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Helix Reports Third Quarter 2013 Results

Stocks in this article: HLX

Helix Energy Solutions Group, Inc. (NYSE: HLX) reported net income of $44.6 million, or $0.42 per diluted share, for the third quarter of 2013 compared to net income of $14.9 million, or $0.14 per diluted share, for the same period in 2012, and $27.2 million, or $0.26 per diluted share, in the second quarter of 2013. Net income from continuing operations totaled $72.3 million, or $0.68 per diluted share for the nine months ended September 30, 2013, as compared with net income of $29.7 million, or $0.28 per diluted share, for the nine months ended September 30, 2012. Including our discontinued operations, net income for the nine months ended September 30, 2013 was $73.4 million, or $0.69 per diluted share, compared with net income of $125.2 million, or $1.19 per diluted share, for the nine months ended September 30, 2012.

Third quarter 2013 results include a net pre-tax gain of $7.0 million ($0.04 per diluted share after-tax) associated with the following two items:

  • $15.6 million gain on the sale of the Express in July 2013
  • $8.6 million loss on the early extinguishment of debt associated with the redemption of our remaining $275 million of Senior Unsecured Notes in July 2013

Owen Kratz, President and Chief Executive Officer of Helix, stated, “Third quarter results increased due to top line growth and profitability in both the Well Intervention and Robotics businesses. Well Intervention benefitted from the introduction of the Skandi Constructor into well intervention mode in September where she has performed well. Last month’s announcement of the Q7000 newbuild is indicative of our confidence in the growing market demand for well intervention services.”

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

 

          Three Months Ended         Nine Months Ended
9/30/2013       9/30/2012       6/30/2013 9/30/2013       9/30/2012
Revenues $ 220,117 $ 217,110 $ 232,178 $ 649,724 $ 644,413
 
Gross Profit
Operating $ 69,457 $ 68,551 $ 67,497 $ 191,121 $ 191,004
32 % 32 % 29 % 29 % 30 %
Contracting Services and ARO Impairments (1)   -     (10,632 )   -     (1,600 )   (32,164 )
Total $ 69,457 $ 57,919 $ 67,497 $ 189,521 $ 158,840
 
Net Income (Loss) Applicable to
Common Shareholders
Income (Loss) from continuing operations $ 44,549 $ 10,362 $ 27,240 $ 72,346 $ 29,661
Income (Loss) from discontinued operations   44     4,503     (29 )   1,073     95,572  
Total $ 44,593   $ 14,865   $ 27,211   $ 73,419   $ 125,233  
 
Diluted Earnings Per Share
Income from continuing operations $ 0.42 $ 0.10 $ 0.26 $ 0.68 $ 0.28
Income from discontinued operations $ -   $ 0.04   $ -   $ 0.01   $ 0.91  
Total $ 0.42   $ 0.14   $ 0.26   $ 0.69   $ 1.19  
 
Adjusted EBITDA from continuing operations $ 70,198 $ 62,895 $ 74,533 $ 186,762 $ 185,913
Adjusted EBITDAX from discontinued operations   -     64,539     -     31,754     301,688  
Adjusted EBITDAX (2) $ 70,198   $ 127,434   $ 74,533   $ 218,516   $ 487,601  
 

Note: Footnotes appear at end of press release.

 
 
Segment Information, Operational and Financial Highlights
(in thousands, unaudited)

 

          Three Months Ended
9/30/2013         9/30/2012         6/30/2013

Continuing Operations:

Revenues:
Contracting Services $ 208,728 $ 221,491 $ 225,356
Production Facilities 24,366 20,024 24,174
Intercompany Eliminations   (12,977 )   (24,405 )   (17,352 )
Total $ 220,117   $ 217,110   $ 232,178  
 
Income (Loss) from Operations:
Contracting Services $ 49,212 $ 50,539 $ 48,685
Production Facilities 14,136 10,180 14,643
Gain (loss) on sale of assets 15,812 (12,933 ) (1,085 )
Contracting Services Impairments (1) - (10,632 ) -
Corporate/Other (16,522 ) (16,977 ) (14,207 )
Intercompany Eliminations   21     39     (839 )

Total

$ 62,659   $ 20,216   $ 47,197  
Equity in Earnings of Equity Investments $ 857   $ 1,392   $ 683  
 

Discontinued Operations (Oil and Gas):

Revenues $ - $ 119,124 $ -
Income (Loss) from Operations $ (68 ) $ 15,159 $ (45 )
 
Note: Footnotes appear at end of press release.
 

Contracting Services

  • Well Intervention revenues increased 15% in the third quarter of 2013 compared to the second quarter of 2013, primarily due to the Q4000 being 100% utilized during the third quarter versus 86% in the second quarter of 2013. On a combined basis, vessel utilization decreased to 84% in the third quarter of 2013 from 93% in the second quarter of 2013. The three vessels in the North Sea achieved 78% utilization in the third quarter compared to 95% in the second quarter of 2013. The decrease in utilization rate of the North Sea vessels reflects the downtime for the Skandi Constructor in order to complete the final modifications to the vessel and install the well intervention equipment onto the vessel.
  • Robotics revenues increased 2% in the third quarter of 2013 compared to the second quarter of 2013 primarily due to the REM Installer being placed into service in July 2013 on an accommodations project in the North Sea. The chartered vessel fleet utilization remained steady at 98% for the third quarter of 2013.

Other Expenses

  • Selling, general and administrative expenses were 10.3% of revenue in the third quarter of 2013, 8.3% of revenue in the second quarter of 2013 and 11.4% in the third quarter of 2012. The increased percentage of selling, general and administrative expenses in the third quarter of 2013 compared to the second quarter of 2013 is primarily attributable to a $2.1 million allowance for doubtful accounts charge that was recorded in the third quarter of 2013.
  • Net interest expense and other increased to $12.8 million in the third quarter of 2013 from $12.6 million in the second quarter of 2013. Net interest expense decreased to $6.6 million in the third quarter of 2013 compared to $11.3 million in the second quarter of 2013. The decrease in interest expense reflects the substantial reduction in our indebtedness, including the redemption of the remaining $275 million of 9.5% Senior Unsecured Notes outstanding in July 2013. Other expense includes the $8.6 million loss on early extinguishment of the Senior Unsecured Notes, partially offset by foreign exchange gains associated with the fluctuation in our non-U.S. dollar functional currencies, reflecting strengthening of the U.S. dollar.

Financial Condition and Liquidity

  • Our total liquidity at September 30, 2013 was approximately $1.1 billion, consisting of cash and cash equivalents of $480 million and $593 million available under our revolver. Consolidated net debt at September 30, 2013 increased to $88 million from $35 million at June 30, 2013. Net debt to book capitalization at September 30, 2013 was 6%. (Net debt to book capitalization is a non-GAAP measure. See reconciliation below.)
  • On July 22, 2013, we redeemed the remaining Senior Unsecured Notes outstanding. In the transaction we paid $282 million consisting of the $275 million principal amount, $6.5 million in premium and $0.5 million of accrued interest. Our third quarter 2013 results include an $8.6 million loss on the early extinguishment of this debt.
  • We incurred capital expenditures (including capitalized interest) totaling $176 million in the third quarter of 2013, compared to $59 million in the second quarter of 2013 and $157 million in the third quarter of 2012. The capital expenditures for the third quarter included $62 million and $72 million, related to the Q5000 and Q7000 newbuild projects, respectively.

Footnotes to “Summary of Results”:

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