Q4 2020 Helix Energy Solutions Group Inc Earnings Call
Please continue to stand by your conference will begin momentarily we thank you for your patience.
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Greetings and welcome to the Helix Energy Solutions Group fourth quarter 2020 earnings conference call. During the presentation, all participants will be in a listen only mode.
Afterwards, we will conduct a question and answer session.
And that time, if you have a question. Please press the one followed by the four on your telephone.
And that anytime during the conference you need to reach and operator, Please press star zero.
As a reminder, this conference is being recorded on Tuesday February 23rd 2021, I would now like to turn the conference over to <unk> Executive Vice President and CFO, Mr. Eric <unk>. Please go ahead.
Good morning, everyone and thanks for joining us today on our conference call for our fourth quarter 2020 earnings release participating on this call for helix today are Owen Kratz, our CEO Scotty Sparks, our COO, Ken Neikirk, our general counsel and myself and hopefully you've had and opportunity.
To review our press release and the related Slide presentation released last night. If you do not have a copy of these materials both can be accessed through the investors page on our website at www Dot helix ESG dot com and the press release can be accessed under the press releases tab and the slide presentation can be accessed by <unk>.
On today's webcast icon before we begin our prepared remarks, Ken neikirk, well 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 well.
Statements in this conference call or and the associated presentation. Other than statements of historical fact are forward looking statements and are made under the safe Harbor provisions of the private Securities Litigation Reform Act of 1095, and our actual future results may differ materially from our projections and forward looking statements due to a number and variety of factors including that.
As set forth on slide two and our most recently filed annual report on form 10-K and on and off.
Our other filings with the SEC also during this call certain non-GAAP financial disclosures may be made in accordance with SEC rules and the final slide of 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 investors section of our website at Www Dot and helix ESG Dot com.
Good morning, everyone, and we hope everyone out there and their families are doing well and staying safe.
And to our employees and customers and Texas and the Gulf Coast region, We hope you've weathered the storm and are on and on the path back to recovery.
And we will review our Q4 performance.
And our operations and this challenging environment, our view of the current market dynamics and provide our preliminary expectations for 2021.
Moving to the presentation slides five to seven and provide a high level summary of our results the impact of the north sea seasonal slowdown and is evident and our financial performance and the fourth quarter, our well intervention group and our robotics group both experienced a significant drop in activity and the north Sea.
C customers scaled back during the winter months. This is normal and expected during this time of year, but it is worth noting.
On a positive note, we were able to secure additional spot work and the Gulf of Mexico, and both well intervention and robotics, allowing us to exceed our expectations in that region.
Revenues in Q4 were reported $160 million with a net income of $4 million and EBITDA of $35 million or gross profit decreased to $14 million from $35 million and the previous quarter.
For our year end.
Excuse me for our year to date results. Our revenues were 734 million with net income of $22 million compared to $752 million of revenues and net income of 58.002 million 19.
We generated EBITDA of 155.002 million 20, compared to $180 million in 2019.
And 2020, there are many headline and factors that impacted our performance, but the COVID-19 pandemic was predominantly.
We entered the year with many positive indicators for 2020 and beyond.
And that make that emerged in Q1 immediately reduced activity levels in 2020 and extended a potential market recovery further out.
Our team adapted well to the changing environment and minimize operational disruptions throughout the year. The Q 7000 and had a successful initial project.
On a robotics group expanded its renewables offering working on a wind farm site clearance project much of the year, our team performed well and encouraging point as we continue to manage the impacts of COVID-19.
On to slide eight from a balance sheet perspective, our cash balance at the end of the quarter was $291 million compared to $259 million at the end of Q3.
During the fourth quarter, we generated $40 million of operating cash flows and spent $1 million on capex.
For the year, we generated free cash flow of $80 million, marking the third consecutive year of positive free cash flow.
Our net debt at the end of the quarter was $58 million and our net book to net debt to book capital was 3%.
I'll now turn the call over to Scotty for an in depth discussion of our operational results.
Thanks, Kevin and good morning, everyone moving on to Slide 10, 2020 presented and extraordinary and challenging environment to us due to the COVID-19 pandemic, our teams and partners by fund share and offshore and continue to respond well to the challenges presented and are doing a fantastic job.
The COVID-19 pandemic has presented many logistical challenges, including travel restrictions quarantines testing and screening and of our personnel.
Despite these challenges and the fourth quarter, we continued to operate 13 vessels globally and throughout 2020 and through the pandemic. We have operated in 14 countries with minimal operational disruption despite the logistical challenges.
We have established very high standard of safety measures and protocols that thus far and whats well against the virus, including pre test and over 11000 to date personnel and prior to allowing them to join the vessels and whilst it's impossible to guaranteed advisement and reach a vessel. We believe we have very good measures in place should and infection occur offshore.
Our program is designed to react quickly to any person shows symptoms, including steps to quarantine and remove offshore staff as soon as possible well.
We continue to mandate, social distance and and tracking of any class contexts.
Additionally, we also have clean increase and place that before and frequently and cleaning of the vessels altogether. We feel these price goes on greatly limited the exposure should and infection.
Most of our auto show offices remain closed and our teams are there and a fantastic job working remotely keeping that business functioning.
We have responded to the revenue reductions caused by the pandemic second two vessels during parts of the year, the seawell and the North Sea and the <unk> 7000, and and the Canary Islands swiftly and reducing our cost base as well as cutting capital expenditure and reduced SG&A spending.
And im extremely proud of our offshore staff are on shelf staff and partners for the wide have tackled these unforeseen challenges and whilst having two operating these test and circumstances. They have achieved in 2020 very good safety standards equal and solid results of 2000 22019, coupled with one of our best share is in relation to operational uptime and our teams do.
And make a difference.
I have a slide 11.
Even in this environment and how usual lower utilization due to seasonal conditions during the fourth quarter, we produced revenues of $160 million.
Resulting in a gross profit margin of 9% producing a gross profit of $14 million compared to $193 million revenue and $35 million gross profit and the third quarter.
Our year ended with revenues of $734 million, resulting on a gross profit of 11% produced and a profit of $80 million.
EBITDA was $155 million exceeding the top levels of revised guidance that we issued earlier in the year and response to the pandemic.
Considering the effects of the virus the fourth quarter seasonal weather conditions effects on utilization and warm stack and the free vessels, we still let's say and reasonably good levels of utilization.
And well intervention fleet achieved utilization of 56% globally, and the fourth quarter and and robotics chartered vessel fleet achieved utilization of 100% globally during the quarter.
Even with the challenges presented to us by the pandemic 2020. It was one of our best performing periods and relationship safety management and operational uptime performance.
Our fleet operated at 98, 5% uptime efficiency and safety statistics, and most categories were reduced compared to 2019 with many vessels now achieve and multiple years been LTI free.
We're extremely pleased and our teams continues our efforts at such a high standards of performance.
And the Gulf of Mexico, We had both the Q4 and then the Q five work and and operational during the quarter.
And <unk> business has been the one most affected by Covid pandemic.
The well enhancer complete to the JD campaign in Q4 and was there and warm stacked as we seasonally day for the harsher winter months and lease Scotland, along with the Seawell.
And the West Africa region, the Keystone and <unk> remained warm stacked and the Canary Islands, and then commenced transit back to Nigeria for its contracted work that is currently ongoing.
Performance in Brazil was at their usual high standards of both vessels performed very well achieve and utilization of 98% and Q4.
And so robotics chartered vessel fleet was very active in the quarter and between RV supports trenching and renewable works globally completes and 336 days of utilization across seven vessels.
Slide 12 provides a more detailed review of our operations for projections of well intervention business and the Gulf of Mexico.
The key 5000 had 89% utilization, while continuing to work for BP into mid February undertaken ultra deepwater production enhancement operations and performing extremely well.
And the vessel remains work and for BP into Q2.
We've now signed a five year global frame agreement with BP for work on a call out basis. However, at this time <unk> BP, We expect BP has little plans for heavy well intervention requirements and the Gulf of Mexico, and 2021, and we therefore expect to be work and investment and the spot market.
The key for performed well with 78% utilization due to a small GAAP and schedule alignment between projects completing work on ultra deepwater for clients. We also utilize the helix Schlumberger jointly and 15 K system from volume declines from the Q4.
Well with vessels remained under contract from nice to have Chi won and have what physical and Q2. However, currently driven among other things to the intensity of Covid restrictions and the uncertainty of government regulations regard and opponents and monitor and we do expect less utilization for our Gulf of Mexico, well intervention business in 2021 than in previous years.
Moving to slide 13.
And Youll see well intervention business has been the one less affected by the reduced work requirements related to the Covid, leading to a continued warm stack and the placebo.
And well enhancer worked into October and then have your GAAP between projects prior to commencing work in December.
And well enhancer achieved 26% utilization in Q4 working for two clients in the quarter, including completing 100 temporary abandonment scope clause by and events environments with clean and project and undertaken and production enhancement scope, the vessels and warm stacked and lease Scotland.
And the Seawell remained stacked and the Scotland with a significantly reduced operating costs and reduced crew levels to a minimum and and allowance.
Based on one of vessels remained and warm stacked condition throughout the winter seasonal period as in previous years and we are at this time optimistic that well, we will reactivate both vessels and 2021 with the well enhancer scheduled to go back to work. This month and we are currently high folks who have the seawell back to work later in Q2.
The key 7000 entered the fourth quarter and warm stack mode, and Tenerife and the Canary Islands again, Thats, a significantly reduced LDL price and cost of the vessel the vessel and translated back to Nigeria and of Q4 and commence contracted works at the end of January 2021.
Moving on to slide 14, and Brazil, our operations for Petrobras continued to go extremely well again produced another quarter of operational excellence with a continued strong performance regarding safety uptime and efficiency.
Well first of all has achieved strong utilization and the fourth quarter and we continued to be ranked as one of the top rig contractors by Petrobras.
And the Siem helix, one had 98% utilization in Q4 and completed abandonment work on six wells Workman and environmentally protected area.
The Siem helix, two had 99% utilization and completed production enhancement work on one well and advancement and work on four wells during the quarter.
I would also like to highlight that for the second consecutive year and.
And Brazil subsidiary <unk> has been awarded supplier of the year by Petrobras for operations of merits on rigs.
Moving on to slide 15 from our Robotics review.
Robotics had another good quarter and a solid year and 2020 operating seven vessels during the quarter with four vessels work and on non oil and gas renewables projects.
Results and an increase and our renewable service lines and further geographical expansion.
And the fourth quarter chartered vessel fleet utilization was 100% with both Grand Canyon vessels fully utilized and an additional 152 days of utilization from spot chartered vessels.
And the fourth quarter, and and ELC free vessels utilized primarily on renewable energy projects and the Grand Canyon, free, which utilize 100% undertakes and renewables and oil and gas trenching, and the Christina <unk> and well paradigm and 100% utilized where consensus four days combined continuing site clearance and <unk> on a wind farm project.
The <unk> allowed construction vessel.
Spot chartered to undertake a decommission and Skype for 22 days as part of a combined well up to UK and robotics projects and the C&I was also project spot charters for 17 days on a further decommission and Skype.
And the APAC region.
The Grand Canyon, and so you had 100% utilization in Q4 performing works on our renewable energy projects, and Taiwan, Droid and accommodation and installation and support the vessel has secured work in 2021 and 2022 to provide RV supports and the APAC region and as recently just completed a further renewables project and so on and it's hard to Taiwan and Japan.
And the Gulf of Mexico, <unk> vessel, the Ross Candies had 39 days of utilization in Q4 work and for RV and support for five clients.
As mentioned previously to Robotics group had a relatively good year, especially expanding services globally and the renewable sector.
I would like to highlight some statistics and key points to provide further detail regarding how we have expanded and anticipate transition and further into their green and renewable sector.
And the renewable sector in 2020, we worked for non clients on 16 projects well.
And six countries the U K, the U S, Belgium, Norway, France, and Taiwan, and again recently and 2021 completed work in Japan and 2020, we had five vessels work and in renewables is complete and over 1100 vessel dates.
Over the course of last year, we had free trenching assets work and renewables undertaken infield sightlines to Teva and <unk> as well as export K, which engine and 12 Rovs assigns to work in this sector.
We expanded our services to include site survey debris removal odor removal UX site clearance and destination trench and installation support total installation and support accommodation support on RV support this.
This highlights our geographical and service line expansion in 2020 that we intend to stay and focus as we aim to continue to move forward and this sector.
And also recently increased our sales Stephanie services.
Over to slide 16, I will leave this slide detail on the vessels are very entrenched and utilization for your reference.
Before I turn the call over to Eric I would again like to thank our helix global team our offshore personnel, our onshore personnel and our partners for achieving what was under the circumstances and exceptional year. There is no doubt that we expect 2021 will be for helix and some ways, even more challenging and in 2020.
Thanks for your hardware I can see and work and work and Thats, an extremely high standard and and extraordinary and challenging year.
Moving to slide 18.
And it outlines our debt instrument and the maturity profile at December 31, 2020, our total funded debt was 405 million moving to slide 19, and provides an update on key balance sheet metrics, including long term debt and net debt levels at year, and our net debt approximated 58 million our cash position at the end of Q4.
Four was $291 million, our corridor and net debt to book capitalization was 3%.
Moving to slide 21.
In March of 2020 year sector was devastated by the impact of COVID-19 on the demand for oil and nearly a year later the environment continues to be weak with many remaining uncertainties. The pandemic has accelerated the interest and green energy investments moving away from traditional oil and gas. In addition, and the U S. We are facing regulatory.
The uncertainties from the New administration.
Our customers have responded to COVID-19 by slashing spending in 2020, and thus far are being very cautious before committing to spending and 21 thus.
Thus at this time, we're not counting on a recovery in 2021 and in fact as we have previously expressed 2021 is shaping up to be more challenging for our business in 2020.
Given the fact that many of our customers are still working through their 2021 budgets, establishing their own spending priorities and formulating and which projects get sanctioned and which do not we feel it is premature to provide quantitative guidance for 2021 at this point other than to say, we expect 2021 financial.
Our results for helix to be lower than 2020, we hope to be in a position in April to provide more quantitative guidance.
That being said, we can say this much on how we see the year unfolding in the near term.
We expect to be free cash flow positive and 'twenty. One as we have previously stated we expect Q1 to be stronger year over year, we expect to have six well interventions vessels to be working and Q1.
Beyond Q1, we anticipate working five intervention vessels and the spot market, where currently visibility is limited we expect.
Visibility and utilization will be on a quarter to quarter basis, and the Gulf of Mexico, well intervention, both vessels will likely be and the spot market for the remainder of the year.
With the added current regulatory uncertainty, we generally expect lower levels of activity and 21.
And the North Seawell intervention business, we expect to have one vessel working most of the season, whether a second vessel gets deployed will be dependent on the strength of the market.
And Brazil, the Siem helix two is on contract into December the Siem Helix. One is our contract into April and we're currently and commercial discussions with Petrobras regarding the continuation of work thereafter.
And West Africa, we expect to work into Q3 with possibilities thereafter.
Robotics may have a weaker year with less site clearance work expected and 21 <unk>.
Production facilities should be consistent with the potential of a production enhancement opportunity well.
And again with many uncertainties. We're currently seeing we feel there is a bit premature to provide quantitative guidance for 'twenty. One at this point, we hope to be and are positioning April to provide guidance.
Providing more color by segment and region on Slide 22, first our well intervention Gulf of Mexico. Q 5000 is working for BP into Q2 to Q4 thousand has contracted work into March.
And the U K North sea, the well enhancer commenced operations in mid February with contracted work into Q2, the seawell remained stacked with earliest opportunities around mid year.
<unk> 7000 commenced operations in late January with contracted work expected to last into Q3.
In Brazil, the Siem helix two has contracted into mid December the Siem helix. One is contracted into mid April we're on commercial discussions with Petrobras for work thereafter. The vessel is scheduled to have an approximate 40 day dry dock currently forecasted from mid year.
Moving now to our robotics segment Slide 23, robotics work and Q1 will be affected by the winter slowdown before likely rebounding in the spring and summer months.
And Canyon, two and APAC is on contract and Q1 and is expected to have good utilization for the balance of 21 and that region.
The Grand Canyon, III is contracted to be performing trenching, and the north Sea Baltic Sea and offshore Egypt for multiple customers with expected strong utilization. The vessel is scheduled to have an approximate two week dry dock and good utilization is expected into Q3.
We were awarded follow on Wind Farm survey and site clearance work to commence in Q2.
Moving to production facilities HP, one is on contract for the balance of 'twenty, one with no expected change.
We have a production and has been opportunity on the Droshky field expected to take place in Q2.
Moving to slide 24, our Capex forecast is and the $20 million to $40 million range. The majority of our Capex forecast is maintenance and project related. It also includes a production enhancement opportunity at Droshky.
Reviewing our balance sheet, our funded debt of 405 millions and is expected to decrease by $91 million as a result of scheduled principal payments in January we paid off the balance of the Q 5000 loan or cash at year end was $291 million.
We anticipate tax refunds and the amount of approximately $19 million in 'twenty and 'twenty one as a result of the tax changes from the cares Act.
I'll Skip slide 26 and leave it for your reference at this time I will turn the call back to Owen for closing comments.
Thanks, Eric.
And going into 2020, we were expecting the recovery that began in 2019 to continue and stood COVID-19 hit and expectations for 2020 were not possible to predict.
Well, we withdrew our guidance and focus on the challenges we were facing by the end of Q2, we felt that we understood the challenges and we're able to issue guidance with our Q2 results. Our people did a fantastic job and meeting the challenges and we were able to revise guidance.
Through continued hard work from our teams, we were able to lower our costs and improve our efficiencies. Our COVID-19 protocols proved largely successful and in spite of and identifying a number of positive cases over the course of the year, we incurred minimal operating operational bound days attributable to Covid.
The market was soft overall, but we were able to meet our original guidance issued at the beginning of the year and all business units with the exception of a slight miss on the Gulf of Mexico on lower utilization and a big Miss and well ups U K.
We saw this and the last oil price collapse of 2016.
On the North Sea decline the worse, but it was also the first region to recover we're expecting and north sea recovery in 2021, but how strong that will be as yet and uncertain and looking forward to 2021, we will again be facing some challenges.
The COVID-19 impact on the market continues but the vaccine rollout is underway, we expect demand for our services ramp up through 2021, but we don't know at this time, how quickly that will happen or to what degree.
Production recovery and shales is uncertain at this time and the effect on supply is unknown.
The customer focus on Green energy is certainly impacting the budgets of most majors and many other E&P companies.
This leads us to believe the work volume will remain anemic.
But oil and gas is not that there's a transition occurring.
Where the majors may be pulling back from oil and gas in favor of capital deployment into renewables smaller producers are stepping in and fields are changing hands and may be a bit early to see the effects of this and 2021 as budgets are being certain and uncertain environment, but we do expect commodity prices and work volumes to increase and <unk>.
2022.
More specific for helix will be what happens to our long term contract renewals.
And as you're all aware, we have three long term contracts or what can now be considered legacy rates.
Outside of Norway. We believe these are the only long term contracts ever issued for subsea well intervention.
Prior to these contracts and essentially the entire subsea well intervention market was the spot market.
We've signaled for some time now that our expectations are for the market to return to being a spot market until a meaningful recovery occurs we recognize that at least and in the near term those producers that can support long term contracts are also dealing with the same uncertainties that face our entire sector and simply difficult to commit to.
Long term spending.
Our contract for the Q 5000, and the Gulf of Mexico with BP for 270 days per year will not be extended and so.
BP has signed a global frame agreement with helix for a five year term this will be a call off contract and.
While we are told that BP will rely heavily on the intervention over the next five years. We also believe there intervention needs are fairly up to date and there could be a hiatus from work for 2021.
This will certainly put pressure on Gulf of Mexico utilization for our two vessels in the region.
Given the transitional nature of 2021.
And this means we are currently not.
We don't have clear visibility on Gulf of Mexico utilization for our two vessels there.
Our other two long term contracts are for the stage, one and the stage II and Petrobras in Brazil.
The assets to contract runs and Decembers are noted.
So we anticipate.
We anticipate any variance on that vessel would be minimal.
And each one contract is due to and in April of this year.
We are in commercial discussions with Petrobras for work after April but it's too soon to know the outcome of these discussions or the impact DSA. Each one will have on 2021 results.
We also have a meaningful re completion plan for one of our wells on the Droshky field.
This is scheduled to be done with the Q five and following the release of the vessel by BP and we expect the re completion and work will likely proceed and early Q2, we're also and discussions for follow on acquisitions similar to <unk> with the goal of securing well intervention backlog and adding incremental production revenue, but its too soon to be.
You're able to estimate the impact they'll have on 2021.
On the robotics side of the company the work class Rovs market remains soft we do anticipate another strong year from trenching and well continue to seek further expansion into the offshore wind market, but that market has become highly competitive.
Our contract for <unk> and bolder clearance that we were on from much of 2020 and scheduled to pick up again as Scott mentioned.
Following seasonal shutdown however.
However, how much more site prep work and other renewable support work, we can secure as yet another uncertainty.
We don't want to be and the same position as last year and half to withdraw guidance. Several of these major issues should be clearer as we get past Q1, we expect Q1 to be a relatively strong quarter, but we're electing to withhold full year quantitative guidance until visibility on key issues firms up.
As we previously said 2021 will no doubt be a challenging year for us However, our balance sheet is strong.
We do expect to once again be cash free cash flow positive and 21, which is an accomplishment in and of itself and this environment. We will continue to prudently manage our capex and of outlining a path to continue to lower our debt, we feel we're well positioned with great leverage to a market recovery and we see.
Opportunities and renewables maturing fields and oil and gas service space that we will be pursuing our team has proven to be very nimble as we face challenges and we fully expect to being good and a good place as the market evolves through this transition periods and Eric.
Operator at this time well take questions.
Thank you.
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Our first question comes from Ian Macpherson.
With Simmons. Please proceed.
Thanks, Good morning.
Nice results and Q4, and I would certainly rather have no guidance and shaky guidance. So.
And I respect that decision as well but.
I wanted to ask first just a detail I thought Q 5000 was expiring earlier.
Earlier year and 'twenty. So is it going to be on legacy BP day rate throughout Q1, ending early Q2 or.
Will it be working with BP, but not necessarily the legacy day rate.
This current quarter.
Yes, and so obviously as Owen mentioned the contract has not been extended and obviously, we're towards the end of the contract now.
Everything that is happening now is outlined in the contract and so I think the assumptions that youre, making.
On the existing contractual rates to continue as is appropriate.
Okay.
And then as you're contemplating the lack of not necessarily a complete lack of work, but just a lack of visibility of the year's work for the Gulf of Mexico.
Does your scenario analysis right now contemplate the decision.
And ultimately only work one vessel as opposed to two after the Droshky.
Re completion and.
And early Q2.
I think Ian I'll start off and then I'll pass it off to Owen.
Obviously I think everything is currently on the table.
I think we expect it to be a soft market and general softer than last year I think in general our thought process is we would steer work to one vessel and try to get that vessel filled up before we pass it onto the second vessel. So I think that's that's definitely a potential and that's on the table.
I think we see opportunities into Q2, we think it's probably going to be quarter to quarter.
For that market.
And we definitely expect it to be a challenge in 'twenty, one hour and I don't know if you want to add additional color I think that pretty much sums it up and we can be specific and we're going to be putting most of our work on to the Q five.
Once we get relief from.
Commitments and that we do right now.
And we're anticipating that Q4 will work its just what utilization and that will achieve as is and <unk>.
Question.
Okay understood. Thanks, and then lastly from me on Droshky, So we're getting.
Some guidance for the Capex on the re completion and then we would assume there will be some.
Production uplift as yet on quantified, but that would that would presumably also be a.
Our revenue and profit bump relative to the normal the normal stable contribution from production facilities that we see in a typical period correct.
That's correct and as I said on my color comments. So it is a meaningful re completion, but it just re completions are light switch they either work or they don't so we're going to be cautious until we know.
Okay.
Thank you.
Our next question comes from Mike Sabella with Bank of America. Please proceed.
Yes.
Hey, good morning, everyone.
Okay.
And I was wondering if you could just kind of target I know, it's a little too early to give firm a firm idea of what we should expect out of Brazil for these renegotiations, but could you just kind of talk us through what the market looks like down there I mean, and I know, we hear a lot of positive anecdotes.
Coming out of what Petrobras is doing down there for offshore.
<unk>.
Rates on <unk>.
Right on.
On floating rigs and appears to gone up I know, it's not a direct.
Correlation to what you all do down there, but just generally and it seems like the market is improving down there can you just talk to us a little bit about what you're seeing down there as you.
And as you work with Petrobras to decide what happens with these two vessels.
Well I'll tell you about it and you guys can add to it. If you want we are we do think that Petrobras is going to be increasing their drilling program and adding rigs we've seen that already.
I think.
What's going on down there is a combination of the.
And.
Short term disruption caused by Covid and demand in 2020 balance by their long term needs and it's further complicated by a change and the tendering laws, and Brazil, which limits their ability to extend contracts or consider multiyear extensions.
And that's made it a little difficult, but that Scott had mentioned this is the second year that we've been there we've won their supplier of the year for our rigs award.
The relationship is good the efficiency is great.
And we think they have a need for the vessels, it's a matter of trying to weave the legal path and fit and with their near term.
And intervention requirements and were and that we're in that we're going to do.
Commercial discussions with them now on it.
Yes.
And Petrobras has one of the largest subsea well counts and they definitely have to work that very very happy with the vessels and they're very happy with our safety culture, which is a big thing for Petrobras and unlike on incentive and commission discussions and Petrobras did not have commercial discussions on this they have a need for work.
Yes.
I think it's pretty apparent also.
The new tendering, well, they're going to be required to come out for a tender.
At the end of next year.
The intent of Petrobras as expressed to us verbally all along was that.
Expect a long term relationship with these vessels and Brazil long term.
And I don't I don't see anything right now that would change that expectation.
Understood. Thank you and then if you were to kind of I know you've mentioned rovs.
Down year over year.
And we were to kind of I guess split this into more legacy oil and gas type work and kind of and more and more renewable type work.
What what was the what was the split in 2020 and is the expectation that both of those pieces.
And a fall in tandem or are they moving in different direction.
I think we've said for a long time and everybody knows that the RV spot market is quiet that being said last year, we had 12 rovs working and the renewable sector. We do see a lot more tender activity for de Novo sector. We have some work already committed for renewables, we have one of the vessels.
Locked up and APAC for the next two years and.
And we have a strong trenching season, and ahead of us on the trenching side and on the revenue side of the business will be there.
Please remember last year, and we had a very flores projects on the site clearance and that project was unexpected and that 60 days and it went to Esa and we expect to pick that project up again and the spring of this year.
And that renewables will be a slightly softer because we had such a good year and last year <unk> will be good and the RV market will be down a little but we're going to continue to China to rfps and to the renewable sector as well and we've expanded our renewable service lines and globally expenses under NAV per site.
Arthur and go to add to that a little bit Scott as you said, we have expanded our renewables offering and the captured work and Asia Pacific and more recently on the total work and Japan, which is an interesting development.
The renewables market.
And as a developing market the contracting styles are changing.
Everybody has pivoted towards renewables, so the competitive pressures and different niches.
Our significant so it's a matter of finding where you can play the best drilling and trenching wise, we're still the global leader and I expect that to remain the same.
<unk>.
Where else we can.
Capture renewables opportunities, we're exploring those and we'll see what happens here, but I am excited about the international developments and also I think the U S. As forecasted over the next few years will be the fastest growing not the largest market, but the fastest growing market and we're well positioned and the U S.
Considering the Jones act the implications of that work.
Got it thanks, if I can squeeze one more and I know you mentioned and the free cash flow and.
<unk> hundred 21 and expect it.
Positive can you help us sort of.
And I know the set expectations I mean.
Clearly probably down from from 2020 and well given the guidance.
Do you think you can kind of get to this free cash our net debt neutral number by the end of the year and then kind of talk to us what happens next.
Yes, so part of the reason obviously, we haven't given overall guidance Mike is because there's a very wide range of possibilities out there.
And I think that obviously on the upper end of the range that puts us very close to the to the target that youre talking about so that is a possibility, but as we said right now.
And there is there's so many uncertainties that that we haven't provided specific guidance.
Okay and thanks, everyone.
As a reminder to register a question. Please press star one four on your telephone. Our next question comes from James Schumm with Cowen. Please proceed.
Hey, guys good morning nice quarter.
And.
If we could just go back to the robotics.
Guidance.
Based on that.
Qualitative outlook is it reasonable to assume that that vessel days could be down 20% year over year, and maybe revenues down 15% or so just just given.
The absence or maybe the step down and the site clearance and then and then.
Do you think that you can be profitable on an EBIT basis this year.
Yes.
I'll take that there will be a step down and vessel days, obviously at one point and we had three vessels working on the site clearance projects. It added a huge amount of vessel days and into 2027 day I expect to.
Step down and because of net revenues will come down and I'll say that we do expect the robotics division to be on the positive side of EBITDA.
Okay.
Sorry, Scotty, but do you think it will be EBIT positive this year.
Are we are you asking and specifically just the.
Robust robotics.
Just robotics.
I think thats definitely within the range of possibilities at this point Mike.
Okay.
And then.
I appreciate the uncertainty in the market that prevents you from giving 2021 guidance, but you said EBITDA will be below the 155 this year and so that appears to represent the upper boundary can you just help us think about a lower boundary assuming no improvement or no worsening of the hour.
And look for here from here. So for example, like maybe you're reasonably confident that EBITDA could stay above 90 or 100 million. This year can you can you help us think about that at all like how wide this range could be.
As you see it right now.
I don't think it would be prudent for us to discuss that right now because some of these issues are major swing factors for instance, the Droshky re completion and as I said as a light switch it's either going on at work or it's not and that has a major impact.
And also the disposition of the assets one.
Really wouldnt want to telegraph, putting the cart before the horse about success with Petrobras in Brazil, just because of the nature of the market right now, but both of those are meaningful swing factors, which.
You can get into some ludicrous.
Ranges ranges.
Alright, Okay, alright, thanks, guys.
Our next question comes from some on Tahoe with Evercore ISI. Please proceed.
Hey, guys and thanks for taking my question.
And we feel like Theres a lot of uncertainty.
Wondering if the cash.
Currency.
Money market is kind of reminding you of another time and the.
And perhaps not too far past, well, just sort of strength and commodity prices are taken customers by surprise and and you may potentially see.
Our agency for <unk>.
You mentioned work and.
Even in the Gulf of Mexico.
And just kind of curious is maybe and I think I mean, obviously you guys are being overly cautious day.
And I'm, just surprised that there wouldn't be any sort of pick up and demand, especially from mid size and where.
And a smaller private operators.
Yes, Bryan well.
And at these levels curious if you could just maybe talk.
Talk about whether or not it feels like another time and history, where.
First the price might just sort of strength and commodity prices.
The short answer is yes and no.
Yes.
And the northern North Sea as we stated in our comments. So we've seen this before where it was the most impacted but the first to come back that would be our expectations. There I think you have a number of smaller producers that will be a lot more aggressive than the majors.
So we expect we are anticipating a pickup and the north sea. This year, we just don't know how robust that would be but even more so for 2022 as we expect the market.
Try and demand to tighten and commodity prices to continue and increase and the transition from majors to smaller producers will continue that.
And setting up a fairly strong 2022.
And the Gulf of Mexico, you have the same thing, but it is compounded a little bit by the.
And the new administration's moratorium on drilling.
There seems to be a lot of uncertainty among producers, both large and small as to what that actually means talking to the regulators there not exactly sure what that means either.
So as a result, and sort of put a freeze on and it came right during the budgeting process this year, which didn't help.
So.
Whether or not we get beyond that in 2021, and the producers start anticipating the higher commodity prices of 2022 I think that's that's.
And occurrence that Hasnt happened before the regulatory uncertainty and then on top of that I'd say.
A bit early to tell whether or not the show.
Production is going to come back as strong as it did and the last outlook.
And that's down cycles, my anticipation would be that it would not come back as strong and that sets up for it and even stronger 2022. So that's.
But that's sort of that's looking at the last cycle, but anticipating that the shell recovery won't be as strong as it was the last time.
Alright. Thanks, I think we are in the Oh go ahead sorry.
Just add to that but we are seeing increased tender activity out of the U K and also geographically, we're seeing more tender activity internationally and we've got more tenders and before out of Africa, and the APAC region as well.
Also just like right now, we're seeing capital spending being reallocated towards renewables and away from oil and gas, but keep in mind, well intervention and our market is actually under the Opex budget of the producers.
As the demand ramps up and supply.
Needed and as the new smaller operators take over these fields, they're going to be very aggressive on the intervention side because it will take some time for the capex to ramp up production again, but and intervention is a very very low hanging fruit and very quickly. So.
And do think we are well positioned for it.
Okay and my.
Other question, how did you with Covid and Theres a lot of it sounds like Theres a lot of incremental cost.
B and carry to students contingency planning and whatnot.
Wondering if you could quantify for us and maybe 2020.
Like how.
What do you think the impact Covid and is just on the cost side.
All of the different measures that you've implemented.
And I'm just kind of curious if you have that number handy.
So I'll take that.
As we said we integrate.
We've put a lot of protocols in place with test and all of our personnel before.
Offshore we are having to quarantine people and certain countries before they can go offshore and roughly the cost of quarantine and testing.
Having a day and manufacturer and we have to come in and around and 2020 of about $8 million.
And <unk> on that.
Yes, that's for the full year since the pandemic started obviously that doesn't include the fact that we have.
We lost on revenues and we had to stack a couple of notes.
Our energy and cost down on respect significantly, but the actual cost per test and quarantine and moving guys around eight.
8 million Bucks.
Okay. Thank you.
Our next question comes from Ian Macpherson with Simmons. Please proceed.
Thanks for giving me the follow up Eric and I wanted to.
Before we see the K I wanted to ask you what the.
The dry dock expense was for 2020 day ran through operations not Capex and then if you could frame that for me visa B.
'twenty, one capex guidance and what that what the dry dock slate looks like across the fleet for this year.
Okay. So just to recap in and in 'twenty and 'twenty, We had I think at least five vessels I think are heavily weighted to the first part of the year that were and dry dock and Ian and I wanted to say that the number is approximately and the $20 million range.
So, but I would like to get back to you on that Thats I think the amount that roughly flowed through on.
Operations as we look at our Capex spending in 2021.
The range is $20 million to $40 million.
The majority of it is maintenance capex as far as pure dry dock, we know that we have.
One scheduled for this year.
And that one is a definite and.
So I would tell you it's probably in the same potential.
Probably on the low and maybe $5 million on the high and maybe $20 million that would flow through through operations.
And in 'twenty one.
Okay. So mid point, probably a slight downtick and dry dock going through operations. This year.
Yes.
Alright, thats it I appreciate it.
There are no further questions at this time.
Okay, operator, and thanks for joining us today, we very much appreciate your interest and participation and look forward to having you on our first quarter 2021 call in April and thank you.
That does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect. Your line have a great day everyone.
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