Helix Reports Third Quarter 2011 Results
HOUSTON, Oct. 24, 2011 /PRNewswire/ -- Helix Energy Solutions Group, Inc.
reported net income of $46.0 million, or $0.43 per diluted share, for the third quarter of 2011 compared with net income of $26.2 million, or $0.25 per diluted share, for the same period in 2010, and net income of $41.3 million, or $0.39 per diluted share, in the second quarter of 2011. Net income for the nine months ended September 30, 2011 was $113.2 million, or $1.06 per diluted share, compared with a net loss of $77.3 million, or $(0.74) per diluted share, for the nine months ended September 30, 2010.(Logo: http://photos.prnewswire.com/prnh/20100128/HELIXLOGO)
Owen Kratz, President and Chief Executive Officer of Helix, stated, 'Helix delivered another strong quarter as our Contracting Services segment continues to improve, with near full utilization of all three of our well intervention vessels and our two reeled pipelay vessels. In addition, utilization in our Robotics business continued to improve even as we added two new ROV units to the fleet. Our Oil and Gas business performed very well despite some production disruptions associated with pipeline issues and tropical storm activity. Helix generated healthy cash flow from operations during the quarter, and also paid down an additional $75 million of gross debt via the repurchase of a portion of our senior unsecured notes. I am pleased to announce that we are increasing our EBITDAX guidance for the remainder of 2011 given our current market visibility.'
Summary of Results
------------------
(in thousands, except per share amounts and percentages,
unaudited)
Quarter Ended Nine Months Ended
------------- -----------------
September 30 June 30 September 30
------------ ------- ------------
2011 2010 2011 2011 2010
---- ---- ---- ---- ----
Revenues $372,496 $392,669 $338,319 $1,002,422 $893,501
Gross Profit
(Loss):
Operating $126,200 $87,891 $130,858 $334,480 $191,241
34% 22% 39% 33% 21%
Oil and Gas (2,357) (897) (22,721) (25,078) (171,871)
Impairments
(1)
Exploration (1,548) (442) (7,939) (9,833) (1,780)
Expense (2) ------ ---- ------ ------ ------
Total $122,295 $86,552 $100,198 $299,569 $17,590
Net Income
(Loss)
Applicable
to Common
Shareholders
(3) $46,016 $26,161 $41,313 $113,186 $(77,281)
Diluted
Earnings
(Loss) Per
Share $0.43 $0.25 $0.39 $1.06 $(0.74)
Adjusted
EBITDAX (4) $178,002 $142,175 $175,840 $503,061 $334,119
Note: Footnotes listed at end of press release.
Segment Information, Operational and Financial Highlights
---------------------------------------------------------
(in thousands, unaudited)
Three Months Ended
------------------
September 30, June 30,
------------- --------
2011 2010 2011
---- ---- ----
Revenues:
---------
Contracting Services $229,967 $238,531 $171,353
Production Facilities 19,986 74,458 20,545
Oil and Gas 159,218 95,566 172,458
Intercompany
Eliminations (36,675) (15,886) (26,037)
------- ------- -------
Total $372,496 $392,669 $338,319
======== ======== ========
Income (Loss) from
Operations:
------------------
Contracting Services $47,363 $31,015 $30,565
Production Facilities 10,983 44,520 11,920
Oil and Gas 52,527 (3,206) 73,724
Gain on Oil and Gas
Derivative - 161 -
Commodity Contracts
Oil and Gas
Impairments (1) (2,357) (897) (22,721)
Exploration Expense
(2) (1,548) (442) (7,939)
Corporate (6,227) (10,767) (9,112)
Intercompany
Eliminations (528) (286) (19)
---- ---- ---
Total $100,213 $60,098 $76,418
======== ======= =======
Equity in Earnings of
Equity Investments $4,906 $6,221 $5,887
====== ====== ======
Note: Footnotes listed at end of press release.
Contracting Services
-- Subsea Construction and Robotics revenues increased in the third quarter
of 2011 compared to the second quarter of 2011 primarily due to
increased utilization of the Express and Intrepid in the Gulf of Mexico,
and increased ROV and trencher utilization in our Robotics business.
Overall our utilization rate for our owned and chartered vessels
increased to 86% in the third quarter of 2011 from 71% in the second
quarter of 2011. ROV and trenching utilization increased to 67% in the
third quarter of 2011 compared to 54% in the second quarter of 2011.
-- Well Intervention revenues increased in the third quarter of 2011 due
primarily to increased utilization of our vessels in both the North Sea
and the Gulf of Mexico. Vessel utilization in the North Sea increased
to 98% in the third quarter of 2011 from 87% in the second quarter of
2011. Vessel utilization in the Gulf of Mexico increased to 100% in the
third quarter of 2011 from 93% in the second quarter of 2011. On a
combined basis, vessel utilization increased to 99% in the third quarter
of 2011 compared to 89% in the second quarter of 2011.
Production Facilities
-- The Helix Producer I continued its deployment on the Phoenix field
throughout the third quarter of 2011.
Oil and Gas
-- Oil and Gas revenues decreased in the third quarter of 2011 compared to
the second quarter of 2011 due primarily to lower oil and gas production
and slightly lower commodity prices. Production in the third quarter of
2011 totaled 11.7 Bcfe compared to 12.7 Bcfe in the second quarter of
2011.
-- The average price realized for oil, including the effects of settled oil
hedge contracts, totaled $100.93 per barrel in the third quarter of 2011
compared to $101.43 per barrel in the second quarter of 2011. For
natural gas and natural gas liquids, including the effect of settled
natural gas hedge contracts, we realized $6.15 per thousand cubic feet
of gas (Mcf) in the third quarter of 2011 compared to $6.17 per Mcf in
the second quarter of 2011.
-- We recorded a charge of approximately $8.4 million to insurance expense
in the third quarter of 2011 to reduce the value of our hurricane
catastrophic bond to its intrinsic value at September 30, 2011. We will
record a $2.0 million charge to insurance expense in the fourth quarter
of 2011.
-- Our October 2011 oil and gas production rate has averaged approximately
128 million cubic feet of natural gas equivalent per day (MMcfe/d)
through October 23, 2011, compared to an average of 127 MMcfe/d in the
third quarter of 2011 and an average of 139 MMcfe/d in the second
quarter of 2011. Production from the Phoenix field was impacted for a
portion of July due to scheduled downtime of a third party pipeline
servicing the field, and was impacted for a portion of August due to
third party pipeline flow restrictions. September production was
impacted by third party pipeline safety shutdowns associated with
Tropical Storm Lee.
-- We currently have oil and gas hedge contracts in place totaling 6.6 Bcfe
(0.7 million barrels of oil and 2.1 Bcf of gas) for the remainder of
2011 (October through December), 22.6 Bcfe (2.8 million barrels of oil
and 6.0 Bcf of gas) in 2012 and 6.0 Bcfe (1.0 million barrels of oil) in
2013.
Other Expenses
-- Selling, general and administrative expenses were 5.9% of revenue in the
third quarter of 2011, 7.0% in the second quarter of 2011 and 6.8% in
the third quarter of 2010.
-- Net interest expense and other increased to $34.8 million in the third
quarter of 2011 from $24.0 million in the second quarter of 2011, due
primarily to foreign currency losses and losses associated with premiums
paid upon repurchases of senior unsecured notes. Net interest expense
decreased to $24.1 million in the third quarter of 2011 compared with
$25.3 million in the second quarter of 2011, due primarily to our
repurchase of $75.0 million of our senior unsecured notes during the
third quarter. The decrease was partially offset by an acceleration of
a portion of the deferred financing costs associated with the repurchase
of our senior unsecured notes.
Financial Condition and Liquidity
-- We repurchased $75.0 million of our senior unsecured notes in the third
quarter of 2011 at an average price of $103.14 ahead of the first
optional call date in January 2012. The optional call price starting in
January 2012 is $104.75. Since the beginning of 2011 we have repaid a
total of $193 million in gross debt.
-- Consolidated net debt at September 30, 2011 decreased to $796 million
from $833 million as of June 30, 2011. We had no outstanding borrowings
under our revolver. Our total liquidity at September 30, 2011 was
approximately $933 million, consisting of cash on hand of $375 million
and revolver availability of $558 million. Net debt to book
capitalization as of September 30, 2011 was 35%. (Net debt to book
capitalization is a non-GAAP measure. See reconciliation attached
hereto.)
-- As of September 30, 2011, we were in compliance with the covenants and
restrictions under our various loan agreements.
-- We incurred capital expenditures (including capitalized interest)
totaling $65 million in the third quarter of 2011, compared to $75
million in the second quarter of 2011 and $31 million in the third
quarter of 2010.
Footnotes to 'Summary of Results':
(1) Third quarter 2011 oil and gas impairments of $2.4 million
primarily related to revisions in cost estimates for
reclamation activities ongoing at two of our Gulf of Mexico oil
and gas properties. Second quarter 2011 oil and gas
impairments of $22.7 million primarily associated with six of
our Gulf of Mexico oil and gas properties and our only
non-domestic (U.K.) oil and gas property. The impairment
charges primarily reflect a premature end of these fields'
production lives either through actual depletion or as a result
of capital allocation decisions affecting third party
operated fields. Second quarter 2010 oil and gas impairments of
$159.9 million related to reduction of the carrying
values of certain Gulf of Mexico oil and gas properties due to
reserve revisions. First quarter 2010 impairments on
our U.S. oil and gas properties ($7.0 million) were due
primarily to the deterioration of certain fields' economics
following a significant decrease in natural gas prices during
the period. We also impaired our U.K. offshore property
($4.1 million) during the first quarter of 2010. The U.K.
impairment was offset by a gain on the reacquisition of our
50% co-owner's interest in the U.K. field.
(2) Second quarter 2011 included $6.6 million of exploration
costs associated with an offshore lease expiration.
(3) First quarter 2010 included a payment of $17.5 million to
settle litigation related to the termination of a 2007
international construction contract.
(4) Non-GAAP measure. See reconciliation attached hereto.
Footnotes to 'Segment Information, Operational and Financial
Highlights':
(1) Third quarter 2011 oil and gas impairments of $2.4 million
primarily related to revisions in cost estimates for
reclamation activities ongoing at two of our Gulf of Mexico oil
and gas properties. Second quarter 2011 oil and gas
impairments of $22.7 million primarily associated with six of
our Gulf of Mexico oil and gas properties and our only
non-domestic (U.K.) oil and gas property. The impairment
charges primarily reflect a premature end of these fields'
production lives either through actual depletion or as a result
of capital allocation decisions affecting third party
operated fields. Second quarter 2010 oil and gas impairments of
$159.9 million related to reduction of the carrying
values of certain Gulf of Mexico oil and gas properties due to
reserve revisions.
(2) Second quarter 2011 included $6.6 million of exploration
costs associated with an offshore lease expiration.
Conference Call Information
Further details are provided in the presentation for Helix's quarterly conference call to review its third quarter 2011 results (see the 'Investor Relations' page of Helix's website, www.HelixESG.com). The call, scheduled for 9:00 a.m. Central Daylight Time on Tuesday, October 25, 2011, will be audio webcast live from the 'Investor Relations' page of Helix's website. Investors and other interested parties wishing to listen to the conference via telephone may join the call by dialing 800-734-8582 for persons in the United States and 1-212-231-2925 for international participants. The passcode is 'Tripodo'. A replay of the conference will be available under 'Investor Relations' by selecting the 'Audio Archives' link from the same page beginning approximately two hours after the completion of the conference call.
Helix Energy Solutions Group, headquartered in Houston, Texas, is an international offshore energy company that provides development solutions and other key life of field services to the open energy market as well as to our own oil and gas business unit.
Reconciliation of Non-GAAP Financial Measures
Management evaluates Company performance and financial condition using certain non-GAAP metrics, primarily Adjusted EBITDAX, net debt and net debt to book capitalization. We calculate Adjusted EBITDAX as earnings before net interest expense, taxes, depreciation and amortization and exploration expense. Net debt is calculated as the sum of financial debt less cash and equivalents on hand. Net debt to book capitalization is calculated by dividing net debt by the sum of net debt, convertible preferred stock and shareholders' equity. These non-GAAP measures are useful to investors and other internal and external users of our financial statements in evaluating our operating performance because they are widely used by investors in our industry to measure a company's operating performance without regard to items which can vary substantially from company to company, and help investors meaningfully compare our results from period to period. Adjusted EBITDAX should not be considered in isolation or as a substitute for, but instead is supplemental to, income from operations, net income or other income data prepared in accordance with GAAP. Non-GAAP financial measures should be viewed in addition to, and not as an alternative to our reported results prepared in accordance with GAAP. Users of this financial information should consider the types of events and transactions which are excluded.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks, uncertainties and assumptions that could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements, other than statements of historical fact, are 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, any projections of financial items; future production volumes, results of exploration, exploitation, development, acquisition and operations expenditures, and prospective reserve levels of property or wells; any statements of the plans, strategies and objectives of management for future operations; any statement concerning developments; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors including but not limited to the performance of contracts by suppliers, customers and partners; actions by governmental and regulatory authorities; operating hazards and delays; employee management issues; uncertainties inherent in the exploration for and development of oil and gas and in estimating reserves; complexities of global political and economic developments; geologic risks; volatility of oil and gas prices and other risks described from time to time in our reports filed with the Securities and Exchange Commission ('SEC'), including the Company's most recently filed Annual Report on Form 10-K and in the Company's other filings with the SEC, which are available free of charge on the SEC's website at www.sec.gov. We assume no obligation and do not intend to update these forward-looking statements except as required by the securities laws.
HELIX ENERGY SOLUTIONS GROUP, INC.
Comparative Condensed Consolidated Statements of Operations
-----------------------------------------------------------
Three Months Ended Sep. 30, Nine Months Ended Sep. 30,
(in thousands, except per
share data) 2011 2010 2011 2010
------------------------- ---- ---- ---- ----
(unaudited) (unaudited)
Net revenues:
Contracting services $213,278 $297,103 $501,887 $604,634
Oil and gas 159,218 95,566 500,535 288,867
------- ------ ------- -------
372,496 392,669 1,002,422 893,501
Cost of sales:
Contracting services 147,614 211,634 371,042 438,008
Oil and gas 100,230 93,586 306,733 266,032
Oil and gas impairments 2,357 897 25,078 171,871
250,201 306,117 702,853 875,911
Gross profit 122,295 86,552 299,569 17,590
Gain on oil and gas
derivative commodity
contracts - 161 - 2,643
Gain (loss) on sale of
assets, net - 13 (6) 6,246
Selling, general and
administrative expenses (22,082) (26,628) (70,821) (91,675)
------- ------- ------- -------
Income (loss) from
operations 100,213 60,098 228,742 (65,196)
Equity in earnings of equity
investments 4,906 6,221 16,443 12,932
Gain on subsidiary equity
transaction - - 753 -
Net interest expense and
other (34,828) (21,407) (81,182) (64,826)
------- ------- ------- -------
Income (loss) before income
taxes 70,291 44,912 164,756 (117,090)
Provision for (benefit of)
income taxes 23,465 17,965 49,186 (41,962)
------ ------ ------ -------
Net income (loss), including
noncontrolling interests 46,826 26,947 115,570 (75,128)
Less: net income applicable
to noncontrolling interests (800) (776) (2,354) (2,049)
---- ---- ------ ------
Net income (loss) applicable
to Helix 46,026 26,171 113,216 (77,177)
Preferred stock dividends (10) (10) (30) (104)
--- --- --- ----
Net income (loss) applicable
to Helix common
shareholders $46,016 $26,161 $113,186 $(77,281)
======= ======= ======== ========
Weighted Avg. Common Shares Outstanding:
Basic 104,700 104,090 104,616 103,772
======= ======= ======= =======
Diluted 105,154 105,307 105,061 103,772
======= ======= ======= =======
Earnings (Loss) Per Share of Common Stock:
Basic $0.43 $0.25 $1.07 $(0.74)
===== ===== ===== ======
Diluted $0.43 $0.25 $1.06 $(0.74)
===== ===== ===== ======
Comparative Condensed Consolidated Balance Sheets
-------------------------------------------------
ASSETS LIABILITIES & SHAREHOLDERS' EQUITY
Sep. 30, Sep. 30,
(in thousands) 2011 Dec. 31, 2010 (in thousands) 2011 Dec. 31, 2010
-------------- --------- ------------- -------------- --------- -------------
(unaudited) (unaudited)
Current Assets: Current Liabilities:
Cash and
equivalents $375,355 $391,085 Accounts payable $145,112 $159,381
Accounts receivable 250,036 226,704 Accrued liabilities 159,676 198,237
Other current
assets 123,236 123,065 Income taxes payable 3,856 -
Current mat of L-T debt
(1) 7,877 10,179
----------------------- ----- ------
Total Current
Assets 748,627 740,854 Total Current Liabilities 316,521 367,797
Net Property &
Equipment: Long-term debt (1) 1,163,914 1,347,753
Contracting
Services 1,466,219 1,452,837 Deferred income taxes 441,520 413,639
Asset retirement
Oil and Gas 1,007,534 1,074,243 obligations 169,429 170,410
Equity investments 186,423 187,031 Other long-term liabilities 4,844 5,777
Convertible preferred stock
Goodwill 62,344 62,494 (1) 1,000 1,000
Other assets, net 80,862 74,561 Shareholders' equity (1) 1,454,781 1,285,644
------ ------------------------
Total Assets $3,552,009 $3,592,020 Total Liabilities & Equity $3,552,009 $3,592,020
============ ========== ========== ========================== ========== ==========
Net debt to book capitalization -35% at September 30, 2011. Calculated as total debt less cash and
equivalents ($796,436) divided by sum of total net debt, convertible preferred stock and
(1) shareholders' equity ($2,252,217).
Helix Energy Solutions Group, Inc.
Reconciliation of Non GAAP Measures
Three and Nine Months Ended September 30, 2011
Earnings Release:
-----------------
Reconciliation From Net Income to
Adjusted EBITDAX:
---------------------------------
3Q11 3Q10 2Q11 2011 2010
---- ---- ---- ---- ----
(in thousands)
Net income (loss)
applicable to common
shareholders $46,016 $26,161 $41,313 $113,186 $(77,281)
Non-cash impairments - - 11,573 11,573 170,974
(Gain) loss on asset sales - (13) 22 (747) (6,219)
Preferred stock dividends 10 10 10 30 104
Income tax provision
(benefit) 23,465 17,965 16,171 49,186 (41,964)
Net interest expense and
other 34,829 21,385 24,022 81,171 64,708
Depreciation and
amortization 72,134 76,225 74,790 238,829 222,017
Exploration expense 1,548 442 7,939 9,833 1,780
----- --- ----- ----- -----
Adjusted EBITDAX $178,002 $142,175 $175,840 $503,061 $334,119
======== ======== ======== ======== ========
We calculate adjusted EBITDAX as earnings before net interest expense, taxes,
depreciation and amortization, and exploration expense. These non-GAAP measures
are useful to investors and other internal and external users of our financial
statements in evaluating our operating performance because they are widely used
by investors in our industry to measure a company's operating performance without
regard to items which can vary substantially from company to company and help
investors meaningfully compare our results from period to period. Adjusted
EBITDAX should not be considered in isolation or as a substitute for, but instead
is supplemental to, income from operations, net income or other income data
prepared in accordance with GAAP. Non-GAAP financial measures should be viewed
in addition to, and not as an alternative to our reported results prepared in
accordance with GAAP. Users of this financial information should consider the
types of events and transactions which are excluded.
----------------------------------------------------------------------------------
Helix Energy Solutions Group, Inc.
CONTACT: Stephen Powers, Director, Finance & Investor Relations of Helix
Energy Solutions Group, Inc., 1-281-618-0400, fax: 1-281-618-0505
Web site: http://www.helixesg.com/