Helix Energy Solutions Group, Inc. ( HLX)

Q3 2011 Earnings Conference Call

October 25, 2011 10:00 ET


Stephen Powers – Director, Finance and Investor Relations

Owen Kratz – Chief Executive Officer

Tony Tripodo – Chief Financial Officer

Alisa Johnson – General Counsel

Cliff Chamblee – Executive Vice President, Contracting Services

Johnny Edwards, Executive Vice President, Oil and Gas

Lloyd Hajdik – Senior Vice President, Finance


Jim Rollyson – Raymond James

Joe Gibney – Capital One

Michael Marino – Stephens Incorporated

Roger Read – Morgan Keegan

Mario Barraza – Tuohy Brothers

Martin Malloy – Johnson Rice



Ladies and gentlemen, thank you for standing by. Welcome to the review of Third Quarter 2011 Results and 2011 Outlook with Investors Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we’ll conduct the question-and-answer session. (Operator Instructions) As a remainder this conference is being recorded today, Tuesday, October 25, 2011.

It is now my pleasure to turn the conference over to Stephen Powers, Director of Finance and Investor Relations of Helix Energy Solutions Group. Please go ahead.

Stephen Powers – Director, Finance and Investor Relations

Thanks (Sharon). Good morning everyone and thanks for joining us. With me today is Owen Kratz our CEO; Tony Tripodo, our Chief Financial Officer; Cliff Chamblee Executive Vice President, Contracting Services; Johnny Edwards, Executive Vice President of Oil and Gas; Alisa Johnson, our General Counsel; Lloyd Hajdik, our Senior VP of Finance.

Hopefully, you’ve had an opportunity to review our press release and the related slide presentation material released last night. If you do not have a copy of these materials, both could be accessed through the Investor Relations page on our website at www.helixesg.com. The press release can be accessed under the 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?

Alisa Johnson – General Counsel

Thank you. Joining this conference, 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 Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual futures results may differ materially from our projections and forward-looking statement due to a number of variety of factors. Including those set forth in slide two and in our annual report on Form 10-K for the year ended December 31st, 2010.

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 replay of this broadcast are available on our website. Owen we are now make some.

Owen Kratz Chief Executive Officer

All right will start the presentation with slide five, you will see high level summary of third quarter results. Quarter three continued our progression is successive quarterly revenue earnings an EBITDA increases in 2011, with earnings of $0.43 up from $0.39 from Q2 and EBITDA rising slightly to $178 million not from $176 million in the prior quarter. Quarter three is revenues increased 10% over Q2, not were the about Q3 result of the underlying strong improvement in our contracting services business, which more than offset the various production disruption experience some oil and gas business. A matter will discuss bit more later as well as the high effective tax rate. Our going slide six, Q3 was characterize by high utilization of our contracting services as I said led by strong performance in both well intervention and robotic. We’ve an achieved high utilization within real pipelay assets albeit at low margins.

Our visibility in the contracting services business is going stronger and that’s were able to increase our full year EBITDA outlook for 2011. Our oil and gas production second quarter averaged $127 million cubic feet equivalent per day with oil representing 69% of that production. Again much of our oil production is sold Louisiana light sweet market rates, which is that a significant premium to the WTI prices you often see quoted. Pipeline disruptions particularly in the pipeline servicing our phoenix field along with the production slowdown due to tropical storm lee as down our production rates in Q3. Tony?

Tony Tripodo Chief Financial Officer

Yes, thank you. Over the slide seven, in addition to the sequential uptake in earnings the companies balance sheet continues to strengthen. In Q3, we took advantage of our high liquidity levels and went into the open market to repurchase $75 million of our high-yield notes. Year-to-date we have paid down approximately $190 million of debt, well at the same time maintaining robust liquidity levels which now stands at $933 million at September 30. The higher effective tax rate mentioned by Owen earlier is 33% and is primarily due to higher proportion of US earnings.

I will now turn the call over to Cliff discussion of our contracting services results.

Cliff Chamblee – Executive Vice President, Contracting Services

Okay, thanks. As I mentioned after innovation in contracting services business continue to improve Q400 achieved 9% utilization, and Express and Intrepid posted approximately 95% utilization, 95% utilization each innovation of ROVs and Trenchers increase from 54% the second quarter to 67% in the third quarter. Is that activity levels translated into 30% increase an contracting services revenue with slight improvement gross profit margins to 27%. From the slide seven, this slide shows equity in earnings contribution of the independent Hub, Marco Polo and Clough Helix JV. Results are fairly consistent with the second quarter and I’ll leave the slide for reference. On the slide seven, well I mentioned business achieve near four utilization in third quarter, Q4000 performed multiple projects were Shell and Anadarko in Gulf of Mexico. Our side from the few days R&M down time for the Seawell to North Sea versus utilized everyday in the third quarter.

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