Helix Energy Solutions' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Helix Energy Solutions Group, Inc. (HLX)

Q1 2012 Earnings Conference Call

April 23, 2012 10:00 AM ET

Executives

Owen Kratz, Chief Executive Officer

Tony Tripodo, Chief Financial Officer

Cliff Chamblee, Executive Vice President of Contracting Services.

Johnny Edwards, Executive Vice President of Oil and Gas,

Alisa Johnson, General Counsel

Lloyd Hajdik, Senior VP of Finance.

Terrance Jamerson, Investor Relations.

Analysts

Jim Rollyson - Raymond James

Joe Gibney – Capital One

Martin Malloy - Johnson Rice

Michael Marino – Stephens

Presentation

Operator

Hi, Welcome to the review of the First Quarter 2012 Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct the question-and-answer session. (Operator Instructions).

As a remainder this conference is being recorded, Monday, April 23, 2012.

It is now like to turn the conference over to Terrance Jamerson, please go ahead Sir.

Terrance Jamerson

Thank you. Good morning everyone and thanks for joining us today. Joining me today, is Owen Kratz our CEO, Tony Tripodo, our CFO, Cliff Chamblee, Executive Vice President of Contracting Services. Johnny Edwards, Executive Vice President of Oil and Gas, Alisa Johnson, our General Counsel and Lloyd Hajdik, our Senior VP of Finance.

Hopefully, you had an opportunity to review our press release and the related slide presentation released yesterday afternoon. If you do not have a copy of these materials, both can 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

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 facts, 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 and 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 materials 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.

Owen Kratz

Good morning everybody. We left you on a pretty positive note at the end of the last quarter. We’ll skip page 3 and 4 here, so moving on to Slide 5, which is the high level summary of first quarter results. Quarter one’s revenue has increased from $396 million in Q4 to $408 million this quarter. With all of the increasing attributable to our Contracting Service segment, an increase that more than offset to decrease in Oil and Gas revenues, resulting from lower oil and gas production.

Consistent with the increased revenues, we also reported increased earnings in operating cash flow. The EBITDA generated of 209 million represents an all time post Caldag divestiture quarterly record for Helix.

Moving on the Slides 6 and 7, quarter one’s reported EPS is $0.62. However, this is after absorbing 17 million of pretax charges or $0.10 after tax, associated with the early repayment of a portion of our Senior Unsecured Notes, and a portion of our Convertible Notes.

The uptick in Contract and Services revenues and operating results in Q1 was actually led by our subsequent construction business which saw a 94% gross full utilization in Q1. However our well intervention business also had an increased operating result from Q4. Despite the fact that the Q4, our Q4000 and our dry dock in early March and the Seawell went into dry dock in late March.

Canyon, our Robotics business had a very active quarter utilizing 5 different stock market vessels at various times, during the quarter in addition to its four regular vessels in the long term charter. Our Oil and Gas production in the first quarter totaled 2 million barrels of oil equivalent, down from 2.2 million barrels of oil equivalent in Q4.

Quarter one’s production decline was impacted by the sale of our main pass field as well as the shutting of our Noonan gas well, along with normal decline rates. We continue to benefit from our oil production being sold at Louisiana light sweet prices, which is at a significant premium to West Texas intermediate prices, realizing 109 a barrel, net of our oil hedge contracts.

In addition, natural gas liquids production along with our natural gas hedge contracts allowed us to realize $5.82 from our natural gas production in Q1. Tony?

Tony Tripodo

Yes, thanks Owen. Continuing on slide 7, from a balance sheet perspective, we continue to strengthen our financial condition. Our net debt position which continues to decrease went from 609 million at year end ’11 to 560 million at the end of the first quarter.

Our cash balances increased to 620 million at the end of Q1, from 546 million at year end. We did a bit of a re-haul of our capital debt structure during the quarter. First, we issued 200 million of new three and a quarter percent Convertible Notes to in 2032 and used the proceeds to buy back a 142 million of the 300 million pre-existing Convertible Notes which we fully expect to be put for repayment in December of this year. The remaining 158 million of the oil converts are expected to be put to us and retired in December. Essentially, we preserved a low-cost form of capital and convertible debt by issuing new 200 million Notes to replace the 300 million that would fully expect to be repaid by year end and reducing the net amount in this type of debt capital by a 100 million. Further more, we issued new 100 million of the syndicated term loan A and along with Revolver borrowings called and retired 200 million of our 9.5% Senior Unsecured Notes. Desired effect of this reshuffling results in a much lower cost debt capital structure. With this I’ll turn the call over to Cliff for an in-depth discussion of our contracting services results.

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