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Helix Energy Solutions Group, Inc. (

HLX

)

Q4 2010 Earnings Conference Call

February 24, 2011, 10:00 am ET

Executives

Stephen Powers – Director of Finance and IR

Alisa Johnson – General Counsel

Owen Kratz – CEO

Tony Tripodo – CFO

Johnny Edwards – EVP, Oil and Gas

Alisa Johnson – General Counsel

Lloyd Hajdik – SVP, Finance

Analysts

Jim Rollyson – Raymond James

TheStreet Recommends

Michael Marino – Stephens Inc.

Martin Malloy – Johnson Rice & Company

Stephen Gengaro – Jefferies & Company

Phyllis Camara – Pax World Funds

Presentation

Operator

Compare to:
Previous Statements by HLX
» Helix Energy Solutions Group CEO discusses Q3 2010 Results – Earnings Call Transcript
» Helix Energy Solutions Group Inc. Q2 2010 Earnings Call Transcript
» Helix Energy Solutions Group, Inc. Q4 2009 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Welcome to the Helix Energy Solutions Group Inc. Review of Fourth Quarter 2010 Results with Investors Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator Instructions) As a reminder, this conference is being recorded today, Thursday, February 24th, 2011. I would now like to turn the conference over to Mr. Stephen Powers, Director of Finance and Investor Relations. Please go ahead, sir.

Stephen Powers

Thank you. Good morning, everyone and thanks for joining us today. Here with me today is Owen Kratz, our CEO; Tony Tripodo, our Chief Financial Officer, Johnny Edwards, Executive Vice President of Oil and Gas; Alisa Johnson, our General Counsel and Lloyd Hajdik, SVP Finance.

Hopefully, you’ve had an opportunity to review our press release and related slide presentation release last night. If you do not have a copy of these materials, both can be accessed through the investor relations page on our web site at www.helixesg.com. The press release can be accessed under press release’s tab and the slide presentation can be accessed by clicking on today’s webcast icon.

Before we begin our prepared remarks, Alisa Johnson will make a statement regarding forward-looking information.

Alisa Johnson

During this conference call, we anticipate making certain projections and forward-looking statements based on our current expectations. All statements in this conference call or any associated presentation other than statements of historical facts are forward-looking statements and are made under the Safe Harbor provisions under Private Securities Litigation Reform Act of 1995.

Our actual future results may differ materially from our projections and forward-looking statements due to a number and variety of factors, including those set forth in our slide two and in our annual report on Form 10-K for the year ended December 31, 2009 and any subsequent Form 10-Q.

Also during this call, certain non-GAAP financial disclosures may be made. In accordance with SEC rules, the final slides of our presentation material provide a reconciliation of certain non-GAAP measures to comparable GAAP financial measures. The reconciliation along with this presentation, earnings release, our annual report and replay of this broadcast are available on our website. Tony?

Tony Tripodo

Thank you, Alisa. Let's move to slide five which summarizes fourth quarter results. I will focus our commentary on sequential quarterly results comparing Q4 to Q3. Quarter four’s revenues decline 22% to $306 million reflecting a sharp decrease in contracting services revenue partially offset by a nice increase in oil and gas revenues.

The largest contributing factor to decrease in revenues directly relates to Helix Producer one coming off BP Macondo spill response activities and on to in-house service on the Phoenix field. Other contributing factors included seasonal declines, plus the Caesar (inaudible) coming out of service for a previously schedule upgrade work.

Oil and gas revenues moved up nicely by 43% in quarter four versus quarter three, reflecting start-up production on the Phoenix field as well as higher oil prices. Our earnings were impacted by the special items noted in the press release and covered on slide six. So when looking at our results from a cash flow basis, we generated a decent level of EBITDA during Q4 at 95 million.

On slide six, earnings were impacted by a few noteworthy items. First, we took a non-cash charge of $23.9 million associated with writing off to goodwill and related to that some deferred tax to assets for our Australian operations. We concluded that the carrying value of these assets was no longer justified, given the performance of our Australian operations last couple of years.

Second, we suffered a loss of $22.4 million after-tax in the quarter related to the first job performed by the Normand Clough on an abandonment project in the South China Seas for CNOOC, the Chinese National Offshore Oil Company. To establish ourselves in the market, we took on weather and other risk, which obviously impacted our profitability but thankfully we moved off this job now.

Third, we impaired some of the oil and gas properties on the shelf and also rode off some deepwater leases to $215.6 million pre-tax or $10.2 million after-tax. On the positive side, we generated a nice amount of free cash flow in the quarter as our cash balances increased by $66 million during the quarter to $391 million. Our total liquidity at year end stood slightly below the $800 million mark.

We commenced production in the Phoenix field on October 19 and finished the quarter with 13.7 billion cubic feet equivalent of oil and gas production above our previous guidance. We have been very pleased with production net at the Phoenix field and our production profile today net is now 63% oil and through Tuesday, we are averaging a 162 million cubic feet equivalent for the month of February with Phoenix production at approximately 12,000 barrels of oil equivalent a day net to our interest.

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