Helix Energy Solutions Group, Inc. (NYSE: HLX) reported net income of $27.2 million, or $0.26 per diluted share, for the second quarter of 2013 compared to net income of $44.6 million, or $0.42 per diluted share, for the same period in 2012, and $1.6 million, or $0.02 per diluted share, in the first quarter of 2013. The net income for the six months ended June 30, 2013 was $28.8 million, or $0.27 per diluted share, compared with net income of $110.4 million, or $1.05 per diluted share, for the six months ended June 30, 2012.
Owen Kratz, President and Chief Executive Officer of Helix, stated, “With the sale of the Caesar and Express now behind us along with the pending sale of the Ingleside Spoolbase, we have completed our transition to a company focused on well intervention and robotics, two businesses with exciting growth prospects. Financially, we are pleased to have closed the chapter on the high yield notes with its payoff yesterday and our new credit facility provides us with a lower cost of capital.”
Summary of Results
(in thousands, except per share amounts and percentages, unaudited)
|Quarter Ended||Six Months Ended|
|Gross Profit (Loss)|
Contracting Services and ARO Impairments (1)
Net Income (Loss) Applicable to Common Shareholders
|Income (Loss) from continuing operations (2)||$||27,240||$||2,425||$||557||$||27,797||$||19,299|
|Income (Loss) from discontinued operations||(29||)||42,216||1,058||1,029||91,069|
|Diluted Earnings (Loss) Per Share|
|Income (Loss) from continuing operations **||$||0.26||$||0.02||$||0.01||$||0.26||$||0.18|
|Income (Loss) from discontinued operations||$||-||$||0.40||$||0.01||$||0.01||$||0.87|
|Adjusted EBITDA from continuing operations **||$||74,533||$||48,920||$||42,031||$||116,564||$||123,018|
|Adjusted EBITDAX from discontinued operations||-||102,606||31,754||31,754||237,149|
|Adjusted EBITDAX (3)||$||74,533||$||151,526||$||73,785||$||148,318||$||360,167|
** First quarter 2013 includes $14.1 million loss in connection with the settlement of our commodity hedge contracts associated with our former oil and gas business, which were not included in the sale of ERT.
Note: Footnotes appear at end of press release.
Segment Information, Operational and Financial Highlights
(in thousands, unaudited)
|Three Months Ended|
|Income (Loss) from Operations:|
|Loss on sale of asset||(1,085||)||-||-|
|Contracting Services Impairments (1)||-||(14,590||)||-|
|Equity in Earnings of Equity Investments||$||683||$||5,748||$||610|
Discontinued Operations (Oil and Gas):
|Income (Loss) from Operations||$||(45||)||$||71,618||$||4,360|
|Note: Footnotes appear at end of press release.|
- Well Intervention revenues decreased 7% in the second quarter of 2013 compared to the first quarter of 2013, primarily representing a slight decrease in vessel utilization. On a combined basis, vessel utilization decreased to 93% in the second quarter of 2013 from 100% in the first quarter of 2013. The three vessels in the North Sea (including the newly introduced Skandi Constructor) achieved 95% utilization in the second quarter compared to 100% for the two vessels, the Seawell and the Well Enhancer, in the first quarter of 2013. The decrease in this combined utilization rate reflects some downtime for maintenance on the Seawell and the Skandi Constructor being quayside while undergoing some modifications to ready her for deployment as a well intervention vessel. The Q4000 achieved 86% utilization in the Gulf of Mexico in the second quarter of 2013, ending its consecutive streak of three quarters with full utilization; however the primary reason for the decrease in utilization was a required and scheduled inspection of the vessel by the U.S. Coast Guard.
- Robotics revenues increased 38% in the second quarter of 2013 compared to the first quarter of 2013, primarily reflecting a significant increase in vessel utilization as the seasonal decline in work over the winter months gave way to more normal activity levels. Chartered vessel utilization in the second quarter of 2013 was 98% compared to 69% in the first quarter of 2013.
- Subsea Construction revenues increased 37% in the second quarter of 2013 compared to the first quarter of 2013, representing increased work scopes on both of the final two projects performed by the Express. We have completed the previously announced sale of our pipelay vessels, with the sale of the Caesar occurring in June 2013 and the sale of the Express just recently occurring on July 17, 2013.
- Selling, general and administrative expenses were 8.3% of revenue in the second quarter of 2013, 11.8% of revenue in the first quarter of 2013, and 10.9% in the second quarter of 2012. The decreased percentage of selling, general and administrative expenses in the second quarter of 2013 compared to the first quarter of 2013 is primarily attributable to lower headcount as well as severance costs incurred in the first quarter of 2013.
- Net interest expense and other decreased to $11.3 million in the second quarter of 2013 from $14.1 million in the first quarter of 2013. Net interest expense increased to $11.3 million in the second quarter of 2013 compared to $10.3 million in the first quarter of 2013. The amount increased despite a substantial reduction in our outstanding indebtedness, including the repayment of both the Term Loan and Revolver debt ($150.4 million) during the quarter, because we no longer allocate any interest to our discontinued former oil and gas business. In the first quarter of 2013, $2.7 million of net interest expense was allocated to our former oil and gas business prior to its sale in February 2013.
- Consolidated net debt at June 30, 2013 decreased to $35 million from $72 million at March 31, 2013. Our total liquidity at June 30, 2013 was approximately $1.1 billion, consisting of cash on hand of $514 million and revolver availability of $579 million. Net debt to book capitalization at June 30, 2013 was 2%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation attached hereto.)
- In June 2013, we entered into a new $900 million Credit Agreement to replace the then existing credit facility, which we fully repaid using cash on hand, including the proceeds from the sale of the Caesar. The new Credit Facility consists of a $300 Term Loan and $600 million Revolving Credit Facility. The Credit Facility will mature on July 19, 2018. We had no amounts outstanding under the facility at June 30, 2013. In July 2013, we borrowed the $300 million under the Term Loan component of the facility, at a rate of one-month LIBOR plus 2.75%, to fund the redemption of the remaining $275 million of our 9.5% Senior Unsecured Notes (as discussed in next paragraph).
- On July 22, 2013, we redeemed the remaining Senior Unsecured Notes outstanding. In the transaction we paid $282 million, including the $275 million principal amount, $6.5 million in premium and $0.5 million of accrued interest. In the third quarter of 2013, we will record a loss on early extinguishment of debt of $8.6 million associated with the early redemption of this debt.
- We incurred capital expenditures (including capitalized interest) totaling $59 million in the second quarter of 2013, compared to $80 million (including $17 million in oil and gas related capital expenditures) in the first quarter of 2013 and $76 million in the second quarter of 2012. The capital expenditures for the second quarter included $22 million related to the H534 conversion.