Q3 2019 Earnings Call
Greetings and welcome to the third quarter 2019 earnings.
For Helix Energy solutions conference call.
During the presentation, all participants will be in listen only mode. Afterwards, we will conduct a question answer session at that time. If you will have a question. Please press the one followed by the foreigner telephone.
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As a reminder, this conference is being recorded Tuesday October 20 seconds 2019.
I would knowledge to turn the conference over to Erik Staffeldt CFO with Helix energy. Please go ahead.
Good morning, everyone. Thanks for joining us today on our conference call for Q3 29 to earnings release participating on this call for he looks today, it's all one credit our CEO Scotty Sparks, our COO 10, like on our general counsel and myself.
Hopefully you've had an opportunity to review our press release and the related slide presentation released last night, if you've not have a copy of these materials both can be accessed through the investors page on our website at www Dot Felix U.S.G. Dot com. The press release can be accessed under the press releases path.
And the slide presentation can be accessed by clicking on todays webcast icon.
Let me begin our prepared remarks kept an eye Kirk will make a statement regarding forward looking information Kevin.
During this conference call, we anticipate making certain projections and forward looking statements based on our current expectations. All statements. In this conference call already associated presentation I live in statements of historical facts or forward looking statements and are made under the safe Harbor provisions of private Securities Litigation Reform Act like to 95.
Our actual future results may differ materially from our projections and forward looking statements due to a number in variety of factors, including those set forth in slide two and our most recently filed annual report on Form 10-K and in our other filings with the FCC also during this call certain non-GAAP financial disclosures, maybe made in accordance with FCC.
The rules the final Slide Department [noise] excuse me presentation provides reconciliations of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations along with this presentation earnings press release, our annual report in the replay of this lots that are available under the for the Investor section of our website at Www Dot helix U.S.G. dotcom.
I would.
Good morning, everyone will start on slide five which is a high level summary of the Q3 results.
Third quarter results reflect improvements in operations with increased utilization and both are well intervention that our robotic segment.
Revenue increased 11 million and our net income increased 15 million from second quarter results. Our results for the third quarter reported revenues of 213 million and net income of 32 million, we generated 66.3 million of EBITDA.
Turning to slide six for the quarter. The 32 million of net income represented an improvement compared to 17 million and acute in Q2, and the 66 million to be the dollar in Q3 was an increase of 16 million Richards compared to the 50 million in Q2, our operating cash flow.
57 million and free cash flow was 39 million.
For our year to date results, we recorded a net income of 50 million compared to net income of 42 million. During the same period in 2018, we generated EBITDA of 147 million compared to 138 million during the same period and the team.
Moving to slide seven we benefited from higher utilization across our business segments, well intervention vessel utilization increased to 97% from 94% in Q2, and we believe we've successfully address the downtime issues that play debts. During the first half for the year on the 15 carry IRS system.
Robotics performance also improve with utilization increasing to 96% on our chartered vessels and 44% on our overseas.
Moving to slide eight.
From a financial statement perspective, our cash levels at quarter end increased to 286 million from 261 million at the end of Q2.
We invested 18 million and capital expenditures and we May 13 million of debt repayment our debt our net debt at the end of Q3 was 127 million compared to 163 million in the second quarter I'll now turn but scottie.
Turning to Scotty for an end up discussion of the operating results.
Thanks, and good morning, everyone moving on to slide 10.
The first quarter, there's a good period.
Our best quarter since 2014 level vescos contracted with strong utilization for the quarter.
We've achieved results across the fleet the minimal operational downtime.
Business lines are performing well.
In the third quarter, we increased revenues of 213 million compared to 219 million. The second quarter gross profit margin increased to 26%, resulting in a profits of 55 million.
Chris around 20% in 40 million gross profits in Q2.
Across the fleet, we had same high levels of utilization the ones Avention fleet to achieve utilization of 97% globally.
The next forgot had 95% smell see at 96% on Brazil at 99% utilization.
Robotics charter fleet to achieve utilization of 96% slightly.
And the Gulf of Mexico into Q4 thousand continued for BP for at the quarter Q4 thousand what's on three wells, including successfully complete some the abandonment.
Strusky well then by students.
I don't see business performed well work in investments in the best of web seasonal period.
Vessels working on 13 wells inside so from numerous clients.
Performance in Brazil was strong again.
Vessels performed very well achieving high utilization of 99% remarkable uptime.
Robotics chartered vessel fleet was very acid working between RV supports and trenching Bucks completing 168 days of working renewable energy projects, and then LC and in Taiwan.
On the robotic Socrates 750, Trenching system achieved 92 days utilization in Mexico that continues into the fourth quarter.
It continues to be excited about expanding our product and service lines geographically Q 7000 is now being ready to transit from Singapore to West Africa in Q4 and is currently being us over some Jay service equipment. So we can provide our integrates it's not panic Sanjay alliance offering globally.
Slide 11 provides more detail review of our operations from a well intervention business in the Gulf of Mexico.
The key 5000 continued working for BP for almost the entire quarter, achieving 93% utilization.
Please note this year SPP contained at the end of September the vessel commenced development activities on our second see an exciting drops do well.
He is X one sub sea Jones beyond 15 carry IRS system would utilize 79% on the key 5000 to BP with minimal MPT throughout the quarter.
The key 4000 achieved good utilization of 97% divestment performed well with minimal commercial bounce on completion the bottom of the fast trustee line by she is that some budget.
The vessel then completes its settlement production constant well for one clients prior to commencing a five well campaigns for another clients.
Moving to slide 12.
I don't see well intervention business performed well with both vessels achieving high utilization throughout the course of near 100% operational uptime performance.
Well enhancer achieved 100% utilization performing very well on the well abandonment operation and complete some production has been activity on seven wells.
Let's see while also performed well working for full clients, achieving 92% utilization on six wells conducting production enhancement activities.
Due to project timing the vessel had the short seven day idle period between projects.
The key 7000 continues mission preparation in Singapore. The best there is now fully mandan training on the vessel continues.
Ill short trials were completed without issuing the courts and the clients upset some process continues.
Yes, there is now being Mobilizers from Jay said us equipments, and it's very close to being ready to commence translate to west Africa into fourth quarter.
Moving to slide 13.
In Brazil, our operations of Petrobras continue to go extremely well again, producing enough rep sectional causative near 100% utilization on uptime performance.
Well I assess those continue to undertake numerous very skypes nicely were related to production enhancements.
And the third quarter to seeing takes one achieved 100% utilization working on C wells on production enhancement skirts.
Let's see in the Phoenix to achieve 99% utilization lesson I was five wells performing full production enhancement skypes on one abandonment Scott.
At the request of our customer the shipyard maintenance period for the steam and Phoenix Turner has now been deferred to Q1 of 2020 .
Overall, we continue to perform well in Brazil for Petrobras and we're now starting to engage with some sort of a tender activity from an overall practice as they expand into the region.
Moving on to slide 14 far Robotics review.
But six continues to guy well Q3 is the best performing quarter in quite some time for robotics with strong operational performance and significantly better commercial results.
And the first quarter vessel charter fleet utilization was 96% including spot vessels.
Two vessels, we utilize mostly on trenching projects in the North Sea the Grand Canyon see what's in the APEC region and the rest candies operated in the Gulf of Mexico.
In the quarter, we achieved 241 days or trench and operations comprised of 114 on trench investment related days launch two days for the T. 750, trenching system in Mexico on the Cline provided vessel.
The Grand Canyon works in a north sea, achieving 100% utilization on a combined hard and soft on trenching projects.
Best is to remain busy into November and that is being much sense at sign a further reducing our cost base.
The Grand Canyon, So you had 100% utilization performing Watson RV support projects and the APEC region, including 60 days on renewable project offshore Polyone.
Grand Canyon free had 87% utilization in the North Sea working 57 days Trenching and 23 days RV supports.
The Russ can do that 28 days utilization price Commencements trend 10 year dry docks being applied for helix.
Well against us in the fourth quarter.
Hi, good slide 15.
This slide detail on the vessels RV entrenched and utilization for your reference.
I'll now turn the call that Eric for a discussion on the balance sheets, and our 2019 outlook.
Thanks, Scott Slide 17 outlines our debt instruments and their principal maturity profile I'll leave the slide for your reference move on to slide 18.
This slide provides an update on key balance sheet metrics, including long term debt and net debt levels as of September Thirtyth. Our net debt in Q3 decreased to 127 million from 163 in Q2. The decrease in net debt. During Q3 is primarily attributable to 57 million of operating cash flow offset in part by.
2 million of Capex.
Our cash position at quarter end increased to 286 million at quarter end net debt to capitalization was 7%.
Moving to slide 20 per discussion on our 2019 outlook. We are adjusting our guidance for 2019, two range of 172 to 184.
EBITDA.
Our year to date results are in line with our expectations and the expected activity levels in our markets for the fourth quarter support our guidance. This range includes some key assumptions expectations and estimates as follows we're assuming full year benefit for Siem helix, one antsy MPLX to in Brazil as previously discussed the plan.
Repair and maintenance on both the CMP next one and Siem helix to have now been pushed into 2020, the latter at the request that the customer we expect to Q4 thousand two 5000 strong utilization in the fourth quarter, although we have gaps to fill we expect to both north sea well intervention vessels to work through note.
Denver and expect to warm stacked vessels at the end of the traditionally slower winter season.
Overall, we expect to step down in the fourth quarter, but expect an improved market as compared to 2018.
Any significant variation from these key functions could cause our EBITDA fall outside of the range provided.
Moving to slide 21.
We have 800 million backlog of which 115 million is currently scheduled an estimated to be completed during the remainder of 2019, our backlog continues to be heavily weighted to the BP to 5000 contract to Petrobras contracts and the huge producer one contract.
In the Gulf of Mexico intervention market, we expect to Q4 Q4 thousand to have high utilization in Q4 in the Q 5000 began the quarter working on the trustee field vessel has backlog into November with opportunities thereafter.
In the North Sea water mentioned market, we expect both vessels to work through November and expect typical seasonal weakness during the winter months.
In Brazil, we expect to full year from both vessels with the shipyard maintenance mapping pushed into 2020.
Forward Slide 22, robotics, I think we'll see the typical slow down with the onset of the winter season in the Morrissey Grand Canyon should complete its trenching project early to mid quarter vessels chartered expires here in the fourth quarter.
When taking into is expected to have good utilization in the APAC region and the Grand Cayman three we'll look.
Toward the spot market in the north sea with gaps to fill other schedule.
Over to slide 23, our capex for the years forecasted at approximately 150 million with most of it most of the capital being related to completing the Q 7000.
During the fourth quarter, we plan to make a final shipyard payment of approximately $70 million and the vessels scheduled to translate to West Africa for its first project expected to start in early 2020.
Maintenance Capex includes the dry docks completed during the first quarter of the HP, one well in lung cancer.
Our schedule.
Manny debt payments for the year approximate 10 million.
I'll Skip slide 25, and even for your reference at this time I'll turn the call back Olin for closing comments.
Thanks, Eric.
Well another quarter is behind us in both the fifth year of the longest down cycle in our industry says story in the last 40 years.
The good news is that we're headed into what could be considered the second year of the slowest recovery in our history, but it should continue.
Uncertainty over the future shale is making it more likely but we'll see capital reallocated to the offshore the huge oversupply in the offshore service segment has kept rates there I mean very favorable for producers we may see those positively impact the producers in 2020 budgets.
We were concerned that the increased tendering volume touted by some contractors earlier this year may not translate into actual work. It may be a slow process, but we do see the volume of working and decreasing although slowly.
Rig utilization is improving as our rates, but also slowly.
Rigs in our universe, or 60% utilization than 80% of marketed utilization I'm feeling that rig operators are also starting to wake up to be on sustainability of the rates at the bottom of the cycle and are starting to behave more rationally the raise of rigs scrapping slowed. This year. This is either a sign that all scrapped.
Worthy rigs have been scrapped, which I don't believe or possibly that operators truly see a pickup in utilization.
The new rig contracts are definitely being priced higher.
Last year at this time, we were cautiously optimistic about a marginally stronger 2019, but we're very concerned with the fourth quarter of 2018.
We've seen the marginally stronger 2019 with improved utilization across all of our service lines, Although we still have gaps to fill and we'll need to execute we have less concerned over meeting our targets for the fourth quarter than we did this time last year.
We're we're not yet able to see any meaningful rate improvement in 2019 over 2018, we've had some issues. This year that will likely keep both from over achieving our guidance for 2015 Chase system, a slower start to do well ups UK season.
FX rates and preferred work for the Q 7000 into 2020 are the main ones that we don't see repeating.
We have some uncertainties in Q4 that we need to fill but nowhere near the level of uncertainty of last year. We also have opportunities that still might allow us to overachieve in Q4.
This time, we do expect it to be an improvement over Q4 2018.
As a result, we're narrowing our guidance, while maintaining a somewhere mid point, we're hopeful 2020 will show yet further improvement our cost and robotics will continue to reduce as our high rate charters roll off.
Thats correct hedges expire.
We're planning to test the market strength.
Coming year with marginal rate increase.
The increase was going into 2020 for Q 7000 is planned to begin work in January and we have good visibility for demand beyond the first project and may be a bit early to quantify the Q 7000 contribution in the first full year, but we should have a good idea by February when we present the guidance for 2020.
We have some clients returning as a result of long term rig commitments rolling off and that combined with the more active markets should support high utilization in the future.
Operationally with the modifications completed on the 15 case system and are performing well our operational execution is at its highest level in nears. The two vessels in Brazil are consistently rated the best performing in the Petrobras fleet each month, something we're very proud of.
We are the results were achieving in this challenging market 2020 is about the year for significant market improvement then where at least on the cost.
We expect to slow but continued improvement ahead based on rate increases cost reduction mark demand increase rig operator rational behavior and the entry of the Q 7000, Rome device into market, which we've done a really good place right now and we plan to proceed with caution imprudence toward growth further improvement.
With that color I'll hand, it back over there. Thanks, so in operator at this time, we'll we'll take any questions.
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One moment, please our first question.
Our first question comes from line of Propylene Naira. Please proceed with your question.
Hi, good morning, guys.
I wanted to us Oh, I guess I wanted to start on.
The early discussions on 2020 and kind of whatever what you're hearing from your customers and getting visibility and or tendering conversations and then I guess too.
You mentioned a bit of the pricing power.
Or potential press rates, a little bit we've seen that with some rig contracts. So I guess could you give us some color on how operators are responding to that.
Pricing pressure I guess.
Well I think its little early I think for 2019, we basically gave our pricing earlier in the year and so David they've been aware of that are going into next year.
We havent given from pricing to decline so they haven't seen the amount of the increase but in general we have told them that.
Costs are starting to rise and therefore, they should start to expect higher rate and for the most part that clients and I'll, let Scott ill speak to the ones. These talk through both declines have spoken with are expecting rates to go up which is also prompting some early discussion on longer commitment of course to producers want to lock in.
On low rates in the contractors are holding out for market improvement.
Yes, I think the clients do expect.
License to go up next year.
Well, we can push that is another discussion, but we're definitely seeing US said it was pack out for next year better than we've seen in previous years, there's more volume of work have them more structured discussions around that that volume of wealth as I mentioned earlier, we have some historical clients coming back to the full here and that's that's going to help.
Our schedule at the Shadows pack out that should lead to an increase in rights and Thats. The current plan right now.
Okay, Great and then I know we've talked about this for wanted to see if there's any updates you get you guys are certainly by our models set to generate a lot of cash flow.
Do you have any any updates on how you guys are thinking about pushing out maturities are just doing something on a capital return to shareholders. How do you guys think about that today.
Oh that will ultimately be aboard decision, but the management recommendation would be to at some point of consider returning value to shareholders more than likely through share repurchases.
But the timing of that and the quantification about I think were little early I think we have to get closer to our.
Contract renewals and rollovers and at that point, when we have longer term visibility on our sustainable cash flow, we can make those decisions.
If I could squeeze one more in just you mentioned normal seasonality for the winter season in the North Sea I guess or we are we nearing a point, where we may see the winter months expand in terms of activity.
Given the amount of active is out there or is it still a bit early to see that.
I think it's slightly changing.
We have five vessels and then I'll see but since in the event.
With some when the citadel types into December .
We have discussions on guide that Kid plays out the vessels for the year.
Yet, but we're in discussions with numerous a number of clients don't numerous.
And we will say a handful of an area stocks, which then brings to get down from what was the couple of years ago four to five in upstate maybe among 40 person.
Perfect. Thank you very much guys good quarter.
Thank you.
Our next question comes the line on Ian Macpherson. Please proceed with your question.
Thanks, Good morning, good quarter.
No I have a question either for Eleanor Scott.
When we look at the the sensitivities around.
Your fourth quarter outcomes at it sounds like the north two vessels are more likely to just.
Hit hit the seasonal wall, but I guess, there could be some some variability with regard to the utilization for the Q4 in the Q five and you still have I guess.
Two in a fraction of drugs ski wells remaining in inventory and I wanted to see what your plans are if you have a plan yet to.
Debt more into draw skew for maximum utilization in the fourth quarter in the Gulf of Mexico.
For a few intensive reserve the remaining couple wells for next year, and then fall into that if you're looking at any more trucks do you like opportunities next year to expand that inventory.
Okay, Let's go to here I'll take that.
Like we said we were in discussions with a number of clients. The work is packing out in the fourth quarter Bison and I'll see ending in the Gulf of Mexico right now like to visit just 70 to fall back on see any further trustee what.
So.
Quietly confident we're going to Max out the rest of the year when not there yet that this biscuits structured discussions ongoing right now.
I'll just add to that.
We are looking to additional opportunities for drugs type deals there is nothing imminent, but.
But there are there is visibility of things out there.
But we still have these two wells so we're not really pressed to consider.
No anything rash.
One thing I would like to mention Boes that is for the past couple of years. The BP work on the Q seven or the Q 5000 has fallen to the latter part of the year or I'm sorry, the earlier part of year with the gap. They take it for 270 days and then there was a 90 day gap.
Thats been late in the year going into next year that.
Flips a little bit BP is planning to take to both the later in the year with the gap showing up in the first quarter, so everyone needs to sort of recalibrate there.
Third quarter by quarter expectations without a mine.
Thanks.
Add that and that this downtime for Q 5000 does not eat into your 270 days that.
Correct.
Okay. Thanks last one for me.
Eric I know I will talk about guidance for next year on next quarter's call, but when we think about helix in a maintenance capex mode. Starting next year, that's been only $20 million to $25 million per year in 2018, and 19 is there anything that looks different than that next year.
Yes, I think in general and we've talked to big picture going forward that maintenance Capex would be in about 30 to 50 million range recognize here probably the last three or four years, we had been running lower you probably have to go back to about 14, when we were closer to the $50 million range to.
Last time, we weren't NIS 30 to 50 million range I think we still feel that 30 to 50 is the right right range. It will be lumpy next year, we will have.
Heavier or expect to have a heavier amount of dry dock or vessel shipyard maintenance.
Including the Q five in the first quarter.
And so I think at 30 to 50 million is the right right way to think about.
The maintenance cost going forward.
Got it perfect. Thank you guys.
Thank you.
Our next question comes from the line of George O'leary. Please proceed with your question.
Morning, guys.
We're in the order.
Just.
Tacking onto that last question.
As you sit here today and look out at the 2020 timeframe are there any interesting growth opportunity that you think you might pursue or should we expect.
Backs at least the sit here today I realize you have to go through the whole budgeting process.
And then move more towards that maintenance capex level in 2020, it looks like the street as soon as where you guys are headed so I just don't want to set false expectations there.
Yeah.
Time, we don't have any and to pay do does capex allocated towards growth I think our focus on going into next year will be now, but our utilization is sufficiently high levels, we're going to be trying to push rate maximize cash flow.
No.
Focus on further debt reduction and.
Possibly on earlier, rather than later moved through returning value to shareholders, but that's probably the priority versus expanding capital for growth personally until rates and improved quite a bit and the market conditions improve I don't think that there is the place in our sector, where you can deploy.
Capital with the.
An appropriate targeted return on capital so we're going to be looking to go into harvest mode here for a while it's not to say that we can't grow.
I, just don't think but it takes capital to grow I think we have plenty of room to add the adjacent services to what we do and to penetrate some new geographic areas where should.
Again spur.
That will.
Create more utilization more demand and higher rates.
Hey rate that some they got the prudent approach and improving market into that.
Point alongside rates when the other things that would be a positive sign is just.
The potential for you guys to see longer term contracts signed and may be income something longer term for that.
7000, just how is dialogue with customers on reloading that backlog hopper with some long term backlog and then for the Q 7000 in particular do you need to get a bunch of reps into your belt before you can get a long term contract there is there the opportunity.
The next 612 months to get a contract signed for that vessel.
Or keep in mind.
11 intervention.
As as.
As an industry is short duration contracts.
Theres very few producers out there that have sufficient or wellhead counts to support a long term contract.
Combined all into there's only five long term contracts and well intervention in the world we have three of them.
Our curves solution or off for oilfield services has won in Norway for Ecuador and island as the other.
Beyond that.
I won't say, but there's not a potential but there's not a likelihood of long term contract. It's more of a spot market and that's also where we're very is that for years, we've been able to build our schedule out from linking together shorter duration project. So we actually see it as a competitive advantage.
The only caveat to that is as I sort of mentioned before producers are looking at the hopper of work that they got realizing that they have more work and theyre looking to try and lock in on the lower rate. So there is discussion about long term partnering agreements not necessarily contracts.
But how that how that unfolds and what form that may take go we'll just have to keep working munis units. If we can come up with a good deal.
Okay, great. Thanks to the color guys.
Our next question comes on line.
Now. Please proceed with your question.
Hey, good morning, Thank you, but taking question and a good quarter.
I guess I just wanted to clarify on the downtime so audit dry docking on Q. Five. So you would have died locking in one Q, but it doesn't impact the btwoc. So maybe look basically stocks from twoq to Fourq. It was that the way to think.
Correct, yes.
Okay.
And can you just Doug.
The minus about about any drydockings that can get some guy docking on Q4, MCM helix, one as well.
Okay I'll take that.
We only have one major dried up next year, which into key 5000, we do have some less maintenance period study such one on SH two will have west maintenance period, relatively small time scales compared to loss dry docks and the first half of the yet.
Then we also have a west maintenance period that we have undertaken the winter season amounts for the Seawell, which again is a shorter period duration.
Okay, and then you say like shut it does that make and disciplined did a good way of thinking about I think the best way to put out because were in the plan in phase right now the best way to put it will be less than a month.
Got you only what are the only one I would add to that Scott to use and with the Q 7000 later on in the year Bill will be a down period of about 30 days in order to.
Dry dog for a new bottom yet, but the final bottom thing yes.
Got it okay.
If I think about Q, San and I understand it's too late.
I just wanted to see if again bookend that best So let's say at least my thinking is that say if you have though I'd call. It 60, 65% utilization for the year that kind of makes it even and I was just trying to see that is it right and.
Let's say it it has a good utilization yet like 85% I'd be talking about maybe like 10 15 million of gross profit contribution and if you can help me that there.
Well, it's very early in the.
In the process for us are really started to quantifying a whole lot about the Q 7000 mile I'll tell you I think 65%.
Utilization is a bit high I would think for breakeven I think breakeven is more around the 50% of utilization.
And then the total earnings power for the Russell.
We have we have a lot of visibility on work how much of that falls in line is yet to be seen but it could be anywhere from breaking even next year to 20 million dollar contribution this.
I know that's a wide range.
But thats about all I'd be willing to say at this point.
Actually the that's that's very helpful. So if I just think about the puts and takes on spending dimension EBITDA growth for next year. So.
I just wanted to make sure that the began moving pieces, so I need to think about.
Obviously, the maintenance aspect and the Q seven.
But I would say that outside those moving parts I think I think the market itself is getting better.
So that should help you guys. It did any update moving pad that I should be thinking about and I think about just going intervention.
Well.
I think right now were if you go through the details of what Scotty was outlining for each of the both wells I think you'll notice that most of the work that we're undertaking right now is for production enhancement.
There's an awful lot of talk about Pn eight.
Becoming a much stronger market of course, I always take that with grain of salt that seems to be the hockey stick that never arrive, but those should that if that comes to fruition like people thing than there is definitely going to be more work than we can then we can cover.
So.
I don't know, where you have anything as Scott, Yes, I'll, let a little bit of color that we've definitely seen an uptick in production.
It's been related activity throughout this year setting.
Last quarter.
On the tick close to 25 wells roughly.
20 of those wells World production enhancement based activities, so and we're seeing the off price has returned to spend money on.
Ways to get bows out from the ground drop them sightseeing on on abandoned them activity sunk cost.
Okay, and maybe one last question for Eric.
Could you remind us how much cost savings should we think about.
The bodies in 2020 was 29 and just a diverse.
So yeah. So from the Big initial driver is going to be obviously, the hedges that have rolled off we had the grand Canyon to hedge rolled off in July of this year and we will have been Grand Canyon three had to roll off in February of next year and the cost that we incur on those.
Overseas.
Say 10, 10 to $15000 a day associated with those hedges so.
From that standpoint, those hedges going away you'd see the cost savings and I think in general we talk in a $7 million to $10 million range of cost benefits associated with that.
Going forward.
Okay and.
Good on Canyon was supposed to be coming up so the new low in October is that correct.
Yes, right now we plan to let the vessel into November is on a content on a hard and soft ground trenching project and at that point. When we were deemed localized divestment handed back to the arena. We have had some discussions about keeping that for a longer term, but in a much different commercial.
Arrangement with the.
If it if it does go back then we'll see we'll look at vessels throughout the year NCC what were climate, we need to pickup spot vessels to cover that.
Okay. That's helpful Me. Thank you Sir.
Thank you.
Our next question comes line of Martin Malloy. Please proceed with your question.
Good morning.
Oh no murdered just.
Just following up on some of the discussion there regarding the mix on well intervention.
Could you maybe help us with I think last couple of years, it's been kind of 50, 50, p. M&A versus well intervention kind of where you see that going and then also on the robotics side the mix there in terms of.
Renewable related work versus traditional oil and gas and sounds like.
Mark is pretty strong through that trenching.
I'll take that one.
Morning.
The one convention mix right now, let's say over the current.
Looking back would be about 50 50 last few years. This year I'd say small 70 to touch sense, but production enhancement. This.
First quarter than they are older workers production enhancement. So we are definitely seem to change.
The what this planned though the discussions with as planned for next year on assays in that range as well, there's definitely more tokens production related.
It's been type activities.
Regarding the robotic side of the business all of our R&D type rents and Ralph R&D work is nine the oil and gas based at the traction side is predominantly onto the renewable side.
The business environment able it can be.
Wind farm working all export cables that it's not just.
Down into a wind farm it can be quite large trenching activities.
At this.
Couple of hundred 68 days in this quarter's renewable based activity a good portion of that comes from trenchant.
We have plans in 2020 o'dwyer out to 2020 , freefall renewable which relates its trenchant activity.
Yeah.
Okay, and then just as a.
Percentage of your revenue in robotics from the renewables is it.
20% 30, 40%.
Yes, it's roughly 30% to 40%.
Barney spend I think in that range in 2018 and 2019.
Okay, great. Thank you.
And then.
Just on the.
In terms of thinking about the BP contract.
I think that.
Ends in early 2021, and then the.
Brazil vessels later on in 2021 could you maybe talk about thoughts in terms of timing of negotiations and when.
We might learn something about.
What does us they're going to be doing going forward.
Well take the ones first of the Petrobras contracts of they don't enter into discussions about the renewal until six months prior to be in the contract.
I think we've had some feedback from their operational group, but they're very happy and they want to extend.
But they will not talk about until six months before the contract, but we don't see to greater worry.
About that with the way, it's going down there is looking very favorable.
The other one with BP.
Of BP is still probably early but I think what you're going to fee. There is so.
Yes, probably.
Reworking.
Scott you're involved with the more I'll, let you.
Sure to describe what's going on I think correct here. It is early to discuss.
Options of extension for the vessels with BP right now, but I'd.
The way, we're seeing that plan I do have an awful lot of production enhancement related activity coming up.
And from that I think the waiver weren't going forward is it's going to be more.
Trying to tie in sub contracts and taking more responsibility for the vessels and the way that we on the tech but again.
The days in any discussions right now.
I think that goes along with our stated intention to expand our service offerings around our assets the discussions with BP or precisely bodes about what what.
Added services can we provide as part of the package. So it's a little bit more of a complicated discussion than just simply.
Are we going to root new at rates or not.
Great. Thank you.
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Our next question comes from line of David Smith. Please proceed with your question.
Hey, good morning, and congratulations on the quarter.
Right.
Present, the Q 7000, you mentioned demand visibility pass the first contract could could you give us any color on that visibility in terms of geography or duration.
Where where you're kind of very rigorously and on interest and maybe the nature of the work.
I can't be too specific but.
We do have a work order code for the first project debated days the work being planned visit in excess.
Typically the projects grow rather than shrink.
Behind that I believe we have four clients all of them all of which are looking to farm into the contract each of them with varying scopes of work so the vessel could be.
And I must say it could be because we don't have assigned yet, but it looks like the vessel could be in the West Africa region.
For most most of this year of ardent this coming year I mean 2020.
Then beyond that we've got discussions going with clients in the UK Asia Pacific and Brazil, So where it where it goes after that is still very much up emitter depends on which clients signed up first but theres multiple clients in multiple regions and the vessel, we've built with Shipshape pontoon sort of.
Trends so at 11 months.
So theoretically.
So that was built to be our swing vessel to the transit to different regions and to penetrate new regions. So so far everything's lining up for both as we expected.
That's great color. Thank you.
And the other one on you mentioned.
Rig RIN pricing.
Picking up I think we've seen some drillships in the Gulf of Mexico book rates more recently in the when 80 to 200000 dollar day range versus 130 to 150 earlier. This year just wondering if thats enough of a price increase on the rig side to give you a cover to.
Good.
Did bump pricing for the Q five that Q4 thousand there or.
I guess the coupon doesn't have much availability next year, but if it that gives you covered loan pricing for for your have a well intervention assets.
Okay.
Thing more than than low single digits.
Well keep in mind, there in the North sea, we compute against more drugs.
Third rig rate, we've seen no increase rather meaningfully.
Thats good news for the North Sea in the Gulf of Mexico, you're right.
The renewal rates actually I think are a little better than the 180 to 200.
There's been one of mentor Ssli low cost producer that.
Renewed.
We're ready to an excess of 200, so thats a very positive sign and then keep in mind, though when comparing our rates to rig rates.
To go to comparable rig rates you have to add the cost to borrow views on the cost of the lending stream through a rig rate of to approximate what our rates might be so I. Thank all of that means that we do have room to move our rates just how much we can move it depends on how how it impacts the commercial.
Although the of the projects with the producers are looking at and how many producers there are in MCU and like we've said before.
Especially if they were picked so far there is going to be more work than we can did too. So we're going to have the luxury of being able to high grade the better paying clients from from those thinking that the downturn is going to last forever.
That's great color. Thank you.
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There are no further questions at this time.
Okay. Thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our fourth quarter 2019 call in February 2020. Thank you.
That does conclude the conference call for today, we thank you for your participation and asset you. Please disconnect your line.