Helix Reports Third Quarter 2009 Results
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HOUSTON--(BUSINESS WIRE)-- Helix Energy Solutions Group, Inc. (NYSE: HLX) reported net income of $3.9 million or $0.04 per diluted share, for the third quarter of 2009 compared with net income of $59.3 million, or $0.63 per diluted share, for the same period in 2008, and net income of $100.2 million, or $0.94 per diluted share, in the second quarter of 2009. Net income for the nine months ended September 30, 2009 was $157.6 million, or $1.48 per diluted share, compared with $222.0 million, or $2.34 per diluted share, for the nine months ended September 30, 2008.
Third quarter 2009 results included the following items on a pre-tax basis:
-- A $17.9 million gain from the sale of 23.2 million shares of Cal Dive
common stock.
-- A $10.4 million charge associated with a weather derivative contract
entered into in July 2009 to mitigate against possible losses during the
2009 hurricane season. The derivative contract was purchased in lieu of
traditional windstorm insurance coverage. The third quarter charge of
$10.4 million was $7.1 million higher than if the cost of the weather
derivative contract was charged to expense evenly over a twelve month
period similar to a traditional insurance premium.
The net impact of these two items in the third quarter, after income taxes, was $0.07 per diluted share.
In addition, third quarter 2009 results excluded approximately $25 million of realized gains associated with the cash settlement of natural gas contracts that were previously recognized as unrealized gains in the first and second quarters of 2009.
Third quarter 2008 results included a pre-tax impairment charge of $6.7 million as a result of damage caused by Hurricane Ike.
Owen Kratz, President and Chief Executive Officer of Helix, stated, "the third quarter results reflect a slowdown in the contracting services market in response to customers reining in spending in late 2008 and early 2009 due to general economic conditions and a lower commodity price environment. Specific to Helix, our third quarter results were impacted as well by the dedication of our Express vessel to internal use, and lower oil and gas production due to a variety of third party pipeline and infrastructure issues. However, we are beginning to see evidence that activity levels for contracting services are likely to rebound in 2010. In addition, a significant third quarter event for Helix was the sale of nearly all of our remaining interest in Cal Dive in September which further serves to enhance our liquidity position and move us closer to our strategic goal of positioning Helix as a deepwater focused company."
Summary of Results(1) (2)
(in thousands, except per share amounts and percentages, unaudited)
Quarter Ended Nine Months Ended
September 30 June 30 September 30
2009 2008 2009 2009 2008
Revenues $ 216,025 $ 607,736 $ 494,639 $ 1,281,639 $ 1,579,635
Gross
Profit:
Operating $ 5,058 $ 207,599 $ 200,312 $ 367,056 $ 535,650
(3)
2 % 34 % 40 % 29 % 34 %
Oil and Gas
Impairments (1,537 ) (6,874 ) (63,073 ) (64,610 ) (23,902 )
(4), (5)
Exploration (904 ) (1,645 ) (1,483 ) (2,863 ) (5,007 )
Expense
Total $ 2,617 $ 199,080 $ 135,756 $ 299,583 $ 506,741
Net Income
Applicable $ 3,895 $ 59,297 $ 100,219 $ 157,564 $ 222,032
to Common
Shareholders
Diluted
Earnings Per $ 0.04 $ 0.63 $ 0.94 $ 1.48 $ 2.34
Share
Adjusted $ 38,306 $ 159,023 $ 147,909 $ 431,520 $ 519,933
EBITDAX(6)
Results of Helix RDS Limited, our former reservoir consulting business,
(1) included as discontinued operations for all periods presented in our
comparative condensed consolidated statements of operations.
Results of Cal Dive, our former Shelf Contracting business, were
consolidated through June 10, 2009, at which time our ownership interest
(2) dropped below 50%. Our remaining interest was accounted for under the equity
method of accounting through September 23, 2009. Subsequent to September 23,
2009 our investment in Cal Dive was accounted for as an available for sale
security.
Included $10.4 million of expense related to a weather derivative contract
(3) and $5.1 million of hurricane-related costs in the third quarter of 2009.
Second quarter of 2009 included insurance recoveries of $102.6 million
offset by hurricane-related costs of $8.1 million.
Second quarter 2009 oil and gas impairments included $51.5 million of
(4) additional asset retirement and impairment costs resulting from Hurricane
Ike. Third quarter 2008 oil and gas impairments included $6.7 million
related to our deepwater Tiger field damaged by Hurricane Ike.
Second quarter 2009 oil and gas impairments included $11.5 million in the
(5) reduction of the carrying values of certain oil and gas properties due to
reserve revisions.
(6) Non-GAAP measure. See reconciliation attached hereto.
Segment Information, Operational and Financial Highlights(1)
(in thousands, unaudited)
Three Months Ended
September 30, June 30,
2009 2008 2009
Revenues:
Contracting Services $ 175,091 $ 276,131 $ 239,476
Shelf Contracting (2) - 278,709 197,656
Production Facilities 5,888 - 5,472
Oil and Gas(3) 63,715 134,619 89,992
Intercompany Eliminations (28,669 ) (81,723 ) (37,957 )
Total $ 216,025 $ 607,736 $ 494,639
Income (Loss) from Operations:
Contracting Services $ 10,132 $ 57,235 $ 23,383
Shelf Contracting (2) - 72,719 38,145
Production Facilities (1,388 ) (140 ) (1,018 )
Oil and Gas (3) (23,599 ) 42,717 103,380
Gain on Oil and Gas Derivative Commodity 4,598 2,705 4,121
Contracts
Oil and Gas Impairments(4), (5) (1,537 ) (6,874 ) (63,073 )
Exploration Expense (904 ) (1,645 ) (1,483 )
Intercompany Eliminations (1,971 ) (13,494 ) (1,631 )
Total $ (14,669 ) $ 153,223 $ 101,824
Equity in Earnings of Equity Investments $ 13,385 $ 8,751 $ 6,264
Results of Helix RDS Limited, our former reservoir consulting business, were
(1) included as discontinued operations for all periods presented in our
comparative condensed consolidated statements of operations.
Results of Cal Dive, our former Shelf Contracting business, were
consolidated through June 10, 2009, at which time our ownership interest
(2) dropped below 50%. Our remaining interest was accounted for under the equity
method of accounting through September 23, 2009. Subsequent to September 23,
2009 our investment in Cal Dive was accounted for as an available for sale
security.
Included $10.4 million of expense related to a weather derivative contract
and $5.1 million of hurricane-related costs in the third quarter of 2009.
(3) Included insurance recoveries of $97.7 million offset by hurricane-related
costs of $7.4 million in the second quarter of 2009. Third quarter 2008
results included $2.3 million of hurricane-related costs.
Second quarter 2009 oil and gas impairments included $51.5 million of
(4) additional asset retirement and impairment costs resulting from Hurricane
Ike. Third quarter 2008 oil and gas impairments included $6.7 million
related to our deepwater Tiger field damaged by Hurricane Ike.
(5) Second quarter 2009 included $11.5 million in the reduction of the carrying
values of certain oil and gas properties due to reserve revisions.
Contracting Services
-- Subsea Construction revenues decreased from the second quarter of 2009
as activity associated with a significant international pipelay
construction contract was substantially completed in the early part of
the third quarter. Further, our Express pipelay vessel experienced out
of service days related to a regulatory drydock and subsequent transit
to the Gulf of Mexico. Utilization for our construction vessels (both
owned and chartered) decreased in the third quarter of 2009 compared
with the second quarter of 2009 (77% compared with 88%). Robotics asset
utilization in the third quarter of 2009 was comparable to that of the
second quarter of 2009.
-- Our well operations business experienced decreased revenues in the third
quarter of 2009 compared with the second quarter of 2009 due to
decreased utilization (92% compared with 98%). Further, the Q4000 was
contracted at significantly lower day rates for much of the third
quarter.
-- Gross profit margins for Contracting Services decreased in the third
quarter of 2009 over the second quarter of 2009 due primarily to lower
vessel utilization and lower day rates for the Q4000.
Shelf Contracting (Cal Dive)
-- As a result of our de-consolidation of Cal Dive's operating results in
June 2009, we accounted for our interest for most of the third quarter
as an equity method investment. Our share of Cal Dive's earnings for the
third quarter totaled $7.2 million. In September, we sold a total of
23.2 million shares of Cal Dive common stock in a secondary offering,
which reduced our remaining ownership interest in Cal Dive to
approximately 0.5%. We account for our remaining interest in Cal Dive as
an investment available for sale.
Oil and Gas
-- Oil and Gas revenues of $63.7 million for the third quarter of 2009 were
lower than the second quarter of 2009 due primarily to lower oil
production and lower realized oil prices. Production in the third
quarter of 2009 totaled 9.8 Bcfe compared with 12.4 Bcfe in the second
quarter of 2009. The average prices realized for our gas sales volumes,
including the effect of settled natural gas hedge contracts, totaled
$8.02 per thousand cubic feet of gas (Mcf) in the third quarter of 2009
compared with $7.62 per Mcf in the second quarter of 2009. For our oil
sales volumes, including the effects of settled hedge contracts, we
realized $68.86 per barrel in the third quarter of 2009 compared with
$72.29 per barrel in the second quarter of 2009.
-- The Company's oil and gas production rate at September 30, 2009
approximated 103 million cubic feet of natural gas equivalent per day
(MMcfe/d). Production continues to be constrained due to mechanical
issues in certain fields and continuing repairs to a third party
pipeline related to the Noonan gas field. The third party pipeline
operator has informed its customers that repairs to this key pipeline is
expected to be completed by the end of November 2009.
-- In addition, to date we have entered into additional oil and gas hedge
contracts for approximately 25 Bcf of natural gas and 2.5 million
barrels of oil to cover a portion of our forecasted production for 2010.
Other Expenses
-- Selling, general and administrative expenses were 10.1% of revenue in
the third quarter of 2009, 8.0% in the second quarter of 2009, and 8.0%
in the third quarter of 2008. Although, the percentage increase was
driven by lower third quarter revenues, total selling, general and
administrative expenses decreased $1.7 million compared to the second
quarter of 2009 (excluding Cal Dive's expenses in the second quarter of
2009).
-- Net interest expense and other increased to $10.3 million in the third
quarter of 2009 from $7.5 million in the second quarter of 2009. The
increase was due to $3.1 million of net hedging losses related to our
foreign currency contracts and realized foreign exchange losses compared
with net gains of $8.2 million in the second quarter. Net interest
expense decreased to $7.3 million in the third quarter of 2009 compared
with $15.6 million in the second quarter of 2009 as a result of lower
debt levels.
Financial Condition and Liquidity
-- Consolidated net debt at September 30, 2009 decreased to $950 million
from $1.10 billion as of June 30, 2009. We had no borrowings under our
revolver and our availability was $370 million (including $50 million of
outstanding letters of credit) at September 30, 2009. Together with cash
on hand of $411 million and our revolver availability, our total
liquidity was approximately $781 million at September 30, 2009. Net debt
to book capitalization as of September 30, 2009 was 39%. (Net debt to
book capitalization is a non-GAAP measure. See reconciliation attached
hereto.)
-- On October 9, 2009, we extended the term of our revolving credit
facility from July 1, 2011 to November 30, 2012. In addition, our
lenders agreed to amend certain restrictive covenants related to asset
sales, and furthermore, increased the amount of capacity under the
revolving credit facility to $435 million through June 2011, decreasing
to $407 million from July 2011 through November 2012. The revolving
credit facility's accordion feature was also increased to allow for a
potential increase in the maximum size of the facility from $450 million
to $550 million. The July 1, 2013 maturity date of our senior secured
term loan under the credit agreement remains unchanged. Lastly,
borrowings under the amended revolving credit facility will bear
interest based on current market rates.
-- We incurred capital expenditures (including capitalized interest)
totaling $87 million in the third quarter of 2009, compared with $57
million in the second quarter of 2009 and $165 million in the third
quarter of 2008. For the nine months ended September 30, 2009, capital
expenditures totaled $209 million and we anticipate total capital
spending in 2009 of approximately $340 million to $360 million. These
amounts exclude all Cal Dive capital expenditures in the periods noted.
Further details are provided in the presentation for Helix's quarterly conference call to review its thirds quarter 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 Thursday, October 29, 2009, will be audio webcast live from the "Investor Relations" page of Helix's website. Investors and other interested parties wishing to listen to the call via telephone may join the call by dialing 800 475 0212 (Domestic) or 1 312 470 7004 (International). The pass code is Tripodo. A replay will be available from the Audio Archives page on Helix's website.
Helix Energy Solutions, 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. That business unit is a prospect generation, exploration, development and production company. Employing our own key services and methodologies, we seek to lower finding and development costs, relative to industry norms.
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. Further, we do not include earnings from our interest in Cal Dive in any periods presented in our Adjusted EBITDAX calculation. 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.
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 statements that could be deemed "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, any projections of revenue, gross margin, expenses, earnings or losses from operations, or other 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, performance or industry rankings; 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 risks, uncertainties and assumptions referred to above include the performance of contracts by suppliers, customers and partners; employee management issues; complexities of global political and economic developments; geologic risks and other risks described from time to time in our reports filed with the Securities and Exchange Commission ("SEC"), including the company's Annual Report on Form 10-K for the year ending December 31, 2008 and any subsequent Quarterly Report on Form 10-Q. We assume no obligation and do not intend to update these forward-looking statements.
HELIX ENERGY SOLUTIONS GROUP, INC.
Comparative Condensed Consolidated Statements of Operations
Three Months Ended Sept. 30, Nine Months Ended Sept.
30,
(in thousands, except 2009 2008 2009 2008
per share data)
(unaudited) (unaudited)
Net revenues:
Contracting $ 152,310 $ 473,117 $ 967,751 $ 1,079,804
services
Oil and gas 63,715 134,619 313,888 499,831
216,025 607,736 1,281,639 1,579,635
Cost of sales:
Contracting 127,402 318,451 765,602 777,206
services
Oil and gas 86,006 90,205 216,454 295,688
213,408 408,656 982,056 1,072,894
Gross profit 2,617 199,080 299,583 506,741
Gain on oil and gas
derivative commodity 4,598 2,705 83,328 2,705
contracts
Gain on sale of - (23 ) 1,773 79,893
assets, net
Selling and
administrative 21,884 48,539 102,609 136,953
expenses
Income (loss) from (14,669 ) 153,223 282,075 452,386
operations
Equity in earnings of 13,385 8,751 27,152 25,722
investments
Gain on subsidiary 17,901 - 77,343 -
equity transaction
Net interest expense 10,306 28,298 39,969 76,914
and other
Income before income 6,311 133,676 346,601 401,194
taxes
Provision of income 4,468 54,165 126,196 151,638
taxes
Income from continuing 1,843 79,511 220,405 249,556
operations
Income (loss) from
discontinued 3,021 (93 ) 10,303 1,671
operations, net of tax
Net income, including
noncontrolling 4,864 79,418 230,708 251,227
interests
Net income applicable
to noncontrolling 844 19,240 19,017 26,553
interests
Net income applicable 4,020 60,178 211,691 224,674
to Helix
Preferred stock 125 881 688 2,642
dividends
Preferred stock
beneficial conversion - - 53,439 -
charges
Net income applicable
to Helix common $ 3,895 $ 59,297 $ 157,564 $ 222,032
shareholders
Weighted Avg. Common Shares
Outstanding:
Basic 101,282 90,725 97,831 90,598
Diluted 101,334 94,583 105,868 95,096
Basic earnings per share of common
stock:
Net income from $ 0.01 $ 0.65 $ 1.49 $ 2.40
continuing operations
Net income from
discontinued $ 0.03 $ 0.00 $ 0.10 $ 0.02
operations
Net income per share $ 0.04 $ 0.65 $ 1.59 $ 2.42
of common stock
Diluted earnings per share of common
stock:
Net income from $ 0.01 $ 0.63 $ 1.38 $ 2.32
continuing operations
Net income from
discontinued $ 0.03 $ 0.00 $ 0.10 $ 0.02
operations
Net income per share $ 0.04 $ 0.63 $ 1.48 $ 2.34
of common stock
Comparative Condensed Consolidated Balance Sheets
ASSETS LIABILITIES & SHAREHOLDERS' EQUITY
(in Sept. 30, Dec. 31, (in thousands) Sept. 30, Dec. 31,
thousands) 2009 2008 2009 2008
(unaudited) (unaudited)
Current Current
Assets: Liabilities:
Cash and $ 410,506 $ 223,613 Accounts $ 177,117 $ 344,807
equivalents payable
Accounts 224,701 545,106 Accrued 198,876 234,451
receivable liabilities
Other Income taxes
current 130,546 191,304 payable 108,213 -
assets
Current mat of 13,136 93,540
L-T debt (1)
Total Total Current
Current 765,753 960,023 Liabilities 497,342 672,798
Assets
Long-term
Net Property & Equipment: debt (1) 1,347,395 1,933,686
(2)
Contracting Deferred
Services 1,401,534 1,876,795 income 456,728 615,504
taxes
Oil and Gas 1,454,798 1,541,648 Decommissioning 177,924 194,665
liabilities
Equity 191,475 196,660 Other long-term 10,148 81,637
investments liabilities
Convertible
Goodwill 78,220 366,218 preferred stock 6,000 55,000
(1)
Other 79,310 125,722 Shareholders' 1,475,553 1,513,776
assets, net equity (1)
Total Total
Assets $ 3,971,090 $ 5,067,066 Liabilities & $ 3,971,090 $ 5,067,066
Equity
Net debt to book capitalization - 39% at September 30, 2009. Calculated as
(1) total debt less cash and equivalents ($950,025) divided by sum of total net
debt, convertible preferred stock and shareholders' equity ($2,431,578).
Reflects impact of retrospective adoption of accounting standard which
(2) required bifurcation of Helix's convertible senior notes between debt and
equity components. Impact on September 30, 2009 and December 31, 2008 was a
reduction in debt totaling $28.9 million and $34.8 million, respectively.
Helix Energy Solutions Group, Inc.
Reconciliation of Non GAAP Measures
Three and Nine Months Ended September 30, 2009
Earnings Release:
Reconciliation From Net Income to Adjusted EBITDAX:
3Q09 3Q08 2Q09 2009 2008
(in thousands)
Net income
applicable to $ 3,895 $ 59,297 $ 100,219 $ 157,564 $ 222,032
common
shareholders
Non-cash 533 6,874 19,261 19,794 23,902
impairment
(Gain) loss on (17,869 ) 23 (69,569 ) (87,892 ) (79,893 )
asset sales
Preferred stock 125 881 250 54,127 2,642
dividends
Income tax
provision 1,415 39,325 50,072 116,281 134,253
(benefit)
Net interest
expense and 10,192 25,992 5,776 36,561 69,650
other
Depreciation
and 46,315 70,275 68,221 188,513 226,748
amortization
Exploration 904 1,645 1,483 2,863 5,007
expense
Adjusted
EBITDAX $ 45,510 $ 204,312 $ 175,713 $ 487,811 $ 604,341
(including Cal
Dive)
Less:
Previously
reported $ (7,204 ) $ (45,289 ) $ (27,804 ) $ (56,291 ) $ (84,408 )
contribution
from Cal Dive
Adjusted $ 38,306 $ 159,023 $ 147,909 $ 431,520 $ 519,933
EBITDAX
We calculate adjusted EBITDAX as earnings before net interest expense, taxes, depreciation and amortization, and exploration expense. Further, we do not include earnings from our interest in Cal Dive in any periods presented in our adjusted EBITDAX calculation. 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.
Reconciliation of Non GAAP Measures
Three Months Ended September 30, 2009
Earnings Release:
Reconciliation of unusual items:
3Q09
(in thousands)
Other charges:
Gain on sale of Cal Dive $ 17,901
Weather derivative contract (7,084 )
Tax provision associated with above (3,805 )
Other income, net 7,012
Diluted shares 101,334
Per share $ 0.07
Source: Helix Energy Solutions Group, Inc.
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