million asset impairment charge related to the February 2013 sale of our oil and gas business. Fourth quarter 2011 included impairments primarily associated with the reduction in carrying values of certain oil and gas properties due to year end revisions in reserves.
 
(4) 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.

 
(2)

Fourth quarter 2012 asset impairment charge of $157.8 million related to the pending sale of the Caesar and related mobile pipelay equipment. Third quarter 2012 asset impairment charge of $4.4 million associated with certain held-for-sale well intervention assets in Australia. Fourth quarter 2011 $6.6 million impairment charge related to our well intervention equipment in Australia.

 
(3) Fourth quarter 2012 included $138.6 million asset impairment charge related to February 2013 the sale of our oil and gas business. Fourth quarter 2011 included impairments primarily associated with the reduction in carrying values of certain oil and gas properties due to year end revisions in reserves.
 

Conference Call Information

Further details are provided in the presentation for Helix’s quarterly conference call to review its fourth quarter 2012 results (see the “Investor Relations” page of Helix’s website, www.HelixESG.com). The call, scheduled for 9:00 a.m. Central Standard Time on Thursday, February 21, 2013, 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 800-757-8529 for persons in the United States and +1-212-231-2921 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 key life of field services to the energy market. For more information about Helix, please visit our website at www.HelixESG.com.

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.

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