Q2 2020 Helix Energy Solutions Group Inc Earnings Call
Thank you for your patience your conference will be get shortly once again. Thank you for your patience and please continue to standby.
[music].
If any time did the conference you need to reach an operator, you can press star zero.
As a reminder, this conference is being recorded Thursday July 20, Threerd 2020, I'd now like to turn it over to Mr. ecstatic <unk> Executive Vice President and CFO. Please go ahead.
Good morning, everyone and thanks for joining us today on our conference call for our second quarter 2020 earnings release.
Participating on this call for helix today.
Our CEO Scotty Sparks, our COO 10 acre got 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'd rather have a copy of these materials both can be accessed through our investors page on our website at www helix E.S.G. Dot com.
Press release can be accessed under the press release tab and aside but presentation can be accessed by quickie lot todays webcast icon before we begin our prepared remarks couldn't like Kirk will make a statement regarding forward looking information Ken.
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 1995, <unk> actual future results may differ materially from our projection lookingstatements due to a number and 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 rules. The final slide up our presentation provides reconciliations of certain non-GAAP measures to comparable GAAP financial measures. These reconciliations along with this presentation. The earnings press release, our annual report and a replay of this broadcast are available under the for the invest.
After section of our website at Www Dot helix CSG Dotcom I went.
Good morning, everyone.
Oh, we hope everyone out there and their families are doing well and staying safe.
This morning will review, our Q2 performance our operations in this challenging environment and provide our outlook for the coming quarters moving to the presentation [laughter] excuse me slides five to seven provide a high level summary of our results.
Our results in the second quarter reflected the expected improvement from the seasonal increase of activity levels.
Our revenues and EBITDA increases we benefited from increased utilization in the Gulf of Mexico, well intervention segment and the seasonal increase in activity in the North sea. The benefits are well intervention and robotic segments, that's where robotics increase renewables activity from trenching and the continued site clearance.
Project, where the catalyst for quarterly improvements in that segment.
Revenues in Q2 were reported 199 million with a net income of 5 million, an EBITDA of 48 million.
Our gross profit increased the 30 million from 2 million the previous quarter, our quarter was negatively impacted by the depressed oh websites market, largely resulting from kobin buying team, we warm stack, the seawell and the Q 7000 significantly reducing their costs.
In addition, we've incurred incremental costs for additional logistics and safety requirements to continue operations in this environment.
This depressed market and operational challenges will continue until the pandemic is behind us, but our team is addressing them head on.
For our year to date results, our revenues were 380 million.
The net loss of 6 million compared to 369 million of revenues and net income of 818 million in 2019.
We generated EBITDA of 67 million in the first half of 2020 compared to 81 million in the first half of 2019.
On slide eight.
From a balance sheet perspective, our cash balance at the end of the quarter was 178 million with an additional 42 million in temporarily restricted cash associated with this short term LC.
We generated 23 million of operating cash flow and spent 5 million on capex.
Our net debt at the end of the quarter decreased by 17 million to 166 million I'll now turn the call over to Scott a front end up discussion of our operating results.
Thanks and.
Good morning, everyone moving on to slide 10.
We continue to operate in a difference in challenging environment, yes, it seems and partners by far off shoring onshore continue to respond well to the logistical challenges presented to us by kind of at 19.
And the second quarter, we had 15 vessels is working.
So they can have 12 vessels on higher.
Vessels have corrective control measures in place designed to keep our vessels operation, including pre testing globally old off shelf staff prior to joining all vessels.
Acquired what we feel is a sufficient surface of pp far off shore teams stretched and Thats all way must at all times on the vessels.
And then kinds regulate the clean and is continuously undertaken.
The second quarter. It was one of our best in relation to safety statistics and operational uptime performance sleep operated at 99 cents uptime efficiency.
It's extremely pleased in Tonight at our staff can produce such solid operational performance and these testing times.
I'm proud of them.
We have in response to reduced invent intervention activity in the North Sea in West Africa warm stacked two vessels, we have considerably reduced operating cost of those vessels.
So that we are undertaking targeted cost cutting measures across all businesses and reduce DNA spending.
Hi, but to slide 11.
In the second quarter, we increased our results with revenues of 199 million, resulting in a gross profit margin of 15%.
Jason a profits of 30 million compared to 191 million revenue and 2 million gross profits in the first quarter.
Considering the effects of the virus costs and warm stacking of the two vessels, we assign reasonably strong levels of utilization.
Intervention fleets achieve utilization of 72% globally.
Thanks, Jonathan tweets achieve utilization of 95% globally.
In the Gulf of Mexico at the start of the quarter. The key 5000 commenced its annual commitment to BP.
And completed a very successful well with the 15 case sub sea system with no commercial downtime.
In the North Sea. The Seawell completed work and was then warm stacked and leaf in Scotland, and the well enhancer had a good quarter include unsuccessful co chairman oppressions onto wells.
The Q 7000 completed its first projects in Nigeria with great success, performing very well with various with downtime completing work on five wells for the client.
The vessel was well the vessel has been warm stacked in the Canary Islands and as possible to commence planned work in Nigeria later in Q4 Q1 next year.
Performance in Brazil as expected was strong again divest has performed very well to our usual standards achieving high utilization of 99% we have excellent top telling.
The robotics chartered vessel fleet was very active watching between RMB support trenching.
Renewable works and salvage operations completes in 499 days of utilization across seven vessels with five of the vessel was working outside of the oil and gas markets.
Slide 12 provides a more detailed review of our operations for well intervention business in the Gulf of Mexico.
The key 5000 had 87% utilization working for two clients the vessel completes a one well ultra deepwater abandonment campaign for one client and then the best on the Tech schedule Deepwater test and then preparation of the jointly owned helix lumber Jay 15 KFC system.
After successfully completing test and if the system. The vessel commenced the charity kind of paying for BP performing very well with zero cash of downtime on the first well.
The vessel now has an integrated slum Ajay spread hinting about two teams are working very well together. The client is very happy with this innovative approach and the vessels on contract to BP for the remainder of quote that yes.
The key 4000 performed well with 90% utilization compete conflates and work and ultra deepwater for two clients.
Let's say well production enhancement project was completed on the for the first customer.
Production enhancement program on one well followed by a one well abandonment and it was completed for the next client.
Talking about to date Wolcott bullets are working today to Q4 thousand is on higher concurrently working that's out deepest ever depth of 9583 feet.
Vessels currently contracted through August and has identified opportunities into Q4.
Moving to slide 13.
I don't see well intervention business has been most affected by reduced work requirements Pizza caving, Kevin dancing late into the warm stacking up the seawell, well enhancer have whereas what contracted into September and several other project potential work scopes identified in the fourth quarter.
They will enhance Richie thank you, 7% utilization working for full clients in the quarter income, including completing two successful co chairman interventions on two wells.
The seawell achieved 21% utilization completes in abandonment programs on four wells for two clients. We then significantly reduce the vessel while pricing cost cuts in the best into warm secondly, in Scotland, reducing the creates a minimal amount and allowance.
The Q 7000 completed its first projects in Nigeria with exceptional performance completing work on five wells with little commercial downtime and competes in one of our longest have a continuous durations, we have a subsea system.
On completion, the vessel transits, it to 10 or even the Canary Islands, where it remains and warm stacked mode again significantly reducing our daily operating cost of the vessel.
Hi, Proto vessel will be back to work in Nigeria and identified work scopes in Q4 or Q1.
Hi, good slide 14.
In Brazil, our operations to Petrobras continue to got extremely well again, producing another quarter of operational excellence. We have continued strong performance regarding safety uptime and efficiency.
Five vessels achieved 99% utilization and we continue to be ranks number one reconstructive for Petrobras.
The Siem helix, one completed work on four wells conducting production enhancement work on one well abandonment work on free wells.
Hey, thanks to compete to production enhancement work on three wells in the quarter.
Moving onto slide 15 for our Robotics review.
Robotics continues to have a very good year. This expected the good second half of the with five vessels work in non oil and gas projects. We continue to expand our renewable energy services by product line and geographically secure and renewable energy works in Europe East Coast USA in Taiwan.
In the second quarter, the vessel charter fleet utilization was 95%, including 342 days from spot charter vessels.
Four vessels, we utilized nicely and renewable energy projects in the North Sea the Grand Canyon too and then be Pride works in the APEC region and the Ross candies operated in the Gulf of Mexico.
In the APEC regions. The Grand Canyon. So you had 100% utilization performing works and RV support projects and is currently working on a renewable energy projects in Taiwan and will be contracted for Q3, we've expected good utilization for the remainder of the year.
Yes, let me provide completed 56 days working in Australia are undertaking an interest in salvage projects.
In the Gulf of Mexico to Ross can these at 91 days utilization Wecan RV supple five clients.
And then we'll see the Grand Canyon free had 72% utilization.
And nicely in renewable trenching, we continue to work with the glaucoma waving the christiansen throughout the quarter working on alongside wind farms site clearance and set a project.
Due to the increasing number of bode has found that the sites. We have had to the fed vessel in the world paradox to the project.
The 1200 Trenching unit continued work on the client provided vessel on the U.S. East coast conduction renewable trenching works.
I went to slide 16.
This slide descend the vessels Arvind trenching utilization for your reference.
Before I turn the call to Eric I would again like to thank coffee at 16 and partners for that inception of work this quarter I'm really proud of our offshore teams.
During the great job and follow now requirements to keep the fleet performing extremely well and our on chefs onshore staff continues to do a great job most working remotely supporting all of our businesses.
Okay.
Thanks, Scott is moving to slide 18, it outlines our debt instruments and their principal maturity profile leave this for your reference and move to slide 19.
This slide provides an update on key balance sheet metrics, including long term debt.
Levels.
Our net debt in Q2 decreased to 166 million from 183 million in Q1. The decrease in net debt. During Q2 was driven by $23 million of operating cash flow 5 million of cap of Capex during the quarter.
We reduced our long term debt by $10 million, our cash position at the end of Q2 was 178 million, excluding $42 million of restricted cash our quarter end net debt to book capitalization was 9%.
Moving to slide 21 for a discussion on our 2020 outlook. Our industry continues to be challenged by coven 19, and operations and logistics continued to be significantly impacted as you may recall in late March we withdrew our guidance for 2020 with a clear expectation of being cash flow positive in 2020 the answer.
90 that led to that decision to withdraw guidance remains today, but we now have been operating in this environment for almost five months. We believe we have a better understanding and appreciation for operating in this time, the marketing customer environment, along with operational challenges. So at this time, we feel we have sufficient visible.
Pretty to issue revised 2020 guidance in a good faith the tend to provide an investors information that is appropriately caveated as best we can against the backdrop of the current environment.
We're studying our revised guidance for 2020 as follows with revenues in a range of 655 million to 740 million EBITDA in a range of 150 million 15 million to 145 million and free cash flow of 40 million to 80 million.
The range, we have provided is wide, but we feel it appropriately balances the risks we face our guidance is based primarily on contracted work our backlog for the balance of 2020 is approximately 263 million.
Although subject to change, especially in this environment. We currently expect the majority of this contracted work to be completed in 2020.
Providing more color by segment and region on slide 22.
First with our well intervention segment the UK North Sea, we expect this region to be a one vessel region for the balance of 2020, the well enhancer has contracted work into September with opportunities into Q4. The seawell remains warm stacked available for work. The Q 7000 is warm stacked with earlier.
For work in late Q4.
In the Gulf of Mexico. The Q 5000 is working for BP and expected to remain on higher for the balance of 2020.
Q4 thousand has contracted work through August with opportunities into Q4.
In Brazil, CMBX, one and CMBX, two or on higher for the balance of 2020.
Moving to our robotic Suddenlink side 23 robotics continues to be more recent resilient in this market that well intervention work in the renewables wind farm sector has continued mostly undeterred by current events.
Project.
And your during this time, providing much needed signs of sustained work robotics is being impacted by the slowdown in oil and gas work ongoing reductions in cost and activity levels in the renewables markets are mitigating the significant portion of that impact to date.
The Grand Canyon, two is on contract through Q3 and is expected to have good utilization for the remainder of 2020.
Grand Canyon three is currently trenching in the North Sea through September with good prospects thereafter.
Ken.
Candies charter commitment expires in early August vessels than expected to operate on a pay as you go basis over the near term.
Our wind farm survey insight clearance project using to be goes it is expected to continue into Q4. We also expect to mobilize the below in August for an expected 60 day North Sea decommissioning project.
Moving to production facilities. The HP one is on contract for the balance of 2020 with no expected change.
As we previously previously stated we intend to continue to aggressively reducing our cost commensurate with levels of activity by assets in overhead.
Moving to slide 24, our Capex forecast remains at 38 million for the year comprised primarily of the recertification cost of our vessels.
The majority of which already spent in the first quarter reviewing our balance sheet. Our funded debt is scheduled to decreased by 23 million. The remainder of 2020 as a result of scheduled principal payments are restricted cash position of 42 million was released on July 17, although it may be required again, if we returned to work.
In West Africa.
We anticipate tax refunds in the amount of $16 million to $20 million in the next six to 12 months as a result of the tax changes from the Cures Act.
I'll Skip slide 26 and leave it for your reference and at this time I'll turn the call back to all went for closing comments.
Thanks, Sir.
It's been it's been and continues to be a wildly vacillating your circumstance like no other year.
It'll innovation on our assets was down across the board as could be expected, but not down as much as we've anticipated where we were actually surprised by new projects approved on awarded that we're not seeing or were not foreseeing sorry.
Rates declined as expected.
Surprise for US was that the pressure on rates did not stem from competitor competitors and drill rigs, but rather from the commercial assessment as to what costs. The projects should carry in this uncertain commodity price environment.
Of course, there the usual effects of supply chain, putting pressure on rates just because they.
They could as well our rates probably decline more than we had anticipated as we perhaps overreacted to concerns about utilization, but that just means that there may be a chance of bill recover with commodity pricing a little quicker should the competitive situation remains rational as it currently is.
The protocols and responses to covert 19, certainly added costs to operating but those aren't as high as one might expect as we've been able to offset that with reductions in crude change costs and logistics.
Early on in March we implemented protocol.
Proven fairly effective we've always taken the safety of our personnel very seriously in fact, we've been told.
Several producers have a truly adoptive our protocols for their entire contracted fleet.
We've had a couple of work suspensions, while we address contaminations, but we had no zero revenue days due to the Corona virus.
Production from our drop the field was halted in late April because the host platform that accepts our production was shut down.
While we don't require the profitability of the production to support the economics of the draw skew deal. The added profitability would have improved our Q2 results.
Field is now producing again with one of its two remaining wells. This delay means that will probably not see decommissioning work being done in 2020 on that field, but more likely will slide into 2021.
The negative on the year event, partially offset by operational cost reductions. Some of these are temporary and will vary with work volume such as the vessel stackings, but some are structural and should be sustainable.
In addition to operational and overhead cost reductions are operating group has done a great job with the result, being a significant reduction in the downtime on our assets.
In this environment that's truly commendable.
Our robotics group has done a great job outperforming our expectations, resulting in a relatively strong year expansion into the renewables market as well as international markets has so far resulted in a stronger year than we anticipated and this does seem to be.
Sustainable.
Many companies, including helix withdrew guidance as all the start uncertainty started to unfold.
Like most we couldn't state with confidence what both was likely in store for the year. Historically, we have provided annual guidance and we feel that if we can ride on its guidance. We believe that we should we know investors are always looking for transparency and insight into our potential ranges of outcomes and we all.
We strive to provide better transparency wherever possible.
There are still challenges ahead in 2020, but we now have improved confidence and how 2020 is going and our ability to meet the challenges we see.
We have decided to issue revised 2020 annual guidance, where the range of 115 million to $145 million of EBITDA.
For 2021, it's way too early in too many variables to say what kind of year it'll be.
Our best guesses that will continue to be a challenging.
We continue to be challenging where the strong recovery not likely to occur in our view until 2022.
On the positive side, we've seen meaningful work comp that was contemplated for 2020 now deferred into 2021, new projects are also being assessed by our clients.
The outline commodity strip analyst projections same favorable for intervention work the commodity price same sufficient to warrant intervention given its relative low cost per barrel wells are being neglected as work is deferred and that work, we'll have to be have to occur at some point.
There is currently a lot of discussion.
About some major deconversion decommissioning work.
That will be coming as well, we'll continue our efforts to expand our work in the renewables market and hope our international expansion continues to add potential. We also see the market conditions, becoming favorable for additional draskovic type deal sometime in the near future.
Uncertainties for 2021 will be similar to 2020 with commodity prices hold steady will there be a significant reaction to a potential covert 19, resurgent that again impact demand recovery will there be a vaccine or therapeutics for 2021.
And we'll go upstream balance sheets cheap distress drive a reduction in an all cash spending.
We feel better about 2020, and even if we don't have clarity yet on 2021.
It's on our ability to react thus far we do feel more confident in our market position and the ability to cope with the uncertainties.
We still expect to be free cash flow positive for 2020, and 2021 with sufficient cash on hand, plus forecasted to be able to meet our debt obligations. We will however continue to look for opportunities to strengthen our balance sheet in ways that provide greater profitability on how we might use our cash and free cash flow.
I'll turn the call back over there now thanks, Ellen operator at this time will take any questions.
If you'd like to register question you can press the one followed by the full telephone and you'll hear a three told prompt technology request. If your question gets answered you can press one three to withdraw.
And Thats one for Q up.
And our first questions from the line of in Macpherson. Please go ahead.
Thanks, Good morning, everyone.
You see that despite the chaos in the years shaping up.
A little bit better than we might have secured recently.
Thank you for that outlook.
And of course understand.
There is.
Prevalent uncertainty still but I was wondering if you could talk a little bit about the bookends.
The guidance range it doesn't sound like Theres a lot in store with regard to your expectations for the Seawell, which I assume is.
Remains warm stacked in throughout your scenarios it into Q 7000 work more likely late in the year or next year. So is the guidance sensitivity more around the second half are mainly the fourth quarter filling up for Q4 thousand a well enhancer.
Or are there other factors that we should consider as well.
No I think thats the right way to think about any and I think were fairly clear on expectations for the seawell. The Q 7000 is a bit of unknown, but as we expect that the opportunities there will be towards the end of the year early next year.
You can say the variables will be of course filling in some of the work on on the spot vessels and of course any additional curve balls that that our cobot 19 environment can throw us.
Yes, just my bad Derek said goodness.
As narrative that.
The guidance is based on our visibility or contracted work.
I think would struggle to guide towards middle of the range the up the upside to the ranges based on.
Potential work that we see but there is uncertainty as to whether or not it gets contracted or moved into 2021 and then the downside to the range is based on basically on unforeseeable events.
We havent suffered any zero revenue days from covert 19, but that doesn't mean, there won't be any so we put a cushion them.
Understood. Thank you both.
I know theres still.
Again.
You have uncertainty and instability in the market overall, but I know that a priority it will you too.
Renew the long term backlog.
On the Q 5000, starting next year as well as extensions in Brazil has the world's settle down enough that you've been able to resume those negotiations or is that still on the shelf for the time being.
I'll start with Scott a comment further on this.
I don't think that our outlook on our contract renewals as change that much of both both clients are very happy with the vessels theyve been commercial success for for all parties.
We havent seen any indication that there won't be a renewal going forward, but having said that I think the uncertainties that next year.
You can deal with the operating groups with them they take their mandates from the corporate and until the corporate.
Groups.
Decide on what their budgets and their perspective of 2021 is going to be it's just it's just too early to say what kind of rate might be achieved or what kind of duration.
Yes, I agree.
Ken citing is that we've had a very good start to the BP campaign, this year and they're very happy with the vessel.
So currently ranked number one in Brazil. So Petrobras is very happy with the vessels as I have a lot of let Sheridan there in the vessels a very efficient for them down that's.
We keep then it could jump for these clients and let's say that lead some discussions later in the it.
Thanks appreciate it good luck.
Thank you.
The next questions from the line of Georgia O'leary. Please go ahead.
Morning, guys.
Good morning.
The.
Materially helps the profitability of the business and just kind of any incremental color on the nature of that work would be helpful. Given the magnitude of.
The beat at least versus our expectations.
Okay. So I'll take that one day the salvage project in Australia. It was a very interesting Joe if it was actually recover in containers that wash side of aboard in a stone from a consignment vessel lasted approximately 80 days. So you have to take that as a one off.
About every few years ago salvage Joe.
And it was it was a spot vessels site was normal sort of oil and gas type margins on that one.
Most of the uptick ready for the robotic side is coming from renewables and.
Changing product service and geographic expansion into renewables.
We've had three vessels work on this site clearance projects, that's that's continuing.
And we expect that to continue into the fourth quarter. We've expanded the renewable was offerings into Taiwan and we in the current ever tried shown on the client provided vessels on the east coast. The USA. So the renewable side of the businesses, helping propagate study the downside of less RV days for the oil and gas side of the market.
What I had there Scott.
Renewal.
Our auvi business is really transforming itself flow in something like 40, plus percent of our revenues and the robotics is now.
From the renewables market and we see that growing yes, we continue to look up backlog on the renewable strengthens side.
We have contracted out now to Twentytwenty for renewables trenching, and we havent seen any erosion and rights on the rent on the renewable side of the trenchant sick.
That's very helpful color that actually answer is the next question was going to ask so move on to a difference.
Topic, just telling you mentioned the competitive situation has been more rational than you might have anticipated I wondered if you could provide a little more color there just.
Talk about the competitive landscape more more broadly and maybe in anything that you think might be driving that more rational behavior.
Well our main competition there, we really don't have that many direct competitors and what we do we're the only want their provide heavy intervention vessels.
Others in the market are all light intervention vessels of on from the direct competitors most of our competition competition comes from the drill rigs no of course, that's why we went into this business was offer better out option to drill rigs for this kind of work.
In the last downturn that was the anomaly.
Typically in a downturn rig operators will stack and been.
Cut up rigs.
The last downturn, what we saw was was the tremendous crashing of the rates in order to try and hold on the market share in key assets active.
This time around though we're seeing a sort of return to the historic rationale of when the rigs are finished with their work and don't have contracting opportunities it looks like they're being stacked rather than just of working for sub cash operationally.
Thats been beneficial, but then like I said in my comments, it's still hasn't avoided the we're probably pricing a little more aggressively than what we need to have from looking at the rig market, but we have been conscious about trying to.
Provide impetus for the producers to make decisions to go ahead with work for this year by pricing at a level that makes their projects.
Extremely attractive.
Commercially.
Now that's very helpful color. Thank you guys I'll turn it back over.
The next questions from line of Mike Sabella. Please go ahead.
Hey, good morning, everyone.
Good morning.
Yes, I was wondering if you could you can dive in a little bit on the cost side or robotics.
Maybe just dig ramp in revenues quarter over quarter with relatively small.
Greece in in comparable costs, where there I know theres been some kind of chunky onetime costs that have rolled off can you talk about how.
That impacted the cost side of the business at all over the over kind of quarter over quarter.
Yes, so I'll start that Mike and then.
Scotty can fill in I think from the robotic side, we did have some additional cost flow through the first quarter.
Associated with with the hedges that we had on the Grand Canyon three in those rolled off so I think our overall fixed cost was reduced.
I think also I think what you what you see also in in that quarter over quarter. The improved improved utilization on our chartered vessel fleet, especially the long term charters that goes a long way the cost is always there.
When we're able to increase utilization on that that does this a day significant.
Driver of the of improvements that we see quarter to quarter.
And year over year, we've dropped off long term charters and that maybe mortis spot scenario that you can see we had seven vessels working for the robotic side and nice those vessels a far cheaper than the longest and challenges that we had sir.
Yes, that's great. Thanks, guys and then.
Just one follow up we think of.
Well that were shut in that are now being brought back on production is there is their work for helix is or the deals create revenue opportunities or it's just more kind of getting back to a normal operating environment.
I'll take that one.
I think could lead to work obviously it depends on the states as well as it comes back on it if the wells have been left for a long time, they have the potential to wax up and that could lead to an intervention you have the potential failure inside the wells of some of the mechanical components.
As these wells that have been Schussing come back online there is the potential for more work we've got a lot of discussions in the in all regions for full work next year.
Like having said that a lot of what's been the fed for next year, but there's a lot of talk us of new work next year and talk of decommissioning activities as well because these wells that have been shutting silo.
That being said that WEX not contract contracted out yet, but as a lot of healthy discussions going on for next year.
Perfect. Thanks, a lot guys.
[music].
The next questions from line James Schumm. Please go ahead.
Hey, good morning, guys and congrats on great quarter.
Thank you I just I just wanted to go back to to the prior commentary on well intervention pricing and can you can you sort of talk a little bit about how vessel pricing behaved in the second quarter relative to the first quarter and then what do you expect the percentage change.
The roughly in the third quarter.
Just trying to get a sense of how that's moving around.
Well.
I'll I'll start off by saying that would take us a little while to dig in and of try and find out we havent really looked at that just off the top of my head and my gut feel is well first quarter was heavily impacted.
Preferences at all by saying first of all that utilization drives our margin a lot more than day rate does.
In the first quarter utilization was way down primarily because we put a lot of vessel maintenance periods into the first quarter, so to compare them quarter by quarter rate wise is very difficult for us to do.
I think in the second quarter, we had a few projects that we're probably at legacy rates.
But then we started to fill in utilization by giving perhaps lower than market required rates. So on a blended basis going forward I think for the rest of this year.
I will probably continue to price aggressively in order to fill utilization because that drives our margin more than the rate does but then for next year.
Sort of see.
An opportunity to rationalize the rates a little bit of based on what we've seen this year.
Okay. I know that does have no that doesn't doesn't give you a percentage as it's just I think we'd have to get back to you on on the.
Okay, Yep I totally understand.
And then on Robotics, you had total vessel days that were close to 500 in the second quarter.
I'm, assuming zero contribution from the Ross candies, I get something close to 400 days of utilization in the third quarter based on your 2020 outlook does that sound reasonable or am I missing something and then.
What's the what's the normal likelihood of picking up additional skew three work.
Given that were near the end of July.
So I'll take that when we do have planned for the rest Kennedy's in Q3, we have some contracts at west where it's already.
But the rest kind of these contract now will be as pay as you guys talk contract.
We have also mentioned that we plan to take a spot vessel in the North Sea for 60 days. So I think days like today is going to be somewhat similar to Q2.
We expect the Okay. Aaron's project to continue to increase Q3, Big Grand Canyon see will be on higher for the whole key and the Grand Canyon free will be on Idaho times, that's going to be very similar.
Okay, great. Thanks for that appreciate it guys.
Thank you.
And as a reminder, if you'd like to Q4 question you can press one for.
The next questions from line of Craig Gilbert. Please go ahead.
Thanks for taking my question I just had a few on the cash flow forecast can you can you. Let me know if the if the carriers Act recovery of 16 to 20 million is captured within that forecast a 40 to 80 million.
I would say on the higher end a portion of it is I think we've disclosed that we expect that in the next six to 12 months. So there is variability I think on the higher end of our free cash flow range would assume.
Certain amount of recovery there.
But it's really I think it's something that we expect the timings just a little bit uncertain.
Okay that that makes sense and then just taking it down from EBITDA less capex I would have gotten a little bit higher free cash flow.
Is there anything going on with working capital is there a usage.
Thats I guess depressing free cash flow because I would've thought at the midpoint EBITDA of about $130 million less the 38 million and then you know interest is fairly small and you're in the EBITDA is net of the 20 million.
The mobilization costs I would've thought it was a little bit higher is there anything at play there that.
That I might be missing.
No I think first of all I think there's no specific you could say.
Bill dumping uses of working capital I think that what we have layered in.
Into our into our models in our estimates is obviously a conservative outlook on working capital.
Based on the current environment.
I think our assumption here is that there could be.
Some some extension there as far as collections, but there is nothing that that is specifically targeted in our assumptions other than conservatism.
Okay. Okay, and then just the last question is renewables within robotic seem to do very well and I recall that the expectation was 2021 was going to be a better year on that front in 2020 was there anything that was pulled forward.
Or is it still is that that previous expectation still hold that 2021 should be even better.
We do have more trenching work booked in 2021, yes, but it'd be mindful that a lot of the renewables work. This year is coming from the site clearance project and we don't have one of those but next year. We're in discussions and that is a product line that we will be offered now it's been very successful declines very happy. So we're in discussions with above us and we will be.
Bid in more of that type of work, but the trenching side is very good.
Okay. Thanks very much appreciate it.
Okay.
The next question's a follow up from James Schumm. Please go ahead.
Hey, Dave Thanks for letting me back in.
I think in the prepared remarks, you guys mentioned some additional costs for totaled 19 and stacking.
And just wanted to know if there might be a threeq you benefit from the absence of these costs.
And if so can you quantify it.
I think in general Jim.
We have incurred additional cost in the code environment and I think we expect that to continue.
For the time being in its included in our forecast also I think we've disclosed roughly the cost of stacking the vessels.
The Seawell I think it's less than 20000, a day in Q seven in the mid 20000, a day costs. Those I think our assumptions is would continue.
Going forward.
Right. Okay I just didn't know if there's any like onetime mobilization cost into the stacking period or something that you would that would not recur in the third quarter, but it sounds like not really not really no.
Okay, Alright, Thanks again guys appreciate it.
There are no other questions of the Q.
Two reprompt or go to closing remarks.
Closing remarks, thanks for joining us today, we very much appreciate your interest and participation look forward to having you on our third quarter 2020 call in October.
Thank you.
That does conclude the conference call for today, we thank you for your participation and you can now disconnect your lines.
[music].