Helix Energy Solutions Group Inc. (HLX)
Q2 2010 Earnings Conference Call
July 29, 2010 10:00 AM ET
Cameron Wallace – Director, Marketing & IR
Alisa Johnson – EVP, General Counsel and Corporate Secretary
Tony Tripodo – EVP and CFO
Owen Kratz – Chairman, President and CEO
Johnny Edwards – EVP, Oil and Gas
Jim Rollyson – Raymond James
Roger Read – Natexis Bleichroeader
Joe Gibney – Capital One Southcoast
Stephen Gengaro – Jefferies & Co
Philip Dodge – Tuohy Brothers
Martin Malloy – Johnson Rice & Co
Terese Fabian – Sidoti & Company
Michael Marino – Stephens Inc
Previous Statements by HLX
» Helix Energy Solutions Group, Inc. Q4 2009 Earnings Call Transcript
» Helix Energy Solutions Group, Inc. Q3 2009 Earnings Call Transcript
» Helix Energy Solutions Group, Inc. Q2 2009 Earnings Call Transcript
Welcome to the review of the second quarter 2010 results with investors. During the presentation all participants will be in a listen-only mode. (Operator Instructions) As a reminder this conference is being recorded Thursday July 29, 2010.
It is now my pleasure to turn the conference over to Mr. Cameron Wallace, Director of Investor Relations. Please, go ahead sir.
Good morning, everyone and thanks for joining us today. Joining me today are Owen Kratz, our CEO, Tony Tripodo, our CFO, Johnny Edwards, Executive Vice President of Oil & Gas, Alisa Johnson, General Counsel; Lloyd Hajdik, our SVP of Finance.
Hopefully, you’ve had an opportunity to review our press release and related slide presentation released last night. If you do not have a copy of these materials, both can be accessed through the Investor Relations tab on our website at www.helixesg.com. The press release can be accessed under recent news and a 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?
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 in the associated presentation other than statements of historical fact are forward-looking statements and are made under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.
Our actual future results may differ materially from our projections in 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.
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, the earnings press release, our Annual Report and a replay of this broadcast are available on our website.
Tony will now make some opening remarks.
Okay. Good morning, everyone. Moving onto slide four which summarizes second quarter results and I will focus our comments on sequential quarterly results comparing quarter two of 2010 to quarter one of 2010.
While quarter two showed a nice increase in revenues from $202 million in the first quarter to $299 million in the second quarter, primarily owing to a substantial increase in well intervention activity in the UK coupled with a lot less intercompany utilization of our vessels.
Gross operating margins increased nicely as well from 18% in the first quarter to 22% in the second quarter again led by strong margins for well intervention and production facilities. Our earnings of negative $0.82 a share were impacted by two large items which I will discuss in more detail later. When stripping out the impairment charges of $160 million, we would have booked positive earnings of $0.18 a share and if booked to back out the incremental DD&A we needed to book on the Bushwood we reserved a revision quarter two earnings were a bit even higher.
Over to slide five with respect to EPS, we recorded two large items that impacted our second quarter results. First, we performed a mid-year review of oil and gas reserves and due to our updated view of field economics we revised reserves downward leading to an impairment charge of a $160 million on 15 of our Gulf of Mexico shelf properties. The impairment amount is at the low end of the range we sited with our early July press release on this subject.
Second, due mainly to production performances issues in our Bushwood deep water field, otherwise known as Danny oil and Noonan gas, we reduced the proved reserve numbers in the field which had the attended result of increase in DD&A. we recorded additional DD&A of approximately $19 million associated with the reserve reduction, over and above it would have been had at the previous DD&A rates. However this impacts us on ongoing basis as the DD&A rates for the Bushwood field are now reset at the higher rate.
I’ll now turn the next few slides over to Owen.
Also on slide six, on the service side of the business as we previously had previously forecasted quarter two results are indicative of improving market conditions as reflected by high vessel utilization particularly for our well intervention in the UK. More over as we were coming to the end of our major oil and gas infrastructure build out for Phoenix and Danny, internal utilization decreased quite a bit and conversely we’re able to book more third-party revenues associated with all of our Gulf of Mexico fleet.
We also placed both the Caesar and the Helix Producer I in service during the quarter. The Caesar contributed but only on a marginal basis. However as we previously press released the Helix Producer I was contracted by BP for the Macondo’s spill containment activities and it was diverted from the restart of production of the Phoenix field. Both the Phoenix field and the HP I have the necessary permits to start production so once the HP I comes off of Macondo, we should be able to put Phoenix into production shortly thereafter.