Helix Energy Solutions' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Helix Energy Solutions Group, Inc. (HLX)

Q2 2012 Earnings Conference Call

July 24, 2012 10:00 AM ET

Executives

Terrence Jamerson - Director, Finance & Investor Relations

Alisa Johnson - Executive Vice President, General Counsel and Corporate Secretary

Owen Kratz - President and Chief Executive Officer

Anthony Tripodo - Executive Vice President and Chief Financial Officer

Clifford Chamblee - Executive Vice President - Contracting Services

Johnny Edwards - Executive Vice President – Oil & Gas

Lloyd Hajdik - Senior Vice President – Finance and Chief Accounting Officer

Analysts

Jim Rollyson - Raymond James

Martin Malloy - Johnson Rice & Company

Joe Gibney – Capital One

Michael Marino – Stephens Inc.

Joshua W. Jayne – Simmons & Co.

Anthony Gugel – Upstream

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the review of Second Quarter 2012 Results Conference Call. During the presentation, all participants will be in listen-only mode. Afterwards, we will conduct a question-and-answer session. (Operator instructions). Today’s call is being recorded Tuesday, July 24.

I would now like to turn the conference over to Terrence Jamerson. Please go ahead, sir.

Terrence Jamerson

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

Hopefully, you have had an opportunity to review our press release and the related slide presentation released last night. 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 releases’ 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 B. Johnson

Thank you. 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 the safe harbor provisions of the 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 2 and in our Annual Report on Form 10-K for the year ended December 31, 2011.

Also during this call, certain non-GAAP financial disclosures maybe made. In accordance with SEC rules, the final slides of our presentation materials provide a reconciliation of certain 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.

I will now turn this over for some opening remarks to Tony Tripodo?

Anthony Tripodo

Yes. Owen, did you want to take slide 5 or you want me to start on slide 5?

Owen E. Kratz

I am here now Tony, I will go ahead. We are moving on to slide 5 which is the high-level summary of second quarter results. Quarter two’s revenues decreased from $408 million in Q1 to $347 million this quarter with most of the decrease attributable to the Q4000 and the Seawell being out of service for a good part of the quarter as they underwent the regulatory dry docks as well as lower oil and gas revenues resulting from lower production levels. Both dry docks ran longer than we had planned, and consistent with the decrease revenues we also reported lower earnings and operating cash flow. Nevertheless, given the fact that our two historically best contributing assets the Q4000 and the Seawell experienced a lot of non-revenue producing base, we still managed to generate $152 million of EBITDA.

On the slide 6 and 7, Quarter two’s reported EPS is $0.42, which is inclusive of absorbing $15 million of impairment charges or $0.09 after tax associated with the decision to cold stack our oldest pipe lay vessel, the Intrepid. The Intrepid was due to for its regulatory dry dock in April and based on the lack of contract visibility in the amount of expenditures that we projected would be required by the regulatory dry dock, we determined that it was better economic decision to cold stuck the vessel. The Intrepid has not really contributed anything to the bottom line for us lately. Canyon, our robotics business unit, as well as our subsea construction continue to put up good numbers in the second quarter. The Express, our other real pipe lay vessel made a nice contribution to our results in Q2 from a Subsea construction project offshore Israel.

Our oil and gas production in the second quarter totaled 1.7 million barrels of oil equivalent, down from 2 million barrels of oil equivalent in Q1. Quarter two’s production declined was impacted by a prolonged shutdown of our South Marsh Island 130 deal for repairs as well as natural declines.

We continue to benefit from our oil production being sold at Louisiana light sweet prices, which is at a significant premium to the West Texas intermediate prices, realizing $107 plus a barrel net of our oil hedge contracts. In addition, natural gas liquid production along with our natural gas hedge contracts allowed us to realize $5.76 for our natural gas production in Q1. Additionally, we are very pleased to report last week that success from drilling the Danny II well. Johnny will speak to that later. Tony?

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